Technology One Limited Annual Report 2010
One vision. One vendor. One experience. TechnologyOne (ASX: TNE) is a leading enterprise software solutions provider. For more than 20 years we have been providing deeply integrated software solutions for business, government, financial services, health and community, education and the utilities sectors. Tens of thousands of people each day use our world class solutions, which we develop, market, sell, implement and support. Our enterprise-wide solution suite is based on leading edge technology and is backed by a substantial R&D program. Our consulting teams provide world-class services and this provides our customers with a long-term, secure and valuable partnership. TechnologyOne employs more than 750 people and has offices in each State and Territory of Australia, as well as New Zealand, Asia, the Pacific, and the United Kingdom.
ONE VISION For the industries we serve and the software solutions we deliver. ONE V E N D O R Responsible for the comprehensive end-to-end service and care of our customers. ONE EXPERIENCE A compelling, positive experience, which enhances our customers’ success. TechnologyOne at a Glance 2
Financial Highlights 3
Letter to Shareholders 4
Evolving our Strategy 8
Our Integrated product Suite 11
our Target Vertical Markets 12
Our preconfigured Solutions 13
CONTENTS Review of Operations - Operating Officers 14
Review of Operations - General Managers 19
Employer of Opportunity 24
investing in the community 25
Financial Statements 27
Shareholder Information 81
Corporate Directory 82
Financial Calendar 83
tech nolo gy one l i m i ted Notice of Annual General Meeting annual report 2010 The Annual General Meeting of Technology One Limited for Financial Year 2010 will be held on Friday 18 February 2011 at 10.30am (AEST) at the Brisbane Convention and Exhibition Centre, Merivale St, South Brisbane Qld 4101. The business to be presented is set out in the separate Notice of Meeting issued to shareholders with a Proxy Form with this report.
Technology O n e ANNUAL REPORT 2 0 1 0 Page TECHNOLOGYONE A T A G LAN C E
Our Main Activities Our Finances TechnologyOne is a leading supplier of TechnologyOne has been continually powerful integrated enterprise software profitable since 1992. solutions for the following markets: Our Reach n Local Government TechnologyOne has offices throughout n government Australia, New Zealand, Asia, the Pacific, and n Education the United Kingdom. n health and Community Services Our Staff n Utilities We employ approximately 750 people n Financial Services throughout our offices. n Managed Services, including property, Did you know? construction, media, entertainment and n TechnologyOne’s preconfigured mining services. solutions reduce the time, cost and risk We develop, market, sell, implement and associated with implementing enterprise support our own world-class software software solutions solutions, which are used by hundreds of n TechnologyOne Business Intelligence large organisations and corporations each won the 2010 Australian Business Award day in Australia, New Zealand, Asia, the for the best eBusiness product Pacific region, and the UnitedK ingdom. n TechnologyOne has moved into a new, Our Products state of the art R&D facility that has TechnologyOne’s comprehensive suite of been designed to generate innovation, business software products include: passion and enthusiasm, and underpin n TechnologyOne Financials our next stage of growth n TechnologyOne Human Resource & n TechnologyOne is the only vendor to Payroll develop, sell, implement and support our own fully integrated suite of enterprise n TechnologyOne Supply Chain software solutions n TechnologyOne Corporate Performance n TechnologyOne has announced its new Management cloud computing suite, C2 n TechnologyOne Business Intelligence n TechnologyOne Enterprise Budgeting n TechnologyOne Performance Planning n TechnologyOne Property & Rating n TechnologyOne Student Management n TechnologyOne Asset Management n TechnologyOne Enterprise Content Management n TechnologyOne Customer Relationship Management n TechnologyOne Plus – custom software development
Page Technology O n e ANNUAL REPORT 2 0 1 0 FINANCIAL h i g h L i g h T S
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Compound $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 gROwth
Revenue 28,125 39,991 47,380 48,348 51,551 55,823 66,485 78,367 110,215 122,487 135,906 17%
Net Profit Before Tax 8,802 11,430 12,844 10,121 13,110 14,302 16,257 19,772 23,129 20,276 23,282 10%
Net Profit After Tax 5,750 7,767 8,755 7,030 9,479 10,280 12,314 14,781 17,229 15,684 17,813 12%
Dividend (cps) 0.50 1.42 2.00 2.50 2.85 3.10 3.41 3.75 4.12 3.75 5.70 28%
Dividend Payout 1,514 7,510 6,354 7,460 8,513 9,288 10,109 11,157 12,313 11,253 17,125 27%
Licence Fees 5,843 10,119 11,534 8,075 10,463 10,644 15,606 18,354 22,588 24,333 26,766 16% Revenue Cash & Cash Equivalents Revenue Cash & Cash Equivalents Consulting 9,825 10,306 13,830 Rev14,078enue 13,309 14,846 18,060 22,498 35,882Cash 41,023& Cash Equivalents41,583 16% $m $m $m $m $m $m 160 Annual Support and 40 160 40 160 40 140 Maintenance 5,018 8,399 10,70435 12,426 14,388 17,173 21,064 25,594140 36,343 43,114 48,506 25% 35 140 35 120 30 120 30 120 30 100 R&D Expense 4,690 7,840 8,13525 9,306 9,547 10,220 12,675 13,837100 21,154 24,908 26,963 19% 25 100 25 80 20 80 20 80 20 60 Net Assets 14,299 35,348 36,64415 35,646 36,956 38,500 39,256 44,31260 50,514 57,143 63,415 16% 15 60 15 40 10 40 10 Cash & Cash 40 10 20 5 20 5 Equivalents 14,271 25,343 23,24420 20,187 23,853 25,623 22,279 28,809 23,6845 30,538 36,573 10% 0 0 0 0 0 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
YEAR 2000 2001 2002 2003 YEA2004 R 2005 2006 2007 2008 2009 2010 2000 2001 YEA 2002 R 2003 2004 2005 2006 2007 2008 2009 2010 YEAR YEAR YEAR
Net ProfitRev Afenueter Tax RevenueDividendCash (cps) & Cash Equivalents CashNet Pr &ofit Cash Af terEquivalents Tax Dividend (cps) Revenue Cash & CashREVENUE Equivalents Net NETProfit PR AfOFterIT A TaFTERx TAX CASH & CASH EQUIVALENTS $m $m Dividend (cps) $m $m $m $m $m $m 20 $m 6.00 20 6.00 160 160 20 40 40 6.00 160 18 40 18 5.0018 5.00 16 140 140 35 3516 5.00 140 35 16 14 120 30 14 120 4.00 30 4.00 14 120 12 30 12 4.00 100 100 25 25 12 100 10 25 3.00 10 3.00 80 80 10 20 20 3.00 80 8 20 8 2.008 2.00 6 60 60 15 156 2.00 60 15 6 4 40 10 4 40 1.00 10 1.00 10 4 40 2 2 1.00 20 5 5 20 2 20 0 5 0 0 0 0 0 0 0 0 0
0 2000 2001 2002 0 2003 2004 2005 2006 2007 2008 2009 2010 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 YEAR 2000 2001 2002 2003 2004 2005 2006 2007 YEA2008 R 2009 2010 2000 2001 2002 2003 2004 YEA2005 R 2006 2007 2008 2009 2010 YEAR 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2000 2001 2002 2003 2004 YEA2005 R 2006 2007 2008 2009 2010 YEAR YEAR YEAR YEAR YEAR YEAR YEAR
Net AssetNets Profit After Tax Net ProfitDividend After TaDividend Pax yout (cps) DividendNet Asset s(cps) Dividend Payout Net Profit After Tax DIVIDEND (cents per share) Net AssetDIVIDENDs PAYOUT NETDividend ASSETS Payout $m Dividend (cps) $m $m $m $m $m $m 20 20 6.00 6.00 $m $m 20 70 6.00 18 70 18 18 18 70 18 18 5.00 5.00 16 16 16 16 60 5.00 60 16 60 16 14 14 14 14 4.00 4.00 14 50 50 14 4.0012 12 1250 12 12 12 40 10 10 10 3.00 3.0040 10 10 3.00 40 8 8 10 30 8 30 8 8 2.00 2.00 6 6 30 8 2.00 6 6 6 20 4 4 20 6 204 1.00 1.00 4 4 2 10 1.00 2 10 4 2 2 2 0 10 0 0 0 2 0 0 0 0 0 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2000 2001 2002 0 2003 2004 2005 2006 2007 2008 2009 2010 2000 2001 2002 0 2003 2004 2005 2006 2007 2008 2009 2010 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2000 2001 2002 2003 2004 2005 2006 2007 YEA2008 R 2009 2010 2000 2001 YEA 2002 R 2003 2004 2005 2006 2007 YEA2008 R 2009 2010 2000 2001 2002 2003 2004 YEA2005 R 2006 2007 2008 2009 2010 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 YEAR YEAR YEAR 2000 2001 2002 2003 2004 YEA2005 R 2006 2007 2008 2009 2010 2000 2001 YEA2002 R 2003 2004 2005 2006 2007 2008 2009 2010 YEAR YEAR YEAR Net Assets Net Assets Dividend Payout Dividend Payout Net Assets Dividend Payout Technology O n e ANNUAL REPORT 2 0 1 0 Page $m $m $m $m $m $m 70 70 18 18 70 18 16 60 60 16 16 60 14 14 5014 50 50 12 12 4012 40 10 10 40 10 30 30 8 8 30 8 6 6 20 6 20 20 4 4 104 10 2 10 2 2 0 0 0 0 0 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2000 2001 2002 2003 2004 YEA2005 R 2006 2007 2008 2009 2010 YEAR YEAR YEAR YEAR YEAR LETTER T O s h ARE H OL D ER S
On behalf of Technology One Limited n Net Profit After Tax up 14% ($2.1m) to Our Consulting Services were impacted $17.8m this year by a number of factors, including (TechnologyOne), I am pleased to n Revenue up 11% ($13.4m) to $135.8m the United Kingdom slow down in licence announce our results for the full year fees and a strongly appreciating Australian n Total expenses up 10% ($10.3m) to dollar. These factors are not expected to be ending 30 September 2010, with $112.6m repeated next year, and we expect to see Profit BeforeT ax up 15% to $23.3m. n Expenses excluding R&D up 11% ($8.1m) strong growth in forthcoming years in our to $85.4m Consulting Services. TechnologyOne has posted its seventh n R& D expenses up 9% ($2.3m) to Our results are especially pleasing given the consecutive year of record revenues and $27.2m fact that we have invested in excess of $10m licence fees, with revenue up 11% and It is important to note that the strongly in a number of future growth areas that this licence fees up 10%. appreciating Australian dollar impacted a year significantly impacted our results, as Based on our strong performance this year, very large project, which is in US dollars. follows: and our continuing confidence going forward, On a constant currency basis, removing the n New solutions group I am also pleased to announce both a final effect of the appreciating Australian dollar, n Our United Kingdom business dividend and a special dividend for the year, our profit before tax would have increased by taking the total dividend for the year to 5.7 a further $750k (3%) this financial year. n Building our new Customer Relationship cents per share (up 52% on the prior year), Management product Our results by revenue stream are as follows: which, based on a share price of 95 cents, n Building our new Enterprise Content n I nitial licence fees up 10% ($2.4m) to represents a fully franked dividend yield of Management product 6%. $26.8m n Building our new Performance Planning n Annual licence fees up 12% ($5.3m) to We have also continued to win major deals product against our multinational competitors, with $48.5m n Building our new, enhanced Human new contracts across all our major vertical n C onsulting Services fees up marginally by Resource & Payroll product markets. 1% ($425k) to $41.3m We see significant growth opportunities n TechnologyOne Plus up 30% ($3.1m) to ANALYSIS OF RESULTS emerging from all these investments over the $13.5m Highlights of our results include: next few years. These items are discussed in n Net Profit Before Tax up 15% ($3m) to more detail later in this letter. $23.3m
1 2 3 4 5 6 7
Page Technology O n e ANNUAL REPORT 2 0 1 0 Technology O n e ANNUAL REPORT 2 0 1 0 Page Balance Sheet Strength The United Kingdom These preconfigured solutions will TechnologyOne continues to have a strong The United Kingdom (UK) has been a dramatically reduce the implementation balance sheet, with cash and short term challenging market for us over the last few time and risk typically associated with a investments available for sale of $36.6m, years, as we are a new entrant to this market large enterprise-wide implementation by undrawn banking facilities of $7m, and a and yet to establish the credibility and allowing a prospective customer to take a debt/equity ratio of only 4.6%. Operating visibility of our much larger, long-established ‘preconfigured solution’ relevant to their cash flow was also very strong for the year multinational competitors. The UK market industry as the starting point, and then tailor at $31.5m, versus a Net Profit After Tax of has also been severely impacted by the it to the specific needs of their organisation. $17.8m. Global Financial Crisis (GFC) and, as a new This is a significant and ambitious entrant to this market, this is increasing the undertaking for the company, as we move Cost Growth Control Initiatives challenge we face to establish our business. from the ‘House of Products’ to the ‘House Critical to our success this year has been Having said this, TechnologyOne is not of Solutions’. This has the potential to leveraging our revenue growth of 11% to complacent and has made significant significantly streamline our business, reduce deliver a profit growth of 15% by controlling changes to our UK operation by creating a our risks, and dramatically enhance the value the increase in our cost base. new North West Region covering Wales, our solutions provide to our customers in Over the full year our expenses were up Ireland, Scotland and Northern England our target vertical markets. 10%, compared to an increase of 17% at the from the Midlands up. We have brought Our new solutions will all be specifically end of last year. This is significantly less than in a new Regional Manager to drive this branded to both reinforce the any time in the company’s recent history. business with extensive enterprise software TechnologyOne brand and our deep At the same time we have retained our experience in the UK. We have also commitment and industry knowledge of staff, increased headcount in critical areas, appointed a new Regional Manager to drive each of our target markets. The solutions continued all our major research projects, our existing Southern Region, which covers developed so far are called OneCouncil, and opened our new, state of the art R&D the remainder of England, including the high OneGovernment, OneHousing, OneHealth, centre in Brisbane. This has been a significant population area of London. Once again, this OneAirport, OneEnergy, OnePort, OneNFP, achievement, which will position us well for new manager brings extensive enterprise OneResearch, OneWater, OneUniversity, continuing growth in future years. software experience in the UK. OneWealth, and OneCommunity. The difficult and uncertain operating These changes will create a greater focus We expect to see the results of this environment of the last few years has on the North and South of the United significant investment in the next 12 challenged TechnologyOne and we Kingdom, as well as allowing us to develop months. have responded with a much leaner and a new strategy for the UK which is more cost conscious business. We have now appropriate to handle the difficult operating Compelling Customer Experience implemented a new set of disciplines, conditions caused by the GFC. TechnologyOne today is a large software systems and processes in our business, company delivering a broad and highly Having said this, it is important to note we which will have a significant and continuing sophisticated suite of enterprise products have created a beach-head in the UK market positive effect in the years to come. to the market. Our ‘Power of One’ business from which we can now grow our business. model is both unique and challenging as This includes customers in the government, we not only research and develop our health, education, financial services and enterprise product suite, but we also market, community services sectors. sell, implement and support our enterprise We expect to see significant long-term suite to provide our customers with a single, B oar d of D i r ec to r s growth opportunities in the UK in the unified experience. coming years. Further changes are planned To continue to be successful it is important to be made to the UK operation over the 1 Edward Chung that we do not become bureaucratic and next 18 months, as we move from a start-up EXECUTIVE DIRECTOR that our customers receive an outstanding to a more established operation, as part of and a compelling customer experience from our ongoing commitment to the UK market. 2 Richard Anstey us at all times. NON-EXECUTIVE DIRECTOR House of Solutions To achieve this goal we have created our Over the last twelve months own unique TechnologyOne Compelling 3 kevin Blinco TechnologyOne’s new Solutions Group has Customer Experience program, which NON-EXECUTIVE DIRECTOR been working with our customers in each of we are now rolling out to all our staff. our vertical markets and with our product This program will teach our people the Di Marco 4 Adrian teams to preconfigure our products for ‘best behaviours, attitudes, skills and techniques EXECUTIVE CHAIRMAN practice’ within each of our target vertical that will allow them to deliver to our markets. Our Solutions Group has been customers an outstanding and compelling 5 david Orchard a substantial investment for us with an customer service experience. Our staff are cOMPANY SECRETARY Operating Officer and 14 people assigned to being taught to embrace a new ethic, “I care this group, including highly experienced and 6 Ron McLean and I can always do something to deliver a talented Solution Managers, Architects and compelling customer experience.” NON-EXECUTIVE DIRECTOR Consultants. 7 John Mactaggart NON-EXECUTIVE DIRECTOR
Page Technology O n e ANNUAL REPORT 2 0 1 0 Technology O n e ANNUAL REPORT 2 0 1 0 Page LETTER T O s h ARE H OL D ER S CONTINUED
In parallel to this program we are also re- Sales & Marketing R&D continued across all our products, but engineering our business over the next few A significant focus for us in the next 24 areas of particular interest are as follows: years to ensure our systems, processes and months will be to drive our sales team hard n Our new and exciting Customer policies support our people to deliver our in a challenging and highly competitive Relationship Management (CRM) customers an outstanding experience. environment. solution, which is now starting to Our customers will now become the Our sales team is now large, and we expect gain traction in the market. The initial compass by which our people make their the sales team to continue to grow quickly, focus has been on the areas of Grants decisions. I believe our commitment to doubling in size over the next four years. Management, Fundraising, Contact and delivering a compelling customer experience It is increasingly important that we better Stakeholder Management, Community will provide us with a significant advantage support our sales team, and to do this we Housing, Community Engagement, and over our competitors, as our competitors’ have now clearly identified theS olutions, Case Management. cultures and business models do not support Programs & Promotions that they will be n Moving our acquired Enterprise Content them well in delivering this to the market. selling. For each of these Solutions, Programs Management (ECM) product to the & Promotions we have now identified Our Next Generation Enterprise Connected Intelligence (Ci) platform and the marketing campaigns to successfully Suite providing deep integration across all our bring them to the market. The marketing products. The first release of our new It is now over seven years since we started campaigns consist of telemarketing, ECM Ci product is now available and building what was then our new generation webinars, seminars, executive briefings, early indications are that we are making product, the Connected Intelligence series. focus groups, and industry events, as well as substantial headway. The success of our Connected Intelligence supporting sales collateral. series of products has underpinned our n S tabilisation of our recently released growth in recent years. This new Solutions, Programs & Promotions Student Management Ci product is approach will allow us to build a stronger nearing completion and we are now The IT industry is constantly changing and and deeper sales pipeline for future years, focused on expanding our product evolving, driven by new concepts, new ideas, and allow us to more effectively harvest capability to handle the dual sector and new technologies. TechnologyOne is these opportunities. requirements of both TAFE and Higher once again embracing the opportunities now Education in one product line. starting to emerge. We are now completing In recent years we have also put in place the research in our next generation platform, a new Regional Sales Management team. n C ontinued investment in our Human which will be used to build the next Our new Regional Sales Management team Resource & Payroll product, with a generation of our enterprise suite. We expect consists of seasoned sales professionals significant focus onH uman Resource to finalise our next generation platform over that are focused on proactively growing capabilities to give us a significant the next six months, at which time we will and building our business, and are targeted product differentiation to our then start the manufacturing and building of on strategy development and execution. competitors. To support the new Regional Sales our next generation enterprise suite. n I nvestment in our new loosely coupled Management team we have put in place new I am confident that our next generation architecture (LCA), which will allow us infrastructure that will allow them to hand enterprise suite will provide us with a to upgrade our customers quickly and over much of the ‘day-to-day management continuing technological competitive easily in the future, and is critical to tasks’ to others parts of our business, advantage over our competitors. It will our ongoing success as an enterprise such as to General Managers, Solution also provide our customers with a simple solution provider. Managers, Project Office, and the Bid and and evolutionary way forward with us n C ontinued investment in our new Presales group, so that the Regional Sales to embrace new concepts, ideas and Mobility platform to create new, Management team can focus on growing our technologies, such as mobile computing, the powerful solutions for field workers. business in the regions. iExperience (e.g. iPad, iPhone), and social n The completion of the migration of our networking phenomena such as Facebook. Research & Development (R&D) Performance Planning product to the Ci Our next generation enterprise suite will In a challenging operating environment platform and providing deep integration also be built for the new phenomenon called TechnologyOne has continued to invest across all our products. cloud computing, which will substantially strongly in R&D, which is fundamental to n C ontinuing investment in our Business reduce our customers’ operating and our continuing growth in the coming years. Intelligence, Enterprise Budgeting, Asset capital expenditure costs, and simplify the R&D expenditure was $27.2m in the full Management and Property & Rating management of their IT systems. It will year, representing 20% of Revenue. This products. provide our customers with a simple, easy was a significant investment and is well and cost effective way forward with no pain n Further investment in new licensable outside our normal 18% target. This and no risk. product extensions for each product to expenditure, over and above our 18% target, drive future sales into our expanding We have named our next generation product impacted our results by an additional $2.8m customer base. TechnologyOne Cloud Computing suite, or expense in the full year. more simply, TechnologyOne C2. We will be providing more information on this exciting new initiative over the next six months.
