Ashland Global Annual Report 2016

FY2016 Annual Report · Ashland Global

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ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Ashley Services Group Limited Annual Report 2016

CHAIRMAN AND MANAGING DIRECTOR’S REVIEW ------------------------------------------------------------------ 3

DIRECTORS’ REPORT --------------------------------------------------------------------------------------------------------- 8

AUDITOR’S INDEPENDENCE DECLARATION -------------------------------------------------------------------------- 24

CORPORATE GOVERNANCE STATEMENT ----------------------------------------------------------------------------- 25

DIRECTORS’ DECLARATION----------------------------------------------------------------------------------------------- 26

INDEPENDENT AUDITOR’S REPORT ------------------------------------------------------------------------------------ 27

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME ------------- 30

CONSOLIDATED STATEMENT OF FINANCIAL POSITION ----------------------------------------------------------- 31

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ------------------------------------------------------------ 32

CONSOLIDATED STATEMENT OF CASH FLOW ----------------------------------------------------------------------- 33

NOTES TO THE FINANCIAL STATEMENTS ----------------------------------------------------------------------------- 34

ASX ADDITIONAL INFORMATION --------------------------------------------------------------------------------------- 71

CORPORATE DIRECTORY -------------------------------------------------------------------------------------------------- 73

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Chairman and Managing Director’s Review

MR IAN PRATT AND MR STEWART CUMMINS
Over the past 6 months significant progress has been made in strategically realigning the business. The
changes in strategy have been evolutionary in nature and are being progressively implemented across five key
areas.

Firstly, the Company is committed to its integrated “jobs and skills” business model as this provides a clear
differentiation in the market relative to our competitors – allowing us to leverage the twin benefits of work
opportunities across a wide range of customers and industries, and high quality job-seeker, upskill and reskill
training.

Secondly, in terms of key geographies, the Company has maintained its national footprint, however greater
sales focus has been concentrated in the New South Wales, Victorian and Western Australian markets. The
Company has also consolidated its International operations under the SILK brand focusing on East Coast
markets and discontinuing its operations in Perth.

Thirdly, the training products being offered have been revised and updated with more emphasis placed on
diversification – striving to better balance revenue earned from government-funded training programs with
more corporate sales. The target is to move from a circa 75/25 proportion to 50/50 over the next few years.

Fourthly, steps have been taken to streamline back office processing for the training business (Ashley Institute
of Training; Integracom; and SILK) into 4 state-based centres of excellence to ensure best practice
management of state government funding contract obligations. There has also been a restructuring of senior
training manager roles in order to reduce costs.

Fifthly and finally, to ensure alignment between the business plan and capital structure, the Company’s debt
facilities have been renegotiated and re-sized to fit with current business activity and funding needs.

We still have work to do but the fundamentals of the business are sound and the process to restore sustained
profitability is well on track.

The business plan is built around 3 key initiatives:

1. Accelerate growth in the Labour Hire Division

New customer relationships have been signed in the logistics and warehousing sector, and with several large
construction engineering companies.

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Chairman and Managing Director’s Review

Our white collar recruitment business has traditionally engaged a multi-service model where its consultants
manage both internal and external recruitment assignments. From 1 July 2016 all internal assignments are
now handled by dedicated staff, allowing the other staff to be singularly focused on growing our external
recruitment for temporary and permanent placements. Early signs are promising with new recruitment
consultants joining the team, a flurry of new assignments from existing, valued customers, and a robust
pipeline of business from new customers.

Turnaround of the Training Division

The Training Division had grown too broad and so over 2016 we have:



Rationalised the number of qualifications to better reflect where our experience and current business
is focusing.
Consolidated our industry groups from 23 to 6, enabling a clearer focus and definition of core
markets. These 6 groups are: Food and Agriculture; Telco and Security; Hospitality; Aged Care,
Children’s Services and Community Services; Industrial and Logistics; and Business Management
(Sales, Customer Services, Leadership and Management).
Grown our sales teams in Sydney and Melbourne to harness the greater growth in these two major
markets, with a particular emphasis on corporate market opportunities.

This will be an ongoing process over the next 12 months.

Strengthen IT business support platform

Being a human services and IP business, it is important that all our staff have good access to information.
Much work has been undertaken during 2016 in order to establish a single Student Management System. We
have also launched a new Customer Relationship Management system in the Training Division and a new
candidate management system for the white collar recruitment business.

DISCUSSION ON RESULTS

Earnings and result

Earnings

Net profit after tax (“NPAT”) for the financial year of the Group was a loss of $69.6 million (2015: $13.7 million
profit). This loss includes:

1.
2.

a $66.0 million after tax expense for impairment of intangible assets,
a $2.6 million after tax loss from the Cantillon operations in Perth, Western Australia, partially offset
by
a $3.5 million after tax income arising from reassessment of the fair value of deferred consideration
liabilities for future earn outs payable in relation to prior period acquisitions.

During the final quarter of the financial year, the Board approved an orderly exit from the International
student business in Perth, Western Australia. This business was originally acquired through the Cantillon
acquisition in September 2014. The Group is fulfilling its obligations for the remaining students and working
with third parties to sub-let three separate properties associated with the business. The $2.6 million after tax
loss represents the trading loss incurred during the financial year ($0.9 million after tax), together with the
costs of exit ($1.7 million), which primarily represents the discounted cost of the future lease obligations.

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Chairman and Managing Director’s Review

Revenues

Revenue from continuing operations at $280.8 million decreased $23.3 million (8%) from the prior period.

Labour hire revenues decreased $12.4 million to $248.6 million, driven by timing of account wins versus losses
(-$10 million) and reduced revenues with engineering customers (-$2 million).

Training revenues decreased $10.8 million to $32.2 million. Total revenues from South Australia and Tasmania
declined $3.4 million, following the uneconomic changes to public funding in those states. Queensland
revenues declined $6.7 million due partly to changes to the Job Service Provider network, effective 1 July 2015,
which impacted Ashley’s public market, but also completion of prior period corporate training contracts, which
were not replaced.

Earnings before interest taxes depreciation and amortisation (“EBITDA”)

Statutory EBITDA (excluding discontinued operations) was a loss of $69.9 million (2015: profit of $23.4 million).
The current year result includes a $66.0 million loss from impairment of intangibles assets, partially offset by a
$3.5 million benefit from reassessment of the fair value of deferred consideration payable in relation to prior
period acquisitions.

Statutory EBITDA1
Reassessment of value of deferred consideration liabilities

Impairment of Intangible assets/other assets
Pre acquisition EBITDA for Integracom and exclusion of SILK post
acquisition profit
IPO and acquisition related costs taken to income statements

Net underlying adjustments

Underlying EBITDA
NOTES:

FY16
$million
(69.9)

(3.5)

66.0

62.5

(7.4)

FY15
$million
23.4

(7.8)

0.9

(0.4)

4.6

(2.7)

20.7

EBITDA is a non IFRS measure used internally by management to assess the performance of the business. It has been derived from
the IFRS figures in the financial report.

Excluding these adjustments, underlying EBITDA for the current period was a $7.4 million loss (2015: profit of
$20.7 million) comprising:

Labour hire. EBITDA of $4.9 million was $4.1 million below the prior period. The prior period margin
benefited from lower workers compensation costs. Current period margin was 2.0%, driven lower
due to competitive pressures.

