Tesserent Limited and Controlled Entities
ABN: 13 605 672 928
Annual
Report
2021
Providing world-class
cybersecurity to
enterprise, government
and critical infrastructure
clients across the region
ABN 13 605 672 928
Annual Report 2021 Tesserent Ltd Contents
2 Chairman and Co-CEOs’ Letter
5
Review of Operations
9 About Tesserent
10 Board of Directors
12 Executive Team
16 Corporate Governance Statement
26 Directors’ Report
45 Auditors Independence Declaration
46 Consolidated Statement of Profit or Loss
and Other Comprehensive Income
47 Consolidated Statement of Financial Position
49 Consolidated Statement of Changes In Equity
50 Consolidated Statement of Cash Flows
51 Notes to the Consolidated Financial Statements
102 Directors’ Declaration
103 Independent Auditor’s Report
108 ASX Additional Information
111 Corporate Directory
1
Chairman and Co-CEOs’ Letter
Geoff
Lord
Julian
Challingsworth
Kurt
Hansen
Dear Fellow Shareholders,
We are pleased to present the 2021 Annual Report
for Tesserent Limited (ASX:TNT) (‘the Company’)
that looks back on a year that represented
significant growth for the Group as the Board
successfully executed its strategy to strengthen
its core Cyber 360 capabilities. During the year, the
business completed and successfully integrated
the acquisition of six complementary businesses
and expanded its product and critical service
offerings to its clients.
During the year ended 30 June 2021, the Group
reported total sales turnover of $96.7m and
statutory revenue of $67.4m (compared to
$20.2m statutory revenue in FY20). In addition,
the normalised EBITDA2 result of $9.6m for FY21
represents a significant turnaround from last year’s
FY20 comparative results (FY20 normalised EBITDA
loss of $2.8m).
Pleasingly, the Group’s financial results have
improved progressively throughout the year
culminating in a fourth quarter turnover result
of $39.2m. This also supports the business
comfortably exceeding its annualised turnover
run rate ambition of $150m.
The Group has achieved a normalised net profit
(NPAT) of $4.9m1 excluding acquisition related costs
and non-operating share-based costs.
The Group’s exceptional growth was achieved both
organically, through its execution of the Cyber 360
go-to-market strategy, and through successful
completion and integration of six acquisitions – with
the acquired businesses adding public and private
sector consulting services, managed services,
specialised product expertise, plus cloud, defend
and detect services to the Tesserent offering.
1
Statutory reported net loss of $4.5m is adjusted for one-off
acquisition related costs and non-operating share based costs.
2 Normalised EBITDA excludes acquisition related costs and non-
operating share based costs
2
Turnover
$96.7m
+372%
Statutory Revenue
$67.4m
Normalised NPAT1
$4.9m
Normalised EBITDA2
$9.6m
Annual Report 2021 Tesserent Ltd The acquisition of Loop Secure will complete in
September and will further add to the breadth
and depth of the Group’s service offerings and
turnover result.
There are also a number of potential strategic
acquisitions currently in review which, if completed,
will further add to inorganic earnings growth and
deepen the Cyber 360 model.
During the year, Tesserent Innovation was launched
in order to establish strategic partnerships with
emerging technology businesses, thereby providing
access to new capabilities to bring to Tesserent’s
customers. Under Tesserent Innovation, the Group
acquired a 25% stake in each of TrustGrid and
AttackBound, plus entered into an investment
agreement for a 7% stake in Daltrey Pty Ltd
(completed in early July 2021).
The launch of Tesserent Academy, which is a cyber-
learning capability designed to promote industry
cyber knowledge and develop industry talent,
and the joint venture with Optic Security Group,
provides the Group with a leadership position in the
Cyber Education markets and Converged Security.
As announced in the market release on 11 August
2021 – the business is pursuing a new brand and
business unit integration strategy to drive growth
in the business. We look forward to updating the
market on this initiative throughout the coming
year.
We expect 2022 to be another dynamic and
successful year, with the Group already delivering
above budget performance and a number of wins
that will provide a foundation for continued strong
organic growth during the current financial year.
On behalf of the Board and Executive Team,
we would like to thank and acknowledge the
efforts of management and staff who have been
committed to the execution and delivery of our
business strategy. We would also like to thank our
shareholders for their continued support as we
expand on our position as Australia’s #1 ASX-listed
cybersecurity firm.
Geoff Lord
Chairman
Julian Challingsworth
Co-CEO
Kurt Hansen
Co-CEO
3
Tesserent provides its
enterprise and government
clients with a simplified end
to end cybersecurity solution
that removes the requirement
to deal with multiple providers
to achieve an uplift in their
cybersecurity posture
4
Annual Report 2021 Tesserent Ltd Review of Operations
FY21 IN REVIEW
Background
Increasingly, organisations are coming under cyber-
attack from sophisticated state-based actors,
hacktivists and cyber-criminals.
As Australia’s #1 ASX-listed cybersecurity provider,
Tesserent provides its enterprise and government
clients with a simplified end-to-end cybersecurity
solution that removes the requirement to deal
with multiple providers to achieve an uplift in their
cybersecurity posture.
Tesserent has a primarily sovereign Aust/NZ
workforce approaching 400 skilled cybersecurity
professionals. Combined with in-house software
monitoring solutions and access to a range of
products from world-leading cybersecurity vendors,
Tesserent delivers a comprehensive solution to
prevent, detect and mitigate potential cyber-
attacks.
With employees located across offices in
Melbourne, Sydney, Brisbane, Canberra, Wellington,
Auckland and Christchurch, Tesserent continues
to cement its place as Australia’s #1 ASX-listed
cybersecurity provider. Tesserent now provides
products and services to over 1,000 clients:
GOVERNMENT
– 47 Federal and State Departments and
Agencies,
– 25 Local Councils
FINANCIAL
– 8 of the 12 Largest Banks in Aust/NZ,
– 6 Top Financial Services firms,
–
14 Foreign Banks
CRITICAL INFRASTRUCTURE
– 21 of the Top Energy firms in Aust/NZ
ENTERPRISE
– Tesserent works with 43 of the S&P/ASX 100.
FY21 FINANCIAL OBJECTIVES ACHIEVED
All financial objectives for FY21 were met or
exceeded, including:
– Achieving a $150m revenue run rate based on the
fourth quarter revenue annualised,
– Record revenue, earnings and customer receipts
growth,
– Cash flow positivity in the second half.
The Company achieved total Group turnover
of $96.7m and statutory revenues of $67.4m
(compared to $20.5m turnover and $20.2m
statutory revenue in FY20), a 372% increase
year on year.
After achieving record company growth in FY21,
the Company is well placed to enter FY22 with a
continuing focus on organic growth, cross-selling
opportunities and strategic acquisitions where
they add to the Group’s Cyber 360 vision.
FY21 Operating EBITDA1 quarter on quarter
$4.1M
$1.7M
$1.4M
$40.5K
Figure 1 Operating EBITDA on a quarterly basis showing 11.1x
EBITDA growth in 12 months.
FY21 Actual turnover quarter on quarter
$39.2M
$21.4M
$21M
$15.1M
$10.9M
Figure 2 Actual Turnover on a quarterly basis, and is a non-
statutory measure (excludes recent announced
acquisitions not yet in control period).
1 Operating EBITDA is the metric that management use to
monitor and manage the business throughout the year
and is consistent with that reported in the quarterly
4C announcements. It excludes the positive impact of
AASB16 adjustments and fair value adjustments.
5
4
3
2
1
0
40
30
20
10
0
Review of Operations
continued
BOARD UPDATE
In FY21, Megan Haas, a former PwC Cyber Security
& Forensic Services Senior Partner who has worked
with organisations across industries including
pharmaceutical, gaming, retail, manufacturing,
government, media, financial services and
communications, joined the Board as a Non-
Executive Director. Megan replaces Patrick
Flannigan, who joined the board with Chairman
Geoff Lord as part of the board refresh in FY20.
Patrick resigned his position in January 2021, and
the Company thanks him for his contribution to
the Board and efforts to advance the activities
of the Company.
STRATEGIC GROWTH
To complement existing strategic acquisitions,
FY21 also saw the addition of Tesserent Innovation
and Tesserent Academy, two divisions designed to
drive growth through strategic investments and
industry education.
Tesserent Innovation is focused on developing
and investing in new cyber technologies, cyber
products, and innovative companies that are
developing leading technology platforms and tools
that will enable Tesserent to deliver enhanced
capabilities to our customers. In FY21, TNT acquired
a 25% stake in each of TrustGrid and AttackBound,
and also entered into an investment agreement for
a 7% stake in Daltrey Pty Ltd (completed in early
July 2021).
The purpose of the Tesserent Academy is to
improve the cyber talent ecosystem, playing an
active role in developing talent and addressing the
skills shortage in the sector.
In mid FY21 Tesserent formed a JV partnership
with Optic Security Group, Australasia’s largest
independent and most technically advanced
converged Enterprise Security Risk Management
Group.
This partnership has already realised positive
commercial value to Tesserent through cross selling
opportunities identified and, as importantly, is
leading the market in developing strategic thinking
and frameworks to connect the physical security
world and the digital, or converged security, world.
We look forward to updating the market further
in FY22 as this convergent security marketplace
evolves.
6
INTEGRATION AND SYNERGIES
Having acquired six businesses in the past 12
months, organic growth potential from unlocking
further cross-selling synergies, and accelerating
revenue growth, is significant.
From September FY22, Tesserent Limited, the
parent company and corporate-facing entities
will go to market from a single entity with a
single customer-facing brand, Tesserent, that
incorporates services from TNT’s existing
business units:
– Tesserent Defend incorporating services from
Airloom, Pure Security and Rivium,
– Tesserent Detect incorporating services from
Secure Logic and Pure Security,
– Tesserent Cloud incorporating services from iQ3
and Pure Security,
– Tesserent NZ incorporating services from
Lateral Security and including services from the
Tesserent Defend, Detect and Cloud brands.
These changes have occurred in Q1 FY22 with the
primary objectives being to consolidate services
under a clearly defined brand to help improve the
customer experience and ultimately increase the
number of Tesserent services utilised per customer.
North Security and Seer Security’s considerable
success driving TNT’s Federal Government offerings
will continue ‘as is’ for the foreseeable future.
Tesserent is also delivering further integration and
synergy initiatives including:
– An annualised cost saving benefit of $1.3m in
the last 12 months with an additional $700k
identified through office consolidation, internal
IT spend rationalisation, and business unit
alignment that has already been delivered,
– Group-wide internal systems and process
efficiency analysis for further cost efficiency
opportunities,
– Further investment into ‘people’ systems to help
build on our already impressive employee Net
Promoter Scores (NPS) and ability to attract,
and retain, high-level talent,
– A group-wide CRM uplift project aligning our
systems to our capability lead go-to-market
strategy, enhancing our ability to connect
with and support our customers, as well as
identifying white space opportunities,
Finalising our processes with our joint venture
and Tesserent Innovation partners to ensure we
realise the full benefits of these partnerships
and deliver key capabilities to our customers
effectively.
–
Annual Report 2021 Tesserent Ltd Security market together with JV partner Optic
Security and in Cyber Education via Tesserent
Academy,
– Continue to identify and pursue tactical
acquisitions that add strength and depth to the
Group’s service offering and meet the Board’s
stated strategic objectives,
– Monitor and review the Group’s capital
structure to raise and deploy funds that allow
the business to make these acquisitions and
minimise the Group’s cost of capital.
The Company looks forward to providing further
market updates on its future financial and
commercial objectives in coming announcements.
CAPITAL RAISE
On 24 September 2021, the Group completed
a capital raise (via an equity placement with a
number of institutional investors) raising $25m
to fund future identified acquisitions. The
placement was significantly oversubscribed,
which management and the Board believe reflects
market confidence in the strategy and prospects
of the Group. An equity capital raise was chosen
to optimise the capital structure of the Group and
has also had the impact of enhancing Tesserent’s
visibility in the ASX market.
FUTURE FOCUS
The Board and Management Team continues to
focus on creating shareholder value by building on
Tesserent’s position as Australia’s #1 ASX-listed
cybersecurity provider. Important goals over this
new financial year include:
– Continue to drive the Company’s acquisition
strategy to expand on Cyber 360 capabilities
and market share, increasing shareholder value
through incremental EPS growth,
– Foster innovation and expand proprietary
intellectual property to drive high-margin
product and service offerings,
– Help drive an industry wide capability uplift
and reduce the skill shortage gap through the
Tesserent Academy,
– Focus on capturing further market share in three
key markets: Government (including Defence),
Critical Infrastructure and Industry and Financial
Services,
– Drive growth through deeper customer
engagements and increase our average number
of services per customer to continue the
momentum of organic growth from FY21,
– Integrate acquisitions to maximise synergy
efficiencies and drive organic revenue growth
through cross-selling,
– Build out high-value, high margin, recurring
annuity revenue streams via our Cloud, Secure
Eye Monitoring, Incident Response and Security
as a Service packaged offerings,
– Explore International expansion opportunities
with a focus on Australia’s key Five Eyes allies,
which consists of the USA, UK, NZ and Canada,
– Build a leadership position in the Converged
7
Tesserent’s Cyber 360
strategy radically simplifies
cybersecurity for our clients,
helping them achieve full
end-to-end protection for
their digital assets
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8
Annual Report 2021 Tesserent Ltd
About Tesserent
TESSERENT TODAY
As Australia’s #1 ASX-listed
cybersecurity provider,
Tesserent’s Cyber 360 offering
radically simplifies cybersecurity
for our clients, helping them
achieve full end-to-end
protection for their digital assets.
Cyber 360 utilises a range of
products from world-leading
cybersecurity vendors, delivering
a comprehensive solution to
prevent, detect and mitigate
potential cyber-attacks. This
is delivered by more than 350
cybersecurity professionals
across offices in Melbourne,
Sydney, Brisbane, Canberra,
Auckland, Wellington and
Christchurch.
Tesserent’s Cyber 360 offering
provides products, services and
strategic advice to more than
1,000 Enterprise, Government and
Critical Infrastructure clients,
including:
1.
Cyber Strategy and
Consulting
2. Security Advisory (GRC)
3. Technical Assurance and
Testing
4. Security Integration and
Development
5. Network and Cloud Security
6. Identity and Access
Management
7.
Managed Services and
Monitoring
8. Digital Forensics and Incident
Response
9. Cyber Education
10. Converged/Physical Security
HISTORY
Following its Initial Public
Offering (IPO) in 2016, Tesserent
operated primarily as a Managed
Security Services Provider (MSSP)
delivering services from its ISO-
certified Security Operations
Centre (SOC) to medium-sized
enterprises, local government
and educational institutions.
FY18 saw Julian Challingsworth
appointed as CEO and the
introduction of Tesserent’s
new Cyber 360 strategy in
2019, which included growth
through strategic acquisitions.
A January 2020 Board refresh,
which included the appointment
of Geoff Lord as Non-executive
Chairman and Kurt Hansen as
Co-CEO/Executive Director, was a
key element in driving Tesserent’s
strategy forward.
FY21 included the addition of
Megan Haas to the Board as a
Non-Executive Director, plus the
addition of Tesserent Innovation
and Tesserent Academy, two
divisions designed to drive growth
through strategic investments
and industry education.
Strategic acquisitions include:
1.
Rivium specialises in
consulting, implementation
and managed services for the
enterprise security solution
Splunk. Completed in July 2019.
2. Pure Security complements
Tesserent’s offerings with
penetration testing, secure
application development and
security advisory services.
Completed in December 2019.
3. North Security brings
expertise in cybersecurity,
Governance, Risk and
Compliance (GRC), project
management and digital
transformation to Australian
Federal Government
departments and agencies
including Defence and Law
Enforcement. Completed in
March 2020.
4. Seer Security provides
specialist high-security
services and delivery
capabilities to Australian
Federal Government
departments and agencies
including Defence and Law
Enforcement. Completed in
August 2020.
5. Airloom is a Sydney-based
cybersecurity firm with a
focus on security architecture
and cloud migration services.
Completed September 2020.
6. Ludus Cybersecurity rounds
out Tesserent’s standing
as the largest end-to-end
cybersecurity services
provider in the Canberra
market. Completed in
September 2020.
7.
iQ3 Secure Cloud Services
materially complements
Tesserent’s Cyber 360
strategy and represents
a significant step forward
in Tesserent’s ability to
provide a full end-to-end
cyber service, and has a
significant presence in the
NSW Government. Completed
in October 2020.
8. Lateral Security is a
cybersecurity consulting
firm headquartered in New
Zealand and specialising in
advisory, security testing,
incident response and
managed services. Completed
February 2021.
9. Secure Logic is a leading
Australian Managed Security
services firm that sees further
strengthening of Tesserent’s
presence in State and Federal
Government departments
and agencies. Completed
April 2021.
10. Loop Secure is a leading
Australian cybersecurity firm
providing Managed Security
Services, GRC and Offensive
Security services. To be
completed by the end of
September 2021.
9
Board of Directors
GEOFF LORD
Non-Executive Chairman
Geoff is the Founder and CEO of
the Belgravia Group, a privately
held investment group which
since being established in 1990
has grown to employ more than
10,000 people in businesses
spanning sports and sports
technologies, fitness, leisure,
sports camps, clothing and more.
In addition, Geoff is the former
Founder and Chairman of UXC
Limited, one of Australia’s largest
IT services businesses. After
being founded in 2002 as a $5m
business, UXC grew under Geoff’s
leadership to be acquired in
2016 by NYSE-listed Computer
Sciences Corporation (now DXC
Technology) in a deal valued at
A$427.6m.
Other board positions held by
Geoff include Director Melbourne
Business School, founding
Director of SME finance business
Judo Bank and Chairman of
Salvest. He has also shown a
significant passion for sports and
clubs, having served as Chairman
of Hawthorn Football Club and
Melbourne Victory. Geoff is a Life
Member of both clubs.
Geoff’s formal qualifications
include an MBA (Distinction)
(Melbourne), BEc (Hons) (Monash),
FIDA, ASIA.
Geoff is the largest shareholder
in Tesserent and has acted as an
advisor to the board since early
2019.
JULIAN CHALLINGSWORTH
Co-Managing Director and
Co-Chief Executive Officer
KURT HANSEN
Co-Managing Director and
Co-Chief Executive Officer
Julian joined Tesserent after
serving as Managing Director
and a Partner of The Litmus
Group for over 10 years and
a board member and Partner
of PPB Advisory. In addition to
advising over 20 organisations on
growth acceleration strategies in
Australia, Asia and Europe, Julian
was a key driver in growing Litmus
in Australia and internationally
before it was acquired by PPB
Advisory.
Julian was a director of
Cordence Worldwide, a global
consulting partnership with
2,800 consultants across 60+
locations. Julian worked with the
international team to develop
sales and growth strategies for
the 8 member firms.
With a strong professional
services and corporate finance
background, Julian has a Masters
of Organisational Consulting
from Ashridge Business School
(UK), a Graduate Diploma in IT,
Swinburne University (Aust) and a
Bachelor of Business, Accounting,
RMIT (Aust). Julian is a member of
Chartered Accountants (CAANZ),
Fellow Australian CPA (FCPA) and
a Graduate, Australian Institute
of Company Directors (GAICD).
Kurt has over 30 years of IT
industry experience driving sales
and delivery transformation
and impressive business growth
across many IT and Cybersecurity
organisations in Australia and
New Zealand.
Kurt was the CEO at Pure
Security where, as part of the
PS&C Group he integrated four
Security businesses following
their acquisition and listing onto
the ASX. Previous roles include
executive, senior management
and operational positions
at Check Point Software
Technologies, F5 Networks,
AirData, Symbol Technologies,
Telstra Wholesale, Cisco Systems,
and Ericsson.
Prior to commencing his
corporate career, Kurt joined
the Australian Army as an
electronic trainee, later
becoming a commission officer
and finishing his military career
in Royal Australian Signal Corp
with the rank of Captain. He
holds a Diploma of Engineering
from Swinburne Institute of
Technology.
See pages 26 to 28 for further information
10
Annual Report 2021 Tesserent Ltd GREGORY BAXTER
Non-Executive Director
MEGAN HAAS
Non-Executive Director
Megan’s core competencies
are centred around cyber risk,
governance, technology and
operational processes developed
over 30+ years both in Australia
and internationally. Formerly a
PwC Cyber Security & Forensic
Services Partner, Megan has
worked with organisations
across international borders
and industries including
pharmaceutical, gaming, retail,
manufacturing, government,
media, financial services and
communications.
Megan has a BBUS Accountancy
& Information Systems
(RMIT), GAICD. Megan’s other
Directorships include: Note
Printing Australia (audit
committee), RMIT University
(Council member), Development
Victoria (Chairperson) and the
Suburban Rail Loop Authority.
Board member since 2015. Greg
is currently Chief Transformation
Officer Hewlett Packard,
leading HP’s IT, Cyber, Software,
Data & AI, and Transformation
Management organizations.
Greg was previously Chief
Digital Officer at MetLife
and Global Head of Digital
at Citibank, leading Citi’s
digital transformation across
businesses and geographies.
Greg specialises in the
development and delivery of
digital strategy, corporate
innovation and business
transformation. He has held
senior business, consulting and
technology roles across Asia,
Europe and North America, with
a track record of high-impact
business results.
Greg was a council (board)
member of Chatham House
(Royal Institute of International
Affairs), a leading international
affairs think tank. He holds a
BSc from Monash University
and an MBA from the University
of Melbourne and has been a
guest lecturer on strategy at
the University of Oxford, New
York University, and American
University (Washington).
11
Executive Team
JULIAN CHALLINGSWORTH
Co-Managing Director and
Co-Chief Executive Officer
KURT HANSEN
Co-Managing Director and
Co-Chief Executive Officer
Julian joined Tesserent after
serving as Managing Director
and a Partner of The Litmus
Group for over 10 years and
a board member and Partner
of PPB Advisory. In addition to
advising over 20 organisations on
growth acceleration strategies in
Australia, Asia and Europe, Julian
was a key driver in growing Litmus
in Australia and internationally
before it was acquired by PPB
Advisory.
Julian was a director of
Cordence Worldwide, a global
consulting partnership with
2,800 consultants across 60+
locations. Julian worked with the
international team to develop
sales and growth strategies for
the 8 member firms.
With a strong professional
services and corporate finance
background, Julian has a Masters
of Organisational Consulting
from Ashridge Business School
(UK), a Graduate Diploma in IT,
Swinburne University (Aust) and a
Bachelor of Business, Accounting,
RMIT (Aust). Julian is a member of
Chartered Accountants (CAANZ),
Fellow Australian CPA (FCPA) and
a Graduate, Australian Institute
of Company Directors (GAICD).
Kurt has over 30 years of IT
industry experience driving sales
and delivery transformation
and impressive business growth
across many IT and Cybersecurity
organisations in Australia and
New Zealand.
Kurt was the CEO at Pure
Security where, as part of the
PS&C Group he integrated four
Security businesses following
their acquisition and listing onto
the ASX. Previous roles include
executive, senior management
and operational positions
at Check Point Software
Technologies, F5 Networks,
AirData, Symbol Technologies,
Telstra Wholesale, Cisco Systems,
and Ericsson.
Prior to commencing his
corporate career, Kurt joined
the Australian Army as an
electronic trainee, later
becoming a commission officer
and finishing his military career
in Royal Australian Signal Corp
with the rank of Captain. He
holds a Diploma of Engineering
from Swinburne Institute of
Technology.
JAMES JONES
Group CFO, Tesserent
James joined Tesserent after
serving as CFO of the Australian
FMCG business, Bellamy’s Organic
Group which was formerly an ASX
listed business (sold in a public to
private transaction in 2019).
In his role at Bellamy’s, James
was responsible for leading the
Finance team across multiple
jurisdictions in the delivery of
technical accounting, reporting,
audit and tax requirements plus
statutory reporting and board
reporting for Bellamy’s Group.
Prior to his role at Bellamy’s,
James was a Director at Deloitte
and EY (UK) working in an advisory
capacity on restructuring,
distressed assets and M&A
transactions.
James has worked on the
ground on both sell side and
buy side mandates, as well
as fund raisings and Stock
Exchange listings on both ASX
and LSE. James has a Bachelor
of Commerce and a Bachelor of
Science from The University of
Melbourne (Aust) and is a member
of Chartered Accountants
(CA ANZ).
James commenced:
April 2021
12
Annual Report 2021 Tesserent Ltd ALEXANDRA BELCHER
Head of Marketing
With experience in IT sector
B2B and B2C marketing, client
experience management,
corporate internal
communications and customer
facing roles - some of these
across complex multi-national
teams and some within medium-
sized businesses, Alex is an
adaptable communicator and
manager. Her experience includes
varied marketing, sales and IT
operations management roles
at organisations including IBM,
Telstra and Jellis Craig.
Alex holds a Bachelor of Arts
(University of Melbourne), a
Masters of Marketing (Melbourne
Business School) and AICD
Foundations.
CHRIS HAGIOS
Managing Partner,
Defend & Protect
Chris was the founder and
Managing Director of Airloom.
Chris has over 20 years of start-
up and high growth technology
company experience leading
consulting, product, software
development, marketing and
sales teams. He brings innovation
and success in mobile, cloud
and the cybersecurity industries
with his unique business sense,
technical acumen and vision
for the future protecting
enterprise data.
Chris leads the Tesserent
Defend BU and has oversight to
develop and grow our Assurance,
Advisory/GRC, Products &
Technology and Data & Analytics
segments, all of which are
focussing on services and
solutions designed to defend and
protect our clients’ digital assets.
CRAIG HUMPHREYS
Managing Partner, Cloud
Craig is an IT veteran having
held leadership positions in both
Australian and multi-national
organisations over the past 25
years. He founded iQ3 in Sydney
in 2010 with a strong vision to
address the dynamic landscape
of IT and the growing appetite for
consuming IT as a Service.
Building a team of professionals
and establishing a significant
position delivering Secure Cloud
services to a large number of
Government organisations, as
well as Australian and multi-
national corporate clients, saw
iQ3 ranked 28th in BRW’s fast 100
in 2015.
Craig leads the Tesserent Cloud
Business Unit providing clients
with highly secure services lines
involving public cloud, private
cloud/IaaS and hybrid managed
cloud offerings.
13
Executive Team
continued
GEORGE KATAVIC
CEO, north - security.digital
EMMELINE MCILLREE
Chief People Officer
DEEPAK SINGH
Managing Partner, Detect
George has more than 25 years
experience with consulting
organisations in the Federal
Government market. George
founded BCT, a specialist in
Defence and National Security
consulting which later became
part of UXC in 2006. From that
time George was responsible for
building UXC Consulting in the
ACT, combining 6 disparate and
small brands which evolved into
the largest Australian owned
Consulting organisation in the
ACT. With over 200 staff including
over 100 cybersecurity staff, UXC
was the largest cyber consulting
organisation in the Federal
Market.
Prior to his current role with
north, George was the Managing
Partner of DXC Consulting in
the ACT. He co-founded north in
2018 which has cemented itself
as a leader in the cyber field in
the ACT.
George commenced:
December 2019
Emmeline is an energetic and
accomplished Human Resources
Executive with extensive
experience across a variety
of industries. Her experience in
senior HR roles includes some
of Australia’s most well-known
brands - PwC, St Kilda Football
Club, Australia Post, Telstra and
the Melbourne Racing Club.
Throughout her career, Emmeline
can evidence a track record
of driving, implementing and
embedding sustainable change.
She is effective at managing
ambiguity and complexity,
turning strategy into action and
influencing people-decisions via
sound judgement and trusted
relationships.
An engaging and authentic
leader who is passionate about
people and creating great places
to work, Emmeline is eager to
make a positive impact!
Emmeline commenced:
November 2020
Deepak is a seasoned
Information Security
professional with over 20 years
of experience in the information
security domain. He has held
leadership roles in local and
international information security
organisations of various scale.
He was instrumental in the
growth and success of Secure
Logic, which provided end to end
information and cybersecurity
solutions and services in various
sectors. His customer focused
view enables the right balance
of security investment against
business objectives, which is
driven through his expertise in
the field.
Deepak leads the Tesserent
Detect BU which provides
secure monitoring and detection
services designed to protect
our client sensitive assets and
information against global
cyber threats.
Deepak commenced:
March 2021
14
Annual Report 2021 Tesserent Ltd HAMISH SOPER
Senior Partner, New Zealand
With over 15 years’ experience
transforming IT businesses,
this role will see Hamish take
the Tesserent Defend, Detect
& Cloud offerings to the NZ
Market and assist the Tesserent
Lateral Security team to expand
the existing Advisory/GRC and
Assurance business.
