Tesserent Limited and Controlled Entities
ABN: 13 605 672 928
Annual Report 2022
About Tesserent
About this report
Tesserent is Australia’s #1 ASX-
listed cybersecurity provider
offering full service cybersecurity
solutions to our clients, helping
them achieve full end-to-end
protection for their digital assets.
This annual report covers
the operations, activities
and financial performance
of Tesserent Limited and its
controlled entities for the year
ended 30 June 2022 (FY22).
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
450 cybersecurity professionals
across offices in Melbourne,
Sydney, Brisbane, Canberra,
Auckland, Wellington and
Christchurch.
In this report, references to
‘Tesserent’, ‘the Company’ and
‘the Group’ refer to Tesserent
Limited (13 605 672 928) and its
controlled entities.
All dollar figures are expressed
in Australian dollars (AUD) unless
otherwise stated.
The financial statements
contained within this Annual
Report are prepared in
accordance with Australian
Accounting Standards and
interpretations issued by
the Australian Accounting
Standards Board.
There are references to IFRS and
non-IFRS financial information in
this report.
Non-IFRS financial measures
are used to enhance the
comparability of information
between reporting periods.
Non-IFRS financial information
should be considered in addition
to, and is not intended to be
a substitute for, IFRS financial
information and measures. Non-
IFRS financial measures are not
subject to audit or review.
Appendix 4E
Financial information for the financial year ended 30 June 2022 as required by ASX listing rule 4.3A.
Reporting period: Financial year ended 30 June 2022
Results for announcement to the market
(all comparisons to financial year ended 30 June 2021)
Revenue from ordinary activities
Loss after tax from ordinary activities
Net Loss attributable to members
$'000
Up/Down
% Change
112,977
(8,783)
(8,783)
Up
Up
Up
68%
94%
94%
Note 1
Under accounting standard AASB15 “Revenue from Contracts with Customer”, some of the Company’s product sales are deemed as Agency Sales. The standard
requires these sale amounts to be netted down against cost of products, which results in a lower reported ‘Statutory’ revenue in the Company’s formal Financial
Statements. The group’s Turnover (or Gross Revenue) for FY22 was $166m (a non-IFRS measure). This has no impact on Gross profit or Net profit.
Note 2
Loss after tax from ordinary activities is presented in accordance with AASB 101 (para 87).
It is noted that the reported statutory loss includes $1.2m of acquisition related expenses (incl. fair value expense on contingent consideration), $2.4m of share option
expense, and $9.4m of non-cash costs associated with the debt refinancing during the financial year ended 30 June 2022.
Dividends paid and proposed
No dividend has been proposed to be paid or is payable for the financial year ended 30 June 2022, nor for the
comparative period.
ABN 13 605 672 928
Annual Report 2022 Tesserent Ltd Contents
1
2
4
11
12
14
Contents
Chairman and CEO’s Letter
Review of Operations
About Tesserent
Board of Directors
Executive Team
52 Consolidated Statement of Profit or Loss
and Other Comprehensive Loss
53 Consolidated Statement of Financial Position
55 Consolidated Statement of Changes in Equity
56 Consolidated Statement of Cash Flows
57 Notes to the Consolidated Financial Statements
20 Corporate Governance Statement
34 Directors’ Report
51 Auditors Independence Declaration
97 Directors’ Declaration
98
Independent Auditor’s Report
103 Shareholder Information
106 Corporate Directory
Our mission is to
be the sovereign
cybersecurity provider
of choice for the
protection of Australia
and New Zealand’s
Digital Assets
1
Chairman and
CEO’s Letter
$166m
Turnover1
up 71% YOY
$18.6m
Normalised EBITDA1
up 94% YOY
$10.0m
Normalised NPAT1
up 38% YOY
Dear Fellow Shareholders,
We are pleased to present
the 2022 Annual Report for
Tesserent Limited (ASX:TNT)
(‘the Company’).
During the year ended 30 June
2022, the Group reported total
sales turnover of $166m (up 71%
from FY21), and a normalised
EBITDA1 result of $18.6m which
represents significant further
growth (+94%) on FY21 results.
The Group achieved an
underlying normalised net profit
(NPAT) of $10.0m, excluding
the impact of one-off costs
incurred during the year, such as
acquisition costs, share based
payments and refinancing costs.
Following the significant
disruption and technological
shifts brought about by
COVID in 2020 and 2021,
many organisations have
been compelled to adapt
their operating systems
and IT security in order to
protect supply chains and
interconnected systems in
the face of the increasingly
sophisticated attacks.
Global threat actors continue
to exploit vulnerabilities
across endpoints and cloud
environments, and ramp up
innovation on how they use
identities and stolen credentials
to bypass enterprise and
government defences.
Targeted intrusions are
expected to continue to
increase, leveraging trends in
technology and the broader
threat landscape throughout
2022 – such as a likely increase
in the use of ransomware from
ransomware-as-a-service.
Following three years of
targeted strategic acquisitions
and continuing integration of
these businesses and their
cybersecurity service offerings
into our Cyber360 framework –
Tesserent, as Australia’s #1 ASX-
listed cybersecurity provider, is
extremely well placed to provide
its existing and new customers
full service cyber security
assessment and protection
solutions.
The FY22 financial year marked
a continuation of the strong
growth experienced in FY21
accompanied by an ongoing
integration and consolidation
of the Group’s operations,
plus initiatives in the areas
of marketing and finance to
consolidate the branding of
the business and improve
profitability.
1
Excludes one-off costs, such as acquisition costs, share-based costs and refinancing costs (see below for further analysis).
2
Annual Report 2022 Tesserent Ltd Consistent with the earnings
profile in FY21, the quarterly
results for FY22 demonstrated
strong seasonality and
progressive improvement
through the year – the second
half of the year 72% of full year
earnings (vs. 76% in FY21).
The Group’s strong growth
at the EBITDA level for FY22
was achieved both through
the contribution from three
acquisitions during the year, plus
an underling organic growth of
25% in the existing business.
During the year, the business
completed the acquisitions
and continues to integrate
the three businesses into the
Group – two in the Tesserent
Federal Government advisory
practice and one into the
Tesserent enterprise/commercial
division – complementing and
expanding the Group’s existing
cybersecurity offering.
The re-organisation of the
Group’s divisional structure
and go-to-market strategy,
which was announced in August
2021 is progressing well. This
has improved the level of
engagement and cross selling
opportunities across the
business. This re-organisation
was also accompanied by a
re-branding of the Group which
has further reinforced the
integration.
On 23 June 2022, the Group
announced a successful
refinancing and upsizing of its
debt facilities – with a new $59m
Market Rate Loan provided by
the Commonwealth Bank of
Australia replacing previous
facilities (of $35m).
We expect FY23 to be another
year of growth, with continued
strong organic growth
and focus on cross selling
opportunities across market
and between divisions. This may
be supplemented with some
strategic acquisitions, where
they complement and add to
the existing Cyber360 strategy.
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
Executive Chairman
Kurt Hansen
CEO and Managing Director
3
Review of Operations
FY22 IN REVIEW
Background
Increasingly, organisations are coming under cyber-
attack from sophisticated state-based actors,
hacktivists and cyber-criminals.
Threat actors continue to exploit vulnerabilities
across endpoints and cloud environments, and
ramp up innovation on how they use identities
and stolen credentials to bypass legacy defences.
Adversaries continue to adapt to security
environments evolving with global market
pressures and supply chain issues.
Targeted intrusions are expected to continue to
increase, leveraging trends in technology and the
broader threat landscape throughout 2022 – such
as a likely increase in the use of ransomware from
ransomware-as-a-service.
Increasingly reliance on mobile devices is
enabling attackers to continue to diversify their
exploitations to include mobile malware — either
to make money or collect sensitive information.
Cloud-related threats are particularly likely to
become more prevalent and to evolve, given that
targeted intrusion adversaries are expected to
continue prioritizing targets that provide direct
access to large consolidated stores of high-
value data.
Cybersecurity market
Following the significant disruption and
technological shifts brought about by COVID in
2020 and 2021, organisations have been compelled
to continue to adapt their operating systems
and IT security in order to protect supply chains
and interconnected systems in the face of the
increasingly sophisticated attacks.
Evaluation of the market landscape identifies
that enterprise risk is focusing around three
critical areas:
– endpoint vulnerabilities and cloud workloads
– identity and
– data
The cybersecurity market is expected to continue
showing strong growth, driven by the increasing
number of retail and financial transactions
processed online and through e-commerce
platforms, plus the increasing integration and
interconnection of business and government
controlled systems and infrastructure. Cloud
computing, edge computing and public cloud
security are the fastest developing market sub-
segments.
4
The impact of COVID-19 has accelerated
cyberattacks faced by many organisations due
to the security vulnerability of remote work and
virtualised IT environments. There is also an ever-
increasing awareness of data risks and threats
among organisations with cybersecurity critical
to the success of the digital transformation
of operations.
The Global cybersecurity market was valued at
US$139.8 billion in 2021 and is forecast to grow
at a 13.4% compound annual growth rate over
2022-2029.
Global Industry Revenue (US$bn)
169
143
121
103
97
129
120
30
110
94
74
61
51
47
34
30
30
40
69
71
86
78
56
63
FY16 FY17 FY18 FY19 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25
Security Services
Cyber Solution
Source: IBISWorld, Statista, Fortune Business Insights
As Australia’s #1 ASX-listed cybersecurity provider,
Tesserent has a broad Cybersecurity service
offering through its Cyber360 framework and
is extremely well placed to provide its existing
and new customers full service cyber security
assessment and protection solutions.
Tesserent has a sovereign Aust/NZ workforce
of over 450 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 cyber-attacks.
Annual Report 2022 Tesserent Ltd With employees located across offices in
Melbourne, Sydney, Brisbane, Canberra, Wellington,
Auckland, and Christchurch, Tesserent continues
to hold its place as Australia’s #1 ASX-listed
cybersecurity provider. Tesserent now provides
products and services to over 1,200 clients:
GOVERNMENT
– 53 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 51 of the S&P/ASX 100
– 50% of the Tier 1 Retail and logistics supply
chain organisations
Other market drivers
Due to a rapidly evolving suite of technology
platforms utilised by businesses and individuals and
increased connectivity, the demand for IT security
solutions is on the rise.
Digital assets and data are becoming an
increasingly important aspect of conducting
business and as such, the need for security will
continue to increase as cybercriminals become
more advanced.
With computer networks and systems becoming
more complex, the need for security and monitoring
services is increasing. Many businesses are
selecting to outsource these services to specialist
providers, with an increased focus on security
software service offerings.
There have been a number of highly publicised
cyber security breaches over the past several
years, highlighting the need for governments and
businesses to proactively improve their digital
security platforms.
5
Review of Operations
continued
The shortage of the required human skill sets
needed for organisations to employ a suitable level
of cyber resilience continues to be a challenge
globally and in Aust/NZ. Tesserent has positioned
itself as a destination employer for cyber skilled
staff and will also contribute to developing skills
across this industry wide problem.
FY22 FINANCIAL PERFORMANCE
The adjacent table, sets out the key financial
metrics for the Group for the current year and
the prior year.
Tesserent continued its expansion through FY22
with growth (versus FY21) in Turnover of 71% and
growth in Operating EBITDA of 91%.
As reported in the most recent quarterly report,
the overall growth in Operating EBITDA of 91%,
comprised 25% organic growth, plus contribution
from newly acquired business (acquisition growth)
of 66%.
During the full year FY22, the Group reported total
Turnover of $165.6m and statutory revenue of
$113.0m.
As previously discussed, Turnover includes revenue
from consulting and advisory services, plus turnover
from product sales. The turnover or ‘Gross revenue’
is equivalent to the value invoiced to customers
and drives the receivables balance reported in the
Group balance sheet.
Under accounting standard AASB15 “Revenue from
Contracts with Customer”, some of the Company’s
product sales are required to be netted down
against cost of products, which results in a lower
reported ‘Statutory’ revenue in the Company’s
formal Financial Statements (this has no impact
on Gross profit or Net profit).
Key observations from the FY22 results
(per the adjacent table)
– The Group’s underlying earnings showed
significant growth with FY22 Operating EBITDA
(before addition of AASB16 adjustments) growing
116% from the prior year (FY21).
– The improved Operating EBITDA reflects
improved operating leverage through the
business, plus the impact of the business
reorganisation whereby the new operating
divisions of the business have reviewed and
addressed pricing and margin recovery on
certain contracts.
6
– Interest expense is up 74% in FY22 as a result
of the upsized facility of $35m for the full year
(vs. partial year in FY21). As a result of the
refinancing with CBA, which was completed
on 23 June 2022, the cash interest cost of
the refinanced $35m will be approximately
$1.2m lower in FY23. The non-cash interest
cost (amortisation of the warrants) will not
be applicable in FY23.
– Depreciation and amortisation costs have
increased by 58% in FY22, driven primarily by
the increase in required accounting treatment
for amortisation of customer contracts
associated with the acquisitions. During FY22,
the depreciation and amortisation costs were
spilt into; Depreciation of Property Plant and
Equipment ($1.7m); Depreciation of AASB16
Right-of-use assets ($2.2m) and Amortisation
of customer contracts associated with the
acquisitions ($3.9m).
– Share based payment and option expenses are
down 46%, as the number of options issued in
FY22 was lower that FY21 – when the Group’s
ESOP plan was launched.
– Acquisition costs were lower, down 76% as a
result of fewer acquisitions in the current year
vs. FY21.
– There were a number of one-off costs
associated with the refinancing and exit from
the previous debt facility, which impacted profit
in FY22 being; exit fee on the previous facility
($1.75m); write-off and amortisation of remaining
unamortised costs on warrants attached to
the previous facility ($7.5m). These costs will not
reoccur in future periods.
– In accordance with accounting standard AASB
128, the Group is required to assess the carrying
value of its investments – taking into account
any external market indicators. During FY22,
there were external indicators that compelled
a write-down of the TrustGrid and AttackBound
minority investments, totalling $1.6m. There was
also a write-down of the call option investments
relating to TrustGrid and AttackBound of $2.5m.
– The write-down of minority investment was
partially offset by a market indicator supporting
a write-up of the Daltrey investment held at fair
value through profit or loss by $0.6m.
Note that the carrying value impairments and
write-up relate to the minority investments held
by the Group. The business has also assessed
the carrying value of all of the controlling
acquisitions made by the Group in the core
business (under the three CGU’s disclosed in
the financial statements) and no impairment
has been required (refer to Note 15 of the
financial statements).
Annual Report 2022 Tesserent Ltd
cash v. non-cash
expenses
30-Jun-22
$’000
30-Jun-21
$’000
Normalised EBITDA and NPAT
Details
Turnover
Statutory revenue
Operating EBITDA (as reported in 4C quarterly reporting)
add Impact of AASB16 lease adjustments
Normalised EBITDA
Interest expense
Depreciation and amortisation
Tax credit
Normalised NPAT
Less: One-off costs/non-recurring expenses
cash
non-cash
non-cash
165,567
112,977
16,312
2,241
18,553
(3,361)
(7,841)
2,634
9,985
–
96,685
67,389
7,560
2,025
9,585
(1,929)
(4,975)
4,578
7,259
–
%
change
+71%
+68%
+116%
+94%
+38%
Share based payment and option expenses
non-cash
(2,401)
(4,462)
Acquisition costs and fair value expense
on contingent consideration
Exit costs on refinancing
Non-cash interest - amortisation of warrants and
facility costs
Loss on carrying value of innovation investments
Statutory NPAT
cash
cash
non-cash
non-cash
(1,192)
(1,750)
(9,398)
(4,027)
(8,783)
(4,934)
–
(2,396)
–
(4,533)
Sum of cash expenses below Normalised NPAT
Sum of non-cash expenses below Normalised NPAT
(2,492)
(15,827)
(4,934)
(6,858)
As noted in the TNT’s recent ASX quarterly performance announcement (on 28 July 2022), the earnings
of the business are highly seasonal, with:
– Turnover in H1/H2 of FY21 reported at 38% / 62% and H1/H2 of FY22 reported at 39% / 61%
– Operating EBITDA in H1/H2 of FY21 reported at 23% / 77% and H1/H2 of FY22 reported at 28% / 72%
as shown below.
FY21/FY22 Turnover - quarter on quarter ($m)
58.6
39.2
41.5
34.7
28.2
21.4
21.0
15.1
Q1 FY21
Q2 FY21
Q3 FY21
Q4 FY21
Q1 FY22
Q2 FY22
Q3 FY22
Q4 FY22
7
60
50
40
30
20
10
0
8
7
6
5
4
3
2
1
0
Review of Operations
continued
FY21/FY22 Operating EBITDA – quarter on quarter ($m)
7.8
4.1
3.9
2.6
2.0
1.3
1.7
0.4
Q1 FY21
Q2 FY21
Q3 FY21
Q4 FY21
Q1 FY22
Q2 FY22
Q3 FY22
Q4 FY22
Cashflows
The Group recorded a positive operating cash
flow of $11.8m for the year, as a result of strong
cash conversion and favourable movements in
net working capital. Operating EBITDA to cash
conversion was 72% for the full year FY22. We note
that operating cashflow can fluctuate significantly
over the year, driven by trading seasonality in the
business coupled with large working capital and WIP
movements which may move the outcome materially
over quarter end reporting dates. Management
monitors the working capital dynamics over the
year to ensure that the group is optimising its cash
position as the business grows organically.
The new debt facilities with the CBA (see below)
includes a revolving facility which provides the
Company flexibility in managing its cash and debt
position.
FY22 ACQUISITIONS
During the year, Tesserent completed controlling
acquisitions of three separate businesses (Loop
Secure, Claricent and Pearson) covering both public
and private sector consulting services, managed
services and specialised product expertise.
Each of these acquisitions have exceeded their
incoming FY22 revenue and earnings targets for
the control period post acquisition and are well
progressed on integration into the Group’s existing
operations and Cyber360 model.
8
INTEGRATION AND OPERATIONAL
RE-ORGANISATION
The financial year FY22, represented a year of both
growth and consolidation for the Group, as the
business continued its plans to pursue a brand and
business unit integration strategy following the
acquisition of nine separate businesses in the two
preceding financial years, in order to build out the
Group’s Cyber360 capabilities.
The re-organisation of the business units acquired
over the last two years has aligned them with the
go-to-market channels and form the basis in which
the Group’s CEO and Board manage and assess
business performance. A new brand strategy
was adopted to accompany and accentuate the
change in the Group’s go-to-market approach.
CLIENT ACQUISITION AND EXPANSION
The integration and reorganisation of these
business acquisitions continues to strengthen the
Group’s trading performance and its commercial
position in the market – enabling the Group to
enhance its value proposition to existing and new
clients and improve gross margins and net margins
reported across the business.
