- IBEX Global

Transcription

- IBEX Global

Capitalising On Our Core Strengths
Our singular focus is providing reliable, consistent, predictable performance. Our outstanding employees
manage worldwide customer relationships on behalf of our business partners and deliver these customer
experiences with a combination of passion, world class training and leading-edge technology. We stand by
core organizational values that have helped us deliver our value proposition to global companies for over
10 years.
At IBEX Global our mission is to build the industry’s most dynamic team of customer service and marketing
associates and deliver cost-effective, high-impact customer management strategies to the world’s leading
organizations.
We believe that we will successfully execute our mission by capitalizing on our core strengths and adhering
to key organizational initiatives:
Integrity:
Our integrity ensures our credibility. Honor your commitments and take ownership of your actions. Our words
and deeds are truthful and reliable.
Respect:
Treat others the way we want to be treated and create a culture of mutual appreciation, regard and value.
Act towards others with dignity and help one another succeed.
Transparency:
Clear, candid and open communication must drive all interactions. Transparency makes our actions
understood, creates reliability and fosters collaboration. We maintain and encourage straightforward
dialogue with our employees, clients and stakeholders.
Excellence:
Strive for excellence in all that we do. Take great pride in your work as each employee’s contribution is vital
towards delivering exceptional customer service to our clients. Provide an extraordinary experience and
reward superior performance.
Table of Contents
Section:
Page
1. Company Information
01
2. Board of Directors
02
3. Chairman’s Statement
04
4. Strategic Report
06
5. Directors’ Report
12
6. Corporate Governance Report
15
7. Statement of Directors’ Responsibilities
17
8. Independent Auditor’s Report on Group Financial Statements 18
9. Consolidated Statement of Comprehensive Income 20
10.Consolidated Statement of Financial Position
21
11.Consolidated Statement of Changes in Equity
22
12.Consolidated Statement of Cash Flows
23
13.Notes to the Consolidated Financial Statements
24
14.Independent Auditor’s Report on Parent Company
Financial Statements
69
15.Parent Company Statement of Financial Position
71
16.Parent Company Statement of Changes in Equity
72
17.Parent Company Statement of Cash Flows
73
18.Notes to the Parent Company Financial Statements
74
Company Information
For the year ended 30 June 2014
Directors
Mohammed Khaishgi (Interim Chief Executive Officer)
Karl Gabel (Chief Financial Officer)
Zia Chishti (Non-executive Chairman)
Stephen Kezirian (Non-executive Director)
Tim Kelly (Non-executive Director)
Gerard Kleisterlee (Non-executive Director)
John Leone (Non-executive Director)
Joel Wyler (Non-executive Director)
Corporate Secretary
Jimmy Holland
Registered Office
3rd Floor
5 Lloyds Avenue
London, EC3N 3AE
Registered Number
8462510
Nominated Advisor
Liberum Capital Limited
and Joint Broker
Ropemaker Place, Level 12, 25 Ropemaker Street
London, EC2Y 9LY
Joint Broker
Cenkos Securities plc
6.7.8 Tokenhouse Yard
London, EC2R 7AS
Legal advisers to the Group
Eversheds LLP
1 Wood Street
London, EC2V 7WS
Auditors to the Group
Grant Thornton UK LLP
Grant Thornton House
Melton Street
Euston Square
London, NW1 2EP
Reporting Accountant
Grant Thornton UK LLP
30 Finsbury Square
London, EC2P 2YU
Registrar
Capita Registrars Limited
The Registry, 34 Beckenham Road
Beckenham, Kent, BR3 4TU
Public Relations adviser
Tavistock Communications Limited
to the Group
131 Finsbury Pavement
London, EC2A 1NT
Website
www.ibexglobal.com
1
Board of Directors
Zia Chishti – Non-executive Chairman
Zia is the Chief Executive Officer (CEO) and Chairman of The Resource Group International (TRGI). He
represents TRGI’s 75 percent interest in the Company. Zia has served as the Chairman and CEO of Align
Technology (NASDAQ: ALGN) which he led from inception to a more than $500.0 million public valuation. Zia
has worked at Morgan Stanley and McKinsey and serves on multiple corporate and non-profit boards. Zia is a
graduate of Columbia University and earned an MBA from Stanford Graduate School of Business.
Mohammed Khaishgi – Interim Chief Executive Officer
Mohammed is Chief Operating Officer of TRGI. He along with Zia Chishti, as Board Directors of TRGI, represent
TRGI’s 75 percent interest in the Company. Prior to joining TRGI in 2003, Mohammed was a Senior Director at
Align Technology, where he managed Align’s offshore contact centre and back office services operations.
He was previously a Senior Investment Officer at the International Finance Corporation (private sector
investment arm of the World Bank) where he was responsible for investments in the Asian telecommunications
and technology sectors. Mohammed has a B.S. degree in Electrical Engineering from University of Engineering
and Technology in Lahore, Pakistan, a B.A. degree in Philosophy, Politics and Economics from the University of
Oxford where he was a Rhodes Scholar and has an MBA from Harvard Business School.
Karl Gabel – Chief Financial Officer
Karl joined IBEX at the time of its acquisition of Telespectrum Worldwide, Inc. in 2004, where he was Vice
President of Finance and was instrumental in the financial restructuring of Telespectrum Worldwide, Inc. prior
to its sale. Karl has over 15 years of experience in the contact centre industry, commencing with his first role
as Director of Revenue at Telespectrum in 1997. Karl has a B.S. in Accounting from Penn State University and
an MBA from St. Joseph’s University.
Stephen Kezirian – Non-executive Director
Steve has over 18 years of management experience with a focus on customer operations. At CG Technology,
he was responsible for the firm’s technology, sales and operations teams, helping drive the growth from a
single-site operation into a multi-location, distributed operating environment. Previously, he served as the
youngest Vice President/General Manager at Sprint Nextel, where he was responsible for all phone-based
sales and sales support operations with a global workforce of over 6,000 in seven countries. Prior to that, Steve
has served in various positions at Morgan Stanley, McKinsey, Tickets.com and JH Whitney. Steve has a B.A. in
Economics from Harvard University and an MBA from Harvard Business School.
Tim Kelly – Non-executive Director
Tim Kelly is a Non-executive Director of the Company. Tim is the Chief Executive Officer of Zubie, Inc. Prior
to Zubie, Tim was the President and Chief Executive of Network Solutions, an internet enablement provider
service to small businesses and consumers. Tim led the company through a period of growth and expanding
profitability, and in November 2011, drove the successful sale of the company to Web.com. Prior to Network
Solutions, Tim enjoyed a successful career at Sprint Nextel, as President of the Consumer Division and as Chief
Marketing Officer. Tim was also President of Tickets.com. Tim graduated from the University of Florida with a
B.S. in Marketing, and earned his MBA from Nova Southeast University.
John Leone – Non-executive Director
John Leone is a Non-executive Director of the Company. John Leone is the Managing Director of PineBridge
Investments, an investor in TRGI. John works on sourcing, negotiating and executing private equity transactions
in Europe, Latin America, the Middle East and Africa. Prior to this role, John was General Counsel of PineBridge
Investments’ Emerging Markets Private Equity operations. Earlier in his career, John was an attorney at Kirkland
& Ellis LLP where he focused on advising private equity clients. John earned a Juris Doctor, with High Honours,
from The George Washington University Law School where he was a member of the Law Review, and a
Bachelor of Arts, Magna Cum Laude, from the State University of New York at Binghamton.
2
Board of Directors
Gerard Kleisterlee – Non-executive Director
Gerard Kleisterlee is a Non-executive Director of the Company. He is Chairman of Vodafone Group Plc,
having served since July 2011. Before that, he was for 10 years the President, CEO and Chairman of the Board
of Management of Royal Philips Electronics N.V., a company with which he spent more than thirty years. Mr.
Kleisterlee is a member of the supervisory board of Daimler AG and a Non-executive Director and member
of the audit committee of Royal Dutch Shell. He also was an independent director of Dell Inc. from 2011 until
its delisting in November 2013.
Joel Wyler – Non-executive Director
Joel Wyler is a Non-executive Director of the Company and, currently, he is the Chairman of Granaria Holdings
B.V, a holding company for investments in companies in Europe, the USA, South America and Asia. He is
Chairman of the European Advisory Board of SATMAP Incorporated, a contact centre technology company,
and a Director of ACPI Investments Limited. In 2000, Mr. Wyler was appointed Officer of the Order of Orange
Nassau and in 2009 Chevalier de la Legion d’Honneur.
3
Chairman’s Statement
I am pleased to present my report as Chairman of IBEX for our first full year of operations as a publicly listed
company. Following our initial public offering in June 2013, the Company has had a successful year with
significant growth in both revenue and profitability. I believe the business is now demonstrating that it has
momentum as we deliver on our plan to grow IBEX and deliver greater shareholder value and returns.
Financial Results
IBEX delivered significant growth in the year to 30 June 2014. Revenues were $184.0 million (2013: $141.6 million)
and adjusted earnings before interest, taxation, depreciation, amortisation, exceptional items and employee
share options payments (EBITDA) was $9.1 million (2013: $4.6 million), reflecting growth of 30.0% and 99.0%,
respectively. Profit before tax was $0.7 million (2013: Loss before tax was $17.0 million). On an operating basis,
the business is now cash flow positive after on-going interest charges and capital expenditures paid in cash.
In addition to its positive financial results, IBEX had several operational successes during the year. It broadened
its service delivery offering by opening three state of the art contact centre facilities, of which two are located
in the Philippines and one based in the US. It broadened its client base through several new wins, which we
believe lay the foundations for continued top line growth.
Dividend
The Board hereby indicates its intent to pay a dividend of 1.7 pence per share, which would represent total
dividends of 3.6 pence per share corresponding to the Group’s commercial operations in FY14. The dividend
will be declared ahead of the Annual General Meeting, and is expected to be paid before the end of the
calendar year.
Planned Management Changes
Three years on from joining the Board, Steve Kezirian is to leave the Company and step down from his role as
Chief Executive Officer. On behalf of the Board, I would like to thank Steve for his considerable contribution
to IBEX since his appointment in 2011 and wish him well with for the future.
The Board intends to appoint Mohammed Khaishgi, an existing non-executive director, as full time Interim
CEO to ensure a smooth transition and to lead IBEX’s executive team while the Board finalises its search for a
new, permanent CEO.
Mohammed currently serves as Chief Operating Officer of The Resource Group International Limited, a
substantial shareholder of the Company. His experience also includes senior roles at Align Technology, where
he set up and oversaw their global contact centre and back office facilities. He is very familiar with IBEX and
its day-to-day operational activities having been the interim CEO of IBEX in 2007, as well as currently serving
as a non-executive director.
The Board is considering internal and external candidates and we are grateful to Steve that he will continue to
assist the business during this transition for the remainder of this calendar year. Once the Board has approved
the appointment of a new CEO, we will provide a further update to the market.
Outlook
Since the start of the 2015 financial year, we have continued to see strong growth and anticipate the balance
of the year will provide further growth opportunities. Our core clients continue to deliver growing volumes of
business to us and we remain confident that our sales team will deliver new client wins which will diversify our
revenue streams, in line with our strategy.
4
Chairman’s Statement
I would like to thank the management and staff of our Company for their extraordinary efforts and
accomplishments during the year. In addition to delivering a transformative increase in revenues and client
satisfaction, the team rebranded the business to its current identity of IBEX Global Solutions, and successfully
executed its initial public offering. As a Board, we are grateful for their tireless efforts.
Zia Chishti
Chairman
Date: 6 October 2014
5
Strategic Report
Nature of the Business
IBEX Global Solutions Plc was incorporated on 26 March 2013 as IBEX Global Solutions Limited and was reregistered as a public limited company on 4 June 2013. The Company is incorporated under the Companies
Act 2006 with a fiscal year end of 30 June.
IBEX Group is a global portfolio of companies in the contact centre and related business process outsourcing
(BPO) sector operating from the United States, Philippines, United Kingdom, Pakistan, United Arab Emirates
and Senegal. Service offerings include customer care support, business and consumer inbound and outbound
telesales and technical support services. IBEX Group also offers enabling technology solutions including
Interactive Voice Response (IVR) and back-office email and chat support services.
Business and Financial Review
Our Group delivered a very strong performance in the year ended 30 June 2014 and has continued to make
good progress in the early months of the new trading year.
In our first full year as a public company, IBEX delivered revenue growth far beyond industry averages,
whilst continuing to improve margins. New client wins, coupled with successfully deepening our existing
relationships with clients across all verticals, bolstered results for the period and positioned the Company for
continued growth in the year ahead.
Key Financial Performance Indicators (KPIs)
The principal KPIs used by the board in measuring the performance of the Group are Revenue, Cost of Sales,
Selling, General & Administrative expenses (SG&A), Adjusted EBITDA and Net Profit/Loss.
30 June 2014
$’000’s
30 June 2013
$’000’s
Revenue
184,019
141,506
Cost of sales
Less depreciation and amortisation
155,783
(3,746)
152,037
31,982
82.6%
17.4%
120,729
(2,087)
118,642
22,864
83.8%
16.1%
23,340
(463)
22,877
9,105
12.4%
5.0%
18,512
(224)
18,288
4,576
12.9%
3.2%
8,305
800
4.5%
0.5%
20,096
(15,520)
14.2%
(11.0%)
Continuing Operations
Adjusted gross profit
SG&A
Less depreciation and amortisation
Adjusted EBITDA
Depreciation and amortisation, finance costs, share
based payments, taxes and others
Net income / (loss)
Borrowings
Cash and cash equivalents
IPO funds receivable
30,911
(4,005)
-
21,008
(10,651)
(7,506)
Net debt
26,906
2,851
The Income Statement KPIs above are in line with internal projections and tracking positively against forecasts.
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Strategic Report
Revenue for the period was up 30.0% to $184.0 million (2013: $141.6 million) driven by increasing business from
our established client base, expanding value-added service offerings and new client wins. Adjusted EBITDA
rose 99.0% to $9.1 million (2013: $4.6 million), principally due to the rapid rate of growth in revenue and the
operating leverage inherent in the business.
Profit before tax for the year was $0.7 million (2013: loss of $17.0 million). Profit per share was 2.02 cents. Cash
in bank and on hand was $4.0 million (2013: $10.7 million). Net debt (cash and cash equivalents and net
receivable of IPO proceeds, less third party borrowings) at the end of the year was $26.9 million (2013: $2.9
million). Net debt increased primarily as a result of borrowings to finance new and or expanded facilities, net
working capital uses, and capital expenditures other than facilities including financing associated with the
purchase of software licenses. During the period, we invested $12.4 million on new sites of which $8.4 million
related to openings in the Philippines, with the balance of $3.2 million being spent on new sites in the US.
Beyond site build-out, total capital expenditure was $5.6 million, of which $4.4 million was spent on centralised
IT purchases, with the remainder directed to maintenance related capital expenditure.
Our Marketplace and Outlook
Being a public company has enhanced the profile of IBEX amongst potential blue-chip clients and we are
pleased to report that we have made progress in our discussions with several potential new clients, many of
which are household brand names. The past year demonstrated the momentum we have across new and
existing verticals, and as we kicked off the current trading year we have continued to make good progress.
Our core markets of the US and Philippines continue to appeal to decision-makers in the industry, and we are
seeing a sustained improvement in the adoption of the UK and Pakistan as viable delivery locations for the
most discerning of our clients. Delivering results is the most powerful tool in winning both new business and
larger mandates from existing clients, who are demonstrating a willingness to launch new sites and move into
new geographies with us.
Our industry remains fragmented despite continued consolidation amongst much of our competition. Recent
estimates suggest that this will be a market worth $73.0 billion annually by 2016, according to HfS research, the
leading analyst authority for the Global Service Industry. And yet today, the largest player boasts revenues
of approximately $3.0 billion. Scale is important from both a service delivery and margin perspective, but
clients continue to base the majority of their decisions on a company’s ability to recruit, retain and develop
individuals who service their end customer needs.
Whilst the global economic environment remains challenging for businesses operating in most sectors,
IBEX is well positioned to assist its clients, providing critical resources and systems across a diversified global
footprint in an efficient and scalable operating environment. The expertise of our staff and our results-driven
approach are driving measurable results for our clients, all of whom continue to have significant needs for
the foreseeable future.
Operational Review
The majority of our revenue growth for the period relates to additional work awarded to us by existing clients,
whilst new client wins put the Group in a strong position to continue our growth trajectory in the year ahead.
During the year under review, the Company signed significant new contracts with a global automotive
company, a leading US-based cable provider, various marketing services businesses, and leading players
in the US energy sector. These wins reflect our established track record and our differentiated services
which, when combined, help us to grow in the consumer technology and automotive verticals in particular.
Meanwhile, the deregulation taking place in the utility industry is providing us with new opportunities to grow
our business. Additionally, we are taking on new lines of work for clients. An example of this is where a client
7
Strategic Report
who previously relied on us for customer retention work has contracted IBEX to provide additional support
with their billing enquiries and customer care calls.
Through continued diversification in its client base, both geographically and across industry verticals, the
Group continues to create new growth opportunities that enhance the predictability and profitability of
the overall business. To fuel this growth, the Company expanded its geographic footprint by adding three
state-of-the-art call centres (two in the Philippines and one in the US), increasing its global footprint to 18
sites. In addition to new openings, the Group expanded two separate locations in the US and Philippines,
capitalising on growth with existing clients and generating increased margin from those locations. To better
service both existing and new customers globally, the Group opened sales offices in Dubai, which provide
us with a foothold into the Gulf region (where we see opportunities in the airline and hospitality industry in
particular) and in London, an office which will support our Bristol centre, from which we currently support
clients in the automotive and pharmaceutical industries.
