Tyro Payments Limited
ABN 49 103 575 042
Annual Report
to Shareholders
Year ended 30 June 2014
Tyro Payments Limited ABN 49 103 575 042
Annual Report 2014
1
The CEO Report
Building a specialised banking institution for merchants
Overview
Tyro was founded on 3 February 2003 by Peter Haig, Andrew Rothwell and Paul Wood. Two founders, Peter Haig
and Andrew Rothwell, have maintained their active association with Tyro. In November 2004, Jost Stollmann
became a major investor, then Director and CEO. Kerry Roxburgh joined as non-executive Director on 18 April
2008. He was appointed Chairman of the Board on 19 February 2010.
Tyro is an Australian banking institution accepting electronic payments on behalf of merchants. Tyro does not take
money on deposit. Tyro holds an authority under the Banking Act to carry on a banking business as a Specialist
Credit Card Institution (SCCI) and operates under the supervision of the Australian Prudential Regulation Authority
(APRA). Tyro is a Principal Member of Visa and MasterCard and a Tier 1 Member of the payment clearing streams
BECS and CECS.
The Payments System Board of the Reserve Bank has decided in principle to vary the Access Regimes applying
to the designated MasterCard and Visa systems in Australia and to seek removal of the current specialist credit
card institution (SCCI) framework, administered by the Australian Prudential Regulation Authority (APRA).
The change requires the repeal of Regulation 4 of the Banking Regulations 1966. The change is expected to
become effective later in the year. The RBA will liaise with the Australian Payments Clearing Association (APCA)
to seek to ensure that the removal of the SCCI framework does not have adverse consequences for participants in
other payment systems such as the Bulk Electronic Clearing System (BECS) that Tyro uses to settle its merchants.
Tyro is an accredited provider for Medicare Australia Easyclaim. Patients can use the Tyro Medicare Easyclaim
solution to claim their Medicare rebate once they have paid their account, the rebate is then paid into their bank
account via the EFTPOS network at the practice. Tyro provides an in-house developed, end-to-end solution,
authorising, clearing and settling electronic card payments. Tyro accepts Visa, MasterCard, American
Express/JCB, Diners, EFTPOS as well as Medicare Easyclaim transactions.
The Tyro solution is internet based and all transactions are processed in real time. Tyro focusses on the small-to-
medium business community and their brick and mortar points of business. Tyro embeds its payment solutions into
business software and markets these through the respective software partner. At the end of June 2014, Tyro
completed its seventh full fiscal year of trading, since the commercial launch of its first EFTPOS facility on 26 April
2007.
Our vision and guiding principles
To be the most efficient provider of merchant payment services in Australia that save time and work, everyday,
everywhere. Tyro listens, understands, develops, integrates and supports flawless solutions that plug in and just
work for merchants.
Tyro People dare to challenge the EFTPOS Industry and they succeed. Tyros learn, think, respect, debate, decide,
act and grow for a new world where innovation, fairness and transparency prevail. Tyro shares the wealth and
recognition fairly among its many stakeholders. Tyro aspires to build wealth for its staff and shareholders and to
contribute innovation and competition to the Australian payments industry.
Corporate Governance
This statement outlines our corporate governance framework, policies and practices.
Framework and approach
At all times demonstrate behaviour that is consistent with being a good corporate citizen by acting honestly, fairly,
diligently and in accordance with the law. All directors, managers, employees and contractors are expected to act
with the utmost integrity and objectivity, striving at all times to enhance the reputation and performance of Tyro.
Processes are in place to promote and communicate these policies. The Board has set a requisite Code of
Conduct at all levels. This approach includes a commitment to governance standards which Tyro sees as intrinsic
to the success of our business and our performance.
Tyro Payments Limited ABN 49 103 575 042
Annual Report 2014
2
Australia
Tyro complies with the Corporations Act and as an ADI must comply with governance requirements prescribed by
APRA under Prudential Standard CPS 510 Governance. The following three key principles apply to the Board and
all employees of Tyro. Directors and employees will act with honesty and integrity; act lawfully and within the spirit
of the law; and act within the spirit of justice and equity.
Over time, Tyro will adopt and report against the ASX Corporate Governance Principles and Recommendations
(ASXCGC Recommendations) published by the ASX Corporate Governance Council (ASXCGC).
Board
The primary role of the Board is to provide effective governance over company affairs whilst having regard for the
interests of all stakeholders and best corporate governance practices.
• Approve the strategic direction and objectives for Tyro.
• Evaluate the performance of the Board and Board committees
• Manage the succession, remuneration and performance of Board members, the CEO and direct reports of
the CEO.
• Consider and approve Tyro’s annual budget including revenue, profit, capital expenditure and cash flows,
as proposed by management, ensuring appropriate resources are available to achieve the business
objectives.
• Evaluate executive management’s performance in the implementation and achievement of business
objectives and strategies.
• Review and approve capital management policies and plans having regard for the various liquidity and
capital adequacy regulatory requirements applying to Tyro.
• Ensure business risks are identified and approve systems of risk management, regulatory compliance and
control and associated group policies to manage those risks.
• Monitor management’s implementation of, and compliance with, these systems and controls.
• Determine and approve the level of authority to be granted to the CEO in respect of operating and capital
expenditures and credit facilities and authorise the further delegation of those authorities to management
In carrying out its responsibilities and powers as set out in this Charter, the Board will at all times recognise its
overriding responsibility to act honestly, fairly, diligently and in accordance with the law.
Board Audit Committee
The Board Audit Committee assists the Board by providing a non-executive review of the effectiveness of Tyro’s
accounting and financial reporting framework and regulatory compliance.
As detailed in its charter, key responsibilities include oversight of: the integrity of the financial statements and
financial reporting systems; reviewing the external auditor’s qualifications, performance, independence and fees;
reviewing performance of the internal audit function and regulatory compliance.
Board Risk Committee
The primary objective of the Board Risk Committee is to assist the Board in fulfilling its responsibilities in the
management of risk in Tyro.
As set out in its charter, the Board Risk Committee provides non-executive oversight of the implementation and on-
going operation of Tyro’s risk management framework. The Board Risk Committee provides recommendations to
the Board on risk appetite; reviews and approves the frameworks for managing risk; monitors the risk profile,
exposures against limits and the management and control of our risks.
Board Remuneration Committee
The primary objective of the Remuneration Committee is to assist the Board in fulfilling its responsibilities in the
management of pay and reward policies and practices and linking these to the overall risk management practices
and risk outcomes.
Tyro Payments Limited ABN 49 103 575 042
Annual Report 2014
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As set out in its charter, the Board Remuneration Committee conducts regular reviews and makes
recommendations to the Board on the remuneration of the CEO, direct reports of the CEO, and other persons
whose activities may affect the financial soundness of Tyro and any other person specified by APRA.
The board currently consists of six directors, with a majority of four directors including the Chairman meeting
APRA’s independence requirements. The directors of the board have set standards applicable at all levels of Tyro
to ensure compliance with the Tyro Code of Conduct, the Corporations Act 2001, the National Privacy Principles
2001 and the Banking Act 1959 and all other applicable regulation. The board has established a policy of board
renewal that ensures it has the necessary range of financial and other skills, experience and knowledge necessary for
Tyro’s business.
Our market position
The main revenue source for credit and debit card payment acceptance is the $2.5 billion merchant service fee
(MSF) charged to Australian merchants in FY1314. That reflects the MSF charged on Visa, MasterCard and eftpos
card transactions. American Express and Diners have direct relationships with their merchants. Tyro’s MSF
income increased during the year to $43.4 million.
Balancing continued investment with earnings growth
Since February 2003, Tyro has been working on developing its technology, gaining access to the banking system
and building its merchant portfolio. Tyro launched its first EFTPOS facility in April 2007.
In the month of December 2011 and then every month from March 2012 onwards, Tyro delivered a net profit. With
this year’s result, Tyro has delivered its second profitable fiscal year. The results reflect the balancing of continued
investment and earnings growth.
Going forward Tyro will emphasise even higher investments into engineering, operations, sales and other
professionals so as to broaden the capacity for product development and for continued growth. Towards the end of
calendar year 2014, Tyro will move into significantly larger office premises taking three floors at 155 Clarence
Street, Sydney CBD. One floor will be sublet.
Historical financial year summary
Over the financial year ended 30 June 2014, the transaction volume grew by 29 per cent for the year and the
operating income by 36 per cent. Over the year there was further significant investment into the engineering and
sales marketing capacity. This led to a 40 per cent more than proportional annual increase of the total expenses.
The earnings before interest and tax increased thus less than proportional with 13 per cent.
Unaudited information
FY0708
FY0809
FY0910
FY1011
FY1112
FY1213
FY1314
Transaction Volume AUD 115,453,972 510,888,137 1,310,465,042 1,983,290,792 2,950,695,145 4,074,382,050 5,250,451,196
Operating Income
870,575
2,580,520
6,578,940
7,694,629
11,873,327
17,473,389
23,712,008
Employment Expenses
3,717,161
3,921,667
4,683,300
5,520,530
7,856,206
9,160,129
12,568,328
Other Expenses
1,994,879
2,800,133
2,938,174
3,646,196
4,227,746
4,879,680
6,519,757
Share based payments
1,013,245
971,875
781,423
133,774
84,503
49,001
671,812
Total Expenses
Expense Ratio
Interest Expense
6,725,285
7,693,675
8,402,897
9,300,500
12,168,455
14,088,810
19,759,897
773%
298%
128%
121%
102%
80%
-
-
-
209,645
233,106
166,116
84%
63,362
EBIT
(5,854,710)
(5,113,155)
(1,823,957)
(1,605,871)
(295,128)
3,458,830
3,915,040
Tyro Payments Limited ABN 49 103 575 042
Annual Report 2014
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Building the merchant portfolio
Tyro has grown its merchant portfolio in the health, hospitality and general retailing space.
No of merchants or merchant outlets (MID)
Month of
June 2012
6,351
Month of
June 2013
8,024
Month of
June 2014
10,140
No of credit and debit card transactions
3,855,041
5,268,401
7,080,574
No of Medicare Easyclaim transactions
882,169
890,208
1,146,241
Value of credit and debit card transactions
$271.8m
$356.1 m
$452.3m
Growth
26%
34%
17%
27%
Tyro Health: Medical Practices and Pharmacies
Since launching, Tyro has focused on opportunities within primary care and related health markets. Specifically
Tyro has targeted the installed base of Health Communication Network (HCN). HCN is the leading Australian
provider of e-health and practice automation solutions and addresses both the General Practitioner and Specialist
Practitioner market place.
During the year, Tyro has certified and started to rollout integrated payment and Medicare Easyclaim solutions with
further provider of practice automation solutions.
Also, Tyro has developed a solution that provides allied health practices with a solution for integrated payment as
well as claiming with Australia’s private health funds and Medicare Australia. The major modalities that will benefit
from this solution in the future are dentists, optometrist and physiotherapists.
Tyro has certified further Point of Sale (POS) software vendors that target specifically the pharmacy space. We
expect to build our presence in that segment further.
Medicare Easyclaim
Tyro has deployed Australia’s first integrated Easyclaim platform. Easyclaim is a real-time Medicare claiming and
reimbursement service for patient-paid and bulk bill claims using an EFTPOS terminal and the EFTPOS network
from the medical practice immediately after the consultation has occurred.
HCN has integrated the Easyclaim platform into its PracSoft practice management system (PMS). The seamless
electronic payment, claiming, reimbursement and reconciliation solution was launched in April 2009. The claim and
Medicare card data is automatically transferred from the PMS, where it resides, through the Tyro EFTPOS terminal
to Medicare and from Medicare back to the PMS for reconciliation.
Subsequently, the integrated Medicare Easyclaim solution was also launched with Blue Chip, HCN’s equivalent
PMS for the specialist medical practices space. Then other practice management software providers like Abaki
Practice 2000, Best Practice, Clinical Computers and Medilink have integrated with Tyro to market and deliver
integrated EFTPOS and Medicare Easyclaim to their practices franchise.
Billing and claiming with Tyro’s Integrated Easyclaim eliminates data entry errors and printing of paper vouchers.
End of day banking is fast and accurate and immediate payments reduce the practice’s outstanding debt.
Patients enjoy instant Medicare rebates by swiping their card and seeing their rebate in their account 11 seconds
later. For bulk bill claims, they can assign their right to benefit to the practitioner right on the terminal.
Medicare statistics show that in June 2014 there were 9,016,986 claims for GP Professional Attendances. During
the same month, Tyro processed 1,014,891 Easyclaim transactions. Thus at this juncture, Tyro is assumed to
process in excess of 11.6% of GP professional attendances in Australia.
Tyro Payments Limited ABN 49 103 575 042
Annual Report 2014
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By end of June 2014, 3,087 General and Specialist practices had signed up to use Tyro’s Integrated Easyclaim
solution.
Tyro Retail
Tyro is continuing to execute its overall strategy of accessing merchants via Point of Sale (POS) vendors. The Tyro
Terminal Adaptor (TTA) and iClient enable the POS vendors to implement the EFTPOS integration protocol
directly with Tyro. This means that integration no longer requires weeks of effort but merely days and integrations
are far more robust.
As at 30 June 2014, Tyro has 114 certified POS and PMS solutions, 13 POS solutions in certification and 46 at
some stage of development.
The Product Management Team has been working closely with POS and PMS providers to deliver integrated
reporting, reconciliation and settlement solutions that automate the end of day processing used by our merchants.
There is a “headless” version of the TTA that allows the POS vendor to provide integrated EFTPOS with his own
skin i.e. the look and feel of his own user interface.
Tyro EFTPOS terminals process card payment transactions with an average of three seconds with most POS
software and without performance degradation though busy peak trading times like Christmas.
Reconciliation has become easy, since the cash register and EFTPOS reports always match. There are no more
time-consuming manual adjustments and printouts each evening.
With a Dynamic Currency Conversion (DCC) feature, customers can pay in more than 135 different currencies
eliminating surprises when they get back home. For the merchant, DCC provides extra revenue from the
generated foreign exchange margins.
Tyro Hospitality
During the 2011 financial year Tyro launched its integrated Pay at Table solution. This solution permits the
payment terminal to communicate with a restaurant’s POS over a wireless network, thus permitting pay at table
transactions to be conducted on an integrated basis. There is now a comprehensive suite of features including
tipping at table, tip completion at the POS, splitting amounts and opening bar tabs.
