TIDMESG
RNS Number : 5537V
eServGlobal Limited
31 January 2017
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eServGlobal Limited
ABN 59 052 947 743
Financial report for the financial year ended 31 October
2016
Annual financial report
For the financial year ended
31 October 2016
Contents
Page
Executive Chairman's review 2
Directors' report 3
Auditor's independence declaration 17
Independent auditor's report 18
Directors' declaration 20
Consolidated statement of profit or loss and other
comprehensive income 21
Consolidated statement of financial position 22
Consolidated statement of changes in equity 23
Consolidated statement of cash flows 24
Notes to the financial statements 25
Additional securities exchange information 71
Executive Chairman's review
FY2016 was a year of significant achievement in eServGlobal, yet
not a year in which we could demonstrate success to our investors.
HomeSend's strategic progress was however marked. Our core
business, while lossmaking, came back to life on the sales front at
the end, and our cost cutting has been very significant.
The HomeSend Joint Venture has moved forward on several
strategic fronts and as we look back on the progress made since
joint venture formation, I believe it is now possible to 'connect
the dots' of the individual milestones which have come together to
show a very different picture than a few short years ago.
HomeSend has pivoted to significantly enlarge both its
capabilities and the potential target markets it can serve. The hub
now provides global payment functionality for person-to-person
transfers as well as international SME and banking
transactions.
The strategic positioning of HomeSend within the Mastercard
suite of solutions has also evolved in the last two years.
HomeSend's solution will now facilitate more use cases than
originally conceived and there is an evident synergy with
Mastercard's global strategy. Supported by the strength of
Mastercard, HomeSend now offers an investment case far larger than
originally presented to the market.
HomeSend can now tap into the substantial global payments
market, namely bank and card transfers. This market is ripe for
disruption. McKinsey expects annual global payments revenues to
increase at an annual rate of 6 percent during the next five years,
exceeding $2 trillion by 2020.
In the Core Business we have provided the first evidence of a
turnaround in our sales function by reporting total contracted
bookings over 60 percent higher than FY2015. A key strategic goal
for FY2016 was to diversify the sales process by working with
channel partners. Initial success with this strategy was achieved
in October when eServGlobal signed a major channel partnership for
mobile financial technology in areas of Africa. This partnership is
expected to bring significant growth in regional opportunities over
the next five years.
Of the new partnerships and opportunities, some are multi-year,
and so we are cognisant that we cannot become complacent and we
continue to hunt new opportunities while refining and improving our
approach.
Our investors have, not for the first time, provided critical
support to the Company through a substantial fundraising. In June
we raised A$26.2m (EUR17.5m) through a placing offer. We used these
funds to reduce outstanding loans, to continue addressing our cost
base and to accelerate sales and marketing in the core business. I
would like to express thanks to our shareholders for their
support.
We recently welcomed Andrew Hayward to the Company and the Board
as Chief Financial Officer. Andrew brings the right mix of
financial and investor relations skills combined with senior
strategic advisory experience, I am sure he will be an asset to the
Board. I would like to thank my colleagues on the Board for their
ongoing dedication and guidance during 2016.
I also want to express, on behalf of the Board, thanks to all
the team at eServGlobal. Turning around this business has required
perseverance, energy and ingenuity and I have witnessed this again
and again across the Company.
Looking ahead, I have confidence that eServGlobal now has not
only the foundations, but the first clear evidence of becoming a
successful and sustainable business in a growing space. Likewise,
the HomeSend Joint Venture is now well-positioned to address a
substantially enlarged potential market, and I am excited about
2017.
John Conoley Chairman
Directors' report
The directors of eServGlobal Limited submit herewith the financial
report for the financial year ended 31 October 2016.
The names and particulars of the directors of the Company who served
during or since the end of the financial year are shown below.
The directors held office during the whole of the financial year
except as noted:
Name Particulars
John Conoley Executive Chairman
John's extensive experience spans the software, hardware,
IT services, telecommunications and energy markets.
He began his career in the IT industry with IBM in 1983,
and worked on a range of industries in technical, sales,
and marketing roles. Since then, John has held general
management and director-level roles in small and medium-sized
private and public companies. Recent roles include:
Non-executive director with IT security Company Vistorm,
Head of the GBP1.6bn B2B Energy Division at Eon, and
Chief Executive Officer of mobile device Company Psion
PLC, an international Company listed in the UK. He is
also currently a non-executive director of London listed
human capital management software Company NetDimensions
(Holdings) PLC.
John was appointed as a Director and a member of the
Audit Committee of eServGlobal on 1 May 2013. John was
appointed Executive Chairman of eServGlobal on 20 April
2015.
Andrew Hayward Chief Financial Officer & Executive Director
Andrew is an experienced finance executive with senior
strategic advisory and investor relations experience.
He is committed to increasing the long-term shareholder
value and providing strategic insight and direction
to the Company. Prior to joining eServGlobal, Andrew
held the role of Head of Finance at Hurricane Energy
PLC. Before this, he worked in various roles at PwC,
latterly within the Corporate Finance Lead Advisory
practice with a focus on Technology, Media and Telecommunications.
Andrew joined eServGlobal as Chief Financial Officer
on 10 October 2016 and was appointed to the Board as
an Executive Director on 21 December 2016.
Stephen Baldwin Non-executive Director, Chairman of the Audit Committee
and Chairman of the Remuneration and Nomination Committee
Stephen is a chartered accountant with over 30 years
of business experience. He commenced his career with
Pricewaterhouse and had a decade with the firm in three
different countries. He was subsequently employed in
the funds management industry for many years, initially
with Hambro-Grantham and then with Colonial First State,
where he was that group's Head of Private Equity. He
has extensive Board experience across multiple industries.
Other current roles include advising one of Australia's
larger superannuation funds on their private markets
program.
Stephen holds a Bachelor of Commerce (Honours) from
the University of Cape Town and is a member of the Institute
of Chartered Accountants of Australia and New Zealand.
Stephen was appointed a director and a member of the
Audit Committee and the Remuneration and Nomination
Committee on 25 November 2011. He was subsequently appointed
as Chairman of the Audit Committee with effect from
1 May 2013 and then Chairman of the Remuneration and
Nomination Committee on 20 July 2015.
Tom Rowe Company Secretary & Non-executive Director
Tom Rowe has served as Company Secretary of eServGlobal since 6
April 2011. He is a Corporate and Commercial Lawyer practicing with
Capital Corporate Law in Sydney with a specialty in corporate
transactions, corporate governance and capital raising. Tom holds a
BA LLB (Hons) from the University of Adelaide and Graduate Diplomas
in both applied corporate governance and applied finance and
investment.
Tom was appointed to the Board in March 2014. He subsequently
became a member of the Remuneration and Nomination Committee on 20
July 2015.
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:
John Conoley NetDimensions (Holdings) 28 October 2016 to date
Ltd
Company Secretary
Tom Rowe has served as Company Secretary of eServGlobal since 6
April 2011.
Principal activities
eServGlobal (LSE:ESG, ASX:ESV) is a provider of innovative mobile
financial technology, offering solutions which put feature-rich services
at the fingertips of users worldwide. eServGlobal covers the full
spectrum of mobile financial services, mobile wallet, mobile commerce,
analytics, advanced recharge, promotions and agent management.
For more than 30 years, eServGlobal has been a source of innovation
for telcos and financial institutions. Service providers worldwide
leverage eServGlobal's best-in-breed software to acquire and retain
subscribers.
Together with MasterCard and BICS, eServGlobal is a joint venture
partner of the HomeSend global payment hub, enabling cross-border
money transfer between mobile wallets, cards, bank accounts or cash
outlets from anywhere in the world.
Review of operations
This report is to be read in conjunction with the Executive Chairman's
review on page 2.
The consolidated entity achieved sales revenue for the year of $21.6
million (2015: $25.9 million).
Earnings before interest, tax, depreciation, amortisation and goodwill
impairment ("EBITDA") was a loss of
$11.0 million, inclusive of foreign exchange gains of $3.6 million
(2015: EBITDA loss of $22.9 million inclusive of foreign exchange
gains of $0.9 million). The net result of the consolidated entity
for the year to 31 October 2016 was a loss after tax and minority
interest for the year of $21.7 million (2015: loss after tax and non-
controlling interest of $32.4 million). Included in this result was
an income tax expense of $0.6 million (2015: income tax expenses of
$2.1 million). Loss per share was 6.0 cents (2015: loss per share
12.3 cents).
The operating cash flow for the year was a net outflow of $12.0 million
(2015: net outflow $15.7 million). Total cash flow for the year was
a net inflow of $5.5 million inclusive of net proceeds from the issue
of shares of
$18.3 million and proceeds from borrowings of $6.8 million, offset
by payment of debt restructuring costs of
$3.3 million and repayment of borrowings of $4.0 million (2015: net
inflow of $1.0 million inclusive of net proceeds from the issue of
shares of $5.5 million and proceeds from borrowings of $15.5 million).
Cash at 31 October 2016 was $9.4 million.
Changes in state of affairs
There were no significant changes in the state of affairs of the consolidated
entity during the financial year.
Subsequent Events
There has not been any matter or circumstance 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 through the date of this report.
Future developments
Details of future developments in the consolidated entity are contained
in the Executive Chairman's review on page 2. To the extent that the
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 consolidated entity, such information has not been disclosed in
this report.
Environmental regulations
The consolidated entity operates primarily within the technology and
telecommunication sector and conducts its business activities with
respect for the environment while continuing to meet the expectations
of shareholders, customers, employees and suppliers.
During the year under review, the Directors are not aware of any particular
or significant environmental issues which have been raised in relation
to the consolidated entity's operations.
Dividends
No dividends were declared or paid during the financial year (2015:
nil).
Directors' report
Share options
Unlisted Options
On 6 June 2016, the Company entered into a Deed of Debt and Capital
Restructure ("Deed") with its lenders Alphagen Volantis Fund Limited
and Alphagen Volantis Catalyst Fund Limited. Under the terms of the
Deed, the existing loan facility was replaced by a new loan. See
Note 16 for details. The share options associated with the existing
loans, which had been issued to Alphagen Volantis Fund Limited and
Alphagen Volantis Catalyst Fund Limited, were cancelled by the lenders.
There are no share options associated with the new loan.
eServGlobal Employee Share Option Plan
The Company has an ownership-based remuneration scheme for directors,
key management personnel 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 exercise of any share
options is not dependent on any performance criteria, however, is
dependent on a period of service relative to the vesting dates.
Share options granted to directors and senior management
During the financial year and up to the date of this report the Company
granted 11,550,000 options to the directors and senior management
of the entity and its controlled entities (2015: nil). Further details
of the executive and employee share option plan are disclosed in
Note 6 to the financial statements.
Details of unissued shares under option as at the date of this
report are:
eServGlobal Limited 1,950,000 Ordinary $0.36 14 May 2017
eServGlobal Limited 1,000,000 Ordinary $0.36 21 Dec 2017
eServGlobal Limited 640,000 Ordinary $0.36 10 Jun 2018
eServGlobal Limited 3,000,000 Ordinary $0.21 14 Mar 2021
eServGlobal Limited 2,000,000 Ordinary $0.21 08 Aug 2021
eServGlobal Limited 6,550,000 Ordinary $0.21 08 Aug 2021
During the financial year and up to the date of this report,
there were no options exercised and 3,181,945 options
cancelled.
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 key management personnel officers of
the Company and of any related body corporate against any liability
incurred as a director, secretary or key management personnel 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 agreed to indemnify the directors of the Company for
any liability incurred as a director or officer, to the extent permitted
by the Corporations Act 2001.
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' attendance at Board and Committee meetings held
during the financial year
Stephen Baldwin 15 14 5544
John Conoley 15 15 55--
Stephen Blundell 2 - ----
Tom Rowe 15 15 --44
*Held during term of director's appointment to Board, Audit or
Remuneration and Nomination Committees.
Non-audit services
The directors are satisfied that the provision of non-audit
services, during the financial 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 financial year by the auditor are
outlined in Note 7 to the financial statements.
The directors are of the opinion that the services as disclosed
in Note 7 to the financial statements do not compromise the
external auditor's independence, based on advice received from the
Audit Committee, for the following reasons:
-- all non-audit services have been reviewed and approved to
ensure that they do not impact the integrity and objectivity of the
auditor; and
-- none of the services undermine the general principles
relating to auditor independence as set out in APES 110 'Code of
Ethics for Professional Accountants' issued by the Accounting
Professional & Ethical Standards Board, including reviewing or
auditing the auditor's own work, acting in a management or
decision-making capacity for the Company, acting as advocate for
the Company or jointly sharing economic risks and rewards.
Auditor's independence declaration
The auditor's independence declaration is included on page 17 of
the financial report.
Rounding off of amounts
The Company is a Company of the kind referred to in ASIC Corporations
(Rounding in Financial / Directors' Reports) Instrument 2016/191
dated 24 March 2016, and in accordance with this Corporations Instrument
amounts in the directors' report and the financial statements are
rounded off to the nearest thousand dollars, unless otherwise indicated.
Remuneration Report
Determining remuneration policy for directors and key management personnel,
and its relationship to eServGlobal's performance
The Company 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 may be
paid after the results of a financial year are completed, and the
entitlement is based primarily on the results achieved by the Group.
The Board's broad policy is implemented through its Remuneration and
Nominations Committee.