Page Technology O n e ANNUAL REPORT 2 0 1 0 New R&D Centre winning a greater share than in the past as pipeline of licensable product extensions TechnologyOne’s new R&D centre opened customers look for ways to improve their and modules. Our Solutions, Programs & in May this year. The new R&D centre is efficiencies and challenge existing supplier Promotions will allow us to focus on our a significant investment for the company arrangements. expanding product line to ensure we achieve that will improve productivity and increase a greater return on our investment in R&D. Outlook for 2011 collaboration across our expanding product We are also continuing to expand The cost control initiatives we successfully range. It will also assist us in continuing to geographically, which is creating new implemented in the 2009 and 2010 financial attract the best R&D talent in the market as opportunities for us. The UK, though a year have positioned us well so that in the it offers an outstanding work environment. challenging market in the short term, has 2011 financial year, we will not be burdened Our new R&D centre is critical to the next significant long-term growth potential for us. with the challenge of a rapidly expanding stage of our growth and to the building cost base. At the same time our pipeline We will also continue to use new of our next generation product suite. The of opportunities is good and we expect to technologies to gain an advantage over modern and appealing R&D centre will also see further growth in revenue in the 2011 our competitors, as we have already impact positively on customer and prospect financial year. This will position us well for achieved with our Connected Intelligence perception about the capabilities of the continuing profit growth during the 2011 series. Our next generation product, called company as we continue to successfully financial year. TechnologyOne C2, which will be based compete against the world’s biggest on the new cloud computing paradigm, is Having said this, we do expect the first half software companies. now nearing the end of the research stage, of the new financial year to be challenging, and we will soon commence development. Dividend as expense growth in the first half will be TechnologyOne C2 will provide us with In light of our continuing strong disproportionately higher at approximately continuing leadership and innovation over performance, the final dividend for the year 16%, compared to 10% over the full year. has been set at 2.87 cents per share. This our competitors. takes the full year dividend to 4.2 cents, up Long Term Outlook Our focus on delivering our customers an 12% on the prior year, in line with our Net TechnologyOne has built a suite of outstanding and compelling experience will Profit After Tax. This represents a payout enterprise products that puts us in an elite also position us as the enterprise supplier of of 71% and is in line with our previous group of software companies globally choice in the coming years. guidance given to the market. that can provide a true ‘end to end’ We will continue to investigate acquisition enterprise solution to an organisation. opportunities that will either increase our Additional Special Dividend The breadth of our enterprise suite today geographical reach or increase our suite of Because of the strong Balance Sheet, encompasses Financials, Supply Chain, enterprise products. continuing growth, and confidence in the Asset Management, Human Resource & Lastly, and most importantly, as many of company’s future outlook, the Board has Payroll, Enterprise Budgeting, Business our newer products move from ‘start-up’ to also approved the payment of an additional Intelligence, Performance Planning, Property ‘established’ mode over the next few years, special dividend of 1.5 cents, which will be & Rating, Student Management, Customer this will improve our margins and return on paid at the same time as the final year end Relationship Management, and Enterprise investment on these products. dividend. Content Management. As such, we remain confident of continuing This will take the total dividend for the year TechnologyOne provides a compelling growth in the long term. to 5.7 cents per share (up 52% on the prior proposition to our target customers because year), which, based on a share price of 95 of our advanced product functionality, the Afterword cents, represents a fully franked dividend deep integration across our enterprise suite, I would like to once again acknowledge the yield of 6%. It is interesting to note that our advanced user interface, our Connected hard work, passion and commitment of the though TechnologyOne is still a high growth Intelligence (Ci) platform, and our unique TechnologyOne team, and the great work company, TechnologyOne will also now be a ‘Power of One’ business model. being done to build, market, sell, implement high dividend paying company. Our concentration on seven key vertical and support our suite of enterprise The Board will continue to consider paying markets and the introduction of our new software. As we continue to ‘raise the bar’, a Special Dividend in future years if cash Solutions Group will enable us to better it is exciting to see our people respond reserves remain high, growth continues focus our sales, marketing, R&D and enthusiastically to the new challenges. as is expected, and there is no compelling consulting teams to deliver an exceptional I would also like to thank you, our alternative use for the cash reserves. customer experience, with the aim of shareholders, for your continuing support. becoming one of the dominant suppliers Operating Environment in each of our chosen vertical markets. As The operating environment for the 2011 we deliver our ‘preconfigured, best practice financial year remains stable and very similar enterprise solutions’ to each of these vertical to that which we encountered in the 2010 markets, we will dramatically reduce the year. We also continue to see aggressive Adrian Di Marco implementation times and risk typically Executive Chairman tactics from our competitors, and customers associated with a large enterprise-wide taking greater time to undertake due implementation and provide us with a diligence before making their decisions. significant competitive advantage. In such an environment it is important Our plan is to continue to expand our to note that we are not losing business product depth by building a substantial to our competitors, and we are actually
Technology O n e ANNUAL REPORT 2 0 1 0 Page EVOLVING O U R S TRATE g y
For more than 20 years, TechnologyOne has 1. Our Technology TechnologyOne Cloud been a leader in providing deeply integrated TechnologyOne operates at the leading edge Computing Suite (C2) enterprise software solutions to business, of technology and ensures that its customers TechnologyOne C2 will offer customers an government, financial services, health and are provided with software that is relevant evolutionary migration path from Connected community, education and utilities sectors. and supports their ongoing needs. Intelligence to the new cloud computing We continuously evolve our products and market. We will be completely business model to keep pace with market Maintaining speed and agility in re-architecting our software over time so demands and technological advances, a our R&D efforts that TechnologyOne C2 will be built in the strategy that, along with our ability to TechnologyOne works closely with its cloud, hosted in the cloud, and delivered respond quickly to our customers’ needs, customers to offer continued software from the cloud. Customers will be provided has been instrumental to our success. releases every twelve months. This ensures with the opportunity to employ both that our software continues to evolve at Our teams continue to grow to meet the Connected Intelligence and C2 functionality a market-relevant pace and includes new ongoing demand for our products and until they are ready to transition fully to features and functions. Our upgrades are services, and TechnologyOne now employs either an open or private cloud solution. easy to install and, most importantly, are more than 750 people in offices in each When customers are ready to operate in the available for no additional licence fees. State and Territory of Australia, as well as cloud, the migration will be both easy and New Zealand, Asia, the Pacific region and the Innovation, creativity and painless. One of the biggest advantages United Kingdom. Our integrated solution collaboration that cloud computing will offer is that it will suite now offers eleven fully integrated TechnologyOne has always prided itself increase the performance, speed and agility enterprise software products. on the development of software solutions of our software utilisation and deployment, and will mean a continuous delivery TechnologyOne’s success is the result of a that are based on the business and social approach, involving ongoing testing and sound strategy focusing on: drivers its customers face. This is where innovation and creativity amongst our R&D updates to the software that happen on an 1. Our Technology teams is key. We need to create software ongoing basis and without the disruption n Mai ntaining speed and agility in our that sets us apart from the rest and our of taking upgrades. R&D efforts developers are leaders in this regard. They The power of our awesome n I nnovation, creativity and collaboration challenge conventional thinking, take risks, software think outside the square, and go beyond n Our Connected Intelligence platform TechnologyOne ensures its software is the traditional realms of development easy to use and offers a wide range of n Using technology for competitive methodology. Our state of the art R&D features and functions. To achieve this, the advantage facility and specific programs designed to company promotes ownership, innovation n TechnologyOn e Cloud Computing foster collaboration, creativity and innovation and commitment with its R&D teams, Suite (C2) offers the platform for our future growth. which results in awesome software that has n The power of our awesome software Our Connected Intelligence an overwhelmingly positive effect on our platform customers’ business. 2. Our Markets TechnologyOne has a suite of 11 products n S even key vertical markets on the Connected Intelligence platform, n D elivering deeply integrated offering superior integration and ease of preconfigured solutions use. The Connected Intelligence platform forms the basis for our Loosely Coupled n H arnessing the opportunities of our Architecture, which enables our customers House of Solutions business model to upgrade or implement products n Expanding within our vertical markets individually and places us well ahead of our n Extending our product breadth and depth competitors. n Expanding within our geographies Using technology for competitive advantage 3. Our Business Using new and emerging technologies to n Our culture of innovation involving a true provide a competitive advantage was one of partnership approach with our customers the founding principles when TechnologyOne n TechnologyOne Evolve, which offers began 23 years ago and continues to be a a ground breaking, evolutionary way major focus today. forward for our customers n The Power of One value proposition n C ompelling customer service n Recruiting and retaining remarkable people
Page Technology O n e ANNUAL REPORT 2 0 1 0 Technology O n e ANNUAL REPORT 2 0 1 0 Page 2. Our markets Expanding within our vertical 3. Our Business TechnologyOne focuses on specific markets markets TechnologyOne’s innovative approach to with the aim of becoming the leading Our broad markets offer a great deal of software offers significant benefits, and software supplier within them. This approach room to expand into new industries and provides a compelling experience for both has led to our current success and will as TechnologyOne continues to grow, we our customers and our people. continue to support our future growth. will be seeking to continue this expansion Our culture of innovation to generate further growth. For example, Seven key vertical markets involving a true partnership this year we have developed solutions approach with our customers TechnologyOne focuses its R&D, sales and for use within five different sectors in the Our customers benefit from a culture of marketing on seven key vertical markets; Health and Community Services market; ongoing improvement, excellent technology Government, Local Government, Financial community housing, community services, and innovative business models. We Services, Education, Health & Community not for profit, research institutions and listen to our customers and make sure we Services, Utilities, and Managed Services. health organisations. Likewise, in the understand their needs, meet their priorities, With our greater understanding of these Financial Services sector, we are focussing and enable ongoing improvements in their markets, and the development of our on superannuation and wealth management, business processes. This ensures that we are preconfigured solutions, we are now realising insurance, credit union and banking able to build best practice into our solutions greater success in these chosen vertical organisations. markets. and that we can provide our customers with Extending our product breadth the best software and services available. Delivering deeply integrated and depth preconfigured solutions TechnologyOne Evolve: a ground Along with the development of Our preconfigured solutions provide specific breaking, evolutionary way preconfigured solutions, TechnologyOne is forward for our customers industries with out of the box software continuing to extend its product offering TechnologyOne’s Evolve commitment designed to meet the diverse needs of through the development of additional means we offer customers continuous their sector. TechnologyOne has been features and functions. We are working improvement in our products and our able to develop these solutions because closely with our customers to ensure we iterative approach ensures our upgrades are it is one of the few vendors world-wide continue to meet their ongoing business easy to implement. This approach has now to own the intellectual property of a core needs and provide an increasing range of seen TechnologyOne successfully migrate enterprise suite, including Financials, Human functions within our enterprise solutions. Resource & Payroll, Supply Chain, Enterprise its customers across a number of technology Budgeting, Business Intelligence, and Asset Expanding within our geographies releases; from mainframe and client/server Management software. As TechnologyOne continues to achieve based computing to web and our Connected Intelligence platform. Our next technology As we continue to develop preconfigured outstanding success in the Australian release, TechnologyOne C2, will see our solutions, customers will realise the ongoing and New Zealand markets, we are looking customers move onto the cloud. benefits of rapid implementation and a to expand within other geographies to reduced total cost of ownership through ensure the business continues to grow. The Power of One value proposition streamlined services and more efficient One such expansion has included the Our unique value proposition, ‘The Power operations. appointment of a dedicated manager for of One’, is that we develop, market, sell, the South Pacific region. implement and support our own world Harnessing the opportunities of Our success has been achieved because our House of Solutions business class software solutions. We do not sell model of our ability to adapt the company to our products through resellers, nor do we meet the differing needs in each region. TechnologyOne has appointed Solutions use third party organisations to implement In particular, we adapt our sales strategies Managers with deep industry knowledge to them. Our customers profit from a direct within our regions as we identify new and drive the company’s long-term strategy of relationship with us every step of the ongoing needs. For example, in 2006 we developing specific solutions for its seven way. From the beginning of a project, our divided the New Zealand sales team into chosen vertical markets. These senior remarkable people take ownership of a two distinct regions, which has achieved managers report directly to the Operating project and provide excellent ongoing service significant growth. Based on the success of Officer for Products andS olutions, and work and support. Our commitment to R&D this model, we have created two regions in closely with customers in their market to means that customers are able to influence the United Kingdom; a North West region, further understand the sector’s requirements. product development directly and work with which covers Wales, Ireland, Scotland and a receptive R&D team. We guarantee that the North of England, and a Southern Region our customers will receive the best available covering the remainder of England. We have solutions and services. appointed highly experienced managers to each of these regions, both of whom have a strong background in driving software sales and growing businesses in new markets.
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COMPELLING CUSTOMER SERVICE Recruiting and retaining Providing a ‘compelling customer experience’ remarkable people is fundamental to the way TechnologyOne It is the innovative people TechnologyOne does business and positions us well to attract employs that ensures it can continuously customers away from our competitors. To evolve as an organisation. Key to our achieve this we have recognised that our ongoing success is our positive work culture. customers are our compass for the decisions To ensure we can continue to attract the we make, the people we employ, and the best and most talented people, we have processes we adopt. invested in a new state of the art R&D Delivering a compelling customer experience centre which will inspire our staff to work in is an overriding concern for the company, an innovative and collaborative manner. We and we are transforming our business to provide a work environment where staff can ensure all our policies, procedures, work pursue excellence; where they can lead and practices and attitudes reflect this focus. where they can make a difference. We have embraced a new motto: “I care and I can always do something” and we are teaching our people that every engagement is an opportunity to deliver a compelling customer experience. We will constantly strive to deliver exceptional products and services and we will be flexible so that we can evolve with our customers and their expectations. The only way to achieve these aims is to listen to our customers, who have the knowledge to help us deliver exceptional software and services.
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TechnologyOne Financials TechnologyOne TechnologyOne Asset TechnologyOne Financials delivers Enterprise Budgeting Management organisation-wide control and integration TechnologyOne Enterprise Budgeting has TechnologyOne Asset Management of financial information critical to strategic been designed from the ground up to link provides a fully integrated Enterprise decision-making and improving the bottom business drivers to financial implications, Asset Management approach to managing line. With rich functionality, powerful rather than the other way around. This the complete asset lifecycle, including online enquiries, and flexible reporting, its enables the budgeting process to be devolved construction and acquisition, operations, unique structural design lets users create an throughout the organisation, meaningfully maintenance, and disposal. It brings together unlimited number of ledgers for any range of connecting both the business and financial human, physical and financial resources into items, allowing both macro and micro control people through ease of use and by presenting a single solution, delivering a 360 degree and analysis. financial information in operational terms, view of asset and project management linking operations with budgeting and activities through a totally integrated project TechnologyOne Human forecasting functions. management, work management, asset Resource & Payroll maintenance, asset capitalisation, contract TechnologyOne TechnologyOne Human Resource & Payroll management, job costing and timesheets, Property & Rating is a complete human resource management billing, and reporting solution. system that empowers organisations to make TechnologyOne Property & Rating is a better people-related decisions. It delivers functionally rich and diverse solution that TechnologyOne Enterprise true integration with other organisational covers all aspects of property and people Content Management systems, business process automation, and management, revenue management, TechnologyOne Enterprise Content career planning and self-service capabilities. customer management, and a wide range of Management enables organisations to regulatory applications. Its unique design and capture and process corporate documents TechnologyOne Supply Chain powerful workflow fulfil the rapidly changing both efficiently and easily. The system TechnologyOne Supply Chain automates needs of the new self-service and mobile can be configured to automate specific and optimises each stage or ‘cost pocket’ of customer-centric business model. document processing requirements from the purchasing process to deliver significant many authoring environments, including TechnologyOne Student cost savings. Simple to use for even the Microsoft Office and other TechnologyOne Management most widely distributed organisation, it products. Customers make efficiency savings delivers advanced workflow to efficiently and TechnologyOne Student Management while simultaneously meeting information effectively request, order, receive, distribute, empowers all stakeholders in an education management compliance obligations. and pay for an organisation’s resources. institution by providing online, real-time access to user-specific information in order TechnologyOne Customer TechnologyOne Business to self-serve or make effective business Relationship Management Intelligence decisions. It provides a total education TechnologyOne Customer Relationship TechnologyOne Business Intelligence comes solution that enables students, academics, Management allows organisations to manage data-aware for the TechnologyOne enterprise administrators and organisational partners to critical relationships with all stakeholders. suite to deliver immediate business benefits. connect through one intuitive application. Offering all the features you would With a user-friendly dashboard, organisations expect from a best in class CRM solution, TechnologyOne can monitor, visualise and take action it differentiates itself with the ability to Performance Planning across software system boundaries with an cater to the specific needs ofG overnment, integrated, real-time, organisation-wide view TechnologyOne Performance Planning is a community service organisations, and sales of key strategic and operational metrics. total corporate performance management and service focused organisations. Data warehousing capabilities mean that our solution that enables organisations to define Business Intelligence suite can provide a true, strategic goals, outcomes and outputs, and whole of organisation view. measure and manage performance against them. It delivers a set of integrated, iterative management and analytical processes that align the philosophies of quadruple bottom line reporting to promote improved planning, reporting and organisational performance.
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Government Health and Community Services TechnologyOne’s powerful enterprise-wide TechnologyOne presents hospitals, health solutions enable Government organisations care, community care, aged care, medical to anticipate and meet the rapidly changing research institutions, privatised medical needs of stakeholders, while delivering facilities, charities and not-for-profit real value and improved services. We providers with an integrated enterprise deliver comprehensive, integrated software solution suite that allows them to control solutions that work with Government costs, manage facilities and operational processes to help increase managerial activity, and provide key stakeholders with effectiveness, reduce reliance on third party accurate financial information. consultants, and ensure that correct and Utilities up to date business critical information is accessible to all stakeholders. Water utilities, energy organisations, ports and airports have sophisticated requirements Local Government that TechnologyOne’s solutions are able to TechnologyOne is one of the largest meet. We have the proven ability to deploy providers of enterprise solutions for Local a flexible, scalable and integrated solution Government, with more than 30 percent of portfolio encompassing key systems such Australasian rates notices produced using as project, works and asset management, our software. Our integrated Property & customer request management, billing, Rating solution is the foundation of our financials, human resources, payroll, and offering and enables the management property management. Our solutions of property, land, people, and address integrate with specialised products such as information within one central location. GIS and other specific operational systems, Integration with other key TechnologyOne and we are ready for smart grids and solutions provides organisation-wide smart metering. In addition to managing budgeting, financial management, asset transactional and operational systems, our management, human resource and payroll, suite of corporate performance management content management and performance tools provides timely, online and clear management solutions. business information.
Financial Services Managed Services TechnologyOne is a leading provider of TechnologyOne has recognised the fast corporate and information management growing services sector, which has expanded software solutions to organisations in as a result of workforce shortages and the Financial Services market, including the need for effective people and project insurance companies, fund managers, credit management capabilities. We define this unions, banks and finance companies. area as the Managed Services sector, and Our integrated solution suite and flexible recognise that these organisations require interfacing options provide financial services powerful operational, financial and analytical organisations with the ability to collate and business solutions to effectively manage effectively use information from disparate their customers and run their business. systems, and to efficiently manage, collect Organisations in this sector, such as property and report on core financial, regulatory and and construction, media and entertainment, operational information. mining services and engineering, memberships, ICT and corporate services Education will benefit from TechnologyOne’s fully More than 50 percent of universities in integrated solution suite. Australia count on TechnologyOne to deliver their leading edge software solutions. As a provider of Student Management solutions, and a suite of fully integrated enterprise solutions, TechnologyOne delivers unparalleled efficiencies to institutions in Australia and New Zealand. Our speed to the market in response to legislative changes ensures the breadth and depth of our Education solution suite are key factors behind our success in this market.
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The House of Solutions Working closely with product General TechnologyOne’s House of Solutions Managers and the sales, service delivery model has resulted in the development of and R&D teams, the Solutions Managers proven practice, preconfigured solutions for are providing these teams with ongoing industries within which we operate. These customer feedback that will be incorporated solutions meet customers’ specific business into best practice, preconfigured solutions to needs and TechnologyOne’s range of 11 ensure we continue to meet our customers’ integrated products form the building blocks business needs. from which these solutions are developed. This will reduce the risk associated with Solutions Managers with deep industry an enterprise-wide implementation and knowledge have worked closely with dramatically enhance the value our solutions customers across our vertical markets provide to our customers. to create end to end solutions that will optimise our customers’ business processes.
