ANNUAL
R E P O R T
2 0 I 8
Table of Contents
Chairman’s Letter
Chief Executive Officer’s Operating + Financial Review
Directors’ Report
Auditor’s Independence Declaration
Statement of Comprehensive Income
Statement of Financial Position
Statement of Cash Flows
Statement of Changes in Equity
Notes to the Financial Statements for the Year Ended 30 June 2018
Note 1 Statement of Accounting Policies
Note 2 Revenue and Expenses
Note 3 Income Tax
Note 4 Cash and Cash Equivalents
Note 5 Due from Other Financial Institutions
Note 6 Trade and Other Receivables
Note 7 Loans
Note 8 Available-for-Sale Investments
Note 9 Property, Plant and Equipment
Note 10 Share-Based Payments
Note 11 Deposits
Note 12 Trade Payables and Other Liabilities
Note 13 Provisions
Note 14 Non-Current Liabilities
Note 15 Contributed Equity and Reserves
Note 16 Financial Risk Management Objectives, Policies and Processes
Note 17 Commitments and Contingencies
Note 18 Leases
Note 19 Segment Reporting
Note 20 Auditor’s Remuneration
Note 21 Related Party Disclosures
Note 22 Matters Subsequent to the End of Financial Year
Directors’ Declaration
Independent Auditor’s Report
Additional Information for Shareholders
Corporate Directory
Tyro Payments Limited
ABN 49 103 575 042
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Annual report for the year ended 30 June 2018
Page 2
Tyro Payments Limited
ABN 49 103 575 042
Chairman’s Letter
Dear Shareholders
It has been an exciting 12 months here at Tyro, one in which many new milestones were met, considerable investment was made
and new initiatives were put in motion. All of which positions us well for success and we are in great shape, with a team that is
truly engaged and totally focused on the year ahead.
On behalf of ‘Team Tyro’, I thank you all for your support throughout the 2018 financial year and for your continuing support.
The Year in a Snapshot – One of Outstanding Growth
In the Financial Statements and in the CEO’s Review that follow, you will see we had a successful year growing our payments
business whilst building out Tyro’s suite of banking products. The financial highlights in FY18 included:
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23% increase in total revenues to $148.3 million (FY17: $120.6 million);
26% increase in the value of payments transacted reaching $13.4 billion (FY17: $10.6 billion);
127% increase in loan originations in the year reaching $25.2 million (FY17: $11.1 million);
197% increase in deposit balances ending the year at $11.6 million (FY17: $3.9 million).
In keeping with our approach in prior years, our investment in technology and product development in FY18 has again been fully
expensed, so that no internal development spend is carried on the Balance Sheet. This approach, coupled with our continuing
investment in developing our products and capabilities, saw Tyro report a net loss after tax of $16.4 million (FY17: $12.8 million).
Operating Environment
It is perhaps an understatement to say the financial services sector in Australia is in the press for all the wrong reasons. The
Financial Services Royal Commission has headlined numerous examples of poor sector behaviours and bad practice.
Tyro’s mission since establishing its operation some 15 years ago is to concentrate on providing a long-neglected segment,
‘Australia’s small and medium businesses’ with alternative banking services that put the customer first.
Our customer centric approach continues today where the culture at Tyro is to ‘do the right thing’. This simple message, is our
recipe for success.
Exceptional Team
I am pleased to say Tyro has an exceptionally talented, creative and driven team. They have a passion for making payments
and banking for Australia’s small and medium businesses a seamless and integrated experience. Our FY18 achievements were
made possible by ‘Team Tyro’s’ commitment to service and innovation. I acknowledge and express my appreciation of their
commitment to pursuing our vision and thank them one and all for their efforts over this financial year.
Management + Board Changes
In January this year, we announced the appointment of Robbie Cooke as our new CEO and he got his ‘feet under the desk’ on
23 March. Your Board considered Robbie the ideal person to lead the Company through its next phase of growth with his
background and experience in Australia customer-centric, digitally-oriented and technology-driven businesses (as the former
Managing Director / CEO of both ASX-listed Tatts Group and Wotif.com). Robbie took the reins from Rob Ferguson who, since
June 2017, led the Tyro executive team as acting Managing Director and CEO. I am happy to report that the leadership transition
to Robbie was trouble free.
In July 2018 Rob Ferguson announced that he had decided after 12 years it was the right time for him to step down from his
Board role at Tyro. Rob remains a shareholder and continues to be a passionate advocate of the Company. The entire team at
Tyro has huge respect for Rob. On behalf of us all, I thank Rob for his significant commitment to the Company. Especially for his
taking on the role as Acting CEO for a period of 9 months at the start of this financial year. We all owe Rob a significant debt of
gratitude – thanks Rob!
Annual report for the year ended 30 June 2018
Page 3
Chairman’s Letter
Tyro Payments Limited
ABN 49 103 575 042
With Rob’s departure, we welcomed David Fite to our Board. David brings a wealth of banking acumen and expertise by reason
of his time as a senior banking executive (previously holding roles of Treasurer, Assistant CFO and a Group Executive at Westpac,
and CFO and Senior Corporate Executive Officer at Japan’s Shinsei Bank). David is also an active investor in fintech companies
(including Tyro since 2008).
Finally, at our Annual General Meeting last October after his serving as Tyro’s CEO and a Director for 12 years, Jost Stollmann
did not stand for re-election. For more than a decade, Jost played a pivotal role at Tyro and it’s fair to say we would not be where
we are today without him. I take this opportunity to say Jost, thanks from us all for your outstanding leadership and service at
Tyro.
Towards a Successful FY19
With a talented and committed leadership team in place, a well-defined project pipeline locked in, clear goals and targets set and
our passionate, dedicated and innovative Tyro team, I am excited to say that we are heading into FY19 in the best possible
position. I express my gratitude to the Tyro team and to my fellow Tyro Board Members both past and present, for their
commitment to the Company and for their contributions in the financial year, just past.
In closing, also at our Annual General Meeting last October I said that “I believe that now is the right time for another person to
chart Tyroʼs course”. Whilst my replacement as Chair of the Board has not been announced, our search is well progressed and I
confirm my intention to leave the Board following the appointment of my successor.
On behalf of all your Tyro Directors, I look forward to joining you at our 2018 Annual General Meeting when we will have the
opportunity to present our FY18 results to you in detail. If you are unable to attend our AGM in person we will provide an
opportunity to ‘dial-in’ to ensure you are able to benefit from that update.
Again, thank you for your support.
Sincerely
Kerry Roxburgh
Chairman
Tyro Payments Limited
4 September 2018
Annual report for the year ended 30 June 2018
Page 4
Tyro Payments Limited
ABN 49 103 575 042
Chief Executive Officer’s Operating + Financial Review
Tyro is a truly unique business and in writing my first report to you as Tyro’s CEO I wanted to take a few moments to reflect on
what sets Tyro apart, as we are proudly different.
Tyro’s DNA
Unlike most of today’s ‘fintechs’ we have a long and successful history, having established our operation some 15 years ago in
the EFTPOS / payments space. This was at a time when the ‘glamour’ and attention many of today’s fintechs receive was virtually
non-existent and the prospect of succeeding in what was a closed market was seen by many as remote at best.
In a similarly contrarian way, three years ago as a fintech we applied for and were granted an unrestricted Australian Banking
Licence – the first new local entrant to the banking sector in a decade. We took this step with a plan and determination to establish
a banking and payments business purpose built for Australia’s small and medium enterprises – the backbone of our economy –
who had been neglected by this country’s banks for years.
Today we have a full, unrestricted, banking licence but unlike others we intend to stay niche, nimble and focused on designing
products specific to our SME customers’ wants, and to deliver these services in the right way. We remain a challenger at heart
with an absolute focus on:
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disrupting the status quo for the benefit of our customers;
re-engineering banking and payments to remove friction; and
putting our customers at the centre of all that we do.
We work with some amazing businesses and are genuinely inspired by their success. This is the essence of Tyro and what drives
us as a team.
The Year in Review
The 2018 financial year proved to be a very successful year for Tyro, with our three key business streams (payments, loans and
deposits) showing strong growth. We continued to invest in building our segment position in the year and this strategy saw us:
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continue to expand our team;
build on our product suite and functionality;
become more focused on customer acquisition and retention; and
invest in our systems and transactional scalability.
In our payments business we processed $13.4 billion in transactions on behalf of our merchants, a lift of 26% on the prior year
(FY17: $10.6 billion) accelerating growth beyond the 23% year-on-year performance in the prior year. We added close to 5,0001
new merchants to our payments business taking the total number of merchants trusting Tyro with their EFTPOS / payments
requirements to more than 23,000 – a 27% increase on FY17 (and up on the 18% growth achieved in FY17).
In our banking business, our merchant cash advance loan product, which has to date only been offered to circa 4,000 of our
23,000 merchants, is showing a very promising growth profile and strong repeat usage. Since product inception we have
originated more than $35 million in loans of which $25.2 million were originations made in FY18, a 127% lift (FY17: $11.1 million
in originations).
Similarly, strong growth, albeit from a low base has been achieved by our Tyro Bank Account. This fee-free and interest paying
business transaction deposit account achieved strong momentum with 1,285 active accounts in existence at year’s end, a 262%
increase on prior year (FY17: 355 active accounts).
In combination the strong performance from these three product streams saw our revenue in FY18 increase by 23% reaching a
record $148.3 million (FY17: $120.6 million).
1 Using Merchant IDs as a proxy for our customer numbers.
Annual report for the year ended 30 June 2018
Page 5
CEO’s Operating + Financial Review
Tyro Payments Limited
ABN 49 103 575 042
As we continued to invest in our technology platform; our team; and customer acquisition, our expenses (including impairment
expenses) increased 22% to $86.6 million (FY17: $71.1 million). Consistent with prior years, we have not carried forward any
capitalised internal IT or development spend – with all these costs being in effect expensed in the period incurred. This continuing
investment in our business, coupled with our approach of expensing (not capitalising) all our technology development expenses
again saw us in a loss position, with Tyro posting a net loss after tax of $16.4 million (FY17: loss of $12.8 million).
Our business is well positioned with total cash and investments of $85.5 million held at the end of the financial year (FY17: $97.6
million). Our total regulatory capital balance is also strong at $96.5 million (FY17: $109.9 million) and our capital ratio is very
healthy at 139% (FY17: 179%). The capital ratio decline is partially due to the more efficient use of capital as we continue building
our lending business.
Payments
Touching on our payments operation in a little more detail and as mentioned we saw very strong growth in our merchant numbers
increasing from 18,329 to 23,245 at the end of FY18.
This 27% lift was the result of a renewed focus on customer acquisition which saw new merchant applications increase 56%. The
increase in merchant numbers was also driven by an increase in our direct integration efforts with our Point of Sales (POS) and
Practice Management Systems (PMS) partners. At the end of the financial year we had a segment leading 257 POS and PMS
partners working with us (FY17: 231), with all these systems integrating seamlessly with our payment terminals. Our merchant
satisfaction and retention levels were also a key area of attention in the year and we achieved market leading outcomes in both
of these important areas.
As mentioned the value of transactions processed on our platform grew an impressive 26% with $13.4 billion in credit and debit
card transactions processed in the 12 months to 30 June 2018 (FY17: $10.6 billion). We achieved an all-time record in monthly
transaction values in December 2017 with $1.3 billion being processed in that month alone. Pleasingly even with these volume
increases, our ongoing transaction reliability to our merchants remained at a high of 99.99% uptime availability for our core
acquiring platform.
All the above factors combined to drive a very strong revenue outcome from our payments operation of $143.0 million (FY17:
$115.8 million).
