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2017 | Annual Report

ABN 14 003 348 730

Reckon Limited Annual Report

for the Financial Year Ended 31 December 2017

4 Message to Shareholders from the Chairman and Group CEO
6 Directors’ Report
13 Remuneration Report
41 Auditor’s Independence Declaration
42 Independent Auditor’s Report
49 Directors’ Declaration
50 ��
51 ��
52 Consolidated Statement of Financial Position
53 Consolidated Statement of Changes in Equity
55 Consolidated Statement of Cash Flows
56 Notes to the Financial Statements
96 Additional Information as at 7 March 2018

Message from the Group CEO

��

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Group Standalone Valuation
Document Management Group Demerger $32m
�� $180m
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��

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Clive Rabie Group CEO

Message from the Chairman

��

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Ian Ferrier Chairman

Directors’ Report

��

Ian Ferrier AM FCA

��

Greg Wilkinson

��

�� appointed to the position of Deputy Chairman in February 2006 and became a member of the board of the listed ��

Christopher Woodforde B Comm LLB

��

Clive Rabie

��

General Counsel and Company Secretary

��

Review of Operations and Statement of Principal Activities

��

~~2017~~ Business Group �� Accountant Practice Management Group Document Management Group

��

~~4 August 2017~~ Business Group �� Accountant Practice Management Group Document Management Group Demerged, listed separately on the AIM Exchange

��

~~2018~~ Business Group �� Practice Management Group (sold to MYOB and when approved by ACCC and NZCC) Document Management Group Demerged, listed separately on the AIM Exchange

Directors’ Report (continued)

��

Business Group

��

�� One cloud based accounting software is based on a “designed by you” concept that allows users to tailor the ��

��

The Company is also engaged in entering partnerships with suppliers who can meet the strategic demands of small ��

Legal Group

��

Practice Management Group (Sold to MYOB subject to ACCC and NZCC approval)

��

Directors’ Report (continued)

��

Results of Operations

Results Headlines (IFRS) for Continuing Operations (Business Group & Legal Practice Management Group)

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Amount
2017 Result 2016 Result % Change Change
Restated
�� Down 1% ��
EBITDA from continuing operations �� Down 6% ��
NPAT attributable to owners of the parent from
�� Down 50% ��
continuing operations
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Results Headlines (IFRS) for Discontinuing Operations (Accountant Practice ��

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Amount
2017 Result 2016 Result % Change Change
Restated
�� Down 14% ��
EBITDA from discontinued operations �� Down 15% ��
NPAT attributable to owners of the parent from
�� Down 17% ��
discontinued operations
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��

Revenue

��

EBITDA

��

Dividends

��

Demerger of Document Management Business

��

Directors’ Report (continued)

��

Sale of Practice Management Group

��

Future Developments, Business Strategies and Prospects for Future Financial Years

��

Matters Since the End of the Financial Year

��

Remuneration Report (Audited)

��

Non-executive Directors

��
Chairman of the Board since 1 July 2015
��
Deputy Chairman since 1 February 2006
��
Remuneration Committee member since 1 December 2011
��
Remuneration Committee Chair since 1 January 2016
��
��

��

��
��
��
��
Mr Chris Hagglund
��
��
General Counsel and Company Secretary since 1 October 2002
Mr Sam Allert
MD Business and Accounting Group ANZ since 1 October 2012
Mr Daniel Rabie
��
��

Remuneration Report (Audited) (continued)

��

The Board has spent considerable energy considering and adapting its approach to remuneration based upon ��

��

�� This is consistent with what was implemented in 2016 set out in great detail in the 2016 Remuneration Report and ��

��

��
��
��
��

��

��
��
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The Remuneration Committee operated substantially in accordance with the aims and aspirations of Principle 8 of ��

�� remuneration policies are in place which are designed to meet the needs of the Company and to enhance ��

��

��
��
��

��

Remuneration Report (Audited) (continued)

��

��
��
��
��
��
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�� both the short and long term
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��

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�� Board is shared equitably amongst its members
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��

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Function Role Fee Including Super
Chair ��
Main Board
Member ��
Chair ��
��
Member ��
Chair ��
��
Member ��
Chair ��
Other Committee
Member ��
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*��

��

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Function Role Fee Including Super
Chair ��
Main Board
Member ��
Chair ��
��
Member ��
Chair ��
��
Member ��
Chair ��
Other Committee
Member ��
��
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��

��
��

Remuneration Report (Audited) (continued)

��

��
��
��

��

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The Measurement Period should be three years
��
��
��
�� in these limited cases
��

��

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Short Term Incentive (STI)
Aspect ��
Purpose ��
��
��
��
��
��
Measurement
��
Period
Award ��
Opportunities ��
��
��
��
��
Comments
��
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Remuneration Report (Audited) (continued)

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��
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Performance
• ��
Goals
• EBITDA
• EPS
��
��
��
Comments
��
��
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��
��
��
��
��
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Award Calculations are performed following the end of the Measurement Period and the audit of
Determination and ��
Payment
��
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��
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Change of Control ��
��
��
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Plan Gate and ��
Board Discretion ��
��
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��
��
Misconduct etc misconduct in relation to the Company then all entitlements in relation to the Measurement
��
��
Malus ��
��
��
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��

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Long Term Incentive (LTI)
Aspect ��
Purpose ��
��
��
��
��
��
��
��
��
��
��
��
Measurement ��
Period
Form of Equity ��
• ��
• ��
��
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by an absolute number of shares only based on the Remuneration Committee’s intention to
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Remuneration Report (Audited) (continued)

Measurement Period

��

Comments

��

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Performance Level Annualised EPS Growth Vesting
Below Threshold < Budget 0%
Threshold = Budget 75%
Between Threshold and Target ��
Target 110% of Budget 100%
Relative TSR of the
Company as % of the S&P
ASX 300 Accumulation
Performance Level Index Vesting
Below Threshold �� 0%
Threshold �� 75%
Between Threshold and Target ��
Target �� 100%
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��

Comments

��

�� companies that was statistically robust enough to be meaningful and the Board was concerned ��

��

The Plan Rules do not contemplate retesting and therefore retesting is not a feature of the ��

Retesting

Remuneration Report (Audited) (continued)

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Plan Gate and ��
Board Discretion ��
��
��
��
��
Amount Payable ��
for Performance
��
Rights
��
Performance ��
Rights ��
��
��
��
Dealing ��
Restrictions on ��
Shares
Cessation of ��
Employment ��
During a
��
Measurement
��
Period
Change of Control ��
of the Company ��
��
Malus
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��

It is the Remuneration Committee’s belief that the addition of these performance shares has added to the balance ��

��

Remuneration Report (Audited) (continued)

��

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Base Package STI LTI
Total
Superannuation Other
Name Role(s) Year Salary Remuneration
Contributions ��
% of % of % of Package (TRP)
Amount Amount Amount
TRP TRP TRP
Group
2016 �� $0 �� 76% �� 27% ��
�� CEO
Rabie Group
2017 �� $0 �� 65% �� 24% �� 11% ��
CEO
Group
2016 �� $0 �� 71% �� 20% �� 9% ��
Mr Chris CFO
Hagglund Group
2017 �� $0 �� 64% �� 19% �� 17% ��
CFO
General
�� 2016 �� $0 �� 72% �� 18% �� 11% ��
Mr Myron CoSec
�� General
�� 2017 �� $0 �� 64% �� 15% �� 20% ��
CoSec
MD ANZ 2016 �� 76% �� 16% �� 9% ��
Mr Sam
Allert
MD ANZ 2017 �� 69% �� 15% �� 16% ��
COO 2016 �� $0 �� 80% �� 8% �� 12% ��
Mr Daniel
Rabie
COO 2017 �� $0 �� 59% �� 10% �� 31% ��
2016 $2,256,525 $157,950 $5,632 $2,420,107 $647,061 $188,349 $3,255,517
TOTALS
2017 $2,284,795 $131,779 $4,288 $2,420,862 $691,432 $606,271 $3,718,565
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**��

***��

****��

�� Remuneration Report to assist shareholders to obtain a more complete understanding of remuneration as it relates ��

��

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Board Committee Other Equity Termination
Name Role(s) Year Superannuation Total
Fees Fees �� Grant ��
��
�� 2016 �� $0 �� $0 $0 $0 ��
Chairman
Mr Ian
Ferrier
��
�� 2017 �� $0 �� $0 $0 $0 ��
Chairman
��
Director and
2016 �� $0 �� $0 $0 $0 ��
Deputy
Chairman
Mr Greg
��
��
Director and
2017 �� $0 �� $0 $0 $0 ��
Deputy
Chairman
Independent
�� 2016 �� $0 �� $0 $0 $0 ��
Director
Mr Chris
��
Independent
�� 2017 �� $0 �� $0 $0 $0 ��
Director
2016 $315,000 $0 $29,925 $0 $0 $0 $344,925
TOTALS
2017 $281,847 $0 $25,781 $0 $0 $0 $307,628
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��

Remuneration Report (Audited) (continued)

��

The disclosures required under the Corporations Act and prepared in accordance with applicable accounting ��

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STI LTI
Total
Base
Fixed STI LTI Remuneration
Package
Position Incumbent % Target % Target % Target % Target % Package at
Including TRP of Base STI TRP of Base LTI TRP Target
Super Package Amount Package Amount Performance
��
�� 55% 37% �� 20% 44% �� 24% ��
Rabie
Mr Chris
Group CFO �� 64% 30% �� 19% 26% �� 17% ��
Hagglund
General
Mr Myron
�� 64% 24% �� 16% 32% �� 21% ��
��
CoSec
MD
�� Mr Sam
�� 66% 22% �� 15% 29% �� 19% ��
Accounting Allert
ANZ
Mr Daniel
COO �� 65% 12% �� 8% 43% �� 28% ��
Rabie
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��

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Grant Value of
Non-deferred
Base Package STI Awarded for Deferred cash STI Previous Equity Actual Total
Including Super the Financial paid out for the Grants that Remuneration
FY Vested for the
Name Role(s) Year Year Package
FY
(TRP)
% of % of % of % of
Amount Amount Amount Amount
TRP TRP TRP TRP
�� 2016 �� 72% �� 17% �� 11% $0 0% ��
��
Rabie
�� 2017 �� 73% �� 16% �� 11% $0 0% ��
Mr Chris Group CFO 2016 �� 73% �� 17% �� 13% �� 7% ��
Hagglund Group CFO 2017 �� 77% �� 12% �� 11% $0 0% ��
General
�� 2016 �� 77% �� 10% �� 11% �� 6% ��
CoSec
Mr Myron
��
General
�� 2017 �� 80% �� 11% �� 9% $0 0% ��
CoSec
MD
��
2016 �� 79% �� 14% �� 4% �� 3% ��
Accounting
ANZ
Mr Sam
Allert
MD
��
2017 �� 82% �� 14% �� 4% $0 0% ��
Accounting
ANZ
COO 2016 �� 90% �� 8% �� 2% �� 1% ��
Mr Daniel
Rabie
COO 2017 �� 58% �� 4% �� 2% �� 36% ��
2016 $2,420,107 $430,761 $260,671 $74,706 $3,186,245
TOTALS
2017 $2,420,862 $415,921 $277,673 $107,430 $3,221,886
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��

�

Remuneration Report (Audited) (continued)

��

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��
attributable to Change in Share
Date Revenue ($m) Share Price Dividends
owners of the parent Price
($m)
��
��
��
��
��
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��

��
��
�� component to encourage retention and
��

The STI paid during the FY17 period related to performance during the FY16 period and was paid in cash on 15 ��

Remuneration Report (Audited) (continued)

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Award
Position FY16 Company Level KPI Summary Outcomes
Name Held at
Year End KPI Total
Weighting Target Achievement
Summary Award
�� 40% �� 98%
�� EBITDA 40% $35m 94% ��
EPS 20% �� 95%
�� 40% �� 98%
Mr Chris
Group CFO EBITDA 40% $35m 94% ��
Hagglund
EPS 20% �� 95%
�� 40% �� 98%
General
Mr Myron
�� EBITDA 40% $35m 94% ��
��
CoSec
EPS 20% �� 95%
�� 40% �� 98%
MD Business
Mr Sam Allert �� EBITDA 40% $35m 94% ��
ANZ
EPS 20% �� 95%
�� 40% �� 98%
Mr Daniel
COO EBITDA 40% $35m 94% ��
Rabie
EPS 20% �� 95%
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��

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Award
Position FY17 Company Level KPI Summary Outcomes
Name Held at
Year End KPI Original Total
Weighting Achievement
Summary Target Award
�� 40%
�� 96%
�� EBITDA 40% �� 97% ��
�� 104%
EPS 20%
�� 40%
�� 96%
Mr Chris
Group CFO EBITDA 40% �� 97% ��
Hagglund
�� 104%
EPS 20%
�� 40%
General �� 96%
Mr Myron
�� EBITDA 40% �� 97% ��
��
CoSec �� 104%
EPS 20%
�� 40%
MD Business �� 96%
Mr Sam Allert �� EBITDA 40% �� 97% ��
ANZ �� 104%
EPS 20%
�� 40%
��
Mr Daniel
COO EBITDA 40% ��
Rabie
��
EPS 20%
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��

Remuneration Report (Audited) (continued)

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Target LTI Number of
Number of
Value (at Performance % of Shares or
Shares
Incumbent Role grant January Tranche Weighting Against Grant Appreciation
Eligible to
2015) to Vest Target Vested Rights
Vest for FY17
for FY17 Vested
�� TSR 100% �� Pending 0% 0
Mr Chris Hagglund Group CFO �� TSR 100% �� Pending 0% ��
General
�� TSR 100% �� Pending 0% ��
CoSec
MD
��
Mr Sam Allert �� TSR 100% �� Pending 0% ��
Accounting
ANZ
Partially Capital
Mr Daniel Rabie COO �� TSR 100% ��
Completed ��
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��

The Company intends to attract and retain the superior talent required to successfully implement the Company’s ��

��
��
�� imposing of deferral periods for part of STI awards and
��

��

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Period of Notice
Position Held Termination
Employing Duration of
Name at Close of Payments
Company Contract
FY17
From
From KMP
Company
��
�� Open ended 1 month 1month
Rabie months
Mr Chris ��
Group CFO �� Open ended 3 months 3 months
Hagglund months
Mr Myron General ��
�� Open ended 1 month 1 month
�� months
��
Mr Sam ��
Accounting �� Open ended 1 month 1 month
Allert months
ANZ
Mr Daniel ��
COO �� Open ended 1 month ��
Rabie months*
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��

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Period of Notice
Position Held at Close of Employing Duration of Termination
Name
FY17 Company Contract From From Payments
Company KMP
Mr Ian ��
3 years None None None
Ferrier Chairman ��
Mr Greg ��
3 years None None None
�� Director and Deputy Chairman ��
Mr Chris ��
3 years None None None
�� Director ��
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��

Remuneration Report (Audited) (continued)

��

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Number Held at Open Granted Purchased / Number Held
Forfeited Vested
2017 FY17 DRP at Close 2017
Name Instrument
Dates
Number Number Number Number Number Number
Granted
Shares �� 0 0 0 ��
��
Rabie
��
�� 0 Pending ��
Options
Shares �� 0 0 0 ��
Mr Chris
Hagglund
��
�� 0 Pending ��
Options
Shares �� 0 0 0 ��
Mr Myron
��
��
�� 0 Pending ��
Options
Shares �� 0 0 0 ��
Mr Sam
Allert
��
�� 0 Pending ��
Options
Shares �� 0 0 0 ��
Mr Daniel
Rabie
��
�� 0
Options
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��

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Number Held at Granted Purchased Number Held
Forfeited Vested
Open 2017 FY17 / DRP at Close 2017
Name Instrument
Date
Number Number Number Number Number Number
Granted
Shares �� na na na 0 ��
Mr Ian
Ferrier ��
na na na na na na
Options
Shares �� na na na 0 ��
Mr Greg
��
na na na na na na
Options
Shares �� na na na 0 ��
Mr Chris
��
na na na na na na
Options
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Value Max Value to Min Value to be
Total Value at
2016 Equity Grants Tranche Expensed in be Expensed in Expensed in
Grant
FY17 Future Years Future Years
Name Role
TSR ��
�� Group CEO EPS ��
�� Must be employed at end of performance period
TSR ��
Mr Chris
Group CFO EPS ��
Hagglund
�� Must be employed at end of performance period
TSR ��
Mr Myron General
EPS ��
��
�� Must be employed at end of performance period
TSR ��
��
Mr Sam Allert Accounting EPS ��
ANZ
�� Must be employed at end of performance period
TSR ��
Mr Daniel
COO EPS ��
Rabie
�� Must be employed at end of performance period
TOTALS $910,000 $303,332 $606,668 $0.00
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��

Remuneration Report (Audited) (continued)

��

�� and
��

��

Directors’ Meeting

��

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Reckon Limited – Attendance Tables
Directors Meeting
Board Audit & Risk Committee Remuneration Committee
A B A B A B
Ian Ferrier 13 13 2 2 1 1
Chris
8 8 1 1 1 1
��
Greg
13 13 2 2 1 1
��
�� 13 13 ��
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��

Non-Audit Fees

��

��
��

On behalf of the directors

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Mr I Ferrier Chairman Sydney 23 March 2018

Deloitte Touche Tohmatsu ABN 74 490 121 060

�� 225 George Street ��

��

The Board of Directors

��

23 March 2018

Dear Board Members

��

��

��

Yours sincerely

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Deloitte Touche Tohmatsu

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��

Partner Chartered Accountants

��

Deloitte Touche Tohmatsu ABN 74 490 121 060

�� 225 George Street ��

��

Independent Auditor’s Report to the Members of Reckon Limited

Report on the Audit of the Financial Report

Opinion

��

�� performance for the year then ended; and

��

Basis for Opinion

�� are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the ��

��

��

��

��

��

Key Audit Matters

��

How the scope of our audit responded to the Key Key Audit Matter Audit Matter

Capitalisation and carrying value of development costs

��

The Group capitalises certain costs that are directly �� in assessing whether the criteria for capitalisation of ��

�� the appropriateness of the costs that can be capitalised and whether these costs were directly ��
��

��

��
��
Assessing the appropriateness of costs capitalised ��
��

��

Auditor’s Report (continued)

Key Audit Matter

How the scope of our audit responded to the Key Audit Matter

Impairment of goodwill

��

��
��

��

��
Challenging management’s ability to accurately �� and
��
�� management to an independently calculated discount rate;
��
��

��

Key Audit Matter

How the scope of our audit responded to the Key Audit Matter

Revenue recognition in respect of multiple element arrangements

As at 31 December 2017 the Group has reported Sales ��

In multiple element arrangements where goods and ��

��

��
Assessing the appropriateness of the Group’s �� element arrangements and their compliance with ��
��
�� used by Management in the underlying allocation model;
��
��

��

Auditor’s Report (continued)

Key Audit Matter

How the scope of our audit responded to the Key Audit Matter

��

��
�� InSpecie Distribution of that business’ non cash assets �� In-Specie distribution ��
�� agreement to sell its Accountant Practice ��

��

��
�� In-Specie ’ ��
Ensuring that the presentation of continuing and �� as held for sale’ along with the corresponding ��

��

Agreeing the demerger and sale transaction of the ��
Agreeing the trading results of the DMG and the ��
�� the ‘liabilities directly associated with assets ��
�� presentation of continuing and discontinued �� as held for sale are measured at the lower of their �� and
�� distributed as an In-Specie ��

��

Other Information

��

Responsibilities of the Directors for the Financial Report

�� in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as ��

��

Auditor’s Responsibilities for the Audit of the Financial Report

��

��
��
��
��

Auditor’s Report (continued)

��

��
��

��

Report on the Remuneration Report

Opinion on the Remuneration Report

��pages 13 to 38 of the Directors’ Report for the year ended 31 ��

��

Responsibilities

The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in ��

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DELOITTE TOUCHE TOHMATSU

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��

Partner Chartered Accountants ��

Directors’ Declaration

��

��
Comply with Accounting Standards; and
��
�� ended on that date of the consolidated group;
��
�� with s 286 of the Corporations Act 2001;
��
��
��
��
��

On behalf of the directors

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Mr I Ferrier Chairman ��

��

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Note Consolidated
2017 2016
$’000 $’000
Restated [1]
Continuing operations
Revenue 3 48,924 49,683
Product costs 3 ��
��
�� 3 ��
��
��
�� 3 ��
Telecommunications ��
��
��
��
�� 2,780 5,543
�� 6 ��
�� 2,211 4,458
��
�
��
�� 4 ��
�� 7,628 10,992
Earnings per share from continuing and discontinued operations Cents Cents
Basic Earnings per Share 21 ��
Diluted Earnings per Share 21 ��
Earnings per share from continuing operations Cents Cents
Basic Earnings per Share 21 ��
Diluted Earnings per Share 21 ��
----- End of picture text -----

��

�� and Other Comprehensive Income

��

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----- Start of picture text -----

