ANNUAL REPORT
2018
1
Praemium Annual Report 2018 CONTENTS
Our Business
Chairman’s Report
CEO’s Report
The Integrated Suite
Important Milestones
Review of operations
Directors’ Report
The year ahead
Key facts & figures
Overview of 2018 financial position
Praemium’s Board of Directors
Disclosures relating to Directors & Senior Management
Remuneration Report
Praemium FY2018 Corporate Governance Statement
Financial Report
Consolidated Statement of Profit & Loss and
Other Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Auditor’s Independence Declaration
Independent Audit Report
Additional disclosures required or recommended
by the listing rules & Corporations Act
Corporate Information
Notes
3
4
6
8
10
12
12
14
15
15
16
17
18
26
31
32
33
34
35
36
67
68
69
73
75
76
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OUR BUSINESS
The leader in Managed Accounts
Praemium Limited is a leading provider of managed accounts technology,
portfolio administration and financial planning tools to the wealth
management industry.
Our clients are predominantly firms that provide financial advice to
investors, namely financial advisers, brokers, accountants, investment
managers, banks and other financial providers such
as superannuation administrators.
Founded in 2001 and listed on the ASX in 2006, the business is operated
in Australia from our head office in Melbourne and internationally with
offices in London, Jersey, Hong Kong, Shenzhen, Coventry, Yerevan and
Dubai.
Praemium supports over 700 corporate firms, from small businesses
up to large institutional clients. We manage or administer over 475,000
investor accounts covering over $110 billion in funds globally.
Wealth professionals are continually seeking to improve productivity
to address lower margins driven by regulatory change and consumer
demand. Praemium helps with this journey by providing leading-edge
technology to automate many routine, time-consuming activities coupled
with innovative scalable investment solutions and industry-leading
reporting.
700+
CORPORATE
FIRMS
SUPPORTED
475,000
INVESTOR
ACCOUNTS
$110B
IN FUNDS
MANAGED
GLOBALLY
3
Praemium Annual Report 2018 CHAIRMAN’S REPORT
I am pleased to be writing to you again, after a year in which your
Company enjoyed stability and significant organic growth, whilst
industry factors provided strong tailwinds which will enhance our
growth in the years ahead.
Last year I reported that the new Board’s unrelenting focus
would be on the following key objectives:
» Continued growth in shareholder value;
» Preserving the cost-conscious culture inherent in the
business;
» Retaining an absolute focus on executing the international
growth strategies; and
» Ensuring that Praemium retains its status as an
industry leader through its market-leading products and
outstanding people.
I’m very pleased to advise that your Company has met, and
continues to meet, these key objectives.
Under Michael Ohanessian’s disciplined and focused
leadership, together with an executive team supplemented by
a number of newly appointed industry-leading professionals,
the past year has seen outstanding growth in shareholder
value.
Financial Results
Change
on FY17
$m
Revenue & other income
43.2
+22%
Earnings before interest, tax and
depreciation (underlying EBITDA)
Cash balances
Separately Managed Accounts (SMA)
Funds Under Administration (FUA)
Australia
International
Total
8.8
+40%
12.1
+35%
$b
5.6
2.7
+45%
+20%
8.3
+35%
Some of the many key achievements during the year which
supported this outcome included record platform inflows in
both Australian and international markets, new and expanded
offers with a number of institutional clients, expanded product
features, significant investment in organic growth in product,
sales distribution and marketing, and major technology
expansion initiatives. Michael will comment in more detail on
these achievements but suffice it to say it’s been an extremely
busy year.
Barry Lewin
Chairman
44
“Significant industry change is creating
an enormous opportunity for Praemium
to build on its advantage as the leading
Managed Account provider.”
Conclusion
Praemium is a profitable, high-growth, cashflow-positive
business built on a sound platform. As a Board, we see our
role as being to support Praemium’s disciplined, experienced
and focused management team and the sound strategies
underpinning the business. We are especially buoyed by the
exciting growth opportunities ahead of your Company.
My fellow Directors and I wish to express our sincere
appreciation to all shareholders, and we are confident you will
continue to benefit from your investment in the Company in
the years ahead.
On behalf of the Board, I extend sincere thanks to our
dedicated staff and management around the world for
delivering another outstanding financial result.
The Directors and I look forward to meeting as many
shareholders as possible at our Annual General Meeting later
this year.
Barry Lewin
Chairman
Board introductions
At the Board level, I was very pleased to welcome Claire
Willette as a non-executive director in August 2017, and
Michael’s return to the Board as Managing Director in May
2018. Claire is a senior management executive with 20 years’
experience in the United States Department of Defence, the
Australian Defence Department and the private sector. She
brings a wealth of risk management experience both in
Australia, and internationally, to our Board.
Industry and Company growth opportunity
At a broader industry level, the Financial Services Royal
Commission has delivered strong tailwinds for the platform
market in which we operate. The reputational damage to the
big players and the pressure on the government to act may
lead to the winding back of the vertical model (where firms
offer both product and advice), and in fact three of the big
banks are planning to divest their wealth businesses. We
also expect an acceleration of the current trend of inflows
being diverted away from the big 4 domestic banks and major
integrated players (who together account for $688bn, or 85%,
of the market) to independent providers. The four main non-
aligned platforms (including Praemium) have 4% of overall
platform FUA but are currently capturing around 40% of net
inflows.
Additionally, and very importantly for Praemium, according
to Morgan Stanley research Managed Account inflows are
expected to account for approximately 75% of net inflows
across the broader platform market over the next 4 years.
SMAs are growing at a rapid pace (c. 35% CAGR to 2020),
as they capture a large percentage of annual industry net
inflows, creating an enormous opportunity for Praemium
to build on its advantage as the leading Managed Account
provider. Your Company’s leading market position was
validated during the year by Morgan Stanley announcing it will
extend its existing relationship to include Praemium’s SMA
offering.
Praemium Annual Report 2018
55
Praemium Annual Report 2018
CEO’S REPORT
FY2018 has been an exciting year for Praemium. We are continuing
to invest in all areas of the Company, with a particular focus on our
managed accounts solution. Our historic strategic focus on managed
accounts (both SMA and IMA) is proving prescient as the market fully
embraces this technology.
We expect opportunities to continue to expand, particularly
with the advent of the Royal Commission as firms seek
to reduce risk and move away from providing both advice
and product. We are proud to be Australia’s leader in
managed accounts. The managed account segment of the
platform market is now growing very quickly and our depth
of experience and expertise in this area places us at the
forefront of this transformation.
I welcome two important people that are already contributing
to the success of the Company. I want to extend a warm
welcome to new Director Claire Willette, whose strength
in risk management and governance is bringing valuable
depth to the Board. I also welcome Mat Walker to the Senior
Management Team as Head of Product and Marketing. His
experience and wisdom have already contributed greatly to
the strategic development of the Company.
This year has seen us add new clients and strengthen existing
relationships. Perth-based financial planning and investment
manager Merchant Group became our first client for our new
administration service, and we expect to add more in the
coming months. We are very pleased to have deepened our
partnership with one of our oldest and best clients, Morgan
Stanley. They have been long-standing users of our portfolio
administration and reporting software, and in June they added
the Praemium SMA to their product offering. Additionally,
JBWere extended their contract with Praemium for an
additional two years, and we signed a 5-year contract with
CMC Markets to use our tax tools; both of these agreements
validating the strength of our reporting engine and our ability
to deliver accurate and timely tax reports.
Michael Ohanessian
CEO
66
“The managed account segment of the
platform market is growing very quickly
and our depth of experience and expertise
in this area places us at the forefront of
this transformation.”
A major focus for the international platform were the advents
of MiFID II and GDPR regulations. These were both huge
undertakings and I am immensely proud of the way the
team pulled together to get us ready. The work we did on
these two initiatives further strengthens our position as a
fully compliant, efficient and sophisticated platform for key
international markets.
We are also excited about our investment management team,
Smartim, securing regulatory authority to operate within the
Dubai International Financial Centre (DIFC) free-trade zone,
regulated by the Dubai Financial Services Authority (DFSA).
Furthermore, we are delighted to have Mashreq Bank as our
local promoter of the innovative Smartfunds as they are one
of UAE’s leading financial institutions with a presence in UAE,
Egypt, Qatar, Kuwait and Bahrain.
Summary
Praemium continues to outperform expectations thanks to
the strength of our client relationships and the dedication
of our outstanding teams around the globe. I want to say a
special thanks to Barry Lewin and the Board, whose support
and input have created real alignment between the Board and
management team. Praemium as a company is in good stead,
and we look forward to presenting continued strong results in
the coming years.
Michael Ohanessian
CEO and Managing Director
Some key financial highlights
This year’s numbers pay testament to the strategic choices
we have made over the past few years and to the quality of the
teams we have globally. Revenue is up 22% to $43.2 million,
and funds under administration (FUA) up 35% to $8.3 billion
across all divisions. We delivered an underlying EBITDA of
$8.8 million, an increase of 40% over the prior year. I am
pleased to say that our track record of strong year-on-year
growth has continued uninterrupted for the past 7 years.
» FUA surpassed $8 billion
» Asset inflows increased 50% to $3.0 billion
» Revenue up 22% to $43.2 million
» Underlying EBITDA up 40% to $8.8 million.
Our strategic accomplishments
We have been progressing well in all areas of the business.
To name just a few:
» SMA, Separately Managed Account: Launched
International models for the Australia platform and a full
SMSF portfolio service for SMA clients. Also significantly
expanded the investment menu over the year.
» VMA, Virtual Managed Account: Signed our first
administration client where we offer a full service covering
mail house, reconciliations, corporate elections and
reporting.
» SMSF: Added a cost-effective option to lodge year
end returns for SMSFs that have adopted the above
administration service.
» Smart Investment Management: Submitted and received
registration in the UAE for our innovative range of
Protected Smartfunds.
» CRM and financial planning tools: Added digital client fact
find and risk profiling capabilities to WealthCraft.
» SIPP, Self-Invested Personal Pension: Integrated the SIPP
solution into the platform account opening process.
We have also built some very exciting functionality such as
digital acceptance for new SMA accounts. We believe this has
significantly reduced the time and effort required to on-board
new clients. Praemium’s innovative retail superannuation
solution, SuperSMA, continues to grow strongly. It is up 42%
to $936 million and now comprises 17% of total platform FUA,
due in no small part to its unrivalled menu of over 300 model
portfolios.
Praemium Annual Report 2018
77
Praemium Annual Report 2018 Michael Ohanessian THE INTEGRATED SUITE
Praemium’s comprehensive and integrated suite gives
advisers the flexibility to create their ideal business.
Portfolio Administration
& Reporting
Praemium Portfolio (formerly V-Wrap) has at its core
a powerful portfolio reconstruction engine with a vast
database of historic corporate actions across all ASX-
listed equities and over 2,000 international equities. This
engine also enables Praemium Portfolio to accurately
and seamlessly update investor accounts with even the
most complex of corporate actions, particularly stapled
securities, and accurately handles post-corporate action
events (such as an ATO ruling) that require backdating.
This functionality and the ability to automatically
maximise or minimise capital gains and perform “what-if”
scenarios give clients confidence when preparing CGT and
tax reports.
Praemium Portfolio provides accountant-strength
reporting capabilities across a wide range of reports
and for any date or range of dates. Report packs can be
customised and stylised to match a business’s brand.
Financial Planning
& CRM
Serving our international market, WealthCraft supports
the entire advice process in a single web-based system,
giving financial professionals the efficiency and scalability
to develop and expand their wealth management
business, improve client service levels and remain
compliant. Built on cloud-based Microsoft Dynamics
CRM and Office 365, its key modules include CRM, fact
find, financial planning administration, commissions
management, investment research, and portfolio
management with automated valuation updates using
secure data feeds from a broad range of third-party data
providers.
8
Praemium Portfolio powers the administration of equities
in portfolios for a number of important institutional clients
in Australia, provides tax tools for CMC Markets and
provides a CGT reporting tool for a major UK platform
operator.
Praemium Portfolio now also includes functionality to
provide SMSF monitoring and processing to support
the day-to-day activity for compliance and reporting
requirements. Praemium Portfolio, with SMSF inside, is a
leading-edge solution for financial advisers.
In the UK, Plum Software is an established software
business serving financial planners with front-end client
management and back-office systems. Plum Software
has an extensive range of UK-based third-party data feeds
and interfaces as well as a robust back-office system with
fund valuation, remuneration computations, compliance
monitoring and reporting.
WealthCraft and Plum Software financial planning
tools are naturally client-centric, creating a compelling
proposition that inherently mirrors wealth managers’
business processes. Client communications integrate
with the client’s record, which in its turn holds all prior
communications, risk assessments, previous statements
of advice as well as live portfolio valuations. Advisers can
seamlessly manage their client, practice and campaign
data and meet regulatory compliance requirements.
Investment Platform
Built around Praemium Portfolio’s unique CGT
reconstruction engine, Praemium’s SMA is a modern
investment platform solution providing a scalable
proposition for wealth professionals. The SMA platform is
the next generation technology to the traditional “wrap”
service provided by many platforms.
SMAs provide clients with professionally managed
portfolios that are aligned to an investment strategy,
or “model portfolio”. Praemium’s SMA allows a model
manager to simultaneously implement investment
changes across a number of client accounts, thus
reducing administrative burden as well as ensuring that
all investor accounts are automatically in line with the
model manager’s thinking.
Praemium’s SMA offsets buy and sell transactions and
then aggregates the trades. The resulting low transaction
costs are highly competitive compared to industry
brokerage rates.
The Praemium SMA is the market leader in the Australian
SMA market and is available in both retail super
(SuperSMA) and non-super. After more than 10 years
of operation, it has earned a reputation for reliability,
scalability and high performance.
Internationally, our core proprietary SMA technology
enables financial advisers to select investment models
provided by third-party investment managers or by
Praemium’s in-house investment management solution,
Smart Investment Management (Smartim). Praemium’s
dynamic modelling capability ensures all client portfolios
are automatically rebalanced to remain in sync with the
investment strategy.
Why SMA is the future
Lower Cost
The investor doesn’t have to pay the administration costs of
a managed fund if they invest in an equivalent equities model
portfolio.
Tailored Strategies
By investing in a model portfolio, advisers can craft
investment strategies with an asset allocation that matches
the risk profile and financial objectives of the investor.
Viewable Transactions
Investors can view the complete transaction history of all
stock trades as the model portfolio changes or as money is
invested or withdrawn.
Easy To Switch
As investor needs or market conditions change, advisers can
easily switch from one model portfolio to another online. The
switch is typically executed the next day.
Visible Holdings
The investor has complete visibility on the underlying stocks
(unlike the rather opaque view for managed funds).
Beneficial Ownership
The investor has beneficial ownership of the underlying
assets, not just units in a fund.
Tax Effective
Investors have more control over the realisation of capital
gains.
9
Praemium Annual Report 2018 IMPORTANT MILESTONES
$3.0B
RECORD ANNUAL
GROSS INFLOWS
$794M
MANAGED BY
SMARTIM
145
NEW MODEL
PORTFOLIOS
22%
INCREASE IN
REVENUE
35%
INCREASE IN
FUNDS UNDER
ADMINISTRATION
40%
INCREASE IN
UNDERLYING
EBITDA
1010
FUNDS ON PLATFORM REACHED
$8.3 BILLION
Gross Inflows ($m)
FUA, platform & funds ($m)
900
800
700
600
500
400
300
200
100
8,500
4,250
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
2014
2015
2016
2017
2018
2014
2015
2016
2017
2018
Australia
International
Australia
International
Praemium Annual Report 2018
1111
Praemium Annual Report 2018 DIRECTORS’ REPORT
Review of operations
Portfolio Administration
CRM and Financial Planning
A major focus for Praemium Portfolio (formerly V-Wrap) this
year has been on enhancing our performance benchmarking
and asset allocation tools. Praemium has always included
a wide range of market indices against which clients can
measure a portfolio’s performance; however, many advisers
are opting for an “absolute return” or “goals-based”
approach. This means they are seeking to provide a fixed
performance benchmark (for example, a flat 7% increase
in value over 12 months or outperformance of the cash rate
by 3%). Another key request from our clients has been to
provide a more complex benchmarking option where they can
construct a composite index based on target weightings and
specific benchmarks for a range of asset classes.
Major enhancements to performance benchmarking and
asset allocation include:
» Asset allocation strategies that can be defined based on
client investment risk profiles.
» Define benchmarks for asset classes within a portfolio’s
asset allocation strategy.
» Additional benchmarking options, including access to
more indices, cash and inflation-rate indices, absolute
return benchmarks, custom indices and composite
indices, where returns are calculated automatically based
on benchmarks and their weightings defined as part of the
portfolio’s asset-class strategy.
» New asset-class performance report that provides an
overall view of asset class and benchmark returns over
multiple periods.
Other major enhancements include:
» New Upload Centre options, including the ability to upload
corporate event elections, Attribution Managed Investment
Trust cost parcels, and cash transactions based on bank
account details.
» Report publisher improvements, including automated
email notifications to investors when reports are published
to the Investor Portal, and creating report publisher events
based on existing portfolio lists and report layouts.
In FY2018, financial advisers in the European and Middle East
markets focused on preparing their businesses to adapt to
new regulatory changes, similar to the Retail Distribution
Review in the UK and Future of Financial Advice in Australia.
Markets in Financial Instruments Directive (MiFID) II and
General Data Protection Regulation (GDPR) requirements are
compelling many more advice businesses to adopt a secure
software solution to fulfil their compliance requirements.
These regulatory changes and WealthCraft’s data-feed
integration with third-party providers has translated into a
healthy pipeline for the coming year, and the launch of the
online fact find and the development of new reports have
gained particular traction in the Middle East. Praemium has
been actively building our implementation and transition
teams to maximise these opportunities.
In the UK, Plum Software consolidated its work on client
engagement, training, and targeted enhancements. They
also made good progress on a major upgrade to the existing
software which expands their suite of sophisticated financial
planning tools, including electronic fact find and digital
account opening. This is due for beta release at the end of the
first quarter in FY 2019.
SMA Platform
Praemium’s SMA platform has again set records this year
across both the Australian and International platforms. The
Australian SMA grew strongly through the year, with record
inflows of $2.2 billion, driving FUA up 45% to $5.6 billion.
We continue to attract new model managers, adding 23 new
managers and a further 88 model portfolios, for a total of 72
managers and 336 managed models. We have also added 43
new ETFs for a total of 156, 95 unlisted managed funds for a
total of 191, and 7 new XTBs for a total of 52.
Our retail superannuation solution, SuperSMA, is up 42%
to $936 million, now comprising 17% of total platform
FUA. SuperSMA now offers over 300 model portfolios. The
international SMA also had record inflows this year of £434
million, taking international FUA to £1.5 billion, a 13%
improvement over last year.
» New login process to improve security and provide access
.
for advisers to Praemium’s global apps.
» Enabling clients to reset cost bases to provide CGT relief
in line with recent pension reform legislation.
» New portfolio labelling features which allow users to
categorise and find portfolios more easily.
12
Global equities are still delivering respectable returns and
in many cases have hit new highs. Investors continue to
shrug off worries about political uncertainty and flashpoints
such as North Korea have dissipated. Investors have focused
on fundamentals like company earnings and employment
numbers which have been strong globally. Over the period,
we have adopted a largely neutral asset allocation policy but
have remained underweight UK equities as uncertainty over
Brexit negotiations continue. We remained broadly neutral
within equities as a whole but maintained our underweight to
fixed income and overweight to cash.”
In summary, Smartim navigated through a period of extreme
uncertainty by taking sensible, risk-adjusted positions which
added solid value to the portfolios.
Performance engine
is an investment
portfolio actively
managed by Smartim
Put option linked to the
investment portfolio
ensures a minimum
protection level of 80% of
the max NAV. Delivered
by Morgan Stanley
Investment Strategy
Protection Component
Protected Fund NAV
Investment Management
Praemium’s London-based in-house investment management
team Smartim has had another strong year of performance and
FUM growth, and its Australian-based portfolios achieved an
investment-grade rating by Lonsec in our initial ratings.
The team’s emphasis on diversification and risk helped navigate
the portfolios through a period of volatility and deliver strong
positive returns on both risk-adjusted and relative basis.
