AnnuAl RepoRt 2020
DELIVERING A STEP CHANGE IN
BUsiness P erFormanCe in FY20
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Rebekah Osmond
Client Configuration Coordinator
My role acts as one of the crucial pieces that links Damstra’s ideas
to the visions of a client. I like to think that my wheelhouse is a hybrid
of technical savviness and engaging customer satisfaction. My drive
is to equip both clients & their contractors with the tools for success.
Suey Stockton
Business Relationship Manager
I look after Damstra’s Learning
Management System (LMS)
customers, from onboarding
to account management and
technical support. Our customers
are at the heart of everything
we do. I am passionate about
delivering a service to be proud
of and engaging the customers,
helping them to meet their
learning needs and engage
their employees.
AnnuAl RepoRt 2020
1
CONTENTS
Chairman’s and Ceo’S Message
Financial Highlights
Damstra at a Glance
Company History
Business Model
Growth Strategy
product Innovation
Strategic Acquisitions
the Damstra Solution
Board of Directors
Directors’ Report
Remuneration Report
Auditor’s Independence Declaration
Consolidated Statement of Profit or Loss and
other Comprehensive Income
Consolidated Statement of Financial position
Consolidated Statement of Changes in equity
Consolidated Statement of Cash Flows
notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Shareholder Information
Corporate Directory
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4
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51
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98
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106
IBC
2
DAmSTRA HOLDingS LimiTeD
CHAIRMAN’S AND CEO’S MESSAGE
Dear Shareholders,
FY20 HIGHlIGH tS
• Pro-forma earnings before
interest, tax, depreciation and
amortisation (eBItDA) of $6.8m
(underlying eBItDA of $4.8m)
versus $1.8m for FY19
• Operating leverage
demonstrated by a 10.3 ppt
increase in gross margin from
58.2% to 68.5%
• pro-forma operating cash flow
of $5.2m versus $0.3m for FY19
• npAtA of $6m versus ($2.3m)
for FY19
• users increased from 320,000
at the end of FY19 to 404,000
On behalf of Damstra Holdings Limited (Damstra
Technology) we are pleased to present our Annual Report
for the financial year ended 30 June 2020 (FY20).
Damstra is an Australian-based provider of integrated
workplace management solutions to multiple industry
segments across the globe. the Company develops,
sells and implements integrated hardware and
software-as-a-service (SaaS) solutions in industries
where compliance and safety are of utmost importance.
these solutions assist Damstra’s clients to better track,
manage and protect their staff, contractors and their
organisations, and to reduce the risks associated with
worker health, safety and regulatory compliance.
It was a transformational year for Damstra, highlighted
by the Ipo of our Company on the Australian Stock
exchange on 16 october 2019. We have delivered a
high-quality set of results across all business metrics,
reflecting a fundamental step change in performance to
prior years and validation of the operating leverage that
exists in the business. to have delivered this performance
during CoVID-19 is a credit to the Damstra team and
demonstrates the quality of our products and business
model. Indeed, Damstra demonstrated its importance
as a critical business tool during these challenging times,
and customers have continued to rely on our solutions.
During the height of the pandemic in our key markets,
there was no reduction in demand for our services
across the key verticals of mining, construction, and
telecommunications.
In the FY20 period, revenue and other income rose
by 47% to $23.5 million and client numbers increased
from 129 to 279. It is especially pleasing to report that
90.7% of our revenue is recurring with churn less than
0.5%. this demonstrates the high quality of our revenue,
the importance of our solutions to deliver a safe working
environment and the commitment of our customer base.
Johannes Risseeuw
Executive Chairman
Christian Damstra
Chief Executive Officer
AnnuAl RepORt 2020
3
While we are incredibly pleased with these results,
we are equally proud of the innovation underpinning the
new products launched to our clients. We added 14 fully
integrated products and modules to our world-leading
platform, to assist organisations in tracking, managing and
protecting their workplaces. As companies prepare for
or manage a return of staff to working locations, product
enhancements to the Damstra solutions now provide the
ability to test, track, trace and train in a highly scalable
manner and using anonymised individual data for exception
management. In doing so we focus on seamless inclusion
into existing infrastructure which makes the Damstra
platform a truly integrated and complete solution for small
and large businesses. Investing deeply and innovating
continuously makes our products easier to sell and
accelerate growth.
Our acquisitions in FY20, including the proposed
purchase of Vault Intelligence, demonstrate a targeted
and considered approach to M&A. We adopt a disciplined
and focused screening and integration methodology.
During FY20, Damstra made three acquisitions:
APE Mobile, Scenario Advantage and Smart Asset Software.
As M&A is a core strategy for Damstra we have developed
a specific approach, including a dedicated team, process
on target selection, due diligence, negotiation, and then
implementation. Our criteria for success and approach to
M&A: no clients lost during transition, retention of key staff
and integrate them organisationally, clear road map of
systems and code base integration, new clients see a
“single view of Damstra” in a product sense and the
expanded offering we bring; and legacy systems and
suppliers removed so the acquisition is marginally costed.
In North America we significantly scaled up resources
to grow with our clients and have plans to pursue a
wide array of opportunities in such a significant market.
Damstra’s channel partnership strategy continues to
evolve as an important long term growth lever. In line
with our regional growth focus we have recently signed
channel partner agreements with leading third party
providers Zivaro, Inc Brilliant IT and Government Acquisition,
Inc. Expanding overseas also opens up new avenues of
growth. For example, our solutions are increasingly being
adopted in new industries such as education in which we
won our first major client in the state of Colorado.
We have entered FY2021 with great energy and
excitement and look forward to integrating the Vault
transaction. We see this as a year of continued evolution
with our business having size, scale and increasing product
innovation effort to accelerate international growth.
From an investor perspective, this is important as we
believe we have significantly reduced our overall risk
profile while increasing our organisational capability.
We will now have presence in South East Asia and will
continue to add significant resources in North America.
Underpinning this we see a structural tailwind in markets
we operate and, given our resilient business model, believe
we are strategically well placed to navigate the disruptions
caused by COVID-19. We believe there remains an ongoing
opportunity to increase our geographic footprint and acquire
attractive adjacent technology through targeted acquisitions.
Damstra is committed and open about this strategy,
as product innovation and development are at the heart
of what we do.
We would like to acknowledge our colleagues on the
Damstra Board and management team for their drive and
ambition to create a truly global business. On the Board
we have recently been joined by seasoned technology
and sales executive Sara La Mela who has already added
tremendous energy, thinking and insight from her extensive
international experience. We are actively building the
capability of our people at all levels of the organisation as
we seize the enormous opportunity before us. Finally, we
thank all our shareholders, employees and clients for your
support. We respect the trust you place in Damstra and
everyone across our organisation is committed to achieving
our vision and delivering long-term shareholder value.
Your sincerely,
Johannes Risseeuw
Executive Chairman
Christian Damstra
Chief Executive Officer
Christian Damstra
Chief Executive Officer
4
DAmSTRA HOLDingS LimiTeD
FINANCIAL HIGHLIGHTS
strong business performance in FY20, demonstrating
a fundamental step change in the business compared
to FY19. this places the business in a strong position
for FY21, including the acquisition of Vault.
404,000
USERS
vs 320k at Jun-19
279
CLIENTS
vs 129 at Jun-19
AnnuAl RepORt 2020
5
$23.5m
REVENUE AND OTHER INCOME
vs $16.0m in FY19
90.7 %
RECURRING REVENUE1
vs 90.4% in FY19
30%
INCREASE IN TOTAL3
R&D SPEND
total R&D spend is 22.9%
of FY20 revenue
46.6%
REVENUE AND OTHER
INCOME GROWTH
vs 3-year CAGR 42.0%
<0.5%
CLIENT REVENUE CHURN2
vs 1.0% in FY19
$6.8m
PRO-FORMA EBITDA4
$4.8M unDeRlYInG eBItDA5
vs $1.8m6 in FY19
$14.2m
CASH AND TRADE RECEIVABLES
vs $3.9m at Jun-19
$5.2m
PRO-FORMA7 OPERATING CASH FLOW
vs $0.3+ in FY19
1. Relates to revenue that is earned over time.
2. Calculated as prior year recurring revenue that was lost during FY20.
3. Calculated as the sum of R&D expense per the pro-forma income statement and capitalised development costs per the cash flow statement.
4. Before IpO costs, share-based payments, income tax, finance expenses and acquisition costs.
5. pro-forma eBItDA excluding one-off other income.
6. FY19 underlying and pro-forma eBItDA are equivalent.
7. excludes transaction costs related to business combinations.
6
DAMSTRA HOLDINGS LIMITED
FINANCIAL HIGHLIGHTS
Continued
STRONG FINANCIAL PERFORMANCE – INCREASING GROSS
MARGINS, OPERATING LEVERAGE, AND OPERATING CASH FLOW
Gross margin ($m) – pro-forma FY18-FY20
Revenue vs Costs and Expenses ($m) –
pro-forma FY17 – FY20
14.1
8.9
7.4
70.7%
58.2%
68.5%
FY18
FY19
FY20
Gross profit
Gross margin
25
20
15
10
5
0
operating cash flow ($m) – pro-forma FY18 – FY20
Revenue
Cost of sales
5.2
R&D
G&A
S&M
FY17
FY18
FY198
FY20
1.5
FY18
0.3
FY19
FY209
8.
Includes pro-forma reallocation within operating expense to align with FY20 cost allocation.
9. excludes transaction costs related to business combinations.
Ling Hou
Financial Controller
Damstra is a great
place to work.
We embrace diverse
backgrounds, we are
empowered to drive
stronger results and
work collaboratively
to support future
growth. I just love it.
AnnuAl RepORt 2020
7
FY20 SAW SIGnIFICAnt ACHI eVeMentS
ACROSS OUR FOUR CORE GROW TH PILL ARS
Organic growth
Product & technology
Partners
expanding our client
base but staying focused
on our core capability.
new products enable
cross-selling opportunities
We split expenditure on;
new products, upgrading
present modules
and integration
Channel partners are
a key plank for growth,
focus on north America
Strategic acquisitions
m&A is product-centric
with a strong focus
on integration
New customer wins
• International: Winning
new clients in the US
and South-East Asia
• SE Asia now seen as
a new market
• new verticals: Winning
new clients in the Education
and Finance sectors
• Construction: Core
clients rolling out new
infrastructure projects, new
clients wins >60,000 users
Cross-selling to existing
customers
• Fever detection – more
than 20 clients have
ordered the solution, and
it is now live with clients
• CPB rollout of learning
solution to all its contractors
(have acquired 15,000
licenses)
Innovation
• Structural increase in
total10 R&D expenditure,
30% increase versus FY19
Product
• Increased R&D expenditure
reflected in delivery of
14 new modules: fever/
facial detection, mobile
attendance, RFID tracking,
digital form integration
and skills management
• Overall, 4,420 new product
features implemented
during FY20
Commercialisation
• new modules:
>50% are focused on
commercialisation,
not just upgraded
uX/uI
US partners
• Strategic relationships
formed with Zivaro
(government and enterprise
clients) and GAI (Federal,
state and local government
and education)
TechnologyOne
• Successful integration
of Damstra’s Learning
Management platform.
targeting 75 clients
acquired by the end
of FY21
Increasing North America
resources
• Two Senior VP’s hired
in North America and
scaling up resources
Acquisition of Scenario
• Accelerates Damstra’s
growth on the East Coast
of Australia
Acquisition of APE mobile
• Expands Damstra’s
paperless product suite,
drives cross-sell
Acquisition of SmartAsset
• Expands Damstra’s asset
management, maintenance
and tracking product
offering and enables
cross-selling
• Acquisitions are being
integrated successfully,
driven by a dedicated
team, enabling cross-selling
to commence
Andrew Aguirre
Senior Engineer
I feel blessed to be a
part of Damstra and
to be able to make an
impact in helping keep
people safe via our
solutions, particularly
during this pandemic.
10. Calculated as the sum of R&D expense per the pro-forma income statement
and capitalised development costs per the cash flow statement.
8
DAMSTRA HOLDINGS LIMITED
DAMSTRA AT A GLANCE
AN AUSTRALIA-BASED PROVIDER OF INTEGRATED WORKPL ACE
MANAGEMENT SOLUTIONS ACROSS THE GLOBE
279+
clients
9
offices
10
countries1
404,000+
registered licences2
~145
employees
LONDON
Denver
42,000+
documents verified
per month
22,000+
lessons completed
per month
Clark
(global
operations
centre)
Perth
Brisbane
Singleton
Newcastle
Melbourne
Christchurch
5,700,000+
hours in time and attendance
per month
240,000+
blood alcohol tests
per month
1,000+
no. of active
hardware devices
1. Countries where Damstra products are used.
2. Based on number of active paying licences as at June 2020.
Continents in which Damstra operates
Damstra office locations
Damstra headquarters
COMPANY HISTORY
AnnuAl RepoRt 2020
9
DAMSTRA WAS FOUNDED AS A CONTRACTOR MANAGEMENT
SolutIon F oR A SInGle SI te I n 2002… A nD HAS SInCe GR oWn
to p RoVIDe S olutIonS to 279 C lIentS ACRoSS AuStRAlIA
AND THE GLOBE
Acquired APE
Mobile (product
capability)
TechnologyOne
integration
Fever
detection
& facial
recognition
Mobile
attendance
Digital
forms
integration
RFID
tracking
Acquired
SmartAsset
(product
capability)
US
partnerships
2020
Acquired Scenario Advantage
(client pipeline)
Initial Public Offer
2019
Paperless
Market
entry UK
Acquired
EIFY
(client
pipeline)
Acquired
Velpic
(product
capability)
Asset
management
App-enabled
access
control
Opened
office in
Christchurch
Westpac
Business of
Tomorrow Award
Winner (2017)
Opened
Philippines
global
operations
centre
2018
Market entry/
opened office in
Denver/US
Facial
recognition
pilot
Acquired
WMS (product
capability)
Acquired SGS
Stax (client
pipeline)
AWS
relocation
2016
2017
Damstra buyout
from Skilled Group
2015
Handheld mobile
terminal biometrics
2014
2006
2005
2004
GPS tracking
Acquired by
Skilled Group
Online
bookings
Drug and
alcohol testing
Biometrics
terminal
PRODUCT
CORPOR ATE
2003
First log in
Development
begins
2002
10
DAMSTRA HOLDINGS LIMITED
BUSINESS MODEL
PL ATFORM OVERVIEW
A single modular platform with integrated software and hardware.
WORKFORCE MANAGEMENT
Assists in ensuring that workers are
approved to be on site and compliant
HSE MANAGEMENT
Remotely managing health,
safety and environmental
risks on site
LEARNING MANAGEMENT
Assists in ensuring workers
inducted, work-ready upon
site arrival and trained on an
ongoing basis to maintain and
develop skills/competencies
ACCESS CONTROL
Range of solutions with
integrated verification
providing live data
ASSET MANAGEMENT
Managing and tracking assets
for an entire lifecycle
Software modules
Damstra’s platform provides a deeply integrated workplace management solution for organisations. Its core products
include workforce management, access control, asset management, learning management and Health, Safety and
Environment (HSE) management. These products are integrated within a single platform, allowing users of multiple products
to have access to real time data on their workforce across all its product offerings. Each product is designed in a modular
approach and its software is mobile enabled for use on remote sites or by mobile workforces. Clients are able to select
individual modules and do not necessarily have all modules within a product active at any point in time.
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11
Hardware solutions
Damstra’s software integrates with hardware devices to provide real time data collection and access control services.
Its onsite hardware devices are able to continue to operate offline and in harsh environments. As an example, alcohol
breath testing hardware devices are available as wall-mountable units which can be customised to control the frequency
and level of testing or as portable devices. Damstra’s access control hardware incorporates biometric technology for
verification purposes and proximity card solutions. Damstra sources its hardware through various arrangements with
third party suppliers. Damstra’s hardware solutions include:
• Login terminals (card and biometrics readers);
• Alcohol and drug testing (breathalysers);
• Tablet solutions and printers (time and attendance tracking); and
• Thermal readers (fever detection).
Our integrated platform replaces a range of standalone solutions, and provides single source of truth
information into upstream ERP systems
Data entry into payroll,
scheduling and eRp systems
Standalone visitor
management systems
Standalone contractor
management platforms
Standalone and greenfield
thermal reader solutions
Spreadsheets and
HR filing systems
Workforce
Access Control
Standalone access control
hardware systems
Standalone digital form
and workflow products
Standalone health and safety
management platforms
Greenfield asset mobilisation
implementation
HSE
Assets
Standalone asset
inspection products
Learning
Data entry into asset management
module of ERP systems
Video editing tools
Standalone safety and
compliance LMS platforms
12
DAMSTRA HOLDINGS LIMITED
BUSINESS MODEL
Continued
REVENUE GENERATION
Damstra generates revenue from a user licence model, often coupled with recurring hardware payments, which are driven
by the number of licence subscriptions and renewals and the penetration of new products and modules within clients.
Damstra enables clients to expand their usage on an as-needed basis, which assists Damstra to grow revenues over time
as clients become more familiar with their product and potentially add more users, products, and modules. 91% of annual
revenue was recurring in nature for the financial year ended 30 June 2020. Key drivers of revenue are:
• Recurring licence subscriptions: prepaid annually for continued use of the software platform;
• Recurring hardware payments: Monthly payments for provision and maintenance of hardware in use on site;
• Hardware installation and maintenance fees: Charged on an as-needed basis;
• Online training fees: for custom training packages; and
• Other: Ad hoc fees for card issuance and replacement.
Clients that have employees using the Damstra solution pay the annual subscription fees. Where clients have contractors
who are not directly employed by the client, the contractor typically pays the annual subscription fees before they
commence work with Damstra’s clients.
Key drivers of revenue for Damstra
Category
Recurring revenue streams
Other revenue streams
Software subscriptions per product
Hardware provision
Other revenue
• Prepaid annual subscription
fee per licence per product
• Monthly fee per item
• Fees determined by type of
equipment supplied, volumes
and locations
• Provision of online and in-person
training packages per licence
• Identification card issuance
• Card replacement
• Site configuration
and implementation
of hardware devices
• On-site training programs
• Development of training programs
• Creation of training content
for online courses
• Customisation and software
development
Michael Saunders
Lead Engineer
I’ve grown with the Damstra business over 14 years. I’ve enjoyed seeing
the business transform into the global presence it is today.
AnnuAl RepORt 2020
13
Cross-sell revenue in action (revenue growth from a major construction client)
Revenue growth (indexed from FY18) – pro-forma1 FY18-FY20
Base year
Site growth
Product expansion
Base products:
WFM integrated with
access control;
plant mobilisation
Base products
deployed across increased
number of sites
new developed and
acquired products taken up:
Velpic lMS, HSe toolbox
talks, fever detection
and mobile login
Potential additions2
HSe digital forms,
WFM lone worker
311%
153%
100%
FY18
FY19
FY20
FY213
1. Based on product invoice data.
2. Digital forms is in pilot; lone worker is subject to the completion of the Vault transaction and successful pilot.
3. FY21 is not a revenue forecast – provided for illustrative purposes only.
14
DAMSTRA HOLDINGS LIMITED
GROWTH STRATEGY
DAMSTRA’S GROW TH STRATEGY IS BASED
ON THE FOLLOWING KEY PILL ARS
1
2
3
4
5
More usage by
existing customers
New customers
in global markets
Greenfield
opportunities
Innovation
Monetise
Data
6
M&A
New modules,
more sites, more
users,more
geographies
• Natural growth
as customers
add users
(e.g. due to
starting new
projects),
expand into new
modules,
increase the
number of sites
on which our
technology is
deployed and
grow revenue
per user
New customers,
new projects, new
global markets
• Near-term vision
is focused on
accelerated
international
expansion
strategy with
a pipeline
of global
opportunities
New customer
wins
• Targeting
increased
penetration
through winning
new clients from
competitors,
or as a result
of new clients
who have not
previously
or do not
currently use an
automated or
software-based
workforce
management
solution
Advance products
• Suite of product
development
activities in
response to
high-demand
offerings such
as voice control,
paperless
human capital
management,
mobile facial
recognition and
further insights
through data
Further insights
• Potential to
Acquisitions
• Focus on
monetise the
significant
(and growing)
collection of
workforce
data; provide
real-time/
predictive
insights about
a workplace
to improve
efficiency
and reduce
risks on site
building a single
platform
• Acquire
companies
to accelerate
entry into new
markets, build
adjacencies and
consolidate
markets. Clients
acquired have
been converted
with high rates
of success
1. More usage by existing clients
Scalability of Damstra’s platform enables clients to increase their use of Damstra’s solution as their businesses grow and
they take advantage of additional functions. Once on Damstra’s platform, the opportunity to grow with global organisations
can be significant as their operations may span across many functions and countries. Damstra plans to grow the use of
its software as its existing clients grow, which is expected to add more users, expand usage into new modules, increase
number of sites deployed and grow revenue over time. Damstra also plans to retain clients who currently use other
providers with solutions offered on its platform. A recent example of existing client expansion into new products is a major
construction company adding the use of acquired digital HSE forms product, Samm (“Site assistant manager on the mobile”),
on their football stadium project.