At this stage, Tyro is not aware of any other acquirer that offers similar functionality.
On 1 August 2014, the phase-out of the cardholder’s signature as acceptable authentication method for face-to-
face payment card transactions has commenced. Going foward, the consumer will be required to enter their four-
digit PIN. That impacts particularly the hospitality space, where table service restaurants have to arrange now for
the terminal to be brought to the table to enable the payment process and the PIN entry.
Tyro Payments Limited ABN 49 103 575 042
Annual Report 2014
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With Tyro the patron will not be forced to leave their seat and pay at the cashier using the four digit PIN code, or
the restaurateur will not be forced back into an unintegrated, error prone and inefficient table payment process.
Tyro provides an integrated PIN ready solution.
Tyro’s Pay@Table makes payments easy. Customers can use their PIN to securely pay, split and tip without
leaving the table. Even better, their POS won’t be locked down while bills are being settled, so restaurant operators
can process payments quickly, turn tables faster, and still provide a great payment service.
With Tyro’s BarTab function, customers pre-authorise their bar tab limit and hold onto their card. The bar operator
can finalise the tab without seeing the card again and their customers are only charged for what they use.
With the automated reconciliation, the cash register and EFTPOS reports always match eliminating time-
consuming manual adjustments or tip entries. Restaurateurs can choose from manual or automatic settlement up
to 5am.
Leveraging the Internet
The Tyro architecture has brought EFTPOS into the internet age. Tyro removes constraints and enables
businesses, no longer tied to legacy technology, to radically improve the efficiency of their processes. Merchants
can increase transaction speed and lower communication expense by using the public internet or for larger retail
organisations their corporate network.
Software vendors can integrate directly with Tyro eliminating an expensive software and hardware middleware
layer and thus point of failure used by incumbents for aggregation and integration purposes. Tyro provides the
capability of secure integrated credit and debit card processing in a “thin client” (web-based) infrastructure. At this
stage, Tyro is not aware of any other acquirer that offers similar functionality.
Availability
Tyro has maintained 100% uptime with its live-live infrastructure. Even during maintenance downtime merchants
are able to continue to transact as our terminals will automatically connect to any available application switch
within either of our two data centres. When integrated the merchant’s POS also uses either data centre. During the
year, Tyro regularly tested recovery of our infrastructure components and transient network failures.
Environmental Sustainability
Climate change is not simply an environmental issue. It is a key business and social issue which impacts us all.
By the very nature of its innovative internet-based technology, Tyro is contributing to a more sustainable future with
paperless statements, integrated receipt, online reporting and web based documentation. With the development of
integrated receipt Tyro continues to further expand its environmental awareness beyond corporate headquarters to
a growing proportion of its customer base.
Tyro has a company-wide recycling program and continues to search for new and efficient ways to minimise its
environmental footprint.
Employees
Tyro employed 127 employees as at 30 June 2014 (compared to 93 employees at 30 June 2013). Our people are
critical to our continued success. By utilising comprehensive recruitment and pre-screening practices for all
employees, along with at least annual performance management reviews, Tyro endeavours to recruit, retain and
suitably reward the best people in the industry. All employees are offered to participate in the Employee Share
Option Plan.
Investments for Future Performance
Tyro has invested significantly in human capital to bed down the availability and speed of the switching and
payments system architecture and to increase the capacity to deliver features and functions tailored to specific
industries’ needs. It has also invested in the purchase of servers and networking to ensure sufficient scalability of
the production IT infrastructure to meet the continued growth of our acquiring services.
In parallel, the Company has been building the non-engineering capability of the business to support the sales and
operational capability necessary to continue to scale up its acquiring services. Tyro is active in the market to hire
software engineers to increase the development capacity further.
Tyro Payments Limited ABN 49 103 575 042
Annual Report 2014
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Performance Indicators
Reviewing and approving all Tyro business strategies and significant policies, the board ensures that all aspects of
management and operations conform to its strategy, direction and policies. Additionally, the board monitors
management practice and ensures that senior management adhere to set KPI’s in all areas of the business. It
practices a rigorous program of board meetings, board committee meetings and a stringent review of a range of
regular management reports encompassing all aspects of the business, including finance, operations, sales and
strategy.
In particular, the board ensures that an effective system of risk management and internal control is established and
maintained, and that senior management proactively monitors the effectiveness of the risk management
framework.
The highlights in the industry
Hype around new mobile payment technologies mainly capitalising on the propagation of smartphones is
invigorating innovation and investment into front-end payment solutions. With NFC, iPhone 5, Apple Passbook,
Google Wallet, Square, PayPal and others, consumers and merchants are daily overwhelmed with news on new
developments in mobile payments and mobile-pass technology.
As these new solutions get adopted, this will result in dramatically increased transaction volumes putting further
stress on the failing back-end legacy core payment systems. Tyro has been very vocal and critical in that regard.
Regulatory environment
The Reserve Bank of Australia (RBA) has concluded its Strategic Review of Innovation in the payment space with
increased engagement and oversight. There are significant efforts under way to reinforce the governance
framework, so as to drive the overdue investments into an open, real-time retail payment infrastructure addressing:
real-time interbank settlement and account posting
•
• network choice in contactless environments
•
• access to the payment system infrastructure
retail payment system reliability
Tyro continues to suffer from constraints due to the challenging EFTPOS access regime and expansion barriers
and imbalanced and discriminatory structures and behaviours in the payment space. The score card for the
industry’s ability of allowing a new entrant to compete within fair rules and on a level playing field continues to fall
short.
If that remains the case, parallel payment worlds will develop without regulatory oversight and thus with all the
risks and failures that this engenders for the community. It is in the public interest to have an open but regulated
payment system where innovation can happen inside the system with trust and security maintained.
Positioning in the new world
The new world of mobile internet connected POS and EFTPOS devices and of cloud based applications should
play well to Tyro’s strengths of an end-to-end internet acquiring platform and its secure internet integration
architecture. Tyro owning its technology should be able to compete well with bringing innovative solutions fast to
market and with custom tailored features and functions to the requirement of specific vertical market segments.
Currently, Tyro is extending its software partnerships to those vendors that provide selling and payment solutions
in this new cloud world. Tyro proposes the easiest, safest and most reliable direct integration model for new POS
software entrants or incumbents extending their offerings to the new platforms. Tyro has launched a generation of
new desktop colour, contactless and 3G enabled EFTPOS terminals.
While there is a lot of enthusiasm, Tyro has to be recognisant that the real ubiquitous infrastructure for
smartphones and tablets to be capable of handling payments, passes and membership cards is possibly a decade
away. And even then, merchants will have to accept all the older payment instruments, be it cash, cheque,
magnetic and EMV card, mobile wallet, coupons. Tyro sees itself as the trusted partner of the software industry
and the merchant community navigating through the proliferation of payment instruments and offering seamless
and efficiently integrated solutions.
Tyro Payments Limited ABN 49 103 575 042
Annual Report 2014
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Strategic choice – further growth
Against the background of all the opportunities arising from new technologies, Tyro intends to continue to invest
even faster into the further build-up of its sales and engineering teams. Tyro is currently in the market seeking Java
Developers. Tyro needs only top talent to work on its mission critical payment and banking applications. On the
other hand Tyro is a very unique and attractive to prospective employees, marrying agile development methods
with deep banking knowledge and an opportunity to make a major difference for the Australian community.
Information for shareholders
We report to shareholders each year, in late August or September, with the Annual Report and then the Annual
General Meeting. We also report half-yearly to shareholders via an email newsletter in January, following the end
of the half-year. A hard copy of the Annual Report can be obtained by contacting the Company Secretary.
Annual General Meeting
The Tyro Annual General Meeting (AGM) will be held at the Hilton Sydney, 488 George Street Sydney NSW 2000
on Thursday, 23 October 2014 commencing at 4pm.
Shareholder Information
For information about your shareholding or to notify a change of address etc., you should contact the company via
the Company Secretary
Phone: (02) 8907 1714
Email: jmitchell@tyro.com
Tyro Payments Limited
Attn: Company Secretary
Level 2
125 York Street
Sydney NSW 2000
Electronic Communications
Shareholders can elect to receive the Annual Report and shareholder newsletters by email. Shareholders who
wish to register or notify a change of their email address should contact the company via the Company Secretary
Tyro Payments Limited
Attn: Company Secretary
Level 2
125 York Street
Sydney NSW 2000
Phone: (02) 8907 1714
Email: jmitchell@tyro.com
Tyro Payments Limited ABN 49 103 575 042
Annual Report 2014
9
Tyro Payments Limited
ABN 49 103 575 042
Directors Report
Year ended 30 June 2014
Tyro Payments Limited ABN 49 103 575 042
Annual Report 2014
10
CONTENTS
PAGE
Directors’ Report
Independent Auditor Declaration
Statement of Comprehensive Income
Statement of Financial Position
Statement of Cash Flow
Statement of Changes in Equity
Notes to the Financial Statements for the year ended 30 June 2014
Note 1 – Statement of Accounting Policies
Note 2 – Revenue and Expense
Note 3 – Income Tax
Note 4 – Cash and Cash Equivalents
Note 5 – Trade and Other Receivables
Note 6 – Inventories
Note 7 – Available for Sale Investments
Note 8 – Property, Plant and Equipment
Note 9 – Share Based Payments
Note 10 – Trade Payables and Other Liabilities
Note 11 – Provisions
Note 12 – Long Service Leave Liability
Note 13 – Contributed Equity and Reserves
Note 14 – Financial Risk Management Objectives, Policies and Processes
Note 15 – Commitments and Contingencies
Note 16 – Leases
Note 17 – Segment Reporting
Note 18 – Auditor’s Remuneration
Note 19 – Related Party Disclosures
Note 20 – Matters subsequent to the end of financial year
Directors’ Declaration
Independent Auditor Report
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Tyro Payments Limited ABN 49 103 575 042
Annual Report 2014
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Directors Report
The Board of Directors of Tyro Payments Limited present their report together with the financial statements for the
financial year ended 30 June 2014.
Directors
The names and details of the company’s directors in office during the financial year and until the date of this report
are Kerry Chisholm Dart Roxburgh, Michael Alexander Cannon-Brookes, Rebecca Dee-Bradbury, Robert Alexander
Ferguson, Paul Gordon Rickard and Hans-Josef Jost Stollmann. Skills, qualifications, experience and special
responsibilities for each director are set out below:
Kerry Roxburgh, Chairman
Non-executive Director since 18 April 2008
Kerry is currently the Lead Independent non-executive Director of Ramsay Health Care Ltd, and a non-executive
director of the Medical Indemnity Protection Society and of MIPS Insurance Ltd. He is Chairman of the Charter Hall
Group and of Tasman Cargo Airlines Ltd. Kerry is Deputy Chairman of Marshall Investments Pty. Ltd. He is also a
member of the Advisory Board of AON Australia.
In 2000 he completed a 3 year term as CEO of E*TRADE Australia (a business that he co-founded in 1997),
becoming its non-executive Chairman until June 2007, when it was acquired by the ANZ Bank. Prior to this
appointment he was an Executive Director of Hong Kong Bank of Australia Group where for 10 years from 1986, he
held various positions including Head of Corporate Finance and Executive Chairman of the group’s stockbroker,
James Capel Australia. Until 1986 Mr Roxburgh was in practice for more than 20 years as a Chartered Accountant.
Kerry is a member of the Audit Committee, Remuneration Committee and Risk Committee.
Directorships held in the last three years:
• LawCover Insurance Group – Deputy Chairman (Resigned July 2011)
• TEKTUM Limited – Chairman (Resigned January 2013)
• Tyro Payments Limited
Mike Cannon-Brookes
Non-executive Director since 10 December 2009
Michael is Co-Founder, CEO and director of Atlassian, an innovative, award-winning enterprise software company
based in Australia and established in 2002. Michael was named Australian IT Professional of the Year in 2004,
awarded 'Australian Entrepreneur of the Year' by Ernst & Young in 2006 and honoured by the World Economic Forum
in 2009 as a Young Global Leader. Michael is an active investor and advisor to technology-focused ventures. Michael
is Chairman of the Remuneration Committee and member of the Audit and Risk Committees.
Directorships held during the past three years:
• Atlassian Corporation Pty Limited & Subsidiaries
• Tyro Payments Limited
Rebecca Dee-Bradbury
Non-executive Director since 5 February 2014
Rebecca has a background in strategic marketing and has held senior regional executive and CEO roles with
businesses operating across Australia, New Zealand and Asia Pacific. She has extensive experience in business
transformation, marketing and innovation gained with international organisations such as Kraft/Cadbury, Maxxium
and Lion Nathan/Pepsi Cola Bottlers. Rebecca is also a member of the Prime Minister’s Manufacturing Leaders
Group and the Premier Napthine’s Food and Agriculture to Asia Strategic Advisory Committee
Directorships held during the past three years:
Independent non-executive director BlueScope Steel Ltd (current)
Independent non-executive director Tyro Payments (current)
•
•
• Member, Federal Government’s Asian Century Strategic Advisory Board
• Tyro Payments Limited
Tyro Payments Limited ABN 49 103 575 042
Annual Report 2014
12
Rob Ferguson
Non-executive Director since 14 November 2005
Rob began his career as a research analyst for a Sydney stockbroker. He joined Bankers Trust Australia in 1972
and became managing director in 1985. By mid 1990s, BT had $50 billion under management. Rob became
chairman of BT Funds Management in 1999 until he resigned the position in 2002. Rob is Chairman of the Risk
Committee and a member of the Audit and Remuneration Committees.
Directorships held during the past three years:
• Chairman of GPT Management Holdings Limited
• Director of the Lowy Institute.
• Tyro Payments Limited
• Non-executive Chairman of IMF (Australia) Ltd
• Non-executive Chairman of Primary Health Care Limited
• Chairman of SmartWard Holdings Pty Ltd (appointed Feb-12)
• Non-executive Director of Watermark Market Neutral Fund Limited (appointed 28-May-13)
Other previous directorships of listed or unlisted companies held by Rob Ferguson:
• Director of Westfield Holdings Ltd (1994 – 2004)
• Chairman of Vodafone Australia (2000 – 2002)
• Chairman of Nextgen Limited (2000 – 2004)
• Director of Racing NSW (2004 – 2009)
• Deputy Chair of the Sydney Institute (1993 – 2013)
Paul Rickard
Non-executive Director since 28 August 2009.
