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Net 1 Ueps Technologies Inc.annual repOrt 2014
COntents
Who we are
What we do
Financial and operational highlights
Our strategy
Chairman and CEO's letter
Our Board
Corporate Governance Statement
Directors' Report
Remuneration Report
Financial Statements
Shareholder information
2
3
6
7
8
12
14
23
34
49
96
Over 120,000 clients
have trusted us with
their internatiOnal
Payments in the
last 12 mOnths.
4
0
Y
F
4
Q
5
0
Y
F
4
Q
6
0
Y
F
4
Q
7
0
Y
F
4
Q
8
0
Y
F
4
Q
9
0
Y
F
4
Q
0
1
Y
F
4
Q
1
1
Y
F
4
Q
2
1
Y
F
4
Q
3
1
Y
F
4
Q
1. The number of clients who booked at least one transaction in the preceding 12 months.
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80,000
60,000
40,000
20,000
4
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4
Q
1
OzForex Annual Report 2014
whO we are
Our asPiratiOn:
tO be the leading
PrOvider Of
internatiOnal
Payments and
innOvative
Payment sOlutiOns
An international payment involves the transfer of money from one country to another, typically requiring
the exchange of the money from one currency into another.
The market for international payments is large and growing, driven by increases in global population and
migration as well as a larger level of cross border transactions and investment. The market is also highly
competitive with OzForex's competitors predominately being banks and other international payments
specialists. OzForex is participating and in many respects leading a successful industry disruption of
traditional international payment methods and processes, driven by online technology and mobile services.
OzForex is well positioned to take advantage of this rapidly evolving industry because it:
• Is priced at a discount to incumbents and offers premium client service to both consumers and businesses
• Has a difficult to replicate combination of assets, relationships and processes
• Has built a scalable proprietary technology platform that underpins key business functions including
marketing, client service, operations, settlements, treasury, risk management and compliance
• Uses a network of local and global banking relationships which ensures transactions process quickly,
securely and at a low cost for customers
The OzForex Group is headquartered in Sydney and has offices in London, Hong Kong, Auckland, Toronto, Singapore
and San Francisco, and employs around 200 hard working and passionate staff.
2
OzForex Annual Report 2014 what we dO
Our missiOn:
tO make
internatiOnal
Payments simPle
OzForex provides online international payment services for consumer and business clients. It enables clients
to make international payments safely and securely from one bank account to another bank account, in over
60 currencies and more than 900 currency pairs.
The Group also provides a range of international payment solutions to partner companies which assist them
to offer international payments services to their end-users.
OzForex offers clients access to a secure technology platform that is user-friendly and designed to provide a
streamlined experience, fast and simple registration and quick funds transfer. This technology platform assists
the Group to provide its clients with competitive and transparent pricing, particularly when compared to the
retail offering of many major banks.
The Group generates income by taking a foreign exchange spread on each transaction and transaction fees
but does not speculate or take positions on the direction of the foreign exchange market.
3
OzForex Annual Report 2014Competitive and transparent customer pricingEasy to use websites providing a streamlined experienceHigh levels of client service 24 hours a dayAn efficient transaction platform allowing for quick international payments across a broad range of currencies and multiple payment options examPle transactiOn Overview
the client receives
a currency price
quote
the client logs into
the Ozforex.com.au
website and enters
the transaction
details
the client receives
an email notification
confirming the
transaction details and
providing settlement
information
the client accepts the
quote and enters the
bank account details
of the beneficiary in
the united states
If this is the client’s first
transaction, the client
receives a call from a client
service officer to confirm
they have correctly entered
the information and
understand that they have
entered into a legal contract
a client in australia wants to pay a tuition fee of
US$15,000
for their child attending a university in
the united states.
4
OzForex Annual Report 2014 the client sends
australian dollars to
the group’s australian
local bank account
Methods of sending
Australian Dollars
Once the australian
dollars are cleared into
the group's australian
bank account the
group will initiate the
settlement process
BPay
POLi
Depending on the
currency and time of
day, this typically occurs
within 24 hours of the
funds being received by
the Group
Electronic funds transfer
via Internet banking
the group undertakes
settlement to the us dollar
beneficiary using one of the
group’s united states local
bank accounts.
5
OzForex Annual Report 2014 financial and OPeratiOnal
highlights
39%
$72,600, 000 net
Operating incOme
33%
$20,074,000 prOFOrma
npat in Fy14
2.375¢
FUlly Franked dividend
per Share
$41m
caSh pOSitiOn net
OF client liaBilitieS
49%
$13,600,000,000
in tUrnOver
38%
54,800 new dealing
clientS
31%
120,500 active clientS
26%
581,000 client
tranSactiOnS
6
OzForex Annual Report 2014 Our strategy
Our strategic drivers focus on customer centricity, innovation to drive more scale and better payment
solutions for our clients and further development of our business platform and risk management program
and systems. These drivers help us deliver against our key strategic initiatives:
1.
2.
3.
build a highly responsive, innovative and scalable
operating model servicing our key client types
expand our geographic footprint
become the provider of choice for other
companies or brands looking for international
payment solutions for their clients
grOwth in fee and cOmmissiOn incOme (%)
Toronto
San Francisco
North
America
74%
London
Europe
30%
Int. Payment
Solutions
56%
Hong Kong
Asia
100%
Sydney
Auckland
Australia &
New Zealand
38%
7
OzForex Annual Report 2014 chairman and ceO's letter
welcOme
it is our pleasure to present to shareholders Ozforex group limited’s inaugural annual
report for the financial year ending 31 march 2014.
this year has been the most significant year in Ozforex’s history. since the group was
founded in 1998, we have grown from being an australian-based foreign exchange
information website to now being a specialist international payments service and
solutions provider with a significant and growing global presence. the corporate
highlight of the year was our public listing on the asx on 11 October 2013 (asx code:
Ofx) which gave us the opportunity to share our growth story with the public and
invite many retail and institutional investors to become shareholders. the success
of the listing culminated in Ozforex entering the standard & Poor’s asx200 index
on 21 march 2014, reflecting not only our financial capability but the confidence of
shareholders in the board and the management team.
Just getting started
Whilst we have delivered strong growth this financial year, we believe that OzForex is just getting started and
life as a public company is the next chapter in the evolution of the Group. We operate in an attractive but highly
competitive market which is serviced predominantly by banks and other international payment specialists. Our
business model has a number of stand out features that puts OzForex in an excellent position to capture global
market share including our customer service proposition, our strong and widespread banking relationships, and
a highly scalable and unique proprietary trading platform that underpins the online nature of our business and
the simple user interface for our clients.
what we dO
OzForex provides online international payment services to consumer and business clients and also a range of
international payment solutions to partner companies, which in turn assists them to offer international payment
services to their own clients. Our technology platform is user friendly and designed to provide a streamlined
experience, with fast and simple registration and quick funds transfer. The same technology platform assists us
to provide clients with highly competitive and transparent pricing backed by a quality service team on call from
the time the foreign exchange market opens in New Zealand on Mondays to closing in New York on Fridays.
PerfOrmance highlights
We have had a successful year with strong growth across many of our key indicator and financial
metrics including:
key indicator highlights
• Active Clients grew by 31% to 120.5k
• New Dealing Clients grew by 38% to 54.8k
• Transaction Numbers grew by 26% to 581.1k
• Transaction Turnover grew by 49% to $13.6 billion
8
OzForex Annual Report 2014 financial highlights
• Pro forma Net Operating Income increased by 39% to $72.6 million
• Pro forma NPAT increased to $20.1 million
• The cash position net of client liabilities increased to $41.0m (pre dividend) from $31.2m in FY13
strategic highlights
We continue to strive and improve the efficiency of our business model with the simple aim of enhancing
the customer experience, which in turn leads to an increase in new dealing clients, active customers
and transactional volumes. Our compliance team has grown to meet the regulatory requirements of an
increasingly global footprint that has led to a significant increase in government organisations that regulate
us this financial year. This has required continued investment in our systems to manage the complexities of
working in different regulatory environments.
Our focus on geographic expansion of the Group’s international payment services is progressing well through
locally tailored marketing campaigns, recruitment of local sales and service staff, and expansion of our referral
network and partners. Since 1 April 2013 we have grown in the key North American market with 42 licences,
which means we can operate in 45 states. Across our key regions we have grown Fee and Commission Income
by 74% in North America, 30% in Europe, 100% in Asia, and 38% in Australia and New Zealand. We continue
to assess the potential expansion of our payment services into new geographies.
OzForex has also expanded its international payment solutions footprint with two of our strategic partners,
Travelex and MoneyGram. We commenced our MoneyGram branded partnership in Australia and New
Zealand, and have rolled out the Travelex branded partnership beyond the UK, to now include Australia,
New Zealand, Canada and the US.
lOOking fOrward
We continue to strive to be the leading provider of international payments and innovative payment solutions,
helping to “make international payments simple”.
To help meet our goals and execute on our growth strategies we have a robust balance sheet with no external
debt and strong cash flow conversion across the business.
Earlier this year we looked at acquiring UK based HIFX Limited, an opportunity we believed would have added
significant scale to our European operations and positioned the combined entity as a clear global leader in
international payments. Although the transaction did not proceed, we will continue to look at opportunities
as we believe the industry will further consolidate.
Whilst we will continue to focus on growth in net operating income and EBTDA, we have a constant requirement
to invest in people, opportunities and build out the IT and operational infrastructure. Notwithstanding this, we
have a strong history of cost containment and efficiency improvements.
the bOard
The Board is committed to the success of our business and ensuring that it is conducted ethically and in
accordance with the highest standards of corporate governance. We recognise the importance of governance,
environmental and social matters to our shareholders and other stakeholders and continually review
developments in these areas which are relevant to our business.
9
OzForex Annual Report 2014 chairman and ceO's letter (CONT)
The Board is relatively small and our Remuneration and Nomination Committee chaired by Melinda Conrad
(Non-Executive Director) has initiated a Board selection process to identify and appoint (one or two)
non-executive Board members with the right balance of attributes, personality, and skill sets. Our ambition
is to have a Board with a diversity of perspective, a collective set of competencies that will increase the
ability to ask critical questions and assess information, in addition to planning, stewardship and governing
responsibilities. We will keep our shareholders informed as we work through this Board selection process
during the coming financial year.
sharehOlder returns
The Board was pleased to announce a dividend of 2.375 cents per share fully franked. The dividend payment will
have a record date of 13 June 2014 and a payment date of 27 June 2014. The Group’s dividend policy is to payout
approximately 70%-80% NPAT per annum.
executive remuneratiOn
Executive remuneration for OzForex has been structured to attract and retain high calibre executives by
incentivising and rewarding strong performance in line with Group values and shareholder objectives. The Board
believes that equity participation through OzForex’s employee remuneration model maintains a strong alignment
with shareholders and is an important tool in attracting and retaining management and rewarding performance.
The remuneration structure proposed has been developed in compliance with the Corporations Act 2001 and
with reference to corporate governance principles and executive remuneration best practices as advised by
KPMG during the Initial Public Offering process. Refer to page 34 for further details.
cOmmunity & sOcial resPOnsibility
This year we ran our third annual Charity Day where we donated the day’s profits to charities selected by
staff from all of our offices. This year we raised $125,000 which was evenly distributed to BOOST Child Abuse
Prevention and Intervention (Canada), The Shepherd Centre (Australia), Rays of Sunshine (UK), Boys and Girls
Club of America (US) and SurfAid (Global).
Our PeOPle
This year staff numbers increased by 34 to 196 and we relocated our UK office to cater for ongoing growth in this
region. We will further invest in our people, our culture and have recently recruited a Head of Human Resources
to ensure we maintain and sustain a high performing diverse workforce across all our offices.
10
OzForex Annual Report 2014 a strOng ‘first’ year
We would like to take the opportunity to thank the following groups:
• The Board (past and present) for their guidance and contribution to the direction and oversight of the Group
• The management team at OzForex for their passion, unwavering determination and plain hard work over
a year in which they have not only delivered an outstanding result but have done so while navigating the
challenges of becoming a publicly listed company
• Our new shareholders for believing in our story and their continued support since listing
• Our hundreds of referral and strategic partners for their ongoing support and valuable feedback on the
services and solutions we offer
• Our clients for trusting us with their international payments and then referring our services to friends
and business networks, and finally
• Our banking partners for their ongoing commitment and willingness to support our business model.
OzForex is excited by the future and is committed to providing simpler and smarter international payment
solutions to our customers. We look forward to updating you, and meeting as many shareholders as possible
at the Company’s first Annual General Meeting on 6 August 2014.
Neil Helm (CEO)
Peter Warne (Chairman)
11
OzForex Annual Report 2014
Our bOard
Peter warne
indePendent nOn-executive
chairman – ba, faicd
member of the audit, risk and
compliance committee and
remuneration and nomination
committee
appointed: 19 September 2013
resident: Sydney, Australia
experience
Peter joined the OzForex Group in
September 2013 and has over 30
years’ experience in banking and
finance. Peter’s prior professional
experience includes Head of
Bankers Trust Australia Limited’s
Financial Markets Group.
current directorships
chairman: Australian Leisure
and Entertainment Property
Management Limited
director: ASX Limited (2006-);
Macquarie Group Limited (2007-);
Macquarie Bank Limited; Crowe
Horwath Australasia Limited
(formerly WHK Group Limited)
(2007-).
member
NSW Treasury Corporation;
Securities Industry Research
Centre of Asia Pacific (SIRCA);
Advisory Board for the Australian
Office of Financial Management;
Patron of Macquarie University
Foundation.
interest in shares:
125,000 ordinary shares.
12
neil helm
chief executive Officer and
managing directOr – bsc
(hOns)
melinda conrad
indePendent nOn-executive
directOr – mba (harvard),
faicd
appointed: 2 September 2013
and CEO since June 2007
resident: Sydney, Australia
experience
Neil commenced working with the
OzForex Group in June 2007.
Prior to joining the Group, Neil was
a Senior Manager at Accenture, a
Business Manager for the Foreign
Exchange Division at Bankers
Trust Australia and an Executive
Director at Macquarie. Neil is AFMA
accredited and is a responsible
manager for the OzForex
Group’s AFSL.
interest in shares:
176,250 performance rights in
the OzForex Group LTI Plan and
250,000 ordinary shares.
chair of the remuneration and
nomination committee and
member of the audit, risk and
compliance committee
appointed: 19 September 2013
resident: Sydney, Australia
experience
Melinda joined the OzForex Group
in September 2013 and has over
20 years’ experience in business
strategy and marketing. Melinda’s
prior professional experience
includes executive roles at
Harvard Business School, Colgate-
Palmolive, and several retail
businesses. Melinda was previously
a director of APN News & Media
Limited (2012-13).
current directorships
director: David Jones Limited
(2012-); The Reject Shop
Limited (2011-); The Australian
Brandenburg Orchestra.
member
Garvan Medical Research Institute
Foundation.
interest in shares:
50,000 ordinary shares.
OzForex Annual Report 2014 william allen
indePendent nOn-executive
directOr – ba
member of the remuneration
and nomination committee
appointed: 19 September 2013
resident: New York, USA
experience
William is a Principal at Carlyle
Global Financial Services Buyout
Group. William joined the OzForex
Group in February 2012 as a
Director of the previous parent
company, OzForex Pty Limited, on
behalf of a major shareholder at
that time, and became a director of
the now parent company, OzForex
Group Limited in September 2013.
He has 12 years’ experience in
finance. William’s prior professional
experience includes Director in the
Financial Institutions Group at UBS
Investment Bank.
current directorships
director: UniRush LLC.
interest in shares: nil.
grant murdoch
indePendent nOn-executive
directOr – mcOm (hOns),
faicd, ficaa
chair of the audit, risk and
compliance committee
appointed: 19 September 2013
resident: Brisbane, Australia
experience
Grant joined the OzForex Group in
September 2013 and has over 35
years’ experience in accounting
and corporate finance. Grant’s
prior professional experience
includes Head of Corporate
Finance for Ernst & Young
Queensland and is a graduate of
the Kellogg Advanced Executive
Program at the North Western
University, Chicago, United States.
current directorships
chairman: Endeavour Foundation
director: ALS Limited; QIC Limited;
Cardno Limited (2013-); UQ
Holdings Limited.
Other
Senator of the University of
Queensland; Adjunct Professor
School of Business, Economics
and Law at the University
of Queensland; Member of
Queensland State Council of AICD.
interest in shares:
50,000 ordinary shares.
13
OzForex Annual Report 2014 cOrPOrate gOvernance
statement
The corporate governance arrangements for OzForex Group Limited (the Company) and its subsidiaries (the
Group) are set by the Board having regard to the ASX Corporate Governance Council’s Corporate Governance
Principles and Recommendations, corporate best practice and the best interests of all shareholders.
The Company is committed to adopting best practice in corporate governance where these practices are
appropriate to the business and add value. Unless otherwise indicated, the practices referred to in this section
were introduced at the time of the Company’s listing on the Australian Securities Exchange on 11 October 2013.
These will be subject to further refinement during the coming year and in any event, will be reviewed regularly
to ensure they continue to be appropriate.
asx cOrPOrate gOvernance cOuncil – cOrPOrate gOvernance PrinciPles
and recOmmendatiOns
ASX Listing Rules require the Group to report on the extent to which it has followed the recommendations
that are contained in the ASX Corporate Governance Council’s Corporate Governance Principles and
Recommendations with 2010 Amendments (2nd Edition) (ASX Principles and Recommendations). The Group
will review and consider the changes introduced in March 2014 by the 3rd Edition of the Principles and
Recommendations in future annual reports as required.
Details of the Group’s application of the Principles and Recommendations during the year are set out below.
The documents referred to in this section of the annual report are available on the Group’s website.
PrinciPle 1
LAY SOLID FOUNDATIONS FOR
MANAGEMENT AND OvERSIGHT
rOle Of bOard and management
The Board has adopted a Board Charter that details the functions and responsibilities of the Board, Chairman
and individual directors. Responsibility for the day to day management and administration of the Group is
delegated to the Chief Executive Officer (CEO), assisted by his direct reports. The CEO manages the Group
in accordance with the strategy, financial plans and delegations approved by the Board.
The Board is responsible for the overall operation and stewardship of the Group and, in particular for the
long-term growth and profitability of the Group, the strategies, policies and financial objectives of the Group
and for monitoring the implementation of those policies, strategies and financial objectives.
The functions reserved to the Board include:
• Providing input to, and approval of, the Group’s strategic direction and budgets as developed by management
and delegating implementation of that to the CEO.
• Directing, monitoring and assessing the Group’s performance against strategic and business plans, to
determine if appropriate resources are available.
• Approving and monitoring capital management and major capital expenditure, acquisitions and divestments.
• Identifying the principal risks of the Group’s business, reviewing and ratifying the Group’s systems of internal
compliance and control, risk management and legal compliance, to determine the integrity and effectiveness
of those systems.
• Approving and monitoring internal and external financial and other reporting, including reporting to
shareholders, the ASX and other stakeholders.
14
OzForex Annual Report 2014 • The appointment and removal of the CEO and the Company Secretary.
• Ratifying the appointment and removal of executives (which includes all executives who report directly
to the CEO).
• Determining whether the remuneration and conditions of service of senior executives are appropriate.
• Establishing and monitoring executive succession planning.
• Approving criteria for assessing performance of senior executives and monitoring and evaluating
their performance.
• Ensuring ethical behaviour and compliance with the Group’s own governing documents, including the Group’s
Code of Conduct.
To assist in undertaking the above in the most efficient manner, it established two Board Committees and the
members are as follows as at 31 March 2014:
• Audit, Risk and Compliance (ARC) Committee – Grant Murdoch (Chair), Melinda Conrad and Peter Warne; and
• Remuneration and Nomination Committee – Melinda Conrad (Chair), William Allen and Peter Warne.
There is a Charter for each Committee setting out its role and responsibilities. Further details about the operation
of these Committees can be found below.
Non-executive directors are appointed pursuant to letters of appointment setting out their key terms and
conditions of appointment and including further details regarding director’s remuneration, director’s duties and
responsibilities, board performance evaluation, confidentiality of information, disclosure of interest and matters
affecting independence and entering into deeds of indemnity, insurance and access.
The CEO and his direct reports all have letters of appointment setting out the key terms and conditions of
appointment and include details about their remuneration, which are updated from time to time, as appropriate.
evaluatiOn Of executives
The Remuneration and Nomination Committee, together with the CEO reviews and makes recommendations to
the Board following the CEO’s annual performance assessment of his direct reports. The annual performance
assessment of the CEO is undertaken by the Remuneration and Nomination Committee. Further details can be
found in the Remuneration Report on pages 34-47 of this Report.
PrinciPle 2
STRUCTURE THE BOARD
TO ADD vALUE
cOmPOsitiOn Of the bOard
At 31 March 2014 the Board comprised five Directors, being a non-executive Chairman, one executive Director
and three non-executive Directors. The Board comprises Directors with an appropriate range of skills, experience
and expertise together with a proper understanding of and competence to deal with, current and emerging
issues of the business.
15
OzForex Annual Report 2014 cOrPOrate gOvernance
statement (CONT)
It is expected that, during the coming financial year, the Board will appoint up to two further independent
directors to the Board. The appointment of any new directors will be based on pre-established criteria having
regard to the existing skills matrix of the Board as a whole and having assessed those areas where additional
skills or background or experience are required.
Full biographical details of the Directors can be found on pages 12-13 of the Report.
directOr indePendence
The Board Charter requires that the majority of the Directors are to be “independent” as defined in the Board
Charter. This takes into account the guidance provided under the ASX Listing Rules and the ASX Principles
and Recommendations.
The Board will review any determination it makes as to a Director’s independence on becoming aware of any
information that may have an impact on the independence of the Director. For this purpose, Directors are
required to ensure that they immediately advise the Board of any relevant new or changed relationships to
enable the Board to consider and determine the materiality of the relationships.
The Board considers that Peter Warne, Melinda Conrad, Grant Murdoch and William Allen are
Independent Directors.
The Board has determined that Neil Helm is not an Independent Director because of his executive
responsibilities as CEO.
chairman and ceO are nOt the same PersOn
The Chairman of the Board is elected by the non-executive Directors. The Board supports the separation of
the role of Chairman (Peter Warne) and CEO (Neil Helm). The Chairman’s role is to manage the Board effectively,
to provide leadership to the Board, and to facilitate the Board’s interface with the CEO.
Peter Warne was appointed as Chairman of the Board in September 2013. The Board has determined that
Peter Warne is an Independent Director.
nOminatiOn cOmmittee
The procedures for the appointment and removal of Directors are ultimately governed by the Company’s
Constitution. One of the roles of the Remuneration and Nominations Committee, as set out in its Charter, is to
identify and recommend to the Board individuals for nomination as members of the Board and its Committees,
taking into account such factors as it deems appropriate, including experience, qualifications, judgement and the
ability to work with other Directors.
Directors receive formal letters of appointment setting out the arrangements relating to their appointments.
bOard and cOmmittee PerfOrmance evaluatiOn
The non-executive Directors were all appointed in September 2013, just prior to the Company’s ASX listing, and
therefore no formal performance assessment has been necessary to date. It is intended that the performance of
the Board will be regularly assessed. Further details will be provided in the 2015 annual report.
directOr inductiOn and educatiOn
All Directors are responsible for ensuring they remain current in understanding their duties as Directors. Directors
have access to continuing education about the Group in the form of regular updates from the CEO and his direct
reports, and where necessary by external legal and financial advisors on specific issues.