IBEX’s business model has some distinct differences from those of our competitors in the BPO industry. The IBEX
management team believes in maintaining a lean operating model, and as a result SG&A is approximately
13% of Group revenue; this compares to 15-28% amongst many of our competitors globally. Given this cost
advantage, IBEX can afford to invest in front line call centre agents vital to our business, which it does by
offering higher salaries and better benefits. This in turn drives increased employee retention and a higher
calibre workforce, which results in improved operational performance over time. In addition, by expanding
its training and coaching environments, IBEX is able to deliver performance at or above expected levels
much more quickly than any of its peers. This operational execution is motivational for the team and, more
importantly, it gives our clients the confidence to entrust greater portions of their overall business to IBEX.
The results of this unique approach are manifested in the vendor scorecard rankings that management
and our clients use on a daily basis. These scorecards track client-specific metrics, including but not limited
to; customer satisfaction, sales conversion, and quality, which are fundamental to each client’s respective
business. We use this client-centric, performance-oriented structure to make real-time decisions around
agent scheduling, performance-management and coaching, and levels of investment across the enterprise.
An alignment of goals unique to each client drives appropriate behaviours and further strengthens the
relationships.
Principal Risks and Uncertainties
While some of the predecessor companies of the Group have been in existence for longer periods of time, the
Group began commercial operations as a combined entity in 2006. The Group therefore has a comparatively
short operating history which makes an evaluation of the Group’s business and prospects difficult.
The Group cannot be certain that its business strategy will be successful or that it will successfully address
these or other risks that may become material. The Group’s failure to address any of the risks described below
could have an adverse effect on its business.
Client concentration
The Group’s business relies on relationships with a limited number of clients and any deterioration of the Group’s
relationship with any particular client could have a material adverse effect on the Group’s performance.
Furthermore, mergers and acquisitions associated with the Company’s client base could have a material
adverse effect on the Group’s performance.
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Strategic Report
Tax
IBEX expects to benefit from an overall effective tax rate of 5-10 percent, following admission as a result of
the Group reorganisation. There is a risk that amounts paid or received under intra-group arrangements in
the past or in the future could be deemed for tax purposes to be lower or higher, as the case may be, or
be disregarded for the purposes of calculating tax, which may increase the Group’s taxable income or
decrease the amount of relief available to the Group with a consequential material negative effect on its
financial and operating results.
Operations in international markets
As the Group has some of its operations in overseas territories, the Group has and expects to become
increasingly subject to diverse local legal and regulatory requirements. Violations of these laws and
regulations could result in fines and/or criminal sanctions against the Group, its officers and employees, as
well as challenges to its ability to conduct its business and its ability to offer products and services in one
or more countries. Such challenges could delay or prevent potential acquisitions and materially damage
the Group’s reputation, brand, international expansion efforts, ability to attract and retain employees and
operating results.
The Group’s success depends, in part, on its ability to anticipate these risks and manage these difficulties.
The Group is also subject to a variety of other risks and challenges in operating in various countries, including
but not limited to: challenges caused by distance, language and cultural differences; general economic
conditions in each country or region; fluctuations in currency exchange rates; regulatory changes; political
unrest, terrorism and the potential for other hostilities; longer payment cycles and difficulties in collecting
debts; overlapping tax regimes; the ability to repatriate funds held by international subsidiaries at favourable
tax rates; difficulties in transferring funds from certain countries; and reduced protection for intellectual
property rights in some countries. If the Group is unable to manage the international aspects of its business, its
operating results and overall business may be significantly and adversely affected.
Ability to recruit and retain skilled personnel
The Company believes that it has appropriate incentive structures to attract and retain the calibre of
employees necessary to ensure the efficient management and development of the Group. However, any
difficulties encountered in hiring and retaining appropriate employees and the failure to do so may have
a detrimental effect upon the trading performance of the Group. The ability to attract and retain new
employees with the appropriate expertise and skills cannot be guaranteed.
Rapid growth
In order to manage the further expansion of the Group’s business and the growth of its operations and
personnel, IBEX may need to expand and enhance its infrastructure and technology, improve its operational
and financial systems and procedures, and update it’s controls from time to time in order to facilitate that
expansion, as well as procure working capital financing. There can be no assurance that the Group’s current
and planned personnel, infrastructure, systems, procedures and controls will be adequate to support its
expanding operations in the future or that the Group will be able to source the working capital financing
required for further growth. If the Group fails to manage its expansion effectively, its business, operations and
prospects may be materially and adversely affected.
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Strategic Report
Competition
Current and potential competitors of the Group may have substantially greater financial, technical and
marketing resources, longer operating histories, larger customer bases, greater name recognition and more
established relationships than the Group and so may be better able to compete in the Group’s target markets.
Financial risks
The Group’s activities expose it to a variety of financial risks:
•
•
•
•
Interest rate risk
Foreign currency risk
Credit risk
Liquidity risk
Interest rate risk
Interest risk is the risk that the value of the financial instrument will fluctuate due to changes in the market
interest rates. The Group is exposed to interest rate risk in respect of borrowings and bank balances. Effective
interest rates and maturities are given in respective notes to the consolidated financial statements.
Currency risk arises mainly where receivables and payables exist due to transactions entered into foreign
currencies. The Group primarily has foreign currency exposures in the Pakistan Rupee, Pound Sterling and
Philippine Peso. However, the majority of the transactions of the Group are denominated in the United States
Dollar ($) and recognised by Group entities that have a functional currency of US$. Accordingly, foreign
currency exposure is not significant to the Group’s financial position and performance.
Concentration of credit risk
Financial instruments which potentially expose the Group to concentrations of credit risk consist primarily of
cash and cash equivalents and accounts receivable. The Group’s cash and cash equivalents are held with
US and foreign commercial banks. The balance at times may exceed insured limits.
Liquidity risk
Based on current operating plans, the Group believes that existing cash and cash equivalents will be sufficient
to meet the Group’s anticipated operating needs through the fiscal year ending 30 June 2015. However,
there are a number of assumptions built into the Group’s current operating plans. If these assumptions do not
materialise, the Group may need to seek additional financing or management may need to implement a
reduced spending plan to fund operations in the 2015 fiscal year.
Incentivising Key Staff
Traditionally, staff churn is a challenge for operators in our industry because the training of staff to make them
effective can be both costly and time consuming. For a BPO solution to be competitive, the staff involved
in dealing with customers’ needs must know their business extremely well and be able to deliver our clients’
aspirations for customer service to very high standards, every time.
IBEX understands that the retention and motivation of staff is absolutely crucial to our success. Attrition has
a disproportionate impact on Company profitability, both through the cost of replacement training and
through foregone margin associated with a departing employee. The Directors believe that employees with
longer tenures are more likely to perform better, thereby improving client metrics and more easily growing the
Group’s share of the client’s outsourcing spend.
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Strategic Report
To this end, the salaries we pay are often above the industry average in each country in which we have
operations. Additionally, our employees are afforded opportunities to progress their careers as we grow
the business. We believe employee career development is inextricably linked to the success of the Group.
In order to further enhance these principles, IBEX used the AIM admission to offer an equity incentivisation
plan. The IBEX equity reward scheme is therefore not limited to the Board and senior management, but is
also offered to nearly all manager-level individuals in the organisation. This represents a significant point
of differentiation in the BPO marketplace and the overall incentivisation package the Company provides,
which will help safeguard the services we offer to our clients.
Customer Service
We are acutely aware that our clients entrust IBEX with key customer support functions, thereby outsourcing
mission-critical parts of their business operations. Given the impact we have on each client’s reputation, we
know that customer service is a key differentiator in the marketplace, and represents a key aspect of how we
manage our business. We are also aware that merely performing against our client’s requirements is the bare
minimum of what we can achieve on each client’s behalf.
Therefore, after taking care of our workforce, we turn 100% of our attention to outperforming against client
requirements. It is this approach, consistently applied, which differentiates us from the competition, and
means that household names use us to protect and cultivate their relationships with their end customers.
Overall, we want our clients to know that IBEX is dedicated to generating the best outcomes of customer
satisfaction on their behalf. In each case, the metrics by which clients measure the value we add to their
operations are examined daily. We are relentless when it comes to ensuring client satisfaction and the
business is set up to improve constantly on our already proven success.
Technology
IBEX uses state-of-the-art systems to service our clients’ needs and deliver the best possible service for each
of them. We have consistently improved our infrastructure through investment to make sure that we run as
efficiently as possible and provide the exceptionally high levels of service which our clients have come to
expect.
The world of technology and connectivity moves very quickly. To that end, IBEX sees the improvement of its
systems as an on-going priority for the Group. By applying the latest technology developments available to
us, we can continually ensure that our system capability is world class. We not only make sure that we are
operating existing technology as efficiently as possible, but we are always looking for ways in which we can
innovate within our client delivery models. This provides us with a strategic advantage over our rivals and
keeps us competitive in the market.
The strategic report was approved by the Board of IBEX Global Solutions Plc and signed on its behalf by:
Mohammed Khaishgi
Karl Gabel
Interim Chief Executive Officer
Chief Financial Officer
11
Directors’ Report
The Directors of the Company are pleased to submit their report and the audited statutory financial statements
of IBEX Global Solutions Plc Group (IBEX or the Group) for the year ended 30 June 2014.
Directors
The Directors who have held office up to the date of signing of these consolidated financial statements are
as follows:
Name
Status
Commencement of
period of office
Date of expiration of term
of office
Zia Chishti
Non-executive
Chairman
26 March 2013
Annual General Meeting
to be held in 2014
Mohammed Khaishgi
Interim Chief
Executive Officer
3 June 2013
to be held in 2014
Karl Gabel
Chief Financial
Officer
5 June 2013
to be held in 2014
Stephen Kezirian
Non-executive
Director
5 June 2013
to be held in 2014
Tim Kelly
Non-executive
Director
5 June 2013
to be held in 2014
John Leone
Non-executive
Director
5 June 2013
to be held in 2014
Gerard Kleisterlee
Non-executive
Director
24 March 2014
to be held in 2014
Joel Wyler
Non-executive
Director
24 March 2014
to be held in 2014
As at the date of this document, the following options have been granted to directors of the Company under
the Company Stock Plan 2013:
Name
Stephen
Kezirian
Karl Gabel
Tim Kelly
Gerard
Kleisterlee
12
Number
of share
options
1,495,443
442,307
49,848
50,000
Percent of enlarged
share capital
immediately following
admission to AIM
Vesting schedule
Exercise
period
(from)
Exercise
price
3.8%
934,651 options vested on
30 June 2014; 31,155 stock
options vesting monthly until 30
November 2015
30 June
2013
$1.55
1.1%
356,284 options vested on
30 June 2014; 12,286 stock
December 2014
30 June
2013
$1.55
0.1%
17,650 options vested on 30
June 2014; 1,039 stock options
vesting monthly until 31
December 2016
31
December
2013
$1.55
0.1%
12,500 options shall vest on 31
December 2014; 1,042 stock
December 2017
31
December
2014
$1.55
Directors’ Report
The aggregate remuneration of the directors for the year were as follows:
Salary and
fees
$’000's
Short-term
benefits
$’000's
Retirement
benefits
$’000's
Employee
share option
$’000's
$’000's
240
258
245
75
-
152
44
637
377
82
44
-
-
-
8
-
90
44
-
624
320
-
204
1,148
Salary and
fees
$’000's
Short-term
benefits
$’000's
Retirement
benefits
$’000's
Employee
share option
$’000's
$’000's
292
236
21
-
-
170
63
483
299
23
-
-
-
1
-
24
-
551
21
-
234
806
2014
Executive Directors
Stephen Kezirian
Karl Gabel
Non-executive Directors
Zia Chishti
Mohammed Khaishgi
Tim Kelly
John Leone
Gerard Kleisterlee
Joel Wyler
Total
2013
Executive Directors
Stephen Kezirian
Karl Gabel
Non-executive Directors
Zia Chishti
Mohammed Khaishgi
Tim Kelly
John Leone
Gerard Kleisterlee
Joel Wyler
Total
Total
Total
Employment of Disabled Persons
The Group’s policy is to comply with applicable laws regarding recruitment and employment of disabled
workers. Arrangements are made, wherever possible, for making reasonable accommodations for employees
who become disabled.
Political Donations
No political donations were made by the Parent Company or the Group during the fiscal year 2014 (2013: nil).
Going Concern
On 8 November 2013, one of the subsidiaries of the Holding Company (the Company) signed a Revolving
Credit and Security Agreement (Agreement) with PNC Bank, National Association (PNC) for a new $35.0
million revolving line of credit (RLOC) to replace the Capital Source Bank (CSB) $20.0 million RLOC. The
Agreement has a 7 November 2016 maturity date and an interest rate of LIBOR +2.50% and or the PNC
Commercial Lending Rate (as publically announced) +0.25%. The Company is subject to certain qualitative
13
Directors’ Report
and quantitative financial performance covenants, including a minimum Fixed Charge Coverage Ratio to
ensure continued access to the line of credit.
As a result, the directors have considered the adequacy of the Group’s resources to meet its demands as
they fall due for the foreseeable future and concluded that it is appropriate to prepare these consolidated
financial statements on the going concern basis.
Auditor
A resolution proposing the re-appointment of Grant Thornton UK LLP will be put to the shareholders at the
forthcoming Annual General Meeting.
Statement of Disclosure to Auditor
Each of the persons who is a Director at the date of approval of this report confirms that:
a.
So far as they are aware, there is no relevant audit information of which the Company’s auditor is
unaware; and
b.
They have taken all the steps that they ought to have taken as Directors in order to make themselves
aware of any relevant audit information and to establish that the Company’s auditor is aware of that
information.
IBEX owes its continuing success not just to the management team but also to our employees across all roles
within the Group. The quality and dedication of our staff is what differentiates us from the competition and
delivers the best, most well informed and professional service for our client base. I would therefore like to
thank every member of the IBEX team for their on-going support and efforts. Galvanised by our successful
IPO on AIM, we remain true to our core values (Integrity, Transparency, Excellence and Respect) and look
forward to a bright future for the entire IBEX family.
By order of the Board
14
Mohammed Khaishgi
Karl Gabel
Corporate Governance Report
Financial Aspects of Corporate Governance
The Directors recognise the importance of sound corporate governance and confirm that they intend to
comply with the Corporate Governance Guidelines (as devised by the QCA in consultation with a number of
significant institutional small company investors), to the extent appropriate for a company of its nature and
size. The Board also proposes to follow, as far as practicable, the recommendations on corporate governance
of the QCA for companies with shares traded on AIM.
This approach to corporate governance was proposed by the QCA as it considers the UK Corporate
Governance Code to be inappropriate to many AIM companies. The Corporate Governance Guidelines
state that, “The purpose of good corporate governance is to ensure that the company is managed in an
efficient, effective and entrepreneurial manner for the benefit of all shareholders over the longer term.” We
do not comply with the UK Corporate Governance Code. However, we have reported on our Corporate
Governance arrangements by drawing upon best practice available, including those aspects of the UK
Corporate Governance Code we consider to be relevant to the Group and best practice.
The Board meets at least four times per year to review, formulate and approve the Group’s strategy, budgets,
and corporate actions and to oversee the Company’s progress towards its goals. It has established audit,
nomination and remuneration committees with formally delegated duties and responsibilities and with written
terms of reference. From time to time, separate committees may be set up by the Board to consider specific
issues when the need arises.
Audit Committee
The audit committee will meet formally at least four times a year and otherwise as required. It will be responsible
for ensuring that the financial performance of the Group is properly reported on and monitored, including
reviews of the annual and interim accounts, results announcements, internal control systems and procedures
and accounting policies, reviewing and monitoring the extent of the non-audit services undertaken by the
external auditor and advising on the appointment of external auditors.
Remuneration Committee
The remuneration committee is expected to meet at such times as required, and not less than twice a year.
Executive Directors may attend meetings at the committee’s invitation. The remuneration committee has
responsibility for determining, within agreed terms of reference, the Group’s policy on the remuneration
packages of senior executives and specific remuneration packages for Executive Directors. This includes
agreeing with the Board the framework for remuneration of the CEO, all other Executive Directors, the
Company Secretary and such other members of the executive management of the Group as it is designated
to consider. It is furthermore responsible for determining the total individual remuneration packages of each
Director including, where appropriate, bonuses, incentives, pension rights and compensation payments. It is
also responsible for making recommendations for grants of options under the Share Option Plans.
The remuneration of Non-executive Directors is a matter for the Board. No Director may be involved in any
discussions as to their own remuneration. From time to time the remuneration committee may consult with
shareholders on remuneration matters, regardless of any regulatory requirement or governance guideline
recommendation to do so.
Nomination Committee
The Nomination Committee will be an ad hoc committee constituted by the Board as and when required.
When constituted it will be chaired by an independent member of the Board. It will have responsibility
for reviewing the balance of the Board including its skills and experience, the state of the business and
its leadership needs, and give full consideration to succession planning. It will also have responsibility for
recommending new appointments to the Board.
15
Corporate Governance Report
Relations with Shareholders
Communication with shareholders is given a high priority by the Board and the Directors are available to
enter into dialogue with shareholders. All shareholders are encouraged to attend and vote at the Annual
General Meeting during which the Board is available to discuss issues affecting the Company.
16
Statement of Directors’ Responsibilities
Directors’ responsibilities
The Directors are responsible for preparing the directors’ report and strategic report along with the Group
and Parent Company financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each fiscal year. Under that law, the
directors have elected to prepare the Group and the Parent Company financial statements in accordance
with International Financial Reporting Standards (lFRS) as adopted by the European Union. Under UK
Companies Law, the directors must not approve the financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the Group and the Parent Company and of the profit or loss
of the Group and the Parent Company for that period.
