2008 Annual Report
Reckon Limited Annual Report
ACN 003 348 730
for the Financial Year Ended 31 December 2008
Contents
Our results at a glance
Message to shareholders from the Chairman and the Group CEO
Directors’ Report
Corporate Governance Report
Auditor’s Report
Financial Report
Directors’ Declaration
Income Statements
Balance Sheets
Statements of Recognised Income and Expense
Cash Flow Statements
Notes to the Financial Statements
Additional Information
2
3
5
15
18
21
21
22
23
24
25
26
54
Reckon | 1
Our results at a glance
Revenue
Group revenue was up
8% to $60.8 million from
$56.2 million.
$m
% Growth
EBITDA
Group EBITDA was up 15%
to $19 million from $16.5
million.
$m
% Growth
NPBT
Group NPBT was up 14%
to $15.1 million from $13.3
million.
$m
% Growth
70
60
50
40
30
20
10
-
20
15
10
5
-
16
12
8
4
-
2004
2005
2006
2007
2008
$60.8m
16%
8%
23%
8%
$19m
29%
29%
26%
15%
$15.1m
26%
19%
21%
14%
2 | Reckon
Message to shareholders from
the Chairman and the Group CEO
Overview
Acquisitions
It is with pleasure that we present the Reckon Limited results
for the year ending 31 December 2008. The results once again
testify to the underlying soundness of the Company’s business
model and execution of its long term strategy with increases
across all key metrics, as shown below.
2008
2007
% Change
$60.8 million
$56.2 million
8% increase
$19.0 million
$16.5 million
15% increase
Group
Revenue
Group
EBITDA
Group NPAT $11.3 million
$9.9 million
14% increase
EPS
8.5 cents
7.5 cents
13% increase
On 10 February 2009 the board declared a final dividend for
2008 of 3.5 cents per share, fully franked. The final dividend for
2007 was 2.5 cents per share.
Future Outlook
The success of the Company in 2008 in the context of current
global and Australian economic conditions is especially
pleasing and positions it well for future growth in 2009. The
Company has advised the market that it expects revenue
growth in the Reckon Group to be approximately 50 percent
over 2008. This growth will cement the Company as a leader in
practice management, accounting and financial management
software and services and will enable further success in the
short to medium term. We remain cautiously optimistic about
future performance given current economic conditions.
We are delighted to advise that in January 2009 the Company
completed the acquisition of the Corporate Services and
BillBack businesses from Espreon Limited. This transaction
is an exciting step in the development of the Company and
will enable it to achieve synergies and revenue growth in the
near to medium term. BillBack presents opportunities in the
cost recovery and cost management market for professional
services firms, while Corporate Services gives significant scale
to our existing Reckon Shelco business.
The underlying strength of the Reckon Group places it in
an optimal position to consider future acquisitions. Our
traditional approach has been to carefully identify acquisitions
which match our selection criteria, including the realisation
of hard and soft synergies, positive EPS results and effective
integration into the overall Reckon strategy. This careful
approach has in the past ensured that the Company has grown
at a sustainable rate and we intend to continue to apply our
high standards to any acquisitions which are identified during
the course of 2009.
Operations
The Reckon Group operations are divided into two main
divisions: a Professional Division and a Business Division.
Results of Professional and Business Divisions
The Professional and Business Divisions each contributed to
the strong growth experienced by Reckon in 2008. The table
below illustrates the performance of each division.
Operating Revenue
% change on 2007
Revenue
EBITDA
% change on 2007
EBITDA
Professional Division
Business Division
$21.3 million
$38.6 million
15% increase
5% increase
$5.3 million
$13.7 million
46% increase
7% increase
3
Message to shareholders from
the Chairman and the Group CEO (continued)
Professional Division in 2008 and 2009
The Professional Division continues to experience strong
growth by positioning itself as a market leader in the provision
of practice management systems to large accounting
practices. Highlights from the 2008 financial year include:
•
•
•
Strong organic growth both from new clients and increased
product uptake from current clients.
Increases in revenue from consulting arising from expanded
implementation capacity built in the 2007 financial year.
APS software awarded “Practice Management Software of
the Year” in the UK “Accountancy Age Awards”.
We expect that the strong performance of the Professional
Division will continue into the 2009 financial year based on both
continued organic growth and expansion from the BillBack
acquisition. Focuses of the Professional Division in 2009
include:
•
Integration of the BillBack operations and leveraging
cross-selling opportunities.
•
Expansion of the APS product offering into new markets.
•
Expansion into new territories.
•
New product releases to complete the comprehensive
practice management offering from APS, including Advance
Company Register, .Net Tax and Workflow and Resource
Planning.
Business Division in 2008 and 2009
The Business Division experienced many successes in the
2008 financial year. A few of the highlights were:
•
i series. QBi is
Release of QuickBooks 2008/09 QB
designed to make accountants’ and customers’ lives
easier. It contains a raft of new features to achieve this
goal, including: a past transactions memory, an always
on audit trail, simultaneous use and synchronisation with
accountants with a secure dividing date, portable company
files, and only one accountants version required to support
different customers versions. The use of an SQL database
also means the product enjoys efficiencies of scale to
accommodate small businesses of virtually any size; a
higher magnitude of processing speed; and a fully scalable
product for virtually unlimited multiple simultaneous users.
•
Strong growth from the QuickBooks customer base
especially in the Enterprise product, with growth of 21
percent.
•
Significant enhancements to the Quicken personal finance
software being incorporated in the Quicken 2009 release.
4
In 2009 the Business Division will build on its performance in
2008 by:
•
•
•
Leveraging off the momentum generated from the
QuickBooks 2008/09 QBi series software with the
QuickBooks 2009/10 QBi series release.
Further expansion into the enterprise market with the
QuickBooks Enterprise product.
Integration of Espreon Corporate Services into the broader
Business Division and leveraging cross-selling opportunities
through the Reckon partner network.
Opportunities for the Reckon Group
The broad product offering of the Reckon Group places it in the
enviable position of being able to leverage its range of products
and services off one another, resulting in not only stronger
sales but in tangible benefits for a growing customer base.
The APS and QuickBooks brands are complementary and
enable Reckon to service any size accounting practice. APS
sells practice management, tax and client accounting software
and allied products to professional accounting firms with full
service requirements whilst the Business Division services the
rest of the accounting market with Elite labeled products. With
the expansion of Reckon’s corporate service offering through
Reckon Espreon and the addition of cost recovery and cost
management products and services through BillBack, the
Reckon Group is now able to offer accounting and professional
service organisations not only software but also services such
as trust documentation, company incorporation and cost
recovery.
Partners
The continued growth of Reckon is due in no small part to the
support of Reckon’s ever growing network of partners amongst
accountants, bookkeepers and business and IT consultants.
The number of new partners continued to increase in 2008
and this trend is expected to continue as recognition of the
QuickBooks, Elite, Reckon Shelco, Reckon Espreon and
APS products as the pre-eminent packages in their market
continues to grow.
We also extend our thanks to the support of all our employees,
customers and suppliers who contributed to our success in
2008.
John Thame
Chairman
Clive Rabie
Group CEO
Directors’ Report
The Directors of Reckon Limited submit these
financial statements for the financial year ended
31 December 2008.
Board of Directors
John Thame AAIBF FCPA
Clive Rabie
Age 67, Non-Executive Chairman
Age 49, Group Chief Executive Officer
Clive was Chief Operating Officer of Reckon from 2001 until
February 2006 and in that time played a pivotal role in its
turn-around. In February 2006 Clive was appointed to the
position of Group Chief Executive Officer. He has extensive
management and operational experience in the IT and retail
sectors as both an owner and Director of companies.
Myron Zlotnick LLM, GCertAppFin
Age 44, General Counsel and Company
Secretary
Myron Zlotnick has over 15 years experience as a general
and corporate counsel, and as a Director of companies in
the information, communications and technology sector.
Myron also assumes responsibility for some aspects of the
management and operations of the Reckon Shelco and
Reckon Espreon businesses.
John Thame has over 30 years’ experience in the retail financial
services industry. He was Managing Director of Advance Bank
Limited from 1986 until it merged with St George Bank Limited
in January 1997 and held a variety of senior positions in his
career with Advance. John was Chairman of St George Bank
Limited until April 2008 and a member of the St George Bank
Limited board until 1 July 2008. He is also Chairman of Abacus
Property Trust Group Limited, where he has been a Director
since 2002. John was appointed to the Board on 19 July 1999.
Ian Ferrier FCA
Age 68, Non-Executive Director
Ian Ferrier is the founder of Ferrier Hodgson. He is a Fellow
of the Institute of Chartered Accountants in Australia. He
has more than 40 years experience in company corporate
recovery and turnaround practice. He is also a Director of a
number of private and public companies. Ian was appointed
Chairman of InvoCare Limited in 2001 and was Chairman
of Port Douglas Reef Resorts Limited until April 2006. Ian is
a Director of McGuigan Simeon Wines Limited since 1991,
Macquarie Goodman Group Limited since 2003 and Australian
Oil Company Limited since 2005. He has significant experience
in property and development, tourism, manufacturing, retail,
hospitality and hotels, infrastructure and aviation and service
industries. Ian joined the Board on 17 August 2004. In
January 2008 Ian assumed the Chair of a new accounting
practice, Ferrier Green Krejci & Silvia, which after merging with
insolvency practice BRI, now trades as BRI Ferrier.
Greg Wilkinson
Age 53, Deputy Executive Chairman
Greg Wilkinson has over 20 years experience in the computer
software industry. Greg entered the industry in the early 1980s
in London where he managed Caxton Software, which became
one of the UK’s leading software publishers. Greg co-founded
Reckon in 1987 and was the Chief Executive Officer until
February 2006. He was appointed to the position of Deputy
Chairman in February 2006 and became a member of the
Board of the listed entity on 19 July 1999.
5
Principal Activities
Reckon Limited conducts business predominantly across
complementary business areas: (1) the sales and support of
small and enterprise business accounting and personal wealth
management software under the QuickBooks and Quicken
brands (2) the sales and support of professional accounting
practice management and allied software under the APS
brand to larger professional accounting firms, and to smaller
professional accounting firms under the Elite brand; (3) the
sales and support of corporate services such as company
incorporations and SMSF documentation under the Reckon
Shelco brand.
Through strategic acquisition of businesses and technology,
Reckon continues to broaden its scope of operations to
provide complementary products and services across these
business areas. The main products and services are principally
organised into two operating units, the Business Division and
the Professional Division.
In the Business Division, under the QuickBooks and Quicken
brands, Reckon develops, localises, distributes and provides
after sales technical support for the accounting software needs
of small to medium sized and enterprise businesses and in the
personal finance and wealth management sector.
Under the Reckon Tools brand, Reckon develops applications
that enhance these products, for example: electronic data
interchange (“EDI”) functionality, bill payment solutions, super
choice management solutions, online backup, and online
trading. In addition, Reckon independently develops and
distributes a payroll and point-of-sale solution.
Reckon operates its QuickBooks and Quicken business
under an exclusive evergreen licence from Intuit Inc. Intuit is
the leading US-based accounting software house with over
25 million customers worldwide, annual sales of over US$2
billion and a market capitalisation of close to US$10 billion.
Intuit’s annual research and development budget exceeds
US$300 million. Reckon is able to leverage off this extensive
research and development spend without the usual associated
development risk. The licence from Intuit has an effective
continuing rolling term of 10 years.
The Reckon Elite business develops and distributes tax return
preparation tools, practice management tools and related
solutions for accountants and tax agents in public practice.
Reckon Elite focuses on sales to smaller accounting firms
compared to APS which pursues the top tier firms.
In the Professional Division the APS business develops,
distributes and supports a suite of practice management, tax
and client accounting software for professional accounting
firms in Australia, New Zealand and the United Kingdom. A
majority of the major accounting firms in Australia and New
Zealand use APS products. APS also delivers complementary
applications for practice management such as document
6
management, customer relations management and business
intelligence solutions. Desktop Super is a tool for the
professional administration of self managed superannuation
funds. With the acquisition of BillBack by Reckon in January
2009, APS now has the ability to offer its client base
technologies for the capture, reporting and billing of client
expenses (including: scanning, network printing and faxing,
telephone and mobile calls, online searches, courier and taxi
usage).
Shelco which was acquired in March 2007 consists of two
main revenue streams, a services business and a data
business. Espreon Corporate Services, which was acquired
by Reckon in January 2009, has similar revenue streams to
Shelco and increases Reckon’s presence and market share
in the corporate services and growth opportunities in the data
supply market. Espreon Corporate Services also adds depth to
the product offering in the market for documentation for trusts
and self managed superannuation funds.
The services business comprises the technology and
established client base for the registration of companies and
other business structures using the traditional full service
method. This business provides clients with an online company
registration service available 24 hours a day, seven days a
week. It also provides services for the establishment of unit
trusts and family trusts (discretionary trusts), as well services
for constitution updates, domain name registrations and self
managed super funds. Espreon Corporate Services brings with
it a compliance team that manages certain company secretarial
functions on behalf of companies and thus also widens the
range of services offered by Reckon Shelco.
The data business provides comprehensive accredited
business name and ASIC information electronically combined
with a highly personalised client relationship. A full range of
sophisticated information services to assist customers with the
provision of financial, corporate and statutory information is
also offered.
Through its New Zealand subsidiary Reckon distributes
QuickBooks and Quicken products as well as IBankData;
Intrepid Payroll, Bit Defender and IBackup solutions.
Review of Operations
Overview of financial performance
Group Operating Revenue:
Up 8% to $60.8m from $56.2m
Group EBITDA:
Group NPAT:
Basic EPS:
Final Dividend:
Up 15% to $19m from $16.5m
Up 14% to $11.3m from $9.9m
Up 13% to 8.5 cents per share from 7.5 cents
3.5 cents per share
100% franked with a dividend payout ratio of 71%
Operating cash flow:
Up 12% to $16.3m with a cash balance of $16.1m at 31 December 2008
Growth in revenue, strong management of costs, and the benefits of a sustainable customer base has resulted in strong group
performance from both the Professional Division and Business Division.
Dividends
On 10 February 2009, the Board declared a final dividend of 3.5 cents per share (100% franked) payable to shareholders recorded
on the Company’s Register as at the record date of 20 February 2009. Reckon does not have a dividend re-investment plan
currently in operation. On 11 August 2008, the Board declared an interim dividend of 2.5 cents per share (100% franked) payable to
shareholders recorded on the Company’s Register at record date of 25 August 2008.
The Future
Reckon’s overall strategy continues to be one of expanding the product and service offering to its customer base, leveraging
cross-selling opportunities across its customer base of small businesses and accountants, generating recurring revenue streams
through subscription products, generating recurring revenue through consulting and technical support, seeking new complementary
products and services, enhancing relationships with sales channels, including retailers and professional partners, maintaining
operating efficiencies resulting in increasing margins.
Reckon announced to the market on 10 February 2009 that, as a consequence of the acquisition of the Corporate Services and
BillBack businesses, it expects revenue growth in the 2009 financial year to be approximately 50 percent over 2008. However, the
nature of the businesses will result in some reduction in EBITDA margin percentages in the short term.
Reckon continues to maintain an excellent relationship with Intuit Inc.
The APS business will continue to expand in 2009 on the back of ongoing maintenance revenue and market share growth together
with growth resulting from expanding the uptake of additional modules by existing clients.
Over the next 12 months Reckon will concentrate on assimilating the operations of the Corporate Services and BillBack
businesses purchased from Espreon Limited in January 2009 into its existing business and realising the synergies and cross-selling
opportunities that the acquisition of those businesses provides the broader Reckon Group.
Significant Changes in State of Affairs
There were no events in 2008 that represented material changes to the state of affairs of the Company but Reckon entered into
binding documentation to acquire the Corporate Services and BillBack businesses of Espreon Limited in November 2008. This
transaction completed after the end of the financial year (see below).
7
Future Developments
Other than as outlined above, disclosure of information
regarding likely developments in the operations of the
consolidated entity in future financial years and the expected
results of those operations is likely to result in unreasonable
prejudice to the consolidated entity. Accordingly, this
information has not been disclosed in this report.
Directors’ Shareholdings
As at the date of this report, the Directors held shares and
options in Reckon Limited as set out in the Remuneration
Report immediately below. All options were granted under the
Executive Share Option Plan.