Paul is a company director, financial adviser and financial services consultant. He was previously the Executive
General Manager, Payments & Business Technology for the Commonwealth Bank. During his 20 year career at
the CBA, Paul was the founding Managing Director of CommSec, which he led from 1994 through to 2002. In
2005, Paul was named ‘Stockbroker of the Year’ and admitted to the Industry Hall of Fame. Paul is Chairman of
the Audit Committee and member of the Risk Committee.
Directorships held during the past three years:
• Tyro Payments Limited
• Property Exchange Australia Limited
• Switzer Financial Group Pty Ltd
• Halidon Asset Management Ltd
• Religare Securities Australia Pty Ltd (ceased)
• Lumus Financial Services Pty Ltd
• Substancia Capital Limited
Jost Stollmann
Director and CEO since 5 April 2005
Jost founded and grew the German system and network integrator CompuNet Computer AG into a US$1B
company, sold it to GE Capital and led the integration and expansion of GE Capital IT Solutions across the
continent as president of Europe. As Federal Shadow Minister of Economy and Technology, he ran and managed
his own election campaign contributing significantly to the landslide victory of the first German government of
Chancellor Gerhard Schröder.
Directorships held during the past three years:
• Tyro Payments Limited
Tyro Payments Limited ABN 49 103 575 042
Annual Report 2014
13
Company Secretary
Our Company Secretary as at 30 June 2014 is Justin Mitchell.
Justin was appointed on 19 March 2007 to build and manage the compliance and risk frameworks and oversee
regulatory obligations. Justin was appointed Company Secretary on 12 April 2007. The Company Secretary
ensures all relevant business is put to the board and the decisions of the board are implemented. In the capacity of
Chief Risk Officer he is accountable for enabling the efficient and effective governance (control environment) of
significant risks.
DIVIDENDS
No dividends have been declared or paid since the date of incorporation.
CORPORATE INFORMATION
Corporate Structure
Tyro Payments Limited (“Tyro”) is an unlisted public company. It is incorporated and domiciled in Australia. The
registered office of Tyro is Level 2, 125 York Street, Sydney, New South Wales, 2000.
Interests in the shares and options of the company and related bodies corporate
As at the date of this report, the interests of the directors in the shares and options of Tyro Payments Limited were:
Director
Shares
Options
Kerry Roxburgh1
Michael Cannon-Brookes2
Rebecca Dee-Bradbury
Rob Ferguson3
Paul Rickard
Jost Stollmann4
940,182
2,966,667
-
30,352,950
328,911
1,824,777
2,760,650
-
4,612,017
1,357,874
59,336,874
11,493,026
1 Includes ordinary shares and options jointly held with Alex Roxburgh as trustees for the Kerry & Alex
Roxburgh
Superannuation Fund being an associate of Kerry Roxburgh
2 Includes ordinary shares by Abyla Pty Ltd and Grokco Pty Ltd being associates of Michael Cannon-Brookes
3 Includes ordinary shares held by Torryburn Superannuation Fund and Simon Peter Price and Rachel Emma
Ferguson being associates of Rob Ferguson
4 Includes options held by Fiona Stollmann being an associate of Jost Stollmann
Nature of operations and principal activities
Tyro is a financial institution providing payment solutions and related services to Australian merchants. Tyro has
implemented appropriate systems and controls to comply with the stringent prudential and regulatory requirements
to perform transaction processing, clearing and settlement activities within the Australian Payments System.
There have been no significant changes in the nature of those activities during the year.
Tyro Payments Limited ABN 49 103 575 042
Annual Report 2014
14
OPERATING AND FINANCIAL REVIEW
Operating Results for the Year
Tyro reported an operating result before tax of $3,851,678 (2013: $3,292,714).
2014
2013
2012
Revenues
Operating Profit
Revenues
Operating Profit
Revenues
Operating Loss
52,643,572
3,851,678
39,090,589
$3,292,714
$28,440,089
$528,234
Capital Structure
Under its banking authority as a Specialist Credit Card Institution, Tyro is subject to prudential capital requirements
set by the Australian Prudential Regulation Authority (APRA). Total Tier 1 capital held as at 30 June 2014 was
$19,9M
During the period, 10,194,219 ordinary shares were issued upon exercise of options raising a total of $706,306.04
additional capital.
Cash from Operations
Tyro had cash and cash equivalents of $9,010,582 at the end of the period.
Risk Management
The Board is responsible for reviewing and approving the risk management strategy, including determining our
appetite for risk. The Board has delegated to the Board Risk Committee responsibility for providing
recommendations to the Board, setting risk appetite, approving frameworks, policies and processes for managing
risk, and determining whether to accept risks beyond management’s delegated authorities.
The Board Risk Committee monitors the alignment of our risk profile with our risk appetite, and with our current
and future capital planning. The Board Risk Committee receives regular reports from management on the
effectiveness of our management of business risks.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
There were no significant changes in the state of affairs.
Significant events after balance date
There are no significant events after balance date.
Likely developments and expected results
The directors expect that in the 2014/15 financial year Tyro will continue to grow the business and continue to
expand the product features of its merchant payment solutions.
SHARE OPTIONS
Unissued shares
As at the date of this report, there were 74,901,450 un-issued ordinary shares under options.
Option holders do not have any right, by virtue of the option, to participate in any share issue of the company.
Tyro Payments Limited ABN 49 103 575 042
Annual Report 2014
15
Ernst & Young
680 George Street
Sydney NSW 2000 Australia
GPO Box 2646 Sydney NSW 2001
Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
ey.com/au
Auditor’s Independence Declaration to the Directors of Tyro
Payments Limited
In relation to our audit of the financial report of Tyro Payments Limited for the financial year ended 30
June 2014, to the best of my knowledge and belief, there have been no contraventions of the auditor
independence requirements of the Corporations Act 2001 or any applicable code of professional
conduct.
Ernst & Young
Clare Sporle
Partner
27 August 2014
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2014
TYRO PAYMENTS LIMITED
ABN 49 103 575 042
Note
2014
$
2013
$
Continuing Operations
Fees and commission income
Fees and commission expense
Net fees and commission income
Terminal and accessories sale
Terminals and accessories COGS
Net terminal and accessories sale income
Interest income
Other income
Total Operating income
Less: Expenses
Employee benefits expenses
Administrative expenses
Depreciation
Impairment of inventories
Interest expense
Other expenses
Total operating expenses
Foreign currency (loss)/ gain
Operating profit before tax expense
Income tax (expense)/benefit
Net income for the year
Other Comprehensive Income
2
2
2
2
2
3
51,326,905
(28,465,964)
22,860,941
554,232
(465,600)
88,632
37,584,389
(21,184,202)
16,400,187
706,558
(432,998)
273,560
749,743
775,396
12,692
24,246
23,712,008
17,473,389
13,736,295
4,427,309
1,275,943
213,428
63,362
106,922
19,823,259
9,707,245
3,195,248
1,098,146
-
166,116
88,171
14,254,926
(37,071)
74,251
3,851,678
3,292,714
(908,046)
6,572,888
2,943,632
9,865,602
Net fair value gain on available for sale financial instrument
31,804
52,883
Total comprehensive income for the period
2,975,436
9,918,485
The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
Tyro Payments Limited ABN 49 103 575 042
Annual Report 2014
18
STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2014
TYRO PAYMENTS LIMITED
ABN 49 103 575 042
Note
2014
$
2013
$
ASSETS
Current Assets
Cash and cash equivalents
Trade and other receivables
Prepayments
Inventories
Total Current Assets
Non-current Assets
Available-for-sale investment
Property, plant and equipment
Deferred Tax Assets
Total Non-current Assets
TOTAL ASSETS
LIABILITIES
Current Liabilities
Trade payables and other liabilities
Provisions
Total Current Liabilities
Non - current Liabilities
Employee benefit liabilities
Total Non - current Liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Reserves
Retained earnings
TOTAL EQUITY
4
5
6
7
8
3
10
11
12
13
13
13
9,010,582
12,098,835
309,801
293,259
21,712,477
381,381
2,995,625
5,574,985
8,951,991
22,945,051
2,645,742
185,343
374,652
26,150,788
335,945
1,736,810
6,496,664
8,569,419
30,664,468
34,720,207
3,383,112
210,741
3,593,853
12,025,019
122,502
12,147,521
831,606
831,606
687,231
687,231
4,425,459
12,834,752
26,239,009
21,885,455
33,911,811
8,040,482
(15,713,284)
33,205,505
7,255,048
(18,575,098)
26,239,009
21,885,455
The above Statement of Financial Position should be read in conjunction with the accompanying notes.
Tyro Payments Limited ABN 49 103 575 042
Annual Report 2014
19
TYRO PAYMENTS LIMITED
ABN 49 103 575 042
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2014
Note
2014
$
2013
$
Cash flows from operating activities
Payments to suppliers and employees
Interest and fee income received
Dividend income received
Receipts from Terminals & accessories sale
Net cash flows from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Proceeds from disposal of property, plant and equipment
Net cash flows from investing activities
2
4
Cash flows from financing activities
Proceeds from loan
Loan repayment
Interest paid on Loans
Proceeds from exercise of share options
Net cash flows from financing activities
Net increase in cash and cash equivalents
Net foreign exchange difference
Cash and cash equivalents at beginning of year
(65,369,258)
52,796,750
1,908
554,233
(12,016,367)
(2,541,923)
17,948
(2,523,975)
6,100,000
(6,100,000)
(63,362)
706,306
642,944
(13,897,398)
(37,071)
22,945,051
(33,739,901)
39,039,399
1,381
706,558
6,007,437
(1,211,954)
50,469
(1,161,485)
5,500,000
(5,500,000)
(166,116)
7,842
(158,274)
4,687,678
74,251
18,183,122
Cash and cash equivalents at end of year
4
9,010,582
22,945,051
The above Statement of Cash Flows should be read in conjunction with the accompanying notes.
Tyro Payments Limited ABN 49 103 575 042
Annual Report 2014
20
TYRO PAYMENTS LIMITED
ABN 49 103 575 042
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2014
Attributable to equity holders of Tyro Payments Limited
Contributed
Equity
$
33,197,663
Asset
Revaluation
Reserve
$
124,975
Note
Employee
Equity
Benefits
Reserve
S
Retained
Earnings
$
6,262,249 (28,366,478)
Option
Premium
Reserve
$
480,320
General
Reserve for
Credit
Losses
$
211,398 11,910,127
Total
$
-
-
-
7,842
-
-
52,883
52,883
-
-
-
-
9,865,602
-
-
-
49,001
9,865,602
-
-
-
-
-
(74,222)
-
-
-
-
-
9,865,602
52,883
9,918,485
7,842
49,001
74,222
-
-
-
-
-
At 30 June 2012
Gain for the year
Other comprehensive
income
Total comprehensive
income
Issue of share capital
Share-based payments
Transfer to general
reserve for credit
losses
At 30 June 2013
33,205,505
177,858
6,311,250 (18,575,098)
480,320
285,620 21,885,455
Gain for the year
Other Comprehensive
income
Total comprehensive
income
Issue of share capital
Share-based payments
Transfer to general
reserve for credit
losses
-
-
-
706,306
-
-
31,804
31,804
-
-
-
-
2,943,632
-
-
-
671,812
2,943,632
-
-
-
-
-
(81,818)
-
-
-
-
-
-
-
-
-
-
2,943,632
31,804
2,975,436
706,306
671,812
81,818
-
At 30 June 2014
13
33,911,811
209,662
6,983,062 (15,713,284)
480,320
367,438 26,239,009
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.
Tyro Payments Limited ABN 49 103 575 042
Annual Report 2014
21
TYRO PAYMENTS LIMITED
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
1. STATEMENT OF ACCOUNTING POLICIES
The significant policies which have been adopted in the preparation of this financial report are set out below:
The financial report of Tyro Payments Limited (the Company) was authorised for issue in accordance with a resolution of the
directors on 20 August 2014.
Tyro Payments Limited is an unlisted public company, incorporated and domiciled in Australia.
The nature of the operations and principal activities of the Group are described in the directors’ report.
(a) Basis of preparation
The financial report is a general purpose financial report, which has been prepared in accordance with the requirements of the
Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting
Standards Board. The financial report has also been prepared on a historical cost basis, except for available-for-sale
investments, which have been measured at fair value.
The financial report is presented in Australian dollars and all values are rounded to the nearest dollars unless otherwise stated.
Management has reviewed the method of presentation of operating expenses and has determined that classifying items by
nature, rather than function is appropriate. As a result, prior year comparative information for these amounts, and as necessary,
has been reclassified to achieve consistency in disclosure with current financial year amounts and other disclosures.
(b) Compliance with IFRS
The financial report also complies with International Financial Reporting Standards (IFRS) as issued by the International
Accounting Standards Board.
(c) Going concern
The Company is in its seventh year of operation and has made an operating profit of $3,851,678 (2013: profit $3,292,714.
The Directors consider the Company is able to pay its debts as and when they fall due, and therefore the Company is able to
continue as a going concern.
(d) Statement of compliance
The financial report complies with Australian Accounting standards issued by the Australian Accounting Standards Board and
complies with International Financial Reporting Standards issued by the International Financial Reporting Standards Board.
(e) New Accounting standards and interpretations
Australian Accounting Standards and Interpretations, which have recently been issued or amended but are not yet effective
have not been adopted by the Company for the annual reporting period ended 30 June 2014, as outlined in the table below.
These new standards, when applied in future periods, are not expected to have a material impact on the Statement of Financial
Position and Statement of Comprehensive Income of the Company.
(i) Changes in accounting policies
The accounting policies are consistent with those applied in the previous financial year and corresponding interim period.
