2018 Annual Report
Transforming business,
making life simple.
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2018
FULL
YEAR
RESULTS
FY18
66.5M
FY14
40.2M
FY15
46.5M
UP15%
FY16
53.2M
FY14
FY17
58M
Net ProfIt
Before Tax
FY18
140M
FY14
84.2M
FY15
95.3M
FY16
108.5M
UP16%
FY17
120M
Annual Licence Fees
FY18
65.3M
FY14
42M
FY15
49.3M
UP 6 %
FY16
56.2M
FY17
61.9M
Licence Fees
FY18
168.6M
FY14
85.6M
FY15
99.5M
UP22%
FY16
118.6M
FY17
138.6M
Annual Recurring Revenue
What’s
inside
3
7
At a glance
Financial highlights
11
Letter to shareholders
25 Enterprise Software as a Service
31 Our strategy
41 Our growth
47 Our operations
55 Our people
63 TechnologyOne Foundation
67 Financial Statements
68 Directors’ report
95 Corporate governance statement
101 Financial Statements
130 Directors’ declaration
141 Shareholder information
143 Corporate directory
144 Financial calendar
%
22UP
Annual Recurring
Revenue recognised
9
Years of record Profits,
Licence Fees & Revenue
%
15UP
Net Profit
After Tax
At a
glance
%
growth 8UP
Dividend
%
Before Tax growth15UP
Net Profit
Our finances
of record revenue19
Consecutive years
%
Annual Recurring Revenue41UP
SaaS Platform
Profitable since
1992
Margin22%
PBT
Our vision
As the only company offering a true
Our difference
We are the only vendor that develops,
and allow our customers to embrace the
enterprise Software as a Service solution
sells, implements, supports and runs a fully
digital revolution and an exciting new world
across the entire enterprise, we are
integrated suite of enterprise software
of possibilities in a cloud-first, mobile-first
transforming business and
making life simple.
solutions. Our true enterprise Software as a
world.
Service solutions span the entire enterprise
Our reach
TechnologyOne has 14 offices throughout
Australia, New Zealand, Asia, the South
Pacific and the United Kingdom.
Our culture
Our global team comprises more than
1,200 passionate individuals. We invest in
developing our people through an array of
initiatives including a wide range of training
opportunities which are delivered by our
TechnologyOne College. Our culture is
customer-oriented and we support our
team members to consistently deliver
outstanding customer service with our
Compelling Customer Experience Program.
Our market-leading
solutions and products
Our markets
• Local Government
For more than 30 years we have developed
• Government
• Education
a deep understanding of our key markets
and are now the leading supplier of
enterprise software solutions for more than
1,200 large-scale organisations.
We offer these customers a range of
industry-leading preconfigured enterprise
solutions that provide proven practice,
• Health and Community Sservices
• Property & Rating
• Asset and Project Intensive Industries
• Business Intelligence
• Corporates and Financial Services
• Enterprise Budgeting
Our preconfigured solutions
Our products
• Financials
• Human Resource & Payroll
• Supply Chain Management
• Performance Planning
• Student Management
• Asset Management
• Enterprise Content Management
• Enterprise Cash Receipting
• Stakeholder Management
• Spatial
• Business Process Management
%
Fees6UP
Initial
Licence
streamline implementations and reduce
• OneCouncil
time, cost and risk. In addition we also
offer a compehensive suite of enterprise
software products.
• OneEducation
• OneGovernment
• OneAgedCare
• OneProject
• OneAsset
• OneHealth
• OneBanking
• OneCorporate
16UP
%
Annual
Licence
Fees
%
Cash
and cash
equivalents
12UP
68 %
Return
on Equity
(adjusted)
Our R&D
We continue to focus our Research and
Our Australian-owned commercial
Development (R&D) on new and emerging
R&D centre is the largest of its kind
technologies, including cloud-based
and encompasses facilities in
technologies, artificial intelligence, machine
Indonesia and Vietnam.
learning and other new innovations.
4
TechnologyOne Limited 2018 Full Year Report
Transforming business, making life simple
5
Financial
highlights
2018
Growth
on last year
15 year
compound
growth
2017
2016
2015
2014
2013
2012
2011
2010 2009
Revenue
298,650
9%
13%
273,253
249,018
218,724
195,124
180,591
169,070
156,742
135,906
122,487
Licence Fees
65,337
6%
13%
61,693
56,165
49,294
41,986
37,073
35,447
30,729
26,766
24,333
Consulting
(excl. Plus)
57,677
-10%
12%
64,335
60,026
55,449
49,735
47,573
45,388
41,746
41,583
41,023
Annual Support
139,605
16%
18%
119,929
108,480
95,346
84,248
72,753
63,684
55,268
48,506
43,114
R&D Expense
54,041
8%
13%
49,856
46,009
41,038
37,873
35,595
33,524
31,796
26,963
24,908
Net Profit Before
Tax
66,528
15%
12%
58,019
53,240
46,494
40,235
35,097
30,324
26,675
23,282
20,276
Net Profit After Tax
50,980
15%
13%
44,494
41,344
35,785
30,967
26,984
23,559
20,326
17,813
15,684
Earnings Per Share
16.14
14%
12%
14.18
13.26
11.57
10.06
8.78
7.73
6.71
5.93
5.24
9.02
10%
9%
8.20
7.45
6.78
6.16
5.60
5.09
4.62
4.20
3.75
Dividend (excl.
Special)
- Cents per share
Dividend Payout
Ratio
(incl. special)
68%
Return on Equity
28%
Adjusted Return
on Equity*
68%
-
-
-
-
-
-
72%
72%
76%
81%
64%
66%
91%
96%
72%
28%
31%
30%
30%
31%
32%
30%
28%
27%
59%
61%
63%
76%
83%
72%
62%
48%
43%
Cash & Cash
Equivalents
104,322
12%
11%
93,383
82,588
75,536
80,209
65,397
51,133
45,357
36,573
30,538
Net Assets
179,519
14%
12%
157,520
138,494
117,940
104,499
87,736
73,997
68,370
63,415
57,143
*Adjusted for net cash above required working capital, assumed at two months of staff costs
One vision.
One vendor.
One code-line.
One experience.
8
Transforming business, making life simple
9
TechnologyOne Limited 2018 Full Year Report Letter to
shareholders
Letter to shareholders
On behalf of Technology One Limited
(TechnologyOne) we are pleased to
announce our 9th consecutive year of
record revenues, record licence fees
and record profits. The TechnologyOne
enterprise SaaS is driving our continuing
strong results with Net Profit Before Tax up
15%. Our products continue to win against
our large multinational competitors.
Dividend up 8%
In light of our strong results and our
confidence in the coming year, the dividend
for the second half has been increased
to 6.16 cents per share, up 10% on the
prior year. The Board has also proposed
once again a special dividend of 2 cents
per share. This takes the total dividend,
including special dividend, for the year to
11.02 cents per share, an increase of 8% on
the prior year. This represents a payout ratio
of 68% for the full year.
Results Summary
We have continued to invest heavily in
Research and Development, which was
$54 million for the year, as follows:
• Ci, our existing very successful enterprise
software suite
• Ci Anywhere, our new generation
product which supports any and all
mobile devices
• TechnologyOne Software as a Service
Platform
• Early research into a number of new
and exciting areas called DXP – Digital
Experience Apps, including Artificial
Intelligence and Machine Learning.
We expect significant revenue streams to
emerge from these investments in future
years. These items are discussed in more
detail later in this letter.
Dividend last five years
Compound
Growth 8%
2.00
2.00
2.00
2.00
2.00
6.16
6.78
7.45
8.20
9.02
FY14
FY15
FY16
FY17
FY18
DPS (cps)
Special Dividend (cps)
• Net Profit Before Tax of $66.5m, up 15%
• Revenue of $299m, up 9%
• Expenses of $232m, up 8%
• Total Annual Recurring Revenue of $169m, up 22%
•
Initial Licence Fees of $65m, up 6%
• Operating Cashflow of $49m, up 5%
• Cash and Cash Equivalents of $104m, up 12%
• Total Dividend of 11.02cps, up 8%
• R&D of $54m fully expensed, up 8%,
which is 18% of Revenue
Our clarity and continuity of vision
is the key to our ongoing long-term
success. Our vision is based on our
unique ‘Power of One’ business
model that sees TechnologyOne as
the only enterprise vendor providing
a totally integrated experience
to customers, in which we build,
market, sell, implement, support
and run our world-class enterprise
software.
The strength of our product
offerings, our enterprise vision,
vertical market focus and the
resilient nature of the enterprise
software market are the foundation
for our continuing success. When
coupled with our innovation,
creativity and substantial ongoing
investment into new and emerging
technologies, we are well
positioned for strong growth in the
coming years.
12
Transforming business, making life simple
13
TechnologyOne Limited 2018 Full Year Reportup 8%0.82 CPS TechnologyOne SaaS Platform continues to grow very strongly
Continued strong profit growth over nine years
The TechnologyOne SaaS Platform
We expect this strong growth to continue
production SaaS offering, achieved critical
continues to grow strongly with Annual
in the years to come. Our target is to once
mass. We remain confident that as we
Recurring Revenue (ARR) now $38.1 million,
again grow this business strongly with ARR
continue to achieve greater scale in this
up 41%. We have added 77 new customers
to reach $62 million in the next 12 months,
business, it will become a platform for the
We have seen continuing strong growth in
profit over the last year, with Net Profit After
Tax up 15%. We are on track to double the
size of our business once again in the next
to the TechnologyOne SaaS Platform this
an increase of 62%.
generation of significantly more profits in
four to five years.
Compound
Growth 14%
up 15%
$6.5m
year, taking the number of enterprise
customers to 347 customers.
The TechnologyOne SaaS Platform
the coming years.
contributed a profit of $7 million this year,
Our SaaS 9.0 and 10.0 architecture,
Once again, we have found that all our
(upgraded from its original forecast of
which further builds on our massively
new customer business was driven by
$5 million) versus a profit of $2.5 million
scalable, mass production architecture, will
TechnologyOne SaaS.
last year, as our single instance, mass
be key to achieving this goal.
Annual
Recurring
Revenue $38.1m
FY15
$4.1m
FY16
$10.1m
FY17
$18.6m
FY18
$29m
SaaS Platform Revenue Billed
FY15
$8m
FY16
$16m
FY17
$27.1m
FY18
$38.1m
SaaS Platform ARR
APAC region grows by 20%
The APAC region performed strongly with
Profit up 20%, underpinned by strong
licence fee growth, significant turnaround
in our consulting business, and our market
leading enterprise SaaS offering. We
continued to invest strongly in the UK and
we remain excited about the significant
opportunities in the coming years. The UK is
discussed in greater detail on page 21.
FY12
$23.6m
FY13
$27m
FY14
$31m
FY15
$35.8m
FY16
$41.3m
FY17
$44.5m
FY18
$51m
Net Profit After Tax
UK
Loss of $4.1m
FY16
($475k)
FY17
($1m)
FY18
($4.1m)
down
100%+
($0.6m)
FY16
$53.7m
FY17
$59.1m
FY18
$70.6m
APAC
Profit of $70.6m
Continued industry focus
Our focus on specific industries once again
coming years in State Government, Asset
underpinned our success. We continue
& Project Intensive Industries and Financial
to be very strong in Local Government,
Services. We see that we have substantial
Higher Education, Health & Community
room to continue to grow in our chosen
Services and Federal Government. We see
markets.
opportunities for substantial growth in the
Total Expenses Up 8%, margins improve to 22%
Total Expenses were once again carefully
managed up 8%, below our revenue growth
of 9%. This has led to an improvement
in Net Profit Before Tax margin to 22%,
compared to 21% pcp. We see margins
continuing to improve in the coming years.
14
15
FY16
FY17
FY18
Transforming business, making life simpleTechnologyOne Limited 2018 Full Year Reportup 56% $10.4mup 84% $8.5mup 145% $6mup 8% $16.9mup 10% $19.4mup 69% $11.1mup 100% $8mup 41% $11mup 20% $11.6mdown 100%+ ($3.1m)up 10% $5.4m Continued strong growth of Initial Licence Fees
Consulting Services returns to profit growth
Our Initial Licence Fees were up by 6%,
customer base. Of these new customers, 20
profile, large-scale enterprise customers
making this our 15th consecutive year of
replaced our competitors’ systems including
against our multinational competitors.
year-on-year growth in licence fees.
systems from Oracle, SAP, Microsoft and
The APAC region grew strongly up 9%. We
achieved preferred status on a number of
deals in the UK, however our ability to close
was an issue so we will be upskilling our
staff in this respect. The UK pipeline of FY19
is strong.
This year we added more than 37 major
new corporate customers to our expanding
Infor. We continue to increase market share
against our large multinational competitors.
With the growth of TechnologyOne SaaS,
our continued investment in Ci, and our
investment in Ci Anywhere and DXP, we are
confident this momentum will continue in
future years.
What is particularly pleasing is our
continuing success in winning very high-
TechnologyOne continued to dominate
in the Local Government sector, where
we closed 11 new major deals totalling
$80 million in contract revenue. We have
more than 300 council customers and are
continuing to grow fast.
TechnologyOne also continues to see
strong growth in Government with Initial
Licence Fees growing 17%.
FY17
$61.7m
FY18
$65.3m
FY17
$58.9m
FY18
$63.9m
FY17
$2.8m
FY18
$1.5m
Company
APAC
UK
Continued strong growth of Annual Licence Fees
In keeping with our very high customer
Our investment in Ci Anywhere (the
retention and satisfaction rates in excess
continued evolution of our Ci enterprise
of 99%, our recurring Annual Licence Fees
software) and the TechnologyOne SaaS
once again grew strongly by 16%.
Platform has been critical to our ongoing
success in this area.
Compound
Growth 14%
up 16%
$19.3m
The Total Consulting Group returned to
improves its profit margin from the current
turnaround to occur in the UK in FY19. The
profit growth this year, with consulting profit
10% to a target of approximately 20%. In the
UK delivered a loss of $3.8 million. We
of $6 million, up 14% pcp.
APAC consulting business, the turnaround
remain excited about the opportunities in
We see significant upside in future years for
our Consulting business as it substantially
has occurred and it delivered $9.9 million
the UK, and expect to return to growth in
profit (up 39% pcp); and we expect the
the new financial year.
$5.3m
$6.0m
Company
$7.1m
$9.8m
APAC
UK
($1.8m)
($3.8m)
Research & Development (R&D)
R&D continues to be a significant
R&D continued across our entire Ci
(compared to our historical growth rate
investment for TechnologyOne at $54
Enterprise Suite, as well our next
of 16%), which will save approximately
million for the year, up 8% and representing
generation product Ci Anywhere and
$75 million over a five-year period. Our R&D
18% of revenue, which still exceeds the
the TechnologyOne SaaS Platform.
program in the coming years continues to
average of our competitors of approximately
12%. R&D continues to be fully expensed in
the period it is incurred.
We remain committed to delivering
Compound Annual Growth (CAG) of 8%
or less over the next five years to 2021
be at the leading edge of our industry as we
embrace new technologies, new concepts
and new paradigms.
Historical
Compound
Growth
16% 8%
Compound
Growth
$96.6m
$29m
$67.6m
FY09
$43.1m
FY10
$48.5m
FY11
$55.3m
FY12
$63.7m
FY13
$72.8m
FY14
$84.2m
FY15
$95.3m
FY16
$108.5m
FY17
$119.9m
FY18
$139.6m
FY16
$46m
FY17
$49.9m
FY18
$54m
FY19
$58.2m
FY20
$62.8m
FY21
$67.6m
R&D Expense Growth Model to 2021
Projected from 2016
Historical Growth Rate
16
17
Transforming business, making life simpleTechnologyOne Limited 2018 Full Year Reportup 14% $0.8mup 39% $2.8mTurnaround has occurred in APACTurnaround in FY19 in the UKdown 100+% $2.0mdown 48% ($1.4m)up 9% $5.0mStrong continuing growthup 6% $3.6m
TechnologyOne is now a
SaaS company
TechnologyOne is now a Software as a
Service (SaaS) company, though the market
is yet to fully appreciate this fact given we
started as a traditional ‘on-premise’ software
company. All our new customer logos
in FY18 were driven by TechnologyOne
SaaS. We now have 347 large enterprise
customers that depend on our SaaS solution
from universities, city councils, hospitals and
government departments.
With the adoption of the new accounting
standard AASB 15 in FY19, TechnologyOne
will now recognise revenue on a daily basis,
which will bring us in alignment with our
SaaS peers. This is discussed in greater
detail later in this letter.
Enterprise software will
dominate the SaaS world
In the SaaS world we have seen the
proliferation of ‘best-of-breed’ products. We
are confident that just as we have seen in
the past for on-premise customers we will
What is even more remarkable is that for the
see a move from best-of-breed products
first 25 years of our life, TechnologyOne was
to enterprise software solutions in the
a traditional on-premise software business.
In only a short time we have successfully
cloud, given the significant benefits it will
provide: One vendor, one user interface,
pivoted the company to become a large and
one common technology architecture and
successful SaaS company.
To achieve this TechnologyOne has created
a mass production platform to deliver
our enterprise software to hundreds of
thousands of customers, providing huge
economies of scale which up until now
was not possible. We have created one
single global code line, that delivers our
enterprise functionality to 347 customers
24/7. Our SaaS customers are always on
the latest release, with two releases every
year at no additional cost providing new
integration across all products ‘out-of-the-
box’. As TechnologyOne is one of only a few
enterprise SaaS vendors globally, we are
well positioned for strong growth.
Deep market functionality
What sets us apart from other enterprise
SaaS vendors is our focus on specific
markets: Local Government, Government,
Education, Health & Community Services
etc. This focus has allowed us to build very
deep functionality for each market and thus
provides a compelling value proposition and
technologies, new features, new functions,
clear market leadership.
new capabilities, with the latest ‘defence-in-
depth’ security protocols. It is a compelling
value proposition for our customers. We
have today the market leading enterprise
SaaS solution.
Ci Anywhere
Ci Anywhere is the continuation of
our very successful Ci product, and
allows organisations to embrace
smart mobile devices including iPad,
iPhone and Android devices, as part
of our enterprise solution. We are
the only major enterprise software
vendor committed to delivering our
entire suite of enterprise software
and all our functionality on these
mobile devices, as we envision a
world where all work will be done
on these devices in the near future.
We see our customers flowing
across smart mobile devices
throughout the course of their day.
Our software has been designed
to be incredibly simple to use, and
to adapt to the device, allowing
customers to continue their work
seamlessly as they flow across
devices.
Ci Anywhere opens up a new world
of possibilities for our customers,
allowing them to access their data
from any device, anywhere in the
world, at any time. It is a new and
exciting generation of enterprise
software that is incredibly simple
to use. Ci Anywhere will enable
our customers to embrace the
digital revolution.
TechnologyOne
SaaS Platform
One global code line delivering
massive economies of scale
The TechnologyOne SaaS Platform
delivers the TechnologyOne enterprise
suite as a service through the cloud to
our customers. TechnologyOne takes
complete responsibility for providing
to do anything to seamlessly get these
new releases into production.
TechnologyOne is at the very forefront
of delivering the benefits of mass
production to the enterprise software
industry. As we have seen in other
industries, the economies of scale of
mass production will change the face of
the software industry.
the processing power, software and
The TechnologyOne SaaS Platform
services, including backup, recovery,
provides a compelling value proposition
upgrade and support services for our
to our customers, giving them what is
SaaS customers.
TechnologyOne is one of only a few
essentially a very simple, cost-effective
and highly scalable model of computing.
companies globally delivering true
Our mass production Software as a
enterprise Software as a Service,
Service Platform provides a massively
offering a fully configurable solution,
scalable platform with significant
based on a mass production line of
economies of scale.
servers that run our software for all of
our customers in a single instance of
software, using one global code line,
which provides massive economies of
scale to our customers.
We have continued to build on our
mass production SaaS Platform with
the release of TechnologyOne SaaS
9.0, which continues to deliver further
economies of scale and enhanced
TechnologyOne makes a substantial
security. We are now working on the
investment each year in ongoing R&D,
next generation SaaS 10.0. The pace at
to continue to improve our software
which we are innovating is accelerating,
to capitalise on new technologies,
and we are seeing many opportunities
concepts and ideas. Because we run
to continue to improve the features,
our software for thousands of customers
speed, security, availability and
simultaneously, we have optimised our
scalability of our SaaS platform for our
software and built the TechnologyOne
customers.
SaaS Platform specifically to do this, and
we can achieve enormous economies
of scale. The TechnologyOne SaaS
Platform delivers a level of service,
security, reliability, scalability and future-
proofing that would not be otherwise
possible.
We are excited by the opportunities
the TechnologyOne SaaS offers not
only to our customers, but to us as
well. It will allow us to streamline our
operations, reduce our costs, improve
our customers’ experience, as well
as reduce the time to market for new
As part of our SaaS offering we
features and functions. It will allow us
automatically make new releases
to become more creative, more
of our software, with new features,
innovative and work in real time
functions and concepts, available to our
with our customers.
customers. Our customers do not need
18
Transforming business, making life simple
19
TechnologyOne Limited 2018 Full Year Report DXP (Digital
Experience Platform)
TechnologyOne will in the coming
months release the next stage of
our Digital Strategy, which will build
upon the powerful foundations we
have created – our mass production
SaaS platform and our Ci Anywhere
technology. This will enable our
customers to embrace the digital
revolution that is now gaining
momentum, simply and easily.
It will digitally enable each and
every stakeholder throughout their
organisation be it an employee,
customer, supplier, student, rate
payer etc - substantially streamlining
their business and improving their
experience. Artificial Intelligence
(AI) and Machine Learning (ML) is an
integral part of our Digital Strategy.
Balance sheet strength
TechnologyOne continues to have a
strong balance sheet with cash and cash
equivalents of $104m. Our debt/equity ratio
remains conservative at less than 1%.
Operating Cash Flow was once again strong
at $48.6m for the full year, versus a Net
Profit After Tax of $51.0m, and is close to
NPAT versus Operating Cash Flows
$48.6m
$46.4m
2017
NPAT
$44.5m
2018
NPAT
$51.0m
Operating Cash Flows
TechnologyOne is now a SaaS company
of the business and executive remuneration.
and to ensure that TechnologyOne’s results
This year total executive remuneration grew
are comparable with other SaaS companies
by 8%, while the company’s profit grew 15%.
we will, from 1 October 2018, recognise
SaaS revenue over time and expect to
Corporate governance
recognise R&D investment also over time.
Given TechnologyOne is such a significant
This will result in TechnologyOne being a
stronger, simpler, better business with:
R&D and innovation-led business, coupled
with our long track record of profitable
growth we have taken a cautious and
• SaaS revenue recognised on
measured approach to the renewal of our
a daily basis
• Minimal impact on P&L
• Simpler revenue model
• No change to free cashflow
Board, to ensure a smooth board transition.
I am happy to report we have made good
progress again this year adding our second
female independent director. We plan to
add another two independent directors in
the 2019 financial year, which will see our
our target ratio of 1 times NPAT.
•
Improved predictability of earnings
“We needed an innovative financial solution that
would embrace recommended practice with a single,
seamlessly integrated, enterprise solution with a
consistent user interface, and available any time,
anywhere and on any device.”
Keith Adams
Head of Financial Systems
London School of Economics
and Political Science
United Kingdom
We see the UK as a platform
for significant growth for
TechnologyOne in the coming
years. Our ‘blue ocean’ strategy,
which is to provide a total ERP
solution for the Higher Education
and Local Government sectors,
is gaining traction. Important to
the success of this strategy will
be the introduction of our Human
Resource & Payroll (HRP) and
Student Management products to
this market. The regionalisation of
these products for the UK market is
in progress, and we will work with
early adopters in the UK to establish
these products.
As we bring more products into
the UK market, this increases our
product offering, and also allows us
to move into the less crowded ‘blue
ocean’ space, as we will be one of
only a few enterprise vendors in the
UK market.
As previously foreshadowed, the
challenge for us has been to build a
successful and profitable consulting
practice in the UK. This was not an
insignificant undertaking.
We expect to return to growth in the
Adoption of AASB 15
The new revenue standard AASB 15 applies
to TechnologyOne from 1 October 2018
(FY19). TechnologyOne’s first reporting
year under AASB 15 will be the year
ending 30 September 2019. At this time
TechnologyOne will restate the prior year,
as if the standard had always applied.
TechnologyOne has taken a strategic
• TechnologyOne now reporting like
Board have four new independent directors.
UK in the 2019 financial year.
its SaaS peers
For further information please refer to
the TechnologyOne IFRS Presentation
submitted to the ASX on 17 July 2018.
Executive remuneration
This year we substantially revamped our
Remuneration Report to make it simple
and clear, and to continue to evolve it
approach toward its adoption of AASB 15.
forward based on the feedback from our
Extensive analysis has been undertaken
shareholders. We have also engaged
by the company of its revenue recognition
external consultants such as ISS and Ernst &
policies over the past 3+ years.
Young to assist us with these changes.
TechnologyOne has also researched other
Our approach to remuneration has allowed
SaaS businesses and has identified best
us to continue to grow our business. There
practice accounting treatment.
is clear alignment between the performance
20
Transforming business, making life simple
21
TechnologyOne Limited 2018 Full Year Report Long-term outlook
We continue to be very excited
about the significant growth
opportunities over the next 10
years. We see continuing strong
growth in our key vertical markets
in Australia and New Zealand.
These markets remain strong and
resilient.
The UK continues to excite us
given the size of this market and
will provide us with significant
growth opportunities over the
coming years.
TechnologyOne enterprise SaaS
is providing enormous economies
of scale to our customers, and
will continue to drive our growth.
We see it is inevitable that
organisations will move from
‘best of breed’ SaaS solutions to
enterprise SaaS solutions because
of the significant benefits it will
provide: One vendor, one user
interface, one common technology
architecture, and integration
across all products ‘out of the box’.
We see continuing growth from
our existing customer base, as our
customers increase the usage of
our products and services.
Outlook for 2018/2019
As we have seen over the last few years,
Afterword
If we are to continue to succeed we
the enterprise software market continues to
must continue to innovate, and focus on
remain resilient, with our products providing
building beautiful software that is incredibly
our customers the opportunity to reduce
simple and easy for our customers to use.
their costs, streamline their business and
Our software must work on any device,
improve their efficiencies in a challenging
anywhere, at any time if we are to enable
economic time.
The TechnologyOne enterprise SaaS
our customers to embrace the exciting
future that is possible with the digital
offering is driving our continuing success.
revolution.
As a result, TechnologyOne’s sales pipeline
of opportunities for 2019 is strong and this
positions us for continuing strong profit
growth in FY19.
Our SaaS business will continue to grow
strongly and profitably.
We also expect continuing strong profit
growth for our Consulting business in the
coming year.
We will provide further guidance at both the
Annual General Meeting and with the first
half FY19 results.
Also, we must continue to earn the right to
be the enterprise software partner for our
customers. At every touchpoint we have
with our customers, we must strive to make
things simpler for them and give them a
great experience.
A few years ago, we set an ambitious goal
to transform business and make life simple
for our customers. We are now making this
a reality.
This would not be possible without the
talented and committed people who make
up TechnologyOne.
I would also like to thank you, our
shareholders, for your continuing support.
Adrian Di Marco
Executive Chairman
Edward Chung
Chief Executive Officer
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TechnologyOne Limited 2018 Full Year Report
Transforming business, making life simple
23
Enterprise
sofware as a
service
TechnologyOne’s enterprise
of software per year, as well as access to our
Awards and Amazon Web Services.
created a new standard in enterprise
SaaS Platform and Ci Anywhere enable
processing resources are shared. When we
Our customers gain access to two releases
Business Awards, UK Cloud Awards, SaaS
Ci Anywhere is incredibly simple and has
The efficiencies that the TechnologyOne
run the same code-line globally, and all
“TechnologyOne was the clear choice because of
its solid technology roadmap, strong reputation
and fully integrated, true enterprise SaaS solution –
OneCouncil.”
John Andrejic
Chief Executive Officer
Cairns Regional Council
Software as a Service is the perfect
OneUniversity for ‘just-in-time’ training and
marriage between infrastructure
and software. The combination of
‘defence-in-depth’ security. This is all provided
standard as part of our SaaS solution, and we
our software built using one global
guarantee it will be future-proof.
code-line and our multi-tenanted
infrastructure with single-tenanted
databases means our customers
can enjoy all the benefits of SaaS
with none of the limitations. Our
unique approach to enterprise SaaS
in particular is key to our ongoing
success.
With our configuration-driven software
design, all of a customer’s unique
configuration information is stored in their
own dedicated and secure database. So
too is their transactional data, delivering a
personalised service at scale.
Our SaaS solution leads the market because
we own, build and support our software.
This is unlike many other software providers
The TechnologyOne enterprise Software
that use cloud hosting and handcraft each
as a Service solution is a single instance
customer’s environment, which fails to
of software, delivered globally, with a
deliver shared benefits or economies of
mass production line of servers running
scale.
Ci Anywhere - Any device,
anywhere, any time
TechnologyOne is the only enterprise
vendor delivering 100 per cent of its
enterprise software on smart mobile
devices – with no carve-outs or exceptions.
Customers have access to the full
software, giving us a significant competitive
for customers is paramount as business
make an improvement to the service we
advantage. Ci Anywhere is a key enabler
becomes faster and more competitive.
automatically roll out that improvement to
for our customers that are undertaking
digital transformations now to secure their
future success.
Digital transformation
Our enterprise customers have begun
Our commitment to
innovation
In FY2018, we invested $54 million in R&D
to continually improve our SaaS offering.
This included integrating new technologies,
functionality of our software on any device,
to realise the benefits that a cloud-first,
concepts and ideas.
anywhere, at any time.
Our Ci Anywhere technology allows
organisations to embrace iPad, iPhone and
Android devices as part of their enterprise
solution. Its adaptive screen design means
mobile-first world provides to them and
their customers. It transforms the way
organisations interact with their customers
and community.
The economies of scale offered by our SaaS
mean that when a customer signs up to our
service, they receive far more than what
they pay for. Each customer benefits from
Our customers tell us that adopting
the hundreds of millions of dollars that we
that users get a great experience regardless
TechnologyOne SaaS, together with
have invested to date and our commitment
of the device they are using at the time.
The user experience is tied to the user, not
the device, so a user can move from one
Ci Anywhere, gives them new capabilities
to continued investment. We take care of
and saves them millions of dollars when
patching and upgrades, and offer two major
compared to an equivalent deployment at
software releases per year.
all our customers.
It is a testament to the collective skill of
our people and organisational structure
that we have achieved such a competitive
advantage and level of differentiation in the
SaaS market.
Insights, our real-time SaaS monitoring
platform, gives us unprecedented visibility of
the real-time performance and reliability of
our SaaS environments and software. This
enables us to rapidly analyse, detect and
respond to issues faster than ever before.
Insights also further strengthens our support
processes by connecting our development
teams directly with our customers.
thousands of customers’ organisations.
It produces substantial economies of scale,
creating cost efficiencies that hosting
providers cannot come close to.
TechnologyOne’s SaaS Platform has
device to another throughout their day and
their premises.
received awards and recognition globally
seamlessly continue their work.
for software innovation from the Australian
Our SaaS offering is massively scalable,
resilient and fault-tolerant. All our customers
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27
Transforming business, making life simpleTechnologyOne Limited 2018 Full Year Report Most trusted SaaS platform
We take the privacy and security of our
TechnologyOne University
Available to all customers through the
customers’ data very seriously and have
power of SaaS, TechnologyOne University
woven this into the fabric of all we do. We
is the learning and training hub for our
are committed to building the world’s most
software, providing self-paced learning
trusted cloud for enterprise software and
and comprehensive training on any device,
have and will continue to make significant
anywhere, at any time. As an innovative
investments to that end.
digital training solution it gives our
customers dynamic, real-time information
that is always up-to-date and available from
within the software.
TechnologyOne University holds more than
45 hours of high-quality video content,
which our Learning and Development team
is constantly adding to.
Some 347 customers have chosen
TechnologyOne SaaS to power
their organisations. This reflects an
increase of more than 22 per cent
in customer numbers over the last
12 months, and we expect this rapid
growth to continue in 2019.
The foundation of our SaaS solution is
a class-leading security and compliance
program that is designed to provide the
highest level of surety around security and
privacy to our customers. This includes
the development and maintenance of
our security framework which passes
the highest levels of external verification,
testing and scrutiny.
We have held ISO 9001 accreditation
continuously for 25 years. Our SaaS
solution is accredited and certified for the
following international standards:
•
•
•
•
ISO/IEC 27001
ISO/IEC 27017
ISO/IEC 27018
ISAE 3402 SOC 1
• SSAE 18 SOC 1
• AT-C 205 SOC 2
Additionally in the UK and EU we are
certified with Cyber Essentials and are
GDPR compliant.
In FY2018 we maintained our status as
recommended for ASD IRAP certification
(Unclassified DLM), further strengthening
our offer to Australian federal government
agencies.
All customers receive the benefit of these
certifications along with the continual flow
of security and privacy enhancements as
part of our service, at no extra charge.
“SaaS is where the future of software is going.
As a business, if you think you’re going to keep
your software on premise, you’re only delaying
the inevitable.”
Elizabeth Cannon
Chief Financial Officer
University of Sunshine Coast
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TechnologyOne Limited 2018 Full Year Report
29
Transforming business, making life simple Our
strategy
Preconfigured
enterprise software
solutions reduce time,
cost and risk
Our vision
Transforming business,
making life simple
Our vision is to build and deliver truly
great products and services that transform
business and make life simple for our
customers. Underpinning this vision are
our beliefs, our dedication to customer
experience and our leadership model.
We have five core beliefs: An enterprise
vision, market focus and commitment, the
Power of One, the power of evolution and
simplicity, not complexity.
We know that our customers’ experience
defines our success. We also believe in
leadership, not management. Our survival
depends on our ability to set ambitious
goals, and to lead and inspire our people
to achieve great things.
As a large, successful company, we
believe it is important to give back to
the community. We established the
TechnologyOne Foundation as a way to
formalise our giving and paying forward
within our business.
These initiatives come together to make up
The TechnologyOne Way, which was first
developed more than 30 years ago and
continues to define the way we operate.
Over more than three decades,
TechnologyOne’s ongoing success
has been a result of our clear vision,
our beliefs, our supporting initiatives
and our continuing growth.
32
TechnologyOne Limited 2018 Full Year Report
33
Transforming business, making life simple We continue to evolve Ci Anywhere,
cent of each sector’s requirements ‘out of
ensuring our customers can easily adapt to
the box’. This accelerates implementation
changes in mobile devices, computing and
while leaving room for the software to be
user preferences.
configured to customers’ specific needs.
