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A I N S W O R T H G A M E T E C H N O L O G Y
2014
A N N U A L R E P O R T
Front Cover:
Ainsworth released the A560SL™
cabinet, with a collection of
unique, high performing games
including Rumble Rumble™
which is enjoying unprecedented
demand in domenstic and
international markets alike.
Ainsworth’s passion for product innovation through technology
continues to deliver players a highly entertaining gaming experience.
The A560™ range of cabinets and the GamePlus™ game library, couple
technology advancement with creative, unique and industry leading
performing game content.
Ainsworth is synonymous for its culture of innovation, quality and
sustainable game performance. The Company’s product range
and customer service are now recognised as being at the forefront
of expectation.
The Ainsworth A560™, GamePlus™ and Premium Plus™ range of game
brands are a true reflection of the Company’s core aspirational values,
of quality, innovation and excellence.
KEY DATES
Annual General Meeting:
Wednesday 19 November 2014
Results announcement for six months
ending 31 December 2014:
Wednesday 25 February 2015
Results announcement for
year ending 30 June 2015:
Thursday 27 August 2015
Dates may be subject to change.
NOTICE OF ANNUAL GENERAL MEETING
Ainsworth Game Technology Limited
ABN 37 068 516 665
Notice is hereby given that the 2014 Annual General Meeting of the
members of Ainsworth Game Technology Limited will be held at:
Bankstown Sports Club
“Georges River Room”
8 Greenfield Parade (Cnr Greenfield Pde and Mona St)
BANKSTOWN NSW 2200
on Wednesday 19 November 2014 at 11.00am.
AINSWORTH GAME TECHNOLOGY
CONTENTS
2014 Highlights ..................................................................02
Financial Statements ........................................................40
Chairman’s Report ............................................................03
Notes to the Financial Statements ..............................44
Chief Executive Officer’s Report ..................................05
Directors’ Declaration ......................................................84
Shareholder Information .................................................08
Independent Auditor’s Report ......................................85
Corporate Governance Statement ...............................10
Lead Auditor’s Independence Declaration ...............87
Directors’ Report ................................................................18
Corporate Directory .........................................................88
01
ANNUAL REPORT 2014 2014
HIGHLIGHTS
REVENUES (M)
(Fiscal years ended June 30)
122.3
H1
H2
101.6
CAGR
26%
54.1
43.9
82.3
68.3
121.8
96.5
FY11
FY12
FY13
FY14
EBITDA (M)
(Fiscal years ended June 30)
H1
H2
42.3
31.9
32.4
23.8
CAGR
37%
17.5
8.2
FY11
39.7
49.7
200
150
100
50
0
90.0
67.5
45.0
22.5
0.0
PERFORMANCE HIGHLIGHTS
– Leading product performance achieved on the Company’s range
of innovative gaming products across global markets
– 32 New Regulatory licences since July 2013
– Australia: Release of branded products including the Players Paradise™
linked jackpot, Quadshot™ game range and A560™ Wide Boy™ Reels
of Wheels™ cabinet assisted on building market share
– Australia: Revenue growth of 84% in Victoria as it transitions out
of previous duopoly
– Americas: Commercialisation of A560SL™ in North America with game
brands such as Sweet Zone™ game, Rumble Rumble™, producing
performance in excess of 200% house average
– Americas: Growth in Game Operation installed base from 1,156 to 1,989
units (up by 72%)
– Americas: Magnificent 7™ licensed theme launched G2E 2013
– Other Regions: New Zealand increased revenues by 48% compared
to pcp
– Online: Granted B2B e-Gambling license in Alderney and established
an agreement to partner 616 Digital in Social Gaming for Online Real
Money Gaming
FY12
FY13
FY14
FINANCIAL HIGHLIGHTS
NPAT (M)
(Fiscal years ended June 30)
– TOTAL REVENUE up 23% to $244 million
– EBITDA up 21% to $89 million
– PROFIT BEFORE TAX up 18% to $82 million
25.9
35.7
30.2
22.0
– PROFIT BEFORE TAX percentage of revenue 33% (2013: 34%)
– REPORTED NPAT of $61.6 million (2013: $52.2 million)
– EPS of $0.19 per share (2013: $0.16 per share)
– STRONG Balance Sheet, Cash Position and Cash Flow
– TOTAL DIVIDENDS of 10.0 cents per share for FY2014 representing
a payout ratio of 52%
75.00
56.25
37.50
H1
H2
CAGR
28%
23.8
40.5
18.75
19.8
0.00
3.3
FY11
FY12
FY13
FY14
*Tax Benefit of $18.1m recognised in FY12
02
AINSWORTH GAME TECHNOLOGY CHAIRMAN’S
REPORT
DEAR SHAREHOLDERS,
R&D EXPENDITURE PERCENTAGE (M)
I am pleased to report our fifth consecutive year of growth
in revenue and profitability as we continue to effectively
execute our strategic plans for growth and expansion of
the Company’s operations. Our current range of premium
products continues to perform strongly and I am confident
our range of innovative new products will further impress
both customers and players.
We continue to invest significantly in the ongoing design,
development and improvement of our product offerings to all
markets in which we operate. It is expected this investment
will produce new and technically advanced products to be
progressively released to both new and existing markets
over the coming months.
We have been privileged to be granted new and renewed
gaming licenses over the past 12 months that will allow the
Group to access additional high value offshore gaming
markets. The Company has progressed new
licence
applications in the current year which are expected to
create incremental revenue opportunities.
We continue to invest in developing the skill levels of our
highly experienced, talented and motivated workforce in
order to secure our reputation for quality and technical
excellence. An expansion of the Long Term Incentive
arrangements established in July 2013 will be undertaken,
and is expected to further assist in retaining our core staff
across all areas of the Group’s operations. Further to this
the Remuneration and Nomination Committee is evaluating
remuneration practices to ensure incentive arrangements
both achieve
the desired outcomes whilst ensuring
alignment to shareholder interests.
I am confident that we are well placed to take advantage of
the numerous growth opportunities that are or will become
available to the Group in both our core land based gaming
business as well as in new and emerging markets, as we
expand our operations beyond this current year.
)
m
$
A
(
e
r
u
t
i
d
n
e
p
x
E
D
&
R
30
25
20
15
10
5
0
R&D as a Percentage of Revenues
Total R&D Expenditure
26.4
23.2
18.6
13.1
FY11
FY12
FY13
FY14
30%
25%
20%
15%
10%
5%
0%
)
%
(
e
g
a
t
n
e
c
r
e
P
D
&
R
In 2014, revenue increased 23% to $244 million, including a
notable 37% increase in international revenue following on
from the Group’s expansion within the Americas. Profit after
tax was $62 million, an increase of 18% on 2013, resulting in
earnings per share of 19 cents. Investment in research and
development activities represented 11% of total revenue
and has been a key driver of the profitability improvements
we have experienced. We have continued to progress our
medium to long term growth initiatives within the various
online gaming segments, which include online and social
gaming business development initiatives that will directly
complement our land based content and business.
The Group maintains a strong balance sheet which allows
it to actively seek out potential high value investment
opportunities for the Board’s consideration. This has also
allowed us to enhance our investment in the future pipeline
of innovative core products for outright sale and units under
gaming operation, as well as to underpin the execution of
our online strategies.
03
ANNUAL REPORT 2014
I am very proud of the achievements of the Group to date
and would sincerely like to thank the hard work and effort
of our Board of Directors, our CEO Mr Danny Gladstone and
the executive team, along with the invaluable contribution
of our loyal and dedicated employees and my fellow
shareholders.
I am confident of continued improvements in the Group’s
financial results beyond the current year as we remain
focused on the execution of our strategic plans to develop
and provide new and exciting products to our customers
and players.
Len Ainsworth
Executive Chairman
CHAIRMAN’S
REPORT (continued)
With such a strong performance in the current year,
I am pleased to report the Board was able to declare an
unfranked dividend of 5 cents per ordinary share at year
end, resulting in total dividends for FY14 of 10 cents. This
continues to be in line with our previously stated dividend
payout range of 40-60% of after tax profits and is consistent
with our focus on delivering value to shareholders.
During the year an ever increasing level of corporate
activity within the gaming sector has occurred. We feel
these external market changes will open up additional
opportunities for bottom line growth for the Group as we
remain focused on our existing business, the execution
of our existing strategic plans, and
the continuous
development and enhancement of our core capabilities.
We continue to improve and evolve our business by
focusing on the needs of our customers, the quality of our
product offering, our investment in technology and the
review of our processes. Strong cash flows and a cautious
approach to capital management has allowed the Group to
maintain a high degree of flexibility to exploit opportunities
as they arise.
Additional market share gains were achieved during the
2014 year. The key market of the Americas saw significant
revenue growth facilitated by the increased investment
in the overall capabilities of our Las Vegas operations,
allowing us to build on the existing strong foundations of
that business. We plan to further increase our investment
into the Americas, with plans for a purpose-built facility in
Las Vegas, Nevada.
04
AINSWORTH GAME TECHNOLOGY CHIEF EXECUTIVE
OFFICER’S REPORT
DEAR SHAREHOLDERS,
I am delighted to report that AGT has achieved continued
improved financial performance for the full year ended
30 June 2014, with a profit after tax of $61.6 million. This
increase of 18% on the prior corresponding period reflects
an ongoing growth in revenue and profitability as we
continue to expand the Group’s geographical footprint and
further strengthen our reputation as a globally recognised
provider of innovative high performance gaming solutions.
With a proven track record of revenue growth over five years
and a strong balance sheet as outlined by the Executive
Chairman, AGT is well positioned to leverage strategic
opportunities that present themselves in both land based
and online markets.
We remain committed to the implementation of strategies to
ensure the Group’s infrastructure is capable of supporting
our growth objectives, whilst maintaining a focus on
profitability across the Group and increasing shareholder
returns through continued payment of dividends. These
strategies include the ongoing investment in securing
additional gaming licences, the continual development of
new technology, the expansion of our product offering, as
well as the recruitment, retention and advancement of our
talented and experienced workforce.
Sales revenue in FY14 increased 23% to $244 million,
reflecting the Group’s continued expansion of its worldwide
operations. Significantly, international revenue increased
37% and now contributes 41% of total revenue, up from 37%
in 2013.
Domestically,
the well-established Australian market
delivered revenue of $143 million, an increase of 15% on
the prior corresponding period. The Group experienced
significant growth in Victoria in particular, owing to the
stabilisation of the market following its transition from a
previous duopoly, and we also experienced continued
strength
in our core markets of New South Wales
and Queensland.
Further increases in market share were achieved as a
result of the continued success of the A560™ cabinet range
and the release of new games providing high yielding
performance.
These games included Treasure Storm™ linked jackpot,
Quad Shot™, MultiPlay™ and the A560™ Wide Boy™ Reels
of Wheels™.
Our service division also continues to grow with the recent
addition of the Reel Gaming Solutions business in the
ACT, and we now have a service footprint of over 13,500
machines in New South Wales.
International revenue increased 37% to $100.8 million,
compared to $73.7 million in 2013. The key market of the
Americas increased revenue by 44% in the period, with
Latin America contributing 32% of overall international
revenue. We expect to achieve further increases in
international revenue in FY15 from the ongoing release
of newly developed product initiatives combined with the
established operational base in Las Vegas, Nevada.
In the specific key market of North America, a revenue
increase of 36% was achieved. The release of new
products, notably the A560SL™, further bolstered the level
of performance in this market and will provide continued
revenue opportunities in future periods. Additional products
released at the G2E Gaming Exhibition in September and
access to new markets including Missouri, Mississippi and
Arizona are expected to assist in revenue growth in this
region in the coming year.
As outlined by the Executive Chairman, we have progressed
plans to relocate to a purpose-built facility in Las Vegas to
accommodate for expansion in all international markets,
and the Americas in particular. The purchase of vacant land
during FY14 has enabled the Group to progress construction
plans for a state-of-the-art facility to service this significant
market. The resulting establishment of additional dedicated
sales and service representation in these new jurisdictions
is expected to provide further opportunities to progress the
Group’s footprint across North America.
In Latin America AGT continued to achieve growth in
revenue and volumes recording increases of 63% and 42%
respectively. The Group has expanded its footprint into
major casinos and established solid relationships in this
geographical area which will provide opportunities for the
coming year.
05
ANNUAL REPORT 2014 CHIEF EXECUTIVE
OFFICER’S REPORT (continued)
REVENUE/PROFITABILITY – AUD (M)
(Fiscal years ended June 30)
Total Revenue
Profit/(Loss) Before Tax (PBT)
250
200
150
100
50
0
69
(2)
FY10
198
151
244
98
15
46
69
82
FY11
FY12
FY13
FY14
Within the ‘Rest of the World’ segment, representing New
Zealand, Asia and Europe, the Group achieved revenue of
$10.4 million. Despite an overall decrease in ‘Rest of World’
revenue of 5%, the New Zealand market increased revenue
by 48% on the prior corresponding period, as a direct result
of further penetration and interest by the major trust groups
within the hotel and club segment.
The Asian market presented challenges following the
introduction of new gaming standards, including dual
language requirements within Macau, which required
additional software development. With a range of newly
developed products recently released in this market, and
a number of planned venue openings providing growth
opportunities, it is expected that revenue increases within
Asia will be steadily realised in future periods.
A gross margin of 64% was achieved, which was equal to
the reported margin for the first half of FY14, however, this
result is down compared to 66% in the prior corresponding
period. The range of factors that contributed to the decline
in margin included a greater contribution from international
regions, specifically Latin America; continued diversification
of product offerings; and, volume discounts offered to
corporate customers in the Americas.
06
Operating costs excluding cost of sales, other expenses
and financing costs increased 17% to $77 million in the
period. This increase was driven by higher variable selling
costs in line with revenue increases, additional product
research and development including online investment,
and the full year impact of investment within the operational
facility in Las Vegas.
Investment in research and development increased 14%
in the period, representing 11% of revenue. Our continued
investment in the development of innovative and technically
advanced products will assist in the capture of further
market share in new markets and provide opportunity for
revenue growth in established markets.
The Group’s product pipeline was evident at the recent
Australasian Gaming Exhibition with the new A560X™ gaming
platform displayed together with the A560SL™ cabinet
variant. The Magnificent 7™ and Cash Challenge™ products
in the wide boy cabinet are expected to be launched
in domestic markets in the first half of the current year.
Internationally, early performance results in the Americas
of the A560SL™ product show all game brands performing
above average, in particular the Sweet Zone™ game Rumble
Rumble™ currently producing results in excess of double the
house average. Additional titles utilising this style of game
were displayed at the G2E trade show in Las Vegas plus 40
new game titles across the A560™ cabinet range.
AINSWORTH GAME TECHNOLOGY TOTAL REVENUE BY CONTINENT
$58.5m
$1.0m
$4.1m
$31.9m
On the regulatory front the Group continues to progressively
pursue additional gaming licenses to expand its footprint
across global markets, and now has a total of 163 unique
gaming licenses across the world. During FY14, 31 additional
licenses were obtained including 3 US States, 26 Tribal,
1 Canadian province and an eGambling license from the
Alderney Gambling Commission for the progression of
online activities. The Group has also submitted a further
4 license applications.
The Group continues to pursue opportunities to provide
its successful content to the ever growing online gaming
segment. The receipt of an eGambling license was an
important step in the Group’s strategy to establish a hub for
the GameConnect™ remote gaming server in the Channel
Islands of Guernsey and will allow the Group to provide
content to European and UK online casino platforms.
In addition to establishing a presence in the online real
money segment, we have entered into an agreement
with an online social gaming casino platform provider, 616
Digital. It is expected that both desktop and mobile social
real money content applications will be launched in the 3rd
quarter of FY15.
$143.3m
$5.3m
Our team of dedicated employees continues to grow
around the world, increasing 14% within FY14, with the
operational facility in Las Vegas now employing 24% of our
global workforce. We remain committed to recognising and
rewarding the efforts of our people and to supporting their
continued development and training.
I wish to express my appreciation to the Board of Directors
for their wise counsel and our talented employees which
have been a major contributing factor to the continued
success achieved. We look forward to continued success
in the coming period as we maintain our strong position
in established domestic markets and leverage further
opportunities within international markets.
Danny Gladstone
Chief Executive Officer
07
ANNUAL REPORT 2014
Distribution of shareholders
Category
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
NUMBER OF EQUITY SHAREHOLDERS
Performance
Rights
Ordinary
Shares
Options
984
2,052
737
594
78
4,445
-
-
1
4
1
6
10
286
29
19
1
345
The number of shareholders holding less than a marketable
parcel of ordinary shares is 189 (12,190 ordinary shares).
On market buy-back
There is no current on market buy-back of ordinary shares.
Unquoted equity securities
At 12 September 2014, 334,345 unlisted non-transferable
options and 1,432,399 performance rights have been issued
to 6 and 345 employees, respectively. These options and
performance rights remain unexercised.
Regulatory considerations affecting shareholders
The Company is subject to a strict regulatory regime in
regard to the gaming licences and operations within the
gaming industry. It is necessary for the Company to regulate
the holding of shares to protect the businesses of the
Company in respect of which a gaming licence is held. By
accepting shares, each potential investor acknowledges that
having regard to the gaming laws, in order for the Company
to maintain a gaming licence, the Company must ensure
that certain persons do not become or remain a member
of the Company. The Constitution of the Company contains
provisions that may require shareholders to provide certain
information to the Company and the Company has powers
to require divesture of shares, suspend voting rights and
suspend payments of certain amounts to shareholders.
INFORMATION ABOUT SHAREHOLDERS
Shareholder
the Australian
Securities Exchange Limited Listing Rules and not disclosed
elsewhere in this report is set out below:
required by
information
SHARE HOLDINGS (AS AT 12 SEPTEMBER 2014)
Number of shareholders and shares on issue
The issued shares in the Company were 322,232,031
ordinary shares held by 4,445 shareholders.
Substantial shareholders
The number of shares held by substantial shareholders and
their associates are set out below:
Shareholder
Mr LH Ainsworth
Votraint No. 1019 Pty Ltd
(MCA Private Investment A/C)
Number of
Ordinary Shares
171,933,947*
28,308,124
* Mr LH Ainsworth granted share options over a portion of his
existing personal shareholding
to Australian employees,
excluding directors. Share options outstanding as at
12th September 2014 were 333,125 (issued to 19 employees)
and remain unexercised.
Voting rights
Ordinary shares
The voting rights attaching to ordinary shares are that on
a show of hands every member present in person or by
proxy has one vote and upon a poll, each share shall have
one vote.
Options and Performance Rights
Option and performance right holders have no voting rights.
08
SHAREHOLDER INFORMATIONAINSWORTH GAME TECHNOLOGY Twenty largest shareholders
Name
Mr L H Ainsworth
Votraint No. 1019 Pty Ltd (MCA Private Investment A/C)
JP Morgan Nominees Australia Limited
HSBC Custody Nominees (Australia) Limited
National Nominees Limited
Associated World Investments Pty Limited
Citicorp Nominees Pty Limited
Baclupas Pty Limited (Valhalla A/C)
BNP Paribas Noms Pty Limited (DRP)
Brispot Nominees Pty Limited (House Head Nominee No. 1 A/C)
Writeman Pty Limited (P L H A Investment A/C)
Merrill Lynch (Australia) Nominees Pty Limited
Trinity Management Pty Limited
Casola Holdings Pty Limited (Nordiv Holdings S/Fund A/C)
Mr Sasha Alexander Cajkovac
Miss Pattarawadee Smarnkeo
Quotidian No. 2 Pty Limited
Mrs Chizuru Larment
Mr David Warren Larment and Mrs Chizuru Larment
(D&C Larment Super Fund A/C)
Mr Christian John Hastings Ainsworth
Total
Number of ordinary shares held
Percentage of total
157,981,764
28,308,124
22,130,290
18,935,361
15,036,931
9,165,240
8,654,551
4,654,043
4,529,202
1,962,466
1,900,000
1,838,653
1,547,378
1,070,000
682,000
659,999
603,9 1 1
600,000
600,000
595,650
281,455,563
49.03
8.79
6.87
5.88
4.67
2.84
2.69
1.4 4
1 . 4 1
0.61
0.61
0.57
0.48
0.33
0.2 1
0.20
0.19
0.19
0.19
0.1 8
87.34
09
ANNUAL REPORT 2014 CORPORATE
GOVERNANCE
STATEMENT
THE COMPANY’S APPROACH TO CORPORATE
GOVERNANCE
The Company’s Board of Directors and management
strongly support
the principles of good corporate
governance to create long-term value for shareholders and
maintaining the Company’s strong reputation for integrity.
This is particularly important given the highly regulated
nature of the industry within which the Company operates
and is essential for securing new gaming licences and
protection of current licences.
Set out below are the Company’s corporate governance
principles and practices in line with the ASX Corporate
Governance Council (“Council”) release of “Corporate
Governance Principles and Recommendations with 2010
Amendments, 2nd edition”. Statements to this corporate
governance section have been referenced to the applicable
.
ASX Recommendations and compliance is indicated by
On 27 March 2014, the Council released the third edition
of Corporate Governance Principles and Recommendations
which takes effect for an entity’s first full financial year
commencing on or after 1 July 2014. The Company is
currently reviewing these new recommendations and will
further enhance its corporate governance based on these
new principles and recommendations with any changes to
the Company’s corporate governance to be reflected in its
next financial reporting year.
PRINCIPLE 1
Lay solid foundations for management and oversight
Role of the Board
The Board’s primary role is the protection and enhancement
of long-term shareholder value. To fulfill this role, the Board
is responsible for the overall corporate governance of
the Company, including guiding its strategic direction,
approving and monitoring capital expenditure, monitoring
financial performance, setting remuneration and reviewing
the performance of the Chief Executive Officer. The Board
is responsible for ensuring appointments, removals and
succession plans for directors and where necessary,
seeking shareholder approval. In addition, the Board
is responsible for appointing, removing and creating
succession polices for the Chief Executive Officer and
senior executives. The Board establishes and monitors the
achievement of management’s goals, ensuring the integrity
of internal control and management information systems
and approves and monitors financial and other business
related reporting.
In his role as Executive Chairman, Mr LH Ainsworth provides
input into technical design, strategic guidance and overview
of the Company with the responsibility for management of
the day to day operations delegated to the Chief Executive
Officer. Responsibilities are delineated by formal authority
delegations.
10
Board Processes
To assist in the execution of its responsibilities, the Board
has established three Board Sub-Committees namely the
Remuneration and Nomination Committee, the Regulatory
and Compliance Committee and the Audit Committee. Each
Committee has a Charter which includes a more detailed
description of their duties and responsibilities. These
Charters are regularly reviewed and approved by the Board
and are available in the Corporate Governance section of
the Company’s website. The Board has also established a
framework for the management of the Company including
a system of internal control, a business risk management
process and the establishment of appropriate ethical
standards.
The Board currently holds monthly scheduled meetings
throughout the year and any extraordinary meetings at such
other times as may be necessary to address any specific
significant matters that may arise.
The agenda for the Board meetings is prepared in
conjunction with the Chairperson, Chief Executive Officer
and
the Chief Financial Officer/Company Secretary.
Standing items include declaration of interests or conflicts,
the Chief Executive Officer’s report, financial reports and
any issues relating to strategic matters, governance and
compliance requirements of the Company. Board papers
and submissions are circulated in advance. Executives are
regularly involved in Board discussions and directors have
the opportunity for contact with a wider group of employees
and other stakeholders.
During the year under review, the Board met ten times and
the Board members’ attendance record is disclosed in the
table of directors’ meetings on page 20 of this Report.
Performance of Key Executives
The Remuneration and Nomination Committee reviews
the performance of the Company’s Chief Executive Officer
and senior executives who directly report to the Chief
Executive Officer. Their findings are reported to the Board.
A performance management review process is undertaken
which involves review against previously established goals
and objectives set by the Board. The performance of the
Company’s senior executives has been assessed this year
in accordance with this process. Key aspects of the review
process are described below.
The Chief Executive Officer’s Key Performance Indicators
(KPIs) are annually determined by the Board based on
recommendations from the Remuneration and Nomination
Committee. The key aspects included in the KPIs are
financial performance measures, strategic initiatives, staff
and human relations matters and compliance performance.
The Remuneration and Nomination Committee reviews
performance against the established KPIs on an ongoing
basis, with a formal evaluation being completed at the
end of each financial year and its findings are reported to
the Board.
AINSWORTH GAME TECHNOLOGY The Chief Executive Officer evaluates, at least annually, the
performance of the following key executives:
Chief Financial Officer/Company Secretary, Group General
Manager of Strategy and Development, General Manager
of Research and Development, General Manager of
Manufacturing, General Counsel, Group Compliance
Manager and Divisional Sales Managers. Both qualitative
and quantitative measures are used that vary according to
an individual’s role. Factors that are taken into consideration
when accessing performance include relative contributions
to profit, how business is conducted, people leadership
and adherence to the Company’s Code of Conduct and
compliance policies. These performance assessments are
reviewed by the Remuneration and Nomination Committee
and reported to the Board.
ASX Corporate Governance Council’s
Recommendations 1.1, 1.2, 1.3
PRINCIPLE 2
Structure the Board to add value
Composition of the Board
The names and details of the directors of the Company in
office at the date of signing the Financial Report are set out
on pages 18 and 19 of this Report.
The composition of the Board is evaluated and reviewed to
ensure it provides a broad range of skills, personal qualities,
expertise, ability to exercise independent judgment and
diversity required to discharge its responsibilities. Provision
of such skills and experience is aimed to assist the Company
to achieve its objectives and continual development.
The Remuneration and Nomination Committee assists
the Board in regularly evaluating the effectiveness, size
and composition of the Board. It identifies and evaluates
suitability qualified candidates as directors and makes
recommendations to the Board for consideration.
