TIDMESG
RNS Number : 9458Y
eServGlobal Limited
31 January 2014
eServGlobal Limited
ABN 59 052 947 743
Financial report for the financial year ended 31 October
2013
Annual financial report
For the financial year ended
31 October 2013
Contents
Page
Chairman's report 2
CEO's report 3
Directors' report 4
Auditor's independence declaration 18
Corporate governance statement 19
Independent audit report 27
Directors' declaration 29
Consolidated statement of profit or loss and other
comprehensive income 30
Consolidated statement of financial position 31
Consolidated statement of changes in equity 32
Consolidated statement of cash flows 33
Notes to the financial statements 34
Additional securities exchange information 77
Chairman's Review
I am delighted to report a successful year for eServGlobal. We
have made significant progress against our strategic objectives
during the period, with the return to full year EBITDA
profitability marking an important milestone in our journey. Our
restructuring initiatives over the last few years are now in place
and we are confident that they will provide the right platform from
which to grow the business. I am excited about the opportunities
ahead as we enter a new age of mobile money.
The achievements in our core business have been complemented by
the continuing success of the HomeSend international remittance
hub. Building on our substantial customer base under contract
coverage, we exceeded our objectives for live deployments in 2013.
This success was instrumental in the creation of a joint venture
with MasterCard and BICS, announced in December 2013. It is our
belief that the JV will accelerate HomeSend's move into a new phase
in which the hub will become open to new markets, while being
supported by the full bandwidth of MasterCard's marketing and
distribution networks.
Board Composition
During the year, we were pleased to announce the appointment of
Paolo Montessori as CEO and Managing Director as well as the
appointment of Steve Blundell to the Board as Chief Financial
Officer. John Conoley joined the Board as a Non-Executive-Director,
replacing Jamie Brooke who stepped down following three years with
the Company. David Smart also retired as a director in 2013 after
thirteen years on the eServGlobal Board. It has been a pleasure
working with Paolo, Steve and John over the course of the year and
I have no doubt we will continue to benefit from their experience
and knowledge. I would also like to thank David and Jamie for their
meaningful contributions to the Company and wish them well in their
future endeavours.
Finally, following the establishment of the HomeSend joint
venture, Director Craig Halliday stepped down from the Board in
December 2013. During his tenure as COO, CEO and Director, Craig
played a major part in the restructuring of the business and the
formation of the leadership team we have in place today that has
brought the Company back to EBITDA profitability. Craig's final
task as Executive Director was to bring HomeSend to a new and
exciting level and the formation of the joint venture with
MasterCard and BICS marked the completion of his commitments to the
Company.
Securities
I would like to thank our shareholders for their support for our
recent share placements. The placement of 29,507,815 shares in
December 2012 raised $9.557 million (approximately GBP6.197
million) and was used to invest in our technology and to position
our company to be able to bid for substantial projects, such as the
Zain Group win. As eServGlobal competes for larger contracts with
larger telecommunications and financial services companies, the
demand for up-front performance bonds and the acceleration of
specific projects and deliverables is required.
In January 2013, shareholders approved a second placement of
$7.245 million (approximately GBP4.765 million), the proceeds of
which were used to fully repay existing shareholder loans.
Subsequent to the year-end, another smaller placement of 4,500,000
shares was carried out in December 2013, raising AUD$3.375 million
(approximately GBP1.843 million). There are now a total of
253,545,997 shares on issue.
The number of share options currently on issue is 9,100,000. All
of the options granted to date under the ESOP have been issued at
36 cents and are "in the money" by a significant amount due to the
recent rapid appreciation in the Company's share price. The efforts
of the option holders have been a significant reason for the rapid
appreciation in the Company's share price. The deferred vesting
dates (and requirement that an option holder be an employee at
those vesting dates) provide a retention benefit for the company,
while providing a tangible incentive to the option holder,
We are pleased to report that during the 2013 financial year we
achieved a 226% increase in our market capitalisation and a 158%
increase in our share price. As at 31 October 2012, eServGlobal's
share price was AU$0.20 with 196,847,706 shares on issue, creating
a market capitalisation of AU$39.4M. At the close of the following
financial year on 31 October 2013, the share price was AU$0.515
with 249,045,997 shares on issue, producing a market capitalisation
of AU$128.3M. We are proud of the value we have created over this
period for our shareholders and we are confident that our strategy
has positioned eServGlobal to continue to lead in the dynamic
mobile money industry.
I would like to thank all employees whose hard work and efforts
have helped us to build our established position today and our
shareholders who have supported us on the journey so far. We are
proud to be a market leader and instrumental part of the innovation
and global growth that characterises this segment of the financial
services industry.
Looking ahead, we remain focussed on expanding our relationships
with our customers and the ongoing innovation of our solutions to
ensure that we remain the leading technology partner for end-to-end
mobile money solutions. I am confident in the continued growth of
the business and that the Company will have another successful year
in 2014.
CEO's Report
At the close of 2013, eServGlobal is in the strongest position
it has been in for many years. Following the efforts that have gone
into reshaping our business over recent years, I am pleased to be
able to report on the considerable successes we have achieved this
year.
Our customer roster continues to grow and we have a diverse base
of over 65 customers for the core domestic services business. This
combined with a healthy backlog of work leaves us well positioned
to capitalise on this expanding market.
This year, our core business has further expanded its footprint
in this target market through the signing of 10 new customers in 10
new geographies and also through expansion within our existing
customers. We have also expanded our product offering into areas
such as Near Field Communications, companion cards and mobile
financial services, which allow mobile money solutions to be
deployed in more developed financial markets where users are
already expecting their phones to play a key role in their
financial affairs.
The marketplace for mobile money solutions is rapidly evolving.
The opportunity for eServGlobal to extend financial services to the
"unbanked" population in emerging markets is vast, particularly
given that these markets are characterised by high rates of mobile
penetration and coupled with limited access to traditional
financial services. Mobile network operators and financial service
providers continue to move quickly to position themselves to be
able to extend these new services to their users.
As the market matures, a key trend is the desire for mobile
operators to seek a more holistic and considered approach to their
mobile money offering so as to ensure a seamless service across all
deployments and customers, in addition to realising cost efficiency
benefits. eServGlobal is ideally placed to benefit from this trend
towards a single vendor strategy. Our technology is built on 30
years' experience in delivering operators with ways to store and
transfer value. Our end-to-end solution allows operators to choose
one technology platform to meet all their needs from recharge
through to basic mobile money and more advanced mobile financial
services. Our modular approach is also well-suited to operators or
financial service providers who need a solution which can grow as
their market matures. These factors were key to securing a
Group-wide framework agreement with the Zain Group, resulting in
estimated revenue of US$12m over three years.
Our objective for the HomeSend service during the year was to
move from subscriber coverage land grab to the next phase of live
deployments, with a target of reaching 50 live corridors by year
end. We are pleased to have achieved that goal and the HomeSend
service is now connecting 51 countries for remittance. Post the
period-end, we announced a transformational joint venture agreement
with MasterCard and BICS that will propel the HomeSend service to a
new operating level. We are excited to be part of this truly unique
partnership on the cutting edge of mobile financial services.
I am confident that the success of 2013 will form the platform
for further market-leading achievements in the coming years.
Directors' report
The directors of eServGlobal Limited submit herewith the financial
report for the financial year ended 31 October 2013.
The names and particulars of the directors of the company during
or since the end of the financial year are:
Name Particulars
----------------- -----------------------------------------------------------------------
Richard Mathews Non-executive Chairman
Richard is the Non-Executive Chairman and former Chief
Executive Officer of eServGlobal. He has over 20 years'
management experience in telecommunications, software
and investment. He is a founding partner of MHB Holdings.
Previously, Mr. Mathews was CEO of Mincom, Australia's
largest enterprise software company, increasing the
share price from $2.50 to $8.77 in a two-year period.
He has also held the role of Senior Vice President,
International at J.D. Edwards and is currently managing
director of listed company RungePincockMinarco Limited.
He holds a Bachelor of Commerce and a Bachelor of
Science and is an Associate Chartered Accountant.
Richard was appointed as a director in July 2009.
Paolo Montessori Managing Director and Chief Executive Officer
Paolo Montessori has worked in the telecommunications
industry for more than 20 years and is a well recognised
figure in the global mobile VAS market with a particular
focus on mobile money solutions. He has been closely
involved in both commercial and solution design in
the field of mobile money and payments, having led
projects for numerous industry leaders.
His experience extends to the telecom and financial
services industries in Australia, the Middle East,
South Asia, Asia Pacific, Europe and Latin America,
encompassing both emerging and developed markets where
mobile money is experiencing rapid growth.
Paolo was appointed Managing Director and Chief Executive
Officer of eServGlobal on 30 April 2013 following
the resignation of Craig Halliday from those roles.
Stephen Blundell Finance Director and Chief Financial Officer
Stephen has nearly 20 years' experience in financial
and operational management having held various senior
roles with leading multi-national software companies,
including EMEA Director of Finance at Adobe Systems
and EMEA Vice President Commercial Operations at Siemens
PLM, where he drove eight quarters of unprecedented
revenue growth, exceeding competitors' success and
the company's own financial plans.
Stephen was appointed as Finance Director on 30 April
2013 and has held the role of Chief Financial Officer
since November 2009
François Non-executive Director and Chairman of the Remuneration
Barrault and Nomination Committee.
François is the founder and chairman of FDB Partners,
an investment and consulting firm that specializes
in technology, renewable energy and publishing. He
has previously served as CEO of BT Global services,
President of BT International, and as a member of
the board and the operating committee of BT Group
PLC. He is also Chairman of Idate/DigiWorld Institute,
the leading European think tank in TMT (Telecom, Media
& Technology). He is also a Non-Executive Director
of Alpha Networks and sits on various advisory boards
around the world.
His extensive experience includes key roles within
Lucent Technologies such as President, Mobility International
and President and CEO for the EMEA region. Prior to
Lucent, he worked at Ascend Communications, where
he held the position of Senior Vice President, International.
He has also held executive positions within IBM, Computervision/Prime
and Stratus and was co-founder and Chairman of the
Board of Astria, an e-commerce software supplier.
He holds a Master of Science (D.E.A) in Robotics/AI
and an E.D.P in Engineering from the Ecole Centrale
de Nantes.
François has been a member of the Board since
March 2003 and is Chairman of the Remuneration and
Nomination Committee.
Stephen Baldwin Non-executive Director and Chairman of the Audit Committee
Stephen is a chartered accountant with 30 years of
business experience. He commenced his career with
Price Waterhouse 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
global private equity 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.
Stephen was appointed a director and a member of the
Audit and Remuneration and Nomination Committees on
25 November 2011. He was appointed as Chairman of
the Audit Committee with effect from 1 May 2013.
John Conoley Non-executive Director
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, Mr. Conoley
has held general management and director-level roles
in small and medium-sized private and public companies.
His most recent roles include: Non-executive director
with IT security company Vistorm, Head of the GBP1.6bn
B2B Energy Division at Eon, Chief Executive Officer
of mobile device company Psion PLC, an international
company listed in the UK. He is also currently CEO
of a Private Equity backed software company based
in the UK.
John holds a Bachelor of Arts (Hons) from Southampton
University.
John was appointed as a Director and a member of the
Audit Committee on 1 May 2013.
Craig Halliday Executive Director
Craig was the Chief Executive Officer and Managing
Director of eServGlobal until his resignation from
these roles on 30 April 2013.
Prior to eServGlobal, Craig served as Executive President
of Field Operations (COO) at Mincom, where he achieved
record-breaking growth in both revenues and profitability.
He has worked in the high-tech industry as an executive
and investor since 1996 and has held senior roles
including President of PeopleSoft Japan and various
management positions within J.D. Edwards.
Craig holds a Bachelor of Science from Edinburgh University
and is a member of the Institute of Chartered Accountants
in England and Wales.
Craig resigned as a Director on 30 December 2013.
Directors' report
James Brooke Non-executive Director
James is a Chartered Accountant with experience in
strategic consulting, finance and investment. He is
currently a fund manager at Henderson in the Henderson
Volantis Small Cap Team with responsibility for active
corporate engagement. He previously worked in the
private equity industry for ten years, initially with
3i in the London buyout team and more recently as
a venture capitalist with Quester where he specialized
in IT services and telecommunications investments.
Prior to this, he was with Deloitte's strategic consultancy
business after having trained with them as a Chartered
Accountant.
He is a non-executive Director of Renovo PLC, NetDimensions,
Oryx International Growth Fund and Chapel Down PLC.
He holds a BA in Mathematics from Oxford University
and an MSc in Telecommunications from University College
London.
James resigned as a Director on 1 May 2013.
David Smart Non-executive Director
David held senior executive positions in large scale
manufacturing and merchandising businesses for more
than 20 years. This includes 13 years as Chief Financial
Officer of Tubemakers of Australia Limited and Metal
Manufactures Limited. He is a non-executive director
of a listed company Saunders International Limited.
David holds a Bachelor of Commerce and MBA from the
University of New South Wales and is a Fellow of the
Australian Society of Certified Practicing Accountants.
David has been a member of the Board since July 2000.
He retired as a Director on 22 March 2013.
Directors' report
Directorships of other listed companies
Directorships of other listed companies held by Directors in the
3 years immediately before the end of the financial year are as
follows:
Name Company Period of Directorship
---------------- -------------------- ---------------------------
Richard Mathews RungePincockMinarco 8 February 2012 - Ongoing
Limited
John Conoley Psion PLC 28 April 2008 - 01 October
2012
Company Secretary
Tom Rowe has served as Company Secretary of eServGlobal since 6
April 2011. He is a Corporate and Commercial Lawyer practising with
Simpsons Solicitors with a specialty in corporate transactions,
corporate governance and listed company secretarial practice. Mr
Rowe holds a BA LLB (Hons) from the University of Adelaide and is
an Associate of the Governance Institute of Australia.
Principal activities
eServGlobal (LSE: ESG, ASX: ESV) offers mobile money solutions which
put feature-rich mobile financial services at the fingertips of
users worldwide, covering the full spectrum of mobile wallet, mobile
commerce, recharge and agent management features. eServGlobal invests
heavily in product development, using carrier-grade, next-generation
technology and aligning with the requirements of 65 customers in
50 countries. eServGlobal is partnering with MasterCard and BICS
to build the HomeSend joint venture, the market leading international
remittance service based on eServGlobal technology and enabling
mobile money transfer in over 50 markets. eServGlobal has been a
source of innovative solutions for mobile and financial service
providers for 30 years.
Directors' report
Review of operations
This report is to be read in conjunction with the Chairman's review
and CEO's report on pages 2 and 3.
The consolidated entity achieved sales revenue for the year of $31.0
million (2012: $28.1 million).
The EBITDA profit was $7.3 million after restructuring and non-core
business costs of $2.0 million, foreign exchange gains of $8.0 million
and share based payments of $0.5 million (2012 EBITDA loss $8.7
million after restructuring and non-core business costs of $2.9
million, foreign exchange losses of $3.4 million and share based
payments of $0.6 million). The net result of the consolidated entity
for the year to 31 October 2013 was a profit after tax and minority
interest for the year of $10.3 million (2012 loss after tax and
minority interest of $15.7 million). Included in this result was
an income tax credit of $5.9 million (2012 income tax expense of
$0.2 million). Earnings per share were 4.3 cents (2012 loss per
share: 8.0 cents).
The operating cash flow for the year was a net outflow of $8.9 million.
Total cash flow for the year was a net inflow of $0.9 million. Cash
at 31 October 2013 was $4.9 million.
Changes in state of affairs
There were no significant changes in the state of affairs of the
Group during the financial year.
Subsequent Events
On 19 December 2013 eServGlobal concluded an agreement to create
a new joint venture with MasterCard and BICS (eServGlobal's current
partner in HomeSend) for the international mobile money transfer
service, HomeSend. Under the terms of the agreement, eServGlobal
will contribute its Homesend business, including staff, that are
directly related to the business into a newly formed company ("NewCo").
Following the transaction, MasterCard will own 55% of NewCo, eServGlobal
will own 35% and BICS will own 10%. Based on the initial shareholdings,
MasterCard will be entitled to appoint three directors to the Board
of NewCo, eServGlobal will be entitled to make two appointments
and BICS will be entitled to nominate one director.