The Company has adopted the following new and amended Australian Accounting Standards and AASB
Interpretations
AASB 13 - Fair Value Measurement and AASB 119 - Employee Benefits
Tyro Payments Limited ABN 49 103 575 042
Annual Report 2014
22
TYRO PAYMENTS LIMITED
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
1. STATEMENT OF ACCOUNTING POLICIES (cont'd)
(ii) Accounting standards and interpretations issued but not yet effective
Title
(summarised)
Amendments to
Australian
Accounting
Standards -
Offsetting
Financial Assets
and Financial
Liabilities
Levies
Australian
Accounting
Standard
Reference
AASB 2012-3
Interpretation
21
Financial
Instruments
AASB 9
Application
date for
Company
1-Jul-14
1-Jul-14
1-Jul-18
Application
date of
standard
1-Jan-14
1-Jan-14
1-Jan-18
Impact on
Company
financial
report
The company
has not yet
determined
the extent of
the impact of
the
amendments,
if any
The company
has not yet
determined
the extent of
the impact of
the
amendments,
if any
The company
has not yet
determined
the extent of
the impact of
the
amendments,
if any
Summary
AASB 2012-3 adds application guidance
to AASB 132 Financial Instruments:
Presentation to address inconsistencies
identified in applying some of the offsetting
criteria of AASB 132, including clarifying
the meaning of "currently has a legally
enforceable right of set-off" and that some
gross settlement systems may be
considered equivalent to net settlement.
This Interpretation confirms that a liability
to pay a levy is only recognised when the
activity that triggers the payment occurs.
Applying the going concern assumption
does not create a constructive obligation.
AASB 9 includes requirements for the
classification and measurement of
financial assets. It was further amended by
AASB 2010-7 to reflect amendments to
the accounting for financial liabilities.
These requirements improve and simplify
the approach for classification and
measurement of financial assets
compared with the requirements of AASB
139. The main changes are described
below.
a. Financial assets that are debt
instruments will be classified based on (1)
the objective of the entity's business model
for managing the financial assets; (2) the
characteristics of the contractual cash
flows.
b. Allows an irrevocable election on initial
recognition to present gains and losses on
investments in equity instruments that are
not held for trading in other
comprehensive income. Dividends in
respect of these investments that are a
return on investment can be recognised in
profit or loss and there is no impairment or
recycling on disposal of the instrument.
c. Financial assets can be designated and
measured at fair value through profit or
loss at initial recognition if doing so
eliminates or significantly reduces a
measurement or recognition inconsistency
that would arise from measuring assets or
liabilities, or recognising the gains and
losses on them, on different bases.
Tyro Payments Limited ABN 49 103 575 042
Annual Report 2014
23
TYRO PAYMENTS LIMITED
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
1. STATEMENT OF ACCOUNTING POLICIES (cont'd)
(ii) Accounting standards and interpretations issued but not effective (cont'd)
Application
date of
standard
Impact on
Company
financial
report
Application
date for
Company
Title
(summarised)
Australian
Accounting
Standard
Reference
Summary
d. Where the fair value option is used for
financial liabilities the change in fair value
is to be accounted for as follows:
- The change attributable to changes in
credit risk are presented in other
comprehensive income (OCI)
- The remaining change is presented in
profit or loss
If this approach creates or enlarges an
accounting mismatch in the profit or loss,
the effect of the changes in credit risk are
also presented in profit or loss.
Consequential amendments were also
made to other standards as a result of
AASB 9, introduced by AASB 2009-11 and
superseded by AASB 2010-7 and 2010-
10.
The AASB issued a revised version of
AASB 9 (AASB 2013-9) during December
2013. The revised standard incorporates
three primary changes:
1. New hedge accounting requirements
including changes to hedge effectiveness
testing, treatment of hedging costs, risk
components that can be hedged and
disclosures
2. Entities may elect to apply only the
accounting for gains and losses from own
credit risk without applying the other
requirements of AASB 9 at the same time
3. In February 2014, the IASB tentatively
decided that the mandatory effective date
for AASB 9 will be 1 January 2018
AASB 2013-3 AASB 2013-3 amends the disclosure
1-Jan-14
Amendments to
AASB 136 –
Recoverable
Amount
Disclosures for
Non-Financial
Assets
Materiality
AASB 1031
requirements in AASB 136 Impairment of
Assets. The amendments include the
requirement to disclose additional
information about the fair value
measurement when the recoverable
amount of impaired assets is based on fair
value less costs of disposal.
The revised AASB 1031 is an interim
standard that cross-references to other
Standards and the Framework (issued
December 2013) that contain guidance on
materiality.
AASB 1031 will be withdrawn when
references to AASB 1031 in all Standards
and Interpretations have been removed.
1-Jan-14
1-Jul-14
1-Jul-14
The company
has not yet
determined
the extent of
the impact of
the
amendments,
if any
The company
has not yet
determined
the extent of
the impact of
the
amendments,
if any
(iii) The adoption of the above Standards and Interpretations is deemed not to have an impact on the financial
statements or performance of the Company.
Tyro Payments Limited ABN 49 103 575 042
Annual Report 2014
24
TYRO PAYMENTS LIMITED
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
1. STATEMENT OF ACCOUNTING POLICIES (cont'd)
(f) Significant accounting judgements, estimates and assumptions
In applying the Company's accounting policies management continually evaluates judgements, estimates and assumptions
based on experience and other factors, including expectations of future events that may have an impact on the Company. All
judgements, estimates and assumptions made are believed to be reasonable based on the most current set of circumstances
available to management. Actual results may differ from judgements, estimates and assumptions. Significant judgements,
estimates and assumptions made by management in the preparation of these financial statements are outlined as follows:
Share-based payments transactions - The Company recognises the cost of equity-settled transactions with employees by
reference to the fair value of the equity instruments at the date on which they are granted. The fair value is determined using
the Black-Scholes option valuation model, with the assumptions detailed in Note 9.
Classification of and valuation of investments - The Company classifies its investments in listed securities as 'available -for-sale'
investments and movements in fair values are recognised directly in equity. The fair value of listed shares has been determined
by reference to published price quotations in an active market.
Estimation of useful lives of assets - The estimation of the useful lives of assets has been based on historical experience. In
addition, the condition of the assets is assessed at least once per year and considered against their remaining useful lives.
Adjustments to useful lives are made when considered necessary. Depreciation charges are included in Note 8.
Long Service Leave - Entitlements that arise in respect of long service leave which are expected to be settled more than 12
months after the reporting date have been measured at their present values of expected future payments. Long service leave is
calculated based on assumptions and estimates of when employees will take leave and the prevailing wage rates at the time
the leave will be taken. Long service leave liability also requires a prediction of the number of employees that will achieve
entitlement to long service leave.
(g) Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can
be reliably measured. The following specific recognition criteria must also be met before revenue is recognised.
(i) Fee income
The Company derives fee income from the following sources:
- Merchant service fee income is generated from merchant customers for credit and debit card acquiring services. Fees are
charged to merchants depending on the type of transaction being performed based on a percentage of transaction value or
on a fixed amount per transaction. Fees related to the payment transactions are recognised at the time transactions are
processed. Related interchange fee, which is collected from merchants and paid to credit institutions is recognised as an
expense instead of netting-off against merchant service fee income in the Statement of Comprehensive Income.
- Revenue from terminal rental income generated from merchants is based on a fixed rental from terminals.
- Revenue from Debit Card Interchange generated from banks is based on a fixed fee per transaction and is recognised
when transactions are processed.
- Revenue from processing Medicare Easyclaim generated from merchants is based on a fixed fee per transaction and is
recognised when transactions are processed.
- Revenue from Dynamic Currency Conversion (DCC) transactions generated from merchants is calculated based on the
individual value of the transactions and is recognised once the transaction has been processed.
(ii) Interest income
Interest income is recognised in the Statement of Comprehensive Income on an accruals basis, using the effective Interest
method. This method measures the amortised cost of a financial asset and allocates the interest income over the relevant
period using the effective interest which is the rate that exactly discounts estimated future cash receipts through the expected
life of the financial asset to the net carrying amount of the financial asset.
Tyro Payments Limited ABN 49 103 575 042
Annual Report 2014
25
TYRO PAYMENTS LIMITED
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
1. STATEMENT OF ACCOUNTING POLICIES (cont'd)
(h) Leases
The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires
an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and whether
the arrangement conveys a right to use the asset.
Leases in which the Company retains substantially all the risks and benefits of ownership of the leased asset are classified as
operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased
asset and recognised as an expense over the lease term on the same basis as lease rental income. Operating lease payments
are recognised as an income or expense in the Statement of Comprehensive Income on a straight-line basis over the lease
term.
Deferred income is recognised as a liability on the Statement of Financial Position on inception of the lease. The deferred lease
incentive is then recognised in the Statement of Comprehensive Income on a straight line basis over the term of the lease,
through lease expense.
(i) Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with an original maturity of three months or less. For the
purposes of the Statement of Cash Flows, cash and cash equivalents are reported net of outstanding bank overdrafts.
(j) Trade and other receivables
Trade receivables, which generally have 30 day terms, are recognised initially at fair value and subsequently measured at
amortised cost using the effective interest method, less an allowance for any uncollectible amounts. Term Deposits are included
in Trade and other receivable.
Collectability of trade receivables is reviewed on an ongoing basis. Debts that are known to be uncollectible are written off when
identified. An allowance for doubtful debts is raised when there is objective evidence that the Company will not be able to
collect the debt.
(k) Prepayments
Prepayments are recognised for amounts paid whereby goods have not transferred ownership to the Company or where
services have not yet been provided. Upon receipt of goods or the service the corresponding asset is recognised in the
Statement of Financial Position or the expense is recognised in the Statement of Comprehensive Income.
(l) Available-for-sale Investments
Available-for-sale investments are initially recognised at fair value plus transaction costs that are directly attributable to the
acquisition of the investment. After initial recognition these investments are measured at fair value. Gains or losses on
available-for-sale investments are recognised as a separate component of equity until the investment is sold, collected or
otherwise disposed of or until the investment is determined to be impaired, at which time the cumulative gain or loss previously
reported in equity is transferred to the Statement of Comprehensive Income.
Purchase and sale of investments are recognised on settlement date - the date on which the Company receives or delivers the
asset.
(m) Inventories
(i) Cost and Valuation
The costs of purchase of inventories comprise the purchase price, import duties and other taxes (other than those subsequently
recoverable by the Company from the taxing authorities), and transport, handling and other costs directly attributable to the
acquisition of finished goods, materials and services. Trade discounts, rebates and other similar items are deducted in
determining the costs of purchase. Inventories are subsequently held at the lower of cost and their net realisable value.
Impairment is assessed on an annual basis. Inventories are derecognised upon transfer to property, plant and equipment when
leased out to merchants or rights to benefits are transferred to a third party.
Tyro Payments Limited ABN 49 103 575 042
Annual Report 2014
26
TYRO PAYMENTS LIMITED
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
1. STATEMENT OF ACCOUNTING POLICIES (cont'd)
(m) Inventories (cont’d)
(ii) Impairment
Management make assessments of the net realisable value of Inventory on an annual basis. The cost of inventory may not be
recoverable where the inventory is damaged, wholly or partially obsolete, or if selling prices have declined. In accordance with
AASB 102, where the cost of inventory exceeds the net realisable value, Inventory is written down to their net realisable value.
Net realisable value is an estimate, based on the most reliable evidence at the time, of the amount the Inventories are expected
to realise.
(n) Income Taxes
Current tax assets and liabilities for the current and prior years are measured at the amount expected to be recovered from or
paid to the taxation authority. The tax rates and tax laws used to compute the amount are those that are enacted or
substantively enacted by the by the reporting date.
(o) Deferred tax asset
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and
their carrying amounts for financial reporting purposes at the reporting date (Note 3).
(p) Other Taxes
Goods and Services Tax (GST)
Revenues, expenses, assets and liabilities are recognised net of the amount of GST except for the following:
-
-
when the GST incurred on the purchase of goods and services is not recoverable from the taxation authority, in which
case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and
trade receivables and trade payables are stated with the amount of GST included.
The net amount of GST recoverable from or payable to the taxation authority is included as part of other receivables or other
payables in the Statement of Financial Position.
Commitments and contingencies are disclosed net of the amount of GST.
(q) Acquisition of assets
All assets acquired including property, plant and equipment are initially recorded at their cost of acquisition at the date of
acquisition, being the fair value of the consideration provided plus any incidental costs directly attributable to the acquisition.
Expenditure is recognised as an asset only when it is probable that future economic benefits associated with the asset will flow
to the Company and the cost of the item can be measured reliably. All other expenditure is expensed as incurred.
(r) Property, plant and equipment
(i) Cost and Valuation
Property, plant and equipment are measured at cost less accumulated depreciation and any impairment in value. The Company
recognises in the carrying amount of an item of property, plant and equipment the cost of replacing parts when the cost is
incurred and the recognition criteria are met. When each major inspection is performed, its cost is recognised in the carrying
amount of the item of property, plant or equipment, as a replacement, provided that the recognition criteria are satisfied.
Tyro Payments Limited ABN 49 103 575 042
Annual Report 2014
27
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
TYRO PAYMENTS LIMITED
ABN 49 103 575 042
1. STATEMENT OF ACCOUNTING POLICIES (cont'd)
(4) Property, plant and equipment (cont’d)
(ii) Depreciation
Depreciation is provided on a straight-line basis over the estimated useful life of each specific item of property, plant and
equipment.
Estimated useful lives are as follows:
2014
2013
Plant and equipment:
- EFTPOS terminals
- Furniture and office equipment
- Computer equipment
3 years
5 years
4 years
3 years
5 years
4 years
The assets' residual values, remaining useful lives and depreciation methods are reassessed and adjusted, if appropriate at
each reporting date.
(iii) Impairment
Management has identified cash generating units and applicable impairment indicators in accordance with AASB 136
Impairment of Assets. The carrying values of plant and equipment are reviewed for impairment when events or changes in
circumstances indicate the carrying value may not be recoverable. If any such indication exists and where the carrying values
exceed the estimated recoverable amount, the assets are written down to their recoverable amount. The recoverable amount of
plant and equipment is the greater of fair value less costs of disposal and it's value in use.
(iv) De-recognition and disposal
An item of property, plant and equipment is derecognised on disposal or when no future economic benefits are expected to
arise from continued use of the asset. Gains and losses on disposals are calculated as the difference between the net disposal
proceeds and the asset's carrying amount and are included in the Statement of Comprehensive Income in the year the asset is
derecognised.