At the Company's Annual General Meeting for the 2015 financial year,
the Company received its second consecutive vote of at least 25% against
the remuneration report. There were no comments made at the Annual
General Meeting by shareholders on the remuneration report. The Board
has not undertaken any action specifically in response to the shareholder
vote on the remuneration report as no shareholder who voted against
the remuneration report provided any reason for their vote specific
to the remuneration practices of the Company. The Board has, however,
continued its cost reductions across the business, with total key
management personnel remuneration reducing from $2,639,078 in 2015
financial year to $1,605,411 in the current year.
Director and other key management personnel details
The following persons acted as key management personnel of the
Company and the Group during or since the end of the financial
year:
John Conoley (Executive Chairman)
Stephen Baldwin (Non-executive director)
Tom Rowe (Company Secretary and non-executive director)
Andrew Hayward (Chief Finance Officer, appointed 10 October
2016, and executive director, appointed 21 December 2016)
Paolo Gagliardi (Chief Operating Officer)
James Hume (Chief Technology Officer)
Peter Green (Vice President Finance)
Stephen Blundell (non-executive director until resignation on 17
December 2015)
Except as noted, the named persons held their current positions
for the whole of the financial year and since the end of the
financial year.
Elements of key management personnel remuneration
Non-executive directors are paid directors' fees. 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 either the Board or
shareholder vote and any appointment is subject to re-election on
retirement required at Annual General Meetings.
Executive directors and other key management personnel
remuneration comprise both Short Term Incentive (STI) and Long Term
Incentive (LTI) components. The STI takes the form of a cash bonus
and the LTI comprises the issue of share options under the
eServGlobal Employee Share Option Plan.
a) The STI component for the executive directors and other key
management personnel is as follows.
The Executive Chairman is remunerated on a salary package that
includes a base salary. The Executive Chairman does not participate
in any variable bonus plan. The Executive Chairman is a permanent
employee with no fixed employment term and a notice period of six
months required by either party.
The Chief Finance Officer (CFO) is remunerated on a salary
package basis that includes a base salary and a portion that is a
variable component which is dependent on agreed performance
objectives. The variable component is effective from 1 November
2016 and comprises elements relating to achievement of financial
plan and specific business objectives. The CFO is a permanent
employee with no fixed employment term and a notice period of six
months required by either party.
The Chief Operating Officer (COO) is remunerated on a salary
package basis that includes a base salary, a portion that is a
variable component which is dependent on agreed performance
objectives, and various allowances such as housing and education.
The variable component comprises elements relating to achievement
of financial plan and agreed performance objectives relating to
sales. The COO is a permanent employee with no fixed employment
term and a notice period of three months required by either
party.
The Chief Technology Officer (CTO) is remunerated on a salary
package basis that includes a base salary and a portion that is a
variable component which is dependent on agreed performance
objectives. The variable component comprises elements relating to
achievement of financial plan and specific business objectives. The
CTO is a permanent employee with no fixed employment term and a
notice period of two months required by either party.
The Vice President Finance (VP Finance) is remunerated on a
salary package that includes a base salary and a portion that is a
variable component which is dependent on agreed performance
objectives. The variable component comprises elements relating to
achievement of financial plan and specific business objectives. The
VP Finance is a permanent employee with no fixed employment term
and a notice period of one month required by the Company and six
months required by the employee.
b) The LTI (share option) component contains an element of
reward to incentivise loyalty and continuity of service to the
Company through the vesting of options over a defined period with
eligibility being dependent on continued employment.
Elements of remuneration which are dependent on Company performance
The Board believes that it is critical that the above specified employees
are driven by the financial performance of eServGlobal and, as detailed
below, has structured key management personnel packages so that a
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 Board at the same time as approval
of the Group's business plan. The key measures of this are: earnings
before interest, tax, depreciation and amortisation (EBITDA) and
achievement of sales orders. The EBITDA component is confirmed in
conjunction with the completion of the financial statements. The
CFO, COO, CTO and VP Finance variable component is earned in full
by reference to the financial result of the Group. These targets
are selected to ensure alignment of shareholders' interests with
key management personnel remuneration.
The tables below set out summary information about the Group's
earnings and movements in shareholder wealth for the five years to
31 October 2016.
Revenue 21,577 25,866 31,261 31,003 28,070
EBITDA (10,974) (22,871) 28,593 7,279 (8,656)
Net profit/(loss) after
tax (21,742) (32,374) 14,240 10,374 (15,589)
Share price at start of
year $0.120 $0.660 $0.515 $0.200 $0.520
Share price at end of
year $0.105 $0.120 $0.660 $0.515 $0.200
Basic earnings/(loss)
per share (6.0) (12.3) 5.6 4.3 (8.0)
Diluted earnings/(loss)
per share (6.0) (12.3) 5.5 4.2 (8.0)
Directors' report
The group's key management personnel received, or will receive,
the following amounts as compensation for their services as
directors and key management personnel of the Group during the
financial year:
Directors
S Baldwin 87,284 - - - - -87,284 -
J Conoley (iii)
(vii) 475,727 - - 9,884 49,980 -535,591 -
T Rowe (iv) 87,507 - - - - -87,507 -
S Blundell (i) (iii)
(v) - - 445 - - -445 -
Group's other Key
Management Personnel
A Hayward (i) (iii)
(vi) 9,334 - - - - -9,334 -
J Hume (i) (iii) 264,816 - 1,811 - 6,417 -273,044 -
P Green (i) (iii) 193,335 - 4,612 7,831 2,528 -208,306 -
P Gagliardi (i)
(ii) 319,697 76,035 - - 8,168 -403,900 19%
Total 1,437,700 76,035 6,868 17,715 67,093 -1,605,411 -
(i) Key management personnel are remunerated on a salary package
basis that includes an appropriate portion that is a variable
component which is dependent on Group's performance. Variable pay
components are confirmed based on achievement of sales performance
plan or corporate performance plan (earnings before interest, tax,
depreciation and amortisation targets) established during the
financial year. The corporate performance plan was not met and
accordingly no bonus was payable in respect of this variable pay
component. The payment of sales commission to P Gagliardi is based
on achievement of sales performance plan target.
(ii) Paid in Euros and subject to foreign exchange fluctuations at Group level.
(iii) Paid in GBP and subject to foreign exchange fluctuations at Group level.
(iv) The fee disclosed relates to payments made to Simpsons
Solicitors, where Tom Rowe was employed as special counsel,
relating to services provided by Simpsons Solicitors. The amount
paid is for services provided by Tom Rowe in his capacity as
company secretary and Non-executive Director. All services are
invoiced on a time spent basis and on normal commercial terms.
(v) Resigned as a director on 17 December 2015.
(vi) Appointed as Chief Finance Officer on 10 October 2016.
(vii) Salary of $475,727 paid to J Conoley includes $135,938
paid to his private company until January 2016 and $339,789 paid
through the company's payroll following the change to the terms of
engagement in February 2016.
No key management personnel appointed during the period received
a payment in consideration for agreeing to hold the position.
Directors' report
The group's key management personnel received the following
amounts as compensation for their services as directors and key
management personnel of the Group during the previous financial
period:
Non-executive Directors
S Baldwin 87,284 - - - - - 87,284 -
F Barrault (ii)
(iv) 81,536 - - - - - 81,536 -
D Lewis (iii) (vi) 102,533 - - - - - 102,533 -
J Conoley (iii)
(v) 351,659 - - - - - 351,659 -
T Rowe (viii) 112,901 - - - - - 112,901 -
P Montessori (i)
(ii) (vii) 157,241 82,356 - - 9,889 361,752 611,238 -
S Blundell (i) (iii)
(ix) 369,524 86,630 2,275 16,163 4,944 - 479,536 -
Group's other Key
Management Personnel
R Arame (i) (ii)
(x) 276,956 128,763 - 38,777 2,967 - 447,463 29%
J Hume (i) (iii) 259,369 - 1,574 - 19,918 - 280,861 -
P Green (i) (iii)
(xi) 16,985 - 393 732 - - 18,110 -
P Gagliardi (i)
(ii) (xii) 65,957 - - - - - 65,957 -
Total 1,881,945 297,749 4,242 55,672 37,718 361,752 2,639,078 -
(i) Key management personnel are remunerated on a salary package
basis that includes an appropriate portion that is a variable
component which is dependent on Group's performance. Variable pay
components are confirmed based on achievement of customers' orders
or earnings before interest, tax, depreciation and amortisation
targets established during the financial year. 100% of the variable
compensation plan bonus was forfeited in the current year for
eligible participants in the corporate earnings plan, being S
Blundell, P Montessori, P Gagliardi, J Hume and P Green. In
addition, a "retention bonus" arrangement was approved by the board
of directors for S Blundell and P Montessori which comprised for
each, five quarterly payments of $100,000 commencing 1 May 2014,
subject to continuing employee status at each payment date. The
retention bonus expense for the financial year ended 31 October
2015 has been recognised based on a time proportionate graded
basis.
(ii) Paid in Euros and subject to foreign exchange fluctuations at Group level.
(iii) Paid in GBP and subject to foreign exchange fluctuations at Group level.
(iv) Resigned as non-executive director on 29 June 2015.
(v) Appointed Executive Chairman on 20 April 2015.
(vi) Resigned as Chairman on 20 April 2015, and resigned as
non-executive director effective on 30 June 2015.
(vii) Resigned as a Director on 2 March 2015. Termination
payment was made in accordance with a Deed of Release.
(viii) The fee disclosed relates to payments made to Simpsons
Solicitors, where Tom Rowe is employed as special counsel, relating
to services provided by Simpsons Solicitors. The amount paid
includes services provided by Tom Rowe in his capacity as company
secretary and Non-executive Director as well other legal services
provided by Simpsons Solicitors. All services are invoiced on a
time spent basis and on normal commercial terms.
(ix) Resigned as Chief Operations Officer on 1 September 2015.
Resigned as a director on 17 December 2015.
(x) Resigned as Chief Sales Officer on 12 September 2015.
(xi) Appointed as Vice President Finance on 1 October 2015.
Remuneration disclosed relates to post appointment period only as
key management personnel.
(xii) Appointed as Chief Operations Officer on 10 August 2015.
Remuneration disclosed relates to post appointment period only as
key management personnel.
(xiii) No key management personnel appointed during the period
received a payment in consideration for agreeing to hold the
position.
Directors' shareholdings
Directors' report
The following table sets out each director's relevant interest
in shares of the Company or a related body corporate as at the end
of the financial year.
Year to 31 October
2016
Stephen Blundell - - - -
Stephen Baldwin 932,600 - 233,150 1,165,750
John Conoley - - 1,900,411 1,900,411
Tom Rowe - - - -
Year to 31 October
2015
Stephen Blundell - - - -
Francois Barrault 500,000 - (500,000) -
Stephen Baldwin 932,600 - - 932,600
John Conoley Duncan - - - -
Lewis Tom Rowe - - - -
- - - -
Share-based payments granted as compensation
During the financial year, the following share-based payment
arrangements were in existence.
Issued 14 May 2012
(i) 14-May-12 2017 $0.36000 $0.11
Issued 11 Feb 2013
(ii) 11-Feb-13 2017 $0.36000 $0.26
Issued 01 Jul 2013
(iii) 01-Jul-13 2018 $0.36000 $0.24
Issued 07 Apr 2016
(iv) 07-Apr-16 2021 $0.21000 $0.0468
Issued 08 Aug 2016
(v) 08-Aug-16 2021 $0.21000 $0.0383
Issued 08 Aug 2016
(vi) 08-Aug-16 2021 $0.21000 $0.0338
(i) The options in this series vest 2 years from the date of
issue and expire on the 5 year anniversary of the date of
issue.
(ii) Options issued in this series vested fully on 21 December
2014 and expire on 21 December 2017.
(iii) Options issued in this series vested as to one half on 10
June 2014 and the balance on 10 June 2015 and expire on 10 June
2018.
(iv) Options issued in this series are executive options which
vest on 14 March 2018 and expire on 14 March 2021.
(v) Options issued in this series are executive options which
vest on 08 August 2018 and expire on 08 August 2021.
(vi) Options issued in this series are employee options which
vest on 08 August 2018 and expire on 08 august 2021.
There has been no alteration of the terms and conditions of the
above share based payment arrangements since the grant date. There
have been variations to the expiry date following the resignation
or termination of employment of some option holders, in accordance
with the rules of the scheme.
Directors' report
Options issued to directors and key management personnel
Key management personnel 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 key management personnel.
During the financial year no options were forfeited as a result
of a condition required for vesting (other than continuing
employment with the Company) not being satisfied.
A total of 981,945 options granted to key management personnel
lapsed during the year (2015: nil). No options vested since the end
of the year (2015: nil).
Year to 31
October 2016
J Conoley - 5,000,000 - - 5,000,000 - -- -
J Hume 1,000,000 1,650,000 - - 2,650,000 1,000,000 -1,000,000 -
P Gagliardi - 2,100,000 - - 2,100,000 - -- -
R Arame 350,000 - - (350,000) - - -- -
S Blundell 631,945 - - (631,945) - - -- -
P Montessori 1,250,000 - - - 1,250,000 1,250,000 -1,250,000 -
P Green (i) 250,000 650,000 - - 900,000 250,000 -250,000 -
Year to 31
October 2015
J Hume 1,000,000 - - - 1,000,000 1,000,000 -1,000,000 450,000
R Arame 1,150,000 - 800,000 350,000 350,000 -350,000 150,000
S Blundell 631,945 - - 631,945 631,945 -631,945 250,000
P Montessori 1,250,000 - - 1,250,000 1,250,000 -1,250,000 500,000
P Green (i) - - - 250,000 250,000 250,000 -250,000 -
(i) Appointed VP Finance on 1 October 2015.