As a result, the group has during FY21/22 developed
eight major service lines, with promising cross-
selling results to date, as follows:
– 60 clients with 2 service lines
– 30 clients with 3 services lines
– 10 clients with 4 or more services lines
– 120 new client “logos” were added in FY22
Annual Report 2022 Tesserent Ltd 9
Review of Operations
continued
The growth opportunity presented now is to
continue to market these service lines to more
than 1,200 existing clients across commercial and
government sectors, as well as using the offering
to add net new clients.
In September 2021 the Company refreshed its brand
image and purpose with a new narrative. “Securing
our digital future, together”.
This narrative recognised that cybersecurity
starts and ends with all of us. That we partner with
our clients to create solutions that keeps their
businesses and customers data safe. Collectively
the more systems we secure the more secure our
interconnected world becomes.
This refreshed brand will be important as we
continue to grow and develop our business to
become known as the sovereign “go to business”
for managing cyber risk.
REFINANCING OF GROUP DEBT FACILITIES
During the Q4 of FY22, Tesserent completed a
refinancing and upsizing of its debt facilities –
with a new $59m Market Rate Loan provided by
the Commonwealth Bank of Australia replacing
previous facilities (of $35m).
As part of the refinancing, CBA is providing a Market
Rate Loan of up to $20m to be used to fund cash
consideration payments on existing and future
acquisitions; plus ancillary facilities of $4m – to
cover Bank Guarantees, FX and corporate cards
for the Group.
The implementation of the new financing
arrangements will materially reduce the (cash)
interest cost and eliminate the ongoing non-cash
warrant expense on the previous debt facility and
result in significant savings on drawn new debt
facilities (based on current benchmark interest
swap rates).
FUTURE FOCUS
A key focus of the Group is ensuring that each of
our divisions has a strong management capability
that is accountable for strategy development
and execution, as well as day-to-day operational
performance.
The Board and Management Team continue to
focus on creating shareholder value by building on
Tesserent’s position as Australia’s #1 ASX-listed
cybersecurity provider. Important goals for FY23
financial year include:
– Fostering innovation across the Group and
expanding proprietary intellectual property to
drive high-margin product and service offerings.
– Focusing on capturing further market share
of clients in three key markets: Government
(including Defence), Critical Infrastructure and
Financial Services.
– Driving growth through deeper and wider
customer engagements and increasing our
average number of services per customer.
– Integrating acquisitions into “Capability Business
Units” to maximise synergy efficiencies and drive
organic revenue growth through cross-selling.
– Building out high-value recurring annuity revenue
streams via Managed Security Operations
Centre (SOC) and Managed Detection and
Response (MDR).
– Investing in the Tesserent Academy strategy to
deliver programs to help the industry shortage
of cyber skills for Tesserent staff, our clients and
industry wide.
– Selectively evaluating acquisition opportunities
that may expand on our Cyber 360 capabilities
and market share, increasing shareholder value
through incremental EPS growth.
10
Annual Report 2022 Tesserent Ltd D efend
v i c e
r
e
Our
P
u
b
li
c
C
l
o
u
d
Clients
Private C l o u
d
t
c
Prote
re as a S
a
w
t
f
o
S
D
e
t
e
c
t
&
R
e
s
p
o
nd
Cyber Strategy
& Consulting
Security Advisory
(GRC)
Tech. Assurance
& Testing
Identity & Access
Management
24x7 Managed
Detection
Incident
Response
Network & Cloud
Security
Critical Controls
Cyber Education
Converged/
Physical Security
11
About Tesserent
THE GROUP TODAY
Tesserent is Australia’s #1 ASX-listed cybersecurity
provider offering full service cybersecurity Solutions
to our clients, helping them achieve full end-to-end
protection for their digital assets.
This is delivered by more than 450 cybersecurity
professionals across offices in Melbourne,
Sydney, Brisbane, Canberra, Auckland, Wellington
and Christchurch.
Cyber 360 utilises a range of products from
world-leading cybersecurity vendors, delivering
a comprehensive solution to prevent, detect and
mitigate potential cyber-attacks.
Tesserent’s Cyber 360 offering provides
products, services and strategic advice to more
than 1,200 Enterprise, Government and Critical
Infrastructure clients.
OUR STRATEGIC DIVISIONS
CYBER360
STRATEGY
Federal
Cloud
Defend &
Protect
Detect
Academy
Training
Associates
Innovation
and IP
development
12
Annual Report 2022 Tesserent Ltd DEFEND
PROTECT
DETECT
RISK IDENTIFICATION
Assist clients to understand their risk profile,
identify business critical assets and the
appropriate level of protection required.
TECHNICAL ASSESSMENTS
Conduct assessments & gap analysis against best
practice and regulatory requirements to assist
clients with measuring their current security posture.
GOVERNANCE & POLICIES
Assess, align & uplift a client’s governance and
risk management strategy to match their risk
profile and/or regulatory requirements
CONTROLS
Design and implementation of appropriate
controls to safeguard assets, through the
adoption of secure architectures and frameworks.
RISK MITIGATION
Actively drive continuous security maturity in
organisations and raise awareness of the
current threat landscape.
04
Data and
Analytics
08
01
02
03
Strategy and
Advisory
Assurance and
Testing
Architecture and
Engineering
05
Incident
Response
06
07
Critical Technology
Controls
Detect – Secure
Digital Eye
Secure Cloud
Migration
13
Board of Directors
GEOFF LORD
Executive Chairman
KURT HANSEN
Chief Executive Officer and Managing Director
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.
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 34 to 35 for further information.
14
Annual Report 2022 Tesserent Ltd GREGORY BAXTER
MEGAN HAAS
Non-Executive Director (NED)
Non-Executive Director (NED)
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 has extensive board and advisory experience
in technology, financial services and research
institutions. 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 Columbia University.
Megan’s core competencies are centered 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: Development Victoria (Chairperson), RMIT
University (Council member) and Note Printing
Australia (audit committee).
15
Executive Team
KURT HANSEN
JAMES JONES
SAMANTHA RIDDLE
Chief Executive Officer
Group CFO
Director – People & Culture
Samantha has extensive
commercial and human resources
experience spanning 30 years
both in Australia, and overseas.
The last 18 years, she has held
senior people leadership roles
across the IT Sector. She is
passionate about leading a
Human Resources function that
attracts, develops and retains
high performing leaders and
teams.
With her depth of knowledge and
experience across the IT sector
and Human resources alike, she is
able to bring alignment between
business and people strategies.
She is both passionate and
committed to making a positive
impact to the business, through
maximising and developing
peoples’ potential and capability.
Samantha, holds a Bachelor’s
degree in Commerce and Political
Science, Honours Degree in
Organisational Development
and a Masters Of Business
Administration.
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 on
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 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 then EY (in the
United Kingdom) working
in an advisory capacity on
restructuring, distressed assets
and M&A transactions. James
has extensive experience
in financial modelling and
scenario analysis, plus providing
advice on bid tactics, sale and
purchase contract structuring
and purchase price mechanics
through execution of M&A deals.
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 hold Bachelor
of Commerce and Bachelor
of Science degrees from the
University of Melbourne and
is a member of Chartered
Accountants (CA ANZ).
16
Annual Report 2022 Tesserent Ltd PAUL TAYLOR
General Counsel and
Company Secretary
CHRIS HAGIOS
Managing Partner,
Defend & Protect
Paul has extensive experience
across the financial services,
e-commerce and legal industries
and is a member of Tesserent’s
Senior Leadership Team. Paul
previously held leadership
roles in the insurance and
financial services sector with
the Cover-More Group Limited
and Insurance Australia Group
Limited, and most recently acted
as General Counsel & Company
Secretary at Simonds Group
Limited, an ASX listed business
focused on residential building
and construction.
At Tesserent, Paul brings his
strong partnership building
approach & commercial acumen
to drive profitable and pragmatic
business transformations.
Paul holds a Master of Laws,
Bachelor of Commerce (Hons)
and is a Member of the Australian
Institute of Company Directors.
Paul is qualified to practice law in
Australia and New York, USA.
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 client’s digital assets.
17
Executive Team
continued
CRAIG HUMPHREYS
GEORGE KATAVIC
DEEPAK SINGH
Managing Partner, Cloud
Managing Partner, Federal
Managing Partner, Detect
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
BU providing clients with highly
secure services lines involving
public cloud, private cloud/
IaaS and hybrid managed cloud
offerings.
George has more than 25 years
of 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 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.
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 business unit which
provides secure monitoring and
detection services designed
to protect our client sensitive
assets and information against
global cyber threats.
18
Annual Report 2022 Tesserent Ltd HAMISH SOPER
PATRICK BUTLER
Managing Partner, New Zealand
CEO, Loop Secure
With over 15 years’ experience
transforming IT businesses, this
role will see Hamish taking the
Tesserent Defend and Detect &
Cloud offerings to the NZ Market
and assisting 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.
Patrick has been at Loop Secure
for more than 15 years, building
up both the cybersecurity
service and technology arms
of the business. Patrick was
formerly the General Manager
of Sales & Marketing overseeing
the national team from the
Sydney office. Patrick was
appointed CEO in 2016. During
his time at Loop, Patrick has
engaged with hundreds of
clients, and understands the
unique challenges posed to
organisations in Australia by
cybersecurity threat actors. In
his role as both a shareholder and
CEO of Loop, Patrick was able to
understand the challenges that
come with running a business
securely. Patrick has extensive
experience in presenting and
training boards and executives
on cybersecurity challenges and
how to be prepared and resilient
today and into the future. Patrick
commenced in August 2021.
19
Corporate Governance Statement
The Board of Directors of Tesserent Limited (Board) is committed to ensuring that its Corporate Governance
framework meets the requirements set out in the ASX Corporate Governance Council’s Principles and
Recommendations (Fourth Edition) (Governance Principles). Strong corporate governance is critical to
the delivery of value to our shareholders and acting with transparency and integrity in the conduct of
our business.
Consistent with prior years, the Board does not consider that all of the ASX Recommendations are applicable
for the Company, and where Tesserent has not fully adhered with an ASX Recommendation, this has been
discussed in the Corporate Governance Statement, together with the reasons why it has not been followed.
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 reassessed.
The Company’s corporate governance policies and practices are outlined below and are in the 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
anti-corruption 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.
20
Annual Report 2022 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
The respective roles and responsibilities of the
Board and executives are defined in the Board
Charter.
board and management; and
The Board Charter outlines:
b. those matters expressly reserved to the board
and those delegated to management.
– The roles of the Board, the Chairman, the Chief
Executive Officer(s) (CEO(s)) and the Company
Secretary.
– The guidelines for Board composition, including
the processes around Director appointments
and Board nominations.
– The general and specific responsibilities of the
Board.
– Responsibility for the operation and
administration of the Group is delegated by the
Board to the CEO(s) and the Senior Leadership
Team (SLT). The Board ensures that the CEO
and SLT are appropriately qualified and
experienced to discharge their responsibilities.
Some key functions reserved for the Board are:
– Approval of the budget;
– Approval of the strategic plan;
– Approval of annual, half-yearly and quarterly
financial reports;
– Approving and monitoring the progress of
major acquisition and divestments;
– Ensuring the Company’s Code of Conduct
and other policies are adhered to, to promote
ethical and responsible decision making and
compliance with applicable laws;
– Ensuring any significant risks that arise
are identified, assessed and appropriately
managed and monitored; and
– Reporting to shareholders.
While the Board retains full responsibility for
guiding and monitoring the Company, to assist
in discharging its responsibilities, it makes use of
sub-committees. To this end the Board had in place
an Audit & Risk Management Committee for FY22.
A Nomination & Remuneration Committee was not
in place in FY22, and these functions were managed
by the Board. Reestablishment of the Nomination &
Remuneration Committee in FY23 has been tabled
for consideration by the Board.
The Company complies with this Recommendation.
21
Corporate Governance Statement
RECOMMENDATION
COMPANY’S CURRENT PRACTICE
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.
1.3
A listed entity should have a written agreement
with each director and senior executive setting
out the terms of their appointment.
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, including experience, qualifications,
relevant memberships, and details of other
material directorships held, or other interest,
position or relationship that might influence on
their ability to bear on issues before the Board and
to act in the best interests of the Company as a
whole rather than in the interests of an individual
shareholder or other party.
The notice of meeting also states whether the
Board considers the Director to be independent,
and the term of office currently served by the
Director.
The Company complies with this Recommendation.
The Company has entered into a written
agreement with each Director and senior
executive setting out the terms of their
appointment, including role, responsibilities and
remuneration.
A director must advise the Board in relation to
any new role that could impact upon the time
commitment expected of the director or give rise
to a conflict of interest.
The Company complies with this Recommendation.
1.4
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 Board Charter provides that the Company
Secretary’s role is:
– advising the Board and its committees on
governance matters;
– monitoring that board and committee policies
and procedures are followed;
– coordinating the timely completion and
despatch of board and committee papers;
– ensuring that the business at board and
committee meetings is accurately captured
in the minutes; and
– helping to organise and facilitate the induction
and professional development of Directors.
As stated in the Board Charter, each director
can communicate directly with the Company
Secretary and vice versa. The Company Secretary
is accountable directly to the Board, through the
Chairman, on all matters to do with the proper
functioning of the Board and its committees.
The Company complies with this Recommendation.
22
Annual Report 2022 Tesserent Ltdcontinued RECOMMENDATION
COMPANY’S CURRENT PRACTICE
1.5
A listed entity should:
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 recognises that a diverse and talented
workforce at all levels is a competitive advantage
and that the Company’s success is the result of
the quality and skills of its people. The Company
has established and implemented a Diversity Policy
which is overseen by the Board and may be viewed
in full at: https://investors.tesserent.com/site/about/
corporate-governance.
The Company’s Diversity Policy requires the Board
to establish measurable objectives to assist the
Company in achieving gender diversity.
The Company did not set Measurable Objectives for
achieving gender diversity for the 2022 financial year
due the level of acquisition and integration activities
required across the Group. Measurable Objectives for
FY23 are in the process of being finalised and tabled
for Board approval and adoption in Q2 FY23.
The following activities were undertaken by the
Company in FY22 in support of the Company’s
broader diversity objectives:
– Partnered with the not-for-profit organisation
UNIQ YOU to encourage more high school
aged young women to consider careers in
Cybersecurity. This partnership with UNIQ
YOU aims to address the gender imbalance
in the industry as a key step toward meeting
that demand.
– Tesserent was an Executive sponsor for the AWSN
– 2021 Australian Women in Security Awards.
– Adopted a Parental Leave Policy to expand
parental leave provisions above the current
standard, statutory requirements for
consideration (12 weeks paid primary carer
and 2 weeks paid secondary carer.
– Adopted a Domestic & Family Violence Leave
Policy.
– Adopted a Group Code of Conduct and
Workplace Harassment, Discrimination and
Bullying Policy.
– Adopted a Flexible Working Arrangement
framework across the Group.
The Company is a ‘relevant employer’ under the
Workplace Gender Equality Act and lodged its report
on 26 July 2022. This report contains the most recent
‘Gender Equality Indicators’ and the public version of
this report can be found in the Media section of the
company’s website at: https://investors.tesserent.
com/site/about/corporate-governance.
As at 30 June 2022, there were 77 females
employed representing 24% of total employees. The
Tesserent board has a female Director, following the
appointment of Megan Haas in January 2021.
The Company partially complies with this
Recommendation.
23
Corporate Governance Statement
RECOMMENDATION
COMPANY’S CURRENT PRACTICE
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
ii.
is chaired by an independent director, and
disclose:
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.
24
The Company has adopted a Board and Senior
Executive Evaluation Policy.
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 oversees conducting individual
Director evaluations. A Non-Executive Director will
be responsible for the performance evaluation of
the Chairman.
A review of the: performance of the Board, its role,
the adequacy and effectiveness of the Boards’
practices and procedures and the behaviours
of the Board was initiated during the fourth
quarter of 2022, in respect of the period ending
30 June 2022. The Board takes this evaluation into
consideration when recommending directors for
(re-election).
Julian Challingsworth, Joint CEO & Director,
resigned from the Company and the Board
effective from 23 November 2021.
The Company complies with this Recommendation.
The Company has adopted a Board and Senior
Executive Evaluation Policy.
The Chief Executive Officer is subject to annual
performance evaluation by the Board. All senior
executives of the Company are subject to annual
performance evaluations by the CEO.
A performance evaluation was undertaken for the
CEO during the reporting period.
The Company complies with this Recommendation.
The Board has adopted a written Nomination &
Remuneration Charter that sets out the role and
objectives, responsibilities and functions of the
Committee and may be viewed in full at: https://
investors.tesserent.com/site/about/corporate-
governance.
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.
Accordingly, a Nomination & Remuneration
Committee was not in place in FY22, and
these functions were managed by the
Board. Reestablishment of the Nomination &
Remuneration Committee in FY23 has been tabled
for consideration by the Board.
The Company does not comply with this
Recommendation.
Annual Report 2022 Tesserent Ltdcontinued RECOMMENDATION
COMPANY’S CURRENT PRACTICE
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.
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
2.4
A majority of the board of a listed entity should
be independent directors.
The experience and expertise relevant to the
position of Director held by each Director in office
at the date of the Annual Report is The Board skills
matrix is set out in the following Board Experience/
Matrix Skill section.
In accordance with the Board Charter and the
ASX CGPRs, the Board regularly assesses the
independence of each of the Non-Executive
Directors based on the interests and associations
disclosed by them.
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 Kurt Hansen is not an
independent director given he is an employee 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.
A Director must advise the Board if there is any
change in the Director’s interests, positions,
associations or relationships that could bear upon
his or her independence at the earliest opportunity.
There are procedures in place, agreed by the
Board, to enable Directors in furtherance of their
duties to seek independent professional advice at
the Company’s expense.
The Company complies with this Recommendation.
During the reporting period, the Board did not
comply with Recommendation 2.4, as the majority
of the Board are not independent Directors for the
ASX purposes.
The Board comprises a blend of experienced,
independent directors and strong, hands-on
directors with deep industry knowledge and
expertise.
Notwithstanding the current majority
non-independence of the Board, the Board has
carefully considered and documented the roles
and responsibilities of its Chair and nominated
chairs of its Committees to ensure strong
governance.
Directors are not involved in decisions where they
have, or could be perceived to have, a conflict of
interest or material personal interest. Any Director
who considers that there may be a conflict of
interest or a material personal interest in any
matter concerning the Company must declare
it immediately.
The Company does not comply with this
Recommendation.
25
Corporate Governance Statement
RECOMMENDATION
COMPANY’S CURRENT PRACTICE
2.5
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.
The Company does not comply with this
Recommendation.
2.6
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.
During the reporting period the Directors are
informed about developments within the Company,
the cyber security industry more generally and
material developments in law, regulations and
accounting standards, in order to maintain the
currency of knowledge, skills and experience
necessary to perform their roles.
