RNS Number : 6795B
eServGlobal Limited
19 August 2008
eServGlobal Limited
ABN 59 052 947 743
Financial report for the financial
year ended 30 June 2008
Annual financial report
for the financial year ended
30 June 2008
Contents
Page
Directors* report 2
Auditor*s independence declaration 14
Corporate governance statement 15
Independent audit report 20
Directors* declaration 22
Income statement 23
Balance sheet 24
Statement of recognised income and expense 25
Cash flow statement 26
Notes to the financial statements 27
Additional stock exchange information 73
Directors' report
The directors of eServGlobal Limited submit herewith
the annual financial report for the financial year
ended 30 June 2008. In order to comply with the
provisions of the Corporations Act 2001, the
directors' report is as follows:
The names and particulars of the directors of the
company during or since the end of the financial
year are:
Name Particulars
Ian Buddery Aged 50 Executive
Chairman
Ian Buddery was a
founder, past
director and CEO of
eServGlobal. He
holds a significant
interest in the
company through a
private company.
During his 29 years
in the technology
industry, Ian has
held senior
management positions
with major
multinational vendor
organisations and
local firms. He has
extensive
international
business experience,
particularly in
Europe and
Australasia.
Laurent Lafarge Aged 48, Director
and Chief Executive
Officer
Laurent Lafarge has
a 21-year track
record of leadership
within the high-tech
industry, at
companies such as
Control Data,
Unisys, Tandem and
Hewlett-Packard.
Prior to
eServGlobal, he was
the Chief Operating
Officer at
Netcentrex Comverse.
He has also been
Vice-President
Europe and Managing
Director of Lucent
Technologies France
and Belgium. He is a
graduate of the ISG
business school in
France and has
completed the
Executive Management
Program at the
Wharton School of
the University of
Pennsylvania, USA.
Laurent Lafarge was
named by the French
Minister for the
Economy, Finance and
Industry as
"Chevalier dans
l'Ordre National du
Mite" in 2004.
Franis Barrault Aged 48.
Non-executive
director.
Franis is Chief
Executive of BT
Global Services and
a member of the
board of the listed
parent, BT Group
plc. He was
previously President
of BT International.
He has played
significant roles
within Lucent
Technologies such as
President of
Mobility
International and
President and CEO of
EMEA. Prior to
Lucent, Franis
worked at Ascend
Communications,
where he had the
position of Senior
Vice President,
International. He
has over 20 years
experience in this
industry, including
executive positions
within IBM,
Computervision/Prime
and Stratus. Franis
was also co-founder
and Chairman of the
Board of Astria, an
e-commerce software
supplier. He has an
extensive knowledge
of the International
and European sector.
Franis holds a
Master of Science
(D.E.A) in
Robotics/AI and an
E.D.P in Engineering
from the Ecole
Centrale de Nantes.
Franis is based in
Brussels, Belgium.
Franis has been a
member of the Board
since March 2003.
Directors' report
Anthony Gilbert Aged 56. Non-executive director and member of the
Remuneration and Nominations Committee.
Anthony was formerly Group Strategic Resourcing Director at
Vodafone PLC. He joined Vodafone in April 2000 as Group
Management Development Director, and was appointed to the
Group Policy Committee chaired by Sir Christopher Gent. He
was the Global Leadership Development/Group Strategic
Resourcing Director from 2005. He was responsible for senior
management recruitment and development and supporting the
Main Board's Nomination Committee in their identification
and appointment of non-executive directors.
Prior to Vodafone, Anthony held positions at companies
including Ernst & Young in the UK, the Netherlands and
Belgium; UKAEA, where he was Head of IT Strategy and Tyzack
and Partners.
He holds an MA (Hons) in Natural Sciences from Trinity
College, Cambridge (UK), an MSc in Computer Sciences from
London University (UK) and an MBA from INSEAD (France).
Anthony joined the Board in July 2006.
Graham Libbesson Aged 55. Non-executive director and a member of the Audit
Committee.
Graham has extensive involvement in the IT industry through
various directorships, consulting roles, and involvement
with investments and transactions. He is a director of a
number of private IT companies and ComOps Limited. He is also
a consultant to Pitcher Partners Sydney Chartered Accountants
and leader of that firm's ICT industry Group. He is a retired
managing partner and a senior tax partner of a large firm of
chartered accountants. His 30 years of experience as a
chartered accountant and tax advisor, together with his
strong background in corporate law and governance, and
operational experience in the IT industry bring expertise in
all areas of the company's activities and commercial
transactions.
Graham holds a Bachelor of Laws and a Bachelor of Commerce
from the University of New South Wales. He is a member of the
Institute of Chartered Accountants in Australia (ACA).
Graham has been a member of the Board since Septembe
Jim Pratt Aged 59. Non-executive director and Chairman of the
Remuneration and Nominations Committee.
Jim brings to the Board over 30 years of experience in the
telecommunications industry in Europe, Australia and Asia. In
1994, Jim was appointed as the founding Chief Executive
Officer of Peoples Telephone Company Ltd., a GSM 1800 network
operator in Hong Kong. On his return to Australia, Jim was
appointed Managing Director of Telstra International's
offshore wireless business interests and held this position
until August 2001. From September 2002 to February 2006 he
was President and CEO of the GlobeTrac Group of companies who
are involved in AVL & Telematics in Europe.
Jim is also the previous Chairman (2002/2003) of the Board of
Directors of the GSM Association (GSMA). The GSMA is the
world's leading wireless industry body representing some 600
GSM network operators.
Jim has been a member of the Board since April 2003.
Directors' report
David Smart Aged 65. Non-executive director and Chairman of the Audit
Committee.
David held senior executive positions in large scale manufacturing
and merchandising businesses for more than 20 years. This includes
13 years as Chief Financial Officer of Tubemakers of Australia
Limited and Metal Manufactures Limited.
David holds a Bachelor of Commerce and MBA from the University of
New South Wales and is a Fellow of the Australian Society of
Certified Practicing Accountants.
David has been member of the Board since July 2000.
Directorships of other listed companies
Directorships of other listed companies held by Directors in the 3 years immediately before the end of the financial year are as
follows:
Name Company Period of Directorship
Franis Barrault BT Group plc Appointed 24 April 2007
Graham ComOps Limited Appointed 27 June 2007
Libbesson East Coast Minerals NL Appointed 17 December 2007
GlobeTrac Inc September 2002 to February
Saunders International Limited 2006
Jim Pratt Appointed 22 October 2007
David Smart
Company Secretary
Ian Buddery Ian is the Executive Chairman of eServGlobal and was previously
the Company Secretary from the founding of the company in 1991
until 1998.
Principal activities
eServGlobal's software systems connect the world's telecommunications networks
with the charging, billing and payments worlds. Phone companies use our
software so that they can charge for phone calls, messages and other services
instantly, and manage advance payments.
eServGlobal Intelligent Network applications enable service providers to
maximize today's proven revenue streams whilst ensuring service continuity and
new revenue opportunities when evolving to next generation networks.
Over 80 of the world's leading telcos are taking advantage of eServGlobal's
advanced solutions
and expertise to successfully address their business challenges and to manage
over 500 million
telecommunications customers.
Headquartered in Sydney, eServGlobal has operations in 15 countries worldwide.
Review of operations
This report is to be read in conjunction with other reports issued
contemporaneously.
The Group achieved sales revenue for the year of $177.934 million (2007:
$153.591 million) - an increase of 16%
A gross profit of $95.213 million was achieved by the Group for the year, an
increase of 30%, up from $73.213 million in the previous year, representing a
margin of 54% of sales revenue. The net result for the Group for the year was a
profit after tax of $10.540 million (2007: $5.610 million).
Changes in state of affairs
There were no significant changes in the state of affairs of the Group during
the financial year.
Directors' report
Subsequent events
There has not been any matter or circumstance, other than that referred to
above or in the financial statements or notes thereto, that has arisen since
the end of the financial year, that has significantly affected, or may
significantly affect, the operations of the Group, the results of those
operations, or the state of affairs of the Group in future financial years.
Future developments
Disclosure of information regarding likely developments in the operations of
the Group in future financial years and the expected results of those
operations is likely to result in unreasonable prejudice to the Group.
Accordingly, this information has not been disclosed in this report.
Dividends
In respect of the financial year ended 30 June 2007, as detailed in the
directors' report for that financial year, a final dividend of 2.0 cents per
share unfranked was paid to the holders of fully paid ordinary shares on 30
November 2007.
Since the end of the financial year the directors have declared the payment of
a final dividend of 3.0 cents per share payable on 15 September 2008, unfranked
to entitled shareholders. The record date is 29 August 2008.
Share options
Share options granted to directors and executives
During the financial year and up to the date of this report the company granted
660,000 (2007: 2,525,000) options to employees of the entity.
(a) Executive and employee share options
At the date of this report, option holders are entitled to purchase an
aggregate of nil (2007: 87,454) ordinary shares of the entity as a result of
options issued prior to the introduction of the eServGlobal Employee Share
Option Plan. 50,000 of these options expired during the financial year and
37,454 were exercised in September 2007 at an exercise price of $0.20.
(b) eServGlobal Employee Share Option Plan
The company has an ownership-based remuneration scheme for directors,
executives and employees. In accordance with the provisions of the scheme,
directors and employees may be granted options to acquire ordinary shares in
the company. The board believes that the options scheme has a significant role
to play in motivating employees to help ensure the continued performance of the
company. The exercise of any share options is not dependant on any performance
criteria, however, is dependent on a period of service relative to the vesting
dates.
The company issued 660,000 (2007: 2,525,000) options during the financial year.
At the date of this report directors, executives and employees are entitled to
purchase an aggregate of 4,979,478 (2007: 5,215,481) ordinary shares of the
entity at issue prices ranging from $0.15 to $0.97 per ordinary share. At 30
June 2008 3,336,131 (2007: 3,827,935) of these options had vested. The options
may be exercised at various times up until 26 October 2012. The holders of such
o
Further details of the executive and employee share option plan are disclosed
in Note 6 to the financial statements.
Directors' report
Details of unissued shares under option as at the date of this report are:
Issuing Entity Number of shares Class of shares Exercise price of Expiry date of options
under option option
eServGlobal Limited 250,000 Ordinary $0.20 12-Nov-08
eServGlobal Limited 250,000 Ordinary $0.40 12-Nov-08
eServGlobal Limited 250,000 Ordinary $0.15 20-Dec-08
eServGlobal Limited 250,000 Ordinary $0.40 20-Dec-08
eServGlobal Limited 387,336 Ordinary $0.23 30-Jun-09
eServGlobal Limited 1,457,142 Ordinary $0.66 29-May-11
eServGlobal Limited 500,000 Ordinary $0.69 17-Nov-11
eServGlobal Limited 975,000 Ordinary $0.69 7-Mar-12
eServGlobal Limited 300,000 Ordinary $0.97 26-Sep12
eServGlobal Limited 310,000 Ordinary $0.97 4-Oct-12
eServGlobal Limited 50,000 Ordinary $0.97 26-Oct-12
Details of shares issued as at the date of this report as a result of exercise of an option are:
Issuing Entity Number of shares Class of shares Amount paid for Amount unpaid on shares
issued shares
eServGlobal Limited 37,454 Ordinary $0.20 $nil
eServGlobal Limited 250,000 Ordinary $0.15 $nil
eServGlobal Limited 250,000 Ordinary $0.40 $nil
eServGlobal Limited 239,337 Ordinary $0.23 $nil
eServGlobal Limited 156,666 Ordinary $0.18 $nil
Indemnification of officers and auditors
During the financial year, the company paid a premium in respect of a contract
insuring the directors of the company (as named above), the company secretary,
and all executive officers of the company and of any related body corporate
against any liability incurred as a director, secretary or executive officer to
the extent permitted by the Corporations Act 2001. The contract of insurance
prohibits disclosure of the nature of the liability cover and the amount of the
premium.
The company has not otherwise, during or since the financial year, indemnified
or agreed to indemnify an officer or auditor of the company or of any related
body corporate, against any liability incurred by such an officer or auditor.
Directors' meetings
The following table sets out the number of directors' meetings (including meetings of committees of directors) held during the financial
year and the
number of meetings attended by each director (while they were a director or committee member). During the financial year, 12 board
meetings, 6 audit
committee meetings, and 12 remuneration committee meetings were held.
Board of Directors Audit Committee Remuneration
Committee
Directors Held Attended Held Attended Held
Attended
I Buddery 12 12 - - -
-
F Barrault 12 8 - - -
-
A Gilbert 12 12 - - 12
12
G Libbesson 12 12 6 6 -
-
J Pratt 12 12 - - 12
12
D Smart 12 9 6 6 -
-
L Lafarge 9 9 - - -
-
Directors' report
Non-audit services
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 audit committee, in conjunction with the Chief Financial Officer, assesses the provision of non-audit services by the auditors to
ensure that the auditor independence requirements of the Corporations Act 2001 in relation to the audit are met.
Details of amounts paid or payable to the auditor for non-audit services provided during the year by the auditor are outlined in note 7
to the financial statements.
Auditor's independence declaration
The auditor's independence declaration is included on page 14 of the financial report.
Rounding off of amounts
The company is a company of the kind referred to in ASIC Class Order 98/0100,
dated 10 July 1998, and in accordance with that Class Order, amounts in the
directors' report and the financial report are rounded off to the nearest
thousand dollars unless otherwise indicated.
Remuneration Report
Determining remuneration policy for directors and executives, and its
relationship to eServGlobal's performance
The Group is listed on both the Australian Securities Exchange and the London
Stock Exchange (AIM). It is an international group which is faced with all of
the market pressures that flow in such circumstances. It must compete
successfully with other international organisations that are substantially
larger and which have the ability to draw on enormous resources. Our employees
are based in diverse parts of the globe and regularly must travel to work in
remote locations. The remuneration policies must be appropriate to these
circumstances.
In determining the appropriate remuneration policies for the Group, the board
believes that the salary packages must be sufficient, in the international
marketplace in which the Group operates, to attract, retain and motivate high
calibre, hard working, dedicated employees, who have the knowledge and skills
appropriate for the business. In this regard, a component of the salary package
for employees is paid after the results of a financial year are completed, and
the ent
Directors' report
Director and group executive details
The following persons acted as directors of the company and the group during or since the end of the financial year:
* I. Buddery (Executive Chairman & Chief Executive Officer to 27 September 2007; Executive Chairman from 28 September 2007;
Executive Chairman and Secretary from 11 July 2008)
* L. Lafarge (Appointed Chief Executive Officer 28 September 2007, previously Chief Operating Officer)
* F. Barrault (Non-executive)
* A. Gilbert (Non-executive)
* G. Libbesson (Non-executive)
* J. Pratt (Non-executive)
* D. Smart (Non executive)
The five highest remunerated group executives for the 2008 financial year were:
* I. Buddery
* L. Lafarge
* J.M. Hartigan (Chief Financial Officer & Secretary, resigned 11 July 2008)
* G. Lemoing (Chief Information Officer)
* JP. Labat (Chief Marketing Officer)
Elements of director and executive remuneration
Non-executive directors are paid directors' fees and, in the case of those who are Australian based, compulsory superannuation fund
contributions are made on their behalf. The board reviews the level of fees from time to time, and sets individual non-executive directors
fees based on the levels of fees for comparable listed companies in the appropriate parts of the world. The non-executive directors are
appointed by shareholder vote and appointment in subject to re-election on retirement required at Annual General Meetings.
Certain non-executive directors, with the approval of shareholders, in an earlier period were issued options under the Executive Share
Option Plan. The benefit of those options is dependent on a period of service relative to the vesting dates.
The Executive Chairman is remunerated on a salary package basis that includes a substantial portion that is a variable component which
is dependent on agreed performance objectives. He is fully committed to eServGlobal and is involved in the business on a full time basis.
The Executive Chairman does not have a formal contract, however, his salary and variable component are considered by the Remuneration and
Nominations Committee on an annual basis, and adjustments recommended to the Board. The variable component comprises elements relating to
achievement of financial plan and specific business objectives.
The Chief Executive Officer (CEO) is remunerated on a salary package basis that includes a substantial portion that is a variable
component, which is dependent on agreed performance objectives. His base salary and variable components are reviewed annually by the
Remuneration and Nominations Committee and recommended to the Board. The variable component comprises elements relating to achievement of
financial plan and specific business objectives. The CEO is a permanent employee and has a formal contract with no fixed term and a notice
period of six months required by either party.
The Chief Financial Officer (CFO) is remunerated on a salary package basis that includes a substantial portion that is a variable
component which is dependent on agreed performance objectives.