Note Consolidated
2017 2016
$’000 $’000
�� 7,628 10,992
Other comprehensive income/(loss), net of income tax
��
�� 20 ��
�� 20 3 309
Total other comprehensive income/(loss), net of income tax (1,846) (4,411)
Total comprehensive income for the year attributable to the owners of the
5,782 6,581
parent
----- End of picture text -----

��

Consolidated Statement of Financial Position

��

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----- Start of picture text -----

Note Consolidated
2017 2016
$’000 $’000
ASSETS
Current Assets
�� 25 ��
�� 8 ��
Financial assets 14 �� 632
��
�� 287
Other assets 9 ��
��
�� 5 ��
Total Current Assets 59,233 18,367
Non-Current Assets
�� 8 40 113
Financial assets 14 136 133
�� 10 ��
�� 11 410 948
Intangible assets 12 ��
Other assets 9 133 ��
Total Non-Current Assets 26,338 101,357
Total Assets 85,571 119,724
LIABILITIES
Current Liabilities
Trade and other payables ��
Borrowings 13 � 936
�� 15 ��
�� 776 �
��
��
�� 5 ��
Total Current Liabilities 18,256 23,129
Non-Current Liabilities
Borrowings 13 ��
�� 16 ��
�� 15 �� 841
Total Non-Current Liabilities 54,216 59,877
Total Liabilities 72,472 83,006
Net Assets 13,099 36,718
Equity
Issued capital 19 ��
�� 20 ��
Retained earnings ��
Total Equity 13,099 36,718
----- End of picture text -----

��

Consolidated Statement ��

��

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----- Start of picture text -----

Acquisition
Foreign Share- of non Attributable
Share currency based Swap controlling to owners
Issued buyback translation payments hedging Retained interest of the
capital reserve reserve reserve reserve earnings reserve parent
Consolidated $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000
Balance at
18,707 (42,018) 221 668 133 65,159 (6,152) 36,718
1 January 2017
� � � � � �
��
Other
��
��
��
��
� � � � � �
��
translation of
foreign operations
��
�� 3 � � 3
interest rate swap
Total
�� 3 ��
income
Share based
� � � 480 � � � 480
��
��
��
��
Treasury shares 752 � � ��
��
Balance at
31 December 19,459 (42,018) (1,628) 396 136 42,906 (6,152) 13,099
2017
----- End of picture text -----

��

Consolidated Statement ��(continued)

��

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----- Start of picture text -----

Acquisition
Foreign of non- Attributable
Share currency Share-based Swap controlling to owners
Issued buyback translation payments hedging Retained interest of the
capital reserve reserve reserve reserve earnings reserve parent
Consolidated $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000
Balance at
16,929 (42,018) 4,941 638 (176) 59,754 (6,152) 33,916
1 January 2016
� � � � � �
��
Other
��
��
��
��
� � � � � �
��
translation of
foreign operations
��
�� 309 � � 309
interest rate swap
Total
�� 309 ��
income
Share based
� � � 126 � � � 126
��
��
��
��
��
� � � � � �
��
��
Treasury shares 96 � � ��
��
Balance at
31 December 18,707 (42,018) 221 668 133 65,159 (6,152) 36,718
2016
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��

Consolidated Statement of Cash Flows

��

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----- Start of picture text -----

Consolidated
Note ��
2017 2016
$’000 $’000
Cash Flows From Operating Activities
Receipts from customers ��
Payments to suppliers and employees ��
��
��
�� 30
Interest paid ��
��
�� 9,651 7,547
Cash Flows From Investing Activities
�
Payment for purchase of business ��
Proceeds on sale of business � ��
�
��
��
��
�� (2,505) (6,109)
Cash Flows From Financing Activities
��
�
��
�� 26 ��
�� (6,067) (2,042)
Net Increase / (Decrease) in cash and cash equivalents 1,079 (604)
�� 924 ��
��
�� 1,958 924
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��

Notes to the Financial Statements

��

Basis of preparation

��

Adoption of new and revised Accounting Standards

��

(a) Basis of consolidation

��

��
��
��

��

Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control are accounted ��

(b) Business Combinations

��

��

��

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the ��

(c) Depreciation and Amortisation

��

��
��

Notes to the Financial Statements (continued)

��

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 ��

��

Group companies

��

��
��
��

��

(g) Intangible assets

��

Goodwill arising on an acquisition of a business is carried at cost as established at the date of the acquisition of the ��

��

Intellectual Property

Intangible assets acquired in a business combination and recognised separately from goodwill are initially recognised ��

��

��
the intention to complete the intangible asset and use or sell it;
the ability to use or sell the intangible asset;
��
�� sell the intangible asset; and
��

��

Notes to the Financial Statements (continued)

(h) Income Tax

��

(i) Inventories

��

(j) Leased Assets

��

(l) Receivables

��

(m) Impairment of assets

��

Notes to the Financial Statements (continued)

(n) Revenue Recognition

��

(o) Deferred Revenue

��

(p) Earnings per share

��

(r) Borrowings

��

(s) Provisions

��

(t) Fair Value estimation

��

(u) Government Grants

��

(v) Hedge Accounting

��

Notes to the Financial Statements (continued)

�� income and accumulated in equity are transferred from equity and included in the initial measurement of the cost of ��

��

The carrying amount of certain assets and liabilities are often determined based on estimates and assumptions of ��

��

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----- Start of picture text -----

