ANNUAL REPORT 2022 ASX : STG STRAKER TRANSLATIONS GROUP THE FUTURE OF GLOBAL COMMUNICATION 2 Straker Translations 3 Annual Report 2022 CONTENTS 06 - 07 Highlights 08 - 11 Chairman & CEO’s Review 12 - 15 Our Strategy 16 - 17 Acquisitions 18 - 19 Enterprise 20 - 21 Technology 22 - 23 ESG 24 - 31 Management Commentary 32 - 33 Board Of Directors 34 - 35 Management Team 36 - 91 Financial Statements 103 - 109 Statutory Information 110 Directory 92 - 102 Corporate Governance Statement 4 Straker Translations ABOUT STRAKER Straker provides next generation language services supported by a state of the art technology stack and robust AI layers to clients around the world. By combining the latest available technologies with linguistic expertise, Straker’s solutions are scalable, cost-effective and accurate. Through technical innovation and data analytics, Straker is a proven partner in future-proofing global communications. HIGHLIGHTS Straker Translations (Straker) has delivered another strong year of growth, building its reputation as a changemaker in the international translations sector and consolidated its reputation as a globally capable technology-led translations partner. $55.9m Revenue up 78.5% on FY2021 lifted by acquisitions and strong organic growth $0.2m Adjusted EBITDA of $0.2m up 194% on 2021 54.3% Gross margin, increase of 90 basis point compared to prior year $15.1m Strong cash balance following A$25m capital raising in Q1 FY2022 6 Straker Translations OPERATIONAL HIGHLIGHTS ACQUIRED Belgium-based IDEST Communication, a company specialising in translations for international institutions including the United Nations and the European Commission. Revenue per project manager up 39% ON FY2021 as our technology drove productivity improvements. COMPLETED THE FIRST FULL YEAR of the landmark STRATEGIC TRANSLATIONS PARTNERSHIP WITH IBM and benefited from the first full year contribution of the US-based Lingotek acquired in February 2021. POSITIVE EBITDA and OPERATING CASH FLOW IN FY22-H2 DROVE THE INTEGRATION of our Ai-Powered RAY (RAY) Translation platform with the Lingotek and IBM platforms to drive productivity and margin improvements. 7 Annual Report 2022 CHAIRMAN & CEO’S REVIEW We have also expanded the number of languages we translate for IBM from the 55 envisaged at the start of the partnership to 90 now. More than 80% of translations are now being completed automatically, a figure ahead of our service commitments. In addition to the sharp increase in revenue for Straker, the partnership has validated our ability to scale quickly to meet the demands of a global customer. It has also highlighted our global reach and technological capabilities with the myriad of global enterprises looking to consolidate their translation needs with a single provider. Our success with IBM, combined with the increased investment we have made into sales and marketing and our new strategies to drive deeper engagement with enterprise clients, has also contributed to growth and assisted with customer wins such as the global electronics giant Panasonic and the sports goods giant Nike. It has also helped to expand our sales pipeline. Dear fellow shareholders, Straker’s reputation over the last year, driven by an acceleration in momentum as a global capable technology-led translations partner, has grown. After announcing its second consecutive quarter of positive Adjusted EBITDA, Straker is looking to extend that record of earnings accretive growth by continuing to execute on its strategy of gaining a greater share of the localisation spend from its broad network of global enterprise relationships and bringing new customers to the business. Annual revenue increased 78.5% to $55.9 million from $31.3 million in the same period a year ago, a result that was ahead of guidance for above $50 million. We saw strong organic growth particularly among the global enterprises that have the most to gain from our global reach and technological leadership. We have also benefitted from recent acquisitions. A key contributor to the result has been the strategic alliance we struck with IBM towards the end of the prior financial year. The alliance has delivered a steady rise in translation volumes. At the end of March, we were translating around 1.8 million words for IBM per month up sharply on the 1 million in January. 8 Straker Translations IDEST ACQUIRED 1st Jan 2022 Acquisitions Earnings & funding In the fourth quarter of the financial year, we acquired the Belgium-based IDEST Communication, a move that is aligned with our strategy to be a leader in the consolidation of the global translation sector. The acquisition, which is the culmination of a long-standing dialogue between our two companies, delivered on all our acquisition criteria. It further strengthened our position in Europe, delivered us relationships with key multilateral governance organisations such as the United Nations and the European Union, and offers us the synergistic benefits that will come from the integration of our Ai-Powered RAY translation platform. Meanwhile, the US-based Lingotek, acquired in the fourth quarter of the prior financial year, has made its first full year contribution to the group, with their revenue up 11% on their prior year’s proforma result. As we mentioned at the half year, in addition to consolidating our position in North America, Lingotek has also bolstered our technology stack. Its translation connector technologies, which allow translations to be delivered directly into customers’ systems, and its Software as a Service (SaaS) capabilities offer significant latent value to Straker and its customers. We expect the consolidation of the translation sector to continue, and we are actively engaged with several translation companies that we believe will complement our global organisation. Annual revenue increased 78.5% to $55.9m from $31.3 million in the same period a year ago, a result that was ahead of guidance for above $50 million. It was gratifying to see adjusted EBITDA turn positive in the second half of the year and to deliver a full year result of $0.2 million, a turn-around of $0.4 million on the prior year’s result. The transition reflects our determination to deliver profitable growth. Gross profit rose to $30.4 million from $16.7 million, with gross margins for the year 54%, up on the prior year’s 53%. A credible result given the dilution caused by lower margin revenue from the recent acquisition of IDEST and the ramp up in the on-boarding of IBM. We see immediate potential to drive margin improvements as we continue to integrate IDEST and other acquisitions and transition these businesses to the Ai-Powered RAY translation platform. However, we are also determined to drive incremental productivity improvements, recognising that such changes can deliver a significant uplift in earnings given our scale. The growing automation we are delivering in the processing of translations is a good example of these improvements. While we are yet to see these efforts in measures of gross margin, we are seeing strong improvements in measures such as revenue per project manager. Separately, we have also moved to mitigate the margin pressures that come with competition for talent, with the opening of a new office in the Philippines. We are well funded. We have seen a strong rise to positive operating cash flows in the second half of the year. Our A$25 million capital raising in the first quarter of the financial year further strengthened our balance sheet and we ended the year with cash and cash equivalents at $15.1million. 9 Annual Report 2022 CHAIRMAN & CEO’S REVIEW CONTINUED Revenue Growth ) m $ Z N ( e u n e v e R 56m 52.5m 35m 17.5m 0m 2010 2013 2016 2019 2022 An Enduring Record Of Growth Straker Translations has established an enduring record of growth as it has moved from the start-up phase in 2010 through to the present where we are poised to leverage our technology advantage and our growing reputation among transnational enterprises. 1. Initial start-up phase, market validation 2. Market structure headwinds 3. Adapted game plan to acquiring relationships, embedding tech, and expanding from the bottom up 4. Rapid growth as we accelerated growth from expanded customer relationships through our technology offering Research & development Straker is determined to become the translation ecosystem of choice for global enterprises. Through this year we have refined our technology with a focus on giving customers choice in how they engage with us and by providing multiple interfaces with their enterprise applications. on our service commitments to IBM. Workflow between IBM and the Ai-Powered RAY platform has also been enhanced as the new application programming interface that links IBM’s systems with ours is further deployed across IBM’s operations. The acquisition of Lingotek, which in addition to giving us Software-as-a-Service (SaaS) capabilities and a highly valuable selection of translation connectors, is facilitating this strategy. The SaaS model, for instance, better suits those customers, that want a deep engagement with the translation process, while others prefer the simplicity of an arm’s length model. We are determined to deliver a service stack that meets these differing needs, while at the same time deliver to all customers the speed and efficiency gains that come with the Ai-Powered RAY translation platform. Research and development spend of $9.1 million for the year represents around 16% of revenue, an increase from last year’s 14%, reflecting an increasing spend on, amongst other things, the on-boarding of IBM and Lingotek’s SaaS platform. Key achievements in the past year have included delivering We also linked the first of Lingotek’s connectors to the Ai-Powered RAY platform. The connector, for the website software WordPress, is working well and we are now turning our attention to other connectors such as those that connect our clients’ CRM and e-commerce platforms. The team is also working on embedding SaaS services across our technology stack, recognising the strong appetite for these capabilities across our customers. Our initial target is to move SaaS revenues from the current level to around 20% of revenue over time. Finally, as we mentioned at the half year, our technology team was successful in gaining ISO27001 certification, the gold standard for information security. This accreditation is pivotal to our success in securing the support of the global enterprise clients we are targeting. 10 Straker Translations Sustainability and people Outlook At Straker we are committed to building a diverse sustainable company that has a positive impact on the community. We have looked at how we can achieve this and decided that B-Corp certification is the gold standard for environmental social and governance credentials (ESG). So, we have set a goal to become B-Corp certified in the 2024 financial year. A key part of this goal is delivering a strong and vibrant company culture. The past year, with its COVID-related lockdowns and constraints on face to face engagement with colleagues and customers around the world, has presented a considerable challenge to the company and its people. We have worked hard to overcome these stresses and we have been inspired by how our global team has responded to the significant constraints the pandemic has imposed. On behalf of shareholders, we thank the directors, the senior leadership team, and all our staff for their outstanding effort and their commitment to the vision we all share for the company. Straker is well positioned for the new financial year to deliver on its strategic goals and establish the company as the translation ecosystem for global enterprises. With the easing of COVID-restrictions and the virus becoming endemic, we expect to convert the growing recognition of our global reach and capabilities into deeper engagement with existing customers and the conversion of this interest into further sales and increased revenues. The next three years present huge opportunities. We are targeting earnings accretive revenue growth of 20% for the new financial year, with a gross margin exceeding the 54% recorded in the most recent financial year. We look forward to updating you on our progress at our annual meeting in August. Phil Norman Chairman Grant Straker Chief Executive Officer Annual Report 2022 11 OUR STRATEGY Straker Translation’s strategy is built on innovation and growth. What we achieved during the year. Repeat Revenue Growth Use technology and global services to grow our repeating revenue base while maintaining high margins Grow Customer Base Expand through organic and acquired growth to capture the opportunities and value as the translations industry consolidates Ai Driven Technology Be world leaders in using AI, humans and automation in the translation process AI Driven Technology Innovation Our proposition is founded on our advanced Ai-Powered RAY. Our goal is to be the world leaders in using humans and automation in the translation process. What we achieved in FY2022 • We drove the integration of our systems with IBM and Lingotek • We processed rapidly mounting volumes of content through our platform from IBM and other customers • We increased the automation of the translation process • We deployed the first of the Lingotek translation connectors, which allow customers to connect their systems with our translation management system • We received ISO 27001 certification, the gold standard for information security, better positioning the company for global enterprise tender opportunities. • We advanced our goal to be the translation ecosystem of choice by offering tools that enable customers to choose how they engage with us 12 Straker Translations Grow Our Customer Base We expand through organic and acquired growth to capture opportunities and value as the translation industry consolidates. What we achieved in FY2022 • We acquired the Belgium-based translation provider IDEST Communications, a company specialising in translations for international institutions such as the United Nations and the European Commission • We onboarded IBM in line with our strategic translations partnership agreement and delivered on our service commitments to the company, processing increasing volumes of content through the platform • Our success with IBM and our growing profile with other transnational businesses is validating the advantages of our technology and our transnational reach • We built out our sales team to 62 globally with offices in Belgium, Germany, Japan, New Zealand, Philippines, Spain, The Netherlands, UK and USA and have developed a strong pipeline of opportunities to drive organic growth • We continue to explore consolidation opportunities in the global translation sector 13 Annual Report 2022 OUR STRATEGY CONTINUED CONTINUED Grow Repeating Revenue: Straker uses it’s technology and global services capability to grow our repeating revenue base, while maintaining high margins. What we achieved in FY2022 • • Building SaaS capabilities acquired with Lingotek into the Ai-Powered RAY translation platform The IBM contract has been extended to 90 languages from the original 55 languages envisaged when we signed the agreement • We have launched a new sales strategy to drive deeper engagement with existing clients and build enduring relationships with new clients • We are positioned well for the return of global travel and the resumption of face-to- face engagement with customers 14 Straker Translations The Next Three Years The coming three years presents a huge opportunity for Straker to use our unique technology and data assets to grow our revenue and margins. The global market for language translations is expected to grow at an estimated compound rate of over 6% up until 2025 to US$73.6 billion supported by factors such as increasing levels of globalisation, the rapid increase in online and offline content being produced, the economic emergence of new markets with specific language requirements and European regulatory requirements. Typical content that is translated includes product brochures, operating manuals, legal documents, and websites. The market is also highly fragmented with over 20,000 providers operating in the sector, the majority of which rely on outdated and cumbersome manual processing of translations. The top 100 translation companies account for just 15.0% of the overall language industry in 2020, creating opportunities for companies with a technology advantage such as Straker to drive consolidation in the industry. The sector is ripe for disruption Market Growth 58.3 61.8 65.5 69.4 73.6 2021 2022 2023 2024 2025 n o i l l i b D S U 80 70 60 50 40 30 20 10 0 15 Annual Report 2022 ACQUISITIONS Participating in the consolidation of the global translations sector. A presence at the heart of Europe IDEST Communication snapshot: Founded: 1990 Staff: 18 full time Translation network: ~500 freelance translators Languages: all the EU’s official languages Key clients: United Nations, European Union. Annual revenue: €4m Head office: Brussels, Belgium Acquisition price: €1.75 million initially in cash and shares with a deferred consideration linked to performance. Straker at the start of this year extended and consolidated it’s presence in the multibillion-dollar European market with the acquisition of IDEST Communication. The acquisition, which follows several years of talks between Straker and IDEST, met all of Straker’s acquisition criteria. This builds on the acquisition of MSS, OnGlobal, Eule GmbH and as a direct result Straker now has a physical presence in 6 countries in Europe. The acquisition offers Straker new relationships with leading global institutions, including the European Commission, the European Parliament, UNESCO, and the United Nations. It offers Straker acquisition synergies, including the gains that will come from the integration of the Ai-Powered RAY translation platform into IDEST. IDEST customers, which until now have relied on the company to deliver translations in French language pairs, will meanwhile benefit from Straker’s capability across a multitude of languages as well as the speed and efficiency gains offered by Straker’s technology and global reach. 16 Straker Translations “We are very happy with Straker acquiring IDEST. They were our top choice for an acquirer given their technology, global services reach and team and cultural fit,” says Jean-Paul Dispaux, Head of Sales and founder - IDEST A long courtship Straker and IDEST first began to discuss the potential for consolidation in 2017. But at that time the founders, Jean-Paul Dispaux and Odette Liétar, were determined to continue to grow the business. Now having achieved their goals, the duo have seen the benefit of joining the Straker family. What we look for in acquisition targets Good base of enterprise customers Location with strategic value Gross margin uplift guaranteed through Straker technology Ability to consolidate costs Strong in-market sales and account management teams Extensive global reach Annual Report 2022 17 ENTERPRISE The scale reach to match the world’s largest enterprises and institutions Straker is building relationships among some of the world’s largest companies amid growing recognition of it’s reach, capability, and the advantages of its technology. Our 25 largest customers span a breadth of industries and geographies from IBM, SAP, and Oracle in the information technology sector to Nike and H&M in the apparel sector, Walmart in retail, Orica in chemicals and the United Nations and the European Union in government. We have acquired these relationships as we have moved to be a key player in the consolidation of the global translation sector. We have also benefited from the patient work of our sales force, which now numbers nearly 70 people across our global network of 14 offices, as they have worked to both build on existing relationships and build new ones. 18 Straker Translations IBM supercharging growth Our success with global enterprises has been supercharged by our multi-year strategic translations alliance with IBM. The agreement, inked in 2020, validated our technology advantage as IBM replaced multiple vendors with Straker’s technology-based approach to translation services. It also validated our ability to scale quickly to meet the demands of a global customer. Volumes through our platform have surged ahead of both IBM and Straker’s forecasts from just under 2.2 million words per month at the commencement of the alliance to a steady average of more than 11 million words per month achieved in the first 4 months of 2022 with peaks reaching up to 19 million words. This rise in volume has been accompanied by a surge in multiple revenue streams to Straker. Straker is supporting all IBM Product & Technical documentation, Legal, Marketing & HR translation content worldwide. Also supporting Corporate Media needs in events such as Think22. The initial agreement covered 55 languages with IBM Adaptive Translations and 33 Languages for IBM Global Media Localisation. We have now moved into translation of 77 languages in this year covering all of IBM’s localization & translation needs. The partnership has also seen IBM directly link Straker’s proprietary Ai-Powered RAY with IBM’s technology platforms. Over the year we have optimised these links to the extent that more than 80% of translations are now being submitted and returned in an automated manner. We are pleased with the progress we have made and continue to see further opportunities across the IBM group for further partnerships. 19 Annual Report 2022 TECHNOLOGY Setting our software strategy to meet the needs of our customers. RAY Translation Hub Customer who want minimal involvement in the process External/Internal Vendors RAY Translation Portal Lingotek TMS Customers who want to manage the process initially Simplifying customers’ technology stack and add value through productivity. CONNECTORS TRANSLATION MANAGEMENT SYSTEM Minimum input, maximum functionality 20 Straker Translations Number of Human Memory Items Added s m e t I f o r e b m u N 9,000,000 6,750,000 4,500,000 2,250,000 0 Jan 19 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan 20 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan 21 Research and development spend for the year represents around 16% of revenue and is supporting our long-term software strategy to drive new business, higher margins, and improved business efficiencies. Month The Industry Ecosystem Of Choice R&D Focus On Driving Productivity Straker’s objective is to be the translation ecosystem provider of choice. We are achieving this goal by giving customers choice in how they engage with us and by providing multiple interfaces with their enterprise applications. For example, thanks to the SaaS technology we gained through the acquisition of Lingotek in 2020, we offer a subscription service for customers, like the global sportswear giant Nike, who wish to manage translations internally. The Ai-Powered RAY platform meanwhile suits those customers like IBM that want translations to take place at arm’s length. In each case customers get to benefit from the combined strengths of each platform. We are, for instance, steadily integrating the translation connectors we gained from Lingotek into our systems. These connectors link critical business applications with translation management software, avoiding the need for content authors to switch between applications. Customers can offer translations into our global network of more than 15,000 translators and thereby benefit from the AI-driven analytics that ensure the prioritisation of the best and most productive translators. Alternatively, they can go directly to those translators with whom they have established enduring relationships. Customers also benefit from the increasing automation we are driving in translations and translation management. Straker over the last year has seen an acceleration in efficiency gains. A single number tells the story: operating revenue per project manager (the group’s operating revenue divided by the number of project managers, the people who shepherd translations through the Ai-Powered RAY translation platform). At the start of the year the average revenue per project manager, was $49k per month. But over the last year this has increased steadily and in March it stood at $77K per project manager as we have driven increasing amounts of automation in the Ai-Powered RAY translation platform. We have achieved this by increasing the automatic processing of translations, from the point a translation enters our systems through to delivering the text back to our customer. We only intervene when our AI identifies an anomaly outside normal tolerances on measures as diverse as the duration of translation times and quality. We call it managing by exception. The most significant development over the past year has been the further extension of the base Application Programming Interface (API). This has allowed IBM to increase its volume of translation source content pushed, merging of thousands of files and the automatic processing of these through the Ai-Powered RAY translation platform. Other advances include the increased sophistication of analysis of the multiple data points collected by the Ai-Powered RAY platform. Any remaining manual interventions meanwhile throws up opportunities to examine the roadblocks to productivity gains. At present we see no barrier to continuous productivity improvements, as we continue to exploit the data collected by the Ai-Powered RAY platform. 