According to the Smartim team, “The year to 30th June
2018 was a year of two halves. In 2017, the global economy
experienced a relatively steady, synchronized expansion,
lower-for-longer low interest rates, with low inflation and low
risk of recession. This supported strong asset performance,
though what was surprising was the low volatility of those
returns. In addition, the weakening dollar was a tailwind
which allowed emerging markets to recover.
2018, however, has been a year of surprises for many
investors. The S&P 500 has posted some of its biggest daily
gains and losses in years, but also sank into its first 10%
correction in about two years.
Markets have been beset with volatility, although this
is largely due to heightened political risk. The US
administration’s approach to global trade, North Korea
and Iran remain uncertain. In Europe, Italy’s new populist
government added to market concerns and in addition,
differences in Europe over EU immigration policy is
undermining Angela Merkel’s political authority and
threatening unity within European Union. This risk-off
sentiment contributed to a significant rise in the value of
the US dollar which is a risk for emerging markets, many of
which have a serious proportion of their debt in US dollars.
Despite this noise the macro data is still relatively supportive.
US unemployment numbers are stronger than expected at
below 4%: to put this into context, they were nearer 4.5%
before the last recession in 2007. Corporate earnings are
growing and have been boosted by a favourable US tax
regime. Inflation is not yet a meaningful problem: however,
you only need a deterioration at the margin of these variables
to call time on a bull market. This is especially true when
equity valuations are at historically high levels.
Who is involved in the Fund
Praemium
(distributor)
Fundlogic SAS
(investment manager)
Smartim
(sub investment manager)
ASX-listed provider of
international fintech and
investment solutions
–
US $84.6bn
(administered)
Subsidiary of
Morgan Stanley
UCITS IV platform
–
US $11.5bn
FCA-authorised
subsidiary of
Praemium
–
US $632m AUM
Morgan Stanley
(protection provider)
One of the largest
financial institutions.
A+ credit rating
–
US $2tr AUM
13
Praemium Annual Report 2018 The competitive landscape for the Australia platform
market is changing to favour independent, nimble and
technically advanced players like Praemium, and we will
invest in capitalising on this change over the next few years.
Equally, the UK platform market has seen disruption due to
consolidation of underlying platform technology, which has
increased the currency of platforms like Praemium that have
control over their technology. Furthermore, although the UK
is well advanced in creating model portfolio solutions for
its clients, it lags behind in Managed Accounts technology
for effective execution. For this reason, Praemium has
great potential in the UK and we will look to increase our
distribution efforts for the year ahead.
THE YEAR AHEAD
As previously foreshadowed, we remain very
committed to the pension and superannuation
sectors for both Australian and British investors.
Having acquired a UK SIPP (Self-Invested Personal Pension)
in FY2017, we are intent on further investments in this area to
scale up our proposition in the UK market. We remain equally
committed to pension portability, especially for UK ex-pats
moving to Australia. In 2015, Australian platforms were
deemed to be no longer compliant as qualifying UK pension
scheme operators. This has left a substantial segment of
the market without a satisfactory solution, especially for
UK ex-pats who have chosen Australia as their retirement
destination. Praemium, with its expertise in retirement
solutions in both Australia and the UK, is well placed to find
viable and compelling solutions for this market gap. We hope
to be able to progress some exciting initiatives in the coming
year.
Praemium is also taking a global approach to client service
and engagement. In FY2019 we will invest in a number of
initiatives to provide more comprehensive adviser support
and a better service experience. We will also make further
investments in our field team covering business development
and training and support. We started to put an increased
focus on brand awareness in FY2018 to help our clients better
understand our journey and how our developments can help
their practices achieve higher efficiencies and improved client
engagement. We will further invest in our brand and client
communications in the FY2019 year.
Praemium’s platform will continue to evolve over the coming
year. We continue to have the leading Managed Account
platform, specifically SMA (Separately Managed Account)
and IMA (Individual Managed Account). In FY2019 we plan to
further evolve our Managed Accounts platform into a Unified
Managed Account (UMA), which will enable us to serve a
much wider part of the addressable platform market. Built
upon the strengths of our superior reporting capabilities
and our best-in-class SMA rebalancing engine, Praemium’s
UMA will enable advisers to have their model portfolios sit
with direct assets within one single account with no separate
cash account or sub-accounts. Model portfolios managed
by external fund managers will co-exist with direct shares,
managed funds, ETFs, etc. Once the UMA is launched, we
expect our addressable market to increase from around 5% of
the platform market to over 90% and enable more clients to
select Praemium as their primary platform.
14
KEY FACTS & FIGURES
Financial Metrics
Revenue and other income^
Expenses
EBITDA (underlying)*
Profit before tax
Tax expense
Net profit after tax
Earnings per share (cents)
Cash
Net Assets
Operating cashflow
FY2018
FY2017
Change
Change
$000
43,182
34,340
8,842
4,903
3,488
1,415
0.4
12,121
20,280
5,412
$000
35,398
29,061
6,337
2,219
1,531
688
0.2
8,983
17,093
1,538
$000
7,784
5,279
2,505
2,684
1,957
727
0.2
3,138
3,187
3,874
%
22%
18%
40%
121%
128%
106%
104%
35%
19%
252%
^Other income as outlined in Note 4 of the financial statements
*Underlying EBITDA excludes restructure, arbitration and acquisition costs of -$1.8 million (2017: -$2.1 million), share based payments of -$1.1 million (2017: -$0.6
million) and foreign exchange movements of currencies held on deposit of $0.0 million (2017: -$0.5 million), as detailed in Note 20 of the attached annual report.
Service Metrics
RESULTS SUMMARY
Separately Managed Account (Australia)
Separately Managed Account (International)
International funds based on closing FX rate 0.5634 (2017:0.595)
FY2018
A$5.61bn
A$2.68bn
FY2017
A$3.87bn
A$2.24bn
CHANGE
A$1.74bn
A$0.44bn
CHANGE
45%
20%
Overview of 2018 financial position
Results
The consolidated profit attributable to the members of the
Group was $1,414,541. This was from a 22% increase in
revenue and other income, compared to a 18% increase in
operating expenses, resulting in a 40% increase in underlying
earnings before interest, tax, depreciation and amortisation
(EBITDA) to $8.8 million. The Company’s net profit before tax
was $4,902,617, 121% higher than the prior year, while the
current year’s tax expense of $3,488,076 was 128% higher
than the prior financial year.
The Group’s net asset position at 30 June 2018 was
$20,279,943 with $12,120,879 held in cash or cash equivalents.
The Group is debt free.
Significant change in the state of affairs
Other than noted in this report, there were no other significant
changes in the state of affairs during the year.
After reporting date events
Directors have not become aware of any other matter or
circumstance not otherwise dealt with in the financial
statements that since 30 June 2018 has significantly affected
or may significantly affect the operations of the Company or
the consolidated entity, the results of those operations or the
state of affairs in subsequent financial years.
Future developments
A detailed review of the Group’s activities and prospects is
contained within the Directors’ Report. The Company will
continue its activities as outlined in its initial prospectus
and subsequent disclosures to the ASX, including a detailed
investor presentation on this year’s results. In the opinion of
the Directors, disclosure of any further information would be
likely to result in unreasonable prejudice to the consolidated
entity.
Dividend recommended, declared or paid
The Company has not recommended, declared or paid a
dividend with respect to the full-year result.
15
Praemium Annual Report 2018 PRAEMIUM’S BOARD OF DIRECTORS
Barry Lewin — Non-executive Chairman
Barry Lewin was appointed as a non-executive chairman
on 12 May 2017. Barry has significant experience advising
public and private companies in transaction structuring, debt
and equity issues, mergers, acquisitions, business sales
and public floats. Prior to establishing SLM Corporate Pty
Ltd in 1999, Barry spent twelve years as in-house counsel
to leading Australian public companies, including diversified
international resource company North Limited, managing
their legal and commercial Australian and international
interests.
Barry has previous experience as Director of ASX-listed
companies Senetas Corporation Limited (1999-2001) and
Clean TeQ Holdings Limited (2007-2011), where he also
served as Chairman of the Audit Committee. He is currently
a Director of a number of private companies. He has degrees
in Commerce and Law and holds an MBA from Swinburne
University, Melbourne.
Stuart Robertson — Non-executive director
Stuart Robertson was appointed as a non-executive director
on 12 May 2017. Stuart has broad experience in business
advisory, investment banking, wrap platforms, alternative
investments and funds management. He held senior roles at
BT Funds Management, KBC Investments Limited and Zurich
Financial Services in Australia, London and New York.
Stuart is a non-executive director of Ellerston Global
Investments Limited (since June 2014), Ellerston Asian
Investments Limited (since July 2015) and Money3 Corporation
Limited (since January 2016).
Stuart chairs the Group’s Audit, Risk & Compliance
Committee and is a member of the Group’s Remuneration
Committee. Stuart is a Chartered Accountant, Fellow of
FINSIA, Member of the Australian Institute of Company
Directors and holds an MBA from the MGSM.
Daniel Lipshut — Non-executive director
Daniel Lipshut was appointed as a non-executive director
on 12 May 2017. Daniel has over 25 years’ experience as a
company director, including more than 15 years as CEO of
both large listed and small private corporations.
Daniel spent 5 years as a Director of listed services company
BSA Limited (2002-2007), including 3 years as joint Managing
Director. Daniel is currently co-owner and Managing Director
of Intercorp Pty Ltd, which provides international trade, advice
and representation to large multinational companies. Daniel
is also the Managing Director of Israel Aerospace Systems
Limited, and a Director of Sunnyvale Ventures Australia and
Positively Buoyant Consulting.
Daniel chairs the Group’s Remuneration Committee and is
also a member of the Audit, Risk & Compliance Committee.
Daniel is a graduate of the AICD and Defence Industry Study
Course (DISC), and holds an MBA from the University of
Technology Sydney.
Claire Willette - Non-executive director
Claire Willette was appointed as a non-executive director on
28 August 2017. Her career has spanned national security,
emerging technologies and critical infrastructure sectors,
with a focus on developing governance frameworks, planning,
risk management and performance/program management.
Claire brings a wealth of experience as a senior executive
in the United States Department of Defense, the Australian
Department of Defence and in the private sector. Claire
has managed a wide variety of projects both in scale and
complexity, including whole-of-government initiatives and
national projects.
Claire is an Associate of, and sat on the Board of Directors
for, the Australian Risk Policy Institute and is a Senior Expert
Advisor to the International Standards Committee in the areas
of Risk, Resilience and Business Continuity.
Claire is a member of the Group’s Audit, Risk & Compliance
Committee. She has a BA from George Mason University (US)
and a Masters of International Relations from Cambridge
University (UK).
Michael Ohanessian — CEO/Managing Director
Michael Ohanessian was appointed as Chief Executive Officer
in August 2011, and re-appointed as Managing Director in
May 2018. Michael’s executive experience in technology-
related businesses brings a mixture of operational, strategic
and leadership capabilities to this role. Following a ten-year
career at Mobil Oil, Michael joined the Boston Consulting
Group where he consulted to clients in industries such as
banking, airlines, mining, packaging, sports, oil and gas,
retailing and biotechnology.
As the CEO of Vision BioSystems, a division of the publicly
listed Vision Systems, he transformed the business over
seven years from a small unprofitable contract manufacturer
into a vertically integrated, profitable and growing medical
diagnostics business with distribution to over 60 countries.
Michael is a member of the Group’s Remuneration
Committee. He holds a BS and MBA from Melbourne
University.
Paul Gutteridge — CFO/Company Secretary
Paul Gutteridge joined Praemium in 2011 and brings
significant experience from finance roles across Australia, UK
and Canada over the past 20 years. Following his early career
at Ernst & Young, he has held senior finance roles at Damovo
(Australia), Telstra Business Systems and Netspace, where he
led the company’s divestment to iiNet Limited in 2010.
Within Praemium, Paul’s responsibilities include overseeing
the financial strategies of the Group and managing the
areas of accounting, tax, corporate governance, compliance,
investor relations, company secretary and treasury. Paul is
a Chartered Accountant and holds a Bachelor of Commerce
from the University of Melbourne.
16
DISCLOSURES RELATING TO DIRECTORS
& SENIOR MANAGEMENT
The number of Board Meetings and number of meetings of each Board committee held during the financial year, and the
number of meetings attended by each of the Company’s Directors were:
Board Of Directors
11 Meetings
Audit, Risk &
Compliance Commitee
6 Meetings
Remuneration Committee
2 Meetings
Eligible To
Attend
Attended
Eligible To
Attend
Attended
Eligible To
Attend
Attended
Barry Lewin
Stuart Robertson
Daniel Lipshut
Claire Willette
Michael Ohanessian
11
11
11
9
2
11
11
11
9
2
2
6
6
5
-
2
6
2
4
-
1
2
2
-
1
1
2
2
-
1
Further disclosures
No performance rights have been issued under the Current
Plan since the end of the financial year. Other than as set out
in this report:
» No Directors have any other rights or options over
shares in, debentures of, or interests in a registered
scheme made available by the Company or a related body
corporate;
» There are no contracts to which any Director is a party or
under which any Director is entitled to a benefit; and
» There are no contracts that confer a right to call for
or deliver shares in, or debentures of or interests in a
registered scheme made available by the Company or a
related body corporate.
Directors’ & Executives’ relevant interests
in shares, options and performance rights
Details of the interests of the Company’s Directors and senior
Executives in the shares of the Company are set out in the
Remuneration Report. The long-term incentive for the
Company’s Executive Directors is membership of the Praemium
Directors & Employees Benefits Plan, which was initially
approved by shareholders on 11 November 2008 (the “Current
Plan”). An updated and amended Plan was approved at the
Company’s 2017 AGM. Details of the securities issued under
the Current Plan and shares issued on the exercise of options
or vesting of performance rights are set out in the Remuneration
Report and 23(a) and (b) of the Financial Statements.
Indemnification and insurance of
Directors, officers and auditors
The Company has executed a deed of access, indemnity and
insurance in favour of each officer of the Company, including
current and past Directors, in accordance with applicable
laws. Under the deeds, Praemium indemnifies the officers
and previous officers with respect to liabilities incurred in
connection with holding office, to the extent permitted by the
Corporations Act (or, where relevant, the UK Companies law).
The Company is also obliged to carry insurance cover for
current and past Directors and provide them with access to
Board and Committee papers. Such insurance also extends to
cover Directors and officers of the Group subsidiaries.
Under its Constitution, Praemium must, subject to certain
exceptions, indemnify each of its Directors to the extent
permitted by law against liability that did not arise out of a
lack of good faith. Total premiums paid with respect to all
Directors’ and Officers’ liability insurance in this reporting
period was $41,860 (ex GST).
17
Praemium Annual Report 2018 REMUNERATION REPORT
During the financial year the following people served as
Directors of the Company:
» Barry Lewin
» Stuart Robertson
» Daniel Lipshut
» Claire Willette (appointed 28 August 2017)
» Michael Ohanessian (re-appointed 14 May 2018)
Remuneration philosophy and principles
The Company’s performance is dependent upon the quality
of its people. To this end, the Company applies the following
principles in its remuneration framework:
» Provide competitive rewards to attract high-calibre
executives;
» Link Executive rewards to shareholder value; and
» Provide for a significant proportion of the Executive
remuneration to be ‘at risk’ – that is, dependent upon
meeting predetermined performance indicators.
Remuneration policies
The Board has established a Remuneration Committee, which
is currently chaired by non-executive director Daniel Lipshut.
The current members of the committee are non- executive
director Stuart Robertson and executive director Michael
Ohanessian. The Remuneration Committee was established
to review the remuneration policies and practices of the
Company to ensure that it remunerates fairly and responsibly.
The Company’s Remuneration Charter, which is reviewed
annually, is available from the Company’s website.
The Remuneration Committee is required to make
recommendations to the Board on all matters within the
Remuneration Committee’s Charter.
The Company’s remuneration framework is designed to
ensure that the level and composition of remuneration is
competitive, reasonable and appropriate for the results
delivered and to attract and maintain talented and motivated
Directors and employees. The framework is designed for:
» Decisions in relation to executive and non-executive
remuneration policy;
» Decisions in relation to remuneration packages for
Executive Directors and senior management;
» Decisions in relation to merit recognition arrangements
and termination arrangements; and
» Ensuring that any equity-based Executive remuneration
is made in accordance with the thresholds set in plans
approved by shareholders.
An external remuneration consultant was used during the
financial year for bench-marking of non-executive and senior
executive roles.
18
The Remuneration Committee is authorised by the Board to
investigate any activity within its charter. It is authorised to
seek any information it requires from any employee and all
employees are directed to cooperate with any request made
by the Remuneration Committee.
In considering the Group’s performance and benefits for
shareholder wealth, the Board has regard to the following
with respect to the current year and the previous three
financial years:
EBITDA^ ($m)
NPAT($m)
EPS (cents)
2018
2017
2016
2015
8.8
1.4
0.4
6.3
0.8
0.2
4.1
0.8
0.2
2.6
(2.1)
(0.5)
^ EBITDA excludes one-off costs, unrealised FX movements and share based
payments.
The Remuneration Committee is authorised by the Board
to obtain outside legal or other independent professional
advice and to secure the attendance of outsiders with relevant
experience and expertise at meetings of the Remuneration
Committee if it considers this necessary. It has exercised this
right when it has considered it appropriate to do so.
In accordance with best practice corporate governance,
the structure of non-executive director and executive
remuneration is separate and distinct.
Non-executive director remuneration
The Board seeks to set aggregate remuneration at a level that
provides the Company with the ability to attract and retain
Directors of the highest calibre, whilst incurring a cost that is
acceptable to shareholders.
The non-executive directors are paid fixed fees in accordance
with a determination of the Board but within an aggregate
limit fixed by the Shareholders. The ASX Listing Rules specify
that the aggregate remuneration of non-executive directors
shall be determined from time to time by a general meeting.
At the 2016 AGM the members approved the aggregate
remuneration for Directors as $450,000.
No securities were issued to non-executive directors
during the financial year. The Company does not operate
any schemes for retirement benefits for any non-executive
director other than the contributions that it makes to
superannuation in accordance with statutory requirements.
The names and positions of each person who held the position
of Director of Praemium Limited at any time during the
financial year is provided within the Remuneration Report
and information about each of those persons (including their
qualifications and experience) is set out on page 16.
Key management personnel
In addition to Group Directors noted earlier, the details of the
following Executives are disclosed within this report as Key
Management Personnel:
» Paul Gutteridge - Chief Financial Officer & Company
LTI measures – Executive & key contributors
Rules for all staff to achieve LTI entitlements (currently the
issue of performance rights) are such that:
» Entitlements issued are based on achieving specified
company targets and individual annual performance;
Secretary
» Anna Itsiopoulos - General Manager, Australia
» Adam Pointon - Chief Technology Officer
» Christine Silcox - Director, Business Improvements.
The remuneration of Key Management Personnel comprises:
» Fixed Remuneration;
» Variable remuneration: short-term incentives; and
» Variable remuneration: long-term incentives.
Fixed remuneration
Total fixed remuneration comprises base salary, any
relevant allowances and statutory superannuation guarantee
contributions. Fixed remuneration is set with reference
to market data, reflecting the scope of the role, skills,
qualifications and experience of the relevant Executive and the
performance of the employee in the role.
Remuneration is reviewed annually, with recommendations
made to the Remuneration Committee. Annual reviews
include using market surveys as benchmarks to ensure
competitive remuneration is set to reflect the market for
comparable roles.
Short-term incentives
A short-term incentive (STI) is currently applicable to a
number of senior Executives. Achievement of this annual STI
is directly linked to the performance of the Group against the
Board’s budgets and key business drivers. Unless Board-set
budgets are achieved, no bonus payment will be made. Over-
achievement of key business drivers may result in an increase
to the amount of the bonus payable, subject to capped levels.
At the discretion of the Board the STI may be paid in cash or
by the issue of securities.
Long-term incentives
Long-term incentives (LTI) are based on participation within
Praemium’s Directors & Employee Benefits Plan. LTI
incentives, based on equity remuneration (being either the
issue of securities, issue of performance rights or issue of
options), are made in accordance with thresholds set out
in this plan. By using the Group’s Directors & Employees
Benefits Plan to offer shares and options to employees,the
interests of employees are aligned with shareholder wealth.