(s) Trade and other payables
Merchant payables arise when the Company has received monies from the relevant schemes and financial institutions.
Payables to merchants are only recognised to the extent that a liability arises. This liability arises when the proceeds have been
paid by the schemes and financial institutions and received by the Company.
Liabilities for trade and other payables are carried at cost, which is the fair value of the consideration to be paid in the future for
goods and services received, whether or not billed to the Company.
(t) Interest-bearing loan and borrowings
All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable
transaction costs. After initial recognition, interest-bearing loans and liabilities are subsequently measured at amortised cost
using the effective interest method. Fees paid on the establishment of loan facilities that are yield related are included as part of
the cost of the loans and liabilities. The fair value of the options attached to the loan is also included in the cost of the loan.
Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement of the liability
for 12 months after the reporting date. Borrowing costs consists of interest and other costs incurred in the borrowing of funds.
Tyro Payments Limited ABN 49 103 575 042
Annual Report 2014
28
TYRO PAYMENTS LIMITED
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
1. STATEMENT OF ACCOUNTING POLICIES (cont'd)
(u) Provisions and contingencies
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event and it
is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation.
If the impact of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects the risks
specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a
finance cost.
Contingent liabilities are not recognised in the Statement of Financial Position, but are disclosed in the relevant notes to the
financial statements. They may arise from uncertainty as to the existence of a liability or represent an existing liability in respect
of which settlement is not probable or the amount cannot be reliably measured. Only when settlement becomes probable will a
liability be recognised.
The Company is contingently liable for processed credit card sales transactions in the event of a dispute between the
cardholder and a merchant. If a dispute is resolved in the cardholder’s favour, the Company will credit or refund the amount to
the cardholder and charge back the transaction to the merchant. If the Company is unable to collect the amount from the
merchant, the Company will bear the loss for the amount credited or refunded to the cardholder.
Management evaluates the risk of such transactions and estimates its potential loss for credit losses based primarily on
historical experience and other relevant factors. A provision is recognised for merchant losses necessary to absorb
chargebacks and other losses for merchant transactions that have been previously processed and on which revenues have
been recorded.
From the current financial year a specific provision for credit losses is maintained when there is objective evidence that the
company will not be able to collect the debts.
(v) General reserve for credit losses
The Company provides for estimated future credit losses with a general reserve for chargebacks. The Company estimates the
reserve by using a multiple of historical losses over a rolling 120 day period of transaction values. The general reserve for credit
losses is then allocated as a separate reserve within equity.
The methodology and assumptions used for estimating general reserve for credit losses required are reviewed regularly.
(w) Employee benefits
Provision is made for employee benefits accumulated as a result of employees rendering services up to the reporting date.
These benefits include wages and salaries, annual leave and long service leave.
Entitlements arising in respect of salaries and wages, annual leaves and other employee benefits that are expected to be
settled within one year have been measured at their nominal amounts.
Entitlements that arise in respect of long service leave which are expected to be settled more than 12 months after the reporting
date have been measured at their present values of expected future payments. Long service leave is calculated based on
assumptions and estimates of when employees will take leave and the prevailing wage rates at the time the leave will be taken.
Long service leave liability also requires a prediction of the number of employees that will achieve entitlement to long service
leave.
No provision has been made for sick leave as all sick leave is non-vesting and the average sick leave to be taken in the future
by all employees at reporting date is estimated to be less than the annual entitlement for sick leave.
Tyro Payments Limited ABN 49 103 575 042
Annual Report 2014
29
TYRO PAYMENTS LIMITED
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
1. STATEMENT OF ACCOUNTING POLICIES (cont'd)
(x) Share-based payment transactions
Share-based compensation benefits are provided to employees (including Key Management Personnel) via the Employee
Share Option Plan, whereby employees render services in exchange for rights over the Company's shares.
The cost of these equity-settled transactions with employees is measured by reference to the fair value of the equity
instruments at the date at which they are granted. The fair value is determined internally using the Black-Scholes Option
Valuation Model.
The cost of equity-settled transactions is recognised, together with any corresponding increase in equity, over the period in
which the employees become fully entitled to the award (the vesting period).
The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects the extent to
which the vesting period has expired and the number of awards that, in the opinion of the Directors of the Company, will
ultimately vest. This opinion is based on the best available information at the reporting date. No adjustment is made for the
likelihood of market performance conditions being met as the effect of these conditions is included in the determination of fair
value at grant date.
No expense is recognised for awards that do not ultimately vest. There were no modifications to the terms of the outstanding
options during the financial year. Details of the types of share-based payments and their respective terms and vesting
conditions are disclosed in Note 9.
(y) Contributed equity
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are
accounted in contributed equity as a deduction, net of tax, from the proceeds of issue.
(z) Foreign currency translation
Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates ruling at the
date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the spot rate of
exchange ruling at the reporting date.
Non-monetary assets and liabilities are translated at their historic rates of exchange at their respective transaction dates.
(aa) De-recognition of assets and liabilities
Assets and liabilities are derecognised from the Statement of Financial Position upon sale, maturity or settlement. Gains and
losses arising from de-recognition of these assets and liabilities are accounted in the Statement of Comprehensive Income.
Tyro Payments Limited ABN 49 103 575 042
Annual Report 2014
30
TYRO PAYMENTS LIMITED
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
2. REVENUE AND EXPENSES
The Operating profit before tax expense has been arrived at after accounting for the following items:
Fees and commission income
Easyclaim income
Merchant service fee
Debit card interchange fee
Terminal rental income
Other fee income
Fees and commission expense
Interchange fees
Switching and settlement fees
Scheme fees
Commissions expense
Other expense
Other Income
Gain on disposal of PPE
Dividend income on financial instruments
Employee benefits expense
Wages, salaries and bonuses
Superannuation
Share based payments expense
Other employee benefits expense
Other expenses
Other Write offs
Bad debt and credit loss expense
2014
$
2,518,097
43,353,436
1,401,718
3,382,285
671,369
51,326,905
19,380,506
728,724
4,451,475
3,677,691
227,568
28,465,964
10,784
1,908
12,692
11,474,874
1,063,410
671,812
526,199
13,736,295
(2,746)
109,668
106,922
2013
$
2,345,418
30,676,853
1,430,978
2,635,928
495,212
37,584,389
13,933,485
770,940
3,172,166
3,076,891
230,720
21,184,202
22,865
1,381
24,246
8,557,263
764,408
49,001
336,573
9,707,245
(1,175)
89,346
88,171
Tyro Payments Limited ABN 49 103 575 042
Annual Report 2014
31
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
TYRO PAYMENTS LIMITED
ABN 49 103 575 042
3. INCOME TAX
a) Income tax expense
Major components of income tax recognised in statement of comprehensive income for the period ended 30 June 2014:
Current Income Tax
Current income tax charge
Prior year under/(over)
Deferred Income Tax
Relating to origination and reversal of temporary differences and tax losses
2014
$
1,032,737
-
2013
$
-
-
(124,691)
(6,572,888)
Income Tax expense/(benefit) in income statement:
908,046
(6,572,888)
Amount reported directly in other comprehensive income
Deferred tax on unrealised gain/(loss) on available-for-sale investment
Income tax expense reported in equity
b) Reconciliation of income tax expense and prima facie tax:
Operating Profit Before Tax
At the statutory income tax rate of 30%
Research and development incentive
Share based payment remuneration
Entertainment
Recognition of previously unrecognised deferred tax balances
Other
13,632
13,632
3,851,676
1,155,503
(431,099)
201,543
15,541
-
(33,442)
76,224
76,224
3,292,714
987,814
(283,327)
14,700
5,709
(7,297,784)
-
Total income tax expense/(benefit)
908,046
(6,572,888)
c) Deferred income tax
Liability and Assets
2014
2013
Deferred income tax assets
Fixed Assets
Provisions & Accruals
Other (Section 40-880)
Unrealised FX loss
Tax Losses
Deferred income tax liabilities
Available-for-sale investments
Unrealised FX gain
Total
Balance
Sheet
Income
Statement
$
$
Other
comprehens
ive Income
$
Balance
Sheet
Income
Statement
$
$
Other
comprehens
ive Income
$
555,361
599,257
-
23,757
4,486,466
5,664,841
(89,856)
(89,856)
5,574,985
(13,086)
(97,565)
1,248
(23,757)
1,073,692
940,532
-
(32,486)
(32,486)
908,046
-
-
-
-
-
13,632
-
13,632
13,632
542,275
501,693
1,248
-
5,560,158
6,605,374
(76,224)
(32,486)
(108,710)
6,496,664
(542,275)
(501,693)
(1,248)
-
(5,560,158)
(6,605,374)
-
32,486
32,486
(6,572,888)
-
-
-
-
-
76,224
-
76,224
76,224
Tyro Payments Limited ABN 49 103 575 042
Annual Report 2014
32
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
TYRO PAYMENTS LIMITED
ABN 49 103 575 042
4. CASH AND CASH EQUIVALENTS
Call deposits
Exchange settlement balance
Cash in hand
2014
$
2,030,580
6,979,502
500
9,010,582
2013
$
2,206,218
20,738,331
500
22,945,049
Call deposits earn interest at floating rates based on daily bank deposit rates. The Reserve Bank of Australia (RBA) pays
interest on balances held in exchange settlement accounts at a rate of 25 basis points below the cash rate. Refer to note 15 for
details of cash and cash equivalents pledged as security.
Term deposits earn interest based on an agreed rate and term.
Reconciliation of operating loss after tax to net cash flows used in
operations
Operating profit/(loss) for the year
Adjustments for:
Depreciation of non-current assets
Share-based payments expense
Gain on disposal of property plant and equipment
Deferred Tax Benefits
Changes in assets and liabilities
Increase in trade and other receivables
Increase in prepayments
Increase/(decrease) in inventory
Increase in trade and other payables
2014
$
2013
$
2,943,631
9,865,602
1,275,943
671,812
(10,784)
908,046
(19,121,382)
(124,458)
81,393
1,359,432
1,098,146
49,001
(22,865)
(6,572,888)
(388,393)
(20,975)
(239,057)
2,238,864
Net cash used in operating activities
(12,016,367)
6,007,435
5. TRADE AND OTHER RECEIVABLES
Trade debtors
Term deposits
Receivables (schemes and merchants)
Interest receivable
Other receivables
726,445
1,834,155
9,452,543
74,919
10,773
12,098,835
623,057
1,855,730
-
72,834
94,122
2,645,743
The Company's ageing of trade and other receivables is as follows:
Current
$
1-30 days
$
31-60 days
$
61-90 days
$
>90 days
$
Trade and other receivables before
impairment
Carrying value 2014 (Total $10,189,761)
2013 (Total $717,179)
Movements in the general reserve for credit losses account are detailed in Note 13 and the Company's accounting policy is
outlined in Note 1(v).
9,831,098
438,880
277,637
358,626
660
-
-
-
37
3
6. INVENTORIES
Terminals and accessories
2014
$
2013
$
293,259
374,652
The asset value of Xenta and Xentissimo of $213,428 has been written off during the current period, and the impairment loss of
$213,428 was recognised in Operating Expenses. Refer to Note (2).
The reason for the write off is due to the age of the terminals and increasing functional obsolescence.
Tyro Payments Limited ABN 49 103 575 042
Annual Report 2014
33
TYRO PAYMENTS LIMITED
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
7. AVAILABLE-FOR-SALE INVESTMENTS
Investment in VISA shares
381,381
335,945
These investments were acquired following the demutualisation of VISA International, as a result of which listed VISA shares
were issued to members of the VISA network. All VISA shares were listed on the New York Stock Exchange (NYSE) on 26th
March 2008 with VISA’s certificate of incorporation providing for the mandatory buyback of up to 80% of the common stock
allocated to VISA members out of IPO proceeds as soon as possible after listing.
8. PROPERTY, PLANT AND EQUIPMENT
Reconciliation of net carrying amounts at the beginning and end of the year:
Year ended 30 June 2014
At 1 July 2013 net of accumulated depreciation
and impairment
Additions/transfers
Disposals/transfers*
Depreciation for the year
At 30 June 2014
net of accumulated depreciation
and impairment
At 1 July 2013
Cost or fair value
Accumulated depreciation and impairment
Net carrying amount
At 30 June 2014
Cost or fair value
Accumulated depreciation and impairment
Net carrying amount
EFTPOS
Terminals
$
Furniture and
Office
Equipment
$
Computer
Equipment
$
Total
$
1,409,036
2,191,060
(7,164)
(1,087,516)
78,291
25,172
-
(27,781)
249,485
325,689
-
(160,646)
1,736,810
2,541,923
(7,164)
(1,275,943)
2,505,417
75,682
414,529
2,995,625
5,001,799
(3,592,763)
1,409,036
7,145,241
(4,639,824)
2,505,417
230,324
(152,033)
78,291
253,905
(178,223)
75,682
1,807,005
(1,557,520)
249,485
2,132,695
(1,718,166)
414,529
7,039,128
(5,302,316)
1,736,810
9,531,841
(6,536,213)
2,995,625
Tyro Payments Limited ABN 49 103 575 042
Annual Report 2014
34
TYRO PAYMENTS LIMITED
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
8. PROPERTY, PLANT AND EQUIPMENT (cont’d)
Year ended 30 June 2013
At 1 July 2012 net of accumulated depreciation
and impairment
Additions/transfers
Disposals/transfers*
Depreciation for the year
At 30 June 2013
net of accumulated depreciation
and impairment
At 1 July 2012
Cost or fair value
Accumulated depreciation and impairment
Net carrying amount
At 30 June 2013
Cost or fair value
Accumulated depreciation and impairment
Net carrying amount
EFTPOS
Terminals
$
Furniture and
Office
Equipment
$
Computer
Equipment
$
Total
$
1,376,596
1,021,632
(27,606)
(961,587)
36,503
63,047
-
(21,259)
237,509
127,275
-
(115,300)
1,650,609
1,211,954
(27,606)
(1,098,146)
1,409,036
78,291
249,485
1,736,810
4,075,953
(2,699,357)
1,376,595
5,001,799
(3,592,763)
1,409,036
167,276
(130,773)
36,504
230,324
(152,033)
78,291
1,679,730
(1,442,221)
237,509
1,807,005
(1,557,520)
249,485
5,922,959
(4,272,351)
1,650,608
7,039,128
(5,302,316)
1,736,810
Fully depreciated assets as at 30th June 2014 $4,687,607 (2013 : $3,754,171)
* Disposals are net of depreciation
9. SHARE-BASED PAYMENTS
The Company will provide benefits to employees and Directors from time to time including share-based payments as
remuneration for service.