Matters Subsequent to the
End of the Financial Year
Acquisition of Corporate Services and BillBack
Businesses
On 2 January 2009 the acquisition of the Corporate Services
and BillBack businesses by Reckon from Espreon Limited for
$18 million was completed. The acquisition of the businesses
was funded through a mix of Reckon’s cash reserves and debt
funding.
The Corporate Services business of Espreon Limited is a
provider of documentation for company formations, secretarial
services, trust and self managed superannuation fund trust
deeds. This business is similar in nature to Reckon’s existing
Shelco business.
The cost recovery (BillBack) business of Espreon Limited is a
provider of technologies for the capture, reporting and billing
of client expenses (including: scanning, network printing and
faxing, telephone and mobile phone calls, online searches,
courier and taxi usage) for professional services suppliers such
as accountants and lawyers.
Dividend
A final dividend for 2008 was declared on 10 February 2009 as
disclosed above.
Options
Since balance date 153,058 shares were issued after exercise
of options under Share Option Plan 2. See Note 19 for the
details of this plan.
Since 31 December 2008 206,672 options have lapsed.
Effective 31 December 2005, the Company terminated Share
Option Plan 2. Going forward the Board will continue to
assess the merits of incentive based schemes pursuant to
the share scheme approved at the Special General Meeting
on 20 December 2005 or such other plan that the Company
may lawfully put in place from time to time. The Remuneration
Report in the Directors’ Report contains details of the relevant
long term incentive plans approved by shareholders at the
Special General Meeting of the Company held on 20 December
2005.
Other matters
Other than as disclosed in this Directors’ Report no other
matter or circumstance has arisen since 31 December 2008
that has significantly affected, or may significantly affect:
•
the consolidated entity’s operations in future financial years,
or
•
the results of those operations in future financial years, or
•
the consolidated entity’s state of affairs in future financial
years
8
Remuneration Report
Key management
The key management personnel include the directors and
group executives who have responsibility for planning,
directing and controlling the activities of the company and the
consolidated entity. Key management personnel details are set
out on page 11 below.
Policy for determining remuneration of key
management personnel
Policy for determining remuneration of key management
personnel, including the directors, the deputy Chairman,
Group CEO, Group CFO, divisional MD’s and other Company
officers is the ultimate responsibility of a remuneration
committee comprising the Chairman of the Board and the
other independent non-executive director. The Chairman
of the remuneration committee is Ian Ferrier. There is no
formal charter for the remuneration committee but policy is
set with due consideration for the need to motivate directors
and management to pursue the long term growth and
success of the Company as well as to tie remuneration in
with performance as contemplated in the ASX Corporate
Governance Principles and Recommendations (“ASX
Guidelines”). It is the view of the Board that the Company
complies with the substance of the aims and aspirations of the
ASX Guidelines in the context of the size of the company, the
size of the Board, the size of the senior management team and
the size of the business.
Policy for determining remuneration of other management
personnel has been delegated to the Group CEO, Group
CFO and divisional MD’s by the Board to be exercised in
accordance with the same broad principles as apply for the
Group CEO, Group CFO, other company officers and divisional
MD’s. The Board approves all remuneration in its review of the
Company’s annual budget process.
The policy is to pay the relevant officers and employees’
remuneration consistent with market comparisons suited to the
unique features of the company, the competitive landscape,
the scale of the business, the responsibilities of the individual
directors and employees, and internal relativities. The Board
is conscious of the need to attract and retain talent. The
remuneration policy takes account of striking the right balance
between short term benefits and long term incentives. All
remuneration is reviewed annually. Generally increases, if
justified, will not exceed comparable market increases.
Terms of employment for key management
personnel
Executive directors and group executives are all appointed on
standard employment terms that are not fixed term contracts.
These contracts include a notice period of between 1 – 3
months to be provided by either the executive or the company.
No contract provides for termination payments except where
the employee is to receive payment in lieu of notice.
For 2008, remuneration for key management personnel
including the Group CEO, Group CFO, other company officers,
divisional MD’s and other senior executives, comprises a
fixed element, a short term incentive element and a long term
incentive element.
Short term incentive payments
The short term incentive element of remuneration is dependent
on satisfaction of performance conditions. A pool representing
varying percentages of the combined fixed remuneration of the
relevant employees is the total potential amount in which they
can share if the performance conditions are met. There are
three weighted elements to the performance conditions, viz: a
revenue target, a net profit after tax (NPAT) target, and earnings
per share (EPS) target measured against the budgeted
performance of the Company. The Board retains a discretion
regarding the allocation of the pool between employees as well
as regarding weightings. Short term incentives are paid in cash
as bonuses usually in about February or March of the following
year.
Long term incentive payments
The long term incentive element is intended to round off
the mix of remuneration elements. It is aimed at retaining
the long term services of the key management personnel
to whom it applies and to align their remuneration with the
longer term performance of the Company. The substance
of the long term incentive element for key management was
approved by Special General Meeting on 20 December 2005.
In general terms, the long term incentive element comprises
three possible methods of participation: an option plan, a
performance share plan and a share appreciation plan. The
Board has discretion to make offers to applicable employees
to participate in any of these plans. Options granted and/or
performance shares awarded (all in respect of the Company’s
ordinary shares) and/or share appreciation rights do not
vest before three years after their grant date. Vesting is also
conditional upon the Company achieving defined performance
criteria. The performance criteria are based upon a total
shareholder return (TSR) target. A TSR is the return to
shareholders over a prescribed period, being the growth in
the Company’s share price plus dividends or returns of capital
for that period. The Company’s initial TSR target will be the
Company achieving a median or higher ranking against the
TSR position of individual companies within a ‘comparator
group’ of companies (i.e. a group of comparable ASX listed
companies pre-selected by the Board) over the same period.
The initial comparator group was determined after taking
advice from independent advisers and was set out in the
Chairman’s speech at the Special General Meeting on 20
December 2005.
The Board will review the suitability of the comparator group on
an ongoing basis. During 2008 some of the entities comprising
the comparator group were delisted either as part of merger
and acquisition activity or for other reasons. This was factored
into the calculation of the Company’s performance by the
independent valuers who undertook the exercise on behalf of
the Company. The comparator group of companies used in the
current year assessment included Adacel Technologies Limited,
Firstfolio Limited, Altium Limited, Amcom Telecommunications
9
Remuneration Report (continued)
Limited, ASG Group Limited, CPT Global Limited, Eftel Limited,
Eservglobal Limited, Hansen Technologies Limited, Infomedia
Ltd, Integrated Research Limited, Melbourne IT Limited,
Lifestyle Communities Limited, Newsat Limited, Objective
Corporation Limited, Oakton Limited, Powerlan Limited, Queste
Communications Limited, Rea Group Ltd, MYOB Limited,
Sirius Corporation Limited, Asian Pacific Limited, Technology
One Limited and Talent2 International Limited.
Only 50 percent of options or performance shares become
exercisable or vest if the initial performance criterion is satisfied.
The extent to which the balance of options or performance
shares become exercisable or vest will depend on the
extent to which the initial performance criterion is exceeded
(i.e., the extent to which the Company exceeds a median
ranking against the TSR position of the comparator group of
companies).
The share appreciation right plan represents an alternative
remuneration element (to offering options or performance
shares) under which the Board can invite relevant employees to
apply for a right to receive a cash payment from the Company
equal to the amount (if any) by which the market price of the
Company’s shares at the date of exercise of the right exceeds
the market price of the Company’s shares at the date of grant
of the right. The right may only be exercised if performance
criteria are met. The performance criteria are fixed by the Board
in the exercise of its discretion. At present these are the same
as the TSR target set for the right to exercise options or for
performance shares to vest.
Balance between salary, short term and long
term incentives
It is the Board’s opinion that an adequate balance is
struck between the three elements comprising the relevant
remuneration. For short term incentives, the performance
targets reflect, in part, the key factors that the Company
pursues in measuring its performance: volume of sales; profit
generated; and value returned to shareholders in terms of
EPS. The targets also represent a measure of an incentive to
encourage commitment to the business and to its growth. The
audited financial results for the year are used to assess whether
the performance conditions are satisfied. Audited results
represent an independent accurate method of determining
the attainment of the conditions. For long term incentives, the
additional targets comprising TSR reflect a further assessment
of value to shareholders before the remuneration is earned. As
stated above the comparator group to which reference will be
had will be subject to review.
The remuneration committee is satisfied that to date, the
remuneration of the relevant employees accords with the
general upward trend of the performance of the Company and
returns to shareholders, as set out in the table below; and also
takes into account the imperative to retain their services so as
to avoid the business and opportunity costs associated with
replacing them as well as the need to be commensurate with
market rates.
Consequence of performance on shareholder wealth
NPAT
EPS
Return of
Capital
Reduction of
Capital
Dividend
Changes in Share Price between the
beginning and the end of the year
$’000
10,1511
7,0342
8,169
9,893
11,312
2004
2005
2006
2007
2008
(cents per share)
(cents)
Beginning of January
End of December
7.41
5.12
6.2
7.5
8.5
3.5
–
–
–
-
–
4
–
–
-
–
2
4.5
5.5
6.0
68
85
76
102
139
85
76
102
139
105
1
2
3
Result positively impacted by one off booking of unutilised tax losses.
Result impacted by tax expense booked for the first time.
The company adopted AIFRS with effect from 1 January 2005 which results in various changes in accounting policies from that date. Results for the year ending 31 December 2004 have been restated.
The Company’s “Trading Policy” prohibits directors, key management personnel and employees from entering into a transaction
with securities which limit the economic risk of any unvested entitlements awarded under any Reckon equity-based remuneration
scheme. Prior to presenting full-year results Reckon equity plan participants are required to confirm that they have not entered into
any transactions which would contravene the Company’s “Trading Policy”.
10
Remuneration Report (continued)
Remuneration 2008
Fixed
component
Short term Incentive
component
Other
compensation
Long term incentive
component
2008
Office
Salary
Bonus1
term benefits5 Superannuation
Other short
Equity settled
share based
payments-
Performance
shares3
Cash settled
share based
payments-
Appreciation
rights4
Total
remuneration
Directors
John Thame
Chairman, Non-
executive Director
$86,000
Greg Wilkinson
Deputy Chairman,
Executive Director
$75,000
0
0
Clive Rabie
Group CEO,
Executive Director
$460,000 $164,095
Ian Ferrier
Non-executive
Director
$66,000
0
Executives
Brian Armstrong CEO, APS
$320,000 $109,400
Chris Hagglund
CFO
$280,000
$70,900
Paul James
GM, APS Australia
$193,806
$21,448
Myron Zlotnick
General Counsel
& Company
Secretary
$210,540
$31,400
0
0
0
0
0
0
0
0
$7,740
$6,750
$41,400
$5,940
0
0
0
0
$31,488
$65,828
$25,200
$52,576
$19,373
$9,124
$18,949
$27,005
Brian Coventry
MD, APS United
Kingdom
$194,003
$34,117
$17,794
$9,649
$9,124
Gavin Dixon
CEO, Quicken
Australia
$310,000
$75,200
Michael
Donnelley8
MD, APS New
Zealand
$172,501
$68,160
0
0
$27,900
$50,584
$17,107
$9,124
Grant Linton9
MD, APS New
Zealand
$36,277
0
$11,497
$4,051
0
Nigel Boland
GM Development,
APS
$161,366
$20,047
0
$12,103
$9,124
0
$93,740
$5,000
$86,750
$34,088
$699,583
0
0
0
0
0
0
0
0
0
0
$71,940
$526,716
$428,676
$243,751
$287,894
$264,687
$463,684
$266,892
$51,825
$202,640
TOTAL
$2,565,493 $594,767
$29,291
$227,650
$232,489
$39,088
$3,688,778
1
2
3
The potential amounts payable for the short term cash performance bonuses are determined
at the beginning of the year and are earned based upon the performance criteria for the year
described in more detail on pages 9 and 10.
No options were granted to any person during the year as part of their remuneration. No options
vested during the financial year. All options issued in previous years as set out in Note 19 in the
financial statements are fully vested. 82,333 options were exercised during 2008.
Mr Armstrong (58,656 shares), Mr Hagglund (51,324 shares), Mr Dixon (56,823 shares), Mr
Zlotnick (27,018 shares), Mr Donnelley (7,332 shares), Mr James (7,332 shares), Mr Coventry,
(7,332 shares), and Mr Boland (7,332 shares) are participants in the 2008 performance share
plan. The date of grant for each of these participants was 1 January 2008. The value of the
long term incentive is obtained by reference to the market price of the shares on the grant date
allocated over each year of the 3 year performance period. If the performance criteria are met,
then the shares are released at no consideration. The fair value of the performance shares at
grant date was $1.36. The performance shares are exercisable on 31 December 2010 at zero
cents. The performance shares expire on 31 December 2017. The fair value of performance
shares which vested and were forfeited during the financial year are set out in the table below.
4
5
6
7
8
9
Mr Rabie is a participant in the share appreciation plan. 495,356 rights were issued under the
plan on 1 January 2008.The value of the rights was 32.3 cents determined using a Monte Carlo
simulation with a Black Scholes based valuation model to determine the value as at hurdle
dates. The fair value of appreciation rights which vested and were forfeited during the financial
year are set out in the table below.
For Mr Coventry and Mr Linton this reflects a sales commission.
To the extent that any of the above are directors of any wholly owned subsidiaries of the
Company listed on page 45, no additional remuneration is paid.
Mr Donnelley resigned effective 15 October 2008 and Mr Linton was appointed MD on 1
September 2008.
Mr Donnelley’s salary includes accrued leave paid out on resignation.
Mr Linton received remuneration of: salary $55,544, commission $61,901 and superannuation
of $9,956 in the period 1 January 2008 – 31 August 2008.
11
Remuneration Report (continued)
Remuneration 2008
Percentage
of total
remuneration
that is
performance
related
Percentage
of available
bonus which
vested in the
year
Percentage
of available
bonus which
was forfeited
during the
year
No of
performance
shares vested
in 2008
Value of
Performance
shares vested
in 2008
Value of
Performance
shares
forfeited in
2008
Value of
Appreciation
shares vested
in 2008
Value of
Appreciation
shares
forfeited in
2008
0%
6%
28%
0%
33%
29%
13%
20%
16%
27%
29%
0
0
0
100%
0
100%
100%
100%
100%
100%
100%
75%
0
14%
100%
0
0
0
0
0
0
0
0
0
0
25%
0
0
0
0
0
0
0
0
0
0
46,762
$37,557
21,802
$17,511
0
0
16,873
$13,551
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
$20,912
0
0
0
$18,750
$93,750
0
0
0
0
0
0
0
0
0
0
85,437
$68,619
$20,912
$112,500
0
0
0
0
0
0
0
0
0
0
0
0
0
0
2008
Directors5
John
Thame
Greg
Wilkinson
Clive Rabie
Ian Ferrier
Executives5
Brian
Armstrong
Chris
Hagglund
Paul
James6
Myron
Zlotnick
Brian
Coventry
Gavin
Dixon
Michael
Donnelley8
Grant
Linton9
Nigel
Boland
TOTAL
12
Remuneration Report (continued)
Remuneration 2007
Office
Salary
Bonus1
Super-
annuation
Value of
options2
Long
term
incentive
plan3
Other
short
term
benefits4
2007
Directors5
John Thame
Chairman, Non-
Executive Director
$81,500
Greg Wilkinson
Deputy Chairman,
Executive Director
$130,000
0
0
$7,335
$11,700
Clive Rabie
Group CEO,
Executive Director
$415,001
$164,096
$37,350
Ian Ferrier
Non-Executive
Director
$62,501
0
$5,625
Executives5
Brian Armstrong
CEO, APS
$300,000
$109,397
$27,000
Chris Hagglund
CFO
$260,001
$70,859
$23,400
Paul James6
GM, APS Australia
$107,241
$21,000
$9,652
Myron Zlotnick
Brian Coventry
General Counsel
& Company
Secretary
MD, APS
United Kingdom
$190,000
$31,408
$17,100
$207,637
$40,000
$9,649
Gavin Dixon
CEO, Quicken
Australia
$275,001
$75,211
$24,750
Michael Donnelly MD, APS
New Zealand
$178,707
$43,860
$14,268
Nigel Boland
GM Development,
APS
$157,714
$19,824
$12,850
TOTAL
$2,365,304
$575,655
$200,679
0
0
0
0
0
0
0
0
0
0
0
0
0
TOTAL
$88,835
$184,060
$901,280
$68,127
$496,674
$394,302
$137,893
$261,082
Percentage
of total that is
performance
related
0%
23%
50%
0%
34%
28%
15%
21%
17%
25%
22%
16%
0
$42,360
$284,833
0
$60,276
$40,042
0
$22,574
0
0
0
0
0
0
0
0
$11,788
$40,274
$309,348
$27,014
$11,788
$11,788
0
0
0
$401,976
$248,622
$202,176
$512,463
$40,274 $3,694,375
1
2
3
The potential amounts payable for the short term cash performance bonuses are determined
at the beginning of the year and are earned based upon the performance criteria for the year
described in more detail on pages 11 to 13.