The CFO has a formal contract which links to the eServGlobal standard conditions of employment. The contract has no set expiry date and
the notice period required by both parties is three months. His package is reviewed annually. The CFO's variable component comprises
elements relating to achievement of financial plan and specific business objectives. The CFO's contract was terminated by mutual agreement
on 11 July, 2008.
The Chief Information Officer (CIO) and Chief Marketing Officer (CMO) have formal contracts and are permanent employees with no fixed
term whose employment conditions require 3 months notice for both parties. In the event of termination, payment of termination benefits on
cessation of employment is based on notice periods, statutory entitlements and any variable components due on previously agreed objectives.
The CIO and CMO's variable components comprise elements related to achievement of financial plan and specific business objectives.
Directors' report
Elements of remuneration which are dependent on company performance
The board believes that it is critical that the specified employees are driven
by the financial performance of eServGlobal and, as detailed below, has
structured executive packages so that a substantial portion of the variable
component of their packages is directly linked to financial outcomes of
eServGlobal. The targets are established annually and are approved by the
Remuneration and Nominations Committee following Board approval of the Group's
business plan. The two key measures of this are: annual revenue and earnings
before interest, tax, depreciation and amortisation components. This component
is confirmed in conjunction with the completion of the accounts. These targets
are selected to ensure alignment of shareholders interests with Executive
remuneration.
The tables below set out summary information about the consolidated entity's earnings and movements in shareholder wealth for the five
years to June 2008:
30 June 2008 30 June 2007 30 June 2006 30 June 2005 30 June 2004 1
$'000 $'000 $'000 $'000 $'000
Revenue 177,934 153,951 95,004 38,427 28,951
EBITDA 24,162 18,934 10,088 3,318 (1,250)
1 eServGlobal Limited adopted the Australian equivalents to International Financial reporting Standards with effect from 1 July 2005,
which results in various changes to its accounting policies from that date. The results for the year ended 30 June 2004 are reported in
accordance with eServGlobal Limited's accounting policies as permitted under Australian accounting standards as applicable at that time.
30 June 2008 30 June 2007 30 June 2006 30 June 2005 30 June 2004 4
Share price at start of year $0.960 $0.600 $0.920 $0.245 $0.100
Share price at end of year $0.820 $0.960 $0.600 $0.920 $0.245
Interim dividend - - - - -
Final dividend 2, 3 3.0 cps 2.0 cps 1.2 cps 1.0 cps -
Basic earnings per share 6.1 3.2 1.7 4.1 5 (5.2)
Diluted earnings per share 6.0 3.2 1.7 3.9 5 (5.2)
2 Final dividends declared for the financial years ending June 2005 and June 2006 were franked to 100% at 30% corporate income tax rate.
Final dividends declared for the financial years ending June 2007 and June 2008 are unfranked.
3 Declared after the balance date and not reflected as a liability in the financial statements.
4 eServGlobal Limited adopted the Australian equivalents to International Financial Reporting Standards with effect from 1 July 2005,
which resulted in various changes to its accounting policies from that date. The results for the year ended 30 June 2004 are reported in
accordance with eServGlobal Limited's accounting policies as permitted under Australian accounting standards as applicable at that time.
5 The results for year ending 30 June 2005 have been re-stated for A-IFRS, the basic earnings per share and diluted earnings per share
reported under superseded policies were 1.0 cents.
Directors' report
The directors and the five identified group executives received the following amounts as compensation for their services as directors
and executives of the Group during the year:
Short-term employee benefits Post Share based payments Termination Benefits Other long term
Total Percentage of
Employment Options employee benefits
remuneration related
benefits (ii)
to performance
2008 Salary & fees Bonus (incl. Non-monetary Options
variable pay
component)
Superannuation
$ $ $ $ $ $ $
$ %
Non-executive Directors
F Barrault 69,353 - - - - - - 69,353 -
A Gilbert 76,916 - - - 60,038 - - 136,954 -
G Libbesson 33,000 - - 51,475 - - - 84,475 -
J Pratt 77,500 - - 6,975 - - - 84,475 -
D Smart - - - 84,475 - - - 84,475 -
Executive Officers
I Buddery (iii) 287,861 191,478 - 13,129 - - - 492,468 38.9
L Lafarge (iii) (iv) 317,508 142,219 35,970 - 58,322 - 18,947 572,966 28.1
J M Hartigan (i) (iii) 240,000 6,357 - 43,129 - 140,000 - 429,486 1.5
G Lemoing (iii) (iv) 270,390 72,392 26,957 91,057 - - 18,947 479,743 19.0
JP Labat (iii) (iv) 203,790 127,850 20,894 - - - 18,947 371,481 39.5
Total 1,576,318 540,296 83,821 290,240 118,360 140,000 56,841 2,805,876 -
(i) The CFO's contract was terminated by mutual agreement on the 11th July 2008. Termination benefits were provided for in the current
financial year and paid to the departing employee early in the 2009 financial year.
(ii) For companies in France employing 50 or more people profit-sharing is compulsory and is set up by an agreement. It is calculated
according to a formula based on taxable income and distributed amongst employees in proportion to their wages and, in certain cases, their
service. The profit-sharing funds are deposited in a corporate investment fund or savings plan and are paid after either 3 or 5 years as
agreed with the employee. In the current financial year the profit sharing arrangement has been aligned with the remuneration policies of
the consolidated group resulting in additional contributions being made.
(iii) Key management personnel are remunerated on a salary package basis that includes an appropriate portion that is a variable
component which is dependent on company performance and individual performance objectives. Key management personnel had their variable pay
components confirmed in conjunction with the completion of the accounts. The variable components for key management personnel were confirmed
on the successful achievement of revenue and earnings before interest, tax, depreciation and amortisation components and/or on the
achievement of performance criteria established during the year. These amounts, related to the current year performance, will be paid in
cash prior to 30November 2008.
(iv) Paid in Euros and subject to foreign exchange fluctuations at Group level.
Directors' report
The directors and the five identified group executives received the following amounts as compensation for their services as directors
and executives of the Group during the previous financial year:
Short-term employee benefits Post Share based payments Termination Benefits Other (v) Other
long term Total Percentage of
Employment Options employee
benefits remuneration related
benefits
(vi) to performance
2007 Salary & fees Bonus (incl. Non-monetary Options
variable pay
component)
Superannuation
$ $ $ $ $ $ $ $
$ %
Non-executive Directors
F Barrault 60,120 - - - 12,175 - - - 72,295 -
A Gilbert 57,789 - - - 54,110 - - - 111,899 -
G Libbesson 45,000 - - 25,850 - - - - 70,850 -
J Pratt 60,000 - - 5,400 9,596 - - - 74,996 -
D Smart 54,167 - - 16,683 - - - - 70,850 -
Executive Officers
I Buddery (vii) 287,861 158,453 - 12,686 - - - - 459,000 34.5
R Agniel (viii) (ix) 194,741 27,700 21,280 - - 315,774 500,000 19,541 1,079,036 4.4
L Lafarge (viii) (ix) (x) 145,422 124,648 15,200 - - - - 8,456 293,726 45.3
J M Hartigan (viii) 240,000 110,000 - 12,686 8,528 - - - 371,214 29.6
G Lemoing (viii) (ix) 279,311 98,422 27,339 1,065 25,480 - - 25,937 457,554 27.2
JP Labat (viii) (ix) 207,927 204,241 - - 25,480 - - 25,802 463,450 49.6
Total 1,632,338 723,464 63,819 74,370 135,369 315,774 500,000 79,736 3,524,870 -
(v) Payment in settlement of any claims.
(vi) For companies in France employing 50 or more people profit-sharing is compulsory and is set up by an agreement. It is calculated
according to a formula based on taxable income and distributed amongst employees in proportion to their wages and, in certain cases, their
service. The profit-sharing funds are deposited in a corporate investment fund or savings plan and are paid after either 3 or 5 years as
agreed with the employee
(vii) When the Executive Chairman agreed to take on the role the CEO role the Board introduced a bonus component to his package.
(viii) Other key management personnel are remunerated on a salary package basis that includes an appropriate portion that is a variable
component which is dependent on company performance and individualperformance objectives. Key management personnel had their variable pay
components confirmed in conjunction with the completion of the accounts. The variable components for key management
personnel were confirmed on the successful achievement of revenue and earnings before interest, tax, depreciation and amortisation
components and/or on the achievement of performance criteria established during the year.
(ix) Paid in Euros and subject to foreign exchange fluctuations at Group level.
(x) Appointed Chief Executive Officer on 28 September 2007, previously Chief Operating Officer.
Directors' report
Directors' shareholdings
The following table sets out each director's relevant interest in shares and
options in shares of the company or a related body corporate as at the date of
this report.
Directors Fully paid ordinary Executive share options
shares
I Buddery 1 15,055,982 -
F Barrault - 500,000
A Gilbert 90,000 500,000
J Pratt 500,000 -
L Lafarge - 300,000
1 Relevant interest held in shares registered in the name of Wallaby Hill Pty
Ltd in which Ian Buddery holds an interest.
Value of options issued to directors and executives
Options which were granted to or vested in directors and executives in the current financial year were as follows:
During the financial year % of compensation
for the year
consisting of
options
Name Options series No. granted No. vested % of grant vested % of grant forfeited
A Gilbert Issued 17 November - 166,667 33.33 - 43.8
2006
L Lafarge Issued 26 September 300,000 - - - 10.2
2007
Executives receiving options are entitled to the beneficial interest under the option only if they continue to be employed with the
Group at the time the option vests. Any exposure in relation to the risk associated with the movement in the underlying share price rests
with the executive.
During the financial year no options were forfeited as a result of a condition required for vesting not being satisfied.
The following table discloses the options granted, exercised or expired during the year:
Name Value of options Value of options Value of options
granted at the grant exercised at the expired
date (i) exercise date $
$ $
J Pratt - 327,500 -
L Lafarge 129,100 - -
D Smart - - $nil
(i)The value of options granted, exercised and lapsed is calculated based on the following:
* Value at grant date represents fair value of the option at grant date multiplied by the number of options granted during the
year.
* Value at exercise date represents fair value of the ordinary share received upon exercise of the option, less the option exercise
price multiplied by the number of options exercised during the year.
During the year, the following directors and executives exercised options that were granted to them as part of their compensation. Each
option converts into one ordinary share of eServGlobal Limited.
Name No. of options No. of ordinary shares of Amount paid Amount unpaid
exercised eServGlobal Limited
J Pratt 250,000 250,000 $0.15 $nil
J Pratt 250,000 250,000 $0.40 $nil
Directors' report
During the financial year, the following share-based payment arrangements were in existence.
Options series Grant date Expiry date Exercise price Grant date fair
value
12 November 2003 (ii) 12/11/2003 2008 $0.2 $0.137
12 November 2003 (ii) 12/11/2003 2008 $0.4 $0.114
20 December 2003 (ii) 20/12/2003 2008 $0.15 $0.145
20 December 2003 (ii) 20/12/2003 2008 $0.4 $0.106
17 November 2006 (i) 17/11/2006 2011 $0.69 $0.297
26 September 2007 (i) 26/09/2007 2012 $0.97 $0.430
In accordance with the terms of the Employee Share Option Plan:
(i) options issued in these series vest as to one-third on each of the first, second and third anniversary dates from the
date of issue and expire five years from date of issue.
(ii) options issued in these series vest on the third anniversary date from the date of issue and expire five years from
the date of issue
Signed in accordance with a resolution of the directors made pursuant to s.298 (2) of the Corporations Act
2001.
On behalf of the Board
Ian Buddery
Director
20 August, 2008
20 August 2008
The Board of Directors
eServGlobal Limited
Level 2
10 Spring Street
Sydney NSW 2000
Dear Board Members
eServGlobal Limited
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the
Directors of eServGlobal Limited.
As lead audit partner for the audit of the financial statements of eServGlobal Limited for the financial year ended 30 June 2008, I
declare that to the best of my knowledge and belief, there have been no contraventions of:
(i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(ii) any applicable code of professional conduct in relation to the audit. .
Yours faithfully
DELOITTE TOUCHE TOHMATSU
Catherine Hill
Partner
Chartered Accountants
Liability limited by a scheme approved under Professional Standards Legislation.
.
Corporate governance statement
The Australian Securities Exchange Limited (ASX) listing rules require a listed
company to provide in its annual report a statement of the main corporate
governance practices that it had in place during the reporting period. The ASX
listing rules also require a listed company to report any instances where it
has failed to follow the recommendations issued by the ASX Corporate Governance
Council ("The Principles of Good Corporate Governance and Best Practice
Recommendations") and the reasons for not following them.
The best practice recommendations of the ASX Corporate Governance Council are
differentiated between ten core principles that the Council believes underlie
good corporate governance. The board's statements to each core area are noted
below:
Lay Solid Foundation for Management and Oversight
The ASX Corporate Governance Council recommends that the board recognise and
publish the respective roles and responsibilities of the Board and management.
The framework of responsibilities should be designed to:
* enable the Board to provide strategic guidance for the company and effective
oversight of management;
* clarify the respective roles and responsibilities of board members and senior
executives in order to facilitate board and management accountability; and
* ensure a balance of authority so that no single individual has unfettered
powers.
The primary responsibilities of eServGlobal's board include:
* the establishment of long term goals of the company and strategic plans to
achieve those goals;
* the review and adoption of the annual business plan and budgets for the
financial performance of the company and monitoring the results on a monthly
basis;
* the appointment and assessment of the chief executive officer;
* ensuring that the company has implemented adequate systems of internal
control to
Structure the board to add value
The ASX Corporate Governance Council recommends that the board be structured in
a such a way that it:
* is of an effective composition, size and commitment to adequately discharge
its responsibilities;
* has a proper understanding of, and competence to deal with, the current and
emerging issues of the business; and
* can effectively review and challenge the performance of management and
exercise independent judgement.
To achieve best practice the Council recommends that:
* a majority of the board be "independent" directors;
* the chairperson be an "independent" director;
* the role of chairperson and chief executive officer should not be exercised
by the same individual; and
* The board should establish a nomination committee.
At the date of this report the eServGlobal board consists of five non-executive
directors, and two executive directors, being the Executive Chairman and the
Chief Executive Officer. Five directors (a majority) are clearly independent
directors.
The Executive Chairman holds a sub
Corporate governance statement
The board has two board committees - an Audit Committee and a Remuneration and
Nominations Committee, both of which are chaired by independent directors and
carry out the normal functions of those committees.
Promote ethical and responsible decision-making
The ASX Corporate Governance Council recommends that the company should:
* clarify the standards of ethical behaviour of directors and executives by
establishing a code of conduct and encourage the observance of those standards;
and
* publish its position concerning the issue of board and employee trading in
company shares.
eServGlobal Limited's policies contain a formal code of conduct that applies to
all directors and employees, who are expected to maintain a high standard of
conduct and work performance, and observe standards of equity and fairness in
dealing with others. The detailed policies and procedures encapsulate the
company's ethical standards.
eServGlobal Limited's shares are listed on both the Australian Securities
Exchange and the London Stock Exchange (AIM). The company's policies relating
to board and employee trading in shares has been designed to meet the
requirements of both stock exchanges. The current policy, which is known as the
Securities Dealing Policy, can be summarised as fo
Safeguard integrity in financial reporting
The ASX Corporate Governance Council recommends that the company has a
structure to independently verify and safeguard the integrity of the company's
financial reporting. It recommends that a company put in place a structure of
review and authorisation designed to ensure the truthful and factual
presentation of the company's financial position, including, for example,
review and consideration of the accounts by the audit committee; and a process
to ensure the independence and competence of the company's external auditors.
In this regard the eServGlobal Limited's board audit committee consists of two
non-executive directors. The members of the audit committee at the date of this
report are:
* David Smart (Chairman)
* Graham Libbesson
Both audit committee members are independent directors, and qualified and very
experienced accountants. The board believes that the audit committee is of an
appropriate size for the company.
The audit committee provides a forum for t
Corporate governance statement
The audit committee, in conjunction with the Chief Financial Officer, assesses
the provision of non-audit services by the auditors to ensure that the auditor
independence requirements of the Corporations Act 2001 in relation to the audit
are met.
The audit committee requires the Chief Executive Officer and the Chief
Financial Officer to report formally on the financial results and these
executives are required to confirm that the company's financial reports and
accounts present a true and fair view, in all material respects, of the
company's financial position and operational results, and are prepared in
accordance with the law and the relevant accounting standards.
Make timely and balanced disclosure
The ASX Corporate Governance Council recommends that a company promote timely
and balanced disclosure of all material matters concerning the company. It
recommends that it put in place mechanisms designed to ensure all investors
have equal and timely access to material information concerning the company
(including its financial situation, performance, ownership and governance), and
that a company's announcements are factual and presented in a clear and
balanced way.