The Company does not comply with this
Recommendation.
The Company’s values are disclosed in detail
within the Board Charter which is published on
the Company’s website.
The Company complies with this Recommendation.
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.
This may be viewed in full at: https://investors.
tesserent.com/site/about/corporate-governance.
The Company complies with this Recommendation.
The Company has adopted a written Whistleblower
Policy which applies to all staff members of the
Company, including directors, executives and
employees.
The Company complies with this Recommendation.
The Company has adopted a written Anti-Bribery
Policy which applies to all staff members of the
Company, including directors, executives and
employees. The Anti-bribery Policy may be viewed
in full at: https://investors.tesserent.com/site/
about/corporate-governance.
The Company complies with this Recommendation.
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.
3.4
A listed entity should:
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.
26
Annual Report 2022 Tesserent Ltdcontinued 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 non-executive directors and a majority
of whom are independent directors; and
ii.
is chaired by an independent director, who
is not the chair of the board, and disclose:
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.
The Board has an Audit and Risk Management
Committee (ARC) and adopted a written Audit &
Risk Management Charter that sets out the role
and objectives, responsibilities and functions
of the Audit & Risk Committee. The Audit & Risk
Management Charter may be viewed in full at:
https://investors.tesserent.com/site/about/
corporate-governance.
The committee comprises the two non-executive
directors and is chaired by independent director
Megan Haas.
The ARC met two times in FY22.
The Chair of the ARC also met separately with the
external Auditor of the Group.
The Company does not comply with this
Recommendation.
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.
In accordance with Recommendation 4.2, before
the Board approved of the Company’s financial
statements for the financial period ending
30 June 2022, the Board received a declaration
from the CEO and Chief Financial officer
(CFO) in accordance with section 295A of the
Corporations Act 2001 (Cth) (Corporations Act)
as well as assurance from those officers that the
declaration was founded on a sound system of
risk management and internal control and that
the system is operating effectively in all material
respects.
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.
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 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 available
at: https://investors.tesserent.com/site/about/
corporate-governance.
The Company complies with this Recommendation.
The Company is committed to providing timely and
balanced disclosure to the market in accordance
with its Continuous Disclosure Policy. which is
available at: https://investors.tesserent.com/site/
about/corporate-governance.
The Company complies with this Recommendation.
27
Corporate Governance Statement
RECOMMENDATION
COMPANY’S CURRENT PRACTICE
5.2
5.3
6.1
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.
6.2
A listed entity should have an investor relations
program that facilitates effective two-way
communication with investors.
6.3
A listed entity should disclose how it facilitates
and encourages participation at meetings of
security holders.
28
The Company complies with this Recommendation.
The Company complies with this Recommendation.
The Company has a website, https://investors.
tesserent.com, which includes a ‘Board of
Directors’, ‘Annual Reports’ and ‘Corporate
Governance’ section where information about the
Company, including its financial and corporate
governance information can be accessed.
The Company complies with this Recommendation.
The Company has adopted a Shareholder
Communications Policy for Shareholders wishing
to communicate with the Board which is available
at: https://investors.tesserent.com/site/about/
corporate-governance.
The Company conducts regular briefings in order
to facilitate effective two-way communication
with investors and other market participants. The
Company provides a copy of the annual report to
all shareholders who have requested to receive a
hard copy and encourages investors to access the
annual report online. The annual report contains
relevant information about the Company’s
operations during the year, changes in the state
of affairs and other disclosures required by the
Corporations Act.
The half year report contains summarised financial
information and a review of Tesserent Group’s
operations during the period. The Company’s
corporate website provides all shareholders and
the public access to our announcements to the
ASX, and general information about the Company
and our business.
The Company complies with this Recommendation.
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.
Annual Report 2022 Tesserent Ltdcontinued RECOMMENDATION
COMPANY’S CURRENT PRACTICE
6.4
6.5
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.
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
ii.
is chaired by an independent director, and
disclose:
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.
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.
The Company provides (and encourages)
shareholders with the option to receive
communications from, and send communications
to, the Company and the Share Registry
electronically, for reasons of speed, convenience,
cost and environmental considerations.
The Company complies with this Recommendation.
The Company views effective risk management
as a key component to achieving and maintaining
its operational and strategic objectives. The
identification and management of the Tesserent
Group’s risks are an important priority of the
Board.
The Company’s risk management is assessed
and managed by the Audit and Risk Management
Committee (ARC) and governed by the Audit
and Risk Management Charter, which may be
viewed at: https://investors.tesserent.com/site/
about/corporate-governance. Refer also to
Recommendation 4.1.
The ARC comprises two non-executive directors
and one executive director and is chaired by
independent director Megan Haas.
The ARC met two times in FY22.
The Chair of the ARC also met separately with the
external Auditor of the Group.
The Company complies with this Recommendation.
The Company has risk processes across the
business that are reviewed at least annually,
continue to be sound and are operating in line with
the risk appetite set by the Board.
The Company complies with this Recommendation.
29
Corporate Governance Statement
RECOMMENDATION
COMPANY’S CURRENT PRACTICE
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.
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.
The Company does not comply with this
Recommendation.
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.
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 Company complies with this Recommendation.
A Nomination & Remuneration Committee was
not in place in FY22, and these functions were
managed by the Board. Reestablishment of the
Nomination & Remuneration Committee in FY23
has been tabled for consideration by the Board.
The Company does not comply with this
Recommendation.
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
ii.
is chaired by an independent director,
and disclose:
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.
The Company complies with this Recommendation.
30
Annual Report 2022 Tesserent Ltdcontinued RECOMMENDATION
COMPANY’S CURRENT PRACTICE
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.
Tesserent Group has an employee equity plan in
place, which includes equity incentives. The rules
of the plan prohibit participants from entering into
transactions or arrangements, including by way
of derivatives or similar financial products, which
limit the economic risk of holding unvested awards
under that plan.
Similar restrictions are contained in the Company’s
Securities Trading Policy and apply to Officers of the
Company, Key Management Personnel and direct
reports of the CEO and the finance team. These
parties are prohibited from trading in any securities
of the company (or engaging in other specified
behaviour) at any time when they are in possession
of un-published sensitive information in relation to
those securities.
The Securities Trading Policy may be viewed in full
at https://investors.tesserent.com/site/about/
corporate-governance.
As required by the ASX Listing Rules, the company
notifies ASX of any transaction conducted by
Directors in securities of the Company.
The Company complies with this Recommendation.
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.
31
Corporate Governance Statement
BOARD SKILLS/EXPERIENCE MATRIX
KEY SKILL
DEMONSTRATED BY ATTRIBUTES
BOARD EXPERIENCE
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
32
Annual Report 2022 Tesserent Ltdcontinued The Directors of Tesserent
Limited (the “Company”)
submit the Directors’
Report on the Company
for the financial year
ended 30 June 2022
33
Directors’ Report
The Directors of Tesserent Limited (the “Company”) submit the Directors’ Report on the Company for the
financial year ended 30 June 2022.
In order 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:
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, fitness, leisure,
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.
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
Kurt Hansen
Qualifications:
Experience:
8,882,500 share options exercisable at $0.10 expiring 1 October 2022
6,000,000 5 year call options exercisable at $0.248 expiring
21 September 2025
Chief Executive Officer (Appointed 12 December 2019)
Grad. Dip. Engineering
Kurt has over 20 years of IT industry experience driving sales and delivery
transformation and impressive business growth across many IT and Security
organisations in Australia and New Zealand.
Kurt was CEO at Pure Security at acquisition date. 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 was a general service officer in the Royal
Australian Signal Corps.
Other Directorships in listed
entities:
Former Directorships in listed
entities in last 3 years:
None
None
Interests in Shares and options: 13,398,000 ordinary shares
34
for the year ended 30 June 2022Annual Report 2022 Tesserent Ltd 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, 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.
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.
Greg has extensive board and advisory experience in technology, financial
services and research institutions. 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 Columbia
University.
Other Directorships in listed
entities:
Former Directorships in listed
entities in last 3 years:
None
None
Interests in Shares and options: 5,620,327 ordinary shares
Megan Haas
Qualifications:
Experience:
3,000,000 unlisted share options
Non-Executive Director (Appointed 19 January 2021)
BBUS Accountancy & Information Systems (RMIT), GAICD.
Megan’s core competencies are centered 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: Development Victoria (Chairperson),
RMIT University (Council member) and Note Printing Australia (audit
committee).
Interests in Shares and options: 281,636 ordinary shares
3,000,000 unlisted share options
Julian Challingsworth
Co-Chief Executive Officer
(Appointed 1 August 2018, resigned 23 November 2021)
Qualifications:
Bachelor of Business, MSc, CA, FCPA, GAICD
Interests in Shares and options: 14,000,000 ordinary shares
35
for the year ended 30 June 2022 Directors’ Report
COMPANY SECRETARY
Paul Taylor
Qualifications:
Experience:
Oliver Carton
Qualifications:
Experience:
General Counsel and Company Secretary (Appointed as Company Secretary
on 29 July 2022)
Master of Laws, Bachelor of Commerce (Hons), GAICD
Paul has extensive experience across the financial services, e-commerce
and legal industries and previously held leadership roles in the insurance and
financial services sector with the Cover-More Group Limited and Insurance
Australia Group Limited. Prior to his role at Tesserent, Paul was General
Counsel & Company Secretary at Simonds Group Limited, an ASX listed
business focused on residential building and construction.
Company Secretary (Appointed as Company Secretary on 6 May 2015,
resigned on 29 July 2022)
BJurisLLB.
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 2022 and the number of meetings attended by each Director.
Director
Geoff Lord
Kurt Hansen
Gregory Baxter
Megan Haas
Julian Challingsworth (resigned 23 November 2021)
Board Meetings
Audit and Risk Committee
Meetings
Entitled to
attend
Attended
Entitled to
attend
Attended
15
15
15
15
7
15 (by invitation)
15 (by invitation)
14
15
2
2
7 (by invitation)
1
2
2
2
1
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 $8.8m for the year ended 30 June 2022 (2021: $4.5m loss). The
Group incurred significant one-off expenses (cash and non- cash costs) in respect of the refinancing,
predominantly in exiting the previous facility, plus non-operating acquisition costs in completing controlling
acquisitions of three companies during the year.
The acquisitions resulted in an increase in total assets to $248.5m including Goodwill of $129.6m and
Intangible assets (including acquired Customer contracts and relationships) of $38.2m.
36
for the year ended 30 June 2022Annual Report 2022 Tesserent Ltd Directors’ Report
OPERATING RESULTS AND FINANCIAL POSITION (CONTINUED)
During the year the Group issued equity of $35.7m after costs, including a $25m capital raise to provide
working capital and capital for the acquisitions. The Group also refinanced its existing debt of $35m and
secured additional financing facilities of $24 million (additional facilities being undrawn at 30 June 2022), to
provide working capital and cash reserves to complete acquisitions. Interest is charged based on a line fee
of 2.0%, plus a usage fee of 1.25%, plus BBSY.
As a result of the acquisitions and the equity, the Group’s net assets at 30 June 2022 were $117.0m.
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
30 June 2022
A high of $0.44 was reached on 8 January 2021.
NET TANGIBLE ASSETS PER SHARE
Net tangible assets per ordinary share ($)
Net tangible assets per share
Closing
share price $
0.092
0.060
0.045
0.080
0.235
0.105
30-Jun-22
30-Jun-21
(0.05)
(0.03)
DIVIDENDS
No dividend has been proposed to be paid or is payable for the financial year ended 30 June 2022, nor for the
comparative period.
CONTROL GAINED OVER ENTITES DURING THE FINANCIAL YEAR
Name of business
Loop Secure Pty Ltd
Claricent Pty Ltd
Pearson Corporation Pty Ltd
% holding
Profit contribution ($’000)
for period under TNT control
Completion
date
1 Oct-21
15 Dec-21
23 Dec-21
30-Jun-22
30-Jun-21
30-Jun-22
30-Jun-21
100%
100%
100%
–
–
–
2,047
600
2,777
–
–
–
37
for the year ended 30 June 2022 Directors’ Report
SIGNIFICANT CHANGE IN STATE OF AFFAIRS
On 8 July 2021, the Group entered into an investment agreement to take a minority stake (7% initially) in
Daltrey Pty Ltd, a leading sovereign biometric company. The investment was made through Tesserent’s
innovation arm which invests in globally applicable proprietary cyber-IP with the potential to support a
go-to-market partnership opportunity and future distributions to Tesserent shareholders. The Sydney-
based biometric technology enables an organisation’s users to prove who they are quickly and securely
in both digital and physical scenarios without the need for passwords or swipe cards improving trust and
accountability across the enterprise
On 11 August 2021, Tesserent announced a Brand and Business unit integration strategy to drive the
consolidation of businesses acquired over the course of FY20 and FY21. The reorganisation resulted in an
integration of existing service offerings with current and prospective customers into new Defend, Detect,
Cloud and Federal divisions and identified cross sell opportunities to both enhance the number of services by
customer, but also identify and address potentially critical security deficiencies in customer infrastructure
and networks.
A rebranding of the Group was also undertaken as an accompaniment to the reorganisation, this rebranding
included a new logo, colour palette and logo to accentuate the consolidation of Tesserent’s service
capabilities under a unified strategy.
As a result of the integration, the Group is seeing promising results in driving cross-selling initiatives with
the sales teams proficient in identifying security risks in client environments which can be mitigated with
Tesserent’s offering of Consulting Services & Critical Controls.
On 28 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 capital raise was undertaken
primarily for the purpose of a further three strategic acquisitions (Loop Secure, Claricent and Pearson) and
to fund deferred consideration and earn-out payments on previous acquisitions.
On 1 October 2021, the Group completed the acquisition of Loop Secure Pty Ltd. Loop Secure is
headquartered in Sydney with offices in Melbourne and Brisbane, providing Managed Security Services, GRC
and Offensive Security services primarily to mid-market corporate clients. The firm also operates a Security
Operations Centre located in Melbourne, working predominantly with a range of international and domestic
enterprises. Tesserent acquired 100% of the ordinary shares of Loop Secure Pty Ltd for consideration of
$17,426,161, with $7,000,000 cash and $3,508,150 in issued share capital, being 15,946,135 shares issued at a
fair value of $0.220 per share. A further deferred consideration cash payment of $1,000,000 was made on 30
June 2022 and additional cash payment of $1,000,000 is payable in Q2 FY23. A completion accounts payment
$490,780, plus estimated earnout payments of $4,427,236, make up the balance of the total acquisition cost.
On 23 November 2021, Tesserent announced the appointment of Kurt Hansen as the CEO, and resignation
of Julian Challingsworth as Co-CEO Tesserent (and resignation from the Board of Tesserent). The change in
leadership structure from Co-CEO to single CEO, reflects the change in Group focus from highly acquisitive
to organic growth via successful customer acquisition and retention though delivery of quality services which
is the expertise and focus of Kurt Hansen.
On 15 December 2021, the Group completed the acquisition of Claricent Pty Ltd. Tesserent acquired 100% of
the ordinary shares of Claricent Pty Ltd for consideration of $6,463,995, with $1,239,000 cash and $791,958 in
issued share capital, being 4,728,105 shares issued at a fair value of $0.1675 per share. Further cash payments
of $1,512,820 in deferred consideration and deferred issued capital of $862,534, plus cash payments of
$1,028,842 and earnout share consideration of $1,028,842 (contingent on the Claricent business meeting
agreed earnings targets), make up the balance of the total acquisition cost.
On 23 December 2021, the Group completed the acquisition of Pearson Corporation Pty Ltd. Tesserent
acquired 100% of the ordinary shares of Pearson Corporation Pty Ltd for consideration of $31,401,477, with
$8,640,000 cash and $5,591,299 in issued share capital, being 33,886,663 shares issued at a fair value of
$0.1650 per share. Further cash payments of $8,743,381 in deferred consideration and deferred issued capital
of $4,999,709 are contingent on the Pearson business meeting agreed earnings targets. Also contingent on
Pearson meeting earnings targets, are estimated earnout cash payments of $2,056,253 and earnout share
consideration of $1,370,835, which make up the balance of the total acquisition cost.
38
for the year ended 30 June 2022Annual Report 2022 Tesserent Ltd Directors’ Report
SIGNIFICANT CHANGE IN STATE OF AFFAIRS (CONTINUED)
Both Claricent Pty Ltd and Pearson Corporation Pty Ltd have leading positions in the Federal Government
marketplace and enable Tesserent to further strengthen its position and deliver large multi-year projects
that support the Federal Government to achieve their cybersecurity goals.
On 23 June 2022, Tesserent announced the successful completion of a refinancing and upsizing of its debt
facilities – replacing its core debt facilities of $35m provided by Pure Asset Management, with a new Market
Rate Loan provided by the Commonwealth Bank of Australia.
In addition to the refinancing of existing debt, CBA is providing a further Market Rate Loan of up to $20m to
be used to fund cash consideration payments on existing and future acquisitions; plus ancillary facilities of
$4m – to cover Bank Guarantees, FX and corporate cards for the Group.
The implementation of the new financing arrangements will materially reduce the (cash) interest cost and
eliminate the ongoing non-cash warrant expense on the previous debt facility and result in significant
savings on drawn new debt facilities (based on current benchmark interest swap rates)
AFTER BALANCE DATE EVENTS
The Company notes the following subsequent event, following 30 June 2022 reporting date.
On 24 August 2022, the Company remitted payment of $2.86m and issued 10,926,052 shares to the Loop
Secure vendors in accordance with the terms of the Share Purchase Agreement for Loop Secure Pty Ltd.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS
The Board and Management Team continue to focus on the following areas:
– Fostering innovation across the Group and expanding proprietary intellectual property to drive
high-margin product and service offerings
– Focusing on capturing further market share in three key markets: Government (including Defence),
Critical Infrastructure and Financial Services
– Driving growth through deeper and wider customer engagements and increasing our average number of
services per customer
– Integrating acquisitions into “Capability Business Units” to maximise synergy efficiencies and drive
organic revenue growth through cross-selling
– Building out high-value recurring annuity revenue streams via Managed Security Operations Centre (SOC)
and Managed Detection and Response (MDR).
– Investing in the Tesserent Academy strategy to deliver programs to help the industry shortage of cyber
skills for Tesserent staff, our clients and industry wide.
– Selectively evaluating acquisition opportunities that may expand on our Cyber 360 capabilities and
market share, increasing shareholder value through incremental EPS growth.
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 willful
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.
39
for the year ended 30 June 2022 Directors’ Report
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.