An objective of the Company is to ensure that the majority
of the Board should comprise independent, non-executive
directors with no other significant business or other links
to the Company. An independent director is a director who
is not a member of the management (i.e. a non-executive
director) team and who:
– holds less than five percent of the voting shares of
the Company and is not an officer of the Company,
or otherwise associated, directly or indirectly, with a
shareholder of more than five percent of the voting
shares of the Company;
– has not within the last three years been employed in an
executive capacity by the Company or another group
member, or has been a director after ceasing to hold any
such employment;
– within the last three years has not been a principal or
employee of a material* professional adviser or a material*
consultant to the Company or another group member;
– is not a material* supplier or customer of the Company
or another group member, or an officer of the Company
or otherwise associated, directly or indirectly, with a
material* supplier or customer;
– has no material* contractual relationship with
the
Company or another group member other than as a
director of the Company;
– has not served on the Board for a period which could,
or could reasonably be perceived to, materially interfere
with the director’s ability to act in the best interests of the
Company; and
– is free from any interest and any business or other
relationship which could, or could reasonably be
perceived to, materially interfere with the director’s ability
to act in the best interests of the Company.
* the Board considers, “material”, in this context to be where any
director-related business relationship has represented, or is
likely in future to represent the lesser of at least 10% of the
relevant segment’s or the director-related business’s revenue.
The Board has considered the nature of the relevant industries’
competition and the size and nature of each director-related
business relationship, in arriving at this threshold.
The majority of the Board comprises independent non-
executive directors with the roles of the Chairperson and
Chief Executive Officer not being exercised by the same
individual. Each director has the right of access to all
Company information and to the Company’s executives.
Further, subject to informing the Board, a director may seek
independent professional advice from a suitably qualified
adviser at the Company’s expense. A copy of the advice
received by the director is made available to all other
members of the Board.
The Company has a formal process to educate new directors
about the nature of the business, current issues, the
corporate strategy and the expectations of the Company
concerning performance of directors. Directors also have
the opportunity to meet with management to gain a better
understanding of business operations. Directors are able to
access continuing education opportunities to update and
enhance their skills and knowledge.
Board Performance Review
The Chairman of the Board is responsible for evaluating
the performance of
its committees and
the Board,
individual directors. The performance of the Board was
assessed during the year in accordance with the process
described below.
The process for conducting the Board’s performance review
consists of individual interviews with each director. The
review includes an assessment of the individual contribution
of each Board member as well as the performance of the
Board as a whole. The performance criteria that is taken
into account include each director’s contribution to setting
the direction, strategy and financial objectives of the group
and monitoring compliance with regulatory requirements
and ethical standards. A written report discussing the
results, issues for discussion and recommendations is to be
presented to the Board and discussed at a Board Meeting.
Each of the Board Committees undertakes a periodic review
of their performance in accordance with their Charters. The
results of these reviews are then presented and discussed
at a Board meeting.
11
ANNUAL REPORT 2014 CORPORATE
GOVERNANCE
STATEMENT (continued)
Sub-Committees of the Board
1. Audit Committee
Details regarding the composition of the Committee, its
role and responsibilities are provided under Principle 4 of
this statement.
2. Remuneration and Nomination Committee
Details regarding the composition of the Committee and its
role and responsibilities are provided under Principle 8 of
this statement.
3. Regulatory and Compliance Committee
The members of the Committee during the year are set
out below:
Composition of Regulatory and Compliance Committee
Chairman: Mr MB Yates (Independent Non-Executive
Director)
Members: Mr GJ Campbell (Lead Independent
Non-Executive Director)
Mr DE Gladstone (Executive Director/Chief
Executive Officer)
Mr JF O’Reilly (Independent Member)
Due to the highly regulated nature of the gaming industry
within which the Company operates, the securing of new
gaming licences and protection of current licences is
an ongoing process which is of great importance to the
Company. The Regulatory and Compliance Committee
Charter, which is reviewed regularly and has been approved
by the Board, outlines responsibilities to monitor, review,
advise and assist the Board to ensure all compliance
related matters and procedures have been established
and are operating effectively. The Charter is available on
the website of the Company. A majority of members are
independent, including two non-executive directors and
the chairman is not the Chairman of the Board.
The Regulatory and Compliance Committee monitors probity
related matters, technical compliance issues and compliance
conduct and issues, systems and procedural requirements
to ensure that the Company maintains a high standard of
compliance with all of its gaming regulatory and licence
obligations. In addition, the Regulatory and Compliance
Committee advises and makes recommendations to the
Board regarding regulatory compliance matters, including
the suitability of key employees and other persons or
entities with whom the Company has or intends to have an
association or affiliation, in line with gaming regulations.
The Group Compliance Manager and
the Technical
Compliance Manager are invited to the Regulatory and
Compliance Committee meetings to present and discuss
their reports and recommendations. The Regulatory and
Compliance Committee met four times during the year and
the directors’ attendance record is disclosed in the table
of directors’ meetings on page 20 of this Report. Due to
the importance of the regulatory environment within which
the Company operates, and to ensure the commitment
by the Board within this important area, the Committee is
scheduled to meet at least four times each financial year and
as required to address any specific issues that may arise.
The main responsibilities of the Regulatory and Compliance
Committee are to:
– oversees activities of the compliance, licencing and
technical compliance functions;
– regularly review the application of compliance to ensure
that the Company meets all requirements outlined in its
Compliance Policy;
– deal with and investigate any breaches, complaints and
derogatory information of which it becomes aware;
– provide assistance and advice to the Board on matters
pertaining to the Company’s continuing suitability to
obtain and maintain gaming licences;
– review operational policies and
relating to compliance issues; and
recommendations
– perform, at least annually, a performance evaluation
of the Committee members to ensure delivery on its
Charter and continually enhance the Committee’s
contribution to the Board.
The Regulatory and Compliance Committee may seek
independent professional advice, at
the Company’s
expense, in carrying out these duties, subject to informing
the Board. The Committee has the authority to conduct any
investigation appropriate to fulfilling its responsibilities and
is provided with the right to direct access to any person
within the Company.
ASX Corporate Governance Council’s Recommendations 2.1, 2.3, 2.4, 2.5, 2.6
Non-compliance to the ASX Corporate Governance Council’s Recommendations is as below:
Principle 2.2 The chair
should be an
independent
director
Given that the Chairman, Mr LH Ainsworth, is a substantial shareholder of the Company,
he is not considered to be an independent director. Mr GJ Campbell has been
appointed as the lead independent director to ensure that any conflicts which may arise
are dealt with in line with ASX Corporate Governance Principles and Recommendations.
12
AINSWORTH GAME TECHNOLOGY PRINCIPLE 3
Promote ethical and responsible decision-making
Diversity and Inclusion
The Company recognises that a diverse and inclusive
workforce is important in attracting and retaining talented
employees, inspiring greater innovation, and embracing the
Company business objectives. The Company is supportive
of the ASX diversity recommendations and will continually
be committed to promote and achieve diversity across the
Company. In addition to the Company’s Equal Employment
Opportunity/Anti-Discrimination Policy, the Company has
established a Diversity Policy which is available on the
Company’s website. The Board will continually develop
measureable objectives for key diversity categories in
line with the Diversity Policy. The Remuneration and
Nomination Committee will review the progress of the
objectives annually and will report the outcomes and make
recommendations as appropriate to the Board.
The Company demonstrated its commitment to gender
diversity by setting a target for female representation
across the Company. The measureable objectives set by
the Board are:
– Female representation in company-wide level to be a
minimum of 30% by 2015;
– Female representation in senior management level to be
a minimum of 15% by 2015; and
– At least one female Non-Executive Director by 2015.
The proportion of women at various levels within the
Company at the end of the financial year is shown in the
chart below.
Board of Directors
Nil
Senior Management
10%
Company-wide
25%
Ethical Standards
All directors, managers and employees are expected
to act with complete integrity and objectivity in all their
activities related to the Company, striving at all times to
enhance the reputation and performance of the Company.
Every employee has a nominated supervisor to whom
they may refer any issues or complaints arising from
their employment. To further promote a culture within
the Company where ethical standards are maintained
in accordance with Company policy, the Company has
established a “Whistleblower” Policy which ensures
protection of
incidents of
misconduct or unethical behaviour.
reporting any
individuals
Conflict of Interest
Directors must keep the Board advised, on an ongoing basis,
of any interest that could potentially conflict with those of the
Company. The Board has developed procedures to ensure
that directors disclose any potential conflicts of interest.
Where the Board believes that a significant conflict exists
for a director on a Board matter, the director concerned
does not participate in any discussion and voting on the
applicable matter and, if considered appropriate, the
director is requested not to be present whilst the matter is
considered. Details of director related transactions with the
Company are set out in Note 30 in the financial statements.
Code of Conduct
The Company has established a Code of Conduct that
embraces high standards of personal and corporate
conduct. Each director, manager and employee has been
advised that they must comply with this Code. The full Code
may be viewed on the Company’s website and it requires all
directors and officers to:
– conduct all dealings with
internal and external
stakeholders in a truthful, honest and trustworthy manner;
– value and maintain professionalism;
– treat all persons with whom they interact, with respect
and dignity;
– respect the rights of individuals;
– act towards others without discrimination;
– comply with
procedures;
the Company’s
internal policies and
– report unethical behaviour or wrongdoing;
– use authority in a fair and unbiased way;
– comply with all applicable laws, regulations and licensing
conditions; and
– not knowingly make a misleading statement.
A copy of the Code of Conduct is made available to all
staff. The Code is reviewed regularly by the Board and
processes are in place to communicate any amendments
to the Code to all staff. New employees are issued with an
employee handbook containing the Code of Conduct and
prior to commencing their respective employment, they
are required to certify that they have read and understood
the requirements contained within it. The Company has
established procedures to monitor compliance with the
Code of Conduct.
In addition to the Code of Conduct and the Whistleblower
policy, the Company also has policies which govern:
– Workplace Health and Safety; and
– Dealing in Company’s securities.
All employees are required to complete the workplace
grievance and compliance training conducted by the
Company. The workplace grievance training covers issues
like harassment, discrimination, bullying and violence which
are governed by the Company’s policies and copies of
these documents are available on the Company’s website.
ASX Corporate Governance Council’s
Recommendations 3.1, 3.2, 3.3, 3.4,3 .5
13
ANNUAL REPORT 2014 CORPORATE
GOVERNANCE
STATEMENT (continued)
PRINCIPLE 4
Safeguard integrity in financial reporting
Audit Committee
The members of the Committee during the year are set out below:
Composition of the Audit Committee
Chairman: Mr GJ Campbell (Lead Independent
Non-Executive Director)
Members: Mr CJ Henson (Independent Non-Executive
Director)
Mr DH Macintosh (Independent
Non-Executive Director)
The Audit Committee has a documented Charter, which is
regularly reviewed and approved by the Board.
All members are currently independent non-executive
directors. The chairman of the Committee is not the
Chairman of the Board. The Committee advises on the
establishment and maintenance of a framework of internal
financial control for the management of the Company.
The external auditors, the Chief Executive Officer and
Chief Financial Officer/Company Secretary, are invited to
attend Audit Committee meetings at the discretion of the
Committee. The Committee met two times during the year
and Committee members’ attendance record is disclosed in
the table of directors’ meetings on page 20 of this Report.
The external auditor met with the Audit Committee and the
Board during the year, without management being present.
The Chief Executive Officer and the Chief Financial Officer/
Company Secretary declared in writing to the Board that
the Company’s financial reports for the year ended 30 June
2014 present a true and fair view, in all material respects, of
the Company’s financial condition and operational results
and are in accordance with relevant accounting standards.
This statement is required for the full year and half year
reporting periods.
The main responsibilities of the Audit Committee are to:
– assist the Board to discharge its fiduciary responsibilities
with regard to the Company’s accounting, control and
reporting practices by monitoring the risk and internal
control environment and management over corporate
assets;
– review
internal controls and any changes
thereto
the Company’s Chief
approved and submitted by
Financial Officer/Company Secretary;
– provide assurance regarding the quality and reliability of
financial information used by the Board;
– oversee the activities of the internal audit function and
external audit staff of the Company and to review the
Company’s risk management policies and internal control
processes;
– review and recommend to the Board the adoption of the
Company’s half year and annual financial statements;
– liaise with and review the performance of the external
auditor;
14
– consider whether non-audit services provided by the
external auditor are consistent with maintaining the
external auditors’ independence; and
– perform, at least annually, a performance evaluation of
the Committee members to ensure delivery on its Charter
and continually enhance the Committee’s contribution to
the Board.
The Audit Committee reviews the performance of the
external auditors on an annual basis and meets with them
during the year to:
– discuss the external audit and internal audit plan;
– identify any significant changes in structure, operations,
internal controls or accounting policies likely to impact
the financial statements;
– review the fees proposed for the audit work to be
performed;
– review the half-year and preliminary final reports and
any significant adjustments required as a result of the
auditor’s findings prior to lodgement with the ASX;
– review the results and findings of the auditor and monitor
the implementation of any recommendations made; and
– organise, review and report as required on any special
reviews or investigations deemed necessary by the
Board subject to the engagement not impairing audit
independence.
The Audit Committee’s Charter
the
Company’s website. The Audit Committee also considers
the selection and appointment of external auditors and the
rotation of external audit engagement partners.
is available on
ASX Corporate Governance Council’s
Recommendations 4.1, 4.2, 4.3, 4.4
PRINCIPLE 5
Make timely and balanced disclosure
The Company is listed on the ASX and is committed to
ensuring that information which is expected to have a
material effect of the price or value of its shares is notified
to the ASX in a timely and balanced manner, with regard to
the Corporations Act 2001 and ASX Listing Rules outlining
continuous disclosure requirements for listed companies.
All senior executives must follow a process which involves
monitoring all areas of the Company’s internal and external
environment to identify and communicate significant matters
in a timely manner to the Chief Financial Officer/Company
Secretary. The Chief Executive Officer and Chief Financial
Officer/ Company Secretary are responsible for determining
whether matters are required to be disclosed in accordance
with the above continuous disclosure requirements and for
informing the Board accordingly.
The Chief Financial Officer/Company Secretary
is
responsible for co-ordinating disclosure to the ASX and
ensuring that such information is not released to any person
until the ASX has confirmed its release to the market.
Such matters are advised to the ASX on the day they are
identified as being material.
ASX Corporate Governance Council’s
Recommendations 5.1, 5.2
AINSWORTH GAME TECHNOLOGY PRINCIPLE 6
Respect the rights of shareholders
The Company is committed to keeping shareholders fully
informed of significant developments and activities of the
Company. This commitment is fulfilled as follows:
– all announcements made to the market and related
information (including investor presentations, information
provided to analysts or the media during briefings), are
placed on the Company’s website after lodgement with
the ASX;
– the Annual Report (including relevant information about the
operations of the Company during the year and changes in
the state of affairs) is distributed to all shareholders (unless
a shareholder has specifically requested not to receive the
document);
– the half yearly report contains summarised financial
information and a review of the operations of the Company
during the period. The half year reviewed financial report
is lodged with the Australian Securities and Investments
Commission and the ASX and sent to any shareholder who
requests it;
– the full texts of notices of meetings and associated
explanatory material are placed on the Company’s website;
– the Board encourages full participation of shareholders
at the AGM, to ensure a high level of accountability and
identification with the Company’s strategy and goals;
– important issues are presented to shareholders as single
resolutions;
– shareholders are requested to vote on the appointment
and aggregate remuneration of directors as well as
changes to the Constitution. The Constitution is available
on the website of the Company and copies are also given
to shareholders who request for the same; and
– the external auditor is requested to attend the AGM to
answer any questions concerning the audit and the content
of the Auditor’s report.
ASX Corporate Governance Council’s
Recommendations 6.1, 6.2
PRINCIPLE 7
Recognise and manage risk
Oversight of the risk management system
The Board oversees the establishment, implementation
and annual review of the Company’s risk management
system. Management has established and implemented
the risk management system for identifying, assessing,
monitoring and managing operational, financial reporting,
and compliance risks for the Company. The Chief Executive
Officer and the Chief Financial Officer/Company Secretary
have declared, in writing to the Board, that the financial
reporting risk management and associated compliance and
controls have been assessed and found to be operating
efficiently and effectively. All risk assessments covered
the whole financial year and the period up to the signing of
the annual financial report for all material operations in the
Company and material associates.
Risk profile and the Audit Committee
The Audit Committee reports to the Board on the status
of risks through integrated risk management processes
and programs aimed at ensuring that risks are identified,
assessed and appropriately managed.
Each business operational unit
responsible and
is
accountable for implementing and managing the standards
required by the risk management system.
The major risks that the Company faces are allocated
to individual executives and are reviewed to determine
progress and to provide updates as to the individual status
and to ensure the identification of any further risks.
the AS/NZ
Risk management and compliance and control
The Company has implemented a compliance program
which complies with the Australian Standard for Compliance
Programs AS 3806. This Standard was prepared by the
Standards Australia Committee following a request by
the Australian Competition and Consumer Commission
the essential elements of an effective
and details
compliance program. The Standard provides principles
for the development, implementation and maintenance
of an effective compliance program, whilst emphasising
the need for continuous improvement. The use of these
principles will enable the Company to identify risks and to
develop processes to ensure compliance with relevant laws
and regulations, including gaming regulatory and licence
obligations.
The Company’s quality management system complies
ISO 9001:2008 standard Quality
with
Management System-Requirements, published by
the
Internal Organisation for Standardisation (ISO). The annual
surveillance audit was conducted in 2014 by independent
auditors further demonstrating the Company’s commitment
to continuous improvement. The next annual surveillance
audit is currently scheduled for May 2015. As a Nevada
licence holder, the Company has obligations under its
Nevada Gaming Compliance Plan in addition to licence and
reporting obligations under its other licences.
The Company continually reviews internal controls and
operating procedures, to enable compliance with Gaming
Machine National Standards and the Company’s Control
System Manual.
To ensure that these standards are maintained, there are a
number of internal reporting measures including monthly
Compliance Reports from all department managers and
monthly Continuous Disclosure Reports from all senior
executives. The Regulatory and Compliance Committee
receives details from the above reports and reviews the
Company’s reporting and processes on all these matters.
The Board is responsible for the overall internal control
framework, but recognises that no cost effective internal
control system will preclude all errors and irregularities. The
Board’s policy on internal control is continually under review
to ensure it keeps pace with internal and external changes.
The Board oversees the Company’s internal compliance and
control systems, including:
15
ANNUAL REPORT 2014 CORPORATE
GOVERNANCE
STATEMENT (continued)
Operating unit controls – Operating units confirm
compliance with financial controls and procedures, including
information systems controls detailed
in procedures
manuals;
Functional specialty reporting – Key areas subject to
regular reporting to the Board include Treasury and Risk
Management, Environmental, Legal and Insurance matters;
and
Investment appraisal – Guidelines for capital expenditure
include annual budgets, detailed appraisal and review
procedures,
levels of authority and due diligence
requirements where businesses are being acquired or
divested.
Comprehensive practices have been established to ensure:
– capital expenditure and revenue commitments above a
certain size, obtain prior Board approval;
– workplace health and safety standards and management
systems are monitored and reviewed
to achieve
high standards of performance and compliance with
regulations;
– business
executed;
transactions are properly authorised and
– the quality and integrity of personnel is maintained (see
below);
– financial reporting accuracy and compliance with the
financial reporting regulatory framework (see below); and
– environmental regulation compliance (see below).
Quality and integrity of personnel
Written confirmation of compliance with policies of the
Company is obtained from all operating units. Formal
appraisals are conducted at least annually for all employees.
Training and development and appropriate remuneration
and incentives with regular performance reviews create
an environment of co-operation and constructive dialogue
with employees and senior management. A
formal
succession plan has been established to ensure competent
and knowledgeable employees fill senior positions, as and
when retirements or resignations occur.
Financial reporting
The Chief Executive Officer and the Chief Financial Officer/
Company Secretary have declared, in writing to the Board,
that the Company’s financial reports are founded on a
sound system of risk management and internal compliance
and control. Monthly actual results are reported against
budgets approved by the directors and revised forecasts
for the year are prepared regularly.
Environmental regulation
The Company’s operations are not subject to significant
environmental regulations under either Commonwealth
or State legislation. The Board believes that the Company
has adequate systems in place for the management of
16
its environmental requirements and is not aware of any
breaches of those environmental requirements as they
apply to the Company.
Assessment of effectiveness of risk management
Internal audit
To further assist the Board in ensuring compliance with
these internal controls and risk management programs,
the Company allocated the responsibilities of the Internal
Audit function to a key employee within the Company’s
compliance department. This role is to oversee and
regularly review the effectiveness of the abovementioned
compliance and control systems and conduct regular audits
against the International and Australian Standards as well
as against all operating policies and procedures. The Audit
Committee is responsible for approving the internal audit
plan to be undertaken during the year and for the scope of
the work to be performed.
ASX Corporate Governance Council’s
Recommendations 7.1, 7.2, 7.3, 7.4
PRINCIPLE 8
Remunerate fairly and responsibly
Remuneration and Nomination Committee
The members of the Committee during the year are set
out below:
Composition of the Remuneration and Nomination
Committee
Chairman: Mr DH Macintosh (Independent
Non-Executive Director)
Members: Mr MB Yates (Independent Non-Executive
Director)
Mr CJ Henson (Independent Non-Executive
Director)
The Remuneration and Nomination Committee has a
documented Charter which is regularly reviewed and
approved by the Board. A majority of members are
independent non-executive directors and the chairman of
the Committee is not the Chairman of the Board.
The Chief Executive Officer and Human Resources/
Payroll Manager are invited to attend the Remuneration
and Nomination Committee meetings, as required, to
discuss senior executives’ performance and remuneration
packages. The Chief Executive Officer and Chief Financial
Officer/Company Secretary are not involved in matters
pertaining to their own remuneration. During the year under
review, the Committee met five times and the directors’
attendance record is disclosed in the table of directors’
meetings on page 20 of this Report.
AINSWORTH GAME TECHNOLOGY responsibilities of
The main
Nomination Committee are to:
– review
the composition of
the Remuneration and
the Board and make
evaluations and recommendations thereon;
– identify and evaluate potential candidates as non-
executive directors and report findings to the Board;
– recommend
the selection, appointment,
induction
process and succession planning process for the Chief
Executive Officer, the Chief Financial Officer/Company
Secretary and other senior executives;
– recommend to the Board ways in which the skills,
experience and expertise levels of existing directors and
senior executives can be enhanced and developed;
– conducts an annual review of performance of the Chief
Executive Officer, the Chief Financial Officer/Company
Secretary and the senior executives reporting directly to
them, and report findings to the Board;
– review and make recommendations to the Board on
remuneration packages and incentive policies applicable
to the Chief Executive Officer, Chief Financial Officer/
Company Secretary, senior executives and directors
themselves;
– establish, review and monitor key diversity objectives
outlined in the Company’s Diversity Policy and an annual
review of measureable objectives is to be undertaken
with outcomes and recommendations reported to the
Board as appropriate; and
– perform, at least annually, a performance evaluation of
the Committee members to ensure delivery on its Charter
and continually enhance the Committee’s contribution to
the Board.
Further details of the Remuneration and Nomination
Committee’s responsibilities are outlined in its Charter,
which is available on the Company’s website. The policy
and procedure for appointment of directors also forms a
part of the Committee’s Charter.
Remuneration Report
The Remuneration Report is set out on pages 29 to 39 of
this Report.
Remuneration policies
Remuneration levels for key personnel of the Company
are competitively set to attract and retain appropriately
qualified and experienced executives and directors.
The Remuneration and Nomination Committee obtains
independent advice on the appropriateness of remuneration
packages, given trends in comparative companies both
locally and internationally.
The
remuneration structures explained below are
designed to attract suitably qualified candidates, reward
the achievement of strategic objectives and achieve the
broader outcome of creation of value for shareholders. The
remuneration structures take into account:
– the capability and experience of key management
personnel;
– the key management personnel’s performance against
individual
Indicators
Key Performance
(KPIs) and
contributions to the Company’s performance;
– the Company’s performance includes;
– revenue and earnings;
– growth in share price and delivering returns on
shareholder wealth; and
– the amount of incentives within each key management
person’s compensation.
Remuneration packages include a mix of fixed and variable
remuneration and short-term and long-term performance-
based incentives. In addition to salaries, the Company
also provides non-cash benefits to its key management
personnel and contributes
to defined contribution
superannuation plans on their behalf.
Senior executives may receive bonuses based on the
achievement of specific performance hurdles. The
performance hurdles are a blend of the Company’s and
each relevant segment’s result. In the year under review,
the Company exceeded the minimum performance targets,
with most segments exceeding operational budgeted
targets which resulted in short-term incentives being earned
during 2014 and was approved by the Board for payment,
after release of the Group’s annual results.
Total remuneration for all non-executive directors, last
voted upon by shareholders is not to exceed $850,000
per annum. The base fee for individual non-executive
directors for the financial year under review was $100,000
per annum, excluding superannuation and covers all main
Board activities. Membership of Committees is remunerated
in addition to the base fee as outlined in the Remuneration
Report on page 32 of this Report. Non-executive directors
do not receive any performance related remuneration
or bonuses or retirement benefits other than statutory
superannuation payments.
ASX Corporate Governance Council’s
Recommendations 8.1, 8.2, 8.3, 8.4
17
ANNUAL REPORT 2014 The directors present their report together with the consolidated financial statements of the Group comprising of
Ainsworth Game Technology Limited (the Company) and its subsidiaries for the financial year ended 30 June 2014 and the
auditor’s report thereon.