No options were granted to any person during the year as part of their remuneration. No options
vested during 2007.
Mr Armstrong (72,451 shares), Mr Hagglund (63,630 shares), Mr Dixon (67,539 shares), Mr
Zlotnick (28,204 shares), Mr Donnelley (9,823 shares), Mr Coventry (9,823 shares) and Mr
Boland (9,823 shares) are participants in the 2007 performance share plan. The date of grant
for each of these participants is 1 January 2007. The value of the long term incentive is obtained
by reference to the market price of the shares on the grant date allocated over each year
of the performance period. If the performance criteria are met, then the shares are released
at no consideration. The fair value of the performance shares at grant date was $1.02. The
performance shares are exercisable on 31 December 2009 at zero cents. The performances
shares expire on 31 December 2016. Performance shares that vested in 2007 are referred to in
Note 27 to the financial statements. Mr Rabie is a participant in the share appreciation plan. The
date of grant of this participation 1 January 2007.
4
5
6
For Mr Coventry this reflects a sales commission.
To the extent that any of the above are directors of any wholly owned subsidiaries of the
Company listed on page 52 no additional remuneration is paid.
Appointed 4 June 2007.
Options and shareholding for directors and relevant employees can be found at note 27 to the accounts.
13
Remuneration Report (continued)
Indemnification of Directors and Officers and Auditors
During the financial year, the Company paid a premium in respect of a contract insuring the Directors of the Company (as named
above), the Company Secretary and all executive officers of the Company, and of any related body corporate, against a liability
incurred as a Director, secretary or executive officer to the extent permitted by the Corporations Act 2001. The contract of insurance
prohibits disclosure of the nature of the liability and the amount of the premium.
In addition, Rule 12 of the Company’s constitution obliges the Company to indemnify on a full indemnity basis and to the full extent
permitted by law, every Director, officer or former officer for all losses or liabilities incurred by the person as an officer. This obligation
continues after the person has ceased to be a Director or an officer of the Company or a related body corporate, but operates only
to the extent that the loss or liability is not covered by insurance.
The Company has not otherwise, during or since the financial year, indemnified or agreed to indemnify an officer or auditor of the
Company, or any related body corporate, against a liability incurred as an officer or auditor.
Directors’ Meetings
The following table sets out the number of Directors’ meetings held during the financial year and the number of meetings attended
by each Director.
Reckon Limited – Attendance Tables
Directors
JM Thame
I Ferrier
G Wilkinson
C Rabie
Board
B
10
10
10
10
A
10
10
10
10
Meetings
Audit Committee
B
A
2
2
2
2
NA
NA
NA
NA
Remuneration Committee
A
2
2
NA
NA
B
2
2
NA
NA
Key: A – number of meetings eligible to attend; B - number of meetings attended
Non audit fees
Details of the non-audit services can be found in Note 4 to the financial statements.
Rounding of Amounts
ASIC Class Order 98/0100 applies to the Company, and in accordance with that Class Order, amounts in the Directors’ report and
the financial statements have been rounded off to the nearest thousand dollars.
Auditors’ Independence Declaration
The auditors independence declaration for the year ended 31 December 2008 has been received and can be found on page 19 of
the directors report.
Signed in accordance with a resolution of the Directors made pursuant to Section 298 of the Corporations Act 2001.
On behalf of the Directors
Mr J Thame
Chairman
Sydney, 27 March 2009
14
Corporate Governance Report
Governance of the Company in general is in accordance with the ASX Corporate Governance Principles and Recommendations,
2nd Edition (“the ASX Governance Principles”). Substantial compliance with the ASX Governance Principles is always pursued
by the board. Any departure from the ASX Governance Principles is purely formal and generally justified on the basis that formal
compliance is not applicable to the size of the Company and the resources available.
1. Management and Oversight
The Company is governed on behalf of the shareholders by
its board of directors who in turn oversee the Company’s
management team. The board is responsible for ensuring
appropriate risk management, accountability, and control
mechanisms. The board also provides advice and input into
development of the businesses generally, overall corporate
strategy, performance objectives, and appointment of senior
executives. The board monitors and reviews the performance
of the Company, financial reporting and implementation of
strategy. The board approves the annual budget, material
capital expenditure and large acquisitions.
The Company departs from the requirements of Principle
1 of the ASX Governance Principles only to the extent that
there is no formal charter. The board is of the opinion, given
the relatively small size of the composition of the board,
the relatively flat structure of management, the size of the
management team and open and frequent channels of
communication between management and the board that the
board has sufficiently appropriate close oversight of operations
and material decisions to ensure compliance with principles of
good corporate governance.
Because of the relatively small size of the board, an Audit
Committee and Remuneration Committee are the only
committees of the board. The board is able to efficiently deal
with issues which in other larger enterprises may normally be
delegated to committees.
The Company undertakes an annual performance evaluation of
key management personnel. The nature of the review varies as
follows:
•
•
In the case of key management personnel other than
head of divisions the review process is managed and
administered by the Group Human Resources Manager. It
generally involves a 360 degree feedback review in which
selected peers and reporting staff assess the performance
of relevant executives and managers according to a set
of questions benchmarked against key performance
indicators. The process also includes a series of reviews
with the Divisional CEO’s in which the 360 degree feedback
review is discussed with the relevant executive or manager
and remedial steps and coaching, if applicable, are
implemented. There may be further additional reviews
undertaken through the year if necessary.
In the case of head of divisions and head office
management (CEO, General Counsel and Company
Secretary) the review process is managed and administered
by the Group Chief Executive Officer. The review involves
a one-on-one interview in which performance against key
performance indicators is assessed and discussed and
feedback from peers (where relevant) is reviewed. Where
necessary remedial steps are identified and coaching is
implemented. There may be additional reviews undertaken
through the year if necessary.
Performance evaluation for key management personnel
was undertaken in 2008 and it was in accordance with the
processes disclosed in this report.
In addition, a portion of remuneration for key management
personnel is tied into the financial performance of the Company
as set out in more detail in the Remuneration Report section of
the Directors’ Report.
The independent non-executive directors also generally
informally monitor and review the ongoing performance of
senior executives.
The Group Human Resources Manager is also responsible for
managing and administering an induction process for newly
appointed senior executives. In addition the Group CEO and
divisional CEO’s undertake a rigorous process of briefing new
senior executives.
2. The board
At present, the board comprises four members: John Thame,
Ian Ferrier, Greg Wilkinson and Clive Rabie. Mr Thame is
Chairman of the board and he, together with Mr Ferrier, are
independent non-executive directors.
Further details of the directors, including a summary of their
skills and experience and period of office, are set out in the
Directors’ Report.
While there is not strictly an independent majority in the sense
described in ASX Governance Principle 2, because there
are only four directors, the non-executive directors ensure
that all issues that come before the board are considered in
an impartial manner and from a variety of perspectives. The
Chairman, who is independent, has a casting vote where
necessary. The independent non-executive directors oversee
the nomination of any potential directors.
The criteria for directorship and the election process are set out
in the Company’s constitution. The directors periodically review
the composition of the board to ensure that members have
the desired breadth of experience and expertise to govern the
Company effectively. The size of the board dictates that there
is no efficiency obtained in establishing a formal nomination
committee.
Directors are entitled to seek independent professional advice
at the Company’s expense to assist them in fulfilling their duties
in order to comply with all applicable laws and regulations.
There is no formal procedure for the board to agree when to
take independent advice at the expense of the Company, but
given the size of the board there is no efficiency to be obtained
15
Corporate Governance Report (continued)
in formalising this process. The independent non-executive
directors exercise their judgment to call for such advice when
they deem appropriate. The Chairman also has frequent
contact with internal legal counsel to assess the need for
external advice.
The board met ten times during 2008. The details of
attendance at these meetings are set out in the Directors’
Report.
The independent non-executive directors monitor and review
the ongoing performance of the executive directors and
key executives. The independent non-executive directors
occasionally meet informally without management being
present to generally discuss the affairs of the Company and the
overall performance of key executives.
The independent non-executive directors are subject to
the Company’s constitution and their continuity of tenure is
dependent on re-election by shareholders in accordance with
the constitution.
Any decision regarding the appointment of new directors
is taken cognizant of the need to appoint someone who is
technically qualified and as far as possible familiar with the
Company’s market sector.
While there is no formal induction process in place, the
Chairman, Deputy Chairman and Group CEO undertake a
rigorous process of briefing new board members.
Given the size of the Company there is also direct informal
communication on a regular basis between the Chairman and
the Company Secretary on governance matters.
3. Ethical and Responsible Decision Making
The Company operates in accordance with appropriate laws,
regulations, principles and ethics to fulfill its responsibilities.
The board’s policy is that the Company, the directors and
employees in addition to their legal obligations must maintain
high ethical standards in their dealings with the public and
other members of the industry.
A pro forma Directors’ Code of Conduct was formally
adopted in 2003 in order to meet the requirements of the ASX
Governance Principles.
In 2007 the Directors’ Code of Conduct was expanded to
apply to all employees, with the relevant changes.
The Company’s Human Resources Policy and Procedures,
binding on all employees, also collectively embraces the
substance of the ASX Governance Principles in a Code of
Conduct, including expectations regarding behaviour in the
workplace, disciplinary processes, grievance processes,
discrimination and harassment, occupational health and
safety, ethical business practices, conflict of interest, corporate
opportunity and the like
A Trading Policy is accessible to the public at the Company
website.
The Company is committed to training employees and
maintaining employees’ relevant product expertise and
undertakes trade practices training from time to time for
relevant staff.
4. Integrity in Financial Reporting
The board assumes the responsibility to ensure the integrity
of the Company’s financial reporting. Consistent with the
requirements of the Corporations Act and Principle 4 of the
ASX Governance Principles, the Group CEO and the Group
CFO state in writing to the board that the Company’s financial
reports present a true and fair view, in all material respects, of
the Company’s operational results and are in accordance with
relevant accounting standards.
The Audit Committee consists of John Thame and Ian Ferrier,
independent, non-executive directors, to ensure independent
review of financial reporting over and above formal audit
processes. The Audit Committee also meets informally to
discuss matters including risk management and reporting. The
terms of reference of the committee are to review and monitor
all financial, risk management and compliance policies. The
terms of reference for the Audit Committee were formalised
in a Charter in 2003 to meet the requirements of the ASX
Governance Principles. Because there are only four directors,
the Audit Committee cannot comprise of three members as
required by Principle 4 of the ASX Governance Principles.
Again the size of the board dictates that the role of the Audit
Committee can operate efficiently and in accordance with the
requirements of the ASX Governance Principles with only two
members.
The independent non-executive directors comprising the Audit
Committee collectively have considerable technical expertise in
the market sector of the Company and in the area of so-called
“financial literacy” as set out in the ASX Governance Principles.
Deloitte Touche Tohmatsu, the Company’s auditors, report
directly to the Audit Committee on the appropriateness of
the Company’s internal accounting policies and practices.
The board reviews the adequacy of existing external audit
arrangements each year, with particular emphasis on the scope
and quality of the audit.
Although not formally chartered, at each Audit Committee
meeting, the independent non-executive directors meet
separately with the auditors without management being
16
Corporate Governance Report (continued)
present to review any concerns that the auditors may have
regarding the financial management of the Company.
The Audit Committee met twice during 2008. The Audit
Committee reports back to the board after each Audit
Committee meeting. The details of attendance at these
meetings are set out in the Directors’ Report.
5. Timely and Balanced Disclosure
The board remains conscious of the Company’s disclosure
obligations under the Corporations Act, the ASX listing rules
and the ASIC guidance principles. All required disclosures are
also made in accordance with the Continuous Disclosure Policy
which is accessible to the public at the Company website.
6. Rights of Shareholders
Given the size of the Company, there is no formally
documented communications strategy but the board is
conscious of the requirements of Principle 6 of the ASX
Governance Principles and acts in accordance with them. The
Company communicates with shareholders through its ASX
disclosures to the market. The Company also communicates
with shareholders through the posting of statutory notices to
shareholders and at the general and special meetings of the
Company. The Company keeps recent announcements and
general Company information on its website with a dedicated
investor relations section which is accessible to the public.
The website contains a link to the ASX website for older
announcements.
The Company’s auditor attends the Annual General Meeting
and is available to answer shareholder questions about the
conduct of the audit and the preparation and content of the
Auditor’s Report at the meeting.
7. Recognise and Manage Risk
As stated above in paragraph 1, the board is responsible for
ensuring appropriate risk management, accountability, and
control mechanisms. As stated above also in paragraph 4
the Audit Committee meets to discuss matters regarding
risk management and reporting. The efficiency that might be
enjoyed by larger companies does not apply to the Company
and hence there are no additional committees formally
established and policies chartered for risk management.
The Group CEO and Group CFO monitor and review the
financial performance of the Company and monitor any
potential risk virtually on a daily basis. While there is no formal
risk management system documented there is substantial
compliance with the requirements of ASX Governance Principle
7.
The board is responsible for the Company’s system of internal
controls. It constantly monitors the operational and financial
aspects of the Company’s activities and, through the Audit
Committee, considers the recommendations and advice of
auditors and other external advisers on the operational and
financial risks that face the Company.
The Group CEO and Group CFO state in writing to the board
which is included in the declaration referred to under paragraph
4, that due consideration is given to budgets, cash flows,
realisation of current assets, continuity of terms of trade, and
consideration of contingencies in the day to day operations
of the Company and in the monthly management financial
reporting and statutory reporting of the Company.
Through the Audit Committee and meetings with the auditors,
the board is also positioned to be informed of any changes to
the general regulatory environment.
At present the nature of operations and scope of business is
reasonably well established and understood by management
and the board. Hence the need for formalising business
risk management policies has not arisen. However, as the
Company grows, consideration will be given to expanding the
formal structures in place for risk management.
As set out above in paragraph 3, the Company and the board
and management and employees are bound to observe all
legal and ethical principles in the conduct of their activities in
the Company.
8. Remunerate Fairly and Responsibly
The Company remunerates directors and key executives in
accordance with the aspirations set out in ASX Governing
Principle 8. Accordingly the board has adopted a remuneration
policy designed to attract and maintain talented and motivated
directors and senior employees so as to encourage enhanced
performance of the Company. There is a clear relationship
between performance and remuneration and a desire to strike
the correct balance between the various components making
up remuneration. The remuneration committee supervises
the development and implementation of the Company’s
remuneration policy including the operation of option plans,
and reviews the performance of the executive directors
and senior executives. There is no formal charter for the
remuneration committee, but it does fix policy and reward in
accordance with ASX Governance Principle 8. The full detail of
the policy and remuneration is contained in the Remuneration
Report.
The Remuneration Committee met twice during 2008. The
details of attendance at these meetings are set out in the
Directors’ Report.
17
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Grosvenor Place
225 George Street
Sydney NSW 2000
PO Box N250 Grosvenor Place
Sydney NSW 1220 Australia
DX 10307SSE
Tel: +61 (0) 2 9322 7000
Fax: +61 (0) 2 9322 7001
www.deloitte.com.au
Independent Auditor’s Report to the
Members of Reckon Limited
Report on the Financial Report
We have audited the accompanying financial report of Reckon Limited, which comprises the
balance sheet as at 31 December 2008, and the income statement, cash flow statement and
statement of recognised income and expense for the year ended on that date, a summary of
significant accounting policies, other explanatory notes and the directors’ declaration of the
consolidated entity comprising the company and the entities it controlled at the year’s end or
from time to time during the financial year as set out on pages 21 to 53.