In preparing these financial statements, the Directors are required to:
•
•
•
•
Select suitable accounting policies and then apply them consistently;
Make judgements and accounting estimates that are reasonable and prudent;
State whether applicable accounting standards have been followed subject to any material
departures disclosed and explained in the financial statements; and
Prepare the financial statements on a going concern basis unless it is inappropriate to presume that
the Group and the Parent Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain
the Parent Company’s and Group’s transactions and which disclose with reasonable accuracy at any time
the financial position of the Parent Company and the Group and enable them to ensure that the financial
statements comply with the Companies Act 2006. The directors are also responsible for safeguarding the
assets of the Parent Company and the Group and, hence, for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
Website publication
The maintenance and integrity of the IBEX Global Solutions Plc website is the responsibility of the Directors.
The work carried out by the auditors does not involve consideration of these matters and, accordingly, the
auditors accept no responsibility for any changes that may have occurred to the financial statements since
they were initially presented on the website. Legislation in the United Kingdom governing the preparation
and dissemination of the financial statements may differ from legislation in other jurisdictions.
17
Independent Auditor’s Report on
Group Financial Statements
Independent Auditor’s Report to the Members of IBEX Global Solutions Plc
We have audited the Group financial statements of IBEX Global Solutions Plc for the year ended 30 June
2014 which comprise the consolidated statement of comprehensive income, the consolidated statement of
financial position, the consolidated statement of changes in equity, the consolidated statement of cash flows,
the accounting policies and the related notes. The financial reporting framework that has been applied in
their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the
European Union.
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16
of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s
members those matters we are required to state to them in an auditor’s report and for no other purpose.
To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the
Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we
have formed.
Respective Responsibilities of Directors and Auditor
As explained more fully in the Directors’ Responsibilities Statement set out on page 17, the directors are
responsible for the preparation of the Group financial statements and for being satisfied that they give a
true and fair view. Our responsibility is to audit and express an opinion on the Group financial statements in
accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards
require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.
Scope of the Audit of the Financial Statements
A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s
website at www.frc.org.uk/apb/scope/private.cfm.
Opinion on Consolidated Financial Statements
In our opinion the Group financial statements:
•
give a true and fair view of the state of the Group’s affairs as at 30 June 2014 and of its profit for the
year then ended;
•
have been properly prepared in accordance with IFRSs as adopted by the European Union; and
•
have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on Other Matter Prescribed by the Companies Act 2006
In our opinion the information given in the Strategic Report and Directors’ Report for the fiscal year for which
the Group financial statements are prepared is consistent with the Group financial statements.
18
Group Financial Statements
Matters on Which We are Required to Report by Exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to
report to you if, in our opinion:
•
certain disclosures of directors’ remuneration specified by law are not made; or
•
we have not received all the information and explanations we require for our audit.
Other Matter
We have reported separately on the Parent Company financial statements of IBEX Global Solutions Plc for
the period ended 30 June 2014.
Marc Summers, FCA
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
London
6 October 2014
19
Consolidated Statement of
Comprehensive Income
Notes
Continuing operations
2014
$'000's
2013
$'000's
Revenue
5
184,019
141,506
Cost of sales
Gross profit
6
(155,783)
28,236
(120,729)
20,777
6
(23,340)
(18,512 )
(1,144)
(674)
-
(16,700)
(24,484)
( 35,886)
Selling, general and administrative
expenses
Share based payments
Exceptional items
7
Total selling, general and administrative expenses
Operating profit / (loss)
3,752
(15,109)
Other expenses
Finance costs
8
(1,799)
(1,924)
Exceptional finance cost
7
(826)
-
(318)
-
(93)
-
Exchange loss
Others
Profit / (loss) before taxation
9
716
(17,033)
Income tax benefit
29
84
1,513
800
(15,520)
Net income / (loss) for the year attributable to the
equity holders of the parent
Other comprehensive income
Item that will not be subsequently reclassified to profit
or loss Actuarial gain on retirement benefits
Item that will be subsequently reclassified to profit or
loss Foreign currency translation
Adjustment
Total comprehensive income / (loss)
attributable to equity holders of the
parent
307
-
11
344
1,118
(15,176)
0.020
(0.480)
Earnings / (loss) per share attributable to equity
holders of the parent
Basic/diluted earnings / (loss) per share (in US$)
30
The accompanying notes are an integral part of these consolidated financial statements.
20
Financial Position
As of 30 June 2014
Assets
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Deferred tax asset
Other non-current assets
Total non-current assets
Current assets
Trade and other receivables
Deferred expenses
Due from affiliates
Total current assets
Total assets
Equity and liabilities
Equity attributable to owners of the parent
Ordinary shares
Share premium
Capital redemption reserve
Other reserves
Deficit
Total equity
2014
$'000's
2013
$'000's
10
11
12
29
13
8,644
4,096
14,272
1,195
4,630
32,837
8,644
602
4,005
879
3,846
17,976
14
38,987
1,901
3,371
4,005
48,264
81,101
39,250
841
1,762
10,651
52,504
70,480
602
14,479
48,530
916
(41,647)
22,880
602
14,479
48,530
(79)
(41,195)
22,337
734
7,035
2,986
1,943
1,597
14,295
495
313
1,535
1,292
3,635
Notes
32
15
16
17
Non-current liabilities
Deferred tax liabilities
Deferred revenue – non-current portion
Obligation under finance lease – non-current portion
Long-term financing
Due to affiliates - long portion
Other
Total non-current liabilities
Current liabilities
Line of credit
22
16,703
19,888
Obligation under finance lease – current portion
19
2,823
807
Current portion of financing
20
1,364
-
Trade and other payables
23
20,978
21,689
1,930
1,158
29
19
20
32
21
Deferred revenue - current portion
Due to affiliates - current portion
32
Total current liabilities
Total liabilities
Total equity and liabilities
128
966
43,926
58,221
81,101
44,508
48,143
70,480
These consolidated financial statements were approved for issue by the Board of Directors on 6 October 2014
and were signed on its behalf by:
Mohammed Khaishgi
Karl Gabel
21
Changes in Equity
Issued,
subscribed and
paid-up capital
Deferred
shares
Share
premium
Other reserves
Foreign
Employee
Capital
Actuarial gain
currency
share option
redemption
translation
on retirement
plan
reserve
reserve
benefits
$'000's
$'000's
$'000's
$'000's
1,639
(814)
-
$’000's
1,464
$’000's
-
$'000's
39,850
Net loss
-
-
-
-
-
-
Total comprehensive income /
(loss) for the year
Transactions with owners
-
-
-
-
-
268
-
-
-
-
-
(1,464)
-
(39,850)
-
-
-
-
49,020
(48,530)
-
48,530
(48,530)
112
-
As at 1 July 2012
Reversal of opening reserves
Transfer from ESOP to APIC due to
re-organization
Shares issued on incorporation
Deferral of shares
Repurchase of shares
Shares issued at par (IPO)
Share premium (net of IPO)
Employee share based payment
options
Total transactions with owners
As at 30 June 2013
Net income
Total comprehensive income for
the year
Dividend distribution
Employee share based payment
options
As at 30 June 2014
Total equity
$'000's
(25,675)
$’000's
16,464
-
(15,520)
(15,520)
-
-
268
268
-
(15,520)
(15,252)
-
-
-
-
(41,314)
-
(1,639)
-
-
-
(1,639)
-
48,530
-
-
-
-
49,020
-
-
14,479
-
-
-
-
-
112
14,479
(862)
-
(25,371)
48,530
467
(1,172)
-
-
-
467
21,125
602
-
14,479
48,530
467
(546)
-
(41,195)
22,337
-
-
-
-
-
11
307
800
-
800
318
-
-
-
-
-
11
307
800
1,118
-
-
-
-
-
-
-
(1,252)
(1,252)
-
-
-
-
677
-
-
-
677
602
-
14,479
48,530
677
1,144
(535)
307
(1,252)
(41,647)
(575)
22,880
22
Deficit
Consolidated Statement of Cash Flows
Notes
2014
$'000's
2013
$'000's
33
5,410
(10,457)
(1,799)
(1,924)
(99)
(340)
3,512
(12,721)
(2,847)
(1,498)
49
(88)
10
(2,798)
(1,576)
16,703
(20,714)
7,905
-
224
(1,252)
-
Investment from parent company
-
IPO investment
-
669
14,624
(40)
-
(2,036)
(914)
(7,339)
22,508
(21)
493
Net (decrease) / increase in cash and cash equivalents
(6,646)
8,704
Cash and cash equivalents, beginning of year
10,651
1,947
4,005
10,651
Cash flows from operating activities
Net cash generated from / (used in) operating activities
Interest paid
Taxes paid
Net cash flow from / (used in) operating activities
Cash flows from investing activities
Purchases of property, plant and equipment
Additions to intangible assets
Proceeds for sale of assets
Net cash used in investing activities
Cash flows from financing activities
Net receipt on line of credit
Repayments on line of credit
Grants received
Payment of dividend
Payments on financing
Payments on capital lease obligations
Net cash (used in) / provided by financing activities
Effect of exchange rate change on cash and cash equivalents
Cash and cash equivalents, end of year
15
-
23
Notes to the Consolidated
(1)
Nature of the business
IBEX Global Solutions Plc (the Holding Company or Parent Company) was incorporated on 26 March
2013 as IBEX Global Solutions Limited and was re-registered as a public limited company on 4 June
2013. The Holding Company was incorporated under the Companies Act 2006 with a fiscal year
end of 30 June. On 28 June 2013, the Holding Company was admitted to trade on the Alternative
Investment Market (AIM), a market operated by the London Stock Exchange Plc.
IBEX Group (the Group) is a global portfolio of companies in the contact centre and related business
process outsourcing (BPO) business, with operations in the United States, Philippines, United Kingdom,
Pakistan and Senegal. Service offerings include customer care support, business and consumer
inbound and outbound telesales and technical support services. IBEX Group also offers enabling
technology solutions including Interactive Voice Response (IVR).
The IBEX Group consists of:
Holding company
Location
IBEX Global Solutions Plc
UK
30 June 2014
24
Subsidiaries
Location
Percentage of
holding in ordinary
shares %
Lovercius Consultants Limited (IBEX Cyprus)
Cyprus
100%
June 2014
IBEX Global Europe S.a.r.l. (IBEX Luxembourg)
Luxembourg
100%
June 2014
TRG Customer Solutions, Inc. (trading as IBEX Global Solutions, Inc.)
USA
100%
June 2014
TRG Customer Solutions (Canada) Inc.
Canada
100%
June 2014
TRG Marketing Solutions Limited
UK
100%
June 2014
Virtual World (Private) Limited
Pakistan
100%
June 2014
IBEX Philippines Inc. (formerly TRG Philippines Inc.)
Philippines
100%
June 2014
IBEX Global Solutions (Philippines) Inc. (formerly TRG Global Solutions Inc.)
Philippines
100%
June 2014
TRGCS Philippines Inc.
Philippines
100%
June 2014
The Resource Group Senegal SA
Senegal
100%
December 2013
IBEX Global Solutions (Private) Limited
Pakistan
100%
June 2014
IBEX Mena
Dubai
100%
June 2014
IBEX I.P. Holdings Ireland Limited
Ireland
100%
June 2014
Reporting Year
(2)
Basis of preparation
The consolidated financial statements have been prepared in accordance with International
Financial Reporting Standards (including International Accounting Standards (IAS)) “IFRS” and
International Financial Reporting Interpretations Committee (IFRIC) interpretations as adopted by the
European Union (IFRS as adopted by the EU) and the Companies Act 2006 applicable to companies
reporting under IFRS.
The consolidated financial statements have been prepared under the going concern assumption.
The Resource Group International Limited (TRGI) incorp orated IBEX Global Solutions Limited on 26
March 2013. On 31 March 2013 IBEX Global Solutions Limited acquired 100% ownership of various
subsidiaries (listed in note 1 – referred as “the Continuing Business Entities”) from TRGI and issued its
shares in exchange. Prior to this transaction TRGI directly controlled each of the Continuing Business
Entities and, by virtue of its controlling interest in IBEX Global Solutions Plc, continues to control
the Continuing Business Entities. As common control transactions are outside the scope of IFRS 3
(Business Combinations), the management has, as required by IAS 8 (Accounting Policies, Change
in Accounting Estimates and Errors), used its judgement in developing and applying an accounting
policy which reflects the economic substance of the transaction to account for the Continuing
Business Entities.
The management considers pooling of interest method of accounting to be appropriate to account
for the combination of various subsidiaries with the Holding Company. As a result, the Holding
Company and its subsidiaries are presented as if they have legally been a group of companies for
all periods presented. The following accounting principles are applied:
-
the assets and liabilities of the Holding Company and its subsidiaries are recorded at book
value;
-
intangible assets and contingent liabilities are recognised only to the extent that they were
recognised by the acquiree in accordance with applicable IFRS; and
-
no goodwill is recorded.
These consolidated financial statements therefore represent a continuation of the financial
statements of Continuing Business Entities with the Holding Company as the reporting entity.
(3)
Ultimate parent undertaking and controlling entity
The Ultimate Parent Company is TRGI incorporated in Bermuda. The Parent Company of the largest
group to include the IBEX Group in its consolidated financial statements is TRGI, and its financial
statements are not publicly available. The ultimate controlling party of the Group are the directors
of TRGI.
25
(4)
Summary of significant accounting policies
(a)
Basis of consolidation
The consolidated financial statements of the Group comprise the financial statements of
the Holding Company and its subsidiaries listed in note 1. The financial statements of the
Holding Company and its subsidiaries are prepared up to the same reporting period and
are combined on a line-by-line basis. All intercompany balances, transaction and related
unrealised profits and losses are eliminated on consolidation.
The acquisition method of accounting is used to account for the acquisition of the subsidiaries
by the Group (except for the common control transactions as disclosed in note 2 above). On
acquisition, the assets and liabilities and contingent liabilities of a subsidiary are measured
at their fair values at the date of acquisition. The cost of acquisition is measured at fair value
of the assets transferred, equity instruments issued and liabilities incurred or assumed at the
acquisition date.
Any excess of the cost of acquisition over the fair values of the identifiable net assets
acquired is recognised as goodwill. Any deficiency of the cost of acquisition below the fair
values of the identifiable net assets acquired is credited to the consolidated statement of
comprehensive income in the period of acquisition.
(b)
Basis of measurement
These consolidated financial statements have been prepared on the basis of the historical
cost convention, except as otherwise disclosed.
(c)
Functional and presentation currency
Items included in the financial statements of each of the Group entities are measured
using the currency of the primary economic environment in which the entity operates (‘the
functional currency’).
The functional currency for each entity included in the consolidated financial statements is
as follows:
Entity
Functional
currency
TRG Customer Solutions, Inc. / Lovercius Consultants Limited / IBEX Global Europe S.a.r.l. /
IBEX Global Solutions Plc / IBEX I.P. Holdings Ireland Limited
US Dollar
TRG Customer Solutions (Canada) Inc.
Pound Sterling
IBEX Global Solutions (Private) Limited / Virtual World (Private) Limited
Pakistan Rupee
IBEX Philippines Inc. / IBEX Global Solutions (Philippines) Inc. / TRGCS Philippines Inc.
Philippine Peso
TRG Senegal SA
IBEX Mena
26
Canadian Dollar
CFA Franc
Emirati Dirham
The consolidated financial statements are presented in United States Dollars, being the
Group's presentation currency.
The closing conversion rates used to convert the foreign currencies as of 30 June 2014 and
2013 are as follows:
Conversion Rate Conversion Rate
Unit of Currency
US$
US$
30 June 2014
30 June 2013
1.70480
1.52110
0.01014
0.01003
0.02288
0.02315
CFA Franc
0.00208
0.00198
Canadian Dollar
1.06710
1.05207
Emirati Dirham
0.27230
-
-
0.76880
Pound Sterling
Pakistan Rupee
Philippine Peso
Euro
(d)
Foreign currency translation
The results and financial position of all the Group entities that have a functional currency
different from the presentation currency are translated into the presentation currency as
follows:
(i)
assets and liabilities are translated at the closing exchange rate at year-end;
(ii)
income and expenses are translated being an approximation to actual; and
(iii)
all resulting exchange differences are recognised as a separate component of equity.
On consolidation, exchange differences arising from the translation of the net investment in
foreign subsidiaries are taken to other comprehensive income. When a foreign subsidiary,
branch or operation is sold, exchange differences that were recorded in equity are
reclassified to profit and loss in the consolidated statement of comprehensive income.
(e)
Foreign currency transactions
Foreign currency transactions of the Group entities are translated into their respective
functional currencies at the rates of exchange approximating to those prevailing on the
date of transaction. Monetary assets and liabilities in foreign currencies are retranslated
into their respective functional currencies at the rates of exchange at the end of each
reporting period. Exchange gains and losses are included in the consolidated statement of
comprehensive income within selling, general and administrative expenses.
(f)
Segment reporting
The Group has one operating segment, being the provision of contact centre and related
business process outsourcing services.
The single operating segment has been identified on the basis of internal reports that are
regularly reviewed by the Chief Operating Decision Maker to allocate resources and assess
performance. Executive management, being the executive leadership team, is considered
to be the Chief Operating Decision Maker.
27
(g)
Revenue recognition
Revenue is measured at the fair value of consideration received or receivable, excluding
rebates, discount and related taxes.
Revenue from call centre services is recognised as the services are performed on the basis
of the number of billable hours or other contractually agreed metrics.
Revenue from inbound and outbound telephonic and internet-based communication
services that are customised to the customers’ needs is recognised at the contractual rates
as services are provided.
Revenue for the initial training that occurs upon commencement of a new client contract is
deferred over the estimated life of the client program and matched against the associated
expenses if that training is billed separately to a client. Training revenue is then amortised
on a straight-line basis over the life of the client contract as it is not considered to have a
standalone value to the customer. The related incremental direct expenses are deferred
and charged to selling, general and administrative expenses on a straight-line basis over
the life of the client contract as the related revenue is recognised. These incremental direct
expenses relate directly to each contract, generate or enhance resources that will be used
in satisfying performance obligations in the future and are expected to be recovered in full.