MasterCard will contribute cash for its interest in NewCo with eServGlobal
to receive EUR9.0m ($13.6 million) in cash, which includes EUR3.45
million ($5.21 million) to be held in escrow, net of a pro rata
of NewCo's estimated working capital requirements for the medium
term. In addition, MasterCard will enter into a commercial agreement
with HomeSend which will have an initial duration of three years
and automatic yearly renewal thereafter. The commercial agreement
will require MasterCard to use its best endeavors to promote the
HomeSend service utilising MasterCard's sales channels.
There are conditions precedent to the creation of the HomeSend joint
venture and those conditions, together with a summary of the material
terms and conditions of the HomeSend joint venture have been included
in the regulatory announcement dated 19 December 2013.
As a result of the transfer of its Homesend business to the HomeSend
joint venture, eServGlobal will recognise a gain on disposal of
between EUR23.5m - EUR24.2m in 2014 ($33.9m - $35.0m) based on consideration
of EUR30.0m ($43.3m) less assets classified as held for sale and
estimated selling expenses.
The assets attributable to the HomeSend business (including the
allocated goodwill component) have been classified as "Assets classified
as held for sale" in the Consolidated Statement of Financial Position
as at 31 October 2013.
The expected taxable profit arising from the Homesend joint venture
has resulted in the recognition of a deferred tax asset and associated
income tax credit of EUR4.7M ($6.8M) as at 31 October 2013 relating
to recoupment of income tax losses not previously recognised by
the consolidated entity.
On 23 December 2013 eServGlobal announced that it had entered into
a subscription agreement with an existing Australian institutional
investor for the Company to issue 4,500,000 fully paid ordinary
shares at AUD$0.75 (GBP0.41) per share, raising AUD$3.375M (GBP1.843M).
No fees were payable on the placement.
The 4,500,000 fully paid ordinary shares were issued on 30 December
2013 (being represented by depositary interests in CREST) and admitted
to AIM on 30 December 2013. Following the issue, the Company's total
issued share capital is 253,545,997 fully paid ordinary shares of
no par value.
Directors' report
Future developments
Details of future developments in the Group are contained in the
Chairmans review and CEO's report on pages 2 and 3. 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 Group, this information has not been disclosed
in this report.
Environmental regulations
The Group 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 (2012:
nil)
Share options
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 Board believes that
the options scheme has a significant role to play in motivating
employees to help ensure the continued performance of the company.
The exercise of any share options is not dependant on any performance
criteria, however, is dependent on a period of service relative
to the vesting dates.
Share options granted to directors and senior management
During the financial year and up to the date of this report the
company granted 2,400,000 options to the directors and senior management
of the entity (2012: 10,200,000). 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:
Number of
shares under Class of Exercise price Expiry date of
Issuing Entity option shares of option options
-------------------- ------------- -------- -------------- --------------
eServGlobal Limited 500,000 Ordinary $0.36 31 May 2014
-------------------- ------------- -------- -------------- --------------
eServGlobal Limited 6,200,000 Ordinary $0.36 14 May 2017
-------------------- ------------- -------- -------------- --------------
eServGlobal Limited 1,600,000 Ordinary $0.36 21 Dec 2017
-------------------- ------------- -------- -------------- --------------
eServGlobal Limited 800,000 Ordinary $0.36 10 Jun 2018
-------------------- ------------- -------- -------------- --------------
During the financial year and up to the date of this report,
there were no options exercised.
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 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' report
Directors' attendance at Board and Committee meetings held
during the financial year
Board of Directors Special Purpose Audit Committee Remuneration
Committees and Nomination
Committee
------------------ --------------------- ------------------- ------------------- -------------------
Directors Held Attended Held(#) Attended Held(*) Attended Held(*) Attended
(*)
------------------ ------- ------------ -------- --------- -------- --------- -------- ---------
David Smart 9 8 1 1 3 3 - -
------------------ ------- ------------ -------- --------- -------- --------- -------- ---------
François
Barrault 15 13 - - - - 11 11
------------------ ------- ------------ -------- --------- -------- --------- -------- ---------
Richard Mathews 15 13 2 1 - - - -
------------------ ------- ------------ -------- --------- -------- --------- -------- ---------
James Brooke 10 7 2 1 - - - -
------------------ ------- ------------ -------- --------- -------- --------- -------- ---------
Stephen Baldwin 15 14 4 4 5 5 11 11
------------------ ------- ------------ -------- --------- -------- --------- -------- ---------
Craig Halliday 15 13 - - - - - -
------------------ ------- ------------ -------- --------- -------- --------- -------- ---------
John Conoley 5 5 - - 2 2
------------------ ------- ------------ -------- --------- -------- --------- -------- ---------
Paolo Montessori 5 5 - - - -
------------------ ------- ------------ -------- --------- -------- --------- -------- ---------
Stephen Blundell 5 5 1 1 - -
------------------ ------- ------------ -------- --------- -------- --------- -------- ---------
(*) Held during term of director's appointment to Board, Audit
or Remuneration and Nomination Committees.
(#) Special purpose committees established during the financial
year with the delegated authority of the Board to consider specific
matters to which the Director was appointed. The special purpose
committees dissolved once the delegated authority was
exercised.
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.
Auditor's independence declaration
The auditor's independence declaration is included on page 18 of
the financial report.
Rounding off of amounts
The company is a company of the kind referred to in ASIC Class Order
98/0100, dated 10 July 1998, and in accordance with that Class Order,
amounts in the directors' report and the financial report are rounded
off to the nearest thousand dollars unless otherwise indicated.
Directors' report
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 is 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.
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:
-- Richard Mathews (Non-executive Chairman)
-- Paolo Montessori (Managing director and Chief Executive
Officer appointed on 30 April 2013; Chief Operating Officer until
30 April 2013)
-- Stephen Blundell (Chief Financial Officer; appointed Finance director on 30 April 2013)
-- David Smart (Non-executive director until resignation on 22 March 2013)
-- François Barrault (Non-executive director)
-- James Brooke (Non-executive director until resignation on 1 May 2013)
-- Craig Halliday (Executive Director until resignation on 30
December 2013; Chief Executive Officer until 30 April 2013)
-- Stephen Baldwin (Non-executive director)
-- John Conoley (Non-executive director appointed on 1 May 2013)
-- Remi Arame (Chief Sales Officer)
-- James Hume (Chief Technology Officer appointed on 1 October 2012)
Except as noted, the named persons held their current positions
for the financial year and since the end of the financial year.
Directors' report
Elements of key management personnel remuneration
Non-executive directors are paid directors' fees and, in the
case of those who are Australian based, compulsory superannuation
fund contributions are made on their behalf. The Board reviews the
level of fees from time to time, and sets individual non-executive
directors fees based on the levels of fees for comparable listed
companies in the appropriate parts of the world. During the year,
the Board commissioned an independent benchmarking report for its
non-executive director fees and, following the receipt and
consideration of the report, reduced the fees paid to the
non-executive directors. No remuneration recommendation was
provided in the report.
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 Incentives (STI) and Long
Term Incentives (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 Chief Executive Officer (CEO) is remunerated on a salary
package basis that includes a base salary, pension contributions, 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 specific business objectives. The
CEO is a permanent employee with no fixed employment term and a
notice period of five months required by either party.
The Chief Financial Officer (CFO) is remunerated on a salary
package basis that includes a base salary, pension contributions
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 CFO is a permanent employee with no fixed
employment term and a notice period of six months required by
either party.
The Chief Sales Officer (CSO) is remunerated on a salary package
that includes a base salary, a portion that is a variable component
(which is dependent on agreed performance objectives relating to
sales), pension contributions and various allowances such as
housing and education. The CSO is a permanent employee with no
fixed employment term and a notice period of thirty days 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.
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.
Directors' report
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 substantial portion of the variable component
of their packages is directly linked to financial outcomes of eServGlobal.
The targets are established annually and are approved by the Board
at the same time as approval of the Group's business plan. The two
key measures of this are: annual revenue and earnings before interest,
tax, depreciation and amortisation components. This component is
confirmed in conjunction with the completion of the financial statements.
The CEO, CSO and CFO variable component is earned in full by reference
to the financial result of the company. 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 two years to
June 2011, the four month period to 31 October 2011 and the two
years to 31 October 2012 and 2013.
31 October 31 October 31 October 30 June 30 June
2013 2012 2011 2011 2010
$'000 $'000 $'000 $'000 $'000
----------- ---------
Revenue 31,003 28,070 7,017 42,808 78,015
EBITDA 7,279 (8,656) (6,186) 52,173 (20,574)
Net profit/(loss) after tax 10,374 (15,589) (9,258) 39,159 (32,286)
----------------------------- ----------- ----------- ----------- -------- ---------
31 October 31 October 31 October 30 June 30 June
2013 2012 2011 2011 2010
-----------
Share price at start of year $0.200 $0.520 $0.730 $0.600 $0.455
Share price at end of year $0.515 $0.200 $0.520 $0.730 $0.600
Interim dividend - - - - -
Final dividend - - 12.1 cps - -
Capital distribution - - 16.9 cps - -
Basic earnings/(loss) per
share 4.3 (8.0) (4.7) 19.8 (16.5)
Diluted earnings/(loss) per
share 4.2 (8.0) (4.7) 19.8 (16.5)
------------------------------ ----------- ----------- ----------- -------- --------
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:
Post
Employment Share based
Short-term employee benefits benefits payments
----------------------------------------- ---------------- ------------ --------------
Percentage
of
Bonus (incl. remuneration
Salary & variable Superannuation Termination related to
2013 fees pay component) Non-monetary Options Benefits Total performance
--------------
$ $ $ $ $ $ $ %
----- --------- --------------- ------------- ---------------- ------------ ------------ ------ --------------
Non-executive Directors
R Mathews 130,000 - - 6,300 - - 136,300 -
S Baldwin 91,142 - - - - - 91,142 -
F Barrault 79,422 - - - - - 79,422 -
J Brooke (i) (viii) - - - - - - - -
J Conoley (vi) 37,392 - - - - - 37,392 -
D Smart (vii) 33,360 - - 3,002 - - 36,362 -
Group's other Key
Management Personnel
C Halliday (v)
(x) 282,602 208,159 24,060 - (48,888) 278,333 744,266 21%
R Arame (ii) (iii) 268,875 239,015 43,474 36,881 61,923 - 650,168 46%
S Blundell (ii)
(iv) 263,524 - 724 14,209 72,083 - 350,540 21%
P Montessori (ii)
(iii) (ix) 346,329 2,098 60,410 - 90,903 - 499,740 19%
J Hume 185,740 - - - 66,927 - 252,667 26%
Total 1,718,386 449,272 128,668 60,392 242,948 278,333 2,877,999 -
------------------------- ---------- -------- -------- ------- --------- -------- ---------- ----
(i) J Brooke agreed to receive no benefit for his services until his resignation on 1 May 2013.
(ii) Key management personnel are remunerated on a salary
package basis that includes an appropriate portion that is a
variable component which is dependent on company performance. Key
management personnel had their variable pay components confirmed in
conjunction with the completion of the financial statements. The
variable components for key management personnel were confirmed on
the achievement of customer orders or earnings before interest,
tax, depreciation and amortisation targets established during the
financial year.
(iii) Paid in Euros and subject to foreign exchange fluctuations at Group level.
(iv) Paid in GBP and subject to foreign exchange fluctuations at Group level.
(v) Paid in USD and subject to foreign exchange fluctuations at Group level.
(vi) Appointed on 1 May 2013.
(vii) Retired as a Director on 22 March 2013.
(viii) Resigned on 1 May 2013.
(ix) Appointed Managing Director and Chief Executive Officer on 30 April 2013.
(x) Resigned as Managing Director and Chief Executive Officer on
30 April 2013. Resigned as executive director on 30 December 2013.
The total value of C Halliday's share options which lapsed is
$190,845.
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:
Post
Employment Share based
Short-term employee benefits benefits payments
----------------------------------------- ---------------- ------------ --------------
Percentage
of
Bonus (incl. remuneration
Salary & variable Superannuation Termination related to
2012 fees pay component) Non-monetary Options Benefits Total performance
--------------
$ $ $ $ $ $ $ %
----- --------- --------------- ------------- ---------------- ------------ ------------ ------ --------------
Non-executive Directors
R Mathews 140,000 - - 12,600 - - 152,600 -
S Baldwin (vi) 87,083 - - - - - 87,083 -
F Barrault 82,004 - - - - - 82,004 -
J Brooke (i) - - - - - - - -
D Smart 85,000 - - 7,650 - - 92,650 -
Group's other Key
Management Personnel
R Arame (ii) (iii) 253,849 194,579 41,762 35,429 73,058 - 598,677 45%
S Blundell (ii)
(iv) 246,077 108,493 - 13,772 73,058 - 441,400 41%
C Halliday (ii)
(v) 506,040 542,529 20,399 - 144,508 - 1,213,476 57%
P Montessori (ii)
(iii) (vii) 187,500 91,689 - - 18,678 - 297,867 37%
Total 1,587,553 937,290 62,161 69,451 309,302 - 2,965,757 -
------------------------- ---------- -------- ------- ------- -------- --- ---------- ----
(i) J Brooke has agreed that he receive no benefit for his services.
(ii) Key management personnel are remunerated on a salary
package basis that includes an appropriate portion that is a
variable component which is dependent on company performance. Key
management personnel had their variable pay components confirmed in
conjunction with the completion of the financial statements. The
variable components for key management personnel were confirmed on
the achievement of customer orders or earnings before interest,
tax, depreciation and amortisation targets established during the
financial year.
(iii) Paid in Euros and subject to foreign exchange fluctuations at Group level.
(iv) Paid in GBP and subject to foreign exchange fluctuations at Group level.
(v) Paid in USD and subject to foreign exchange fluctuations at Group level.
(vi) Appointed on 25 November 2011.
(vii) Appointed on 6 February 2012.
Directors' report
Directors' shareholdings
The following table sets out each director's relevant interest in
shares and options in shares of the company or a related body corporate
during the financial year and as at the date of this report.
Directors Fully paid ordinary Executive share options
shares
John Conoley - -
-------------------------- ------------------------- --------------------------
François Barrault 500,000 -
-------------------------- ------------------------- --------------------------
Richard Mathews 10,679,512 (1) -
-------------------------- ------------------------- --------------------------
Paolo Montessori - 1,250,000
-------------------------- ------------------------- --------------------------
Stephen Blundell - 1,250,000
-------------------------- ------------------------- --------------------------
Stephen Baldwin 932,600 -
-------------------------- ------------------------- --------------------------
(1) Shares are held by Paua Pty Ltd.
Share-based payments granted as compensation for the current financial
year
During the financial year, the following share-based payment
arrangements were in existence.
Grant date
Options series Grant date Expiry date Exercise price fair value
---------------------- ------------ ------------- --------------- ------------
Issued 27 April 2012
(i) 27-Apr-12 2017 $0.36000 $0.13
---------------------- ------------ ------------- --------------- ------------
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
---------------------- ------------ ------------- --------------- ------------
(i) The options in these 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 these series vest fully on 21 December
2014 and expire on 21 December 2017.
(iii) Options issued in this series vest as to one half on 10
June 2014 and the balance on 10 June 2015 and expire on 10 June
2018.
Value of 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.
1,500,000 options held by Craig Halliday lapsed during the
yearfollowing his resignation as the Group's Chief Executive
Officer and Managing Director.
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. No options vested
during the year.
The following table discloses the options granted, exercised or
lapsed during the financial year:
Directors' report
Name Number of Value of Value of options Value of
options options granted exercised options
granted at the grant at the exercise lapsed
date (i) date (ii)
$ $ $
-------------- ---------- ----------------- ----------------- ---------
R Arame 150,000 39,438 - -
-------------- ---------- ----------------- ----------------- ---------
S Blundell 250,000 65,730 - -
-------------- ---------- ----------------- ----------------- ---------
P Montessori 500,000 131,461 - -
-------------- ---------- ----------------- ----------------- ---------
J Hume 650,000 161,370 - -
-------------- ---------- ----------------- ----------------- ---------
C Halliday - - - 190,845
-------------- ---------- ----------------- ----------------- ---------
(i) The value of options granted during the period is recognised
in compensation over the vesting period of the grant, in accordance
with the Australian Accounting Standards.
(ii) The value of options lapsing during the period due to the
failure to satisfy a vesting condition is determined assuming the
vesting condition has been satisfied.
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
Richard Mathews
Chairman
31 January 2014
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Grosvenor Place
225 George Street
Sydney NSW 2000
PO Box N250 Grosvenor Place
Sydney NSW 1220 Australia
Tel: +61 2 9322 7000
Fax: +61 (0)2 9322 7001
www.deloitte.com.au
The Board of Directors
eServGlobal Limited
c/- Simpsons Solicitors
Level 2, Pier 8/9
23 Hickson Road,
Millers Point NSW 2000
31 January 2014
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
2013, 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.