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TechnologyOne’s commitment to Regional coverage Significant wins during the year included continuous improvement in both our During the year we introduced a new Sunshine Coast Regional Council, Unity products and services has enabled us to management team to the United Kingdom, Water, Mission Australia, St George maintain steady growth this year. With and restructured the region to create two Community Housing Limited, Hurstville City an increased focus on a vertical market separate offices to address the growing Council, Epworth HealthCare, Australian approach, the organisation has continued needs of the region. This followed the split Home Care Services Pty Ltd, Multiple its evolution as a global enterprise solution of our New Zealand region the previous Sclerosis Limited, South East Water Limited, provider. year, which verified the success of our Tasmania Fire Service, MainPower New The executive team is leading the way, model to ensure we can continue to cover Zealand Ltd, NZ Department of Labour, and improving the way we work, and developing geographically all opportunities and grow Carnegie College in the United Kingdom. new and innovative business opportunities. our brand internationally. The success in Finally, we had significant success amongst New Zealand since the regional split has Victorian TAFEs, with each organisation Sales and Marketing been impressive and this year we gained in this sector now using TechnologyOne our one hundredth New Zealand customer, Financials. MainPower New Zealand Limited. Vertical Market Solutions We have also formalised our South Pacific region, appointing a new Regional Manager to oversee operations and continue to grow our opportunities. In Australia, we coupled the South Australian and Northern Territory regions to offer a coordinated approach to these regions which Roger Phare share many similarities. This has proven to be a very successful approach and we have The past year has seen the Sales and now established an office inD arwin to help Marketing team focus on three main maintain the existing strong foothold in Martin Harwood areas; aligning our go to market strategies, the Government sector in response to our increasing our regional strength, and The Operating Officer for Products and commitment to the market. positioning our marketing team as a key Solutions is a new position that has been enabler for the business. We also introduced a number of new introduced to manage the development of Regional Managers, significantly lifting the industry leading enterprise solutions that Go to market strategy level of skill and experience in our customer deliver an end to end business solution TechnologyOne’s go to market strategy facing geographic operations. Our regional for customers in the seven markets focusses on the acquisition, retention, model remains one of our key strengths TechnologyOne targets. and growth of customers. We provide and differentiators, with the managers in TechnologyOne has created a solutions both prospective and existing customers these regions driving growth and leading our team and appointed Solutions Managers across each of our vertical markets with customer service focus. across each vertical market to drive the an enterprise vision, and the marketing development of specific preconfigured team plays a vital role in positioning the Empowering our Sales Force solutions for each sector. A specific solutions organisation and delivering this vision to A number of initiatives were developed configuration group, which is a team of the market. Our positioning, promotion during the year to enable our sales teams to expert consultants with specialist knowledge and communication strategies have been improve their efficiency and effectiveness. in TechnologyOne products, will also support underpinned by a co-ordinated campaign The market focussed sales initiative model the Solutions Managers to determine and approach called Solutions, Programs was further enhanced, with the sales force implement each solution’s configuration. & Promotions, which aligns the entire being segmented into new and existing Each Solutions Manager is responsible for company; from R&D roadmaps through business. This has helped the regional sales defining the company’s enterprise offering to marketing campaigns, plans and our teams focus on achieving their goals either by market. They will work closely with customer retention strategy. in competitive new customer situations, or when building strong relationships R&D to oversee the development of a Our new business efforts are structured and adding value to existing customers. preconfigured solution that contains proven around a three year engagement cycle, Improved use of sales support tools such practice for their assigned vertical, and will specifically designed to engage with as the Customer Relationship Management have a close relationship with sales and organisations according to where they sit in system has also delivered key information to marketing. the purchasing cycle. Our existing customer all stakeholders in the sales process. The development of preconfigured solutions base benefits from targeted communication for vertical markets requires a close working to maximise the value of their current relationship between the product General investment and to take advantage of Managers and the Solutions Managers. As additional offerings. such, the product General Managers have also been moved to report to the Operating Officer for Products andS olutions to ensure
Page 14 Technology O n e ANNUAL REPORT 2 0 1 0 Technology O n e ANNUAL REPORT 2 0 1 0 Page 15 consistency and a close working relationship. Preconfigured Solutions Project Delivery For each vertical market we are now building The strategic initiative to develop a series The new project delivery model has been a proven practice solution that will have of preconfigured solutions for our vertical implemented and all project managers at least 80 percent of the configuration markets has continued to evolve and now report to the project office.I nitiatives to meet customer requirements before this year a team of experienced principal are also underway to ensure that project implementation begins. This will ensure that consultants has developed the core of these management and the implementation of our customers can buy a preconfigured, out of solutions. This work was completed on time solutions is standardised. the box solution that can be delivered more and the initial configuration has now been This year the service delivery team quickly and at a lower cost. As a result, we used as the building block for a number worked closely with the sales teams to will be able to provide our customers with of our industry-specific vertical market develop materials that outline the project superior value and as a result of this new solutions. management stages and both the customer’s way of creating and deploying solutions, we The initial delivery of our preconfigured and TechnologyOne’s responsibilities. These will reduce risk for both TechnologyOne and solutions has been extremely successful; are now being used with both existing and our customers. the solutions have been implemented more potential customers to ensure we have The solutions will deliver seamless efficiently and have had a more rapid impact communicated the importance of project integration between the products that will on the customer’s business, thus providing a management, and the commitment and constitute each industry solution and the greater return on investment. resources required to minimise risk. functional requirements of our customers Our initial areas of focus have been airports, Product Customer Service Managers in these verticals will drive future R&D social housing, local councils, government This year we have created a new position investment in each product. departments and energy providers, with to help our customers gain maximum value a number of customers already live. We The solutions team has already successfully from their TechnologyOne investment. will continue to work on the development developed and implemented a number The Product Customer Service Managers of other industry-specific solutions during of new preconfigured solutions to our (PCSMs) now work with customers to review the forthcoming year to ensure we offer vertical markets. These have included and support the use of our software. The preconfigured solutions across each of our the OneGovernment solution across 12 Customer Development Manager continues vertical markets. Australian Federal Government sites, to own and manage the relationship, but and Newcastle Airport is now live on the Our vertical market solutions focus will has the ability to access the skills of product OneAirport solution. These solutions provide consultants with an in-depth specialists as they are required. This change have proven to be highly successful, and knowledge of the complete end to end has greatly improved the level of service we St George Community Housing, Epworth solution relevant to the vertical market can offer our customers and plays a very Hospital, Hurstville City Council, MainPower in which they work, thus providing an important role in engaging and providing and the Disability Trust will go live on additional benefit to our customers. them with additional value. industry relevant solutions in the next Project Office financial year. Research & Development This year we have established a new Service Delivery centralised project office that will ensure TechnologyOne solutions are implemented consistently and in accordance with world class service delivery methodologies. The new office signals the company’s shift to refine its culture of project management to ensure all implementations are delivered seamlessly and with minimal impact on customers, regardless of geographical location or industry. This will be achieved Peter Cameron by using professional project managers Mark Culverson Throughout the past financial year, we have and proven methodologies to reduce risk, continued to focus on developing our suite The ongoing growth in the number of which benefits both the customer and of best in class products. As we develop our products that TechnologyOne offers and the TechnologyOne. products, we are ensuring that we undertake evolution to deliver preconfigured vertical The risk management review process has rigorous assessment of the viability of the market solutions has resulted in the need also been further refined to ensure we are proposed development before we begin to strategically review the process and proactive in addressing any commercial risk work. This ensures that each module, feature approach to service delivery. in the delivery of our solutions. This includes and function meets the ongoing needs of our early resource planning, allocation customers and makes our products superior of responsibilities for customer engagement to those of our competitors. during an implementation, project audits, and lifecycle management of project deliverables to ensure the customer’s expectations are managed and met.
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Seamless Integration TechnologyOne remains committed to TechnologyOne’s unparalleled range of delivering the same level of innovation in products creates a unique opportunity in the all of its releases, and this change has taken market. Our end to end enterprise solution place to ensure we can deliver higher levels and the move towards providing customers of service to our customers. with industry specific preconfigured We have also commenced development solutions acts as a driver to create on our next generation product suite, exceptional integration so that transition TechnologyOne C2, which will be specifically between our products is seamless. Our designed to operate in the cloud. Our ability to provide customers with out of the transition strategy for this new platform will box, best in class solutions that seamlessly take advantage of the existing Connected work together will ensure our position as a Intelligence platform and advance the market leader. underlying technology to ensure an easy and seamless transition. This work will continue Loosely Coupled Architecture throughout the forthcoming financial year, One of the most exciting projects in with an initial focus on our Financials and R&D during the last year has been the Supply Chain products. development of our products into a loosely coupled architecture (LCA). This LCA New Business Development initiative enables our products to seamlessly integrate to each other, initiate functionality in one product from another and, most importantly, allow independent upgrades for these products in the future. Competitors’ products still do not offer this capability, which means their products are monolithic and consequently expensive to upgrade. Property & Rating was the first product to be uncoupled and we already have a number of customer sites live. LCA is now Richley Down resulting in a great deal of positive feedback This year has represented ongoing from customers and there is significant consolidation for new business at interest from a number of organisations. TechnologyOne to ensure that the most This development has created a unique recently acquired products continue to move offering within our target markets and will onto the TechnologyOne model. be extended to all of our products to ensure we provide our customers with the best Product Integration products possible. The process of fully integrating ECM into TechnologyOne is now virtually complete, Supporting our customers and Performance Planning has been moved Our support teams play a vital role in into the Corporate Performance Management ensuring our customers have a positive team. This solution has been integrated into experience with TechnologyOne and to Business Intelligence and Enterprise ensure consistency across the business Budgeting to form a broader Corporate when dealing with common support issues, Performance Management suite. we have implemented a number of new initiatives in this area. This has included Partnering reviewing and improving our approach to TechnologyOne generally partners with customer service and providing training to the owner of the IP before making any our support staff to reduce customer service decisions about the acquisition of new timeframes significantly. technologies. The drive to find new products and services that can be offered to customers Making Upgrades Easier continues, with a number of partnerships To ensure R&D can continue its focus on being investigated. Given TechnologyOne’s delivering preconfigured solutions, we unique business model, and especially with have implemented a new release cycle for the focus moving towards proven practice our software. New releases will now be vertical market solutions, finding partnership delivered every 12 months. Reducing the opportunities that add value to our current number of releases and revisions each year and future customers is difficult. will simplify the upgrade options for our customers.
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We have continued to work in partnership implemented across the business to ensure A lot of work has been done to evolve the with organisations providing report writing ongoing consistency and we are now in TechnologyOne disaster recovery plan into and document scanning solutions. Our the process of reviewing our policies and a business continuity plan and by the end of customers have benefited significantly from procedures to ensure these are aligned with the 2011 financial year, all critical business these partnerships and these will continue. our requirements. systems will be available in rapid recovery We have also been working with other mode. In addition, we have implemented Business Partnering vendors in areas such as electronic market new disk storage techniques, which will One of our key priorities is to work with places and investigating alternative software result in the IT department being able to departments and individuals to help them delivery models. support future data increase requests from to make better business decisions. We call We are also continuing to investigate the business at significantly reduced cost. this business partnering and as part of this partnerships with vendors that supply vertical practice we are continuing our development Strong Balance Sheet market solutions that can integrate with our of people, systems and processes. During TechnologyOne’s plan to come out of the new proven practice solutions. Any offering the year we worked with the business to Global Financial Crisis with a strong balance in this area will ensure TechnologyOne can revise a number of strategic plans. sheet has been highly successful. We position itself as the supplier of choice across While continuing to offer the traditional have continued our focus on cost control its chosen vertical markets. corporate function services, we are now initiatives, including a program of annual Plus working with the sales and consulting leave accrual management, improved As TechnologyOne moves towards providing business to ensure consistency across the performance management, an increased customers with enterprise solutions, the company. This has involved reviewing risk focus on rebalancing headcount within the skills and expertise the Plus team has are processes, reengineering business processes company and renegotiating contracts with invaluable assets that can both support and developing new systems. We are key suppliers. and enhance the overall solution. In the working to create an integrated view of our Margin improvement has been a focal point past year the Plus team has been closely customers across all of our functions. throughout the last 12 months and as we involved in the successful tender for work The Corporate Services team has been enter the new financial year, it will continue with the Student Management team and instrumental in providing the company with to be an area of considerable focus. has independently won significant deals practical tools and knowledge to ensure we The strong balance sheet, continuing growth, around product upgrades. The Plus team’s offer our customers a compelling experience. and confidence in the company’s future knowledge, skills and experience have We have launched a series of workshops outlook has enabled the Board to approve proven an invaluable addition across the throughout the company that every staff the payment of an additional, special various products and the team foresees an member will attend, and which we believe dividend of 1.5 cents, which will be paid at ongoing role in providing customers with will be fundamental to retaining our existing the same time as the final year end dividend. value added services. customers and winning new customers. HQ Corporate Services Systems and Processes This past year has also seen the relocation We have continued to develop detailed of our international headquarters to the new operating cycles for the company in each HQ building in Fortitude Valley in Brisbane. of our disciplines to systemise our policies, TechnologyOne now occupies the largest processes and procedures, improving Australian-owned commercial research and them to ensure stability should key staff development facility for enterprise software leave. This has included implementing and and the building itself is Six Star Green Star upgrading a number of systems, including rated. It also represents the consolidation our Human Resource & Payroll and of three offices and the fitout is designed to Financials solutions. One of the major new enhance creativity and innovation. Edward Chung systems for the year has been the internal With the move to HQ, we have secured a development and release of Pricebook, long-term sub-lease of our other Fortitude The Corporate Services team is responsible which is built on the Connected Intelligence Valley office, while other offices throughout for ensuring we have in place efficient and platform. This system is helping us to build the company are undergoing refurbishment effective company wide policies and risk controls and processes to support growth in to ensure the facilities offered are of a management, partnering with the business our sales group. similar style and standard to those present in to help it make better business decisions, We have piloted our new competency the new HQ. ensuring our systems and processes are based framework across a number of scalable and efficient, and providing services teams and will be rolling this out to the to the business. rest of the business in the forthcoming Policies and Risk Management financial year. The team continues to During the year we retained our ISO9001 develop a range of systems to support accreditation and reviewed our management our attraction and retention strategies, systems, which has led us to establish a including a team review program, a revised new framework to meet the ongoing needs performance appraisal program and an of the business. This framework is being annual leave purchasing initiative.
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Financials and Supply Chain Significant customers for the year include Human Resource & Payroll MainPower in New Zealand, and St George Community Housing and Newcastle Airport in New South Wales. As we enter the new year the Financials team will continue to develop functionality to round out the vertical market solutions and make improvements to existing functionality. We are also starting to plan for the next technology release, Richley Down TechnologyOne C2. Iain Rouse Supply Chain Financials and Supply Chain are two of The past financial year was the culmination TechnologyOne’s top selling products. This has been a significant year for of intense product development to ensure Together they offer customers a broad range TechnologyOne Supply Chain, which has that the Human Resource & Payroll solution of financial and supply chain management continued to grow and develop. We have reached its goal of becoming a best in class functionality, which is virtually unrivalled worked hard to get the first release of our solution. across our chosen vertical markets. Enterprise Cash Receipting module ready One of our great focusses for the year has to release and, while it will continue to be Financials been to improve our customers’ experience. developed, we have engaged with a number We have improved functionality on the The Financials team has worked hard of early adopters. With the first release now Connected Intelligence (Ci) platform and this year to deliver additional modules imminent, we are continuing to improve it as a result, a majority of customers have and increase the value of our customers’ to provide an even more compelling system upgraded to our latest software release. investment in the product. Last year we for our customers to use. As a stand alone This has been a highly positive result and finalised development of our Travel and application it is not only tightly integrated has consequently enhanced our customers’ Expense Management module, which offers with the other TechnologyOne products, but experience. users an end to end system to manage all it will also easily integrate with other, third travel requirements and expense claims. This party vendors’ solutions. The latest release offered has seen the year we delivered phase two of this solution. team continue to win major new customers One of the most significant new customers We have been successfully working with a this year, including Australian Home of the year, Epworth HealthCare, has also number of customers in the government Care Services, Randwick City Council and provided the Supply Chain team with a sector and we expect that this new module Tamworth City Council. We have also partner organisation for the development of will generate significant opportunities in the had a number of important customers a prosthesis management module and has coming financial year. go-live in the system this year, including been instrumental in revitalising the Rebates the Australian Institute of Marine Science, This year we updated the product to module. Rebates allows any organisation the National Offshore Petroleum Safety include Standard Business Reporting that uses a large quantity of any single Authority and Papua New Guinea Ports, our (SBR) compliance and were one of the item to calculate any rebates that are due first customer in PNG. Go-lives have been first vendors to offer this capability. This as items are ordered. While this system is especially important in New Zealand, where Australian Government initiative provides initially being developed for the Health and during the year we have had four customers organisations with the ability to streamline Community Services sector, we envisage go-live on the solution, firmly establishing their Government reporting requirements that it will be applicable to a wide range of TechnologyOne as a provider of choice for and significantly cut down the time spent on sectors, including Local Government. making sure all relevant reports are made. human resource and payroll software. This year has also seen continued success The legislation regarding this initiative came One of the most important go-lives in in the Water sector, with an important into effect on 1 July 2010 and we have this region was at The Salvation Army, contract won at Barwon Water. already successfully implemented the SBR which involved the complex multi- relevant modules at a number of customer The coming year will see the Supply Chain phase consolidation of disparate payroll sites. team work on completing the back office, implementations, while back in Australia, front office and web functions for Enterprise With enhancements this year, such as the we commenced important web service work Cash Receipting, and working to further extended debt management capabilities, the with a key partner to expand our timesheet develop and refresh our Rebates module. Financials product is now functionally both offering to include time and attendance broad and deep and can meet the functionality. In the forthcoming year wide-ranging needs of customers working in we will leverage this success to build our our vertical markets. We have also finalised business in this region, particularly in the research on our new Treasury module, which Health and Community Services sector. will offer customers superior cash flow Standard Business Reporting (SBR) in management and cash forecasting, as well Australia has now been completed, and as loans, investment management and other we now have a number of customers capabilities when complete. taking advantage of the streamlined reporting this offers.
Technology O n e ANNUAL REPORT 2 0 1 0 Page 19 REVIEW O F O P E R A T I ON S – G ENERAL MANA G ER S CONTINUED
The New Zealand government is also from different systems and combines it for Property & Rating planning to adopt a similar framework use with the Business Intelligence reporting during the next 12 months, so we will be product and as an integration layer to our working to meet the ongoing needs of our suite, has been the catalyst for this rapid customers in this region. growth. As with all of our products, we have With a solid customer base in Australia, an a strong business focus for this module, emerging New Zealand market, our first which will empower users to deliver on customer in PNG and having delivered an their own information requirements. This improved experience to existing customers, focus gives us a noticeable competitive the next financial year will see us turn our advantage against mainstream Business attention to the rapidly expanding HR Intelligence providers. Michael Preedy side of the solution. The next 12 months Our Performance Planning product, which will deliver a number of new components has been successfully migrated to the Throughout the past financial year the within this solution. The first is a flexible Connected Intelligence platform, will be Property & Rating team has undergone solid recruitment module that will focus on released in the new financial year and has growth due to a number of new contracts the engagement between employer and also created exciting opportunities for the and our ability to make inroads into new candidate, and provide a direct link to vacant team. TechnologyOne now has a unique markets. We have also made significant positions, integration that is lacking in Corporate Performance Management technical advances with the product, which competitive products. We will also offering in the marketplace. have proven extremely popular amongst our existing customer base. establish a new, more flexible competency Significant work has been undertaken to framework to provide customers with a rebrand the Business Intelligence, Enterprise One of the most exciting developments broad choice to match their HR needs now Budgeting and Performance Planning this year has been the release of our first and into the future. products into an end-to-end Corporate loosely coupled architecture (LCA) version Performance Management solution, which of Property & Rating. This has enabled Corporate Performance our solution to be upgraded independently Management will be launched officially to the market in the forthcoming financial year. of the Core Enterprise suite, which now provides a unique offering in the market. The overall Corporate Performance Management suite has been further Our increasing focus on the water developed to offer a mature product for management markets has created some TechnologyOne’s target markets. These excellent opportunities this year and we components have now been rebranded have secured significant new customers into three distinct solutions; Business in SEQ Water and Unity Water. We will Intelligence, Budgeting and Forecasting, continue to work with customers to refine and Corporate Performance Management, our water management solution and which aligns our offering with market norms. aim to significantly increase our presence Peter Gill Each component can be implemented in this sector, especially with new The last financial year was a period of both separately or combined to ensure customers functionality being released early in the consolidation and growth for the Corporate are offered the most appropriate solution for new financial year. Performance Management team. their needs. We are continuing to migrate all of our The individual products that make up As part of the unique Corporate Performance customers to Connected Intelligence, with the Corporate Performance Management Management offering TechnologyOne now more than 40 percent of our customers now suite have continued to perform well, with presents to the market, we are in a position live on this platform. There has been strong significant growth across the suite. Our to move beyond the traditional Local uptake of our new mobility and eProperty Enterprise Budgeting solution has delivered Government domain of our Performance modules and we now have a number of strong sales this year and while we are now Planning product and will focus on our other excellent reference sites. As we continue entering a period of consolidation with this vertical markets. to develop these and other modules, we will be undertaking further investigations product, we have established a strong user The team is also working on the next series into the expanding United Kingdom market. base across a large number of sites. There is of releases for the Corporate Performance Significant new business wins this year now excellent potential to offer this product, Management suite, and our sales team and include Hurstville City Council, City of along with Business Intelligence, as best-in- customers are eagerly anticipating our new Casey, Land Development Agency, and Isaac class solutions. MS Word, MS PowerPoint and PDF Regional Council. Business Intelligence has significantly reporting solution, which will be released increased both in customer numbers early in the next financial year. This will We have been successfully partnering and sales revenue; it has now surpassed revolutionise the way in which periodic with customers to improve solutions and Enterprise Budgeting in terms of overall reports, such as board, project and the customer experience, and have now sales revenue for the financial year. The management reports, are created, delivering completed funded development projects introduction of our new Business ETL to our customers a genuine time saving and with the Municipal Association of Victoria functionality, which extracts information return on investment. and NSW Department of Planning.
Page 20 Technology O n e ANNUAL REPORT 2 0 1 0 Technology O n e ANNUAL REPORT 2 0 1 0 Page 21 This year has seen a number of changes to With the extensive development that has student Management the Property & Rating team. We have been undertaken on the Asset Management gained a number of team members who products during the past few years, we are share extensive industry experience, which now entering a period of consolidation. This has helped drive both R&D and sales, and we has resulted in an increased focus on sales have significantly increased our customer of the new features and functions available, service capability by appointing dedicated which led to the first sales of both ourGIS Customer Service Managers. Integration and Mobility products. The forthcoming year will present a number Another area of recent development has of opportunities as competitors’ solutions been the enhancement of asset hierarchies, reach their end of life and customers which will undergo further development Richley Down rationalise IT towards an enterprise ‘best during the next year to ensure it meets the practice’ offering. increasingly stringent needs of our chosen The past year has been very successful for the Student Management team, with a After the implementation of OneCouncil target markets. number of key customers going live on the at Hurstville City Council, we will be Our focus on leveraging our recent solution, a significant contract which has seeking to drive the solution into more investments in product development into resulted in an expansion into a new sector, councils throughout Australia and New sales this year led to a strong growth in and a growing team. Zealand. This solution will be simpler revenue. This has been particularly notable and easier to implement and reduce within our consulting practice as customers With the migration of the Student administration effort for any organisation implemented the Asset Management Management solution to the Connected that implements this system. solution within their businesses. We have Intelligence platform essentially complete in 2009, the past 12 months has seen all of our We are also planning to work closely with also seen a solid growth in licence fees this customers migrate to the new platform. In our customers to engage at all levels and year due to the inclusion of new features addition to these successful migrations, we foster activity within the user community. and functions within the product. have also seen significant customers such as This will involve regular meetings and a The success of the product is indicated the University of Melbourne and La Trobe forum in which to share experience, which through a number of major new customers University go live. will lead to improved customer engagement this year, which reflects our ongoing focus and satisfaction. We will also be on both the Utilities and Local Government The major milestone for the year, however, implementing a range of new programs and markets. These include MainPower in NZ, was the agreement we signed with Skills promotions to further stimulate business Wannon Water, Randwick City Council, Victoria to deliver our Student Management improvement within our customer base. Parramatta City Council, Australian Rail solution to 13 of the 18 TAFE institutions Track Corporation, Northern Territory in the state. Once live, more than Asset management Airports and Newcastle Airport. We have 300,000 TAFE students and staff will use also had a number of important customer TechnologyOne Student Management, sites go live with the software this year, which will be the major operational system including Port Kembla Coal Terminal, within TAFEs. This strategic move into Newcastle Airports and Felix Resources. the TAFE sector will make TechnologyOne Student Management a true dual sector As we enter the new financial year, we will solution for both universities and TAFEs. continue to invest in our Mobility solution and GIS Integration capabilities, and will Our focus during the coming year will focus on growing our asset management be the continued development of the capabilities. Each of these areas will ensure Student Management solution for the Peter Suchting we continue to meet the specific needs of TAFE sector, while ensuring that we do not lose our focus on the requirements of our This financial year has seen a number of customers in our core industries. university customers. We are continuing changes within the Asset Management team, Finally, we will continue to focus on the to improve the stability of the Connected with a new General Manager who possesses ease of use of the solution, ensuring Intelligence solution for all of our customers, extensive asset management industry TechnologyOne Asset Management remains and building a larger national consulting experience entering the role. This has led the asset management solution of choice for team to ensure we can meet the ongoing to a revision of our strategy and a more our customers. requirements of our customers. focussed engagement with organisations Building on our strong position in the working in asset intensive industries such Australian Higher Education sector, we are as Utilities, Local Government, and Ports also working to move into the New Zealand and Airports. market and undertaking initial research into other international markets.