Banking Operations
Our two banking products, whilst still in their infancy, are displaying positive trends. These products are focused on providing our
customers with innovative ways to meet their transactional and unsecured lending needs.
Deposits
Our Tyro Bank Account is a fee free interest bearing transactional account. As at 30 June 2018 we had 1,258 active Tyro Bank
Accounts up from 355 as at 30 June 2017. We held $11.6 million of funds on deposit as at 30 June 2018 compared with $3.9
million a year prior.
Loans
Our Tyro Business Loan is a cash-flow based unsecured loan purpose-built to assist SMEs in growing their businesses. This
product provides small unsecured loans to eligible Tyro merchants which are repaid via a pre-agreed percentage of their daily
EFTPOS / payments settlements, offered on the basis of a fixed fee.
With average loan balances of less than $40,000 and an average loan term of less than 6 months, this product is being used by
many of our SMEs as a way of accessing cash flow earlier to accelerate their growth initiatives. The highly attractive feature of
this product is its ease of management, with repayments that cycle up or down in accordance with a merchant’s daily card
transaction volumes.
This innovative product was soft launched in early 2017 and to date it has only been offered to around 4,000 of our 23,000
merchants. As mentioned the product is displaying a very promising growth profile and has achieved strong repeat usage. We
achieved a 127% lift in loan originations in FY18 reaching $25.2 million (FY17: $11.1 million) taking the total originations since
product inception to more than $35 million in loans.
Annual report for the year ended 30 June 2018
Page 6
CEO’s Operating + Financial Review
Tyro Payments Limited
ABN 49 103 575 042
New Initiatives
We were proud to have been the first (and to date only) bank to have launched ‘least cost routing’ to market. Our ‘Tap + Save’
feature is a cost-saving initiative for our merchants that directs card payments through the transaction path that is the lowest cost
for the merchant, instead of the most profitable for the bank. This initiative is a clear demonstration of our commitment to doing
the right thing for those Australian businesses that have chosen to partner with Tyro.
Towards the end of FY18 we launched our ‘born for business’ marketing campaign to build awareness of Tyro in the market which
is understandably low given the absence of a sustained marketing effort in the past. A continual marketing profile will be a feature
in FY19 and beyond.
We secured exclusive rights with six of Australia’s leading hospitality Point of Sale (POS) providers to connect to our newly
announced Tyro Platform which is in development. This Platform aims to streamline the connectivity of third-party apps (such as
Order Ahead and Loyalty apps) to POS systems. This initiative builds on our long history of system integration expertise and aims
to remove the friction and complexity that multiple apps cause for merchants in their day-to-day operations.
We announced last week that we had entered into an agreement with the world’s largest mobile and online payment platform,
Alipay, to become the first Australian bank to offer a seamless, all-in-one EFTPOS solution with Alipay for Tyro’s merchants and
improve Australian businesses’ access to the Chinese visitor market. We expect the first merchant integration to be operational
this calendar year.
Also last week, Tyro was announced as the winner of the “Best Payments Services Bank” category at the prestigious 2018
Australian Business Banking Awards beating several of the ‘majors’ for this award.
In closing, I thank the amazing and talented team at Tyro - it is their enthusiasm, commitment and sheer hard work that drove our
performance in FY18 and so I thank one and all for making our results in the year possible.
As always, our Annual General Meeting will provide an opportunity to provide you with further insights and to outline a few of the
new initiatives we have in the pipeline for FY19, I hope you can join us for this event on 25 October 2018.
Robbie Cooke
Chief Executive Officer
Tyro Payments Limited
4 September 2018
Annual report for the year ended 30 June 2018
Page 7
Tyro Payments Limited
ABN 49 103 575 042
Directors’ Report
The Board of Directors of Tyro Payments Limited (the Company or Tyro) present their report together with the financial
statements for the financial year ended 30 June 2018.
DIRECTORS AND COMPANY SECRETARIES
The names and details of Tyro’s Directors that held office during the period commencing on 1 July 2017 and ending on the date
of this report are:
• Kerry Roxburgh
• Michael Cannon-Brookes
• Robert Ferguson (resigned 3 July 2018)
• David Fite (appointed 3 July 2018)
• Catherine Harris
• Paul Rickard
• Hans-Josef Jost Stollmann (resigned 17 October 2017)
Skills, qualifications, term of office, experience and 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 Eclipx Group Ltd.
Kerry is a Member Practitioner of the Stockbrokers and Financial Advisers Association of Australia. In 2000 he completed a
3 year term as CEO of E*TRADE Australia (a business that he co-founded in 1997), continuing as its non-executive
Chairman until June 2007, when it was acquired by the ANZ Bank and subsequently re-named ANZ Share Investing. Prior
to this appointment he was an Executive Director of Hong Kong Bank of Australia Group (now HSBC Bank Australia) 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 Kerry practiced for more than 20 years as a Chartered Accountant.
Other Current Directorships
Chairman of ASX listed Eclipx Group Limited (Director since March 2015); Non-executive Director of ASX listed Ramsay
Healthcare Ltd (since July 1997); Directorships with Medical Indemnity Protection Society Ltd and MIPS Insurance Pty Ltd.
Special Responsibilities
Chairman of the Board of Tyro, a Member of the Audit Committee, a Member of the Risk Committee and a Member of the
Nominations and Remuneration Committee.
Annual report for the year ended 30 June 2018
Page 8
Directors’ Report
Tyro Payments Limited
ABN 49 103 575 042
Mike Cannon-Brookes
Non-executive Director since 10 December 2009
Mike Cannon-Brookes is the Co-Founder and Co-CEO of Atlassian, a collaboration software company that helps teams
organise, discuss and complete shared work. More than 120,000 large and small organisations across the world, including
companies like Citrix, Dominos, Qantas and Twitter use Atlassian’s collaboration products to help their teams work better
together.
Mike was the youngest person ever to be awarded the ‘Australian Entrepreneur of the Year’ in 2006 by Ernst & Young
alongside Co-Founder and Co-CEO Scott Farquhar. In 2016 they were awarded the AFR’s ‘Australian Business Person of
the Year’ and in 2017 Forbes named them on their ‘Global Game Changers’ list. Mike was recognised by the World
Economic Forum as a ‘Young Global Leader’ in 2009.
Outside Atlassian, Mike is a technology investor in the areas of software, fintech, agriculture and energy. He serves as an
adjunct professor at the University of New South Wales’ School of Computer Science and Engineering, as well as chair of
the Computer Science and Engineering Industry Advisory Board.
Mike holds a Bachelor of Commerce in Information Systems from the University of New South Wales, Australia.
Other Current Directorships
Executive Director of NASDAQ listed Atlassian Corp Plc (Director since October 2002); Non-executive Director of Zoox,
Inc.
Special Responsibilities
Member of the Risk Committee.
Rob Ferguson
Non-executive Director since 17 November 2005, resigned 3 July 2018
During the year, Rob held the position of Acting Managing Director and Acting Chief Executive Officer of Tyro from 14 June
2017 to 23 March 2018.
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 from the position in 2002. He was previously Non-Executive Director of IMF
Bentham Ltd and Westfield.
Other Current Directorships
Non-executive Director with ASX listed Watermark Neutral Fund Ltd; Non-executive Chairman of Smartward Pty Ltd.
Special Responsibilities
Acting Managing Director and Acting Chief Executive Officer of Tyro (resigned 23 March 2018).
Former Listed Public Company Directorships in Last 3 Years
Non-executive Chairman of the GPT Group (ceased 2 May 2018); Non-executive Chairman of Primary Health Care Limited
(ceased 20 July 2018).
David Fite
Non-executive Director since 3 July 2018
David is currently an investor in various credit, financial services and technology businesses, and has been a shareholder
in Tyro since 2008. David has significant executive experience in the financial services sector both domestically and
globally. David has worked at Westpac Banking Corporation (holding various roles, including Treasurer, Assistant Chief
Financial Officer and the Group Executive responsible for all retail and business banking products in Australia). David has
also worked at Japan’s Shinsei Bank (formerly known as The Long-Term Credit Bank of Japan) as its Senior Corporate
Executive Officer, Chief Financial Officer and a member of its Board. Prior to entering the financial services sector, David
was a consultant at Bain & Company in Boston and London focussing on manufacturing and consumer products industries.
Other Current Directorships
Non-executive Director of Judo Capital Holdings Ltd and Judo Capital Pty Ltd; Non-executive Director of Evari Insure Pty
Ltd; Non-executive Director of Collect Ltd (New Zealand company).
Annual report for the year ended 30 June 2018
Page 9
Directors’ Report
Tyro Payments Limited
ABN 49 103 575 042
Catherine Harris
Non-executive Director since 17 December 2015
Catherine is the Chair of Harris Farm Markets Pty Ltd. Her previous roles have included Federal Director of the Affirmative
Action Agency and Deputy Chancellor of the University of NSW, Trustee of the Sydney Cricket Ground Trust, The National
Gallery of Australia, The Australian Defence Force Academy, The MCA, St Margaret's Public Hospital, The Australian
Rugby League Commission and the Australia Japan Foundation.
Catherine is an Officer in the Order of Australia and was awarded the Australian Public Service Medal, The Centenary
Medal and has an Honorary Doctorate in Business from UNSW.
Other Current Directorships
Chair of Harris Farm Markets Pty Ltd; Director of The Australian Ballet; Independent Director of The Sports Australia Hall of
Fame; Director of The Australian School of Business of UNSW.
Special Responsibilities
Chair of the Nominations and Remuneration Committee and a Member of the Audit Committee.
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.
Other Current Directorships
Non-executive Director of Property Exchange Australia Ltd, Switzer Asset Management Limited and ASX listed WCM
Global Growth Ltd (April 2017) and holds Board positions with several other Australian private companies.
Special Responsibilities
Chair of the Audit Committee, Chair of the Risk Committee and a Member of the Nominations and Remuneration
Committee.
Jost Stollmann
Non-executive Director, appointed as a Director on 5 April 2005, resigned 17 October 2017
Prior to taking up the Non-executive Director position, Jost held the position of Executive Director and Chief Executive
Officer of Tyro since 5 April 2005. Jost retired as Chief Executive Officer, effective 24 October 2016 and as Executive
Director, effective 14 June 2017.
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.
Company Secretaries
Tyro’s Company Secretaries as at 30 June 2018 were Justin Mitchell and Sami Wilson.
Justin was appointed on 19 March 2007 to build and manage the compliance and risk frameworks and oversee all regulatory
obligations. Justin was appointed Company Secretary on 12 April 2007. In addition, Justin is the Chief Risk Officer.
Sami was appointed Company Secretary on 7 May 2018. In addition, Sami is Tyro’s Senior Legal Counsel and joined Tyro in
April 2018. Sami holds Bachelors of Law and Commerce and was previously a member of Herbert Smith Freehills’ Private
Equity team.
DIVIDENDS
No dividends or distributions were declared or paid for the year ended 30 June 2018.
Annual report for the year ended 30 June 2018
Page 10
Directors’ Report
Tyro Payments Limited
ABN 49 103 575 042
CORPORATE INFORMATION AND CAPITAL STRUCTURE
Corporate Structure
Tyro is an unlisted public company. It is incorporated and domiciled in Australia. The registered office of the Company is Level
1, 155 Clarence Street, Sydney, New South Wales, 2000.
Capital Structure
Tyro’s issued share capital as at the date of this report was 440,432,695 fully paid ordinary shares.
During the period commencing on 1 July 2017 and ending on the date of this report, 15,840,945 fully-paid ordinary shares were
issued by Tyro upon the exercise of options, raising a total of $2.9 million in fully paid capital.