21 Annual Report 2022 ENVIRONMENTAL, SOCIAL AND CORPORATE GOVERNANCE Working towards a global sustainability standard Targeting B-Corp accreditation At Straker we are committed to building a diverse, sustainable company that has a positive impact on the community. We have looked at how we can achieve this and decided that B-Corp certification is the gold standard for environmental, social, and governance credentials (ESG). So have set a goal to become B-Corp certified in the 2024 financial year. Outside of being a company with good ethics and contributing positively to the communities where we work we see strong ESG credentials as good for business. It is a strong signal to talent that we are a good company to work for. It may also improve our access to growth capital as it opens doors to ESG investors that focus on companies that build sustainability and good corporate citizenship into their DNA. There are five major categories in B-Corp certification: Governance Workers Community Environment Customers 22 Straker Translations Governance Environment We are committed to upholding a high standard of corporate governance and work to comply with as far as possible with the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations having regard to the nature and size of Straker’s operations. At Straker given the nature of our business as an information technology provider we have a low carbon footprint relative to industrial companies. But we know our information infrastructure and our corporate travel among other things, have a carbon footprint, and we need to examine ways to reduce our impact. We also take pride in the diversity of our organisation from the Board through to our people across the world. More than half our leaders in the company are women and a third of the Board is from an indigenous minority. Our Chief Executive and Co-founder Grant Straker is Ngāti Raukawa. Workers We strive hard to look after our team and promote a culture that recognises and values diversity and accountability and promotes wellbeing, flexibility and financial success. Community While we like to contribute to our communities, we still have work to do to match the benchmark set by B-Corp. We are now looking at ways to allow staff to have days off to help with community projects, how we can contribute to local and national projects and what we need to do to give force to our determination to be a good corporate citizen. Recognising measurement is the first step, in FY2022 we had engaged sustainability consultants Go Well Consulting to undertake a stock take of where we were at and what was needed to reduce our environmental impact as part of our overall Sustainability Strategy. Customers With respect to customer, we share B-Corp’s determination to add value to customers and we are proud of our record. Our Diversity Objectives: Straker has adopted the following measurable objectives: • • • Sustaining current overall gender equity position with no more than a 10% variance; Increasing representation by females in leadership positions by 5% YoY; and Increasing awareness and inclusion of LGBTTQIA+ employees by a Company-wide awareness programme We are delighted that we have achieved all of these goals. 23 Annual Report 2022 MANAGEMENT COMMENTARY This process is managed using Straker’s proprietary Ai- Powered RAY platform, which has been developed over eight years and is an enterprise grade, end-to-end, cloud- based platform. By leveraging machine translations and its big data assets, the Ai-Powered RAY platform enables the delivery of faster and more accurate translations, lowering the time and cost to deliver versus traditional translation services. The platform can be integrated directly into customers’ systems and consists of a customer dashboard, machine translation integration and modules for assisting and managing translators. Industry Straker operates in the language services industry, providing a platform for the translation of written content in both offline and online form. Typical content translated includes product brochures, operating manuals, legal documents and websites. The global language services market was recently estimated at US$55 billion in 2020 and is projected to reach US$73.6 billion by 2025, growing at a compound annual growth rate of 6.0% . Key drivers behind the growth of the industry include: • • • • the increasing level of globalisation, accompanied by the need for localisation of content; the rapid increase in content produced, both online and offline, providing an ever-increasing base of content which may require translation; the economic emergence of new markets with specific language requirements; and regulatory authorities mandating translation of content, particularly in the European Union. The following commentary should be read in conjunction with the consolidated financial statements and the related notes in this report. Some parts in this commentary include forward looking statements and information on strategy and plans for the business that involve risks and uncertainties. Actual events and the timing of events may vary. All amounts are presented in New Zealand dollars unless otherwise stated. Straker is a New Zealand incorporated company and has a 31 March year-end balance date. References to FY21 and FY22 refer to the 12 months ended 31 March in the respective years. Non-IFRS measures To ensure that the presentation of results fully reflect the underlying performance of the business, Straker Translations Group publishes its key metrics on a non- IFRS basis as well as on an IFRS basis. For transparency purposes, Straker also publishes full reconciliations between IFRS and non-IFRS measures. IFRS refers to New Zealand International Financial Reporting Standards. Repeat business is revenue from repeat customers (customers who have previously placed an order with Straker, many of whom are enterprise in nature). Non-operating costs include costs of restructuring activities, IPO costs and other non-recurring consulting costs. The non-IFRS measures have not been independently audited or reviewed. The obligation to prepare a Directors’ Report in section 298 of the Australian Corporations Act 2001 (CA) does not apply to Straker as a New Zealand company. However, the ASX Listing Rules include a separate requirement (ASX LR 4.10.17) requiring all listed entities to include an operational and financial review statement in their Annual Reports which is equivalent to the general information requirements set out in s299 and 299A of the CA. This Management Commentary section is intended to meet this requirement. Company background Based in New Zealand, Straker Translations has established itself as a world-leading AI data-driven translation platform powering the global growth of businesses. Straker has developed a hybrid translation platform that uses a combination of AI, machine-learning and a crowd-sourced translators. The company’s cloud- based platform manages the end-to end translation process, leveraging AI, machine-learning (both in-house and third party owned engines) to create a first draft translation and subsequently matches the customer’s content with one or more of the approximately 10,000 crowd-sourced human translators for refinement. 24 Straker Translations Competitive positioning Straker’s value proposition The translation services market is highly fragmented with thousands of small companies across the globe offering personalized services to customers in local geographies. Such companies rarely use technology-driven translation platforms and are, therefore, relatively inefficient compared to Straker. The explosion and speed of content creation today means there is more content being created than all the human translators in the world can translate effectively. We could see this happening nearly a decade ago and knew that machines and humans together would be the future of the industry. These companies are ideal Straker acquisition targets as we can secure margin improvements from the integration of our sophisticated Ai-Powered RAY platform and synergy benefits from geographic consolidation. As Straker scales its business, its ability to enhance its offerings is improving, allowing it to compete more effectively for enterprise customers with larger competitors in areas such as video streaming, mobile apps and e-commerce. At this part of the translation market, there is a relatively small number of larger players and Straker is now well positioned to compete with these companies based on its world-class technology capability, its service strength and its global footprint. Significant changes in the year During the FY22 year the company made a significant acquisition of the Belgium-based IDEST, which on an annualised basis is contributing an incremental $7million to Straker’s revenue. It also onboarded a significant contract from IBM and had a full year contribution from Lingotek which was acquired in February 2021. That point has now arrived and, using our world-class Ai- Powered RAY translation platform and our global services capability, we are able to deliver solutions to customers that legacy providers in the industry have no ability to match. Our value proposition is based around: • How we can simplify the translation process - from rapid quoting to advanced customer dashboards and fully integrated Application Programming Interfaces (API) connectors • How we are able to deliver better value through our platform and our ability to offer differentiated delivery and pricing models • With offices in 9 countries around the globe offering 24/7 delivery capability and services using more than 10,000 translators we have scale on tap and can deliver large and urgent projects quickly. • • Speed is now a major consideration for customers, so our ability to deliver projects within a short timeframe is of huge value. This includes our ability to automate and increase the speed of the actual translation. The combination of our world-class sales and support teams, advanced technology and our geographical reach is a compelling proposition for both large and small customers. With a growing development team, we are continuing to invest in research and development and continue to find more ways to increase the efficiency of the translation process and integration of acquired companies. 25 Annual Report 2022 MANAGEMENT COMMENTARY CONTINUED Operating revenues During the FY22 year the company made a significant acquisition of the Belgium-based IDEST, which on an annualised basis is contributing an incremental $7million to Straker’s revenue. It also onboarded a significant contract from IBM and had a full year contribution from Lingotek which was acquired in February 2021. Revenue growth Types of goods and services Language services Subscriptions Professional services 2022 $’000 50,293 5,345 263 55,901 2021 $’000 30,293 856 173 31,322 Change % 66% 524% 52% 78.5% Total revenue for the 2022 financial year was $55.9 million, a 78.5% improvement on the prior year’s $31.3 million. The increase was driven by a large increase in language services, reflecting a full-year of the IBM contract, and acquisitions including Lingotek, which also contributed $5.3 million in subscription revenue, and IDEST which was acquired in the last quarter of the 2022 financial year. Professional services revenue of $263,000 was generated from value-add services related to the translation management platform. 26 Straker Translations Revenue by region APAC EMEA NAM Total 2022 $’000 21,518 14,129 20,254 55,901 2021 $’000 7,583 14,256 9,483 31,322 Change % 184% -1% 114% 78.5% Growth in regional revenue largely reflects the same trends as operating revenue growth. Growth in the Asia Pacific region reflected the IBM contract win, which impacted Europe negatively, as the legacy business was previously with them. Growth in North American revenues reflected the full year contribution of Lingotek. Straker also continues to grow from expanding technology-enabled translation services to enterprise customers. Straker also grew from expanding technology-enabled translation services offered to a number of existing enterprise customers. These gains were moderated by the COVID-19 pandemic, which slowed revenue generation, particularly in the first half of the year. Gross margin Gross margin (%) 2022 $’000 54.3% 2021 $’000 53.4% Change % 1% Gross margins for the year increased to 54.3% from 53.4% in the same period a year ago, largely reflecting the high- margin Lingotek subscription revenue making a strong contribution to the uplift, offset by the short-term dilutionary impact of the IDEST acquisitions and the on-boarding of IBM. Straker continues to seek improved gross margin by feeding more translation volume through the Ai-Powered RAY platform. 27 Annual Report 2022 MANAGEMENT COMMENTARY CONTINUED Statutory results Revenue Gross Margin Gross Margin % Other Income Depreciation & Amortisation Operating expenses excluding D&A Operating expenses Percentage of operating revenue Loss from trading operations Percentage of operating revenue Amortisation of acquired intangibles Acquisition & Integration costs Operating loss before net finance expense Net Finance expense Loss before income tax Percentage of operating revenue Income tax credit Net loss after tax 2022 $’000 55,901 30,381 54.3% 90 (4,511) (30,280) (34,791) -62.2% (4,320) -7.7% (2,030) (300) (6,650) 263 (6,387) -11.4% 475 (5,912) 2021 $’000 31,322 16,718 53.4% 562 (1,801) (17,888) (19,689) -62.9% (2,409) -7.7% (1,431) (509) (4,349) (1,896) (6,245) -19.9% 229 (6,016) Change % 78% 82% 2% -84% -151% -69% -77% -1.0% -79% 0.5% -42% 41% -53% 114% -2% 43% 107% 2% Revenue for the 2022 financial year was $55.9 million, a 78.5% improvement on the prior year’s $31.3 million. The increase was driven by growing recognition of Straker’s capabilities from global enterprises with a 39% increase in organic growth as well as contributions from recent acquisitions, Lingotek and IDEST. On a nominal (dollars generated) basis, gross margin was up 82% year-on-year to $30.4 million. Other income dropped due to no COVID subsidies being claimed. Operating expenses, excluding depreciation and amortisation, of $30.3 million were up 69% on FY21 due to the costs of scaling up to deliver on the new IBM contract, the full year of Lingotek, and the three months of IDEST. The loss from trading operations increased to $4.3 million with an increased nominal gross margin contribution offset by higher operating expenses and higher depreciation and amortisation. The loss before income tax was $6.4 million, which was marginally higher than the prior year’s $6.3 million. It is important to note the significant turn-around in trading operations from the first half of the year as the prior period investment returns a positve adjusted EBITDA for the year. 28 Straker Translations Earnings before interest, tax, depreciation and amortisation Operating loss before net finance expense Add: Depreciation & Amortisation Amortisation of acquired intangibles EBITDA EBITDA Margin Acquisition & Integration costs Other non operating costs Adjusted EBITDA Adjusted EBITDA margin 2022 $’000 (6,650) 4,511 2,030 (109) -0.2% 300 - 191 0.3% 2021 $’000 (4,349) 1,801 1,431 (1,117) -3.6% 509 410 (198) -0.6% Change % 52.9% 150.5% 41.9% 90.2% 94.5% -41.1% -100.0% 196.5% EBITDA losses narrowed by 90% to $0.1 million from $1.1 million in the prior year reflecting the contribution of acquisitions and organic revenue growth. Adjusted EBITDA, which excludes non-recurring acquisition, integration and other non-operating costs improved 194% to $0.2 million profit from a loss of $0.2 million in the prior year. Non-operating costs include costs of restructuring activities and non-recurring consulting costs. 29 Annual Report 2022 MANAGEMENT COMMENTARY CONTINUED Cashflow Receipts from customers Other operating cash flows Operating cash flow Capital Investment Free cash flow Investment in acquisitions Investing cash flow Proceeds from borrowings Repayment of borrowings Interest & transaction costs paid Net capital raise Lease Liability Deferred consideration and contingent payments Net financing cash flow Net cash flow Opening bank balance Foreign exchange Closing bank balance 2022 $’000 50,330 (52,695) (2,365) (2,682) (5,047) (1,924) (4,606) - (8,400) (669) 25,841 (687) (993) 15,092 8,121 7,175 (165) 15,131 2021 $’000 31,444 (31,764) (320) (1,688) (2,008) (7,202) (8,890) 8,400 (200) (244) 73 (462) (1,937) 5,630 (3,580) 11,228 (473) 7,175 Change % 60% -66% -639% -59% -151% 73% 48% -100% -4100% -174% 35299% -49% 49% 168% 327% -36% 65% 111% Receipts from customers were up 60% to $50.3 million, a figure which remains closely aligned to revenue growth with the differences reflecting the timing of payments. Operating cash outflows for the year increased to $2.3 million from $0.3 million, reflecting the on-boarding of IBM and integration of Lingotek. It is important to note that the second half of the year returned a $1.0 million inflow, a significant milestone, as the benefits of the prior investment are realised. Free cash outflow increased to $5.0 million, with the second half the year returning an inflow of $0.1 million. Investing cash flows included $1.9 million to acquire IDEST and $2.7 million in capital investment. Financing cash flows benefited from an $25.8 million capital raise to repay debt of $8.4 million and bolster working capital. Straker continues to make deferred consideration and contingent payments to former shareholders of acquired companies. This year $1.0 million was paid. These payments demonstrate the success of the acquisition strategy for all parties involved. Total cash inflow for the year was $8.1 million. The second half performance of operating cash flow positive represents a significant turnaround in the face of the challenges of ongoing impacts from the COVID-19 pandemic and rising inflation. Cash reserves at the end of the period stood at $15.1 million up on the $7.2 million at the end of the same period a year ago. With no debt and substantial cash reserves, the company is in a strong position to continue to deliver on its strategy to be a leader in the consolidation of the global translation sector and support organic growth. The company is in a strong position to continue to deliver on its strategy to be a leader in the consolidation of the global translation sector and support organic growth. 30 Straker Translations Strategy to deliver growth The language industry continues to evolve as technology plays an increasingly important part in the localisation process. Companies like Straker are now providing translation innovation that larger, traditional suppliers cannot match. At the heart of our success is our market-leading proprietary Ai-Powered RAY technology platform that allows us to deliver faster easier and smarter translations than our competitors. Meanwhile as a smaller and rapidly growing company, Straker has the flexibility to capture market opportunities quickly. Acquisition strategy Leveraging these capabilities, we seek to grow revenue organically and through acquisition to capture value and opportunities as the global translation sector consolidates. We seek companies that have a good base of enterprise customers, that are in locations of strategic value such as developed markets in the Asia Pacific, Europe and the Americas. They must offer the potential for margin uplift as they integrate our technology into their operations, and they also need a strong and committed team. Securing new customer relationships via acquisitions is frequently easier than developing these relationships via organic sales activity. Once acquired, Straker can offer these customers more innovative solutions that will provide productivity improvements and expansion opportunities. The IBM strategic alliance, delivering significant revenue growth this year, is a strong validation of this approach as the alliance builds on a relationship established by Spain’s MSS, which we acquired in 2018. 31 Annual Report 2022 BOARD OF DIRECTORS Phil Norman Grant Straker Tim Williams Independent Non-Executive CEO and Co-Founder Independent Non-Executive Chairman Director Tim was appointed a Non-Executive Director of Straker on 24 June 2015. He founded ValueCommerce Co. Ltd in 1996. Tim is one of the original pioneers in the Japanese internet and advertising industry. His vision and record of achievement are demonstrated by the success and growth of ValueCommerce Co. Ltd. Tim founded ValueCommerce, an internet affiliate marketing company, selling a 49% stake to Yahoo Japan in 2005. Subsequently in 2007, ValueCommerce was listed on the Tokyo Stock Exchange. Tim is also a Director of The Icehouse, The University of Auckland’s technology incubator, and is a General Partner in The Icehouse linked fund Tuhua Ventures, which invests in high growth start-ups in New Zealand. Tim holds a Bachelor of Science (Hons) in molecular genetics from the University of Canterbury. Phil was appointed the Non- Executive Chairman of Straker on 13 January 2014. Prior to founding Straker in 1999, Grant served in the British Army as an elite paratrooper. As a co-founder of Straker, Grant has extensive experience in the language translation market. Grant was appointed to the board on 21 December 1999. Grant’s wide-ranging technical, sales and business skills, combined with his strong entrepreneurial drive, have placed him in an ideal position to help accelerate the growth of Straker. Grant is a member of the NZ Institute of Directors. Along with Merryn Straker, Grant was the winner of the 2018 master category for NZ Entrepreneur of the Year. He was the founding Chairman of Xero Limited, one of New Zealand’s most successful listed technology companies, and retired from Xero’s Board in July 2012 after five years’ service. Phil’s other current director roles include the Independent Chairmanship of Loyalty New Zealand Limited (New Zealand’s largest loyalty company and operator of Fly Buys), Chair of NZX and ASX listed Plexure Group Limited (a customer engagement software company), Chair of NZX listed Just Life Group Limited (a water cooler, home ventilation and supplements business) and Chair of Touchpoint Group Limited (a software company specialising in customer interaction platforms). Phil is a past Chairman of the New Zealand Private Equity and Venture Capital Association and was for six years a member of New Zealand Trade and Enterprise’s New Zealand Beachheads Advisory Board. Phil holds an MBA from the University of Auckland and is a Chartered Member of the New Zealand Institute of Directors. 32 Straker Translations Amanda Cribb Steve Donovan Paul Wilson Independent Non-Executive Non-Executive Director Non-Executive Director Director Amanda was appointed as a Straker Director on 20 July 2020. She is an experienced executive with extensive experience in the technology sector including more than 15 years in executive leadership roles. She has expertise in finance, transformation, strategy, corporate investment and M&A, and has a proven track record as a change agent in high growth companies. Until recently, Amanda was Group CFO, Company Secretary and Head of Transformation and Strategy for Datacom Group, New Zealand’s largest technology company. At Datacom, Amanda was responsible for finance, strategy, commercial, legal and risk operations across the Group. Prior to her role at Datacom, Amanda spent ten years at IT consulting company Zag Limited vars as CFO and Company Secretary. In this role, Amanda had leadership of finance, people, technology, and commercial operations and helped drive the Company through its early stage growth. Amanda is a full member of Chartered Accountants Australia & New Zealand (CA ANZ) and a member of the New Zealand Institute of Directors. Steve was appointed a Non- Executive Director of Straker on 1 December 2004. Paul was appointed a Non- Executive Director of Straker on 22 September 2015. He is a co-founder of ASX listed Bailador Technology Investments (which is a major shareholder of Straker). He has had extensive private equity investment experience as a director of CHAMP Private Equity in Sydney and New York, with MetLife in London, and as executive director at media focussed investment group, Illyria. Paul is a director of SiteMinder, Stackla, the Rajasthan Royals IPL cricket franchise and ASX listed Vita Group Limited. Paul holds a Bachelor of Business (Banking and Finance), from Queensland University of Technology and is a Fellow of the Financial Services Institute of Australia, a Member of the Institute of Chartered Accountants of Australia and a Member of the Australian Institute of Company Directors. He is a former partner of Ernst & Young. He qualified as a Chartered Accountant in the UK and has operated within the IT and finance industry in New Zealand for a number of years. Steve has significant experience as a director and investor in the SME sector in New Zealand, including a Finance Director role at accounting software provider, Greentree Software Group, which was sold to MYOB in 2016. Other current directorships include, Buro Seating Limited (office chair wholesaler) and New Zealand Pure Dairy Products Limited (infant formula manufacturer). Steve is Straker’s former Chief Financial Officer and has been working with technology companies across a range of industries. Steve holds a Bachelor of Economics from the University of Lancaster and is a qualified Chartered Accountant and a current member of the Institute of Chartered Accountants in England and Wales. 33 Annual Report 2022 MANAGEMENT TEAM Grant Straker Merryn Straker Kim Andrews CEO and Co-Founder Chief Operating Officer Chief People Officer Prior to founding Straker in 1999, Grant served in the British Army as an elite paratrooper. As a co-founder of Straker, Grant has extensive experience in the language translation market. Grant was appointed to the board on 21 December 1999. Grant’s wide-ranging technical, sales and business skills, combined with his strong entrepreneurial drive, have placed him in an ideal position to help accelerate the growth of Straker. Grant is a member of the NZ Institute of Directors. Along with Merryn Straker, Grant was the winner of the 2018 master category for NZ Entrepreneur of the Year. In her role as Chief Operating Officer, Merryn oversees Straker Translations’ global production systems and teams, making sure that every touch point within the company runs smoothly – from client projects to finance and everything in between. Merryn is also Also responsible for the Integration team for new acquisitions and the Product team for product development. She has a Bachelor of Management Studies (majoring in Management and HR), from Waikato University. Kim works alongside the leadership team to provide operational support to improve the performance, production, and efficiency of the business. Her primary responsibilities include managing every aspect of human resources and administering best practice, plus overseeing day-to-day office operations, the coordination and supervision of policies and procedures, and employee engagement. Prior to joining Straker – Kim was in the Telco industry for 16 years and has a strong background in Leadership, HR and Credit Management. 