2. new clients in global markets
Damstra’s near-term vision is focused on accelerated international expansion and they are and intend to continue
executing on a pipeline of global opportunities. Damstra’s expansion strategy has proved successful in winning new clients
in the past, from small-to-medium regional providers through to large multi-region logistics service providers and it intends
to continue these strategies going forward to win new clients. The North American market is a current key priority for
Damstra, having opened an office in Denver in December 2017, which is regarded as the mining and manufacturing centre
in North America. Following recent success with Newmont Goldcorp where Damstra has implemented its solutions to
various sites, Damstra has recently won a prominent school network contract, established a significant partnership
agreement and broadened North American sales team capability with senior hires.
AnnuAl RepoRt 2020
15
3. Greenfield opportunities
Damstra is targeting increased penetration through winning new clients from competitors, or as a result of new
clients who have not previously or do not currently use a SaaS-based workplace management solution. An example
of this is the new application of the Damstra solution in a north American schools network, to track, monitor and
protect students. Damstra anticipates continued expansion of its solution into new industries which previously may
not have considered or been aware of the application to its business or organisation. Damstra anticipates this will
particularly be driven in the near term by the current CoVID-19 pandemic, where there is heightened awareness
of the need to trace worker contacts and check temperatures before they enter the site or workplace. Damstra also
plans to accelerate market penetration by increasing investment into sales and marketing capabilities and initiatives
to drive lead generation and new client wins.
4. Innovation
Damstra’s strategy is to expand and advance its product offerings including voice control, mobile facial recognition
and further insights through data. In the financial year ended 30 June 2020 Damstra invested 23% of its revenues
in product development and innovation. Damstra intends to regularly upgrade and expand its platform to broaden
its product offering and expand its addressable market. In FY20, significant enhancements included rapid
development of fever detection and contact tracing in response to the CoVID-19 pandemic, as well as development
of mobile login and logout, worker skills matrices and training needs analysis and digital toolbox talk solutions.
5. Monetise data
Damstra’s database of workplace and workforce data has the potential to be monetised to provide real time and
predictive insights about an organisation’s workplace to improve efficiency and reduce risks on site. there is also
opportunity to utilise the significant amount of data collected across various industries and workforce sizes to
provide insights for individual business that would otherwise have no or limited ability to utilise this for making
key business decisions.
6. M&A
Damstra makes strategic acquisitions to buy into new markets, build adjacencies and consolidate markets.
Clients acquired are retained with high rates of success. Another focus of Damstra’s acquisitions is for intelligence
of new product modules Damstra currently does not offer to allow it to offer its clients a more comprehensive range
of solutions and expand on its addressable market. Damstra ensures that new products are integrated onto its platform.
Oscar Tap
Enterprise Business Development Manager
I work with the entire Damstra team on making customer sites
safe and compliant with the latest technology available.
16
DAMSTRA HOLDINGS LIMITED
GROWTH STRATEGY
Continued
Growth strategy is bolstered by structural tailwinds. CoVID-19 has accelerated some underlying industry
trends around digitisation, but companies must operate in an environment where every company say they
have a “COVID” solution. There are some key long term underlying trends1
High
Australian
infrastructure
Fever
detection
Mobility
tracking
Digitalisation
of site
operations
Move away
from point
solutions
Fear,
“keep me
safe”
Manage
people’s
access
Productivity
requirement
eLearning
Integrate
with other
systems
High
IMPACT
FOR
DAMSTRA
Low
Increased
use of
analytics
Scalability
“Where
do you sit
in my tech
stack?”
Acceleration of digitalisation
as a result of CoVID-19
Low
STRUCTURAL CHANGE
Damstra’s solutions are considered critical by many customers in ensuring the delivery of a safe work environment,
as well as to reduce the health and safety risks for employees on a site.
1. Based on Management observations and client survey feedback.
PRODUCT INNOVATION
AnnuAl RepORt 2020
17
During FY20, we have continued to invest in our product and infrastructure – with a focus on building innovative,
highly scalable products for our clients
30%+
83%
4,420
Feature releases
99.9% 700m
API calls
Increase in total1
R&D expenditure
Increase in
R&D headcount
Faster product
feature releases
Platform
up-time
Increasing usage
of API integrations
Future growth
Product innovation
increased investment
in innovation to drive
and accelerate
future growth
increased investment
in people to drive
product module
roll out
Product
enhancements and
deployments
Leveraged new
software tools,
frameworks and
methodologies for
faster innovation
Better platform
performance
Scale on demand
infrastructure
upgrades for
improved, faster and
more consistent
experience
expanding core
platform, scaling,
functionality,
productivity and
performance
We have added 14 fully integrated products and modules to our world-leading platform,
to assist organisations in tracking, managing and protecting their workplaces
Workforce
Access Control
Assets
Learning
Health and Safety
Company
mobilisation
Employee
mobilisation
Verification
Time and
attendance
RFID
solution
Mobile login
and logout
Tracing
of workers
Deep integration
with digital forms
14 products
and modules
added in FY20
Fixed and mobile
access terminals
Drug and
alcohol testing
Visitor
management
Evacuation
management
Facial
recognition
Temperature
detection
Plant
management
Equipment
management
Equipment
calibration
RFID
solution
Learning
management
Course
editor
Prestart and
toolbox talks
Digital forms
and flows
Deep integration
with Workforce
Template form
and flow building
Expanded
course library
Asset management
and maintenance
Skills matrix & training
needs analysis
Added in FY20:
Deep integration
with digital forms
Internally developed
Acquired and Integrated
Grown from 14
product modules
to 28 since 2018
Proven capability to
integrate products/
modules fast
Proven ability to
cross-sell products
to existing clients
Insight from
customers has driven
development of
additional modules
and features
1. Calculated as the sum of R&D expense per the pro-forma income statement and capitalised development costs per the cash flow statement.
18
DAMSTRA HOLDINGS LIMITED
STRATEGIC ACQUISITIONS
We have created a specific approach, including a dedicated team, process on target selection,
due diligence, negotiation, and then implementation
1
2
What do we look for in an acquisition target?
Acquisitions completed during FY20
We have three core principles to identify a suitable target
1. Product – enhance or accelerate
2. People – if you don’t retain the key staff you have no value
3. Commercialised – products must have been
commercialised to some degree, we do not chase
“moon shot” product successes
Our secondary filters
• Provide entry into new markets, be it geography
or new verticals
• Establish new client and cross-selling opportunities
increased network effect
• Accelerate convergence of technologies, that can
scale internationally
• Acquire organisational capability
• Damstra internal “bandwidth” to execute and integrate
Since IPO, Damstra announced and completed three
acquisitions:
• Dec 2019 acquired Scenario Advantage:
– Small competitor, opportunistic
• Feb 2020 acquired Ape Mobile:
– Product focussed acquisition – paperless forms
• Jun 2020 acquired Smart Asset:
– Product focussed acquisition – asset management
• Acquisition multiples ranged between 1x to 4.5x last
twelve months revenue
We have a demonstrated track record of successful integration of acquisitions and delivering value for shareholders.
Our M&A strategy continues to evolve and is much more than a simple roll-up approach.
Kelechi Achara
Head of M&A
I am driven by executing value accretive acquisitions that expand our
global presence, and enhance organic growth through the addition of
complementary products and talent. At Damstra, delivering a seamlessly
integrated product platform that meets our clients’ needs is central to
everything we do.
AnnuAl RepORt 2020
19
We have developed a four-step process for identifying, analysing and implementing M&A opportunities within Damstra
Target Identification
Due Diligence
Technology
Delivering value
New customer wins
• We are scanning >200
companies globally, this
also assists in terms of
benchmarking our
products
• Can acquire private or
listed businesses
• Key questions we ask:
– What client verticals
are they in?
– What is their operating
cash burn and after
acquisition can it be
marginally costed?
– What is the vendor’s
selling motivation?
Key Risk items
• Intellectual property
protection
• Client contracts,
pricing logic
• Staff contracts
• Security and privacy
review
• Understanding recurring
vs one-off revenue
• Tax implications
• Compatibility with
Damstra’s module strategy
• Ability to extract
operational synergies
Technical perspective
• Technical due diligence,
including code review
and independent
penetration testing
• How will the tech stack
be integrated
• Can we stand up the
product on Damstra’s
infrastructure
• Ability to integrate
seamlessly into Damstra’s
ERP system
Generating value
• Cross sell targets
identified, and approach
agreed
• target 100% client
retention
• Define Branding strategy,
so the customer is clear
Marginally costed
methodology
• Removing duplicate/
redundant systems
• Can’t be run as standalone
organisation
• Staff retention and
integration critical
Acquisition case study – Velpic defines our approach
Our approach on accelerating overall Damstra growth once
target is acquired – Velpic Case Study
• Velpic was acquired in 2018 predominately for its
superior learning management system (LMS) product
• Velpic was listed on the ASX
At the time of acquisition, the Velpic business profile
was as follows:
• Product launched with some commercial success,
albeit sub-scale
• Revenue was ~$750k per annum
• R&D spent developing the product was ~$10m,
product was first launched in 2014
• Organisational size pre-acquisition was ~25 full time
employees, despite being listed on the ASX
• EBITDA and operating cash flow negative
Achieved Outcomes
• All IP acquired and integrated into Damstra,
with single sign on implemented
• Now a core module offering that can be sold on
a standalone basis or as an integrated solution
• Staff reduced from 24 to 4, using our infrastructure
and support service functions
• Damstra LMS system was retired and associated
R&D redeployed
• Velpic brand retained
• Business was operating cash breakeven within 3 months
• Revenue has increased ~200% since the acquisition
(at the end of FY20)
• ~20% continual standalone client wins
• ~80% new revenue from cross sell to existing Damstra clients
This simple case study demonstrates the approach Damstra
takes in regard to acquisition. In this case, where the acquisition
was product driven, our approach was to undertake operational
integration for the business, and then to cross-sell the product
to our existing client base.
While every acquisition is different this case study demonstrates how Damstra extracts and delivers values from M&A.
It is not simply a land grab approach.
20
DAMSTRA HOLDINGS LIMITED
THE DAMSTRA SOLUTION
AnnuAl RepORt 2020
21
22
DAMSTRA HOLDINGS LIMITED
THE DAMSTRA SOLUTION
Continued
AnnuAl RepORt 2020
23
24
DAMSTRA HOLDINGS LIMITED
THE DAMSTRA SOLUTION
Continued
AnnuAl RepORt 2020
25
26
DAMSTRA HOLDINGS LIMITED
THE DAMSTRA SOLUTION
Continued
AnnuAl RepORt 2020
27
28
DAMSTRA HOLDINGS LIMITED
THE DAMSTRA SOLUTION
Continued
BOARD OF DIRECTORS
AnnuAl RepORt 2020
29
Johannes Risseeuw
Executive Chairman
Johannes joined Damstra in 2012 and has held the role of executive Chairman since 2017.
Former Vice President, Mergers & Acquisitions, Asia Pacific at Shell, where he drove billion
dollar plus transactions across Australia, Singapore, Hong Kong, Malaysia and the Middle east.
Previously Chief Investment Officer of Questus Energy, focused on the acquisition and
management of oil and gas assets, and Chief Operating Officer at Skilled Group Limited.
Christian Damstra
Chief Executive Officer
Christian joined Damstra in 2002 as General Manager, after Christian’s father founded the
Company while undertaking contract work in the mining industry. Christian managed Damstra
as a technology company as part of the Skilled Group, before leading a management buy-out
of the Company in 2016 along with Johannes Risseeuw. prior to joining Damstra, Christian ran
his own business consulting to the mining industry and is a holder of an Open Cut Examiner
Certificate of Competency.
Drew Fairchild
Non-executive Director
Drew joined Damstra as a non-executive Director in 2016. Drew has more than 20 years’ experience
as a Chief Financial Officer and entrepreneur, having commenced his career with Shell Australia,
becoming Finance Director and a member of the Board. Prior to his appointment as a Non-Executive
Director, Drew assisted the Company as an adviser during the buy-out of the Company from the
Programmed Group. Prior to joining Damstra, Drew worked as a Chief Financial Officer within both
Fulton Hogan and Cleanaway, and founded an oil and gas investment fund which was sponsored by
Intermediate Capital Group plc.
Morgan Hurwitz
Non-executive Director
Morgan joined Damstra as a non-executive Director in 2016. Morgan is a senior It executive with over
25 years’ experience developing technology strategies and implementing technology across a range
of industries in Australia and internationally. Prior to joining Damstra, Morgan was the President of
Supply Chain and Chief Information Officer at Linfox, global Chief Information Officer at Orica Limited,
and held a number of senior IT roles within Shell in Melbourne and London.
Simon Yencken
Non-executive Director
Simon joined Damstra as a non-executive Director in 2019. Simon is the Chief executive Officer and
founder of FanPlayr, which uses behavioural personalisation to increase user engagement with websites.
prior to joining Damstra, Simon was a Director of Aconex limited for 18 years (including Chairman between
2011 and 2014). Aconex is a provider of cloud collaboration software for the construction industry, which
was acquired by Oracle in 2018 for approximately uS$1.2 billion. Simon is an active investor in start-up
technology companies, including Canva, Matrak Industries, Moda Operandi and Redbubble.
30
Damstra HolDings limiteD
FINANCIAL REPORT
30 June 2020
Directors’ Report
Remuneration Report
Auditor’s Independence Declaration
Consolidated Statement of Profit or Loss and
Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report
31
39
50
51
52
53
54
55
98
99
Shareholder Information
106
DIRECTORS’ REPORT
For the year ended 30 June 2020
ANNu AL REPoRT 2020
31
The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter
as the ‘Group’) consisting of Damstra Holdings Limited (referred to hereafter as ‘Damstra’ or ‘the Company’) and the entities
it controlled at the end of, or during, the year ended 30 June 2020.
Directors
The following persons were directors of Damstra Holdings Limited during the whole of the financial year and up to the
date of this report, unless otherwise stated:
Christian Damstra
Drew Fairchild
Johannes Risseeuw
Morgan Hurwitz
Simon Yencken (appointed 1 August 2019)
Company Secretaries
Pieter Christiaan Scholtz and Carlie Hodges were Joint Company Secretaries for the financial year and up to the date
of this report.
Principal activities
Damstra is an Australian‑based provider of integrated workplace management solutions to multiple industry segments
across the globe. The Company develops, sells and implements integrated hardware and software‑as‑a‑service (SaaS)
solutions in industries where compliance and safety are of utmost importance. These solutions assist Damstra’s clients to
better track, manage and protect their staff, contractors and their organisations and to reduce the risks associated with
worker health, safety and regulatory compliance.
The Company has been operating since 2002 and has grown from providing an Australian mining contractor management
solution to an integrated workplace management solutions provider with a growing client base in international markets.
Dividends
There were no dividends paid, recommended or declared during the current or previous financial year.
Review of operations
Certain financial information in the review of operations section below referencing Earnings Before Interest, Tax,
Depreciation and Amortisation1 (“EBITDA”) has been derived from the reviewed financial statements. The pro‑forma
EBITDA, pro‑forma revenue and pro‑forma operating expenses are non‑IFRS financial information and as such have
not been reviewed in accordance with Australian Accounting Standards.
For the full‑year ended 30 June 2020 (FY20), Damstra reported revenue and other income of $23.5m, compared to
$16.0m for the full‑year ended 30 June 2019 (FY19). Damstra’s profit after transaction costs of listing and share‑based
payments, before income tax, depreciation and amortisation and finance costs was $1.6m (FY19: profit of $1.6m).
1.
Throughout this Annual Report, the Group has included certain non‑IFRS financial information, including earnings before interest, tax, depreciation and
amortisation (“EBITDA”), net debt and free cash flow. This information is presented to assist readers in making appropriate comparisons with prior periods
and to assess the performance of the Group. EBITDA as it is sometimes called, is a measure frequently quoted in the industry and forms the basis upon
which many investors, financiers and analysts are briefed. Non‑IFRS information is not audited by PwC.
32
DAMSTRA HoLDINGS LIMITED
DIRECTORS’ REPORT
Continued
Key operational and financial metrics for the full year ended 30 June 2020
Key financial metrics
Revenue and other income growth vs pcp (%)
Gross margin (%)
Research and development expenses as a % of revenue
Sales and marketing expenses as a % of revenue
General and administration expenses as a % of revenue
Pro‑forma EBITDA margin (%)
Revenue
The growth in revenue during the year was driven by;
FY20
46.6%
68.5%
(10.8%)
(15.8%)
(23.0%)
32.9%
FY19
47.7%
58.2%
(2.8%)
(25.2%)
(25.3%)
8.2%
FY18
30.5%
70.7%
(3.7%)
(25.8%)
(19.8%)
23.1%
• Continued new client wins in Australia across a broad range of industries as well as internationally in Hong Kong
and the Philippines;
• Significant growth of new projects which we will continue to implement over the course of FY21 in our core vertical
market segments of infrastructure and construction;
• No residential construction and minimal office building construction exposure, both of which have been impacted
by CoVID‑19;
• Implementation of numerous client contracts across various projects and operating sites across Australia;
• International market revenue comprised 17% of total revenue in FY20. International revenue performance demonstrates
the ongoing implementation of Damstra’s international strategic plan;
• Increased investment in research and development (R&D) and the development of new and existing modules which
eventuated with 14 additional products/modules brought to market during FY20;
• Major staff appointments in North America and scale up in our North American business, including signing of our first
North American channel partners. This is expected to show increased revenue in FY21;
• Three businesses acquired during FY20 with integration ahead of plan in all cases and an expanded product offering
positioned to accelerate cross‑sell opportunities during FY21; and
• Enhanced brand awareness and reputation of Damstra and its product offering.
Pro-forma financial performance
Damstra’s pro‑forma EBITDA before IPo costs, share‑based payments, income tax, finance expenses and depreciation
and amortisation was $6.8m (FY19: $1.8m) as shown in the table below:
Revenue and other income
Employee benefits expense
other expenses excluding share‑based payments and IPo costs
Pro-forma EBITDA
2020
$m
23.5
(8.1)
(8.6)
6.8
2019
$m
16.0
(6.3)
(7.9)
1.8
Pro‑forma financial information reflects Damstra’s statutory financial statements adjusted for the impacts of IPo costs,
share‑based payments and expenses associated with the acquisitions. other income includes income as per Note 7
of the financial statements.
ANNu AL REPoRT 2020
33
Pro-forma gross margin
For FY20, Damstra reported pro‑forma gross margin, excluding other income, of $13.1m (FY19: $8.7m).
Gross margin is calculated based on the total revenue from business operations less directly attributable costs associated
with revenue earned. Based on the statutory presentation of the Group’s consolidated comprehensive income, gross margin
constitutes non‑lFRS information.
Pro-forma EBITDA
For FY20, Damstra pro‑forma EBITDA before IPo costs, share‑based payments, income tax, finance expenses and
depreciation and amortisation was $6.8m (FY19: $1.8m).
The key driver for operating expenses was Damstra’s continued investment in future growth. There was increased
investment in:
• Damstra’s sales and marketing function, which reported pro‑forma expenses of $3.2m. This represents 17% of revenue;
• Research and development of a total of $4.5m (including capitalised costs), primarily due to the development of new
modules and the enhancement of existing modules. This represents 23% of revenue, which is a 280% increase on
Prospectus forecast; and
• General and administrative expenses was $4.7m.
A reconciliation between loss before tax and pro‑forma EBITDA is provided below.
Pro-forma EBITDA
Share‑based payments
Acquisition costs
IPo costs
Statutory EBITDA
Financial position
FY20
($m)
6.8
(2.1)
(0.6)
(2.5)
1.6
As at 30 June 2020, Damstra has no debt (excluding leases) and a cash balance of $9.4m. The consolidated entity’s strong
cash position is due to Damstra’s SaaS‑based revenue model, whereby clients typically enter multiple year contracts and
pay annual license fees in advance.
The consolidated entity’s working capital (being current assets less current liabilities) was positive by $2.6m as at
30 June 2020 (FY19: negative $16.0m).
Consequently, the Directors believe the consolidated entity is in a strong and stable position to expand and grow its
current operations.
Business growth strategy and likely developments
Expand and deepen the product offering
We will continue with new product releases across our platform. We see continued product innovation as a key differentiator
for Damstra and will evolve the product platform across our core five pillars: workforce, access control, assets, learning
and health and safety. We will continue to increase R&D resources to accelerate our product pipeline and supplement this
with product‑led acquisitions. Damstra will increase the breadth of modules in each of the core five pillars based on client
demand and where industry trends show us opportunities that can be commercialised if brought to market.
34
DAMSTRA HoLDINGS LIMITED
DIRECTORS’ REPORT
Continued
Increasing international growth
Damstra plans to accelerate growth in the North American and the America’s markets via an increased head count,
marketing support and expanding our engagement with more channel partners.