(h)Grants
Government grants are recognised at fair value where there is a reasonable assurance that
the grant will be received and the Group will comply with all attached conditions.
Government grants relating to costs are recognised in the consolidated statement of
comprehensive income over the period necessary to match the corresponding costs that
are intended to be compensated. These are netted off against the relevant costs in the
consolidated statement of comprehensive income.
Government grants relating to property, plant and equipment are deducted from the assets
carrying value resulting in a lower depreciation charge over the life of the asset.
(i)Goodwill
Goodwill arising as a result of a business combination represents the excess of the cost of the
business combination over the Group’s interest in the net fair value of identifiable assets and
liabilities of the acquired business at the date of acquisition. Goodwill is initially recognised as
an asset at cost and subsequently measured at cost less impairment in value, if any.
Goodwill is tested for impairment on an annual basis and also when there is an indication
of impairment. Impairment losses on goodwill are not reversed. On disposal of an entity,
the attributable amount of goodwill is included in the determination of the profit or loss on
disposal.
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.
28
(j)
Intangible assets
Software
Software which can be separately identifiable is capitalised as an intangible asset at
purchase cost and then amortised over its estimated useful life of three years on a straightline basis.
Trademarks
Trademarks considered as intangible assets are capitalised at cost of acquisition. Trademarks
with an indefinite useful life are not amortised but are tested for impairment annually.
Patents
Patents are capitalised at cost of acquisition and amortised over their estimated useful life
of four years on a straight-line basis.
Intangible assets are stated at cost less accumulated amortisation and impairment in value,
if any. Amortisation is included within depreciation and amortisation in cost of sales and
selling, general and administrative expenses. Useful lives of intangible assets, other than
goodwill, are reviewed at the end of each reporting period and adjusted if the impact on
amortisation is significant.
Gains and losses on the disposal of intangible assets are taken to the consolidated statement
of comprehensive income. Subsequent expenditure is capitalised only when it increases
the future economic benefits embodied in the specific asset to which it relates. All other
expenditure, including expenditure on internally generated intangible assets which do
not meet the IAS 38, Intangible Assets, criteria as development costs, is recognised in the
consolidated statement of comprehensive income as incurred.
(k)
Property, plant and equipment are recorded at historical cost reduced by the value of grants
received that are used to acquire the property, plant and equipment, where applicable.
Depreciation is provided using the straight-line method over the estimated useful lives or the
shorter of estimated useful life or lease term for leased assets.
Leasehold improvements
33% (or period of the lease if shorter)
Furniture and fittings
20%
Computers, communications and office equipment
20% - 50%
Vehicles
20%
Expenditure for maintenance, repairs and improvements that do not prolong the useful
life of an asset is charged to operations as incurred. Additions and improvements that
substantially extend the useful life of an asset are capitalised. Any tenant allowance received
is recognised as deferred income or reduces the value of property, plant and equipment.
An item of property, plant and equipment is derecognised upon disposal or when no future
economic benefits are expected from its use or disposal. Gains and losses on disposals are
determined by comparing the sale proceeds with the carrying amount of the relevant
assets. These are recognised in the consolidated statement of comprehensive income.
29
(l)
Assets subject to finance leases
Leases of property, plant and equipment, where the Group has substantially all the risks and
rewards of ownership, are classified as finance leases. Assets subject to finance lease are
initially recorded at the lower of the present value of minimum lease payments under the
lease agreements and the fair value of the leased assets. The related obligation under the
lease less financial charges allocated to future periods is shown as a liability. Finance lease
obligations are secured by the related assets held under finance leases.
The financial charges are allocated to accounting periods in a manner so as to provide a
constant periodic rate of charge on the outstanding liability.
Depreciation on finance lease assets is provided on a straight line basis over the lesser of
their estimated useful life or the lease term.
(m)
Operating leases
Leases in which a significant portion of the risks and rewards of ownership are retained by
the lessor are classified as operating leases. Payments made under operating leases (net
of any incentives received from the lessor) are charged to the consolidated statement of
comprehensive income on a straight-line basis over the lease term.
(n)
Financial instruments
Financial assets and financial liabilities are recognised at the time when the Group becomes
a party to the contractual provisions of the instrument.
Financial assets
The Group considers its financial assets to comprise cash, deposits and various other
receivable balances that arise from its operations.
Trade receivables, deposits and other receivables that have fixed or determinable payments
that are not quoted in an active market are classified as loans and receivables. Loans and
receivables are initially recorded at fair value and subsequently at amortised cost using
the effective interest rate method, less any impairment. Interest income is recognised by
applying the effective interest rate, except for short-term receivables when the recognition
of interest would be immaterial.
The carrying amount of the financial asset is reduced by any impairment loss directly for
all financial assets with the exception of trade receivables where the carrying amount is
reduced through the use of an allowance account. When a trade receivable is considered
uncollectable, it is written off against the allowance account. Subsequent recoveries of
amounts previously written off are credited against the allowance account. Changes in the
carrying amount of the allowance account are recognised in the consolidated statement
of comprehensive income. If in a subsequent period the amount of the impairment loss
decreases and the decrease can be related objectively to an event occurring after the
impairment was recognised, the previously recognised impairment loss is reversed through
the consolidated statement of comprehensive income to the extent that the carrying
amount of the financial asset at the date the impairment is reversed does not exceed what
the amortised cost would have been had the impairment not been recognised.
30
The Group derecognises a financial asset or a portion of financial asset when, and only when,
the contractual rights to the cash flows from the assets expire; or it transfers the financial
asset and substantially all of the risks and rewards of ownership of the asset to another entity.
If the Group neither transfers nor retains substantially all of the risks and rewards of ownership
and continues to control the asset, the Group recognises its retained interest in the asset
and associated liability for amounts it may have to pay. If the Group retains substantially all
the risks and rewards of ownership of a transferred financial asset, the Group continues to
recognise the financial asset and also recognises a collateral borrowing for the proceeds
received.
Financial liabilities
Financial liabilities are initially measured at fair value and are classified according to the
substance of the contractual arrangement entered into. Financial liabilities are subsequently
measured at amortised cost. The Group’s financial liabilities comprise trade payables,
borrowings and other payables balances that arise from its operations. They are classified
as “financial liabilities measured at amortised cost”. Finance charges are accounted for
on an accruals basis in the consolidated statement of comprehensive income using the
effective interest rate method and are added to the carrying amount of the investment
to the extent that are not settled in the period in which they arise. The Group derecognises
financial liabilities when the Group’s obligations are discharged, cancelled or they expire.
Embedded derivatives
An embedded derivative is one or more implicit or explicit terms in a host contract that affect
the cash flows of the contract in a manner similar to a stand-alone derivative instrument. An
embedded derivative is accounted for separately from the host contract when it is not closely
related to the host contract. The embedded derivative and host contract are considered
to be closely related when the economic characteristics and risks of each are considered
to be similar. If the embedded derivative is “closely related” to the host then there is no
need to separate the embedded derivative. Conversely, if the embedded derivative is not
closely related to the host, then the embedded derivative should be separated and carried
at fair value through profit or loss. The assessment of whether an embedded derivative is
required to be separated from the host contract and accounted for as a derivative is made
at inception of the contract, i.e., when it first becomes a party to the contract. A derivative
instrument is a type of contract under which cash flows are linked to movements in some
other rate, index, or commodity. It will require relatively little up-front investment, and will be
settled at a future date.
(o)
Impairment of non-financial assets
The carrying amounts of the Group’s assets are reviewed at the end of each reporting
period to determine whether there is any indication of impairment loss. If any such indication
exists, the asset’s recoverable amount is estimated in order to determine the extent of the
impairment loss, if any. 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 cost to sell and value in use. Impairment losses are charged to
the consolidated statement of comprehensive income in selling, general and administrative
expenses. During the years ended 30 June 2014 and 2013, no impairment was recorded.
31
(p)
Affiliated companies
Affiliated companies represent the companies under the common control of the Ultimate
Parent Company, TRGI.
(q)
Cash and cash equivalents consist of cash and cheques on hand and bank deposits
available on demand.
(r)
Share capital
Ordinary shares are classified as equity. Equity instruments issued are recorded at the
proceeds received, net of direct issue costs.
(s)
Employee stock option plan
The Ultimate Parent Company, TRGI, maintains a Stock Option Plan (the Plan), which
authorises the granting of stock options to certain employees of the Group to acquire
Ordinary Shares and restricted stock awards (Company Options) over Ordinary Shares of
the Parent Company. Each subsidiary recognises as an expense the services acquired
related to the Plan for the options granted to its employees over the vesting period with a
corresponding increase in the equity.
For cash settled share based payment plans, each subsidiary recognises an expense for the
services acquired over the vesting period and liability incurred at the fair value of the liability.
The entity re-measures the fair value of the liability at the end of each reporting period until
the date of settlement, with any changes in value recognised in profit or loss for the period.
Any cancellations of the Plan are treated as acceleration of vesting period and any
remaining expense is recognised immediately.
(t)
Retirement benefits
The subsidiaries of the Holding Company maintain their individual retirement benefit plans
as follows:
TRG Customer Solutions Inc. maintains the defined contribution TRG 401(k) Plan (the Plan),
formerly known as the TRG Customer Solutions, Inc. 401(k) Retirement Savings Plan. The Plan
was amended effective 1 January, 2010 to: (i) comply with Economic Growth and Tax Relief
Reconciliation Act; (ii) eliminate the hardship withdrawal provision; (iii) change the eligibility
to make Elective Deferrals; (iv) change the Vesting Service to the Elapsed Time Method; and
(v) rename the Plan to the TRG 401(k) Plan. The Plan is a single employer plan including the
affiliated companies: TRG iSky, Inc., TRG Holdings, LLC, SATMAP Incorporated, and Digital
Globe Services. Employees who meet certain eligibility requirements, as defined, are able
to contribute up to federal annual maximums. The Plan provides for Company matching
contributions of 25.0% of the first 6.0% of employee contributions to the Plan, which vests
25.0% per year over a four year period. The subsidiary’s contributions to the Plan for the fiscal
years ended 30 June 2014 and 2013 were $53,283 and $36,000, respectively.
32
IBEX Philippines Inc. operates an unfunded defined benefit plan. Under the Plan, pension
costs are actuarially determined using the projected unit credit method. This method
considers each period of service as giving rise to an additional unit of benefit entitlement
and measures each unit separately to build up the final obligation. Gains or losses on the
curtailment or settlement of pension benefits are recognised when the curtailment or
settlement occurs. In line with IAS 19 (Revised 2011), Employee Benefits, all actuarial gains and
losses are recognised in the year in which they arise, with re-measurements presented within
other comprehensive income. The net interest cost is derived by applying a single discount
rate to the net surplus or deficit of the fund. These gains and losses are recognised over
the expected average remaining working lives of the employees participating in the Plan.
Otherwise, the actuarial gain or loss is not recognised. When the benefits of the pension plan
are improved, the portion of the increased benefit relating to past service by employees is
recognised in the consolidated statement of comprehensive income on a straight-line basis
over the average period until the benefits become vested. To the extent that the benefits
vest immediately, the expense is recognised immediately in the consolidated statement of
comprehensive income.
Virtual World (Private) Limited operates a defined contribution plan (i.e. recognised
provident fund scheme) for all its permanent employees. Equal monthly contributions at
the rate of 6.5% of the basic salary are made to Provident Fund (the Fund) both by the
subsidiary and employees. The assets of the fund are held separately under the control of
Trustees. Contributions made by the subsidiary are charged to the consolidated statement
of comprehensive income.
IBEX UK Limited operates the Axa Insurance Personal Pensions Scheme. This is a defined
contribution plan under which the subsidiary makes contributions for some employees.
(u)
Taxation
Current taxation
The charge for current taxation is based on taxable income at the current rates of taxation
of the respective countries of incorporation of the Group entities after taking into account
applicable tax credits, rebates and exemptions available, if any.
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 taxation
Deferred tax is provided on all temporary differences at the end of each reporting period,
between the tax base of the assets and liabilities and their carrying amounts for financial
reporting purposes.
Deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax
assets are recognised for all deductible temporary differences and unused tax losses to
the extent that it is probable that the deductible temporary differences will reverse in the
future and sufficient taxable profits will be available against which the deductible temporary
differences and unused tax losses can be utilised. However, deferred 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.
33
The carrying amount of all deferred tax assets is reviewed at the end of each reporting
period and reduced to the extent that it is no longer probable that sufficient taxable profits
will be available to allow all or part of the deferred tax assets to be utilised.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply
to the period when the asset is realised or the liability is settled, based on the tax rates (and
tax laws) that have been enacted or substantively enacted at the end of the reporting
period.
(v)
Borrowing costs
Borrowing costs relating to the acquisition, construction or production of a qualifying asset
are recognised as part of the cost of that asset. All other borrowing costs are recognised as
an expense in the period in which they are incurred.
(w)
Investment in subsidiaries
Investment in subsidiaries is carried at cost and tested for impairment on an annual basis.
(x)
Use of estimates and judgements
The preparation of the consolidated financial statements requires the use of certain critical
estimates that affect the reported amounts of assets and liabilities, revenues and expenses.
It also requires management to exercise its judgement in the process of applying the Group’s
accounting policies.
Estimates and judgements are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are believed to
be reasonable under the circumstances. Due to the inherent uncertainty involved in making
those estimates, actual results reported in future periods could differ from those estimates.
Revisions to accounting estimates are recognised in the period in which the estimates are
revised and in any future periods affected.
In the process of applying Group’s accounting policies, management has made the following
estimates and judgements which are significant to the consolidated financial statements:
Recognition of training revenue and associated incremental direct expenses
Management have considered a number of alternative options for the recognition of
training revenue and associated incremental direct expenses and following this review they
have concluded the following:
34
-
as training revenue does not have a standalone value to the customer it should be
amortised on a straight-line basis over the life of the client contract.
-
as incremental direct expenses relate directly to each customer contract, generated
or enhanced resources that will be used in satisfying performance obligations in the
future and are expected to be recovered in full should be deferred and amortised
on a straight-line basis over the life of the client contract.
Impairment of goodwill
The calculation for considering the impairment of the carrying amount of goodwill requires
a comparison of the present value of the cash-generating units to which goodwill has been
allocated, to the value of goodwill and the associated assets in the consolidated statement
of financial position. The calculation of present value requires an estimate of the future cash
flows expected to arise from the cash generating unit, the selection of a suitable discount
rate and terminal value.
The key assumptions made in relation to the impairment of goodwill are set out in note 10.
Staff retirement plans and other employee benefits
The net defined benefit pension plan assets or liabilities are recognised in the Group’s
consolidated statement of financial position. The determination of the position requires
assumptions to be made regarding future salary increases, mortality, discount rates and
inflation. The key assumptions made in relation to the pension plans are set out notes 26 and
28.
Provision for taxation
Management has estimated the stand-alone tax position of Group entities for inclusion
in these consolidated financial statements. The key assumptions made in relation to tax
provisioning are set out in note 29.
Separation of embedded derivative from the line of credit
Management has assessed whether an embedded derivate is required to be separated
from the current line of credit in these consolidated financial statements. The key judgements
made in relation to this are set out in note 22.
(y)
Exceptional items
Exceptional items are disclosed separately in the consolidated financial statements where
it is necessary to do so to provide further understanding of the financial performance of the
Group. They are material items of income or expense that have been shown separately due
to the significance of their nature and amount.
(z)
Standards, Interpretations and Amendments not yet effective
The Group has not early adopted the following new standards, amendments or interpretations
that have been issued but are not yet effective. The directors anticipate that the adoption
of these standards will not result in significant changes to the Group’s accounting policies.
The Group has commenced its assessment of the impact of these standards but it is not yet
in a position to state whether these standards would have a material impact on its results of
operations and financial position.
•
•
•
•
•
•
•
•
IFRS 10, Consolidated Financial Statements (effective 1 January 2014)
IFRS 11, Joint Arrangements (effective 1 January 2014)
IFRS 12, Disclosure of Interests in Other Entities (effective 1 January 2014)
IAS 27, (Revised), Separate Financial Statements (effective 1 January 2014)
IAS 28, (Revised), Investments in Associates and Joint Ventures (effective 1 January 2014)
IFRS 9, Financial Instruments (effective 1 January 2015)
IFRIC 21, Levies (effective 1 January 2014)
Amendments to IFRS 10, IFRS 11, IFRS 12, IAS 27, IAS 36, Impairment of Assets, and IAS
39, Financial Instruments: Recognition and Measurement (effective 1 January 2014)
35
(5)
Operating segments
These consolidated financial statements have been prepared on the basis of a single operating
segment. Whilst the Group operates in different locations, there are no multiple products or lines of
services upon which the results reported to the Chief Operating Decision Maker are segregated and
analysed.
93.8% and 91.6% of the total revenue was earned from customers in the United States of America for
the years ended 30 June 2014 and 2013, respectively.
The following table summarises those non-related party customers with revenue or accounts
receivable in excess of 5.0% total revenue or total receivables for the years ended 30 June 2014
and 2013, respectively. The revenue analysis below does not form part of the Group’s segmental
reporting but is provided voluntarily.
Amount
$’000's
Client 1
Client 2
Client 3
Client 4
Others
63,156
57,669
12,358
11,690
144,873
39,146
34
31
8
6
79
21
18,209
8,710
1,262
2,513
30,694
4,539
52
25
3
7
87
13
184,019
100
35,233
100
Amount
$’000's
Client 1
Client 2
Client 3
Client 4
Others
30 June 2014
Revenue
Accounts receivable
Percentage
Percentage of
of total
Total
Amount
%
$’000's
%
30 June 2013
Revenue
Accounts receivable
Percentage
Percentage of
of total
total
Amount
%
$’000's
%
41,966
41,960
12,853
8,570
105,349
36,157
30
30
9
6
75
25
9,113
11,170
1,745
1,914
23,942
4,877
32
39
6
6
83
17
141,506
100
28,819
100
Above clients are Fortune 100 and/or Fortune 500 companies.