16
OzForex Annual Report 2014 cOnflicts Of interest
The letters of appointment of the Directors outline the Board’s policy on conflicts of interest. Where conflicts of
interest do exist, Directors excuse themselves from discussions and do not exercise their right to vote in respect
of such matters.
access tO infOrmatiOn
All Directors have access to the CEO’s direct reports, including the Company Secretary, to discuss issues or obtain
information on specific areas in relation to items to be considered at Board meetings or other areas as they
consider appropriate. Further, Directors have unrestricted access to Group records and information.
The Board, the Board Committees and each Director have the right, subject to the approval of the Chairman,
to seek independent professional advice at the Group’s expense to assist them to carry out their responsibilities.
Further, the Board and Board Committees have the authority to secure the attendance at meetings of outsiders
with relevant experience and expertise.
cOmPany secretary
The Company Secretary reports directly to the Chairman of the Board and has an internal reporting line to the
CEO. The Company Secretary is accountable to the Board, through the Chairman on all Board and governance
matters.
The Company Secretary is responsible for supporting the effectiveness of the Board by ensuring that policies and
procedures are followed and co-ordinating the completion and dispatch of the Board agendas and papers.
trading in the cOmPany securities by directOrs and emPlOyees
All Directors and employees are required to comply with the Group’s Securities Trading Policy in undertaking any
trading in the Company’s shares and may not trade if they are in possession of any inside information. Directors
and employees can only trade during the specified trading windows immediately following the release of the half
year and full year results and the annual meeting. In addition, Directors and certain restricted employees may
only trade during the trading windows with prior written clearance as set out in the Policy.
The table of Directors’ shareholdings is included in the Directors Report.
PrinciPle 3
PROMOTE ETHICAL AND
RESPONSIBLE DECISION MAKING
cOde Of cOnduct
The Board maintains high standards of ethical conduct and the CEO is responsible for ensuring that high
standards of conduct are maintained by all staff. The Group’s reputation as an ethical business organisation is
critical to its ongoing success. The Board has adopted a “Code of Conduct” covering the practices necessary
to maintain confidence in the Group’s integrity; the practices necessary to take into account the Group’s
legal obligations and reasonable expectations of its stakeholders; and the responsibility and accountability of
individuals for reporting and investigating reports of unethical practices. It is not a prescriptive set of rules but
rather a practical set of principles giving direction and reflecting the Group’s approach to business conduct.
A full copy of the Code of Conduct is available on the Group’s website.
17
OzForex Annual Report 2014 cOrPOrate gOvernance
statement (CONT)
diversity
The Board has adopted a Diversity Policy and the Company is committed to providing and promoting a corporate
culture which embraces diversity. The Diversity Policy includes a requirement for the Board to establish
measureable objectives for achieving gender diversity and for the Board to assess annually both the objectives
and progress in achieving them. The Head of Human Resources is responsible for ensuring that the Company
meets its compliance and reporting obligations.
At 31 March 2014, the proportion of women employed by the Group (and its wholly owned subsidiaries) was
as follows: 31% in all positions; 28% in executive positions; and 20% on the Board. These figures include
permanent full-time, permanent part-time and fixed-term employees, but not independent contractors.
The Group aims to introduce the following programs and initiatives to assist with improving diversity within
the organisation:
• Coaching and mentoring programs;
• Career opportunity and targeted professional development programs including those aimed at helping
employees develop skills and experience in preparation for senior management and board positions;
• Work life balance policies including flexible work options, in-house childcare facilities, return to work
programs; and
• Networking opportunities.
The Board intends, during the 2015 financial year, to develop measurable objectives for achieving gender
diversity, and will report on progress in its 2015 annual report.
PrinciPle 4
SAFEGUARD INTEGRITY IN
FINANCIAL REPORTING
audit, risk and cOmPliance cOmmittee
The Board is committed to a transparent system for auditing and reporting of the Group’s financial performance.
The Board has established an Audit, Risk and Compliance Committee, which performs a central role in
achieving this goal.
The Audit Risk and Compliance Committee’s principal functions as set out in its Charter, which is available
on the website are as follows:
• To ensure that it understands the Group’s structure, business and controls to ensure that it can adequately
assess the significant risks facing the Group;
• To oversee the Group’s financial reporting process on behalf of the Board and to report the results of its
activities to the Board, including:
– to review the Group’s financial statements to determine whether they are accurate and complete
and make any necessary recommendations to the Board;
– to review significant accounting policies adopted by the Group to ensure compliance with AIFRS
and generally accepted accounting principles;
– consider financial matters relevant to half year reporting in a timely manner; and
– review other financial information distributed externally as required.
18
OzForex Annual Report 2014 One of the main purposes of the Audit, Risk and Compliance Committee is to ensure the quality and
independence of the audit process. The Chair of the Committee and the Chief Financial Officer work with the
external auditors to plan the audit approach. All aspects of the audit are reported back to the Committee and
the auditors are given the opportunity at Committee meetings to meet with the Board. At least twice a year,
the auditors meet with the Board without management present.
The Audit, Risk and Compliance Committee is structured so that it has at least three members, consists only of
non-executive directors, consists of a majority of independent directors and is chaired by an independent Chair
who is not the Chairman of the Board. Further, all members must be financially literate and at least one member
shall have accounting and/or related financial management expertise.
The Audit, Risk and Compliance Committee has a minimum of four scheduled meetings each year and at other
times as required. The Company Secretary attends and minutes all meetings. The Chair of the Committee reports
the findings of the Committee back to the Board at the following Board meeting. Details of the meetings of the
Audit, Risk and Compliance Committee can be found in the Directors' Report.
The auditor is invited to attend all meetings. To ensure the auditor remains independent, all audit and non-audit
work is authorised by the Committee. The auditors are not permitted to perform any non-audit or assurance
services that may impair or appear to impair the external auditor’s judgement.
PrinciPle 5 MAKE TIMELY AND
BALANCED DISCLOSURE
cOntinuOus disclOsure POlicy
The Board has adopted a comprehensive Continuous Disclosure Policy. The purpose of the Continuous Disclosure
Policy is to:
• Ensure that the Company, as a minimum, complies with its continuous disclosure obligations under the
Corporations Act 2001 and the ASX Listing Rules and as much as possible seeks to achieve and exceed
best practice;
• Provide shareholders and the market with timely, direct and equal access to information issued by the
Group; and
• Promote investor confidence in the integrity of the Group and its securities.
The Policy is administered by several key personnel within the Group with the Company Secretary having overall
responsibility for the administration of the Policy and all communications with the ASX. The onus is on all staff to
inform the Company Secretary of any material price sensitive information as soon as becoming aware of it.
19
OzForex Annual Report 2014 cOrPOrate gOvernance
statement (CONT)
PrinciPle 6
RESPECT THE RIGHTS OF
SHAREHOLDERS
sharehOlder cOmmunicatiOns
The Group is committed to effective, accurate and timely communication with its shareholders, market
participants, customers, employees, suppliers, financiers, creditors, other stakeholders and the wider community.
The Group will ensure that all stakeholders, market participants and the wider community are informed of its
activities and performance.
The Board has adopted a Communications Policy, which sets out the Group’s approach and commitment
to communication. Information is communicated in a number of ways including:
• Website;
• Annual and half yearly reports;
• Market disclosure;
• Updates on operations and developments;
• Market briefings;
• Presentations at annual meetings.
The half year and annual report, market releases and presentations are all available on the Group’s website.
PrinciPle 7
RECOGNISE AND
MANAGE RISK
risk management POlicy
The Group has a Risk Management Policy. The Group seeks to ensure that appropriate systems are in place to
identify material risks that impact the business; that the financial impact of identified risks are understood and
appropriate internal control systems are in place to limit the Group’s exposure to such risks; that appropriate
responsibilities are delegated to control the identified risks effectively and any material changes to the Group’s
risk profile are appropriately disclosed.
a risk management and internal cOntrOl system
The Board Charter provides that it is the responsibility of the Board to identify the principal risks of the business
and also to review and ratify the Group’s systems of internal compliance and control, risk management and legal
compliance to determine the integrity and effectiveness of those systems.
The Audit, Risk and Compliance Committee also assists the Board in carrying out its accounting, auditing,
financial reporting and risk management responsibilities. The Committee is required to regularly review those
areas of greatest compliance risk including obtaining updates from management. The Committee are required
to at least annually review the effectiveness of the compliance function and be satisfied that all regulatory
compliance matters have been considered in the preparation of all official documents of the Group. Management
20
OzForex Annual Report 2014 undertakes half yearly risk assessments and these assessments are reported to the Committee. The risk
assessments include information to show the status of identified risks and how these are being managed.
The Chief Executive and the Chief Financial Officer have provided a written statement to the Board in accordance
with section 295A of the Corporations Act 2001 that their view provided on the Group’s financial report is
founded on a sound system of risk management, internal compliance and control which implements the
financial policies adopted by the Board, and that the Group’s risk management and internal compliance and
control system is operating in all material respects. The signed statement was received by the Board prior to
the acceptance of the annual financial statements.
PrinciPle 8
REMUNERATE FAIRLY AND
RESPONSIBLY
remuneratiOn and nOminatiOn cOmmittee
The Remuneration and Nomination Committee’s purpose, duties, membership and structure are documented
in its Charter. The Remuneration and Nomination Committee is responsible for:
• Providing advice in relation to remuneration packages of senior executives, non-executive Directors and
executive Directors, equity-based incentive plans and other employee benefit programs;
• Reviewing the Group’s recruitment, retention and termination policies;
• Reviewing the Group’s superannuation arrangements;
• Reviewing succession plans of Executives and the CEO;
• Recommending individuals for nomination as members of the Board and its committees;
• Ensuring the performance of the senior executives and members of the Board are reviewed at least annually;
• Considering those aspects of the Group’s remuneration policies and packages including equity-based
incentives, which should be subject to shareholder approval; and
• Monitoring the size and composition of the Board and consider strategies to address Board diversity and the
Group’s performance in respect of the Group’s Diversity Policy.
Details of meetings of the Remuneration and Nomination Committee can be found in the Directors' Report.
cOmPOsitiOn Of cOmmittee
The Remuneration and Nomination Committee is structured so that is has at least three members, consists only
of non-executive directors all of whom are independent directors, and is chaired by an independent Chair
who is not the Chairman of the Board.
remuneratiOn Of nOn-executive directOrs and executives
Full details of the remuneration arrangements of the non-Executive Directors and Executives are set out
in the Remuneration Report on pages 34-47 of this Report.
21
OzForex Annual Report 2014 Financial RepoRt
FoR the Financial yeaR ended 31 MaRch 2014
Directors’ Report
Remuneration Report
Auditor’s Independence Declaration
Financial Statements
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
Derivative financial instruments at fair value through profit and loss
Note 1. Summary of significant accounting policies
Note 2. Segment information
Note 3. Profit for the financial year
Note 4.
Income tax expense
Note 5. Cash and cash equivalents (current assets)
Note 6.
Note 7. Other assets (current assets)
Note 8. Property, plant and equipment
Note 9. Deferred income tax assets/(liabilities)
Note 10. Client liabilities
Note 11. Other liabilities (current liabilities)
Note 12. Provisions
Note 13. Contributed equity
Note 14. Retained earnings
Note 15. Dividends paid and distributions paid or provided for
Note 16. Capital
Note 17. Commitments
Note 18. Notes to the statement of cash flows
Note 19. Related party information
Note 20. Key management personnel disclosure
Note 21. Employee equity participation
Note 22. Contingent liabilities and assets
Note 23. Financial risk management
Note 24. Fair values of financial assets and liabilities
Note 25. Remuneration of auditors
Note 26. Events occurring after balance sheet date
Note 27. Earnings per share
Note 28. Parent entity financial information
Directors’ Declaration
Independent Auditor’s Report
Shareholder Information
Corporate Information
22
OzForex Annual Report 2014
23
34
48
49
49
50
51
52
53
53
65
67
69
69
69
69
70
71
71
72
72
73
73
74
74
75
75
76
78
80
81
81
89
90
91
91
92
93
94
96
98
diRectoRs’ RepoRt
The Directors of OzForex Group Limited (OzForex, the Company), submit their report (including the Remuneration
Report), Statement of Comprehensive Income and Statement of Cash Flow for the year ended 31 March 2014 and
the Statement of Financial Position as at 31 March 2014 of the Company and its subsidiaries (the Consolidated
Entity, the Group) at the end of, and during, the financial year ended on 31 March 2014, the auditor’s report, and
report as follows:
section 1: listing oF ozFoRex gRoup liMited on the a ustRalian
secuRities exchange
The Company was conditionally listed on the Australian Securities Exchange (ASX) on 11 October 2013
(listing date).
The listing of OzForex on the ASX required an internal corporate restructure immediately prior to the listing
becoming unconditional on 16 October 2013. The internal corporate restructure resulted in the share capital
of OzForex Limited (former parent entity) being transferred to the Company for a like for like share swap on
15 October 2013. The beneficial owners of the Company at the time of the transfer were the shareholders
of the former parent entity in the same proportions. In accordance with AASB 3 the transaction was
treated as a continuation of the former Group.
section 2: state oF aFFaiRs and signiFicant changes
in the state oF aFFaiRs
In association with the listing on the ASX referred to above, the following changes in the state of affairs occurred:
• 4 October 2013 OzForex Pty Limited became a non-listed public company (OzForex Limited);
• 11 October 2013 OzForex Group Limited (ACN 165 602 273) listed on the ASX on a conditional basis;
• 15 October 2013 the shareholders of OzForex Group Limited resolved to approve a division of issued share
capital in accordance with section 245H of the Corporations Act 2001, increasing the number of shares
on issue from 360,000 to 228,000,000 shares; and
• 16 October 2013 OzForex Group Limited issued a further 12,000,000 new shares (and 207,690,000
existing shares were transferred) to new shareholders as part of the listing on the ASX for $2.00 per
share raising $24 million of new capital. This resulted in the OzForex Group Limited listing on the ASX
on an unconditional basis.
The purpose of this offering was to:
• Provide funding flexibility to support future growth, including by acquisition; and
• Create liquidity in OzForex shares by listing on the ASX, allowing for existing and new shareholders
to sell their shares or buy further shares on market.
There have been no other material changes in the state of affairs that have occurred in the financial year.
23
OzForex Annual Report 2014For the Financial year ended 31 March 2014 diRectoRs’ RepoRt (CONT)
section 3: statutoRy and pRo FoRMa inFoRMation
As required for statutory reporting purposes, the consolidated financial statements of the Consolidated Entity
have been presented for the financial year ended 31 March 2014.
The Group’s statutory financial information has been prepared as a continuation of OzForex Limited (formerly
OzForex Pty Limited) and its subsidiaries. Its comparative periods and the period 1 April 2013 to 15 October 2013
are based on the results of OzForex Limited and its subsidiaries.
The Group’s statutory financial information for the year ended 31 March 2014 and for the comparative year ended
31 March 2013 present the Group’s performance in compliance with statutory reporting obligations. The Group’s
statutory financial results only reflect changes in operating and corporate costs associated with the Group
becoming a publicly listed entity from 11 October 2013.
To assist shareholders and other stakeholders in their understanding of the Group’s financial information
as a publicly listed entity, additional pro forma financial information for the years ended 31 March 2013
and 31 March 2014 are provided in the operating and financial review section of this Report.
In the preparation of the pro forma financial information, adjustments have been made to the Group’s statutory
results to present a view of performance as if the Group had been listed on the ASX from 1 April 2012.
A reconciliation of the Company’s statutory and pro forma financial information is included in Section 10.
The reconciliation and the pro forma information have not been audited.
section 4: diRectoRs
The following persons were Directors of the Group at 31 March 2014:
Peter Warne
William Allen
Melinda Conrad
Neil Helm
Grant Murdoch
Chairman
Non-Executive Director
Non-Executive Director
Managing Director and Chief Executive Officer (CEO)
Non-Executive Director
The background, qualifications and experience of each of the Directors as at the date of this Report is included in
Section 23.
section 5: coMpany secRetaRy
Ms Linda Cox was appointed Company Secretary and Head of Investor Relations of the Company on 31 January 2014.
Ms Cox has over 15 years of experience working in company secretarial roles in ASX and NZX listed companies
including Telecom Corporation of New Zealand Limited, Xero Limited and Trade Me Group Limited. Ms Cox holds a
Bachelor of Laws from Victoria University of Wellington. She is a Fellow of the Governance Institute of Australia.
24
OzForex Annual Report 2014For the Financial year ended 31 March 2014 section 6: diRectoRs’ Meetings
The following table shows meetings held between 19 September 2013 and 31 March 2014 and the number
attended by each Director or Committee member.
Director
P Warne
W Allen
M Conrad
N Helm1
G Murdoch
Board
Audit, Risk & Compliance Committee
Remuneration and Nomination
Committee
Held
Attended
Held
Attended
Held
Attended
5
5
5
5
5
5
5
5
5
5
3
–
3
3
3
3
–
3
3
3
2
2
2
2
–
2
2
2
2
–
1. Mr Helm attended the Audit, Risk and Compliance Committee and the Remuneration and Nomination Committee meetings at the invitation of the Committees.
section 7: diRectoRs’ inteRests
The relevant interest of each Director in the equity of the Company as at the date of this Report is outlined in the
table below. All interests are ordinary shares unless otherwise stated.
P Warne
W Allen
M Conrad
N Helm2
Type
ordinary
–
ordinary
ordinary
performance rights
G Murdoch
ordinary
Opening balance
–
–
–
–
–
–
Acquisition
125,000
–
50,000
250,000
176,250
50,000
Closing balance
125,000
–
50,000
250,000
176,250
50,000
2. Mr Helm was granted 176,250 performance rights on 11 October 2013. More details about these can be found in the Remuneration Report.
There were no disposals of shares by the Directors during the year or share transactions post year end.
section 8: pRincipal activities
The Group’s principal activity during the year was the provision of international payments and foreign
exchange services.
section 9: dividend and distRibutions
Dividends paid or declared by the Company during and since the end of the year are set out in Notes 15
and Notes 26 to the Financial Statements respectively.
Per Share
Total amount ($000)
Franked3
Payment date
3. All dividends are fully franked based on tax paid at 30%
Final 2014
0.02375
5,700
100%
27 June 2014
25
OzForex Annual Report 2014 diRectoRs’ RepoRt (CONT)
section 10: opeRating and Financial Review
A summary of financial results for the years ended 31 March are outlined below:
Net operating income1
EBITDA2
EBITDA margin3
Net profit (after tax)
Pro forma net profit (after tax)4
Earnings per share (EPS)
Pro forma earnings per share5
Cash balance at 31 March6
Growth
%
39.3%
(8.8%)
(6.8%)
33.3%
2014
$’000
72,565
20,912
28.8%
15,967
20,074
6.84
8.60
148,758
2013
$’000
52,079
22,934
44.0%
17,137
15,064
7.52
7.26
92,112
1. Net operating income is the combination of net interest income and net fee and commission income;
2. Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) is a non IFRS measure that is unaudited. Refer to EBITDA reconciliation further in this Section;
3. EBITDA margin is calculated with reference to net operating income;
4. Pro forma net profit (after tax) (NPAT) is net profit after tax adjusted for one time income and expenses and also the annualisation of ongoing expenses.
Refer to the NPAT reconciliation further in this Section;
5. Pro forma earnings per share was calculated with reference to pro forma net profit after tax;
6. Cash includes cash held for subsequent settlement of client liabilities. The net cash position after client liabilities is $41.0 million at 31 March 2014
(2013: $31.2 million).
The Group continued to experience strong revenue growth in 2014, increasing net operating income by 39.3%
to $72.6 million. As a result of listing on the ASX, the Group incurred a number of one-time expenses. Combined
with an approach to acquire a UK based competitor, HiFX Limited (‘the HiFX process’), these one-time expenses
caused a 6.8% decrease in net profit after tax (NPAT) to $16.0 million. Excluding the HiFX process costs, the
decrease was foreshadowed in the IPO prospectus.
Whilst the statutory NPAT of the Group was down, the underlying NPAT adjusted for the one off impacts of
listing and the HiFX process was up by 25.8% to $20.8 million. In order to better understand the underlying
NPAT of the Group, and the pro forma NPAT, the reconciliation is outlined as follows:
26
OzForex Annual Report 2014For the Financial year ended 31 March 2014 NPAT
GST reclaim relating to prior periods7
IPO process bonuses and related on costs8
HiFX process costs
Income for role as IPO arranger9
Tax impact
Tax timing difference of IPO bonuses
Underlying NPAT
Annualisation of ongoing public company costs10
Tax effect
Pro forma NPAT
2014
$’000
15,967
–
6,890
878
(844)
(427)
(1,650)
20,814
(1,057)
317
20,074
2013
$’000
17,137
(847)
–
–
–
254
–
16,544
(2,114)
634
15,064
Growth
%
(6.8%)
25.8%
33.3%
7. An amendment to the Goods and Services Tax Ruling GSTR 2002/2 in Australia resulted in a historical claim for previously expensed non-recoverable GST.
The claim for historic periods was recognised in the period ended 31 March 2013 as a one-time benefit.
8. Relates to the bonuses allocated to key employees pre the IPO listing. These are outlined in the Remuneration Report.
9. OzForex Limited acted as arranger in the IPO process for Cloudbreak Settlement Pty Limited, and received a fee for the service.
10. In the process of becoming a listed entity the operational costs of the Group increased by approximately $2 million per annum. The actual costs incurred were
only for a 6 month period from listing date. The above adjustment annualises the expenses to allow a comparison of the NPAT run rate.
The pro forma reconciliation reflects the Group’s strong growth in pro forma NPAT up 33.3% to $20.1 million. This
is including the $1.5 million of annualised post tax expenses that were incurred as a result of listing on the ASX.
Geographic expansion of the Group’s own branded international payment services is progressing well through
locally tailored marketing campaigns, recruitment of local sales and service staff, and expansion of partnerships
and referral networks. All the Group’s segments experienced growth for the year ended 31 March 2014.
Whilst Australia and New Zealand (ANZ) and Europe continue to provide the majority of the Group’s fee and
commission income, delivering 74.9% of the Group total, the proportion attributable to ANZ and Europe has
decreased from 78.6% for the year ended 31 March 2013. Despite this slight decrease in overall contribution,
ANZ still experienced 38.2% growth, whilst Europe grew by 36.7%.
In North America the Group has operations in Canada and the US. The increasing license footprint in the US,
where the Group’s license portfolio increased by 27 licenses since April 2013 allowing the Group to operate
in 42 States, enabled the Group to grow fee and commission income by 76% to $8.5 million. North America’s
contribution to the Group’s fee and commission income increased from 9% in the year ended 31 March 2013
to 11% in the year ended 31 March 2014.
Hong Kong was the Group’s key Asian focus in the period with the segment experiencing 100% growth in fee
and commission income to $1.7 million.
The International Payment Solutions (IPS) division was successful in initiating branded partnership solutions for
MoneyGram in ANZ and Travelex in Australia, New Zealand, Canada and the US. These additions augmented the
Group’s suite of existing branded partnerships (Macquarie, ING), and enabled the IPS division to increase Fee and
commission income by 57% to $9.2 million.