Greater usage from existing customers
Damstra aims to incorporate organic growth through increasing the use of its solutions among the existing customer
base and by encouraging customers to licence additional modules. This involves clients adding new active users and
Damstra increasing the number of modules and products that existing users have access to – therefore driving the revenue
generated per active user. Where the acquisition is product‑driven, our approach incorporates operational integration and
cross‑selling the product to our existing client base. After this, the product becomes core to the platform and is set for
continued growth.
Channel partners
Damstra’s channel partnership strategy continues to develop, with the T1 partnership already realising commercial results.
In line with our North America growth focus we have recently signed channel partnerships with Zivaro, Inc Brilliant IT (Zivaro)
and Government Acquisition, Inc (GAI). We see the North America Channel partner strategy as a key growth pillar.
Mergers & Acquisition (M&A)
M&A is a core strategy for Damstra, and we will continually look for opportunities globally. We have a demonstrated
track record of successful integration and enhancement of value for acquisitions. While M&A strategy continues to evolve,
we have three core principles in target identification:
• Product – enhance or accelerate;
• People – if you don’t retain the key staff you have no value; and
• The product has already been commercialised to some degree – we are not chasing the next “moon shot” product success.
Significant changes in the state of affairs
on 16 october 2019 Damstra listed on the Australian Securities Exchange (“ASX”) and issued 38.9m shares and raised
$35m before costs.
on 16 october 2019 Damstra issued 8.7m shares to extinguish a convertible note liability with a value of $6.1m.
on 16 october 2019 Damstra issued 3,818,722 options over ordinary shares.
Damstra completed the acquisition of Scenario Advantage Workforce business (Scenario) from the Projection Group on
20 December 2019. Predominantly based on the East coast of Australia, Scenario is a provider of integrated workplace
management solutions to the mining and utilities industries. Total purchase consideration was $4m.
on 25 February 2020 Damstra acquired all the issued shares in APE Mobile Pty Ltd (“APE Mobile”), a leading provider
of digital form and workflow management solutions to the civil construction and mining industries, for a purchase
consideration of $5.5m.
on 1 June 2020 Damstra acquired SmartAsset Software to accelerate the Group’s asset and plant management product
offering. SmartAsset Software Pty Ltd (“SmartAsset”) is a provider of end‑to‑end enterprise asset management software.
Total purchase consideration was $0.45m.
There were no other significant changes in the state of affairs of the Group during the financial year.
ANNu AL REPoRT 2020
35
Matters subsequent to the end of the financial year
on 8 July 2020 Damstra announced that it has entered into an implementation agreement to acquire Vault Intelligence
Limited (“Vault”, ASX: VLT) by way of a recommended Scheme. The acquisition will create a larger, more diversified,
workplace management company with an expanded and highly complementary product range.
A scheme booklet containing information relating to the Scheme, reasons for the Vault directors’ unanimous
recommendation, an Independent Expert Report and details of the Scheme meeting is expected to be sent to
Vault shareholders in September 2020.
Vault shareholders will have the opportunity to vote on the Scheme at a court convened shareholder meeting,
expected to be held on 2 october 2020. Subject to shareholder approval being obtained by the requisite majorities and
the other conditions of the Scheme being satisfied, the Scheme is expected to be implemented on 19 october 2020.
The impact to the Group from CoVID‑19 disruption has been limited. our recurring revenue base has stayed steady,
and we have developed several new products to assist our clients to return to work safely.
No other matter or circumstance has arisen since 30 June 2020 that has significantly affected, or may significantly
affect, the Group’s operations, the results of those operations, or the Group’s state of affairs in future financial years.
Environmental regulation
The Group is not subject to any significant environmental regulation under Australian Commonwealth or State law.
Information on Directors
Key information on the Directors of the Company is as follows;
Name:
Title:
Qualifications:
Johannes Risseeuw
Executive Chairman
Johannes holds a Bachelor of Economics from the university of Sydney and Graduate
Diploma of Applied Finance from Kaplan Professional.
Experience and expertise:
Johannes joined Damstra in 2012 and has held the role of Executive Chairman since 2017.
Former Vice President, Mergers & Acquisitions, Asia Pacific at Shell, where he drove
billion dollar plus transactions across Australia, Singapore, Hong Kong, Malaysia and
the Middle East.
Previously Chief Investment officer of Questus Energy, focused on the acquisition and
management of oil and gas assets, and Chief operating officer at Skilled Group Limited.
Other current directorships: None
Former directorships
(last 3 years):
Questus Energy Pty Ltd
Special responsibilities:
None
Interests in shares:
19,125,556 shares
36
DAMSTRA HoLDINGS LIMITED
DIRECTORS’ REPORT
Continued
Name:
Title:
Christian Damstra
Chief Executive officer
Qualifications:
Christian holds a Diploma in Electrical Engineering from TAFE New South Wales.
Experience and expertise:
Christian joined Damstra in 2002 as General Manager, after Christian’s father founded
the Company while undertaking contract work in the mining industry.
Christian managed Damstra as a technology company as part of the Skilled Group, before
leading a management buy‑out of the Company in 2016 along with Johannes Risseeuw.
Prior to joining Damstra, Christian ran his own business consulting to the mining industry
and is a holder of an open Cut Examiner Certificate of Competency.
Other current directorships: None
Former directorships
(last 3 years):
None
Special responsibilities:
None
Interests in shares:
19,031,500 shares
Name:
Title:
Qualifications:
Drew Fairchild
Non‑executive Director
Drew holds a Bachelor of Business from Monash university, a Master of Applied
Finance from Melbourne university, and is a graduate of the Group Business Leadership
Program (Insead).
Experience and expertise:
Drew joined Damstra as a Non‑Executive Director in 2016.
Drew has more than 20 years’ experience as a Chief Financial officer and entrepreneur,
having commenced his career with Shell Australia, becoming Finance Director and a
member of the Board.
Prior to his appointment as a Non‑Executive Director, Drew assisted the Company as an
adviser during the buy‑out of the Company from the Programmed Group.
Prior to joining Damstra, Drew worked as a Chief Financial officer within both Fulton Hogan
and Cleanaway, and founded an oil and gas investment fund which was sponsored by
Intermediate Capital Group plc.
Other current directorships: Top Shelf International Pty Ltd
Former directorships
(last 3 years):
Questus Energy Pty Ltd
Special responsibilities:
Audit and Risk Committee (Chair); Remuneration and Nomination Committee (Member)
Interests in shares:
3,662,222 shares
ANNu AL REPoRT 2020
37
Name:
Title:
Qualifications:
Morgan Hurwitz
Non‑Executive Director
Morgan holds a Bachelor of Arts from Monash university, and is a graduate of the
Australian Institute of Company Directors.
Experience and expertise:
Morgan joined Damstra as a Non‑Executive Director in 2016.
Morgan is a senior IT executive with over 25 years’ experience developing technology
strategies and implementing technology across a range of industries in Australia
and internationally.
Prior to joining Damstra, Morgan was the President of Supply Chain and Chief Information
officer at Linfox, global Chief Information officer at orica Limited, and held a number of
senior IT roles within Shell in Melbourne and London.
Other current directorships: None
Former directorships
(last 3 years):
None
Special responsibilities:
Audit and Risk Committee (Member); Remuneration and Nomination Committee (Chair)
Interests in shares:
3,466,667 shares
Name:
Title:
Qualifications:
Simon Yencken
Non‑executive Director
Simon holds a Bachelor of Laws from Monash university and Bachelor of Science
(Mathematics) from Monash university.
Experience and expertise:
Simon joined Damstra as a Non‑Executive Director in 2019.
Simon is the Chief Executive officer and founder of FanPlayr, which uses behavioural
personalisation to increase user engagement with websites.
Prior to joining Damstra, Simon was a Director of Aconex Limited for 18 years (including
Chairman between 2011 and 2014). Aconex is a provider of cloud collaboration software
for the construction industry, which was acquired by oracle in 2018 for approximately
uS$1.2 billion.
Simon is an active investor in start‑up technology companies, including Canva,
Matrak Industries, Moda operandi and Redbubble.
Other current directorships: Fanplayr Pty Ltd
Matrak Industries Pty Ltd
Former directorships
(last 3 years):
None
Special responsibilities:
Audit and Risk Committee (Member); Remuneration and Nomination Committee (Member)
Interests in shares:
1,111,111 shares
38
DAMSTRA HoLDINGS LIMITED
DIRECTORS’ REPORT
Continued
Company Secretaries
Name:
Title:
Pieter Christiaan Scholtz
Chief Financial officer and Company Secretary
Experience and expertise:
Chris assumed finance responsibility for Damstra in 2014 at the Skilled Group,
and became Chief Finance officer in 2016.
Prior to joining Damstra, Chris was a Chief Financial officer and General Manager
of Finance within the Skilled Group and was Chief Financial officer at Thomas &
Coffey Limited.
Chris commenced his career within the audit division of KPMG in South Africa.
Chris holds a Bachelor of Commerce (Honours) from the university of Johannesburg
and is a practising member of the Institute of Chartered Accountants in South Africa,
Australia and New Zealand.
Name:
Title:
Carlie Hodges
Company Secretary
Experience and expertise:
Carlie has held the role as Company Secretary of Damstra since June 2019.
Carlie is a Manager of Corporate Governance at cdPlus Corporate Services, which provides
outsourced corporate governance and company secretarial services to both private and
public companies in Australia. In addition, she is an Associate at Coghlan Duffy & Co.
Carlie is also Company Secretary of Murray River organics Limited.
Carlie holds a Bachelor of Science and Bachelor of Laws from Deakin university, a Master
of Arts from King’s College London, and is admitted as a solicitor in the state of Victoria.
Meetings of Directors
The number of meetings of the Group’s Board of Directors (‘the Board’) and of each Board committee held during the year
ended 30 June 2020, and the number of meetings attended by each director were:
Christian Damstra
Drew Fairchild
Johannes Risseeuw
Morgan Hurwitz
Simon Yencken
Full Board
Nomination and
Remuneration Committee
Audit and Risk
Committee
Attended
Held
Attended
Held
Attended
Held
16
17
17
17
15
17
17
17
17
16
–
1
–
1
1
–
1
–
1
1
–
6
–
6
4
–
6
–
6
6
Held: represents the number of meetings held during the time the director held office or was a member of the
relevant committee.
ANNu AL REPoRT 2020
39
REMUNERATION REPORT (AUDITED)
The remuneration report details the key management personnel remuneration arrangements for the Group, in accordance
with the requirements of the Corporations Act 2001 and its Regulations.
This is the first year that the entity has prepared a remuneration report as it is the Group’s first year as a listed company.
on this basis, the remuneration report does not contain comparative information for the year ended 30 June 2019.
In addition, as there was no requirement to prepare a remuneration report in the prior year, no resolution was voted
on at the 2019 annual general meeting (“AGM”).
Key management personnel are those persons having authority and responsibility for planning, directing and controlling
the activities of the entity, directly or indirectly, including all directors.
The remuneration report is set out under the following main headings:
• Principles used to determine the nature and amount of remuneration;
• Details of remuneration;
• Service agreements;
• Share‑based compensation; and
• Additional disclosures relating to key management personnel.
Principles used to determine the nature and amount of remuneration
The objective of the Group’s executive reward framework is to ensure reward for performance is competitive and appropriate
for the results delivered. The framework aligns executive reward with the achievement of strategic objectives and the creation
of value for shareholders, and it is considered to conform to the market best practice for the delivery of reward. The Board of
Directors (‘the Board’) ensures that executive reward satisfies the following key criteria for good reward governance practices:
• Competitiveness and reasonableness;
• Acceptability to shareholders;
• Performance linkage/alignment of executive compensation; and
• Transparency.
The Nomination and Remuneration Committee is responsible for determining and reviewing remuneration arrangements
for its directors and executives. The performance of the Group depends on the quality of its directors and executives.
The remuneration philosophy is to attract, motivate and retain high performance and high‑quality personnel.
The reward framework is designed to align executive reward to shareholders’ interests. The Board has considered that
it should seek to enhance shareholders’ interests by:
• having economic profit as a core component of plan design;
• focusing on sustained growth in shareholder wealth, consisting of dividends and growth in share price, and delivering
constant or increasing return on assets, as well as focusing the executive on key non‑financial drivers of value; and
• attracting and retaining high calibre executives.
Additionally, the reward framework should seek to enhance executives’ interests by:
• rewarding capability and experience;
• reflecting competitive reward for contribution to growth in shareholder wealth; and
• providing a clear structure for earning rewards.
In accordance with best practice corporate governance, the structure of non‑executive director and executive director
remuneration is separate.
40
DAMSTRA HoLDINGS LIMITED
DIRECTORS’ REPORT
Continued
Non‑executive directors’ remuneration
Fees and payments to non‑executive directors reflect the demands and responsibilities of their role. Non‑executive
directors’ fees and payments are reviewed annually by the Nomination and Remuneration Committee. The Nomination and
Remuneration Committee may, from time to time, receive advice from independent remuneration consultants to ensure
non‑executive directors’ fees and payments are appropriate and in line with the market. FY20 total directors’ fees were
below the present approved shareholder cap of $600,000. The proposed total directors’ fees for FY21 will also be below
this approved shareholder cap.
Remuneration can be broken down on an annualised basis as follows:
Special responsibilities
Chair of Audit and
Risk Committee
Chair of Nomination and
Remuneration Committee
Drew
Fairchild
Morgan
Hurwitz
Simon
Yencken
Executive remuneration
Director
fee
$
Chair
fee
$
Member
fee
$
Total
base
$
Superan-
nuation
$
Total
$
60,000
10,000
5,000
75,000
7,125
82,125
60,000
10,000
5,000
75,000
7,125
82,125
65,700
–
10,950
76,650
–
76,650
185,700
20,000
20,950
226,650
14,250
240,900
The Group aims to reward executives based on their position and responsibility, with a level and mix of remuneration
which has both fixed and variable components.
The executive remuneration and reward framework have four components:
• base pay;
• non‑monetary benefits;
• share‑based payments; and
• other remuneration such as superannuation, annual leave and long service leave.
The combination of these comprises the executive’s total remuneration.
Fixed remuneration, consisting of base salary, superannuation and non‑monetary benefits, are reviewed annually by the
Nomination and Remuneration Committee based on individual and business unit performance, the overall performance
of the Group and comparable market remunerations.
Executives may receive their fixed remuneration in the form of cash or other fringe benefits (for example motor vehicle
benefits) where it does not create any additional costs to the Group and provides additional value to the executive.
The long‑term incentives (‘LTI’) include long service leave and share‑based payments. Share options are granted based
on continued service with the Company under the employee incentive plan.
ANNu AL REPoRT 2020
41
Group performance and link to remuneration
The board has approved the establishment of an Employee Incentive Plan (“EIP”) with the purpose of incentivising staff
against Company and individual targets. Remuneration for certain individuals is directly linked to the performance of the
Group (Variable Remuneration). A portion of cash bonus and incentive payments are dependent on defined service
conditions being met.
The objective of variable remuneration is to link the achievement of the Group’s operational targets with the remuneration
received by the employees charged with meeting those targets. The total potential variable remuneration is set at a level
to provide sufficient incentive to employees to achieve the operational targets at a cost to the Company that is reasonable
in the circumstances. The targets for the year under review, as it relates to key management personnel, were:
• 70% linked to the revenue and other income performance for the Group; and
• 30% linked to individual targets.
There is an EIP schedule for the broader staff population, with 50% of awards linked to the performance of the Group,
and 50% linked to individual targets.
There are certain threshold hurdles that had to be achieved before the consideration of variable remuneration:
• At least 90% achievement at both a company and an individual target level; and
• Achievement of certain base targets regarding security and privacy.
Variable remuneration consists of both short‑term and long‑term incentives. In FY20, the EIP scheme was structured to
pay variable remuneration based on a percentage of base salary with outcomes determined by individual and company
KPI’s as follows:
• Cash of 33%, payable after the annual report is finalised;
• Zero priced options of 33.5%, that vests over the course of the next three years if the employee remains in service; and
• Premium priced options of 33.5%, that vests over the course of the next three years if the employee remains in service.
These options can be exercised at 170% of the volume weighted average price in the 20 days before award.
In all cases, the Board has final discretion on the value of the awards.
The EIP scheme will also be implemented for FY21 and will have a similar structure as the FY20 scheme.
In considering the performance of the consolidated entity and benefits for shareholder wealth, the Board and the
remuneration committee have regard to the following indices in respect of the current financial year and the previous
financial years. These are not necessarily consistent with the measures used in determining the variable amounts of
remuneration to be awarded to KMPs. As a consequence, there may not be a direct correlation between the statutory
key performance measures and the variable remuneration awarded.
Revenue ($‘000s)
other Income ($’000s)
Profit/(loss) after tax ($‘000s)
Share price at year end ($)
Basic loss per share (cents)
2020
19,577
3,889
(3,779)
1.31
(3.05)
2019
15,278
726
(3,718)
N/A
(4.14)
2018
10,577
240
(3,989)
N/A
N/A
42
DAMSTRA HoLDINGS LIMITED
DIRECTORS’ REPORT
Continued
Details of performance is listed below:
Name
Johannes Risseeuw
Christian Damstra
Pieter Christiaan Scholtz
Group revenue and other income
performance vs target
Individual targets
performance vs target
Target
Actual
Target
Actual
70%
70%
70%
70%
70%
70%
30%
30%
30%
30%
30%
30%
Total
100%
100%
100%
The Nomination and Remuneration Committee and the Board has assessed performance as having met for both Company
and individual targets for FY20.
The Nomination and Remuneration Committee is of the opinion that the continued improved results can be attributed in
part to the adoption of performance‑based compensation and is satisfied that this improvement will continue to increase
shareholder wealth if maintained over the coming years.
Details of remuneration
The key management personnel of the Group consisted of the following directors:
• Christian Damstra
• Drew Fairchild
• Johannes Risseeuw
• Morgan Hurwitz
• Simon Yencken
And the following person:
• Pieter Christiaan Scholtz
ANNu AL REPoRT 2020
43
Details of remuneration are set out in the tables below;
2020
Cash salary
and fees
$
Cash bonus
$
Non‑Executive Directors:
Drew Fairchild
Morgan Hurwitz
Simon Yencken
Executive Directors:
Johannes Risseeuw
Christian Damstra
53,365
53,365
54,294
–
–
–
371,565
449,351
112,860
112,860
Other Key Management Personnel:
Short-term
benefits
Expatriate
and other
allowances
$
–
–
–
–
153,756
Post-
employment
benefits
Long-term
benefits
Share-based
payments
Super-
annuation
$
Other
$
Equity-
settled
$
Total
$
178,435
178,435
174,294
–
–
–
120,000
120,000
120,000
19,762
27,273
377,854
377,854
902,600
1,139,189
5,070
5,070
–
20,559
18,095
Pieter Christiaan
Scholtz
276,324
57,915
–
21,674
18,686
151,829
526,428
1,258,264
283,635
153,756
70,468
65,721
1,267,537
3,099,381
1. Drew Fairchild, Morgan Hurwitz, and Simon Yencken’s director fees start from 16 october 2019. Their FY20 base salaries reflect the period from
16 october 2019 to 30 June 2020, inclusive. Simon Yencken’s fees are paid in uS Dollars (uSD36,634).
2. Christian Damstra’s base salary and benefits include a base salary of uSD 301,073 and living away from home and school fees uSD 103,007.
His superannuation relates to the 401(k) employer contributions paid in the uS.
3. other long‑term benefits relate to annual and long service leave.
4. Cash bonus relates to FY20 incentive accrued and proposed to be paid subsequent to the year end. The amount is subject to individual and Group
performance conditions that were dependent on FY20 results and will be dependent on the individual satisfying employment service condition and
is subject to shareholder approval.
5. The share‑based payment expense for Johannes Risseeuw, Christian Damstra and Pieter Christiaan Scholtz includes an estimated valuation for
options proposed to be issued subsequent to the year end. The options were subject to individual and Group performance conditions that were
dependent on FY20 results and will be dependent on the participants satisfying employment service conditions and is subject to shareholder approval.
The proportion of remuneration linked to performance and the fixed proportion are as follows:
Name
Non‑Executive Directors:
Drew Fairchild
Morgan Hurwitz
Simon Yencken
Executive Directors:
Johannes Risseeuw
Christian Damstra
Other Key Management Personnel:
Pieter Christiaan Scholtz
Fixed
remuneration
2020
100%
100%
100%
46%
57%
60%
At risk
STI & LTI
2020
–%
–%
–%
54%
43%
40%
Amounts received by the Executive Directors and other KMP in respect of cash bonus (STI) and share‑based payments (LTI)
are disclosed in the details of remuneration table above.
1. Non‑Executive Directors received some remuneration in share options, but these were not subject to performance conditions.