Each executive share plan option converts into one 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). Options
may be exercised at any time from the date of vesting to the date
of expiry.
No options were exercised during the year and 981,945 options
lapsed during the year.
The following table discloses the number and value of options
granted and exercised during the financial year in relation to
options granted to key management personnel as part of their
remuneration:
J Conoley 5,000,000 217,000 --
J Hume 1,650,000 55,770 --
P Gagliardi 2,100,000 70,980 --
P Green 650,000 21,970 --
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
John Conoley Chairman
31 January 2017
The Board of Directors eServGlobal Limited
c/- Simpsons Solicitors Level 2, Pier 8/9
23 Hickson Road, Millers Point NSW 2000
31 January 2017
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 31 October
2016, 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
Michael Kaplan Partner
Chartered Accountants
Liability limited by a scheme approved under Professional
Standards Legislation.
Independent Auditor's 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 statement of financial position as at
31 October 2016, the statement of profit or loss and other
comprehensive income, the statement of cash flows and the statement
of changes in equity for the year ended on that date, notes
comprising a summary of significant accounting policies and other
explanatory information, 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 20 to 70.
Directors' Responsibility for the Financial Report
The directors of the company are responsible for the preparation
of the financial report that gives a true and
fair view in accordance with Australian Accounting Standards and
the Corporations Act 2001. The directors are also responsible for
such internal control as the directors determine is necessary to
enable the preparation of the financial report that is free from
material misstatement, whether due to fraud or error. In Note 1,
the directors also state, in accordance with Accounting Standard
AASB 101 Presentation of Financial Statements, that the financial
statements comply with International Financial Reporting
Standards.
Auditor's Responsibility
Our responsibility is to express an opinion on the financial
report based on our audit. We conducted our audit in accordance
with Australian Auditing Standards. Those standards require that we
comply with relevant ethical requirements relating to audit
engagements and plan and perform the audit to obtain reasonable
assurance that 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 of the financial report that gives a
true and fair view, in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity's internal
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.
Auditor's Independence Declaration
In conducting our audit, we have complied with the independence
requirements of the Corporations Act 2001. We confirm that the
independence declaration required by the Corporations Act 2001,
which has been given to the directors of eServGlobal Limited, would
be in the same terms if given to the directors as at the time of
this auditor's report.
Liability limited by a scheme approved under Professional
Standards Legislation.
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 consolidated entity's
financial position as at 31 October 2016 and
of its performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001;
(b) the consolidated financial statements also comply with
International Financial Reporting Standards as disclosed in Note
1.
Material Uncertainty Regarding Going Concern
Without modifying our opinion, we draw your attention to Note
1(v) Going Concern in the financial report which indicates that the
consolidated entity incurred a loss after tax of $24.652 million
and had net cash outflows from operations of $12.046 million during
the year ended 31 October 2016. These conditions, along with the
matters set forth in Note 1(v) Going Concern, indicate the
existence of a material uncertainty which may cast significant
doubt about the ability of the consolidated entity and the company
to continue as going concerns and therefore, they may be unable to
realise their assets and extinguish their liabilities in the normal
course of business and at the amounts stated in the financial
report.
Report on the Remuneration Report
We have audited the Remuneration Report included in pages 9 to
16 of the directors' report for the year ended 31 October 2016. 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.
Opinion
In our opinion the Remuneration Report of eServGlobal Limited
for the year ended 31 October 2016, complies with section 300A of
the Corporations Act 2001.
DELOITTE TOUCHE TOHMATSU
Michael Kaplan Partner
Chartered Accountants Sydney, 31 January 2017
19
eSer v Gl o b al L i m i t ed
Directors' declaration
The directors declare that:
(a) based on the matters set out in Note 1(v), 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) the attached financial statements are in compliance with
International Financial Reporting Standards, as stated in Note 1 to
the financial statements;
(c) in the director's 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
consolidated entity; and
(d) the directors have been given the declarations required by
section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of the directors made
pursuant to section 295(5) of the Corporations Act 2001.
On behalf of the directors
John Conoley
Chairman
31 January 2017
Consolidated statement of profit or loss and other comprehensive
loss for the financial year ended 31 October 2016
Year Ended Year Ended 31
31 October October
2016 2015
Note $'000 $'000
Revenue 3 21,577 25,866
Cost of sales (15,490) (20,608)
Gross profit 6,087 5,258
Fair value gain on derivative financial
liability 2 - 1,280
Foreign exchange gain 2 3,621 883
Research and development expenses (1,284) (931)
Sales and marketing expenses (5,612) (7,008)
Administration expenses (9,148) (18,522)
Share of loss of associate 26 (4,638) (3,831)
Loss before interest expense, tax,
depreciation, amortisation and goodwill
impairment (10,974) (22,871)
Amortisation expense 2 (2,970) (1,883)
Depreciation expense 2 (87) (137)
Impairment of goodwill 13 - (4,002)
Loss before interest expense and tax (14,031) (28,893)
Finance cost 2 (7,115) (1,356)
Loss before tax 2 (21,146) (30,249)
Income tax expense 4 (596) (2,125)
Loss for the year (21,742) (32,374)
Other comprehensive (loss)/income
Items that may be reclassified subsequently
to profit or loss:
Exchange differences arising on the
translation of
foreign operations (nil tax impact) (2,910) 4,297
Total comprehensive loss for the year (24,652) (28,077)
(Loss)/Profit attributable to:
Equity holders of the parent (21,938) (32,540)
Non-controlling interest 196 166
(21,742) (32,374)
Total comprehensive (loss)/income attributable
to:
Equity holders of the parent (24,813) (28,265)
Non-controlling interest 161 188
(24,652) (28,077)
Loss per share:
Basic (cents per share) 22 (6.0) (12.3)
Diluted (cents per share) 22 (6.0) (12.3)
Notes to the financial statements are included on pages 25 to
70
Consolidated statement of financial position as at 31 October
2016
31 October 31 October
Note 2016 2015
$'000 $'000
Current Assets
Cash and cash equivalents 29(a) 9,375 4,976
Trade receivables and work in progress 8 14,939 21,586
Inventories 10 72 66
Current tax assets 4 817 107
Other current assets 11 3,037 8,160
Total Current Assets 28,240 34,895
Non-Current Assets
Investment in associate 26 24,986 31,473
Property, plant and equipment 12 32 84
Trade receivables 8 1,596 -
Deferred tax assets 4 1,062 976
Other intangible assets - capitalised
software development 14 5,598 6,939
Other non-current assets 11 - 3,456
Total Non-Current Assets 33,274 42,928
Total Assets 61,514 77,823
Current Liabilities
Trade and other payables 15 11,488 19,619
Borrowings 16 - 3,000
Current tax payables 4 280 235
Provisions 17 1,009 1,380
Deferred Revenue 1,692 1,286
Total Current Liabilities 14,469 25,520
Non-Current Liabilities
Borrowings 16 11,759 16,531
Other financial liabilities 18 - 2,058
Provisions 17 890 943
Total Non-Current Liabilities 12,649 19,532
Total Liabilities 27,118 45,052
Net Assets 34,396 32,771
Equity
Issued capital 19 142,276 116,074
Reserves 20 (2,626) 174
Accumulated Losses 21 (105,827) (83,889)
Parent entity interest 33,823 32,359
Non-controlling interest 573 412
Total Equity 34,396 32,771
Notes to the financial statements are included on pages 25 to
70
Consolidated statement of changes in equity for the financial
year ended 31 October 2016
Foreign Equity- Retained
Currency settled Earnings
Translation benefits (Accumu-
Reserve Reserve lated Losses)
$'000 $'000 $'000 Attributable Non- controllin
to owners g Interest
of the parent
Issued $'000 $'000
Capital
$'000 Total
$'000
Consolidated
Balance at 1 November
2015 116,074 (2,791) 2,965 (83,889) 32,359 412 32,771
(Loss)/Profit for the
year - - - (21,938) (21,938) 196 (21,742)
Other comprehensive
income
(loss) for the year,
net
of income tax
Exchange differences
arising
on translation of
foreign
operations - (2,875) - - (2,875) (35) (2,910)
Total comprehensive
loss
for the year - (2,875) - (21,938) (24,813) 161 (24,652)
Issue of new shares
(Note
19) 26,202 - - - 26,202 - 26,202
Equity settled
payments
(Note 20) - - 75 - 75 - 75
Balance at 31 October
2016 142,276 (5,666) 3,040 (105,827) 33,823 573 34,396
Balance at 1 November
2014 110,574 (7,066) 2,911 (51,349) 55,070 224 55,294
(Loss)/Profit for the
year - - - (32,540) (32,540) 166 (32,374)
Other comprehensive income
(loss) for the year, net
of income tax
Exchange differences arising
on translation of foreign
operations - 4,275 - - 4,275 22 4,297
Total comprehensive loss
for the year - 4,275 - (32,540) (28,265) 188 (28,077)
Issue of new shares (Note
19) 5,500 - - - 5,500 - 5,500
Equity settled payments
(Note 20) - - 54 - 54 - 54
Balance at 31 October
2015 116,074 (2,791) 2,965 (83,889) 32,359 412 32,771
Notes to the financial statements are included on pages 25 to
70
Consolidated statement of cash flows for the financial year
ended 31 October 2016
Year Ended 31 Year Ended
October 31 October
2016 2015
Note $'000 $'000
Cash Flows from Operating Activities
Receipts from customers 18,320 21,244
Payments to suppliers and employees (29,470) (33,374)
Refund of research & development
tax credits 438 -
Interest and other finance cost
paid (175) (426)
Income tax paid (1,159) (3,148)
Net cash used in operating activities 29(b) (12,046) (15,704)
Cash Flows From Investing Activities
Escrow proceeds from HomeSend business
divestment 5,133 -
Investment in HomeSend joint venture
Company (3,905) (1,350)
Payment for property, plant and
equipment (35) (163)
Software development costs (1,548) (2,758)
Net cash used in investing activities (355) (4,271)
Cash Flows From Financing Activities
Proceeds from issue of shares 19 19,609 5,788
Payment for share issue costs 19 (1,347) (288)
Payment of debt restructuring costs (3,250) -
Proceeds from borrowings 6,834 15,457
Repayment of borrowings (3,980) -
Net cash provided by financing activities 17,866 20,957
Net Increase/(Decrease) In Cash
and Cash Equivalents 5,465 982
Cash At The Beginning Of The Financial
Year 4,976 3,679
Effects of exchange rate changes
on the balance of cash held in foreign
currencies (1,066) 315
Cash and Cash Equivalents At The
End Of The Financial Year 29(a) 9,375 4,976
Notes to the financial statements are included on pages 25 to
70
Notes to the Financial Statements for the financial year ended
31 October 2016
1. SUMMARY OF ACCOUNTING POLICIES
Statement of compliance
The financial statements are general purpose financial statements which
have been prepared in accordance with the Corporations Act 2001, Accounting
Standards and Interpretations, and comply with other requirements of
the law.
The financial statements include the consolidated financial statements
of the Group, comprising eServGlobal Limited (the Company/ Parent)
and the entities it controlled at the end of, or during, the year.
For the purposes of preparing the consolidated financial statements
the Company is a for-profit entity.
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 comply with International
Financial Reporting Standards ('IFRS') as issued by the International
Accounting Standards Board ("IASB").
The financial statements were authorised for issue by the directors
on 31 January 2017.
A description of the nature of the Group's operations and its principal
activities are included in the directors' report, which is not part
of the financial statements.
Basis of preparation
The financial statements have been prepared on the historical cost
basis, unless otherwise stated below. Historical cost is based on the
fair values of the consideration given in exchange for goods and services.
All amounts are presented in Australian dollars, unless otherwise noted.
The Company is a Company of the kind referred to in ASIC Corporations
(Rounding in Financial / Directors' Reports) Instrument 2016/191 dated
24 March 2016, and in accordance with this Corporations Instrument
amounts in the directors' report and the financial statements 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
statements:
(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 original 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 statement of financial position.
(b) Employee benefits
Provision is made for benefits accruing to employees in respect
of wages and salaries, annual leave, long service leave and
retirement benefits 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 the
reporting date.
For defined benefit retirement plans, the cost of providing
benefits is determined by way of actuarial valuations being carried
out at the end of each annual reporting period. Remeasurement is
reflected in the statement of financial position with the charge or
credit recognised in other comprehensive income.
Notes to the Financial Statements for the financial year ended
31 October 2016
1. SUMMARY OF ACCOUNTING POLICIES (continued)
(c) Financial assets
Financial assets are classified into the following specified
category: 'loans and receivables'. The classification depends on
the nature and purpose of the financial assets and is determined at
the time of initial recognition.
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.
The effective interest method is a method of calculating the
amortised cost of a debt instrument 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 and 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 debt
instrument, or, where appropriate, a shorter period, to the net
carrying amount on initial recognition.
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. 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 or loss.
(d) Financial instruments issued by the Group
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.