The Group’s EBITDA decreased by 8.8% to $20.9 million, with EBITDA margin decreasing from 44.0% to 28.8%.
The Group’s operating expenses increased by 82%, with a net expenditure of $6.9 million relating to the Group’s
listing on the ASX, and the Groups involvement in the HiFX sale process in January 2014. Operating expenses
in the year ended 31 March 2013 also benefited from a one-off GST benefit of $0.8 million. Excluding these
one-time costs the Group’s operating expenses increased by $14.9 million to $43.2 million, an increase of 52.7%.
27
OzForex Annual Report 2014 diRectoRs’ RepoRt (CONT)
section 10: opeRating and Financial Review (CONT)
EBITDA is a non-IFRS unaudited measure that is calculated by adding back tax and is reconciled as outlined below:
Profit for the year
Add back income tax expense
Add back depreciation
Add back amortisation
Earnings before Tax, Depreciation
and Amortisation (EBTDA)1
Less net interest income
EBITDA
Growth
%
(6.7%)
2014
$’000
15,984
5,915
540
–
2013
$’000
17,136
7,107
489
–
22,439
24,732
(9.3%)
(1,527)
20,912
(1,798)
22,934
(8.8%)
1. The Group actively uses its cash balances as part of its hedging strategy making the interest income integral to its earnings. For this reason, the Group regularly
uses EBTDA as a measure of performance.
The Group’s financial position remains strong. The balance sheet consists predominantly of cash and client
liabilities. The cash position net of customer liabilities increased to $41.0 million from $31.2 million. The Group
currently has no external debt.
Cash2
Client liabilities2
Net Cash position
2014
$’000
148,758
(107,763)
40,995
2013
$’000
92,112
(60,944)
31,168
Growth
%
61.5%
76.8%
31.5%
2. Cash and Client liabilities can vary greatly depending on the timing of deal flows.
The financial position provides a good platform to pursue future growth opportunities.
28
OzForex Annual Report 2014For the Financial year ended 31 March 2014 section 11: stRategy
The strategy of the Group remains to:
• Build a highly responsive, innovative and scalable operating model servicing our consumer
and business clients;
• Expand the geographic footprint; and
• Become the provider of choice for other companies or brands looking for international payment
solutions for their clients.
Supporting these three strategic goals are specific drivers that will drive the business priorities and initiatives.
These include further maturation of the customer centric approach, continued focus on innovation to drive
more scale and better payment solutions for our clients and further development of business systems and
the risk management program. Critical to our success will be maintaining and sustaining a high performing
diverse workforce across all office locations.
operational highlights
Build a highly responsive, innovative and scalable operating model servicing our key client types
• Since inception in August 2012, the iOS/Android ‘Currency App’ continues to evolve and increase
in popularity having been downloaded by over 220,000 users;
• The Group added three new currencies – BGN (Bulgarian Lev), EGP (Egyptian Pound) and MGA
(Malagasy Ariary) – taking the total to 65 currencies where payment facilities can be provided
to clients;
• The number of visits to the mobile site has increased to 3.4m, a 292% increase on the year ended
31 March 2013;
• Significant improvements to the payments reconciliation engine have increased automatic matching
rates by c.50% and helped deliver annual efficiency gains in the settlements team by 33%;
• ClearFX branded website re-launched to bring it in line with the Group’s brands;
• Re-engineered registration journey to improve scalability in the customer service teams
eliminating registrations for unsupported products (e.g. cash);
• Redesigned the mobile registration pages to improve conversion rates with development
and implementation scheduled for the first half of 2015;
• Debit card payments launched in the UK;
• Direct debit capability launched in the US and has improved new dealing client conversion rates.
Expand the geographic footprint
• Expanded the US State license portfolio by 27 enabling the Group to operate in 42 States;
• Increased focus on merger and acquisition opportunities in offshore markets to aid geographic expansion;
• Submitted application for a Money Services Organisation license with the Monetary Authority of Singapore
with a decision due in the coming months.
Become the provider of choice for other companies or brands looking for international payment
solutions for their clients
• Commenced the MoneyGram branded partnership in Australia and New Zealand;
• Expanded the Travelex branded partnership to include Australia, New Zealand, Canada
and selected states in the US;
• Addition of MoneyGram and expansion of Travelex augmented the Group’s existing branded partnerships
(Macquarie, ING) and enabled the IPS division to grow income before hedging and transaction costs by 56%;
• The number of activated OzForex Travel cards increased by 133% to 15,000.
29
OzForex Annual Report 2014 diRectoRs’ RepoRt (CONT)
section 12: Risk
The potential risks associated with the Group’s business are outlined below. It does not list every risk that may
be associated with the Group, and the occurrence or consequences of some of the risks described are partially
or completely outside the control of the Group, its Directors and senior management. There is also no guarantee
or assurance that the risks will not change or that other risks will not emerge:
• Competition – A substantial increase in competition could result in the Group’s services becoming less
attractive to consumer or business clients and partner companies; require the Group to increase its marketing
or capital expenditure; or require the Group to lower its spreads or alter other aspects of its business model to
remain competitive. The Group continues to invest in product innovation and monitor competition to ensure it
is able to respond to such challenges;
• Relationships with banking counterparties – The Group relies on banks to conduct its business, particularly to
provide its network of local and global bank accounts and act as counterparties in the management of foreign
exchange and interest rate risk. There is a risk that one or more of these banks may cease to deal with the
Group (which may occur on short notice), cease to deal with international payments services generally,
substantially reduce the services it offers, substantially alter the terms on which it is willing to offer services
to the Group, exit one or more of the markets for which the Group uses its services, or collapse. This has
occurred in the past and may occur again in the future. The Group manages this risk by having a suite of
banking service providers to ensure there is redundancy in its banking relationships to operate effectively;
• Regulatory compliance – The international payments market is a highly regulated area of economic activity.
The Group devotes significant resources to comply with applicable regulations. However, there is a risk that
any new or changed regulations could require the Group to increase its spending on regulatory compliance
and/or change its business practices, which could adversely affect the Group’s profitability. There is a risk
that such regulations could also make it uneconomic for the Group to continue to operate in places that it
currently does business.
In addition, there is a risk that evidence of a serious failure to comply with laws may result in severe penalties
including being forced to cease doing business;
• Information technology (IT) – The Group’s business operations rely on IT infrastructure and systems. Any
interruptions to these operations could impair the Group’s ability to operate its customer facing websites
which could have a negative impact on performance. The Group has a number of operational processes and
disaster risk recovery plans in place to mitigate this risk;
• Foreign exchange rate fluctuations – The Group may be affected by a change in the value of currencies, in
particular a strengthening of the Australian Dollar, which may impact both transaction turnover and reported
earnings. The Group continues to increase its geographic footprint and therefore the diversity of its currency
flows in order to mitigate the impact of any one currency’s fluctuation;
• Online marketing channels – The growth in new dealing clients depends in part on the effectiveness of
the online marketing efforts of the Group and its partner companies. There is a risk that the Group’s online
advertising may become less effective or more expensive. This may result in the Group being unable to
continue to grow at the same rate or with the same profit margins. The Group is developing additional
marketing channels to continue growth and minimise acquisition costs.
section 13: outlook
OzForex is a high growth business with a strong balance sheet, no external interest bearing debt, strong cash
flow conversion and limited capital requirements. The focus is on growth in net operating income and EBTDA
but still with the emphasis on cost containment and efficiency. There will be continued investment in people,
new opportunities, and development of the Group’s IT and physical infrastructure.
30
OzForex Annual Report 2014For the Financial year ended 31 March 2014
International payment services is a large and growing market driven by increases in global population and
migration, leading to a larger level of cross border transactions and investment. OzForex is participating,
and in many respects leading a successful industry disruption of traditional international payment methods
and processes, driven by online technology and mobile services. The industry remains fragmented yet there
is increased competition and a rapid growth in the number of online international payment providers.
Industry participants are seeking ways to grow quickly and since the listing there has been a heightened level
of merger and acquisition activity. It’s expected that this trend will continue as participants look to add scale to
their existing businesses. As previously announced, the Group participated in the HiFX sale process, and believes
targeted and selective merger and acquisition is an important aspect of its growth strategy in existing and new
markets. OzForex will continue to assess consolidation opportunities and is well positioned to take advantage
of this rapidly evolving industry through its:
• Scalable proprietary technology platform;
• Attractive customer value proposition;
• Large portfolio of Tier 1 banking relationships;
• Effective operational risk and compliance management;
• Clearly defined organic and inorganic growth strategies.
section 14: events subsequent to balance date
As at the date of this Report, the Directors are not aware of any circumstance that has arisen since 31 March 2014
that has significantly affected, or may significantly affect the Group’s operations in future financial years, the
results of those operations in future financial years, or the Group’s state of affairs in future financial years.
section 15: likely developMents and expected Results
While the impacts of foreign exchange market conditions make accurate forecasting challenging, it is currently
expected that the combined net profit for the financial year ending 31 March 2015 will be up on the financial year
ended 31 March 2014.
The key growth driver for the business is active clients (the number of clients who have transacted at least once
in the prior 12 months). The growth in active clients for the financial year ended 31 March 2014 was up 31% to
120,500. This growth was augmented by the launch of Travelex, MoneyGram and the further penetration
through online marketing into the US. As these channels mature the growth in active clients is expected to
follow trends similar to prior years.
The net profit contributions for the financial year ending 31 March 2015 from North America are expected to
become a larger portion of overall net profit contributions compared to the financial year ended 31 March 2014
due to continued strong growth in fee and commission income, and expanding EBTDA margins as the Group
begins to achieve critical mass.
While Europe is a more competitive market, growth in active clients in this region is expected to be more
challenging. It is expected to be broadly in line with the financial period ending 31 March 2014. Subject to
consistent currency exchange rates the net profit contribution in the UK is expected to be up in the financial
year ended 31 March 2015.
The Australia and New Zealand segment will continue to be the largest single contributor to the net profit of the
Group. The growth in contribution, assuming a constant Australian Dollar exchange rate, is expected to be in line
with the growth in active clients, albeit offset by the full year impact of public company costs outlined in the
NPAT reconciliation on page 27.
The tax rate for the financial year ending 31 March 2015 is expected to be in line with the financial year ended
31 March 2014.
Accordingly, the Group’s result for the financial year ending 31 March 2015 is expected to be up on the result in the
financial year ended 31 March 2014, with the potential for a better result if market conditions continue to improve.
The Group’s short term outlook remains subject to the range of challenges outlined in the risks in section 12,
including market conditions, the impact of volatility in the foreign exchange markets, the cost of its customer
acquisition through online channels, potential regulatory changes and tax uncertainties.
OzForex remains well positioned to deliver continued growth in the short to medium term.
31
OzForex Annual Report 2014 diRectoRs’ RepoRt (CONT)
section 16 insuRance and indeMniFication oF diRectoRs and oFFiceRs
The Directors of the Company and such other officers as the Directors determine are entitled to receive the
benefit of an indemnity contained in the Constitution of the Company, to the extent allowed by the Corporations
Act 2001.
The Company has entered into a standard form deed of indemnity, insurance and access with the non-executive
Directors against liabilities they may incur in the performance of their duties as Directors of the Company, to the
extent permitted by the Corporations Act 2001. The indemnity operates only to the extent that the loss or liability
is not covered by insurance.
During the year the Company has paid premiums in respect of contracts insuring the Directors and Officers
of the Company against liability incurred in that capacity to the extent allowed by the Corporations Act 2001.
The terms of the policies prohibit disclosure of the details of the liability and premium paid.
Until October 2013 the Company held a Directors’ and Officer’s Liability Insurance Policy on behalf of the
Directors and Officers of OzForex Pty Limited (now known as OzForex Limited, a subsidiary of OzForex
Group Limited) and its subsidiaries.
In October 2013 the Company took a new Directors’ and Officers’ Liability Policy on behalf of the Directors
and Officers of OzForex Group Limited.
section 17: no oFFiceRs aRe FoRMeR auditoRs
No officer of the consolidated entity has been a partner of an audit firm or a Director of an audit company
that is the auditor of the Company and the Consolidated Entity for the financial year.
section 18: non-audit seRvices
The Company may decide to employ the external auditor on assignments additional to their statutory audit
duties where the auditors expertise and experience with the Company and/or the Group are important.
The Audit, Risk and Compliance Committee is required to pre-approve all audit and non-audit services provided
by the external auditors. The Committee is not permitted to approve the engagement of the auditors for any
non-audit services that may impair or appear to impair the external auditor’s judgement or independence in
respect of the Company.
The Board has considered the non-audit services provided during the year by the auditor and in accordance with
written advice provided by resolution of the Audit Risk and Compliance Committee, is satisfied that the provision
of those non-audit services during the year by the auditor is compatible with, and did not compromise, the
auditor independence requirements of the Companies Act 2001 for the following reasons:
• All non-audit services were subject to the corporate governance procedures adopted by the Group and have
been reviewed by the Audit Risk and Compliance Committee to ensure they do not impact the integrity and
objectivity of the auditor; and
• The non-audit services provided do not undermine the general principles relating to auditor independence as
set out APES110 Code of Ethics for Professional Accountants, as they did not involve reviewing or auditing the
auditor’s own work, acting in a management of decision making capacity for the Group, acting as an advocate
for the Group or jointly sharing risk or rewards.
32
OzForex Annual Report 2014For the Financial year ended 31 March 2014 During the year the following fees were paid or payable for non-audit services provided by the external auditor
(PWC) of the Company to its related practices and non-related audit firms:
Initial public offering services
Taxation services
Total remuneration for non-audit services
2014
$’000
250,000
72,263
322,263
2013
$’000
–
90,820
90,820
section 19: coRpoRate social Responsibility
This year the Group held its third annual Charity Day and donated the day’s profits to charities selected by staff
from each of its offices. This year $125,000 was raised, which was evenly distributed to BOOST Child Abuse
Prevention and Intervention (Canada), The Shepherd Centre (Australia), Rays of Sunshine (United Kingdom),
Boys and Girls Club of America (United States) and SurfAid (Global).
section 20: auditoRs’ independence declaRation
A copy of the Auditor’s Independence Declaration as required under section 307C of the Corporations Act 2001
in relation to the audit for the year ended 31 March 2014 is on page 48 of this Report.
section 21: chieF executive oFFiceR/chieF Financial oFFiceR declaRation
The Chief Executive Officer and the Chief Financial Officer have given the declarations to the Board concerning the
Group’s Financial Statements and other matters as required under section 295A(2) of the Corporations Act 2001.
section 22: Rounding aMounts
The Group is of the kind referred to in ASIC Class Order 98/0100, dated 10 July 1998, and in accordance with
that Class Order amounts in the Directors’ Report and the Financial Report are rounded off to the nearest
thousand dollars, unless otherwise indicated.
section 23: diRectoRs inFoRMation
peter warne
Independent Non-Executive Chairman – BA, FAICD
Please refer to page 12 for Directors information.
neil helm
Chief Executive Officer and Managing Director – BSc (Hons)
Please refer to page 12 for Directors information.
Melinda conrad
Independent Non-Executive Director
– MBA (Harvard), FAICD
Please refer to page 12 for Directors information.
william allen
Independent Non-Executive Director – BA
Please refer to page 13 for Directors information.
grant Murdoch
Independent Non-Executive Director – MCom (Hons), FAICD, FICAA.
Please refer to page 13 for Directors information.
33
OzForex Annual Report 2014 ReMuneRation RepoRt
section 24
introduction
The Directors are pleased to present the Group’s Remuneration Report in which the remuneration practices
for the Group’s key management personnel (KMP) are outlined.
The Remuneration Report outlines the remuneration practices post-listing on the ASX on 11 October 2013,
as well as the remuneration practices prior to, and leading up to, listing. Post-listing remuneration disclosures
relate to OzForex Group Limited (ultimate parent entity, OzForex Group) and the entities it controls. Pre-listing
and comparative remuneration disclosures relate to OzForex Limited (former ultimate parent entity) and the
entities it controlled.
The information provided in this Remuneration Report has been prepared in accordance with the requirements
of the Corporations Act 2001 (Cth) (the Corporations Act) and has been audited as required by section 308(3C)
of the Corporations Act.
section 24.1: key management personnel (kMp)
This Remuneration Report outlines the remuneration arrangements in place for the KMP of OzForex Group
Limited and its subsidiaries, which comprises all Directors (Executive and non-Executive) and those Executives
who have authority and responsibility for planning, directing and controlling the activities of the Group.
For the financial year, the Executives that form part of the KMP have been determined to be those members
of the Global Executive Team that report directly to the CEO.
The following Executives and Non-Executive Directors of the Group were classified as KMP during the 2014
financial year and unless otherwise indicated were classified as KMP for the entire year.
Executives
Title
Current Executives
Neil Helm
Managing Director and Chief Executive
Officer (CEO)
Mark Ledsham
Chief Financial Officer (CFO)
Simon Griffin
David Higgins
Jeff Parker
Jason Rohloff
Linda Cox
Chief Commercial Officer (CCO)
Chief Technology Officer (CTO)
Chief Operating Officer (COO)
Head of Compliance
Company Secretary
Jacqueie Davidson
Head of Human Resources
Other key employees
Former KMP’s
Lionel Docker1
Michael Ward1
Senior Legal Counsel
Head of Europe and North America
(commenced 23 September 2013)
(commenced 31 January 2014)
(commenced 25 February 2014)
Christopher Minehan
Head of Marketing
(resigned 21 March 2014)
1. Ceased being KMP’s but remained employees of the Group
34
OzForex Annual Report 2014For the Financial year ended 31 March 2014 Non-Executive Directors
Title
Current
Non-Executive Directors
Peter Warne
William Allen2
Melinda Conrad
Grant Murdoch
Former
Non-Executive Directors
Chairman
Independent Director
Independent Director
Independent Director
Matthew Gilmour2
Independent Director
Gary Lord2
Eric Schimpf2
Ryan Sweeney2
Independent Director
Independent Director
Independent Director
(appointed 19 September 2013)
(appointed 19 September 2013)
(appointed 19 September 2013)
(resigned 20 September 2013)
(resigned 20 September 2013)
(resigned 20 September 2013)
(resigned 20 September 2013)
2. Directors were Non-Executive Directors of OzForex Limited (previous ultimate parent entity) prior to the group restructure that took place 15 October 2013
resulting in OzForex Group Limited being instated as the ultimate parent entity of the Group.
section 24.2: Remuneration snapshot
The Board reviewed and made a number of changes to the remuneration framework during the year ended
31 March 2014. Executives of the Group will receive Total Reward Remuneration (TRR) that comprises fixed
and variable (at risk) annual pay. The three components of the remuneration framework post-listing are
outlined as follows:
Remuneration component
Details
Total fixed
remuneration (TFR)
TFR may be delivered as a combination of cash and prescribed non-financial benefits
at the Executives’ discretion. TFR is set to reflect the market for a comparable role.
Short-term incentives
(STI)
All Executives are eligible to receive a STI award under their employment agreements.
STI awards are based on the achievement of annual Key Performance Indicators (KPIs).
The STI opportunity is typically in the range of 15-30% of TRR.
50% of the total target STI is based on non-financial KPIs. For the year ended
31 March 2014, the KPIs included objectives around leadership and culture, risk
and compliance, project management and customer focus.
50% of the total target STI is based on financial KPIs. In the event of outperformance
against the financial KPIs, there is a potential additional 20% outperformance bonus
available on the total target (non-financial and financial) STI. If financial performance
is more than 25% negative to target, no standard STI will be payable. For year ended
31 March 2014, the KPIs were based on forecast net operating income, pro forma
EBTDA, and New Dealing Clients. The STI is paid as cash.
Long-term incentives
(LTI)
All Executives are eligible to receive performance rights under the OzForex Group
Long Term Incentive Plan (LTI Plan).
The LTI opportunity is typically in the range of 15-30% of TRR. The LTI Plan is designed
to link long-term Executive reward with the ongoing creation of shareholder value.
Performance rights will be subject to a performance hurdle and ongoing employment,
and will have a three year performance period.
The LTI Plan was established during the year ended 31 March 2014 and will first
operate in the year ended 31 March 2015.
35
OzForex Annual Report 2014 ReMuneRation RepoRt (CONT)
section 24.3: Role of the Remuneration and nomination committee
The Remuneration and Nomination Committee (‘Remuneration Committee’) is responsible for reviewing and
making recommendations to the Board on the remuneration arrangements for the CEO and his direct reports
(‘Global Executive Team’). The Charter of the Remuneration and Nomination Committee is available on the
Group’s website at www.ozforex.com.au.
To assist in performing its duties and making recommendations to the Board, the Remuneration Committee
seeks independent advice from external consultants on various remuneration related matters. The Remuneration
Committee follows protocols around the engagement and use of external remuneration consultants to ensure
compliance with the relevant Executive remuneration legislation.
Prior to listing, the Board (before the formation of the Remuneration Committee) engaged KMPG to provide
advice on the development of a new remuneration structure to be implemented following listing. It provided
recommendations on new short-term incentive and long-term incentive plans and also advised on Executive
and non-Executive director remuneration benchmarking.
The Board is satisfied the recommendations received were free from undue influence from KMP’s to whom
the remuneration recommendations apply. The following arrangements were made to meet this requirement:
• KPMG was engaged by and reported to the Board. The agreement for the provision of remuneration
consulting services was executed by the Chairman;
• The report containing the remuneration recommendations was provided by KPMG directly to the Chairman; and
• KPMG was permitted to speak to management throughout the engagement to understand Company
processes, practices and other business issues and obtain management perspectives.
The recommendations made by KPMG to the Board were as an input into decision making only. The Board
considered these along with other factors. The fees paid to KPMG for the remuneration recommendations were
$90,200. KPMG also provided Tax and consulting services to the Group during the IPO. The fees paid to KPMG
for these services (excluding remuneration recommendations) were $1,491,690.
section 24.4: executive remuneration principles and structure
Principles used to determine the nature and amount of remuneration
The objective of the Group’s Executive reward framework is to ensure reward for performance is competitive
and appropriate for the results delivered. The framework aligns Executive reward with achievement of strategic
objectives and the creation of value for shareholders and conforms to market practice for delivery of reward.
The Board, in consultation with external remuneration consultants, ensures that Executive reward satisfies
the following key criteria for good reward governance practices:
• Competitiveness and reasonableness;
• Incorporates shareholders feedback;
• Performance linkage / alignment of Executive compensation;
• Transparency.
36
OzForex Annual Report 2014For the Financial year ended 31 March 2014 Other criteria which are considered in the Company’s remuneration principles are:
• Alignment to shareholder’ interests:
– has economic profit as a core component of plan design;
– focuses on sustained growth in shareholder wealth, growth in share price and delivering constant
return on assets as well as focusing the Executive on key non-financial drivers of value;
– attracts and retains high calibre Executives.
• Alignment to participant interests:
– rewards capability and experience;
– reflects competitive reward for contribution to growth in shareholder wealth;
– provides a clear structure for earning rewards;
– provides recognition for contribution to operational performance.
Overview of Executive remuneration components
The Total Reward Remuneration (TRR) framework provides a blend of fixed short-term and long-term incentives
and has three components:
• Fixed – TFR;
• At Risk – STI;
• At Risk – LTI.