1. DIRECTORS
The directors of the Company at any time during or since the end of the financial year are:
Name, qualifications
and independence status
CURRENT
Age
Experience, special responsibilities and other directorships
Mr Leonard Hastings Ainsworth, DUniv,
FAICD, FAIM
Executive Chairman
91 yrs
– Sixty one years gaming industry experience
– Founder and former Managing Director of Aristocrat
– Fellow of the Institute of Company Directors in Australia and the
Australian Institute of Management
– Life member – Clubs N.S.W
– Founder of Australian Gaming Machines Manufacturers Association –
now Gaming Technology Association
– Founder of Australasian Gaming Exhibition
– Inducted into the Australian Gaming Hall of Fame and U.S Gaming Hall
of Fame in 1994 and 1995, respectively
– Recognition as export hero in 2002 by Australian Institute of Export
– G2E Asia Gaming Visionary Award Recipient in 2010
– Recipient of Clubs NSW award for outstanding contribution to the club
industry in 2011
– Recipient of Keno and Club Queensland Award for excellence in March
2014 for services to industry
– Awarded Higher Doctorate degree by the University of New South
Wales
– Director and Chairperson since 1995 – Executive Chairperson since
2003
– Graeme has specialised in the area of liquor and hospitality for over
30 years in corporate consultancy services with particular emphasis on
hotels and registered clubs
– Former Chairman of Harness Racing NSW, recipient of Ern Manea Gold
Medal and inducted into the Inter Dominion Hall of Fame in February
2014
– Former Director of Central Coast Stadium and Blue Pyrenees Wines
– Director of Liquor Marketing Group Limited and Hotel Liquor
Wholesalers Pty Ltd effective 2 September 2013
– Chairman of Audit Committee of Illawarra Catholic Club Group
– Director since 2007
– Chairperson of Audit Committee and member of Regulatory and
Compliance Committee
– Lead Independent Non-Executive Director since 30 June 2013
Mr Graeme John Campbell
Lead Independent Non-Executive Director
57 yrs
18
DIRECTORS’ REPORTfor the year ended 30 June 2014AINSWORTH GAME TECHNOLOGY Name, qualifications
and independence status
CURRENT
Mr Michael Bruce Yates B.Com (with merit),
LLB
Independent Non-Executive Director
Age
Experience, special responsibilities and other directorships
60 yrs
– Michael has extensive commercial and corporate law experience in a
career spanning over 34 years
– He is a former senior corporate partner of Sydney Law practices
Holding Redlich and Dunhill Madden Butler and has acted for a number
of clients involved in the gaming industry
– Director since 2009
– Chairperson of Regulatory and Compliance Committee and member of
Remuneration and Nomination Committee since 30 June 2013
Mr Daniel Eric Gladstone
Executive Director and Chief Executive
Officer
59 yrs
– Danny has held senior positions within the gaming industry over a
successful career spanning 40 years
– Inducted into the Club Managers Association Australia Hall of Fame
in 2000
– Chairman of Gaming Technologies Association from 2011 until
resignation on 21 February 2012
– Chief Executive Officer since 2007 - Executive Director since 2010
– Member of Regulatory and Compliance Committee
Mr Colin John Henson, Dip Law- BAB,
FCPA, FCIS, FAICD
Independent Non-Executive Director
66 yrs
– Colin has had a lengthy career in senior corporate positions and as a
director of private and publicly listed companies across a broad range
of industries
– Currently the Non-Executive Chairman of QuayPay Ltd and Videlli
Mr David Hugh Macintosh, AM, BBus, FCA
Independent Non-Executive Director
58 yrs
Limited
– Lead associate with Madison Cross Corporate Advisory Pty Ltd, a leading
Asia Pacific management consultancy practice, effective 2 July 2014
– Formerly the Executive Chairman of Redcape Property Fund Limited,
an ASX Listed Property Trust
– Fellow of the Australian Institute of Company Directors, CPA Australia
and Australian Institute of Corporate Managers, Secretaries and
Administrators
– Non practising member of the Law Society of NSW
– Director (subject to regulatory approval) since 2013
– Member of Audit Committee and Remuneration and Nomination
Committee since 30 June 2013
– David has an extensive career spanning over 40 years experience in
transport and the construction industry specialising in the hospitality
and gaming industry
– Currently the Managing Director of a major Australian construction
company
– Formerly the Executive Chairman and director of an ASX listed
Australian company for a period of approximately 20 years
– Inducted into the Club Managers Association Australia Hall of Fame in
March 2006
– Fellow of the Institute of Chartered Accountants Australia
– Member of the Order of Australia in June 2011
– Awarded the Australian National Medal in 2014
– Director (subject to regulatory approval) since 2013
– Chairperson of Remuneration and Nomination Committee and member
of Audit Committee since 30 June 2013
19
ANNUAL REPORT 2014 2. COMPANY SECRETARY
Mr Mark L Ludski has held the position of Company Secretary since 2000. Mr ML Ludski previously held the role of Finance
Manager with another listed public company for ten years and prior to that held successive positions in two leading accounting
firms where he had experience in providing audit, taxation and business advisory services.
Mr ML Ludski is a Chartered Accountant holding a Bachelor of Business degree, majoring in accounting and sub-majoring
in economics.
3. DIRECTORS’ MEETINGS
The number of directors’ meetings (including meetings of committees of directors) and number of meetings attended by each
of the directors of the Company during the financial year are:
Director
LH Ainsworth
GJ Campbell
MB Yates
DE Gladstone
CJ Henson
DH Macintosh
Board Meetings
B
A
10
10
10
10
10
10
10
10
10
10
10
10
Audit Committee
Meetings
Remuneration
& Nomination
Committee Meetings
Regulatory
& Compliance
Committee Meetings
A
–
2
–
–
2
2
B
–
2
–
–
2
2
A
–
–
5
–
5
5
B
–
–
5
–
5
5
A
–
4
4
4
–
–
B
–
4
4
4
–
–
A Number of meetings attended
B Number of meetings held during the time the director held office during the year
4. PRINCIPAL ACTIVITIES
The principal activities of the Group during the course of the financial year were the design, development, production, lease,
sale and servicing of gaming machines and other related equipment and services. The Group also operates or has strategies
to expand its activities within the on-line gaming markets, both social and real money.
There were no significant changes in the nature of the activities of the Group during the year.
Objectives
The Group’s objectives are to:
– focus on increasing revenue and profitability within geographical markets that are expected to achieve the greatest
contributions to the Group’s financial results, and creation of sustained growth;
– continue investing in product research and development in order to provide quality market leading products that are innovative
and entertaining and result in increased player satisfaction and therefore greater venue profitability;
– provide a growing return on shareholder equity through increasing profitability, payment of dividends and share price growth;
– prudently manage levels of investment in working capital and further improve cash flow from operations in the ensuing
financial year; and
– continue to pursue opportunities within on-line gaming markets, both social and real money.
In order to meet these objectives the following priority actions will continue to apply in future financial years:
– grow market share for existing business and increase revenue and operating activities in domestic and international markets;
– continual investment in research and development to produce innovative products with leading edge technology;
– further reduce product and overhead costs through improved efficiencies in supply chain and inventory management;
– continue to improve and manage working capital;
– maintain best practice compliance policies and procedures and increase stakeholder awareness of the Group’s regulatory
environment; and
– ensure retention and development of key employees.
20
DIRECTORS’ REPORT (continued)for the year ended 30 June 2014AINSWORTH GAME TECHNOLOGY 5. OPERATING AND FINANCIAL REVIEW
Overview of the Group
The Group’s performance for the current and prior corresponding period is set out below:
In millions of AUD
Reported results
Total segment revenue from ordinary activities
Earnings before interest, tax, depreciation and amortisation (EBITDA)
Earnings before interest and tax (EBIT)
Profit before income tax
Profit after income tax
Earnings per share (fully diluted)
Total dividends per share
12 months to
30 June 2014
12 months to
30 June 2013
Variance
%
244.1
89.4
79.1
82.0
61.6
19.0c
10.0c
198.1
74.1
66.0
69.3
52.2
16.0c
8.0c
23.2
20.7
19.8
18.3
18.0
18.8
25.0
The Group’s profit for the year ended 30 June 2014 was a profit after tax of $61.6 million, an increase of 18% on the $52.2 million in
2013. This result was achieved on revenue of $244.1 million, an increase of 23% on the revenue of $198.1 million in 2013. Further,
revenue gains in the key market of the Americas have assisted in increasing the contribution of revenue from international
markets from 37% in 2013 to 41% in the current year.
Profit before tax was $82.0 million, an increase of 18% compared to $69.3 million in 2013. Excluding the effect of net foreign
currency gains the current year result was an increase of $14.8 million (22%) compared to 2013.
Further expansion and market share gains were achieved during the current period following the development initiatives
introduced within all geographical markets. The key growth market of the Americas increased revenue by 44% in the period
through the commercialisation of the A560SL™ in North America and by the strong foundation of the Las Vegas operations
established in prior periods. The Group continues to invest in new product development to assist in the capture of further
market share in new markets and provide revenue growth in established markets.
Shareholder returns
2014
2013
2012
2011
2010
Profit/(loss) attributed to owners of the company
$61,570,000 $52,202,000 $64,275,000 $23,121,000
$(2,721,000)
Basic EPS
Dividends paid
Change in share price
$0.19
$0.16
$32,211,000
$9,661,000
($0.29)
$1.93
$0.23
$–
$1.74
$0.08
$–
$0.27
($0.01)
$–
$0.02
Net profit/(loss) amounts for 2010 to 2014 have been calculated in accordance with Australian Accounting Standards (AASBs).
The profit amount for 2012 included an income tax benefit of $18.1 million following the recognition of previously unrecognised
deferred tax assets.
Investments for future performance
The Group continues to review and evaluate opportunities within the gaming sector. Further increases in research and
development expenditure in future periods will continue to ensure that the expansion of the Group’s range of products is
innovative and technically advanced with a view to building on the consistently high performance achieved to date.
The implementation of an on-line strategy continues for both real money and social gaming applications. The Company
was granted a licence by the Alderney Gaming Commission in the Channel Islands in June 2014 to enable distribution of
content via the GameConnect™ Remote Gaming Server (RGS) with selected operators in both European and North American
regulated markets.
21
ANNUAL REPORT 2014 5. OPERATING AND FINANCIAL REVIEW (continued)
It is expected that by the end of the calendar year desktop and mobile content applications will be launched into the United
Kingdom on-line gaming market. Entry into the social gaming environment is well underway with the Group establishing an
agreement with Digital 616 LLC, an online social platform provider, to jointly progress development and marketing of a social
gaming offering on both desktop and mobile, leveraging the extensive game content library established for land based markets.
It is expected that this launch will take effect by the end of calendar year 2014.
Significant changes in the state of affairs
Investment in research and development continues to help ensure new initiatives positively affect future product performance.
Further investment within the Americas was undertaken in the 2014 financial year to ensure the Group is positioned to capitalise
on the significant opportunities within this region.
The high yielding performance of the Group’s current range of products combined with further development and release of
new products in selected markets is expected to enable the Group to further improve financial results.
Other than the matters noted above, there were no significant changes in the state of affairs of the Group during the financial
year.
Review of principal businesses
Results in the current period and prior corresponding period are summarised as follows:
12 months to
30 June 2014
12 months to
30 June 2013
Variance
Variance
%
143.3
90.4
10.4
244.1
83.6
36.3
6.1
124.4
62.6
11.1
198.1
69.9
26.2
6.2
126.0
102.3
0.8
(26.4)
(20.3)
(45.9)
79.1
2.9
82.0
(20.4)
61.6
2.9
(23.2)
(15.2)
(35.5)
66.0
3.3
69.3
(17.1)
52.2
18.9
27.8
(0.7)
46.0
13.7
10.1
(0.1)
23.7
(2.1)
(3.2)
(5.1)
(10.4)
13.1
(0.4)
12.7
(3.3)
9.4
15.2
44.4
(6.3)
23.2
19.6
38.5
(1.6)
23.2
(72.4)
13.8
33.6
29.3
19.8
(12.1)
18.3
(19.3)
18.0
In millions of AUD
Segment revenue
Australia
Americas
Rest of World
Total segment revenue
Segment result
Australia
Americas
Rest of World
Total segment result
Unallocated expenses
Net foreign currency gains
R&D expense
Corporate
Total unallocated expenses
EBIT
Net interest
Profit before income tax
Income tax
Profit after income tax
22
DIRECTORS’ REPORT (continued)for the year ended 30 June 2014AINSWORTH GAME TECHNOLOGY Key performance metrics
Segment result margin
Australia
Americas
Rest of World
Segment result margin
R&D expense
EBIT(1)
Profit before income tax (excluding net foreign currency gains)
Profit after income tax
Effective tax rate
(1) Excludes net foreign currency gains of $0.8 million (2013: $2.9 million)
% of revenue
Variance
12 months
30 June 2014
12 months
30 June 2013
Points
58.3
40.2
58.2
51.6
10.8
32.1
33.3
25.2
24.9
56.1
41.9
55.9
51.6
11.7
32.3
33.5
26.4
24.7
2.2
(1.7)
2.3
–
(0.9)
(0.2)
(0.2)
(1.2)
0.2
Revenue
Sales revenue of $244.1 million was recorded in the year under review compared to $198.1 million in 2013, an increase of 23%.
This increase represents the fifth consecutive year of double digit revenue growth achieved by the Group and is consistent
with the objective of increasing shareholder value and the vision to become a globally recognised provider of gaming solutions.
Within domestic markets revenue achieved was $143.3 million, an increase of 15% over 2013. The continued success of the
A560™ gaming machine, release of new game combinations and leading product performance resulted in the Group further
increasing its market share in these markets. The increased revenue within Australia was primarily due to the product
development strategies previously introduced, which provided continued high yielding performance, and the expansion of
the cabinet variants within the A560™ product family. The Victorian market contributed revenue of $30.8 million, an increase of
84% over 2013. This result was achieved due to the continued leading performance of the Group’s range of products and the
stabilisation of this market subsequent to its transition from a previous duopoly. The release of branded products including the
Players Paradise™ linked jackpot product, the highly successful Quad Shot™ game range and the A560™ Wide Boy™ Reels of
Wheels™ cabinet assisted in building on market share gains achieved in previous periods.
International revenue was $100.8 million compared to $73.7 million in 2013, representing an increase of 37%. The Group expects
to achieve further increases in international revenue in FY15 from the ongoing release of newly developed product initiatives
combined with an established operational base in Las Vegas, Nevada.
The key market of the Americas contributed 90% of total international revenue, an increase of 44% over the corresponding
year in 2013. The North American market realised revenue of $58.5 million in the current period, an increase of 36% on
the $42.9 million in 2013. The release of the A560SL™ within North America in March 2014 continues to provide revenue
opportunities with game brands such as Sweet Zone™ and Whopper Reels™. The recent granting of licenses and progression of
product approvals in Missouri, Mississippi and Arizona are expected to contribute to revenue growth in the short term.
In conjunction with the revenue increase in outright sales the Group achieved an 84% increase in gaming units under
participation arrangements in the reporting period. At the reporting date the Group had 1,105 units under gaming operations in
North America, an increase of 503 units from those at 30 June 2013. Release of products such as The Magnificent 7™ and Cash
Challenge™ together with the previously released Reels of Wheels™ continue to achieve high performance in venues where
those products are operating.
Revenue from South America was $31.9 million, an increase of 62% on the corresponding period in 2013. In addition to the
above, the Group has increased its footprint and at the report date has 884 gaming machines under gaming operation in this
market. This represents an increase of 60% compared to the 554 units under gaming operation as at 30 June 2013. Continued
high performance of products such as the Multi Win™ multi game range, Rio Grande Rapids™ and Quad Shots™, along with
strategies previously undertaken have facilitated the achievement of the Group’s growth within this geographical region. The
Company is well positioned to build on its reputation as a provider of high performing gaming products in this region and
expects to continue to expand its established footprint of products under gaming operation.
23
ANNUAL REPORT 2014 5. OPERATING AND FINANCIAL REVIEW (continued)
Revenue from other international markets (“Rest of World” segment) of New Zealand, Europe and Asia contributed $10.4 million
and represented 10% of international revenue compared to 15% in 2013. Despite an overall decrease in Rest of World revenue of
5%, revenue from the New Zealand market increased by 48% compared to 2013. This increase was a direct result of interest in the
Group’s products by the major trust groups within the hotel and club segment within New Zealand. The Asian market continues
to present challenges following the introduction of new gaming standards, including dual language requirements within Macau,
which required additional development of operating base software and related games. It is expected that revenue increases
within Asia will be steadily realised in future periods as the newly revised gaming standards are introduced, and the planned
new venue openings provide growth opportunities. Newly developed products, including the Treasure Storm™ linked product
with game titles 888 Blue Dragon™, 888 Red Dragon™ and 888 Yellow Dragon™ have been recently released within this market.
Operating costs
Gross margin of 64% was achieved, compared to 66% in 2013. The Company noted that margins within domestic markets
remained strong and the margin decrease in the year relates to stronger competition within international markets and was
consistent with the 64% achieved and reported in the first half of FY14. The maintenance of gross margin was achieved despite
further revenue increases from South America, which represented 32% of total international revenue (2013: 27%), and which
are at a lower margin. Continued cost reduction initiatives combined with higher sales volumes, production efficiencies and a
greater concentration of premium progressive recurring revenue games are expected to assist in off-setting potential negative
margin impacts as international revenue increases its contribution to total revenue of the Group. Overall segment profit margins
were maintained at 52% of revenue across the Group.
Operating costs, excluding cost of sales, other expenses and financing costs were $77.3 million, an increase of 17% over 2013.
This increase was primarily attributed to increased variable selling costs in line with revenue increases, increased expenditure
on research and development on new product initiatives and the full year impact of the increased investment in the Group’s
operational facility in Las Vegas, Nevada. Operating costs relating to global expansion are first assessed to ensure these costs
are aligned to the achievement of revenue growth before being incurred.
Research and development (R&D) expense was $26.4 million, an increase of 14% over 2013 and represented 11% of revenue
(2013: 12%). Additional resources and development within the on-line gaming division accounted for 35% of the increase in R&D
expenditure. Further investment into the A560™ cabinet range with the addition of a Slant Bench Top model A560SBT™ and
the completion of development of the new A560SL™ occurred in the current period. These hardware initiatives have allowed
enhanced game presentation leveraging off the intellectual property in the A560™ game library so as to facilitate an expanded
library of the Premium Plus range of recurring revenue games targeted for international markets.
Administration costs were $20.3 million, an increase of $5.1 million compared to 2013. This increase was primarily due to the full
year impact of expansion of the American facility established part way into FY13 which accounted for 43% of the overall increase
and additional support functions to progress expansion strategies in global markets. These overhead costs as a percentage of
total revenue were 8% and remained consistent with 2013.
Financing income and costs
Net financing income was $3.8 million in the current period, a reduction of $2.4 million on the net financing costs of $6.2 million
in 2013. This reduction was primarily a result of the reduction in net foreign exchange gains in the current year whereby gains
of $0.8 million were recorded compared to $2.9 million in 2013, an adverse change of $2.1 million.
Review of financial condition
Capital structure and treasury policy
The Company currently has on issue 322,193,331 ordinary shares. The Board continues to ensure a strong capital base is
maintained to invest in the future development of the business. Group performance is monitored to ensure an acceptable return
on capital is achieved and that dividends are provided to ordinary shareholders in future periods. There were no changes in the
Group’s approach to capital management and no externally imposed capital requirements in place.
The Group is exposed to foreign currency risks on sales and purchases that are denominated in currencies other than AUD.
The Group regularly monitors and reviews the financial impact of currency variations to determine strategies to minimise the
volatility of changes and adverse financial effects in foreign currency exchange rates. No hedging arrangements were utilised
in the current period due to the expectation of a reduction in the Group’s net asset exposure and the favourable reversal of
previous translational impacts.
Liquidity and funding
The Group continues to generate positive cashflows from operating activities. In addition to cash and term deposits held of
$71.9 million (2013: $66.7 million), the Group has in place a $30 million facility with a leading Australian bank consistent with
strategies previously outlined. This facility will allow the Group to pursue traditional financing alternatives, including the ability
to minimise working capital investment through cash reserves.
24
DIRECTORS’ REPORT (continued)for the year ended 30 June 2014AINSWORTH GAME TECHNOLOGY Cash flows from operations
Net cash inflows from operations for the year ended 30 June 2014 was $57.6 million, an increase of 82% on the corresponding
period in 2013. The Group actively monitors its working capital requirements and has further increased the investment in
establishing machines under gaming operation so as to pursue recurring revenue streams in the Americas under revenue
sharing arrangements.
Impact of legislation and other external requirements
The Group continues to work with regulatory authorities to ensure that the necessary product approvals to support its
operations within global markets are granted on a timely and cost effective basis. The granting of such licences will allow the
Group to expand its operations. The Group aims to conduct its business worldwide in jurisdictions where gaming is legal and
commercially viable. Accordingly, the Group is subject to licensing and other regulatory requirements of those jurisdictions.
The Group’s ability to operate in existing and new jurisdictions could be adversely impacted by new or changing laws or
regulations and delays or difficulties in obtaining or maintaining approvals and licences.
6. DIVIDENDS
The following dividends were declared by the Company for year ended 30 June 2014:
Declared and paid during the year 2014
Final 2013 ordinary (unfranked)
Interim 2014 ordinary (unfranked)
Total amount
Cents
per share
Total amount
$’000
Date of
payment
5.0
5.0
16,101 27 September 2013
16,110
32,211
8 April 2014
Declared after end of year
The dividends have not been provided and there are no income tax consequences. After the balance sheet date the following
dividend was declared by the directors.
Final ordinary (unfranked)
Total amount
Cents
per share
Total amount
$’000
Date of
payment
5.0
16,110 26 September 2014
16,110
The financial effect of this dividend has not been brought to account in the consolidated financial statements for the year ended
30 June 2014 and will be recognised in subsequent financial reports, and there are no income tax consequences.
Dividends have been dealt with in the financial report as:
- Dividends
- Noted as a subsequent event
Note
19(c)
$’000
32,211
16,110
25
ANNUAL REPORT 2014 7. EVENTS SUBSEQUENT TO REPORTING DATE
After the reporting date, the Company declared an unfranked dividend of 5.0 cents per ordinary share amounting to $16,110,000
with an expected payment date of 26 September 2014. The financial effect of this dividend has not been brought to account in
the financial statements for the year ended 30 June 2014 and will be recognised in subsequent financial reports.
Subsequent to 30 June 2014 the Company settled all previous legal proceedings with a competitor claiming that certain
products of the Company infringe that competitor’s patents. The settlement had no effect on the Group’s financial position and
did not result in any financial payments between the parties and no amount was or is required to be recognised with respect
to this matter.
Other than the matters discussed above, there has not arisen in the interval between the end of the financial year and the
date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the
Company, to affect significantly the operations of the Group, the results of those operations, or the state of affairs of the Group,
in future financial years.
8. LIKELY DEVELOPMENTS
The Group continues to pursue development initiatives and the necessary product approvals to help ensure sustainable
revenue growth and continued financial improvement in future periods.
Further execution of strategies through the strategic investment in a social on-line gaming company is expected to provide
complementary revenue gains within e on-line social and real money gaming segments. This strategy is aimed at achieving
increased market share in selected geographical business sectors so as to positively contribute to Group results in future
financial years.
Further information about likely developments in the operations of the Group and the expected results of those operations
in future financial years has not been included in this report because disclosure of the information would be likely to result in
unreasonable prejudice to the Group.
9. DIRECTORS’ INTERESTS
The relevant interest of each director in the shares and rights or options over such instruments issued by the companies within
the Group and other related bodies corporate, as notified by the directors to the ASX in accordance with S205G(1) of the
Corporations Act 2001, at the date of this report is as follows:
Ainsworth Game
Technology Limited
Ordinary shares
Performance
rights over
ordinary shares
172,187,521
300,000
22,400
50,000
40,000
5,000
–
–
–
–
–
137,536
Mr LH Ainsworth
Mr GJ Campbell
Mr MB Yates
Mr CJ Henson
Mr DH Macintosh
Mr DE Gladstone
26
DIRECTORS’ REPORT (continued)for the year ended 30 June 2014AINSWORTH GAME TECHNOLOGY 10. SHARE OPTIONS/PERFORMANCE RIGHTS
Unissued shares under option or performance right
At the date of this report unissued ordinary shares of the Group under option or performance right are:
Expiry date
1 March 2016
22 July 2018
Instrument
Exercise price
Options
Rights
$0.225
$Nil
Number of
shares
373,045
1,442,931
1,815,976
All unissued shares are ordinary shares of the Company.
All options and performance rights expire on the earlier of their expiry date or termination of the employee’s employment. In
addition, the ability to exercise the performance rights is conditional on the Group achieving annual growth in Earnings Per
Share of at least eight per cent each year over four years and ranking according to Total Shareholder Return in the fiftieth
percentile compared to companies in the ASX 300 index with the same Consumer Services GICS industry sector as the Group.
Further details about share based payments to directors and KMP are included in the Remuneration report in section 15. These
options and rights do not entitle the holder to participate in any share issue of the Company or any other body corporate.
In addition to the share options issued by the Company, an incentive plan introduced in a prior period whereby share options
were granted under the LH Ainsworth Share Option Trust (ASOT) to Australian employees, excluding directors. These share
options were granted over a portion of the personal shareholding of the Company’s Executive Chairman, Mr LH Ainsworth.
During or since the end of the financial year 60,738 options were forfeited due to cessation of employment and 4,814,459 were
exercised leaving a balance of 586,699 share options under issue.
The options under the ASOT plan have vesting conditions, which were satisfied on 1 March 2014. The vesting conditions were
set with reference to the anniversary of the issue date of the option. All options expire on the earlier of their expiry date or
termination of the employee’s employment. These options do not entitle the holder to participate in any share issue of the
Company or any other body corporate.
The share options outstanding at 30 June 2014 under the ASOT plan issued to key management personnel, totalled nil
(2013:1,788,627). Share options exercised by key management personnel during the year were 1,788,627 (2013: 1,018,628)
options following completion of the final vesting condition during the year.