The eServGlobal board and senior management are conscious of the ASX Listing
Rule disclosure requirements, and take steps to ensure compliance. Also, the
company has a policy that requires,
* All announcements be reviewed by the company secretary; and
* All media comment is provided by the chairman, chief executive officer or the
chief financial officer.
Respect the rights of shareholders
The ASX Corporate Governance Council recommends that a company respects the
rights of shareholders, and facilitates the effective exercise of those rights
by effectively communicating with them; giving them balanced and understandable
information about the company; and making it easy for them to participate in
general meetings.
eServGlobal provides information to its shareholders through the formal
communications processes (eg ASX releases, annual general meeting, annual
report, occasional shareholder letters). This material is normally also
available on the eServGlobal website (www.eservglobal.com).
The company requests its external auditor attend the annual general meeting and
to be available to answer any shareholder questions about the conduct of the
audit and the preparation and content of the audit report.
Recognise and manage risk
The ASX Corporate Governance Council recommends that the company establish a
sound system of risk oversight and management and internal control. It
recommends that the system be designed to identify, assess, monitor and manage
risk; and inform investors of material changes to the company's risk profile.
It suggests that to achieve "best practice", the board or an appropriate board
committee should establish policies on risk oversight and management, with the
CEO and CFO to provide to the board in writing a statement confirming that the
financial statements are founded on a sound system of risk management and
internal compliance and control, which implements the policies adopted by the
board; and that the company's risk management and internal compliance and
control system is operating efficiently and effectively in all material
respects.
The eServGlobal board monitors the risks and internal controls of eServGlobal
through the Audit Committee. The Audit Committee looks to the CFO to ensure
that an adequate
Corporate governance statement
Encourage enhanced performance
The ASX Corporate Governance Council recommends that the board fairly review
and actively encourage enhanced board and management effectiveness. In this
regard it is suggested that the board and key executives should be equipped
with the knowledge and information that they need to discharge their duties
effectively, and that individual and collective performance is regularly and
fairly reviewed. To achieve "best practice" it recommends that a company
disclose the process for performance evaluation of the board; its committees;
and individual directors and key executives.
The eServGlobal board uses a personal evaluation process to review the
performance of directors. Individual directors are asked to write to the
Remuneration & Nominations committee on a confidential basis to comment on
their own performance, and the performance of the board and its committees.
This information is presented to the chairman, who then assesses the
information received and reports to the Board on the responses received from
Remunerate fairly and responsibly
The ASX Corporate Governance Council recommends that the company ensures that
the level and composition of remuneration is sufficient and reasonable and that
its relationship to corporate and individual performance is defined. In this
regard it recommends that companies adopt remuneration policies that attract
and maintain talented and motivated directors and employees so as to encourage
enhanced performance, and that there be a clear relationship between
performance and remuneration, and that the policy underlying executive
remuneration be understood by investors.
The eServGlobal board's Remuneration and Nominations Committee at the date of
this report consists of the following directors:
* Jim Pratt (Chairman)
* Anthony Gilbert
The Remuneration & Nominations Committee has specific responsibilities for the
recommendation of board nominations, and for recommendations relating to
remuneration policies applicable for all directors and senior executive
officers.
In relation to board nominations, when it i
Corporate governance statement
Recognise the legitimate interests of stakeholders
The ASX Corporate Governance Council recommends that the company recognise the
legal and other obligations to all legitimate stakeholders. In this regard it
is acknowledged that companies have a number of legal and other obligations to
non-shareholder stakeholders such as employees, clients/customers and the
community as a whole, and it is suggested that companies disclose a code of
conduct.
eServGlobal Limited's code of conduct for managing the interests of all
stakeholders is published internally on its intranet through its internal
policies and procedures that guide the way the company conducts its business.
The policies cover compliance with laws, employment practices, occupational
health and safety, confidentiality and other legal compliance.
Independent Audit Report to the
Members of eServGlobal Limited
Report on the Financial Report
We have audited the accompanying financial report of eServGlobal Limited, which comprises the balance sheet as at 30 June 2008, and the
income statement, cash flow statement and statement of recognised income and expense for the year ended on that date, a summary of
significant accounting policies, other explanatory notes and the directors* declaration of the consolidated entity comprising the company
and the entities it controlled at the year*s end or from time to time during the financial year as set out on pages 22 to 72.
Directors' Responsibility for the Financial Report
The directors of the company are responsible for the preparation and fair presentation of the financial report in accordance with
Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility
includes establishing and maintaining internal control relevant to the preparation and fair presentation of the financial report that is
free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making
accounting estimates that are reasonable in the circumstances. In Note 1, the directors also state, in accordance with Accounting Standard
AASB 101 Presentation of Financial Statements, that compliance with the Australian equivalents to International Financial Reporting
Standards ensures that the financial report, comprising the financial statements and notes, complies with International Financial Reporting
Standards.
Auditor's Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with
Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit
engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The
procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement of the financial
report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's
preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the
overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Liability limited by a scheme approved under Professional Standards Legislation.
Auditor's Independence Declaration
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
Auditor's Opinion
In our opinion:
(a) the financial report of eServGlobal Limited is in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the company*s and consolidated entity*s financial position as at 30 June 2008 and of their
performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations
Regulations 2001; and
(b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1.
Report on the Remuneration Report
We have audited the Remuneration Report included in pages 7 to 13 of the directors' report for the year ended 30 June 2008. The
directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of
the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
Auditor's Opinion
In our opinion the Remuneration Report of eServGlobal Limited for the year ended 30 June 2008, complies with section 300A of the
Corporations Act 2001.
DELOITTE TOUCHE TOHMATSU
Catherine Hill
Partner
Chartered Accountants
Sydney, 20 August 2008
Directors' declaration
The directors declare that:
(a) in the directors' opinion, there are reasonable grounds to believe that the company will be able to pay its debts as and when they
become due and payable.
(b) in the directors' opinion, the attached financial statements and notes thereto are in accordance with the Corporations Act 2001,
including compliance with accounting standards
and giving a true and fair view of the financial position and performance of the Company and the Group; and
(c) the directors have been given the declarations required by s.295A of the Corporations Act 2001.
Signed in accordance with a resolution of the directors made pursuant to s.295(5) of the Corporations Act 2001.
On behalf of the Directors
Ian Buddery
Director
20 August, 2008
Income Statement for the
financial year ended 30 June 2008
Note Consolidated Company
Note Consolidated Company
2008 2007 2008 2007
$'000 $'000 $'000 $'000
Revenue 2 177,934 153,591 7,432 5,571
Cost of sales 3 (82,721) (80,378) (6,285) (2,991)
Gross profit 95,213 73,213 1,147 2,580
Other income 2 272 188 5,041 7,416
Research and development expenses (25,062) (18,771) - -
Sales and marketing expenses (20,271) (15,835) (370) (769)
Administration expenses (25,990) (19,861) (2,413) (3,773)
Earnings before interest, tax, 24,162 18,934 3,405 5,454
depreciation and amortisation
Amortisation (6,883) (6,975) - -
Depreciation (2,997) (2,577) (100) (106)
Earnings before interest and tax 14,282 9,382 3,305 5,348
Finance costs (400) (266) (1) (173)
Profit before tax 3 13,882 9,116 3,304 5,175
Income tax expense 4 (3,342) (3,506) (1,219) (1,173)
Profit for the year 10,540 5,610 2,085 4,002
Attributable to:
Equity holders of the parent 10,391 5,425 2,085 4,002
Minority interest 149 185 - -
10,540 5,610 2,085 4,002
Earnings per share
Basic (cents per share) 22 6.1 3.2
Diluted (cents per share) 22 6.0 3.2
Notes to the financial statements are included on pages 27 to 72
Balance Sheet
as at 30 June 2008
Note Consolidated Company
Note Consolidated Company
2008 2007 2008 2007
$'000 $'000 $'000 $'000
Current assets
Cash and cash equivalents 29 (a) 18,288 12,528 9,626 1,092
Trade and other receivables 8 80,120 73,328 8,493 8,517
Inventories 10 1,456 707 - -
Current tax assets 4 5,555 98 - -
Total current assets 105,419 86,661 18,119 9,609
Non-current assets
Trade and other receivables 11 5,077 - 63,189 70,983
Other financial assets 12 - - 38,432 38,432
Property, plant and equipment 13 5,855 4,703 85 131
Goodwill 14 46,804 46,210 - -
Other intangible assets 15 22,544 28,424 - -
Deferred tax assets 4 6,715 8,236 675 2,791
Total non-current assets 86,995 87,573 102,381 112,337
Total assets 192,414 174,234 120,500 121,946
Current liabilities
Trade and other payables 16 46,164 34,003 1,128 1,829
Current tax payables 4 86 1,040 - -
Provisions 17 5,346 4,946 128 125
Other 18 7,432 8,762 62 138
Total current liabilities 59,028 48,751 1,318 2,092
Non-current liabilities
Deferred tax liabilities 4 8,510 9,756 207 132
Provisions 17 1,331 1,347 - -
Total non-current liabilities 9,841 11,103 207 132
Total liabilities 68,869 59,854 1,525 2,224
Net assets 123,545 114,380 118,975 119,722
Equity
Issued capital 19 115,325 115,005 115,325 115,005
Reserves 20 1,638 (308) 1,042 786
Retained earnings / (accumulated 21 6,536 (447) 2,608 3,931
losses)
Equity attributable to equity 123,499 114,250 118,975 119,722
holders of the parent
Minority interest 46 130 - -
Total equity 123,545 114,380 118,975 119,722
Notes to the financial statements are included on pages 27 to 72
Statement of recognised income and expense
for the financial year ended 30 June 2008
Note Consolidated Company
2008 2007 2008 2007
$'000 $'000 $'000 $'000
Translation of foreign operations:
Exchange differences taken to equity 20 1,690 (2,368) - -
Net income recognised directly in equity 1,690 (2,368) - -
Profit for the year 10,540 5,610 2,085 4,002
Total recognised income and expense for 12,230 3,242 2,085 4,002
the year
Attributable to:
Equity holders of the parent 12,081 3,057 2,085 4,002
Minority interest 149 185 - -
12,230 3,242 2,085 4,002
Notes to the financial statements are included on pages 27 to 72
Cash flow statement for the
financial year ended 30 June 2008
Note Consolidated Company
2008 2007 2008 2007
$'000 $'000 $'000 $'000
Cash flows from operating
activities
Receipts from customers 176,215 149,963 3,583 3,841
Payments to suppliers and (153,173) (131,448) (7,605) (6,533)
employees
Interest and other costs of (400) (266) (1) (173)
finance paid
Income tax paid (10,008) (4,029) (242) (283)
Net cash (used in)/provided by 12,634 14,220 (4,265) (3,148)
operating activities 29(d)
Cash flows from investing
activities
Interest received 196 38 170 53
Payment for property, plant 13 (4,184) (3,441) (59) (42)
and equipment
Net cash outflow for - (1,269) - -
acquisition of business assets 29(b)
Net cash provided by/(used in) (3,988) (4,672) 111 11
investing activities
Cash flows from financing
activities
Proceeds from issues of equity 19 228 71 228 71
securities
Repayment from borrowings - (2,000) - (2,000)
Loan repaid from other group - - 15,868 7,177
Companies
Dividends paid 23 (3,408) (2,040) (3,408) (2,040)
Net cash (used in)/provided by (3,180) (3,969) 12,688 3,208
financing activities
Net increase in cash held 5,466 5,579 8,534 71
Cash and cash equivalents at 12,528 7,471 1,092 1,021
the beginning of the financial
year
Effects of exchange rate 294 (522) - -
changes on the balance of cash
held in foreign currencies
Cash and cash equivalents at 18,288 12,528 9,626 1,092
the end of the financial year 29(a)
Notes to the financial statements are included on pages 27 to 72
Notes to the Financial Statements
for the financial year ended 30 June 2008
1. SUMMARY OF ACCOUNTING POLICIES
Adoption of new and revised Accounting Standards
In the current year, the Group has adopted all of the new and revised Standards
and Interpretations issued by the Australian Accounting Standards Board (the
AASB) that are relevant to its operations and effective for the current annual
reporting period. There was no material impact on the adoption of these new
Standards and Interpretations. The Group has also adopted the following
Standards as listed below which only impacted on the Group's financial
statements with respect to disclosure:
* AASB 101 'Presentation of Financial Statements (revised October 2006)'
* AASB 7 'Financial Instruments: Disclosures'
At the date of authorisation of the financial report, a number of Standards and
Interpretations were on issue but not yet effective. Initial application of the
following Standards will not affect any of the amounts recognised in the
financial report, but will change the disclosures presently made in relation to
the consolidated entity's and the company's financial report:
Standard Effective for annual Expected to be
reporting periods initially applied in
beginning on or the financial year
after ending
AASB 101 'Presentation of 1 January 2009 30 June 2010
Financial Statements (revised
September 2007)
AASB 8 'Operating Segments' 1 January 2009 30 June 2010
and AASB 2007-3 'Amendments to
Australian Accounting
Standards arising from AASB 8'
Initial application of the following Standards and Interpretations, which are
relevant to the financial report, is not expected to have any material impact
to the financial report of the consolidated entity and the company:
Standard/Interpretation Effective for annual Expected to be
reporting periods initially applied in
beginning on or the financial year
after ending
AASB 123 'Borrowing Costs' 1 January 2009 30 June 2010
(revised)
AASB 2008-5 'Amendments to 1 January 2009 30 June 2010
Australian Accounting
Standards arising from the
Annual Improvements Process'
AASB 2008-6 'Further 1 July 2009 30 June 2010
Amendments to Australian
Accounting Standards arising
from the Annual Improvements
Process'
AASB 2008-7 'Amendments to 1 January 2009 30 June 2010
Australian Accounting
Standards - Cost of an
Investment in a Subsidiary,
Jointly Controlled Entity or
Associate'
The potential effect of the initial application of the following Standard has not yet been determined:
Standard/Interpretation Effective for annual Expected to be
reporting periods initially applied in
beginning on or the financial year
after ending
AASB 3 'Business Combinations' 1 July 2009 30 June 2010
and AASB 127 'Consolidated and
Separate Financial Statements'
Notes to the Financial Statements
for the financial year ended 30 June 2008
1. SUMMARY OF ACCOUNTING POLICIES (continued)
Statement of compliance
The financial report is a general purpose financial report which has been
prepared in accordance with the Corporations Act 2001, Accounting Standards and
Interpretations, and complies with other requirements of the law.
The financial report includes the separate financial statements of the company
and the consolidated financial statements of the Group.
Accounting Standards include Australian equivalents to International Financial
Reporting Standards ('A-IFRS'). Compliance with A-IFRS ensures that the
financial statements and notes of the Group and Company comply with
International Financial Reporting Standards ('IFRS').
The financial statements were authorised for issue by the directors on 20
August 2008.
Basis of preparation
The financial report has been prepared on the basis of historical cost modified
by the revaluation of selected non*current assets, financial assets and
financial liabilities for which the fair value basis of accounting has been
applied. Cost is based on the fair values of the consideration given in
exchange for assets. All amounts are presented in Australian dollars, unless
otherwise noted.
The company is a company of the kind referred to in ASIC Class Order 98/100,
dated 10 July 1998, and in accordance with that Class Order amounts in the
financial report are rounded off to the nearest thousand dollars, unless
otherwise indicated.
The following significant accounting policies have been adopted in the preparation and presentation of the financial report:
(a) Cash and cash equivalents
Cash and cash equivalents include cash on hand and in banks, deposits held at call with banks and financial institutions, investments in
money market instruments with maturities of three months or less from the date of acquisition, and bank overdrafts. Bank overdrafts are
shown within short*term borrowings in current liabilities on the balance sheet.
(b) Employee benefits
Provision is made for benefits accruing to employees in respect of wages and salaries, annual leave and long service leave when it is
probable that settlement will be required and they are capable of being measured reliably.
Provisions made in respect of employee benefits expected to be settled within 12 months, are measured at their nominal values using the
remuneration rate expected to apply at the time of settlement.
Provisions made in respect of employee benefits which are not expected to be settled within 12 months are measured as the present value
of the estimated future cash outflows to be made by the Group in respect of services provided by employees up to reporting date.
Defined contribution plans
Contributions to defined contribution superannuation plans are expensed when employees have rendered service entitling them to the
contributions.
Notes to the Financial Statements
for the financial year ended 30 June 2008
1. SUMMARY OF ACCOUNTING POLICIES (continued)
(c) Financial assets
Investments
Investments in subsidiaries are recognised at cost, less impairment losses, in the company financial statements.