Training. The EBITDA loss was $6.6 million (2015: $14.3 million profit). The majority of revenue
shortfall flowed to margin, because training cost reductions lagged the volume drop. Also, overheads
increased significantly for the year, due mainly to additional sales and marketing costs incurred to
pursue growth initiatives and to utilise Smart and Skilled funding in NSW and VET FEE HELP funding
nationally.

Corporate costs at $5.7 million were $3.1 million above the prior period. Management costs
increased, with additional COO/CEO costs from December 2015 and the CFO included for the full
year. Marketing costs increased to assist diversification of training revenues, IT costs increased with
key core systems being upgraded and legal fees increased.

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Chairman and Managing Director’s Review

Statement of financial position

The Group balance sheet has been heavily impacted by the combined impacts of:

a.
b.
c.

$66 million of impairment charges;
$7.4 million of current period trading losses, primarily in the first half; and
payout of the $6.15 million FY15 final dividend.

Consequently, net assets were $27.1 million at 30 June 2016, down from $102.9 million at 30 June 2015.

As at 30 June 2016, the Group had $17 million of facilities with Bankwest Limited, comprising a $15 million
working capital facility, and $2 million in bank guarantee and credit card facilities. The bank has fixed and
floating charges over the Group’s assets.

As at 30 June 2016, the working capital facility was undrawn (30 June 2015, nil).

Cash Flow

There was a strong operating cash inflow (after capex) of $7.4 million during the second half of 2016 (1H16:
$12.0 million operating cash outflow) reflecting improved underlying EBITDA trading results, a 60% reduction
in capital expenditure, and seasonality of working capital. Changes to capital expenditure were predominantly
focused on winding back the planned expansion of the international student business in Perth, and did not
inhibit investment in the Company’s core labour hire and training markets.

Over the full year there was a net outflow of $10.9 million as a result of the $4.6 million operating cash
outflow (after capex) and the final dividend payment for FY15 of $6.2 million.

DIVIDEND

During the financial year ended 30 June 2016, the Group paid a final dividend of $6.15m on 25 September
2015 which represents a payment of 4.1 cents per share. The Directors did not declare any dividends in
respect of the financial year ended 30 June 2016.

FUNDING UPDATE

Subsequent to year end, the Company has revised its funding arrangements by establishing an ‘evergreen’
invoice discount facility with a Big 4 bank at competitive rates and reduced the BankWest debt facility from
$15 million to $10 million in August 2016, with a plan to wind this down to $5 million over the next
4 months. This will provide the Company with equivalent liquidity at comparable cost to the previous
$15 million facility. The term of the BankWest facility is unchanged (still 29 October 2017) and includes a
similar covenant package, albeit financial measures have been re-set to the Company’s current business plan.

EVENTS SUBSEQUENT TO BALANCE DATE

On 19 August 2016 the Company served legal proceedings filed in the Supreme Court of New South Wales
against Holmes Management Group Pty Limited, the vendor of the Integracom telecommunications training
business acquired in August 2014. These proceedings relate to alleged breaches of warranties under the Unit
Sale and Purchase Agreement for the acquisition. It is not possible at this time to quantify the likely financial
impact of these proceedings.

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Chairman and Managing Director’s Review

LEVERAGING THE KEY STRENGTHS OF THE BUSINESS

Through its 5 main trading brands, Ashley Services Group has built a strong market position as the leading
“jobs and skills” company in Australia.

We have a talented and dedicated team across our various businesses. We would like to thank our people for
their commitment to service our customers and to ensure that Ashley Services Group retains its mantle as a
high quality serviceprovider.

Ian Pratt
Chairman

Stewart Cummins
Managing Director

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Directors’ Report

The Directors present their annual financial report on the consolidated entity, being Ashley Services Group
Limited and its controlled entities (“Group”) for the financial year ended 30 June 2016.

GENERAL INFORMATION

a. Directors

The names of the Directors in office at any time during, or since the end of the year are:

Table 1: Director Details

Names

Mr Ian Pratt
Mr Ross Shrimpton

Mr Stewart Cummins
Mr Marc Shrimpton

Appointed / Resigned

Chairman
Non-Executive Director

Appointed 1 October 2015
Appointed 12 October 2000

Managing Director
Executive Director

Appointed 15 February 2016
Appointed Alternative Director on 31 July 2014, then
appointed Director 1 October 2015

Mr Peter Turner
Mr Simon Crean

Mr Vincent Fayad

Chairman
Non-Executive Director

Appointed 21 July 2014 and resigned 1 October 2015
Appointed 31 July 2014 and resigned 1 October 2015

Non-Executive Director

Appointed 31 July 2014 and resigned 1 October 2015

Directors’ Information



Mr Ian Pratt | Non-Executive Chairman (since 1 October 2015)

Qualifications | CA

Experience | Mr Ian Pratt has over 40 years’ experience in the accounting profession and is a
Director of a number of Public and Private companies. During this time, he has been involved in
the recruitment, finance and property industries, and advises on income tax and related matters.
Currently Mr Pratt is a Partner at Trood Pratt & Co Chartered Accountants and he is a Director of
Charter Hall Direct Property Management Limited (formerly Macquarie Direct Property
Management Limited). Mr Pratt is a Member of Chartered Accountants Australia and New
Zealand.

Ian is the Chairman of the Nominations, Audit & Risk Management and Remuneration
Committees.

Mr Stewart Cummins | Managing Director (since 15 February 2016)

Qualifications | B.Ec (MAC), Master of Management (MGSM), FCA

Experience | Stewart was appointed Chief Operating Officer of Ashley Services Group in
December 2015 and became Managing Director and Chief Executive Officer (CEO) in February
2016. Prior to this, Stewart has had broad business experience across several sectors, having
been the CEO at Vocation Limited (ASX:VET), the CFO of Transpacific Industries Group Ltd (ASX:
TPI), and Finance Director at TNT Express N.V. in Australia, New Zealand and the Pacific Islands.
Stewart has also held senior financial roles with Caltex Australia, Dairy Farmers, Multiplex and
Arthur Andersen over the past 25 years.

Stewart is a Fellow of Chartered Accountants Australia & New Zealand and a Graduate Member
of the Australian Institute of Company Directors.

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Directors’ Report



Mr Ross Shrimpton | Non-Executive Director (from 15 February 2016, Executive Director to 15
February 2016)

Qualifications | BComm (UNSW), CA

Experience | Ross is the founder and former Managing Director of Ashley Services Group. Ross
has been a Director of the Company since incorporation and has been instrumental in the overall
growth and strategic direction of Ashley Services.
He is a Chartered Accountant with over 40 years’ experience in finance and management across
a number of large international organisations such as CSR / Humes and David Brown. Ross
commenced his professional career with Deloitte Touche Tohmatsu, where he worked with a
number of major listed companies. Overall, Ross has had 20 years of relevant experience in the
labour hire and training industries.
Ross is a member of the Nominations Committee, Audit & Risk Management and Remuneration
Committees.



Mr Marc Shrimpton | Executive Director (from 1 October 2015)

Qualifications | Member of the Australian Institute of Company Directors. Dip of Management
and Leadership, Cert IV in Workplace Training and Assessment. Graduate of the Owner /
President Management program at Harvard Business School, Boston.
Experience | Marc joined Ashley Services Group in 2000 and has been the key driver of
Blackadder, a professional labour hire and recruitment services business since it was acquired in
2007.
Prior to the acquisition of Blackadder, Marc held a number of positions within Ashley Services
Group, including state manager roles in the Labour Hire and Training business and has over 16
years relevant industry experience.
Marc is a member of the Nominations Committee, Audit & Risk Management and Remuneration
Committees.