Shares issued on exercise of options
During or since the end of the financial year, the Group issued ordinary shares of the Company as a result of the exercise of
options under the Employee Share Option Trust (ESOT) as follows (there are no amounts unpaid on the shares issued):
Number of shares
167,455
Amount paid
on each share
$0.225
27
ANNUAL REPORT 2014 11. INDEMNIFICATION AND INSURANCE OF OFFICERS AND AUDITORS
Indemnification
The Group has agreed to indemnify current and former directors of the Group against all liabilities to another person (other
than the Company or a related body corporate) that may arise from their position as directors of the Company and its controlled
entities, except where the liability arises out of conduct involving a lack of good faith. The agreement stipulates that the
Company will meet the full amount of any such liabilities, including costs and expenses.
Neither the Group nor Company have indemnified the auditor in relation to the conduct of the audit.
Insurance premiums
Since the end of the previous financial year, the Company has paid insurance premiums in respect of directors’ and officers’
liability and legal expenses’ insurance contracts, for current and former directors and officers, including senior executive officers
of the Company and directors, senior executive and secretaries of its controlled entities.
The directors have not included details of the nature of the liabilities covered or the amount of the premium paid in respect of the
directors’ and officers’ liability and legal expenses contracts, as such disclosure is prohibited under the terms of the contract.
12. NON-AUDIT SERVICES
During the year KPMG, the Group’s auditor, has only provided audit and review services over the financial statements.
Details of the amounts paid to the auditor of the Group, KPMG, and its network firms for audit services provided during the year
are set out below.
Audit and review of financial statements
Total paid to KPMG
2014
$
258,000
258,000
13. LEAD AUDITOR’S INDEPENDENCE DECLARATION
The Lead auditor’s independence declaration is set out on page 87 and forms part of the directors’ report for the financial year
ended 30 June 2014.
14. ROUNDING OFF
The Group is of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 and in accordance with that Class Order,
amounts in the consolidated financial statements and directors’ report have been rounded off to the nearest thousand dollars,
unless otherwise stated.
28
DIRECTORS’ REPORT (continued)for the year ended 30 June 2014AINSWORTH GAME TECHNOLOGY 15. REMUNERATION REPORT – AUDITED
15.1 Principles of compensation – audited
Remuneration is referred to as compensation throughout
this report.
Key management personnel have authority and
responsibility for planning, directing and controlling the
activities of the Group, directly or indirectly, including
directors of the Company and other executives. Key
management personnel comprise the directors of the
Company and senior executives for the Group that are
named in this report.
Compensation levels for key management personnel of the
Group are competitively set to attract and retain appropriately
qualified and experienced directors and executives. The
remuneration and nomination committee reviews market
surveys on the appropriateness of compensation packages
of the Group given trends in comparative companies both
locally and internationally, and the objectives of the Group’s
compensation strategy.
The compensation structures explained below are
designed to attract suitably qualified candidates, reward
the achievement of strategic objectives, and achieve the
broader outcome of creation of value for shareholders. The
compensation structures take into account:
– the capability and experience of the key management
personnel;
– the key management personnel’s performance against
individual
Indicators
Key Performance
contributions to the Group’s performance;
(KPIs) and
– the Group’s performance including:
– revenue and earnings;
– growth in share price and delivering returns on
shareholder wealth; and
– the amount of incentives within each key management
person’s compensation.
Compensation packages include a mix of fixed and variable
compensation and short-term and long-term performance-
based incentives.
In addition to their salaries, the Group also provides non-
cash benefits to its key management personnel, and
to post-employment defined contribution
contributes
superannuation plans on their behalf.
Fixed compensation
Fixed compensation consists of base compensation
(which is calculated on a total cost basis and includes
any FBT charges related to employee benefits including
motor vehicles), as well as employer contributions to
superannuation funds.
Compensation
the
remuneration and nomination committee through a process
that considers individual, segment and overall performance
of the Group. In addition market surveys are obtained to
provide further analysis so as to ensure the directors’ and
senior executives’ compensation is competitive in the
market place. A senior executive’s compensation is also
reviewed on promotion and performance.
levels are reviewed annually by
The remuneration and nominated committee has initiated
a review of fixed compensation levels by an independent
remuneration consultant to assist with determining an
appropriate mix between fixed and performance linked
compensation for senior executives of the Group.
Performance linked compensation
Performance linked compensation includes both short-
term and long-term incentives and is designed to reward
key management personnel for meeting or exceeding their
financial and personal objectives. The short-term incentive
(STI) is an ‘at risk’ bonus provided in the form of cash, while the
long-term incentive (LTI) is provided as options or performance
rights over ordinary shares of the Company under the
rules of the Employee Share Option Plans (see Note 23 to
financial statements).
In addition to their salaries, selected key sales management
personnel receive commission on sales within their specific
business segments as part of their service contracts at each
vesting date.
As outlined above, a review is currently being undertaken
by an independent remuneration consultant on behalf of
the remuneration and nomination committee to assess
current performance linked compensation arrangements
- STI and LTI plans. This review will assist the Group to
determine appropriate remuneration levels for FY15 taking
into consideration the Group’s growth objectives, industry
specific and market considerations and related retention of
key employees.
Short-term incentive bonus
Each year the remuneration and nomination committee
determines the objectives and KPIs of the key management
personnel. The KPIs generally include measures relating
to the Group, the relevant segment, and the individual,
and include financial, people, customer, strategy and risk
measures. The measures are chosen as they directly align
the individual’s reward to the KPIs of the Group and to its
strategy and performance.
The financial performance objective is ‘profit before tax’
excluding foreign currency gains / (losses) and any extra-
ordinary items, which is compared to budgeted amounts.
This objective is designed to reward key management
personnel for the Group’s performance and not simply the
achievement of individual segment results. The non-financial
objectives vary with position and responsibility and include
measures such as achieving strategic outcomes, safety
measures, and compliance with established regulatory
processes, customer satisfaction and staff development.
At the end of the financial year the remuneration and
nomination committee assesses the actual performance
of the Group, the relevant segment and individual against
the KPI’s set at the beginning of the financial year. A pre-
determined maximum amount is awarded depending on
results with an additional amount awarded for stretch
performance. No bonus is awarded where performance
falls below the minimum performance established. The
performance evaluation in respect of the year ended 30 June
2014 has taken place in accordance with this process.
29
ANNUAL REPORT 2014 DIRECTORS’
REPORT (continued)
for the year ended 30 June 2014
15. REMUNERATION REPORT – AUDITED (continued)
15.1 Principles of compensation – audited (continued)
The remuneration and nomination committee recommends the cash incentive to be paid to the individuals for approval by the
board. The method of assessment was chosen as it provides the Committee with an objective assessment of the individual’s
performance.
For the year ended 30 June 2014, the Group exceeded the minimum performance targets outlined in the incentive plan approved
by the Board in August 2013, with most segments either meeting or exceeding operational targets. This resulted in short-term
incentives being earned during 2014, which were confirmed by the Board on 26 August 2014. Currently, the performance linked
component of compensation comprises approximately 30% (2014: 35%) of total payments to key management personnel.
Long-term incentive
Employee Share Option Plans
In prior years options for new shares were issued under an Employee Share Option Trust (ESOT) to American employees.
Additionally, there is an option scheme entitling Australian employees to options over a number of existing shares personally
held by the Company’s Executive Chairman, Mr LH Ainsworth under the LH Ainsworth Share Option Trust (ASOT). These share
option plans provide for employees to receive options over new or existing ordinary shares at a pre-determined exercise price.
The ability to exercise the options is conditional on continuation of employment.
Performance Rights Plan
During the year a new employee incentive plan was established whereby performance rights were granted under the Rights
Share Trust (RST). Under the RST, eligible employees and executives were allocated performance rights over ordinary shares
in the Company. The performance rights were granted at nil consideration or exercise price however are dependent on service
conditions, vesting conditions and performance hurdles. The performance rights convert to ordinary shares of the Company
on a one-for-one basis. The performance rights were granted to all eligible Group employees and executives in two tranches
subject to separate performance and vesting conditions. 50% of the performance rights vest on 1 September 2016 and the
remaining 50% vest on 1 September 2017 depending on the extent to which the performance hurdles are achieved.
Of each tranche that vests on 1 September 2016 and 1 September 2017, 70% vest subject to Earnings Per Share (EPS) targets
and 30% vest subject to Total Shareholder Return (TSR) targets. The relevant weighting of performance conditions of 70% EPS
and 30% TSR were determined as appropriate due to the following:
– EPS is more reflective of the Group’s underlying performance in terms of long term sustainable growth;
– To ensure relevance of the LTI for international employees;
– International expansion requires looking beyond ASX listed companies for a more meaningful performance comparison;
– Inherent volatility of the gaming industry makes TSR less relevant and reflective of underlying performance; and
– There are limited numbers of gaming industry companies in the ASX.
EPS growth is an absolute performance measure that refers to consolidated results of operating activities. Relative TSR
measures the Group’s notional return in the form of share price increases and dividends over the term against a comparison
group of companies in the ASX300 that have the same Consumer Service GICS industry sector as the Company.
The Board believes that these two performance hurdles, in combination, serve to align the interests of the individual executives
and employees with the interests of the Company’s shareholders, as EPS growth is a key driver of company long-term share
price performance, and relative TSR compared to the ASX300 comparator companies provides a comparison of the entities
performance against potential alternative shareholder investment.
Vesting on each tranche is as follows:
Tranche 1
Tranche 2
EPS growth
Vesting
outcome
Company TSR
percentile ranking
Vesting
outcome
Less than 8.0% per annum
Nil vesting
Below 50th percentile
Nil vesting
8.0% per annum
10.0% per annum
25% vesting plus 1.25% for
each 0.1% increase in EPS
50th percentile
50% vesting
50% vesting plus 2.0% for
each 0.1% increase in EPS
Between 50th and 75th
percentile
Pro-rata (sliding scale)
percentage vesting
12.5% per annum or more
100% vesting
At or above 75th percentile
100% vesting
30
AINSWORTH GAME TECHNOLOGY Rights that do not vest at the end of the vesting periods will lapse, unless the Board in its discretion determine otherwise. Upon
cessation of employment prior to the vesting date, rights will be forfeited and lapse. Performance rights do not entitle holder to
dividends that are declared during the vesting period. No adjustments to reported results from operating activities are made
when the remuneration committee determines whether the EPS hurdle is achieved.
Short-term and long-term incentive structure
The remuneration and nomination committee considers that the above performance-linked remuneration structure is generated
the desired outcome. The evidence of this is:
– the strong growth in profits in recent years;
– the performance-linked element of the structure appears to be appropriate because senior executives achieved a level
of performance which qualifies them for performance limited incentives; and
– the high levels of retention among senior executives and key personnel.
In the current year the Group did not achieve the stretch targets although most segments met budgeted financial results.
As a result the maximum short-term incentives were not achieved.
Consequences of performance on shareholder wealth
In considering the Group’s performance and benefits for shareholder wealth, the remuneration and nomination committee have
regard to the following indices in respect of the current financial year and the previous four financial years.
2014
2013
2012
2011
2010
Profit/(loss) attributable to owners of the company $61,570,000 $52,202,000 $64,275,000 $23,121,000
$(2,721,000)
Dividends paid
Change in share price
$32,211,000
$9,661,000
($0.29)
$1.93
$–
$1.74
$–
$0.27
$–
$0.02
Profit is considered as one of the financial performance targets in setting the short-term incentive bonus. Profit/(loss) amounts
for 2010 to 2014 have been calculated in accordance with Australian Accounting Standards (AASBs).
Other benefits
Key management personnel receive additional benefits such as non-monetary benefits, as part of the terms and conditions of
their appointment. Non-cash benefits typically include payment of club memberships and motor vehicles, and the Group pays
fringe benefits tax on these benefits.
Service contracts
It is the Group’s policy that service contracts for Australian key management personnel and key employees be unlimited in term
but capable of termination by either party on 12 months’ notice and that the Group retains the right to terminate the contracts
immediately, by making payment equal to 12 months’ pay in lieu of notice.
The Group has entered into service contracts with each Australian key management person that provide for the payment
of benefits where the contract is terminated by the Group. The key management persons are also entitled to receive on
termination of employment their statutory entitlements of accrued annual and long service leave, together with any accrued
superannuation.
The service contract outlines the components of remuneration paid to the key management personnel but does not prescribe
how remuneration levels are modified year to year. Remuneration levels are reviewed each year to take into account cost-of-
living changes, any change in the scope of the role performed by the senior executive, retention of key personnel and any
changes required to meet the principles of the remuneration policy.
Mr Danny Gladstone, Executive Director and Chief Executive Officer (CEO), has a contract of employment dated 5 February
2007 and amended on 7 December 2010 with the Company. The contract specifies the duties and obligations to be fulfilled by
the CEO and provides that the board and CEO will early in each financial year, consult and agree objectives for achievement
during that year.
The CEO has no entitlement to a termination payment in the event of removal for misconduct as specified in his service contract.
Refer to Note 28 of the financial statements for details on the financial impact in future periods resulting from the Group’s
commitments arising from non-cancellable contracts for services with key management personnel.
31
ANNUAL REPORT 2014 15. REMUNERATION REPORT – AUDITED (continued)
15.1 Principles of compensation – audited (continued)
Non-executive directors
Total compensation for all non-executive directors, last voted upon by shareholders at the 2012 Annual General Meeting, is not
to exceed $850,000 per annum, with effect from 1 July 2012. Directors’ base fees are presently $100,000 per annum (excluding
superannuation) and is set based on a review of fees paid to other non-executive directors of comparable companies. The fees
paid to non-executive directors reflect the demands and responsibilities associated with their roles and the global nature of
the operations within the highly regulated environment within which the Group operates. Fees incorporate an allowance for the
onerous probity requirements placed on non-executive directors by regulators of the jurisdictions in which the Group operates
or proposes to operate in. In addition to these fees the cost of reasonable expenses are reimbursed as incurred.
Non-executive directors do not receive in performance related compensation and are not provided with retirement benefits
apart from statutory superannuation.
The Executive Chairman, CEO and Company Secretary do not receive any additional fees for undertaking Board or Committee
responsibilities. Other independent non-executive directors who also chair or are a member of a committee receive a
supplementary fee in addition to their annual remuneration. Current fees for directors excluding superannuation, are set out below.
POSITION
Australian resident non-executive director
Chair of Audit Committee
Chair of Regulatory and Compliance Committee
Chair of Remuneration and Nomination Committee
Member of Audit Committee
Member of Regulatory and Compliance Committee
Member of Remuneration and Nomination Committee
$
(per annum)
100,000
16,000
20,000
9,000
10,000
12,000
6,000
Services from remuneration consultants
The remuneration and nomination committee (RNC), comprising of independent non-executive directors only, has secured the
services of an independent remuneration consultant to review current compensation levels of senior executives, including the
structure, amount and elements of performance linked compensation of the key management personnel remuneration and
provide recommendations in relation thereto. This review is expected to provide a basis for performance linked compensation
for the FY15 STI and any proposed expansion of current LTI arrangements. No amounts were paid to remuneration consultants
during the year.
The engagement of a remuneration consultant by the RNC is subject to protocols which both members of the RNC and key
management personnel are required to follow in developing and recommending remuneration matters to the Board.
The protocols include the prohibition of the consultant providing advice or recommendations to key management personnel,
before the advice or recommendations are given to members of the RNC and only if the consultant is provided approval by the
RNC to do so.
These arrangements will ensure that the independent consultant will be able to carry out their work, including information
capture and the formation of its recommendations, free from undue influence by members of the key management personnel
about whom the recommendations may relate.
The Board is expected to undertake its own inquiries and review of the processes and procedures followed by the remuneration
consultant during the course of their assignment to ensure that they are satisfied that any remuneration recommendations are
made free from undue influence.
The Board’s inquiries will include a summary of the way in which the remuneration consultant carried out any work, details
of any interaction with key management personnel in relation to the assignment and other services, and further questions in
relation to the assignment.
32
DIRECTORS’ REPORT (continued)for the year ended 30 June 2014AINSWORTH GAME TECHNOLOGY %
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I
ANNUAL REPORT 2014
15. REMUNERATION REPORT – AUDITED (continued)
15.3 Analysis of bonuses included in remuneration – audited
Details of the vesting profile of the short-term incentive cash bonuses awarded as remuneration to each director of the Company,
and other key management personnel are detailed below:
Short term incentive bonus
Included in remuneration
$ (A)
% vested in year
% forfeited in year
(B)
Director
Mr DE Gladstone
Executives
Mr ML Ludski
Mr V Bruzzese
Mr I Cooper
Mr S Clarebrough
510,686
338,979
244,528
21 6, 215
373,024
100%
100%
100%
100%
100%
38%
29%
29%
29%
29%
A.
B
Amounts included in remuneration for the financial year represent the amount that vested in the financial year based on achievement
of personal goals and satisfaction of specified performance criteria. No amounts vest in future financial years in respect of the short
term incentive bonus schemes for the 2014 financial year. The remuneration and nomination committee reviewed and approved these
amounts on 23 July 2014 based on the criteria previously established and approved.
The amounts forfeited are due to the performance criteria not being met in relation to the current financial year.
15.4 Equity instruments – audited
All rights and options refer to rights and options over ordinary shares of Ainsworth Game Technology Limited, unless otherwise
stated, which are exercisable on a one-for-one basis under the ESOT and RST plans.
15.4.1 Rights and options over equity instruments granted as compensation – audited
Details on rights and options over ordinary shares in the Company that were granted as compensation to each key management
person during the reporting period and details on options that vested during the reporting period are as follows:
Options(1)
Mr DE Gladstone
Mr ML Ludski
Mr V Bruzzese
Mr I Cooper
Mr PS Clarebrough
Number of options
granted during
2014
Number of
options vested
during 2014
Fair value per
option at grant
date ($)
Grant date
Exercise price
per option ($)
Expiry date
–
–
–
–
–
1 March 2011
500,000
1 March 2011
1 March 2011
1 March 2011
1 March 2011
288,627
300,000
300,000
400,000
0.079
0.079
0.079
0.079
0.079
0.225 1 March 2016
0.225 1 March 2016
0.225 1 March 2016
0.225 1 March 2016
0.225 1 March 2016
(1) Share options granted under ASOT over a portion of the personal shareholding of the Group’s Executive Chairman, Mr LH Ainsworth.
36
DIRECTORS’ REPORT (continued)for the year ended 30 June 2014AINSWORTH GAME TECHNOLOGY Rights
Mr DE Gladstone
Number of rights
granted during
2014
Vesting
condition
Grant date
Fair value at
grant date ($)
Expiry date
87,649
Earnings per share
22 July 2013
$3.20 22 July 2018
49,887
Relative TSR
22 July 2013
$2.41 22 July 2018
Mr ML Ludski
38,928
Earnings per share
22 July 2013
$3.20 22 July 2018
22,156
Relative TSR
22 July 2013
$2.41 22 July 2018
Mr V Bruzzese
28,621
Earnings per share
22 July 2013
$3.20 22 July 2018
Mr I Cooper
25,166
Earnings per share
22 July 2013
$3.20 22 July 2018
16,290
Relative TSR
22 July 2013
$2.41 22 July 2018
Mr PS Clarebrough
49,184
Earnings per share
22 July 2013
$3.20 22 July 2018
27,994
Relative TSR
22 July 2013
$2.41 22 July 2018
14,324
Relative TSR
22 July 2013
$2.41 22 July 2018
All rights and options expire on the earlier of their expiry date or termination of the individual’s employment. The options are
exercisable on an annual basis over a three year period from grant date. The rights are exercisable on 1 September 2016 and
1 September 2017. In addition to a continuing employment service condition, vesting of rights is conditional on the Group
achieving certain performance hurdles. Details of the performance criteria are included in the long-term incentives discussion
on page 30. For rights granted in the current year, the earliest vesting date is 1 September 2016.
15.4.2 Modification of terms of equity-settled share-based payment transactions – audited
No terms of equity-settled share-based payment transactions (including options and performance rights granted as
compensation to a key management person) have been altered or modified by the issuing entity during the reporting period
or the prior period.
15.4.3 Exercise of options granted as compensation – audited
During the reporting period 167,455 shares (2013: 213,101 shares) were issued under the ESOT plan on the exercise of options
previously granted as compensation. Options under the ASOT plan exercised during 2014 were 4,814,459 (2013: 3,690,067)
which were transferred to the ASOT on behalf of employees from the Company’s Executive Chairman, Mr LH Ainsworth.
15.4.4 Details of equity incentives affecting current and future remuneration – audited
Details of vesting profiles of rights and options held by each key management person of the Group are detailed below:
Instrument
(A)
Number
Grant date
% vested
in year
% forfeited
in year (B)
Financial
years in which
grant vests
Mr DE Gladstone
Options
1,000,000
1 March 2011
Mr ML Ludski
Mr V Bruzzese
Mr I Cooper
Mr PS Clarebrough
Rights
Options
Rights
Options
Rights
Options
Rights
Options
Rights
137,536
22 July 2013
577,255
1 March 2011
61,084
22 July 2013
600,000
1 March 2011
44,911
22 July 2013
600,000
1 March 2011
39,490
22 July 2013
800,000
1 March 2011
77,178
22 July 2013
50%
–%
50%
–%
50%
–%
50%
–%
50%
–%
–%
–%
–%
–%
–%
–%
–%
–%
–%
–%
2012-2014
2017-2018
2012-2014
2017-2018
2012-2014
2017-2018
2012-2014
2017-2018
2012-2014
2017-2018
A.
B.
Options were granted over a portion of the personal shareholding of the Group’s Executive Chairman, Mr L H Ainsworth and rights
granted over ordinary shares in the Company.
The % forfeited in the year represents the reduction from the maximum number of options available to vest.
37
ANNUAL REPORT 2014 15. REMUNERATION REPORT – AUDITED (continued)
15.4 Equity instruments – audited (continued)
15.4.5 Analysis of movements in equity instruments – audited
The movement during the reporting period, by value, of rights or options over ordinary shares in the Company held by each key
management person of the Group is detailed below.
Mr DE Gladstone
Mr ML Ludski
Mr V Bruzzese
Mr I Cooper
Mr S Clarebrough
Granted in year
$ (A)
Amount paid
on exercise
$
Value of rights
or options
exercised
in year
$ (B)
Forfeited
in year
$
401,062
178,124
130,963
115,155
112,500
1,957,500
64,941
67,500
67,500
1,129,975
1,174,500
1,174,500
225,055
90,000
1,566,000
–
–
–
–
–
A.
B.
The value of rights granted in the year is the fair value of the rights calculated at grant date. The total value of the rights granted is
included in the table above. This amount is allocated to remuneration over the vesting period (i.e. in years 1 July 2013 to 30 June 2018).
All options exercised were granted over a portion of the personal shareholding of the Group’s Executive Chairman, Mr LH Ainsworth
under the ASOT plan. The value of options exercised during the year is calculated as the market price of shares of the Company as
at close of trading on the date the options were exercised after deducting the price paid to exercise the options. No amounts remain
unpaid on options exercised.
15.4.6 Options and rights over equity instruments – audited
The movement during the reporting period, by number of rights and options over ordinary shares in Ainsworth Game Technology
Limited held, directly, indirectly or beneficially, by each key management person, including their related parties, is as follows:
Held at
1 July 2013
Granted as
compensation
Exercised
Held at
30 June 2014
Vested during
the year
Vested and
exercisable at
30 June 2014
Options(1)
Mr DE Gladstone
Mr ML Ludski
Mr V Bruzzese
Mr I Cooper
Mr PS Clarebrough
Rights
Mr DE Gladstone
Mr ML Ludski
Mr V Bruzzese
Mr I Cooper
Mr PS Clarebrough
500,000
288,627
300,000
300,000
400,000
–
–
–
–
–
(500,000)
(288,627)
(300,000)
(300,000)
(400,000)
–
–
–
–
–
500,000
288,627
300,000
300,000
400,000
–
–
–
–
–
137,536
61,084
44,911
39,490
77,178
–
–
–
–
–
137,536
61,084
44,911
39,490
77,178
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1) The above options were over a portion of the personal shareholding of Mr LH Ainsworth under the ASOT Plan.
Rights and options held by key management personnel that are vested and exercisable at 30 June 2014 were Nil (2013: Nil).
No rights or options were held by related parties of key management personnel.
38
DIRECTORS’ REPORT (continued)for the year ended 30 June 2014AINSWORTH GAME TECHNOLOGY 15.5 Key management personnel transactions – audited
Movements in shares
The movement during the reporting period in the number of ordinary shares in Ainsworth Game Technology Limited held,
directly, indirectly or beneficially, by each key management person, including their related parties, is as follows:
Mr LH Ainsworth
Mr GJ Campbell
Mr MB Yates
Mr CJ Henson
Mr DH Macintosh
Mr DE Gladstone
Mr M Ludski
Mr V Bruzzese
Mr I Cooper
Mr PS Clarebrough
Received on
exercise of
options
Sales on
exercise of
options under
ASOT plan
Other
changes*
Held at
30 June 2014
(4,814,459)
(2,431,121)
202,660,645
Held at
1 July 2013
209,906,225
500,000
108,400
50,000
–
–
–
–
–
–
5,000
500,000
(500,000)
–
2,700
–
261,000
288,627
300,000
300,000
400,000
(288,627)
(300,000)
(300,000)
(400,000)
–
–
–
–
(200,000)
300,000
(86,000)
–
40,000
–
–
800
–
(261,000)
22,400
50,000
40,000
5,000
–
3,500
–
–
* Other changes represent shares that were purchased or sold during the year.
No shares were granted to key management personnel during the reporting period as compensation in 2014 or 2013.