Revenues are attributed to geographic areas based upon the location in which the sale originated.
The Holding Company is domiciled in the United Kingdom.
36
Non-current assets located outside of the United Kingdom comprises majority of assets of TRG
Customer Solutions Inc., IBEX Philippines Inc. and IBEX Global Solutions (Philippines) Inc. as at 30 June
2014 and 2013 as follows:
30 June
30 June
2014
2013
Location
$'000's
$'000's
TRG Customer Solutions, Inc.
IBEX Philippines Inc.
IBEX Global Solutions (Philippines) Inc.
(6)
USA
Philippines
Philippines
20,903
2,391
7,755
31,049
13,413
1,266
1,211
15,890
30 June
2014
$'000's
30 June
2013
$'000's
150,742
4,209
70
25,246
180,267
113,243
2,311
273
24,088
139,915
155,783
24,484
180,267
120,729
19,186
139,915
Expenses by nature
Employee benefit expenses (note 27)
Depreciation and amortisation
Foreign currency losses
Other expenses
Analysed as:
Cost of sales
Selling, general and administrative expenses
The analysis of auditor’s remuneration, included under Other Expenses, is as follows:
Audit fees:
Audit of Parent Company and consolidated financial statements
Audit of Parent Company’s subsidiaries pursuant to legislation
Non-audit fees:
Tax compliance services
Other services*
30 June
2014
$'000's
30 June
2013
$'000's
31
151
182
33
133
166
70
61
131
9
432
441
*In 2013, other services represent fees for the assurance services, special audit and tax expenses
related to the admission on AIM of London Stock Exchange.
37
(7)
Exceptional items
7.1 Operating expense
30 June
30 June
2014
2013
$'000's
$'000's
Cost related to admission to the London Stock Exchange
-
1,030
Affiliates balances written off
-
15,670
-
16,700
On 30 March 2013, TRG Customer Solutions Inc., IBEX Philippines Inc. and IBEX Global Solutions
(Philippines) Inc. wrote off its balances with other affiliates as follows:
30 June
2013
$’000's
Due from affiliates (net)
461
TRG Holdings LLC
Alert, Inc.
TRG Marketing Services, Inc.
TRG iSky, Inc.
BPO Solutions, Inc.
944
10,605
390
3,291
Total
15,691
Due to affiliates
Stratasoft, Inc.
Net write off amount
(21)
15,670
7.2 Other expense
30 June
Early termination fees of Capital Source Bank
30 June
2014
2013
$'000's
$'000's
826
-
826
-
Early termination fees were paid to Capital Source Bank (CSB) after the Company signed a Revolving
Credit and Security Agreement with PNC Bank, National Association (PNC) for a new revolving line of
credit (RLOC) to replace the CSB RLOC on 8 November 2013 (see note 22).
38
(8)
Finance costs
Interest on bank borrowings
Factoring fees
Finance charges on leased assets
Bank charges
(9)
Profit / (loss) before income taxes
Profit / (loss) before income taxes is stated after charging:
Operating lease expenses
Land and buildings
Depreciation of property, plant and equipment:
Owned
Held under finance leases
Amortisation:
Owned
Held under finance leases
Foreign currency losses
30 June
30 June
2014
2013
$'000's
$'000's
1,110
1,774
-
5
678
134
11
11
1,799
1,924
30 June
2014
$'000's
30 June
2013
$'000's
7,093
6,362
1,712
2,302
1,568
557
169
26
104
82
388
273
30 June
2014
$'000's
30 June
2013
$'000's
8,644
8,644
(10)Goodwill
Cost and net book value
Goodwill arose on the acquisition of the trade and assets of TRG iSky, Inc. and Murt Inc.by TRG
Customer Solutions, Inc. and the merger of Reese, Inc. with TRG Customer Solutions, Inc., therefore
goodwill is allocated to TRG Customer Solutions, Inc. as a cash generating unit for impairment testing
purposes.
Goodwill is tested annually for impairment or more frequently if there are indications that the value of
goodwill may have impaired. Goodwill is tested for impairment by comparing its carrying value with
the recoverable amount for the IBEX Global Solutions, Inc.
39
Testing for impairment of goodwill
Key assumptions applied in impairment testing
The recoverable amount of the cash generating unit is determined on a value in use basis using
cash flow projections prepared by management covering a five-year period. The first year of
the projections is based on detailed budgets prepared by management as part of the Group’s
performance and control procedures. Subsequent years are based on extrapolations using the key
assumptions listed below which are management approved projections. The discount rate applied
to cash flow projections beyond five-years is extrapolated using a terminal growth rate which
represents the expected long-term growth rate of the BPO sector.
The following rates were used by the Group for the years ended 30 June 2014, 2013 and 2012:
30 June 2014
30 June 2013
30 June 2012
Revenue
growth rate
%
Gross
Margin
%
Discount
rate
%
Terminal
growth rate
%
5.0
5.0
5.0
16.5
16.5
22.6
15.2
15.2
15.2
5.0
5.0
5.0
The calculation of value in use for the business operations is most sensitive to changes in the following
assumptions:
Revenue growth
Revenue growth assumptions have been derived from projections prepared by the management.
Management is of the view that these assumptions are reasonable considering current market
conditions.
Cost of sales and gross margin
Cost of sales has been projected on the basis of multiple strategies planned by management to
ensure profitable operations. These strategies include cost minimisation mechanisms such as offshore
migration of labour, centralisation of support activities and increasing efficiency of service delivery,
resulting in improved gross margins over the forecasted period.
Discount rate
Discount rates reflect management estimates of the rate of return required for the business and
are calculated after taking into account the prevailing risk free rate, industry risk and business risk.
Discount rates are calculated using the weighted average cost of capital.
Management does not believe that a reasonably possible change in any of the key assumptions
would result in impairment of goodwill.
40
(11)
Intangible assets
Patents
$’000's
Trademarks
$’000's
Software
$’000's
Total
$’000's
196
196
371
371
2,690
3,690
6,380
3,257
3,690
6,947
196
196
-
2,459
195
1
2,655
2,655
195
1
2,851
At 30 June 2014
-
371
3,725
4,096
At 30 June 2013
-
371
231
602
Patents
$’000's
Trademarks
$’000's
Software
$’000's
Total
$’000's
196
371
2,602
3,169
196
371
88
2,690
88
3,257
196
196
-
2,267
186
6
2,459
2,463
186
6
2,655
At 30 June 2013
-
371
231
602
At 30 June 2012
-
371
335
706
Cost
At 1 July 2013
Additions
At 30 June 2014
Accumulated amortisation
At 1 July 2013
Amortisation charge for the year
Foreign currency differences
At 30 June 2014
Net book value
Cost
At 1 July 2012
Additions and adjustments for grants
received
At 30 June 2013
Amortisation
At 1 July 2012
Amortisation charge for the year
At 30 June 2013
Net book value
Allocation of amortisation charge in the consolidated statement of comprehensive income
Cost of sales
Selling, general and administrative expenses
30 June
2014
$'000's
30 June
2013
$'000's
188
7
186
-
195
186
41
The intangible assets that have an indefinite life are trademarks and are considered to have an
indefinite life on the grounds of the proven longevity of the trademarks and the Group’s commitment
to maintaining those trademarks.
In June 2014, one of the subsidiaries of the Parent Company entered into a financing arrangement
with IBM Credit LLC to finance the purchase of software licenses from Microsoft Corporation (see
note 20).
(12)
Leasehold
Improvements
$’000's
Furniture
and
fittings
$’000's
Computers,
communications
and office
equipment
$’000's
Vehicles
$’000's
Total
$’000's
3,385
3,914
(5)
1,709
5,340
6
15,838
5,074
(6)
(38)
250
41
(52)
(2)
21,182
14,369
(58)
(39)
At 30 June 2014
7,294
7,055
20,868
237
35,454
Disposals
2,952
1,217
-
1,355
625
-
12,719
2,146
(1)
151
26
(8)
17,177
4,014
(9)
At 30 June 2014
4,169
1,980
14,864
169
21,182
At 30 June 2014
3,125
5,075
6,004
68
14,272
At 30 June 2013
433
354
3,119
99
4,005
3,156
234
(5)
1,467
245
(3)
14,259
1,599
(20)
212
99
(57)
(4)
19,094
2,177
(57)
(32)
3,385
1,709
15,838
250
21,182
2,729
223
-
1,159
196
-
11,029
1,690
-
186
16
(51)
15,103
2,125
(51)
2,952
1,355
12,719
151
17,177
At 30 June 2013
433
354
3,119
99
4,005
At 30 June 2012
427
308
3,230
26
3,991
Cost
At 1 July 2013
Additions
Disposals
Accumulated
depreciation
At 1 July 2013
Charge for the year
Net book value
Cost
At 1 July 2012
Additions
Disposals
Depreciation
At 1 July 2012
Charge for the year
Disposals
Net book value
42
Details of property, plant and equipment held under finance lease are as follows:
At 30 June 2014
Cost
Accumulated depreciation
Closing net book value
At 30 June 2013
Cost
Accumulated depreciation
Closing net book value
(13)
Leasehold
improvements
$’000's
Furniture
and
fittings
$’000's
Computers
communication
and office
equipment
$’000's
Vehicles
$’000's
Total
$’000's
2,792
(912)
5,104
(494)
4,094
(1,234)
126
(93)
12,116
(2,733)
1,880
4,610
2,860
33
9,383
-
-
2,563
(1,104)
95
(6)
2,658
(1,110)
-
-
1,459
89
1,548
Other non-current assets
Other non-current assets consist of the following:
Long-term deposits
Long-term deferred expenses
Long-term prepayment
Other
30 June
2014
$'000's
30 June
2013
$'000's
1,362
1,415
853
1,000
4,630
1,525
349
1,182
790
3,846
On 31 March 2013, the Holding Company entered into a contract of Standard Terms and Conditions
with SATMAP Incorporated (SATMAP), subsequently amended on 31 March 2013 and April 2013 (the
contract and the two amendments collectively, Agreement). Under the Agreement, the Holding
Company (a) issued additional share capital of $1.0 million to TRGI, direct parent of the Holding
Company and indirect parent of SATMAP; and (b) issued a note in the amount of $1.0 million payable
to SATMAP. In exchange, the Company received an asset of $2.0 million in dedicated data services
(up to 2000 call-centre seats) from SATMAP to be amortised over 120 months. The asset represents
an advance payment for the proprietary artificial intelligence and pattern recognition technology
invented and developed by SATMAP (SATMAP Services). The SATMAP Services integrate with callcentre telephony and agent staffing to connect in real time customers with agents most likely to
produce improved performance and service in call outcomes for such customers. As of 14 October
2013, the Holding Company (with the consent of SATMAP) assigned all of its rights and obligations
under the Agreement and the note to TRG Customer Solutions, Inc. d/b/a IBEX Global Solutions,
Inc. (IBEX US), which assumed all such rights and obligations. The assignment and assumption of
the Agreement and the note enables IBEX US to use the SATMAP Services in its call centres. IBEX US
deploys the SATMAP Services in its call centres to enhance performance and as a value-added
differentiator for its clients, producing more revenue for both the clients and IBEX US. The total value
(net of amortisation) of this asset as of 30 June 2014 is $1.8 million, of which $1.6 million is classified as
a non-current asset ($0.8 million each in long-term prepayment and long-term deferred expenses)
and $0.2 million is classified as a current asset. As of 30 June 2013, the total value of this asset (net
of amortisation) was $1.9 million, of which $1.1 million was classified as a non-current asset and $0.8
million was classified as a current asset.
43
(14)
Trade and other receivables consist of the following:
Trade receivables – gross
Less: provision for doubtful debts
Trade receivables – net
Prepayments and other receivables
Deposits
IPO funds receivable*
30 June
2014
$'000's
30 June
2013
$'000's
35,607
(374)
35,233
3,504
250
-
29,161
(342)
28,819
2,753
172
7,506
38,987
39,250
*The Holding Company was admitted to AIM of the London Stock Exchange on 28 June 2013. The
funds from the flotation were received on 2 July 2013.
Provision for doubtful debts
(15)
30 June
2014
$'000's
30 June
2013
$'000's
Opening balance as of 1 July
Charge for the year
Foreign exchange differences
Reversals/write offs against provision
342
120
(59)
(29)
147
221
(26)
Closing balance as of 30 June
374
342
Cash and cash equivalents consist of the following:
30 June
2014
$'000's
30 June
2013
$'000's
3,391
606
3,997
8
10,386
255
10,641
10
4,005
10,651
30 June
2014
$'000's
30 June
2013
$'000's
Authorised
39,554,400 ordinary shares of $0.0152
602
602
Allotted. called up and fully paid
602
602
Balances with banks in:
- current accounts
- deposit accounts
Cash in hand
(16)
44
Share capital
The following share issues and redemptions were made by the Group since its incorporation:
Opening share capital, being subsidiaries share capital
Reversal of subsidiaries share capital on incorporation
26 March 2013 on incorporation
31 March 2013 on transfer of subsidiary assets
28 June 2013 IPO on AIM listing
Ending share capital, being subsidiaries share capital
No. of ordinary
shares
3,677,582
(3,677,582)
1
32,250,554
7,304,345
39,554,900
Consistent with the pooling of interest method of accounting, as described in note 1, Basis of
Preparation, the issued share capital shown above at 30 June 2014 and 2013 is that of the Holding
Company with the comparative issued share capital being that of the subsidiaries of the Holding
Company.
On 31 May 2013, by means of a board decision of the sole director and a written resolution of the sole
member, the Holding Company adopted a new set of articles of association and divided its shares
with a nominal value of £1 each into:
•
•
one ordinary share of one pence each in the capital of the Holding Company; and
one deferred share of 99 pence each in the capital of the Holding Company (a “Deferred
Share”).
On 31 May 2013, the Holding Company received an application for 100 ordinary shares of one
pence each from M Khaishgi (at par). M Khaishgi is a Director on TRGI’s Board. On the same date,
by means of a Board decision of the sole Director and a written resolution of the sole member, the
Holding Company granted its directors a general and unconditional authority under section 551
of the Companies Act 2006 to allot shares in the Holding Company up to an aggregate nominal
amount of £1. Thereafter, 100 ordinary shares of one pence each were issued to M Khaishgi for an
aggregate subscription price of £1.
On 31 May 2013, by means of a Board decision of the sole director and a written resolution of the
eligible shareholder, the Holding Company agreed to purchase 32,000,000 Deferred Shares from
TRGI for a total consideration of £1. On the same date, the Holding Company entered into an offmarket share purchase agreement with TRGI to effect such transfer of Deferred Shares and upon
completion of such share buyback, the Deferred Shares were cancelled.
On 31 May 2013, M Khaishgi sold his interest in 100 ordinary shares of one pence each in the Holding
Company to TRGI for aggregate consideration of £1.
At the conclusion of the above series of transactions, the Holding Company’s share capital consists
of 32,250,055 ordinary shares of one pence each, with a nominal share capital of £322,500. The
Holding Company issued additional shares with a nominal value of £73,043 at the time of admission
to AIM.
All shares are equally eligible to receive dividends and the repayment of capital, and represent one
vote each at the Annual General Meeting.
45
(17)
Opening balance
Redemption of deferred shares
Closing balance
(18)
30 June
2014
$'000's
30 June
2013
$'000's
48,530
48,530
48,530
48,530
Share option plan
The Group maintains the following share based payment plans:
Company Stock Plan 2013
Equity Settled
Phantom Stock Plans
Cash Settled
Any cancellations of grants other than due to termination of employment are treated as acceleration
of vesting period and any remaining expense is recognised immediately.
Company Stock Plan 2013
TRGI and the Parent Company adopted an employee stock option plan on 4 June 2013 (the
Company Stock Plan 2013) to enable certain executives and employees of the Group to be granted
options to acquire Ordinary Shares and restricted stock awards (Company Options) over 4,616,688
and 4,301,890 Ordinary Shares of the Parent Company as of 30 June 2014 and 2013, respectively.
These options were over the Holding Company shares already held by TRGI (rather than new shares
earmarked for issuance by the Parent Company).
The obligation to issue shares under this plan is with TRGI, therefore, each individual entity within the
Group accounts for these grants by recognising a share based payment expense for the Plan with
the corresponding increase in equity.
Phantom Stock Plan
Certain subsidiaries of the Parent Company have established Phantom Stock Plans in order to
provide financial incentives to their officers, employees and consultants that are tied to the value of
the Parent Company and thereby aligning their interests with the Parent Company’s stockholders.
For cash settled share based payment plans, each entity recognises an expense for the services
acquired over the vesting period and liability incurred at the fair value of the liability. The entity
remeasures the fair value of the liability at the end of each reporting period until the date of
settlement, with any changes in value recognised in profit or loss for the period.
TRGI Share Options Plan
The majority shareholder (was previously the parent entity), TRGI, maintains a stock option plan,
which authorises the granting of stock options to employees of the Group and other subsidiaries of
TRGI. Prior to the rollout of the Parent Company’s own stock plan, certain eligible executives of the
Parent Company participated in the TRG Share Options Plan. While these options are exercisable in
exchange for shares in TRGI and not of the Parent Company or any of the subsidiaries included in the
Group, the Group historically recognised expense related to the Plan.
46
With the rollout of the Parent Company’s own stock plan in 2013, those TRGI share options that were
surrendered and were unvested were considered to have been accelerated and recognised as
an expense by the Parent Company. The amount recognised as compensation cost in profit or loss
within the consolidated statement of comprehensive income related to the TRGI Share Option Plan
for the year ended 30 June 2013 was $54,980. No additional expense associated with the TRGI Share
Option Plan was recognised by the Parent Company after 30 June 2013.
