47  / OZFOREX GROUP NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE FINANCIAL YEAR ENDED 31 MARCH 2015 NOTE 2. SEGMENT INFORMATION The group operates international payment services in defined geographic regions (based on client location) and international payment solutions globally. International payment solutions is a package offered to strategic partners which consists of the OzForex IT platform, customer service, compliance sophistication, banking relationships, and payments capabilities. Year ending 31 March 2015 Australia & New Zealand $’000 Europe $’000 North America $’000 Asia $’000 International Payment Solutions $’000 Consolidated $’000 Segment Revenue Fee and commission income 50,740 19,165 12,935 1,816 10,990 95,646 Total segment revenue 50,740 19,165 12,935 1,816 10,990 95,646 19,127 7,509 1,457 684 3,981 32,758 Segment result EBITDA Depreciation and amortisation Interest income Profit before income tax Income tax expense (579) 1,754 33,933 (9,667) Profit for the year 24,266 Segment assets At 31 March 2015 Segment assets Intergroup eliminations Deferred tax assets Total Assets 149,035 24,238 23,784 6,430 – 203,487 – (10,937) (3,342) (615) – (14,894) 3,919 192,512 Segment liabilities At 31 March 2015 Segment liabilities Intergroup eliminations Deferred tax liabilities Total Liabilities Segment net assets Intergroup eliminations Net deferred tax Total Net Assets (119,340) 14,894 (21,329) – (18,304) – (787) – – – (159,760) 14,894 (15) (144,881) 29,695 2,909 5,480 5,643 – 14,894 (10,937) (3,342) (615) – 43,727 – 3,904 47,631 48  / OZFOREX GROUP NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE FINANCIAL YEAR ENDED 31 MARCH 2015 NOTE 2. SEGMENT INFORMATION (CONTINUED) Australia & New Zealand $’000 Fee and commission income Total segment revenue Year ending 31 March 2014 Asia $’000 International Payment Solutions $’000 Consolidated $’000 8,430 1,674 9,123 76,725 15,746 8,430 1,674 9,123 76,725 6,840 86 608 2,850 20,895 Europe $’000 North America $’000 41,752 15,746 41,752 10,511 Segment Revenue Segment result EBITDA Depreciation and amortisation Interest income Profit before income tax Income tax expense (540) 1,527 21,882 (5,915) Profit for the year 15,967 Segment assets At 31 March 2014 Segment assets Intergroup eliminations Deferred tax assets1 Total Assets 133,036 24,357 16,107 5,438 – 178,938 – (11,953) (4,431) (523) – (16,907) 5,517 167,548 Segment liabilities At 31 March 2014 Segment liabilities1 Intergroup eliminations Deferred tax liabilities Total Liabilities Segment net assets Intergroup eliminations Net deferred tax Total Net Assets (113,849) 16,907 (21,221) – (12,519) – (827) – – (148,416) – 16,907 (36) (131,545) 19,187 3,136 3,588 4,611 – 16,907 (11,953) (4,431) (523) – 1. Comparative information has been restated to reflect a prior period reclassification. Refer to Note 1 (vi) for further detail. 30,522 – 5,481 36,003 49  / OZFOREX GROUP NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE FINANCIAL YEAR ENDED 31 MARCH 2015 NOTE 3. PROFIT FOR THE FINANCIAL YEAR Net profit before income tax has been determined as follows: 2015 $’000 2014 $’000 Interest and similar income received/receivable 1,754 1,527 Interest income 1,754 1,527 97,906 76,303 (2,272) 1,096 Interest income Net fee and commission income Realised margin and fees on foreign exchange contracts Unrealised gains/(losses) on foreign exchange contracts Retranslation of foreign exchange assets and liabilities Fee and commission expense Net fee and commission income 12 (674) (7,256) (5,687) 88,390 71,038 96 12,740 5 8 101 12,748 Other income Reimbursement of IPO expenses1 Other Total other income 1. Relates to income to the Group from arranger fees in relation to the IPO. Employment expenses Salary related costs including commissions Employee benefits Defined contribution plan Retention payments Provision for annual leave Provision for long service leave Recoveries2 Total compensation expense Other employment expenses including on-costs, staff procurement and staff training (25,932) (20,120) (1,023) (8,713) (1,339) (1,130) – (866) (21) (277) (59) (195) – 866 (28,374) (30,435) (2,056) (1,656) (30,430) (32,091) Operating lease rentals Depreciation: Furniture, fittings and leasehold Other occupancy expenses (1,509) (1,153) Total occupancy expenses Total employment expenses 2. Recoveries received during the prior year were from Macquarie Equities Limited. Occupancy expenses (150) (71) (463) (399) (2,122) (1,623) Advertising Other promotional expenses (13,007) (10,133) (902) (524) Total promotional expenses (13,909) (10,657) Promotional expenses 50  / OZFOREX GROUP NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE FINANCIAL YEAR ENDED 31 MARCH 2015 NOTE 3. PROFIT FOR THE FINANCIAL YEAR (CONTINUED) 2015 $’000 2014 $’000 Professional fees1 Travel expenses (96) (11,721) – (183) Total IPO related expenses (96) (11,904) Professional fees Information technology Depreciation: computer equipment and software Communication expenses Compliance expenses Insurance expenses Travel expenses Bad and doubtful debts recovery/(expense) Non recoverable GST Other expenses (3,222) (1,837) (1,196) (845) (429) (469) (512) (792) Total other operating expenses (9,755) (7,156) 2015 $’000 2014 $’000 Current tax expense Adjustments for current tax of prior periods 8,785 8,000 (695) 3,266 Total tax on profits for the year Deferred income tax: Decrease/(Increase) in deferred tax assets (Decrease)/Increase in deferred tax liabilities 8,090 11,266 1,598 (5,364) (21) 13 IPO related expenses 1. Relates to costs incurred by the Group while acting as an arranger throughout the IPO transaction Other operating expenses (601) (538) (1,510) (860) (581) (586) (728) (654) (845) (511) (131) (64) NOTE 4. INCOME TAX EXPENSE a) Income tax expense 2 Total deferred income tax expense/(benefit) 1,577 (5,351) 9,667 5,915 Profit before income tax expense Prima facie income tax expense on operating profit 3 Tax effect of amounts adjusted in calculating taxable income: Other items 33,933 21,882 10,180 6,565 (513) (650) Total income tax expense 9,667 5,915 2 Total income tax expense b) Reconciliation of income tax expense to prima facie tax payable 2. Comparative information has been restated to reflect a prior period reclassification. Refer to Note 1 (vi) for further details. 3. Prima facie income tax on operating profit is calculated at the rate of 30 percent (2014: 30 percent). The Group has a tax year ending on 30 September. No tax losses were transferred to the parent or utilised during the period. 51  / OZFOREX GROUP NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE FINANCIAL YEAR ENDED 31 MARCH 2015 NOTE 5. CASH AND CASH EQUIVALENTS (CURRENT ASSETS) 2015 $’000 Cash held1,2 Cash held for subsequent settlement of client liabilities Total cash and cash equivalents 2014 $’000 44,213 40,795 124,591 107,763 168,804 148,558 1. Included in cash held are balances of $13,760,000 (2014: $8,110,000) which are held as collateral by counter parties for over the counter derivative transactions and other services. 2. Comparative information has been restated to conform to presentation in the current year. NOTE 6. RECEIVABLES DUE FROM FINANCIAL INSTITUTIONS 2015 $’000 2014 $’000 Receivables due from financial institutions 5,200 200 Total receivables due from financial institutions 5,200 200 Receivables due from financial institutions relate to term deposits with an original maturity of more than three months, but less than twelve months. NOTE 7. DERIVATIVE FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT AND LOSS 2015 $’000 Value of forward contracts – positive values Value of forward contracts – negative values Total derivative financial instruments at fair value through profit and loss3 2014 $’000 10,294 8,593 (10,327) (5,615) (33) 2,978 3. All derivative financial instruments are expected to mature within 12 months after the reporting date. NOTE 8. OTHER ASSETS (CURRENT ASSETS) 2015 $’000 Prepayments Goods and services tax receivable4 Other debtors Total other assets 4. Comparative information has been restated to conform to presentation in the current year. 2014 $’000 1,469 981 379 297 1,235 2,355 3,083 3,633 52  / OZFOREX GROUP NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE FINANCIAL