Other financial assets are classified into the following specified categories: financial assets 'at fair value through profit or loss',
'held to maturity investments', 'available for sale' financial assets, and 'loans and receivables'. The classification depends on the nature
and purpose of the financial assets and is determined at the time of initial recognition.
Held to maturity investments
Financial assets with fixed or determinable payments and fixed maturity dates where the Group has the positive intent and ability to
hold to maturity are classified as held to-maturity investments. Held to-maturity investments are recognised at amortised cost using the
effective interest method less impairment, with revenue recognised on an effective yield basis.
Loans and receivables
Trade and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as 'loans
and receivables'. Loans and receivables are measured at amortised cost using the effective interest method less impairment. Interest income
is recognised by applying the effective interest rate.
Appropriate allowances for estimated irrecoverable amounts are recognised in profit or loss when there is objective evidence that the
asset is impaired. The allowance recognised is measured as the difference between the asset's carrying amount and the present value of
estimated future cash flows discounted at the effective interest rate computed on initial recognition.
The carrying amount of loans and receivables is reduced by the impairment loss through the use of an allowance account. Subsequent
recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying value of the allowance
account are recognised in profit and loss.
Effective interest method
The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over
the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees on
points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts)
through the expected life of the financial asset, or, where appropriate, a shorter period. Income is recognised on an effective interest
basis for debt instruments
Notes to the Financial Statements
for the financial year ended 30 June 2008
1. SUMMARY OF ACCOUNTING POLICIES (continued)
(d) Financial instruments issued by the company
Debt and equity instruments
Debt and equity instruments are classified as either liabilities or as equity in accordance with the substance of the contractual
arrangement. An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its
liabilities. Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.
Transaction costs on the issue of equity instruments
Transaction costs arising on the issue of equity instruments are recognised directly in equity as a reduction of the proceeds of the
equity instruments to which the costs relate. Transaction costs are the costs that are incurred directly in connection with the issue of
those equity instruments and which would not have been incurred had those instruments not been issued.
Financial guarantee contract liabilities
Financial guarantee contract liabilities are measured initially at their fair values and subsequently at the higher of:
* The amount of the obligation under the contract, as determined under AASB 137 'Provisions, Contingent Liabilities and Contingent
Assets'; and
* The amount initially recognised less, where appropriate, cumulative amortisation in accordance with the Group's revenue
recognition policies.
Other financial liabilities
Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs and are subsequently
measured at amortised cost using the effective interest method, with the interest expense recognised in an effective yield basis. The
effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the
relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of
the financial liability, or, where appropriate, a shorter period.
Trade payables
Trade payables are initially measured at fair value, and are subsequently measured at amortised cost
(e) Foreign currency
Foreign currency transactions
All foreign currency transactions arising during the financial year are brought to account using the exchange rate in effect at the date
of the transaction. Foreign currency monetary items at reporting date are translated at the exchange rate existing at reporting date.
Non-monetary assets and liabilities carried at fair value that are denominated in foreign currencies are translated at the rates prevailing
at the date when the fair value was determined. Non-monetary items that are measured at historical cost in a foreign currency are not
re-translated.
Exchange differences are recognised in profit or loss in the period in which they arise.
Notes to the Financial Statements
for the financial year ended 30 June 2008
1. SUMMARY OF ACCOUNTING POLICIES (continued)
(e) Foreign currency (continued)
Foreign operations
All overseas subsidiaries, other than those that are part of the eServGlobal Holdings SAS group, report in their functional currency of
AUD, as per AASB 121 "The Effects of Changes in Foreign Currency Exchange Rates" and as a consequence all exchange rate differences are
taken to profit or loss. The eServGlobal Holdings SAS group reports in its functional currency of EUR and on consolidation, the assets and
liabilities of the eServGlobal Holdings SAS group are translated at exchange rates prevailing at the reporting date. Income and expense
items are translated at the average exchange rates for the period unless exchange rates fluctuate significantly. Exchange differences
arising, if any, are recognised in the foreign currency translation reserve, and recognised in profit or loss on disposal of the foreign
operation.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity on or after the date of transition to A-IFRS are
treated as assets and liabilities of the foreign entity and translated at exchange rates prevailing at the reporting date.
(f) Goods and services tax
Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except:
i. where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the cost of
acquisition of an asset or as part of an item of expense; or
ii. for receivables and payables which are recognised inclusive of GST.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables.
Cash flows are included in the cash flow statement on a gross basis. 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 operating cash flows.
(g) Goodwill
Goodwill, representing the excess of the cost of acquisition over the fair value of the identifiable assets, liabilities and contingent
liabilities acquired, is recognised as an asset and not amortised, but tested for impairment annually and whenever there is an indication
that the goodwill may be impaired.
Any impairment is recognised immediately in profit or loss and is not subsequently reversed. Refer also note 1(h).
(h) Impairment of assets
At each reporting date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any
indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is
estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are
independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
For the purpose of impairment testing, goodwill is allocated to the cash-generating units expected to benefit from the synergies of the
business combination.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of
money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
Notes to the Financial Statements
for the financial year ended 30 June 2008
1. SUMMARY OF ACCOUNTING POLICIES (continued)
(h) Impairment of assets (continued)
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of
the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised in profit or loss immediately.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised
estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would
have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment
loss is recognised in profit or loss immediately.
(i) Income tax
Current tax
Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable profit or tax loss
for the period. It is calculated using tax rates and tax laws that have been enacted or substantively enacted by reporting date. Current tax
for current and prior periods is recognised as a liability (or asset) to the extent that it is unpaid (or refundable).
Deferred tax
Deferred tax is accounted for using the comprehensive balance sheet liability method in respect of temporary differences arising from
differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax base of those
items.
In principle, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised to the
extent that it is probable that sufficient taxable amounts will be available against which deductible temporary differences or unused tax
losses and tax offsets can be utilised. However, deferred tax assets and liabilities are not recognised if the temporary differences giving
rise to them arise from the initial recognition of assets and liabilities (other than as a result of a business combination) which affects
neither taxable income nor accounting profit. Furthermore, a deferred tax liability is not recognised in relation to taxable temporary
differences arising from goodwill.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, branches, associates
and joint ventures except where the Group is able to control the reversal of the temporary differences and it is probable that the temporary
differences will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with
these investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against
which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when the asset and
liability giving rise to them are realised or settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by
reporting date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in
which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the
company/Group intends to settle its current tax assets and liabilities on a net basis.
Notes to the Financial Statements
for the financial year ended 30 June 2008
1. SUMMARY OF ACCOUNTING POLICIES (continued)
(i) Income tax (continued)
Current and deferred tax for the period
Current and deferred tax is recognised as an expense or income in the income statement, except when it relates to items credited or
debited directly to equity, in which case the deferred tax is also recognised directly in equity, or where it arises from the initial
accounting for a business combination, in which case it is taken into account in the determination of goodwill or excess.
Tax consolidation
The company and all its wholly-owned Australian resident entities are part of a tax-consolidated group under Australian taxation law.
eServGlobal Limited is the head entity in the tax-consolidated group. Tax expense/income, deferred tax liabilities and deferred tax assets
arising from temporary differences of the members of the tax-consolidated group are recognised in the separate financial statements of the
members of the tax-consolidated group using the 'separate taxpayer within group' approach. Current tax liabilities and assets and deferred
tax assets arising from unused tax losses and tax credits of the members of the tax-consolidated group are recognised by the company (as
head entity in the tax-consolidated group).
Due to the existence of a tax funding arrangement between the entities in the tax-consolidated group, amounts are recognised as payable
to or receivable by the company and each member of the group in relation to the tax contribution amounts paid or payable between the parent
entity and the other members of the tax-consolidated group in accordance with the arrangement. Where the tax contribution amount recognised
by each member of the tax-consolidated group for a particular period is different to the aggregate of the current tax liability or asset and
any deferred tax asset arising from unused tax losses and tax credits in respect of that period, the difference is recognised as a
contribution from (or distribution to) equity participants.
(j) Intangible assets
All intangible assets acquired in a business combination are identified and recognised separately from goodwill where they satisfy the
definition of an intangible asset and their fair value can be measured reliably.
Software and Documentation
Software and Documentation are recorded initially at fair value and have an estimated useful life. Amortisation is charged on a straight
line basis over their useful lives.
Customer Relationships
Customer Relationships are recorded initially at fair value and have an estimated useful life. Amortisation is charged on a straight
line basis over their useful lives.
(k) Inventories
Inventories are valued at the lower of cost and net realisable value. Costs, including an appropriate portion of fixed and variable
overhead expenses, are assigned to inventory on hand by the method most appropriate to each particular class of inventory, with the majority
being valued on a first in first out basis. Net realisable value represents the estimated selling price less all estimated costs of
completion and costs to be incurred in marketing, selling and distribution.
Notes to the Financial Statements
for the financial year ended 30 June 2008
1. SUMMARY OF ACCOUNTING POLICIES (continued)
(l) Leases
Operating lease payments, where substantially all of the risks and benefits remain with the lessor, are recognised as an expense on a
straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic
benefits from the leased asset are consumed. Contingent rentals are recognised as an expense in the period in which they are incurred.
Lease incentives
In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The
aggregate benefits of incentives are recognised as a reduction of rental expense on a straight-line basis, except where another systematic
basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
(m) Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its
subsidiaries) (referred to as 'the Group' in these financial statements). Control is achieved where the Company has the power to govern the
financial and operating policies of an entity so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective
date of acquisition or up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with
those used by other members of the Group.
All intra-group transactions, balances, income and expenses are eliminated in full on consolidation. In the separate financial
statements of the Company, intra-group transactions ('common control transactions') are generally accounted for by reference to the existing
(consolidated) book value of the items. Where the transaction value of common control transactions differ from their consolidated book
value, the difference is recognised as a contribution by or distribution to equity participants by the transacting entities.
Minority interest in the net assets (excluding goodwill) of consolidated subsidiaries are identified separately from the Group's equity
therein. Minority interests consist of the amount of those interests at the date of the original business combination and the minority's
share of changes in equity since the date of the combination. Losses applicable to the minority in excess of the minority's interest in the
subsidiary's equity are allocated against the interests of the Group except to the extent that the minority has a binding obligation and is
able to make an additional investment to cover the losses.
Acquisitions of subsidiaries and businesses are accounted for using the purchase method. The cost of the business combination is
measured as the aggregate of the fair values (at the date of exchange) of the assets given, liabilities incurred or assumed, and equity
instruments issued by the group in exchange for control of the acquiree, plus any cost directly attributable to the business combination.
The acquiree's identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under AASB 3 "Business
Combinations are recognised at their fair values at the acquisition date, except for non-current assets (or disposal groups) that are
classified as held for sale in accordance with AASB 5 "Non-current Assets Held for Sale and Discontinued Operations", which are recognised
and measured at fair value less costs to sell.
Goodwill arising on acquisition is recognized as an asset and initially measured at cost, being the excess of the cost of the business
combination over the groups interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognized. If
after reassessment, the group's interest in the net fair value of the acquiree's identifiable assets, liabilities and contingent liabilities
exceeds the cost of the business combination, the excess is recognised immediately in profit or loss.
The interest of minority shareholders in the acquiree is initially measured at the minority's proportion of the net fair value of the
assets, liabilities and contingent liabilities recognised.
Notes to the Financial Statements
for the financial year ended 30 June 2008
1. SUMMARY OF ACCOUNTING POLICIES (continued)
(n) Property, plant and equipment
Plant and equipment, office furniture and fittings and leasehold improvements are stated at cost less accumulated depreciation and
impairment. Cost includes expenditure that is directly attributable to the acquisition of the item. In the event that settlement of all or
part of the purchase consideration is deferred, cost is determined by discounting the amounts payable in the future to their present value
as at the date of acquisition.
Depreciation is provided on property, plant and equipment. Depreciation is calculated on a straight line
basis so as to write off the net cost of each asset over its expected useful life to its estimated residual value. Leasehold
improvements are depreciated over the period of the lease or estimated useful life, whichever is the shorter, using the straight line
method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each annual reporting period.
The following estimated useful lives are used in the calculation of depreciation:
Office furniture and fittings 5 years
Plant and equipment 3 years
Leasehold improvements over the period of the lease
(o) Provisions
Provisions are recognised when the Group has a present obligation, the future sacrifice of economic benefits is probable, and the amount
of the provision can be measured reliably.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting
date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows
estimated to settle the present obligation, its carrying amount is the present value of those cash flows.
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable
is recognised as an asset if it is virtually certain that recovery will be received and the amount of the receivable can be measured
reliably.
Onerous Contracts
An onerous contract is considered to exist where the Group has a contract under which the unavoidable cost of meeting the contractual
obligations exceeds the economic benefits estimated to be received. Present obligations arising under onerous contracts are recognised as a
provision to the extent that the present obligation exceeds the economic benefits estimated to be received.
(p) Research and development costs
Internally-generated intangible assets - research and development expenditure
Expenditure on research activities is recognised as an expense in the period in which it is incurred. Where no internally-generated
intangible asset can be recognised, development expenditure is recognised as an expense in the period as incurred.
An intangible asset arising from development (or from the development phase of an internal project) is recognised if, and only if, all
of the following have been demonstrated:
* the technical feasibility of completing the intangible asset so that it will be available for use or sale;
* the intention to complete the intangible asset and use or sell it;
* the ability to use or sell the intangible asset;
* how the intangible asset will generate probable future economic benefits;
* the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible
asset; and
* the ability to measure reliably the expenditure attributable to the intangible asset during its development.
Notes to the Financial Statements
for the financial year ended 30 June 2008
1. SUMMARY OF ACCOUNTING POLICIES (continued)
(p) Research and development costs (continued)
The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred from the date when the
intangible asset first meets the recognition criteria listed above.
Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated amortisation and
accumulated impairment losses, on the same basis as intangible assets acquired separately.
(q) Revenue recognition
Sale of Goods and Licences
Revenue from the sale of goods and licences is recognised when the Group has passed control of the goods or other assets to the buyer,
except in the case of projects involving significant customisation where revenue is recognised by reference to the stage of completion of
the project.
Rendering of Services
Revenue from services to supply custom designed and developed software or solutions is recognised by reference to the stage of
completion of the project. The stage of completion is determined by assessing, at the reporting date, the level of actual services performed
as a percentage of total services to be performed in relation to the project.
Revenue recognised in advance of the corresponding bill being raised is recorded as 'work in progress', whilst bills raised in advance
of the services being performed is recorded as 'deferred income'.
Where a loss is expected to occur it is recognised immediately and a provision is made in relation to any future work on the contract.
Revenue from Support, Maintenance and Facilities Management Agreements
Revenue from support and maintenance contracts is recognised over time as it is earned.
Work in Progress
Work in progress is stated at the aggregate of contract costs incurred to date plus recognised profits less recognised losses and
progress billings. If there are contracts where progress billings exceed the aggregate costs incurred plus profits less losses, the net
amounts are presented in other liabilities.
Contracts costs include all costs directly related to specific contracts and costs that are specifically chargeable to the customers
under the terms of the contract.
(r) Share-based payments
Equity-settled share-based payments granted after 7 November 2002 that were unvested as of 1 July 2005, are measured at fair value at
the date of grant. Fair value is measured by use of a either a Black Scholes or binomial model. The expected life used in the model has been
adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions, and behavioural
considerations.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the
vesting period, based on the Group's estimate of shares that will eventually vest.
(s) Derivative financial instruments and hedge accounting
The Group uses derivative financial instruments (primarily foreign currency forward contracts) to hedge its risks associated with
foreign currency fluctuations relating to transactions arising from specific customer orders. Derivatives are initially recognised at fair
value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting date. The
resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging
instrument, in which event, the timing of the recognition in profit or loss depends on the nature of the hedge relationship.
Notes to the Financial Statements
for the financial year ended 30 June 2008
1. SUMMARY OF ACCOUNTING POLICIES (continued)
(s) Derivative financial instruments and hedge accounting (continued)
The fair value of all derivative financial instruments outstanding at the balance sheet date are recognised in the balance sheet as
either financial assets or financial liabilities. Changes in the fair value of derivative financial instruments that are designated and
effective as hedges of future cash flows are recognised directly in equity, with any ineffective portion being recognised in the income
statement. Amounts deferred in equity are recycled in profit or loss in the periods when the hedged item is recognised in profit or loss in
the same line of the income statement as the recognised hedged item.