There were no changes in key management in the period after the reporting date and prior to the date when the Financial
Report was authorised for issue.
This Directors’ report is made out in accordance with a resolution of the directors:
LH Ainsworth
Executive Chairman
Dated at Sydney this 26th day of August 2014
39
ANNUAL REPORT 2014
Note
2014
2013
18
17
16
17
15
13
14
24
21
22
25
21
22
71,929
93,663
39,862
1,404
206,858
21,690
3,467
35,096
21,549
81,802
40,135
106,394
29,931
766
177,226
22,042
12,409
16,535
17,864
68,850
288,660
246,076
28,582
347
11,343
11,601
687
27,641
533
9,830
2,356
248
52,560
40,608
116
682
798
53,358
421
629
1,050
41,658
235,302
204,418
182,327
74,491
(21,516)
182,290
50,639
(28,511)
235,302
204,418
In thousands of AUD
Assets
Cash and cash equivalents
Receivables and other assets
Inventories
Prepayments
Total current assets
Receivables and other assets
Deferred tax assets
Property, plant and equipment
Intangible assets
Total non-current assets
Total assets
Liabilities
Trade and other payables
Loans and borrowings
Employee benefits
Current tax liability
Provisions
Total current liabilities
Loans and borrowings
Employee benefits
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Reserves
Accumulated losses
Total equity
The notes on pages 44 to 83 are an integral part of these consolidated financial statements.
40
CONSOLIDATED STATEMENT OF FINANCIAL POSITIONas at 30 June 2014AINSWORTH GAME TECHNOLOGY In thousands of AUD
Revenue
Cost of sales
Gross profit
Other income
Sales, service and marketing expenses
Research and development expenses
Administrative expenses
Other expenses
Results from operating activities
Finance income
Finance costs
Net finance income
Profit before income tax
Income tax expense
Profit for the year
Other comprehensive income
Items that may be reclassified to profit and loss:
Foreign operations – foreign currency translation differences
Total other comprehensive income
Total comprehensive income for the year
Profit attributable to owners of the Company
Total comprehensive income attributable to the owners of the Company
Earnings per share:
Basic earnings per share (dollars)
Diluted earnings per share (dollars)
The notes on pages 44 to 83 are an integral part of these consolidated financial statements.
Note
2014
2013
8
9
12
12
15
20
20
244,118
(88,542)
155,576
396
(30,626)
(26,380)
(20,288)
(432)
78,246
3,857
(89)
3,768
82,014
(20,444)
61,570
284
284
61,854
61,570
61,854
$0.19
$0.19
198,147
(67,536)
130,611
156
(27,516)
(23,162)
(15,186)
(1,812)
63,091
6,264
(88)
6,176
69,267
(17,065)
52,202
93
93
52,295
52,202
52,295
$0.16
$0.16
41
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEfor the year ended 30 June 2014ANNUAL REPORT 2014 In thousands of AUD
Balance at 1 July 2012
Total comprehensive income for the year
Profit
Transfer between reserves
Other comprehensive income
Foreign currency translation reserve
Total other comprehensive income
Total comprehensive income for the year
Transactions with owners, recorded
directly in equity
Issue of ordinary shares on exercise of share
options
Dividend to owners of the Company
Share based payment transactions
Share based payment adjustment on
non-vesting options
Total transactions with owners
Issued
capital
182,242
–
–
–
–
–
48
–
–
–
48
Attributable to equity holders of the Company
Equity
compensation
reserve
Fair
value
reserve
Translation
reserve
Profits
reserve
Accumulated
losses
Total
equity
1,021
9,684
–
–
–
–
–
–
–
212
(5)
207
–
–
–
–
–
–
–
–
–
–
–
93
93
24
–
–
–
(31,447)
161,524
52,202
52,202
– 49,271
(49,271)
93
93
93
–
–
–
–
–
–
–
–
49,271
2,931
52,295
–
(9,661)
–
–
(9,661)
–
–
–
5
5
48
(9,661)
212
–
(9,401)
Balance at 30 June 2013
182,290
1,228
9,684
117 39,610
(28,511) 204,418
Balance at 1 July 2013
182,290
1,228
9,684
117 39,610
(28,511) 204,418
Total comprehensive income for the year
Profit
Transfer between reserves
Other comprehensive income
Foreign currency translation reserve
Total other comprehensive income
Total comprehensive income for the year
Transactions with owners, recorded
directly in equity
Issue of ordinary shares on exercise of share
options
Dividends to owners of the Company
Share based payment transactions
Share based payment adjustment on non-
vesting options
Total transactions with owners
–
–
–
–
–
37
–
–
–
37
–
–
–
–
–
–
–
1,204
(6)
1,198
–
–
–
–
–
–
–
–
–
–
–
–
61,570
61,570
– 54,581
(54,581)
–
284
284
–
–
–
–
284
284
284 54,581
6,989
61,854
–
–
– (32,211)
–
–
–
–
– (32,211)
–
–
–
6
6
37
(32,211)
1,204
–
(30,970)
Balance at 30 June 2014
182,327
2,426
9,684
401 61,980
(21,516) 235,302
NOTE: An amendment was made in relation to the accumulated losses balance as at 30 June 2013 representing dividends paid of
$9,661,000 being re-classified against profits reserve consistent with the face of the consolidated statement of financial position.
The notes on pages 44 to 83 are an integral part of these consolidated financial statements.
42
CONSOLIDATED STATEMENT OF CHANGES IN EQUITYfor the year ended 30 June 2014AINSWORTH GAME TECHNOLOGY In thousands of AUD
Note
2014
2013
Cash flows from/(used in) operating activities
Cash receipts from customers
Cash paid to suppliers and employees
Cash generated from operations
Income taxes paid
Borrowing costs paid
243,750
181,320
(183,775)
(148,135)
59,975
(2,288)
(90)
33,185
(691)
(928)
Net cash from operating activities
18(a)
57,597
31,566
Cash flows from/(used in) investing activities
Proceeds from sale of property, plant and equipment
Interest received
Acquisitions of property, plant and equipment
Proceeds from call deposits
Payment for business acquisition
Development expenditure
Net cash from/(used in) investing activities
Cash flows from/(used in) financing activities
Proceeds from exercise of share options
Re-purchase of convertible notes
Payment of finance lease liabilities
Dividends paid
Net cash (used in) financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at 1 July
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents at 30 June
The notes on pages 44 to 83 are an integral part of these consolidated financial statements.
14
–
2,590
(14,493)
26,518
(548)
(7,099)
6,968
37
–
(593)
(32,211)
389
2,964
(6,028)
3,482
–
(4,681)
(3,874)
48
(121)
(962)
(9,661)
(32,767)
(10,696)
31,798
40,135
(4)
16,996
22,928
211
18
71,929
40,135
43
CONSOLIDATED STATEMENT OF CASH FLOWSfor the year ended 30 June 2014ANNUAL REPORT 2014 INDEX TO NOTES TO THE FINANCIAL
STATEMENTS AND SIGNIFICANT
ACCOUNTING POLICIES
1. Reporting entity
2. Basis of preparation
3. Changes in accounting policies
a. Offsetting of financial assets
and financial liabilities
b. Consolidated financial statements (2011)
c. Joint arrangements
d. Disclosures of interests in other entities
e. Fair value measurements
f. Employee benefits
g. Recoverable amount disclosures
for non-financial assets
4. Significant accounting policies
a. Basis of consolidation
b. Foreign currency
c. Financial instruments
d. Property, plant and equipment
e. Intangible assets
f. Leased assets
g. Inventories
h. Impairment
i. Employee benefits
j. Provisions
k. Warranties
l. Revenue
m. Lease payments
n. Finance income and finance costs
o. Income tax
p. Earnings per share
q. Segment reporting
r.
New standards and interpretations
not yet adopted
44
45
45
45
46
46
46
46
46
46
46
47
47
47
47
48
49
49
49
50
50
51
51
51
52
52
52
52
53
53
5. Determination of fair values
6. Financial risk management
7. Operating segments
8. Revenue
9. Other income
10. Expenses by nature
11. Employee benefit expenses
12. Finance income and finance costs
13. Property, plant and equipment
14. Intangible assets
15. Taxes
16. Inventories
17. Receivables and other assets
18. Cash and cash equivalents
53
54
56
58
58
58
59
59
60
61
63
64
65
66
18a. Reconciliation of cash flows from operating activities 66
19. Capital and reserves
20. Earnings per share
21. Loans and borrowings
22. Employee benefits
23. Share-based payments
24. Trade and other payables
25. Provisions
26. Financial instruments
27. Operating leases
28. Capital and other commitments
29. Related parties
30. Group entities
31. Subsequent events
32. Auditor’s remuneration
33. Parent entity disclosures
67
68
69
70
71
74
74
74
79
79
80
82
82
82
83
AINSWORTH GAME TECHNOLOGY
(the
1. REPORTING ENTITY
Ainsworth Game Technology Limited
‘Company’)
is a company domiciled in Australia. The address of the
Company’s registered office is 10 Holker Street, Newington,
NSW, 2127. The consolidated financial statements of the
Company as at and for the year ended 30 June 2014 comprise
the Company and its subsidiaries (together referred to as
the ‘Group’ and individually as ‘Group entities’). The Group
is a for-profit entity and primarily is involved in the design,
development, manufacture, sale and servicing of gaming
machines and other related equipment and services.
2. BASIS OF PREPARATION
a. Statement of compliance
The consolidated financial statements are general
purpose financial statements which have been prepared in
accordance with Australian Accounting Standards (AASBs)
adopted by the Australian Accounting Standards Board
(AASB) and the Corporations Act 2001. The consolidated
financial statements comply with International Financial
Reporting Standards (IFRSs) adopted by the International
Accounting Standards Board (IASB).
The consolidated financial statements were authorised for
issue by the Board of Directors on 26 August 2014.
b. Basis of measurement
The consolidated financial statements have been
prepared on the historical cost basis except for loans
and borrowings with a Director related entity, which were
measured initially at fair value and then subsequently
carried at amortised cost.
c. Functional and presentation currency
The financial information of each of the Group’s entities
and foreign branches is measured using the currency of
the primary economic environment in which it operates (the
functional currency). As of 1 January 2014, The Company’s
US branch activities became a foreign operation.
These consolidated financial statements are presented
in Australian dollars, which is the Company’s primary
functional currency.
The Company is of a kind referred to in ASIC Class Order
98/100 dated 10 July 1998 and in accordance with that
Class Order, all financial information presented in Australian
dollars has been rounded to the nearest thousand unless
otherwise stated.
d. Use of estimates and judgements
The preparation of the consolidated financial statements
in conformity with IFRSs requires management to make
judgements, estimates and assumptions that affect the
application of accounting policies and the reported amounts
of assets, liabilities, income and expenses. Actual results
may differ to these estimates.
Estimates and underlying assumptions are reviewed on
an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised
and in any future periods affected.
Information about assumptions and estimation uncertainties
that have a significant risk of resulting in a material
adjustment to the carrying amounts of assets and liabilities
within the next financial year are included in Note 14 -
Intangible assets and Note 26 – Financial instruments
(trade and other receivables).
e. Presentation of transactions recognised in other
comprehensive income
From 1 July 2012 the Group applied amendments to
AASB 101 Presentation of Financial Statements outlined in
AASB 2011-9 Amendments
to Australian Accounting
Standards – Presentation of Items of Other Comprehensive
Income. The change in accounting policy only relates
to disclosures and has had no impact on consolidated
earnings per share or profit. The changes have been
applied retrospectively and require the Group to separately
present those items of other comprehensive income
that may be reclassified to profit of loss in the future from
those that will never be reclassified to profit or loss. These
changes are included in the statement of profit or loss and
other comprehensive income.
3. CHANGES IN ACCOUNTING POLICIES
Except for the changes below, the Group has consistently
applied the accounting policies set out in Note 4 to all periods
presented in these consolidated financial statements.
The Group has adopted the following new standards and
amendments to standards, including any consequential
amendments to other standards, with a date of initial
application of 1 July 2013.
a. Disclosure – Offsetting Financial Asset and Financial
Liabilities (Amendments to AASB 7)
b. AASB 10 Consolidated Financial Statements (2011) (see (a))
c. AASB 11 Joint Arrangements (see(b))
d. AASB 12 Disclosure of Interests in Other Entities (see(c))
e. AASB 13 Fair Value Measurement (see (d))
f. AASB 119 Employee Benefits (2011) (see (e))
g. Recoverable Amount Disclosures
for Non-Financial
Assets (Amendments to AASB 136) (2013)
45
NOTES TO THE FINANCIAL STATEMENTSfor the year ended 30 June 2014ANNUAL REPORT 2014 3. CHANGES IN ACCOUNTING POLICIES
(continued)
The nature and effects of the changes are explained below.
a. Offsetting of financial assets and financial
liabilities
The amendments to the disclosure requirements in AASB
7 Financial Instruments: Disclosure requires information
about all recognised financial instruments that are set
off in accordance with paragraph 42 of AASB 132. The
amendments also require disclosure of information about
recognised financial instruments subject to enforceable
master netting arrangements and similar arrangements
even if they are not set off under AASB 132. The Group
does not have any financial assets and financial liabilities
that could be set off, thus, the amendment to AASB 7 has
no impact on the financial statements of the Group.
b. Consolidated financial statements (2011)
As a result of the adoption of AASB 10, the Group has
changed its accounting policy with respect to determining
whether it has control over and consequently whether
it consolidates its investees. AASB 10 introduces a new
control model that is applicable to all investees.
In accordance with the transitional provision of AASB 10, the
Group re-assessed the control conclusion for its investees
at 1 July 2013. As all the entities within the Group are wholly
owned subsidiaries of the Company there has been no
change to the entities consolidated by the Group, and thus
no change to the financial statements as a result of applying
the new standard.
The Group’s revised accounting policy is set out in Note 4(a)(i).
c. Joint arrangements
The Group did not have any joint arrangements in the
current or previous reporting period. AASB 11 has therefore
had no impact on the financial statements of the Group.
d. Disclosures of interests in other entities
AASB 12 requires the Group to make certain disclosures
regarding its interests in other entities. Other than interests
in wholly owned subsidiaries, the Company and the Group
do not have interests in any other entities. As such, and
as the composition of the Group is consistent with that
disclosed in the consolidated financial statements of the
Group as at and for the year ended 30 June 2013, and as
there are no restrictions on the ability of the entities within
the group to access or use assets and settle liabilities of
other entities within the Group, the standard has no material
impact on the financial statements of the Group.
e. Fair value measurements
AASB 13 establishes a single framework for measuring
fair value and making disclosures about
fair value
measurements, when such measurements are required
or permitted by other AASBs. In particular, it unifies the
definition of fair value as the price at which an orderly
transaction to sell an asset or to transfer a liability would take
place between market participants at the measurement date.
It also replaces and expands the disclosure requirements
about fair value measurements in other AASBs, including
AASB 7 Financial Instruments: Disclosures. As a result, the
Group has included the additional disclosures in this regard
(see Note 26).
In accordance with the transitional provisions of AASB 13, the
Group has applied the new fair value measurement guidance
prospectively, and has not provided any comparative
information for new disclosures. Notwithstanding the above,
the change had no significant impact on the measurements
of the Group’s assets and liabilities.
f. Employee benefits
AASB 119 (2011) changes the definition of short-term and
other long term employee benefits to clarify the distinction
between the two. Upon adoption of AASB 119 (2011), the
annual leave liability is classified as an other long-term
employee benefit, resulting in a change in the recognition
and measurement of the liability. The transitional provisions of
AASB 119 require the changes to be applied retrospectively.
However, the Group assessed the impact of the change
on the measurement of the Group’s prior period financial
results and position and concluded that it was not material
and as such, the Group has not restated the comparative
information. The Group has applied the new recognition
and measurement guidance prospectively, and has not
provided any comparative information for new disclosures.
The change had no material impact on the measurements of
the Group’s assets and liabilities.
g. Recoverable amount disclosures for non-financial
assets
The amendments to AASB 136 Impairment of Assets require
certain disclosures when an impairment is recognised
or reversed and recoverable amount is based on the fair
value less costs of disposal. As the Group did not recognise
any impairment in the current and previous period, this
amendment has no impact on the financial statements of
the Group.
46
NOTES TO THE FINANCIAL STATEMENTS (continued)for the year ended 30 June 2014AINSWORTH GAME TECHNOLOGY 4. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies set out below have been applied
consistently to all periods presented in these consolidated
financial statements, and have been applied consistently by
Group entities.
Certain comparative amounts have been reclassified to
conform with the current year’s presentation.
a. Basis of consolidation
i. Subsidiaries
Subsidiaries are entities controlled by the Group. The Group
controls an entity when it is exposed to, or has right to,
variable returns from its involvement with the entity and has
the ability affect those returns through its power over the
entity. The financial statements of subsidiaries are included
in the consolidated financial statements from the date that
control commences until the date that control ceases.
ii. Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised
income and expenses arising from intra-group transactions,
are eliminated in preparing the consolidated financial
statements.
iii. Acquisitions prior to 1 July 2004
As part of its transition to AASBs, the Group elected to
restate only those business combinations that occurred on
or after 1 July 2004. In respect of acquisitions prior to 1 July
2004, goodwill represents the amount recognised under
the Group’s previous accounting framework, Australian
GAAP.
iv. Acquisitions on or after 1 July 2004
For acquisitions on or after 1 July 2004, goodwill represents
the excess of the cost of the acquisition over the Group’s
interest in the net fair value of the identifiable assets,
liabilities and contingent liabilities of the acquiree. When
the excess is negative (negative goodwill), it is recognised
immediately in profit or loss.
b. Foreign currency
i. Foreign currency transactions
Transactions in foreign currencies are translated to the
respective
functional currencies of Group entities at
exchange rates at the dates of the transaction. Monetary
assets and liabilities denominated in foreign currencies at
the balance date are retranslated to the functional currency
at the foreign exchange rate at that date. The foreign
currency gain or loss on monetary items is the difference
between amortised cost in the functional currency at the
beginning of the period, adjusted for effective interest and
payments during the period, and the amortised cost in
foreign currency translated at the exchange rate at the end
of the year.
ii. Foreign operations
The assets and liabilities of foreign operations are translated
to Australian dollars at exchange rates at the reporting
date. The income and expenses of foreign operations are
translated to Australian dollars at the average exchange
rates for the period.
Foreign currency differences are recognised in other
comprehensive income and presented in the Translation
Reserve in equity. When a foreign operation is disposed
of such that control is lost, the cumulative amount in the
Translation Reserve related to that foreign operation
is transferred to the profit or loss, as part of gain or loss
on disposal.
When the Group disposes of only a part of its interest in a
subsidiary that includes a foreign operation while retaining
control, the relevant portion of cumulative amounts is
re-attributed to non-controlling interest.
When the settlement of a monetary item receivable from
or payable to a foreign operation is neither planned nor
likely in the foreseeable future, foreign exchange gains and
losses arising from such a monetary item are considered
to form part of a net investment in a foreign operation,
are recognised in other comprehensive income and are
presented in the translation reserve in equity.
c. Financial instruments
i. Non-derivative financial assets
Non-derivative financial assets comprise trade and other
receivables and cash and cash equivalents.
Trade and other receivables are recognised on the date
that they are originated. Financial assets are derecognised
if the Group’s contractual rights to the cash flows from
the financial assets expire or if the Group transfers the
financial asset to another party without retaining control
or substantially all risks and rewards of ownership of the
financial asset are transferred.
Financial assets and liabilities are offset and the net amount
presented in the statement of financial position when, and
only when, the Group has a legal right to offset the amounts
and intends either to settle on a net basis or to realise the
asset and settle the liability simultaneously.
Trade and other receivables are financial assets with fixed
or determinable payments that are not quoted in an active
market. Such assets are recognised initially at fair value.
Subsequent to initial recognition trade and other receivables
are measured at amortised cost using the effective interest
method, less any impairment losses.
Cash and cash equivalents comprise cash balances and
call deposits with original maturities of three months or less
from the acquisition date that are subject to an insignificant
risk of changes in their fair value, and are used by the Group
in the management of its short-term commitments.
47
ANNUAL REPORT 2014 loans and
liabilities comprise
4. SIGNIFICANT ACCOUNTING POLICIES
(continued)
ii. Non-derivative financial liabilities
Non-derivative financial
borrowings and trade and other payables.
Debt securities issued and subordinated liabilities are
initially recognised on the date that they are originated. All
other financial liabilities are recognised initially on the trade
date at which the Group becomes a party to the contractual
provisions of the instrument. The Group derecognises
a financial liability when its contractual obligations are
discharged or cancelled or expire.
Loans and borrowings and trade and other payables are
recognised initially at fair value plus any directly attributable
transaction costs. Subsequent to initial recognition, these
financial liabilities are measured at amortised cost with
any difference between cost and redemption value being
recognised in the income statement over the period of the
borrowings on an effective interest basis.
Where
terms and conditions of borrowings are
modified, the carrying amount is remeasured to fair value.
Any difference between the carrying amount and fair value
is recognised in equity.
the
iii. Compound financial instruments
Compound financial instruments issued by the Group
comprise convertible notes that can be converted to share
capital at the option of the holder, and the number of shares
to be issued does not vary with changes in their fair value.
The liability component of a compound financial instrument
is recognised initially at the fair value of a similar liability
that does not have an equity conversion option. The equity
component is recognised initially at the difference between
the fair value of the compound financial instrument as a
whole and the fair value of the liability component. Any
directly attributable transaction costs are allocated to the
liability and equity components in proportion to their initial
carrying amounts.
Subsequent to initial recognition, the liability component of a
compound financial instrument is measured at amortised cost
using the effective interest method. The equity component
of a compound financial instrument is not remeasured
subsequent to initial recognition.
Interest, losses and gains relating to the financial liability
are recognised in profit or loss. On conversion, the financial
liability is re-classified to equity. No gain or loss is recognised
on conversion.
48
iv. Share capital
Ordinary shares
Ordinary shares are classified as equity. Incremental costs
directly attributable to issue of ordinary shares and share
options are recognised as a deduction from equity, net of
any tax effects.
d. Property, plant and equipment
i. Recognition and measurement
Items of property, plant and equipment are measured at
cost less accumulated depreciation and impairment losses.
Cost includes expenditures that are directly attributable
to the acquisition of the asset. Purchased software that
is integral to the functionality of the related equipment is
capitalised as part of that equipment.
When parts of an item of property, plant and equipment have
different useful lives, they are accounted for as separate
items (major components) of property, plant and equipment.
Machines previously held as inventory are transferred to
property, plant and equipment when a rental or participation
agreement is entered into. When the rental or participation
agreements cease and the machines become held for sale,
they are transferred to inventory at their carrying amount.
Gains and losses on disposal of an item of property, plant
and equipment are determined by comparing the proceeds
from disposal with the carrying amount of the property, plant
and equipment and are recognised net within “other income”
in profit and loss.
ii. Subsequent costs
The cost of replacing a part of an item of property, plant and
equipment is recognised in the carrying amount of an item if it
is probable that the future economic benefits embodied within
the part will flow to the Group and its cost can be measured
reliably. The costs of the day-to-day servicing of property, plant
and equipment are recognised in profit or loss as incurred.
iii. Depreciation
Depreciation is based on the cost of an asset less its
residual value. Significant components of individual assets
are assessed and if a component has a useful life that is
different from the remainder of that asset, that component is
depreciated separately.
Depreciation is recognised in profit or loss on a straight-line
basis over the estimated useful lives of each part of an item of
property, plant and equipment since this most closely reflects
the expected pattern of consumption of the future economic
benefits embodied in the assets. Leased assets are depreciated
over the shorter of the lease term and their useful lives unless it
is reasonably certain that the Group will obtain ownership by the
end of the lease term. Land is not depreciated.
Items of property, plant and equipment are depreciated
from the date that they are installed and are ready for use,
or in respect of internally constructed assets, from the date
that the asset is completed and ready for use.
NOTES TO THE FINANCIAL STATEMENTS (continued)for the year ended 30 June 2014AINSWORTH GAME TECHNOLOGY v. Amortisation
Amortisation is based on the cost of an asset less its
residual value. Amortisation is recognised in profit or loss
on a straight-line basis over the estimated useful lives of
intangible assets, other than goodwill, from the date that
they are available for use, since this most closely reflects
the expected pattern of consumption of the future economic
benefit embodied in the asset. The estimated useful lives
for the current and comparative periods are as follows:
– capitalised development costs
– service contracts
– intellectual property
4 years
8 years
10 years
Amortisation methods, useful lives and residual values are
reviewed at each reporting date and adjusted if appropriate.
f. Leased assets
Leases in terms of which the Group assumes substantially
all the risks and rewards of ownership are classified as
finance leases. Upon initial recognition the leased asset is
measured at an amount equal to the lower of its fair value
and the present value of the minimum lease payments.
Subsequent to initial recognition, the asset is accounted for
in accordance with the accounting policy applicable to that
asset.
Other leases are operating leases and the leased assets
are not recognised on the Group’s statement of financial
position.
g. Inventories
Inventories are measured at the lower of cost and net
realisable value. The cost of inventories is based on the
first-in first-out principle, and includes expenditure incurred
in acquiring the inventories, production or conversion
costs and other costs incurred in bringing them to their
existing location and condition. In the case of manufactured
inventories and work
includes an
appropriate share of production overheads based on normal
operating capacity. Net realisable value is the estimated
selling price in the ordinary course of business, less the
estimated costs of completion and selling expenses.
in progress, cost
The estimated useful lives for the current and comparative
periods are as follows:
– buildings
– leasehold improvements
– plant and equipment
– machines under rental or participation
40 years
10 years
2.5 – 20 years
3 years
agreements
Depreciation methods, useful lives and residual values are
reviewed at each financial year-end and adjusted if appropriate.
e. Intangible assets
i. Goodwill
Goodwill that arises upon the acquisition of subsidiaries
is included in intangible assets. For the measurement of
goodwill at initial recognition, see Note 4(a)(iii) and (iv).