Previously, Hamish was Country
Manager with Check Point
Software Technologies where he
built the business from $2M to
$16M over a 10 year period. In 2017
he established the AppDynamics
(a Cisco Company) business in
New Zealand and then returned
to Check Point in 2018 as ANZ
Channel Director. Earlier roles
include running the M2M (IoT)
sector at Vodafone.
Hamish commenced:
August 2021
15
Corporate Governance Statement
The Company has adopted systems of control and accountability as the basis for the administration of
corporate governance. The Board is committed to administering the policies and procedures with openness
and integrity, pursuing the spirit of corporate governance commensurate with the Company’s needs.
The Company has adopted The Corporate Governance Principles and Recommendations (4th edition) as
published by the ASX Corporate Governance Council (ASX Recommendations).
Consistent with prior years, the Board does not consider that all of the ASX Recommendations are
appropriate for the Company, and where Tesserent has not followed an ASX Recommendation, this has been
identified in the Corporate Governance Statement, together with the reasons why it has not been followed.
The Board considers that the current board composition provides a cost effective and practical method of
directing and managing the Company. The Board has been composed with consideration to the experience,
skill sets and capabilities of each director and the combined capabilities required for an ASX-listed
cybersecurity business. As Tesserent’s activities develop in size, nature, and scope, the size of the Board and
the implementation of additional corporate governance policies and structures will be revisited.
The Company’s corporate governance policies and practices are outlined below and the Company’s full
Corporate Governance Plan is available in a dedicated corporate governance information section of the
Company’s website: www.tesserent.com.
a. Code of Conduct – This policy sets out a statement of the shared values of the Company and how
the Company conducts itself and its business.
b. Board Charter – This policy sets out the principles for the operation of the Board and describes the
functions of the Board and those functions delegated to management of the Company.
c. Selection and Appointment of New Directors Policy – This policy ensures that the procedure when
selecting and appointing new Directors is formal and transparent.
d. Board and Senior Executive Evaluation Policy – This policy sets out the process relating to performance
and evaluation of the Board, senior executives and individual Directors.
e. Appointment of External Auditor Policy – This policy summarises the conditions on which the Company
will select an external auditor.
f. Continuous Disclosure Policy – This policy sets out certain procedures and measures which are
designed to ensure that the Company complies with its continuous disclosure obligations.
g. Trading Policy – This policy is designed to maintain investor confidence in the integrity of the
Company’s internal controls and procedures and to provide guidance on avoiding any breach of the
insider trading laws.
h. Anti-Bribery Policy – This policy sets out the practices which the Company follows to ensure
compliance by the Company, its Directors, Senior Executives and employees with the anti-bribery or
anticorruption laws in the jurisdictions that the Company operates.
i. Shareholder Communications Policy – This policy sets out practices which the Company will implement
to ensure effective communication with its Shareholders.
j. Diversity Policy – This policy sets out the Company’s objectives for achieving diversity amongst its
Board, management and employees.
k. Audit and Risk Management Committee Charter – This policy sets out the objectives and procedures
for the Audit and Risk Management Committee when it is in operation.
l. Nominations and Remuneration Committee Charter – This policy sets out the objectives and
procedures for the Nominations and Remuneration Committee when it is in operation.
16
Annual Report 2021 Tesserent Ltd ADHERENCE WITH AND DEPARTURES FROM RECOMMENDATIONS
The Company’s compliance with and departures from the Recommendations during the reporting period are
set out on the following pages.
RECOMMENDATION
COMPANY’S CURRENT PRACTICE
1.1
A listed entity should have and disclose a board
charter setting out:
a. the respective roles and responsibilities of its
board and management; and
b. those matters expressly reserved to the board
and those delegated to management.
1.2
A listed entity should:
a. undertake appropriate checks before
appointing a director or senior executive or
putting someone forward for election as a
director; and
b. provide security holders with all material
information in its possession relevant to a
decision on whether or not to elect or re-elect
a director.
The respective roles and responsibilities of
the Board and executives are defined in the
Board Charter.
There is a clear delineation between the Board’s
responsibility for the Company’s strategy and
activities, and the day-to-day management
of operations conferred upon the Company’s
officers.
The procedure for the selection of new Directors
is set out in the Selection and Appointment of New
Directors Policy. Under this policy, Shareholders
are required to be provided with all material
information relevant to making an informed
decision on whether or not to elect or re-elect
a Director.
1.3
1.4
A listed entity should have a written agreement
with each director and senior executive setting
out the terms of their appointment.
The Company has entered into a written
agreement with each Director and senior
executive.
The company secretary of a listed entity should
be accountable directly to the board, through
the chair, on all matters to do with the proper
functioning of the board.
The Company Secretary, Oliver Carton, reports
directly to the Chairman of the Board. The role
of the Company Secretary is outlined in the
Board Charter.
1.5
A listed entity should:
The Company has adopted a Diversity Policy.
a. have and disclose a diversity policy;
b. through its board or a committee of the
board set measurable objectives for achieving
gender diversity in the composition of its
board, senior executives and workforce
generally; and
c. disclose in relation to each reporting period:
i. the measurable objectives set for that
period to achieve gender diversity;
ii. the entity’s progress towards achieving
those objectives; and
iii. either:
a. the respective proportions of men and
women on the board, in senior executive
positions and across the whole
workforce (including how the entity has
defined “senior executive” for these
purposes); or
b. if the entity is a “relevant employer”
under the Workplace Gender Equality
Act, the entity’s most recent “Gender
Equality Indicators”, as defined in and
published under that Act.
The Company’s Diversity Policy requires the Board
to establish measurable objectives to assist the
Company in achieving gender diversity.
The Company does not believe it is appropriate to
establish a quota system for measuring gender
diversity, and indeed such a quota system could
itself lead to discrimination.
Management undertakes monitoring in line with the
Corporate Governance Council Recommendations
and reports to the Board regularly as to how the
business is positioned with respect to diversity.
As at 30 June 2021, there were 58 females
employed representing 19% of total employees,
including 2 women as part of the executive team.
The Tesserent board has a female Director,
following the appointment of Megan Haas in
January 2021.
17
Corporate Governance Statement
RECOMMENDATION
COMPANY’S CURRENT PRACTICE
The Company has adopted a Board and Senior
Executive Evaluation Policy.
A Non-Executive Director will be responsible for
the performance evaluation of the Chairman. The
process for evaluating the performance of the
Board as a whole is the responsibility of the Board
under the direction of the Chairman. The Chairman
is in charge of conducting individual Director
evaluations.
The Company has adopted a Board and Senior
Executive Evaluation Policy.
The Co-Chief Executive Officers are subject to
annual performance evaluation by the Board. All
senior executives of the Company are subject to
annual performance evaluations by the Co-CEOs.
A performance evaluation was undertaken for
each of the Co-CEOs during the reporting period.
The Company previously had a Nominations and
Remuneration Committee.
During the year ended 30 June 2020, the Board
suspended the operations of the Committee
as it was determined that the Committee was
unnecessary given the size of the Board and the
Company’s operations. The Board as a whole
undertakes the role of the Committee as set
out in its Charter.
1.6
A listed entity should:
a. have and disclose a process for periodically
evaluating the performance of the board, its
committees and individual directors; and
b. disclose for each reporting period whether a
performance evaluation has been undertaken
in accordance with that process during or in
respect of that period.
1.7
A listed entity should:
a. have and disclose a process for evaluating the
performance of its senior executives at least
once every reporting period; and
b. disclose for each reporting period whether a
performance evaluation has been undertaken
in accordance with that process during or in
respect of that period.
2.1
The board of a listed entity should:
a. have a nomination committee which:
i. has at least three members, a majority
of whom are independent directors; and
is chaired by an independent director, and
disclose:
ii.
iii. the charter of the committee;
iv. the members of the committee; and
v. as at the end of each reporting period,
the number of times the committee met
throughout the period and the individual
attendances of the members at those
meetings; or
b. if it does not have a nomination committee,
disclose that fact and the processes it
employs to address board succession
issues and to ensure that the board has the
appropriate balance of skills, knowledge,
experience, independence and diversity
to enable it to discharge its duties and
responsibilities effectively.
2.2
A listed entity should have and disclose a board
skills matrix setting out the mix of skills that the
board currently has or is looking to achieve in its
membership.
The Board skills matrix is set out in the following
section.
18
Annual Report 2021 Tesserent Ltdcontinued RECOMMENDATION
COMPANY’S CURRENT PRACTICE
2.3
A listed entity should disclose:
a. the names of the directors considered by the
board to be independent directors;
b. if a director has an interest, position or
relationship of the type described above
but the board is of the opinion that it does
not compromise the independence of the
director, the nature of the interest, position
or relationship in question and an explanation
of why the board is of that opinion; and
b. the length of service of each director
The Board considers that Megan Haas and
Greg Baxter are independent directors. The Board
considers that Geoff Lord does not meet the
ASX Corporate Governance Council definition of
Independent Director given his significant holding
of Tesserent securities.
The Board considers that Julian Challingsworth
and Kurt Hansen are not independent directors
given they are employees of the Company.
The date of appointment of each director
is disclosed in details of each director in the
Directors’ Report section of the Annual Report.
2.4
2.5
2.6
A majority of the board of a listed entity should
be independent directors.
The majority of the Board are not independent
Directors for the ASX purposes.
The chair of the board of a listed entity should be
an independent director and, in particular, should
not be the same person as the CEO of the entity.
The roles of the Chairman and CEO are exercised
by separate individuals. The Chairman is not
considered to be an independent Director for
ASX purposes.
A listed entity should have a program for
inducting new directors and for periodically
reviewing whether there is a need for existing
directors to undertake professional development
to maintain the skills and knowledge needed to
perform their role as directors effectively.
The Company does not have a formal program for
inducting new Directors and providing appropriate
professional development opportunities. The
induction process for each Director is tailored
based on the background and needs of that
incoming director.
3.1
A listed entity should articulate and disclose
its values.
3.2
A listed entity should:
a. have and disclose a code of conduct for its
directors, senior executives and employees;
and
b. ensure that the board or a committee of the
board is informed of any material breaches of
that code.
3.3
A listed entity should:
a. have and disclose a whistle-blower policy; and
b. ensure that the board or a committee of the
board is informed of any material incidents
reported under that policy.
The Company’s values are disclosed in detail
within the Board Charter which is published on
the Company’s website.
The Company has adopted a Code of Conduct
which applies to all Directors, officers, employees,
contractors or consultants of the Company as
well as a Trading Policy. Each of these has been
prepared having regard to the Recommendations.
The company complies with this
Recommendation.
3.4
A listed entity should:
The Company complies with this Recommendation.
a. have and disclose an anti-bribery and
corruption policy; and
b. ensure that the board or a committee of the
board is informed of any material breaches of
that policy.
19
Corporate Governance Statement
RECOMMENDATION
COMPANY’S CURRENT PRACTICE
4.1
The board of a listed entity should:
a. have an audit committee which:
i. has at least three members, all of whom
are nonexecutive directors and a majority
of whom are independent directors; and
is chaired by an independent director, who
is not the chair of the board, and disclose:
ii.
iii. the charter of the committee;
iv. the relevant qualifications and experience
of the members of the committee; and
v.
in relation to each reporting period, the
number of times the committee met
throughout the period and the individual
attendances of the members at those
meetings; or
b. if it does not have an audit committee,
disclose that fact and the processes it
employs that independently verify and
safeguard the integrity of its corporate
reporting, including the processes for the
appointment and removal of the external
auditor and the rotation of the audit
engagement partner.
4.2
The board of a listed entity should, before it
approves the entity’s financial statements for
a financial period, receive from its CEO and
CFO a declaration that, in their opinion, the
financial records of the entity have been properly
maintained and that the financial statements
comply with the appropriate accounting
standards and give a true and fair view of the
financial position and performance of the entity
and that the opinion has been formed on the
basis of a sound system of risk management and
internal control which is operating effectively.
4.3
A listed entity should disclose its process to verify
the integrity of any periodic corporate report
it releases to the market that is not audited or
reviewed by an external auditor.
The Company re-instated the Audit and Risk
Committee (ARC) following the appointment
of Megan Haas as an independent director in
January 2021.
The committee comprises the three non-executive
directors and is chaired by independent director
Megan Haas.
The ARC met three times in FY21, following its
re-instatement each of which was attended
by all three non-executive directors.
The Chair of the ARC also met separately
with the external Auditor of the Group.
The Company complies with this Recommendation.
The Company has established a Disclosure Team,
which reviews all periodical corporate reports
and announcements before they are disclosed
to the market. The composition of the Disclosure
Team and the verification and approval process
for market release is outlined in the Company’s
Continuous Disclosure Policy, which is published on
the Company’s website.
5.1
A listed entity should have and disclose a written
policy for complying with its continuous disclosure
obligations under listing rule 3.1.
The Company is committed to providing timely and
balanced disclosure to the market in accordance
with its Continuous Disclosure Policy.
20
Annual Report 2021 Tesserent Ltdcontinued RECOMMENDATION
COMPANY’S CURRENT PRACTICE
5.2
5.3
6.1
6.2
6.3
6.4
6.5
A listed entity should ensure that its board
receives copies of all material market
announcements promptly after they have
been made.
A listed entity that gives a new and substantive
investor or analyst presentation should release
a copy of the presentation materials on the ASX
Market Announcements Platform ahead of the
presentation.
A listed entity should provide information about
itself and its governance to investors via its
website.
The Company complies with this Recommendation.
The Company complies with this Recommendation.
The Company has a dedicated corporate
governance information section on its website.
A listed entity should have an investor relations
program that facilitates effective two-way
communication with investors.
The Company has adopted a Shareholder
Communications Policy for Shareholders wishing
to communicate with the Board.
A listed entity should disclose how it facilitates
and encourages participation at meetings of
security holders.
A listed entity should ensure that all substantive
resolutions at a meeting of security holders are
decided by a poll rather than by a show of hands.
A listed entity should give security holders the
option to receive communications from, and send
communications to, the entity and its security
registry electronically.
All Shareholders are invited to attend the
Company’s annual meeting, either in person or
by representative. The Board regards the annual
meeting as an excellent forum in which to discuss
issues relevant to the Company and accordingly
encourages full participation by Shareholders.
Shareholders have an opportunity to submit
questions to the Board and to the Company’s
auditor.
The Company complies with this Recommendation.
The Company seeks to recognise numerous
modes of communication, including electronic
communication, to ensure that its communication
with Shareholders is frequent, clear and
accessible.
21
Corporate Governance Statement
RECOMMENDATION
COMPANY’S CURRENT PRACTICE
7.1
The board of a listed entity should:
a. have a committee or committees to oversee
risk, each of which:
i. has at least three members, a majority
of whom are independent directors; and
is chaired by an independent director,
and disclose:
ii.
iii. the charter of the committee;
iv. the members of the committee; and
v. as at the end of each reporting period,
the number of times the committee met
throughout the period and the individual
attendances of the members at those
meetings; or
b. if it does not have a risk committee or
committees that satisfy (a) above, disclose
that fact and the processes it employs for
overseeing the entity’s risk management
framework.
7.2
The board or a committee of the board should:
a. review the entity’s risk management
framework at least annually to satisfy itself
that it continues to be sound and that the
entity is operating with due regard to the risk
appetite set by the board; and
b. disclose, in relation to each reporting period,
whether such a review has taken place.
7.3
A listed entity should disclose:
a. if it has an internal audit function, how
the function is structured and what role it
performs; or
b. if it does not have an internal audit function,
that fact and the processes it employs
for evaluating and continually improving
the effectiveness of its governance, risk
management and internal control processes.
7.4
A listed entity should disclose whether it has
any material exposure to environmental or social
risks and, if it does, how it manages or intends to
manage those risks.
The Company re-instated the Audit and Risk
Committee (ARC) following the appointment
of Megan Haas as an independent director in
January 2021.
The committee comprises the three non-executive
directors and is chaired by independent director
Megan Haas.
The ARC met three times in FY21, following its
re-instatement each of which was attended
by all three non-executive directors.
The Chair of the ARC also met separately
with the external Auditor of the Group.
The Company has substantive risk processes
across the business – however these are
being reviewed in the context of the current
reorganisation (announced to the market on
11 August 2021). The Company’s updated risk
framework will be formalised at completion of
this operational reorganisation.
The Company does not have an internal audit
function established. Management designs
and implement risk management and internal
control systems to manage the Company’s
material business risks and to report to
the Board on whether those risks are being
managed effectively.
For the reporting period, the Company has not
identified any material exposures to environmental
or social risks, other than COVID – for which the
Company has documented a COVID-safe plan.
The Board is reviewing this policy in respect of
an appropriate position on vaccination and
return to work.
22
Annual Report 2021 Tesserent Ltdcontinued RECOMMENDATION
COMPANY’S CURRENT PRACTICE
The Company has presently suspended operation
of its Nominations and Remuneration Committee.
During the period the full Board undertook the role
of the Committee as set out in its Charter.
8.1
The board of a listed entity should:
a. have a remuneration committee which:
i. has at least three members, a majority
of whom are independent directors; and
is chaired by an independent director,
and disclose:
ii.
iii. the charter of the committee;
iv. the members of the committee; and
v. as at the end of each reporting period,
the number of times the committee met
throughout the period and the individual
attendances of the members at those
meetings; or
b. if it does not have a remuneration committee,
disclose that fact and the processes
it employs for setting the level and
composition of remuneration for directors
and senior executives and ensuring that such
remuneration is appropriate and not excessive.
8.2
A listed entity should separately disclose its
policies and practices regarding the remuneration
of non-executive directors and the remuneration
of executive directors and other senior
executives.
The policies and practices regarding remuneration
of Directors is set out in the Selection and
Appointment of New Directors Policy. Full details of
Director remuneration is included in annual reports.
8.3
A listed entity which has an equity-based
remuneration scheme should:
a. have a policy on whether participants are
permitted to enter into transactions (whether
through the use of derivatives or otherwise)
which limit the economic risk of participating
in the scheme; and
b. disclose that policy or a summary of it.
9.1
9.2
9.3
A listed entity with a director who does not speak
the language in which board or security holder
meetings are held or key corporate documents
are written should disclose the processes it has in
place to ensure the director understands and can
contribute to the discussions at those meetings
and understands and can discharge their
obligations in relation to those documents.
A listed entity established outside Australia
should ensure that meetings of security holders
are held at a reasonable place and time.
A listed entity established outside Australia, and
an externally managed listed entity that has
an AGM, should ensure that its external auditor
attends its AGM and is available to answer
questions from security holders relevant to
the audit.
While the Company has issued options to
Independent Directors and some senior
executives. During the year ended 30 June
2021 (initiated in October 2020), the Company
established a new Employee Share Option Plan
(ESOP) designed to align key employees’ interests
with those of the shareholders and give the
company a significant advantage in attracting
and retaining talent over TNT’s non-listed cyber
competitors.
This recommendation is not applicable to the
Company given the current composition of
the Board of Directors.
This recommendation is not applicable to the
Company.
This recommendation is not applicable to the
Company
23
Corporate Governance Statement
BOARD SKILLS/EXPERIENCE MATRIX
KEY SKILL
DEMONSTRATED BY ATTRIBUTES
Cyber industry
experience
Sound knowledge of the structure, operations
and opportunities in the Cyber Security industry.
Technology and
digital innovation
Experience in developing setting and
implementing digital innovation and technology
strategies.
Risk management
Knowledge, background and experience in
balancing commercial imperatives with agreed
risk appetites, building organisational risk culture
Financial acumen
Proficiency in finance, including in financial
accounting and reporting and capital
management, including an ability to probe the
adequacy of financial and risk controls
Strategy
Demonstrated experience in developing and
implementing strategic opportunities to create
long term value for shareholders.
M&A experience
Experience in identifying executing and
integrating mergers and acquisitions to create
long term value for shareholders.
ASX board and
other relevant
board experience
Exposure to relevant disclosure regimes,
understanding of contemporary corporate
governance practices.
Executive
leadership
Experience in appointing and evaluating senior
management, executive planning and monitoring
corporate performance
International
markets and
trade
Experience in working in an organisation with
global operations and understanding of political
and regulatory requirements plus appreciation
of market opportunities
Sustainability
Experience related to environmental, social and
community responsibility
24
Annual Report 2021 Tesserent Ltdcontinued The Directors of Tesserent
Limited (the “Company”)
submit herewith the
Directors’ Report on the
Company for the financial
year ended 30 June 2021
25
Directors’ Report
The Directors of Tesserent Limited (the “Company”) submit herewith the Directors’ Report on the Company
for the financial year ended 30 June 2021.
To comply with the provisions of the Corporations Act 2001, the Directors report as follows:
DIRECTORS
Details of the Directors of the Company in office at any time during or since the end of the financial year and
at the date of this report are:
Geoff Lord
Qualifications:
Experience:
Non-Executive Chairman (Appointed 10 January 2020)
MBA (Distinction) (Melbourne), BEc (Hons) (Monash), FIDA, ASIA
Geoff is the Founder and CEO of the Belgravia Group, a privately held
investment group which since being established in 1990 has grown to
employ more than 10,000 people in businesses spanning sports and sports
technologies, fitness, leisure, sports camps, clothing and more.
In addition, Geoff is the former Founder and Chairman of UXC Limited, one
of Australia’s largest IT services businesses. After being founded in 2002 as
a $5m business, UXC grew under Geoff’s leadership to be acquired in 2016 by
NYSE-listed Computer Sciences Corporation (now DXC Technology) in a deal
valued at A$427.6m.
Other board positions held by Geoff include Director Melbourne Business
School, founding Director of SME finance business Judo Bank and Chairman
of Salvest. He has also shown a significant passion for sports and clubs,
having served as Chairman of Hawthorn Football Club and Melbourne Victory.
Geoff is the largest shareholder in Tesserent and previously acted as an
advisor to the board since early 2019.
Other Directorships in listed
entities:
Former Directorships in listed
entities in last 3 years:
None
None
Interests in Shares and options: 99,258,956 ordinary shares
8,882,500 share options
6,000,000 5 year call options
26
for the year ended 30 June 2021Annual Report 2021 Tesserent Ltd Directors’ Report
DIRECTORS (CONTINUED)
Julian Challingsworth
Co-Managing Director and Co-Chief Executive Officer (Appointed 1 August 2018)
Qualifications:
Experience:
Bachelor of Business, MSc, CA, FCPA , GAICD
With a strong professional services and corporate finance background,
Julian has a Masters of Organisational Consulting from Ashridge Business
School (UK), a Graduate Diploma in IT, Swinburne University (Aust) and
a Bachelor of Business, Accounting, RMIT (Aust). Julian is a member of
Chartered Accountants (CAANZ), Fellow Australian CPA (FCPA) and a
Graduate, Australian Institute of Company Directors (GAICD).
Julian joined Tesserent after serving as Managing Director and a Partner of
The Litmus Group for over 10 years and a board member of PPB Advisory. In
addition to advising over 20 organisations on growth acceleration strategies
in Australia, Asia and Europe, Julian was a key driver in growing Litmus in
Australia and internationally before it was acquired by PPB Advisory.
Julian was a director or Cordence Worldwide, a global consulting partnership
with 2,800 consultants across 60+ locations. Julian worked with the
international team to develop sales and growth strategies for the 8 member
firms.
Other Directorships in listed
entities:
Former Directorships in listed
entities in last 3 years:
None
None
Interests in Shares and options: 14,000,000 ordinary shares
Kurt Hansen
Qualifications:
Experience:
Co-Managing Director and Co-Chief Executive Officer (Appointed
12 December 2019)
Grad. Dip. Engineering
Kurt has over 30 years of IT industry experience driving sales and delivery
transformation and impressive business growth across many IT and
Cybersecurity organisations in Australia and New Zealand.
Kurt was the CEO at Pure Security where, as part of the PS&C Group he
integrated four Security businesses following their acquisition and listing
onto the ASX. Previous roles include executive, senior management and
operational positions at Check Point Software Technologies, F5 Networks,
AirData, Symbol Technologies, Telstra Wholesale, Cisco Systems, and
Ericsson.
Prior to commencing his corporate career, Kurt joined the Australian Army as
an electronic trainee, later becoming a commission officer and finishing his
military career in Royal Australian Signal Corp with the rank of Captain. He
holds a Diploma of Engineering from Swinburne Institute of Technology.
Other Directorships in listed
entities:
Former Directorships in listed
entities in last 3 years:
None
None
Interests in Shares and options: 12,939,574 ordinary shares
27
for the year ended 30 June 2021 Directors’ Report
DIRECTORS (CONTINUED)
Gregory Baxter
Qualifications:
Experience:
Non-Executive Director (Appointed 16 November 2016)
BSc MBA
Board member since 2015. Greg is currently Chief Transformation Officer
Hewlett Packard, leading HP’s IT, Software, Data & AI, and Transformation
Management organizations. Greg was previously Chief Digital Officer
at MetLife and Global Head of Digital at Citibank, leading Citi’s digital
transformation across businesses and geographies.
Greg specialises in the development and delivery of digital strategy, corporate
innovation and business transformation. He has held senior business,
consulting and technology roles across Asia, Europe and North America, with a
track record of high- impact business results.
Previously Gregory was a Partner and U.K. Board member at Booz & Company
(formerly Booz Allen Hamilton), where he held leadership roles across the
financial services, public sector and digital practices.
Gregory is a council (board) member of Chatham House (Royal Institute of
International Affairs), a leading international affairs think tank. He holds a
BSc from Monash University and an MBA from the University of Melbourne and
has been a guest lecturer on strategy at the University of Oxford, New York
University, and American University (Washington).
Other Directorships in listed
entities:
Former Directorships in listed
entities in last 3 years:
None
None
Interests in Shares and options: 4,120,327 ordinary shares
Megan Haas
Qualifications:
Experience:
4,500,000 unlisted share options
Non-Executive Director (Appointed 19 January 2021)
BBUS Accountancy & Information Systems (RMIT), GAICD.
Megan’s core competencies are centred around cyber risk, governance,
technology and operational processes developed over 30+ years
both in Australia and internationally. Formerly a PwC Cyber Security &
Forensic Services Partner, Megan has worked with organisations across
international borders and industries including pharmaceutical, gaming, retail,
manufacturing, government, media, financial services and communications.
Megan has a BBUS Accountancy & Information Systems (RMIT), GAICD.
Megan’s other Directorships include: Note Printing Australia (audit
committee), RMIT University (Council member), Development Victoria
(Chairperson) and the Suburban Rail Loop Authority.
Interests in Shares and options: 3,000,000 unlisted share options
28
for the year ended 30 June 2021Annual Report 2021 Tesserent Ltd Directors’ Report
DIRECTORS (CONTINUED)
Patrick Flannigan
Qualifications:
Non-Executive Director (Appointed 20 January 2020, retired 19 January 2021)
BBus. (Victoria University), FAIDC, FAIM
Interests in Shares and options: 12,625,000 ordinary shares
6,000,000 unlisted share options
COMPANY SECRETARY
Oliver Carton
Qualifications:
Experience:
Company Secretary
BJurisLLB. Appointed as Company Secretary on 6 May 2015.
Oliver Carton is a lawyer with over 30 years’ experience in a variety of
corporate roles. He is currently a director or company secretary of a
number of listed, unlisted and not for profit entities such as the Melbourne
Symphony Orchestra and Australian Mines Ltd (ASX: AUZ). He currently runs
his own consulting business and was previously a Director of the Chartered
Accounting firm KPMG. Prior to that, he was a senior legal officer with ASIC.
MEETINGS OF DIRECTORS
The following table sets out the number of meetings of the Company’s Directors during the year ended
30 June 2021 and the number of meetings attended by each Director.
Role
Entitled to
attend
Attended
Entitled to
attend
Attended
Full Board
Audit and Risk Committee
Meetings
Director
Geoff Lord
Non-Executive Director
Julian Challingsworth
Executive Director
Kurt Hansen
Gregory Baxter
Patrick Flannigan
(resigned 19 January 2021)
Megan Haas
(appointed 19 January 2021)
Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
13
13
13
13
5
6
13
3
12 (by invitation)
13 (by invitation)
13
5
6
3
n/a
3
3
1
1
2
n/a
3
PRINCIPAL ACTIVITIES
Tesserent provides Cyber Security consulting, cloud and managed services to a wide range of Australian and
international customers, including education providers, corporate enterprises, and government customers.