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Research has shown that a number of Raising the profile of CE M throughout the Customer Relationship opportunities exist in other regions in which company is another cornerstone of the Management TechnologyOne operates, and we will be go-to-market strategy moving forward. proactively investigating requirements for With ECM now integrated to the House of these arenas so that we can continue to Products, we are aiming to move beyond grow the breadth of our solution simple integration and data capture to and our customer base. develop sophisticated functionality that creates a central document repository all enterprise content Management products can use. This establishes one source of the truth through an automated process, which has the potential to excite our users and significantly elevate the profile ofC E M. Nick Davey The design phase is all but complete and the functionality is now under development. The Customer Relationship Management This year has also offered us the opportunity (CRM) team has had an exciting year, with to enter new markets, principally the TAFE a growing team, an increasing customer sector in Victoria. Central Gippsland TAFE base, and a rapidly increasing offering for our is now live with TechnologyOne ECM, using customers. Geoff Moore the new email integration functionality with In order to meet growing demands for This year has culminated in the migration great success. There is an opportunity for CRM, the team has expanded significantly of Enterprise Content Management (ECM) us to build on this success and expand our with new staff, including a R&D Manager to the Connected Intelligence (Ci) platform. presence in the TAFE sector. and a Practice Manager. These positions The Ci release (release 4.01) is strategically The eMinisterials solution is now configured have provided the team with a refined set important for TechnologyOne ECM, and we are in the process of implementing of skills that will be very important as the signalling an improved user experience and the solution at our first customer site.W e product continues to grow and be refined. interface, a reduced cost of deployment, and have high expectations for this solution The team growth will also help to accelerate capabilities that will ensure we can enter and believe that it will offer prospective the delivery of core functionality and provide new markets in the future. The Ci release customers a compelling value proposition. additional capabilities for the development is the first step in ensuring CE M can enter It is important that we quickly establish of point solutions such as our existing Grants all seven of TechnologyOne’s key vertical credibility in the marketplace, which will Management and Fundraising Management markets. help us to propel sales for the financial solutions. Throughout the year, customers have year 2011. The R&D team has now commenced increasingly benefited from a renewed focus Continued development of the Ci product developing the next point solution, on customer support. Customer support will be the major focus for the research and Community Engagement, and in the requests are being dealt with in a timelier development team in 2011. The core end forthcoming year will work with the manner and this is assisting in our programs user components are due to be complete by Enterprise Content Management (ECM) to establish the TechnologyOne ECM brand the end of calendar year 2011. At the same team to start the research phase around in our primary markets. These improvements time a number of product improvements requirements for a Case Management are progressively being acknowledged with will be included to enable the ECM product solution. positive feedback from our customers. to more easily assist organisations. This is Sales this year have predominantly been In the forthcoming year we will increasingly particularly relevant in the Government focused on the Health and Community focus on driving better business outcomes sector, where we are improving functionality Services and Government markets. The through the use of TechnologyOne ECM. In to meet compliance obligations, which will Health and Community Services sector is particular we will be focussed on ensuring therefore allow ECM to compete for core the principal market for our Fundraising that the ECM system is delivering on Government business. solution, which is now in its third release the strategic goals and objectives of our The ECM product group is still in a rebuilding and essentially complete. Government customers. Improved user interface and phase. For the next 12 months the division customers have been the initial focus successful change management programs will be focussed on improving the use of our for Grants Management, as the initial will enable us to increase user adoption product at existing (predominantly Local development phase focused on organisations of the software. Most of our licence sales Government) customer sites, establishing that provide funds. The new phase of the this financial year have been to existing eMinisterials in the Government market Grants Management solution will focus on customers and there are significant and leveraging the deep integration to developing a system to manage the entire opportunities to continue this approach in other TechnologyOne products. These three lifecycle for organisations that receive funds. the next financial year. The delivery of the programs are expected to generate the vast One of the major successes for the year was new Ci product and the focus on maintaining majority of the licence revenue in 2010/11. the implementation of CRM at the Ministry excellent customer relationships will ensure Significant customers for the year include for the Environment, which is part of the we can continue to leverage the significant Sunshine Coast Regional Council and New Zealand central government. The customer base already in place. SEQWater.
Page 22 Technology O n e ANNUAL REPORT 2 0 1 0 Ministry is now fully operational, using CRM Perhaps the most important contract for the to deliver outcomes in both the areas of Plus team revolved around its involvement emissions offsets and waste management. in the engagement with the Skills Victoria The other significant event for theC RM project. While the Student Management team was the sale of the first proven team is leading on this, the Plus team will practice solution to St George Community also engage with Skills Victoria to provide Housing (NSW). The CRM solution will access to its extensive experience in working manage the entire customer and contact on large scale projects. relationship lifecycle, from the application The contract with Skills Victoria has also waiting list through to approved tenancy. seen the Plus team grow significantly and CRM will provide the single source of truth represents its first major engagement with for all customer contact when St George the product and R&D teams. This formed Community Housing goes live in the next part of Plus’ strategy for the year and has financial year. been remarkably successful. Our strategy to embed CRM functionality Throughout the forthcoming financial in other TechnologyOne products is also year the Plus team will work closely with well under way. The first step will be to the sales team and regional managers to embed CRM in the Student Management capitalise on the increasing opportunities product, which will offer a new piece of that exist. The talent and experience within core functionality to manage the end to the Plus team will allow TechnologyOne to end student lifecycle, from enquiry to offer customers a full portfolio of software alumni. The CRM team is also exploring solutions and services, from strategic and opportunities to embed similar functionality business analysis, to requirements definition, within ECM and Asset Management. customer specific software development, data management, implementation, and Plus support. This places the company in a unique position in the marketplace as a single supplier through which all aspects of a major ICT project can be carried out and the consequent economies of scale and reduced risk provides an invaluable and attractive value proposition. It will also continue to engage with the product and R&D teams to provide added value on major deals. John Vickers We will continue to focus on developing Throughout the past financial year, the staff knowledge and experience, which will Plus team has increased its business lead to ongoing and improved customer significantly and delivered on its strategy engagements. This will help us to achieve of working closely with the TechnologyOne our goals of engaging at a high level, product teams. continuing to win against the competition, Plus has experienced considerable growth and significantly growing the business in line this financial year due to a significant with the rest of the company’s growth. amount of new business with long-term To this end we have embarked upon a customers and because of opportunities program of professional development to engage with new customers, which is certification courses throughout the business a testament to the fact that we deliver unit. This will ensure that our delivery excellent solutions and services. capabilities remain current and allow us to This has been particularly notable through deliver on our strategy of competing against the ongoing engagement we have gained larger multinational corporate competitors. with the Victorian Online Titling System It will also ensure we can meet customer team, which has been a TechnologyOne Plus expectations and lay the foundations for customer for a number of years. continued growth. The Plus team has also seen significant projects go-live this year, most notably the New South Wales and Victorian Legal Aid system, ATLAS, which once again represents a long-term customer engagement.
Technology O n e ANNUAL REPORT 2 0 1 0 Page 23 E mployer OF OPPORTUN I T Y
Employee engagement continues to remain Human Resources Business Partners are a focus for TechnologyOne this financial assigned to each business unit and are year. This is evidenced by enthusiastic responsible for working closely with our and passionate teams that deliver great managers on all their people-related results for the organisation. As we strive matters. The objective is close partnering to ensure that employees are motivated with the business to improve our to actively engage with our business, the employee engagement levels, which has employment market continues to experience proved successful in delivering responsive retrenchments, salary cuts, and enforced management and control mechanisms. leave without pay. We have continued to deliver our great Our people strategies over the past financial people programs, including our Buddy year remain unchanged from the previous Program, the Service Recognition Program, financial year, and are based on a two and ClubGrad, with the focus on how we pronged approach of responsible cost control best manage our people in order to build and and employee engagement, and we have sustain strong business performance. continued to successfully strike the balance Launched this year to coincide with our between the two. move to HQ in May, was Kick Start, our Our cost control strategy has been on-boarding program for all new employees. implemented with the underlying premise This program aims to fast track new of providing our people with a stable and employees’ immersion in the company and secure working environment so that our its culture during their initial twelve months. teams can focus on continuing our track record of high performance. We continue to realise financial benefits from driving down leave accruals, while still offering our people salary increases for strong performance. Employee engagement strategies at TechnologyOne are focussed on attracting, recruiting and retaining the best staff. While this is a business-as-usual approach for us, we recognise the challenge of retaining our people when the economy recovers and the employment market returns to buoyant levels. Our Team Review program, which was launched last year, has enabled the business to measure levels of employee engagement across the business. The program is a focussed review of each business unit, with one on one interviews by Human Resources with all employees. This rigorous health check has provided in-depth feedback for management and the Executive on each team in the organisation, and has delivered through focussed programs better levels of employee engagement.
Page 24 Technology O n e ANNUAL REPORT 2 0 1 0 investing I N T H E C OMMUN I T Y
Corporate Citizenship Providing financial aid Caring for the Environment At TechnologyOne, we pride ourselves on to those in need TechnologyOne has a strong commitment holding a strong set of values that underpin TechnologyOne worked with the Australian to managing its business operations in an the way in which we work, how we form Red Cross throughout the year to provide environmentally responsible manner. This relationships with our customers, and how much needed funds to assist those affected year TechnologyOne moved its international we engage with our staff and stakeholders. by natural disasters in Haiti and Pakistan. headquarters into a new Six Star Green Star We operate with respect and integrity, The earthquake in Haiti saw staff across environmentally rated building in Brisbane’s and feel empowered to make a difference. Australia, New Zealand and the United Fortitude Valley. This new building includes TechnologyOne’s ongoing investment in Kingdom donate money to help provide a number of environmentally sustainable the community has resulted in the company food, medical supplies and clothing to the development features including 50 percent undertaking a number of activities and many people affected. more fresh air than standard commercial events that have far reaching benefits for Our people also donated funds through buildings, CO2 monitoring, external views to those in need. With the support of our staff Oxfam in August when billions of dollars maximise daylight, energy efficient lighting, and many gracious charitable organisations, of infrastructure, crops and houses were dedicated exhausts in photocopier areas, the company has been able to deliver much destroyed in widespread flooding in Pakistan. a gas powered generator, and a large rain needed funds, awareness, and above all In both instances, the company matched the water collection area on the roof to supply hope, to those in need. funds TechnologyOne staff raised. water for the toilets and garden irrigation. All staff are encouraged to access and adhere Education in the Community Other Donations to our Environment Policy, which is available Once again, The Salvation Army was In addition to support for disaster relief on our intranet. It outlines our commitment the recipient of a major donation from and education, TechnologyOne encourages to providing an environmentally responsible TechnologyOne. The money was used to and supports regular charitable events staff workplace, ways to engage in sound work help homeless but motivated young people choose throughout the year. This year, the practices through reducing waste, and the between the ages of 12 and 18 to return company and its staff made donations to: considered use of energy and resources. to the education system to complete their n Movember Foundation’s beneficiaries studies through the Youth Outreach Service. Prostate Cancer Foundation of Australia TechnologyOne’s donation was dispersed and BeyondBlue amongst the Youth Outreach Service in n Multiple Sclerosis Australia through MS Brisbane, Sydney, Perth, Adelaide and Brissie to the Bay Bike Ride Melbourne and contributed to: n D iabetes Australia and the Heart n Education scholarships – five grants Foundation through the Wilson HTM offered to students to fund their Brisbane to the Gold Coast Cycle education Challenge n Lunchtime program for all students n Autism Queensland through support of – providing perhaps the only meal these the Bridge to Brisbane Fun Run teenagers enjoy each day n The Cancer Council through Australia’s n Field trips during the school holidays Biggest Morning Tea – these trips provide productive n Royal Children’s Hospital Foundation’s entertainment for the students, Everest Virtual Challenge replacing less constructive activities n The Children’s Medical Research n G raduation service – to celebrate the Institute’s annual Jeans for Genes Day students’ successful completion of their fundraising education at the end of the year n H ear & Say Centre’s Loud Shirt Day This is the fourth year that TechnologyOne has supported The Salvation Army’s n The Mobile 4 Charity phone recycling programs. program helping disadvantaged women prepare for work placement n S pinal Injuries Association to ensure people with a spinal cord injury can achieve equity, independence and inclusiveness. n W aterAid Australia, which enables the world’s poorest people to gain access to safe water, sanitation and hygiene education. TechnologyOne also sponsors eight children in third world countries through World Vision Australia and PLAN Australia.
Technology O n e ANNUAL REPORT 2 0 1 0 Page 25 Page 26 F I NAN c i A L S TATEMENT S tech nolo gy one l i m i ted Technology One Limited and annual report 2010 Controlled Entities fi n a n c i a l s tat e m e n ts for the Year Ended 30 September 2010
DIRECTORS’ REPORT 28
CONTENTS CORPORATE GOVERNANCE STATEMENT 36
INCOME STATEMENT FOR THE YEAR ENDED 30 SEPTEMBER 2010 39
STATEMENT OF FINANCIAL POSITION AS AT 30 SEPTEMBER 2010 41
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 SEPTEMBER 2010 42
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 SEPTEMBER 2010 43
NOTES TO THE FINANCIAL STATEMENTS 44
DIRECTORS’ DECLARATION 77
AUDITOR’S INDEPENDENCE DECLARATION 78
INDEPENDENT AUDITor’s REPORT 79
F I NAN c i A L S TATEMENT S Page 27 d i RE C TOR S ’ R E P O R T
Your directors present their report on the consolidated entity (referred to hereafter as the Company) consisting of Technology One Limited and the entities it controlled at the end of, or during, the year ended 30 September 2010.
Directors The following persons were directors of Technology One Limited during the whole of the financial year and up to the date of this report:
Adrian Di Marco B Sc, FAICD Experience and expertise Mr Di Marco founded TechnologyOne in 1987 after extensive experience in the software industry in the area of large scale fixed time and fixed price software development projects to meet client specific requirements. MrD i Marco has more than 25 years experience in the software industry. He has been responsible for all operational aspects of TechnologyOne, as well as the strategic direction of the Company. Appointed 8 December 1999. Special responsibilities Chair of the Board Interests in shares and options 55,378,500 ordinary shares in Technology One Limited (Masterbah Pty Ltd)
Ron McLean Experience and expertise Mr McLean has more than 30 years experience in the software industry, having held senior positions in companies in Australia and overseas, including the multi-national computer manufacturer NCR Corporation. Mr McLean joined the Board as a non-executive Director in 1992, was appointed as a General Manager in 1994, Chief Operating Officer in 1999, andC hief Executive Officer of Operations in 2003. Mr McLean resigned as Chief Executive Officer of Operations on 15 July 2004, and remains a non-executive director. Appointed 8D ecember 1999. Special responsibilities Chairman of the Executive Remuneration Committee Interests in shares and options 500,000 ordinary shares in Technology One Limited (RONMAC Investments Pty Ltd)
John Mactaggart FAICD Experience and expertise Mr Mactaggart has extensive experience across many industries, including export of animal products, food processing, industrial fasteners, manufacturing of building equipment, and computer hardware and software. Mr Mactaggart is a Director of a number of companies. Mr Mactaggart, through JL Mactaggart Holdings Pty Ltd, is a founding shareholder of TechnologyOne. He has been a Fellow of the Australian Institute of Company Directors since 1991. Appointed 8 December 1999. Interests in shares and options 66,902,500 ordinary shares in Technology One Limited (JL Mactaggart Holdings Pty Ltd)
Kevin Blinco B Bus, FCA Experience and expertise Mr Blinco is a former Director of accounting firm MooreS tephens. His expertise is broadly respected and acknowledged throughout the business community. He is a Fellow of the Institute of Chartered Accountants. Appointed 1 April 2004. Special responsibilities Chairman of Audit Committee Interests in shares and options 201,285 ordinary shares in Technology One Limited (Assembly Road Pty Ltd)
Page 28 F I NAN c i A L S TATEMENT S Richard Anstey AICD, FAIM Experience and expertise Mr Anstey has more than 30 years experience in the information technology and telecommunications industry, and in associated investment banking roles. For the past 22 years he has been building and managing his own companies. The first, TangentG roup Pty Ltd, established a strong reputation for the development of software and strategic management consultancy for the banking and finance sector. After the sale of Tangent, he co-founded InQbator in 2000, an early stage investment group focussed upon the technology telecommunications and life sciences sector. InQbator manages a Federal Government backed seed fund and a portfolio of some 14 active companies across Australia. In 2006, Mr Anstey continued his career in venture capital by co-founding iQ Capital Management Pty Ltd, which manages iQ Fund 2. Mr Anstey is a member of the Australian Institute of Company Directors, a Fellow of the Australian Institute of Management, and a member of the Australian Venture Capital Association. Appointed 2 December 2005. Special responsibilities Chairman of Nomination Committee Interests in shares and options 7,500 ordinary shares in Technology One Limited
Edward Chung BCom, MCom, CA, FTIA, AICD Experience and expertise Mr Chung is a Chartered Accountant, Fellow of the Tax Institute of Australia and an Associate Member of the AICD. Prior to joining TechnologyOne as Operating Officer –C orporate Services, Mr Chung was Chief Financial Officer of Queensland Rail, leading a finance team of approximately 300 staff where he was responsible for the areas of accounting, tax and treasury functions, as well as strategy and merger and acquisition activity. Mr Chung’s experience spans corporate law, audit, senior finance and commercial roles in both the public and private sector. Appointed 14 May 2008. Interests in shares and options Nil shares and 1,000,000 options in Technology One Limited
Company secretary The company secretary is Mr David Orchard BCom, CA, ACIS. Mr Orchard was appointed to the position of Company Secretary in 1995 after joining the company in 1994 as the Financial Controller. Mr Orchard was instrumental in the Company’s listing on the Australian Securities Exchange in 1999.
Meetings of directors The numbers of meetings of the Company’s Board of Directors and of each Board Committee held during the year ended 30 September 2010, and the numbers of meetings attended by each director were:
Meetings of committees
Full meetings Executive of OF directors Audit Nomination Remuneration Adrian Di Marco 10 - 1 1 Ron McLean 10 3 (4) 1 0 (1) John Mactaggart 9 (10) 3 (4) 1 1 kevin Blinco 10 4 1 1 Richard Anstey 9 (10) 3 (4) 1 1 Edward Chung 10 - - - Where a Director did not attend all meetings of the Board or relevant Committee, the number of meetings for which the Director was eligible to attend is shown in brackets. In sections where there is a dash, the Director was not a member of that committee.
F I NAN c i A L S TATEMENT S Page 29 d i RE C TOR S ’ R E P O R T CONTINUED
Principal activities The principal activity of Technology One Limited (the Company) during the financial year was the development, marketing, sales, implementation and support of fully integrated enterprise business software solutions, including: n TechnologyOne Financials n TechnologyOne Human Resource & Payroll n TechnologyOne Supply Chain n TechnologyOne Corporate Performance Management
n TechnologyOne Business Intelligence
n TechnologyOne Enterprise Budgeting
n TechnologyOne Performance Planning n TechnologyOne Property & Rating n TechnologyOne Student Management n TechnologyOne Asset Management n TechnologyOne Enterprise Content Management (ECM) n TechnologyOne Customer Relationship Management (CRM) The Company also provides custom software development services for large scale, purpose built applications.
Dividends Technology One Limited Dividends paid to members during the financial year were as follows:
2010 2009 $’000 $’000 Final dividend for the year ended 30 September 2009 of 2.87 cents (2008 – 2.45 cents) per fully paid share paid in December 2009 (2008 December 2008) 8,619 7,322 Interim dividend for the year ended 30 September 2010 of 1.33 cents (2009 – 0.88 cents) per fully paid share paid on June 2010 (2009 June 2009) 3,995 2,636 12,614 9,958
Review of operations On behalf of Technology One Limited (TechnologyOne), I am pleased to announce our results for the full year ending 30 September 2010, with Profit Before Tax up 15% to $23.3m. TechnologyOne has posted its seventh consecutive year of record revenues and licence fees, with revenue up 11% and licence fees up 10%. Based on our strong performance this year, and our continuing confidence going forwardI am also pleased to announce both a final dividend and a special dividend for the year, taking the total dividend for the year to 5.7 cents per share (up 52% on the prior year), which, based on a share price of 95 cents, represents a fully franked dividend yield of 6%. We have also continued to win major deals against our multinational competitors, with new contracts across all our major vertical markets. For more detailed information, please see the Letter to Shareholders, Review of Operations - Operating Officers andR eview of Operations - General Managers.