COMPANY STOCK PLAN 2013
The main features of the Company Stock Plan 2013 (which is not yet approved by HM Revenue and
Customs) are summarised below:
Eligibility
Options may be granted under the Company Stock Plan 2013 at the discretion of the Board of the
Parent Company or a committee of the Board of the Parent Company to employees, directors, and
consultants of the Group.
Scheme limit
The number of grants that may be made pursuant to the Company Stock Plan 2013 are limited in
aggregate to 4,616,688 and 4,301,890 options on Ordinary Shares of the Parent Company held by
TRGI as of 30 June 2014 and 2013, respectively.
Grant of options
Options may be granted at any time, at the discretion of the Board of the Parent Company or a
committee of the Board of the Parent Company, provided that the grant of such option would
not breach the terms of any share dealing, corporate governance code adopted by the Parent
Company, the AIM Rules and regulations applicable from time to time, or exceed the number of
shares authorised and reserved for the Company Stock Plan 2013.
Exercise price
The exercise price payable per Ordinary Shares is:
•
in the case of an employee of the Group owning 10 (ten) percent or more of the voting
power of all classes of share of the Parent Company or its Parent or any company in the
Group, the exercise of the option shall be equal to or greater than 110 per cent of the fair
market value of the Ordinary Shares on the date the option is granted; and
•
in the case of any other employee, the exercise of the option shall be equal to or greater
than 100 per cent of the fair market value.
The fair market value shall, where possible, be the closing price per share of the Parent Company as
reported in the Wall Street Journal for the date of grant.
Amendment and Termination
The Company Stock Plan 2013 may be altered or terminated at any time, except that a termination
or amendment, which materially and adversely affects or impairs the rights of subsisting option
holders, shall not be made unless the option holder consents.
Change of Control
In the event of a change of control of TRGI or the Parent Company, the administrator of the Company
Stock Plan 2013 has discretion as to how such options are determined.
47
During the years ended 30 June 2014 and 2013, the Company granted 324,768 and 4,301,890 share
options to its employees, respectively. The weighted average exercise price of options granted
during 2014 and 2013 was $3.09 and $1.55, respectively. The options have a maximum contractual
term of no longer than ten years from their date of grant and vest and become exercisable over a
maximum period of 42 months in accordance with terms of the grant agreement. No options have
been exercised as at 30 June 2014 and 2013.
The Parent Company estimates the fair value of its stock options on the date of the grant using the
Black Scholes option pricing model, which requires the use of certain estimates and assumptions
that affect the reported amount of share based compensation cost recognised in the profit and
loss. These include estimates of the expected term of stock options, expected volatility of the Parent
Company’s shares, expected dividends and the risk-free interest rate:
(a) Expected term
The expected term of options granted during the years ended 30 June 2014 and 2013 is six years. In
estimating the expected term, the Group applied the “simplified method,” which assumes all options
will be exercised midway between the vesting date and the contractual term of the option.
(b) Volatility
As the Company was recently listed on AIM, estimated volatility for fiscal year 2013 was derived
by calculating the average historical volatility of certain comparable public companies in the call
centre/business process outsourcing sector over the expected term of the options. Management
used a volatility of 43.1% and 55.0% for grant calculations for the years ended 30 June 2014 and 2013,
respectively.
(c) Expected dividends
The expected dividend yield is 2.2% and 3.0% for 2014 and 2013, respectively.
(d) Risk-free rate
The risk free rate is the continuously compounded United States nominal treasury rate corresponding
to the term of the option. The risk free rate used for options granted during the years ended 30 June
2014 and 2013 were 2.2% and 2.1%, respectively.
48
30 June
2014
30 June
2013
No. of share options
Options outstanding, beginning
Options granted during the year
Options forfeited/cancelled/expired during the year
Options outstanding, ending
4,301,890
324,768
(9,970)
4,616,688
4,301,890
4,301,890
Options exercisable
2,589,753
548,262
A summary of the stock options outstanding and exercisable as at 30 June 2014 and 2013 are as
follows:
30 June 2014
Options Outstanding
Options Exercisable
Number
Weighted average
remaining life
(years)
Weighted average
exercise price US $
Number
Weighted average
remaining life
(years)
Weighted average
exercise price US $
4,616,688
9.13
1.66
2,589,753
8.95
1.61
30 June 2013
Options Outstanding
Options Exercisable
Number
Weighted average
remaining life
(years)
Weighted average
exercise price US $
4,301,890
9.91
1.55
Number
Weighted average
remaining life
(years)
Weighted average
exercise price US $
548,262
9.91
1.55
The weighted average grant date fair value of stock options granted during the years ended 30
June 2014 and 2013 are $0.890 and $0.249, respectively. The amount recognised as share based
payment expense pertaining to this plan for the years ended 30 June 2014 and 2013 were $676,889
and $410,435, respectively.
49
PHANTOM STOCK PLAN
The main features of the Phantom Stock Plans are summarised below:
Phantom Stock Option
A Phantom Stock Option is the right to receive upon exercise an amount equal to the difference
between
(a) the fair value of the share of stock at the time of exercise; and
(b) the exercise price of the option per share of stock.
The following subsidiaries of the Company have established Phantom Stock Option Plans:
•
•
•
•
TRG Senegal SA
Eligibility & grant of options
Options may be granted under the Phantom Stock Plans at the discretion of a committee of the
Board of Directors of the respective entity designated for granting options. Where no such committee
is designated; by the Chief Executive Officer of the relevant entity.
Exercise price and exercise date
The exercise price of the options granted under the Plan will be provided in the grant agreement. The
vested options can be exercised on the date announced by the relevant entities for this purpose.
Amendment and termination
The Board of Directors of the respective entity may amend or terminate these plans at any time.
These plans shall continue until terminated by the respective Boards.
During the years ended 30 June 2014 and 2013, the subsidiaries included in the Group granted 147,088
and 624,300 Phantom Stock Options, respectively, to their respective employees. The weighted
average exercise price of all options granted in 2014 and 2013 was $3.24 and $1.55, respectively. The
options have a maximum contractual term of no longer than ten years from their date of grant and
vest and become exercisable over a maximum period of 42 months in accordance with terms of the
grant agreement. No options have been exercised as at 30 June 2014 and 2013.
The grants of Phantom Stock Options are treated as cash settled share based payment transactions
under IFRS 2. The fair value of the liability is measured at the end of each reporting period and
settlement date and changes in fair value are recognised in profit and loss for the period. The Parent
Company uses the Black Scholes option pricing model, which requires the use of certain estimates
and assumptions that affect the reported amount of share based compensation cost recognised in
the profit and loss. These include estimates of the expected term of stock options, expected volatility
of the Parent Company’s shares, expected dividends and the risk-free interest rate:
(a) Expected term
The expected term of options granted during the years ended 30 June 2014 and 2013 is six years. In
estimating the expected term, the Group applied the “simplified method,” which assumes all options
will be exercised midway between the vesting date and the contractual term of the option.
50
(b) Volatility
As the Parent Company was recently listed on AIM, estimated volatility for fiscal year 2013 was derived
by calculating the average historical volatility of certain comparable public companies in the call
centre/business process outsourcing sector over the expected term of the options. Management
used a volatility of 53.2% and 55.0% for measurement of fair value of options as at 30 June 2014 and
2013, respectively.
(c) Expected dividends
The expected dividend yield is 2.7% and 3.0% for 2014 and 2013, respectively.
(d) Risk-free rate
The risk free rate is the continuously compounded United States nominal treasury rate corresponding
to the term of the option. The risk free rate used for computation of fair value of options as at 30 June
2014 and 2013 were 2.1% and 2.5%, respectively.
30 June
30 June
2014
No. of share options
Options outstanding, beginning
624,300
Options granted during the year
147,088
Options forfeited/cancelled/expired during the year
-
Options outstanding, ending
771,388
Options exercisable
301,633
2013
624,300
624,300
145,372
A summary of the stock options outstanding and exercisable as at 30 June 2014 and 2013 are as
follows:
30 June 2014
Options Outstanding
Options Exercisable
Number
Weighted average
remaining life
(years)
Weighted average
exercise price US $
Number
Weighted average
remaining life
(years)
Weighted average
exercise price US $
771,388
9.01
1.87
301,633
8.93
1.55
30 June 2013
Options Outstanding
Options exercisable
Number
Weighted average
remaining life
(years)
Weighted average
exercise price US $
Number
Weighted average
remaining life
(years)
Weighted average
exercise price US $
626,000
9.91
1.55
145,372
9.91
1.55
51
The weighted average fair value of Phantom Stock Options as at 30 June 2014 and 2013 are $1.207
and $1.110, respectively. The amount recognised as share based payment expense pertaining to this
plan for the years ended 30 June 2014 and 2013 were $467,586 and $206,012, respectively. A total of
301,633 and 143,800 Phantom Stock Options having total intrinsic value of $268,453 and $103,536 had
vested as at 30 June 2014 and 2013, respectively.
(19)
Liabilities against assets subject to finance lease
Liabilities against assets subject to finance lease are secured by the related assets held under finance
leases. Future minimum lease payments at 30 June 2014 and 2013 are as follows:
30 June 2014
Minimum
Present
lease
value of
payments
payments
$000's
$000's
Within one year
After one year but not more than five years
Total minimum lease payments
Less: amounts representing finance charges
Present value of minimum lease payments
Less: current portion shown under current
liabilities
Obligation under finance lease – non-current
30 June 2013
Minimum
Present
value of
lease
payments
payments
$000's
$000's
3,513
7,855
11,368
(1,510)
9,858
2,823
7,035
9,858
9,858
921
323
1,244
(124)
1,120
807
313
1,120
1,120
(2,823)
(2,823)
(807)
(807)
7,035
7,035
313
313
These lease arrangements have interest rates ranging from 6.0% to 18.0% and 8.0% to 15.0% for the
years ended 30 June 2014 and 30 June 2013, respectively. At the end of the lease term, the ownership
of the assets shall be transferred to the respective entities of the Group.
(20)
Financing arrangements
In June 2014, the US subsidiary of the Company (IBEX US) entered into a $3.3 million three-year financing
agreement (IBM Agreement) with IBM Credit LLC to finance the purchase of software licenses (under
a Select Agreement) from Microsoft Corporation (Microsoft). In June 2014, IBEX US also entered
into a three-year Enterprise Agreement with Microsoft for use of certain cloud software services
for approximately $1.1 million in year one, with minimum service commitments of approximately
$50,000 in each of years two and three. The monthly financing payments under the IBM Agreement
are approximately $103,000 per month for 36 months beginning in July 2014. The monthly payments
under the Microsoft Enterprise Agreement during year one are approximately $100,000 per month
beginning in July 2014, with minimum monthly service commitments of approximately $4,000 in each
of years two and three.
IBEX US acquired the Microsoft software licenses and cloud services to accommodate the needs
of the IBEX Group and to facilitate the acquisition by the Company’s parent, The Resource Group
International, Ltd (TRGI), of software for TRGI and its non-IBEX subsidiaries. Consequently, TRGI, the
Company and IBEX US have entered into an agreement as of July 2014 under which the Company
has sub-licensed to TRGI the use, for a fixed monthly consideration (that includes a management
fee / mark-up), of that portion of the software and services purchased that correspond to the
requirements of TRGI and its non-IBEX subsidiaries.
52
In addition, IBEX US has financed the purchase of various property, plant and equipment during the
current year with CIT Finance LLC (CIT). As of June 2014, IBEX US has financed $1.1 million of assets
with CIT at the interest of approximately 6% per annum.
As of 30 June 2014, the outstanding liabilities from these transactions are shown in the consolidated
statement of financial position as follows:
Current Non-current
$000's
$000's
IBM Credit LLC
CIT Finance LLC
(21)
(22)
1,038
326
2,283
703
1,364
2,986
30 June
2014
30 June
2013
$'000's
$'000's
Deferred rent – long-term
763
714
Pension defined benefit plan (note 26)
173
372
Share option plan
661
206
1,597
1,292
Other non-current liabilities
Working capital line of credit
In the beginning of fiscal year 2013, one of the subsidiaries of the Parent Company (the Company)
had an existing $20.0 million Revolving Line of Credit (RLOC) with Capital Source Bank (CSB) pursuant
to an amendment on 7 September 2012. It had a maturity date of 20 July 2015 with certain accounts
receivable concentration limits and carried an interest rate of one month LIBOR +6.0% (subject to
one month LIBOR floor of 1.5%) per annum.
On 15 January 2013, CSB agreed to extend eligible accounts receivable concentration limits to 30
September 2013. In addition, TRG Holdings, LLC injected $0.5 million on 23 February 2013 to increase
the cash contribution amount to $1.1 million. The Company interest rate of one month LIBOR +6.0%
(subject to one month LIBOR floor of 1.5%) per annum was extended, until the later of 30 September
2013. If the Company failed to meet its financial performance covenants, the outstanding debt
would become immediately callable by CSB.
On 8 November 2013, the Company signed a Revolving Credit and Security Agreement with PNC for
a new $35.0 million RLOC to replace the CSB $20.0 million RLOC. The said agreement will mature on
7 November 2016 and promises an interest rate of LIBOR +2.50% and or the PNC Commercial Lending
Rate (as publically announced) +0.25%. During the course of the fiscal year, the Company entered
into a waiver and an Amendment (Amendment 1) whereby PNC waived the Borrowers technical
non-compliance with a certain covenant cap. On 2 October 2014, the Company entered into an
Amendment (Amendment 2) whereby PNC increased the Caps associated with certain covenants,
increased indebtedness, and waived past technical covenant non-compliance events.
53
In this agreement, the Company will derive value from the choice of interest rates, depending on the
rate selected. This value changes in response to the changes in the various interest rates alternatives.
Thus, a derivative is embedded within the loan commitment, i.e. the facility terms which are agreed
for a fixed period until 2016. The part of the value associated with the loan commitment derivative
(the embedded derivative part) is derived from the potential interest rate differential between
the alternative rates, i.e. it creates economic characteristics that are different to a typical loan
commitment.
The Company assessed that the derivative is considered to be closely related and is not separated
as part of the loan commitment due to the following factors: (1) the instrument can be settled in
a way that PNC would recover substantially all of its investment (the borrowed principal) since the
derivative only impacts the choice in interest rate; and (2) PNC will not generate a rate of return that
is at least twice that of the market return because no matter which rate is selected, each interest
rate alternative available to the Company (each of the PNC, FFOR and 2 LIBOR rates) represents a
market rate of interest and would be impacted in the same way by market factors.
(23)
30 June
2014
30 June
2013
$'000's
$'000's
Trade payables
3,190
5,338
Accrued expenses and payables
4,218
5,149
13,570
11,202
20,978
21,689
Accrued salaries and wages
(24)Grants
The Group received grants from various US states as follows:
54
•
The Group received grants in a total of $475,000 from the State of West Virginia during the
year ended 30 June 2012 for its facilities in Beckley ($159,000), Elkins ($161,000) and Charleston
($155,000). These funds were treated as a reduction in cost of sales for the year ended 30
June 2013 to support a customised industrial training programme.
•
The Group recorded grant income of $184,000 from State of Tennessee, Department of
Economic and Community Development for the provision of employee instruction/training
and associated expenses in support of the Group’s commitment to maintain and increase
jobs and income in Tennessee in 30 June 2014 and 2013. The Grant Contract is effective
for the period commencing 21 May 2012 and ending on 20 May 2015. The total amount
awarded to the Group under this Grant Contract is $595,000. These funds were treated as a
reduction in Cost of Sales for the years ended 30 June 2014 and 2013.
(25)
Contingencies and commitments
Contingencies
The Company and its subsidiaries are subject to claims and lawsuits filed in the ordinary course of
business. Management does not believe that the outcome of any of the proceedings will have a
material adverse effect on the Company’s business results, operations, liquidity or financial condition.
Although management does not believe that any such proceedings will have material adverse
effect, no assurances to that effect can be given.
In March 2012, an ex-employee of a related company filed a complaint with the West Virginia
Human Rights Commission (WVHRC), alleging unlawful discrimination due to race and unlawful
retaliation. The ex-employee previously worked for TRG Insurance Solutions, Inc. (TRGIS), a then-sister
corporation of the Holding Company. TRGIS was an entirely separate corporation with its own lines
of business, management and employees. While employed by TRGIS at its facility in Beckley WV, in
2009, the plaintiff filed a discrimination complaint against TRGIS, which the parties settled by mutual
agreement. Later in 2009, TRGIS announced that it was closing its operations in Beckley and laying
off all employees, including the plaintiff. In January 2010, the plaintiff interviewed for a position with
IBEX but was not offered a job. The Plaintiff claims that the Holding Company did not offer her a job
because of her race and in retaliation for her having filed the 2009 discrimination complaint against
TRGIS, a different company. The Plaintiff alleges $107,941 in damages for back pay, plus future pay
and interest, plus $92,313 in attorneys’ fees. The Holding Company has defended this case vigorously
and intends to continue doing so. The Holding Company has defended on the grounds that (1) its
records prove race-neutral employment practices, and (2) the Holding Company as a matter of
law cannot be liable for retaliating against a person whom it never employed. This case was tried
on December 17-18, 2012, before an administrative judge of the WVHRC. The administrative judge
issued an order in March 2014 finding generally for the plaintiff, but made no specific findings as to the
amounts of damages or attorneys’ fees. The WVHRC remanded the order to the administrative judge
with instructions to add findings as to the amounts of damages and attorneys’ fees. As of this date,
no supplemental order has been filed addressing these issues; the claimed damages and attorney’s
fees are approximately $150,000 and $100,000, respectively. The Holding Company has already filed
a timely notice of appeal with the WVHRC, appealing the general finding for the plaintiff, and will
further appeal the supplemental order when it is filed. The Holding Company has further rights of
appeal (beyond the WVHRC) to the Circuit Court of Kanawha County, West Virginia, and to the
Supreme Court of West Virginia. The Holding Company will continue to appeal and defend this case
vigorously.
