MYOB Finance Australia Limited ACN 161 013 654 Registered office: Level 3, 235 Springvale Road, Glen Waverley, VIC 3150 25 August 2014 Market Announcements Office ASX Limited interim financial report for the half-year ended 30 June 2014 We attach the Interim Financial Report for the half-year ended 30 June 2014. As a result of its listing on the ASX, MYOB Finance Australia Limited is required to lodge with the ASX the annual and half-yearly financial reports of, the parent company of MYOB Finance Australia Limited and its controlled entities, for the period. Ian Boylan Company Secretary MYOB Finance Australia Limited Legal\309451466.1
ACN 152 570 431 Interim Financial Report
Contents Page Directors' report 1 Financial statements Consolidated income statement 5 Consolidated statement of comprehensive income 6 Consolidated balance sheet 7 Consolidated statement of changes in equity 8 Consolidated statement of cash flows 9 Notes to the consolidated financial statements: 1 Corporate information 10 2 Preparation of interim financial report 10 3 Comparative Information 10 4 Critical accounting estimates and judgements 11 4.1 Recovery of deferred tax assets 11 4.2 Useful life of intangible assets 11 5 Segment information 12 6 Income tax expense 14 7 Derivative financial instruments 15 8 Events occurring after the balance sheet date 15 Auditor's review report 16
DIRECTORS REPORT The directors present their report on (formerly known as Bain Capital Abacus Holding Pty Limited) and the entities it controlled for the half-year ended 30 June 2014. is a company limited by shares, incorporated on 9 August 2011. DIRECTORS The following persons were directors of during the half-year and up to the date of this report: Craig Boyce Serge Walid Sarkis Neil Kalvelage Paul Edgerley Timothy Reed Richard Moore PRINCIPAL ACTIVITIES The principal activities of during the period were the development and publishing of software and the provision of services for small and medium enterprises, including accountants in public practice. REVIEW OF OPERATIONS For the half-year ended 30 June 2014 reported operating revenue from continuing operations of $139.5 million (2013 half-year period: $115.8 million). s profit from continuing operations before income tax, other expenses, finance income and expenses, depreciation and amortisation was $69.7 million (2013 half-year period: $54.0 million). SIGNIFICANT CHANGES IN STATE OF AFFAIRS There were no other significant changes in the state of affairs of during the halfyear ended 30 June 2014. MATTERS SUBSEQUENT TO THE END OF THE PERIOD On 14 August 2014 MYOB Finance NZ Limited, a subsidiary of, announced it had signed a conditional agreement to purchase PayGlobal Limited (NZ Co). The acquisition is scheduled to be completed on 31 August 2014. Page 1 of 17
DIRECTORS REPORT AUDITOR INDEPENDENCE DECLARATION A copy of the auditor s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 3. ROUNDING OF AMOUNTS The company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments Commission, relating to the rounding off of amounts in the directors report. Amounts in the directors report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar. TAX CONSOLIDATION and its 100% owned Australian subsidiaries are part of a tax consolidated group, the head of the tax consolidated group being MYOB Group Pty Limited. AUDITOR PricewaterhouseCoopers continues in office in accordance with section 327 of the Corporations Act 2001. Signed in accordance with a resolution of the Board of Directors: Tim Reed Director Richard Moore Director Dated at Melbourne this 21 st day of August 2014 Page 2 of 17
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DIRECTORS DECLARATION In accordance with a resolution of the directors of, we state that: 1. In the opinion of the directors: (a) The financial statements and notes of the Company and of the consolidated entity are in accordance with the Corporations Act 2001, including: (i) (ii) Giving a true and fair view of the Company's and consolidated entity's financial position as at 30 June 2014 and of their performance for the period ended on that date; and Complying with Accounting Standards and Corporations Regulations 2001; and (b) There are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. On behalf of the Board Tim Reed Director Richard Moore Director Melbourne, 21 st of August 2014 Page 4 of 17
Consolidated income statement Half-year Note 2014 2013 Revenue 139,524 115,757 Expenses Staff related (43,166) (40,528) General office / administration (12,813) (9,652) Direct materials (5,092) (2,957) Royalties (1,299) (1,331) Reseller commissions (3,708) (3,255) Marketing (3,757) (3,993) Non recurring / other (15,746) (5,453) Depreciation and amortisation (34,729) (30,805) Interest received 511 143 Finance cost (29,701) (29,548) (Loss) from operations before income tax (9,976) (11,622) Income tax benefit 6 4,371 5,335 (Loss) from operations after income tax (5,605) (6,287) (Loss) for the period is attributable to: Owners of the parent (5,605) (6,287) The above consolidated income statement should be read in conjunction with the accompanying notes. Page 5 of 17