These services are provided on the basis of consulting contracts, software implementation contracts and
a subscription fees, either as one off engagements, longer term projects or as monthly or annual fees.
OPERATING RESULTS AND FINANCIAL POSITION
The Group recorded a loss after tax of $4.5m for the year ended 30 June 2021 (2020: $7.3m loss). The Group
incurred significant expenditure in completing controlling acquisitions of six companies, plus two 25%
investments in entities classified as associates.
The acquisitions resulted in an increase in total assets to $181.1m including Goodwill of $83.3m and Intangible
assets (including acquired Customer contracts and relationships) of $29.0m.
During the year the Group issued equity of $73.5m after costs, as well as converting notes of $6.7m before
costs to provide working capital and capital for the acquisitions. The Group also secured additional
financing facilities of $30 million (to bring total long-term debt to $35m) to provide working capital and
cash reserves to complete acquisitions. The two facilities are split into two tranches of $15m and $20m,
and mature in August 2024 and April 2025 respectively. Interest is charged at 8.9% and 8.5% on Facility 1
and Facility 2, respectively.
29
for the year ended 30 June 2021 Directors’ Report
As a result of the acquisitions and the equity, the Group’s net assets at 30 June 2021 were $87.6m.
More detailed discussion of the Group’s results are provided in the Review of Operations preceding the
Directors Report.
CLOSING SHARE PRICE
30 June 2017
30 June 2018
30 June 2019
30 June 2020
30 June 2021
A high of $0.44 was reached on 8 January 2021
LOSS PER SHARE
Loss per share
Basic loss per share
Diluted loss per share
Closing
share price $
0.092
0.060
0.045
0.080
0.235
2020
cents
2.02
2.02
2021
cents
0.52
0.52
As the Group made a loss for the year ended 30 June 2021, potential ordinary shares, being options or
performance rights to acquire ordinary shares, are considered non-dilutive and therefore not included in the
diluted earnings per share calculation.
DIVIDENDS
During the year, the Company did not pay, or propose to pay, any dividends.
SIGNIFICANT CHANGE IN STATE OF AFFAIRS
On 28 July 2020, the Group signed an agreement with its existing debt provider Pure Asset Management
(‘PAM’) to secure a new debt facility for $15m, to replace the existing facility of $5m. The term of this facility
is 48 months (loan repayable on 31/8/24 and the nominal borrowing rate for this facility is 8.9%). The facility
has 43.7m warrants attached to it, which have independently valued at $4.9m –accounted for under the
effective interest rate method and amortising over the life of the loan.
On 4 August 2020, the Group completed the acquisition of Seer Security Pty Ltd. Seer Security provides
specialist high-security services and delivery capabilities to Australian Federal Government departments
and agencies including Defence and Law Enforcement. Tesserent acquired 100% of the ordinary shares of
Seer Security Pty Ltd for consideration of $20,636,811 million, with $6,982,965 cash and $13,653,846 in issued
share capital, being 76,923,077 shares issued at a fair value of $0.1775 per share. In addition, a cash payment
of $1,383,158 was made post-completion as a working capital adjustment.
On 11 September 2020, the Group completed the acquisition of Airloom Holdings Pty Ltd. Airloom is a Sydney-
based cybersecurity firm with a focus on security architecture and cloud migration services. Tesserent
acquired 100% of the ordinary shares of Airloom Holdings Pty Ltd for consideration of $23,184,758, with
$12,298,323 cash and $10,886,435 in issued share capital, being 39,950,221 shares issued at fair value of
$0.2725 per share. Total consideration for the acquisition also includes estimated earnout payments based
upon forecast performance of the business.
On 11 September 2020, the Group completed the acquisition of Ludus Information Security Pty Ltd. Ludus
Cybersecurity cemented Tesserent’s standing as the largest end-to-end cybersecurity services provider in
the Canberra market. Tesserent acquired 100% of the ordinary shares of Ludus Information Security Pty Ltd
for consideration of $2,094,224, with $1,006,324 cash and $1,087,900 in issued share capital, being 4,440,410
shares issued at a fair value of $0.245 per share. Total consideration for the acquisition also includes $0.3m in
estimated earnout payments based upon forecast performance of the business.
30
for the year ended 30 June 2021Annual Report 2021 Tesserent Ltd Directors’ Report
SIGNIFICANT CHANGE IN STATE OF AFFAIRS (CONTINUED)
During September 2020, the Group launched a new Employee Share Option Plan (ESOP) in order to further
engage key employees and align their interests with the Tesserent shareholders. The ESOP plan is also used
strategically to attract and retain key talent to the Tesserent, giving the Group a recruitment advantage
over its non-listed competitors.
The ESOP plan, which is issued under the parameters of ASIC Class Order CO 14/1000 was approved by the
Board on 16 September 2020, and allows the Group to issue options and performance rights up to a limit of
5% of share capital.
The ESOP Plan allows for the grant of options in two tranches:
Tranche 1 – options with a three year expiry, vesting immediately and an exercise price of $0.28
Tranche 2 – options with a three year expiry, vesting 12 months from ESOP launch date and an exercise price
of $0.35
The valuation and cost of issuing options under the ESOP scheme is determined using a Black-Scholes Pricing
model and detailed in Note 31 to the financial statements.
On 28 October 2020, the Group completed the acquisition of iQ3 Pty Ltd. iQ3 provides Secure Cloud Services,
materially complementing Tesserent’s Cyber 360 strategy and represented a significant step forward in
Tesserent’s ability to provide a full end-to-end cyber service. iQ3 also has a significant presence in the NSW
Government. Tesserent acquired 100% of the ordinary shares of iQ3 Pty Ltd for consideration of $18,086,895
with $8,634,650 cash and $9,513,336 in issued share capital, being 34,593,950 shares at fair value of $0.275
per share. The cash consideration has been split, with $4,317,325 paid on completion and four deferred
quarterly payments of $1,079,331, payable over a 12-month period after completion.
On 12 February 2021, the Group completed the acquisition of New Zealand business Lateral Security (IT)
Services Limited. Lateral Security is a cybersecurity consulting firm headquartered in New Zealand and
specialising in advisory, security testing, incident response and managed services. Tesserent acquired 100%
of the ordinary shares of New Zealand based Lateral Security (IT) Services Limited for consideration of
NZ$8,594,502 (A$8.253m), with A$4,163,883 cash, A$2,055,197 in issued share capital, being 5,871,990 shares
issued at a fair value of $0.350 per share and a provision for a further A$2,034,204 in share capital being
5,812,014 shares issued at a fair value of $0.350 per share in relation to in estimated earnout payments based
upon forecast performance of the business.
On 19 April 2021, the Group signed a further agreement with Pure Asset Management (‘PAM’) to secure a
second debt facility for $20m (in addition to the existing facility of $15m described above). The term of this
facility is 48 months (loan repayable on 30/4/25) and the nominal borrowing rate for this facility is 8.5%. The
facility has 44.4m warrants attached to it, which have been independently valued at $4.5m –accounted for
under the effective interest rate method and amortising over the life of the loan.
On 28 April 2021, the Group completed the acquisition of Secure Logic Pty Ltd. Secure Logic is a leading
Australian Managed Security services firm that sees further strengthening of Tesserent’s presence in State
and Federal Government departments and agencies. Tesserent acquired 100% of the ordinary shares of
Secure Logic Pty Ltd for consideration of $17,904,336, with $8,526,857 cash and $9,377,479 in issued share
capital, being 42,145,974 shares issued at a fair value of $0.2225 per share.
AFTER BALANCE DATE EVENTS
The company notes three subsequent events following 30 June 2021 reporting date, being the announcement
of its brand and business unit integration strategy, the signing of a share purchase agreement for the
acquisition of Loop Secure Pty Ltd and the completion of a capital raise, as outlined below.
Announcement of brand and business unit integration strategy
On 11 August 2021, Tesserent announced a brand and business unit integration strategy to drive growth in
the business, such that, moving forward, TNT commercial will go to market from a single entity with a single
customer-facing brand, Tesserent, that incorporates services from TNT’s existing business units.
The re-organisation of the go-to-market approach also reflects the evolution of the Group as it integrates
the businesses acquired during the last 18 months, and is consistent with the basis in which the Group’s chief
operating decision makers manage the business and assess performance.
The Company’s new go-to-market approach will be accompanied by a new logo and branding – which was
subsequently released to the market on 16 September 2021.
31
for the year ended 30 June 2021 Directors’ Report
AFTER BALANCE DATE EVENTS (CONTINUED)
Acquisition of Loop Secure Pty Ltd
Tesserent announced to the market, the acquisition of Loop Secure Pty Ltd following the signing of a Share
Purchase Agreement executed between both parties on the 18 August 2021.
Under the terms of the Share Purchase Agreement, TNT Cyber Services Pty Ltd, a subsidiary of Tesserent
Limited, acquired 100% of the ordinary shares of Loop Secure Pty Ltd for consideration of $13.5m, with $7m
initial payment of cash and $4.5m in issued share capital, based on 15,946,137 shares at a based on VWAP
of $0.2822 per share. Two further deferred consideration payments of $1m are payable six months and
twelve months following completion date. Final consideration is also subject to net debt and working capital
adjustments and an earnout payment if the business exceeds agree future targets.
The acquisition of Loop Secure is expected to complete by the end of September 2021.
Capital Raise
On 24 September 2021, the Group launched and completed a capital raise – via an equity placement with
a number of institutional investors, raising $25m to fund future identified acquisitions. An equity capital
raise was chosen to optimise the capital structure of the Group and has also had the impact of enhancing
Tesserent’s visibility in the ASX market.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS
Tessrent’s strategy includes continued focus on the following areas:
– Expanding the number of Channel partners in Australia and internationally,
– Increasing the number of direct sales to organisations, in Australia and internationally, through increased
sales and marketing,
– Assessing strategic acquisition opportunities where they increase the product/service offering or
geographical presence of the Group, and
– On-going research and development.
Further information on expected results of operations is included in the Review of Operations preceding the
Directors Report.
INDEMNITY AND INSURANCE OF OFFICERS
In accordance with its Constitution, and where permitted under relevant legislation or regulation, the
Company indemnifies the Directors and Officers against all liabilities to another person that may arise
from their position as Directors or Officers of the Company and its subsidiaries, except if, in the Board’s
reasonable opinion, the liability arises out of conduct which is fraudulent, criminal, dishonest or a wilful
default of the Directors’ or Officers’ duties. In accordance with the provisions of the Corporations Act 2001,
the Company has insured the Directors and Officers against liabilities incurred in their role as Directors and
Officers of the Company.
The terms of the insurance policy, including the premium, are subject to confidentiality clauses and therefore
the Company is prohibited from disclosing the nature of the liabilities covered and the premium paid.
INDEMNITY AND INSURANCE OF AUDITOR
The Company has not, during or since the financial year, indemnified or agreed to indemnify the auditor of
the Company or any related entity against a liability incurred by the auditor. During the financial year, the
Company has not paid a premium in respect of a contract to insure the auditor of the Company or any
related entity.
ENVIRONMENTAL ISSUES
Tesserent is not subject to any significant environmental regulation under Australian Commonwealth or State
law. Tesserent recognises its obligations to its stakeholders (customers, shareholders, employees and the
community) to operate in a way that minimises the impact it has on the environment.
32
for the year ended 30 June 2021Annual Report 2021 Tesserent Ltd Directors’ Report
SHARES UNDER OPTION
At the date of this report the Company had shares under option and warrants as follows: -
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Description
NED Options
NED Options
NED Options
Call Options
Employee Options
Converting Note Options
Converting Note Options
Converting Note Options
Employee Options
Date of
Expiry
Exercise
Price
Number
on issue
Number
escrowed
30 Nov 2021
30 Nov 2021
30 Nov 2021
$0.10
$0.13
$0.15
500,000
500,000
500,000
16-Dec-21
$0.08
1,000,000
1 Mar 2022
1 Oct 2022
1 Oct 2022
1 Oct 2022
$0.10
300,000
$0.10 26,770,000
$0.10
3,832,500
$0.10 3,000,000
29 Nov 2022
$0.125
1,000,000
Warrants issued to Pure Asset Management Pty Ltd
6 Dec 2022
$0.080
7,500,000
Employee Options
Employee Options
Employee Options
Employee Options
Employee Options
Employee Options
Employee Options
Employee Options
Acquisition Warrants
2 Nov 2023
2 Nov 2023
1 Jan 2024
1 Jan 2024
6 Apr 2024
6 Apr 2024
$0.35
12,771,500
$0.28 12,200,000
$0.35 3,000,000
$0.28
3,750,000
$0.35
1,250,000
$0.28
1,500,000
20 Apr 2024
$0.35
1,670,000
20 Apr 2024
$0.28
1,670,000
18 Sep 2024
$0.120
19,250,001
Warrants issued to Pure Asset Management Pty Ltd
18 Sep 2024
$0.120 17,500,000
Acquisition Warrants
7 May 2025
$0.450 30,555,556
Warrants issued to Pure Asset Management Pty Ltd
7 May 2025
$0.450 13,888,889
NED Options
21 Sep 2025
$0.248
9,000,000
172,908,446
Share options do not provide the holder with the same rights as shareholders. Share options do not provide
the rights to participate in rights issues, dividends, or enable the holder to vote at General Meetings.
PROCEEDINGS ON BEHALF OF THE COMPANY
No person has applied for leave of the Court under Section 327 of the Corporations Act 2001 to bring
proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for
the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings. The
Company was not a party to any proceedings during the year.
33
for the year ended 30 June 2021
Directors’ Report
REMUNERATION REPORT (AUDITED)
The remuneration report, which has been audited, outlines the Director and executive remuneration
arrangements for the Company, in accordance with the requirements of the Corporations Act 2001 and its
Regulations.
A. Principles Used to Determine the Nature and Amount of Remuneration
The broad principles for determining the nature and amount of remuneration of KMP has historically been
agreed by the Board.
An annual review of the Board structure is undertaken by the Board with changes made as deemed
appropriate to the size, structure and needs of the Company.
ASX listing rules require the aggregate non-executive directors’ remuneration be determined periodically by
a general meeting. The maximum annual aggregate remuneration is $250,000, not including various payments
such as out of pocket expenses and share based payments, and this was set prior to listing via the IPO in
2016.
The Board can obtain professional advice where necessary to ensure that the Group attracts and retains
talented and motivated directors and employees who can enhance performance through their contribution
and leadership. No external advice regarding remuneration policy was obtained in the current year.
The guiding principles for determining the nature and amount of remuneration for KMP of the Group is as
follows:
– Remuneration should include an appropriate mix of fixed and performance-based components,
– Components of remuneration should be understandable, transparent and easy to communicate; and
– Remuneration Committee / Board to review KMP packages annually by reference to the Group’s
performance, executive performance and comparable information from industry sectors.
The Board sets out to link remuneration polices with the achievement of financial and personal objectives.
Components of remuneration
The Non-executive directors in place during the year agreed to take no cash salary, instead agreeing to take
shares and/or options in lieu of director fees. All equity issued to Directors during the year was subject to
shareholder approval.
The executive directors and other KMP are remunerated based upon market value of the position and the
range of skills and experience they bring to the company and is split between fixed and performance linked
remuneration.
Fixed remuneration consists of base remuneration and employer contributions to superannuation funds.
Performance linked remuneration includes short-term incentives and is designed to reward the Co-Chief
Executive Officers, Managing Directors (MD) and other KMP’s for meeting and exceeding their financial and
personal objectives.
The Board has the responsibility of setting the Key Performance Indicators (KPI’s) for the Co-CEOs and have
input to the KPI’s for the executives. KPI’s generally include measures relating to the Group, the relevant
business unit and the individual. At the conclusion of the year the Board will assess the performance of the
Co-CEOs, and the Co-CEOs assesses the performance of the individual executives against their targets.
The Co-CEOs’ recommendations are presented to the Board for approval.
The Board, at its discretion, may pay cash bonuses or bonuses settled in shares or options, to Executive
Directors or other KMPs.
The Board has implemented a Director Option Plan. The Option Plan is aimed at incentivising the Directors
in retaining key strategic skills. The Director Plan currently covers Executive Directors.
Engagement of remuneration consultants
During the year, the Company did not engage any remuneration consultants.
Voting and comments made at the Company’s 20 November 2020 Annual General Meeting (‘AGM’)
At the 20 November 2020 AGM, 96.10% of the votes received supported the adoption of the remuneration
report for the year ended 30 June 2020. The Company did not receive any specific feedback at the AGM
regarding its remuneration practices.
34
for the year ended 30 June 2021Annual Report 2021 Tesserent Ltd Directors’ Report
REMUNERATION REPORT (AUDITED) (CONTINUED)
B. Details of Remuneration
Details of the remuneration of the Directors, other key management personnel (defined as those who have
the authority and responsibility for planning, directing and controlling the major activities of the Company)
are set out in the tables on the following pages.
Key Management Personnel - Directors and Executives
The key management personnel (“KMP”) of the Company consisted of the following Directors and executives
during the year:
Directors
Geoff Lord
Position
Non-Executive Chairman
Gregory Baxter
Non-Executive Director
Patrick Flannigan
Non-Executive Director (Appointed 20 January 2020, Retired 19 January 2021)
Megan Haas
Non-Executive Director (Appointed 19 January 2021)
Julian Challingsworth
Co-Chief Executive Officer and Director
Kurt Hansen
Co-Chief Executive Officer and Director
Other Key Management Personnel
Position
Stefan Scheffer
Chief Financial Officer (Resigned 30 October 2020)
Peter Fearns
James Jones
George Katavic
Chris Hagios
Chief Financial Officer (Commenced 9 November 2020, resigned 23 April 2021)
Chief Financial Officer (Commenced 30 April 2021)
Managing Director, North
Managing Director, Airloom (Appointed on acquisition 11 September 2020)
Craig Humphreys
Managing Director, iQ3 (Appointed on acquisition 11 November 2020)
Deepak Singh
Managing Director, Secure Logic (Appointed on acquisition 1 May 2021)
Key Management Personnel (KMPs) – Service Agreements
Employment contracts – J Challingsworth
The key terms of the contract are as follows:
– Position of Co-CEO Tesserent Group, amended employment contract commencing 1 October 2020
– Salary of $350,000 per annum, plus superannuation
– Discretionary STI payable in cash at the discretion of the Board
– Agreement can be terminated in writing by Mr Challingsworth providing three months’ notice
– Agreement can be terminated in writing by the Company providing twelve months’ notice
– Performance rights as issued shares – refer to Share Based Compensation section in remuneration report
Employment contracts – K Hansen
The key terms of the contract are as follows:
– Position of Co-CEO Tesserent Group, contract commencing 12 December 2019
– Salary of $335,616 per annum, plus superannuation
– Sign-on bonus of 2,000,000 options in Tesserent Limited, granted in a prior period and escrowed for 180
days from the date of issue
– Agreement can be terminated in writing by Mr Hansen providing six months’ notice
– Agreement can be determined in writing by the Company providing nine months’ notice
– Performance rights as issued shares – refer to Share Based Compensation section in remuneration report
35
for the year ended 30 June 2021 Directors’ Report
REMUNERATION REPORT (AUDITED) (CONTINUED)
Employment contracts – J Jones
The key terms of the contract are as follows:
– Position of Group CFO, contract commencing 30 April 2021
– Salary of $278,305 per annum, plus superannuation and other benefits
– Short term incentive based on the following:
– 10% of the base remuneration (incl. super) with KPI’s to be agreed
– 1,000,000 TNT share options at $0.24 which vest following six-month probationary period
– The employee is eligible for the Employee Share Options Plan (ESOP) provided separately
– Agreement can be terminated in writing by either party providing three months’ notice
Employment contracts – G Katavic
The key terms of the contract are as follows:
– Position of Managing Director – North, contract commencing 23 March 2020
– Salary of $273,972 per annum, plus superannuation, and other benefits
– Agreement can be terminated in writing by either party providing four weeks’ notice
Employment contracts – C Hagios
The key terms of the contract are as follows:
– Position of Managing Director - Airloom, existing employment contract commenced 15 March 2019
– Salary of $280,000 per annum, plus superannuation and other benefits
– Car Allowance of $42,000 per annum
– Performance Bonus, bonus payable half yearly based upon half year EBIT of the Company x 5%, where the
half year EBIT of the company means the earnings before interest and tax of the Company
– Agreement can be terminated in writing by either party providing six months’ notice
Employment contracts – C Humphreys
The key terms of the contract are as follows:
– Position of CEO – iQ3, contract commencing 11 November 2020
– Base Salary of $100,000 per annum, plus superannuation and other benefits
– Monthly Performance payments – 3% of monthly Gross profit generated in the previous calendar month
– Additional benefits – School fees, plus any work-related expenses such as travel, phone and internet
– Agreement can be terminated in writing by either party providing one months’ notice
Employment contracts – D Singh
The key terms of the contract are as follows:
– Position of Managing Partner - Secure Logic, contract commencing 01 May 2021
– Salary of $273,750 per annum inclusive of superannuation, and other benefits
– Retention Bonus of $50,000 to be paid on 1 July 2022
– Eligible for an Annual Bonus amount of $75,000 based on agreed KPI’s and performance against budget
– The Employee is eligible for the Employee Share Options Plan (ESOP) provided separately
– Agreement can be terminated in writing by either party providing four weeks’ notice
36
for the year ended 30 June 2021Annual Report 2021 Tesserent Ltd Directors’ Report
REMUNERATION REPORT (AUDITED) (CONTINUED)
Details of Remuneration for the year ended 30 June 2021
The individual remuneration for key management personnel of the Company during the year was as follows:
Short term employment
benefits
Long term
benefits
Post
employment
Equity based
payments
Salary and
Fees
$
Bonus
$
Long-Service
Leave
$
Superannua-
tion
$
Shares
$
Options
$
Total
$
Year ended
30 June 2021
Non-Executive
Directors
G Lord
G Baxter
P Flannigan1
M Haas2
Subtotal
Executive
Directors
J Challingsworth
K Hansen
Subtotal
Other KMPs
S Scheffer3
P Fearns4
J Jones5
G Katavic
C Hagios6
–
–
–
–
–
320,969
335,616
656,586
113,288
104,737
47,438
270,848
268,333
–
–
–
–
–
–
–
–
–
–
–
–
197,373
–
–
–
–
–
1,661
21,721
23,382
–
–
–
–
–
C Humphreys7
66,668
255,610
19,100
D Singh8
Subtotal
Total
41,668
–
–
912,981
452,983
1,569,567
452,983
19,100
42,481
–
–
–
–
–
29,818
31,834
61,651
8,986
9,215
3,698
25,000
18,349
17,412
3,616
86,275
147,926
–
–
–
–
–
–
–
–
172,177
86,089
172,177
86,089
–
–
380,000
380,000
638,266
638,266
87,019
87,019
439,467
476,190
174,038
915,657
28,738
–
–
–
–
–
–
–
–
41,399
–
–
–
151,012
113,952
92,535
295,848
484,055
358,789
193,688
238,972
28,738
235,087
1,735,163
28,738
1,047,391
3,289,086
1
In August 2020, 3m options were awarded as part of the shareholder approved non-executive director remuneration
package. These options lapsed when P Flannigan retired on 19 January 2021.
2 Appointed on 19 January 2021.
3 Resigned on 30 October 2020.
4 Commenced 9 November 2020, finished 23 April 2021.
5 Commenced 30 April 2021.
6 Appointed on acquisition 11 September 2020.
7 Appointed on acquisition 11 November 2020.
8 Appointed on acquisition 1 May 2021.
37
for the year ended 30 June 2021 Directors’ Report
REMUNERATION REPORT (AUDITED) (CONTINUED)
Details of Remuneration for the year ended 30 June 2020
The individual remuneration for key management personnel of the Company during the period was as follows:
Short term employment
benefits
Long term
benefits
Post
employment
Equity based
payments
Year ended 30 June
2020
Salary and
Fees
$
Cash Bonus
$
Long-Service
Leave
$
Superannua-
tion
$
Shares
$
Options
$
Total
$
Non-Executive
Directors
G Lord1
R Langford2
G Baxter3
P Flannigan4
S Bertamini5
S Caswell6
Subtotal
Executive
Directors
–
45,000
–
–
–
12,500
57,500
J Challingsworth
199,883
–
–
–
–
–
–
–
–
K Hansen7
Subtotal
Other KMPs
S Scheffer
M Glennan8
R Miller9
M Phillips10
G Katavic11
R Silver12
Subtotal
Total
332,953
200,000
532,836
200,000
199,734
304,386
158,347
90,055
68,484
235,965
1,056,971
–
–
–
–
–
–
–
1,647,307
200,000
–
–
–
–
–
–
–
3,764
16,127
19,891
4,297
–
–
–
10,997
–
–
–
–
–
–
–
–
–
–
150,000
19,633
214,633
–
–
–
13,500
–
–
–
–
–
–
26,000
163,500
19,633
240,633
18,115
142,900
50,630
97,400
157,219
37,481
521,881
734,591
68,745
240,300
194,700
1,256,472
18,861
24,702
14,279
7,120
6,507
22,500
86,500
–
–
–
–
–
245,392
11,601
–
–
–
–
427,189
172,626
97,175
85,988
258,381
–
22,416
15,294
35,185
93,885
109,000
11,601
1,286,751
162,630
512,800
225,934
2,783,856
1 Appointed 10 January 2020. No director fees paid or accrued during the year.
2 Retired 4 December 2019. Salary and fees were settled with the issue of shares and options.
3 No director fees paid or accrued during the year.
4 Appointed 20 January 2020. 3m share options were awarded as director remuneration during the year, however these
options lapsed when P Flannigan retired as a director.
5 Retired 29 November 2019. No director fees paid or accrued during the year.
6 Appointed 19 September 2019. Retired 29 November 2019. Salary and fees were settled with the issue of shares and options.
7 Appointed 12 December 2019. Kurt Hansen received a bonus of $200,000 as part of his sign-on fee upon the acquisition of
Pure Security Group.
8 Resigned 7 February 2020.
9 Resigned 8 June 2020.
10 Appointed 8 March 2020.
11 Appointed upon acquisition 31 March 2020.
12 Appointed upon acquisition 3 July 2019.
38
for the year ended 30 June 2021Annual Report 2021 Tesserent Ltd Directors’ Report
REMUNERATION REPORT (AUDITED) (CONTINUED)
Bonuses included in remuneration
The proportion of remuneration linked to performance and the fixed proportions are as follows:
2021
2020
Fixed
remuneration
At risk - STI
At risk - LTI
Fixed
remuneration
At risk - STI
At risk - LTI
Non-Executive Directors
G Lord
G Baxter
P Flannigan
M Haas
R Langford
S Bertamini
S Caswell
Executive Directors
J Challingsworth
K Hansen
Other KMPs
S Scheffer
P Fearns
J Jones
G Katavic
C Hagios
C Humphreys
D Singh
M Glennan
R Miller
M Phillips
R Silver
–
–
–
–
n/a
n/a
n/a
80%
82%
81%
100%
55%
100%
59%
29%
19%
n/a
n/a
n/a
n/a
–
–
–
–
n/a
n/a
n/a
–
–
–
–
–
–
41%
71%
–
n/a
n/a
n/a
n/a
100%
100%
–
100%
n/a
n/a
n/a
20%
18%
19%
–
45%
–
–
–
81%
n/a
n/a
n/a
n/a
–
–
–
n/a
21%
–
48%
42%
55%
91%
n/a
n/a
100%
n/a
n/a
n/a
77%
100%
100%
100%
–
–
–
n/a
–
–
–
–
27%
–
n/a
n/a
–
n/a
n/a
n/a
–
–
–
–
–
–
–
n/a
79%
–
52%
58%
18%
9%
n/a
n/a
–
n/a
n/a
n/a
23%
–
–
–
In 2020, Kurt Hansen received a cash bonus as part of his sign-on fee upon the acquisition of Pure Security
Pty Ltd.
39
for the year ended 30 June 2021 Directors’ Report
REMUNERATION REPORT (AUDITED) (CONTINUED)
C. Share Based Compensation
Ordinary shares
Details of shares issued to Directors and other key management personnel as part of compensation during
the year ended 30 June 2021 are set out below:
KMP
S Scheffer
Date
No of shares
10 Jul-20
343,750
343,750
Weighted
average
issue price
($)
0.084
Value ($)
28,738
28,738
1
J Challingsworth and K Hansen shares were issued under existing performance rights (issued during the year ended 30 June
2020). Performance rights conditions (linked to share price) were met during the year ended 30 June 2021.