Commitments
The Group has an annual telecommunication service commitment with one of its carriers. The carrier
agreement was signed in January 2012 for a three-year term with minimum annual commitment for
$600,000. The agreement has a provision for an early termination at the one year anniversary with a
sixty day written notice.
The Group is also subject to early termination provisions in certain telecommunications contracts,
which if enforced by the telecommunications providers, would subject the Group to early terminations
fees. To date, these early termination provisions had not been triggered by the Group.
55
Operating leases
Certain Group companies have access to computer equipment, software, office facilities, furniture
and fixtures and office premises under operating lease arrangements, of which certain arrangements
have renewal options and escalation clauses for operating expenses and inflation. Rent expense is
recognised on a straight-line basis over the life of the lease term. Future minimum lease rentals under
operating leases for years ending subsequent to the reporting period are as follows:
Within one year
After one year but not more than five years
More than five years
30 June
2014
$’000's
30 June
2013
$’000's
6,741
17,966
694
3,995
10,956
1,807
25,401
16,758
Rental expenditure was approximately $7.1 million and $6.4 million for the years ended 30 June 2014
and 2013, respectively.
(26)
Retirement benefits obligations
IBEX Philippines Inc. and IBEX Global Solutions (Philippines) Inc. operates an unfunded defined benefit
plan for qualifying employees. Under the Plan, the employees are entitled to one half month’s salary
for every year of service, with six months or more of service considered as one year. One half month’s
salary has been defined to include the following:
•
•
•
15 days salary based on the latest salary rate
cash equivalent to 5 days service incentive leave
one-twelfth of the 13th month’s pay
An employee is entitled to retirement benefits only upon attainment of a retirement age of 60 years
and completion of at least five years of previous credited service. No other post-retirement benefits
are provided to these employees. The most recent actuarial valuations of the present value of the
defined benefit obligation were carried out at 30 June 2013. The present value of the defined benefit
obligation, and the related current service cost and past service cost, were measured using the
projected unit credit method.
IAS 19 (Revised 2011), Employee Benefits, is applicable for accounting periods beginning on or
after 1 January 2013. This revised standard made various changes to the accounting for defined
benefit pension schemes including requiring all remeasurements (actuarial gains and losses) to be
recognised in other comprehensive income and a different calculation of the net interest cost to
be recognised in profit or loss. In line with the original standard, the Group has applied the corridor
method of recognising actuarial gains and losses in prior years. As the impact on the 2012 statement
of financial position is immaterial to the financial statements, it is not considered necessary to prepare
a third statement of financial position for inclusion in the financial statements.
The principal assumptions used for the purposes of the actuarial valuations are as follows:
Discount rate
Expected rate of salary increase
56
30 June
2014
%
30 June
2013
%
5.4
3.0
5.1
5.0
Amounts recognised within cost of sales in the consolidated statement of comprehensive income in
respect of defined benefit plan are as follows:
Current service cost
Interest on obligation
Actuarial gains recognised during the year
30 June
2014
$'000's
30 June
2013
$'000's
107
9
116
110
10
(29)
91
The amount included in the consolidated statement of financial position in respect of its defined
benefit plan obligation as of 30 June 2014 and 2013 are as follows:
30 June
2014
$'000's
173
173
Present value of unfunded defined benefit obligation
Unrecognised actuarial gains
30 June
2013
$'000's
178
194
372
The movements in the defined benefit plan obligation for the years ended are as follows:
30 June
2014
$'000's
Present value of defined benefit obligation, beginning
Foreign exchange differences
Current service cost
Interest cost
Actuarial gains
Present value of defined benefit obligation, ending
372
(8)
107
9
(307)
173
30 June
2013
$'000's
288
(7)
110
10
(29)
372
The historical information of the amounts for the current and previous annual periods is as follows:
Present value of defined benefit
obligation
30 June
30 June
30 June
30 June
2014
2013
2012
2011
$'000's
$'000's
$'000's
$'000's
173
178
155
181
The Group is yet to contribute to a plan asset as of 30 June 2014.
57
(27)
Employee information
Expenses recognised for employee benefits are analysed below:
Salaries and other employee costs
Social security and other taxes
Employee share option expense
Retirement – contribution plan
Pensions – defined benefits plan (note 26)
30 June
2014
$'000's
30 June
2013
$'000's
119,303
30,001
1,144
178
116
150,742
89,374
23,023
674
62
110
113,243
Average number of employees are analysed below:
Direct labour
Administrative staff
(28)
30 June
2014
30 June
2013
9,679
855
10,534
6,776
815
7,591
Remuneration of key management personnel
Managerial remuneration
Short-term employee benefits
30 June
2014
$'000's
30 June
2013
$'000's
3,825
2,212
467
6,504
3,837
778
317
4,932
The key management personnel include the senior management team, having an annual base
salary of $100,000 or more.
The number of key management personnel was 26 and 33 for the years ended 30 June 2014 and
2013, respectively.
The number of key management personnel participating in defined contribution retirement benefit
schemes was 20 and 26 for the years ended 30 June 2014 and 2013, respectively.
58
Remuneration for highest paid key management personnel
Managerial remuneration
Short-term employee benefits
Retirement benefits
(29)
30 June
2014
$'000's
30 June
2013
$'000's
150
679
30
859
140
490
10
31
671
30 June
2014
$'000's
30 June
2013
$'000's
231
(315)
(84)
126
(1,639)
(1,513)
Income taxes
The tax provision consists of the following:
Current
Deferred
TRG Customer Solutions, Inc. (trading as IBEX Global Solutions, Inc.) was wholly owned by TRG
Holdings LLC until 31 March 2013 and was filing its tax return as a part of the consolidated US tax
group. As a part of group reorganisation (explained in note 2), TRG Customer Solutions, Inc. left the US
consolidated tax group on 31 March 2013 and started filing separate tax return in the US with effect
from 1 April, 2013. Other entities in the Group file standalone tax returns in their respective jurisdictions.
The US tax provision calculations include TRG Customer Solutions Inc. (trading as IBEX Global Solutions,
Inc.). Additionally, included in the provision are TRG Customer Solutions, Inc. (Canada), TRG Marketing
Limited (UK), IBEX Global Solutions Plc. (UK), IBEX Cyprus, IBEX Luxembourg, IBEX Ireland, Virtual World
(Private) Limited (Pakistan), IBEX Global Solutions (Private) Limited (Pakistan) and IBEX Philippines Inc.
59
Deferred income taxes reflect the net tax effects of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used for income
tax purposes, as well as net operating losses and tax credit carry forwards. Deferred tax assets and
liabilities are measured using the enacted tax rates that will apply to taxable income in the periods
the deferred tax item is expected to be settled or realised. The tax effects of the Group’s temporary
differences and carry forwards are as follows:
Tax effect of deductible / (taxable) temporary differences
Tax effect of deductible temporary differences:
- Provisions and write offs against trade debts
- Unpaid accrued expenses/compensation
- Net operating losses
- Property, plant and equipment
- Intangible assets
Tax effect of taxable differences:
- Property, plant and equipment
- Intangible assets
Less deferred tax asset not recognised
Total deferred tax
Comprising:
Deferred tax asset
Deferred tax liability
30 June
2014
$'000's
30 June
2013
$'000's
97
265
4,310
18
4,690
88
292
3,273
40
3,693
(705)
(937)
(1,642)
(270)
(803)
(1,073)
(1,853)
1,195
(1,741)
879
2,837
(1,642)
1,195
1,952
(1,073)
879
Deferred tax asset on deductible temporary differences (including unused tax losses) are recognised
to the extent that realisation of the related tax benefit is probable on the basis of Group’s current
expectation of future taxable profits. Unrecognised taxable temporary differences represent net
operating losses of Group’s European, Canadian and Philippine subsidiaries as, the management
is of the prudent view that, it is not probable that sufficient taxable profits will be available for those
subsidiaries in foreseeable future against which unused tax losses can be utilised.
At 30 June 2014, the Group’s US federal and state net operating loss carry forward for income tax
purposes are $6.2 million (30 June 2013: $4.2 million) which will begin to expire in 2032. The Group’s
Canadian subsidiary has net operating loss carry forward of $1.8 million (30 June 2013: $1.9 million) for
Canadian income tax purposes, expiring over the period 2028 through 2034. The Group’s European
subsidiaries (UK, Ireland, Luxemburg and Cyprus) has net operating loss carry forward of $3.6 million
(30 June 2013: $1.4 million). The Group’s Philippine subsidiary has net operating loss carry forward of
$1.6 million (30 June 2013: $1.6 million) expiring over the period 2015 through 2017. These amounts
are based on the income tax returns filed for the year ended 30 June 2013 and estimated amounts
for the year ended 30 June 2014.
60
Management has evaluated the Group’s tax positions and concluded that the Group had taken no
uncertain tax positions that require adjustment to the consolidated financial statements. The Group
recognises interest and penalties related to uncertain tax positions in income tax expense. As of 30
June 2014, the Group had no provision for interest or penalties related to uncertain tax positions. The
years 2010-2013 are open to examination by the tax authorities.
Reconciliation of effective tax rate
Profit / (loss) for the year before taxation
Income tax benefit
Profit / (loss) for the period
Income tax / (benefit) using applicable tax rate
State taxes (net of federal tax effect)
Effect of tax and exchange rates in foreign
jurisdictions
Non-deductible expenses
Gain on sale of IP
Effect of departure from US tax group
Change in unrecognised temporary differences
(30)
30 June
2014
$'000's
30 June
2013
$'000's
716
84
800
(17,033)
1,513
(15,520)
%
30 June 2014
$'000’s
%
30 June 2013
$'000’s
34
5
244
37
34
4
(5,792)
(710)
22
162
-
144
(89)
16
(12)
(639)
112
(84)
(1)
(17)
(31)
20
9
202
2,862
5,122
(3,341)
(1,513)
Earnings per share
(a)Basic
Basic earnings / (loss) per share is calculated by dividing the profit / (loss) attributable to
equity holders of the Holding Company by the weighted average number of ordinary shares
in issue during the year.
Profit / (loss) attributable to equity holders of the
Holding Company (in US$'000's)
Weighted average number of ordinary shares in issue
Basic earnings / (loss) per share (in US$)
30 June
2014
30 June
2013
800
(15,520)
39,554,900
0.02
32,310,000
(0.48)
61
(b)Diluted
Diluted earnings per share is calculated by adjusting the weighted average number of
ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares
that could be issued from options outstanding for less than the average market price. As
of 30 June 2013, the Holding Company had no dilutive potential ordinary shares. As of 30
June 2014, the reconciliation of the weighted average number of shares for the purposes of
diluted earnings per share to the weighted average number of ordinary shares used in the
calculation of basic earnings per share is as follows:
Weighted average number of ordinary shares (basic)
Shares deemed to be issued for less than average market price
39,554,900
14,602
39,569,502
Profit / (loss) attributable to equity holders of the Holding Company (in US$'000's)
Weighted average number of ordinary shares (diluted)
Diluted earnings per share (in US$)
800
39,569,502
0.02
(31)Dividends
Dividend to the Company’s shareholders are recognised as a liability in the Group’s consolidated
financial statements in the period in which the dividends are approved by the Company’s
shareholders.
An interim dividend of 1.9 pence per share was declared and communicated with the Company’s
interim results which was announced on 22 March 2014 amounting to a total dividend of $1.2 million.
The dividend was paid on 25 March 2014 to stockholders on the register as at 31 January 2014.
(32)
Related parties - due to and from affiliates
During the years ended 30 June 2014 and 2013, the Group entered into various transactions at arm’s
length with affiliated companies, by virtue of common control, as follows:
Year ended 30 June 2014
TRG Holdings, LLC
TRG BPO Solutions, Inc.
TRGI
E-Telequote, LLC
TRG Pakistan Limited
Alert, Inc.
Digital Globe Services, Inc.
SATMAP Incorporated
TRG (Private) Limited
TRG iSky, Inc.
62
As of 30 June 2014
Service
delivery
revenue
Service
delivery
expense
$’000's
$’000's
Total due
from
affiliates
current
$’000's
-
-
151
1,079
815
404
521
159
608
3,737
7
7
Total due to
affiliates
current
Total due to
affiliates
long-term
$’000's
$’000's
111
-
-
852
937
281
208
325
391
266
3,371
(112)
(6)
(10)
(128)
(1,943)
(1,943)
TRG Holdings, LLC
TRG BPO Solutions, Inc.
TRGI
Alert, Inc.
SATMAP Incorporated
TRG (Private) Limited
TRG iSky, Inc.
E-Telequote, LLC
Service
delivery
revenue
Service
delivery
expense
$’000's
2,206
663
174
300
553
508
79
4,483
$’000's
3,515
30
3,545
As of 30 June 2013
Total due
from
affiliates
current
$’000's
43
549
248
174
439
25
200
84
1,762
Total due to
affiliates
current
Total due to
affiliates
long-term
$’000's
(122)
(844)
(966)
$’000's
(1,535)
(1,535)
On 30 March 2013, TRGI assumed liabilities worth $2.4 million and $1.9 million that were payable by
TRG Marketing Solutions UK and TRG Senegal SA, respectively, to other affiliated companies. On the
same date, TRG Marketing Solutions UK and TRG Senegal SA issued shares to the TRGI for $2.4 million
and $1.9 million, respectively, to convert those debts in to equity.
The amount of $1.9 million (2013: $1.5 million represents unsecured finance facility provided by TRG
(Private) Limited, an associated company, out of total facility limit of $2.4 million (2013: $2.4 million)
to meet working capital needs. It carries mark-up at the average rate of 12.90% per annum (2013:
13.50%) which is equivalent to borrowing cost of TRG (Private) Limited. During the year, an amount
of $0.3 million (2013: $2.2 million) is advanced to the Company and repayment of $27 thousand
(2013: $1.8 million) was made by the Company. The principal along with the mark-up is payable on
1 September 2017.
63
(33)
Cash generated from / (used in) operations
Profit / (loss) before taxation
Adjustments for:
Finance cost
Exceptional finance cost
Write off intercompany receivable
(Reversal) / provision for retirement benefits
Gain on sale of property, plant and equipment
Increase / decrease in operating assets and liabilities:
Increase in trade and other receivables
(Decrease) / increase in trade and other payables
(Decrease) / increase in net deferred revenue
Decrease in net due to affiliates
Net cash generated from / (used in) operating activities
(34)
30 June
2014
$'000's
30 June
2013
$'000's
716
(17,033)
4,209
1,799
826
(211)
1,144
2,311
1,924
15,670
110
(4)
674
(456)
(463)
(115)
(2,039)
5,410
(20,679)
6,936
173
(539)
(10,457)
(a)
Financial risk management
The Group’s activities expose it to a variety of financial risks: market risk (including interest
rate risk and foreign currency risk), credit risk and liquidity risk.
Financial instruments by category are as follows:
Financial assets category: loans and receivables
Non-current assets
Long-term deposits
Other
Current assets
Deposits
Due from affiliates
Cash and bank balances
64
30 June
2014
$'000's
30 June
2013
$'000's
1,362
1,000
2,362
1,525
790
2,315
35,233
250
3,371
4,005
42,859
28,819
172
7,506
1,762
10,651
48,910
45,221
51,225
Line of credit
Liabilities against assets subject to finance lease
Long-term and current portion of financing
Due to affiliates
30 June
2014
$'000's
30 June
2013
$'000's
16,703
9,858
4,350
2,071
20,978
53,960
19,888
1,120
2,501
21,689
45,198
Risks managed and measured by the Group are explained below.
(b)
Concentration of credit risk
Financial instruments which potentially expose the Group to concentrations of credit risk
consist primarily of cash and cash equivalents and accounts receivable (see notes 14 and
15). The Group’s cash and cash equivalents are held with US and foreign commercial banks.
The balance at times may exceed insured limits.
Credit rating breakup of balances:
AA
AAA-1
A+
A
ABBB+
BBBNon-rated
30 June
2014
$'000's
30 June
2013
$'000's
278
226
645
8
2,300
334
214
4,005
182
111
6
206
9,983
153
10
10,651
The maximum exposure to credit risk as at 30 June 2014 and 2013 is tabulated below.
Financial assets category: loans and receivables
Non-current assets
Long-term deposits
Other
Current assets
Deposits
Due from affiliates
Cash and bank balances
30 June
2014
$'000's
30 June
2013
$'000's
1,362
1,000
2,362
1,525
790
2,315
35,233
250
3,371
4,005
42,859
28,819
172
7,506
1,762
10,651
48,910
45,221
51,225
65
The Group’s exposure to concentration of credit risk with clients representing greater than
5.0% of the consolidated revenue or receivable balances (refer note 5).
The ageing of trade receivables at year end is as follows:
Due 0 to 30 days
Due 31 to 60 days
Due 61 to 90 days
Due 91 to 180 days
Due over 180 days
Less: provision for doubtful debts
30 June
2014
$'000's
30 June
2013
$'000's
26,774
6,883
664
933
353
(374)
35,233
23,588
4,334
579
446
214
(342)
28,819
The Group does not hold any collateral against these assets. Financial assets other than
trade receivables do not contain any impaired or non-performing assets. The Group normally
operates under a 60 days credit terms.
(c)
Currency risk arises mainly where receivables and payables exist due to transactions entered
into foreign currencies. The Group primarily has foreign currency exposures in Pakistan Rupee,
Pound Sterling, CFA Francs and Philippine Peso. However the majority of the transactions of
the Group are denominated in United States Dollar and recognised by the Group entities
that have a functional currency of US Dollar. Accordingly foreign currency exposure is not
significant to the Group’s financial position and performance.
At 30 June 2014, if exchange rates of Pakistan Rupee, Pound Sterling, CFA Francs and
Philippine Peso had changed by 5.0% against US Dollar with all other variables held constant,
net loss after taxation for the year would have been higher/lower by $579,488.