SHARES UNDER OPTION
At the date of this report the Company had shares under option and warrants as follows:
Description
Converting Note Options
Converting Note Options
Converting Note Options
Employee Options
Date of
Expiry
Exercise
Price
Number
on issue
Number
escrowed
1 Oct 2022
1 Oct 2022
1 Oct 2022
$0.10
2,400,000
$0.10
3,832,500
$0.10 26,470,000
29 Nov 2022
$0.13
1,000,000
Warrants issued to Pure Asset Management Pty Ltd
6 Dec 2022
$0.08
7,500,000
Employee Options
Employee Options
Employee Options
Employee Options
Acquisition Warrants
2 Nov 2023
2 Nov 2023
1 Jul 2024
1 Jul 2024
$0.28
17,963,632
$0.35
16,963,632
$0.28
1,000,000
$0.35
1,000,000
18 Sep 2024
$0.12
18,083,334
Warrants issued to Pure Asset Management Pty Ltd
18 Sep 2024
$0.12
17,500,000
Employee Options
Acquisition Warrants
31 Jan 2025
$0.28
7,400,000
12 Apr 2025
$0.45 30,555,556
Warrants issued to Pure Asset Management Pty Ltd
12 Apr 2025
$0.45
13,888,889
Call Options
NED Options
NED Options
9 Jun 2025
$0.240
1,000,000
21 Sep 2025
$0.248
9,000,000
5 Jul 2026
$0.21
3,000,000
178,557,543
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
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.
40
for the year ended 30 June 2022Annual Report 2022 Tesserent Ltd
Directors’ Report
REMUNERATION REPORT (AUDITED)
The remuneration report, which has been audited, outlines the directors’ 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.
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.
KMP Remuneration Framework
The KMP remuneration framework comprises three principal elements:
– a total fixed remuneration (TFR) comprising a fixed component, consisting of a base salary,
superannuation contributions and other related allowances; •
– a performance based, variable ‘at risk’ component, comprising cash and/or equity settled short-term
incentives (STI); and •
– a performance and service based, variable ‘at risk’ component, comprising of options and/or
performance rights and/or cash equivalents referred to as long-term incentives (LTI).
Components of remuneration
Directors
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 Board has implemented a Director Option Plan. The Option Plan is aimed at incentivising the Directors in
retaining key strategic skills. The Director Option Plan currently covers Executive Directors and Non-executive
Directors.
TFR overview
TFR consists of base remuneration and employer contributions to superannuation funds. While comparative
levels of remuneration are monitored on a periodic basis, there is no contractual requirement or expectation
that any adjustments will be made.
STI overview
Performance linked remuneration includes short-term incentives (STI) and is designed to reward the Chief
Executive Officer & Managing Director, Chief Financial Officer and other Executive KMP’s for meeting and
exceeding their financial and key performance objectives.
The STI’s ensure that a proportion of remuneration is tied to Group performance measured annually in line
with the financial year. Executives can only realise their STI at-risk component if challenging pre-determined
objectives are achieved. The achievement of the Group’s budgeted Earnings Before Interest, Tax,
Depreciation and Amortisation (EBITDA) is an initial gateway to realise a STI amount.
41
for the year ended 30 June 2022 Directors’ Report
REMUNERATION REPORT (AUDITED) (CONTINUED)
As in the prior year, all STI’s are subject to the achievement of clear performance measures. This aligns
executive interests with shareholder interests and focuses executive performance on those areas aligned to
the achievement of the Group’s operational strategy.
The Board has the responsibility of setting the Key Performance Indicators (KPI’s) for the CEO 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 CEO, and
the CEO assesses the performance of the individual executives against their targets.
The CEO’s recommendations are presented to the Board for approval.
LTI overview
The Group’s LTIs ensure that a proportion of remuneration is linked to Group performance over the long term.
Executives can only realise their LTI at-risk component if challenging pre-determined objectives are achieved.
This aligns executive interests with shareholder interests and focuses executive performance on sustainable
shareholder wealth. LTI consists of the granting of Performance Rights and/or options and/or cash
equivalents that vest after a defined period. Vesting conditions may be waived at the absolute discretion of
the Board.
Engagement of remuneration consultants
During the year, the Company did not engage any remuneration consultants.
Voting and comments made at the Company’s 19 November 2021 Annual General Meeting (‘AGM’)
At the 19 November 2021 AGM, 86.81% of the votes received supported the adoption of the remuneration
report for the year ended 30 June 2021. The Company did not receive any specific feedback at the AGM
regarding its remuneration practices.
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
Executive Chairman
Gregory Baxter
Non-Executive Director
Megan Haas
Kurt Hansen1
Non-Executive Director
Chief Executive Officer and Director
Julian Challingsworth2
Co-Chief Executive Officer and Director (resigned 23 November 2021)
Other Key Management Personnel
Position
James Jones
George Katavic
Chris Hagios
Chief Financial Officer
Managing Partner, Tesserent Federal
Managing Partner, Tesserent Defend
Craig Humphreys
Managing Partner, Tesserent Cloud
Deepak Singh
Patrick Butler
Managing Partner, Tesserent Detect
Managing Director, Loop Secure (Appointed on acquisition 1 October 2021)
1 On 19 November 2021, the Company announced the appointment of Kurt Hansen as sole CEO.
2 On 19 November 2021, the Company announced the retirement of Julian Challingsworth as joint CEO and Director effective
23 November 2021.
42
for the year ended 30 June 2022Annual Report 2022 Tesserent Ltd Directors’ Report
REMUNERATION REPORT (AUDITED) (CONTINUED)
Key terms of Executive Services Agreement – Chief Executive Officer (CEO)
The material terms of the Executive Services Agreement between Kurt Hansen and the Company for the role
of CEO are as follows:
Term:
No fixed term. Ongoing until terminated by either party in accordance
with the Agreement
Total Fixed Remuneration (TFR):
$500,000 per annum (including superannuation) from 1 December 2021
Short Term Incentive (STI) for FY22: Short term incentive of up to $125,000 per annum based on agreed KPI’s
and subject to performance
Long Term Incentive (LTI):
Performance rights as issued shares – refer to Share Based
Compensation section in remuneration report
Notice period:
Six months if notice is provided by Mr Hansen to the Company
Nine months if notice is provided by the Company to Mr Hansen
Employment may be ended immediately in certain circumstances,
including misconduct or by mutual agreement
Post-employment restraint:
A 12 month post-employment restraint provision applies to Mr Hansen
Executive Service Agreements – other key terms
Name
K Hansen
J Jones
G Katavic
C Hagios
C Humphreys
D Singh
P Butler
Contract Length
Termination by KMP
Termination by Company
Minimum Notice Period
No fixed term
No fixed term
No fixed term
No fixed term
No fixed term
No fixed term
No fixed term
6 months
3 months
1 week
6 months
1 month
4 weeks
16 weeks
9 months
6 months
1 week
6 months
1 month
4 weeks
16 weeks
STI payments to KMPs
All STIs are subject to the achievement of Key Performance Indicators agreed between each KMP and the
Company, however the Board may exercise its discretion in approving short-term incentive payments to the
KMPs based on other factors.
43
for the year ended 30 June 2022 Directors’ Report
REMUNERATION REPORT (AUDITED) (CONTINUED)
Details of Remuneration for the year ended 30 June 2022
The individual remuneration for key management personnel of the Company during the year was as follows:
Short term employment
benefits
Other
benefits
Post
employment
Equity based
payments
Salary and
Fees
$
Bonus
$
Leave
Entitlements
$
Superannua-
tion
$
Shares
$
Options
$
Total
$
Year ended
30 June 2022
Directors
G Lord
G Baxter1
M Haas
Subtotal
Executive
Directors
K Hansen
–
–
–
–
–
–
–
–
–
–
–
–
434,765
125,000
39,003
J Challingsworth2
215,503
–
–
Subtotal
650,268
125,000
39,003
Other KMPs
J Jones
G Katavic
C Hagios3
355,599
80,000
30,525
366,398
240,000
7,722
379,216
380,000
109,919
C Humphreys
238,216
200,000
250,000
125,000
232,324
–
76,196
18,733
3,259
D Singh
P Butler4
Subtotal
Total
1,821,753
1,025,000
246,354
144,085
2,472,021
1,150,000
285,357
180,979
–
–
–
–
23,568
13,326
36,894
23,568
28,602
23,568
23,568
23,516
21,263
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
220,764
220,764
142,952
142,952
–
–
363,716
363,716
–
–
–
622,336
228,829
851,165
82,797
572,489
–
–
–
–
–
642,722
892,703
537,980
417,249
256,846
82,797
3,319,989
446,513
4,534,870
Includes NED options of $32,570 granted in 2018.
1
2 Resigned on 23 November 2021. Salary and fees includes a termination payment of $43,236.
3.
4. Appointed on acquisition 1 October 2021. Includes $2,500 being for fully maintained company vehicle.
Includes car allowance of $42,000.
44
for the year ended 30 June 2022Annual Report 2022 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
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
1,569,566
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.
45
for the year ended 30 June 2022 Directors’ Report
REMUNERATION REPORT (AUDITED) (CONTINUED)
Bonuses included in remuneration
The proportion of remuneration linked to performance and the fixed proportions are as follows:
2022
2021
Fixed
remuneration
Weighting
(% of total
REM) - STI
Weighting
(% of total
REM) - LTI
Fixed
remuneration
Weighting
(% of total
REM) - STI
Weighting
(% of total
REM) - LTI
Directors
G Lord
G Baxter
M Haas
Executive Directors
K Hansen
J Challingsworth
Other KMPs
J Jones
G Katavic
C Hagios
C Humphreys
D Singh
P Butler
–
–
–
80%
100%
72%
63%
57%
63%
70%
100%
–
–
–
20%
–
14%
37%
43%
37%
30%
–
100%
100%
–
–
–
14%
–
–
–
–
–
–
–
–
82%
80%
55%
100%
59%
29%
19%
n/a
–
–
–
–
–
–
–
41%
71%
–
n/a
100%
100%
100%
18%
20%
45%
–
–
–
81%
n/a
C. Share Based Compensation
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
G Baxter
G Baxter
G Baxter
J Jones
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
21-Dec-18
500,000
21-Dec-18
30-Nov-21
21-Dec-18
500,000
21-Dec-19
30-Nov-21
21-Dec-18
500,000
21-Dec-20
30-Nov-21
30 Apr-21
1,000,000
30 Oct-21
9 Jun-25
$0.25
$0.25
$0.10
$0.13
$0.15
$0.24
$0.107
$0.107
$0.022
$0.021
$0.022
$0.124
–
–
100%
100%
100%
100%
No performance rights were contracted during the year ended 30 June 2022. 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.
46
for the year ended 30 June 2022Annual Report 2022 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 FY2022.
Granted
during the
year
Other
change
Exercised
Lapsed/
forfeited
during the
year
Balance at
30 June 2022
Year ended 30 June 2022
G Lord
G Lord
G Lord
G Baxter
G Baxter1
M Haas
J Jones
D Singh
Balance at
1 July 2021
6,250,000
2,632,500
6,000,000
3,000,000
–
–
–
–
1,500,000
3,000,000
1,000,000
2,000,000
–
–
–
–
–
–
–
–
–
–
–
–
(1,500,000)
–
–
–
–
–
–
–
–
–
6,250,000
2,632,500
6,000,000
3,000,000
–
3,000,000
1,000,000
2,000,000
1 Options granted in December 2018 but not issued until current financial year
The total value of options and performance rights that were granted during the year ended 30 June 2022 is
as follows:
KMP
G Baxter1
G Baxter1
G Baxter1
No of
options
Value per
option at
grant date
500,000
500,000
500,000
$0.022
$0.021
$0.022
Total value
of options
granted
during the
year $
10,764
10,686
11,120
1 Options granted in December 2018 but not issued until current financial year
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.
47
for the year ended 30 June 2022 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 2022
are summarised below, along with details that are considered to be factors in shareholder returns:
$’000 (unless otherwise stated)
30-Jun-18
30-Jun-19
30-Jun-20
30-Jun-21
30-Jun-22
Statutory revenue - external customer sales
5,328
5,260
20,223
67,389
112,977
Earnings before interest, tax, depreciation
and amortisation (EBITDA)
Loss after income tax
(1,529)
(3,096)
(3,843)
(4,373)
(5,020)
189
9,183
(7,312)
(4,533)
(8,783)
Basic loss per share ($)
Share price at financial year end (cents)
(2.62)
6.0
(2.90)
4.5
(2.02)
8.0
(0.52)
23.5
(0.73)
10.5
E. Additional Information in relation to key management personnel shareholdings
Ordinary shares held in Tesserent Limited (number) as at 30 June 2022
Issued on
exercise
of options
during the
year
Balance
1 July 2021
On-market
changes
Balance
30 June 2022
99,258,956
–
4,120,327
1,500,000
–
–
99,258,956
5,620,327
–
14,000,000
12,939,574
7,945,800
9,426,577
20,410,431
–
–
–
–
–
281,636
281,636
14,000,000
458,426
13,398,000
–
–
–
7,945,800
9,426,577
20,410,431
168,101,665
1,500,000
740,062
170,341,727
Directors
G Lord
G Baxter
M Haas
Executive Directors
J Challingsworth
K Hansen
Other KMPs
G Katavic
C Hagios
C Humphreys
Total
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for the year ended 30 June 2022Annual Report 2022 Tesserent Ltd
Directors’ Report
REMUNERATION REPORT (AUDITED) (CONTINUED)
Share Options and performance rights held in Tesserent Limited (number) as at 30 June 2022
Directors
G Lord
G Baxter
M Haas
Other KMPs
J Jones
D Singh
Total
Balance
1 July 2021
Options/
rights
converted
Balance
30 June 2022
Vested and
exercisable
14,882,500
–
14,882,500
8,882,500
4,500,000
(1,500,000) 3,000,000
–
3,000,000
–
3,000,000
3,000,000
1,000,000
2,000,000
–
–
1,000,000
1,000,000
2,000,000
2,000,000
25,382,500
(1,500,000) 23,882,500 23,882,500
F. Loans from/to KMP
There were no loan balances with Key Management Personnel as at 30 June 2022.
G. Other Transactions with KMP
The Company undertook business with Belgravia Group and associated companies in which Mr G Lord is a
director of and owns an interest. Products purchased totalled $nil. Products and services sold to Belgravia
totalled $124,368 being professional services and software subscriptions and support to Belgravia Group Pty
Ltd. There were no other transactions with Key Management Personnel for the year ended 30 June 2022.
This concludes the Remuneration Report which was approved by the Board on 29 August 2022 and has
been signed in accordance with a resolution of the Directors made pursuant to section 298(2) of the
Corporations Act 2001 (Cth).
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 27 of the financial statements:
Corporate and indirect tax services
Due diligence services
Total
2022
$
103,900
35,000
138,900
2021
$
26,538
575,041
601,579
49
for the year ended 30 June 2022 Directors’ Report
NON-AUDIT SERVICES (CONTINUED)
The Directors are of the opinion that the services outlined in Note 27 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 51 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://investors.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
Kurt Hansen
Chief Executive Officer
30 August 2022
50
for the year ended 30 June 2022Annual Report 2022 Tesserent Ltd Auditors Independence Declaration
for the year ended 30 June 2022
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 SALIM BISKRI TO THE DIRECTORS OF TESSERENT LIMITED
As lead auditor of Tesserent Limited for the year ended 30 June 2022, 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.
Salim Biskri
Director
BDO Audit Pty Ltd
Melbourne, 30 August 2022
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.
51
for the year ended 30 June 2022
Consolidated Statement of Profit or Loss
and Other Comprehensive Loss
Revenue
Other income
Fair value gain on investment held at fair value through profit or loss
Expenses
Software licence and connectivity fees
Employee benefits expense
Operating expenses
Impairment of receivables
Business acquisition costs
Fair value loss on contingent consideration
Share option expense
Depreciation and amortisation expense
Finance costs
Impairment of financial instruments
Share of loss of equity accounted associates
Debt facility unamortised warrants write-off expense
Debt facility exit fee
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 loss for the year
Basic loss per share
Diluted loss per share
Note
4
5
2022
$’000
2021
$’000
112,977
67,389
526
597
964
–
(13,526)
(9,654)
(59,884)
(35,567)
6
(21,358)
(13,206)
–
(592)
(600)
(2,401)
(7,841)
(5,439)
(4,303)
(322)
(7,501)
(1,750)
(11,417)
2,634
(8,783)
–
(235)
(4,934)
–
(4,462)
(4,975)
(4,431)
–
–
–
–
(9,111)
4,578
(4,533)
–
(8,783)
(4,533)
$
(0.73)
(0.73)
$
(0.52)
(0.52)
6
6
6
6
6
7
35
35
The above consolidated statement of profit or loss and other comprehensive income should be read in
conjunction with the accompanying notes.
52
for the year ended 30 June 2022Annual Report 2022 Tesserent Ltd Consolidated Statement of Financial Position
as at 30 June 2022
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Contract assets
Prepayments
Inventories
Lease asset receivables
Financial assets at fair value through profit or loss
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 equity accounted associates
Financial assets at fair value through profit or loss
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
Note
2022
$’000
2021
$’000
9
10
11
10
13
14
15
12
16
11
17
18
19
20
21
14,339
32,082
13,190
1,751
104
265
500
–
14,860
24,799
9,293
1,906
85
254
3,000
215
62,231
54,412
3,041
3,317
39,854
129,635
6,129
296
941
2,298
790
159
2,700
29,652
83,259
6,812
534
2,867
–
735
186,301
126,718
248,532
181,130
35,853
28,973
11,313
3,110
4,119
233
7,335
2,390
2,831
172
23,600
11,699
78,228
53,400
53
Consolidated Statement of Financial Position
as at 30 June 2022
Non-current liabilities
Contract liabilities
Lease liabilities
Borrowings
Provisions
Deferred settlement liabilities
Deferred tax liability
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Accumulated losses
Total equity
Note
2022
$’000
2021
$’000
18
19
22
20
21
7
23
24
2,285
3,516
1,179
5,078
34,473
25,603
1,027
5,485
6,524
675
1,652
5,910
53,310
40,097
131,538
116,994
93,497
87,633
138,666
102,992
13,145
11,200
(34,817)
(26,558)
116,994
87,633
The above consolidated statement of financial position should be read in conjunction with the accompanying
notes.