Directors’ Responsibility for the Financial Report
The directors of the company are responsible for the preparation and fair presentation
of the financial report in accordance with Australian Accounting Standards (including the
Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility
includes establishing and maintaining internal control relevant to the preparation and fair
presentation of the financial report that is free from material misstatement, whether due
to fraud or error; selecting and applying appropriate accounting policies; and making
accounting estimates that are reasonable in the circumstances. In Note 1,the directors
also state, in accordance with Accounting Standard AASB 101 Presentation of Financial
Statements, that compliance with the Australian equivalents to International Financial
Reporting Standards ensures that the financial report, comprising the financial statements
and notes, complies with International Financial Reporting Standards.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We
conducted our audit in accordance with Australian Auditing Standards. These Auditing
Standards require that we comply with relevant ethical requirements relating to audit
engagements and plan and perform the audit to obtain reasonable assurance whether the
financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts
and disclosures in the financial report. The procedures selected depend on the auditor’s
judgement, including the assessment of the risks of material misstatement of the
financial report, whether due to fraud or error. In making those risk assessments, the
auditor considers internal control relevant to the entity’s preparation and fair presentation
of the financial report in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
entity’s internal control. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by the directors, as
well as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide
a basis for our audit opinion.
t
r
o
p
e
R
s
’
r
o
t
i
d
u
A
18
Auditor’s Independence Declaration
In conducting our audit, we have complied with the independence requirements of the
Corporations Act 2001.
Auditor’s Opinion
In our opinion:
(a)
the financial report of Reckon Limited is in accordance with the
2001, including:
Corporations Act
(i) giving a true and fair view of the company’s and consolidated entity’s financial
position as at 31 December 2008 and of their performance for the year ended on
that date; and
(ii) complying with Australian Accounting Standards (including the Australian
Accounting Interpretations) and the Corporations Regulations 2001; and
(b)
the financial report also complies with International Financial Reporting Standards as
disclosed in Note 1.
Report on the Remuneration Report
We have audited the Remuneration Report included on pages 9 to 14 of the directors’
report for the year ended 31 December 2008. The directors of the company are
responsible for the preparation and presentation of the Remuneration Report in accordance
with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion
on the Remuneration Report, based on our audit conducted in accordance with Australian
Auditing Standards.
Auditor’s Opinion
In our opinion the Remuneration Report of Reckon Limited for the year ended 31
December 2008, complies with section 300A of the Corporations Act 2001.
DELOITTE TOUCHE TOHMATSU
Michael Kaplan
Partner
Chartered Accountants
Sydney, 27 March 2009
Liability limited by a scheme approved under Professional Standards Legislation.
19
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Grosvenor Place
225 George Street
Sydney NSW 2000
PO Box N250 Grosvenor Place
Sydney NSW 1220 Australia
DX 10307SSE
Tel: +61 (0) 2 9322 7000
Fax: +61 (0) 2 9322 7001
www.deloitte.com.au
27 March 2009
The Board of Directors
Reckon Limited
35 Saunders Street
Pyrmont NSW 2009
Dear Board Members
RECKON LIMITED
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the
following declaration of independence to the directors of Reckon Limited.
As lead audit partner for the audit of the financial statements of Reckon Limited for the
financial year ended 31 December 2008, I declare that to the best of my knowledge and
belief, there have been no contraventions of:
(i) the auditor independence requirements of the Corporations Act 2001 in relation to the
audit; and
(ii) any applicable code of professional conduct in relation to the audit.
Yours sincerely
DELOITTE TOUCHE TOHMATSU
Michael Kaplan
Partner
Deloitte Growth Solutions Pty Limited
Liability limited by a scheme approved under Professional Standards Legislation
20
Financial Report
Directors’ Declaration
The Directors declare that the financial statements and notes set out on pages 22 to 53:
•
•
comply with Accounting Standards, the
mandatory professional reporting requirements; and
Corporations Regulations 2001 and other
give a true and fair view of the Company’s and consolidated entity’s financial position as
at 31 December 2008 and of their performance, as represented by the results of their
operations and their cash flows, for the financial year ended on that date.
In the Directors’ opinion:
•
•
the financial statements and notes are in accordance with the
and
Corporations Act 2001;
there are reasonable grounds to believe that the company will be able to pay its debts
as and when they become due and payable; and
This declaration is made in accordance with a resolution of the Directors and after receiving
a declaration from the Chief Executive Officer and Chief Financial Officer as contemplated in
section 295A of the Corporations Act 2001.
On behalf of the Directors
Mr J Thame
Chairman
Sydney, 27 March 2009
21
Income Statements
for the year ended
31 December 2008
Note
Consolidated
2008
$’000
2007
$’000
Parent
2008
$’000
2007
$’000
Revenue
2
60,775
56,153
44,788
42,135
Product and selling costs
Royalties
Employee benefits expenses
Employee related expenses
Expense of share-based payments
Marketing expenses
Premises and establishment expenses
Depreciation and amortisation
Telecommunications
Legal and professional expenses
Finance costs
Other expenses
Profit before income tax
Income tax expense
Profit for the year
Loss attributable to minority interest
Profit attributable to members of Reckon Limited
Basic Earnings per Share
Diluted Earnings per Share
The above income statements should be read in conjunction with the accompanying notes.
(5,358)
(4,211)
(19,145)
(906)
(301)
(4,467)
(1,771)
(4,663)
(809)
(441)
-
(3,580)
15,123
(3,811)
11,312
–
11,312
(5,010)
(4,081)
(17,432)
(835)
(571)
(4,275)
(1,593)
(3,839)
(748)
(672)
-
(3,763)
13,334
(3,441)
9,893
–
9,893
Cents
8.5
Cents
7.5
8.5
7.4
3
22
23
23
(3,728)
(4,200)
(10,430)
(597)
(301)
(3,736)
(1,144)
(4,511)
(530)
(350)
(93)
(1,991)
13,177
(2,214)
10,963
–
10,963
(3,548)
(4,062)
(9,674)
(596)
(571)
(3,571)
(1,022)
(3,636)
(500)
(554)
(21)
(1,865)
12,515
(2,358)
10,157
–
10,157
22
Balance Sheets
as at 31 December 2008
ASSETS
Current Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other assets
Total Current Assets
Non-Current Assets
Receivables
Other financial assets
Property, plant and equipment
Deferred tax assets
Intangible assets
Other assets
Total Non-Current Assets
Total Assets
LIABILITIES
Current Liabilities
Trade and other payables
Current tax liabilities
Provisions
Other liabilities
Total Current Liabilities
Non-Current Liabilities
Borrowings
Deferred tax liabilities
Provisions
Other liabilities
Total Non-Current Liabilities
Total Liabilities
Net Assets
Equity
Issued capital
Reserves
Retained earnings
Parent entity interest
Minority interest
Total Equity
The above balance sheets should be read in conjunction with the accompanying notes.
Note
Consolidated
2008
$’000
16,134
4,993
440
855
22,422
-
629
2,543
426
24,088
905
28,591
51,013
4,918
1,742
808
3,076
10,544
-
640
605
841
2,086
12,630
38,383
17,566
816
20,003
38,385
(2)
38,383
2007
$’000
14,141
4,205
349
846
19,541
-
380
1,714
387
23,326
324
26,131
45,672
5,038
937
727
2,688
9,390
-
732
720
178
1,630
11,020
34,652
18,203
513
15,938
34,654
(2)
34,652
28
6
5
7
6
8
9
10
11
12
13
14
15
16
17
14
18
20
21
22
29
Parent
2008
$’000
14,889
1,161
280
401
16,731
1,029
15,069
1,613
-
13,062
905
31,678
48,409
3,036
1,569
351
2,010
6,966
3,052
210
432
733
4,427
11,393
37,016
17,566
958
18,492
37,016
–
37,016
2007
$’000
11,037
1,489
196
461
13,183
527
14,820
811
-
12,269
324
28,751
41,934
3,098
1,205
367
1,690
6,360
1,395
302
437
-
2,134
8,494
33,440
18,203
461
14,776
33,440
–
33,440
23
Statements of Recognised Income and Expense
for the year ended 31 December 2008
Note
Consolidated
Parent
Exchange differences on translation of foreign subsidiaries
21
Net income/(loss) recognised directly into equity
Profit for the year
Total recognised income and expense for the year
Attributable to:
Members of Reckon Limited
Minority interest
The above statements of changes in equity should be read in conjunction with the accompanying notes.
2008
$’000
(194)
(69)
11,312
11,118
11,118
–
11,118
2007
$’000
(69)
(130)
9,893
9,824
9,824
–
9,824
2008
$’000
–
–
10,963
10,963
10,963
–
10,963
2007
$’000
–
–
10,157
10,157
10,157
–
10,157
24
Cash Flow Statements
for the year ended 31 December 2008
Note
Consolidated
Inflows/(Outflows)
Parent
Inflows/(Outflows)
2008
$’000
2007
$’000
2008
$’000
2007
$’000
Cash Flows From Operating Activities
Receipts from customers
Payments to suppliers and employees
Interest received
Dividends received
Income taxes paid
Net cash inflow from operating activities
28(c)
Cash Flows From Investing Activities
Payment for purchase of business, net of cash acquired
Payments for purchase of intellectual property
Payment for deferred acquisition costs
Expenditure on capitalised development costs
Payment for property, plant and equipment
Increase in loans from subsidiaries
Payments for security deposits
Net cash outflow from investing activities
Cash Flows From Financing Activities
Proceeds from issues of equity securities
Payments for treasury shares
Dividends paid to Company’s shareholders
Net cash outflow from financing activities
Net Increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the
financial year
Cash and cash equivalents at the end of the
financial year
28(a)
The above cash flow statements should be read in conjunction with the accompanying notes.
65,180
(46,548)
804
-
(3,137)
16,299
(366)
(40)
(905)
(4,634)
(664)
-
(249)
(6,858)
113
(314)
(7,247)
(7,448)
1,993
14,141
16,134
60,496
(43,889)
721
-
(2,711)
14,617
(2,315)
(100)
-
(3,745)
(537)
-
(79)
(6,776)
203
-
(6,629)
(6,426)
1,415
12,726
14,141
41,236
(27,405)
626
3,312
(1,942)
15,827
(366)
(40)
(905)
(4,841)
(309)
2,183
(249)
(4,527)
113
(314)
(7,247)
(7,448)
3,852
11,037
14,889
39,094
(26,137)
401
3,150
(2,005)
14,503
(2,315)
(100)
-
(3,900)
(235)
1,632
(94)
(5,012)
203
-
(6,629)
(6,426)
3,065
7,972
11,037
25
Notes to the Financial Statements
for the year ended 31 December 2008
1. Summary of Significant Accounting Policies
(c) Depreciation and Amortisation
The principal accounting policies adopted in the preparation of
the financial report are set out below. Unless otherwise stated,
the accounting policies adopted are consistent with those
of the previous year. The financial report includes separate
financial statements for Reckon Limited as an individual entity
and the consolidated entity consisting of Reckon Limited and
its subsidiaries.
Basis of preparation
This general purpose financial report has been prepared
in accordance with Australian Accounting Standards and
Interpretations and the Corporations Act 2001, and complies
with the other requirements of the law.
Australian Accounting Standards include Australian equivalents
to International Financial Reporting Standards. Compliance
with AIFRS ensures that the consolidated financial statements
and notes of Reckon Limited, complies with International
Financial Reporting Standards (IFRSs).
The financial report has been prepared in accordance with the
historical cost convention, except for the revaluation of certain
non-current assets and financial instruments.
Significant Accounting Policies
(a) Trade Payables
These amounts represent liabilities for goods and services
provided to the consolidated entity prior to the end of the
financial year and which are unpaid. These amounts are
unsecured and are usually paid within 30 days of the month of
recognition. Trade payables are recognised initially at fair value,
and subsequently at amortised cost.
(b) Acquisition of Assets
Assets acquired are recorded at the cost of acquisition, being
the fair value of the purchase consideration determined as at
the date of acquisition plus costs incidental to the acquisition.
Where equity instruments are issued in an acquisition, the value
of the instruments is the weighted average of their closing
market price for the total of the five business days either side of
the acquisition date.
In the event that settlement of all or part of the consideration
given in the acquisition of an asset is deferred, the fair value of
the purchase consideration is determined by discounting the
amounts payable in the future to their present value as at the
date of acquisition. However, where the deferred component
is subject to certain criteria being met, the amount deferred is
recognised based on an estimate where it is probable that the
relevant criteria will be met. If the amount is not probable or
cannot be reliably measured, no amount is recognised.
Depreciation is provided on plant and equipment. Depreciation
is calculated on a straight-line basis. Leasehold improvements
are amortised over the period of the lease or the estimated
useful life, whichever is the shorter, using the straight-line
method. The following estimated useful lives are used in the
calculation of depreciation and amortisation:
Plant and equipment
Leasehold improvements
(d) Employee Benefits
3 – 5 years
3 – 6 years
Provision is made for benefits accruing to employees in respect
of wages and salaries, annual leave and long service leave,
when it is probable that settlement will be required and they are
capable of being measured reliably.
Provisions made in respect of wages and salaries, annual
leave, and other employee entitlements expected to be settled
within 12 months are measured at the amounts expected to be
paid when the liabilities are settled.
Provisions made in respect of long service leave which are not
expected to be settled within 12 months are measured as the
present value of the estimated future cash outflows to be made
by the consolidated entity in respect of services provided by
employees up to the reporting date, using the projected unit
credit method. Consideration is given to expected future wage
and salary levels, experience of employee departures and
periods of service.
The Group recognises a liability and an expense for the long
term incentive plan for selected executives based on a formula
that takes into consideration the ranking of total shareholder
return measured against a comparator group of companies.
Contributions are made by the Group to defined contribution
employee superannuation funds and are charged as expenses
when incurred.
(e) Contributed Equity
Transaction Costs on the Issue of Equity Instruments
Transaction costs arising on the issue of equity instruments are
recognised directly in equity as a reduction of the proceeds of
the equity instruments to which the costs relate. Transaction
costs are the costs that are incurred directly in connection with
the issue of those equity instruments and which would not
have been incurred had those instruments not been issued.
(f) Foreign Currency Translation
Functional and presentation currency
Items included in the financial statements of each of the
Group’s entities are measured using the currency of the primary
26
Notes to the Financial Statements
Notes to the Financial Statements
for the year ended 31 December 2008
for the year ended 31 December 2008
economic environment in which the entity operates (“the
functional currency”). The consolidated financial statements
are presented in Australian dollars, which is Reckon Limited’s
functional and presentation currency.
Transactions and balances
All foreign currency transactions during the financial year have
been brought to account in the functional currency using the
exchange rate in effect at the date of the transaction. Foreign
currency monetary items at reporting date are translated at the
exchange rate existing at that date. Exchange differences are
brought to account in the income statement in the period in
which they arise.
Group companies
The results and financial position of all the Group entities (none
of which has the currency of a hyperinflationary economy)
that have a functional currency different from the presentation
currency are translated into the presentation currency of the
consolidated entity as follows:
•
•
Assets and liabilities for each balance sheet presented are
translated at the closing rate at the date of the balance
sheet;
Income and expenses for each income statement
are translated at average rates (unless this is not a
reasonable approximation of the cumulative effect of the
rates prevailing on the transaction dates, in which case
income and expenses are translated at the dates of the
transactions); and
•
All resulting exchange differences are recognised as a
separate component of equity.
On consolidation, exchange differences arising from the
translation of monetary items forming part of the net investment
in foreign entities, and of borrowings and other currency
instruments designated as hedges of such investments, are
taken directly to reserves. When a foreign operation is sold or
borrowings repaid, a proportionate share of such exchange
differences are recognised in the income statement as part of
the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of
a foreign entity are treated as assets and liabilities of the foreign
entity at the closing rate.
(g) Goods and Services Tax
Revenues, expenses and assets are recognised net of the
amount of goods and services tax (GST), except:
i.
where the amount of 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
ii.
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.
(h) Intangible assets
Goodwill
Where an entity or operation is acquired, the identifiable
net assets acquired are measured at fair value. Goodwill
represents the excess of the fair value of the cost of acquisition
over the fair value of the identifiable net assets acquired.
Goodwill is not amortised, and is tested for impairment annually
or more frequently if events or changes in circumstances
indicate that it might be impaired. Following initial recognition
goodwill is measured at cost less any accumulated impairment
losses.
Goodwill is allocated to cash-generating units for the purpose
of impairment testing. Each of those cash-generating units
represents the Group’s investment in each country of operation
by each primary reporting segment which represents the
lowest level within the Group at which the goodwill is monitored
for internal management purposes. If an impairment has
been identified, the goodwill is written down and an expense
recognised in the income statement. Impairment losses
recognised for goodwill are not subsequently reversed.
Intellectual Property
Acquired Intellectual Property is recognised at cost, less
accumulated amortisation and any impairment losses, and is
amortised on a straight-line basis between 3-5 years.