(a) Employee Share Option Plan
The Employee Share Option Plan was established to grant options over ordinary shares in the Company to employees or
Directors who provide services to the Company.
Options granted pursuant to the Employee Share Option Plan may be exercised, in whole or part, subject to vesting terms and
conditions as indicated below:
Type of Option
Vesting Terms and Conditions
Linear vesting schedule Options granted will vest in proportion to the time that passes linearly during the vesting schedule,
subject to maintaining continuous status as an employee or consultant with the Company during the
vesting schedule.
Service vesting schedule The options vest according to a period of service may be exercised as to a set number of shares
per agreed day of service, as defined in the specific option grant.
Fully vested at time of
grant
Options may be exercised as to all shares from the vesting commencement date.
All option grants must be held for a minimum period commencing on the date on which the options are granted and continuing
until the earlier of:
-
-
the date which is 3 years after the date on which options are granted; or
the date on which the Participant ceases employment with the Company.
Tyro Payments Limited ABN 49 103 575 042
Annual Report 2014
35
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
TYRO PAYMENTS LIMITED
ABN 49 103 575 042
9. SHARE BASED PAYMENTS (cont'd)
Other relevant terms and conditions applicable to options granted under the Employee Share Option Plan include:
-
-
-
the term of each option grant shall be 7 years from the date of grant or such shorter term as provided in the Employee
Share Option Plan agreement.
Each option entitles the holder to one ordinary share.
All awards granted under the Employee Share Option Plan are equity-settled.
(b) Fair value of options
The fair value of each option is estimated on the date of grant using the Black-Scholes Option Valuation Model. The table below
lists the assumptions used in determining the fair value of the options granted during the year ended 30 June 2014:
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
Share price ($)
2014
0%
74%
3.39%
$0.25
A zero dividend policy assumption is used for valuing all option grants. This is in line with the Company's capital management
policy and growth strategy.
Expected volatility used is the historical volatility of the peer group. The expected volatility reflects the assumption that the
historical volatility is indicative of future trends, which may not necessarily be the actual outcome.
The average expected life for 7 year options is assumed to be 5 - 6 years from the grant date. The expected life for 10 year
option is assumed to be 5 - 8 years. For all other options with a contractual life of 5 year or less, the expected life is assumed to
be the total contractual life from the date of grant to the expiry date.
There were 10,194,219 options exercised during the year ended 30 June 2014 (2013: 130,707).
The weighted average remaining contractual life for share options outstanding as at 30 June 2014 was 4 years (2013: 5 years).
The following table summarises further details of the share options outstanding at 30 June 2014:
Range of Exercise Prices
Contractual life
Vesting conditions
No of Outstanding Options
6 cents to 55 cents
6 cents to 45 cents
6 cents to 55 cents
10 years or less
5 years and 10 years 12 months service
3, 5 and 10 years
5 year linear vesting
6 cents to 55 cents
10 years or less
Total
12 months linear
vesting
Fully vested at time of
grant
2014
25,272,457
1,043,478
2013
20,478,093
1,565,217
11,460,798
12,848,031
23,314,679
61,091,412
29,235,501
64,126,842
Tyro Payments Limited ABN 49 103 575 042
Annual Report 2014
36
TYRO PAYMENTS LIMITED
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
9. SHARE BASED PAYMENTS (cont'd)
The following table illustrates the number and weighted average exercise prices (WAEP) in cents and movements of share
options during the year:
2014
No
2014
WAEP (cents)
2013
No
2013
WAEP (cents)
12
14
8
21
12
12
12
11
6
17
12
12
34,326,124
7,618,284
(3,802,915)
(1,408,238)
36,733,255
36,733,255
34,433,038
2,004,501
(130,707)
(1,980,708)
34,326,124
34,021,123
Linear vesting schedule
Outstanding at the beginning of the year
Granted during the year
Exercised during the year
Forfeited/expired during the year
Outstanding at the end of the year
Exercisable at the end of the year
Fully vested at time of grant
Outstanding at the beginning of the year
Granted during the year
Exercised during the year
Forfeited/expired during the year
Outstanding at the end of the year
Exercisable at the end of the year
Service vesting schedule
Outstanding at the beginning of the year
Granted during the year
Exercised during the year
Forfeited/expired during the year
Outstanding at the end of the year
Exercisable at the end of the year
Total outstanding at the end of the year
61,091,412
61,091,412
Total exercisable at the end of the year
The expense recognised in the Statement of Comprehensive Income in relation to share-based payments is disclosed in Note 2.
29,235,501
-
(5,869,565)
(51,257)
23,314,679
23,314,679
29,399,137
-
-
(163,636)
29,235,501
29,235,501
1,565,217
-
(521,739)
-
1,043,478
1,043,478
1,565,217
-
-
-
1,565,217
1,565,217
64,126,842
63,821,841
6
34
7
7
55
7
7
6
6
6
6
6
7
7
6
6
Tyro Payments Limited ABN 49 103 575 042
Annual Report 2014
37
TYRO PAYMENTS LIMITED
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
10. TRADE PAYABLES AND OTHER LIABILITIES
Merchant payables
Accounts payable
Rent payable
Accruals
Other liabilities
11. PROVISIONS
Annual leave provision
Balance at the beginning of the year
Provision during the year
Leave taken during the year
Balance at the end of the year
Long Service Liability
Balance at the beginning of the year
Provision during the year
Balance at the end of the year
Provision for Credit Losses
Balance at the beginning of the year
Provision during the year
Balance at the end of the year
12. EMPLOYEE BENEFITS LIABILITIES
Long Service Leave Liability
Balance at the beginning of the year
Provision during the year
Balance at the end of the year
Annual Leave Liability
Balance at the beginning of the year
Provision during the year
Leave taken during the year
Balance at the end of the year
2014
$
-
795,875
36,314
1,856,998
693,925
3,383,112
2013
$
9,558,841
410,094
59,249
1,331,656
665,179
12,025,019
2014
$
2013
$
77,110
44,903
(25,500)
96,513
45,392
39,315
84,707
-
29,521
29,521
2014
$
243,372
76,077
319,449
443,859
158,057
(89,759)
512,157
57,638
26,946
(7,474)
77,110
37,442
7,950
45,392
-
-
-
2013
$
160,143
83,229
243,372
324,171
165,638
(45,948)
443,859
Tyro Payments Limited ABN 49 103 575 042
Annual Report 2014
38
TYRO PAYMENTS LIMITED
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
13. CONTRIBUTED EQUITY AND RESERVES
(i) Ordinary Shares
Issued and fully paid
Ordinary shares paid at 5 cents each
Ordinary shares paid at 6 cents each
Ordinary shares paid at 8 cents each
Ordinary shares paid at 10 cents each
Ordinary shares paid at 15 cents each
Ordinary shares paid at 30 cents each
Ordinary shares paid at 45 cents each
Ordinary shares paid at 55 cents each
Number of Shares
54,618,733
156,320,233
1,166,668
5,102,660
10,475,433
32,571,562
8,111,112
11,282,322
2014
$
2013
$
2,730,937
9,379,214
93,333
510,266
1,571,315
9,771,469
3,650,000
6,205,277
33,911,811
2,730,937
8,924,323
13,333
354,069
1,571,315
9,756,251
3,650,000
6,205,277
33,205,505
Terms and conditions of contributed equity
Ordinary shares have the right to receive dividends when declared and, in the event of winding up of the Company, to
participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on ordinary
shares held. Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company.
Movement in ordinary shares on issue
At 1 July 2012
Shares issued during the year:
- 25 September 2012 shares issued at 6c each
- 21 January 2013 shares issued at 6c each
At 30 June 2013
Shares issued during the year:
- 01 August 2013 shares issued at 30c each
- 20 November 2013 shares issued at 6c each
- 31 December 2013 shares issued at 6c each
- 31 December 2013 shares issued at 6c each
- 31 December 2013 shares issued at 8c each
- 28 February 2014 shares issued at 6c each
- 01 April 2014 shares issued at 10c each
- 01 April 2014 shares issued at 10c each
- 02 April 2014 shares issued at 10c each
At 30 June 2014
No:
Shares
$
269,323,797
33,197,663
50,000
80,707
3,000
4,842
269,454,504
33,205,505
50,725
146,739
5,869,565
521,739
1,000,001
1,043,478
450,000
600,000
511,972
279,648,723
2014
$
15,218
8,804
352,174
31,304
80,000
62,609
45,000
60,000
51,197
33,911,811
2013
$
(ii) Share-based payments reserve
Balance at the beginning of the year
Share-based payments expensed during the year
Balance at the end of the year
Nature and purpose of reserve
The share-based payments reserve is used to record the value of share-based payments / benefits provided to any Directors,
employees and consultants as part of their remuneration or compensation.
Refer to Note 9 for further details of these plans.
6,311,250
671,812
6,983,062
6,262,249
49,001
6,311,250
(iii) General reserve for credit losses:
Balance at the beginning of the year
Transfer to retained earnings
Balance at the end of the year
2014
$
2013
$
285,620
81,818
367,438
211,398
74,222
285,620
Tyro Payments Limited ABN 49 103 575 042
Annual Report 2014
39
TYRO PAYMENTS LIMITED
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
13. CONTRIBUTED EQUITY AND RESERVES (cont’d)
The general reserve for credit losses has been created to satisfy Australian Prudential and Regulation Authority (APRA)
prudential standards for Authorised Deposit-Taking Institutions (ADI) to maintain a general reserve for credit losses. The
Company applies an internal methodology to estimate the credit risk of its merchant customers and the maximum expected
losses based upon a number of assumptions concerning the performance of merchants in relation to the Company's credit risk
grading system and actual experience.
(iv) Available-for-sale investment revaluation reserve
Balance at the beginning of the year
Total revaluations for the year
Balance at the end of the year
(v) Option Premium Reserve
Balance at the beginning of the year
Total premium received
Balance at the end of the year
2014
$
2013
$
177,857
31,804
209,661
480,320
-
480,320
124,975
52,882
177,857
480,320
-
480,320
In 2012 consideration of $313,600 was received by the Company to extend the life of some options. In 2011, the option
premium reserve revaluation corresponds to the fair value of the equity instruments issued in consideration for the $2.5 million
loan taken out by Tyro. The fair value of these options has been determined using the Black-Scholes Option Valuation Model.
Total reserves at the end of the year
8,040,482
7,255,047
(vi) Retained losses
Movements in retained losses were as follows:
Retained losses at the beginning of the financial year
Net Profit attributable to shareholders of the Company
Transfer to general reserve for credit losses
Retained losses at the end of the financial year
(18,575,098)
2,943,632
(81,818)
(15,713,284)
(28,366,478)
9,865,602
(74,222)
(18,575,098)
14. FINANCIAL RISK MANAGEMENT OBJECTIVES, POLICIES AND PROCESSES
The Company's principal financial instruments include cash and cash equivalents, trade and other receivables, held-to-maturity
investments, available-for-sale financial assets and trade and other payables.
(i) Risk management
The Board is responsible for approving and reviewing the risk management strategy and risk framework and all risk
management policies. The Board has installed a Board Risk Committee to assist the Board in fulfilling its responsibilities in the
management of risk. The Board Risk Management Committee provides non-executive oversight of the implementation and on-
going operation of Tyro’s risk management framework. The Board Risk Committee provides recommendations to the Board on
risk appetite; reviews and approves the frameworks for managing risk; monitors the risk profile, exposures against limits and the
management and control of our risks.
(ii) Risk controls
Risks are controlled through a system that identifies key risks, establishes controls to manage those risks (with an emphasis on
preventive control), and maintains a regular review process to monitor the effectiveness of controls. Business risks are
controlled within tolerance levels approved by the Board Risk Committee and Board.
Tyro Payments Limited ABN 49 103 575 042
Annual Report 2014
40
TYRO PAYMENTS LIMITED
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
14. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (cont'd)
(iii) Internal audit
Tyro has an independent and adequately resourced internal audit function. The internal audit function provides independent
assurance to the Board on the adequacy and effectiveness of the control environment and risk framework. Internal Audit also
reviews the controls implemented by management to ensure compliance with APRA's prudential requirements. This program of
internal control and audit is reviewed and approved on a regular basis by the Audit Committee.
The internal auditor has unfettered access to Tyro’s business lines and support functions.
(iv) Credit risk
Credit risk is the risk that a counter party will not meet its obligations under a financial instrument or customer contract, leading
to a financial loss. Tyro is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing
activities, including deposits with banks and financial institutions, foreign exchange transactions and held to maturity
investments.
The maximum exposure to credit risk is represented by the carrying amounts of the financial assets at reporting date. Tyro's
credit risk management principles define the framework and core values which govern its credit risk taking activities and reflect
the priorities established by the Board.
From these principles flow the development of target market strategies, underwriting standards and credit procedures which
define the operating processes. The operation of a credit risk grading system coupled with ongoing monitoring, reporting and
review allows Tyro to identify changes in credit quality at client and portfolio levels and to take corrective actions in a timely
manner.
In addition, Tyro is subject to the risk of credit card chargebacks (credit losses). The maximum period Tyro is potentially liable
for such chargebacks is 120 days after the date of the transaction. Tyro prudently manages credit risk associated with its
merchant portfolio both at an individual and a portfolio level, by monitoring the concentration of risk by industry and type of
counterparty.
It is Tyro's policy that all merchants are subject to credit verification procedures including an assessment of their independent
credit rating, financial position, past experience and industry reputation.
As part of equity, a general provision reserve for credit losses is raised to cover losses due to uncollectible chargebacks that
have not been specifically identified. The reserve is calculated based on expected future credit losses as described in Note 1(v).
Tyro does not hold any credit derivatives or collateral to offset its credit exposure. Tyro trades only with recognised,
creditworthy third parties and as such no collaterals are requested. Credit exposures are monitored on an ongoing basis with
the result that Tyro's exposure to bad debts is not significant at reporting date.