The relative proportion of ‘fixed’ and ‘at risk’ components of Executive remuneration varies by Executive.
As Executives gain seniority within the Group, the balance of this mix shifts to a higher proportion of ‘at risk’.
The table below outlines the percentage allocations for the CEO and the Executives. Participation in
special retention plans is not taken into account in determining the Executives percentage allocations.
Total Reward Remuneration
CEO
Executives
Fixed
TFR
40%
At Risk
STI
30%
LTI
30%
60% – 70% 15% – 20% 15% – 20%
Remuneration is reviewed annually to ensure it remains competitive within the market. Remuneration increases
are subject to merit and are in respect of Executives, are subject to the approval of the Remuneration
Committee. The Remuneration Committee has the discretion to reduce performance-based elements of
remuneration, including short-term and long-term incentives, at any time, where it considers it appropriate.
The Remuneration Committee has not exercised such discretion in the 2014 financial year.
Total fixed remuneration (TFR)
TFR may be delivered as a combination of cash and prescribed non-financial benefits at the Executives discretion.
Executives are offered a competitive base pay that comprises the fixed cash component of pay and rewards
inclusive of superannuation. External remuneration consultants from time to time provide analysis and advice
to ensure TFR is set to reflect the market for a comparable role. This was done prior to the IPO.
(i) Benefits
Executives may structure their remuneration to include non-cash benefits.
(ii) Superannuation
Retirement benefits are provided via defined contributions to approved superannuation funds.
37
OzForex Annual Report 2014 ReMuneRation RepoRt (CONT)
section 24.4: executive remuneration principles and structure (CONT)
Principles used to determine the nature and amount of remuneration (CONT)
Short-term incentives (STI)
For the 2014 financial year a short-term incentive plan (‘STI Plan’) was introduced on listing to replace the
OzForex Profit Share Scheme (OPSS). The key details of the STI Plan are as outlined below:
STI Component
Eligibility
Opportunity
Details
All the Executives participated in the STI Plan or will participate from the 2015 financial year.
The size of the STI opportunity available to each Executive is based on their accountabilities
and impact of their role on the Company. This is typically in the range of 15-30% of TRR.
Executives that commence or leave during the financial year are generally paid a pro-rata
share of their STI entitlements.
The STI is subject to the achievement of annual KPIs. See below for further detail.
Payments of the STI are made after the financial results are released in May.
Cash.
KPIs
Payment
Delivery
(i) Key performance indicators
The Remuneration Committee will annually approve the KPIs to link the STI Plan and the level of payout if the
KPI targets are met. This includes setting any maximum payout under the STI Plan, and minimum levels of
performance. The Remuneration Committee is responsible, after the preparation of the financial statements each
year (in respect of financial measures) and after a review of performance against non-financial measures by the
CEO (and in the case of the CEO, by the Board following recommendation by the Committee), for recommending
to the Board the final STI payout for the previous financial year. The Board retains the discretion to vary the final
STI payout if performance is considered to be deserving of either a greater or lesser amount.
The KPI’s linked to the STI Plan comprise two equal tranches (50% each) and within each tranche are a series
of objectives. Tranche A are non-financial performance indicators for the particular Executive and Tranche B are
financial performance indicators.
(ii) Tranche A (50%)
The non-financial performance indicators are designed to drive leadership performance and behaviours
consistent with the role and expectations for that individual Executive. These include objectives around
leadership and culture, risk and compliance, project management and customer focus. A maximum of
50% of the total target STI is available in Tranche A. If an Executive does not meet a minimum
performance threshold in Tranche A, they are not eligible to participate in Tranche B.
(iii) Tranche B (50%)
The financial performance indicators are an appropriate way to align the delivery of the Group’s objective
of delivering growth to the shareholders and ultimately improving shareholder returns. In the event of
outperformance against the target financial performance indicators, there is a potential additional 20%
outperformance bonus available on the Total STI (Tranche A and Tranche B). If financial performance is
more than 25% negative to target then no STI will be payable. For the 2014 financial year, the financial
objectives are as outlined below:
Financial Performance Indicator
Net Operating Income1
EBTDA
New Dealing Clients2
2014 Objectives
$68.2 million
$20.7 million
61,476
1. Net operating income is a non-IFRS measure and is the combination of “Net interest income” and “Net fee and commission income”.
2. New Dealing Clients are clients of the Group who transacted for the first time during the period. It is a lead indicator of the group’s growth prospects.
All of the Executive KMP received 100% of their cash bonus during the year ended 31 March 2014 (nil was forfeited).
38
OzForex Annual Report 2014For the Financial year ended 31 March 2014 Long-term incentives (LTI)
Long-term incentives are provided to Executives pursuant the OzForex Group Long Term Incentive Plan (‘the LTI
Plan’) which was outlined in the prospectus (section 6.5 of the prospectus). The key details of the plan are as
outlined below:
LTI Components
Objective
Eligibility
Instrument
Award value
Allocation methodology
Allocation timing
Performance period
Vesting conditions
Forfeiture conditions
Shareholder approval
Change of control
provisions
Changes in share capital
Details
The LTI Plan is designed to link long-term Executive reward with the ongoing
creation of shareholder value, with the allocation of equity awards which are
subject to satisfaction of performance hurdles.
All the Executives participate in the LTI Plan or will participate from the
2015 financial year, dependent on their commencement date.
Performance Rights enable the Executives to acquire an ordinary share in the
Company in the future subject to time-based and performance-based vesting
conditions being achieved. They are granted for nil cash consideration. They
carry no right to vote or receive a dividend.
An Executives LTI award is typically in the range of 15-30% of their TRR.
The number of performance rights issued to each Executive is calculated by
dividing their LTI target value by the value per right, being the volume weighted
share price in the five days prior to issuance.
Generally performance rights will be issued annually in June. An additional
issuance of performance rights outside of the annual issuance may occur
as a retention mechanism at different times.
3 years.
Performance rights are subject to a performance hurdle and ongoing
employment
The performance hurdle to apply to each issuance of performance rights
will be determined by the Board at the time of issue.
Performance rights will automatically be converted to one ordinary share upon
the vesting date provided the Executive complies with the rules of the LTI Plan.
Performance rights that are not converted will lapse where:
• The expiry date applicable to the performance right is reached; and
• If, upon the employee ceasing to be employed or their employment is
terminated, the Board notifies the Executive of the lapse or;
• Performance conditions are not met.
Any performance rights which do not vest following testing of the performance
hurdles at the end of the performance period will automatically lapse.
Any performance rights to be issued to the CEO are subject to shareholder
approval.
The Board has the discretion to waive any vesting conditions attached to
the performance rights in the event of a change of control in the Company.
If there are any changes in the share capital of the Company (such as a rights
issue, subdivision, consolidation or reduction in capital) then the Directors may
make adjustments as they consider appropriate subject to the ASX Listing Rules.
section 24.5: legacy remuneration practices
Transaction process bonus
In addition to the STI Plan outlined in section 4, Executives and select employees involved in preparing the Group
for the listing process were able to earn a special cash bonus. The quantum of these bonuses was set with
reference to the accountabilities of the individual’s role in the process. These cash bonuses were granted and
paid in August 2013.
Post-IPO completion and retention bonus
As disclosed in the prospectus prior to the IPO (section 6.3.4 of the Prospectus), certain Executives who were
employed by the Company at the listing date (and others who were members of the Leadership Team at the
time of the IPO) are entitled to a portion of a $5.3m bonus pool:
• The CEO is entitled to 39.1% of the pool ($2,072,300); and
• Executives and other select key employees are entitled to 60.9% of the pool ($3,227,700).
39
OzForex Annual Report 2014 ReMuneRation RepoRt (CONT)
section 24.5: legacy remuneration practices (CONT)
Post-IPO completion and retention bonus (CONT)
To be eligible for receipt of the bonus an Executive must remain in the employment of the Group as at the
12 month anniversary of the IPO. To the extent that an Executive leaves their allocation will be re-distributed.
There are no performance conditions.
IPO performance rights issuance
As foreshadowed in the prospectus prior to the IPO (section 6.3.1 – 6.3.3 of the Prospectus), all Executives who
were employed by the Company at the listing date (and others who were members of the Leadership Team at
the time of the IPO) were issued performance rights on the listing date, which subject to satisfaction of relevant
performance conditions will vest on 1 June 2016 (reflecting a 32 month vesting period to align the vesting date
with annual issuances of performance rights). A key performance condition for full vesting of the performance
rights will be that the Group meets or exceeds earnings growth targets for the performance period and the
employment of the relevant Executive at the vesting date. The performance conditions will be measured for
the period 1 October 2013 to 31 March 2016 (Performance Period), or 30 months.
The Board has determined that in order for the performance rights to vest, the three year EBTDA compound
annual growth rate (CAGR) must exceed 18% and there will be vesting of some or all of the performance rights
on the basis as outlined below:
Performance level
At or above Target
EBTDA over a 30 month Performance Period
Vesting level
Greater than or equal to 18% CAGR
100%
Between Threshold and Target
Between 13% and 18% CAGR
Pro-rata from 25% to 100%
Below Threshold
Below 13%
0%
The Board considered this to be an appropriate hurdle as one that best aligned the interest of shareholders with
those of the Executives.
176,250 performance rights were issued to the CEO, and 360,325 (KMP’s 253,000) performance rights were
issued to senior Executives and several other select employees on 26 February 2014. These performance rights
were valued using a Monte Carlo simulation and discounted for the probability of employee retention and the
probability of achieving performance levels. They were issued at a nil exercise price with a 32 month vesting
period. The vesting date is 1 June 2016. See Section 11 for further detail. The details of these performance
rights were also outlined in the prospectus.
Previous LTI and retention plans
Some Executives who were Executives of OzForex Limited prior listing took part in the OzForex Limited
Employee Share Option Plan (ESOP). There were two grants on issue at the time of listing as outlined below:
Grant
20101
20133
Number
Grant date
18,000
19 November 2010
Exercise
price $
472.232
1,300
1 January 2013
625.004
Vesting
25% per year on anniversary
of grant date for 4 years
25% per year on anniversary
of grant date for 4 years
Expiry
7 years
7 years
1. The options were granted equally over the existing ordinary shares of OzForex Limited, representing 56.9% of total shares on issue.
2. The exercise price was based on the share capital prior to the capital restructure. After adjusting for the share split and new share capital, the exercise price
was $0.7456.
3. The options were granted proportionately over the Class A and ordinary shares of OzForex Limited, representing 100% of shares on issue.
4. The exercise price was based on the share capital prior to the capital restructure. After adjusting for the share split and new share capital, the exercise price
was $0.9868.
40
OzForex Annual Report 2014For the Financial year ended 31 March 2014 Both option grants were equity settled, where on exercise; the underlying share converts into a class B share.
There were no performance hurdles, but the Executive was required to still be in employment at the time of
vesting. If the Executive left prior to vesting the options lapsed.
The change of control event triggered by the Group capital reconstruction and listing, caused the accelerated
vesting of the options that had been granted in 2010 and 2013. The options were then cancelled. Participating
Executives were paid $12,353,646 as fair value consideration of the stock options at cancellation date. The
payment to the Executives was made prior to the listing by the exiting shareholders. There were no outstanding
options on issue as at 31 March 2014. No options were granted, exercised, forfeited or lapsed during the year
ended 31 March 2014.
Change of control retention payment
As a result of a change of control event in November 2010 a scheme was put in place at that time and funded
by the exiting shareholder in order to retain the services of the CEO for three years from that date. The scheme
consisted of a cash payment at each anniversary date of the change of control for a period of three years
including $866,000 in each of the financial years ending 31 March 2013 and 31 March 2014. In order to qualify
for the payment, the CEO needed to be in the employment of the Group at the date of the payment and the
Group needed to have achieved profit before tax levels as outlined below:
Performance level
At or above Target
Group Profit before Tax in the financial year
Greater than or equal to $17m
Between Threshold and Target
Between $15.3m and $17m
Below Threshold
Below $15.3m
Vesting level
100%
33.33% pro-rated
0%
The Group was refunded for the payment in full by the majority shareholder who reduced their holding to a
minority. On completion of the final performance hurdle in March 2013, it was decided to accelerate the vesting
of the final cash payment to 30 June 2013. There are no outstanding payments.
section 24.6: group performance
As the Company only listed on 11 October 2013, it is not possible to present five years of financial company
performance data. The Group’s 2014 annual financial performances measures are listed below. The financial
measures for the Group for the period 1 April 2013 to 11 October 2013 are based on the results of OzForex
Limited (formerly OzForex Pty Limited), as the Group’s financial results have been prepared as a continuation
of the OzForex Limited consolidated group.
Performance Metrics
Net operating income5
EBTDA
Underlying EBTDA6
New Dealing Clients
Basic earnings per share7
Underlying basic earnings per share8
Dividend per share
Closing share price/change in share price
2014
$72.6 million
$22.4 million
$29.4 million
54,814
6.84cps
8.92cps
n/a
3.30 (1.30 above
‘retail’ price)
5. Net operating income is a non-IFRS measure and is the combination of ‘Net interest income’ and ‘Net fee and commission income’.
6. Non measures which are unaudited differ from statutory presentation. The Underlying EBTDA has been adjusted to be EBTDA before one off impacts and the
annualisation of ongoing expenses. In 2014 these adjustments are specifically related to the IPO and the HiFX process referred to in Section 10 of the Directors
Report for the reconciliation of underlying NPAT and underlying EBTDA.
7. For the calculation of EPS refer to Note 27 of the financial statements.
8. Underlying basic earnings per share is the basic earnings per share calculation utilising the Underlying NPAT of the Group.
41
OzForex Annual Report 2014 ReMuneRation RepoRt (CONT)
section 24 (CONT)
section 24.7: executive remuneration disclosures
Short-term employee benefits
Year
Entity
and fees Cash bonus1
Cash salary
$
$
2014
OFX
226,113
352,500
Non-
monetary
benefits2
$
–
Post-
employ-
ment
benefits
Super-
annuation
Long term employee
benefits
Share-based payments
Long
service
leave
Retention4
Perfor-
mance
rights
Options5
$
$
$
$
$
Other3
$
Total
$
–
8,887
34,266
–
45,985
–
667,751
13,450
866,000
–
4,960 3,520,054
47,716 866,000
45,985
4,960 4,187,805
8,151
866,000
–
7,352 1,558,750
Pre–IPO
175,000
375,000
Total
401,113
727,500
– 2,072,300
– 2,072,300
316,000
339,000
OFX
156,113
110,000
–
–
–
–
Pre–IPO
100,000
240,000
– 604,200
Total
256,113
350,000
– 604,200
170,000
90,000
OFX
163,613
115,000
Pre–IPO
112,500
145,000
Total
276,113
260,000
181,096
110,000
OFX
148,613
105,000
–
–
–
–
– 625,400
– 625,400
–
–
–
–
Pre–IPO
110,000
25,000
– 742,000
13,344
22,231
22,247
8,888
9,125
18,013
16,884
8,887
10,266
19,153
22,904
8,888
10,037
182,500
100,000
OFX
132,113
94,000
Pre–IPO
92,500
25,000
Total
224,613
119,000
160,000
81,000
OFX
118,497
82,000
Pre–IPO
–
–
Total
118,497
82,000
–
OFX
16,289
Pre–IPO
–
Total
16,289
–
–
–
–
–
–
–
–
–
–
– 503,500
– 503,500
–
36,613
–
22,824
8,888
8,402
17,290
19,228
7,406
–
36,613
7,406
–
–
–
–
–
–
1,507
–
1,507
–
–
–
–
–
–
–
–
–
–
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
5,012
3,177
8,189
2,388
4,208
820
5,028
1,402
18,741
13,939
8,401
15,831
3,859
19,690
5,473
–
–
–
–
–
–
–
–
Total
258,613
130,000
– 742,000
18,925
32,680
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
14,350
– 294,363
–
779
957,281
14,350
779 1,251,644
–
1,155
280,427
15,002
– 306,710
–
992
894,978
15,002
992 1,201,688
–
1,470
316,872
13,698
– 294,940
–
1,204
902,180
13,698
1,204
1,197,120
–
1,785
315,510
12,263
–
12,263
– 263,095
779
779
634,040
897,135
–
1,155
266,856
10,697
–
10,697
–
–
–
–
–
–
–
–
–
–
–
255,213
–
255,213
–
17,796
–
17,796
–
Current
Executives
N Helm
M Ledsham
S Griffin
D Higgins
J Rohloff
J Parker6
J Davidson6
42
OzForex Annual Report 2014For the Financial year ended 31 March 2014
Short-term employee benefits
Post-
employ-
ment
benefits
Long term employee
benefits
Share-based payments
Year
Entity
and fees Cash bonus1
Cash salary
Non-
monetary
benefits2
Other3
Super-
annuation
Long
service
leave
Retention4
Perfor-
mance
rights
Options5
L Cox6
2014
$
OFX
Pre–IPO
$
14,123
–
Total
14,123
2013
–
2014
OFX
108,261
$
–
–
–
–
–
$
–
–
–
–
–
–
–
–
–
–
–
–
$
–
–
–
–
–
–
–
–
–
74,200
74,200
–
–
$
1,306
–
1,306
–
8,888
13,920
22,808
20,423
8,742
13,211
21,953
20,409
–
–
–
–
72,287
78,305
Pre–IPO
87,500
25,000
Total
195,761
25,000
165,000
72,500
OFX
94,508
44,250
Pre–IPO
93,750
–
Total
188,258
44,250
182,000
57,000
OFX
145,254
95,499
6,622
Pre-IPO
92,166
145,000
28,561
339,200
Total
237,420
240,499
35,183
339,200
144,994
117,213
38,681
–
OFX
1,323,497
998,249
6,622
36,613
Pre-IPO
863,416
980,000
28,561 4,960,800
Former
Executives
C Minehan7
L Docker8
M Ward8,9
Total KMP
remuneration
(Group)
2013
2014
2013
2014
2013
2014
$
–
–
–
–
(3,589)
1,654
(1,935)
1,424
813
3,062
3,875
3,115
–
–
–
–
75,282
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
$
–
–
–
–
–
–
–
–
5,773
–
5,773
Total
$
15,429
–
15,429
–
$
–
–
–
–
113,560
779
779
128,853
242,413
1,155
260,502
– 154,086
779
779
185,002
339,088
–
1,155
263,679
12,813
–
260,188
–
3,801
608,728
12,813
3,801
868,916
–
569
301,457
130,581
– 2,643,131
Total 2,186,913 1,978,249
35,183 4,997,413
150,592
115,243 866,000
130,581
14,073 10,474,247
2013
1,501,590
966,713
38,681
–
144,919
30,354
866,000
–
15,796 3,564,053
39,961
866,000
–
14,073
7,831,116
1. 2014 Cash bonus consists of the pre IPO listing bonuses paid in August 2013 and the post IPO STI plan accrued in the period but not paid at the date of this report. The 2013 cash bonus was accrued in the
period ended 31 March 2013 but paid during the period ended 31 March 2014.
2. 2014 Non-monetary benefits relate to the payment of a portion of Mike Ward’s TFR in the form accommodation, and the provision of health insurance benefits.
3. All Other bonus amounts relate to the IPO retention and completions bonus. The bonus amounts, have been accrued in the period, but are not due for payment until the 12 month anniversary of the
Company listing date. Other bonus for Jeff Parker was a retention payment paid at the commencement of his employment.
4. Retention payments relate to a change of control retention bonus for the CEO following a change of control event in November 2010 set out in section 5.
5. The options were the previous OzForex Limited employee share option plan. In order to facilitate the capital restructure and listing of the Company on the ASX, the options were cancelled for cash
consideration.
6. Commenced employment during the year on the dates set out in section 1 of this Remuneration Report.
7. Resigned 21 March 2014. An amount of $339,200 (6.4% of the $5.3m IPO retention bonus outlined in section 6.3.4 of the prospectus) was originally allocated to C. Minehan. As C. Minehan resigned before
the vesting date of the cash bonus, the allocation will be re-distributed amongst the remaining members of the bonus scheme. The exact split of the re-distribution is yet to be confirmed by the
Remuneration Committee.
8. Ceased being KMP’s during the year.
9. M Ward was remunerated in USD. His fixed remuneration has been converted into AUD utilising an average annual FX rate of 1.0756 (2013: CAD 0.9741 and USD 0.9604).
43
OzForex Annual Report 2014
ReMuneRation RepoRt (CONT)
section 24 (CONT)
section 24.7: executive remuneration disclosures (CONT)
Fixed and at-risk remuneration
The percentage of remuneration received as fixed pay and at-risk pay during the year ending 31 March 2014
by the Executive KMP is outlined below:
Name
Current KMPs
N Helm
M Ledsham
S Griffin
D Higgins
J Rohloff
J Parker1
J Davidson1
L Cox1
C Minehan2
Former KMPs
L Docker3
M Ward3
Fixed
Remuneration
At risk – STI
At risk – LTI
Other
Rights
Options
11.2%
22.6%
25.0%
25.9%
29.1%
49.3%
100%
100%
89.4%
63.2%
31.4%
66.9%
76.2%
73.7%
72.8%
69.4%
46.5%
–
–
10.3%
34.9%
66.7%
20.7%
–
–
–
–
–
–
–
–
–
–
1.1%
1.1%
1.2%
1.2%
1.4%
4.2%
–
–
–
1.7%
1.5%
0.1%
0.1%
0.1%
0.1%
0.1%
–
–
–
0.3%
0.2%
0.4%
1. Commenced employment during the year on the dates set out in section 1 of this Remuneration Report.
2. Ceased employment on 21 March 2014.
3. Ceased being KMP’s following the capital restructure of the Group triggered by the listing of the Company.
section 24.8: executive contracts
The key terms of the Executive KMP contracts are summarised below:
Contract Components
Details
Duration
For the CEO, CFO and CCO, the contract duration is initially fixed term until the
release of the 30 September 2014 half year results to the ASX. Following this,
their contracts will be ongoing
All other Executive KMP have ongoing contracts
Termination by Executive
Post initial fixed term 6 months’ notice
Termination by the Company
Post initial fixed term 6 months’ notice
Post-employment restraints
For the CEO, 6 months restraint of trade post notice period
None of the other KMP have post-employment restraints
44
OzForex Annual Report 2014For the Financial year ended 31 March 2014 section 24.9: securities trading policy
All Directors and employees are required to comply with the Group’s Securities Trading Policy in undertaking any
trading in the Company’s shares and may not trade if they are in possession of any inside information. Directors
and employees can only trade during the specified trading windows immediately following the release of the half
year and full year results and the annual meeting. In addition, Directors and certain restricted employees may
only trade during the trading windows with prior written clearance as set out in the Policy. The Policy prohibits
employees who participate in any equity-based plan from entering into any transaction in relation to unvested
securities which would have the effect of limiting the economic risk of an unvested security.
section 24.10: non-executive director Fees
The Board seeks to set fees for the non-Executive directors that reflect the demands which are made on and
the responsibilities of the Directors, and at a level which will attract and retain directors of the highest calibre.
The Non-Executive Director fees are based on the findings of a benchmarking exercise undertaken by KPMG
prior to the listing which reviewed Board remuneration relative to peer and comparable sized companies.