�� Expected to be initially
reporting periods ��
Standard/Interpretation beginning on or after year ending
AASB 9 ‘Financial Instruments’, and the relevant
1 January 2018 31 December 2018
amending standards
AASB 15 ‘Revenue from Contracts with
Customers’, AASB 2014-5 ‘Amendments to
Australian Accounting Standards arising from AASB 1 January 2018 31 December 2018
15’, AASB 2015-8 ‘Amendments to Australian
��
AASB 16 ‘Leases’ 1 January 2019 31 December 2019
----- End of picture text -----

��

��
��
��
��
��

Notes to the Financial Statements (continued)

��

(a) Business segment information

��

Business Group
Accountant Practice Management Group
��
Document Management Group

��

��
��
��
��

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----- Start of picture text -----

2017 2016
Segment revenues and results $’000 $’000
Restated
Operating revenue
Business Group ��
��
��
�� 30
Continuing operations ��
Discontinued operations ��
Total revenue 90,320 97,759
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Notes to the Financial Statements (continued)

��

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----- Start of picture text -----

2017 2017 2017 2016 2016 2016
$’000 $000 $’000 $’000 $’000 $’000
Continuing Discontinued Continuing Discontinued
business business Total business business Total
Restated Restated Restated
EBITDA
Business Group ��
��
Central administration costs ��
15,935 15,637 31,572 16,902 18,359 35,261
Depreciation and amortisation
Business Group ��
��
��
�� 15 15 30
Finance costs ��
�� 2,780 6,811 9,591 5,543 8,123 13,666
��
�� 2,211 5,417 7,628 4,458 6,534 10,992
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��

==> picture [460 x 216] intentionally omitted <==

----- Start of picture text -----

Additions to non-
Assets Liabilities current assets
2017 2016 2017 2016 2017 2016
Segment revenues and results $’000 $’000 $’000 $’000 $’000 $’000
Business Group ��
��
� �
Accountants Practice Management Group ��
� �
Document Management Group ��
�
��
��
��
Total of all segments ��
----- End of picture text -----

(b) Geographical information

==> picture [460 x 164] intentionally omitted <==

----- Start of picture text -----

Continuing business
revenue from external
customers Non-current assets
2017 2016 2017 2016
$’000 $’000 $’000 $’000
Restated
Australia ��
��
��
��
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��

Notes to the Financial Statements (continued)

��

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----- Start of picture text -----

Consolidated
2017 2016
$’000 $’000
Restated
��
Revenue
Sales revenue
��
��
�� 722 65
��
��
Other Revenue
�� 30
��
Expenses
Product costs ��
��
Other Entities 69 29
��
�� 525 577
��
�� 73 76
Intellectual property ��
��
Total depreciation and amortisation ��
�� 120 92
��
��
�� 322 129
��
�� 480 126
�� 108 247
588 373
��
Minimum lease payments ��
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4 Discontinued operations

��

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----- Start of picture text -----

Consolidated
2017 2016
$’000 $’000
��
��
�
��
��
��
��
��
��
��
��
----- End of picture text -----

Notes to the Financial Statements (continued)

��

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----- Start of picture text -----

Consolidated
2017 2016
$’000 $’000
��
�� 40 �
Other assets ��
Financial assets 196 �
�� 262 -
Intangible assets �� -
��
Trade and other payables 640 -
�� -
�� 287 -
�� -
�
��
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��

==> picture [452 x 399] intentionally omitted <==

----- Start of picture text -----

Consolidated
2017 2016
$’000 $’000
��
��
��
�� 18
569 ��
��
��
��
�� 834 ��
��
��
��
��
Sundry items 33 ��
624 ��
�� 18
�� 569 ��
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----- Start of picture text -----

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----- End of picture text -----

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��	� �
Capital	�� ��
	�� ��

Notes to the Financial Statements (continued)

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==> picture [452 x 317] intentionally omitted <==

----- Start of picture text -----

Consolidated
2017 2016
$ $
(a) Deloitte Touche Tohmatsu
��
��
��
��
(b) Other Auditors
��
��
��
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==> picture [452 x 486] intentionally omitted <==

----- Start of picture text -----

Consolidated
2017 2016
$’000 $’000
��
��
Allowance for doubtful debts ��
��
��
��
��
�� 53
�� 40 60
40 113
��
�� 163 ��
�� 281 416
Past due 61 [�] days ��
Total ��
��
��
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Balance at beginning of the year	315 311
��	�� ��
��	�� �
��	77 92
Balance at end of year	211 315

Notes to the Financial Statements (continued)

��

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----- Start of picture text -----

Consolidated
2017 2016
$’000 $’000
��
Prepayments ��
Other � 635
��
��
Prepayments 47 199
Other 86 ��
133 ��
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��

==> picture [452 x 613] intentionally omitted <==

----- Start of picture text -----

Consolidated
2017 2016
$’000 $’000
Leasehold Improvements
At cost ��
��
�� 285 392
Plant and equipment
At cost ��
��
Total plant and equipment 947 ��
��
Leasehold Plant and
Improvements Equipment Total
$’000 $’000 $’000
Consolidated
Carrying amount at 1 January 2017 392 ��
Additions 129 557 686
��
��
��
��
Balance at 31 December 2017 285 947 ��
Consolidated
Carrying amount at 1 January 2016 292 ��
Additions 251 ��
��
Balance at 31 December 2016 392 ��
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Notes to the Financial Statements (continued)

��

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----- Start of picture text -----