Our core beliefs
An enterprise vision
We believe in the power of a single,
integrated enterprise solution built on a
modern platform with a consistent look
and feel.
A best-in-class enterprise solution
Only through an enterprise solution can
organisations really embrace the future of
SaaS and smart mobile devices, and get the
efficiencies they need across their complete
organisation. We have spent more than 30
years and hundreds of millions of dollars to
deliver on such an enterprise-wide vision.
Today we are unique among enterprise
software providers in delivering best-in-
class products that come together as a total
enterprise solution from a single vendor.
Deep functionality for the
markets we serve
We have chosen to focus on eight key
markets: Local Government, Government,
Education, Health and Community Services,
Asset and Project Intensive Industries,
and Corporates and Financial Services.
With over 30 years’ experience and over
1,200 large scale enterprise customers we
possess an expansive understanding of
these sectors and we provide the deepest
functionality for the markets we serve. We
continue to add more and more functionality
to our products and preconfigured solutions
Our leading-edge platform
for these markets which streamline
Our comprehensive suite of fully integrated
implementation and reduce customers’
software products is designed to deliver the
time, cost and risk.
best possible experience for users.
Our software solutions are underpinned by
our state-of-the-art Ci Anywhere platform.
The platform provides the core functionality,
security and a consistent user interface
for each of our products, and enables
Preconfigured solutions
TechnologyOne’s integrated products
form the building blocks from which our
preconfigured, market-specific solutions are
developed.
our customers to access their information
Developed in collaboration with hundreds
anywhere, at any time and from any device.
of customers, the solutions cover 80 per
This approach is faster, cheaper and safer
than that adopted by our competitors.
Deep industry engagement
Each of our preconfigured solutions is
developed by a team of specialists with
an in-depth understanding of our key
markets. We work closely with our sectors
to stay abreast of current requirements,
organisational and user challenges,
legislation and emerging trends. This
deep industry engagement ensures our
preconfigured solutions continue to lead
the market.
The Power of One
TechnologyOne’s hallmark is being one
vendor with a single vision, code-line and
experience. We do not use implementation
partners or value-added resellers. We
take complete responsibility for building,
marketing, selling, implementing, supporting
and running our enterprise solution for each
customer to guarantee long-term success.
The power of a
single, integrated
enterprise solution
Our unique value proposition
We are accountable to our customers,
whether the focus is on business needs,
underlying technology, delivering
implementations on time and within
budget, or excellence in support and
Using technology for
competitive advantage
Simplicity, not complexity
As a leader in the enterprise software
One of our founding principles in 1987
market, we have always focused on
was to use new and emerging technologies
transforming business. More importantly,
to provide a competitive advantage for our
we also aim to remove complexity to make
customers. It continues to be a major
life simple for our customers.
customer service.
focus today.
Simplicity is a philosophy we continue
When organisations invest in our solutions
they benefit from a direct relationship with
us every step of the way. Right from the
start, we take ownership of a project and
provide outstanding service and support.
Unlike our competitors, we provide a single,
integrated consulting capability to enable
a safer, faster and more cost-effective time
to delivery for our industry solutions. This
is underpinned by the industry and product
experience of our 300 consultants and the
power of our Solutions Implementation
Methodology (SIM) 2.0.
The power of evolution
TechnologyOne’s enterprise solution
adapts and evolves by embracing new
technologies and concepts to ensure
customers maintain their competitive edge
through innovation.
For more than 30 years, we have
to embrace in everything we do for our
successfully delivered a continuous
customers. We want to be known for
and smooth technology transition that
software that is easy, simple and intuitive to
has seen TechnologyOne migrate our
use, and that removes needless complexity.
customers across a number of technology
paradigms, from mainframe to client-server
computing to the Internet, to our Connected
Intelligence (Ci) platform and more recently,
Ci Anywhere. Ci Anywhere is built on
beautiful design, and can be used by any
business consumer, anywhere, on any
device and at any time. It is powerful and
simple to use, allowing our customers to
By embracing the simplicity of a SaaS
model, we deliver our software in a high
performing and secure manner. Our highly
available infrastructure has redundancy
built in at every level and ensures our
customers don’t have to worry about
running or updating their own software
and infrastructure.
realise the benefits of our TechnologyOne
By removing the need to manage their
SaaS Platform and smart mobile devices.
computing environment, customers
can focus on business, rather than the
supporting technology.
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35
Transforming business, making life simpleTechnologyOne Limited 2018 Full Year Report The future
of enterprise
software, today
Our initiatives
Compelling Customer Experience
We continue to recognise that our
customers are our compass for the
ideas, concepts and technologies – rather
Collaborative facilities
than needing to retain legacy systems.
Our ‘Hack space’ is an extension of the
Over the past 30 years we have completely
R&D Centre in our Brisbane headquarters.
decisions we make, the people we employ
redeveloped our software platform four
The project area provides a collaborative
and the processes we create. This is why
times. Since the introduction of SaaS and
workspace for aspiring interns, graduates
we continue to invest in our Compelling
smart mobile devices, the pace of change is
and our people to innovate and develop
Customer Experience (CCE) program,
accelerating and our software continues to
world-class software.
which provides our people with ongoing
evolve at a market-leading pace. This year,
development and support in delivering
outstanding customer experience.
Providing a compelling customer
experience is fundamental to the way
TechnologyOne does business and
positions us well to attract customers away
from our competitors.
Application Managed Services
As specialised services that deliver
continuous improvement and lower the
cost of application management, our
Application Managed Services (AMS) group
drives productivity and cost efficiencies for
our customers. The AMS team has many
we extended our research into several new
technologies including artificial intelligence
(AI) and machine learning (ML).
Our world-class R&D
With a team of more than 400 developers,
TechnologyOne runs one of the largest
With technology and design being at the
forefront of the concept, the Village Green
social areas provide spaces in our offices
to showcase the ongoing accomplishments
and achievements of the company in an
environment that reflects our products and
values.
Australian-owned R&D centres for
Throughout the year, we make a point of
enterprise software. Each year about 20
bringing together our employees globally.
per cent of our revenue is invested into our
This is achieved using state-of-the-art
R&D program, which continues to produce
audio visual equipment and technology to
leading-edge technology that will enable
connect all regional offices for Town Hall
our customers to embrace the digital
meetings, Hack Days, R&D Showcases and
revolution, streamlining their business and
other global company events.
improving their experience.
MARVELs
Our annual awards program recognises and
rewards high-performing employees. The
awards assist in driving our high-performing
culture, by providing employees with a
benchmark to strive towards. You can read
more about our MARVELs program in the
Our People section on page 55.
years’ experience in running our software
In addition to our R&D centres in Brisbane
and a deep understanding of our customers,
and Perth, we have offshore R&D centres
enabling them to deliver superior value and
in Indonesia and Vietnam. This allows us to
outcomes.
We continue to invest in our AMS services
extend our capability and better support our
customers and existing products.
to ensure that all customers benefit from our
Hack Days
consulting team’s breadth of expertise.
In FY2018, TechnologyOne continued its
Cultivating a culture of innovation
investment in innovation culture through
The innovation and creativity of our team
is key to our success. Our developers
are leaders in their field who challenge
conventional thinking and go beyond
the traditional realms of development
methodology. Our state-of-the-art R&D
company-wide Hack Days. These sessions
encourage innovation, creativity and fun.
They also give employees an opportunity to
break down silos and participate in projects
outside their normal day-to-day work.
Hack Days enable us to showcase some of
centre and initiatives are designed to foster
our emerging leaders by giving our people
collaboration, creativity and innovation
to provide the platform for our future
growth. In recent years, we have also
the freedom to lead outside a traditional
organisational structure. All parts of the
business are encouraged to participate,
learned extensively from how consumers
regardless of which team or region they
use technology to simplify our enterprise
are in.
software.
New ideas, new concepts
We are committed to a continuous cycle of
Some of the innovations that have come
out of Hack Days have truly transformed
the way we operate and have made our
redeveloping our software platform from the
customers’ lives simpler.
ground up every seven years. This process
leaves no line of code untouched and
ensures that we are free to embrace new
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37
Transforming business, making life simpleTechnologyOne Limited 2018 Full Year Report
TechnologyOne Foundation
Showcase
The TechnologyOne Foundation and our
Our Showcase events provide an
approach to charitable giving are key
opportunity to demonstrate to customers
defining factors behind who we are as a
and prospects how we are transforming
company. Our aspirational goals for the
how businesses operate through our SaaS
TechnologyOne Foundation set the tone
solutions. They also provide an invaluable
for our company culture and demonstrate
opportunity for customers and industry
the values we are looking for in future team
leaders to network with peers.
members.
This financial year, we took the
The focus of the TechnologyOne
TechnologyOne Showcase to several
Foundation is investment in youth, because
Australian capital cities and to Auckland,
it is through the youth that we can have
New Zealand. This gave us opportunities to
the greatest impact on the future. In line
engage with hundreds of unique customers
with this, the TechnologyOne Foundation
and prospects, and strengthen our pipeline
has several charity partners including
of sales opportunities. The events featured
Opportunity International Australia, The
discussion of the latest industry trends
Fred Hollows Foundation, The School of
and insights, and were used to unveil new
St Jude and The Salvation Army.
software developments.
Opportunity International Australia
Regional Days
We partnered with Opportunity International
A new initiative in FY18 was the
Australia (Opportunity), and set a goal to
establishment and roll-out of our new
help 500,000 children and their families
Regional Days for our Sales and Consulting
free themselves from poverty over the
teams. We kicked-off a regular series of
next 15 years, through an innovative,
these days in May to discuss our strategy
entrepreneurial approach to charitable giving.
and goals, strengthen relationships across
regions, teams and projects, and to improve
engagement across the whole organisation.
The partnership with Opportunity will
provide small loans to enable families to
grow businesses, earn regular incomes and
create safety nets for the future. As 98 per
cent of these small loans are repaid and
then re-lent to other families, the impact
creates a ripple effect within communities.
Read more in the TechnologyOne
Foundation section of this annual report on
page 63.
38
Transforming business, making life simple
39
TechnologyOne Limited 2018 Full Year Report Our
growth
Enterprise
Software as a Service
“The introduction of TechnologyOne’s
enterprise SaaS solution makes life easier
for our ratepayers and customers who are
demanding that we provide improved digital
services.”
Councillor Darren Grimwade
Moreton Bay Regional Council
Our growth
Enterprise SaaS
Platform
Our ongoing success has been underpinned
Expanding within
our geographies
We have 14 offices around the world.
Expanding within our
vertical markets
We operate within eight large vertical
Adding value to
existing customers
We listen to our customers and make sure
Expanding our product
range and depth
We are working closely with our customers
by the incredible growth of our SaaS
These are located in each state and
markets and deliver preconfigured products
we understand their needs, meet their
to ensure we meet their ongoing business
business, which doubles in size every 18
territory of Australia, as well as the United
to enable customers to quickly realise value
priorities and enable ongoing improvements
needs and provide an increasing range of
months. This is powering the growth of
Kingdom (UK), New Zealand, the South
from our solutions. This lets us specialise,
in their business processes. Our goal is
functions within our enterprise solutions.
identify new and ongoing customer needs.
markets. The launch of our SaaS Platform
developments and the experiences of fellow
By re-engineering all our products for
TechnologyOne which continues to double
Pacific and Asia.
in size every four to five years.
We have adapted our business to meet
We now have 347 customers on our SaaS
the differing needs of customers in each of
while providing significant room to expand
our customer base and grow our solution
footprint as we add value for customers.
Platform.
these regions. In particular, we adapt our
We have experienced continued success
sales strategies for different regions as we
and expansion within each of our vertical
Our solution is a clear market leader
because we are the only enterprise vendor
to offer a true enterprise SaaS solution
We will continue to build on our success
across the entire enterprise.
and consistent growth in Australia and
New Zealand, while also capitalising on
the strong growth of our SaaS solution
has also enabled us to penetrate our key
vertical markets more deeply, by making it
easier to reach customers that may not have
been suitable for our on-premise solution.
Unlike many other software providers
that use cloud hosting, we own, build
and support our software. Because other
providers handcraft each customer’s
environment, they cannot offer similar
shared benefits or economies of scale.
in the UK. We continue to grow our market
Organisations that do not have the
share in the UK’s Local Government and
technical capability or resources to roll out
Higher Education sectors, and expect this
our software on-premise can now easily
will contribute significantly to our growth in
implement our SaaS solution.
the years to come.
to build proven practice into our solutions
The result is that we continue to extend our
and deliver the best software and services
product offering by developing additional
available for our customers.
features and functions – further building
Our Sales and Marketing teams keep
customers informed about recent
on what is already one of the world’s most
comprehensive enterprise software suites.
TechnologyOne customers. This helps
Ci Anywhere, customers can enjoy the
customers further improve their technology
same software functionality regardless of
systems and business processes and
the device they are using. Ci Anywhere is
allowing us to further expand our footprint
with existing customers as they embrace our
easy-to-use solution.
models.
Building on this partnership approach, the
TechnologyOne Customer Community has
transformed our support experience. As a
dynamic group of TechnologyOne experts
and customers, the Customer Community
provides a world-class support experience
to customers. It also enables our customers
to influence product direction, keep up-to-
date with industry news and collaborate with
other customers.
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43
Transforming business, making life simpleTechnologyOne Limited 2018 Full Year Report Customer Showcase and
User Group events
In FY2018 TechnologyOne relaunched our external
events program for existing and new customers.
Across the APAC region, we hosted and ran 10 events
including two show-stopping ‘Showcases’ and eight
‘User Group’ events. The uptake from our customers
and prospects exceeded our expectations with 429
organisations sending 1,435 representatives to attend,
engage, network and learn.
Our investment in strategic events including regional
Showcases also ensures our customers benefit from
a strong community and have the opportunity to
collaborate with experts and executives from all areas
of the business.
Our User Groups let our customers hear from fellow
users, build local support networks and learn more
about our products.
44
TechnologyOne Limited 2018 Full Year Report
Transforming business, making life simple
45
Our
operations
Greater visibility and leverage
Strategy for FY2019
During 2018, we used our ‘heartbeat’
Now that we have verticalised our teams in
concept to increase visibility between our
line with our eight key market sectors, we
departments and further enable them to
will focus on scaling our SaaS platform for
leverage each other’s strengths. Heartbeat
existing and future customers in FY2019. We
is an internal initiative which provides
will continue to leverage our Marketing, Pre-
visibility of the seasonal rhythms and
Sales, Sales and Consulting departments to
patterns of work demand across teams and
achieve greater visibility and optimise our
functions; this enhances understanding and
capabilities to serve our key markets.
enables greater process alignment across
the business to optimise project delivery for
customers.
We have built the foundation for faster and
more efficient business growth. We now
look forward to achieving the vision we
As a result, our Sales and Consulting teams
have set for our SaaS business.
Stuart MacDonald
Chief Operating Officer
are working more closely. The sales team
now brings in the consulting unit earlier
in our engagement with customers, which
provides the customer with expert advice
that differentiates TechnologyOne from its
During the last financial year, we
successfully completed a range of critical
competitors.
strategic initiatives that will allow us to
rapidly scale our SaaS offering across
our eight key market sectors. The most
important of these was to finalise our
transition to becoming a true enterprise
Software as a Service business.
Achievements in FY2018
Alignment for SaaS and scale
To optimise our operations and prepare
to scale our SaaS business, we finalised
the ‘verticalisation’ of our organisation –
We have also brought our Sales and
Marketing groups together, thanks to
a better understanding of their team
structures and programs, and our go-to-
market initiatives. This has helped us better
develop sales and marketing campaigns
and achieve record numbers of participants
at our Showcase and User Group events.
To help us achieve our vision for our SaaS
business, we hired additional experienced
and qualified individuals, including
executives for our UK and consulting
effectively aligning teams to our eight key
businesses.
market sectors. This required aligning our
Marketing, Pre-Sales and Sales teams, and
Marketing for success
structuring them according to the industries
We continued to focus on leveraging
we serve. In achieving this, we enhanced
and promoting customer success in our
visibility between our teams and optimised
marketing programs. We also leveraged
resources to seamlessly add value to our
our vertical market strategy to launch
key markets.
By moving to a markets-focused structure,
international marketing campaigns using
traditional and digital marketing tools.
we have streamlined the journey our
We also plan to align our marketing
customers take across all their touchpoints
initiatives more closely with the other areas
with us. We can also better ensure
of our operations to promote our SaaS
customers are using our software effectively
business.
and support the digital transformation of
their organisations.
Enterprise software
incredibly simple
“Having integrated ERP software has automated a lot
of processes and reports, removed a lot of risks, freed
up resources and enables us to deliver services more
effectively. We have definitely noticed a shift from
being reactive and putting out fires, to being proactive
and being on the front foot.”
Andrew Gall
Information Technology
Manager, City of Launceston
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TechnologyOne Limited 2018 Full Year Report
Transforming business, making life simple
49
processes. We continued to work with the
and negotiating contracts for new business
leadership team to set up cost management
systems.
parameters, enabling us to maintain a
scalable business model.
Audit and risk
Plans for the coming year
In FY2019, Corporate Services will continue
to focus on providing operational support
We further increased our audit and risk
and advice for our SaaS business and
capability in FY2018 to provide more rigour
progress toward realising our cloud-first,
around our processes and proactively
mobile-first vision. We will also further
manage our corporate governance. Our
develop our processes to ensure our risk
Company Secretary has also helped
framework is in line with our business
strengthen our compliance and risk
expansion.
Gareth Pye
Acting Operating Officer –
Corporate Services and Deputy CFO
Corporate Services’ focus this year was to
ensure all systems were set up to support
the rapid and frictionless scaling of our full
SaaS business. We also emphasised cost
discipline and efficiency improvements
to streamline our end-to-end finance
management.
Information technology
We focused our IT efforts on preparing
our systems and processes for changes
related to the introduction of the AASB 15
accounting standard and the European
Union’s General Data Protection Regulation.
On the corporate side, we worked to
enhance the efficiency of internal systems,
and automate core business reporting,
and bolster data protection. We also
matured our internal IT processes and
supported various teams in investigating
On the technology front, we will continue
to simplify our systems and processes,
and focus on achieving cost savings and
mitigating risk. We will also enhance IT
expenditure reporting and make our IT
roadmap more visible to internal teams.
John Ruthven
Operating Officer – Sales
exciting market for our products, particularly
The UK is an important market for
our Student Management solution and
TechnologyOne in its own right and as a
will be a source of strong profit growth in
launchpad for the global distribution of our
the next few years. Our eight-year deal to
products. The fact that all of our new UK
provide a OneUniversity SaaS solution to
customers are SaaS users also makes the
the University of Exeter is an example of
market a good fit for our strategy. We are
this potential.
Platform for growth
The education sector has become a major
growth area for us in the UK. Over the past
two years, we have executed a turnaround
in our performance with the effective rollout
of our customer-first strategy. This has seen
us achieve seven successful customer go
lives and secure a number of education
customers, including the world-renowned
London School of Economics and Political
Science and the University of Sunderland.
We have also won several Local
Government clients; including three
Councils Cambridge City, South
Cambridgeshire and Huntingdonshire
Councils who procured together and all of
whom recently went live.
particularly excited about our potential to
further grow in our two key sectors of Local
Government and Education.
Supporting the cloud-first,
mobile-first vision
For the coming year, we will continue to
be selective in considering new deals
to ensure that we can implement them
successfully. We will focus on supporting
the company’s cloud-first, mobile-first vision
and complete the movement of all our UK
customers to the TechnologyOne SaaS
Platform. We will also further invest in our
consulting capability to help us scale the
business and support our customers.
Anwen Robinson
Operating Officer –
United Kingdom
We continued to make significant
investments in the UK as part of the
expansion of our consulting business and
to support the significant future growth
potential of this market and beyond.
With a large addressable market three times
the size of APAC, we believe the UK is an
Strategic wins
Our SaaS solutions enjoyed sales growth
across all sectors and particularly in Local
Government, where we had another banner
year. Key wins in FY2018 included:
had significant growth in our Shared Service
business in the Federal Government sector.
Strategic approach for 2019
In the coming year will execute on the
strategic shift in our sales model to leverage
• Cairns Regional Council in Queensland
the new AASB 15 accounting standard for
• Armadale City Council in Western
reporting on our annual recurring revenue
Australia
(ARR).
• City of Onkaparinga in South Australia
• Wollongong City Council in New South
Wales
• City of South Perth in Western Australia
• Whitsunday Regional Council in
Queensland
• The Shire of Serpentine Jarrahdale in
Western Australia
• The Department of Prime Minister and
Cabinet in ACT
To support this change and accelerate
our growth, we will continue to optimise
the sales coverage model to retain and
grow with existing customers, acquire
new customers and enhance our sales
organisational structure to enable us to
scale effectively.
We have re-planned our sales reward model
to reflect the change to ARR, strengthened
our sales enablement to develop and
retain top talent and refined our systematic
The shift in our sales focus from perpetual
• Christian Community Ministries in
licences to SaaS has surpassed our
Queensland
expectations. We made significant progress
in shifting new business to subscription
licences. This highlights customers’
confidence in our business model and
product strategy.
Besides acquiring new customers, we
approach to creating long-term value across
expanded our solution footprint across the
the business.
Education, Asset Intensive, and Health &
Community Services industries. We also
that they are best placed to configure
which demonstrate that this new approach
our software effectively. Equally, they
is working and we expect to continue
invest time engaging widely across the
implementing this across the APAC region
organisation from Sales through to R&D to
with great success over the coming year.
ensure that their deep industry knowledge
is harnessed and that they understand
where the evolution of our software is
headed in the next five years and beyond.
Early wins in transformation
Whilst maintaining our 99 per cent customer
retention rate, we also completed an
unprecedented 197 customer go lives
in FY18. This is almost a 100% increase
on FY17. Much of this success can be
This year we elevated the performance
attributed to greater collaboration across
and operations of our global Consulting
teams and engaging effectively with more
team. We empowered our regional leads
customers using our SIM 2.0 methodology
by expanding both their accountabilities
to implement our software.
and responsibilities. We also consolidated
our new projects division to streamline
delivery processes. These initiatives built
on the foundation laid last year to separate
consulting units to service new customers
who are implementing new products, from
Significant implementations
amongst FY18 go lives included:
• NZ Statistics
• TAFE Qld
• Exeter University
existing customers who seek to extend their
• Mount Alexander Council
Brock Douglas
Operating Officer – Consulting
Our global consulting team guarantees
our customers’ long-term success by
building strong partnerships with them and
existing solutions.
Strategy for FY2019
delivering projects on time and to budget.
Deep understanding
We invest in our consulting team by
comprehensively training them in all
In FY18 we commenced the roll-out of our
In the coming year we will extend the roll-
transformation strategy, which comprises
out of our winning transformation strategy.
33 new initiatives across three key streams:
Now that APAC is materially aligned for
customers, people and disciplines. We
efficient growth, we plan to focus on the UK
aspects of our technology and ensuring
have already seen strong uplift in our
with a ‘lift and shift’ approach to achieve
utilisation metrics and other data points
similar success there.
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Transforming business, making life simpleTechnologyOne Limited 2018 Full Year Report
Federal Government, New Zealand
In FY18 we delivered a range of enhanced
Federal Government, Local Government
security and privacy outcomes for our
and continue to help our customers stay
customers, across all the industries that
competitive in Education.
we serve, and our cloud customers now
On achieving go live, our customers are
reporting positive Return On Investment
utilise a version of software no older than 18
months.
figures of greater than 30%. These go
Concurrently, we accelerated the pace of
lives provide strong incentives for our on-
our innovation and improved the features,
premise customers to start their journey to
speed, security, availability and scalability of
cloud.
our cloud for our customers.
Optimising our enterprise software
Strategy for FY2019
TechnologyOne’s SaaS Platform has
We will continue to invest in R&D and new
provided a compelling value proposition
technology platforms, as we expect our
for our customers, giving them a simple,
cloud business to substantially drive the
cost-effective and highly scalable model of
company’s growth in the next five to seven
computing.
years and beyond.
The launch of the TechnologyOne
Leveraging the TechnologyOne SaaS
Cloud 17A and 18A enabled us to build
Platform will enable us to improve our
on our mass production SaaS Platform.
customers’ experience and reduce the
As we continue to scale, we are able to
time to market for our new features and
identify new opportunities to optimise
functions. It will let our customers reach
our enterprise software. These new
new markets, operate globally and let them
opportunities provide a landscape to deliver
focus on their business, while we take care
Iain Rouse
Group Director – R&D, Cloud
As our SaaS business has been doubling
in size every 18 months, our ongoing
investment in R&D, continued innovation,
greater compliance with international
standards, and precise capacity planning
are critical focuses for us.
In FY18 we managed a 100% increase in go
live activity and have achieved important
sustainable increases in profitability by
of the technology.
helping us deliver greater economies of
customer go lives in the Australian
scale over time.
this year has been the Property & Rating
Developing and supporting talent
product, with the first of its Ci Anywhere only
implementations already underway; and
the student portal in Ci Anywhere which is
complete and in production use at several
higher education customer sites.
Optimising R&D for SaaS at scale
We have completed a range of projects
that leverage the latest SaaS technology
to enable our R&D team to work more
efficiently within a SaaS environment. These
As a strong supporter of developing talent
for our industry, we sponsor programs to
help increase the interest of young people
in science, technology, engineering and
mathematics (STEM) subjects. Our activities
this year included: Sponsoring BiG Day InTM
Junior, supporting the launch of STEAM Lab,
backing Tech Girls are Superheroes and
sponsoring James Cook University’s Design
Sprint.
projects included moving our source code to
The next evolution of our software
a global best practice location, adopting the
latest generation cloud SaaS desktops for
day-to-day development, and implementing
the latest technology for compiling and
distributing our code base.
Under the banner of Team of Teams,
everyone in R&D is improving creativity
We have exciting announcements to make
in FY19. Key among them is the next major
evolution of our enterprise software based
on digital experiences which will drive our
software direction for the next eight years.
The first parts of this is DXP, our digital
experience platform, and unveiling our
within their working environment through
artificial intelligence and augmented reality
Brett Hooker
Director – R&D
Our Research and Development (R&D)
centre which drives innovation and continues
to deliver two major software releases a year,
has been recognised for excellence with the
greater collaboration.
R&D outcomes.
Software Innovation Award for Ci Anywhere
at this year’s Australian Business Awards.
As our Ci Anywhere product suite grows in
breadth and depth of functionality, we have
converted many of our existing
Ci products to Ci Anywhere. A highlight
To support the future scaling of our SaaS
We will continue to invest in the Ci Anywhere
business, we have automated processes for
platform to increase the capability of all
our colleagues including those in the finance
products. We will also continue to attract
department who now have straight through
new talent and expand our award-winning
processing of their transactions.
graduate programs to engage more young
people, including launching a summer
internship program.
We listen to our customers and address
Strategic direction
In FY19 we will focus on expanding our
Customer Community to enhance our ability
to collaborate with other TechnologyOne
customers using the insights gained from
our SaaS operations to drive continual
improvements and continue to ensure
our customers are successful using our
solutions.
their challenges. This enables us to build
proven practice into our solutions and
provide our customers with our world-
leading software and services.
Providing world-class support
To enhance our customer support, we
relaunched the TechnologyOne Customer
Community in 2018. This provides a
world-class support experience through a
community of TechnologyOne experts and
customers. The relaunched platform offers
an enhanced user experience, additional
features and easier navigation.
Our changed support profile
In line with our greater focus on SaaS, we
now provide more support for our SaaS and
Ci Anywhere businesses. We also invested
Richard Nicol
Group Director – Support
& Enhance
Our goal in the Support & Enhance team is
in our UK business to provide enhanced
to give our customers a compelling support
local customer support and to assist with
experience. We achieve this by having a
our 24/7 support coverage.
culture of service excellence, innovative
support tools and processes, and a focus on
ensuring our customers’ success with our
solutions.
in line with our focus on selling SaaS. Our
By doing this, we can ensure our policies
people are well positioned to scale this area
and practices reflect the needs of our
of the business and achieve our growth
people.
aspirations.
To enhance our People & Culture (P&C)
practices, we optimised our use of data
in our decision making. We also evolved
our policies and processes to complement
the changing needs of our people and
business.
Attracting new talent
New initiatives
Our initiatives for 2019 will include
strengthening our leadership team and
expanding the career paths available to our
team members.
We will also continue to focus on attracting
talent as we accelerate the growth of our
SaaS business. This will include expanding
We continue to attract high potential
our graduate program to engage graduates
professionals and ensure that every part
across all areas of the business, and, our
of our business attracts and appoints
internship program to encourage university
new talent who will thrive in our culture
students to spend their summer working
of innovation. Our graduate program has
with us in Brisbane.
Jane Coe
Group Director – People & Culture
succeeded in engaging young talent, and
At TechnologyOne, we believe in investing
celebrated recognition as one of Australia’s
in our people’s development so they
can grow their capability, and therefore,
accelerate our business.
In 2018, we focused on ensuring we have
the right teams and policies to support
our SaaS business. We introduced a new
commission structure for our Sales team,
aimed at driving different sales behaviour
top 20 graduate programs in 2018.
Retaining our team members is a core
part of our People & Culture strategy.
We deliver programs to engage our
people and encourage participation in
regular surveys to give them an
opportunity to have their say.
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Transforming business, making life simpleTechnologyOne Limited 2018 Full Year Report
Our
people
We are an
Employer of Choice
Our people are a crucial source of our
our people and growing their careers by
We want to create interest around this
competitive advantage, and we strategically
delivering training in leadership, technical
exciting time in Australia’s economy
invest in activities that support the
and professional skills development.
and ensure we are engaging early with
recruitment, retention and development of
individual talent within our workforce.
Graduate program
As a nationally recognised Employer of
Choice, TechnologyOne is committed to
providing an environment in which our
talented people can be innovative, creative
and realise their full potential.
This year, TechnologyOne received more
than 15,000 recruitment applications,
processed 60 promotions and facilitated 18
international secondments, many of which
were employee-initiated.
Our graduate and intern programs form
the foundation of our talent pipeline into
the future. These programs will continue to
expand, and we have developed strategies
for investing in and valuing our high
performers.
This year, we onboarded 20 new R&D
graduates across Australia. These graduates
work very closely with the company’s top
engineers, providing them with valuable
skills and experience.
Extensive onboarding and training
TechnologyOne’s graduate program was
TechnologyOne hires passionate, talented
recognised in 2018 as one of the top 20
and innovative people who are inspired to
leading graduate programs in Australia
think about the future.
by the Australian Association of Graduate
Our comprehensive onboarding program
Employers.
provides the best possible start for our
Industry partnerships
Australia’s youngest and brightest minds
in Science, Technology, Engineering and
Maths (STEM) subjects.
As part of this commitment, we sponsor
the Queensland University of Technology
Dean’s Scholars Program and the University
of Queensland’s School of Information
Technology and Electrical Engineering (ITEE)
ICT Excellence (Prentice) Scholars Program.
Many of these students are later channelled
into our award-winning internship program.
IT students from both universities take
part in TechnologyOne’s annual The Big
Game event. This gaming tournament
gives students a look inside the company’s
culture and innovative workspaces.
We also partner with the Australian
Computer Society (ACS) Foundation to
sponsor the national BiG Day In™ series. The
people in their careers at TechnologyOne.
The TechnologyOne College then continues
to support our commitment to developing
We are committed to actively fostering
series is designed to inspire high school
a diverse and vibrant information and
and university students to pursue careers in
communications technology (ICT) industry.
the IT industry.
Equal opportunity
TechnologyOne takes diversity and
inclusion seriously. We advocate equal
opportunity for all, and are committed
to addressing the shortage of female
technology workers in Australia. To
help achieve this, we provide equal pay
opportunities for men and women and have
a zero-tolerance policy of discrimination and
harassment of any kind.
Some of the key programs TechnologyOne
Winners of the MARVELs receive company-
supported this year include the Tech Girls
wide recognition, and are inducted into
Movement and the Queensland Women in
TechnologyOne’s League of Extraordinary
Technology Awards.
People.
Reward and recognition
Capability development
To maintain our high-performing culture, we
We remain focused on implementing
think it is important to recognise and reward
innovative people programs to hire, retain
top talent. The annual TechnologyOne
and develop a high-performing workforce.
MARVEL awards celebrate employees
This is critical to achieving our goal of
who go above and beyond and showcases
transforming our customers’ businesses and
Recruitment and promotion within
ordinary people, doing extraordinary things.
making their working lives simple.
TechnologyOne is based only on the relevant
skills, experience, qualifications, aspirations,
potential and aptitude of the applicants.
MARVEL stands for Merit, Achievement,
In FY18, we ran 871 training programs
Recognition, Values, Excellence and
attended by 3,096 individuals. The
Leadership. Categories for the MARVEL
TechnologyOne College continues to
Our participation of women at
awards are centred around our key
develop training programs to ensure we are
TechnologyOne is at 35 per cent, which
initiatives. These include:
is high compared to other IT businesses
globally. However, we are committed to
further increasing the representation of
women by working with strategic partners
• Leader of the Year
• Compelling Customer Experience
of the Year
to encourage more women to pursue STEM-
• Hack of the Year
based careers. In doing so, we play a lead
• Rookie of the Year
role in growing a more diverse pipeline of
future candidates to work in technical fields
and at TechnologyOne.
• TechnologyOne Superheroes
providing our people with the right skills to
further their careers and meet customers’
needs.
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Transforming business, making life simpleTechnologyOne Limited 2018 Full Year Report Employee engagement
At TechnologyOne, we value our
Our Corporate Sustainability
scheme
employees’ right to have their say. This
year, we conducted eNPS surveys, which
provided a channel for our people to be
heard. The results of these will be used to
influence ongoing enhancements to our
initiatives and programs.
To improve communication across our
TechnologyOne is committed to
managing our business operations in
an environmentally responsible manner.
In FY18, we extended our lease by five
years on our headquarters in Brisbane’s
Fortitude Valley, which has a Six Green
Star environmental rating. The building
global offices, we conducted regular Town
includes numerous environmentally-rated
Hall Meetings in FY18. These enable our
sustainable development features, including
executive team to share company updates
50 per cent more fresh air than standard
with all employees simultaneously, by
commercial buildings, carbon dioxide
connecting all offices via our state-of-the-art
monitoring, external views to maximise
audio visual equipment.
As highlighted in the ‘Our Initiatives’
section on page 37, we also continued our
investment in Hack Days to give employees
the opportunity to collaborate across
daylight, energy-efficient lighting, dedicated
exhausts in photocopier areas, a gas-
powered generator and a large rainwater
collection area on the roof to supply water
for the toilets and garden irrigation.
functional teams and work on projects that
Our people are also encouraged to access
fall outside their normal day-to-day work.
These Hack Days are key to driving our
culture of innovation and creativity.
