1
rhipe.com
rhipe 2021 Annual Report
Appendix 4E
rhipe Limited
ABN: 91 112 452 436
1. Reporting Period
Report for the financial year ended: 30 June 2021
Previous corresponding period is the financial year ended: 30 June 2020
2. Results for announcement to the market (Item 2)
$’000
Revenues from ordinary activities (Item 2.1)
Up 20% to
66,817
Profit from ordinary activities after tax attributable to
members (Item 2.2)
Up 46% to
7,008
Net Profit for the period attributable to members (Item 2.3)
Up 46% to
7,008
Dividends (Items 2.4)
Amount
per security
Franked amount
per security
Interim Dividend
1.5 cent
1.5 cent
Final Dividend
-
-
Record date for determining entitlements to a dividend
(Item 2.5)
-
Brief explanation of any of the figures reported above
necessary to enable the figures to be understood (Item 2.6)
Refer to attached financial report
3. Statement of Comprehensive Income (Item 3)
Refer to attached financial report
4. Statement of Financial Position (Item 4)
Refer to attached financial report
5. Statement of Cash Flows (Item 5)
Refer to attached financial report
6. Statement of Changes in Equity (Item 6)
Refer to attached financial report
7. Dividends (Item 7)
2021 interim dividend of 1.5 cents per share was paid on 22 March 2021. No full-year dividend has been declared for
2021.
2
rhipe 2021 Annual Report
8. Dividend Reinvestment Plan (Item 8)
There was no dividend reinvestment plan in operation which occurred during the financial year.
9. Net Tangible Assets per Security (Item 9)
2021
2020
Net tangible asset backing per ordinary security 1
$0.22
$0.32
1 Right of use assets excluded
10. Details of Entities over which Control has been Gained or Lost during the Period (Item 10)
Refer to attached financial report
Control gained over entities/acquisitions Name of entities
Date(s) of gain of control rhipe
Parallo Limited
30 September 2020
The Trustee for Parallo Unit Trust
30 September 2020
emt Distribution Pty Ltd
30 April 2021
emt Distribution Singapore Pte Ltd
30 April 2021
Loss of control of entities/disposals Name of entities
Date(s) of loss of control
None
11. Details of Associates and Joint Venture Entities (Item 11)
Not applicable
12. Details of Significant Information Relating to the Entity’s Financial Performance and Financial Position (Item 12)
Refer to attached financial report.
13. For Foreign Entities, which set of Accounting Standards is Used in Compiling the Report (Item 13)
Not applicable
14. Commentary on Results for the Period (Item 14)
Refer to attached financial report.
15. Audit of the Financial Report (Items 15 to 17)
Not applicable
2021 Annual Report
Table of Contents
Chairman and CEO Report
6
2021 Financial Report
10
Directors’ Report
14
Remuneration Report
27
Auditor’s Independence Declaration
49
Consolidated Statement of Comprehensive Income
50
Consolidated Statement of Financial Position
51
Consolidated Statement of Changes in Equity
52
Consolidated Statement of Cash Flows
53
Notes to the Financial Statements
54
Directors’ Declaration
107
Independent Auditor’s Report
108
Additional Information for Listed Public Companies
114
rhipe 2021 Annual Report
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rhipe.com
Cloud Licencing and Services across
the Asia Pacific Region
9
2
7
6
164
43
287
11
4
4
537
EMPLOYEES
34%
GROWTH
rhipe 2021 Annual Report
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Financial Highlights
$377.0m
Sales – software products
and services (1)
$66.8m
Group Revenue
$18.0m
Group Operating Profit (1)
$16.6m
Group EBITDA
$53.8m
Group Cash Balance
16%
GROWTH
20%
GROWTH
31%
GROWTH
44%
GROWTH
$7.14m
REDUCTION
$0.1
$5.0
$7.8
$12.8
$13.8
$18.0
$137.0
$196.6
$252.5
FY16
FY17
FY18
FY19
FY20
FY21
FY16
FY17
FY18
FY19
FY20
FY21
FY16
FY17
FY18
FY19
FY20
FY21
$1.5
$6.4
$10.0
$11.6
$16.6
$4.0
FY16
FY17
FY18
FY19
FY20
FY21
FY16
FY17
FY18
FY19
FY20
FY21
$325.2
$377.0
$157.0
$13.8
$22.7
$25.5
$60.9
$53.8
$19.8
$26.2
$35.6
$48.4
$55.8
$66.8
$29.0
1 Non-AASB measure. Refer to Note 2 in the Financial Statements for Operating Profit reconciliation.
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Cloud First
Channel First
rhipe is a born in the cloud, value add
software distributor, supporting approximately
3,500 IT resellers across Asia Pacific. Our
business model is focused on pay-as-you-
consume cloud software subscriptions and
maximising our customer’s return from their
investment in cloud software.
Value added services for our resellers including
technical advice and support, marketing, cloud
management services and 24/7 support-
as-a- service.
These services are aimed at driving the
ongoing growth in consumption of cloud
software subscriptions.
Our Value Proposition
rhipe 2021 Annual Report
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CLOUD LICENSING
Software sold and implemented by IT service providers.
Monthly pay as you go cloud licencing subscriptions.
SERVICES
Professional services and support people to help
Vendors and Service Providers with technical needs.
CLOUD OPERATIONS
Includes back-office support locations to support
Cloud Licensing and Services. Internally developed
software subscription management platform (“PRISM”).
Cloud first, digital first marketing to drive demand for
channel partners.
Strategic Operating Divisions
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Chairman and CEO Report
Dear Shareholders,
The 2021 Financial Year (“FY21”) will long
be remembered as a time dominated by
news of the COVID-19 pandemic. As
the year commenced, our colleagues in
Melbourne were in a COVID-19 related
lock-down that did not end until October
26, 2020. Fast forward nine months to
the time of writing this shareholder update,
and Sydney is now in its ninth week of
an as-yet-undetermined COVID-19 lock-
down period with other states going in
and out of lock-down. The impacts of
COVID-19 on Australian citizens and the
Australian economy, however, pales into
insignificance when compared to some
other countries in which rhipe operates.
Singapore, Malaysia, Thailand, Indonesia,
Philippines, South Korea, Japan, Sri Lanka,
and other ASEAN countries that rhipe
services, all suffered significant impacts
in terms of loss of life, healthcare system
overload, reductions in GDP, and loss of
jobs. To our Asian staff and partners,
in particular, we say thank you for your
commitment and loyalty to rhipe during
this most challenging of years.
On a more positive note, the impacts of
COVID-19 did highlight the resilience of
rhipe’s subscription-based cloud licensing
and services business. Our Group again
delivered strong results with Sales of
$377m, up 16% year on year, and
revenue of $66.8m, up 20% year on year,
compared to 16% in the prior comparative
year. Furthermore, solid cost control
during the period led to a 31% increase
in operating profit of $18m and a 44%
increase in EBITDA of $16.6m compared to
the prior financial year. This was achieved
despite ongoing investment in growth with
staff headcount increasing from 400 to
537 (up 34%) during the financial year.
rhipe overview
rhipe is a leading wholesale provider
of subscription-based cloud licences,
infrastructure and services in the Asia
Pacific region (“APAC”). rhipe’s ~3,500
customer resellers are Information
Technology (“IT”) service providers that
have a need to move their own end-user
clients onto cloud-based technology.
rhipe enables these resellers with
marketing, enablement services, sales and
technical support plus subscription billing
capabilities.
rhipe is currently the only globally-
managed Microsoft Indirect Cloud Solutions
Provider (CSP) headquartered in Asia
Pacific, with approximately 76% of rhipe
revenue derived from Microsoft related
software licenses, cloud infrastructure,
professional services-as-a-service, and
technical support activities. rhipe also
has strong relationships with a number of
other global software companies including
VMWare, Citrix, RedHat, Veeam, Acronis
and Zimbra.
rhipe strategy
Over the past three years, rhipe has
embarked on a “Grow and Diversify”
strategy based on four key pillars:
1. Geographical expansion in Asia Pacific to:
a. Cement our strategic importance
to key vendors, and
b. Reduce the threat from local
competitors in any one country.
2. Vendor expansion to find new
opportunities for growth outside of our
core Microsoft related business.
3. Growth of value added services to IT
Resellers, with marketing, consulting, and
support as a service to:
a. Provide more value and
differentiation to rhipe’s resellers,
and
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b. Build high-margin sources of
revenue that are rhipe-owned and
managed.
4. Intellectual Property investment to
provide capabilities that resellers cannot
get from another rhipe competitor:
a. rhipe’s platform for recurring
subscription management (PRISM),
and
b. rhipe’s SmartEncrypt product which
will commercially launch in the
FY22 financial year.
The strategic investments in each of
these growth pillars have been aimed
at continuing rhipe’s revenue growth
and reducing the impact of any margin
decline that may occur due to increased
competition or reduced vendor incentives
in rhipe’s traditional licensing business.
People and Culture
With the addition of 137 new staff
across 10 different countries in 2021,
rhipe continues to focus on people and
culture (P&C) as a key staff retention and
engagement measure. During the financial
year, rhipe launched a new One Team
Culture Council (OTCC) to garner staff
feedback and launch new P&C initiatives.
Our staff surveys indicate strong overall
engagement, ongoing support for
rhipe’s management, and very positive
sentiment in relation to rhipe’s response to
COVID-19. However, despite many staff
members enjoying the benefits of working
from home, there is also ongoing concern
about the impact that this has on inter-
team collaboration and communication.
rhipe has recently launched a new flexible
and hybrid working framework that
will hopefully allow us to address these
issues as and when different government
authorities allow a return-to-work for non-
essential employment functions.
FY21 Highlights
Adoption of public and private cloud
computing continued to grow across
Asia Pacific in FY21 despite the impact
of COVID-19 on many businesses. While
some countries and some businesses were
hurt badly due to a lack of tourism, a
slowdown in hospitality, or a reduction in
consumer demand, others boomed due to
the implementation of work-from-home
technology, or from increased demand
for products and services that are more
desirable for people who are spending
more time at home. It seems that with
almost every crisis there are winners and
losers. On the other hand, many of the
companies who have boomed due to
COVID-19 may struggle to continue with
this growth as the crisis comes to an end.
During the FY21, rhipe added annual sales
growth of over 33% for Microsoft Office
365 and 26% for Microsoft Azure. Billable
end-user Microsoft Office 365 seats grew
from 630,000 to 840,000, with growth in
Microsoft Azure end customers from 1,700
to 2,200 in the same period.
The FY20 launch of rhipe Japan via an
80% owned joint-venture (JV) with a
leading Microsoft partner, Japan Business
Systems Co.,Ltd (JBS) continued to make
progress in FY21 despite the significant
impact of COVID-19 on Japanese business
operations. Microsoft Office 365 seats
in Japan grew from 200 to 13,400
over the course of the year with sales
increasing from $14k to $2.3m from
approximately 30 transacting partners.
While it is still very early days for rhipe
Japan, we do believe that the ongoing
investment in our Japanese JV will lead to
significant business growth for rhipe in the
longer term.
During FY21, rhipe also launched a number
of new software vendor programs on
behalf of Zoom and Adobe in South East
Asia, with Access4, Nerdio, RuneCast,
ESET, and Octopus Cloud across the ANZ
and Asian rhipe locations. While these
vendors have not added material sales
or revenue to rhipe during the financial
year, the ongoing investment in vendor
diversification is planned to contribute to
rhipe’s growth in future financial years.
rhipe 2021 Annual Report
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During FY21 rhipe also completed
two strategic business acquisitions as
outlined below:
Parallo
In September 2020, rhipe acquired New
Zealand-based Azure and specialist IT
services provider Parallo for an initial
purchase price of AUD $4.3M plus a
two year earn out. Parallo helps rhipe to
diversify into deeper cloud services and
managed services that can complement
and deliver more value to rhipe’s reseller
community. Parallo helps Independent
Software Vendors (ISVs), Software as
a Service (SaaS) businesses and other
scale-based cloud partners to manage
security, performance, availability and
cost, including builds, deployments,
upgrades and many other related services.
The end goal is to enable companies to
focus on their own software applications
with Parallo taking care of the cloud
workload management.
The acquisition of Parallo contributed
towards rhipe winning Microsoft Asia
Pacific Services partner of the year for the
first time ever in January, 2021. Despite
only being owned by rhipe for nine
months of the FY21 financial year, Parallo
contributed $721k to rhipe’s operating
profit in line with the acquisition business
case. The business is expected to grow
strongly with further investment in FY22
and beyond.
Emerging Market Technologies (EMT)
At the end of April 2021, rhipe acquired
EMT Australia and EMT Singapore
(together “EMT”) for up-front cash based
consideration of AUD $11M. EMT is
a cyber security distribution specialist
that focuses on both on-premise and
cloud-based security solutions aimed
at protecting companies against cyber
security attacks. EMT operations in
Australia and Asia has 22 employees and
sales of $20m across these locations.
rhipe intends to acquire EMT, Middle East
Operations in FY22. The acquisition of EMT
is aimed at providing a security-focused
division within rhipe that can add expertise
for security-based products including
rhipe’s own SmartEncrypt product.
Despite only being owned by rhipe for two
months of the FY21 financial year, EMT
contributed $940k to rhipe’s operating
profit. The business is expected to grow
strongly with further investment planned in
FY22 and beyond.
Future Outlook
rhipe’s traditional licensing business is
expected to continue showing strong
sales growth in FY22 and beyond due to
ongoing demand for cloud-based software
and infrastructure and a full year’s
contribution from recent acquisitions.
Licensing margin decline in recent years
(from 15.9% in 2019 to 13.6% in 2020 and
13% in 2021) is likely to continue to some
extent as a result of:
a. Increased competition from large
traditional software distributors who
are now moving more into cloud-
based subscription licensing and are
leveraging their scale,
b. Lower vendor incentives as their
products become more mainstream
with more distributors and higher sales
results,
c. Increased bargaining power from large
resellers as their spend with rhipe
grows, and
d. The relatively faster rhipe growth
in lower margin geographies (Asia)
and lower margin product offerings
(Microsoft Azure).
rhipe’s plan to counteract this margin
pressure are outlined in the strategy
section above but broadly involve
investments in more geographies, more
vendors, more value-added services, and
more intellectual property.
rhipe’s services and rhipe’s Parallo and
EMT business units are all expected
to continue growing strongly without
the same margin pressure that may be
expected in rhipe’s traditional software
licensing business.
rhipe 2021 Annual Report
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Crayon Acquisition Offer
On 6 July 2021, rhipe entered into a
binding Scheme Implementation Deed
with Crayon Group Holding ASA (“Crayon”)
under which it is proposed that Crayon
will acquire 100% of the shares in rhipe
by way of a Scheme of Arrangement (“the
Scheme”). Crayon is a global leader in
software asset management and cloud
optimisation localised in over 35 countries,
with its head office in Oslo, Norway, with
revenues of approximately Kr 19.5 billion
(AU$3 billion).
rhipe shareholders are to receive Scheme
Consideration of $2.50 cash per share
(reduced to the extent of any Permitted
Special Dividend). In addition, as part of
the Scheme Consideration, rhipe intends
to declare a fully franked special dividend
of up to 13 cents per share (“Permitted
Special Dividend”) to be paid on or shortly
before the implementation date of the
Scheme, conditional on the Scheme being
approved and becoming Effective.1
The rhipe Directors unanimously
recommend that rhipe shareholders vote
in favour of the Scheme at the Scheme
Meeting in the absence of a superior
proposal and subject to the Independent
Expert concluding (and continuing to
conclude) that the Scheme is in the
best interests of rhipe’s shareholders.
Subject to the same qualification, each
Director of rhipe who owns or controls
any rhipe shares intends to vote those
shares in favour of the Scheme at the
Scheme Meeting.
It is anticipated that a Scheme Booklet in
relation to the proposed Scheme will be
sent to rhipe shareholders in September
2021 and that rhipe shareholders will vote
on the scheme in October 2021.
Closing Remarks
In last year’s annual report we noted
that rhipe continues to invest in public
cloud programs such as Microsoft CSP,
in 24x7 support services, and in other
rhipe services and solutions. While not
all of these investments have paid off,
others have performed very well. And,
without investment in these new business
opportunities, rhipe would have been
much more exposed to the impact of our
global pandemic. In FY21 this statement
still holds true. The business continues
to be resilient and despite some margin
decline in our traditional cloud licensing
sales, the rhipe services business and our
recent acquisitions of Parallo and EMT
have all been strong financial contributors.
On behalf of the rhipe Board and
management team we would like to thank
our dedicated staff for a fantastic FY21.
It has been an incredibly difficult year in
the midst of an ongoing global pandemic,
particularly so for our team members in
Asia. Our deepest sympathies for the
hardship endured and thanks to you all for
your ongoing dedication and hard work.
To our shareholders we continue to say
thanks for your ongoing support.
Best Regards
1 The rhipe Directors will determine (in their absolute discretion) whether to pay any Special Dividend after assessing the rhipe Group’s cash position and
available funding at the applicable time. Whether a shareholder will be able to capture the full benefit of the franking credits will depend on their individual tax
circumstances. If a fully franked special dividend of 13 cents per share was declared and paid, this would reduce the Scheme Consideration to $2.37.
Dominic O’Hanlon
Managing Director
and CEO
Gary Cox
Chairman
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OPERATING AND
FINANCIAL REVIEW
rhipe Limited and Controlled Entities
Principal Activities and Significant
Changes in Nature of Activities
The principal activity of rhipe Limited
(“rhipe” or the “Company”) and controlled
entities (the “Group”) during the financial
year was the sale and support of
subscription software licences to ~3,500
IT service provider resellers in the Asia
Pacific region, who support the small and
medium sized businesses in this region.
rhipe has established sales momentum
driven by its vision of “Expertise that
Empowers” and has become one of the
leading Asia Pacific platforms for monthly
Pay As You Go (PAYG) cloud software
licence subscriptions.
International software vendors such as
Microsoft, VMWare, Citrix, Red Hat, Trend
Micro and Veeam, all rely on rhipe’s
ecosystem of partners, technical resources
and licence subscription management
platform to build, grow and support
the consumption of their cloud licence
programs. In addition, rhipe also provides
value add services to its resellers in Asia
Pacific including rhipe’s 24x7 technical
support desk, consulting services
and migration to the cloud services.
Our technical support offering is also
supporting one of rhipe’s software vendors
to service the vendor’s end customers.
Operating Results and Review of
Operations for the Year
Although the 12-month period to 30 June
2021 (“FY21”) has been impacted by the
global pandemic crisis, rhipe has continued
to invest in operations and people that are
focused on the IT industry transition to
the cloud business model. rhipe has three
integrated business divisions;
1. Cloud Licencing (private, public and
hybrid cloud IT environments),
2. Services (consulting and support
services), and
3. Operations (subscription billing,
provisioning, support and marketing).
rhipe has taken much of the know-how
from many years of experience in software
subscription management to build rhipe’s
own subscription management platform
known as PRISM. Our platform, when
combined with rhipe’s other value-added
services, such as technical support, provide
a strong differentiator in the market and
will allow rhipe to continue building on its
strong market position in the countries in
which rhipe operates.
rhipe Licencing
Whereas rhipe has provided licences
to private-cloud data centers for more
than 17 years, rhipe only launched its
public cloud business in the financial
year to 30 June 2016 (“FY16”). rhipe
did this in anticipation of an industry
shift away from on-premise and private
data centre software implementations
towards hyper-scale public cloud software
and infrastructure. In FY16 rhipe was
appointed by Microsoft as an Indirect
Cloud Solutions Provider (“CSP”) to build
a channel of resellers for Microsoft’s key
public cloud products (Microsoft Office 365
and Microsoft Azure). Growth in Office
365 (“O365”) and Azure has continued
to underpin the growth in revenue and
profit of the Company. In FY21, rhipe
experienced growth in O365 sales of 33%
with sales of Microsoft Azure growing at
more than 26% despite the impact of the
pandemic crisis on small and medium sized
enterprises in our geographic footprint.
Sales of Microsoft’s public cloud products
now represent 41% of total licencing sales
and delivered around two-thirds of the
Company’s licencing sales growth in FY21.
2021 Financial Report
rhipe 2021 Annual Report
11
At the beginning of FY21, rhipe’s partners
were consuming approximately 630,000
licences or ‘seats’ of O365 per month. As
at 30 June 2021 the monthly consumption
of O365 seats was 840,000 seats, an
increase of 33% in paid seats in the last 12
months or 17,500 new seats per month.
Annualized Run Rate (“ARR”) Sales from
CSP is now over $158m with Office 365
contributing $109m and Azure more than
$49m. This compares to total ARR Sales
from CSP of $123m twelve months ago
and $80m at June 2019.
Although Microsoft products deliver around
76% of our licencing sales, rhipe continues
to invest in other software vendors
including VMWare, Citrix, Veeam, Trend
Micro and Redhat. Our strategy is to invest
and grow these areas of the business
as well as add to our portfolio of other
software vendors.
rhipe Services
rhipe Services includes the provision of
a number of value-add services aimed
at enhancing the services offered to our
partners and their end customers. These
services include a technical consulting
group focused on providing value add
services centered on products like
Microsoft SharePoint and Azure, Microsoft
Dynamics, Security and a large 24x7
support team to assist rhipe’s resellers and
vendors.
The consulting team helps with technical
implementation services to deepen our
relationships with resellers while also
assisting to drive the ongoing sale of
cloud software licences. Over the last
12 months we have continued to invest
and refine the strategy for our consulting
services especially in relation to public
cloud growth opportunities for products
such as Microsoft Azure and Microsoft
Dynamics365.
The 24x7 technical support team
continued to expand in FY21 as a result
of the growth in a support contract for
one of rhipe’s software vendors. At the
end of FY21, rhipe had 239 employees
in this support team, primarily based in
Philippines, compared to 156 employees at
June 2020.
In FY22 we intend to continue to invest
in the service offering provided by rhipe
Services and expansion of the service
offering into related areas. Our strategy is
to grow the share of the Group’s revenue
and profitability derived from these value-
add services.
Overall Results
The results presented in this financial
report reflect the operations of the Group
from 1 July 2020 to 30 June 2021.
Financial Summary
($’000)
FY21
FY20
Change
Sales - Software
Products & Services 1
376,980 325,201
16%
Revenue
66,817 55,828
20%
Gross Profit
60,385 52,380
15%
Operating Expenses
(42,375) (38,625)
10%
Operating Profit 1
18,010
13,755
31%
Operating Profit
(excluding Japan)
19,057
15,009
27%
Reported EBITDA
16,613
11,566
44%
Profit After Tax
7,008
4,799
46%
1 Non-AASB measure. Refer to Note 2 in the Financial Statements
for Operating Profit reconciliation.
For FY21, the Group reported another
increase in profitability despite the
challenging economic conditions caused
by the worldwide pandemic with operating
profit of $18m, an increase of 31% from
the prior year. The growth in profitability
of the Group has been driven by:
1. Investments made in the business
over the past few years, notably
in our public cloud capabilities, our
Asian operation and our 24x7 support
activities, all of which have produced
strong sales and revenue growth in
FY21;
2. Contribution from our newly acquired
businesses Parallo and EMT;
3. Attracting new customers or partners
into the rhipe ecosystem to increase
our customer base in all countries; and
rhipe 2021 Annual Report
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4. Cautious cost management which has
allowed us to continue to invest in a
number of areas while also delivering
an increase in profitability.
Sales
FY21 sales growth of $52m, compared
to $56m in FY20, was driven by the
areas of the business where we have
made material investments, notably our
public cloud business with Microsoft CSP
(Microsoft Office 365 and Azure) and
professional and value-add services. Over
the last 12 months, sales from Microsoft
CSP grew by 31% YoY, from $33m in
FY18, $65m in FY19, $110m in FY20 and
to $144m in FY21. The growth in Microsoft
CSP delivered two-thirds of the licensing
sales growth in FY21.
Growth from our non-Microsoft vendors
was 5.5% YoY, driven by continued focus
on investing in our capabilities, marketing
of these complementary products plus the
contribution from EMT.
The rhipe Services business delivered
growth in sales of 52% in FY21 compared
to 40% in FY20 driven by the acquisition
of Parallo and growth in demand for
rhipe Services.
Revenue
Growth in Group revenue for FY21 of
20% was driven by growth in sales in our
Services business and contribution from
Parallo and EMT businesses acquired in
October 2020 and May 2021 respectively.
Excluding the impact of the acquisition
revenue growth was around 7%. Decline
in Licensing sales margin from 13.6% to
13% in FY21 was due to lower standard
software vendor rebates and lower
strategic growth rebates received from a
key software vendor. In addition, Licensing
sales margin also declined due to growth
in the lower margin Asia region and also
strong growth in Microsoft Azure which is
typically at a lower margin than software
licences. Growth in rhipe Services revenue
in FY21 was $7m or 52%.
Operating Expenses
Operating expenses in FY21 increased
by $3.8m or 10% year on year, with
the majority of this increase driven by
investment in front office headcount to
help support the sales and revenue growth
experienced by the Licencing business and
also additional investment into building our
Services business. The number of full-time
equivalent employees (FTE) across the
Group has increased from 400 at 30 June
2020 to 537 at 30 June 2021 representing
34% increase Year on Year.
It should also be noted that we have
continued to include property lease costs
in “Operating Expenses” whereas in our
Consolidated Statement of Comprehensive
Income, the property lease costs are
included in amortisation cost line and
interest from lease liabilities in finance
cost line in accordance with the revised
AASB 16.