As at the date of this report, there were 36,334,251 unissued ordinary shares under options. When the options are exercised
(assuming they have vested), Tyro will issue one fully-paid ordinary share in respect of each option exercised. Option holders do
not have any right, by virtue of the option, to participate in any share issue of the Company. The expiry dates in respect of these
options range from 29 August 2019 to 1 March 2024 (depending on the date of grant). The shares to be issued on exercise of
these options will be issued at the relevant option’s exercise price. The exercise prices for the outstanding options are: $0.06,
$0.08, $0.10, $0.12, $0.14, $0.375, $0.45, $0.60, $1.49, $1.62 and $1.76.
Director and Officer Option Grants
During the period commencing on 1 July 2017 and ending on the date of this report (Reporting Period), the following options
were granted by Tyro to:
•
•
Tyro’s Directors; and
Tyro’s 5 most highly remunerated officers (other than Directors).
When the options are exercised Tyro will issue one fully-paid ordinary share in respect of each option exercised.
Director
Options granted during Reporting Period
Kerry Roxburgh
Mike Cannon-Brookes
Rob Ferguson
David Fite
Catherine Harris
Paul Rickard
Jost Stollmann
Officer
Robbie Cooke, Chief Executive Officer
David Coombes, Director of Engineering
Bronwyn Yam, Director of Product
Joshua Walther, Director of Sales
Prav Pala, Chief Financial Officer
75,000
50,000
250,0001
75,000
50,000
50,000
-
-
450,000
450,000
250,000
250,000
1 At the time of the grant of these options, Rob Ferguson held the position of Acting Managing Director and Acting Chief
Executive Officer of Tyro. Upon Rob’s resignation as a Director on 3 July 2018, 229,185 of these options were forfeited as they
had not yet vested.
Annual report for the year ended 30 June 2018
Page 11
Directors’ Report
Tyro Payments Limited
ABN 49 103 575 042
OPERATING AND FINANCIAL REVIEW
Nature of Operations and Principal Activities
Tyro is an Australian bank and operates under the supervision of the Australian Prudential Regulation Authority (APRA). Tyro
provides credit, debit and EFTPOS card acquiring, Medicare and private health fund claiming and rebating services to
Australian businesses. Tyro takes money on deposit and offers unsecured cash-flow based lending to Australian EFTPOS
merchants. The Company has implemented appropriate systems and controls to comply with the stringent prudential and
regulatory requirements within the Australian Banking System.
Review of Operations and Financial Position
The Company reported the following operating results for the year and the comparative period:
(amounts in $’000s)
Revenue
Operating income
Operating loss before tax expense
Net loss
2018
2017
$148,251
$120,628
$69,088
$56,090
($17,521)
($14,988)
($16,370)
($12,775)
The Company had a net loss of $16.4 million for the year ended 30 June 2018. The Company continued to scale up its
investment in building its banking business and embarked on a significant growth program including new product design,
improved operating systems and distribution. The Company had interest income of $4.1 million for the year.
For further information refer to the CEO’s Review on pages 5 to 7.
Regulatory Landscape, Capital and Funding
The Company holds an authority under the Banking Act 1959 (Cth) to carry on a banking business as an Authorised Deposit-
taking Institution and is subject to prudential capital requirements set by APRA. The Company is fully compliant with the
prudential capital requirements prescribed by APRA and has sufficient capital to fund on-going operations. The information
required by APS 330: Public Disclosure is provided in the ‘Investors’ section of Tyro’s website at www.tyro.com/investors (under
Regulatory Disclosures).
The Company had cash and cash equivalents of $28.6 million at the end of the reporting period.
Total Tier 1 capital held as at 30 June 2018 was $95.7 million. The Company has always held sufficient capital to meet its internal
targets above APRA’s prudential capital requirements.
Risk Management
The Board is responsible for reviewing and approving the risk management strategy, including determining the Company’s
appetite for risk. The Chief Executive Officer and Management team are responsible for implementing the risk management
strategy and framework, and for developing policies, controls, processes and procedures for identifying and managing risk.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
Significant events during the financial year
On 23 March 2018, Robbie Cooke was appointed as Chief Executive Officer.
Significant events after the balance date
In the opinion of the Directors, there have been no matters or circumstances which have arisen between 30 June 2018 and the
date of this report that have significantly affected or may significantly affect the operations of the Company, the result of those
operations or the state of affairs of the Company in subsequent financial years.
Likely developments and expected results
Tyro’s key priorities and strategies for FY19 and beyond are discussed in the CEO’s Review on pages 5 to 7. In the Directors’
opinion, any further disclosure of information would be likely to result in unreasonable prejudice to the Company.
Annual report for the year ended 30 June 2018
Page 12
Directors’ Report
Tyro Payments Limited
ABN 49 103 575 042
INDEMNIFICATION AND INSURANCE
The Company’s Constitution allows the Company to pay insurance premiums for contracts insuring a Director, Secretary or
other officer of the Company against any liability incurred in that person’s capacity as an officer of the Company, to the extent
permitted by law. During the financial year, consistent with the Company’s Constitution, the Company paid a premium in
respect of a contract insuring the current and former Directors of the Company, the Company Secretaries and the officers of the
Company. The contract of insurance prohibits disclosure of the nature of the liabilities insured against and the amount of the
premium.
Clause 104.1 of the Company’s Constitution provides that each current and former Director, Secretary or other officer of the
Company is indemnified, to the maximum extent permitted by law against any liability incurred by the person in their capacity as
an officer of the Company (including legal costs incurred in defending any legal action or proceedings). The Company has also
entered into deeds of indemnity, insurance and access with its Directors, Chief Executive Officer, Company Secretaries and
Chief Financial Officer (and certain former officers) which will indemnify them against liability incurred as an officer of the
Company, to the extent permitted by law.
Pursuant to the terms of the Company’s standard engagement letter with the Company’s auditor, Ernst & Young (EY), the
Company has agreed to indemnify EY against any liability incurred as auditor, to the extent permitted by law.
MEETINGS OF DIRECTORS
The number of Board meetings and meetings of Board Committees held during the year and the number of meetings attended
by each Director is as follows:
Board
Audit Committee
Risk Committee
Nominations &
Remuneration
Committee
Kerry Roxburgh
Mike Cannon-Brookes
Rob Ferguson2
Catherine Harris
Paul Rickard
Jost Stollmann3
A
10
10
10
10
10
4
B
9
6
8
8
10
4
A
4
nm
nm
4
4
B
3
nm
nm
2
4
A
6
6
B
6
2
A
2
1
B
2
1
nm
nm
nm
nm
3
4
3
4
2
1
1
2
1
1
nm
nm
nm
nm
A: number of meetings during the year while the Director was a member of the Board or Committee
B: number of meetings attended by the Director as a member during the year
nm: not a member of the relevant Committee
Committee Membership
As at the date of this report, the Company had a Board Audit Committee, a Board Risk Committee and a Board Nominations
and Remuneration Committee.
Directors appointed to the Board Committees as at 30 June 2018 were:
Audit Committee
Risk Committee
P. Rickard (Chair)
C. Harris
K. Roxburgh
P. Rickard (Chair)
M. Cannon-Brookes
K. Roxburgh
Nominations &
Remuneration Committee
C. Harris (Chair)
P. Rickard
K. Roxburgh
2 Rob Ferguson resigned as a Director, following conclusion of the financial year, on 3 July 2018.
3 Jost Stollmann resigned as a Director, on 17 October 2017.
Annual report for the year ended 30 June 2018
Page 13
Ernst & Young
200 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
As lead auditor for the audit of Tyro Payments Limited for the financial year ended 30 June 2018, I
declare to the best of my knowledge and belief, there have been:
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
b) no contraventions of any applicable code of professional conduct in relation to the audit.
Ernst & Young
Andrew Price
Partner
4 September 2018
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Page 14
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2018
Continuing Operations
Fees and commission income
Interchange, integration and support fees expense
Net fees and commission income
Interest income on loans
Interest expense on deposits
Net banking operating income
Terminal and accessories sale
Terminal and accessories COGS
Net terminal and accessories sale income/(expense)
Tyro Payments Limited
ABN 49 103 575 042
Note
2
2
2018
$000
2017
$000
142,213
(78,511)
63,702
1,567
(110)
1,457
810
(542)
268
115,453
(63,761)
51,692
450
(33)
417
327
(744)
(417)
Interest income on treasury investments
2,498
2,866
Other income
Total operating income
Expenses
Employee benefits expense (exc. share-based payments)
Share-based payments expense
Administrative expenses
Depreciation
Bank fee expenses
Impairment of inventories
Other expenses
Total operating expenses
Loan impairment expense
Foreign currency loss
Operating loss before tax expense
Income tax benefit
Net loss for the year
Other comprehensive income
2
2
2
9
7
3
1,163
1,532
69,088
56,090
(53,370)
(1,411)
(24,081)
(7,064)
(181)
-
(71)
(86,178)
(45,820)
(1,841)
(16,920)
(5,984)
(180)
(16)
(34)
(70,795)
(411)
(20)
(230)
(53)
(17,521)
(14,988)
1,151
2,213
(16,370)
(12,775)
Net fair value gain on available-for-sale investments, net of tax
232
203
Total comprehensive loss for the period
(16,138)
(12,572)
The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
Annual report for the year ended 30 June 2018
Page 15
STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2018
ASSETS
Current assets
Cash and cash equivalents
Due from other financial institutions
Trade and other receivables
Prepayments
Inventories
Loans
Total current assets
Non-current assets
Available-for-sale investments
Property, plant and equipment
Net deferred tax assets
Total non-current assets
TOTAL ASSETS
LIABILITIES
Current liabilities
Deposits
Trade payables and other liabilities
Provisions
Total current liabilities
Non-current liabilities
Provisions
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Reserves
Accumulated losses
TOTAL EQUITY
Tyro Payments Limited
ABN 49 103 575 042
Note
2018
$000
2017
$000
4
5
6
7
8
9
3
11
12
13
14
15
15
15
28,564
17,812
15,935
1,925
2,588
7,590
74,414
24,052
52,438
10,489
1,992
1,148
4,511
94,630
39,097
14,696
11,351
65,144
21,097
13,482
10,300
44,879
139,558
139,509
11,563
13,764
3,922
29,249
3,948
11,000
2,636
17,584
768
768
534
534
30,017
18,118
109,541
121,391
141,258
13,973
(45,690)
138,381
12,157
(29,147)
109,541
121,391
The above Statement of Financial Position should be read in conjunction with the accompanying notes.
Annual report for the year ended 30 June 2018
Page 16
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2018
Cash flows from operating activities
Fees and commission income received
Interchange, integration and support fees expenses paid
Note
Interest received
Interest paid
Other operating income received
Payments to employees and suppliers:
Personnel expenses paid
Terminals purchased
Other operating expenses paid
Movement in net schemes receivable and other
Cash flows from operating activities before changes in
customer deposits and lending balances
Net increase in customer loans
Net increase in retail deposits
Changes in customer deposits and lending balances arising
from cash flow movements
Net cash flows from operating activities
4
Cash flows from investing activities
Movement in term deposit investments
Purchases
Proceeds on maturity
Movement in available-for-sale investments
Purchases
Purchase of property, plant and equipment (exc. terminals)
Net cash flows from investing activities
Cash flows from financing activities
Proceeds from exercise of share options
15
Net cash flows from financing activities
Net increase/(decrease) in cash and cash equivalents
Effect of foreign exchange rates on cash and cash
equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
4
Tyro Payments Limited
ABN 49 103 575 042
2018
$000
142,178
(78,582)
4,004
(103)
2017
$000
115,265
(63,783)
2,827
(29)
1,998
1,733
(52,321)
(5,179)
(24,432)
(4,489)
(16,926)
(3,489)
7,616
4,127
(12,799)
-
35,013
(17,668)
(2,891)
14,454
2,877
2,877
4,532
(20)
(45,134)
(5,060)
(17,409)
(2,729)
(14,319)
(4,741)
3,489
(1,252)
(15,571)
(24,698)
281
(20,125)
(1,822)
(46,364)
3,815
3,815
(58,120)
(52)
24,052
28,564
82,224
24,052
The above Statement of Cash Flows should be read in conjunction with the accompanying notes.