54
Annual Report 2022 Tesserent Ltd Consolidated Statement of Changes in Equity
Contributed
equity
$’000
Converting
notes
$’000
Share based
payment
reserve
$’000
Foreign
currency
translation
reserve
$’000
Balance at 1 July 2020
29,485
6,531
1,841
Loss after income tax benefit
for the year
Other comprehensive income
for the year, net of tax
Total comprehensive loss
for the year
Capital raising costs
Share based payments
Share options issued
Shares issued or accrued as part
of business combinations
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
Balance at 30 June 2021
Balance at 1 July 2021
Total comprehensive loss
for the year
Issue of shares
Capital raise
Capital raising costs
Shares issued as part of business
combinations
Options issued
Options exercised
Options forfeited
Warrants exercised
Deferred tax
Translation of foreign currencies
Balance at 30 June 2022
–
–
–
(216)
–
–
50,480
4,744
–
–
–
–
–
–
–
–
7,172
(6,721)
–
4,114
–
7,213
–
–
102,992
102,992
–
738
25,000
(1,372)
10,669
–
99
–
128
412
–
138,666
190
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
8,050
4,213
–
–
–
–
(169)
(365)
–
(2,400)
–
11,170
11,170
–
–
–
–
–
2,401
(99)
(164)
(128)
–
–
13,180
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
30
30
13
–
–
–
–
–
–
–
–
–
–
(48)
(35)
Accumulated
losses
$’000
Total
equity
$’000
(21,349)
16,507
(4,533)
(4,533)
–
–
(4,533)
–
–
–
–
–
(4,533)
(216)
8,050
4,213
50,480
4,744
(451)
–
(190)
(90)
365
–
(310)
–
(26,558)
–
3,855
–
7,213
(2,710)
30
87,633
(26,198)
87,977
(8,783)
–
–
–
–
–
–
164
–
–
–
(34,817)
(8,783)
738
25,000
(1,372)
10,669
2,401
–
–
–
412
(48)
116,994
The above consolidated statement of changes in equity should be read in conjunction with the
accompanying notes.
55
for the year ended 30 June 2022 Consolidated Statement of Cash Flows
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 operating activities
Cash flows from investing activities
Payment for purchase of business combinations, net of cash acquired
Final payments for prior period's business acquisition
Payments for investments
Payments for property, plant and equipment
Payments for intangibles
Proceeds from release of security deposits
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
Proceeds from borrowings
Transaction costs on borrowings
Repayment of lease liabilities
Payments for share issue transaction costs
Proceeds (distributions to)/from convertible notes
Refinancing exit costs paid
Repayment of borrowings
Net cash from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Cash and cash equivalents at the end of the financial year
Note
2022
$’000
2021
$’000
167,984
90,933
(151,659)
(86,148)
495
31
(3,543)
(1,520)
11,790
158
9
(1,177)
(881)
2,893
(13,990)
(18,629)
(11,433)
(5,778)
(3,200)
(3,000)
(2,518)
(1,461)
(924)
63
(25)
–
(32,002)
(28,893)
8
32
32
13
14
23
25,738
9,485
35,000
30,000
(527)
(2,398)
(1,372)
–
(1,750)
(35,000)
–
(1,772)
(216)
(190)
(799)
–
19,691
36,509
(521)
14,860
14,339
10,510
4,350
14,860
The above consolidated statement of cash flows should be read in conjunction with the accompanying
notes.
56
for the year ended 30 June 2022Annual Report 2022 Tesserent Ltd Notes to the Consolidated Financial Statements
1. SIGNIFICANT ACCOUNTING POLICIES
The financial statements were authorised for issue by the Directors on 30 August 2022.
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.
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 2022. The Company is a company limited by
shares that are publicly traded on the Australian Stock Exchange, incorporated and domiciled in Australia.
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.
Historical cost convention
The financial statements have been prepared under the historical cost convention, except for, where
applicable, investments in financial assets which have been measured at fair value.
Comparatives
Where necessary, comparative information has been reclassified and repositioned for consistency with
current year disclosures.
Going Concern
The consolidated financial statements have been prepared on a going concern basis, which contemplates
the continuity of normal business activities and the realisation of assets and discharge of liabilities in the
normal course of business.
For the year ended 30 June 2022 the Group made a net loss of $8.8 m (2021: $4.5m) and had cash inflows
from operating activities of $11.8m (2021: $2.9m inflow).
As at the date the consolidated entity had net current liabilities of $16.0m (2021: Net current assets of
$1.0m). The directors believe there are reasonable grounds to conclude that the Group will continue as going
concern based on the following:
– The Group has $14.3m of cash and cash equivalents at 30 June 2022 (2021: $14.9m)
– The Group has access to $24m of unused facilities at 30 June 2022
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. The group anticipates that all relevant pronouncements will be adopted for the first
period beginning on or after the effective date of the pronouncement. New Standards, amendments and
Interpretations not adopted in the current year have not been disclosed as they are not expected to have
a material impact on the Group’s financial statements.
57
for the year ended 30 June 2022 Notes to the Consolidated Financial Statements
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
New accounting standards and interpretations not yet mandatory or early adopted include:
– AASB 2014-10 Amendments to Australian Accounting Standards: Sale or Contribution of Assets Between
an Investor and its Associate or Joint Venture
– AASB 2015-10 Amendments to Australian Accounting Standards – Effective Date of Amendments to AASB
10 and AASB 128
– AASB 2017-5 Amendments to Australian Accounting Standards – Effective Date of Amendments to AASB
10 and AASB 128 and Editorial Corrections
– AASB 2020-1 Amendments to Australian Accounting Standards – Classification of Liabilities as Current
or Non-Current
– AASB 2020-6 Amendments to Australian Accounting Standards – Classification of Liabilities as Current
or Non-Current
– AASB 2020-3 Amendments to Australian Accounting Standards – Annual Improvements 2018-2020 and
Other Amendments
– AASB 2021-2 Amendments to Australian Accounting Standards – Disclosure of Accounting Policies and
Definition of Accounting Estimates
– AASB 2021-5 Amendments to Australian Accounting Standards – Deferred Tax related to Assets and
Liabilities arising from a Single Transaction
– AASB 2022-1 Amendments to Australian Accounting Standards – Initial Application of AASB 17 and AASB 9
– Comparative Information
Consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Tesserent
Limited (‘company’ or ‘parent entity’) as at 30 June 2022 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’.
The consolidated financial statements include the financial statements of the Company, and the information
and results of each subsidiary from the date on which the Company obtains control and until such time
as the Company ceases to control such entity. An entity is controlled when Tesserent is exposed to, or
has rights to, variable returns from involvement with the entity and has the ability to affect those returns
through power over the entity.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting
policies in line with the Group’s accounting policies. In reporting the consolidated financial statements,
all intercompany balances and transactions, and unrealised profits or losses within the Group are eliminated
in full.
Foreign currency translation
Functional and presentation currency
The consolidated financial statements are presented in Australian dollars (AUD), which is also the functional
currency of the Company.
Foreign currency transactions
All foreign currency transactions during the financial year are brought to account using the exchange rate in
effect at the date of the transaction. Foreign currency monetary items at reporting date are translated at
the exchange rate existing at the reporting date.
Exchange differences are recognised in profit or loss in the period in which they arise except that exchange
differences on monetary items receivable from or payable to a foreign operation for which settlement is
neither planned or likely to occur, which form part of the net investment in a foreign operation are recognised
in the foreign currency translation reserve in the consolidated financial statements and are recognised in
profit or loss on disposal of the net investment.
58
for the year ended 30 June 2022Annual Report 2022 Tesserent Ltd Notes to the Consolidated Financial Statements
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Foreign operations
Assets and liabilities of foreign operations are translated using exchange rates prevailing at the end of each
reporting period. Income and expense items are translated at the average exchange rates for the period,
unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the
dates of the transactions are used. Any exchange differences are recognised in equity. On the disposal of
a foreign operation, all of the exchange differences accumulated in equity in respect of that operation are
reclassified to profit or loss.
Financial instruments
Financial assets and financial liabilities are recognised in the Group’s statement of financial position when
the Group becomes a party to the contractual provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs directly
attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets
and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the
financial assets or financial liabilities, as appropriate, on initial recognition.
Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair
value through profit or loss are recognised immediately in profit or loss.
When the transaction price differs from fair value at initial recognition, the Group will account for such
difference if:
– fair value is evidenced by a quoted price in an active market for an identical asset or liability or based
on a valuation technique that uses only data from observable markets, then the difference is recognised
as a gain or loss on initial recognition (ie day 1 profit or loss)
– (in all other cases), the fair value will be adjusted to bring it in line with the transaction price (ie day-1 profit
or loss will be deferred by including it in the initial carrying amount of the asset or liability)
Classification and subsequent measurement of financial assets
Financial assets that meet the following conditions and are subsequently measured at amortised
cost include:
– the financial asset is held within a business model whose objective is to collect contractual cash flows
– the contractual terms give rise on specified dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding. All other financial assets are subsequently measured at
fair value
Amortised cost and interest income
Interest income is recognised using the effective interest method for financial assets measured
subsequently at amortised cost. Interest income is calculated by applying the effective interest rate to
the gross carrying amount of a financial asset, except for financial assets that have subsequently become
credit impaired.
Impairment of financial assets
The Group performs impairment assessment under the expected credit losses model on financial assets
(including trade and other receivables) which are subject to impairment under AASB 9 Financial Instruments.
The amount of expected credit losses is updated at the end of each reporting period to reflect changes in
credit risk since initial recognition. Refer to Note 9.
Derecognition of financial assets
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset
expire, or, when it transfers the financial asset and substantially all the risks and rewards of ownership
of the asset to another entity. On derecognition of a financial asset measured at amortised cost, the
difference between the asset’s carrying amount and the sum of the consideration received and receivable is
recognised in profit or loss.
Cash and cash equivalents
Cash and cash equivalents include cash in hand and on-demand deposits, and other short-term highly liquid
investments, readily convertible into a known amount of cash and are subject to an insignificant risk of
changes in value.
59
for the year ended 30 June 2022 Notes to the Consolidated Financial Statements
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the substance of the contractual
arrangements entered into. An equity instrument is any contract that evidences a residual interest in the
assets of the Company after deducting all of its liabilities. Equity instruments issued by the Company are
recorded at the proceeds received, net of direct issue costs.
Share capital represents the nominal value of equity shares issued. Share premium represents the excess
over nominal value of the fair value of the consideration received for equity shares, net of direct issue costs.
Bank borrowings
Interest-bearing bank loans and overdrafts are recorded at the fair value of proceeds received, net of direct
issue costs. Finance charges, including premiums payable on settlement or redemption and direct issue
costs, are accounted for on an accruals basis in the statement of comprehensive income using the effective
interest rate method. They are added to the carrying amount of the instrument to the extent that they are
not settled in the period in which they arise.
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.
Trade payables
Trade payables are initially measured at fair value and are subsequently measured at amortised cost, using
the effective interest rate method.
Share-based payment
Employees (including senior executives) of the Group receive remuneration in the form of share-based
payments, whereby employees render services as consideration for equity instruments (equity-settled
transactions).
The grant date fair value of equity settled share-based payment awards granted to employees is recognised
as an expense, with a corresponding increase in equity, over the vesting period of the awards. The amount
recognised as an expense is adjusted to reflect the number of awards for which the related service and
non-market performance conditions are expected to meet. Therefore, the amount ultimately recognised is
based on the number of awards that meet the related service and non-market performance conditions at
the vesting date.
2. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of the Group’s consolidated financial statements requires management to make
judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets
and liabilities. The judgements, estimates and assumptions that are material to the financial reports are
discussed below.
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 Tesserent 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 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.
60
for the year ended 30 June 2022Annual Report 2022 Tesserent Ltd Notes to the Consolidated Financial Statements
2. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS (CONTINUED)
Provision for expected credit losses
The Group applies the simplified approach to measuring expected credit losses which uses a lifetime
expected loss allowance for all trade receivables.
Expected credit losses are measured by grouping trade receivables and contract assets, based on shared
credit risk characteristics and the days past due. The contract assets relate to unbilled work in progress and
have substantially the same risk characteristics as the trade receivables for the same types of contracts.
A provision matrix is then determined based on the historic credit loss rate for each group of customers,
adjusted for any material expected changes to the future credit risk for that customer group.
Goodwill and other indefinite life intangible assets
Significant judgement is required in the assumptions used in the value-in-use models used in impairment
testing. Refer to Notes 14 and 15 for more detailed information.
Fair value measurement on financial instruments
When the fair values of financial assets and financial liabilities recorded in the statement of financial position
cannot be measured based on quoted prices in active markets, their fair value is measured using valuation
techniques.
A degree of judgement is required in establishing fair values when inputs used are not derived from
observable markets.
Recovery of deferred tax assets
Deferred tax assets are recognised for unused tax losses to the extent that it is probable that taxable profit
will be available against which the losses can be utilised. Significant management judgement is required to
determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the
level of future taxable profits, together with future tax planning strategies.
Leases – estimating the 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.
Share-based payment transactions
Estimating fair value for share-based payment transactions requires determination of the most appropriate
valuation model, which depends on the terms and conditions of the grant. This estimate also requires
determination of the most appropriate inputs to the valuation model including the expected life of the share
option or appreciation right, volatility and dividend yield and making assumptions about them.
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 assumptions and models used for estimating fair value for share-based payment transactions are
disclosed in Note 24.
61
for the year ended 30 June 2022 Notes to the Consolidated Financial Statements
3. SEGMENT INFORMATION
Operating segments are reported in a manner consistent with the internal reporting provided to the chief
operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources
and assessing performance of the operating segments, has been identified as the Chief Executive Officer.
Identification of reportable operating segments
The Group operates predominantly in Australia and New Zealand.
The Group’s internal reporting and management comprises three primary operating segments, being:
1.
2.
Tesserent Commercial segment – comprising the Group’s core customer offerings Defend, Cloud and
Detect customer service offerings, including the Loop Secure Pty Ltd business acquired during the
current financial year ended 30 June 2022.
Tesserent Federal segment – comprising the Group’s services primarily to the Federal and State
Governments, including the Pearson Corporation Pty Ltd and Claricent Pty Ltd businesses acquired
during the financial year ended 30 June 2022.
3.
Tesserent New Zealand segment – comprising the Group’s services to New Zealand customers.
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.
Year ended 30 June 2022
Net sales to external customers
Other income
Total revenue
Tesserent
Commercial
$000
Tesserent
Federal
$000
Tesserent
New Zealand
$000
Other/
Corporate
$000
61,932
46,334
517
–
62,449
46,336
4,711
9
4,720
–
–
–
Total
$000
112,977
526
113,505
EBITDA (before other non-operating costs)
10,270
10,357
Other non-operating costs
(see breakdown below*)
EBITDA
Depreciation and amortisation
Amortisation of remaining warrants on
refinancing
Interest expense and PAM facility
amortisation
–
–
10,270
10,357
–
–
–
–
–
–
Loss before income tax expense
10,270
10,357
Income tax benefit
–
–
Profit/(loss) after income tax expense
10,270
10,357
474
–
474
–
–
–
474
–
474
(2)
21,099
(11,911)
(11,912)
(7,841)
(11,911)
9,189
(7,841)
(9,397)
(9,397)
(3,366)
(32,516)
2,634
(3,366)
(11,417)
2,634
(29,882)
(8,783)
Material items include:
* Corporate costs
* Share based payments
* Acquisition costs and fair value expense
on contingent consideration
* Exit costs on refinancing
* Share of loss in equity accounted
associates, fair value gain on investments
and impairment of investments
* Impact of AASB16 accounting adjustments
(5,019)
(2,401)
(1,152)
(1,750)
(3,829)
2,241
Total segment assets
Total segment liabilities
98,132
84,518
(30,395)
(12,496)
7,912
(820)
57,970
248,532
(87,827)
(131,538)
62
for the year ended 30 June 2022Annual Report 2022 Tesserent Ltd Notes to the Consolidated Financial Statements
3. SEGMENT INFORMATION (CONTINUED)
Year ended 30 June 2021
Tesserent
Commercial
$000
Tesserent
Federal
$000
Tesserent
New Zealand
$000
Other/
Corporate
$000
Total
$000
Net Sales to external customers
40,572
24,976
Other income
Total revenue
EBITDAC
Other non-operating costs*
EBITDA
Depreciation and amortisation
Interest expense and PAM facility
amortisation
171
23
40,743
24,999
7,262
–
7,262
–
–
5,595
–
5,595
–
–
Profit/(loss) before income tax benefit
7,262
5,595
Income tax benefit
-
-
Profit/(loss) after income tax benefit
7,262
5,595
1,846
–
1,846
661
–
661
–
–
661
-
661
(5)
67,389
770
765
964
68,353
(31)
13,487
(13,298)
(13,298)
(13,329)
189
(4,975)
(4,975)
(4,325)
(4,325)
(22,629)
4,578
(9,111)
4,578
(18,051)
(4,533)
Material items include:
* Share based payments
* Acquisition costs
Total segment assets
Total segment liabilities
4. REVENUE
Managed services
Consulting services
Software licences
Hardware equipment
Support and maintenance renewals
Other sales revenue
Revenue
Significant Accounting Policy
89,597
42,330
36,946
6,600
6,996
193
47,591
44,374
2022
$’000
13,907
84,715
11,426
1,138
1,697
94
4,462
(4,934)
181,130
93,497
2021
$’000
7,217
50,964
7,844
642
687
35
112,977
67,389
Revenue from contracts with customers – General principles
Revenue is recognised at an amount that reflects the consideration to which the Company is expected to be
entitled in exchange for transferring goods and services to a customer. For each contract with a customer,
the Company 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.
63
for the year ended 30 June 2022 Notes to the Consolidated Financial Statements
4. REVENUE (CONTINUED)
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.
Contract liabilities represent the Company’s obligation to transfer goods or services to a customer and are
recognised when a customer pays consideration, or when the Company recognises a receivable to reflect its
unconditional right to consideration before the Company has transferred the goods or services.
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 based on performance
obligations identified in the sales contracts. The revenue is recognised over time depending on the
circumstances.
Revenue derived from the connectivity and related support services (including installation and setup of
hardware) is recognised over time as services are delivered. Revenue is calculated based on time and
materials used. For fixed-price contracts, revenue is recognised based on the actual service provided to
the end of the reporting period. If contracts include the installation of hardware, revenue for the hardware
is recognised at a point in time when the hardware is delivered, the legal title has passed, and the customer
has accepted the hardware.
Revenue from contracts - Consulting services
Revenue from the sale of consulting services is recognised over time as services are delivered. Revenue
from providing services is recognised in the accounting period in which the services are rendered. Revenue is
calculated based on time and materials used.
Revenue from contracts - Sale of software licences
Software licences income is recognised on an agency basis as Tesserent acts as a reseller in the transaction.
Tesserent recognises the transaction on a net basis which represents its commission earned.
Revenue from contracts - Hardware equipment
Revenue derived from the sale of hardware equipment is recognised on an agency basis as Tesserent acts
as a reseller in the transaction. Tesserent recognises the transaction on a net basis which represents its
commission earned.
Revenue from contracts - Maintenance and support renewals
Revenue from the sale of maintenance and support renewals is recognised based on the performance
obligations identified in the sales contracts. The revenue is recognised overtime depending on
circumstances.