Operating Profit and EBITDA
The table below outlines the reconciliation
of operating profit to reported EBITDA for
the year ending June 30, 2021 compared
to the prior year:
($’000)
FY21
FY20
Operating profit 1
18,010 13,755
Less
Foreign exchange (loss) / gain
(234)
(97)
Restructuring and transaction costs
(597) (1,068)
Share-based payments expense
(non-cash)
(2,342)
(3,112)
Impairment expense
- (3,425)
Impact of AASB 16 - Lease
Payments
1,776
2,013
Fair value adjustment to deferred
consideration
-
3,500
Total adjustments
(1,397) (2,189)
EBITDA
16,613 11,566
Interest income
108
111
Interest on leases
(92)
(142)
Non-controlling interest
(287)
(216)
Impact of AASB16 - Lease
depreciation
(1,684) (1,872)
Depreciation and amortisation
(3,964) (2,297)
Profit/(loss) before tax
10,694
7,150
Tax expense
(3,686) (2,351)
Profit after tax
7,008
4,799
1 Non-AASB measure. Refer to Note 2 in the Financial Statements
for Operating Profit reconciliation.
rhipe 2021 Annual Report
13
Operating profit in FY21 grew by $4.3m
or 31% year on year with EBITDA growing
by $5m or 44% over the same period.
The growth in both operating profit
and EBITDA was substantial despite
the challenging economic environment
caused by the global pandemic and the
investment that the Company is making in
our professional services and CSP. Parallo
contributed $721k and EMT contributed
$940k to rhipe’s operating profit in FY21.
Significant non-operating cost include:
• Foreign exchange losses of $245k
compared to a loss of $97k in FY20
driven by weakening of US dollar
• Transaction cost of $597k relating to
due diligence cost incurred in relation
to FY21 acquisitions
• Share-based payment expenses relate
to FY19, FY20 and FY21 Long Term
Incentives.
Investment & Capital Expenditure
rhipe continues to invest in its operations
and people in areas that management
believe will provide future profitable
sustainable competitive advantages.
In the 12 months to 30 June 2021, the
Group invested $1m in fixed asset spend,
down from $1.4m in previous year in
which majority of investment related to
our new office in the Philippines.
In addition, the Company invested $1.6m
in developing software intangible assets
with around $0.8m invested in our cloud
software encryption product SmartEncrypt
and $0.8m invested in PRISM our software
subscription management platform.
Cash & Returns to Shareholders
At 30 June 2021, the Group had cash of
$53.8m compared to a cash balance of
$60.9m at 30 June 2020.
During the year the company acquired
Parallo and EMT and paid $15.3m in cash
for these acquisitions. Excluding the net
cash impact of acquisitions the Company’s
cash position increased by $6.4m or 10%
compared to 30 June 2020.
The $6.4m increase in cash resources
excluding acquisitions is after distributing
$5.6m to shareholders via dividends,
investment in SmartEncrypt and PRISM
of $1.6m and investment in fixed assets
of $1m. Net cash-flow from operating
activities in FY21 increased broadly in line
with our operating profit for the year from
$13.7m in FY20 to $19.9m in FY21 despite
the economic turmoil inflicted by the
global pandemic.
As part of the Scheme Consideration,
rhipe intends to declare a fully franked
special dividend of up to 13 cents per
share to be paid on or shortly before
the implementation date of the Scheme,
conditional on the Scheme being approved
and becoming Effective.2
2 The rhipe Directors will determine (in their absolute discretion) whether to pay any special dividend after assessing the rhipe Group’s cash position and
available funding at the applicable time. Whether a shareholder will be able to capture the full benefit of the franking credits will depend on their individual tax
circumstances.
rhipe 2021 Annual Report
14
rhipe.com
Your Directors present their report on the Group consisting of rhipe Limited and its controlled
entities for the financial year ended 30 June 2021. The information in the preceding Operating
and Financial Review forms part of this Directors’ Report for the financial year ended 30 June
2021 and is to be read in conjunction with the following information.
General Information Directors & other Executives
The following people were Directors of rhipe Limited during or since the end of the financial
year up to the date of this report:
y Gary Cox
y Dominic O’Hanlon
y Dawn Edmonds
y Mark Pierce
y Michael Tierney
y Inese Kingsmill
y Olivier Dispas
Information relating to Directors, other Executives and Company Secretary
Gary Cox, Non-executive Chairman
Experience and Qualifications
Appointed 26 March 2019
Gary Cox has over 35 years of global experience in the technology industry across the UK,
USA, Asia, Japan and ANZ in senior leadership roles with Microsoft, EMC and Oracle. Recently
Mr Cox has held both strategic consulting and board appointments for technology organisations
based in Australia with global growth focus and leveraging both his broad business
management and extensive experience in cloud and managed services.
His last position at Microsoft was VP Enterprise and Partner business for Asia (Japan, India,
APAC, Hong Kong, Taiwan) excluding China. He retained responsibility for all key industry
segments throughout Asia across 16 subsidiaries which encompassed all Microsoft’s large
customers across the commercial and public sector markets.
Interest in Shares, Options and
Performance rights
None
Special Responsibilities
Remuneration and
Nomination Committee
and People and Culture
Committee
Directorships held in other listed
entities during the three years prior
to the current year
None
Directors’ Report
rhipe 2021 Annual Report
15
Dominic O’Hanlon, Managing Director & Chief Executive Officer
Experience and Qualifications
Appointed as Managing Director 15 June 2015, Chief Executive Officer from 5 August 2014
Mr O’Hanlon is a well-known and successful technology entrepreneur who has over 25
years’ experience in software development, marketing, sales, implementation and support.
Dominic has served in prior roles as CEO, Chief Strategy Officer, NED and Chairman for
numerous high growth technology companies. Dominic is a Fellow of the Australian Institute of
Company Directors.
Interest in Shares, Options and
Performance rights
2,657,840 ordinary shares and
1,429,707 performance rights
Special Responsibilities
None
Directorships held in other listed
entities during the three years prior
to the current year
None
Dawn Edmonds, Non-executive Director
Experience and Qualifications
Appointed 10 April 2014. Ceased Interim Chief Executive Officer on 5 August 2014 upon
appointment of Dominic O’Hanlon.
Dawn Edmonds is one of the founders of rhipe (then NewLease) and has nearly 20 years’
experience in the IT industry. Until the end of 2016, Dawn served as the Chief Operating
Officer for the Company and was responsible for the management of systems, process and
performance as well as the day-to-day operations of the organisation. Dawn has led the
development and implementation of processes and systems that have been recognised as best
practice by vendors. Prior to starting NewLease in 2003, she was instrumental in building two
other successful start up businesses.
Dawn has received industry awards for Women in IT and Entrepreneurship and continues to be
passionate about diversity in the workplace and the IT industry.
Interest in Shares, Options and
Performance rights
2,702,294 ordinary shares
Special Responsibilities
Remuneration and
Nomination Committee
(Chair) and People and
Culture Committee
Directorships held in other listed
entities during the three years prior
to the current year
None
rhipe 2021 Annual Report
16
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Mark Pierce, Non-executive Director
Experience and Qualifications
Appointed 10 April 2014
Mr Pierce has over 25 years’ corporate finance and business experience gained from senior
positions held at Westpac, Macquarie Bank, Rabobank and Credit Suisse. Since 2009, he has
worked as an independent advisor and company director. In this role, he has extended his
experience to include a deep understanding of business and product development, company
operations, and corporate governance. In 2016, Mr Pierce co-founded a finance business,
offering specialist finance to the medical sector. This business has grown to over $100m of
assets and continues to grow its assets and profitability with significant institutional funding
support. Mark is a Graduate of the Australian Institute of Company Directors.
Interest in Shares, Options and
Performance rights
320,000 ordinary shares
Special Responsibilities
Audit and Risk Committee
(Chair)
Directorships held in other listed
entities during the three years prior
to the current year
None
Michael Tierney, Non-executive Director
Experience and Qualifications
Appointed 27 January 2017
Mr Tierney brings to the Company over 30 years’ experience in global financial markets, most
recently as Managing Director and Head of Leverage Finance at Credit Suisse for the Asia
Pacific region. Mr Tierney has worked across a wide range of industries and clients advising and
executing financing and M&A strategies to enable them to achieve their strategic objectives. He
has extensive governance experience fulfilling reporting requirements to APRA and ASIC and is
a Senior Fellow of FINSIA
Interest in Shares, Options and
Performance rights
1,757,191 ordinary shares
Special Responsibilities
Audit and Risk Committee
Directorships held in other listed
entities during the three years prior
to the current year
None
rhipe 2021 Annual Report
17
Inese Kingsmill, Non-executive Director
Experience and Qualifications
Appointed 15 April 2019
Over the course of a career spanning over 25 years, Inese Kingsmill has earned a reputation as
a growth focused and customer oriented business leader. Her end-to-end business experience
has spanned leadership across a broad spectrum of accountabilities at Microsoft, Telstra
and Virgin Australia. Transformation and growth have been common themes underpinning
Inese’s career.
In addition to her corporate career, Inese was a member of the Board and Chair of the
Australian Association of National Advertisers (AANA), Australia’s peak media, marketing and
advertising industry body. She also currently serves on the boards of HiPages Group Holdings
(ASX:HPG) Spirit Technology Solutions (ASX:ST1), NobleOak Life Limited (ASX:NOL) and
WorkVentures Limited.
With a personal interest in fostering innovation in Australian business, Inese is currently
director and co-founder of Breakfast Epiphanies Consulting Group, a privately held
management consulting practice engaged in digital transformation, strategy planning and
leadership development.
Interest in Shares, Options and
Performance rights
32,904 ordinary shares
Special Responsibilities
People and Culture
Committee (Chair) Audit and
Risk Committee
Directorships held in other listed
entities during the three years prior
to the current year
Spirit Technology Solutions
(Since July 2020);
HiPages Group Holdings
(Since November 2020);
NobleOak Life Limited
(Since December 2019)
Olivier Dispas, Non-executive Director
Experience and Qualifications
Appointed 15 April 2019
Olivier Dispas has spent more than 25 years in the IT industry, focused on channel and
partner strategy and sales leadership. Most recently, he led the worldwide partner sales and
strategy team focusing on licencing solution partners at Microsoft, driving deal and investment
negotiation and long-term growth planning. He serves as an advisor to the boards of Enlyft and
Quantiq, and continues to provide consulting and coaching services to partner organisations
within the industry.
Interest in Shares, Options and
Performance rights
None
Special Responsibilities
Remuneration and
Nomination Committee and
Audit and Risk Committee
Directorships held in other listed
entities during the three years prior
to the current year
None
rhipe 2021 Annual Report
18
rhipe.com
Mark McLellan, Chief Financial Officer and Chief Operating Officer
Experience and Qualifications
Mark joined rhipe in November 2016 as Chief Financial Officer and was appointed Chief
Operating Officer in March 2018. Mark qualified as a member of the Institute of Chartered
Accountants of Scotland in 1997 and also holds a B.A. (Hons) Degree in Economics. Mark has
previously worked for PriceWaterhouseCoopers and Ernst & Young. Prior to joining rhipe, Mark
worked for The Royal Bank of Scotland plc for 12 years latterly in their Strategy and Corporate
Development team. Mark has extensive experience in strategic planning, financial and capital
allocation modelling and mergers and acquisitions.
Interest in Shares, Options and
Performance rights
233,171 ordinary shares
824,294 performance rights
Special Responsibilities
None
Directorships held in other listed
entities during the three years prior
to the current year
None
Warren Nolan, Group Executive - Professional Services
Experience and Qualifications
Warren Nolan joined rhipe in 2005. Warren is an experienced senior executive with a deep
understanding of strategic planning, channel development, relationship management and sales
execution. He has been at the forefront of rhipe’s go-to-market strategy in the early stages of
rhipe’s evolution. Warren was inducted into the Australian Reseller News ICT industry Hall of
Fame in 2017, recognising his contribution to the development of Australian’s Cloud channel.
His previous experience includes senior management positions in the banking & finance,
manufacturing and recruitment sectors.
Interest in Shares, Options and
Performance rights
1,222,796 ordinary shares
653,378 performance rights
Special Responsibilities
None
Directorships held in other listed
entities during the three years prior
to the current year
None
Key Management Personnel
rhipe 2021 Annual Report
19
Chris Sharp, Group Executive - Products and Programs (resigned 28 February 2021)
Experience and Qualifications
Chris joined rhipe in October 2014 as Chief Strategy Officer and was appointed Group Executive
- Products & Programs in July 2019. Chris holds undergraduate qualifications from USQ and a
Master of Business Administration from AIB. Chris has worked in the IT industry for most of his
career and has held senior management roles for Red Hat and Microsoft prior to joining rhipe.
Chris has spent the last 17 years in Singapore helping Multinational companies like Microsoft
and rhipe to expand their partner channel throughout Asia. Chris has extensive experience in
channel strategy, partner planning and market development.
Interest in Shares, Options and
Performance rights
Nil reportable ordinary shares
and performance rights
Special Responsibilities
None
Directorships held in other listed
entities during the three years prior
to the current year
None
Marika White, Company Secretary, non KMP
Experience and Qualifications
Appointed 24 May 2019
Marika is Executive Director of Emerson Operations and provides tailored company secretarial
and compliance services to a range of public, private and not-for-profit organisations in
Australia and internationally. Marika has extensive company secretarial experience, both in
Australia and overseas, and is a member of the Australian Institute of Company Directors and
the Governance Institute of Australia.
Interest in Shares, Options and
Performance rights
None
Special Responsibilities
None
Directorships held in other listed
entities during the three years prior
to the current year
None
rhipe 2021 Annual Report
20
rhipe.com
Meeting of Directors
During the financial year, twenty seven
Meetings of Directors were held. The Audit
and Risk Committee, the Remuneration
and Nomination Committee and the
People and Culture Committee met during
the reporting period. Attendances by each
Director during the year were as follows:
Directors’ Meeting
Audit & Risk
Remuneration &
Nomination
People & Culture
Number
eligible to
attend
Number
attended
Number
eligible to
attend
Number
attended
Number
eligible to
attend
Number
attended
Number
eligible to
attend
Number
attended
Gary Cox
18
18
-
-
2
2
3
3
Olivier Dispas
18
17
3
3
2
2
-
-
Dawn Edmonds
18
18
-
-
2
2
3
3
Inese Kingsmill
18
17
3
3
-
-
3
3
Dominic O’Hanlon
18
15
-
-
-
-
-
-
Mark Pierce
18
18
3
3
-
-
-
-
Michael Tierney
18
17
3
3
-
-
-
-
rhipe Limited Risk Governance
Framework
The rhipe Limited risk governance
framework outlines how risk is managed
in the Company including maintenance
and ownership of the risk register and also
the Company’s risk appetite statement
is determined.
The risk governance framework is reviewed
on an annual basis by the Board to ensure
that the Company is operating pursuant to
the risk appetite set by the Board.
Overview of Board Responsibilities
for Risk Management
Below is a summary of the risk
management responsibilities of the Board:
y Identify and assess the principal risks
facing the Company
y Determine risks the organisation is
willing to take or “risk appetite”
y Ensure the risk profile of the Company
is kept under review and that measures
to manage or mitigate the principal risks
are taken
y Regular monitoring and review of
identified risks is undertaken
y Regular risk management
communication takes place to and from
the board
y Ensure that risk management is
incorporated within normal processes;
and
y Review, approve and monitor system
of internal controls including those
designed to ensure the integrity of
budgets, financial statements and other
reporting.
rhipe 2021 Annual Report
21
To assist the Board in discharging
its responsibilities in relation to risk
management, the Board has approved
this risk governance framework and has
delegated certain activities to the Audit
and Risk Committee. The Board has also
delegated various authorities to the
Managing Director and CEO, to enable the
management of the Company on a day to
day basis are carried out within authorities
approved by the Board.
GOVERNANCE
Board of Directors
Delegation of Authorities, Risk Appetite Statement and Internal Controls
Remuneration and
Nomination Committee
Audit and Risk
Committee
Operational
Management
Including Program
Operations
Central Support
Functions
Finance, IT, HR
and Legal
Audit
Activities
Including ISO 27001 audit
and external audit
An outline of the risk governance framework is shown below:
People and Culture
Committee
The Managing Director, CEO and the
Chief Financial Officer are responsible
for providing a declaration to the Board
regarding the half and full-year financial
statements in accordance with section
295A of the Corporations Act 2001 and
recommendation 4.2 of the ASX Principles
and for providing assurance to the Board
that the Company’s financial and non-
financial risk management and internal
control systems are operating effectively.
rhipe 2021 Annual Report
22
rhipe.com
Audit and Risk Committee
The Board has merged an Audit
Committee and Risk Committee into
Audit and Risk Committee on 1 July 2019
to assist the Board in its responsibilities
regarding continuous disclosure, financial
reporting, legal and regulatory compliance,
managing the Company’s risk register and
its internal control systems.
The Committee oversees the internal
controls, policies and procedures which the
Company has established to identify and
manage key risks and where required the
Committee will review matters on behalf
of the Board and make recommendations,
which are then referred to the Board
for resolution (if the committee has an
advisory role) or resolve matters entirely
(if the committee has been delegated
authority), which is then reported to the
Board.
The roles and responsibilities of the
Committee are set out in the Audit and
Risk Committee Charter.
The CEO, Managing Director, the Chief
Financial Officer, Chief Operating Officer,
Company Secretary, General Counsel,
external Auditor and any other relevant
third-party advisors or personnel may
also attend meetings of the Audit and
Risk Committee.
Risk Appetite
The Board also have in place a Risk
Appetite statement that is reviewed and
updated annually as part of the business
planning cycle and reflects the expected
financial performance of the Company in
the next 12 months.
The risk appetite takes into account
the level of risk and earnings volatility
that the Board is prepared to take to
achieve strategic objectives and offers
management practical guidance around
risk appetite when managing the business
on a day to day basis. In determining its
risk appetite, the Board considers:
y Updates provided by senior
management on key strategic and
operational matters
y The Group’s annual budgeting process
y Significant matters that have been
reserved for the Board
y Risk factors identified by the Board and
Management and included in the risk
register; and
y The reports of the external Auditor.
Key Material Business Risks
rhipe’s activities and the industry that
it operates within give rise to a broad
range of risks. These risks are identified
by the Board and Management and are
recorded in the Company’s risk register.
Each identified risk is allocated a Senior
Management owner who has responsibility
to ensure any appropriate internal controls
are in place and operating to provide
mitigation, or ensure the Board is regularly
informed on any material changes in the
identified risk. rhipe continues to improve
the identification, prioritisation and
management of risks across the business.
There is a strong focus to increase Board
visibility into risks across the business to
promote prudent risk management.
rhipe 2021 Annual Report
23
The Company’s risk register includes the following key risks categorised under Strategic Risks,
People Risks, Operational Risks and Financial Risks:
Strategic Risks
y Competitive pressures from existing
competitors and new market entrants
y Dependency on Microsoft
y Technological innovation change
y Failure to retain existing customers
and attract new customers
y Geopolitical risks associated with each
country that we operate in
Operational Risks
y Data loss and data breach
y Cyber Security and disruption to
technology systems
y Adequacy of IT systems including
Financial systems
y Anti-bribery & corruption
y Modern slavery
y Inadequate process documentation
y Business continuity and disaster
recovery risk
y Compliance with applicable laws and
regulations in each country rhipe
operates
y Ability to manage operational change
in a careful and controlled manner
People Risks
y Key person risk
y Inability to retain and attract talent
y Insufficient resources to manage
continued growth
y Work place health, safety and welfare
y Misalignment of values and employee
behaviors or actions
Financial Risks
y Competitive pressures and impact on
margin earned
y Liquidity and funding risk
y Credit risk - customers and suppliers
y FX risk
y Completeness and accuracy of
revenue recording, availability and
accuracy of systems
y Capitalised software development
costs; to date ~$15m costs have been
capitalised in relation to Prism and
SmartEncrypt and impairment of these
assets is possible
y Goodwill impairment
y Tax & Compliance risk in certain less
developed Asian countries
The risk register is reviewed by the
Audit and Risk Committee quarterly or
more frequently as necessary. The risks
included on the risk register are also
rated as Low, Medium or High from a
probability perspective and weighted in
terms of impact on the Company. This
segmentation helps to identify the higher
rhipe 2021 Annual Report
24
rhipe.com
risk items and whether they have a low,
medium or high impact on rhipe.
The risk register is also reviewed by
Senior executives and management every
three months to ensure they are aware
of their risk management responsibilities
and are required to escalate any key
issues which arise or have the potential
to arise. The CEO and CFO have the
primary responsibility to advise the Board
of key risk areas which arise and together,
the Board and senior management are
responsible for taking all reasonable steps
to address and mitigate such risk items.
Indemnifying Officers or Auditor
During or since the end of the financial
year, the Company has given an indemnity
or entered into an agreement to indemnify
or paid or agreed to pay insurance
premiums as follows:
– The Company has paid premiums to
insure each of the Directors against
liabilities for costs and expenses
incurred by them in defending legal
proceedings arising from their conduct
while acting in the capacity of directors
of the Company, other than conduct
involving a willful breach of duty in
relation to the Company. The contract
of insurance prohibits disclosure of the
nature of the liability and the amount
of the premium
– No indemnity has been provided for
the auditors.
Proceedings on Behalf of Company
No person has applied to the Court under
section 237 of the Corporations Act 2001
for leave to bring proceedings to which
the Company is a party, for the purpose
of taking responsibility on behalf of the
Company for all or part of the proceedings.
No proceedings have been brought or
intervened in on behalf of the Company
with leave of the Court under section 237
of the Corporations Act 2001.
Non-audit Services
The Board of Directors, in accordance
with advice from the Audit and Risk
Committee, is satisfied that the provision
of non‑audit services during the year is
compatible with the general standard of
independence for auditors imposed by the
Corporations Act 2001. The Directors are
satisfied that the services disclosed below
did not compromise the external auditor’s
independence for the following reasons:
All non-audit services are reviewed and
approved by the audit committee prior
to commencement, to ensure they do
not adversely affect the integrity and
objectivity of the auditor; and
The nature of the services provided does
not compromise the general principles
relating to auditor independence in
accordance with APES 110 Code of Ethics
for Professional Accountants set by the
Accounting Professional and Ethical
Standards Board.
The following fees were paid or payable
to Ernst & Young Australia for non-audit
services provided during the year ended
30 June 2021.
$
Taxation services
55,000
Due Diligence services
240,929
rhipe 2021 Annual Report
25
Significant Changes in State
of Affairs
There were no significant changes in the
state of affairs of the Group during the
financial year.
Future Developments, Prospects and
Business Strategies
The Group has strong existing relationships
with a number of key software and
technology partners and the Group will
look to continue to build and nurture these
relationships. The Group will also continue
to explore opportunities to further
expand its reach from its current bases
in Australia, New Zealand, Singapore,
Thailand, Malaysia, Philippines, Korea,
Indonesia and Sri Lanka. In FY20 rhipe
established a subsidiary in Japan with 20%
of the entity owned by our joint venture
business partner, Japan Business Systems
Co.,Ltd. The Group intends to invest
significantly in its activities into the large
Japanese market.
rhipe will continue to assess further
acquisition opportunities that will
complement, create synergies or bring
scale and earnings growth to the
Company’s existing business model.
Sustainability and
Environmental Issues
The consolidated Group’s
operations are not regulated by any
significant environmental regulations
under a law of the Commonwealth or of a
state or territory. However the Group is
committed to finding ways of reducing the
impact of our work to the environment.
Options
As at the date of signing this report, there
were Nil unissued ordinary shares under
option (30 June 2020: 100,000).
Auditor’s Independence Declaration
The lead auditor’s independence
declaration for the year ended 30 June
2021 has been received and can be found
on page 48 of the Financial Report.
Rounding of Amounts
The Company is an entity to which ASIC
Legislative Instrument 2016/191 applies
and, accordingly, amounts in the financial
statements and directors’ report have been
rounded to the nearest thousand dollars.
Corporate Governance Statement
The Directors of the Group support and
adhere to the principles of corporate
governance, recognising the need
for the highest standard of corporate
behaviour and accountability to the
corporate governance statement
dated 31 August 2021 released to ASX and
posted on the Company’s website
www.rhipe.com/about/investors/.
rhipe 2021 Annual Report
26
rhipe.com
Reporting under the Workplace
Gender Equality Act 2012
In accordance with the requirements
under the Workplace Gender Equality
Act 2012 (Cth), rhipe has submitted an
annual compliance report to Workplace
Gender Equality Agency. This report is for
the reporting period of 1 April 2020 to 31
March 2021. Key points from the report are:
y Gender composition to 31 March 2021:
34% Female and 66% Male in Australia
versus, 38% Female and 62% Male
globally at 30 June 2021.
y Promotions: 58.3% of employees
awarded promotions were women and
41.7% were men
y Resignations: 40% of employees
who resigned were women and 60%
were men.
rhipe continues to promote diversity and
inclusion of all types during the period
through offering primary carer leave of 16
weeks and secondary carer of two weeks,
both fully paid with only six months
qualifying period and flexible working
arrangements. 4% of the workforce used
this leave in FY21.
rhipe further leveraged its partnership
with Work180 in Australia in 2021 as an
endorsed employer supporting diversity
and inclusion to attract and retain
diverse talent. Work180 is a global jobs
network that promotes diversity, inclusion
and equality.
rhipe’s Diversity and Inclusion Council
was rolled up into the One Team Culture
Council in 2021, with multicultural
representation across most of the
company’s APAC locations. The Council
continues to drive initiatives which
promote inclusion and celebrate our multi-
cultural workforce.
The Group has currently over 25
nationalities across our 537 employees
globally.
The full report may be accessed on
rhipe’s website.