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, recognising interest expense on 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, to the net carrying amount on
initial recognition.
Derecognition of financial liabilities
A financial liability is de-recognised when the obligation under
the liability is discharged, cancelled, or expires. When an
existing financial liability is replaced by another from the same
lender on substantially different terms, or the terms of an
existing liability are substantially modified, such an exchange or
modification is treated as the derecognition of the original
liability and the recognition of a new liability. The difference in
the respective carrying amounts is recognised in the statement of
profit or loss and other comprehensive income.
Notes to the Financial Statements for the financial year ended
31 October 2016
1. SUMMARY OF ACCOUNTING POLICIES (continued)
(d) Financial instruments issued by the Group (continued)
Derivative financial liabilities
Equity-settled options denominated in a foreign currency are
recognised as derivative financial instruments based on the
substance of the contractual arrangement.
Derivatives are initially recognised at fair value at the date
the derivative contract is entered into and are subsequently
remeasured to their fair value at the end of each reporting period.
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. The
Group did not have any hedging relationships in the current or
prior year.
Fair value measurements are categorised into Level 1, 2 or 3
based on the degree to which the inputs to the fair value
measurements are observable and the significance of the inputs to
the fair value measurement in its entirety, which are described as
follows:
-- Level 1 inputs are quoted prices (unadjusted) in active
markets for identical assets or liabilities that the entity can
access at the measurement date;
-- Level 2 inputs are inputs, other than quoted prices included
within Level 1, that are observable for the asset or liability,
either directly or indirectly; and
-- Level 3 inputs are unobservable inputs for the asset or liability.
Trade payables
Trade payables are initially measured at fair value, and are
subsequently measured at amortised cost.
(e) 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 statement of cash flows 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.
Notes to the Financial Statements for the financial year ended
31 October 2016
1. SUMMARY OF ACCOUNTING POLICIES (continued)
(f) Foreign currencies
The individual financial statements of each group entity are
presented in the currency of the primary economic environment in
which the entity operates (its functional currency). For the
purpose of the consolidated financial statements, the results and
financial position of each group entity are expressed in Australian
dollars, which is the functional currency of the Company and the
presentation currency for the consolidated financial
statements.
In preparing the financial statements of each individual group
entity, transactions in currencies other than the entity's
functional currency (foreign currencies) are recognised at the
rates of exchange prevailing on the dates of the transactions. At
the end of each reporting period, monetary items that are
denominated in foreign currencies are retranslated at the rates
prevailing at that date. Non- monetary items 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 in terms of historical cost in
a
foreign currency are not retranslated.
Exchange differences on monetary items are recognised in profit
or loss in the period in which they arise except for exchange
differences on monetary items receivable from or payable to a
foreign operation for which settlement is neither planned nor
likely to occur in the foreseeable future (therefore forming part
of the net investment in the foreign operation), which are
recognised initially in other comprehensive income (loss) and
reclassified from equity to profit or loss on repayment of the
monetary items.
For the purpose of presenting these consolidated financial
statements, the assets and liabilities of the Group's foreign
operations are translated into Australian dollars using exchange
rates prevailing at the end of the reporting period. Income and
expense items are translated at the average exchange rates for the
period, unless exchange rates fluctuated significantly during that
period, in which case the exchange rates at the dates of the
transactions are used. Exchange differences arising, if any, are
recognised in other comprehensive income (loss) and accumulated in
equity (and attributed to non-controlling interests as
appropriate).
Goodwill and fair value adjustments to identifiable assets
acquired and liabilities assumed through acquisition of a foreign
operation are treated as assets and liabilities of the foreign
operation and translated at the rate of exchange prevailing at the
end of each reporting period. Exchange differences arising are
recognised in other comprehensive income (loss).
(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 to Note 1(h).
Notes to the Financial Statements for the financial year ended
31 October 2016
1. SUMMARY OF ACCOUNTING POLICIES (continued)
(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.
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.
With the exception of goodwill, 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 year. It is calculated using tax rates and tax
laws that have been enacted or substantively enacted by the
reporting date. Current tax for current and prior year is
recognised as a liability (or asset) to the extent that it is
unpaid (or refundable).
Deferred tax
Deferred tax is accounted for 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 only
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.
Notes to the Financial Statements for the financial year ended
31 October 2016
1. SUMMARY OF ACCOUNTING POLICIES (continued)
(i) Income tax (continued)
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 assets and liabilities are measured at the tax
rates that are expected to apply to the year(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 the 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 Group
intends to settle its current tax assets and liabilities on a net
basis.
The carrying amount of deferred tax assets is reviewed at the
end of each reporting period and reduced to the extent that it is
no longer probable that sufficient taxable profits will be
available to allow all or part of the asset to be recovered.
Current and deferred tax for the year
Current and deferred tax is recognised as an expense or income
in profit or loss, except when it relates to items credited or
debited to other comprehensive income (loss) or directly to equity,
in which case the deferred tax is also recognised in other
comprehensive income (loss) or directly in equity. Where it arises
from the initial accounting for a business combination it is taken
into account in the determination of goodwill.
(j) Inventories
Inventories are valued at the lower of cost and net realisable
value. Costs 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 to be incurred in marketing, selling and distribution.
(k) 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 year 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.
Notes to the Financial Statements for the financial year ended
31 October 2016
1. SUMMARY OF ACCOUNTING POLICIES (continued)
(l) 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.
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.
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.
The expenditure capitalised includes cost of materials, direct
labour and a proportion of directly attributable overheads. Other
development expenditure is recognised in profit or loss as an
expense as and when incurred.
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.
(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 when the Company:
has the power over the investee;
is exposed, or has rights to variable returns from its
involvement with the investee; and
has the ability to use its power to affect the returns.
The Group reassesses whether or not it controls an investee if
facts and circumstances indicate that there are changes to one or
more of the three elements of control listed above.
The results of subsidiaries acquired or disposed of during the
year are included in consolidated profit or loss 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.
Notes to the Financial Statements for the financial year ended
31 October 2016
1. SUMMARY OF ACCOUNTING POLICIES (continued)
(m) Basis of consolidation (continued)
Non-controlling interest in the net assets (excluding goodwill)
of consolidated subsidiaries are identified separately from the
Group's equity therein. Non-controlling interests consist of the
amount of those interests at the date of the original business
combination and the non-controlling interest's share of changes in
equity since the date of the combination. Total comprehensive
income is attributed to non-controlling interests even if this
results in the non-controlling interests having a deficit
balance.
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. 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. Acquisition related costs are recognised in profit
or loss as incurred.
Goodwill arising on acquisition is recognised as an asset and
initially measured at cost, being the excess of the cost of the
business combination over the group's interest in the net fair
value of the identifiable assets, liabilities and contingent
liabilities recognised. 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.
(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
Notes to the Financial Statements for the financial year ended
31 October 2016
1. SUMMARY OF ACCOUNTING POLICIES (continued)
(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 expected 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 expected to be
received.
(p) Assets held for sale
Assets and disposal groups are classified as held for sale if
their carrying amount will be recovered principally through a sale
transaction rather than through continuing use. This condition is
regarded as met only when the asset (or disposal group) is
available for immediate sale in its present condition subject only
to terms that are usual and customary for sales of such asset (or
disposal group) and its sale is highly probable. Management must be
committed to the sale, which should be expected to qualify for
recognition as a completed sale within one year from the date of
classification.
Non-current assets (and disposal groups) classified as held for
sale are measured at the lower of their previous carrying amount
and fair value less costs to sell.
Notes to the Financial Statements for the financial year ended
31 October 2016
1. SUMMARY OF ACCOUNTING POLICIES (continued)
(q) Revenue recognition
Revenue is measured at the fair value of consideration received
or receivable. Revenue is reduced for estimated customer returns,
rebates and other similar allowances.
Sale of Goods and Licences
Revenue from the sale of goods and licences is recognised when
the Group has transferred significant risks and rewards of
ownership and control over the goods or licences to the buyer; the
amount of revenue can be reliably measured; the Group retains
neither continuing managerial involvement to the degree usually
associated with ownership nor effective control over the goods or
licences sold; and it is probable that the associated economic
benefit will flow to the Group.
Rendering of Services
Revenue from services relating to custom designed software
solutions or provision of licence installation services 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 on
a straight line basis over the contract period.
Multiple element contracts
Revenue from multiple element contracts is allocated and
recognised based on the relative fair value of the respective
elements, generally as stipulated in the contractual terms.
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 are measured at fair value
at the date of grant. Fair value is measured by use of 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.
Notes to the Financial Statements for the financial year ended
31 October 2016
1. SUMMARY OF ACCOUNTING POLICIES (continued)
(s) Investments in associates
An associate is an entity over which the group has significant
influence and that is neither a subsidiary nor an interest in a
joint venture. Significant influence is the power to participate in
the financial and operating policy decisions of the investee but is
not control or joint control over those policies.
The results and assets and liabilities of associates are
incorporated in these financial statements using the equity method
of accounting, except when the investment is classified as held for
sale, in which case it is accounted for in accordance with AASB 5
Non-current Assets Held for Sale and Discontinued Operations. Under
the equity method, investments in associates are carried in the
consolidated statement of financial position at cost and adjusted
for post-acquisition changes in the Group's share of the net assets
of the associate, less any impairment in the value of individual
investments.
Losses of an associate in excess of the group's interest in that
associate (which includes any long- term interests that, in
substance, form part of the group's net investment in the
associate) are recognised only to the extent that the group has
incurred legal or constructive obligations or made payments on
behalf of the associate.
An investment in an associate is accounted for using the equity
method from the date on which the investee becomes an associate. On
acquisition of the investment in an associate, any excess of the
cost of the investment over the Group's share of the net fair value
of the identifiable assets and liabilities of the investee is
recognised as goodwill, which is included within the carrying
amount of the investment. Any excess of the Group's share of the
net fair value of the identifiable assets and liabilities over the
cost of the investment, after reassessment, is recognised
immediately in profit or loss in the period in which the investment
is acquired.
The requirements of AASB 139 Financial Instruments: Recognition
and Measurement are applied to determine whether it is necessary to
recognise any impairment loss with respect to the Group's
investment in an associate. When necessary, the entire carrying
amount of the investment (including goodwill) is tested for
impairment in accordance with AASB 136 Impairment of Assets as a
single asset by comparing its recoverable amount (higher of value
in use and fair value less costs to sell) with its carrying amount,
Any impairment loss recognised forms part of the carrying amount of
the investment. Any reversal of that impairment loss is recognised
in accordance with AASB 136 to the extent that the recoverable
amount of the investment subsequently increases.
The Group discontinues the use of the equity method from the
date when the investment ceases to be an associate, or when the
investment is classified as held for sale. When the Group retains
an interest in the former associate or joint venture and the
retained interest is a financial asset, the Group measures the
retained interest at fair value at that date and the fair value is
regarded as its fair value on initial recognition in accordance
with AASB 139. The difference between the carrying amount of the
associate at the date the equity method was discontinued, and the
fair value of any retained interest and any proceeds from disposing
of a part interest in the associate is included in the
determination of the gain or loss on disposal of the associate. In
addition, the Group accounts for all amounts previously recognised
in other comprehensive income in relation to that associate on the
same basis as would be required if that associate had directly
disposed of the related assets or liabilities. Therefore, if a gain
or loss previously recognised in other comprehensive income by that
associate would be reclassified to profit or loss on the disposal
of the related assets or liabilities, the Group reclassifies the
gain or loss from equity to profit or loss (as a reclassification
adjustment) when the equity method is discontinued.
Notes to the Financial Statements for the financial year ended
31 October 2016
1. SUMMARY OF ACCOUNTING POLICIES (continued)
(s) Investments in associates (continued)
When the group transacts with the associate, profits and losses
resulting from the transactions with the associate are recognised
in the Group's consolidated financial statements only to the extent
of interests in the associate that are not related to the
Group.
(t) Critical accounting judgments and key sources of estimation
uncertainty
The directors evaluate estimates and judgments incorporated into
the financial statements based on historical knowledge and best
available current information. Estimates assume a reasonable
expectation of future events and are 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 reporting 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 goodwill impairment at each reporting date.
Value-in-use calculations performed in assessing recoverable
amounts incorporate a number of key estimates described in Note 13.
In the prior year the full carrying value of goodwill was assessed
as being non-recoverable and an impairment loss of $4.002 million
was recognised in profit or loss. Refer to Note 13 for further
details.
Revenue recognition
Revenue in relation to the supply of custom designed solutions
and the provision of licence installation services 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 significant judgement based on assessing future
project costs (time and materials) and profitability of each
project. The information used to forecast these costs is based on
historical experience and other relevant data on a customer by
customer basis.
Judgement is also required in assessing when the Group has
transferred to the buyer significant risks and rewards of ownership
of the goods, and for 'multiple element contracts' in assessing the
relative fair value of the respective elements. Generally fair
value is the amount reflected for each element in the contract.
Unused tax losses
The recognition of unused tax losses as a deferred tax asset
requires estimation and judgement of the availability of future
taxable profits and compliance with the relevant tax legislations.
In the current year the directors determined that deferred tax
assets should not be recognised on the year's losses.