5. OTHER INCOME
Government grants
Sublease income
Interest income
Other income
64
2022
$’000
2021
$’000
–
495
31
526
113
842
9
964
for the year ended 30 June 2022Annual Report 2022 Tesserent Ltd Notes to the Consolidated Financial Statements
6. 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
Intellectual property
Total amortisation
Total depreciation and amortisation
Impairment of financial instruments
Call options write-off expense
Impairment of equity accounted associates
Impairment of receivables
Impairment of financial instruments
Exit costs and costs of refinancing debt facilities
Unamortised warrants write-off expense on Pure Asset Management loan
Exit fee on Pure Asset Management loan
Total exit refinancing costs on refinancing of debt facilities
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
Total Finance costs
Operating expenses
Contractor expenses
Consulting and legal expenses
Advertising and promotion
Administration expenses
Other expenses
Total operating expenses
2022
$’000
2021
$’000
131
844
29
588
59
26
2,241
3,918
3,919
4
3,923
7,841
2,500
1,604
199
4,303
7,501
1,750
9,251
3,088
1,897
273
181
5,439
141
559
25
768
33
5
1,235
2,766
2,206
3
2,209
4,975
–
–
–
–
–
–
–
1,630
2,396
280
125
4,431
15,849
8,679
1,284
606
1,568
2,051
962
404
1,475
1,686
21,358
13,206
65
for the year ended 30 June 2022 Notes to the Consolidated Financial Statements
7.
INCOME TAX BENEFIT
(a) Income tax benefit
Deferred tax movements (current year)
Deferred tax movements (prior year)
(b) Reconciliation of income tax benefit 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%
Prior year tax losses recognised
Share based payments
Other (non-deductible)/assessable items
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/(utilised) (current year)
Tax losses recognised/(utilised) (prior year)
Other
2022
$’000
2021
$’000
(2,634)
–
(4,101)
(477)
(2,634)
(4,578)
(11,417)
(3,425)
–
720
71
(9,111)
(2,733)
(4,101)
1,296
–
(2,634)
(4,578)
472
729
(11,241)
(28)
(3,491)
5,371
1,664
(6,524)
(2,160)
300
(8,416)
(65)
1,270
4,101
(940)
(5,910)
Share issue
costs
$’000
Provisions
$’000
Intangible
assets
$’000
Right of use
assets and
liabilities
$’000
Tax losses
recognised
$’000
Other
$’000
Total
$’000
As at 1 July 2021
(2,160)
300
(8,416)
(65)
5,371
(940)
(5,910)
–
(254)
(3,598)
(3,960)
1,135
–
–
(5)
42
–
–
(3,491)
2,980
–
–
–
–
(11,241)
(28)
1,880
1,664
2,773
411
(200)
(6,524)
Acquired upon business
combination
–
Charged to profit and loss
2,314
Charged through equity
Overprovision in previous
years
411
(93)
472
621
(207)
–
15
729
66
for the year ended 30 June 2022Annual Report 2022 Tesserent Ltd Notes to the Consolidated Financial Statements
7.
INCOME TAX BENEFIT (CONTINUED)
(d) Tax losses
Unused tax losses for which no deferred tax asset has been recognised
Potential tax benefit at 30%
2022
$’000
2021
$’000
–
–
–
–
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%
2022
$’000
2021
$’000
–
28
Significant Accounting Policy
Total income tax benefit comprises current and deferred tax recognised in the statement of profit or loss in
the year. Current and deferred tax is also recognised directly in equity, and not in the Statement of Profit or
Loss, to the extent it is attributable to amounts and movements which have also been recognised directly
in equity.
Current tax comprises expected tax payable/receivable on business taxable income/loss which is recognised
in the statement of profit or loss in the current year. Any adjustments to tax payable/receivable are
recognised in the current year that relate to taxable income/ loss recognised in the statement of profit or
loss in prior years.
Current tax is measured using the applicable enacted (or substantively enacted) income tax rates, at the
reporting date in the countries where the company’s subsidiaries and associates operate.
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.
67
for the year ended 30 June 2022 Notes to the Consolidated Financial Statements
7.
INCOME TAX BENEFIT (CONTINUED)
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.
Tesserent Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation
legislation. As a consequence, these entities are taxed as a single entity and the deferred tax assets and
liabilities of these entities are set off in the consolidated financial statements. Current and deferred tax is
recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive
income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly
in equity, respectively.
8. RECONCILIATION OF LOSS AFTER INCOME TAX TO NET CASH FROM OPERATING ACTIVITIES
2022
$’000
2021
$’000
(8,783)
(4,533)
7,841
1,006
2,401
397
–
–
–
1,183
9,397
(48)
(3,545)
(5,934)
(19)
215
237
3,199
5,299
2,725
(1,797)
(2,571)
585
–
4,975
–
4,462
–
3,238
(4,578)
235
(80)
2,396
–
(12,688)
(8,141)
(21)
–
467
(120)
14,331
4,105
74
(1,384)
–
155
11,790
2,893
Loss after income tax benefit for the year
Adjustments for:
Depreciation and amortisation
Impairment
Share-based payments
Write off of assets
Acquisition costs settled in shares
Tax credit
Bad debt provision
Other expenses - non-cash
Finance costs - non-cash
Foreign currency differences
Change in operating assets and liabilities:
Increase in trade and other receivables
Increase in contract assets
Increase in inventories
Decrease in income tax refund due
Decrease in prepayments
Decrease/(increase) in other operating assets
Increase in trade and other payables
Increase in contract liabilities
Increase/(decrease) in provision for income tax
Decrease in deferred tax liabilities
Increase in employee benefits
Increase in other provisions
Net cash from operating activities
68
for the year ended 30 June 2022Annual Report 2022 Tesserent Ltd
Notes to the Consolidated Financial Statements
9. TRADE AND OTHER RECEIVABLES
Trade receivables
Less: Allowance for expected credit losses
Other receivables
2022
$’000
2021
$’000
29,940
23,385
(186)
(248)
29,754
23,137
2,328
32,082
1,662
24,799
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. Tesserent’ credit
terms are generally 30 days from the date of invoice. Therefore, the carrying amount of receivables
approximates their fair value.
Allowance for expected credit losses
The consolidated entity has recognised a loss of $185,964 (2021: $247,878) in profit or loss in respect of the
expected credit losses for the year ended 30 June 2022.
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
2022
%
–
2%
13%
26%
42%
2021
%
–
1%
9%
29%
29%
2022
$’000
30,697
864
341
194
172
2021
$’000
20,019
4,134
280
368
247
32,268
25,048
Allowance for expected
credit losses
2022
$’000
2021
$’000
–
18
45
51
72
186
–
45
26
106
71
248
Movements in the allowance for expected credit losses are as follows:
Opening balance
Additional provisions recognised
Receivables written off during the year as uncollectable
Write back of allowance
Closing balance
2022
$’000
2021
$’000
247
7
–
(68)
186
81
246
(42)
(37)
248
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.
The Group has no significant concentrations of credit risk in any one customer.
69
for the year ended 30 June 2022
Notes to the Consolidated Financial Statements
10. 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 32)
Transfer to trade receivables
Write off of assets
Closing balance
2022
$’000
2021
$’000
13,190
9,293
3,041
159
9,452
26,405
845
938
19,048
372
(20,431)
(10,898)
(40)
16,231
(8)
9,452
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.
11. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
Current assets
Fair value of call options held
Opening balance
Additions
Impairment of fair value
Closing balance
2022
$’000
2021
$’000
500
3,000
3,000
–
–
3,000
(2,500)
500
–
3,000
The balance as at 30 June 2022 relates to the fair value of the call option in AttackBound Holdings Pty
Ltd which is exercisable by 30 June 2023. In 2022, the Group impaired half of the call option investment
in AttackBound Holdings Pty Ltd ($0.5m) and the full value of the call option in TrustGrid Holdings Pty Ltd
($2.0m).
Non-current assets
Investment in Daltrey Pty Ltd
2022
$’000
2021
$’000
2,298
–
At 30 June 2022, the Group held a 5.48% interest in Daltrey Pty Ltd, a leading sovereign biometric security
company. The investment was acquired in July 2021.
12. RIGHT-OF-USE ASSETS
Building Leases - right-of-use
Less: Accumulated depreciation
70
2022
$’000
13,824
(7,695)
6,129
2021
$’000
12,367
(5,555)
6,812
for the year ended 30 June 2022Annual Report 2022 Tesserent Ltd Notes to the Consolidated Financial Statements
12. RIGHT-OF-USE ASSETS (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 2020
Additions through business combinations
Disposals from early termination
Depreciation expense
Balance at 30 June 2021
New leases entered into during the year
Disposals from early termination
Depreciation expense
Balance at 30 June 2022
Group as a lessee
Building
Leases
$’000
3,920
5,007
(880)
(1,235)
6,812
2,072
(515)
(2,241)
6,129
Right-of-use asset
The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-
of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted
for any lease payments made at or before the commencement date, plus any initial direct costs incurred
and an estimate of costs to dismantle and remove the underlying asset – or to restore the underlying asset
or the site on which it is located—less any lease incentives received. The right-of-use asset is separately
disclosed in the Consolidated Statement of Financial Position. The right-of-use asset is subsequently
depreciated using the straight-line method from the commencement date to either the earlier of the end of
the useful life of the right-of-use asset, or the end of the lease term. The estimated useful lives of right-of-
use assets are determined on the same basis as those of plant and equipment. In addition, the right-of-use
asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the
lease liability.
Short-term leases and leases of low-value assets
The Group has elected not to recognise right-of-use assets and lease liabilities for short-term leases of
office and information technology equipment with a lease term of 12 months or less, or for leases of low-
value assets. The Group recognises the lease payments associated with these leases as an expense on a
straight-line basis, over the lease term.
Group as a lessor
When the Group acts as a lessor—generally when it subleases property on which it has entered a head
lease as a lessee–it determines at the sublease inception whether each sublease is a finance lease or an
operating lease.
To classify each lease, the Group makes an overall assessment of whether the lease transfers substantially
all of the risks and rewards incidental to ownership of the underlying asset. If this is the case, then the lease
is a finance lease. If not, then it is accounted for as an operating lease. As part of this assessment, the
Group considers certain indicators, such as whether the lease is for the major part of the economic life of
the asset.
When the Group is an intermediate lessor, it accounts for its interests in the headlease and the sublease
separately.
The Group assesses the lease classification of a sublease with reference to the right-of-use asset arising
from the headlease, not with reference to the underlying asset. If a headlease is a short-term lease to which
the Group applies the exemption described above, then it classifies the sublease as an operating lease.
If an arrangement contains a lease and non-lease component, the Group applies AASB 15 Revenue from
Contracts with Customers to allocate the consideration in the contract. The Group recognises lease
payments received under operating leases as income on a straight-line basis over the lease term as part of
non-operating income.
71
for the year ended 30 June 2022 Notes to the Consolidated Financial Statements
13. PROPERTY, PLANT AND EQUIPMENT
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
2022
$’000
1,354
(515)
839
5,456
(4,108)
1,348
347
(265)
82
10
(10)
–
6,460
(5,834)
626
1,318
(1,156)
162
459
(393)
66
1,435
(1,241)
194
3,317
2021
$’000
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
Property, plant and equipment are carried at cost, less accumulated depreciation, and any impairment
losses. The estimated useful lives, residual values, and depreciation method are reviewed at the end of each
annual reporting period. The depreciation charge for each period is recognised in profit or loss.
Depreciation is calculated on a straight-line basis to write off the net cost of each item of property, plant
and equipment over their expected useful lives as follows:
Furniture & fittings
Hardware employed
Office equipment
Computer Software
10 years
3 years
10 years
5 years
Leasehold improvement
40 years
Plant & equipment
Computer equipment
3 years
4 years
72
for the year ended 30 June 2022Annual Report 2022 Tesserent Ltd
Notes to the Consolidated Financial Statements
13. 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
87
10
28
–
(25)
100
6
5
–
(29)
82
7
20
–
–
(5)
22
70
–
–
(26)
66
64
638
962
(31)
(768)
865
366
158
(14)
(588)
788
–
235
117
–
(36)
316
43
6
(112)
(59)
194
641
104
31
–
(141)
635
349
2
(16)
(131)
839
Balance at 1 July 2020
Additions
Additions through business
combinations
Disposals
Depreciation expense
Balance at 30 June 2021
Additions
Additions through business
combinations
Disposals
Depreciation expense
Balance at 30 June 2022
14. INTANGIBLES
Customer contracts - at cost
Less: Accumulated amortisation
Intellectual property - at cost
Less: Accumulated amortisation
There were no intangibles whose title is restricted or pledged as security for liabilities.
Total
$’000
863
1,458
1,950
(37)
64
451
812
(6)
(559)
(1,534)
762
1,429
2,700
2,263
–
–
171
(142)
(844)
(1,677)
1,348
3,317
2022
$’000
44,811
(6,565)
2021
$’000
31,611
(2,647)
38,246
28,964
1,683
(75)
1,608
759
(71)
688
39,854
29,652
73
for the year ended 30 June 2022 Notes to the Consolidated Financial Statements
14. 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 2020
Capitalised development costs
Additions through business combinations (Note 32)
Amortisation expense
Balance at 30 June 2021
Capitalised development costs
Additions through business combinations (Note 32)
Amortisation expense
Balance at 30 June 2022
Customer
contracts
and
relationships
$’000
Intellectual
property
$’000
7,596
–
23,574
(2,206)
28,964
–
13,200
(3,919)
38,246
23
100
569
(3)
689
924
–
(4)
1,608
Total
$’000
7,619
100
24,143
(2,209)
29,653
924
13,200
(3,923)
39,854
Intangible assets with finite lives are carried at cost, less accumulated amortisation, and accumulated
impairment losses.
Customer relationships and intellectual property were acquired as part of business combinations. These
intangible assets are initially recognised at their fair value at the acquisition date. Subsequent to initial
recognition, customer relationships are amortised over a 10 year expected useful life.
15. GOODWILL
Goodwill balances and goodwill acquired during the year through business acquisitions is as follows:
Goodwill
2022
$’000
2021
$’000
129,635
83,259
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 2020
Additions through business combinations (Note 32)
Additional amount recognised from prior year business combination
Balance at 30 June 2021
Additions through business combinations (Note 32)
Additional amount recognised from prior year business combination
Balance at 30 June 2022
$’000
15,965
66,737
557
83,259
45,292
1,084
129,635
74
for the year ended 30 June 2022Annual Report 2022 Tesserent Ltd Notes to the Consolidated Financial Statements
15. GOODWILL (CONTINUED)
Goodwill acquired through business combinations has been allocated to the
following cash–generating units:
Tesserent Commercial
Tesserent Federal
Tesserent New Zealand
2022
$’000
2021
$’000
71,737
56,022
52,633
5,265
21,972
5,265
129,635
83,259
Goodwill recognised arose from business combinations where the fair value of the consideration paid
exceeded the fair value of the assets acquired. Goodwill is considered to have an indefinite life and is not
amortised as it represents the synergistic benefits of bringing the businesses together.
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 is allocated to cash-generating units for the purpose of impairment testing. The allocation is made
to those cash-generating units that are expected to benefit from the business combination in which the
goodwill arises, identified according to operating segments (refer to segment information Note 3). Goodwill
is monitored by management at the operating segment level.
The recoverable amount of the cash generating unit is 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.
The following are the key assumptions applied in calculating the recoverable amount:
Input
Revenue growth rate - post year 1
EBITDA as a % of revenue
Discount rate (post-tax, nominal)
Terminal growth rate
Tesserent
Commercial
Tesserent
Federal
Tesserent
New Zealand
11.4%
12.9%
13.0%
2.8%
27.7%
18%
13.0%
2.8%
17.0%
15%
13.0%
2.8%
The discount rates reflect management’s estimate of the time value of money and 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 impairment testing performed, it was concluded that no impairment was required to be booked
in the year to 30 June 2022.
75
for the year ended 30 June 2022 Notes to the Consolidated Financial Statements
15. 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 CGU whose impairment testing headroom is most sensitive to assumptions around future revenue
growth and increasing margin is Tesserent Commercial:
– 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 (post-tax) would be required to increase to over 14% 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 CGU’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.
16. INVESTMENTS IN EQUITY ACCOUNTED ASSOCIATES
Investment in TrustGrid Holdings Pty Ltd
Investment in AttackBound Holdings Pty Ltd
Opening balance
Consideration paid for investments - cash
Consideration paid for investments - shares
Equity accounting - share of profit/(loss) in associates
Write up/(down) on carrying value of investment based on impairment review
Closing balance
2022
$’000
831
110
941
2,867
–
–
(322)
(1,604)
941
2021
$’000
2,676
191
2,867
–
1,500
1,367
–
–
2,867
The Group has 20.95% (2021: 25%) interest in TrustGrid Holdings Pty Ltd and a 25% interest in AttackBound
Holdings Pty Ltd. AttackBound is a cyber threat intelligence platform that provides insights to predict
online threat exposure. TrustGrid offers a confidential computing platform for identity-based transactions.
Tesserent’s interest in those companies is accounted for using the equity method.
The following table illustrates the summarised financial information of the Group’s investments in AttackBound
and TrustGrid:
Total Assets
Total Liabilities
Net assets
Group's share of equity (%)
Group's share of equity
Goodwill
Group's carrying amount of the investment
Revenue of associate entity
Net loss of associate entity
TrustGrid
2022
$’000
TrustGrid
2021
$’000
AttackBound
2022
$’000
AttackBound
2021
$’000
2,089
(903)
1,186
21
248
583
831
568
(1,150)
1,020
(84)
936
25
234
2,442
2,676
137
(64)
970
(372)
598
25
150
–
110
384
(326)
529
(103)
426
25
106
85
191
27
(74)
The associates had no contingent liabilities or capital commitments as at 30 June 2021 and 2022.
76
for the year ended 30 June 2022Annual Report 2022 Tesserent Ltd Notes to the Consolidated Financial Statements
17. TRADE AND OTHER PAYABLES
Trade payables
Other payables
2022
$’000
21,771
14,082
35,853
2021
$’000
17,534
11,438
28,972
Trade payables are non-interest bearing and are normally settled on 30-day terms. Other payables are non-
interest bearing and have an average term of 38 days.
18. CONTRACT LIABILITIES
Current liabilities
Contract liabilities
Non-current liabilities
Contract liabilities
Reconciliation
2022
$’000
2021
$’000
11,313
7,335
2,285
1,179
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
Acquired through business combinations
Decrease due to revenue recognised from performance obligations satisfied
Closing balance
8,514
18,794
2,359
(16,069)
13,598
2,780
15,420
579
(10,265)
8,514
Contract liabilities relate to cash received in advance of services provided to the customers.