YEAR ENDED 31 MARCH 2015 NOTE 9. PROPERTY, PLANT AND EQUIPMENT 2015 $’000 2014 $’000 1,648 1,455 (1,119) (926) Furniture, fittings and leasehold improvements Cost Less accumulated depreciation Exchange adjustment – 2 529 Total furniture, fittings and leasehold improvements 531 Software Cost Less accumulated depreciation Exchange adjustment 702 512 (507) (415) 3 (2) Total software 198 95 Computer equipment Cost Less accumulated depreciation Exchange adjustment 1,938 (1,160) 1 Total computer equipment 1,578 (1,454) 3 485 421 1,212 Total property, plant and equipment 1,047 Reconciliation of the movement in the Group’s property, plant and equipment at their written-down value: Furniture, fittings and leasehold improvements $’000 Balance at 31 March 2014 Acquisitions Disposals Depreciation expense Exchange adjustment Software $’000 Computer equipment $’000 Total $’000 531 95 421 1,047 191 192 357 740 – – – – (193) (92) (294) (579) – 3 1 4 529 198 485 1,212 Furniture, fittings and leasehold improvements $’000 Software $’000 Computer equipment $’000 Total $’000 Balance at 31 March 2013 Acquisitions Disposals Depreciation expense Exchange adjustment 435 130 434 999 227 76 285 588 Balance at 31 March 2014 Balance at 31 March 2015 – (3) – (3) (133) (106) (301) (540) 2 (2) 3 3 531 95 421 1,047 53  / OZFOREX GROUP NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE FINANCIAL YEAR ENDED 31 MARCH 2015 NOTE 10. DEFERRED INCOME TAX ASSETS/(LIABILITIES) 2015 $’000 2014 $’000 1,338 3,145 2,571 3,266 10 (894) 3,919 5,517 Deferred income tax assets The balance comprises temporary differences attributable to: Provisions and accrued expenses IPO expenditure deemed capital for taxation1 Financial instruments Total deferred income tax assets Deferred income tax liabilities The balance comprises temporary differences attributable to: Other timing differences (15) (36) Total deferred income tax liabilities (15) (36) Net deferred income tax assets2 3,904 5,481 1. Comparative information has been restated to reflect a prior period reclassification. Refer to Note 1 (vi) for further detail. 2. Unless otherwise stated the material portion of the balance represents amounts expected to be settled within twelve months after the reporting date. The principles of the balance sheet method of tax effect accounting have been adopted whereby the income tax expense for the financial year is the tax payable on the current period’s taxable income adjusted for changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements. The tax assets relating to deductible temporary differences are not carried forward as an asset unless the benefit is probable of realisation. The deferred tax assets have been applied against deferred tax liabilities to the extent that they are expected to be realised in the same period, within the same tax paying entity. NOTE 11. CLIENT LIABILITIES Client liabilities of $124,591,000 (2014: $107,763,000) relate to amounts owed to clients in order to settle outstanding deals. Client liabilities are unsecured and are short-term in nature. The carrying amounts of client liabilities are assumed to be the same as their fair values, due to their short-term nature (expected to be settled within twelve months after the balance sheet date). NOTE 12. OTHER LIABILITIES (CURRENT LIABILITIES) 2015 $’000 2014 $’000 2,437 2,398 743 701 Accrued charges and sundry liabilities Trade creditors3 Other 1,083 814 Total other liabilities4 4,263 3,913 3. Comparative information has been restated to conform to presentation in the current year. 4. Unless otherwise stated the material portion of the balance represents amounts expected to be settled within twelve months after the reporting date. 54  / OZFOREX GROUP NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE FINANCIAL YEAR ENDED 31 MARCH 2015 NOTE 13. PROVISIONS 2015 $’000 Current – provision for employee entitlements Annual Leave Employee Benefits Long service leave 2014 $’000 977 917 1,492 7,598 241 200 289 Movements in provision balances 190 289 390 2,999 Total provisions 8,787 – Non-current – provision for employee entitlements Employee Benefits Long