Notes to the Financial Statements for the financial year ended
31 October 2016
1. SUMMARY OF ACCOUNTING POLICIES (continued)
(t) Critical accounting judgments and key sources of estimation uncertainty
(continued)
Recoverability of internally generated intangible asset
An intangible asset arising from development expenditure on an
internal project is recognised only when the consolidated entity
can demonstrate the technical feasibility of completing the
intangible asset so that it will be available for use or sale, its
intention to complete and its ability to use or sell the asset, how
the asset will generate future economic benefits, the availability
of resources to complete the development, and the ability to
measure reliably the expenditure attributable to the intangible
asset during its development. Following the initial recognition of
the development expenditure, the cost model is applied requiring
the asset to be carried at cost less any accumulated amortisation
and accumulated impairment losses. Any expenditure so capitalised
is amortised over the period of expected benefits from the related
project commencing from the commercial release of the project. The
carrying value of an intangible asset arising from development
expenditure is tested for impairment annually when the asset is not
yet available for use or more frequently when an indication of
impairment arises during the reporting period.
Based on the directors' assessment there is no evidence of
impairment in the carrying value of internally generated intangible
assets at year end.
Recoverability of investment in associate
The Group assesses its associate investment carrying value for
indications of impairment at each reporting date. Where an
impairment trigger exists the recoverable amount of the investment
is determined. This determination may include value-in-use
calculations which incorporate a number of key estimates which are
subject to judgment and estimation uncertainty. Based on an
independent valuation obtained during the prior year, and supported
by the absence of any significant changes in market conditions, and
the tracking of the overall performance and prospects of the
HomeSend entity, no impairment indicators were considered to exist
at year end.
Recoverability of trade receivables and work in progress
The Group operates in geographical jurisdictions where delays
are frequently encountered in the receipt of invoiced receivables
due to banking and other regulatory issues, and where political
instability and other factors can cause delays in provision of
contractual services to customers. This can lead to high levels of
receivables and work in progress relative to the Group's operating
revenues. In consideration of these factors, which are frequently
outside of the direct control of the Group, significant judgement
is required in assessing the recoverability of trade receivables
and work in progress and in assessing requirements for impairment
provisioning against these balances.
Based on a detailed assessment by management, an impairment
expense on trade debtors of
$0.884 million (2015: $4.624 million) and on work in progress of
$1.404 million (2015: $2.569 million) was recognised in profit or
loss in the current year.
Notes to the Financial Statements for the financial year ended
31 October 2016
1. SUMMARY OF ACCOUNTING POLICIES (continued)
(u) New, revised or amending Accounting Standards and Interpretations adopted
The Group has adopted all of the new, revised or amending
Accounting Standards and Interpretations issued by the Australian
Accounting Standards Board ('AASB') that are mandatory for the
current reporting period.
Accounting Standards and Interpretations issued but not yet
effective
Certain Australian Accounting Standards and Interpretations have
recently been issued or amended but are not yet effective and have
not been adopted by the Group for the annual reporting period ended
31 October 2016. The directors have not early adopted any of these
new or amended standards or interpretations. The directors have not
yet fully assessed the impact of these new or amended standards and
interpretations (to the extent relevant to the Group).
At the date of authorisation of the financial statements, the
Standards and Interpretations listed below and applicable to the
Group were issued but not yet effective.
Effective for annual Expected to be initially
Standard/Interpretation reporting periods applied in the financial
beginning on or year ending
after
1 January 2018 31 October 2019
AASB 9 'Financial Instruments',
and the relevant amending standards
AASB 15 'Revenue from Contracts 1 January 2018 31 October 2019
with Customers' and the relevant
amending Standards
AASB 16 'Leases' 1 January 2019 31 October 2020
(v) Going Concern
The consolidated statement of profit or loss and other
comprehensive loss for the financial year ended 31 October 2016
reflects a loss after tax of $21.742 million, and the consolidated
statement of cash flows reflects net cash outflows from operations
of $12.046 million. The Directors have reviewed a cash flow
forecast prepared by management for the period through to 31
January 2018. The cash flow forecast indicates that the Group will
have sufficient funding to operate as a going concern during the
forecast period, and on this basis the Directors have prepared the
financial statements on the going concern basis.
The cash flow forecast is predicated on timely conversion of
work in progress and collection of trade receivables balances, and
the Group achieving its anticipated rate of conversion of sales
pipeline opportunities over the forecast period. The Directors
believe that the actions undertaken during the 2016 financial year
to re-align the core business operations will support achieving
these outcomes.
If the Group is unable to generate its expected levels and
timing of cash flows through to 31 January 2018, it is likely that
additional capital and/or alternative funding will need to be
secured. In the absence of such additional funding, significant
uncertainty would exist as to whether the Group and the Parent
entity will be able to continue as going concerns and therefore
whether they will realise their assets and extinguish their
liabilities in the normal course of business and at the amounts
stated in the financial statements.
The financial statements do not include adjustments relating to
the recoverability and classification of recorded asset amounts nor
to the amounts and classification of liabilities that might be
necessary should the Group and the Parent entity not continue as
going concerns.
Notes to the Financial Statements for the financial year ended
31 October 2016
2. LOSS BEFORE TAX
Consolidated
Year Ended Year Ended
31 October 31 October
2016 2015
$'000 $'000
Loss before tax has been arrived at after
charging (crediting) the following:
Other gains and losses:
Net foreign exchange (gain)/ loss (3,621) (883)
Fair value gain on derivative financial
liability - (1,280)
Total other gains and losses (3,621) (2,163)
Finance costs:
Bank borrowings - interest 90 214
Other entities - interest 124 164
Shareholder loans
- Interest 1,781 617
- Amortisation of establishment costs and
premium 413 225
- Amortisation of prepaid share option
cost associated with the 453 136
- Debt restructure fees 3,250 -
- Loss on extinguishment of borrowings 1,004 -
Total finance costs 7,115 1,356
Depreciation of non-current assets:
Office furniture and fittings 35 31
Plant and equipment 52 106
Total depreciation of non-current assets 87 137
Amortisation of intangible assets:
Software development costs 2,970 1,883
Operating lease rental expenses:
Minimum lease payments 553 1,156
Impairment recognised on goodwill (Note
13) - 4,002
Impairment/(write back) recognised on trade
receivables (Note 8) 884 4,624
Impairment recognised on work in progress
(Note 8) 1,404 2,569
Employee benefit expense:
Contributions to defined contribution plans - 16
Other employee benefits 18,637 21,224
Equity settled share-based payments 75 54
Total employee benefits expense 18,712 21,294
Notes to the Financial Statements for the financial year ended
31 October 2016
Consolidated
Year Ended 31 Year Ended
31
October 2016 October
2015
$'000 $'000
3. REVENUE
Revenue from continuing operations
consisted of the following items:
Revenue from the sale of goods and
Licences 9,011 9,968
Revenue from the rendering of services 12,566 15,898
Total revenue from continuing operations 21,577 25,866
4. INCOME TAXES Year Ended Year Ended
31 31
October October
2016 2015
$'000 $'000
(a) Income tax recognised in profit/(loss)
Tax (benefit)/expense comprises:
Current tax (benefit)/expense 770 626
Adjustments recognised in the current
year in relation to the current tax of
prior years (88) 153
Deferred tax (income)/expense relating
to the origination and reversal of temporary
differences and tax credits (86) 1,346
Income tax expense 596 2,125
The prima facie income tax expense on
pre-tax accounting profit/(loss) from
operations reconciles to the income tax
(benefit)/expense in the financial statements
as follows:
Profit/(loss) from operations (21,146) (30,249)
Income tax expense/ (benefit) calculated
at 30% (6,344) (9,075)
Non-deductible expenses 301 2,215
Foreign withholding tax credits not utilised 417 312
Deferred tax assets not recognised 6,580 9,002
Deferred tax asset written off - 1,346
Effect of different tax rate in foreign
operations (184) (1,828)
Under/(over) provision of income tax
in previous year (174) 153
Income tax expense 596 2,125
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.
No income tax was recognised directly in equity or in other
comprehensive income (loss) during the financial year.
Notes to the Financial Statements for the financial year ended
31 October 2016
4. INCOME TAXES (continued)
Consolidated
31 31
October 2016 October
2015
$'000 $'000
(b) Current tax assets and
liabilities
Current tax assets:
Tax refund receivable 817 107
Current tax payables:
Income tax payable 280 235
Deferred tax balances
Deferred tax assets arise from the following:
Deferred tax assets:
Research & development tax credits 326 - 51 377
Foreign tax credits and other
tax offsets 650 - 35 685
976 - 86 1,062
Deferred tax assets:
Tax losses - revenue (i) 990 - (990) -
Research & development tax credits 445 (119) - 326
Foreign tax credits and other
tax offsets 266 740 (356) 650
1,701 621 (1,346) 976
(i) During the prior year deferred tax asset totalling $0.990 million
which was previously recognised in respect of unused tax losses
was assessed as being non-recoverable and was accordingly charged
against income tax expense.
The benefit of tax losses which have not been recognised as a deferred
tax asset due to non- satisfaction of the probability of the recoupment
criteria totalled $37.7m at year end (2015:
$31.1m).
Notes to the Financial Statements for the financial year ended
31 October 2016
4. INCOME TAXES (continued)
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 and are therefore taxed as a single entity.
The head entity within the tax-consolidated group is eServGlobal Limited.
The members of the tax-consolidated group are eServGlobal (NZ) Pty Limited
and eServGlobal Aust Pty Limited.
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 recognized in the financial
statements in respect of this agreement as payment of any amounts under
the tax sharing agreement is considered remote.
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 Board's 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 Group is set out as follows:
Consolidated
Year Ended Year Ended
31 October 31 October
2016 2015
$ $
Short-term employee benefits 1,520,603 2,183,936
Post-employment benefits 17,715 55,672
Termination benefits - 361,752
Share-based payments 67,093 37,718
1,605,411 2,639,078
Notes to the Financial Statements for the financial year ended
31 October 2016
6. SHARE BASED PAYMENTS
Executive and Employee Equity-Settled Share Based Payments
The Group has an ownership-based remuneration scheme for
directors, key management personnel 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 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.
Under the eServGlobal Employee Share Option Plan, established 4
August 2000 to assist in the attraction, retention and motivation
of employees and Directors of the Company and its related corporate
bodies, as at 31 October 2016, certain key management personnel and
employees (past and present) are entitled to purchase an aggregate
of 15,140,000 (2015: 6,771,945) ordinary shares of the entity at an
average exercise price of $0.246 (2015: $0.36) per ordinary share.
At 31 October 2016, 3,590,000 options had vested (31 October 2015:
6,771,945). The options may be exercised at various times up until
08 August 2021. The holders of such options do not have the right,
by virtue of the option to participate in any share issue or
interest issue of any other corporate body or scheme, and do not
participate in any dividends declared.
During the financial year, the Company issued 11,550,000 options
under its executive and employee share option plan (2015: nil).
The following executive and employee share-based payment
arrangements were in existence during the year:
Issued 14 May 2012
(i) 14-May-12 2017 $0.36 $0.11 1,950,000 194
Issued 11 Feb 2013
(ii) 11-Feb-13 2017 $0.36 $0.26 1,000,000 415
Issued 01 Jul 2013
(iii) 01-Jul-13 2018 $0.36 $0.24 640,000 586
Issued 07 Apr 2016
(iv) 07-Apr-16 2021 $0.21 $0.0468 Nil 1,594
Issued 08 Aug 2016
(v) 08-Aug-16 2021 $0.21 $0.0383 Nil 1,741
Issued 08 Aug 2016
(vi) 08-Aug-16 2021 $0.21 $0.0338 Nil 1,741
In accordance with the terms of the Employee Share Option
Plan:
(i) Options issued in this series vest fully on the second
anniversary date from the date of issue and expire five years from
the date of issue.
(ii) Options issued in these series vested fully on 21 December
2014 and expire on 21 December 2017.
(iii) Options issued in this series vested as to one half on 10
June 2014 and the balance on 10 June 2015 and expire on 10 June
2018.
(iv) Options issued in this series are executive options which
vest on 14 March 2018 and expire on 14 March 2021.
(v) Options issued in this series are executive options which
vest on 08 August 2018 and expire on 08 August 2021.
(vi) Options issued in this series are employee options which
vest on 08 August 2018 and expire on 08 august 2021.
Notes to the Financial Statements for the financial year ended
31 October 2016
6. SHARE BASED PAYMENTS (continued)
The fair value of the options were derived by an appropriately
qualified expert using the Black- Scholes model. Expected
volatility is based on the historical share price volatility over
the past 12 months. The risk-free rate is sourced from the Reserve
Bank of Australia.
Key inputs into the models for the series of options:
7 Apr 2016 0.108 2.05% 4.94 0.21 90%
8 Aug 2016 0.086 1.58% 5 0.21 100%
8 Aug 2016 0.086 1.58% 5 0.21 100%
The following reconciles the outstanding share options granted
under the executive share option plan at the beginning and the end
of the financial year:
31 October 2016 31 October 2015
Weighted Weighted
average exercise average
price exercise
Number of $ Number of price
Options Options $
Balance at the beginning
of the financial year 6,771,945 0.360 7,571,945 0.360
Granted during the year 11,550,000 0.210 - -
Exercised during the year - - (800,000) 0.360
Expired/ lapsed/ cancelled
during the year (3,181,945) 0.360 - -
Balance at the end of the
financial year 15,140,000 0.246 6,771,945 0.360
Exercisable at the end
of the financial year 3,590,000 0.360 6,771,945 0.360
Consolidated
Year Ended 31 October Year Ended
31 October
2016 2015
$ $
7. REMUNERATION OF AUDITORS
Auditor of the Parent Entity
Auditing or review of the financial
report 129,000 139,000
129,000 139,000
Other Auditors
Auditing or review of the financial
report 126,096 153,303
Other services - Taxation 16,922 27,601
143,018 180,904
272,018 319,904
The auditor of eServGlobal Limited is Deloitte Touche Tohmatsu
in Australia and the Other Auditors are all affiliated firms of
Deloitte Touche Tohmatsu. Fees paid to other auditors are charged
in respective foreign currencies and are subject to exchange rate
fluctuations.