Events after the Reporting Period
On 6th July 2021, rhipe entered into a
binding Scheme Implementation Deed
with Crayon under which it is proposed
that Crayon will acquire 100% of the
shares in rhipe by way of a Scheme of
Arrangement. The Scheme is subject to
limited conditionality and is not subject to
financing or due diligence. It is anticipated
that a Scheme Booklet in relation to the
proposed Scheme will be sent to rhipe
shareholders in September 2021 and rhipe
shareholders will vote on the Scheme in
October 2021.
The company continues to monitor the
impact of the global pandemic on its
business and its partners whom are
focused on serving small and medium
sized businesses, which is the hardest hit
sector. Management will continue to assess
the risk and take actions aimed at reducing
the impact of the pandemic on our people
and our partners.
Apart from those noted above, there
has not been any other matter or
circumstances occurring subsequent to
the end of the financial year that has
significantly affected, or may significantly
affect the operations of the Group,
the results of those operations, or the
state of affairs of the Group in future
financial years.
Dominic O’Hanlon
Managing Director and CEO
rhipe 2021 Annual Report
27
Remuneration Report
rhipe Limited and Controlled Entities
1
Message from the Chair of the Remuneration and
Nomination Committee
28
2 Persons Addressed and Scope of the Remuneration Report
29
3 Context of and Changes to Key Management Personnel “KMP” Remuneration for FY21
30
3.1 Matters Identified as Relevant Context for Remuneration Governance in FY21
30
3.2 Changes to KMP Remuneration in FY21
30
4 Overview of rhipe’s Remuneration Governance Framework
and Strategy
31
4.1 Remuneration and Nomination Committee Charter
31
4.2 Senior Executive Remuneration Policy
31
4.3 Non-Executive Director (“NED”) Remuneration Policy
32
4.4 Approach to Determining Comparators for
Remuneration Benchmarking
33
4.5 Short-Term Incentive Policy
33
4.6 Long-Term Incentive Policy
34
4.7 Setting Incentive Plans
34
4.8 Clawback Policy and Procedure
35
4.9 Securities Trading Policy
35
4.10 Equity Holding Policy
35
4.11 Executive Remuneration Consultant Engagement Policy
and Procedure
35
4.12 Variable Executive Remuneration – Short-Term
Incentive Plan (STIP)
36
4.13 Variable Executive Remuneration – Long-Term Incentive Plan (LTIP) – Performance
Rights Plan
37
5 Performance Outcomes for FY21 Including STI and
LTI Assessment
40
5.1 Company Performance
40
5.2 Links Between Performance and Reward Including STI
and LTI Outcomes
41
5.3 Links between Company Strategy and Remuneration
42
6 Changes in Equity held by KMP
43
7 NED Fee Policy Rates for FY21 and FY22, and Fee Limit
45
8 Remuneration Records for FY21 – Statutory and
share-based reporting
46
8.1 Senior Executive Remuneration
46
9 Employment Terms for Key Management Personnel
48
9.1 Service Agreements
48
10 External Remuneration Consultant Advice
48
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Message from the Chair of the Remuneration and
Nomination Committee
Whilst COVID-19 continues to challenge
governments, industry and individuals across the
globe and economic uncertainty has followed as
surely as night follows day, rhipe has stayed the
course and delivered a strong result for FY21. It
is with pleasure that I present to shareholders
this year’s Remuneration Report on behalf of the
Remuneration and Nomination Committee and
the Board.
The remuneration strategy has continued to
support the Company’s long term strategic plan
with a focus on long term incentives that target
consistent gross profit growth and EPS growth
and align to shareholder return. During the period
shareholders approved a new set of equity plan
rules that updated and modernised treatment of
areas such as cessation of employment, change
of control and inappropriate behaviour. Further,
in line with development plans for middle
management and high performing contributors,
the Board was delighted to extend its LTI program
to a broader cohort for the first time. The
Company also continued its employee share
scheme across the wider business.
Given the climate, there were minimal changes to
KMP remuneration for the FY21 period and any
changes were related directly to the responsibilities
of individual roles.
In aggregate, the total remuneration package
outcome for KMP decreased by approximately 13%
in FY21 compared to the prior period. This was
largely due to changes in LTI values.
Short term incentives were calibrated to better
support the changing needs of increasingly diverse
business units and this helped drive momentum
and successful outcomes in those business units.
Short term incentives were also used to help
drive the success of two new acquisitions, Parallo
and EMT.
Subsequent to these acquisitions and following
prudent hiring in key areas, rhipe’s headcount
grew from 400 in the previous year to 537, an
increase of 34%.
This talent growth, combined with careful cost
management, delivered a full year operating profit
of $18m, an increase on the previous year of 31%.
Given that KMP achieved or over-achieved
most STI and LTI targets this financial year, and
these targets drove the excellent performance
of the business, the Board is satisfied that
the remuneration mix has been effective and
continues to support rhipe’s longer term goals.
Lastly, although this report is primarily focused
on remuneration matters relating to KMP, I would
like to extend heartfelt thanks to our staff across
the whole business. In the face of lock-downs
across the region as well as frightening and, in
many cases, traumatic situations, our people
continue to demonstrate remarkable resilience and
camaraderie which are ultimately the foundations
of rhipe’s success.
Yours sincerely,
Dawn Edmonds
Chair of the Remuneration and
Nomination Committee
The report has been prepared and audited against the disclosure requirements of
the Corporations Act 2001 (Cth).
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rhipe 2021 Annual Report
2. Persons Addressed and Scope of the Remuneration Report
The Remuneration Report sets out, in accordance with section 300A of the Corporations Act 2001:
(i) The Company’s governance relating to remuneration
(ii) The policy for determining the nature and amount or value of remuneration of KMP
(iii) The various components or framework of that remuneration
(iv) The prescribed details relating to the amount or value paid to key management personnel, as well as a
description of any performance conditions
(v) The relationship between the policy and the performance of the Company.
In addition, rhipe Limited (rhipe, the Company or the Group) has decided to set out such further information
as shareholders may require for them to obtain an accurate and complete understanding of the Company’s
approach to the remuneration of KMP.
KMP are the NEDs, the Executive Directors and employees who have authority and responsibility for planning,
directing and controlling the activities of the Group. On that basis, the following roles/individuals are addressed
in this report (all located in Australia unless otherwise noted):
NEDs as at the End of the Financial Year
Gary Cox
- Independent NED and Chairman of the Board since 26 March 2019
- Remuneration and Nomination Committee since 26 March 2019
- People & Culture Committee since 1 January 2020
Dawn Edmonds
- Independent NED since 1 January 2017
- Remuneration and Nomination Committee since 10 April 2014, Chair since 8 November 2018
- People & Culture Committee since 1 January 2020
Mark Pierce
- Independent NED since 10 April 2014
- Audit and Risk Committee Chair since 1 July 2019
Michael Tierney
- Independent NED since 27 January 2017
- Audit and Risk Committee since 1 July 2019
Inese Kingsmill
- Independent NED since 15 April 2019
- Audit and Risk Committee since 1 July 2019
- People & Culture Committee since 1 January 2020
Olivier Dispas
- Independent NED since 15 April 2019, located in Seattle, USA
- Audit and Risk Committee since 1 July 2019
- Remuneration and Nomination Committee since 1 July 2019
Senior Executives Classified as KMP in this Report during the Financial Year
Dominic O’Hanlon
Managing Director since 15 June 2015 and Chief Executive Officer since 5 August 2014
Mark McLellan
Chief Financial Officer since 1 November 2016 and Chief Operating Officer since 1 March 2018
Warren Nolan
Group Executive - Solutions & Professional Services, since 2 August 2005
Chris Sharp
Group Executive - Products & Programs since 1 October 2014, resigned 28 February 2021
During the period the following person ceased to be KMP of rhipe: Chris Sharp as of 28 February 2021.
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3. Context of and Changes to KMP Remuneration for FY21
3.1 Matters Identified as Relevant Context for Remuneration Governance in FY21
Organisational Updates - Throughout FY21, rhipe continued to execute its strategic plan with a focus on
diversification and strengthening of its services offerings. The organisational structure was further refined
to support the strategy implementation and the Licensing sales division was moved under the CFO/COO in
order to better align sales functions with other partner facing functions and to implement better structure and
processes to the sales function.
Growth - Subsequent to the capital raising completed in FY20, rhipe acquired two businesses in FY21. New
Zealand based Parallo in September 2020 and South Australia based EMT in May 2021. Through these
acquisitions and through organic growth the number of employees across the organisation increased by 34%,
from 400 to 537 in total.
Incentive Plan Changes - The company continued to fine tune its incentive programs in the period. Short
term incentive goals were set with a greater focus on business unit specific targets. Long term incentives
were granted under an updated set of plan rules approved by shareholders in November 2020. Key
differences to the preceding rules were in the areas of change of control, termination of employment
and inappropriate behaviour. See section 4.13 for further details. In an effort to reward and retain high
performing talent, the board was pleased to extend invitations to the LTI program to high-performing
participants amongst its middle management and senior cohort.
COVID-19 – The global pandemic continued to impact the countries that rhipe operates in throughout
the reporting period. Where appropriate, rhipe extended additional leave and entitlements to support
employees and their families. Assistance offered included EAP counselling, leave for vaccinations and testing
reimbursement where applicable and seminars on mental health and managing finances.
Overall, the continued growth of the company, combined with recent M&A activity in the industry and the
impacts of COVID-19, has meant that competition for talent has become a challenge and will continue to be a
challenge into the next financial year.
3.2 Changes to KMP Remuneration in FY21
Executives
Total remuneration packages for Executive KMP remained mostly in line with the previous reporting periods.
Specific changes were as follows:
Dominic O’Hanlon (Managing Director) was awarded a 10% increase to the target LTI component of his total
remuneration package.
Mark McLellan (CFO/COO) acquired additional sales function responsibilities and his target STI pay was
increased by 25% accordingly.
Due to the organisational changes, target STI and LTI pay for Warren Nolan (Group Executive – Professional
Services) was reduced by 26% and 12% respectively.
Chris Sharp (Group Executive – Products and Programs) ceased to be KMP of rhipe in February 2021 and left
the organisation. There were no changes to Mr Sharp’s target TRP for the period.
NEDS – No changes to NED fees were made during the reporting period. A per diem payment of $2,000 per
day was made to Gary Cox for additional work performed in connection with the Scheme. Total payment is as
shown in the remuneration records in section 7.
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4. Overview of rhipe’s Remuneration Governance Framework & Strategy
The performance of the Company depends upon the quality of its Directors and Executives. The Group
recognises the need to attract, motivate and retain highly skilled Directors and Executives.
The Board, through its Remuneration and Nomination Committee (the “Committee”), accepts responsibility
for determining and reviewing remuneration arrangements for the Directors and Executives. The Committee
assesses the appropriateness of the nature and amount of remuneration of Directors and Executives on a
periodic basis by reference to relevant employment market conditions, giving due consideration to the overall
profitability and financial resources of the Company, with the objective of ensuring maximum stakeholder
benefit from the retention of a high-quality Board and Executive team.
Sections 13.7 and 13.8 of the Company’s constitution set out broadly how remuneration is to be dealt with in
line with the Corporations Act and ASX Listing Rules. The following summarises the Board’s current approach
to governing and setting remuneration
4.1 Remuneration and Nomination Committee Charter
The Committee is appointed and authorised by the Board to assist the Board in fulfilling its statutory and
fiduciary duties. The Committee is responsible for the following:
y Assessing the Remuneration Policy for compliance with legal and regulatory requirements
y Reviewing changes to the Remuneration Policy, including remuneration structure, retention and
termination policies
y Reviewing changes to the recruitment process, procedures and remuneration approach for the
Senior Executives
y Recommending performance-based (at-risk) components of remuneration and targets for the Company’s
financial performance as they relate to incentive plans, including equity-based payments
y Reviewing and making recommendations regarding the remuneration framework for Non-Executive
Directors and making remuneration recommendations for Non-Executive Director fees
y Proposing the Remuneration Report to the Board, liaising with external auditors and making
recommendations that are in accordance with the Corporations Act and other regulations/laws
y Identifying and recommending candidates to the Board after considering the necessary and desirable
competencies of Board members, reviewing induction processes and reviewing succession plans; and
y Developing and implementing processes to review Board performance.
The Committee shall have free and unfettered access to all personnel and other parties (internal and external),
including the external auditors, legal advice or independent remuneration advisers. Committee members
may seek independent professional advice for Company related matters. The Committee must approve the
engagement of remuneration consultants when obtaining independent advice on the appropriateness of
remuneration packages and other employment conditions for Senior Executives.
rhipe recognises the importance of ensuring that any recommendations given to the Committee provided by
remuneration consultants are provided independently of those to whom the recommendations relate.
4.2 Senior Executive Remuneration Policy
The Senior Executive remuneration policy applies to Senior Executives who are defined as follows:
y Managing Director and CEO - accountable to the Board for the Company’s performance and long-term
planning
y Those roles classified as executive KMP under the Corporations Act
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y Direct Reports to the Managing Director – roles that are business unit, functional, or expertise heads; and
y Any other members of the executive/senior leadership team as may be determined from time to time.
In relation to remuneration for Senior Executives:
y Remuneration should be composed of:
– Base Package (inclusive of superannuation, allowances, benefits and any applicable fringe benefits tax
(FBT)
– STI which provides a reward for performance against annual objectives which may be subject to deferral
should the Board determine that this is appropriate from time to time
– LTI which provides an equity-based reward for performance against indicators of shareholder benefit or
value creation, over an extended period, and intended to create alignment with shareholders; and
– In total the sum of the elements will constitute a TRP.
y Both internal relativities and external market factors should be considered
y TRPs should be structured with reference to relevant market practices
y The Base Package policy mid-points should be set with reference to P50 (the median or the middle) of the
relevant market practice
y TRPs at Target (being the Base Package plus incentive awards intended to be paid for targeted levels of
performance) should be set with reference to P75 (the upper quartile, the point at which 75% of the
sample lies below) of the relevant market practice so as to create a strong incentive to achieve targeted
objectives in both the short and long term
y Remuneration of individuals will be managed within a range of a policy benchmark so as to allow for the
recognition of individual differences such as the calibre of the incumbent and the competency with which
they fulfill a role
y Exceptions will be managed separately such as when particular talent needs to be retained or there are
individuals with unique expertise that need to be acquired; and
y Termination benefits will generally be limited to the default amount allowed for under the Corporations Act
(without shareholder approval).
4.3 NED Remuneration Policy
Fees and payments to NEDs reflect the demands which are made of the Directors in fulfilling their
responsibilities. The NED remuneration policy applies to NEDs of the Company in their capacity as Directors
and as members of committees, and may be summarised as follows:
y Remuneration may be composed of:
– Board fees
– Committee fees
– Superannuation
– Other benefits; and
– Equity (if deemed appropriate as may occur from time to time).
y Remuneration will be managed within the Aggregate Fee Limit (AFL) or fee pool approved by shareholders
of the Company (see Section 3.1 for details pertaining to changes in FY20)
y Remuneration should be reviewed annually
y Nominal termination benefits are included in NED Services Agreements
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y A policy level of Board Fees (being the fees paid for membership of the Board, inclusive of superannuation
and exclusive of committee fees) will be set with reference to the P50 (median or middle) of the market
of comparable ASX listed companies
y Directors are not paid additional fees for serving on committees although Committee Chair fees were
introduced in December 2019 (see Section 3.1 for further detail)
y Per diem fees may be paid on occasions where approved special work is undertaken outside of the
expected commitments
y Any Non-Executive Director remuneration package that is subject to fee sacrifice into equity arrangements
should fall at or close to P75 of the market of the comparable ASX listed company market. Currently
the Company does not provide an equity facility as part of Non-Executive Director remuneration and
shareholder approval would be sought for any plan that may facilitate this element of remuneration
being paid.
4.4 Approach to Determining Comparators for Remuneration Benchmarking
When the Company seeks external market data in relation to NED or Senior Executive benchmarking, or the
Board seeks independent expert advice, the following principles are generally intended to apply:
y A benchmarking comparator group will take into account the Company’s estimated sustainable market
capitalisation at the time of the exercise, which may include discounting the market capitalisation if and
when the Company’s P/E ratio is unusually high relative to peers
y It will include direct competitors of comparable scale to the extent possible, noting that there are a very
limited number of these in the Australian market
y The group should be large enough to produce valid statistics, and small enough to be reasonably specific
y To the extent that direct competitors are not sufficient to produce a statistically robust sample, companies
of comparable scale from the same industry or sector will be included
y The group should be balanced with an equal number of comparators larger and smaller, generally limited
to those within a range of half to double the Company’s market capitalisation value used in designing
the group
y International data benchmarks will be considered when relevant to incumbents who are internationally
sourced or located; and
y These principles are specific to remuneration benchmarking exercises and therefore may produce different
outcomes than those applied to the design of other types of comparator groups.
4.5 Short-Term Incentive Policy
The STIP may be summarised as follows:
The purpose of the STIP as part of the TRP offered to Senior Executives is to:
y Motivate Senior Executives to achieve the short-term annual objectives linked to Company success and
shareholder value creation:
– Create a strong link between performance and reward
– Share Company success with the Senior Executives that contribute to it; and
– Create a component of the employment cost that is responsive to short to medium term changes in the
circumstances of the Company.
y NEDs are excluded from participation
y The measurement period for performance should be the financial year of the Company which is considered
short-term
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y The STIP should be outcome focused rather than input focused, and while an individual performance
component may be present, rewards should generally be linked to indicators of shareholder value creation
y The Board will retain discretion to adjust actual awards so as to manage circumstances in which the
calculated award may be considered inappropriate
y The Board will give consideration as to whether deferral should apply to a portion of STI awards, from time
to time, to be specified in an invitation to participate in the STIP if it does; and
y Any claw back policy as may be developed by the Company from time to time, will apply to the STIP
unless otherwise determined by the Board.
4.6 Long-Term Incentive Policy
The LTIP may be summarised as follows:
y The purpose of the LTIP as part of the TRP offered to Senior Executives (as defined in the policy) is to:
– Motivate Senior Executives to achieve long-term objectives linked to shareholder value creation over the
long-term
– Create a strong link between performance and reward over the long-term; and
– Share the experience of shareholders with the Senior Executives that contribute to it including creating
an ownership position.
y NEDs are currently excluded from participation
y The measurement period for performance should be aligned with the financial year of the Company and
typically vest over a three-year period
y The Board will retain discretion to adjust actual vesting so as to manage circumstances in which the
calculated vesting may be considered inappropriate; and
y A claw back policy applies to the LTI and any further development of this policy as may be required by the
Company from time to time will apply to the LTIP unless otherwise determined by the Board.
4.7 Setting Incentive Plans
Performance-related incentives are linked to the achievement of financial and non-financial objectives which
are relevant to meeting the Company’s business objectives according to its Balanced Scorecard as well as
longer term Shareholder value.
In relation to the design, implementation and operation of incentives there should be a range of performance
and reward outcomes identified and defined. These should be set with regard to the elasticity of the measure,
the impact of the measure on shareholder value creation and the ability of Senior Executives to influence the
measure. In order to create clarity and consistency, the following concepts and principles are generally applied
to the design of incentive scales:
y “Threshold”, being a minimum acceptable outcome for a “near miss” of the target, associated with a
fraction of the target reward appropriate to the threshold outcome
y “Target”, being a challenging but achievable outcome, and which is the expected outcome for a Senior
Executive/team that is of high calibre and high performing
y “Stretch” (the maximum) levels of objectives, which is intended to be a “blue sky” or exceptional out-
performance, not expected to be achieved, the purpose of which is to create a continuous incentive to
outperform when out-performance of the Target has already been achieved. This is particularly important
for shareholders to understand when comparing with other Companies whose maximum levels of
incentives may be associated with a planned or target outcome.
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Awards for outcomes between these levels should generally be scaled on a pro-rata basis dependent on actual
performances. This is intended to provide a motivating opportunity to attain a reward and to ensure that
reward outcomes align with performance under a range of circumstances.
It is recognised that there is a link between the budget setting culture of the Company and the setting of
incentive hurdles. In this regard, the Board is confident that budgets developed and agreed to, are sufficiently
challenging but also achievable.
4.8 Claw back Policy and Procedure
A claw back policy continued to apply to the Performance Rights Plan in FY21. The Board will continue to
review how this may be applied more broadly over time. However, claw back policies are generally intended to
relate to the recovery of overpayments when there has been a material misstatement in the financial reports
of the Company, which is a demonstrably low risk based on the frequency of occurrence in the Australian
market. The Company has sufficient controls in place as to be confident that this risk is negligible.
4.9 Securities Trading Policy
The Company’s Policy on Trading in rhipe Securities by Directors and KMP:
y Sets out the guidelines for dealing in any type of rhipe securities by the Company’s KMP; and
y Summarises the law relating to insider trading which applies to everyone, including to all rhipe Group
employees as well as to KMP.
Under the current policy, KMP may not trade during black out periods. These black out periods are near
financial reporting dates in January and February for 1H reporting , July and August for full year reporting and
October and November for the Annual General Meeting for rhipe.
In addition to the above, all of the CEO’s vested options are restricted from being traded without the approval
of the Board.
4.10 Equity Holding Policy
The Company does not currently have an equity holding policy applicable to KMP.
4.11 Executive Remuneration Consultant Engagement Policy & Procedure
The Company has an executive remuneration consultant (ERC) engagement policy which is intended to
manage the interactions between the Company and ERCs, so as to ensure their independence and so that the
Remuneration and Nomination Committee will have clarity regarding the extent of any interactions between
management and the ERC. This policy enables the Board to state with confidence whether or not the advice
received has been independent and why that view is held. The policy states that ERCs are to be approved and
engaged by the Board before any advice is received, and that such advice may only be provided to a Non-
Executive Director. Interactions between management and the ERC must be approved and will be overseen by
the Remuneration and Nomination Committee when appropriate.
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4.12 Variable Executive Remuneration – STIP
Aspect
Plan, Offers and Comments
Purpose
The STIP’s purpose is to give effect to an element of remuneration.
This element of remuneration constitutes part of a market competitive total remuneration
package and aims to provide an incentive for Senior Executives to deliver and outperform
annual business plans that will lead to sustainable superior returns for shareholders. The
STIP aims to reflect current trading conditions experienced by the Company. Target-
based STI’s are also intended to modulate the cost to the Company of employing Senior
Executives, such that risk is shared with the Executives themselves and the cost to the
Company is reduced in periods of poor performance
Measurement Period
The four quarters of the Company’s financial year.
Award Opportunities
FY21 Invitations
The MD/CEO was offered a target-based STIP equivalent to 52% of the Base Package
for Target performance, with a maximum/stretch opportunity of up to 150% of the
Target Award.
Other Senior Executives who are KMP were offered a target-based STIP equivalent to
43% to 53% of their Base Package for Target performance, with a maximum/ stretch
opportunity of up to 150% of the Target Award.
FY22 Invitations
No decisions on changes to award opportunities have been made yet.
Performance Indicators
(KPIs), Weighting and
Performance Goals
FY21 Invitations
FY21 Invitations to participate in the STIP for all participants, had an 80% weighting on a
range of Operating Profit KPIs relating to the Group, specific business lines and strategic
targets that the relevant KMP were charged with.
Financial targets are set with reference to the annual budget for the financial year.
Non-financial KPIs for each KMP were incorporated with a 20% weighting, awarded on an
annual basis provided 75% of Operating Profit had been met.
The Operating Profit target remains the primary performance measure for KMP.
FY22 Invitations
The Board cannot disclose the financial targets for FY22 as this information is
commercially sensitive. Targets which are set with reference to the annual Group Budget
for the financial year and non-financial targets will be finalised pending decisions based
on change of control.
Award Determination and
Payment
Calculations are performed following the end of the quarterly and annual Measurement
Periods and the audit of Company accounts. The Board has discretion to determine the
extent and nature of any deferral, as part of invitations. At present, no amounts of STI
awards are subject to deferral, and therefore STI awards are paid in cash through
payroll soon after the end of each quarter, the final payment being after the end of the
financial year.
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Cessation of Employment
During a Measurement
Period
In the event of cessation of employment due to dismissal for cause, or any other reason
considered a “bad leaver”, all entitlements in relation to the Measurement Period are
forfeited, as are any unvested deferred amounts. In the event of cessation of employment
classified as “good leaver”, the Board has discretion to determine the appropriate
treatment of STI entitlements for the period, within the termination benefit limit.
Change of Control
In the event of the Board declaring that a Change of Control is likely to occur,
including a takeover, the Board has discretion to determine appropriate treatment
of STI entitlements, given the circumstances at the time. This will generally include
consideration of performance up to the date of the event.
Plan Gate & Board
Discretion
No plan gate applies to the STIP. Board discretion to modify award outcomes applies to
the STIP in circumstances where it would be considered as inappropriate to shareholders.
Claw back & Malus
The Company does not currently operate a claw back policy in relation to the STIP.
4.13 Variable Executive Remuneration – (LTIP) – Performance Rights Plan
Aspect
Plan, Offers and Comments
Purpose
The LTIP’s purpose is to give effect to an element of Senior Executive remuneration. This
element of remuneration constitutes part of a market competitive total remuneration
package and aims to provide an incentive for Senior Executives to deliver Company
performance that will lead to sustainable superior returns for shareholders. The LTIP
is also designed to act as a retention mechanism so as to maintain a stable team of
performance focused Senior Executives and to create alignment with the interests and
experiences of shareholders through developing the “ownership position” of Executive
KMP.
Form of Equity
Currently the Company operates a Performance Rights plan for the purposes of the LTIP.
Performance Rights were selected because they have an inherent incentive to improve
the Company’s performance over the longer term, consistent with the intention of the
LTIP.
Plans in Operation
There are three grants currently in operation:
FY19 Grant - granted under the plan rules approved by shareholders in November 2017.
FY20 Grant - granted under the plan rules approved by shareholders in November 2017.