Interests in shares and options

As at the date of this report, the interests of the directors in the shares of Ashley Services Group Limited were:

Table 2: Shares Held by Directors

Names

Mr Ian Pratt
Mr Ross Shrimpton1

Mr Stewart Cummins

Mr Marc Shrimpton

Note:



Number
of Shares Held

15,060

86,046,305

600,000

1,917,423

Shareholding



0.01

57.36

0.40

1.28

This includes shares owned by Ross Shrimpton (9,857), Catherine Shrimpton (wife of Ross Shrimpton, 60,858,282), their family
companies (22,178,166) and shares purchased on behalf of Dean and Andrew Shrimpton (1,500,000 and 1,500,000 respectively). It
excludes shares held non-beneficially in trust on behalf of Holmes Management Group Pty Limited (6,024,096).

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Directors’ Report

Directorships of other listed companies

Directorships held in other listed companies by the Directors in the three years immediately before the end of
the financial year are as follows:

Table 3: Other Directorships of listed entities

Name
Mr Ian Pratt1

Mr Ross Shrimpton
Mr Stewart Cummins2

Mr Marc Shrimpton
Mr Peter Turner3
Mr Simon Crean3
Mr Vincent Fayad3

Note:

Company

Nil

Date from

Date to

Vocation Limited

1 May 2015

16 December 2015

Nil

Virtus Health Limited (ASX: VRT)

17 May 2013

Current

Nil

Greenvale Energy NL (ASX: GRV)
Medibio Limited (ASX: BPO) formerly
BioProspect Limited (ASX: BPO)
Esperance Minerals Limited (ASX: ESM)

31 October 2014

Current

29 April 2014
1 February 2013

7 April 2015
12 August 2015

1. Mr Ian Pratt was appointed a Director on 1 October 2015.
2. Mr Stewart Cummins was appointed Managing Director and CEO on 15 February 2016.
3. Messrs Turner, Crean and Fayad resigned as Directors on 1 October 2015.

a. Principal activities
The principal activities of the Group during the financial year were the provision of labour hire (including
recruitment) and training services.

There have been no significant changes in the nature of the Group’s principal activities during the financial
year.

b. Company secretary
Mr Ron Hollands held the position of Company Secretary for the entire financial year.

Ron is a qualified Chartered Accountant and holds a Bachelor of Business from University of Technology,
Sydney, an MBA from MGSM and a Graduate Diploma of Applied Corporate Governance from the Governance
Institute of Australia.

Ron has over 25 years’ experience in a range of industries including professional practice, financial services and
real estate.

c. Directors’ meetings
Details of meetings of directors (including committees of directors) held in the financial year and attendances
by each director are shown in the following table:

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Directors’ Report

Table 4: Meeting Attendance

Audit & Risk
Management
Committee
Meetings

Remuneration
Committee
Meetings

Nomination
Committee
Meetings

Held

Attended

Held

Attended

Held

Attended

Board Meetings

Held5 Attended

N/A

Mr Ian Pratt1

Mr Ross Shrimpton
Mr Marc Shrimpton2
Mr Stewart Cummins3
Mr Peter Turner4
Mr Simon Crean4
Mr Vince Fayad4

Note:

Ian Pratt was appointed a director on 1 October 2015.

1.
2. Marc Shrimpton was alternate director for Ross Shrimpton from 31 July 2014 until he became a director on 1 October 2015.
3.
4. Messrs Turner, Crean and Fayad resigned as directors on 1 October 2015.
5. Meetings held during the period the individual held office.

Stewart Cummins was appointed a director on 15 February 2016.

2. BUSINESS REVIEW

Operating results

The consolidated loss of the Group attributable to
equity holders after providing for income tax
amounted
(2015: profit of
$13,676,000).

to $69,626,000

The Group did not declare any dividends in relation
to the year ended 30 June 2016.

On 17 August 2015, the Group declared a final fully
franked dividend for the year ended 30 June 2015
of 4.1 cents per share ($6,150,000) payable to
shareholders on 25 September 2015 based on a
record date at 4 September 2015.

Review of operations

Information on the operations and
financial
position of the Group and its business strategies
and prospects is set out in the Chairman and
Managing Director’s Review.

Future developments

Likely developments
in the operations of the
consolidated entity in future financial years and
the expected results of those operations are
referred
the Chairman and
in
Managing Director’s Review.

to generally

Events subsequent to reporting date

There have been no matters or circumstances that
have arisen since the end of the year that would
have significantly affected the group’s operations
in financial year 2016, except as follows:

Subsequent to year end, the Company has revised
its
funding arrangements by establishing an
‘evergreen’ invoice discount facility with a Big 4
bank at competitive rates. The BankWest debt
facility reduced from $15 million to $10 million in
August 2016, and will be reduced to $5 million
over the next 4 months. This will provide the
Company with equivalent liquidity at comparable
cost to the previous $15 million facility. The term
of the BankWest
(still
facility
29 October 2017) and includes a similar covenant
package, albeit financial measures have been re-
set to the Company’s current business plan. Key
terms of the revised facility agreement are
outlined in Note 15 to the financial statements.

is unchanged

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Directors’ Report

and

Purchase

Agreement

the
Sale
acquisition. It is not possible at this time to
quantify the
impact of these
proceedings.

likely financial

for

Potential Litigation

The Group became aware that IMF Bentham
Limited (“IMF”) made a release to the ASX dated
17 August 2015 in which it announced that IMF
proposed
fund claims of certain ASH
shareholders against ASH with respect to alleged
misstatements
from, ASH’s
in, or omissions
prospectus dated 7 August 2014 in connection with
ASH’s acquisition of
training
organisation Integracom.

registered

the

The Group has ceased discussions with
IMF
Bentham in relation to its proposed class action.
No legal proceedings have been served.

3. OTHER INFORMATION
a. Options

There are no unissued ordinary shares that are
either under option at the date of this report or
have been exercised during the year.

During the year, the Group
issued 1,561,688
Performance Rights to senior executives under the
terms of the FY16 Long term incentive (LTI) plan. A
summary of these terms can also be found in
section 4 of this Directors’ report.

b. Non-audit services

The Group may decide to employ the auditor on
assignments additional to their statutory audit
duties where
the auditor’s expertise and
experience with the Group are important.

Grant Thornton did not provide any non-audit
services during the year ended 30 June 2016.

Details of the amounts paid to the auditor (Grant
Thornton) for audit services provided during the
in Note 4 to the financial
year are outlined
statements.

c. Auditor’s independence declaration

A copy of the auditor’s independence declaration
as required under section 307c of the Corporations
Act 2001 is set out on page 24 and forms part of
this report.

d. Environmental issues

The Group’s operations are not regulated by any
significant environmental regulation under a law of
the Commonwealth or of a state or territory.

Indemnifying officers or auditors

Insurance of officers

During the financial year, Ashley Services Group
Limited paid a premium to insure the directors,
secretaries and officers of the Group and its
Australian entities.