Annual report for the year ended 30 June 2018
Page 17
Tyro Payments Limited
ABN 49 103 575 042
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2018
Attributable to equity holders of Tyro Payments Limited
Contributed
Equity
$000
Note
Available-
for-Sale
Revaluation
Reserve
$000
Share-
Based
Payments
Reserve
$000
Accumulated
Losses
$000
Option
Premium
Reserve
$000
General
Reserve
for Credit
Losses
$000
Total
$000
At 30 June 2016
134,566
420
8,435
(15,831)
167
550 128,307
Loss for the year
Other comprehensive
income
Total comprehensive
income
Issue of share capital –
from options exercised
Share-based payments
Transfer to general reserve
for credit losses
-
-
-
(12,775)
-
-
(12,775)
-
203
-
-
-
-
203
-
203
-
(12,775)
-
-
(12,572)
3,815
-
-
-
-
-
3,815
-
-
1,841
-
-
-
1,841
-
-
-
(541)
-
541
-
At 30 June 2017
138,381
623
10,276
(29,147)
167
1,091 121,391
Loss for the year
Other comprehensive
income
Total comprehensive
income
Issue of share capital –
from options exercised
Share-based payments
Transfer to general reserve
for credit losses
-
-
-
(16,370)
-
-
(16,370)
-
232
-
-
-
-
232
-
232
-
(16,370)
-
-
(16,138)
2,877
-
-
-
-
-
2,877
-
-
1,411
-
-
-
1,411
-
-
-
(173)
-
173
-
At 30 June 2018
15
141,258
855
11,687
(45,690)
167
1,264 109,541
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.
Annual report for the year ended 30 June 2018
Page 18
Tyro Payments Limited
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018
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 4 September 2018.
The Company is an unlisted public company, incorporated and domiciled in Australia. The nature of the operations and principal
activities of the Company 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.
Similar categories of income and expenses have been grouped together. Prior year comparative information for these amounts,
where necessary, has been reclassified to achieve consistency in disclosure with current financial year amounts and other
disclosures.
The financial report is presented in Australian dollars and all values are rounded to the nearest thousand dollars, under the
option available to the Company under ASIC Corporations Instrument 2016/191, unless otherwise stated.
(b) 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 and Interpretations issued by the International Accounting Standards
Board.
(c) Going concern
The Company had net current assets of $45.2 million as at 30 June 2018 (2017: $77.0 million).
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) New accounting standards and interpretations
(i) Changes in accounting policies
The accounting policies are consistent with those applied in the previous financial year and the corresponding half-year interim
period.
(ii) Accounting standards and interpretations issued but not yet effective
The following Australian Accounting Standards and Interpretations which may have a material impact on the Company have
been issued, but are not yet effective, and unless otherwise stated have not been early adopted by the Company:
AASB 9 Financial Instruments
AASB 9 replaces AASB 139 and results in changes to accounting policies for financial assets and financial liabilities in the
areas of Classification and Measurement, Impairment and Hedge Accounting. The Company will first apply AASB 9 in the
financial year beginning 1 July 2018. Details of the implementation and major changes are outlined below:
Classification and Measurement:
AASB 9 introduces a new model that categorises financial assets based on the Company’s business model for realising
these assets and whether the contractual cash flows of the asset represent solely payments of principal and interest. The
Company will apply the following policies for the new AASB 9 classification and measurement categories:
Annual report for the year ended 30 June 2018
Page 19
Tyro Payments Limited
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018
1. STATEMENT OF ACCOUNTING POLICIES (cont’d)
• Amortised Cost - A financial asset will be measured at amortised cost if both of the following conditions are met:
1.
2.
the financial asset is held within a business model whose objective is to hold financial assets in order to
collect contractual cash flows; and
the contractual terms of the financial asset give rise on specified dates to cash flows that are solely
payments of principal and interest on the principal amount outstanding.
• Fair Value through Other Comprehensive Income (FVOCI) - A financial asset will be measured at FVOCI if both of
the following conditions are met:
1.
2.
the financial asset is held within a business model whose objective is achieved by both collecting
contractual cash flows and selling financial assets; and
the contractual terms of the financial asset give rise on specified dates to cash flows that are solely
payments of principal and interest on the principal amount outstanding.
• Fair Value through Profit and Loss (FVPL) - All financial assets that are not measured at amortised cost or FVOCI
will be measured at FVPL. All financial assets that are equity instruments will be measured at FVPL unless the
Company irrevocably elects to present subsequent changes in the fair value in other comprehensive income. The
Company does not expect to make this election. The Company may also irrevocably elect to designate a financial
asset as measured at FVPL on initial recognition if doing so eliminates or significantly reduces an accounting
mismatch.
The accounting for financial liabilities is largely unchanged.
The Company expects a change to the classification and measurement of its loan product which under AASB 139 is
currently classified as Loans and Receivables and measured at amortised cost. Under AASB 9, the loan product is
assessed to be classified and measured at FVPL. The financial impact from the change is not expected to be material.
With the exception of the loan product, the Company expects no significant impact from the implementation of AASB 9.
Impairment:
AASB 9 introduces a revised impairment model which moves from an incurred loss model to an expected loss model which
requires more timely recognition of expected credit losses as well as recognition of full lifetime expected losses. The
standard uses a three-stage approach:
1. Stage 1 - For financial assets where there has been no significant increase in credit risk since origination a
provision for 12-month expected credit losses is required;
2. Stage 2 - For financial assets where there has been a significant increase in credit risk a provision for full lifetime
expected losses is required.
3. Stage 3 – For financial assets where the asset is credit impaired a provision for full lifetime expected losses is
required.
The impairment model is only applicable to financial assets measured at amortised cost or FVOCI.
For financial assets at amortised cost, these will either be subject to the simplified approach or have low credit risk, and so
are expected to have no significant impact from the implementation of AASB 9.
Hedge Accounting:
AASB 9 simplifies the hedge accounting requirements, including hedge effectiveness testing to better align to the risk
management practices of an organisation.
The Company currently does not have any hedges in place.
Annual report for the year ended 30 June 2018
Page 20
Tyro Payments Limited
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018
1. STATEMENT OF ACCOUNTING POLICIES (cont’d)
AASB 15 Revenue from Contracts with Customers
AASB 15 replaces AASB 118 and establishes principles for reporting useful information to users of financial statements
about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with
customers. The core principle of AASB 15 is that an entity recognises revenue to depict the transfer of promised goods or
services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for
those goods or services. An entity recognises revenue in accordance with the core principles explained in a step by step
approach in the standard.
The Company will first apply AASB 15 in the financial year beginning 1 July 2018. Presentation changes in the Statement
of Comprehensive Income and Statement of Financial Position are expected as a result of AASB 15 with the impacted
revenue streams primarily related to merchant service fees and terminal rental income. The financial impact from the
change is not expected to be material.
AASB 16 Leases
Introduces a single lessee accounting model and requires a lessee to recognise assets and liabilities for all leases with a
term of more than 12 months, unless the underlying asset is of low value. For lessors, enhanced disclosures are required to
improve information about the lessor’s risk exposure, particularly to low value risk. AASB 16 applies to annual reporting
periods beginning on or after 1 January 2019. AASB 16 is not mandatory until 1 July 2019 for the Company.
Other amendments to existing standards that are not yet effective are not expected to result in significant changes to the
Company’s accounting policies.
(e) 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
(including Key Management Personnel) 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 10.
Classification of and valuation of investments - The Company classifies its investments in listed securities and floating rate
notes 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. Where no active market
exists for a particular asset, the Company uses a valuation technique to arrive at the fair value. The fair value of floating
rate notes has been estimated using pricing data inputs provided by an independent third party pricing service which
factors in recent arm’s length transactions into their valuation methods. This makes maximum use of observable market
inputs and places minimal reliance on entity specific inputs.
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 9. An
impairment assessment is conducted and reviewed by Management at least annually as to whether indicators of
impairment such as technical obsolescence exist.
Long service leave - Entitlements that arise in respect of non-current long service leave 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.
Annual report for the year ended 30 June 2018
Page 21
Tyro Payments Limited
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018
1. STATEMENT OF ACCOUNTING POLICIES (cont’d)
Taxation – Provisions for taxation require significant judgement with respect to outcomes that are uncertain. The Company
has estimated its tax provisions based on expected outcomes. Deferred tax assets are recognised for deductible temporary
differences as Management considers that it is probable that future taxable profits will be available to utilise those
temporary differences. In forming their view, Management considers the probability of forecast future taxable income and
performs stress testing on expected budgets to assess the likelihood of deferred tax assets being utilised. Management
does not recognise deferred tax assets where utilisation is not considered probable. An assessment of research and
development (R&D) activities and associated expenditure that is considered claimable, is conducted and reviewed by
Management at least annually as part of the annual R&D tax incentive application. An assessment of the continuity of
ownership test (and where applicable, the same business test) is also performed to support the recognition of any carry
forward tax losses and R&D credits.
Software capitalisation –The Company has not capitalised any investments on in-house product development. All such
costs have been expensed to the Statement of Comprehensive Income.
Loan impairment – Individually assessed provisions are made against loans that have been individually assessed as
impaired. The Company raises specific provisions for impairment of these loans when there is objective evidence of
impairment (i.e. when an event of default is triggered). The specific provision raised is based on the exposure amount at
the date of default. Loans that do not have an individually assessed provision are assessed collectively for impairment. A
collective provision is raised based on a risk rating system that considers the probability of default (based on an externally
rated business score), loss given default rates (using an internally derived probability factor that takes into consideration the
loans being unsecured), and the exposure at default.
(f) 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, debit and charge 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 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 using a method that approximates the effective
interest method. The effective interest 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.
Annual report for the year ended 30 June 2018
Page 22
Tyro Payments Limited
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018
1. STATEMENT OF ACCOUNTING POLICIES (cont’d)
(g) 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 which transfer substantially all the risks and rewards incidental to
ownership of an asset are classified as a finance lease. All other leases are operating leases.
For operating leases entered into by the Company as lessee, operating lease payments are recognised as an expense in the
Statement of Comprehensive Income on a straight-line basis over the lease term. Deferred lease incentives are recognised as
a liability on the Statement of Financial Position on inception of the lease and subsequently reduced on a straight line basis
over the lease term by recognising the incentive through rent expense.
For purchased assets where the Company is the lessor under an operating lease, these are carried at cost and depreciated
over their useful lives. Property, plant and equipment includes assets leased out under operating leases. Operating lease
income is recognised on a straight-line basis over the lease term unless another systematic basis is more appropriate.
The Company does not have any finance leases in place.
(h) Cash and cash equivalents
Cash and cash equivalents comprise cash balances, call deposits and term deposits with an original maturity of three months or
less from the date of acquisition.
(i) Due from other financial institutions
Includes term deposits with maturities greater than three months from the date of acquisition, and term deposits pledged to
counterparties as collateral. These are initially measured at fair value and subsequently measured at amortised cost using a
method that approximates the effective interest method.