Options and performance rights
The terms and conditions of each grant of options affecting remuneration in the current or future reporting
periods are as follows:
KMP
G Lord
G Baxter
M Haas
J Jones
D Singh*
D Singh*
Grant date
options Vesting date
Expiry date
No of
Exercise
price
Value per
option at
grant date
% vested
16 Sep-20
6,000,000
16 Sep-25
16 Sep-25
16 Sep-20
3,000,000
16 Sep-25
16 Sep-25
22 Jun-21
3,000,000
22 Jun-21
21 Sep-26
30 Apr-21
1,000,000
27 Oct-21
30 Apr-26
2 Jun-21
1,000,000
2 Jun-21
16 Sep-23
2 Jun-21
1,000,000
16 Sep-21
16 Sep-23
$0.25
$0.25
$0.21
$0.24
$0.28
$0.35
$0.180
$0.180
$0.127
$0.124
$0.110
$0.120
100%
100%
100%
–
100%
–
* Options awarded were granted on 2 Jun-21, at the commencement of D Singh’s employment contract with TNT. As these
options fall under the ESOP plan, the deemed issue date is 16 Sep-20 and the calculation of option expense amortisation
is determined based on this earlier issue date.
No performance rights were contracted during the year ended 30 June 2021. The options carry no dividends
or voting rights. The options will vest if the option holder remains employed by the company at the relevant
vesting date.
40
for the year ended 30 June 2021Annual Report 2021 Tesserent Ltd
Directors’ Report
REMUNERATION REPORT (AUDITED) (CONTINUED)
The table below shows a reconciliation of options and rights held by each KMP from the beginning to the end
of FY 2021.
Year ended 30 June 2021
G Lord
G Lord
G Lord
G Lord
G Baxter
P Flannigan
P Flannigan
M Haas1
J Challingsworth2
K Hansen3
J Jones4
D Singh5
Balance at
1 July 2020
Granted
during the
year
10,000,000
14,250,000
2,632,500
–
–
–
– 6,000,000
– 3,000,000
6,000,000
–
– 3,000,000
– 3,000,000
10,000,000
10,000,000
–
1,000,000
– 2,000,000
Other
change
Exercised
– (10,000,000)
–
–
–
–
–
–
–
–
(8,000,000)
–
–
–
–
–
–
(10,000,000)
(10,000,000)
–
Lapsed/
forfeited
during the
year
Balance at
30 June 2021
–
–
–
–
6,250,000
2,632,500
– 6,000,000
– 3,000,000
– 6,000,000
(3,000,000)
–
– 3,000,000
–
–
–
–
–
1,000,000
2,000,000
1 M Haas’s non-executive director options were formally approved by shareholder vote at the General Meeting held by
videoconference, at 9.00 am AEDT on 22 June 2021
2 Represent performance rights which met conditions for conversion to ordinary shares during the year
3 Represent performance rights which met conditions for conversion to ordinary shares during the year
4 Options contracted upon commencement of employment on 30 April 2021 and vest 6 months after commencement date
5 Represent options issued under Employee Share Option Plan (ESOP), approved by the board in October 2020
The total value of options and performance rights that were granted during the year ended 30 June 2021 is
as follows:
KMP
G Lord
G Baxter
M Haas
J Jones
D Singh
D Singh
No of
options
Value per
option at
grant date
Total value
of options
granted
during the
year $
6,000,000
$0.180
1,080,000
3,000,000
$0.180
540,000
3,000,000
$0.127
380,000
1,000,000
1,000,000
$0.124
$0.110
124,196
110,000
1,000,000
$0.120
120,000
The fair value of these options granted as remuneration as shown in the above table has been determined
in accordance with Australian Accounting Standards, using the Black-Scholes method of calculation and will
be recognised over the relevant vesting period to the extent that the conditions necessary for vesting are
satisfied.
41
for the year ended 30 June 2021
Directors’ Report
REMUNERATION REPORT (AUDITED) (CONTINUED)
D. Additional Information
Relationship between remuneration policy and Company performance
The remuneration policy has been tailored to increase goal congruence between shareholders, directors
and executives. The chosen method to achieve this aim is providing shares and share options to link future
benefits to the performance of the Company’s share price. The Company believes this policy will be effective
in increasing shareholder’s wealth. The earnings of the Company for the reporting periods to 30 June 2020
are summarised below, along with details that are considered to be factors in shareholder returns:
$’000 (unless otherwise stated)
30-Jun-17
30-Jun-18
30-Jun-19
30-Jun-20
30-Jun-21
Statutory revenue - external customer sales
5,375
5,328
5,260
20,223
67,389
Earnings before interest, tax, depreciation
and amortisation (EBITDA)
Loss after income tax
(2,884)
(3,464)
(1,529)
(3,096)
(3,843)
(4,373)
(5,020)
189
(7,312)
(4,533)
Basic loss per share (cents)
Share price at financial year end (cents)
(2.99)
9.2
(2.62)
6.0
(2.90)
4.5
(2.02)
8.0
(0.52)
23.5
Performance rights exercised during the year ended 30 June 2021
During the year the Performance Rights which were put in place in order to reflect growth in revenue and
market capitalisation were exercised as a result of the performance conditions having been met.
These Performance Rights were approved by shareholders on 29 November 2019. No performance-based
measures were put in place during the year ended 30 June 2021.
E. Additional Information in relation to key management personnel shareholdings
Ordinary shares held in Tesserent Limited (number) as at 30 June 2021
Shares issued
as remunera-
tion during
the year
Issued on
exercise of
options and
CNs during
the year
Balance
1 July 2020
On-market
changes
Other
changes
Balance
30 June 2021
27,433,334
4,120,327
–
71,825,622
–
– 99,258,956
–
4,120,327
–
– 22,000,000
(9,375,000)
–
12,625,000
4,000,000
4,202,112
–
–
10,000,000
–
10,000,000
(1,262,538)
–
–
–
14,000,000
12,939,574
–
–
343,750
6,774,641
–
–
–
–
–
–
–
–
–
(343,750)
–
–
–
1,171,159
7,945,800
9,313,333
9,313,333
20,410,431
20,410,431
46,530,414
343,750
113,825,622
(10,981,288) 30,894,923
180,613,421
Non-Executive Directors
G Lord
G Baxter
P Flannigan
Executive Directors
J Challingsworth
K Hansen
Other KMPs
S Scheffer
G Katavic
C Hagios
C Humphreys
Total
42
for the year ended 30 June 2021Annual Report 2021 Tesserent Ltd Directors’ Report
REMUNERATION REPORT (AUDITED) (CONTINUED)
Share options and performance rights held in Tesserent Limited (number) as at 30 June 2021
Non-Executive Directors
G Lord
G Baxter
P Flannigan
M Haas
Executive Directors
J Challingsworth
K Hansen
Other KMPs
J Jones
D Singh
Total
Balance
1 July 2020
Granted as
payment for
remuneration
Options/
rights
converted
Other
changes
Balance
30 June 2021
Vested and
exercisable
26,882,500
6,000,000 (10,000,000) (8,000,000)* 14,882,500
14,882,500
1,500,000
3,000,000
6,000,000
3,000,000
– 3,000,000
–
–
–
–
4,500,000
4,500,000
(3,000,000) 6,000,000
6,000,000
– 3,000,000
3,000,000
10,000,000
10,000,000
–
–
(10,000,000)
(10,000,000)
–
–
–
–
–
1,000,000
– 2,000,000
–
–
–
1,000,000
– 2,000,000
1,000,000
52,882,500 18,000,000 (30,000,000) (11,000,000) 29,882,500 29,382,500
–
–
–
* Options transfered to related parties (not controlled by G Lord).
F. Loans from/to KMP
There were no loan balances with Key Management Personnel as at 30 June 2021.
G. Other Transactions with KMP
The Company undertook business with Belgravia Group and associated companies that Mr G Lord is a
director of and owns an interest in. Products purchased totalled $4,351 (interest relating to the funding of
insurance premiums) through Belgravia Finance Pty Ltd. Products and services sold to Belgravia totalled
$147,982 being professional services (cyber consulting) to Belgravia Health Pty Ltd of $6,250, and professional
services and software subscriptions and support to Belgravia Group Pty Ltd of $141,732.
There were no other transactions with Key Management Personnel.
This concludes the remuneration report, which has been audited.
NON-AUDIT SERVICES
During the year, BDO Audit Pty Ltd, the Company’s auditor, performed certain other services in addition
to their statutory duties. The Directors are satisfied that the provision of these non-audit services 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. Details of amounts paid or payable for
non-audit services is outlined in Note 34 of the financial statements:
Corporate and indirect tax services
Due diligence services
Total
2021
$
2020
$
26,538
575,041
601,579
41,750
118,000
159,750
43
for the year ended 30 June 2021 Directors’ Report
NON-AUDIT SERVICES (CONTINUED)
The Directors are of the opinion that the services outlined in Note 34 to the financial statements do not
compromise the external auditor’s independence for the following reasons:
– All non-audit services have been reviewed and approved by the Board 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 Profession and Ethical
Standards Board, including reviewing or auditing the auditor’s own work, acting in a management or
decision-making capacity for the Company, acting as an advocate for the Company or jointly sharing
economic risks and rewards.
AUDITOR’S INDEPENDENCE DECLARATION
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act
2001 is included at page 45 of the Annual Report.
CORPORATE GOVERNANCE
In recognising the need for the highest standards of corporate behaviour and accountability, the
Directors support the principles of Corporate Governance. The Company continued to follow best
practice recommendations as set out by the ASX Corporate Governance Council. Where the Company has
not followed best practice for any recommendation, explanation is given in the Corporate Governance
Statement within this Annual Report. The Company’s Corporate Governance statement, can be found earlier
in this report and is available on the Company’s website at https://www.tesserent.com/.
ROUNDING OF AMOUNTS
The company 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.
Signed in accordance with a resolution of the Directors made pursuant to s.298 (2) of the Corporations Act
2001. On behalf of the Directors
Julian Challingsworth
Co-Chief Executive Officer
29 September 2021
44
for the year ended 30 June 2021Annual Report 2021 Tesserent Ltd Tel: +61 3 9603 1700
Fax: +61 3 9602 3870
www.bdo.com.au
Collins Square, Tower Four
Level 18, 727 Collins Street
Melbourne VIC 3008
GPO Box 5099 Melbourne VIC 3001
Australia
DECLARATION OF INDEPENDENCE BY DAVID GARVEY TO THE DIRECTORS OF TESSERENT LIMITED
As lead auditor of Tesserent Limited for the year ended 30 June 2021, I declare that, to the best of my
knowledge and belief, there have been:
1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
2. No contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Tesserent Limited and the entities it controlled during the period.
David Garvey
Director
BDO Audit Pty Ltd
Melbourne, 29 September 2021
BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO
Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members
of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent
member firms. Liability limited by a scheme approved under Professional Standards Legislation.
Consolidated Statement of Profit or Loss
and Other Comprehensive Income
Revenue
Other income
Expenses
Software licence and connectivity fees
Employee benefits expense
Contractor expense
Administration expenses
Bad and doubtful debts
Consulting and legal costs
Advertising and promotion
Business acquisition costs
Share option expense
Depreciation and amortisation expense
Impairment of assets
Finance costs
Other expenses
Loss before income tax benefit
Income tax benefit
Loss after income tax benefit for the year
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Basic earnings per share
Diluted earnings per share
Note
2021
$’000
2020
$’000
5
6
7
7
7
8
42
42
67,389
20,223
964
175
(9,654)
(5,449)
(35,567)
(12,044)
(8,679)
(1,475)
(235)
(962)
(404)
(4,934)
(4,462)
(4,975)
–
(4,431)
(1,686)
(9,111)
4,578
(4,533)
–
(2,082)
(883)
(281)
(957)
(212)
(1,995)
(265)
(1,523)
(786)
(824)
(1,250)
(8,153)
841
(7,312)
–
(4,533)
(7,312)
Cents
Cents
(0.52)
(0.52)
(2.02)
(2.02)
The above consolidated statement of profit or loss and other comprehensive income should be read in
conjunction with the accompanying notes.
46
for the year ended 30 June 2021Annual Report 2021 Tesserent Ltd Consolidated Statement of Financial Position
as at 30 June 2021
Assets
Current Assets
Cash and cash equivalents
Trade and other receivables
Contract assets
Prepayments
Inventories
Lease asset receivables
Current tax asset
Total current assets
Non-Current Assets
Contract assets
Property, plant and equipment
Intangibles
Goodwill
Right-of-use assets
Lease asset receivables
Investments in associates and joint ventures
Other assets
Total non-current assets
Total Assets
Liabilities
Current Liabilities
Trade and other payables
Contract liabilities
Lease liabilities
Provisions
Income tax payable
Deferred settlement liabilities
Total current liabilities
Non-Current Liabilities
Contract liabilities
Lease liabilities
Borrowings
Provisions
Deferred settlement liabilities
Deferred tax liability
Total non-current liabilities
Total Liabilities
Net Assets
Note
2021
$’000
2020
$’000
9
11
12
13
14
15
12
18
19
20
17
15
21
16
22
23
24
25
26
27
23
24
28
25
27
8
14,860
24,799
9,293
1,906
85
254
215
4,350
7,423
780
1,382
64
–
288
51,412
14,286
159
2,700
29,577
83,259
6,812
534
5,867
811
129,718
181,130
28,973
7,335
2,390
2,831
172
11,699
53,400
1,179
5,078
25,603
675
1,652
5,910
40,097
93,497
87,633
158
864
7,618
15,965
3,921
–
–
466
28,992
43,278
7,470
2,651
1,046
843
–
4,714
16,724
129
3,489
3,637
666
686
1,440
10,047
26,771
16,507
47
Consolidated Statement of Financial Position
as at 30 June 2021
Equity
Contributed equity
Convertible notes
Reserves
Accumulated losses
Total Equity
Note
2021
$’000
2020
$’000
29
30
31
102,992
29,485
–
11,200
6,532
1,840
(26,558)
(21,349)
87,633
16,507
The above consolidated statement of financial position should be read in conjunction with the accompanying
notes.
48
Annual Report 2021 Tesserent Ltd Consolidated Statement of Changes In Equity
Balance at 1 July 2019
Loss after income tax benefit for the year
Other comprehensive income for the year,
net of tax
Total comprehensive income for the year
Issue of shares
Issue of convertible notes
Capital raising costs
Share based payments
Shares issues as part of business
combination
Shares issued on conversion of convertible
notes
Distributions to convertible note holders
Options expired
Deferred tax
Impact AASB 16 Lease, net of tax
Contributed
equity
$’000
Converting
notes
$’000
Reserves
$’000
Accumulated
losses
$’000
Total
equity
$’000
13,756
–
–
–
4,924
–
(330)
1,628
6,732
–
–
–
–
–
9,434
(451)
–
–
2,775
(2,775)
–
–
–
–
324
–
–
–
773
(14,165)
362
–
–
–
–
–
–
1,781
–
–
–
(403)
(310)
–
(7,312)
(7,312)
–
(7,312)
–
–
–
–
–
–
(324)
403
–
49
–
(7,312)
4,924
9,434
(781)
3,409
6,732
–
–
–
(310)
49
Balance at 30 June 2020
29,485
6,532
1,840
(21,349)
16,507
Balance at 1 July 2020
29,485
6,532
1,840
(21,349)
16,507
Loss after income tax benefit for the year
Other comprehensive income for the year, net
of tax
Total comprehensive income for the year
Capital raising costs
Warrants issued
Share options issued
–
–
–
(216)
–
–
Shares issued or accrued as part of business
combinations
50,480
Shares issued or accrued to employees or
consultants
Shares issued on conversion of convertible notes
Distribution to convertible note holders
Options exercised
Options forfeited
Warrants exercised
Deferred tax
Translation of foreign operations
4,744
7,172
–
4,114
–
7,213
–
–
Balance at 30 June 2021
102,992
–
–
–
–
–
–
–
–
(6,721)
190
–
–
–
–
–
–
–
–
–
–
8,050
4,213
–
–
–
–
(169)
(365)
–
(2,400)
30
(4,533)
(4,533)
–
–
(4,533)
(4,533)
–
–
–
–
–
(451)
(190)
(90)
365
–
(310)
–
(216)
8,050
4,213
50,480
4,744
–
–
3,855
–
7,213
(2,710)
30
11,200
(26,558)
87,633
The above consolidated statement of changes in equity should be read in conjunction with the
accompanying notes.
49
for the year ended 30 June 2021 Consolidated Statement of Cash Flows
Note
2021
$’000
2020
$’000
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Other revenue
Interest received
Interest and other finance costs paid
Income taxes paid
Net cash from / (used in) operating activities
Cash flows from investing activities
Payment for purchase of business, net of cash acquired
Payments for investments
Payments for property, plant and equipment
Capitalised development costs
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
Cost of issuing shares
Proceeds from borrowings
Repayment of lease liabilities
Transaction costs related to loans and borrowings
Proceeds (distributions to) / from convertible notes
Payment of deferred settlement liabilities
Net cash from financing activities
6
6
10
39
21
18
19
29
29
28
90,933
23,312
(86,148)
(26,170)
158
9
(1,177)
(881)
2,893
(18,629)
(3,000)
(1,461)
(25)
166
9
(416)
(151)
(3,250)
(10,171)
–
(73)
(82)
(23,115)
(10,326)
9,485
(216)
30,000
24, 25
(1,772)
28
30
27
(798)
(190)
(5,778)
4,924
(188)
4,920
(751)
(12)
8,995
(962)
30,732
16,926
10,510
4,350
14,860
3,350
1,000
4,350
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Cash and cash equivalents at the end of the financial year
9
The above consolidated statement of cash flows should be read in conjunction with the accompanying
notes.
50
for the year ended 30 June 2021Annual Report 2021 Tesserent Ltd Notes to the Consolidated Financial Statements
1. SIGNIFICANT ACCOUNTING POLICIES
The financial statements were authorised for issue by the Directors on 29 September 2021.
The principal accounting policies adopted in the preparation of the financial statements are set out below.
These policies have been consistently applied to all the years presented, unless otherwise stated.
New or amended Accounting Standards and Interpretations adopted
The group has adopted all of the new or amended Accounting Standards and Interpretations issued by the
Australian Accounting Standards Board (‘AASB’) that are mandatory for the current reporting period.
Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been
early adopted.
Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting
Standards and Interpretations issued by the Australian Accounting Standards Board (‘AASB’) and the
Corporations Act 2001, as appropriate for for-profit oriented entities. These financial statements also
comply with International Financial Reporting Standards as issued by the International Accounting Standards
Board (‘IASB’).
The financial statements cover Tesserent Limited (“the Company”) and its controlled entities as a
consolidated entity (“the Group”) for the year ended 30 June 2021. The Company is a company limited by
shares that are publicly traded on the Australian Stock Exchange, incorporated and domiciled in Australia.
Tesserent provides Cyber security consulting, cloud and managed services to a wide range of Australian and
international customers, including education providers, corporate enterprises, and government customers.
These services are provided on the basis of consulting contracts, software implementation contracts and
a subscription fees, either as one off engagements, longer term projects or as monthly or annual fees.
Historical cost convention
The financial statements have been prepared under the historical cost convention, except for, where
applicable, the revaluation of financial assets and liabilities at fair value through profit or loss, financial
assets at fair value through other comprehensive income, investment properties, certain classes of
property, plant and equipment and derivative financial instruments.
Comparatives
Where necessary, comparative information has been reclassified and repositioned for consistency with
current year disclosures.
Going Concern
For the year ended 30 June 2021 the Group made a net loss of $4.5m (2020: $7.3m) and had cash inflows
from operations of $2.9m (vs. 2020: outflows of $3.3m). Current liabilities exceed current assets by $2.0m.
The group’s cash reserves amounted to $14.9m and trade and other receivables amounted to $24.8m, whilst
current trade and other payables amounted to $29.0m.
Management has considered the impacts of continuing Government restrictions in response to the COVID–19
pandemic.
The measures taken have impacted how the Group’s employees operate and how the Group operates. Whilst
this has proven disruptive, the Group has continued to trade and is able to meet ongoing customer contract
obligations, and source and service new sales contracts. The Group’s supply chain has also been disrupted
but not to the extent that the Group is unable to deliver products and services. Management has fully
considered the impact of the pandemic when considering the Group’s ability to continue as a going concern.
The Group budgets and cash flow forecasts take into account expected trading performance and the
Directors believe that the Group will continue to meet its obligations as and when they fall due, with positive
forecast operational cash flows contributing to cash reserves. The Group does not expect to require any
additional debt funding other than that required to fund additional acquisitions and expects that the Group
will raise additional funding through a combination of equity placings and debt funding, which has occurred
after balance date as disclosed in Note 41.
On the basis of this information, the Directors have a reasonable expectation that the business has
adequate resources to continue in operational existence for the foreseeable future. Accordingly, the
Directors continue to adopt the going concern basis in preparing this financial report.
51
for the year ended 30 June 2021 Notes to the Consolidated Financial Statements
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 consolidated entity’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 2.
Parent entity information
In accordance with the Corporations Act 2001, these financial statements present the results of the
consolidated entity only. Supplementary information about the parent entity is disclosed in Note 38.
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Tesserent
Limited (‘TNT’ or ‘company’ or ‘parent entity’) as at 30 June 2021 and the results of all subsidiaries for
the year then ended. Tesserent Limited and its subsidiaries together are referred to in these financial
statements as the ‘Group’ or the ‘Company’.
Subsidiaries are all those 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 de-consolidated from the date that control ceases.
Intercompany transactions, balances and unrealised gains on transactions between entities in the group are
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment
of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure
consistency with the policies adopted by the group.
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change
in ownership interest, without the loss of control, is accounted for as an equity transaction, where the
difference between the consideration transferred and the book value of the share of the non-controlling
interest acquired is recognised directly in equity attributable to the parent.
Foreign currency translation
The functional currency of each of the entities in the Group must reflect the primary economic environment
in which the entity operates. Accordingly, the relevant functional currencies are Australian dollars for the
Australian entities and NZ dollars for the NZ entity and Singapore dollars for the Singapore entity. Foreign
currency items are translated to Australian currency on the following basis.
– Transactions are converted at exchange rates approximating those in effect at the date of the
transaction.
– On consolidation, the assets and liabilities of the foreign operation are translated into Australian dollars
at the rate of exchange prevailing at the reporting date except for retained earnings which is translated
at a historic rate of exchange pertaining to the relevant financial year. The Statement of Comprehensive
income is translated at an average exchange rate over the financial year.
– The exchange difference arising on translation for consolidation are recognised in the balance sheet as
a foreign currency translation reserve. On disposal of a foreign operation, the reserve is reclassified to
profit or loss.
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.
52
for the year ended 30 June 2021Annual Report 2021 Tesserent Ltd Notes to the Consolidated Financial Statements
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Investments and other financial assets
Investments and other financial assets are initially measured at fair value. Transaction costs are included
as part of the initial measurement, except for financial assets at fair value through profit or loss. Such
assets are subsequently measured at either amortised cost or fair value depending on their classification.
Classification is determined based on both the business model within which such assets are held and the
contractual cash flow characteristics of the financial asset unless an accounting mismatch is being avoided.
Financial assets are derecognised when the rights to receive cash flows have expired or have been
transferred and the group has transferred substantially all the risks and rewards of ownership. When there is
no reasonable expectation of recovering part or all of a financial asset, it’s carrying value is written off.
Share-based payments
Equity-settled and cash-settled share-based compensation benefits are provided to employees.
Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in
exchange for the rendering of services. Cash-settled transactions are awards of cash for the exchange of
services, where the amount of cash is determined by reference to the share price.
The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently
determined using either the Binomial or Black-Scholes option pricing model that takes into account the
exercise price, the term of the option, the impact of dilution, the share price at grant date and expected
price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term
of the option, together with non-vesting conditions that do not determine whether the group receives the
services that entitle the employees to receive payment. No account is taken of any other vesting conditions.
The cost of equity-settled transactions are recognised as an expense with a corresponding increase in
equity over the vesting period. The cumulative charge to profit or loss is calculated based on the grant date
fair value of the award, the best estimate of the number of awards that are likely to vest and the expired
portion of the vesting period. The amount recognised in profit or loss for the period is the cumulative amount
calculated at each reporting date less amounts already recognised in previous periods.
The cost of cash-settled transactions is initially, and at each reporting date until vested, determined by
applying either the Binomial or Black-Scholes option pricing model, taking into consideration the terms and
conditions on which the award was granted. The cumulative charge to profit or loss until settlement of the
liability is calculated as follows:
– during the vesting period, the liability at each reporting date is the fair value of the award at that date
multiplied by the expired portion of the vesting period.
– from the end of the vesting period until settlement of the award, the liability is the full fair value of the
liability at the reporting date.
All changes in the liability are recognised in profit or loss. The ultimate cost of cash-settled transactions is
the cash paid to settle the liability.
Market conditions are taken into consideration in determining fair value. Therefore any awards subject to
market conditions are considered to vest irrespective of whether or not that market condition has been met,
provided all other conditions are satisfied.
Rounding of amounts
The company 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.
New Accounting Standards and Interpretations not yet mandatory or early adopted
The company has adopted all of the new or amended Accounting Standards and Interpretations issued by
the Australian Accounting Standards Board (‘AASB’) that are mandatory for the current reporting period. Any
new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early
adopted. The Directors do not believe the adoption of these Accounting Standards and Interpretations will
have a material impact on the financial performance or position of the Company in future reporting periods.
53
for the year ended 30 June 2021 Notes to the Consolidated Financial Statements
2. CRITICAL ACCOUNTING JUDGEMENTS
The preparation of the financial statements requires management to make judgements, estimates and
assumptions that affect the reported amounts in the financial statements. Management continually
evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and
expenses. Management bases its judgements, estimates and assumptions on historical experience and
on other various factors, including expectations of future events, management believes to be reasonable
under the circumstances. The resulting accounting judgements and estimates will seldom equal the related
actual results. The judgements, estimates and assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next
financial year are discussed below.
Share-based payment transactions
The group measures the cost of equity-settled transactions with employees by reference to the fair value of
the equity instruments at the date at which they are granted. The fair value is determined by using either the
Binomial or Black-Scholes model taking into account the terms and conditions upon which the instruments
were granted. The accounting estimates and assumptions relating to equity-settled share-based payments
would have no impact on the carrying amounts of assets and liabilities within the next annual reporting
period but may impact profit or loss and equity.
Revenue from contracts with customers involving sale of goods
When recognising revenue in relation to the sale of goods to customers, the key performance obligation of
the group is considered to be the point of delivery of the goods to the customer, as this is deemed to be
the time that the customer obtains control of the promised goods and therefore the benefits of unimpeded
access.
A portion of the Group’s revenue is derived from selling third party Cyber Security products and monitoring
software to clients. In the instances where the Group makes these sales to customers with limited or
no associated implementation or customisation work, the requirements under the AASB15 Revenue from
Contracts with Customers, deem TNT to be selling those products as an ‘agent’ and require the sales
turnover (invoiced amount) to be netted off against the cost of acquiring that software. The impact of this
during the year ended 30 June 2021, is to net down the Groups Turnover (invoiced sales) from $96.7m to a
reported statutory revenue of $67.4m.
The Group’s revenue is derived from the provision of software licences, hardware equipment, managed
services, consulting services and support and maintenance renewals over multiple periods. In applying the
requirements of AASB 15 Revenue from Contracts with Customers the Group has had to make assumptions
around future billing and completion of future performed obligations.
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.
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 lives, 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 20. 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.
54
for the year ended 30 June 2021Annual Report 2021 Tesserent Ltd Notes to the Consolidated Financial Statements
2. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS (CONTINUED)
Impairment of non-financial assets other than goodwill and other indefinite life intangible
assets
The group assesses impairment of non-financial assets other than goodwill and other indefinite life
intangible assets at each reporting date by evaluating conditions specific to the group and to the particular
asset that may lead to impairment. If an impairment trigger exists, the recoverable amount of the asset is
determined. This involves fair value less costs of disposal or value-in-use calculations, which incorporate a
number of key estimates and assumptions.
Fair Value of Lateral earnout consideration
Deferred consideration in respect of Lateral Security includes a component payable in issued capital. The
contractual obligation for Earnout Shares as set out in the Share Purchase Agreement, is to issue a defined
number of ordinary shares in TNT.