If the cash flow hedge of a firm commitment or forecasted transaction results in the recognition of a non-financial asset or
non-financial liability, the gains and losses previously deferred in equity are transferred from equity and included in the initial
measurement of the cost of the asset or liability.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for
hedge accounting. At that time, for forecast transactions, any cumulative gain or loss on the hedging instrument recognised in equity is
retained in equity until the forecasted transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain
or loss recognised in equity is transferred to profit or loss for the period.
Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting are recognised in profit or loss
as they arise.
Derivatives embedded in other financial instruments, or other non financial host contracts, are treated as separate derivatives when
their risks and characteristics are not closely related to those of the host contract, and the host contract is not carried at fair value
with unrealised gains or losses reported in profit or loss.
(t) Critical accounting judgments and key sources of estimation uncertainty
The directors evaluate estimates and judgments incorporated into the financial report based on historical knowledge and best available
current information. Estimates assume a reasonable expectation of future events and based on current trends and economic data, obtained both
externally and within the Group.
The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date,
that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial
year:
Impairment of goodwill
The Group assesses impairment at each reporting date by evaluating conditions specific to the Group that may lead to impairment of
goodwill. Where an impairment trigger exists, the recoverable amount of the asset is determined. Value*in*use calculations performed in
assessing recoverable amounts incorporate a number of key estimates described in note 14.
Revenue recognition
Revenue in relation to the supply of custom designed and developed software or solutions is recognised on each project by reference to
the stage of completion of the project. The method of calculating the percentage completion of the project involves an element of judgement
based on future project costs and profitability of each project. The information used to forecast these costs is based on historical events
and current economic data on a customer by customer basis.
Notes to the financial statements
for the financial year ended 30 June 2008
Consolidated Company
2008 2007 2008 2007
$'000 $'000 $'000 $\'000
2. REVENUE
Revenue from continuing operations
consisted of the following items:
Revenue from the sale of goods 101,567 90,399 1,955 69
Revenue from the rendering of 76,367 63,192 4,077 968
services
Related parties �- - 1,400 4,534
177,934 153,591 7,432 5,571
Interest revenue:
Bank deposits 196 38 170 53
Related parties - - 4,795 3,313
196 38 4,965 3,366
Other income 76 150 76 150
Dividends from subsidiaries - - - 3,900
272 188 5,041 7,416
178,206 153,779 12,473 12,987
3. PROFIT BEFORE TAX
Profit before tax has been arrived at
after charging the following expenses
from continuing operations:
Net foreign exchange loss 677 816 87 327
Finance costs:
Interest - other entities 400 266 1 173
Depreciation of non-current assets:
Office furniture and fittings 685 383 - 1
Leasehold improvements 26 23 16 15
Plant and equipment 2,286 2,171 84 90
2,997 2,577 100 106
Amortisation of intangible assets:
Customer relationships, software and 6,883 -
documentation 6,975 -
Operating lease rental expenses:
Minimum lease payments 3,246 2,730 140 135
Net loss on disposal of non-current
assets
Plant and equipment 5 193 5 -
Notes to the financial statements
for the financial year ended 30 June 2008
Consolidated Company
2008 2007 2008 2007
$'000 $'000 $' $'
000 000
3. PROFIT BEFORE TAX (continued)
Employee benefit expense:
Contributions to defined contribution plans 197 223 197 139
197 223 197 139
Share-based payments:
Equity settled share-based payments 348 329 348 329
348 329 348 329
Termination benefits 140 340 140 24
4. INCOME TAXES
(a) Income tax recognised in profit
Tax expense comprises:
Current tax expense/(income) 3,472 4,976 (1,051) 424
Adjustments recognised in the current 123 (59) 79 19
year in relation to the current tax of
prior years
Deferred tax expense/(income) relating to (253) (1,411) 2,191 730
the origination and reversal of temporary
differences
Total tax expense 3,342 3,506 1,219 1,173
The prima facie
income tax expense
on pre-tax
accounting profit
from operations
reconciles to the
income tax expense
in the financial
statements as
follows:
Profit from 13,882 9,116 3,304 5,175
operations
Income tax expense 4,165 2,735 991 1,553
calculated at 30%
Non-deductible 1,533 368 149 771
expenses
Non-assessable item (1,711) (211) - -
- R&D tax
concessions
Non-assessable (1,544) - - -
income
Effect of different 751 482 -
tax rate in foreign
operations
Effect on deferred 25 191 - -
tax balances due to
change of rate in
other jurisdiction
Non assessable - - - (1,170)
dividend
(Over)/under 123 (59) 79 19
provision of income
tax in previous year
3,342 3,506 1,219 1,173
The tax rate used in the above reconciliation is the corporate tax rate of 30% payable by Australian corporate entities on taxable
profits under Australian tax law. There has been no change in the corporate tax rate when compared with the previous reporting
period.
Notes to the financial statements
for the financial year ended 30 June 2008
Consolidated Company
2008 2007 2008 2007
$'000 $'000 $' $'
000 000
4. INCOME TAXES (continued)
(b) Current tax assets and liabilities
Current tax assets:
Tax refund receivable 5,555 98 - -
Current tax payables:
Income tax payable 86 1,040 - -
Deferred tax balances
Deferred tax assets and liabilities arise from the following:
2008 Consolidated
Opening balance Charged Charged to equity Closi
to ng
income balan
ce
$'000 $'000 $'000 $'000
Deferred tax
liabilities:
Accrued income 132 75 - 207
Exchange difference on - - 190 190
foreign subsidiary
Property, plant and 89 51 - 140
equipment
Intangible assets 9,535 (1,562) - 7,973
9,756 (1,436) 190 8,510
Deferred tax assets:
Tax losses - revenue 3,408 (592) - 2,816
Foreign tax credits 392 (378) - 14
Trade receivables 1,327 (160) - 1,167
Property, plant and 121 (11) - 110
equipment
Deferred income 39 9 - 48
Accrued costs 1,474 38 - 1,512
Retirement provisions 355 103 - 458
Exchange difference on 562 - (338) 224
foreign subsidiary
Other - AIM listing 34 (17) - 17
costs
Other - share issue 524 (175) - 349
expenses
8,236 (1,183) (338) 6,715
Notes to the financial statements
for the financial year ended 30 June 2008
4. INCOME TAXES (continued)
2007 Consolidated
Opening balance Charged to income Charged to equity Closing balance
$'000 $'000 $'000 $'000
Deferred tax
liabilities:
Accrued income 631 (499) - 132
Property, plant and 81 8 - 89
equipment
Intangible assets 11,907 (2,372) - 9,535
12,619 (2,863) - 9,756
Deferred tax assets:
Tax losses - revenue 3,838 (430) - 3,408
Foreign tax credits 797 (405) - 392
Trade receivables 1,145 182 - 1,327
Property, plant and 142 (21) - 121
equipment
Deferred income 35 4 - 39
Accrued costs 2,091 (617) - 1,474
Retirement 326 29 - 355
provisions
Exchange difference 108 - 454 562
on foreign
subsidiary
Other - AIM listing 52 (18) - 34
costs
Other - share issue 700 (176) - 524
expenses
9,234 (1,452) 454 8,236
2008 Company
Opening balance Charged to income Closing balance
$'000 $'000 $'000
Deferred tax liabilities:
Accrued income 132 75 207
132 75 207
Deferred tax assets:
Tax losses - revenue 1,184 (1,127) 57
Foreign tax credits 392 (392) -
Trade receivables 200 (200) -
Property, plant and equipment 34 3 37
Accrued costs 423 (208) 215
Other - AIM listing costs 34 (17) 17
Other - share issue expenses 524 (175) 349
2,791 (2,116) 675
Notes to the financial statements
for the financial year ended 30 June 2008
4. INCOME TAXES (continued)
2007 Company
Opening balance Charged to income Closing balance
$'000 $'000 $'000
Deferred tax liabilities:
Accrued income 363 (231) 132
363 (231) 132
Deferred tax assets:
Tax losses - revenue 1,256 (72) 1,184
Foreign tax credits 797 (405) 392
Trade receivables - 200 200
Property, plant and equipment 31 3 34
Accrued costs 916 (493) 423
Other - AIM listing costs 52 (18) 34
Other - share issue expenses 700 (176) 524
3,752 (961) 2,791
Tax consolidation
Relevance of tax consolidation to the consolidated entity
The company and its wholly-owned Australian resident entities have formed a
tax-consolidated group with effect from 1 July 2002 and are therefore taxed as
a single entity from that date. The head entity within the tax-consolidated
group is eServGlobal Limited. The members of the tax-consolidated group are
identified at note 25.
Nature of tax funding arrangements and tax sharing agreements
Entities within the tax-consolidated group have entered into a tax funding
arrangement and a tax-sharing agreement with the head entity. Under the terms
of the tax funding arrangement, eServGlobal Limited and each of the entities in
the tax-consolidated group has agreed to pay a tax equivalent payment to or
from the head entity, based on the current tax liability or current tax asset
of the entity. Such amounts are reflected in amounts receivable from or payable
to other entities in the tax-consolidated group.
The tax sharing agreement entered into between members of the tax-consolidated
group provides for the determination of the allocation of income tax
liabilities between the entities should the head entity default on its tax
payment obligations. No amounts have been recognised in the financial
statements in respect of this agreement as payment of any amounts under the tax
sharing agreement is considered remote.
Notes to the financial statements
for the financial year ended 30 June 2008
5. KEY MANAGEMENT
PERSONNEL
COMPENSATION
Key management personnel compensation policy
The Remuneration and Nominations Committee reviews the remuneration packages of all
key management on an annual basis and makes recommendations to the Board. The Boards
approach on Remuneration Policies is set out in the Remuneration Report which forms
part of the Directors' Report.
The aggregate compensation made to key management personnel of the company and the Group is set out
below:
Consolidated Company
2008 2007 2008 2007
$ $ $ $
Short-term employee 2,200,435 2,419,621 982,465 955,481
benefits
Post-employment 290,240 74,370 199,183 73,306
benefits
Termination benefits 140,000 315,774 140,000 -
Other - 500,000 - 500,000
Other long term 56,841 79,736 - -
employee benefits
Share-based payment 118,360 135,369 60,038 18,124
2,805,876 3,524,870 1,381,686 1,546,911
6.
EXECUTIVE AND
EMPLOYEE SHARE OPTIONS
The Group has ownership-based remuneration schemes for directors, executives and employees of the Group. In accordance with the provisions
of the scheme, directors and employees may be granted options to acquire ordinary shares in the company. The board believes that the options
scheme has a significant role to play in motivating employees to help ensure the continued performance of the Group, although the
obligations under A-IFRS to expense the notional benefit of options issued has impacted the attractiveness of issuing options. The vesting
of any share options is not
dependent on any performance criteria, however, is dependent on a period of service relative to the vesting dates.
During the financial year, the company issued 660,000 options (2007: 2,525,000).
At the date of this report, option holders are entitled to purchase an aggregate of nil (2007: 87,454) ordinary shares of the entity as a
result of options issued prior to the introduction of the eServGlobal Employee Share Option Plan. 50,000 of
Notes to the financial statements
for the financial year ended 30 June 2008
6. EXECUTIVE AND EMPLOYEE SHARE OPTIONS (continued)
The following share-based payment arrangements were in existence during the period:
Option Series Number Grant Date Expiry Date Exercise Price Fair value at grant
$ date
Issued 1 January 2000 (iv) 37,454 01/01/2000 2007 0.20 32,061
Issued 8 September 2000 (iv) 50,000 08/09/2000 2007 1.00 58,200
Issued 4 September 2002 (i) 156,666 04/09/2002 2007 0.18 136,455
Issued 12 November 2003 (ii) 250,000 12/11/2003 2008 0.20 34,250
Issued 12 November 2003 (ii) 250,000 12/11/2003 2008 0.40 28,500
Issued 20 December 2003 (ii) 500,000 20/12/2003 2008 0.15 72,500
Issued 20 December 2003 (ii) 500,000 20/12/2003 2008 0.40 53,000
Issued 30 June 2004 (i) 626,673 30/04/2004 2009 0.23 261,960
Issued 29 May 2006 (iii) 1,457,142 29/05/2006 2011 0.66 364,286
Issued 17 November 2006 (i) 500,000 17/11/2006 2011 0.69 148,333
Issued 7 March 2007 (i) 975,000 07/03/2007 2012 0.69 321,750
Issued 26 September 2007(i) 300,000 26/09/2007 2012 0.97 129,100
Issued 4 October 2007(i) 310,000 04/10/2007 2012 0.97 136,917
Issued 26 October 2007(i) 50,000 26/10/2007 2012 0.97 21,367
In accordance with the terms of the Employee Share Option Plan:
(i) options issued in these series vest as to one-third on each of the first, second and third anniversary dates from the
date of issue and expire five years from date of issue.
(ii) options issued in these series vest on the third anniversary date from the date of issue and expire five years from
the date of issue
(iii) options issued in this series vest one-half immediately on issue and the balance on the first anniversary date from
the date of issue and expire five years from date of issue.
(iv) options issued in these series vest as to one-third on each of the first, second and third anniversary dates from the
date of issue and expire seven years from date of issue.
In accordance with the terms of the Employee Share Option Plan, options may be
exercised at any time from the date on which they vest to the date of their
expiry.
The weighted average fair value of the share options granted during the
financial year is $0.435 (2007: $0.312).
Options issued December 1998 to June 2004
Options were priced with the assistance of an appropriately qualified expert
using the Black Scholes model. Where relevant, the expected life used in the
model has been adjusted based on a best estimate for the effects of
non-transferability, exercise restrictions and behavioural considerations.
Expected volatility is based on the semi-annual historical volatility of share
prices as at the grant date. The interest rate has been derived from swap
market interest rates on the valuation date in the model. This data is sourced
from the Bloomberg financial data provider.
Notes to the financial statements
for the financial year ended 30 June 2008
6. EXECUTIVE AND EMPLOYEE SHARE OPTIONS (continued)
Inputs into the models
Inputs into the models for the series of options issued from September 2000 to June 2004 are:
Issue Date Underlying Price Exercise Price Expiry Date Vesting Date Expected Life Interest Rate Historical
Volatility
08-Sep-00 $1.80 $1.00 08-Sep-07 08-Sep-03 07-Sep-05 6.64% 50.00%
04-Sep-02 $0.20 $0.18 04-Sep-07 04-Sep-03 03-Sep-05 5.09% 53.88%
04-Sep-02 $0.20 $0.18 04-Sep-07 04-Sep-05 04-Sep-06 5.24% 53.88%
12-Nov-03 $0.20 $0.20 12-Nov-08 12-Nov-06 12-Nov-07 6.07% 110.43%
12-Nov-03 $0.20 $0.40 12-Nov-08 12-Nov-06 12-Nov-07 6.07% 110.43%
20-Dec-03 $0.21 $0.15 20-Dec-08 20-Dec-06 20-Dec-07 5.87% 97.18%
20-Dec-03 $0.21 $0.40 20-Dec-08 20-Dec-06 20-Dec-07 5.87% 97.18%
30-Jun-04 $0.25 $0.23 30-Jun-09 30-Jun-05 30-Jun-07 5.48% 107.44%
30-Jun-04 $0.25 $0.23 30-Jun-09 30-Jun-06 30-Dec-07 5.79% 107.44%
30-Jun-04 $0.25 $0.23 30-Jun-09 30-Jun-07 30-Jun-09 5.84% 107.44%
Options issued since June 2004
Options were priced by an appropriately qualified expert who chose to use the binomial pricing model, because it allows for performance
hurdles and settlement before expiry. Where relevant, the expected life used in the model has been adjusted based on a best estimate for the
effects of non-transferability, exercise restrictions and behavioural considerations. Expected volatility is based on the historical share
price volatility over the past 5 years. The risk-free rate is sourced from the Reserve Bank of Australia. To allow for effects of early
exercise, it was assumed that employees would exercise the options after vesting date when the share price was two times the exercise
price.
Inputs into the models for the series of options issued post June 2004:
Issue Date Share price at grant Risk free rate of Years to Dividend yield Volatility Sub optimal early
date return to expiry expiration/exercise (p.a.) exercise factor
(p.a.)