Our Community Sports program
and adhere to our Environment Policy. It
outlines our commitment to providing an
environmentally responsible workplace,
ways to engage in sound workplace
practices through reducing waste, and the
We support our people in sporting events to
considered use of energy and resources.
For more information see our Corporate
Sustainability Report overview on page 60.
encourage health, well-being and charitable
fundraising. It has been one of the biggest
years for our TechnologyOne athletes who
made more than 70 requests for event
registration over the course of the year. A
highlight event this year was the Corporate
Games in Brisbane, in which we had 96
team members participate across more than
nine different teams and individual sporting
events.
Our people competed in events such as:
Wellington Round the Bays, City2Surf, the
Gold Coast Marathon, Gold Coast Cycle,
Brissie to the Bay, Bridge to Brisbane, the
Great Brisbane Bike Ride and Palace to
Palace Cycle Ride.
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59
Transforming business, making life simpleTechnologyOne Limited 2018 Full Year Report Corporate sustainability overview
Customer retention99 %
• Customer satisfaction and retention
• Data privacy and security
TechnologyOne’s approach
to sustainability
Customer
People
33 %
among the best globally in the
Participation of women, placing us
• Talent attraction and retention
• Workplace diversity and inclusion
• Employee engagement and culture
• Employee training and development
• Employee health and wellbeing
IT industry.
Responsible
business
$
(18% of revenue)54m
R&D investment for 2018
• Ethics, values and transparency
•
Innovation
• Compliance
Pledge
Community and
environment
• Community investment and education
• Environmental footprint
e
1% ti m
Our people
R&D
Our community
& environment
Our products
& solutions
Implementation
& Support
Marketing
& Sales
F
e
e
d
b
a
c
k
m
e
c
h
a
n
is
m
s
1
%
p
r
o
fi
t
Our customers
Profit
Revenue
Our growth
60
TechnologyOne Limited 2018 Full Year Report
Transforming business, making life simple
61
For the full sustainablility report visit our website TechnologyOneCorp.com
Our goal is to help
500,000 children
out of poverty
The TechnologyOne Foundation is
enables us to make a bigger difference to
year partnership with The Fred Hollows
In addition to our major charity partners,
dedicated to making a difference to
the causes we support.
underprivileged and at-risk youth in our
communities by empowering them to
transform their lives and create their own
pathways to success.
Through the 1% product, our commitment
is to donate 1% of licence fee revenue each
year. This makes it easier for not-for-profit
organisations to access our solutions and
We established the TechnologyOne
take advantage of the efficiencies they
Foundation in 2016 to ensure that charitable
provide, which in turn extends the impact of
Foundation to support the Vietnam
Child Eye Care program, which aims
to eradicate avoidable blindness in
school-aged children. One year into
the partnership and we have assisted
13,000 children through the Vietnam
Child Eye Care program
giving would become a long-term initiative
their work.
•
Supported eight of our not-for-profit
All TechnologyOne team members can also
take up to 2.5 days as leave each year to
customers further their services
through our 1% product pledge
we supported a number of other worthy
charities and causes including: The Prince’s
Trust UK, Bond University Indigenous
Program, Yayasan Kemanusiaan Ibu Pertiwi
(YKIP) – Bali, Plan International – Cambodia,
disaster relief programs – Australian
Drought, Cyclone Gita and the Cancer
Council.
Our work with Opportunity
Australia
Boosting local communities
With more income and therefore more
money to spend on items such as food
and transport, families who used to live in
poverty become active participants in their
local economies. This benefits the providers
of those products and services, who are
themselves often entrepreneurs.
This virtuous cycle ensures that
microfinance provides a long-term boost
to economies and helps to develop self-
volunteer during work hours for charitable
•
Assisted over 30 charities through our
Through our donations to and partnership
sustaining communities more so than one-
organisations. This supports our 1% of time
volunteering hours and donations
with the microfinance group Opportunity
time handouts.
for our business. It represents a multi-
million-dollar annual commitment and it
reflects our values, our culture and who we
aspire to be.
The 1% Pledge
Our Foundation is part of the Pledge 1%
corporate philanthropy movement, which is
dedicated to making the community a key
stakeholder in every business. In aligning
with the Pledge 1% movement, individuals
and companies donate 1% of their profit,
product and employee time to their
communities.
TechnologyOne donates 1% of annual
profit to its charity partners, supporting
our vision of changing the future by
empowering underprivileged and at-risk
youth to transform their lives. We partner
with a number of key charities, including
Opportunity International Australia, The
School of St Jude, The Fred Hollows
Foundation and The Salvation Army. This
strategic approach to charitable giving
commitment.
Year in summary
In FY18 the work of the TechnologyOne
Foundation was recognised with two
awards: Winner - The Australian Business
Awards - Community contribution; and
Ranked 30 in the 50 Best Workplaces to
Give Back in Australia in 2018. We were also
shortlisted for the QLD Philanthropy awards.
we supported 900 Solar Buddy lights
being assembled and delivered to
children in Cambodia living in energy
poverty. With access to these lights
students are studying 78% longer.
•
Signed two new three-year
•
Launched the Recycle IT program
partnerships with The School of St
Jude and The Salvation Army, totalling
more than $300,000
•
One year into the partnership with
Opportunity International we have
assisted 12,870 children and their
families out of poverty
•
Continued our commitment to a three-
in Queensland. Our IT waste
goes to a local social enterprise
initiative, Substation 33, which
assists disadvantaged youth to gain
confidence and skills for the transition
to sustainable employment through
the recycling of electronic waste. So
far we have donated 2,516kg from
TechnologyOne and our people.
•
Supported World Vision’s work with
children, families and communities to
overcome poverty and injustice
International Australia we are transforming
communities and helping families. We aim
to help 500,000 children and their families
free themselves from poverty over the next
•
Through company-wide volunteering,
15 years.
Creating change
Micro-entrepreneurs are also able to use
students
their influence to bring about positive
changes in their communities. Backed by
the confidence that comes with having
their own businesses, this includes health
workers seeking better infrastructure or
educational facilities from government, or
bringing local families together to take on
As a result of this partnership, families in
India will be able to access small loans to
enable them to build businesses. This will
also help them to earn regular incomes to
support themselves and plan for the future.
community projects.
With funds for initiatives such as starting a
shop or buying seeds for a vegetable farm,
families can transform their lives and their
children’s futures. Further, because 98 per
cent of small loans are repaid and recycled,
the impact creates a positive ripple effect in
their communities as more jobs are created.
Those jobs might include delivering goods
or helping with sewing and weaving orders.
Together with The Fred Hollows
Foundation, the TechnologyOne
Foundation is restoring sight,
fighting for change and empowering
communities. Our joint commitment
to the three-year Vietnam Child
Eye Care program will improve
eye health for all Vietnamese
primary and secondary school
children by encouraging healthy
eye care practices to prevent visual
impairment. This will benefit:
• 210 primary schools, including
6,581 teachers and 146,326
• 150 secondary schools, which
includes 5,446 teachers and
102,614 students
• 200 eye care workers who will
be trained in primary eye health
and 12,027 teachers and school
staff members who will be trained
in basic eye health during the
project cycle.
64
65
Transforming business, making life simpleTechnologyOne Limited 2018 Full Year Report Financial
statements
Directors’ report
Your Directors present their report on the consolidated entity
(referred to hereafter as the Company) consisting of Technology
One Limited and the entities it controlled at the end of, or during,
the year ended 30 September 2018.
Directors
The following persons were Directors of Technology One Limited
during the financial year and up to the date of this report:
Adrian Di Marco
B Sc, MAICD, FACS
Appointed 8 December 1999.
Experience and expertise
Mr Di Marco founded TechnologyOne in 1987, after extensive
experience in the software industry in the area of large scale fixed
time and fixed price software development. Mr Di Marco has over 35
years’ experience in the software industry. He has been responsible
for all operational aspects of TechnologyOne, as well as the
Ron McLean
Appointed 8 December 1999.
Experience and expertise
Mr McLean has more than 40 years’ experience in the enterprise
software industry including holding Senior Executive and Managing
Director roles in several International and Australian Software
companies. His involvement in the enterprise software industry has
included leading and managing software development, consulting
and sales and marketing teams.
John Mactaggart
FAICD
Appointed 8 December 1999.
Experience and expertise
Kevin Blinco
B Bus, FCA
Appointed 1 April 2004.
Experience and expertise
Mr Mactaggart’s experience spans industries such as agriculture,
Mr Blinco is a former Director and chairman of Business Advisory
agri-tech, manufacturing and software. He is a co- founder of
accounting firm Moore Stephens Brisbane Ltd. He has over 30
Brisbane Angels, and an active investor and mentor in a large
years’ experience in the areas of business services and planning,
number of entrepreneurial ventures. Mr Mactaggart played
investment strategies, management and financial advice. Mr Blinco
an integral role in the creation, funding, and development of
is a Director of a number of unlisted companies. His expertise is
strategic direction of the company.
Mr McLean joined the Board as a Non-executive Director in 1992
TechnologyOne and remains a major shareholder. Mr Mactaggart
broadly respected and acknowledged throughout the business
Mr Di Marco has played a major role in promoting the Australian IT
industry and is a past director of the Australian Information Industry
Association, the industry’s peak body. He has been a director of
a number of IT companies. He has also been actively involved in
charitable organisations and is a past director of the Royal Children’s
was appointed as the General Manager in 1994, Chief Operating
has been a Fellow of the Australian Institute of Company Directors
community. He is a Fellow of the Institute of Chartered Accountants
Officer in 1999 and was the promoted to Chief Executive Officer
since 1991.
and a Member of the Institute of Company Directors.
of Operations in 2003. Mr McLean retired from this role at
TechnologyOne on the 15th July 2004 and remains a Non-executive
Director.
Interests in shares and options
Special responsibilities
42,872,500 ordinary shares in Technology One Limited held
Chairman of the Audit Committee and Remuneration Committee.
beneficially through JL Mactaggart Holdings Pty Ltd. 30,000
ordinary shares in Technology One Limited held via family trust.
Interests in shares and options
260,000 ordinary shares in Technology One Limited held
beneficially through Autun Pty Ltd ATF Blinco Accumulation
Superannuation Fund.
Hospital Foundation Board. He is a member of the Australian
Interests in shares and options
69,737 ordinary shares in Technology One Limited held beneficially
through RONMAC Investments Pty Ltd. 71,263 ordinary shares in
Technology One held via a Pension fund.
Institute of Company Directors and a Fellow of the Australian
Computer Society. Mr Di Marco has received extensive recognition
for his contribution and pioneering work for the IT industry. He
remains a major shareholder of TechnologyOne.
Mr Di Marco is the Executive Chairman of TechnologyOne, and
Chief Innovation officer for the company. He continues to work with
the Executive team and Board. He continues to focus on strategy,
innovation and creativity to ensure the company continues to build
future platforms for strong growth.
Special responsibilities
Chairman of the Board, and Chief Innovation Officer.
Interests in shares and options
31,372,500 ordinary shares in Technology One Limited held
beneficially through Masterbah Pty Ltd. 6,000 ordinary shares in
Technology One Limited held via family trust.
68
69
Transforming business, making life simpleTechnologyOne Limited 2018 Full Year Report
Stephen Kennedy
Company Secretary
B Bus, FGIA
Appointed 13 April 2017.
Mr Kennedy was appointed Company Secretary on 13 April 2017 and
has been employed with TechnologyOne since January 2017.
Richard Anstey
FAICD, FAIM
Appointed 2 December 2005.
Experience and expertise
Jane Andrews
PhD, GAICD
Appointed 22 February 2016.
Experience and expertise
Mr Anstey has more than 35 years’ experience in IT and
Dr Jane Andrews joined the Board in 2016, bringing more than 15
telecommunications industries and in associated investment
years’ leadership experience in research and innovation-based
banking and funds management roles. Most of his career he has
organisations. As a founder and investor in numerous innovative
been building and managing his own companies. The first being
companies, Dr Andrews has extensive experience in corporate
Tangent Group Pty Ltd which established a strong reputation for
strategy, entrepreneurship, commercialisation, innovation, research
software and strategic advice in the banking and finance sector.
and development.
After the sale of Tangent, he co-founded inQbator which became
iQfunds as an early stage investment group focused upon the
technology, telecommunications and life sciences sector. iQFunds
has managed 3, federal government backed seed funds, the last
being iQFund 3 and has invested in over 30 companies over the
Dr Andrews is a Graduate of the Australian Institute of Company
Directors, holds a PhD in Life Sciences, a Bachelor of Science (First
Class Honours) and a Graduate Diploma in Applied Finance and
Investment.
past 15 years.
Interests in shares and options
Mr Anstey now continues his career in venture capital and corporate
advisory roles through iQFunds. Mr Anstey is a Director and Non-
executive Chairman of Veriluma Limited (ASX: VRI).
30,600 ordinary shares held in Technology One Limited held
beneficially through the Sarabande Zenith Jewel Trust.
Special responsibilities
Chairman of the Nomination Committee.
Interests in shares and options
25,500 ordinary shares in Technology One Limited.
Sharon Doyle
B Laws (Hons), B IT (Dist), G Dip Bus Admin, GAICD
Appointed 22 May 2018.
Experience and expertise
Ms Doyle is the Managing Director and majority owner of
corporate advisory firm, InterFinancial Corporate Finance Limited.
She has successfully navigated technology companies through
the challenges of steep global growth curves, with a strong
understanding of the dynamics in Software as a Service (SaaS).
Ms Doyle’s leadership of InterFinancial has seen her develop a
core practice providing strategic advice for technology and other
IP-rich, high-growth companies. She also has extensive international
experience managing merger, acquisition and private equity
processes across the technology industry.
Ms Doyle was previously Vice President at Mincom, one of
Australia’s most successful enterprise software companies.
Ms Doyle is a Non-executive Director at UnityWater and Starts at 60.
She holds a Bachelor of Laws (Hons) and Bachelor of Information
Technology (Dist.) from the Queensland University of Technology,
as well as a Graduate Diploma of Business Administration from the
University of Queensland. She is a member of Australian Venture
Capital and Private Equity Association and a qualified member of the
Australian Institute of Company Directors.
Interests in shares and options
At 30 September 2018, Ms Doyle held nil ordinary shares in
Technology One Limited.
70
71
Transforming business, making life simpleTechnologyOne Limited 2018 Full Year Report Meetings of Directors
The numbers of meetings of the Company’s Board of Directors and
of each Board Committee held during the year ended 30 September
2018, and the numbers of meetings attended by each Director were:
Full meetings
of Directors
(Board)
Meetings of committees
Audit
Nomination
Remuneration
A Di Marco
R McLean
J Mactaggart
K Blinco
R Anstey
J Andrews
S Doyle
9
9
9
9
9
8(9)
3(4)
-
3
-
4
4
4
1
-
-
4
4
4
4
-
-
-
4
4
4
4
-
Final dividend for the year ended 30 September 2017 of
5.60 cents (2016 – 5.09 cents) per fully paid share paid on
December 2017- December 2016)
Special dividend for the year ended 30 September 2017 of
2.0 cents (2016 - 2.00 cents) per fully paid share paid on
December 2017
Interim dividend for the year ended 30 September 2018 of
2.86 cents (2017 - 2.60 cents) per fully paid share paid on
June 2018 (2016 - June 2017)
9,029
8,158
33,002
30,370
Review of operations
Please refer to Letter to Shareholders on page 11.
Corporate structure
The Technology One group of companies consists of the following:
Where a Director did not attend all meetings of the Board or
relevant committee, the number of meetings for which the Director
• Technology One Limited
was eligible to attend is shown in brackets. In sections where there
• Technology One New Zealand Limited
is a dash, the Director was not a member of that committee.
• Technology One Corporate Sdn Bhd
Principal activities
The principal activity of Technology One Limited (the Company)
• Technology One UK Limited
• Avand Pty Ltd
during the financial year was the development, marketing, sales,
• Avand Pty Ltd (New Zealand) Pty Ltd
implementation and support of fully integrated enterprise business
software solutions, including:
• TechnologyOne Enterprise Asset Management
• TechnologyOne Financials
• TechnologyOne Human Resource & Payroll
• TechnologyOne Enterprise Budgeting
• TechnologyOne Supply Chain
• TechnologyOne Property & Rating
• TechnologyOne Student Management
• TechnologyOne Business Intelligence
• TechnologyOne Enterprise Content Management
• Desktop Mapping Systems Pty Ltd
• Digital Mapping Solutions NZ Limited
• Boldridge Pty Ltd
•
Icon Solution Unit Trust
• Jeff Roorda & Associates Pty Ltd
Significant changes in the state of affairs
There were no significant changes in the Company’s state of affairs
during the financial year.
Matters subsequent to the end of the
financial year
On 20 November, the Directors of Technology One Limited declared
• TechnologyOne Performance Planning
a final dividend on ordinary shares in respect of the 2018 financial
• TechnologyOne Spatial
• TechnologyOne Enterprise Cash Receipting
• TechnologyOne Stakeholder Management
• TechnologyOne Business Process Management
Dividends - Technology One Limited
Dividends paid to members during the financial year were as
follows:
year. The total amount of the dividend is $19,508,207 and is 75%
franked. There was also a special dividend declared for the 2017
financial year of $6,333,834 which is also 75% franked.
No other matter or circumstance has occurred subsequent to period
end that has significantly affected, or may significantly affect, the
operations of the Company, the results of those operations or the
state of affairs of the Company or economic entity in subsequent
financial years.
Likely developments
Refer to the Letter to Shareholders.
2018
$’000
2017
$’000
17,664
15,947
Indemnification and insurance of officers
Insurance and indemnity arrangements established in the previous
year concerning officers of the Company were renewed or
continued during the year ended 30 September 2018.
• The existing independence and service metrics in place with EY
and Mr Tozer, are sufficient to ensure that auditor independence
would not be diminished in any way by such an extension
• Mr Tozer will continue to abide by the independence guidance
6,309
6,265
TechnologyOne and each of the Directors of the Company named
An indemnity agreement has been entered into between
earlier in this report and with each full-time Executive officer and
secretary of the Company. Under the agreement, the Company has
indemnified those officers against any claim or for any expenses
or costs which may arise as a result of work performed in their
respective capacities. There is a limit of $25,000,000 for any one
claim.
TechnologyOne paid an insurance premium in respect of a contract
insuring each of the Directors of the Company named earlier in
this report and each full-time Executive officer and secretary of
provided in APES 110 ‘Code of Ethics for Professional
Accountants’ as issued by the Accounting Professional
and Ethical Standards Board and EY’s own independence
requirements
• The threats of self-interest and familiarity have been mitigated as
EY appointed a new Engagement Quality Review Partner
• The Board of Directors are of the view that Mr Tozer’s continued
involvement with the Group as the Lead Audit Partner will not in
any way diminish the audit quality provided to the Group
Rounding of amounts
The Company is of a kind referred to in Instrument 2016/191, issued
the Company, against all liabilities and expenses arising as a result
by the Australian Securities and Investments Commission, relating
of work performed in their respective capacities, to the extent
permitted by law.
Non-audit services
Non-audit services provided by the Company’s auditor, Ernst
& Young, in the current financial period and prior financial year
included taxation advice. The Directors are satisfied that the
provision of non-audit services is compatible with the general
to the ‘rounding off’ of amounts in the Directors’ report and financial
report. Amounts in the Directors’ report and financial report have
been rounded off in accordance with that Class Order to the nearest
thousand dollars, or in certain cases, to the nearest dollar.
Environmental regulation
The Company has determined that no particular or significant
environmental regulations apply to it.
standard of independence for auditors imposed by the Corporations
Act.
Share options
Unissued shares
During the year the following fees were paid or payable for non-
audit services provided by the auditor of the Company and its
related practices:
2018
$
2017
$
As at the date of this report, there were 5,480,083 unissued
ordinary shares under options (4,199,817 at the reporting date). Refer
to note 32 for further details of the options outstanding.
Option holders do not have any right, by virtue of the option, to
participate in any share issue of the company.
Ernst and Young:
Taxation advice
107,515
134,550
Shares issued on the exercise of options
Due diligence services Ernst and Young
-
-
During the year, employees and Executives have exercised options
Total remuneration
107,515
134,550
Auditor’s independence declaration
A copy of the auditor’s independence declaration as required under
section 307C of the Corporations Act 2001 is set out on page 131.
to acquire 1,143,616 fully paid ordinary shares in Technology One
Limited at a weighted average exercise price of $0.84. Refer to note
32 for further details of the options exercised during the year.
This report is made in accordance with a resolution of Directors.
On 15 August 2016 the Board approved the extension of the Lead
Audit Partner rotation period from five years to seven years in
accordance with section 324DAB of the Corporations Act 2001 and
the Corporations Legislation Amendment (Audit Enhancement) Act
Adrian Di Marco
Brisbane
20 November 2018
2012.
The reasons why the Board approved the extension included:
• Mr Tozer, the Lead Audit Partner, has a detailed understanding
of the Group’s business and strategies, its systems and controls.
This knowledge is considered to be invaluable to the Board at
this point in time.
72
73
Transforming business, making life simpleTechnologyOne Limited 2018 Full Year Report Introduction from the Chair of the Remuneration
Committee
Dear Shareholders,
This report shares with you the remuneration outcomes for the year,
• The transition to a SaaS company coincides with the application
which the Committee and Board believes is commensurate with
of the new accounting standard (AASB 15 Revenue from
• Our LTI plan resulted in 76% of ‘at risk’ Share Purchase Options
shareholder wealth.
Contracts with Customers), as a result the company will need
to move forward carefully to ensure we maintain the Executive
KMP on Target Earnings. This should neither advantage or
disadvantage the Executives. The Committee will review our
current policies, including performance measures, to ensure they
remain reflective of our strategic initiatives and continue to drive
TechnologyOne remains focused on delivering its growth
promises and we believe that our current remuneration structure,
accompanied by the anticipated changes for FY19, positions us well
to continue providing our shareholders with strong returns, both in
the short and long-term, as well as ensuring alignment across our
Executive KMP. We are committed to ongoing dialogue with our
shareholders and we will always listen actively to their thoughts and
share any feedback where appropriate.
We thank you for your loyalty and look forward to your continued
support.
Kevin Blinco
Chairman, Remuneration Committee
Brisbane
20 November 2018
On behalf of TechnologyOne’s Remuneration Committee (the
Committee), I am pleased to present to you our Remuneration
business performance. In summary:
Report for the year ended 30 September 2018. The intention of
• Total Executive KMP remuneration grew by 8%. This is below the
this report is to provide you with information around the linkage
company’s 15% growth in profit
between our strategic initiatives, remuneration principles and
remuneration framework to give transparency over how they
drive shareholder returns. This year, we have invested significant
time and effort to restructure our Remuneration Report to ensure
that the information is presented in a manner which we believe is
more concise and meaningful to our shareholders and interested
stakeholders. As part of this process, we have carefully considered
the feedback from our shareholders to our remuneration philosophy
and structures. The Company continues to look for ways to improve
its remuneration programs, based on shareholder feedback.
The primary objective of the Committee is to ensure that we
align Key Management Personnel (KMP) financial rewards with
shareholder interests and our business strategy, whilst ensuring
that we attract and retain exceptional Executives, Directors and
employees who are collectively responsible for delivering long-term
profitable growth and substantial shareholder returns.
Following some key changes to our corporate structure, we have
re-considered our classification of Executive KMP for the purposes
of disclosure in our Remuneration Report. Further information
regarding this change has been outlined in section 1.2 of this report.
Notwithstanding this, there have been no significant changes to our
remuneration policies for KMP in FY18, continuing to place emphasis
on:
• STI outcomes across our Executive KMP were in line with target.
This is consistent with our growth in NPBT of 15%.
vesting for our Executive KMP. The relatively low vesting
percentage is the result of our challenging LTI targets which
we believe assist in incentivising our KMP to drive superior
performance and long-term shareholder wealth creation.
A recent review of our remuneration framework will likely result in
the following proposed changes in FY19:
• LTI plan - We intend to implement a performance measure with
respect to relative Total Shareholder Return (TSR) and EPS
growth. This will ensure that our Executive KMP remuneration is
determined based on the Company’s performance relative to our
peers. Existing contracts will continue to be honoured under the
proposed plan.
• Remuneration review - Next year we will undertake a review
of our Executive KMP’s remuneration to ensure alignment with
our peers. As part of this process, it is proposed that Executive
KMP will be subject to a deferred STI component. The deferred
component will be calculated as 25% of the STI earned in the
year under review and will only be awarded at the conclusion
of a two-year period, on the condition, that the Executive KMP
remains employed with the Company for the entire deferral
• A large at risk short-term incentive (STI) portion relative to our
period. Introducing a deferred component to the STI is intended
peers. The STI for each of our Executive KMP is based on a fixed
to ensure the Company retains high performing Executives under
percentage determined at the start of a contract for Net Profit
an incentive scheme which drives long-term shareholder wealth.
Before Tax (NPBT), for the Company or relevant business unit.
This aligns Executive KMP with our growth strategy and ensures
that they share in the upside, as well any potential downside if
results fall below expectations. A focus on driving growth in NPBT
encourages the winning of new business, which in turn translates
to overall long-term growth and shareholder wealth. Further
details of the STI plan are set out in section 4.2 of this report.
• Directors fee pool - Subject to shareholder approval, the fee pool
for Non-executive Directors will be increased from $1,000,000
to $1,500,000 per annum (including applicable statutory
superannuation guarantee contributions and committee fees).
The current Non-executive Director fee pool has remained
unchanged for the past three years and the proposed increase
recognises the fact that two additional Independent Directors
• A long-term incentive (LTI) plan, in the form of Share Purchase
have been appointed to the Board in the past two years, with a
Options, which is typically set at 33% of total remuneration at
further two expected to be added in the short to medium term.
the start of a contract. This provides our Executive KMP with
A further two Non-executive Directors will result in the current
challenging mid and stretch targets over a three-year period. This
$1,000,000 cap being exceeded and is the primary reason for
is intended to secure long-term shareholder value. Further details
the proposed increase in fee pool to $1,500,000. It is important
of the LTI plan are set out in section 4.3 of this report.
to note that the increase is purely to acknowledge the intended
increase in Board size and will not result in a significant increase
in Non-executive Director fees, which are only set to increase by
CPI in FY19.
74
75
Transforming business, making life simpleTechnologyOne Limited 2018 Full Year Report Remuneration Report (Audited)
The remuneration report contains the following sections.
As a result of the separation of Executive Chairman and CEO a
2. Key questions
Key questions
TechnologyOne approach
Why does our remuneration framework have such
a high weighting towards variable remuneration?
Our Executive remuneration framework complies with common practice for ASX200 companies but has been adapted to meet the
demands of the enterprise software market. Relative to our ASX-listed peers, our Executives receive:
1.
About this report
2. Key questions
3. Executive remuneration at TechnologyOne
4. How remuneration is structured
number of other operational changes were made to the roles and
responsibilities of the senior leadership team.
FY18 is the first full financial year of these changes and we
consider our Executive Chairman, CEO, COO and CFO as meeting
the definition of Executive KMP. This is because we consider
5. Relationship between remuneration and company performance
these people to be ultimately responsible for the key strategic
and operating decisions of the business on a day to day basis.
Accordingly, our Executive KMP now comprises these four
individuals.
The table below shows all the personnel covered by the
Remuneration Report.
Non-executive Directors
Ron McLean
Deputy Board Chair
Independent Director
Full year
Why do we not disclose our LTI targets?
6. Remuneration governance
7. Non-executive director fees
8. Statutory remuneration
9. Service Agreements for the Executive KMP
10. Additional statutory disclosures
1. About this report
1.1 Basis for preparation of FY18
remuneration report
The information in this report has been prepared based on
the requirements of the Corporations Act 2001 and applicable
accounting standards.
The Remuneration Report is designed to provide shareholders
with a clear and detailed understanding of TechnologyOne’s
remuneration framework, and the link between our remuneration
policies and Company performance.
The Remuneration Report details the remuneration framework
for TechnologyOne’s Key Management Personnel (KMP). For the
purpose of this report, KMP are defined as those persons having
authority and responsibility for planning, directing and controlling
the major activities of TechnologyOne, directly or indirectly,
including any Director (whether Executive or otherwise).
This report has been audited.
1.2 People covered by the remuneration
Report
The Remuneration Report discloses the remuneration arrangements
to meet the definition of KMP under AASB 124 Related Party
Disclosures. The below table summarises each KMP, their position
and term as KMP.
Following some key changes to our corporate structure, we have
re-considered our classification of Executive KMP for the purposes
of disclosure in our Remuneration Report. The changes to our
corporate structure are summarised as follows:
• Adrian Di Marco remains in his capacity as Executive Chairman
having stood down from his role as joint Chief Executive Officer
(CEO) and Executive Chairman on 23 May 2017
• Edward Chung, previously Chief Operating Officer (COO), was
appointed to the new position of CEO on 23 May 2017
John Mactaggart
Kevin Blinco
Richard Anstey
Dr Jane Andrews
Sharon Doyle
Executive Director
Adrian Di Marco
Executive KMP
Audit and Risk Committee (to 22 May 2018)
Non-independent Director
Nomination & Governance Committee;
Remuneration Committee
Full year
Independent Director
Audit and Risk Committee Chair; Remuneration
Committee Chair; Nomination Committee
Full year
Independent Director
Nomination & Governance Committee Chair;
Audit and Risk Committee; Remuneration
Committee
Full year
Independent Director
Audit and Risk Committee; Remuneration
Committee; Nomination & Governance
Committee
Full year
Independent Director
Audit and Risk Committee (from 22 May 2018)
From 28
February 2018
Board Chair
Chief Innovation Officer
Full year
Full year
Full year
Stuart MacDonald
Chief Operating Officer
Paul Jobbins
Former KMP
Tony Ristevski
Operating Officer - Corporate Services and
Chief Financial Officer
Appointed 30
October 2018
Operating Officer - Corporate Services and
Chief Financial Officer
To 4 May 2018
and outcomes for those individuals who we have determined
Edward Chung
Chief Executive Officer
•
•
•
Relatively low fixed remuneration to enable a greater emphasis on performance
Relatively large at risk short-term incentive (STI) portion aligning Executives to current year performance
Long-term incentives (LTI) linked to long-term strategy, targets, and shareholder wealth creation
The winning of new business, driving licence fee and continued profit growth in the current year is the key to our long-term success, and
it is for this reason our STI as a percentage of the total remuneration is significantly higher than our ASX-listed peers (33% vs 15% for our
ASX-listed peers). At the same time, the fixed remuneration for our Executives is comparatively low compared to our ASX-listed peers (33%
vs 65% for our ASX-listed peers). The significant weighting towards the STI encourages our Executives to drive new business and financial
performance in the current year, which creates Annual Recurring Revenue (ARR) for future years, and therefore long-term success and
shareholder wealth.
TechnologyOne Executives are already exposed to the long-term outcomes of the business through a larger long-term incentive (LTI)
component than our ASX-listed peers (33% vs 20% for our peers). It is important to note that our LTI being 33% of our Executives
remuneration is similar to the sum of STI and LTI of our ASX-listed peers (15% and 20%).
The talent pool in Australia for Executives with large scale enterprise software companies is highly competitive. Therefore, it is important to
ensure that our remuneration framework is appropriately structured for the enterprise software market. We believe that our remuneration
structure offers the necessary flexibility and incentive to ensure that we attract and retain talented Executives who understand the industry
and, in turn, drive shareholder value.
For 2018, the Committee, following market consultation, is of the opinion that the financial targets for the LTI measures are commercially
sensitive and would therefore be detrimental to the Company to disclose these details at the beginning and during the performance
period. Performance targets and assessment against those targets for the relevant Executive KMP will however be disclosed at the end
of the relevant performance period, subject to determination by the Committee that commercial sensitivity no longer remains. It has been
determined appropriate in the current year to disclose this information for those Executive KMP who have completed a performance period
in FY18. This information has been presented in section 5.2 of this report.
As in 2017, the 2018 LTI KPIs are reviewed annually and set by the Board. It is important to note, there is an overall three-year testing
window before the options can vest, the KPIs are primarily yearly based measures to ensure a consistent year-on-year growth.
Why are profit based measures a focus in both our
STI and LTI plans?
Typically, there is a blended approach of LTI performance targets, incentivising our Executives to work for the strategic initiatives of the
Company, as well as driving the performance of their individual business unit (where appropriate). The Board equally has a strong focus on
sustainable profit growth. Thus, each Executive will have as a minimum 50% of their LTI value aligned to profit growth as a measure.
Is our STI plan sufficiently challenging with only
one performance measure?
The Board acknowledges that this target is also the primary target for STI, however the rationale is that the growth of licence fee translates
into long-term ARR growth.
In FY19 two new LTI measures will be introduced to replace NPBT growth, they are EPS growth and relative TSR growth.
The LTI targets other than NPAT growth, as referred to in section 4.3, are aligned to ensuring that the licence income is supported by focus
on customer satisfaction and customer retention to encourage further licence sales.
The winning of new business, driving licence fee and continued profit growth is the key to our long-term success. Having Executives focus
solely on NPBT ensures there is clear line of sight for Executives and transparency for shareholders as to how STI awards are determined.
The simplification of our software also reduces the cost of implementations which in turn increases our consulting margins, thereby
increasing our NPBT and enhancing our competitive advantage.
Therefore, we consider the use of NPBT as the sole measure within our STI to be appropriate.
3. Executive Remuneration
Framework
3.1 Our remuneration strategy and principles
At TechnologyOne, our remuneration strategy is aligned with our
vision of “transforming business, making life simple”. The Board
believes that in order to deliver on our vision and build long-term
shareholder growth, TechnologyOne must have a remuneration
framework that allows it to compete for talent both locally and
globally in a highly competitive and fast-moving environment
and against companies such as Oracle and SAP, as well as other
• Provide remuneration which is appropriate and competitive both
internally and against comparable companies (our peers)
• Align Executives’ financial rewards with shareholder interests and
our business strategy
• Achieve outstanding shareholder wealth creation
• Articulate clearly to Executives the direct link between individual
and group performance, and individual financial reward
• Reward superior performance, while managing risks
• Provide flexibility to meet changing needs and emerging
competitive market practices
Australian software companies.
• Commitment to diversity, reflecting a fair and equitable
The remuneration principles that underpin our remuneration
strategy and framework are:
• Attract, retain and motivate skilled Directors and Executives in
leadership positions
remuneration framework
3.2 Overview of remuneration framework
The remuneration arrangements of our Executives are made up of
both fixed and at-risk remuneration (STI and LTI), as follows:
76
77
Transforming business, making life simpleTechnologyOne Limited 2018 Full Year Report Fixed remuneration
Short term incentive (STI)
Long term incentive (LTI)
Table 4. Executive KMP remuneration mix - FY18 actual
Nature
Base salary plus superannuation.