44
DAMSTRA HoLDINGS LIMITED
DIRECTORS’ REPORT
Continued
Service agreements
Name:
Title:
Johannes Risseeuw
Executive Chairman
Agreement commenced:
16 october 2017
Notice period:
6 months
Details:
Name:
Title:
$380,000 inclusive of superannuation
Christian Damstra
Chief Executive officer
Agreement commenced:
15 March 2016
Notice period:
6 months
Details:
Name:
Title:
$380,000 inclusive of superannuation
Drew Fairchild
Non‑executive Director
Agreement commenced:
1 April 2016
Notice period
Details
Name:
Title
open until a written notice of resignation is communicated by the Director
$82,125 in Director Fees
Morgan Hurwitz
Non‑executive Director
Agreement commenced:
7 November 2016
Notice period:
open until a written notice of resignation is communicated by the Director
Details
Name:
Title:
$82,125 in Director Fees
Simon Yencken
Non‑executive Director
Agreement commenced:
1 August 2019
Notice period:
Details:
Name:
Title:
open until a written notice of resignation is communicated by the Director
$76,650 in Director Fees
Pieter Christiaan Scholtz
Chief Financial officer and Company Secretary
Agreement commenced:
1 September 2016
Notice period:
6 months
Details:
$292,500 inclusive of superannuation
ANNu AL REPoRT 2020
45
Share-based compensation
Issue of shares
There were no shares issued to directors and other key management personnel as part of compensation during the
year ended 30 June 2020.
Options
The following tranches of options are on issue to Directors and key management personnel;
Option tranche
Grant date
Vesting date
Expiry date
options issued to directors
and key management personnel
and other staff
Issue of share options to CEo
and Executive Chairman (Issue 1)
Issue of share options to
Non‑executive Directors and
key management personnel
and other staff (Issue 2)
01/10/2018
16/10/2019
16/10/2034
16/10/2019
16/10/2019
16/10/2025
Exercise
price
($)
Fair value
at grant date
($)
–
1.53
0.73
0.28
16/10/2019
16/10/2019
16/10/2034
–
0.90
In respect of issues 1 and 2 the options immediately vested upon successful IPo on the ASX, subject to an employee
or KMP being employed by the Company on the IPo date. upon vesting, 50% of the options will be subject to a 12‑month
exercise restriction and the remaining 50% will be subject to a 24‑month exercise restriction period.
Details of options over ordinary shares granted, vested and lapsed for directors and other key management personnel
as part of compensation during the year ended 30 June 2020 are set out below:
Name
Issue of premium priced options
to Executive Directors (issue 1):
Johannes Risseeuw
Christian Damstra
Issue of zero priced options to
Non‑Executive Directors and key
management personnel (issue 2):
Drew Fairchild
Morgan Hurwitz
Simon Yencken
Pieter Christiaan Scholtz
Number
of options
granted
Value
of options
granted
$
Value
of options
vested at
30 June 2020
$
Number
of options
lapsed
$
Value
of options
lapsed
$
982,142
982,142
275,000
275,000
275,000
275,000
133,333
133,333
133,333
111,111
120,000
120,000
120,000
100,000
120,000
120,000
120,000
100,000
–
–
–
–
–
–
–
–
–
–
–
–
As at 30 June 2020 all options had fully vested but were unexercisable as explained within this remuneration report.
A total of 683,328 zero‑priced options with notional accounting value of $614,995 were granted and vested for 24 other
staff as part of compensation during the year ended 30 June 2020.
46
DAMSTRA HoLDINGS LIMITED
DIRECTORS’ REPORT
Continued
Performance rights
There were no performance rights over ordinary shares issued to directors and other key management personnel as part
of compensation that were outstanding as at 30 June 2020.
Additional disclosures relating to key management personnel
Shareholding
The number of shares in the Group held during the financial year by each director and other members of key management
personnel of the Group, including their personally related parties, is set out below:
Ordinary shares
Johannes Risseeuw
Christian Damstra
Drew Fairchild
Morgan Hurwitz
Simon Yencken
Pieter Christiaan Scholtz
Balance
at the start
of the year
Received
as part of
remuneration
Additions
through on
market trades
Disposals
through on
market trades
Balance
at the end
of the year
19,440,000
19,440,000
9,840,000
2,800,000
–
1,460,000
52,980,000
–
–
–
–
–
–
–
785,556
141,500
(1,100,000)
19,125,556
(550,000)
19,031,500
–
(6,177,778)
3,662,222
666,667
1,111,111
–
–
3,466,667
1,111,111
–
(150,000)
1,310,000
2,704,834
(7,977,778)
47,707,056
Balance at the start of the year is represented on a post consolidation basis. on 9 September 2019, the Company completed
a share consolidation of 1:20,000 prior to the completion of the initial public offering process.
Option holding
The number of options over ordinary shares in the Group held during the financial year by each director and other members
of key management personnel is set out below:
Options over ordinary shares
Johannes Risseeuw
Christian Damstra
Drew Fairchild
Morgan Hurwitz
Simon Yencken
Pieter Christiaan Scholtz
Balance
at the start
of the year
200,000
200,000
–
–
–
100,000
500,000
Granted
Exercised
Expired/
forfeited/
other
Balance
at the end
of the year
982,142
982,142
133,333
133,333
133,333
111,111
2,475,394
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,182,142
1,182,142
133,333
133,333
133,333
211,111
2,975,394
ANNu AL REPoRT 2020
47
Loans to key management personnel and their related parties
There is an outstanding loan to Johannes Risseeuw as at 30 June 2020. The loan has no agreed term and is repaid at the
request of the Board of Directors. Interest is charged on the outstanding balance at 8% per annum. Movements in the loan
balance in the current year are shown below;
opening balance at 1 July 2019
Interest charged for the year
Repayments made during the year
Closing balance at 30 June 2020
Securities trading policy
$
305,802
13,829
(214,130)
105,501
A securities trading policy (“Trading Policy”) has been adopted by the Board to provide guidance to Directors, employees
of the Group, and other parties who may have access to price sensitive information and who may be contemplating
dealing in the Group’s securities or the securities of entities with whom the Group may have dealings. The Trading Policy is
designed to ensure that any trading in the Group’s securities is in accordance with the law. Any non‑compliance with the
Trading Policy will be regarded as an act of serious misconduct. The Trading Policy is available on Damstra’s website at
www.damstratechnology.com/investors.
THIS CONCLUDES THE REMUNERATION REPORT,
WHICH HAS BEEN AUDITED.
48
DAMSTRA HoLDINGS LIMITED
DIRECTORS’ REPORT
Continued
Shares under option
unissued ordinary shares of Damstra Holdings Limited under option at the date of this report are as follows:
Grant date
1 october 2018
16 october 2019
16 october 2019
Expiry date
16 october 2034
16 october 2025
16 october 2034
Exercise
price
Number
under option
$0.00
$1.53
$0.00
660,000
1,964,284
1,194,438
3,818,722
No person entitled to exercise the options had or has any right by virtue of the option to participate in any share issue
of the Group or of any other body corporate.
Shares under performance rights
There were no unissued ordinary shares of Damstra Holdings Limited under performance rights outstanding at the date
of this report.
Shares issued on the exercise of options
There were no ordinary shares of Damstra Holdings Limited issued on the exercise of options during the year ended
30 June 2020 and up to the date of this report.
Corporate governance statement
The ASX Corporate Governance Principles and Recommendations (Fourth Edition) and the ASX Listing Rules (ASX LR 4.10.3)
permits entities to elect to publish their ASX Corporate Governance Statement and ASX Appendix 4G on its website.
Accordingly, the Group’s 2020 ASX Corporate Governance Statement does not appear in this Annual Report and can be
located on the Company’s website (www.damstratechnology.com).
Indemnity and insurance of officers
During the year, the Group paid a premium to insure the directors and officeholders of Damstra Holdings Limited.
The confidentiality clause of the contract of insurance prohibits disclosure of the nature of the liabilities insured against
and the amount of the premium. No payment has been made to indemnify PwC during or since the financial year.
No premium has been paid by the Company in respect of any insurance for PwC.
Indemnity and insurance of auditor
Damstra Holdings Limited has agreed to indemnify their auditors, PwC Australia, to the extent permitted by law, against
any claim by a third party arising from the Company’s breach of their agreement. The indemnity stipulates that the Company
will meet the full amount of any such liabilities, including a reasonable amount of legal costs.
ANNu AL REPoRT 2020
49
Proceedings on behalf of the Group
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf
of the Group, or to intervene in any proceedings to which the Group is a party for the purpose of taking responsibility on
behalf of the Group for all or part of those proceedings.
Non-audit services
Details of the amounts paid or payable to the auditor for non‑audit services provided during the financial year by the
auditor are outlined in note 27 of the financial statements.
The directors are satisfied that the provision of non‑audit services during the financial year, by the auditor (or by another
person or firm on the auditor’s behalf), is compatible with the general standard of independence for auditors imposed by
the Corporations Act 2001.
The directors are of the opinion that the services as disclosed in note 27 to the financial statements do not compromise
the external auditor’s independence requirements of the Corporations Act 2001 for the following reasons:
• All non‑audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity
of the auditor; and
• None of the services undermine the general principles relating to auditor independence as set out in APES 110 Code
of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including
reviewing or auditing the auditor’s own work, acting in a management or decision‑making capacity for the Group,
acting as advocate for the Group or jointly sharing economic risks and rewards.
Rounding of amounts
The Group is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and Investments
Commission, relating to ‘rounding‑off’. Amounts in this report have been rounded off in accordance with that Corporations
Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar.
Auditor’s independence declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out
immediately after this directors’ report.
This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001.
on behalf of the directors
Drew Fairchild
Director
27 August 2020
Melbourne
Johannes Risseeuw
Director
50
DAMSTRA HoLDINGS LIMITED
AUDITOR’S INDEPENDENCE DECLARATION
Auditor’s Independence Declaration
As lead auditor for the audit of Damstra Holdings Limited for the year ended 30 June 2020, I declare
that to the best of my knowledge and belief, there have been:
(a)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
(b)
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Damstra Holdings Limited and the entities it controlled during the
period.
Jason Perry
Partner
PricewaterhouseCoopers
Melbourne
27 August 2020
PricewaterhouseCoopers, ABN 52 780 433 757
2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001
T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
ANNu AL REPoRT 2020
51
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
For the year ended 30 June 2020
Revenue
other income
Employee benefits expense
Depreciation and amortisation expense
other expenses
Finance costs
Loss before income tax (expense)/benefit
Income tax (expense)/benefit
Consolidated
2020
$’000
19,577
3,889
(10,186)
(6,164)
(11,645)
(554)
(5,083)
1,304
2019
$’000
15,278
726
(6,546)
(4,129)
(7,943)
(1,008)
(3,622)
(96)
Note
6
7
8
8
9
Loss after income tax (expense)/benefit for the year attributable
to the owners of Damstra Holdings Limited
(3,779)
(3,718)
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Exchange differences on translation of foreign operations
other comprehensive income for the year, net of tax
Total comprehensive income for the year attributable to the owners
of Damstra Holdings Limited
Basic loss per share
Diluted loss per share
(48)
(48)
1
1
(3,827)
(3,717)
35
35
Cents
(3.05)
(3.05)
Cents
(4.14)
(4.14)
The above statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes.
52
DAMSTRA HoLDINGS LIMITED
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2020
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Current tax receivables
other current assets
Total current assets
Non-current assets
Costs to fulfil contracts
Property, plant and equipment
Right‑of‑use assets
Intangible assets
Deferred tax assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Contract liabilities
Borrowings
Lease liabilities
Provisions
Deferred income
Total current liabilities
Non-current liabilities
Contract liabilities
Borrowings
Lease liabilities
Provisions
other payables
Deferred income
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
other reserves
(Accumulated losses)
Total equity
Note
Consolidated
2020
$’000
2019
$’000
11
12
13
14
10
15
16
17
6
18
19
20
6
21
22
23
24
25
9,365
4,812
1,032
717
15,926
616
2,298
5,277
31,757
2,366
42,314
58,240
3,653
4,581
–
2,687
2,064
328
13,313
912
–
2,540
74
–
376
3,902
17,215
41,025
43,269
9,085
(11,329)
41,025
303
3,572
583
835
5,293
659
4,849
–
21,493
57
27,058
32,351
5,625
3,478
10,269
–
1,902
233
21,507
565
7,241
–
–
1,335
390
9,531
31,038
1,313
2,542
6,321
(7,550)
1,313
The above statement of financial position should be read in conjunction with the accompanying notes.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2020
ANNu AL REPoRT 2020
53
Consolidated
Balance at 1 July 2018
Loss after income tax expense for the year
other comprehensive income for the year, net of tax
Total comprehensive income for the year
Transactions with owners in their capacity as owners
Share‑based payments
Balance at 30 June 2019
Consolidated
Balance at 1 July 2019
Loss after income tax expense for the year
other comprehensive income for the year, net of tax
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
Contributions of equity, net of transaction costs (note 24)
Share‑based payments (note 36)
Shares issued for part consideration of business
combinations (note 31)
Acquisition reserve (note 31)
Balance at 30 June 2020
Issued
capital
$’000
2,542
–
–
–
–
2,542
Issued
capital
$’000
2,542
–
–
–
38,477
–
2,250
–
43,269
Other
reserves
$’000
6,056
–
1
1
264
6,321
Other
reserves
$’000
6,321
–
(48)
(48)
–
2,062
–
750
9,085
Accumulated
losses
$’000
(3,832)
(3,718)
–
(3,718)
–
(7,550)
Accumulated
losses
$’000
(7,550)
(3,779)
–
(3,779)
–
–
–
–
(11,329)
Total
equity
$’000
4,766
(3,718)
1
(3,717)
264
1,313
Total
equity
$’000
1,313
(3,779)
(48)
(3,827)
38,477
2,062
2,250
750
41,025
The above statement of changes in equity should be read in conjunction with the accompanying notes.
54
DAMSTRA HoLDINGS LIMITED
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 June 2020
Notes
Consolidated
2020
$’000
2019
$’000
Cash flows from operating activities
Receipts from customers (inclusive of Goods and Services Tax (“GST”)
Payments to suppliers and employees (inclusive of GST)
Income taxes paid
Transaction costs relating to business combinations
Cash received from government grants
Net cash from operating activities
Cash flows from investing activities
Payments for acquisitions, net of cash acquired
Payments for property, plant and equipment
Payments for software development costs
(Repayment)/proceeds from related party loans (net)
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
Share issue transaction costs
(Repayment)/proceeds from borrowings (net)
Payment of principal element of lease payments
Transaction costs related to issue of shares expensed
Interest and other finance costs paid
Interest received
Net cash from financing activities
20,835
(16,061)
4,774
–
(471)
420
4,723
(9,220)
(4,997)
(2,480)
214
(16,483)
34
31
24
35,000
(3,642)
(4,776)
(2,589)
(2,815)
(388)
45
20,835
9,085
290
9,365
15,298
(13,327)
1,971
(355)
–
–
1,616
(8,799)
(3,760)
(2,558)
(116)
(15,233)
–
–
14,550
(891)
–
(526)
90
13,223
(394)
684
290
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Cash and cash equivalents at the end of the financial year
11
The above statement of cash flows should be read in conjunction with the accompanying notes.
NOTES TO THE FINANCIAL STATEMENTS
30 June 2020
ANNu AL REPoRT 2020
55
Note 1. General information
The financial statements cover Damstra Holdings Limited as a group, consisting of Damstra Holdings Limited and the
entities it controlled at the end of, or during, the year. The financial statements are presented in Australian dollars ($),
which is Damstra Holdings Limited’s functional and presentation currency. A list of subsidiaries is included in Note 32.
Damstra Holdings Limited is a listed public company limited by shares and incorporated and domiciled in Australia.
For the purposes of preparing the financial statements, the Group is a for‑profit entity. Its registered office and principal
place of business is:
Level 1
38‑40 Garden Street
South Yarra VIC 3141
A description of the nature of the group’s operations and its principal activities is included in the directors’ report,
which is not part of the financial statements.
The financial statements were authorised for issue, in accordance with a resolution of directors, on 27 August 2020.
The directors have the power to amend and reissue the financial statements.
Note 2. Significant accounting policies
This note provides a list of all significant accounting policies adopted in the preparation of this consolidated financial
report. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial
report is for the Group consisting of Damstra Holdings Limited and its subsidiaries.
(a) Basis of preparation
This general‑purpose financial report has been prepared in accordance with Australian Accounting Standards and
Interpretations issued by the Australian Accounting Standards Board. For the purpose of preparing the financial report,
Damstra Holdings Limited is a for‑profit entity.
(i) Compliance with IFRS
The consolidated financial report of Damstra Holdings Limited complies with International Financial Reporting Standards
(IFRS) as issued by the International Accounting Standards Board (IASB).
(ii) Historical cost convention
The financial report has been prepared on a historical cost basis.
(iii) Critical accounting estimates
The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving
a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial
statements, are disclosed in Note 3.
56
DAMSTRA HoLDINGS LIMITED
NOTES TO THE F INANCIAL S TATEMENTS
Continued
(b) New or amended Accounting Standards and Interpretations adopted
The following accounting standards and interpretations became effective for the Group from 1 July 2019;
AASB 16 Leases
The Group leases various offices and equipment. Rental contracts are typically made for fixed periods of three to seven
years but may have extension options as described below. Lease terms are negotiated on an individual basis and contain
a wide range of different terms and conditions. The Group’s equipment lease facilities contain certain covenants to be
complied with and are subject to half‑yearly reviews. under the terms of the facility, the Group is required to comply with
the following financial covenants
• The Financial Debt/EBITDA Ratio of the Group must at all times be less than 2.00 times by 30 June 2020 and 1.75 times
by 30 June 2021;
• The Debt Service Cover Ratio for the Group must at all times be greater than 1.75 times by 30 June 2020 and 2 times
by 31 December 2020; and
• The Quasi Capital Ratio of the Group must at all times be greater than 50%.
The Group has been in breach of its financial covenant during the financial year ended 30 June 2020 and a letter of waiver
was obtained whereby the financier stipulated that they would defer their right to demand repayment as a result of the
breaches for a period of at least 12 months from the reporting date (the reporting date being 30 June 2020). Management
expects that the Group will be able to meet all contractual obligations from borrowings on a timely basis going forward.
until the financial year ended June 2019, leases of property, plant and equipment were classified as either finance or
operating leases. Payments made under operating leases (net of any incentives received from the lessor) were charged
to profit or loss on a straight‑line basis over the period of the lease.
From 1 July 2019, leases are recognised as a right‑of‑use asset and a corresponding liability at the date at which the leased
asset is available for use by the Group. Each lease payment is allocated between the liability and finance cost. The finance
cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining
balance of the liability for each period. The right‑of‑use asset is depreciated over the shorter of the asset’s useful life and
the lease term on a straight‑line basis.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net
present value of the following lease payments:
• fixed payments (including in‑substance fixed payments), less any lease incentives receivable;
• variable lease payments that are based on an index or a rate;
• amounts expected to be payable by the lessee under residual value guarantees;
• the exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and
• payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined,
the lessee’s incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds
necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions.
ANNu AL REPoRT 2020
57
Right‑of‑use assets are measured at cost comprising the following:
• the amount of the initial measurement of lease liability;
• any lease payments made at or before the commencement date less any lease incentives received;
• any initial direct costs; and
• restoration costs.
At each reporting date the Group records a deferred tax asset or liability on the differential between the right‑of‑use asset
and corresponding liability.
Payments associated with short‑term leases and leases of low‑value assets are recognised on a straight‑line basis as an
expense in profit or loss. Short‑term leases are leases with a lease term of 12 months or less. Low‑value assets comprise
IT‑equipment and small items of office furniture.
Extension and termination options
Extension and termination options are incorporated in the lease liability if the lease is reasonably certain to be extended
(or not terminated). These terms are used to maximise operational flexibility in terms of managing contracts. Most extension
and termination options held are exercisable only by the Group and not by the respective lessor.
IFRIC Interpretation 23 Uncertainty over Income Tax Treatment
The Interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that affects the
application of IAS 12 Income Taxes. It does not apply to taxes or levies outside the scope of IAS 12, nor does it specifically
include requirements relating to interest and penalties associated with uncertain tax treatments. The Interpretation
specifically addresses the following:
• Whether an entity considers uncertain tax treatments separately;
• The assumptions an entity makes about the examination of tax treatments by taxation authorities;
• How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates; and
• How an entity considers changes in facts and circumstances.
The Group determines whether to consider each uncertain tax treatment separately or together with one or more
uncertain tax treatments and uses the approach that better predicts the resolution of the uncertainty.
The Group applies significant judgement in identifying uncertainties over income tax treatments. Since the Group
operates in a complex multinational environment, it assessed whether the interpretation had an impact on its consolidated
financial statements.
upon adoption of the Interpretation, the Group considered whether it has any uncertain tax positions, particularly those
relating to transfer pricing. The Company’s and the subsidiaries’ tax filings in different jurisdictions include deductions
related to transfer pricing and the taxation authorities may challenge those tax treatments. The group determined, based
on its tax compliance and transfer pricing study, that it is probable that its tax treatments (including those for the subsidiaries)
will be accepted by the taxation authorities. The Interpretation did not have an impact on the consolidated financial
statements of the Group.
58
DAMSTRA HoLDINGS LIMITED
NOTES TO THE F INANCIAL S TATEMENTS
Continued
New standards issued but not yet effective
Certain new accounting standards and interpretations have been published that are not mandatory for the 30 June 2020
reporting period and have not been early adopted by the Group. These standards are currently being assessed by the
Group, but are not expected to have a material impact on the entity in the current or future reporting periods and on
foreseeable future transactions.