Service Leave 272 2,710 9,177 Carrying amount at the end of the period Carrying amount at beginning of the period Release of provisions Additional provisions made Annual Leave Employee Benefits Long Service Leave 917 (1,281) 1,341 977 7,788 (7,788) 1,492 1,492 472 (19) 77 530 Total 9,177 (9,088) 2,910 2,999 NOTE 14. CONTRIBUTED EQUITY 2015 Number of shares 2014 Number of shares 2015 $’000 2014 $’000 240,000,000 204,840 24,360 360 Ordinary share capital Opening balance of fully paid ordinary shares Class A shares converted to ordinary shares Fully paid ordinary shares Closing balance of fully paid ordinary shares – 155,160 – – – 239,640,000 – 24,000 240,000,000 240,000,000 24,360 24,360 Class A share capital Opening balance of fully paid ordinary shares Class A shares converted to ordinary shares – 155,160 – 155 – (155,160) – (155) Closing balance of fully paid class A shares – – – – 240,000,000 240,000,000 24,360 24,360 Total equity contribution Ordinary shares Ordinary shares entitle the holder to participate in dividends and the proceeds of the company in a liquidity event in proportion to the number of and amounts paid on the shares held. This is subject to the prior entitlements of the class A shares. Each ordinary shareholder is entitled to one vote per share held. Class A shares Class A shares entitle the holder to participate in dividends and the proceeds of the company in a liquidity event in proportion to the number of and amounts paid on the shares held. This is subject to the liquidity preference that enables the holder of the class A share to recover the amount of their initial investment prior to any distribution to ordinary shareholders. Each class A shareholder is entitled to one vote per share held. There were no class A shares issued at 31 March 2015. 55  / OZFOREX GROUP NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE FINANCIAL YEAR ENDED 31 MARCH 2015 NOTE 15. RETAINED EARNINGS 2015 $’000 2014 $’000 11,555 30,588 Balance at the beginning of the financial year Profit attributable to ordinary equity holders of OzForex Group Limited Dividends paid 24,266 15,967 (14,100) (35,000) Balance at the end of the financial year 21,721 11,555 2015 $’000 1 2014  $’000 NOTE 16. DIVIDENDS PAID AND DISTRIBUTIONS PAID OR PROVIDED FOR First Interim dividend paid ($0.03500 (2014: $27.78) per share)2 Second Interim dividend paid (2014: $0.10417) per share2 Final dividend paid ($0.02375 (2014: $0) per share)2,3 Total dividends paid (8,400) (10,000) – (25,000) (5,700) – (14,100) (35,000) 1. During the year ended 31 March 2014 all dividends were paid to the pre-IPO shareholders. 2. These dividends were 100 percent franked at the 30 percent corporate tax rate. 3. The final dividend relates to the year ended 31 March 2014 which was declared on 27 May 2014. Dividend per share is calculated based on the ordinary shares outstanding on the dividend declaration date. Details of the movement in the number of shares outstanding are disclosed in Note 14 and details of the share transactions are disclosed in the directors’ report. 2015 $’000 2014 $’000 4,699 1,778 Franked dividends Franking credits available for subsequent financial years based on a tax rate of 30% (2014: 30%) The above amounts represent the balance of the franking account as at the end of the financial period, adjusted for franking credits that will arise from the payment of the amount of the provision for income tax. NOTE 17. CAPITAL The Group’s capital management strategy is to maximise shareholder value through optimising the level and use of capital resources. The Group’s capital management objectives are to: •• Ensure sufficient capital resource to support the Group’s business and operational requirements •• Maintain sufficient capital to exceed externally imposed capital requirements •• Safeguard the Group’s ability to continue as a going concern. Periodic reviews of the entity’s capital requirements are performed to ensure the Group is meeting its objectives. Capital is defined as share capital plus reserves. During the financial year ended 31 March 2015, the Group has continued to meet its capital requirements under the licence and no breaches have occurred. The Group has satisfied its externally imposed capital requirements. 