FY21 Grant - granted under new plan rules approved by shareholders in November 2020.
Retesting
Retesting is not available under either of the plan rules.
Plan Gate
No Plan gate applies to either of the plan rules the Performance Rights.
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Board Discretion
FY19 and FY20 Grants - The Board does not have discretion to adjust vesting outcomes
but does retain some discretion to adjust the number of shares issued and the terms in
certain situations.
FY21 Grants - The Board does not have discretion to adjust vesting outcomes but does
retain some discretion to adjust the number of shares issued and the terms in certain
situations. The Board retains discretion to determine that some or all unexercised
Performance Rights lapse in the event of a participant undertaking excessively risky and/
or harmful behaviour.
Amount Payable for
Performance Rights
No amount is payable by participants for Performance Rights granted as part of
remuneration.
Exercise of Vested
Performance Rights
The Company will notify the Participant that a Performance Right has Vested pursuant to
the Plan Rules and allocate shares accordingly.
Disposal Restrictions etc.
Performance Rights are not subject to any disposal or dealing restrictions at any time,
other than the Corporation’s Act restrictions or those restrictions outlined in the Group’s
share trading policy and cannot be exercised prior to vesting.
Cessation of Employment
FY19 and FY20 Grants - The Board has discretion to specify how the Participant’s
Performance Rights will be treated on cessation of employment and may detail additional
or alternative treatment in the invitation terms. The applicable treatment may vary
depending on the circumstances in which the Participant’s employment or engagement
ceases.
FY21 Grants - If the employee ceases employment with the Company during the
measurement period, rights may be retained on a pro-rata basis with reference to time
served. All remaining rights will lapse.
Change of Control of
the Company
FY19 and FY20 Grants - If a change of Control Event occurs the Board may, in
its absolute discretion, determine that all or a specified number of a Participant’s
Performance Rights vest or cease to be subject to vesting conditions or restrictions (as
applicable).
FY21 Grants - If a Change of Control Event occurs 75% of Target Rights vest and the
Board retains discretion over the remaining 25% Target Rights.
Claw back & Malus
The Company implements a Claw back Policy in relation to LTIP.
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LTI Value
The Board retains discretion to determine the value of LTI to be offered each year,
subject to shareholder approval in relation to Directors when the Performance Rights are
to be settled in the form of a new issue of Company shares. The Board may also seek
shareholder approval for grants to Directors in other circumstances, at its discretion.
FY21 LTI Invitations
LTI allocations were issued to KMP and other key executives in FY21 in the form of
Performance Rights. The LTI Target value was set between 55% and 105% of base
packages.
Comments
The target LTI value reflects the Company’s current position in terms of expected growth
trajectory and its intention to retain valued executives. As the remuneration governance
framework evolves, the LTI component as a percentage of base is expected to evolve
also.
The Board has discretion to set exercise prices, measurement periods, and vesting
conditions for each round of invitations. Performance Rights that are not exercisable or
are unexercised by their Expiry Date will lapse.
FY21 Invitations
Measurement Period
Three years from 1 July 2020:
Vesting Conditions:
Gross Profit Growth on a CAGR basis
Threshold 10%
Target 13%
Stretch ≥16%
EPS Growth on CAGR basis
Threshold 12.5%
Target 15%
Stretch ≥17.5%
TSR
Threshold- Index TSR
Target – Index TSR plus 5% per annum
Stretch – Index TSR plus 10% or more per annum
The exercise price is Nil; and
Holders of Performance Rights in the Company do not have any shareholder rights such
as voting or dividend rights.
Comments
Gross profit growth was chosen as it is an important lead indicator of ongoing, profitable
growth and can be directly impacted by KMP behaviour. EPS growth ensures that there
is an appropriate focus on cost management and tax planning which is also directly
controlled by KMP. TSR is the most direct measure of value creation for shareholders
and is therefore one of the most effective measures available to align the interests of
executives with those of shareholders. The TSR target compares Total Shareholder Return
with the TSR of the S&P/ASX Small Industrials Index, the most relevant index available at
the grant date. This avoids the problems of gains or losses associated with broader market
movements.
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rhipe 2021 Annual Report
5. Performance Outcomes for FY21 Including STI and LTI Assessment
5.1 Company Performance
The following outlines the performance of the Company over the FY21 period and the previous four financial
years in accordance with the requirements of the Corporations Act:
($’000’s) unless otherwise stated
2021
2020
2019
2018
2017
Sales – Software Products & Services 1
376,980
325,201
252,537
196,608
156,970
Revenue
66,817
55,828
48,356
35,624
28,969
Operating profit 1
18,010
13,755
12,842
7,761
5,024
Reported EBITDA 2
16,613
11,566
10,017
6,384
4,004
Profit/(Loss) before income tax ($’000’s)
10,694
7,150
8,491
5,190
3,344
Profit/(Loss) after income tax ($’000’s)
7,008
4,799
6,214
3,066
2,507
30 June Share Price ($)
2.09
1.97
2.86
1.18
0.52
Change in Share Price ($)
0.12
-0.89
1.68
0.66
-0.38
Basic Earnings/(loss) Per Share (cents)
4.54
3.49
4.53
2.26
1.83
Dividends declared during the period
3.50
2.00
2.00
0.50
-
Total Shareholder Return (%)
6%
-31%
143%
128%
-42%
1 Non-AASB measure. Refer to Note 2 in the Financial Statements for Operating Profit reconciliation.
2 Includes impact of AASB 16 from FY20
The overall Executive award takes into account performance over the financial year especially as it relates to
improving performance over prior years. The Company’s strong financial performance over the last few years
has been the result of investment in public cloud operations and professional services, geographical expansion
across APAC and several strategic acquisitions. The Company continues to invest every year in its people and
operations with a view to the medium to long term benefit for shareholders.
This investment is also made in the knowledge of market expectations about continued growth in operating
profitability and it is an ongoing challenge around this decision trade off.
Operating profit, which is one of the key performance measures for KMP and the Company, grew 31% from
$13.8m in FY20 to $18m in FY21. This was driven by growth in revenue and gross profit in the Licencing
business including in Asia and the addition of two new acquisitions. Delivery of $18m operating profit
compares to the original market guidance of $17.5m made at the beginning of FY21 and aligned to the update
given to the market in April 2021.
EBITDA also grew 44% from $11.6m in FY20 to $16.6m in FY21.
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rhipe 2021 Annual Report
5.2 Links between Performance and Reward Including STI and LTI Outcomes
The remuneration of executive KMP is intended to be composed of three parts as outlined earlier, being:
1. Base Package, which is not intended to vary with performance, but which tends to increase as the scale of
the business increases (i.e. following success)
2. STI which is intended to vary with indicators of annual Company and individual performance, and may
include a deferred component which will vary with exposure to the market; and
3. LTI which is also intended to deliver a variable reward based on long-term measures of Company
performance.
For the FY21 period, a 10-50% weighting component of STIs was tied to delivery of the Group Financial
Target of $17.2M annual operating profit, with additional weightings this year on specific business line,
strategic growth and diversification targets applied to the relevant KMP. The STI components related to
financial performance continue to be paid according to quarterly operating profit targets to drive strong results
throughout the full period. This component is awarded after each relevant quarter throughout the year and
after the final quarter (i.e. during FY22).
The Board assessed the extent to which target levels of performance had been achieved and used the pre-
determined scales to calculate the total award payable for the Financial components of the STI. Overall in
FY21 STI awards were up 27% compared to FY20. This was due to the KMP exceeding strategic growth targets
through highly successful acquisitions and Asia growth and also takes into account the COVID-19 impact which
resulted in comparatively lower STI last year.
Due to overall strong KMP performance efforts, the Company delivered 111% of the original profit target.
Payment of STI therefore included accelerators tied to the Group Operating Profit as well as components
for the respective KMP related to profit from strategic acquisitions and Asia operating profit, which was also
exceeded by 123%. Where specific business line and diversification KPIs allocated to the relevant KMP were
not met, STI payments were paid accordingly below target.
Non-financial KPIs according to the Company Balanced Scorecard were allocated to each KMP with a 20%
weighting for the FY21 period and achievements assessed and also awarded after the close of the financial
year. The combination of financial, non-financial KPIs and accelerators resulted in an award to KMP of
between 77% to 120% of target STI.
This method of performance assessment has been maintained as the most objective approach to short term
incentive governance and drives the desired behaviours to optimise strong quarterly results and maintain
momentum throughout the year as well as incentivise KMP towards specific strategic growth initiatives and
customer, process and people and culture targets over the full period.
The second part, being 50%, of the FY19 LTI grant that commenced in July 2018 vested at the end of
June 2021.
KMP achievement for the three-year tranche was as follows:
y Gross profit growth - achievement at the Stretch level
y EPS growth – achievement between Target and Stretch level (after excluding capital raising impacts and
Japan investment)
y iTSR – achievement at the Stretch level.
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rhipe 2021 Annual Report
The Board is therefore of the view that LTI outcomes align appropriately with the performance outcomes of
the business.
It is the Board’s view that the combination of quarterly financial targets and annual awards for the STI related
to financial and non-financial targets continued the momentum to drive a strong close to results at the end of
each quarter throughout FY21, as well as build a sustainable business environment aligned to the continued
growth strategy. The Operating Profit and non-financial targets for the STI and the extended targets for the
LTI continued to provide executives with challenging but attainable and controllable targets that have led to
good results for the business and for shareholders in FY21 despite difficult circumstances.
5.3 Links between Company Strategy and Remuneration
The Company intends to attract the superior talent required to successfully implement the Company’s
strategies at a reasonable and appropriately variable cost by:
y Positioning Base Packages (the fixed element) around relevant market data benchmarks when they are
undertaken
y Supplementing the Base Package with at-risk remuneration, being incentives that motivate Executives to
focus on:
– Short to mid-term objectives linked to the strategy via KPIs and annual performance assessments. The
percentage of total remuneration that constitutes an executive’s STI varies depending on the size of the
role and its impact on the attainment of the Company’s short-term targets; and
– Long-term value creation for shareholders by linking a material component of remuneration to those
factors that underpin the Company’s long-term strategy, including expansion into new regions and
diversification of products and programs.
The Board remains confident that the remuneration strategy continues to support and drives the Company’s
medium and longer-term strategy.
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rhipe 2021 Annual Report
6.
Changes in Equity held by KMP
The table outlines the changes in the number of shares held by executives over the financial year:
Ordinary Shares
Balance At
Beginning of the
Year
Granted As
Remuneration
During The Year
Issued On
Exercise of
Options or
Rights During
The Year
Other Changes
During the Year
Balance At End
of The Year
Notes
Mr Gary Cox
-
-
-
-
-
Ms Inese Kingsmill
32,904
-
-
-
32,904
Mr Olivier Dispas
-
-
-
-
-
Mr Dominic O’Hanlon
3,057,840
-
388,618
(788,618)
2,657,840
1,2
Ms Dawn Edmonds
2,702,294
-
-
-
2,702,294
Mr Mark Pierce
320,000
-
-
-
320,000
Mr Michael Tierney
2,007,191
-
-
(250,000)
1,757,191
Mr Mark McLellan
369,984
-
233,171
(369,984)
233,171
1,2
Mr Warren Nolan
1,028,487
-
194,309
-
1,222,796
2
Mr Chris Sharp
779,225
-
170,991
(950,216)
-
1,2,3
Total
10,297,925
-
987,089
(2,358,818)
8,926,196
1. The KMP disposed of ordinary shares during the period
2. The KMP converted performance rights during the period
3. KMP resigned 28 February 2021
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rhipe 2021 Annual Report
All options and rights in the following table were issued by rhipe Limited unless stated otherwise. The table
outlines the changes in the number of options and rights held by NEDs and KMP over the financial year:
Options and Rights
Balance At
Beginning
of the Year
Granted As
Compensation
During The Year
Exercised
No.
Forfeited
Rights During
the Year
& Other
Balance At End
Of The Year
Balance Vested
At
30 June 2021 &
Exercisable
Balance Not
Vested & Not
Exercisable
At
30 June 2021
Notes
Gary Cox
Options
-
-
-
-
-
-
-
Performance
Rights
-
-
-
-
-
-
-
Olivier Dispas
Options
-
-
-
-
-
-
-
Performance
Rights
-
-
-
-
-
-
-
Inese Kingsmill
Options
-
-
-
-
-
-
-
Performance
Rights
-
-
-
-
-
-
-
Dominic O’Hanlon
Options
-
-
-
-
-
-
-
Performance
Rights
1,233,075
614,726
(388,618)
(29,476)
1,429,707
-
1,429,707
1,2
Dawn Edmonds
Options
-
-
-
-
-
-
-
Performance
Rights
-
-
-
-
-
-
-
Mark Pierce
Options
-
-
-
-
-
-
-
Performance
Rights
-
-
-
-
-
-
-
Michael Tierney
Options
-
-
-
-
-
-
-
Performance
Rights
-
-
-
-
-
-
-
Mark McLellan
Options
-
-
-
-
-
-
-
Performance
Rights
739,846
335,304
(233,171)
(17,685)
824,294
-
824,294
1,2
Warren Nolan
Options
-
-
-
-
-
-
-
Performance
Rights
616,535
245,890
(194,309)
(14,738)
653,378
-
653,378
1,2
Chris Sharp
Options
-
-
-
-
-
-
-
Performance
Rights
542,551
245,890
(170,991)
(617,450)
-
-
-
1,2,3
Total
Options
-
-
-
-
-
-
-
Performance
Rights
3,132,007
1,441,810
(987,089)
(679,349)
2,907,379
-
2,907,379
1. KMP were granted performance rights as part of their remuneration and incentive packages for FY21 from under the rhipe Performance Rights Plan which was approved by
shareholders in FY21.
2. Number of performance rights granted in FY21 is based on stretch (maximum) amount the KMPs can be awarded.
3. KMP resigned 28 February 2021
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rhipe 2021 Annual Report
The number of Performance Rights granted to KMP of the Group during the year is as follows:
Number of rights
2021 Equity Grants
Instrument
Grant Date
Threshold
Target
Stretch
Dominic O’Hanlon
Performance Rights
15-Jan-21
153,680
307,363
614,726
Mark McLellan
Performance Rights
15-Jan-21
83,824
167,651
335,304
Warren Nolan
Performance Rights
15-Jan-21
61,471
122,944
245,890
Chris Sharp
Performance Rights
15-Jan-21
61,471
122,944
245,890
2021 Equity
Grants
Exercise
Price
$
Value Per
Security
$
Grant Value
$
Value
Expensed in
FY21
Percentage
Remaining
as Unvested
%
Service period
Expiry Date
for Exercise
Notes
Dominic O’Hanlon
–
1.79
550,000
179,500
100
Jul 20 to Jun 23
15-Jan-36
2,3,4
Mark McLellan
–
1.79
300,000
97,908
100
Jul 20 to Jun 23
15-Jan-36
2,3,4
Warren Nolan
–
1.79
220,000
71,799
100
Jul 20 to Jun 23
15-Jan-36
2,3,4
Chris Sharp
–
1.79
220,000
-
-
Jul 20 to Jun 23
15-Jan-36 1,2,3,4
1. Chris Sharp left rhipe on 28 February 2021 and forfeited all performance rights associated with FY20 and FY21 LTI plans.
2. Equity settled share-based payments expense represents amounts accrued for performance rights that have not vested and do not represent payments made to KMP
3. Value per security represents grant value awarded to executives over the base number of performance rights
4. The fair value of these performance rights is disclosed in Note 22 of the financial report
7. NED Fee Policy Rates for FY21 and FY22, and Fee Limit
Non-Executive Director fees are managed within an annual fees limit (AFL or fee pool) as specified in the
Company’s constitution and it remains at $700,000 in FY21 as approved at the AGM in 2019.
The following table outlines the NED fee policy rates that were applicable during FY21:
Function
Role
NED Fee Policy Rates
From 1 July 2020 to 30 June 2021
Main Board
Chair
$160,000
Member
$70,000
Committee Chair
$10,000
From time to time, a daily fee may be paid on such occasions where approved special work is undertaken
outside of the expected commitments of NEDs. Such fees paid to Mr Gary Cox in FY21 are reported in Table
8.
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8. Remuneration Records for FY21 – Statutory and share-based reporting
8.1 Senior Executive Remuneration
The following table outlines the remuneration received by Senior Executives of the Company during FY20 prepared according to statutory disclosure
requirements and applicable accounting standards:
DIRECTORS
Role(s)
Year
Short term benefits
Post
employment
Long Term
Benefits
Share-based
payments/
LTI**
Termination
payments
Total Remuneration
Package (TRP) ($)
Performance
related %
Notes
Salary & Fees
($)
Bonus/STI*
($)
Other
($)
Superannua
tion ($)
Employee
Entitlements
($)
Performance
rights
($)
Dominic O’Hanlon
Managing
Director & CEO
2021
504,000
326,563
-
21,694
111,747
651,544
-
1,615,548
61%
Managing
Director & CEO
2020
504,000 234,035
-
21,003
74,456
958,487
-
1,791,981
67%
Dawn Edmonds
NED
2021
80,000
-
-
-
-
-
-
80,000
0%
2
NED
2020
71,667
-
-
-
-
-
-
71,667
0%
2
Gary Cox
Non-Executive Chairman
2021
160,000
-
28,000
-
-
-
-
188,000
0%
1,2
Non-Executive Chairman
2020
155,833
-
-
-
-
-
-
155,833
0%
2
Mark Pierce
NED
2021
80,000
-
-
-
-
-
-
80,000
0%
2
NED
2020
71,667
-
-
-
-
-
-
71,667
0%
2
Michael Tierney
NED
2021
70,000
-
-
-
-
-
-
70,000
0%
2
NED
2020
65,833
-
-
-
-
-
-
65,833
0%
2
Inese Kingsmill
NED
2021
80,000
-
-
-
-
-
-
80,000
0%
2
NED
2020
70,833
-
-
-
-
-
-
70,833
0%
2
Olivier Dispas
NED
2021
70,000
-
-
-
-
-
-
70,000
0%
2
NED
2020
65,833
-
-
-
-
-
-
65,833
0%
2
Sub-Total
Current Directors
2021 1,044,000 326,563
28,000
21,694
111,747
651,544
-
2,183,548
45%
2020 1,005,666 234,035
-
21,003
74,456
958,487
-
2,293,647
52%
1. Additional work performed by Mr Cox on Crayon transaction.
2. Director’s fees are invoiced and are net of GST.
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rhipe 2021 Annual Report
OTHER EXECUTIVES
Role(s)
Year
Short term benefits
Post
employment
Long Term
Benefits
Share-based
payments/
LTI**
Termination
payments
Total Remuneration
Package (TRP) ($)
Performance
related %
Notes
Salary & Fees
($)
Bonus/STI* ($)
Other ($)
Superannuation
($)
Employee
Entitlements
($)
Performance
rights
($)
Mark McLellan
CFO & COO
2021 450,000 300,000
-
21,694
25,555
381,133
-
1,178,382
58%
1
CFO & COO
2020 450,000 170,208
-
21,003
15,966
575,089
-
1,232,266
60%
Warren Nolan
Executive-Solutions &
Professional Services
2021
375,000 133,066
-
21,694
118,153
307,820
-
955,733
46%
2
Executive - Solutions &
Professional Services
2020
375,000
171,813
-
21,003
117,246
479,241
-
1,164,303
56%
Chris Sharp
Executive - Products &
Licencing
2021
258,630 170,980
-
8,117
-
176,701
126,547
740,975
47%
3,4,5
Executive - Products &
Licencing
2020
420,019
155,871
-
13,182
51,373
421,732
-
1,062,177
54%
Sub-Total
Other Current
Executives
2021 1,083,630 604,046
-
51,505
143,708
865,654
126,547
2,875,090
51%
2020 1,245,019 497,892
-
55,188
184,585 1,476,062
-
3,458,746
57%
Grand Total
All Current KMP
2021 2,127,630 930,609
28,000
73,199
255,455
1,517,198
126,547
5,058,638
48%
2020 2,250,685
731,927
-
76,191
259,041 2,434,549
-
5,752,393
55%
1 Mr McLellan’s TRP ratios were amended with STI increased effective 1 July 2020.
2 Mr Nolan’s .TRP ratios were amended with STI and LTI decreased in relation to base effective 1 July 2020.
3 Mr Sharp left the company on 28 February 2021. Termination benefits exclude accrued leave of A$27,604 (see
section 9)
2 Mr Sharp is paid in SGD, Salary and local Provident Fund was converted to AUD based on the Reserve Bank of
Australia average rate for the financial year. Bonuses are accrued in AUD and is paid in SGD on payment date.
3 Mr Sharp STI includes employer CPF contribution payable in Singapore
* Please note that the STI value reported in this table is the STI that was accrued for the relevant financial year. Actual
cash payments may differ.
** Please note that the LTI value reported in this table is the amortised accounting charge of all grants that were not
lapsed or vested at the start of the reporting period and do not represent payments to KMP. Where a market-based
measure of performance is used such as TSR, no adjustments can be made to reflect actual LTI vesting. However, in
relation to non-market conditions, such as EPS, adjustments must be made to ensure the accounting charge matches
the vesting.
The table below shows the LTI for FY21 as well as prior years’ LTI that was expensed in FY21:
Total SBPE for FY21 per KMP:
Prior Years LTI
2021 LTI
Total
Dominic O’Hanlon
472,044
179,500
651,544
Mark McLellan
283,225
97,908
381,133
Warren Nolan
236,021
71,799
307,820
Chris Sharp
176,701
-
176,701
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rhipe 2021 Annual Report
9. Employment Terms for Key Management Personnel
9.1 Service Agreements
A summary of contract terms in relation to executive KMP is presented below:
Name
Position Held at Close of FY21
Duration of
Contract
Period of Notice
Termination
Payments
From Company
From KMP
Dominic O’Hanlon
Managing Director & CEO
Open ended
6 months
6 months
Up to 12 months*
Mark McLellan
Chief Financial Officer & Chief
Operations Officer
Open ended
6 months
3 months
Up to 12 months*
Warren Nolan
Group Executive - Solutions &
Professional Services
Open ended
3 months
3 months
Up to 12 months*
Chris Sharp
Group Executive - Products
& Licencing
Resigned 28th
February 2021
1 months
1 months
Up to 12 months*
* Under the Corporations Act the Termination Benefit Limit is 12 months average Salary (last 3 years) unless shareholder approval is obtained.
The treatment of incentives in the case of termination is addressed in the STI and LTI Plan sections of
this report. On appointment to the Board, all NEDs enter into a service agreement with the Company. The
service agreement summarises the Board policies and terms, including compensation relevant to the office of
the Director.
A summary of the appointment terms in relation to NEDs is presented below:
Name
Position Held at Close of FY21
Duration of
Contract
Period of Notice
Termination
Payments
From Company
From KMP
Gary Cox
Non-Executive Chairman
3 years
3 months
3 months
None
Dawn Edmonds
NED
3 years
3 months
3 months
None
Mark Pierce
NED
3 years
3 months
3 months
None
Michael Tierney
NED
3 years
3 months
3 months
None
Inese Kingsmill
NED
3 years
3 months
3 months
None
Olivier Dispas
NED
3 years
3 months
3 months
None
Termination payments consist of notice period only, no other benefits apply.
Other Remuneration Related Matters
The following outlines other remuneration related matters that may be of interest to stakeholders, in the
interests of transparency and disclosure:
y Chris Sharp departed the company on 28 February 2021. A redundancy payment of $126,547 and accrued
leave of $27,604 was made. As per the STIP, the full annual target of $170,980 was paid for KPIs met
(see section 7.1)
y There were no loans to Directors or other KMP at any time during the reporting period
y There were no other relevant material transactions involving KMP other than compensation and
transactions concerning shares, performance rights/options as discussed in this report.
10. External Remuneration Consultant Advice
The Board did not engage any independent expert external remuneration consultants in FY21.
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rhipe 2021 Annual Report
Auditor’s Independence Declaration
Ernst & Young
200 George Street
Sydney NSW 2000 Australia
GPO Box 2646 Sydney NSW 2001
Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
ey.com/au
Auditor’s independence declaration to the directors of rhipe Limted
As lead auditor for the audit of the financial report of rhipe Limited for the financial year ended 30
June 2021, I declare to the best of my knowledge and belief, there have been:
a.
No contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
b.
No contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of rhipe Limited and the entities it controlled during the financial year.
Ernst & Young
Graham Leonard
Partner
31 August 2021
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
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rhipe 2021 Annual Report
Consolidated Statement of Comprehensive Income
And Other Comprehensive Income For The Year Ended 30 June 2021
rhipe Limited and Controlled Entities
CONSOLIDATED GROUP
Note
2021
$’000
2020
$’000
Revenue
4(a)
66,817
55,828
Cost of Sales
(6,432)
(3,448)
Gross Profit
60,385
52,380
Other income
4(b)
108
3,611
Sales and Marketing
(26,592)
(29,015)
General and Administration
(22,881)
(16,162)
Impairment expense
-
(3,425)
Other expenses
5(c)
(234)
(97)
Finance cost
5(e)
(92)
(142)
Total expenses
5
(49,799)
(48,841)
Profit before income tax
10,694
7,150
Tax expense
6
(3,686)
(2,351)
Profit after tax
7,008
4,799
Attributable to:
Equity holders of the parent
7,295
5,015
Non-controlling interest
(287)
(216)
7,008
4,799
EARNINGS PER SHARE
- Basic, profit for the year attributable to ordinary equity holders of the parent (cents)
7
4.54
3.49
- Diluted, profit for the year attributable to ordinary equity holders of the parent (cents)
7
4.42
3.41
OTHER COMPREHENSIVE INCOME
Items that may be reclassified subsequently to profit or loss in subsequent periods:
Exchange differences on translating foreign operations
(783)
2
Other comprehensive income for the period
(783)
2
Total comprehensive income
6,225
4,801
The accompanying notes form part of these financial statements.