Going forward, Non-Executive Directors fees will be reviewed from time to time and they may seek the advice
of external remuneration advisors for this purpose.
Current fees
The Non-Executive Directors were appointed in September 2013, and began receiving director’s fees from
the date of listing.
The maximum payable to be shared by all non-Executive directors was set at $1,000,000 per annum, prior to
listing. To preserve independence, non-Executive directors do not receive any performance related compensation.
(i) Fees applicable for 2014:
Role
Chairperson fee
Base Director fee
Committee Chair fee
Committee Member fee
$
200,000
100,000
25,000
15,000
(ii) Statutory Non-Executive Director fee disclosure
Details of the fees paid to the Non-Executive Directors are outlined below. The directors did not receive any fees
prior to listing. As the non-Executive directors do not receive any performance-based remuneration, 100% of
any fee relates to fixed remuneration.
Non-Executive directors
P Warne4
W Allen4,5
M Conrad4
G Murdoch4
M Gilmour6
G Lord6
E Schimpf6
R Sweeney6
Total non-Executive remuneration (Group)
4. There was no remuneration for Non-Executive Directors prior to listing
5. Appointed to the Board of OzForex Group Limited 19 September 2013
6. Resigned from OzForex Limited (former group) 20 September 2013
Short-term
employee
benefits
Cash salary
and fees4
106,113
–
64,073
57,208
–
–
–
–
Post-
employment
benefits
Super-
annuation
8,887
–
5,927
5,292
–
–
–
–
Total
115,000
–
70,000
62,500
–
–
–
–
227,394
20,106
247,500
Year
2014
2014
2014
2014
2014
2014
2014
2014
2014
45
OzForex Annual Report 2014
ReMuneRation RepoRt (CONT)
section 24 (CONT)
section 24.11: Further information on equity awards
IPO performance rights
Details of the IPO performance rights (‘IPO rights’) provided as remuneration to each of the Executive KMP during
the financial year are set out below.
On vesting each IPO right is convertible into one ordinary share of the Company. No exercise price is payable
and no IPO rights vested or were forfeited during the period. The IPO rights vest on 1 June 2016 providing the
performance hurdle and other threshold conditions are satisfied. Further information on the IPO rights is
set out in in section 7 of the Remuneration Report and note 21 of the financial statements.
Number of IPO
rights granted
during the year
Fair value at
grant date
$
Grant date
11 October 2013
176,250
11 October 2013
11 October 2013
11 October 2013
11 October 2013
11 October 2013
55,000
57,500
52,500
47,000
41,000
1.83
1.83
1.83
1.83
1.83
1.83
Date IPO rights
can be
converted into
shares
1 June 2016
1 June 2016
1 June 2016
1 June 2016
1 June 2016
1 June 2016
Value of IPO
rights granted
during the
year1
$
322,538
100,650
105,225
96,075
86,010
75,030
N Helm
M Ledsham
S Griffin
D Higgins
J Rohloff
J Parker
1. This also corresponds to the maximum total value of the unvested rights. The minimum total value of the rights is nil as they can be forfeited if the service
condition is not achieved.
The movement in the IPO rights over the year is outlined below:
Held at
1 April 2013
Number of IPO
rights granted
during the year
Held at
31 March 2014
–
–
–
–
–
–
176,250
176,250
55,000
57,500
52,500
47,000
41,000
55,000
57,500
52,500
47,000
41,000
N Helm
M Ledsham
S Griffin
D Higgins
J Rohloff
J Parker
46
OzForex Annual Report 2014For the Financial year ended 31 March 2014 section 24.12: outlook
The Group will continue to review and adjust its reward mechanisms annually, as required to ensure that its
long-term growth aspirations are met. In particular, shareholders can expect that further adjustments may
be required to the LTI Plan for future performance periods and in some cases, special Executive retention
mechanisms introduced. Such changes will recognise the continuing role the LTI Plan plays in motivating
and retaining Executives and driving Group performance. Consultation with shareholders and the use of
external consultants will occur as appropriate to ensure that a fair remuneration framework continues
to exist going forward.
This Report is made in accordance with a resolution of the directors.
On behalf of the Board
Peter Warne
Chairman
27 May 2014
Neil Helm
Chief Executive Officer and Managing Director
47
OzForex Annual Report 2014
auditoR’s independence declaRation
Auditor’s Independence Declaration
As lead auditor for the audit of OzForex Group Limited for the year ended 31 March 2014, I
declare that to the best of my knowledge and belief, there have been:
a) no contraventions of the auditor independence requirements of the Corporations Act
2001 in relation to the audit; and
b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of OzForex Group Limited and the entities it controlled during
the period.
CJ Heath
Partner
PricewaterhouseCoopers
Sydney
27 May 2014
PricewaterhouseCoopers, ABN 52 780 433 757
Darling Park Tower 2, 201 Sussex Street, GPO BOX 2650, SYDNEY NSW 1171
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
48
OzForex Annual Report 2014 stateMent oF coMpRehensive incoMe
Interest and similar income
Net interest income
Fee and commission income
Fee and commission expense
Net fee and commission income
Other income
Total other Income
Employment expenses
Occupancy expenses
Promotional expenses
IPO related expenses
Other operating expenses
Total operating expenses
Profit before income tax
Income tax expense
Profit for the year
Notes
3
3
3
3
3
3
3
3
3
4
2014
$’000
1,527
1,527
76,725
(5,687)
71,038
12,748
12,748
(32,091)
(1,623)
(10,657)
(11,904)
(7,156)
(63,431)
21,882
(5,915)
15,967
2013
$’000
1,798
1,798
53,939
(3,658)
50,281
–
–
(16,673)
(1,325)
(6,771)
–
(3,066)
(27,835)
24,244
(7,107)
17,137
Profit attributable to ordinary
equity holders of OzForex1 Group Limited
15,967
17,137
Other comprehensive income
Exchange differences on translation of foreign operations2
Total comprehensive income for the year
Total comprehensive income for the year is attributable to:
256
16,223
(191)
16,946
Ordinary equity holders of OzForex Group Limited
16,223
16,946
1. Represents profit from continuing operations
2. Represents other comprehensive income that will be reclassified to profit and loss
Earnings per share based on profit from continuing operations, attributable
to the ordinary equity holders of the parent entity:
Basic earnings per share
Diluted earnings per share
Notes
27
27
Cents
6.84
6.83
Cents
7.52
7.52
The above statement of comprehensive income should be read in conjunction with the accompanying notes.
49
OzForex Annual Report 2014For the Financial year ended 31 March 2014 stateMent oF Financial position
as at 31 MaRch 2014
Assets
Cash and cash equivalents
Derivative financial instruments – positive values
Other assets
Property, plant and equipment
Deferred income tax assets
Total assets
Liabilities
Client liabilities
Derivative financial instruments – negative values
Other liabilities
Current tax liabilities
Provisions
Deferred income tax liabilities
Total liabilities
Net assets
Equity
Ordinary share capital
Foreign currency translation reserve
Share option reserve
Retained earnings
Total capital and reserves attributable to equity
holders of OzForex Group Limited
Total equity
Notes
2014
$’000
2013
$’000
5
6
7
8
9
10
6
11
12
9
13
14
148,758
8,593
3,633
1,047
2,251
92,112
3,576
962
999
153
164,282
97,802
107,763
60,944
5,615
3,913
1,775
9,177
36
128,279
36,003
24,360
(3)
91
11,555
36,003
1,259
2,223
415
2,175
23
67,039
30,763
360
(259)
74
30,588
30,763
36,003
30,763
The above statement of financial position should be read in conjunction with the accompanying notes.
50
OzForex Annual Report 2014 stateMent oF changes in equity
Contributed
equity
$’000
Retained
earnings
$’000
Notes
Foreign
currency
translation
reserve
$’000
Share option
reserve
$’000
Balance at 1 April 2012
360
25,568
Profit for the year, after income tax
Other comprehensive income, net of tax
Total comprehensive income
Transactions with equity holders in their
capacity as equity holders:
Dividends and distributions paid
Employee share options
– value of employee services
–
–
–
–
–
–
17,137
–
17,137
(12,117)
–
(12,117)
(68)
–
(191)
(191)
–
–
–
Balance at 31 March 2013
360
30,588
(259)
Profit for the year, after income tax
Other comprehensive income, net of tax
Total comprehensive income
Transactions with equity holders in their
capacity as equity holders:
Share issue
Dividends and distributions paid
Employee share options
– value of employee services
Balance at 31 March 2014
–
–
–
15,967
–
15,967
24,000
–
– (35,000)
–
–
15
21
24,000
(35,000)
24,360
11,555
–
256
256
–
–
–
–
(3)
Total
Equity
$’000
25,915
17,137
(191)
16,946
(12,117)
19
(12,098)
30,763
15,967
256
16,223
55
–
–
–
–
19
19
74
–
–
–
–
24,000
– (35,000)
17
17
91
17
(10,983)
36,003
The above statement of changes in equity should be read in conjunction with the accompanying notes.
The foreign currency translation reserve and the share option reserve are non-distributable reserves of the Group.
51
OzForex Annual Report 2014For the Financial year ended 31 March 2014
stateMent oF cash Flows
Notes
2014
$’000
2013
$’000
Cash flows from operating activities
Interest received
Total cash inflows from customers
Total cash outflows to customers, suppliers and employees
Income tax paid
Net cash flows from operating activities
Cash flows from investing activities
Loss on sale of property, plant and equipment
Payments for property, plant and equipment
Net cash flows used in investing activities
Cash flows from financing activities
Proceeds from share issue
Dividends paid
Net cash flows used in financing activities
Net increase in cash
18
15
Cash and cash equivalents at the beginning of the financial year
Exchange gains on cash and cash equivalents
Cash and cash equivalents at the end of the financial year
5
1,527
1,798
13,608,329
9,047,358
(13,534,934)
(9,015,862)
(6,702)
68,220
(8,259)
25,035
(3)
(588)
(591)
24,000
(35,000)
(11,000)
56,629
92,112
17
148,758
–
(718)
(718)
–
(12,117)
(12,117)
12,200
79,867
45
92,112
The above statement of cash flows should be read in conjunction with the accompanying notes.
52
OzForex Annual Report 2014For the Financial year ended 31 March 2014 notes to the Financial stateMents
note 1. suMMaRy oF signiFicant accounting policies
i) basis of preparation
The principal accounting policies adopted in the preparation of this financial report and that of the previous
financial year are set out below. These policies have been consistently applied to all the periods presented,
unless otherwise stated.
The financial report is a general purpose financial report which has been prepared in accordance with
Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board
and the Corporations Act 2001. OzForex Group Limited is a for-profit entity for the purpose of preparing
the financial statements. OzForex Group Limited and its subsidiaries together are referred to in this
financial report as the Group.
The directors have the power to amend and reissue the financial report.
On the 4th October 2013 OzForex Pty Limited became a non-listed public company (OzForex Limited).
On the 11th October 2013 OzForex Group Limited (ACN 165 602 273) listed on the ASX on a conditional basis.
On the 15th October 2013 the share capital of OzForex Limited was transferred to OzForex Group Limited in
exchange for a like for like share swap. The beneficial owners of OzForex Group Limited were the shareholders
of OzForex Limited in the same proportions. In accordance with AASB 3 the transaction was treated as a
continuation of the existing Group.
Continuation of existing group
OzForex Group Limited has determined that the acquisition of OzForex Limited (former parent entity) does
not represent a business combination as outlined in Australian Accounting Standard AASB 3 for accounting
purposes. The appropriate accounting treatment for recognising the new Group structure is on the basis that
the transition is a form of capital reconstruction and group reorganisation. Therefore, the financial information
has been prepared using the principles of a reverse acquisition by OzForex Limited of OzForex Group Limited.
As a result the consolidated financial statements have been prepared as a continuation of the financial
statements of the accounting acquirer, OzForex Limited. Accordingly, comparative information is provided
for the Statement of Financial Position as at 31 March 2013 and for the Consolidated Statement of
Comprehensive Income and Statement of Cash Flows for the period ended 31 March 2013.
As a result:
• Retained earnings of the Group represent the retained earnings of OzForex Limited since its date
of incorporation, plus the results of the combined entities from the date of acquisition.
• The Statement of Financial Position comprises the existing consolidated net assets of OzForex Limited
and its consolidated entities measured at their historical cost plus fair value of the net assets of the other
combining entities.
• The comparatives for the Statement of Comprehensive Income and Statement of Cash Flows comprise
the resulting consolidated statements of OzForex Limited and its controlled entities.
Compliance with IFRS as issued by the IASB
Compliance with Australian Accounting Standards ensures that the financial report complies with International
Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
Consequently, this financial report has also been prepared in accordance with and complies with IFRS as
issued by the IASB.
53
OzForex Annual Report 2014For the Financial year ended 31 March 2014 notes to the Financial stateMents
(CONT)
note 1. suMMaRy oF signiFicant accounting policies (CONT)
i) basis of preparation (CONT)
Historical cost convention
This financial report has been prepared under the historical cost convention, as modified by the revaluation
of certain assets and liabilities (including derivative instruments) at fair value.
Critical accounting estimates and significant judgements
The preparation of the financial report in conformity with Australian Accounting Standards requires the use
of certain critical accounting estimates. It also requires management to exercise judgement in the process of
applying the accounting policies. The notes to the financial statements set out areas involving a higher degree
of judgement or complexity, or areas where assumptions are significant to the Company and its subsidiaries
(the Group) and the consolidated financial report such as:
• Fair value of financial instruments (Note 1(viii) and 24).
• Accounting for remuneration arrangements (Notes 1(xiv), 20 and 21).
Estimates and judgments are continually evaluated and are based on historical experience and other factors,
including reasonable expectations of future events. Management believes the estimates used in preparing the
financial report are reasonable. Actual results in the future may differ from those reported and therefore it is
reasonably possible, on the basis of existing knowledge, that outcomes within the next financial year that are
different from our assumptions and estimates could require an adjustment to the carrying amounts of the
assets and liabilities reported.
New Accounting Standards and amendments to Accounting Standards that became effective
in the current financial year
When a new accounting standard is first adopted, any change in accounting policy is accounted
for in accordance with the specific transitional provisions (if any), otherwise retrospectively.
The Group’s and parent entity’s assessment of the impact of the key new Accounting standards,
amendments to Accounting Standards and Interpretations is set out below.
The following key Accounting Standards and amendments to Accounting Standards became applicable
in the current financial year:
AASB 10 Consolidated Financial Statements – AASB 10 replaces the previous guidance on control and retains
the core principle that a consolidated entity presents a parent and its subsidiaries as if they are a single economic
entity. Whereas the control definition in the previous guidance focused on ‘risks and rewards’, AASB 10 focuses
on the combination of power, exposure to variable returns and ability to use the power to affect the returns.
The group’s accounting policy for principles of consolidation in accordance with AASB 10 is provided in note 1(ii).
The transitional provisions permit prior period comparatives to not be restated where the accounting outcome
under the previous guidance is the same as that under AASB 10 as at the date of initial application, 1 April 2013.
For all other situations, comparatives are restated retrospectively in accordance with AASB 108 Accounting
Policies, Changes in Accounting Estimates and Errors as if AASB 10 had always been applied.
The application of AASB 10 in the current financial year has neither affected any of the amounts recognised
in the financial statements nor has it had an effect on the entities consolidated in the Group.
54
OzForex Annual Report 2014For the Financial year ended 31 March 2014 note 1. suMMaRy oF signiFicant accounting policies (CONT)
i) basis of preparation (CONT)
AASB 12 Disclosures of Interests in Other entities – sets out disclosures for interests in entities that are
subsidiaries, associates, joint ventures and unconsolidated structured entities. The application of AASB 12
in the current financial year has not affected any of the amounts recognised in the financial statements.
AASB 13 Fair value measurement – became effective in the current financial year. AASB 13 explains how to
measure fair value and aims to enhance fair value disclosures. In accordance with the transitional provisions,
AASB 13 has been applied prospectively from 1 April 2013. The application of AASB 13 in the current financial
year has not had a material impact on the financial position nor performance of the Group, however has resulted
in additional fair value disclosures as provided in note 24.
AASB 119 Employee Benefits (September 2011) and AASB 2011-10 Amendments to Australian Accounting
Standards arising from AASB 119 (September 2011) – These amendments introduce various modifications
including changes to the measurement of defined benefit plans, change to timing for the recognition of
termination benefits and amend the definition of short term employee benefits. The application of AASB 119 in
the current financial year has not had a material impact on the financial position nor performance of the Group.
AASB 127 Consolidated and Separate Financial Statements was reissued as AASB 27 Separate Financial
Statements and now deals solely with separate financial statements. Application of this standard
by the Group and the company has not affected any of the amounts recognised in the financial statements.
AASB 2012-2 Amendments to Australian Accounting Standards – Disclosures – Offsetting Financial
Assets and Financial Liabilities – AASB 2012-2 requires additional disclosures of enforceable master netting
arrangements and their effect, even if assets and liabilities are not offset on the statement of financial position.
In accordance with the transitional provisions, AASB 2012-2 has been applied retrospectively. The application of
AASB 2012-2 in the current financial year has not had a material impact on the financial position nor
performance of the Group.
AASB 2011-9 Amendments to Australian Accounting Standards – Presentation of Items of Other
Comprehensive Income – AASB 2011-9 requires items included in other comprehensive income (OCI) in the
Statement of comprehensive income (including prior period comparatives) to be grouped according to whether
they may be reclassified subsequently to profit or loss. For the year ended 31 March 2014, all items have been
presented as “Items that may be reclassified subsequently to profit or loss”.
New Accounting Standards, amendments to Accounting Standards and Interpretations
that are not yet effective
AASB 2012-3 Amendments to Australian Accounting Standards – Offsetting Financial Assets and Financial
Liabilities – AASB 2012-3 amends AASB 132 Financial Instruments: Presentation to clarify that to set off an
asset with a liability: – the right of set-off must be available and legally enforceable for all counterparties in
the normal course of business, as well as in the event of default, insolvency or bankruptcy – certain gross
settlement mechanisms (such as through a clearing house) may be equivalent to net settlement – master
netting arrangements where the legal right of offset is only enforceable on the occurrence of a future event
(such as default of the counterparty) continue to not meet the requirements for netting.
AASB 2012-3 is effective for annual reporting periods beginning on or after 1 January 2014. The Group will first
apply AASB 2012-3 in the financial year beginning 1 April 2014. The Group is continuing to assess the impact
of AASB 2012-3.
AASB 2011-4 Amendments to Australian Accounting Standards to Remove Individual Key Management
Personnel Disclosure Requirements – AASB 2011-4 removes the individual Key Management Personnel
disclosure requirements from AASB 124 Related Party Disclosures, and is effective for annual reporting periods
beginning on or after 1 July 2013. The Group will first apply the amendments in the financial year beginning
1 April 2014. Whilst the amendments may reduce the disclosures provided, it will not affect any of the amounts
recognised in the financial statements.
55
OzForex Annual Report 2014 notes to the Financial stateMents
(CONT)
note 1. suMMaRy oF signiFicant accounting policies (CONT)
i) basis of preparation (CONT)
New Accounting Standards, amendments to Accounting Standards and Interpretations
that are not yet effective (CONT)
AASB 9 Financial Instruments and consequential amendments – AASB 9 includes the classification,
measurement, recognition and derecognition requirements for financial instruments. A financial asset is
measured at amortised cost only if it is held within a business model whose objective is to collect contractual
cash flows and the contractual terms of the asset give rise to cash flows on specified dates that are payments
solely of principal and interest (on the principal amount outstanding). All other financial assets are measured at
fair value. Changes in the fair value of financial assets carried at fair value are reported in the income statement.
In respect of financial liabilities, the component of change in fair value of financial liabilities designated at fair
value through profit or loss due to an entity’s own credit risk are presented in OCI, unless such presentation
creates an accounting mismatch. If a mismatch is created or enlarged, all changes in fair value (including the
effects of changes in credit risk) are presented in profit or loss. All other key requirements for classification
and measurement of financial liabilities have been carried forward unamended from AASB 139. The recognition
and derecognition requirements in AASB 139 have also been retained and relocated to AASB 9 unamended.
AASB 2013-9 Amendments to Australian Accounting Standards – Conceptual Framework, Materiality and
Financial Instruments makes amendments to AASB 9 to: (i) replace the general hedge accounting requirements
to more closely align hedge accounting with risk management activities undertaken when hedging financial and
non-financial risks; (ii) permit fair value changes due to changes in ‘own credit risk’ of financial liabilities measured
at fair value to be recognised through other comprehensive income, without applying all other requirements of
AASB 9 at the same time; and (iii) defer the mandatory application date of AASB 9 to annual reporting periods
beginning on or after 1 January 2017. This application date is subject to review and is expected to be revised by
the IASB. The Group is continuing to assess the full impact of adopting AASB 9.
AASB: 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 In December 2010, the
AASB re-issued AASB 9 Financial Instruments, which is effective for annual reporting periods beginning on or
after 1 January 2015. Early adoption is permitted if all the requirements are applied at the same time. The revised
AASB 9 includes the classification and measurement requirements for financial liabilities, and the recognition
and derecognition requirements for financial instruments, in addition to the classification and measurement
requirements for financial assets that appeared in the December 2009 version of the standard.
Under new guidance, a financial asset is to be measured at amortised cost only if it is held within a business
model whose objective is to collect contractual cash flows and the contractual terms of the asset give rise
to cash flows on specified dates that are payments solely of principal and interest (on the principal amount
outstanding). All other financial assets are to be measured at fair value.
Changes in the fair value of financial assets carried at fair value are reported in the income statement.
In respect of financial liabilities, the change in fair value (for financial liabilities designated at fair value through
profit and loss) due to changes in an entity’s own credit risk is to be presented in OCI, unless such presentation
would create an accounting mismatch. If a mismatch is created or enlarged, all changes in fair value (including
the effects of changes in the credit risk of the liability) are presented in the income statement. All other key
requirements for classification and measurement of financial liabilities have been carried forward unamended
from AASB 139 Financial instruments: Recognition and Measurement. The recognition and derecognition
requirements in AASB 139 have also been retained and relocated to the revised AASB 9 unamended. The Group
will first apply AASB 9 in the financial year beginning 1 April 2015. The impact of AASB 9 on the Group’s financial
statements on initial application has not yet been assessed.
56
OzForex Annual Report 2014For the Financial year ended 31 March 2014 note 1. suMMaRy oF signiFicant accounting policies (CONT)
ii) principles of consolidation
Subsidiaries
The consolidated financial report comprises the assets and liabilities of all subsidiaries of OzForex Group Limited
(“the Company”) as at 31 March 2014 and the results of all subsidiaries for the year then ended.
Subsidiaries are all those entities over which the Group has the power to direct the relevant activities, exposure
to significant variable returns and the ability to utilise power to affect the Group’s own returns. The determination
of control is based on current facts and circumstances and is continuously assessed.
The acquisition method of accounting is used to account for business combinations by the Group
(refer to note 1(xvii)).
Intercompany transactions, balances and unrealised gains on transactions between group companies
are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the
impairment of the asset transferred.
Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the
policies adopted by the Group.