Notes to the Financial Statements for the financial year ended
31 October 2016
31 October 31 October
2016 2015
$'000 $'000
8. TRADE RECEIVABLES AND WORK IN PROGRESS
(a) Current trade receivables and work
in progress
Trade receivables (i) 8,715 17,029
Less : Allowance for doubtful debts (3,733) (5,514)
4,982 11,515
Work in progress 14,723 13,433
Less : Allowance for non-recoverability
and losses (4,766) (3,362)
9,957 10,071
14,939 21,586
(b) Non-current trade receivables
Trade receivables 1,596 -
(i) The average credit period on sales of goods and rendering of
services is 60 - 90 days (2015: 60 - 90 days). Historically, the
Group has not charged interest on overdue receivables, although customer
contractual terms include the ability to do this. The Group recognises
an allowance for debts whose collectability is considered doubtful.
Objective evidence is determined by reference to knowledge of disputes
at the reporting date, where applicable. Other relevant factors considered
include political or regulatory issues in the geographical location
of the customer, as well as any change in the credit quality of the
customer 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'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 $1.7 million (2015: $7.3 million) (see below
for aged analysis) which are past due at the reporting date for which
the Group has not provided an allowance for doubtful debts as there
has not been a significant change in credit quality and the amounts
are still considered recoverable. The Group does not hold any collateral
over these balances. The average days overdue for these receivables
is 59 days (2015: 136 days).
31 October 31 October
2016 2015
$'000 $'000
Ageing of past due but not impaired
By up to 30 days 1,119 934
30 - 90 days 128 1,350
90 - 120 days 6 1
120 + days (*) 405 4,995
1,658 7,280
(*) It is noted that the aged 120 + days balance for the prior year
included a single customer totalling $2.899 million. Against this
balance were payable amounts owing to the same customer totalling
$2.493 million which were included in trade creditors and accruals
at 31 October 2015 balance date.
Notes to the Financial Statements for the financial year ended 31
October 2016
31 October 31 October
8. TRADE RECEIVABLES AND WORK IN PROGRESS 2016 2015
(continued) $'000 $'000
Balance at the beginning of the financial
year 5,514 890
Impairment (reduction)/losses recognised
on receivables 884 4,624
Write off of impaired receivables (2,665) -
Balance at the end of the financial year 3,733 5,514
The ageing of all impaired receivables is 120+ days (2015: 120+
days).
31 October 31 October
9. WORK IN PROGRESS AND DEFERRED INCOME 2016 2015
$'000 $'000
Contract work in progress 23,250 31,421
Progress billings and advances received (14,985) (22,636)
8,265 8,785
Recognised and included in the financial
statements:
Work in progress (i) :
Current (Note 8) 9,957 10,071
Deferred income:
Current (1,692) (1,286)
8,265 8,785
(i) Net of provision for non-recoverability and losses totalling
$4.766 million (2015: $3.362 million).
31 October 31 October
2016 2015
$'000 $'000
10. CURRENT INVENTORIES
Finished goods 72 66
Notes to the Financial Statements for the financial year ended
31 October 2016
31 October 31 October
2016 2015
$'000 $'000
11. OTHER ASSETS
(a) Current
Deferred sales proceeds held in escrow
account (i) - 5,343
Prepayments 1,149 1,117
Deposits and other assets (iii) 1,888 1,700
3,037 8,160
(b) Non-current
Unamortised loan facility cost (ii) - 3,456
- 3,456
(i) Deferred sales proceeds held in escrow, which related to the
sale of HomeSend business to the associate Company HomeSend SRCL on
3 April 2014, were received by the Company on 3 April 2016.
(ii) Unamortised loan facility cost as at 31 October 2015
included loan establishment cost (net of amortisation) of $0.334
million and fair value of share options issued associated with the
loan (net of amortisation) of $3.122 million. On 6 June 2016, the
terms of the existing loan were substantially modified under a Deed
of Debt and Capital Restructure ("Deed") between the Company and
its lenders Alphagen Volantis Fund Limited and Alphagen Volantis
Catalyst Fund Limited. Under the terms of the Deed the existing
loans were replaced by a new loan facility and the share options
associated with the existing loans were cancelled. Refer Note 16
for details.
The total unamortised facility costs have been written off as a
finance cost in FY 2016 as a result of the extinguishment and
derecognition of the existing loan.
(iii) Other current assets include goods and services tax receivable of $0.644 million (2015:
$0.554 million). The prior year balance has been reclassified
from Trade and Other Receivables to Other Assets.
Notes to the Financial Statements for the financial year ended
31 October 2016
12. PROPERTY, PLANT AND EQUIPMENT
Gross carrying amount - at
cost
Balance at 1 November 2014 484 4,536 5,020
Additions 112 51 163
Disposals and scraps (427) (3,725) (4,152)
Net foreign currency movement 54 398 452
Balance at 31 October 2015 223 1,260 1,483
Additions 8 27 35
Disposals and scraps (2) (745) (747)
Net foreign currency movement (34) (73) (107)
Balance at 31 October 2016 195 469 664
Accumulated depreciation
Balance at 1 November 2014 483 4,534 5,017
Depreciation expense 31 106 137
Disposals and scraps (427) (3,725) (4,152)
Net foreign currency movement 79 318 397
Balance at 31 October 2015 166 1,233 1,399
Depreciation expense 35 52 87
Disposals and scraps (2) (745) (747)
Net foreign currency movement (19) (88) (107)
Balance at 31 October 2016 180 452 632
Net book value
As at 31 October 2015 57 27 84
As at 31 October 2016 15 17 32
Notes to the Financial Statements for the financial year ended
31 October 2016
Consolidated
31 October 31 October
2016 2015
$'000 $'000
13. GOODWILL
Gross carrying amount and net book value
Balance at the beginning of the financial
year 14,465 13,241
Additions - -
Translation effects of foreign currency
exchange movements - 1,224
Balance at end of financial year 14,465 14,465
Accumulated impairment losses
Balance at the beginning of the financial
year (14,465) (9,673)
Impairment - (4,002)
Translation effects of foreign currency
exchange movements - (790)
Balance at end of financial year (14,465) (14,465)
Net book value
At the beginning of the financial year - 3,568
At the end of the 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 operating
business, at which level goodwill is monitored for internal
management purposes. This is because substantially the entire
product list of the consolidated entity is available for sale
to, and being sold to, substantially the entire customer base
of the consolidated entity.
The recorded carrying value of Goodwill was fully impaired in
the prior year as a result of the Group's poor performance in
the prior year and the impairment assessment undertaken by management.
Notes to the Financial Statements for the financial year ended
31 October 2016
14. INTANGIBLES
Gross carrying amount
Balance at 1 November 2014 - 5,443 5,443
Internally developed - 2,820 2,820
Effects of foreign currency exchange movements - 593 593
Balance at 31 October 2015 - 8,856 8,856
Acquired 592 - 592
Internally developed - 1,549 1,549
Effects of foreign currency exchange movements (19) (539) (558)
Balance at 31 October 2016 573 9,866 10,439
Accumulated amortisation and impairment
Balance at 1 November 2014 - - -
Amortisation expense - (1,883) (1,883)
Effects of foreign currency exchange movements - (34) (34)
Balance at 31 October 2015 - (1,917) (1,917)
Amortisation expense (96) (2,874) (2,970)
Effects of foreign currency exchange movements 2 44 46
Balance at 31 October 2016 (94) (4,747) (4,841)
Net Book Value
As at 31 October 2015 - 6,939 6,939
As at 31 October 2016 479 5,119 5,598
Significant intangible assets
Software development costs of $5.119 million relate to the
transformation of PayMobile 3 for channel sales enablement, and are
being amortised over three years on a straight line basis.
Based on the directors' assessment the directors do not consider
there is evidence of impairment in the carrying value of these
assets at year end.
Notes to the Financial Statements for the financial year ended
31 October 2016
Consolidated
31 31
October October
2016 2015
$'000 $'000
15. TRADE AND OTHER PAYABLES
Trade payables (i) 1,768 5,108
Balance due on partly paid shares subscribed
in associate company (ii) - 4,059
Accruals and other payables 9,720 10,452
11,488 19,619
(i) The average credit period on purchases of goods is 45
days (2015: 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.
(ii) The balance due on the partly paid shares in the HomeSend
joint venture company of 2.625 million Euros ($4.059 million)
was paid on 3 April 2016.
The directors consider that the carrying amount of trade
payables approximates their fair value.
Consolidated
31 October 31 October
2016 2015
$'000 $'000
16. BORROWINGS
Interest bearing loans (secured) - at amortised cost
Current (a) - 3,000
Non-current (b) 11,759 16,531
11,759 19,531
(a) The National Australia Bank loan of $3 million was repaid in
full on 23 March 2016.
(b) Non-current borrowings is from related party shareholders -
Alphagen Volantis Fund Limited and Alphagen Volantis Catalyst Fund
Limited ("Lenders"). On 6 June 2016, the Company entered into a
Deed of Debt and Capital Restructure ("Deed") with its Lenders.
Under the terms of the Deed, the existing loan facility was replaced
by a new loan of $11.2 million (GBP 7 million) accruing compound
interest of 1% per month. A total of $7.94 million (GBP 4.4 million)
of the existing loan was converted to equity and a total 47,866,107
share options associated with the existing loans were cancelled
by the lenders. A debt restructure fee of
$3.25 million (GBP 1.8 million) was paid to the lenders. The new
loan is secured by way of a fixed and floating charge over the total
assets and undertakings of the Group and is due for repayment, including
accrued interest, on 30 June 2019.
The Group recognised a loss on extinguishment of $1.004 million
as a result of the de- recognition of the existing loans from the
Lenders.
(c) Available Facilities
There are no unused facilities as at 31 October 2016 (2015: nil).
Notes to the Financial Statements for the financial year ended
31 October 2016
17. PROVISIONS
Consolidated
Balance as at 1 November 2015 1,380 943 2,323
Additional provisions recognised - - -
Utilised during the year (371) (53) (424)
Balance as at 31 October 2016 1,009 890 1,899
Current 1,009 - 1,009
Non-current - 890 890
Balance as at 31 October 2016 1,009 890 1,899
(i) The retirement benefit provision is a provision for statutory
termination obligations due to eligible employees in France
who remain employed with the French entity until their statutory
retirement date. The amount of the statutory lump sum retirement
payment is dependent on the employee's length of service with
the Company and their salary on retirement. No entitlement
accrues to employees who terminate their employment prior to
retirement date. The Group's obligations are unfunded and covered
by the recorded provision. The cost of providing the benefit
is determined by way of actuarial valuation carried out at
the end of each annual reporting period (Refer to Note 1(b)).
Consolidated
31 31
October 2016 October
2015
$'000 $'000
18. OTHER FINANCIAL LIABILITIES
Derivative financial liability - 2,058
The derivative financial liability of $2.058 million in the
prior year, in relation to the fair value of options granted by the
Company in connection with the shareholder loans from Alphagen
Volantis Fund Limited and Alphagen Volantis Catalyst Fund Limited,
was derecognised upon the cancellation of the options as part of
the loan restructure on 6 June 2016. Refer to Note 16 for
details.
Notes to the Financial Statements for the financial year ended
31 October 2016
31 31
19. ISSUED CAPITAL October October 2015
2016
$'000 $'000
640,183,996 fully paid ordinary shares
(2015: 265,774,052) 142,276 116,074
31 October 2016 31 October 2015
No. '000 $ '000 No. '000 $ '000
Fully Paid Ordinary Shares
Balance at the beginning of financial
year 265,774 116,074 254,974 110,574
Issue of shares under the Company's
employee share option plan (Note
6) - - 800 288
Issue of new shares in the Company 374,410 27,549 10,000 5,500
Costs of share issue - (1,347) - (288)
Balance at the end of financial
year 640,184 142,276 265,774 116,074
31 October
Reconciliation of new shares issued: 2016
$'000
Cash proceeds from issue of shares 19,609
Borrowings converted to equity (i) 7,940
Total value of new shares issued 27,549
Less: Share issue costs (1,347)
Net value of share capital issued 26,202
(i) 110,141,050 shares were issued at 4 pence to the lenders
Alphagen Volantis Fund Limited and Alphagen Volantis Catalyst Fund
Limited as part of the debt restructure. Total of $7.94 million of
the existing loan was converted to equity. Refer Note 16 for
details on debt restructure.