Page 30 F I NAN c i A L S TATEMENT S Corporate Structure The Technology One group of companies consists of the following: n Technology One Limited n Technology One New Zealand Limited n Technology One Corporation Sdn Bhd n Technology One UK Limited n Avand Pty Ltd Significant changes in the state of affairs There were no significant changes in theC ompany’s state of affairs during the financial year. Matters subsequent to the end of the financial year The Company will pay a fully franked dividend on 17 December 2010 of $8,623,000. There will also be a fully franked special dividend paid on the same day for $4,507,000. Likely developments Refer to the Review of Operations section. Remuneration report (Audited) The remuneration report is set out under the following main headings: n Principles used to determine the nature and amount of remuneration n Details of remuneration n Service agreements The information provided in this remuneration report has been audited as required by section 308(3C) of the Corporations Act 2001. Principles used to determine the nature and amount of remuneration The objective of the Company’s executive reward framework is to ensure reward for performance is competitive and appropriate for the results delivered. The framework aligns executive reward with achievement of strategic objectives and the creation of value for shareholders, and conforms with market practice for delivery of reward. The Board ensures that executive reward satisfies the following key criteria for good reward governance practices: n Competitiveness and reasonableness n Acceptability to shareholders n Performance linkage/alignment of executive compensation n Transparency The Company has structured an executive remuneration framework that is market competitive and complementary to the reward strategy of the organisation. In considering the remuneration to be paid to executives, the following principles are applied: n The Company should provide the packages needed to attract, retain, and motivate highly talented and experienced executives. n The Company should judge where to position itself relative to other companies. This involves being aware of comparable companies’ pay, but to exercise caution. n The Company should be sensitive to the wider scene, especially with regard to salary increases. n Performance related elements should form a significant proportion of the package, should align interests with those of shareholders, and should provide keen incentives. n The performance of the Company depends upon the quality of its directors and executives. To prosper, the Company must attract, motivate and retain highly skilled directors and executives. n Lastly, the Company must take in specific and unique conditions that may apply in individual circumstances in order to attract and retain the right executive team in the long term. The framework provides a mix of fixed and variable pay, and a blend of short and long-term incentives. As executives gain seniority with the group, the balance of this mix shifts to a higher proportion of “at risk” rewards.
F I NAN c i A L S TATEMENT S Page 31 d i RE C TOR S ’ R E P O R T CONTINUED
Review of operations continued The Board has established a remuneration committee which makes recommendations to the Board on remuneration and incentive policies and practices, and specific recommendations on remuneration packages and other terms of employment for executive directors, other senior executives and non-executive directors. The Corporate Governance Statement provides further information on the role of this committee. Directors’ fees The Company’s constitution and the ASX listing rules specify that the aggregate remuneration of non-executive directors shall be determined from time to time by a general meeting. An amount not exceeding the amount determined is then divided between the Directors as agreed. The latest determination was the 6 February 2009 when shareholders approved an aggregate remuneration of $600,000 per year. In the 2010 year, Directors’ fees of $270,000 were paid. No additional fees are paid for each Board Committee on which a Director sits. Executive pay The executive pay and reward framework has three components: n Base pay and benefits, including superannuation n Short-term performance incentives, and n Long-term incentives through participation in the Technology One Employee Option Plan. The combination of these comprises an executive’s total remuneration. The Company intends to revisit the incentives during the year ending 30 September 2011. Base pay and benefits Structured as a total employment cost package which may be delivered as a combination of cash and prescribed non-financial benefits at the executives’ discretion. Executives are offered a competitive base pay that comprises the fixed component of pay and rewards. Base pay for executives is reviewed annually to ensure the executive’s pay is competitive with the market. An executive’s pay is also reviewed on promotion. There are no guaranteed base pay increases included in any executive’s contract. Short-term incentives The objective of the incentive program is to link the achievement of the Company’s profit target with the remuneration received by the executives charged with meeting those targets. The target incentive component of the executives’ remuneration ranges between 8% and 70% of their total remuneration. This relatively large component is evidence of the Company’s requirement for executives to perform well in order to attain their target remuneration. The incentive for each executive is based on the relevant division’s Net Profit Before Tax figure (NPBT). NPBT has been chosen as it is the key indicator of performance. It is calculated in accordance with statutory reporting requirements. Long-term incentives The objective of having long term incentives for executives is to reward executives in a manner which aligns this element of remuneration with the Company’s interests. By having an equity interest in the Company, it aligns the executives’ actions with the interests of shareholders. The executives must meet continued service conditions in order to exercise these options. The options became exercisable over five separate tranches, which commenced in July 2007. Share options are granted to executives at the discretion of the Executive Chairman, based on the option plan approved by the Board. The exercise price of the options is set based on future expected share price movements. The options vest if and when the executive satisfies the period of service contained in each option grant. The contractual life of each option varies between two and five years. There are no cash settlement alternatives. The Executive Chairman has the discretion to increase the exercise price of the options. Details of remuneration Amounts of remuneration Details of the remuneration of the directors, the key management personnel of the Company (as defined in AASB 124 Related Party Disclosures) and includes the five highest paid executives of Technology One Limited are set out in the following tables. The key management personnel of Technology One Limited includes the directors as per pages 28 to 29 above and the following executives, being: n R Down Operating Officer New BusinessD evelopment n M Culverson Operating OfficerC onsulting Services n R Phare Operating OfficerS ales & Marketing n P Cameron Operating Officer Research &D evelopment n M Harwood Operating Officer Products &S olutions (Appointed 1 October 2009) n D Orchard company Secretary
Page 32 F I NAN c i A L S TATEMENT S 2010 Short-term employee benefits Post share- employMENT BAsed benefits PAyments Ca cAsh Performance % options salary RELATEd directors’ sUPER- OF total an ANd fees BONUs FEE ANNUATion Options Total remuneration NAME $ $ $ $ $ $ $ Directors A Di Marco (Executive) 395,527 397,031 45,000 35,597 - 873,155 0% R McLean (Non-executive) - - 45,000 - - 45,000 0% J Mactaggart (Non-executive) - - 45,000 - - 45,000 0% K Blinco (Non-executive) - - 45,000 - - 45,000 0% R Anstey (Non-executive) - - 45,000 - - 45,000 0% E Chung (Executive) 197,477 146,249 45,000 17,773 94,777 501,276 19% Total Directors’ Remuneration 593,004 543,280 270,000 53,370 94,777 1,554,431 6% Key Management Personnel R Down (Operating Officer New Business Development) 205,317 304,342 - 18,479 66,530 594,668 11% M Culverson (Operating Officer Consulting Services) 173,109 350,884 - 15,580 58,967 598,540 10% R Phare (Operating Officer Sales and Marketing) 173,109 350,884 - 15,580 38,476 578,049 7% P Cameron (Operating Officer Research & Development) 194,092 251,942 - 17,468 38,476 501,978 8% M Harwood (Operating Officer Products & Solutions) 183,486 210,598 - 16,514 61,859 472,457 13% D Orchard (Company Secretary) 158,752 - - 14,288 18,040 191,080 9% Total Key Management Personnel 1,087,865 1,468,650 - 97,909 282,348 2,936,772 10% Total Directors’ and Key Management Personnel Remuneration 1,680,869 2,011,930 270,000 151,279 377,125 4,491,203 8%
2009 Short-term employee benefits Post share- employMENT BAsed benefits PAyments Ca cAsh Performance % options salary RELATEd directors’ sUPER- OF total an ANd fees BONUs FEE ANNUATion Options Total remuneration NAME $ $ $ $ $ $ $
Directors A Di Marco (Executive) 395,527 354,977 45,000 35,597 - 831,101 0% R McLean (Non-executive) - - 45,000 - - 45,000 0% J Mactaggart (Non-executive) - - 45,000 - - 45,000 0% K Blinco (Non-executive) - - 45,000 - - 45,000 0% R Anstey (Non-executive) - - 45,000 - - 45,000 0% E Chung (Executive) 235,073 87,838 45,000 21,157 81,513 470,581 17% Total Directors’ Remuneration 630,600 442,815 270,000 56,754 81,513 1,481,682 6% Key Management Personnel R Down (Operating Officer New Business Development) 205,317 260,700 - 18,479 81,059 565,555 14% M Culverson (Operating Officer Consulting Services) 173,109 323,841 - 15,580 72,307 584,837 12% R Phare (Operating Officer Sales and Marketing) 173,109 323,841 - 15,580 46,929 559,459 8% P Cameron (Operating Officer Research & Development) 194,092 138,825 - 17,468 48,598 398,983 12% D Orchard (Company Secretary) 153,517 - - 13,817 18,358 185,692 10% Total Key Management Personnel 899,144 1,047,207 - 80,924 267,251 2,294,526 12% Total Directors’ and Key Management Personnel Remuneration 1,529,744 1,490,022 270,000 137,678 348,764 3,776,208 9%
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remuneration report (audited) continued Service agreements The Executive Chairman, Mr Di Marco, is employed under contract. The current employment contract commenced on 1 December 1999 and continues until terminated in accordance with the agreement. Under the terms of the present contract: n Mr Di Marco may resign from his position and thus terminate this contract by giving not less than three months written notice. n The Company may terminate this employment agreement by either providing three months written notice or by paying the appropriate proportion of the termination remuneration package in lieu thereof. All other executives are employed on a continuing basis and are required to give not less than three months written notice. Apart from termination benefits which accrue under statute, or mentioned above (such as unpaid annual leave, long service leave), there are no retirement benefits for executive directors and executives. The Company retains between 10% to 20% of the performance related bonus until the audited results are released to market. If an employee leaves prior to this date, they forego this retainer and it will be reversed to the income statement. Compensation Options: Granted and Vested During the Year There were no shares issued to Directors or Key Management Personnel on exercise of compensation options during the year.
Additional information Performance of Technology One Limited The graph below shows the performance of the Company (as measured by the Company’s NPBT) and the comparison of the Company’s NPBT with its earnings per share (EPS) and dividends per share (DPS) over the last five years.
Cents per share NPBT ($,000) 7.00 25,000
6.00 20,000
5.00
15,000 4.00
3.00 10,000
NPBT 2.00 EPS 5,000 1.00 SP DIV
DPS 0.00 0 2006 2007 2008 2009 2010
Page 34 F I NAN c i A L S TATEMENT S Indemnification of officers Insurance and indemnity arrangements established in the previous year concerning officers of the company were renewed or continued during the year ended 30 September 2010. An indemnity agreement has been entered into between TechnologyOne and each of the directors of the Company named earlier in this report and with each full time executive officer and secretary of the company. Under the agreement, theC ompany has indemnified those officers against any claim or for any expenses or costs which may arise as a result of work performed in their respective capacities. There is a limit of $20,000,000 for any one claim. TechnologyOne paid an insurance premium in respect of a contract insuring each of the directors of the Company named earlier in this report and each full time executive officer and secretary of theC ompany, against all liabilities and expenses arising as a result of work performed in their respective capacities, to the extent permitted by law. Non-audit services Non audit services provided by the company’s auditor, Ernst & Young, in the current financial period and prior financial year included taxation and statutory compliance assistance. The directors are satisfied that the provision of non audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act. During the year the following fees were paid or payable for non audit services provided by the auditor of the Company and its related practices:
Consolidated
2010 2009 $ $ Ernst & Young: Taxation advice 126,083 34,845 compliance services 17,687 12,360 Total 143,770 47,205 Auditor’s 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 78. 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 and financial 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. This report is made in accordance with a resolution of directors.
Adrian Di Marco Executive Chairman Brisbane 22 November 2010
F I NAN c i A L S TATEMENT S Page 35 c orporate g o v ernan c e s tatement
Corporate governance statement The Board of Directors of the Company is responsible for its corporate governance. The Board guides and monitors the business and affairs of the Company on behalf of the shareholders by whom they are elected and to whom they are accountable. The Board has the authority to delegate any of its powers to committees consisting of such directors and external consultants, as the directors think fit. The Board has established an AuditC ommittee, a Remuneration Committee, and a Nomination and Review Committee. The format of the Corporate Governance Statement is in accordance with the Australian Securities Exchange Corporate Governance Council’s ‘Principles of Good Corporate Governance and Best Practice Recommendations’. In accordance with the Council’s recommendations, the Corporate Governance Statement must now contain certain specific information and must disclose the extent to which theC ompany has followed the guidelines during the period. TechnologyOne’s corporate governance practices were in place throughout the year ended 30 September 2010. As noted below, there are some recommendations with which the Company has not complied. These are at the end of the statement. Apart from these, the Company has complied with all of the principles. The Directors have established guidelines for the operation of the Board. Set out below are the Company’s main corporate governance practices. Unless otherwise stated, these practices were in place throughout the financial period. The Corporate Governance Statement is available on the company’s internet site www.TechnologyOneCorp.com under the ‘Investor Relations’ area.
Board of Directors and its Committees Board of Directors The Directors are as follows: Adrian Di Marco Executive Chairman (and Chief Executive Officer) – major shareholder John Mactaggart Non executive Director – major shareholder Ronald McLean Non executive Director – independent Kevin Blinco Non executive Director – independent Richard Anstey Non executive Director – independent Edward Chung Executive Director The Board of Directors operates in accordance with the following broad principles: n The Board should comprise at least three members, but no more than 10. The current Board membership is six. The Board may increase the number of Directors where it is felt that additional expertise in specific areas is required. TheC ompany believes for its current size, a smaller Board allows it to be more effective and to react quickly to opportunities and threats. n The Board should be comprised of Directors with an appropriate range of qualifications, expertise, and experience. n The Board shall meet regularly as required and have available all necessary information to participate in an informed discussion of agenda items. n The Directors are entitled to be paid expenses incurred in connection with the execution of their duties as Directors. Each Director is therefore able to seek independent professional advice at the Company’s expense, where it is in connection with their duties and responsibilities as Directors. The Company policy is that a Director wishing to seek independent legal advice should advise the Board, or if this is not possible, the Chairman, at least 48 hours before doing so. Appointment of Directors If a vacancy exists, or where the Board considers it will benefit from the appointment of a newD irector with particular skills, the Board will interview the candidates. Potential candidates will be identified by the Board although the Board will be entitled to seek the advice of an external consultant. The Board will then appoint the most suitable candidate, who, upon acceptance, will hold office until the next Annual General Meeting, where the appointee must retire and is entitled to stand for re-election.
Page 36 F I NAN c i A L S TATEMENT S Audit Committee The Board has established an Audit Committee. The Committee meets at least four times per year. The Committee is comprised of: K Blinco B Bus, FCA, (Chairman) J Mactaggart FAICD R Anstey AICD, FAIM R McLean The role of the Committee is as follows: n Receive and review reports from the external auditor. n Ensure that systems of internal control are functioning effectively and economically, and that these systems and practices contribute to their achievement of the Company’s corporate objectives. n Direct follow-up action where considered necessary. n Relate any matters of concern to the accountable authority. n Review the performance of the external auditor on an annual basis. Executive Remuneration Committee The Board has established an Executive Remuneration Committee. The Committee meets annually. The Committee is comprised of: R McLean (Chairman) J Mactaggart A Di Marco K Blinco R Anstey The role of the Committee is as follows: n Advise the Board with regard to the Company’s broad policy for executive remuneration. n Determine, on behalf of the Board, the individual remuneration packages for executives and directors. n Give the Executives encouragement to enhance the Company’s performance and to ensure that they are fairly, but responsibly, rewarded for their individual contribution. Non executive directors’ remuneration is determined by the Board within the aggregate amount per annum which may be paid in directors fees. Nomination Committee The Board has established a Nomination Committee. The Committee meets annually. The Committee is comprised of: R Anstey (Chairman) A Di Marco J Mactaggart R McLean K Blinco The role of the Committee is as follows: n Assessment of the necessary and desirable competencies and experience for Board membership. n Assessment of the independence of each director. Evaluation of the performance of the Board, Audit and Remuneration committees, and their membership. n Evaluation initially and on an on going basis of non executive director’s commitments and their ability to commit the necessary time required to fulfil their duties to a high standard. n Adherence by directors to the Director’s Code of Conduct and to good Corporate Governance. n Review of Board succession plans, changes to committees, and appointment of new directors.
F I NAN c i A L S TATEMENT S Page 37 c orporate g o v ernan c e s tatement CONTINUED
Ethical Standards All directors, managers and employees are expected to act with the utmost integrity and objectivity, observe the highest standards of behaviour and business ethics, and strive at all times to enhance the reputation and performance of the Company. Shareholders’ Rights The Board of Directors aims to ensure that shareholders are informed of all major developments affecting the Company’s state of affairs. The information is communicated to shareholders by the: n Annual Report being distributed to all shareholders. The Board ensures the Annual Report contains all relevant information about the operations of the Company during the financial year, together with details of future developments and other disclosures required under the Corporations Act 2001. n Half Year Results Report distributed to all shareholders. n Disclosures forwarded to the Australian Securities Exchange under the Company’s continuous disclosure obligations. Risk Management The Board has received reports from management on the risk management strategies, their effectiveness, and any current risk items. Management is responsible for the design and implementation of control systems, which are reviewed and approved by the Board. The whole area of risk management is outlined in the full Corporate Governance Statement (on the company website) and is constantly reviewed. Risk management review is included in the papers of each full Board meeting and each Audit Committee meeting. The Board requires the CEO and Operating Officer forC orporate Services to sign all statements required in accordance with the Corporations Act. Non Compliance with ASX Corporate Governance Principles and Recommendations The Board of TechnologyOne believes in working to the highest standards of Corporate Governance. Notwithstanding this, the Board believes it is important to recognise there is not a ‘one size fits all’ to goodC orporate Governance, and that it is important to consider the size of the Company, the industry it operates within, the corporate history, and the Company’s inherent strengths. The ASX Corporate Governance Council has recognised this fact, and has allowed companies to explain where it does not comply with the Corporate Governance Principles and Recommendations. The Company has complied with the majority of the ASX recommendations, with the exception of but a few. The Board believes the areas of non-conformance shown below will not impact the Company’s ability to meet the highest standards of Corporate Governance and will, at the same time, allow the Company to capitalise on its inherent strengths. This section explains those areas of non-compliance. Majority of Independent Directors (Refer ASX Corporate Guidelines – Recommendation 2.1) The number of Directors is six. Three of these are independent and three are not independent. This combination is seen as appropriate in order to provide balance on the Board. Only two of the Directors are Executives and this provides sufficient resources for the daily operations of the company. It would be inappropriate to add another Director at this stage, purely to meet the ASX guidelines. Independent Chairman (Refer ASX Corporate Guidelines – Recommendation 2.2) The Board is of the opinion it should maximise the vision, skills and deep industry knowledge of the company’s founder and major shareholder to continue to lead the company forward. The Board believes Mr Adrian Di Marco is the best candidate to clearly communicate the company’s vision, strategy, and to set market expectations. To this end, it is seen as appropriate that Mr Adrian Di Marco should remain as Executive Chairman (and Managing Director) of the company. There is no empirical evidence to support the preference of an Independent Chairman. Separation of Chairman & CEO Roles (Refer ASX Corporate Guidelines – Recommendation 2.3) The Company’s Chief Executive Officer is also theC ompany’s Executive Chairman. There are six Operating Officers who are responsible for the day to day operations, who report to the Executive Chairman. The Board believes this provides the necessary balance required.
Page 38 F I NAN c i A L S TATEMENT S i n c ome s tatement FOR THE YEAR ENDED 30 SEPTEMBER 2010
Consolidated
2010 2009 Notes $’000 $’000 Revenue 5 135,906 122,487 Sales & marketing expense (20,625) (15,080) Occupancy expense (6,700) (3,845) Administration expense (20,073) (18,632) Depreciation and amortisation expense 6 (3,888) (3,450) Product distribution & servicing expense (31,261) (33,279) Other expense (2,250) (2,269) Finance expense (194) (180) Equity based compensation expense (670) (568) Profit from continuing activities before research & development expense 50,245 45,184
Research & development expense (26,963) (24,908) Profit before income tax 7 23,282 20,276
Income tax expense 7 (5,469) (4,592) Profit for the year 17,813 15,684
Basic earnings per share (cents per share) 31 5.93 5.24 Diluted earnings per share (cents per share) 31 5.80 5.12
The above income statement should be read in conjunction with the accompanying notes.
F I NAN c i A L S TATEMENT S Page 39 s tatement O F C OMPRE H EN s i v E I N C O M E FOR THE YEAR ENDED 30 SEPTEMBER 2010
Consolidated
2010 2009 Notes $’000 $’000 Profit for the year (from previous page) 17,813 15,684 Other comprehensive income Translation of foreign operation: Exchange differences taken to equity (378) (560)
Revaluation of assets: Revaluation of available for sale assets taken to equity 144 (81) Total comprehensive income for the year 17,579 15,043
The above statement of comprehensive income should be read in conjunction with the accompanying notes.
Page 40 F I NAN c i A L S TATEMENT S s tatement O F F I NAN c i A L P O s i T I O N AS AT 30 SEPTEMBER 2010
Consolidated
2010 2009 Notes $’000 $’000
ASSETS Current assets Cash and cash equivalents 8 32,652 25,586 Available for sale financial assets 3,921 4,952 Trade and other receivables 9 16,486 21,854 Earned and unbilled revenue 2,078 1,471 Other current assets 10 1,356 1,460 Total current assets 56,493 55,323
Non-current assets Property, plant and equipment 11 18,814 7,468 Intangible assets 12 16,742 17,023 Deferred tax assets 13 6,035 3,879 Other non-current assets 220 - Total non-current assets 41,811 28,370
Total assets 98,304 83,693
LIABILITIES Current liabilities Trade and other payables 14 9,264 7,580 Provisions 15 7,378 6,344 Current tax liabilities 1,757 1,375 Unearned revenue 5,379 4,438 Borrowings 16 1,234 1,378 Total current liabilities 25,012 21,115
Non-current liabilities Provisions 17 2,198 1,630 Borrowings 18 1,656 1,371 Other non-current liabilities 19 6,023 2,434 Deferred tax liabilities 20 - - Total non-current liabilities 9,877 5,435
Total liabilities 34,889 26,550
Net assets 63,415 57,143
EQUITY Contributed equity 21 24,299 24,284 Reserves 22 14,326 8,755 Retained earnings 24,790 24,104 Total equity 63,415 57,143
The above statement of financial position should be read in conjunction with the accompanying notes.