Research and development costs
Research and development expenditure is recognised as an
expense when incurred, except in the undernoted instances.
Development costs in respect of enhancements on existing
APS and Elite suites of software applications are capitalised
and written off over a 3-year period. Development costs on
technically and commercially feasible new APS and Elite
products are capitalised and written off on a straight-line basis
over a period of 3 years commencing at the time of commercial
release of the new product.
Development costs include cost of materials, direct labour and
appropriate overheads.
At each balance sheet date, a review of the carrying value of
the capitalised development costs being carried forward is
undertaken to ensure the carrying value is recoverable from
future revenue generated by the sale of that software.
27
Notes to the Financial Statements
Notes to the Financial Statements
for the year ended 31 December 2008
for the year ended 31 December 2008
(i) Income Tax
The income tax expense or revenue for the period is the tax
payable on the current period’s taxable income based on
the national income tax rate for each jurisdiction adjusted by
changes in deferred tax assets and liabilities attributable to
temporary differences between the tax bases of assets and
liabilities, and their carrying amounts in the financial statements,
and to unused tax losses.
Deferred tax assets and liabilities are recognised for temporary
differences at the tax rates expected to apply when the assets
are recovered or liabilities are settled, based on those tax
rates which are enacted or substantively enacted for each
jurisdiction. The relevant tax rates are applied to the cumulative
amounts of deductible and taxable temporary differences to
measure the deferred tax asset or liability. An exception is
made for certain temporary differences arising from the initial
recognition of an asset or liability. No deferred tax asset or
liability is recognised in relation to those temporary differences if
they arose in a transaction, other than a business combination,
that at the time of the transaction did not affect either
accounting profit or taxable profit or loss.
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. All deferred tax liabilities are
recognised.
Current and deferred tax balances attributable to amounts
recognised directly in equity are also recognised directly in
equity.
Reckon Limited, and its wholly-owned Australian controlled
entities have formed a tax consolidated group.
Under the tax consolidation regime, the parent Company is
responsible for recognising the current tax assets and liabilities
both for itself and its underlying subsidiaries. Therefore any
current tax assets or liabilities attributable to the underlying
subsidiaries are assumed by the parent Company.
Deferred tax is recognised by each entity within the Group,
with the exception of deferred tax assets arising from available
tax losses and tax credits, which are assumed by the parent
Company.
Both current and deferred tax assets and liabilities are
calculated as if each entity were a standalone taxpayer.
All the wholly-owned Australian subsidiaries in the Group
have entered into a tax funding agreement, which requires
that all balances assumed by the head entity are settled in
full. Furthermore, in the event that the head entity defaults in
its obligations under the tax consolidation system, each entity
in the Group is limited in its obligation to fund the income tax
28
obligation of the head entity to the proportion that the tax
liability to which the entity would have been liable had the
Group not elected to become a tax consolidated entity bears to
the total taxation liability of the head entity.
(j) Inventories
Inventories are stated at the lower of cost and net realisable
value. Costs are assigned to inventory on hand on a weighted
average cost basis.
(k) Investments in subsidiaries
Investments in subsidiaries are recorded at cost.
Dividend revenue is taken to income on a receivable basis.
(l) Leased Assets
A distinction is made between finance leases which effectively
transfer from the lessor to the lessee substantially all the risks
and benefits incident to ownership of leased assets, and
operating leases under which the lessor effectively retains
substantially all the risks and benefits.
The consolidated entity does not have any finance leases in
force.
Operating lease payments are recognised on a straight-line
basis over the lease term, except where another systematic
basis is more representative of the time pattern in which
economic benefits from the leased assets are consumed.
Contingent rentals arising under operating leases are
recognised as an expense in the period in which they are
incurred. Lease incentives are initially recognised as a liability
and are amortised over the term of the lease on a straight-line
basis.
(m) Principles of Consolidation
The consolidated financial statements have been prepared
by combining the financial statements of all the entities that
comprise the consolidated entity, being the Company (the
parent entity) and its subsidiaries. Subsidiaries are all entities
over which the Group has the power to govern the financial
and operating policies.
The consolidated financial statements include the information
and results of each subsidiary from the date on which the
Company obtains control and until such time as the Company
ceases to control the entity.
In preparing the consolidated financial statements, all inter-
company balances and transactions, and unrealised profits
arising from transactions within the consolidated entity are
eliminated in full.
Notes to the Financial Statements
for the year ended 31 December 2008
(n) Receivables
Interest and Other Revenue
Trade receivables and other receivables are recorded at
amortised cost, less impairment.
(o) Impairment of assets
Interest revenue is recognised on a time proportional basis
taking into account the effective interest rates applicable to the
financial assets. Other revenue is recognised when the right to
receive the revenue has been established.
Assets that have an indefinite useful life are not subject to
amortisation and are tested annually for impairment. Assets
that are subject to amortisation are reviewed for impairment
whenever events or changes in circumstances indicate that
the carrying amount may not be recoverable. An impairment
loss is recognised for the amount by which the asset’s carrying
amount exceeds its recoverable amount. The recoverable
amount is the higher of an asset’s fair value less costs to sell
and value in use. For the purposes of assessing impairment,
assets are grouped at the lowest levels for which there are
separately identifiable cash flows (cash-generating units).
(p) Revenue Recognition
Sale of Goods and Disposal of Assets
Revenue from the sale of goods and disposal of other assets
is recognised when the consolidated entity has passed control
of the goods or other assets to the buyer, the fee is fixed or
determinable and collectability is probable.
APS software licence fee revenue is recognised at the point
when the customer is in agreement for a “live operation” (i.e.
when the customer accepts that all users can use the system
on a fully functional basis).
Rendering of Services
Revenue from a contract to provide services is recognised
by reference to the stage of completion of the contract or on
a time and materials basis depending upon the nature of the
contract.
Support and maintenance revenue is recognised on a
straight-line basis over the period of the contract, unless the
cost of providing the technical support is insignificant. Under
those circumstances the revenue and the associated cost of
providing the technical support is accrued upon shipment of
the goods. In multiple element arrangements where goods
and services are sold as a bundled product, the fair value of
the services is recognised as revenue over the period during
which the service is performed, unless cost of providing
those services is insignificant. Under those circumstances the
revenue and the associated cost of providing the services is
accrued upon shipment of the goods.
Royalty Income
Royalty income is recognised on an accruals basis in
accordance with the substance of the relevant agreement.
(q) Deferred Revenue
Revenue earned from maintenance and support services
provided on sales of certain products by the consolidated entity
are deferred and then recognised in the income statement over
the contract period as the services are performed, normally 12
months. Refer note 1(p) for further detail.
(r) Earnings per share
Basic earnings per share is determined by dividing net profit
after income tax attributable to members of the Company by
the weighted average number of ordinary shares outstanding
during the financial year, adjusted for bonus elements in
ordinary shares issued during the year.
Diluted earnings per share adjusts the figures in the
determination of basic earnings per share by taking 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 dilutive potential
ordinary shares.
(s) Share–based compensation benefits
Equity-based compensation benefits are provided to
employees via the Employee Option Plan.
The fair value of options granted is recognised as an employee
benefit expense with a corresponding increase in equity. The
fair value is measured at grant date and recognised over the
period during which the employees become unconditionally
entitled to the options.
The fair value at grant date is independently determined
using a binomial option pricing model that takes into account
the exercise price, the term of the option, the share price at
grant date, the expected volatility of the underlying share, the
expected dividend yield and the risk free rate for the term of the
option.
The fair value of the options granted excludes the impact of any
non-market vesting conditions. Non-market vesting conditions
are included in assumptions about the number of options that
are expected to become exercisable. At each balance date,
the entity revises its estimate of the number of options that
are expected to become exercisable. The employee benefit
expense recognised each period takes into account the most
recent estimate.
29
Notes to the Financial Statements
for the year ended 31 December 2008
Upon the exercise of options, the balance of the share-based
payments reserve relating to those options is transferred to
share capital.
(t) Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits
held at call with financial institutions and bank overdrafts.
(u) Other financial assets
Other financial assets represent security deposits held as rental
guarantees. They are valued at amortised cost.
(v) Provisions
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.
(w) Fair Value estimation
The fair value of financial instruments and share based
payments that are not traded in an active market is determined
using valuation techniques. The Group uses a variety of
methods and assumptions that are based on existing market
conditions. Other techniques, such as estimated discounted
cash flows, are used to determine fair value for the remaining
instruments.
The Directors consider that the nominal value less estimated
credit adjustments of trade receivables and payables
approximate their fair values.
(x) Rounding of amounts
value of the services is recognised as revenue over the period
during which the service is performed
Significant accounting estimates and assumptions
The carrying amount of certain assets and liabilities are often
determined based on estimates and assumptions of future
events. The key estimates and assumptions that have a
significant risk of causing material adjustment to the carrying
amounts of certain assets and liabilities are:
Impairment of goodwill – the Group determines whether
goodwill is impaired on an annual basis. This requires an
estimation of the recoverable amount of the cash-generating
unit to which the goodwill is allocated. The assumptions used
in this estimation, and the effect if these assumptions change,
are disclosed in Note 11.
Share-based payments – the Group measures the cost of
equity-settled transactions with employees by reference to the
fair value of the equity instruments at the date on which they
are granted. The fair value has been determined using the
Binomial Option Pricing Model, and the assumptions related to
this can be found in Note 19.
(z) New accounting standards not yet effective
At the date of authorisation of the financial report, a number
of Standards and Interpretations were in issue but not yet
effective.
Initial application of the following Standards will not affect
any of the amounts recognised in the financial report, but will
change the disclosures presently made in relation to the Group
and the company’s financial report.
The parent entity has applied the relief available to it under
ASIC Class Order 98/100, and accordingly, amounts in the
financial report have been rounded off to the nearest thousand
dollars.
Standard
(y) Significant accounting judgments, estimates and
assumptions
Significant accounting judgments
In applying the Group’s accounting policies, management has
made the following judgments which have the most significant
effect on the financial statements:
Capitalisation of development costs – the Group has adopted
a policy of capitalising development costs only for products for
which an assessment is made that the product is technically
feasible and will generate definite economic benefits for the
Group going forward. The capitalised costs are subsequently
amortised over the expected useful life of the product.
Revenue recognition - in multiple element arrangements where
goods and services are sold as a bundled product, the fair
AASB 101 ‘Presentation
of Financial Statements’
(revised September
2007), AASB 2007-8
‘Amendments to
Australian accounting
Standards arising from
AASB 101’
AASB 8 ‘Operating
Segments’, AASB
2007-3 ‘Amendments
to Australian Accounting
Standards arising from
AASB 8’
Effective for
annual reporting
periods
beginning on or
after
Expected to
be initially
applied in
the financial
year ending
1 January 2009
31
December
2009
1 January 2009
31
December
2009
30
Notes to the Financial Statements
for the year ended 31 December 2008
Initial application of the following Standards is not expected to have any material impact on the financial report of the Group and the
company:
Standard/Interpretation
AASB 123 ‘ Borrowing Costs’ (revised),
AASB 2007-6 ‘Amendments to Australian
Accounting Standards arising from AASB
123’
AASB 3 ‘Business Combinations’ (2008),
AASB 127 ‘Consolidated and Separate
Financial Statements’ and AASB 2008-3
‘Amendments to Australian Accounting
Standards arising from AASB 3 and
AASB 127’
AASB 2008-1 ‘Amendments to Australian
Accounting Standard – Share-based
Payments: Vesting Conditions and
Cancellations’
AASB 2008-2 ‘Amendments to Australian
Accounting Standards – Puttable
Financial Instruments and Obligations
arising on Liquidation’
AASB 2008-5 ‘Amendments to Australian
Accounting Standards arising from the
Annual Improvements Project’
AASB 2008-6 ‘Further Amendments to
Australian Accounting Standards arising
from the Annual Improvements Project’
AASB 2008-7 ‘Amendments to
Australian Accounting Standards – Cost
of an Investment in a Subsidiary, Jointly
Controlled Entity or Associate’
AASB 2008-8 ‘Amendment to Australian
Accounting Standards – Eligible Hedged
Items’
AASB 2008-10 ‘Amendments to
Australian Accounting Standards –
Reclassification of Financial Assets’
AASB 2008-13 ‘Amendments to
Australian Accounting Standards
arising from AASB Interpretation
17 – Distributions of non-cash assets to
owners’
Effective for annual reporting periods
beginning on or after
Expected to be initially applied in the
financial year ending
1 January 2009
31 December 2009
AASB 3 (business combinations
occurring after the beginning of annual
reporting periods beginning 1 July 2009),
AASB 127 and AASB 2008-3 (1 July
2009)
31 December 2010
1 January 2009
31 December 2009
1 January 2009
31 December 2009
1 January 2009
31 December 2009
1 July 2009
31 December 2010
1 January 2009
31 December 2009
1 July 2009
31 December 2010
1 July 2008
31 December 2009
1 July 2009
31 December 2010
AASB Interpretation 13 ‘Customer Loyalty
Programmes’
1 July 2008
AASB Interpretation 16 ‘Hedges of a Net
Investment in a Foreign Operation’
1 October 2008
AASB Interpretation 17 ‘Distributions of
Non-Cash Assets to Owners’
1 July 2009
31 December 2009
31 December 2009
31 December 2010
31
Notes to the Financial Statements
for the year ended 31 December 2008
Consolidated
2008
$’000
2007
$’000
Parent
2008
$’000
2007
$’000
2. Profit for the year
Profit before income tax includes the following items of
revenue and expense:
Revenue
Sales revenue
Sale of goods and rendering of services
59,871
55,274
37,026
35,372
Other revenue
Other income
Interest revenue – Bank deposits
Royalty revenue
Dividend income
Expenses
Cost of Sales
Bad debt expense:
Other Entities
Finance costs expensed: Wholly-owned controlled entities
Net transfers to/(from) provisions:
Sales returns and rebates
Employee benefits
Allowance for doubtful debts
Depreciation of non-current assets:
Property, plant and equipment
Amortisation of non-current assets:
Leasehold improvements
Intellectual property
Development costs
Foreign exchange losses/(gains)
Research and development costs
Operating lease rental expenses:
Minimum lease payments
100
804
-
-
158
721
-
-
904
60,775
879
56,153
163
626
3,661
3,312
7,762
44,788
192
401
3,020
3,150
6,763
42,135
9,569
9,091
7,928
7,610
-
-
55
32
23
552
196
602
3,313
(155)
2,342
20
-
(139)
530
(50)
473
174
748
2,444
39
2,438
1,718
1,480
-
93
55
(19)
43
346
119
602
3,444
4
2,260
1,015
12
21
(139)
450
(84)
308
24
748
2,556
8
2,438
902
32
Notes to the Financial Statements
for the year ended 31 December 2008
3. Income Tax
(a) Income tax expense
Current tax
Deferred tax
Under /(over) provided in prior years
(b) The prima facie income tax expense on pre-tax accounting
profit reconciles to the income tax expense/(income tax revenue)
in the financial statements as follows:
Profit before income tax
Income tax expense calculated at 30% of profit
Tax effect of:
Effect of higher tax rates on overseas income
Tax effect of non-deductible/non-taxable items:
Dividends
Research and development claims
Share-based payments
Sundry items
Under/(over) provision in prior years
Benefit of tax losses of prior years recouped
Income tax expense attributable to profit
(c) Future income tax benefits not brought to account as an
asset: not probable of recovery
Tax losses:
Revenue
Capital
Consolidated
2008
$’000
2007
$’000
Parent
2008
$’000
4,169
(133)
(225)
3,811
3,549
84
(192)
3,441
2,540
(92)
(234)
2,214
2007
$’000
2,337
129
(108)
2,358
15,123
4,537
13,334
4,000
13,177
3,953
12,515
3,755
-
-
(530)
-
29
4,036
(225)
-
3,811
-
2,261
2,261
42
-
(364)
3
27
3,708
(192)
(75)
3,441
-
2,261
2,261
-
-
(994)
(530)
-
19
2,448
(234)
-
2,214
-
2,261
2,261
(945)
(364)
3
17
2,466
(108)
-
2,358
-
2,261
2,261
33
Notes to the Financial Statements
for the year ended 31 December 2008
4. Remuneration of Auditors
During the year, the auditors of the parent entity and its related
practices earned the following remuneration:
(a) Deloitte Touche Tohmatsu
Auditing and reviewing of financial reports
Due diligence and other assurance services
Tax compliance and consulting services
(b) Other Auditors
Auditing and reviewing of financial reports
Other assurance services
Tax compliance services
5. Inventories
Finished goods:
Consolidated
2008
$
2007
$
Parent
2008
$
2007
$
164,777
42,750
80,914
288,441
32,181
-
25,139
57,320
345,761
130,158
-
70,296
200,454
45,444
18,520
24,223
88,187
288,641
Consolidated
2008
$’000
2007
$’000
135,915
42,750
80,914
259,579
109,482
-
70,296
179,778
–
–
–
–
–
–
–
259,579
–
179,778
Parent
2008
$’000
2007
$’000
At lower of cost and net realisable value
440
349
280
196
6. Trade and Other Receivables
Current:
Trade receivables1
Allowance for doubtful debts
Other receivables
Non current:
Unsecured loans to subsidiaries2
i.