34 Straker Translations David Ingram David Sowerby Indiver Nagpal Chief Finacial Officer Chief Revenue Officer Chief Platform Officer As CFO, David is responsible for all the company’s financial functions including accounting, audit, treasury, corporate finance, and investor relations. Before joining Straker, David was CFO at Ultra Commerce, a digital commerce software business based out of Sydney, and prior to this, CFO at ASX/NZX listed Gentrack and CFO of Zeacom (now part of Enghouse Systems). His career spans more than 25 years of varied experience in financial management, business leadership and corporate strategy. David has more than ten years’ experience in the Internet and tech industry. He is the sales manager at Straker Translations and founder of Sportsys Pty Ltd. His background in statistics and data analysis and his strong entrepreneurial drive helps accelerate the growth of several early-stage ventures. He has proven experience in building businesses and has been directly responsible for growing several companies from start-up phase and growing start-up units within larger organisations. David has an Undergraduate Degree in Science from the University of Queensland, a Graduate Diploma in Management from CQU and a Masters of Business Administration from Trinity College Dublin. Indy has been working in web application development for more than 17 years at various companies in the US, Canada, Australia, India and New Zealand. Over the years, Indy has been involved in different aspects of software development from programming to project management, content development, training and consulting. As the CPO of Straker Translations, Indy is responsible for setting the technical direction of the company across its multilingual translation product sets. 35 Annual Report 2022 STRAKER TRANSLATIONS LIMITED AND GROUP Financial report For the year ended 31 March 2022 36 Straker Translations STRAKER TRANSLATIONS LIMITED AND GROUP Financial statements content Directors’ Responsibility Statement Independent Auditor’s Report Financial Statements Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Change in Equity Consolidated Statement of Financial Position Consolidated Statement of Cash Flows Notes to the Financial Statements General Information 1. Reporting entity and statutory base 2. Basis of Preparation Performance 3. Segment Reporting 4. Revenue 5. Other Income 6. Operating Loss Before Net Finance (Expense)/ Income 7. Net Finance Income And Expense 8. Income Tax Expense 9. Earnings Per Share Current Assets 10. Trade Receivables 11. Other Assets and Prepayments Business Combinations 12. Business Combinations Completed In Current Period 13. Business Combinations Completed In Prior Period 14. Intangibles Operating Liabilities 15. Trade Payables 16. Sundry Creditors and Accruals 17. Contract Liability Funding and Risk 18. Consideration Liabilities 19. Lease Accounting 20. Loans and Borrowings 21. Share Capital Group Structure 22. Group Subsidiaries Other Information 23. Capital Management 24. Events after the Reporting Period 25. Financial Risk Management 26. Related Party Transactions 27. Share Options 28. Cash Flow Reconciliation 29. Significant Accounting Policies 39 40-43 44 45 46-47 48 49 49-50 50-51 52-53 53 54 55 56-58 58 59 59 60-61 62-63 64-68 69 69 70 71-72 73-75 76 76 77 78 78 78-83 84-85 85-86 87 88-90 Annual Report 2022 37 38 Straker Translations STRAKER TRANSLATION LIMITED AND GROUP Directors’ responsibility statement For the year ended 31 March 2022 The Directors are pleased to present the consolidated financial statements of Straker Translations Limited for the year ended 31 March 2022. The Directors are responsible for the preparation, in accordance with New Zealand law and generally accepted accounting practice, of financial statements which give a true and fair view of the financial position of the Straker Translations Limited Group as at 31 March 2022 and the results of their operations and cash flows for the year ended 31 March 2022. The Directors consider that the consolidated financial statements of the Group have been prepared using accounting policies appropriate to the Group’s circumstances, consistently applied, and supported by reasonable and prudent judgements and estimates and that all applicable New Zealand equivalents to International Financial Reporting Standards have been followed The Directors have responsibility for ensuring that proper accounting records have been kept which enable, with reasonable accuracy, the determination of the financial position of the Group and enables them to ensure that the financial statements comply with the Financial Reporting Act 2013. The Directors have responsibility for the maintenance of a system of internal control designed to provide reasonable assurance as to the integrity and reliability of financial reporting. The Directors consider that adequate steps have been taken to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. Approved for and on behalf of the Board of Directors on 31 May 2022. Phil Norman Chairman Grant Straker Chief Executive Officer Annual Report 2022 39 STRAKER TRANSLATION LIMITED AND GROUP Independent auditor’s report to the shareholders of Straker Translations Limited BDO Auckland INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF STRAKER TRANSLATIONS LIMITED Report on the Audit of the Consolidated Financial Statements Opinion We have audited the consolidated financial statements of Straker Translations Limited (“the Company”) and its subsidiaries (together, “the Group”), which comprise the consolidated statement of financial position as at 31 March 2022, and the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies. In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at 31 March 2022, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with New Zealand equivalents to International Financial Reporting Standards (“NZ IFRS”). Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (New Zealand) (“ISAs (NZ)”). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with Professional and Ethical Standard 1 International Code of Ethics for Assurance Practitioners (including International Independence Standards) (New Zealand) issued by the New Zealand Auditing and Assurance Standards Board, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our firm carries out other services for the Group in the areas of taxation advice services and corporate finance services. The firm has no other relationship with, or interests in, the Company or any of its subsidiaries. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Business combination completed in the current year – IDEST Communication SA Key Audit Matter How The Matter Was Addressed in Our Audit The acquisition of the IDEST Communication SA (“IDEST”) business and assets has occurred in the year. The financial reporting of the acquisition involves determining the fair value accounting for assets acquired and liabilities assumed, as well as the identification of separately identifiable intangible assets. As a result, the Group has recognised a customer relationship intangible asset. There is a significant level of judgement required to determine the fair value of assets, liabilities and intangible assets. In addition, part of the consideration payable for the acquisition is contingent on future financial performance, resulting in the recognition of a contingent consideration liability. As recognition is dependent on forecast revenue and margin levels when compared to the prescribed targets, the liability is subject to significant judgement and estimation uncertainty around the assumptions and inputs to management’s forecast calculations, and are prone to bias. Refer to note 12 (business combination completed in the current year), note 14.3 (customer relationship assets), note 18.2 (contingent consideration) of the consolidated financial statements. Fair value accounting for assets acquired and liabilities assumed as part of the business combination • We obtained Management’s assessment of identifiable assets acquired and liabilities assumed in the acquisitions, and we performed audit procedures on the book value of assets and liabilities at acquisition date to identify any recorded fair value adjustments. Intangible assets acquired as part of the business combination • We obtained Management’s assessment of identifiable intangible assets acquired in the acquisitions, and we reviewed their assessment against our expectations of likely intangible assets, based on our review of the sale and purchase agreements and our understanding of similar acquisitions. • We obtained Management’s fair value calculation for intangibles acquired in the business combinations, which included a customer relationship asset. The calculation was prepared in conjunction with an external valuation expert. We assessed the competence and independence of Management’s external valuation expert, and challenged the expert as to the scope, methodology, findings and conclusions of their work. 40 40 Straker Translations STRAKER TRANSLATION LIMITED AND GROUP Independent auditor’s report to the shareholders of Straker Translations Limited BDO Auckland Business combination completed in the current year – IDEST Communication SA (continued) How The Matter Was Addressed in Our Audit (continued) Intangible assets acquired as part of the business combination (continued) • We reviewed the key financial inputs to the fair value calculation to supporting documentation, including the existence of any contractual arrangements, historical financial data, cash flow forecasts and our understanding of the businesses. • We engaged our internal valuation experts to review the valuation methodology used and the discount rate used. Contingent consideration liability • We reviewed the sale and purchase agreement to identify the contingent consideration clauses and relevant earn out targets. For earn out clauses based on achieving revenue and margin targets for future periods from the date of acquisition, we have performed the following procedures: • o o o Compared actual revenue performance since acquisition to the earn out target. Compared future forecast revenue to Management-prepared budgets. Challenged Management’s assumptions and inputs to the budgets, focussing on revenue by customer, historical financial information (including prior to acquisition). • We re-performed Management’s contingent consideration liability calculation based on actual and forecast revenue and margin to the prescribed earn out target. • We have evaluated the adequacy of the disclosures of contingent consideration to ensure that they adequately disclose the key judgements and estimates made. Goodwill impairment Key Audit Matter How The Matter Was Addressed in Our Audit The Group has recognised goodwill on historical acquisitions, as well as for the IDEST Communication SA (“IDEST”) business combination, which was acquired in the year. The total goodwill balance of $15.242m at 31 March 2022 is subject to an annual impairment test in accordance with NZ IAS 36 Impairment of Assets, which includes goodwill resulting from the IDEST business combination of $4.425m. Management performed their impairment test by considering the recoverable amount of the Group’s goodwill using a value in use calculation. This calculation is complex and subject to key inputs and assumptions, such as discount rates, terminal growth rates and future cash flows, which inherently include a degree of estimation uncertainty and are prone to potential bias or inconsistent application. • We have obtained Management’s value in use calculations prepared for each of the cash generating units and evaluated the key inputs and assumptions. The key inputs included revenue, growth rates, gross margin, costs, discount rates, and terminal growth rates. • We assessed the accuracy of previous forecasts to actual performance in order to form a view on the reliability of management's forecasting ability. We have considered the sensitivity of key assumptions to the value in use calculations. We tested the mathematical accuracy of the value in use calculations. We have performed this in order to identify the cash generating units that required closer scrutiny. 41 41 Annual Report 2022 STRAKER TRANSLATION LIMITED AND GROUP Independent auditor’s report to the shareholders of Straker Translations Limited BDO Auckland Goodwill impairment (continued) Key Audit Matter (continued) Refer to note 14.4 goodwill of the consolidated financial statements. How The Matter Was Addressed in Our Audit (continued) • We engaged our internal valuation experts to assess that the methodology used is consistent with NZ IAS 36 Impairment of Assets, and to ensure appropriate discount rates were used. • We reviewed disclosures in the consolidated financial statements, including impairment sensitivity analysis, to the requirements of the accounting standard. • We have compared the carrying value of the CGUs’ assets to the recoverable amount determined by the impairment test to identify any impairment losses. Contingent acquisition consideration – Lingotek Straker LLC Key Audit Matter How The Matter Was Addressed in Our Audit As part of the consideration for the historical acquisition of Lingotek Straker LLC (“Lingotek”), management previously recognised $2.246m of contingent consideration liabilities in the prior period. • We reviewed the sale and purchase agreement to identify the contingent consideration clauses and relevant earn out targets. • We re-calculated the gain on fair value of contingent consideration liability of $1.974m in relation to the Lingotek cash generating unit. We confirmed that the earn out target for the first 12 months from date of acquisition was not achieved in full. • We reviewed management’s assertion that the earn out target for the second year from date of acquisition will not be achieved based on actual and forecast revenue performance. • We reviewed the consolidated financial statement disclosures against the accounting standards. The liabilities are contingent on the future revenue and margin performance of the acquired entity over a period of two years. Management has re-assessed the probability of the acquired subsidiary achieving the revenue and margin targets in the earn out periods. This has resulted in the Group recognising a gain on fair value of the contingent consideration liability of $1.974m to profit or loss in the year as a result of earn out targets no longer being forecast to be met. As recognition is dependent on forecast revenue levels when compared to the prescribed revenue targets, the liabilities are subject to significant judgement and estimation uncertainty around the assumptions and inputs to management’s forecast calculations and are prone to bias. Refer to note 13 (business combination completed in the prior period) and note 18.2 (contingent consideration) of the consolidated financial statements. 42 42 Straker Translations STRAKER TRANSLATION LIMITED AND GROUP Independent auditor’s report to the shareholders of Straker Translations Limited BDO Auckland Other Information The directors are responsible for the other information. The other information comprises the Appendix 4E Report and Annual Report (which we obtained prior to the date of this auditor’s report), but does not include the consolidated financial statements and our auditor’s report thereon. Our opinion on the consolidated financial statements does not cover the other information and we do not and will not express any form of audit opinion or assurance conclusion thereon. In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Directors’ Responsibilities for the Consolidated Financial Statements The directors are responsible on behalf of the Group for the preparation and fair presentation of the consolidated financial statements in accordance with NZ IFRS, and for such internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, the directors are responsible on behalf of the Group for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (NZ) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the decisions of users taken on the basis of these consolidated financial statements. A further description of our responsibilities for the audit of the consolidated financial statements is located on the External Reporting Board’s website at: https://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors- responsibilities/audit-report-1. This description forms part of our auditor’s report. Who we Report to This report is made solely to the Company’s shareholders, as a body. Our audit work has been undertaken so that we might state those matters which we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s shareholders, as a body, for our audit work, for this report or for the opinions we have formed. The engagement partner on the audit resulting in this independent auditor’s report is Richard Croucher. BDO Auckland Auckland New Zealand 31 May 2022 43 43 Annual Report 2022 STRAKER TRANSLATION LIMITED AND GROUP Consolidated statement of profit or loss and other comprehensive income for the year ended 31 March 2022 Revenue Cost of sales Gross margin Other income Selling and distribution expenses Administration expenses Loss from trading operations before amortisation of acquired intangibles, acquisition and integration costs and net finance costs Amortisation of acquired intangibles Acquisition and integration costs Operating loss before net finance expense Finance income Finance expense Net finance expense Loss before income tax Income tax credit Notes 2022 $’000 2021 $’000 4 5 14.3 6 7 8 55,901 31,322 (25,520) (14,604) 30,381 16,718 90 30,471 (15,504) (19,287) 562 17,280 (8,989) (10,700) (4,320) (2,409) (2,030) (300) (6,650) 2,140 (1,877) 263 (6,387) 475 (1,431) (509) (4,349) 162 (2,058) (1,896) (6,245) 229 Loss for the year after tax attributable to shareholders (5,912) (6,016) Other Comprehensive Income Items that may be reclassified to profit or loss, net of tax Foreign currency translation differences 401 732 Total Comprehensive Income for the year attributable to shareholders (5,511) (5,284) Earnings per share for the year attributable to the owners of the parent Basic and diluted earnings per share (cents) 9 (8.83) (11.25) The above statement should be read in conjunction with the notes to and forming part of the financial statements 44 Straker Translations STRAKER TRANSLATION LIMITED AND GROUP Consolidated statement of changes in equity for the year ended 31 March 2022 Notes Share Capital Accumulated Losses Group – 31 March 2022 Balance 1 April 2021 Loss for the year Foreign currency translation differences Total comprehensive income for the year Transactions with owners in their capacity as owners Issue of share capital Cost of issue of share capital Share option cost expensed 21 21 27 $’000 42,529 - - - 27,405 (1,138) $’000 (22,305) (5,912) - (5,912) - - - Balance 31 March 2022 68,796 (28,217) Share Option Reserve $’000 460 - - - - - 370 830 Foreign Currency Translation Reserve Total Equity $’000 (623) $’000 20,061 - (5,912) 401 401 401 (5,511) - - - 27,405 (1,138) 370 (222) 41,187 Group – 31 March 2021 Balance 1 April 2020 Loss for the year Foreign currency translation differences Total comprehensive income for the year Transactions with owners in their capacity as owners 40,786 - - - Issue of share capital Cost of issue of share capital Share option cost expensed 21 21 27 1,759 (16) - (16,289) (6,016) - (6,016) - - - Balance 31 March 2021 42,529 (22,305) 323 (1,355) 23,465 - - - - - 137 460 - (6,016) 732 732 732 (5,284) - - 1,759 (16) 137 (623) 20,061 The above statement should be read in conjunction with the notes to and forming part of the financial statements 45 Annual Report 2022 STRAKER TRANSLATION LIMITED AND GROUP Consolidated statement of financial position For the year ended 31 March 2022 Consolidated Statement of Financial Position Current Assets Cash and cash equivalents Trade receivables Other assets and prepayments Total Current Assets Non–current Assets Capitalised software development Purchased computer software Customer relationship assets Goodwill Plant and equipment Right-of-use assets Total Non–current Assets Total Assets Current Liabilities Trade payables Sundry creditors and accruals Contract liability Holiday pay liability Deferred consideration Contingent consideration Lease liabilities Loans and borrowings Total Current Liabilities Non-current Liabilities Contingent consideration Lease liabilities Deferred tax liability Total Non-current Liabilities Total Liabilities NET ASSETS Notes 10 11 14.1 14.2 14.3 14.4 19 15 16 17 18.1 18.2 19 20 18.2 19 8 2022 $’000 15,131 12,218 1,827 29,176 4,606 7,169 4,380 15,242 364 1,634 33,395 62,571 4,170 5,234 3,779 1,132 1,401 1,348 463 - 17,527 1,230 1,421 1,206 3,857 2021 $’000 7,175 5,752 3,074 16,001 3,198 9,939 4,845 10,817 335 653 29,787 45,788 2,971 2,655 5,234 813 - 1,435 629 8,400 22,137 1,899 334 1,357 3,590 21,384 25,727 41,187 20,061 The above statement should be read in conjunction with the notes to and forming part of the financial statements 46 Straker Translations STRAKER TRANSLATION LIMITED AND GROUP Consolidated statement of financial position as of 31 March 2022 Consolidated Statement of Financial Position (Continued) Equity Share capital Foreign currency translation reserve Share option reserve Accumulated losses TOTAL EQUITY Notes 21 27 2022 $’000 68,796 (222) 830 (28,217) 41,187 2021 $’000 42,529 (623) 460 (22,305) 20,061 Approved for and on behalf of the Board of Directors on 31 May 2022. Phil Norman Chairman Grant Straker Chief Executive Officer The above statement should be read in conjunction with the notes to and forming part of the financial statements 47 Annual Report 2022 STRAKER TRANSLATION LIMITED AND GROUP Consolidated statement of cash flows For the year ended 31 March 2022 Cash flows from operating activities Notes Receipts from customers Government grants and tax incentives Interest received Payments to suppliers and employees Net cash used in operating activities Cash flows from investing activities Proceeds from sale of plant and equipment Payments for capitalised software development Payments for plant & equipment 28 Payments for acquisition of businesses and subsidiaries, net of cash acquired 12 Net cash used in investing activities Cash flows from financing activities Proceeds from borrowings Payment of borrowings Bank loan interest paid Interest expense on leases Proceeds from issue of shares Cost of share issue Lease liability payments Payment of deferred consideration Payment of contingent consideration Net cash from financing activities Net (decrease) in cash and cash equivalents Effect of exchange rate on foreign currency balances Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year 21 2022 $’000 50,330 93 - (52,788) (2,365) - (2,457) (225) (1,924) (4,606) - (8,400) (602) (67) 26,979 (1,138) (687) - (993) 15,092 8,121 (165) 7,175 15,131 2021 $’000 31,444 403 19 (32,186) (320) 29 (1,497) (220) (7,202) (8,890) 8,400 (200) (183) (61) 93 (20) (462) (561) (1,376) 5,630 (3,580) (473) 11,228 7,175 The above statement should be read in conjunction with the notes to and forming part of the financial statements 48 Straker Translations STRAKER TRANSLATION LIMITED AND GROUP Notes to & forming part of the financial statements for the year ended 31 March 2022 1. Reporting entity and statutory base c) Use of estimates and judgements Straker Translations Limited (“the Company” or “parent”) is a company domiciled in New Zealand and registered under the New Zealand Companies Act 1993 and is listed on the Australian Securities Exchange (ASX). The audited consolidated financial statements of Straker Translations Limited and its subsidiaries (together, “the Group” or “Straker”) have been prepared in accordance with the requirements of New Zealand Companies Act 1993 and the Financial Reporting Act 2013. For the purposes of complying with generally accepted accounting practice in New Zealand (“NZ GAAP”), the Group is a Tier 1 for-profit entity. The principal activity of the Group is the provision of language & subscription services. 2. Basis of preparation The financial statements comply with NZ GAAP, New Zealand equivalents to International Financial Reporting Standards (“NZ IFRS”) and International Financial Reporting Standards. The financial statements are presented in New Zealand dollars (NZD), which is also the functional currency of the parent company. Amounts are rounded to the nearest thousand dollars ($’000) in the financial statements. The preparation of financial statements in compliance with NZ IFRS requires the use of certain critical accounting estimates. It also requires Group management to exercise Judgement in applying the Group’s accounting policies. The preparation of the financial statements in conformity with NZ IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from those estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. The directors have applied significant judgement in the Group’s going concern assessment (refer Note 2d). i) Business combination complete in the current and prior period (Notes 12 and 13) and contingent consideration liabilities (Note 18) The directors have made significant judgements in respect of the accounting of business combinations by considering the fair value of the assets and liabilities acquired, in particular customer relationship intangible assets and software intangible assets, and by considering the likelihood of the acquirees achieving revenue and gross margin earn out targets in determining the contingent consideration liabilities. ii) Goodwill (Note 14.4) The directors have made significant judgement in considering the assumptions and inputs in the value-in- use calculations used to support the carrying value of goodwill. a) Basis of measurement iii) Capitalised software development (Note 14.1) The Group has considered costs associated with software development and capitalised those that meet the criteria of their accounting policy. Judgement is required particularly in respect of meeting those criteria. The consolidated financial statements have been prepared on a historical cost basis, except as noted in the accounting policies. b) New standards, interpretations and amendments effective from 1 April 2021 There were no new standards, interpretation and amendments impacting the Group that have been adopted in the annual financial statements for the year ended 31 March 2022. There are no new standards, interpretations and amendments that are expected to have a material impact on the Group’s financial statements for the year ending 31 March 2023. 