F I NAN c i A L S TATEMENT S Page 41 s tatement O F c h AN G E S I N E Q U I T Y FOR THE YEAR ENDED 30 SEPTEMBER 2010
shARE iNvestment cONTRibuted Retained dividend FOREx OPTiON REvaluatiON TOTAL EQUity EARNings REservE REservE REserve reservE EQUity CONSOLIDATED NOTES $’000 $’000 $’000 $’000 $’000 $’000 $’000
Balance at 1 October 2009 24,284 24,104 8,617 (1,298) 1,990 (554) 57,143 Loss realised on sale of available for sale financial assets - - - - - 84 84 Net gains on available for sale financial assets - - - - - 60 60 Exchange differences on translation of foreign operations - - - (378) - - (378) Profit for the year - 17,813 - - - - 17,813 Total comprehensive income for the year - 17,813 - (378) - 144 17,579
Dividends paid 23 - - (12,614) - - - (12,614) Transfer to dividend reserve - (17,127) 17,127 - - - - Exercise of share options 15 - - - - - 15 Cost of equity based compensation - - - - 670 - 670 Equity based compensation - - - - 622 - 622 15 (17,127) 4,513 - 1,292 - (11,307)
Balance at 30 September 2010 24,299 24,790 13,130 (1,676) 3,282 (410) 63,415
Balance at 1 October 2008 23,863 19,673 7,322 (738) 867 (473) 50,514 Gain realised on sale of available for sale financial assets - - - - - (16) (16) Net gains/(losses) on available for sale financial assets - - - - - (65) (65) Exchange differences on translation of foreign operations - - - (560) - - (560) Profit for the year - 15,684 - - - - 15,684 Total comprehensive income for the year - 15,684 - (560) - (81) 15,043
Dividends paid 23 - - (9,958) - - - (9,958) Transfer to dividend reserve - (11,253) 11,253 - - - - Exercise of share options 421 - - - - - 421 Cost of equity based compensation - - - - 568 - 568 Equity based compensation - - - - 555 - 555 421 (11,253) 1,295 - 1,123 - (8,414)
Balance at 30 September 2009 24,284 24,104 8,617 (1,298) 1,990 (554) 57,143
The above statement of changes in equity should be read in conjunction with the accompanying notes.
Page 42 F I NAN c i A L S TATEMENT S s tatement O F C A s h F L O w s FOR THE YEAR ENDED 30 SEPTEMBER 2010
Consolidated
2010 2009 Notes $’000 $’000 Cash flows from operating activities Receipts from customers 138,912 121,043 Payments to suppliers and employees (102,364) (97,530) Interest received 1,069 802 Income taxes paid (6,622) (6,468) Other revenue 774 894 Interest paid (194) (180) Net cash inflow from operating activities 30 31,575 18,561
Cash flows from investing activities Payments for property, plant and equipment (12,702) (2,076) Proceeds from sale of available for sale financial assets 1,106 203 Proceeds from sale of plant and equipment - 13 Net cash outflow from investing activities (11,596) (1,860)
Cash flows from financing activities Proceeds from conversion of share options 15 421 Payment for interest rate cap (314) - Dividends paid to Company’s shareholders 23 (12,614) (9,958) Net cash outflow from financing activities (12,913) (9,537)
Net increase in cash and cash equivalents 7,066 7,164 Cash and cash equivalents at the beginning of the financial year 25,586 18,422 Cash and cash equivalents at end of year 8 32,652 25,586
The above statement of cash flows should be read in conjunction with the accompanying notes.
F I NAN c i A L S TATEMENT S Page 43 note s to t h e f i nan c i al s tatement s 30 SEPTEMBER 2010
1 sUMMARy of significant accounting policies The financial report of Technology One Limited (theC ompany) for the year ended 30 September 2010 was authorised for issue in accordance with a resolution of directors on 22 November 2010. The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial statements are for the consolidated entity consisting of Technology One Limited and its subsidiaries.
(a) Basis of preparation These general purpose financial statements have been prepared in accordance with Australian AccountingS tandards, other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations, and the Corporations Act 2001. The financial report is presented in Australian dollars and all values are rounded to the nearest thousand dollars ($000) unless otherwise stated. Compliance with IFRS This financial report also complies withI nternational Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. Early adoption of standards The Company has elected to apply the following pronouncements to the annual reporting period beginning 1 October 2009: n AASB 2009–5 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project n AASB 1053 Application of Tiers of Australian Accounting Standards and AASB 2010 2 Amendments to Australian Accounting Standards arising from Reduced Disclosure Requirements Historical cost convention These financial statements have been prepared under the historical cost convention, as modified by the revaluation of available for sale financial assets, financial assets and liabilities (including derivative instruments) at fair value through profit or loss, certain classes of property, plant and equipment, and investment property. Critical accounting estimates The preparation of financial statements requires the use of certain critical accounting estimates. I t also requires management to exercise its judgement in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 3. Financial statement presentation The Company has applied the revised AASB 101 Presentation of Financial Statements, which became effective on 1 January 2009. The revised standard requires the separate presentation of a statement of comprehensive income and a statement of changes in equity. All non owner changes in equity must now be presented in the statement of comprehensive income. As a consequence, the Company had to change the presentation of its financial statements. C omparative information has been re-presented so that it is also in conformity with the revised standard.
(b) New accounting standards and interpretations Relevant Australian Accounting Standards that have recently been issued or amended, but are not yet effective and have not yet been adopted for the annual reporting period ended 30 September 2010, are as follows: (i) AASB 2010-3 Amendments to Australian Accounting Standards Arising from the Annual Improvements Project (effective from 1 July 2010) (ii) AASB 2010-4 Amendments to Australian Accounting Standards Arising from the Annual Improvements Project (effective from 1 January 2011) (iii) AASB 2009-5 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project (effective for annual periods beginning on or after 1 January 2010) Annual Improvements Project In May 2008 and April 2009, the AASB issued omnibus of amendments to its Standards as part of the Annual Improvements Project, primarily with a view to removing inconsistencies and clarifying wording. There are separate transitional provisions and application dates for each amendment. The adoption of the following amendments resulted in changes to accounting policies, but did not have any impact on the financial position or performance of theC ompany. n AASB 8 Operating Segments: clarifies that segment assets and liabilities need only be reported when those assets and liabilities are included in measures that are used by the chief operating decision-maker. As the Company’s chief operating decision-maker does not review segment assets and liabilities, the Company has not disclosed this information in note 4. n AASB 101 Presentation of Financial Statements: assets and liabilities classified as held for trading in accordance with AASB 139 Financial Instruments: Recognition and Measurement are not automatically classified as current in the statement of financial position. TheC ompany amended its accounting policy accordingly and analysed whether management’s expectation of the period of realisation of financial assets and liabilities is in accordance with AASB 101. This did not result in any re-classification of financial instruments between current and non current in the statement of financial position.
Page 44 F I NAN c i A L S TATEMENT S n AASB 116 Property, Plant and Equipment: replace the term “net selling price” with “fair value less costs to sell”. The Company amended its accounting policy accordingly, which did not result in any change in the financial position. n AASB 136 Impairment of Assets: when discounted cash flows are used to estimate “fair value less cost to sell” additional disclosure is required about the discount rate, consistent with disclosures required when the discounted cash flows are used to estimate “value in use”. The Company has amended its disclosures accordingly in note 12. n The amendment also clarified that the largest unit permitted for allocating goodwill, acquired in a business combination, is the operating segment as defined in AASB 8 before aggregation for reporting purposes. The amendment has no impact on the Company as the annual impairment test is performed before aggregation. Other amendments resulting from the Annual Improvements Project to the following Standards did not have any impact on the accounting policies, financial position, or performance of theC ompany: n AASB 2 Share Based Payments n AASB 110 Events after the Reporting Period n AASB 117 Leases n AASB 118 Revenue n AASB 119 Employee Benefits
(c) Principles of consolidation (i) Subsidiaries The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Technology One Limited (“company” or “parent entity”) as at 30 September 2010 and the results of all subsidiaries for the year then ended. Technology One Limited and its subsidiaries together are referred to in this financial report as theC ompany or the consolidated entity. Intercompany transactions, balances and unrealised gains on transactions between Company companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Company. (ii) Employee Share Trust The Company has formed a trust to administer the Company’s employee share scheme. This trust is consolidated, as the substance of the relationship is that the trust is controlled by the Company.
(d) Foreign currency translation (i) Functional and presentation currency Items included in the financial statements of each of theC ompany’s operations are measured using the currency of the primary economic environment in which it operates (“the functional currency”). The consolidated financial statements are presented in Australian dollars, which is Technology One Limited’s functional and presentation currency. (ii) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the profit or loss. (iii) Group companies The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: n Assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position n Income and expenses for each income statement and statement of comprehensive income are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions), and n All resulting exchange differences are recognised in other comprehensive income.
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(e) Revenue recognition Revenue is measured at the fair value of the consideration received or receivable. The Company recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity, and specific criteria have been met for each of theC ompany’s activities as described below. The Company bases its estimates on historical results, taking into consideration the type of customer, the type of transaction, and the specifics of each arrangement. Revenue is recognised for the major business activities as follows: (i) Software licence fee revenue Revenue from licence fees due to software sales is recognised on the transferring of significant risks and rewards of ownership of the licensed software under an agreement between the company and the customer. (ii) Implementation and consulting services revenue for licensed software Revenue from implementation and consulting services attributable to licensed software is recognised in proportion to the stage of completion. (iii) Post sales customer support revenue for licensed software Post sales customer support (PSCS) revenue for licensed software comprises fees for ongoing upgrades, minor software revisions, and helpline support. PSCS revenue is allocated between annual fees for helpline support and fees for rights of access to ongoing upgrades and minor software patches. At each reporting date, the unearned portion of help line support fees is assessed and deferred to be recognised over the period of service. Fees for rights of access to ongoing upgrades and minor software revisions are recognised at the commencement of the period to which they relate on the basis that the company has no ongoing obligations or required expenditure related to this revenue. (iv) Project services revenue Revenue from project services agreements is recognised in proportion to their stage of completion, typically in accordance with the achievement of contract milestones and/or hours expended. (v) Unearned services revenue Amounts received from customers in advance of provision of services are accounted for as a liability called Unearned Revenue. (vi) Earned and unbilled revenue Amounts recorded as earned and unbilled revenue represent revenues recorded on software licence fees and PSCS fees not yet invoiced to customers. These amounts have met the revenue recognition criteria of the company, but have not reached the payment milestones contracted with customers.
(f) iNcome tax The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the company’s subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. H owever, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. D eferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in foreign operations where the company is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities, and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. The carrying amount of deferred income tax assets is reviewed at each Balance Sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.
Page 46 F I NAN c i A L S TATEMENT S Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the Balance Sheet date. Technology One Limited and its wholly owned, Australian controlled entities have implemented the tax consolidation legislation. As a consequence, these entities are taxed as a single entity and the deferred tax assets and liabilities of these entities are set off in the consolidated financial statements. The head entity, Technology One Limited, and the controlled entities in the tax consolidated group account for their own current and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated group continues to be a standalone taxpayer in its own right. The Company has applied the Group allocation approach in determining the appropriate amount of current taxes and deferred taxes to allocate to members of the tax consolidated group. The current and deferred tax amounts are measured in a systematic manner that is consistent with the broad principles in AASB 112. The Company created an Employee Share Trust during 2009, which allows an employee on the exercise of an option to hold the share in the Trust. As per AASB 112, on granting the option, the Company now records a deferred tax asset on the expected value of the share. If the amount of the tax deduction (or estimated future tax deduction) exceeds the amount of the related cumulative remuneration expense, the difference is recognised directly in equity. When the employee exercises the option, the tax effect difference between the actual market value and what was recorded as a deferred tax asset is recognised to equity.
(g) sEgment reporting An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity), whose operating results are regularly reviewed by the entity’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. Operating segments have been identified based on the information provided to the chief operating decision maker, being the Executive Chairman. Operating segments that meet the quantitative criteria as prescribed by AASB 8 are reported separately. However, an operating segment that does not meet the quantitative criteria is still reported separately where information about the segment would be useful to users of the financial statements. Information about other business activities and operating segments that are below the quantitative criteria are combined and disclosed in a separate category for “all other segments”.
(h) Leases Leases of property, plant and equipment where the Company, as lessee, has substantially all the risks and rewards of ownership are classified as finance leases (note 11). Finance leases are capitalised at the lease’s inception at the fair value of the leased property or, if lower, the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in other short-term and long- term payables. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to the profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases are depreciated over the asset’s useful life or over the shorter of the asset’s useful life and the lease term if there is no reasonable certainty that the Company will obtain ownership at the end of the lease term. Leases in which a significant portion of the risks and rewards of ownership are not transferred to theC ompany as lessee are classified as operating leases (note 27). Payments made under operating leases (net of any incentives received from the lessor) are charged to the profit or loss on a straight-line basis over the period of the lease. (i) Research and Development costs Research and development expenses include payroll, employee benefits and other employee-related costs associated with product development. Technological feasibility for software products is reached shortly before products are released for commercial sale to customers. Costs incurred after technological feasibility is established are not material, and accordingly, all research and development costs are expensed when incurred. (j) Impairment of assets Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
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(k) cAsh and cash equivalents For the purpose of presentation in the preliminary statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. For purposes of the cash flow statement, cash includes cash and cash equivalents, net of outstanding bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet.
(l) Trade receivables Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. Trade receivables are generally due for settlement within 30 days. Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off by reducing the carrying amount directly. An allowance account (provision for impairment of trade receivables) is used when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 60 days overdue) are considered indicators that the trade receivable is impaired. The amount of the impairment loss is recognised in profit or loss within other expenses. W hen a trade receivable for which an impairment allowance had been recognised becomes uncollectible in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against other expenses in profit or loss.
(m) Investments and other financial assets The Company classifies its investments in the following categories: financial assets at fair value through profit or loss, loans and receivables, and available for sale financial assets. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition. (i) Available for sale financial assets Available for sale financial assets, comprising principally marketable equity securities, are non-derivatives that are either designated in this category. Investments are designated as available for sale if they do not have fixed maturities and fixed or determinable payments and management intends to hold them for the medium to long-term. Investments held which are classified as available for sale are measured at fair value where such investments comprise tradeable securities. Fair value is determined by reference to quoted market prices in an active, liquid, and observable market. Gains or losses on available for sale investments are recognised as a separate component of equity until the investment is sold, collected or otherwise disposed of, or until the investment is determined to be impaired, at which time the cumulative gain or loss previously reported in equity is included in the statement of comprehensive income.
(n) Property, plant and equipment Property, plant and equipment are measured at cost less accumulated depreciation and any impairment in value. Depreciation is calculated on a straight-line basis over the estimated useful economic lives of the assets as follows:
Life Method Office furniture and equipment 3-11 years straight line Computer software 3-4 years straight line Motor vehicles 4-5 years straight line
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (note 1(j)). Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit or loss.
Page 48 F I NAN c i A L S TATEMENT S (o) Intangible assets (i) Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Company’s share of the net identifiable assets of the acquired subsidiary/associate at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill is not amortised. Instead, goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash generating units for the purpose of impairment testing. The allocation is made to those cash generating units or groups of cash generating units that are expected to benefit from the business combination in which the goodwill arose, identified according to operating segments (note 4). (ii) Intellectual Property/Source Code Intangible assets acquired separately are capitalised at cost, and if acquired as a result of a business combination, capitalised at fair value as at the date of acquisition. Following initial recognition, the cost model is applied to all classes of intangible assets. The useful lives of the intangible assets are assessed to be either finite or infinite.W here amortisation is charged on intangible assets with finite lives, this expense is taken to the income statement through the ‘depreciation and amortisation expense’ line item. Intangible assets with finite lives are tested for impairment where an indicator of impairment exists. Useful lives are examined on an annual basis and adjustments, where applicable, are made on a prospective basis. Intellectual Property/Source Code is amortised on a straight line basis over 8 years. Gains or losses arising from the de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset, and are recognised in the statement of comprehensive income when the intangible asset is de-recognised.
(p) Trade and other payables These amounts represent liabilities for goods and services provided to the Company prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition.
(q) Provisions Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Provisions are not recognised for future operating losses. Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense.
(r) Employee benefits (i) Short-term obligations Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be settled within 12 months after the end of the period in which the employees render the related service, are recognised in respect of employees’ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for sick leave, which are non-vesting, are recognised when the leave is taken and measured at the rates paid or payable. (ii) Long service leave The liability for long service leave is recognised in the provision for employee benefits and is measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting period. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the end of the reporting period on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. (iii) Share based payments The company provides benefits to certain employees in the form of share-based payment transactions, whereby employees render services in exchange for rights over shares. The costs of share based payment transactions with employees are measured by reference to the fair value of the equity instruments at the date at which they are granted. Refer to note 32. The cost of share-based payments is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (the vesting period). No expense is recognised for awards that do not ultimately vest.
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(s) cONTRibuted equity Ordinary shares are classified as equity. Issued and paid up capital is recognised at the fair value of the consideration received. Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received.
(t) Earnings per share Basic earnings per share is calculated by dividing: n The profit attributable to owners of the company, excluding any costs of servicing equity other than ordinary shares. n By the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year and excluding treasury shares. Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account: n The after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares, and n The weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares.
(u) dividends Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity, on or before the end of the reporting period, but not distributed at the end of the reporting period.
(v) gOOds and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the statement of financial position. Cash flows are presented on a gross basis. TheGS T components of cash flows arising from investing or financing activities which are recoverable from, or payable to, the taxation authority are presented as operating cash flows.
Page 50 F I NAN c i A L S TATEMENT S 2 Financial risk management The Company’s principal financial instruments are finance leases, cash and short-term deposits, and assets available for sale. The Company has various other financial assets and liabilities such as trade receivables and trade payables, which arise directly from its operations. It is, and has been throughout the period under review, the Company’s policy that no trading in financial instruments shall be undertaken. The main risks arising from the Company’s financial assets and liabilities are interest rate risk, foreign currency risk, and credit risk. The Board reviews and agrees policies for managing each of these risks and they are summarised below. Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income 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. During the year the company entered into an asset finance facility which has an interest rate cap to limit any exposure in interest rate movements above a BBSY of 5.50%. The Cap was for $8,000,000. There are no changes in the financial risks faced by theC ompany in the period. The Company’s cash and investment assets are exposed to movements in deposit and fixed interest rates. TheC ompany does not hedge this exposure. Interest rate risk on leasing instruments is managed by taking out fixed interest leases. No variable interest risk exposures exist. Interest rate risk on available for sale instruments and cash is not considered to be material. The company holds the following financial instruments:
2010 2009 $’000 $’000 Financial assets Cash and cash equivalents 32,652 25,586 Trade and other receivables 16,486 21,854 Available for sale financial assets 3,921 4,952 Other financial assets 283 - 53,342 52,392
Financial liabilities Trade and other payables 9,264 7,580 Borrowings 2,890 2,749 12,154 10,329
At balance date the Company held investments in available for sale instruments. These instruments represented reset preference shares traded on the Australian Securities Exchange paying interest as opposed to dividends. The exposure on these instruments is principally interest related. At each reporting date the fair value of these shares is determined as the close bid price published by the Australian Securities Exchange. Any movements in the fair value of these instruments are included in an equity reserve. Fixed returns are recorded as interest as received. The designation of available for sale investments is made on acquisition. Where the intent is not to acquire an instrument for short term profit taking the instrument is classified as available for sale.
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(a) Foreign currency risk As a result of operations in New Zealand, Malaysia and the United Kingdom, and sales contracts denominated in United States dollars, the Company’s balance sheet can be affected by movements in the exchange rates applicable to these geographical locations and currencies. The Company does not hedge this risk. At balance date, the Group had the following exposures in Australian dollar equivalents of amounts to foreign currencies which are not effectively hedged:
Consolidated
2010 2009 $’000 $’000 Receivables United States Dollars 320 195
The Company’s sensitivity to a 10% change in the Australian Dollar against the United States Dollar would impact net profit by $205,000 (2009: $144,000).
(b) cREdit risk The Company trades only with recognised, creditworthy third parties. It is the Company’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures.I n addition, receivable balances are monitored on an ongoing basis with the result that the Company’s exposure to bad debts is not significant. Information on credit risk exposures is contained in Note 9.
(c) Liquidity risk Liquidity risk arises from the financial liabilities of theG roup and Group’s subsequent ability to meet its obligations to repay its financial liabilities as and when they fall due. Contractual maturities of financial liabilities
Less than 6-12 BETween Over Total 6 months MONThs 1 and 5 years contractual 5 years cash flows At 30 September 2010 $’000 $’000 $’000 $’000 $’000
Operating lease commitments 3,253 3,254 25,323 10,723 42,553 Finance lease commitments 708 526 1,656 - 2,890 Total 3,961 3,780 26,979 10,723 45,443
At 30 September 2009 Operating lease commitments 2,347 2,348 18,065 14,527 37,287 Finance lease commitments 684 640 1,425 - 2,749 Total 3,031 2,988 19,490 14,527 40,036
Page 52 F I NAN c i A L S TATEMENT S (d) Fair value measurements The fair value of financial assets and financial liabilities must be estimated for recognition and measurement, or for disclosure purposes. As of 1 October 2009, Technology One Limited has adopted the amendment to AASB 7 Financial Instruments: Disclosures, which requires disclosure of fair value measurements by level of the following fair value measurement hierarchy: (a) quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1) (b) inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices) (level 2), and (c) inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3). The following table presents the Company’s assets and liabilities measured and recognised at fair value at 30 September 2010. Comparative information has not been provided as permitted by the transitional provisions of the new rules.
At 30 September 2010 Level 1 Level 2 Level 3 Total $’000 $’000 $’000 $’000 Assets Available for sale financial assets Listed investments 3,921 - - 3,921
The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and trading and available for sale securities) is based on quoted market prices at the end of the reporting period. The quoted market price used for financial assets held by theC ompany is the current bid price. These instruments are included in level 1.