Consolidated statement of comprehensive income Half-year 2014 2013 (Loss) from operations after income tax (5,605) (6,287) Other comprehensive income Foreign currency translation 565 763 Change in fair value of cash flow hedges 1,410 1,167 Other comprehensive income for the period, net of tax 1,975 1,930 Total comprehensive (loss) for the period (3,630) (4,357) Total comprehensive (loss) for the period is attributable to: Owners of the parent (3,630) (4,357) The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes. Page 6 of 17
Consolidated balance sheet AS AT 30 JUNE 2014 2014 2013 June December ASSETS Current Assets Cash and cash equivalents 40,132 33,643 Trade and other receivables 11,956 10,075 Inventories 383 381 Other current assets 20,301 8,474 Current tax receivables 399 2 Total current assets 73,171 52,575 Non-current Assets Property, plant and equipment 22,229 16,949 Intangible assets & goodwill 1,251,422 1,263,107 Derivative financial instruments 3 73 Investments 2,315 - Total non-current assets 1,275,969 1,280,129 TOTAL ASSETS 1,349,140 1,332,704 LIABILITIES Current Liabilities Trade and other payables 57,933 34,786 Current tax payable 711 1,338 Interest-bearing loans and borrowings 36,806 35,003 Unearned revenue 39,691 38,839 Provisions 10,333 9,062 Derivative financial instruments 1,753 3,526 Total current liabilities 147,227 122,554 Non-current Liabilities Non-current payables - 50 Interest-bearing loans and borrowings 570,935 593,966 Deferred tax liabilities 7,420 3,896 Provisions 4,676 4,591 Total non-current liabilities 583,031 602,503 TOTAL LIABILITIES 730,258 725,057 NET ASSETS 618,882 607,647 EQUITY Contributed equity 683,135 668,894 Retained earnings (74,324) (68,720) Reserves 10,071 7,473 TOTAL EQUITY 618,882 607,647 The above consolidated balance sheet should be read in conjunction with the accompanying notes. Page 7 of 17
Consolidated statement of changes in equity Issued capital Foreign currency translation reserve Cash flow hedge reserve Management shares reserve Retained earnings Total equity At 1 January 2014 668,894 7,390 (1,989) 2,072 (68,719) 607,648 (Loss) for the period - - - - (5,605) (5,605) Other comprehensive income (net of tax) - 565 1,410 - - 1,975 Total comprehensive income / (loss) for the period - 565 1,410 - (5,605) (3,630) Transactions with owners in their capacity as owners: Management share scheme - - - 623-623 Issue of share capital 14,241 - - - - 14,241 At 30 June 2014 683,135 7,955 (579) 2,695 (74,324) 618,882 At 1 January 2013 612,359 1,020 (4,282) 1,070 (54,642) 555,525 (Loss) for the period - - - - (6,287) (6,287) Other comprehensive income (net of tax) - 763 1,167 - - 1,930 Total comprehensive income / (loss) for the period - 763 1,167 - (6,287) (4,357) Transactions with owners in their capacity as owners: Management share scheme - - - 428-428 Issue of share capital 582 - - - - 582 At 30 June 2013 612,941 1,783 (3,115) 1,498 (60,929) 552,178 Page 8 of 17
Consolidated statement of cash flows 2014 2013 June June Cash flows from operating activities Receipts from customers 153,014 127,272 Payments to suppliers and employees (79,678) (72,524) Finance costs (25,482) (25,754) Income tax (paid) (2,128) (321) Interest received 500 143 Management fees paid (1,258) (1,160) Non recurring / other costs (14,159) (1,753) Net cash flows from operating activities 30,809 25,903 Cash flows from investing activities Purchase / Sale of property, plant and equipment (2,238) (6,977) Payment for acquisition of subsidiary, net of cash acquired (522) (113,145) Capitalised internally generated software costs (4,409) (2,462) Capitalised Product Development (3,341) - Investment in Kounta (2,315) - Purchase of Intangible assets (1,423) - Net cash flows used in investing activities (14,248) (122,584) Cash flows from financing activities Debt raised - 62,463 Repayment of borrowings (25,703) - Issue of share capital 14,241 582 Increase in related party borrowings 1,137 49,650 Net cash flows from financing activities (10,325) 112,695 Net increase in cash and cash equivalents 6,236 16,014 Net foreign exchange differences 253 (416) Cash and cash equivalents at beginning of period 33,643 5,268 Cash and cash equivalents at end of period 40,132 20,866 The above Cash Flow Statement should be read in conjunction with the accompanying notes. Page 9 of 17