(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. 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) 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.
(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.
Annual report for the year ended 30 June 2018
Page 23
Tyro Payments Limited
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018
1. STATEMENT OF ACCOUNTING POLICIES (cont’d)
Net realisable value is an estimate, based on the most reliable evidence at the time, of the amount the inventories are expected
to realise.
(m) Loans
(i) Recognition and measurement
Loans to merchants are initially recognised at fair value. Subsequent to initial recognition, these assets are measured at
amortised cost, less any provisions for impairments. As the merchant receives daily settlements, a percentage is taken towards
loan repayments. The loan repayment includes a portion which recycles the upfront unearned fee charged to the merchant into
the Statement of Comprehensive Income as interest income. This method of recognition approximates the effective interest
method.
(ii) Provisions for loan impairments
Individually assessed provisions are made against loans that have been individually assessed as impaired. The Company
raises specific provisions for impairment of these loans when there is objective evidence of impairment (i.e. when an event of
default is triggered). The specific provision raised is based on the exposure amount at the date of default.
Loans that do not have an individually assessed provision are assessed collectively for impairment. A collective provision is
raised based on a risk rating system that considers the probability of default (based on an externally rated business score), loss
given default rates (using an internally derived probability factor that takes into consideration the loans being unsecured), and
the exposure at default.
When a loan is uncollectible, it is written off against the related provision for impairment. Such loans are written off after all the
necessary procedures have been completed and the amount of the loss has been determined. Subsequent recoveries of
amounts previously written off go to the Statement of Comprehensive Income.
(n) 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.
(o) 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 reporting date.
Current income tax relating to items recognised directly in equity is recognised in equity and not in the statement of
comprehensive income. Management periodically evaluates positions taken in the tax returns with respect to situations in which
applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
(p) 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).
Annual report for the year ended 30 June 2018
Page 24
Tyro Payments Limited
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018
1. STATEMENT OF ACCOUNTING POLICIES (cont’d)
(q) 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.
Cash flows are included in the Statement of Cash Flows on a gross basis (unless stated otherwise) and the GST component of
cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority is
classified as part of operating cash flows.
(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.
(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:
2018
2017
Plant and equipment:
EFTPOS terminals
Furniture and office equipment
Computer equipment
Leasehold improvements
3 years
5 years
4 years
3 years
5 years
4 years
Remaining term
of lease
Remaining term
of lease
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 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 its 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.
Annual report for the year ended 30 June 2018
Page 25
Tyro Payments Limited
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018
1. STATEMENT OF ACCOUNTING POLICIES (cont’d)
(s) Deposits from customers
Deposits from customers are initially recognised at fair value. Subsequent to initial recognition, these liabilities are measured at
amortised cost. Interest expense on deposits is recognised in the Statement of Comprehensive Income using a method that
approximates the effective interest method.
(t) Trade and other payables
Merchant payables arise when the Company has received monies from the relevant schemes and financial institutions that
have not yet been settled with the merchant.
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.
(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 may 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 from chargebacks 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.
(v) General reserve for credit losses
The Company provides for estimated future credit losses primarily from chargebacks, with a general reserve for credit losses.
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 Company also provides for estimated future credit losses from loans to ensure the Company has sufficient capital to cover
credit losses estimated to arise over the full life of the loans as required by APRA Prudential Standard APS 220.
The methodology and assumptions used for estimating the 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.
Annual report for the year ended 30 June 2018
Page 26
Tyro Payments Limited
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018
1. STATEMENT OF ACCOUNTING POLICIES (cont’d)
Entitlements arising in respect of salaries and wages, annual leave and other employee benefits that are expected to be settled
within one year have been measured at their nominal amounts. Employees are entitled to 20 days annual leave each year.
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. Expected future payments are discounted using market yields at the reporting date on high quality corporate bonds with
terms to maturity and currencies that match as closely as possible to the estimated future cash outflows.
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 the reporting date is estimated to be less than the annual entitlement for sick leave.
(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 10.
The Company also has share-based compensation benefits in the form of share performance rights which are tied to a
performance condition. The policy treatment is consistent with that for share options via the Employee Share Option Plan.
(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. The
Company de-recognises scheme receivables against associated merchant payables as the risks and rewards are passed
through in line with contractual obligations.
Annual report for the year ended 30 June 2018
Page 27
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018
2. REVENUE AND EXPENSES
The operating loss before tax expense has been arrived at after accounting for the following items:
Tyro Payments Limited
ABN 49 103 575 042
Fees and commission income
Merchant service fee
Terminal rental income
Other fee income
Interchange, integration and support fees expense
Interchange fees and scheme fees
Integration, support and other fee expense
Other income
Sublease and other rental income
Other income
Employee benefits expense
Wages, salaries and bonuses
Superannuation
Other employee benefits expense
Administrative expenses
Contractor and consulting costs
Communications, hosting and licencing costs
Rent
Marketing
Terminal management and logistics
Recruitment
Accounting
Legal
Other administrative expenses
2018
$000
125,618
11,793
4,802
142,213
(71,863)
(6,648)
(78,511)
2017
$000
101,092
9,643
4,718
115,453
(57,656)
(6,105)
(63,761)
1,124
39
1,163
1,310
222
1,532
(45,784)
(4,213)
(3,373)
(53,370)
(5,201)
(4,132)
(4,052)
(2,899)
(1,671)
(957)
(686)
(585)
(3,898)
(24,081)
(39,491)
(3,793)
(2,536)
(45,820)
(1,532)
(3,098)
(4,013)
(2,000)
(1,162)
(1,453)
(961)
(423)
(2,278)
(16,920)
Annual report for the year ended 30 June 2018
Page 28
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018
3. INCOME TAX
a) Income tax benefit
Major components of income tax benefit for the period ended 30 June 2018:
Current income tax
Current income tax charge
Deferred income tax
Relating to origination and reversal of temporary differences
Income tax benefit in the statement of comprehensive income
Amount reported directly in other comprehensive income
Deferred tax related to items recognised in equity during the year
Deferred tax on unrealised gain on available-for-sale investment
Income tax expense reported in equity
b) Reconciliation of income tax expense and prima facie tax:
Operating loss before tax
At the statutory income tax rate of 30%
Research and development incentive
Share-based payment remuneration
Entertainment expenses
Adjustment in respect to previous year’s tax balances
Tax effect of current year losses for which no deferred tax asset is recognised
Total income tax benefit
c) Deferred income tax assets and liabilities
Tyro Payments Limited
ABN 49 103 575 042
2018
$000
-
1,151
1,151
-
(100)
(100)
2017
$000
-
2,213
2,213
-
(87)
(87)
(17,521)
(14,988)
5,256
184
(423)
(106)
-
(3,760)
1,151
4,496
435
(551)
(62)
(711)
(1,394)
2,213
Statement
of Financial
Position
$000
2018
Statement of
Comprehensive
Income
$000
Deferred tax assets
Fixed assets
Provisions & accruals
Other (legal fees)
Lease break fee
R&D credits
Tax losses
Prepayments
Available-for-sale
investments
Unrealised FX gain
Total
1,097
3,021
58
21
5,502
2,093
11,792
(9)
(367)
(65)
(441)
11,351
173
513
(24)
(21)
(1,139)
1,677
1,179
(4)
-
(24)
(28)
1,151
$000
-
-
-
-
-
-
-
(100)
-
(100)
(100)
Other
Comprehensive
Income
Statement
of Financial
Position
$000
2017
Statement of
Comprehensive
Income
$000
Other
Comprehensive
Income
$000
925
2,508
83
42
6,641
416
10,615
(6)
(267)
(42)
(315)
10,300
224
398
(4)
(21)
1,182
416
2,195
(6)
-
24
18
2,213
-
-
-
-
-
-
-
(87)
-
(87)
(87)
Annual report for the year ended 30 June 2018
Page 29
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018
4. CASH AND CASH EQUIVALENTS
Deposits at call
Short term deposits
Tyro Payments Limited
ABN 49 103 575 042
2018
$000
18,564
10,000
2017
$000
24,052
-
28,564
24,052
Deposits at call include cash at banks, cash held in the exchange settlement account with the Reserve Bank of Australia, and
cash in hand. Short-term deposits are those with maturities of three months or less from date of acquisition.
Reconciliation of operating loss after tax to net cash flows used in operations
Operating loss
Adjustments for:
Depreciation
Share-based payments expense
Loan impairment expense
Foreign currency loss
(Gain)/loss on disposal of property plant and equipment
Deferred tax benefits
Changes in assets and liabilities
(Increase) in loans
(Increase) in interest and other receivables
(Increase) in inventories
Decrease/(increase) in prepayments
Increase in retail deposits
(Decrease) in interest and other payables
Increase in provisions
Net cash from operating activities
5. DUE FROM OTHER FINANCIAL INSTITUTIONS
Term deposits
Deposits held as collateral
2018
$000
2017
$000
(16,370)
(12,775)
7,064
1,411
411
20
(10)
(1,151)
(3,489)
(4,549)
(1,440)
67
7,616
(3,898)
1,519
(12,799)
2018
$000
10,000
7,812
17,812
5,984
1,841
230
53
12
(2,213)
(4,741)
(3,382)
(225)
(1,026)
3,489
(3,777)
959
(15,571)
2017
$000
44,698
7,740
52,438
Includes term deposits with maturities greater than three months from the date of acquisition and deposits pledged to
counterparties as collateral. Refer to Note 17 for details of deposits held as collateral.
Annual report for the year ended 30 June 2018
Page 30
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018
6. TRADE AND OTHER RECEIVABLES
Scheme and other receivables
Merchant acquiring fees
Interest receivable
The Company's ageing of scheme and other trade receivables before impairment is as follows:
Tyro Payments Limited
ABN 49 103 575 042
2018
$000
11,812
3,978
145
15,935
2017
$000
6,897
3,192
400
10,489
Carrying value 2018
Carrying value 2017
7. LOANS
Loans (net of unearned fees)
Specific provision for impairment
Collective provision for impairment
Total
$000
11,812
6,897
Current
$000
11,234
6,013
1-30
days
$000
455
476
31-60
days
$000
3
23
61-90
days >90 days
$000
$000
41
292
79
93
2018
$000
7,985
(206)
(189)
7,590
2017
$000
4,647
(24)
(112)
4,511
In July 2016, the Company launched the Smart Growth Funding product in pilot, which was offered to existing Tyro EFTPOS
merchants. In January 2017, the product exited pilot into wider availability. The loans are unsecured, with an upfront
(“unearned”) fee charged to the merchant. As the merchant receives daily settlements, a percentage is taken towards loan
repayments. The loan repayment includes a portion which reduces the loan principal and a portion which recycles the unearned
fee into the Statement of Comprehensive Income as interest income. This method of recognition approximates the effective
interest method. In the Statement of Financial Position, any outstanding unearned fees are netting off against the loan balance.
Provision for impairment
Specific provisions
Opening balance
Net movement in provision
Sub-total
Bad debts written off
Closing balance – specific provisions
Collective provisions
Opening balance
Net movement in provision
Closing balance – collective provisions
Total provision for impairment
2018
$000
24
334
358
(152)
206
2018
$000
112
77
189
395
2017
$000
-
118
118
(94)
24
2017
$000
-
112
112
136
Annual report for the year ended 30 June 2018
Page 31
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018
8. AVAILABLE-FOR-SALE INVESTMENTS
Floating rate notes
Investment in VISA shares
Tyro Payments Limited
ABN 49 103 575 042
2018
$000
37,875
1,222
39,097
2017
$000
20,265
832
21,097
VISA shares were acquired following the demutualisation of VISA International, as a result of which listed VISA shares were
issued to members of the VISA network.