A copy of the plan can be found on the Company’s website.
» Entitlements vest over 3 years; and
» Entitlements expire upon cessation of employment.
Vesting hurdles are based on Group profitability (EBITDA)
targets set by the Board and Total Shareholder Return (TSR)
measurement over the LTI cycle. For key Executives, vesting
hurdles are weighted 50% for Group profitability targets and
50% for achievement of TSR targets. For Praemium staff,
vesting hurdles are weighted 100% for Group profitability
targets.
The test of Group profitability is based on 3-year EBITDA
target, as set by the Board at the start of the LTI cycle
and measured on a cumulative basis over the LTI period.
Achievement of entitlements is based on actual performance
relative to target, with no entitlements achieved below 80%
of target and up to 100% of entitlements achieved upon full
achievement of target.
The test of Total Shareholder Return is performance of
Praemium’s share price relative to the performance of a
comparable peer group of companies (Peer Group) over
the LTI period, as approved by the Board. Achievement of
entitlements is based on actual performance relative to the
Peer Group, with no entitlements achieved below 80% of the
Peer Group’s TSR and up to 100% of entitlements achieved
upon full achievement of the Peer Group’s TSR.
An individual’s annual performance is based on rating
measures, applied consistently across the Company.
The Board, on the recommendations of the CEO and
the Remuneration Committee, considers the individual
performance of the Executives and their contributions to the
Company’s performance.
Provided LTI measures are met, firstly for Company
performance and then for individual performance,
entitlements then vest over 3 years based on 15% in year one,
25% in year two and 60% in year three.
LTI measures – prior to 2018
Prior to the 2018 financial year, the rules for LTI plans were
consistent with the above other than the following: vesting
hurdles for all staff were based on Group profitability targets
and Total Shareholder Return (TSR) measurement. The test of
TSR was performance of Praemium’s share price relative to
the change of the All Ordinaries Accumulation Index (AORD)
over the LTI period.
Achievement of entitlements is based on actual performance
relative to target, with no entitlements achieved below 100%
of target and up to 100% of entitlements achieved upon
Praemium’s share price performance being greater than
110% of AORD.
19
Praemium Annual Report 2018 Voting and comments made at the Company’s last
annual general meeting
Praemium Limited received 97.2% of ‘yes’ votes on its
Remuneration Report for the financial year ended 30 June
2017. The Company received no specific feedback on its
Remuneration Report at the Annual General Meeting.
Executive remuneration policies and contracts
All Group Executives are employed under employment
contracts. Those contracts do not have a fixed term and are
terminable on between one and three months’ notice (as
set out below) by the Executive or by the Company or, in the
event that the Executive materially breaches the contract of
employment in a way that involves dishonesty, fraud, a breach
of any law affecting the Company or a breach of certain of the
Group’s policies, the Executive may be summarily dismissed.
To the extent that elements of the remuneration of key
Executives consists of securities in the Company, the
Board, in considering whether to grant those securities and
negotiating the terms of remuneration with the key Executive,
requires the key Executive to obtain their own advice in
respect to their exposure to risk in relation to the securities
and relies on the undertakings of the key Executives that
they have obtained such advice prior to accepting the offer of
securities. No securities were issued to new employees as an
incentive or sign on bonus during the 2018 financial year.
The Company may elect, on the giving or receipt of notice
from any Executive, to pay out the balance of the term with or
without requiring the Executive to ‘go on garden leave’ for the
remaining term. The notice periods and amounts payable in
lieu of notice for each of the Key Management Personnel are:
Michael Ohanessian, CEO and Managing Director, is currently
employed pursuant to an ongoing contract. Mr Ohanessian’s
maximum entitlement on termination in lieu of notice would
be equal to the value of 9 month’s total employment package
(TEP).
Paul Gutteridge, Chief Financial Officer & Company Secretary,
Anna Itsiopoulos, General Manager Australia, Chris Silcox,
Director, Business Improvements, and Adam Pointon, Chief
Technology Officer are all employed on an ongoing basis.
Each has a maximum entitlement on termination in lieu of
notice equal to the value of 3 months TEP.
20
Detail of key management personnel remuneration
2018
Short-term
employee
benefits
Salary fees &
commissions
Share based payments
Post-Employ-
ment Benefits
Other
Long-Term
Benefits
Bonus by
way of
shares1
Performance
rights2
Superannuation Long service
Leave
Total
Performance
Related
%
Parent entity directors
Barry Lewin
Stuart Robertson
Daniel Lipshut
Claire Willette*
Michael
Ohanessian
109,589
80,000
63,927
46,505
-
-
-
-
-
-
-
-
10,411
-
6,073
4,417
-
-
-
-
120,000
80,000
70,000
50,922
443,333
130,000
34,058
25,000
17,769
650,160
Key management personnel
Paul Gutteridge
273,378
152,711
Anna Itsiopoulos
255,705
147,942
Adam Pointon
Christine Silcox
231,869
135,693
174,016
-
2018 total
1,678,322
566,346
1.Bonus by way of shares relates to:
132,726
77,630
125,573
80,385
450,372
25,971
24,292
22,028
16,532
8,878
1,906
593,664
507,475
733
515,896
1,739
272,672
134,724
31,025
2,860,789
0%
0%
0%
0%
25%
48%
44%
51%
29%
36%
a) achievement of FY2018 STI for key executives, with annual results exceeding target by 10%. Achievement of STI is calculated as 30% of base
salary, with amounts accrued into FY2018’s financial results, but not yet issued/paid at the date of this report; and
b) achievement of the FY2017 STI for key executives, as approved by the Board in September 2017.
2.Performance rights relates to entitlements under the Praemium Directors & Employee Benefits Plan, with amounts recognised over the life of
the vesting period in accordance with AASB 2: Share Based Payments, and does not reflect actual remuneration received within the year.
* Claire Willette joined the Board on 28 August 2017.
21
Praemium Annual Report 2018 DETAIL OF KEY MANAGEMENT PERSONNEL REMUNERATION
2017
Short-term
employee
benefits
Share-based
payments
Termination2
Salary fees &
commissions
Performance
Rights1
Post-
employment
benefits
Other
long-term
benefits
Super-
annuation
Long
service
leave
Total
Performance
related
Parent entity directors
Barry Lewin*
Stuart Robertson*
Daniel Lipshut*
15,034
10,968
8,770
-
-
-
-
-
-
1,428
-
833
-
-
-
16,462
10,968
9,603
Michael Ohanessian
329,429
(10,068)
335,484
35,000
16,343
706,188
Key management personnel
Paul Gutteridge
Anna Itsiopoulos
Adam Pointon
Christine Silcox
232,854
235,912
203,626
165,081
56,156
15,861
52,509
23,461
-
-
-
-
22,121
22,412
19,344
15,683
11,520
322,651
828
275,013
5,186
1,479
280,665
205,704
2017 total
1,201,674
137,919
335,484
116,821
35,356
1,827,254
%
0%
0%
0%
0%
17%
6%
19%
11%
8%
1.Performance rights relates to entitlements under the Praemium Directors & Employee Benefits Plan, with amounts recognised over the life of
the vesting period in accordance with AASB 2: Share Based Payments, and does not reflect actual remuneration received within the year.
2.Termination comprises payments for notice in lieu and employee entitlements (annual leave where applicable) following the CEO’s departure on
21 February 2017.
All STI and LTI’s were also reversed at this date. Michael Ohanessian was re-appointed at the Company’s general meeting on 12 May 2017.
*Barry Lewin, Stuart Robertson and Daniel Lipshut joined the Board on 12 May 2017.
BONUSES INCLUDED IN REMUNERATION
Percentage vested in year
Percentage forfeited in year
Parent entity directors
Michael Ohanessian
Key management personnel
Paul Gutteridge
Anna Itsiopoulos
Adam Pointon
43%
43%
43%
43%
57%
57%
57%
57%
Details of the short-term incentive bonuses awarded as remuneration to each Key Management Personnel, the percentage
of the available bonus that was vested in the financial year and the percentage that was forfeited because the person did not
meet the service and performance criteria is set out below.
22
SHARE-BASED REMUNERATION
LTI Allocations To Key Management Personnel
The following tables detail the movement during the reporting period of performance rights granted over issued ordinary
shares in Praemium held directly, indirectly or beneficially by Key Management Personnel:
Grant date
Expiry date
Granted
during the
year
Granted
during the
year
Exercised
during the
year
Forfeited/
lapsed
During the
year
Total fair
value in
year
Number
$
Parent entity directors
Michael Ohanessian
20-Sep-17
30-Sep-20
476,744
193,081
Key management personnel
Paul Gutteridge
Anna Itsiopoulos
Adam Pointon
Christine Silcox
20-Sep-17
30-Sep-20
20-Sep-17
30-Sep-20
20-Sep-17
30-Sep-20
20-Sep-17
30-Sep-20
419,572
321,251
405,442
249,184
169,927
130,107
164,204
100,920
$
-
-
-
-
-
$
-
-
-
-
-
$
193,081
169,927
130,107
164,204
100,920
OTHER INFORMATION
A) Performance rights holdings
Alloted
Date
Balance
1 July 2017
Granted as
compensation
Vested/
Exercised
Balance
30 June 2018
Forfeited/
lapsed
during the
year
Parent entity directors
Michael Ohanessian
20-Sep-17
-
476,744
-
Key management personnel
Paul Gutteridge
Anna Itsiopoulos
Adam Pointon
Christine Silcox
20-Sep-17
20-Sep-17
20-Sep-17
20-Sep-17
565,831
246,191
519,882
308,397
419,572
321,251
405,442
249,184
(185,373)
(34,116)
(175,834)
(49,078)
1,640,301
1,872,193
(444,401)
-
-
-
-
-
-
476,744
800,030
533,326
749,490
508,503
3,068,093
23
Praemium Annual Report 2018
B) Shareholdings directly and indirectly beneficially held
2018
Balance
1 July 2017
Received as
Compensation1
Received on the
exercise of share
schemes
Other changes
during the year
Balance
30 June 2018
Parent entity directors
Barry Lewin
Stuart Robertson
Michael Ohanessian
Key management personnel
Paul Gutteridge
Anna Itsiopoulos
Adam Pointon
Christine Silcox
115,000
-
15,119,786
2,145,207
-
542,458
3,954,308
-
-
-
63,123
63,598
59,066
-
1 Relates to FY2017 STI, with remuneration recognised in the 2018 year.
21,876,759
185,787
-
-
-
185,373
34,116
175,834
49,078
444,401
100,000
220,000
215,000
220,000
-
15,119,786
(300,000)
(43,722)
-
-
2,093,703
53,992
777,358
4,003,386
(23,722)
22,483,225
24
Non-audit services/auditor’s independence
declaration
A copy of the Auditor’s Independence declaration in relation to
the audit for the financial year is provided with this report. The
auditor of the Group is Grant Thornton. Non-audit services of
approximately $107,934 have been provided by the Group’s
Parent Entity audit firm for internal controls review and
income tax compliance services. The Directors are satisfied
that the provision of non-audit services is compatible with the
general standard of independence for auditors, and that the
nature of non-audit services means that auditor independence
was not compromised.
Signed in accordance with a resolution of Directors.
Barry Lewin
Chairman
13 August 2018
ASX-listed company
As at the date of this report, the Company’s securities are not
quoted on any stock exchange other than the ASX. There is
not currently any on-market buy back in progress.
Unquoted securities
The only unquoted securities in the capital of the Company
currently on issue are Enterprise Management Incentives
(EMI) options and performance rights referred to above.
All unquoted securities were issued or acquired under an
employee incentive scheme.
Use of cash and assets readily convertible
to cash since admission to ASX official list
In accordance with Listing Rule 4.10.19 the Company confirms
that the Group has been utilising the cash and assets in a
form readily convertible to cash that it held at the time of its
admission to the Official List of ASX since its admission to the
end of the reporting period in a way that is consistent with its
business objectives.
Corporate governance
A corporate governance statement is set out on pages 26-30
of this document.
Environmental issues
The Group’s operations are not presently subject to
significant environmental regulations under the law of the
Commonwealth or State.
Proceedings on behalf of the consolidated
entity
No person has applied for leave of Court to bring proceedings
on behalf of the consolidated entity. The Company was not a
party to any such proceedings during the year.
25
Praemium Annual Report 2018 FY2018 CORPORATE
GOVERNANCE STATEMENT
The policies and practices of the Company are in
accordance with the ASX Corporate Governance
Council’s “Corporate Governance Principles and
Recommendations (3rd Edition)” (ASX Guidelines)
unless otherwise stated.
Key disclosures as required under the Corporate
Governance Principles and Recommendations are
outlined in the Company’s Appendix 4G, which has
been released together with this Annual Report,
with disclosures included either in this Corporate
Governance Statement or on the Company’s
website. These documents are linked to this page:
http:// www.praemium.com.au/who-we-are/
investor-relations/ corporate-governance or are
otherwise available under the “Investor Relations”
section (under “Who we are”) of the Praemium
website.
The Corporate Governance Statement below has
been set out using the same headings used in the
ASX Guidelines.
The Corporate Governance Statement is current at
the date of approval of this annual report and has
been approved by the Board.
26
Principle 1 –
Lay solid foundations for management
and oversight
Board role & responsibilities (principle 1.1)
Principle 1.1 recommends that listed entities should disclose
the respective roles and responsibilities of its Board and
management, including matters expressly reserved to the
Board and those delegated to management.
The Company has adopted a Board Charter, a copy of which
it makes publicly available on its website, which outlines the
principle functions of the Company’s Board (see Principle 2).
The Charter makes it clear that it is the role of the Board to
govern the Company, and in particular to set policy direction,
whilst it is the role of the Executive to manage the Company’s
operations. Newly appointed Directors are also advised of
their responsibilities in their letter of appointment.
Directors’ appointment (principle 1.2)
The term of appointment for each non-executive director of
the Company shall be the period commencing on appointment
and expiring when the Director is next required to stand for
election by the shareholders or a period of 3 years, whichever
is the lesser. At each AGM of the Company, subject to ASX
Listing Rule 14.4, at least one Director must retire from office,
excluding 1) a Director who is a managing director; and 2) a
Director appointed by the Directors under rule 9.1 (b) of the
Company’s Constitution and is standing for election.
Board support for a Director’s re-election is not automatic
and is subject to satisfactory Director performance (in
accordance with the evaluation process described for
Principle 1.6).
Praemium undertakes appropriate background and
screening checks prior to nominating a Director for election
by shareholders, and provides to shareholders all material
information in its possession concerning the Director
standing for election or re-election in the explanatory notes
accompanying the notice of meeting.
Terms of appointment (principle 1.3)
The Company has a written agreement with each Director and
senior Executive setting out the terms of their appointment.
Further details of key executive terms are outlined in the
Remuneration Report.
Company Secretary (principle 1.4)
The Company Secretary is accountable directly to the
Board, through the Chairman, on all matters to do with the
proper functioning of the Board. The Company Secretary
is responsible for ensuring that Board procedures are
complied with and that governance matters are addressed.
All Directors have direct access to the Company Secretary.
The appointment and removal of the Company Secretary is a
matter for decision by the Board.
The Company’s current performance against its diversity
policy objectives is as follows:
Gender
30 June 2018
30 June 2017
representation %
Female
Male
Female
Male
Board
Senior Executive
Group
20%
47%
37%
80%
53%
63%
0%
38%
34%
100%
62%
66%
Board & committee performance (principle 1.6)
The Chairman conducts a review of Board and Committee
performance at least once each calendar year, with this
process conducted in this financial year. The process usually
involves the preparation of a questionnaire, to which Directors
and nominated senior Executives respond anonymously,
addressing matters relating to the conduct of meeting, the
content of Board/Committee papers and other matters
relevant to Board/Committee performance
Senior Executive performance (principle 1.7)
Praemium’s processes require that reviews be undertaken
in respect to all staff at least annually for the purpose of
reviewing activities and setting key focus areas, goals and
targets for the coming year. All senior Executives participated
in the review process in the financial year in accordance with
the process. Evaluation of the CEO’s performance is a specific
function under the Company’s Board charter, which is also
performed annually.
Diversity policy (principle 1.5)
The Company is required to report on matters relating to
diversity, in particular board diversity. The Company has a
formal diversity policy, located on the Company’s website,
setting out a number of broad objectives:
» Introduce processes to ensure that diversity commitments
are implemented appropriately;
» Implement processes to ensure transparency in the
selection of qualified employees, senior management
and Board candidates with regard to Company’s diversity
profile and objectives;
» Ensure that recruitment strategies allow the Company
to maximise its opportunities to target diverse and
appropriately qualified employees;
» Develop clear criteria on behavioural expectations in
relation to promoting diversity;
» Recognise and cater for employees that may have special
requirements (such as family member responsibilities) as
part of the Company’s overall diversity objectives;
» Consider whether the work environment is likely to attract
a diversity of individuals; and
» Facilitate a corporate culture that embraces diversity
and recognises that employees at all levels have
responsibilities outside of the workplace.
The Board has set the following measurable objectives for
achieving gender diversity:
» Increase gender diversity on the Board and senior
Executive positions and throughout the Group, aiming
for at least 20% female representation on a full-
time equivalent basis on the Board and in Executive
management positions and the entire Group by 30 June 2018;
» Promote flexible work practices to provide managers
and staff with the tools to tailor flexible work options
that suit both the business and the individual’s personal
requirements;
» Select new staff, development, promotion and
remuneration based solely on performance and capability;
and
» Annually assess gender diversity performance against
objectives set by the Remuneration Committee.
27
Praemium Annual Report 2018 Table 2 - Areas of competence and skills of the
Board of Directors
Area
Competence
Corporate leadership
Company experience
Business leadership, public
listed
Successful career as a senior
Executive or CEO, assessing
senior management
Executive leadership
Successful career as a senior
Accounting, business strategy,
competitive business analysis,
corporate financing, legal,
mergers & acquisitions,
commercial agreements, risk
management
Define strategic objectives,
constructively question business
plans and implement strategy
Accounting, business strategy,
competitive business analysis,
corporate financing, legal,
mergers & acquisitions,
commercial agreements
Financial services expertise,
commercial and business
experience
Technology, infrastructure,
product development, product
life cycle management
Corporate governance, risk
management
International business
management, geographical
experience
Director independence (principle 2.4)
Using the criteria recommended by the ASX Guidelines, all
four of the Company’s non-executive directors (Barry Lewin,
Stuart Robertson, Daniel Lipshut and Claire Willette) are
independent Directors.
Two current Directors are shareholders in the Company,
however are not substantial shareholders. Any change in
Director’s interest is disclosed in accordance with ASX
Listing Rules. The Company’s policies allow Directors to seek
independent advice at the Company’s expense.
Independence of chairman (principle 2.5)
The Chairman of the Board, Barry Lewin who has held the
role of Chairman since May 2017, is an independent non-
Principle 2 –
Structure the Board to add value
Nomination committee (principle 2.1)
For the 2018 financial year, the Company’s Remuneration
Committee Charter was expanded to include the functions
of a Nomination Committee. A copy of the Nomination
Committee functions is outlined within the Remuneration
Committee Charter as published on the Company’s website.
The Committee comprises Daniel Lipshut (Chairman), Stuart
Robertson and Michael Ohanessian, with a majority of whom
are independent directors. The Committee met twice during
the financial year, with meetings attended by Committee
members as disclosed in the Directors Report.
The procedure for the selection and appointment of new
Directors or the re-election of incumbent Directors, other
than as outlined in the Company’s Constitution is detailed at
Principle 1.2.
The Board may seek independent external advice in regard
to its composition, when there is a required change (such as
retirement or resignation).
Executive or CEO,
assessing senior
management
Strategy
Financial acumen
Board composition (principles 2.2 & 2.3)
The Company’s Board comprises four non-executive directors
and one executive director (Managing Director).
In addition to the information outlined on page 16, Tables 1
and 2 below set out specific details of the Company’s
Market & industry
Directors and the relevant skills and experience of the Board
collectively.