The fair value of the Earnout Shares which were expected to be issued under the Share Purchase Agreement
was determined based on the share price of TNT shares on 12 February 2021 (being the date on which the
acquisition of Lateral Security was completed). The fair value of these Earnout Shares was re-assessed at
the date that the earnout date was reached and the contractual obligation to issue the shares crystalised
(being 31 May 2021).
These Earnout Shares are to be issued on 12 February 2022. They have been accounted for in line with
Accounting Standard AASB132 in that an instrument that meets requirements for classification as equity and
the contractual obligation has been classified as ‘Contributed equity’.
Fair Value of TrustGrid and AttackBound options held
In June 2021, Tesserent Group (TNT) entered into two investments comprising a 25% stake in TGrid Holdings
Pty Ltd and a 25% stake in AttackBound Holdings Pty Ltd.
Consideration payable for the shares and options in TrustGrid and AttackBound under the terms of the
Share Purchase Agreements and Convertible Note Deeds, comprises respectively, cash consideration and
consideration in TNT shares as consideration for shares in the acquired entities plus cash consideration for
grant of option instruments.
The options acquired under the Convertible Note Deeds (Options), give TNT the right to acquire additional
shares in either TrustGrid or AttackBound to maintain TNT’s shareholding in the relevant business when each
business raises additional capital by issuing new shares.
The right to acquire these additional shares is essentially drawn down against amounts paid (or payable)
under the Cash consideration plus Deferred Cash consideration for grant of Option Instrument. The pricing
of these additional shares is to be equivalent to the share price applied to the applicable capital raise
(Notional Share Price). The Options have a two-year Exercise Period from the date of completion of the
Convertible Note Deeds – being 16 June 2021.
As at 30 June 2021, the carrying value of these options has been assessed as being equal to the cost of the
options under the Convertible Note Deed, as the Directors believe this is the best estimate of the extent
of the Call Option that will be exercised in the future. The carrying value of the options will be re-assessed,
based on the underlying value of each of the TrustGrid and AttackBound businesses and the expectation/
probability of the businesses raising capital within the Exercise Period.
Fair value of warrants associated with long term borrowings facilities
The fair value of long-term borrowings disclosed in Note 28, are based on cash flows discounted using
effective market discount rates available to the Group. Finance costs of $10.3m (2020:$1.6m) have been
recognised to be amortised over the life of the borrowings, which in effect discounts the face value of the
borrowings of $35 million. The effective interest rate method is a method of calculating the amortised cost
of a financial liability and allocating interest expense over the relevant period. The effective interest rate is
the rate that exactly discounts estimate future cash payments through the expected life of the financial
liability or, where appropriate, shorter period.
55
for the year ended 30 June 2021 Notes to the Consolidated Financial Statements
2. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS (CONTINUED)
Income tax
The group is subject to income taxes in the jurisdictions in which it operates. Significant judgement is required
in determining the provision for income tax. There are many transactions and calculations undertaken during
the ordinary course of business for which the ultimate tax determination is uncertain. The group recognises
liabilities for anticipated tax audit issues based on the group’s current understanding of the tax law. Where
the final tax outcome of these matters is different from the carrying amounts, such differences will impact
the current and deferred tax provisions in the period in which such determination is made.
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary differences and income tax losses only if
the group considers it is probable that future taxable amounts will be available to utilise those temporary
differences and losses.
Employee benefits provision
As discussed in Note 25, the liability for employee benefits expected to be settled more than 12 months
from the reporting date are recognised and measured at the present value of the estimated future cash
flows to be made in respect of all employees at the reporting date. In determining the present value of the
liability, estimates of attrition rates and pay increases through promotion and inflation have been taken into
account.
Business combinations
As discussed in Note 39, 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.
Lease term
The lease term is a significant component in the measurement of both the right-of-use asset and lease
liability. Judgement is exercised in determining whether there is reasonable certainty that an option to
extend the lease or purchase the underlying asset will be exercised, or an option to terminate the lease will
not be exercised, when ascertaining the periods to be included in the lease term. In determining the lease
term, all facts and circumstances that create an economical incentive to exercise an extension option, or
not to exercise a termination option, are considered at the lease commencement date. Factors considered
may include the importance of the asset to the Group’s operations; comparison of terms and conditions to
prevailing market rates; incurrence of significant penalties; existence of significant leasehold improvements;
and the costs and disruption to replace the asset. The Group reassesses whether it is reasonably certain to
exercise an extension option, or not exercise a termination option, if there is a significant event or significant
change in circumstances.
Incremental borrowing rate
Where the interest rate implicit in a lease cannot be readily determined, an incremental borrowing rate is
estimated to discount future lease payments to measure the present value of the lease liability at the lease
commencement date. Such a rate is based on what the Group estimates it would have to pay a third party
to borrow the funds necessary to obtain an asset of a similar value to the right-of-use asset, with similar
terms, security and economic environment.
56
for the year ended 30 June 2021Annual Report 2021 Tesserent Ltd
Notes to the Consolidated Financial Statements
3. ADJUSTMENTS TO PRELIMINARY FINANCIAL STATEMENTS
On 30 August 2021, the Group released its unaudited Preliminary Financial Statements and Appendix 4E, with
a reported loss after tax of $4.5m and net assets of $87.6m.
The reported loss after tax of $4.5m and net assets of $87.6m, remain unchanged within this final Annual
Report, however it is noted that there have been a some changes to the classification grouping of items
within the Statement of Financial Position as follows:
Total current assets
Total non-current assets
Total current liabilities
Total non-current liabilities
Net increase in cash held
Appendix 4E
Preliminary
report
$’000
51,467
129,722
Audited
Annual
Report
$’000
51,412
129,718
(54,523)
(53,400)
(39,034)
(40,097)
87,632
87,633
Further to this, there have also been some changes to the Statement of Cashflows to ensure classification
of items is consistent with the notes to this Annual report. The impact of these changes are as follows:
Cash used in operations
Cash used in investing activities
Cash from financing activities
Net increase in cash held
Appendix 4E
Preliminary
report
$’000
Audited
Annual
Report
$’000
2,668
2,893
(20,656)
(23,115)
28,498
10,510
30,732
10,510
The difference in cash flows arose from a re-allocation of some investing costs to operating payments and
correction in the treatment of cash paid for acquisitions but held in escrow.
4. OPERATING SEGMENTS
Identification of reportable operating segments
The Group operates predominantly in Australia and New Zealand (following the acquisition of Lateral Security
on 12 February 2021 – refer to Note 39 Business Combinations)
An operating segment is a component of an entity that engages in business activities from which it may earn
revenue and incur expenses, whose operating results are reviewed by the Group’s chief operating decision
maker (CODM) in order to effectively allocate Group resources and assess performance. In the case of
Tesserent, the Co-Chief Executive Officers are the Group’s CODM’s.
In the process of preparing the strategic plan and budget for the 30 June 2022 financial year, the Group
updated its internal management reporting structure and go to market approach. This revised structure has
evolved through the management reporting developed in the 30 June 2021 financial year given the significant
number of acquisitions during the year, and forms the basis in which the CODMs manage the business and
assessment performance.
Under the revised structure, the Group’s internal reporting and management comprises three primary
operating segments, being:
1.
Tesserent Commercial segment- comprising the Group’s core customer offerings Defend, Cloud and
Detect customer service offerings
2. Tesserent Federal segment – comprising the North Security, Ludus and Seer Security businesses
3.
Tesserent New Zealand segment – comprising the newly acquired Lateral business plus the newly
incorporated Tesserent NZ entity to cross sell services from the Australian Commercial Division into
Lateral and new NZ customers
57
for the year ended 30 June 2021 Notes to the Consolidated Financial Statements
4. OPERATING SEGMENTS (CONTINUED)
The CODMs review these segments down to the EBIDAC level (Earnings before interest, tax, depreciation,
amortisation and corporate overhead costs), with reporting of corporate overhead costs and non-cash
costs done on a consolidated group basis.
Total
$000
67,389
964
68,353
(13,298)
189
(4,975)
(4,325)
(9,111)
4,578
(4,533)
(4,462)
(4,934)
181,130
93,497
Total
$000
20,223
175
20,399
Tesserent
Commercial
$000
Tesserent
Federal
$000
Tesserent
New Zealand
$000
Other /
unallocated
$000
40,572
24,976
171
23
40,743
24,999
7,262
5,595
–
7,262
–
–
7,262
–
7,262
–
5,595
–
–
5,595
–
5,595
1,846
–
1,846
661
–
661
–
–
661
–
661
(5)
770
765
(13,298)
(13,329)
(4,975)
(4,325)
(22,629)
4,578
(18,051)
(31)
13,487
89,597
42,330
36,946
6,600
6,998
193
47,591
44,374
Tesserent
Commercial
$000
Tesserent
Federal
$000
Tesserent
New Zealand
$000
Other /
unallocated
$000
16,151
110
16,261
(1,397)
–
(1,397)
–
–
(1,397)
–
(1,397)
4,072
65
4,138
798
–
798
–
–
798
–
798
15,782
12,230
8,096
2,335
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(794)
(1,393)
(4,413)
(5,207)
(1,523)
(824)
(7,554)
841
(6,713)
19,400
12,205
(4,413)
(5,806)
(1,523)
(824)
(8,153)
841
(7,312)
(1,468)
(1,296)
43,278
26,771
Year ended 30 June 2021
Net Sales to external customers
Other sales
Total revenue
EBITDAC
Corporate costs
(including acquisition costs and SBP*)
EBITDA
Depreciation and amortisation
Interest expense and PAM facility
amortisation
Profit/(loss) before income tax expense
Income tax expense
Profit/(loss) after income tax expense
Material items include:
* Share based payments
* Acquisition costs
Total segment assets
Total segment liabilities
Year ended 30 June 2020
Net Sales to external customers
Other sales
Total revenue
EBITDAC
Corporate costs (including acquisition costs
and SBP*)
EBITDA
Depreciation and amortisation
Interest expense and PAM facility
amortisation
Profit/(loss) before income tax expense
Income tax expense
Profit/(loss) after income tax expense
Material items include:
* Share based payments
* Acquisition costs
Total segment assets
Total segment liabilities
58
for the year ended 30 June 2021Annual Report 2021 Tesserent Ltd Notes to the Consolidated Financial Statements
5. REVENUE
Managed services
Consulting services
Software licences
Hardware equipment
Support and maintenance renewals
Other sales revenue
Revenue
Significant accounting policy
2021
$’000
7,216
50,964
7,844
642
687
36
2020
$’000
5,938
12,112
1,327
545
299
2
67,389
20,223
Revenue from contracts with customers – General principles
Revenue is recognised at an amount that reflects the consideration to which the consolidated entity is
expected to be entitled in exchange for transferring goods and services to a customer. For each contract
with a customer, the consolidated entity identifies the contract with a customer, identifies the performance
obligations in the contract, determines the transaction price which takes into account estimates of variable
consideration and the time value of money, allocates the transaction price to the separate performance
obligations on the basis of the relative stand-alone selling price of each distinct good or service to be
delivered, and recognises revenue when or as each performance obligation is satisfied in a manner that
depicts the transfer to the customer of the goods or services promised.
Variable consideration within the transaction price, if any, reflects concessions provided to the customer
such as discounts, rebates and refunds, any potential bonuses receivable from the customer and any other
contingent events. Such estimates are determined using either the ‘expected value’ or ‘most likely amount’
method. The measurement of variable consideration is subject to a constraining principle whereby revenue
will only be recognised to the extent that it is highly probable that a significant reversal in the amount of
cumulative revenue recognised will not occur. The measurement constraint continues until the uncertainty
associated with the variable consideration is subsequently resolved. Amounts received that are subject to
the constraining principle are recognised as a liability.
Revenue from contracts – Managed services
Revenue derived through licensing arrangements for customers who subscribe to Tesserent’s security
infrastructure platform for the provision of Security-as-a-Service is recognised as performance obligation
identified in the sales contract are performed. Related costs of the performance obligations are recognised
on completion of the performance obligation. Costs arising from incomplete performance obligations are
capitalised into contract assets. Revenue invoiced for incomplete performance obligations is recognised
as a liability in unearned revenue.
Revenue derived from the connectivity and related support services including installation and setup of
hardware is recognised at the time the service is provided. On the basis that monthly unused support
services do not accumulate, the company recognises revenue evenly over the term of the contract, in line
with service delivery.
59
for the year ended 30 June 2021 Notes to the Consolidated Financial Statements
5. REVENUE (CONTINUED)
Revenue from contracts – Consulting services
Revenue from the sale of consulting services is recognised as performance obligations set out in the
contract of sale are performed as outlined above. Where no contract is in place, revenue is recognised as
the service is consumed by the customer. Unbilled consulting services are recognised as work in progress.
Services invoiced in advance of completion are recorded as a liability as unearned income.
Revenue from contracts – Sale of software licences
Software licences income is recognised on an agency basis. The Group sells the licence and bills customers
the full cost, including its agency fee. The related cost of the software licence is offset against the software
licence income recognised.
Revenue from contracts - Hardware equipment
Revenue derived from the sale of hardware equipment is recognised on an agency basis. The Group sells the
equipment and bills the customer the full cost, including its agency fee. The related cost of the hardware
equipment is offset against the hardware equipment income recognised.
Revenue from contracts - Maintenance and support renewals
Revenue from the sale of maintenance and support renewals is recognised as performance obligations set
out in the contract of sale are performed as outlined above.
Where vendor renewals are resold to customers, revenue is recognised on an agency basis. The Group sells
the renewals and bills the customer the full cost, including its agency fee. The related cost of the renewal is
offset against the renewal income recognised.
Other revenue
Other revenue is recognised when it is received or when the right to receive payment is established.
Interest revenue
Interest revenue is recognised as interest accrues using the effective interest method. This is a method
of calculating the amortised cost of a financial asset and allocating the interest income over the relevant
period using the effective interest rate, which is the rate that exactly discounts estimated future cash
receipts through the expected life of the financial asset to the net carrying amount of the financial asset.
Critical accounting estimates and assumptions
When recognising revenue in relation to the sale of goods to customers, the key performance obligation of
the consolidated entity is considered to be the point of deliver of the goods or services to the customer,
as this is deemed to be the time that the customer obtains control of the promised goods and therefore
the benefits of unimpeded access. The Group’s revenue is derived from the provision of software licences,
hardware equipment, managed services, consulting services and support and maintenance renewals over
multiple periods. In applying the requirements of AASB 15 Revenue from Contracts with Customers the Group
has had to make assumptions around future billing and completion of future performed obligations.
6. OTHER INCOME
Government grants
Other income*
Interest income
Other income
2021
$’000
2020
$’000
113
842
9
964
100
67
9
175
* Other income in 2021 includes $684k of non-cash income, the majority of which relates to a positive fair value adjustment
on equity consideration recorded but not yet issued in relation to the acquisition of Lateral Security.
60
for the year ended 30 June 2021Annual Report 2021 Tesserent Ltd Notes to the Consolidated Financial Statements
7. EXPENSES
Loss before income tax includes the following specific expenses:
Depreciation
Leasehold improvements
Plant and equipment
Fixtures and fittings
Office equipment
Computer software
Hardware employed
Right of use assets
Total depreciation
Amortisation
Customer contracts and relationships
Software
Intellectual property
Total amortisation
Total depreciation and amortisation
Impairment
Software IP
Finance costs
Interest and finance charges paid/payable on borrowings (cash)
Interest and finance charges paid/payable on borrowings (warrant amortisation)
Interest and finance charges paid/payable on lease liabilities
Other finance costs
Finance costs expensed
Superannuation expense
2021
$’000
2020
$’000
141
559
25
768
33
5
1,235
2,766
2,206
–
3
2,209
4,975
125
28
15
53
–
10
600
831
441
251
–
692
1,523
–
786
1,630
2,396
280
125
4,431
604
–
139
80
824
Defined contribution superannuation expense
2,618
1,077
Bad and Doubtful Debts Expense
Trade and other receivables
235
235
281
281
61
for the year ended 30 June 2021 Notes to the Consolidated Financial Statements
8. INCOME TAX BENEFIT
(a) Income tax expense
Current tax expense
Deferred tax movements (current year)
Deferred tax movements (prior year)
(b) Reconciliation of income tax expense to prima facie tax on
accounting loss
Numerical reconciliation of income tax benefit and tax at the statutory rate
Loss before income tax benefit
Tax at the statutory tax rate of 30% (2020: 27.5%)
Share based payments
Current year tax losses not recognised
Prior year tax losses recognised
Other
Prior year adjustments
Income tax benefit
(c) Movement in deferred tax balances
Deferred tax assets/(liabilities)
Share issue costs
Provisions
Intangible assets
Right of use assets and liabilities
Tax losses recognised (current year)
Tax losses recognised (prior years)
Other1
1 Other is predominantly the tax effect on accrued revenue.
Share issue
costs
$’000
Provisions
$’000
Intangible
assets
$’000
Right of use
assets and
liabilities
$’000
Tax losses
recognised
$’000
As at 1 July 2020
(217)
756
(2,028)
176
Acquired upon business
combination (Note 39)
Charged to profit and loss
-
661
Charged through equity
(2,604)
Overprovision in previous
years
Change in tax rate
-
-
503
(882)
(100)
23
-
(7,016)
628
-
-
-
As at 30 June 2021
(2,160)
300
(8,416)
(245)
26
(6)
(16)
-
(65)
62
2021
$’000
2020
$’000
–
(4,101)
(477)
(4,578)
(9,111)
(2,733)
1,296
–
(4,101)
960
–
(4,578)
(2,160)
300
–
(841)
–
(841)
(8,153)
(2,242)
215
467
–
729
(11)
(841)
(217)
756
(8,416)
(2,028)
(65)
1,270
4,101
(940)
(5,910)
176
–
–
(127)
(1,440)
Other
$’000
Total
$’000
(127)
(1,440)
-
-
-
5,371
(683)
-
-
-
5,371
-
1
(131)
(940)
(6,758)
5,121
(2,710)
8
(131)
(5,910)
for the year ended 30 June 2021Annual Report 2021 Tesserent Ltd Notes to the Consolidated Financial Statements
8. INCOME TAX BENEFIT (CONTINUED)
(d) Tax losses
Unused tax losses for which no deferred tax asset has been recognised
Potential tax benefit at 30% (2020: 27.5%)
2021
$
–
–
2020
$’000
13,060
3,591
Carried forward tax losses have been brought to account as a deferred tax asset. Based on the value of tax
losses incurred, the directors’ have formed an opinion that the business is in a position to satisfy the criteria
for recognising these losses as a deferred tax asset.
The benefits of deferred tax losses not brought to account can only be realised in the future if:
– assessable income is derived of a nature, and of an amount sufficient to enable the benefit from the
deductions to be realised
– conditions for deductibility imposed by law are complied with; and
– no changes in tax legislation adversely affect the realisation of the benefit from the deductions.
The directors on a regular basis will assess the recognition of the deferred tax assets.
(e) Franking credits
Franking credits available for subsequent financial years based on a tax rate of
30% (2020: 27.5%)
2021
$
2020
$
–
26
Significant Accounting Policy
The income tax expense or benefit for the period is the tax payable on that period’s taxable income based
on the applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and
liabilities attributable to temporary differences, unused tax losses and the adjustment recognised for prior
periods, where applicable.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be
applied when the assets are recovered or liabilities are settled, based on those tax rates that are enacted or
substantively enacted, except for:
– When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset
or liability in a transaction that is not a business combination and that, at the time of the transaction,
affects neither the accounting nor taxable profits; or
– When the taxable temporary difference is associated with interests in subsidiaries, associates or
joint ventures, and the timing of the reversal can be controlled and it is probable that the temporary
difference will not reverse in the foreseeable future.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is
probable that future taxable amounts will be available to utilise those temporary differences and losses.
The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting
date. Deferred tax assets recognised are reduced to the extent that it is no longer probable that future
taxable profits will be available for the carrying amount to be recovered. Previously unrecognised deferred
tax assets are recognised to the extent that it is probable that there are future taxable profits available to
recover the asset.
Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current
tax assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they
relate to the same taxable authority on either the same taxable entity or different taxable entities which
intend to settle simultaneously.
63
for the year ended 30 June 2021 Notes to the Consolidated Financial Statements
9. CASH AND CASH EQUIVALENTS
Current assets
Cash at bank
2021
$’000
2020
$’000
14,860
4,350
Significant Accounting Policies
Cash and cash equivalents include cash on hand and at banks, short-term deposits with an original maturity
of three months or less held at call with financial institutions, and bank overdrafts.
Financial Instrument Risk Management
The main risks arising from cash and cash equivalents is interest rate risk. The Directors manage risk by
monitoring levels of exposure to interest rates and consider cash requirements in relation to ongoing cash
flow budgets.
Interest Rate Risk
Exposure to interest rate risk arises on financial instruments whereby a future change in interest rates will
affect future cash flows of variable rate financial instruments. At 30 June 2021, the Company cash and cash
equivalents was held in variable rate bank accounts. The risk attached to the interest income for the year
ended 30 June 2021 was not considered significant.
Credit Risk
The Group banks with reputable institutions with credit worthiness appropriate to mitigate credit risk
associated to the bank deposits. Credit risk is managed by the Board in accordance with its policy.
Fair Value
The fair value of the cash balances approximates fair value due to the short-term nature of the deposits.
10. RECONCILIATION OF LOSS AFTER INCOME TAX TO NET CASH FROM/(USED IN)
OPERATING ACTIVITIES
Operating loss after income tax
Tax credit
Depreciation and amortisation
Interest (non-cash component)
Impairment of non-current assets
Other expenses (non-cash)
Acquisition costs settled in shares
Share option expense
Bad debt provision
Change in net operating assets and liabilities:
Increase in trade and other receivables
Increase in contract assets
Decrease in prepayments
Increase in inventories
Increase in other assets
Increase in trade and other payables
Increase in contract liabilities
Decrease in current tax asset
Decrease in deferred tax balances
Increase in provisions
Net cash inflow/(outflow) from operating activities
64
2021
$’000
2020
$’000
(4,533)
(7,312)
(4,578)
4,975
2,396
–
(80)
3,238
4,462
235
(12,688)
(8,141)
467
(21)
(120)
14,961
5,155
74
(3,063)
154
2,893
–
1,523
387
786
5
–
1,468
281
(1,653)
(401)
–
213
(175)
1,133
1,355
(151)
(852)
143
(3,250)
for the year ended 30 June 2021Annual Report 2021 Tesserent Ltd
Notes to the Consolidated Financial Statements
11. TRADE AND OTHER RECEIVABLES
Current assets
Trade receivables
Less: Allowance for expected credit losses
Other receivables
2021
$’000
2020
$’000
23,385
(248)
23,137
1,662
24,799
7,421
(81)
7,340
83
7,423
Allowance for expected credit losses
The consolidated entity has recognised a provision of $248k (2020: $81k) with movement through the profit
and loss in respect of the expected credit losses for the year ended 30 June 2021.
The ageing of the receivables and allowance for expected credit losses provided for above are as follows:
Not overdue
Past due 30 to 60 days
Past due 60 to 90 days
Past due 90 to 120 days
Past due over 120 days
Expected credit loss rate
Carrying amount
2021
%
–
1%
9%
29%
29%
2020
%
–
–
–
–
12%
2021
$’000
20,019
4,134
280
368
247
2020
$’000
4,496
1,328
770
231
679
25,047
7,504
Allowance for expected
credit losses
2021
$’000
2020
$’000
–
45
26
106
71
248
–
–
–
–
81
81
Movements in the allowance for expected credit losses are as follows:
Opening balance
Additional provisions recognised
Additions through business combinations
Receivables written off during the year as uncollectable
Write back of allowance
Closing balance
2021
$’000
2020
$’000
81
246
–
(43)
(36)
248
60
341
19
(279)
(60)
81
Significant Accounting Policies
Trade and other receivables include amounts due from customers for goods sold and services performed
in the ordinary course of business. Receivables expected to be collected within 12 months of the end of the
reporting period are classified as current assets. All other receivables are classified as non-current assets.
Trade and other receivables are initially recognised at fair value and subsequently measured at amortised
cost using the effective interest method, less any allowances for expected credit losses. To measure the
expected credit losses, trade receivables have been grouped based on days overdue.
65
for the year ended 30 June 2021 Notes to the Consolidated Financial Statements
11. TRADE AND OTHER RECEIVABLES (CONTINUED)
Financial Instrument Risk Management
The main risk arising from trade and other receivables is credit risk. Credit risk is the risk that one party to a
financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The
maximum exposure to credit risk, excluding the value of any collateral or other security, at reporting date
of recognised financial assets is the carrying amount of those assets, net of any provisions for impairment
of those assets, as disclosed in consolidates statement of financial position and notes to the consolidated
financial statements.
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be
uncollectable are written off by reducing the carrying amount directly. An allowance account provision for
impairment of trade receivables is used when there is objective evidence that the Group will not be able to
collect all amounts due according to the original terms of the receivables. Significant financial difficulties
of the debtor, probability that the debtor will enter bankruptcy or financial reorganisations, and default or
delinquency in payments are considered indicators that the trade receivable is impaired. The amount of
the impairment allowance is the difference between the asset’s carrying amount and the present value
of estimated future cash flows, discounted at the original effective interest rate.
The Group does not have any significant credit risk to any single counterparty given the large number
of customers.
Credit Risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in
financial loss to the consolidated entity. The maximum exposure to credit risk for trade and other receivables
is the carrying amount, net of any provisions for impairment of those assets, as discussed in the statement
of financial position and notes to the financial statements. The consolidated entity does not hold any
collateral. The entity considers a receivable as impaired once all efforts to recover an amount have been
exhausted, including referring to debt collection or statutory action.
12. CONTRACT ASSETS
Current assets
Contract assets
Non-current assets
Contract assets
Reconciliation
Reconciliation of the written down values at the beginning and end of the current
and previous financial year are set out below:
Opening balance
Additions
Additions through business combinations (Note 39)
Transfer to trade receivables
Write off of assets
Closing balance
2021
$’000
2020
$’000
9,293
780
159
158
938
19,048
373
(10,899)
(8)
9,452
–
4,944
1,413
(5,419)
–
938
Significant Accounting Policy
Contract assets are recognised when the group has transferred goods or services to the customer but
where the group is yet to establish an unconditional right to consideration. Contract assets are treated as
financial assets for impairment purposes.
66
for the year ended 30 June 2021Annual Report 2021 Tesserent Ltd Notes to the Consolidated Financial Statements
13. PREPAYMENTS
Current assets
Connectivity services
Subscriptions
Other
14. INVENTORIES
Current assets
Inventory
2021
$’000
2020
$’000
854
462
590
1,906
1,008
280
94
1,382
2021
$’000
2020
$’000
85
64
Significant Accounting Policies
Inventory is stated at lower of cost and net realisable value. Costs of purchased inventory are determined
after deducting rebates and discounts. Net realisable value is the estimated selling price in the ordinary
course of business less the estimated cost of completion and the estimated costs necessary to make
the sale.
As at 30 June 2021 there had been no write downs and all inventories are stated at cost (2020: $nil).
15. LEASE ASSET RECEIVABLES
Current assets
Lease asset receivables
Non-current assets
Lease asset receivables
16. OTHER ASSETS
Non-current assets
Security deposits
Other non-current assets
2021
$’000
2020
$’000
254
534
–
–
2021
$’000
2020
$’000
736
75
811
465
1
466
67
for the year ended 30 June 2021 Notes to the Consolidated Financial Statements
17. RIGHT-OF-USE ASSETS
Non-current assets
Building Leases - right-of-use
Less: Accumulated depreciation
2021
$’000
2020
$’000
12,367
(5,555)
6,812
6,087
(2,166)
3,921
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial
year are set out below:
Balance at 1 July 2019
Additions through business combinations
Depreciation expense
Balance at 30 June 2020
Additions through business combinations (Note 39)
Disposals
Depreciation expense
Balance at 30 June 2021
Building leases comprise office and operational workspace leased on long term leases.
Included in the cost are leases acquired on business combinations as follows:
Pure Security Group
North Security.Digital Pty Ltd
iQ3
Secure Logic
Building
Leases
$’000
1,262
3,258
(600)
3,920
5,007
(880)
(1,235)
6,812
2021
$’000
–
–
4,413
594
5,007
Total
$’000
1,262
3,258
(600)
3,920
5,007
(880)
(1,235)
6,812
2020
$’000
2,746
512
–
–
3,258
Significant Accounting Policy
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 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.