Member of Deloitte Touche Tohmatsu Limited
Corporate governance statement
The eServGlobal Limited board is responsible for establishing
the corporate governance framework of the group having regard to
the ASX Corporate Governance Council (CGC) published guidelines as
well as its corporate governance principles and recommendations.
eServGlobal is also required to comply with, inter alia, the
Corporations Act 2001 (Cwth), the ASX Listing Rules and the London
Stock Exchange AIM Rules for Companies. The table below and
accompanying statement outlines the main corporate governance
practices of eServGlobal during the financial year and the extent
of eServGlobal's compliance with the CGC's recommendations as at
the date of this report.
Recommendation Comply
---- -------------------------------------------------------------- -------
Principle 1 - Lay solid foundations for management and
oversight
1.1 Companies should establish the functions reserved
to the board and those delegated to senior executives
and disclose those functions.
1.2 Companies should disclose the process for evaluating
the performance of senior executives.
1.3 Companies should provide the information indicated *
in the Guide to reporting on Principle 1.
Recommendation Comply
---- -------------------------------------------------------------- -------
Principle 2 - Structure the board to add value
2.1 A majority of the board should be independent directors. *
2.2 The chair should be an independent director. *
2.3 The roles of chair and chief executive officer (CEO)
should not be exercised by the same individual.
2.4 The board should establish a nomination committee.
2.5 Companies should disclose the process for evaluating
the performance of the board, its committees and
individual directors.
2.6 Companies should provide the information indicated *
in the Guide to reporting on Principle 2.
Recommendation Comply
---- -------------------------------------------------------------- -------
Principle 3 - Promote ethical and responsible decision-making
3.1 Companies should establish a code of conduct and
disclose the code or a summary of the code as to:
* The practices necessary to maintain confidence in the
company's integrity;
* The practices necessary to take into account their
legal obligations and the reasonable expectations of
their stakeholders; and
* The responsibility and accountability of individuals
for reporting and investigating reports of unethical
practices.
3.2 Companies should establish a policy concerning diversity x
and disclose the policy or a summary of that policy.
The policy should include requirements for the board
to establish measurable objectives for achieving
gender diversity for the board to assess annually
both the objectives and the progress in achieving
them.
3.3 Companies should disclose in each annual report x
the measurable objectives for achieving gender diversity
set by the board in accordance with the diversity
policy and progress towards achieving them.
3.4 Companies should disclose in each annual report
the proportion of women employees in the whole organisation,
women in senior executive positions and women on
the board.
3.5 Companies should provide the information indicated
in the Guide to reporting on Principle 3.
Corporate governance statement
---- -------------------------------------------------------------- -------
Recommendation Comply
---- -------------------------------------------------------------- -------
Principle 4 - Safeguard integrity in financial reporting
4.1 The board should establish an audit committee.
4.2 The audit committee should be structured so that *
it:
* Consists only of non-executive Directors.
* Consists of a majority of independent Directors.
* Is chaired by an independent chair, who is not chair
of the board.
* Has at least three members.
4.3 The audit committee should have a formal charter.
4.4 Companies should provide the information indicated *
in the Guide to reporting on Principle 4.
Recommendation Comply
---- -------------------------------------------------------------- -------
Principle 5 - Make timely and balanced disclosure
5.1 Companies should establish written policies designed
to ensure compliance with ASX listing rule disclosure
requirements and to ensure accountability at a senior
executive level for that compliance and disclose
those policies or a summary of those policies.
5.2 Companies should provide the information indicated
in the Guide to reporting on Principle 5.
Recommendation Comply
---- -------------------------------------------------------------- -------
Principle 6 - Respect the rights of shareholders
6.1 Companies should design a communications policy
for promoting effective communication with shareholders
and encouraging their participation at general meetings
and disclose their policy or a summary of that policy.
6.2 Companies should provide the information indicated
in the Guide to reporting on Principle 6.
Recommendation Comply
---- -------------------------------------------------------------- -------
Principle 7 - Recognise and manage risk
7.1 Companies should establish policies for the oversight *
and management of material business risks and disclose
a summary of those policies.
7.2 The board should require management to design and
implement the risk management and internal control
system to manage the Company's material business
risks and report to it on whether those risks are
being managed effectively. The board should disclose
that management has reported to it as to the effectiveness
of the Company's management of its material business
risks.
7.3 The board should disclose whether it has received
assurance from the CEO [or equivalent] and the Chief
Financial Officer (CFO) [or equivalent] that the
declaration provided in accordance with section
295A of the Corporations Act is founded on a sound
system of risk management and internal control and
that the system is operating effectively in all
material respects in relation to financial reporting
risks.
7.4 Companies should provide the information indicated
in the Guide to reporting on Principle 7.
Recommendation Comply
---- -------------------------------------------------------------- -------
Principle 8 - Remunerate fairly and responsibly
8.1 The board should establish a remuneration committee.
8.2 The remuneration committee should be structured *
so that it:
* Consists of a majority of independent Directors.
* Is chaired by an independent chair.
* Has at least three members.
8.3 Companies should clearly distinguish the structure
of non-executive directors' remuneration from that
of executive directors and senior executives.
8.4 Companies should provide the information indicated *
in the Guide to reporting on Principle 8.
* indicates partial compliance. Refer to further details below.
Corporate governance statement
Principle 1. Lay solid foundations for management and oversight
1.1 Companies should establish the functions reserved to the board
and those delegated to senior executives and disclose those functions.
The primary responsibilities of eServGlobal's board include:
* the establishment of long term goals of the company
and strategic plans to achieve those goals;
* the review and adoption of the annual business plan
and budgets for the financial performance of the
company and monitoring the results on a monthly
basis;
* the appointment of the Chief Executive Officer;
* ensuring that the company has implemented adequate
systems of internal control together with appropriate
monitoring of compliance activities; and
* the approval of the annual and half-yearly financial
statements and reports.
The board meets on a regular basis, on average at least once monthly,
to review the performance of the company against its goals, both
financial and non-financial. In normal circumstances, prior to the
scheduled monthly board meetings, each board member is provided
with a formal board package containing appropriate management and
financial reports.
The responsibilities of senior management including the Chief Executive
Officer are contained in letters of appointment and job descriptions
given to each executive on appointment and updated annually or as
required.
The primary responsibilities of senior management are to:
(i) Achieve the annual business plan and budget
(ii) Ensure the highest standards of quality and service are delivered
to customers
(iii) Ensure that employees are supported, developed and rewarded
to the appropriate professional standards
(iv) Ensure that the company continues to produce innovative technology
and leading products
Decision making in respect of the functions reserved for the board
and those delegated to management is in accordance with a delegation
of authority policy and procedures adopted by the board.
1.2 Companies should disclose the process for evaluating the performance
of senior executives.
The performance of all senior executives is reviewed at least once
a year by the Chief Executive Officer, in conjunction with the full
board. They are assessed against personal and company key performance
indicators established at the start of each calendar year for each
individual. For more detail, refer to the Remuneration Report.
1.3 Companies should provide the information indicated in the Guide
to reporting on Principle 1.
A performance evaluation for each senior executive has taken place
in the reporting period in line with the process disclosed. A statement
covering the primary responsibilities of the board is set out in
1.1 above. A statement covering the primary responsibilities of
the senior management is set out in 1.1 above. A copy of the board
charter is not publicly available.
Corporate governance statement
Principle 2. Structure the board to add value
2.1 A majority of the board should be independent directors.
The eServGlobal board consists of four non-executive directors and
two executive directors. John Conoley, Stephen Baldwin and Francois
Barrault are considered to be independent directors. David Smart
was also considered an independent director during his tenure with
the board. Richard Mathews and James Brooke were not considered
to be independent by virtue of being associated with substantial
shareholders of the company during the financial year. Craig Halliday
was not considered independent as he is a former Chief Executive
Officer of the company and associated with a former substantial
shareholder of the Company. As such, during the financial year a
majority of the board were not independent directors.
At the date of this Annual Report, Richard Mathews has ceased to
be associated with a substantial shareholder of the Company and
as his executive role with the company ceased more than three years
ago, he is now considered an independent director. Accordingly,
the board is currently composed of four independent and two non-independent
directors.
2.2 The chair should be an independent director.
Richard Mathews is a former Chief Executive Officer of the Company
and stepped into the position of Chairman of the Board in 2010.
While this movement resulted in a chairman who is not independent,
the company believes that a chairman with a strong knowledge of
the company's operations has been in the best interests of the company.
Due to the passage of time since his executive role with the company
and his ceasing to be associated with a substantial shareholder
since the end of the financial year, the Chairman is independent
at the date of this Annual Report.
2.3 The roles of chair and chief executive officer should not be
exercised by the same individual.
Richard Mathews is the company's Chairman and Paolo Montessori is
the Chief Executive Officer.
2.4 A nomination committee should be established.
The Company has established a Remuneration and Nomination Committee.
The members of this Committee are Francois Barrault and Stephen
Baldwin. Many of the functions of the Remuneration and Nomination
Committee were also carried out in conjunction with the full board.
2.5 Companies should disclose the process for evaluating the performance
of the board, its committees and individual directors.
The Chairman undertakes an annual informal evaluation process in
reviewing the performance of directors and the board.
2.6 Companies should provide the information indicated in the Guide
to reporting on Principle 2
A description of the skills and experience of each director is contained
in the Directors' Report.
The names of the directors considered to be independent are specified
in 2.1 above.
Directors are able to take independent professional advice at the
expense of the company, with the prior agreement of the chairman.
The period of office held by each director is specified in the Directors'
Report.
An evaluation of the board of directors did take place during the
reporting period as described at 2.5 above.
New directors are selected by and voted on by the board. The board
does not have a formal policy for the nomination and appointment
of directors but considers the position on merit on a case by case
basis. Any director appointed by the board must retire at the next
Annual General Meeting of the company but may submit himself/herself
for re-election. Further, each year, a third of directors retire
by rotation and are subject to re-election by shareholders at the
Annual General Meeting.
A copy of the Remuneration and Nomination Committee charter is not
publicly available.
Corporate governance statement
Principle 3. Promote ethical and responsible decision-making
3.1 Companies should establish a code of conduct and disclose the
code or a summary of the code as to:
* the practices necessary to maintain confidence in the
company's integrity;
* the practices necessary to take into account their
legal obligations and the reasonable expectations of
their stakeholders; and
* the responsibility and accountability of individuals
for reporting and investigating reports of unethical
practices.
eServGlobal Limited's policies contain a formal code of ethics that
applies to all directors and employees, who are expected to maintain
a high standard of conduct and work performance, and observe standards
of equity and fairness in dealing with others. The detailed policies
and procedures encapsulate the company's ethical standards.
The code of ethics is available on the company's website www.eservglobal.com.
3.2 Companies should establish a policy concerning diversity and
disclose the policy or a summary of that policy. The policy should
include requirements for the board to establish measurable objectives
for achieving gender diversity for the board to assess annually
both the objectives and the progress in achieving them.
The company has not established a policy concerning diversity.
3.3 Companies should disclose in each annual report the measurable
objectives for achieving gender diversity set by the board in accordance
with the diversity policy and progress towards achieving them.
The company has not established measurable objectives for achieving
gender diversity
3.4 Companies should disclose in each annual report the proportion
of women employees in the whole organisation, women in senior executive
positions and women on the board.
The proportion of women within the organisation is: 26%
Women within whole organisation: 48
Women in senior executive positions: 29%
Women on the board: none
3.5 Companies should provide the information indicated in the Guide
to reporting on Principle 3.
The company's business operations are conducted worldwide, and its
Code of Ethics has been designed to accommodate the business operations
of all the countries in which the company operates. The Code of
Ethics complies with Principle 3.1.
Corporate governance statement
Principle 4. Safeguard integrity in financial reporting
4.1 The board should establish an audit committee.
The company has established an Audit Committee.
4.2 The audit committee should be structured so that it:
* consists only of non-executive directors.
* consists of a majority of independent directors.
* is chaired by an independent chair, who is not chair
of the board.
* has at least three members.
Until 22 March 2013, The Audit Committee comprised David Smart and
Stephen Baldwin at which date David Smart retired as a director.
On 1 May 2013, John Conoley was appointed to the Audit Committee.
All members of the Audit Committee are independent directors. Despite
not having at least three members, the board believes that the Audit
Committee is of an appropriate size for the company.
4.3 The audit committee should have a formal charter.
The company has adopted an Audit Committee charter.
4.4 Companies should provide the information indicated in the Guide
to reporting on Principle 4
The names and qualifications of the audit committee members and
the number of meetings of the audit committee are contained in the
Directors' Report.
The Audit Committee charter is not publicly available on the company's
website.
The Audit Committee meets with and receives regular reports from
the external auditors concerning any matters that arise in connection
with the performance of their role, including the adequacy of internal
controls.
In conjunction with the auditors, the Audit Committee monitors the
term of the external audit engagement partner and ensures that the
regulatory limit for such term is not exceeded. At the completion
of the term, or earlier in some circumstances, the auditor nominates
a replacement engagement partner. The Audit Committee interviews
the nominee to assess relevant prior experience, potential conflicts
of interest and general suitability for the role. If the nominee
is deemed suitable, the Audit Committee reports to the board on
its recommendation.
Principle 5. Make timely and balanced disclosure
5.1 Companies should establish written policies designed to ensure
compliance with ASX listing rule disclosure requirements and to
ensure accountability at a senior executive level for that compliance
and disclose those policies or a summary of those policies.
The eServGlobal board, Company Secretary and senior management are
aware of the ASX Listing Rules, AIM Rules and Corporations Act disclosure
requirements, and take steps to actively monitor and ensure ongoing
compliance. At each board meeting, there is a separate agenda item
on this topic where directors review the disclosures made by the
company over the past month and consider any existing issues that
may give rise to further required disclosure.
The Chairman and Chief Executive Officer continually monitor developments
in the company and its business and in conjunction with the Company
Secretary report any developments immediately to the board
Corporate governance statement
for consideration. All announcements are reviewed by the Company
Secretary and/or other external advisers before release to the ASX
or AIM.
5.2 Companies should provide the information indicated in the
Guide to reporting on Principle 5.
The company's continuous disclosure policy is described above.
Principle 6. Respect the rights of shareholders
6.1 Companies should design a communications policy for promoting
effective communication with shareholders and encouraging their
participation at general meetings and disclose their policy or a
summary of that policy.
eServGlobal provides information to its shareholders through the
formal communications processes (eg ASX & AIM announcements, annual
general meeting, annual report, and shareholder letters). This material
is also available on the eServGlobal website (www.eservglobal.com)
and on the ASX and AIM websites.
Shareholders are encouraged to participate in the AGMs and time
is set aside for formal and informal questioning of the board and
senior management.
The company requests that its external auditor attend the annual
general meeting and be available to answer any shareholder questions
about the conduct of the audit and the preparation and content of
the audit report.
6.2 Companies should provide the information indicated in the Guide
to reporting on Principle 6.
The company's communications policy is described in 6.1 above.
Principle 7. Recognise and manage risk
7.1 Companies should establish policies for the oversight and management
of material business risks and disclose a summary of those policies.
The board monitors the risks and internal controls of eServGlobal
in conjunction with the Audit Committee. The Audit Committee looks
to the Chief Executive Officer and Chief Financial Officer to ensure
that an adequate system is in place to identify and, where possible,
appropriately manage and mitigate risks inherent in the business,
and to implement appropriate internal controls.
Categories of risks managed cover all major aspects of a global
technology company. The details are not disclosed as this may disadvantage
the company in regard to its competitors.
7.2 The board should require management to design and implement
the risk management and internal control system to manage the Company's
material business risks and report to it on whether those risks
are being managed effectively. The board should disclose that management
has reported to it as to the effectiveness of the Company's management
of its material business risks.
The board has required management to design and implement the risk
management and internal control system to manage the company's material
business risks and report to it on whether those risks are being
managed effectively. Management has reported to the board as to
the effectiveness of the company's management of its material business
risks.
7.3 The board should disclose whether it has received assurance
from the CEO [or equivalent] and the Chief Financial Officer (CFO)
[or equivalent] that the declaration provided in accordance with
section 295A of the Corporations Act is founded on a sound system
of risk management and internal control and that the system is operating
effectively in all material respects in relation to financial reporting
risks.