30 June 2014
Standard & Poor’s Credit Rating*
AAA
AA-
unrated
30 June 2013
Standard & Poor’s Credit Rating*
AAA
AA-
unrated
*Long-term credit rating
Cash and balances with
financial institutions
Trade receivables
6,979,502
2,030,580
1,380,042
10,718,793
Cash and balances with
financial institutions
Trade receivables
20,738,331
2,206,220
1,401,617
1,244,125
Tyro Payments Limited ABN 49 103 575 042
Annual Report 2014
41
TYRO PAYMENTS LIMITED
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
14. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (cont'd)
(v) Operational risk
Operational risk is the risk that arises from inadequate or failed internal processes and systems, human error or misconduct, or
from external events. It also includes, among other things, technology risk, model risk and outsourcing risk.
The Board Risk Committee is responsible for monitoring the operational risk profile, the performance of operational risk
management and controls, and the development and ongoing review of operational risk policies.
(vi) Market risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market
prices. Market prices comprise four types of risk: interest rate risk, currency risk, commodity price risk and other price risk, such
as equity price risk. Tyro does not engage in financial market trading activities nor assume any foreign exchange, interest rate
or other derivative positions and does not have a trading book. The Company does not undertake any hedging around the
values of its financial instruments as any risk of loss is considered insignificant to the operations of the Company.
Any government securities, bank bills or other marketable instruments that the Company holds are for investment or liquidity
purposes and held in the normal course of business in line with investment and liquidity guidelines. Each component of market
risk is detailed below as follows:
1) Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in
market interest rates. The Company has exposure to interest rate risk on its variable interest-bearing cash and cash equivalent
balances. Other interest bearing assets are held to maturity and carried at amortised cost.
The following table demonstrates the sensitivity to a reasonably possible change in interest. With all other variables held
constant, Tyro’s profit before tax is affected as follows:
Cash and cash equivalents
Other Term Deposits
USD Term Deposit
Sensitivity analysis:
Variable Interest Rate
8,556,469
454,113
-
< 3 Months
-
-
-
Fixed Interest Rate
3 to 12 Months
-
-
1,380,042
> 1 Year
-
-
-
Total
8,556,469
454,113
1,380,042
An increase of 100 basis points in the general cash rate (assuming every other factors being constant) will increase the
Company's profit after tax and increase equity by $90,106 (2013:$229,450). A decrease of 100 basis points in the general cash
rate will have an equal and opposite effect.
2) Foreign Currency risk
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of
changes in foreign exchange rates.
Tyro is not exposed to foreign currency risk in the settlement of merchant transactions as all monies received and paid are in
Australian Dollars. The Company's settlement of fees with card schemes and the purchases of inventory from foreign suppliers
are transacted in foreign currencies at the exchange rate prevailing the balance sheet date. At reporting date the Company has
some US Dollar and Euro exposure.
Tyro Payments Limited ABN 49 103 575 042
Annual Report 2014
42
TYRO PAYMENTS LIMITED
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
14. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (cont'd)
(vi) Market risk (cont’d)
FX Sensitivity analysis:
An appreciation of 15% of the US Dollar and EUR compared to the Australian Dollar (assuming every other factors being
constant) will increase the Company's profit after tax and increase equity by $186,134 (2013: $240,256). A depreciation of 15%
of the US Dollar and EUR compared to the Australian Dollar will reduce the company's profit after tax and reduce equity by
$137,578 (2013:$177,581).
Foreign currency sensitivity
The following tables demonstrate the sensitivity to a reasonably possible change in the US dollar, Euro and AUD exchange
rates, with all other variables held constant
Available-for-sale investments-VISA shares
Trade Payables
USD Term Deposit
3) Other Price Risk
AUD
2014
381,381
325,377
1,380,042
AUD
2013
335,945
40,480
1,401,617
USD
EUR
USD
The Company's investment in available-for-sale financial assets is valued by way of reference to an underlying listed equity on
the New York Stock Exchange (NYSE) and as such its fair value will fluctuate in direct proportion with the quoted market price
indicated.
(vii) Capital Management
Tyro Payments Limited capital management objectives are to:
- Maintain a sufficient level of capital above the regulatory minimum to provide a buffer against loss arising from
unanticipated events, and allow Tyro to continue as a going concern; and
Ensure that capital management is closely aligned with Tyro’s business and strategic objectives.
-
Tyro manages capital adequacy according to the framework set out by APRA Prudential Standards.
APRA determines minimum prudential capital ratios (eligible capital as a percentage of total risk-weighted assets) that must be
held by all authorised deposit-taking institutions. Accordingly, Tyro is required to maintain a minimum prudential capital ratio
(eligible capital as a percentage of total risk-weighted assets) on a Level 1 basis as determined by APRA.
The board considers Tyro’s strategy, financial performance objectives, and other factors relating to the efficient management of
capital in setting target ratios of capital above the regulatory required levels. These processes are formalised within Tyro’s
internal capital adequacy assessment process (or ICAAP).
Tyro operates under the specific capital requirements set by APRA. Tyro has satisfied its minimum capital requirements
throughout the 2013/14 financial year in the form of Tier 1 capital which is the highest quality components of capital.
Tyro Payments Limited ABN 49 103 575 042
Annual Report 2014
43
TYRO PAYMENTS LIMITED
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
14. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (cont'd)
(vii) Capital Management (cont’d)
Capital Adequacy
Risk weighted capital ratios
Tier 1
Tier 2
Total capital ratio
Qualifying capital
Tier 1
Contributed capital
Retained profits & reserves
Innovative Tier 1 capital
Less
Intangible assets
Net deferred tax assets
50/50 deductions
Other adjustments
Total Tier 1 capital
Tier 2
General reserve for credit losses
Subordinated debt
Asset revaluation reserves
Less
50/50 deductions
Total Tier 2 capital
Total qualifying capital
Total risk weighted assets
(viii) Liquidity risk
2014
2013
19,915,203
124,391
174%
33,911,811
-8,040,242
25,871,569
14,767,226
69,078
268%
33,205,505
-11,605,671
21,599,834
5,956,366
19,915,203
6,832,608
14,767,226
124,391
69,078
124,391
20,039,594
11,509,418
69,078
14,836,304
5,526,254
Tyro's liquidity risk is the risk that the Company will have insufficient liquidity to meet its obligations as they fall due. This could
potentially arise as a result of mismatched cash flows.
Tyro manages this risk by the Board Risk Committee approved liquidity framework. Responsibility for liquidity management is
delegated to the Financial Controller and CEO. The Financial Controller manages liquidity on a daily basis and submits monthly
reports to the CEO and to CRO, and bi-monthly reports to the Board Risk Committee. The Financial Controller is also
responsible for monitoring and managing capital planning. The capital plan outlines triggers for additional funding should
liquidity be required.
Liquidity risk management framework models the ability to fund under both normal conditions and periods of stress. The capital
plan and liquidity management is reviewed at least annually.
At balance sheet date, the board of directors determined that there was sufficient cash available to meet its anticipated
expenditure and other financial liabilities.
Tyro Payments Limited ABN 49 103 575 042
Annual Report 2014
44
TYRO PAYMENTS LIMITED
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
14. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (cont'd)
(vii) Capital Management (cont’d)
Year ended 30 June 2014
Cash and cash equivalents
Trade and other receivables
Financial Liabilities
Trade payables and other liabilities
Net inflow
Year ended 30 June 2013
Cash and cash equivalents
Trade and other receivables
Financial Liabilities
Trade payables and other liabilities
Net inflow
(ix) Fair values
< 6 months
6-12 months
Total
9,010,582
10,718,793
19,729,375
(3,383,112)
(3,383,112)
16,346,263
-
1,380,042
1,380,042
-
-
1,380,042
9,010,582
12,098,835
21,109,417
(3,383,112)
(3,383,112)
17,726,305
< 6 months
6-12 months
Total
22,945,049
1,244,126
24,189,175
(12,025,019)
(12,025,019)
-
1,401,617
1,401,617
22,945,049
2,645,743
25,590,792
-
-
(12,025,019)
(12,025,019)
12,164,156
1,401,617
13,565,773
The Company uses various methods in estimating the fair value of a financial instrument. The methods comprise:
Level 1 – the fair value is calculated using quoted prices in active markets.
Level 2 – the fair value is estimated using inputs other than quoted prices included in Level 1 that are observable for the asset
or liability, either directly (as prices) or indirectly (derived from prices).
Level 3 – the fair value is estimated using inputs for the asset or liability that are not based on observable market data.
The fair value of the financial instruments as well as the methods used to estimate the fair value are summarised in the table
below.
Year ended 30 June 2014
Quoted market price
(Level 1)
Valuation technique -
market observable
inputs (Level 2)
Valuation technique -
non market
observable inputs
(Level 3)
Total
381,381
-
-
381,381
Year ended 30 June 2013
Quoted market price
(Level 1)
Valuation technique -
market observable
inputs (Level 2)
Valuation technique -
non market
observable inputs
(Level 3)
Total
335,945
-
-
335,945
Financial Asset
Available for sale
Financial Asset
Available for sale
Tyro Payments Limited ABN 49 103 575 042
Annual Report 2014
45
TYRO PAYMENTS LIMITED
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
14. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (cont'd)
(ix) Fair values (cont’d)
Quoted market price represents the fair value determined based on quoted prices on active markets as at the reporting date
without any deduction for transaction costs.
For financial instruments not quoted in active markets, the Company uses valuation techniques such as present value
techniques, comparison to similar instruments for which market observable prices exist and other relevant models used by
market participants. These valuation techniques use both observable and unobservable market inputs.
Transfer between categories
There were no transfers between Level 1 and Level 2 during the current year.
15. COMMITMENTS AND CONTINGENCIES
Commitments relating to BECS
Tyro pays merchants through the BECS system (Bulk Electronic Clearing System). As a result of BECS Intra-day settlements
which went live in November 2013 all merchant settlements committed are processed on the same day.
On each settlement day, Tyro would have received a portion of the funds committed, thus the actual contingent asset and
corresponding liability would be less than the total amount committed.
Contingent liabilities -secured
(I) Irrecoverable standby letters of credit in favour of:
- MasterCard International
- Visa International
(ii) Bank Guarantee in favour of:
- Dukeville Pty Ltd, the lessor of 125 York Street, Sydney
2014
$
2013
$
2,780,042
140,000
454,113
3,374,155
2,801,617
140,000
454,113
3,395,730
The Company has provided an irrevocable standby letter of credit of $2,920,042 (in 2013: 2,941,617) secure through fixed
charges over term deposits with the Commonwealth Bank of Australia and Westpac Banking Corporation, to MasterCard
International and Visa International. These are one-year arrangements that are subject to automatic renewal on a yearly basis.
MasterCard International and Visa International, at their discretion, may increase the required amounts of the standby letters of
credit upon written request to the Company. The required amounts of the standby letters of credit are dependent on MasterCard
International's and Visa International's view of their risk exposure to the Company.
A bank guarantee is held with the Westpac Banking Corporation in relation to the lease arrangement for the office premises.
The amount represents 9 month’s rent and is refundable on expiry of the lease agreement, subject to satisfactory vacation of
the leased premises.
Tyro Payments Limited ABN 49 103 575 042
Annual Report 2014
46
TYRO PAYMENTS LIMITED
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
16. LEASES
(a) Operating lease commitments - Company as lessor
Prior to April 2010, Tyro operated a "rent to own" model whereby ownership of the terminal would transfer to the merchant once
they had made 36 consecutive rental payments. However Tyro bears the risk of repairing or replacing the terminal over the 3
year period. The merchant would then continue to pay a service and maintenance fee after this period. There is no minimum
rental period for merchants and they are able to terminate with Tyro at any time with no penalty or buy out fees. From April
2010, the company has moved to a perpetual rental model whereby there will be no transfer of ownership of the asset and the
merchant will pay terminal rental for the duration that they are with Tyro.
Cost
Depreciation
Expense
Net Carrying Value
Type of Terminals
Xenta
Xentissimo
Yomani
Yomani XR
Yoximo 3G
Others (Accessories)
(b) Operating lease commitments - Company as lessee
2,825,115
2,328,255
777,327
700,948
298,752
214,844
7,145,241
2,748,587
1,460,291
163,484
56,938
9,809
200,715
4,639,824
2014
$
Future minimum rentals payable under the non-cancellable operating leases as at 30 June 2014 are as follows:
- Within one year
- After one year but not more than five years
605,279
361,182
966,461
76,528
867,964
613,843
644,010
288,943
14,129
2,505,417
2013
$
581,999
966,461
1,548,460
The operating lease commitments relates to the lease of the Company's registered office located at 125 York Street, Sydney
NSW. It is a non-cancellable lease with a term of 3 years ending 31 January 2016. The lease agreement provides the Company
with a right of renewal on expiry at which time all terms will be renegotiated. Lease payments are subject to discretionary
annual increases of 4%.
17. SEGMENT REPORTING
The Company operates in one geographical segment being Australia and within one business segment being the provision of
credit and debit card acquiring services to merchants.
18. AUDITOR'S REMUNERATION
Amounts received or due and receivable by Ernst & Young:
- an audit of the financial report of the Company
- other services in relation to the Company
2014
$
2013
$
193,875
61,541
255,416
193,875
49,022
242,897
Tyro Payments Limited ABN 49 103 575 042
Annual Report 2014
47
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
TYRO PAYMENTS LIMITED
ABN 49 103 575 042
19. RELATED PARTY DISCLOSURES
(a) Key Management Personnel
The amounts disclosed in the table are the amounts recognised as an expense during the reporting period related to key
management personnel.