68
for the year ended 30 June 2021Annual Report 2021 Tesserent Ltd
Notes to the Consolidated Financial Statements
18. PROPERTY, PLANT AND EQUIPMENT
2021
$’000
2020
$’000
Non-current assets
Leasehold improvements - at cost
Less: Accumulated depreciation
Plant and equipment - at cost
Less: Accumulated depreciation
Fixtures and fittings - at cost
Less: Accumulated depreciation
Motor vehicles - at cost
Less: Accumulated depreciation
Computer equipment - at cost
Less: Accumulated depreciation
Office equipment - at cost
Less: Accumulated depreciation
Hardware employed - at cost
Less: Accumulated depreciation
Computer software - at cost
Less: Accumulated depreciation
Total
1,025
(390)
635
4,082
(3,320)
762
319
(219)
100
52
(52)
–
5,881
(5,228)
653
1,286
(1,074)
212
394
(372)
22
1,378
(1,062)
316
2,700
1,133
(492)
641
477
(416)
61
138
(87)
51
46
(43)
3
167
(111)
56
203
(151)
52
375
(375)
–
–
–
–
864
69
for the year ended 30 June 2021 Notes to the Consolidated Financial Statements
18 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial
year are set out below:
Furniture
& Fittings
$’000
Hardware
Employed
$’000
Office
Equipment
$’000
Software
$’000
Leasehold
improvement
$’000
Plant &
Equipment
$’000
Motor
Vehicle
$’000
Balance at 1 July 2019
Additions
Additions through
business combinations
(Note 39)
Disposals
Depreciation expense
Balance at 30 June 2020
Additions
Additions through
business combinations
(Note 39)
Disposals
Depreciation expense
Balance at 30 June 2021
19. INTANGIBLES
58
24
21
(1)
(15)
87
11
28
–
(25)
100
13
4
–
–
(10)
7
19
–
–
(5)
22
–
27
91
(1)
(53)
64
639
962
(31)
(768)
865
–
–
–
–
–
–
235
117
–
(36)
316
369
–
399
(2)
(125)
641
105
31
–
(141)
635
70
19
–
–
(28)
61
452
812
(3)
(559)
762
Total
$’000
510
73
514
(4)
(231)
864
1,461
–
–
3
–
–
3
–
–
(3)
–
–
1,950
(37)
(1,534)
2,700
2021
$’000
2020
$’000
31,611
(2,647)
28,964
684
(71)
613
8,037
(441)
7,596
90
(68)
22
29,577
7,618
Non-current assets
Customer contracts - at cost
Less: Accumulated amortisation
Other intangible assets - at cost
Less: Accumulated amortisation
70
for the year ended 30 June 2021Annual Report 2021 Tesserent Ltd Notes to the Consolidated Financial Statements
19. INTANGIBLES (CONTINUED)
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial
year are set out below:
Balance at 1 July 2019
Capitalised development costs
Additions through business combinations
Impairment of assets
Amortisation expense
Balance at 30 June 2020
Capitalised development costs
Additions through business combinations (Note 39)
Amortisation expense
Balance at 30 June 2021
Significant Accounting Policies
Customer
contracts
and
relationships
$’000
Intellectual
property
$’000
Software
$’000
–
–
8,037
–
(441)
7,596
–
23,574
(2,206)
28,964
23
–
–
–
–
23
25
569
(3)
614
955
82
–
(786)
(251)
–
–
–
–
–
Total
$’000
978
82
8,037
(786)
(692)
7,618
25
24,143
(2,209)
29,577
Recognition and measurement
Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at
their fair value at the date of the acquisition. Intangible assets acquired separately are initially recognised
at cost.
Indefinite life intangible assets are not amortised and are subsequently measured at cost less any
impairment. Finite life intangible assets are subsequently measured at cost less amortisation and any
impairment. The gains or losses recognised in profit or loss arising from the de-recognition of intangible
assets are measured as the difference between net disposal proceeds and the carrying amount of the
intangible asset. The method and useful lives of finite life intangible assets are reviewed annually. Changes
in the expected pattern of consumption or useful life are accounted for prospectively by changing the
amortisation method period.
Impairment of non–financial assets
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 non-financial assets are reviewed for impairment whenever events or changes in
circumstances indicate that they 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.
Recoverable amount is the higher of an asset’s fair value less costs of disposal and value-in-use. The value-
in-use is the present value of the estimated future cash flows relating to the asset using a pre-tax discount
rate specific to the asset or cash-generating unit to which the asset belongs. Assets that do not have
independent cash flows are grouped together to form a cash-generating unit.
Software
Significant costs associated with software development are deferred and amortisation on a straight-line
basis over the period of their expected benefit, being their finite life of 5 years.
71
for the year ended 30 June 2021 Notes to the Consolidated Financial Statements
19. INTANGIBLES (CONTINUED)
Critical accounting estimates and assumptions
Cost of Customer contracts and relationships
The carrying value of the Customer contracts and relationships acquired through business combinations
were valued in accordance with the AASB 3 Business combinations and AASB 138 Intangibles. No cost had
previously been attributed to the intangible assets as they related to internally generated intangible assets
that were not easily measurable.
The carrying values of the assets have been included in the CGUs in which they reside, which have been
tested for impairment in accordance with AASB 136 Impairment. The critical accounting estimates and
assumptions used in the impairment review are outlined in Note 20 Goodwill.
Amortisation of Customer contracts and relationships
The ability to sell security solutions and consulting relies heavily on the relationships with customers and
performance of solutions when in place. Accordingly, the ability to cultivate positive relationships is expected
to provide a basis for the generation of future revenue from the renewal of licence fees, upgrades and
the up-sale of different solutions. The Group used an independent valuer to consider the Purchase Price
Allocation in a business combination.
The attrition rate of the relationships have been estimated by management to determine the amortisation
rate of the Customer contracts and relationships. The estimate is based on past experience and
expected impacts of the market maturing and both customers and supply being more stable. Accordingly
management has estimated an amortisation period of 10 years for customer contracts and relationships.
20. GOODWILL
Goodwill balances and goodwill acquired during the year through business acquisitions is as follows:
Non-current assets
Goodwill - at cost
Less: Impairment
2021
$’000
2020
$’000
83,259
–
83,259
16,742
(777)
15,965
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are
set out below:
Balance at 1 July 2019
Additions through business combinations
Impairment of assets
Balance at 30 June 2020
Additions through business combinations (Note 39)
Additional amount recognised from prior year business combination*
Balance at 30 June 2021
Total
$’000
–
16,742
(777)
15,965
66,738
557
83,259
* As disclosed in the half year accounts, goodwill contains a prior year adjustment of $557k to the correct the valuation
of share consideration issued in respect of the acquisition of the North BDT (acquired in December 2019).
Goodwill acquired through business combinations has been allocated to the
following cash–generating units (CGU’s):
Tesserent Commercial
Tesserent Federal
Tesserent New Zealand
72
2021
$’000
2020
$’000
56,022
21,972
5,265
83,259
11,264
4,701
–
15,965
for the year ended 30 June 2021Annual Report 2021 Tesserent Ltd Notes to the Consolidated Financial Statements
20. GOODWILL (CONTINUED)
Tesserent Commercial CGU - comprises the Group’s core customer offerings Defend, Cloud and Detect
customer service offerings.
Tesserent Federal CGU – comprises the North Security, Ludus and Seer Security business combinations.
Tesserent New Zealand CGU – comprises the newly acquired Lateral business combination plus the newly
incorporated Tesserent NZ entity to cross sell services from the Australian CGU’s segment into Lateral and
new NZ customers.
Significant Accounting Policies
Recognition and measurement
Goodwill arises on the business combinations. Goodwill is not amortised. Instead, goodwill is tested annually
for impairment, or more frequently if events or changes in circumstances indicate that it might be impaired,
and is carried at cost less accumulated impairment losses. Impairment losses on goodwill are taken to profit
or loss and are not subsequently reversed.
Goodwill arising on business combinations represents the excess of the consideration transferred, the
amount of any non– controlling interest in the acquiree and the acquisition–date fair value of any previous
equity interest in the acquiree over the fair value of the net identifiable assets acquired.
Gains and losses on the disposal of subsidiaries, joint ventures and associated companies include the
carrying amount of goodwill relating to the entity sold.
Impairment of non–financial assets
Goodwill and other 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 non–financial assets are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount
by which the asset’s carrying amount exceeds its recoverable amount.
Critical accounting estimates and assumptions
The recoverable amount of the consolidated entity’s goodwill has been determined by a value–in–use
calculation using a discounted cash flow model, based on a 12 month budget approved by the Board and
management and extrapolated for a further 4 years using steady growth rates, risk based discount rates
and a terminal value (represents the ‘Base case’ forecasts).
Key assumptions are those to which the recoverable amount of an asset or cash–generating units is most
sensitive.
Input
Forecast period
Projections
Tesserent
Commercial
Tesserent
Federal
Tesserent
New Zealand
5 yrs from 1 Jul-21
5 yrs from 1 Jul-21
5 yrs from 1 Jul-21
Base case
Base case
Base case
CGU carrying value of net assets (A$’000)
Revenue growth rate - post year 1
EBITDA as a % of revenue
Discount rate (post-tax, nominal)
Terminal growth rate
Calculated value in use (A$’000)
70,516
12.0%
10.2%
14.0%
2.9%
78,778
28,229
11.3%
16.5%
14.0%
2.7%
45,014
7,593
11.3%
24.3%
14.0%
3.0%
10,270
The discount rates reflect management’s estimate of the time value of money and the consolidated entity’s
weighted average cost of capital adjusted for the Group, the risk free rate and the volatility of the share
price relative to market movements.
Management believes the projected revenue growth rates in each CGU are appropriate based on experience
and forecasts of the growth of the market for cyber security services and the Group’s share of the market.
Based on the value in use estimates using a discounted cash flow model, the carrying values of the CGUs,
and the Goodwill therein, are not impaired.
Corporate costs (overheads) have been allocated to the CGU’s on the basis of proportion of turnover
generated by each CGU.
73
for the year ended 30 June 2021 Notes to the Consolidated Financial Statements
20. GOODWILL (CONTINUED)
Sensitivities
As noted above, the directors have made judgements and estimates in respect of impairment testing of
goodwill. Should these judgements and estimates not occur the resulting goodwill carrying amount may
decrease. The key sensitivities that management has considered are as follows:
– Revenue would need to decrease by more than 2% CAGR over the forecast period before goodwill in the
Tesserent Commercial CGU would need to be impaired, with all other assumptions remaining constant.
– The discount rate would be required to increase by 1.3% before goodwill in the Tesserent Commercial CGU
would need to be impaired, with all other assumptions remaining constant.
Management believes that other reasonable changes in the key assumptions on which the recoverable
amount of Tesserent Commercial CGU’s goodwill is based would not cause the cash-generating unit’s
carrying amount to exceed its recoverable amount.
The value in use estimates for the Tesserent Federal and Tesserent New Zealand CGU’s exceeds the carrying
value of the CGUs by a significant amount. It is therefore not considered particularly sensitive to the
variances in inputs in these CGU’s.
21. INVESTMENTS IN ASSOCIATES AND JOINT VENTURES
Non-current assets
Investment in TrustGrid
Investment in AttackBound
Represented by:
Cash paid
Share consideration - issued capital
Deferred consideration - call options for TGrid and ABound
2021
$’000
2020
$’000
4,676
1,191
5,867
3,000
1,367
1,500
5,867
–
–
–
–
–
–
–
Equity investments
In addition to the controlling acquisitions identified above, during the year TNT entered into two investments,
being:
Investment
Investment Date
25% stake in TGrid Holdings Pty Ltd
16 June 2021
25% stake in AttackBound Holdings Pty Ltd
16 June 2021
Under Accounting Standard AASB 128 Investments in Associates and Joint Ventures it is determined that the
25% stake in each of these entities, plus representation on the board of each business, results in Tesserent
having significant influence.
The Group has accounted for each of these investments by the application of the equity method when
accounting for investments in associates.
No material trading or profit/loss has been made by the investment entities during the 14 days that these
investments were held by Tesserent for financial year ended 30 June 2021, so TNT has reported the carrying
value of the investments at cost as at 30 June 2021. The $5.8m investment disclosed above includes call
options of $2m for TrustGrid and $1m for AttackBound.
The call options give TNT the right to acquire additional shares in either TrustGrid or AttackBound to maintain
TNT’s 25% share holding in the relevant business – in the event that a business raises additional capital by
issuing new shares.
The right to acquire these additional shares is essentially drawn down against amounts paid (or payable)
under the Cash consideration plus Deferred Cash consideration for grant of Option Instrument. The pricing
of these additional shares is to be equivalent to the share price applied to the applicable capital raise.
The Options have a two year Exercise Period from the date of completion of the Convertible Note Deeds –
being 16 June 2021.
74
for the year ended 30 June 2021Annual Report 2021 Tesserent Ltd
Notes to the Consolidated Financial Statements
21. INVESTMENTS IN ASSOCIATES AND JOINT VENTURES (CONTINUED)
As at 30 June 2021, the assessed carrying value of these options (financial instruments) is equal to the cost
of the options under the Convertible Note Deed (i.e. Cash consideration plus Deferred Cash consideration for
grant of Option Instrument).
Joint ventures
During the year TNT also entered into a joint venture arrangement with New Zealand-headquartered security
firm, Optic Security Group.
The Joint venture is managed through a newly incorporated entity, Optic TNT Security Pty Ltd, which is 50/50
jointly owned with Optic Security Group. The initial investment into the joint venture was a nominal amount of
$50, representing issued capital.
No material activities, or trading or profit/loss has been made by the joint venture entity during the financial
year ended 30 June 2021, so TNT has reported the carrying value of the investment in the joint venture – at
cost at 30 June 2021.
Significant Accounting Policy
Associates
Associates are entities over which the consolidated entity has significant influence but not control or joint
control. Investments in associates are accounted for using the equity method. Under the equity method,
the share of the profits or losses of the associate is recognised in profit or loss and the share of the
movements in equity is recognised in other comprehensive income. Investments in associates are carried in
the statement of financial position at cost plus post-acquisition changes in the consolidated entity’s share
of net assets of the associate. Goodwill relating to the associate is included in the carrying amount of the
investment and is neither amortised nor individually tested for impairment. Dividends received or receivable
from associates reduce the carrying amount of the investment.
When the consolidated entity’s share of losses in an associate equals or exceeds its interest in the
associate, including any unsecured long-term receivables, the consolidated entity does not recognise
further losses, unless it has incurred obligations or made payments on behalf of the associate.
The consolidated entity discontinues the use of the equity method upon the loss of significant influence
over the associate and recognises any retained investment at its fair value. Any difference between the
associate’s carrying amount, fair value of the retained investment and proceeds from disposal is recognised
in profit or loss.
Joint ventures
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have
rights to the net assets of the arrangement. Investments in joint ventures are accounted for using the
equity method. Under the equity method, the share of the profits or losses of the joint venture is recognised
in profit or loss and the share of the movements in equity is recognised in other comprehensive income.
Investments in joint ventures are carried in the statement of financial position at cost plus post-acquisition
changes in the consolidated entity’s share of net assets of the joint venture. Goodwill relating to the joint
venture is included in the carrying amount of the investment and is neither amortised nor individually tested
for impairment. Income earned from joint venture entities reduce the carrying amount of the investment.
75
for the year ended 30 June 2021
Notes to the Consolidated Financial Statements
22. TRADE AND OTHER PAYABLES
Current liabilities
Trade payables
Other payables
2021
$’000
2020
$’000
17,534
11,439
28,973
3,383
4,087
7,470
Significant Accounting Policies
Trade payables and other payables are carried at amortised cost and represent liabilities for goods and
services provided to the Group prior to the end of the financial year that are unpaid and arise when the
Company becomes obliged to make future payments in respect of the purchase of these goods and
services.
Financial Instrument Risk Management
The main risks arising from trade and other payables is liquidity risk. The Directors manage risk by monitoring levels
of obligation arising from liabilities and commitments and consider cash requirements in relation to ongoing cash
flow budgets.
Liquidity Risk
All payables are current and payable within 30 days. Accordingly, management has ensured that the
Company has sufficient cash resources to meet the liabilities as and when they are due.
23. CONTRACT LIABILITIES
Current liabilities
Contract liabilities
Non-current liabilities
Contract liabilities
Reconciliation
Reconciliation of the written down values at the beginning and end of the current
and previous financial year are set out below:
Opening balance
Additions
Additions through business combinations (Note 39)
Transfer to revenue
Closing balance
2021
$’000
2020
$’000
7,335
2,651
1,179
129
2,780
15,420
579
(10,265)
8,514
–
2,344
436
–
2,780
Contract liabilities relate to amounts that the Group will be required to pay to various Vendors in the future
from prior Software, Licensing and Software Subscription sales and amounts allocated to the performance
obligations that are unsatisfied at the end of the reporting period. See Note 12 for contract assets.
At 30 June 2021, total amounts required to be paid to vendors was $4.3m and amounts expected to be
recognised as revenue in future reporting periods was $4.2m.
76
for the year ended 30 June 2021Annual Report 2021 Tesserent Ltd Notes to the Consolidated Financial Statements
23. CONTRACT LIABILITIES (CONTINUED)
Within 6 months
6 to 12 months
12 to 18 months
18 to 24 months
24. LEASE LIABILITIES
Current liabilities
Lease liability
Non-current liabilities
Lease liability
Movement in Lease Liability
Balance as at 1 July
Adoption of AASB 16
Acquired in a business combination (net of amounts settled through
completion accounts)
Cash Payments
Interest Expense
Balance as at 30 June
2021
$’000
5,346
1,990
465
713
8,514
2020
$’000
2,651
–
129
–
2,780
2021
$’000
2020
$’000
2,390
1,046
5,078
3,489
2021
$’000
4,536
–
4,506
(1,755)
181
7,468
2020
$’000
102
1,666
3,371
(751)
148
4,536
Refer to Note 28 for further information on financial instruments.
Significant Accounting Policies
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 consolidated entity’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.
77
for the year ended 30 June 2021 Notes to the Consolidated Financial Statements
25. PROVISIONS
Current liabilities
Annual leave
Long service leave
Non-current liabilities
Long service leave
Lease make good
2021
$’000
2020
$’000
2,368
463
2,831
525
150
675
665
178
843
499
167
666
Lease make good
The provision represents the present value of the estimated costs to make good the premises leased by the
group at the end of the respective lease terms.
Movements in provisions
Movements in each class of provision during the current financial year, other than employee benefits, are set
out below:
2021
Carrying amount at the start of the year
Premises vacated
Carrying amount at the end of the year
Lease
make good
$’000
167
(17)
150
Amounts not expected to be settled within the next 12 months
The current provision for employee benefits includes all unconditional entitlements where employees have
completed the required period of service and also those where employees are entitled to pro-rata payments
in certain circumstances. However, based on past experience, the consolidated entity does not expect all
employees to take the full amount of accrued leave or require payment within the next 12 months.
Significant Accounting Policies
Recognition and measurements
Provisions are recognised when the Group has a legal or constructive obligation as a result of past events,
for which it is probable that an outflow of economic benefits will result and that outflow can be reliably
measured. Provisions are measured using the best estimate of the amounts required to settle the obligation
at the end of the reporting period.
Employee Benefits
The current portion of this liability includes all of the accrued annual leave and the unconditional
entitlements to long service leave where employees have completed the required period of service
Long service leave
The liability for long service leave is 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 period. Consideration is
given to expected future wage and salary levels, experience of employee departures and periods of service.
Expected future payments are discounted to their net present value at the end of the reporting period using
corporate bond rates.
Retirement benefit obligations
The Group makes payments to employees’ superannuation fund in line with the relevant superannuation
legislation. Contributions made are recognised as expenses when they arise.
78
for the year ended 30 June 2021Annual Report 2021 Tesserent Ltd Notes to the Consolidated Financial Statements
26. INCOME TAX PAYABLE
Current liabilities
Provision for income tax
2021
$’000
2020
$’000
172
–
The tax payable of $171,973 relates to the business Lateral Security Pty Ltd which is based in New Zealand and
therefore not part of the Australian tax consolidated group.
27. DEFERRED SETTLEMENT LIABILITIES
Current liabilities
Deferred settlement liability
Non-current liabilities
Deferred settlement liability
Reconciliation
Reconciliation of the fair values at the beginning and end of the current and
previous financial year are set out below:
Opening balance
Contingent consideration from business acquisitions plus investments
Adjustment on completion
Payments
Movements to issued capital
Closing balance
Significant Accounting Policies
2021
$’000
2020
$’000
11,699
4,714
1,652
686
5,401
18,955
(3,119)
(5,778)
(2,108)
13,351
352
5,771
(652)
(70)
–
5,401
Recognition and measurement
Deferred settlement liability is recognised when the company has a legal or constructive obligation, as a
result of a past event, for which an outflow of economic benefits will result and can be reliably measured. The
difference between actual payments and the discounted amount is recognised as a finance cost.
Where the discounted payment is due within 12 months of the reporting date, the deferred settlement
liability will be recorded as a current liability. The balance is represented as non-current. Details of deferred
settlement liabilities are outlined in Note 39 Business Combinations.
79
for the year ended 30 June 2021 Notes to the Consolidated Financial Statements
28. BORROWINGS
Non-current liabilities
Borrowings
Loan facility
Fair value of attaching warrants1
Transaction costs1
Amortisation of finance component (warrants and transaction costs)
2021
$’000
2020
$’000
25,603
3,637
2021
$’000
35,000
(9,498)
(797)
24,705
898
25,603
2020
$’000
5,000
(1,448)
(138)
3,414
223
3,637
1
The fair value of long-term borrowings are based on cash flows discounted using effective market discount rates available
to the Group. Finance costs of $10.3m have been recognised to be amortised over the life of the borrowings, which in effect
discounts the face value of the borrowings of $35 million. The effective interest rate method is a method calculating the
amortised cost of a financial liability and allocating interest expense over the relevant period. The effective interest rate
method is the rate that exactly discounts estimated future cash payments through the expected life of the financial
liability or where appropriate shorter period.
Significant Accounting Policies
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 period of the borrowings using the
effective interest method.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement
of the liability for at least 12 months after the end of the reporting period.
Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs
are expensed in the period in which they are incurred.
80
for the year ended 30 June 2021Annual Report 2021 Tesserent Ltd Notes to the Consolidated Financial Statements
29. CONTRIBUTED EQUITY
Issued capital
Other equity
2021
Shares
2020
Shares
2021
$’000
2020
$’000
1,063,018,657
511,834,114
100,229
29,485
1,063,018,657
511,834,114
102,992
29,485
2,763
–
Contributed equity includes Other equity which represents accrued equity which has been allocated to
settle contracts, but has not yet been issued at 30 June 2021.
Movements in ordinary share capital - during the year ended 30 June 2021
Details
Balance
Issued to Employees
Date
Shares
Issue price
$’000
1 Jul-20
511,834,114
10 Jul-20
343,750
Shares issued on conversion of convertible notes
28 Jul-20
2,000,000
Shares issued on conversion of options
28 Jul-20
11,100,000
Shares issued as consideration in business
combination
31 Jul-20
70,000,000
Shares issued on conversion of convertible notes
3 Aug-20
2,000,000
Shares issued on conversion of options
6 Aug-20
300,000
Shares issued on conversion of convertible notes
6 Aug-20
4,231,200
Shares issued on conversion of options
7 Aug-20
9,000,000
Shares issued on conversion of convertible notes
14 Aug-20
13,189,300
Shares issued on conversion of options
14 Aug-20
1,800,000
Shares issued on conversion of options
20 Aug-20
1,200,000
Shares issued on conversion of performance rights
2 Sep-20
2,000,000
Shares issued on conversion of warrants
Shares issued on conversion of options
Shares issued on conversion of warrants
2 Sep-20
25,000,000
2 Sep-20
750,000
8 Sep-20
24,586,777
Shares issued on conversion of convertible notes
18 Sep-20
10,000,000
Shares issued on conversion of convertible notes
21 Sep-20
2,071,720
$0.084
$0.050
$0.100
$0.208
$0.050
$0.050
$0.050
$0.100
$0.050
$0.100
$0.100
–
$0.100
$0.100
$0.079
$0.050
$0.050
29,485
29
100
1,110*
14,562
100
15
212
900
659*
180
120
–
2,510*
75*
1,938*
500
104
Shares issued as consideration in business
combination
Shares issued as consideration in business
combination
Shares issued as consideration in business
combination
21 Sep-20
6,923,077
$0.208
1,440
21 Sep-20
4,333,333
$0.215
21 Sep-20
4,333,333
$0.215
932
932
–
400
Shares issued on conversion of performance rights
21 Sep-20
2,000,000
–
Equity Settled expense
21 Sep-20
8,000,000
$0.050
Shares issued as consideration in business
combination
23 Sep-20
39,701,333
$0.194
7,694
Shares issued on conversion of convertible notes
24 Sep-20
3,100,493
$0.050
Shares issued on conversion of warrants
24 Sep-20
1,458,334
$0.120
Shares issued on conversion of performance rights
24 Sep-20
4,000,000
–
Shares issued as consideration in business
combination
30 Sep-20
4,440,410
$0.224
155
175*
–
995
81
for the year ended 30 June 2021
Notes to the Consolidated Financial Statements
29. CONTRIBUTED EQUITY (CONTINUED)
Details
Date
Shares
Issue price
$’000
Shares issued on conversion of performance rights
5 Oct-20
4,000,000
–
Shares issued as consideration in business
combination
Shares issued as consideration in business
combination
5 Oct-20
1,000,000
$0.220
5 Oct-20
1,000,000
Shares issued on conversion of convertible notes
5 Oct-20
5,401,639
Shares issued as consideration in business
combination
23 Oct-20
248,888
Shares issued on conversion of convertible notes
23 Oct-20
10,852,504
Shares issued on conversion of options
Equity Settled expense
26 Oct-20
300,000
27 Oct-20
11,001,600
Shares issued on conversion of convertible notes
5 Nov-20
2,177,049
Shares issued on conversion of options
5 Nov-20
600,000
Shares issued as consideration in business
combination
Shares issued on conversion of options
Shares issued on conversion of options
11 Nov-20
34,593,950
11 Nov-20
500,000
11 Nov-20
500,000
Shares issued on conversion of warrants
27 Nov-20
12,000,000
Shares issued on conversion of warrants
30 Nov-20
9,583,334
Shares issued on conversion of options
Shares issued on conversion of convertible notes
30 Nov-20
30 Nov-20
178,500
193,989
Shares issued as consideration in business
combination
Shares issued as consideration in business
combination
30 Nov-20
1,466,000
$0.355
30 Nov-20
1,466,000
Shares issued on conversion of options
3 Dec-20
10,000,000
Shares issued on conversion of performance rights
4 Dec-20
4,000,000
Equity Settled expense
Shares issued on conversion of options
Shares issued as consideration in business
combination
Shares issued on conversion of options
Shares issued as consideration in business
combination
Shares issued on conversion of warrants
4 Dec-20
4,309,298
4 Dec-20
150,000
10 Dec-20
20,071,652
10 Dec-20
71,500
10 Dec-20
10 Dec-20
1,334
729,167
Shares issued on conversion of convertible notes
14 Dec-20
61,825,622
Shares issued on conversion of convertible notes
16 Dec-20
26,400,000
Shares issued on conversion of performance rights
16 Dec-20
4,000,000
Shares issued on conversion of options
Shares issued on conversion of options
Shares issued on conversion of options
Shares issued on conversion of options
15 Jan-21
1,000,000
8 Feb-21
300,000
12 Feb-21
1,000,000
12 Feb-21
1,000,000
82
$0.220
$0.050
$0.194
$0.050
$0.100
$0.050
$0.050
$0.100
$0.250
$0.050
$0.280
$0.120
$0.120
$0.280
$0.050
$0.355
$0.050
–
$0.175
$0.100
$0.069
$0.280
$0.355
$0.120
$0.050
$0.050
–
$0.100
$0.100
$0.075
$0.100
–
220
220
270
48
543
30*
550
109
60*
8,635
25*
140*
1,440*
1,150*
50*
10
520
520
500
–
752
15*
1,379
20*
0
88*
3,091
1,320
–
100
30
75
100
for the year ended 30 June 2021Annual Report 2021 Tesserent Ltd Notes to the Consolidated Financial Statements
29. CONTRIBUTED EQUITY (CONTINUED)
Details
Date
Shares
Issue price
$’000
Shares issued on conversion of convertible notes
16 Feb-21
3,255,738
$0.000
0
Shares issued as consideration in business
combination
Equity Settled expense
Shares issued on conversion of warrants
Shares issued as consideration in business
combination
Equity Settled expense (accrued - shares issue
deferred)
Shares issued as consideration in business
combination
Shares issued as consideration in business
combination
Equity Settled expense (accrued - shares issue
deferred)
Cost of issuing equity
Balance
18 Mar-21
5,871,990
$0.350
2,055
16 Apr-21
3,000,000
16 Apr-21
729,167
$0.075
$0.120
225
88
28 Apr-21
42,145,974
$0.223
9,377
30 Apr-21
–
–
1,228
15 Jun-21
5,970,149
$0.214
1,276
15 Jun-21
426,439
$0.214
91
30 Jun-21
–
–
30 Jun-21 1,063,018,657
1,535
(216)
102,992
*
indicates issued capital that has a corresponding cash inflow during FY21
Movements in ordinary share capital - during the year ended 30 June 2020
Details
Balance
Date
Shares
Issue price
$’000
1 July 2019
183,043,123
Shares issued pursuant to capital raising
11 July 2019
40,111,113
$0.04
Share issued as consideration in business
combination
11 July 2019
17,550,000
Shares issued pursuant to capital raising
23 July 2019
6,250,000
Shares issued pursuant to capital raising
23 July 2019
1,000,000
Shares issued to employees
Equity settled expense
Equity settled expense
Shares issued to employees
Equity settle expense
Conversion of options
Equity settled expense
Shares issued to employees
Shares issues as consideration in business
combination
Shares issued to employees
Conversion of options
Equity settled payments
Conversion of options
23 July 2019
23 July 2019
555,556
180,000
16 Sep 2019
1,590,000
16 Sep 2019
1,000,000
17 Oct 2019
600,000
18 &
25 Oct 2019
2,500,000
2 Dec 2019
6,583,333
2 Dec 2019
185,185
16 Dec 2019 100,000,000
16 Dec 2019
2,000,000
16 Dec 2019
2,000,000
8 Jan 2020
3,798,169
22 Jan 2020
20,198,112
$0.04
$0.04
$0.04
$0.04
$0.05
$0.05
$0.04
$0.05
$0.05
$0.04
$0.05
$0.05
$0.05
$0.05
$0.06
$0.05
13,755
1,805
772
250
45
23
9
80
45
30
125
310
9
5,000
96
96
226
1,010
83
for the year ended 30 June 2021 Notes to the Consolidated Financial Statements
29. CONTRIBUTED EQUITY (CONTINUED)
Details
Date
Shares
Issue price
Equity settled expense / Conversion of convertible note
22 Jan 2020
27,400,000
Shares issued to employees
Conversion of options
22 Jan 2020
1,000,000
2 Mar 2020
24,764,671
$0.05
$0.08
$0.05
$’000
1,370
85
1,238
Conversion of convertible note / Conversion
of options
2 & 10 &
13 Mar 2020
23,277,777
$0.05
1,164
Shares issued as consideration in business
combination / Conversion of convertible notes /
Equity settled payments
Conversion of convertible note
Cost of issuing equity
Balance
9 Apr 2020
44,247,075
27 Apr 2020
2,000,000
–
–
30 June 2020
511,834,114
$0.05
$0.05
$0.00
2,172
100
(330)
29,485
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the
company in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares
have no par value and the company 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’s objectives when managing capital is 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.
Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net
debt is calculated as total borrowings less cash and cash equivalents.
In order to maintain or adjust the capital structure, the group may adjust the amount of dividends paid to
shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
The group would look to raise capital when an opportunity to invest in a business or company was seen as
value adding relative to the current company’s share price at the time of the investment. The group is not
actively pursuing additional investments in the short term as it continues to integrate and grow its existing
businesses in order to maximise synergies.
The group is subject to certain financing arrangements covenants and meeting these is given priority in all
capital risk management decisions. There have been no events of default on the financing arrangements
during the financial year.
84
for the year ended 30 June 2021Annual Report 2021 Tesserent Ltd Notes to the Consolidated Financial Statements
30. CONVERTIBLE NOTES
Convertible notes
Convertible notes at the start of year
Convertible notes issued
Distributions to convertible note holders
Notes converted to equity
2021
$’000
2020
$’000
–
6,532
6,532
9,434
–
190
(6,721)
–
(451)
324
(2,775)
6,532
Tesserent has borrowed under a convertible note with a face value of $6,531,698 with the following terms:
– Conversion during year one to 160,000,000 ordinary Tesserent shares at $0.05 per share. Conversion
during year two to 113,266,666 ordinary Tesserent shares at $0.075 per share.
– Automatic conversion at the end of two to 84,950,000 ordinary Tesserent shares at $0.10 per share.
– 1 option to be issued for every for 3.33 shares subscribed for (exercisable at $0.10) – Interest rate of 8%
(cash) or 10% if paid in shares (at the Company’s discretion).
As the above conversion feature results in the conversion of a fixed amount of the stated principal into a
fixed number of shares, it satisfies the “fixed for fixed” criterion and, therefore, it is classified as an equity
instrument.
The convertible notes are unsecured.
During the year ended 30 June 2021, Tesserent has converted all available convertible notes to equity at
$0.05 per share. Interest was converted to equity at $0.10 per share.
31. RESERVES
Share-based payments reserve
Options reserve
Tax consolidation reserve
Translation reserve
2021
$’000
9,565
4,315
(2,710)
30
11,200
2020
$’000
1,516
635
(310)
–
1,841
Nature and purpose of Reserves
Share-based payments reserve
This reserve is used to recognise the value of share based payments issued to employees and directors as
part of their remuneration, plus share based payments issued to third parties as compensation for their
services.
Options reserve
The options reserve is used to recognise the value of options issued to employees and directors as part of
their remuneration, plus any options and warrants issued to third parties as compensation for their services.
Tax consolidation reserve
This reserve is used to recognise the movement of deferred tax liabilities that arise through the equity
account – primarily as a result of the warrants attached to the PAM debt facilities which are amortised
through application of the effective interest rate method.
Translation reserve
This reserve is used to record exchange differences that arise from the translation of the financial
statements of controlled foreign subsidiaries.
85
for the year ended 30 June 2021
Notes to the Consolidated Financial Statements
31. RESERVES (CONTINUED)
Movements in reserves
Movements in each class of reserve during the current and previous financial year are set out below:
Balance at 1 July 2019
Share based compensation recognised during the year
Share options expired during the year
Deferred tax
Balance at 30 June 2020
Warrants issued on new PAM Finance Facilities (net)
Share options issued
Share options expired during the year
Share options exercised during the year
Foreign currency translation
Deferred tax
Balance at 30 June 2021
(a) Share based payments
Share based payments included during the period are as follows:
Description
Share-based payments reserve
Warrants issued to PAM in respect of new facilities
Exercise of PAM Warrants in accordance with exercise rights
Subtotal
Net movement in Share-based payments reserve
Description
Options Reserve
Performance rights expense during the year
Conversion of performance rights into issued capital
ESOP and NED Options expense during the year
Conversion of options into issued capital
Transfer to retained earnings
Subtotal
Net movement in Options reserve
Description
Total
$’000
773
1,781
(403)
(310)
1,841
8,050
4,213
(365)
(169)
30
(2,400)
11,200
Expenses
$000
Liabilities
$000
Other capital
$000
–
–
–
–
9,498
–
9,498
–
–
(1,448)
(1,448)
8,050
Expenses
$000
Liabilities
$000
Other capital
$000
174
–
4,288
–
–
4,462
–
–
–
–
–
–
–
–
–
(249)
–
(168)
(365)
(783)
3,680
Expenses
$000
Liabilities
$000
Other capital
$000
Foreign currency translation reserve movement
–
–
30
Description
Expense
$000
Liabilities
$000
Other capital
$000
Recognise deferred tax liability on PAM facility warrants
–
–
2,400
86
for the year ended 30 June 2021Annual Report 2021 Tesserent Ltd
Notes to the Consolidated Financial Statements
31. RESERVES (CONTINUED)
In addition to share options issued during the year, the Group issued ordinary shares as payments, as follows:
Description
Payments to employees
Payment to contractors to settle invoices
Total value of shares issued as payments
Contractors invoices accrued by capital not yet issued
Total value of shares to be issued as payments
Expense
$000
Capital
raised
$000
Other equity
$000
278
1,703
–
1,535
–
–
–
–
–
–
–
–
1,981
–
1,535
Valuation
The Group has issued options during the year. The options were valued using a Black-Scholes Pricing model.
During the year, the following options were issued with the following inputs:
No. issued
Grant Date
Expiry Date
Terms (days)
Exercise price (cents)
Share price at grant date (cents)
Volatility
Risk free rate
Dividend yield
Early exercise multiple
Value per option
Total cost
Cost recognised
Value forfeited*
Future costs*
NED options
Share
Options
ESOP
Series 1
ESOP
Series 2
12,000,000
19,120,000
17,870,000
16 Sep-20
16 Sep-20
16 Sep -20
16 Sep-25
16 Sep -23
16 Sep -23
1,826
$0.250
$0.240
107%
0.4%
0.0%
2.0
$0.18
1,095
$0.285
$0.240
107%
0.1%
0.0%
2.0
$0.11
1,095
$0.350
$0.240
107%
0.1%
0.0%
2.0
$0.12
$2,208,000 $2,022,755
$2,061,449
$258,566 $2,022,755
$1,475,505
$552,000
$1,397,434
–
–
$184,573
$401,371
*
Future costs for options adjusted as some options were forfeited during the year ended 30 June 2021.
In addition to the options noted above, there were an additional 3 million non-executive director options and 1
million executive options which were approved by the board but not yet issued as at 30 June 2021.
These options were valued and the expense of issuing these options has been accrued in the financial results
and is set out in the Remuneration Report. The 3 million Non-executive director options and 1 million executive
options were valued using the Black-Scholes Pricing model as per the metrics above, but based on 5 year
expiry and exercise price of $0.21 and $0.24 respectively.
87
for the year ended 30 June 2021 Notes to the Consolidated Financial Statements
31. RESERVES (CONTINUED)
Significant Accounting Policies - 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 Company’s estimate of equity instruments that will
eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Company
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.
For cash-settled share-based payments, a liability is recognised for the goods or services acquired,
measured initially at the fair value of the liability. At the end of each reporting period until the liability is
settled, and at the date of settlement, the fair value of the liability is remeasured, with any changes in fair
value recognised in profit or loss for the year.
Key assumptions
Equity-settled share-based compensation benefits are provided to employees and directors.
Equity-settled transactions are awards of shares, or options over shares, that are provided to employees
and directors in exchange for the rendering of services.
The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently
determined using the Black-Scholes option pricing model that takes into account the exercise price, the
term of the option, the impact of dilution, the share price at grant date and expected price volatility of
the underlying share, the expected dividend yield and the risk free interest rate for the term of the option,
together with non-vesting conditions that do not determine whether the consolidated entity receives the
services that entitle the employees to receive payment. No account is taken of any other vesting conditions.
The cost of equity-settled transactions are recognised as an expense with a corresponding increase in
equity over the vesting period. The cumulative charge to profit or loss is calculated based on the grant date
fair value of the award, the best estimate of the number of awards that are likely to vest and the expired
portion of the vesting period. The amount recognised in profit or loss for the period is the cumulative amount
calculated at each reporting date less amounts already recognised in previous periods.
An independent valuation was prepared for each tranche of options and rights granted during the year.
The values were estimated using the Black-Scholes option valuation model. The inputs used in the model to
estimate the values are identified in the tables above. The key estimates used in the model are the volatility,
which is estimated with reference to a broad set of ASX listed comparable companies, and the risk-free rate,
which is estimated with reference to Government bond rates.
The expense recognised for options granted prior to 1 July 2019 is $188,128. The cost recognised reflects
the amortisation of the expense over the vesting period of the options granted and is based upon an
independent valuation that was prepared. The valuation was prepared using the Black Scholes valuation
model and the key inputs were as follows:
Risk free rate
Volatility
0.2 – 0.4%
107% & 109%
88
for the year ended 30 June 2021Annual Report 2021 Tesserent Ltd
Notes to the Consolidated Financial Statements
31. RESERVES (CONTINUED)
Options, Warrants and Convertible Note movements
Set out below are summaries of options ,warrants and convertible note movements during the year:
Description
Expiry date
Exercise
price
$
Balance
1-Jul
Granted
Exercised
Expired/
Forfeited/
other
Balance
30-Jun
Options
Call options -
investor
03/12/2020
0.05 10,000,000
Broker options
19/03/2021
Broker options
29/03/2021
0.10
0.10
1,100,000
500,000
Employee options
19/04/2021
0.08
3,000,000
Broker options
22/07/2021
0.05
800,000
– (10,000,000)
–
–
(1,100,000)
(500,000)
– (3,000,000)
–
(800,000)
Performance
rights
03/10/2021
20,000,000
– (20,000,000)
Chairman options
30/11/2021
Chairman options
30/11/2021
Chairman options
30/11/2021
NED Options
NED Options
NED Options
30/11/2021
30/11/2021
30/11/2021
0.10
0.13
0.15
0.10
0.13
0.15
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
Employee options
29/11/2022
0.08
1,000,000
Employee options
29/11/2022
Employee Options 01/03/2022
Employee Options 06/04/2024
Employee Options 06/04/2024
Employee Options
01/01/2024
Employee Options
01/01/2024
0.10
0.10
0.35
0.28
0.35
0.28
1,000,000
300,000
–
–
–
–
1,250,000
1,500,000
3,000,000
3,750,000
–
–
–
–
–
–
–
–
–
(1,000,000)
(1,000,000)
(1,000,000)
(500,000)
(500,000)
(500,000)
(1,000,000)
(1,000,000)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
500,000
500,000
500,000
–
–
300,000
1,250,000
1,500,000
3,000,000
3,750,000
Converting Note
Options
01/10/2022
0.10 50,370,000
– (23,600,000)
– 26,770,000
Employee Options
29/11/2022
0.13
1,000,000
Converting Note
Options
NED Options
Converting Note
Options
Call Options
01/10/2022
21/09/2015
01/10/2022
16/12/2021
Employee Options 20/04/2024
Employee Options 20/04/2024
Employee Options
02/11/2023
Employee Options
02/11/2023
0.10
3,832,500
–
–
–
–
–
–
1,000,000
3,832,500
0.25
– 12,000,000
– (3,000,000) 9,000,000
0.10
1,800,000
1,200,000
0.08
0.35
0.28
0.35
0.28
1,000,000
–
–
–
–
1,670,000
1,670,000
12,771,500
– 12,200,000
–
–
–
–
–
–
–
–
–
–
–
3,000,000
1,000,000
1,670,000
1,670,000
12,771,500
– 12,200,000
101,702,500
51,011,500 (65,500,000) (3,000,000) 84,214,000
89
for the year ended 30 June 2021 Notes to the Consolidated Financial Statements
31. RESERVES (CONTINUED)
Description
Expiry date
Exercise
price
$
Balance
1-Jul
Granted
Exercised
Expired/
Forfeited/
other
Balance
30-Jun
Warrants
Acquisition
Warrants
Warrants issued
to Pure Asset
Management
Warrants issued
to Pure Asset
Management
Warrants issued
to Pure Asset
Management
06/12/2022
0.06
49,586,777
– (49,086,777)
–
500,000
30/09/2022
0.08 25,000,000
–
– (25,000,000)
–
18/09/2024
0.12
– 43,750,003
07/05/2025
0.45
– 44,444,445
–
–
– 43,750,003
– 44,444,445
74,586,777
88,194,448 (49,086,777) (25,000,000) 88,694,448
Convertible Notes
NOT - Convertible
16/12/2021
NT1 - Convertible
16/12/2021
TOTAL Options,
Warrants and
Convertible Notes
–
–
–
938,750
5,620,000
6,558,750
–
–
–
(938,750)
(5,620,000)
(6,558,750)
–
–
–
–
–
–
182,848,027 139,205,948 (121,145,527) (28,000,000) 172,908,448
32. DIVIDENDS
There were no dividends paid, recommended or declared during the current or previous financial year.
33. FINANCIAL RISK MANAGEMENT, OBJECTIVES AND POLICIES
Financial Instruments
Initial Recognition and Measurement
Financial assets and financial liabilities are recognised when the Company becomes a party to the
contractual provisions to the instrument. For financial assets, this is the date that the company commits
itself to either the purchase or sale of the asset.
Financial instruments are initially measured at fair value plus transaction costs, except where the instrument
is classified “at fair value through profit or loss”, in which case transaction costs are expensed to profit or
loss immediately. The Company has no financial instruments classified as “at fair value through profit or
loss”.
Classification and subsequent measurement
The Company classifies its financial instruments based on the purpose for which the instrument were
acquired. Management determines the classification of its financial instruments at the time of initial
recognition. The Company’s principal financial instruments comprise receivables, payables, cash and short
term deposits.
At the reporting date, the Company’s financial instruments were classified within the following categories.
Cash and cash equivalents - financial assets at amortised cost
See Note 9.
Receivables at amortised cost
See Note 11.
90
for the year ended 30 June 2021Annual Report 2021 Tesserent Ltd Notes to the Consolidated Financial Statements
33. FINANCIAL RISK MANAGEMENT, OBJECTIVES AND POLICIES (CONTINUED)
Financial liabilities at amortised cost
All of the Company’s financial liabilities are recognised and subsequently measured at amortised cost, using
the effective interest rate method.
The effective interest rate method is a method of calculating the amortised cost of a debt instrument and of
allocating interest expense in profit or loss over the relevant period. The effective interest rate is the internal
rate of return of the financial asset or liability. That is, it is the rate that exactly discounts the estimate future
cash flows through the expected life of the instrument to the net carrying amount at initial recognition.
Impairment of financial assets at amortised cost
The Company considers all financial assets for recoverability and impairment. Where there are indicators of
impairment the Company will review the carrying amount of the financial asset and estimate its recoverable
amount. The Company will take all available action to recover the full amount of financial assets, and once
all efforts are exhausted the Company will record an impairment. Any impairment is recorded in a separate
allowance account. Any amounts subsequently written off are offset against the impairment allowance.
Financial Risk Management
The company manages its exposure to key financial risks, including interest rate and currency risk in
accordance with the Company’s financial risk management policy. The object of the policy is to support the
delivery of the Company’s financial targets whilst protecting future financial security.
The main risk arising from the Company’s financial instruments are interest rate risk, foreign currency risk,
credit risk and liquidity risk. The Company manages its risk informally at Board level. The Board monitors
levels of exposure to interest rate and credit risk by banking with reputable banks. Liquidity risk is monitored
through the development of future rolling cash flow forecasts.
The Board reviews and agrees policies for managing each of these risks informally.
Primary responsibility for identification and control of financial risks rests with the Board of Directors (‘the
Board’). The Board reviews and agrees policies for managing each of the risks identified below, including
interest rate risk, credit allowances, forward exchange contracts and future cash flow forecast projections.
The carrying amounts and fair values of the Company’s financial assets and liabilities at reporting date are:
2021
Carrying
Value
$’000
2021
Fair
Value
$’000
2020
Carrying
Value
$’000
2020
Fair
Value
$’000
4,350
7,423
11,772
7,469
5,400
4,536
3,637
Financial Assets
Cash and cash equivalents
Trade and other receivables
Non-Traded Financial Assets
Financial Liabilities at amortised cost
Trade and other payables
Other financial liabilities*
Lease liabilities
Borrowings
Non-Traded Financial Liabilities
14,860
24,799
39,659
28,973
13,351
7,468
25,603
75,395
14,860
24,799
39,659
28,973
13,351
7,468
25,603
75,395
4,350
7,423
11,772
7,469
5,400
4,536
3,637
21,042
21,042
* Other financial liabilities are deferred settlement liabilities. See Note 27.
Market risk
Foreign currency risk
The Group undertakes certain transactions denominated in foreign currency and is exposed to foreign
currency risk through foreign exchange rate fluctuations.
Foreign exchange risk arises from future commercial transactions and recognised financial assets and
financial liabilities denominated in a currency that is not the Group’s functional currency. The risk is measured
using sensitivity analysis and cash flow forecasting.
91
for the year ended 30 June 2021 Notes to the Consolidated Financial Statements
33. FINANCIAL RISK MANAGEMENT, OBJECTIVES AND POLICIES (CONTINUED)
In order to protect against foreign exchange rate movements, Airloom Holdings Pty Ltd has entered into
forward exchange contracts. These forward contracts are hedging highly probably cash outflows for
payments to vendors from the ensuing financial year. Management has a risk management policy to hedge
between 80% and 95% of anticipated foreign currency transactions for the subsequent 3 months.
The maturity, settlement amounts and the average contractual exchange rates of the group’s outstanding
forward foreign exchange contracts at the reporting date were as follows:
Buy US dollars
Maturity:
0 - 3 months
6 - 9 months
Sell
Australian
dollars
2021
$’000
Average exchange rates
2021
2020
6,488
77
0.7669
0.7389
–
–
The Group is exposed to foreign currency risk via its cash and cash equivalents, trade receivables, contract
assets, trade payables and contract liabilities as part of its normal business.
The Group incurs foreign currency expenses predominantly in USD and NZD.
The holdings of cash and cash equivalents, trade receivables, contract assets, trade payables and contract
liabilities analysed by nominated currency at 30 June 2021, along with prior year comparatives, were as
follows:
Denominated
in AUD
$’000
Denominated
in USD
$’000
Denominated
in NZD
$’000
14,466
21,590
8,734
44,791
20,099
5,236
25,336
4
2,571
678
3,254
8,730
3,277
12,007
389
638
–
1,027
151
–
151
30 June 2021
Financial Assets
Cash and cash equivalents
Trade and other receivables
Contract assets
Financial Liabilities
Trade and other payables
Contract liabilities
92
for the year ended 30 June 2021Annual Report 2021 Tesserent Ltd Notes to the Consolidated Financial Statements
33. FINANCIAL RISK MANAGEMENT, OBJECTIVES AND POLICIES (CONTINUED)
A hypothetical 10% strengthening in the exchange rate of the Australian dollar (A$) against the New Zealand
dollar (NZ$) of the Parents’ overseas subsidiary Lateral Security Pty Ltd with all other variables held constant
would have an unfavourable effect of ($50,330) on the loss and equity for the 2021 financial year.
30 June 2020
Financial Assets
Cash and cash equivalents
Trade and other receivables
Contract assets
Financial Liabilities
Trade and other payables
Contract liabilities
Denominated
in AUD
$’000
Denominated
in USD
$’000
4,350
7,282
938
12,570
7,330
2,780
10,110
–
141
–
141
139
–
139
Price risk
The Group is not exposed to any significant price risk.
Interest rate risk
Exposure to interest rate risk arises on financial instruments whereby a future change in interest rate
will affect future cash flows or the fair value of the fixed rate financial instruments. The Company is also
exposes to earnings volatility on floating rate instruments. At reporting date, the Company’s exposure
to interest rate risk was wholly related to cash and cash equivalents and its disclosed in Note 9.
Interest rate risk is managed by monitoring the level of floating rate which the Group is able secure.
It is the policy of the Group to keep the majority of its cash in accounts with floating interest rates.
Sensitivity analysis
During the current year the interest paid was $4.4m. Much of the interest relates to the PAM facility and is
based on a fixed rate, and interest on lease liabilities. As such, management does not consider sensitivity to
interest rates to be a useful measure of risk to the result or the overall financial statements.
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in
financial loss to the Company. Credit risk arises from the financial assets of the Company, which comprises
cash and cash equivalents and trade and other receivables. The Company has a strict code of credit,
including obtaining agency credit information, confirming references and setting appropriate credit limits.
The Company obtains guarantees where appropriate to mitigate credit risk. The maximum exposure to credit
risk at the reporting date to recognised financial assets is the carrying amount, net of any provisions for
impairment of those assets, as disclosed in the statement of financial position and notes to the financial
statements. Exposure at reporting date in relation to cash and cash equivalents is discussed in Note 9.
Credit risk relating to trade and other receivables is discussed in Note 11. The Group has no significant
concentrations of credit risk in any one customer.
Liquidity risk
Liquidity Risk is the risk that the Company, although Statement of Financial Position solvent, cannot meet or
generate sufficient cash resources to meet its payment obligations in full as they fall due, or can only do so
at materially disadvantageous terms.
The Board manages liquidity risk by maintaining adequate cash reserves and available borrowing facilities
by continuously monitoring actual and forecast cash flows and matching the maturity profiles of financial
assets and liabilities.
93
for the year ended 30 June 2021 Notes to the Consolidated Financial Statements
33. FINANCIAL RISK MANAGEMENT, OBJECTIVES AND POLICIES (CONTINUED)
Remaining contractual maturities
The following tables detail the group’s remaining contractual maturity for its financial instrument liabilities.
The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the
earliest date on which the financial liabilities are required to be paid. The tables include both interest and
principal cash flows disclosed as remaining contractual maturities and therefore these totals may differ
from their carrying amount in the statement of financial position.
2021
Non-derivatives
Non-interest bearing
Trade payables
Other financial liabilities
Other liabilities
Interest-bearing - variable
Borrowings
Borrowings
Lease liability
Total non-derivatives
2020
Non-derivatives
Non-interest bearing
Trade payables
Other financial liabilities
Other liabilities
Interest-bearing - variable
Borrowings
Borrowings
Lease liability
Total non-derivatives
Weighted
average
interest rate
%
1 year or less
$’000
Between 1
and 2 years
$’000
Between 2
and 5 years
$’000
Over 5 years
$’000
Remaining
contractual
maturities
$’000
–
–
–
8.90%
8.50%
4.00%
28,973
11,699
7,335
–
–
2,390
50,397
–
1,652
1,179
–
–
1,949
4,780
–
–
–
15,000
20,000
2,362
37,362
–
–
–
–
–
767
767
28,973
13,351
8,514
15,000
20,000
7,468
93,306
Weighted
average
interest rate
%
1 year or less
$’000
Between 1
and 2 years
$’000
Between 2
and 5 years
$’000
Over 5 years
$’000
Remaining
contractual
maturities
$’000
–
–
–
9.90%
11.50%
4.00%
7,470
4,714
2,651
–
–
1,046
15,881
–
686
129
–
–
950
1,765
–
–
–
3,000
2,000
1,315
6,315
–
–
–
–
–
784
784
7,470
5,400
2,780
3,000
2,000
4,095
24,745
The cash flows in the maturity analysis above are not expected to occur significantly earlier than
contractually disclosed above.
Fair value of financial instruments
Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value.
94
for the year ended 30 June 2021Annual Report 2021 Tesserent Ltd Notes to the Consolidated Financial Statements
34. REMUNERATION OF AUDITORS
During the financial year the following fees were paid or payable for services provided by BDO, the auditor of
the company:
Audit services - BDO
Audit or review of the financial statements
Other services - BDO
Preparation of the tax return
Due diligence
2021
$
2020
$
726,654
327,924
26,538
575,041
601,579
1,328,233
41,750
118,000
159,750
487,674
It is the company’s policy to engage BDO on assignments additional to their statutory audit duties where
BDO’s expertise and experience with the Company are important. During the year, the Company engaged
BDO in providing services in relation to tax compliance services and due diligence work.
35. CONTINGENT LIABILITIES
There are no other matters which the Group considers would result in a contingent liability as at the date
of this report.
36. COMMITMENTS
The Group has no commitments at 30 June 2021.
37. RELATED PARTY TRANSACTIONS
Parent entity
Tesserent Limited is the parent entity.
Key management personnel Compensation
The aggregate compensation of the key management personnel (KMPs) of the Company is set out below:
Short term employment benefits
Post-employment benefits
Long term benefits
Share based payments
2021
$
2020
$
2,022,550
1,847,307
147,926
42,481
162,630
35,185
1,076,129
738,734
3,289,086
2,783,856
Transactions with related parties
The Company undertook business with Belgravia Group and associated companies that Mr G Lord is a
director of and owns an interest in. Products purchased totalled $4,351 (interest relating to insurance
premium funding) through Belgravia Finance Pty Ltd. Products and services sold to Belgravia totalled $147,982
being professional services (cyber consulting) to Belgravia Health Pty Ltd of $6,250, and professional services
and software subscriptions and support to Belgravia Group Pty Ltd of $141,732.
There were no other transactions with related parties at the current and previous reporting date.
Receivable from and payable to related parties
There were no trade receivables from or trade payables to related parties at the current and previous
reporting date.