The aging of past due trade receivables at year-end is
detailed as:
Past due 0-30 days
Past due 31-60 days
Past due 60+ days
Total
The movement in the allowance for doubtful accounts in
respect of trade receivables is detailed below:
Balance at beginning of the year
Amounts written off during the year
Increase in allowance recognised in the profit and loss
Balance at end of year
4,670
(317)
4,353
640
4,993
4,019
(294)
3,725
480
4,205
912
(233)
679
482
1,161
1,292
(190)
1,102
387
1,489
–
–
1,029
527
982
466
504
616
397
417
1,952
1,430
294
-
23
317
364
(20)
(50)
294
168
107
-
275
190
-
43
233
118
158
-
276
286
(12)
(84)
190
1
The average credit period on provision of services is 30 days. No interest is charged on trade
receivable balances overdue. The Group has used the following basis to assess the allowance
loss for trade receivables and as a result is unable to specifically allocate the allowance to the
ageing categories shown above:
- a general provision based on historical bad debt experience;
- the general economic conditions;
- an individual account by account specific risk assessment based on past credit history; and
- any prior knowledge of debtor insolvency or other credit risk.
Included in the Group’s trade receivable balance are debtors with a carrying amount of
$1,635,000 (2007: $1,136,000) which are past due at the reporting date which the Group has
not provided for as there has been no significant change in credit quality and the Group believes
that the amounts are still considered recoverable. The Group does not hold any collateral over
these balances.
2
The loans to wholly owned subsidiaries have no fixed repayment terms. The loans are interest
free.
34
Notes to the Financial Statements
for the year ended 31 December 2008
7. Other Assets
Prepayments
Other
8. Other Financial Assets
Security deposits
Shares in controlled entities - at cost (note 26)
9. Property, Plant And Equipment
Leasehold Improvements
At cost
Less: Accumulated amortisation
Total leasehold improvements
Plant and equipment
At cost
Less: Accumulated depreciation
Total plant & equipment
Reconciliations
Consolidated
2008
$’000
2007
$’000
740
115
855
629
-
629
2,329
1,119
1,210
(225)
5,417
4,084
1,333
2,543
714
132
846
380
-
380
1,368
937
431
(192)
5,046
3,763
1,283
1,714
Parent
2008
$’000
401
-
401
2007
$’000
461
-
461
629
14,440
15,069
380
14,440
14,820
1,732
835
897
(234)
4,234
3,518
716
1,613
763
716
47
(108)
3,937
3,173
764
811
Reconciliations of the carrying amounts of each class of property, plant and equipment at the beginning and end of the financial year
are set out below.
Consolidated
Carrying amount at 1 January 2008
Additions
Depreciation/amortisation expense
Balance at 31 December 2008
Parent Entity
Carrying amount at 1 January 2008
Additions
Depreciation/amortisation expense
Balance at 31 December 2008
Leasehold
Improvements
$’000
Plant and
Equipment
$’000
431
975
(196)
1,210
47
969
(119)
897
1,283
647
(597)
1,333
764
298
(346)
716
Total
$’000
1,714
1,622
(793)
2,543
811
1,267
(465)
1,613
35
Notes to the Financial Statements
for the year ended 31 December 2008
Leasehold
Improvements
$’000
Plant and
Equipment
$’000
556
50
(175)
431
64
7
(24)
47
1,177
606
(500)
1,283
815
257
(308)
764
Consolidated
2008
$’000
2007
$’000
Parent
2008
$’000
22
314
-
90
426
387
41
–
426
6,270
(5,138)
1,132
16,573
(8,325)
8,248
14,708
24,088
32
205
75
75
387
158
229
–
387
6,230
(4,536)
1,694
11,894
(5,012)
6,882
14,750
23,326
–
–
–
–
–
–
–
–
–
6,270
(5,138)
1,132
17,255
(8,727)
8,528
3,402
13,062
Total
$’000
1,733
656
(675)
1,714
879
264
(332)
811
2007
$’000
–
–
–
–
–
–
–
–
–
6,230
(4,536)
1,694
12,414
(5,283)
7,131
3,444
12,269
9. Property, Plant and Equipment (cont.)
Consolidated
Carrying amount at 1 January 2007
Additions
Depreciation/amortisation expense
Balance at 31 December 2007
Parent Entity
Carrying amount at 1 January 2007
Additions
Depreciation/amortisation expense
Balance at 31 December 2007
10. Deferred Tax Asset
The balance comprises temporary differences attributable to:
Doubtful debts
Employee benefits
Deferred revenue
Other provisions
Details of unrecognised deferred tax assets can be found in
Note 3(c)
Opening balance at 1 January
Credited (charged) to the income statement
Acquisition of businesses
Balance at 31 December
11. Intangibles
Intellectual property – at cost
Accumulated amortisation
Development costs – at cost
Accumulated amortisation
Goodwill – at cost
36
Notes to the Financial Statements
for the year ended 31 December 2008
11. Intangibles (cont.)
Aggregate amortisation allocated during the year is recognised
as an expense and disclosed in note 2 to the financial
statements.
Impairment test for goodwill
Goodwill is allocated to the Group’s cash-generating units
(CGUs) identified according to the business entities acquired,
as follows:
APS Australia
APS New Zealand
Reckon Elite
Reckon Shelco
Consolidated
2008
$’000
9,564
1,742
2,536
866
2007
$’000
9,564
1,742
2,536
908
14,708
14,750
Consolidated movements in intangibles
At 1 January 2008
Additions
Adjustment to purchase price
Amortisation charge
At 31 December 2008
At 1 January 2007
Additions
Amortisation charge
At 31 December 2007
Parent movements in intangibles
At 1 January 2008
Additions
Adjustment to purchase price
Amortisation charge
At 31 December 2008
At 1 January 2007
Additions
Amortisation charge
At 31 December 2007
The recoverable amount of a CGU is determined based on
value-in-use calculations. The calculations use cash flow
projections based on annual financial budgets for 2009
approved by the Board. Cash flows beyond the annual budget
are extrapolated for 5 years using estimated average growth
rates of 10 percent per annum, which are based on past
experience. Value in use is calculated based on the present
value of cash flow projections. A pre-tax discount rate of
17.9 percent is applied to cash flow projections for all CGU’s
reflecting similar risk profiles in each.
No impairment write-offs arose from the recoverable value
assessments conducted on each of the CGUs during the
current year (2007: Nil)
Goodwill
$’000
14,750
–
(42)
–
14,708
13,842
908
–
14,750
3,444
–
(42)
–
3,402
2,536
908
–
3,444
Intellectual
Property
$’000
Development
Costs
$’000
1,694
40
–
(602)
1,132
1,468
974
(748)
1,694
1,694
40
–
(602)
1,132
1,468
974
(748)
1,694
6,882
4,679
–
(3,313)
8,248
5,553
3,773
(2,444)
6,882
7,131
4,841
–
(3,444)
8,528
5,787
3,900
(2,556)
7,131
Total
$’000
23,326
4,719
(42)
(3,915)
24,088
20,863
5,655
(3,192)
23,326
12,269
4,881
(42)
(4,046)
13,062
9,791
5,782
(3,304)
12,269
37
Notes to the Financial Statements
for the year ended 31 December 2008
12. Other assets
Prepayments – deferred acquisition costs
Prepayments - other
13. Trade and Other Payables
Current:
Trade payables and sundry accruals (i)
Payables in relation to acquisitions
Employee benefits (Note 19)
(i) The credit period for the majority of goods purchased is 30
days. No interest is charged. The Group has policies in place
to ensure payables are paid within the credit periods.
14. Provisions
Current:
Sales returns, volume rebates
Employee benefits (Note 19)
Commissions and sundry provisions
Non-current:
Employee benefits (Note 19)
Consolidated
2008
$’000
905
–
905
3,885
–
1,033
4,918
190
343
275
808
605
2007
$’000
–
324
324
3,551
504
983
5,038
135
246
346
727
720
Parent
2008
$’000
905
–
905
2,466
–
570
3,036
190
161
–
351
432
Movement in provisions
Movements in each class of provision during the financial year,
excluding employee benefits, are set out below:
Sales returns,
volume rebates
$’000
Commissions and
sundry
$’000
2008 Consolidated
Carrying amount at the start of the year
Additional provisions recognised
Released to income statement
Carrying amount at the end of the year
2008 Parent
Carrying amount at the start of the year
Additional provisions recognised
Released to income statement
Carrying amount at the end of the year
38
135
55
–
190
135
55
–
190
346
–
(71)
275
–
–
–
–
2007
$’000
–
324
324
2,081
504
513
3,098
135
232
–
367
437
Total
$’000
481
55
(71)
465
135
55
–
190
Notes to the Financial Statements
for the year ended 31 December 2008
15. Other Liabilities
Current:
Deferred revenue
Deferred rent contribution
16. Borrowings
Unsecured loans from subsidiaries
Loans from related parties are interest bearing at 7% (2007:
8%) on normal commercial terms with no fixed terms of
repayment.
17. Deferred tax liabilities
The temporary differences are attributable to:
Withholding tax payable in event of distribution of pre-
acquisition dividend
Doubtful debts
Employee benefits
Sales returns and volume rebates
Deferred revenue
Difference between book and tax value of non-current assets
Other provisions
Details of unrecognised deferred tax assets can be found in
Note 3(c)
Opening balance at 1 January
Charged (credited) to the income statement
Reclassification of recoverable withholding tax
Acquisition of businesses
Balance at 31 December
18. Other liabilities
Deferred rent contribution
Consolidated
2008
$’000
2,863
213
3,076
2007
$’000
2,617
71
2,688
Parent
2008
$’000
1,868
142
2,010
2007
$’000
1,690
–
1,690
–
–
3,052
1,395
430
(70)
(260)
(57)
(560)
1,634
(477)
640
732
(92)
–
–
640
430
(57)
(226)
(41)
(452)
1,446
(368)
732
430
313
–
(11)
732
–
(70)
(260)
(57)
(560)
1,634
(477)
210
302
(92)
–
–
210
–
(57)
(226)
(41)
(452)
1,446
(368)
302
184
129
–
(11)
302
841
178
733
–
39
Notes to the Financial Statements
for the year ended 31 December 2008
19. Employee Benefits
The aggregate employee benefit liability recognised and
included in the financial statements is as follows:
Accrued annual leave:
Current (Note 13)
Long term incentive:
Current (Note 14)
Non-current (Note 14)
Provision for long service leave:
Current (Note 14)
Non-current (Note 14)
Long term incentive plan
The long term incentive plan was approved at the Special
General Meeting on 20 December 2005, and comprises
three possible methods of participation: an option plan, a
performance share plan and a share appreciation plan. The
Board has a discretion to make offers to applicable employees
to participate in any of these plans. Options granted and/or
performance shares awarded (all in respect of the Company’s
ordinary shares) and/or share appreciation rights do not
vest before three years after their grant date. Vesting is also
conditional upon the Company achieving defined performance
criteria. The performance criteria are based upon a total
shareholder return (TSR) target. A TSR is the return to
shareholders over a prescribed period, being the growth in
the Company’s share price plus dividends or returns of capital
for that period. The Company’s initial TSR target will be the
Company achieving a median or higher ranking against the
TSR position of individual companies within a ‘comparator
Group’ of companies (i.e. a group of comparable ASX listed
companies pre-selected by the Board) over the same period.
The initial comparator group was determined by independent
advisers and was set out in the Chairman’s speech at the
Special General Meeting on 20 December 2005. The Board will
review the suitability of the comparator group on an on going
basis.
Only 50 percent of options or performance shares become
exercisable or vest if the initial performance criterion is satisfied.
The extent to which the balance of options or performance
shares become exercisable or vest will depend on the extent
to which the initial performance criterion is exceeded (i.e.
the extent to which the Company exceeds a median ranking
against the TSR position of the comparator group of
40
Consolidated
2008
$’000
2007
$’000
Parent
2008
$’000
2007
$’000
1,033
119
176
224
429
983
173
254
73
466
570
119
176
42
256
513
173
254
59
183
1,981
1,949
1,163
1,182
companies). The performance shares are held in trust after
vesting.
The share appreciation right plan represents an alternative
remuneration element (to offering options or performance
shares) under which the Board can invite relevant employees to
apply for a right to receive a cash payment from the Company
equal to the amount (if any) by which the market price of the
Company’s shares at the date of exercise of the right exceeds
the market price of the Company’s shares at the date of grant
of the right. The right may only be exercised if performance
criteria are met. The performance criteria are fixed by the Board
in the exercise of its discretion. At present these are the same
as the TSR target set for the right to exercise options or for
performance shares to vest.
No options were issued during the year (2007: Nil).
495,356 (2007; 561,798) appreciation rights and 252,477
(2007; 300,585) performance shares were issued during the
year. The fair value of these rights was 32.3 cents (2007; 26.7
cents) and the shares were $1.36 (2007; $1.02), using market
price for the shares, and a model that incorporates the Black
Scholes model for the rights. The expense recognised in 2008
for appreciation rights/performance shares was $300,666
(2007; $559,615).
Notes to the Financial Statements
for the year ended 31 December 2008
19. Employee Benefits (cont.)
Performance Shares
Grant Date
Expiry Date
Jan’05
Jan’06
Jan’07
Jan’08
Dec’07
Dec’08
Dec’09
Dec’10
Appreciation Rights
Grant Date
Expiry Date
Jan’05
Jan’06
Jan’07
Jan’08
Dec’07
Dec’08
Dec’09
Dec’10
Shares
Granted
78,815
85,437
300,590
252,477
Rights
Granted
302,014
401,785
561,798
495,356
Shares lapsed
during the year
Shares vested
during the year
Shares available at the
end of the year
2008
–
–
–
–
2007
–
85,437
–
–
2008
78,815
–
–
–
2007
–
–
300,590
252,477
2008
–
–
–
–
2007
–
–
–
–
Rights lapsed
during the year
Rights vested
during the year
Rights available at the
end of the year
2008
–
–
–
–
2007
–
401,785
–
–
2008
302,014
–
–
–
2007
–
–
561,798
495,356
2008
–
–
–
–
2007
–
–
–
–
Options are valued using the Binomial Option Pricing Model,
taking into account the exercise price, the expected life of the
options (estimated at 4.5 years), the price of the underlying
shares (range is between $0.29 and $1.00), the expected
volatility of those shares based on historical volatility, the
expected dividends and the risk-free rate of interest. The
weighted average share price during the year was $1.14.
Reckon Limited Employee Option Plans
The Company has previously had two ownership-based
remuneration schemes:
Executive share option plan
The executive share option plan has been terminated.
Executive share option plan No. 2
The Reckon Limited Executive Share Option Plan No. 2 was
established on 19 July 2000. Under the provisions of the plan,
the Directors may grant options over unissued shares in the
Company to executives and Directors of the Company (or their
associates) or subsidiaries of the Company selected by the
Directors from time to time, subject to the ASX Listing Rules
and the Corporations Act 2001.
Options are granted for a five-year period and 50 percent
of each new tranche becomes exercisable after each of the
first two anniversaries of the grant date. The entitlements
are vested as soon as they are exercisable (i.e. they are not
conditional on future employment). Each option entitles the
holder to one ordinary share.
Amounts receivable on exercise of any options are recognised
as share capital. Options exercised during the year were
exercised with an average exercise price of $0.60.
No further options will be issued under either of these plans.
The plans have been replaced by the employee incentive plans
approved by the Special General Meeting on 20 December
2005.
41
Notes to the Financial Statements
for the year ended 31 December 2008
19. Employee Benefits (cont.)
Set out below are summaries of options granted under the Executive Share Option Plan No. 2.