Standard
The revised Conceptual Framework for Financial Reporting
AASB 2018‑6 Amendments to Australian Accounting Standards
– Definition of a Business
AASB 2018‑7 Amendments to Australian Accounting Standards
– Definition of Material
AASB 2020‑1 Amendments to Australian Accounting Standards
– Classification of liabilities as Current or Non‑Current
(c) Principles of consolidation
Subsidiaries
Mandatory date for
annual reporting periods
beginning on or after
Reporting period
standard adopted
by the company
1 January 2020
1 January 2020
1 July 2020
1 July 2020
1 January 2020
1 July 2020
1 January 2023
1 July 2023
Subsidiaries are all those entities over which the Group has control. The Group controls an entity when the consolidated
subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity
when the Group 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 to direct the activities of the entity. Subsidiaries are fully consolidated from the date
on which control is transferred to the Group. They are deconsolidated from the date that control ceases.
The acquisition method of accounting is used to account for business combinations by the Group (refer to Note 2(h)).
Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated.
unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset.
Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted
by the Group.
Non‑controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statement of
profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement
of financial position respectively.
(d) Foreign currency translation
(i) Functional and presentation currency
Items included in the financial report of each of the Group’s entities are measured using the currency of the primary
economic environment in which the entity operates (‘the functional currency’). The consolidated financial report is
presented in Australian dollars ($), which is Damstra Holdings Limited’s functional and presentation currency.
ANNu AL REPoRT 2020
59
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation
of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are generally recognised in
profit or loss.
Foreign exchange gains and losses that relate to borrowings are presented in the consolidated statement of profit or loss
and other comprehensive income, within finance costs. All other foreign exchange gains and losses are presented in the
consolidated statement of profit or loss and other comprehensive income on a net basis within other gains/(losses).
(iii) Group companies
The results and financial position of foreign operations (none of which has the currency of a hyper‑inflationary economy) that
have a functional currency different from the presentation currency are translated into the presentation currency as follows:
• Assets and liabilities for each consolidated statement of financial position presented are translated at the closing rate at
the date of that consolidated statement of financial position;
• Income and expenses for each consolidated statement of profit or loss and other comprehensive income are translated
at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing
on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and
• All resulting exchange differences are recognised in other comprehensive income.
on consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of
borrowings, are recognised in other comprehensive income. When a foreign operation is sold or any borrowings forming
part of the net investment are repaid, the associated exchange differences are reclassified to profit or loss, as part of the
gain or loss on sale.
(e) Revenue recognition
The Group recognises revenue predominantly from the provision of software services (processing and development);
the rental of hardware equipment; card reissues and training services.
Software services revenue primarily consists of fees that give customers access to the Group’s workforce management
system, which also includes related customer support and maintenance. These revenues are recognised over time as they
are delivered and consumed concurrently over the service period, beginning on the date that the service is made available
to the customer. Software services typically have a term of 12 months and are subject to penalties for early termination by
the customer. Subscription services represent a single obligation to provide continuous access to the software, maintenance
and support including upgrades on and when available basis.
Revenue from the rental of hardware equipment consists of fees that give customers access to hardware and includes
(among other hardware) Alcolizers, Biometric technology, login terminals and handheld devices. These revenues are
recognised over time as customers derive the benefit from the hardware, beginning on the date that the service is made
available to the customer. Hardware rental contracts typically have a term of 12 months’ duration.
Revenue from training and card re‑issues is recognised at the point in time following delivery and completion of the agreed
service with the Group.
Other income
other income comprises Australian research and development grants and other income earned from third parties.
60
DAMSTRA HoLDINGS LIMITED
NOTES TO THE F INANCIAL S TATEMENTS
Continued
Revenue recognition
To determine whether to recognise revenue, the Group follows a five‑step process:
(a)
Identifying the contract with a customer;
(b)
Identifying the performance obligations within the customer contract;
(c) Determining the transaction price;
(d) Allocating the transaction price to the performance obligation; and
(e) Recognising revenue when/as performance obligations are satisfied.
Contract liabilities
Where consideration is received for subscription revenue in advance of the Group satisfying the corresponding performance
obligations, a contract liability is recognised in the consolidated statement of financial position and will be subsequently
released into the consolidated statement of profit or loss and other comprehensive income when control of the promised
service is transferred to the customer.
Operating segments
operating segments are presented using the ‘management approach’, where the information presented is on the same
basis as the internal reports provided to the Chief operating Decision Makers (‘CoDM’). The CoDM is responsible for the
allocation of resources to operating segments and assessing their performance.
(f) Government grants
Grants from governments are recognised at their fair value where there is a reasonable assurance that the grant will be
received and the Group will comply with all attached conditions. In relation to research and development (‘R&D’) government
grants, to the extent that these relate to costs which have been expensed as incurred, the government grant income is
recognised as ‘R&D tax incentive income’. To the extent that these relate to costs which have been capitalised to intangible
assets, the government grant income is initially included in current and non‑current liabilities as ‘deferred income’ and is
subsequently credited to the consolidated statement of profit or loss and other comprehensive income on a straight‑line
basis over the expected lives of the related assets.
(g) Income tax
The income tax expense or credit for the year is the tax payable on the current year’s taxable income based on the
applicable income tax rate for each jurisdiction, adjusted by changes in deferred tax assets and liabilities attributable
to temporary differences and to unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the
reporting year in the countries where the Group and its subsidiaries and associates operate and generate taxable income.
Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation
is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the
tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts in the consolidated financial report. However, deferred tax liabilities are not
recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from
initial recognition of an asset or liability in a transaction other than a business combination that, at the time of the transaction,
affects neither accounting nor taxable profit or loss.
ANNu AL REPoRT 2020
61
Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end
of the reporting year and are expected to apply when the related deferred income tax asset is realised or the deferred
income tax liability is settled.
Deferred tax assets are recognised only if it is probable that future taxable amounts will be available to utilise those
temporary differences and losses.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities
and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset
where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset
and settle the liability simultaneously.
The Group considers its leases in the scope of AASB 16 Leases as single transactions in which the asset and liabilities are
integrally linked, so there is no net temporary difference at inception. Subsequently, as differences arise on settlement of
the liability and the amortisation of the leased asset, there will be a net temporary difference on which deferred tax is
recognised.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other
comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or
directly in equity, respectively.
(h) Business combinations
The acquisition method of accounting is used to account for all business combinations, regardless of whether equity
instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the:
• Fair values of the assets transferred;
• Liabilities incurred to the former owners of the acquired business;
• Equity interests issued by the Group;
• Fair value of any asset or liability resulting from a contingent consideration arrangement; and
• Fair value of any pre‑existing equity interest in the subsidiary.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited
exceptions, measured initially at their fair values at the acquisition date.
Acquisition‑related costs are expensed as incurred.
The excess of the:
• Consideration transferred;
• Amount of any non‑controlling interest in the acquired entity; and
• Acquisition‑date fair value of any previous equity interest in the acquired entity.
over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the
fair value of the net identifiable assets of the business acquired, the difference is recognised directly in profit or loss
as a bargain purchase.
Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date.
Subsequent changes to the fair value of the contingent consideration will be recognised in the profit or loss.
62
DAMSTRA HoLDINGS LIMITED
NOTES TO THE F INANCIAL S TATEMENTS
Continued
(i) Impairment of assets
Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually
for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. other assets
are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. For the
purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash
inflows which are largely independent of the cash inflows from other assets or groups of assets (cash‑generating units).
Non‑financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment
at the end of each reporting year.
(j) Cash and cash equivalents (excluding bank overdrafts)
For the purpose of presentation in the consolidated statement of cash flows, cash and cash equivalents includes cash on
hand, deposits held at call with financial institutions, other short‑term, highly liquid investments with original maturities of
three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of
changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the consolidated
statement of financial position.
(k) Trade receivables
Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business.
They are generally due for settlement within 30 days and therefore are all classified as current.
Trade receivables are recognised initially at the amount of consideration that is unconditional unless they contain significant
financing components, when they are recognised at fair value.
The Group holds trade receivables with the objective to collect the contractual cash flows, and therefore measures
them subsequently at an amortised cost using the effective interest method. The company applies the AASB 9 simplified
approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables.
To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics
and the days past due.
(l) Investments and other financial assets
(i) Classification
The Group classifies its financial assets in the following measurement categories:
• those to be measured subsequently at fair value (either through other comprehensive income (‘oCI’) or through profit
or loss); and
• those to be measured at amortised cost.
The classification depends on the entity’s business model for managing the financial assets and the contractual terms
of the cash flows.
For assets measured at fair value, gains and losses will either be recorded in profit or loss or oCI. For investments in equity
instruments that are not held for trading, this will depend on whether the Group has made an irrevocable election at the
time of initial recognition to account for the equity investment at fair value through other comprehensive income (‘FVoCI’).
The Group reclassifies debt investments only when its business model for managing those assets changes.
ANNu AL REPoRT 2020
63
(ii) Recognition and derecognition
Regular way purchases and sales of financial assets are recognised on trade‑date, the date on which the Group commits to
purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets
have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.
(iii) Measurement
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair
value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset.
Transaction costs of financial assets carried at FVPL are expensed in profit or loss.
Debt instruments
Subsequent measurement of debt instruments depends on the Group’s business model for managing the asset and the
cash flow characteristics of the asset. The Group classifies its debt instruments as amortised cost.
Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal
and interest are measured at amortised cost. Interest income from these financial assets is included in finance income
using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss and
presented in other gains/(losses) together with foreign exchange gains and losses. Impairment losses are presented as a
separate line item in the consolidated statement of profit or loss and other comprehensive income.
Equity instruments
The Group subsequently measures all equity investments at fair value. Where the Group’s management has elected to
present fair value gains and losses on equity investments in oCI, there is no subsequent reclassification of fair value gains
and losses to profit or loss following the derecognition of the investment.
Dividends from such investments continue to be recognised in profit or loss as other income when the Group’s right
to receive payments is established.
(iv) Impairment
From 1 July 2018, the Group assesses on a forward‑looking basis the expected credit losses associated with its debt
instruments carried at amortised cost. The impairment methodology applied depends on whether there has been a
significant increase in credit risk.
For trade receivables, the Group applies the simplified approach permitted by AASB 9, which requires expected
lifetime losses to be recognised from initial recognition of the receivables, see Note 2(k) for further details.
(m) Property, plant and equipment
Property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is
directly attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or are recognised as a separate asset, as appropriate, only
when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item
can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when
replaced. All other repairs and maintenance are charged to profit or loss during the reporting year in which they are incurred.
64
DAMSTRA HoLDINGS LIMITED
NOTES TO THE F INANCIAL S TATEMENTS
Continued
Depreciation is calculated using the straight‑line method, net of their residual values, over their estimated useful lives
or, in the case of leasehold improvements and certain leased plant and equipment, the shorter lease term as follows:
Plant and equipment:
3‑5 years
Leasehold improvements:
4‑5 years
Motor vehicles:
5 years
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting year.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater
than its estimated recoverable amount (Note 2(i)).
An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit
to the Group. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss.
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit or loss.
(n) Intangible assets
(i) Goodwill
Goodwill is measured as described in Note 2(h). Goodwill on acquisitions is included in intangible assets. Goodwill is not
amortised but it is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it
might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity
include the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash‑generating units for the purpose of impairment testing. The allocation is made to those
cash‑generating units or groups of cash‑generating units that are expected to benefit from the business combination
in which the goodwill arose. The units or groups of units are identified at the lowest level at which goodwill is monitored
for internal management purposes, being the operating segments (Note 5).
(ii) Customer relationships
The customer relationships were acquired as part of multiple business combinations (which occurred in this financial
year and historical financial years). They are recognised at their fair value at the date of acquisition and are subsequently
amortised on a straight‑line based on the timing of projected cash flows of the contracts over their estimated useful lives.
(iii) Software
Software consists of capitalised development costs being an internally generated intangible asset and externally
acquired software.
(iv) Development costs
In relation to the Group’s internally generated intangible assets, the initial capitalisation of costs is based on management’s
judgment that technological and economic feasibility is confirmed and when the preliminary research phase has been
completed. These costs are analysed on a monthly basis to determine what amount is to be capitalised. only costs directly
relating to the development phase (design, construction and testing) are capitalised, excluding research and general project
administrative costs.
ANNu AL REPoRT 2020
65
The Group’s policy is to capitalise expenditure for new product development or product development that significantly
enhances existing software and is expected to result in commercial benefits. After initial recognition, development costs
are to be carried at their cost less accumulated amortisation and any accumulated impairment losses on the consolidated
statement of financial position. The capitalised development costs are to be amortised over the useful life of the developed
software. The estimated useful life is 3 years and amortised on a straight‑line basis.
At least annually, an assessment is to be performed to ensure that both the amortisation period and amortisation methods
are still appropriate. The value of capitalised development costs is to be reviewed for impairment indicators at least annually,
in accordance with AASB 136 Impairment of Assets, or sooner if circumstances indicate that the carrying amount might not
be recoverable.
(v) Amortisation methods and useful lives
Amortisation is calculated to write off the cost of intangible assets less their estimated residual values using the straight
line method over their estimated useful lives, and is generally recognised in profit or loss. The useful life of intangible assets
is based on the following criteria;
• Historical and forecast customer retention rates;
• The typical product life cycle for the asset; and/or
• Technical, technological, commercial or other types of obsolescence.
Goodwill is not amortised, but it tested for impairment annually of more frequently if events or changes in circumstances
indicate that it might be impaired. The estimated useful lives are as follows:
Customer relationships:
5‑15 years
Software:
3 years
Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.
(o) Right‑of‑use assets
A right‑of‑use asset is recognised at the commencement date of a lease. The right‑of‑use asset is measured at cost,
which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before
the commencement date. This is measured net of any lease incentives received, any initial direct costs incurred, and, except
where included in the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the
underlying asset, and restoring the site or asset.
Right‑of‑use assets are depreciated on a straight‑line basis over the unexpired period of the lease or the estimated useful
life of the asset, whichever is the shorter. Where the Group expects to obtain ownership of the leased asset at the end of
the lease term, the depreciation is over its estimated useful life. Right‑of‑use assets are subject to impairment or adjusted
for any remeasurement of lease liabilities.
The Group has elected not to recognise a right‑of‑use asset and corresponding lease liability for short‑term leases with
terms of 12 months or less and leases of low‑value assets. Lease payments on these assets are expensed to profit or loss
as ‘incurred’.
(p) Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of financial year which
are unpaid. The amounts are unsecured and are usually paid within 30‑60 days of recognition. Trade and other payables
are presented as current liabilities unless payment is not due within 12 months from the reporting date. They are recognised
initially at their fair value and subsequently measured at amortised cost using the effective interest method.
66
DAMSTRA HoLDINGS LIMITED
NOTES TO THE F INANCIAL S TATEMENTS
Continued
(q) Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at
amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised
in profit or loss over the year of the borrowings using the effective interest method. Fees paid on the establishment of loan
facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be
drawn down. In this case, the fee is deferred until the draw down occurs. To the extent there is no evidence that it is probable
that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised
over the year of the facility to which it relates.
Borrowings are removed from the consolidated statement of financial position when the obligation specified in the
contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has
been extinguished or transferred to another party and the consideration paid, including any non‑cash assets transferred
or liabilities assumed, is recognised in profit or loss as ‘other income’. Interest received or paid on borrowings is classified
as a ‘cash inflow/outflow from financing activities.
(r) Borrowing costs
General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a
qualifying asset are capitalised during the year of time that is required to complete and prepare the asset for its intended
use or sale. Qualifying assets are assets that necessarily take a substantial year of time to get ready for their intended use
or sale.
other borrowing costs are expensed in the year in which they are incurred.
(s) Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is
probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated.
Provisions are not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined
by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect
to any one item included in the same class of obligations may be small.
Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the
present obligation at the end of the reporting year. The discount rate used to determine the present value is a pre‑tax rate
that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in
the provision due to the passage of time is recognised as an interest expense.
(t) Employee benefits
(i) Short‑term obligations
Liabilities for wages and salaries, including non‑monetary benefits and annual leave expected to be settled within
12 months after the end of the period in which the employees render the related service, are recognised in respect of
employee’s services up to the end of the reporting period and are measured at the amounts expected to be paid when
the liabilities are settled. The liability for annual leave is recognised in the provision for employee benefits. All other
short‑term employee benefit obligations are presented as ‘payables’.
ANNu AL REPoRT 2020
67
(ii) Other long‑term employee benefit obligations
The liabilities for long service leave and annual leave are not expected to be settled wholly within 12 months after the end of
the year in which the employees render the related service. They are therefore measured as the present value of expected
future payments to be made in respect of services provided by employees up to the end of the reporting year using the
projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee
departures and periods of service. Expected future payments are discounted using market yields at the end of the reporting
year of high‑quality corporate bonds with terms and currencies that match, as closely as possible, the estimated future cash
outflows. Remeasurements resulting from experience adjustments and changes in actuarial assumptions are recognised in
profit or loss.
The obligations are presented as current liabilities in the consolidated statement of financial position if the entity does not
have an unconditional right to defer settlement for at least twelve months after the reporting date, regardless of when the
actual settlement is expected to occur.
(iii) Share‑based payments
Equity‑settled share‑based payments to employees and others providing similar services are measured at the fair value
of the equity instruments at the grant date.
The fair value determined at the grant date of the equity‑settled share‑based payments is expensed on a straight‑line
basis over the vesting period, based on the Group’s estimate of equity instruments that will eventually vest, with a
corresponding increase in equity. At the end of each reporting period, the Group revises its estimate of the number of
equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in profit
or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the
equity‑settled employee benefits reserve.
Equity‑settled share‑based payment transactions with parties other than employees are measured at the fair value of the
goods or services received, except where that fair value cannot be estimated reliably, in which case they are measured
at the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counterparty
renders the service.
(u) Contributed equity
ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax,
from the proceeds.
(v) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not
recoverable from the taxation authority. In this case, it is recognised as part of the cost of acquisition of the asset or as
part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST
recoverable from, or payable to, the taxation authority is included with other receivables or payables in the consolidated
statement of financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing
activities which are recoverable from, or payable to, the taxation authority are presented as operating cash flows.
68
DAMSTRA HoLDINGS LIMITED
NOTES TO THE F INANCIAL S TATEMENTS
Continued
(w) Parent entity financial information
The financial information for the parent entity, Damstra Holdings Limited, disclosed in Note 37 has been prepared
on the same basis as the consolidated financial report, except as set out below.
Investments in subsidiaries, associates and joint venture entities
Investments in subsidiaries, associates and joint venture entities are accounted for at cost in the financial report of
Damstra Holdings Limited.
(x) Lease liabilities
A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present
value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease
or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. Lease payments comprise of fixed
payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts
expected to be paid under residual value guarantees, exercise price of a purchase option when the exercise of the option
is reasonably certain to occur, and any anticipated termination penalties. The variable lease payments that do not depend
on an index or a rate are expensed in the period in which they are incurred.
Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured
if there is a change in the following: future lease payments arising from a change in an index or a rate used; residual
guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an
adjustment is made to the corresponding right‑of use asset, or to profit or loss if the carrying amount of the right‑of‑use
asset is fully written down.
(y) Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of Damstra Holdings Limited,
excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares
outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account
the after‑income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the
weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential
ordinary shares.
(z) Rounding of amounts
The Group is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and Investments
Commission, relating to ‘rounding‑off’. Amounts in this report have been rounded off in accordance with that Corporations
Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar.
ANNu AL REPoRT 2020
69
Note 3. Critical accounting estimates, judgements and errors
The preparation of financial statements requires the use of accounting estimates which, by definition, will seldom
equal the actual results. Management also needs to exercise judgement in applying the Group’s accounting policies.
Estimated fair value of assets or liabilities acquired in a business combination including goodwill and intangibles
Detailed information about each of these estimates and judgements is included in Note 31 together with information about
the basis of calculation for each critical accounting estimate and assumption used by management in determining the
estimated fair value of certain assets or liabilities acquired in the business combinations.
Estimated fair value of share‑based payments
Equity‑settled share‑based payments to employees and others providing similar services are measured at the fair value
of the equity instruments at the grant date.
For the long‑term incentive plans the fair value of the rights at grant date is determined using an options pricing model
and is expensed on a straight‑line basis over the vesting period, based on the Group’s estimate of the number of equity
instruments that will eventually vest.
At the end of each reporting period, the Group revises its estimate of the number of equity instruments expected to vest.
The impact of the revision of the original estimates, if any, is recognised in profit or loss, where the change is unrelated to
market conditions, such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to
the employee share plans reserve.
Allowance for expected credit losses
The allowance for expected credit losses assessment requires a degree of estimation and judgement. It is based
on the lifetime expected credit loss, grouped based on days overdue, and makes assumptions to allocate an overall
expected credit loss rate for each group. These assumptions include recent sales experience and historical collection
rates. In developing the Group’s allowance for expected credit losses, the Group also considers existing market
conditions as well as forward‑looking estimates at the end of each reporting period.