Investments in subsidiaries are accounted for at cost in the separate financial statements of OzForex Limited
in accordance with AASB Separate Financial Statements.
iii) segment reporting
Operating segments are identified on the basis of internal reports to senior management about components
of the Group that are regularly reviewed by senior management and the board of directors who have been
identified as the chief operating decision makers, in order to allocate resources to the segment and to assess
its performance. Information reported to senior management and the board of directors for the purposes of
resource allocation and assessment of performance is specifically focused on core products and services offered,
comprising five reportable segments as disclosed in note 2. Information about products and services and
geographical segments is based on the financial information used to produce the Group’s financial statements.
iv) Foreign currency translations
Functional and presentation currency
Items included in the financial statements of foreign operations are measured using the currency of the primary
economic environment in which the foreign operation operates (the functional currency). The Group’s financial
statements are presented in Australian dollars, which is the OzForex Group Limited’s functional currency and
the Group’s presentation currency.
Transactions and balances
Foreign currency transactions are translated into the functional currency 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 year-end exchange rates of monetary assets and liabilities denominated
in foreign currencies are recognised in the income statement, except when deferred in other comprehensive
income as a result of meeting net investment hedge accounting requirements.
Group Companies
The results and financial position of foreign operations (none of which has the currency of a hyperinflationary
economy) that have a functional currency different from the presentation currency are translated into the
presentation currency as follows:
• Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of the
balance sheet
• Income and expense for each income statement and statement of comprehensive income are translated
at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the
rates prevailing on the transaction dates, in which case income and expenses are translated at the dates
of the transactions), and
• All resulting exchange differences are recognised in other comprehensive income.
On consolidation, exchange differences arising from the translation of any net investment in foreign entities,
and of borrowings and other financial instruments designated as hedges of such investments, are recognised
in other comprehensive income. When a foreign operation is sold or any borrowings forming part of the net
investment are repaid, the associated exchange differences are reclassified to profit and loss, as part of the
gain or loss on sale.
57
OzForex Annual Report 2014 notes to the Financial stateMents
(CONT)
note 1. suMMaRy oF signiFicant accounting policies (CONT)
v) Revenue
Revenue is measured at the fair value of the consideration received or receivable. Revenue is recognised for the
major revenue stream as follows:
Interest income
Interest income is recognised using the effective interest rate method. When a receivable is impaired, the group
reduces the carrying value amount to its recoverable amount, being the estimated future cash flow discounted
at the original effective interest rate of the instrument, and continues unwinding the discount as interest income.
Fee and commission income
Fee and commission income consists of the margin generated from foreign currency spreads, fees charged on
low-value transactions and the cost or benefit of the Group’s hedging policy. The cost or benefit of the Group’s
hedging policy is the result of changes in exchange rates between the time when a client rate is agreed and the
subsequent hedge transaction is entered.
As a result of timing differences inherent to OzForex Group Limited’s policy of aggregating and netting foreign
currency contracts, these two balances should be viewed in combination to give a true reflection of revenue
generated for the period. Fee and commission income is presented inclusive of realised and unrealised income
earned from the sale of foreign currency contracts to customers.
(i) Unrealised gain/loss on foreign exchange contracts
Gains and losses on foreign exchange contract financial assets/liabilities arise from fair valuation of foreign
exchange contract financial assets/liabilities recognised in profit and loss.
(ii) Retranslation of foreign exchange assets and liabilities
Gains and losses arise from the retranslation of foreign currency denominated assets/liabilities into functional
currency.
Fee and commission expense
Fee and commission expenses are transaction costs which relate to fees paid to partners and transactional
banking fees.
Dividends and distributions
Dividends and distributions are recognised as income when the entity becomes entitled to the dividend
or distribution.
58
OzForex Annual Report 2014For the Financial year ended 31 March 2014 note 1. suMMaRy oF signiFicant accounting policies (CONT)
vi) income taxes
The income tax expense for the financial year is the tax payable on the current period’s taxable income based
on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities
attributable to temporary differences and to unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the
end of the reporting period in the countries where the Company’s subsidiaries operate and generate taxable
income. Management periodically evaluates positions taken in tax returns with respect to situations in which
applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis
of amounts expected to be paid to the tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the
tax base of assets and liabilities and their respective carrying amounts which give rise to a future tax benefit,
or where a benefit arises due to unused tax losses, but are only recognised in both cases to the extent that it
is probable that future taxable amounts will be available to utilise those temporary differences or tax losses.
Deferred tax liabilities are recognised when such temporary differences will give rise to taxable amounts being
payable in future periods. Deferred tax assets and liabilities are recognised at the tax rates expected to apply
when the assets are recovered or the liabilities are settled.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets
and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and
liabilities are offset when there is a legally enforceable right to offset and an intention to either settle on a net
basis, or realise the asset and settle the liability simultaneously. Current and deferred taxes attributable to
amounts recognised directly in equity are also recognised directly in equity.
The Group and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation
as of 15 October 2013. As a consequence, these entities are taxed as a single entity and the deferred tax assets
and liabilities Current and deferred tax is recognised in profit and loss, except to the extent that it relates to items
recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other
comprehensive income or directly in equity, respectively.
vii) dividends
Provision for dividends to be paid by the Group are recognised on the statement of financial position as a liability
and a reduction in retained earnings when the dividend has been declared.
viii) derivative instruments
Derivative instruments entered into by the Group include forward rate agreements and options in the foreign
exchange markets. These derivative instruments are principally used for the risk management of existing
financial assets and liabilities.
All derivatives, including those used for statement of financial position hedging purposes, are recognised on the
statement of financial position and are disclosed as an asset where they have a positive fair value at balance
date or as a liability where the fair value at balance date is negative.
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and subsequently
remeasured to their fair value. Fair values are obtained from quoted market prices in active markets, including
recent market transactions, and valuation techniques, including discounted cash flow models and option pricing
models, as appropriate. Movements in the carrying amounts of derivatives are recognised in the income
statement, unless the derivative meets the requirements for cash flow or net investment hedge accounting.
59
OzForex Annual Report 2014 notes to the Financial stateMents
(CONT)
note 1. suMMaRy oF signiFicant accounting policies (CONT)
ix) hedge accounting
The Group designates certain derivatives or financial instruments as hedging instruments in qualifying hedge
relationships. On initial designation of the hedge, the Group documents the hedge relationship between hedging
instruments and hedged items, as well as its risk management objectives and strategies. The Group also documents
its assessment, both at hedge inception and on an ongoing basis, of whether hedging relationships have been
and will continue to be highly effective. Derivatives or financial instruments for the Group are designated as net
investment hedge relationships.
Net investment hedges
For a derivative or borrowing designated as hedging a net investment in a foreign operation, the gain or loss
on revaluing the derivative or borrowing associated with the effective portion of the hedge is recognised in
the foreign currency translation reserve and subsequently released to the income statement when the foreign
operation is disposed of. The ineffective portion is recognised in the income statement immediately. The fair
values of various financial instruments used for hedging purposes are disclosed in note 24.
investments and other financial assets
x)
Classification
With the exception of derivatives which are classified separately in the statement of financial position, the
remaining investments in financial assets are classified in the following categories: other financial assets at
fair value through profit or loss, loans and receivable. The classification depends on the purpose for which the
investments were acquired, which is determined at initial recognition and, except for other financial assets at
fair value through profit or loss, is re-evaluated at each reporting date.
(i) Other financial assets at fair value through profit or loss
This category includes only those financial assets which have been designated by management as held at fair
value through profit or loss on initial recognition. The policy of management is to designate a financial asset as
such if the asset contains embedded derivatives which must otherwise be separated and carried at fair value; if
it is part of a group of financial assets managed and evaluated on a fair value basis; or if by doing so eliminates,
or significantly reduces, a measurement or recognition inconsistency that would otherwise arise. Interest income
on debt securities designated as at fair value through profit or loss is recognised in the income statement in
interest income using the effective interest method as disclosed in Note 1 (v).
(ii) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market.
(iii) Held-to-Maturity investments
Held to maturity investments are non-derivative financial assets with fixed or determinable payments and fixed
maturity that an entity has the positive intention and ability to hold to maturity other than those that the entity
upon initial recognition designates as at fair value through profit or loss, those that the entity designates as
available for sale and those that meet the definition of loans and receivables.
Recognition and derecognition
Regular purchases and sales of financial assets are recognised on trade-date, the date on which the Group
commits to purchase or sell the asset. A regular way of purchase or sale of a financial asset under contract
is a purchase or sale that requires delivery of the assets within the period established generally by regulation
or convention in the market place.
Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired
or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.
60
OzForex Annual Report 2014For the Financial year ended 31 March 2014 investments and other financial assets (CONT)
note 1. suMMaRy oF signiFicant accounting policies (CONT)
x)
Subsequent measurement
Loans and receivables are carried at amortised cost using the effective interest method.
Financial assets at fair value through profit or loss are subsequently carried at fair value. Gains or losses arising
from changes in the fair value of the ‘other financial assets at fair value through profit or loss’ category are
presented in the statement of comprehensive income.
The fair value of investments that are actively traded in organised financial markets are determined by reference
to quoted market bid prices at the close of business on the balance sheet date. For investments with no active
market, fair values are determined using valuation techniques. Such techniques include: using recent arm’s
length market transactions; reference to the current market value of another instrument that is substantially
the same; discounted cash flow analysis and option pricing models making as much use of available and
supportable market data as possible and keeping judgemental inputs to a minimum.
Impairment
Impairment is assessed at the end of each reporting period based on whether there is objective evidence that
a financial asset or group of financial assets is impaired.
If there is evidence of impairment for any of the financial assets carried at amortised cost, the loss is measured
as the difference between the asset’s carrying amount and the present value of estimated future cash flows.
The cash flows are discounted at the financial asset’s original effective interest rate. The loss is recognised
in the statement of comprehensive income.
xi) property, plant and equipment
Property, plant and equipment are stated at historical cost less accumulated depreciation and accumulated
impairment losses, if any. Assets are reviewed for impairment at each reporting date. Historical cost includes
expenditure directly attributable to the acquisition of the asset.
Depreciation on assets is calculated on a straight-line basis to allocate the difference between their cost
and their residual values over their estimated useful lives, at the following rates:
• Furniture and fittings
10 per cent to 20 per cent
• Leasehold improvements1
• Computer equipment and software
20 per cent
33 per cent
• Plant and equipment
20 per cent to 33 per cent
1. Where remaining lease terms are less than five years, leasehold improvements are depreciated over the lease term.
Useful lives and residual values are reviewed annually and reassessed in light of commercial and technological
developments. If an asset’s carrying value is greater than its recoverable amount due to an adjustment to its useful
life, residual value or impairment, the carrying amount is written down immediately to its recoverable amount.
Adjustments arising from such items and on disposal of fixed assets are recognised in the income statement.
Gains and losses on disposal are determined by comparing proceeds with the asset’s carrying amount and are
recognised in the income statement.
61
OzForex Annual Report 2014
notes to the Financial stateMents
(CONT)
note 1. suMMaRy oF signiFicant accounting policies (CONT)
xii) provisions
Employee benefits
(i) Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits and accumulating sick and annual leave that
are expected to be settled wholly within 12 months after the end of the period in which the employees render
the related service are recognised in respect of employees’ services up to the end of the reporting period and
are measured at the amounts expected to be paid when the liabilities are settled. The liability for accumulating
sick and annual leave is recognised in the provision for employee benefits. All other short-term employee benefit
obligations are presented as payables.
(ii) Other long-term employee benefit obligations
The liabilities for long service leave and employee bonus provisions are not expected to be settled wholly within
12 months after the end of the period in which the employees render the related service. They are therefore
recognised in the provision for employee benefits and measured as the present value of expected future
payments to be made in respect of services provided by employees up to the end of the reporting period using
the projected unit credit method. Consideration is given to expected future wage and salary levels, experience
of employee departures and periods of service. Expected future payments are discounted using market yields
at the end of the reporting period of government bonds with terms and currencies that match, as closely as
possible, the estimated future cash outflows.
Provisions for unpaid employee benefits are derecognised when the benefit is settled, or is transferred to
another entity and the Group is legally released from the obligation and do not retain a constructive obligation.
xiii) earnings per share
Basic earnings per share is calculated by dividing the Group’s profit attributable to ordinary equity holders by the
weighted average number of ordinary shares outstanding during the financial year. Diluted earnings per share is
calculated by dividing the Group’s profit attributable to ordinary equity holders by the weighted average number
of ordinary shares that would be issued on the exchange of all the dilutive potential ordinary shares into ordinary
shares. Refer to note 13 for information concerning the classification of securities.
xiv) performance based remuneration
Share based payments
OzForex Group Long Term Incentive Plan
The Group provides benefits to its employees (including key management personnel) in the form of share-based
payments, whereby employees render services in exchange for shares or rights over shares (equity settled
transactions). There is currently one plan in place, the IPO performance rights issue, which provides benefits to
Executives identified by the Board. The fair value of each performance right is estimated at grant date using a
Monte Carlo simulation and discounted for the probability of employee retention and the probability of achieving
performance levels.
The cost of equity settled transactions is recognised, together with a corresponding increase in equity, over the
period in which the performance and/or service conditions are fulfilled (the vesting period), ending on the date on
which the relevant employees become fully entitled to the award (the vesting date). At each subsequent reporting
date until vesting, the cumulative charge to the income statement is in accordance with the vesting conditions as
set out under the Group’s Long Term Incentive Plan (Note 21).
Equity settled awards granted by the Company to employees of subsidiaries are recognised in the subsidiaries’
separate financial statements as an expense with a corresponding credit to equity. As a result, the expense
recognised by the Group is the total expense associated with all such awards. Until an award has vested, any
amounts recorded are contingent and will be adjusted if more or fewer awards vest than were originally anticipated.
The Group currently does not provide benefits in the form of cash settled share-based payments.
62
OzForex Annual Report 2014For the Financial year ended 31 March 2014 note 1. suMMaRy oF signiFicant accounting policies (CONT)
xiv) performance based remuneration (CONT)
Share option plan
The Group operated share options plans which were granted to employees and employees of its subsidiaries.
The Company recognises a share option expense in relation to options granted to its employees with the
offsetting adjustment recognised as a contribution of capital from the shareholders. The options are measured
at their grant dates based on their fair value and using the number expected to vest. This amount is recognised
as an expense evenly over the respective vesting periods.
The fair value of each option is estimated on the date of grant using a trinomial option pricing framework. No
grants were made in the current financial year. The following key assumptions have been adopted for grants
made in the current financial year:
Risk free Rate
Expected life
Volatility of share price
Dividend yield
Grant 2010
Grant 2013
5.5 per cent
3 per cent
7 years
7 years
35 per cent
20 per cent
Nil
Nil
Where options are issued by the Company to employees of subsidiaries, the Company recognises the equity
provided as an investment in the subsidiary.
The Company annually revises its estimates of the number of options that are expected to become exercisable.
Where appropriate, the impact of revised estimates is reflected in the income statement over the remaining
vesting period, with a corresponding adjustment to the share option reserve.
Short-term incentives
Staff Profit Share Scheme
The Group recognises a liability and an expense for profit share based on a formula that takes into consideration
the growth rate of the Group’s earnings before tax and the employee’s performance over the financial year.
Short-term incentive plan
The Group recognises a liability and an expense for 15-30% of the Total Reward Remuneration (TRR) of
Executives and select employees. The short-term incentive awards are based on the achievement of annual
Key Performance Indicators (KPIs).
xv) cash and cash equivalents
Cash and cash equivalents include cash on hand and deposits held at call with financial institutions.
xvi) leases
Leases entered into by the Group as lessee, are operating leases. The total fixed payments made under
operating leases are charged to the income statement on a straight-line basis over the period of the lease.
63
OzForex Annual Report 2014 notes to the Financial stateMents
(CONT)
note 1. suMMaRy oF signiFicant accounting policies (CONT)
xvii) business combinations
The acquisition method of accounting is used to account for all business combinations, regardless of whether
equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary
comprises the
• fair values of the assets transferred
• liabilities incurred
• equity interests issued by the group
• fair value of any asset or liability resulting from a contingent consideration arrangement, and
• fair value of any pre-existing equity interest in the subsidiary
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are,
with limited exceptions, measured initially at their fair values at the acquisition date.
Acquisition-related costs are expensed as incurred. The excess of the
• consideration transferred
• amount of any non-controlling interest in the acquired entity, and
• acquisition-date fair value of any previous equity interest in the acquired entity
over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than
the fair value of the net identifiable assets of the subsidiary acquired, the difference is recognised directly in
profit and loss as a bargain purchase.
xviii) client liabilities
Client liabilities represent an obligation of the Group for amounts unpaid to customers that transacted with
the Group prior to the end of the financial year. They are recognised initially at their fair value and subsequently
measured at amortised cost using the effective interest method.
xiv) gst
Revenues, expenses and fixed assets are recognised net of the amount of associated GST, unless the GST
incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of the
acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amounts of GST receivable or payable. The net amount
of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables
in the statement of financial position.
Cash flows are presented on a gross basis. The GST components of the cash flows arising from investing or
financing activities which are recoverable from, or payable to the taxation authority, are presented as operating
cash flows.
xx) contributed equity
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or
options are shown in equity as a deduction, net of tax, from the proceeds.
xxii) Rounding of amounts
The Company is of a kind referred to in Australian Securities and Investments Commission Class Order 98/100
(as amended), relating to the “rounding off” of amounts in the financial report. Amounts in the financial
report have been rounded off in accordance with that Class Order to the nearest thousand dollars unless
otherwise indicated.
64
OzForex Annual Report 2014For the Financial year ended 31 March 2014 note 2. segMent inFoRMation
The group operates international payment services in defined geographic regions (based on client location)
and international payment solutions globally.
International payment solutions is a package offered to strategic partners which consists of the OzForex IT
platform, customer service, compliance sophistication, banking relationships, and payments capabilities.
Year ending
31 March 2014
Segment Revenue
Fee and commission
income
Australia &
New Zealand
$’000
Europe
$’000
North America
$’000
Asia
$’000
International
Payment
Solutions
$’000
Consolidated
$’000
41,752
15,746
8,430
1,674
9,123
76,725
Total segment revenue
41,752
15,746
8,430
1,674
9,123
76,725
10,511
6,840
86
608
2,850
20,895
Segment result
EBITDA
Depreciation and
amortisation
Interest income
Profit before income tax
Income tax expense
Profit for the year
Segment assets
31 March 2014
Segment assets
Intergroup eliminations
Deferred tax assets
Total Assets
Segment liabilities
31 March 2014
Segment liabilities
133,036
–
24,357
(11,953)
16,107
(4,431)
5,438
(523)
(110,583)
(21,221)
(12,519)
(827)
–
Intergroup eliminations
16,907
–
–
Deferred tax liabilities
Total Liabilities
Segment net assets
Intergroup eliminations
Net deferred tax
Total Net Assets
22,453
16,907
3,136
(11,953)
3,588
(4,431)
4,611
(523)
–
–
–
–
–
–
(540)
1,527
21,882
(5,915)
15,967
178,938
(16,907)
2,251
164,282
(145,150)
16,907
(36)
(128,279)
33,788
–
2,215
36,003
65
OzForex Annual Report 2014
Year ending
31 March 2013
Segment Revenue
Fee and commission
income
Segment result
EBITDA
Depreciation and
amortisation
Interest income
Profit before income tax
Income tax expense
Profit for the year
Segment assets
31 March 2013
Segment assets
Intergroup eliminations
Deferred tax assets
Total Assets
Segment liabilities
31 March 2013
Segment liabilities
notes to the Financial stateMents
(CONT)
note 2. segMent inFoRMation (CONT)
Australia &
New Zealand
$’000
Europe
$’000
North America
$’000
Asia
$’000
International
Payment
Solutions
$’000
Consolidated
$’000
Total segment revenue
30,244
12,149
4,851
30,244
12,149
4,851
835
835
5,860
53,939
5,860
53,939
13,863
6,013
180
213
2,666
22,935
(489)
1,798
24,244
(7,107)
17,137
103,697
(6,048)
153
97,802
(73,064)
6,048
(23)
(67,039)
30,633
–
130
30,763
78,665
–
12,536
(3,536)
8,405
–
4,091
(2,512)
–
–
–
–
–
–
(56,053)
(10,885)
(5,908)
(218)
–
Intergroup eliminations
5,457
–
591
22,610
5,457
1,651
(3,536)
2,497
591
3,873
(2,512)
Deferred tax liabilities
Total Liabilities
Segment net assets
Intergroup eliminations
Net deferred tax
Total Net Assets
66
OzForex Annual Report 2014For the Financial year ended 31 March 2014
note 3. pRoFit FoR the Financial yeaR
Net interest income
Interest and similar income received/receivable
Net interest income
Net fee and commission income
Realised margin and fees on foreign exchange contracts
Unrealised gains/(losses) on foreign exchange contracts
Retranslation of foreign exchange assets and liabilities
Fee and commission expense
Net fee and commission income
Other income
Reimbursement of IPO expenses1
Other
Total other income
Employment expenses
Salary related costs including commissions
Employee benefits
Defined contribution plan
Retention payments
Provision for annual leave
Provision for long service leave
Recoveries2
Total compensation expense
Other employment expenses including on-costs,
staff procurement and staff training
Total employment expenses
1. Relates to income to the Group from arranger fees in relation to the IPO.
2. Recoveries received during the year were from Macquarie Equities Limited.
2014
$’000
1,527
1,527
76,303
(674)
1,096
(5,687)
71,038
12,740
8
12,748
(20,120)
(8,713)
(1,130)
(866)
(277)
(195)
866
(30,435)
(1,656)
2013
$’000
1,798
1,798
53,627
235
77
(3,658)
50,281
–
–
–
(13,614)
(1,281)
(889)
(866)
(109)
(64)
866
(15,957)
(716)
(32,091)
(16,673)
67
OzForex Annual Report 2014 notes to the Financial stateMents
(CONT)
note 3. pRoFit FoR the Financial yeaR (CONT)
Occupancy expenses
Operating lease rentals
Depreciation: furniture, fittings and leasehold
Other occupancy expenses
Total occupancy expenses
Promotional expenses
Advertising
Other promotional expenses
Total promotional expenses
IPO related expenses
Professional fees1
Travel expenses
Total IPO related expenses
Other operating expenses
Professional fees
Information technology
Depreciation: computer equipment and software
Communication expenses
Compliance expenses
Insurance expenses
Travel expenses
Bad and doubtful debts recovery/(expense)
Non recoverable GST2
Other expenses
Total other operating expenses
2014
$’000
(1,153)
(71)
(399)
(1,623)
(10,133)
(524)
(10,657)
(11,721)
(183)
(11,904)
(1,837)
(845)
(469)
(538)
(860)
(586)
(654)
(511)
(64)
(792)
(7,156)
2013
$’000
(901)
(140)
(284)
(1,325)
(6,728)
(43)
(6,771)
–
–
–
(707)
(648)
(349)
(434)
(682)
(438)
(407)
327
733
(461)
(3,066)
1. Relates to costs incurred by the Group while acting as an arranger throughout the IPO transaction
2. The recovered GST in 2013 was a result of the Travelex high court decision which ruled that with the sale of foreign currency, the implicit rights of the currency
note cannot be consumed in Australia and therefore it must be considered an export. Following this ruling any sales by OzForex to non-Australian residents and
sales of non AUD currencies to Australian residents were considered exports. This increased the percentage of reclaimable GST on purchases, which dated back
to 2006, compared to what had initially been reclaimed.