Grant date
Expiry
date
Exercise
Price
Options
Initially
Granted
Options lapsed
during the year
Options exercised and
shares issued during
the year
Options available at
the end of the year
Jan 02
Feb 02
Mar 02
Jul 02
Sep 02
Dec 02
Jun 03
Sep 03
Dec 03
Jan 04
Mar 04
Jun 04
Sep 04
Dec 04
Mar 05
Jul 05
Sep 05
Dec 05
Jan 07
Feb 07
Mar 07
Jul 07
Sep 07
Dec 07
Jun 08
Sep 08
Dec 08
Jan 09
Mar 09
Jun 09
Sep 09
Dec 09
Mar 10
Jul 10
Sep 10
Dec 10
$0.139
$0.138
$0.138
$0.133
$0.135
$0.176
$0.270
$0.505
$0.619
103,553
7,778
41,666
41,668
16,111
130,553
58,891
115,002
48,890
$0.551
1,061,159
$0.789
$0.960
$0.823
$0.796
$0.743
$0.741
$0.779
$0.722
56,110
76,668
151,166
250,554
75,555
79,999
113,887
144,445
2008
-
-
-
-
-
-
19,001
50,407
24,808
-
-
-
-
-
-
-
-
-
2007
38,368
-
10,291
22,168
-
31,929
-
-
-
-
-
-
-
-
-
6,860
3,430
15,833
2008
-
2007
-
2008
-
2007
-
-
-
-
-
-
-
7,387
3,789
-
-
-
8,972
-
-
-
-
-
-
-
-
-
-
26,389
12,938
-
-
-
-
-
19,001
84,183
41,535
176,806
233,710
381,937
558,743
-
-
-
-
-
-
-
-
-
-
21,111
35,888
-
15,305
6,861
-
35,889
69,667
87,664
35,889
69,667
87,664
158,596
158,596
57,527
49,876
84,180
81,809
57,527
49,876
84,180
81,809
94,216
128,879
187,982
321,847
1,046,472
1,328,670
Number of shares that can be issued for unexercised options
1,046,472
1,328,670
42
Notes to the Financial Statements
for the year ended 31 December 2008
20. Issued Capital
Fully Paid Ordinary Share Capital
Balance at beginning of financial year
Transfer from share-based payments reserve for options
exercised during the year
Issue of shares
Balance at end of financial year
Less Treasury shares
Balance at beginning of financial year
Shares purchased in prior periods
Shares purchased in 2008
2008
No.
132,749,825
-
187,982
132,937,807
-
464,842
252,477
$’000
18,203
62
113
18,378
-
498
314
2007
No.
132,427,978
-
321,847
132,749,825
-
-
-
$’000
17,896
104
203
18,203
-
-
-
Balance at end of financial year
Balance at end of financial year net of treasury shares
717,319
132,227,820
812
17,566
-
132,749,825
-
18,203
Fully paid ordinary shares carry one vote per share and carry
the right to dividends.
Changes to the then Corporations Law abolished the
authorised capital and par value concepts in relation to share
capital from 1 July 1998. Therefore the company does not have
a limited amount of authorised capital and issued shares do not
have a par value.
187,982 (2007; 321,847) Options were exercised during the
year with an average exercise price of $0.60. Details of the
options that were exercised and further details in respect of
the share option plans are contained in note 19 to the financial
statements.
Total consideration for options exercised during the year is
$112,815.
21. Reserves
Foreign currency translation reserve
Balance at beginning of financial year
Translation of foreign operations
Balance at end of financial year
Share-based payments reserve
Balance at beginning of financial year
Treasury share expense
Option expense
Transfer to share capital (options exercised)
Balance at end of financial year
Nature and purpose of reserves
Consolidated
2008
$’000
2007
$’000
Parent
2008
$’000
2007
$’000
52
(194)
(142)
461
559
-
(62)
958
816
121
(69)
52
554
-
11
(104)
461
513
–
–
–
461
559
-
(62
958
958
–
–
–
554
-
11
(104)
461
461
(a)
Foreign currency translation reserve
Exchange differences arising on translation of the financial reports of foreign subsidiaries are taken to the foreign currency
translation reserve, as described in note 1(f)
(b)
Share-based payments reserve
The share-based payments reserve is for the fair value of options granted and recognised to date but not yet exercised.
43
Notes to the Financial Statements
for the year ended 31 December 2008
22. Retained Earnings
Balance at beginning of financial year
Net profit
Dividends
Balance at end of financial year
23. Earnings Per Share
Basic earnings per share
Diluted earnings per share
Weighted average number of ordinary shares used
in the calculation of basic earnings per share
Weighted average number of ordinary shares and potential
ordinary shares used in the calculation of diluted earnings
per share
Consolidated
2008
$’000
2007
$’000
Parent
2008
$’000
14,776
10,963
(7,247)
18,492
15,938
11,321
(7,247)
20,003
12,674
9,893
(6,629)
15,938
2008
¢
8.5
8.5
2007
$’000
11,248
10,157
(6,629)
14,776
2007
¢
7.5
7.4
132,599,634
132,318,888
133,927,248
134,083,502
Earnings per share calculations are based on profit for the year as set out in the income statement.
Potential ordinary shares of 1,327,614 (2006: 1,778,340) are options issued but not exercised as disclosed in note 19.
24. Contingent Liabilities
There are no contingent liabilities as at 31 December 2008.
25. Commitments For Expenditure
(a) Capital Expenditure Commitments
The consolidated entity has capital expenditure commitments of $53,000 as at 31 December 2008 (2007: $Nil)
(b) Lease Commitments
Operating Leases
Within 1 year
Later than 1 year and not longer than 5 years
Later than 5 years
Consolidated
Parent
2008
$’000
1,720
4,736
1,111
7,567
2007
$’000
1,485
1,725
-
3,210
2008
$’000
1,021
3,803
1,111
5,935
2007
$’000
803
312
-
1,115
Operating leases relate to office and warehouse premises and office facilities with lease terms of between 1 to 7 years. All
operating lease contracts contain market review clauses in the event that the consolidated entity exercises its option to renew. The
consolidated entity does not have an option to purchase the leased asset at the expiry of the lease period.
44
Notes to the Financial Statements
for the year ended 31 December 2008
26. Subsidiaries
Name of Entity
Parent Entity
Reckon Limited
Subsidiaries
Reckon.com.au Pty Limited
Reckon Australia Pty Limited
Reckon Investment Centre Limited
Reckon Online Holdings Pty Limited
Reckon Pacrim Pty Limited
Reckon Training Pty Limited
Reckon Limited Performance Share Plan Trust
Reckon New Zealand Pty Limited
Advanced Professional Solutions Pty Limited
Advanced Professional Solutions Limited
Advanced Professional Solutions Limited
All shares held are ordinary shares.
27. Related Party Disclosures
(a) Key Management Personnel Remuneration
Short term benefits
Post-employment benefits
Share based payments
Ownership Interest
Country of
Incorporation
2008
%
2007
%
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
Australia
New Zealand
United Kingdom
100
100
100
100
100
90
100
100
100
100
100
100
100
100
100
100
90
100
100
100
100
100
Consolidated
2008
$
2007
$
Parent
2008
$
2007
$
3,189,551
227,650
2,940,959
200,679
1,829,135
133,879
1,755,579
127,260
271,577
552,737
169,253
416,823
3,688,778
3,694,375
2,132,267
2,299,662
The names of and positions held by the key management are
set out in note 27(e). Further details of the remuneration of key
management are disclosed in the Directors’ Report.
(b) Other Transactions with Key Management Personnel
There were no transactions with Directors apart from those
disclosed in this note.
development services to Reckon Limited at market rates and
has charged fees for these services of $4,541,519 (2007:
$3,900,823). The APS Group paid dividends to Reckon Limited
of $3,311,804 (2007: $3,149,703). Receivables/payables from
entities within the wholly-owned Group include amounts arising
under the Group’s tax funding arrangement. These loans are
interest free and repayable on demand.
(c) Transactions within the Wholly-Owned Group
(d) Other Related Party Transactions
During the financial year, Reckon Limited provided
management, accounting and administration services, at no
cost, to other entities in the wholly-owned Group.
During the financial year, Reckon Limited charged royalties
on intellectual property at market rates to the APS Group of
$3,660,961 (2007: $3,020,422), and was charged interest
at normal commercial rates on the intercompany loan with
Advanced Professional Solutions Limited in New Zealand of
$93,289 (2007: $21,315). The APS Group has also provided
Intuit Ventures Inc
Intuit Ventures Inc, a significant shareholder (11.2%) in
Reckon Limited provides the rights for Reckon to market and
distribute Intuit software throughout Australasia and parts of
South-East Asia. In return for this, Intuit receives a royalty
payment based on sales made throughout the territory. These
royalties amounted to $4,209,212 (2007: $3,991,294) which is
expensed in the month that the associated product was sold.
The balance due at 31 December 2008 is $150,843 (2007:
$154,402).
45
Notes to the Financial Statements
for the year ended 31 December 2008
27. Related Party Disclosures (cont.)
(e) Directors’ and Key Management Equity Holdings
Options and Shareholding 2008
Shareholding
Shareholding
Performance
Performance
Performance
Performance
at start of
at end of
Options at
Options at end
shares at start
shares vested
shares issued
shares held at
2008
20085
start of 2008
of 20084
of 2008
in 2008
in 2008
end of 2008
Office
Deputy
Chairman,
Executive
Director
Executive
Director
MD, APS United
Kingdom
Non-Executive
Director
General Counsel
& Co Secretary
Non-Executive
Director
Chief Financial
Officer
GM,
Development
APS
GM, APS
Australia
CEO, Quicken
Australia
MD, APS New
Zealand
MD, APS New
Zealand
Greg
Wilkinson
Clive
Rabie
Brian
Armstrong
Brian
Coventry
John
Thame
Myron
Zlotnick
Ian
Ferrier
Chris
Hagglund1
Nigel
Boland
Paul
James
Gavin
Dixon
Michael
Donnelly2
Grant
Linton3
7,450,000
7,450,000
10,508,000 10,508,000
0
0
CEO, APS
728,000
748,222
42,222
287,766
287,766
40,111
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
162,351
46,762
58,656
221,007
9,823
0
0
0
7,332
17,155
0
0
60,642
16,873
27,018
87,660
0
0
0
0
0
0
0
47,500
47,500
105,544
21,802
51,324
156,868
0
0
0
0
0
0
0
0
0
0
9,823
0
67,539
9,823
0
0
0
0
0
0
7,332
17,155
7,332
7,332
56,823
124,362
7,332
0
0
0
19,000
19,000
0
0
0
0
0
0
23,222
23,222
0
0
0
0
0
0
0
0
1
2
3
4
5
Options granted on: 15 December 2004; fair value per option granted: $0.3809; options expire on 15 December 2009. At exercise of options, an exercise price of $0.796 is payable per share.
Mr Donnelly resigned on 15 October 2008.
Mr Linton was appointed MD on 1 September 2008.
All options have vested and are exercisable. No options were issued in 2008.
Shareholdings at the date of the Director’s Report remain unchanged.
46
Notes to the Financial Statements
for the year ended 31 December 2008
27. Related Party Disclosures (cont.)
(e) Directors’ and Key Management Equity Holdings
Options and Shareholding 2007
Shareholding
Shareholding
Performance
Performance
Performance
Performance
at start of
at end of
Options at
Options at end
shares at start
shares vested
shares issued
shares held at
2007
20075
start of 2007
of 20074
of 2007
in 2007
in 2007
end of 2007
7,450,000
7,450,000
10,508,000 10,508,000
0
0
0
0
0
0
0
0
0
0
0
0
Office
Deputy
Chairman,
Executive
Director
Executive
Director
CEO, APS
814,532
728,000
42,222
42,222
89,900
43,138
72,451
162,351
287,766
287,766
40,111
40,111
40,111
19,000
19,000
0
0
0
0
0
0
0
0
0
0
0
0
0
0
9,823
9,823
0
0
0
32,438
15,565
28,204
60,642
0
0
0
0
47,500
47,500
41,914
20,211
63,630
105,544
28,261
23,222
23,222
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
9,823
9,823
0
0
67,539
67,539
9,823
9,823
Greg
Wilkinson
Clive
Rabie
Brian
Armstrong1
Brian
Coventry2
John
Thame
Myron
Zlotnick
Ian
Ferrier
Chris
Hagglund3
Nigel
Boland
Paul
James6
Gavin
Dixon
Michael
Donnelly
MD, APS United
Kingdom
Non-Executive
Director
General Counsel
& Co Secretary
Non-Executive
Director
Chief Financial
Officer
GM,
Development
APS
GM, APS
Australia
CEO, Quicken
Australia
MD, APS New
Zealand
1
2
3
4
5
6
Options granted on: 1 January 2004; fair value per option granted: $0.3056; options expire on 1 January 2009. At exercise of options an exercise price of $0.637 is payable per share.
Options granted on: 1 January 2004; fair value per option granted: $0.3056; options expire on 1 January 2009. At exercise of options an exercise price of $0.637 is payable per share.
Options granted on: 15 December 2004; fair value per option granted: $0.3809; options expire on 15 December 2009. At exercise of options, an exercise price of $0.796 is payable per share.
All options have vested and are exercisable. No options were issued in 2007.
Shareholdings at the date of the Director’s Report remain unchanged.
Mr James was appointed on 4 June 2007.
47
Notes to the Financial Statements
for the year ended 31 December 2008
28. Notes to the Statement of Cash Flows
(a) Reconciliation of Cash
For the purposes of the statement of cash flows, cash
includes cash on hand and in banks and investments
in money market instruments, net of outstanding bank
overdrafts. Cash at the end of the financial year as shown in
the statement of cash flows is reconciled to the related items
in the balance sheet as follows:
Cash (i)
(i) Cash balance is predominantly in the form of short term
money market deposits, which can be accessed at call.
(b) Businesses Acquired
Shelco and New Zealand Distributor
Consideration:
Cash
Direct costs relating to the acquisition
Consideration yet to be paid
Fair value of net assets of entity acquired:
Receivables
Inventories
Intellectual property
Deferred tax assets
Fixed assets
Trade payables
Other current liabilities
Goodwill
Consolidated
2008
$’000
2007
$’000
Parent
2008
$’000
2007
$’000
16,134
16,134
14,141
14,141
14,889
14,889
11,037
11,037
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,170
128
366
1,664
7
88
804
11
119
(42)
(189)
798
866
1,664
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,170
128
366
1,664
7
88
804
11
119
(42)
(189)
798
866
1,664
Shelco and New Zealand Distributor
Reckon Limited acquired the Shelco business effective from 1 March 2007 for a total of $1,145,000. The final payment of $395,000
was made in August 2008. Shelco is a provider of company registration, trust and superannuation fund establishment, ASIC
searches and other services predominantly to the accounting and legal professions.
Effective 1 March 2007 Reckon Limited also acquired its New Zealand Quicken distributor as well as the intellectual property for a
complimentary range of products for $420,000. The additional products acquired included an ASP payroll solution,
an online backup solution and a tool which allows the more efficient downloading and processing of bank data.
The book value of all of the net assets acquired were equivalent to their fair values, apart from intellectual property. The book value
of intellectual property was $nil.
48
Notes to the Financial Statements
for the year ended 31 December 2008
(c) Reconciliation of Profit After Income Tax To Net Cash
Flows From Operating Activities
Profit after income tax
Depreciation and amortisation of non-current assets
Non-cash employee benefits expense –
share based payment
Increase/(decrease) in current tax
liability/asset
Increase in deferred tax balances
Unrealised foreign currency translation amount
(Increase)/decrease in assets:
Current receivables
Current inventories
Other current assets
Non-current receivables
Increase/(decrease) in liabilities:
Current trade payables
Other current liabilities
Other non-current liabilities
Net cash inflow from operating activities
29. Outside Equity Interests in
Controlled Entities
Interest in:
Share Capital
Accumulated Losses
30. Dividends – Ordinary Shares
Final franked dividend for the year ended 31 December 2007 of 3.0
cents (2007: 2.5 cents) per share paid on 7 March 2008
Interim franked dividend for the year ended 31 December 2008 of
2.5 cents per share (2007: 2.5 cents) paid on 10 September 2008
Franking credits available for subsequent financial years based on a
tax rate of 30% (2007: 30%)
Consolidated
2008
$’000
11,312
4,663
-
805
(131)
(194)
(788)
(91)
52
324
288
327
(268)
16,299
2007
$’000
9,893
3,839
11
657
84
(69)
(479)
97
(172)
(124)
(104)
744
240
14,617
Consolidated
2008
$’000
2007
$’000
–
(2)
(2)
–
(2)
(2)
Parent
2008
$’000
2007
$’000
10,963
4,511
10,157
3,636
-
(664)
(92)
-
328
(84)
121
324
346
162
(88)
15,827
11
203
129
-
(26)
178
(132)
(124)
(106)
356
221
14,503
Parent
2008
$’000
2007
$’000
3,983
3,312
3,264
7,247
2,507
3,317
6,629
2,977
49
Notes to the Financial Statements
for the year ended 31 December 2008
31. Financial Instruments
(a) Significant Accounting Policies
Details of the significant accounting policies and methods
adopted, including the criteria for recognition, the basis of
measurement and the basis on which revenues and expenses
are recognised, in respect of each class of financial asset,
financial liability and equity instrument are disclosed in note 1 to
the financial statements.