51
rhipe 2021 Annual Report
CONSOLIDATED GROUP
Note
2021
$’000
2020
$’000
CURRENT ASSETS
Cash and cash equivalents
8
53,789
60,925
Trade and other receivables
9
56,172
42,281
Other assets
10
2,084
1,504
Total Current Assets
112,045
104,710
NON-CURRENT ASSETS
Right of use assets
11
1,919
3,191
Property, plant and equipment
12
1,712
1,804
Deferred tax assets
16
3,722
2,660
Intangible assets
13
54,059
36,611
Total Non-Current Assets
61,412
44,266
Total Assets
173,457
148,976
CURRENT LIABILITIES
Trade and other payables
14
65,078
47,947
Unearned revenue
15
1,928
274
Tax liabilities
16
3,367
1,688
Lease liability
11
1,821
1,656
Provisions
17
1,860
1,158
Deferred contingent consideration
18
3,739
939
Total Current Liabilities
77,793
53,662
NON-CURRENT LIABILITIES
Deferred tax liabilities
16
780
72
Lease liability
11
550
2,203
Provisions
17
670
501
Deferred contingent consideration
18
2,876
1,878
Total Non-Current Liabilities
4,876
4,654
Total Liabilities
82,669
58,316
Net Assets
90,788
90,660
EQUITY
Issued capital
19
77,758
77,438
Treasury shares
(1,533)
(729)
Reserves
5,056
6,044
Accumulated profits
9,522
7,848
Equity attributable to equity holders of the parent
90,803
90,601
Non-controlling interest
(15)
59
Total Equity
90,788
90,660
The accompanying notes form part of these financial statements.
Consolidated Statement of Financial Position
As at 30 June 2021
rhipe Limited And Controlled Entities
52
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rhipe 2021 Annual Report
Share Capital
Reserves
CONSOLIDATED GROUP
Ordinary
$’000
Treasury
$’000
Accumu
lated
Profits/
(losses)
$’000
Foreign
Currency
Translation
Reserve
$’000
Equity
Settled
Employee
Benefits
Reserve
$’000
Other
Equity
$’000
Total
$’000
Non-con
trolling
interest
$’000
Total equity
$’000
Balance at 1 July 2019
43,320
-
5,635
26
2,168
-
51,149
-
51,149
COMPREHENSIVE INCOME
Profit for the year
-
-
5,015
-
-
-
5,015
(216)
4,799
Exchange differences on translation
of subsidiaries
-
-
-
2
-
-
2
-
2
Total comprehensive income for the year
-
-
5,015
2
-
-
5,017
(216)
4,801
TRANSACTIONS WITH OWNERS, IN THEIR CAPACITY AS OWNERS, AND OTHER TRANSFERS
Shares issued during the period
34,386
-
-
-
-
-
34,386
-
34,386
Shares purchased on the market by ESS Trust
-
(729)
-
-
-
-
(729)
-
(729)
Transaction costs, net of tax
(1,058)
-
-
-
-
-
(1,058)
-
(1,058)
Deferred tax assets on cost of capital raise
315
-
-
-
-
-
315
-
315
Set up of rhipe Japan
-
-
-
-
-
-
-
275
275
Share based payments
-
-
-
-
37
-
37
-
37
Equity settled deferred consideration
-
-
-
-
-
1,174
1,174
-
1,174
Dividend paid
-
-
(2,802)
-
-
-
(2,802)
-
(2,802)
Share based payments
-
-
-
-
3,112
-
3,112
-
3,112
Transfer from SBP Reserves-options exercised
475
-
-
-
(475)
-
-
-
-
Total transactions with owners
and other transfers
34,118
(729)
(2,802)
-
2,674
1,174
34,435
275
34,710
Balance at 30 June 2020
77,438
(729)
7,848
28
4,842
1,174
90,601
59
90,660
Balance at 1 July 2020
77,438
(729)
7,848
28
4,842
1,174
90,601
59
90,660
COMPREHENSIVE INCOME
Profit for the year
-
-
7,295
-
-
-
7,295
(287)
7,008
Exchange differences on translation
of subsidiaries
-
-
-
(783)
-
-
(783)
-
(783)
Total comprehensive income for the year
-
7,295
(783)
-
-
6,512
(287)
6,225
TRANSACTIONS WITH OWNERS, IN THEIR CAPACITY AS OWNERS, AND OTHER TRANSFERS
Shares issued during the period
50
-
-
-
-
-
50
-
50
Shares purchased on the market by ESS Trust
-
(3,175)
-
-
-
-
(3,175)
-
(3,175)
Transaction costs, net of tax
(4)
-
-
-
-
-
(4)
-
(4)
Shares bought back during the period
(117)
-
-
-
-
-
(117)
-
(117)
rhipe Japan non-controlling interest
-
-
-
-
-
-
-
213
213
Share based payments
-
-
-
-
2,531
-
2,531
-
2,531
Equity settled deferred consideration
-
-
-
-
-
-
-
-
-
Dividend paid
-
-
(5,621)
-
-
-
(5,621)
-
(5,621)
Shares distributed to employees
-
26
-
-
-
-
26
-
26
Transfer from SBP Reserves-options exercised
391
2,345
-
-
(2,736)
-
-
-
-
Total transactions with owners and other
transfers
320
(804)
(5,621)
-
(205)
-
(6,310)
213
(6,097)
Balance at 30 June 2021
77,758
(1,533)
9,522
(755)
4,637
1,174
90,803
(15)
90,788
The accompanying notes form part of these financial statements.
Consolidated Statement of Changes in Equity
For The Year Ended 30 June 2021
rhipe Limited and Controlled Entities
53
rhipe 2021 Annual Report
CONSOLIDATED GROUP
Note
2021
$’000
2020
$’000
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from partners
383,242
322,380
Payments to vendors/customers and employees
(359,424)
(304,137)
Interest received
108
111
Interest paid
(92)
(142)
Income tax paid
(3,978)
(4,476)
Net cash provided by operating activities
23
19,856
13,736
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment
(1,047)
(1,371)
Payments for intangibles
(1,626)
(2,906)
Payment for subsidiary on acquisition (net of cash acquired)
3
(13,531)
(2,000)
Net cash used in investing activities
(16,204)
(6,277)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares
50
34,386
Buy back of shares
(117)
-
Purchase of Treasury shares
(3,175)
(729)
Payment of principal portion of lease liability
(1,992)
(1,893)
Dividend paid
(5,622)
(2,802)
Costs associated with issue of shares
(4)
(1,058)
Net cash provided by / (used in) financing activities
(10,860)
27,903
Net decrease in cash held
(7,208)
35,362
Cash and cash equivalents at beginning of financial year
60,925
25,530
Effect of exchange rates on cash holdings in foreign currencies
72
33
Cash and cash equivalents at end of financial year
8
53,789
60,925
The accompanying notes form part of these financial statements.
Consolidated Statement of Cash Flows
For The Year Ended 30 June 2021
rhipe Limited and Controlled Entities
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rhipe 2021 Annual Report
These consolidated financial statements and notes represent those of rhipe Limited and subsidiaries
(the “consolidated Group” or “Group”).
The financial statements were authorised for issue on 31 August 2021 by the directors of the Company.
Note 1. Summary of Significant Accounting Policies
(a) Basis of Preparation
These general purpose financial statements have been prepared in accordance with the Corporations Act
2001, Australian Accounting Standards and Interpretations of the Australian Accounting Standards Board and
International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board.
The Group is a for‑profit entity for financial reporting purposes under Australian Accounting Standards. Material
accounting policies adopted in the preparation of these financial statements are presented throughout the
financial statements and have been consistently applied unless stated otherwise.
The consolidated financial statements have been prepared on the basis of historical cost, except for certain
financial instruments that are measured at fair value at the end of each reporting period, as explained in the
accounting policies below. Historical cost is generally based on the fair value of the consideration given in
exchange for goods and services. All amounts are presented in Australian dollars, unless otherwise noted.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date, regardless of whether that price is directly
observable or estimated using another valuation technique. In estimating the fair value of an asset or a
liability, the Group takes into account the characteristics of the asset or liability if market participants would
take those characteristics into account when pricing the asset or liability at the measurement date. Fair value
for measurement and/or disclosure purposes in these consolidated financial statements is determined on such
a basis.
(b) Basis of Consolidation
The consolidated financial statements incorporate all of the assets, liabilities and results of rhipe Limited (the
“Parent”) and its subsidiaries. Subsidiaries are entities the Parent controls.
The Parent controls an entity when it is exposed to, or has rights to, variable returns from its involvement with
the entity and has the ability to affect those returns through its power over the entity. A list of the subsidiaries
is provided in Note 28.
The assets, liabilities and results of all subsidiaries are fully consolidated into the financial statements of
the Group from the date on which control is obtained by the Group. The consolidation of a subsidiary is
discontinued from the date that control ceases. Inter-company transactions, balances and unrealised gains
or losses on transactions between Group entities are fully eliminated on consolidation. Accounting policies
of subsidiaries have been changed and adjustments made where necessary to ensure uniformity of the
accounting policies adopted by the Group.
Equity interests in a subsidiary not attributable, directly or indirectly, to the Group are presented as ‘Non-
controlling Interests’. The Group initially recognises non-controlling interests where the Group is entitled to a
Notes to the Financial Statements
For The Year Ended 30 June 2021
rhipe Limited And Controlled Entities
55
rhipe 2021 Annual Report
proportionate share of the subsidiary’s net assets on liquidation at either fair value or at the non-controlling
interests’ proportionate share of the subsidiary’s net assets.
Subsequent to initial recognition, non-controlling interests are attributed their share of profit or loss and each
component of other comprehensive income. Non-controlling interests are shown separately within the equity
section of the statement of financial position and statement of comprehensive income
(c) Business Combination and Goodwill
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured
as the aggregate of the consideration transferred, which is measured at acquisition date fair value, and the
amount of any non-controlling interests in the acquiree. For each business combination, the Group elects
whether to measure the non-controlling interests in the acquiree at fair value or at the proportionate share
of the acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred and included in
administrative expenses.
When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate
classification and designation in accordance with the contractual terms, economic circumstances and pertinent
conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by
the acquiree.
Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the
acquisition date. Contingent consideration classified as equity is not remeasured and its subsequent settlement
is accounted for within equity. Contingent consideration classified as an asset or liability that is a financial
instrument and within the scope of AASB 9 Financial Instruments, is measured at fair value with the changes
in fair value recognised in the statement of profit or loss in accordance with AASB 9. Other contingent
consideration that is not within the scope of AASB 9 is measured at fair value at each reporting date with
changes in fair value recognised in profit or loss.
Goodwill is initially measured at cost (being the excess of the aggregate of the consideration transferred and
the amount recognised for non-controlling interests and any previous interest held over the net identifiable
assets acquired and liabilities assumed). If the fair value of the net assets acquired is in excess of the
aggregate consideration transferred, the Group re-assesses whether it has correctly identified all of the assets
acquired and all of the liabilities assumed and reviews the procedures used to measure the amounts to be
recognised at the acquisition date. If the reassessment still results in an excess of the fair value of net assets
acquired over the aggregate consideration transferred, then the gain is recognised in profit or loss.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose
of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to
each of the Group’s cash-generating units that are expected to benefit from the combination, irrespective of
whether other assets or liabilities of the acquiree are assigned to those units.
Where goodwill has been allocated to a cash-generating unit (CGU) and part of the operation within that
unit is disposed of, the goodwill associated with the disposed operation is included in the carrying amount
of the operation when determining the gain or loss on disposal. Goodwill disposed in these circumstances
is measured based on the relative values of the disposed operation and the portion of the cash-generating
unit retained.
Notes to the Financial Statements
Notes to the Financial Statements
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(d) Financial Instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or
equity instrument of another entity.
(i) Financial assets Initial recognition and subsequent measurement
Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value
through other comprehensive income (OCI), and fair value through profit or loss.
The Group’s business model for managing financial assets refers to how it manages its financial assets in
order to generate cash flows. The business model determines whether cash flows will result from collecting
contractual cash flows, selling the financial assets, or both.
Purchases or sales of financial assets that require delivery of assets within a time frame established by
regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e. the
date that the Group commits to purchase or sell the asset. For purposes of subsequent measurement, financial
assets are classified in four categories:
y Financial assets at amortised cost (debt instruments)
y Financial assets at fair value through OCI with recycling of cumulative gains and losses (debt instruments)
y Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses upon
derecognition (equity instruments)
y Financial assets at fair value through profit or loss. Financial assets at amortised cost (debt instruments.)
Financial assets at amortised cost is the category that is the most relevant to the Group. The Group measures
financial assets at amortised cost if both of the following conditions are met:
y The financial asset is held within a business model with the objective to hold financial assets in order to
collect contractual cash flows; and
y The contractual terms of the financial asset give rise on specified dates to cash flows that are solely
payments of principal and interest on the principal amount outstanding.
The Group’s financial assets at amortised cost includes trade receivables and cash included under other current
financial assets.
The Group measures debt instruments at fair value through OCI if both of the following conditions are met:
y The financial asset is held within a business model with the objective of both holding to collect contractual
cash flows and selling; and
y The contractual terms of the financial asset give rise on specified dates to cash flows that are solely
payments of principal and interest on the principal amount outstanding.
For debt instruments at fair value through OCI, interest income, foreign exchange revaluation and impairment
losses or reversals are recognised in the statement of profit or loss and computed in the same manner as for
financial assets measured at amortised cost.
Notes to the Financial Statements
57
rhipe 2021 Annual Report
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets)
is primarily derecognised (i.e., removed from the Group’s consolidated statement of financial position) when:
y The rights to receive cash flows from the asset have expired; or
y The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation
to pay the received cash flows in full without material delay to a third party under a ‘pass-through’
arrangement and either:
(a) the Group has transferred substantially all the risks and rewards of the asset, or
(b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but
has transferred control of the asset.
When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-
through arrangement, it evaluates if, and to what extent, it has retained the risks and rewards of ownership.
When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor
transferred control of the asset, the Group continues to recognise the transferred asset to the extent of its
continuing involvement. In that case, the Group also recognises an associated liability. The transferred asset
and the associated liability are measured on a basis that reflects the rights and obligations that the Group
has retained.
Impairment of financial assets
The Group recognises an allowance for expected credit losses (ECLs) for all debt instruments not held at
fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due
in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an
approximation of the original effective interest rate. The expected cash flows will include cash flows from
the sale of collateral held or other credit enhancements that are integral to the contractual terms. For trade
receivables, the Group applies a simplified approach in calculating ECLs. Therefore, the Group does not track
changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date.
The Group has established a provision matrix that is based on its historical credit loss experience, adjusted for
forward-looking factors specific to the debtors and the economic environment.
(ii) Financial liabilities
Initial recognition and subsequent measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss,
loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge,
as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and
payables, net of directly attributable transaction costs.
The Group’s financial liabilities include trade and other payables, loans and borrowings including bank
overdrafts, and derivative financial instruments.
Notes to the Financial Statements
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Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
y Financial liabilities at fair value through profit or loss
y Financial liabilities at fair value through profit or loss include financial liabilities held for trading and
financial liabilities designated upon initial recognition as at fair value through profit or loss.
y Gains or losses on liabilities held for trading are recognised in the statement of profit or loss.
y Financial liabilities at amortised cost (loans and borrowings)
This is the category most relevant to the Group. After initial recognition, interest-bearing loans and
borrowing are subsequently measured at amortised cost using the EIR method. Gains and losses are
recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation
process. Amortised cost is calculated by taking into account any discount or premium on acquisition and
fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the
statement of profit or loss.
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or canceled or expires.
When an existing financial liability is replaced by another from the same lender on substantially different
terms, or the terms of an existing liability are substantially modified, such an exchange or modification is
treated as the derecognition of the original liability and the recognition of a new liability. The difference in the
respective carrying amounts is recognised in the statement of profit or loss.
(e) Impairment of Assets
At the end of each reporting period, the Group assesses whether there is any indication that an asset may be
impaired. The assessment will include the consideration of external and internal sources of information. If such
an indication exists, an impairment test is carried out on the asset by comparing the recoverable amount of
the asset, being the higher of the asset’s fair value less costs to sell and value-in-use, to the asset’s carrying
amount. Any excess of the asset’s carrying amount over its recoverable amount is recognised immediately in
profit or loss.
Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the
recoverable amount of the cash-generating unit to which the asset belongs.
Impairment testing is performed annually for goodwill, intangible assets with indefinite lives and intangible
assets not yet available for use. Due to a restructuring of services division, impairment testing was conducted
on Dynamics Business IT Solutions as at 31st March 2021 when the DBITS CGU was no longer separately
identifiable form the rhipe CGU (refer to note 13).
Notes to the Financial Statements
59
rhipe 2021 Annual Report
(f) Foreign Currency Transactions and Balances
Functional and presentation currency
The functional currency of each of the Group’s entities is measured using the currency of the primary
economic environment in which that entity operates. The consolidated financial statements are presented in
Australian dollars which is the parent entity’s functional currency.
Transaction and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing
at the date of the transaction. Foreign currency monetary items are translated at the year-end exchange rate.
Non‑monetary items measured at historical cost continue to be carried at the exchange rate at the date of the
transaction. Non‑monetary items measured at fair value are reported at the exchange rate at the date when
fair values were determined.
Exchange differences arising on the translation of monetary items are recognised in profit or loss, except
where deferred in equity when the exchange difference arises on monetary items receivable from or payable
to a foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the
net investment in the foreign operation).
Exchange differences arising on the translation of non-monetary items are recognised directly in other
comprehensive income to the extent that the underlying gain or loss is recognised in other comprehensive
income, otherwise the exchange difference is recognised in the profit or loss.
Group companies
The financial results and position of foreign operations whose functional currency is different from the Group’s
presentation currency are translated as follows:
y Assets and liabilities are translated at exchange rates prevailing at the end of the reporting period
y Income and expenses are translated at average exchange rates for the period; and
y Retained earnings are translated at the exchange rates prevailing at the date of the transaction.
Exchange differences arising on translation of foreign operations with functional currencies other than
the Australian dollar are recognised in other comprehensive income and included in the foreign currency
translation reserve in the statement of financial position. The cumulative amount of these differences is
reclassified into profit or loss in the period in which the operation is disposed of.
(g) Employee Benefits
Short-term employee benefits
Provision is made for the Group’s obligation for short-term employee benefits. Short-term employee benefits
are benefits (other than termination benefits) that are expected to be settled wholly before 12 months after
the end of the annual reporting period in which the employees render the related service, including wages,
salaries and sick leave. Short-term employee benefits are measured at the (undiscounted) amounts expected
to be paid when the obligation is settled.
Notes to the Financial Statements
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rhipe 2021 Annual Report
Other long-term employee benefits
Provision is made for employees’ long service leave and annual leave entitlements are expected to be settled
after 12 months after the end of the annual reporting period in which the employees render the related
service. Other long‑term employee benefits are measured at the present value of the expected future
payments to be made to employees.
Expected future payments incorporate anticipated future wage and salary levels, durations of service and
employee departures and are discounted at rates determined by reference to market yields at the end of the
reporting period on government bonds that have maturity dates that approximate the terms of the obligations.
Any remeasurements for changes in assumptions of obligations for other long-term employee benefits are
recognised in profit or loss in the periods in which the changes occur.
The Group’s obligations for long-term employee benefits are presented as non-current provisions in its
statement of financial position, except where the Group does not have an unconditional right to defer
settlement for at least 12 months after the end of the reporting period, in which case the obligations are
presented as current provisions.
(h) Goods and Services Tax (“GST”)
Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST
incurred is not recoverable from the Australian Taxation Office (“ATO”) or local tax authority.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount
of GST recoverable from, or payable to, the ATO or local tax authority is included with other receivables or
payables in the statement of financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or
financing activities which are recoverable from, or payable to, the ATO or local tax authority are presented as
operating cash flows included in receipts from customers or payments to suppliers.
(i) Rounding of Amounts
The Group has applied the relief available to it under ASIC Corporations (Rounding in Financial / Directors’
reports) Instrument 2016/191. Accordingly, amounts in the financial statements and directors’ report have been
rounded off to the nearest $1,000.
Notes to the Financial Statements
61
rhipe 2021 Annual Report
(j) Critical Accounting Estimates and Judgements
The Directors evaluate estimates and judgements incorporated into the financial statements based on historical
knowledge and best available current information. Estimates assume a reasonable expectation of future events
and are based on current trends and economic data, obtained both externally and within the Group.
Key Estimates and Judgements
i. Cash-generating unit and goodwill determination
Goodwill is allocated to cash-generating units and tested for impairment on an annual basis. Management
apply judgement in inputs and assumptions used in performing impairment testing including revenue forecasts,
operating cost projections, customer numbers, customer churn, discount rates and growth rates. Management
also apply judgement in determining cash-generating units and allocating the goodwill arising from business
combinations to these cash‑generating units. Following a restructuring of operations on 31 March 2021, DBITS
CGU cash inflows were no longer separately identifiable from the rhipe CGU. The recoverable amount of the
Asia Pacific region now includes 2 CGUs, rhipe and Services to which goodwill is recognised.
ii. Capitalisation of intangible assets
Internally generated intangible assets are capitalised in accordance with AASB 138: Intangible Assets.
Assumptions and judgements are made with regard to assessing the expected future economic benefits, the
economic useful life and the level of completion. At the point where activities no longer relate to development
but only to maintain the asset, capitalisation is discontinued.
iii. Equity settled compensation
The Group measures the cost of equity-settled transactions with employees by reference to the fair value of
the equity instruments at the date at which they are granted. The fair value is determined by using the Black-
Scholes model taking into account the terms and conditions upon which the instruments were granted. The
accounting estimates and assumptions relating to equity-settled share-based payments would have no impact
on the carrying amounts of assets and liabilities within the next annual reporting period but may impact profit
or loss and equity.
iv. Recoverability of trade and other receivables
Trade and other receivables include amounts that are past due but not impaired and balances that are
receivable from counter-parties and governments based in Asia. Other receivables include indirect taxes due
from governments in Asia. There is a high degree of judgment in estimating whether these receivables require
an impairment provision.
v. Contingent consideration
Contingent consideration resulting from business combinations, is valued at fair value at the acquisition date as
part of the business combination. The determination of the fair value is based on discounted cash flows. The
key assumptions take into consideration the probability of meeting each performance target.
As part of the accounting for the acquisition of Parallo Limited and Parallo Unit Trust, contingent consideration
with an estimated fair value of $3,761k was recognised on acquisition as a financial liability (refer to Note 3).
Based on current modelling at 30 June 2021, the fair value is $5,078k.
Notes to the Financial Statements
62
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rhipe 2021 Annual Report
As part of the accounting for the acquisition of Network2share Pty Ltd, contingent consideration with an
estimated fair value of $2,817k was recognised on acquisition (refer to Note 3). Based on current modelling
at 30 June 2021, the fair value is $1,536k. An amount of $1,174k was also recognised in equity at acquisition
and is not revalued.
Share-based payments
Senior Executives of the Group receive remuneration in the form of share-based payments, whereby
employees render services as consideration for equity instruments (equity-settled transactions).
The cost of equity-settled transactions is determined by the fair value at the date when the grant is made
using an appropriate valuation model.
That cost is recognised in employee benefits expense (Note 5), together with a corresponding increase in
equity (Share-based payment reserves), over the period in which the service and, where applicable, the
performance conditions are fulfilled (the vesting period). The cumulative expense recognised for equity-
settled transactions at each reporting date until the vesting date reflects the extent to which the vesting
period has expired and the Group’s best estimate of the number of equity instruments that will ultimately vest.
The expense or credit in the statement of profit or loss for a period represents the movement in cumulative
expense recognised as at the beginning and end of that period.
Service and non-market performance conditions are not taken into account when determining the grant
date fair value of awards, but the likelihood of the conditions being met is assessed as part of the Group’s
best estimate of the number of equity instruments that will ultimately vest. Market performance conditions
are reflected within the grant date fair value. Any other conditions attached to an award, but without an
associated service requirement, are considered to be non-vesting conditions. Non-vesting conditions are
reflected in the fair value of an award and lead to an immediate expensing of an award unless there are also
service and/or performance conditions. The dilutive effect of outstanding options is reflected as additional
share dilution in the computation of diluted earnings per share.
(k) New Accounting Standards, Interpretation and amendments adopted by the Group
The accounting policies adopted in the preparation of the consolidated financial statements are consistent with
those followed in the preparation of the Group’s annual consolidated financial statements for the year ended
30 June 2020, except for the adoption of new standards effective as of 1 July 2020 identified below.
AASB 2018-6 Amendments to Australian Accounting Standards - Definition of a business
The amendments clarify that to be considered a business, an integrated set of activities and assets must
include, at a minimum, an input and a substantive process that, together, significantly contribute to the
ability to create output. Furthermore, it clarifies that a business can exist without including all of the inputs
and processes needed to create outputs. These amendments had no impact on the consolidated financial
statements of the Group. All business combinations during the period continued to satisfy the definition of a
business.
AASB 2018-7 Amendments to Australian Accounting Standards - Definition of Material
The amendments provide a new definition of material that states, “information is material if omitting,
misstating or obscuring it could reasonably be expected to influence decisions that the primary users of
Notes to the Financial Statements
63
rhipe 2021 Annual Report
general purpose financial statements make on the basis of those financial statements, which provide financial
information about a specific reporting entity.” The amendments clarify that materiality will depend on the
nature or magnitude of information, either individually or in combination with other information, in the context
of the financial statements. A misstatement of information is material if it could reasonably be expected to
influence decisions made by primary users. These amendments had no impact on the consolidated financial
statements of the Group, nor is there expected to be any future impact to the Group.