49 Annual Report 2022 STRAKER TRANSLATION LIMITED AND GROUP Notes to & forming part of the financial statements for the year ended 31 March 2022 3. Segment reporting The Group provides language services and language technology via subscriptions to its customers. The Group’s operating segments are each of the Company and its subsidiaries, and these are grouped as territories by geographical region as reportable segments as there are regional managers responsible for the performance of the Group entities within their territories. The geographical regions are Asia Pacific (APAC), Europe, Middle East and Africa (EMEA) and North America (NAM). Reportable segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision maker has been identified as the management team including the Board of Directors, Chief Executive Officer, Chief Operating Officer and the Chief Financial Officer. Segment financial performance is evaluated based on profit or loss and is measured consistently with profit or loss in the consolidated financial statements. Inter-segment sales are minimal. The Group’s only customer exceeding 10% of revenue is IBM, contributing $14.8 million in revenue. Reports provided to the chief operating decision maker do not identify assets and liabilities per segment. Assets and liabilities are instead presented on a consolidated basis as they are throughout the consolidated financial statements. Also, the Group’s financing (including finance costs and finance income), amortisation of intangible assets, acquisition and integration costs and income taxes are managed on a Group basis and are not provided to the chief operating decision makers at the reportable segment level. iv) Revenue (Note 4) and Contract asset (Note 11.1) and Contract liability (Note 17) recognition Language services revenue Language services revenue determined to be earned but not yet invoiced is accrued as a contract asset and recorded under current assets on the Statement of Financial Position when it is probable that economic benefits will flow to the Group. Language services revenue received in advance for services not yet performed are deferred as contract liability on the Statement of Financial Position until the percentage of completion of services is sufficient to ensure it is probable that economic benefits will flow to the Group. Subscriptions Subscription revenues received in advance for services not yet performed are deferred as contract liability on the Statement of Financial Position and recognised over time on a straight line basis over the duration of the contract. d) Going concern The directors have prepared the financial report on a going concern basis. The Group has positive net current assets of $11.649 million (2021: negative net current assets of $6.1 million) as a result of A$25 million equity capital raised in the current year. At the date of this report the directors are satisfied there are reasonable grounds to believe that the Group will be able to continue to meet its debts as and when they fall due and that it is appropriate for the financial statements to be prepared on a going concern basis due the following factors: • • The directors monitor the Group’s cash position and, on an on-going basis, consider a number of options to ensure that adequate funding continues to be available. Cash flow forecasts have been prepared for a period to 31 May 2023 that indicate that the Group will be able to continue meet its obligations as and when they fall due. 50 Straker Translations STRAKER TRANSLATION LIMITED AND GROUP Notes to & forming part of the financial statements for the year ended 31 March 2022 3. Segment reporting (Continued) Year ended 31 March 2022 Revenue Language services Subscriptions Professional services Other income Total income APAC $’000 EMEA $’000 21,516 14,129 - 2 65 - - 17 NAM $’000 14,648 5,345 261 8 TOTAL $’000 50,293 5,345 263 90 21,583 14,146 20,262 55,991 Cost of sales, Selling and distribution and Administration expenses (21,954) (15,150) (23,207) (60,311) Segment contribution (371) (1,004) (2,945) (4,320) Year ended 31 March 2021 Revenue Language services Subscriptions Professional services Other income Total income APAC $’000 EMEA $’000 NAM $’000 TOTAL $’000 7,593 14,246 8,454 30,293 - - - - 452 109 856 173 1 856 173 562 8,045 14,355 9,484 31,884 Cost of sales, Selling and distribution and Administration expenses (7,490) (16,050) (10,753) (34,293) Segment contribution 555 (1,695) (1,269) (2,409) Reconciliation from segment contribution to loss before tax Segment contribution Amortisation of acquired intangibles Acquisition and integration costs Net finance income / (expense) Loss before income tax 2022 $’000 (4,320) (2,030) (300) 263 (6,387) 2021 $’000 (2,409) (1,431) (509) (1,896) (6,245) 51 Annual Report 2022 STRAKER TRANSLATION LIMITED AND GROUP Notes to & forming part of the financial statements for the year ended 31 March 2022 Language services revenue determined to be earned but not yet invoiced is accrued as a contract asset and recorded under current assets on the Statement of Financial Position when it is probable that economic benefits will flow to the Group. Subscriptions The Group recognises revenue pursuant to software licence agreements upon the provision of access to its customers of the Group’s intellectual property as it exists at any given time during the period of the licence. The Group’s Subscription revenue is derived from software platform access and support services contracts with customers. The Group has determined that the software access and support services are only one performance obligation, which is to provide the platform services to the customers over the contracted period. The customer could not benefit from deployment of the platform on its own and separately from the platform access, and as such there is no distinct performance obligation. The customer receives and consumes the benefit as the Group performs its performance obligation, therefore control is transferred over time. Revenue is therefore recognised over the duration of the agreement or for as long as the customer has been provided access, when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable and collectability is probable. Revenue received for services not yet performed are deferred as a contract liability on the Statement of Financial Position, and recognised over the contract period as the performance obligation is completed. Professional services Professional services revenue comprises fees charged for value-add services which are one-off charges. Revenue is recognised over time based on input hours. 4. Revenue The Group recognises revenue as follows: Revenue from contracts with customers Revenue is recognised at an amount that reflects the consideration to which the Group is expected to be entitled in exchange for transferring goods or services to a customer. For each contract with a customer, the Group: identifies the contract with a customer; identifies the performance obligations in the contract; determines the transaction price which takes into account estimates of variable consideration and the time value of money; allocates the transaction price to the separate performance obligations on the basis of the relative stand-alone selling price of each distinct good or service to be delivered; and recognises revenue when or as each performance obligation is satisfied in a manner that depicts the transfer to the customer of the goods or services promised. Variable consideration within the transaction price, if any, reflects revenue dependent on factors such as input hours, words translated, and costs incurred. Normally these factors are known at time of recognition. If estimates are required, these are determined using either the ‘expected value’ or ‘most likely amount’ method. The measurement of variable consideration is subject to a constraining principle whereby revenue will only be recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur. The measurement constraint continues until the uncertainty associated with the variable consideration is subsequently resolved. Amounts received that are subject to the constraining principle are initially recognised as deferred revenue. The accounting policy and key judgements for the Group’s material revenue streams are outlined below. Language services The Group’s Language Services contracts with customers provide for the Group to be reimbursed for their performance under the contract as the work is undertaken. The Group’s performance obligations towards customers, in the majority of the Group’s contracts, are for the provision of language services as a single delivery. As the Group has an enforceable right to remuneration for the work completed up to that stage and there is no alternative use for the translated asset, the Group recognises revenue over time for this performance obligation. The Group measures the completeness of this performance obligation using input methods. The relevant input method is the cost incurred to date as a proportion of total costs, in determining the progress towards the completion of the performance obligation for Language Services contracts. 52 Straker Translations STRAKER TRANSLATION LIMITED AND GROUP Notes to & forming part of the financial statements for the year ended 31 March 2022 4. Revenue (Continued) a. Disaggregated revenue information Set out below is the disaggregation of the Group’s revenue from contracts with customers: Language services Subscriptions Professional services Revenue from contracts with customers Additional disaggregation of the Group’s revenue by segment is included in Note 3. 5. Other income Government grant income Research & development grant tax credit Miscellaneous income 2022 $’000 50,293 5,345 263 55,901 - 43 47 90 2021 $’000 30,293 856 173 31,322 458 - 104 562 The Group received government grant income in the year. Government grants are not recognised until there is reasonable assurance that: (a) the entity will comply with the conditions attaching to them and (b) the grants will be received. When the recognition criteria are met, government grants are recognised in profit or loss on a systematic basis over the periods in which the entity recognises as expenses the related costs for which the grants are intended to compensate. When the recognition criteria are met, a government grant that becomes receivable as compensation for expenses or losses already incurred, or for the purpose of giving immediate financial support to the entity with no future related costs, is recognised in profit or loss in the period in which it becomes receivable. During the year, the Group received R&D Tax Credit of $43,000. 53 Annual Report 2022 STRAKER TRANSLATION LIMITED AND GROUP Notes to & forming part of the financial statements for the year ended 31 March 2022 6. Operating loss before net finance expense The following items of expenditure are included in operating loss before finance expense: Selling and Distribution expenses Note Advertising and marketing Salaries and wages Defined contributions Administrative expenses Remuneration to parent auditor: - fee relating to audit of the financial statements - fee relating to other assurance engagement (interim review) - fee relating to audit of subsidiary financial statements paid to parent auditor network - taxation services – compliance Amortisation of capitalised software development Amortisation of computer software Depreciation of plant and equipment Amortisation of right of use assets Bad debts written off Impairment provision recognised on receivables at amortised cost 14.1 14.2 19 10 Short term and low value leases Salaries and wages Defined contributions Share option expenses 2022 $’000 1,077 2021 $’000 784 13,200 8,033 100 61 106 52 15 25 1,062 2,697 214 539 24 5 151 112 51 - 52 603 456 270 472 120 88 10,218 3,558 205 235 118 111 During the year, a fee of EUR 35,556 was paid to BDO Belgium for advisory services related to acquisition activities. During the year a fee of EUR 15,000 was paid to parent auditor network for audit of subsidiary financial statements. In the previous financial year, a fee of USD 6,403 was paid to BDO USA, LLP and a fee of USD12,000 was paid to an affiliate of BDO USA, LLP for consulting and advisory services related to acquisition activities for services provided. 54 Straker Translations STRAKER TRANSLATION LIMITED AND GROUP Notes to & forming part of the financial statements for the year ended 31 March 2022 7. Net finance income and expense Finance income Interest received on financial assets at amortised cost Gain on fair value adjustment to contingent consideration liability Notes 18.2 Total finance income Finance expense Interest expense on loans and borrowings stated at amortised cost Interest expense on leases Foreign exchange loss Loss on fair value adjustment to contingent consideration liability Imputed interest on contingent consideration liability 18.2 18.2 Total finance expense Net finance (expense)/income Interest income and expense 2022 $’000 - 2,140 2,140 (831) (67) (910) - (69) (1,877) 263 2021 $’000 19 143 162 (221) (61) (1,596) (143) (37) (2,058) (1,896) Finance income includes interest income, which is recognised as it accrues in profit or loss, using the effective interest method, and fair value gain on adjustment to contingent consideration liabilities, which is measured at fair value through profit or loss. Finance expense includes interest expense on liabilities, and imputed interest on deferred consideration liability. Foreign currency translation gains and losses are recorded in finance income and expense in accordance with Note 29 b. 55 Annual Report 2022 STRAKER TRANSLATION LIMITED AND GROUP Notes to & forming part of the financial statements for the year ended 31 March 2022 8. Income tax expense (a) Income tax recognised in profit or loss Current tax expense Deferred tax credit Total tax credit 2022 $’000 (86) 561 475 2021 $’000 (185) 414 229 The income tax expense comprises current and deferred tax. The income tax expense is recognised in profit and loss, except to the extent that it relates to items recognised directly in other comprehensive income, in which case it is recognised in other comprehensive income. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax is provided on temporary differences between carrying amounts of assets and liabilities for financial reporting purposes and the amounts for taxation purposes. Deferred income tax is provided on temporary differences arising on investments in subsidiaries except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on laws that have been enacted or substantively enacted by the reporting date. Deferred tax is not recognised for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination that affects neither accounting nor taxable profit or loss. The total charge for the period can be reconciled to the accounting profit as follows: Loss before tax Income tax expense calculated at 28% (2021: 28%) Different tax rates applied in overseas jurisdictions Tax losses not recognised Income tax credit recognised in profit or loss 2022 $’000 (6,387) (1,788) 25 1,288 475 2021 $’000 (6,245) (1,749) 15 1,505 229 56 Straker Translations STRAKER TRANSLATION LIMITED AND GROUP Notes to & forming part of the financial statements for the year ended 31 March 2022 8. Income tax expense (Continued) b) Deferred tax liability Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 28% (2021: 28%). b) Deferred tax liability Deferred tax liabilities arising on intangible assets Reversal of temporary differences Effect of change in foreign exchange rates At 31 March $’000 1,760 (561) 7 1,206 $’000 2,090 (733) - 1,357 Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different entities, but they intend to settle current tax assets and liabilities on a net basis. A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which temporary differences can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. A deferred tax asset has not been recognised by the Group because the directors consider that it is not probable that the related tax benefit will be recognised, due to a recent history of losses. The value of deferred tax asset not recognised as at 31 March 2022 was $1,262,704 (2021: $872,946). The deferred tax asset not recognised is comprised of the effect of the tax benefit of operating losses. The Group has accumulated tax losses to carry forward for tax purposes of $4,509,656 (2021: $3,117,665). c) Factors affecting the future tax charge Estimates and assumptions The Group is subject to income tax in several jurisdictions and significant judgement is required in determining the provision for income taxes. During the ordinary course of business, there are transactions and calculations for which the ultimate tax determination is uncertain. As a result, the company recognises tax liabilities based on estimates of whether additional taxes and interest will be due. These tax liabilities are recognised when, despite the company’s belief that its tax return positions are supportable, the company believes it is more likely than not that a taxation authority would not accept its filing position. In these cases, the Group records its tax balances based on either the most likely amount or the expected value, which weights multiple potential scenarios. The company believes that its accruals for tax liabilities are adequate for all open audit years based on its assessment of many factors including past experience and interpretations of tax law. No material uncertain tax positions exist as at 31 March 2022. This assessment relies on estimates and assumptions and may involve a series of complex judgments about future events. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will impact income tax expense in the period in which such determination is made. 57 Annual Report 2022 STRAKER TRANSLATION LIMITED AND GROUP Notes to & forming part of the financial statements for the year ended 31 March 2022 8. Income tax expense (Continued) d) Imputation credits Imputation credits available for use in future reporting periods are as follows: Imputation credits at 1 April New Zealand tax payments, net of refunds Imputation credits available to shareholders of the company at 31 March 2022 $’000 19 (14) 5 2021 $’000 53 (34) 19 9. Earnings per share Earnings per share has been calculated based on shares issued at the respective measurement dates. Share options are considered anti-dilutive as the Group is loss making and are thus not taken into account in the calculation of diluted earnings per share. Numerator Loss for the year after tax (“N”) 2022 $’000 (5,912) 2021 $’000 (6,016) Denominator Weighted average number of ordinary shares used in basic EPS (“D1”) $’000 66,961 $’000 53,465 Basic and diluted earnings per share (N/D1 x 100) Cents (8.83) Cents (11.25) 58 Straker Translations STRAKER TRANSLATION LIMITED AND GROUP Notes to & forming part of the financial statements for the year ended 31 March 2022 10. Trade receivables Gross trade receivables Impairment allowance Trade receivables Notes Opening balance of impairment provision Additional expense identified 6 2022 $’000 12,498 (280) 12,218 275 5 280 2021 $’000 6,027 (275) 5,752 155 120 275 The Group applies the NZ IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected credit loss provision for trade receivables and contract assets. To measure expected credit losses, trade receivables and contract assets are grouped based on similar credit risk and aging. The contract assets have similar risk characteristics to the trade receivables for similar types of contracts. The expected loss rates are based on the Group’s historical credit losses experienced over the three year period prior to the period end. The historical loss rates are then adjusted for current and forward-looking information on macroeconomic factors affecting the Group’s customers. The Group has identified the impact of the COVID-19 pandemic, gross domestic product (GDP), unemployment rate and inflation rate as the key macroeconomic factors in the countries where the Group operates. Notes 11.1 11. Other assets and prepayments Contract asset Receivables in relation to acquisitions Prepayments Sundry receivables 11.1. Contract asset Opening balance Invoiced in the year Revenue accrued for services performed not yet invoiced 2022 $’000 571 - 1,160 96 1,827 2022 $’000 1,652 (1,652) 571 571 2021 $’000 1,652 612 604 206 3,074 2021 $’000 1,074 (1,074) 1,652 1,652 59 Annual Report 2022 STRAKER TRANSLATION LIMITED AND GROUP Notes to & forming part of the financial statements for the year ended 31 March 2022 12. Business combinations completed in current period IDEST Communication SA (“IDEST”) On 1 January 2022, Straker Translations Limited obtained control of the assets and business of IDEST Communication SA (“IDEST”), based in Brussels, Belgium. Founded in 1990, IDEST focuses on serving international institutions with state-of- the-art, tailor-made translation services. IDEST specializes in the institutional sector and translates into all the official languages of the European Union and United Nations. Its core business provides a comprehensive range of linguistic services to national and international institutions both and the public. The acquisition represents Straker’s strategy to extend and consolidate its presence in the multi- billion-dollar European market. The goodwill for the acquisition reflects intangible assets which do not qualify for separate recognition and include expected synergies. An element of the consideration is contingent on achieving revenue, gross margin targets and the re-signing of a major customer agreement, as detailed in Note 18. A fair value assessment of IDEST’s assets and liabilities has been undertaken and the identifiable assets and liabilities are shown at fair value. The valuation of the separately identifiable intangible assets, including customer relationships have been determined by an independent valuer. The table below summaries the major classes of consideration transferred, and the recognised amounts of asset acquired, and liabilities assumed at the acquisition date. All amounts are in NZD’000. IDEST Debtors and other receivables Property, plant and equipment Computer software Customer relationship asset Creditors and accruals Deferred tax liability Total net assets Cash paid (NZD), net of cash acquired Deferred liability Shares in Straker Translations Limited Fair value of contingent consideration liability on acquisition Total consideration Goodwill Fair value $’000 1,264 12 12 1,438 (616) (403) 1,707 1,924 1,401 426 2,381 6,132 4,425 Note 18.1 21 18.2 14.4 60 Straker Translations STRAKER TRANSLATION LIMITED AND GROUP Notes to & forming part of the financial statements for the year ended 31 March 2022 12. Business combinations completed in current period The revenue and loss before tax included in the Group’s statement of comprehensive since acquisition for IDEST is shown below: Revenue since date of acquisition Profit before tax since date of acquisition $’000 2,203 595 If the acquisition date for these business combinations had been 1 April 2021, the pro forma revenue and profit for each would have been: Pro forma revenue for the year Profit before tax for the year 7,562 2,871 61 Annual Report 2022 STRAKER TRANSLATION LIMITED AND GROUP Notes to & forming part of the financial statements for the year ended 31 March 2022 13. Business combinations completed in prior period Straker Lingotek LLC During the prior year, Straker Translations Limited, the acquirer, obtained control of the assets and business of Lingotek, Inc. and transferred these into newly formed subsidiary Straker Lingotek LLC. Straker Lingotek LLC (“Lingotek”) is based in Lehi, Utah and it is a company incorporated in Delaware USA on 11th December 2020. Lingotek is a provider of language services, subscriptions and professional services. The acquisition was made as part of the growth strategy of the Group. The goodwill for the acquisition reflects intangibles assets which do not qualify for separate recognition and include expected synergies. A fair value assessment of Lingotek’s assets and liabilities has been undertaken and the identifiable assets and liabilities are shown at fair value, including the fair value of the contract revenue liability, which has been determined by an independent valuer. The valuation of the separately identifiable intangible assets, including customer relationships and acquired software have been determined by an independent valuer. The table below summaries the major classes of consideration transferred, and the recognised amounts of asset acquired, and liabilities assumed at the acquisition date. All amounts are in NZD’000. Lingotek Debtors and other receivables Property, plant and equipment Computer software Customer relationship asset Right of use assets Creditors and accruals Lease liability Contract revenue liability Deferred tax liability Total net assets Cash paid (NZD) Receivable in escrow Shares in Straker Translations Limited Fair value of contingent consideration liability on acquisition Total consideration Goodwill Note 21 14.4 Fair value $’000 1,183 38 10,349 2,836 127 (1,040) (127) (5,157) (794) 7,415 7,202 (562) 1,666 2,246 10,552 3,137 62 Straker Translations STRAKER TRANSLATION LIMITED AND GROUP Notes to & forming part of the financial statements for the year ended 31 March 2022 13. Business combinations completed in prior period (Continued) Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group. The Group 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. In assessing control, the Group takes into consideration potential voting rights that currently are exercisable. The Group measures goodwill at the acquisition date as: • • • • The fair value of consideration transferred; plus The recognised amount of any non-controlling interests in the acquiree; plus If the business combination is achieved in stages, the fair value of the pre-existing equity interest in the acquiree; less The net recognised amount (fair value) of the identifiable assets acquired and liabilities assumed. When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss. Consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts generally are recognised in profit or loss. Transactions costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred. Any contingent consideration payable is measured at fair value at the acquisition date. If the contingent consideration is classified as equity, then it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes in the fair value of contingent considerations are recognised in profit or loss. 63 Annual Report 2022 STRAKER TRANSLATION LIMITED AND GROUP Notes to & forming part of the financial statements for the year ended 31 March 2022 14.1 Capitalised software development Cost Opening Balance Additions in the year Effect of change in foreign exchange rates Closing Balance Amortisation Opening Balance Charge recognised in profit or loss Effect of change in foreign exchange rates Closing Balance Net book value 2022 $’000 4,941 2,468 (2) 7,407 (1,743) (1,062) 4 (2,801) 2021 $’000 3,444 1,497 - 4,941 (1,140) (603) - (1,743) 4,606 3,198 Research costs are expensed as incurred. Costs associated with maintaining computer software programs are recognised as an expense as incurred. Costs that are directly associated with the production of identifiable and unique software products controlled by the Group, and that will probably generate economic benefits exceeding costs beyond one year, are recognised as intangible assets where the following criteria are met: it is technically feasible to complete the software so that it will be available for use; • management intends to complete the software and use or sell it; • • • • there is an ability to use or sell the software; it can be demonstrated how the software will generate probable future economic benefits; adequate technical, financial and other resources to complete the development and to use or sell the software are available; and the expenditure attributable to the software during its development can be reliably measured. Other development expenditures that do not meet these criteria are expensed when incurred. Development costs previously recognised as expenses are not recognised as assets in a subsequent period. Development costs that have a finite useful life that have been capitalised are amortised from the commencement of the time at which they are available for use on a straight-line basis over the period of its expected benefit, not exceeding five years. Capitalised development costs are carried at cost less accumulated amortisation and impairment losses. Additions in the year include salaries and wages of $1.819m (2021: $0.906m). Capitalised development costs are amortised over the periods the Group expects to benefit from utilising the software to manage translation service projects (currently five years. 