9. PROPERTY, PLANT AND EQUIPMENT
Reconciliation of net carrying amounts at the beginning and end of the year:
Year ended 30 June 2018
At 30 June 2017 net of accumulated
depreciation and impairment
Additions/transfers
Disposals/transfers
Depreciation for the year
At 30 June 2018 net of accumulated
depreciation and impairment
At 30 June 2017
Cost or fair value
Accumulated depreciation and impairment
Net carrying amount
At 30 June 2018
Cost or fair value
Accumulated depreciation and impairment
Net carrying amount
EFTPOS
Terminals
$000
Furniture
and Office
Equipment
$000
Computer
Equipment
$000
Leasehold
Improvements
$000
6,933
5,734
(24)
(4,758)
1,342
2
-
(392)
2,156
2,316
(1)
(1,237)
3,051
251
-
(677)
Total
$000
13,482
8,303
(25)
(7,064)
7,885
952
3,234
2,625
14,696
20,484
(13,551)
6,933
26,119
(18,234)
7,885
2,113
(771)
1,342
2,115
(1,163)
952
4,909
(2,753)
2,156
7,222
(3,988)
3,234
3,995
(944)
3,051
4,246
(1,621)
2,625
31,501
(18,019)
13,482
39,702
(25,006)
14,696
Annual report for the year ended 30 June 2018
Page 32
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018
9. PROPERTY, PLANT AND EQUIPMENT (cont’d)
Tyro Payments Limited
ABN 49 103 575 042
EFTPOS
Terminals
$000
Furniture
and Office
Equipment
$000
Computer
Equipment
$000
Leasehold
Improvements
$000
6,364
4,871
(36)
(4,266)
1,212
444
-
(314)
1,716
1,242
-
(802)
3,265
388
-
(602)
Total
$000
12,557
6,945
(36)
(5,984)
6,933
1,342
2,156
3,051
13,482
15,853
(9,489)
6,364
20,484
(13,551)
6,933
1,662
(450)
1,212
2,113
(771)
1,342
3,662
(1,946)
1,716
4,909
(2,753)
2,156
3,607
(342)
3,265
3,995
(944)
3,051
24,784
(12,227)
12,557
31,501
(18,019)
13,482
Year ended 30 June 2017
At 30 June 2016 net of accumulated
depreciation and impairment
Additions/transfers
Disposals/transfers
Depreciation for the year
At 30 June 2017 net of accumulated
depreciation and impairment
At 30 June 2016
Cost or fair value
Accumulated depreciation and impairment
Net carrying amount
At 30 June 2017
Cost or fair value
Accumulated depreciation and impairment
Net carrying amount
10. SHARE-BASED PAYMENTS
The Company will provide benefits to employees (including Key Management Personnel (KMP)) from time to time including
share-based payments as remuneration for service.
(a) Employee Share Option Plan
The Employee Share Option Plan (ESOP) 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 ESOP 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 KMP with the Company
during the vesting schedule.
Service vesting schedule
The options that 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.
Annual report for the year ended 30 June 2018
Page 33
Tyro Payments Limited
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018
10. 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 6 to 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 under the ESOP
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 2018:
Sep 2017
Oct 2017
Jan 2018
Feb 2018
Mar 2018
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
Share price ($)
0%
40%
2.22%
$1.08
0%
40%
2.33%
$1.08
0%
38%
2.34%
$1.05
0%
38%
2.38%
$1.05
0%
38%
2.35%
$1.05
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 6 and 7 year options is assumed to be 5 - 6 years from the grant date. The expected life for 10
year options 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 14,090,505 options exercised during the year ended 30 June 2018 (2017: 37,612,657).
The weighted average remaining contractual life for share options outstanding as at 30 June 2018 was 4 years (2017: 4 years).
The following table summarises further details of the share options outstanding at 30 June 2018:
Range of Exercise Prices Contractual life
Vesting conditions
No. of Outstanding Options
162 cents
10 years or less
6 cents to 176 cents
10 years or less
No vesting in first 6 months of 5
year linear vesting period
5 year linear vesting
6 cents to 45 cents
5 years and 10 years
12 months service
6 cents to 55 cents
3, 5 and 10 years
12 months linear vesting
6 cents to 55 cents
10 years or less
Fully vested at time of grant
Total
2018
400,000
2017
700,000
31,715,817
1,043,478
10,626
-
33,169,921
30,455,628
1,043,478
3,208,697
4,640,587
40,048,390
Annual report for the year ended 30 June 2018
Page 34
Tyro Payments Limited
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018
10. 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:
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
Total exercisable at the end of the year
2018
No
34,364,325
10,813,180
(9,449,918)
(3,601,144)
32,126,443
4,682,461
4,640,587
-
(4,640,587)
-
-
-
1,043,478
-
-
-
1,043,478
1,043,478
33,169,921
5,725,939
2018
WAEP
(cents)
19
175
25
120
91
36
8
-
8
-
-
-
6
-
-
-
6
6
2017
No
46,604,233
11,782,640
(20,686,087)
(3,336,461)
34,364,325
8,819,708
21,684,244
-
(16,926,570)
(117,087)
4,640,587
4,640,587
1,043,478
-
-
-
1,043,478
1,043,478
40,048,390
14,503,773
2017
WAEP
(cents)
12
150
13
110
70
19
10
-
7
55
8
8
6
-
-
-
6
6
Refer to Note 21, for outstanding share options at the end of the year that are not part of ESOP.
Annual report for the year ended 30 June 2018
Page 35
Tyro Payments Limited
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018
10. SHARE-BASED PAYMENTS (cont’d)
(c) Share performance rights
During the period, the Company agreed to grant 1,200,000 share performance rights as part of an equity incentive
arrangement. There were no performance rights outstanding at the beginning of the period.
Fair value of rights granted
While the terms and conditions were yet to be agreed and finalised as at 30 June 2018, for the purpose of fair valuing the
performance rights, the following estimated model inputs were used in the Black-Scholes valuation model:
Grant date
Vesting period
Expiry date
Share price at grant date ($)
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
3 equal tranches over three years following a performance condition being met
10 years from performance condition being met
Mar-18
$1.05
0%
N/A
N/A
The fair value output estimate of $1.05 is not expected to change materially assuming no significant changes in the draft terms
and conditions.
Expenses arising from share-based payment transactions
During the period, of the $1.4 million recognised as share-based payment expenses, $0.2 million relates to share performance
rights.
11. DEPOSITS
Deposits
2018
$000
11,563
11,563
2017
$000
3,948
3,948
The deposits are at call, earn a daily interest with rates that increase for every dollar held for longer than 30 days, 60 days and
90 days, and are guaranteed by the Australian Government up to $250,000 per customer.
12. TRADE PAYABLES AND OTHER LIABILITIES
Accounts payable
Deferred rent incentive
Accruals – scheme fees, commissions, bonuses and others
Other liabilities – payroll liabilities and clearing suspense
2018
$000
2,933
2,978
4,332
3,521
13,764
2017
$000
1,910
3,239
3,971
1,880
11,000
Annual report for the year ended 30 June 2018
Page 36
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018
13. PROVISIONS
Annual leave provision
Balance at the beginning of the year
Provided for during the year
Released during the year
Balance at the end of the year
Long service liability
Balance at the beginning of the year
Provided for during the year
Released during the year
Balance at the end of the year
Other provisions
Balance at the beginning of the year
Provided for during the year
Balance at the end of the year
Total provisions - current liabilities
Tyro Payments Limited
ABN 49 103 575 042
2018
$000
1,907
3,446
(2,878)
2,475
299
82
(78)
303
430
714
1,144
3,922
2017
$000
1,462
2,996
(2,551)
1,907
286
258
(245)
299
-
430
430
2,636
Other provisions have been calculated based on contractual obligations. No discounting has been applied as the amounts are
expected to be settled in less than twelve months.
14. NON-CURRENT LIABILITIES
Provisions:
Long service leave liability
Balance at the beginning of the year
Provided for during the year
Released during the year
Balance at the end of the year
Make good provision
Balance at the beginning of the year
Provided for during the year
Balance at the end of the year
Total provisions - non-current liabilities
2018
$000
272
132
(45)
359
262
147
409
768
2017
$000
349
117
(194)
272
114
148
262
534
Annual report for the year ended 30 June 2018
Page 37
Tyro Payments Limited
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018
15. 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 12 cents each
Ordinary shares paid at 14 cents each
Ordinary shares paid at 15 cents each
Ordinary shares paid at 30 cents each
Ordinary shares paid at 37.5 cents each
Ordinary shares paid at 45 cents each
Ordinary shares paid at 55 cents each
Ordinary shares paid at 60 cents each
Ordinary shares paid at 1.0361 dollars each
Ordinary shares paid at 1.49 dollars each
2018
Number of
Shares
2017
Number of
Shares
61,018,733
185,865,638
15,848,939
8,659,606
463,539
52,389
10,475,433
35,575,640
2,799,346
9,414,989
12,562,168
895,848
96,638,869
36,118
440,307,255
61,018,733
182,642,334
9,355,246
8,089,164
112,037
-
10,475,433
34,055,009
1,146,511
8,347,550
12,562,168
148,696
96,638,869
-
424,591,750
2018
$000
2017
$000
3,051
11,152
1,267
866
56
7
1,571
10,673
1,050
4,237
6,909
537
100,127
54
141,557
3,051
10,959
748
809
13
-
1,571
10,217
430
3,756
6,909
89
100,128
-
138,680
Costs directly attributable to the capital raising (net of tax)
Ordinary shares
(299)
141,258
(299)
138,381
During the year ended 30 June 2018, 15,715,505 ordinary shares were issued upon exercise of options, raising a total of $2.9
million in fully paid capital.
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.
(ii) Share-based payments reserve
Balance at the beginning of the year
Share-based payments expensed
Balance at the end of the year
2018
$000
10,276
1,411
11,687
2017
$000
8,435
1,841
10,276
The share-based payments reserve is used to record the value of share-based payments or benefits provided to any Directors
and employees as part of their remuneration or compensation.
(iii) General reserve for credit losses
Balance at the beginning of the year
Transfer from accumulated losses:
Provision for chargeback losses
Provision for lending losses
Balance at the end of the year
2018
$000
1,091
72
101
1,264
2017
$000
550
146
395
1,091
Annual report for the year ended 30 June 2018
Page 38
Tyro Payments Limited
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018
15. CONTRIBUTED EQUITY AND RESERVES (cont’d)
The general reserve for credit losses has been created to satisfy APRA’s prudential standards for ADIs as described in Note
1(v). The Company applies an internal methodology to estimate the credit risk of its merchant customers and the maximum
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 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 options transferred to shares
Balance at the end of the year
2018
$000
623
232
855
2018
$000
167
-
167
2018
$000
2017
$000
420
203
623
2017
$000
167
-
167
2017
$000
Total reserves at the end of the year
13,973
12,157
(vi) Accumulated losses
Movements in accumulated losses were as follows:
Accumulated losses at the beginning of the financial year
Net loss attributable to shareholders of the Company
Transfer to general reserve for credit losses
Accumulated losses at the end of the financial year
2018
$000
2017
$000
(29,147)
(16,370)
(173)
(45,690)
(15,831)
(12,775)
(541)
(29,147)
Annual report for the year ended 30 June 2018
Page 39
Tyro Payments Limited
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018
16. FINANCIAL RISK MANAGEMENT OBJECTIVES, POLICIES AND PROCESSES
The Company's principal financial instruments include cash and cash equivalents, deposits due from other financial institutions,
trade and other receivables, loans, available-for-sale investments, deposits and trade and other payables.