AASB 2019-3 Amendments to Australian Accounting Standards - Interest Rate Benchmark Reform [Phase 1]
The amendments provide a number of reliefs, which apply to all hedging relationships that are directly affected
by interest rate benchmark reform. A hedging relationship is affected if the reform gives rise to uncertainty
about the timing and/or amount of benchmark-based cash flows of the hedged item or the hedging
instrument. These amendments have no impact on the consolidated financial statements of the Group as it
does not have any interest rate hedge relationships.
AASB 2020-4 Amendments to Australian Accounting Standards - COVID-19 Related Rent Concessions
The amendments provide relief to lessees from applying AASB 16 guidance on lease modification accounting
for rent concessions arising as a direct consequence of COVID-19. As a practical expedient, a lessee may
elect not to assess whether a COVID-19 related rent concession from a lessor is a lease modification. A lessee
that makes this election accounts for any change in lease payments resulting from the COVID-19 related rent
concession the same way it would account for the change under AASB 16, if the change were not a lease
modification. This amendment had no impact on the consolidated financial statements of the Group.
IFRS Interpretations Committee (IFRIC) Decision on Software as a Service (SaaS)
IFRIC has issued two final agenda decisions on cloud computing arrangements. The March 2019 decision
considers whether a customer receives a software asset at the contract commencement date or a service over
the contract term. The April 2021 decision builds on the 2019 decision and considers how a customer accounts
for configuration or customisation costs where an intangible asset is not recognised. There has been no
material impact on the Group’s financial statements due to the implementation of the decisions.
The Group has not early adopted any standard, interpretation or amendment that has been issued but is not
yet effective. The below amendments and standards are not expected to have an impact on the consolidated
financial statements of the Group.
y AASB 2020-8 Amendments to Australian Accounting Standards - Interest Rate Benchmark Reform - Phase
2 (Effective for annual reporting periods beginning on or after 1 January 2021)
y AASB 2020-3 Amendment to AASB 9 - Fees in the ‘10 per cent’ Test for Derecognition of Financial
Liabilities (Effective for annual reporting periods beginning on or after 1 January 2022)
y AASB 2014-10 Amendments to Australian Accounting Standards - Sale or Contribution of Assets between
an Investor and its Associate or Joint Venture (Effective for annual reporting periods beginning on or after
1 January 2022)
y AASB 2021-5 Amendments to Australian Accounting Standards - Deferred Tax related to Assets and
Liabilities arising from a Single Transaction (Effective for annual reporting periods beginning on or after 1
January 2023)
Notes to the Financial Statements
64
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rhipe 2021 Annual Report
y AASB 17 Insurance Contracts (Effective for annual reporting periods beginning on or after 1 January 2023)
y AASB 2020-5 Amendments to Australian Accounting Standards - Insurance Contracts (Effective for annual
reporting periods beginning on or after 1 January 2021)
y AASB 2021-3 Amendments to Australian Accounting Standards - COVID-19-Related Rent Concessions
beyond 30 June 2021 (Effective for annual reporting periods beginning on or after 1 April 2021)
y AASB 2020-3 Amendments to AASB 3 - Reference to the Conceptual Framework (Effective for annual
reporting periods beginning on or after 1 January 2022)
y AASB 2020-1 Amendments to Australian Accounting Standards - Classification of Liabilities as Current or
Non-current (Effective for annual reporting periods beginning on or after 1 January 2023)
y AASB 2021-2 Amendments to AASB 7, AASB 101, AASB 134 Interim Financial Reporting and AASB
Practice Statement 2 Making Materiality Judgements - Disclosure of Accounting Policies (Effective for
annual reporting periods beginning on or after 1 January 2023)
y AASB 2020-3 Amendments to AASB 116 - Property, Plant and Equipment: Proceeds before intended use
(Effective for annual reporting periods beginning on or after 1 January 2022)
y AASB 2020-3 Amendment to AASB 141 - Taxation in Fair Value Measurements (Effective for annual
reporting periods beginning on or after 1 January 2022)
y AASB 2020-3 Amendment to AASB 1 - Subsidiary as a First-time Adopter (Effective for annual reporting
periods beginning on or after 1 January 2022)
y AASB 2020-3 Amendments to AASB 137 - Onerous Contracts - Cost of fulfilling a Contract (Effective for
annual reporting periods beginning on or after 1 January 2022)
y AASB 2021-2 Amendments to AASB 108 - Definition of Accounting Estimates (Effective for annual
reporting periods beginning on or after 1 January 2023)
Note 2. Operating Segments
The Group has identified its operating segments based on the internal reports that are reviewed and used
by the Managing Director (chief operating decision maker) in assessing performance and determining the
allocation of resources.
The Managing Director manages the Group’s activities as one business segment providing cloud based licencing
programs and services for its key software vendors across the Asia Pacific region.
Revenue derived by region:
CONSOLIDATED GROUP
2021
$’000
2020
$’000
Oceania
54,734
45,229
Asia
12,083
10,599
Total rhipe group
66,817
55,828
Notes to the Financial Statements
65
rhipe 2021 Annual Report
Information about major vendors and customers
Revenue and incentives earned from Microsoft products and services equate to more than 74% of the Group
revenue. Excluding Microsoft, no single customer contributed 10% or more to the Group’s revenue for both
2021 and 2020.
Operating Profit
The Managing Director assesses the performance of the business based on a measure of Operating Profit.
This measure excludes foreign exchange differences, depreciation and amortisation, share-based payments,
taxation and the effect of specific expenditure which is not in the ordinary course of business and non-cash
losses. These include restructuring costs, business combination related expenses, impairments and the effects
of gains or losses from financial instruments.
A reconciliation of profit before income tax to Operating Profit is shown below:
CONSOLIDATED GROUP
2021
$’000
2020
$’000
Profit before income tax
10,694
7,150
Share based payments
2,342
3,112
Restructuring and due diligence
597
1,068
Depreciation and amortisation
3,964
2,298
Impairment expense
-
3,425
Non-controlling interest
287
216
Foreign exchange loss/(gain)
234
97
Interest income
(108)
(111)
Fair value adjustment to deferred contingent consideration
-
(3,500)
Operating profit 1
18,010
13,755
1 Non-AASB measure. Calculated based on pre-adoption of AASB 16 by including property lease expenses.
Note 3. Business combination
Acquisitions in FY21
On the 30th of September 2020 (“Completion date”) rhipe Australia Pty Ltd acquired 100% of the units
in Parallo Pty Ltd as Trustee for the Parallo Unit Trust and rhipe New Zealand Ltd acquired 100% of the
share capital in Parallo limited (jointly ‘Parallo’). Parallo is a New Zealand based IT services provider that
specialises in infrastructure and cloud deployment technologies. Parallo helps Independent Software Vendors
(ISVs), Software as a Service (SaaS) businesses and other scale-based cloud partners to manage security,
performance, availability and cost, including builds, deployments, upgrades and many other related services.
Notes to the Financial Statements
66
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rhipe 2021 Annual Report
The total consideration of $8.06m, consisted of upfront and deferred contingent payments as follows:
1. Up-front completion payment of $4.3m in cash to the seller
2. Deferred contingent consideration of an estimated $3.76m to be paid in two payments as follows:
a. A first deferred contingent payment (“DP1”) based on the normalised EBITDA for the first 12 months
(Year 1) multiplied by 7 less $4.3m. The fair value at acquisition was estimated to be $2.23m in
cash and shares to the seller.
b. A second deferred contingent payment (“DP2”) based on the normalised EBITDA for the second 12
months (Year 2) less $4.3m and the monetary amount of DP1. The fair value at acquisition was
estimated to be $1.53m in cash and shares to the seller
The deferred contingent consideration payments above forms part of the consideration paid and is considered
contingent consideration as per AASB 3 Business Combinations (para. 39). The cash and share contingent
consideration is recognised as a financial liability at the acquisition date, recognised at fair value as part of the
consideration transferred in exchange for Parallo.
Assets acquired and liabilities assumed:
Assets
$’000
Cash & Cash equivalents
388
Trade & Other Receivables
1,237
Property, Plant & Equipment
172
Customer relationship identified on acquisition
3,599
Right of Use Asset
256
Deferred Tax Asset
42
Total Assets
5,694
Liabilities
Trade & Other Payables
1,284
Employee entitlements
143
Deferred Tax Liability arising on acquisition
1,080
Lease Liability
256
Total Liabilities
2,763
Total identifiable net assets at fair value
2,931
Goodwill arising on acquisition
5,127
Purchase consideration
8,058
Contingent consideration current - payable in cash and shares
2,232
Contingent consideration non-current - payable in cash and shares
1,529
Up-front payment - paid in cash
4,297
Total purchase consideration
8,058
Notes to the Financial Statements
67
rhipe 2021 Annual Report
Profit before tax for the period since acquisition date was $593k net of transaction cost of $79k which were
expensed and included in General and Administration expenses.
The acquisition accounting was provisional at 30 June 2021 subject to receipts of completion accounts and
allocatable cost amount calculation (“ACA”) at which point deferred tax liability (“DTL’) was recognised.
On 30th April 2021, rhipe Australia Pty Ltd acquired 100% of the shares in emt Distribution Pty Ltd and emt
Distribution Pte Limited (jointly ‘EMT’). EMT is a cyber security distribution specialist that focuses on sourcing
innovative security software vendors and working with channel partners, to deliver both on-premise and
cloud-based security solutions, aimed at protecting companies against cyber security attacks.
The total consideration of $11m was paid upfront on completion.
Assets acquired and liabilities assumed:
Assets
$’000
Cash & Cash equivalents
1,381
Trade & Other Receivables
4,317
Other Current Assets
115
Fixed Assets
73
Customer Relationships identified at acquisition
1,701
Right of Use Asset
154
Deferred Tax Asset
107
Total Assets
7,848
Liabilities
Trade & Other Payables
3,173
Other Current Liabilities
913
Tax Liability
367
Other Non-Current Liabilities
116
Deferred Tax Liability arising on acquisition
510
Total Liabilities
5,079
Total identifiable net assets at fair value
2,769
Goodwill arising on acquisition
8,193
Purchase consideration
10.962
Up-front payment - paid in cash
10,962
Total purchase consideration
10,962
Profit before tax for the period since acquisition date was $642k net of transaction cost of $305k which were
expensed and included in General and Administration expenses.
Notes to the Financial Statements
68
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rhipe 2021 Annual Report
The acquisition accounting was provisional at 30 June 2021 subject to receipts of completion accounts and
allocatable cost amount calculation (“ACA”) at which point deferred tax liability (“DTL”) was recognised.
Acquisitions in FY20
On the 2nd of August 2019, rhipe Australia Pty Ltd acquired 100% of the share capital in each of the
target companies, Network2Share Pty Ltd (“N2S”) and Data Confidence Solutions Pty Ltd (“DCS”). N2S
is an Australian based security software company that has developed a user-friendly encryption product
(“SmartEncrypt”) which rhipe intends to bundle with existing vendor software licences. The acquired
companies were pre-revenue generating and the total consideration of $5m plus earn out, consisted of upfront
and deferred contingent payments as follows:
1. Up-front completion payment of $2m in cash to the seller
2. Deferred contingent consideration of up to a further $3m to be paid in three payments consisting of part
cash and part shares as follows:
a. A first deferred contingent payment (“DP1”) of $1m in cash to the seller when rhipe sells at least 10,000
SmartEncrypt licences (‘Payment trigger’). If the payment trigger for DP1 is not satisfied within two years
after the completion date, DP1 is invalid.
b. A second deferred contingent payment (“DP2”) of $750k in cash and issue fully paid ordinary shares in
rhipe Limited to the seller equal to $250k (“Consideration shares”) if the target companies sell cumulatively
20,000 SmartEncrypt licences, irrespective of the target companies achieving the payment trigger for DP1.
If the payment trigger for DP2 is not satisfied any time following the completion date and ending on the
date, which is two years after the first deferred payment cut-off date, DP2 is invalid. The period between
the completion date and 2 years after first deferred payment cut-off date (i.e. 4 years post completion
date) is the second deferred payment cut-off date.
c. A third deferred contingent payment (‘DP3’) of fully paid ordinary shares in rhipe Limited to the seller
equal to $1m if the target companies sell at least 40,000 SmartEncrypt licences, irrespective of the target
companies achieving the payment trigger for DP1 or DP2. If the payment trigger for DP3 is not satisfied
any time following the completion date and ending on the date which is 2 years after the second deferred
payment cut-off date (i.e. 6 years post completion date), DP3 is invalid.
Consideration shares issued for the second and third deferred payments are calculated at a price per share
based on the volume weighted average market price (VWAP) for rhipe Limited ordinary shares over 30
consecutive trading days up to the last trading day immediately prior to the acquisition date.
3. In addition to the above deferred contingent consideration, rhipe must pay additional earn out payments
for up to five years post acquisition as follows:
a. A percentage of the monthly licence gross revenue over an agreed threshold in respect of sales outside of
rhipe’s existing geographic footprint
b. Percentage of the monthly licence gross revenue over a threshold in respect of sales outside of rhipe’s
geographic foot print less the direct selling and marketing cost incurred.
Notes to the Financial Statements
69
rhipe 2021 Annual Report
The deferred contingent consideration and earn out payments above forms part of the consideration paid and
is considered contingent consideration as per AASB 3 Business Combinations (para. 39). The cash component
of contingent consideration is recognised as a financial liability at the acquisition date, recognised at fair
value as part of the consideration transferred in exchange for the target companies. The share component of
contingent consideration is recognised in equity.
Assets acquired and liabilities assumed on acquisition date:
Assets
$’000
Intangible assets - capitalised software
4,687
Total Assets
4,687
Liabilities
Employee entitlements
92
Total Liabilities
92
Total identifiable net assets at fair value
4,595
Goodwill arising on acquisition
1,395
Purchase consideration
5,990
Contingent consideration current - payable in cash
939
Contingent consideration non-current - payable in cash
1,877
Contingent consideration - payable in shares
1,174
Up-front payment - paid in cash
2,000
Total purchase consideration
5,990
The total consideration paid at acquisition was allocated to intangible assets and goodwill. The amount
allocated to intangible assets has been recognised as capitalised software development.
The acquisition accounting was finalised during the period and there were no changes to the purchase
consideration.
Notes to the Financial Statements
70
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rhipe 2021 Annual Report
Note 4. Revenue and Other Income
Revenue from contracts with customers is recognised when control of the goods or services are transferred
to the customer at an amount that reflects the consideration to which the Group expects to be entitled
in exchange for those goods or services. The Group has concluded that it is the agent in its revenue
arrangements for licencing business and principal for the provision of services, because it has control of
services being provided to the customer. If the consideration in a contract includes a variable amount, the
Group estimates the amount of consideration to which it will be entitled in exchange for transferring the goods
to the customer.
The variable consideration is estimated at contract inception and constrained until it is highly probable that
a significant revenue reversal in the amount of cumulative revenue recognised will not occur when the
associated uncertainty with the variable consideration is subsequently resolved. Volume rebates give rise to
variable consideration.
Revenue recognition relating to the provision of services is determined with reference to the stage of
completion of the transaction at the end of the reporting period where outcome of the contract can be
estimated reliably. Stage of completion is determined with reference to the services performed to date as a
percentage of total anticipated services to be performed.
Where the outcome cannot be estimated reliably, revenue is recognised only to the extent that related
expenditure is recoverable. All revenue is stated net of the amount of goods and services tax.
Interest revenue is recognised using the effective interest method. Government grants are recognised where
there is reasonable assurance that the grant will be received and all attached conditions will be complied with.
When the grant relates to an expense item, it is recognised on a net basis over the periods that the related
costs are expensed.
Set out below, is the reconciliation of the revenue from contracts with customers with the amount disclosed in
the segment information (Note 2).
CONSOLIDATED GROUP
2021
$’000
2020
$’000
Sales - Software products & services
376,980
325,201
Less purchases of software products
(310,163)
(269,373)
Revenue
66,817
55,828
(a) Revenue from continuing operations
Revenue
Licencing revenue
46,384
42,364
Service & support revenue
20,433
13,464
Total revenue
66,817
55,828
(b) Other income
Interest income
108
111
Changes in fair value of deferred consideration
-
3,500
Total other income
108
3,611
Notes to the Financial Statements
71
rhipe 2021 Annual Report
Note 5. Expenses
CONSOLIDATED GROUP
2021
$’000
2020
$’000
(a) Employee benefits
Share-based payments
2,342
3,112
Defined contribution superannuation expenses
2,134
1,861
Salaries and other employee benefits
30,906
27,502
35,382
32,475
(b) Depreciation and amortisation
Depreciation
1,127
676
Amortisation of intangible assets
2,837
1,621
Amortisation of right of use asset
1,684
1,871
5,648
4,168
(c) Other expenses
Foreign exchange loss
234
97
(d) Impairment expense
Impairment of goodwill
-
3,425
(e) Finance cost
Interest on leases
92
142
(f) Marketing and travel expense
Marketing and travel related expenses
1,576
1,296
(g) Business administration expense
Business administration expense
6,867
7,238
Total expenses
49,799
48,841
Notes to the Financial Statements
72
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rhipe 2021 Annual Report
Note 6. Tax Expense
Income Tax
The income tax expense/(benefit) for the year comprises current income tax expense/(benefit) and deferred
tax expense/ (benefit).
Current income tax expense/(benefit) charged to profit or loss is the tax payable on taxable income. Current
tax liabilities/(assets) are measured at the amounts expected to be paid to/ (recovered from) the relevant
taxation authority.
Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances
during the year as well as unused tax losses.
Current and deferred income tax expense/(income) is charged or credited outside profit or loss when the tax
relates to items that are recognised outside profit or loss.
Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when
the asset is realised or the liability is settled and their measurement reflects the manner in which management
expects to recover or settle the carrying amount of the related asset or liability.
Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent
that it is probable that future taxable profit will be available against which the benefits of the deferred tax
asset can be utilised. Where temporary differences exist in relation to investments in subsidiaries, branches,
associates, and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the
reversal of the temporary difference cannot be controlled and it is not probable that the reversal will occur in
the foreseeable future.
Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended
that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur.
Deferred tax assets and liabilities are offset where:
(a) A legally enforceable right of set-off exists; and
(b) The deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on
either the same taxable entity or different taxable entities where it is intended that net settlement
or simultaneous realisation and settlement of the respective asset and liability will occur in future
periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered
or settled.
Notes to the Financial Statements
73
rhipe 2021 Annual Report
Tax consolidation
Relevance of tax consolidation to the Group
The Company and its wholly-owned Australian resident entities have formed a tax-consolidated group with
effect from 2014 and are therefore taxed as a single entity from that date. The head entity within the tax-
consolidated group is rhipe Limited.
Tax expense/(benefit), deferred tax liabilities and deferred tax assets arising from temporary differences
of the members of the tax-consolidated group are recognised in the separate financial statements of the
members of the tax-consolidated group, using the ‘separate taxpayer within group’ approach by reference to
the carrying amounts in the separate financial statements of each entity and the tax values applying under
tax consolidation. Current tax liabilities and assets and deferred tax assets arising from unused tax losses and
relevant tax credits of the members of the tax consolidated group are recognised by the Company (as head
entity in the tax‑consolidated group).
Due to the existence of a tax funding arrangement between the entities in the tax-consolidated group,
amounts are recognised as payable to or receivable by the Company and each member of the tax consolidated
group in relation to the tax contribution amounts paid or payable between the parent entity and the other
members of the tax-consolidated group in accordance with the arrangement.
Nature of tax funding arrangements and tax sharing agreements
Entities within the tax-consolidated group have entered into a tax funding arrangement and a tax sharing
agreement with the head entity. Under the terms of the tax funding arrangement, rhipe Limited and each of
the entities in the tax-consolidated group have agreed to pay a tax equivalent payment to or from the head
entity, based on the current tax liability or current tax asset of the entity. The tax sharing agreement entered
into between members of the tax-consolidated group provides for the determination of the allocation of
income tax liabilities between the entities should the head entity default on its tax payment obligations or if an
entity should leave the tax consolidated group. The effect of the tax sharing agreement is that each member’s
liability for tax payable by the tax-consolidated group is limited to the amount payable to the head entity
under the tax funding arrangement.
Notes to the Financial Statements
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rhipe 2021 Annual Report
CONSOLIDATED GROUP
Note
2021
$’000
2020
$’000
(a) The components of tax (expense)/income comprise:
Current tax
5,345
3,213
Deferred tax
16
(1,605)
(1,237)
Under/(over) provision in respect of prior years
(54)
375
Total tax expense
3,686
2,351
(b) The prima facie tax on profit from ordinary activities before income tax is reconciled to the
income tax as follows:
Prima facie tax payable on profit from ordinary activities before income tax at 30% (2020: 30%)
– Consolidated Group
3,294
2,210
– Effect of tax rates of subsidiaries operating in other jurisdictions
(70)
42
Add tax effect of:
– Other non–allowable items
158
126
3,382
2,378
Less tax effect of:
– Under/(over) provision of prior year income tax
(54)
375
– Temporary differences not recognised in the prior year
60
(449)
– Current year overseas losses not recognised/(Utilisation of tax losses)
310
205
– Research and development offset
(12)
(158)
Total tax expense
3,686
2,351
(c) Amounts recognised directly in equity:
Aggregate current and deferred tax arising in the reporting period and not recognised in net profit
or loss or other comprehensive income but directly credited to equity:
Share based payments
(189)
(37)
AASB 16 recognition
-
(123)
Capital raising
-
(315)
Total
(189)
(475)
The group has tax losses of $3,867,632 (2020: $2,537,261) primarily in Korea and Japan that are not being
recognised as deferred tax assets as it is not considered probable that these will be recoverable.
Notes to the Financial Statements
75
rhipe 2021 Annual Report
Note 7. Earnings per Share
CONSOLIDATED GROUP
2021
Cents
2020
Cents
Basic EPS
4.54
3.49
Diluted EPS
4.42
3.41
NET PROFIT ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE PARENT:
$000
$000
(a) Reconciliation of earnings to profit or loss
Profit/(Loss)
7,295
5,015
Earnings used to calculate basic EPS
7,295
5,015
Earnings used in the calculation of dilutive EPS
7,295
5,015
2021 No.
of Shares
2020 No.
of Shares
(b) Weighted average number of ordinary shares outstanding during the year
used in calculating basic EPS
160,659,724
143,848,303
Weighted average number of dilutive options and performance rights outstanding
4,416,571
3,215,882
Weighted average number of ordinary shares outstanding during the year used in calculating
dilutive EPS
165,076,295
147,064,185
Note 8. Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, deposits available on demand with banks and other short-
term highly liquid investments with original maturities of three months or less.
CONSOLIDATED GROUP
2021
$’000
2020
$’000
Cash at bank
53,510
22,983
Short-term highly liquid investments
279
37,942
Cash and cash equivalents
53,789
60,925
Note 9. Trade and Other Receivables
Trade and other receivables include amounts due from customers for goods sold and services performed in the
ordinary course of business. Receivables expected to be collected within 12 months of the end of the reporting
period are classified as current assets. All other receivables are classified as non-current assets.
Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value
through other comprehensive income (OCI), and fair value through profit or loss. The Group recognises an
allowance for expected credit losses (ECLs) for trade and other receivables. Refer to Note 1(d) for further
discussion on the determination of impairment of financial assets. Interest rates, unemployment rates and
other micro-economic factors were considered when calculating ECL.
Notes to the Financial Statements
76
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rhipe 2021 Annual Report
CONSOLIDATED GROUP
Note
2021
$’000
2020
$’000
CURRENT
Trade receivables
42,716
30,753
Provision for expected credit losses
9(a)
(2,316)
(1,990)
Indirect taxes
2,978
2,624
Accrued revenue
12,794
10,894
Total
56,172
42,281
(a) Provision For Expected Credit Losses
Movement in provision for ECL is as follows:
CONSOLIDATED GROUP
Opening
Balance
$’000
Increase in ECL
For The Year
$’000
Amounts Written
Off During
The Year
$’000
Closing
Balance
$’000
(i) Current trade receivables 2020
819
1,339
(168)
1,990
(ii) Current trade receivables 2021
1,990
474
(148)
2,316
(b) Credit risk
The Group has no significant concentration of credit risk with respect to any single counter party or group of
counter parties. Cash and Cash Equivalents have low risk and Trade and Other Receivables are considered to
be the main source of credit risk related to the Group.
On a geographic basis, the Group has significant credit risk exposures in Australia, Singapore, New Zealand,
Malaysia, Philippines and Thailand given the substantial operations in those regions. The Group’s exposure to
credit risk for receivables at the end of the reporting period in those regions is as follows:
CONSOLIDATED GROUP
2021
%
2021
$’000
2020
%
2020
$’000
Australia
53%
29,697
53%
22,401
Singapore
14%
7,644
11%
4,792
Malaysia
9%
4,878
10%
4,207
New Zealand
6%
3,442
6%
2,551
Philippines
9%
5,179
8%
3,357
Thailand
2%
1,456
5%
1,994
Other (Indonesia, Korea, USA and Japan)
7%
3,876
7%
2,979
Total
100%
56,172
100%
42,281
Notes to the Financial Statements
77
rhipe 2021 Annual Report
The following table details the Group’s trade and other receivables exposed to credit risk with ageing analysis
and ECL provided for thereon. Amounts are considered as ‘past due’ when the debt has not been settled
within the terms and conditions agreed between the Group and the customer or counter party to the
transaction. All receivables are assessed for ECL using the historical default rate adjusted for forward-looking
estimates based on macro economic indicators.