The liabilities insured are legal costs that may be
incurred in defending civil or criminal proceedings
that may be brought against the officers in their
capacity as officers of entities in the Group, and
any other payments arising from liabilities incurred
such
by
proceedings.

connection with

the officers

This does not include such liabilities that arise from
conduct involving a wilful breach of duty by the
officers or the improper use by the officers of their
position or of information to gain advantage for
themselves or someone else or to cause detriment
to the Group. It is not possible to apportion the
the
premium between amounts
insurance against legal costs and those relating to
other liabilities.

relating

The Group has not otherwise, during or since the
end of the financial year, except to the extent
permitted by
indemnified or agreed to
indemnify an officer or auditor of the Group or of
any related body corporate against a
liability
incurred as such an officer or auditor.

law,

Details of the premium paid in respect of insurance
policies are not disclosed as such disclosure is
prohibited under the terms of the contract.

f. Proceedings on behalf of the Company

No person has applied to the Court under section
237 of the Corporations Act 2001 for leave to bring
proceedings on behalf of the Group, or to
intervene in any proceedings to which the Group is
a party, for the purpose of taking responsibility on
behalf of the Group for all or part of those
proceedings.

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Directors’ Report

g. Rounding off of amounts

In accordance with ASIC Corporations (Rounding in
Financial
Instrument
/ Directors’ Reports)
2016/191, amounts in the financial report are
rounded off to the nearest thousand dollars unless
otherwise indicated.

4. REMUNERATION REPORT – AUDITED

The directors of Ashley Services Group Limited
present the remuneration report for Non-Executive
Directors, Executive Directors and other key
management personnel, prepared in accordance
with
the
the Corporations Act 2001 and
Corporations Regulations 2001.

The remuneration report is set out in the following
main headings:










key management personnel;
principles used to determine the nature and
amount of remuneration;
Non-Executive Director remuneration;
details of remuneration;
executive service agreements;
share-based compensation; and
additional information.

Key management personnel

The following persons acted as Directors of the
Group or as key management personnel during the
financial year:

Executive Directors:




Ross Shrimpton (to 15 February 2016)
Stewart Cummins (from 15 February 2016);
and

 Marc Shrimpton (from 1 October 2015)
Non-Executive Directors:

Ross Shrimpton (from 15 February 2016)
Peter Turner (until 1 October 2015);
Simon Crean (until 1 October 2015);
Vince Fayad (until 1 October 2015); and
Ian Pratt (from 1 October 2015).






Other key management personnel:






Stewart Cummins (Chief Operating Officer,
from 15 December 2015 to 15 February 2016)
Paul Brittain (Chief Financial Officer);
Brett O’Connor (General Manager, Training);
and

Paul Rixon (General Manager, Labour Hire).


Key management personnel
include both the
Directors and other key management personnel
named above.

Principles used to determine the nature and
amount of remuneration

that

to ensure

The objective of the Group’s executive reward
framework
for
performance is competitive and appropriate for
the results delivered. The framework seeks to
align executive reward with achievement of
strategic objectives and the creation of value for
shareholders.

reward

The Board seeks to ensure that executive reward
satisfies the following key criteria for good reward
governance practices:




competitiveness and reasonableness;
acceptability to shareholders;
performance linkage / alignment of executive
compensation;
transparency; and
capital management.




Alignment of shareholders’ interest



focuses on sustained growth in shareholder
wealth, consisting of dividends and growth in
share price, and delivering a return on assets
as well as focusing the executive on key non-
financial drivers of value; and
attracts and retains high-calibre executives.

Alignment to program participants’ interests






rewards capability and experience;
provides a clear structure
rewards; and
provides recognition for contribution to the
business.

for earning

The framework provides a mix of fixed and variable
pay, and a blend of short and long-term incentives.

The Board has established a Remuneration
Committee which provides advice on remuneration
and incentive policies and practices and specific
recommendations on remuneration packages and
other terms of employment for executives and
Directors. The Corporate Governance Statement

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Directors’ Report

provides further information on the role of this
committee.

Executive pay



through
incentives provided
long-term
participation in the Ashley Services Group
Performance Rights Share Plan.

The executive pay and reward framework has
three components:


base pay and benefits, including
superannuation;
short-term performance incentives, provided
in cash; and



these
combination of
The
executive’s total remuneration.

comprises

the

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Directors’ Report

Table 5: Key components of senior executive remuneration framework in place during the year ended 30 June 2016.

Fixed Remuneration/Base Pay

Short Term Incentive (STI)

Long Term Incentive (LTI)

Remuneration Elements



Base pay is determined by
reference to appropriate
benchmark information, taking
into account an individual’s
responsibilities, performance,
qualifications and experience,
the broad objective being to
pitch fixed remuneration at
median market levels.

Base pay is structured as a
package, which may be
delivered as a mix of cash and
other benefits, such as the
provision of a motor vehicle, at
the executive’s discretion.

‘At risk’ award opportunity for the
achievement of annual performance
objectives linked to annual financial
targets and non financial goals set by
individual.

 ‘At risk’ award opportunity for

the achievement of
performance hurdle over a
three year measurement
period.

Financial targets in line with budgets set
for the individual’s area of influence for
the financial year, coupled with non
financial key performance measures.



Two performance hurdles:
i) 50% relates to achieving 10%
compound annual growth
rate in Earnings Per Share
(EPS) with Proforma EPS for
the year ended 30 June 2015
as the base for year 1 of the
three year period.
ii) 50% relates to Total

Shareholder Return (TSR)
which measures share price
performance of ASH versus a
comparator group of 20
companies.



There are no guaranteed base
pay increases in any executives’
employment contracts.



Paid in cash within 30 days of finalisation
of Audited Annual Report.

 No value is derived unless the
Group exceeds the EPS growth
measure or TSR is 1st or 2nd
quartile versus the comparator
group.

 Vesting is 50% at the end of
year 3 and 50% at the end of
year 4, provided the 3 year
performance hurdles were met
and the executive is still
employed at the date of
vesting.

 Grant of equity awards aligns
shareholder and executive
interests, enhances retention
of key talent and focuses
executives on long term
sustainable business
performance.

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Directors’ Report

Table 6: Key features of the senior executive STI plan for FY16

Overview of the senior executive STI plan

Who participates in
the Senior Executive
STI plan?

Senior executives, including the CEO, participate in the senior executive STI plan.

How much can
executives earn?

STI opportunity for senior executives ranges from zero to 100% of target STI for significant out-
performance

Thresholds and performance conditions

Is there a threshold
level of performance
required?

Yes. There are threshold levels for EBITDA that must be met to receive an STI payment.
Achievement of the thresholds does not automatically entitle executives to an STI award. Financial
and non-financial performance measures must also be met to earn an STI payment.

What are the
performance
conditions?

Measures

Financial measures
(80% of STI opportunity)

Non-financial measures
(20% of STI opportunity)

Senior Executives

Assessed against:



Budget EBITDA for the individual’s area of
influence for the financial year.
50% payable for achievement of budget.
Remaining 50% payable on a straight line
pro rata basis for financial performance
from 100% to 120% of budget.

Assessed against:

 Achievement of individual’s performance

objectives.

 Only eligible for this potential allocation

once a financial threshold of 90% of budget
EBITDA for the individual’s area of influence
is met or exceeded.

Setting and assessing performance

Who sets and
assesses
performance?

How is the STI
delivered?

The CEO sets and assesses performance and short term incentive outcomes for senior executives
with guidance from the Remuneration Committee. The Remuneration Committee sets the targets
for CEO and assesses performance against those targets.

100% of any STI award is paid in cash within 30 days of finalisation of the audited Annual Report.

Table 7: Key features of the senior executive FY16 LTI plan

Overview of the LTI plan for FY16

Who participates in
the Senior Executive
LTI?

What was awarded
under the LTI plan in
FY16?