68
OzForex Annual Report 2014For the Financial year ended 31 March 2014 note 4. incoMe tax expense
a) Income tax expense
Current tax expense
Deferred tax benefit
Total income tax expense
Deferred income tax benefit included in income tax expense comprises:
Increase/(Decrease) in deferred tax assets
Decrease/(Increase) in deferred tax liabilities
Total deferred income tax benefit
2014
$’000
(8,000)
2,085
(5,915)
2,098
(13)
2,085
2013
$’000
(7,114)
7
(7,107)
(660)
(667)
7
b) Reconciliation of income tax expense to prima facie tax payable
Prima facie income tax expense on operating profit3
(6,565)
(7,273)
Tax effect of amounts adjusted in calculating taxable income:
Other items
Total income tax expense
650
(5,915)
166
(7,107)
3. Prima facie income tax on operating profit is calculated at the rate of 30 percent (2013: 30 percent). The Group has a tax year ending on 30 September.
No tax losses were transferred to the parent or utilised during the period.
note 5. cash and cash equivalents (cuRRent assets)
Cash held4
Cash held for subsequent settlement of client liabilities
Total cash and cash equivalents
2014
$’000
40,995
107,763
148,758
2013
$’000
31,168
60,944
92,112
4. Included in cash held are balances of $ 8,110,000 (2013: $5,100,000) which are held as collateral by counter parties for over the counter derivative transactions.
note 6. deRivative Financial instRuMents at FaiR value thRough pRoFit
and loss
Value of forward contracts – positive values
Value of forward contracts – negative values
Total derivative financial instruments at fair value through profit and loss5
5. All derivative financial instruments are expected to mature within 12 months after the reporting date.
note 7. otheR assets (cuRRent assets)
Prepayments
Other debtors
Total other assets
2014
$’000
8,593
(5,615)
2,978
2014
$’000
981
2,652
3,633
2013
$’000
3,576
(1,259)
2,317
2013
$’000
639
323
962
69
OzForex Annual Report 2014
notes to the Financial stateMents
(CONT)
2013
$’000
1,231
(802)
6
435
439
(311)
2
130
1,294
(862)
2
434
999
Total
$’000
999
588
(3)
(540)
3
1,047
note 8. pRopeRty, plant and equipMent
Furniture, fittings and leasehold improvements
Cost
Less accumulated depreciation
Exchange adjustment
Total furniture, fittings and leasehold improvements
Software
Cost
Less accumulated depreciation
Exchange adjustment
Total Software
Computer equipment
Cost
Less accumulated depreciation
Exchange adjustment
Total computer equipment
Total property, plant and equipment
2014
$’000
1,455
(926)
2
531
512
(415)
(2)
95
1,578
(1,160)
3
421
1,047
Reconciliation of the movement in the Group’s property, plant and equipment at their written-down value:
Furniture,
fittings and
leasehold
improvements
$’000
435
227
–
(133)
2
531
Software
$’000
Computer
equipment
$’000
130
76
(3)
(106)
(2)
95
434
285
–
(301)
3
421
Balance 31 March 2013
Acquisitions
Disposals
Depreciation expense
Exchange adjustment
Balance at 31 March 2014
70
OzForex Annual Report 2014For the Financial year ended 31 March 2014 note 8. pRopeRty, plant and equipMent (CONT)
Balance 31 March 2012
Acquisitions
Depreciation expense
Exchange adjustment
Balance at 31 March 2013
Furniture,
fittings and
leasehold
improvements
$’000
263
312
(140)
–
435
Software
$’000
Computer
equipment
$’000
158
76
(104)
–
130
349
332
(245)
(2)
434
Total
$’000
770
720
(489)
(2)
999
note 9. deFeRRed incoMe tax assets/(liabilities)
Deferred income tax assets
The balance comprises temporary differences attributable to:
Provisions and accrued expenses
Financial instruments
Total deferred income tax assets
Deferred income tax liabilities
The balance comprises temporary differences attributable to:
Other timing differences
Total deferred income tax liabilities
Net deferred income tax assets1
2014
$’000
2013
$’000
3,145
(894)
2,251
(36)
(36)
2,215
848
(695)
153
(23)
(23)
130
1. Of the above $52,000 (2013: $45,000) is expected to be recovered more than twelve months after the reporting date. The remaining balance represents
amounts expected to be settled within twelve months after the reporting date.
Comparative information has been restated to conform to presentation in the current year.
The principles of the balance sheet method of tax effect accounting have been adopted whereby the income
tax expense for the financial year is the tax payable on the current period’s taxable income adjusted for changes
in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and
liabilities and their carrying amounts in the financial statements. The tax assets relating to deductible temporary
differences are not carried forward as an asset unless the benefit is probable of realisation.
The deferred tax assets have been applied against deferred tax liabilities to the extent that they are expected
to be realised in the same period, within the same tax paying entity.
note 10. client liabilities
Client liabilities relate to amounts owed to clients or counterparty banks in order to settle outstanding deals.
Client liabilities are unsecured and are short term in nature. The carrying amounts of client liabilities are
assumed to be the same as their fair values, due to their short-term nature.
71
OzForex Annual Report 2014 notes to the Financial stateMents
(CONT)
note 11. otheR liabilities (cuRRent liabilities)
Accrued charges and sundry liabilities
Other
Total other liabilities1
2014
$’000
2,398
1,515
3,913
2013
$’000
1,591
632
2,223
1. Unless otherwise stated the material portion of the balance represents amounts expected to be settled within twelve months after the reporting date.
note 12. pRovisions
Current – provision for employee entitlements
Annual Leave
Employee Benefits
Long service leave
Non-current
– provision for employee entitlements
Employee Benefits
Long Service Leave
Total provisions
Movements in provision balances
Annual Leave
Employee Benefits
Long Service Leave
Total
2014
$’000
2013
$’000
917
7,598
272
8,787
190
200
390
9,177
620
1,278
127
2,025
–
150
150
2,175
Carrying
amount at
beginning of
the period
620
1,278
277
2,175
Release of
provisions
(933)
(1,278)
–
(2,211)
Additional
provisions
made
Carrying
amount at the
end of the
period
1,230
7,788
195
9,213
917
7,788
472
9,177
Comparative information has been restated to conform to presentation in the current year.
72
OzForex Annual Report 2014For the Financial year ended 31 March 2014 note 13. contRibuted equity
2014
Number of
shares
2013
Number of
shares
Ordinary share capital
Opening balance of fully paid ordinary shares
Class A shares converted to ordinary shares
Fully paid ordinary shares
204,840
155,160
239,640,000
204,840
–
–
Closing balance of fully paid ordinary shares
240,000,000
204,840
2014
$’000
360
–
24,000
24,360
Class A share capital
Opening balance of fully paid ordinary shares
Class A shares converted to ordinary shares
155,160
(155,160)
155,160
–
Closing balance of fully paid class A shares
–
155,160
155
(155)
–
Total equity contribution
240,000,000
360,000
24,360
2013
$’000
205
–
–
205
155
–
155
360
On the 15th October 2013 the shareholders of OzForex Group Limited resolved to approve a division of issued
share capital in accordance with s245H of the Corporations Act, increasing the number of shares on issue from
360,000 to 228,000,000 shares.
On the 16th October 2013 OzForex Group Limited issued a further 12,000,000 new shares (and 207,690,000
existing shares were transferred) to investors as part of the listing on the ASX for $2.00 per share raising
$24 million of new capital, and following this OzForex Group Limited listed on the ASX on an unconditional basis.
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds of the company in a liquidity event
in proportion to the number of and amounts paid on the shares held. This is subject to the prior entitlements of
the class A shares.
Each ordinary shareholder is entitled to one vote per share held.
Class A shares
Class A shares entitle the holder to participate in dividends and the proceeds of the company in a liquidity event
in proportion to the number of and amounts paid on the shares held. This is subject to the liquidity preference
that enables the holder of the class A share to recover the amount of their initial investment prior to any
distribution to ordinary shareholders.
Each class A shareholder is entitled to one vote per share held.
note 14. Retained eaRnings
Balance at the beginning of the financial year
Profit attributable to ordinary equity holders of OzForex Group Limited
Dividends paid
Balance at the end of the financial year
2014
$’000
30,588
15,967
(35,000)
11,555
2013
$’000
25,568
17,137
(12,117)
30,588
73
OzForex Annual Report 2014 notes to the Financial stateMents
(CONT)
note 15. dividends paid and distRibutions paid oR pRovided FoR
First Interim dividend paid ($27.78 (2013: $0.33) per share)1
Second Interim dividend paid ($1.04 (2013: $0) per share)1
Final dividend paid ($0 (2013: $33.33) per share)1
Total dividends paid
1. These dividends were 100 percent franked at the 30 percent corporate tax rate.
2014
$’000
(10,000)
(25,000)
–
(35,000)
2013
$’000
(117)
–
(12,000)
(12,117)
Dividend per share is calculated based on the ordinary shares outstanding on the dividend declaration date.
Details of the movement in the number of shares outstanding are disclosed in note 13 and details of the share
transactions are disclosed in the directors’ report.
Franked dividends
Franking credits available for subsequent financial years
based on a tax rate of 30% (2013: 30%)
2014
$’000
2013
$’000
1,778
10,815
The above amounts represent the balance of the franking account as at the end of the financial period, adjusted
for franking credits that will arise from the payment of the amount of the provision for income tax.
note 16. capital
The Group’s capital management strategy is to maximise shareholder value through optimising the level and use
of capital resources.
The Group’s capital management objectives are to:
• Ensure sufficient capital resource to support the Group’s business and operational requirements
• Maintain sufficient capital to exceed externally imposed capital requirements
• Safeguard the Group’s ability to continue as a going concern.
Periodic reviews of the entity’s capital requirements are performed to ensure the Group is meeting its objectives.
Capital is defined as share capital plus reserves.
The Group has satisfied its externally imposed capital requirements throughout the year.
During the current period, the Group has continued to meet its capital requirements under the licence and no
breaches have occurred.
74
OzForex Annual Report 2014For the Financial year ended 31 March 2014 note 17. coMMitMents
operating leases
The Group leases offices under a non-cancellable operating leases expiring within one to five years. The
leases have escalating clauses and renewable rights. On renewal, the terms of the leases are renegotiated.
Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows:
Not later than one year
Later than one year and not later than five years
Total capital and other expenditure commitments
note 18. notes to the stateMent oF cash Flows
Reconciliation of cash and cash equivalents
Reconciliation of profit from ordinary activities
after income tax to net cash flows from operating activities
Profit from ordinary activities after income tax
Adjustments to profit from ordinary activities
Depreciation on property, plant and equipment
Share-based payments expense
Foreign exchange revaluation
Loss on disposal of property, plant and equipment
Fair value changes on financial assets and liabilities
at fair value through profit or loss
Changes in assets and liabilities
(Increase) in debtors and prepayments
(Increase) in deferred tax assets
Increase in accrued charges and creditors
Increase in deferred tax liabilities
Increase in provisions for employee entitlements
(Decrease) in tax provision
Net cash flows from operating activities
2014
$’000
1,073
2,519
3,592
2013
$’000
979
2,713
3,692
2014
$’000
2013
$’000
15,967
17,137
540
17
(1,096)
3
674
(2,673)
(2,098)
48,511
13
7,001
1,361
68,220
489
19
(235)
–
(77)
(394)
(41)
8,767
23
481
(1,134)
25,035
75
OzForex Annual Report 2014 notes to the Financial stateMents
(CONT)
note 19. Related paRty inFoRMation
(a) ultimate parent entity
The ultimate parent entity is OzForex Group Limited.
(b) subsidiaries
All entities have a 31 March financial year end.
The following entities are wholly owned subsidiaries of the company
Entity
CanadianForex Limited
OzForex (HK) Limited
OzForex Limited
OzForex Operations Pty Limited
OzForex (SNG) PTE. Limited
NZForex Limited
UKForex Limited
USForex Incorporated
(c) other related parties
Cloudbreak Settlements Pty Limited
Country of
Incorporation
Canada
Hong Kong
Australia
Australia
Singapore
New Zealand
United Kingdom
United States
Equity Holding
100%
100%
100%
100%
100%
100%
100%
100%
(d) key management personnel
Disclosures relating to directors and other key management personnel are set out in Note 20.
(e) transactions with other related parties
Directors and parent entities of OzForex Group Limited may from time to time have investments in entities which
transact with OzForex Group Limited. These transactions are based on normal commercial terms and conditions.
Transactions with Cloudbreak Settlements Pty Limited relate to arranger fees and costs incurred relating to the
initial public offering and are as follows:
Transaction type
Receivable due from related party
Income received
Expense incurred
2014
$’000
1,274
12,740
11,904
2013
$’000
–
–
–
76
OzForex Annual Report 2014For the Financial year ended 31 March 2014 note 19. Related paRty inFoRMation (CONT)
As a result of the initial public of offering share options due to Executives in the OzForex Group were cancelled
and cash settled by the exiting shareholders as follows:
Settlement of share options:
Macquarie Equities Limited
Matthew Gilmour
G & A Lord Pty Limited
Carboni Pty Limited
Accel Growth Fund L.P.
Accel London III L.P.
Accel IX L.P.
Accel Growth Fund Investors 2010 L.L.C.
Accel Growth Fund Strategic Partners L.P.
Accel IX Strategic Partners L.P.
Accel London Investors 2009 L.P.
Accel Investors 2010 (B) L.L.C.
Carlyle Financial Services AIV IV, L.P.
CGFSP Coinvestment AIV, L.P.
2014
$’000
7,459
3,475
3,475
366
117
49
11
8
2
1
1
1
159
11
2013
$’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
All other transactions with related entities were made on normal commercial terms and conditions and at market rates.
(f) loans to/from related parties
The Company entered into a HK$30,000,000 loan on 23 June 2011 with its wholly owned subsidiary
OzForex (HK) Limited. The facility attracts interest of 3 month HIBOR plus 1 per cent margin, is unsecured
and has a repayment date that is 10 years from the date of the loan agreement.
The Company entered into a $24,000,000 loan on 16 October 2013 with its wholly owned subsidiary
OzForex Limited. The facility is interest free, unsecured and has no repayment date.
77
OzForex Annual Report 2014 notes to the Financial stateMents
(CONT)
note 20. key ManageMent peRsonnel disclosuRe
(a) directors
(I) Chairman – non-Executive
Peter Warne
(II) Executive Director
Neil Helm
(III) Non-Executive Director
Grant Murdoch
Melinda Conrad
William Allen
(b) other key management personnel
The following persons also had authority and responsibility for planning, directing and controlling the activities
of the Group, directly or indirectly, during the financial year.
Name
Mark Ledsham
Simon Griffin
Jason Rohloff
Jeff Parker
David Higgins
Jacqueie Davidson1
Linda Cox1
1. Newly appointed in the current financial year.
Position
Employer
Chief Financial Officer
OzForex Group Limited
Chief Commercial Officer
OzForex Group Limited
Head of Compliance
Chief Operating Officer
Chief Technology Officer
Head of Human resources
Company Secretary
OzForex Group Limited
OzForex Group Limited
OzForex Group Limited
OzForex Limited
OzForex Limited
(c) key management personnel remuneration
The following persons ceased being key management personnel following the capital restructure of the Group
which was triggered by the listing on the ASX:
Name
Chris Minehan
Lionel Docker
Michael Ward
Position
Head of Marketing
Head of Legal
Employer
OzForex Group Limited
OzForex Group Limited
Head of Europe and North America USForex Inc.
78
OzForex Annual Report 2014For the Financial year ended 31 March 2014 note 20. key ManageMent peRsonnel disclosuRe (CONT)
Remuneration
Short-term employee benefits
Post-employment benefits
Long term employee benefits
Share based payments
2014
$
2013
$
9,197,758
2,506,984
150,592
981,243
144,654
144,919
896,354
15,796
Total remuneration paid to key management personnel
10,474,247
3,564,053
Detailed Remuneration Disclosures are provided in the remuneration report in Section 24 of the Directors’ Report.
Comparative information has been restated to conform to presentation in the current year.
(d) share holdings and share options
The number of shares and share options in the Company held during the financial year by each director of
OzForex Group Limited and other key management personnel of the Group, including their personally related
parties, are set out below. There were no shares granted during the reporting period as compensation.
Ordinary shares
Shares held at
31 March 2013
Shares acquired
during the
period
Shares held at
31 March 2014
Options held at
31 March 2013
Share options
Options
cancelled
during the
period
Options held at
31 March 2014
Directors of
OzForex
Group Limited
P Warne
N Helm
G Murdoch
M Conrad
W Allen
Other key
management
personnel
of the group
M Ledsham
S Griffin
J Rohloff
J Parker
D Higgins
J Davidson
L Cox
C Minehan2
M Ward2
L Docker2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
125,000
250,000
50,000
50,000
–
125,000
250,000
50,000
50,000
–
25,000
25,000
15,000
20,000
28,000
–
–
15,000
25,000
–
25,000
25,000
15,000
20,000
28,000
–
–
15,000
25,000
–
–
7,000
–
–
–
1,100
1,400
1,100
–
1,700
–
–
1,100
1,300
1,100
–
(7,000)
–
–
–
(1,100)
(1,400)
(1,100)
–
(1,700)
–
–
(1,100)
(1,300)
(1,100)
2. The following ceased being key management personnel following the capital restructure of the group triggered by the listing on the ASX.
No comparable figures are available as OzForex Group Limited was incorporated during the year ending
31 March 2014.
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
79
OzForex Annual Report 2014 notes to the Financial stateMents
(CONT)
note 21. eMployee equity paRticipation
share based payments
(a) OzForex Group Long Term Incentive Plan
During the 2014 financial year, the Group established and announced the OzForex Group Long Term Incentive
Plan for Executives and other select employees identified by the Board. The plan is based on the grant of
performance rights that vest into shares on a 1 to 1 basis at no cost to the employee subject to performance
hurdles. Settlement of the performance rights is made in ordinary shares.
The performance measures approved by the Board are based upon Group EBTDA for all Executives responsible
for the Group.
There have been no cancellations or modifications to the plan during 2014.
If the Executive leaves the granted rights may be forfeited at the Board’s discretion.
Plan
Performance
period end date
Balance
as at
31 March 2013
Granted during
the year
Exercised
during the year
Forfeited/
cancelled
during the year
Balance
as at
31 March 2014
IPO rights
31 March 2016
–
536,575
–
–
536,575
Rights are vested 32 months after grant date (vesting period). During the vesting period the performance
measures are based on the 30 month period from 1 October 2013 to 31 March 2016 (performance period). In case
of under or over performance the eligible rights will be adjusted as per below:
Performance level
At or above target
EBITDA over a 30 month performance period
Vesting level
Greater or equal to 18% CAGR
100%
Between threshold and target
Between 13% and 18% CAGR
Pro-rata from 25% – 100%
Below threshold
Below 13%
0%
As all performance periods lie in the future, no performance rights are exercisable (or have been exercised) at
balance date. The tables below show the number of performance rights granted at grant date.
Plan
IPO rights
Grant date
Performance
period
Vesting date
Number of
rights granted
Value of rights
at grant date
11 October 2013
2016
1 June 2016
536,575
832,721
The value of each performance right is estimated on the grant date using a Monte Carlo simulation and
discounted for the probability of employee retention and the probability of achieving performance levels.
The OzForex Group Long Term Incentive Plan resulted in a net share-based compensation expense of $157,507.
(b) Share options
During the period ended 31 March 2014, the Company had two equity settled share-based payment arrangements,
which are described below. These share-based payment arrangements were cancelled and cash settled by the
pre-restructure shareholders as a result of listing on the ASX. For details of the payments in relation to the
cancelled options refer to the related party transactions in note 19.
Grant
2010
Number
Grant date
Exercise price
Vesting
18,000
19 November 2010
472.23
25% per year on anniversary
of grant date for 4 years
Expiry
7 years
The estimated fair value of each share option granted in the plan is $4.80. This was calculated by applying
a trinomial option pricing model. The model inputs were the underlying share price at grant date of $91.95,
exercise price of $472.23, expected volatility of 35%, no expected dividends, contractual life of 7 years and
a risk-free interest rate of 5.5%.
80
OzForex Annual Report 2014For the Financial year ended 31 March 2014 note 21. eMployee equity paRticipation (CONT)
When this plan was implemented the Company was unlisted and as such did not have access to the historical
information to calculate assumed volatility rates. The volatility in the pricing model had been based on that of
Western Union, a similar payments and foreign exchange business. The assessed volatility of Western Union
was 21.05% over 4 years. Given that the Company’s stock and options were less liquid, the volatility was
adjusted upward to 35%.
Grant
2013
Number
Grant date
Exercise price
Vesting
1,300
1 January 2013
625.00
25% per year on anniversary of
grant date for 4 years
Expiry
7 years
The estimated fair value of each share option granted in the plan is $3.36. This was calculated by applying
a trinomial option pricing model. The model inputs were the underlying share price at grant date of $183.60,
exercise price of $782.23, expected volatility of 19.88%, no expected dividends, contractual life of 7 years and
a risk-free interest rate of 3%.
When this plan was implemented the Company was unlisted and as such did not have access to the historical
information to calculate assumed volatility rates. The volatility in the pricing model had been based on that of
Western Union, a similar payments and foreign exchange business. The assessed volatility of Western Union
was 19.88% over 6 years.
Further details of the share option plans are as follows:
Outstanding at start of year
Granted
Forfeited
Exercised
Outstanding at end of year
Exercisable at end of year
2014
2013
Number of
options
Weighted
average
exercise price
$
19,300
482.52
–
–
(19,300)
482.52
–
–
–
–
–
–
Number of
options
Weighted
average
exercise price
18,000
1,300
–
–
19,300
9,000
$
472.23
625.00
–
–
482.52
472.23
The options outstanding at 31 March 2014 had a weighted average exercise price of $0 (2013: $482.52), and a
weighted average remaining contractual life of 0 years (2013: 4.77 years).
Expense arising from share option plans
note 22. contingent liabilities and assets
The Group has no contingent assets and liabilities.
2014
$
17,124
2013
$
18,905
note 23. Financial Risk ManageMent
Risk Management
Risk is an integral part of the Group’s businesses. The main risks faced by the Group are market risk, credit risk,
liquidity risk, operational risk, legal compliance risk and documentation risk. Responsibility for management of
these risks lies with the individual businesses giving rise to them. It is the responsibility of the Leadership Team
and the Risk Committee to ensure appropriate assessment and management of these risks.
The risks which the Group is exposed to are managed on a globally consolidated basis for OzForex Group Limited
as a whole, including all subsidiaries, in all locations. The Group’s approach to risk ensures that risks in subsidiaries
are subject to the same rigour and risk acceptance decisions at the parent entity level (i.e. not differentiating
where the risk is taken within the OzForex Group).
81
OzForex Annual Report 2014 notes to the Financial stateMents
(CONT)
note 23. Financial Risk ManageMent (CONT)
note 23.1 credit risk
Credit risk arises from cash and cash equivalents, favourable derivative financial instruments and deposits
with banks and financial institutions, as well as credit exposures to wholesale and retail customers, including
outstanding receivables and committed transactions.