2021: 5 years). The amortisation expense is included within the administration expenses in profit or loss. Development expenditure not satisfying the above criteria and expenditure on the research phase of internal projects are recognised in profit or loss as incurred. 64 Straker Translations STRAKER TRANSLATION LIMITED AND GROUP Notes to & forming part of the financial statements for the year ended 31 March 2022 14.2. Computer software Cost Opening Balance Acquired as part of a business combination Additions during the year Impairment during the year Effect of foreign exchange rate changes Closing Balance Amortisation Opening Balance Charge recognised in profit or loss Effect of foreign exchange rate changes Closing Balance Net book value Notes 12 2022 $’000 10,587 12 51 (114) 12 10,548 (648) (2,697) (34) (3,379) 2021 $’000 320 10,349 - - (82) 10,587 (192) (456) - (648) 7,169 9,939 Computer software acquired separately or in a business combination is initially measured at cost. The cost of an intangible asset acquired in a business combination is its fair value as at the date of acquisition. Following initial recognition, Computer software is carried at cost less any accumulated amortisation and any accumulated impairment losses. The useful economic lives of computer software is between 2 and 4 years dependent on the underlying nature and historical information and is amortised over 2-4 years on a straight line basis. 14.3 Customer relationship assets Cost Opening Balance Acquired as part of current year business combination Recognised as part of prior year business combination Notes 12 13 Impact of foreign exchange rates Closing Balance Amortisation Opening Balance Charge recognised in profit or loss Impact of foreign exchange rates Closing Balance Net book value 2022 $’000 8,599 1,438 - (92) 9,945 (3,754) (2,030) 219 (5,565) 2021 $’000 5,673 2,836 188 (98) 8,599 (2,304) (1,431) (19) (3,754) 4,380 4,845 65 Annual Report 2022 STRAKER TRANSLATION LIMITED AND GROUP Notes to & forming part of the financial statements for the year ended 31 March 2022 14.3 Customer relationship assets (Continued) Customer relationships acquired separately or in a business combination are initially measured at cost. The cost of an intangible asset acquired in a business combination is its fair value as at the date of acquisition. Following initial recognition, customer relationship intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. The useful economic lives of customer relationships are between 3 and 7 years dependent on the underlying contracts, historical information and forecast revenues. Fair value of customer relationship assets as part of a business combination completed in the current year During the year, the Group has completed the acquisition of IDEST, as outlined in Note 12. This included the valuation of separately identifiable intangible assets, including customer relationships. This has been determined by an independent valuer. The fair value of the intangibles at the date of acquisition is determined by estimated discounted cash flow valuation using the Multi-Period Excess Earnings Method which is a financial valuation model used in valuing customer-related intangible assets that estimates revenues and cash flows derived from the intangible asset and then deducts portions of the cash flow that can be attributed to supporting assets, such as a brand name or fixed assets, that contributed to the generation of the cash flows. The resulting cash flow, which is attributable solely to the intangible asset, is then discounted at a rate of return commensurate with the risk of the asset to calculate a present value. Key assumptions and inputs are as follows: Revenue was based on pre-acquisition historical financial information adjusted for known losses and customers at the end of contracts. Revenue attributable to customer relationships Annual customer attrition rates Earnings before interest, tax, depreciation and amortisation rate (as a percentage of revenue) Discount rate % Customer relationship useful economic life IDEST 94% 1.00% 11% 15.5% 4 years Intangible asset impairment The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised over the useful life and tested for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for prospectively by changing the amortisation period or method, as appropriate, which is a change in accounting estimate. The amortisation expense on intangible assets with finite lives is recognised in profit or loss. 66 Straker Translations STRAKER TRANSLATION LIMITED AND GROUP Notes to & forming part of the financial statements for the year ended 31 March 2022 14.4. Goodwill (Continued) Cost Opening Balance Acquired as part of current year business combination Recognised as part of prior year business combination Finalisation of prior year business combination accounting Notes 12 18.2 13 Closing Balance Accumulated impairment Closing Balance Net book value 2022 $’000 11,616 4,425 - - 2021 $’000 8,389 3,137 225 (135) 16,041 11,616 (799) (799) (799) (799) 15,242 10,817 Goodwill represents the excess of the cost of a business combination over the total fair value of the identifiable assets (including intangibles), liabilities and contingent liabilities acquired at acquisition date. Cost comprises the fair value of assets given, liabilities assumed, and equity instruments issued, plus the amount of any non-controlling interests in the acquiree. Contingent consideration is included in cost at its fair value at acquisition date and, in the case of contingent consideration classified as a financial liability, remeasured subsequently through profit or loss. Direct costs of acquisition are recognised immediately as an expense. Any impairment in the goodwill carrying value is charged to the profit or loss. Where the fair value of identifiable assets, liabilities and contingent liabilities exceed the fair value of consideration paid, the excess is credited in full to profit or loss on acquisition date. Goodwill impairment Note Eurotext Elanex MSS Eule COM On-Global NZ Lingotek IDEST $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 Total $’000 31 March 2021 Additions 31 March 2022 Operating segment 12 3 449 970 1,797 930 1,020 1,520 994 3,137 - 10,817 - - - - - - - - 4,425 4,425 449 970 1,797 930 1,020 1,520 994 3,137 4,425 15,242 EMEA NAM EMEA EMEA NAM EMEA APAC NAM EMEA The carrying amount of goodwill has been allocated to the cash generating units (CGUs) as follows: The Group has allocated goodwill to the above subsidiaries, as the group of assets that each generate cash inflows that are largely independent of the cash inflows from other assets and subsidiaries in the Group. The CGUs have been defined in Note 22. NZTC is amalgamated to Straker Translations Limited, and form part of NZ CGU. The Group is required to test, on an annual basis, whether goodwill has suffered any impairment, by comparing the carrying amount of each CGU to its recoverable amount. The recoverable amount of all CGUs, has been determined based on value-in-use calculations. The cash flow projections used in the value in use calculations are based on management’s forecasts for the year ending 31 March 2023, then applicable growth rates applied to revenue and costs from year 2 to 5 for most of the cash generating units. Cash flows beyond the five-year period are extrapolated using the terminal growth rates stated below. 67 Annual Report 2022 STRAKER TRANSLATION LIMITED AND GROUP Notes to & forming part of the financial statements for the year ended 31 March 202 14.4 Goodwill impairment (continued) The key assumptions and inputs to the value in use calculations are as follows. Eurotext Elanex MSS Eule Com On-Global NZ Lingotek IDEST Annual revenue growth rates Gross margin rate Discount rate % Terminal growth rate 6% 2% 6% 5% 2% 6% 5% 6% 5% 35% 58% 47% 53% 44% 58% 55% 67% 47% 10.29% 11.17% 11.33% 9.36% 11.33% 11.33% 11.90% 11.17% 11.50% 1.70% 1.70% 1.70% 1.70% 1.70% 1.70% 1.70% 1.70% 1.70% Based on the value in use calculations, there is no impairment of goodwill in the current year. Lingotek CGU Management has determined that there are other reasonably possible changes in the key assumptions on which management has based its determination of Lingotek CGU’s recoverable amounts that would cause the CGU’s carrying amount to exceeds it’s recoverable value. If any one of the following changes were made to the above assumptions, the carrying amount and the recoverable amount would be equal. Lingotek Annual revenue growth rates Gross margin rate Discount rate % Terminal growth rate Decrease in rate of 0.83% Decrease in rate of 2.14% Increase in rate of 3.23% Rate to below 0% COM Management has determined that there are other reasonably possible changes in the key assumptions on which management has based its determination of the COM CGU’s recoverable amounts that would cause the CGU’s carrying amount to exceeds it’s recoverable value. If any one of the following changes were made to the above assumptions, the carrying amount and the recoverable amount would be equal. Annual revenue growth rates Gross margin rate Discount rate % Terminal growth rate COM Rate to below 0% Decrease in rate of 3.20% Increase in rate of 4.6% Rate to below 0% IDEST Management has determined that there are other reasonably possible changes in the key assumptions on which management has based its determination of the IDEST CGU’s recoverable amounts that would cause the CGU’s carrying amount to exceeds it’s recoverable value. If any one of the following changes were made to the above assumptions, the carrying amount and the recoverable amount would be equal. Annual revenue growth rates Gross margin rate Discount rate % Terminal growth rate Rate to below 0% Decrease in rate of 8.7% Increase in rate of 8.1% Rate to below 0% IDEST 68 Straker Translations STRAKER TRANSLATION LIMITED AND GROUP Notes to & forming part of the financial statements for the year ended 31 March 2022 15. Trade payables Trade payables 2022 $’000 4,170 2021 $’000 2,971 No interest is incurred on the trade payables. The Group has financial risk management policies in place to ensure that all payables are paid within the credit timeframe. 16. Sundry creditors and accruals Accruals Translator costs accrual Goods and services tax Sundry payables 2022 $’000 2,294 2,820 (113) 233 5,234 2021 $’000 1,377 823 292 163 2,655 69 Annual Report 2022 STRAKER TRANSLATION LIMITED AND GROUP Notes to & forming part of the financial statements for the year ended 31 March 2022 17. Contract liability Opening balance Acquired as part of business combination Recognised as revenue in the year Payments received in advance Note 12 2022 $’000 5,234 - (4,989) 3,534 3,779 2021 $’000 600 5,157 (678) 155 5,234 Contract liability represents an obligation to provide products or services to a customer when payment has been made in advance and delivery or performance has not yet occurred. 70 Straker Translations STRAKER TRANSLATION LIMITED AND GROUP Notes to & forming part of the financial statements for the year ended 31 March 2022 18. Consideration liabilities 18.1. Deferred consideration liabilities Due within one year Movement during the year Opening balance On acquisition in current year (a) Paid in year Closing balance 18.2. Contingent consideration liabilities Due within one year Due after more than one year Total Movement during the year Opening balance On acquisition in current year (a) On acquisition – updated prior year Paid in year Gain on fair value adjustment to contingent consideration liability (finance income) Loss on fair value adjustment to contingent consideration liability (finance expense) Unwinding of imputed interest on contingent consideration (Note 7) Foreign exchange revaluation Closing balance (a) Details the business combinations completed in the current period for IDEST. 2022 $’000 1,401 - 1,401 - 1,401 2022 $’000 1,348 1,230 2,578 3,334 2,381 2021 $’000 - 561 - (561) - 2021 $’000 1,435 1,899 3,334 2,291 2,246 225 (993) (1,418) (2,140) (143) - 85 (89) 2,578 143 37 (47) 3,334 During the year, the Group re-measured Lingotek’s earn-out liability. Management has de-recognised $1.974m contingent consideration amount at 31 March 2022, as a result of revised revenue forecasts made at 31 March 2022. The revisions to the revenue forecasts have been adjusted for management’s best estimation of the revenue and customer demand. The corresponding impact has been recorded in current period profit or loss. 71 Annual Report 2022 STRAKER TRANSLATION LIMITED AND GROUP Notes to & forming part of the financial statements for the year ended 31 March 2022 period profit or loss. NZTC In relation to the acquisition, contingent consideration payments amounting to NZD 0.225m were made during the current period after the successful achievement of revenue targets. A further contingent consideration earnout liability of NZD 0.3m is payable upon the successful achievement of revenue and margin targets on 31 May 2022. The maximum earn out liability of NZD 0.3m has been recognised. This is unchanged from 31 March 2021. On-Global In relation to the acquisition, contingent consideration payments amounting to EUR 0.25m (NZD 0.415m) were made during the current period after the successful achievement of revenue targets. IDEST In relation to the acquisition of IDEST, a deferred consideration liability of EUR 0.821m (NZD 1.401m) is payable. Further, a contingent consideration liability of EUR 1.50m (NZD 2.558m) is payable upon achieving revenue and gross margin targets. Of which, EUR 0.75m (NZD 1.279m) is payable on 30 April 2023 and EUR 0.750m (NZD 1.279m) payable on 29 April 2024 for achieving respective revenue and gross margin targets set for each of the years. A further contingent consideration liability of EUR 0.25m (NZD 0.426m) is payable upon successful renewal of the contract with the European Commission on or before 30 April 2024 on terms and conditions similar to or better than the current terms and conditions. Lingotek In relation to the acquisition, contingent consideration payments amounting to USD 0.245m (NZD 0.353m) were made during the current period after the successful achievement of revenue targets. A contingent consideration liability of USD 1.372m (NZD 1.974m) has been de-recognised in the current period due to re-measurement of forecast earnings. The corresponding impact has been recorded in current 72 Straker Translations STRAKER TRANSLATION LIMITED AND GROUP Notes to & forming part of the financial statements for the year ended 31 March 2022 19. Lease accounting Right of use assets At 1 April 2021 Additions Impact of lease modifications Amortisation At 31 March 2022 At 1 April 2020 Additions From business combination Impact of lease modifications Amortisation At 31 March 2021 Lease liabilities At 1 April 2021 Additions Interest expense Lease payments Effect of change in foreign exchange rates Lease modifications At 31 March 2022 Current Non-Current At 1 April 2020 Additions Interest expense Lease payments Effect of change in foreign exchange rates Lease modifications At 31 March 2021 Equipment Property Motor vehicles $’000 $’000 $’000 8 - - (3) 5 645 765 755 (536) 1,629 11 1,022 - - - (3) 8 401 127 (444) (461) 645 - - - - - 16 - - (8) (8) - Equipment Property Motor vehicles $’000 $’000 $’000 7 - 1 (5) - - 3 11 - 1 (5) - - 7 956 732 75 (518) (37) 673 1,881 1,109 722 59 (525) 23 (432) 956 - - - - - - - 20 - 1 (21) - - - Total $’000 653 765 755 (539) 1,634 1,049 401 127 (452) (472) 653 Total $’000 963 732 76 (523) (37) 673 1,884 463 1,421 1,884 1,140 722 61 (551) 23 (432) 963 73 Annual Report 2022 STRAKER TRANSLATION LIMITED AND GROUP Notes to & forming part of the financial statements for the year ended 31 March 2022 19. Lease accounting (Continued) Lease liability payments are made monthly. The payments to be made within 12 months amount to NZD $0.451m (2021: NZD $0.626m). The remaining NZD $1.433m (2021: NZD $0.337m) will be paid within 4 years. All leases are accounted for by recognising a right-of-use asset and a lease liability except for: • • Leases of low value assets; and Leases with a term of 12 months or less. Under the exemption, lease payments are recognised single lease expenses typically on a straight-line basis over the lease term. Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the discount rate determined by reference to the rate inherent in the lease unless (as is typically the case) this is not readily determinable, in which case the Group’s incremental borrowing rate on commencement of the lease is used. Variable lease payments are only included in the measurement of the lease liability if they are dependent on an index or rate. In such cases, the initial measurement of the lease liability assumes the variable element will remain unchanged throughout the lease term. Other variable lease payments are expensed in the period to which they relate. On initial recognition, the carrying value of the lease liability may also include: • • • amounts expected to be payable under any residual value guarantee; the exercise price of any purchase option granted in favour of the Group if it is reasonably certain to exercise that option; any penalties payable for terminating the lease, if the term of the lease has been estimated on the basis of termination option being exercised. Right of use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and increased for: Subsequent to initial measurement, lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease payments made. Right-of-use assets are amortised on a straight-line basis over the remaining term of the lease or over the remaining economic life of the asset if, rarely, this is judged to be shorter than the lease term. When the Group renegotiates the contractual terms of a lease with the lessor, the accounting depends on the nature of the modification: • • • if the renegotiation results in one or more additional assets being leased for an amount commensurate with the standalone price for the additional rights-of- use obtained, the modification is accounted for as a separate lease in accordance with the above policy in all other cases where the renegotiation increases the scope of the lease (whether that is an extension to the lease term, or one or more additional assets being leased), the lease liability is remeasured using the discount rate applicable on the modification date, with the right-of-use asset being adjusted by the same amount if the renegotiation results in a decrease in the scope of the lease, both the carrying amount of the lease liability and right-of-use asset are reduced by the same proportion to reflect the partial of full termination of the lease with any difference recognised in profit or loss. The lease liability is then further adjusted to ensure its carrying amount reflects the amount of the renegotiated payments over the renegotiated term, with the modified lease payments discounted at the rate applicable on the modification date. The right-of-use asset is adjusted by the same amount. lease payments made at or before commencement of the lease; initial direct costs incurred; and the amount of any provision recognised where the Group is contractually required to dismantle, remove or restore the leased asset. • • • 74 Straker Translations STRAKER TRANSLATION LIMITED AND GROUP Notes to & forming part of the financial statements for the year ended 31 March 2022 19. Lease accounting (Continued) For contracts that both convey a right to the Group to use an identified asset and require services to be provided to the Group by the lessor, the Group has elected to account for the entire contract as a lease, i.e. it does not allocate any amount of the contractual payments to, and account separately for, any services provided by the supplier as part of the contract. Nature of leasing activities (in the capacity as lessee) The Group leases a number of properties in the jurisdictions in which it operates. In some jurisdictions it is customary for lease contracts to provide for payments to increase each year by inflation and in others to be reset periodically to market rental rates. The Group also leases certain items of plant and equipment. These leases comprise only fixed payments over the lease terms. The percentages in the table below reflect the current proportions of lease payments that are either fixed or variable. The sensitivity reflects the impact on the carrying amount of lease liabilities and right-of-use assets if there was an uplift of 2% on the reporting date to lease payments that are variable. Year ended 31 March 2022 Lease Contracts Number Fixed payments % Variable payments % Sensitivity $’000 Equipment leases with fixed payments Property leases with payments linked to inflation Property leases with periodic uplifts to market rentals Property leases with fixed payments 1 4 1 3 9 0.0% - - 4.0% 4.0% - 52% 41% - 93% - ±5 ±1 - ±6 Year ended 31 March 2021 Lease Contracts Number Fixed payments % Variable payments % Sensitivity $’000 Equipment leases with fixed payments Property leases with payments linked to inflation Property leases with periodic uplifts to market rentals Property leases with fixed payments 1 4 1 4 10 0.0% - - 4.0% 4.0% - 52% 41% - 93% - ±5 ±1 - ±6 75 Annual Report 2022 STRAKER TRANSLATION LIMITED AND GROUP Notes to & forming part of the financial statements for the year ended 31 March 2022 20. Loans and borrowings Current Collateralised borrowings Unsecured related party borrowings (Note 26) Callaghan Innovation R&D loan The Group repaid the loans during the year using the part of equity capital raised. 21. Share capital Ordinary capital Balance at beginning of the year Proceeds from issue of ordinary shares during the year Ordinary shares issued during the year – consideration as part of business combination Costs of share issue Balance at end of the year 2022 $’000 - - - - 2022 $’000 42,529 26,979 426 (1,138) 68,796 2021 $’000 6,500 1,500 400 8,400 2021 $’000 40,786 93 1,666 (16) 42,529 Ordinary shares Share capital at the beginning of the year Ordinary shares issued during the year Ordinary shares issued during the year – consideration as part of business combination Balance at end of the year 2022 2021 No. of Shares No. of Shares 54,334,855 13,198,964 53,101,360 244,473 263,196 989,022 67,797,015 54,334,855 The company has issued 67,797,015 ordinary shares (2021: 54,334,855) at year end. These shares have no par value. Ordinary shares have equal voting rights and share equally in dividends and surplus on winding up. 76 Straker Translations STRAKER TRANSLATION LIMITED AND GROUP Notes to & forming part of the financial statements for the year ended 31 March 2022 22. Group subsidiaries Subsidiary Straker Europe Limited Straker Translations Inc. Straker Translations Australia Pty Limited Straker Spain SL Straker Translations UK Limited Eurotext Translations Limited (“Eurotext”) Elanex Inc. (“Elanex”) Straker Translations Hong Kong Limited Management System Solutions SL (“MSS”) Straker Germany GmbH (previously Eule Lokalisierung GmbH) (“Eule”) Straker Media SL (previously ComTranslations Online SL) (“Com”) On-Global Language Marketing Services SL (“On-Global”) New Zealand Translations Centre Limited (“NZTC”) Straker Lingotek LLC Note Country of Incorporation Ownership Interest 2022 Ownership Interest 2021 Ireland United States of America Australia Spain United Kingdom Ireland United States of America Hong Kong Spain Germany Spain Spain New Zealand United States of America 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 0% IDEST Communication SA 12 Belgium Management System Solutions SL, Straker Media SL and On-Global Language Marketing Services SL are 100% subsidiaries of Straker Spain SL. Straker Spain SL, Straker UK Limited, IDEST Communication SA and Eurotext Translations Limited are 100% subsidiaries of Straker Europe Limited. Elanex Inc. and Straker Lingotek LLC are 100% subsidiaries of STS Translations Inc. (USA). All subsidiary companies are providers of language services and have 31 March balance dates other than On-Global which has a 31 December financial year end. 77 Annual Report 2022 STRAKER TRANSLATION LIMITED AND GROUP Notes to & forming part of the financial statements for the year ended 31 March 2022 23. Capital management The Group’s capital includes share capital and retained earnings. The Group’s policy is to maintain a strong share capital base to maintain investor, creditor and market confidence and to sustain future development of the business. The Group’s policies in respect of capital management and allocation are reviewed regularly by the Board of Directors. 