Paid in cash monthly with 20% retention
until accounts are audited and finalised.
Retention amount paid in cash 3 months
after year end.
Options subject to meeting performance targets tested
over three years.
Purpose
To provide a competitive salary based
on market benchmarking from the
Remuneration Committee.
Drives outstanding performance in the
short-term which in turn translates to long-
term shareholder wealth.
Creates a strong focus on long-term performance, with
a strong alignment to long-term shareholder wealth
creation.
Performance targets
N/A
Remuneration mix at start of contract
date and over time
Typically, 33% of total remuneration at start
of contract, decreasing over time due to
relative increase in STI.
It is noted that the fixed remuneration base
is relatively low in comparison to our peers
due to proportionately larger STI and LTI
components. This aligns with our focus to
drive shareholder wealth.
This typically increases by CPI each
year consistent with increases provided
across the company, but decreases as a
percentage of total remuneration based on
larger relative increases in STI component.
Percentage of agreed Net Profit Before
Tax (NPBT) for the Group; or percentage of
NPBT for the relevant business segment for
the Executive.
Blended approach of performance targets, including:
- Net Profit After Tax (NPAT) growth
- Licence fee growth
- Sales operating expense growth
- R&D expense growth.
Typically, 33% of total remuneration at start
of contract.
Typically, 33% of total remuneration at start of contract,
decreasing over time due to relative increase in STI.
This typically increases over time in line
with increases in Company (or business
segment) profitability.
LTI typically decreases as a percentage of total
remuneration based on larger relative increases in STI
component.
This typically increases by CPI each year.
Three years.
Performance period
N/A
Annual.
Three years.
Target remuneration mix at the beginning of the contract for the CEO
Table 2. Target CEO remuneration mix - FY18 actual
(Table 1), and other Executive KMP (Table 3) is represented below.
Over time, the remuneration mix is expected to change due to a
larger increase in STI relative to other remuneration components.
The below represents the contracted remuneration mix for the CEO
(Table 2) and demonstrates how remuneration mix has changed over
time.
Table 1. Target CEO remuneration mix (start of contract target)
30%
LTI
36%
STI
34%
Fixed
33%
LTI
33%
STI
34%
Fixed
The below details how other Executive KMP in FY18 (excluding
Executive Chairman) and demonstrates how remuneration mix
changes over time (Table 4).0
Table 3. Target Executive KMP remuneration mix (start of contract
target)
34%
Fixed
33%
LTI
33%
STI
38%
Fixed
24%
LTI
38%
STI
4. How Executive remuneration is
structured
4.1 Fixed remuneration
Key attributes of the fixed remuneration component include:
• The Board determines an appropriate level of fixed remuneration
for Executives with recommendations based on market
benchmarking from the Remuneration Committee at the start
of their contract. In performing the benchmarking exercise, the
Remuneration Committee considers Executive fixed remuneration
of relevant peers (e.g. Oracle, SAP and other Australian software
companies) in conjunction with TechnologyOne’s remuneration
We have reported separately the remuneration mix for our Executive
policy.
Chairman (Table 5). The Chairman was offered an LTI of $400,000
• Fixed remuneration is made up of base remuneration and
which he declined as he has in previous years. The Remuneration
superannuation. Fixed remuneration includes cash salary and any
Committee recognises that Mr Di Marco’s total remuneration
salary sacrifice items.
is substantially below that of comparable companies. The
• The Executives fixed remuneration is reviewed annually, following
Remuneration Committee acknowledges that Mr Di Marco existing
the end of the performance period (30 September). For the 2018
10+% shareholding in TechnologyOne provides the benefits that the
financial year, the average fixed remuneration increases for the
LTI aims to achieve.
Executive Chairman and Executives was 1%.
Table 5. Target Executive Chairman remuneration mix
34%
Fixed
33%
LTI
33%
STI
Table 6. Executive Chairman remuneration mix - FY18 actual
4.2 Short-term incentive
TechnologyOne is a growth company, with strong compound growth
over many years (approximately 11% per annum profit growth over
the last 10 years). Our strong long-term performance is directly
linked to the success of our STI framework.
Approximately 60% of our revenues each year are recurring
revenue, which directly flow from contract wins in prior years.
Continuing to win new business, driving licence fee and profit
growth in the current year is the key to our long-term success, and it
is for this reason our STI as a percentage of the total remuneration
is significantly higher than our ASX-listed peers (33% vs 15%).
While at the same time the fixed remuneration for our Executives
is comparatively low compared to our ASX-listed peers (33% vs
65%). The significant weighting towards the STI, with the low fixed
remuneration, encourages our Executives to drive new business and
financial performance in the current year, which creates recurring
revenue for future years, and therefore long-term success and
63%
STI
37%
Fixed
shareholder wealth.
Our STI differs from that of many other ASX200 companies
because strong short-term performance creates a strong recurring
revenue base in the long-term, driving outstanding performance
and shareholder wealth. In simple terms, the STI is structured
to drive short-term performance, which in turn creates a strong
long-term recurring revenue base. In the long-term, this creates
continuing financial success and substantial shareholder wealth for
TechnologyOne.
78
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Transforming business, making life simpleTechnologyOne Limited 2018 Full Year Report
Feature
Opportunity
Description
The value of the STI is based on a percentage of Net Profit Before Tax (NPBT) for the Group or percentage of NPBT for the relevant business segment
for the Executive. The percentage of target NPBT is determined at the outset of the contract and remains fixed for the contract period for each
Executive KMP. As the STI awarded is a percentage of NPBT, it is uncapped to encourage over-achievement and drive performance in the current
year and the creation of long-term shareholder wealth. Given the expected growth in NPBT over time, the STI component of total remuneration
typically grows in greater proportion to the fixed and LTI components which typically only increase by CPI on an annual basis. An illustrative example
of how this works over time in practice has been presented below this table.
The STI is uncapped to encourage over-achievement, driving performance in current year and long-term shareholder wealth. There is no floor on the
STI, aligning Executives with shareholder expectations.
Award vehicle
Cash
Performance measures
The STI target is based on NPBT for the Group or NPBT for the relevant business segment for the Executive. This effectively aligns the target
incentive with shareholder return.
TechnologyOne’s use of STIs differs from most other organisations in that it utilises only one performance measure (percentage of NPBT) in
determining STI awards. This is to create focus and clarity for Executives whilst also providing transparency for shareholders as to how STI awards
are determined. The Board and Remuneration Committee continue to monitor STI performance measures so as to ensure that they best align with
the Company’s commitment to providing shareholder wealth.
Timing
Because the fixed remuneration of an Executive is very low compared to our ASX-listed peers (33% vs 65%), to assist the Executives in meeting their
short-term financial obligations, the STI is calculated and paid monthly with up to 20% retention.
Up to 20% retention of their STI is paid three months after TechnologyOne’s year end to ensure that the STI paid are based on audited and finalised
accounts. In the unlikely event that business outcomes differ materially to what was expected, the Company can claw back any STI.
STI deferral
TechnologyOne does not defer the STI longer than three months after year-end because:
STI cap
Executives have low fixed remuneration relative to their ASX-listed peers and so payment of STI in a fair and reasonable time frame is important.
TechnologyOne packages are structured so that our Executives fixed remuneration and 70% of their STI target is the equivalent of our competitors
fixed remuneration.
TechnologyOne carries minimal risk associated with revenue.
TechnologyOne Executives are already exposed to the long-term outcomes of the business through a larger long-term incentive (LTI) component
than our ASX-listed peers (33% vs 20% for our peers). It is important to note that our LTI being 33% of our Executives remuneration is similar to the
STI and LTI of our ASX-listed peers (15% and 20%).
As disclosed in our Chair’s letter, we intend to introduce a two year STI deferral of 25% in the FY19 year, 25% of the STI earned, will only be
awarded at the conclusion of the two year period, on the condition that the Executive KMP remains employed with the Company for the entire
deferral period.
An important element of the success of our STI has been that it is uncapped so the greater the results in the current financial year, the greater the
STI. This not only encourages over performance in the current financial year, it has a dramatic flow on effect in future years through the greater
recurring revenues for the Company. The uncapped STI also helps retain Executives over the long-term because the more they succeed, the more
financial incentive there is to stay with us as they become dependent on the STI and continue to work hard to achieve it each year, and the greater
benefit to our shareholders through an ever-increasing recurring revenue base.
Likewise, if an Executive under performs in a year, there is a significant financial impact to them as their STI forms a significant portion of their total
remuneration. Just as the STI is uncapped on the upside, it is uncapped on the downside. Because the Executive’s fixed remuneration is significantly
lower than our ASX-listed peers, if there is under performance this has a significant negative impact on their total remuneration.
The STI framework aligns performance with remuneration outcomes encouraging over performance and penalising under performance.
Bonus guarantees
There are no bonus guarantees in place.
Clawback
Termination
The ability to clawback STIs exist in the unlikely event that business outcomes differ materially from expected.
On termination, the Executive foregoes any further STI payments which would have otherwise been available for the remainder of the financial year
under their STI plan.
TechnologyOne Executives have an STI set at the start of their
• The LTI is typically 33% of the package
contract which is typically approximately 33% of their total targeted
• The STI target typically commences at 75% to 100% of fixed
remuneration compared to only 15% for our ASX-listed peers.
Over future years with strong continuing performance by the
Executive, the STI increases to approximately 50% of their targeted
remuneration compared to 15% for our ASX-listed peers.
remuneration value established during contract negotiations.
Our expectation is at the start of an Executive’s contract, the
STI will be similar to their fixed remuneration. In this example,
$300,000 is used as the initial STI target. If we assume that
The best way to consider the mechanics of the TechnologyOne
NPBT of the Group is to be used and the forecast NPBT is
salary packaging arrangements is by way of the following example.
$40m (a 15% increase on the prior year) then contract STI will be
Consider a candidate who can command a remuneration package
$300,000/$40m, or 0.75% of profit.
of $900,000 in the open market. The TechnologyOne method is as
follows:
To explain the growth in STI over time compared to the fixed
remuneration, consider the following using the above example over
• Fixed remuneration package of approximately $300,000 or 33%
a three year period with:
of the package with minimal future adjustments, akin to CPI, in
• Profit increasing by 12% p.a.
future years
80
• CPI as 1%
• STI target of 15% NPBT
Year
Fixed
Profit target ($m)
Actual profit ($m)
STI %
STI target (STI % x
profit target) ($)
Actual STI
(STI % x actual
profit) ($)
LTI (assuming
$300,000 each
year)1 ($)
1
2
3
300,000
40.00
38.96
303,000
44.80
43.63
306,030
50.18
48.87
0.75%
0.75%
0.75%
35%
300,000
292,200
336,000
376,350
327,225
366,525
42%
70,000
140,000
210,000
24%
Total ($)
662,200
770,225
882,555
100%
1 LTI is explained further in section 4.3. This number is provided for illustrative purposes only. The LTI of $70,000 is based on the KPI or NPAT growth > 10% with 50% of LTI earned and 100% earned if growth > 15%. Growth
between 10% and 15% will be calculated on a linear basis. As the example has NPAT growth of 12%, this equates to 70% of the LTI being earned (i.e.70% of $100,000).
4.3 Long-term incentives (LTI)
TechnologyOne Executives are eligible to participate in an LTI plan. The LTI plan is designed to provide participants with the incentive to
deliver substantial consistent growth in shareholder value:
Feature
Opportunity
Award vehicle
Performance period
Description
The value of the total number of LTIs issued each year (called a grant) to an Executive is typically set at 75% to 100% of fixed remuneration and is
determined during contract negotiation when an Executive is hired but will ultimately depend on negotiations and the overall package components
negotiated. The LTI component of remuneration increases by approximately CPI each year, in line with the increase in fixed remuneration.
Each LTI entitles the Executive to receive the right to purchase one TechnologyOne share in the future at the agreed strike price, subject to meeting
specified performance targets.
Performance is measured over a three-year performance period with individual and Company targets assessed annually or at the conclusion of the
three-year performance period. The performance period commences at grant date and extends for three years to give a vesting date. This may be
less where an Executive commences part way through a financial year.
The number of options in the grant are split into tranches based on the weighting of each performance measure. For performance measures with
a three-year target, the relevant tranche vests at the end of the three-year period in accordance with the vesting schedule provided below. For
performance measures met with an annual target, 1/3 of the relevant tranche is assessed in accordance with below vesting schedule, however will
not vest until the end of the overall three-year performance period.
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Transforming business, making life simpleTechnologyOne Limited 2018 Full Year Report Feature
Description
Performance measures
The performance measures for LTI grants made in FY18 are presented below. Note that specific performance targets are not disclosed as they are
commercially sensitive and provide our competitors with insights into the key areas of focus for our business. However, the performance targets
set are such that they are all considered to be ‘hard targets’ that, if met, will drive significant shareholder wealth creation.
Feature
Board discretion
LTI feature
Executive KMP and LTI weighting5
Change of control
Description
The Board also retains sole discretion to determine the amount and form of any award that may vest (if any) to prevent any unintended outcomes,
or in the event of a corporate restructuring or capital event. Board discretion has not been applied to any Executive KMP threshold performance
targets.
The Board has discretion to determine the extent to which LTIs vest based on the period elapsed and performance at the time of any change of
control event.
Performance targets1,2
NPAT growth
Licence fee growth – APAC
Sales operating expense growth - APAC
Customer Retention by ASM Value - APAC
Customer Retention by ASM Value
Operating Cash Flow / NPAT
Company profit before tax margin growth
FY19 (new performance targets)
EPS growth
TSR growth
1 Performance targets exclude acquisitions.
Edward
Chung
Stuart
MacDonald
50%
30%
10%
10%
50%
17%
16%
17%
Performance
period
3 years
3 years
3 years
3 years
3 years
3 years
3 years
3 years
3 years
Testing
Annual3
Annual3
3 years4
Annual3
Annual3
Annual3
3 years4
Annual3
3 years4
2 These performance targets do not have a minimum target. The performance target has to be achieved for the Executive to meet their LTI target.
3 The Company has chosen annual testing in circumstances, where long-term consistent year-on-year growth will drive greater shareholder returns. The
Cessation of employment
Awards lapse unless the Board determines otherwise, in which case it considers performance of the individual over the relevant period up to the
date of cessation of employment.
Expiry
Re-testing
Clawback
Option re-pricing
Margin loans
Bonus guarantees
One-off grants
At the end of the applicable performance period, any LTIs that have vested will expire 5 years after vesting.
We do not revise or re-test our LTIs over the relevant performance period.
Yes available
No options have been re-priced.
Directors and Executives are not permitted to use TechnologyOne securities as security for margin loans.
There are no bonus guarantees in place.
No one-off grants were made to Executive KMP which were not in line with their remuneration agreement.
Scenario – comparison of annual testing versus three testing for the NPAT growth target:
To further explain the rationale for a number of our LTI measures being tested annually (as opposed to over three years), we have provided
the below illustrative example which compares the following scenarios:
performance targets are assessed on an annual basis with no LTIs vesting until the end of the three-year performance period. This ensures that the annually tested
• LTI measure for NPAT growth – average annualised NPAT growth stretch target of 15% over three years and average annualised NPAT
KPIs generate value for shareholders over time.
4 The Company has chosen a three-year testing period where the average over a three-year performance period is used.
5 Represented in this table are those current Executive KMP who are subject to LTI targets.
Under the current LTI plan, it is acknowledged that the profit growth target, which makes up 50% of each Executive’s LTI measure, is also the
primary target for STI. The rationale for including the measure for both STI and LTI assessment is that the growth of licence fee in the short-term
translates into long-term ARR growth. We further note that even though this LTI performance measure is tested annually over a three-year period, if
targets are achieved the options will only vest and become available for exercise at the conclusion of that three-year performance period (subject
to any Board discretion which may be applied, as noted below).
As disclosed in the Chair’s letter, we intend to introduce EPS growth and relative TSR performance measures in the FY19 LTI plan. Existing
contracts will continue to be honoured under the proposed plan. It is proposed that the introduction of these two new performance
measures will replace the NPAT growth performance measure, which currently comprises 50% of the LTI allocation for both existing
Executive KMP subject to LTI targets. It is intended that the relative TSR and EPS growth targets will each have an allocation of 25% of the
total LTI weighting. This is planned to improve on the existing NPAT growth performance target through ensuring that a significant portion of our
Executive KMP LTI is determined based on the Company’s performance relative to our peers. Our peer group has not yet been finalised but will
nonetheless be determined based on companies which we believe to be directly comparable to TechnologyOne (i.e. comparable SaaS companies).
Our peer group will be included as part of our LTI disclosures from FY19 onwards.
Vesting schedule
For each performance target there will be a mid and stretch hurdle (for the performance period) based on the Executive’s area of responsibility:
Mid hurdles have been calculated so that if they are achieved, this will create substantial shareholder wealth
Performance achieved
Meets the stretch hurdle
Between stretch and mid hurdle
Meets mid hurdle1
Less than the mid hurdle
Level of vesting
100% vesting
vest linearly
50%
0%
growth mid hurdle of 10% over three years
• Total agreed LTI value of $300,000. Under the LTI plan rules, the 10 working day Volume Weighted Average Price (VWAP) is $5 per option.
Under the Black Scholes model, the value of each option is $1.00. Individual performance factor of 100%.
• Based on the above, the Executive will be allocated 300,000 options for potential vesting at the end of year 3
Note, in the example below, the profit growth achieved, is the same under each scenario.
Example
Year
1
2
3
Annual testing
Three year testing
Profit
growth
12%
9%
20%
Options
available
Options
earned
Commentary
100,000
70,000
(50,000) + (2/5 X 50,000)
100,000
- Below the mid target
100,000
100,000
Exceeds the stretch target
300,000
170,000
Commentary
Options
available
-
-
-
Options
earned
-
-
-
300,000
267,796
Achieved 89% of 3 year
stretch target
The above illustrates how evaluating our Executive KMP each year of a three year performance period (as opposed to assessing only at
the conclusion of the period) helps ensure they are incentivised to drive consistent year-on-year performance and growth, therefore driving
stronger shareholder returns over the long-term. It demonstrates how under performance in one year is reflected in an Executive’s overall
LTI award with annual testing. As is evident from the above, this may not be the case under a plan which has a three year testing period. It is
The number of options that vest at the end of the relevant performance period is determined as follows:
also noted that as the LTIs which vest are in the form of options, share price has to appreciate over the three year period for vesting options
• Number of LTIs earned per three-year performance target = Number of LTIs available for that target x percentage earned x individual
to be of any benefit to our Executive KMP. This further aligns our current plan with long-term shareholder wealth.
performance factor2
• Number of LTIs earned per yearly performance target = 1/3 x number of LTIs available for that target x percentage earned x individual
performance factor2
1 Note that the R&D expense growth target and customer retention by ASM target do not have mid hurdles attached.
2 The individual performance factor is typically 100%. The Board however has the discretion in exceptional circumstances to increase the individual
performance factor above 100% to a maximum of 200% to take into consideration exceptional performance or contribution by an Executive.
Allocation methodology
The LTI is allocated based on the cost of the option which is accounted under AASB 2 Share Based Payments using the Black-Scholes model with a
strike price being the volume weighted average price (VWAP) over the 10 days prior to the grant date with no discount.
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Transforming business, making life simpleTechnologyOne Limited 2018 Full Year Report 5. Relationship between
remuneration and company
performance
performance, earnings and movement in shareholder wealth over
the past five financial years up to and including FY18.
The first graph below shows EPS growth over the last five years,
whilst the other graphs show that average Executives’ STI and
TechnologyOne performance in FY18 was strong, with NPAT
average Executive Remuneration have grown at a slower rate than
increasing by 15% on prior year.
the Company’s NPBT growth rate.
Executives’ remuneration, excluding LTI and termination benefits,
EPS has grown at 10% compared to 4% for the averaged Executive
increased at a rate below NPAT, which is the Remuneration
STI growth over last 5 years.
Committee’s goal.
5.1 TechnologyOne’s five-year performance
The below table sets out information showing the creation of
shareholder wealth for the years ended 30 September 2014 to 30
September 2018.
Our STI structure is driving performance in both the current year and
long-term shareholder wealth.
The second graph below shows our average Executives’ STI has
grown by 4% below the Company’s NPBT profit growth of 11% over
the last 5 years. Company profit is growing almost three times faster
than our Executives STI over the last 5 years
Actual profit before tax ($’000)
40,235
46,494
53,240
58,019
66,528
Average STI vs. NPBT
2014
2015
2016
2017
2018
Total dividend including special
(cps)
8.16
8.78
9.45
10.20
11.02
Earnings per share (basic)
10.06
11.58
13.26
Share price at start of period
Share price at end of period
Total shareholder return
Profit after tax growth %
Average Executives growth1 %
2.05
3.18
59%
15%
7%
3.18
3.84
24%
16%
15%
3.84
5.94
57%
16%
15%
14.18
5.94
5.02
(14%)
8%
(6%)
16.14
5.02
5.58
13%
15%
8%
1This is the average annual full time package excluding any termination payments.
As can be seen from this information, the Executives’ remuneration
framework has successfully driven performance and the creation
of shareholder wealth over the longer term, while at the same time
Executives’ remuneration has been clearly in alignment with overall
company performance.
As can be seen from the table above, the Executives’ remuneration
framework has successfully driven performance and the creation
of shareholder wealth over the longer term, while at the same time
$409k
2014
$411k
2015
$461k
2016
$395
2017
$445k
2018
Average STI
NPBT
Average STI has grown by 4% which is at a much slower rate than
the 11% growth in NPBT over the last 5 years
Our STI structure is working as it drives short-term performance,
which in turn creates a strong long-term recurring revenue base.
In the long-term, this creates continuing financial success and
substantial shareholder wealth for TechnologyOne.
The third graph shows that the average Executives’ remuneration
has been growing at less than the Company’s NPBT profit growth
over the last 5 years.
Executives’ remuneration has clearly been in alignment with overall
Average remuneration vs. NPBT
Company performance.
EPS v Average STI
5.2 Outcome of equity plans
which is reviewed annually by the Board.
The key responsibilities of the Committee include:
2018
Name
Number
of options
granted
during the
period
Value of
options
at grant
date
A Di Marco
-
-
E Chung
261,207 $179,657
S MacDonald
371,833 $255,746
T Ristevski
295,106 $202,973
Number
of
options
issued
during
the
period
-
-
-
-
Number
of
options
still to be
issued
Number
of options
vested
during the
period
Number
of options
(forfeited)
during the
period
Value
at lapse
date
• Advising the Board on TechnologyOne’s policy for Executive and
Director remuneration
• Making recommendations to the Board on the remuneration
arrangements for Executives and Directors to ensure they are
aligned with TechnologyOne’s vision and are set competitively to
-
-
-
-
-
-
-
the market
167,000
(12,105)
11,316
• Approving KMP terms of employment
241,700
(43,475)
29,983
In making recommendations to the Board, the Committee reviews
-
(295,106) 202,973
the appropriateness of the nature and amount of remuneration to
Refer to sections 8.2 and 8.4 for additional information on the
outcome of equity plans.
During the year, only one Executive KMP, Stuart MacDonald,
completed a 3 year performance period, therefore coming eligible
to exercise options which have vested over that period. A summary
of the targets set, performance against each target and options
which have vested and are available to be exercised has been set
out below:
Target
measure1
Testing
Target
met
Number
of LTIs
available
for target
Percentage
earned5
Individual
performance
factor
LTIs
vested
and
available
for
exercise
>15%2
Annual
Partial
95,169
>15%3
Annual
Partial
158,616
76%
67%
1.00
72,510
1.00
105,744
NPAT
growth
Licence
fee
growth
(APAC)
Sales
operating
expense
growth
1 Represents target measures for FY16 grant. The target measures disclosed in section 4.3 of this report
reflect measures applicable to the FY17 and FY18 grants.
2 Represents stretch target at which 100% of options vest. Mid hurdle target, at which 50% of options vest
linearly up to the stretch target, was between 8% and 15% growth.
3 Represents stretch target at which 100% of options vest. Mid hurdle target, at which 50% of options vest
linearly up to the stretch target, was between 10% and 15% growth.
4 Represents stretch target at which 100% of options vest. Mid hurdle target, at which 50% of options vest
Executives and NEDs on an annual basis.
In carrying out its duties, the Committee can engage external
advisors who are independent of management. No external advisors
have been engaged in FY18.
7. Non-executive Director fees
The total amount of Directors’ fees is capped at a maximum
pool that is approved by shareholders. The current fee pool is
$1,000,000, which was approved by shareholders at the Annual
General Meeting on 17 February 2016. As noted the Chair’s letter
at the front of this report, we propose an increase to our Directors’
fee pool to $1,500,000 in FY19. This is purely to acknowledge the
additional two Directors added to the Board since the last review,
and our intention to add a further two Directors over the short to
medium term.
Non-executive Directors receive fees to recognise their contribution
to the work of the Board and the associated committees that they
serve. Non-executive Directors do not receive any performance-
The Committee has the responsibility for determining the
appropriate remuneration for Non-executive Directors. Every third
year the Committee reviews and compares the Non-executive
Director fees to market. In FY17, as part of the process of adding a
Non-executive Director to the Board, we engaged an independent
third party to review our Directors’ fees and benchmark them
against our peers to ensure we can continue to attract and retain
quality Directors.
<10%4
Annual
Full
63,446
100%
1.00
63,446
related remuneration.
10.0
2014
11.6
2015
13.3
2016
14.2
2017
16.1
2018
EPS (cent)
Average STI
($000’s)
Average total Executive remuneration has grown by 8% which is
at a much slower rate than 11% growth in NPBT over the last 5 years.
$750k
2014
$843k
2015
$936k
2016
$1m
2017
$1.1m
2018
Average STI
NPBT
linearly up to the stretch target, was between 10% and 11% growth.
Based on the outcome of the review in FY17, the Committee agreed
5 Percentages earned are rounded to the nearest percent.
6. Remuneration governance
The Remuneration Committee is responsible for developing the
that the Directors’ fees be set at the 75th percentile of ASX 101
– ASX 200 companies with CPI increases until the next review.
Director fees are set at the 75th percentile of the ASX101-200 to
ensure TechnologyOne attracts and retains Directors of high calibre
with the skills, qualifications and experience to oversee our business
remuneration framework for TechnologyOne Executives and making
strategy and strategic direction. This resulted in an increase in
recommendations related to remuneration to the Board. The
fees to $127,000 in FY17, including statutory superannuation
Committee develops the remuneration philosophy and policies for
contributions. Directors’ fees have increased by CPI of 1% in FY18
The graphs below set out information regarding TechnologyOne’s
In summary, profit and EPS have grown faster than our Executives’
Board approval.
remuneration.
The responsibilities of the Committee are outlined in their Charter,
which aligns with Board policy. No additional fees are paid in
respect of committee attendance.
84
85
Transforming business, making life simpleTechnologyOne Limited 2018 Full Year Report 8. Statutory Remuneration
Total remuneration for Executives increased by 8% from FY17 below
policy. Mr Chung and Mr MacDonald were promoted to CEO and
COO on 23 May 2017. The 2018 remuneration below represents
the first full year in their new roles. Please refer to section 8.1 for a
our company profit growth of 15%. Directors’ fees increased by 1%
detailed explanation.
per Director on an annualised basis, in line with the agreed board
Refer to detail provided below:
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l
c
n
i
r
a
e
y
$
-
-
-
-
-
-
-
-
-
-
-
-
117,142
115,982
117,142
115,982
117,142
115,982
117,142
115,982
117,142
115,982
11,128
11,018
11,128
11,018
11,128
11,018
11,128
11,018
11,128
11,018
128,270
127,000
128,270
127,000
128,270
127,000
128,270
127,000
128,270
127,000
68,333
6,492
74,824
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
360,797
117,142
19,616
497,555
848,150
358,574
115,982
18,073
492,629
740,547
502,949
367,567
418,522
381,255
199,849
256,923
-
-
-
-
-
-
19,616
522,565
12,841
380,408
537,114
471,105
19,616
17,989
438,138
367,028
399,244
322,653
19,616
219,465
25,797
15,121
272,044
303,982
1,482,117
117,142
78,464
1,677,723
1,778,089
1,364,319
115,982
64,024
1,544,325
1,838,287
1,482,117
771,185
140,596
2,393,897
1,778,089
1,364,319
695,892
119,114
2,179,325
1,838,287
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
336,925
295,932
204,735
38,478
(15,478)
15,478
526,182
349,888
526,182
349,888
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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128,270
127,000
128,270
127,000
128,270
127,000
128,270
127,000
128,270
127,000
74,824
-
1,345,705
1,233,176
1,396,604
1,147,445
1,009,901
760,375
229,784
591,504
3,981,994
3,732,500
4,698,168
4,367,500
1%
1%
1%
1%
1%
1%
1%
1%
1%
1%
N/A
N/A
9%
9%
24%
22%
12%
33%
(57%)
(61%)
2%
4%
7%
8%
Name
Non-executive
Directors
R McLean
(Non-executive
Director
J Mactaggart
(Non-executive
Director)
K Blinco
(Non-executive
Director)
R Anstey
(Non-executive
Director)
Dr J Andrews
(Non-executive
Director
S Doyle
(Non-executive
Director)
Executives
A Di Marco
(Executive
Chairman)1
E Chung
(Chief
Executive
Officer)2
S MacDonald
(Chief
Operating
Officer)3
T Ristevski
(Operating
Officer –
Corporate
Services)4
Total
Executives
Total KMP
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
1 Mr Di Marco was offered an LTI of $400K which he declined in the 2017/2018 year, as he has in previous years. The Remuneration Committee acknowledges that Mr
Di Marco’s existing 10+% shareholding in TechnologyOne provides the benefits that the LTI aims to achieve. Mr Di Marco’s STI is calculated as 1.26% of Group NPBT.
Mr Di Marco’s remuneration grew by 9% on the prior year, this was due to his fixed remuneration being up 1% and his STI up 15% inline with company profit.
2 Mr Chung’s increase in remuneration reflects a full year in his position as Chief Executive Officer (commenced 23 May 2017). Mr Chung’s STI is calculated as 0.78% of
Group NPBT.
Mr Chung’s remuneration grew by 33% on the prior year, Mr Chung’s fixed remuneration was up 37% reflecting his promotion to CEO, the comparative year had 4
months of his revised base, Mr Chung’s STI is up 16%, of which 15% was as a result of the increase in group NPBT and 1% due to the 4 months of additional STI earned
as a result of his promotion (it is important to note Mr Chung’s growth in annualised FY18 STI was 15% inline with company profit growth), Mr Chung’s LTI increased by
18% as a result of achieving 100% of his LTI targets in FY18 compared to the 33%
achievement in 2017.
3 Mr MacDonald changed position to Chief Operating Officer on 23 May 2017.
His increase in remuneration reflects a full year in his position as Chief Operating
Officer. Mr Macdonald’s STI is calculated as 0.533% of NPBT.
Mr MacDonald’s remuneration grew by 22% on the prior year. Mr Macdonald’s
fixed remuneration is up 10% reflecting his promotion to COO, the comparative
year had 4 months of his revised base, Mr MacDonald’s STI is up 16%, with
15% as a result of an increase in group NPBT and 1% due to the 4 months of
additional STI earned as a result of his promotion (it is important to note Mr
MacDonald’s growth in annualised FY18 STI was 15% inline with company profit
growth), Mr MacDonald’s LTI increased by +100% as a result of achieving 100% of
his LTI targets in FY18 compared to the 33% achievement in 2017.
4 Mr Ristevski left the Company effective 4 May 2018. Mr Ristevski’s STI was
calculated as 0.499% of YTD Group NPBT.
5 Due to the changes outlined in section 1.2 of this report, the composition
of KMP has changed in FY17. The FY18 comparatives represent the FY17
remuneration of the FY18 KMP. Total KMP totals included in the FY17 report
under the old composition was as follows: Fixed remuneration - $1,906,497;
Directors’ fees - $762,000; Superannuation: $70,246; Termination benefits - $nil;
Value of performance rights offered - $546,801 (total FY17 KMP remuneration of
$5,565,844).
8.1 Detail of Executive remuneration and
performance for FY18
The remuneration package for Executives, including the Executive
Chairman, for FY18 comprises the amounts outlined in the following
tables. Employment contract terms presented for the CEO and other
Executives do not have a fixed duration period (i.e. they are ongoing
rolling contracts that cease following notice of termination by either
employee or employer).
There is no maximum or minimum STI for Executives as the
Company wants to ensure a strong focus on performance in the
current year (refer to section 4.2).
With respect to measurement of the STI, the key measures in which
the FY18 STI are applied against are:
• Target Executive NPBT was set at $68,228,363 (calculated based
on company NPBT before the Executive STI is calculated) was up
15% on prior year in line with company profit growth
• Target Group NPBT is $76,020,199 (calculated after we have
calculated the Executives’ STI. Once calculated it is used to
calculate the Executive Chairman’s STI) was up 15% on prior year
in line with company profit growth.
The annualised uplift in STI for the Executive KMP was consistent
with the increase in overall Company NPBT.
86
87
Transforming business, making life simpleTechnologyOne Limited 2018 Full Year Report
Adrian Di Marco
Position
Executive Chairman
Remuneration mix
FY18 Actual
FY18 Target
FY17 Actual
FY17 Target
Fixed remuneration
Base salary
Directors’ fees
Superannuation
$497,555
$497,555
$492,629
$492,629
Fixed
STI
$848,150
$851,629
$740,547
$740,547
2018
$
2017
$ Notes
360,497
358,574 Increase in Base of 1% in line with CPI
117,142
19,616
115,982 Increase in Base of 1% in line with CPI
18,073 Compulsory superannuation guarantee contributions up to the maximum contribution base.
Total fixed remuneration
497,555
492,629 Increase in Fixed remuneration of 1% in line with CPI
Performance based remuneration
STI
848,150
740,547 Growth in STI is consistent with growth in NPBT, the primary measure of STI. Mr Di Marco’s
STI is calculated as 1.26% of Group NPBT.
LTI new scheme
Value of share options offered
LTI old scheme
Value of share options
Nil
Nil
Nil
Nil Mr Di Marco, as in previous years has again agreed to forgo his LTI entitlement of $400,000.
The Remuneration Committee recognises that Mr Di Marco’s total remuneration is
substantially below that of comparable companies. The Remuneration Committee
acknowledges that Mr Di Marco existing 10+% shareholding in TechnologyOne provides the
benefits that the LTI aims to achieve.