Estimation of useful lives of assets
The Group determines the estimated useful lives and related depreciation and amortisation charges for its property, plant
and equipment and finite life intangible assets. The useful lives could change significantly as a result of technical innovations
or some other event. The depreciation and amortisation charge will increase where the useful lives are less than previously
estimated, or technically obsolete or non‑strategic assets that have been abandoned or sold will be written off or written down.
Goodwill and other indefinite life intangible assets
The Group tests annually, or more frequently if events or changes in circumstances indicate impairment, whether goodwill
and other indefinite life intangible assets have suffered any impairment, in accordance with the accounting policy stated
in note 2. The recoverable amounts of cash‑generating units have been determined based on value‑in‑use calculations.
These calculations require the use of assumptions, including estimated discount rates based on the current cost of capital
and growth rates of the estimated future cash flows.
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary differences and tax losses carried forward if the Group
considers it is probable that future taxable amounts will be available to utilise those temporary differences and losses.
70
DAMSTRA HoLDINGS LIMITED
NOTES TO THE F INANCIAL S TATEMENTS
Continued
Business combinations
As discussed in Note 2, business combinations are initially accounted for on a provisional basis. The fair value of assets
acquired, liabilities and contingent liabilities assumed are initially estimated by the Group, taking into consideration all
available information at the reporting date. Fair value adjustments on the finalisation of the business combination accounting
is retrospective, where applicable, to the period the combination occurred and may have an impact on the assets and
liabilities, depreciation and amortisation reported.
Coronavirus (COVID‑19) pandemic
Judgement has been exercised in considering the impacts that the Coronavirus (CoVID‑19) pandemic has had, or may have,
on the Group based on known information. This consideration extends to the nature of the products and services offered,
customers, supply chain, staffing and geographic regions in which the Group operates. As a result of CoVID‑19, other than
as addressed in specific notes, there does not currently appear to be either any significant impact upon the financial
statements or any significant uncertainties with respect to events or conditions which may impact the consolidated entity
unfavourably as at the reporting date or subsequently.
Note 4. Financial risk management
This note explains the Group’s exposure to financial risks and how these risks could affect the Group’s future financial
performance. Current year profit and loss information has been included where relevant to add further context.
(a) Market risk
(i) Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risk arising from foreign currency transactions,
primarily with respect to the uS$. Foreign exchange risk arises from future commercial transactions and recognised assets
and liabilities denominated in a currency that is not the functional currency of the relevant Group entity. The risk is measured
through a forecast of highly probable uS$ expenditures.
The Group manages its foreign exchange risk by monitoring overseas operations closely. Foreign exchange risk is currently
not significant and therefore hedging instruments are not required.
Exposure
The Group’s exposure to foreign currency risk at the end of the reporting year, expressed in Australian dollars, was as follows:
Cash and cash equivalents
Trade receivables
Trade payables
(ii) Interest rate risk
2020
USD
$’000s
201
357
21
2020
NZD
$’000s
82
59
9
2019
USD
$’000s
17
651
–
2019
NZD
$’000s
18
46
7
The Group repaid its borrowings during the year, and therefore is not exposed to any material interest rate risk.
(iii) Group sensitivity
Movements in exposure to fluctuations in foreign exchange are not considered material to the Group.
ANNu AL REPoRT 2020
71
(b) Credit risk
Management assesses the risks arising from trade and other receivables in order to ensure that the Group’s cash flows
are not adversely impacted by credit risk.
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the
Group. The Group’s risk related to trade receivables is managed by credit control assessing the credit worthiness of
customers on an individual customer basis.
The Group provides services to a wide range of customers in Australia. There is no significant concentration of credit risk
that management believes presents a significant risk to the Group’s operational income. Management is satisfied that these
concentrations are within acceptable limits based on its stage of development and of the industry it operates in.
All bank balances are assessed to have low credit risk at each reporting date as they are held with reputable financial institutions.
Carrying value of trade and other receivables reflect their fair value.
(i) Impairment of financial assets
• Receivables – Trade receivables;
• Receivables – Receivables from related parties; and
• Cash and cash equivalents.
There was no material impairment loss recognised on receivables from related parties or cash and cash equivalents.
Cash and cash equivalents
The Group’s cash is held with respectable and well‑regarded financial institutions.
Trade receivables
The Group applies the AASB 9 simplified approach to measuring expected credit losses, which uses a lifetime expected
loss allowance for all trade receivables. To measure the expected credit losses, trade receivables have been grouped based
on shared credit risk characteristics and the days past due.
(c) Liquidity risk
The Group manages liquidity risk by maintaining adequate cash reserves and access to funding by continuously monitoring
actual and forecast cash flows and matching the maturity profiles of financial assets and liabilities.
(i) Financing arrangements
The Group had access to the following undrawn borrowing facilities at the end of the reporting year:
Variable rate
– Expiring beyond one year (Bank Bill Business Loan and Leases)
5,168
1,272
The bank overdraft facility may be drawn at any time and may be terminated by the bank without notice.
Consolidated
2020
$’000
2019
$’000
72
DAMSTRA HoLDINGS LIMITED
NOTES TO THE F INANCIAL S TATEMENTS
Continued
(ii) Maturities of financial liabilities
The following table analyses the Groups’ financial liabilities based on their contractual maturities. The balances due within 12
months are equal to their carrying value as the impact of discounting is not significant.
Contractual maturities
of financial liabilities
At 30 June 2020
Non‑derivatives
Trade payables
other payables and accruals
Lease liabilities
Contractual maturities
of financial liabilities
At 30 June 2019
Non‑derivatives
Trade payables
other payables and accruals
Contingent consideration
Bank overdraft
Convertible notes
Borrowings (excluding finance leases)
Finance lease liabilities
(d) Fair value measurements
Up to
12 months
$’000s
Between
1 and 2
years
$’000s
Between
2 and 5
years
$’000s
Total
contractual
cash flows
$’000s
1,384
2,153
2,913
6,450
–
–
2,013
2,013
–
–
620
620
1,384
2,153
5,546
9,083
Up to
12 months
$’000s
Between
1 and 2
years
$’000s
Between
2 and 5
years
$’000s
Total
contractual
cash flows
$’000s
1,250
2,052
2,361
13
5,899
2,874
1,483
15,932
–
–
1,335
–
–
1,349
2,016
4,700
–
–
–
–
–
3,876
–
3,876
1,250
2,052
3,696
13
5,899
8,099
3,499
Carrying
amount
(assets)/
liabilities
$’000s
1,384
2,153
5,227
8,764
Carrying
amount
(assets)/
liabilities
$’000s
1,250
2,052
3,696
13
5,899
8,099
3,499
24,508
24,508
Fair value hierarchy AASB 13 requires disclosure of fair value measurements by level of the following fair value
measurement hierarchy:
a) quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
b)
inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly
or indirectly (level 2); and
c)
inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3).
ANNu AL REPoRT 2020
73
The following table presents the Group’s financial assets and financial liabilities measured and recognised at fair value
at 30 June 2020, on a recurring basis:
Fair value measurements – Level 2
Convertible note
Contingent consideration
(e) Price risk
The Group is not exposed to any significant price risk.
Note 5. Segment information
(a) Identification of reportable operating segments
2020
$’000s
–
–
2019
$’000s
5,899
3,696
The Group has determined there is one operating segment, being the operation of workforce management solutions.
The determination of the operating segment is based on the information provided to the chief operating decision maker,
who is the CEo, to assess performance and determine the allocation of resources.
Consideration has been given to the manner in which services are provided to customers, the organisational structure
and the nature of the Group’s customer base.
(b) Major customers
During the year ended 30 June 2020, two customers individually contributed more than 10% of the total external revenue
generated by the Group (2019: nil).
(c) Disaggregation of revenue and non‑current assets by geographical regions
The Group operates in Australia and internationally. Revenue is attributable to the country where the service was transacted.
Total revenue and other income from continuing operations
Australia
International operations*
Total
Total non-current assets
Australia
International operations*
Total
*
A significant portion of revenue from the Group’s international operations was earned in the uSA.
Consolidated
2020
$’000
2019
$’000
16,259
3,319
19,578
40,794
1,156
41,950
13,324
1,954
15,278
26,577
238
26,815
74
DAMSTRA HoLDINGS LIMITED
NOTES TO THE F INANCIAL S TATEMENTS
Continued
Note 6. Revenue
From continuing operations
Revenue from rendering of services – over time
Revenue from leasing hardware – over time
Revenue from training and card re‑issues – At a point in time
Total revenue
Assets and liabilities related to contracts with customers
Consolidated
2020
$’000
2019
$’000
13,348
4,414
1,815
19,577
11,784
2,008
1,486
15,278
Costs to fulfil contracts and contract liabilities relate solely to the rendering of services in relation to subscription income.
Revenue recognised in relation to contract liabilities
The following table shows how much of the revenue recognised in the current reporting period relates to carried‑forward
contract liabilities and how much relates to performance obligations that were satisfied in a prior year.
opening contract liabilities
Acquisition via business combination
Revenue recognised in current year
Advance payments received
Closing contract liabilities
Revenue analysis
Revenue recognised over time
Revenue recognised at a point in time
Total revenue
Consolidated
2020
$’000
(4,042)
(775)
8,704
(9,380)
(5,493)
Consolidated
2020
17,762
1,815
19,577
2019
$’000
(2,630)
(547)
4,498
(5,363)
(4,042)
2019
13,812
1,466
15,278
ANNu AL REPoRT 2020
75
Note 7. Other income
Reversal of provisional R&D Clawback adjustment in relation to prior year
business combinations
Interest income
R&D tax incentive income
other income
Gain from bargain purchase (note 31)
Reversal of contingent consideration in relation to prior year business combinations
other income
Note 8. Expenses
(Loss) before income tax includes the following specific expenses
Depreciation
Amortisation
IT and administration expenses
Contractor expenses
Listing expense
other costs directly associated with service delivery
Note 9. Income tax expense/(benefit)
(a) Income tax expense
Current tax
Current tax on profits for the year
Adjustments for current tax of prior periods
Total current tax expense
Deferred income tax
Decrease/(increase) in deferred tax assets (Note 16)
(Decrease)/increase in deferred tax liabilities (Note 16)
Total deferred tax (benefit)
Income tax expense/(benefit)
Income tax expense/(benefit) is attributable to:
(Loss) from continuing operations
Consolidated
2020
$’000
2019
$’000
857
142
551
425
451
1,463
3,889
Consolidated
2020
$’000
2,308
3,784
2,679
765
2,509
2,585
–
22
636
68
–
–
726
2019
$’000
1,228
2,899
1,733
1,055
31
2,342
Consolidated
2020
$’000
2019
$’000
–
183
183
(1,084)
(403)
(1,487)
(1,304)
(1,304)
286
221
507
(293)
(118)
(411)
96
96
76
DAMSTRA HoLDINGS LIMITED
NOTES TO THE F INANCIAL S TATEMENTS
Continued
(b) Numerical reconciliation of income tax expense to prima facie tax payable
Loss before income tax (expense)/benefit
Tax at the statutory tax rate of 27.5%
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Stamp duty
overseas operation losses
Entertainment
Non‑taxable income
Adjustment for current tax of prior periods
Share‑based payments
other items – Net
Amortisation of customer contracts
other non‑deductible expenses
unrecognised temporary differences
Income tax expense/(benefit)
Note 10. Lease accounting
Consolidated
2020
$’000
(5,083)
(1,398)
–
–
–
(937)
183
567
–
74
234
(1,277)
(27)
(1,304)
2019
$’000
(3,622)
(996)
40
222
20
(21)
343
72
252
60
104
96
–
96
This note explains the impact of the adoption of AASB 16 Leases on the Group’s financial statements.
The Group has adopted AASB 16 retrospectively from 1 July 2019 but has not restated comparatives for the 2019 reporting
period, as permitted under the specific transitional provisions in the standard. The reclassifications and the adjustments
arising from the new leasing rules are therefore recognised in the opening balance sheet on 1 July 2019.
on adoption of AASB 16, the Group recognised lease liabilities in relation to leases which had previously been classified
as ‘operating leases’ under the principles of AASB117 Leases. These liabilities were measured at the present value of the
remaining lease payments, discounted using the lessee’s incremental borrowing rate as of 1 July 2019. The weighted
average lessee’s incremental borrowing rate applied to the lease liabilities on 1 July 2019 was 4.44%.
For leases previously classified as finance leases, the entity recognised the carrying amount of the lease asset and lease
liability immediately before transition as the carrying amount of the right‑of‑use asset and the lease liability at the date of
initial application. The measurement principles of AASB 16 are only applied after that date. The remeasurements to the lease
liabilities were recognised as adjustments to the related right‑of‑use assets immediately after the date of initial application.
ANNu AL REPoRT 2020
77
operating lease commitments disclosed as at 30 June 2019
Discounted using the lessee’s incremental borrowing rate at the date of initial application
Add: finance lease liabilities
Less: adjustments as a result of a different treatment of extension and termination options
Lease liability recognised at 1 July 2019
of which are:
Current lease liabilities
Non‑current lease liabilities
1 July 2019
$’000s
857
756
3,498
(161)
4,093
1,844
2,249
The Group’s lease liabilities contain certain covenants to be complied with. These have been detailed in Note 2. Significant
accounting policies. The associated right‑of‑use assets for property leases were measured as if the lease commenced on
1 July 2019. There were no onerous lease contracts that would have required an adjustment to the right‑of‑use assets at the
date of initial application.
The recognised right‑of‑use assets relate to the following types of assets:
30 June 2020
$’000s
1 July 2019
$’000s
384
4,893
5,277
574
3,029
3,603
Properties
Equipment
The transition to AASB 16 affected the following items in the balance sheet on 1 July 2019:
• Right‑of‑use assets – increase by $3,603,000;
• Property, plant and equipment – decrease by $3,029,000;
• other receivables – increase by $20,596;
• Deferred tax assets – no change in balance;
• Borrowings – decrease by $3,498,404; and
• Lease liabilities – increase by $4,093,000.
There was no impact to retained earnings as a result of the change in this standard.
Practical expedients applied
In applying AASB 16 for the first time, the Group has used the following practical expedients permitted by the standard:
• The use of a single discount rate to a portfolio of leases with reasonably similar characteristics;
• Reliance on previous assessments on whether leases are onerous;
• The exclusion of initial direct costs for the measurement of the right‑of‑use assets at the date of initial application; and
• The use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.
78
DAMSTRA HoLDINGS LIMITED
NOTES TO THE F INANCIAL S TATEMENTS
Continued
The Group has also elected not to reassess whether a contract is or contains a lease at the date of initial application.
Instead, for contracts entered into before the transition date the Group relied on its assessment made applying AASB 117
and Interpretation 4 Determining whether an Arrangement contains a Lease.
Reconciliations
Reconciliations of the written down values at the beginning and end of the current financial year are set out below:
Consolidated
Balance at 1 July 2019
Additions
Additions through business combinations
Lease depreciation
Exchange difference
Balance at 30 June 2020
Properties
$’000s
Equipment
$’000s
574
69
48
(309)
2
384
3,029
3,528
–
(1,664)
–
4,893
The interest expense on lease liabilities for the year ended 30 June 2020 was $0.2 million.
Note 11. Current assets – cash and cash equivalents
Cash at bank and in hand
Reconciliation to cash and cash equivalents at the end of the financial year
The above figures are reconciled to cash and cash equivalents at the end of the
financial year as shown in the statement of cash flows as follows:
Balances as above
Bank overdraft (note 18)
Balance as per statement of cash flows
Classification as cash equivalents
Consolidated
2020
$’000
9,365
9,365
–
9,365
Total
$’000s
3,603
3,597
48
(1,973)
2
5,277
2019
$’000
303
303
(13)
290
Term deposits and demand deposits are presented as ‘cash equivalents’ if they have a maturity of three months or less
from the date of acquisition and are repayable with 24 hours’ notice with no loss of interest. See Note 2(j) for the Group’s
other accounting policies on cash and cash equivalents.
Note 12. Current assets – trade and other receivables
Trade receivables
Less: Provision for impairment (a)
Receivables from related parties
other receivables
ANNu AL REPoRT 2020
79
Consolidated
2020
$’000
4,759
(131)
4,628
106
78
184
4,812
2019
$’000
3,374
(133)
3,241
304
27
331
3,572
(a) Provision for impairment of receivables
The Group applies the AASB 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss
allowance for all trade receivables. To measure the expected credit losses, trade receivables have been grouped based on
shared credit risk characteristics and the days past due.
Expected
credit
loss rate
2020
%
–
0.06%
0.63%
0.97%
1.13%
Expected
credit
loss rate
2019
%
–
0.06%
0.63%
0.97%
2.27%
Gross
carrying
amount
2020
$’000s
2,978
810
558
190
223
4,759
Gross
carrying
amount
2019
$’000s
2,224
530
136
210
274
3,374
Allowance
for expected
credit losses
2020
$’000s
Allowance
for expected
credit losses
2019
$’000s
–
1
30
46
54
131
–
2
21
33
77
133
Consolidated
0‑30 days
31‑60 days
61‑90 days
91‑120 days
120+ days
(b) Risk exposure
Information about the Group’s financial risk management can be found in Note 4.
Note 13. Current assets – other current assets
Prepayments
Security deposits
other current assets
Consolidated
2020
$’000
422
85
210
717
2019
$’000
372
40
423
835
80
DAMSTRA HoLDINGS LIMITED
NOTES TO THE F INANCIAL S TATEMENTS
Continued
Note 14. Non‑current assets – property, plant and equipment
Leasehold improvements – at cost
Less: Accumulated depreciation
Plant and equipment – at cost
Less: Accumulated depreciation
Motor vehicles – at cost
Less: Accumulated depreciation
Consolidated
2020
$’000
179
(147)
32
8,136
(5,885)
2,251
121
(106)
15
2,298
2019
$’000
233
(189)
44
9,410
(4,634)
4,776
121
(92)
29
4,849
Reconciliations
Reconciliations of the written‑down values at the beginning and end of the current and previous financial year are set out below:
Consolidated
Balance at 1 July 2018
Additions
Additions through business combinations (Note 31)
Depreciation expense
Balance at 30 June 2019
Additions
Transfer to right‑of‑use assets (AASB 16)
Exchange differences
Depreciation expense
Balance at 30 June 2020
Plant and
Equipment
$’000
Motor
Vehicles
$’000
Leasehold
Improvements
$’000
2,120
3,763
90
(1,197)
4,776
882
(3,029)
–
(378)
2,251
34
1
4
(10)
29
–
–
–
(14)
15
69
(4)
–
(21)
44
–
–
3
(15)
32
Total
$’000
2,223
3,760
94
(1,228)
4,849
882
(3,029)
3
(407)
2,298
In the 2019 financial year, plant and equipment contains assets that are leased to customers.
ANNu AL REPoRT 2020
81
Consolidated
2020
$’000
18,471
3,381
(898)
2,483
18,551
(7,748)
10,803
31,757
2019
$’000
14,071
2,846
(630)
2,216
9,841
(4,635)
5,206
21,493
Note 15. Non‑current assets – intangible assets
Goodwill – at cost
Customer relationships – at cost
Less: Amortisation
Software – at cost
Less: Amortisation
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:
Consolidated
Balance at 1 July 2018
Additions
Additions through business combinations
Amortisation expense
Balance at 30 June 2019
Additions
Disposals
Additions through business combinations (note 31)
Amortisation expense
Balance at 30 June 2020
(a) Impairment tests for goodwill
Goodwill
$’000
Software
$’000
Customer
relationships
$’000
2,088
–
11,983
–
14,071
–
–
4,400
–
18,471
1,929
1,973
3,827
(2,523)
5,206
2,524
(270)
6,456
(3,113)
10,803
2,202
–
231
(217)
2,216
–
–
534
(267)
2,483
Total
$’000
6,219
1,973
16,041
(2,740)
21,493
2,524
(270)
11,390
(3,380)
31,757
Goodwill is allocated to the Group’s one cash generating unit being the provision of workforce management solutions
to multiple industries.
The recoverable amount is determined based on value‑in‑use calculations. These calculations use cash flow projections
based on financial budgets approved by management covering a five‑year period.
82
DAMSTRA HoLDINGS LIMITED
NOTES TO THE F INANCIAL S TATEMENTS
Continued
(b) Key assumptions used for value‑in‑use calculations
Growth rate in revenue
Post-tax
discount rate
Terminal
growth rate
Year 1 – 28% revenue growth rate for reoccurring work, 0% for non‑reoccurring work
FY20: 10.2%
2.5% (FY19: 2%)
Year 2 to 5 – 10% revenue growth rate for reoccurring work, 0% for non‑reoccurring work
(FY19: average growth rate of 18.75% per year)
FY19: 11.4%
The Directors believe that the growth rates disclosed above over the five‑year forecast period are realistic and achievable
based on the organic and significant existing investment in the Group’s workplace management software.
As at 30 June 2020, the directors have concluded that there are no reasonable changes in the key assumptions that would
cause an impairment.