19. LEASE LIABILITIES
Current liabilities
Lease liability
Non-current liabilities
Lease liability
Movement in Lease Liability
Balance as at 1 July
Acquired in a business combination
Additions
Cash Payments
Accretion of interest
Balance as at 30 June
2022
$’000
2021
$’000
3,110
2,390
3,516
5,078
2022
$’000
7,468
–
1,557
(2,669)
271
6,627
2021
$’000
4,536
4,506
–
(1,755)
181
7,468
77
for the year ended 30 June 2022 Notes to the Consolidated Financial Statements
19. LEASE LIABILITIES (CONTINUED)
The lease liability is initially measured at the present value of the lease payments not paid at the
commencement date, discounted using the interest rate implicit in the lease, or, if that rate cannot be
readily determined, the Group’s incremental borrowing rate. Generally, the Group uses its incremental
borrowing rate as the discount rate. The Group’s average incremental borrowing rate used is 4.0%
(2021: 4.0%).
Lease payments included in the measurement of the lease liability include:
– fixed payments, including in-substance fixed payments less any lease incentives receivable
– variable lease payments that depend on an index or a rate, initially measured using the index or rate as at
the commencement date
– amounts expected to be payable under a residual value guarantee
– the exercise price under a purchase option that the Group is reasonably certain to exercise, lease
payments in an optional renewal period if the Group is reasonably certain to exercise an extension option
– payment of penalties for early termination of a lease unless the Group is reasonably certain not to
terminate early.
The lease liability is separately disclosed in the consolidated statement of financial position. The lease
liability is measured at amortised cost using the effective interest method. It is remeasured when there is a
change in future lease payments arising from a change in an index or rate, if there is a change in the Group’s
estimate of the expected payable amount under a residual value guarantee, or, if the Group changes its
assessment of whether it will exercise a purchase, extension, or termination option.
When the lease liability is remeasured in this way, either a corresponding adjustment is made to the carrying
amount of the right-of-use asset, or, it is recorded in profit or loss if the carrying amount of the right-of-use
asset has been reduced to zero
20. PROVISIONS
Current liabilities
Annual leave
Long service leave
Non-current liabilities
Long service leave
Lease make good
2022
$’000
2021
$’000
3,569
550
4,119
877
150
1,027
2,368
463
2,831
525
150
675
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.
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.
78
for the year ended 30 June 2022Annual Report 2022 Tesserent Ltd Notes to the Consolidated Financial Statements
21. 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
Deferred and contingent consideration from business acquisitions (refer to Note 32)
Change in completion adjustments
Cash paid on prior period acquisitions
Issued capital from prior period acquisitions
Closing balance
2022
$’000
2021
$’000
23,600
11,699
5,485
1,652
13,351
28,521
1,924
(13,933)
(778)
29,085
5,400
18,955
(3,119)
(5,778)
(2,108)
13,351
Deferred settlement liabilities represent purchase consideration payable for acquisitions once certain
conditions are met as stipulated in the contracts. These are measured at the discounted value of the best
estimate of the cash payable based on conditions existing at the balance date.
The measurement of deferred consideration at fair value at each reporting date requires estimates to
be made about expected revenue and expenses over the measurement period to which the deferred
consideration relates.
22. BORROWINGS
Non-current liabilities
Borrowings
Loan facility - Pure Asset Management
Fair value of attaching warrants
Transaction costs
Amortisation of finance component (warrants and transaction costs)
Proceeds from drawdown on CBA loan
Transaction costs
2022
$’000
2021
$’000
34,473
25,603
2022
$’000
–
–
–
–
35,000
(527)
2021
$’000
35,000
(9,498)
(797)
898
–
–
34,473
25,603
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are
subsequently measured at amortised cost. Any gains or losses are recognised in the Statement of Profit or
Loss in the event the borrowings are derecognised.
79
for the year ended 30 June 2022 Notes to the Consolidated Financial Statements
22. BORROWINGS (CONTINUED)
On 23 June 2022, Tesserent entered into agreements with Commonwealth Bank of Australia (CBA) to
refinance its existing debt facilities with Pure Asset Management (PAM).
The refinancing resulted with the following new borrowings at 30 June 2022:
– Full extinguishment of the PAM facilities through a CBA Market Rate Loan Facility of $35.0m, expiring in
June 2025
– $20.0,Market Rate Loan Facility to finance deferred consideration payments related to past and future
business acquisitions. The facility expires in June 2025.
– $1.5m Contingent Liability Facility
– $2.0m Asset Finance Facility
– $0.5m Corporate Card Facility
In addition, Tesserent is required to comply with quarterly covenants requirements from 30 September 2022
(Leverage ratio, minimum EBITDA and Minimum Net Worth).
The refinancing of the debt facilities resulted in exit fees paid ($1.75m) and the accelerated amortisation of
warrants interest ($7.5m) as disclosed in Note 6.
The table below summarises the facilities available, used and unused at balance date:
2022
$’000
35,000
20,000
500
2,000
1,500
59,000
35,000
–
–
–
–
35,000
–
20,000
500
2,000
1,500
24,000
Total facilities
Bank loan - facility A
Bank loan - facility B
Credit card facility
Asset finance facility
Bank guarantee facility
Used at the reporting date
Bank loan - facility A
Bank loan - facility B
Credit card facility
Asset finance facility
Bank guarantee facility
Unused at the reporting date
Bank loan - facility A
Bank loan - facility B
Credit card facility
Asset finance facility
Bank guarantee facility
80
for the year ended 30 June 2022Annual Report 2022 Tesserent Ltd
Notes to the Consolidated Financial Statements
23. CONTRIBUTED EQUITY
2022
Shares
2021
Shares
2022
$’000
2021
$’000
Ordinary shares - fully paid
1,258,183,427 1,063,018,657
138,666
102,992
Movements in ordinary share capital
Details
Balance
Date
Shares
Issue price
$’000
1 July 2021
1,063,018,657
102,992
Issued to consultant (share issue deferred)
5 July 2021
5,988,665
Shares issued on conversion of options
10 August 2021
250,000
Shares issued on conversion of options
10 August 2021
1,000,000
Shares issued on conversion of options
8 September 2021
500,000
Shares issued on conversion of options
8 September 2021
600,000
$0.00
$0.28
$0.13
$0.10
$0.10
Shares issued as consideration in business
combination
Shares issued as consideration in business
combination
Shares issued as consideration on raising
of capital
1 November 2021
674,633
$0.22
4 October 2021
15,946,137
$0.22
3,508
4 October 2021
119,047,619
$0.21
25,000
Costs of issuing equity
4 October 2021
–
Shares issued on conversion of warrants
1 November 2021
1,166,667
Shares issued as consideration in business
combination
1 November 2021
2,764,264
Shares issued on conversion of options
10 December 2021
1,000,000
Shares issued on conversion of options
10 December 2021
500,000
Shares issued on conversion of options
10 December 2021
500,000
Shares issued on conversion of options
10 December 2021
500,000
$0.00
$0.12
$0.22
$0.08
$0.10
$0.13
$0.15
(960)
140
625
75
50
63
75
–
70
125
50
60
153
24 December 2021
33,886,663
$0.17
5,591
Shares issued as consideration in business
combination
Shares issued as consideration in business
combination
Shares issued on conversion of options
31 January 2022
300,000
24 December 2021
4,728,105
$0.17
$0.10
Shares issued as consideration in business
combination (share issue deferred)
Shares issued on conversion of options
(options expense)
11 February 2022
5,812,017
$0.00
30 June 2022
–
$0.00
792
30
–
227
Balance
30 June 2022 1,258,183,427
138,666
81
for the year ended 30 June 2022
Notes to the Consolidated Financial Statements
23. CONTRIBUTED EQUITY (CONTINUED)
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
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
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
$0.220
$0.050
Shares issued on conversion of convertible notes
5 Oct-20
5,401,639
82
932
932
–
400
155
175*
–
995
–
220
220
270
for the year ended 30 June 2022Annual Report 2022 Tesserent Ltd Notes to the Consolidated Financial Statements
23. CONTRIBUTED EQUITY (CONTINUED)
Details
Date
Shares
Issue price
$’000
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
$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
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
$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
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
0
Shares issued on conversion of convertible notes
16 Feb-21
3,255,738
$0.000
Shares issued as consideration in business
combination
Equity Settled expense
Shares issued on conversion of warrants
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
83
for the year ended 30 June 2022 Notes to the Consolidated Financial Statements
23. CONTRIBUTED EQUITY (CONTINUED)
Details
Date
Shares
Issue price
$’000
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
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
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.
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 2022Annual Report 2022 Tesserent Ltd Notes to the Consolidated Financial Statements
24. RESERVES
The Group has issued options during the year. The options were values using a Black-Scholes Pricing model.
During the year, the following options were issued with the following inputs:
Share Options
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
ESOP
Series 1
ESOP
Series 2
ESOP
Series 1
ESOP
Series 2
ESOP
Series 3
1,000,000
1,000,000
4,704,936
4,454,936
7,400,000
2-Jun-21
2-Jun-21
30-Aug-21
30-Aug-21
31-Jan-22
1-Jul-24
1-Jul-24
16-Sep-23
16-Sep-23
31-Jan-25
1,125
$0.28
$0.21
100%
0.10%
0%
2
1,125
$0.35
$0.21
100%
0.10%
0%
2
$0.09
$0.09
747
$0.28
$0.27
108%
747
$0.35
$0.27
108%
0.20%
0.20%
0%
2
$0.11
0%
2
$0.12
1,096
$0.28
$0.17
100%
1.20%
0%
2
$0.07
$88,090
$88,090
$0
$0
$91,413
$528,798
$539,031
$479,281
$91,413
$528,798
$437,688
$479,281
$0
$0
$0
$0
$27,158
$74,186
$0
$0
85
for the year ended 30 June 2022 –
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Notes to the Consolidated Financial Statements
24. 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-21
Granted
Exercised
Expired/
Forfeited/
other
Balance
30-Jun-22
Options
NED Options
NED Options
NED Options
Call Options
30/11/2021
30/11/2021
30/11/2021
16/12/2021
0.10
0.13
0.15
500,000
500,000
500,000
0.08
1,000,000
Employee Options 01/03/2022
0.10
300,000
Converting Note
Options
Converting Note
Options
Converting Note
Options
01/10/2022
0.10 26,770,000
01/10/2022
0.10
3,832,500
Employee Options
29/11/2022
01/10/2022
0.10
0.13
3,000,000
1,000,000
Employee Options
02/11/2023
0.35
12,771,500
4,968,632
(500,000)
(500,000)
(500,000)
(1,000,000)
–
–
–
–
–
(300,000)
–
–
–
–
–
(300,000)
– 26,470,000
–
(600,000)
–
–
–
–
–
3,832,500
2,400,000
1,000,000
(776,500)
16,963,632
Employee Options
02/11/2023
0.28 12,200,000
4,968,632
(250,000)
1,045,000
17,963,632
Employee Options
01/01/2024
0.35
3,000,000
– (3,000,000)
Employee Options
01/01/2024
Employee Options 06/04/2024
Employee Options 06/04/2024
Employee Options 20/04/2024
Employee Options 20/04/2024
Employee Options
01/07/2024
Employee Options
01/07/2014
Employee Options
31/01/2025
Call Options
09/06/2025
NED Options
NED Options
Total Options
21/09/2025
06/07/2026
0.28
0.35
0.28
0.35
0.28
0.35
0.28
0.28
0.24
0.25
0.21
3,750,000
1,250,000
1,500,000
1,670,000
1,670,000
–
–
–
–
1,000,000
1,000,000
7,400,000
1,000,000
9,000,000
–
–
3,000,000
(3,750,000)
(1,250,000)
(1,500,000)
(1,670,000)
(1,670,000)
–
–
–
–
–
–
–
–
–
–
–
–
1,000,000
1,000,000
7,400,000
1,000,000
9,000,000
3,000,000
–
–
–
–
–
–
–
–
–
–
–
84,214,000
23,337,264
(3,650,000)
(12,871,500)
91,029,764
Weighted average exercise price
$0.21
$0.29
$0.12
$0.31
$0.22
25. DIVIDENDS
There were no dividends paid, recommended or declared during the current or previous financial year.
26. FINANCIAL RISK MANAGEMENT
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.
86
for the year ended 30 June 2022Annual Report 2022 Tesserent Ltd Notes to the Consolidated Financial Statements
26. FINANCIAL RISK MANAGEMENT (CONTINUED)
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 at Board level. The Board monitors levels of
exposure to interest rate, foreign currency 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 reviews and agrees policies for managing each of the risks identified below.
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 Group incurs
foreign currency predominantly in USD and NZD.
In order to protect against foreign exchange rate movements, the Group has entered into forward exchange
contracts. These forward contracts are buying forward foreign currency for contracted cash outflows for
payments to vendors from the ensuing financial year.
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
Average exchange rates
2022
$’000
2021
$’000
2022
2021
9,898
6,488
0.7005
–
77
–
0.7669
0.7389
The holdings of cash and cash equivalents, trade receivables, contract assets, trade payables and contract
liabilities analysed by nominated currency at 30 June 2022, along with prior year comparatives, were as
follows:
30 June 2022
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
Denominated
in NZD
$’000
Total
in SGD
$’000
Total
in AUD
$’000
13,469
31,100
7,677
52,246
25,250
7,434
32,684
1
72
8,554
8,627
10,362
6,165
16,527
252
888
–
1,140
217
–
217
616
23
–
639
23
–
23
14,339
32,083
16,231
62,652
35,853
13,598
49,451
A hypothetical 10% strengthening in the exchange rate of the Australian dollar (A$) against the New Zealand
dollar (NZ$) of the Parents’ overseas subsidiaries, Lateral Security Pty Ltd and Tesserent Cyber Services NZ
Pty Ltd, with all other variables held constant, would have an unfavourable effect of $24,293 (2021:$50,330
unfavourable) on the profit and equity for the 2021 financial year.
87
for the year ended 30 June 2022 Notes to the Consolidated Financial Statements
26. FINANCIAL RISK MANAGEMENT (CONTINUED)
30 June 2021
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
Denominated
in NZD
$’000
Total
in AUD
$’000
14,467
21,590
8,774
44,831
20,093
5,236
25,329
4
2,571
678
3,253
8,730
3,278
12,008
389
638
–
1,027
151
–
151
14,860
24,799
9,452
49,111
28,974
8,514
37,488
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 related to cash and cash equivalents and borrowings.
As at the reporting date, the group had the following variable rate borrowings outstanding:
Borrowings
Net exposure to cash flow interest rate risk
2022
Weighted
average
interest rate
%
4.70%
Balance
$’000
34,473
34,473
An analysis by remaining contractual maturities is shown in ‘liquidity and interest rate risk management’ below.
In 2022, the interest paid on the debt facilities was $3,353,664. The majority of the interest paid was related
to the PAM facility which extinguished on 23 June 2022 as part of the refinancing process undertaken with
CBA. The weighted average interest rate with the CBA facility is 4.70% in comparison to 8.70% cash rate
under the PAM facility.
Liquidity risk
The Group manages liquidity risk by maintaining adequate reserves and banking facilities continuously
monitoring the forecast and actual cashflows and matching the maturity profile of financial assets and
liabilities.
On 23 June 2022, the Group refinanced its borrowings with CBA. The Group had access to the following
undrawn facilities at the end of the reporting period:
Bank loan - facility B
Credit card facility
Asset finance facility
Bank guarantee facility
88
2022
$’000
20,000
500
2,000
1,500
24,000
2021
$’000
–
–
–
–
–
for the year ended 30 June 2022Annual Report 2022 Tesserent Ltd
Notes to the Consolidated Financial Statements
26. FINANCIAL RISK MANAGEMENT (CONTINUED)
Bank facilities are subject to the continuance of satisfactory covenant reporting, and have an average
maturity of 3 years. The bank loan - facility B, can be used to finance current payable or deferred cash
considerations in relation to past acquisitions of future permitted acquisitions. The other bank facilities may
be drawn at any time.
Maturities of financial liabilities
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.
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
2022
Non-derivatives liabilities
Non-interest bearing
Trade payables
Other financial liabilities
Other liabilities
Interest-bearing - variable
Borrowings
Lease liability
–
–
–
35,853
23,600
11,313
–
5,485
2,285
3.25%
4.00%
1,138
3,110
1,138
1,969
–
–
–
36,138
1,635
37,773
–
–
–
–
333
333
35,853
29,085
13,598
38,414
7,047
123,996
Total non-derivatives
75,014
10,877
2021
Non-derivatives liabilities
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%
28,972
11,699
7,335
–
–
2,390
50,396
–
1,652
1,179
–
–
1,949
4,780
–
–
–
15,000
20,000
2,362
37,362
–
–
–
–
–
767
767
28,972
13,351
8,514
15,000
20,000
7,468
93,305
The cash flows in the maturity analysis above are not expected to occur significantly earlier than
contractually disclosed above.
89
for the year ended 30 June 2022 Notes to the Consolidated Financial Statements
26. FINANCIAL RISK MANAGEMENT (CONTINUED)
Fair value of financial instrument
Fair value hierarchy
The following tables detail the consolidated entity’s assets and liabilities, measured or disclosed at fair
value, using a three-level hierarchy, based on the lowest level of input that is significant to the entire fair
value measurement, being:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can
access at the measurement date
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability,
either directly or indirectly
Level 3: Unobservable inputs for the asset or liability
Fair value measurement
Fair value hierarchy
The following tables detail the consolidated entity’s assets and liabilities, measured or disclosed at fair
value, using a three-level hierarchy, based on the lowest level of input that is significant to the entire fair
value measurement, being:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can
access at the measurement date
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability,
either directly or indirectly
Level 3: Unobservable inputs for the asset or liability
Consolidated - 2022
Assets
Call option investments
Investment in Daltrey Pty Ltd
Total assets
Liabilities
Deferred settlement liabilities
Total liabilities
Consolidated - 2022
Assets
Call option investments
Total assets
Liabilities
Deferred settlement liabilities
Total liabilities
Level 1
$’000
Level 2
$’000
Level 3
$’000
Total
$’000
–
–
–
–
–
–
–
–
–
–
Level 1
$’000
Level 2
$’000
–
–
–
–
–
–
–
–
500
2,298
2,798
29,085
29,085
Level 3
$’000
3,000
3,000
13,351
13,351
500
2,298
2,798
29,085
29,085
Total
$’000
3,000
3,000
13,351
13,351
The carrying amounts of trade and other receivables and trade and other payables are assumed to approximate
their fair values due to their short-term nature.
Valuation techniques for fair value measurements categorised within level 3
Call option investments have been valued using a weighted average probability assessment of the likelihood of
the instrument being exercised before the expiry date.
The basis of the valuation of investment in Daltrey Pty Ltd is based on the current share price in an active market.
The basis of the valuation of deferred settlement liabilities is the use of observable market data where it
is available and relies as little as possible on entity specific estimates.
Level 3 assets and liabilities
Refer to Note 11 and 21 for movements in Level 3 assets and liabilities.
The level 3 assets and liabilities unobservable inputs are not subject to materiality sensitivities.