Senior executives, including the CEO, participate in the senior executive LTI plan.

On 25 September 2015 senior executives received an LTI award of 1,561,688 performance rights,
the vesting of which is subject to the performance condition outlined below. The number of rights
awarded was calculated by dividing the remuneration value of the award by the volume weighted
average price of ASH shares for the 5 day trading period prior to the approval to grant their award.

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Directors’ Report

Overview of the LTI plan for FY16

Performance conditions

What are the
performance
conditions?

Over what period is
performance
measured?

How are the
performance
conditions
assessed?

Performance
condition 1) EPS

Senior executive LTI awards are earned only upon achievement of the following performance
hurdles:



Earnings Per Share growth (EPS): 50% of the LTI grant
Total Shareholder Return (TSR): 50% of the LTI grant

The Board has determined that the LTI plan will be subject to the performance condition over a
three year period, commencing 1 July 2015.

Absolute EPS performance condition - measured as the compound annual underlying EPS growth
over the 3 year performance period.

The EPS target is:

EPS

Actual proforma EPS for the financial year ended
30 June 2015

10% growth FY16
10% growth FY17
10% growth FY18

EPS Target

8.7 cents

9.6 cents
10.5 cents
11.6 cents

If actual EPS for the year ended 30 June 2018 exceeds 11.6 cents per share, 50% of the performance
rights granted to each employee will vest as follows:

50% of performance rights granted to each employee vest at the end of the third year (25
September 2018)

The remaining 50% vest at the end of the fourth year (25 September 2019), provided the executive
is still employed at this vesting date.

Performance
condition 2) TSR

The TSR performance condition is a measure of ASH’s TSR compared to the TSR of a comparator
group of twenty competing and industry related companies at the beginning of the respective
performance periods.

TSR is measured by the change in value of the ASH’s cumulative TSR over the performance period
compared to the TSR performance of the comparator group over the 3 year performance period.

If actual TSR for ASH is top quartile for the 3 year performance period, 50% of the performance
rights granted to each employee will vest. If actual TSR for ASH is 2nd quartile for the 3 year
performance period 25% of the performance rights granted to each employee will vest. If actual
TSR for ASH is below 2nd quartile, none of the performance rights attributed to this performance
hurdle will vest.

Vesting of TSR related performance rights is as follows:

50% of performance rights granted to each employee vest at the end of the third year (25
September 2018)
The remaining 50% vest at the end of the fourth year (25 September 2019), provided the executive
is still employee at this vesting date.

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Directors’ Report

Overview of the LTI plan for FY16

Why were the
performance
measures chosen?

The Board considers two performance conditions to be appropriate because they ensure that a
proportion of each executive’s remuneration is linked to the generation of profits (expressed on a
per share basis) and shareholder value through the combined application of both absolute and
relative performance criteria.

In particular, the use of a relative TSR based hurdle:
•

Ensures alignment between comparative shareholder return and reward for the executive;
and
Provides a relative, external market performance measure, having regard to those
companies with which the Group competes for capital, customers and talent.

An absolute underlying EPS growth based hurdle:
•

Links executive reward to a fundamental indicator of financial performance that is directly
connected to shareholders; and
Links directly to ASH’s long term objectives of improving and maintaining earnings
performance.

•

The use of dual performance measures combines a strong external market based focus through
share price growth and dividends (TSR), and a non-market based internal measure aimed at driving
improved Company earnings results (EPS).

No, retesting of performance is not permitted.

The Remuneration Committee based on financial information (EPS measure) and share price
performance (the TSR measure).

No, there are no voting rights or entitlements to dividends on unvested awards under the LTI plan.

Is performance
subject to retesting?

Who assesses
performance against
targets?

Does the executive
receive dividends
and voting rights on
unvested awards?

Cessation of employment and change of control

What happens in the
event of a change of
control?

Upon a change of control event, the Board may determine to vest some or all of the LTI awards. In
making this determination, the Board will consider all relevant circumstances, including the
performance against the EPS measure up to the date of the change of control event and the portion
of the performance period that has expired.

What happens in the
event of cessation of
employment?

In general, unvested LTI awards are forfeited.
In limited circumstances, such as upon a senior executive’s death, serious injury or incapacity during
the performance period or other reason approved by the Board, any unvested performance shares
will vest at the end of the performance period if the relevant performance conditions have been
satisfied.

STI and LTI plans for the financial year ended 30 June 2017
The remuneration committee has approved a similar Short Term Incentive (STI) plan for the year ended 30 June
2017, based upon budget targets for that annual period.

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Directors’ Report

In light of the loss for the financial year ended 30 June 2016 and reduced share price, the Board and the
Remuneration Committee have temporarily suspended the LTI scheme. There will be no award of performance
rights to senior executives in relation to the year ended 2017.

Non-executive Director remuneration and Board performance review

c.
Non-executive Directors’ remuneration are reviewed annually and are determined by the Board based on
recommendations from the Remuneration Committee. In making its recommendations, the Remuneration
Committee takes into account remuneration paid to other non-executive Directors of comparable companies
and where necessary will seek external advice. No remuneration consultants were used during the financial
year.

In accordance with the Company’s Constitution, the Directors are entitled to receive an annual fee and for
participation in Board sub-committees. For non-executive Directors, fees are not linked to performance.

The Company does not operate equity plans for non-executive Directors.

Non-executive Directors are entitled to statutory superannuation included as part of their Directors’ fees.
There are no other schemes for retirement benefits for non-executive Directors.

No review of the Board’s performance occurred in the financial year ended 30 June 2016.

Details of remuneration

d.
Details of remuneration of the Directors and other key management personnel of Ashley Services Group are set
out in the tables on pages 19 to 21.

The key management personnel of Ashley Services Group are listed on page 13. The key management
personnel have authority and responsibility for planning, directing and controlling activities of the Group.

Remuneration and other terms of employment for the Executive Directors and other Key Management
Personnel are formalised in a service agreement. The major provisions of the agreements relating to
remuneration are set out below:

Table 8: Executive and Key Management Personnel Service Agreements

Name

Stewart Cummins

Marc Shrimpton

Paul Brittain

Brett O’Connor

Paul Rixon

Note:

Base Salary $1

Target STI %2

Target LTI %2, 3

600,000

275,000

450,000

275,000

Term of
agreement

Ongoing
Ongoing
Ongoing
Ongoing
Ongoing

Notice Period

6 months

1.
Base salary includes superannuation contributions.
2. Maximum annual award as a percentage of annual salary.
3.

This plan has been suspended for the year ended 30 June 2017.

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Directors’ Report

Table 9: 2016 – Remuneration of Key Management Personnel

2016

Name
Non-executive Directors
Ian Pratt5, 7
Ross Shrimpton
Peter Turner6
Simon Crean6
Vincent Fayad6
Executive Director
Stewart Cummins8
Marc Shrimpton

Other key management
personnel

Brett O’Connor

Paul Rixon

Paul Brittain

Total
Note:

ST1 employee benefits

Cash salary
& fees
$

Salary non-
cash
$

ST1 employee
bonus
S

PE2 benefits
Super-
annuation
$

113,014

134,962

35,388

25,114

20,548

278,259

255,692

366,415

255,692

421,192

1,906,276

10,736

9,051

3,361

2,386

1,952

22,490

19,308

28,808

136,708

LT3 employee
benefit

Total4

Performa
nce based
Remunera
tion

123,750

144,013

38,749

27,500

22,500

300,749

275,000

385,723

275,000

450,000

2,042,984

ST – Short-term.
PE – Post-employment.