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 terms of the executive and employee share
option plan as at 31 October 2016, employees are entitled to exercise
options granted and thus acquire 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
31 October 2016
Consolidated
31 31
October 2016 October
2015
$'000 $'000
20. RESERVES
Foreign currency translation reserve
(a) (5,666) (2,791)
Equity-settled benefits reserve (b) 3,040 2,965
(2,626) 174
(a) Foreign currency translation reserve
Balance at beginning of financial year (2,791) (7,066)
Translation of foreign operations (2,875) 4,275
Balance at the end of the financial
year (5,666) (2,791)
Exchange differences relating to the translation from the
functional currency of foreign subsidiaries into Australian
dollars, and translation of inter-company monetary items
which settlement is neither likely nor planned to occur in
the foreseeable future, are recognised in other comprehensive
income (loss) and accumulated in the foreign currency translation
reserve.
(b) Equity-settled benefits reserve
Balance at beginning of financial year 2,965 2,911
Employee equity-settled benefits (i) 75 54
Balance at the end of the financial
year 3,040 2,965
(i) The employee equity-settled benefits reserve arises on
the grant of share options to key management personnel and
employees under the executive and employee share option plan.
Further information about equity-settled benefits is contained
in Note 6 to the financial statements.
31 31
21. ACCUMULATED LOSSES October October
2016 2015
$'000 $'000
Balance at beginning of the financial year (83,889) (51,349)
Loss for the year attributable to equity
holders of the parent (21,938) (32,540)
Balance at end of financial year (105,827) (83,889)
Notes to the Financial Statements for the financial year ended
31 October 2016
Consolidated
Year Ended 31 October Year Ended 31
2016 October
2015
22. EARNINGS PER SHARE
Basic earnings per share (cents per
share) (6.0) (12.3)
Diluted earnings per share(cents per
share) (6.0) (12.3)
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:
Year Ended 31 October Year Ended 31
October
2016 2015
$'000 $'000
Earnings - being the (loss)/profit for
the year
attributable to equity holders of the
parent (21,938) (32,540)
31 October 31 October
2016 2015
No '000 No '000
Weighted average number of ordinary
shares 366,222 263,963
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:
Year Ended 31 October Year Ended 31
October
2016 2015
$'000 $'000
Earnings - being the (loss)/profit for
the year
attributable to equity holders of the
parent (21,938) (32,540)
31 October 31 October
2016 2015
No '000 No '000
Weighted average number of ordinary
shares and
potential ordinary shares (a) 366,222 294,576
(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 number of ordinary
shares used in the calculation of basic
(loss)/earnings per share 366,222 263,963
Shares deemed to be issued for no consideration
in respect of share options - 30,613
Weighted average number of ordinary
shares and potential ordinary shares
used in the calculation of
diluted (loss)/earnings per share 366,222 294,576
No dilution has been included in the current or prior year due
to losses incurred.
Notes to the Financial Statements for the financial year ended
31 October 2016
23. DIVIDS
No dividend has been declared in respect of the current
or previous financial year.
24. LEASES
Operating Leases
Leasing arrangements
Operating leases relate to office facilities with lease terms
of up to five years. The Group does not have an option to purchase
the leased asset at the expiry of the lease period.
At the end of the reporting period, the Group had outstanding
commitments for future minimum lease payments under non-cancellable
operating leases, which fall due as follows:
Consolidated
Year Ended Year Ended
31 October 31 October
2016 2015
$'000 $'000
Non-cancellable operating leases
No longer than 1 year 512 578
Longer than 1 year and not longer than
5 years 954 1,541
Longer than 5 years - 11
1,466 2,130
Notes to the Financial Statements for the financial year ended
31 October 2016
Ownership Interest and voting power
31 31
COUNTRY OF INCORPORATION October October
2016 2015
% %
25. SUBSIDIARIES
Details of the Group's material
subsidiaries at the end of the
reporting period are as follows:
Parent Entity
eServGlobal Limited Australia
Material Subsidiary
eServGlobal Holdings SAS France 100 100
eServGlobal SAS France 100 100
eServGlobal (NZ) Pty Limited Australia 100 100
eServGlobal UK Limited United Kingdom 100 100
The Group's principal operating activities are carried out by
eServGlobal SAS which is based in France; its administrative
activities are carried out by eServGlobal UK Limited which is based
in London; and its ultimate listed holding Company is eServGlobal
Limited which is based in Australia. The Group's investment in its
associate Homesend SCRL is held by eServGlobal (NZ) Pty
Limited.
Notes to the Financial Statements for the financial year ended
31 October 2016
26. INVESTMENT IN ASSOCIATES
Details of the material investment in associates at the end of
the reporting period are as follows:
Name of Principal activity Place of incorporation Proportion of ownership
associate and principal interest and voting rights
place of business held by the Group
31 October 31 October
2016 2015
Homesend Provision of international
SCRL (i) mobile money services Brussels, Belgium 35% 35%
The associate is accounted for using the equity method in these
consolidated financial statements. Refer to Note 1(s).
(i) HomeSend SCRL was formed on 3 April 2014. The directors have
determined that the Group exercises significant influence over
HomeSend SCRL by virtue of its 35% voting power in shareholders
meetings and its contractual right to appoint two out of six
directors to the board of directors of that Company.
Summarised financial information in respect of HomeSend SCRL is
set out below. The summarised financial information below
represents amounts shown in the associate's financial statements
prepared in accordance with local Belgium GAAP, adjusted to align
with the Australian equivalent to International Financial Reporting
Standards and to reflect other required notional equity accounting
adjustments.
31 October 31 October
HomeSend SCRL 2016 2015
$'000 $'000
Current assets 15,773 25,637
Non-current assets 64,085 71,361
Current liabilities (8,469) (7,075)
Non-current liabilities - -
Net assets 71,389 89,923
Year ended 31 Year ended 31
October October
2016 2015
$'000 $'000
Revenue 5,615 3,630
Profit or (loss) from continuing operations (13,253) (10,945)
Profit (loss) for the year (13,253) (10,945)
Total comprehensive income (loss) for
the year (13,253) (10,945)
Dividends received from the associate - -
during the year
Notes to the Financial Statements for the financial year ended
31 October 2016
26. INVESTMENT IN ASSOCIATES (continued)
Reconciliation of the above summarised financial information to
the carrying amount of the interest in HomeSend SCRL recognised in
the consolidated financial statements:
31 October 31
2016 October
2015
$'000 $'000
Net assets of the associate 71,389 89,923
Proportion of the Group's ownership interest
in HomeSend SCRL 35% 35%
Carrying amount of the Group's interest
in HomeSend SCRL 24,986 31,473
Reconciliation of the carrying amount of the investment in
associate:
31 October 31 October
2016 2015
$000 $000
Opening balance 31,473 27,777
Investment in associate (i) - 5,412
Share of current period loss of the associate (4,638) (3,831)
Effects of foreign currency exchange movements (1,849) 2,115
Closing balance 24,986 31,473
(i) On 5th October 2015 the Company agreed to invest additional
$5.412 million with full voting rights, in the HomeSend joint
venture Company so as to maintain its shareholding at 35%.
The Company paid $0.875 million Euros ($1.353 million) on 14th
October 2015 and the balance of
$2.625 million Euros ($4.059 million) on 3rd April 2016.
Notes to the Financial Statements for the financial year ended
31 October 2016
27. SEGMENT INFORMATION
The Group operates in a single segment being the provision
of telecommunications software solutions to mobile and financial
service providers on a global basis. Information reported to
the chief operating decision maker (Board of directors) for
the purposes of resource allocation and assessment of segment
performance focuses on the telecommunication software solution
business as a single business unit.
The results and financial position of this single segment are
shown in the statement of profit or loss and other comprehensive
loss and the statement of financial position respectively.
Revenue from major products and services
The following is an analysis of the Group's revenue from continuing
operations from its major products and services.
Year Ended Year Ended
31 October 31 October
2016 2015
$'000 $'000
Hardware 1,518 2,210
Licences 7,492 7,758
Services 3,482 6,079
Support 7,375 7,741
Software as a Service 1,710 2,078
Total revenue from continuing operations 21,577 25,866
Geographical information
The Group's revenue from continuing operations from external
customers by location of operations and information about
its non-current assets by location of assets are detailed
below.
Revenue from external Non-current assets
customers
Year Ended Year Ended Year Ended Year Ended
31 October 31 October 31 October 31 October
2016 2015 2016 2015
$'000 $'000 $'000 $'000
Middle East 12,518 13,031 - -
Asia Pacific 971 4,063 24,700 3,486
Europe 663 1,138 7,512 38,465
Africa 7,405 7,604 - 1
Central and South America 20 30 - -
Total 21,577 25,866 32,212 41,952
Non-current assets exclude deferred tax assets.
Information about major customers
Included in total revenue is revenue of $5.947 million and
$2.588 million which arose from sales to the Group's two largest
customers.
Notes to the Financial Statements for the financial year ended
31 October 2016
28. RELATED PARTY DISCLOSURES
a) Equity Interests in Related Parties
Equity Interests in Controlled Entities
Details of the percentage of ordinary shares held in material
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
Information on key management personnel interests in shares and
options is detailed in the Directors' Report.
d) Non-executive directors option holdings
There were no options issued to non-executive directors during
the financial year or in the prior financial period.
e) Loans from related party shareholders
Refer to details per Note 2, Note 16 and Note 18.
f) Other related party transactions
Consolidated
Year Ended Year Ended
31 October 31 October
2016 2015
$ $
Mr Conoley's Director Fees were
paid to his private Company up
to January 2016 after which he
was placed on the Company's payroll 135,938 351,659
Mr Baldwin's Director's Fees, as
detailed in the Directors' Report,
are paid to his private Company 87,284 87,284
Consulting Fees paid to FDB Partners
SPRL, a Company controlled by Francois
Barrault (resigned in 2015) - 23,134
g) Parent Entities
The parent and ultimate parent entity in the Group
is eServGlobal Limited.
Notes to the Financial Statements for the financial year ended
31 October 2016
29. NOTES TO THE STATEMENT OF CASH FLOWS
Consolidated
Year Ended Year Ended
31 October 31 October
2016 2015
$'000 $'000
a) Reconciliation of cash
For the purposes of the statement of cash flows,
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 statement
of financial position as follows:
Cash and cash equivalents 9,375 4,976
Bank overdraft - -
9,375 4,976
b) Reconciliation of loss for the year to net
cash flows from operating activities
Loss for the year (21,742) (32,374)
Depreciation of non-current assets 87 137
Amortisation of non-current assets 2,970 1,883
Foreign exchange (gain)/ loss, including changes
in foreign currency net assets and liabilities (4,020) 370
Fair value gain on derivative financial instrument - (1,280)
Equity settled share-based payments 75 54
Non-cash finance cost 3,651 977
Non-operating finance cost 3,250 -
Share of loss of associate 4,638 3,831
(Increase)/decrease in current income tax balances (666) (1,798)
(Increase)/decrease in deferred tax balances (86) 726
Impairment of goodwill - 4,002
Impairment loss recognised on trade receivables
and work in progress (377) 7,193
Changes in net assets and liabilities, net
of effects from acquisition of businesses:
(Increase)/decrease in assets:
- Trade receivables, work in progress and other
assets 1,938 (4,825)
- Inventories (6) 106
Increase/(decrease) in liabilities:
- Trade payables (1,792) 4,840
- Provisions (371) 284
- Other liabilities 406 170
Net cash used in operating activities (12,046) (15,704)
Notes to the Financial Statements for the financial year ended
31 October 2016
29. NOTES TO THE STATEMENT OF CASH FLOWS (continued)
c) Cash balance not available for use
The cash balance not available for use (classified as other
current assets) as at 31 October 2015 is $0.444 million (2015:
$1.059 million). The cash balance which is not available for use is
held as security by the financial institutions in relation to a
financial guarantee that has been issued on behalf of the
Company.
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 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 31 October
2016 the Group had bank borrowings of $ nil (2015: $ 3.0m), and
borrowings from related party shareholders of $11.8m (2015: $16.5m).
The Group has no other borrowings (2015: nil) Operating cash flows
and advances from borrowings are used to maintain and expand the
Group's assets as well as to pay for operating expenses, tax liabilities
and software 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. 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.
d) Market Risk
The Group's activities expose it primarily to the financial risks
of changes in foreign currency exchange rates and changes in market
interest rates. There has been no change to the Group's exposure
to market risks or the manner in which it manages and measures
the risks from the previous period.
Notes to the Financial Statements for the financial year ended
31 October 2016
30. FINANCIAL INSTRUMENTS (continued)
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 which are recorded
in profit or loss. The group may use foreign currency exchange
contracts to hedge these risks. No such contracts were entered
into during the current year (2015: nil).
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
31 October 31 October 31 October 31 October
2016 2015 2016 2015
$'000 $'000 $'000 $'000
External Group Exposure
(*)
US Dollars 5,822 6,073 398 548
Euro (Functional currency
- Australian Dollars) 56 34 - 20
UK Pounds (Functional currency
- Australian Dollars) - - 11,804 17,261
Egyptian Pounds 7 43 - -
Indonesian Rupees 9 66 - -
Indian Rupees 21 18 - -
Romanian Lei (RON) 4 5 - -
UAE Dirham (AED) 22 85 - -
Brazilian Real - 9 - -
(*) Unless otherwise indicated, the functional currency for
the above external group exposure is predominantly Euro.
Internal Group Exposure
Australian Dollars (Functional
currency - Euro) - - - 5,376
Euros (Functional currency
Australian Dollars) - 23,950 - -
UK Pounds (Functional currency
Australian Dollars) 11,210 - - -
Internal Group exposure relates only to inter-company balances
where foreign exchange gains or losses are recognised in the profit
or loss.