24. Events after the reporting period There were no reported significant events after reporting date. 25. Financial risk management The Group has exposure to the following risks from its use of financial instruments: • • • • Credit risk; Interest rate risk; Liquidity risk; and Foreign exchange risk In common with all other businesses, the Group is exposed to risks that arise from its use of financial instruments. This Note describes the Group’s objectives, policies and processes for managing those risks and the methods used to measure them. There have been no substantive changes in the Group’s exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from previous periods unless otherwise stated in this note. Principal financial instruments The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows: Cash and cash equivalents Trade receivables Trade payables, accruals and translator costs accrual Contract liability Contingent consideration liability • • • • • 78 Straker Translations STRAKER TRANSLATION LIMITED AND GROUP Notes to & forming part of the financial statements for the year ended 31 March 2022 25. Financial risk management (continued) Financial risk management objectives, policies and processes The Group manages their exposure to key financial risks, including credit risk, interest risk, liquidity risk and foreign exchange risk in accordance with the Group’s financial risk management policies. The objective of these policies is to support the delivery of the Group’s financial targets whilst protecting future financial security. The Board reviews and agrees policies for managing each of these risks as summarised below. i) Financial instruments by category 31 March 2022 Financial assets Cash and cash equivalents Trade receivables Total Financial liabilities Trade payables Accruals Translator costs accrual Deferred consideration Contingent consideration Contract liabilities Lease liabilities Total Assets at Amortised Cost Liabilities at Amortised Cost Fair value through Profit or Loss Total Carrying Amount $’000 $’000 $’000 $’000 15,131 12,218 27,349 - - - - - - - - - - (4,170) (2,294) (2,820) (1,401) (3,779) (1,884) (16,348) - - - - - - - - - - (2,578) (2,578) (18,926) Maturity analysis - Contractual liability Current Due 1-6m Due 7-12m Due 13-24m Due 25-36m Trade payables Accruals Translator costs accrual Deferred consideratoin Contingent consideration Contract liabilities Lease liabilities 4,170 2,294 2,820 - - 80 - 9,364 - - - 1,401 - 2,130 222 3,753 - - - - 1,279 1,369 230 2,878 - - - - 1,706 200 419 2,325 - - - - - - 1,013 15,131 12,218 27,349 (4,170) (2,294) (2,820) (1,401) (2,578) (3,779) (1,884) Total 4,170 2,294 2,820 1,401 2,985 3,779 1,884 1,013 19,333 79 Annual Report 2022 STRAKER TRANSLATION LIMITED AND GROUP Notes to & forming part of the financial statements for the year ended 31 March 2022 25. Financial risk management (continued) 31 March 2021 Financial assets Cash and cash equivalents Trade receivables Total Financial liabilities Trade payables Accruals Translator costs accrual Contingent consideration Contract liabilities Loans and borrowings Lease liabilities Total Assets at Amortised Cost Liabilities at Amortised Cost Fair value through Profit or Loss Total Carrying Amount $’000 $’000 $’000 $’000 7,175 5,752 12,927 - - - - - - - - - - - (2,971) (1,377) (2,820) - - - - - - - (3,334) (5,234) (8,400) (963) - - - 7,175 5,752 12,927 (2,971) (1,377) (2,820) (3,334) (5,234) (8,400) (963) (21,765) (3,334) (25,099) Maturity analysis - Contractual liability Current Due 1-6m Due 7-12m Due 13-24m Due 25-36m Trade payables Accruals Translator costs accrual Contingent consideration Contract liabilities Loans and borrowings Lease liabilities 2,971 1,377 823 - 114 - - - - - 812 3,878 429 330 - - - 641 1,140 8,643 230 - - - 1,881 58 - 350 - - - - 44 - 70 Total 2,971 1,377 823 3,334 5,234 9,072 980 5,285 5,449 10,654 2,289 114 23,791 Financial instruments not measured at fair value The fair value measurement of the Group’s financial and non-financial assets and liabilities utilises market observable inputs and data as far as possible. Inputs used in determining fair value measurements are categorised into different levels based on how observable the inputs used in the valuation technique utilised are (the ‘fair value hierarchy’): Level 1: Quoted prices in active markets for identical items (unadjusted) Level 2: Observable direct or indirect inputs other than Level 1 inputs Level 3: Unobservable inputs (i.e. not derived from market data). Financial instruments not measured at fair value include cash and cash equivalents, trade receivables, trade payables, accruals and deferred consideration. Due to their short-term nature, the carrying value of each approximates their fair value. There are no Level 1 or Level 2 financial instruments. 80 Straker Translations STRAKER TRANSLATION LIMITED AND GROUP Notes to & forming part of the financial statements for the year ended 31 March 2022 Financial instruments measured at fair value The fair value hierarchy of financial instruments measured at fair value is provided below. Level 3 Level 3 Financial liabilities Contingent consideration liabilities Notes 18.2 2022 $’000 2,578 2021 $’000 3,334 There were no transfers between levels during the year. Quantitative information on significant unobservable inputs – Level 3 The fair value of the Level 3 contingent consideration liability has been determined by discounted cash flow valuation technique. The fair value has been determined with reference to unobservable inputs, including forecast revenue as explained in Note 18.2. During the year, the Group used cost of equity percentage in determining the IDEST contingent consideration. In the prior years, the Group used cost of debt percentage. There was no any other changes to the valuation technique used during the year. ii) Credit Risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. Financial instruments which potentially subject the Group to credit risk principally consist of cash and cash equivalents and trade receivables. In the normal course of business, the Group incurs credit risk from debtors and transactions with banking institutions. The Group manages its exposure to credit risk by: • holding bank balances with banking institutions with good credit ratings; and • maintaining credit control procedures over debtors. The Group performs credit evaluations on all customers requiring credit. The maximum exposure at reporting date is equal to the total carrying amount of cash and cash equivalents, and trade receivables as disclosed in the Statement of Financial Position. At each reporting date, trade receivables are reviewed for future expected credit losses in accordance with Note 29 e. The Group does not require any collateral or security to support these financial instruments and other debts it holds due to the low risk associated with the counterparties to these instruments. Trade receivables net of the Expected Credit Loss provision as stated in Note 10, include balances more than 30 days past due of $4.935m. The Group has received $2.120m in the post reporting date period and has determined that no further impairment of the remaining balance is required. 81 Annual Report 2022 STRAKER TRANSLATION LIMITED AND GROUP Notes to & forming part of the financial statements for the year ended 31 March 2022 25. Financial risk management (continued) Bank AIB ANZ New Zealand Bank of America Barclays BBVA US Citibank N.A. Commerzbank ING Caixa NAB Silicon Valley Bank Ulster Rating BA1 A2 AA2 BAA2 BAA1 BAA1 BAA2 AA BAA3 A2 A2 BAA2 2022 $’000 144 3,739 202 175 395 997 64 1,256 387 6,112 1,083 150 2021 $’000 344 1,642 166 969 278 316 147 - 1,632 391 436 162 A significant amount of cash and cash equivalents is held with the following institutions: iii) Interest rate risk The Group does not have borrowings, as a result it is not exposed to cash flow interest rate risk. iv) Liquidity risk Liquidity risk is the risk that the Group will encounter difficulty in meeting its financial obligations associated with financial liabilities as they fall due. The Group closely monitors its cash inflows and cash requirements to manage the net position in order to maintain an appropriate liquidity position. Refer to financial instrument maturity analysis in Note 25 (i). Cash and cash equivalents consist of cash at bank immediately available on demand. v) Foreign currency risk The Group has exposure to foreign exchange risk as a result of transactions denominated in foreign currencies arising from normal trading activities. The foreign currencies in which the Group primarily transacts are Euros, US Dollars and Australian Dollars. The following significant exchange rates applied during the year: Monthly average rate Reporting date spot rate 2022 0.9436 0.5988 0.6942 2021 0.9334 0.5762 0.6753 2022 0.9288 0.5996 0.6961 2021 0.9182 0.5959 0.6997 AUD EUR USD 82 Straker Translations STRAKER TRANSLATION LIMITED AND GROUP Notes to & forming part of the financial statements for the year ended 31 March 2022 25. Financial risk management (continued) The table below summarises the material foreign exchange exposure on the net monetary assets and liabilities of entity against the significant foreign currencies in which the Group primarily transacts, expressed in NZD: EUR Cash and cash equivalents Trade receivables Trade payables Total USD Cash and cash equivalents Trade receivables Trade payables Total AUD 2022 $’000 1,161 2,518 (1,298) 2,381 5,165 1,727 (1,553) 5,339 2021 $’000 2,349 2,966 (1,070) 4,245 2,551 2,929 (660) 4,820 Cash and cash equivalents 5,990 287 Sensitivity analysis Based on the net exposure above, the table below outlines the sensitivity of profit and equity to reasonably likely movements of that currency to the NZD. 12.5% weakening in NZD/EUR (2021: 12.5%) 5% strengthening in NZD/EUR (2021: 5%) 20% weakening in NZD/USD (2021: 20%) 7.5% strengthening in NZD/USD (2021: 7.5%) 20% weakening in NZD/AUD (2021: 20%) 7.5% strengthening in NZD/AUD (2021: 7.5%) 2022 $’000 340 (113) 1,335 (372) 856 (285) 2021 $’000 606 (202) 965 (269) 41 (14) Foreign exchange risk arises when individual Group entities enter into transactions denominated in a currency other than their functional currency. The Group’s policy is, where possible, to allow group entities to settle liabilities denominated in their functional currency with the cash generated from their own operations in that currency. Where group entities have liabilities denominated in a currency other than their functional currency (and have insufficient reserves of that currency to settle them), cash already denominated in that currency will, where possible, be transferred from elsewhere within the Group. In order to monitor the continuing effectiveness of this policy, the Board receives a monthly forecast, analysed by the major currencies held by the Group, of liabilities due for settlement and expected cash reserves. The Group has exposure to foreign exchange risk as a result of transactions denominated in foreign currencies arising from normal trading activities. The foreign currencies in which the Group primarily transacts are Euros, Australian Dollars and US Dollars. 83 Annual Report 2022 STRAKER TRANSLATION LIMITED AND GROUP Notes to & forming part of the financial statements for the year ended 31 March 2022 26. Related party transactions The Group’s related parties include its subsidiary companies as disclosed in Note 22. All related party transactions within the Group are eliminated on consolidation. a) Transactions with other related parties during the normal course of business No other related party transactions were noted during the year. b) Transactions with directors and key management personnel The Group repaid an unsecured simple term debt facility of NZD $1.5m (2021: NZD $1.5m) with an interest rate of 11.50%pa (2021:11.50%pa) provided by an entity associated with Stephen Donovan, a Straker non-executive director. A loan commitment fee of NZD $0.038m was paid to establish the facility in 2021. During the year interest on unsecured borrowings was NZD $0.135m (2021: NZD $0.037m). Director Fees (including Consulting Fees disbursements) Employee Benefits – Defined Contribution Plan Salary & Bonus Interest & Commiment Fee on Unsecured Borrowings - 63 64 102 63 64 355 - - 65 - - - 65 13 436 - - - - - - - - - - - - 135 - - - 13 436 135 1,004 Total $’000 449 63 263 102 63 64 Director Fees (including Consulting Fees disbursements) Employee Benefits – Defined Contribution Plan Salary & Bonus Interest & Commiment Fee on Unsecured Borrowings - 45 64 102 62 63 336 - - 87 - - - 87 12 320 - - - - - - - - - - 12 320 - - 75 - 75 Total $’000 332 45 226 102 62 63 830 2022 Grant Straker Amanda Cribb Stephen Donovan Philip Norman Tim Williams Paul Wilson 2021 Grant Straker Amanda Cribb Stephen Donovan Philip Norman Tim Williams Paul Wilson 84 Straker Translations STRAKER TRANSLATION LIMITED AND GROUP Notes to & forming part of the financial statements for the year ended 31 March 2022 26. Related party transactions (continued) c) Key management personnel including the Chief Executive Officer Short-term employee benefits Termination benefits Total 2022 $’000 1,801 - 1,801 2021 $’000 1,517 103 1,620 Key management personnel are defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly. Key management personnel includes the Executive Team. Provision of services of $993.00 paid during the year, party related to David Ingram. 27. Share options Options to subscribe for shares have been issued to certain directors and employees of the Group. The purpose of this plan is to incentivise, attract, retain and reward certain staff for their service to the Group and to motivate them to contribute to the growth and profitability of the Group. The options vest at each financial year end. All options are fully exercisable by 18 March 2025. Reconciliation of outstanding options Number of Options Average Exercise Price (NZD$) Balance at 31 March 2020 Issued during the year Exercised during the year Lapsed during the year Balance at 31 March 2021 Issued during the year Exercised during the year Lapsed during the year Balance at 31 March 2022 2,135,591 1,005,256 (244,479) (331,321) 2,565,047 1,419,600 (97,351) (144,526) 3,742,770 $1.39 $1.21 $0.79 $1.36 $1.41 $1.96 $1.14 $1.65 $1.59 The fair value of options granted was measured based upon the Black Scholes pricing model. Expected volatility is estimated by considering historic average share price and volatility. Fair Value on grant date Share Price at grant date Exercise Price Expected Volatility Expected Life Risk Free rate Black out factor 2022 $’000 $2.02 $1.96 30.0% 4 years 0.50% 25.0% 2021 $’000 $1.39 $1.21 30.0% 4 years 0.46% 25.0% 85 Annual Report 2022 STRAKER TRANSLATION LIMITED AND GROUP Notes to & forming part of the financial statements for the year ended 31 March 2022 27. Share options (Continued) Directors The following directors hold the following number of options as at balance date expressed at a blended average exercise price: Directors Stephen Donovan Amanda Cribb Philip Norman Grant Straker Tim Williams Paul Wilson 2022 2022 2021 2021 Exercise Price (NZD$) Number of Options Exercise Price (NZD$) Number of Options $1.53 - $1.53 $1.53 $1.53 $1.53 25,000 - 183,980 604,300 25,000 50,000 $1.38 - $1.38 $1.38 $1.38 $1.38 25,000 - 197,970 413,000 25,000 50,000 Philip Norman exercised 13,990 share options at NZD$0.596 per share in both the current year and prior year. Grant Straker directly and indirectly exercised 133,920 share options on a cashless basis for which he received 79,456 ordinary shares in the prior year. Key management personnel including the Chief Executive Officer The key management personnel hold the following number of options as at reporting date: 2022 2022 2021 2021 Exercise Price (NZD$) Number of Options Exercise Price (NZD$) Number of Options Key management personnel $1.61 2,243 $1.43 1,383 86 Straker Translations STRAKER TRANSLATION LIMITED AND GROUP Notes to & forming part of the financial statements for the year ended 31 March 2022 28. Reconciliation of net profit for the year with net cash flows from operating activities Net loss after tax for the year Adjusted for: Non-cash items Amortisation of capitalised software development Amortisation of computer software Amortisation of acquired intangibles Amortisation of right of use assets Depreciation of plant and equipment Impairment loss on trade receivables Impairment of plant and equipment Imputed interest on deferred consideration liability Fair value of contingent consideration liability on acquisition Share options Taxation Unrealised foreign currency (gain)/loss Non-operating expenses IFRS 16 Rent Adjustment Interest paid for financing activity IFRS-16 Interest amortisation Impact of changes in working capital items Movement in debtors, prepayments and other debtors Movement in creditors, accruals and other payables Movement in tax provisions Net cash flow from operating activities 2022 $’000 2021 $’000 (5,912) (6,016) 1,062 2,697 2,030 539 210 47 3 (169) (1,895) 370 (549) 377 - 831 58 (4,081) 2,159 (142) (2,365) 603 456 1,431 472 270 120 - 37 - 124 (372) 1,609 (551) - - (325) 1,679 143 (320) Non-cash investing and financing activities Significant non-cash transactions included in financing activities include recognition of contingent consideration, gain/ (loss) on fair value adjustments and unwinding of imputed interest on the contingent consideration liabilities, as detailed in Note 18.2. There are no significant non-cash transactions included in investing activities. 87 Annual Report 2022 STRAKER TRANSLATION LIMITED AND GROUP Notes to & forming part of the financial statements for the year ended 31 March 2022 Exchange differences recognised to profit or loss in Group entities’ separate financial statements on the translation of long-term monetary items forming part of the Group’s net investment in the overseas operation concerned are reclassified to other comprehensive income and accumulated in the foreign exchange reserve on consolidation. c) Goods and Services Tax Revenue, expenses and assets are recognised net of the amount of goods and services tax (GST), except: • where the amount of GST incurred is not recovered from the taxation authority, it is recognised as part of the cost of acquisition of an asset or as part of an item of expense; or • for receivables and payables which are recognised inclusive of GST (the net amount of the GST recoverable from or payable to the taxation authority is included as part of receivables or payables). Cash flows are included in the statement of cash flows on a net basis. The GST component of cash flows arising from investing and financing which is recovered from or paid to, the taxation authority is classified as operating cash flow. 29. Summary of significant accounting policies a) Basis of Consolidation The financial statements incorporate the financial statements of the Parent and entities controlled by the Company (its subsidiaries). Control exists when the Parent is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. The results of subsidiaries acquired or disposed of during the period are included in the profit or loss from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group. All intra-group transactions, balances, income and expenses are eliminated in full on consolidation. b) Foreign currency translation Transactions entered into by Group entities in a currency other than the currency of the primary economic environment in which they operate (their “functional currency”) are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates ruling at the reporting date. Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are recognised immediately in profit or loss. Exchange differences realised on settlement of monetary assets and liabilities are also recognised in profit or loss. On consolidation, the results of overseas operations are translated into New Zealand dollars at rates approximating to those ruling when the transactions took place. All assets and liabilities of overseas operations, including goodwill arising on the acquisition of those operations, are translated at the rate ruling at the date of the statement of financial position. Exchange differences arising on translating the opening net assets at opening rate and the results of overseas operations at actual rate are recognised in other comprehensive income and accumulated in the foreign exchange reserve. 88 Straker Translations STRAKER TRANSLATION LIMITED AND GROUP Notes to & forming part of the financial statements for the year ended 31 March 2022 d) Financial instruments e) Impairment of assets Non-derivative financial assets Financial assets – trade receivables The Group classifies its financial assets as financial assets at amortised cost. Amortised cost These assets arise principally from the provision of services to customers (e.g. trade receivables), but also incorporate other types of financial assets where the objective is to hold these assets in order to collect contractual cash flows and the contractual cash flows are solely payments of principal and interest. They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment. Non-derivative financial liabilities Non-derivative financial liabilities comprise trade payables, accruals, translator costs accrual, contract liability, lease liabilities, deferred consideration liabilities and contingent consideration liabilities. Financial liabilities (including liabilities designated at fair value through profit or loss) are recognised initially on the trade date, which is the date that the Group becomes a party to the contractual provisions of the instrument. The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expire. The Group classifies non-derivative financial liabilities into the following: • Other financial liabilities Such financial liabilities are recognised initially at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortised cost using the effective interest method. The Group’s other financial liabilities comprise: trade payables, accruals, translator costs accrual, contract liability and deferred consideration. • Financial liabilities classified as fair value through profit or loss After initial measurement, the Group measures its financial instruments which are classified as at FVPL, at fair value. Subsequent changes in the fair value of those financial instruments are recorded in net gain or loss on financial assets and liabilities at FVPL in profit or loss. Interest and dividends earned or paid on these instruments are recorded separately in interest revenue or expense and dividend revenue or expense in profit or loss. Impairment provisions for current trade receivables and contract assets are recognised based on the simplified approach within NZ IFRS 9 using a provision matrix in the determination of the lifetime expected credit losses. During this process the probability of the non-payment of the trade receivables is assessed. This probability is then multiplied by the amount of the expected loss arising from default to determine the lifetime expected credit loss for the trade receivables. For trade receivables, which are reported net, such provisions are recorded in a separate provision account with the loss being recognised within cost of sales in the consolidated statement of comprehensive income. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision. Impairment provisions for receivables from related parties and loans to related parties are recognised based on a forward looking expected credit loss model. The methodology used to determine the amount of the provision is based on whether there has been a significant increase in credit risk since initial recognition of the financial asset. For those where the credit risk has not increased significantly since initial recognition of the financial asset, twelve month expected credit losses along with gross interest income are recognised. For those for which credit risk has increased significantly, lifetime expected credit losses along with the gross interest income are recognised. For those that are determined to be credit impaired, lifetime expected credit losses along with interest income on a net basis are recognised. From time to time, the Group elects to renegotiate the terms of trade receivables due from customers with which it has previously had a good trading history. Such renegotiations will lead to changes in the timing of payments rather than changes to the amounts owed and, in consequence, the new expected cash flows are discounted at the original effective interest rate and any resulting difference to the carrying value is recognised in the consolidated statement of comprehensive income (operating profit). The Group’s financial assets measured at amortised cost comprise trade and other receivables and cash and cash equivalents in the consolidated statement of financial position. Cash and cash equivalents includes cash in hand, deposits held at call with banks, and other short term highly liquid investments with original maturities of three months or less. 89 Annual Report 2022 STRAKER TRANSLATION LIMITED AND GROUP Notes to & forming part of the financial statements for the year ended 31 March 2022 Non-financial assets Equity settled share option plan The Employee Share Option Plan allows Group employees to acquire shares in the Company. The fair value of options granted is recognised as an employee expense in profit and loss with a corresponding increase in the share option reserve. The fair value is measured at the grant date and spread over the vesting periods. The fair value of the options granted is measured using the Black-Scholes pricing model, taking into account terms and conditions upon which the options are granted. When options are exercised the amount in the share option reserve relating to those options, together with the exercise price paid by the employee, is transferred to share capital. The carrying amounts of the Group’s non-financial assets other than deferred tax assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the assets recoverable amount is estimated. If the estimated recoverable amount of an asset is less than its carrying amount, the asset is written down to its estimated recoverable amount and an impairment loss is recognised in profit or loss. Estimated recoverable amount of other assets is the greater of their fair value less costs to sell and value in use. Value in use is determined by estimating future cash flows from the use and ultimate disposal of the asset and discounting these to present value using a pre-tax discount rate that reflects current market rates and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash- generating unit to which the asset belongs. A cash-generating unit is the smallest group of assets that independently generates cash flow and whose cash flow is largely independent of the cash flows generated by other assets. Goodwill is tested for impairment annually. f) Employee benefits Short Term Employee Benefits Liabilities for wages and salaries, including non-monetary benefits and annual leave wholly settled within twelve months of the reporting date are recognised in other payables in respect of employees’ services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled on an undiscounted basis. Liabilities for non-accumulating sick leave are recognised when the leave is taken and measured at the rates paid or payable. Defined contribution schemes Contributions to defined contribution schemes are charged to the profit or loss in the year to which they relate. 