(i) Risk management
The Board is responsible for approving and reviewing the risk management strategy, including determining the Company’s
appetite for risk. The CEO and Management team are responsible for implementing the risk management strategy and
framework, and for developing policies, controls, processes and procedures for identifying and managing risk.
Various Management committees, including the Management Risk Committee (MRC) and the Asset and Liability Management
Committee (ALCO), ensure appropriate execution of the risk management strategy and framework is applied in the day-to-day
operations and regularly report to the Board Risk Committee.
(ii) Risk controls
Risks are controlled through a system that identifies key risks, establishes controls to manage those risks (with an emphasis on
preventative control), and maintains a regular review process to monitor the effectiveness of controls. Business risks are
controlled within tolerance levels approved by the MRC, ALCO and the Board.
(iii) Internal Audit
The Company 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.
(iv) Credit risk
Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading
to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its
lending and investing activities, including deposits with banks and financial institutions, foreign exchange transactions and
available-for-sale investments.
The maximum exposure to credit risk is represented by the carrying amounts of the financial assets at the reporting date. The
Company’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 the Company to identify changes in credit quality at client and portfolio levels and to take corrective actions in a
timely manner.
Credit losses from chargebacks
In addition, the Company is subject to the risk of credit card losses via chargebacks. The maximum period the Company is
potentially liable for such chargebacks is 120 days after the date of the transaction. The Company 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 the Company’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 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 estimated future credit losses as described in Note 1(v). The
Company does not hold any credit derivatives or collateral to offset its credit exposure. The Company 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 the Company’s exposure to bad debts is not significant at the reporting date.
Annual report for the year ended 30 June 2018
Page 40
Tyro Payments Limited
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018
16. FINANCIAL RISK MANAGEMENT OBJECTIVES, POLICIES AND PROCESSES (cont’d)
Credit losses from loans
The Company is also subject to the risk of credit losses from its unsecured loan product which commenced on 1 July 2016. The
Company manages this risk in accordance with the Board approved Lending Credit Risk policy. Responsibility for monitoring
and management of this risk is delegated to the CRO. The CRO is also responsible for ensuring the Lending Credit Risk policy
is reviewed regularly and submitted to the Board Risk Committee for approval.
To manage the risk of credit losses, various underwriting criteria is in place before a loan can be offered, which includes
assessment of credit bureau scores, age of credit files and no adverse records, time in business, and an internal credit risk
grading. A merchant must also have an acquiring transaction history to be eligible for a loan offer. A personal guarantee is
required.
The Company provides for credit losses from these loans to ensure the Company has sufficient provisions and capital to cover
credit losses estimated to arise over the full life of the loans as described in Note 1(v).
30 June 2018
Standard & Poors Credit
Rating*
AAA
AA
A+
A
A-
BBB+
unrated
30 June 2017
Standard & Poors Credit
Rating*
AAA
AA
A+
A
A-
BBB+
unrated
*Long-term credit rating
(v) Operational risk
Due from
other
financial
institutions
($000)
Cash and
balances with
financial
institutions
($000)
-
16,414
17,744
12,150
- 68
-
-
- -
-
-
-
-
17,812
28,564
Trade
receivables
($000)
968
28
114
3
-
14,822
15,935
Available-for-
sale
investments
($000)
Loans and
advances
($000)
-
20,205
5,414
-
-
-
-
-
3,933 -
-
9,545
7,590
-
7,590
39,097
-
Cash and
balances with
financial
institutions
($000)
Due from
other
financial
institutions
($000)
Trade
receivables
($000)
Available-for-
sale
investments
($000)
Loans and
advances
($000)
15,336
-
39,340
8,716
- 65
-
-
-
48
- -
13,033
-
-
- 9,468
-
10,489
24,052
-
951
-
-
5,114
22
-
- 5,020
3,927
-
- -
7,036
-
- 4,511
4,511
21,097
52,438
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, amongst 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.
Annual report for the year ended 30 June 2018
Page 41
Tyro Payments Limited
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018
16. FINANCIAL RISK MANAGEMENT OBJECTIVES, POLICIES AND PROCESSES (cont’d)
(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, foreign currency risk, commodity price risk and other price
risk, such as equity price risk. The Company 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 primarily on its variable interest-bearing cash and cash
equivalent balances, floating rate notes, term deposits and variable Smart Account deposits.
Interest rate sensitivity analysis
The following demonstrates the sensitivity to a reasonably possible change in interest rates. With all other variables held
constant, the Company’s profit after tax is affected as follows:
An increase of 50 basis points for 12 months in the general cash rate (assuming other factors remain constant) will increase the
Company's profit after tax and increase equity by $403,019 (2017: $486,949). A decrease of 50 basis points in the general cash
rate will have an equal and opposite effect.
The following table shows the financial assets and liabilities on which the interest rate sensitivity analysis has been performed.
(amounts in $’000s)
Variable
Interest Rate
Fixed Interest Rate
Total
< 3 Months
3 to 12
Months
> 1 Year
Financial assets
Cash and cash equivalents
Other term deposits
USD term deposit
Loans (before impairment)
Floating rate notes
Financial liabilities
Smart Account deposits
2) Foreign currency risk
18,564
1,460
-
-
10,000
11,547
-
2,069
-
-
2,978
1,759
5,455
-
-
-
-
461
-
28,564
15,985
1,759
7,985
37,875
37,875
(11,563)
-
-
-
(11,563)
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.
The Company 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 at the transaction date. At the reporting
date the Company has some US Dollar and Euro exposure.
Annual report for the year ended 30 June 2018
Page 42
Tyro Payments Limited
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018
16. FINANCIAL RISK MANAGEMENT OBJECTIVES, POLICIES AND PROCESSES (cont’d)
Foreign currency sensitivity analysis
The following demonstrates the sensitivity to a reasonably possible change in the US dollar and Euro exchange rates, with all
other variables held constant.
An appreciation of 15% of the US Dollar and Euro compared to the Australian Dollar (assuming other factors remain constant),
will increase the Company's profit after tax and increase equity by $381,991 (2017: $396,464). A depreciation of 15% of the US
Dollar and Euro compared to the Australian Dollar will reduce the Company's profit after tax and reduce equity by $282,341
(2017: $293,038).
The following table shows the financial assets and liabilities on which the foreign currency sensitivity analysis has been
performed.
USD Term Deposit
Union Pay Deposit
Available-for-sale investments - VISA shares
Trade Payables
Trade Payables
3) Other price risk
AUD
2018
($000)
1,759
68
1,222
809
75
AUD
2017
($000)
1,690
65
832
254
86
USD
USD
USD
EUR
USD
The Company's investment in available-for-sale financial investments (Visa shares) is valued by way of reference to an
underlying listed equity on the New York Stock Exchange and as such its fair value will fluctuate in direct proportion with the
quoted market price indicated.
(vii) Capital Management
The Company’s 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 the Company to continue as a going concern; and
• Ensure that capital management is closely aligned with the Company’s business and strategic objectives.
The Company 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 ADIs. Accordingly, the Company 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 the Company’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 the Company’s Internal Capital Adequacy Assessment Process (ICAAP). The Company operates under the specific
capital requirements set by APRA. The Company has satisfied its minimum capital requirements throughout the 2018 financial
year in the form of Tier 1 capital which is the highest quality components of capital.
Annual report for the year ended 30 June 2018
Page 43
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018
16. FINANCIAL RISK MANAGEMENT OBJECTIVES, POLICIES AND PROCESSES (cont’d)
Capital Adequacy
Risk weighted capital ratios
Common equity tier 1
Tier 1
Total capital ratio
Qualifying capital
Tier 1
Contributed capital
Accumulated losses & reserves
Common equity tier 1 capital
Less
Net deferred tax assets
Other adjustments
Total Tier 1 capital
Tier 2
General reserve for credit losses1
Total Tier 2 capital
Total qualifying capital
Total risk weighted assets
Tyro Payments Limited
ABN 49 103 575 042
2018
($000)
138%
138%
139%
141,258
(32,981)
108,277
(11,351)
(1,222)
95,704
2017
($000)
178%
178%
179%
138,381
(18,081)
120,300
(10,300)
(832)
109,168
769
769
696
696
96,473
109,864
69,208
61,494
1. Standardised approach (to a maximum of 1.25% of total credit risk weighted assets)
(viii) Liquidity risk
The Company’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.
The Company manages this risk by the ALCO approved liquidity framework. Responsibility for liquidity management is
delegated to the CFO and CEO. The CFO manages liquidity on a daily basis and submits weekly reports to the Management
team, and monthly reports to ALCO. The CFO 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 the reporting date, the Board of Directors determined that there was sufficient cash available to meet its anticipated
expenditure and other financial liabilities.
Annual report for the year ended 30 June 2018
Page 44
Tyro Payments Limited
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018
16. FINANCIAL RISK MANAGEMENT OBJECTIVES, POLICIES AND PROCESSES (cont’d)
Maturity analysis
Amounts in the table below are based on contractual undiscounted cash flows for the remaining contractual maturities.
(amounts in $’000s)
<3 months
3-6 months
>6-12
months
>1-5 years
>5 years
Total
As at 30 June 2018
Financial liabilities
Deposits
Trade payables and other liabilities
As at 30 June 2017
Financial liabilities
Deposits
Trade payables and other liabilities
(ix) Fair values
(11,563)
(13,764)
(25,327)
-
-
-
-
-
-
-
-
-
-
-
-
(11,563)
(13,764)
(25,327)
<3 months
3-6 months
>6 -12
months
>1-5 years
>5 years
Total
(11,430)
(3,948)
(15,378)
-
-
-
-
-
-
-
-
-
-
-
-
(11,430)
(3,948)
(15,378)
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 table below shows the Company’s financial assets that are measured at fair value. Management has assessed that for
other financial assets and liabilities not disclosed in the table below, that due to their short term maturity profile, the carrying
amount is an approximation of fair value.
Year ended 30 June 2018 ($000)
Level 1
Level 2
Level 3
Total
Financial Asset
Floating rate notes
VISA shares
Financial Asset
Floating rate notes
VISA shares
37,875
1,222
39,097
-
-
-
-
- -
37,875
1,222
39,097
Year ended 30 June 2017 ($000)
Level 1
Level 2
Level 3
Total
20,265
832
-
-
-
-
20,265
832
21,097
- -
21,097
Quoted market price represents the fair value determined based on quoted prices in active markets as at the reporting date
without any deduction for transaction costs.
Annual report for the year ended 30 June 2018
Page 45
Tyro Payments Limited
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018
16. FINANCIAL RISK MANAGEMENT OBJECTIVES, POLICIES AND PROCESSES (cont’d)
Transfer between categories
In the year ended 30 June 2018, the Company further invested in floating rate notes which have a short-term repricing profile
and are of high credit quality. The fair value of these floating rate notes is obtained from an independent third party pricing
service that uses tradable prices and quotes from active markets. In order to align with this quoted price methodology, during
the year there were transfers of floating rate notes out of Level 2 into the Level 1 fair value hierarchy. $37.9 million of floating
rate notes are reported in Level 1 as at 30 June 2018 and $20.3 million were restated in the comparative period into Level 1.
17. COMMITMENTS AND CONTINGENCIES
Commitments relating to BECS
The Company 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.