56  / OZFOREX GROUP NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE FINANCIAL YEAR ENDED 31 MARCH 2015 NOTE 18. COMMITMENTS Operating leases The Group leases offices under non-cancellable operating leases expiring within one to five years. The leases have escalating clauses and renewable rights. On renewal, the terms of the leases are renegotiated. 2015 $’000 Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows: Not later than one year Later than one year and not later than five years 2014 $’000 1,714 1,073 4,106 2,519 5,820 3,592 Reconciliation of profit from ordinary activities after income tax to net cash flows from operating activities 2015 $’000 2014 $’000 Profit from ordinary activities after income tax Adjustments to profit from ordinary activities Depreciation on property, plant and equipment Share-based payments expense Foreign exchange revaluation Loss on disposal of property, plant and equipment Fair value changes on financial assets and liabilities at fair value through profit or loss 24,266 15,967 Total capital and other expenditure commitments NOTE 19. NOTES TO THE STATEMENT OF CASH FLOWS Reconciliation of cash and cash equivalents Changes in assets and liabilities Decrease/(increase) in debtors and prepayments Decrease/(increase) in deferred tax assets1 Increase in accrued charges and creditors (Decrease)/increase in deferred tax liabilities (Decrease)/increase in provisions for employee entitlements (Decrease)/increase in tax provision Net cash flows from operating activities 1. Comparative information has been restated to reflect a prior period reclassification. Refer to Note 1 (vi) for further detail. NOTE 20. RELATED PARTY INFORMATION (a) Ultimate Parent entity The ultimate parent entity is OzForex Group Limited. 579 540 1,148 17 2,272 (1,096) – 3 (12) 674 550 (2,673) 1,598 (5,364) 17,178 48,511 (21) 13 (6,178) 7,001 (2,355) 4,627 39,025 68,220 57  / OZFOREX GROUP NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE FINANCIAL YEAR ENDED 31 MARCH 2015 (b) Subsidiaries All entities have a 31 March financial year end. The following entities are wholly owned subsidiaries of the Company Entity Country of Incorporation CanadianForex Limited OzForex (HK) Limited OzForex Limited OzForex Operations Pty Limited OzForex (SNG) PTE. Limited NZForex Limited UKForex Limited USForex Incorporated Equity Holding Canada Hong Kong Australia Australia Singapore New Zealand United Kingdom United States 100% 100% 100% 100% 100% 100% 100% 100% (c) Other related parties Cloudbreak Settlement Pty Limited (d) Key management personnel Disclosures relating to directors and other key management personnel are set out in Note 21. (e) Transactions with other related parties Directors and parent entities of OzForex Group Limited may from time to time have investments in entities which transact with OzForex Group Limited. These transactions are based on normal commercial terms and conditions. Transactions with Cloudbreak Settlement Pty Limited relate to arranger fees and costs incurred relating to the initial public offering and are as follows: Transaction type Receivable due from related party Income received Expense incurred 2015 $’000 2014 $’000 – 1,274 96 12,740 96 11,904 As a result of the initial public of offering share options due to Executives in the OzForex Group were cancelled and cash settled by the existing shareholders as follows: Settlement of share options: Macquarie Equities Limited Matthew Gilmour G & A Lord Pty Limited Carboni Pty Limited Accel Growth Fund L.P. Accel London III L.P. Accel IX L.P. Accel Growth Fund Investors 2010 L.L.C. Accel Growth Fund Strategic Partners L.P. Accel IX Strategic Partners L.P. Accel London Investors 2009 L.P. Accel Investors 2010 (B) L.L.C. Carlyle Financial Services AIV IV, L.P. CGFSP Coinvestment AIV, L.P. – 7,459 – 3,475 – 3,475 – 366 – 117 – 49 – 11 – 8 – 2 – 1 – 1 – 1 – 159 – 11 All other transactions with related entities were made on normal commercial terms and conditions and at market rates.