Nil
Nil
Total remuneration
1,345,705
1,233,176
% growth on prior year excluding LTI
and termination benefits
% growth on prior year including LTI
and termination benefits
Post-employment
Post-employment benefits
Termination benefits
9%
9%
Nil
Nil
(16%)
(16%)
Nil
Nil
Refer to section 9
Edward Chung
Position
Chief Executive Officer
Remuneration mix
FY18 Actual
FY18 Target
$522,565
$522,565
$537,114
$546,436
$336,925
$402,375
Fixed
STI
LTI
FY17 Actual
$380,408
$471,105
$295,932
FY17 Target
$517,391
$475,162
$400,000
Fixed remuneration
Fixed remuneration
Directors’ fees
Superannuation
2018
$
2017
$ Notes
502,949
367,567 The increase in Mr Chung’s base is due to promotion to CEO effective 23 May 2017. His
remuneration is inline with the details published on the ASX on his appointment.
The reason for the increase in base is due to the comparative year only having 4 months of
Edward’s revised base due to his promotion.
-
-
19,616
12,841 Compulsory superannuation guarantee contributions up to the maximum contribution base.
Total fixed remuneration
522,565
380,408
Fixed remuneration increased due to his promotion. Mr Chung’s FY18 fixed
remuneration increased by 1% of his annualised FY17 fixed remuneration.
Performance based remuneration
STI
537,114
471,105 Mr Chung ‘s STI was increased from 0.625% to 0.78% of executive NPBT following his
promotion on 23 May 2017. This is in line with his remuneration package published on the
ASX with his promotion to CEO. Growth in his annualised STI is consistent with growth in
NPBT.
20% of the STI is retained for three months after the reporting period.
LTI new scheme
Value of share options offered
Value of shares forfeited
115,329
(11,316)
57,097 Mr Chung was issued with 261,207 options in October 2017, with an overall value of
(38,255)
$179,657.
Please refer to section 8.2 for further information.
In FY17, Mr Chung was issued with 192,746 options. Mr Chung did not meet all KPIs in FY17.
Value of shares earned
104,013
18,842
LTI old scheme
Value of share options offered
232,911
277,090
Total remuneration
1,396,604
1,147,445
% growth on prior year excluding LTI
and termination benefits
% growth on prior year including LTI
and termination benefits
Post-employment
Post-employment benefits
Termination benefits
24%
22%
Nil
Nil
29%
16%
Nil
Nil
Please refer to section 8.2 for further information. Mr Chung ‘s STI was increased from
0.625% to 0.78% of executive NPBT following his promotion on 23 May 2017. This is in line
with his remuneration package published on the ASX with his promotion to CEO. Growth in
his annualised STI is consistent with growth in NPBT. 20% of the STI is retained for three
months after the reporting period.
Mr Chung was issued with 1,000,000 options in July 2014. No further options will be issued
under this plan as it has been quarantined.
167,000 options vested during FY2018. All future LTI will be based on the new LTI scheme.
Refer to section 9
88
89
Transforming business, making life simpleTechnologyOne Limited 2018 Full Year Report Remuneration mix
FY18 Actual
FY18 Target
FY17 Actual
FY17 Target
Fixed remuneration
Fixed remuneration
$438,138
$438,138
$399,244
$433,800
Stuart MacDonald
Position
Chief Operating Officer
$367,028
$373,398
$204,735
$254,520
Tony Ristevski
Position
Chief Financial Officer
Remuneration mix
FY18 Actual
$219,465
$25,797
FY18 Target
$283,312
$364,006
$200,000
Fixed
STI
LTI
Fixed
STI
LTI
$322,653
$38,478
$324,694
$252,000
2018
$
2017
$ Notes
418,522
381,255 Mr MacDonald was promoted 23 May 2017 to the role of COO. Mr MacDonald was previously
the OO – Sales and Marketing with the company therefore the 2017 base only represents 4
months of Stuart’s revised base due to his promotion
FY17 Actual
FY17 Target
$272,044
$279,125
$303,982
$316,527
$15,478
$200,000
Fixed remuneration
Fixed remuneration
2018
$
2017
$ Notes
199,849
256,923 Mr Ristevski left the Company effective 4 May 2018. His reduction in fixed remuneration is
reflective of him being employed by the Company for part of the year.
Superannuation
19,616
15,121 Compulsory superannuation guarantee contributions up to the maximum contribution base.
Superannuation
19,616
17,989 Compulsory superannuation guarantee contributions up to the maximum contribution base.
Total fixed remuneration
438,138
399,244
Fixed remuneration increased due to his promotion. Mr MacDonald’s FY18 fixed
remuneration increased by 1% of his annualised FY17 fixed remuneration.
Total fixed remuneration
219,465
272,044
Performance based remuneration
Performance based remuneration
STI
367,028
322,653 Mr MacDonald’s STI increased from 0.455% to 0.533% Executive NPBT upon his promotion
to COO in FY17.
20% of the STI is retained for three months after the reporting period.
Growth in his annualised STI is consistent with growth in NPBT
LTI new scheme
Value of share options offered
234,718
123,553 Mr MacDonald was issued with 371,853 options in October 2017, with an overall value of
$255,746.
Value of shares forfeited
(29,983)
(85,075)
Value of shares earned
204,735
38,478
In FY17, Mr MacDonald was issued with 325,364 options. Mr MacDonald did not meet all KPIs
for FY17.
STI
25,797
303,982 Mr Ristevski left the Company effective 4 May 2018. Mr Ristevski’s STI was calculated as
0.499% of Group Net Profit Before Tax for the year on a pro rata basis.
Mr Ristevski forfeited his retained 20% STI in FY18.
LTI new scheme
Value of share options offered
Value of shares forfeited
Value of shares earned
-
(15,478)
(15,478)
46,902
(31,424)
15,478
On leaving the Company on 4 May 2018, Mr Ristevski’s unvested options lapsed and the
FY18 expense in relation to his LTI was reversed.
Forfeitures include unvested options in respect of Mr MacDonald’s FY16 issue.
LTI old scheme
Please refer to section 8.2 for further information.
LTI old scheme
Value of share options offered
Nil
Nil
Total remuneration
1,009,901
760,375
% growth on prior year excluding LTI
and termination benefits
% growth on prior year including LTI
and termination benefits
Post-employment
Post-employment benefits
Termination benefits
12%
33%
Nil
Nil
94%
182%
Nil
Nil
Refer to section 9
Value of share options offered
Nil
Nil
Total remuneration
229,784
591,504
% growth on prior year excluding LTI
and termination benefits
% growth on prior year including LTI
and termination benefits
Post-employment
Post-employment benefits
Termination benefits
(57%)
(61%)
Nil
Nil
100%
100%
Nil
Nil
Refer to section 9
90
91
Transforming business, making life simpleTechnologyOne Limited 2018 Full Year Report 8.2 Long-term incentive scheme
In 2016, TechnologyOne replaced its previous Executive Option Plan (EOP) with an LTI plan aligned to market, shareholder and Executive
requirements.
Name
E Chung
A Di Marco
S MacDonald
T Ristevski
Number
of options
granted
during the
period
Grant date
Exercise price
Value per
option
Value of
options at
grant date*
Number of
options still
to be issued
Number
of options
vested during
the period
Number
of options
(forfeited)
during the
period
Value at lapse
date
Lapse date
261,207
1/10/2017
$5.15
$0.69
$179,657
-
167,000
(12,105)
11,316
1/10/2025
-
371,833
295,106
-
1/10/2017
1/10/2017
$5.15
$5.15
$0.69
$0.69
-
$255,746
$202,973
-
-
-
-
-
-
-
225,838
(43,475)
29,983
1/10/2025
-
(295,106)
202,973
4/05/2018
For details of grants under the previous EOP plan, please refer to
Under the EOP, options were issued with typically between 0% and
sections 8.3 and 8.4.
* The assessed fair value at grant date of options granted to the
individuals is allocated equally over the period from grant date to
vesting date. The amount is included in the remuneration tables
above. As outlined in greater detail in note 1 (q) (iii) fair values at
50% discount on the volume weighted average price for the 10
days prior to the grant date. The discount could be forfeited prior
to vesting at the Board’s discretion based on the performance of
the Executive. The option could also be withheld by the Executive
Chairman for unsatisfactory performance.
grant date are determined using a Black-Scholes pricing model.
Share options were granted to Executives by the Board based on
Options forfeited during the period, are due to non-achievement of
the option plan approved by the Board.
performance targets set by the Board for 2018. The Board is focused
The options vest if and when the Executive satisfies the period of
on ensuring that management remuneration and shareholder value
service contained in each option grant.
are aligned by setting performance targets that create long-term
shareholder wealth.
The model inputs for options granted to Executives are as follows:
(a) Options are granted for no consideration. Each tranche vests at
the end of the three-year period.
(b) Dividend yield – 2.0%
(c) Expected volatility – 19.8%
(d) Risk-free interest rate – 2.0%
(e) Price of shares on grant date – $5.15
(f) Fair value of options – $0.69
8.3 Quarantined Executive Option Plan
(EOP) (now superseded)
These options were issued to existing Executives and
TechnologyOne is required to honour these pre-existing contracts.
The variation to the 2016 LTI plan allows for options with the
The contractual life of each option varies between two and five
years. There are no cash settlement alternatives.
Options granted under this plan carry no dividend or voting rights.
When exercisable, each option is convertible into one ordinary
TechnologyOne share. Further information is set out in note 32 to
the financial statements.
8.4 Historical incentive outcomes under the
previous options plan
TechnologyOne previously issued options under a now obsolete
Executive Option Plan (EOP), which was described in section 8.2.
The EOP has now been quarantined and all new Executives to
the Company, as well as existing Executives when their existing
contracts come to an end, are under the new LTI plan.
For those Executives that are under the older quarantined Option
Plan:
condition that there is no discount to the strike price at grant date.
• The numbers of options over ordinary shares in the Group
The performance criteria still apply as per the 2015 LTI plan. These
held during the financial year by each Executive of the Group,
pre-existing contracts have been quarantined and as existing
including their personally related parties, are set out below
Executive contracts come to an end, they will be renegotiated so
that the LTI is based on the 2016 LTI plan going forward. All new
appointments of Executives to the Company will be under the 2016
LTI plan. For the sake of disclosure, details of the now obsolete and
quarantined EOP are provided below.
• The KMP have historically received the following share options.
E Chung is the only Executive KMP who participated in options
granted 14 July 2014
Name
E Chung
Balance at start of
year
Granted as
compensation
670,000
-
Exercised
(167,000)
Forfeited
Balance at the end of
the year
-
503,000
Vested and
exercisable
--
Unvested
503,000
8.5 Payment of STI retention
STI Retentions are paid three months after TechnologyOne’s year
end to ensure that the final STI is based on audited and finalised
accounts (refer to section 4.2). The value actually received by
individuals differs from the remuneration outlined in the previous
section 8 (which is based on accounting values). For the 2017
financial year, 20% ($367,357) of the performance related bonus
as previously accrued in that period became payable in cash to
Executives (based on audited results) and was paid during the 2018
financial year. There was $5k in forfeitures during the year which
related to forfeited retentions from KMP which left the Company
during the year.
For the 2018 financial year 20% ($394,150) of the performance
related bonus as previously accrued will become payable in cash to
Executives (based on audited results).
8.6 Shares provided on exercise of
remuneration options
Details of ordinary shares in the Group provided as a result of the
exercise of remuneration options to each Director of Technology
One Limited and Senior Executives of the group are set out below.
LTI (Quarantined Options)
Year
granted
Vested
%
Forfeited
%
Financial
years in which
options may
Maximum total value of
grant yet to vest
$
2014
50%
-
2017-2021
$670,739
Name
E Chung
9. Service agreements for the
Executive KMP
Remuneration and other terms and conditions of employment for
Executive KMP are formalised in service agreements which are
reviewed each year. All Executive KMP service agreements are
rolling contracts which cease following notice of termination by
either employee or employer.
The following table presents some of the key contractual
arrangements for the Executive KMP:
KMP
Contract term
Executive Chairman
CEO
Other Executive KMP
Ongoing
Ongoing
Ongoing
Termination notice by
either party
Post-employment
restraint
3 months
6 months
12 weeks
12 months
12 months
12 months
If an Executive KMP resigns, payment in lieu of notice that is not
worked is provided, in addition to any statutory entitlements. No
other additional termination or post employment benefits are
provided on termination of employment. Refer to sections 4.2 and
Date of exercise of
options
Number of ordinary
shares issued on
exercise of options
during the period
Name
E Chung
6/07/2018
167,000
$223,580
Executive KMP.
Total paid at exercise
4.3 respectively for treatment of STIs and LTIs on termination of
No amounts are unpaid on any shares issued on the exercise of
options.
8.7 Value of LTI grants yet to vest
For the new option plan, they vest three years after the grant date
providing that the vesting conditions are met. For the old EOP, they
vest after two years.
The maximum value of options yet to vest has been determined as
the amount of the grant date fair value that could be expensed.
10. Additional statutory
disclosures
10.1 Director shareholdings
Directors are required to hold a minimum shareholding of one
year’s (pre-tax) Directors’ fees in TechnologyOne shares. Directors
are required to rectify any short fall within a 12 month period. New
Directors are allowed 36 months to meet this requirement.
The Board in total holds 74,738,100 shares representing 24% of the
The number of options granted during the year is disclosed below:
total shareholding of the Company.
LTI (Options)
Year
granted
Vested
%
Forfeited
%
Financial years
in which rights
may vest
Maximum total value of
grant yet to vest
$
2018
2018
-
-
6%
15%
2020
2020
$175,824
$242,958
Name
E Chung
S MacDonald
10.2 Equity instruments held by Key
Management Personnel
The number of shares in the Group held during the financial year
by each Director and Senior Executive of Technology One Limited,
including their personally related parties, are set out below.
There were no shares granted during the reporting period as
compensation.
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Transforming business, making life simpleTechnologyOne Limited 2018 Full Year Report 2018
Name
Balance at the start of year
Purchased during the year
Sale during the year
Net change other
Balance at the end of the
year
Directors of Technology One Limited
A Di Marco
R McLean
J Mactaggart
K Blinco
R Anstey
Dr J Andrews
S Doyle
31,378,500
141,000
42,902,500
260,000
19,000
24,300
-
-
-
-
-
6,500
6,300
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
31,378,500
141,000
42,902,500
260,000
25,500
30,600
-
Senior Executives of the
Group
Balance at the start of year
Received during the year on
the exercise of
options
Sale during the year
Net change other
Balance at the end of the
year
E Chung
S MacDonald
2017
Name
432,000
-
167,000
-
-
-
-
-
599,000
-
Balance at the start of year
Purchased during the year
Sale during the year
Net change other
Balance at the end of the
year
Directors of Technology One Limited
A Di Marco
R McLean
J Mactaggart
K Blinco
R Anstey
Dr J Andrews
34,378,500
141,000
45,902,500
250,000
15,000
8,325
-
-
-
10,000
4,000
15,975
(3,000,000)
-
(3,000,000)
-
-
-
-
-
-
-
-
-
31,378,500
141,000
42,902,500
260,000
19,000
24,300
Senior Executives of the
Group
Balance at the start of year
Received during the year on
the exercise of
options
Sale during the year
Net change other
Balance at the end of the
year
E Chung
S MacDonald
265,000
-
167,000
-
-
-
-
-
432,000
-
10.3 Loans to Key Management Personnel
There have been no loans to Directors or Executives during the
financial year (2017 - nil).
10.4 Other transactions with Key Management
Personnel
During the year there were no transactions with the Key Management
Personnel. This report is made in accordance with a resolution of
Directors.
Corporate governance
statement
The Board of Directors of the Company is responsible for its
The Board of Directors operates in
accordance with the following broad
principles:
• The Board should comprise of at least three members, but no
corporate governance. The Board guides and monitors the business
more than 10. The current Board membership is seven. The
and affairs of the Company on behalf of the shareholders by whom
Board may increase the number of Directors where it is felt that
they are elected and to whom they are accountable.
The Board has the authority to delegate any of their powers to
committees consisting of such Directors and external consultants,
as the Directors think fit. The Board has established an Audit &
Risk Committee, a Remuneration Committee and a Nomination &
Governance Committee.
The format of the Corporate Governance Statement is in accordance
with the Australian Securities Exchange Corporate Governance
Council’s Corporate Governance Principles and Recommendations
(3rd Edition). In accordance with the Council’s recommendations,
the Corporate Governance Statement must contain specific
information and disclose the extent to which the Company has
followed the guidelines during the period.
additional expertise in specific areas is required. The Company
believes for its current size, a smaller Board allows it to be more
effective and to react quickly to opportunities and threats.
• The Board should be comprised of Directors with an appropriate
mix of skills, qualifications, expertise, experience and diversity.
The skills, experience and expertise which the Board considers
to be particularly relevant include those in the area of finance,
information technology, and Australian and International Business.
In respect of diversity, the Board recognises that diversity
relates to, but is not limited to gender, age, ethnicity and cultural
background. The Board values diversity and recognises the
individual contribution that people can make and the opportunity
for innovation that diversity brings.
• The Board shall meet on both a planned basis and an unplanned
TechnologyOne’s corporate governance practices were in place
basis when required and have available all necessary information
throughout the year ended 30 September 2018. As noted below
to participate in an informed discussion of agenda items
there are some recommendations with which the Company has
not complied to which the Company explains why at the end of the
statement. Apart from these the Company has complied with all the
principles’ recommendations.
The Directors have established guidelines for the operation of
the Board. Set out below are the Company’s main corporate
Governance practices.
The Company’s complete Corporate Governance Statement is
available on the Company’s internet site www.technologyonecorp.
com in the ‘Shareholders’ area.
Board of Directors and its Committees
Board of Directors
The Directors are as follows:
Name
Position
Adrian Di Marco
Executive Chairman – Major Shareholder
Appointed
16/07/1987
John Mactaggart
Non-executive Director – Major Shareholder
16/07/1987
Ronald McLean
Non-executive Director - Independent
Kevin Blinco
Non-executive Director - Independent
Richard Anstey
Non-executive Director - Independent
Jane Andrews
Non-executive Director - Independent
Sharon Doyle
Non-executive Director - Independent
16/04/1992
01/04/2004
02/12/2005
22/02/2016
28/02/2018
The Company Secretary is Stephen Kennedy.
• The Directors are entitled to be paid expenses incurred in
connection with the execution of their duties as Directors. Each
Director is therefore able to seek independent professional
advice at the Company’s expense, where it is in connection with
their duties and responsibilities as Director. The Company policy
is that a Director wishing to seek independent legal advice should
advise the Chairman at least 48 hours before doing so.
• The Directors and Officers will not engage in short-term trading of
the Company’s shares. Furthermore, the Directors and officers will
not buy or sell shares at a time when they possess information
which, if disclosed publicly, would be likely to materially affect
the market price of the Company’s shares. Information is not
considered to be generally available until a reasonable time has
elapsed to allow the market to absorb these announcements. A
detailed policy exists on this matter – refer below, section: Trading
in Company Securities.
• Directors have a clear understanding of the corporate and
regulatory expectations of them. To this end formal letters of
appointment are made for each Director setting out the key
terms and conditions, any special duties or arrangements,
remunerations and expenses, their rights and entitlements,
confidentiality and rights of access to corporate information, as
well as Indemnity and Insurance cover provided.
• Newly appointed Directors undertake an induction course
covering the Company’s strategy, products and operations. They
are also provided a copy of the Company’s constitution.
• Directors are required to disclose Directors’ interests and any
matters that affect the Director’s independence. This includes
disclosure of conflicts of interest, which may include transactions
with family members or related entities.
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Transforming business, making life simpleTechnologyOne Limited 2018 Full Year Report •
If there is a potential conflict of interest, conflicted Directors must
The Board is required to disclose any new information that could,
formal written employment agreements which set out the terms
• Ensure the integrity in financial reporting
immediately inform the Board and abstain from deliberations
or would be reasonably perceived, to influence, or reasonably be
of their employment, roles and responsibilities, reporting lines,
on such matters. Such Directors are not permitted to exercise
perceived to influence, in a material respect their capacity to bring
remuneration, confidentiality and termination provisions.
any influence over other Board members. If the Board believes
an independent judgement to bear on the issues before the Board
the conflict of interest is material or significant the Directors
and to act in the best interests of the Company and its shareholders.
All Directors and senior management are required to comply with
period prior to approval by the Board, and publishing
key corporate policies of the Company which include, but are not
concerned will not be allowed to attend the meeting or receive
the relevant Board papers.
The role of the Board is as follows:
• Setting objectives, goals and strategic direction for management,
with a view to maximising shareholder value
The independence of the Board is assessed annually as part
limited to, share trading policy, insider trading policy, privacy policy,
of the function of the Nomination & Governance Committee in
anti-discrimination and workplace gender equality policies.
conjunction with the ASX Corporate Governance Principles and
Recommendations.
All new Directors and senior management also participate in the
• Ensure that the financial statements for each reporting period
Company’s formal on-boarding program which includes a formal
comply with appropriate accounting standards
While the ASX Corporate Governance Principles and
induction program and participation in the Company’s “O-week”
• Receive and review reports from the external Auditor
• Review for accuracy financial statements for each reporting
• Monitor compliance with the requirements of the Corporations
Act, Listing Rules, Australian and Foreign Taxation Offices and
other related legal obligations
•
Input into and ratifying any significant changes to the Company
Recommendations and proxy advisors consider the tenure of a
programs.
• To review and evaluate the performance of the Board as a whole,
Independent Director
• Review of independence of each Director
each Committee, key Executives and each Director on an annual
• Acting as principle liaison between the Independent Directors
• Review of skills matrix to ensure relevance of required skills
basis
and the Chairman
• Adopting an annual budget and monitoring financial performance
Director as affecting independence, the Board believes that this is
• Ensuring adequate internal controls exist and are appropriately
monitored for compliance
• Ensuring significant business risks are identified and appropriately
managed
• Selecting, appointing and reviewing the performance of the
Managing Director
• Setting the highest business standards and code of ethical
behaviour
• Overseeing the establishment and implementation of the risk
management system, and annually reviewing its effectiveness
not a material consideration due to its cohesion and alignment to
the Company’s strategy which have contributed to the long-term
success of the Company.
Lead Independent Director
The Company will appoint a Lead Independent Director in the
near future once another 2 additional independent non-executive
Directors have been appointed, which is scheduled to occur during
the next 12 months. The Lead Independent Director will represent
the interests of shareholders where the Executive Chairman is
unable to do so due to a conflict of interest.
• Decisions relating to the appointment or removal of the Company
The role of Lead Independent Director will include:
Secretary
• Representing the Independent Directors as the most senior
• Advising the Board with reference to the other Independent
Directors on the matters where there is a conflict of interest
The roles of Deputy Chairman and Lead Independent Director will
be separated to further strengthen the overall independence of the
Board and to allow greater flexibility in responding to governance
issues and in supporting the interests of the shareholders.
Director appointments
All Directors, both Executive and Non-executive, receive written
notifications of their appointment and a new Director induction
pack which details the terms and conditions of their appointment,
remuneration (including superannuation contributions), continuous
A code of conduct has been established for the Board.
The Board has established a Diversity policy, which is discussed
below.
The Company has established a policy requiring the evaluation of
the performance of Directors on an annual basis.
Appointment of Directors
If a vacancy exists, or where the Board considers it will benefit from
the appointment of a new Director with particular skills, the Board
will interview the candidates. Potential candidates will be identified
by the Nomination & Governance Committee, with the Board entitled
to seek the advice of an external consultant. The Board will then
appoint the most suitable candidate, who upon acceptance will hold
office until the next Annual General Meeting, where the appointee
must retire and is entitled to stand for re-election.
Majority of Independent Directors
The Board comprises a majority of independent Non-executive
Directors who have broad commercial experience and bring
independence, accountability and judgement in discharging the
Board’s responsibilities to ensure optimal returns to shareholders
and the ongoing provision of benefits to the Company’s employees.
Board performance evaluation
The Board meets annually for the purpose of reviewing and
evaluating the performance of the Board as a whole, each
• Regularly review Accounting Standards and Company Policies in
conjunction with the Auditors and recommend adoption/changes
to the Board
• Ensure the Internal Audit Function maintains a high standard of
performance
Committee, key Executives and each Director individually in meeting
• Monitor compliance with the requirements of the Corporations
key responsibilities and achieving its objectives.
Act, Listing Rules, Australian & foreign taxation offices and other
The following areas were considered by the Board in its 2018 annual
related legal obligations
review:
• Oversee the ongoing development by management of an
enterprise-wide risk management framework for management of
• Performance evaluation of Directors and Senior Executives
material risks
• Review of skills and experience of the Board for current
operations of the Company and identification of any shortfalls
• Periodically review the adequacy and effectiveness of the
Company’s policies and procedures relating to risk management
• Director succession planning
and compliance
• Review of current legislation in relation to any age restrictions
• Make recommendations to the Board on key risk management
To assist the Board in maximising its effectiveness, the Board and
Nomination & Governance Committee have a skills matrix to provide
objective information about each Director and the Board as a whole
during the past year.
performance indicators and levels of risk appetite
Remuneration Committee
The Board has established a Remuneration Committee.
The Committee meets at least four times per year.
The Committee is comprised of a majority of Independent Directors
and is chaired by an Independent Director.
Each Director is encouraged to discuss any issue concerning Board
performance with the Chairman at any time.
The Committee is comprised of:
Directors are encouraged to maintain and improve their knowledge,
Kevin Blinco (Chair)
Independent Non-executive Director
skills and expertise through briefings, seminars and going
John Mactaggart
Non-executive Director
professional development programs.
Audit & Risk Committee
The Board has established an Audit & Risk Committee.
Richard Anstey
Independent Non-executive Director
Jane Andrews
Independent Non-executive Director
The role of the committee is:
disclosure requirements (including interests in the Company),
The Committee is comprised of:
• To advise the Board with regard to the Company’s broad policy
ongoing confidentiality obligations, Company policies on when to
seek independent professional advice, the Company’s indemnity
and insurance measures.
Prior to appointment, appropriate checks are undertaken on the
candidates and relevant information provided to shareholders to
consider when voting on the election of the Director. Relevant
information is also provided for shareholders to consider when
voting to re-elect existing Directors upon rotation. Executive
Directors and senior management of the Company also have
Kevin Blinco (Chairman)
Independent Non-executive Director
Richard Anstey
Independent Non-executive Director
Jane Andrews
Sharon Doyle
Independent Non-executive Director
Independent Non-executive Director
for Executive and Director remuneration
• To determine, on behalf of the Board, the individual remuneration
packages for Executives and Directors
• To give the Company’s Executives encouragement to enhance
the Company’s performance and to ensure that they are fairly, but
The number of meetings held during the years and the attendance
responsibly, rewarded for their individual contribution
of the members is provided in the Annual Report. The Audit & Risk
Committee Charter is available on the Company’s website.
The number of meetings held during the years and the attendance
of the members is provided in the Annual Report.
The role of the Committee is as follows:
The Remuneration Committee Charter is available on the Company’s
website.
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Transforming business, making life simpleTechnologyOne Limited 2018 Full Year Report the company’s two-way investor relations program:
complete Corporate Governance Statement on the Company’s
• By ensuring that all shareholders can elect to receive information
website.
Non-executive Directors’ remuneration is determined by the Board
The codes address:
within the aggregate amount per annum which may be paid in
Directors’ fees.
Nomination & Governance Committee
The Board has established a Nomination and Governance
• Responsibilities to shareholders, and clients
• “The TechnologyOne Way”, which refers to the success of the
company coming from our shared values, our entrepreneurial
spirit and innovation
Committee. The Committee meets as required during the year.
• Employment practices (anti-discrimination, occupational health
The Committee is comprised of a majority of Independent Directors
and safety, etc.)
and is chaired by an Independent Director. The Committee is
• Responsibilities to the community
comprised of:
The role of the Committee is as follows:
• Responsibilities to the individual
• Compliance with the codes
• Assessment of the necessary and desirable competencies and
experience for Board membership
• Assessment of the independence of each Director. Each Director
must provide to the Board all relevant information. When the
independent status of a Director is lost, the market will be
immediately notified.
In addition, the Directors, Executive Chairman, Chief Executive
Officer, Chief Financial Officer, Executives and all employees have
employment agreements, which include job descriptions. These job
descriptions describe their duties, rights and responsibilities.
Shareholders’ rights
The Board of Directors aim to ensure that shareholders are informed
• Evaluation of the membership of the Board, Audit & Risk and
of all major developments affecting the Company’s state of affairs.
Remuneration committees, and their membership
The information is communicated to shareholders, and forms part of
• Evaluation initially and on an on-going basis of Non-executive
Director’s professional development, commitments, and their
ability to commit the necessary time required to fulfil their duties
to a high standard
• Adherence by Directors to the Director’s Code of Conduct and to
through the share registry
good corporate governance
• By the Annual Report being distributed to all shareholders. The
• Review of Board succession plans
Board ensures the Annual Report contains all relevant information
and communications from the Company’s share registry either
physically or electronically and can update their preferences
about the operations of the Company during the financial
year, together with details of future developments and other
disclosures required under the Corporations Act 2001.
Risk management
The Company has adopted an active approach to risk management
and the Board recognises that the Company’s participation in
commercial and operational activities require a certain level of risk.
• Continue to identify employee feedback mechanisms
through the review of existing forums and information
provided as well as the identification of appropriate new
mechanisms for employee consultation
As such, the Board has delegated the risk management function to
• Maintain existing educational programs that support diversity
the management of the Company with oversight by the Audit & Risk
including but not limited to induction, on boarding and
Committee.
leadership programs delivered through the TechnologyOne
The Board has received assurance from the Chief Executive Officer
College
and CFO that the declaration provided in accordance with section
The Company’s 2018 Workplace Gender Equality Agency report can
295A of the Corporations Act is founded on a sound system of risk
be found on the ‘Shareholders’ section of the Company’s website.
management and internal control and that the system is operating
effectively in all material aspects in relation to the financial reporting
risks.
These objectives have been met, however TechnologyOne
recognises further progress and improvement is possible and for
this reason, for 2018, TechnologyOne will continue to progress these
The Board has expanded the role of the Audit Committee to include
objectives.
oversight of risk management and compliance functions and as such
is now referred to as the Audit & Risk Committee. The Committee
has performed an annual risk review and have identified a number
of key risk categories for the business.
TechnologyOne’s Australia workplace profile, as at 30 September
2018, is detailed below:
Name
Male
%
Female
%
Total
Further information on the company’s key risks are outlined in the
Board & Executive Directors
Diversity at Technology One
The diversity of TechnologyOne remains fundamental to our
ongoing success. TechnologyOne has established a Diversity Policy
which reflects the company’s commitment to providing an inclusive
workplace.
A summary of the Diversity Policy is following:
• Diversity is one of TechnologyOne’s strengths. TechnologyOne
Executive
Managers
Employees
5
8
81
450
83
89
69
63
2
1
37
264
17
11
31
37
7
9
118
714
The Board is aiming to add up to an additional two Directors to
the Board this coming year. This provides the Company with an
exciting opportunity to increase the diversity on the Board as well as
increasing the number of Independent Directors.
Non-Compliance with ASX Corporate
Governance Principle and Recommendations
The Board of Technology One believes in working to the highest
standards of Corporate Governance. Notwithstanding this, the Board
believes it is important to recognise there is not a ‘one size fits all’ to
• Recommendation for changes to committees
• Recommendation of, and undertaking the appropriate checks,
before for the appointment of new Directors
• Recommendation of, and undertaking the appropriate checks, for
the endorsement or non-endorsement of existing Directors
• Ensuring that an effective induction process is in place for new
Board members
• Review and oversight of the Company’s Corporate Governance
Statement and governance related policies
The number of meetings held during the years and the attendance
of the members is provided in the Annual Report. The Nomination
& Governance Committee Charter is available on the Company’s
website.
Ethical standards
All Directors, managers and employees are expected to act with the
utmost integrity and objectivity, observe the highest standards of
behaviour and business ethics, and strive at all times to enhance the
reputation and performance of the Company.
Codes of Conduct have been approved by the Board and given their
full support.
• By publishing its Notice of Meetings and Explanatory
values this diversity and recognises the individual contribution
Memorandum for each Annual General Meeting or other such
our people can make and the opportunity for innovation such
meetings as required from time to time
diversity brings.
• By encouraging shareholders to attend and participate in the
• TechnologyOne believes that we will achieve greater success
good Corporate Governance, and that it is important to consider the
Company’s Annual General Meeting
by providing our people with an environment that respects the
size of the Company, the industry it operates within, the corporate
• By encouraging shareholders to participate in proxy voting should
they be unable to attend the Company’s Annual General Meeting
• By the Half Year results report distributed to all shareholders
• By disclosures forwarded to the ASX under the Company’s
continuous disclosure obligations
• Through the Company’s web site, under a special area called
Shareholders
• By the Company’s participation in scheduled briefings with
• By the participation of the Company’s Auditors and Solicitors at
the Annual General Meeting
dignity of every individual, fosters trust, and allows every person
history and the Company’s inherent strengths.
the opportunity to realise their full potential
• TechnologyOne is committed to providing an inclusive workplace
and our commitment to diversity extends to our interactions with
The ASX Corporate Governance Council has recognised this fact
and has allowed companies to explain where they do not comply
with the Corporate Governance Principles and Recommendations
customer and suppliers
3rd Edition.
• The Board established measurable objectives for 2018 and the
objectives are:
• Ensuring compliance with the published diversity policy
The Company has complied with the majority of recommendations,
with the exception of but a few. The Board believes the areas of non-
conformance shown below will not impact the Company’s ability to
meet the highest standards of Corporate Governance and will at the
same time allow the Company to capitalise on its inherent strengths.
• Diversity target – setting targets for the number of women in
This section highlights those areas of non-compliance and provides
institutional shareholders and security analysts
• 30% of all vacant Senior Management roles are to have at
least one female candidate shortlisted
All information communicated by the Company is in accordance with
senior roles in the organisation
the reasons why.
its continuous disclosure requirements under ASX Listing Rule 3.1.
• Maintain reporting measures that are in compliance with both
the ASX guidelines and Workplace Gender Equality Agency
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Transforming business, making life simpleTechnologyOne Limited 2018 Full Year Report Majority of Independent Directors (Refer ASX
Corporate Guidelines – Recommendation 2.4)
The number of Directors is seven. The Board has identified five
Independent Chairman (Refer ASX Corporate
Guidelines – Recommendation 2.5)
The Board is of the opinion it should maximise the vision, skills and
of these Directors are independent, and two as not independent
deep industry knowledge of the Company’s founder and major
because they are major shareholders.
shareholder, Mr Di Marco, to continue to lead the Company forward.
The Board is of the opinion that it should bring independent
judgment in making all decisions and believes strongly that having
two major shareholders (both who have been founders of the
He has a long and proven track record of creating significant
shareholder wealth for the Company as its Chairman, since listing on
the ASX in 1999.