The board has received assurance from the Chief Executive Officer
and the Chief Financial Officer that the declaration provided in
accordance with section 295A of the Corporations Act 2001 is founded
on a sound system of risk management and internal control and that
the system is operating effectively in all material
Corporate governance statement
respects in relation to financial reporting risks.
7.4 Companies should provide the information indicated in the guide
to reporting on Principle 7.
The board has received the report from management under recommendation
7.2; the board has received assurance from the Chief Executive Officer
and the Chief Financial Officer under recommendation 7.3; the company's
policies on risk oversight and management of material business risks
are not publicly available for the reason specified above.
Principle 8. Remunerate fairly and responsibly
8.1 The board should establish a remuneration committee.
The Company has established a Remuneration and Nomination Committee.
The members of that Committee are Francois Barrault and Stephen
Baldwin.
8.2 The remuneration committee should be structured so that it:
-- Consists of a majority of independent directors
-- Is chaired by an independent chair
-- Has at least three members.
The committee consists of a majority of independent directors.
The committee is chaired by Francois Barrault and despite not having
three members the board believes the size of the committee is appropriate
to discharge its mandate.
8.3 Companies should clearly distinguish the structure of non-executive
directors' remuneration from that of executive directors and senior
executives.
Non-executive directors are paid a fixed directors fee as set out
in the Directors' Report.
Senior executives remuneration packages, which consist of base salary,
fringe benefits, incentive schemes (including performance related
bonuses), superannuation and pension payments and entitlements upon
retirement or termination, are reviewed annually with due regard
to performance.
8.4 Companies should provide the information indicated in the guide
to reporting on Principle 8.
The members of the Remuneration and Nomination Committee and its
operation are described above.
There are no schemes for retirement benefits, other than superannuation,
for non-executive directors. Non-executive directors do not receive
options or bonus payments.
A copy of the Remuneration and Nomination committee charter is not
publicly available.
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Grosvenor Place
225 George Street
Sydney NSW 2000
PO Box N250 Grosvenor Place
Sydney NSW 1220 Australia
Tel: +61 2 9322 7000
Fax: +61 (0)2 9322 7001
www.deloitte.com.au
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 2013, 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 29 to 76.
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.
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 2013 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.
Report on the Remuneration Report
We have audited the Remuneration Report included in pages 11 to
17 of the directors' report for the year ended 31 October 2013. 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 2013, complies with section 300A of
the Corporations Act 2001.
DELOITTE TOUCHE TOHMATSU
Michael Kaplan
Partner
Chartered Accountants
Sydney, 31 January 2014
Directors' declaration
The directors declare that:
(a) in the directors' opinion, there are reasonable grounds to
believe that the company will be able to pay its debts as and when
they become due and payable;
(b) 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
Richard Mathews
Chairman
Brisbane, 31 January 2014
Consolidated statement of profit or loss and other comprehensive
income for the financial year ended 31 October 2013
Year Ended Year Ended
31 October 31 October
2013 2012
Note $'000 $'000
------------------------------------------------ ----- ------------ ------------
Revenue 2 31,003 28,070
Cost of sales (11,789) (12,267)
------------------------------------------------ ----- ------------ ------------
Gross profit 19,214 15,803
Other income 2 55 389
Foreign exchange gain/(loss) 8,024 (3,387)
Research and development expenses (2,717) (2,289)
Sales and marketing expenses (4,683) (6,132)
Administration expenses (12,614) (13,040)
------------------------------------------------ -----
Earnings/(loss) before interest expense,
tax, depreciation and amortisation 7,279 (8,656)
Amortisation expense 3 (1,875) (4,704)
Depreciation expense 3 (468) (637)
------------------------------------------------ -----
Earnings/(loss) before interest expense
and tax 4,936 (13,997)
Finance costs 3 (441) (1,405)
Profit/(loss) before tax 3 4,495 (15,402)
Income tax benefit/(expense) 4 5,879 (187)
------------------------------------------------ ----- ------------ ------------
Profit/(loss) for the year 10,374 (15,589)
------------------------------------------------ ----- ------------ ------------
Other comprehensive income/(loss)
Items that may be reclassified subsequently
to profit or loss:
Exchange differences arising on the
translation of foreign operations (nil
tax impact) (4,475) 1,277
------------------------------------------------ ----- ------------ ------------
Total comprehensive income/(loss) for
the year 5,899 (14,312)
------------------------------------------------ ----- ------------ ------------
Profit/(loss) attributable to:
Equity holders of the parent 10,248 (15,715)
Non-controlling interest 126 126
------------------------------------------------ ----- ------------ ------------
10,374 (15,589)
------------------------------------------------ ----- ------------ ------------
Total comprehensive income/(loss) attributable
to:
Equity holders of the parent 5,784 (14,438)
Non-controlling interest 115 126
------------------------------------------------ ----- ------------ ------------
5,899 (14,312)
------------------------------------------------ ----- ------------ ------------
Earnings/(loss) per share:
Basic (cents per share) 22 4.3 (8.0)
Diluted (cents per share) 22 4.2 (8.0)
Notes to the financial statements are included on pages 34 to
76
Consolidated statement of financial position as at 31 October
2013
31 October 31 October
2013 2012
Note $'000 $'000
------------------------------------ ------ ----------- -----------
Current Assets
Cash and cash equivalents 28(a) 4,909 3,794
Trade and other receivables 9 21,846 14,094
Inventories 11 74 158
Current tax assets 4 4,272 90
------------------------------------ ------ ----------- -----------
31,101 18,136
Assets classified as held for sale 8 7,754 -
------------------------------------ ------ ----------- -----------
Total Current Assets 38,855 18,136
------------------------------------ ------ ----------- -----------
Non-Current Assets
Property, plant and equipment 12 482 912
Deferred tax assets 4 10,325 6,005
Goodwill 13 3,523 5,878
Other intangible assets 14 - 3,508
------------------------------------ ------ ----------- -----------
Total Non-Current Assets 14,330 16,303
------------------------------------ ------ ----------- -----------
Total Assets 53,185 34,439
------------------------------------ ------ ----------- -----------
Current Liabilities
Trade and other payables 15 8,143 7,816
Borrowings 16 3,000 1,200
Current tax payables 4 150 69
Provisions 17 1,800 1,724
Deferred Revenue 18 1,989 2,125
------------------------------------ ------ ----------- -----------
Total Current Liabilities 15,082 12,934
------------------------------------ ------ ----------- -----------
Non-Current Liabilities
Borrowings 16 - 6,000
Provisions for employee benefits 17 749 431
------------------------------------ ------ ----------- -----------
Total Non-Current Liabilities 749 6,431
------------------------------------ ------ ----------- -----------
Total Liabilities 15,831 19,365
------------------------------------ ------ ----------- -----------
Net Assets 37,354 15,074
------------------------------------ ------ ----------- -----------
Equity
Issued capital 19 106,695 90,770
Reserves 20 (4,090) (82)
Accumulated Losses 21 (65,451) (75,699)
------------------------------------ ------ ----------- -----------
Parent entity interest 37,154 14,989
Non-controlling interest 200 85
------------------------------------ ------
Total Equity 37,354 15,074
------------------------------------ ------ ----------- -----------
Notes to the financial statements are included on pages 34 to
76
Consolidated statement of changes in equity for the year ended
31 October 2013
Foreign Employee Retained Attributable
Currency equity-settled Earnings to owners
Issued Translation benefits (Accumu-lated of the Non-controlling
Capital Reserve Reserve Losses) parent Interest Total
$'000 $'000 $'000 $'000 $'000 $'000 $'000
--------- ------------- --------------- --------------- ------------- ---------------- --------
Consolidated
Balance at 1
November
2012 90,770 (2,099) 2,017 (75,699) 14,989 85 15,074
--------------- --------- ------------- --------------- --------------- ------------- ---------------- --------
Profit for the
year - - - 10,248 10,248 126 10,374
Other
comprehensive
income
(loss) for the
year,
net of income
tax
Exchange
differences
arising on
translation
of foreign
operations - (4,464) - - (4,464) (11) (4,475)
--------------- --------- ------------- --------------- --------------- ------------- ---------------- --------
Total
comprehensive
income
(loss) for
the year - (4,464) - 10,248 5,784 115 5,899
Issue of new
shares (Note
19) 15,925 - - - 15,925 - 15,925
Equity settled
payments - - 456 - 456 - 456
--------------- --------- ------------- --------------- --------------- ------------- ---------------- --------
Balance at 31
October
2013 106,695 (6,563) 2,473 (65,451) 37,154 200 37,354
--------------- --------- ------------- --------------- --------------- ------------- ---------------- --------
Balance at 1 November
2011 90,770 (3,376) 1,393 (59,984) 28,803 70 28,873
---------------------------- ------- -------- ------ --------- --------- ------ ---------
Profit/(Loss) for the
year - - - (15,715) (15,715) 126 (15,589)
Other comprehensive income
(loss) for the year,
net of income tax
Exchange differences
arising on translation
of foreign operations - 1,277 - - 1,277 - 1,277
---------------------------- ------- -------- ------ --------- --------- ------ ---------
Total comprehensive income
(loss) for the year - 1,277 - (15,715) (14,438) 126 (14,312)
Payment of dividends - - - - - (111) (111)
Equity settled payments - - 624 - 624 - 624
---------------------------- ------- -------- ------ --------- --------- ------ ---------
Balance at 31 October
2012 90,770 (2,099) 2,017 (75,699) 14,989 85 15,074
---------------------------- ------- -------- ------ --------- --------- ------ ---------
Notes to the financial statements are included on pages 34 to
76
Consolidated statement of cash flows for the year ended 31
October 2013
Year Ended Year Ended
31 October 31 October
2013 2012
Note $'000 $'000
--------------------------------------- ------ ------------ ------------
Cash Flows from Operating Activities
Receipts from customers 23,851 30,182
Payments to suppliers and employees (31,058) (42,083)
Interest and other finance cost
paid (591) (1,536)
Net income tax paid (1,088) (7,813)
--------------------------------------- ------
Net cash used in operating activities 28(c) (8,886) (21,250)
--------------------------------------- ------ ------------ ------------
Cash Flows From Investing Activities
Proceeds from asset disposal (escrow
deposit) - 23,307
Interest received 11 562
Payment for property, plant and
equipment (111) (140)
Software development costs (1,839) (1,826)
--------------------------------------- ------
Net cash (used in)/provided by
investing activities (1,939) 21,903
--------------------------------------- ------ ------------ ------------
Cash Flows From Financing Activities
Proceeds from issue of shares 19 16,802 -
Payment for share issue costs 19 (877) -
Dividend paid by controlled entity
to non-controlling interest - (111)
Proceeds from borrowings 3,000 2,500
Repayment of borrowings (7,200) (9,300)
--------------------------------------- ------
Net cash provided by/(used in)
financing activities 11,725 (6,911)
--------------------------------------- ------ ------------ ------------
Net Increase/(Decrease) In Cash
and Cash Equivalents 900 (6,258)
Cash At The Beginning Of The Year 3,794 10,129
Effects of exchange rate changes
on the balance of cash held in
foreign currencies 215 (77)
--------------------------------------- ------ ------------ ------------
Cash and Cash Equivalents At The
End Of The Year 28(a) 4,909 3,794
--------------------------------------- ------ ------------ ------------
Notes to the financial statements are included on pages 34 to
76
Notes to the Financial Statements for the financial year ended
31 October 2013
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.
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').
The financial statements were authorised for issue by the directors
on 31 January 2014.
Basis of preparation
The financial statements have been prepared on the basis of historical
cost. Cost is based on the fair values of the consideration given
in exchange for assets. All amounts are presented in Australian
dollars, unless otherwise noted.
The company is a company of the kind referred to in ASIC Class Order
98/100, dated 10 July 1998, and in accordance with that Class Order
amounts in the financial 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 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 and long service leave when it
is probable that settlement will be required and they are capable
of being measured reliably.
Provisions made in respect of employee benefits expected to be
settled within 12 months, are measured at their nominal values
using the remuneration rate expected to apply at the time of
settlement.
Provisions made in respect of employee benefits which are not
expected to be settled within 12 months are measured as the present
value of the estimated future cash outflows to be made by the Group
in respect of services provided by employees up to reporting
date.
Defined contribution plans
Contributions to defined contribution superannuation plans are
expensed when employees have rendered service entitling them to the
contributions.
Notes to the Financial Statements for the financial year ended
31 October 2013
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.
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, with the interest expense recognised 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.
Trade payables
Trade payables are initially measured at fair value, and are
subsequently measured at amortised cost.
Notes to the Financial Statements for the financial year ended
31 October 2013
1. SUMMARY OF ACCOUNTING POLICIES (continued)
(e) Foreign currency
Foreign currency transactions
All foreign currency transactions arising during the financial
year are brought to account using the exchange rate in effect at
the date of the transaction. Foreign currency monetary items at
reporting date are translated at the exchange rate existing at
reporting date. Non-monetary assets and liabilities carried at fair
value that are denominated in foreign currencies are translated at
the rates prevailing at the date when the fair value was
determined. Non-monetary items that are measured at historical cost
in a foreign currency are not re-translated.
Exchange differences are recognised in profit or loss in the
year in which they arise.
Foreign operations
All overseas subsidiaries, other than those that are part of the
eServGlobal Holdings SAS group, report in their functional currency
of AUD, in accordance with the requirements of AASB 121 "The
Effects of Changes in Foreign Currency Exchange Rates" and as a
consequence all exchange rate translation differences are taken to
profit or loss. The eServGlobal Holdings SAS group reports in its
functional currency of EUR and on consolidation, the assets and
liabilities of the eServGlobal Holdings SAS group are translated at
exchange rates prevailing at the reporting date. Income and expense
items are translated at the average exchange rates for the year
unless exchange rates fluctuate significantly. Exchange differences
arising, if any, are recognised in other comprehensive income and
accumulated in equity (foreign currency translation reserve).
Accumulated exchange differences are recognised in profit or loss
on disposal of the foreign operation.
Goodwill and fair value adjustments arising on the acquisition
of a foreign entity on or after the date of transition to A-IFRS
are treated as assets and liabilities of the foreign entity and
translated at exchange rates prevailing at the reporting date.
(f) Goods and services tax
Revenues, expenses and assets are recognised net of the amount
of goods and services tax (GST), except:
i. where the amount of GST incurred is not recoverable from the
taxation authority, it is recognised as part of the cost of
acquisition of an asset or as part of an item of expense; or
ii. for receivables and payables which are recognised inclusive of GST.
The net amount of GST recoverable from, or payable to, the
taxation authority is included as part of receivables or
payables.
Cash flows are included in the 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.
(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 2013
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 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 recognised
to the extent that it is probable that sufficient taxable amounts
will be available against which deductible temporary differences or
unused tax losses and tax offsets can be utilised. However,
deferred tax assets and liabilities are not recognised if the
temporary differences giving rise to them arise from the initial
recognition of assets and liabilities (other than as a result of a
business combination) which affects neither taxable income nor
accounting profit. Furthermore, a deferred tax liability is not
recognised in relation to taxable temporary differences arising
from goodwill.
Deferred tax 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 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.
Notes to the Financial Statements for the financial year ended
31 October 2013
1. SUMMARY OF ACCOUNTING POLICIES (continued)
(i) Income tax (continued)
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 or directly to equity, in
which case the deferred tax is also recognised in other
comprehensive income 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) Intangible assets
All intangible assets acquired in a business combination are
identified and recognised separately from goodwill where they
satisfy the definition of an intangible asset and their fair value
can be measured reliably.
Software and Documentation
Software and Documentation are recorded initially at fair value
and have an estimated useful life. Amortisation is charged on a
straight line basis over their useful lives.
Customer Relationships
Customer Relationships are recorded initially at fair value and
have an estimated useful life. Amortisation is charged on a
straight line basis over their useful lives.
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 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.
(k) 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.
Notes to the Financial Statements for the financial year ended
31 October 2013
1. SUMMARY OF ACCOUNTING POLICIES (continued)
(l) Leases
Operating lease payments, where substantially all of the risks
and benefits remain with the lessor, are recognised as an expense
on a straight-line basis over the lease term, except where another
systematic basis is more representative of the time pattern in
which economic benefits from the leased asset are consumed.
Contingent rentals are recognised as an expense in the 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.
(m) Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(its subsidiaries) (referred to as 'the Group' in these financial
statements). Control is achieved where the Company has the power to
govern the financial and operating policies of an entity so as to
obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the
year are included in 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.