Notes to the Financial Statements 1 CORPORATE INFORMATION The consolidated financial statements and notes represent those of (parent) and its consolidated entities ("the Group"). The financial statements were authorised for issue on 21 August 2014 by the directors of the company. The directors have the power to amend and reissue the financial statements. The condensed consolidated interim financial statements and notes provide comparative information for the half-year ended 30 June 2014. The nature of the operations and principal activities of the Group are described in the Directors' Report. Registered Office: Level 3, 235 Springvale Road, Glen Waverley, Victoria 3150. The amounts represented in the financial statements have been rounded to the nearest thousand dollars. 2 PREPARATION OF INTERIM FINANCIAL REPORT This condensed consolidated interim financial report for the half-year reporting period ended 30 June 2014 has been prepared in accordance with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Act 2001. This condensed consolidated interim financial report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the annual report for the year ended 31 December 2013. These financial statements have been prepared on an accruals basis and are based on historical costs, as modified where applicable by the measurement at fair value of derivatives. Notwithstanding the deficiency in net current assets in the Group, the directors have determined the entity can continue as a going concern as the consolidated future cash flows will be sufficient to cover the shortfall, along with active management of costs and use of facilities over the next 12 months. The accounting policies adopted are consistent with those of the previous financial year. The entity is a for-profit entity for the purpose of preparing the financial statements. 3 COMPARATIVE INFORMATION The Statement of Comprehensive Income, Statement of Changes in Equity and Statement of Cash Flows provide comparative information for the half-year ended 30 June 2013. The Balance Sheet provides comparative information as at 31 December 2013. Where necessary, the comparatives have been reclassified to be consistent with the current year disclosures. Page 10 of 17
Notes to the Financial Statements 4 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS The group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below. 4.1 Recovery of deferred tax assets Deferred tax assets are recognised for deductible temporary differences as management considers that it is probable that sufficient taxable temporary differences are expected to reverse in a future period or future taxable profits will be available to utilise those temporary differences. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits over the next two years together with future tax planning strategies. 4.2 Useful life of intangible assets The useful lives of intangible assets are assessed to be either finite or indefinite. Brand names that have indefinite lives are not amortised. Management use judgement in determining whether an individual brand will have a finite life or an indefinite life. In making this determination, management make use of information on the long-term strategy for the brand, the level of growth or decline of the markets that the brand operates in, and the history of the market and the brand s position within that market. If a brand is assessed to have a finite life, management will use judgement in determining the useful life of the brand and will consider the period over which expected cash flows will continue to be derived in making that decision. During May 2014, management undertook a review of the amortisation relating to brand of BankLink. It was determined that the brand is to be amortised over a useful life of 5 years from July 2013. Page 11 of 17
Notes to the Financial Statements (continued) 5 SEGMENT INFORMATION 5.1 Description of segments Management has determined the operating segments based on the reports reviewed by the Operational Business Review committee. The committee analyses the Group's activities by operating divisions which are organised and managed separately according to the nature of the customers they service, with each segment offering different products and serving different markets. The committee reviews each of the operating divisions down to contribution. The Business division provides business management software and services to small and medium enterprises. The Accountants division provides business software and services to accounting professionals in practice. The Enterprise and Connected Services division provides business management software and services to medium enterprises. There are no significant transactions between segments. 5.2 Reporting Segments Half-year 2014 Business Accountants Enterprise & Connected Corporate Services Total Division Division Division (a) Revenue Segment revenue 67,635 59,201 12,623 65 139,524 (b) Other profit and loss disclosures Direct materials / Royalties / Reseller Commissions 2,839 3,656 3,604-10,099 Staff related expenses 18,531 15,418 3,411 5,806 43,166 Other operating expenses 7,055 5,571 747 3,197 16,570 Contribution 39,210 34,556 4,861 (8,938) 69,689 Depreciation and amortisation 34,729 Non-recurring expenses Other expenses 5,776 9,970 Finance costs 29,190 (Loss) before tax (9,976) (c) Revenue by Country Segment revenue (d) Non-current Assets by Country Property, plant and equipment Intangible assets & goodwill Total Aust NZ Total 118,643 20,881 139,524 Aust NZ Asia Total 16,439 5,632 158 22,229 1,160,103 91,319-1,251,422 1,176,542 96,951 158 1,273,651 Page 12 of 17