1.
2.
3. LT – Long-term. Details of the long term incentive plan are included in the Directors’ report, pages 15 to 18. Management have
assessed the probability of the performance hurdles for the 2015 and 2016 plans being met as nil and no expense has been
recognised in the profit and loss account for the year ended 30 June 2016.

4. Amounts included in the above table include amounts paid to key management from all entities.
5.
6.
7.
8.

During the year tax advisory fees have also been paid to Trood Pratt & Co (Company in which Ian Pratt is a Partner).
Ceased as Directors 1 October 2015 and included to that date.
Commenced as Director 1 October 2015 and inclusive from that date.
Stewart Cummins commenced as Chief Operating Officer on 14 December 2015 and moved to Executive Director on 15 February
2016. These amounts represent remuneration from the date he commenced with the Group, rather than the date he was
appointed Director.

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Directors’ Report

Table 10: 2015 – Remuneration of Key Management Personnel

2015

Name
Non-executive Directors

Peter Turner

Simon Crean
Vincent Fayad5
Executive Director

Ross Shrimpton

Marc Shrimpton

Andrew Shrimpton

Other key management
personnel

Brett O’Connor

Paul Rixon
Paul Brittain6
John Knights7
Total
Note:

Cash salary
& fees
$

ST1 employee benefits
Salary non-
cash
$

ST1 employee
bonus
S

PE2 benefits
Super-
annuation
$

IPO
Bonus8
$

132,751

93,116

74,655

263,165

243,789

231,547

384,994

241,254

245,709

54,001

120,001

74,998

10,753

67,824

2,707

100,000

137,501

17,474

71,924

137,501

400,000

12,414

8,846

7,092

17,725

18,058

19,506

17,958

19,242

10,957

4,652

1,964,982

28,227

239,748

872,708

136,450

LT3
employee
benefit

Performan
ce based
Remunera
tion

Total4

265,166

176,960

81,747

280,890

261,847

332,336

640,454

487,396

256,666

458,653

3,242,115

1.
2.
3.

ST – Short-term.
PE – Post-employment.
LT – Long-term. Details of the long term incentive plan are included in the Directors report, pages 15 to 18. Management have assessed
the probability of the performance hurdle for the 2015 plan being met as nil and no expense has been recognised in the profit and loss
account for the year ended 30 June 2015.

4. Amounts included in the above table include amounts paid to key management from all entities.
5.

During the year financial advisory fees have also been paid to PKF Lawler Corporate Finance (Company in which Vincent Fayad is a
Director). These include payments for the period to 30 November 2014, during which Vince was both a Director and the Interim Chief
Financial Officer.
Commenced employment and included as KMP from 1 December 2014.
Resigned 31 August 2014.
Mr Turner and Mr Crean received payments of $120,001 and $74,998 respectively for services rendered as part of the IPO process.
John Knights, Andrew Shrimpton, Brett O’Connor and Paul Rixon received bonuses at the time of the IPO for past services rendered.

6.
7.
8.

Other transactions with key management personnel

Information on share-based payments and other transactions with key management personnel is set out on the
previous pages.

Shares held by key management personnel

e.
The number of ordinary shares in the Company during the 2016 reporting period held by each of the Group’s
key management personnel, including their related parties are set out below:

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Directors’ Report

Table 11: Shares held by Key Management Personnel

Name
Ian Pratt2
Ross Shrimpton1
Stewart Cummins2
Marc Shrimpton

Brett O’Connor

Paul Rixon

Paul Brittain

Total
Note:

Balance at start of the year
15,060

Shares Purchased
-

Balance at end of the year
15,060

85,248,940

1,688,000

41,416
41,416

18,000

87,052,832

797,365

600,000

229,423

6,024
-

1,632,812

86,046,305

600,000

1,917,423

47,440
41,416

18,000

88,685,644

This includes shares owned directly by Ross Shrimpton (9,857), Catherine Shrimpton (wife of Ross Shrimpton, 60,858,282), their family
companies (22,178,166) and shares purchased on behalf of Andrew (1,500,000) and Dean Shrimpton (1,500,000). It excludes shares
held non-beneficially in trust on behalf of Holmes Management Group Pty Limited (6,024,096).
Ian Pratt was appointed a director on 1 October 2015. Stewart Cummins was appointed a director on 15 February 2016.

Executive service agreements

On appointment to the Board, all non-executive Directors sign a letter of appointment with the Company. The
letter summarises the terms including compensation, relevant to the office of Director.

All contracts with executives may be terminated by either party with a notice period as outlined in Table 8.
Executives are typically restricted for twelve months after termination from conducting or engaging in
competing businesses and from solicitation of customers and employees of the Company.

Share-based compensation

Senior Executive Share Plan

The Company established the Performance Rights Share Plan on 31 July 2014. The Performance Rights Share
Plan is intended to provide incentives to attract motivate and retain key executives whose present and
potential contributions are important to the success of the Group by offering them an opportunity to
participate in ownership of the Company. The Performance Rights Share Plan is administered by the Board in
its discretion. The terms and conditions of the Performance Rights Share Plan are summarised below.

During the financial year the Board issued 1,561,688 performance rights (2015: 380,787).

The number of Performance Rights awarded to executive directors and Key Management Personnel is set out
below:

Table 12: Performance Rights held by Executive Directors and Key Management Personnel

Name
Ross Shrimpton

Stewart Cummins

Marc Shrimpton

Brett O’Connor

Paul Rixon

Paul Brittain

Total
Note:

Balance at start of the year
-

Performance Rights Granted1
-

Balance at end of the year
-

49,699

120,482

82,831

73,755

326,767

157,143

428,571
261,905

428,571

1,276,190

206,842

549,053

344,736

502,326

1,602,957

1. Rights granted 25 September 2015 at 52.5 cents per right, corresponding to the weighted average price of ASH shares for the 5 days

prior to the grant date.

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Directors’ Report

The offer of rights to Shares under the Employee Performance Rights Plan did not exceed 5% of the total
number of issued shares in that class.

Consideration for the Shares is provided in the form of services to or for the benefit of the Company and as
such performance conditions may be attached to any rights under the Employee Performance Rights Plan. An
eligible employee who has contracted with Ashley Services (under the Employee Performance Rights Plan) for
the right to Shares in the Company (Participant), holds those rights on the following terms:






disposal of rights is not permitted without the permission of the Board;
any new issue of shares to existing shareholders will only apply to the Participant if the rights to shares
have vested in the Participant and the Participant has become a shareholder in the Company at the
relevant record date (as defined in the ASX Listing Rules);
in the event there is a bonus issue to Ashley Services shareholders, the number of shares a Participant is
entitled to under the Employee Performance Rights Plan will be increased by the number of Shares the
Participant would have received had they been a shareholder before the record date (as defined in the
ASX Listing Rules) for the bonus issue; and
in the event of a reconstruction of the issued capital of the Company prior to a Participant’s rights under
the Employee Performance Rights Plan vesting in the Participant, the rights and Shares to which the
Participant is entitled will be reconstructed in accordance with ASX Listing Rules.

Rights under the Employee Performance Rights Plan will vest in a Participant at a determined date subject to
the Participant’s continued employment with Ashley Services and the satisfaction of any performance
conditions and other terms and conditions imposed by the Board. Shares allotted under the plan are held
under the following conditions:




shares issued under the plan will rank equally to shares issued in Ashley Services; and
compliance with Ashley Services’ Share Trading Policy is required.