(e) cAPital risk management The Company 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 current risk management structure of the Company is to use all equity funding except for funding required to purchase core information technology assets, which is funded by a leasing facility. The equity funded position of the Company is managed by the Board through dividends, new shares, and share buy backs, as well as the issue of new equity where considered appropriate to fund business acquisitions.
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3 cRitical accounting estimates and judgements Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances. The Company 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 discussed below.
Impairment of goodwill and other assets The Company tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in note 1(o). The recoverable amounts of cash generating units have been determined based on value in use calculations. These calculations require the use of assumptions. Refer to note 12 for details of these assumptions and the potential impact of changes to the assumptions. All other assets are reviewed for indicators or object evidence of impairment. If indicators or objective evidence exists, the recoverable amount is reviewed.
Share-based payments The costs of equity settled transactions are measured by reference to the fair value of the equity instruments at the date at which they are granted. The fair value of rights over shares is determined using a binomial model, further details of which are given in note 32. The accounting estimates and assumptions relating to equity settled share-based payments would have no impact on the carrying amounts of assets and liabilities with the next annual reporting period, but may impact expenses and equity.
Long service leave A liability for long service is recognised and measured at the present value of the estimated future cash flows to be made in respect of all employees at balance date. In determining the present value of the liability, attrition rates and pay increases through promotion and inflation have been taken into account.
Make good provisions A provision has been made for the present value of anticipated costs of future restoration of leased offices. The provision includes future cost estimates associated with restoring premises to their original condition. The uncertainties arise where the future actual expenditure differs from the amounts currently provided. The provision recognised for each site is periodically reviewed and updated with any changes to the estimated future costs recognised in the statement of financial position by adjusting both the expense or asset (if applicable) and provision. The related carrying amounts are disclosed in notes 16 and 17. Because of the long-term nature of the liability, the greatest uncertainty in estimating the precision is the costs that will ultimately be incurred.
Onerous lease A provision has been made for the recent sublease of an eight year head lease of one of the Group’s offices.W here a provision is required for an onerous lease, management has made an assessment of the most likely outcome of the lease and sublease arrangements.
Page 54 F I NAN c i A L S TATEMENT S 4 sEgment information The Group’s chief operating decision-maker makes financial decisions and allocates resources based on the information they receive from its internal management system. Sales are attributed to an operating segment based on the type of product or service provided to the customer. Segment information is prepared in conformity with the accounting policies of the group as disclosed in note 1 and Accounting Standard AASB 8. TechnologyOne’s reportable segments are: n Sales and Marketing – Sales of licence fees and customer support to our customers. n Service Delivery – Implementation and consulting services. n Research & Development – The research, development and support of our products. Intersegment revenues/expenses are where another operating segment has been charged at an agreed rate for the use of their expertise, as well as an internal royalty for the use of the Technology One brand and corporate functions.
F I NAN c i A L S TATEMENT S Page 55 note s to t h e f i nan c i al s tatement s 30 SEPTEMBER 2010 CONTINUED
4 sEgment information continued
2010 S sALEs & Service Research & Marketing dELivery Development Total $’000 $’000 $’000 $’000 Segment revenue Software licence fees & customer support 75,272 - - 75,272 Implementation & consulting services - 55,079 3,688 58,767 Intersegment revenue 411 351 30,294 31,056 Total segment revenue 75,683 55,430 33,982 165,095
Intersegment elimination (31,056) Other revenues from external customers 1,867 Consolidated revenue 135,906
Segment result 1,224 8,962 6,770 16,956 Corporate Services contribution 6,326 Profit before income tax 23,282 Income tax expense (5,469) Profit for the year 17,813
Total assets 98,304
Total liabilities 34,889
Total depreciation and amortisation 3,888
2009 S sALEs & Service Research & Marketing dELivery Development Total $’000 $’000 $’000 $’000 Segment revenue Software licence fees & customer support 67,447 - - 67,447 Implementation & consulting services - 52,067 1,214 53,281 Intersegment revenue 582 142 27,514 28,238 Total segment revenue 68,029 52,209 28,728 148,966
Intersegment elimination (28,238) Other revenues from external customers 1,759 Consolidated revenue 122,487
Segment result 3,628 6,445 3,645 13,718 Corporate Services contribution 6,558 Profit before income tax 20,276 Income tax expense (4,592) Profit for the year 15,684
Total assets 83,693
Total liabilities 26,550
Total depreciation and amortisation 3,450
Page 56 F I NAN c i A L S TATEMENT S (a) segment information provided to the strategic steering committee
Segment revenues from sales to external customers Segment assets
2010 2009 2010 2009 $’000 $’000 $’000 $’000 Australia 124,036 110,153 90,175 78,046 New Zealand 10,260 9,201 6,781 4,012 International 1,610 3,133 1,348 1,635 135,906 122,487 98,304 83,693 Major customers The Company has a number of customers to which it provides both products and services, none of which contribute greater than 10% of external revenue.
5 Revenue
Consolidated
2010 2009 $’000 $’000 Sales revenue Software licence fees 26,766 24,333 Implementation and consulting services 41,583 41,023 Post sales customer support 48,506 43,114 Project services 13,730 11,171 Product modifications 3,454 1,087 Total sales revenue 134,039 120,728
Other revenue Rents and sub lease rentals 774 - Interest received – Cash 852 434 Interest received – Available for sale investments 214 369 User conference 21 920 Grants received - 19 Other 6 17 1,867 1,759
Total revenue 135,906 122,487
F I NAN c i A L S TATEMENT S Page 57 note s to t h e f i nan c i al s tatement s 30 SEPTEMBER 2010 CONTINUED
6 Expenses
Consolidated
2010 2009 $’000 $’000 Profit before income tax includes the following specific expenses:
Depreciation: depreciation 2,472 2,142 Amortisation: Leased office furniture & equipment 978 679 Leased computer software 157 366 Amortisation 281 263 Total amortisation 1,416 1,308
Total depreciation and amortisation 3,888 3,450
Employee benefit expenses: wages and salaries 60,798 58,943 defined contribution plan expense 5,055 4,683 Payroll tax 3,533 3,334 Provision for annual leave 447 299 Provision for long service leave 260 753 Equity based compensation 670 568 Other 2,871 2,721 73,634 71,301
Other expense items: Provision for doubtful debts 349 198 Foreign exchange loss 177 32 Rental expenses on operating leases 6,082 3,892 Loss on sale of available for sale assets 70 33
Page 58 F I NAN c i A L S TATEMENT S 7 iNcome tax expense
Consolidated
2010 2009 $’000 $’000 (a) income tax expense Current tax 7,963 6,077 Relating to origination and reversal of temporary differences (2,156) (1,515) Adjustments for current tax of prior periods (338) 30 5,469 4,592
Deferred income tax (revenue) expense included in income tax expense comprises: Decrease/(increase) in deferred tax assets (note 13) (3,694) 1,988 (Decrease)/increase in deferred tax liabilities (note 20) 1,538 874 (2,156) 2,862
(b) Numerical reconciliation of income tax expense to prima facie tax payable Profit from continuing operations before income tax expense 23,282 20,276 Tax at the Australian tax rate of 30% (2009 – 30%) 6,985 6,083
Adjustments for current tax of prior periods (338) 30 Research and development tax concession (1,118) (1,168) Recognition of previously unrecognised tax asset (85) (81) Non-deductible foreign loss - (36) Non assessable foreign income (104) (111) Expenditure not allowable for income tax purposes 322 218 Employee share trust (193) (343) (1,516) (1,491)
Income tax expense 5,469 4,592
8 cURRENT assets – Cash and cash equivalents
Consolidated
2010 2009 $’000 $’000 Cash and cash equivalents 32,652 25,586
The company has a secured $7 million interchangeable facility which is transferable between an Overdraft, Fixed Rate Commercial Bill, and Variable Rate Commercial Bill to assist with working capital requirements. Cash at bank earns interest at floating rates based on daily bank deposit rates. Money market accounts at call are made for varying periods of between one day and three months, depending on immediate cash requirements of the Company, and earn interest at the respective money market deposit rates. The fair value of cash assets at 30 September are their carrying values.
F I NAN c i A L S TATEMENT S Page 59 note s to t h e f i nan c i al s tatement s 30 SEPTEMBER 2010 CONTINUED
9 cURRENT assets – Trade and other receivables
Consolidated
2010 2009 $’000 $’000 Net trade receivables Trade receivables (i) (ii) 17,294 21,657 Sundry receivables (116) 563 Provision for impairment of receivables (692) (366) 16,486 21,854
(i) Trade receivables are non-interest bearing and are on 30 day terms. No interest is charged on trade receivables. A specific analysis of debts that may be uncollectible is made at each reporting date by an internal credit committee and provisions made where appropriate. Provisions recorded are based on estimated irrecoverable amounts from the sale of goods and services, determined by reference to the circumstances of the specific customer. included in the trade receivable balance are debtors with a carrying amount of $1,774,000 (2009: $4,213,000), which are past due at the reporting date for which the consolidated entity has not provided as there has not been a significant change in credit quality and the consolidated entity believes that the amounts are still considered recoverable. The consolidated entity does not hold any collateral over these balances, apart from the withdrawal of future support and software licence use rights. The average age of these receivables is 25 days (2009: 31 days). (ii) included in trade receivables are amounts billed but not yet collected for post implementation customer support to commence post 30 September at each balance date. An equal and offsetting amount is included in unearned income. The balance at 30 September 2010 is $2,324,000 (2009: $2,073,000).
Movements in the provision for impairment of receivables are as follows:
Consolidated
2010 2009 $’000 $’000 At 1 October 366 411 Receivables written off during the year as uncollectible (349) (242) Provision for impairment recognised during the year 692 366 Unused amount reversed (17) (169) 692 366
In determining the recoverability of a trade receivable the Company considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date. The concentration of credit risk is limited due to the customer base being large and unrelated. Accordingly, the directors believe that there is no further credit provision required in excess of the allowance for doubtful debts.
10 Current assets – Other current assets
Consolidated
2010 2009 $’000 $’000 Prepayments 1,042 1,088 Deposits owing 251 246 Other 63 126 1,356 1,460
Page 60 F I NAN c i A L S TATEMENT S 11 Non-current assets – Property, plant and equipment
Leased o OFFice Office Leased f FURNiture & FURNiture & computer MOTOR cOMPUTER e EQUipment EQUipment software vEhicles software Total $’000 $’000 $’000 $’000 $’000 $’000 Year ended 30 September 2010 Opening net book amount 5,625 1,292 201 141 209 7,468 Additions * 13,013 1,612 880 21 - 15,526 Disposals (440) (2) - - - (442) Exchange differences (13) - - - - (13) Depreciation charge (2,313) (978) (133) (26) (157) (3,607) Make good movement (118) - - - - (118) Reclassification (157) 252 (95) - - - Closing net book amount 15,597 2,176 853 136 52 18,814
At 30 September 2010 Cost or fair value 21,881 4,385 2,230 185 312 28,993 Accumulated depreciation (6,284) (2,209) (1,377) (49) (260) (10,179) Net book amount 15,597 2,176 853 136 52 18,814
Leased o OFFice Office Leased f FURNiture & FURNiture & computer MOTOR cOMPUTER e EQUipment EQUipment software vEhicles software Total $’000 $’000 $’000 $’000 $’000 $’000 Year ended 30 September 2009 Opening net book amount 4,368 901 86 20 137 5,512 Additions * 2,919 57 1,513 145 - 4,634 Disposals (224) - - (9) - (233) Exchange differences (8) - - - - (8) Depreciation charge (1,671) (679) (91) (15) (366) (2,822) Make good movement 371 - - - - 371 Reclassification (130) 1,013 (1,307) - 438 14 Closing net book amount 5,625 1,292 201 141 209 7,468
At 30 September 2009 Cost or fair value 10,673 3,753 1,490 165 398 16,479 Accumulated depreciation (5,048) (2,461) (1,289) (24) (189) (9,011) Net book amount 5,625 1,292 201 141 209 7,468
* Included in additions of office furniture and equipment are fitout incentives received of $4,233,190 (2009: $1,480,685) that was used to fitout our new offices.
F I NAN c i A L S TATEMENT S Page 61 note s to t h e f i nan c i al s tatement s 30 SEPTEMBER 2010 CONTINUED
12 Non-current assets – Intangible assets
p PROPERTy/ iNTELLEctual G gOOdwill Source code Total $’000 $’000 $’000 Year ended 30 September 2010 Opening net book amount 15,491 1,532 17,023 Amortisation charge - (281) (281) Closing net book amount 15,491 1,251 16,742
At 30 September 2010 Cost 15,491 2,358 17,849 Accumulated amortisation and impairment - (1,107) (1,107) Net book amount 15,491 1,251 16,742
p PROPERTy/ iNTELLEctual G gOOdwill Source code Total $’000 $’000 $’000 Year ended 30 September 2009 Opening net book amount 15,473 1,795 17,268 Additions 18 - 18 Amortisation charge - (263) (263) Closing net book amount 15,491 1,532 17,023
At 30 September 2009 Cost 15,491 2,358 17,849 Accumulated amortisation and impairment - (826) (826) Net book amount 15,491 1,532 17,023
(a) impairment tests for goodwill Goodwill is allocated to the Company’s cash generating units (CGUs) identified according to each reportable segment. The recoverable amount of the software engineering unit has been determined based on a value in use calculation using cash flow projections based on financial budgets approved by senior management covering a five year period. The discount rate applied to cash flow projections is 13.5% pre tax (2009: 14.41%). The key assumptions used in value in use calculations for 30 September 2010 and 2009 are: n Budgeted margins – the basis used to determine the value assigned to budgeted margin is the average margin achieved in the year immediately before the budgeted year. n Bond rates – the yield on a five year government bond rate at the beginning of the budgeted year is used. n Conservative growth rates – based on long term historical trends for each segment.
Page 62 F I NAN c i A L S TATEMENT S 13 Non-current assets – Deferred tax assets
Consolidated
2010 2009 $’000 $’000 The balance comprises temporary differences attributable to: Employee benefits 2,382 2,164 Provisions – other 2,957 549 Accrued expenses 596 215 Copyright – software 425 425 Lease liability (net) 199 297 Employee share trust 1,573 788 8,132 4,438
Set off of deferred tax liabilities pursuant to set off provisions (note 20) (2,097) (559) Net deferred tax assets 6,035 3,879
Movements: Opening balance at 1 October 4,438 2,450 Credited/(charged) to the income statement (note 7) 3,694 1,988 Offset from deferred tax liabilities (2,097) (559) Closing balance at 30 September 6,035 3,879
Deferred tax assets expected to be recovered within 12 months 5,154 3,573 Deferred tax assets expected to be recovered after more than 12 months 881 306 6,035 3,879
14 Current liabilities – Trade and other payables
Consolidated
2010 2009 $’000 $’000 Trade payables 6,673 6,376 Sundry creditors 2,523 1,136 Directors’ fees 68 68 9,264 7,580
Trade payables and sundry creditors are non-interest bearing and are normally settled on 30 day terms. No interest is payable on outstanding balances. The Company has financial risk management policies in place to ensure that all payables are paid within the credit timeframe.
F I NAN c i A L S TATEMENT S Page 63 note s to t h e f i nan c i al s tatement s 30 SEPTEMBER 2010 CONTINUED
15 Current liabilities – Provisions
Consolidated
2010 2009 $’000 $’000 Annual leave 4,255 3,824 Onerous contracts 213 - Make good 271 127 Long service leave 2,639 2,393 7,378 6,344
(a) Movements in provisions Please refer to note 17 for details.
16 Current liabilities – Borrowings
Consolidated
2010 2009 $’000 $’000 Lease liabilities (note 27) 1,234 1,378
17 Non-current liabilities – Provisions
Consolidated
2010 2009 $’000 $’000 Long service leave 1,072 1,021 Onerous contracts 566 - Make good 560 609 2,198 1,630
Refer to note 1(r) and 3 for a description of the nature and timing of cash flows associated with the above provisions.
(a) Movements in provisions Movements in each class of provision during the financial year, other than employee benefits, are set out below:
Annual Long service Onerous le LEAve leave contracts Make good Total $’000 $’000 $’000 $’000 $’000 Consolidated 2010 Carrying amount at start of year 3,824 3,414 - 736 7,974 Charged/(credited) to the profit or loss – additional provisions recognised 4,588 537 894 198 6,217 Amounts used during the year (4,157) (240) (115) (103) (4,615) Carrying amount at end of year 4,255 3,711 779 831 9,576
The non-current provisions have been discounted using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.
Page 64 F I NAN c i A L S TATEMENT S 18 Non-current liabilities – Borrowings
Consolidated
2010 2009 $’000 $’000 Lease liabilities (note 27) 1,656 1,371
19 Non-current liabilities – Other non current liabilities
Consolidated
2010 2009 $’000 $’000 Lease incentive 5,697 2,018 Other payables 326 416 6,023 2,434
The lease incentive relates to leases entered into by the company whereby the company has obtained an incentive to enter into a lease of office premises. The incentive is written back to the income statement on a straight line basis over the life of the lease. Other payables consist of a contingent consideration paid for the acquisition of Outcome Manager Pty Ltd that occurred during 2008. The amount was $500,000 to be paid based on the performance of the product. At balance date, $174,073 has so far been earnt.
20 Non-current liabilities – Deferred tax liabilities
Consolidated
2010 2009 $’000 $’000 The balance comprises temporary differences attributable to: Unearned revenue (468) (473) Intangible assets (13) (22) Accelerated depreciation for tax purposes (1,438) 73 Other (178) (137) Total deferred tax liabilities (2,097) (559)
Set off of deferred tax liabilities pursuant to set off provisions (note 13) 2,097 559 Net deferred tax liabilities - -
Movements: Opening balance at 1 October (559) (1,433) Charged/(credited) to the income statement (note 7) (1,538) 874 Offset to deferred tax assets 2,097 559 Closing balance at 30 September - -
F I NAN c i A L S TATEMENT S Page 65 note s to t h e f i nan c i al s tatement s 30 SEPTEMBER 2010 CONTINUED
21 Contributed equity
2010 2009 2010 2009 S shares Shares $’000 $’000 Ordinary shares Fully paid 300,303,455 300,257,455 24,299 24,284
(a) Movements in ordinary share capital:
Date D dETAils Number of shares $’000 1 October 2009 Opening balance 300,257,455 24,284 Exercise of share options 46,000 15 30 September 2010 Balance 300,303,455 24,299
1 October 2008 Opening balance 298,869,705 23,863 Exercise of share options 1,387,750 421 30 September 2009 Balance 300,257,455 24,284
(b) Employee Share Option Plan Information relating to the TechnologyOne Employee Share Option Plan, including details of options issued, exercised and lapsed during the financial year and options outstanding at the end of the financial year, is set out in note 32.
22 Reserves and retained earnings
Consolidated
2010 2009 $’000 $’000 Investment revaluation reserve (410) (554) Share-based payments 3,282 1,990 Foreign currency translation (1,676) (1,298) Dividend reserve 13,130 8,617 14,326 8,755
(i) Investment revaluation reserve The reserve is used to record changes in fair values of available for sale investments. (ii) Share-based payments The reserve is used to record the value of equity benefits provided to employees through share-based payment transactions. (iii) Foreign currency translation Exchange differences arising on translation of the foreign controlled entity are recognised in other comprehensive income as described in note 1(d) and accumulated in a separate reserve within equity. The cumulative amount is reclassified to profit or loss when the net investment is disposed of. (iv) Dividend reserve The reserve records retained earnings set aside for the payment of future dividends.
Page 66 F I NAN c i A L S TATEMENT S 23 Dividends
Consolidated
2010 2009 $’000 $’000 Final dividend paid for the year ended 30 September 2009 of 2.87 cents (2008 – 2.45 cents) per fully paid share paid in December 2009 (2008 – December 2008) Fully franked based on tax paid @ 30% 8,619 7,322
Interim dividend paid for the year ended 30 September 2010 of 1.33 cents (2009 – 0.88 cents) per fully paid share paid June 2010 (2009 – June 2009) Fully franked based on tax paid @ 30% 3,995 2,636 Total dividends provided for or paid 12,614 9,958
Consolidated
2010 2009 $’000 $’000 (a) dividends not recognised at the end of the reporting period Final In addition to the above dividends, since year end the Directors have recommended the payment of a final dividend of 4.37 cents per fully paid ordinary share, (2009 2.87 cents) fully franked based on tax paid at 30%. The aggregate amount of the proposed dividend expected to be paid on 17 December 2010 out of retained earnings at 30 September 2010, but not recognised as a liability at the end of the year: 8,623 8,617 Special In addition to the above dividends, since year end the directors have recommended the payment of a special dividend of 1.5 cents per fully paid ordinary share, (2009 nil) fully franked based on tax paid at 30%. The aggregate amount of the proposed dividend expected to be paid on 17 December 2010 out of retained earnings at 30 September 2010, but not recognised as a liability at the end of the year: 4,507 - 13,130 8,617
(b) Franked dividends The franked portions of the final dividends recommended after 30S eptember 2010 will be franked out of existing franking credits or out of franking credits arising from the payment of income tax in the year ending 30 June 2011.
Consolidated
2010 2009 $’000 $’000 Franking account balance as at the end of the financial year at 30% (2009 – 30%) 6,081 5,236 Franking credits that will arise from the payment of income tax payable as at the end of the financial year 1,832 2,067 7,913 7,303
The above amounts represent the balance of the franking account as at the reporting date, adjusted for: (a) franking credits that will arise from the payment of the amount of the provision for income tax (b) franking debits that will arise from the payment of dividends recognised as a liability at the reporting date, and The impact on the franking account of the dividend recommended by the Directors since the end of the reporting period, but not recognised as a liability at the reporting date, will be a reduction in the franking account of $5,627,000 (2009 – $3,694,000).