Consolidated
2017 2016
$’000 $’000
��
�� 772
Doubtful debts 9 12
�� 58 99
�� 343 65
410 948
��
��
Opening balance at 1 January 948 193
�
��
�� 755
Balance at 31 December 410 948
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��

==> picture [452 x 199] intentionally omitted <==

----- Start of picture text -----

��
Accumulated amortisation ��
436 ��
��
Accumulated amortisation ��
��
��
��
----- End of picture text -----

��

==> picture [452 x 49] intentionally omitted <==

----- Start of picture text -----

Consolidated
2017 2016
$’000 $’000
----- End of picture text -----

Impairment test for goodwill

��

==> picture [452 x 73] intentionally omitted <==

----- Start of picture text -----

�
Accountants Group ��
��
�
��
��
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��

==> picture [452 x 351] intentionally omitted <==

----- Start of picture text -----

Consolidated movements in intangibles Intellectual Development
Goodwill Property Costs Total
$’000 $’000 $’000 $’000
At 1 January 2017 ��
Additions � � ��
�� 42 67 ��
��
��
�
Amortisation charge ��
At 31 December 2017 �� 436 ��
At 1 January 2016 ��
Additions � � ��
�
Acquisitions ��
��
� �
Disposals ��
�
Amortisation charge ��
At 31 December 2016 ��
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Notes to the Financial Statements (continued)

��

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----- Start of picture text -----

Consolidated
2017 2016
$’000 $’000
��
�� 791
Hire purchase liabilities � 145
� 936
Non-current
��
Hire purchase liabilities � 112
��
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----- Start of picture text -----

2017
Bank
guarantee &
Bank Loan transaction
overdraft facility facility
$’000 $’000 $’000
��
��
��
��
The remaining contractual maturity for the facility (including both interest and
��
��
� �
��
��
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��

==> picture [451 x 147] intentionally omitted <==

----- Start of picture text -----

Consolidated
2017 2016
$’000 $’000
��
�� 632
��
�� 136 133
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==> picture [452 x 221] intentionally omitted <==

----- Start of picture text -----

Consolidated
2017 2016
$’000 $’000
��
�� 704 ��
��
��
��
�� 187 347
�� 948 494
�� 841
----- End of picture text -----

Notes to the Financial Statements (continued)

��

==> picture [452 x 252] intentionally omitted <==

----- Start of picture text -----

Consolidated
2017 2016
$’000 $’000
��
Doubtful debts ��
��
��
��
��
��
��
----- End of picture text -----

��

��
Opening balance at 1 January	�� ��
��	�� �
��	�� �
��	�� 740
Balance at 31 December	�� ��

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==> picture [451 x 529] intentionally omitted <==

----- Start of picture text -----

Parent
2017 2016
$’000 $’000
Financial position
Assets
Current assets ��
��
��
��
��
Current liabilities ��
�
��
��
��
Equity
Share capital ��
��
�� 136 133
�� 396 668
��
��
Retained earnings ��
��
Financial performance
��
��
��
��
Capital commitments for the acquisition of property, plant and equipment
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----- Start of picture text -----

|||
|---|---|
|�|�|
|Not longer than 1 year|

----- End of picture text -----

Other

��

Notes to the Financial Statements (continued)

��

Long-term incentive plan

��

�� group of companies has been jettisoned and replaced by the company’s TSR performance measured against the ��

��

==> picture [451 x 250] intentionally omitted <==

----- Start of picture text -----

Performance Shares
Grant Vesting Shares Shares lapsed Shares vested Shares available at
Date Date Granted during the year during the year the end of the year
2017 2016 2017 2016 2017 2016
Jan’14 Dec’16 ��
Jan’15 Dec’17 �� 921 ��
Jan’11 Dec’17 �� 268 � ��
Jan’12 Dec’18 ��
Jan’13 Dec’19 ��
Jan’14 Dec’20 ��
Jan’15 Dec’21 ��
----- End of picture text -----*

��

Notes to the Financial Statements (continued)

��

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----- Start of picture text -----

Appreciation Rights
Grant Expiry Rights Rights lapsed Rights vested Rights available at
Date Date Granted during the year during the year the end of the year
2017 2016 2017 2016 2017 2016
Jan’14 Dec’16 ��
Jan’15 Dec’17 ��
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----- Start of picture text -----

Senior Executive Rights
Grant Expiry Rights Rights lapsed Rights vested Rights available at
Date Date Granted during the year during the year the end of the year
2017 2016 2017 2016 2017 2016
Jan’16 Dec’18 ��
Jan’16 Dec’18 ��
----- End of picture text -----*

��

Short-term incentive plan

��

�� payment will only be made if the employee remains in employment for a further one year period after the performance ��

�� performance is then measured on a sliding scale from 90% to 110% against the budgeted performance of the group ��

��

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----- Start of picture text -----

2017 2016
No. $’000 No. $’000
Fully Paid Ordinary Share Capital
��
� �
��
��
Less Treasury shares
��
� � � �
Shares purchased in current period
� � �
��
��
��
��
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��

Notes to the Financial Statements (continued)

��

Nature and purpose of reserves

��

(b) Swap hedging reserve

��

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----- Start of picture text -----

Consolidated
2017 2016
cents cents
��
��
��
��
��
��
per share
��
��
��
----- End of picture text -----

��

(a) Capital Expenditure Commitments

��

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----- Start of picture text -----