Management have assessed the probability of the performance hurdles for the 2015 and 2016 plans being met
as nil and no expense has been recognised in the profit and loss account for the year ended 30 June 2016.

End of audited Remuneration Report.

Signed in accordance with a resolution of the Board of Directors made pursuant to section 298(2) of the
Corporations Act 2001

Ian Pratt

Chairman
Sydney, 30th August 2016

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Level 17, 383 Kent Street
Sydney NSW 2000

Correspondence to:
Locked Bag Q800
QVB Post Office
Sydney NSW 1230

T +61 2 8297 2400
F +61 2 9299 4445
E info.nsw@au.gt.com
W www.grantthornton.com.au

Auditor’s Independence Declaration
To the Directors of Ashley Services Group Limited

In accordance with the requirements of section 307C of the Corporations Act 2001, as lead
auditor for the audit of Ashley Services Group Limited for the year ended 30 June 2016, I
declare that, to the best of my knowledge and belief, there have been:

no contraventions of the auditor independence requirements of the Corporations Act
2001 in relation to the audit; and

no contraventions of any applicable code of professional conduct in relation to the
audit.

GRANT THORNTON AUDIT PTY LTD
Chartered Accountants

C F Farley
Partner - Audit & Assurance

Sydney, 30 August 2016

Grant Thornton Audit Pty Ltd ACN 130 913 594
a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389

‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the
context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm
is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and
are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its
Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited.

Liability limited by a scheme approved under Professional Standards Legislation. Liability is limited in those States where a current
scheme applies.

Corporate Governance Statement

A Corporate Governance Statement has been
adopted by the Board on 30August 2016 and can be
found at

http://www.ashleyservicesgroup.com.au/investor-
centre/corporate-governance/

The Board has adopted a suite of governance
materials which are available
in the Corporate
Governance section of the Company’s website
(www.ashleyservicesgroup.com.au), under “Investor
Centre”.
The governance materials have been
prepared and adopted on the basis that corporate
governance procedures can add to the performance
of the Company and the creation of shareholder
value, and help to engender the confidence of the
investment market.

Diversity

To date, the board or a committee have not set
measurable objectives for achieving gender diversity
and to assess annually both the objectives and the
company’s progress in achieving them.

The Company provides the following information on
the proportion of women employees in the whole

organisation, women in Senior Executive positions
and women on the Board of the Company.

Directors & Senior
Management
Corporate & Administration
Labour Hire
Recruitment
Training
Total

Female Male

23%
84%
68%
79%
59%
63%

77%
16%
32%
21%
41%
37%

During the financial year ending 30 June 2016 the
Company submitted its first report to the Workplace
Gender Equality Agency.

The performance of the Board and Senior Executives
in the 2016 financial year has been reviewed against
both quantitative and qualitative measures and
Directors and Senior Executives provided feedback
on the discharge of their responsibilities.

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Directors’ Declaration

In the opinion of the Directors of Ashley Services Group Limited:

The consolidated financial statements and notes of Ashley Services Group Limited are in
accordance with the Corporations Act 2001, including:
i. Giving a true and fair view of its financial position as at 30 June 2016 and of its

performance for the financial year ended on that date; and

ii. Complying with Australian Accounting Standards (including the Australian Accounting

Interpretations) and the Corporations Regulations 2001; and

There are reasonable grounds to believe that Ashley Services Group Limited will be able to
pay its debts as and when they become due and payable.

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
2016.

3. Note 1 confirms that the consolidated financial statements also comply with International Financial

Reporting Standards.

Signed in accordance with a resolution of the Directors.

..................................................................
Ian Pratt
Chairman

Sydney, 30th August 2016

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Level 17, 383 Kent Street
Sydney NSW 2000

Correspondence to:
Locked Bag Q800
QVB Post Office
Sydney NSW 1230

T +61 2 8297 2400
F +61 2 9299 4445
E info.nsw@au.gt.com
W www.grantthornton.com.au

Independent Auditor’s Report
To the Members of Ashley Services Group Limited

Report on the financial report
We have audited the accompanying financial report of Ashley Services Group Limited (the
“Company”), which comprises the consolidated statement of financial position as at 30 June
2016, the consolidated statement of profit or loss and other comprehensive income,
consolidated statement of changes in equity and consolidated statement of cash flows for
the year then ended, notes comprising a summary of significant accounting policies and
other explanatory information and the directors’ declaration of the consolidated entity
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. The Directors’ responsibility also includes such internal control as
the Directors determine is necessary to enable the preparation of the financial report that
gives a true and fair view and is free from material misstatement, whether due to fraud or
error. The Directors also state, in the notes to the financial report, in accordance with
Accounting Standard AASB 101 Presentation of Financial Statements, the financial
statements 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. Those standards
require us to 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.

Grant Thornton Audit Pty Ltd ACN 130 913 594
a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389

Liability limited by a scheme approved under Professional Standards Legislation. Liability is limited in those States where a current
scheme applies.

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
Company’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 Company’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 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:

the financial report of Ashley Services Group Limited is in accordance with the
Corporations Act 2001, including:

giving a true and fair view of the consolidated entity’s financial position as at 30
June 2016 and of its performance for the year ended on that date; and

complying with Australian Accounting Standards and the Corporations
Regulations 2001; and

the financial report also complies with International Financial Reporting Standards as
disclosed in the notes to the financial statements.

Report on the remuneration report
We have audited the remuneration report included in pages 13 to 23 of the directors’ report
for the year ended 30 June 2016. 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 Australian Auditing Standards.

Auditor’s opinion on the remuneration report
In our opinion, the remuneration report of Ashley Services Group Limited for the year
ended 30 June 2016, complies with section 300A of the Corporations Act 2001.

GRANT THORNTON AUDIT PTY LTD
Chartered Accountants

C F Farley
Partner - Audit & Assurance

Sydney, 30 August 2016

Consolidated Statement of Profit or Loss and Other Comprehensive Income
For the financial year ended 30 June 2016

Note

30 Jun 2016
$000

30 Jun 2015
$000

Revenue

Other income

Employment costs

Depreciation and amortisation expense

Finance costs

Other expenses

IPO and acquisition related costs

Impairment of intangibles

Deferred vendor earn-out adjustment

(Loss)/profit before income tax from continuing operations

Income tax credit/(expense)

(Loss)/profit for the year from continuing operations

Loss for the year from discontinued operations

(Loss)/profit for the year

Other comprehensive income

Total comprehensive (loss)/income for the year

Basic earnings per share (cents) from continuing operations

Diluted earnings per share (cents) from continuing operations

Basic earnings per share (cents) from discontinued operations

Diluted earnings per share (cents) from discontinued operations

Basic earnings per share (cents) Total

Diluted earnings per share (cents) Total

The accompanying notes form part of these financial statements.