Technology
Table 1 - Details of Directors
Director
Term in office
as Director
Qualifications
Status
Barry Lewin
(Chairman)
From May
2017
BCom, BLaw,
MBA
Independent
Sustainability &
stakeholder
International
Stuart
Robertson
Daniel
Lipshut
Claire
Willette
From May
2017
From May
2017
CA, MBA, AICD Independent
MBA, AICD Independent
From August
2017
BA, IR
(Masters)
Independent
Michael
Ohanessian
From May
2018
BS, MBA
Executive
28
executive director. The Chairman of each Board Committee
is an independent non-executive director and there is a clear
division of responsibility between the Chairman and the CEO.
Director induction & training (principle 2.6)
New Directors receive a letter of appointment and a deed
of access and indemnity. The letter of appointment outlines
ASX’s expectations of Directors with respect to their
participation, time commitment and compliance with ASX
policies and regulatory requirements. An induction process
for incoming Directors is coordinated by the Company
Secretary.
The Board receives regular updates at Board meetings,
meetings with customers, shareholders and site visits. These
assist Directors to keep up-to-date with relevant market and
industry developments.
Principle 3 –
Act Ethically And Responsibly
Code of conduct (principle 3.1)
The Company has a code of conduct which is published on its
website. The Code is reviewed annually and updated where
appropriate.
Principle 4 –
Safeguard Integrity In Corporate Reporting
Audit committee (principle 4.1)
The role of the Audit, Risk & Compliance Committee is to
assist the Board to meet its oversight responsibilities in
relation to the Company’s financial reporting, compliance with
legal and regulatory requirements, internal control structure,
risk management procedures and the external audit function.
It is intended that the members of the Audit, Risk &
Compliance Committee between them should have
the accounting and financial expertise, and a sufficient
understanding of the industry in which Praemium operates,
to be able to effectively discharge the committee’s
responsibilities.
The Company’s Audit, Risk & Compliance Committee
comprises Stuart Robertson (Chairman), Daniel Lipshut
and Claire Willette. All members are independent and non-
executive. Six Committee meetings were held during the
financial year with meetings attended by Committee members
(as disclosed in the Directors Report) and on two occasions
by the Company’s Auditor. The Audit, Risk & Compliance
Committee has a formal charter, a copy of which is available
on the Company’s website. The Charter is reviewed annually
and updated where appropriate.
CEO & CFO assurance (principle 4.2)
The Board has received declarations from the CEO and CFO
that the financial records of the entity have been properly
maintained and that the financial statements comply with the
appropriate accounting standards and give a true and fair view
of the financial position and performance of the entity and that
the opinion has been formed on the basis of a sound system
of risk management and internal control which is operating
effectively.
Auditor attendance (principle 4.3)
The Company’s external auditor, Grant Thornton, has and will
continue to attend our Annual General Meeting in order to be
available to answer questions from security holders relevant
to the audit.
Principle 5 –
Make Timely And Balanced Disclosure
The Company has established written policies designed
to ensure compliance with ASX Listing Rule disclosure
requirements and to ensure accountability at a senior
Executive level for that compliance. The key policy,
Praemium’s Continuous Market Disclosure Policy, and
corresponding procedures are published on the Company’s
website.
Principle 6 –
Respect The Rights Of Shareholders
Investor relations (principles 6.1 – 6.4)
The Company has developed a framework for communicating
with shareholders which has been followed during the
financial year, as outlined in Praemium’s Shareholder
Communications Policy, as disclosed on the Company’s
website.
Where possible and practical, the Company communicates
with Shareholders using its website and email. For
this purpose, it maintains a list of email addresses for
shareholders and others interested in hearing from the
Company and provides regular updates by email – in
particular, links to market sensitive announcements
and financial filings. Praemium commits to facilitating
shareholder participation in shareholder meetings, and
dealing with shareholder inquiries.
Praemium strongly encourages all shareholders to assist it
to reduce costs and be mindful of the environment by opting
to receive annual reports, notices of meeting, proxy forms
and other formal communications electronically. Praemium’s
constitution allows for direct online voting.
29
Praemium Annual Report 2018 Principle 8 –
Remunerate Fairly and Responsibly
Remuneration committee (principle 8.1)
The Company’s Remuneration Committee comprises
Daniel Lipshut (Chairman), Stuart Robertson and Michael
Ohanessian. The Committee consists of a majority of
independent Directors.
The Committee met twice during the financial year, with
meetings attended by Committee members as disclosed in
the Directors Report. A copy of the Remuneration Committee
Charter is published on the Company’s website.
Remuneration policies (principles 8.2 – 8.3)
The Company’s approach to remuneration and this
principle is set out in its Remuneration Report on
page 18 and following. The Company’s approach to
the remuneration of non-executive directors is clearly
distinguished from that of Executive Directors and senior
Executives.
The Company does offer an equity based remuneration
scheme to Executives and staff, under Praemium’s
Directors & Employee Benefits Plan, which is published on
the Company’s website. Participants of this Plan are not
permitted to enter into transactions (whether through the
use of derivatives, hedging or otherwise) which limit the
economic risk of participating in this Plan.
.
Principle 7 –
Recognise and Manage Risk
Risk commitee (principle 7.1)
The Company’s Audit, Risk & Compliance Committee is
responsible for internal control, risk oversight and risk
management for the Company. The Company’s Audit, Risk
& Compliance Committee comprises Stuart Robertson
(Chairman), Daniel Lipshut and Claire Willette.
All members are independent and non-executive. Four
Committee meetings were held during the financial year,
with meetings attended by Committee members as disclosed
in the Directors Report. The Audit, Risk & Compliance
Committee has a formal charter, a copy of which is available
on the Company’s website. The Charter is reviewed annually
and updated where appropriate.
Risk management framework (principle 7.2)
The Audit, Risk & Compliance Committee has required
management to design and implement a risk management
and internal control system to identify and manage the
Group’s material business risks and to report to it on whether
those risks are being managed effectively. The Committee
reviewed the Company’s risk management framework in this
financial year to satisfy itself that the framework continues to
be sound.
Internal audit (principle 7.3)
The Group does not currently have any internal audit function.
The Board considers that at the Company’s current stage of
growth and size there is no particular benefit to appointing
internal audit and in the alternative seeks independent advice
as it considers appropriate. In all other respects, the Company
complies with the recommendations set out in Principle 7.
Risk management (principle 7.4)
The Company monitors its exposure to all risks, including
economic, environmental and social sustainability risks.
Material business risks are described in the annual report,
which also outlines the Company’s activities, performance
during the year, financial position and main business
strategies. This specific report and the Annual Report overall
provide further details about how Praemium manages its
economic, environmental and social sustainability risks.
3030
FINANCIAL REPORT
Financial Report
2018
2018
31
CONSOLIDATED STATEMENT OF PROFIT & LOSS
AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2018
NOTE
3
4
5
5
5
6
Revenue
Other income
Employee costs
Depreciation, amortisation and impairments
Legal, professional, advertising and insurance expense
IT support
Commissions expense
Travel expenses
Occupancy costs
Net foreign exchange gains / (losses)
Telecommunication costs
Platform trading & recovery
Other expenses
Share based payments
Restructure, Arbitration and Acquisition costs
Withholding tax not recoverable
Profit before income tax expense
Income tax expense
Profitable attributable to members of the Group
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss
Changes in the fair value of available-for-sale financial assets
Exchange differences on translation of foreign operations
Total items that may be reclassified subsequently to profit or loss
Other comprehensive income/(loss) for the year, net of tax
Total comprehensive income/(loss) attributable to Owners of the
parent
Profit for the year attributable to Owners of the parent
Total comprehensive income attributable to Owners of the parent
2018
$
2017
$
42,193,434
34,083,109
988,617
1,314,755
(21,797,153)
(19,645,831)
(1,047,478)
(939,852)
(4,222,271)
(3,462,860)
(1,705,565)
(1,057,403)
(5,091,862)
(2,895,888)
(1,138,123)
(1,129,002)
(1,907,365)
(1,434,588)
123,932
(310,108)
1,915,665
(59,086)
(1,060,002)
(362,558)
(266,473)
914,071
(125,953)
(576,917)
(1,829,168)
(2,080,592)
(150,850)
(114,916)
4,902,617
2,219,102
(3,488,076)
(1,530,833)
1,414,541
688,269
46,183
256,954
303,137
303,137
1,717,678
1,717,678
1,717,678
(5,150)
(636,152)
(641,302)
(641,302)
46,967
46,967
46,967
Earnings per share
Basic earnings/(loss) per share (cents per share)
Diluted earnings/(loss) per share (cents per share)
24
24
0.4
0.4
0.2
0.2
The accompanying notes form part of the financial statements.
32
STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2018
NOTE
Current assets
Cash and cash equivalents
Trade and other receivables
Total current assets
Non-current assets
Other Financial assets
Property, plant and equipment
Goodwill
Intangible Assets
Deferred Tax Assets
Total non-current assets
TOTAL ASSETS
Current liabilities
Trade and other payables
Provisions
Income Tax Payable
Total current liabilities
Non-current liabilities
Provisions
Deferred Tax Liability
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Share capital
Reserves
Accumulated losses
TOTAL EQUITY
The accompanying notes form part of the financial statements.
7
8
9
10
11
12
13
14
15
15
13
16
17
2018
$
2017
$
12,120,879
7,334,761
8,983,491
6,694,113
19,455,640
15,677,604
2,287,113
1,316,010
3,207,751
3,245,328
807,144
2,242,399
1,239,391
2,946,235
1,435,292
629,139
10,863,346
8,492,456
30,318,986
24,170,060
6,899,460
1,333,384
1,543,770
9,776,614
62,647
199,782
262,429
5,359,987
1,055,558
304,416
6,719,961
76,375
280,467
356,842
10,039,043
7,076,803
20,279,943
17,093,257
65,371,547
64,840,789
1,201,151
(40,201)
(46,292,755)
(47,707,331)
20,279,943
17,093,257
33
Praemium Annual Report 2018 STATEMENT OF CHANGES IN EQUITY
FOR YEAR ENDED 30 JUNE 2018 ORDINARY
SHARES
$
ACCUMULATED
LOSSES
$
FOREIGN
CURRENCY
TRANSLATION
RESERVE
$
OPTION
RESERVE
$
REVALUATION
RESERVE
$
TOTAL
$
Equity as at beginning of period
64,840,789
(47,707,331)
(850,256)
804,823
5,232 17,093,257
Profit attributable to members of
the parent entity
Other comprehensive income /
(loss)
Total comprehensive income/
(loss) for the year
-
-
-
1,414,541
-
-
256,954
1,414,541
256,954
Transactions with owners in their capacity as owners
Issue of shares
Option expense
Exchange difference on option
reserve
Transfer on exercise of options
95,102
-
-
435,656
530,758
-
-
35
-
35
-
-
-
-
-
-
-
-
-
1,373,871
-
(435,656)
938,215
-
1,414,541
46,183
303,137
46,183
1,717,678
-
-
-
-
-
95,102
1,373,871
35
-
1,469,008
Equity as at 30 June 2018
65,371,547
(46,292,755)
(593,302)
1,743,038
51,415 20,279,943
FOR YEAR ENDED 30 JUNE 2017
ORDINARY
SHARES
ACCUMULATED
LOSSES
$
$
FOREIGN
CURRENCY
TRANSLATION
RESERVE
$
OPTION
RESERVE
REVALUATION
RESERVE
$
$
TOTAL
$
Equity as at beginning of period
64,098,522
(48,395,595)
(214,104)
740,820
10,382 16,240,025
Profit attributable to members of
the parent entity
Other comprehensive income/
(loss)
Total comprehensive income/
(loss) for the year
-
-
-
688,269
-
-
(636,152)
688,269
(636,152)
Transactions with owners in their capacity as owners
Issue of shares
223,386
Performance rights expense
Exchange difference on
performance rights reserve
Transfer on exercise of
performance rights
-
-
518,881
742,267
-
-
(5)
-
(5)
-
-
-
-
-
-
-
-
-
582,884
-
(518,881)
64,003
-
688,269
(5,150)
(641,302)
(5,150)
46,967
-
-
-
-
-
223,386
582,884
(5)
-
806,265
Equity as at 30 June 2017
64,840,789
(47,707,331)
(850,256)
804,823
5,232 17,093,257
The accompanying notes form part of the financial statements.
34
STATEMENT OF CASH FLOWS
FOR YEAR ENDED 30 JUNE 2018
NOTE
2018
$
2017
$
Cash from operating activities:
Receipts from customers
Payments to suppliers and employees
Interest received
Unit trust distributions received
Income tax paid
Net cash (used by) /provided from operating activities
22
Cash flows from investing activities:
Payments for property, plant and equipment
Proceeds / (Payment) for Investments
Payment for intangible assets
Acquisition of subsidiaries, net of cash
Net cash used in investing activities
Cash flows from financing activities:
Net cash provided by financing activities
43,110,132
(34,987,033)
21,501
2,881
(2,735,705)
5,411,776
(522,461)
5,000
(2,317,645)
34,871,970
(30,114,558)
8,957
5,519
(3,233,770)
1,538,118
(872,576)
(460,000)
-
-
(790,673)
(2,835,106)
(2,123,249)
-
-
Net cash increase (decreases) in cash and cash equivalents
2,576,670
(585,131)
Cash and cash equivalents at beginning of year
Effect of exchange rates on cash holdings in foreign currencies
Cash and cash equivalents at end of year
7
8,983,491
560,718
12,120,879
10,425,973
(857,351)
8,983,491
The accompanying notes form part of the financial statements.
35
Praemium Annual Report 2018
NOTES TO THE FINANCIAL STATEMENTS
1. Notes to the financial statements
General information
(a)
The financial report is a general-purpose financial report that
covers the consolidated entity consisting of Praemium Limited
and its subsidiaries. Praemium Limited is a listed public
company, incorporated and domiciled in Australia.
Separate financial statements for Praemium Limited as an
individual entity are no longer presented as a consequence
of a change to the Corporations Act 2001; however, limited
financial information for Praemium Limited as an individual
entity are included in Note 25. The Group is a for-profit entity
for the purpose of preparing the financial statements.
Segment reporting
(d)
Operating segments are identified and segment information
disclosed on the basis of internal reports that are regularly
provided to, or reviewed by, the Group’s chief operating
decision maker which, for the Group, is the Board of
Directors. In this regard, such information is provided using
different measures to those used in preparing the statement
of profit & loss and other comprehensive income and
statement of financial position.
Property, plant and equipment
(e)
Each class of property, plant and equipment is carried at
cost, where applicable, any accumulated depreciation and
impairment losses.
The following is a summary of the material accounting
policies adopted by the Group in the preparation of the
financial report. The accounting policies have been
consistently applied, unless otherwise stated.
Basis of preparation
(b)
The financial report of Praemium Limited and controlled
entities has been prepared in accordance with Australian
Accounting Standards (including Australian Accounting
Interpretations), other authoritative pronouncements of the
Australian Accounting Standards Board and the Corporations
Act 2001.
Australian Accounting Standards include International
Financial Reporting Standards as adopted in Australia.
Compliance with Australian Accounting Standards ensures
that the financial report complies with International Financial
Reporting Standards (IFRS).
(i)
Reporting basis and conventions
The financial report has been prepared on an accruals basis
and is based on historical costs as modified by the revaluation
of available-for-sale financial assets, financial assets and
liabilities at fair value through profit or loss, certain classes of
property, plant and equipment and investment property.
Principles of consolidation
(c)
The consolidated financial statements incorporate the
assets and liabilities of all subsidiaries of Praemium Limited
(“parent entity”) as at 30 June 2018 and the results of all
subsidiaries for the year then ended. Praemium Limited and
its subsidiaries are referred to in this financial report as the
“Group” or the “consolidated entity”.
The parent controls a subsidiary if it is exposed, or has rights,
to variable returns from its involvement with the subsidiary
and has the ability to affect those returns through its power
over the subsidiary.
All intercompany balances and transactions between entities
in the Group, including any unrealised profits or losses, have
been eliminated on consolidation. Accounting policies of
subsidiaries have been changed where necessary to ensure
consistency with those policies adopted by the Group.
Subsidiaries are fully consolidated from the date which
control is transferred to the Group. They are de-consolidated
from the date control ceases.
(i)
Plant and equipment
Plant and equipment is measured on the cost basis less
depreciation and impairment losses.
The carrying amount of plant and equipment is reviewed
annually by Directors for indications of impairment. If any
such indications exist, an impairment test is carried out,
and any impairment losses on the assets recognised in the
statement of profit & loss and other comprehensive income.
To ensure that costs are not recognised in the statement of
financial position in excess of their recoverable amounts, the
recoverable amount is assessed on the basis of the expected
net cash flows that will be received from the assets employed
and subsequent disposals discounted to their net present
value.
Subsequent costs are included in the asset’s carrying amount
or recognised as a separate asset, as appropriate, only when
it is probable that future economic benefits associated with
the item will flow to the Group and the cost of the item can
be measured reliably. All other repairs and maintenance
are charged to the statement of profit & loss and other
comprehensive income during the financial period in which
they are incurred.
Plant and equipment is measured initially at cost. Cost
includes all directly attributable expenditure incurred
including costs to get the asset ready for its use as intended
by management. Costs include an estimate of any expenditure
expected to be incurred at the end of the asset’s useful life,
including restoration, rehabilitation and decommissioning
costs.
(ii)
Depreciation
The depreciable amount of all fixed assets, including
capitalised lease assets, is depreciated on a straight-line
basis over their useful lives (commencing from the time
the asset is ready for use). Leasehold improvements are
depreciated over the shorter of either the unexpired period of
the lease or the estimated useful lives of the improvements.
The depreciable amount is the carrying value of the asset less
estimated residual amounts. The residual amount is based on
what a similar asset of the expected condition of the asset at
the end of its useful life could be sold for.
36
The depreciation rates used for each class of depreciable
assets are:
CLASS OF FIXED ASSET
DEPRECIATION
RATE
METHOD
Plant, furniture and
equipment
Computer equiment
Buildings & leasehold
improvements
10-20%
Straight-line
20-33%
Straight-line
15%
Straight-line
The assets’ residual values and useful lives are reviewed, and
adjusted if appropriate, at each reporting date.
Gains and losses on disposals are determined by comparing
proceeds with the carrying amount. These are included in the
statement of profit & loss and other comprehensive income.
Intangible assets
(f)
Customer lists and databases acquired in a business
combination that qualify for separate recognition are
recognised as intangible assets at their fair values. All
intangible assets, including customer contracts and
databases, are accounted for using the fair value model
whereby capitalised costs are amortised on a straight-line
basis over their estimated useful lives, as these assets
are considered finite. Residual values and useful lives are
reviewed at each reporting date. In addition, they are subject
to impairment testing as described in Note 1(g).
The following useful lives are applied:
» Customer lists: 5 years
» Databases: 5 years
» Software: 3 years
Amortisation has been included within depreciation
and amortisation of non-financial assets.
(g) Impairment testing of goodwill, other intangible assets
and property, plant and equipment
For impairment assessment purposes, assets are grouped
at the lowest levels for which there are largely independent
cash inflows (cash-generating units). As a result, some assets
are tested individually for impairment and some are tested
at cash-generating unit level. Goodwill is allocated to those
cash-generating units that are expected to benefit from
synergies of the related business combination and represent
the lowest level within the Group at which management
monitors goodwill.
Cash-generating units to which goodwill has been allocated
(determined by the Group’s management as equivalent to
its operating segments) are tested for impairment at least
annually. All other individual assets or cash-generating units
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 or cash-generating unit’s carrying amount exceeds
its recoverable amount, which is the higher of fair value less
costs to sell and value-in-use. To determine the value-in-use,
management estimates expected future cash flows from each
cash-generating unit and determines a suitable interest rate
in order to calculate the present value of those cash flows.
The data used for impairment testing procedures are directly
linked to the Group’s latest approved budget, adjusted as
necessary to exclude the effects of future reorganisations
and asset enhancements. Discount factors are determined
individually for each cash-generating unit and reflect
management’s assessment of respective risk profiles, such
as market and asset-specific risks factors.
Impairment losses for cash-generating units reduce first
the carrying amount of any goodwill allocated to that cash-
generating unit. Any remaining impairment loss is charged
pro rata to the other assets in the cash-generating unit.