Company) has added to the significant strength to the Board and
The Board believes Mr Di Marco continues to be the best candidate
Financial Statements
Consolidated income statement
For the year ended 30 September 2018
Revenue
Variable costs
Variable customer cloud costs
provides a continuing vision for the Company’s success.
to clearly communicate the Company’s vision, strategy and to set
Total variable costs
The independence of Mr Ron Mclean has been debated by some
corporate advisory groups because he was a past employee of
TechnologyOne, ceasing to be an Executive in 2004. The Board is
of the opinion that, due to the period of time that has lapsed since
market expectations. To this end it is seen as appropriate that Mr
Di Marco should remain as Executive Chairman of the Company.
There is no empirical evidence to support the preference of an
Independent Chairman.
Mr Mclean’s employment with the company 14 years ago, Mr Mclean
The ASX Corporate Governance Principles and Recommendations
is considered as being independent. Mr McLean’s appointment also
propose that “if the Chair is not an Independent Director, a listed
took place in 1992, prior to the introduction of the ASX’s 1st edition
entity should consider the appointment of an Independent Director
of the Principles of Good Corporate Governance in March 2003.
as the Deputy Chair”. Mr McLean was appointed Deputy Chair at the
The ASX guidelines commentary provides the following guidelines
note which supports this position: “The mere fact that a director
Board meeting held 15 August 2017. Mr McLean is deemed to be an
independent non-executive Director in the Board’s opinion.
has served on a board for a substantial period does not mean that
On 23 May 2017, Ed Chung was appointed as Chief Executive
he or she has become too close to management to be considered
Officer. Mr Di Marco will not be deemed as independent under the
independent. However, the board should regularly assess whether
ASX guidelines due to him being a substantial shareholder. This
that might be the case for any director who has served in that
however, aligns Mr Di Marco with the interests of the Company’s
position for more than 10 years.”
shareholders.
The ASX guidelines also states that it “recognises that the interests
of a listed entity and its security holders are likely to be well served
by having a mix of Directors, some with a longer tenure with a deep
understanding of the entity and its business and some with a shorter
tenure with fresh ideas and perspective.”
The Company has set the objective to increase the Board size,
with the aim of adding additional Independent Directors, with Jane
Andrews’ appointment in the 2016 financial year, Sharon Doyle’s
appointment in the 2018 Financial Year and two further additional
Directors in the coming year, resulting in an undisputed majority of
Independent Directors.
Occupancy costs
Corporate costs
Depreciation and amortisation
Computer and communication costs
Marketing costs
Employee costs
Share-based payments
Finance expense
Total operating costs
Profit before income tax
Income tax expense
Profit for the year from continuing operations
Basic earnings per share
Diluted earnings per share
Notes
5
6
7
7
31
31
2018
$’000
298,650
(27,786)
(11,884)
(39,670)
(9,588)
(18,951)
(4,276)
(10,339)
(4,068)
(143,240)
(1,595)
(395)
(192,452)
66,528
(15,548)
50,980
Cents
16.14
16.10
2018
$’000
50,980
348
348
51,328
2017
$’000
273,253
(24,766)
(9,611)
(34,377)
(7,750)
(16,421)
(4,237)
(10,599)
(5,624)
(134,602)
(1,576)
(48)
(180,857)
58,019
(13,525)
44,494
Cents
14.18
14.10
2017
$’000
44,494
(167)
(167)
44,327
The above consolidated income statement should be read in conjunction with the accompanying notes.
Consolidated statement of comprehensive income
For the year ended 30 September 2018
Profit for the year from continuing operations
Other comprehensive income
Items that may be reclassified to profit or loss in subsequent periods
Exchange differences on translation of foreign operations
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
100
101
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
Transforming business, making life simpleTechnologyOne Limited 2018 Full Year Report
Consolidated statement of financial position
as at 30 September 2018
Consolidated statement of changes in equity
For the year ended 30 September 2018
ASSETS
Current assets
Cash and cash equivalents
Prepayments
Trade and other receivables
Earned and unbilled revenue
Other current assets
Current tax assets
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets
Earned and unbilled revenue
Deferred tax assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Provisions
Current tax liabilities
Unearned revenue
Borrowings
Total current liabilities
Non-Current liabilities
Trade and other payables
Provisions
Other non-current liabilities
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Other reserves
Retained earnings
Total equity
Notes
8
9
10
11
12
13
14
15
16
28
17
18
20
21
2018
$’000
104,322
10,852
59,554
19,758
959
1,574
197,019
12,280
45,011
26,374
404
84,069
2017
$’000
93,383
8,220
53,262
14,305
798
-
169,968
13,525
47,549
11,914
5,482
78,470
281,088
248,438
52,617
13,257
-
31,305
5
97,184
-
3,144
1,241
4,385
101,569
179,519
33,171
30,530
115,818
179,519
38,253
11,270
392
27,862
10
77,787
8,370
3,338
1,423
13,131
90,918
157,520
32,152
34,687
90,681
157,520
Balance at 1 October 2017
32,152
90,681
15,775
(728)
19,640
157,520
Notes
Contributed
equity
$’000
Retained earnings
$’000
Dividend reserve
$’000
FOREX
reserve
$’000
Share option
reserve
$’000
Total
equity
$’000
Exchange differences on translation of foreign
operations
Profit for the period
Total comprehensive income for the period
Dividends paid
Transfer to dividend reserve
Exercise of share options
Share based payments
Tax impact of share trust
Balance at 30 September 2018
-
-
-
-
-
1,019
-
-
1,019
33,171
-
50,980
50,980
-
-
-
-
(33,002)
(25,843)
25,843
-
-
-
(25,843)
115,818
-
-
-
(7,160)
8,616
348
-
348
-
-
-
-
-
-
-
-
-
-
-
-
1,595
1,059
2,654
(380)
22,294
348
50,980
51,328
(33,002)
-
1,019
1,595
1,059
(29,329)
179,519
22
20
32
Balance at 1 October 2016
29,984
70,160
22,172
Exchange differences on translation of foreign
operations
Profit for the period
Total comprehensive income for the period
Dividends paid
Transfer to dividend reserve
Exercise of share options
Share-based payments
Tax impact of share trust
Balance at 30 September 2017
-
-
-
-
-
2,168
-
-
2,168
32,152
-
44,494
44,494
-
(23,973)
-
-
-
(23,973)
90,681
-
-
-
(30,370)
23,973
-
-
-
(6,397)
15,775
22
20
32
(561)
(167)
-
(167)
-
-
-
-
-
-
16,739
138,494
-
-
-
-
-
-
1,576
1,325
2,901
(167)
44,494
44,327
(30,370)
-
2,168
1,576
1,325
(25,301)
157,520
(728)
19,640
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
102
103
Transforming business, making life simpleTechnologyOne Limited 2018 Full Year Report
Consolidated statement of cash flows
For the year ended 30 September 2018
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Unused prepayments to suppliers
Payments to suppliers and employees (inclusive of GST)
Interest received
Income taxes paid
Other revenue
Interest paid
Net cash inflow / (outflow) from operating activities
Cash flows from investing activities
Payments for acquisition of subsidiary (net of cash acquired)
Payments for property, plant and equipment
Proceeds from sale of property, plant and equipment
Net cash inflow / (outflow) from investing activities
Cash flows from financing activities
Proceeds from exercise of share options
Repayment of finance lease
Dividends paid to Company's shareholders
Net cash inflow / (outflow) from financing activities
Net increase / (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Cash and cash equivalents at end of year
Notes
30
22
8
2018
$’000
300,058
(2,632)
(237,983)
735
(11,187)
-
(395)
48,596
(2,721)
(3,388)
440
(5,669)
1,019
(5)
(33,002)
(31,988)
10,939
93,383
104,322
2017
$’000
296,419
(2,417)
(238,006)
728
(10,507)
273
(48)
46,442
(1,322)
(6,109)
3
(7,428)
2,168
(17)
(30,370)
(28,219)
10,795
82,588
93,383
Notes to the consolidated financial statements
1 Summary of significant accounting policies
The financial report of Technology One Limited (the Company) for
AASB 9 Financial Instruments
AASB 9 includes requirements for the classification and
the year ended 30 September 2018 was authorised for issue in
measurement of financial assets, including a new expected
accordance with a resolution of Directors on 20 November 2018.
credit loss model for calculating impairment on financial assets.
Technology One Limited (the Company) is a company limited by
shares incorporated in Australia whose shares are publicly traded
on the Australian Stock Exchange.
The principal accounting policies adopted in the preparation of
these financial statements are set out below. These policies have
It was further amended by AASB 2010 - 7 to reflect amendments
to the accounting for financial liabilities. The Company has
adopted AASB 9 from 1 October 2018. The Company is currently
assessing the impact of AASB 9.
AASB 15 Revenue from Contracts with Customers
been consistently applied to all the periods presented, unless
AASB 15 changes the manner in which revenue is recognised
otherwise stated. The financial statements are for the consolidated
and provides for a significant increase in the disclosure
entity consisting of Technology One Limited and its subsidiaries.
requirements for the Company.
The nature of the operations and principal activities of the Group are
described in the Directors’ report.
(a) Basis of preparation
The financial report is a general purpose financial report prepared
by a for profit entity, which has been prepared in accordance
with the requirements of the Corporations Act 2001, Australian
Accounting Standards and other authoritative pronouncements of
the Australian Accounting Standards Board.
The financial report is presented in Australian dollars and all
values are rounded to the nearest thousand dollars ($000) unless
otherwise stated.
The accounting policies adopted are consistent with those of the
previous financial year.
(i) Compliance with IFRS
This financial report also complies with International Financial
Reporting Standards (IFRS) as issued by the International
Accounting Standards Board.
(ii) Newly adopted standards
New or amended standards that became applicable for the
first time for the 30 September 2018 year end did not result
The core principle is that an entity recognises revenue to depict
the transfer of promised goods or services to customers in
an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services.
This means that revenue will be recognised when control of
goods or services is transferred rather than on transfer of risks
and rewards.
The Company is adopting a well planned and researched, strategic
approach to adopting AASB 15 and is well advanced. During
the current period, the Company has progressed the evaluation
of potential changes from adopting the new standard on future
financial reporting and disclosures. The Company has substantially
completed material contract reviews (signed prior to 30 September
2017) and detailed policy drafting. The evaluation has included
consultation between Company Finance Teams, Commercial and
Group Legal functions. The quantification is ongoing and therefore
all amounts are current estimates which are subject to finalisation
prior to final implementation. On finalisation of pre 30 September
2017 contract reviews the Company will then finalise its review of
contracts signed in the 30 September 2018 financial year in order
to report the final impact assessment in the 31 March 2019 financial
statements.
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
in a change to the Company’s accounting policies or require
A summary of impacts determined to date are disclosed below:
retrospective adjustments. Certain new accounting standards
and interpretations have been published that are not effective
for the 30 September 2018 year end reporting period are
outlined below.
(iii) Issued but not yet effective
The following standards, amendments to standards and
interpretations are relevant to current operations. They are
available for early adoption but have not been applied by the
Group in this Financial Report.
104
105
Transforming business, making life simpleTechnologyOne Limited 2018 Full Year Report
The Company has adopted AASB 15 from 1 October 2018 and will
ensure consistency with the policies adopted by the Company.
ended 30 September 2018 being recognised as revenue for the
Current Accounting
Future Accounting
hosted SaaS contracts with customers the Company has determined
(‘Company’ or ‘parent entity’) as at 30 September 2018 and the
comprehensive income
performance obligations contained within contracts are distinct. For
and liabilities of all subsidiaries of Technology One Limited
• All resulting exchange differences are recognised in other
1. Term licence fee hosted on the Company’s cloud environment
that revenue from Term Licences, Post Sales Customer Support
results of all subsidiaries for the year then ended. Technology
and Cloud Services where a customer is hosting the Term Licence
One Limited and its subsidiaries together are referred to in this
on the Company’s cloud environment are not distinct performance
financial report as the ‘Company’ or the ‘Consolidated entity’.
(d) Revenue recognition
Revenue is measured at the fair value of the consideration
received or receivable in the financial report for the year ended
Revenue from term licences where the
licence is hosted on the Company’s
cloud environment are currently
recognised in full when the significant
risk and rewards of ownership of the
licenced software has passed to the
customer.
The Company’s critical accounting
estimates and judgements associated
with multiple element contracts is
disclosed in Note 3.
Revenue is allocated to each contracted
performance obligation and recognised
as the performance obligation is satisfied.
Performance obligations may be satisfied at a
point in time or over time.
AASB 15 requires a more granular approach
to identify the different revenue streams (i.e.
performance obligations) in a contract by
identifying the different activities that are being
undertaken and then aggregating only those
where the different activities are significantly
integrated or highly interdependent.
AASB 15 provides guidance in respect of the
term over which revenue may be recognised
and is limited to the period for which the parties
have enforceable rights and obligations and the
points at which the customer has control over
the items sold.
Where customers hold a right of access to
software revenue is recognised over the period
of access even if the customer has exposure to
the significant risks and rewards in the licensed
software.
obligations as defined by AASB 15. The Company will no longer
be separating these items into their individual components in the
Company’s Half Year and Annual Report but will be reporting them
as a single line item titled ‘SaaS Fee’. SaaS fees will be recognised
rateably over the term of the contract.
perform a full retrospective restatement of prior period comparatives
(including 30 September 2018) in the 2019 financial report.
Based on the current assessment, an adjustment of $76.7 million
after tax is expected to be recognised in the Company’s opening
retained earnings at 1 October 2017 for items currently identified in
areas 1 to 2 above.
AASB 16 Leases
2. Post sales customer support
Revenue from Post Sales Customer
Support which relates to rights to
fees for rights of access to ongoing
upgrades and minor software revisions
is recognised at the commencement of
the period to which they relate on the
basis that the Company has no ongoing
obligations or required expenditure
related to this revenue. Fees for
helpline support are recognised over the
period of the contract.
3. Directly related contract costs
Costs directly related to acquiring
the customer contract are expensed
as incurred. Such costs include sales
incentives and legal costs in drafting
and settling customer specific contracts.
Expected impact on transition
AASB 16 was issued in February 2016. The standard introduces a
Revenue from term licences hosted on
the Company’s cloud environment will be
recognised on a daily basis. The Company
considers that term contracts hosted on the
Company’s cloud environment represent a right
to access the Company’s licenced intellectual
property over the term of the contract.
Revenue is allocated to each contracted
performance obligation and recognised as the
performance obligation is satisfied which may be
at a point in time or over time.
Contracts that provide an implied performance
obligation for an entity to “stand ready” to
perform the services are recognised as revenue
over the period that the services could be
performed.
single lessee accounting model and requires lessees to recognise
assets and liabilities for all leases with a term of more than 12
months, unless the underlying asset is of low value. The standard
removes the clarification of leases as either operating or finance
leases for the lessee and effectively treats all leases as finance
leases. There are also changes in the accounting over the life of the
lease. AASB 16 substantially carries forward the lessor accounting
requirements in AASB 117. Accordingly, lessor accounting will remain
similar to current practice. The new standard will be effective
for annual periods beginning on or after 1 January 2019. Early
application is permitted, provided the new revenue standard, AASB
15 Revenue from Contracts with Customers, has been applied, or
is applied at the same date as AASB 16. The Company has not yet
Expected Impact on transition
assessed how it will be affected by the new standard.
The Company considers that it satisfies the stand
ready performance obligations associated with
all Post Sales Customer Support over time and
therefore revenue from Post Sales Customer
Support will be recognised on a daily basis.
Costs incurred in obtaining the customer
contract will be expensed, unless they are
incremental to obtaining the contract and the
Company expects to recover those costs. Costs
that meet the criteria for capitalisation will be
amortised over the life of the contract that they
relate to. The impact for this has not yet been
quantified.
(iv) Historical cost convention
These financial statements have been prepared under the historical
cost convention, as modified by the revaluation of available-for-sale
financial assets, financial assets and liabilities (including derivative
instruments) at fair value through the income statement.
(v) Critical accounting estimates
The preparation of financial statements requires the use of certain
critical accounting estimates. It also requires management to
exercise its judgement in the process of applying the Company’s
accounting policies. The areas involving a higher degree of
judgement or complexity, or areas where assumptions and estimates
are significant to the financial statements, are disclosed in note 3.
The Company continues to work through the identification of
impacts to the accounting for revenue from Initial Software Licence
Fees for perpetual contracts and term contracts not utilising the
Company’s cloud environment, Cloud Services, Consulting Services
(b) Principles of consolidation
for Licenced Software or Project Services.
(i) Subsidiaries
Intercompany transactions, balances and unrealised gains on
30 September 2018 and prior periods. As disclosed in Note 1(a)
transactions between companies are eliminated. Unrealised
(iii) the implementation of AASB 15 “Revenue from Contracts with
losses are also eliminated unless the transaction provides
Customers” will result in different revenue recognition policies
evidence of the impairment of the asset transferred. Accounting
being used by the Group. The changes to the policies below, where
policies of subsidiaries have been changed where necessary to
applicable, will result in some of the revenues recorded for the year
(ii) Employee Share Trust
The Company has formed a trust to administer the Company’s
employee share scheme. This trust is consolidated, as the
substance of the relationship is that the trust is controlled by the
Company. At 30 September 2018, the Company had 399,126
treasury shares (2017: 500,656).
(c) Foreign currency translation
(i) Functional and presentation currency
year ending 30 September 2019 or subsequent years.
The Company recognises revenue when the amount of revenue can
be reliably measured, it is probable that future economic benefits
will flow to the entity and specific criteria have been met for each of
the Company’s activities as described below. The Company bases
its estimates on historical results, taking into consideration the
type of customer, the type of transaction and the specifics of each
arrangement.
The Company sells its licenced software under a perpetual licence
Items included in the financial statements of each of the
contract with associated services, or as part of a “Software as a
Company’s operations are measured using the currency of the
Service” (SaaS) solution which allows customers access to licensed
primary economic environment in which the entity operates
software for a defined period, along with associated services.
(‘the functional currency’). The consolidated financial statements
are presented in Australian dollars, which is Technology One
Limited’s functional and presentation currency.
(ii) 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.
(iii) 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 statement of financial position
presented are translated at the closing rate at the date of that
statement of financial position
•
Income and expenses 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
Revenue is recognised for the major business activities as follows:
(i) Software licence fee revenue
Revenue from licence fees due to software sales is recognised
on the transferring of significant risks and rewards of ownership
of the licensed software under an agreement between the
Company and the customer.
(ii) Implementation and consulting services revenue for licenced
software
Revenue from implementation and consulting services
attributable to licensed software is recognised in proportion
to the stage of completion, typically in accordance with the
achievement of contract milestones and/or hours expended.
(iii) Post sales customer support revenue for licensed software
Post sales customer support (PSCS) revenue for licensed
software comprises fees for ongoing upgrades, minor software
revisions and helpline support. PSCS revenue is allocated
between annual fees for helpline support and fees for rights of
access to ongoing upgrades and minor software patches. Fees
for rights of access to ongoing upgrades and minor software
revisions are recognised at the commencement of the period to
which they relate on the basis that the Company has no ongoing
obligations or required expenditure related to this revenue.
Revenue associated with non-refundable fees for an agreed
modification to an existing PSCS contract anniversary date, is
recognised at the commencement of the modified period for
AASB 15 also requires the Company to consider whether
The consolidated financial statements incorporate the assets
the transactions)
106
107
Transforming business making life simpleTechnologyOne Limited 2018 Full Year Report the rights of access to ongoing upgrades and minor software
income tax is determined using tax rates (and laws) that have been
value of the share. If the amount of the tax deduction (or estimated
(h) Research and development costs
revisions.
(iv) Project services revenue
enacted or substantially enacted by the end of the reporting period
future tax deduction) exceeds the amount of the related cumulative
and are expected to apply when the related deferred income tax
remuneration expense, the difference is recognised directly in
asset is realised or the deferred income tax liability is settled.
equity. When the employee exercises the option, the tax effect
Revenue from project services agreements is recognised in
proportion to their stage of completion, typically in accordance
with the achievement of contract milestones and/or hours
expended.
(v) Cloud services
Deferred tax assets are recognised for deductible temporary
differences and unused tax losses only if it is probable that future
taxable amounts will be available to utilise those temporary
differences and losses.
difference between the actual market value and what was recorded
as a deferred tax asset is recognised to equity.
(f) Segment reporting
An operating segment is a component of an entity that engages
Research and development expenses include payroll, employee
benefits and other employee-related costs associated with product
development. Technological feasibility for software products is
reached shortly before products are released for commercial
sale to customers. Costs incurred after technological feasibility
is established are not material, and accordingly, all research and
development costs are expensed when incurred.
Deferred tax liabilities and assets are not recognised for temporary
in business activities from which it may earn revenues and incur
(i) Variable costs
Revenue from cloud services is recognised as the services are
differences between the carrying amount and tax bases of
performed.
(vi) Unearned services revenue
investments in foreign operations where the Company is able to
control the timing of the reversal of the temporary differences and
it is probable that the differences will not reverse in the foreseeable
Amounts received from customers in advance of provision
of services are accounted for as a liability called Unearned
future.
Revenue.
(vii) Earned and unbilled revenue
Amounts recorded as earned and unbilled revenue represent
revenues recorded on software licence fees and PSCS fees
not yet invoiced to customers. These amounts have met the
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to offset current tax assets and liabilities
and when the deferred tax balances relate to the same taxation
authority. Current tax assets and tax liabilities are offset where the
entity has a legally enforceable right to offset and intends either to
settle on a net basis, or to realise the asset and settle the liability
revenue recognition criteria of the Company but have not
simultaneously.
reached the payment milestones contracted with customers.
(viii) SaaS revenue
Software as a Service (SaaS) revenue is separable into each of
its components of software licence fees, post sales customer
support and cloud services. At each reporting date, the
unearned portion is assessed and deferred to be recognised
over the period of service.
(e) Income tax
The income tax expense or benefit for the period 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
The carrying amount of deferred income tax assets is reviewed at
each reporting date and reduced to the extent that it is no longer
probable that sufficient taxable profit will be available to allow all or
part of the deferred income tax asset to be utilised.
Deferred income tax assets and liabilities are measured at the
tax rates that are expected to apply to the year when the asset is
realised or the liability is settled, based on tax rates (and tax laws)
that have been enacted or substantively enacted at the reporting
date.
Technology One Limited and its wholly-owned Australian controlled
entities have implemented the tax consolidation legislation. As a
consequence, these entities are taxed as a single entity and the
deferred tax assets and liabilities of these entities are set off in the
consolidated financial statements.
The head entity, Technology One Limited, and the controlled entities
in the tax consolidated group account for their own current and
deferred tax amounts. These tax amounts are measured as if each
entity in the tax consolidated group continues to be a stand-alone
taxpayer in its own right.
provisions where appropriate on the basis of amounts expected to
The Company has applied the Group allocation approach in
be paid to the tax authorities.
Deferred income tax is provided in full, using the liability method, on
temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the consolidated financial
determining the appropriate amount of current taxes and deferred
taxes to allocate to members of the tax consolidated group. The
current and deferred tax amounts are measured in a systematic
manner that is consistent with the broad principles in AASB 112.
statements. However, the deferred income tax is not accounted for if
The Company created an Employee Share Trust during 2009
it arises from initial recognition of an asset or liability in a transaction
which allows an employee on the exercise of an option to hold
other than a business combination that at the time of the transaction
the share in the Trust. As per AASB 112, on granting the option,
affects neither accounting nor taxable profit or loss. Deferred
the Company now records a deferred tax asset on the expected
expenses (including revenues and expenses relating to transactions
with other components of the same entity), whose operating results
are regularly reviewed by the entity’s chief operating decision
maker to make decisions about resources to be allocated to the
Variable expenses include costs associated with annual support,
licence fee upgrades and sales commissions. These costs are
expensed as incurred.
segment and assess its performance and for which discrete financial
(j) Impairment of assets
information is available.
Operating segments have been identified based on the information
provided to the chief operating decision maker - being the Executive
Chairman.
Operating segments that meet the quantitative criteria as prescribed
by AASB 8 are reported separately. However, an operating
segment that does not meet the quantitative criteria is still reported
separately where information about the segment would be useful to
users of the financial statements.
Information about other business activities and operating segments
that are below the quantitative criteria are combined and disclosed
in a separate category for ‘all other segments’.
(g) Leases
Goodwill and intangible assets that have an indefinite useful life are
not subject to amortisation and are tested annually for impairment,
or more frequently if events or changes in circumstances indicate
that they might be impaired. Other assets are tested for impairment
whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. An impairment loss is
recognised for the amount by which the asset’s carrying amount
exceeds its recoverable amount. The recoverable amount is the
higher of an asset’s fair value less costs to sell and value-in-use. For
the purposes of assessing impairment, assets are grouped at the
lowest levels for which there are separately identifiable cash inflows
which are largely independent of the cash inflows from other assets
or groups of assets (cash-generating units). Non-financial assets
other than goodwill that suffered an impairment are reviewed for
possible reversal of the impairment at the end of each reporting
Leases of property, plant and equipment where the Company, as
period.
lessee, has substantially all the risks and rewards of ownership are
classified as finance leases (note 11). Finance leases are capitalised
at the lease’s inception at the fair value of the leased property
or, if lower, the present value of the minimum lease payments.
The corresponding rental obligations, net of finance charges, are
included in other short-term and long-term payables. Each lease
payment is allocated between the liability and finance cost. The
finance cost is charged to the Income Statement over the lease
period so as to produce a constant periodic rate of interest on the
(k) Cash and cash equivalents
For the purpose of presentation in the statement of cash flows, cash
and cash equivalents includes cash on hand, deposits held at call
with financial institutions, other short-term, highly liquid investments
with original maturities of three months or less that are readily
convertible to known amounts of cash and which are subject to an
insignificant risk of changes in value, and bank overdrafts.
For purposes of the statement of cash flows, cash includes cash and
remaining balance of the liability for each period. The property, plant
cash equivalents, net of outstanding bank overdrafts.
and equipment acquired under finance leases is depreciated over
the asset’s useful life or over the shorter of the asset’s useful life and
(l) Trade receivables
the lease term if there is no reasonable certainty that the Company
Trade receivables are recognised initially at fair value and
will obtain ownership at the end of the lease term.
subsequently measured at amortised cost using the effective
Leases in which a significant portion of the risks and rewards
of ownership are not transferred to the Company as lessee are
interest method, less provision for impairment. Trade receivables are
generally due for settlement within 30 days.
classified as operating leases (note 26). Payments made under
Collectability of trade receivables is reviewed on an ongoing
operating leases (net of any incentives received from the lessor) are
basis. Debts which are known to be uncollectible are written off
charged to the income statement on a straight-line basis over the
by reducing the carrying amount directly. An allowance account
period of the lease.
(provision for impairment of trade receivables) is used when there
is objective evidence that the Company will not be able to collect
all amounts due according to the original terms of the receivables.
108
109
Transforming business making life simpleTechnologyOne Limited 2018 Full Year Report Significant financial difficulties of the debtor, probability that the
An asset’s carrying amount is written down immediately to its
(q) Provisions
debtor will enter bankruptcy or financial reorganisation, and default
recoverable amount if the asset’s carrying amount is greater than its
or delinquency in payments (more than 60 days overdue) are
estimated recoverable amount (note 1(i)).
considered indicators that the trade receivable is impaired.
Gains and losses on disposals are determined by comparing
The amount of the impairment loss is recognised in the income
proceeds with carrying amount. These are included in the income
statement within corporate expenses. When a trade receivable for
statement.
which an impairment allowance had been recognised becomes
uncollectible in a subsequent period, it is written off against the
allowance account. Subsequent recoveries of amounts previously
written off are credited against corporate expenses in the income
statement.
(m) Investments and other financial assets
The Company classifies its investments in the following categories:
financial assets at fair value through the Income Statement,
loans and receivables and available-for-sale financial assets. The
classification depends on the purpose for which the investments
were acquired. Management determines the classification of its
investments at initial recognition.
(i) Available-for-sale financial assets
(o) Intangible assets
(i) Goodwill
Goodwill represents the excess of the cost of an acquisition
over the fair value of the Company’s share of the net identifiable
assets of the acquired subsidiary/associate at the date of
acquisition. Goodwill on acquisitions of subsidiaries is included
in intangible assets. Goodwill is not amortised. Instead, goodwill
is tested for impairment annually, or more frequently if events or
changes in circumstances indicate that it might be impaired and
is carried at cost less accumulated impairment losses. Gains and
losses on the disposal of an entity include the carrying amount
of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units for the purpose
Available-for-sale financial assets, comprising principally
of impairment testing. The allocation is made to those cash-
marketable equity securities, are non-derivatives that are either
generating units or groups of cash-generating units that are
designated in this category or not classified in any of the other
expected to benefit from the business combination in which the
Provisions are recognised when the Company has a present legal
or constructive obligation as a result of past events, it is probable
that an outflow of resources will be required to settle the obligation
and the amount has been reliably estimated. Provisions are not
recognised for future operating losses.
Provisions are measured at the present value of management’s
best estimate of the expenditure required to settle the present
obligation at the end of the reporting period. The discount rate
used to determine the present value is a pre-tax rate that reflects
current market assessments of the time value of money and the
rights over shares do not vest at the end of the performance
period, the corresponding expense in relation to those rights will
be reversed. No expense is recognised for awards that do not
ultimately vest.
(s) Contributed equity
Ordinary shares are classified as equity.
Issued and paid up capital is recognised at the fair value of the
consideration received. Any transaction costs arising on the
issue of ordinary shares are recognised directly in equity as a
reduction of the share proceeds received.
risks specific to the liability. The increase in the provision due to the
(t) Earnings per share
passage of time is recognised as interest expense.
(i) Basic earnings per share
(r) Employee benefits
(i) Short-term obligations
Liabilities for wages and salaries, including non-monetary
benefits and annual leave expected to be settled 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. Liabilities for sick leave, which are non-
Basic earnings per share is calculated by dividing:
• The profit attributable to owners of the Company, excluding
any costs of servicing equity other than ordinary shares
• By the weighted average number of ordinary shares
outstanding during the year, adjusted for bonus elements
in ordinary shares issued during the year and excluding
treasury shares
(ii) Diluted earnings per share
categories. Investments are designated as available-for-sale
goodwill arose, identified according to operating segments (note
vesting, are recognised when the leave is taken and measured
Diluted earnings per share adjusts the figures used in the
if they do not have fixed maturities and fixed or determinable
4).
payments and management intends to hold them for the
medium to long-term.
(ii) Intellectual property/source code
Investments held which are classified as available-for-sale
are measured at fair value where such investments comprise
tradeable securities. Fair value is determined by reference to
quoted market prices in an active, liquid and observable market.
Intangible assets acquired separately are capitalised at cost,
and if acquired as a result of a business combination, capitalised
at fair value as at the date of acquisition. Following initial
recognition, the cost model is applied to all classes of intangible
assets. The useful lives of the intangible assets are assessed
Gains or losses on available-for-sale investments are recognised
to be either finite or indefinite. Where amortisation is charged
as a separate component of equity until the investment is sold,
on intangible assets with finite lives, this expense is taken to
collected or otherwise disposed of, or until the investment is
the Income Statement through the ‘depreciation & amortisation
determined to be impaired, at which time the cumulative gain or
expense’ line item. Intangible assets with finite lives are tested
loss previously reported in equity is included in the statement of
for impairment where an indicator of impairment exists. Useful
comprehensive income.
lives are examined on an annual basis and adjustments, where
(n) Property, plant and equipment
Property, plant and equipment are measured at cost less
accumulated depreciation and any impairment in value. Depreciation
is calculated on a straight-line basis over the estimated useful
economic lives of the assets as follows:
Office furniture and
3 - 11 years
equipment
Computer software
Motor vehicles
3 - 4 years
4 - 5 years
The assets’ residual values and useful lives are reviewed, and
adjusted if appropriate, at the end of each reporting period.
applicable, are made on a prospective basis.
Intellectual Property/Source Code is amortised on a straight line
basis over 8 years.
Gains or losses arising from the de-recognition of an intangible
asset are measured as the difference between the net disposal
proceeds and the carrying amount of the asset and are
recognised in the statement of comprehensive income when the
intangible asset is derecognised.
(p) Trade and other payables
These amounts represent liabilities for goods and services provided
to the Company prior to the end of financial year which are unpaid.
The amounts are unsecured and are usually paid within 30 days of
recognition.
at the rates paid or payable.
(ii) Long service leave
The liability for long service leave is recognised in the provision
for employee benefits and is measured as the present
value of expected future payments to be made in respect of
services provided by employees up to the reporting period.
Consideration is given to expected future wage and salary
levels, experience of employee departures and periods of
determination of basic earnings per share to take into account:
• The after income tax effect of interest and other financing
costs associated with dilutive potential ordinary shares
• The weighted average number of additional ordinary shares
that would have been outstanding assuming the conversion
of all dilutive potential ordinary shares
(u) Dividends
service. Expected future payments are discounted using market
Provision is made for the amount of any dividend declared, being
yields at the end of the reporting period on national corporate
appropriately authorised and no longer at the discretion of the entity,
bonds with terms to maturity and currency that match, as closely
on or before the end of the reporting period but not distributed at
as possible, the estimated future cash outflows.
the end of the reporting period.
(iii) Share-based payments
(v) Goods and Services Tax (GST)
The Company provides benefits to certain employees in the
form of share-based payment transactions, whereby employees
render services in exchange for rights over shares. The
costs of share-based payment transactions with employees
are measured by reference to the fair value of the equity
instruments at the date at which they are granted. Refer to note
32.
The cost of share-based payments is recognised, together with
a corresponding increase in equity, over the period in which
the performance and/or service conditions are fulfilled, ending
on the date on which the relevant employees become fully
Revenues, expenses and assets are recognised net of the amount of
associated GST, unless the GST incurred is not recoverable from the
taxation authority. In this case it is recognised as part of the cost of
acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST
receivable or payable. The net amount of GST recoverable from, or
payable to, the taxation authority is included with other receivables
or payables in the statement of financial position.
Cash flows are presented on a gross basis. The GST components
of cash flows arising from investing or financing activities which are
recoverable from, or payable to the taxation authority, are presented
entitled to the award (the vesting period). In the case that the
as operating cash flows.
110
111
Transforming business making life simpleTechnologyOne Limited 2018 Full Year Report 2 Financial risk management
The Company’s principal financial instruments are finance leases,
The Company does not hedge this risk. The Company’s exposure to
foreign currency changes is not significant.
cash and short-term deposits and assets available-for-sale,
At balance date, the Group had the following exposures in Australian
contingent consideration and borrowings.
dollar equivalents of amounts to foreign currencies which are not
The Company has various other financial assets and liabilities such
as trade receivables and trade payables, which arise directly from its
operations.
effectively hedged:
It is, and has been throughout the period under review, the
Trade Receivables
Company’s policy that no trading in financial instruments shall be
undertaken. The main risks arising from the Company’s financial
(c) Credit risk
2018
USD
$’000
1,044
2018
PGK
$’000
2017
USD
$’000
2017
PGK
$’000
-
628
770
assets and liabilities are interest rate risk, foreign currency risk and
credit risk. The Board reviews and agrees policies for managing
each of these risks and they are summarised below.