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.
Notes to the Financial Statements for the financial year ended
31 October 2013
1. SUMMARY OF ACCOUNTING POLICIES (continued)
(n) Property, plant and equipment
Plant and equipment, office furniture and fittings and leasehold
improvements are stated at cost less accumulated depreciation and
impairment. Cost includes expenditure that is directly attributable
to the acquisition of the item. In the event that settlement of all
or part of the purchase consideration is deferred, cost is
determined by discounting the amounts payable in the future to
their present value as at the date of acquisition.
Depreciation is provided on property, plant and equipment.
Depreciation is calculated on a straight line basis so as to write
off the net cost of each asset over its expected useful life to its
estimated residual value. Leasehold improvements are depreciated
over the period of the lease or estimated useful life, whichever is
the shorter, using the straight line method. The estimated useful
lives, residual values and depreciation method are reviewed at the
end of each annual reporting period.
The following estimated useful lives are used in the calculation
of depreciation:
Office furniture and fittings 5 years
Plant and equipment 3 years
Leasehold improvements over the period of the lease
(o) Provisions
Provisions are recognised when the Group has a present
obligation, the future sacrifice of economic benefits is probable,
and the amount of the provision can be measured reliably.
The amount recognised as a provision is the best estimate of the
consideration required to settle the present obligation at
reporting date, taking into account the risks and uncertainties
surrounding the obligation. Where a provision is measured using the
cash flows estimated to settle the present obligation, its carrying
amount is the present value of those cash flows.
When some or all of the economic benefits required to settle a
provision are expected to be recovered from a third party, the
receivable is recognised as an asset if it is virtually certain
that recovery will be received and the amount of the receivable can
be measured reliably.
Onerous Contracts
An onerous contract is considered to exist where the Group has a
contract under which the unavoidable cost of meeting the
contractual obligations exceeds the economic benefits 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 2013
1. SUMMARY OF ACCOUNTING POLICIES (continued)
(q) Revenue recognition
Sale of Goods and Licences
Revenue from the sale of goods and licences is recognised when
the Group has passed control of the goods or other assets to the
buyer, except in the case of projects involving significant
customisation where revenue is recognised by reference to the stage
of completion of the project.
Rendering of Services
Revenue from services to supply custom designed and developed
software or solutions is recognised by reference to the stage of
completion of the project. The stage of completion is determined by
assessing, at the reporting date, the level of actual services
performed as a percentage of total services to be performed in
relation to the project.
Revenue recognised in advance of the corresponding bill being
raised is recorded as 'work in progress', whilst bills raised in
advance of the services being performed is recorded as 'deferred
income'.
Where a loss is expected to occur it is recognised immediately
and a provision is made in relation to any future work on the
contract.
Revenue from Support, Maintenance and Facilities Management
Agreements
Revenue from support and maintenance contracts is recognised on
a straight line basis over the contract period.
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.
(s) Derivative financial instruments and hedge accounting
The Group may use derivative financial instruments (primarily
foreign currency forward contracts) to hedge its risks associated
with foreign currency fluctuations relating to transactions arising
from specific customer orders. Derivatives are initially recognised
at fair value at the date a derivative contract is entered into and
are subsequently remeasured to their fair value at each reporting
date. The resulting gain or loss is recognised in profit or loss
immediately unless the derivative is designated and effective as a
hedging instrument, in which event, the timing of the recognition
in profit or loss depends on the nature of the hedge
relationship.
Notes to the Financial Statements for the financial year ended
31 October 2013
1. SUMMARY OF ACCOUNTING POLICIES (continued)
(s) Derivative financial instruments and hedge accounting (continued)
The fair value of all derivative financial instruments
outstanding at the reporting date are recognised in the statement
of financial position as either financial assets or financial
liabilities. Changes in the fair value of derivative financial
instruments that are designated and effective as hedges of future
cash flows are recognised directly in equity, with any ineffective
portion being recognised in profit or loss. Amounts deferred in
equity are recycled in profit or loss in the periods when the
hedged item is recognised in profit or loss in the same line of the
income statement as the recognised hedged item.
Changes in the fair value of derivative financial instruments
that do not qualify for hedge accounting are recognised in profit
or loss as they arise.
Derivatives embedded in other financial instruments, or other
non financial host contracts, are treated as separate derivatives
when their risks and characteristics are not closely related to
those of the host contract, and the host contract is not carried at
fair value with unrealised gains or losses reported in profit or
loss.
Critical accounting judgments and key sources of estimation
(t) 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 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 impairment at each reporting date by
evaluating conditions specific to the Group that may lead to
impairment of goodwill. Where an impairment trigger exists, the
recoverable amount of the asset is determined. Value--in--use
calculations performed in assessing recoverable amounts incorporate
a number of key estimates described in Note 13.
Revenue recognition
Revenue in relation to the supply of custom designed and
developed software or solutions is recognised on each project by
reference to the stage of completion of the project. The method of
calculating the percentage completion of the project involves an
element of judgement based on future project costs and
profitability of each project. The information used to forecast
these costs is based on historical events and current economic data
on a customer by customer basis.
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 is subject to compliance with the relevant tax
legislations. At the date of this report, the directors have
assessed the degree of probability of recovering the remaining
unused tax losses. Accordingly, a deferred tax asset has been
recognised to the extent that the probability criteria has been
met.
Notes to the Financial Statements for the financial year ended
31 October 2013
1. SUMMARY OF ACCOUNTING POLICIES (continued)
(u) Adoption of new and revised Accounting Standards
In the current year, the Group has adopted all of the new and
revised Standards and Interpretations issued by the Australian
Accounting Standards Board (the AASB) that are relevant to their
operations and effective for the current annual reporting period.
The adoption of these new and revised Standards and Interpretations
has resulted in no changes to the Group's accounting policies, but
has resulted in disclosure changes. Refer below.
(u.1) Standards and Interpretations affecting amounts reported
in the current year (and/or prior years)
The following new and revised Standard and Interpretation has
been adopted in the current year and has affected the presentation
of amounts reported in these financial statements.
Standards affecting presentation and disclosure
Amendments to AASB 101 'Presentation AASB 2011-9 'Amendments to Australian
of Financial Statements' Accounting Standards - Presentation
of Items of Other Comprehensive Income'
introduces new terminology for the
statement of comprehensive income and
income statement.
The amendments to AASB 101 requires
items of other comprehensive income
to be grouped into two categories in
the other comprehensive income section:
(a) items that will not be reclassified
subsequently to profit or loss and
(b) items that may be reclassified
subsequently to profit or loss when
specific conditions are met. Income
tax on items of other comprehensive
income is required to be allocated
on the same basis.
------------------------------------- ----------------------------------------------
Standards and Interpretations affecting the reported results or
financial position
There are no new and revised Standards and Interpretations
adopted in these financial statements affecting the reporting
results or financial position.
(u.2) Standards and Interpretations in issue not yet adopted
At the date of authorisation of the financial statements, the
Standards and Interpretations listed below were in issue but not
yet effective. The potential impact of the new or revised Standards
and Interpretations has not yet been determined.
Notes to the Financial Statements for the financial year ended
31 October 2013
1. SUMMARY OF ACCOUNTING POLICIES (continued)
(u.2) Standards and Interpretations in issue not yet adopted
(continued)
Effective for Expected to
Standard/Interpretation annual reporting be initially
periods beginning applied in the
on or after financial year
ending
----------------------------------------------------- ------------------- ----------------
-- AASB 10 'Consolidated Financial Statements' 1 January 2013 31 October 2014
and AASB 2011-7 'Amendments to Australian
Accounting Standards arising from the consolidation
and Joint Arrangements standards'
----------------------------------------------------- ------------------- ----------------
-- AASB 11 'Joint Arrangements' and AASB 1 January 2013 31 October 2014
2011-7 'Amendments to Australian Accounting
Standards arising from the consolidation
and Joint Arrangements standards'
----------------------------------------------------- ------------------- ----------------
-- AASB 12 'Disclosure of Interests in Other 1 January 2013 31 October 2014
Entities' and AASB 2011-7 'Amendments to
Australian Accounting Standards arising
from the consolidation and Joint Arrangements
standards'
----------------------------------------------------- ------------------- ----------------
-- AASB 13 'Fair Value Measurement' and 1 January 2013 31 October 2014
AASB 2011-8 'Amendments to Australian Accounting
Standards arising from AASB 13'
----------------------------------------------------- ------------------- ----------------
-- AASB 119 'Employee Benefits'(2011) and 1 January 2013 31 October 2014
AASB 2011-10 'Amendments to Australian Accounting
Standards arising from AASB 119 (2011)'
----------------------------------------------------- ------------------- ----------------
-- AASB 9 'Financial Instruments', and the 1 January 2017 31 October 2018
relevant amending standards
----------------------------------------------------- ------------------- ----------------
-- AASB 2011-4 'Amendments to Australian 1 July 2013 31 October 2015
Accounting Standards to Remove Individual
Key Management Personnel Disclosure Requirements'
----------------------------------------------------- ------------------- ----------------
-- AASB 2012-3 'Amendments to Australian 1 January 2014 31 October 2015
Accounting Standards -- Disclosures -- Offsetting
Financial Assets and Financial Liabilities'
----------------------------------------------------- ------------------- ----------------
-- AASB 2013-3 'Amendments to AASB 136 - 1 January 2014 31 October 2015
Recoverable Amount Disclosures for Non-Financial
Assets'
----------------------------------------------------- ------------------- ----------------
-- AASB 2013-5 'Amendments to Australian 1 January 2014 31 October 2015
Accounting Standards -- 'Investment Entities'
----------------------------------------------------- ------------------- ----------------
-- Interpretation 21 'Levies' 1 January 2014 31 October 2015
----------------------------------------------------- ------------------- ----------------
Notes to the Financial Statements for the financial year ended
31 October 2013
Consolidated
Year Ended Year Ended
31 October 31 October
2013 2012
$'000 $'000
2. REVENUE
a) Revenue from continuing operations
consisted of the following items:
Revenue from the sale of goods 12,681 9,813
Revenue from the rendering
of services 18,322 18,257
-----------------------------------------
Total Revenue from continuing
operations 31,003 28,070
----------------------------------------- ------------ ------------
b) Other Income
Interest revenue 55 389
----------------------------------------- ------------ ------------
3. PROFIT/ (LOSS) BEFORE TAX Consolidated
Year Ended Year Ended
31 October 31 October
2013 2012
$'000 $'000
Profit/(loss) before tax has been arrived
at after charging (crediting) the following:
Net foreign exchange (gain)/ loss (8,024) 3,387
Finance costs:
Interest - bank borrowings 85 47
Interest - other entities 356 1,358
---------------------------------------------------- ------------ --------------
Total finance costs 441 1,405
Depreciation of non-current assets:
Office furniture and fittings 36 40
Leasehold improvements - 3
Plant and equipment 432 594
---------------------------------------------------- ------------ --------------
Total depreciation of non-current assets 468 637
Amortisation of intangible assets:
Software development costs 1,875 4,704
Operating lease rental expenses:
Minimum lease payments 1,661 2,063
Net (profit)/loss on disposal of non-current
assets
Plant and equipment (10) 123
(Write back)/ impairment recognised on
trade receivables (Note 9) 2 (200)
Employee benefit expense:
Contributions to defined contribution
plans 14 26
Other employee benefits 15,973 23,546
Equity settled share-based payments 456 624
---------------------------------------------------- ------------ --------------
Total employee benefits expense 16,443 24,196
Notes to the Financial Statements for the financial year ended
31 October 2013
4. INCOME TAXES Year
Year Ended Ended
31 October 31 October
2013 2012
$'000 $'000
(a) Income tax recognised in profit/(loss)
Tax (benefit)/expense comprises:
Current tax (benefit)/expense (1,611) 1,753
Adjustments recognised in the current
year in relation to the current tax
of prior years 52 (130)
Deferred tax (income)/expense relating
to the origination and reversal of
temporary differences (4,320) (1,436)
------------------------------------------------- ------------ ------------
Total tax (benefit)/expense (5,879) 187
------------------------------------------------- ------------ ------------
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 4,495 (15,402)
--------------------------------------------- -------- ---------
Income tax expense/ (benefit) calculated
at 30% 1,349 (4,621)
Non-deductible expenses 196 591
Foreign withholding tax credits not
utilised 635 943
Deferred tax assets not recognised 1,859 3,698
Non-assessable income (3,187) (217)
Recognition of previously unrecognised (6,788) -
deferred tax asset in respect of available
tax losses
Effect of different tax rate in foreign
operations 5 (77)
Under/(over) provision of income tax
in previous year 52 (130)
--------------------------------------------- -------- ---------
(5,879) 187
--------------------------------------------- -------- ---------
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 during the financial year.
Consolidated
31 October 31 October
2013 2012
$'000 $'000
(b) Current tax assets and
liabilities
Current tax assets:
Tax refund receivable (i) 4,272 90
------------------------------ ---------- ----------- -----------
Current tax payables:
Income tax payable 150 69
------------------------------ ---------- ----------- -----------
(i) The tax refund mainly relates to research & development
tax credits which are eligible as a tax refund claim from the
taxation authorities in the 2014 financial year.
Notes to the Financial Statements for the financial year ended
31 October 2013
4. INCOME TAXES (continued)
Deferred tax balances
Deferred tax assets and liabilities arise from the
following:
Consolidated
-------------------------------- ------------------------------------------------
Opening Credited Closing
balance Reclassified to income balance
2013 $'000 $'000 $'000 $'000
-------------------------------- --------- ------------- ----------- ---------
Deferred tax liabilities:
Exchange difference on foreign
subsidiary - - - -
Intangible assets - - - -
-------------------------------- --------- ------------- ----------- ---------
- - - -
-------------------------------- --------- ------------- ----------- ---------
Deferred tax assets:
Tax losses - revenue 1,020 - 6,807 7,827
Research & development tax
credits 4,483 - (2,676) 1,807
Foreign tax credits 113 - 189 302
Doubtful debts 319 - - 319
Accrued costs 35 - - 35
Other 35 - - 35
--------------------------------
6,005 - 4,320 10,325
-------------------------------- --------- ------------- ----------- ---------
Consolidated
-------------------------------- ------------------------------------------------
Opening Credited Closing
balance Reclassified to income balance
2012 $'000 $'000 $'000 $'000
-------------------------------- --------- ------------- ----------- ---------
Deferred tax liabilities:
Exchange difference on foreign
subsidiary (15) - 15 -
Intangible assets 805 - (805) -
-------------------------------- --------- ------------- ----------- ---------
790 - (790) -
-------------------------------- --------- ------------- ----------- ---------
Deferred tax assets:
Tax losses - revenue 866 - 154 1,020
Research & development tax
credits 3,913 - 570 4,483
Foreign tax credits 124 - (11) 113
Doubtful debts 319 - - 319
Accrued costs 103 - (68) 35
Other 34 - 1 35
-------------------------------- --------- ------------- ----------- ---------
5,359 - 646 6,005
-------------------------------- --------- ------------- ----------- ---------
The deferred tax asset recognised in respect of taxation losses
in the current financial year relates predominantly to taxable
gains expected to be derived in the 2014 financial year as a
result of the HomeSend transaction disclosed in Note 31.
The benefit of tax losses which have not been recognised as a
deferred tax asset due to non-satisfaction of the reasonable
probability of the recoupment criteria totalled $20.4m at year
end (2012: $23.9m).
Notes to the Financial Statements for the financial year ended
31 October 2013
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 identified
at Note 25.
Nature of tax funding arrangements and tax sharing agreements
Entities within the tax-consolidated group have entered into a tax
funding arrangement and a tax-sharing agreement with the head entity.
Under the terms of the tax funding arrangement, eServGlobal Limited
and each of the entities in the tax-consolidated group has agreed
to pay a tax equivalent payment to or from the head entity, based
on the current tax liability or current tax asset of the entity.
Such amounts are reflected in amounts receivable from or payable
to other entities in the tax-consolidated group.
The tax sharing agreement entered into between members of the tax-consolidated
group provides for the determination of the allocation of income
tax liabilities between the entities should the head entity default
on its tax payment obligations. No amounts have been 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 Boards approach on Remuneration Policies is set
out in the Remuneration Report which forms part of the Directors'
Report.