(b) Financial Risk Management Objectives
The Board of Directors has overall responsibility for the
establishment and oversight of the company and group’s
financial management framework.
The Board of Directors oversees how Management monitors
compliance with risk management policies and procedures and
reviews the adequacy of the risk management framework in
relation to the risks. The main risk arising from the company
and group’s financial instruments are currency risk, credit risk,
liquidity risk and cash flow interest rate risk.
(c) Interest Rate Risk
The group and parent are exposed to interest rate risk on the
cash held in bank deposits. Cash deposits of $16,134,000 and
$14,889,000 were held by the consolidated entity and parent
entity respectively at the reporting date, attracting an average
interest rate of 4.1% (2007: 6.2%). If interest rates had been
50 basis points higher or lower and all other variables were
held constant, the group’s net profit would increase/decrease
by $81,000 (2007: $71,000) and the parent’s net profit would
increase/decrease by $74,000 (2007: $55,000).
The parent entity is also exposed to an immaterial interest
rate risk on interest bearing loan balances due to its overseas
subsidiaries.
(d) Credit Risk
Credit risk refers to the risk that a counter party will default
on its contractual obligations resulting in financial loss to the
consolidated entity. The consolidated entity has adopted
the policy of only dealing with creditworthy counterparties
and obtaining sufficient collateral or other security where
appropriate, as a means of mitigating the risk of financial loss
from defaults.
The consolidated entity does not have any significant credit
risk exposure to any single counterparty or any group of
counterparties having similar characteristics.
The carrying amount of financial assets recorded in the financial
statements, net of any provisions for losses, represents the
consolidated entity’s maximum exposure to credit risk without
taking account of the value of any collateral or other security
obtained.
(e) Foreign Currency Risk
The consolidated entity and company undertakes certain
transactions denominated in foreign currencies that are different
to the functional currencies of the entities undertaking the
transactions, hence exposures to exchange rate fluctuations
arise. The Board of Directors monitor these exposures and
does not presently hedge against this risk.
The carrying amount of the consolidated entity and company’s
foreign currency denominated monetary assets and liabilities
at the reporting date that are denominated in a currency that
is different to the functional currency of respective entities
undertaking the transactions is as follows:
Consolidated
Parent
Liabilities
Assets
Liabilities
Assets
2008
$’000
–
2007
$’000
–
2008
$’000
96
2007
$’000
54
2008
$’000
–
2007
$’000
–
2008
$’000
–
2007
$’000
–
US Dollar
50
Notes to the Financial Statements
for the year ended 31 December 2008
31. Financial Instruments (cont.)
(e) Foreign Currency Risk (cont.)
At 31 December 2008, if the US Dollar weakened against
the New Zealand Dollar by 10 percent (being the relevant
volatility considered relevant by Management), with all other
variables held constant the net profit of the consolidated
entity would decrease by $9,578. At 31 December 2008, if
the New Zealand Dollar and UK Sterling weakened against
the Australian Dollar by 10 percent (being the relevant volatility
considered relevant by Management), with all other variables
held constant the net profit of the consolidated entity would
decrease by $269,151. This latter sensitivity relates to inter-
group loan balances denominated in Australian Dollars, which
are eliminated on consolidation.
In Management’s opinion, the sensitivity analysis is not fully
representative of the inherent foreign exchange risk as the
year-end exposure does not necessarily reflect the exposure
during the course of the years. The consolidated entity
includes certain subsidiaries whose functional currencies are
different to the consolidated entity presentation currency. The
main operating entities outside of Australia as based in New
Zealand and the United Kingdom. These entities transact
primarily in their functional currency and, aside from inter-
group loan balances, do not have significant foreign currency
exposures due to outstanding foreign currency denominated
items. As stated in the company and consolidated entity’s
accounting policies per Note 1, on consolidation the assets
and liabilities of these entities are translated into Australian
Dollars at exchange rates prevailing on the balance sheet date.
The income and expenses of these entities is translated at the
average exchange rates for the year. Exchange differences
arising are classified as equity and are transferred to a foreign
exchange translation reserve. The company and consolidated
entity’s future reported profits could therefore be impacted by
changes in relates of exchange between the Australian Dollar
and the New Zealand Dollar and the Australian Dollar and the
UK Sterling.
(f) Liquidity
The Group manages liquidity risk by maintaining adequate
cash reserves and banking facilities by continuously monitoring
forecast and actual cash flows.
(g) Capital risk management
The Group manages its capital to ensure that entities in the
Group will be able to continue as a going concern. The capital
structure of the Group consists of cash and equity attributable
to equity holders of the parent, comprising share capital,
reserves and retained earnings as disclosed in notes 20, 21
and 22. The Board reviews the capital structure on a regular
basis. Based upon this review, the Group balances its overall
capital structure through the payment of dividends, issues of
shares, share buy-backs and returns of capital. This strategy
remains unchanged since the prior year.
(h) Fair Value
The carrying amount of financial assets and financial liabilities
recorded in the financial report approximates their respective
fair values, determined in accordance with the accounting
policies disclosed in note 1 to the financial statements.
32. Segment Information
(a) Primary Reporting – Business Segments
For management purposes, the consolidated entity is organised
into two major operating divisions:
Business Division (formerly Quicken products)
Professional Division (formerly APS products)
These divisions are the basis upon which the consolidated entity
reports its primary segment information.
The principal activities of these divisions are as follows:
•
•
Business Division - development, distribution and support
of personal financial and accounting software, as well as
related products and services to professional partners.
Professional Division - development, distribution and
support of practice management, tax, client accounting
and related software.
51
Notes to the Financial Statements
for the year ended 31 December 2008
32. Segment Information (cont.)
(a) Primary Reporting – Business Segments (cont.)
External sales
Inter-segment
2008
$’000
2007
$’000
2008
$’000
2007
$’000
Other
2008
$’000
38,543
21,328
36,658
18,616
6,973
6,170
–
–
633
271
2007
$’000
538
341
Total
2008
$’000
46,149
21,599
67,748
(6,973)
60,775
9,872
5,251
15,123
(3,811)
11,312
Segment revenues
Business Division
Professional Division
Total of all segments
Eliminations
Total revenue
Segment results
Business Division*
Professional Division
Profit before income tax
Income tax expense
Net profit for the year
* The Business Division result includes royalty income from APS, net of APS development cost and IP amortisation.
Segment assets and liabilities
Business Division
Professional Division
Total of all segments
Eliminations
Unallocated
Consolidated
Assets
Liabilities
2008
$’000
26,569
25,764
52,333
(1,320)
–
51,013
2007
$’000
21,010
25,140
46,150
(478)
–
45,672
2008
$’000
10,012
3,938
13,950
(1,320)
–
12,630
2007
$’000
43,366
18,957
62,323
(6,170)
56,153
9,655
3,679
13,334
(3,441)
9,893
2007
$’000
7,850
3,648
11,498
(478)
–
11,020
Other segment information
Acquisition of segment assets
Depreciation and amortisation of segment assets
Business Division
Professional Division
2008
$’000
1,797
1,244
2007
$’000
3,115
939
2008
$’000
3,907
3,419
2007
$’000
3,196
2,900
Segment revenues from
external sales
Segment assets
Acquisitions of property, plant and
equipment, intangibles and other
non-current segment assets
(b) Secondary Reporting –
Geographical Segments
Australia
Other countries
Unallocated assets
Total assets
2008
$’000
51,526
8,345
59,871
2007
$’000
47,519
7,755
55,274
2008
$’000
42,782
10,453
53,235
(2,222)
51,013
2007
$’000
36,713
9,652
46,365
(693)
45,672
2008
$’000
3,851
1,853
5,704
2007
$’000
4,600
1,711
6,311
52
Notes to the Financial Statements
for the year ended 31 December 2008
33. Economic Dependency
Reckon Limited generates a significant volume of its revenue
from products supplied by Intuit Inc. under the manufacturing
and distribution agreement it has with Intuit Inc. The term of
the agreement is 10 years and is subject to market growth
objectives. If these objectives are met the agreement is
automatically extended by one year for each calendar year in
which Reckon meets or exceeds its market growth objective.
To date Reckon Limited has exceeded these growth objectives.
34. Subsequent Events
Estimated Consideration:
Cash consideration
Net debt acquired
Direct costs relating to the acquisition
Consideration yet to be paid
Estimated Fair Value of net assets of
entity acquired:
Receivables
Subsequent to the end of the financial year:
Inventories
Dividend
The Board has declared a dividend of 3.5 cents per share
to shareholders on 10 February 2009. The dividend will be
franked. The record date for the dividend is 22 February 2009.
The impact on the franking account balance of unrecognised
dividends is $1,998,000.
Options
Intellectual property – customer contracts
Intellectual property – development and
software
Intellectual property – trademarks and
domain names
Deferred tax assets
Fixed assets
Trade payables
Deferred revenue
206,672 options in the Executive Share Option Plan No. 2
have lapsed and 153,058 options have been exercised with an
average exercise price of $0.67.
Other current liabilities
Other non-current liabilities
Acquisition
Goodwill
$’000
18,000
228
1,050
-
19,278
3,437
1,587
4,210
1,793
150
430
728
(773)
(3,361)
(883)
(138)
7,180
12,098
19,278
Reckon Limited acquired the Corporate Services and BillBack
businesses previously owned by Espreon Limited effective
from 2 January 2009 for $18m. The acquisition was funded
predominantly from existing cash reserves. Debt funding was
used to fund the difference. The two businesses contributed
$5m to Espreon’s EBITDA result for the year ended 30 June
2008.
The Corporate Services business is a provider of
documentation for company formations, secretarial services,
trust and self managed superannuation fund deeds. This is a
range of products and services which is similar to Reckon’s
Shelco business.
The BillBack business is a provider of technologies for the
capture, reporting and billing of client expenses by professional
services suppliers such as lawyers and accountants, and
hence has a natural fit with Reckon’s Professional Division.
The initial accounting for the acquisition of Corporate Services
and BillBack has only been provisionally determined at
reporting date. The acquisition values set out below are based
upon the Espreon completion accounts. Reckon Limited
has lodged a number of claims against Espreon which is
expected to reduce the consideration paid. The claims are at a
preliminary stage and at the date of this report no demand has
been issued. The amount of the claims is yet to be determined.
35. Company information
Reckon Limited is a listed public company limited by shares,
incorporated and domiciled in Australia. Its registered office
and principal place of business is:
Ground Floor, 35 Saunders Street
Pyrmont NSW 2009
A description of the nature of the consolidated entity’s
operations and its principal activities is included in the review of
operations and activities in the Directors’ Report, which is not
part of this financial report.
The financial report was authorised for issue by the Directors
on 27 March 2009.
53
Additional Information
as at 6 March 2009
Twenty Largest Holders of Quoted Equity Securities
Ordinary Shareholder
National Nominees Limited
Intuit Ventures Inc
JP Morgan Nominees Australia Limited
HSBC Custody Nominees (Australia) Limited
ANZ Nominees Limited
Australian Executor Trustees NSW Ltd
Gregory John Wilkinson
DJZ Investments Pty Limited
Mr Clive Rabie and Mrs Kerry Rose Rabie
Queensland Investment Corporation
Mr Stephen James Rickwood
Mr Philip Ross Hayman
Mr Clive Alan Rabie
Cogent Nominees Pty Limited
UBS Nominees Pty Limited
Rawform Pty Ltd
Mr Philip Ross Hayman
Citicorp Nominees Pty Limited
Citicorp Nominees Pty Limited
Citicorp Nominees Pty Limited
Number
Percentage
17,473,715
14,828,304
11,348,200
10,111,620
7,951,853
6,603,266
6,300,000
4,750,000
3,764,071
2,929,995
2,751,062
2,105,384
1,993,929
1,258,438
1,197,502
1,150,000
1,000,000
998,845
970,442
911,022
13.13
11.14
8.53
7.60
5.97
4.96
4.73
3.57
2.83
2.20
2.07
1.58
1.50
0.95
0.90
0.86
0.75
0.75
0.73
0.68
100,397,648
75.43
Number of Holders of Equity Securities
Equity securities include shares, units, options over issued or unissued securities, rights to any one of the former securities and
convertible securities.
Ordinary Share Capital
133,090,865 fully paid ordinary shares are held by 3,742 individual shareholders as at 6 March 2009.
All issued ordinary shares carry one vote per share.
Options
1,046,472 options were held by 93 individual option holders as at 31 December 2008. These options do not carry a right to vote
and are not listed on the ASX.
Since 31 December 2008 206,672 options have lapsed.
54
Additional Information as at 6 March 2009 (continued)
Distribution of Holders of Equity Securities
Auditors
As at 6 March 2009
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
Substantial Shareholders
As at 6 March 2009
National Nominees
Limited
Intuit Ventures Inc
JP Morgan Nominees
Australia Limited
Clive Rabie
HSBC Custody
Nominees (Australia)
Limited
Ordinary Shares
Options
844
1,801
537
511
49
3,742
1
9
35
22
0
67
Ordinary Shares
(Number)
Ordinary Shares
(%)
17,473,715
14,828,304
11,348,200
10,508,000
10,111,620
13.13
11.14
8.53
7.89
7.60
Principal Registered Office
Ground Floor, 35 Saunders Street
Pyrmont NSW 2009
Tel: (02) 9577 5000
Principal Administration Office
Ground Floor, 35 Saunders Street
Pyrmont NSW 2009
Tel: (02) 9577 5000
Share Registry
Computershare Investor Services Pty Limited
Level 3
60 Carrington Street
Sydney NSW 2000
Tel: (02) 8234 5000
Stock Exchange Listings
Reckon Limited’s ordinary shares are listed on the Australian
Stock Exchange Limited under the symbol ‘RKN’.
Deloitte Touche Tohmatsu
225 George Street
Sydney NSW 2000
Company Secretary
Mr Myron Zlotnick
Annual General Meeting
The Annual General Meeting for Reckon Limited will be held
on Tuesday 19 May 2009 at 10:00am at 35 Saunders Street,
Pyrmont NSW. If you are unable to attend, you are invited to
complete the Proxy Form included with your Notice of Meeting.
The completed Proxy Form must be received no later than 48
hours before the Annual General Meeting.
Important Information – Corporate Notices
Securityholders will be aware that recent legislative changes
have impacted the options to receive statutory corporate
notices and reports. In the interest of cost saving and the
environment (every little bit helps), we encourage you to opt
in to receive all notices and reports electronically. Please go
to: www.computershare.com.au and follow the prompts to
register your opting in to receive ALL NOTICE AND REPORTS
IN ELECTRONIC FORMAT.
To register to be notified by email when the Annual Report and
other Announcements are available online:
•
Visit the share registry at www.computershare.com
•
Click on ‘Securityholders’
•
Click on ‘Elect to receive eCommunications from your
companies’
•
Type ‘RKN’ in the Company Code field
•
•
You will need to enter your personal security information:
Holder Identification Number (HIN) or Securityholder
Reference Number (SRN); family or company name,
postcode or country (if outside Australia); and click ‘Submit’
After you have entered your email address and selected the
publications you wish to receive, a confirmation email will
be sent to you
Should you have any further enquiries, contact the Registry on
1300 855 080 or +61 3 9415 4000 (if outside Australia). For
web enquiries, please send an email to
web.queries@computershare.com.au.
Alternatively, email your full name and address of the
securityholder to shareholders@reckon.com.au to receive the
Annual Report, corporate and statutory notices electronically.
55
56 | Reckon
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