Loans to/from related parties
There were no loans to or from related parties at the current and previous reporting date.
Controlled entities
Details of the percentage of ordinary shares held in controlled entities are disclosed in Note 40 of this report.
95
for the year ended 30 June 2021
Notes to the Consolidated Financial Statements
38. PARENT ENTITY INFORMATION
The parent entity in the consolidated entity is Tesserent Limited.
The parent entity in the wholly-owned group is Tesserent Limited.
The ultimate Australian parent entity is Tesserent Limited.
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Loss after income tax
Total comprehensive income
Statement of financial position
Total current assets
Total non-current assets
Total assets
Total current liabilities
Total non-current liabilities
Total liabilities
Net assets
2021
$’000
(10,778)
(10,778)
2020
$’000
(3,833)
(3,833)
2021
$’000
2020
$’000
120,047
31,126
7,146
127,193
6,977
38,103
1,027
325
25,823
26,850
100,343
3,857
4,182
33,921
Recoverability of parent entity intercompany assets
The parent entity, Tesserent Limited, has intercompany loans receivable with its subsidiaries. The most
material intercompany loan receivable is with Tesserent Cyber Services Pty Ltd representing funds used to
acquire subsidiary businesses. The Company is confident that this intercompany asset is recoverable based
on the work done on impairment testing. For more detail refer to Note 20.
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
The parent entity had no guarantees in relation to the debts of its subsidiaries as at 30 June 2021 and
30 June 2020.
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2021 and 30 June 2020.
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for purchase of property, plant and equipment as at 30 June
2021 and 30 June 2020.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the group, as disclosed in Note 1,
except for the following:
– Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
– Investments in associates are accounted for at cost, less any impairment, in the parent entity.
– Dividends received from subsidiaries are recognised as other income by the parent entity and its receipt
may be an indicator of an impairment of the investment.
96
for the year ended 30 June 2021Annual Report 2021 Tesserent Ltd Notes to the Consolidated Financial Statements
39. BUSINESS COMBINATIONS
During the year, the Group completed the acquisitions of Seer Security Pty Ltd, Airloom Holdings Pty Ltd,
Ludus Information Security Pty Ltd, iQ3 Pty Ltd, Lateral Security (IT) Services Limited (New Zealand) and
Secure Logic Pty Ltd. Details of the acquisitions were as follows:
Seer Security Pty Ltd
On 4 August 2020, TNT Cyber Services Pty Ltd, a subsidiary of Tesserent Limited, acquired 100% of
the ordinary shares of Seer Security Pty Ltd for consideration of $20,636,811, with $6,982,965 cash and
$13,653,846 in issued share capital, being 76,923,077 shares issued at a fair value of $0.1775 per share. In
addition, a cash payment of $1,383,158 was made post-completion as a working capital adjustment.
The cash consideration has been split, with $2.5 million paid on completion, $1.25 million payable 13 months
after completion and the final payment of $1.25m, 25 months after completion.
Airloom Holdings Pty Ltd
On 11 September 2020, TNT Cyber Services Pty Ltd, a subsidiary of Tesserent Limited, acquired 100% of
the ordinary shares of Airloom Holdings Pty Ltd for consideration of $23,184,758, with $12,298,323 cash and
$10,886,435 in issued share capital, being 39,950,221 shares issued at fair value of $0.2725 per share.
The cash consideration has been split, with $7.50 million paid on completion and $1 million payable 12 months
after completion upon achievement of set milestones. Total consideration for the acquisition also includes
$3.8m in estimated earnout payments based upon forecast performance of the business.
Ludus Information Security Pty ltd
On 11 September 2020, TNT Cyber Services Pty Ltd, a subsidiary of Tesserent Limited, acquired 100% of the
ordinary shares of Ludus Information Security Pty Ltd for consideration of $2,094,224, with $1,006,324 cash
and $1,087,900 in issued share capital, being 4,440,410 shares issued at a fair value of $0.245 per share.
The cash consideration has been split, with $267,750 paid on completion and $267,750 payable 12 months
after completion. A cash payment of $156,838 was made post-completion as a working capital adjustment.
Total consideration for the acquisition also includes $0.3m in estimated earnout payments based upon
forecast performance of the business.
iQ3 Pty Ltd
On 28 October 2020, TNT Cyber Services Pty Ltd, a subsidiary of Tesserent Limited, acquired 100% of the
ordinary shares of iQ3 Pty Ltd for consideration of $18,086,895 with $8,634,650 cash and $9,513,336 in issued
share capital, being 34,593,950 shares at fair value of $0.275 per share.
The cash consideration has been split, with $4,317,325 paid on completion and four deferred quarterly
payments of $1,079,331, payable over a 12-month period after completion. A working capital adjustment
of $(61,091) has been estimated for completion accounts.
Lateral Security (IT) Services Limited
On 12 February 2021, TNT Cyber Services Pty Ltd, a subsidiary of Tesserent Limited, acquired 100% of the
ordinary shares of New Zealand based Lateral Security (IT) Services Limited for consideration of NZ$8,594,502
(A$8.253m), with A$4,163,883 cash, A$2,055,197 in issued share capital, being 5,871,990 shares issued at a fair
value of $0.350 per share and a provision for a further A$2,034,204 in share capital being 5,812,014 shares
issued at a fair value of $0.350 per share in relation to in estimated earnout payments based upon forecast
performance of the business.
The cash consideration has been split, with A$1,068,000 paid on completion and A$970,140 payable 6 months
after completion. A cash payment of A$654,838 was made post-completion as a working capital adjustment
and a further cash payment of $1,470,904 was made in relation to Lateral meeting agreed earnout targets.
Deferred consideration in respect of Lateral Security includes a component payable in issued capital. The
contractual obligation for FY21 Earnout Shares as set out in clause 10.7(b), is to issue 5,812,014 ordinary shares
in TNT. These Earnout Shares have been accounted for in line with Accounting Standard AASB132 -in that an
instrument that meets requirements for classification as equity and the contractual obligation has been
classified as ‘Contributed equity’.
97
for the year ended 30 June 2021 Notes to the Consolidated Financial Statements
39. BUSINESS COMBINATIONS (CONTINUED)
Secure Logic Pty Ltd
On 28 April 2021, TNT Cyber Services Pty Ltd, a subsidiary of Tesserent Limited, acquired 100% of the ordinary
shares of Secure Logic Pty Ltd for consideration of $17,904,336, with $8,526,857 cash and $9,377,479 in issued
share capital, being 42,145,974 shares issued at a fair value of $0.2225 per share.
The cash consideration has been split, with $7,002,139 paid on completion and further $1,524,716 held in
escrow pending finalisation of working capital adjustment.
The above business combinations have been initially accounted for on a provisional basis.
Details of the acquisition are as follows:
Cash and cash equivalents
2,493
Seer
Fair value
$’000
Airloom
Fair value
$’000
Ludus
Fair value
$’000
iQ3
Fair value
$’000
Lateral
Fair value
$’000
Secure
Logic
Fair value
$’000
Total
$’000
9,900
4,689
150
373
991
1,950
5,007
212
3,665
1,639
–
–
52
–
–
–
210
217
–
–
1
–
–
–
2,731
1,328
104
–
358
1,559
4,413
212
758
538
–
–
–
37
–
–
43
349
–
48
580
354
594
–
(1,768)
(139)
(1,052)
(249)
(2,869)
(6,550)
–
(364)
(548)
–
–
(72)
(19)
–
(40)
(246)
(573)
(6,019)
–
(57)
(84)
–
(219)
(109)
(414)
(695)
(579)
(1,557)
(1,832)
(6,714)
618
46
325
–
–
–
–
(473)
(320)
(709)
(194)
–
5,320
4,541
415
4,201
2,797
6,300
23,574
(1,532)
(1,143)
(170)
(1,348)
–
5,574
15,063
–
6,071
17,113
–
443
1,651
–
5,628
12,459
(751)
–
2,989
5,265
(1,814)
(6,758)
569
2,717
15,187
569
23,422
66,738
20,637
23,184
2,095
18,087
8,253
17,904
90,160
3,883
7,495
425
6,476
1,723
7,002
27,004
13,654
3,100
20,637
10,886
4,803
23,184
1,088
582
2,095
9,513
2,098
18,087
2,055
4,475
8,253
9,377
1,525*
17,904
46,573
16,583
90,160
3,883
7,495
425
6,476
1,723
8,527*
28,529
(2,493)
(3,665)
1,390
3,830
(210)
215
(2,731)
3,745
(758)
965
(43)
8,484
(9,900)
18,629
Trade and other receivables
Deposits
Contract assets
Prepayments
Plant and equipment
Right-of-use assets
Deferred tax asset
Trade and other payables
Contract liabilities
Provision for income tax
Employee benefits
Lease liability
Fair value of contracts and
relationships acquired
Deferred tax liability arising
from acquisition
Software IP acquired
Net assets acquired
Goodwill
Acquisition-date fair value
of the total consideration
transferred
Representing:
Cash paid or payable to
vendor
Tesserent Limited shares
issued to vendor
Deferred consideration
Total Consideration
Acquisition-date fair value
of the total consideration
transferred
Less: cash and cash
equivalents acquired
Net cash used
* Note – deferred consideration for Secure Logic has been paid to an intermediary and is held in escrow pending finalisation
of completion accounts.
98
for the year ended 30 June 2021Annual Report 2021 Tesserent Ltd
Notes to the Consolidated Financial Statements
39. BUSINESS COMBINATIONS (CONTINUED)
Significant Accounting Policies – Business combinations
The acquisition method of accounting is used to account for business combinations regardless of whether
equity instruments or other assets are acquired.
The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity
instruments issued or liabilities incurred by the acquirer to former owners of the acquiree and the amount of
any non-controlling interest in the acquiree. For each business combination, the non-controlling interest in
the acquiree is measured at either fair value or at the proportionate share of the acquiree’s identifiable net
assets. All acquisition costs are expensed as incurred to profit or loss.
On the acquisition of a business, the consolidated entity assesses the financial assets acquired and
liabilities assumed for appropriate classification and designation in accordance with the contractual
terms, economic conditions, the consolidated entity’s operating or accounting policies and other pertinent
conditions in existence at the acquisition-date.
Where the business combination is achieved in stages, the consolidated entity remeasures its previously held
equity interest in the acquiree at the acquisition-date fair value and the difference between the fair value
and the previous carrying amount is recognised in profit or loss.
Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair value.
Subsequent changes in the fair value of the contingent consideration classified as an asset or liability
is recognised in profit or loss. Contingent consideration classified as equity is not remeasured and its
subsequent settlement is accounted for within equity.
The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any
non-controlling interest in the acquiree and the fair value of the consideration transferred and the fair value
of any pre-existing investment in the acquiree is recognised as goodwill. If the consideration transferred and
the pre-existing fair value is less than the fair value of the identifiable net assets acquired, being a bargain
purchase to the acquirer, the difference is recognised as a gain directly in profit or loss by the acquirer
on the acquisition-date, but only after a reassessment of the identification and measurement of the net
assets acquired, the non-controlling interest in the acquiree, if any, the consideration transferred and the
acquirer’s previously held equity interest in the acquirer.
Critical Accounting Estimates and Assumptions
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 consolidated entity taking into
consideration all available information at the reporting date. Fair value adjustments on the finalisation of
the business combination accounting are retrospective, where applicable, to the period the combination
occurred and may have an impact on the assets and liabilities, depreciation and amortisation reported.
At balance date, acquisition accounting had been finalised for Seer, Airloom and Ludus.
99
for the year ended 30 June 2021 Notes to the Consolidated Financial Statements
40. INTERESTS IN SUBSIDIARIES
The consolidated financial statements incorporate the assets, liabilities and results of the following
subsidiary in accordance with the accounting policy described in Note 1:
Principal place of business /
Country of incorporation
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
Australia
New Zealand
Ownership interest
2021
%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
2020
%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
–
–
–
–
–
–
–
Name
Pure Security Managed Services Pty Ltd
Tesserent Wholesale Pty Ltd
Tesserent IP Pty Ltd
Tesserent Cyber Services Pty Ltd
Rivium Pty Ltd
Pure Security Pty Ltd
Certitude Pty Ltd
Hacklabs Pty Ltd
Securus Global Pty Ltd
Pure Hacking Pty Ltd
North BDT
Seer Security Pty Ltd1
Airloom Holdings Pty Ltd2
Ludus Information Security Pty Ltd3
iQ3 Pty Ltd4
Lateral Security (IT) Services Limited5
Secure Logic Pty Ltd6
Tesserent Cyber Services Limited7
1 Acquired 4 August 2020
2 Acquired 11 September 2020
3 Acquired 11 September 2020
4 Acquired 28 October 2020
5 Acquired 12 February 2021
6 Acquired 28 April 2021
7
Incorporated 14 April 2021
41. EVENTS AFTER THE REPORTING PERIOD
Announcement of brand and business unit integration strategy
On 11 August 2021, Tesserent announced a brand and business unit integration strategy to drive growth in the
business, such that, moving forward, TNT will go to market from a single entity with a single customer-facing
brand, Tesserent, that incorporates services from TNT’s existing business units.
The re-organisation of the go-to-market approach also reflects the evolution of the Group as it integrates
the businesses acquired during the last 18 months, and it’s consistent with the basis in which the Group’s
chief operating decision makers manage the business and assess performance.
The Company’s new go-to-market approach will be accompanied by a new logo and colour palette – to be
announced in the coming weeks following the 11 August 2021 announcement.
100
for the year ended 30 June 2021Annual Report 2021 Tesserent Ltd Notes to the Consolidated Financial Statements
41. EVENTS AFTER THE REPORTING PERIOD (CONTINUED)
Acquisition of Loop Secure Pty Ltd
Tesserent announced to the market, the acquisition of Loop Secure Pty Ltd following the signing of a Share
Purchase Agreement executed between both parties on the 18 August 2021.
Under the terms of the Share Purchase Agreement, TNT Cyber Services Pty Ltd, a subsidiary of Tesserent
Limited, acquired 100% of the ordinary shares of Loop Secure Pty Ltd for consideration of $13,500,000, with
$7m initial payment of cash and $4.5m in issued share capital, based on 15,946,137 shares at a based on
VWAP of $0.2822 per share. Two further deferred consideration payments of $1m are payable six months and
twelve months following completion date. Final consideration is also subject to net debt and working capital
adjustments and an earnout payment if the business exceeds agree future targets.
Capital Raise
On 24 September 2021, the Group launched and completed a capital raise – via an equity placement with
a number of institutional investors, raising $25m to fund future identified acquisitions. An equity capital
raise was chosen to optimise the capital structure of the Group and has also had the impact of enhancing
Tesserent’s visibility in the ASX market.
No other matter or circumstance has arisen since 30 June 2021 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.
42. EARNINGS PER SHARE
Loss after income tax
2021
$’000
2020
$’000
(4,533)
(7,312)
Number
Number
Weighted average number of ordinary shares outstanding during the year used in
calculating basic loss per share
875,632,954 361,822,054
Weighted average number of ordinary shares and convertible redeemable
cumulative preference shares outstanding and performance rights during the year
used in calculating diluted earnings per share
875,632,954 361,822,054
Basic earnings per share
Diluted earnings per share
Cents
Cents
(0.52)
(0.52)
(2.02)
(2.02)
101
for the year ended 30 June 2021
Directors’ Declaration
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 1 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 2021 and of its performance for the financial year ended on that date; and
– there are reasonable grounds to believe that the company 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
Mr J Challingsworth
Co-Managing Director and Co-CEO
29 September 2021
102
for the year ended 30 June 2021Annual Report 2021 Tesserent Ltd Tel: +61 3 9603 1700
Fax: +61 3 9602 3870
www.bdo.com.au
Collins Square, Tower Four
Level 18, 727 Collins Street
Melbourne VIC 3008
GPO Box 5099 Melbourne VIC 3001
Australia
INDEPENDENT AUDITOR'S REPORT
To the members of Tesserent Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Tesserent Limited (the Company) and its subsidiaries (the
Group), which comprises the consolidated statement of financial position as at 30 June 2021, the
consolidated statement of profit or loss and other comprehensive income, the consolidated statement
of changes in equity and the consolidated statement of cash flows for the year then ended, and notes
to the financial report, including a summary of significant accounting policies and the directors’
declaration.
In our opinion the accompanying financial report of the Group, is in accordance with the Corporations
Act 2001, including:
(i)
Giving a true and fair view of the Group’s financial position as at 30 June 2021 and of its
financial performance for the year ended on that date; and
(ii)
Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the Financial
Report section of our report. We are independent of the Group in accordance with the 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.
We confirm that the independence declaration required by the Corporations Act 2001, which has been
given to the directors of the Company, would be in the same terms if given to the directors as at the
time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report of the current period. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters.
BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO
Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of
BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member
firms. Liability limited by a scheme approved under Professional Standards Legislation.
Impact of Acquisition Accounting
Key audit matter
How the matter was addressed in our audit
As disclosed in Note 39 Business Combinations of the
accompanying financial report, Tesserent Limited
made six acquisitions during the financial year (Seer
Security Pty Ltd, Airloom Holdings Pty Ltd, Ludus
Information Security Pty Ltd, iQ3 Pty, Lateral Security
(IT) Services Limited and Secure Logic Pty Ltd).
The accounting for business combinations was a key
audit matter given each acquisition was material to the
Group and involved significant judgements made by the
Group, including:
Our procedures included, but were not limited to:
• Reading the relevant sale and purchase
agreements for key terms to ensure the
accounting for each acquisition is consistent with
the agreement.
• Obtaining an understanding of each business
combination including an assessment of the
accounting and whether the transaction
constituted a business combination or an asset
acquisition.
•
Estimating the fair value of assets and liabilities
acquired, in particular the valuation of identified
finite life intangible assets acquired. Under
Australian Accounting Standards, the Group is
required to estimate the fair value of all assets
and liabilities acquired.
• Determining the fair value of the purchase
consideration for each acquisition, including
estimating the fair value of shares issued by the
Company and estimating the fair value of
contingent consideration dependant on future
performance hurdles. Contingent consideration is
required by Australian Accounting Standards to be
recorded as a financial liability and subsequently
re-measured at each period end based on the
Group's judgement on whether future performance
hurdles will be, or have been, achieved.
• Ensuring the fair value of contingent consideration
was in accordance with contractual arrangements
and the requirements of Accounting Standards.
• Comparing the fair value of assets and liabilities
recognised on acquisition against the historical
financial information of the acquired entities.
• Assessing the competency and objectivity of the
external valuation specialists engaged by the
Company and considering the valuation
methodologies adopted, and determining that we
could use these reports as evidence for the
purpose of our audit.
• For the valuation of identified finite life
intangible assets recognised on acquisition and
with assistance from our internal valuation
specialists, we assessed the reasonableness of the
key judgements in the valuations, in particular,
comparing the discount rates with rates generally
observed in the industry, and comparing the
expected useful life of the identified assets to
generally observed useful lives for similar assets.
• Assessing the competency and objectivity of the
external valuation specialists engaged by the
Company and considering the valuation
methodologies adopted, and determining that we
could use these reports as evidence for the
purpose of our audit.
• Considering the adequacy of the business
combination disclosures under Australian
Accounting Standards.
Impairment Assessment of Goodwill
Key audit matter
How the matter was addressed in our audit
As disclosed in Note 20 Goodwill of the accompanying
Our procedures included, but were not limited to:
financial report, the Group has $83.3 million of
goodwill assets, which are required to be tested at
least annually for impairment in accordance with
Australian Accounting Standards.
This is a key audit matter because the impairment
assessment process is complex and is required to be
carried out at the level of the lowest identifiable cash
generating units (‘CGUs’). The assessment requires
significant judgement and includes assumptions that
are based on future operating results, discount rates
and the broader market conditions in which the Group
operates.
• Assessing whether the CGU’s identified by
management were in accordance with the
requirements of Australian Accounting Standards
and consistent with our knowledge of the Group's
operations and internal reporting.
• Engagement with our BDO IFRS experts to ensure
that the assessment of CGU’s was in accordance
with Australian Accounting Standards.
• Testing the integrity and mathematical accuracy
of the value-in-use discounted cash flow models.
• Engaging our BDO valuation experts to assist in
assessing the discount rate, revenue growth rates
and terminal growths rate applied to each CGU.
• Challenging key assumptions, including forecast
growth rates by comparing them to historical
results, business trends, economic and industry
forecasts and comparable organisations.
• Comparing the cash flow forecasts for 2022 in the
models to those in the latest Board approved
budgets.
• Evaluating management’s ability to forecast
future cash flows by comparing forecast cash
flows to actual performance.
• Engaging our valuation experts to perform a
sensitivity analysis to identify whether a
reasonable variation in the assumptions could
cause the carrying value of the CGU assets to
exceed their recoverable amount which would
indicate an impairment.
• Evaluating the adequacy of the disclosures
relating to intangible assets in the financial
report, including those made with respect to
judgments and estimates.
Revenue Recognition
Key audit matter
How the matter was addressed in our audit
As disclosed in Note 5 Revenue, the Group recognised
$67.4 million (2020: $20.2 million) of revenue from five
distinct streams (managed services, consulting
(professional) services, software license subscription,
hardware equipment sales and support & maintenance
renewals). The Group’s management focus on revenue
as a key driver by which performance is measured.
Each revenue stream has unique contracts with
performance obligations and recognition criteria that
require assessment under the 5 step model outlined in
AASB 15 Revenue form Contracts with Customers.
This is a key audit matter because the Group has
complex customer contracts, including multiple and
bundled performance obligations and agency
arrangements. Revenue recognition was significant to
our audit due to its complexity and amount of audit
attention required.
Our procedures included, but were not limited to:
• Understanding and documenting the processes and
controls used by the Group in recording revenue.
• Reviewing the Group’s revenue recognition
policies to ensure compliance with Australian
Accounting Standards.
• Reviewing vendor contract arrangements relating
to the provision of software licences on an agency
basis.
• Performing substantive procedures on a sample of
revenue transactions from each material revenue
stream to supporting documentation.
• Challenging management’s assessments around
individual performance obligations, particularly in
relation to managed services contracts, and
ensuring revenue has been recognised in
accordance with AASB 15.
• Testing cut-off around the year end to ensure
revenue is recognised in the correct accounting
period.
• Evaluating the completeness of revenue
disclosures including assumptions in the financial
report.
Other information
The directors are responsible for the other information. The other information comprises the
information in the Group’s annual report for the year ended 30 June 2021, but does not include the
financial report and the auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the 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 has no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website (http://www.auasb.gov.au/Home.aspx) at:
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf
This description forms part of our auditor’s report.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 34 to 43 of the directors’ report for the
year ended 30 June 2021.
In our opinion, the Remuneration Report of Tesserent Limited, for the year ended 30 June 2021,
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.
BDO Audit Pty Ltd
David Garvey
Director
Melbourne, 29 September 2021
ASX Additional Information
As at 22 September 2021
The shareholder information set our below was applicable at 22 September 2021.
A. DISTRIBUTION OF EQUITY SECURITIES
Analysis of numbers of equity security holders by size of holding:
SPREAD OF HOLDINGS
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
TOTAL
Number of
Holders
Number of
Units
% of Total
Issued
Capital
428
150,372
3,928
11,722,630
2,329
18,411,391
5,075 170,193,858
1,022 870,879,070
0.01
1.09
1.72
15.89
81.29
12,782 1,071,357,321
100.00
Based on the price per security, number of holders with an unmarketable holding: 1,633, with total 2,198,294
amounting to 0.21% of Issued Capital.
B. DISTRIBUTION OF EQUITY SECURITIES – SHARE OPTIONS
Analysis of numbers of equity security holders by size of holding:
Number of
Holders
Number of
Units
% of Total
Issued
Capital
–
–
–
5
–
–
–
450,000
124
177,186,946
–
–
–
0.25
99.75
129 177,636,946
100.00
SPREAD OF HOLDINGS
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
TOTAL
108
Annual Report 2021 Tesserent Ltd ASX Additional Information
As at 22 September 2021
C. EQUITY SECURITY HOLDERS
Twenty largest quoted equity security holders.
The names of the twenty largest holders of quoted equity securities are listed below:
NAME
BELGRAVIA STRATEGIC EQUITIES PTY LTD
SCOTT CEELY
G & N LORD SUPERANNUATION PTY LTD
SANBRU PTY LTD
CRAIG OWEN HUMPHREYS
C14N PTY LTD
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
BNP PARIBAS NOMINEES PTY LTD
UBS NOMINEES PTY LTD
XERT SERVICES PTY LIMITED
FLANNIGAN HOLDINGS PTY LTD
MR JOHN GEORGOPOULOS
MR ROBERT ANTHONY SILVER
CS THIRD NOMINEES PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2
SANBRU PTE LTD
AVANTEOS INVESTMENTS LIMITED <9015040 KAGE A/C>
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
CHRIS HAGIOS
CITICORP NOMINEES PTY LIMITED
Ordinary
Shares
Held
56,825,622
46,153,846
37,433,334
27,394,882
20,410,431
20,000,000
16,199,987
14,960,736
13,954,746
12,998,583
12,625,000
12,300,534
12,065,965
10,628,882
10,617,045
10,573,838
8,721,608
8,326,272
8,259,999
7,438,117
% of
Issued
Shares
5.30%
4.31%
3.49%
2.56%
1.91%
1.87%
1.51%
1.40%
1.30%
1.21%
1.18%
1.15%
1.13%
0.99%
0.99%
0.99%
0.81%
0.78%
0.77%
0.69%
Totals: Top 20 holders of ORDINARY FULLY PAID SHARES (Total)
367,889,427
34.34%
As at 22 September 2020, the 20 largest shareholders held ordinary shares representing 34.34% of the
issued share capital.
109
ASX Additional Information
As at 22 September 2021
D. SUBSTANTIAL SHAREHOLDERS
Substantial holders in the Company are set out below:
NAME
G Lord*
Ordinary
Shares
Held
% of
Issued
Shares
94,258,956
8.80%
* G Lord holds 8.80% through BELGRAVIA STRATEGIC EQUITIES PTY LTD - 56,825,622 shares, and G & N LORD SUPERANNUATION
PTY LTD - 37,433,334 shares.
E. VOTING RIGHTS
The voting rights attached to ordinary shares are set out below:
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.
F. SHARE BUY BACK
There is no current on-market share buy-back.
G. ESCROWED SHARES
The following share sunder escrow are on issue:
Ordinary shares under escrow until 11 November 2021 – 20,756,370
Ordinary shares under escrow until 12 February 2022 – 2,935,995
Ordinary shares under escrow until 27 April 2022 – 21,072,986
Ordinary shares under escrow until 15 June 2022 – 3,198,293
Ordinary shares under escrow until 10 August 2022 – 1,000,000
Ordinary shares under escrow until 8 September 2022 – 500,000
H. SHARE PLACEMENT
On 24 September 2021, the Group launched and completed a capital raise – via an equity placement with a
number of institutional investors, raising $25m to fund future identified acquisitions. An equity capital raise
was chosen to optimise the (balance of debt to equity) capital structure of the Group.
I. USE OF CASH
Cash and assets readily convertible to cash held by the Company at the time of admission to the Australian
Stock Exchange are being used in a way consistent with its business objectives as set out in the listing
prospectus.
110
Annual Report 2021 Tesserent Ltd Corporate Directory
BOARD OF DIRECTORS
Geoff Lord
Non-Executive Chairman
Julian Challingsworth Co-Managing Director
Kurt Hansen
Co-Managing Director
Gregory Baxter
Non-Executive Director
Megan Haas
Non-Executive Director
COMPANY SECRETARY
Oliver Carton
Email: investor@tesserent.com
REGISTERED OFFICE
Level 5, 990 Whitehorse Road
Box Hill, VIC 3128, Australia
PRINCIPAL PLACE OF BUSINESS
Level 5, 990 Whitehorse Road
Box Hill, VIC 3128, Australia
SHARE REGISTRY
Computershare Investor Services Pty Limited
Yarra Falls
452 Johnston Street, Abbotsford VIC 3067
AUDITOR
BDO Audit Pty Ltd
Collins Square, Tower Four
Level 18 727 Collins Street, Melbourne VIC 3000
STOCK EXCHANGE LISTING
Tesserent Limited shares are listed on the Australian Securities Exchange (ASX code: TNT)
WEBSITE
www.tesserent.com
111
for the year ended 30 June 2021 T E S S E R E N T AU S T R A L I A P T Y LT D
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