Gross Amount
$’000
Within
Initial Terms
$’000
Past Due <30
$’000
(Days Overdue)
ECL
$’000
31-60 $’000
>60 $’000
2020 Trade and term receivables
30,753
17,177
8,071
2,693
2,812
Expected credit loss rate
2%
3%
6%
42%
Expected credit loss
378
277
168
1,167
1,990
2021 Trade and term receivables
42,716
21,648
10,769
7,004
3,295
Expected credit loss rate
2%
4%
6%
33%
Expected credit loss
358
435
431
1,092
2,316
Note 10. Other Assets
CONSOLIDATED GROUP
2021
$’000
2020
$’000
CURRENT
Prepayments
1,508
995
Bonds
576
509
Total
2,084
1,504
Prepayments relate to prepaid operating expenses (such as insurance) and these prepayments will be realised
within 12 months (the period of time that these services relate to). Bonds are rental bonds for the property
leases. See note 11 for more details on leases.
Notes to the Financial Statements
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Note 11. Leases
The Group has various property leases used in its operations. Property leases have lease terms of less than
five years. There are several lease contracts that include extension options.
Set out below are the carrying amounts of right-of-use assets recognised and the movement during the year:
$'000
As at 1 July 2019
2,708
Additions
2,354
Amortisation expense
(1,871)
As at 30 June 2020
3,191
Additions
83
Additions from business combinations
410
Modifications
(81)
Amortisation expense
(1,684)
As at 30 June 2021
1,919
Set out below are the carrying amounts of lease liabilities and the movement during the year:
$'000
As at 1 July 2019
3,405
Additions
2,354
Accretion of interest
135
Payments
(2,035)
As at 30 June 2020
3,859
Additions
83
Additions from business combinations
410
Modifications
(81)
Accretion of interest
92
Payments
(1,992)
As at 30 June 2021
2,371
Current
1,821
Non-current
550
The Group has several lease contracts that include extension options. These options are negotiated by
management to provide flexibility in managing the leased-asset portfolio and align with the Group’s business
needs. Management exercises judgment in determining whether these extension options are reasonably certain
to be exercised.
Notes to the Financial Statements
79
rhipe 2021 Annual Report
Note 12. Property, Plant and Equipment
Each class of property, plant and equipment is carried at cost less, where applicable, any accumulated
depreciation and impairment losses.
Property Plant and equipment
Plant and equipment is measured on the cost basis and therefore carried at cost less accumulated depreciation
and any accumulated impairment. In the event the carrying amount of plant and equipment is greater than the
estimated recoverable amount, the carrying amount is written down immediately to the estimated recoverable
amount and impairment losses are recognised either in profit or loss. A formal assessment of the recoverable
amount is made when impairment indicators are present (refer to Note 1(e) for details of impairment of
assets).
Depreciation
The depreciable amount of all fixed assets including buildings and capitalised leased assets, but excluding
freehold land, is depreciated on a straight-line basis over the asset’s useful life to the Group commencing from
the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either
the unexpired period of the lease or the estimated useful lives of the improvements.
The depreciation rates used for each class of depreciable assets are:
Class of Fixed Asset
Depreciation rate
Computer Equipment
25% – 33%
Furniture & Fittings
13% – 33%
Leasehold Improvements
20% – 33%
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each
reporting period.
Property, plant and Equipment carrying amounts are tested for impairment at the individual CGU level. No
impairments were identified as a result of the testing.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains
and losses are recognised in profit or loss in the period in which they arise.
Notes to the Financial Statements
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rhipe 2021 Annual Report
Movements in Carrying Amounts
Movements in carrying amounts between the beginning and the end of the current financial year.
Consolidated Group
Computer
Equipment $’000
Furniture &
Fittings $’000
Leasehold
Improvements
$’000
Total
$’000
Cost at 30 June 2019
1,650
225
748
2,623
Additions
460
12
899
1,371
Disposals
-
-
-
-
Cost at 30 June 2020
2,110
237
1,647
3,994
Accumulated depreciation at 30 June 2019
(923)
(111)
(480)
(1,514)
Depreciation expense
(434)
(31)
(211)
(676)
Disposals
-
-
-
-
Accumulated depreciation at 30 June 2020
(1,357)
(142)
(691)
(2,190)
Balance at 30 June 2020
753
95
956
1,804
Cost at 30 June 2020
2,110
237
1,647
3,994
Additions
747
205
95
1,047
Disposals
(37)
-
-
(37)
Cost at 30 June 2021
2,820
442
1,742
5,004
Accumulated depreciation at 30 June 2020
(1,357)
(142)
(691)
(2,190)
Depreciation expense
(515)
(86)
(526)
(1,127)
Disposals
25
-
-
25
Accumulated depreciation at 30 June 2021
(1,847)
(228)
(1,217)
(3,292)
Balance at 30 June 2021
973
214
525
1,712
Notes to the Financial Statements
81
rhipe 2021 Annual Report
Note 13. Intangible Assets
Goodwill
Goodwill is carried at cost less any accumulated impairment losses. Goodwill is calculated as the excess of
the sum of:
(i)
The consideration transferred
(ii) Any non-controlling interest (determined under either the full goodwill or proportionate interest
method); and
(iii) The acquisition date fair value of any previously held equity interest, less
(iv) The acquisition date fair value of net identifiable assets acquired.
The acquisition date fair value of the consideration transferred for a business combination plus the acquisition
date fair value of any previously held equity interest forms the cost of the investment in the separate
financial statements.
The amount of goodwill recognised on acquisition of each subsidiary in which the Group holds less than a
100% interest will depend on the method adopted in measuring the non-controlling interest. The Group can
elect in most circumstances to measure the non-controlling interest in the acquiree either at fair value (full
goodwill method) or at the non-controlling interest’s proportionate share of the subsidiary’s identifiable net
assets (proportionate interest method). In such circumstances, the Group determines which method to adopt
for each acquisition and this is stated in the respective notes to these financial statements disclosing the
business combination.
Goodwill is tested for impairment annually (refer to Note 1(e) for details of impairment) and is allocated to
the Group’s cash‑generating units or groups of cash-generating units, representing the lowest level at which
goodwill is monitored being not larger than an operating segment. Gains and losses on the disposal of an
entity include the carrying amount of goodwill related to the entity disposed of.
Research and development
Expenditure during the research phase of a project is recognised as an expense when incurred. Development
costs are capitalised only when:
1. The technical feasibility of completing the asset so that it will be available for use or sale
2. Intention to complete the asset and use or sell it
3. Ability to use or sell the asset
4. How the asset will generate probable future economic benefits
5. Availability of adequate technical, financial and other resources to complete the development
6. Ability to measure reliably the expenditure attributable to the asset during its development.
Software development costs have a finite useful life and are amortised on a straight-line basis over their
estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of each
reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.
Notes to the Financial Statements
82
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rhipe 2021 Annual Report
Consolidated Group
Goodwill
$’000
Customer
Relationships
$’000
WIP Software
Development
$’000
Software
Development
$’000
Total
$’000
Cost at 30 June 2019
27,331
792
85
7,333
35,541
Additions
-
-
2,906
-
2,906
Additions - business combination
1,395
-
4,687
-
6,082
Transfers
-
-
(2,781)
2,781
-
Cost at 30 June 2020
28,726
792
4,897
10,114
44,529
Accumulated amortisation at 30 June 2019
-
(53)
-
(2,819)
(2,872)
Amortisation expense
-
(152)
-
(1,469)
(1,621)
Impairment expense
(3,425)
-
-
-
(3,425)
Accumulated amortisation and impairment at
30 June 2020
(3,425)
(205)
-
(4,288)
(7,918)
Balance at 30 June 2020
25,301
587
4,897
5,826
36,611
Cost at 30 June 2020
28,726
792
4,897
10,114
44,529
Additions
-
-
1,626
-
1,626
Additions - business combination
13,320
5,339
-
-
18,659
Transfers
-
-
(6,018)
6,018
-
Cost at 30 June 2021
42,046
6,131
505
16,132
64,814
Accumulated amortisation and impairment at 30
June 2020
(3,425)
(205)
-
(4,288)
(7,918)
Amortisation expense
-
(706)
-
(2,131)
(2,837)
Accumulated amortisation and impairment at
30 June 2021
(3,425)
(911)
-
(6,419)
(10,755)
Balance at 30 June 2021
38,621
5,220
505
9,713
54,059
Notes to the Financial Statements
83
rhipe 2021 Annual Report
Goodwill and Customer Relationship additions arose due to business combination, please refer to note 3
(Business combination) for more details. The amount of all software development costs are amortised on a
straight-line basis over the estimated useful life to the Company commencing from the time the asset is held
ready for use.
The amortisation rates used for each class of depreciable assets are:
Amortisation rate
Software development
20%
Customer relationship
20%
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each
reporting period. The carrying amounts are tested for impairment at the individual CGU level and written
down immediately to their recoverable amount if impaired. Intangible assets, other than goodwill and
trademarks and licences, have an indefinite useful lives. The current amortisation charges for intangible assets
are included under Sales and marketing expense per the statement of profit or loss. Goodwill and trademarks
and licences have an indefinite useful life.
Goodwill is allocated to the group of cash-generating units (“CGU”) which is the level at which goodwill is
monitored and is based on the Group’s reporting regions.
2021
$’000
2020
$’000
rhipe
38,621
21,292
Services
-
-
DBITS 1
-
4,009
Asia Pacific Region
38,621
25,301
1 DBITS and rhipe CGU’s were merged on 31st March 2021 to form a single CGU
Goodwill impairment testing
In the prior year, there were 3 separate CGUs, (rhipe, Services and DBITS). Due to a restructuring on 31st
March 2021, DBITS CGU cash inflows were no longer separately identifiable from the rhipe CGU, and therefore
the DBITS and rhipe CGUs were combined to form the rhipe CGU. The DBITS and rhipe CGU’s were tested
separately for impairment prior to the merger on 31st March 2021 and no impairment arose as a result of this
test.
The recoverable amount of the Asia Pacific region at 30 June 2021, includes 2 CGUs, rhipe and Services, to
which goodwill is allocated. The recoverable amounts were calculated on the basis of value-in-use using a
discounted cash flow model. Management has based the value-in-use calculations on board approved budgets
for the 2021 financial year for the cash-generating unit. This budget is adjusted for future years and uses an
initial growth rate of 25% (30 June 2020: 28%) decreasing over five years to a terminal growth of 1% (30
June 2020: 1%) and a real pre-tax discount rate of 13.5% (30 June 2020: 13.5%). The terminal growth rate is
determined based on the long-term anticipated growth rate of the business. The forecast financial information
is based on both past experience and future expectations of cash-generating unit performance. The major
Notes to the Financial Statements
84
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rhipe 2021 Annual Report
inputs and assumptions used in performing an impairment assessment that require judgment include revenue
forecasts, operating cost projections, customer numbers, customer churn, discount rates and growth rates.
Determining whether goodwill is impaired requires an estimation of the recoverable amount of the cash-
generating units to which goodwill has been allocated. The value-in-use calculation requires the Directors to
estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate
in order to calculate present value. Where the actual future cash flows are less than expected, a material
impairment loss may arise. No impairment losses arose as a result of Goodwill impairment testing of CGUs.
Note 14. Trade and Other Payables
Trade and other payables represent the liabilities for goods and services received by the entity that remain
unpaid at the end of the reporting period. The balance is recognised as a current liability with the amounts
normally paid within 30 days of recognition of the liability.
No interest is charged on trade payables. The Group has financial risk management policies in place to ensure
that all payables are paid within the pre-agreed credit terms.
CONSOLIDATED GROUP
Note
2021
$’000
2020
$’000
CURRENT
Unsecured liabilities
Trade payables
55,907
42,211
Sundry payables and accrued expenses
9,171
5,736
Total trade and other payables
27
65,078
47,947
(a) Financial liabilities at amortised cost classified as trade and other
Trade and other payables, unearned revenue and employee benefits
– Total current
65,078
47,947
– Total non-current
-
-
Financial liabilities as trade and other payables
27
65,078
47,947
Note 15. Contract Liabilities
CONSOLIDATED GROUP
2021
$’000
2020
$’000
CURRENT
Unearned revenue
1,928
274
Unearned revenue relates to Services revenue that is invoiced in advance and recognised in Profit and Loss
when certain milestones are completed.
Notes to the Financial Statements
85
rhipe 2021 Annual Report
Note 16. Tax
CONSOLIDATED GROUP
2021
$’000
2020
$’000
CURRENT
Income tax payable
3,367
1,688
CONSOLIDATED GROUP
2021
$’000
2020
$’000
Deferred tax assets
3,722
2,660
Deferred tax liabilities
(780)
(72)
Deferred tax assets (net)
2,942
2,588
CONSOLIDATED GROUP
Opening
Balance
$’000
Recognised
To Income
$’000
Recognised
To Equity
$’000
Acquisition
of subsidiary
$’000
Closing
Balance
$’000
Balance at 30 Jun 2019
Net Deferred Tax Assets/(Liabilities)
(721)
1,835
-
(237)
877
Provisions - employee benefits
1,079
44
-
-
1,123
Provisions - doubtful debt
246
351
-
-
597
Customer relationships
(237)
61
-
-
(176)
Accrued revenue
-
505
37
-
542
Other
(211)
275
438
-
502
Balance at 30 June 2020
Net Deferred Tax Assets
877
1,236
475
-
2,588
Provisions – employee benefits
1,123
188
-
107
1,418
Provisions – doubtful debts
597
27
-
-
624
Customer relationships
(176)
264
-
(1,589)
(1,501)
Share-based payments
542
205
189
-
936
Accrued expenses
705
687
-
42
1,434
Other
(203)
234
-
-
31
Balance at 30 June 2021
Net Deferred Tax Assets/(Liabilities)
2,588
1,605
189
(1,440)
2,942
Notes to the Financial Statements
86
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Note 17. 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 outflow can be reliably
measured. Provisions are measured using the best estimate of the amounts required to settle the obligation at
the end of the reporting period.
Provision for Employee Benefits
Provision for employee benefits represents amounts accrued for annual leave and long service leave. The non-
current portion for this provision includes amounts accrued for long service leave entitlements that have not
yet vested in relation to those employees who have not yet completed the required period of service.
The probability of long service leave being taken is based on historical data. The measurement and recognition
criteria relating to employee benefits have been detailed in Note 1(g).
CONSOLIDATED GROUP
2021
$’000
2020
$’000
CURRENT
Employee Benefits
1,860
1,158
NON CURRENT
Employee Benefits
670
501
Opening Balance
$’000
Additional
Provision
for the Year
$’000
Utilisation
Of Provision
During The Year
$’000
Closing Balance
$’000
1 Jul 2019
30 Jun 2020
Employee benefits – Current
1,037
1,895
(1,774)
1,158
Employee benefits – Non-Current
257
244
-
501
1 Jul 2020
30 Jun 2021
Employee benefits – Current
1,158
2,208
(1,506)
1,860
Employee benefits – Non-Current
501
230
(61)
670
Notes to the Financial Statements
87
rhipe 2021 Annual Report
Note 18. Deferred Contingent Consideration
CONSOLIDATED GROUP
2021
$’000
2020
$’000
CURRENT
Contingent consideration
3,739
939
NON CURRENT
Contingent consideration
2,876
1,878
Total Contingent consideration - fair value
6,615
2,817
Fair value of $6,615k is disclosed in the balance sheet as a financial liability and is re-measured each reporting
period. $1,174k has been recognised on acquisition to equity and it is not remeasured. Total contingent
consideration of $7,789k is to be paid in cash and shares.
As part of the accounting for the acquisition of Parallo Limited and Parallo Unit Trust, contingent consideration
with an estimated fair value of $3,761k (refer to note 3) was recognised on acquisition as a financial liability.
The fair value of contingent consideration based on current modelling at 30 June 2021 to be paid is $5,079k
payable in cash and shares.
As part of the accounting for the acquisition of Network2share Pty Ltd, contingent consideration with
an estimated fair value of $2,817k (refer to note 3) was recognised on acquisition as a financial liability
and $1,174k recognised in equity. First, second and third installments are payable after 2, 4 and 6 years
respectively from completion date and are tied to sales volume of SmartEncrypt licences (refer to note 3). The
fair value of contingent consideration based on current modelling at 30 June 2021 is $1,536k and $1,174k in
equity is not remeasured.
Notes to the Financial Statements
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Note 19. Issued Capital
RHIPE LIMITED
2021
$’000
2020
$’000
CURRENT
161,075,376 (2020: 161,132,639) fully paid ordinary shares
77,758
77,438
77,758
77,438
(a) Movement in ordinary shares on issue
RHIPE LIMITED
2021
No.
2021
$’000
2020
No.
2020
$’000
rhipe Limited shares as at 30 June 2020
161,132,639
77,438
138,982,996
43,320
Shares issued upon exercise of options
-
50
632,343
758
Shares issued upon exercise of performance rights
-
-
500,000
-
Capital raised
-
-
21,017,300
33,628
Deferred tax asset on capital raising
-
-
-
315
Shares bought back during the period
(57,263)
(117)
-
-
Transfer from equity settled employee benefits reserve
-
391
-
475
Share issue costs, net tax
-
(4)
-
(1,058)
Closing balance at 30 June 2021
161,075,376
77,758
161,132,639
77,438
Ordinary shares participate in dividends and the proceeds on winding-up of the parent entity in proportion to
the number of shares held. At shareholders’ meetings each ordinary share is entitled to one vote when a poll
is called, otherwise each shareholder has one vote on a show of hands.
Ordinary shares have no par value and the Company does not have a limited amount of authorised capital.
(b) Capital Management
Management controls the capital of the Group in order to maintain a sustainable debt to equity ratio,
generate long-term shareholder value and ensure that the Group can fund its operations and continue as a
going concern.
The Group’s debt and capital include ordinary share capital and financial liabilities, supported by
financial assets.
Management effectively manages the Group’s capital by assessing the Group’s financial risks and adjusting
its capital structure in response to changes in these risks and in the market. These responses include the
management of debt levels, distributions to shareholders, share issues and share buy-backs.
Notes to the Financial Statements
Notes to the Financial Statements
89
rhipe 2021 Annual Report
(c) Franking Account
RHIPE LIMITED
2021
$’000
2020
$’000
The amount of franking credits available for the subsequent financial year are:
–
Franking account balance as at the end of the financial year at 30%
8,905
8,687
–
Franking credits that will arise from the payment of income tax payable as at the end of the
financial year
1,576
575
–
Franking debits that will arise from the payment of dividends as at the end of the financial year 1
-
(1,381)
10,481
7,881
1 rhipe intends to declare a fully franked special dividend of up to 13 cents per share to be paid on or shortly before the implementation date of the Scheme, conditional on the
Scheme being approved and becoming Effective. The rhipe Directors will determine (in their absolute discretion) whether to pay any Special Dividend after assessing the rhipe Group’s
cash position and available funding at the applicable time. Whether a shareholder will be able to capture the full benefit of the franking credits will depend on their individual tax
circumstances.
Note 20. Reserves
(a) Equity-settled employee benefits reserve
Equity-settled employee benefits reserve relates to share options granted by the Company to its employees
under its employee share option plan. Further information about share-based payments to employees
is set out in Note 22. It is also used from time to time to account for deferred taxes arising on share
based payments.
(b) Foreign Currency Translation Reserve
Exchange differences relating to the translation of the results and net assets of the Group’s foreign operations
from their functional currencies to the Group’s presentation currency (i.e. Australian dollars) are recognised
directly in other comprehensive income and accumulated in the foreign currency translation reserve. Exchange
differences previously accumulated in the foreign currency translation reserve (in respect of translating both
the net assets of foreign operations and hedges of foreign operations) are reclassified to profit or loss on the
disposal of the foreign operation.
(c) Other Equity
Other equity is used to account for contingent consideration classified as equity arising from a
business combination.
Notes to the Financial Statements
Notes to the Financial Statements
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Note 21: Dividends
Amount per
ordinary share
(cents)
Franked amount
per ordinary share
(cents)
Dividend Declared
Payment date
2020 Final dividend
2.0
2.0
24 August 2020
24 September 2020
2021 Interim dividend
1.5
1.5
16 February 2021
22 March 2021
Note 22. Share-based Payments
Equity-settled compensation
Share-based payments to employees are measured at the fair value of the instruments issued at the grant
date and amortised over the vesting periods. The corresponding amount is recorded to the equity-settled
employee benefits reserve. The fair value of options is determined using the Black-Scholes pricing model. A
Monte Carlo simulation approach was used to value awards subject to the TSR performance conditions. For
the awards with non-market vesting condition the number of options and performance rights expected to vest
is reviewed and adjusted at the end of each reporting period such that the amount recognised for services
received as consideration for the equity instruments granted is based on the number of equity instruments
that eventually vest.
The Group has an ownership-based compensation scheme for executives and senior employees. In accordance
with the terms of the plan, as approved by shareholders at a previous annual general meeting, Executives
and senior employees of the Group may be granted options or performance rights to purchase ordinary
shares. Each employee share option or performance right converts into one ordinary share of rhipe Limited on
exercise. No amounts are paid or payable by the recipient on receipt of the option or performance right. The
options or rights carry neither rights to dividends nor voting rights. Options and rights may be exercised at any
time from the date of vesting to the date of their expiry.
In addition, rhipe has launched an Employee Share Plan In March 2020 for employees in Australia and New
Zealand whereby the Plan allows ANZ employees (subject to service criteria) to salary sacrifice up to $5,000
per annum to purchase shares in the Company.
rhipe utilises an Employee Share Trust (“EST”) to facilitate the long term incentive plans for executives and
employee share plans for other employees. The commercial purpose of this trust is to hold shares that have
been bought by EST on the open market or directly from the Company and to issue the shares to employees
under agreed share plans.
Notes to the Financial Statements
91
rhipe 2021 Annual Report
(a) Options
(i) Information relating to the rhipe Limited employee option plan, including details of options issued,
exercised and lapsed during the financial year and the options outstanding at year-end is disclosed below.
All 100,000 remaining options from 30 June 2020 were exercised during the year on a 1:1 basis for 100,000
ordinary shares in the Company.
2021
No. Of Options
2020
No. Of Options
Balance at beginning of the year
100,000
870,000
Granted during the year
-
-
Exercised during the year
(100,000)
(770,000)
Expired during the year
-
-
Balance at end of year
-
100,000
CONSOLIDATED GROUP
No Of Options
Weighted Average
Exercise Price
Options outstanding as at 30 June 2019
870,000
$0.78
Granted
-
-
Exercised
(770,000)
$0.817
Expired
-
-
Options outstanding as at 30 June 2020
100,000
$0.50
Granted
-
-
Exercised
(100,000)
$0.50
Expired
-
-
Options outstanding as at 30 June 2021
-
-
Options exercisable as at 30 June 2021
-
-
Options exercisable as at 30 June 2020
100,000
$0.50
As at the date of exercise, the weighted average share price of options exercised during the year was $0.50.
There are no remaining options at year end.
Notes to the Financial Statements
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(b) Performance rights
As at 30 June 2021, rhipe Management estimates that 3,811,673 performance rights to acquire shares (30
June 2020: 3,184,118) are probable to vest in the future. These performance rights are exercisable as follows:
Details
Date Of Grant
Number Of Rights
Vesting Date
Date Of Expiry
Exercise Price ($)
FY21 LTI
15/01/2021
1,865,635
01/07/2023
15/01/2036
Nil
FY20 LTI
30/01/2020
683,566
01/07/2022
30/01/2035
Nil
FY19 LTI
31/05/2019
1,262,472
01/07/2021
31/05/2034
Nil
2021 No. of Rights
2020 No. Of Rights
Balance at beginning of the year
3,184,118
2,258,755
Additional rights due to assumption of stretch performance achieved
120,305
541,160
Granted during the year
1,865,635
884,203
Exercised during the year
(1,246,910)
(500,000)
Forfeited during the year
(111,475)
-
Balance at end of year
3,811,673
3,184,118
Fair value of performance rights
On 15 January 2021, 1,865,635 performance rights were granted to executives as part of a management
incentive plan. The performance rights vest on the satisfaction of vesting conditions and each right has a term
of 15 years and if not exercised within that time the rights will lapse. The Company expensed $838,099 in
relation to these performance rights in FY21. The fair value of performance rights have been determined by a
third party using the following assumptions:
FY21 LTI
FY20 LTI
FY19 LTI
No. of performance rights
1,865,635
683,566
1,262,472
Grant date
15/01/2021
30/01/2020
31/05/2019
Share price at grant date
$1.88
$2.20
$2.30
Vesting conditions
(a) (b) (c) (d)
(a) (b) (c) (d)
(a) (b) (c) (d)
Expected volatility
49%
49%
50%
Risk free interest rate
0.64%
0.64%
1.11%
Dividend yield
1.14%
1.14%
1.09%
Value per performance right
(d)
(d)
(d)
Notes to the Financial Statements
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rhipe 2021 Annual Report
(a) Total Shareholder Return (TSR) is a measure of investment return in percentage terms, adjusted for
dividends and capital movements, from the start to the end of the measurement period. The vesting
of Performance Rights will be determined by comparing the Company’s total shareholder return
(TSR) over the Measurement Period with the movement in the ASX Small Industrials Index over the
Measurement Period
(b) Earning per share growth (EPSG) is a measure of the increase in the amount of profit generated by a
Company divided by the number of shares on issue. It will be calculated by comparing the reported EPS
for the final year of the Measurement Period with the reported EPS for the year immediately prior to
the commencement of the Measurement Period and determining the implied CAGR (compound annual
growth rate)
(c) Gross profit growth will be calculated by comparing the gross profit for the final year of the Measurement
Period with the gross profit for the year immediately prior to the commencement of the Measurement
Period and determining the implied CAGR.