Consolidated
2017 2016
$’000 $’000
(b) Lease Commitments
Operating Leases
��
��
�� 269
��
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��

Notes to the Financial Statements (continued)

��

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----- Start of picture text -----

Name of Entity Country of Incorporation Ownership Interest
2017 2016
% %
Parent Entity
�� Australia
Subsidiaries
�� Australia 100 100
�� Australia 100 100
�� New Zealand 100 100
�� Australia 100 100
�� New Zealand 100 100
�� 100 100
�� Australia 100 100
�� Australia 100 100
�� 100 100
�� 100 100
�� 100 100
�� 100
��
�� 100
�� Singapore 100 100
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��

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----- Start of picture text -----

Consolidated
2017 2016
$’000 $’000
----- End of picture text -----

(a) Reconciliation of Cash

��

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----- Start of picture text -----

��
��
�� 924
----- End of picture text -----

��

Flows From Operating Activities

��	�� ��
��	�� ��
��	�� ��
�� ��	�� �� 480 126
��	� ��
��	931 ��
��	�� ��
��	248 154
��
��	�� ��
��	�� ��
Other current assets	30 ��
��	73 55
��	�� ��
��
Current trade payables	�� 613
Other current liabilities	�� ��
��	429 182
��	�� ��

Notes to the Financial Statements (continued)

��

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----- Start of picture text -----

Consolidated
2017 2016
$’000 $’000
(c) Business acquired
SmartVault Corporation
��
��
��
�
Cash paid ��
�
Cash acquired ��
Debt acquired � 368
Cash � ��
��
�� 430
�
��
�� 421
�
Trade payables ��
��
Goodwill � ��
�
��
----- End of picture text -----

��

(d) Assets and liabilities

��

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----- Start of picture text -----

Note Cash Non-cash
Balance at Financing Demerger of Fair value Balance at
1 Jan 2017 �� subsidiary adjustment 31 Dec 2017
$’000 $’000 $’000 $’000 $’000
Borrowings 13 ��
��
hedge or economically 14 ��
��
��
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��

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----- Start of picture text -----

Consolidated
2017 2016
$’000 $’000
��
��
��
��
��
��
�
��
��
��
614 11
��
----- End of picture text -----

��

(a) Financial Risk Management Objectives

��

(b) Interest Rate Risk

��

Notes to the Financial Statements (continued)

��

c) Credit Risk

��

(f) Capital risk management

��

(h) Fair Value

��

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----- Start of picture text -----

Consolidated
2017 2016
$ $
(a) Key Management Personnel Remuneration
��
��
Share based payments ��
��
----- End of picture text -----

��

��

North Sydney

��

��

Additional Information as at ��(Unaudited)

Corporate Governance Statement

��

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----- Start of picture text -----

Ordinary Shareholder Number Percentage
��
��
��
��
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��
��
��
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��
��
��
��
��
��
��
��
��
��
��
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��

Shareholdings less than marketable parcels

��

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----- Start of picture text -----

Number of
Number of Ordinary Shares Shareholders
�� 891
��
�� 480
�� 476
�� 42
Total ��
----- End of picture text -----

Substantial Shareholders

��

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----- Start of picture text -----

Ordinary Shareholder Number Percentage
��
��
��
��
��
��
----- End of picture text -----

(b) As disclosed to ASX

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----- Start of picture text -----

Ordinary
Shares Percentage
��
��
��
��
��
��
----- End of picture text -----

Additional Information as at

��(Unaudited) (continued)

��

��

��

��

Stock Exchange Listings

��

Auditors

Deloitte Touche Tohmatsu 225 George Street ��

��

Annual General Meeting

�� �� at �� ��

��

��
��
��
Follow the prompts to update your “Communications Options”
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AI assistant

RECKON LIMITED — Annual Report 2018

65708_rns_2018-03-26_f0f7f0e9-710c-4236-afec-1b48845e476e.pdf

2017 | Annual Report

Reckon Limited Annual Report

Contents

Message from the Group CEO

Message from the Chairman

Directors’ Report

Ian Ferrier AM FCA

Greg Wilkinson

��������������������������������������������������

Christopher Woodforde B Comm LLB

Clive Rabie

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General Counsel and Company Secretary

Review of Operations and Statement of Principal Activities

�������

Directors’ Report (continued)

Business Group

Legal Group

Practice Management Group (Sold to MYOB subject to ACCC and NZCC approval)

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Directors’ Report (continued)

Results of Operations

Revenue

EBITDA

Dividends

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Demerger of Document Management Business

Directors’ Report (continued)

Sale of Practice Management Group

Future Developments, Business Strategies and Prospects for Future Financial Years

Matters Since the End of the Financial Year

Remuneration Report (Audited)

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Non-executive Directors

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Remuneration Report (Audited) (continued)

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Remuneration Report (Audited) (continued)

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Remuneration Report (Audited) (continued)

Remuneration Report (Audited) (continued)

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Comments

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Comments

Remuneration Report (Audited) (continued)

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Remuneration Report (Audited) (continued)

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Remuneration Report (Audited) (continued)

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Remuneration Report (Audited) (continued)

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Remuneration Report (Audited) (continued)

Remuneration Report (Audited) (continued)

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Remuneration Report (Audited) (continued)

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Directors’ Meeting

Non-Audit Fees

RECKON LIMITED Annual Report 2018

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Consolidated Statement ��

Consolidated Statement ��(continued)

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