90 Straker Translations 91 Annual Report 2022 92 Straker Translations STRAKER TRANSLATIONS LIMITED CORPORATE GOVERNANCE STATEMENT 31 March 2022 Annual Report 2022 93 CORPORATE GOVERNANCE STATEMENT For the year ended 31 March 2022 The Board of Directors of Straker Translations Limited (Straker) is committed to upholding a high standard of corporate governance. Straker complies as far as possible with the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations (4th Edition) (ASX Corporate Governance Principles and Recommendations) having regard to the nature and size of Straker’s operations. This Corporate Governance Statement outlines Straker’s commitment to achieving compliance with the central principles of the recommendations set by the ASX Corporate Governance Council based on: • • • an overview of Straker’s implementation of the ASX Corporate Governance Principles and Recommendations during the year ended 31 March 2022 an explanation of the ASX Corporate Governance Principles and Recommendations with which Straker does not currently comply and the reasons for any non-compliance; and a statement of Straker’s intention to take certain actions and adopt certain policies and processes in order to achieve compliance with the ASX Corporate Governance Principles and Recommendations. Straker’s Board charters, corporate governance principles and policies are available on Straker’s website at at www. strakertranslations.com This Corporate Governance Statement was approved by the Board on 30th May 2022. Principle 1: Lay solid foundations for management and oversight A listed entity should clearly delineate the respective roles and responsibilities of its board and management and regularly review their performance. The respective roles and responsibilities of Straker’s Board and Management Straker’s Board of Directors is the body responsible for the overall corporate governance and decision making within the Company. While Straker’s senior executive management team (being employees of Straker who report directly to Straker’s Chief Executive Officer) deal with and supervise the day-to-day operational issues and processes experienced by Straker in carrying out its business, the role of the Board is to direct and supervise the management of Straker’s business by its senior executive team, and to ensure that the longer-term strategic objectives of the Company continue to be met. In order to promote efficiency, Straker’s Board of Directors may from time to time delegate certain functions to its senior executive management team. Actions delegated to the senior executive management team typically involve management of Straker’s resources 94 to deal with day-to-day operations of the business in a way that contributes to Straker’s overall strategic direction as set by the Board of Directors. Straker’s Board has delegated to the Managing Director all the powers and authorities required to manage the day-to-day operations of Straker’s business, except those expressly reserved to the Board or one of its committees. Straker’s Board Charter sets out the role and responsibilities of Straker’s Board of Directors and regulates internal Board procedures. Details about the Company’s Board are available on Straker’s website. Selection and recommendation of director candidates Before appointing or putting forward to shareholders any candidate for election or re-election as a Director of Straker, a formal process is undertaken to complete appropriate checks on that candidate, including checks as to that candidate’s character, experience, education, criminal record and bankruptcy history. If Straker is satisfied with the results of such checks and determines that the candidate be put forward to shareholders for election, Straker will provide shareholders with all material information in its possession relevant to a decision on whether or not to elect or re-elect that Director candidate. Terms of appointment of Directors and senior executives All newly appointed Directors of Straker are provided with a letter of appointment setting out the term of appointment, remuneration, the Director’s roles and responsibilities and the entity’s expectations of that Director (including with regard to time commitments, the requirement to disclose Directors’ interests and matters affecting the Director’s independence, the requirement to comply with key corporate policies, and ongoing confidentiality obligations). Existing Non-Executive Directors of Straker also have their terms of appointment formalised in a written letter of appointment setting out the above items. All senior executive employees of Straker have their terms of employment (including a description of their position, duties and responsibilities, remuneration arrangements, the role to which they report, termination obligations and entitlements, and ongoing confidentiality obligations) contained in a written agreement with Straker. The Company Secretary role Straker’s Board has appointed an Australian based Company Secretary following completion of the Company’s listing on the ASX. The Company Secretary performs the following functions for which she’s accountable directly to Straker’s Board: Straker Translations CORPORATE GOVERNANCE STATEMENT For the year ended 31 March 2022 • • advising the Board and its committees on governance matters; ensuring compliance with the Company’s continuous disclosure obligations; • monitoring that the Board and committee policy and procedures are followed; • • • coordinating the timely completion and despatch of Board and committee papers; ensuring that the matters discussed at Board and committee meetings are accurately captured in the minutes of those meetings; and helping to organise and facilitate the induction and professional development of Directors. Diversity The Company is committed to creating and ensuring a diverse work environment in which everyone is treated fairly, with respect and where everyone feels responsible for the reputation and performance of the Company. Straker understands that diversity and inclusivity in the workforce is a strategic asset, and that a workplace with a genuine balance of employees by gender, age and background will strengthen Straker’s business performance and create opportunities to access the best people for Straker’s business. Straker has developed a formal Diversity and Inclusion Policy, which was adopted upon the Company’s listing to the ASX in October 2018. A copy of the policy can be found on the Company’s website. As at the date of this statement, the Company has adopted the following measurable objectives: • • • Sustaining current overall gender equity position with no more than a 10% variance; Increasing representation by females in leadership positions by 5% YOY; and Increasing awareness and inclusion of LGBTTQIA+ employees by a Company-wide awareness programme; • Maintaining a gender-balanced workforce with 50% female employees. As at the year ended 31 March 2022, the respective proportions of men and women within Straker were as follows: Board of Directors Executive Team Non-Executive Team All other employees (not including senior executive staff ) Female Male 1 2 23 120 5 5 23 94 Performance Management Straker undertakes formal evaluation processes on an annual basis to review the performance of Straker’s Board, various Board committees, individual Directors and senior executive employees. These evaluation processes are conducted as follows: • • • Board performance and Board committee performance: Straker’s Board conduct an annual self-review and evaluation of its own performance (with assistance from the Remuneration & Nomination Committee and the Company Secretary), including the Board’s performance against the requirements of the Board Charter. Individual Director performance: Straker’s Chairperson of the Board conducts performance reviews with individual Directors on an annual basis. Senior executive employee performance: The Remuneration & Nomination Committee periodically evaluates the performance of Straker’s senior executives in accordance with the provisions of Straker’s Remuneration & Nomination Committee Charter, which is available on Straker’s website. Straker’s Board of Directors conducted formal performance review in accordance with the abovementioned processes during April 2022 and will conduct a similar review at or around the end of each following year. The evaluation process noted strengths, recommended improvements and identified areas for increased focus. Principle 2: Structure the Board to add value The Board of a listed entity should be of an appropriate size and collectively have the skills, commitment and knowledge of the entity and the industry in which it operates, to enable it to discharge its duties effectively and to add value. Straker understands the importance of a high performing and effective Board of Directors in ensuring proper governance of a listed entity. Straker has structured its Board of Directors in accordance with the recommendations set out in the ASX Corporate Governance Principles and Recommendations to ensure that the Board is of a sufficient size, independence level, and skill set composition to enable it to manage the requirements of Straker’s business and the industry and market in which it operates. 95 Annual Report 2022 CORPORATE GOVERNANCE STATEMENT For the year ended 31 March 2022 Remuneration and Nominations Committee Straker’s Remuneration & Nomination Committee is tasked with overseeing and making recommendations to Straker’s Board of Directors on the nomination, selection and appointment of Directors to Straker’s Board, the re-election of incumbent Directors, and the remuneration strategies and policies of the Company, including recommendations on the fees to be paid to Directors. The Remuneration & Nomination Committee has three members, with current members being Tim Williams, Paul Wilson and Phil Norman (a majority of whom are Independent Non-Executive Directors). The Committee is chaired by Tim Williams who is an Independent Director of Straker, in accordance with the requirements of the ASX Corporate Governance Principles and Recommendations. The Remuneration & Nomination Committee Charter sets out the Board’s policies and practices regarding the nomination, selection and appointment of new Directors and the re-election of incumbent Directors, as well as the Board’s policies regarding the remuneration of Non-Executive Directors and other senior executives and is available on the Company’s website. Skills and experience of Straker’s Board of Directors Straker recognises that its Board of Directors should represent a diverse range of skills, experience and attributes in order to ensure effective decision-making and governance of the Company. Straker’s Board of Directors is currently comprised of members with skills and experience in the following areas: • • • • • • • • • • Strategic capability and leadership; Financial management, accounting and audit; Commercial focus and knowledge of business practices; Capital Markets and financing; Technology and Innovation; Legal and Regulatory; Risk Management; Compliance; Corporate Governance & ESG; Sales and Marketing; • Digital Media and Communications There are also a range of qualifications currently represented across Straker’s Board of Directors, including in the fields of finance and accounting, business management, sales and marketing, and software development. Straker’s Board of Directors’ review on an annual basis the skills, experience and attributes held by the Directors and whether the Board group as a whole possess the skills and experience required to fulfil their role on the Board and relevant Board committees. Where any gaps 96 are identified, the Board will consider what training or development could be undertaken to fill those gaps and provide resources or access to resources to help develops and maintain the skills and knowledge of its Directors. Board composition and independence As at the year ended 31 March 2022, Straker’s Board comprised the following five Non-Executive Directors: Name Position Date appointed to Straker’s board Phil Norman Chair and Independent Non-Ex- ecutive Director 13 January 2014 Grant Straker Executive Director 21 December 1999 Stephen Donovan Non-Executive Director 1 December 2004 Paul Wilson Non-Executive Director 22 September 2015 Tim Williams Amanda Cribb Independent Non-Executive Director Independent Non-Executive Director 24 June 2015 20 July 2020 The Board only considers a Director to be independent where they are independent of management and free of any business or other relationship that could materially interfere with, or could reasonably be perceived to interfere with, the exercise of their unfettered and independent judgement. On this basis, the following Directors have been determined as being independent as at 31 March 2022 and for the full financial year ending on that date – ( Phil Norman, Tim Williams and Amanda Cribb). This is despite the foregoing interests/ relationships which the Board considers are not material and do not compromise the independence of the relevant Director: Options in the following employee incentive schemes: Name Plan Scheme Number Extra Price Expiry Date Phil Norman Legacy ESOP 13,980 NZ$0.596 31-Mar-23 LTI ESOP 50,000 120,000 A$1.51 A$0.95 Various Various Tim Williams LTI ESOP 25,000 $1.51 26-Sep-24 Grant Straker, Steve Donovan and Paul Wilson are regarded as non-independent based on the ASX criteria in Principle 2 of the ASX Recommendations. The Board considers the composition of the Board to be appropriate and does not believe that it is detrimental to the Company or its Shareholders that the majority of the Board is not independent. Straker Translations CORPORATE GOVERNANCE STATEMENT For the year ended 31 March 2022 The Remuneration & Nomination Committee re-assesses the independence of each Non-Executive Director on an annual basis and in cases where a specific need for an independence assessment is identified due to a change in the interests, positions, associations or relationships of one or more Non-Executive Directors. If Straker’s Board of Directors determines that a Director’s status as an Independent Director has changed, the Board will disclose and explain that determination to the market in a timely manner. Chair of the Board The Chair of the Board, Phil Noman, is an Independent Director and is not the CEO. Induction of new Directors and ongoing professional development Where a new Director is appointed to Straker’s Board, Straker’s Chairperson will arrange induction sessions with the new Director in order to brief them on the background and growth story of the Company and advise the new Director on Straker’s Board procedures, constitutional documents, corporate governance policies and procedures. Due to the current size and growth stage of Straker’s business, the Director induction and professional development processes of the Company are largely informal. However, as Straker grows in size and market significance, Straker will consider providing Directors with appropriate formalised professional training and development opportunities to allow new and existing Directors to develop and maintain the skills and knowledge needed to perform their roles effectively. Board and Committee Meeting Attendance The number of scheduled Board and Committee meetings held during the year ended 31 March 2022 and the number of meetings attended by each of the Directors is set out in the table below: Board Meeting Audit & Risk Nomination & Management Remuneration Committee Committee Name Phil Norman Grant Straker Stephen Donovan Paul Wilson Tim Williams Amanda Cribb A 13 13 11 11 11 11 B 13 13 13 13 13 13 A 4 NA 4 NA NA 4 B 4 NA 4 NA NA 4 A 3 NA NA 3 3 B 3 NA NA 3 3 NA NA A = Number of meetings attended B = Number of meetings held during the time the director held office or was a member of a committee during the year Principle 3: Instil a culture of acting lawfully, ethically and responsibly A listed entity should instil and continually reinforce a culture across the organisation of acting lawfully, ethically and responsibly. Straker is committed to complying with its legal obligations and to acting with honesty, integrity and in a manner consistent with the reasonable expectations of its investors and the wider community. Company Values Straker’s key objectives are to: • • • • Embrace change to continually evolve; Solve hard problems that others cannot; Celebrate success as one team; Build trust and empower the Company’s teams; and • Operate one platform with one team. Code of Conduct Straker expects that all of its Directors, senior executives and employees will also act ethically and responsibly, in strict compliance with all applicable laws, regulations, and in accordance with accepted principles of good corporate citizenship. In order to demonstrate Straker’s commitment to acting ethically and responsibly, Straker’s Board of Directors has developed a Code of Conduct that clearly defines Straker’s core values, articulates what Straker regards as acceptable business practices, and sets out the standards and expectations required of Straker’s Board of Directors, senior executives and employees in performing their duties. Straker’s Code of Conduct is available on Straker’s website. Whistleblower Policy Straker has developed a Whistleblower Policy, which was adopted on 26 February 2020. The purpose of the Whistleblower Policy is to encourage the reporting of any instances of suspected unethical, illegal, fraudulent or undesirable conduct involving the Company’s businesses. The Company provides protections and measures so that anyone who makes a report may do so confidentially and without fear of intimidation, disadvantage or reprisal. The Whistleblower Protections Officers, which include any Director, Company Secretary or Auditor of Straker receives reports of material breaches of the policy, including action taken in response to breaches. A copy of the Whistleblower Policy can be found on the Company’s website. 97 Annual Report 2022 CORPORATE GOVERNANCE STATEMENT For the year ended 31 March 2022 Anti-Bribery and Corruption policy Straker has developed an Anti-Bribery and Corruption Policy, which was adopted in April 2019. The purpose of the Anti-Bribery and Corruption Policy is to set out Straker position on matters relating to bribery and similar problematic conduct, and the responsibilities of those to whom this policy applies. It also provides guidance on how to recognise and deal with such conduct. The Company Secretary, Chair of the Board and Chair of the Audit & Risk Management Committee receives reports of material breaches of the policy. A copy of the Anti-Bribery and Corruption Policy can be found on the Company’s website. Principle 4: Safeguard integrity in corporate reports A listed entity should have appropriate processes to verify the integrity of its corporate reporting. Audit and Risk Management Committee Straker’s Audit and Risk Management Committee is tasked with reporting to Straker’s Board of Directors on the integrity of Straker’s financial reporting process, its internal and external audit functions, and its internal control and risk management process. In accordance with the requirements of the ASX Corporate Governance Principles and Recommendations, the Audit and Risk Management Committee comprises of at least three Non-Executive Director members, being Amanda Cribb, Steve Donovan and Phil Norman (a majority of whom are Independent Directors). The ASX Corporate Governance Principles recommend that the Audit and Risk Management Committee will be chaired by an independent Director. Straker’s Board of Directors have had regard to the skills and experience of the Board and have determined that Amanda Cribb is the most appropriate member of the Board to act as chair of the Audit and Risk Management Committee. The relevant qualifications and experience of the members of the Audit and Risk Management Committee are available in the Annual Report. The Audit and Risk Management Committee Charter sets out the policies and practices of Straker’s Board of Directors regarding the financial audit and risk management processes of Straker and is available on the Straker’s website. Declaration of Managing Director and CFO on financial statements As a New Zealand incorporated Company, Straker is not subject to section 295A(4) of the Corporations Act 2001 (Cth) (which requires that the CEO/Managing Director and CFO of a listed entity to provide certain declarations regarding the financial statements for that entity in each financial year). However, in accordance with the ASX Corporate Governance Principles and Recommendations, 98 Straker’s Managing Director and CFO provided to Straker’s Board of Directors (prior to the approval by the Board of Straker’s financial statements for a financial period) a written opinion to the Board of Directors that, in their opinion: • • • Straker’s financial reports comply with the appropriate accounting standards; Straker’s financial reports give a true and fair view of Straker’s financial position and performance; and the opinion of the Managing Director and CFO has been formed on the basis of a sound system of risk management and internal control, which is operating effectively. Periodic corporate reporting Periodic reports are subject to approval from the Board or a Committee before release. The approval process includes confirmation from Management to the Directors that the relevant report has been reviewed and is accurate. Principle 5: Make timely and balanced disclosure A listed entity should make timely and balanced disclosure of all matters concerning it that a reasonable person would expect to have a material effect on the price or value of its securities. Complying with Continuous Disclosure Obligations Straker complies with the continuous disclosure obligations contained in the ASX Listing Rules. As part of these continuous disclosure obligations, where Straker becomes aware of any information concerning the Company that a reasonable person would expect to have a material effect on the price or value of the Straker’s securities, Straker must immediately disclose that information to the market (subject to limited exceptions available under the ASX Listing Rules). To encourage and assist compliance by Straker’s Board of Directors and its employees with these continuous disclosure obligations, Straker’s Board of Directors have developed a Continuous Disclosure Policy which is available on Straker’s website. The Continuous Disclosure Policy has been developed with regard to ASX Listing Rules 3.1-3.1B and relevant ASIC regulatory guidance with respect to disclosure for investors. The Company Secretary will have primary responsibility for all relevant regulatory filings to ensure Straker’s compliance with its continuous disclosure obligations. Market Announcements To ensure the Board has timely visibility of all information being disclosed to the market, all material announcements are circulated to the Board promptly after they have been made. Straker Translations CORPORATE GOVERNANCE STATEMENT For the year ended 31 March 2022 Investor and Analyst Presentations All substantive investor or analyst presentations issued by Straker are released via the ASX Platform prior to commencement of the relevant presentation. Principle 6: Respect the rights of security holders A listed entity should provide information about itself and its governance to investors via its website. Access to information about Straker and its governance In accordance with the ASX Corporate Governance Principles and Recommendations, Straker has an “Investors” section on its website, from which all relevant corporate governance information about Straker can be accessed by the general public. Such information includes: • • • • • this corporate governance statement; Straker’s constitution, Board charter and Board committee charters; the Straker code of conduct; various corporate governance policies; and names, photographs and summarised biographical information for each of Straker’s Directors and senior executives. Other relevant information and documents about Straker, including but not limited to copies of Straker’s annual reports and financial statements, copies of Straker’s announcements to the ASX, and copies of notices of meetings of shareholders (and any accompanying documents) can be accessed on relevant areas of Straker’s website. Shareholder relations Straker has implemented a formal Shareholder Communications Policy to ensure that shareholders are provided with sufficient information to assess the performance of Straker at regular intervals and are informed of all major developments affecting the state of affairs of Straker, in accordance with applicable laws. A copy of Straker’s Shareholder Communications Policy has been adopted and is available on Straker’s website. Pursuant to Straker’s Shareholder Communications Policy, Straker regularly provides information to shareholders via: • market releases to the ASX in accordance with Straker’s continuous disclosure obligations; In addition to providing shareholders with information about the Company, Straker also provides opportunities for two-way communication between shareholders and Straker by requesting that its external auditor and the relevant chairs of the various Board committees attend Straker’s Annual Meeting to be available to answer any shareholder questions about the conduct of the audit and the preparation and content of the audit report, or about the activities of the various Board committees. Shareholders are encouraged to express to the relevant Straker representatives present at the Annual Meeting any matters of concern or interest to shareholders, with the understanding that these views will be communicated to Straker’s Board of Directors for consideration. Shareholder participation at General Meetings The Annual Meeting provides an open forum for the Board of Directors to communicate directly with Straker’s shareholders. It is also an opportunity for shareholders to express views and ask questions. Shareholders who are not able to attend the Annual Meeting and exercise their right to ask questions about or make comments on the management of Straker will be given the opportunity to provide questions or comments ahead of the Annual Meeting. Where appropriate, these questions will be considered and answered at the Annual Meeting. Poll Resolutions Straker’s practice at all security holder meetings, is that all resolutions are decided by a poll rather than by a show of hands. Electronic communications Straker encourages its shareholders to receive information and communications from, and send communications to, Straker and its share registry electronically. Shareholders may elect to send and receive communications electronically by registering their email address online with Straker’s share registry. Principle 7: Recognise and manage risk A listed entity should establish a sound risk management framework and periodically review the effectiveness of that framework. Straker is committed to the establishment and maintenance of a sound risk management framework encompassing oversight, management and internal control of risks within and facing Straker’s business. • • • • the investor relations section of Straker’s website; Audit and Risk Management Committee investor webinars and podcasts; Straker’s annual and half-yearly reports; and Straker’s Annual Meeting. As outlined above (see Principle 4), Straker’s Audit and Risk Management Committee, oversees and reports to the Board of Directors on the integrity of Straker’s financial reporting process and risk management process. Please see Principle 4 for further information on the membership structure and committee charter of Straker’s Audit and Risk Management Committee. 