The Company trades only with recognised, creditworthy third
parties. It is the Company’s policy that all customers who wish to
trade on credit terms are subject to credit verification procedures.
Details of the significant accounting policies and methods adopted,
In addition, receivable balances are monitored on an ongoing basis
including the criteria for recognition, the basis of measurement
with the result that the Company’s exposure to bad debts is not
and the basis on which income and expenses are recognised, in
significant.
respect of each class of financial asset, financial liability and equity
instrument are disclosed in Note 1 to the Financial Statements.
There are no changes in the financial risks faced by the Company in
the period.
Information on credit risk exposures is contained in Note 9.
(d) Liquidity risk
Liquidity risk arises from the financial liabilities of the Group and
Groups subsequent ability to meet their obligations to repay their
Less than
12 months
$’000
Between
1 and 5
years
$’000
Over 5
years
$’000
Total
contractual
cash
flows
$’000
3 Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based
on historical experience and other factors, including expectations of
future events that may have a financial impact on the entity and that
are believed to be reasonable under the circumstances.
At 30 September 2017
Financial assets
Cash and cash equivalents
Trade and other receivables
93,383
53,262
-
-
Earned and unbilled
14,305
11,914
Total
160,950
11,914
Financial liabilities
Trade and other payables
Borrowings
Contingent consideration
Total
Net inflow / (outflow)
30,156
10
16,467
46,633
126,231
-
-
-
-
-
-
-
-
-
-
-
-
-
-
93,383
53,262
26,219
172,864
30,156
10
16,467
46,633
126,231
(e) Fair value measurements
Contingent consideration as set out in note 28 is classified as
Level 3. The valuation techniques and fair value of consideration is
The Company makes estimates and assumptions concerning the
future. The resulting accounting estimates will, by definition, seldom
equal the related actual results. The estimates and assumptions
that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial
year are discussed below.
(i) Impairment of goodwill and other assets
The Company tests annually whether goodwill has suffered any
impairment, in accordance with the accounting policy stated in
note 1(n)(i). The recoverable amounts of cash-generating units
have been determined based on value-in-use calculations.
These calculations require the use of assumptions. Refer to note
12 for details of these assumptions and the potential impact of
changes to the assumptions.
All other assets are reviewed for indicators or object evidence
of impairment. If indicators or objective evidence exists, the
recoverable amount is reviewed.
The Company holds the following financial instruments:
financial liabilities as and when they fall due.
outlined in note 28.
Financial assets
Cash and cash equivalents
Trade and other receivables
Earned and unbilled revenue
Financial liabilities
Trade and other payables
Borrowings
Contingent consideration
(a) Interest rate risk
2018
$’000
2017
$’000
104,322
59,554
46,132
93,383
53,263
26,219
210,008
172,865
40,807
30,156
5
10
11,810
16,467
52,622
46,633
Less than
12 months
$’000
Between
1 and 5
years
$’000
Over 5
years
$’000
Total
contractual
cash
flows
$’000
At 30 September 2018
Financial assets
Cash and cash equivalents
Trade and other receivables
104,322
59,554
-
-
Earned and unbilled revenue
19,758
26,374
Total
183,634
26,374
Financial liabilities
Trade and other payables
Borrowings
Contingent consideration
Total
40,807
5
11,810
52,622
-
-
-
-
-
-
-
-
-
-
-
-
-
104,322
59,554
46,132
210,008
40,807
5
11,810
52,622
157,386
The Company’s cash and investment assets are exposed to
Net inflow / (outflow)
131,012
26,374
movements in deposit and variable interest rates. The Company
does not hedge this exposure. Interest rate risk on cash is not
considered to be material.
(b) Foreign currency risk
As a result of operations in New Zealand, Malaysia, Papua New
Guinea and the United Kingdom and sales contracts denominated in
United States dollars, the Company’s statement of financial position
can be affected by movements in the exchange rates applicable to
these geographical locations and currencies.
Contingent Consideration
$’000
(ii) Share-based payments
Opening balance at 1 October 2017
Payments (ICON)
Release of earn out provision (ICON)
(Gains)/losses recognised in the income statement
Closing balance at 30 September 2018
16,467
(2,721)
(2,177)
241
11,810
The carrying value of trade receivables, accrued revenue and
trade payables are assumed to approximate their fair value due to
their short-term nature or the effect of discounting on non-current
financial assets not being significant. The fair value of non-current
borrowings materially approximates their carrying amount, as the
impact of discounting is not significant.
(f) Capital risk management
The Company provides benefits to certain employees in the
form of share-based payment transactions, whereby employees
render services in exchange for rights over shares. The costs
of share-based payment transactions with employees are
measured by reference to the fair value of the equity instruments
at the date at which they are granted. Refer to note 32.
The cost of share-based payments is recognised, together with
a corresponding increase in equity, over the period in which the
performance and/or service conditions are fulfilled, ending on
the date on which the relevant employees become fully entitled
to the award (the vesting period). In the event that the rights
over shares do not vest at the end of the performance period,
the expense relating to the unvested rights is reversed. No
expense is recognised for awards that to not ultimately vest.
The Company manages its capital to ensure that entities in the
(iii) Long service leave
Group will be able to continue as a going concern while maximising
the return to stakeholders through the optimisation of the debt and
equity balance.
The current risk management structure of the Company is to use
all equity funding except for funding required to purchase core
information technology assets which is funded by a leasing facility.
The equity funded position of the Company is managed by the
Board through dividends, new shares and share buy backs as well
as the issue of new equity where considered appropriate to fund
business acquisitions.
A liability for long service is recognised and measured at the
present value of the estimated future cash flows to be made
in respect of all employees at balance date. In determining the
present value of the liability, attrition rates and pay increases
through promotion and inflation have been taken into account.
(iv) Contingent consideration
A provision has been made for the present value of anticipated
costs for future contingent earn out considerations resulting
from the acquisitions made during the year. In estimating the
liability it was assumed that the maximum earn out amount will
112
113
Transforming business making life simpleTechnologyOne Limited 2018 Full Year Report
be payable based on current operating projections. Further
details are available at note 28.
(v) Multiple element contracts
2018
Revenue
Sales &
Marketing
$’000
Consulting
$’000
R&D
$’000
Cloud
$’000
Corporate
$’000
Total
$’000
(c) Other segment information
(i) Segment revenue
6 Expenses
Profit before income tax includes the
following specific expenses:
2018
$’000
2017
$’000
2018
$’000
2017
$’000
Depreciation
258,830
241,355
Plant and equipment
3,896
3,688
30,029
21,679
Amortisation
9,791
10,219
Leased office furniture and equipment
SaaS contracts entered into by the Group require judgement
in the identification and separation of the contract components
related to software licence fees, post sales support and
cloud services. The Group assesses each customer contract
individually into its components and considers if any
External revenue
204,264
63,355
184
29,009
1,838 298,650
Intersegment
revenue
(1,092)
1,512
(328)
(69)
(23)
Net royalty
(136,011)
(6,765)
85,282
(3,058)
60,552
-
-
components should be aggregated where they cannot be
Total revenue
67,161
58,102
85,138 25,882
62,364 298,650
Australia
New Zealand
International *
The Group’s chief operating decision maker makes financial
Profit for the year
R&D expenses (external) as a % of total
external revenue
18%
separately determined. Revenue is assigned to each component
based upon the stand alone fair value of the component
relevant to the total contract value.
4 Segment information
(a) Description of segments
decisions and allocates resources based on the information they
receive from its internal management system. Sales are attributed
to an operating segment based on the type of product or service
provided to the customer.
Segment information is prepared in conformity with the accounting
policies of the group as discussed in note 1 and Accounting Standard
AASB 8 Operating Segments.
During the year, the reportable segments changed and now
Consulting and Plus are reported as one segment.
TechnologyOne’s reportable segments are:
• Sales and Marketing - sales of licence fees and
customer support to our customers
• Consulting - implementation, consulting services and custom
software development services for large scale, purpose built
applications
• Research & Development (R&D) - the research,
development and support of our products
Income tax expense
Total assets
Total liabilities
Total depreciation
and amortisation
Other disclosures:
Capital expenditure
2017
Revenue
Expenses
Total external
expenses
57,492
52,084
54,041
18,985
49,520
232,122
(ii) Segment assets
* International segments include United Kingdom, South Pacific and Malaysia.
Profit before tax
9,669
6,018
31,097
6,897
12,847
66,528
Segment revenues from sales to external customers
298,650
273,253
Intangible assets
(15,548)
50,980
280,684
101,569
(4,276)
3,388
Australia
New Zealand
International *
Segment assets
2018
$’000
2017
$’000
239,888
212,068
26,745
20,023
14,052
10,865
280,685
242,956
* International segments include United Kingdom, South Pacific and Malaysia.
All significant non-current assets are located in Australia. Segment
assets are presented net of deferred tax.
(iii) Major customers
The Company has a number of customers to which it provides
both products and services, none of which contribute greater
than 10% of external revenue.
Total amortisation
Total depreciation and amortisation
Wages and salaries
Defined contribution plan expense
Payroll tax
Provision for employee benefits
Share-based payments
Other
Provision for doubtful debts
Foreign exchange gain
Rental expenses on operating leases
(Gain) / Loss on sale of fixed assets
7 Income tax expense
(a) Income tax expense
Sales &
Marketing
$’000
Consulting
$’000
R&D
$’000
Cloud
$’000
Corporate
$’000
Total
$’000
External revenue
181,621
71,349
121
18,636
1,526 273,253
Intersegment
revenue
77
(208)
87
(101)
145
Net royalty
(118,631)
(7,423)
74,447
(1,951)
53,558
-
-
5 Revenue
Sales revenue
Software licence fees
Implementation and consulting services
57,677
64,335
Adjustments for current tax of prior periods
65,337
61,693
Relating to origination and reversal of temporary differences
4,743
854
18
362
380
10
539
549
4,276
4,237
114,690
110,923
9,154
7,030
2,357
1,595
9,778
9,320
6,800
158
1,576
7,032
144,604
135,809
377
(501)
(3)
99
6,020
5,796
(16)
176
2018
$’000
2017
$’000
11,604
13,958
(799)
(1,287)
15,548
13,525
(1,235)
6,203
(221)
161
(215)
(800)
4,743
(854)
Total revenue
63,067
63,718
74,655
16,584
55,229 273,253
Post sales customer support
• Cloud - the delivery of cloud hosting services to our customers
• Corporate - the aggregation of the corporate services functions
costs and revenue, and corporately-funded projects
Expenses
Total external
expenses
52,085
58,455
49,856
14,077
40,761 215,234
Intersegment revenues/expenses are where one operating
Profit before tax
10,982
5,263
24,799
2,507
14,468
58,019
segment has been charged for the use of another’s expertise.
Royalties are a mechanism whereby each segment pays or
receives funding for their contribution to the ongoing success of
TechnologyOne. For example, Sales & Marketing pays R&D for the
development and support of the products that they have sold, as
well as Corporate for the use of corporate services.
Our chief operating decision maker views each segments
performance based on revenue post royalties and profit before tax.
No reporting or reviews are made of segment assets, liabilities and
cash flows and as such this is not measured or reported by segment.
Income tax expense
Profit for the year
R&D expenses (external) as a % of total
external revenue
18%
Total assets
Total liabilities
Total depreciation
and amortisation
Other disclosures:
Capital expenditure
(13,525)
44,494
242,956
90,918
(4,237)
5,834
Project services
Cloud service fees
Total sales revenue
Other income
Rents and sub-lease rentals
Interest received - cash
Other
Total other income
Total revenue
2018
$’000
2017
$’000
Current tax
Deferred income tax (revenue) / expense included in income tax
expense comprises:
(Increase) / decrease in deferred tax assets
Increase / (decrease) in deferred tax liabilities
Adjustment for deferred taxes of prior periods
139,605
119,929
5,520
7,013
29,009
18,636
297,148
271,606
-
735
767
273
728
646
1,502
1,647
298,650
273,253
114
115
Transforming business making life simpleTechnologyOne Limited 2018 Full Year Report
(b) Numerical reconciliation of income tax expense to
prima facie tax payable
estimated irrecoverable amounts from the sale of goods and
services, determined by reference to the circumstances of the
Profit from continuing operations before income tax
expense
2018
$’000
2017
$’000
specific customer.
66,528
58,019
carrying amount of $14,377,317 (2017 - $14,795,838) which are
Included in the trade receivable balance are debtors with a
Tax at the Australian tax rate of 30% (2017 - 30%)
Adjustments for current tax of prior periods
19,958
(799)
17,406
(1,287)
Research and development tax concession
(3,980)
(3,368)
Other non-deductible items
369
774
(4,410)
(3,881)
past due at the reporting date for which the consolidated entity
has not provided as there has not been a significant change
in credit quality and the consolidated entity believes that the
amounts are still considered recoverable. The consolidated
entity does not hold any collateral over these balances, apart
from the withdrawal of future support and software licence use
rights. The average age of these receivables is 40 days (2017 -
Income tax expense
15,548
13,525
45 days).
(c) Amounts recognised directly in equity
Aggregate current and defered tax arising in the reporting
period and not recognised in net profit or loss or other
comprehensive income but directly debited or credited to
equity:
2018
$’000
2017
$’000
(ii) Included in trade receivables are amounts billed but not
yet collected for post implementation customer support to
commence post 30 September at each balance date. An
equal and offsetting amount is included in unearned income.
The balance at 30 September 2018 is $21,321,000 (2017 -
Net deferred tax
- debited (credited) directly to equity
1,059
1,325
$20,810,000).
8 Current assets - cash and cash equivalents
2017
$’000
2018
$’000
Cash and cash equivalents
104,322
93,383
The Company has a secured $2 million interchangeable facility
which is transferable between an Overdraft, Fixed Rate Commercial
(a) Impaired trade receivables
Movements in the provision for impairment of receivables
are as follows:
At 1 October
Provision for impairment recognised
during the year
Unused amounts reversed
Bill and Variable Rate Commercial Bill to assist with working capital
At 30 September
requirements. The facility is unused at 30 September 2018.
In determining the recoverability of a trade receivable the Company
Cash at bank earns interest at floating rates based on daily bank
considers any change in the credit quality of the trade receivable
deposit rates.
Money market accounts at call are made for varying periods of
between one day and three months, depending on immediate cash
requirements of the Company, and earn interest at the respective
money market deposit rates. The fair value of cash assets at 30
September are their carrying values.
9 Current assets - trade and other receivables
2017
$’000
2018
$’000
from the date credit was initially granted up to the reporting date.
The concentration of credit risk is limited due to the customer
base being large and unrelated. Accordingly, the Directors believe
that there is no further credit provision required in excess of the
allowance for doubtful debts.
10 Current assets - other current assets
2018
$’000
Deposits receivable
2018
$’000
525
839
(462)
902
2017
$’000
528
281
(284)
525
2017
$’000
407
391
798
959
-
959
Trade receivables (i) (ii)
59,809
52,028
Income tax receivable
Provision for impairment of receivables
Sundry receivables
(902)
647
(525)
1,759
59,554
53,262
(i) Trade receivables are non-interest bearing and are on 30 day
terms. No interest is charged on trade receivables. A specific
analysis of debts that may be uncollectible is made at each
reporting date by an internal credit committee and provisions
made where appropriate. Provisions recorded are based on
11 Non-current assets - property, plant and equipment
Office furniture and
equipment
$’000
Leased office
furniture and
equipment
$’000
Computer software
$’000
Motor vehicles
$’000
Leased computer
software
$’000
Year ended 30 September 2018
Opening net book amount
Additions
Disposals
Excange differences charge
Depreciation charge
Make good movement
Closing net book amount
At 30 September 2018
Cost
Accumulated depreciation
Net book amount
Year ended 30 September 2017
Opening net book amount
Additions
Disposals
Depreciation charge
Make good movement
Closing net book amount
At 30 September 2017
Cost
Accumulated depreciation
Net book amount
13,427
3,358
(680)
(39)
(3,860)
(5)
12,201
41,167
(28,966)
12,201
11,507
5,834
(367)
(3,625)
78
13,427
38,804
(25,377)
13,427
49
-
-
-
(13)
-
36
1,240
(1,204)
36
62
-
-
(10)
(3)
49
1,240
(1,191)
49
10
30
-
-
(19)
-
21
2,976
(2,955)
21
48
-
-
(38)
-
10
2,946
(2,936)
10
39
-
-
-
(17)
-
22
282
(260)
22
64
-
-
(25)
-
39
282
(243)
39
-
-
-
-
-
-
-
248
(248)
-
-
-
-
-
-
-
248
(248)
-
Total
$’000
13,525
3,388
(680)
(39)
(3,909)
(5)
12,280
45,913
(33,633)
12,280
11,681
5,834
(367)
(3,698)
75
13,525
43,520
(29,995)
13,525
116
117
Transforming business making life simpleTechnologyOne Limited 2018 Full Year Report 12 Non-current assets - intangible assets
Goodwill
$’000
Intellectual property/
Source code
$’000
Customer contracts
$’000
Year ended 30 September 2018
Opening net book amount
Amortisation charge
Impairment
Closing net book amount
At 30 September 2018
Cost
Accumulated amortisation
Accumulated impairment
Net book amount
Year ended 30 September 2017
Opening net book amount
Amortisation charge
Closing net book amount
At 30 September 2017
Cost
Accumulation amortisation
Net book amount
40,003
-
-
40,003
40,003
-
-
40,003
40,003
-
40,003
40,003
-
40,003
6,668
(306)
(2,177)
4,185
10,358
(3,996)
(2,177)
4,185
7,152
(484)
6,668
10,358
(3,690)
6,668
878
(55)
-
823
1,100
(277)
-
823
933
(55)
878
1,100
(222)
878
Total
$’000
47,549
(361)
(2,177)
45,011
51,461
(4,273)
(2,177)
45,011
48,088
(539)
47,549
51,461
(3,912)
47,549
(a) Impairment tests for goodwill
Goodwill and indefinite life intangibles are allocated to the
budgets approved by senior management covering a five year
Company’s cash generating units (CGUs) identified according to
period, as there is no active market against which to compare the
each reportable segment for impairment testing purposes.
fair value of the unit.
A segment-level summary of the goodwill allocation is presented
The discount rate applied to cash flow projections is 15% pre-tax
below.
2018
Goodwill
(2017 - 15%).
Sales &
Marketing
$’000
Consulting
$’000
Research &
Development
$’000
Total
$’000
The key assumptions used for all CGUs in value in use calculations
for 30 September 2018 and 2017 are:
13,378
12,947
13,678
40,003
• Budgeted margins - the basis used to determine the value
Indefinite life intangibles
702
660
660
2,022
14,080
13,607
14,338
42,025
Sales &
Marketing
$’000
Consulting
$’000
Research &
Development
$’000
Total
$’000
13,378
12,947
13,678
40,003
2017
Goodwill
Indefinite life intangibles
1,428
1,386
1,386
4,200
assigned to budgeted margin is the average margin achieved in
the year immediately before the budgeted year.
• Bond rates - the yield on a five year government bond rate at the
beginning of the budgeted year is used.
• Growth rates - based on long-term historical trends for each
segment.
• Terminal growth rates - these have been set at 3% (2017 - 3%).
As part of the ICON acquisition (refer to note 28), an ambitious earn
14,806
14,333
15,064
44,203
out target was established. ICON partially achieved their earn out
The recoverable amounts have been determined based on a value
in use calculation using cash flow projections based on financial
target and, as a result, the Company has reduced the contingent
consideration by $2.2m, and, following a review of the value of
associated intangible assets, also reduced the carrying value of the
associated indefinite life IP intangible assets by $2.2m.
Notwithstanding this, a reasonable possible change in the
14 Current liabilities - trade and other payables
2017
$’000
2018
$’000
assumptions would have no significant impact on remaining carrying
Trade payables
value of these assets.
13 Non-current assets - deferred tax assets
Contingent consideration (note 28)
Sundry Creditors
Directors’ fees
2018
$’000
2017
$’000
32,319
22,543
11,810
8,084
404
8,097
7,270
343
52,617
38,253
The balance comprises temporary differences attributable to:
Trade payables and sundry creditors are non-interest bearing and
4,452
3,821
are normally settled on 30 day terms. No interest is payable on
outstanding balances. The Company has financial risk management
policies in place to ensure that all payables are paid within the credit
timeframe.
15 Current liabilities - provisions
Employee benefits
Provisions - other
Accrued expenses
Intangibles
Copyright - software
Lease liability (net)
Employee share trust
Other
Set-off of deferred tax liabilities pursuant
to set-off provisions (note 19)
Net deferred tax assets
Deferred tax assets expected to be
recovered within 12 months
Deferred tax assets expected to be
recovered after more than 12 months
Movements:
Opening balance at 1 October
Credited / (charged) to the
consolidated income statement
Credited / (charged) to equity
Acquisition of subsidiary
Offset from deferred tax liabilities
Closing balance at 30 September
2,193
1,376
1,202
258
3
1,911
748
1,271
277
9
2,223
2,333
142
354
11,849
10,724
(11,445)
(5,242)
404
5,482
Make good provision
Other provisions
Annual leave
Onerous contracts
Long service leave
2018
$’000
157
731
6,672
5,697
2017
$’000
90
720
5,727
4,733
13,257
11,270
11,270
11,194
2018
$’000
2017
$’000
5
5
10
10
2018
$’000
2017
$’000
2,588
2,648
556
690
3,144
3,338
194
2,630
(a) Movements in provisions
210
2,852
404
5,482
Please refer to note 17 for details.
16 Current liabilities - borrowings
10,724
12,970
Secured
Lease liabilities (note 26)
Total secured current borrowings
17 Non-current liabilities - provisions
1,234
(161)
(109)
(2,085)
(11,445)
(5,242)
404
5,482
5,482
7,512
Long service leave
Make good provision
(a) Movements in provisions
Movements in each class of provision during the financial year, other
than employee benefits, are set out below:
The non-current provisions have been discounted using a pre-tax
rate that reflects current market assessments of the time value of
money and the risks specific to the liability.
118
119
Transforming business making life simpleTechnologyOne Limited 2018 Full Year Report
18 Non-current liabilities - other
non-current liabilities
20 Contributed equity
(a) Share capital
22 Dividends
Ordinary shares
Annual
Leave
$’000
Long
service
leave
$’000
Make
Good
($’000)
Service Level
Commitment
($’000)
Sub-total
($’000)
5,727
7,381
780
720
14,608
Ordinary shares
Fully paid
2018
Shares
2017
Shares
2018
$’000
2017
$’000
316,691,676
315,442,363
33,171
32,152
3,743
2,334
94
1,450
7,621
Date Details
Number of shares
$’000
(b) Movements in ordinary share capital
(2,798)
(1,430)
(161)
(1,439)
(5,828)
6,672
8,285
713
731
16,401
1 Oct 2017 Opening balance
315,442,363
32,152
Exercise of options
1,249,313
1,019
30 Sep 2018 Closing balance
316,691,676
33,171
1 Oct 2016 Opening balance
313,294,930
29,984
Final dividend for the year ended 30 September 2017 of 5.60
cents (2016 – 5.09 cents) per fully paid share paid on December
2017 (2016 - December 2016)
100% franked (2016 - 100%) based on tax paid at 30%
Special dividend for the year ended 30 September 2017 of 2.0
cents (2016 - 2.00 cents) per fully paid share paid on December
2017
100% franked based on tax paid at 30%
Interim dividend for the year ended 30 September 2018 of 2.86
cents (2017 - 2.60 cents) per fully paid share paid in June 2018
(2017 - June 2017)
100% franked (2017 - 100%) based on tax paid at 30%
9,029
8,158
2018
$’000
2017
$’000
1,241
1,423
Exercise of options
2,147,433
2,168
Total dividends provided for or paid
33,002
30,370
30 Sep 2017 Closing balance
315,442,363
32,152
2018
Carrying amount at 1
October 2017
Additional provisions
recognised
Charged / (credited)
to the P&L or loss -
unwinding of discount
Carrying amount at
end of period
Other non-current liabilities
Other non-current liabilities consists of lease incentives. The lease
(c) Employee Share Option Plan
incentive relates to leases entered into by the Company whereby
Information relating to the TechnologyOne Employee Share Option
the Company has obtained an incentive to enter into a lease
Plan, including details of options issued, exercised and lapsed
credits, growth continues as is expected and there is no compelling
of office premises. The incentive is written back to the income
during the financial year and options outstanding at the end of the
alternative use for the cash reserves.
(a) Dividend Policy
The Board will continue to consider paying a special dividend
in future years if cash reserves remain high, available franking
(b) Dividends not recognised at the end of
the reporting period
2018
$’000
2017
$’000
2018
$’000
2017
$’000
17,664
15,947
Franking credits that will arise from the payments of income tax
payable as at the end of the financial year
2018
$’000
2017
$’000
2,544
3,868
1,426
2,992
The above amounts represent the balance of the franking account
as at the end of the reporting period, adjusted for:
6,309
6,265
(A) franking credits that will arise from the payment of the
amount of the provision for income tax
(B) franking debits that will arise from the payment of dividends
recognised as a liability at the reporting date
The impact on the franking account of the dividend recommended
by the Directors since the end of the reporting date, but not
recognised as a liability at the reporting date, will be a reduction in
the franking account of $8,306,307 (2017 - $7,705,607).
23 Key Management Personnel disclosures
(a) Key Management Personnel compensation
2018
$
2017
$
Short-term employee benefits
4,171,986
4,948,797
Post-employment benefits
Share-based payments
-
70,246
526,182
546,801
4,698,168
5,565,844
2018
$’000
2017
$’000
22,294
19,640
(380)
8,616
(728)
15,775
30,530
34,687
Final
In addition to the above dividends, since year end the Directors
have recommended the payment of a final dividend of 6.16
cents per fully paid ordinary share, (2017 – 5.60 cents) 75%
franked based on tax paid at 30% (2017 - 30%).
The aggregate amount of proposed dividend expected to be
paid out of retained earnings, but not recognised as a liability
at year end
(b) Nature and purpose of other reserves
Special
statement on a straight-line basis over the life of the lease.
financial year, is set out in note 32.
19 Non-current liabilities - deferred
tax liabilities
21 Reserves
(a) Other reserves
2018
$’000
2017
$’000
The balance comprises temporary differences attributable to:
Share-based payments
(11,573)
(5,212)
Foreign currency translation
Dividend reserve
Accrued receivables
Accelerated depreciation for tax purposes
Prepayments
Other
Total deferred tax liabilities
Set-off of deferred tax liabilities pursuant to set-off provisions
(note 13)
Net deferred tax liabilities
Movements:
154
(26)
-
(30)
-
-
(11,445)
(5,242)
11,445
5,242
-
-
Opening balance at 1 October
(5,242)
(5,457)
Charged / (credited) to the income statement
(6,203)
215
Offset to deferred tax assets
11,445
5,242
(i) Share-based payments
The reserve is used to record the value of equity benefits
provided to employees, through share-based payment
transactions and associated tax benefits.
(ii) Foreign currency translation
Exchange differences arising on translation of the foreign
controlled entity are recognised in other comprehensive income
as described in note 1(c) and accumulated in a separate reserve
Closing balance at 30 September
-
-
within equity. The cumulative amount is reclassified to the
Other non-current liabilities consists of lease incentives.
income statement when the net investment is disposed of.
The lease incentive relates to leases entered into by the Company
(iii) Dividend reserve
whereby the Company has obtained an incentive to enter into a
The reserve records retained earnings set aside for the payment
lease of office premises. The incentive is written back to the income
of future dividends.
statement on a straight-line basis over the life of the lease.
(b) Equity instrument disclosures relating to Key
Management Personnel
19,509
17,664
Details of options provided as remuneration to KMP and shares
issued on the exercise of such, together with terms and conditions
can be found in the remuneration report.
24 Remuneration of auditors
During the year, the following fees were paid or payable for services
provided by the auditor of the consolidated entity:
6,334
6,309
Ernst & Young
In addition to the above dividends, since year end the Directors
have recommended that payment of a special dividend of 2.00
cents per fully paid ordinary share (2017 - 2.00 cents) 75%
franked based on a tax paid at 30%.
The aggregate amount and the proposed dividend expected
to be paid in December 2018 out of retained earnings at 30
September 2018, but not recognised as a liability at the end of
the year
(c) Franked dividends
The franked portions of the final dividends recommended after 30
Audit and review of financial statements
Other assurance services
25,843
23,973
Audit and other assurance services
September 2018 will be franked out of existing franking credits or
Total remuneration for audit and other assurance services
839,148
899,338
out of franking credits arising from the payment of income tax in the
year ended 30 September 2019.
Other services
Taxation advice
2018
$’000
2017
$’000
Total remuneration of Ernst & Young
107,515
134,550
946,663
1,033,888
Final
The relative ratio of other services to audit and assurance services
Franking account balance as at the end of the financial year at
30% (2017: 30%)
(1,118)
(876)
was 11%.
2018
$
2017
$
622,200
306,208
216,948
593,130
120
121
Transforming business making life simpleTechnologyOne Limited 2018 Full Year Report
25 Contingencies
TechnologyOne is a global business and from time to time in the
ordinary course of business it receives enquiries from various
regulators and government bodies. TechnologyOne cooperates fully
with all enquiries and these enquiries do not require disclosure in
(b) Finance lease commitments
Commitments in relation to finance leases are payable
as follows:
their initial state, however should the Company become aware that
Within one year
an enquiry is developing further or if any regulator or government
Representing lease liabilities:
action is taken against the group, appropriate disclosure is made in
Current (note 16)
accordance with the relevant accounting standards.
2018
$’000
2017
$’000
5
5
10
10
As a global business, from time to time TechnologyOne is also
27 Related party transactions
subject to various claims and litigation from third parties during the
(a) Ultimate controlling entity
ordinary course of its business. The Directors of TechnologyOne
The ultimate controlling entity of the consolidated entity is
earn out tranche, plus interest, will be achieved. The earn out period
for the DMS acquisition was completed during 2018 and settled
subsequent to year end. Therefore, the fair value of contingent
consideration at 30 September 2018 reflects the maximum earn
out tranche, which was achieved at the conclusion of the earn out
period.
JRA
The fair value of the estimate of the JRA contingent consideration
of $8,487,392 was calculated based on the assumption that a
maximum $8,500,000 ($2,500,000 for earn out tranche, $1,000,000
for bonus tranche and $5,000,000 for the North American tranche)
may be payable three calendar years after acquisition and a
have given consideration to such matters which are or may be
subject to claims or litigation at year end and, unless specific
provisions have been made, are of the opinion that no material
Technology One Limited, a company incorporated in Australia.
discount rate of 1.54% based on relevant government bonds with
Name of entity
(b) Transactions with related parties
3.
terms to maturity. The contingent consideration is classified as Level
contingent liability for such claims of litigation exists. The group had
The parent entity entered into the following transactions during the
no material contingent assets or liabilities other than the following:
year with related parties in the wholly owned group:
The potential undiscounted earn-out tranche amount payable
under the Agreement is up to $2,500,000 and is based on the earn
Current
Non Current
Total
ICON
$’000
DMS
$’000
JRA
$’000
Total
$’000
-
-
-
3,322
8,488
11,810
-
-
-
3,322
8,488
11,810
29 Controlled entities
The consolidated financial statements incorporate the assets,
liabilities and results of the following subsidiaries in accordance with
the accounting policy described in note 1(b):
Country of
Incorporation
Class of shares
2018 %
2017%
Equity holding
Malaysia
Ordinary
100
100
New Zealand
Ordinary
100
100
Guarantees
At 30 September 2018, the Company had $4,474,910 (2017 -
$6,478,061) in outstanding performance guarantees. The total
available guarantee facility is $7,000,000 (2017 - $7,000,000).
• Loans were advanced and repayments received on short-term
out tranche Net Profit Before Tax (NPBT) divided by the earn-out
intercompany accounts
tranche Target NPBT of $6,300,000 multiplied by $5,000,000 less
England
Ordinary
• Marketing support and management fees were charged to wholly
$2,500,000.
Avand Pty Ltd
Australia
Ordinary
owned controlled entities
The earn-out tranche is payable 3 years after the completion of the
New Zealand
Ordinary
100
100
100
100
100
100
The Company also had unused foreign currency dealing limits of
These transactions were undertaken on commercial terms and
acquisition.
$1,040,040 (2017 - $950,576).
The parent entity, Technology One Limited, continues to support its
subsidiaries in their operations, by way of financial support.
Earn out
At 30 September 2018, the Company had $11,810,000 (2017 -
$16,467,362) in earn out contingencies relating to the acquisitions
made in prior years. The valuation techniques and fair value of the
consideration and the recording of the liability is outlined in note 28.
26 Commitments
(a) Operating lease commitments
conditions. No provision for doubtful debts has been raised on
amounts due to and receivable from related parties.
TechnologyOne has agreed to pay the selling shareholders an
additional bonus tranche based on JRA’s 3 year cumulative actual
The ownership interest in related parties in the wholly owned group
NPBT Bonus Tranche divided by the Target NPBT of $6,300,000
is set out in note 29.
28 Business combination
There were no business combinations in the 2018 year.
During the year, the ICON earn out was settled which resulted
in accounting for the reduction of the corresponding contingent
consideration. As part of the ICON acquisition, an ambitious earn
out target was established. ICON partially achieved their earn out
target and, as a result, the Company has reduced the contingent
multiplied by 33% of any amount above the Bonus tranche figure to
a maximum of $1,000,000. The additional bonus tranche is payable
3 years after the completion of the acquisition. TechnologyOne has
agreed to pay the selling shareholders an additional North American
tranche based on JRA’s 3 year cumulative actual NPBT Bonus
Tranche divided by the North American Target NPBT of $3,500,000,
multiplied by $5,000,000 to a maximum of $5,000,000. The
additional North American tranche is payable 3 years after the
completion of the acquisition.