Note 16. Non‑current assets – deferred tax assets
The balance comprises temporary differences attributable to:
Blackhole expenditure
other
Accruals and provisions
Tax losses carried forward from current period
Total deferred tax assets
The balance comprises temporary differences attributable to:
Costs to fulfil customer contracts
Property, plant and equipment
Customer relationships
other
Total deferred tax liabilities
opening balance
Charged/(credited) to comprehensive income
Charged/(credited) to equity
Charged/(credited) to amounts recognised on acquisition
Closing balance
Consolidated
2020
$’000
2019
$’000
1,143
151
598
1,815
3,707
1,070
52
247
–
1,369
Consolidated
2020
$’000
2019
$’000
162
372
683
124
1,341
Consolidated
2020
$’000
56
1,487
990
(167)
2,366
181
522
609
–
1,312
2019
$’000
241
410
–
(594)
57
ANNu AL REPoRT 2020
83
The deferred tax asset balance includes an amount of $1.8 million, which relates to carry forward tax losses of Damstra
Holdings Limited. The Group has incurred the losses in the current financial year due to the costs associated with the
continued growth of the Group’s business. Specifically, these relate to one off cost incurred during the year associated
with the business combinations completed by the Group and the costs of the IPo.
The Group has concluded that the deferred assets will be recoverable using the estimated future taxable income, based
on the approved business plans and budgets for the Group. The Group is expected to generate taxable income from 2021
onwards. The losses can be carried forward indefinitely and have no expiry date.
Note 17. Current liabilities – trade and other payables
Trade payables
Accruals and other payables
Deferred consideration (a)
(a) Deferred consideration
Consolidated
2020
$’000
1,384
2,269
–
3,653
2019
$’000
1,250
2,052
2,323
5,625
All deferred consideration amounts in respect of business combinations completed in the prior period were either released
or paid during the year ended 30 June 2020.
(b) Risk exposures
Details of the Group’s exposure to risks are set out in Note 4.
Note 18. Current liabilities – borrowings
Secured
Bank overdraft
Bank bill business loan
Finance lease liabilities
unsecured
Deferred consideration
Convertible notes
Total current borrowings
Consolidated
2020
$’000
–
–
–
–
–
–
–
–
2019
$’000
13
1,349
1,483
2,845
1,525
5,899
7,424
10,269
84
DAMSTRA HoLDINGS LIMITED
NOTES TO THE F INANCIAL S TATEMENTS
Continued
(a) Risk exposures
The Group’s bank overdraft and bank bill business loan was repaid during the year. Finance lease liabilities have been
reclassified on implementation of AASB 16 Leases.
(b) Convertible notes
Convertible notes issued in the previous financial year were converted to shares during the current financial year.
Note 19. Current liabilities – provisions
Employee benefit obligations (a)
Provision for claim
other provisions
(a) Employee benefit obligations
Consolidated
2020
$’000
1,804
–
260
2,064
2019
$’000
810
857
235
1,902
The current provision for employee benefits includes accrued annual leave and long service leave. Long service
leave covers all unconditional entitlements where employees have completed the required period of service and those
where employees are entitled to pro‑rata payments in certain circumstances. The entire amount of the provision is
presented as ‘current’, since the Group does not have an unconditional right to defer settlement for any of these obligations.
However, based on past experience, the Group does not expect all employees to take the full amount of accrued leave
or require payment within the next 12 months. The following amounts reflect leave that is not expected to be taken or
paid within the next 12 months.
Current leave obligations expected to be settled after the 12 months
Employee benefit obligation schedule
opening balance
Additional provision recognised
Provision used during the year
Provision reversed/unused during the year
Adjustments/transfers
Consolidated
2020
$’000
69
2019
$’000
132
Consolidated
2020
$’000
810
1,593
(489)
(111)
–
1,804
ANNu AL REPoRT 2020
85
Consolidated
2020
$’000
328
2019
$’000
233
Consolidated
2020
$’000
–
–
–
2019
$’000
5,225
2,016
7,241
Note 20. Current liabilities – deferred income
Deferred income
Note 21. Non‑current liabilities – borrowings
Bank bill business loan – secured
Finance lease liabilities – secured
(a) Risk exposure
The Group’s bank bill business loan was repaid during the year. Finance lease liabilities have been reclassified on
implementation of AASB 16 Leases.
Note 22. Non‑current liabilities – other payables
Contingent consideration
Contingent consideration
Consolidated
2020
$’000
–
2019
$’000
1,335
The contingent consideration provision recorded in the 2019 financial year was based on EIFY achieving a predetermined
‘Earn‑out revenue’ target for the 18‑month period following the acquisition (ending April 2020). The revenue target was not
achieved and the contingent consideration provision was released in its entirety as at 30 June 2020.
Note 23. Non‑current liabilities – deferred income
other deferred income
Note 24. Equity – issued capital
ordinary shares – fully paid
Consolidated
2020
$’000
376
2019
$’000
390
2020
Shares
139,482,567
Consolidated
2019
Shares
4,488
2020
$’000
43,269
2019
$’000
2,542
86
DAMSTRA HoLDINGS LIMITED
NOTES TO THE F INANCIAL S TATEMENTS
Continued
Movements in ordinary share capital
Details
Balance
Balance
Date
1 July 2018
30 June 2019
Cancellation of previously issued shares
6 September 2019
Shares
4,488
4,488
(4,488)
Conversion of issued shares at a ratio of 1:20,000
6 September 2019
89,760,000
Conversion of issued shares at a ratio of 1:20,000
6 September 2019
60,000
Issue of shares on initial public offering (“IPo”)
16 october 2019
38,888,889
Issue of employee gift shares
16 october 2019
38,885
Issue of shares on conversion of convertible notes
16 october 2019
8,680,000
Issues of shares for part consideration of APE Mobile
28 February 2020
2,054,793
Share issuance costs (net of tax)
–
Balance
Ordinary shares
30 June 2020
139,482,567
Issue price
$0.00
$0.00
$0.00
$0.90
$0.00
$0.70
$1.10
–
$’000
2,542
2,542
–
–
–
35,000
–
6,062
2,250
(2,585)
43,269
ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the Group in proportion
to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the Group does
not have a limited amount of authorised capital.
on a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each
share shall have one vote.
Share buy‑back
There is no current on‑market share buy‑back.
Capital risk management
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while
maximising the return to stakeholders through the optimisation of the debt and equity balance.
The Group’s overall strategy remains largely unchanged from 30 June 2019.
The capital structure of the Group consists of cash and cash equivalents, borrowings (at 30 June 2019) and equity
attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings/accumulated losses.
None of the Group’s entities are subject to externally imposed capital requirements.
operating cash flows are used to maintain and expand operations, as well as to make routine expenditures such as general
administrative outgoings.
ANNu AL REPoRT 2020
87
2020
$’000
(54)
8,389
750
9,085
Consolidated
2019
$’000
(6)
6,327
–
6,321
Consolidated
2020
$’000
2019
$’000
6,327
2,062
8,389
(6)
(48)
(54)
6,063
264
6,327
(7)
1
(6)
Note 25. Equity – other reserves
(a) Other reserves
Foreign currency translation
Share‑based payments
Acquisition reserve (note 31)
Movements:
Share‑based payments
opening balance
Employee share plan expense
Balance as at 30 June
Foreign currency translation
opening balance
Currency translation differences arising during the year
Balance as at 30 June
Nature and purpose of other reserves
The reserve is used to record the value of equity instruments issued to employees and directors as part of their
remuneration, and other parties as part of compensation for their services.
Share‑based payments
During the prior year, the Group entered into several agreements that included the issue of Group options to employees.
options issued to directors and employees were issued at the fair value of $14,548 per option. The fair value was based
on the Group valuation.
Capital risk management
The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern, so that it can
provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce
the cost of capital.
Foreign currency translation
Exchange differences arising on translation of the foreign controlled entity are recognised in other comprehensive income
as described in Note 2(d) and accumulated in a separate reserve within equity. The cumulative amount is reclassified to
profit or loss when the net investment is disposed of.
88
DAMSTRA HoLDINGS LIMITED
NOTES TO THE F INANCIAL S TATEMENTS
Continued
(b) Retained earnings
Movements in retained earnings were as follows:
Balance at 1 July
Net (loss) for the year
Balance as at 30 June
Note 26. Equity – dividends
Consolidated
2020
$’000
(7,550)
(3,779)
(11,329)
2019
$’000
(3,832)
(3,718)
(7,550)
There were no dividends paid, recommended or declared during the current or previous financial year.
(a) Dividends
There were no dividends paid, recommended or declared during the current or previous financial year.
Franking credits available for subsequent financial years based on a tax rate of 27.5%
Consolidated
2020
$’000
1,172
2019
$’000
588
The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for:
• franking credits that will arise from the payment of the amount of the provision for income tax at the reporting date;
• franking debits that will arise from the payment of dividends recognised as a liability at the reporting date; and
• franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date.
Note 27. Remuneration of auditors
During the year, the following fees were paid or payable for services provided by the auditor of the consolidated group,
its related practices and non‑related audit firms:
(a) PwC Australia
(i) Audit and other assurance services
Audit or review of the financial statements
(ii) Other services
Advice in relation to employee equity services
Preparation of an investigating accountant’s report
Employee Share Trust
other
Total remuneration for other services
Total remuneration of PwC Australia
Consolidated
2020
$
2019
$
199,637
75,500
–
665,475
7,650
16,363
689,488
889,125
70,000
20,000
–
–
90,000
165,500
ANNu AL REPoRT 2020
89
Consolidated
2020
$’000
1,831
1,268
106
14
2019
$’000
1,207
197
306
19
Consolidated
2020
$’000
1
8
2019
$’000
101
18
Note 28. Contingent liabilities and contingent assets
The Group had no contingent assets or liabilities at 30 June 2020 (2019: nil).
Note 29. Commitments
(a) Capital commitments
The Group had no capital commitments at 30 June 2020 (2019: nil).
Note 30. Related party transactions
(a) Key management personnel compensation
Employee benefits
Share‑based payments
Loan to key management personnel
Interest charged on loan to key management personnel
Subsidiaries
Interests in subsidiaries are set out in Note 32.
(b) Transactions with related parties
The following transactions occurred with related parties:
Rent paid during year
Rental income
(c) Outstanding balances arising from sales/purchases of goods and services
The following balances are outstanding at the end of the reporting year in relation to transactions with related parties:
Current payables (rent payable as at 30 June)
Consolidated
2020
$’000
–
2019
$’000
8
90
DAMSTRA HoLDINGS LIMITED
NOTES TO THE F INANCIAL S TATEMENTS
Continued
(d) Loans to/from related parties
Loans to key management personnel
Beginning of the year
Loans advanced
Loan repayments received
Interest charged
End of year
(e) Terms and conditions
Consolidated
2020
$’000
2019
$’000
306
–
(214)
14
106
136
454
(303)
19
306
The loan to the key management personnel is unsecured and accrues interest at the rate of 8% per annum, computed from
the date of each advance.
Note 31. Business combinations
Summary of acquisitions
The Group completed the acquisition of three business combinations during the year; being the Scenario Advantage
Workforce Business (“SAW”), Applied Project Experience Pty Ltd (“APE Mobile”) and SmartAsset Software Business (“SAS”).
Acquisition of the Scenario Advantage Workforce Business (‘SAW’)
on 20 December 2019, the Company acquired 100% of the assets of the SAW business from the Projection Group. SAW
provides workplace management solutions to the mining and utilities industries predominantly on the east coast of Australia.
The assets were purchased for a cash consideration of $3,895,000.
Identifiable assets acquired and liabilities assumed
The fair value of the identifiable assets and liabilities of SAW as at the date of the acquisition have been provisionally
determined as follows:
Intangible assets – software
Intangible assets – customer relationships
Deferred tax asset
Plant and equipment
Contract liabilities
Provisions
Purchase consideration transferred including working capital adjustment (cash)
Goodwill arising of acquisition*
20 Dec 2019
$’000s
2,384
429
29
8
(397)
(178)
2,275
3,895
1,620
*
Goodwill recognised is primarily attributed to the expected synergies and other benefits from combining the assets and activities of SAW with those
of the Company. The Goodwill is not deductible for tax purposes.
ANNu AL REPoRT 2020
91
Acquisition costs
Transaction costs of approximately $176,630 associated with the acquisition have been expensed and are included within
other expenses in the income statement.
Contingent Assets and Contingent Liabilities
No contingent assets or liabilities were assumed by the Group as a result of the acquisition of SAW.
Profit contribution
Since the date of acquisition, estimated revenue contributed by SAW was $1,057,084. Given the Group’s blended pricing
model and integrated workforce model, the Group was unable to determine with accuracy the profit contributed by SAW
since the date of acquisition. Similarly, based on the nature of the business combination it was not possible to determine
the revenue and profit impact to the Group if the acquisition had occurred on 1 July 2019.
Acquisition of Applied Project Experience Pty Ltd Business (“APE Mobile”)
on 27 February 2020, the Company acquired APE Mobile, a leading provider of digital form and workflow management
solutions, for a total consideration of $5.5 million.
Intangible assets – software
Intangible assets – customer relationships
other assets
Deferred tax asset
Right of use asset
Plant and equipment
other liabilities
Lease liabilities
Contract liabilities
Provisions
Cash consideration transferred including working capital adjustment, net of cash acquired
Shares issued as consideration
Deferred consideration shares**
Purchase consideration transferred including working capital adjustment, net of cash acquired
Goodwill arising of acquisition*
27 Feb 2020
$’000s
2,733
77
299
52
47
14
(174)
(48)
(216)
(99)
2,685
2,465
2,250
750
5,465
2,780
*
Goodwill recognised is primarily attributed to the expected synergies and other benefits from combining the assets and activities of APE Mobile
with those of the Company. The Goodwill is not deductible for tax purposes.
**
Deferred consideration shares are expected to be settled in November 2020.
Acquisition costs
Transactions costs of approximately $96,727 associated with the acquisition have been expensed and are included within
other expenses in the income statement.
92
DAMSTRA HoLDINGS LIMITED
NOTES TO THE F INANCIAL S TATEMENTS
Continued
Contingent Assets and Contingent Liabilities
No contingent assets or liabilities were assumed by the Group as a result of the acquisition of APE Mobile.
Profit contribution
Since the date of acquisition, the estimated revenue contributed by APE Mobile was $360,415. Given the Group’s blended
pricing model and integrated workforce model, the Group was unable to determine with accuracy the profit contributed by
APE Mobile since the date of acquisition. Similarly, based on the nature of the business combination it was not possible to
determine the revenue and profit impact to the Group if the acquisition had occurred on 1 July 2019.
Acquisition of the SmartAsset Software Business (“SAS”)
on 1 June 2020, the Company acquired SmartAsset Software, a provider of end‑to‑end enterprise asset management
software, for a total consideration of $454,545.
Intangible assets – software
Intangible assets – customer relationships
Deferred tax liability
Contract liabilities
Provisions
Cash consideration transferred including working capital adjustment, net of cash acquired
Gain from a bargain purchase
Acquisition costs
1 Jun 2020
$’000s
1,338
30
(231)
(162)
(69)
906
455
451
Transactions costs of approximately $10,252 associated with the acquisition have been expensed and are included within
other expenses in the income statement.
Contingent Assets and Contingent Liabilities
No contingent assets or liabilities were assumed by the Group as a result of the acquisition of SAS.
Profit contribution
Since the date of acquisition, the estimated revenue contributed by SAS was $45,065. Given the Group’s blended pricing
model and integrated workforce model, the Group was unable to determine with accuracy the profit contributed by SAS
since the date of acquisition. Similarly, based on the nature of the business combination it was not possible to determine
the revenue and profit impact to the Group if the acquisition had occurred on 1 July 2019.
Status of business combinations completed in prior periods
In the prior period the Group completed the acquisitions of Velpic Limited (which includes Velpic Australia Pty Ltd) and
Eify Pty Ltd on 3 August 2018 and 2 october 2018 respectively. There have been no changes to the provisional accounting
previously disclosed in the Group’s 30 June 2019 annual report in respect of these acquisitions. In addition, the deferred
consideration relating to the acquisitions completed in the prior year, what had a total value of $2.4m, was paid during the
current period.
ANNu AL REPoRT 2020
93
Note 32. Interests in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in
accordance with the accounting policy described in Note 2:
Entity
Country of incorporation
Damstra Technology Pty Ltd
Damstra Technology Pty Ltd
Australia
New Zealand
Damstra Technology LLC
united States of America
Damstra Technology uK Limited
united Kingdom
EIFY Pty Limited
Applied Project Experience Pty Ltd
Australia
Australia
Applied Project Experience Ltd
united Kingdom
Applied Project Experience Inc
united States of America
Equity holding
2020
%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
2019
%
100.00%
100.00%
100.00%
100.00%
100.00%
–
–
–
The proportion of ownership interest is equal to the proportion of voting power held.
Note 33. Events after the reporting period
on 8 July 2020, Damstra announced that it has entered into an implementation agreement to acquire Vault Intelligence
Limited (“Vault”, ASX: VLT) by way of a recommended Scheme. The acquisition will create a larger, more diversified
workplace management company with an expanded and highly complementary product range.
A scheme booklet containing information relating to the Scheme, reasons for the Vault directors’ unanimous
recommendation, an Independent Expert Report and details of the Scheme meeting is expected to be sent to Vault
shareholders in September 2020.
Vault shareholders will then have the opportunity to vote on the Scheme at a court convened shareholder meeting,
expected to be held 2 october 2020. Subject to shareholder approval being obtained by the requisite majorities and the
other conditions of the Scheme being satisfied, the Scheme is expected to be implemented on 19th october 2020.
The impact to the Group from CoVID‑19 disruption has been limited. our recurring revenue base has stayed steady,
and we have developed several new products to assist our clients to return to work safely.
No other matter or circumstance has arisen since 30 June 2020 that has significantly affected, or may significantly affect
the Group’s operations, the results of those operations, or the Group’s state of affairs in future financial years.
94
DAMSTRA HoLDINGS LIMITED
NOTES TO THE F INANCIAL S TATEMENTS
Continued
Note 34. Reconciliation of loss after income tax to net cash from operating activities
(a) Reconciliation of loss after income tax to net cash inflow from operating activities
Loss after income tax (expense)/benefit for the year
Adjustments for:
Depreciation and amortisation
Non‑cash employee benefits expense – share‑based payments
Net exchange differences
Change in operating assets and liabilities:
Increase in trade and other receivables
Increase in income tax refund due
(Increase) in other assets
Increase/(decrease) in trade and other payables
(Decrease) in income tax payables
Increase in other provisions
(Increase) in deferred revenue
Increase in deferred tax assets
Net cash from operating activities
Note 35. Loss per share
Loss after income tax attributable to the owners of Damstra Holdings Limited
Consolidated
2020
$’000
(3,779)
6,164
2,062
(72)
(1,225)
(449)
318
(758)
–
234
(81)
2,309
4,723
2019
$’000
(3,718)
4,128
264
2
(2,012)
–
(479)
3,444
(1,085)
315
–
757
1,616
Consolidated
2020
$’000
(3,779)
2019
$’000
(3,718)
Number
Number
Weighted average number of ordinary shares used in calculating basic earnings per share
124,057,501
89,760,000
Weighted average number of ordinary shares used in calculating diluted earnings per share
124,057,501
89,760,000
Basic loss per share
Diluted loss per share
Cents
(3.05)
(3.05)
Cents
(4.14)
(4.14)
ANNu AL REPoRT 2020
95
Note 36. Share‑based payments
Movement in share‑based payments reserve during the year is as follows:
Date
1 July 2019
Detail
opening balance
16 october 2019
Issue of employee gift shares*
16 october 2019
Issue of share options to CEo and Executive Chairman (Issue 1)
16 october 2019
Issue of share options to non‑executive Directors (issue 2)
16 october 2019
Issue of share options to senior management (issue 2)
30 June 2020
30 June 2020
Proposed issue of share options to the CEo, Executive Chairman and senior
management (issue 3)
Proposed issue of share options to the CEo, Executive Chairman and senior
management (issue 4)
30 June 2020
Cost of share‑based payments issued in prior periods
$’000s
6,327
35
550
360
715
106
36
260
8,389
*
As part of the Initial public offering completed on 16 october 2019 the Company issued 38,885 gift shares to employees of the Company.
Each eligible employee received 1,111 shares at an issue price of $0.90.
The dollar value for each tranche noted above represents the expenses for the period recognised in the statement
of profit or loss and other comprehensive income in employment expenses for the period to 30 June 2020.
Issue of share options (Issue 1 – Issue 2)
As part of the IPo, share options were issued to the Group CEo, Executive Chairman and Senior Management.
All tranches of options noted above have been valued by an independent expert. The options have been valued
using the binomial option valuation model to enable the restriction periods to be factored into the valuation.