With the exception of goodwill, all assets are subsequently
reassessed for indications that an impairment loss previously
recognised may no longer exist. An impairment charge is
reversed if the cash-generating unit’s recoverable amount
exceeds its carrying amount.
Financial instruments
(h)
Financial assets and financial liabilities are recognised
on the Group’s statement of financial position when the
Group becomes a party to the contractual provisions of the
instrument.
Trade receivables
(i)
Trade receivables are measured at initial recognition at
fair value, and are subsequently measured at amortised
cost using the effective interest rate method less provision
for impairment. Appropriate allowances for estimated
irrecoverable amounts are recognised in profit or losswhen
there is objective evidence that the asset is impaired.
The allowance recognised is measured as the difference
between the asset’s carrying amount and the present value
of estimated future cash flows discounted at the effective
interest rate computed at initial recognition. Collectability of
trade receivables is reviewed on an ongoing basis and debts
which are known to be uncollectible are written off. Trade
receivables are generally due for settlement within 30 days.
(ii)
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, demand
deposits and other short-term highly liquid investments that
are readily convertible to a known amount of cash and are
subject to an insignificant risk of changes in value.
Financial assets and financial liabilities are recognised
on the Group’s statement of financial position when the
Group becomes a party to the contractual provisions of the
instrument.
(iii)
Financial liabilities and equity
Financial liabilities and equity instruments issued by the
Group are classified according to the substance of the
contractual arrangements entered into and the definitions
of a financial liability and an equity instrument. An equity
instrument is any contract that evidences a residual interest
in the assets of the Group after deducting all of its liabilities.
The accounting policies adopted for specific financial liabilities
and equity instruments are set out below.
37
Praemium Annual Report 2018
Financial liabilities are classified as either financial liabilities
“at fair value through profit or loss” or other financial
liabilities depended on the purpose for which the liability was
acquired. The Group’s financial liabilities include trade and
other payables.
Financial liabilities are recognized when the Group becomes a
party to the contractual agreements of the instrument.
All interest-related charges and, if applicable, changes in an
instrument’s fair value that are reported in profit or loss are
included in the statement of profit & loss and comprehensive
income line items “finance costs” or “finance income”.
(iv)
Fair Value
The net fair value of financial assets and financial liabilities
approximates their carrying amounts as disclosed in the
statement of financial position and notes to the financial
statements. Fair value is defined as the price that would
be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants at the
measurement date.
(v)
Available-for-sale financial assets
Available-for-sale financial assets, comprising principally
units in unlisted registered schemes, are non-derivatives
that are either designated in this category or not classified
in any of the other categories. They are included as non-
current assets unless management intends to dispose of the
investment within 12 months of reporting date.
Available-for-sale financial assets are initially recognised
at fair value plus transaction costs and are subsequently
measured at fair value. Changes in fair value are recognised
directly in equity in an available-for-sale assets revaluation
reserve.
When securities classified as available-for-sale are sold or
impaired, the accumulated fair value adjustments recognised
in equity are included in the statement of profit & loss and
comprehensive income as gains and losses.
The Group assesses at each reporting date whether there is
objective evidence that a financial asset is impaired. In the
case of equity securities classified as available-for-sale, a
significant or prolonged decline in the fair value of a security
below its cost is considered in determining whether the
security is impaired. If such evidence exists for available-
for-sale financial assets, the cumulative loss –measured as
the difference between the acquisition cost and the current
fair value, less any impairment loss on that financial asset
previously recognised in profit or loss – is removed from
equity and recognised in the statement of profit & loss and
other comprehensive income. Impairment losses recognised
in the statement of profit & loss and other comprehensive
income on equity instruments classified as available-for-sale
are not reversed through the statement of profit & loss and
other comprehensive income.
(i)
Employee benefits
Provision is made for the Group’s liability for employee
benefits arising from services rendered by employees to
reporting date. Employee benefits that are expected to be
settled within one year have been measured at the amounts
expected to be paid when the liability is settled, plus related
on costs. Employee benefits payable later than one year have
been measured at the present value of the estimated future
cash outflows to be made for those benefits..
(i) Equity-settled compensation
The Group operates a share-based compensation scheme.
Equity-settled share-based payments are measured at fair
value at the date of grant. The fair value determined at the
grant date is expensed on a straight-line basis over the
vesting period, based on the Group’s estimate of shares that
will eventually vest.
Fair value is measured by use of a Black-Scholes model. The
expected life used in the model has been adjusted, based on
management’s estimate, for the effects of non-transferability,
exercise restrictions and behavioural considerations.
Provisions
(j)
Provisions are recognised when the Group has a legal or
constructive obligation, as a result of past events, for which
it is probable that an outflow of economic benefits will result
and that the outflow can be reliably measured.
Income tax
(k)
The charge for current income-tax expense is based on
the profit for the year adjusted for any non-assessable or
disallowed items. It is calculated using the tax rates that have
been enacted or are substantially enacted by reporting date.
Deferred tax assets and liabilities are recognised using the
balance sheet liability method with respect to temporary
differences arising between the tax bases of assets and
liabilities and their carrying amounts in the financial
statements, and on unused tax losses. No deferred tax assets
or liabilities will be recognised from the initial recognition of
an asset or liability excluding a business combination, which
at the time of the transaction did not affect either accounting
or taxable profit or loss.
Deferred tax is calculated at the tax rates that are expected
to apply to the period when the asset is realised or liability is
settled. Deferred tax is recognised in the statement of profit
& loss and comprehensive income except where it relates to
items that are recognised directly in equity, in which case the
deferred tax is recognised directly in equity.
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.
Deferred tax liabilities and assets are not recognised for
temporary differences between the carrying amount and tax
bases of investments in controlled entities where the parent
entity 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 future.
38
The Directors have elected for those entities within the
consolidated entity that are wholly-owned Australian resident
entities to be taxed as a single entity from July 1 2005. The
head entity within the tax-consolidated group for the purposes
of tax consolidation is Praemium Limited.
Praemium Limited and its wholly-owned Australian controlled
entities have implemented the tax consolidation legislation.
Praemium Limited and each of the entities within the tax-
consolidated group account for their own current and
deferred tax amounts. These amounts are measured as
if each entity in the Group continues to be a stand-alone
taxpayer in its own right.In addition to its own current and
deferred tax amounts, Praemium Limited also recognises
the current tax liabilities (or assets) and the deferred tax
assets arising from unused tax losses and unused tax credits
assumed from controlled entities in the tax-consolidated
group.
Entities within the tax-consolidated group have entered into a
tax funding agreement with the head entity. Under the terms
of this agreement, each of the wholly-ownedentities within
the tax-consolidated group has agreed to fully compensate
Praemium Limited for any current tax payable assumed and
are compensated by Praemium Limited for any current tax
receivable and deferred tax assets relating to unused tax
losses or unused tax credits that are transferred to Praemium
Limited under the tax consolidation legislation.
The funding amounts are determined by reference to the
amounts recognised in the wholly-owned entities’ financial
statements. Such amounts are reflected in amounts
receivable from or payable to other entities in the tax-
consolidated group.
Any difference between the amounts assumed and amounts
receivable or payable under the tax funding agreement are
recognised as a contribution to (or distribution from) wholly-
owned tax consolidated entities.
Leases
(l)
Leases of fixed assets where substantially all the risks and
rewards incidental to the ownership of the asset, but not the
legal ownership, that are transferred to entities in the Group
are classified as finance leases.
Finance leases are capitalised at the inception of the lease
by recording an asset and a liability at the lower of the
amounts equal to the fair value of the leased property and the
present value of the minimum lease payments, including any
guaranteed residual values. Lease payments are allocated
between the reduction of the lease liability and the lease
interest expense.
The interest expense is recognised in the statement of profit
& loss and other comprehensive income so as to achieve a
constant periodic rate of interest on the remaining balance of
the liability outstanding.
Leased assets are depreciated on a straight-line basis over
the shorter of the asset’s useful life and the lease term.
Lease payments for operating leases, where substantially all
the risks and benefits remain with the lessor, are charged
to the statement of profit & loss and other comprehensive
income on a straight line basis over the lease term.
Lease incentives under operating leases are recognised as a
liability and amortised on a straight-line basis over the lease
term.
Revenue recognition
(m)
Revenue is measured at the fair value of the consideration
received or receivable. Revenue from the rendering of
services is recognised in the accounting period in which the
services are rendered. When revenue is received but services
are not rendered at reporting date, the receipt is recorded in
the statement of financial position as unearned income.
Interest revenue is recognised on a proportional basis using
the effective interest rate in relation to the outstanding
financial asset. Dividends are recognised as revenue when the
right to receive payment is established.
All revenue is stated net of the amount of goods and services
tax (GST), returns, trade allowances and other duties and
taxes paid. Revenue in the form of grant income is recognised
when earned and receivable.
(n)
(i)
Foreign currency translation
Functional and presentation currency
The functional currency of each of the Group’s entities
is identified as the currency of the primary economic
environment in which that entity operates, and is used in the
recognition of transactions and balances for that entity. Where
the functional currency of a group entity is different from the
parent’s functional currency, the entity has been translated
for consolidation using the method described below for ‘Group
entities’.
The United Kingdom subsidiaries’ functional currency is GBP
which is translated to the presentation currency at the end of
each reporting period.
The Hong Kong and Shenzhen (China) subsidiaries’ functional
currency are HKD and CNY respectively, which are translated
to the presentation currency at the end of each reporting
period.
The Armenian subsidiary’s functional currency is AMD which
is translated to the presentation currency at the end of each
reporting report.
The consolidated financial statements are presented in
Australian dollars which is the parent’s functional and
presentation currency.
(ii)
Group entities
The financial results and position of all Group entities whose
functional currency is different from the Group’s presentation
currency are translated as follows:
Assets and liabilities are translated at year-end exchange
rates prevailing at reporting date;
» Income and expenses are translated at the rate on the
date of the transaction, or an average exchange rate
for the period (if the average approximates the actual
rate for that period); and
» Retained earnings are translated at the respective
historical exchange rate.
39
Praemium Annual Report 2018 Exchange differences arising on translation of Group entities
from a different functional currency are recognised directly
in a foreign currency translation reserve in the statement of
financial position. These differences are recognised in the
statement of profit & loss and other comprehensive income in
the period in which the entity is disposed. Goodwill and fair-
value adjustments arising on the acquisition of a foreign entity
are treated as assets and liabilities of the foreign entity and
translated at the closing rate.
(iii)
Transactions and balances
Foreign currency transactions are translated into the
functional currency using the exchange rates prevailing at the
date of the transaction. Foreign currency monetary items are
translated at the spot rate on reporting date.
Non-monetary items measured at historical cost are not
retranslated. Non-monetary items measured at fair value are
reported at the exchange rate at the date when fair values
were determined.
Exchange differences arising on the translation of monetary
items are recognised in the statement of profit & loss and
other comprehensive income. Exchange differences on
translation of non-monetary items are recognised directly in
equity.
(o)
Ordinary shares are classified as equity.
Contributed equity
Incremental costs directly attributable to the issue of new
shares or options are shown in equity as a deduction, net of
tax, from the proceeds. Incremental costs directly attributable
to the issue of new shares or options for the acquisition of a
business are not included in the cost of the acquisition as part
of the purchase consideration.
Dividends
(p)
Provision is made for the amount of any dividend declared,
being appropriately authorised and no longer at the discretion
of the entity, on or before the end of the financial year but not
distributed at reporting date.
(q)
(i)
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit
attributable to equity holders of the Group, excluding any
costs of servicing equity other than ordinary shares, by the
weighted average number of ordinary shares outstanding
during the financial year, adjusted for bonus elements in
ordinary shares issued during the year.
(ii)
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the
determination of basic earnings per share to take into account
the after-income-tax effect of interest and other financing
costs associated with dilutive potential ordinary shares
and the weighted average number of shares assumed to
have been issued for no consideration in relation to dilutive
potential ordinary shares.
Goods and services tax (GST)
(r)
Revenues, expenses and assets are recognised net of the
amount of goods and services tax (GST), except:
1. Where the amount of the GST incurred is not recoverable
from the taxation authority, it is recognised as part of the cost
of acquisition of an asset or as part of an item of expense; or
2. For receivables and payables which are recognised
inclusive of GST.
The net amount of GST recoverable from, or payable to,
the taxation authority is included as part of receivables or
payables. Cash flows are included in the statement of cash
flows on a gross basis. The GST component of cash flows
arising from investing and financing activities which
is recoverable from, or payable to, the taxation authority is
classified as operating cash flows.
Comparatives
(s)
Where necessary, comparative figures have been adjusted to
conform to changes in presentation in the current year.
Going concern
(t)
The financial report has been prepared on a going concern
basis. This contemplates continuity of normal business
activities and the realisation of assets and settlement of
liabilities in the ordinary course of business. The Company
has recorded an operating profit before tax of $4,902,617
during the financial year ended 30 June 2018 (June 2017
$2,219,102 with accumulated losses amounting to $46,292,755
as at 30 June 2018. Cash reserves were $12,120,879 at 30
June 2018.
The Directors are of the opinion that the existing cash
reserves will provide the Company with adequate funds to
ensure its continued viability and operations.
The Company is actively enhancing its profile in the
Australian, Europe and Asian markets. Moreover, internal
control processes in place will facilitate close monitoring
of expenditure, and the Board is confident that it will be
able to manage its cash resources appropriately without
negatively impacting upon product development or revenue
opportunities.
At this time, the Directors are of the opinion that no asset is
likely to be realised for an amount less than the amount at
which it is recognised in the financial report as at 30 June
2018. Accordingly, no adjustments have been made to the
financial report relating to the recoverability and classification
of the asset-carrying amounts and classification of liabilities
that might be necessary.
Accounting standards and interpretations issued
(u)
but not yet effective and not yet adopted
The following new accounting standards, amendments to
standards and interpretations have been issued, but are
not mandatory as at 30 June 2018. They may impact the
Consolidated Entity in the period of initial application. They
are available for early adoption, but have not been applied in
preparing this financial report:
40
leases of 12 months or less and leases of low-value assets
(such as printers) where an accounting policy choice exists
whereby either a ‘right-of-use’ assets is recognised or
lease payments are expensed to profit or loss as incurred.
A liability corresponding to the capitalised lease will also be
recognised, adjusted for lease prepayments, lease incentives
received, initial direct costs incurred and an estimate of any
future restoration, removal or dismantling costs. Straight-
line operating lease expense recognition will be replaced
with a depreciation charge for the leased asset (included
in operating costs). In the earlier periods of the lease, the
expenses associated with the lease under AASB 16 will be
higher when compared to lease expenses under AASB 117.
However EBITDA (Earnings Before Interest, Tax, Depreciation
and Amortisation) results will be improved as the operating
expense is replaced by depreciation in profit or loss under
AASB 16. The consolidated entity will adopt this standard
from 1 July 2019, and the impact on gross assets and gross
liabilities is estimated to be approximately $4.1 million per
Note 19.
(v)
Critical accounting estimates and judgments
The Directors evaluate estimates and judgments incorporated
into the financial report based on historical knowledge and
best available current information. Estimates assume a
reasonable expectation of future events and are based on
current trends and economic data, obtained both externally
and within the Group.
Impairment of available-for-sale financial assets
The Group follows the guidance of AASB 139 Financial
Instruments: Recognition and Measurement in determining
when an available-for-sale financial asset is impaired. This
determination requires significant judgment. In making this
judgment, the Group evaluates, among other factors, the
duration and extent to which the fair value of an investment
is less than its cost and the financial health of and near-term
business outlook for the investee, including factors such as
industry and sector performance, changes in technology, and
operational and financing cash flows.
Share-based payment transactions
The consolidated entity measures the cost of equity-settled
transactions with employees by reference to the fair value of
the equity instruments at the date at which they are granted.
The fair value is determined using either the Binomial or
Black-Scholes model taking into account the terms and
conditions upon which the instruments were granted. The
accounting estimates and assumptions relating to equity-
settled share-based payments would have no impact on the
carrying amounts of assets and liabilities within the next
annual reporting period but may impact profit or loss and
equity.
AASB 9 Financial Instruments
AASB 9 introduces new requirements for the classification
and measurement of financial assets and liabilities and
includes a forward-looking ‘expected loss’ impairment model
and a substantially-changed approach to hedge accounting.
These requirements improve and simplify the approach for
classification and measurement of financial assets compared
with the requirements of AASB 139. Based on the entity’s
preliminary assessment, the listed unit trust and regulatory
reserve will be reclassified to financial assets at fair value
through the consolidated statement of profit and loss and
other comprehensive income when this standard is first
adopted for the year ending 30 June 2019.
AASB 15 Revenue from Contracts with
Customers
AASB 15 replaces AASB 118 Revenue, AASB 111 Construction
Contracts and some revenue related Interpretations and:
» Establishes a new revenue recognition model
» Changes the basis for deciding whether revenue is to be
recognised over time or at a point in time
» Provides new and more detailed guidance on specific
topics (e.g. multiple element arrangements, variable
pricing, rights of return, warranties and licensing)
» Expands and improves disclosures about revenue.
Adoption is mandatory for financial years commencing on or
after 1 January 2018. The Group intends to adopt the standard
using the modified retrospective approach which means that
the cumulative impact of the adoption will be recognised in
retained earnings as of 1 July 2018, and that comparatives
will not be restated. Management has assessed the effect of
applying the new standard on retained earnings and estimates
that the cumulative impact will be $2.0 million, based on
specific Portfolio contracts where upfront recognition of
revenue would be amended to recognised over the contract
life.
AASB 16 Leases
AASB 16 replaces AASB 117 Leases and some lease-
related interpretation requires all leases to be accounted
for ‘on-balance sheet’ by lessees, other than short-term
and low value asset leases provides new guidance on the
application of the definition of lease and on sale and lease
back accounting largely retains the existing lessor accounting
requirements in AASB 117 requires new and different
disclosures about leases
This standard is applicable to annual reporting periods
beginning on or after 1 January 2019. The standard replaces
AASB 117 “Leases” and for lessees will eliminate the
classification of operating leases and finance leases. Subject
to exceptions, a ‘right-of-use’ asset will be capitalised in
the statement of financial position, measured at the present
value of the unavoidable future lease payments to be made
over the lease term. The exceptions relate to short-term
41
Praemium Annual Report 2018 Where the business combination is achieved in stages, the
consolidated entity re-measures its previously held equity
interest in the acquiree at the acquisition-date fair value
and the difference between the fair value and the previous
carrying amount is recognised in the profit or loss.
Contingent consideration to be transferred by the acquirer
is recognised at the acquisition date fair value. Subsequent
changes in the fair value of contingent consideration
classified as an asset or liability is recognised in profit or
loss. Contingent consideration classified as equity is not
re-measured and its subsequent settlement is accounted for
within equity.
The difference between the acquisition date fair value of
assets acquired, liabilities assumed and any non-controlling
interest in the acquiree and the fair value of the consideration
transferred and the fair value of any pre- existing investment
in the acquire is recognised as goodwill. If the consideration
transferred and the pre-existing fair value is less than the fair
value of the identifiable net assets acquired, being a bargain
purchase to the acquirer, the difference is recognised as a
gain directly in profit or loss by the acquirer on the acquisition
date, but only after a reassessment of the identification and
measurement of the net assets acquired, the non-controlling
interest in the acquiree, if any, the consideration transferred
and the acquirer’s previously held equity interest in the
acquirer.
Business combinations are initially accounted for on a
provisional basis. The acquirer retrospectively adjusts
the provisional amounts recognised and also recognises
additional assets and liabilities during the period, based on
new information obtained about the facts and circumstances
that existed at the acquisition date. The measurement
period ends on the earlier of either (i) 12 months from the
date of acquisition or (ii) when the acquirer receives all the
information possible to determine fair value.
Change in Accounting Policies
(x)
A number of new and revised standards are effective for
annual periods beginning on or after 1 July 2018. However,
there has not been any significant impact upon the application
of these standards.