29-May-06 0.66 5.62% 5 0.0% 50.00% - 60.00% 2.00
17-Nov-06 0.70 5.80% 5 1.5% 50.00% - 60.00% 2.00
7-Mar-07 0.77 5.80% 5 1.5% 45.00% - 55.00% 2.00
26-Sep-07 1.06 6.36% 5 1.5% 45.00% - 50.00% 2.00
4-Oct-07 1.07 6.42% 5 1.5% 45.00% - 50.00% 2.00
26-Oct-07 1.05 6.41% 5 1.5% 45.00% - 50.00% 2.00
Notes to the financial statements
for the financial year ended 30 June 2008
6. EXECUTIVE AND EMPLOYEE SHARE OPTIONS (continued)
The following reconciles the outstanding share options granted under the executive share option plan at the beginning and the end of the
financial year:
2008 2007
Number of Options Weighted average Number of Options Weighted average
exercise price exercise price
$ $
Balance at the beginning of 5,302,935 0.497 4,420,933 0.413
the year
Granted during the year 660,000 0.970 2,525,000 0.690
Exercised during the financial (933,457) 0.244 (333,330) 0.212
year
Forfeited during the financial - - (1,309,668) 0.660
year
Expired during the year (50,000) 1.00 -
Balance at the end of the year 4,979,478 0.602 5,302,935 0.497
Exercisable at the end of the 3,336,131 0.503 3,827,935 0.422
financial year
Exercised during the financial year
The following options were exercised during the financial year:
Issued Number Exercised Exercise Date Share Price at Exercise Date
$
1-Jan-00 37,454 6-Sep-07 0.95
4-Sep-02 50,000 30-Aug-07 0.95
4-Sep-02 106,666 9-Aug-07 0.98
20-Dec-03 500,000 4-Jun-08 0.93
30-Jun-04 87,000 9-0ct-07 1.08
30-Jun-04 40,000 30-Nov-07 1.08
30-Jun-04 42,002 9-Aug-07 0.98
30-Jun-04 22,001 4-Mar-08 1.15
30-Jun-04 10,000 9-Aug-07 0.98
30-Jun-04 13,334 23-Apr-08 1.06
30-Jun-04 20,000 8-Jan-08 1.20
30-Jun-04 5,000 26-0ct-07 1.05
933,457
Notes to the financial statements
for the financial year ended 30 June 2008
6. EXECUTIVE AND EMPLOYEE SHARE OPTIONS (continued)
The following options were exercised during the previous financial year:
Issued Number Exercised Exercise Date Share Price at Exercise Date
$
04-Sep-02 100,000 4-Aug-06 0.55
04-Sep-02 20,000 8-May-07 0.77
30-Jun-04 16,666 11-Jul-06 0.64
30-Jun-04 6,666 11-Jul-06 0.64
30-Jun-04 13,333 4-Aug-06 0.55
30-Jun-04 6,666 4-Aug-06 0.55
30-Jun-04 13,333 18-Sep-06 0.68
30-Jun-04 30,666 18-Sep-06 0.68
30-Jun-04 15,333 18-Sep-06 0.68
30-Jun-04 5,000 18-Sep-06 0.68
30-Jun-04 7,000 23-Oct-06 0.63
30-Jun-04 16,667 23-Oct-06 0.63
30-Jun-04 16,667 23-Oct-06 0.63
30-Jun-04 20,000 17-Nov-06 0.70
30-Jun-04 3,334 17-Nov-06 0.70
30-Jun-04 13,333 10-Apr-07 0.85
30-Jun-04 15,333 10-Apr-07 0.85
30-Jun-04 13,333 8-May-07 0.77
333,330
Balance at the end of the financial year
The share options outstanding at the end of the financial year are as follows:
Issued No Vested Unvested Expiry Exercise Contractual
No. No. Date Price Life
$ (days)
Issued 12 November 2003 250,000 250,000 - 2008 $0.20 135
Issued 12 November 2003 250,000 250,000 - 2008 $0.40 135
Issued 20 December 2003 250,000 250,000 - 2008 $0.15 173
Issued 20 December 2003 250,000 250,000 - 2008 $0.40 173
Issued 30 June 2004 387,336 387,336 - 2009 $0.23 365
Issued 29 May 2006 1,457,142 1,457,142 - 2011 $0.66 1,063
Issued 17 November 2006 500,000 166,666 333,334 2011 $0.69 1,235
Issued 7 March 2007 975,000 324,987 650,013 2012 $0.69 1,346
Issued 26 September 2007 300,000 - 300,000 2012 $0.97 1,549
Issued 4 October 2007 310,000 - 310,000 2012 $0.97 1,557
Issued 26 October 2007 50,000 - 50,000 2012 $0.97 1,579
4,979,478 3,336,131 1,643,347
Notes to the financial statements
for the financial year ended 30 June 2008
Consolidated Company
2008 2007 2008 2007
$ $ $ $
7. REMUNERATION OF AUDITORS
Auditor of the Parent Entity
Auditing of the financial report 228,000 310,000 228,000 310,000
Other services - Taxation advice 6,500 58,416 6,500 58,416
Other services - Other 5,775 5,250 5,775 5,250
240,275 373,666 240,275 373,666
Other Auditors
Auditing the financial report 306,405 245,128 - -
Other services - Taxation 11,047 5,000 - -
317,452 250,128 - -
557,727 623,794 240,275 373,666
The auditor of eServGlobal is Deloitte Touche Tohmatsu in Australia and the Other Auditors are all affiliated firms of Deloitte Touche
Tohmatsu.
2008 2007 2008 2007
$'000 $'000 $'000 $'000
8. CURRENT TRADE AND
OTHER RECEIVABLES
Trade receivables 57,123 47,838 2,658 493
(i)
Prepayments 2,342 1,400 91 68
Goods and services 2,438 2,050 124 5
tax (GST) receivable
Amount owed by - - 4,931 7,508
wholly-owned
controlled entities
Work in progress 14,911 19,814 687 438
(Note 9)
Deposits 3,306 2,226 2 5
80,120 73,328 8,493 8,517
(i) The average credit period on sales of goods and rendering of services is 60 days. Historically, the Group has had no requirement
to charge interest on overdue receivables, although customer contractual terms include the ability to do this. Objective evidence
is determined by reference to knowledge of disputes at balance date. The Group also considers any change in the quality of the
trade receivable from the date credit was initially granted up to the reporting date.
Before accepting any new customers, the Group obtains, where considered necessary, third party references to assess the potential
customer's credit worthiness. The majority of the Group and Company's outstanding trade receivables consist of large
Telecommunication companies and are considered high quality creditworthy customers.
Included in the Group's trade receivable balance are debtors with a carrying amount of $14.5 million (2007: $16.4 million) which
are past due at the reporting date for which the Group has not provided as there has not
Notes to the financial statements
for the financial year ended 30 June 2008
8. CURRENT TRADE AND OTHER RECEIVABLES
(continued)
Consolidated Company
2008 2007 2008 2007
$'000 $'000 $'000 $'
000
Ageing of past due but not impaired
By up to 30 days 8,364 6,822 471 -
30 - 90 days 3,214 4,245 243 -
90 - 120 days 405 289 206 -
120 + days 2,498 5,013 141 -
14,481 16,369 1,061 -
9. WORK IN PROGRESS
Contract work in progress 95,345 116,135 2,454 9,981
Progress billings and advances (87,866) (105,083) (1,829) (9,681)
received
7,479 11,052 625 300
Recognised and included in the
financial statements as amounts
due:
From customers:
Current (note 8) 14,911 19,814 687 438
To customers as deferred income:
Current (note 18) (7,432) (8,762) (62) (138)
7,479 11,052 625 300
10. CURRENT INVENTORIES
Finished goods - at net realisable value 1,456 707 - -
11. NON-CURRENT TRADE AND OTHER RECEIVABLES
Amount owed by wholly-owned controlled - - 63,189 70,983
entities - at amortised cost (i)
Other 5,077 - - -
5,077 - 63,189 70,983
(i) The wholly-owned controlled entity
receivable is due from a creditworthy related
party. The amount is not past due or impaired
and no allowance has been provided on the
receivable. The outstanding amount is
available on call and bears interest at a
variable rate.
12. OTHER NON-CURRENT FINANCIAL ASSETS
Shares in controlled entities - at cost - - 38,432 38,432
Notes to the financial statements
for the financial year ended 30 June 2008
13. PROPERTY, PLANT AND EQUIPMENT
Office Furniture And Leasehold Plant And Equipment Total
Fittings Improvements
Consolidated
$'000 $'000 $'000 $'000
Gross carrying
amount - at cost
Balance at 1 July 942 403 8,103 9,448
2006
Additions 473 44 2,924 3,441
Acquisitions through - - 326 326
business
combinations
Disposals (3) - (286) (289)
Net foreign currency (59) 23 (254) (290)
Balance at 30 June 1,353 470 10,813 12,636
2007
Additions 662 3 3,519 4,184
Disposals - - (535) (535)
Net foreign currency 143 (35) 318 426
Balance at 30 June 2,158 438 14,115 16,711
2008
Accumulated
depreciation
Balance at 1 July 557 347 4,647 5,551
2006
Depreciation expense 383 23 2,171 2,577
Disposal (3) - (93) (96)
Net foreign currency (33) 20 (86) (99)
Balance at 30 June 904 390 6,639 7,933
2007
Depreciation expense 685 26 2,286 2,997
Disposal - - (530) (530)
Net foreign currency 133 (28) 351 456
Balance at 30 June 1,722 388 8,746 10,856
2008
Net book value
As at 30 June 2007 449 80 4,174 4,703
As at 30 June 2008 436 50 5,369 5,855
Notes to the financial statements
for the financial year ended 30 June 2008
13 PROPERTY, PLANT AND EQUIPMENT (continued)
Office Furniture And Leasehold Plant And Equipment Total
Fittings Improvements
Company
$'000 $'000 $'000 $'000
Gross carrying
amount - at cost
Balance at 1 July 31 208 829 1,068
2006
Additions 1 7 34 42
Balance at 30 June 32 215 863 1,110
2007
Additions - 2 57 59
Disposals - - (499) (499)
Balance at 30 June 32 217 421 670
2008
Accumulated
depreciation/
amortisation
Balance at 1 July 31 180 662 873
2006
Depreciation expense 1 15 90 106
Balance at 30 June 32 195 752 979
2007
Depreciation expense - 16 84 100
Disposals - - (494) (494)
Balance at 30 June 32 211 342 585
2008
Net book value
As at 30 June 2007 - 20 111 131
As at 30 June 2008 - 6 79 85
Notes to the financial statements
for the financial year ended 30 June 2008
Consolidated Company
2008 2007 2008 2007
$'000 $'000 $'000 $'000
14. GOODWILL
Gross carrying
amount and net book
value
Balance at the 46,210 45,685 - -
beginning of the
financial year
Additional amounts - 943 - -
recognised from
business
combinations
occurring during the
year
Translation effects 594 (418) - -
of foreign currency
exchange movements
Balance at end of 46,804 46,210 - -
financial year
Allocation of goodwill to cash-generating
units
Goodwill has been allocated for impairment testing purposes to a single cash generating unit, being the entire business. This is
because substantially the entire product list of the combined entity is available for sale to, and being sold to, substantially
the entire customer base of the combined entity.
The recoverable amount of the cash-generating unit is determined based on a value-in-use calculation which uses cash flow
projections based on financial budgets approved by management covering a 7 year period, and a terminal value based upon an
extrapolation of cash flows beyond the 7 year period using an estimated growth rate of 4% per annum.
The key assumptions used in the value-in-use calculation for the cash generating unit are as follows:
* Sales are expected to grow over the forecast period at 9% - 16%.
* A gross margin of 54% over the forecast period: this is based upon average gross margins achieved in the period immediately
before the forecast period.
* In performing the value-in-use calculations, the company has applied post-tax discount rates to discount the forecast future
attributable post tax cash flows. The equivalent pre-tax discount rate is 26.14% per annum.
* Operating expenses are expected to increase steadily over the forecast period, but at a rate lower than the sales growth.
Management believes that any reasonably possible change in the key assumptions on which recoverable amount is based would not
cause the aggregate carrying amount to exceed the aggregate recoverable amount of the cash-generating unit.
Notes to the financial statements
for the financial year ended 30 June 2008
15. INTANGIBLES
Consolidated
Software & Customer Relationships Total
Documentation $'000 $'000
$'000
Gross carrying amount
Balance at 1 July 2006 17,950 22,353 40,303
Effects of foreign currency (356) (444) (800)
exchange movements
Balance at 30 June 2007 17,594 21,909 39,503
Effects of foreign currency 415 591 1,006
exchange movements
Balance at 30 June 2008 18,009 22,500 40,509
Accumulated Amortisation and
impairment
Balance at 1 July 2006 (2,393) (2,126) (4,519)
Amortisation expense (3,690) (3,285) (6,975)
Effects of foreign currency 220 195 415
exchange movements
Balance at 30 June 2007 (5,863) (5,216) (11,079)
Amortisation expense (3,642) (3,241) (6,883)
Effects of foreign currency (2) (1) (3)
exchange movements
Balance at 30 June 2008 (9,507) (8,458) (17,965)
Net Book Value
As at 30 June 2007 11,731 16,693 28,424
As at 30 June 2008 8,502 14,042 22,544
Significant intangible assets
The carrying amount of 'Software & Documentation' of $8.502 million (2007: $11.731 million) will be
fully amortised in 3 years (2007: 4 years).
The carrying amount of 'Customer Relationships' of $14.042 million (2007: $16.693 million) will be
fully amortised in 5 years (2007: 6 years).
Notes to the financial statements
for the financial year ended 30 June 2008
Consolidated Company
2008 2007 2008 2007
$'000 $'000 $'000 $'000
16. CURRENT TRADE AND
OTHER PAYABLES
Trade payables (i) 13,007 8,844 148 36
Accruals and other 33,157 25,159 980 1,793
payables
46,164 34,003 1,128 1,829
(i) The average credit period on purchases of certain goods is 45 days, No interest is charged on overdue payables. The Group
has financial risk management policies in place to ensure that all payables are paid within the credit timeframe.
17. PROVISIONS
Employee leave Retirement Onerous contracts Total
provisions contribution plans
(i)
$'000 $'000 $'000 $'000
Consolidated
Balance as at 1 July 2007 4,946 1,034 313 6,293
Additional provisions recognised 400 297 - 697
Utilised/reversed during the period - - (313) (313)
Balance as at 30 June 2008 5,346 1,331 - 6,677
Current 5,346 - - 5,346
Non-current - 1,331 - 1,331
5,346 1,331 - 6,677
Company
Balance as at 1 July 2007 125 - - 125
Additional provisions recognised 3 - - 3
Balance as at 30 June 2008 128 - - 128
Current 128 - - 128
(i) The retirement contribution plan is the statutory termination payment due to eligible employees
in France.
Notes to the financial statements
for the financial year ended 30 June 2008
Consolidated Company
2008 2007 2008 2007
$'000 $'000 $' $'
000 000
18. OTHER CURRENT LIABILITIES
Deferred income (Note 9) 7,432 8,762 62 138
19. ISSUED CAPITAL
171,009,598 fully paid ordinary shares
(2007: 170,076,141) 115,325 115,005
115,325 115,005
Consolidated and Company
2008
2007
No. $
No. $
'000 '000
'000 '000
Fully Paid Ordinary Shares
Balance at the beginning of financial year 170,076
115,005 169,743 114,896
Issue of shares under the executive and 933
228 333 71
employee share option plan (Note 6)
Transfer from employee equity-settled -
92 - 38
benefits reserve
Balance at the end of financial year 171,009
115,325 170,076 115,005
Fully paid ordinary shares carry one vote per share and carry the right to dividends.
Changes to the then Corporations Law abolished the authorised capital and par value concept in relation to share capital from 1 July
1998. Therefore, the company does not have a limited amount of authorised capital and issued shares do not
have a par value.
Share Options
In accordance with the executive and employee share option plan as at 30 June 2008, employees are entitled to purchase shares in the
company. Details of the executive and employee share option plan are contained in note 6 to the financial
statements.
Notes to the financial statements
for the financial year ended 30 June 2008
Consolidated Company
2008 2007 2008 2007
$'000 $'000 $'000 $'000
20. RESERVES
Foreign currency 596 (1,094) - -
translation
Employee 1,042 786 1,042 786
equity-settled
benefits
1,638 (308) 1,042 786
Foreign currency
translation reserve
Balance at beginning (1,094) 1,274 - -
of financial year
Translation of
foreign operations 1,690 (2,368) - -
(net of deferred
tax)
Balance at the end 596 (1,094) - -
of the financial
year
Exchange differences relating to the translation from Euros, being the functional currency of the eServGlobal SA group, into
Australian dollars are brought to account by entries made directly to the foreign currency translation reserve.
Employee
equity-settled
benefits reserve
Balance at beginning 786 495 786 495
of financial year
Share based payments 348 329 348 329
Transfer to issued (92) (38) (92) (38)
share capital (note
19)
Balance at the end 1,042 786 1,042 786
of the financial
year
The employee equity-settled benefits reserve arises on the grant of share options to executives and employees under the executive
and employee share option plan. Amounts are transferred out of the reserve and into issued capital when options are exercised.