Details of Key Management Personnel
Directors
Kerry Roxburgh
Mike Cannon-Brookes
Rebecca Dee-Bradbury
Rob Ferguson
Paul Rickard
Jost Stollmann
Executives
Garry Duursma
Peter Haig
Justin Mitchell
Andrew Rothwell
Appointed
Resigned
Non-executive Chairman
Non-executive
Non-executive
Non-executive
Non-executive
Chief Executive Officer
Title
VP Sales and Marketing
Chief Information Officer
Chief Risk Officer
VP Product & Channel Management
18-Apr-08
10-Dec-09
18-Feb-14
14-Nov-05
28-Aug-09
05-Apr-05
01-Jan-07
03-Feb-03
19-Mar-07
01-Jul-13
13-Sep-13
Compensation of Key Management Personnel
Short-term benefits
Termination benefits
Post-employment benefits (superannuation)
Share-based payments
Total
2014
$
2013
$
2,428,308
254,259
178,084
313,877
2,354,288
1,590,122
-
109,475
5,675
1,705,272
30 June 2014
Directors
Kerry Roxburgh
Michael Cannon-Brookes
Rebecca Dee-Bradbury
Rob Ferguson
Paul Rickard
Jost Stollmann
Executives
Garry Duursma
Peter Haig
Justin Mitchell
Andrew Rothwell
Short-term
Benefits
Salary &
fees ($)
Termination
Benefits
($)
Post
Employment
Super-
annuation ($)
Share-based
Payments
Options
($)
Total
($)
60,000
40,000
20,000
40,000
40,000
521,378
50,038
530,877
274,777
172,176
1,749,245
-
-
-
-
-
-
254,259
-
-
-
254,259
5,550
3,700
1,850
3,700
3,700
22,225
4,628
24,895
20,668
24,354
115,271
2,799
1,866
-
-
1,866
76,241
(2,086)
76,244
39,293
39,290
235,513
68,349
45,566
21,850
43,700
45,566
619,844
306,839
632,016
334,738
235,820
2,354,288
Tyro Payments Limited ABN 49 103 575 042
Annual Report 2014
48
TYRO PAYMENTS LIMITED
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
19. RELATED PARTY DISCLOSURES (cont’d)
30 June 2013
Directors
Kerry Roxburgh
Michael Cannon-Brookes
Rob Ferguson
Paul Rickard
Jost Stollmann
Executives
Garry Duursma
Peter Haig
Justin Mitchell
Short-term
Benefits
Salary &
fees ($)
Termination
Benefits
($)
Post
Employment
Super-
annuation ($)
Share-based
Payments
Options
($)
60,000
40,000
40,000
40,000
365,262
394,684
391,777
258,399
1,590,122
-
-
-
-
-
-
-
-
-
5,400
3,600
3,600
3,600
21,101
23,750
23,488
24,936
109,475
-
-
-
-
1,669
1,370
1,674
962
5,675
Total
($)
65,400
43,600
43,600
43,600
388,032
419,804
416,939
284,297
1,705,272
Shareholdings of Key Management Personnel and their Related Entities Transactions
30 June 2014
Directors
Kerry Roxburgh
Rebecca Dee-Bradbury
Michael Cannon-Brookes
Rob Ferguson
Paul Rickard
Jost Stollmann
Executives
Garry Duursma
Peter Haig
Justin Mitchell
Andrew Rothwell
Total
30 June 2013
Directors
Kerry Roxburgh
Michael Cannon-Brookes
Rob Ferguson
Paul Rickard
Jost Stollmann
Executives
Garry Duursma
Peter Haig
Justin Mitchell
Total
Outstanding at
start of year
Shares issued/
transferred during
the year
On exercise of
options
Outstanding at
end of year
940,182
-
2,966,667
30,352,950
248,204
53,467,309
3,113,325
5,405,977
700,000
3,144,047
100,338,661
-
-
-
-
80,707
-
-
-
-
-
80,707
-
-
-
-
-
5,869,565
-
600,000
-
511,972
6,981,537
940,182
-
2,966,667
30,352,950
328,911
59,336,874
3,113,325
6,005,977
700,000
3,656,019
107,400,905
Outstanding at
start of year
Shares issued/
transferred during
the year
On exercise of
options
Outstanding at
end of year
940,182
2,966,667
30,352,950
248,204
53,467,309
3,113,325
5,405,977
700,000
97,194,614
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
940,182
2,966,667
30,352,950
248,204
53,467,309
3,113,325
5,405,977
700,000
97,194,614
Tyro Payments Limited ABN 49 103 575 042
Annual Report 2014
49
TYRO PAYMENTS LIMITED
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
19. RELATED PARTY DISCLOSURES (cont'd)
Option Holdings of Key Management Personnel
30 June 2014
Linear/Service vesting
schedule
Directors
Kerry Roxburgh
Rebecca Dee-Bradbury
Michael Cannon-Brookes
Rob Ferguson
Paul Rickard
Jost Stollmann
Executives
Garry Duursma
Peter Haig
Justin Mitchell
Andrew Rothwell
Fully vested at time of grant
Directors
Kerry Roxburgh
Rebecca Dee-Bradbury
Michael Cannon-Brookes
Rob Ferguson
Paul Rickard
Jost Stollmann
Executives
Garry Duursma
Peter Haig
Justin Mitchell
Andrew Rothwell
Total
Outstanding
at start of
period 1-Jul-
13
Options
granted as
remuneration
Other
movement*
Options
exercised/
expired/forfei
ted during
the year
Outstanding
at end of
period 2014
Exercisable
at end of
period 2014
1,787,967
-
1,111,110
2,962,477
1,333,334
3,154,100
545,046
2,812,244
595,927
1,019,976
15,322,181
-
-
1,625,000
1,625,000
-
13,342,391
5,543,874
8,588,142
3,105,538
110,989
33,940,934
49,263,115
36,810
-
24,540
24,540
24,540
812,500
-
812,500
417,857
417,857
2,571,144
-
-
-
-
-
-
-
-
-
-
-
2,571,144
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,824,777
-
1,135,650
2,987,017
1,357,874
3,966,600
1,824,777
-
1,135,650
2,987,017
1,357,874
3,966,600
199,850
600,000
-
511,972
1,311,822
-
-
-
-
-
5,869,565
-
-
-
-
5,869,565
7,181,387
345,196
3,024,744
1,013,784
925,861
16,581,503
345,196
3,024,744
1,013,784
925,861
16,581,503
-
-
1,625,000
1,625,000
-
7,472,826
-
-
1,625,000
1,625,000
-
7,472,826
5,543,874
8,588,142
3,105,538
110,989
28,071,369
44,652,872
5,543,874
8,588,142
3,105,538
110,989
28,071.369
44,652,872
Tyro Payments Limited ABN 49 103 575 042
Annual Report 2014
50
TYRO PAYMENTS LIMITED
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
19. RELATED PARTY DISCLOSURES (cont'd)
30 June 2013
Linear/Service vesting
schedule
Directors
Kerry Roxburgh
Michael Cannon-Brookes
Rob Ferguson
Paul Rickard
Jost Stollmann
Executives
Garry Duursma
Peter Haig
Justin Mitchell
Fully vested at time of grant
Directors
Kerry Roxburgh
Michael Cannon-Brookes
Rob Ferguson
Paul Rickard
Jost Stollmann
Executives
Garry Duursma
Peter Haig
Justin Mitchell
Total
Outstanding
at start of
period 1-Jul-
12
Options
granted as
remuneration
Other
movement*
Options
exercised/
expired/forfei
ted during
the year
Outstanding
at end of
period 2013
Exercisable
at end of
period 2013
1,787,967
1,111,110
2,962,477
1,333,334
4,204,100
545,046
2,812,244
595,927
15,352,205
-
1,625,000
1,625,000
-
13,506,027
5,543,874
8,588,142
3,105,538
33,993,581
49,345,786
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,050,000
1,787,967
1,111,110
2,962,477
1,333,334
3,154,100
1,787,967
1,111,110
2,962,477
1,333,334
3,154,100
-
-
-
1,050,000
545,046
2,812,244
595,927
14,302,205
545,046
2,812,244
595,927
14,302,205
-
-
-
-
163,636
-
-
-
163,636
1,213,636
-
1,625,000
1,625,000
-
13,342,391
5,543,874
8,588,142
3,105,538
33,829,945
48,132,150
-
1,625,000
1,625,000
-
13,342,391
5,543,874
8,588,142
3,105,538
33,829,945
48,132,150
* Other options transfer or issuance
Option Terms and Conditions
Stock option grants may be exercised, in whole or in part, subject to vesting terms and conditions indicated below:
Type
Type of Option
Linear vesting schedule
Service vesting schedule
Terms and Conditions
Vesting Terms and Conditions
Options granted will vest in proportion to the time that passes linearly during the vesting
schedule, subject to maintaining continuous status as an employee or consultant with the
Company during the vesting schedule.
Options granted will vest in proportion to the time that passes during the vesting
schedule, subject to maintaining continuous status as providing service to the Company
during the vesting schedule.
Fully vested at time of grant
Options may be exercised as to all shares from the grant date.
(b) Transactions with related parties
The following table provides the total amount of transactions that were entered into with related parties for the relevant financial
year. These transactions were on commercial terms & conditions.
Tyro Payments Limited ABN 49 103 575 042
Annual Report 2014
51
TYRO PAYMENTS LIMITED
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
19. RELATED PARTY DISCLOSURES (cont'd)
Related Party
Health Communications Network
Rob Ferguson, a director of Tyro Payments is also the Non-Executive Chairman of Primary Health Care Ltd. Health
Communications Network is a subsidiary of Primary Health Care Ltd.
Commissions Paid
2014
$
1,928,269
2013
$
1,816,334
c) Loans from related parties
On 25 November 2013 the company utilised it's redraw facility of $2.5m from five lenders, all of whom being Directors or related
parties for the purpose of funding operational liquidity requirements. The facility was documented and approved by the Board.
The first 1M was redrawn on the 20th of December 2013 for 38 days and subsequently the next 1.5M on the 20th of December
2013 for 13 days.
Loan Amount
Interest Paid
Abyla Pty Ltd ABN 92 119 827 593 related party Michael Cannon-
Brookes (Director)
$984,000.00
$6,343.73
Robert Alexander Ferguson (Director)
$290,000.00
$1,918.77
Euclid Capital Partners ABN 79 937 786 536 related party David
Fite (Shareholder)
$320,000.00
$2,062.03
Thomas Girgensohn (Shareholder)
$500,000.00
$3,308.22
Fiona Stollmann related party Jost Stollmann (Director)
$406,000.00
$2,683.40
On 20 December 2013 the company entered into a loan facility of $3.6m with eight lenders, all of whom being Directors or
related parties for the purpose of funding operational liquidity requirements. Consideration paid consisted of an Establishment
Fee equal to 1% of loan amount, a Line Fee of 1% of maximum loan amount and interest equal to 9.5% per annum payable on
the total outstanding. The facility was documented and approved by the Board.
Abyla Pty Ltd ABN 92 119 827 593 related party Michael Cannon-
Brookes (Director)
Robert Alexander Ferguson (Director)
Euclid Capital Partners ABN 79 937 786 536 related party David
Fite (Shareholder)
Jost Stollmann (Director)
Paul Rickard (Director)
Cosmetic Cubed ABN 11 077 859 931 related party Peter
Wetenhall (Shareholder)
Dominique Hess related party Sascha Hess
Loan Amount
Interest Paid
$705,000.00
$1,100.96
$355,000.00
$250,000.00
$650.71
$260.27
$1,290,000.00
$2,350.27
$250,000.00
$250,000.00
$250,000.00
$455.48
$455.48
$455.48
$455.48
Rachel Ferguson related party Robert Ferguson (Director)
$250,000.00
Tyro Payments Limited ABN 49 103 575 042
Annual Report 2014
52
TYRO PAYMENTS LIMITED
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
20. MATTERS SUBSEQUENT TO END OF THE FINANCIAL YEAR
No matter or circumstance has arisen subsequent to 30 June 2014 that has affected or may significantly affect:
(a) the Company's operations in future financial years; or
(b) the results of those operations in future financial years; or
(c) the Company's state of affairs in future financial years.
Tyro Payments Limited ABN 49 103 575 042
Annual Report 2014
53
Ernst & Young
680 George Street
Sydney NSW 2000 Australia
GPO Box 2646 Sydney NSW 2001
Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
ey.com/au
Independent Auditor's Report to the Members of Tyro Payments
Limited
Report on the financial report
We have audited the accompanying financial report of Tyro Payments Limited, which comprises the
statement of financial position as at 30 June 2014, the statement of comprehensive income,
statement of changes in equity and statement of cash flows for the year then ended, notes
comprising a summary of significant accounting policies and other explanatory information, and the
directors' declaration.
Directors' responsibility 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 controls as the directors determine are necessary to enable the
preparation of the financial report that is free from material misstatement, whether due to fraud or
error. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101
Presentation of Financial Statements, that the financial statements comply with International
Financial Reporting Standards.
Auditor's responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted
our audit in accordance with Australian Auditing Standards. Those standards require that we comply
with relevant ethical requirements relating to audit engagements and plan and perform the audit to
obtain reasonable assurance about whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial report. The procedures selected depend on the auditor's judgment,
including the assessment of the risks of material misstatement of the financial report, whether due
to fraud or error. In making those risk assessments, the auditor considers internal controls relevant
to the entity's preparation of the financial report that gives a true and fair view in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the entity's internal controls. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting estimates made
by the directors, as well as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
Independence
In conducting our audit we have complied with the independence requirements of the Corporations
Act 2001. We have given to the directors of the company a written Auditor’s Independence
Declaration, a copy of which is included in the directors’ report.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Opinion
In our opinion:
a.
the financial report of Tyro Payments Limited is in accordance with the Corporations Act
2001, including:
i
ii
giving a true and fair view of the company's financial position as at 30 June 2014
and of its performance for the year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations
2001; and
b.
the financial report also complies with International Financial Reporting Standards as
disclosed in Note 1.
Ernst & Young
Clare Sporle
Partner
Sydney
27 August 2014
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
TYRO PAYMENTS LIMITED
ABN 49 103 575 042
Corporate Information
Directors
Kerry Roxburgh (Chairman)
Mike Cannon-Crookes
Rebecca Dee-Bradbury
Rob Ferguson
Paul Rickard
Jost Stollmann
Company Secretary
Justin Mitchell
Registered Office
Level 2
125 York Street
Sydney NSW 2000
(02) 8907 1700
Solicitors
Cowell Clarke
Level 5, 63 Pirie Street
Adelaide SA 5000
(08) 8228 1111
Auditors
Ernst & Young
680 George Street
Sydney NSW 2000
(02) 9248 5555
Website
www.tyro.com
Tyro Payments Limited ABN 49 103 575 042
Annual Report 2014
57