(d)
Interest rate risk
Interest risk is the risk that the value of the financial instrument will fluctuate due to changes
in the market interest rates. The Group is exposed to interest rate risk in respect of borrowings
and bank balances. Effective interest rates and maturities are given in respective notes to
the consolidated financial statements.
At 30 June 2014, if interest rates on financial assets and liabilities, having variable interest
rates, had been 100 basis points higher/lower with all other variables held constant, net loss
after taxation for the year would have been higher/lower by $275,776.
66
(e)Liquidity
Based on current operating plans, the Group believes that existing cash and cash equivalents
will be sufficient to meet the Group’s anticipated operating needs. However, there are a
number of assumptions built into the Group’s current operating plans. If these assumptions
do not materialise, the Group may need to seek additional financing from the new RLOC
with PNC or management may need to implement a reduced spending plan.
Financial liabilities in accordance with their contractual maturities are presented below.
30 June 2014
Line of credit
Liabilities against assets
subject to finance lease
Long-term financing
Trade payables and
accrued expenses
Due to affiliates
$'000's
16,703
Between
one to
two
years
$'000's
-
Between
two to
five
years
$'000's
-
11,368
3,513
2,847
5,008
4,350
4,818
1,598
1,625
1,595
20,978
20,978
20,978
-
-
2,071
53,960
2,071
55,938
128
42,920
1,943
6,415
6,603
Between
two to
five
years
$'000's
-
Carrying
value
Total
contractual
cash flows
Less than
one year
$'000's
16,703
$'000's
16,703
9,858
30 June 2013
Line of credit
Liabilities against assets
subject to finance lease
Trade payables and
accrued expenses
Due to affiliates
(f)
Carrying
value
Total
contractual
cash flows
Less than
one year
$'000's
19,888
$'000's
19,888
$'000's
19,888
Between
one to
two
years
$'000's
-
1,120
1,266
921
201
144
21,689
21,689
21,689
-
-
2,501
45,198
2,501
45,344
966
43,464
1,535
1,736
144
Fair value of financial instruments
Fair value is the amount for which an asset could be exchanged, or liability settled, between
knowledgeable willing parties in an arm’s length transaction. Consequently, differences can
arise between the carrying value and fair value estimates.
The estimated fair value of financial assets and liabilities is considered not significantly
different from carrying values as the items are either short-term in nature or periodically repriced.
67
(35)
Capital risk management
The Board’s objective is to maintain a capital structure that supports the Group’s strategic objectives
and shareholders’ value. The Group’s capital consists of cash and cash equivalents, debt balances
(working capital line of credit, long-term and short-term lease liabilities) and equity attributable to
equity holders.
The following table summarises the Capital of the Group:
30 June
30 June
2014
2013
$'000's
$'000's
Borrowings
30,911
21,008
(4,005)
(10,651)
-
(7,506)
Net Debt
26,906
2,851
Equity
22,880
22,337
Total Capital of the Group
49,786
25,188
The Group leverages the Working Capital Revolving Line of Credit to fund its working capital cycle
as necessary. These borrowings, together with cash generated through operations, may be loaned
internally or contributed as equity to certain subsidiaries.
(36)
Subsequent events
The management evaluated subsequent events and transactions that occurred from the end of the
reporting period through 6 October 2014, the date at which the consolidated financial statements
were available to be issued, and concluded that no subsequent events require adjustment to or
disclosure in these consolidated financial statements, except for the agreement that have entered
into by the Company as of July 2014 with TRGI which was disclosed in note 20 and purchase of Avaya
System by a subsidiary of the Company.
In September 2014, a subsidiary of the Company purchased $1.8 million in Avaya System hardware
and software upgrades from North American Communications Resource, Inc. (NACR) and entered
into related maintenance and other contracts with NACR for $0.5 million per year over a three
year period. The Avaya System hardware and software upgrades (including the maintenance and
related contracts) will support the growth of the Company’s business globally.
68
Parent Company Financial Statements
Independent auditor’s report to the members of IBEX Global Solutions Plc
We have audited the Parent Company financial statements of IBEX Global Solutions Plc for the period ended
30 June 2014 which comprise the parent company statement of financial position, parent company statement
of changes in equity, parent company statement of cash flows and the related notes. The financial reporting
framework that has been applied in their preparation is applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the European Union and as applied in accordance with the provisions of
the Companies Act 2006.
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16
of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s
members those matters we are required to state to them in an auditor’s report and for no other purpose.
To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the
Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we
have formed.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement set out on page 17, the directors are
responsible for the preparation of the Parent Company financial statements and for being satisfied that
they give a true and fair view. Our responsibility is to audit and express an opinion on the Parent Company
financial statements in accordance with applicable law and International Standards on Auditing (UK and
Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards
for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s
website at www.frc.org.uk/apb/scope/private.cfm.
Opinion on financial statements
In our opinion the Parent Company financial statements:
•
give a true and fair view of the state of the Company’s affairs as at 30 June 2014;
•
have been properly prepared in accordance with IFRS as adopted by the European Union and as
applied in accordance with the provision of the Companies Act 2006; and
•
have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Strategic Report and Directors’ Report for the financial period for
which the financial statements are prepared is consistent with the Parent Company financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to
report to you if, in our opinion:
•
adequate accounting records have not been kept by the Parent Company, or returns adequate for
our audit have not been received from branches not visited by us; or
•
the Parent Company financial statements are not in agreement with the accounting records and
returns; or
•
certain disclosures of directors’ remuneration specified by law are not made; or
•
we have not received all the information and explanations we require for our audit.
69
Parent Company Financial Statements
Other matter
We have reported separately on the Group financial statements of IBEX Global Solutions Plc for the year
ended 30 June 2014.
Marc Summers, FCA
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
London
6 October 2014
70
Parent Company Statement
of Financial Position
As of 30 June 2014
Assets
Notes
$'000's
Non-current assets
Investments in subsidiaries
4
Total non-current assets
48,126
48,126
Current assets
Due from related parties
9
11
5
93
15,280
589
Total current assets
15,962
Total assets
64,088
Equity and liabilities
Equity attributable to owners of the parent
Ordinary shares
6
Share premium
602
14,479
7
Foreign currency translation reserve
48,530
228
Retained earnings
49
Total equity
63,888
Current liabilities
10
Total liabilities
200
200
Total equity and liabilities
64,088
The accompanying notes are an integral part of these financial statements.
These financial statements were approved for issue by the Board of Directors on 6 October 2014 and were
signed on its behalf by
Mohammed Khaishgi
Karl Gabel
Registered Number: 08462510
71
Parent Company Statement
of Changes in Equity
For the period ended 30 June 2014
As at 26 March 2013
Net profit
Total comprehensive income for the year
Issued,
subscribed
and paid-up
capital
Deferred
shares
Share
premium
Capital
redemption
reserve
Foreign
currency
translation
reserve
Retained
earnings
Total equity
$’000's
$’000's
$'000's
$'000's
$'000's
$'000's
$’000's
-
-
-
-
-
-
-
-
-
-
-
-
1,301
1,301
-
-
-
228
-
228
-
-
-
228
1,301
1,529
49,020
-
-
-
-
-
49,020
(48,530)
48,530
-
-
-
-
-
-
(48,530)
-
48,530
-
-
-
112
-
-
-
-
-
112
-
14,479
-
-
-
(1,252)
(1,252)
14,479
14,479
48,530
48,530
228
(1,252)
49
62,359
63,888
-
Shares issue on incorporation
Deferral of shares
Repurchase of shares
Shares issued at par (IPO)
Share premium (net of IPO)
-
Dividend distribution
-
As at 30 June 2014
602
602
72
-
14,479
Parent Company Statement of
Cash Flows
Note
$'000's
12
(12,872)
Cash flows from operating activities
Net cash used in operating
activities
Cash flows from investing activities
Additional investment in subsidiaries
Net cash used in financing activities
(126)
(126)
Cash flows from financing activities
IPO investment
14,624
Payment of dividend
(1,252)
Net cash from financing activities
13,372
Effect of exchange rate change on cash and cash
equivalents
215
Net increase in cash and cash equivalents
589
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
-
589
73
Notes to the Parent Company
(1)
Summary of significant accounting policies
(a)
Basis of preparation
The separate financial statements of the Company are presented in accordance with
applicable law and International Financial Reporting Standards (IFRSs) as adopted by the
European Union and as applied in accordance with the provisions of the Companies Act
2006.
The principal accounting policies used in the preparation of the Parent Company financial
statements are summarised below. They have all been applied consistently throughout the
period.
(b)
Investment in subsidiaries is carried at cost and tested for impairment on an annual basis.
(c)
Financial assets and financial liabilities are recognised at the time when the Company
becomes a party to the contractual provisions of the instrument.
Financial assets
The Company considers its financial assets to comprise cash, deposits and various other
receivable balances that arise from its operations.
Trade receivables, deposits and other receivables that have fixed or determinable payments
that are not quoted in an active market are classified as loans and receivables. Loans and
receivables are initially recorded at fair value and subsequently at amortised cost using
the effective interest rate method, less any impairment. Interest income is recognised by
applying the effective interest rate, except for short-term receivables when the recognition
of interest would be immaterial.
The carrying amount of the financial asset is reduced by any impairment loss directly for
all financial assets with the exception of trade receivables where the carrying amount is
reduced through the use of an allowance account. When a trade receivable is considered
uncollectable, it is written off against the allowance account. Subsequent recoveries of
amounts previously written off are credited against the allowance account. Changes in
the carrying amount of the allowance account are recognised in the profit or loss. If in a
subsequent period the amount of the impairment loss decreases and the decrease can
be related objectively to an event occurring after the impairment was recognised, the
previously recognised impairment loss is reversed through the profit or loss to the extent that
the carrying amount of the financial asset at the date the impairment is reversed does not
exceed what the amortised cost would have been had the impairment not been recognised.
The Company derecognises a financial asset or a portion of financial asset when, and
only when, the contractual rights to the cash flows from the assets expire; or it transfers
the financial asset and substantially all of the risks and rewards of ownership of the asset
to another entity. If the Company neither transfers nor retains substantially all of the risks
and rewards of ownership and continues to control the asset, the Company recognises
its retained interest in the asset and associated liability for amounts it may have to pay.
If the Company retains substantially all the risks and rewards of ownership of a transferred
financial asset, the Company continues to recognise the financial asset and also recognises
a collateral borrowing for the proceeds received.
74
Financial liabilities are initially measured at fair value and are classified according to the
substance of the contractual arrangement entered into. Financial liabilities are subsequently
measured at amortised cost. The Company's financial liabilities comprise trade payables,
borrowings and other payables balances that arise from its operations. They are classified
as "financial liabilities measured at amortised cost". Finance charges are accounted for on
an accruals basis in the profit or loss using the effective interest rate method and are added
to the carrying amount of the investment to the extent that are not settled in the period
in which they arise. The Company derecognises financial liabilities when the Company's
obligations are discharged, cancelled or they expire.
(d)
Impairment of non-financial assets
The carrying amounts of the Company's assets are reviewed at the end of each reporting
period to determine whether there is any indication of impairment loss. If any such indication
exists, the asset’s recoverable amount is estimated in order to determine the extent of the
impairment loss, if any. 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 cost to sell and value in use. Impairment losses are charged to the
profit or loss in selling, general and administrative expenses. During the period ended 30 June
2014 no impairment was recorded.
(e)
Affiliated companies
Affiliated companies represent the companies under the common control of the Ultimate
Parent Company, The Resource Group International Limited (TRGI).
(f)
Cash and cash equivalents consist of cash and cheques on hand and bank deposits
available on demand.
(g)
Share capital
Ordinary shares are classified as equity. Equity instruments issued are recorded at the
proceeds received, net of direct issue costs.
(h)Taxation
Current taxation
The charge for current taxation is based on taxable income at the current rates of taxation
after taking into account applicable tax credits, rebates and exemptions available, if any.
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 taxation
Deferred tax is provided on all temporary differences at the end of each reporting period,
between the tax base of the assets and liabilities and their carrying amounts for financial
reporting purposes.
Deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax
assets are recognised for all deductible temporary differences and unused tax losses to
the extent that it is probable that the deductible temporary differences will reverse in the
future and sufficient taxable profits will be available against which the deductible temporary
differences and unused tax losses can be utilised. However, deferred 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.
The carrying amount of all deferred tax assets is reviewed at the end of each reporting
period and reduced to the extent that it is no longer probable that sufficient taxable profits
75
will be available to allow all or part of the deferred tax assets to be utilised.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply
to the period when the asset is realised or the liability is settled, based on the tax rates (and
tax laws) that have been enacted or substantively enacted at the end of the reporting
period.
(i)
Foreign Currency Transactions
The accounting records of the Company are maintained in U.S. Dollars. Foreign currency
transactions during the year are translated into the functional currency at exchange rates
which approximate those prevailing on transaction dates.
Foreign currency gains and losses resulting from the settlement of such transactions and from
the translation at exchange rates at the end of the reporting period of monetary assets and
liabilities denominated in foreign currencies are recognized in the profit or loss.
(2)
Profit for the Period ended 30 June 2014
As permitted by Section 408 of the Companies Act 2006, the profit and loss account for the Company
is not presented as part of these financial statements. The Company reported total comprehensive
income for the period ended 30 June 2014 of $1.5 million.
The auditor’s remuneration for audit of the Company is $5,100 for the period ended 30 June 2014
(non-statutory audit of the period ended 30 June 2013: $2,150).
Fees payable to Grant Thornton UK LLP and their associates for non-audit services to the Company
are not required to be disclosed because the consolidated financial statements are required to
disclose such fees on a consolidated basis.
(3)
Directors and employees remuneration
As in previous years, all Group Directors are remunerated by the Company. Details of Directors’
remuneration is disclosed within the Directors’ Report on page 12.
The average number of persons (including Directors) employed by the Company during the period
ended 30 June 2014 was 4.
(4)
On 31 March 2013, the Company issued shares worth $48 million to TRGI in exchange for shares of
various entities previously owned by TRGI.
30 June
2014
$'000's
Subsidiaries directly owned:
Subsidiaries indirectly owned:
Lovercius Consultants Limited
IBEX Global Europe S.a.r.l.
76
30,552
2,381
1,988
545
12,534
48,000
3
20
103
48,126
The movement in Investments in subsidiaries account are as follows:
30 June
2014
$'000's
Balance at beginning of period
Additions
Balance at end of period
48,126
48,126
The following are the information of the Company’s subsidiaries:
Country of
incorporation
Percentage of
holding in ordinary
shares %
Cyprus
100%
Luxembourg
100%
USA
100%
Canada
100%
UK
100%
Pakistan
100%
IBEX Philippines Inc. (formerly TRG Philippines Inc.)
Philippines
100%
IBEX Global Solutions (Philippines) Inc. (formerly TRG Global Solutions Inc.)*
Philippines
100%
TRGCS Philippines Inc.*
Subsidiaries
Lovercius Consultants Limited (IBEX Cyprus)
IBEX Global Europe S.a.r.l. (IBEX Luxembourg)
TRG Customer Solutions, Inc. (trading as IBEX Global Solutions, Inc.)
TRG Customer Solutions (Canada) Inc.*
Philippines
100%
Senegal
100%
Pakistan
100%
IBEX Mena
Dubai
100%
IBEX I.P. Holdings Ireland Limited*
Ireland
100%
*These are companies owned indirectly through other Group companies.
(5)
Cash and cash equivalents consist of the following:
30 June
2014
$'000's
Balances with banks in current accounts
589
589
77
(6)
Share capital
30 June
2014
$'000's
Authorised
602
Allotted. called up and fully paid
602
The Company’s share capital consists of 32,250,055 ordinary shares of one pence each, with a
nominal share capital of £322,500. The Company issued additional shares with a nominal value of
£73,043 at the time of admission to the London Stock Exchange’s Alternative Investment Market
(AIM).
All shares are equally eligible to receive dividends and the repayment of capital, and represent one
vote each at the Annual General Meeting.
(7)
30 June
2014
$'000's
Balance at beginning of period
Redemption of deferred shares
Balance at end of period
48,530
48,530
(8)Dividends
Dividend distributions to the Company’s shareholders are recognised as a liability in the Company’s
financial statements in the period in which the dividends are approved by the Company’s
shareholders.
An interim dividend of 1.9 pence per share was declared and communicated with the Company’s
interim results which was announced on 22 March 2014 amounting to a total dividend of $1.2 million.
The dividend was paid on 25 March 2014 to stockholders on the register as at 31 January 2014.
(9)
Trade and other receivables consist of the following:
30 June
2014
$'000's
Prepayments and other receivables
78
93
93
(10)
30 June
2014
$'000's
Accrued expenses and payables
200
200
(11)
Related parties - due to and from
During the period ended 30 June 2014, the Company entered into various transactions at arm’s
length with related companies, by virtue of common control, as follows:
IBEX Philippines, Inc.
IBEX Global Solutions Philippines, Inc.
Virtual World Private Limited
IBEX Mena
IBEX Ireland
IBEX Cyprus
IBEX Luxembourg
IBEX Global Solutions Private Limited
Transactions with IBEX affiliates
TRGI
Transactions with non-IBEX affiliates
As of 30 June 2013
Service
delivery
revenue
Service
delivery
expense
$’000's
$’000's
Total due
from
affiliates
current
$’000's
-
-
13,730
44
667
8
7
194
3
474
5
179
15,311
15,311
$’000's
Net due
from (to)
affiliates
current
$’000's
(3)
(28)
(31)
(31)
13,730
44
667
8
7
194
3
474
5
179
15,311
(3)
(28)
(31)
15,280
Total due to
affiliates
current
79
(12)
Cash used in operations
Profit before taxation
30 June
2014
$'000's
1,301
Changes in operating assets and liabilities:
Due to/from affiliates
Net cash used in operating activities
(13)
80
Capital Commitments
There were no capital commitments at 30 June 2014.
(93)
200
(14,280)
(12,872)
81

- IBEX Global

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