The aggregate compensation made to key management personnel of
the Group is set out as follows:
Consolidated
Year Ended Year Ended
31 October 31 October
2013 2012
$ $
Short-term employee benefits 2,296,326 2,587,004
Post-employment benefits 60,392 69,451
Termination benefits 278,333 -
Share-based payments 242,948 309,302
------------------------------ ------------ ------------
2,877,999 2,965,757
------------------------------ ------------ ------------
Notes to the Financial Statements for the financial year ended
31 October 2013
6. EXECUTIVE AND EMPLOYEE SHARE OPTIONS
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 board
believes that the options scheme has a significant role to play
in motivating employees to help ensure the continued performance
of the Group. The vesting of any share options is not dependent
on any performance criteria, however, is dependent on a period of
service relative to the vesting dates.
During the financial year, the company issued 2,400,000 options
(2012: 10,200,000).
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 bodies
corporate, at 31 October 2013, key management personnel and employees
are entitled to purchase an aggregate of 9,100,000 (2012: 9,200,000)
ordinary shares of the entity at an exercise price of $0.36 (2012:
$0.36) per ordinary share. At 31 October 2013, nil (31 October 2012:
nil) of these options had vested. The options may be exercised at
various times up until 01 Jun 2018. 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 body corporate or
scheme, and do not participate in any dividends declared.
The following share-based payment arrangements were in existence
during the year:
Fair value
Grant Expiry Exercise Price at grant
Option Series Number Date Date $ date
----------
Issued 27 April 2012
(i) (iii) 1,500,000 27-Apr-12 2017 $0.36000 $0.13
---------------------- ---------- ---------- ------- --------------- -----------
Issued 14 May 2012
(i) (iv) 7,700,000 14-May-12 2017 $0.36000 $0.11
---------------------- ---------- ---------- ------- --------------- -----------
Issued 11 Feb 2013
(v) 1,600,000 11-Feb-13 2017 $0.36000 $0.26
---------------------- ---------- ---------- ------- --------------- -----------
Issued 01 Jul 2013
(ii) 800,000 01-Jul-13 2018 $0.36000 $0.24
---------------------- ---------- ---------- ------- --------------- -----------
In accordance with the terms of the Employee Share Option
Plan:
(i) Options issued in these 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 this series vest as to one half on 10
June 2014 and the balance on 10 June 2015 and expire on 10 June
2018.
(iii) During the year the options issued in this series lapsed in its entirety.
(iv) During the year 1,000,000 options issued in this series lapsed.
(v) Options issued in these series vest fully on 21 December 2014 and expire on 21 December 2017.
In accordance with the terms of the Employee Share Option Plan,
options may be exercised at any time from the date on which they
vest to the date of their expiry.
Notes to the Financial Statements for the financial year ended
31 October 2013
6. EXECUTIVE AND EMPLOYEE SHARE OPTIONS (continued)
The fair value of the options were derived by an appropriately
qualified expert using the binomial pricing model. Where relevant,
the expected life used in the model has been adjusted based on a
best estimate for the effects of non-transferability, exercise
restrictions and behavioural considerations. Expected volatility is
based on the historical share price volatility over the past 5
years. The risk-free rate is sourced from the Reserve Bank of
Australia.
Inputs into the models for the series of options:
Risk free
Share price rate of Sub optimal
at grant return to Years to Dividend early exercise
Issue Date date expiry (p.a.) expiration/exercise yield (p.a.) Volatility factor
------------ ------------ --------------- --------------------- -------------- ----------- ----------------
27-Apr-12 0.30 3.23% 5 0.0% 52.50% none assumed
14-May-12 0.25 2.82% 5 0.0% 52.50% none assumed
11-Feb-13 0.45 2.91% 4.86 0.0% 65.00% none assumed
01-Jul-13 0.38 3.19% 4.94 0.0% 65.00% none assumed
------------ ------------ --------------- --------------------- -------------- ----------- ----------------
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 2013 31 October 2012
------------------------ ------------------------
Weighted Weighted
average average
exercise exercise
Number of price Number of price
Options $ Options $
Balance at the beginning
of the year 9,200,000 0.360 7,710,000 0.656
Granted during the year 2,400,000 0.360 10,200,000 0.360
Expired/ lapsed/ cancelled
during the year (2,500,000) 0.360 (8,710,000) 0.622
---------------------------- ------------ ---------- ------------ ----------
Balance at the end of
the year 9,100,000 0.360 9,200,000 0.360
---------------------------- ------------ ---------- ------------ ----------
Exercisable at the end
of the financial year - - - -
---------------------------- ------------ ---------- ------------ ----------
Exercised during the financial year
No options were exercised during the financial year, nor during
the previous financial period.
Balance at the end of the financial year
The share options outstanding at the end of the financial year
are as follows:
Vested Unvested Expiry Exercise Contractual
No. No. Date Price Life
Issued No $ (days)
Issued 14 May 2012 6,700,000 - 6,700,000 2017 $0.36 1,290
Issued 11 February
2013 1,600,000 - 1,600,000 2017 $0.36 1,511
Issued 01 July 2013 800,000 - 800,000 2018 $0.36 1,682
9,100,000 - 9,100,000
---------- ------- ----------
Notes to the Financial Statements for the financial year ended
31 October 2013
Consolidated
Year Ended Year Ended
31 October 31 October
2013 2012
$ $
7. REMUNERATION OF AUDITORS
Auditor of the Parent Entity
Auditing or review of the financial report 113,000 135,000
113,000 135,000
------------------------------------------------- ------------ ------------
Other Auditors
Auditing or review of the financial report 139,062 121,883
Other services - Taxation 44,961 20,806
-------------------------------------------------
184,023 142,689
------------------------------------------------- ------------ ------------
297,023 277,689
------------------------------------------------- ------------ ------------
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.
8. ASSETS CLASSIFIED AS HELD FOR SALE
On 19(th) December 2013 the company concluded an agreement
to create a new joint venture with MasterCard and BICS (eServGlobal's
current partner in HomeSend) for the international mobile
money transfer service, HomeSend. Under the terms of the
agreement, eServGlobal will contribute its Homesend business,
including staff, that are directly related to the business
into a newly formed company ("NewCo"). The major classes
of HomeSend business assets at the end of the reporting period
that will be derecognised by the Group are as follows:
31 October 31 October
2013 2012
$'000 $'000
Goodwill 3,550 -
Other intangible assets (capitalised 4,204 -
R&D expenditure)
HomeSend assets classified as held for 7,754 -
sale
------------- ------------
No impairment loss was recognised on reclassification of
the above assets as held for sale at 31 October 2013.
Notes to the Financial Statements for the financial year ended
31 October 2013
31 October 31 October
2013 2012
$'000 $'000
9. CURRENT TRADE AND OTHER RECEIVABLES
Trade receivables (i) 8,943 9,683
Less : Allowance for doubtful debts (894) (892)
--------------------------------------------------------- --------------- --------------
8,049 8,791
Prepayments 1,223 956
Goods and services tax receivable 851 461
Work in progress (Note 10) 10,400 3,602
Deposits and accrued interest 1,323 284
21,846 14,094
--------------------------------------------------------- --------------- --------------
(i) The average credit period on sales of goods and rendering of
services is 60 days (2012: 60 days). Historically, the Group has
had no requirement to charge interest on overdue receivables, although
customer contractual terms include the ability to do this. The
group recognises an allowance for debts whose collectability is
considered doubtful. Objective evidence is determined by reference
to knowledge of disputes at balance date, where applicable. The
Group also considers any change in the credit quality of the trade
receivable from the date credit was initially granted up to the
reporting date.
Before accepting any new customers, the Group obtains, where considered
necessary, third party references to assess the potential customer's
credit worthiness. The majority of the Group'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 $5.7 million (2012: $2.6 million) 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 103 days (2012: 108
days).
Consolidated
31 October 31 October
2013 2012
$'000 $'000
Ageing of past due but not impaired
By up to 30 days 1,129 640
30 - 90 days 577 410
90 - 120 days 2,456 371
120 + days 1,552 1,129
--------------------------------------------------------- --------------- --------------
5,714 2,550
--------------------------------------------------------- --------------- --------------
Movement in allowance for doubtful debts
Balance at the beginning of the year 892 1,092
Impairment (reduction)/losses recognised
on receivables 2 (200)
Balance at the end of the year 894 892
------------------------------------------ ---- ------
The ageing of all impaired receivables is 120+ days (2012: 120+
days)
Notes to the Financial Statements for the financial year ended
31 October 2013
31 October 31 October
2013 2012
10. WORK IN PROGRESS $'000 $'000
Contract work in progress 17,808 17,750
Progress billings and advances received (9,397) (16,273)
------------------------------------------------- ----------- -----------
8,411 1,477
------------------------------------------------- ----------- -----------
Recognised and included in the financial
statements as amounts due:
From customers:
Current (Note 9) 10,400 3,602
To customers as deferred income:
Current (Note 18) (1,989) (2,125)
------------------------------------------------- ----------- -----------
8,411 1,477
------------------------------------------------- ----------- -----------
31 October 31 October
2013 2012
$'000 $'000
11. CURRENT INVENTORIES
Finished goods 74 158
--------------------------- ----------- -----------
Notes to the Financial Statements for the financial year ended
31 October 2013
12. PROPERTY, PLANT AND EQUIPMENT
Consolidated
-----------------------------------------------------
Office
furniture Leasehold Plant and
and fittings improvements equipment Total
$'000 $'000 $'000 $'000
Gross carrying amount -
at cost
Balance at 31 October 2011 648 11 8,267 8,926
Additions 4 - 136 140
Disposals (72) (11) (3,059) (3,142)
Net foreign currency movement (53) - (684) (737)
------------------------------------- -------------- -------------- ----------- --------
Balance at 31 October 2012 527 - 4,660 5,187
Additions 3 - 108 111
Disposals (54) - (778) (832)
Net foreign currency movement 84 - 730 814
------------------------------------- -------------- -------------- ----------- --------
Balance at 31 October 2013 560 - 4,720 5,280
------------------------------------- -------------- -------------- ----------- --------
Accumulated depreciation
Balance at 31 October 2011 576 8 6,801 7,385
Depreciation expense 40 3 594 637
Disposal (72) (11) (2,936) (3,019)
Net foreign currency movement (55) - (673) (728)
------------------------------------- -------------- -------------- ----------- --------
Balance at 31 October 2012 489 - 3,786 4,275
Depreciation expense 36 - 432 468
Disposal (58) - (784) (842)
Net foreign currency movement 86 - 811 897
------------------------------------- -------------- -------------- ----------- --------
Balance at 31 October 2013 553 - 4,245 4,798
------------------------------------- -------------- -------------- ----------- --------
Net book value
As at 31 October 2012 38 - 874 912
------------------------------------- -------------- -------------- ----------- --------
As at 31 October 2013 7 - 475 482
------------------------------------- -------------- -------------- ----------- --------
Notes to the Financial Statements for the financial year ended
31 October 2013
Consolidated
31 October 31 October
2013 2012
$'000 $'000
13. GOODWILL
Gross carrying amount and net book value
Balance at the beginning of the financial
year 14,328 15,391
Reclassified as "held for sale" (3,550) -
--------------------------------------------------- ------------- ------------
Translation effects of foreign currency
exchange movements 2,519 (1,063)
--------------------------------------------------------- ------------- ------------
Balance at end of financial year 13,297 14,328
--------------------------------------------------------- ------------- ------------
Accumulated impairment losses
Balance at the beginning of the financial
year (8,450) (9,009)
Translation effects of foreign currency
exchange movements (1,324) 559
--------------------------------------------------------- ------------- ------------
Balance at end of financial year (9,774) (8,450)
--------------------------------------------------------- ------------- ------------
Net book value
At the beginning of the financial year 5,878 6,382
--------------------------------------------------------- ------------- ------------
At the end of the financial year 3,523 5,878
--------------------------------------------------------- ------------- ------------
During the financial year, the Group assessed the recoverable
amount of goodwill based on the methodology below, and determined
that no impairment was required (2012: $ nil). No write-down
of the carrying amounts of other assets in the cash-generating
unit was necessary.
Allocation of goodwill to cash-generating units
Goodwill has been allocated for impairment testing purposes
to a single cash generating unit, being the entire business,
at which level goodwill is monitored for internal management
purposes. This is because substantially the entire product
list of the combined entity is available for sale to, and
being sold to, substantially the entire customer base of the
combined entity.
The recoverable amount of the cash-generating unit is determined
based on a value-in-use calculation which uses cash flow projections
based on financial budgets approved by management covering
a 5 year forecast period, and a terminal value based upon
an extrapolation of cash flows beyond the 5 year period using
an estimated growth rate of 3% per annum which does not exceed
the average long term growth rate for the global industry
in which it operates.
The key assumptions used in the value-in-use calculation for
the cash generating unit are as follows:
* Sales are expected to grow over the forecast period
by 10% per annum consistent with the actual growth
rate achieved in the current year.
* A gross margin of 60% over the forecast period: this
is based upon average gross margins achieved in
recent periods.
* In performing the value-in-use calculations, the
company has applied post-tax discount rates to
discount the forecast future attributable post tax
cash flows. The equivalent pre-tax discount rate is
23% per annum.
* Operating expenses are expected to increase steadily
over the forecast period, but at a rate lower than
the sales growth.
The directors believe that any reasonable possible change
in the key assumptions on which recoverable amount is based
would not cause the aggregate carrying amount to exceed the
aggregate recoverable amount of the cash-generating unit.
Notes to the Financial Statements for the financial year ended
31 October 2013
14. INTANGIBLES
Consolidated
------------------------------------------------------------------
Software & Customer
documentation relationships Software
acquired acquired development Total
$'000 $'000 $'000 $'000
Gross carrying amount
Balance at 31 October
2011 17,545 20,897 6,799 45,241
Internally developed - - 1,826 1,826
Effects of foreign currency
exchange movements - (164) (283) (447)
----------------------------- --------------- --------------- -------------- ----------------
Balance at 31 October
2012 17,545 20,733 8,342 46,620
Internally developed - - 1,840 1,840
Reclassified as held
for sale - - (10,922) (10,922)
----------------------------- --------------- --------------- -------------- ----------------
Effects of foreign currency
exchange movements - - 740 740
----------------------------- --------------- --------------- -------------- ----------------
Balance at 31 October
2013 17,545 20,733 - 38,278
----------------------------- --------------- --------------- -------------- ----------------
Accumulated Amortisation
and impairment
Balance at 31 October
2011 (17,545) (18,267) (2,621) (38,433)
Amortisation expense - (2,479) (2,225) (4,704)
Effects of foreign currency
exchange movements - 13 12 25
----------------------------- --------------- --------------- -------------- ----------------
Balance at 31 October
2012 (17,545) (20,733) (4,834) (43,112)
Amortisation expense - - (1,875) (1,875)
Reclassified as held
for sale - - 6,718 6,718
----------------------------- --------------- --------------- -------------- ----------------
Effects of foreign currency
exchange movements - - (9) (9)
----------------------------- --------------- --------------- -------------- ----------------
Balance at 31 October
2013 (17,545) (20,733) - (38,278)
----------------------------- --------------- --------------- -------------- ----------------
Net Book Value
As at 31 October 2012 - - 3,508 3,508
----------------------------- --------------- --------------- -------------- ----------------
As at 31 October 2013 - - - -
----------------------------- --------------- --------------- -------------- ----------------
Significant intangible assets
Software development costs of $10.922 million are amortised over
three years, They relate to HomeSend and have been reclassified
as held for sale at year end (see Note 8).
Notes to the Financial Statements for the financial year ended
31 October 2013
Consolidated
31 October 31 October
2013 2012
$'000 $'000
15. TRADE AND OTHER PAYABLES
Trade payables (i) 2,019 1,359
Accruals and other payables 6,124 6,457
----------------------------------------- ------------- -------------
8,143 7,816
----------------------------------------- ------------- -------------
(i) The average credit period on purchases of goods is
45 days (2012: 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.
31 October 31 October
2013 2012
$'000 $'000
16. BORROWINGS
Secured
Loans 3,000 7,200
Current (i) (ii) 3,000 1,200
Non-current (ii) - 6,000
------------------------ ----------- -----------
3,000 7,200
------------------------ ----------- -----------
(i) Current borrowings at 31 October 2013 represent a $3
million loan from National Australia Bank which was drawn
down in full in June 2013. It is secured by way of a fixed
and floating charge over the total assets of the Group
(refer to the statement of financial position). Interest
is charged at the weighted average of the interest rates
applicable to each of the business markets facility components
(average rate in 2013: 7.6%). The loan facility is due
for repayment on 30 April 2014.