99 Annual Report 2022 CORPORATE GOVERNANCE STATEMENT For the year ended 31 March 2022 Annual review of Straker’s risk management framework The Audit and Risk Management Committee, regularly reviews and discusses the major risks affecting Straker’s business and develops strategies to mitigate these risks throughout the year, and reviews Straker’s overall risk management framework at least annually to ensure that the framework continues to be effective and suitable to the risks involved in Straker’s business. Evaluating and improving risk management and internal control processes • While Straker does not have an internal audit function, Straker’s Board of Directors ensures that the risk management and internal control processes of Straker are regularly evaluated and the effectiveness of these processes will be continually improved through review by the Audit and Risk Committee, and by the Board of Directors of Straker. Where it considers necessary, Straker’s Board of Directors will consider the recommendations of the external auditors and other external advisers in relation to Straker’s financial reporting process and risk management framework, and appropriate action will be taken by the Board of Directors to ensure that key risks, as identified, are managed effectively. Material exposure to risk Straker’s Board of Directors ensures that any material exposure of Straker to economic, environmental and social sustainability risks will be disclosed in accordance with the requirements of ASX Listing Rule 3.1. The Board has considered the Company’s exposure specifically to economic, environmental and social sustainability risks and has determined the following: • Economic risks – The business is exposed to general economic conditions. Specifically, material risk exists in relation to: competition and new technologies; reliance on key personnel; data loss, theft or corruption; technology platform failure; the impact of privacy laws and regulations; country specific risks in new unfamiliar markets. In addition the Covid-19 global pandemic has been extraordinarily disruptive with dramatic health- related effects in terms of the death toll, number of affected patients and worldwide negative economic consequences. The uncertainty around how long this situation will persist increases the complexity of formulating a concise response, and Straker Translations recognises that it will have to be proactive in assessing the Covid-19 risk and vulnerably from an operational and financial standpoint. • Cyber risks - Straker Translations aims to provide its customers, as well as other stakeholders including contractors and employees, with increased cyber security precautions and greater resilience in a constantly evolving cyber security landscape. Straker Translations makes a conscious effort to continually 100 refine its approach towards information security, risk appetite and accountability frameworks. The Company is certified to the standards required in ISO27001 and in ISO9001; in addition its data centers hold information security certifications including SOC1, SOC2 and SOC3 (Service Organisation Controls). Environmental & Social sustainability risks Straker Translations recognises that there is an increasing global focus on environmental and sustainable business practices. The business is continuing to explore how it may enhance its reporting on environmental and social matters in a way that would be useful to investors and other stakeholders to better understand its business operations and its environmental and social impact. Straker Translations is in the process of obtaining B Corp certification which is a designation that a business is meeting high standards of verified performance, accountability, and transparency on factors including employee benefits, supply chain practices and input materials. In order to achieve certification, a company must demonstrate high social and environmental performance by achieving a B Impact Assessment score of 80 or above and passing an independent review. Principle 8: Remunerate fairly and responsibly A listed entity should pay director remuneration sufficient to attract and retain high quality directors and design its executive remuneration to attract, retain and motivate high quality senior executives and to align their interests with the creation of value for security holders and with the entity’s values and risk appetite Remuneration & Nomination Committee As outlined above (see Principle 2), Straker’s Remuneration & Nomination Committee’s principal function is the oversight of the remuneration strategies and policies of the Company. Please see Principle 2 for further information on the membership structure and committee charter of Straker’s Remuneration & Nomination Committee. Board review and determination of remuneration structures Straker’s Board of Directors reviews the overall remuneration structure and policies and will consider recommendations from the Remuneration & Nomination Committee. No individual Director or senior executive is or will be involved in deciding his or her own remuneration. Straker Translations CORPORATE GOVERNANCE STATEMENT For the year ended 31 March 2022 The Board of Directors of Straker may seek the advice of external advisers from time to time in order to develop remuneration packages to retain and attract high quality Non-Executive Directors and senior executives and encourage these Directors and executives to pursue the growth and success of the entity without taking undue risks Straker’s non-executive Directors are paid by way of fees for services up to a maximum aggregate sum of $A600,000 per annum as approved by shareholders at the Company’s Annual Meeting held on 25 September 2018. Only with prior shareholder approval in General Meeting may fees be paid to Non- Executive Directors in excess of this $A600,000 fee cap. As at 31 March 2022, non-executive Directors were paid $A60,000 per annum with the Chair receiving $A96,000 per annum. Grant Straker, who is an Executive Director, is not paid Director’s fees. In addition, Straker’s Directors are entitled to participate in the Company’s Employee Share Options Schemes, which requires approval by shareholders before further option issuances can be made to Directors. As at 31 March 2022, the following Directors held options in Straker’s legacy ESOP scheme: • Phil Norman: 13,980 options issued at $NZ0.596 On 26 September 2018, additional options were issued to Directors in Straker’s new, LTI ESOP scheme: • Grant Straker: 300,000 options issued at $A1.51 • • • • Phil Norman: 50,000 options issued at $A1.51 Paul Wilson: 50,000 options issued at $A1.51 Steve Donovan: 25,000 options issued at $A1.51 Tim Williams: 25,000 options issued at $A1.51 On 30 August 2020, additional options were issued to Directors in Straker’s new, LTI ESOP scheme: • Grant Straker: 113,000 options issued at $A0.95 • Phil Norman: 120,000 options issued at $A0.95 On 1 July 2021, additional options were issued to Directors in Straker’s LTI ESOP scheme: • Grant Straker: 191,301 options issued at $A1.83 Straker’s CEO and Managing Director and other senior executives are paid by way of cash salaries, in addition to which they are entitled to an STI cash bonus expressed as a percentage of base salary. Payment of the STI cash bonuses is assessed by the Remuneration and Nomination Committee following each year-end and after completion of the audited annual financial statements and is linked to the achievement of annually agreed corporate and individual KPI’s. STI bonuses were paid to the CEO and Managing Director and other senior executives during the period totalling NZ$179,509. as follows: The Company’s CEO and Managing Director is paid $NZ350,000 per annum as at 31 March 2022 and has the potential to be paid an STI cash bonus of up to 50% of his base salary. In addition, Straker’s senior executives are entitled to participate in the Company’s Employee Share Option Schemes. Option grants were made to various employees during the year ended 31 March 2022. Aligning remuneration and performance to the creation of value for shareholders As at the year ended 31 March 2022, Straker had in place an employee share option plan (ESOP) entitling certain Directors, senior executive staff and other employees to the issue of options over ordinary shares in Straker, according to the terms of the plan. To ensure that Straker’s incentive strategies are appropriate for an ASX listed entity and continue to align the interests of Directors and senior executives with the creation of value for shareholders, Straker’s Board of Directors has taken the following steps: • • retained the existing ESOP scheme that was in place prior to the IPO with some minor amendments to ensure compliance with the relevant ASX listing rule requirements (this old ESOP scheme will be grandfathered); and established a new Long Term Incentive Employee Share Option Scheme (LTI scheme) to provide long-term incentives for qualifying employees, contractors, Directors and advisers of Straker, under which options over the ordinary shares of Straker may be issued to such qualifying employees, contractors, Directors and advisers of Straker. The new LTI scheme was approved by Straker’s Board and shareholders and adopted at Straker’s 2020 Annual Meeting. Under Straker’s Securities Trading Policy, participants in either or both of Straker’s LTI and ESOP schemes are not permitted to enter into transactions (whether through the use of derivatives or otherwise) which limit the economic risks of participating in the relevant scheme (or schemes, as the case may be). Any options offered to Directors and/or senior executives after Straker was listed on the ASX will be subject to Board and/or shareholder approval as required by applicable law, the ASX listing rules and Straker’s constitution. 101 Annual Report 2022 102 Straker Translations STATUTORY INFORMATION As required under s(211) of the Companies Act 1993, the Company and Group disclose the following statutory information. Entries made into the Companies Interest Register Director Relevant Interest % of Ordinary Shares Owned 31 March 2022 % of Ordinary Shares Owned 31 March 2021 Stephen Donovan Philip Norman Grant Straker Timothy Williams Paul Wilson Ordinary Shares Ordinary Shares Ordinary Shares Ordinary Shares Ordinary Shares 2.32% 0.12% 8.96% 0.17% 0.37% 2.90% 0.12% 13.20% 0.21% 0.46% Philip Norman acquired 13,990 ordinary shares through the exercise of share options in the current year. Grant Straker disposed of 1,100,000 ordinary shares during the current year. Directors’ remuneration for the current and prior year is disclosed in Note 26 of the financial statements for the year ended 31 March 2022. 103 Annual Report 2022 ADDITIONAL DISCLOSURES Number of Employees or Ex-Employees, excluding Directors, who received benefits exceeding $100,000 during the year: 2022 2021 $100,001 to $110,000 $110,001 to $120,000 $120,001 to $130,000 $130,001 to $140,000 $140,001 to $150,000 $150,001 to $160,000 $160,001 to $170,000 $170,001 to $180,000 $180,001 to $190,000 $190,001 to $200,000 $200,001 to $210,000 $210,001 to $220,000 $220,001 to $230,000 $230,001 to $240,000 $240,001 to $250,000 $250,001 to $260,000 $260,001 to $270,000 $270,001 to $280,000 $280,001 to $290,000 $290,001 to $300,000 $330,001 to $340,000 $360,001 to $370,000 $430,001 to $440,000 8 5 6 6 5 5 1 1 0 4 3 1 0 1 1 2 1 2 1 3 1 0 1 3 3 5 3 0 2 0 0 3 1 0 0 0 1 0 2 0 0 1 1 0 1 0 Auditor’s Remuneration Fees payable to the Group auditor, and its affiliates, for assurance and non-assurance services are disclosed in Note 6 of the financial statements for the year ended 31 March 2022. Donations The Group made donations during the year of $nil (2021: nil). Equity holding of all Directors Notes Number of shares Number of options Non-executive Directors Stephen Donovan Philip Norman Timothy Williams Paul Wilson Amanda Cribb Executive Directors Grant Straker 1,575,830 77,980 114,760 250,000 - 25,000 197,970 25,000 50,000 - 6,072,513 604,300 Entries recorded in the interests register Straker maintains an interests register in accordance with the Companies Act 1993 (New Zealand). The following are particulars of entries made in the interests register during FY22: 104 Straker Translations ADDITIONAL DISCLOSURES CONTINUED Directors’ Interests Directors disclosed the following relevant interests, or cessations of interest, the following entities. Director / Entity Steve Donovan Buro Seating Limited and Buro Seating Limited Partnership Dopast Holdings Limited Relationship Director / Entity Director & Shareholder Grant Straker Serko Limited (NZX/ASX dual listed) Bailador Technology Investments Limited (ASX listed) Director & Shareholder Ubco Limited New Zealand Pure Dairy Products Limited Director & Shareholder Plexure Group Limited (ASX/NZX dual listed) Director & Shareholder My Food Bag Group Limied (ASX/NZX listed) Canaveral Corner Limited Allright Group Limited Sherwood Country Limited Aritech Innovations Limited Aritech Investments Limited Radius Group Limited Rosetta Finance Limited Advanced Customs Service Limited Viranda Holdings Limited Bailador Technology Investments Limited Blue Frog Breakfast Limited Nealon Whanau Trust Flux Federation Fronde Technologies Ltd Phil Norman Amanda Cribb Human Resources Institute of New Zealand (HRNZ) Independent Director Plexure Group Limited (ASX/NZX dual listed) Director & Shareholder Plexure Limited VMob IP Limited VMob Singapore Pte Limited Xero Limited (ASX listed) Loyalty New Zealand Limited UBNZ World Markets (NZ) Limited iSport Federation Holdings Limited Director Director Director Shareholder Director Shareholder Shareholder Nortek Management Services Limited Director & Shareholder Timothy Williams 90 Seconds TV Pte Limited (Singapore domiciled) Director & Shareholder Donovan Group NZ Limited Director & Shareholder Technomancy Global Limited Director & Shareholder Trustee Trustee Trustee Trustee Trustee Shareholder Shareholder Donovan Group International Limited Shareholder Trustee Donovan Group Properties Limited Donovan Group Modular Limited Director & Shareholder Donovan Group Holdings Limited The Icehouse Limited (NPO) Shuttlerock Limited Horizon Management Limited Remington Properties Limited Trustee CFO Photowonder New Zealand Limited Design Station Limited Independent Director Firstwood Limited Spoke Network Limited Managwhai Village Development Limited Modern Building Product (2018) Limited T Williams Trustees Limited Kiwispan 2017 Limited Coresteel New Zealand Limited President’s Bush Limited Director & Shareholder Global Crop Traders Co Limited Director TWG General Partner Limited Director & Shareholder Circular Plastics General Partner Limited Director & Shareholder TruScreen Limited (NZX listed) MyWave Holdings Limited Touchpoint Group Limited Shareholder Shareholder Home Research Limited Picsos Limited Our Home Direct General Partner Limited Director & Option Holder MBP Company Limited Bright Spark Innovations GP Limited Director & Option Holder Dawn Aerospace Co. Ltd Sitesoft International Limited Director Icehouse Ventures Limited Atrax Group New Zealand Limited Advisory Board Member Liquidity Pty Limited Just Life Group Limited (NSX listed) Trade Window Holdings Limited Trade Window Limited Advisory Board Member Paul Wilson Director Director Director Vita Group Limited Director & Shareholder Royals Multisport Private Limited (India) Director & Shareholder InstantScripts Pty Limited SiteMinder Limited Director & Shareholder Director & Shareholder Bailador Technology Investments Limited Director & Shareholder Bailador Investment Management Pty Limited Director & Shareholder Peandel Pty Limited Kismet Pty Limited Director & Shareholder Director & Shareholder 105 Relationship Shareholder Shareholder Shareholder Shareholder Shareholder Director Director Director Director Director Shareholder Director Shareholder Director Director Director Director Director Director Director Director Director Director Director Director Director Shareholder Shareholder Annual Report 2022 ADDITIONAL DISCLOSURES CONTINUED Share Dealing Of Directors Directors disclosed the following acquisitions or disposals of relevant interests in Straker shares during the year. All dollar figures in this table are in Australian dollars. Registered holder Date of acquisition/ (disposal) Consideration per share Number of shares acquired/(disposed) Philip Norman Grant Straker Insurance 3 March 2022 1 July 2021 0.596 1.90 13,990 (1,100,000) In accordance with the Companies Act 1993 (New Zealand), Straker has continued to insure its directors and officers (through renewal of its D&O insurance policy) against potential liability or costs incurred in any proceeding, except to the extent prohibited by law. Remuneration disclosures Information about non-executive and executive directors remuneration is provided on page 84 of this report. The total remuneration available to non-executive directors is fixed by shareholders. Currently, the annual total aggregate non- executive directors’ remuneration is capped at AUD 600,000 as approved by shareholders at the Annual General Meeting in September 2018. Information regarding employee remuneration exceeding $100,000 per annum is presented on page 104 of this report. Shareholder information The shareholder information set out below is current at 31 March 2022. Issued capital The total number of issued ordinary shares in Straker Translations Limited as at 31 March 2022 was 67,797,015. 106 Straker Translations ADDITIONAL DISCLOSURES CONTINUED Distribution of shareholding Range 1 to 1,000 1,001 to 5,000 5,001 to 10,000 10,001 to 100,000 100,001 and over Total Un-marketable share parcels Range < AUD$500 Distribution of share options Range 2,001 to 10,000 10,001 to 100,000 100,001 and over Total Options Number of holders % Ordinary shares 351 470 195 241 46 26.94 36.07 14.97 18.50 3.53 193,386 1,237,468 1,426,705 6,682,512 58,241,533 1,303 100.00 67,781,604 Number of holders % Ordinary shares 105 8.06 21,161 % 0.29 1.83 2.10 9.86 85.93 100.00 % 0.03 Number of holders 9 26 8 43 % Ordinary shares % 20.93 60.47 18.60 87,900 1,041,544 2,613,326 100.00 3,742,770 2.35 27.83 69.82 100.00 There were 43 individuals holding a total of 3,742,770 unlisted options. 107 Annual Report 2022 ADDITIONAL DISCLOSURES CONTINUED Substantial holdings and limitations on the acquisition of securities Straker is a New Zealand incorporated and domiciled company listed on the Australian Securities Exchange (ASX). From a regulatory perspective, this means that while the ASX Listing Rules apply to Straker, certain provisions of the Australian Corporations Act 2001 (Cth) do not. Straker is not subject to chapters 6, 6A, 6B, and 6C of the Australian Corporations Act 2001 (Cth) dealing with the acquisition of its shares (including substantial holdings and takeovers). The Companies Act 1993 (New Zealand) applies to Straker, while certain provisions of the Financial Markets Conduct Act 2013 (New Zealand) do not. There is no requirement on Straker’s substantial shareholders to provide substantial holder notices to Straker. Straker is aware of the following substantial shareholders with a holding of 5% or greater: Name 1 Mr Scobie D Ward 2 3 4 5 6 Bailador Technology Investments Limited Angelina I Hunter & Merryn J Straker & Grant O Straker Clime Asset Management Limited Australian Ethical Investment Limited Skyone Capital Pty Ltd 7 Mr Michael Gregg & Mrs Suzanne Jane Gregg Total substantial Shareholders Number of ordinary shares held % of total issued capital 9,814,621 9,160,354 6,072,513 5,861,896 4,342,675 4,095,326 3,428,605 42,775,990 14.48 13.51 8.96 8.65 6.41 6.04 5.06 63.09 Key limitations on the acquisition of shares in Straker are imposed by the following legislation: Commerce Act 1986, Overseas Investment Act 2005 and Takeovers Act 1993, together with various regulations and codes promulgated under such legislation. 108 Straker Translations ADDITIONAL DISCLOSURES CONTINUED Top 20 Holders The names of the 20 largest holders of Straker’s ordinary shares are set out below Name 1 Mr Scobie D Ward 2 3 4 5 6 Bailador Technology Investments Limited Angelina I Hunter & Merryn J Straker & Grant O Straker Clime Asset Management Limited Australian Ethical Investment Limited Skyone Capital Pty Ltd 7 Mr Michael Gregg & Mrs Suzanne Jane Gregg 8 Washington H Soul Pattinson And Company Limited 9 Mr Stephen Donovan 10 Mr & Mrs Ian Bailey 11 Accident Compensation Corp 12 Lingotek Inc 13 Mr David Sowerby 14 Mr Leigh Morgan 15 Mr Austin Miller 16 Mr Donald Straker 17 Mr Indiver Nagpal 18 Mr & Mrs Craig P Andrews 19 Mr & Mrs David J Denholm 20 Mr Paul R Wilson Top 20 holders of ordinary fully paid shares (total) Other shareholders (balance on register) Grand total Voting rights Number of ordinary shares held % of total issued capital 9,814,621 9,160,354 6,072,513 5,861,896 4,342,675 4,095,326 3,428,605 2,545,125 1,575,830 1,306,540 1,236,757 989,022 918,810 530,000 507,772 400,845 380,000 298,795 271,794 250,000 53,987,280 13,809,735 67,797,015 14.48 13.51 8.96 8.65 6.41 6.04 5.06 3.75 2.32 1.93 1.82 1.46 1.36 0.78 0.75 0.59 0.56 0.44 0.40 0.37 79.63 20.37 100.00 Straker has a single class of ordinary shares on issue. Where voting at a meeting of shareholders is by voice or a show of hands, every shareholder present in person, or by representative, has one vote. On a poll, every shareholder present in person, or by representative, has one vote for each fully paid ordinary share. In practice, Straker ensures that all resolutions at shareholder meetings are decided by poll rather on a show of hands. Share options carry no voting rights until they are fully exercised and converted into actual shares. On market buy-back there is no on-market buy-back for Straker shares. On market buy-back There is no on-market buy-back for Straker shares. Restricted ordinary shares There were no restricted ordinary shares as at 31 March 2022. Matters of circumstance arisen since year end There have been no material matters of circumstance that have arisen since year end. Environment issues The Group is not affected by any significant environmental regulation in respect of its operations. 109 Annual Report 2022 DIRECTORY Company Numbers New Zealand 1008867 Auditor BDO, Auckland Australia 628 707 399 Share Registrar Link Market Services Limited Level 12 680 George Street Sydney, NSW 2000 Australia Phone: +61 2 8280 7100 Stock Exchange Straker’s shares are listed on the Australian Securities Exchange (ASX code: STG) Company website www.strakertranslations.com Registered office New Zealand Level 2, 49 Parkway Drive Rosedale, Auckland 0632 Australia C/o Boardroom Pty Limited Level 12 225 George Street Sydney, NSW 2000 Head Office Address Level 2, and Principal Place 49 Parkway Drive of Business Rosedale Auckland 0632 New Zealand Directors Phil Norman (Chair) Grant Straker (Managing Director and Chief Executive Officer) Steve Donovan Paul Wilson Amanda Cribb Tim Williams 110 Straker Translations 111 Annual Report 2022