Notes to the Financial Statements (continued) 5 SEGMENT INFORMATION (continued) Half-year 2013 Business Accountants Enterprise & Connected Corporate Services Total Division Division Division (a) Revenue Segment revenue 61,245 41,997 12,424 91 115,757 (b) Other profit and loss disclosures Direct materials / Royalties / Reseller Commissions 2,612 1,038 3,893-7,543 Staff related expenses 18,021 12,386 4,317 5,804 40,528 Other operating expenses 4,775 3,613 502 4,755 13,645 Contribution 35,837 24,960 3,712 (10,468) 54,041 Depreciation and amortisation 30,805 Non-recurring expenses Other expenses 4,054 1,399 Interest 29,405 (Loss) before tax (11,622) (c) Revenue by Country Segment revenue Aust NZ Total 102,650 13,107 115,757 (d) Non-current Assets by Country Property, plant and equipment Intangible assets & goodwill Total Aust NZ Asia Total Dec-13 Dec-13 Dec-13 Dec-13 15,070 1,650 229 16,949 1,177,588 85,519-1,263,107 1,192,658 87,169 229 1,280,056 Page 13 of 17
Notes to the Financial Statements (continued) 6 INCOME TAX EXPENSE Numerical reconciliation of income tax expense to prima facie tax payable 2014 2013 (Loss) from operations before income tax (9,976) (11,622) Tax at the Australian tax rate of 30% (2013-30%) (2,993) (3,487) Tax effect of amounts which are not deductible (taxable) in calculating taxable income: Amortisation of intangibles - 326 Entertainment, Legal/Consultant fees and Management shares 273 238 Research and Development Concession (843) (2,085) Derivative valuation not realised for tax 65 (75) Non-deductible acquisition costs 25 168 Sundry items (8) 82 (488) (1,346) Difference in overseas tax rate (32) (21) Adjustments for current tax of prior periods (858) (481) Income tax (benefit) (4,371) (5,335) Page 14 of 17
Notes to the Financial Statements (continued) 7 DERIVATIVE FINANCIAL INSTRUMENTS This note provides an update on the judgements and estimates made by the Group in determining the fair values of the financial instruments since the last annual financial report. (a) Fair values of derivative financial instruments To provide an indication about the reliability of the inputs used in determining fair value, the Group classifies its financial instruments as prescribed under the accounting standards. An explanation of each follows below: Level 1: The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and trading and availablefor-sale securities) is based on quoted (unadjusted) market prices at the end of the reporting period. The quoted marked price used for financial assets held by the group is the current bid price. These instruments are included in level 1. Level 2 - The fair value of financial instruments that are not traded in an active market (for example, over the counter derivatives) is determined using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2. Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case for unlisted equity securities. All derivative assets and liabilities are classed as Level 2 by the Group, meaning the valuations have inputs other than quoted prices that are observable for the asset or liability. 2014 2013 June December Level 2 Level 2 Derivatives used for hedging: Assets 3 73 Liabilities 1,753 3,526 (b) Fair values of other financial instruments The group also has a number of financial instruments which are not measured at fair value in the balance sheet. These had the following fair values as at 30 June 2014: Carrying amount Fair value Current receivables - Trade and other receivables 11,956 11,956 11,956 11,956 Current liabilities - Interest-bearing loans and borrowings 36,806 36,806 - Trade and other payables 57,933 57,933 - Loans from related parties 711 711 95,450 95,450 Non-current liabilities - Interest-bearing loans and borrowings 570,935 570,935 570,935 570,935 Due to their short-term nature, the carrying amounts of current receivables, current payables and current borrowings is assumed to approximate their fair value. 8 EVENTS OCCURRING AFTER THE BALANCE SHEET DATE On 14 August 2014 MYOB Finance NZ Limited, a subsidiary of, announced it had signed a conditional agreement to purchase PayGlobal Limited (NZ Co). The acquisition is scheduled to be completed on 31 August 2014. Page 15 of 17
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