Fair value and hierarchy of financial instruments
The consolidated entity is required to classify financial
instruments, measured at fair value, using a three-level
hierarchy, being: Level 1: Quoted prices (unadjusted) in active
markets for identical assets and liabilities; Level 2: Inputs
other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (as prices)
or indirectly (derived from prices); and Level 3: Inputs for the
asset and liability that are not based on observable market
data (unobservable inputs). An instrument is required to be
classified in its entirety on the basis of the lowest level of
valuation inputs that is significant to fair value. Considerable
judgement is required to determine what is significant to
fair value and therefore the category in which the financial
instrument is placed can be subjective.
The fair value of financial instruments classified as Level 3
is determined by the use of valuation models. These include
discounted cash flow analysis or the use of observable inputs
that require significant adjustments based on unobservable
inputs.
Provision for impairment of receivables
The provision for impairment of receivables assessment
requires a degree of estimation and judgement. The level of
provision is assessed by taking into account the recent sales
experience, the aging of receivables, historical collection rates
and specific knowledge of the individual debtor’s financial
position.
Estimation of useful lives of assets
The consolidated entity determines the estimated useful lives
and related depreciation and amortisation charges for its
property, plant and equipment and definitive life intangible
assets. The useful lives could change significantly as a result
of technical innovations or some other event. The depreciation
and amortisation charge will increase where the useful
lives are less than previously estimated lives, or technically
obsolete or non-strategic assets that have been abandoned or
sold will be written off or written down.
Business combinations
(w)
The acquisition method of accounting is used to account for
business combinations.
The consideration transferred is the sum of the acquisition-
date fair values of the assets transferred, equity instruments
issued or liabilities incurred by the acquirer to former owners
of the acquiree and the amount of any non-controlling interest
in the acquire. For each business combination, the non-
controlling interest in the acquiree is measured at either
fair value or at the proportionate share of the acquiree’s
identifiable net assets. All acquisition costs are expensed as
incurred to the profit or loss.
On the acquisition of the business, the consolidated entity
assesses the financial assets acquired and liabilities assumed
for appropriate classification and designation in accordance
with the contractual terms, economic conditions, the
consolidated entity’s operating or accounting policies and
other pertinent conditions in the existence at the acquisition
date.
42
2.
Financial risk management
The Praemium Group is exposed to risks that arise from
the use of its financial instruments. This note describes the
Group’s objectives, policies and processes for managing those
risks and the methods used to measure them.
There have been no substantive changes in the Group’s
exposure to financial instrument risks, its objectives, policies
and processes for managing those risks or the methods used
to measure them from previous periods unless otherwise
stated in this note.
The Group’s Audit, Risk & Compliance Committee oversees
how management monitors compliance with the Group’s
risk management policies and procedures and reviews the
adequacy of the risk management framework in relation to
the risks faced by the Group.
Principal financial instruments
The principal financial instruments used by the Group, from
which financial instrument risk arises, are as follows:
» Trade receivables
» Cash at bank and on deposit
» Trade and other payables
» Intercompany receivables
» Investments in unlisted unit trusts
General objectives, policies and processes
The Board has overall responsibility for the determination
of the Group’s risk management objectives and policies
and, whilst retaining ultimate responsibility for them, has
delegated the authority for designing and operating processes
that ensure the effective implementation of the objectives and
policies to the Group’s finance function. The Board receives
monthly reports from the Chief Financial Officer through
which it reviews the effectiveness of the processes put in
place and the appropriateness of the objectives and policies it
sets.
The overall objective of the Board is to set policies that seek
to reduce risk as far as possible without unduly affecting
the Group’s competitiveness and flexibility. Further details
regarding these policies are set out below.
Credit risk
Credit risk arises from the Group’s trade receivables, other
receivables, receivables from subsidiaries and cash at bank
and on deposit. The maximum amount of credit risk is the
statement of financial position carrying values.
Trade receivables
Clients of the Group range from financial advisers and
brokers to accountants. In the majority of new client “sign-
ons”, clients are required to prepay their first years’ service
before they can start utilising the Group’s products. The
reduction of risk concentration is due principally to the
number of independent operators who have entrenched the
Praemium system within their everyday business process.
Clients who subsequently fail to meet their credit terms are
at risk of having their services “switched off”. The Board
receives monthly reports summarising trade receivables
balances, and aging profiles of the total trade receivables.
There have been no changes from previous periods.
Liquidity risk
Liquidity risk arises from the Group’s management of working
capital. It is the risk that the Group will encounter difficulty in
meeting its financial obligations as they fall due.
The Group’s policy is to ensure that it will always have
sufficient cash to allow it to meet its liabilities when they
become due. To achieve this aim, it seeks to maintain cash
balances to meet expected requirements for a period of at
least three months. The Group also seeks to reduce liquidity
risk by ensuring that its cash deposits are earning interest at
the best rates.
At reporting date, these reports indicate that the Group
is expected to have sufficient liquid resources to meet its
obligations under all reasonably expected circumstances.
There have been no changes from previous periods.
As at 30 June 2018, financial liabilities have contractual
maturities, which are summarised below:
2018
CURRENT NON-CURRENT
WITHIN 6
MONTHS
6-12
MONTHS
1-5
YEARS
LATER
THAN
5
YEARS
$
-
-
-
-
$
-
-
-
-
$
-
-
-
-
$
Trade payables
831,070
Accrued
expenses
3,277,041
Other payables
1,434,220
5,542,331
Total
2017
CURRENT
NON-CURRENT
WITHIN 6
MONTHS
6-12
MONTHS
1-5
YEARS
LATER
THAN 5
YEARS
$
Trade payables
734,740
Accrued
expenses
2,477,740
Other payables
984,255
Total
4,196,735
$
-
-
-
-
$
-
-
-
-
$
-
-
-
-
The contractual amounts of financial liabilities in the tables
above are equal to their carrying values. Differences from the
statement of financial position amounts reflect the exclusion
of statutory charges from the definition of financial liabilities.
43
Praemium Annual Report 2018 Market risk
Market risk arises from the Group’s use of financial
instruments, including interest bearing and foreign currency
financial deposits and investment in unlisted trusts. It is the
risk that the fair value or future cash flows of the financial
instruments will fluctuate as a result of changes in interest
rates (interest rate risk), foreign exchange rates (currency
risk) or other market factors (other price risk).
Interest rate risk
The Group invests surplus cash in major Australian and UK
banks and in doing so is exposed to fluctuations in interest
rates that are inherent in such a market. The Company and
Group have no borrowings.
The Group’s interest rate risk arises from:
» Bank balances which give rise to interest at floating rates;
and
» Cash on term deposit, which are at floating rates.
The amounts subject to cash flow interest rate risk are in
the statement of financial position carrying amounts of these
items.
The Group’s policy is to minimise cash flow interest rate
risk exposures on surplus funds by ensuring deposits attract
the best available rate. There have been no changes from
previous periods.
Cash flow interest rate sensitivity
The following table illustrates the sensitivity of the net result
for the year and equity to a reasonably possible change
in interest rates of +/-100 basis points (2017: +/-100 basis
points), with effect from the beginning of the year. These
changes are considered reasonably possible based on
observation of current market conditions.
The calculations are based on the Group’s financial
instruments held at each reporting date.
2018
$
-100
BASIS
PTS
+100
BASIS
PTS
2017
$
-100
BASIS
PTS
+100
BASIS
PTS
Cash
and cash
equivalents
121,209
(121,209)
89,835
(89,835)
Net result
121,209
(121,209)
89,835
(89,835)
Currency risk
The Group’s policy is, where possible, to allow group entities
to settle liabilities denominated in their functional currency
with the cash generated from their own operations in that
currency. Where group entities have liabilities denominated
in a currency (and have insufficient reserves of that currency
to settle them), cash already denominated in that currency
will, where possible, be transferred from elsewhere within the
Group.
In order to monitor the continuing effectiveness of this
policy, the Board receives a monthly forecast, analysed by
the geographical region’s cash balances, commitments and
receipts, converted to the Group’s main functional currency,
Australian Dollars (AUD).
The Group is exposed to currency risk on cash at bank and on
deposit in British Pound (GBP) to fund its UK operations and
US Dollars (USD); Hong Kong dollars (HKD) and Chinese Yuan
(CNY) for its Asian operations and Armenian dram (AMD) in its
Armenian operations. The Group is also exposed to currency
risk on sterling denominated loans to its UK entities.
Exposure to currency risk
Foreign currency denominated financial assets and liabilities,
translated into Australian Dollars at the closing rate, are as
follows:
Nominal amounts
Consolidated
2018
GBP
2017
GBP
Cash at bank and on term
deposit
2,876,182
2,971,055
The following table illustrates the sensitivity of the net result
for the year and equity in regards to the Group’s financial
assets and financial liabilities and the GBP and AUD exchange
rate.
It assumes a +/- 5% change in the AUD/GBP sterling
exchange rate for the year ended at 30 June 2018 (2017: 5%).
This percentage has been determined based on average
market volatility in exchange rates in the previous 12 months.
The sensitivity analysis is based on the Group’s foreign
currency financial instruments held at each reporting date.
This assumes that other variables, in particular interest rates,
remain constant. The analysis is performed on the same basis
for 2018 and 2017.
If the Australian dollar had strengthened against the GBP
sterling by 5% (2017: 5%) then this would have had the
following impact on profit and other equity:
Consolidated
Profit after tax
Other equity
2018
$
2017
$
(136,961)
(141,479)
-
-
44
If the Australian dollar had weakened against the GBP by 5%
(2017: 5%) then this would have had the following impact on
profit and other equity:
If the Australian dollar had weakened against the USD by 5%
(2017: 5%) then this would have had the following impact on
profit and other equity:
Consolidated
2018
$
2017
$
151,378
156,371
-
-
Profit after tax
Other equity
Consolidated
2018
$
447
-
2017
$
391
-
Profit after tax
Other equity
Exposures to foreign exchange rates vary during the
year depended on the volume of overseas transactions.
Nonetheless, the analysis above is considered to be
representative of the Group’s exposure to foreign currency
risk.
Other price risk
The Group is exposed to other price risk on its investments
in listed unit trusts. These investments are classified on the
statement of financial position as available-for-sale financial
assets. As these investments are carried at fair value with
changes in fair value recognised in equity, all changes in
market conditions, except for impairment, will directly affect
equity, but have no effect on profit.
The investments are in a number of different unit trusts with a
dominant emphasis on balanced funds that have exposures to
a wide range of asset classes and geographical locations. The
assets and liabilities within these unit trusts indirectly expose
the Company and Group to interest rate risk, currency risk
and equity price risks. It is not considered practicable to ‘look
through’ the unit trusts to analyse these risks in detail. There
have been no changes from previous periods.
Other price risk sensitivity analysis
If the fair value of investments in unit trusts increased by
10% (2017: 10%) this would have increased equity for both the
Company and Group by $13,317 (2017: $13,453) A decrease of
10% would have reduced equity by the same amount.
Exposures to foreign exchange rates vary during the year
depended on the volume of overseas transactions.
Nonetheless, the analysis above is considered to be
representative of the Group’s exposure to foreign currency
risk.
Currency risk sensitivity analysis – Other currencies (USD)
Foreign currency denominated financial assets and liabilities,
translated into Australian Dollars at the closing rate, are as
follows:
Nominal amounts
Cash at bank and on term
deposit
Consolidated
2018
USD
2017
USD
8,499
7,424
The following table illustrates the sensitivity of the net result
for the year and equity in regards to the Group’s financial
assets and financial liabilities and the USD and AUD exchange
rate.
It assumes a +/- 5% change in the AUD/USD exchange
rate for the year ended at 30 June 2018 (2017: 5%). This
percentage has been determined based on average market
volatility in exchange rates in the previous 12 months.
The sensitivity analysis is based on the Group’s foreign
currency financial instruments held at each reporting date.
This assumes that other variables, in particular interest rates,
remain constant. The analysis is performed on the same basis
for 2018 and 2017.
If the Australian dollar had strengthened against the USD by
5% (2017: 5%) then this would have had the following impact
on profit and other equity:
Consolidated
2018
$
(405)
-
2017
$
(354)
-
Profit after tax
Other equity
45
Praemium Annual Report 2018
Fair value hierarchy
Financial assets and financial liabilities measured at fair value in the statement of financial position are grouped into three
levels of a fair value hierarchy:
Level 1 - the instrument has quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 - a valuation technique is applied using inputs other than quoted prices within Level 1 that are observable for the
financial instrument, either directly (i.e. as prices), or indirectly (i.e. derived from prices); or
Level 3 - a valuation technique is applied using inputs that are not based on observable market data (unobservable inputs).
The following table shows the levels within the hierarchy of financial assets and liabilities measured at fair value on a recurring
basis at 30 June 2018 and 30 June 2017.
2018
Assets
Available-for-sale financial assets:
- Listed unit trusts
- Shares in unlisted entity
- Regulatory reserve
2017
Assets
Available-for-sale financial assets:
- Listed unit trusts
- Shares in unlisted entity
- Regulatory reserve
LEVEL 1
LEVEL 2
LEVEL 3
TOTAL
133,166
-
1,153,947
1,287,113
-
-
-
-
-
1,000,000
-
133,166
1,000,000
1,153,947
1,000,000
2,287,113
LEVEL 1
LEVEL 2
LEVEL 3
TOTAL
134,533
-
1,107,866
1,242,399
-
-
-
-
-
1,000,000
-
134,533
1,000,000
1,107,866
1,000,000
2,242,399
46
3. REVENUE
REVENUE FROM
Sales of services
Interest income from other parties
Unit trust distributions
Total revenue
4. OTHER INCOME
R&D Incentive Received (UK)
Rental income
Fund Recoveries
Commissions
Other
5. EXPENSES
Defined contribution superannuation expense
Net foreign exchange (gains)/losses
Depreciation of plant and equipment
Amortisation of intangible assets
Other expenses
Consolidated
2018
$
2017
$
42,166,276
34,064,059
21,501
5,657
8,957
10,093
42,193,434
34,083,109
Consolidated
2018
$
662,506
57,177
13,857
213,432
41,645
988,617
Consolidated
2018
$
1,554,820
(123,932)
474,610
572,868
59,086
2017
$
790,779
100,927
19,822
303,007
100,219
1,314,755
2017
$
1,285,926
362,558
460,508
479,344
125,953
Rental expense relating to operating leases – minimum lease payments
1,504,026
1,048,428
Impairment losses - trade receivables
56,120
63,759
47
Praemium Annual Report 2018 6. INCOME TAX EXPENSE
a) Numerical reconciliation of income tax expense to prima facie tax payable
Profit before tax
Prima facie tax expense on profit before income tax at 30% (2017: 30%)
Expenditure not allowable for income tax purposes1
R&D incentive tax offsets
Tax effect of:
Difference in overseas tax rates
Current year tax losses not brought to account for overseas entities
Current year temporary differences not brought to account
Income tax expense
Tax expense comprises:
Current tax expense
Deferred tax expense/(income):
Origination and reversal of temporary differences
Tax expense
Consolidated
2018
$
4,902,617
1,470,785
827,057
(260,233)
647,734
792,575
10,158
2017
$
2,219,102
665,731
985,678
(1,697,812)
511,556
1,068,399
(2,719)
3,488,076
1,530,833
3,402,954
1,412,803
85,122
118,030
3,488,076
1,530,833
1: Non allowable expenditure includes R&D incurred for accounting purposes, share based payments and non-deductible entertainment
b) Deferred tax assets not brought to account
2018
$
2017
$
Unused tax losses for which no deferred tax asset has been recognised
56,463,920
32,583,683
Deductible temporary differences for which no deferred tax asset has been
recognised
Potential tax benefit @ 30%
225,160
191,301
56,689,080
32,774,984
17,006,724
9,832,495
The benefit of the tax losses, which relate to the Company’s UK and Asian operations, will only be realised if:
(i)
taxation deductions to be realised;
The Group derive future assessable income of a nature and amount sufficient to enable the benefit of the
(ii)
(iii)
The Group continue to comply with the conditions for deductibility imposed by law; and
There are no changes in taxation legislation adversely affecting the Group in realising the benefit.
c) Franking credits
Parent
2018
$
2017
$
The amount of the franking credits available for subsequent reporting periods are:
Balance at the end of the reporting period
4,137,182
2,240,885
Franking credits that will arise from the payment of the amount of provision for
income tax
Total franking credits
48
172,404
501,000
4,309,586
2,741,885
7. CASH AND CASH EQUIVALENTS
Cash on hand
Term deposit
Bank balances
Consolidated
2018
$
1,748
388,577
11,730,554
12,120,879
2017
$
1,644
499,657
8,482,190
8,983,491
Bank balances include a cash management account held in Australia which earns a weighted average effective interest rate of 1.3% (2017: 1.3%), and deposits on
call held in Australia and denominated in GBP, CNY, HKD, USD and AMD, which bears a weighted average effective interest rate of nil% (2017: nil%). Cash on term
deposit matures on an annual basis. Cash on hand is non-interest bearing.
RECONCILIATION OF CASH
Cash at the end of the financial year as shown in the statement of cash flows is
reconciled to items in the statement of financial position as follows:
Cash and cash equivalents
8. TRADE AND OTHER RECEIVABLES
Current
Trade receivables
Allowance for impairment of receivables
Prepayments
Deposits receivable
Other receivables
2018
$
2017
$
12,120,879
12,120,879
8,983,491
8,983,491
Consolidated
2018
$
2017
$
4,593,209
4,118,986
(83,325)
(99,440)
4,509,884
4,019,546
1,936,860
1,463,733
434,556
453,461
2,824,877
7,334,761
414,934
795,900
2,674,567
6,694,113
The carrying value of trade receivables is considered a reasonable approximation of fair value due to the short-term nature of
the balances.
The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable in the financial
statements. The Group does not hold any collateral as security over any receivable balance. Refer to Note 2 for the policies and
processes for credit risk on trade receivables.
The average credit period on trade receivables is 30 days. No interest is charged on trade or other receivables.
49
Praemium Annual Report 2018 Impaired receivables
The Group’s trade and other receivables have been reviewed for indicators of impairment. Certain trade receivables were found
to be impaired and a provision of $83,325 (2017: $99,440) has been recorded accordingly. The impaired trade receivables are
mostly due from Praemium Australia Limited. There are no other impaired trade receivables in any of the Group’s subsidiaries.
The aging of these impaired receivables is:
Not more than 3 months
More than 3 months but not more than 6 months
More than 6 months but not more than 1 year
More than one year
Total
Consolidated
2018
$
7,961
6,391
68,973
-
83,325
2017
$
6,708
11,328
46,381
35,023
99,440
In addition, some of the unimpaired trade receivables are past due as at the reporting date. These relate to clients who have a
good credit history with Praemium Australia Ltd.
The age of trade receivables past due but not impaired is as follows:
Not more than 3 months
More than 3 months but not more than 6 months
More than 6 months but not more than 1 year
More than one year
Total
Consolidated
2018
$
2017
$
4,302,548
3,827,168
-
207,336
-
-
178,221
-
4,509,884
4,005,389
A reconciliation of the movement in the provision for impairment of receivables is shown below:
At 1 July 2017
Provision for impairment recognised in the year
Receivables written off as uncollectible
Balance at 30 June 2018
Consolidated
2018
$
99,440
56,120
(72,235)
83,325
2017
$
38,682
63,759
(3,001)
99,440
There are no other impaired assets within other receivables and it is expected that other receivable balances will be received
when due.