The options were issued under the following terms and assumptions;
Number of options issued
1,964,284
399,999
794,439
Options issued to CEO
and Executive Chairman
(Issue 1)
Options issued to
non-executive directors
(Issue 2)
Options issued to
senior management
(Issue 2)
Grant date
Expiry date
Price on issue date
Exercise price
Volatility
Risk free rate
Dividend yield
16 october 2019
16 october 2025
16 october 2019
16 october 2019
16 october 2034
16 october 2034
$0.90
$1.53
65%
0.95%
$0.90
$nil
50%
1.18%
$0.90
$nil
50%
1.18%
0% for first 2 years, 8%
for subsequent years
0% for first 2 years,
8% for subsequent years
0% for first 2 years,
8% for subsequent years
Fair value of option at grant date
$0.28
$0.90
$0.90
Vesting conditions
options will immediately vest upon successful IPo on the ASX, subject to an employee or Directors remaining employed
by the Company. upon vesting, 50% of the options will be subject to a 12‑month exercise restriction and the remaining
50% will be subject to a 24‑month exercise restriction period.
96
DAMSTRA HoLDINGS LIMITED
NOTES TO THE F INANCIAL S TATEMENTS
Continued
Proposed issue of share options (Issue 3 – Issue 4)
As part of FY20 Equity Incentive Plan (“EIP”), the Company has proposed to issue share options to Key Management
Personnel and staff under the EIP. In total, two tranches are proposed to be issued. Both tranches of options have been
valued by an independent expert as part of the process. The proposed options have been valued using the binomial option
valuation model to enable expected early exercise of the options to be factored into the valuation. The Group has begun
to accrue for these options in advance of the proposed grant date as the terms have been mutually agreed between the
parties on the IPo date. All issues to Key Management Personnel remain subject to shareholder approval.
The options are proposed to be issued under the following terms and assumptions;
Number of options to be issued
Grant date
Expiry date
Price on issue date
Exercise price
Volatility
Risk free rate
Dividend yield
EIP Options
(Issue 3)
552,935
30 June 2020
30 June 2035
$1.31
$nil
50%
1.18%
EIP Options
(Issue 4)
552,935
30 June 2020
30 June 2026
$1.31
$1.64
65%
0.95%
0% for first 2 years,
8% for subsequent years
0% for first 2 years,
8% for subsequent years
Fair value of option at grant date
$0.77
$0.26
Vesting conditions
The holder is required to remain employed by the Company. Assuming the vesting condition is satisfied, the options
will vest in four equal tranches following release of the annual report for the years ending 30 June 2020, 30 June 2021,
30 June 2022 and 30 June 2023.
ANNu AL REPoRT 2020
97
Consolidated
2020
$’000
2019
$’000
3
42,387
42,390
–
–
–
42,390
36,873
9,289
(3,772)
42,390
(2,840)
(2,840)
1
17,062
17,063
9,225
5,899
15,124
1,939
2,607
6,327
(6,995)
1,939
(869)
(869)
Note 37. Parent entity financial information
(a) Summary financial information
Balance sheet
Current assets
Non‑current assets
Total assets
Current liabilities
Non‑current liabilities
Total liabilities
Net assets
Shareholders’ equity
Contributed equity
Reserves
Accumulated losses
(Loss)/profit for the year
Total comprehensive (loss)/income
(b) Guarantees entered into by the parent entity
The parent entity has not entered into any guarantees in relation to the debts of its subsidiaries.
(c) Contingent liabilities of the parent entity
The parent entity did not have any contingent liabilities as at 30 June 2020 or 30 June 2019.
(d) Contractual commitments for the acquisition of property, plant or equipment
The parent entity did not have any contractual commitments as at 30 June 2020 or 30 June 2019.
98
DAMSTRA HoLDINGS LIMITED
DIRECTORS’ DECLARATION
30 June 2020
In the directors’ opinion:
• The attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards,
the Corporations Regulations 2001 and other mandatory professional reporting requirements;
• The attached financial statements and notes comply with International Financial Reporting Standards as issued
by the International Accounting Standards Board as described in note 2 to the financial statements;
• The attached financial statements and notes give a true and fair view of the Group’s financial position as at 30 June 2020
and of its performance for the financial year ended on that date; and
• There are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due
and payable.
The directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001.
on behalf of the directors
Drew Fairchild
Director
27 August 2020
Melbourne
Johannes Risseeuw
Director
INDEPENDENT AUDITOR’S REPORT
ANNu AL REPoRT 2020
99
Independent auditor’s report
To the members of Damstra Holdings Limited
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of Damstra Holdings Limited (the Company) and its controlled
entities (together the Group) is in accordance with the Corporations Act 2001, including:
(a) giving a true and fair view of the Group's financial position as at 30 June 2020 and of its financial
performance for the year then ended
(b) complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The Group financial report comprises:
●
●
●
●
●
●
the consolidated statement of financial position as at 30 June 2020
the consolidated statement of changes in equity for the year then ended
the consolidated statement of cash flows for the year then ended
the consolidated statement of profit or loss and other comprehensive income for the year then
ended
the notes to the consolidated financial statements, which include a summary of significant
accounting policies
the directors’ declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial report
section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence
Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also
fulfilled our other ethical responsibilities in accordance with the Code.
PricewaterhouseCoopers, ABN 52 780 433 757
2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001
T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
100
DAMSTRA HoLDINGS LIMITED
INDEPENDENT AUDITOR’S REPORT
Continued
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion
on the financial report as a whole, taking into account the geographic and management structure of the
Group, its accounting processes and controls and the industry in which it operates.
Materiality
Audit scope
Key audit matters
● Our audit focused on where
the Group made subjective
judgements; for example,
significant accounting
estimates involving
assumptions and inherently
uncertain future events.
● The Group operates across
a single operating segment,
being the operation of
workforce management
solutions. Its head office
function is based in
Melbourne, Australia.
● For the purpose of our audit we
used overall Group materiality of
$194,000, which represents
approximately 1% of the Group’s
revenues from ordinary activities.
● We applied this threshold,
together with qualitative
considerations, to determine the
scope of our audit and the nature,
timing and extent of our audit
procedures and to evaluate the
effect of misstatements on the
financial report as a whole.
● We chose Group revenue from
ordinary activities because, in our
view, it is the benchmark against
which the performance of the
Group is most commonly
measured.
● We utilised a 1% threshold based
on our professional judgement,
noting it is within the range of
commonly acceptable thresholds.
● Amongst other relevant topics,
we communicated the following
key audit matters to the Audit
and Risk Committee:
− Carrying value of goodwill
and intangible assets
− Determination of
amortisation periods
applied to finite intangible
assets
− Revenue recognition
− Accounting for business
−
combinations
Share-based payments and
remuneration report
● These are further described in
the Key audit matters section of
our report.
ANNu AL REPoRT 2020
101
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our
audit of the financial report for the current period. The key audit matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters. Further, any commentary on the outcomes of a particular audit
procedure is made in that context.
Key audit matter
How our audit addressed the key audit matter
Carrying value of goodwill and intangible
assets
Refer to note 15 Intangible assets
At 30 June 2020, the Group has $31.8m of goodwill
and intangible assets.
At least annually, an impairment test is performed by
the Group over the goodwill and intangible assets
based on a value in use discounted cash flow model
(the model). No impairment of the Group’s goodwill
and intangible assets was identified.
The Group has determined that there is one Cash
Generating Unit (“CGU”), being Total Workforce
Management Solutions.
We considered this a key audit matter due to:
● The financial significance of the goodwill and
intangibles assets balance
● The significant judgement required by the Group
to estimate the key assumptions in the model to
determine the recoverable amount of the goodwill
and intangible assets. The key assumptions
applied by the Group include:
−
−
−
short-term and future growth rates in revenue
the discount rate adopted in the model
terminal growth rate
The rapidly developing COVID-19 pandemic has meant
assumptions regarding the economic outlook and the
impacts on the Group’s estimates is uncertain,
increasing the degree of judgement required in
determining the recoverable amount of goodwill and
intangible assets. Specifically, this includes judgements
regarding the impact of COVID-19 on forward looking
information, including short term and future growth
rates and terminal value forecasts.
Our audit procedures included, amongst others:
● Assessing whether the allocation of goodwill and
intangible assets to one CGU was consistent with
our knowledge of the Group’s operations and
internal Group reporting.
● Assessing whether the CGU appropriately included
all directly attributable assets, liabilities, corporate
overheads and cash flows.
● Assessing the Group’s historical ability to forecast
future cash flows by comparing budgets with
reported actual results for the previous year.
● Evaluating forecast cash flows used in the models
for consistency with the Group’s most up-to-date
budgets and business plans formally approved by
the Board of Directors.
● Considering whether the cash flows used in the
model were reasonable and based on supportable
assumptions by comparing actual cash flows for
previous years to forecast cash flows and
evaluating significant differences identified.
● Assessing the sensitivity of key assumptions used
in the model, including whether a reasonably
possible change, either individually or collectively,
would result in the impairment of assets.
● Testing of the mathematical accuracy of the model
on a sample basis.
● Together with PwC valuation experts evaluating
whether the discount rate and terminal growth
rate used in the model appropriately reflected the
risks of the CGU by considering relevant industry
and market factors.
● Considering the adequacy of disclosures in note 15,
including those regarding the key assumptions in
light of the requirements of Australian Accounting
Standards.
102
DAMSTRA HoLDINGS LIMITED
INDEPENDENT AUDITOR’S REPORT
Continued
Key audit matter
How our audit addressed the key audit matter
Determination of amortisation periods applied
to finite intangible assets
Refer to notes 2(n)(v) Amortisation and useful lives
and 15 Intangible assets
At 30 June 2020, the Group has $13.3m of finite
intangible assets, comprising customer relationships,
acquired software and internally generated software.
The assessment of the amortisation period of
intangible assets was a key audit matter due to the
judgement involved in determining the amortisation
period of intangible assets which can be susceptible to
rapid change and technological obsolescence. In
making these judgements the Group has considered the
typical product life cycle as well as historical customer
retention rates.
Revenue recognition
Refer to notes 2(e) Revenue recognition and 6 Revenue
The Group recognised revenue of $19.6m, which is
predominantly comprised of the following revenue
streams:
● Provision of software services ($13.4m)
● Rental of hardware equipment ($4.4m)
● Training and card re-issues ($1.8m)
Costs to fulfil contracts totalling $0.3m were
capitalised as contracts costs.
Revenue recognition is a key audit matter due to:
● The significance of revenue to the Group's
financial results.
● The extent of deferred revenue and contract assets
recognised by the Group and the related revenue
recognised during the year.
● The level of judgement applied in the
capitalisation and determination of the period over
which to amortise contract costs.
Our audit procedures included, amongst others:
● Evaluating the Group’s assessment of the
amortisation period of acquired customer
relationships by considering significant changes in
expected customer retention rates since
acquisition.
● Assessing the estimated amortisation period
applied to acquired software relative to the
manner in which it is expected to be used by the
Group.
● Assessing the estimated amortisation period of
internally developed costs capitalised to software
during the year relative to the Group’s experience
of software lifecycles.
● Assessing the remaining useful life of intangible
assets with finite lives having considered any
changes in the extent or manner in which the
intangible assets are expected to be used.
● Recalculation the amortisation expense for a
sample of finite lived intangible assets.
● Evaluating the adequacy of the disclosures made in
notes 2(n)(v) and 15 in light of the requirements of
Australian Accounting Standards.
Our audit procedures included, amongst others:
● Developing an understanding of the process
undertaken by the Group to recognise revenue
from the provision of software services and from
the rental of hardware equipment.
● Testing the operating effectiveness of key controls
over the processes for the deferral and recognition
of revenue within the Group’s general ledger
system and the automated interface between the
Group’s invoicing systems.
● Comparing a sample of invoices created in the
invoicing systems to those transferred to the
general ledger system.
● Performing testing over revenue transactions and
agreed a sample to supporting documents.
● Performing tests over the mathematical accuracy
of the contract cost calculation.
● Assessing the reasonableness of the amortisation
period over which contract costs are amortised
relative to the average contract period.
● Evaluating the adequacy of the disclosures made in
notes 2(e) and 6 in light of the requirements of
Australian Accounting Standards.
ANNu AL REPoRT 2020
103
Key audit matter
How our audit addressed the key audit matter
Accounting for business combinations
Refer to note 31 Business combinations
Our audit procedures included, amongst others:
The Group acquired Scenario Advantage Workforce
Business (‘SAW’), Applied Project Experience Pty Ltd
(‘APE Mobile’) and SmartAsset Software Business
(‘SAS’) for purchase consideration of $3.9m, $5.5m and
$0.5m respectively. Goodwill of $1.6m, $2.8m and a
gain of $0.5m was recognised respectively.
The Group has recognised the fair value of assets and
liabilities for the acquired businesses.
We considered this a key audit matter because of the
significant judgement involved by Group in the
following areas:
● determining the acquisition dates
●
considering whether the Group acquired
assets or a business
estimating the purchase consideration
identifying all assets and liabilities of the
newly acquired businesses and;
estimating the fair value of each asset and
liability for initial recognition by the Group.
●
●
●
Share-based payments and remuneration
report
Refer to note 36 Share-based payments and the
remuneration report outlined in pages 9 to 16
The Group recognised a share-based payment expense
of $2.1m during the year relating to:
● Options granted over shares that vested upon
completion of the Group's initial public
offering.
● Options proposed to be issued as part of the
FY20 Equity Incentive Plan which are
expected to vest over a four year period.
This was a key audit matter due to the judgement in the
key assumptions and estimates used in determining the
fair value of the share-based payment expense
including:
● determination of the grant date
●
estimated volatility over the option period
● probability of meeting vesting conditions
● Evaluating the Group’s accounting against the
requirements of Australian Accounting Standards,
the respective purchase agreements and our
understanding of the businesses acquired.
● Assessing the determination of the acquisition date
against supporting documentation including ASX
announcements, relevant share registers and the
requirements of Australian Accounting Standards.
● Assessing the fair value of the purchase
consideration for each business by comparing a
sample of payments to bank records and ASX
takeover announcements.
● Assessing the fair value of acquired software and
customer relationship assets recognised by
evaluating the valuation methodology and
considering key sales and replacement cost
assumptions used in the valuation models.
● Evaluating the adequacy of the disclosures made in
note 31 in light of the requirements of Australian
Accounting Standards.
Our audit procedures included, amongst others:
● Developing an understanding of the nature of the
share based incentive schemes.
● Reading the terms and conditions of the various
incentive plan agreements.
● Evaluating the Group’s assessment of the
likelihood of meeting the vesting conditions
attached to each of the agreements.
● Assessing the Group's methodology for calculating
the fair value of share options, and agreeing a
sample of valuation inputs to supporting
documents including external data and employee
offer letters.
● Evaluating the adequacy of the disclosures made in
note 36 and in the remuneration report in light of
the requirements of Australian Accounting
Standards and the Corporations Act.
104
DAMSTRA HoLDINGS LIMITED
INDEPENDENT AUDITOR’S REPORT
Continued
Other information
The directors are responsible for the other information. The other information comprises the information
included in the annual report for the year ended 30 June 2020, but does not include the financial report
and our auditor’s report thereon. Prior to the date of this auditor's report, the other information we
obtained included the Directors report. We expect the remaining other information to be made available
to us after the date of this auditor's report.
Our opinion on the financial report does not cover the other information and accordingly we do not and
will not express an opinion or any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of
this auditor’s report, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
When we read the other information not yet received, if we conclude that there is a material misstatement
therein, we are required to communicate the matter to the directors and use our professional judgement
to determine the appropriate action to take.
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a true
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for
such internal control as the directors determine is necessary to enable the preparation of the financial
report that gives a true and fair view and is free from material misstatement, whether due to fraud or
error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
A further description of our responsibilities for the audit of the financial report is located at the Auditing
and Assurance Standards Board website at:
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of our
auditor's report.
ANNu AL REPoRT 2020
105
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 9 to 16 of the directors’ report for the year
ended 30 June 2020.
In our opinion, the remuneration report of Damstra Holdings Limited for the year ended 30 June 2020
complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the remuneration
report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an
opinion on the remuneration report, based on our audit conducted in accordance with Australian
Auditing Standards.
PricewaterhouseCoopers
Jason Perry
Partner
Melbourne
27 August 2020
106
DAMSTRA HoLDINGS LIMITED
SHAREHOLDER INFORMATION
30 June 2020
The following information was applicable as at 31 July 2020.
1. Substantial shareholders
The following holders are registered by the Company as a substantial holder, having declared a relevant interest
in accordance with the Corporations Act 2001 (Cth), in the voting shares below:
Holder name
Damstra Holdings Limited
Johannes Risseeuw
Christian Damstra
AustralianSuper Pty Ltd
Date of interest
18 April 2020
16 october 2020
16 october 2020
09 July 2020
Regal Funds Management Pty Ltd
28 July 2020
Number
of ordinary
shares1
45,557,778
18,895,556
18,890,000
8,397,083
10,621,207
1.
2.
As disclosed in the last notice lodged with the ASX by the substantial shareholder.
The percentage set out in the notice lodged with the ASX is based on the total issued capital of the Company at the date of interest.
2. Number of security holders
Securities
ordinary Shares
unlisted options over ordinary shares (options)
3. Voting Rights
Securities
Voting rights
% of
issued
capital2
32.66%
13.75%
13.70%
6.02%
7.61%
Number
of holders
4,236
30
Subject to the constitution and to any rights or restrictions attached to any shares
or class of shares, at a general meeting:
(a) on a show of hands, every member present has one vote;
(b) on a poll, every member present has:
ordinary Shares
(i) one vote for each fully paid share held as at the record time by the member
and in respect of which the member is entitled to vote; and
(ii) a fraction of a vote for each partly paid share held as at the record time by the
member and in respect of which the member is entitled to vote, equivalent to
the proportion which the amount paid (not credited) on the share bears to the
total amounts paid and payable (excluding amounts credited) on the share.
options
options do not carry any voting rights.
ANNu AL REPoRT 2020
107
Holders
1,128
1,961
584
507
56
Ordinary
shares
763,992
5,191,283
4,469,702
12,123,818
% of total
ordinary
shares
0.55%
3.72%
3.20%
8.69%
116,933,772
83.83%
4,236
139,482,567
100.00%
Holders
Options
0
0
0
23
7
30
0
0
0
692,217
3,126,505
3,818,722
% of total
options
0.00%
0.00%
0.00%
18.13%
81.87%
100.00%
Closing price
of shares
Number
of holders
$1.70
74
4. Distribution schedule
The distribution schedule for ordinary Shares is as follows:
Spread of holdings
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – 9,999,999,999
Totals
The distribution schedule for options is as follows:
Spread of holdings
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – 9,999,999,999
Totals
5. Holders of non‑marketable parcels
Date
31 July 2020
108
DAMSTRA HoLDINGS LIMITED
SHAREHOLDER INFORMATION
Continued
6. Top 20 shareholders
The top 20 largest fully paid ordinary shareholders together hold 75.48% of the securities in this class and are listed below:
Rank
Holder name
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
RISJEF PTY LTD
DAMSTAR PTY LTD
J P MoRGAN NoMINEES AuSTRALIA PTY LIMITED
CS THIRD NoMINEES PTY LTD
HSBC CuSToDY NoMINEES (AuSTRALIA) LIMITED
MR JoHN CoLIN LooSEMoRE + MRS SuSAN MARJoRY LooSEMoRE
NATIoNAL NoMINEES LIMITED
DAMSTRA SuPER PTY LTD
FoRTIGEN PTY LTD
RoSELEE RIDGE RESouRCES PTY LIMITED
CITCoRP NoMINEES PTY LIMITED
CHoCoLATE PEARL PTY LTD
FAIRCHILD ADVISoRY PTY LTD
BNP PARIBAS NoMS PTY LTD
HuRWITZ FAMILY PTY LTD
XWSL HoLDINGS PTY LTD
MR PIETER CHRISTIAAN SCHoLTZ
CS FouRTH NoMINEES PTY LIMITED
Damstar Pty Ltd
9. Share buy‑backs
There is no current on‑market buy‑back scheme.
Exercise
price
$0.00
$1.53
Number
of options
1,854,438
1,964,284
3,818,722
Number
of holders
30
2
30
Securities
% of issued
1,182,142
1,182,142
30.96%
30.96%
110
DAMSTRA HoLDINGS LIMITED
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CORPORATE DIRECTORY
Stock exchange listing
Damstra Holdings Limited shares are
listed on the Australian Securities Exchange
(ASX code: DtC)
Website
https://www.damstratechnology.com
Share registry
Computershare Investor Services Pty Ltd
level 3, 60 Carrington Street
Sydney nSW 2000
ASX Code
DTC
Directors
Christian William Damstra
Drew Fairchild
Johannes Risseeuw
Morgan Hurwitz
Simon Yencken
Joint company secretaries
Pieter Christiaan Scholtz
Carlie Hodges
Registered office
level 1
38-40 Garden Street
South Yarra VIC 3141
Auditor
pricewaterhouseCoopers
2 Riverside Quay
Southbank VIC 3006
Solicitors
Cottell & Co
level 31, 120 Collins Street
Melbourne VIC 3000
www.colliercreative.com.au #DAM0002
w w w.damstratechnology.com