(ii) The $7.2 million loans outstanding at the end of the
prior year were repaid in full in February 2013. These
loans were secured by a fixed and floating charge over
the total assets of the group and were subject to interest
at a rate of 9.75% per annum.
Notes to the Financial Statements for the financial year ended
31 October 2013
17. PROVISIONS
Retirement
contribution
Employee provisions plans (i) Total
$'000 $'000 $'000
Consolidated
Balance as at 31 October 2012 1,724 431 2,155
Additional provisions recognised 114 318 432
Utilised during the year (38) - (38)
------------------------------------- -------------------- -------------- ------------
Balance as at 31 October 2013 1,800 749 2,549
------------------------------------- -------------------- -------------- ------------
Current 1,800 - 1,800
Non-current - 749 749
------------------------------------- -------------------- -------------- ------------
1,800 749 2,549
------------------------------------- -------------------- -------------- ------------
(i) The retirement contribution plan is the statutory termination
payment due to eligible employees in France.
Consolidated
31 October 31 October
2013 2012
$'000 $'000
18. OTHER CURRENT LIABILITIES
Deferred income (Note 10) 1,989 2,125
--------------------------------- ----------- -----------
Notes to the Financial Statements for the financial year ended
31 October 2013
19. ISSUED CAPITAL
31 October 31 October
2013 2012
$'000 $'000
249,045,997 fully paid ordinary shares
(2012: 196,847,706) 106,695 90,770
------------------------------------------------------ ---------------- ------------
31 October 2013 31 October 2012
No. $ No. $
'000 '000 '000 '000
---------------------------------------- --------- --------------- ----------------- -------
Fully Paid Ordinary Shares
Balance at the beginning of
financial year 196,848 90,770 196,848 90,770
Shares issued in the year 52,198 16,802 - -
Costs of share issue - (877) - -
Balance at the end of financial
year 249,046 106,695 196,848 90,770
---------------------------------------- --------- --------------- ----------------- -------
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 2013, 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.
Subsequent to the 31 October 2013 year end, on 23 December
2013 eServGlobal announced that it had entered into a subscription
agreement with an existing Australian institutional investor
for the Company to issue 4,500,000 fully paid ordinary shares
at AUD$0.75 (GBP0.41) per share, raising AUD$3.375M (GBP1.843M).
No fees were payable on the placement. The 4,500,000 fully
paid ordinary shares were issued on 30 December 2013 (being
represented by depositary interests in CREST) and admitted
to AIM on 30 December 2013. Following the issue, the Company's
total issued share capital is 253,545,997 fully paid ordinary
shares of no par value.
Notes to the Financial Statements for the financial year ended
31 October 2013
Consolidated
31 October 31 October
2013 2012
$'000 $'000
20. RESERVES
Foreign currency translation (6,563) (2,099)
Employee equity-settled benefits 2,473 2,017
------------------------------------------------- ----------- ------------
(4,090) (82)
------------------------------------------------- ----------- ------------
Foreign currency translation reserve
Balance at beginning of financial year (2,099) (3,376)
Translation of foreign operations (4,464) 1,277
------------------------------------------------- ----------- ------------
Balance at the end of the financial year (6,563) (2,099)
------------------------------------------------- ----------- ------------
Exchange differences relating to the translation from Euros,
being the functional currency of the eServGlobal SAS and
its controlled entities, into Australian dollars are recognised
directly in other comprehensive income and accumulated
in the foreign currency translation reserve.
Employee equity-settled benefits reserve
Balance at beginning of financial year 2,017 1,393
Share based payments 456 624
Balance at the end of the financial year 2,473 2,017
----------------------------------------------------- -------- -------
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. Amounts are transferred out of the reserve and into
issued capital when options are exercised. Further information
about share-based payments to key management personnel
and employees is contained in Note 6 to the financial statements.
21. ACCUMULATED LOSSES 31 October 31 October
2013 2012
$'000 $'000
Balance at beginning of the financial year (75,699) (59,984)
Profit/(loss) for the year attributable
to equity holders of the parent 10,248 (15,715)
Balance at end of financial year (65,451) (75,699)
-------------------------------------------------- ----------- -----------
Notes to the Financial Statements for the financial year ended
31 October 2013
Consolidated
Year Ended Year Ended
31 October 31 October
2013 2012
Cents Per Cents Per
Share Share
22. EARNINGS/(LOSS) PER SHARE
Basic earnings/(loss) per share 4.3 (8.0)
-------------------------------------------- ------------- -------------
Diluted earnings/(loss) per share 4.2 (8.0)
-------------------------------------------- ------------- -------------
Basic earnings/(loss per share
The earnings/(loss) and weighted average number of ordinary
shares used in the calculation of basic earnings/(loss) per
share are as follows:
Year Ended Year Ended
31 October 31 October
2013 2012
$'000 $'000
Earnings - being the profit/(loss)
for the year attributable to equity
holders of the parent 10,248 (15,715)
-------------------------------------------- ------------- -------------
31 October 31 October
2013 2012
No '000 No '000
Weighted average number of ordinary
shares 241,072 196,848
-------------------------------------------- ------------- -------------
Diluted earnings/(loss) per share
The earnings/(loss) and weighted average number of ordinary
and potential ordinary shares used in the calculation of
diluted loss per share are as follows:
Year Ended Year Ended
31 October 31 October
2013 2012
$'000 $'000
--------------------------------------
Earnings - being the profit/(loss)
for the year attributable to equity
holders of the parent 10,248 (15,715)
-------------------------------------------- ------------- -------------
31 October 31 October
2013 2012
No '000 No '000
Weighted average number of ordinary
shares and potential ordinary shares
(a) 242,124 196,848
-------------------------------------------- ------------ ------------
(a) Weighted average numbers of ordinary shares and potential
ordinary shares used in the calculation of diluted earnings(loss)
per share reconciles to the weighted average number of ordinary
shares used in the calculation of basic earnings/(loss) per
share as follows:
Weighted average number of ordinary
shares used in the calculation of
basic earnings/(loss) per share 241,072 196,848
Shares deemed to be issued for no 1,052 -
consideration in respect of employee
options
-------------------------------------------- ------------ ------------
Weighted average number of ordinary
shares and potential ordinary shares
used in the calculation of diluted
earnings/(loss) per share 242,124 196,848
-------------------------------------------- ------------ ------------
Notes to the Financial Statements for the financial year ended
31 October 2013
Consolidated
31 October 2013 31 October 2012
Cents Total Cents Total
Per Share $'000 Per Share $'000
23. DIVIDENDS
Fully Paid Ordinary Shares partly - - - -
franked
In respect of the current financial year no dividend has been declared.
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.
Consolidated
Period
Year Ended Ended
31 October 31 October
2013 2012
$'000 $'000
Non-cancellable operating leases
No longer than 1 year 1,711 1,512
Longer than 1 year and not longer than 5 years 1,141 2,425
Longer than 5 years - -
----------------------------------------------- ----------- -----------
2,852 3,937
-------------------------------------------------- ----------- -----------
Notes to the Financial Statements for the financial year ended
31 October 2013
Ownership Interest
COUNTRY OF INCORPORATION 31 October 31 October
2013 2012
% %
---------------------------------------- ----------------------------- --- ----------- -----------
25. SUBSIDIARIES
Parent Entity
eServGlobal Limited Australia (vi) (vii)
Subsidiary
eServGlobal Holdings SAS France (i) 100 100
eServGlobal SAS France (i) (iii)(viii) 100 100
PT eServGlobal Indonesia Indonesia (i) (ix) 100 100
eServGlobal Telecom Romania
Srl Romania (i)(ix)(viii) 50 50
eServGlobal Telecom Serviços
do Brasil Ltda Brazil (i) (ix) 100 100
Australia (ii) (v)
eServGlobal (NZ) Pty Limited (vi) 100 100
eServGlobal (HK) Limited Hong Kong (i) (iv) 100 100
eServGlobal NVSA Belgium (i) 100 100
eServGlobal UK Limited United Kingdom (x) 100 100
eServ UK Limited United Kingdom(iv) 100 100
eServGlobal Singapore Pte.
Ltd. Singapore (i) 100 100
United States of America
eServGlobal Inc (iv) 100 100
Australia (iv) (v)
eServGlobal Aust Pty Limited (vi) 100 100
(i) These subsidiaries carry on business in their country of
incorporation; France, Indonesia, Romania, Brazil, Hong
Kong, Belgium and Singapore.
(ii) eServGlobal (NZ) Pty Ltd carries on business in Australia
and has a branch which carries on business in New Zealand.
(iii) eServGlobal SAS carries on business in France and has branches
or representative office which carry on business in Egypt,
Poland, India and the United Arab Emirates.
(iv) These subsidiaries did not trade in the year ended 31 October
2013.
(v) These subsidiaries are classified as small proprietary
companies and, in accordance with the Corporations Act
2001, are relieved from the requirement to prepare, audit
and lodge a financial report.
(vi) These companies are members of the Australian tax consolidated
group.
(vii) eServGlobal Limited is the head entity within the tax consolidated
group.
(viii) This company is a subsidiary of eServGlobal Holdings SAS.
Management have determined that the group has the power
to govern the financial and operating policies of eServ
Global Telecom Romania Srl.
(ix) These companies are subsidiaries of eServGlobal SAS.
(x) eServGlobal UK Limited carries on business in the United
Kingdom and has a branch which carries on business in the
Netherlands.
Notes to the Financial Statements for the financial year ended
31 October 2013
26. 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
income 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
2013 2012
$'000 $'000
Hardware 1,992 613
Licences 10,689 9,200
Services 3,754 3,378
Support 12,534 12,148
Software as a Service 2,034 2,731
------------------------------------------------- ------------ ------------
Total revenue from continuing operations 31,003 28,070
------------------------------------------------- ------------ ------------
Geographical information
The Group's revenue from continuing operations from external
customers by location of operations and information about
it's 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
2013 2012 2013 2012
$'000 $'000 $'000 $'000
Middle East 11,583 7,863 - -
Asia Pacific 6,519 3,783 21 19
Europe 3,077 3,706 3,973 10,266
Africa 9,228 12,120 11 13
Central and South
America 596 598 - -
----------------------- ------------ ------------ ------------ ------------
Total 31,003 28,070 4,005 10,298
----------------------- ------------ ------------ ------------ ------------
Non-current assets exclude non-current assets held for sale
and deferred tax assets.
Information about major customers
No single customers contributed 10% or more to the Group's
revenue for both 2013 and 2012.
Notes to the Financial Statements for the financial year ended
31 October 2013
27. RELATED PARTY DISCLOSURES
a) Equity Interests in Related Parties
Equity Interests in Controlled Entities
Details of the percentage of ordinary shares held in subsidiaries
are disclosed in Note 25 to the financial statements.
b) Key management personnel compensation
Details of key management personnel compensation are disclosed
in Note 5 to the financial statements.
c) Key management personnel equity holdings
Fully paid ordinary shares issued by eServGlobal
Limited.
Balance Received Net other Balance
at 1 November on exercise change at 31 October
of options
No. No. No. No.
Year to 31 October
2013
Richard Mathews(i) 16,317,275 - (3,030,303) 13,286,972
Craig Halliday(ii) 23,445,324 - (3,030,303) 20,415,021
Francois Barrault 500,000 - - 500,000
James Brooke(iii) 35,153,419 - (35,153,419) -
Stephen Baldwin
(v) 932,600 - - 932,600
David Smart(iv) 40,000 - (40,000) -
Year to 31 October
2012
David Smart 40,000 - - 40,000
Richard Mathews(i) 16,317,275 - - 16,317,275
Craig Halliday(ii) 23,445,324 - - 23,445,324
Francois Barrault 500,000 - - 500,000
James Brooke(iii) 35,153,419 - - 35,153,419
Stephen Baldwin
(v) - - 932,600 932,600
(i) Had the power to exercise, control the exercise of, or
influence the exercise of, the voting powers or disposal of the
securities to which the relevant interest relates of the 16,110,592
ordinary shares held by MHB Holdings Pty Ltd and 206,683 shares
held by Paua Pty Ltd. On 19 February 2013, MHB Holdings Pty Ltd,
holding as agent, transferred 3,030,303 ordinary fully paid shares
to an unrelated principal, unrelated to Mr Mathews.
(ii) Had the power to exercise, control the exercise of, or
influence the exercise of, the voting powers or disposal of the
securities to which the relevant interest relates of the 16,110,592
ordinary shares held by MHB Holdings Pty Ltd, 62,005 held by Paua
Pty Ltd, and 7,272,727 shares held by National Nominees Limited. On
19 February 2013, MHB Holdings Pty Ltd, holding as agent,
transferred 3,030,303 ordinary fully paid shares to the principal,
unrelated to Mr Halliday.
(iii) James Brooke has a relevant interest in shares held by
Henderson Global Investors Limited. James Brooke resigned on 1 May
2013.
(iv) David Smart retired as a Director on 22 March 2013.
(v) Stephen Baldwin appointed a Director on 25 November 2011.
Notes to the Financial Statements for the financial year ended
31 October 2013
27. RELATED PARTY DISCLOSURES (continued)
c) Key management personnel equity holdings (continued)
Options issued by eServGlobal Limited to Key Management
Personnel
Balance Granted Exercised Net other Balance Balance Vested Vested Vested
at 1 as change at vested but not and during
November compen-sation 31 at 31 exercisable exercisable the
October October year
No. No. No. No. No. No. No. No. No.
Year to 31
October 2013
Craig Halliday 1,500,000 - - (1,500,000) - - - - -
R Arame 1,000,000 150,000 - - 1,150,000 - - - -
S Blundell 1,000,000 250,000 - - 1,250,000 - - - -
P
Montessori(i) 750,000 500,000 - - 1,250,000 - - - -
Balance Granted Exercised Net other Balance Balance Vested Vested Vested
at 1 as change at vested but not and during
July compen-sation 31 at 31 exercisable exercisable the
October October year
No. No. No. No. No. No. No. No. No.
Year to 31
October 2012
Craig Halliday 1,000,000 1,500,000 - (1,000,000) 1,500,000 - - - -
R Arame 1,000,000 1,000,000 - (1,000,000) 1,000,000 - - - -
S Blundell 1,000,000 1,000,000 - (1,000,000) 1,000,000 - - - -
P
Montessori(i) - 750,000 - - 750,000 - - - -
(i) P Montessori was employed on 6 February 2012.
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).
d) Non-executive directors option holdings
There were no options in issue to non-executive directors during
the financial year or in the prior financial period.
Notes to the Financial Statements for the financial year ended
31 October 2013
27. RELATED PARTY DISCLOSURES (continued)
Consolidated
Year Ended Year Ended
31 October 31 October
2013 2012
$ $
e) Loans from related parties
Loans from shareholders - 6,000,000
During the year, the Group paid
down all of the secured loans
from shareholders (refer Note
16).
f) Other related party transactions
Interest on shareholder loans 252,691 915,740
Mr Baldwin's Director's Fees,
as detailed in the Directors'
Report, are paid to his private
company 91,142 87,083
Mr Mathews' Directors Fees have
been paid to his private company
since April 2013 70,000 -
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 2013
28. NOTES TO THE STATEMENT OF CASH FLOWS
Consolidated
Year Ended Year Ended
31 October 31 October
2013 2012
$'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 4,909 3,794
Bank overdraft - -
4,909 3,794
b) Financing facilities
Secured loan facility
* amount used 3,000 7,200
- -
* amount unused
Total Secured loan facilities 3,000 7,200
c) Reconciliation of profit/ (loss) for the
year to net cash flows from operating activities
Profit/(loss) for the year 10,374 (15,589)
Interest income (11) (562)
Depreciation of non-current assets 468 637
Amortisation of non-current assets 1,875 4,704
(Profit)/loss on disposal of non-current
assets (10) 123
Foreign exchange (gain)/loss, including changes
in foreign currency net assets and liabilities (6,534) 2,290
Equity settled share-based payments 456 624
Proceeds from asset disposal (escrow deposit) - (23,307)
(Increase)/decrease in current income tax
balances (4,101) (6,835)
(Increase)/decrease in deferred tax balances (4,320) (1,435)
Changes in net assets and liabilities, net
of effects from acquisition of businesses:
(Increase)/decrease in assets:
- Receivables (7,752) 26,331
- Inventories 84 12
Increase/(decrease) in liabilities:
- Trade payables 327 (7,428)
- Provisions 394 (747)
- Other liabilities (136) (68)
Net cash used in operating activities (8,886) (21,250)
Notes to the Financial Statements for the financial year ended
31 October 2013
28. NOTES TO THE STATEMENT OF CASH FLOWS (continued)
Consolidated
31 October 31 October
2013 2012
$'000 $'000
d) Cash balance not available for use 1,014 428
The above 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.