50
9. FINANCIAL ASSETS
Consolidated
Available-for-sale financial assets
a)
Available-for-sale financial assets comprised of
Listed Investments
Units in unit trust
Regulatory reserve
Unlisted Investments
Shares in unlisted entity
Total available-for-sale financial assets
10. PROPERTY, PLANT AND EQUIPMENT
Buildings and leasehold improvements at cost
Accumulated depreciation
Total buildings and leasehold improvements
Furniture, fixtures and fittings at cost
Accumulated depreciation
Total furniture, fixtures and fittings
Computer equipment at cost
Accumulated depreciation
Total computer equipment
Total property, plant and equipment
2018
$
2,287,113
2,287,113
2018
$
133,166
1,153,947
1,000,000
2,287,113
Consolidated
2018
$
512,931
(204,651)
308,280
1,077,818
(816,357)
261,461
4,864,387
(4,118,118)
746,269
1,316,010
30 JUNE 2018
Balance at 1 July 2017
Additions
Disposals
Depreciation expense
Exchange differences
Balance at 30 June 2018
FURNITURE,
FIXTURES AND
FITTINGS
COMPUTER
EQUIPMENT
BUILDINGS &
LEASEHOLD
IMPROVEMENTS
$
207,990
104,329
(2,966)
(55,361)
7,469
261,461
$
646,398
411,031
-
(318,086)
6,926
746,269
$
385,003
7,101
-
(101,163)
17,339
308,280
2017
$
2,242,399
2,242,399
2017
$
134,533
1,107,866
1,000,000
2,242,399
2017
$
481,864
(96,861)
385,003
968,809
(760,819)
207,990
4,374,181
(3,727,783)
646,398
1,239,391
TOTAL
$
1,239,391
522,461
(2,966)
(474,610)
31,734
1,316,010
51
Praemium Annual Report 2018 10. PROPERTY, PLANT AND EQUIPMENT
30 JUNE 2017
Balance at 1 July 2016
Additions
Acquired through business combination
Disposals
Depreciation expense
Exchange differences
Balance at 30 June 2017
FURNITURE,
FIXTURES AND
FITTINGS
COMPUTER
EQUIPMENT
BUILDINGS &
LEASEHOLD
IMPROVEMENTS
$
230,878
84,312
9,865
(44,271)
(63,160)
(9,634)
207,990
$
620,347
300,752
-
(1,472)
(256,888)
(16,341)
646,398
$
52,308
487,512
-
(65,598)
(140,460)
51,241
385,003
11. GOODWILL
The movements in the net carrying amount of goodwill are as follows:
Gross carrying amount
Balance at 1 July 2017
Acquisition through business combination
Net exchange differences
Balance at 30 June 2018
Accumulated impairment
Balance at 1 July 2017
Balance at 30 June 2018
Consolidated
2018
$
2,969,235
-
261,516
3,230,751
(23,000)
(23,000)
TOTAL
$
903,533
872,576
9,865
(111,341)
(460,508)
25,266
1,239,391
2017
$
2,903,411
222,023
(156,199)
2,969,235
(23,000)
(23,000)
Carrying amount 30 June 2018
3,207,751
2,946,235
(a)
Impairment testing
For the purpose of annual impairment testing, goodwill is allocated to the following cash-generating unit, which is the unit
expected to benefit from the synergies of the business combination in which the goodwill arises.
Praemium Asia Limited (formerly WealthCraft Systems Limited)
Plum Software Limited
Wensley Mackay Limited
Goodwill allocation at 30 June 2018
52
2018
$
657,997
2,182,995
366,759
3,207,751
2017
$
635,768
2,075,153
235,314
2,946,235
The recoverable amounts of the cash-generating units were determined based on value-in-use calculations, covering a detailed
five-year forecast, followed by an extrapolation of expected cash flows for the unit’s remaining useful life using the growth rate
determined by management. The present value of the expected cash flows of each segment is determined by using a suitable
discount rate.
Growth rates
(b)
The growth rates reflect the long-term average growth rates for the product lines and industries of the segments (all publicly
available). The growth rate for Praemium Asia is 3.0% (2017: 2.0%) and for Plum is 2.0% (2017: 2.0%).
Discount rates
(c)
The discount rates reflect appropriate adjustments relating to market risk and specific risk factors of each unit. The discount
rate for Praemium Asia is 12.37% (2017: 12.38%) and for Plum is 9.49% (2017: 9.66%)
Cash flow assumptions
(d)
Management’s key assumptions include stable profit margins, based on past experience in this market. The Group’s
management believes that this is the best available input for forecasting. Cash flow projections reflect stable profit margins
achieved immediately before the budget period. No expected efficiency improvements have been taken into account and prices
and wages reflect publicly available forecasts of inflation for the industry.
Apart from the considerations described in determining the value-in-use of the cash-generating units described above,
management is not currently aware of any other probable changes that would necessitate changes in its key estimates.
12. OTHER INTANGIBLE ASSETS
INTANGIBLE ASSETS 2018
Gross carrying amount
Balance at 1 July 2017
Additions
Net exchange differences
Balance at 30 June 2018
Amortisation and Impairment
Balance at 1 July 2017
Amortisation
Impairment losses
Net exchange differences
Balance at 30 June 2018
Carrying amount 30 June 2018
CUSTOMER
CONTRACTS
DATABASES
$
$
1,812,751
-
-
901,063
2,321,599
-
TOTAL
$
2,713,814
2,321,599
-
1,812,751
3,222,662
5,035,413
(829,894)
(326,216)
-
42,055
(1,114,055)
698,696
(448,628)
(246,652)
-
19,250
(1,278,522)
(572,868)
-
61,305
(676,030)
(1,790,085)
2,546,632
3,245,328
53
Praemium Annual Report 2018 INTANGIBLE ASSETS 2017
Gross carrying amount
Balance at 1 July 2016
Additions
Acquisition through business combination
Net exchange differences
Balance at 30 June 2017
Amortisation and Impairment
Balance at 1 July 2016
Amortisation
Impairment losses
Net exchange differences
Balance at 30 June 2017
Carrying amount 30 June 2017
CUSTOMER
CONTRACTS
DATABASES
$
$
TOTAL
$
1,240,706
901,063
2,141,769
-
540,828
31,217
-
-
-
-
540,828
31,217
1,812,751
901,063
2,713,814
(476,585)
(311,228)
-
(42,081)
(829,894)
982,857
(238,837)
(168,116)
-
(715,422)
(479,344)
-
(41,675)
(83,756)
(448,628)
(1,278,522)
452,435
1,435,292
Praemium has assessed that the customer contracts and technical databases intangibles have a finite useful period of 5 years.
This is based on a conservative estimate of customers’ future term using Praemium’s services. The customer contracts and
technical databases intangibles are amortised on a straight-line basis over 5 years (2017: 5 years) and software is amortised on
a straight-line basis over 3 years (2017: nil). All amortisation charges are included within depreciation and amortisation of non-
financial assets.
13. DEFERRED TAX ASSETS AND LIABILITIES
Deferred taxes arising from temporary differences and unused tax losses can be summarised as follows:
DEFERRED TAX ASSETS/(LIABILITIES) 2018
Current assets
Trade and other receivables
Non-current assets
Intangible assets
Plant, property & equipment
Non-current liabilities
1 JULY
2017
$
29,832
(280,467)
-
Pension and other employee obligations
350,231
Current liabilities
Provisions
Unused tax losses
Net Deferred Tax Assets/(Liabilities)
182,118
66,958
348,672
Deferred tax asset as represented on the Statement of Financial Position
Deferred tax liability as represented on the Statement of Financial Position
Total
54
RECOGNISED
IN OCI*
RECOGNISED
IN BUSINESS
COMBINATION
RECOGNISED
IN PROFIT
AND LOSS
30 JUNE
2018
$
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
$
$
(12,227)
17,605
80,685
82,195
(199,782)
82,195
81,408
431,639
22,382
4,247
204,500
71,205
258,690
607,362
807,144
(199,782)
607,362
RECOGNISED
IN OCI*
RECOGNISED
IN BUSINESS
COMBINATION
RECOGNISED
IN PROFIT
AND LOSS
30 JUNE
2017
DEFERRED TAX ASSETS/(LIABILITIES) 2017
Current assets
Trade and other receivables
Non-current assets
Intangible assets
Non-current liabilities
1 JULY
2016
$
11,605
(264,312)
Pension and other employee obligations
360,116
Current liabilities
Provisions
Unused tax losses
Net Deferred Tax Assets/(Liabilities)
173,765
70,649
351,823
Deferred tax asset as represented on the Statement of Financial Position
Deferred tax liability as represented on the Statement of Financial Position
Total
14. TRADE AND OTHER PAYABLES
Unsecured liabilities
Trade payables
Accrued expenses
Good and services tax
Other payables
Unearned income
$
-
-
-
-
-
-
$
-
$
$
18,227
29,832
(114,477)
98,322
(280,467)
-
-
-
(114,477)
(9,885)
350,231
8,353
(3,691)
111,326
182,118
66,958
348,672
629,139
(280,467)
348,672
Consolidated
2018
$
831,070
3,277,041
575,601
1,434,220
781,528
6,899,460
2017
$
734,740
2,477,740
476,563
984,255
686,689
5,359,987
All amounts are short term and the carrying values are considered to be a reasonable approximation of fair value.
15. PROVISIONS
Current
Employee benefits
Non-current
Employee benefits
Consolidated
2018
$
2017
$
1,333,384
1,333,384
1,055,558
1,055,558
62,647
62,647
76,375
76,375
55
Praemium Annual Report 2018
16. ISSUED CAPITAL
2018: 400,468,586 (2017: 398,536,797) fully paid ordinary shares
Movement in ordinary share capital
Consolidated
202018
$
2017
$
65,371,547
64,840,789
30-September-2017
Issue under employee share plan
1,097,391
DATE
01-July-2017
31-August-2017
31-October-2017
31-December-2017
31-January-2018
31-March-2018
30-June-2018
30-June-2018
DETAILS
NUMBER OF
SHARES
Balance
398,536,797
ISSUE PRICE
Share issue costs
-
TOTAL
$
64,840,789
(4,014)
294,041
104,041
106,783
(4,925)
12,495
22,337
-
0.268
0.560
0.241
-
0.179
0.165
Issue under employee STI bonus
Issue under employee share plan
Share issue costs
Issue under employee share plan
Issue under employee share plan
185,787
443,355
-
69,975
135,281
Balance
400,468,586
65,371,547
Ordinary shares
(a)
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to
the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in
person or by proxy is entitled to one vote, and upon a poll each share is entitled to one vote.
Capital management
(b)
The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain
future development of the business. The Group considers its capital to be total equity, which comprises ordinary share capital,
available-for-sale financial assets revaluation reserve, foreign currency translation reserve, option reserve and accumulated
retained earnings/losses.
In managing its capital, the Group’s primary objective is to ensure its continued ability to provide a consistent return for its equity
shareholders through capital growth. In making decisions to adjust its capital structure, for instance by issuing new shares, the
Group considers not only its short-term position but also its long-range operational and strategic objectives.
Share capital
Available-for-sale financial assets revaluation reserve
Foreign currency translation reserve
Option reserve
Accumulated losses
Total equity
56
Consolidated
202018
$
2017
$
65,371,547
64,840,789
51,415
(593,302)
1,743,038
5,232
(850,256)
804,823
(46,292,755)
(47,707,331)
20,279,943
17,093,257
17. RESERVES
Reserves
Available-for-sale financial assets revaluation reserve
Foreign currency translation reserve
Option reserve
Total
Movement in reserves
(a)
Movements in reserves are detailed in the statement of changes in equity.
Consolidated
202018
$
51,415
(593,302)
1,743,038
1,201,151
2017
$
5,232
(850,256)
804,823
(40,201)
Nature and purpose of reserves
(b)
Foreign Currency Translation Reserve - Exchange differences arising on translation of the foreign-controlled entity are taken
to the foreign currency translation reserve, as described in note 1(n). The reserve is recognised in profit and loss when the net
investment is disposed of.
Option Reserve - The option reserve records the fair value of options issued.
Revaluation Reserve - The revaluation reserve records the revaluation of available-for-sale financial assets.
18. AUDITOR’S REMUNERATION
Remuneration of the auditor of the consolidated entity for:
Grant Thorton
- Audit and review of financial reports
Non-Grant Thornton firm
- Audit and review of financial reports
Audit services remuneration
Other Services
Auditors of Praemium Limited: Grant Thornton
- Internal controls review
- Taxation services
- Other services
Overseas non-Grant Thornton firm
- Taxation services
- Compliance audit
Total other services remuneration
Total Auditors’ remuneration
202018
$
2017
$
98,100
88,700
193,061
291,161
154,267
242,967
70,000
20,500
17,434
33,996
31,381
173,311
464,472
71,500
48,749
16,821
52,770
-
189,840
432,807
57
Praemium Annual Report 2018
19. CAPITAL AND LEASING COMMITTMENTS
(a)
Non-cancellable operating leases contracted for but not capitalised in the financial statements.
Operating lease commitments
PAYABLE-MINIMUM LEASE PAYMENTS
Not later than 12 months
Between 12 months and 5 years
Total
Consolidated
2018
$
1,264,799
4,086,049
5,350,848
2017
$
1,285,247
4,094,661
5,379,908
Operating lease commitments relate to rental commitments for office premises in Melbourne, London, Coventry, Jersey,
Shenzhen, Yerevan, Hong Kong and Dubai expiring within one to five years. The leases have varying terms, escalation clauses
and renewal rights. On renewal, the terms of the leases are renegotiated.
20. SEGMENT INFORMATION
Description of segments
(a)
Management has determined the operating segments that are used to make strategic decisions. It considers performance on a
geographic basis and has identified 3 reportable segments, being Australia, the United Kingdom and Asia.
Segment information provided to the Board of Directors
(b)
The segment information provided to the Board of Directors for the reportable segments for the year ended 30 June 2018 is as
follows:
2018
Total segment revenue
Inter-segment revenue
UNITED
AUSTRALIA
KINGDOM
ASIA
TOTAL
27,599,416
13,915,409
651,451
42,166,276
-
-
-
-
Revenue from external customers
27,599,416
13,915,409
651,451
42,166,276
EBITDA profit/(loss)
Interest
Intercompany interest and margin
Depreciation and amortisation
Unrealised FX
Unit trust income
One-off costs
Withholding tax not recoverable
Profit/(Loss) on disposal of fixed assets
Share based payments
Net profit/(loss) before tax
-
11,590,961
(1,725,801)
(1,023,169)
8,841,991
21,458
-
43
21,501
2,155,358
(1,372,167)
(783,191)
-
(366,681)
(674,500)
141,120
5,657
(11,737)
-
(6,297)
(5,451)
-
(1,047,478)
123,932
5,657
(1,381,992)
(335,463)
(111,713)
(1,829,168)
(150,850)
-
-
-
-
(150,850)
(2,966)
(2,966)
(1,049,625)
(9,662)
(715)
(1,060,002)
10,965,406
(4,129,330)
(1,933,459)
4,902,617
Segment assets
Segment liabilities
17,997,472
11,094,442
1,227,072
30,318,986
(6,141,667)
(3,828,646)
(68,730)
(10,039,043)
Employee benefits expense
12,352,012
8,154,875
1,290,266
21,797,153
Additions to non-current assets (other than financial assets,
deferred tax, post-employment benefit assets, rights arising
under insurance contracts)
395,353
120,551
6,557
522,461
58
The segment information provided to the Board of Directors for the reportable segments for the year ended 30 June 2018 is as
follows:
2017
Total segment revenue
Inter-segment revenue
UNITED
AUSTRALIA
KINGDOM
ASIA
TOTAL
23,209,310
10,381,845
472,904
34,064,059
-
-
-
-
Revenue from external customers
23,209,310
10,381,845
472,904
34,064,059
EBITDA profit/(loss)
Interest
Intercompany interest and margin
Depreciation and amortisation
Unrealised FX
Unit trust income
Restructure and acquisition costs
Withholding tax not recoverable
Share based payments
Profit/(Loss) on disposal of fixed assets
Net profit/(loss) before tax
9,759,270
(2,225,658)
(1,196,531)
6,337,081
8,911
399,827
(304,518)
(357,202)
10,093
-
(458,203)
(613,092)
(1,718)
-
46
58,376
(22,242)
(3,638)
-
8,957
-
(939,852)
(362,558)
10,093
(1,765,492)
(255,921)
(59,179)
(2,080,592)
(114,916)
(535,311)
(63,091)
-
(52,070)
757
-
10,464
140
(114,916)
(576,917)
(62,194)
7,037,571
(3,605,905)
(1,212,564)
2,219,102
Segment assets
Segment liabilities
12,954,252
10,004,197
1,211,611
24,170,060
(3,640,519)
(3,421,975)
(14,309)
(7,076,803)
Employee benefits expense
10,775,169
7,545,454
1,325,208
19,645,831
Additions to non-current assets (other than financial assets,
deferred tax, post-employment benefit assets, rights arising
under insurance contracts)
333,898
534,669
4,009
872,576
(c) Reconciliation
(i) Revenue
A reconciliation of segment revenue to entity revenue is provided as follows:
Segment revenue
Interest income from other parties
Unit trust distributions
Total revenue
Consolidated
2018
$
2017
$
42,166,276
34,064,059
21,501
5,657
8,957
10,093
42,193,434
34,083,109
59
Praemium Annual Report 2018 20. SEGMENT INFORMATION Continued
(ii)
EBITDA
A reconciliation of EBITDA to operating profit before income tax is provided as follows:
Consolidated
EBITDA
Depreciation and amortisation
Interest revenue
Unrealised FX
Unit trust income
One-off costs
Withholding tax
Share based payments
Profit/(Loss) on disposal of fixed assets
Net profit/(loss) before tax
(iii)
Segment assets
2018
$
8,841,991
(1,047,478)
21,501
123,932
5,657
(1,829,168)
(150,850)
(1,060,002)
(2,966)
4,902,617
2017
$
6,337,081
(939,852)
8,957
(362,558)
10,093
(2,080,592)
(576,917)
(114,916)
(62,194)
2,219,102
The amounts provided to the Board of Directors with respect to total assets are measured in a manner consistent with that of
the financial statements. These assets are allocated based on the operations of the segment.
Reportable segments’ assets are reconciled to total assets as follows:
Segment assets
Total assets as per the statement of financial position
Consolidated
2018
$
30,318,986
30,318,986
2017
$
24,170,060
24,170,060
The total of non-current assets other than financial instruments and deferred tax assets (there are no employment benefit
assets and rights arising under insurance contracts) located in Australia is $2,599,183 (2017: $502,397) and the total of these
non-current assets located in other countries is $5,169,906 (2017: $5,118,521). Segment assets are allocated to countries based
on where the assets are located.
(iv)
Segment liabilities
The amounts provided to the Board of Directors with respect to total liabilities are measured in a manner consistent with that of
the financial statements. These liabilities are allocated based on the operations of the segment.
Reportable segments’ liabilities are reconciled to total liabilities as follows:
Segment liabilities
Total liabilities as per the statement of financial position
Consolidated
2018
$
(10,039,043)
(10,039,043)
2017
$
7,076,803
7,076,803
Entity-wide information
(d)
The entity is domiciled in Australia. The amount of its revenue from external customers in Australia is $27,599,416
(2017:$23,209,310) and the total revenue from external customers in other countries is $14,566,860 (2017: $10,854,749).
Segment revenues are allocated based on the country in which revenue and profit are derived.
Revenues of $3,487,905 (2017: $3,680,712) are derived from a single external customer. These revenues are attributable to the
Australian segment.
60
21. EVENTS AFTER THE REPORTING DATE
(a)
Directors have not become aware of any other matter or circumstance not otherwise dealt within the financial
statements that since 30 June 2018 has significantly affected or may significantly affect the operations of
the Company or the consolidated entity, the results of those operations or the state of affairs in
subsequent financial years.
(b)
The financial report was authorised for issue on 13 August 2018 by the Board of Directors.
22. CASH FLOW INFORMATION
Net income for the period
Non cash flows in profit from ordinary activities
Depreciation and amortisation
Share based payments
Bad debt expense/ (recovery)
Shares issued as employee bonus
Unrealised foreign exchange loss
Loss on disposal of plant and equipment
Withholding tax receivable
Revaluation
Changes in assets and liabilities, net of the effects of purchase and disposal of subsidiaries
Increase/(decrease) in trade and other receivables
Increase/(decrease) in trade payables and accruals
Increase/(decrease) in employee provisions
Increase/(decrease) in deferred tax asset / payable
Increase/(decrease) in deferred income
Net cash (used by)/provided from operating activities
Consolidated
2018
$
2017
$
1,414,541
688,269
1,047,478
1,060,002
56,120
-
(123,932)
(2,966)
150,850
(2,777)
(542,697)
1,263,082
258,479
752,371
81,225
5,411,776
939,852
576,917
63,759
97,228
362,558
62,194
114,916
(4,573)
(1,422,985)
1,435,881
99,992
(1,702,938)
227,048
1,538,118
61
Praemium Annual Report 2018
23. SHARE-BASED PAYMENTS
Performance rights
(a)
Performance rights are granted to key employees and will be vested in the respective employee on the vesting date upon the
employee successfully meeting the following criteria: 1) the employee must still be an employee as at the vesting date, 2) the
Company’s Group EBITDA target (as agreed by the Board) is achieved, 3) the Company’s total shareholder return (TSR) measure
is achieved (for 2018 plans) and 4) the employee must successfully deliver upon certain measurable key performance indicators.