Goodwill is subsequently carried at cost less accumulated
impairment losses (refer Note 4(h)).
ii. Research and development
Expenditure on
research activities, undertaken with
the prospect of gaining new technical knowledge and
understanding, is recognised in profit or loss when incurred.
Development activities involve a plan or design for the
production of new or substantially improved products and
processes. Development expenditure is capitalised only if
development costs can be measured reliably, the product
or process is technically and commercially feasible, future
economic benefits are probable, and the Group intends
to and has sufficient resources to complete development
and to use or sell the asset. The expenditure capitalised
includes the cost of materials, direct labour and overhead
costs that are directly attributable to preparing the asset
for its intended use. Other development expenditure is
recognised in profit or loss when incurred.
Capitalised development expenditure is measured at cost
less accumulated amortisation and accumulated impairment
losses.
iii. Other intangible assets
Other intangible assets, which include service contracts,
that are acquired by the Group, which have finite useful
lives, are measured at cost less accumulated amortisation
and accumulated impairment losses.
iv. Subsequent expenditure
Subsequent expenditure
it
increases the future economic benefits embodied in the
specific asset to which it relates. All other expenditure,
including expenditure on internally generated goodwill and
brands, is recognised in profit or loss when incurred.
is capitalised only when
49
ANNUAL REPORT 2014 The recoverable amount of an asset or CGU is the greater
of its value in use and its fair value less costs to sell. In
assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount
rate that reflects current market assessments of the time
value of money and the risks specific to the asset, CGU or
group of CGUs. For the purpose of impairment testing, assets
are grouped together into the smallest group of assets that
generates cash inflows from continuing use that are largely
independent of the cash inflows of other assets or groups of
assets (the “CGU or group of CGUs”). The goodwill acquired
in a business combination for the purpose of impairment
testing, is allocated to CGUs or group of CGUs that are
expected to benefit from the synergies of the combination.
The Group’s corporate assets do not generate separate
cash inflows and are utilised by more than one CGU.
Corporate assets are allocated to CGUs or group of CGUs
on a reasonable and consistent basis and tested for
impairment as part of the testing of the CGU or group of
CGUs to which the corporate asset is allocated.
An impairment loss is recognised if the carrying amount
of an asset or its CGU exceeds its recoverable amount.
Impairment losses are recognised in profit or loss. Impairment
losses recognised in respect of CGUs are allocated first to
reduce the carrying amount of any goodwill allocated to the
CGUs and then to reduce the carrying amount of the other
assets in the CGU or group of CGUs on a pro rata basis.
An impairment loss in respect of goodwill is not reversed.
In respect of other assets, impairment losses recognised
in prior periods are assessed at each reporting date for
any indications that the loss has decreased or no longer
exists. An impairment loss is reversed if there has been a
change in the estimates used to determine the recoverable
amount. An impairment loss is reversed only to the extent
that the asset’s carrying amount does not exceed the
carrying amount that would have been determined, net
of depreciation or amortisation, if no impairment loss had
been recognised.
i. Employee benefits
i. Defined contribution superannuation funds
A defined contribution plan is a post-employment benefit
plan under which an entity pays fixed contributions into
a separate entity and will have no legal or constructive
obligation to pay further amounts.
Obligations
to defined contribution
superannuation funds are recognised as an employee
benefit expense in profit or loss in the periods during which
services are rendered by employees.
for contributions
4. SIGNIFICANT ACCOUNTING POLICIES
(continued)
h. Impairment
i. Non-derivative financial assets
A financial asset not carried at fair value through profit
or loss is assessed at each reporting date to determine
whether there is any objective evidence that it is impaired.
A financial asset is considered to be impaired if objective
evidence indicates that one or more events have had a
negative effect on the estimated future cash flows of that
asset that can be estimated reliably.
Objective evidence that financial assets are impaired can
include default or delinquency by a debtor, restructuring of
an amount due to the Group on terms that the Group would
not otherwise consider and indications that a debtor will
enter bankruptcy.
Financial assets measured at amortised cost
The Group considers evidence of impairment for financial
assets measured at amortised cost (loans and receivables)
at both a specific and collective level. All individually
significant financial assets are tested for impairment on
an individual basis. The remaining financial assets are
assessed collectively in groups that share similar credit
risk characteristics.
In assessing collective impairment the Group uses historical
trends of the probability of default, timing of recoveries and
the amount of loss incurred, adjusted for management’s
judgement as to whether current economic, industry and
credit conditions are such that the actual losses are likely to
be greater or less than suggested by historical trends.
An impairment loss in respect of a financial asset measured
at amortised cost is calculated as the difference between its
carrying amount, the present value of the estimated future
cash flows discounted at the original effective interest rate.
All impairment losses are recognised in profit or loss and
reflected in an allowance account against receivables. An
impairment loss is reversed if the reversal can be related
objectively to an event occurring after the impairment loss
was recognised. When a subsequent event causes the
amount of impairment loss to decrease, the decrease in
impairment loss is reversed through profit and loss.
ii. Non-financial assets
The carrying amounts of the Group’s non-financial assets,
other than inventories and deferred tax assets, are reviewed
at each reporting date to determine whether there is any
indication of impairment. If any such indication exists then
the asset’s recoverable amount is estimated. For goodwill
and intangible assets that have indefinite lives or that are
not yet available for use, recoverable amount is estimated at
each reporting date. An impairment loss is recognised if the
carrying amount of an asset or its related cash generating
unit (CGU) exceeds its estimated recoverable amount.
50
NOTES TO THE FINANCIAL STATEMENTS (continued)for the year ended 30 June 2014AINSWORTH GAME TECHNOLOGY ii. Other long term employee benefits
The Group’s net obligation in respect of long-term employee
benefits is the amount of future benefit that employees have
earned in return for their service in the current and prior
periods plus related on-costs; that benefit is discounted to
determine its present value, and the fair value of any related
assets is deducted. The discount rate is the yield rate at
the reporting date on government bonds that have maturity
dates approximating the terms of the Group’s obligations.
iii. Termination benefits
Termination benefits are recognised as an expense when
the Group is demonstrably committed, without realistic
possibility of withdrawal, to a formal detailed plan to terminate
employment before the normal retirement date or to provide
termination benefits as a result of an offer made to encourage
voluntary redundancy. Termination benefits for voluntary
redundancies are recognised if the Group has made an offer
encouraging voluntary redundancy, it is probable that the
offer will be accepted, and the number of acceptances can
be estimated reliably.
iv. Short term benefits
Liabilities for employee benefits for wages, salaries and
annual leave represent present obligations resulting from
employees’ services provided to reporting date and are
calculated at undiscounted amounts based on remuneration
wage and salary rates that the Group expects to pay as at
reporting date including related on-costs, such as workers
remuneration insurance and payroll tax. Non-accumulating
non-monetary benefits, such as cars and free or subsidised
goods and services, are expensed based on the net
marginal cost to the Group as the benefits are taken by
the employees.
A liability is recognised for the amount expected to be
paid under short-term cash bonus plans if the Group has a
present legal or constructive obligation to pay this amount
as a result of past service provided by the employee and
the obligation can be estimated reliably.
v. Share-based payment transactions
The grant date fair value of options granted to employees is
recognised as an employee expense, with a corresponding
increase in equity, over the period in which the employees
become unconditionally entitled to the options. The amount
recognised as an expense is adjusted to reflect the actual
number of share options for which the related service and
non-market vesting conditions are expected to be met,
such that the amount ultimately recognised is based on the
number of awards that meet the related service and non-
market performance conditions at the vesting date.
j. Provisions
A provision is recognised if, as a result of a past event,
the Group has a present legal or constructive obligation
that can be estimated reliably, and it is probable that an
outflow of economic benefits will be required to settle the
obligation. Provisions are determined by discounting the
expected future cash flows at a pre-tax rate that reflects
current market assessments of the time value of money and,
where appropriate, the risks specific to the liability.
The unwinding of the discount is recognised as a finance cost.
k. Warranties
A provision for warranties is recognised when the underlying
products are sold. The provision is based on historical
warranty data and a weighting of all possible outcomes
against their associated probabilities.
l. Revenue
i. Goods sold
Revenue from the sale of goods in the course of ordinary
activities is measured at the fair value of the consideration
received or receivable, net of returns, allowances and
trade discounts. Revenue is recognised when persuasive
evidence exists usually in the form of an executed sales
agreement, that the significant risks and rewards of
ownership have been transferred to the buyer, recovery
of the consideration is probable, the associated costs and
possible return of goods can be estimated reliably, there is
no continuing management involvement with the goods, and
the amount of revenue can be measured reliably. Transfer
of risks and rewards vary depending on the individual terms
of the contract of sale.
When gaming machines, games, conversions and other
incidental items are licensed to customers for extended
periods, revenue is recognised on delivery for gaming
machines and games and
including
conversions on a straight line basis over the licence term.
The revenue recognised for each item is based on the
relative fair values of the items included in the arrangement.
for other
items
ii. Services
Revenue from services rendered is recognised in profit or
loss when the services are performed.
iii. Participation and rental
Participation revenue is revenue earned when the Group’s
owned machines are placed in venues either directly by
the Group or indirectly through a licensed operator for a
fee. The fee is calculated as either a daily fee or an agreed
fee based upon a percentage of turnover of participating
machines, depending on the agreement.
Revenue from rental of gaming machines is recognised in
profit or loss on a straight line basis over the term of the
rental agreement.
51
ANNUAL REPORT 2014 4. SIGNIFICANT ACCOUNTING POLICIES
(continued)
m. Lease payments
Payments made under operating leases are recognised in
profit or loss on a straight-line basis over the term of the
lease. Lease incentives received are recognised as an
integral part of the total lease expense, over the term of
the lease.
Minimum lease payments made under finance leases
are apportioned between the finance expense and the
reduction of the outstanding liability. The finance expense
is allocated to each period during the lease term so as to
produce a constant periodic rate of interest on the remaining
balance of the liability.
n. Finance income and finance costs
Finance income comprises interest income and foreign
currency gains. Interest income is recognised in profit or
loss as it accrues using the effective interest method.
Finance costs comprise interest expense on borrowings,
foreign currency losses and impairment losses recognised
on financial assets. Borrowing costs that are not directly
attributable to the acquisition, construction or production of
a qualifying asset are recognised in profit or loss using the
effective interest method.
Foreign currency gains and losses are reported on a net
basis as either finance income or finance cost depending
on whether foreign currency movements are in a net gain
or net loss position.
o. Income tax
Income tax expense comprises current and deferred tax.
Current and deferred tax are recognised in profit or loss
except to the extent that it relates to items recognised
directly in equity, in which case it is recognised in other
comprehensive income.
Current tax is the expected tax payable on the taxable
income for the year, using tax rates enacted or substantively
enacted at the reporting date, and any adjustment to tax
payable in respect of previous years.
Deferred tax
in respect of temporary
differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts
used for taxation purposes. Deferred tax is not recognised
for temporary differences arising from: the initial recognition
of assets or liabilities that affect neither accounting nor
taxable profit, and differences relating to investments in
subsidiaries to the extent that they will probably not reverse
in the foreseeable future.
is recognised
Deferred tax is not recognised for taxable temporary
differences arising from the initial recognition of goodwill.
Deferred tax is measured at the tax rates that are expected
to be applied to the temporary differences when they
reverse, based on the laws that have been enacted or
substantively enacted by the reporting date.
In determining the amount of current and deferred tax
the Group takes into account the impact of uncertain tax
positions and whether additional taxes and interest may be
due. The Group believes that its accruals for tax liabilities
are adequate for all open tax years based on its assessment
of many factors, including interpretations of tax law and
prior experience. This assessment relies on estimates and
assumptions and may involve a series of judgements about
future events. New information may become available that
causes the Group to change its judgement regarding the
adequacy of existing tax liabilities; such changes to tax
liabilities will impact tax expense in the period that such a
determination is made.
Deferred tax assets and liabilities are offset if there is a
legally enforceable right to offset current tax liabilities and
assets, and they relate to income taxes levied by the same
tax authority on the same taxable entity, or on different tax
entities, but they intend to settle current tax liabilities and
assets on a net basis or their tax assets and liabilities will be
realised simultaneously.
A deferred tax asset is recognised for unused tax losses,
tax credits and deductible temporary differences, to the
extent that it is probable that future taxable profits will be
available against which they can be utilised. Deferred tax
assets are reviewed at each reporting date and are reduced
to the extent that it is no longer probable that the related tax
benefit will be realised, see Note 15.
p. Earnings per share
The Group presents basic and diluted earnings per share
(EPS) data for its ordinary shares. Basic EPS is calculated by
dividing the profit or loss attributable to ordinary shareholders
of the Company by weighted average number of ordinary
shares outstanding during the period. Diluted EPS
is
determined by adjusting the profit or loss attributable to
ordinary shareholders and the weighted average number
of ordinary shareholders and the weighted average number
of ordinary shares outstanding for the effects of all dilutive
potential ordinary shares, which comprise convertible notes
and share options granted to employees.
52
NOTES TO THE FINANCIAL STATEMENTS (continued)for the year ended 30 June 2014AINSWORTH GAME TECHNOLOGY q. Segment reporting
An operating segment is a component of the Group that
engages in business activities from which it may earn
revenues and incur expenses, including revenues and
expenses that relate to transactions with any of the Group’s
other components. All operating segments’ operating
results are regularly reviewed by the Group’s CEO to make
decisions about resources to be allocated to the segment
and assess its performance, and for which discrete financial
information is available.
Segment results that are reported to the CEO include items
directly attributable to a segment as well as those that can
be allocated on a reasonable basis.
r. New standards and interpretations not yet adopted
A number of new standards, amendments to standards and
interpretations are effective for annual periods beginning
after 1 July 2013, and have not been applied in preparing
these consolidated financial statements. Those which may
be relevant to the Group are set out below. The Group does
not plan to adopt these standards early.
AASB 9 Financial Instruments (2010), AASB 9 Financial
Instruments (2009)
AASB 9 (2009) introduces new requirements for the
classification and measurement of financial assets.
Under AASB 9 (2009), financial assets are classified and
measured based on the business model in which they are
held and characteristics of their contractual cash flows.
AASB 9 (2010) introduces additional changes relating
to financial liabilities. The IASB currently has an active
project to make limited amendments to the classification
and measurement requirement of AASB 9 and add new
requirements to address the impairment of financial assets
and hedge accounting.
This change will not have a significant effect on the
consolidated financial statements of the Group. AASB 9
(2010) and (2009) are effective for annual periods beginning
on or after 1 January 2015, with early adoption permitted.
No other new standards, amendments to standards and
interpretations are expected to affect the Group’s consolidated
financial statements.
5. DETERMINATION OF FAIR VALUES
A number of the Group’s accounting policies and disclosures
require the determination of fair value, for both financial and
non-financial assets and liabilities. Fair values have been
determined for measurement and/or disclosure purposes
based on the following methods. Where applicable, further
information about the assumptions made in determining
fair values is disclosed in the notes specific to that asset
or liability.
i. Intangible assets
The fair value of customer contracts acquired in a business
combination is based on the discounted cash flows
expected to be derived from the use or eventual sale of
these contracts. The fair value of other intangible assets is
based on the discounted cash flows expected to be derived
from the use and eventual sale of the assets.
ii. Trade and other receivables/payables
For receivables / payables with a remaining life of less
than one year, the notional amount is deemed to reflect
the fair value. The fair value of all other receivables/
payables is estimated as the present value of future cash
flows, discounted at the market rate of interest at the
reporting date.
iii. Non-derivative financial instruments
Fair value, which is determined for disclosure purposes, is
calculated based on the present value of future principal
and interest cash flows, discounted at the market rate
of interest at the reporting date. In respect of the liability
component of convertible notes, the market rate of interest
is determined by reference to similar liabilities that do
not have a conversion option. For finance leases the
market rate of interest is determined by reference to similar
lease agreements.
iv. Loans and borrowings
Fair value is calculated based on discounted expected
future principal and interest cash flows.
v. Finance lease liabilities
The fair value is estimated as the present value of future
cash flows, discounted at market
for
homogeneous lease agreements. The estimated fair values
reflect changes in interest rates.
interest rates
53
ANNUAL REPORT 2014 Credit risk
Credit risk is the risk of financial loss to the Group if a
customer or counterparty to a financial instrument fails to
meet its contractual obligations, and arises principally from
the Group’s receivables from customers.
from
Trade and other receivables
The Group’s exposure to credit risk is influenced mainly by
the individual characteristics of each customer, including the
default risk of the industry and country in which customers
operate. The Group’s concentration of credit risk arises from
its two most significant receivable amounts represented by
a customer in Australian and customer in South America.
They account for $9,746 thousand (2013: $3,920 thousand)
and $4,369 thousand (2013: $4,427 thousand) of the trade
receivables carrying amount at 30 June 2014 respectively.
Credit policy guidelines have been introduced under
which each new customer is assessed by the compliance
division as to suitability and analysed for creditworthiness
before the Group’s standard payment and delivery terms
and conditions are offered. The Group’s review includes
investigations, external ratings, when available, and in some
cases bank references. Purchase limits are established
for each customer, which represents the maximum open
the Board.
requiring approval
amount without
Customers that fail to meet the Group’s creditworthiness
criteria may only transact with the Group within established
limits unless Board approval is received or otherwise only
on a prepayment basis.
In monitoring customer credit risk, customers are grouped
according to their credit characteristics, including whether
they are an individual or legal entity, whether they are a
distributor, operator or customer, geographic location,
aging profile, maturity and existence of previous financial
difficulties. The Group’s trade and other receivables relate
mainly to the Group’s direct customers, operators and
established distributors. Customers that are graded as
“high risk” require future sales to be made on a prepayment
basis within sales limits approved by the Chief Executive
Officer and Chief Financial Officer, and thereafter only with
Board approval.
Goods are sold subject to retention of title clauses, so that
in the event of non-payment the Group may have a secured
claim. The Group does not require collateral in respect of
trade and other receivables.
The Group has established an allowance for impairment
that represents its estimate of incurred losses in respect
of trade and other receivables. The main components of
this allowance are a specific loss component that relates to
individually significant exposures.
5. DETERMINATION OF FAIR VALUES (continued)
vi. Share-based payment transactions
The fair value of employee stock options is measured using
the Black Scholes Merton model. Measurement inputs
include share price on measurement date, exercise price
of the instrument, expected volatility (based on weighted
average historic volatility adjusted for changes expected
due to publicly available information), weighted average
expected life of the instruments (based on historical
experience and general option holder behaviour), expected
dividends, and the risk-free
(based on
government bonds). Service and non-market performance
conditions attached to the transactions are not taken into
account in determining fair value.
interest rate
6. FINANCIAL RISK MANAGEMENT
Overview
The Group has exposure to the following risks from their
use of financial instruments:
– Credit risk;
– Liquidity risk; and
– Market risk.
This note presents information about the Group’s exposure
to each of the above risks, its objectives, policies and
processes for measuring and managing risk, and the
management of capital. Further quantitative disclosures are
included throughout this financial report.
Risk management framework
The Board of Directors has overall responsibility for the
establishment and oversight of the risk management
framework. The Board has established processes through
the Group Audit Committee, which is responsible for
developing and monitoring risk management policies. The
Committee reports regularly to the Board of Directors on
its activities.
Risk management policies are established to identify and
analyse the risks faced by the Group, to set appropriate risk
limits and controls, and to monitor risks and adherence to
limits. Risk management policies and systems are reviewed
regularly to reflect changes in market conditions and the
Group’s activities. The Group, through its training and
management standards and procedures, aims to develop
a disciplined and constructive control environment in which
all employees understand their roles and obligations.
The Group’s Audit Committee oversees how management
monitors compliance with the Group’s risk management
policies and procedures and reviews the adequacy of the
risk management framework in relation to the risks faced by
the Group. The Audit Committee is assisted in its oversight
role by Internal Audit. Internal Audit undertakes reviews of
risk management controls and procedures, the results of
which are reported to the Audit Committee.
54
NOTES TO THE FINANCIAL STATEMENTS (continued)for the year ended 30 June 2014AINSWORTH GAME TECHNOLOGY Interest rate risk
The Group’s borrowing rates are fixed and no interest rate
risk exists.
Capital management
The Board’s policy is to maintain a strong capital base so
as to maintain investor, creditor and market confidence and
to sustain future development of the business. The Board
continues to monitor group performance so as to ensure an
acceptable return on capital is achieved and that dividends
are able to be provided to ordinary shareholders in the
short term.
The Board continues to review alternatives to ensure
present employees will hold 3-5% of the Company’s
ordinary shares. This is expected to be partially achieved
assuming all outstanding share options issued vest and/or are
exercised. These share options were issued on 1 March 2011
to all Australian employees over a portion of the Executive
Chairman’s shareholding under the ASOT plan and to US
employees under the ESOT plan, see Note 23.
There were no changes in the Group’s approach to capital
management during the year. The Group is not subject to
externally imposed capital requirements.
Guarantees
The Group’s policy is to provide financial guarantees only for
wholly-owned subsidiaries. At 30 June 2014 no guarantees
were outstanding (2013: none).
Liquidity risk
Liquidity risk is the risk that the Group will not be able to
meet its financial obligations as they fall due. The Group’s
approach to managing liquidity is to ensure, as far as
possible, that it will always have sufficient liquidity to meet
its liabilities when due, under both normal and stressed
conditions, without incurring unacceptable losses or risking
damage to the Group’s reputation.
Typically the Group ensures that it has access to sufficient
cash on demand to meet expected operational expenses
for a period of 60 days, including the servicing of financial
obligations; this excludes the potential impact of extreme
circumstances that cannot reasonably be predicted, such
as natural disasters.
Market risk
Market risk is the risk that changes in market prices, such
as foreign exchange rates and interest rates will affect the
Group’s income or the value of its holdings of financial
instruments. The objective of market risk management
is to manage and control market risk exposures within
acceptable parameters, while optimising the return.
Currency risk
The Group is exposed to currency risk on sales and
purchases that are denominated in a currency other than
the respective functional currencies of Group entities,
primarily the Australian dollar (AUD), but also the US dollar
(USD). The currencies in which these transactions primarily
are denominated are AUD, USD, Euro and New Zealand
dollars (NZD). The Group regularly monitors and reviews,
dependant on available facilities, the hedging of net assets
denominated in a foreign currency. The Group has previously
utilised currency call options to hedge its currency risk,
most with a maturity of less than six months. No hedging
arrangements were utilised during the reporting period.
In respect of other monetary assets and
liabilities
denominated in foreign currencies, the Group monitors
its net exposure to address short-term imbalances in
its exposure.
55
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C
ANNUAL REPORT 2014
8. REVENUE
In thousands of AUD
Sale of goods
Rendering of services
Rental and participation revenue
9. OTHER INCOME
In thousands of AUD
Net gain on sale of property, plant and equipment
Other income
10. EXPENSES BY NATURE
In thousands of AUD
Changes in raw material and consumables, finished goods and work in progress
Employee benefits expense
Depreciation and amortisation expense
Legal expenses
Evaluation and testing expenses
Marketing expenses
Operating lease expenses
Impairment loss
Other expenses
Note
2014
2013
225,479
185,019
5,692
12,947
244,118
5,255
7,873
198,147
2014
–
396
396
2013
18
138
156
2014
2013
79,944
50,455
10,364
1,949
4,903
3,320
2,612
595
12,126
62,600
43,202
8,130
1,004
3,879
2,661
2,316
1,812
9,608
166,268
135,212
16
11
13,14
27
58
NOTES TO THE FINANCIAL STATEMENTS (continued)for the year ended 30 June 2014AINSWORTH GAME TECHNOLOGY 11. EMPLOYEE BENEFIT EXPENSES
In thousands of AUD
Wages and salaries
Short term incentives
Contributions to defined contribution superannuation funds
Increase in liability for annual leave
Increase in liability for long service leave
Termination benefits
Equity settled share-based payment transactions
12. FINANCE INCOME AND FINANCE COSTS
In thousands of AUD
Interest income on trade receivables
Interest income on bank deposits
Net foreign exchange gain
Finance income
Interest expense on financial liabilities
Finance costs
Net financing income recognised in profit or loss
Note
2014
2013
39,099
33,530
22
22
6,303
3,229
166
446
8
1,204
5,675
2,995
466
310
14
212
50,455
43,202
2014
1,037
1,997
823
3,857
(89)
(89)
3,768
2013
844
2,498
2,922
6,264
(88)
(88)
6,176
59
ANNUAL REPORT 2014 13. PROPERTY, PLANT AND EQUIPMENT
In thousands of AUD
Cost
Balance at 1 July 2012
Re-classification of inventory to plant and equipment
Additions
Disposals
Effect of movements in foreign exchange
Balance at 30 June 2013
Balance at 1 July 2013
Re-classification of inventory to plant and equipment
Additions
Disposals
Effect of movements in foreign exchange
Balance at 30 June 2014
Depreciation and impairment losses
Balance at 1 July 2012
Depreciation charge for the year
Disposals
Effect of movements in foreign exchange
Balance at 30 June 2013
Balance at 1 July 2013
Depreciation charge for the year
Disposals
Effect of movements in foreign exchange
Balance at 30 June 2014
Carrying amounts
At 1 July 2012
At 30 June 2013
At 30 June 2014
Land and
buildings
Plant and
equipment
Leasehold
Improvements
Total
25,496
5,466
6,598
(4,063)
157
33,654
33,654
15,461
15,531
(8,152)
684
57,178
14,769
3,875
(1,606)
81
17,119
17,119
6,517
(1,755)
201
–
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24,761
5,466
4,115
(3,965)
85
30,462
30,462
15,461
6,598
(8,151)
684
735
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2,483
(98)
72
3,192
3,192
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1,100
(1)
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45,054
4,291
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3,618
(1,433)
51
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(1,755)
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10,152
13,617
7,833
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932
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575
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16,535
35,096
Disposals in the table above includes sale of gaming machines previously under participation or rental agreements of
$430 thousand (2013: $864 thousand) at net book value.