29. FINANCIAL INSTRUMENTS
a) Significant Accounting Policies
Details of the significant accounting policies and methods adopted,
including the criteria for recognition, the basis of measurement
and the basis on which revenues and expenses are recognised,
in respect of each class of financial asset, financial liability
and equity instrument are disclosed in Note 1 to the financial
statements.
b) Capital Risk Management
The Group manages its capital to ensure that entities in the
Group will be able to continue as a going concern while maximising
the return to stakeholders through the optimisation of the debt
and equity balance. The Group's overall strategy remains unchanged
from the year ended 31 October 2012.
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
2013 the Group had bank borrowings of $ 3.0m (2012: $ nil).
The Group has no other borrowings (2012: $7.2m secured borrowings).
Operating cash flows 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. The Group seeks to minimise the
effect of foreign currency risks using derivative financial
instruments detailed at 29 (e). A risk management framework,
including the policy on use of financial derivatives is governed
by the Board of Directors. The Group does not enter into or
trade financial instruments, including derivative financial
instruments, for speculative purposes.
d) Market Risk
The Group's activities expose it primarily to the financial
risks of changes in foreign currency exchange rates. The Group
may enter into forward foreign exchange contracts to cover foreign
currency receipts from specific customer orders. There has been
no change to the Group's exposure to market risks or the manner
in which it manages and measures the risk from the previous
period.
Notes to the Financial Statements for the financial year ended
31 October 2013
29. 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. The group may
use foreign currency exchange contracts to hedge these risks.
No such contracts were entered into during the current year
(2012: 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
2013 2012 2013 2012
$'000 $'000 $'000 $'000
US Dollars 2,399 2,532 60 266
Euro 43 98 - 14
UK Pounds - - 154 23
Egyptian Pounds 483 20 - -
Indonesian Rupees 115 35 - -
Indian Rupees 71 36 - -
Romanian Lei (RON) 39 23 - -
UAE Dirham (AED) 116 89 - -
Consolidated
31 October 31 October
2013 2012
Categories of financial instruments $'000 $'000
Financial Assets:
Cash and cash equivalents 4,909 3,794
Loans and receivables
Receivables 8,049 8,791
Deposits and accrued interest 1,323 284
Financial Liabilities:
Trade payables (at amortised
cost) 2,019 1,359
Borrowings 3,000 7,200
Notes to the Financial Statements for the financial year ended
31 October 2013
29. FINANCIAL INSTRUMENTS (continued)
Foreign currency sensitivity analysis
The following table details the Group's sensitivity to a 10% increase
and decrease in the Australian dollar against the relevant foreign
currencies, which represents management's assessment of the possible
change in foreign exchange rates. The sensitivity analysis includes
only outstanding foreign currency denominated monetary items (arising
from monetary assets and liabilities held at balance date in a
currency different to the functional currency of the respective
entities holding the assets or liabilities) and adjusts their
translation at a year end for a 10% change in foreign currency
rates.
Profit or loss
Consolidated
Currency 31 October 31 October
2013 2012
$'000 $'000
US Dollar 273 311
Euro 5 12
UK Pounds 17 3
Egyptian Pounds 54 2
Indonesian Rupees 13 4
Indian Rupees 8 4
Romanian Lei (RON) 4 3
UAE Dirham (AED) 13 10
A positive number indicates an increase in profit or loss with
the Australian Dollar strengthening against the respective currency.
For a weakening of the Australian Dollar against the respective
currency there would be an equal and opposite impact on the profit,
and the amounts above would be negative.
In management's opinion, the above sensitivity analysis is not
fully representative of the inherent foreign exchange risk as
the year end exposure does not necessarily reflect the exposure
during the course of the year.
In addition, the Group includes certain subsidiaries whose functional
currencies are different to the Group's presentation currency.
The main operating entity outside of Australia is based in France.
As stated in the Group's Accounting Policies Note 1(e), on consolidation
the assets and liabilities of these entities are translated into
Australian dollars at exchange rates prevailing on the balance
date. The income and expenses of these entities is 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 Group's future reported profits
could therefore be impacted by changes in rates of exchange between
the Australian Dollar and the Euro.
f) Interest Rate Risk Management
The Group's exposure to interest rate risk at 31 October 2013
is in respect of interest generated on deposits balances invested
during the course of the year and interest incurred on external
borrowings. Cash deposits yielded a weighted average interest
rate of 0.97% for the financial year (2012: 0.2%), and borrowings
were incurred at a weighted average rate of 8.87% for the current
financial year (2012: 9.75%).
Interest rate sensitivity analysis
The Group's sensitivity to interest rates is on surplus cash placed
on short-term deposit or drawings on borrowing facilities. The
Group's net sensitivity to interest rate movements is not
Notes to the Financial Statements for the financial year ended
31 October 2013
considered to be material to the Group.
29. FINANCIAL INSTRUMENTS (continued)
g) Credit Risk Management
Credit risk refers to the risk that a counterparty will default
on its contractual obligations resulting in financial loss to
the 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.
h) Liquidity Risk Management
Ultimate responsibility for liquidity risk management rests
with the board of directors, who have built an appropriate liquidity
risk management framework for the management of the 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 principal cash flows.
Weighted
average
effective
interest Less than 3 months
rate 1 month 1-3 months - 1 year 1-5 years
% $'000 $'000 $'000 $'000
Consolidated
31 October 2013
Trade payables
- Non-interest
bearing - 1,346 673 - -
Borrowings 7.60% - - 3,000 -
31 October 2012
Trade payables
- Non-interest
bearing - 906 453 - -
Borrowings 9.75% - - 1,200 6,000
Notes to the Financial Statements for the financial year ended
31 October 2013
29. 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.
Weighted
average
effective
interest Less than 3 months
rate 1 month 1-3 months - 1 year 1-5 years 5+ years
% $'000 $'000 $'000 $'000 $'000
Consolidated
31 October 2013
Cash and cash equivalents 0.12% 4,909 - - - -
Deposits - Non-interest
bearing - - - 1,323 - -
Trade receivables -
Non-interest bearing - 4,427 2,213 1,409 - -
9,336 2,213 2,732 - -
31 October 2012
Cash and cash equivalents 0.02% 3,794 - - - -
Deposits - interest - - - -
bearing - -
Deposits - Non-interest
bearing - - - 284 - -
Trade receivables -
Non-interest bearing - 4,835 2,418 1,538 - -
8,629 2,418 1,822 - -
i) Fair Value of Financial Instruments
The fair values of financial assets and financial liabilities
are determined as follows:
* The fair value of other financial assets and
financial liabilities are determined in accordance
with generally accepted pricing models based on
discounted cash flow analysis using prices from
observable current market transactions;
The directors consider that the carrying amount of financial
assets and financial liabilities recorded at amortised cost
in the financial statements approximates their fair values.
Notes to the Financial Statements for the financial year ended
31 October 2013
30. PARENT ENTITY INFORMATION
(a) Financial position 31 October 31 October
2013 2012
$'000 $'000
Assets
Current assets 2,412 894
Non-current assets 38,304 21,972
Total assets 40,716 22,866
Liabilities
Current liabilities 3,362 1,792
Non-current liabilities - 6,000
Total liabilities 3,362 7,792
Equity
Issued capital 106,695 90,770
Accumulated losses (71,814) (77,713)
Reserves
Employee equity-settled benefits 2,473 2,017
Total equity 37,354 15,074
(b) Financial performance
Year Ended Year Ended
31 October 31 October
2013 2012
$'000 $'000
Profit/(loss) for the year 5,899 (14,422)
Other comprehensive income - -
Total comprehensive income/(loss) 5,899 (14,422)
(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 2013
31. SUBSEQUENT EVENTS
On 19 December 2013 eServGlobal concluded an agreement to create
a new joint venture with MasterCard and BICS (eServGlobal's
current partner in HomeSend) for the international mobile money
transfer service, HomeSend. Under the terms of the agreement,
eServGlobal will contribute its Homesend business, including
staff that are directly related to the HomeSend business into
a newly formed company ("NewCo"). Following the transaction,
MasterCard will own 55% of NewCo, eServGlobal will own 35% and
BICS will own 10%. Based on the initial shareholdings, MasterCard
will be entitled to appoint three directors to the Board of
NewCo, eServGlobal will be entitled to make two appointments
and BICS will be entitled to nominate one director.
MasterCard will contribute cash for its interest in NewCo with
eServGlobal to receive EUR9.0m ($13.6 million) in cash, which
includes EUR3.45 million ($5.21 million) to be held in escrow,
net of a pro rata of NewCo's estimated working capital requirements
for the medium term. In addition, MasterCard will enter into
a commercial agreement with HomeSend which will have an initial
duration of three years and automatic yearly renewal thereafter.
The commercial agreement will require MasterCard to use its
best endeavors to promote the HomeSend service utilising MasterCard's
sales channels.
There are conditions precedent to the creation of the HomeSend
joint venture and those conditions, together with a summary
of the material terms and conditions of the HomeSend joint venture
have been included in the regulatory announcement dated 19 December
2013.
As a result of the transfer of Homesend business to the HomeSend
joint venture, eServGlobal will recognise a gain on disposal
of between EUR23.5m - EUR24.2m in 2014 ($33.9m - $35.0m) based
on consideration of EUR30.0m ($43.3m) less assets classified
as held for sale and estimated selling expenses.
The assets attributable to the HomeSend business (including
the allocated goodwill component) have been classified as "Assets
classified as held for sale" in the Consolidated Statement of
Financial Position as at 31 October 2013.
The expected taxable profit arising from the Homesend joint
venture has resulted in the recognition of a deferred tax asset
and associated income tax credit of EUR4.7M ($6.8M) as at 31
October 2013 relating to recoupment of income tax losses not
previously recognised by the consolidated entity.
On 23 December 2013 eServGlobal announced that it had entered
into a subscription agreement with an existing Australian institutional
investor for the Company to issue 4,500,000 fully paid ordinary
shares at AUD$0.75 (GBP0.41) per share, raising AUD$3.375M (GBP1.843M).
No fees were payable on the placement.
The 4,500,000 fully paid ordinary shares were issued on 30 December
2013 (being represented by depositary interests in CREST) and
admitted to AIM on 30 December 2013. Following the issue, the
Company's total issued share capital is 253,545,997 fully paid
ordinary shares of no par value.
Notes to the Financial Statements for the financial year ended
31 October 2013
32. ADDITIONAL COMPANY INFORMATION
eServGlobal Limited is a listed public company, incorporated
in Australia and operating in Australia, Europe, the Middle
East, North Africa, Asia/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 22 January 2014
Ordinary share capital
253,545,997 fully paid ordinary shares are held by 951 individual shareholders
on the Australian Securities Exchange and 198 individual depository interest
holders on the London Stock Exchange (AIM).
All issued ordinary shares carry one vote per share.
Options
18 individual option holders hold 9,100,000 options
Options do not carry a right to vote.
Distribution of holders of equity securities
Fully Paid Ordinary Depository Interests Options- not
Shares Listed on LSE (AIM) listed
Listed on ASX
1-1,000 131 16 -
1,001-5,000 357 25 -
5,001-10,000 179 26 -
10,001-100,000 232 72 -
100,001-Over 52 59 18
Total 951 198 18
Holding less than a marketable
parcel 68
Substantial shareholders Number
Legal and General Investment Management
Plc 45,295,200
Henderson Global Investors Ltd 35,153,419
Acorn Capital Limited 32,913,500
Investec Asset Management Limited 19,047,619
Twenty largest holders of quoted equity securities
Australian Securities Exchange London Stock Exchange (AIM)
Computershare Clearing Pty Ltd holds
157,666,241 ordinary fully paid shares
on behalf of the Depositary Interest
Holders.
Ordinary Shareholders Number % of Depository Interest (DI) Number % of
capital Holders DI Holders
NORTRUST NOMINEES LIMITED
NATIONAL NOMINEES LIMITED 20,134,023 7.94 <TDS> 29,959,699 19.01
VIDACOS NOMINEES LIMITED
MHB HOLDINGS PTY LTD(#) 13,080,289 5.16 <2303> 18,809,453 11.93
J P MORGAN NOMINEES AUSTRALIA STATE STREET NOMINEES
LIMITED 11,799,467 4.65 LIMITED <OM04> 18,000,000 11.42
HSBC CUSTODY NOMINEES HSBC GLOBAL CUSTODY NOMINEE
(AUSTRALIA) LIMITED 9,547,822 3.77 (UK) LIMITED <764685> 12,500,000 7.93
BT PORTFOLIO SERVICES
LIMITED <MCMANAMEY SUPER HSBC GLOBAL CUSTODY NOMINEE
FUND A/C> 4,121,388 1.63 (UK) LIMITED <667656> 11,648,006 7.39
HSBC CUSTODY NOMINEES
(AUSTRALIA) LIMITED <NT-COMNWLTH NORTRUST NOMINEES LIMITED
SUPER CORP A/C> 3,903,233 1.54 <SLEND> 6,506,936 4.13
CITICORP NOMINEES PTY
LIMITED <COLONIAL FIRST NUTRACO NOMINEES LIMITED
STATE INV A/C> 3,030,436 1.20 <UKREITS> 6,186,986 3.93
MR DAVID BATKIN + MRS
ADRIENNE BATKIN + MRS
JENNIFER BEST <D & A BATKIN BNY (OCS) NOMINEES LIMITED
FAMILY A/C> 3,030,303 1.20 <HIT> 5,595,790 3.55
CITICORP NOMINEES PTY THE BANK OF NEW YORK (NOMINEES)
LIMITED 1,953,197 0.77 LIMITED <RUEGF> 5,300,000 3.36
PLATFORM SECURITIES NOMINEES
PATRICK MCGRORY 1,730,426 0.68 LIMITED <KKCLT> 5,151,597 3.27
MIRRABOOKA INVESTMENTS HSBC GLOBAL CUSTODY NOMINEE
LIMITED 1,300,000 0.51 (UK) LIMITED <944287> 4,000,000 2.54
RBC INVESTOR SERVICES
AUSTRALIA NOMINEES PTY HSBC GLOBAL CUSTODY NOMINEE
LIMITED <PISELECT> 1,002,183 0.40 (UK) LIMITED <978777> 3,260,714 2.07
LINK 405 PTY LTD 995,759 0.39 CHASE NOMINEES LIMITED 3,000,000 1.90
MR STEPHEN JOHN BALDWIN
+ MRS ANDREA MAREE BALDWIN
<THE STEVE BALDWIN SF FITEL NOMINEES LIMITED
A/C> 850,000 0.34 <DMOD> 2,108,000 1.34
JP MORGAN NOMINEES AUSTRALIA HSBC GLOBAL CUSTODY NOMINEE
LIMITED <CASH INCOME A/C> 673,299 0.27 (UK) LIMITED <887711> 2,044,037 1.30
MR NIGEL PILCHER + MRS
FRANCES PILCHER <PILCHER JAMES CAPEL (NOMINEES)
SUPER FUND A/C> 555,000 0.22 LIMITED <PC> 1,825,000 1.16
HARGREAVES LANSDOWN (NOMINEES)
MR FRANCOIS BARRAULT 500,000 0.20 LIMITED <HLNOM> 1,737,778 1.10
BNY (OCS) NOMINEES LIMITED
HALLAM DRAINAGE PTY LTD 500,000 0.20 <UKREITS> 1,707,708 1.08
HSBC GLOBAL CUSTODY NOMINEE
MR JAMES PRATT 500,000 0.20 (UK) LIMITED <909731> 1,100,000 0.70
BARCLAYSHARE NOMINEES
MR IAN FRASER MCMANAMEY 376,266 0.15 LIMITED 886,640 0.56
(#) On 30 December 2013 MHB Holdings Pty Ltd transferred
10,534,834 shares to Paua Pty Ltd and 2,545,455 Shares to Mr Paul
Beesley. These transfers have not been recorded on the Company's
register of members at 22 January 2014.
Secretary
Tom Rowe
Chief Financial Officer
Stephen Blundell
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".
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR KMGFMGMMGDZG
Eservglobal (LSE:ESG)
Historical Stock Chart
From Jun 2024 to Jul 2024
Eservglobal (LSE:ESG)
Historical Stock Chart
From Jul 2023 to Jul 2024