2018
GRANT
DATE
VESTING
DATE
BALANCE AT
START OF
THE YEAR
GRANTED
DURING THE
YEAR
EXERCISED
DURING THE
YEAR
FORFEITED
DURING
THE YEAR
BALANCE AT
END OF THE
YEAR
EXERCISABLE
AT END OF THE
YEAR
NUMBER
NUMBER
NUMBER
NUMBER
NUMBER
22-Dec-10
27-Apr-11
6-Sep-12
30-Sep-13
11-Sep-13
30-Sep-14
30-Sep-15
30-Sep-16
12-Nov-14
30-Sep-15
30-Sep-16
30-Sep-17
15-Sep-15
30-Sep-16
30-Sep-17
33,333
33,333
60,000
60,000
80,000
195,000
440,000
715,000
98,250
169,500
696,000
963,750
110,810
634,481
30-Sep-18
1,561,800
20-Sep-16
30-Sep-17
30-Sep-18
2,307,091
464,430
860,056
30-Sep-19
2,064,134
3,388,620
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(80,000)
(100,000)
(115,000)
(295,000)
(20,250)
(62,250)
(523,000)
(605,500)
(3,038)
(449,965)
-
-
-
-
-
-
-
-
-
-
-
(20,000)
(20,000)
(25,516)
(17,547)
(96,000)
33,333
33,333
60,000
60,000
-
95,000
325,000
420,000
78,000
107,250
153,000
338,250
82,256
166,969
1,465,800
(453,003)
(139,063)
1,715,025
(366,983)
-
-
(4,464)
(70,747)
92,983
789,309
(169,793)
1,894,341
33,333
33,333
60,000
60,000
-
95,000
325,000
420,000
78,000
107,250
153,000
338,250
82,256
166,969
-
249,225
92,983
-
-
(366,983)
(245,004)
2,776,633
92,983
20-Sep-17
30-Sep-18
30-Sep-18
30-Sep-19
30-Sep-20
-
-
-
-
-
1,400,000
719,459
1,199,098
2,877,835
6,196,392
-
-
-
-
-
-
1,400,000
(42,937)
(71,560)
(171,745)
676,522
1,127,538
2,706,090
(286,242)
5,910,150
-
-
-
-
-
Total
7,467,794
6,196,392
(1,720,486)
(690,309)
11,253,391
1,193,791
62
2017
GRANT
DATE
VESTING
DATE
BALANCE AT
START OF
THE YEAR
GRANTED
DURING THE
YEAR
EXERCISED
DURING THE
YEAR
FORFEITED
DURING THE
YEAR
BALANCE
AT END OF
THE YEAR
EXERCISABLE
AT END OF THE
YEAR
22 Dec 10
27 Apr 11
6 Sep 12
11 Sep 13
12 Nov 14
15 Sep 15
20 Sep 16
30 Sep 13
30 Sep 14
30 Sep 15
30 Sep 14
30 Sep 15
30 Sep 16
30 Sep 15
30 Sep 16
30 Sep 17
30 Sep 16
30 Sep 17
30 Sep 18
30 Sep 17
30 Sep 18
30 Sep 19
183,333
183,333
150,000
90,000
120,000
360,000
510,000
570,000
1,620,000
2,700,000
246,000
637,500
810,000
1,693,500
466,884
913,167
2,191,600
3,571,651
NUMBER
NUMBER
NUMBER
NUMBER
NUMBER
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(150,000)
(150,000)
(90,000)
(90,000)
(120,000)
(300,000)
(430,000)
(365,000)
(1,030,000)
(1,825,000)
(135,750)
(422,250)
(40,000)
-
-
-
-
-
-
-
(10,000)
(150,000)
(160,000)
(12,000)
(45,750)
(74,000)
(598,000)
(131,750)
(347,504)
(8,570)
(50,000)
(228,686)
33,333
33,333
60,000
-
-
60,000
80,000
195,000
440,000
715,000
98,250
169,500
696,000
963,750
110,810
634,481
-
(629,800)
1,561,800
33,333
33,333
60,000
-
-
60,000
80,000
180,000
420,000
680,000
91,500
162,750
-
254,250
110,810
-
-
(397,504)
(867,056)
2,307,091
110,810
-
-
-
-
619,114
1,031,858
2,476,458
4,127,430
-
-
-
-
(154,684)
(171,802)
464,430
860,056
(412,324)
2,064,134
(738,810)
3,388,620
-
-
-
-
Total
8,508,484
4,127,430
(3,270,504)
(1,897,616)
7,467,794
1,138,393
(b)
Shares issued during the period as an employee bonus were measured at the quoted market price of the shares.
Shares issued as employee bonus
Consolidated – 2018
Consolidated – 2017
NUMBER ISSUED
185,787
449,529
VALUE
104,041
195,331
WEIGHTED AVERAGE
FAIR VALUE
0.56
0.43
63
Praemium Annual Report 2018 23. SHARE-BASED PAYMENTS
Expenses arising from share-based payment transactions
(c)
Total expenses arising from share-based payment transactions recognised during the period as part of employee costs were as
follows:
Shares issued as employee bonus
Performance rights
24. EARNINGS PER SHARE
(a)
Reconciliation of earnings to profit or loss:
Profit/(loss) attributable to the parent entity
Earnings used to calculate basic EPS
Earnings used in calculation of diluted EPS
(b)
Weighted average number of ordinary shares (diluted):
Weighted average number of ordinary shares outstanding during the year:
Number used in calculating basic EPS
Number used in calculating diluted EPS
Consolidated
2018
$
445,000
1,060,002
1,505,002
2017
$
9,700
576,917
586,617
Consolidated
2018
$
1,414,541
1,414,541
1,414,541
2017
$
688,269
688,269
688,269
Consolidated
2018
$
2017
$
399,721,311
400,915,102
396,656,050
397,794,443
2018: 10,059,600 (2017: 6,329,401) options/performance rights outstanding are not included in the calculation of diluted earnings
per share because they are anti-dilutive for the years ended 30 June 2018 and 2017.
64
25. PARENT ENTITY INFORMATION
The following details information related to the parent entity, Praemium Limited, at 30 June 2018. The information presented
here has been prepared using consistent accounting policies as presented in Note 1.
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Contributed equity
Accumulated losses
Option reserve
Available-for-sale financial assets revaluation reserve
Total equity
Profit /(loss) for the year
Other comprehensive income/(loss) for the year
Total comprehensive income/(loss) for the year
26. GROUP ENTITIES
2018
$
7,378,386
73,032,124
80,410,510
3,581,010
80,327,181
83,908,191
2017
$
5,539,297
66,459,592
71,998,889
1,517,080
66,327,682
67,844,762
65,371,547
64,840,789
(70,610,947)
(61,490,114)
1,743,038
(1,319)
804,823
(1,371)
(3,497,681)
4,154,127
(9,120,833)
(7,633,566)
-
-
(9,120,833)
(7,633,566)
The consolidated financial statements include the financial statements of Praemium Limited and those entities detailed in the
following table:
OWNERSHIP
INTEREST
OWNERSHIP
INTEREST
% 2018
% 2017
SUBSIDIARIES
Praemium Australia Limited
Praemium Portfolio Services Limited
Praemium (UK) Limited
Praemium Administration Limited (formerly Smartfund
Administration Limited)
Smartfund Nominees Limited
Smart Investment Management Limited
Plum Software Limited
Praemium Trustees Limited
Praemium International Limited
Praemium RA LLC
Praemium Asia Limited
WealthCraft Systems (Shenzhen) Limited
Wensley Mackay Limited
WM Pension Trustee Services Limited
COUNTRY OF
INCORPORATION
Australia
UK
UK
UK
UK
UK
UK
UK
Jersey
Armenia
Hong Kong
China
UK
UK
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Praemium Limited is the ultimate Australian parent entity and the ultimate parent entity of the Group.
100
100
100
100
100
100
100
100
100
100
100
100
100
100
65
Praemium Annual Report 2018 27. RELATED PARTY TRANSACTIONS
The following disclosures should be read in conjunction with Remuneration Report contained in the Directors’ Report. Details of
Key Management Personnel are disclosed in the Remuneration Report.
(a)
Key management personnel compensation (including non-executive directors)
Short-term employee benefits
Post-employment benefits
Long-term benefits
Share-based payments
2018
2017
1,678,322
1,201,674
134,724
31,026
1,016,717
2,860,789
116,821
35,356
473,403
1,827,254
28. CONTRACTUAL COMMITMENTS AND CONTINGENCIES
Since 2016, the Company has made a claim against a customer for additional billing for expense and delay incurred arising from
project scope expansion and rework. Due to uncertainty surrounding this claim, including the potential of arbitration to finalise a
determination, it is difficult to quantify the impact on the Company at this time.
66
DIRECTORS’ DECLARATION
The Directors of the Company declare that:
1.
The financial statements and notes, as set out on pages 31-66, are in accordance with the Corporations Act 2001
and:
a.
b.
Comply with Australian Accounting Standards (including the Australian Accounting Interpretations) and
the Corporations Regulations 2001; and
Give a true and fair view of the financial position as at 30 June 2018 and of the performance for the year
ended on that date of the consolidated entity.
2.
The Chief Executive Officer and Chief Financial Officer have each declared that:
a.
b.
c.
The financial records of the Company for the financial year have been properly maintained in accordance
with section 286 of the Corporations Act 2001;
The financial statements and notes for the financial year comply with the Accounting Standards; and
The financial statements and notes for the financial year give a true and fair view.
3.
4.
In the Directors’ opinion there are reasonable grounds to believe that the Company will be able to pay its debts as
and when they become due and payable.
Note 1 confirms that the consolidated financial statements also comply with International Financial Reporting
Standards. This declaration is made in accordance with a resolution of the Board of Directors.
Barry Lewin
Chairman
13 August 2018
67
Praemium Annual Report 2018
AUDITOR’S INDEPENDENCE DECLARATION
Collins Square, Tower 1
727 Collins Street
Docklands VIC 3008
Correspondence to:
GPO Box 4736
Melbourne VIC 3001
T +61 3 8320 2222
F +61 3 8320 2200
E info.vic@au.gt.com
W www.grantthornton.com.au
Auditor’s Independence Declaration
To the Directors of Praemium Limited
In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of Praemium
Limited for the year ended 30 June 2018, I declare that, to the best of my knowledge and belief, there have been:
a
b
no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
Grant Thornton Audit Pty Ltd
Chartered Accountants
B L Taylor
Partner - Audit & Assurance
Melbourne, 13 August 2018
Grant Thornton Audit Pty Ltd ACN 130 913 594
a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389
www.grantthornton.com.au
‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients
and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International
Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are
delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one
another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to
Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to
Grant Thornton Australia Limited.
Liability limited by a scheme approved under Professional Standards Legislation.
68
INDEPENDENT AUDIT REPORT
Collins Square, Tower 1
727 Collins Street
Docklands VIC 3008
Correspondence to:
GPO Box 4736
Melbourne VIC 3001
T +61 3 8320 2222
F +61 3 8320 2200
E info.vic@au.gt.com
W www.grantthornton.com.au
Independent Auditor’s Report
To the Members of Praemium Limited
Report on the audit of the financial report
Opinion
We have audited the financial report of Praemium Limited (the Company) and its subsidiaries (the Group), which
comprises the consolidated statement of financial position as at 30 June 2018, the consolidated statement of profit or loss
and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows
for the year then ended, and notes to the consolidated 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 Group’s financial position as at 30 June 2018 and of its financial performance for the
year then ended; 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 judgement, were of most significance in our audit of the financial
report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in
forming our opinion thereon, and we do not provide a separate opinion on these matters.
We have determined the matters described on the next page to be the key audit matters to be communicated in our report.
Grant Thornton Audit Pty Ltd ACN 130 913 594
a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389
www.grantthornton.com.au
‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients
and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International
Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are
delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one
another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to
Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to
Grant Thornton Australia Limited.
Liability limited by a scheme approved under Professional Standards Legislation.
69
Praemium Annual Report 2018 Key audit matter
How our audit addressed the key audit matter
Revenue Recognition Note 3
We determined the Group’s long terms contracts are Key Audit
Matters due to the complexity and variations in terms and conditions
attached to each contract. Revenue represents a material amount of
the Group’s total revenue.
Our procedures included, amongst others:
• Reviewing revenue recognition policies of individual customer
agreements and contractual arrangements to ensure compliance
with AASB 118 Revenue;
• Documenting and testing the operating effectiveness of the internal
controls in respect to revenue from the rendering of services;
• Testing a sample of revenue recognised during the year to
supporting documentation to verify the occurrence;
• Performance of substantive analytical procedures on revenue
balances; and
Reviewing relevant disclosures in the financial statements including
assessing the adequacy of disclosures on the application of AASB 15
when it is first adopted.
Impairment of goodwill balances Note 11
At 30 June 2018, the Group's statement of financial position includes
goodwill amounting to $3,207,751 relating to Praemium Asia Limited,
Plum Software Limited and Wensley Mackay Limited.
Our procedures included, amongst others:
• Reviewing the model for compliance with AASB 136 Impairment of
Assets;
AASB 136 Impairment of Assets requires that an entity shall assess at
the end of each reporting period whether there is any indication that
an asset may be impaired. If any indication exists, the entity shall
estimate the recoverable amount of the asset.
• Assessing management's determination of the Group's cash
generating units based on our understanding of the nature of the
Group's business, the economic environment in which the
segments operate and the Group's internal reporting structure;
This area is a key audit matter due to the high degree of judgement
required by management and the subjectivity relating to assumptions
and key inputs.
Valuation of shares in unlisted entity Note 9
As at 30 June 2018 the Company held shares in an unlisted Company
with a carrying value of $1m.
In line with AASB 139 Financial Instruments: Recognition and
Measurement, the investment is to be measured at fair value.
This is a key risk as the determination of the fair value of this
investment is subject to judgement as the shares of this Company are
not publicly traded
• Testing the mathematical accuracy and appropriateness of the
methodology of the underlying model calculations;
• Evaluating the cash flow projections against board approved cash
flows and understanding the process by which they were
developed;
• Assessing management’s ability to forecast against historical
accuracy;
• Assessing the key growth rate assumptions by comparing them to
historical results, economic and industry forecasts;
• Performing sensitivity analysis of the key assumptions in the
model; and
Reviewing relevant disclosures in the financial statements.
Our procedures included, amongst others:
• Obtaining information on any additional arms-length transactions,
including recent capital raisings by the investee in respect to the
shares of the unlisted Company and comparing the price to the
carrying value;
• Comparing the carrying value to publicly listed Companies that
have comparable businesses; and
• Reviewing relevant disclosures in the financial statements.
70
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
Group’s annual report for the year ended 30 June 2018, 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 accordingly we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or
otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The Directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in
accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the Directors
determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material
misstatement, whether due to fraud or error.
In preparing the financial report, the Directors are responsible for assessing the Group’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Group or to cease operations, or 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.
A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance
Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our
auditor’s report.
Report on the audit of the financial report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 18 to 25 of the directors’ report for the year ended 30 June
2018.
In our opinion, the Remuneration Report of Praemium Limited, for the year ended 30 June 2018, complies with section
300A of the Corporations Act 2001.
71
Praemium Annual Report 2018 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.
Grant Thornton Audit Pty Ltd
Chartered Accountants
B L Taylor
Partner – Audit & Assurance
Melbourne, 13 August 2018
72
ADDITIONAL DISCLOSURES
Required or recommended by the listing rules & Corporations Act
Top 20 Shareholders
RANK
NAME
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
J P MORGAN NOMINEES AUSTRALIA LIMITED
CITICORP NOMINEES PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
NATIONAL NOMINEES LIMITED
MR MICHAEL OHANESSIAN
DR DONALD STAMMER
BNP PARIBAS NOMS PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
SUPERTCO PTY LTD
MEROMA PTY LIMITED
EPR SUPERANNUATION FUND PTY LTD
BOND STREET CUSTODIANS LIMITED
COWEN SUPERANNUATION FUND PTY LTD
DAVID SIMMONDS FRANKS
PACIFIC CUSTODIANS PTY LIMITED
LSF 2000 PTY LTD
EMHAL PTY LTD
MR PAUL GUTTERIDGE
MR DANIEL DROGA
FAT PROPHETS PTY LTD
TOTAL
Balance of Register
Grand TOTAL
31 JULY 2018
41,006,498
33,376,575
30,379,349
15,469,968
14,295,245
11,624,866
9,320,002
8,861,783
7,500,000
5,353,304
3,370,408
2,751,394
2,330,000
2,222,223
2,158,751
2,100,000
2,040,756
2,033,703
2,000,000
2,000,000
%IC
10.2%
8.3%
7.6%
3.9%
3.6%
2.9%
2.3%
2.2%
1.9%
1.3%
0.8%
0.7%
0.6%
0.6%
0.5%
0.5%
0.5%
0.5%
0.5%
0.5%
200,194,825
200,273,761
400,468,586
50.0%
50.0%
100.0%
Substantial Holdings
There are 400,468,586 ordinary shares on issue in the capital of the Company at the date of this report. There are no other
classes of shares currently on issue other than ordinary shares. Each holder of ordinary shares has the right to attend and vote
at general meetings of the Company in person, by representative or by proxy. On a show of hands, each member entitled to be
present has one vote. If the shareholder is represented by more than one person, they will still only have one vote on a show of
hands. On a poll, each ordinary share represents one vote.
Details of all options and performance rights on issue as at the end of the financial year are set out in Note 23 to the Accounts.
As at the date of this report, the names of the substantial holders in the Company and the number of ordinary shares to which
each substantial holder and its associates have a relevant interest as disclosed in substantial holding notices given to the
Company are set out below:
PARADICE INVESTMENT MANAGEMENT
BLACKROCK GROUP
38,984,452
20,013,204
9.7%
5.0%
73
Praemium Annual Report 2018 The following table shows the number of holders of each class of equity securities as at the date of this report and how those
holdings are distributed:
Ordinary Shares
RANGE
100,001 and over
10,001 to 100,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
SECURITIES
NO. OF HOLDERS
NUMBER
305,376,331
81,334,695
8,767,291
4,713,872
276,397
400,468,586
%
NUMBER
76.3%
20.3%
2.2%
1.2%
0.1%
100%
341
2,496
1,088
1,524
431
5,880
Performance Rights
(includes EMI Options, including those that have vested but have not yet been exercised)
SECURITIES
NO. OF HOLDERS
NUMBER
9,039,847
2,077,246
116,115
19,434
750
%
NUMBER
80.3%
18.5%
1.0%
0.2%
0.0%
20
67
14
6
1
11,253,391
100.0%
108
100.0%
%
5.8%
42.4%
18.5%
25.9%
7.3%
100%
%
18.5%
62.0%
13.0%
5.6%
0.9%
RANGE
100,001 and over
10,001 to 100,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
74
CORPORATE INFORMATION
Registered office and principal place of business
The registered office of the Company is Praemium Limited, Level 19, 367 Collins Street, Melbourne, VIC 3000.
Phone: 1800 571 881
Fax:
+613 8622 1200
Website: www.praemium.com.au
Board of Directors
Barry Lewin
Stuart Robertson
Daniel Lipshut
Claire Willette
CEO & Managing Director
Michael Ohanessian
Company Secretary
Paul Gutteridge
Share Registry
Link Market Services: Level 12, 680 George Street, Sydney, NSW 2000. Phone: Within Australia: 1300 554 474
Outside Australia: +61 2 8280 7111
Auditor
Grant Thornton: Collins Square, 727 Collins Street, Melbourne, VIC 3008. Phone: +613 8320 2222
75
Praemium Annual Report 2018
Level 19, 367 Collins Street
Melbourne VIC 3000
Postal address
PO Box 322
Collins Street West
VIC 8007
General: 1800 571 881
Sales: 1800 702 488
Email: support@praemium.com.au
praemium.com.au
76