Leased plant and equipment
The Group leases plant and equipment and motor vehicles under hire purchase agreements. At the end of each of these
agreements the Group has the option to purchase the equipment at a beneficial price. The leased equipment and guarantees
by the Group secure lease obligations. Acquisition of plant and equipment including computer equipment and motor vehicles,
by means of hire purchase agreements amounted to $48 thousand (2013: $570 thousand). At 30 June 2014, the net carrying
amount of leased plant and equipment was $764 thousand (2013: $1,558 thousand).
60
NOTES TO THE FINANCIAL STATEMENTS (continued)for the year ended 30 June 2014AINSWORTH GAME TECHNOLOGY 14. INTANGIBLE ASSETS
In thousands of AUD
Cost
Goodwill
Development
costs
Intellectual
property
Nevada
licence costs
Service
contracts
Total
Balance at 1 July 2012
2,436
15,859
836
1,583
1,223
21,937
Development costs fully amortised
and written off
Development costs capitalised
during the year
Balance at 30 June 2013
Balance at 1 July 2013
Development costs / service
contracts fully amortised and
written off
Development costs / service
contracts capitalised during the year
–
–
2,436
2,436
–
–
Balance at 30 June 2014
2,436
Amortisation and impairment
losses
Balance at 1 July 2012
Development costs fully amortised
and written off
Amortisation for the year
Balance at 30 June 2013
Balance at 1 July 2013
Development costs / service
contracts fully amortised and
written off
Amortisation for the year
Balance at 30 June 2014
Carrying amounts
At 1 July 2012
At 30 June 2013
At 30 June 2014
–
–
–
–
–
–
–
–
2,436
2,436
2,436
–
4,681
20,540
20,540
–
7,099
27,639
2,932
–
4,096
7,028
7,028
–
3,763
10,791
12,927
13,512
16,848
–
–
836
836
–
–
–
–
1,583
1,583
–
–
836
1,583
419
–
84
503
503
–
84
587
417
333
249
–
–
–
–
–
–
–
–
1,583
1,583
1,583
(1,223)
(1,223)
–
–
–
–
433
433
4,681
25,395
25,395
–
7,532
32,927
1,148
4,499
(1,223)
75
–
–
–
–
–
75
–
433
(1,223)
4,255
7,531
7,531
–
3,847
11,378
17,438
17,864
21,549
61
ANNUAL REPORT 2014
14. INTANGIBLE ASSETS (continued)
Amortisation charge and impairment loss
The amortisation charge is recognised in the following line items in the income statement:
In thousands of AUD
Cost of sales
Research and development expenses
2014
84
3,763
3,847
2013
84
4,171
4,255
Impairment testing for development costs
The carrying amount of the Group’s development costs amounts to $16,848 thousand (2013: $13,512 thousand), comprising of
$14,993 thousand in development costs relating to product development and $1,855 thousand in development costs relating to
online development activities. The impairment testing for these different development costs are performed separately as they
generate or are expected to generate independent cash flows and are therefore allocated to separate cash-generating units
(‘CGUs’). The disclosure relating to the product development costs of $14,993 thousand are outlined below.
Product development costs
The determination of CGUs for the purposes of testing product development costs for impairment has changed from prior years.
This change was triggered by a material increase in the asset base specific to generating cash flows in particular geographic
jurisdictions. The Group has determined that the most reasonable and consistent basis upon which to allocate development
costs is to have the Group’s research and development function (‘Development CGU’) recharge product development costs to
the Group’s other CGUs, which are in line with the Group’s geographic operating segments.
Product development costs include development costs relating to products that are not yet available for sale and as such their
recoverable amount is assessed at the end of each reporting period.
Product development costs are recharged from the Development CGU to individual CGUs, based on the forecasted unit sales
of each individual CGU. Other assets, primarily property, plant and equipment, are allocated to the individual CGUs to which
they relate. Assets that cannot be allocated to individual CGUs are allocated to the minimum collection of CGUs (‘Groups of
CGUs’) to which they can be allocated on a reasonable and consistent basis.
The three main CGUs or Group of CGUs are: Development, Australia and other (comprised of the New South Wales, Queensland,
South Australia, Victoria, Tasmania, Asia, New Zealand and Europe individual CGUs), and Americas (comprised of the North and
South America individual CGUs).
The recoverable amount of each CGU or Group of CGUs was estimated based on its value in use. Value in use for each
individual CGU and Group of CGUs was determined by discounting the future cash flows generated from continuing use of the
product development costs over a four year period. Future cash flows are expected to be generated from the sales of machines
and products and are based on the following key assumptions:
CGU/Groups of CGUs
Development
Australia and other
Americas
North America
South America
Average
annual
revenue
growth rate(2)
Discount
rate(1)
22.5%
19.7%
17.4%
19.7%
12.7%
7.0%
4.2%
14.4%
17.7%
9.2%
(1) Discount rates are pre-tax discount rates, which are based on the weighted average cost of capital.
(2) The average annual revenue growth rate presented above is calculated based on forecast revenue for 2015 to 2017, having regard to
Board approved budgets, the Group’s three year business plan, historical experience, actual operating results and strategic initiatives.
Revenue growth for the fourth year was forecast at 3 percent.
62
NOTES TO THE FINANCIAL STATEMENTS (continued)for the year ended 30 June 2014AINSWORTH GAME TECHNOLOGY The allocation of goodwill, indefinite useful life intangible assets and other assets to the Groups of CGUs are as follows:
CGU/Groups of CGUs
Development
Australia and other
Americas
North America
South America
Goodwill/
indefinite
useful life
intangible
assets
‘$000
–
–
1,583
1,583
–
Capitalised
development
costs
‘$000
14,993
–
–
–
–
Other
assets
‘$000
Recoverable
amount
‘$000
6,261
9,271
23,331
9,829
2,232
34,066
131,369
45,652
41,081
3,844
The recoverable amount of each CGU and Group of CGUs was estimated to be higher than the carrying amount of the unit and
as such no impairment was required.
The determination of the recoverable amount of the South American CGU, which exceeds its carrying amount by $1,683
thousand, is particularly sensitive to changes in the following key assumptions:
– An increase of 2.2 percent in the discount rate used would cause the recoverable amount of the CGU to equal its carrying
amount; and
– A 2.5 percent reduction in annual revenue growth rates would cause the recoverable amount of the CGU to equal its carrying amount.
Impairment testing for goodwill
Goodwill relates to acquired service businesses and entities in Australia. The recoverable amount of the Australian service
CGU was estimated based on its value in use.
Value in use for the CGU was determined by discounting the future cash flows generated from the servicing of gaming machines
and are based on the following key assumptions:
– Cash flows were projected based on actual operating results over a projected four year period. Cash flows for a further 10 year
period were extrapolated using a constant growth rate of 3 percent, which does not exceed the long term average growth rate
for the industry. Management believes that this forecast period was justified due to the long term nature of the service business;
– An average revenue annual growth rate of 5.2% for 2015 to 2017 based on the three year Board approved business plan,
historical experience and actual operating results. All future years of the model use a constant growth rate of 3.0% which does
not exceed the long term average growth rate for the industry; and
– A pre-tax discount rate of 9.2% based on the weighted average cost of capital.
As the recoverable amount of the CGU was estimated to be higher than the carrying amount of the Group, no impairment was
considered necessary.
15. TAXES
Current tax expense
In thousands of AUD
Tax recognised in profit or loss
Current tax expense
Current year
Prior year adjustments
Deferred tax benefit
Timing differences movement
Recognition of R&D tax credits
Total income tax expense
2014
2013
(31,450)
(23,967)
495
1,311
(30,955)
(22,656)
779
9,732
10,511
277
5,314
5,591
(20,444)
(17,065)
63
ANNUAL REPORT 2014 15. TAXES (continued)
Reconciliation of effective tax rate
In thousands of AUD
Profit before income tax
2014
2014
82,014
2013
2013
69,267
Income tax expense using the Company’s domestic tax rate
(30.00%)
(24,604)
(30.00%)
(20,780)
Effective tax rates in foreign jurisdictions
Non-deductible expenses
Non-assessable income and concessions
Other tax concessions
Prior year adjustments
Utilisation of previously unrecognised tax losses
Recognition of previously unrecognised tax losses and timing
differences
Recognised deferred tax assets
Deferred tax assets are attributable to the following:
0.12%
(10.01%)
11.87%
1.54%
0.60%
–
0.95%
102
(8,209)
9,735
1,259
495
–
778
(0.63%)
(7.79%)
11.49%
–
2.29%
–
–
(433)
(5,393)
7,956
–
1,585
–
–
(24.93%)
(20,444)
(24.64%)
(17,065)
In thousands of AUD
Employee benefits
Provisions
Other items
R&D non-refundable tax offset credits
Tax loss carry-forwards
Net tax assets
Assets
2014
2,002
1,739
(418)
–
144
3,467
2013
1,533
896
178
9,658
144
12,409
The deductible temporary differences and tax losses do not expire under current tax legislation. R&D non-refundable tax offset
credits are available to be applied against income tax payable in future years and do not expire under current tax legislation.
Management has assessed that the carrying amount of the deferred tax assets of $3,467 thousand should be recognised as
management considers it probable that future taxable profits would be available against which they can be utilised.
16. INVENTORIES
In thousands of AUD
Raw materials and consumables
Finished goods
Stock in transit
Inventories stated at the lower of cost and net realisable value
2014
13,519
22,231
4,112
39,862
2013
9,215
15,981
4,735
29,931
During the year ended 30 June 2014 raw materials, consumables and changes in finished goods and work in progress
recognised as cost of sales amounted to $79,944 thousand (2013: $62,600 thousand).
A re-classification from inventory to property, plant and equipment of $15,461 thousand (2013: $5,466 thousand) was recorded
to reflect gaming products for which rental and participation agreements were entered into during the year.
During the year ended 30 June 2014, the write down of inventories to net realisable value amounted to $6 thousand
(2013: $991 thousand). The write down is included in cost of sales.
64
NOTES TO THE FINANCIAL STATEMENTS (continued)for the year ended 30 June 2014AINSWORTH GAME TECHNOLOGY 17. RECEIVABLES AND OTHER ASSETS
In thousands of AUD
Current
Trade receivables
Less impairment losses
Call deposits
Other assets
Non-current
Trade receivables
Note
2014
2013
26
95,384
(2,105)
93,279
–
384
80,953
(2,089)
78,864
26,518
1,012
93,663
106,394
21,690
21,690
22,042
22,042
The Group realised impairment losses of $363 thousand (2013: $1,812 thousand) for the year ended 30 June 2014.
Receivables denominated in currencies other than the functional currency comprise $58,211 thousand of trade receivables
denominated in US dollars (2013: $49,959 thousand), $1,406 thousand in New Zealand Dollars (2013: $650 thousand),
$20 thousand in Great Britain Pounds and $nil thousand in Euro (2013: $2 thousand).
Leasing arrangements
Included in trade receivables are receivables from gaming machines that have been sold under finance lease arrangement. The
lease payments receivable under these contracts is as follows:
In thousands of AUD
2014
2013
Minimum lease payments under finance leases are receivable as follows:
Within one year
Later than one year but not later than 5 years
Unearned finance income
Within one year
Later than one year but not later than 5 years
The present value of minimum lease payments is as follows:
Within one year
Later than one year but not later than 5 years
Lease receivables are classified as follows:
Within one year
Later than one year but not later than 5 years
1,900
2,918
4,818
177
350
527
1,723
2,568
4,291
1,723
2,568
4,291
3,390
3,069
6,459
434
409
843
2,956
2,660
5,616
2,956
2,660
5,616
The Group’s exposure to credit and currency risks and impairment losses related to trade and other receivables are disclosed
in Note 26.
65
ANNUAL REPORT 2014 18. CASH AND CASH EQUIVALENTS
In thousands of AUD
Bank balances
Call deposits
Cash and cash equivalents in the statement of cash flows
2014
2013
20,854
51,075
71,929
5,492
34,643
40,135
The Group’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in Note 26.
18A. RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES
In thousands of AUD
Cash flows from operating activities
Profit for the period
Adjustments for:
Depreciation
Impairment losses on trade receivables
Amortisation of intangible assets
Net finance income
Loss/(Gain) on sale of property, plant and equipment
Equity-settled share-based payment transactions
Income tax expense
Operating profit before changes in working capital and provisions
Change in trade and other receivables
Change in inventories
Change in other assets
Change in trade and other payables
Change in provisions and employee benefits
Interest paid
Income taxes paid
Net cash from operating activities
Note
2014
2013
61,570
52,202
13
26
14
12
9
11
15
17
16
6,517
363
3,847
(3,768)
12
1,204
20,444
90,189
(12,725)
(24,947)
(638)
6,091
2,005
59,975
(90)
(2,288)
57,597
3,875
1,812
4,255
(6,176)
(18)
212
17,065
73,227
(33,695)
(18,845)
(265)
11,687
1,076
33,185
(928)
(691)
31,566
66
NOTES TO THE FINANCIAL STATEMENTS (continued)for the year ended 30 June 2014AINSWORTH GAME TECHNOLOGY 19. CAPITAL AND RESERVES
(a) Share capital
In thousands of shares
In issue at 1 July
Exercise of share options
In issue at 30 June – fully paid
Ordinary shares
2014
2013
322,026
321,813
167
213
322,193
322,026
(i) Ordinary shares
The Company does not have authorised capital or par value in respect of its issued shares. All issued shares are fully paid. All
shares rank equally with regard to the Company’s residual assets.
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per
share at meetings of the Company.
Issue of ordinary shares
During the year, 167 thousand ordinary shares were issued as a result of the exercise of vested options arising from the ESOT.
Options were exercised at a price of $0.225 per option (see Note 23).
(b) Nature and purpose of reserve
(i) Equity compensation reserve
The equity compensation reserve represents the cost of share options issued to employees.
(ii) Fair value reserve
The fair value reserve comprises the cumulative net change in fair value of related party loans and borrowings where interest
is charged at below market rates.
(iii) Translation reserve
The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of
foreign operations where their functional currency is different to the presentation currency of the reporting entity, as well as
from the translation of liabilities that hedge the Company’s net investment in a foreign subsidiary.
(iv) Profits reserve
This reserve is comprised wholly of the profits generated by the Australian entity which would be eligible for distribution as a
frankable dividend.
(c) Dividends
The following dividends were declared and paid by the Company for the year:
In thousands of AUD
10.0 cents per qualifying ordinary share (2013: 3.0 cents)
2014
32,211
2013
9,661
After the reporting date, the following dividends were proposed by the board of directors. The dividends have not been
recognised as liabilities and there are no tax consequences.
In thousands of AUD
5.0 cents per qualifying ordinary share (2013: 5.0 cents)
2014
16,110
2013
16,101
67
ANNUAL REPORT 2014 20. EARNINGS PER SHARE
Basic earnings per share
The calculation of basic earnings per share at 30 June 2014 was based on the profit attributable to ordinary shareholders
of $61,570 thousand (2013: $52,202 thousand) and a weighted average number of ordinary shares outstanding during the
financial year ended 30 June 2014 of 322,092 thousand (2013: 321,932 thousand), calculated as follows:
Profit attributable to ordinary shareholders
In thousands of AUD
Profit for the period
Profit attributable to ordinary shareholders
Weighted average number of ordinary shares
In thousands of shares
Issued ordinary shares at 1 July
Effect of shares issued
Weighted average number of ordinary shares at 30 June
Note
2014
61,570
61,570
2013
52,202
52,202
19
322,026
321,813
66
119
322,092
321,932
Diluted earnings per share
The calculation of diluted earnings per share at 30 June 2014 was based on the profit attributable to ordinary shareholders of
$62,774 thousand (2013: $52,204 thousand) and a weighted average number of ordinary shares outstanding after adjustment
for the effects of all dilutive potential ordinary shares of 323,830 thousand (2013: 322,241 thousand), calculated as follows:
Profit attributable to ordinary shareholders (diluted)
In thousands of AUD
Profit attributable to ordinary shareholders
Amortisation of performance rights (RST)
Interest expense on convertible notes and options, net of tax
Profit attributable to ordinary shareholders (diluted)
Weighted average number of ordinary shares (diluted)
In thousands of shares
Weighted average number of ordinary shares at 30 June
Effect of rights and options on issue
Weighted average number of ordinary shares (diluted) at 30 June
2014
61,570
1,204
–
2013
52,202
–
2
62,774
52,204
322,092
321,932
1,738
309
323,830
322,241
68
NOTES TO THE FINANCIAL STATEMENTS (continued)for the year ended 30 June 2014AINSWORTH GAME TECHNOLOGY 21. LOANS AND BORROWINGS
This note provides information about the contractual terms of the Group’s interest-bearing loans and borrowings, which are
measured at amortised cost. For more information about the Group’s exposure to interest rate, foreign currency and liquidity
risk, see Note 26.
In thousands of AUD
Current
Finance lease liabilities
Non-current
Finance lease liabilities
2014
2013
347
533
116
421
Terms and debt repayment schedule
Terms and conditions of outstanding loans were as follows:
In thousands of AUD
Currency
Nominal
interest rate
Year of
maturity
Face
value
Carrying
amount
Face
value
Carrying
amount
2014
2013
AUD 2.90-8.39%
2014-2018
484
484
463
463
1,017
1,017
954
954
Finance lease
liabilities
Total interest-bearing
liabilities
Convertible notes
In thousands of AUD
Proceeds from issue of 19,714,717 convertible notes on 20 December 2004
Transaction costs
Net proceeds
Amount classified as equity
Transaction costs classified as equity
Accreted interest capitalised
Re-purchase of convertible notes
Redemption of convertible notes
Convertible notes converted into share capital
Equity component of convertible notes repurchased and converted
Carrying amount of liability at 30 June
Current
Non-current
2014
2013
–
–
–
–
–
–
–
–
–
–
–
–
–
–
25,629
(1,085)
24,544
(2,842)
121
782
(540)
(5,460)
(16,732)
127
–
–
–
–
69
ANNUAL REPORT 2014 21. LOANS AND BORROWINGS (continued)
Finance lease liabilities
Finance lease liabilities of the Group are payable as follows:
In thousands of AUD
Less than one year
Between one and five years
Future
minimum
lease
payments
2014
362
122
484
Present value
of minimum
lease
payments
Future
minimum
lease
payments
2014
347
116
463
2013
577
440
1,017
Interest
2014
15
6
21
Present value
of minimum
lease
payments
2013
533
421
954
Interest
2013
44
19
63
The Group leases plant and equipment under finance leases with terms expiring from three to five years. At the end of the
lease term, there is the option to purchase the equipment at a discount to market value, a price deemed to be a bargain
purchase option.
2014
2013
667
6,290
2,912
1,474
11,343
682
682
273
5,730
2,746
1,081
9,830
629
629
22. EMPLOYEE BENEFITS
In thousands of AUD
Current
Accrual for salaries and wages
Accrual for short term incentive plan
Liability for annual leave
Liability for long service leave
Non–current
Liability for long service leave
70
NOTES TO THE FINANCIAL STATEMENTS (continued)for the year ended 30 June 2014AINSWORTH GAME TECHNOLOGY 23. SHARE-BASED PAYMENTS
(a) Description of share-based payment arrangements
(i) Share option and rights programmes (equity-settled)
On 1 March 2011, the Group established share option programmes that entitled all eligible Group personnel to purchase shares
in the Company at an exercise price of $0.225 per share. The Employee Share Option Trust (ESOT) granted share options
over new ordinary shares to all American employees. The LH Ainsworth Share Option Trust (ASOT) granted share options to
all Australian employees, excluding directors apart from the CEO, Mr Danny Gladstone, over a portion of the personal share
holding of the Company’s Executive Chairman, Mr LH Ainsworth.
The ESOT and AOST share option plans were a replacement to the employee share option plans previously granted.
On 22 July 2013 a new employee incentive plan was established whereby performance rights were granted to all eligible Group
employees under the Rights Share Trust (RST). Under the RST eligible employees were allocated performance rights over
ordinary shares in the Company at nil consideration or exercise price however are dependent on service conditions, vesting
conditions and performance hurdles.
The key terms and conditions related to the grants under these programmes are as follows; all options and rights are to be
settled by the physical delivery of shares.
Grant date/employee entitled
Number of
instruments
Option grant to senior and other employees at 1 March 2011
373,045
Total share options ESOT
373,045
Option grant to senior and other employees at 1 March 2011
586,699
Total share options ASOT
586,699
Rights grant to key management at 22 July 2013
360,199
Rights grant to senior and other employees
at 22 July 2013
Total rights RST
1,092,368
1,452,567
Vesting conditions
Three years of service as
per ESOT below
Three years of service as
per ASOT below
Four years service and
performance hurdles from
grant date as per RST
below
Four years service and
performance hurdles from
grant date as per RST
below
Contractual life of
options
5 years
5 years
5 years
5 years
To be eligible to participate in the ESOT and ASOT the employee was selected by the directors and reviewed by the remuneration
and nomination committee. Options may be exercised within a five-year period, starting on the first anniversary of the issue of
the options, subject to earlier exercise where a takeover offer or takeover announcement is made, or a person becomes the
holder of a relevant interest in 50% or more of the Company’s voting shares.
Both the ESOT and ASOT provide for employees to receive options for no consideration. Each option is convertible to one
ordinary share. Option holders have no voting or dividend rights. On conversion from option to ordinary shares, the issued
shares will have full voting and dividend rights. The exercise price of the options is determined in accordance with the rules of the
ESOT and ASOT. The ability to exercise the options is conditional on the continuing employment of the participating employee.
71
ANNUAL REPORT 2014 23. SHARE-BASED PAYMENTS (continued)
The vesting conditions of the share options issued on 1 March 2011 under the ESOT and ASOT are as follows:
Date
First Anniversary of Grant Date
Second Anniversary of Grant Date
Third Anniversary of Grant Date
The vesting conditions of the performance rights issued on 22 July 2013 under the RST are as follows:
Date
1 September 2016
1 September 2017
Vesting condition
(% of Options vesting)
25%
25%
50%
Vesting condition
(% of Rights vesting)
50%
50%
In addition to the vesting conditions on rights granted under the RST, specific performance hurdles relative to Total Shareholder
Return (TSR) relative targets and Earnings per Share (EPS) targets are required to be met as follows:
Vesting date of 1 September 2016:
– 30% vest subject to the TSR target below with a fair value at grant date of $2.4349;
– 70% vest subject to the EPS target below with a fair value at grant date of $3.2375; and
The remaining 50% of the rights vest on 1 September 2017, of which:
– 30% vest subject to the TSR target below with a fair value at grant date of $2.3892; and
– 70% vest subject to the EPS target below with a fair value at grant date of $3.1693.
Total Shareholder Return (TSR) Relative Targets
TSR rank
Less than 50% percentile
50th percentile
Proportion of TSR rights that vest
0%
50%
Between 50th and 75th percentile
Pro-rata (sliding scale) percentage
At or above 75th percentile
100%
The Comparison Group of Companies for the TSR hurdle is companies in the ASX 300 Index that have the same Consumer
Services GICS industry sector as Ainsworth.
Proportion of EPS rights that vest
0%
25% plus 1.25% for each 0.1% increase in EPS
50% plus 2.0% for each 0.1% increase in EPS
100%
EPS Targets
EPS achievement
Less than 8.0% p.a.
8.0% p.a.
10% p.a.
12.5% p.a.
72
NOTES TO THE FINANCIAL STATEMENTS (continued)for the year ended 30 June 2014AINSWORTH GAME TECHNOLOGY (b) Reconciliation of outstanding share options and rights
ESOT plan
The number and weighted average exercise prices of Group issued share options under ESOT is as follows:
In thousands of options
Outstanding at the beginning of the period
Forfeited during the period
Cancelled during the period
Exercised during the period
Granted during the period
Outstanding at the end of the period
Exercisable at the end of the period
Weighted
average
exercise price
2014
Number
of options
2014
Weighted
average
exercise price
2013
Number
of options
2013
$0.225
$0.225
$0.225
567
(27)
–
(167)
–
373
373
$0.225
$0.225
$0.225
–
$0.225
808
(28)
–
(213)
–
567
182
The options outstanding at 30 June 2014 have an exercise price of $0.225 and a remaining life of 1.67 years. The weighted-
average share price at the dates of exercise for share options exercised in 2014 was $4.29 (2013: $3.07).
ASOT plan
The share options granted under the ASOT to Australian employees on 1 March 2011 totalled 9,899,182. During the year 60,738
previously granted share options were cancelled and 4,814,459 were exercised with 586,699 share options outstanding as at 30
June 2014. The weighted-average share price at the dates of exercise for share options exercised in 2014 was $4.32 (2013: $3.20).
RST plan
The rights granted under the RST to all eligible Group employees totalled 1,489,358. During the year 36,791 were cancelled with
1,452,567 rights outstanding as at 30 June 2014. No rights were exercisable as at 30 June 2014.