Australia
Ordinary
100
100
Australia
Ordinary
100
100
New Zealand
Ordinary
Boldridge Pty Ltd
Australia
Ordinary
Icon Solution Unit Trust
Australia
Ordinary
Jeff Roorda & Associates
Pty Ltd
Australia
Ordinary
100
100
100
100
100
100
100
100
The parent entity is Technology One Limited, a public company,
limited by shares and is domiciled in Brisbane, Australia and whose
Technology One
Corporation Sdn Bhd
Technology One New
Zealand Ltd
Technology One UK
Limited
Avand (New Zealand)
Pty Ltd
Technology One Employee
Share Trust
Desktop Mapping Systems
Pty Ltd
Digital Mapping Solutions
NZ Limited
Operating leases are entered into as a means of acquiring access
consideration by $2.2m, and, following a review of the value of
to office property. Rental payments are generally fixed, but with
inflation escalation clauses on which contingent rentals are
associated intangible assets, also reduced the carrying value of
these assets by $2.2m. This has resulted in a net impact on the
determined. No renewal or purchase options exist in relation to
income statement of nil.
operating leases and no operating leases contain restrictions on
financing or other leasing activities.
2018
$’000
2017
$’000
Commitments for minimum lease payments in relation to
non-cancellable operating leases are payable as follows:
Contingent consideration in relation to the DMS and JRA business
combinations, as set out in the prior year, is classified as Level 3. The
impact on the income statement during the period represents the
unwinding of the contingent consideration. The inputs and valuation
techniques are consistent with those in the prior year and as such,
the amounts payable under the respective acquisition agreements
Within one year
6,760
7,144
have been discounted to present value.
Later than one year but not later than five years
22,603
17,245
DMS
Management has commenced discussions with the vendors of
shares are traded on the Australian Securities Exchange. All entities
JRA in respect of the earn-out which, under the original contract,
operate in the software industry in their geographical locations. The
completed on 1 October 2018. Although an outcome is yet to be
Registered office is located at:
determined, an extension of earn-out period is being considered.
As a result, TechnologyOne has retained the full earn-out liability of
$8,500,000 at 30 September 2018.
Reconciliation of Level 3 contingent consideration is set out below.
Level 11, TechnologyOne HQ
540 Wickham Street
Fortitude Valley QLD 4006
Balance at 30 September 2017
Payments (ICON)
Release of ICON earn out
$’000
16,467
(2,721)
(2,177)
241
11,810
Later than five years
11,906
64
The fair value of the estimate of the DMS contingent consideration of
(Gains) / Losses recognised in income statement
41,269
24,453
$3,322,272, which includes an interest component of $322,272, was
calculated based on the assumption that a maximum $3,000,000
122
123
Transforming business making life simpleTechnologyOne Limited 2018 Full Year Report
30 Reconciliation of profit after income tax to
net cash inflow from operating activities
(b) Weighted average number of shares used as
denominator
Set out below are summaries of options granted under the plan:
2018
Number
2017
Number
Issue date
Expiry date
Exercise price
315,802,661
313,865,453
2018
Balance at start of the
period
Number
Issued during the
period
Number
Exercised during
the period
Number
Forfeited during
the period
Number
Balance at the end
of the period
Number
Vested and
exercisable at end
of the period
Number
Profit for the period
Depreciation and amortisation
Non-cash employee benefits expense - share-based payments
Impairment of intangibles
Transfers to / (from) provisions:
Employee entitlements
Doubtful debts
Net (gain) / loss on sale of non-current assets
Movements in provision for:
Income tax payable
Deferred income tax
Change in operating assets and liabilities:
Decrease / (increase) in trade debtors
Decrease / (increase) in sundry debtors
2018
$’000
2017
$’000
50,980
44,494
4,276
1,595
2,177
4,237
1,576
-
1,793
(319)
377
(16)
(3)
179
Weighted average number of ordinary shares used as the
denominator in calculating basic earnings per share
Adjustments for calculation of diluted earnings per share:
Options
890,545
1,637,750
Weighted average number of ordinary and potential
ordinary shares used as the denominator in calculating
diluted earnings per share
316,693,206
315,503,203
There are no potentially dilutive share instruments not included in
the calculation of diluted earnings per share.
There have been no transactions involving ordinary shares or
(1,966)
(361)
of ordinary shares or potential ordinary shares outstanding between
potential ordinary shares that would significantly change the number
5,078
3,379
the reporting date and the date of completion of these financial
statements.
(7,781)
(10,461)
32 Share-based payments
1,112
(1,440)
(a) Employee Option Plan
Decrease / (increase) in prepayments
(2,632)
(2,470)
Decrease / (increase) in earned and unbilled revenue
(19,913)
(5,818)
Options are granted to employees at the discretion of the Board
based on the option plan approved by the Board.
Decrease / (increase) in other assets
Increase / (decrease) in trade creditors
(161)
600
10,421
5,932
TechnologyOne issues options with typically between 0% and 50%
discount on the volume weighted average price for the 10 days prior
to the grant date. The discount can be reduced or removed prior to
Increase / (decrease) in other liabilities
(182)
286
vesting at the Board’s discretion. The option can be withheld by the
Increase / (decrease) in unearned revenue
Increase / (decrease) in lease liability
3,443
6,900
(5)
(269)
Net cash inflow / (outflow) from operating activities
48,596
46,442
31 Earnings per share
(a) Basic earnings per share
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
Executive Chairman for unsatisfactory performance for as long as it
takes for the employee to rectify the performance matter.
The options typically vest if and when the employees satisfy the
following conditions:
• The employee must be in the same or higher position at the time
of exercise
2018
Cents
16.14
16.10
2017
Cents
14.18
14.10
• A successor must be in place before the last tranche of options
can be exercised
• Satisfactory performance on non-financial indicators as
determined by the Executive Chairman
Profit used for calculating basic and diluted earnings per share
($'000)
50,980
44,494
The period available between vesting date and expiry date of each
option is five years. There are no cash settlement alternatives.
Each option entitles the holder to purchase one share. Fair values
of options granted as part of remuneration are based on values
determined using the Black-Scholes option pricing model.
26-Jun-18
N/A
15-Feb-18
25-Jan-18
25-Jan-18
25-Jan-18
25-Jan-18
25-Jan-18
25-Jan-18
25-Jan-18
Oct-25
Oct-25
Jul-24
Jul-24
Jul-24
Jul-24
Jul-24
Jul-24
02-Jan-18
Oct-25
02-Jan-18
02-Jan-18
02-Jan-18
01-Oct-17
01-Oct-17
01-Oct-17
23-May-17
10-Mar-17
20-Feb-17
14-Feb-17
07-Feb-17
01-Oct-16
01-Jul-16
01-Jul-16
01-Jul-16
01-Jul-16
01-Jul-16
01-Jul-16
01-Jul-16
01-Jul-16
01-Jul-16
01-Jul-16
10-Oct-15
01-Oct-15
01-Oct-15
01-Jul-15
Jul-24
Jul-24
Jul-24
Oct-25
Oct-25
Oct-25
Oct-24
Oct-24
Oct-24
Oct-24
Oct-24
Oct-24
Jul-23
Jul-23
Jul-23
Jul-23
Jul-23
Jul-23
Jul-23
Jul-23
Jul-23
Jul-23
Oct-23
Jul-22
Jul-22
Jul-22
$0.00
$5.15
$5.15
$0.53
$0.86
$1.03
$1.16
$1.59
$1.89
$5.15
$0.48
$0.86
$5.15
$5.15
$5.15
$4.12
$5.60
$5.60
$5.11
$5.07
$5.23
$5.75
$0.57
$1.59
$0.68
$0.48
$1.89
$1.03
$1.16
$0.53
$0.86
$1.59
$3.78
$3.03
$1.89
$0.57
-
17,480
(17,480)
-
257,864
-
-
-
-
257,864
-
2,113,488
-
(318,008)
1,795,450
-
50,000
(50,000)
-
158,300
-
-
225,667
-
-
16,650
-
-
12,500
-
-
50,000
-
-
158,300
225,667
16,650
12,500
50,000
-
356,167
-
(141,771)
214,396
-
60,000
-
(60,000)
-
-
91,650
-
-
25,000
-
-
-
-
-
100,594
-
-
22,799
-
91,650
25,000
-
100,594
22,799
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
189,759
-
-
189,759
-
22,516
-
-
22,516
-
101,242
-
-
101,242
-
50,000
-
-
50,000
-
50,000
-
-
50,000
-
1,481,763
-
-
(569,920)
911,843
-
200,000
-
(200,000)
-
-
-
-
-
-
-
200,000
-
(200,000)
-
-
60,000
-
(60,000)
-
-
50,000
-
(50,000)
-
-
200,666
-
(126,666)
74,000
74,000
16,650
-
(16,650)
-
-
100,000
-
(50,000)
(50,000)
-
-
249,950
-
(195,800)
54,150
54,150
12,500
-
-
12,500
12,500
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
124
125
Transforming business making life simpleTechnologyOne Limited 2018 Full Year Report
Issue date
Expiry date
Exercise price
Balance at start of the
period
Number
Issued during the
period
Number
Exercised during
the period
Number
Forfeited during
the period
Number
Balance at the end
of the period
Number
Vested and
exercisable at end
of the period
Number
Issue date
Expiry date
Exercise price
Balance at start of the
period
Number
Issued during the
period
Number
Exercised during
the period
Number
Forfeited during
the period
Number
Balance at the end
of the period
Number
Vested and
exercisable at end
of the period
Number
01-Jul-15
01-Jul-15
01-Jul-15
01-Jul-15
01-Jul-15
01-Jul-15
01-Jul-15
01-Jul-15
01-Oct-14
14-Jul-14
14-Jul-14
14-Jul-14
14-Jul-14
14-Jul-14
12-Jul-14
01-Jul-14
01-Jul-14
12-Aug-13
01-Jul-13
01-May-09
10-Oct-08
Jul-22
Jul-22
Jul-22
Jul-22
Jul-22
Jul-22
Jul-22
Jul-22
Jul-21
Jul-22
Jul-23
Jul-24
Jul-25
Jul-26
Jul-21
Jul-21
Jul-21
Jul-20
Jul-22
Jul-22
Jul-20
25-Aug-06
Aug-24
$1.59
$0.68
$0.48
$1.03
$1.16
$0.53
$0.86
$1.59
$1.59
$1.34
$1.34
$1.34
$1.34
$1.34
$0.40
$1.03
$0.86
$1.03
$0.86
$0.36
$0.41
$0.35
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
50,000
-
-
50,000
50,000
41,650
-
-
41,650
41,650
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
167,000
-
(167,000)
-
-
167,000
-
-
167,000
-
167,000
-
-
167,000
-
167,000
-
-
167,000
-
-
-
-
-
-
-
-
-
-
-
25,000
-
(25,000)
-
-
-
-
-
-
-
-
-
-
-
-
55,000
-
-
55,000
55,000
-
-
-
-
-
142,500
-
(52,500)
90,000
90,000
4,199,817
3,558,153
(1,211,096)
(1,139,699)
5,407,181
377,300
Weighted average exercise price
$3.28
$4.30
$0.83
$5.00
$4.14
$0.68
Issue date
Expiry date
Exercise price
Balance at start of the
period
Number
Issued during the
period
Number
Exercised during
the period
Number
Forfeited during
the period
Number
Balance at the end
of the period
Number
Vested and
exercisable at end
of the period
Number
2017
23-May-17
10-Mar-17
20-Feb-17
14-Feb-17
07-Feb-17
18-Oct-16
01-Oct-16
01-Jul-16
01-Jul-16
01-Jul-16
Oct-24
Oct-24
Oct-24
Oct-24
Oct-24
Oct-24
Oct-24
Jul-23
Jul-23
Jul-23
$5.60
$5.60
$5.11
$5.07
$5.23
$5.87
$5.75
$0.57
$1.59
$0.68
-
247,373
-
(57,614)
189,759
-
-
22,516
-
-
22,516
-
-
151,863
-
(50,621)
101,242
-
-
50,000
-
-
50,000
-
-
50,000
-
-
50,000
-
-
195,804
-
(195,804)
-
-
200,000
-
200,000
-
200,000
-
(200,000)
-
-
200,000
-
200,000
-
01-Jul-16
01-Jul-16
01-Jul-16
01-Jul-16
01-Jul-16
01-Jul-16
01-Jul-16
01-Jul-16
11-Apr-16
10-Oct-15
01-Oct-15
01-Oct-15
01-Jul-15
01-Jul-15
01-Jul-15
01-Jul-15
01-Jul-15
01-Jul-15
01-Jul-15
01-Jul-15
01-Jul-15
01-Oct-14
14-Jul-14
14-Jul-14
14-Jul-14
14-Jul-14
14-Jul-14
12-Jul-14
01-Jul-14
01-Jul-14
12-Aug-13
01-Jul-13
01-May-09
10-Oct-08
Jul-23
Jul-23
Jul-23
Jul-23
Jul-23
Jul-23
Jul-23
Jul-23
Oct-23
Oct-23
Jul-22
Jul-22
Jul-22
Jul-22
Jul-22
Jul-22
Jul-22
Jul-22
Jul-22
Jul-22
Jul-22
Jul-21
Jul-22
Jul-23
Jul-24
Jul-25
Jul-26
Jul-21
Jul-21
Jul-21
Jul-20
Jul-22
Jul-22
Jul-20
$0.48
$1.89
$1.03
$1.16
$0.53
$0.86
$4.10
$1.59
$4.80
$3.78
$3.03
$1.89
$0.57
$1.59
$0.68
$0.48
$1.03
$1.16
$0.53
$0.86
$1.59
$1.59
$1.34
$1.34
$1.34
$1.34
$1.34
$0.40
$1.03
$0.86
$1.03
$0.86
$0.36
$0.41
$0.35
60,000
-
50,000
-
200,666
-
16,650
-
60,000
-
50,000
-
200,666
-
16,650
-
150,000
-
(50,000)
100,000
-
249,950
-
249,950
-
100,000
-
(100,000)
-
-
12,500
-
12,500
-
317,211
-
(84,590)
232,621
-
50,262
-
(50,262)
-
-
100,000
-
(50,000)
(50,000)
-
-
50,000
-
(50,000)
-
-
200,000
-
(200,000)
-
-
200,000
-
(200,000)
-
-
200,000
-
(200,000)
-
-
50,000
-
(50,000)
-
-
200,666
-
(200,666)
-
-
16,650
-
(16,650)
-
-
150,000
-
(50,000)
(50,000)
50,000
-
249,950
-
(208,300)
41,650
41,650
12,500
-
(12,500)
-
-
200,000
-
(200,000)
-
-
167,000
-
(167,000)
-
-
167,000
-
167,000
-
167,000
-
167,000
-
167,000
-
167,000
-
167,000
-
167,000
-
60,000
-
(60,000)
-
-
74,000
-
(74,000)
-
-
124,950
-
(99,950)
25,000
25,000
4,000
-
(4,000)
-
-
71,717
-
(71,717)
-
-
55,000
-
55,000
55,000
-
-
-
-
-
142,500
-
(52,500)
90,000
90,000
5,014,172
2,443,384
(2,147,433)
(1,110,306)
4,199,817
264,150
-
1,725,828
(22,650)
(221,415)
1,481,763
-
25-Aug-06
Aug-24
Weighted average exercise price
$1.35
$5.68
$1.07
$4.08
$3.28
$0.48
126
127
Transforming business making life simpleTechnologyOne Limited 2018 Full Year Report
At September 2018 a total of 5,430,083 options (2017 – 4,199,817)
were offered to employees. The amount of options offered is in
excess of options granted as certain options while offered will only
be granted in a future period at the discretion of the Executive
Chairman.
(c) Expenses arising from share-based payment
transactions
Total expenses arising from share-based payment transactions
recognised during the year as part of employee benefit expense
were as follows:
The weighted average share price at the date of exercise of options
exercised during the year ended 30 September 2018 was $0.83
(2017 - $1.07).
Options issued under employee option plan:
The weighted average remaining contractual life of share options
outstanding at the end of the period was 6.4 years (2017 - 4.4 years).
Vested
Forfeited
32 Share-based payments (continued)
Total share-based payment expense
2018
$’000
2017
$’000
1,634
(39)
1,993
(417)
1,595
1,576
33 Parent entity financial information
(a) Summary financial information
The individual financial statements for the parent entity show the
following aggregate amounts:
(a) Employee Option Plan (continued)
Fair value of options granted
The fair value of the equity-settled options is measured at the
reporting date using the Black-Scholes option pricing model taking
into account the terms and conditions upon which the instruments
were granted.
The fair value of options granted during the year was between
$0.69 and $0.83 (2017 - $0.60 - $1.68).
The model inputs for options granted during the year ended 30
September 2018 included:
(I) Dividend yield of 2.0% (2017 - 1.6% - 1.9%)
II) Expected volatility between 19.8% and 27.8% (2017 – 20.2% -
33.6%)
(III) Risk free interest rate between 2.0% and 2.2% (2017 – 1.5%
- 2.0%)
(IV) Expected life of option 3.3 years (2017 – 3.3 years)
(V) Option exercise price between $0.00 and $5.15 (2017 - $5.07
- $5.75)
(VI) Weighted average share price at grant date between $5.00
and $5.15 (2017 - $5.07 - $5.75)
The expected volatility reflects the assumption that the historical
volatility of a basket of similar companies over a period similar to the
life of the options is indicative of future trends, which may also not
Balance sheet
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Shareholders' equity
Contributed equity
Dividend reserve
Share option reserve
Retained earnings
necessarily be the actual outcome.
(b) Executive performance rights
Profit or loss before tax for the year
Total comprehensive income
2018
$’000
2017
$’000
172,807
146,573
114,995
96,009
287,801
242,582
88,739
52,466
-
6,384
88,739
58,850
33,171
32,152
8,616
15,775
22,294
19,668
134,981
116,137
183,528
183,732
64,573
55,525
64,573
54,798
(b) Guarantees entered into by the parent entity
At 30 September 2018, the parent entity had $4,474,910 (2017 -
$6,628,690) in outstanding performance guarantees. The total
available guarantee facility is $7,000,000 (2017 - $7,000,000). The
parent entity also had unused foreign currency dealing limits of
$1,040,040 (2017 - $950,676).
The parent entity, Technology One Limited, continues to support its
subsidiaries in their operations, by way of financial support.
(c) Contingent liabilities of the parent entity
At 30 September 2018, the Parent had $11,810,000 (2017 -
$9,488,000) in earn out contingencies relating to the acquisitions
during the year. The valuation techniques and fair value of the
consideration is outlined in note 28.
34 Events occurring after the reporting period
(a) Dividends
On 22 November, the Directors of Technology One Limited declared
a final dividend on ordinary shares in respect of the 2018 financial
year. The total amount of the dividend is $19,508,207 and is 75%
franked. There was also a special dividend declared for the 2018
financial year of $6,333,834 and this is also 75% franked.
No other matter or circumstance has occurred subsequent to period
end that has significantly affected, or may significantly affect, the
operations of the Company, the results of those operations or the
state of affairs of the Company or economic entity in subsequent
financial years.
After further market consultation, the company made the decision
to return to issuing options or EPRs. The view is that the use of
options under an LTI scheme for a growth company best aligns
The reserves balance is higher than Group due to the foreign
currency translation reserve losses of $380,000 (2017 - loss of
shareholder and Executive interests. Please refer to section 3 of the
$728,000).
remuneration report for further information.
128
129
Transforming business making life simpleTechnologyOne Limited 2018 Full Year Report
Directors’ declaration
Technology One Limited Directors’ declaration 30 September 2018
In accordance with a resolution of the Directors of Technology One Limited, I state that:
In the opinion of the Directors:
Ernst & Young
111 Eagle Street
Brisbane QLD 4000 Australia
GPO Box 7878 Brisbane QLD 4001
Tel: +61 7 3011 3333
Fax: +61 7 3011 3100
ey.com/au
(a)
the financial statements and notes set out on pages 101 to 129 are in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 30 September 2018 and of its performance for the
year ended on that date; and
(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations
Regulations 2001;
Auditor’s Independence Declaration to the Directors of Technology One
Limited
As lead auditor for the audit of Technology One Limited for the financial year ended 30 September 2018,
I declare to the best of my knowledge and belief, there have been:
(b)
the financial statements and notes also comply with International Financial Reporting Standards as disclosed in note 1(a); and
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
(c)
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and
payable; and
(d)
this declaration has been made after receiving the declarations required to be made to the Directors in accordance with section
295A of the Corporations Act 2001 for the reporting year ended 30 September 2018.
On behalf of the Board of Directors
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 Technology One Limited and the entities it controlled during the financial
year.
Adrian Di Marco
Director
Brisbane
20 November 2018
Ernst & Young
Brad Tozer
Partner
20 November 2018
130
131
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
112
Transforming business, making life simpleTechnologyOne Limited 2018 Full Year Report Ernst & Young
111 Eagle Street
Brisbane QLD 4000 Australia
GPO Box 7878 Brisbane QLD 4001
Tel: +61 7 3011 3333
Fax: +61 7 3011 3100
ey.com/au
Independent Auditor's Report to the Shareholders of Technology One
Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Technology One Limited (the Company) and its subsidiaries
(collectively the Group), which comprises the consolidated statement of financial position as at 30
September 2018, the consolidated statement of comprehensive income, consolidated statement of
changes in equity and consolidated statement of cash flows for the year then ended, notes to the financial
statements, including a summary of significant accounting policies, and the directors' declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act
2001, including:
a)
b)
giving a true and fair view of the consolidated financial position of the Group as at 30 September
2018 and of its consolidated financial performance for the year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting
Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the
Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other
ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the financial report of the current year. These matters were addressed in the context of our audit
of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate
opinion on these matters. For each matter below, our description of how our audit addressed the matter
is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the
Financial Report section of our report, including in relation to these matters. Accordingly, our audit
included the performance of procedures designed to respond to our assessment of the risks of material
misstatement of the financial report. The results of our audit procedures, including the procedures
performed to address the matters below, provide the basis for our audit opinion on the accompanying
financial report.
1. Measurement and Recognition of Revenue and Associated Assets and Liabilities
Why significant
How our audit addressed the key audit matter
2
The Group contracts with its
customers using written contracts
which often encompass a number of
activities (separately identifiable
components) as referred to in Note
1(d).
The process to recognise revenue,
which included the allocation of
revenue to the activities and the
estimation and determination of
when delivery or service provision
took place, involved significant
judgment by the Group. This
judgment impacted the value of
revenue recognised and unearned
revenue that has been recorded as a
liability in the Consolidated
Statement of Financial Position.
Revenue recognition for multiple
element arrangements was
considered to be a key audit matter
due to the complexity of contracts
and the judgement required to
allocate revenue amongst the
respective contracted activities.
Note 1(d) to the financial
statements details the Group’s
revenue streams and the associated
accounting policies and Revenue is
disclosed in Note 5 and associated
assets in Note 9.
Our audit procedures addressed revenue from the following
business activities:
Implementation and consulting services;
► Software licence fees;
►
► Project services;
► Post sales customer support; and
► Cloud service fees.
We considered the Group’s identification and separation of these
activities and the allocation of the total contract value to these
activities. We also considered if the revenue recognition criteria
used by the Group was consistent with Australian Accounting
Standards. Our audit procedures for each of the revenue
generating activities identified in signed customer contracts
included the following:
Software licence fees
We read a sample of individual customer contracts and
determined whether the risks and rewards associated with the
relevant licensed software passed to the customer in the
reporting period. We then assessed whether the recorded
amount for the licence software fees agreed with the determined
contract value and whether any refund clauses or termination of
convenience clauses should have prevented revenue recognition.
Implementation and Consulting Services; and Project Services
For a sample of consulting service arrangements (time and
materials) we assessed the Group’s controls associated with the
recording of consulting days delivered and the application of
contracted fee rates to these days.
For a sample of fixed rate project agreements we assessed the
Group’s controls associated with the recognition of revenue and
the calculation of the percentage of completion of the project and
its application to the agreed fee. For fixed rate project
agreements we also considered the Group’s identification and
measurement of onerous contracts.
Where licence and optional services were sold together we
assessed on a sample basis the Group’s assessment of whether
the services sold with licences should be recognised separately.
Post Sales Customer Support
For a sample of contracts entered into during the current period,
we assessed whether the appropriate revenue recognition criteria
had been met.
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Why significant
How our audit addressed the key audit matter
3. Impairment Testing of Intangible Assets
3
4
For post sales customer support revenue (renewing customers)
for a sample of customers we compared the amount and timing of
amounts recorded in 2018 to the amounts and timing of revenue
recorded in prior periods and obtained explanations from the
Group where significant differences were identified. We also
tested a sample of customers and determine whether they had
consented to the renewal and where applicable the change of
date of the renewal of their support.
We assessed whether the Group, had any legal or constructive
obligation at balance date, through its support agreements, to
provide general new software releases to customers and whether
it was appropriate to recognise amounts as revenue, related to
this business activity up front as described in Note 1(d).
Cloud Service Fees
For a sample of significant service fee contracts we read
individual service contracts and assessed whether revenue
recognised was based upon the appropriate contract value and
the service period.
The above procedures also addressed the amounts of revenue
deferred and recognised as a liability in the Consolidated
Statement of Financial Position as at 30 September 2018 for
services to be provided in a future period.
2. Disclosure of the expected impact of the initial application of Australian Accounting
Standard AASB 15 Revenue from Contracts with Customers
Why significant
How our audit addressed the key audit matter
The application of the new accounting
standard related to revenue
recognition, AASB 15 Revenue from
Contracts with Customers will have a
significant impact on the way in which
Technology One recognize revenue
from 1 October 2018.
Note 1(a)(iii) to the financial
statements discloses the expected
impact of the new accounting
standard.
Our audit procedures included the following:
► Considered management’s application of the new
accounting standard to the term licence fee hosted on
the cloud and post sales customer support revenue
streams.
► Assessed the methodology used by the Group to
calculate the expected impact at 1 October 2018.
► Assessed the adequacy of the financial report
disclosures included in Note1 1(a)(iii) to the financial
statements
► For a sample of customer contracts we assessed the
determination of the expected transition impact of
AASB 15 for the revenue streams where it has been
assessed and disclosed in the financial report.
Why significant
How our audit addressed the key audit matter
Note 12 to the financial statements
discloses the goodwill and other
intangible assets allocated to each of
the Groups individually significant
cash generating units (CGUs).
The annual impairment assessment of
the intangible assessments performed
by the Group was a key audit matter
due to the value of the intangible
assets and the degree of estimation
and assumptions involved in the
assessment, specifically concerning
the revenue growth and margin
assumptions inherent in the future
discounted cash flows.
We considered whether the Group’s impairment testing satisfied
the requirements of Australian Accounting Standards.
This included considering the identification of CGU’s to which
goodwill and other assets were allocated.
The assumptions used in the impairment testing by the Group
and in the cash flow forecasts upon which it was based are
summarised in Note 12 to the financial statements. We
evaluated these assumptions and forecasts as follows:
► Assessed the mathematical accuracy of the impairment
model.
► Considered the historical reliability of the Group’s cash
flow forecasts.
► Assessed the Group’s determination of the carrying
value of each of the CGUs.
► Assessed whether the forecasts were consistent with
our knowledge of the business, Board approved budgets
and corroborated our work with external information
where possible.
► Assessed the sensitivities of the impairment models to
reasonably possible changes in assumptions.
We assessed the relevant disclosures in Note 12 to the Financial
Statements, including the disclosure of the impairment charge
of $2,177,000.
Information Other than the Financial Report and Auditor’s Report Thereon
The directors are responsible for the other information. The other information comprises the information
included in the Company’s 2018 Annual Report, but does not include the financial report and our
auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not and will not
express any form of assurance conclusion thereon, with the exception of the Remuneration Report and
our related assurance opinion.
In connection with our audit of the financial report, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial report or
our knowledge obtained in the audit or otherwise appears to be materially misstated.
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If, based on the work we have performed on the other information obtained prior to the date of this
auditor’s report, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a true
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for
such internal control as the directors determine is necessary to enable the preparation of the financial
report that gives a true and fair view and is free from material misstatement, whether due to fraud or
error.
In preparing the financial report, the directors are responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as applicable, matters relating to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgment and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial report, whether due to fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence
that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a
material misstatement resulting from fraud is higher than for one resulting from error, as fraud
may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
Obtain an understanding of internal control relevant to the audit 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 Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s
report to the related disclosures in the financial report or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our
auditor’s report. However, future events or conditions may cause the Group to cease to continue as
a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events in a
manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the financial report. We are
responsible for the direction, supervision and performance of the Group audit. We remain solely
responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated to the directors, we determine those matters that were of most
significance in the audit of the financial report of the current year and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should
not be communicated in our report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
Report on the Audit of the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in the directors' report for the year ended 30
September 2018.
In our opinion, the Remuneration Report of Technology One Limited for the year ended 30 September
2018, complies with section 300A of the Corporations Act 2001.
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7
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration
Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an
opinion on the Remuneration Report, based on our audit conducted in accordance with Australian
Auditing Standards.
Ernst & Young
Brad Tozer
Partner
Brisbane
20 November 2018
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Transforming business, making life simpleTechnologyOne Limited 2018 Full Year Report
Shareholder
information
Corporate directory - TechnologyOne Limited
Branch Offices
Board of Directors
Lawyer
Adrian Di Marco
Ron McLean
John Mactaggart
Kevin Blinco
Richard Anstey
Jane Andrews
Sharon Doyle
Company Secretary
Stephen Kennedy
Brisbane
Sydney
Melbourne
Canberra
Adelaide
Perth
Hobart
Auckland
Wellington
Australian Business Number
Kuala Lumpur
84 010 487 180
Registered Office
Technology One Limited
Level 11, TechnologyOne HQ
540 Wickham Street
Maidenhead
Glasgow
Port Moresby
Auditor
Ernst & Young
Fortitude Valley QLD 4006
Level 51, 111 Eagle Street
Australia
www.TechnologyOneCorp.com
P. 1800 671 978
International: +617 3167 7300
Brisbane QLD 4000
www.ey.com/au
McCullough Robertson
Level 11, 66 Eagle Street
Brisbane QLD 4000
www.mccullough.com.au
Share Registry
Link Market Services Limited
Locked Bag A14
Sydney NSW 1235
Phone: 02 8280 7454
Fax: 02 9287 0303
www.linkmarketservices.com.au
Stock Exchange Listing
Australian Securities Exchange
(ASX: TNE)
Shareholder information
Substantial shareholders as at 10 December 2018
Shareholder Name
JL Mactaggart Holdings Pty Ltd
Pinnacle Investment Management Group Ltd
Hyperion Asset Management Limited
Masterbah Pty Ltd
Number of Issued
Shares Held
Percentage of
Issued Shares Held
38,902,500
31,928,341
31,470,405
27,372,500
12.2%
10.08%
9.94%
8.6%
Distribution of shareholdings as at 10 December 2018
Size of Holding
100,001 and Over
10,001 to 100,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
Unmarketable Parcels
Voting rights
Ordinary Shareholders
74
1,367
1,397
4,001
2,905
9,744
101
All ordinary shares issued by Technology One Limited carry one vote per share without restriction.
Twenty largest shareholders as at 10 December 2018
Name
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
JL MACTAGGART HOLDINGS PTY LTD
CITICORP NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMINEES PTY LTD
ARGO INVESTMENTS LIMITED
BNP PARIBAS NOMS PTY LTD
MASTERBAH PTY LTD
CITICORP NOMINEES PTY LIMITED
MILTON CORPORATION LIMITED
MR NICHOLAS BARRY DEBENHAM
UBS NOMINEES PTY LTD
NATIONAL NOMINEES LIMITED
AMP LIFE LIMITED
MRS JUDITH BARBARA MACTAGGART
BNP PARIBAS NOMINEES PTY LTD
BNP PARIBAS NOMINEES PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
30 Nov 2017
%IC
97,719,699
35.78
27,026,958
16,872,500
13,323,113
12,213,183
7,770,556
5,964,564
5,932,961
5,372,500
2,505,118
1,515,000
1,161,185
1,120,815
1,095,431
691,020
655,000
620,000
544,607
511,074
510,132
9.90
6.18
4.88
4.47
2.85
2.18
2.17
1.97
0.92
0.55
0.43
0.41
0.40
0.25
0.24
0.23
0.20
0.19
0.19
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Transforming business, making life simpleTechnologyOne Limited 2018 Full Year Report Financial calendar
The following calendar shows the planned dates for significant shareholder events for the 2019 year.
These dates are subject to change and declaration of dividends which should be checked before taking any action
by referring at the company’s web site: www.TechnologyOneCorp.com, under the heading Shareholders.
2019 (Year Ending 30 September 2019)
Announcement of half year results for 2019
Media Interviews
Presentations to Institutions – Sydney (tentative)
Presentations to Institutions – Melbourne (tentative)
Ex-Div for 2019 Interim Dividend
Record date for interim dividend
Distribute 2019 Half Year Results Report
Payment date for interim dividend
Announcement of Full Year Results for 2019
Media Interviews
Presentations to Institutions – Sydney (tentative)
Presentations to Institutions – Melbourne
Ex-Div for 2019 Final Dividend
Record date for 2019 dividend
Payment date for 2019 final dividend
Distribute 2020 Annual Report
Annual General Meeting (tentative)
21 May 2019
21 May 2019
21 – 22 May 2019
23 May 2019
30 May 2019
31 May 2019
14 June 2019
14 June 2019
19 November 2019
19 November 2019
19 - 20 November 2019
21 November 2019
28 November 2019
29 November 2019
13 December 2019
21 January 2020
TBC
The Record Date is 5.00pm on the date TechnologyOne closes its share register to determine which shareholders are entitled to receive the
current dividend. It is the date where all changes to registration details must be finalised. The Record Date must be at least 7 business days
after the announcement of the Results (and record date being published).
The Ex-dividend date occurs one business day before TechnologyOne’s Record Date. To be entitled to a dividend a shareholder must have
purchased the shares before the ex-dividend date. If you purchase shares on or after that date, the previous owner of the shares (and not
you) is entitled to the dividend.
The Payment Date is the date on which TechnologyOne’s dividend is paid to shareholders. The payment date is to be 10 business days after
the Record Date.
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Transforming business, making life simpleTechnologyOne Limited 2018 Full Year Report TechnologyOne (ASX:TNE) is Australia’s largest enterprise software
company and one of Australia’s top 150 ASX-listed companies,
with offices across six countries. We create solutions that transform
business and make life simple for our customers. We do this by
providing powerful, deeply integrated enterprise software that is
incredibly easy to use. Over 1,200 leading corporations, government
departments and statutory authorities are powered by our software.
We participate in only eight key markets: government, local
government, financial services, education, health and community
services, asset intensive, project intensive and corporate. For these
markets we develop, market, sell, implement, support and run our
preconfigured solutions, which reduce time, cost and risk for our
customers.
For more than 30 years, we have been providing our customers
enterprise software that evolves and adapts to new and emerging
technologies, allowing them to focus on their business and not
technology. Today, our software is available on the TechnologyOne
Cloud and across smart mobile devices.
TechnologyOneCorp.com
Australia | New Zealand | South Pacific | Asia | United Kingdom
Freecall 1800 671 978 (within Australia) | +617 3167 7300 (outside Australia)