90
for the year ended 30 June 2022Annual Report 2022 Tesserent Ltd Notes to the Consolidated Financial Statements
27. REMUNERATION OF AUDITORS
During the financial year the following fees were paid or payable for services provided by BDO Audit Pty Ltd,
the auditor of the company:
Audit services - BDO Audit Pty Ltd
Audit or review of the financial statements
Other services - BDO
Tax compliance and advisory services - BDO Services Pty Ltd
Other non-audit services - BDO Corporate Finance Pty Ltd
2022
$
2021
$
510,000
726,654
103,900
35,000
138,900
26,538
575,041
601,579
648,900
1,328,233
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.
28. CONTINGENT LIABILITIES
There are no other contingent assets or liabilities requiring disclosure as at the date of this report.
29. COMMITMENTS
The Group has no commitments at 30 June 2022. (30 June 2021: nil).
30. 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
2022
$’000
2021
$’000
3,622
2,023
181
285
447
4,535
148
42
1,076
3,289
Transactions with related parties
The Company undertook business with Belgravia Group and associated companies in which Mr G Lord is a director
of and owns an interest. There were no products purchased from Belgravia Group in 2021 or 2022. Products and
services sold to Belgravia totalled $124,368 being professional services and software subscriptions and support
to Belgravia Group Pty Ltd.
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 33 of this report.
91
for the year ended 30 June 2022
Notes to the Consolidated Financial Statements
31. PARENT ENTITY INFORMATION
The financial information for the parent entity has been prepared on the same basis as the consolidated
financial statements. The accounting policies adopted by the parent entity are the same as the
consolidated group 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
– Tesserent Limited is the ultimate parent entity of the consolidated group
Tesserent Limited is the ultimate parent entity of the consolidated group.
Statement of profit or loss and other comprehensive income
Loss after income tax
Total comprehensive income
2022
$’000
(18,196)
(18,196)
2021
$’000
(10,778)
(10,778)
The parent entity loss after income tax in 2022 includes the costs incurred as a result of the exit from the
Pure Asset Management debt facility. Refer to Note 6.
Statement of financial position
Total current assets
Total non-current assets
Total assets
Total current liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Share-based payments reserve
Options reserve
Accumulated losses
Total equity
2022
$’000
2021
$’000
148,867
120,047
7,145
7,145
156,012
127,192
509
1,027
34,693
35,202
25,823
26,850
120,810
100,342
143,120
106,630
9,437
6,453
9,565
4,315
(38,200)
(20,166)
120,810
100,344
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 2022 and
30 June 2021.
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2022 and 30 June 2021.
Capital commitments
The parent entity had no capital commitments for purchase of property, plant and equipment as at 30 June
2022 and 30 June 2021.
92
for the year ended 30 June 2022Annual Report 2022 Tesserent Ltd
Notes to the Consolidated Financial Statements
32. BUSINESS COMBINATIONS
The Group accounts for business combinations using the acquisition method when control is transferred to
the Group. The consideration transferred in the acquisition is measured at fair value, as are the identifiable
net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on a bargain
purchase is recognised in profit or loss immediately. Transaction costs are expensed as incurred, except if
related to the issue of debt or equity securities. Any deferred contingent consideration is measured at fair
value at the date of acquisition.
If any obligation to pay contingent consideration meets the definition of a financial instrument it is classified
as equity, and not remeasured, with settlement accounted for within equity. Otherwise, subsequent changes
in the fair value of the contingent consideration are recognised in profit or loss.
In FY22, the Group completed the acquisitions of Loop Secure Pty Ltd, Claricent Pty Ltd, and Pearson
Corporation Pty Ltd. Details of the acquisitions were as follows:
Loop Secure Pty Ltd
On 1 October 2021, TNT Cyber Services Pty Ltd, a subsidiary of Tesserent Limited, acquired 100% of the
ordinary shares of Loop Secure Pty Ltd for consideration of $17,426,161, with $7,000,000 cash and $3,508,150
in issued share capital, being 15,946,135 shares issued at a fair value of $0.220 per share. A further deferred
consideration cash payment of $1,000,000 was made on 30 June 2022 and additional cash payment
of $1,000,000 is payable in Q2 FY23. A completion accounts payment $490,780, plus estimated earnout
payments of $4,427,236, make up the balance of the total acquisition cost.
Loop Secure’s Offensive Security, GRC and Managed Security Services strengthens TNT’s Cyber
360 capabilities with significant synergy benefits and cross-sell opportunities
Claricent Pty Ltd
On 15 December 2021, TNT Cyber Services Pty Ltd, a subsidiary of Tesserent Limited, acquired 100% of the
ordinary shares of Claricent Pty Ltd for consideration of $6,463,995, with $1,239,000 cash and $791,958 in
issued share capital, being 4,728,105 shares issued at a fair value of $0.1675 per share.
Further cash payments of $1,512,820 in deferred consideration and deferred issued capital of $862,534, plus
estimated earnout payments of $2,057,683 (contingent on the Claricent business meeting agreed earnings
targets), make up the balance of the total acquisition cost.
Pearson Corporation Pty Ltd
On 23 December 2021, TNT Cyber Services Pty Ltd, a subsidiary of Tesserent Limited, acquired 100% of the
ordinary shares of Pearson Corporation Pty Ltd for consideration of $31,401,477, with $8,640,000 cash and
$5,591,230 in issued share capital, being 33,886,663 shares issued at a fair value of $0.1650 per share.
Further cash payments of $8,743,381 in deferred consideration and deferred issued capital of $4,999,708 are
contingent on the Pearson business meeting agreed earnings targets. Also contingent on Pearson meeting
earnings targets, are estimated earnout payments of $3,427,088, which make up the balance of the total
acquisition cost.
Both Claricent Pty Ltd and Pearson Corporation Pty Ltd have leading positions in the Federal Government
marketplace and enable Tesserent to further strengthen its position and deliver large multi-year projects
that support the Federal Government to achieve their cybersecurity goals.
93
for the year ended 30 June 2022 Notes to the Consolidated Financial Statements
32. BUSINESS COMBINATIONS (CONTINUED)
Details of the acquisition are as follows:
Cash and cash equivalents
Trade and other receivables
Deposits
Contract assets
Prepayments
Plant and equipment
Trade and other payables
Contract liabilities
Provision for income tax
Employee benefits
Fair value of contracts and relationships acquired
Deferred tax liability arising from acquisition
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
Loop
Secure
Fair value
$’000
Claricent
Fair value
$’000
Pearson
Fair value
$’000
2,958
1,364
112
67
237
171
(1,406)
(2,352)
(534)
(705)
3,900
(1,018)
2,794
280
128
215
112
–
–
651
2,031
–
666
–
–
(426)
(1,491)
–
(74)
(227)
1,400
(431)
977
(7)
(1,251)
(122)
7,900
(2,149)
6,228
25,173
Total
$’000
3,889
3,523
327
845
237
171
(3,323)
(2,359)
(1,859)
(1,054)
13,200
(3,598)
9,999
45,292
14,632
5,487
17,426
6,464
31,401
55,291
7,000
3,508
6,918
17,426
7,000
(2,958)
4,042
1,239
792
4,433
6,464
1,239
(280)
959
8,640
5,591
17,170
31,401
8,640
(651)
7,989
16,879
9,891
28,521
55,291
16,879
(3,889)
12,990
The fair value of the trade receivables acquired for those business acquisitions amounts to $3.3m. The gross
amount of trade receivables is $3.3m and it is expected that the full contractual amounts can be collected.
Given the seasonality of the acquirees performance, it is impractical to disclose the revenue and profit
contributions if the entities had been acquired on 1 July 2021.
Since their respective acquisition dates, the acquirees contributed as follows to the consolidated revenue
and loss of the Group:
Revenue contribution
Profit contribution
Loop
Secure
$’000
9,833
2,047
Claricent
$’000
Pearson
$’000
2,043
600
11,922
2,777
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.
94
for the year ended 30 June 2022Annual Report 2022 Tesserent Ltd
Notes to the Consolidated Financial Statements
33. 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:
Ownership interest
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 Ltd
Airloom Holdings Pty Ltd
Ludus Information Security Pty Ltd
iQ3 Pty Ltd
Lateral Security (IT) Services Limited
Secure Logic Pty Ltd
Tesserent Cyber Services Limited
Loop Secure Pty Ltd1
Claricent Pty Ltd2
Pearson Corporation Pty Ltd3
1 Acquired 1 October 2021
2 Acquired 15 December 2021
3 Acquired 23 December 2021
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
Australia
Australia
Australia
2022
%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
2021
%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
–
–
–
34. EVENTS AFTER THE REPORTING PERIOD
The Company notes the following subsequent event since the 30 June 2022 reporting date:
On 24 August 2022, the Company remitted payment of $2.86m and issued 10,926,052 shares to the Loop
Secure vendors in accordance with the terms of the Share Purchase Agreement for Loop Secure Pty Ltd.
95
for the year ended 30 June 2022 Notes to the Consolidated Financial Statements
35. LOSS PER SHARE
Loss after income tax
2022
$’000
2021
$’000
(8,783)
(4,533)
Number
Number
Weighted average number of ordinary shares outstanding during the year used in
calculating basic loss per share
1,197,938,015 875,632,954
Weighted average number of ordinary shares and convertible redeemable
cumulative preference shares outstanding and performance rights during the year
used in calculating diluted loss per share
1,197,938,015 875,632,954
Basic loss per share
Diluted loss per share
Cents
Cents
(0.73)
(0.73)
(0.52)
(0.52)
Weighted average number of ordinary shares disclosed above exclude options and rights granted to
employees which are anti-dilutive.
96
for the year ended 30 June 2022Annual Report 2022 Tesserent Ltd
Directors’ Declaration
In the Directors’ opinion:
(a) the financial statements and notes set out on pages 52 to 96 are in accordance with the
Corporations Act 2001, including:
(i)
(ii)
complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory
professional reporting requirements, and
giving a true and fair view of the Group’s financial position as at 30 June 2022 and of its
performance for the year-ended on that date, and
(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they
become due and payable.
Note 1 confirms that the financial statements also comply with International Financial Reporting Standards
as issued by the International Accounting Standards Board.
The Directors have been given the declarations by the chief executive officer and chief financial officer
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 Kurt Hansen
CEO
30 August 2022
97
for the year ended 30 June 2022
Independent Auditor’s Report
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 2022, 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 2022 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.
98
for the year ended 30 June 2022Annual Report 2022 Tesserent Ltd
Independent Auditor’s Report
Business combinations
Key audit matter
How the matter was addressed in our audit
As disclosed in Note 32, the Group acquired 100% of
the shares of Loop Secure Pty Ltd, Pearson Corporation
Pty Ltd and Claricent Pty Ltd during the year ended 30
June 2022.
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:
•
Estimating the fair value of assets and liabilities
acquired, in particular the valuation of identified
finite life intangible assets acquired.
• Determining the fair value of the purchase
Our procedures included, but were not limited to:
• Reading the signed Share Purchase Agreements to
understand the entities being acquired and the
considerations payable for the acquisitions;
• Obtaining a copy of the external valuation reports
to assess the determination of the fair values of
the intangible assets associated with the
acquisitions;
• Testing on a sample basis of the fair value of the
assets and liabilities acquired; and
• Assessing management’s calculations in
determining the deferred considerations payable.
consideration for each acquisition, including
estimating the fair value of shares issued by the
Company and the fair value of contingent
consideration dependent upon future performance
hurdles.
In conjunction with our valuation specialists, we:
• Assessed the identification of intangible assets
acquired, including customer contracts and
relationships along with the valuation
methodologies used to value those assets;
• Assessed the reasonableness of the discount rates
used; and
• Tested on a sample basis, the mathematical
accuracy of the models.
We have also assessed the appropriateness of the
disclosures included in Note 32 to the financial
statements.
99
for the year ended 30 June 2022
Independent Auditor’s Report
Carrying value of goodwill and intangible assets
Key audit matter
How the matter was addressed in our audit
As disclosed in Notes 14 and 15, at 30 June 2022 the
Our procedures included, but were not limited to:
Group has intangible assets related to customers
contracts and relationships, intellectual property and
goodwill.
Goodwill and other intangible assets are required to be
assessed for impairment annually or where there is an
indicator of impairment.
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.
• Obtaining an understanding of the process that
management undertook to perform their
impairment assessment; and
• Evaluating the level at which goodwill is
monitored, including the identification of CGUs.
In conjunction with our valuation specialists, we:
• Evaluated the value in use models prepared by
management and validated the reasonableness of
the assumptions used to calculate the discount
rate, growth rates, terminal values, working
capital values and allocation of corporate costs
compared to historical performance and industry
benchmark to ensure compliance with the
relevant accounting standards;
• Agreed the forecasted cashflows for FY23 to the
latest Board approved budget;
• Assessed historical forecasting accuracy;
• Compared the market capitalisation of the
Company to the Group’s net assets;
• Confirming the integrity and mathematical
accuracy of the value-in-use discounted cash flow
models;
• Subjected the key assumptions to sensitivity
analyses on growth and discount rates to
understand the change that would be required for
the goodwill and intangibles assets to be impaired
and assessed the likelihood of such movement in
those key assumptions arising; and
• Assessed the appropriateness of the disclosures
included in Notes 14 and 15 to the financial
statements.
100
for the year ended 30 June 2022Annual Report 2022 Tesserent Ltd
Independent Auditor’s Report
Revenue recognition
Key audit matter
How the matter was addressed in our audit
As disclosed in Note 4, at 30 June 2022 the Group
generates revenue from five distinct streams (managed
services, consulting services, software licenses,
hardware equipment and support and maintenance
renewals).
Each revenue stream has unique contracts with
performance obligations and recognition criteria that
require assessment under the relevant accounting
standards.
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:
• Obtaining an understanding of the process
undertaken by management to account for the
recognition of revenue for each revenue stream,
including factors influencing whether the revenue
is recognised on a principal or agency basis;
• Testing, on a sample basis, to validate the
accuracy and occurrence of revenue related
transactions to underlying evidence; and
• Assessing the appropriateness of the disclosures in
Note 4 to the financial statements.
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 2022, 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.
101
for the year ended 30 June 2022
Independent Auditor’s Report
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 41 to 49 of the directors’ report for the
year ended 30 June 2022.
In our opinion, the Remuneration Report of Tesserent Limited, for the year ended 30 June 2022,
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
Salim Biskri
Director
Melbourne, 30 August 2022
102
for the year ended 30 June 2022Annual Report 2022 Tesserent Ltd
Shareholder Information
The shareholder information set out below was applicable as at 25 August 2022.
A. DISTRIBUTION OF EQUITABLE SECURITIES
Analysis of number of equitable security holders by size of holding:
Range
1 - 1,000
1001 - 5,000
5001 - 10,000
10,001 - 100,000
100,001 and over
Total holders
Units
% Units
428
140,585
3,325
10,067,092
2,197
17,292,420
5,157
181,519,325
0.01%
0.79%
1.36%
14.3%
1,184 1,060,090,056
83.54%
12,291 1,269,109,478
Based on the price per security, the number of holders with an unmarketable holding: 3,176 with total
7,424,960 units, amounting to 0.6% of Issued Capital.
B. DISTRIBUTION OF EQUITY SECURITIES – SHARE OPTIONS
Analysis of numbers of equity holders by size of holding:
SPREAD OF HOLDINGS
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,000 - 100,000
100,001 and over
Number of
Holders
Number of
Units
% of Total
Issued
Capital
–
–
–
11
–
–
–
–
–
–
453,792
0.25%
137
178,103,751
99.75%
148 178,557,543
103
for the year ended 30 June 2022 Shareholder Information
C. EQUITY SECURITY HOLDERS
Twenty largest quoted equity security holders
The names of the twenty largest security holders of quoted equity securities are listed below:
NAME
BELGRAVIA STRATEGIC EQUITIES PTY LTD
SCOTT CEELY
G & N LORD SUPERANNUATION PTY LTD
PEARSON HOLDINGS (AUST) PTY LTD ACN 127 656
NATIONAL NOMINEES LIMITED
CS THIRD NOMINEES PTY LIMITED
BNP PARIBAS NOMS PTY LTD
CITICORP NOMINEES PTY LIMITED
C14N PTY LTD
CRAIG OWEN HUMPHREYS
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2
SHAYNE MARCIA DAVENPORT
BNP PARIBAS NOMINEES PTY LTD
XERT SERVICES PTY LIMITED
FLANNIGAN HOLDINGS PTY LTD
MR JOHN GEORGOPOULOS
UBS NOMINEES PTY LTD
SANBRU PTE LTD
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
COLONIAL FIRST STATE INV LTD <9015040 KAGE A/C>
Ordinary
Shares
Held
% of
Issued
Shares
56,825,622
47,312,405
37,433,334
33,886,663
33,312,419
27,557,561
26,917,985
24,448,539
20,718,709
20,410,431
17,388,681
17,338,909
16,126,289
12,998,583
12,625,000
12,300,534
11,504,600
10,573,838
10,331,900
8,721,608
4.48
3.73
2.95
2.67
2.62
2.17
2.12
1.93
1.63
1.61
1.37
1.37
1.27
1.02
0.99
0.97
0.91
0.83
0.81
0.69
Totals: Top 20 holders of ORDINARY FULLY PAID SHARES (Total)
458,733,610
36.15
As at 25 August 2022, the 20 largest shareholders held ordinary shares representing 36.15% of the issued
share capital.
Unquoted equity securities
There are no unquoted equity securities.
D. SUBSTANTIAL HOLDERS
G Lord holds 7.82% of the ordinary shares on issue through BELGRAVIA STRATEGIC EQUITIES PTY LTD - totaling
61,825,622 shares, and G & N LORD SUPERANNUATION PTY LTD GNR S/F A/C - 37,433,334 shares.
E. VOTING RIGHTS
The voting rights attached to ordinary shares are set out below:
Ordinary shares
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.
104
for the year ended 30 June 2022Annual Report 2022 Tesserent Ltd Shareholder Information
F. SHARE BUY BACKS
There is no current on-market share buy-back.
There are no other classes of equity securities.
G. ESCROWED SHARES
Class
Ordinary Shares
Ordinary Shares
Ordinary Shares
Expiry date
Number
of shares
8 September 2022
500,000
4 October 2022
15,538,625
23 December 2022
38,614,768
54,653,393
H. 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.
105
for the year ended 30 June 2022 Corporate Directory
DIRECTORS
Geoff Lord
Kurt Hansen
Executive Chairman
Chief Executive Officer and Managing Director
Gregory Baxter
Non-Executive Director
Megan Haas
Non-Executive Director
COMPANY SECRETARY
Paul Taylor
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 REGISTER
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
106
for the year ended 30 June 2022Annual Report 2022 Tesserent Ltd T E S S E R E N T L I M I T E D
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