Further information about share-based payments to executives and employees is contained in note 6 to the financial statements.
21. RETAINED EARNINGS / (ACCUMULATED
LOSSES)
Balance at beginning of the (447) (3,832) 3,931 1,969
financial year
Profit for the year attributable to 10,391 5,425 2,085 4,002
equity holders of the parent
Dividends paid (note 23) (3,408) (2,040) (3,408) (2,040)
Balance at end of financial year 6,536 (447) 2,608 3,931
Notes to the financial statements
for the financial year ended 30 June 2008
Consolidated
2008 2007
Cents Per Share Cents Per share
22. EARNINGS PER SHARE
Basic earnings per 6.1 3.2
share
Diluted earnings per 6.0 3.2
share
Basic earnings per
share
The earnings and weighted average number of ordinary shares used in the calculation of
basic earnings per share are as follows:
2008 2007
$'000 $'000
Earnings - being the 10,391 5,425
profit for the year
attributable to
equity holders of
the parent
2008 2007
No No
Weighted average 170,435,344 169,978,020
number of ordinary
shares
Diluted earnings per
share
The earnings and weighted average number of ordinary and potential ordinary shares
used in the calculation of diluted earnings per share are as follows:
2008 2007
$'000 $'000
Earnings - being the 10,391 5,425
profit for the year
attributable to
equity holders of
the parent
2008 2007
No No
Weighted average 172,535,632 171,523,802
number of ordinary
shares and potential
ordinary shares (a)
(a) Weighted average numbers of ordinary shares and potential ordinary shares used in
the calculation of diluted earnings per share reconciles to the weighted average
number of ordinary shares used in the calculation of basic earnings per share as
follows:
Weighted average 170,435,344 169,978,020
number of ordinary
shares used in the
calculation of basic
EPS
Shares deemed to be 2,100,288 1,545,782
issued for no
consideration in
respect of employee
options
Weighted average 172,535,632 171,523,802
number of ordinary
shares and potential
ordinary shares used
in the calculation
of diluted earnings
per share
Notes to the financial statements
for the financial year ended 30 June 2008
Consolidated and Company
2008 2007
Cents Total Cents Per Share
Total
Per Share $'000
$'000
23. DIVIDENDS
Recognised Amounts
Final dividend
Fully Paid Ordinary 2.0 3,408 1.2
2,040
Shares unfranked
Unrecognised Amounts
Final dividend
Fully Paid Ordinary 3.0 5,130 2.0
3,408
Shares unfranked
On 24 July 2008, the directors declared an unfranked final dividend of 3.0 cents per share to the holders of fully paid ordinary shares in
respect
of the financial year ended 30 June 2008, to be paid to shareholders on 15 September 2008. As this dividend was declared post year end it
has not
been included as a liability in these financial statements. The dividend will be paid to all shareholders on the Register of Members on 29
August
2008. The total estimated dividend to be paid is $5.130 million.
Company
2008
2007
$'000
$'000
Adjusted franking 99
99
account balance (tax
paid basis)
Impact on franking -
-
account of
unrecognised
dividends
24. LEASES
Operating Leases
Leasing arrangements
Operating leases relate to office facilities with lease terms of up to six years. The company/Group does not have an option to
purchase the
leased asset at the expiry of the lease period.
Consolidated Company
2008 2007 2008 2007
$'000 $'000 $' $'
000 000
Non-cancellable operating leases
Not longer than 1 year 2,662 2,724 70 131
Longer than 1 year and not longer than 5 years 12,853 4,444 - 66
Longer than 5 years 2,179 1,260 - -
17,694 8,428 70 197
Notes to the financial statements
for the financial year ended 30 June 2008
Ownership Interest
COUNTRY OF INCORPORATION
2008 2007
% %
25. SUBSIDIARIES
Parent Entity
eServGlobal Limited Australia (vii) (viii)
- -
Subsidiary
eServGlobal Holdings SAS France (i)
100 100
eServGlobal SAS France (i) (iii)(ix)
100 100
PT eServGlobal Indonesia Indonesia (i) (x)
100 100
eServGlobal (Beijing) Telecommunication China (i) (x)
100 100
Technical Services, Co Ltd
eServGlobal Telecom Romania Srl Romania (i)(x)
50 50
eServGlobal (NZ) Pty Limited Australia (ii) (vi) (vii)
100 100
eServGlobal (HK) Limited Hong Kong (i)
100 100
eServGlobal NVSA Belgium (i)
100 100
eServGlobal UK Limited United Kingdom (i)
100 100
eServ UK Limited United Kingdom (i)
100 100
eServGlobal Inc United States of America (iv)
100 100
eServGlobal Aust Pty Limited (formerly Australia (v) (vi) (vii)
100 100
Integrator Pty Limited)
(i) These subsidiaries carry on business in their country of incorporation; France, Indonesia, China, Romania, Hong
Kong, Belgium and United Kingdom .
(ii) eServGlobal (NZ) Pty Ltd carries on business in Australia and has a branch which carries on business in New
Zealand.
(iii) eServGlobal SAS carries on business in France and has branches which carry on business in Egypt, Poland, India
and the United Arab Emirates.
(iv) This subsidiary did not trade during the current financial year and is relieved from the requirement to prepare,
audit and lodge a financial report.
(v) This subsidiary did not trade in the year ended 30 June 2008.
(vi) These subsidiaries are classified as small proprietary companies and, in accordance with the Corporations Act
2001, are relieved from the requirement to
prepare, audit and lodge a financial report.
(vii) These companies are members of the Australian tax consolidated group.
(viii) eServGlobal Limited is the head entity within the tax consolidated group.
(ix) This company is a subsidiary of eServGlobal Holdings SAS
(x) These companies are subsidiaries of eServGlobal SAS
Notes to the financial statements
for the financial year ended 30 June 2008
26. ACQUISITION OF
BUSINESS
Names of businesses acquired Principal Activity Date of acquisition Proportion of shares Cost of acquisition
acquired (%) $'000
2008 Nil
2007
Empower Interactive Global provider of 23 February 2007 Nil 1,269
telecommunications
value added services
software
During the year some of the assets (described below) of Empower Interactive Group Limited were purchased from the
Administrator. As the company was insolvent and had been placed in Administration the book value is based on the
contract purchase value. The cost of acquisition comprises cash �0.5 million (A$1.269 million).
Included in the net profit for the period is $Nil attributable to the additional business generated by Empower. This
strategic acquisition will provide benefits in the future.
Empower Interactive
Net assets acquired Book value Fair Value Fair Value on acquisition
$'000 adjustment $'000
$'000
Current Assets
Trade Debtors 12 (12) -
Non Current Assets
Property, plant and equipment 326 - 326
326
Goodwill 943
Total cash and non cash consideration 1,269
Notes to the financial statements
for the financial year ended 30 June 2008
27. SEGMENT INFORMATION
Based on the risks and rewards associated with the company's business, organisational structure and system of internal financial reporting
to the Board of Directors, management considers that
the Group operates in one business segment, the Telecommunications Software Solutions business, and in the following geographical
segments.
Revenue in the table below has been calculated based on the geographical location of the group company deriving the revenue.
Segment Revenues EXTERNAL SALES INTER-SEGMENT
TOTAL
Geographical
2007 2008 2007
2008 2007 2008
$'000 $'000 $'000
$'000 $'000 $'000
Asia Pacific 10,807 2,662 6,972 5,842
17,779 8,504
Europe 167,203 151,079 271
- 167,474 151,079
Total of all 178,010 153,741 7,243 5,842
185,253 159,583
geographies
Eliminations
(7,243) (5,842)
Unallocated
196 38
Consolidated
178,206 153,779
The Group also captures revenue by the geographical segment, based on the location of the ultimate customer:
Segment Revenues EXTERNAL SALES INTER-SEGMENT
TOTAL
Geographical
2007 2008 2007
2008 2007 2008
$'000 $'000 $'000
$'000 $'000 $'000
Middle East 109,873 81,296
- - 109,873 81,296
Asia Pacific 25,885 37,239
- - 25,885 37,239
Europe 31,078 23,759
- - 31,078 23,759
Africa 7,433 8,807
- - 7,433 8,807
Central and South 3,741 2,640
- - 3,741 2,640
America
Total of all 178,010 153,741
- - 178,010 153,741
geographies
Eliminations
- -
Unallocated
196 38
Consolidated
178,206 153,779
The group does not capture costs and assets information based on customer geographies.
Notes to the financial statements
for the financial year ended 30 June 2008
28. RELATED PARTY DISCLOSURES
a) Equity Interests in Related Parties
Equity Interests in Controlled Entities
Details of the percentage of ordinary shares held in subsidiaries are disclosed in note 25 to the
financial statements.
b) Key management personnel compensation
Details of key management personnel compensation are disclosed in note 5 to the financial
statements.
c) Key management personnel equity holdings
Fully paid ordinary shares issued by
eServGlobal Limited
Balance at 1 July Received on exercise Net other change Balance at 30 June
of options
No. No. No. No.
2008
I Buddery (i) 15,055,982 - - 15,055,982
A Gilbert 90,000 - - 90,000
J M Hartigan (iii) 10,000 - - 10,000
JP Labat (ii) 99,464 - - 99,464
G Lemoing (ii) 99,464 - - 99,464
J Pratt - 500,000 - 500,000
2007
I Buddery (i) 15,055,982 - - 15,055,982
A Gilbert - - 90,000 90,000
R Agniel (ii) 397,855 - - 397,855
J M Hartigan (iii) 10,000 - - 10,000
JP Labat (ii) 99,464 - - 99,464
G Lemoing (ii) 99,464 - - 99,464
(i) Relevant interest held in shares registered in the name of Wallaby Hill Pty Ltd in which I Buddery holds an interest.
(ii) Shares held by a company in trust.
(iii) Held indirectly.
Notes to the financial statements
for the financial year ended 30 June 2008
28. RELATED PARTY DISCLOSURES (continued)
c) Key management personnel equity holdings (continued)
Options issued by eServGlobal Limited to Executives
Balance at 1 July Granted as Exercised Net other change Balance at Balance vested at 30 Vested but not
Vested and Vested during the
compen-sation 30 June June exercisable
exercisable year
No. No. No. No. No. No. No.
No. No.
2008
J M Hartigan 500,000 - - - 500,000 500,000 -
500,000 -
JP Labat 242,857 - - - 242,857 242,857 -
242,857 -
G Lemoing 242,857 - - - 242,857 242,857 -
242,857 -
L Lafarge - 300,000 - - 300,000 - -
- -
2007
J M Hartigan 500,000 - - - 500,000 500,000 -
500,000 500,000
JP Labat 242,857 - - - 242,857 242,857 -
242,857 121,429
G Lemoing 242,857 - - - 242,857 242,857 -
242,857 121,429
R Agniel - 1,050,000 - (1,050,000) - - -
- -
All executive share options issued to key management during the financial year were made in accordance with the provisions of the
executive share option plan. Each executive share plan option converts into 1 ordinary share of eServGlobal Limited when the option is
exercised and the exercise price paid. When options are issued, no amounts are paid or payable by the recipient of the option (Refer Note
6).
d) Non executive directors option holdings
Balance at 1 July Granted as Exercised Net other change Balance at Balance vested at 30 Vested but not
Vested and Vested during the
compen-sation 30 June June exercisable
exercisable year
No. No. No. No. No. No. No.
No. No.
2008
F Barrault 500,000 - - - 500,000 500,000 -
500,000 -
A Gilbert 500,000 - - - 500,000 166,667 -
166,667 166,667
J Pratt 500,000 - (500,000) - - - -
- -
D Smart 50,000 - - (50,000) - - -
- -
2007
F Barrault 500,000 - - - 500,000 500,000 -
500,000 500,000
A Gilbert - 500,000 - - 500,000 - -
- -
J Pratt 500,000 - - - 500,000 500,000 -
500,000 500,000
D Smart 50,000 - - - 50,000 50,000 -
50,000 -
Notes to the financial statements
for the financial year ended 30 June 2008
28. RELATED PARTY DISCLOSURES (continued)
d) Non executive directors option holdings (continued)
All executive share options issued to non executive directors during the financial year were made in accordance with the provisions of
the executive share option plan. Each executive share plan option converts into 1 ordinary share of eServGlobal Limited when the option is
exercised and the exercise price paid. When options are issued, no amounts are paid or payable by the recipient of the option (Refer Note
6).
Consolidated Company
2008 2007 2008 2007
$ $ $ $
e) Other
transactions with
key management
personnel
The profit from
operations includes
the following items
of expenditure that
resulted from
transactions, other
than compensation or
equity holdings,
with key management
personnel or their
related entities:
Graham Libbesson (a 27,000 8,500 27,000 8,500
non-executive
director) is a
director of the
company Unorfadox
Pty Limited which
provided services in
relation to the
group's taxation
position, on normal
commercial terms.
Anthony Gilbert (a 59,312 - 59,312 -
non-executive
director) provided
services in relation
to professional
consulting services,
on normal commercial
terms
f) Transactions within the Wholly-Owned
Group
The wholly-owned group includes:
* the ultimate parent entity in the wholly-owned group and
* wholly-owned controlled entities
The ultimate parent entity in the wholly-owned group is eServGlobal Limited.
Amounts owed by wholly-owned controlled entities are disclosed in notes 8 and 11 to the financial
statements.
Details of dividend revenue derived by the entity from entities in the wholly-owned group are
disclosed in note 2 to the financial statements.
During the financial year eServGlobal Limited provided accounting and administration services, at
cost, to entities in the wholly-owned group.
Under the Australian Tax Consolidation system eServGlobal Ltd assumed all of the tax liabilities
of the Australian tax consolidated group.
g) Parent Entities
The parent entity in the Group is eServGlobal Limited.
Notes to the financial statements
for the financial year ended 30 June 2008
29. NOTES TO THE CASH FLOW STATEMENT
Consolidated Company
2008 2007 2008 2007
$'000 $'000 $'000 $'000
a) Reconciliation of
cash
For the purposes of
the cash flow
statement, cash and
cash equivalents
includes cash on
hand and in banks
and investments in
money market
instruments, net of
outstanding bank
overdrafts. Cash at
the end of the
financial year as
shown in the
statement of cash
flows is reconciled
to the related items
in the balance sheet
as follows:
Cash and cash 18,288 12,528 9,626 1,092
equivalents
b) Business
acquisition
During the previous financial year some of the assets (described below) of Empower Interactive Group Limited were purchased from
the Administrator.
Details of that transaction was as follows:
Consolidated Company
2008 2007 2008 2007
$'000 $'000 $'000 $'000
Consideration
Cash and cash - 1,269 - -
equivalents
Fair value of net
assets acquired
Fair value of net - 326 - -
assets acquired
Goodwill on - 943 - -
acquisition
- 1,269 - -
Net cash outflow on
acquisition
Cash and cash - (1,269) - -
equivalents
consideration
Less cash and cash - - - -
equivalent balances
acquired
- (1,269) - -
c) Financing
facilities
Secured bank
facilities with a
maturity date of 30
September 2008 which
may be extended by
mutual agreement.
* amount used in 1,318 - - -
guarantee
* amount unused 3,682 5,000 5,000 5,000
5,000 5,000 5,000 5,000
A bank guarantee allowing the group to participate in a specific customer bid (Bid Bond) was entered into during the financial
year and remains valid until the expiry date of 25 August 2008. At balance sheet date the facility limit has been reduced by
$1.318 million to partake in this tender process. The bank guarantee is expected to be released on expiry date and the facility
limit will return to $5 million.
Notes to the financial statements
for the financial year ended 30 June 2008
29. NOTES TO THE CASH FLOW STATEMENT (continued)
Consolidated Company
2008 2007 2008 2007
$'000 $'000 $'000 $'000
d) Reconciliation of profit for
the year to net cash flows from
operating activities
Profit for the year 10,540 5,610 2,085 4,002
Interest received (196) (38) (170) (53)
Depreciation of non-current 2,997 2,577 100 106
assets
Amortisation of non-current 6,883 6,975 - -
assets
Loss on disposal of non-current 5 193 5 -
assets
Equity settled share-based 348 329 348 329
payments
Dividends receivable - - - (3,900)
Increase/(decrease) in current (6,411) 1,829 - -
income tax balances
Increase/(decrease) in deferred (253) (1,411) 2,191 730
tax balances
Changes in net assets and
liabilities, net of effects from
acquisition of businesses:
- (Increase)/decrease in assets:
- Current receivables (6,792) (1,962) (3,563) (1,477)
- Other current inventories (749) 1,862 - -
- Other assets (5,077) - (4,489) (3,008)
Increase/(decrease) in
liabilities:
- Current trade payables 12,285 1,919 (699) 290
- Current provisions 400 (800) 3 (157)
- Other current liabilities (1,330) (2,922) (76) (10)
- Non-current provisions (16) 59 - -
Net cash from operating 12,634 14,220 (4,265) (3,148)
activities
Notes to the financial statements
for the financial year ended 30 June 2008
30. FINANCIAL
INSTRUMENTS
a) Significant
Accounting Policies
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement
and the basis on which revenues and expenses are recognised, in respect of each class of financial asset,
financial liability and equity instrument are disclosed in note 1 to the financial statements.
b) Capital Risk
Management
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the
return to stakeholders through the optimisation of the debt and equity balance. The Group's overall strategy
remains unchanged from 2007.