Contingent liabilities arising from commitments are secured by way of standby letters of credit or bank guarantees as follows:
Contingent liabilities – secured
(I) Irrevocable standby letters of credit in favour of:
MasterCard International
Visa International
UnionPay International
(ii) Bank Guarantee in favour of:
UIR Australia, the lessor of 155 Clarence Street, Sydney
2018
$000
3,159
60
68
4,525
7,812
2017
$000
3,090
60
65
4,525
7,740
The Company has provided an irrevocable standby letter of credit of $3.3 million (in 2017: $3.2 million) secured through fixed
charges over term deposits with the Commonwealth Bank of Australia and Westpac Banking Corporation, to MasterCard
International, Visa International and Union Pay International. These are one-year arrangements that are subject to automatic
renewal on an annual 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 up to 9 month’s rent and includes all annual increases of 4% since 2016 until lease maturity and is
refundable on expiry of the lease agreement, subject to satisfactory vacation of the leased premises.
Annual report for the year ended 30 June 2018
Page 46
Tyro Payments Limited
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018
18. LEASES
(a) Operating lease commitments - Company as lessor
Prior to April 2010, the Company 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, the Company carried 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.
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 the Company. There is no minimum rental
period for merchants and they are able to terminate with the Company at any time with no penalty or buy out fees.
Type of Terminals
Yomani, Yomani XR and Yoximo 3G (including accessories)
Xenta and Xentissimo
(b) Operating lease commitments - Company as lessee
Cost
($000)
21,189
4,930
26,119
Accumulated
Depreciation
($000)
Net Carrying
Value
($000)
13,304
4,930
18,234
7,885
-
7,885
Future minimum rentals payable under the non-cancellable operating leases as at 30 June 2018 are as follows:
Within one year
After one year but not more than five years
More than five years
2018
$000
4,482
12,279
-
16,761
2017
$000
4,212
16,424
-
20,636
The operating lease commitments relate to the lease of the Company's registered office located at 155 Clarence Street, Sydney
NSW. It is a non-cancellable lease with a term of up to 7 years ending 22 January 2022. The lease agreement provides the
Company with the option to extend the lease for another 3 years. Lease payments are subject to annual increases of 4%.
19. SEGMENT REPORTING
The Company operates in one geographical segment being Australia. Currently the acquiring business segment which provides
EFTPOS solutions to merchants (transaction processing, clearing and settlement activities within the Australian Payments
System) comprises the only material contributor to the Company’s Statement of Comprehensive Income. Therefore, no
segment reporting attributed to other products has been presented in the current year.
Annual report for the year ended 30 June 2018
Page 47
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018
20. AUDITOR'S REMUNERATION
Amounts paid or payable to the auditor, Ernst & Young (EY), for audit and
non-audit services performed during the year are set out as follows:
Audit of the financial reports of the Company
Other services in relation to the Company
Tax compliance
Regulatory compliance
Other assistance and services
Tyro Payments Limited
ABN 49 103 575 042
2018
$000
384
72
160
30
646
2017
$000
347
146
57
20
570
The Directors are satisfied that the provision of non-audit services, during the year, by the auditor (or by another person or firm
on the auditor’s behalf) is compatible with the general standard of independence for auditors imposed by the Corporations Act
2001.
The Directors are of the opinion that the services as disclosed in Note 20 do not compromise the external auditor’s
independence for the following reasons:
- all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the
auditor, and
- none of the services undermine the general principles relating to auditor independence as set out in Code of Conduct APES
110 Code of Ethics for Professional Accountants issued by the Accounting Professional & Ethical Standards Board,
including reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the
Company, acting as advocate for the Company jointly sharing economic risks and rewards.
21. RELATED PARTY DISCLOSURES
(a) Compensation of 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
Rob Ferguson1
Catherine Harris
Paul Rickard
Jost Stollmann2
Title
Non-executive Director, Chairman
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Appointed
18 April 2008
10 December 2009
17 November 2005
17 December 2015
28 August 2009
05 April 2005
1. Non-executive Director since 17 November 2005. Appointed to Acting Managing Director and Acting Chief Executive Officer
from 14 June 2017 to 23 March 2018.
2. Executive Director since 5 April 2005. Appointed to Non-executive Director on 14 June 2017, resigned effective 17 October
2017.
Executives
Robbie Cooke
David Coombes
Justin Mitchell
Praveenesh Pala
Joshua Walther
Bronwyn Yam
Title
Chief Executive Officer
Director of Engineering
Chief Risk Officer
Chief Financial Officer
Director of Sales
Director of Product
Appointed
23 March 2018
03 July 2017
19 March 2007
20 October 2014
25 May 2017
16 October 2017
Annual report for the year ended 30 June 2018
Page 48
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018
21. RELATED PARTY DISCLOSURES (cont’d)
Compensation of Key Management Personnel
Short-term benefits
Long-term benefits (long service leave)
Post-employment benefits (superannuation)
Termination benefits
Share-based payments
Total
Interests held by Key Management Personnel
Tyro Payments Limited
ABN 49 103 575 042
2018
$000
3,312
-
264
-
563
4,139
2017
$000
2,661
71
254
924
330
4,240
Share options held by Key Management Personnel to purchase ordinary shares have the following expiry dates and exercise
prices.
Issue Year
Expiry Year
FY07/08
FY08/09
FY10/11
FY10/11
FY13/14
FY14/15
FY15/16
FY16/17
FY16/17
FY17/18
FY17/18
FY17/18
FY18/19
FY17/18
FY17/18
FY20/21
FY21/22
FY22/23
FY23/24
FY23/24
FY23/24
FY23/24
Exercise
Price($)
$0.300
$0.060
$0.060
$0.080
$0.375
$0.450
$0.600
$1.490
$1.620
$1.620
$1.760
2018
Number
Outstanding
2017
Number
Outstanding
-
1,043,478
-
3,250,000
528,287
549,297
461,289
477,076
200,000
400,000
3,605,680
436,996
1,043,478
2,940,587
5,250,001
1,758,644
1,140,846
929,030
932,051
400,000
-
-
During the period, the Company agreed to grant 1,200,000 share performance rights to a member of Key Management
Personnel. Details are covered in Note 10(c).
(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 arm’s length commercial terms and conditions.
Related Party
Atlassian Pty Ltd
Atlassian Pty Ltd
Software purchased
Sub-lease rental income
2018
$000
(47)
-
2017
$000
(73)
560
Mike Cannon-Brookes, a Non-Executive Director of the Company is Co-Founder, CEO and Director of Atlassian. The
Company entered into an agreement with Atlassian to sublease Level 4 of 155 Clarence Street, commencing 1 April 2016 to
31 December 2016, with an option to renew for up to two months. Atlassian vacated the premises in March 2017.
Annual report for the year ended 30 June 2018
Page 49
Tyro Payments Limited
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018
21. RELATED PARTY DISCLOSURES (cont’d)
(c) Share options with related parties (not under ESOP)
In December 2010, the Company granted 7.5 million share options to related parties for providing a (now expired) loan facility to
the Company for liquidity purposes, which was drawn down. These options are not under ESOP.
During the year, 1.6 million share options were exercised and 5.9 million share options were outstanding with a WAEP of 8
cents as at 30 June 2018.
Euclid Capital Partners, related party of David Fite (Shareholder)1
Abyla Pty Ltd, related party of Mike Cannon-Brookes (Director)
Robert Ferguson (Director)
Total
1. Appointed Director subsequent to the end of financial year
22. MATTERS SUBSEQUENT TO THE END OF FINANCIAL YEAR
Outstanding options at
the end of the year
2,625,000
1,625,000
1,625,000
5,875,000
In the opinion of the Directors, there have been no matters or circumstances which have arisen between 30 June 2018 and the
date of this report that have significantly affected or may significantly affect the operations of the Company, the result of those
operations or the state of affairs of the Company in subsequent financial years.
Annual report for the year ended 30 June 2018
Page 50
Tyro Payments Limited
ABN 49 103 575 042
DIRECTORS’ DECLARATION
In accordance with a resolution of the Directors of Tyro Payments Limited, I state that:
In the opinion of the Directors:
a)
the financial statements and notes of the Company are in accordance with the Corporations Act 2001, including:
I. giving a true and fair view of the Company’s financial position as at 30 June 2018 and of its performance
for the year ended on that date; and
II. complying with Accounting Standards and Corporations Regulations 2001;
b)
c)
the financial statements and notes also comply with International Financial Reporting Standards as disclosed in
Note 1; and
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become
due and payable.
On behalf of the Board
Kerry Roxburgh
Chairman
Sydney, 4 September 2018
Annual report for the year ended 30 June 2018
Page 51
Ernst & Young
200 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
Opinion
We have audited the financial report of Tyro Payments Limited (the Company), which comprises the
statement of financial position as at 30 June 2018, the statement of comprehensive income,
statement of changes in equity and statement of cash flows for the year then ended, notes to the
financial statements, including a summary of significant accounting policies, and the directors’
declaration.
In our opinion, the accompanying financial report of the Company is in accordance with the
Corporations Act 2001, including:
a)
giving a true and fair view of the Company's financial position as at 30 June 2018 and of its
financial performance for the year ended on that date; and
b)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Company in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also
fulfilled our other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Information Other than the Financial Report and Auditor’s Report Thereon
The directors are responsible for the other information. The other information comprises the
information included in the annual report, but does not include the financial report and our auditor’s
report thereon. The other information comprises the Chief Executive Officer’s Year in Review and
Directors’ Report accompanying the financial report.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Page 52
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the Company’s ability to
continue as a going concern, disclosing, as applicable, matters relating to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Company or to
cease operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_files/ar3.pdf.
This description forms part of our auditor’s report.
Ernst & Young
Andrew Price
Partner
Sydney
4 September 2018
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Page 53
Tyro Payments Limited
ABN 49 103 575 042
ADDITIONAL INFORMATION FOR SHAREHOLDERS
Information for Shareholders
A hard copy of this Annual Report can be obtained by contacting the Company Secretary. The Company became a disclosing
entity in the 2016 financial year and publishes an Interim Financial Report for each half-year ended 31 December.
Details of announcements released by Tyro can be found on Tyro’s Investors page at www.tyro.com.
Annual General Meeting
The Tyro Annual General Meeting will be held at the Four Seasons Hotel, at 199 George Street, Sydney NSW 2000 on
Thursday 25 October 2018, commencing at 3pm.
Share Registry Information
Tyro maintains its share registry. For information about your shareholding or to notify a change of address or contact details,
please contact Tyro’s Company Secretary via:
Phone: +61 2 8907 1700
Email: cosec@tyro.com
Tyro Payments Limited
Attn: Company Secretary
Level 1, 155 Clarence Street
Sydney NSW 2000
Electronic Communications
Shareholders can elect to receive the Annual Report and other shareholder communications by email. Shareholders who wish
to register or notify a change of their email address should contact Tyro’s Company Secretary via:
Tyro Payments Limited
Attn: Company Secretary
Level 1, 155 Clarence Street
Sydney NSW 2000
Phone: +61 2 8907 1700
Email: cosec@tyro.com
Annual report for the year ended 30 June 2018
Page 54
CORPORATE DIRECTORY
Directors
Kerry Roxburgh (Chairman)
Mike Cannon-Brookes
David Fite
Catherine Harris
Paul Rickard
Company Secretary
Justin Mitchell
Sami Wilson
Registered Office
Level 1, 155 Clarence Street
Sydney NSW 2000
+61 2 8907 1700
Auditors
Ernst & Young
200 George Street
Sydney NSW 2000
+61 2 9248 5555
Website
www.tyro.com
Tyro Payments Limited
ABN 49 103 575 042
Annual report for the year ended 30 June 2018
Page 55
Level 1, 155 Clarence Street
Sydney NSW 2000