Notes to the Financial Statements for the financial year ended
31 October 2016
30. FINANCIAL INSTRUMENTS (continued)
Foreign currency sensitivity analysis
The following table details the Group's sensitivity to a 10% increase
and decrease in the functional currency 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 year end for a 10% change in foreign currency rates.
Profit or loss
Consolidated
31 October 31 October
Currency 2016 2015
$'000 $'000
External Group Exposure
US Dollars 691 736
Euro 6 6
UK Pounds 1,312 1,918
Egyptian Pounds 1 5
Indonesian Rupees 1 7
Indian Rupees 2 2
Romanian Lei (RON) 1 1
UAE Dirham (AED) 2 9
Brazilian Real - 1
Internal Group Exposure
Australian Dollars - 538
Euro - 2,661
UK Pounds 1,246 -
The sensitivity includes external receivables and payables as well
as inter-company balances with foreign operations within the Group
where the denomination of the receivable or payable is in a currency
other than the functional currency of the respective entity and
the balance is expected to be repaid in the foreseeable future.
For assets, a positive number indicates an increase in profit with
the functional currency weakening against the respective currency.
For a strengthening of the functional currency against the respective
currency there would be an equal and opposite impact on the profit,
and the amounts above would be negative. For liabilities, the opposite
would apply.
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. As stated in the Group's Accounting Policies Note 1(f),
on consolidation the assets and liabilities of these entities are
translated into Australian dollars at exchange rates prevailing on
the balance date. The income and expenses of these entities are
translated at the average exchange rates for the year. Exchange
differences arising are classified as equity and are transferred to
a foreign exchange translation reserve. The main operating entity
outside of Australia is based in France. The Group's future
reported profits could therefore be impacted by changes in rates of
exchange between the Australian Dollar and the Euro.
Notes to the Financial Statements for the financial year ended 31 October
2016
30. FINANCIAL INSTRUMENTS (continued)
f) Interest Rate Risk Management
The Group's exposure to interest rate risk at 31 October 2016 is in respect
of interest generated on deposits balances invested during the course
of the year and interest incurred on variable rate external borrowings.
Cash deposits yielded a weighted average interest rate of 0.02% for the
financial year (2015: 1.52%), and borrowings were incurred at a weighted
average rate of 12.7% for the current financial year (2015: 29%).
Interest rate sensitivity analysis
The Group's sensitivity to interest rates is on surplus cash placed on
short-term deposit or drawings on variable rate borrowing facilities.
The Group's net sensitivity to interest rate movements is not considered
to be material to the Group. The shareholder loan facilities are at a
fixed rate of interest and the Group (Refer to Note 16) is therefore
not exposed to interest rate sensitivity in respect of this loan.
g) 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 Group's short, medium and long-term
funding and liquidity management requirements. The 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 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 principal and interest cash flows.
Consolidated
31 October 2016
Trade payables - Non-
interest bearing - 884 884 - -
Other payables - - 7,834 1,886 -
Borrowings 12.7% - - - 16,168
884 8,718 1,886 16,168
31 October 2015
Trade payables - Non-
interest bearing - 2,553 2,555 - -
Other payables - - 10,452 4,059 -
Borrowings 29% (i) - - 3,089 20,661
Other financial liabilities - - - - 2,058
2,553 13,007 7,148 22,719
(i) This included the effective interest amortisation of the
fair value of options issued to Alphagen Volantis Fund Limited and
Alphagen Volantis Catalyst Fund Limited. These options were
cancelled in the current year.
Notes to the Financial Statements for the financial year ended
31 October 2016
30. FINANCIAL INSTRUMENTS (continued)
The following tables detail 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 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
31 October 2016
Cash and cash equivalents 0.10% 9,375 - - - -
Deposits - Non-interest
bearing - - - 1,888 - -
Trade receivables -
Non- interest bearing - 1,246 2,217 425 - -
Trade receivables -
interest bearing 15%
- 274 821 2,189
10,621 2,491 3,134 2,189 -
31 October 2015
Cash and cash equivalents 0.04% 4,976 - - - -
Deferred sales proceeds - - - 5,343 - -
Deposits - Non-interest
bearing - - - 1,700 - -
Trade receivables -
Non- interest bearing - 2,879 5,757 2,879 - -
7,855 5,757 9,922 - -
h) Credit Risk Management
Credit risk refers to the risk that a counterparty will default on
its contractual obligations resulting in financial loss to the Group.
The Group has adopted the policy of 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 Group's maximum exposure
to credit risk.
Notes to the Financial Statements for the financial year ended
31 October 2016
30. FINANCIAL INSTRUMENTS (continued)
(i) Fair value measurements recognised in the statement of financial position
Consolidated
31 October 31 October
2016 2015
Categories of financial instruments $'000 $'000
Financial Assets:
Cash and cash equivalents 9,375 4,976
Loans and receivables
Trade receivables - current and
non- current 6,578 11,515
Deposits and other assets 1,888 1,700
Deferred sales proceeds - 5,343
Financial Liabilities:
Trade payables (at amortised cost) 1,768 5,108
Other payables 9,720 14,511
Borrowings 11,759 19,531
Other financial liabilities - 2,058
Fair value of the Group's financial assets and financial
liabilities that are measured at fair value on a recurring
basis
None of the Group's other financial assets and financial
liabilities are measured at fair value as at 31 October 2016. As at
31 October 2015, derivative financial liability of $2.058 million
in relation to share options associated with non-current borrowings
were measured at fair value. The derivative financial liability was
derecognised upon the cancellation of the options as part of the
loan restructure in the current year. Refer to Note 16 and 18.
Fair value of financial assets and financial liabilities that
are not measured at fair value on a recurring basis (but fair value
disclosures are required)
The directors consider that the carrying amounts of the
financial assets and financial liabilities recognised in the
consolidated financial statements approximate their fair
values.
Notes to the Financial Statements for the financial year ended
31 October 2016
31. PARENT ENTITY INFORMATION
(a) Financial position 31 October 2016 31 October 2015
$'000 $'000
Assets
Current assets 3,886 3,852
Non-current assets 42,896 51,477
Total assets 46,782 55,329
Liabilities
Current liabilities 627 3,969
Non-current liabilities 11,759 19,869
Total liabilities 12,386 23,838
Equity
Issued capital 142,276 116,074
Accumulated losses (110,926) (86,268)
Reserves
Equity-settled benefits 3,040 2,965
Foreign currency translation 6 -
Total equity 34,396 32,771
(b) Financial performance
Year Ended 31 October Year Ended 31
October
2016 2015
$'000 $'000
Loss for the year (24,658) (28,078)
Other comprehensive income - -
(loss)
Total comprehensive loss (24,658) (28,078)
(c) Guarantees entered into by the parent entity
eServGlobal Limited has not provided any guarantees in relation
to any of its subsidiaries.
(d) Contingent liabilities of the parent entity
There are no contingent liabilities for the parent entity.
(e) Commitments for the acquisition of property, plant and
equipment by the parent entity
There are no commitments for the acquisition of property, plant
and equipment by the parent entity.
Notes to the Financial Statements for the financial year ended
31 October 2016
32. SUBSEQUENT EVENTS
There has not been any matter or circumstance that has arisen
since the end of the financial year through the date of this report
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.
33. ADDITIONAL COMPANY INFORMATION
eServGlobal Limited is a listed public company, incorporated in
Australia and operating in Australia, Europe, the Middle East,
North Africa, Asia/Pacific and the Americas.
Registered Office
c/o Simpsons Solicitors
Level 2, Pier 8/9
23 Hickson Road
Millers Point Sydney NSW
2000 Australia
Additional Securities Exchange Information as at 27 January
2017
Corporate Governance
The Corporate Governance Statement of the Company may be found at http://eservglobal.com/investors/cgs/
Ordinary share capital
640,183,996 fully paid ordinary shares are held by 1,168 individual shareholders
on the Australian Securities Exchange (including the depositary interest
holder nominee) and 118 individual depository interest holders on the London
Stock Exchange (AIM).
All issued ordinary shares carry one vote per share.
Options
7 individual option holders hold 3,590,000 options at an exercise price
of $0.36 per option. 10 individual option holders hold 11,550,000 options
at an exercise price of $0.21 per option.
Options do not carry a right to vote.
Distribution of holders of equity securities
Fully Paid Ordinary Depository nterests $0.36 Options- $0.21 Options-
Shares I Listed on ASX Listed on LSE not listed not listed
(AIM)
1-1,000 153 5 - -
1,001-5,000 368 8 - -
5,001-10,000 191 7 - -
10,001-100,000 367 34 - 2
100,001-Over 89 64 7 8
Total 1,168 118 7
Holding less than a
marketable
parcel 429
Substantial Number
shareholders
Henderson Global
Investors
Ltd 158,690,263
Legal and General Investment Management
Plc 88,409,480
Commonwealth Bank of
Australia 41,202,192
Blue Lake Partners
Pty
Ltd 38,505,613
Twenty largest holders of quoted equity securities
Australian Securities Exchange Computershare London Stock Exchange (AIM)
Clearing Pty Ltd holds 472,901,475
ordinary fully paid shares on behalf
of the Depositary Interest Holders.
Ordinary Shareholders Number % of capital Depository Interest Number % of DI
(DI) Holders Holders
AURORA NOMINEES LIMITED
UBS NOMINEES PTY LTD 42,710,278 6.67 <2234100> 130,534,280 27.60
HSBC GLOBAL CUSTODY
CITICORP NOMINEES PTY NOMINEE (UK) LIMITED
LIMITED 32,552,103 5.08 <944287> 86,467,645 18.28
NORTRUST NOMINEES
DCM BLUELAKE PARTNERS LIMITED
PTY LTD 11,040,784 1.72 <TDS> 58,634,864 12.40
J P MORGAN NOMINEES HSBC GLOBAL CUSTODY
AUSTRALIA NOMINEE (UK) LIMITED
LIMITED 9,400,371 1.47 <667656> 28,388,902 6.00
CITICORP NOMINEES PTY
LIMITED
<COLONIAL FIRST STATE
INV A/C> 8,713,623 1.36 W B NOMINEES LIMITED 21,808,569 4.61
BT PORTFOLIO SERVICES
LIMITED NORTRUST NOMINEES
<MCMANAMEY SUPER FUND LIMITED
A/C> 6,883,317 1.08 <SL> 15,071,461 3.19
BNP PARIBAS NOMS PTY BNY (OCS) NOMINEES
LTD LIMITED
<DRP> 6,002,531 0.94 <HIT> 14,040,975 2.97
PAUA PTY LTD <THE
PAUA
A/C> 4,355,812 0.68 SPREADEX LIMITED 12,480,005 2.64
HANOVER NOMINEES LIMITED
MR BRAN THOMAS BIRTHISTLE 1,904,500 0.30 <UBS03> 11,041,951 2.33
HSBC GLOBAL CUSTODY
NOMINEE (UK) LIMITED
PATRICK MCGRORY 1,730,426 0.27 <800757> 10,312,174 2.18
CONNAUGHT CONSULTANTS
(FINANCE) PTY LTD <SUPER W B NOMINEES LIMITED
FUND A/C> 1,432,500 0.22 <ISAMAX> 8,762,026 1.85
MR JOHN JOSEPH RYAN 1,294,800 0.20 ING BANK N.V. <INGNV9> 7,975,000 1.69
MR STEPHEN JOHN BALDWIN
+ MRS ANDREA MAREE BALDWIN
<THE STEVE BALDWIN SF GOLDMAN SACHS SECURITIES
A/C> 1,062,500 0.17 (NOMINEES) LIMITED <ILSEG> 5,216,314 1.10
BNP PARIBAS NOMINEES PTY
LTD HAREWOOD NOMINEES LIMITED
<COMMERZBANK AG DRP> 1,000,000 0.16 <4153230> 4,548,469 0.96
TD DIRECT INVESTING
MR NICHOLAS SEOW LENG NOMINEES (EUROPE) LIMITED
GOH 972,950 0.15 <SMKTISAS> 3,963,643 0.84
HONNE INVESTMENTS PTY THE BANK OF NEW YORK
LIMITED 875,000 0.14 (NOMINEES) LIMITED 3,834,303 0.81
IDEALING NOMINEES LIMITED
MR ALAN FRANCIS WYLDE 837,100 0.13 <IDLISA> 3,447,325 0.73
CREDIT SUISSE CLIENT
NOMINEES (UK) LIMITED
MR REMI ARAME 800,000 0.12 <D6M5PB> 3,200,000 0.68
MR JAMIE RUSSELL STUART
+ MRS TANYA CARLENE STUART
<STUART FAMILY SF A/C> 600,000 0.09 HSDL NOMINEES LIMITED 2,977,236 0.63
BARCLAYSHARE NOMINEES
HALLAM DRAINAGE PTY LTD 569,787 0.09 LIMITED 2,773,216 0.59
Company Secretary
Tom Rowe
Registered Office & Principal Administration Office
C/o Simpsons Solicitors Level 2, Pier 8/9
23 Hickson Road
Millers Point Sydney NSW 2000 Australia
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 Depository Interests under the ticker "ESG".
Date of Annual General Meeting
13 March 2017
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR MMGFMFMLGNZG
(END) Dow Jones Newswires
January 31, 2017 02:00 ET (07:00 GMT)
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