The capital structure of the Group includes cash and cash equivalents and equity attributable to equity holders of the parent,
comprising issued capital, reserves and retained earnings. At 30 June 2008 and 30 June 2007 the Group had no
borrowings, although it does have the available finance facilities disclosed in note 29. Operating cash flows are used to maintain and
expand the Group's assets as well as to pay for operating expenses, tax liabilities and development
activities.
c) Financial Risk Management Objectives
The Group's activities expose it to a variety of financial risks: market risk (including currency and interest rate risk), credit risk
and liquidity risk. The Group's overall risk management program focuses on the unpredictability of
financial and exchange rate markets and seeks to minimise potential adverse effects on the Group's performance. The Group seeks to
minimise the effect of foreign currency risks using derivative financial instruments detailed at 30 (e). A
risk management framework, including the policy on use of financial derivatives is governed by the Board of Directors. The Group does
not enter into or trade financial instruments, including derivative financial instruments, for speculative
purposes.
The Company's activities expose it to a variety of financial risks: market risk (interest rate risk), credit risk and liquidity risk.
d) Market Risk
The Group's activities expose it primarily to the financial risks of changes in foreign currency exchange rates. In the last two
financial years the Group has entered into forward foreign exchange contracts to cover foreign currency
receipts arising from specific customer orders. There has been no change to the Group's exposure to market risks or the manner in
which it manages and measures the risk from the previous period.
e) Foreign Currency
Risk Management
The Group undertakes certain transactions denominated in foreign currencies that are different to the functional currency of the
respective entities undertaking the transactions, hence exposures to exchange rate fluctuations arise. Exchange
rate exposures arising from specific
customer orders are managed within approved policy parameters utilising forward foreign exchange contracts.
The carrying amount of the Group's foreign currency denominated monetary assets and monetary liabilities at the reporting date
that are denominated in a currency that is different to the functional currency of the respective entities
holding the monetary assets and liabilities are as follows:
Assets
Liabilities
2008 2007
2008 2007
$'000 $'000
$'000 $'000
US dollars 8,698 5,231
476 2,114
Euro 477 102
42 -
Notes to the financial statements
for the financial year ended 30 June 2008
30. FINANCIAL INSTRUMENTS (continued)
Forward foreign exchange contracts
It is the policy of the Group to enter into forward foreign exchange
contracts to cover foreign currency receipts arising from specific customer
orders. The Group has entered into fixed price contracts to supply Software
and Services and as a consequence has, in certain cases, entered into forward
foreign exchange contracts (for terms not exceeding 12 months) to hedge the
exchange risk arising from these transactions.
The following table details the forward foreign currency contract outstanding
as at the reporting date:
Average Exchange Rate Foreign Currency
Contract Value Fair Value
Outstanding
Contacts
2008 2007 2008 2007
2008 2007 2008 2007
USD'000 USD'000
$'000 $'000 $'000 $'000
Sell US Dollars
Less than 3 months 0.9440 0.8585 4,658 2,771
4,934 3,227 77 8
3 to 6 months 0.9535 0.8563 2,407 2,206
2,524 2,577 4 10
7 to 9 months 0.9499 0.8759 1,507 1,571
1,586 1,794 2 8
10 to 12 months 0.9428 0.8588 772 262
819 306 2 6
9,344 6,810
9,863 7,904 85 32
As at reporting date the aggregate amount of unrealised gains under forward foreign exchange contracts relating to anticipated
future transactions is $85,000 (2007: $32,000 unrealised gain). In the current and prior year, these unrealised gains have not been
recognised as they are
not significant to the results of the Group.
Categories of financial instruments
Consolidated Company
2008 2007 2008 2007
$'000 $'000 $'000 $'000
Financial Assets
Cash and cash equivalents 18,288 12,528 9,626 1,092
Loans and receivables
Receivables 57,123 47,838 2,658 493
Deposits 3,306 2,226 2 5
Related party loans - current - - 4,931 7,508
Related party loans - non current - - 63,189 70,983
Financial Liabilities
At amortised cost
Trade payables 13,007 8,844 148 36
Notes to the financial statements
for the financial year ended 30 June 2008
30. FINANCIAL INSTRUMENTS (continued)
Foreign currency
sensitivity analysis
The following table details the Company's and Group's sensitivity to a 10% increase and decrease in the Australian dollar against
the relevant foreign currencies, which represents management's assessment of the possible change in foreign exchange rates. The
sensitivity analysis includes only outstanding foreign currency denominated monetary items (arising from monetary assets and
liabilities held at balance date in a currency different to the functional currency of the respective entities holding the assets
or liabilities) and adjusts their translation at a period end for a 10% change in foreign currency rates.
USD Impact
Consolidated Company
2008 2007 2008 2007
$'000 $'000 $'000 $'000
Profit or loss 860 326 315 120
Euro Impact
Consolidated Company
2008 2007 2008 2007
$'000 $'000 $'000 $'000
Profit or loss 48 11 48 11
A positive number indicates an increase in profit or loss with the Australian Dollar strengthening against the respective
currency. For a weakening of the Australian Dollar against the respective currency there would be an equal and opposite impact on
the profit, and the amounts above would be negative.
In management's opinion, the above sensitivity analysis is not fully representative of the inherent foreign exchange risk as the
year end exposure does not necessarily reflect the exposure during the course of the year.
In addition, the Group includes certain subsidiaries whose functional currencies are different to the Group's presentation
currency. The main operating entity outside of Australia is based in France. This entity transacts primarily in its functional
currency, the Euro, and does not have significant foreign currency exposures, because of the hedging policies outline above. As
stated in the Group's Accounting Policies Note 1(e), on consolidation the assets and liabilities of these entities are translated
into Australian dollars at exchange rates prevailing on the balance sheet date. The income and expenses of these entities is
translated at the average exchange rates for the period. Exchange differences arising are classified as equity and are transferred
to a foreign exchange translation r
f) Interest Rate
Risk Management
The Company's and Group's exposure to interest rate risk at 30 June 2008 is limited to the interest generated on deposits balances
invested during the course of the year which attract a variable interest rate and yielded a 6.3% (2007: 4.4%) weighted average
interest rate for the financial year.
Interest rate
sensitivity analysis
The Group's sensitivity to interest rates is restricted only to surplus cash placed on short-term deposit or short-term drawings
on facilities utilised to manage operational cash requirements across the entities within the group. The Company's sensitivity to
interest rate is restricted to surplus cash placed and loans from wholly-owned controlled entities which are available on call.
Notes to the financial statements
for the financial year ended 30 June 2008
30. FINANCIAL INSTRUMENTS (continued)
g) Credit Risk
Management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the
Company or Group. The Group has adopted the policy of only dealing with creditworthy counterparties, as a means of mitigating the
risk of financial loss from defaults. Trade receivables consist of a relatively small number of closely managed customers, spread
across diverse geographical areas. Ongoing credit evaluation is performed on the financial condition of accounts receivable as
part of the overall client management process.
The carrying amount of the financial assets recorded in the financial statements, net of any allowance for losses, represents the
Company's and Group's maximum exposure to credit risk.
h) Liquidity Risk
Management
Ultimate responsibility for liquidity risk management rests with the board of directors, who have built an appropriate liquidity
risk management framework for the management of the Company's and Group's short, medium and long-term funding and liquidity
management requirements. The Company and Group manages liquidity risk by maintaining adequate reserves, banking facilities and
reserve borrowing facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of
financial assets and liabilities.
Liquidity and
interest risk tables
The following tables detail the company's and the Group's remaining contractual maturity for its non-derivative financial
liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest
date on which the Group can be required to pay. The table includes both interest and principal cash flows.
Consolidated Weighted average Less than 1 month 1-3 months $ 3 months - 1 year 1-5 years $
effective interest $ $
rate
%
2008
Trade payables - Non-interest
bearing - 3,975 8,974 58 -
2007
Trade payables - Non-interest
bearing - 3,652 5,192 - -
Company Weighted average Less than 1 month 1-3 months $ 3 months - 1 year 1-5 years $
effective interest $ $
rate
%
2008
Trade payables - Non-interest
bearing - 148 - - -
2007
Trade payables - Non-interest
bearing - 36 - - -
Notes to the financial statements
for the financial year ended 30 June 2008
30. FINANCIAL INSTRUMENTS (continued)
The following tables detail the company's and the Group's expected maturity for its non-derivative financial assets. The tables have been
drawn up
based on the undiscounted contractual maturities of the financial assets including interest that will be earned on those assets except
where the
company/Group anticipates that the cash flow will occur in a different period based on the earliest date on which the Group can expect to
receive
payment. The table includes both interest and principal cash flows.
Consolidated Weighted average Less than 1 month 1-3 months $ 3 months - 1 year 1-5 years $
5+ years
effective interest $ $
$
rate
%
2008
Cash and cash equivalents 3.73 18,288 - -
- -
Deposits - 3,306 - -
- -
Trade receivables -
Non-interest bearing - 23,465 22,386 11,272 -
-
45,059 22,386 11,272 -
-
2007
Cash and cash equivalents 0.38 12,528 - - -
-
Deposits - 2,226 - - -
-
Trade receivables -
Non-interest bearing - 15,251 22,224 10,363 -
-
30,005 22,224 10,363 -
-
Company
2008
Cash and cash equivalents 6.91 9,626 - - -
-
Deposits - 2 - - -
-
Trade receivables -
Non-interest bearing - 1,258 1,400 - -
-
Intercompany loan - Variable
interest rate instruments 6.73 - - 4,931 29,528
33,661
10,886 1,400 4,931 29,528
33,661
2007
Cash and cash equivalents 4.28 1,092 - - -
-
Deposits - 5 - - -
-
Trade receivables -
Non-interest bearing - 368 125 - -
-
Intercompany loan - Variable
interest rate instruments 6.10 - - 7,508 -
-
Intercompany loan - Variable
interest rate instruments 4.90 - - - 28,522
42,461
1,465 125 7,508 28,522
42,461
Notes to the financial statements
for the financial year ended 30 June 2008
30. FINANCIAL INSTRUMENTS (continued)
i) Fair Value of
Financial
Instruments
The fair values of financial assets and financial liabilities are determined as follows:
* The fair value of other financial assets and financial liabilities are determined in accordance with generally accepted pricing
models based on discounted cash flow analysis using prices from observable current market transactions;
* Foreign currency forward contracts are measured using quoted forward exchange rates and yield curves derived from quoted interest
rates matching maturities of the contracts.
The directors consider that the carrying amount of financial assets and financial liabilities recorded at amortised cost in the
financial statements approximates their fair values.
31. SUBSEQUENT EVENTS
There has not been any matter or circumstance, other than that referred to in the financial statements or notes thereto, that has
arisen since the end of the financial year, that has significantly affected, or may significantly affect, the operations of the
Group, the results of those operations, or the state of affairs of the Group in future financial years.
32. ADDITIONAL COMPANY
INFORMATION
eServGlobal Limited is a listed public company, incorporated in Australia and operating in Australia, Europe, the Middle East, North
Africa, Asia and Asia/Pacific.
Registered Office
Level 2,
10 Spring Street
Sydney NSW 2000
Australia
Tel: +61 2
93642700
Additional Stock Exchange Information
as at 11 August 2008
Ordinary share capital
171,009,598 fully paid ordinary shares are held by 1,068 individual shareholders on the Australian Securities Exchange and 113 individual
depository interest holders on the London Stock Exchange (AIM).
All issued ordinary shares carry one vote per share.
Options
82 individual option holders hold 4,979,479 options
Options do not carry a right to vote.
Distribution of holders of equity securities
Fully Paid Ordinary Shares Depository Interests Listed on
LSE (AIM) Options- not listed
Listed on ASX
1-1,000 98 15
-
1,001-5,000 463 20
2
5,001-10,000 178 10
21
10,001-100,000 271 31
49
100,001-Over 58 37
10
Total 1,068 113
82
Holding less than a marketable parcel 32
Substantial shareholders
Ordinary Shareholders Number
Percentage
Guinness Peat Group plc and subsidiaries 31,400,395 18.36%
Wallaby Hill Pty Ltd 15,055,982 8.8%
Twenty largest holders of quoted equity securities
Australian Securities Exchange London
Stock Exchange (AIM)
Ordinary Shareholders Number % of capital Depository Interest
Holders Number % of capital
GPG Nominees Pty Limited 24,231,046 14.17% Vidacos Nominees Limited
12,421,828 7.26%
Wallaby Hill Pty Ltd 15,055,982 8.80% Nortrust Nominees Limited
5,387,749 3.15%
National Nominees Limited 9,366,473 5.48% Roy Nominees Limited
4,173,913 2.44%
Link 405 Pty Ltd 8,106,536 4.74% BNY Gil Client Account (Nominees) Limited
4,026,017 2.35%
RBC Dexia Investor Services 7,322,411 4.28% Nortrust Nominees Limited
3,480,907 2.04%
Australia Nominees Pty Limited
GPG Nominees Pty Limited 7,169,350 4.19% Chase (GA Group) Nominees Limited
2,898,479 1.69%
Andy Taylor 5,794,535 3.39% Nortrust Nominees Limited
2,135,364 1.25%
ANZ Nominees Limited 4,195,439 2.45% Chase Nominees Limited
2,025,000 1.18%
Ian McManamey 3,198,654 2.29% Vidacos Nominees Limited
1,811,265 1.06%
GPG Nominees Pty Ltd 2,000,000 1.17% Deutsche Bank Aktiengesellschaft London
1,400,000 0.82%
James Cone 1,946,008 1.14% BNYNorwich Union Nominees Limited
995,965 0.58%
Adrian Seal 1,764,862 1.03% Mellon Nominees (UK) Limited
974,969 0.57%
Invia Custodian Pty Limited 1,759,756 1.03% Cuim Nominee Limited
939,291 0.55%
Patrick McGrory 1,730,426 1.01% Euroclear Nominees Limited
743,000 0.43%
JP Morgan Nominees Australia 769,884 0.45% Barnard Nominees Ltd
675,000 0.39%
Limited
Citicorp Nominees Pty Limited 714,021 0.42% BNY Gil Client Account (Nominees) Limited
593,756 0.35%
Janvin Pty Ltd 600,000 0.35% Pershing Nominees Limited
527,500 0.31%
HSBC Custody Nominees 581,524 0.34% State Street Nominees Limited
504,092 0.29%
(Australia) Limited
Sandhurst Trustees Ltd 530,927 0.31% W B Nominees Limited
480,500 0.28%
Mr James Pratt 500,000 0.29% New Street Nominees Limited
463,249 0.27%
Additional Stock Exchange Information
as at 11 August 2008
Secretary
Ian Buddery
Chief Financial Officer
Jonathan Macleod (B Com, CA (Aust) CA (NZ), GAICD)
Registered Office
Level 2,
10 Spring Street
Sydney NSW 2000
Australia
Tel: +61.2.93642700
Principal administration office
Level 2,
10 Spring Street
Sydney NSW 2000
Australia
Tel: +61.2.93642700
Share Registry
Computershare Registry Services Pty Ltd
Level 3, 60 Carrington Street
Sydney NSW 2000
Australia
Stock Exchange listings
eServGlobal Limited's ordinary shares are quoted on the Australian Securities
Exchange Limited under the ticker "ESV", and on the London Stock Exchange
(AIM) as Depositary Interests under the ticker "ESG".
Annual General Meeting
The annual general meeting will be held Press Room 1 at the Radisson Plaza
Hotel, 27 O'Connell Street Sydney on Wednesday 5 November 2008 at 3pm. The
business of the meeting will include the normal business for an annual
general meeting and will be set out in a formal Notice of Meeting.
This information is provided by RNS
The company news service from the London Stock Exchange
END
ACSLKLLFVVBXBBD
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