F I NAN c i A L S TATEMENT S Page 67 note s to t h e f i nan c i al s tatement s 30 SEPTEMBER 2010 CONTINUED
24 Key management personnel disclosures (a) key management personnel compensation
Consolidated
2010 2009 $’000 $’000 Short-term employee benefits 2,556,515 1,946,350 Post employment benefits 97,909 80,923 Share based payments 282,348 267,251 2,936,772 2,294,524
(b) Equity instrument disclosures relating to key management personnel (i) Option holdings The numbers of options over ordinary shares in the company held during the financial year by each director of Technology One Limited and other key management personnel of the Company, including their personally related parties, are set out below. All of the Key Managements Personnel participated in the share options granted on 1 July 2004, except D Orchard who participates in options granted 25 August 2006. E Chung was the only Director to participate in the share options granted on 5 May 2008.
2010 Balance at gRANTEd Balance at start of compensation OthER ENd OF vEsted and Name The yEAR ON Exercised changes The yEAR Exercisable Unvested Directors of Technology One Limited E Chung 1,000,000 - - - 1,000,000 - 1,000,000
Other key management personnel of the Company R Down 800,000 - - - 800,000 400,000 400,000 M Culverson 775,000 - - - 775,000 375,000 400,000 R Phare 875,000 - - - 875,000 625,000 250,000 P Cameron 1,100,000 - - - 1,100,000 850,000 250,000 M Harwood ------D Orchard 300,000 - - - 300,000 120,000 180,000
2009 Balance at gRANTEd Balance at start of compensation OthER ENd OF vEsted and Name The yEAR ON Exercised changes The yEAR Exercisable Unvested Directors of Technology One Limited E Chung 1,000,000 - - - 1,000,000 - 1,000,000 Other key management personnel of the Company R Down 1,500,000 - (700,000) - 800,000 - 800,000 M Culverson 1,350,000 - (575,000) - 775,000 - 775,000 R Phare 875,000 - - - 875,000 375,000 500,000 P Cameron 1,100,000 - - - 1,100,000 600,000 500,000 D Orchard 300,000 - - - 300,000 75,000 225,000
Page 68 F I NAN c i A L S TATEMENT S (ii) Share holdings The numbers of shares in the Company held during the financial year by each director of Technology One Limited and other key management personnel of the Company, including their personally related parties, are set out below. There were no shares granted during the reporting period as compensation.
2010 REceived b BALANce during the othER BALANce a AT the on the changes AT the start OF Exercise during start of Name The yEAR OF options The yEAR The year Directors of Technology One Limited A Di Marco 55,378,500 - - 55,378,500 R McLean 500,000 - - 500,000 J Mactaggart 66,902,500 - - 66,902,500 K Blinco 201,285 - - 201,285 R Anstey 7,500 - - 7,500 E Chung - - - -
Other key management personnel of the Company R Down 420,000 - - 420,000 M Culverson 485,000 - - 485,000 R Phare 110,000 - - 110,000 P Cameron - - - - M Harwood - - - - D Orchard 224,351 - - 224,351
2009 REceived b BALANce during the othER BALANce a AT the on the changes AT the start OF Exercise during start of Name The yEAR OF options The yEAR The year Directors of Technology One Limited A Di Marco 55,378,500 - - 55,378,500 R McLean 500,000 - - 500,000 J Mactaggart 66,902,500 - - 66,902,500 K Blinco 201,285 - - 201,285 R Anstey 15,000 - (7,500) 7,500 E Chung - - - -
Other key management personnel of the Company R Down 30,000 700,000 (310,000) 420,000 M Culverson 30,000 575,000 (120,000) 485,000 R Phare 110,000 - - 110,000 P Cameron 15,000 - (15,000) - D Orchard 224,351 - - 224,351
(c) Other transactions with directors and key management personnel During the financial year the RoyalC hildren’s Hospital Foundation Qld (RCHF) purchased consulting services of $8,200 (2009: $12,630), software of $nil (2009: $22,150) and post sales customer support of $21,397 (2009: $20,866) from TechnologyOne. The sale was on normal business terms and conditions. Mr Di Marco is a Director of Technology One Limited and RCHF.
F I NAN c i A L S TATEMENT S Page 69 note s to t h e f i nan c i al s tatement s 30 SEPTEMBER 2010 CONTINUED
25 Remuneration of auditors During the year the following fees were paid or payable for services provided by the auditor of the consolidated entity:
Consolidated
2010 2009 $’000 $’000 (a) ernst & Young Audit and review of financial statements 241,800 236,800 Total remuneration for audit services 241,800 236,800
Other services Taxation advice 126,083 34,845 compliance services 17,687 12,360 Total remuneration of Ernst & Young 385,570 284,005
26 Contingencies The Company had contingent liabilities at 30 September 2010 in respect of: Guarantees At 30 September 2010 the Company had $7,679,203 (2009: $7,982,323) in outstanding performance guarantees. The total available guarantee facility is $10,000,000 (2009: $9,300,000). The Company also had unused foreign currency dealing limits of $1,300,000 (2009: $1,300,000). The parent entity, Technology One Limited, continues to support its subsidiaries in their operations by way of financial support.
Page 70 F I NAN c i A L S TATEMENT S 27 Commitments (i) Operating lease commitments Operating leases are entered into as a means of acquiring access to office property. Rental payments are generally fixed, but with inflation escalation clauses on which contingent rentals are determined. No renewal or purchase options exist in relation to operating leases and no operating leases contain restrictions on financing or other leasing activities.
Consolidated
2010 2009 $’000 $’000 Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows: Within one year 6,507 4,695 Later than one year, but not later than five years 25,323 18,065 Later than five years 10,723 14,527 42,553 37,287
(ii) Finance lease commitments The finance lease liabilities below are secured by a Registered MortgageD ebenture given by the Company in favour of ANZ Banking Group Limited for the assets under lease. The Company has available leasing facilities of $9,670,000 (2009: $5,000,000) of which $6,779,552 remain undrawn at 30 September 2010. The borrowings carry a fixed rate of 6.89% 9.12% (2009: 7.70% 9.12%) and have an average term of 3 years.
Consolidated
2010 2009 $’000 $’000 Commitments in relation to finance leases are payable as follows: Within one year 1,401 1,484 Later than one year but not later than five years 1,805 1,561 Minimum lease payments 3,206 3,045
Future finance charges (316) (296) Total lease liabilities 2,890 2,749
Representing lease liabilities: Current (note 16) 1,234 1,378 Non current (note 18) 1,656 1,371 2,890 2,749
28 Related party transactions (a) ultimate controlling entity The ultimate controlling entity of the consolidated entity is Technology One Limited, a company incorporated in Australia. (b) Transactions with related parties The parent entity entered into the following transactions during the year with related parties in the wholly owned Group: n Loans were advanced and repayments received on short term intercompany accounts; n Marketing support and management fees were charged to wholly owned controlled entities. These transactions were undertaken on commercial terms and conditions. Amounts due to and receivable from related parties in the wholly owned Group are set out in the respective notes to the financial statements. The ownership interest in related parties in the wholly owned Group is set out in note 29.
F I NAN c i A L S TATEMENT S Page 71 note s to t h e f i nan c i al s tatement s 30 SEPTEMBER 2010 CONTINUED
29 Controlled entities The consolidated financial statements incorporate the assets, liabilities, and results of the following subsidiaries in accordance with the accounting policy described in note 1(c):
Equity holding C cOUNTRy OF cLAss of 2010 2009 Name of entity incorporation shares % % Technology One Corporation SDN BHD Malaysia Ordinary 100 100 Technology One New Zealand Ltd New Zealand Ordinary 100 100 Technology One UK Limited England Ordinary 100 100 Avand Pty Ltd Australia Ordinary 100 100 Avand (New Zealand) Ltd New Zealand Ordinary 100 100 Technology One Employee Share Trust Australia Ordinary - -
The parent entity is Technology One Limited, a public company, limited by shares and is domiciled in Brisbane, Australia, and whose shares are traded on the Australian Securities Exchange. All entities operate in the software industry in their geographical locations. The registered office is located at: Level 11, TechnologyOne HQ 540 Wickham Street Fortitude Valley QLD 4006
30 Reconciliation of profit after income tax to net cash inflow from operating activities
Consolidated
2010 2009 $’000 $’000 Profit for the year 17,813 15,684 Depreciation and amortisation 3,888 3,450 Non-cash employee benefits expense – share based payments 670 568 Provision for onerous contract 779 - Transfers to/(from) provisions: Employee entitlements 728 823 Doubtful debts 327 (45) Net loss on sale of non current assets 301 131 Movement in provision for: Income tax payable 3,497 (361) Deferred income tax (4,651) (873) Interest income classified as investing cash flow - 8 Net (gain)/loss on sale of available for sale financial assets 70 33 Change in operating assets and liabilities decrease/(Increase) in trade debtors and bills of exchange 4,362 (2,399) decrease in sundry debtors 517 467 decrease/(Increase) in prepayments 46 (578) (Increase)/Decrease in earned and unbilled revenue (606) 2,157 (Increase) in other assets (1) (592) increase in trade creditors 591 625 increase/Decrease) in other liabilities 2,458 (230) increase/(Decrease) in unearned revenue 786 (307) Net cash inflow (outflow) from operating activities 31,575 18,561
During the financial period theC ompany acquired equipment and software with an aggregate fair value of $1,597,307 (2009: $2,558,720), by means of finance leases.
Page 72 F I NAN c i A L S TATEMENT S 31 Earnings per share
Consolidated
2010 2009 cents cents (a) earnings per share Basic earnings per share 5.93 5.24 Diluted earnings per share 5.80 5.12
Profit used for calculating basic and diluted earnings per share ($’000) 17,813 15,684
(b) Weighted average number of shares used as the denominator
Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share 300,300,052 299,411,693
Adjustments for calculation of diluted earnings per share: Options 6,727,041 6,691,531
Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating diluted earnings per share 307,027,093 306,103,224
There are no potentially dilutive share instruments not included in the calculation of diluted earnings per share.
32 Share-based payments Share options are granted to employees at the discretion of the Executive Chairman. The exercise price of the options is set based on future expected share price movements. The options vest if and when the employees satisfy the period of service contained in each option grant. The contractual life of each option varies between two and five years. There are no cash settlement alternatives. Each option entitles the holder to purchase one share. Fair values of options granted as part of remuneration are based on values determined using the binomial option pricing model. Options issued 1 July 2004 have had their fair value increased in line with modifications to the exercise price of such options approved on 25 August 2006. The Executive Chairman has the discretion to increase the option exercise price. Set out below are summaries of options granted under the plan:
F I NAN c i A L S TATEMENT S Page 73 note s to t h e f i nan c i al s tatement s 30 SEPTEMBER 2010 CONTINUED
32 Share-based payments continued
V vESTED AND BALANCE AT gRANTED EXERCISED FORFEITED BALANCE AT EXERCISABLE S sTART OF dURINg dURINg dURING END OF AT END OF EXPIRY EXERCISE THE YEAR THE YEAR THE YEAR THE YEAR THE YEAR THE YEAR GRANT DATE DATE PRICE Number Number Number Number Number Number Consolidated – 2010 12 July 2010 July 2013 to Jul 2017 $0.40 - 60,000 - - 60,000 60,000 1 May 2009 Jul 2016 to Jul 2022 $0.36 4,550,000 - - (600,000) 3,950,000 3,950,000 10 Oct 2008 Jul 2015 to Jul 2020 $0.41 1,100,000 - - - 1,100,000 1,100,000 5 May 2008 Nov 2015 to Nov 2019 $0.41 1,000,000 - - - 1,000,000 1,000,000 25 Aug 2006 Aug 2018 to Aug 2024 $0.35 1,766,000 - (21,000) - 1,745,000 1,745,000 1 Jul 2004 Jun 2012 to Jun 2016 $0.33 3,550,000 - - - 3,550,000 3,550,000 31 Oct 2002 Oct 2006 to Oct 2009 $0.31 25,000 - (25,000) - - - Total 11,991,000 60,000 (46,000) (600,000) 11,405,000 11,405,000
Weighted average exercise price $0.36 $0.40 $0.33 $0.36 $0.36 $0.36
V vESTED AND BALANCE AT gRANTED EXERCISED FORFEITED BALANCE AT EXERCISABLE S sTART OF dURINg dURINg dURING END OF AT END OF EXPIRY EXERCISE THE YEAR THE YEAR THE YEAR THE YEAR THE YEAR THE YEAR GRANT DATE DATE PRICE Number Number Number Number Number Number Consolidated – 2009 1 May 2009 Jul 2016 to Jul 2022 $0.36 - 4,550,000 - - 4,550,000 4,550,000 10 Oct 2008 Jul 2015 to Jul 2020 $0.41 - 1,100,000 - - 1,100,000 1,100,000 5 May 2008 Nov 2015 to Nov 2019 $0.41 1,000,000 - - - 1,000,000 1,000,000 25 Aug 2006 Aug 2018 to Aug 2024 $0.35 1,860,000 - (94,000) - 1,766,000 1,766,000 1 Jul 2004 Jun 2012 to Jun 2016 $0.33 4,825,000 - (1,275,000) - 3,550,000 3,550,000 31 Oct 2002 Oct 2006 to Oct 2009 $0.31 43,750 - (18,750) - 25,000 25,000 Total 7,728,750 5,650,000 (1,387,750) - 11,991,000 11,991,000
Weighted average exercise price $0.34 $0.37 $0.33 - $0.36 $0.36
The weighted average share price at the date of exercise of options exercised during the year ended 30 September 2010 was $0.33 (2009 – $0.33).
Page 74 F I NAN c i A L S TATEMENT S The weighted average remaining contractual life of share options outstanding at the end of the period was 7.45 years (2009 – 8.49 years). Fair value of options granted The fair value of the equity settled options is measured at the reporting date using the Black Scholes option pricing model, taking into account the terms and conditions upon which the instruments were granted. The fair value of options granted during the year was $0.35 (2009: $0.27). The model inputs for options granted during the year ended 30 September 2010, included: (a) dividend yield 4.7% (2009 – 4.3%) (b) Expected volatility 25.8% (2009 – 30.5%) (c) Risk free interest rate 4.7% (2009 – 6.5%) (d) Expected life of option 3 years (2009 – 5 years) (e) Option exercise price $0.40 (2009 – $0.41) (f) weighted average share price at grant date $0.80 (2009 – $0.82)
33 Parent entity financial information (a) summary financial information The individual financial statements for the parent entity show the following aggregate amounts:
PARENT EQUITY
2010 2009 $’000 $’000 Balance sheet Current assets 52,845 50,087
Non current assets 44,791 31,667
Total assets 97,636 81,754
Current liabilities 23,728 19,991
Non current liabilities 9,835 5,435
Total liabilities 33,563 25,426
Shareholders’ equity Contributed equity 24,299 24,284 Reserves 16,003 10,053 Retained earnings 23,771 21,991 64,073 56,328
Profit after tax for the year 18,905 15,095
Total comprehensive income 19,049 15,014
The Reserves balance is higher than Group due to the foreign currency translation reserve losses of $1,676,000 (2009: loss of $1,298,000).
F I NAN c i A L S TATEMENT S Page 75 note s to t h e f i nan c i al s tatement s 30 SEPTEMBER 2010 CONTINUED
33 Parent entity financial information continued (b) Guarantees entered into by the parent entity At 30 September 2010, the parent entity had $7,679,203 (2009: $7,982,323) in outstanding performance guarantees. The total available guarantee facility is $10,000,000 (2009: $9,300,000). The parent entity also had unused foreign currency dealings of $1,300,000 (2009: $1,300,000). The parent entity, Technology One Limited, continues to support its subsidiaries in their operations by way of financial support. (c) contractual commitments for the acquisition of property, plant or equipment At balance date, the parent entity had contractual commitments for the acquisition of property, plant or equipment totalling $23,132 (2009: nil). These commitments are not recognised as liabilities at 30 September 2010 as the relevant assets have not yet been received and, accordingly, the amounts are not yet payable.
34 Employee benefits
Consolidated
2010 2009 The number of full time equivalents employed at period end 754 679
35 Events occurring after the reporting period On the 22 November, the Directors of Technology One Limited declared a final dividend on ordinary shares in respect of the 2010 financial year. The total amount of the dividend is $8,623,000 and is fully franked. There was also a special dividend declared for the 2010 financial year of $4,507,000 and this is also fully franked. No other matter or circumstances have arisen since the end of the year which have significantly affected or may significantly affect the operations of the consolidated entity, the results of the operations of the state of affairs of the consolidated entity in future financial years.
Page 76 F I NAN c i A L S TATEMENT S d i RE C TOR S ’ D E C LARAT I O N 30 SEPTEMBER 2010
In the Directors’ opinion: (a) the financial statements and notes set out on pages 39 to 76 are in accordance with theC orporations Act 2001, including: (i) complying with Accounting Standards, the Corporations Regulations 2001, and other mandatory professional reporting requirements, and (ii) giving a true and fair view of the consolidated entity’s financial position as at 30S eptember 2010 and of its performance for the financial year ended on that date. Note 1(a) confirms that the financial statements also comply withI nternational Financial Reporting Standards as issued by the International Accounting Standards Board. The Directors have been given the declarations by the chief executive officer and chief financial officer required by section 295A of the Corporations Act 2001.
Adrian Di Marco Executive Chairman Brisbane 22 November 2010
F I NAN c i A L S TATEMENT S Page 77 Page 78 F I NAN c i A L S TATEMENT S F I NAN c i A L S TATEMENT S Page 79 Page 80 F I NAN c i A L S TATEMENT S s h ARE H OL D E R I NFORMAT I ON
Substantial Shareholders as at 30 November 2010
Shareholder Name Number of Ordinary Shares JL Mactaggart Holdings Pty Ltd 66,872,500 Masterbah Pty Ltd 55,372,500 National Nominees Limited 31,981,594 HSBC Custody Nominees (Australia) Limited 26,576,063 J P Morgan Nominees Australia Limited 22,283,670
Distribution of shareholdings as at 30 November 2010
Size of Holding Ordinary Shareholders 1 to 1,000 370 1,001 to 5,000 1,210 5,001 to 10,000 931 10,001 to 100,000 1,291 100,001 and over 86 Total shareholders 3,888
Number of ordinary Shareholders with a less than marketable parcel 76
Voting Rights All ordinary shares issued by Technology One Limited carry one vote per share without restriction.
Twenty Largest Shareholders as at 30 November 2010
Shareholder Name Number of Ordinary Shares % JL Mactaggart Holdings Pty Ltd 66,872,500 22.07% Masterbah Pty Ltd 55,372,500 18.27% National Nominees Limited 31,981,594 10.55% HSBC Custody Nominees (Australia) Limited 26,576,063 8.77% J P Morgan Nominees Australia Limited 22,283,670 7.35% Citicorp Nominees Pty Limited 11,582,663 3.82% Cogent Nominees Pty Limited 6,239,395 2.06% JP Morgan Nominees Australia Limited (Cash Income Account) 5,336,204 1.76% Argo Investments Limited 4,164,564 1.37% PacificC ustodians Pty Ltd (TNE Employee Share Trust) 2,715,000 0.90% Bond Street Custodians Limited (Macquarie Smaller Co’s Account) 1,793,737 0.59% Mr Nicholas Barry Debenham & Mrs Annette Cecilia Debenham 1,583,449 0.52% Mr Nicholas Barry Debenham 1,117,119 0.37% Mr Charles Douglas Sheardown 1,000,000 0.33% RBC Dexia Investor Services Australia Nominees Pty Limited 891,818 0.29% Norema Pty Ltd 720,000 0.24% Clahsen Enterprises Pty Ltd 700,000 0.23% Mr Dugald Gilmour Mactaggart and Mrs Judith Barbara Mactaggart 604,000 0.20% Mr Roger John Phare 513,000 0.17% Superluminal Pty Ltd (Maurton Account) 500,000 0.16%
F I NAN c i A L S TATEMENT S Page 81 C O R P O R A T E d i RE C TOR Y
Board of Directors Auditor Adrian Di Marco Ernst & Young Ron McLean Waterfront Place John Mactaggart 1 Eagle Street Kevin Blinco Brisbane Queensland 4000 Richard Anstey www.ey.com.au Edward Chung
Lawyer Company Secretary McCullough Robertson David Orchard Level 12, 66 Eagle Street Brisbane Queensland 4000 www.mccullough.com.au Australian Business Number 84 010 487 180 Share Registry Link Market Services Limited Registered Office Technology One Limited Locked Bag A14 Level 11, TechnologyOne HQ Sydney NSW 1235 540 Wickham Street Phone: 02 8280 7454 Fortitude Valley QLD 4006 Fax: 02 9287 0303 Australia www.linkmarketservices.com.au www.TechnologyOneCorp.com Stock Exchange Listing Phone: 1800 671 978 Australian Securities Exchange (ASX:TNE) International: +617 3167 7300
Branch Offices Adelaide Auckland Brisbane Canberra Darwin Hobart Kuala Lumpur London Manchester Melbourne Perth Port Moresby Sydney Wellington
Page 82 F I NAN c i A L S TATEMENT S F I NAN c i A L C ALEN D AR
2011 (Year Ending 30 September 2011)
Announcement of half year results for 2011 23 May 2011
Media interviews 23 May 2011
Presentations to institutions - Brisbane 23 May 2011
Presentations to institutions - Sydney 25-26 May 2011
Share quoted ex-dividend for interim dividend 30 May 2011
Record date for interim dividend 3 June 2011
Payment date for interim dividend 17 June 2011
Distribute 2011 Half Year Results Report 17 June 2011
Announcement of Full Year Results for 2011 21 November 2011
Media interviews 21 November 2011
Presentations to institutions - Brisbane 21 November 2011
Presentations to institutions - Sydney 23-24 November 2011
Shares quoted ex-dividend for final dividend 30 November 2011
Record date for 2011 final dividend 2 December 2011
Payment date for 2011 final dividend 16 December 2011
Distribute 2011 Annual Report 9 January 2012
Annual General Meeting 17 Febuary 2012
F I NAN c i A L S TATEMENT S Page 83 NOTE S
Page 84 F I NAN c i A L S TATEMENT S www.TechnologyOneCorp.com