Credit risk within the Group is managed on a group basis by the Leadership Team. At an entity level the
Group actively monitors the forward positions of its counterparties to ensure adequate collateral is held
against a client position.
The balances disclosed in the credit risk tables below exclude financial assets that are subject to risks
other than credit risk, such as equity investments or banknotes and coin.
Maximum exposure to credit risk
The table below details the concentration of credit exposure of the Group’s assets to significant geographical
locations and counterparty types. The amounts shown represent the maximum credit risk of the Group’s assets.
In all cases this is equal to the carrying value of the assets with the exception of derivatives which are recorded
at the maximum credit exposure.
Consolidated
Australia
Financial institutions
Other
Total Australia
New Zealand
Financial institutions
Other
Total New Zealand
Asia
Financial institutions
Other
Total Asia
Europe
Financial institutions
Other
Total Europe
North America
Financial institutions
Other
Total North America
82
2014
Derivative
financial
instrument
– positive
values
$’000
Cash and cash
equivalents
$’000
Other assets
$’000
Total
$’000
86,002
–
86,002
8,333
–
8,333
7,062
7,062
23,340
–
23,340
24,017
–
24,017
102
4,429
4,531
44
1,029
1,073
–
124
124
1,210
951
2,161
22
94
116
–
1,739
1,739
–
84
84
–
49
49
–
766
766
–
14
14
86,104
6,168
92,272
8,377
1,113
9,490
7,062
173
7,235
24,550
1,717
26,267
24,039
108
24,147
OzForex Annual Report 2014For the Financial year ended 31 March 2014
note 23. Financial Risk ManageMent (CONT)
Consolidated
Other
Financial institutions
Other
Total Other
Total gross credit risk
Maximum exposure to credit risk
Consolidated
Australia
Financial institutions
Other
Total Australia
New Zealand
Financial institutions
Other
Total New Zealand
Asia
Financial institutions
Other
Total Asia
Europe
Financial institutions
Other
Total Europe
North America
Financial institutions
Other
Total North America
Other
Financial institutions
Other
Total Other
2014
Derivative
financial
instrument
– positive
values
$’000
Cash and cash
equivalents
$’000
Other assets
$’000
Total
$’000
4
–
4
–
588
588
–
–
–
4
588
592
148,758
8,593
2,652
160,003
2013
Derivative
financial
instruments
– positive
values $’000
Cash and cash
equivalents
$’000
Other assets
$’000
Total
$’000
47,628
–
47,628
3,863
–
3,863
2,493
–
2,493
16,972
–
16,972
21,153
–
21,153
3
–
3
35
1,539
1,574
46
526
572
–
36
36
380
729
1,109
–
56
56
–
229
229
–
506
506
–
–
–
–
40
40
–
158
158
–
222
222
–
36
36
47,663
2,045
49,708
3,909
526
4,435
2,493
76
2,569
17,352
887
18,239
21,153
278
21,431
3
265
268
Total gross credit risk
92,112
3,576
962
96,650
83
OzForex Annual Report 2014
notes to the Financial stateMents
(CONT)
note 23. Financial Risk ManageMent (CONT)
Credit quality of financial assets
The credit quality of financial assets is managed by the Group using internal credit ratings.
The table below shows the credit quality by class of financial asset for statement of financial position lines.
Credit Quality – 2014
Neither past due nor impaired
Cash and cash equivalents
– Financial institutions
Derivative financial instruments
– positive values
– Financial institutions
– Other
Other assets
– Other
Total
Investment
Grade
Below
Investment
Grade
$’000
$’000
148,758
1,376
–
–
150,134
–
–
–
–
–
Credit Quality – 2013
Neither past due nor impaired
Cash and cash equivalents
– Financial institutions
Derivative financial instruments
– positive values
– Financial institutions
– Other
Other assets
– Other
Total
Investment
Grade
Below
Investment
Grade
$’000
$’000
92,112
461
–
–
92,573
–
–
–
–
–
Unrated
$’000
Total
$’000
–
148,758
–
7,217
2,652
9,869
1,376
7,217
2,652
160,003
Unrated
$’000
Total
$’000
–
92,112
–
3,115
962
4,076
461
3,115
962
96,650
There are no balances that are past due or impaired as at 31 March 2014 (2013: Nil).
Unrated balances relate to amounts due from entities that are not graded by the company
or by a public ratings agency.
84
OzForex Annual Report 2014For the Financial year ended 31 March 2014 note 23. Financial Risk ManageMent (CONT)
note 23.2 liquidity risk
Liquidity risk is the risk of an entity encountering difficulty in meeting obligations with financial liabilities.
Liquidity risk within the Group is managed on a group basis by Group Treasury.
If counterparty banks do not provide the volume of counterparty hedging required by the OzForex Group, the
Group would be exposed to movements in exchange rates and interest rates. The Group manages this liquidity
risk by ensuring that at any point in time a minimum of two counterparty banks facilitate counterparty hedging.
Contractual undiscounted cash flows
The table below summarises the maturity profile of the Group’s financial liabilities as at 31 March based on
contractual undiscounted repayment obligations. Repayments which are subject to notice are treated as if notice
were given immediately. However, the Group expects that many customers will not request repayment on the
earliest date the Group could be required to pay and the table does not reflect the expected cash flows indicated
by the Group’s deposit retention history.
Derivatives and trading portfolio liabilities are included in the less than 3 months column at their fair value.
Liquidity risk on these items is not managed on the basis of contractual maturity, since they are not held for
settlement according to such maturity and will frequently be settled in the short term at fair value. Derivatives
designated in a hedging relationship are included according to their contractual maturity.
2014
On demand
$’000
3 months
or less
$’000
Other liabilities1
(1,389)
(109,279)
3 to 12 months
1 to 5 years
Over 5 years
$’000
(9,563)
$’000
(952)
$’000
–
Total
$’000
(121,183)
Derivative
financial
instruments
Inflows
(Outflows)
Total
2013
Other liabilities1
Derivative
financial
instruments
Inflows
(Outflows)
Total
–
–
794,370
(792,965)
(1,389)
(107,874)
114,384
(112,811)
(7,990)
–
–
(952)
–
–
–
908,754
(905,776)
(118,205)
On demand
$’000
(897)
3 months
or less
$’000
(61,569)
3 to 12 months
1 to 5 years
Over 5 years
$’000
(1,693)
$’000
(718)
$’000
–
Total
$’000
(64,877)
–
–
(897)
360,191
(358,247)
(59,625)
49,435
(49,063)
(1,321)
–
–
(718)
–
–
–
409,626
(407,310)
(62,561)
1. Excludes items that are not financial instruments and non-contractual accruals and provisions.
85
OzForex Annual Report 2014
notes to the Financial stateMents
(CONT)
note 23. Financial Risk ManageMent (CONT)
note 23.3 Market risk
Market risk is the exposure to adverse changes in the value of Group’s trading portfolios as a result of changes
in market prices or volatility. The Group is exposed to the following risks in each of the major markets in which
it trades:
• foreign exchange: changes in spot and forward exchange rates and the volatility of exchange rates;
• interest rates: changes in the level, shape and volatility of yield curves, the basis between different interest
rate securities and derivatives and credit margins;
• Market risk of the Group is managed on a globally consolidated basis for the Group as a whole, including all
subsidiaries, in all locations. The Group’s internal approach to risk ensures that risks in subsidiaries are subject
to the same rigour and risk acceptance decisions at the parent entity level.
When a foreign exchange transaction is booked, the exchange rate (and therefore the amount of foreign currency
which the OzForex Group will be required to deliver to the client’s beneficiary) is agreed. Typically funding from
the client for the international payment is not received by the Group for another 12 to 24 hours and in that time
the available exchange rate (which the Group could use to acquire the required currency) is likely to have moved.
The OzForex Group manages this risk at the time the transaction is agreed by regular hedging of its net foreign
currency exposures with one of its counterparty banks.
To manage the movement in foreign exchange rates, the Group’s technology platform aggregates transactions
across its entire client base and nets out buy transactions against sell transactions. The OzForex Group staff
clear exposures by entering into hedging contracts with counterparty banks pursuant to internal guidelines
which provide for hedging to occur once exposure to a single currency reaches or exceeds a defined threshold.
The Group’s financial risk on these exposures is limited to potential loss or gain from currency movements which
may occur between when the transaction with the client is booked and when hedging occurs.
In addition to direct payment services, the Group also offers forward contracts to its clients that enable clients to
lock in exchange rates up to 12 months in advance. In addition to movements in foreign exchange rates (which
are managed in the manner described above), these forward contract transactions are exposed to changes in
interest rates. To manage this risk, the Group runs interest scenario testing across the aggregated transactions
and may enter into swap contracts with counterparty banks to reduce their aggregate exposure when applicable.
86
OzForex Annual Report 2014For the Financial year ended 31 March 2014 note 23. Financial Risk ManageMent (CONT)
Interest Rate Risk
The Group also has exposure to non-traded interest rate risk generated by cash and cash equivalents.
The table below indicates the Group’s exposure to movements in interest rates as at 31 March.
Movement in basis points (%)
+50
-50
+50
-50
31 March 2014
AUD
CAD
EUR
GBP
NZD
SGD
USD
Other
Total
Sensitivity
of profit
before tax
$’000
458
Sensitivity
of profit
before tax
$’000
(458)
Sensitivity
of equity
after tax
$’000
324
27
49
38
10
84
11
67
(27)
(49)
(38)
(10)
(84)
(11)
(67)
20
34
27
7
58
9
49
Sensitivity
of equity
after tax
$’000
(324)
(20)
(34)
(27)
(7)
(58)
(9)
(49)
744
(744)
528
(528)
31 March 2013
Movement in basis points (%)
+50
-50
+50
-50
AUD
CAD
EUR
GBP
NZD
SGD
USD
Other
Total
Sensitivity
of profit
before tax
$’000
259
31
30
16
5
65
18
37
Sensitivity
of profit
before tax
Sensitivity
of equity
after tax
Sensitivity
of equity
after tax
$’000
(259)
(31)
(30)
(16)
(5)
(65)
(18)
(37)
$’000
187
23
13
21
11
4
47
27
$’000
(187)
(23)
(13)
(21)
(11)
(4)
(47)
(27)
461
(461)
333
(333)
87
OzForex Annual Report 2014 notes to the Financial stateMents
(CONT)
note 23. Financial Risk ManageMent (CONT)
Foreign Currency Risk
The table below indicates the Group’s exposure to movements in foreign currency exchange rates as at
31 March 2014 and 31 March 2013.
Movement in exchange rate (%)
+10%
-10%
+10%
-10%
31 March 2014
CAD
EUR
GBP
NZD
SGD
USD
Other
Total
Sensitivity
of profit
before tax
Sensitivity
of profit
before tax
Sensitivity
of equity
after tax
$’000
$’000
$’000
14
(47)
(38)
(39)
16
(27)
40
(81)
10
(33)
(26)
(26)
11
(19)
27
(56)
(14)
47
38
39
(16)
27
(40)
81
31 March 2013
Sensitivity
of equity
after tax
$’000
(10)
33
26
26
(11)
19
(27)
56
Movement in exchange rate (%)
+10%
-10%
+10%
-10%
Sensitivity
of profit
before tax
Sensitivity
of profit
before tax
Sensitivity
of equity
after tax
Sensitivity
of equity
after tax
1
45
(26)
(5)
14
(34)
(76)
(81)
(1)
(45)
26
5
(14)
34
76
81
1
32
(18)
(4)
10
(24)
(53)
(56)
(1)
(32)
18
4
(10)
24
53
56
CAD
EUR
GBP
NZD
SGD
USD
Other
Total
88
OzForex Annual Report 2014For the Financial year ended 31 March 2014 note 24. FaiR values oF Financial assets and liabilities
Fair value is defined as 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. Fair value reflects the amount for which
an asset could be exchanged or a liability settled, between knowledgeable, willing parties in an arm’s length
transaction. Quoted prices or rates are used to determine fair value where an active market exists. If the market
for a financial instrument is not active, fair values are estimated using present value or other valuation techniques,
using inputs based on market conditions prevailing on the measurement date.
The values derived from applying these techniques are affected by the choice of valuation model used and the
underlying assumptions made regarding inputs such as timing and amounts of future cash flows, discount rates,
credit risk, volatility and correlation.
Financial instruments measured at fair value are categorised in their entirety, in accordance with the levels
of the fair value hierarchy as outlined below:
Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 – inputs other than quoted prices included within level 1 that are observable for the asset or liability,
either directly (i.e. as prices) or indirectly (i.e. derived from prices);
Level 3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The appropriate level for an instrument is determined on the basis of the lowest level input that is significant
to the fair value measurement.
The following methods and significant assumptions have been applied in determining the fair values of
financial instruments:
• Liabilities, financial assets and liabilities at fair value through profit or loss, derivative financial instruments
and other transactions undertaken for trading purposes are measured at fair value by reference to quoted
market prices when available (e.g. listed securities). If quoted market prices are not available, then fair values
are estimated on the basis of pricing models or other recognised valuation techniques.
Where valuation techniques are used to determine fair values, they are validated and periodically reviewed by
qualified personnel independent of the area that created them. All models are certified before they are used, and
models are calibrated periodically to test that outputs reflect prices from observable current market transactions
in the same instrument or other available observable market data. To the extent possible, models use only
observable market data (e.g. for OTC derivatives), however management is required to make assumptions for
certain inputs that are not supported by prices from observable current market transactions in the same
instrument, such as volatility and correlation. Changing these assumptions to reasonably possible alternative
assumptions, for those financial instruments for which fair values were determined in whole or in part using
valuation techniques based on such assumptions (e.g. for certain exotic or structured financial instruments),
would not significantly change the fair values recognised in the financial statements.
The following methods and significant assumptions have been applied in determining the fair values of financial
instruments which are carried at amortised cost:
• The fair values of liquid assets and other instruments maturing within 3 months approximate their carrying
amounts. This assumption is applied to liquid assets and the short-term elements of all other financial assets
and financial liabilities.
• The fair value of demand deposits with no fixed maturity is approximately their carrying amount as they are
short term in nature or are payable on demand.
• The fair values of balances due from/to related entities are approximated by their carrying amount as the
balances are generally receivable/payable on demand.
89
OzForex Annual Report 2014 notes to the Financial stateMents
(CONT)
note 24. FaiR values oF Financial assets and liabilities (CONT)
The table below summarises the carrying value and fair value of all financial instruments of the Group at 31 March.
Assets
Cash
Derivative financial instruments
– positive values
Total financial assets
Liabilities
Derivative financial instruments
– negative values
Total financial liabilities
2014
Carrying
amount
$’000
2014
Fair
value
$’000
148,758
8,593
148,758
8,593
2013
Carrying
amount
$’000
92,112
3,576
2013
Fair
value
$’000
92,112
3,576
157,351
157,351
95,688
95,688
5,615
5,615
5,615
5,615
1,259
1,259
1,259
1,259
The following table summarises the levels of the fair value hierarchy for financial instruments measured at fair
value of the Group at 31 March:
Assets
Derivative financial instruments – positive values
Total assets
Liabilities
Derivative financial instruments
– negative values
Total liabilities
2014
Level 2
$’000
8,593
8,593
5,615
5,615
2014
Total
$’000
8,593
8,593
5,615
5,615
2013
Level 2
$’000
3,576
3,576
1,259
1,259
2013
Total
$’000
3,576
3,576
1,259
1,259
note 25. ReMuneRation oF auditoRs
During the year the following fees were paid or payable for services provided by the auditor of the parent entity,
its related practices and non-related audit firms:
(a) PricewaterhouseCoopers firm
Audit and review of financial reports
Initial public offering services
2014
$
2013
$
251,866
250,000
190,698
–
Total remuneration for audit and other assurance services
501,866
191,698
90
OzForex Annual Report 2014For the Financial year ended 31 March 2014 note 25. ReMuneRation oF auditoRs (CONT)
Taxation services
2014
$
2013
$
72,263
90,820
Total remuneration of PricewaterhouseCoopers
574,129
281,518
(b) Non-PricewaterhouseCoopers audit firms
Audit and review of financial reports
Total remuneration of non-PricewaterhouseCoopers firms
Total audit firm remuneration
12,328
25,853
12,328
586,457
25,853
307,370
It is the Company’s policy to employ PwC on assignments additional to their statutory audit duties where PwC’s
expertise and experience with the Company are important. These assignments are principally tax advice and
due diligence reporting on acquisitions, or where PwC is awarded assignments on a competitive basis. It is
the Company’s policy to seek competitive tenders for all major consulting projects.
The term of the lead audit partner was extended for an additional year in line with section 324 DD of the
Corporations Act.
note 26. events occuRRing aFteR balance sheet date
Dividend declared
On 27 May 2014 a dividend of $0.02375 per share ($5,700,000) was declared.
Ex-Dividend date
Record date
Payment date
11 June 2014
13 June 2014
27 June 2014
There were no other material post balance sheet events occurring after the reporting date requiring disclosure
in these financial statements.
As the parent entity OzForex Group Limited is a holding company which has no trading profits, dividends
declared but not paid will be funded through the profits of subsidiary entities.
note 27. eaRnings peR shaRe
(a) Basic earnings per share
From continuing operations attributable to the ordinary
equity holders of the Company
Total basic earnings per share attributable to the ordinary
equity holders of the Company
(b) Diluted earnings per share
From continuing operations attributable to the ordinary
equity holders of the Company
Total diluted earnings per share attributable to the ordinary
equity holders of the Company
2014
Cents
6.84
6.84
2014
Cents
6.83
6.83
2013
Cents
7.52
7.52
2013
Cents
7.52
7.52
91
OzForex Annual Report 2014 notes to the Financial stateMents
(CONT)
note 27. eaRnings peR shaRe (CONT)
(c) Earnings used in calculating earnings per share
Basic earnings per share
Profit from continuous operations
Diluted earnings per share
Profit from continuous operations
(d) Weighted average number of shares used as denominator
Number of ordinary shares used as the denominator
in calculating basic earnings per share
Number of ordinary shares used as the denominator
in calculating diluted earnings per share
2014
$’000
2013
$’000
15,967
15,967
17,136
17,136
2014
2013
233,490,411
228,000,000
233,741,793
228,000,000
The number of ordinary share outstanding has been adjusted retrospectively for the share split which occurred
on 15 October 2013. 12 million new shares were issue on 16 October 2013.
Share options on hand relate to shares that were already in issue and do not dilute the weighted average
number of shares.
note 28. paRent entity Financial inFoRMation
Summary financial information
Balance sheet
Investment in subsidiary
Total Assets
Ordinary share capital
Total Equity
Profit or loss for the year
Total comprehensive income
Parent Entity
2014
$’000
2013
$’000
24,360
24,360
24,360
24,360
–
–
–
–
–
–
–
–
Earnings per share based on profit from continuing operations,
attributable to the ordinary equity holders of the parent entity:
Basic and diluted earnings per share
–
–
Cents
Cents
92
OzForex Annual Report 2014For the Financial year ended 31 March 2014 diRectoRs’ declaRation
In the directors’ opinion:
(a) the financial statements and notes for the year ended 31 March 2014 are in accordance with the
Corporations Act 2001, including;
(i)
(ii)
complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory
professional reporting requirement, and
giving a true and fair view of the consolidated entity’s financial position as at 31 March 2014 and
of its performance for the financial year ended on that date, and
(b) there are reasonable grounds to believe that OzForex Group Limited will be able to pay its debts as and
when they become due and payable, and
(c) Note 1(i) confirms that the financial statements also comply with International Financial Reporting
Standards as issued by the International Accounting Standards Board.
The directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required
by section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the directors.
On behalf of the Board:
Peter Warne
Chairman
Neil Helm
Chief Executive Officer and Managing Director
27 May 2014
93
OzForex Annual Report 2014
independent auditoR’s RepoRt
to the MeMbeRs oF ozFoRex gRoup liMited
Independent auditor’s report to the members of OzForex
Group Limited
Report on the financial report
We have audited the accompanying financial report of OzForex Group Limited (the consolidated
entity), which comprises the statement of financial position as at 31 March 2014, the statement of
comprehensive income, statement of changes in equity and statement of cash flows for the year ended
on that date, a summary of significant accounting policies, other explanatory notes and the directors’
declaration for OzForex Group Limited. The consolidated entity comprises Ozforex Group Limited (the
company) and the entities it controlled at year’s end or from time to time during the financial year.
Directors’ responsibility for the financial report
The directors of the company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that is free from material misstatement, whether due to fraud or error. In Note 1, the
directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial
Statements, that the financial statements comply with International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted
our audit in accordance with Australian Auditing Standards. Those standards require that we comply
with relevant ethical requirements relating to audit engagements and plan and perform the audit to
obtain reasonable assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial report. The procedures selected depend on the auditor’s judgement, including the
assessment of the risks of material misstatement of the financial report, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the consolidated
entity’s preparation and fair presentation of the financial report in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by the directors, as well
as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations
Act 2001.
PricewaterhouseCoopers, ABN 52 780 433 757
Darling Park Tower 2, 201 Sussex Street, GPO BOX 2650, SYDNEY NSW 1171
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
94
OzForex Annual Report 2014 Auditor’s opinion
In our opinion:
(a)
the financial report of OzForex Group Limited is in accordance with the Corporations Act 2001,
including:
(i)
(ii)
giving a true and fair view of the consolidated entity's financial position as at 31 March
2014 and of its performance for the year ended on that date; and
complying with Australian Accounting Standards (including the Australian Accounting
Interpretations) and the Corporations Regulations 2001.
(jj)
the financial report and notes also comply with International Financial Reporting Standards as
disclosed in Note 1.
Report on the Remuneration Report
We have audited the remuneration report included in Section 24 of the Directors’ Report for the year
ended 31 March 2014. The directors of the company are responsible for the preparation and
presentation of the remuneration report in accordance with section 300A of the Corporations Act
2001. Our responsibility is to express an opinion on the remuneration report, based on our audit
conducted in accordance with Australian Auditing Standards.
Auditor’s opinion
In our opinion, the remuneration report of OzForex Group Limited for the year ended 31 March 2014
complies with section 300A of the Corporations Act 2001.
PricewaterhouseCoopers
CJ Heath
Partner
PricewaterhouseCoopers, ABN 52 780 433 757
Darling Park Tower 2, 201 Sussex Street, GPO BOX 2650, SYDNEY NSW 1171
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
Sydney
27 May 2014
95
OzForex Annual Report 2014 shaReholdeR inFoRMation
The shareholder information set out below is current as at 30 May 2014.
distRibution oF shaReholdeRs as at 30 May 2014
Range
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,000+
Total
Total holders
Shares
574
1,440
854
865
50
3,783
341,467
4,427,875
7,019,034
20,712,134
207,499,490
240,000,000
% of issued
capital
0.14
1.85
2.92
8.63
86.46
100.00
There were 55 holders of less than a marketable parcel of ordinary shares.
twenty laRgest secuRity holdeRs oF oRdinaRy shaRes as at 30 May 2014
Name
J P MORGAN NOMINEES AUSTRALIA LIMITED
1.
NATIONAL NOMINEES LIMITED
2.
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
3.
CITICORP NOMINEES PTY LIMITED
4.
BNP PARIBAS NOMS PTY LTD
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