(c) Measurement of fair values
The following factors and assumptions were used in determining the fair value of options under the ESOT and ASOT plans on
grant date:
Grant date
Expiry date
Fair value per
option
Exercise price
Price of shares
on grant date
Expected
volatility
Risk free
interest rate
Dividend yield
1 March 2011
1 March 2016
$0.079
$0.225
$0.225
51%
5.25%
–
The fair value of the rights under the RST were as follows:
Fair value at grant date
– Vesting date 1 September 2016
– Vesting date 1 September 2017
TSR Target
EPS Target
$2.43
$2.39
$3.24
$3.17
The inputs used in the measurement of the above fair values at grant date of the equity settlement share based payment plan
under the RST were as follows:
Share price at grant date
Exercise price
Expected volatility
Expected life
Expected dividends
Risk-free interest rate (based on Treasury Bonds)
RST Plan
$3.46
–
40.3%
5 years
2.1%
2.6%
73
ANNUAL REPORT 2014
23. SHARE-BASED PAYMENTS (continued)
The estimate of the fair value of the services received is measured based on the Black Scholes Merton model. The fair value
of services received in return for share options and rights granted are measured by reference to the fair value of share options
and rights granted. The contractual life of the option and right is used as an input into this model. Expectations of early exercise
are incorporated into these models. The expected volatility is based on the historic volatility (calculated based on the weighted
average remaining life of the share options or rights), adjusted for any expected changes to future volatility due to publicly
available information.
(d) Expense recognised in profit or loss
For details on the related employee benefit expenses, see Note 11.
24. TRADE AND OTHER PAYABLES
In thousands of AUD
Current
Trade payables
Other payables and accrued expenses
Amount payable to director/shareholder controlled entities
2014
2013
12,544
15,958
80
12,651
14,980
10
28,582
27,641
The Group’s exposure to currency and liquidity risk related to trade and other payables is disclosed in Note 26.
Trade and other payables denominated in currencies other than the functional currency comprise $12,061 thousand of payables
denominated in US Dollars (2013 $10,830 thousand), $13 thousand of payables denominated in Euro (2013: $3 thousand),
$423 thousand of payables denominated in New Zealand Dollars (2013: $384 thousand), and $2 thousand of payables
denominated in Great Britain Pounds (2013: $137 thousand), $10 thousand of payables denominated in Canadian Dollars
(2013:$0) and $7 thousand of payables denominated in Hong Kong Dollars (2013:$0).
25. PROVISIONS
In thousands of AUD
Balance at 1 July 2013
Provisions made during the year
Provisions used during the year
Provision reversed during the year
Balance at 30 June 2014
Service/
warranties
203
549
(203)
–
549
Legal
45
138
(45)
–
138
Total
248
687
(248)
–
687
26. FINANCIAL INSTRUMENTS
Credit risk
Exposure to credit risk
Trade and other receivables
The carrying amount of the Group’s financial assets represents the maximum credit exposure. The Group’s maximum exposure
to credit risk at the reporting date was:
In thousands of AUD
Receivables
Note
17
Carrying amount
2014
2013
114,969
114,969
100,906
100,906
The Group’s maximum exposure to credit risk at the reporting date was $114,969 thousand (2013: $100,906 thousand)
for receivables.
74
NOTES TO THE FINANCIAL STATEMENTS (continued)for the year ended 30 June 2014AINSWORTH GAME TECHNOLOGY The Group’s gross maximum exposure to credit risk for trade receivables at the reporting date by geographic region was:
In thousands of AUD
Australia
Americas
Europe
New Zealand
Asia
2014
55,278
59,500
63
1,406
827
2013
49,643
49,711
6
1,350
2,285
117,074
102,995
The Group’s concentration of credit risk arises from its two most significant receivable amounts represented by a customer in
Australian and customer in South America. They account for $9,746 thousand (2013: $3,920 thousand) and $4,369 thousand
(2013: $4,427 thousand) of the trade receivables carrying amount at 30 June 2014 respectively.
Cash and cash equivalents
The Group held cash of $19,002 thousand at 30 June 2014 (2013: $5,492 thousand) and $52,927 thousand of cash deposits at
30 June 2014 (2013: $61,161 thousand), which represents its maximum credit exposure on these assets. The cash and cash deposits
are held with bank and financial institution counterparts, which are rated AA- to A-, based on rating agency Standard & Poor ratings.
Impairment losses
The aging of the Group’s trade receivables at the reporting date was:
In thousands of AUD
Not past due
Past due 0-30 days
Past due 31-120 days
Past due 121 days to one year
More than one year
Gross
2014
Impairment
2014
Gross
2013
Impairment
2013
86,973
20,784
8,658
659
–
–
–
1,768
337
–
81,379
12,023
8,598
950
45
117,074
2,105
102,995
–
–
1,796
248
45
2,089
2013
102
(7)
1,812
182
2,089
The movement in the allowance for impairment in respect of trade receivables during the year was as follows:
In thousands of AUD
Balance at 1 July
Impairment loss written off
Provision during the year
Effect of exchange rate fluctuations
Balance at 30 June
2014
2,089
(319)
363
(28)
2,105
The provision of $363 thousand (2013: $1,812 thousand) was recognised in other expenses in the income statement.
Based on historic default rates and current repayment plans in place, the Group believes that apart from the above, no impairment
is necessary in respect of trade receivables not past due or on amounts past due as these relate to known circumstances that
are not considered to impact collectability.
An impairment allowance of $337 thousand has been provided for amounts past due more than 121 days and relates to a
customer where the Group has assessed potential collectability issues. The remaining balance where no impairment allowance
has been provided relates to negotiated repayment plans from long standing customers and distributors who have met or had
their obligations previously re-negotiated.
The allowance for impairment losses in respect of receivables is used to record impairment losses unless the Group is satisfied
that no recovery of the amount owing is possible; at that point the amounts are considered irrecoverable and are written off
against the financial asset directly.
75
ANNUAL REPORT 2014 26. FINANCIAL INSTRUMENTS (continued)
Liquidity risk
The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the
impact of netting agreements:
30 June 2014
In thousands of AUD
Non-derivative financial liabilities
Finance lease liabilities
Trade and other payables
Carrying
amount
463
28,582
29,045
Contractual
cash flows 6 mths or less
6-12 mths
1-2 years
2-5 years
(484)
(232)
(28,582)
(28,582)
(29,066)
(28,814)
(130)
–
(130)
(70)
–
(70)
(52)
–
(52)
It is not expected that the cash flows included in the maturity analysis could occur significantly earlier or at significantly
different amounts.
30 June 2013
In thousands of AUD
Non-derivative financial liabilities
Finance lease liabilities
Trade and other payables
Carrying
amount
Contractual
cash flows 6 mths or less
6-12 mths
1-2 years
2-5 years
954
27,641
(1,017)
(27,641)
(319)
(27,641)
28,595
(28,658)
(27,960)
(257)
–
(257)
(314)
–
(314)
(127)
–
(127)
It is not expected that the cash flows included in the maturity analysis could occur significantly earlier or at significantly
different amounts.
Currency risk
The Group is exposed to foreign currency risk on sales and purchases that are denominated in a currency other than the AUD.
The Group monitors and assesses under its Treasury Risk policy and facilities available whether hedging of all trade receivables
and trade payables denominated in a foreign currency from time to time is considered appropriate. The Group uses foreign
currency call options to hedge its foreign currency risk. No foreign currency call options were utilised during the year.
Exposure to currency risk
The Group’s significant exposures to foreign currency risk at balance date were as follows, based on notional amounts:
In thousands
Trade receivables
Trade payables
Net exposure in statement of financial
position
2014
2013
USD
Euro
NZD
GBP
USD
Euro
NZD
GBP
58,211
(12,061)
46,150
–
(13)
(13)
1,406
(423)
20
49,959
(2)
(10,830)
983
18
39,129
2
(3)
(1)
650
(384)
–
(137)
266
(137)
76
NOTES TO THE FINANCIAL STATEMENTS (continued)for the year ended 30 June 2014AINSWORTH GAME TECHNOLOGY The following significant exchange rates applied during the year:
AUD
USD
Euro
NZD
GBP
Average rate
Reporting date spot rate
2014
2013
2014
2013
0.9184
0.6771
1.1097
0.5674
1.0271
0.7949
1.2497
0.6549
0.9420
0.6906
1.0761
0.5531
0.9275
0.7095
1.1871
0.6072
Sensitivity analysis
In managing currency risks the Group aims to reduce the impact of short-term fluctuations on the Group earnings. Over the
longer-term, however, permanent changes in foreign exchange will have an impact on profit/(loss).
A 10 percent strengthening of the Australian dollar against the following currencies at 30 June 2014 would have increased
(decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables remain
constant. This analysis is based on foreign currency exchange rate variances that the Group considered to be reasonably
possible at the end of the reporting period. The analysis is performed on the same basis for 2013.
Effect in thousands of AUD
30 June 2014
USD
Euro
NZD
GBP
30 June 2013
USD
Euro
NZD
GBP
Equity Profit or (loss)
(4,926)
(3,805)
1
(89)
(2)
1
(89)
(2)
(3,650)
(3,559)
–
(24)
12
–
(24)
12
A 10 percent weakening of the Australian dollar against the following currencies at 30 June would have increased (decreased)
equity and profit or loss by the amounts shown below. This analysis assumes that all other variables remain constant. This
analysis is based on foreign currency exchange rate variances that the Group considered to be reasonably possible at the end
of the reporting period. The analysis is performed on the same basis for 2013.
Effect in thousands of AUD
30 June 2014
USD
Euro
NZD
GBP
30 June 2013
USD
Euro
NZD
GBP
Equity Profit or (loss)
7,397
4,184
(1)
98
2
(1)
98
2
4,012
3,912
–
26
(13)
–
26
(13)
77
ANNUAL REPORT 2014 26. FINANCIAL INSTRUMENTS (continued)
Fair values
The fair values of financial assets and liabilities, together with the carrying amounts shown in the statement of financial position,
are as follows:
In thousands of AUD
Assets carried at amortised cost
Receivables and other assets
Cash and cash equivalents
In thousands of AUD
Liabilities carried at amortised cost
Trade and other payables
Finance leases
Note
17
18
Carrying
amount
2014
115,353
71,929
187,282
Carrying
amount
2014
Fair value
2014
Carrying
amount
2013
Fair value
2013
115,353
71,929
187,282
Fair value
2014
128,436
128,436
40,135
168,571
Carrying
amount
2013
40,135
168,571
Fair value
2013
24
21
28,582
28,582
463
463
27,641
954
27,641
954
29,045
29,045
28,595
28,595
Estimates of fair values
The methods used in determining the fair values of financial instruments are discussed in Note 5.
Interest rates used for determining fair value
The interest rates used to discount estimated cash flows, where applicable, are based on the government yield curve as of
30 June 2014 plus an adequate constant credit spread and are as follows:
Receivables
Leases
Interest rate risk
The Group’s borrowing rates are fixed and no interest rate risk exists.
2014
2013
6.00% - 10.25% 3.84% - 10.25%
2.90-8.39%
0.91% - 11.25%
78
NOTES TO THE FINANCIAL STATEMENTS (continued)for the year ended 30 June 2014AINSWORTH GAME TECHNOLOGY 27. OPERATING LEASES
Leases as lessee
Non-cancellable operating lease rentals are payable as follows:
In thousands of AUD
Less than one year
Between one and five years
More than five years
2014
2,386
9,414
2,982
14,782
2013
2,172
9,308
4,741
16,221
The Group leases a number of warehouse and office facilities under operating leases. The leases typically run for a period
of 3-10 years, with an option to renew the lease after that date. Lease payments are increased every year either by annual
increases of 2-4% per annum, or by market rent reviews at stipulated dates. None of the leases include contingent rentals.
During the year $2,612 thousand was recognised as an expense in profit or loss in respect of operating leases (2013: $2,316
thousand).
The warehouse and office lease are combined leases of land and buildings. Since the land title does not pass, the rent paid to
the landlord for the building is increased to market rent at regular intervals, and the Group does not participate in the residual
value of the building, it was determined that substantially all the risks and rewards of the building are with the landlord. As such,
the Group determined that the leases are operating leases.
28. CAPITAL AND OTHER COMMITMENTS
In thousands of AUD
Plant and equipment
Contracted but not yet provided for and payable:
Within one year
Employee compensation commitments
Key management personnel
2014
2013
565
663
Commitments under non-cancellable employment contracts not provided for in the financial
statements and payable:
Within one year
2,248
2,149
79
ANNUAL REPORT 2014 29. RELATED PARTIES
The following were key management personnel of the Group at any time during the reporting period and unless otherwise
indicated were key management personnel for the entire period:
Non-executive directors
Current
Mr GJ Campbell
Mr MB Yates
Executives
Current
Mr ML Ludski (Chief Financial Officer and Company Secretary,
Ainsworth Game Technology Limited)
Mr V Bruzzese (General Manager Technical Services,
Ainsworth Game Technology Limited)
Mr CJ Henson - (subject to regulatory approval in the
jurisdictions of Missouri and Alberta)
Mr I Cooper (General Manager, Manufacturing, Ainsworth
Game Technology Limited)
Mr DH Macintosh - (subject to regulatory approval in the
jurisdictions of Missouri and Alberta)
Mr S Clarebrough (Group General Manager, Strategy and
Development, Ainsworth Game Technology Limited).
Executive directors
Mr LH Ainsworth (Executive Chairperson)
Mr DE Gladstone (Executive Director and Chief Executive
Officer, Ainsworth Game Technology Limited)
Key management personnel compensation
The key management personnel compensation included in ‘employee benefit expenses’ (see Note 11) is as follows:
In AUD
Short-term employee benefits
Post-employment benefits
Share based payments
Other long term benefits
2014
2013
4,710,115
4,880,587
399,236
356,166
316,497
169,665
77,000
156,749
5,595,513
5,470,502
Individual directors and executives compensation disclosures
Information regarding individual directors and executives compensation and some equity instruments disclosures as permitted
by Corporations Regulations 2M.3.03 and 2M.6.04 is provided in the Remuneration Report section of the Directors’ Report.
Apart from the details disclosed in this note, no director has entered into a material contract with the Group since the end of the
previous financial year and there were no material contracts involving directors’ interests existing at year-end.
Other key management personnel transactions
A number of key management persons, or their related parties, hold positions in other entities that result in them having control
or significant influence over the financial or operating policies of those entities.
A number of those entities transacted with the Group during the year. Other than as described below the terms and conditions
of the transactions with key management persons and their related parties were no more favourable than those available,
or which might reasonably be expected to be available, on similar transactions to non-director related entities on an arm’s
length basis.
80
NOTES TO THE FINANCIAL STATEMENTS (continued)for the year ended 30 June 2014AINSWORTH GAME TECHNOLOGY The aggregate value of transactions and outstanding balances relating to key management personnel and their related parties
were as follows:
In AUD
Key management
person
Mr LH Ainsworth
Transaction
Leased plant and equipment and
other costs
Mr LH Ainsworth
Sales revenue
Mr LH Ainsworth
Purchases and other charges for
payments made on behalf of the
Company
Mr LH Ainsworth Operating lease rental costs
Transactions value
year ended 30 June
Balance receivable/
(payable) as at
30 June
Note
2014
2013
2014
2013
(i)
(ii)
(ii)
(iii)
62,400
62,400
931,326
1,315,062
343,514
12,456
–
–
–
–
6,221
–
1,627,982
1,536,135
(79,705)
110,729
(i)
(ii)
The Company leased associated plant and equipment from an entity controlled by Mr LH Ainsworth on normal commercial terms and
conditions.
Transactions were with Ainsworth (UK) Ltd and Associated World Investments Pty Ltd, entities controlled by Mr LH Ainsworth. These
sales and purchases/charges were on normal commercial terms and conditions.
(iii) Operating leases rental costs of the premises at Newington from an entity controlled by Mr LH Ainsworth on normal commercial terms
and conditions.
In addition to the transactions above, AGT Pty Argentina S.R.L. was incorporated in FY13 with the shareholding currently held
in trust by Mr D Gladstone and an officer of Ainsworth Game Technology Inc. on behalf of the Group. This shareholding is in the
process of being transferred and was originally structured to facilitate the incorporation within Argentina.
Amounts receivable from and payable to key management personnel and their related parties at reporting date arising from
these transactions were as follows:
In AUD
2014
2013
Assets and liabilities arising from the above transactions
Current receivables and other assets
Trade receivables
Other assets
Current trade and other payables
–
–
6,221
120,729
Amount payable to director/shareholder controlled entities
79,705
10,000
81
ANNUAL REPORT 2014
30. GROUP ENTITIES
Parent entity
Ainsworth Game Technology Limited
Subsidiaries
AGT Pty Ltd
AGT Pty Mexico S. de R.L. de C.V.
AGT Pty Peru S.A.C.
AGT Pty Argentina S.R.L.
AGT Alderney Limited
Ainsworth Game Technology Inc
AGT Service Pty Ltd
AGT Service (NSW) Pty Ltd
J & A Machines Pty Ltd
RE & R Baker & Associates Pty Ltd
Bull Club Services Pty Ltd
Ownership Interest
Country of
incorporation
2014
2013
Australia
Australia
Mexico
Peru
Argentina
Alderney
USA
Australia
Australia
Australia
Australia
Australia
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
–
100%
100%
100%
100%
100%
100%
31. SUBSEQUENT EVENTS
After the reporting date, the Company declared an unfranked dividend of 5.0 cents per ordinary share amounting to $16,110,000
with an expected payment date of 26 September 2014. The financial effect of this dividend has not been brought to account in
the financial statements for the year ended 30 June 2014 and will be recognised in subsequent financial reports.
Subsequent to 30 June 2014 the Company settled all previous legal proceedings with a competitor claiming that certain
products of the Company infringe that competitor’s patents. The settlement had no effect on the Group’s financial position and
did not result in any financial payments between the parties and no amount was or is required to be recognised with respect
to this matter.
Other than the matters discussed above, there has not arisen in the interval between the end of the financial year and the
date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the
Company, to affect significantly the operations of the Group, the results of those operations, or the state of affairs of the Group,
in future financial years.
32. AUDITOR’S REMUNERATION
In AUD
Audit services
Auditors of the Company – KPMG
Audit and review of financial reports
Other services
Auditors of the Company – KPMG
2014
2013
258,000
222,000
In relation to regulatory, due diligence and other services
–
140,600
82
NOTES TO THE FINANCIAL STATEMENTS (continued)for the year ended 30 June 2014AINSWORTH GAME TECHNOLOGY
33. PARENT ENTITY DISCLOSURES
As at and throughout the financial year ended 30 June 2014 the parent entity of the Group was Ainsworth Game Technology
Limited.
In thousands of AUD
Result of parent entity
Profit for the year
Total comprehensive income for the year
Financial position of parent entity at year end
Current assets
Total assets
Current liabilities
Total liabilities
Total equity of parent entity comprising of:
Share capital
Equity compensation reserve
Fair value reserve
Profit reserves
Accumulated losses
Total equity
Parent entity capital commitments for acquisitions of
property plant and equipment
In thousands of AUD
Plant and equipment
Contracted but not yet provided for and payable:
Within one year
2014
2013
59,806
59,806
51,540
51,540
194,233
280,955
45,526
49,638
172,598
245,461
35,845
43,313
182,327
182,290
2,759
9,684
61,980
1,228
9,684
39,610
(25,433)
(30,664)
231,317
202,148
2014
2013
565
663
83
ANNUAL REPORT 2014 1.
In the opinion of the directors of Ainsworth Game Technology Limited (the ‘Company’):
a. the consolidated financial statements and notes that are set out on pages 40 to 83 and the Remuneration report
in sections 15.1 to 15.5 in the Directors’ report, are in accordance with the Corporations Act 2001, including:
i.
giving a true and fair view of the Group’s financial position as at 30 June 2014 and of its performance for the financial
year ended on that date; and
b.
ii. complying with Australian Accounting Standards and the Corporations Regulations 2001; and
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due
and payable.
2.
The directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the chief
executive officer and chief financial officer for the financial year ended 30 June 2014.
The directors draw attention to Note 2(a) to the consolidated financial statements, which includes a statement of compliance
with International Financial Reporting Standards.
Signed in accordance with a resolution of the directors:
3.
LH Ainsworth
Executive Chairman
Dated at Sydney this 26th day of August 2014.
84
DIRECTORS’ DECLARATIONAINSWORTH GAME TECHNOLOGY
INDEPENDENT AUDITOR’S
REPORT
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF AINSWORTH GAME TECHNOLOGY LIMITED
Report on the financial report
We have audited the accompanying financial report of Ainsworth Game Technology Limited (the company), which comprises
the consolidated statement of financial position as at 30 June 2014, and consolidated statement of comprehensive income,
consolidated statement of changes in equity and consolidated statement of cash flows for the year ended on that date, Notes 1
to 33 comprising a summary of significant accounting policies and other explanatory information and the directors’ declaration
of the Group comprising the company and the entities it controlled at the year’s end or from time to time during the financial year.
Directors’ responsibility for the financial report
The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in
accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors
determine is necessary to enable the preparation of the financial report that is free from material misstatement whether due to
fraud or error. In Note 2(a), the directors also state, in accordance with Australian Accounting Standard AASB 101 Presentation
of Financial Statements, that the financial statements of the Group comply with International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance
with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating
to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from
material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report.
The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement
of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the entity’s preparation of the financial report that gives a true and fair view in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s
internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.
We performed the procedures to assess whether in all material respects the financial report presents fairly, in accordance with
the Corporations Act 2001 and Australian Accounting Standards, a true and fair view which is consistent with our understanding
of the Group’s financial position and of its performance.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
Auditor’s opinion
In our opinion:
a.
the financial report of the Group is in accordance with the Corporations Act 2001, including:
i.
giving a true and fair view of the Group’s financial position as at 30 June 2014 and of its performance for the year ended
on that date; and
complying with Australian Accounting Standards and the Corporations Regulations 2001.
ii.
the financial report also complies with International Financial Reporting Standards as disclosed in Note 2(a).
b.
KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International
Cooperative (“KPMG International”), a Swiss entity. Liability limited by a scheme approved under Professional Standards Legislation.
85
ANNUAL REPORT 2014
INDEPENDENT AUDITOR’S
REPORT (continued)
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF AINSWORTH GAME TECHNOLOGY LIMITED
(continued)
Report on the remuneration report
We have audited the Remuneration Report included in sections 15.1 to 15.5 of the directors’ report for the year ended 30 June 2014.
The directors of the company are responsible for the preparation and presentation of the remuneration report in accordance with
Section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report, based on our
audit conducted in accordance with auditing standards.
Auditor’s opinion
In our opinion, the remuneration report of Ainsworth Game Technology Limited for the year ended 30 June 2014, complies with
Section 300A of the Corporations Act 2001.
KPMG
Tony Nimac
Partner
Sydney
26 August 2014
KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International
Cooperative (“KPMG International”), a Swiss entity. Liability limited by a scheme approved under Professional Standards Legislation.
86
AINSWORTH GAME TECHNOLOGY LEAD AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001
To: the directors of Ainsworth Game Technology Limited
I declare that, to the best of my knowledge and belief, in relation to the audit for the financial year ended 30 June 2014 there
have been:
i.
no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit;
and
ii. no contraventions of any applicable code of professional conduct in relation to the audit.
KPMG
Tony Nimac
Partner
Sydney
26 August 2014
KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International
Cooperative (“KPMG International”), a Swiss entity. Liability limited by a scheme approved under Professional Standards Legislation.
87
ANNUAL REPORT 2014
Securities Exchange Listing
The Company is listed on the
Australian Securities Exchange.
The Home Exchange is Sydney.
CODE: AGI
Website
www.ainsworth.com.au
Share Registry
Computershare Investor Services
Pty Ltd
Level 3, 60 Carrington Street,
Sydney NSW Australia 2001
Tel:
1300 850 505 (within Aust)
+61 3 9415 4000 (outside Aust)
Fax: +61 3 9473 2500
Auditor
KPMG
10 Shelley Street
Sydney NSW Australia 2000
Tel: +61 2 9335 7000
Fax: +61 2 9299 7001
Other Information
Ainsworth Game Technology Limited,
incorporated and domiciled in
Australia, is a publicly listed company
limited by shares.
THE AMERICAS
Nevada
6975 S. Decatur Blvd. Suite 140
Las Vegas, NV 89118 USA
Tel: +1 (702) 778-9000
Fax: +1 (702) 778-9001
Email: enquiries@ainsworth.com.au
Florida
6600 NW 12 Avenue, Suite 201
Ft. Lauderdale, FL 33309 USA
Tel: +1 (954) 317-5500
Fax: +1 (954) 317-5555
Email: enquiries@ainsworth.com.au
ASIA
Malaysia
Mr Jonathan Siah
Key Account Sales Executive
Tel: +60 1225 40866
Email: jonathan.siah@ainsworth.com.au
Macau
Mr Jim Tang
Key Account Sales Executive
Tel: +853 6648 5180
Email: jim.tang@ainsworth.com.au
CORPORATE
DIRECTORY
CORPORATE DIRECTORY
Executive Chairman
Mr LH Ainsworth
Independent Non-Executive
Directors
Mr GJ Campbell
Mr MB Yates
Mr CJ Henson
Mr DH Macintosh AM
Chief Executive Officer
and Executive Director
Mr DE Gladstone
Company Secretary
and Chief Financial Officer
Mr ML Ludski
OFFICES
AUSTRALIA
Corporate and Head Office
10 Holker Street,
Newington NSW Australia 2127
Tel: +61 2 9739 8000
Fax: +61 2 9648 4327
Email: enquiries@ainsworth.com.au
Queensland
Unit 5 / 3990 Pacific Highway
Loganholme QLD Australia 4129
Tel: +61 7 3209 6210
Fax: +61 7 3209 6510
Email: glen.coleman@ainsworth.com.au
South Australia
Ms Toni Odgers
South Australia Sales Executive
Tel: +61 0402 927 833
Email: toni.odgers@ainsworth.com.au
Victoria
Mr Wayne Flood
State Sales Manager
Tel: +61 0419 551 454
Email: wayne.flood@ainsworth.com.au
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AINSWORTH GAME TECHNOLOGY
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www.ainsworth.com.au
AINSWORTH GAME TECHNOLOGY
10 Holker Street, Newington,
NSW Australia, 2127
T. +61 2 9739 8000
F. +61 2 9648 4327