(d) Tranche
No. of Performance rights
Vesting condition
Fair value
Vesting Date
FY21 LTI
Tranche 1
430,529
EPS Hurdle
$1.80
1 July 2023
Tranche 2
861,068
TSR Hurdle
$0.82
1 July 2023
Tranche 3
574,038
Gross Profit Hurdle
$1.80
1 July 2023
FY20 LTI
Tranche 1
89,159
EPS Hurdle
$2.15
1 July 2022
Tranche 2
356,645
TSR Hurdle
$0.86
1 July 2022
Tranche 3
237,762
Gross Profit Hurdle
$2.15
1 July 2022
FY19 LTI
Tranche 1
307,460
EPS Hurdle
$2.25
1 July 2021
Tranche 2
409,290
TSR Hurdle
$1.91
1 July 2021
Tranche 3
545,722
Gross Profit Hurdle
$2.25
1 July 2021
Notes to the Financial Statements
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Note 23. Cash Flow Information
CONSOLIDATED GROUP
2021
$’000
2020
$’000
(a) Reconciliation of Cash Flow from Operating Activities with Profit after Income Tax
Profit after income tax
7,008
4,799
Cash flows excluded from profit attributable to operating activities
Non-cash flows in profit:
Share-based payments expense
2,342
3,112
Interest on lease liabilities
92
142
Amortisation
4,521
1,621
Depreciation
1,127
676
Net foreign exchange (gain)/ loss
234
97
Fair value adjustment of a contingent consideration
-
(3,500)
Impairment of goodwill
-
3,425
Provision for expected credit losses
474
1,171
Changes in operating assets and liabilities:
Increase in trade and term receivables and unearned revenue
(7,568)
(3,975)
Increase in other current assets
(465)
(289)
Increase in trade payables and accruals
12,671
6,606
Increase in income taxes payable
1,312
1,197
Decrease in deferred tax liabilities
(882)
(192)
Increase in deferred tax assets
(710)
(1,519)
Increase/(decrease) in provisions
(300)
365
Net cash provided by operating activities
19,856
13,736
Notes to the Financial Statements
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(b) Bank Guarantees
The Group has the following bank guarantee in place:
Provider
Guarantee
Utilised Total
Security
CITIBANK
AUD 3,000,000
AUD 2,778,381
General Security Interest by rhipe Australia Pty Ltd and rhipe Limited comprising: First
ranking charge over All Present & After Acquired Property
The guarantee requires compliance with certain conditions and the Group was in compliance with the
covenants governing this guarantee during the year.
Note 24. Related Party Transactions
Related Parties
(a) The Group’s main related parties are as follows
i. Key Management Personnel:
Any person(s) having authority and responsibility for planning, directing and controlling the activities of
the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity are
considered key management personnel.
Refer to the Remuneration Report contained in the Directors’ Report for details of the remuneration paid or
payable to each member of the Group’s Key Management Personnel (KMP) for the year ended 30 June 2021.
The totals of remuneration paid to KMP of the Company and the Group during the year are as follows:
CONSOLIDATED GROUP
2021 ($)
2020 ($)
Short-term employee benefits
3,086,238
2,982,612
Post-employment benefits
73,199
76,191
Other Long-Term benefits
255,455
259,041
Share-based payments
1,517,198
2,434,549
Termination benefits
126,547
-
Total KMP compensation
5,058,637
5,752,392
Further information in relation to KMP remuneration can be found in the Remuneration Report.
Notes to the Financial Statements
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ii. Other Related Parties
Other related parties include entities controlled by the ultimate parent entity, entities over which key
management personnel have joint control, and entities that directors are common directors of.
CONSOLIDATED GROUP
2021 ($)
2020 ($)
Other related parties
AI services provided by Officespark Technology Pty Ltd
77,025
-
2021 fees relate to a one off project provided by an entity owned and operated by a relative of Dominic
O’Hanlon.
Note 25. Auditors’ Remuneration
CONSOLIDATED GROUP
2021
($)
2020
($)
Fees to Ernst & Young (Australia)
Fees for auditing the statutory financial report of the parent covering the Group and auditing the statutory
financial reports of any controlled entities
261,000
230,000
Fees for assurance services that are required by legislation to be provided by the auditor
-
-
Fees for other assurance and agreed-upon-procedures services under other legislation or contractual
arrangements where there is discretion as to whether the service is provided by the auditor or another firm
-
-
Fees for other services
- Due diligence
240,929
-
- Tax compliance
55,000
55,132
- Set up of ESS Trust and application for tax ruling
-
54,500
Total fees to Ernst & Young (Australia)
556,929
339,632
Fees to other overseas member firms of Ernst & Young (Australia)
Fees for auditing the financial report of any controlled entities
96,000
56,500
Fees for assurance services that are required by legislation to be provided by the auditor
-
-
Fees for other assurance and agreed-upon-procedures services under other legislation or contractual
arrangements where there is discretion as to whether the service is provided by the auditor or another firm
-
-
Total fees to overseas member firms of Ernst & Young (Australia)
96,000
56,500
Total auditor’s remuneration
652,929
396,132
Notes to the Financial Statements
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rhipe 2021 Annual Report
Note 26. Contingent Liabilities and Contingent Assets
A proceeding had been filed during 2020 in the Supreme Court of New South Wales against two members of
the Group, rhipe Cloud Solutions and rhipe Solutions Australia, along with 10 other defendants. rhipe Limited
is the ultimate holding company of rhipe Cloud Solutions Pty Ltd and rhipe Solutions Australia Pty Ltd who
were named as defendants in the proceedings. The litigation was settled in October 2020 and had no material
financial impact.
Note 27. Financial Risk Management
The totals for each category of financial instruments, measured in accordance with AASB 9 as detailed in the
accounting policies to these financial statements, are as follows:
CONSOLIDATED GROUP
Note
2021
$’000
2020
$’000
FINANCIAL ASSETS
Cash and cash equivalents
8
53,789
60,925
Receivables
9
56,172
42,281
Bonds & deposits
10
576
509
Total Financial Assets
110,537
103,715
FINANCIAL LIABILITIES
Trade and other payables
14
65,078
47,947
Deferred consideration payable in cash
18
6,615
2,817
Total Financial Liabilities
71,693
50,764
Net Financial Assets
38,844
52,951
Financial Risk Management Policies
Specific Financial Risk Exposures and Management
The main risks the Group is exposed to through its financial instruments are credit risk, liquidity risk and
market risk consisting of interest rate risk and foreign currency risk. There have been no substantive changes
in the types of risks the Group is exposed to, how these risks arise, or the Board’s objectives, policies and
processes for managing or measuring the risks from the previous period.
Notes to the Financial Statements
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(a) Credit risk
Although the Group’s clients are credit-worthy, exposure to credit risk relating to financial assets arises from
the potential non-performance by counter parties of contract obligations that could lead to a financial loss to
the Group.
Credit risk is managed through the maintenance of procedures (such procedures include the review of
customer business activities, regular monitoring of exposures and monitoring of the financial stability of
significant customers and counter parties), ensuring to the extent possible, that customers and counter
parties to transactions are of sound credit worthiness. Such monitoring is used in assessing receivables for
impairment. Depending on the division within the Group, credit terms are generally 14 to 30 days from the
invoice date.
The maximum exposure to credit risk by class of recognised financial assets at the end of the reporting
period, excluding the value of any collateral or other security held, is equivalent to the carrying amount
and classification of those financial assets (net of any provisions) as presented in the statement of
financial position.
For details on concentration of credit risk and geographic break down of trade receivables refer to Note 9.
(b) Liquidity risk
Liquidity risk arises from the possibility that the Group might encounter difficulty in settling its debts or
otherwise meeting its obligations related to financial liabilities. The Group manages this risk through the
following mechanisms:
y Preparing forward-looking cash flow analyses in relation to its operating, investing and financing activities
y Maintaining a reputable credit profile
y Managing credit risk related to financial assets
y Only investing surplus cash with major financial institutions; and
y Comparing the maturity profile of financial liabilities with the realisation profile of financial assets.
The table below reflects an undiscounted contractual maturity analysis for financial liabilities. Cash flows
realised from financial assets reflect management’s expectation as to the timing of realisation. Actual timing
may therefore differ from that disclosed. The timing of cash flows presented in the table to settle financial
liabilities reflect the earliest contractual settlement dates and do not reflect management’s expectations that
banking facilities will be rolled forward.
Notes to the Financial Statements
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rhipe 2021 Annual Report
CONSOLIDATED GROUP
Within 1 Year
Over 1 Year
No Maturity
Total
2021 $’000 2020 $’000
2021 $’000 2020 $’000
2021 $’000 2020 $’000
2021 $’000 2020 $’000
Financial liabilities due for payment
Trade and other payables
65,078
47,947
-
-
-
-
65,078
47,947
Lease liabilities
1,821
1,656
550
2,203
-
-
2,371
3,859
Deferred consideration
3,739
939
2,876
1,878
-
-
6,615
2,817
Total expected outflows
70,638
50,542
3,426
4,081
-
-
74,064
54,623
Financial Assets – cash flows realisable
Cash and cash equivalents
53,789
60,925
-
-
-
-
53,789
60,925
Trade and other receivables
56,172
42,281
-
-
-
-
56,172
42,281
Bonds and deposits
576
509
-
-
-
-
576
509
Total anticipated inflows
110,537
103,715
-
-
-
-
110,537
103,715
Net inflow on financial instruments
39,899
53,173
(3,426)
(4,081)
-
-
36,473
49,092
(c) Market Risk
i. Interest rate risk
Exposure to interest rate risk arises on financial assets and financial liabilities recognised at the end of the
reporting period whereby a future change in interest rates will affect future cash flows or the fair value of
fixed rate financial instruments.
The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s cash at
bank balances with floating interest rates.
The movement in interest rates would not have any material impact on the Group’s profit as the Group is
debt free. In addition, any changes to fixed term interest rate on cash balances would not materially impact
the Group’s results.
ii. Foreign exchange risk
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because
of changes in foreign exchange rates. The Group’s exposure to the risk of changes in foreign exchange rates
relates primarily to the Group’s operating activities (when revenue or expense is denominated in a foreign
currency) and the Group’s net investments in foreign subsidiaries.
The Group has invested in businesses in Australia, New Zealand, Singapore and other Asian countries. In
addition, the Group is billed from a number of software vendors in US dollars whereas for some customers
it bills in local currency and this creates an exchange rate risk. Hedging these risks in Asian countries is
expensive and in certain countries not possible hence the Group currently undertakes no hedging of these
positions. Exposure to foreign exchange risk may result in the fair value or future cash flows of a financial
Notes to the Financial Statements
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rhipe 2021 Annual Report
instrument fluctuating due to movement in foreign exchange rates of currencies in which the Group holds
financial instruments which are other than the AUD functional currency of the Parent.
In addition to the US exchange risk identified the Group has material operations in Singapore, where functional
currency is US Dollar and New Zealand where fluctuations in the US Dollar and New Zealand Dollar may
impact on the Group’s financial results unless those exposures are appropriately hedged. The Group has not
hedged its exposure to the above currencies.
Foreign currency sensitivity analysis
The Group is mainly exposed to the US Dollar and New Zealand Dollar from a net asset perspective.
The following table details the Group’s sensitivity to a 10% increase and decrease in the Australian dollar
against the relevant foreign currencies.
NZD
USD
2021
$’000
2020
$’000
2021
$’000
2020
$’000
Equity
176
68
45
85
(d) Fair Value
Fair value measurements are categorised into Level 1,2 or 3 based on the degree to which the inputs to the
fair value measurements are observable and the significance of the inputs to the fair value measurement.
Deferred contingent consideration fair value is based on financial modelling and requires management to
provide judgement based on unobservable inputs in determining assumptions and outcomes. The directors
consider that the carrying amounts of financial assets and financial liabilities recognised in the consolidated
financial statements approximate their fair values.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised
within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the
fair value measurement as a whole:
y Level 1 - Quoted (unadjusted ) market prices in active markets for identical assets or liabilities
y Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value
measurement is directly or indirectly observable
y Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value
measurement is unobservable
A discounted cash flow model is used to determine the fair value of Level 3 items. The major inputs and
assumptions used include revenue forecasts, operating cost projections, customer numbers, customer churn,
discount rates and growth rates.
Notes to the Financial Statements
101
rhipe 2021 Annual Report
The following table provides the fair value measurement hierarchy of the Group’s assets and liabilities as at 30
June 2021:
Date of valuation
Total
$’000
Quoted prices in active
markets (Level 1)
$’000
Significant
observable inputs
(Level 2)
$’000
Significant
unobservable inputs
(Level 3)
$’000
Liabilities measured at fair value
Deferred contingent consideration
30 June 2021
6,615
-
-
6,615
There were no transfers between levels during FY21.
The following table provides the fair value movement during FY21:
CONSOLIDATED GROUP
2021
($’000)
Opening balance as at 1st July 2020
2,817
Additions due to business combinations
3,798
Gain/(loss) recognised in profit or loss
-
Gain/(loss) recognised in other comprehensive income
-
Closing balance as at 30 June 2021
6,615
Notes to the Financial Statements
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Note 28. Interests in Subsidiaries
(a) Information about Subsidiaries
The subsidiaries listed below have share capital consisting solely of ordinary shares or ordinary units which
are held directly by the Group. The proportion of ownership interests held equals the voting rights held by the
Group. Each subsidiary’s principal place of business is also its country of incorporation.
Name of Subsidiary
Principal
Place
Of Business
Ownership Interest Held
By Group
Proportion Of
Non‑Controlling Interest
2021
(%)
2020
(%)
2021
(%)
2020
(%)
rhipe Australia Pty Ltd 1,5
Australia
100%
100%
–
–
rhipe Dynamics Pty Ltd 1
Australia
100%
100%
–
–
NewLease G2M Pty Ltd 4
Australia
63%
63%
37%
37%
rhipe Cloud Solutions Pty Ltd 1
Australia
100%
100%
–
–
rhipe Solutions Australia Pty Ltd 1
Australia
100%
100%
–
–
Dynamic Business IT Solutions Pty Limited 1
Australia
100%
100%
–
–
SmartEncrypt Pty Ltd (Former name Network2Share Pty Ltd) 1
Australia
100%
100%
-
-
Data Confidence Solutions Pty Ltd 1
Australia
100%
100%
-
-
Parallo Pty Ltd as Trustee for the Parallo Unit Trust 1,2
Australia
100%
-
–
–
emt Distribution Pty Ltd 1,3
Australia
100%
-
–
–
rhipe Japan K.K.
Japan
80%
80%
20%
20%
rhipe New Zealand Limited
New Zealand
100%
100%
–
–
Parallo Limited 2
New Zealand
100%
-
–
–
rhipe Singapore Pte. Ltd
Singapore
100%
100%
–
–
emt Distribution Singapore Pte Ltd 1,3
Singapore
100%
-
-
-
rhipe Technology (Thailand) Co., Ltd
Thailand
100%
100%
–
–
rhipe Malaysia Sdn Bhd
Malaysia
100%
100%
–
–
rhipe Hong Kong Limited
Hong Kong
100%
100%
–
–
rhipe Philippines, Inc
Philippines
100%
100%
–
–
rhipe Philippines Technology, Inc
Philippines
100%
100%
–
–
PT rhipe International Indonesia
Indonesia
100%
100%
–
–
rhipe Lanka (Private) Limited
Sri Lanka
100%
100%
–
–
rhipe Licencing Technology Korea Ltd.
Republic of
Korea
100%
100%
–
–
rhipe Solutions LLC (formerly Online SC LLC)
United States
100%
100%
-
-
Subsidiary financial statements used in the preparation of these consolidated financial statements have also been prepared as at the same reporting date as the Group’s financial statements.
1
These companies are part of the Australian tax consolidated group.
2 This company is a wholly-owned subsidiary which was acquired on 30 September 2020.
3 This company is a wholly-owned subsidiary which was acquired on 30 April 2021.
4 This company is dormant.
5 This wholly-owned subsidiary has entered into a deed of cross guarantee with rhipe Limited pursuant to ASIC Corporations (Wholly owned Companies) Instrument 2016/785 and is relieved from the
requirement to prepare and lodge an audited financial report.
6 Consolidated financial statements include rhipe Limited Employee Share Trust which holds securities on trust for the benefit of directors and employees of the Group.
(b) Significant Restrictions
Notes to the Financial Statements
103
rhipe 2021 Annual Report
There are no significant restrictions over the Group’s ability to access or use assets, and settle liabilities, of
the Group.
(c) Deed of Cross Guarantee
The consolidated income statement and consolidated statement of financial position of rhipe Australia Pty Ltd
and rhipe Limited who are party to the deed of cross guarantee are:
2021
$’000
2020
$’000
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Profit before income tax
11,345
6,169
Income tax expense
(2,224)
(1,379)
Profit after income tax
9,121
4,790
Profit attributable to members of the parent entity
9,121
4,790
Retained Earnings
2021
$’000
2020
$’000
Retained profit/(loss) at the beginning of the year
(46,417)
(48,405)
Profit after income tax
9,121
4,790
Dividend paid
(5,639)
(2,802)
Retained profits at the end of the year
(42,935)
(46,417)
Notes to the Financial Statements
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STATEMENT OF FINANCIAL POSITION
2021
$’000
2020
$’000
ASSETS
Current Assets
Cash and cash equivalents
33,383
49,363
Trade and other receivables
29,719
28,221
Other assets
8,721
3,499
Total Current Assets
71,823
81,083
Non-current Assets
Right of use assets
709
1,232
Property, plant and equipment
445
568
Deferred tax assets
1,701
1,394
Intangible assets
20,001
11,225
Loans and investments
71,354
52,898
Total Non-Current Assets
94,210
67,317
Total assets
166,033
148,400
LIABILITIES
Current Liabilities
Trade and other payables
57,451
41,653
Unearned revenue
378
651
Current tax liabilities
713
723
Current lease liabilities
741
695
Provisions
1,088
754
Deferred contingent consideration
-
939
Total Current Liabilities
60,371
45,415
Non-current Liabilities
Non-current lease liabilities
307
1,049
Provisions
609
449
Deferred contingent consideration
1,536
1,878
Total Non-Current Liabilities
2,452
3,376
Total Liabilities
62,823
48,791
Net Assets
103,210
99,609
EQUITY
Issued Capital
139,754
139,429
Reserves
6,391
6,597
Retained profit/(loss)
(42,935)
(46,417)
Total Equity
103,210
99,609
Notes to the Financial Statements
105
rhipe 2021 Annual Report
Note 29. Parent Information
The following information has been extracted from the books and records of rhipe Limited and has been
prepared in accordance with Australian Accounting Standards:
2021
$’000
2020
$’000
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Total profit/(loss)
24,527
5,420
Total comprehensive income
24,527
5,420
STATEMENT OF FINANCIAL POSITION
ASSETS
Current Assets
714
33,000
Non-current Assets
101,690
48,843
Total assets
102,404
81,843
LIABILITIES
Current Liabilities
1,221
538
Non-current Liabilities
1,446
575
Total Liabilities
2,667
1,113
EQUITY
Issued Capital
139,754
139,429
Retained Earnings
(69,761)
(69,542)
Current Year Earnings
24,527
5,420
Reserves
5,217
5,423
Total Equity
99,737
80,730
Contractual commitments
At 30 June 2021, rhipe Limited had not entered into any contractual commitments for the acquisition of
property, plant and equipment (2020: $Nil).
Notes to the Financial Statements
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Note 30. Events After the Reporting Period
On 6th July 2021, rhipe entered into a binding Scheme Implementation Deed with Crayon under which it
is proposed that Crayon will acquire 100% of the shares in rhipe by way of a Scheme of Arrangement. The
Scheme is subject to limited conditionality and is not subject to financing or due diligence. It is anticipated that
a Scheme Booklet in relation to the proposed Scheme will be sent to rhipe shareholders in September 2021
and rhipe shareholders will vote on the Scheme in October 2021.
Other than noted above, there has not been any other matter or circumstances occurring subsequent to the
end of the financial year that has significantly affected, or may significantly affect the operations of the Group,
the results of those operations, or the state of affairs of the Group in future financial years.
Note 31. Company Details
The registered office and principal place of business of the Company is:
rhipe Limited
Level 19, 100 Miller Street
North Sydney NSW 2060
Notes to the Financial Statements
107
rhipe 2021 Annual Report
Directors’ Declaration
In accordance with a resolution of the directors of rhipe Limited, the Directors of the Company state that:
1. In the opinion of the directors:
(a) The financial statements and notes of rhipe Limited for the financial year ended 30 June 2021 are in
accordance with the Corporations Act 2001, including:
(i)
giving a true and fair view of the consolidated entity’s financial position as at 30 June 2021
and of its performance for the year ended on that date; and
(ii)
complying with Accounting Standards and the Corporations Regulations 2001;
(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when
they become due and payable.
2. This declaration has been made after receiving the declarations required to be made to the directors by the
chief executive officer and chief financial officer in accordance with section 295A of the Corporations Act
2001 for the financial year ended 30 June 2021.
3. The Company and a wholly-owned subsidiary, rhipe Australia Pty Limited, have entered into a deed of
cross guarantee under which the Company and its subsidiary guarantee the debts of each other.
At the date of this declaration, there are reasonable grounds to believe that the companies which are party
to this deed of cross guarantee will be able to meet any obligations or liabilities to which they are, or may
become subject to by virtue of the deed.
On behalf of the board.
Dominic O’Hanlon
Managing Director
Dated this 31st day of August 2021
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rhipe 2021 Annual Report
Independent Auditor’s Report
To the members of rhipe limited and controlled entities (formerly rhype limited)
Ernst & Young
200 George Street
Sydney NSW 2000 Australia
GPO Box 2646 Sydney NSW 2001
Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
ey.com/au
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Independent Auditor’s Report
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rhipe 2021 Annual Report
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Independent Auditor’s Report
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rhipe.com
rhipe 2021 Annual Report
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Independent Auditor’s Report
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rhipe 2021 Annual Report
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A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Independent Auditor’s Report
112
rhipe.com
rhipe 2021 Annual Report
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A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Independent Auditor’s Report
113
rhipe 2021 Annual Report
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
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rhipe 2021 Annual Report
1. Shareholding
a. Distribution of Shareholders
Distribution of Shareholders
Ordinary Shares
Size of Holding
Number of Shares
% of Issued Capital
Number of Holders
100,001 and Over
132,606,141
82.33
67
10,001 to 100,000
19,648,738
12.20
838
5,001 to 10,000
4,754,296
2.95
611
1,001 to 5,000
3,565,187
2.21
1,256
1 to 1,000
501,014
0.31
956
Total
161,075,376
100.00
3,728
b. The number of shareholdings held in less than marketable parcels is 121
c. The names of the substantial shareholders listed in the holding company’s register are:
Shareholder
Number of Ordinary
Fully Paid Shares
Held
TUTUS MCDONAGH PTY LTD
23,910,730
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
23,496,272
CITICORP NOMINEES PTY LIMITED
19,455,055
NATIONAL NOMINEES LIMITED
13,959,658
BRISPOT NOMINEES PTY LTD
10,619,673
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
8,405,646
d. Voting Rights
The voting rights attached to each class of equity security are as follows: Ordinary Shares.
Each ordinary share is entitled to one vote when a poll is called, otherwise each member present at a meeting
or by proxy has one vote on a show of hands.
Additional Information for Listed Public Companies
rhipe Limited and Controlled Entities
The following information is current as at 3rd August 2021
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e. 20 Largest Shareholders – Ordinary Shares
Name
Number of Ordinary Fully
Paid Shares Held
% Held of Issued Ordinary
Capital
1
TUTUS MCDONAGH PTY LTD
23,910,730
14.84
2
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
23,496,272
14.59
3
CITICORP NOMINEES PTY LIMITED
19,455,055
12.08
4
NATIONAL NOMINEES LIMITED
13,959,658
8.67
5
BRISPOT NOMINEES PTY LTD
10,619,673
6.59
6
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
8,405,646
5.22
7
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2
2,859,449
1.78
8
MR DOMINIC OHANLON & MRS KAREN OHANLON
2,157,840
1.34
9
BNP PARIBAS NOMS PTY LTD
2,064,743
1.28
10
DAWN EDMONDS
2,000,000
1.24
11
CS FOURTH NOMINEES PTY LIMITED
1,858,187
1.15
12
MIRRABOOKA INVESTMENTS LIMITED
1,768,701
1.10
13
UBS NOMINEES PTY LTD
1,718,309
1.07
14
NEWECONOMY COM AU NOMINEES PTY LIMITED
1,495,830
0.93
15
MR WARREN NOLAN
1,222,796
0.76
16
BNP PARIBAS NOMINEES PTY LTD
947,476
0.59
17
PRM INVESTMENTS PTY LTD
850,680
0.53
18
PACIFIC CUSTODIANS PTY LIMITED
845,949
0.53
19
MRS ELIZABETH HELEN GOUDIE
769,000
0.48
20
EDMONDS WALLIS PTY LTD
702,294
0.44
121,108,288
75.19
2. The name of the company secretary is
Marika White.
3. The address of the principal registered office in Australia is
Level 19, 100 Miller Street, North Sydney New South Wales, 2060.
Telephone: 1300 732 009
4. Registers of Securities are held at the following addresses
Link Market Services Limited
Tower 4, 747 Collins Street, Docklands VIC 3008
Investor Enquiries: 1300 554 474
Facsimile: +61 2 9287 0303
5. Stock Exchange Listing
Quotation has been granted for all the ordinary shares of the Company on all Member Exchange of the
Australian Securities Exchange Limited.
6. Unquoted Securities
Nil unquoted securities.
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