280,832

1,077

(274,065)

(3,470)

(612)

(15,169)

(65,966)

3,482

(73,891)

6,913

(66,978)

(2,648)

(69,626)

(44.65)

(1.77)

(46.42)

304,083

689

(273,804)

(2,535)

(934)

(10,507)

(4,387)

7,790

20,395

(6,151)

14,244

(568)

13,676

10.06

10.05

(0.40)

9.66

9.65

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Consolidated Statement of Financial Position
As at 30 June 2016

Note

30 Jun 2016
$000

30 Jun 2015
$000

Assets

Current assets

Cash and cash equivalents

Trade and other receivables

Current tax receivable

Other assets

Total current assets

Non-current assets

Property, plant and equipment

Deferred tax assets

Intangible assets

Total non-current assets

Total assets

Liabilities

Current liabilities

Trade and other payables

Borrowings

Other liabilities

Provisions

Total current liabilities

Non-current liabilities

Other liabilities

Deferred tax liabilities

Provisions

Total non-current liabilities

Total liabilities

Net assets

Equity

Share capital

Common control reserve

(Accumulated losses)/Retained earnings

Total Equity

11, 12

1,704

27,925

2,838

930

33,397

6,064

7,590

9,847

23,501

56,898

18,982

102

942

3,792

23,818

3,700

2,280

5,980

29,798

27,100

149,929

(57,687)

(65,142)

27,100

12,580

37,737

1,974

767

53,058

5,222

3,873

76,216

85,311

138,369

22,300

226

2,485

25,011

4,660

5,551

271

10,482

35,493

102,876

149,929

(57,687)

10,634

102,876

The accompanying notes form part of these financial statements.

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Consolidated Statement of Changes in Equity
For the financial year ended 30 June 2016

For the year ended 30 June 2016

Balance at 1 July 2015

Loss for the period

Other comprehensive income for the period

Total comprehensive loss for the period
Transactions with owners in their capacity as
owners:
Dividends paid

Share Capital
$000

Common
Control Reserve
$000

149,929

(57,687)

Balance at 30 June 2016

149,929

(57,687)

For the year ended 30 June 2015

Balance at 1 July 2014

Profit for the period

Other comprehensive income for the period

Total comprehensive income for the period
Transactions with owners in their capacity as
owners:
Dividends paid

Common control business combination

Shares issued to acquire Integracom
Shares issued through initial public offering,
net of IPO costs
Balance at 30 June 2015

57,687

10,000

82,239

(57,687)

Retained
Earnings
$000

10,634

(69,626)

Total
$000

102,876

(69,626)

(6,150)

(65,142)

(6,150)

27,100

31,068

13,676

31,071

13,676

(34,110)

10,000

82,239

149,929

(57,687)

10,634

102,876

The accompanying notes form part of these financial statements.

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Consolidated Statement of Cash Flows
For the financial year ended 30 June 2016

Note

30 Jun 2016
$000

30 Jun 2015
$000

Operating activities

Receipts from customers

Payments to suppliers and employees

Payments in relation to IPO and acquisition related costs

Interest received

Interest paid

Income taxes received/(paid)

Net cash from continuing operations

Net cash (used in) discontinued operations

Net cash (used in)/from operating activities

Investing activities

Payments for property, plant and equipment in continuing operations

Payments
operations

for property, plant and equipment

in discontinued

Proceeds from sale of property, plant and equipment

Payments for intellectual property

Payments for businesses acquired net of cash acquired

Net cash used in investing activities

Financing activities

(Repayment of) external borrowings in continuing operations

(Repayment of) external borrowings in discontinued operations

Proceeds from related party borrowings

Dividend paid

Net proceeds from issue of shares

Net cash (used in)/from financing activities

Net increase / (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of the period

Cash and cash equivalents at end of the period

The accompanying notes form part of these financial statements.

320,134

336,847

(320,655)

(320,725)

(340)

1,617

793

(1,020)

(227)

(3,576)

383

(257)

(7,612)

5,060

(547)

4,513

(2,565)

(1,507)

(278)

(1,301)

(307)

(4,374)

(89)

(35)

(47)

165

(1,768)

(32,788)

(35,945)

(5,301)

(518)

487

(6,151)

(34,110)

(6,275)

(10,876)

12,580

1,704

82,239

42,797

11,365

1,215

12,580

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Table of Contents for the Notes to the Financial Statements

10.

11.

12.

13.

14.

15.

16.

17.

18.

19.

20.

21.

22.

23.

24.

25.

26.

27.

28.

29.

30.

31.

32.

33.

ACCOUNTING POLICIES -------------------------------------------------------------------------------------------------------------------- 35

REVENUE AND OTHER INCOME ---------------------------------------------------------------------------------------------------------- 43

EXPENSES -------------------------------------------------------------------------------------------------------------------------------------- 43

AUDITOR’S REMUNERATION ------------------------------------------------------------------------------------------------------------- 44

INCOME TAX EXPENSE --------------------------------------------------------------------------------------------------------------------- 44

KEY MANAGEMENT PERSONNEL DISCLOSURES -------------------------------------------------------------------------------------- 45

CASH AND CASH EQUIVALENTS ---------------------------------------------------------------------------------------------------------- 45

TRADE AND OTHER RECEIVABLES ------------------------------------------------------------------------------------------------------- 45

OTHER ASSETS -------------------------------------------------------------------------------------------------------------------------------- 46

PROPERTY PLANT AND EQUIPMENT ---------------------------------------------------------------------------------------------------- 46

INTANGIBLE ASSETS ------------------------------------------------------------------------------------------------------------------------- 48

IMPAIRMENT --------------------------------------------------------------------------------------------------------------------------------- 49

TAX BALANCES ------------------------------------------------------------------------------------------------------------------------------- 51

TRADE AND OTHER PAYABLES------------------------------------------------------------------------------------------------------------ 52

BORROWINGS -------------------------------------------------------------------------------------------------------------------------------- 52

OTHER LIABILITIES --------------------------------------------------------------------------------------------------------------------------- 54

PROVISIONS ----------------------------------------------------------------------------------------------------------------------------------- 54

SHARE CAPITAL------------------------------------------------------------------------------------------------------------------------------- 55

COMMON CONTROL RESERVE ----------------------------------------------------------------------------------------------------------- 55

EARNINGS PER SHARE ---------------------------------------------------------------------------------------------------------------------- 56

SEGMENT INFORMATION ----------------------------------------------------------------------------------------------------------------- 57

DISCONTINUED OPERATION ------------------------------------------------------------------------------------------------------------ 58

CASH FLOW INFORMATION --------------------------------------------------------------------------------------------------------------- 59

BUSINESS COMBINATION ----------------------------------------------------------------------------------------------------------------- 60

CONTROLLED ENTITIES --------------------------------------------------------------------------------------------------------------------- 61

PARENT ENTITY DISCLOSURES ------------------------------------------------------------------------------------------------------------ 64

RELATED PARTY TRANSACTIONS --------------------------------------------------------------------------------------------------------- 65

SECURED AND CONTINGENT LIABILITIES ---------------------------------------------------------------------------------------------- 65

FINANCIAL INSTRUMENTS ----------------------------------------------------------------------------------------------------------------- 65

OPERATING LEASE COMMITMENTS ---------------------------------------------------------------------------------------------------- 68

EVENTS AFTER THE REPORTING DATE -------------------------------------------------------------------------------------------------- 69

EMPLOYEE SHARE RIGHTS PLAN --------------------------------------------------------------------------------------------------------- 69

DIVIDENDS ------------------------------------------------------------------------------------------------------------------------------------ 70

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Notes to the Financial Statements

ACCOUNTING POLICIES

General information

The financial statements for the financial year ended
30 June 2016 cover Ashley Services Group Limited
and its controlled entities (“Ashley Services” or the
Ashley Services Group
“Group”).
is a public
the Australian Securities
listed on
Company
Exchange
the symbol “ASH”),
(trading under
incorporated and domiciled in Australia.

The following
is a summary of the material
accounting policies adopted by the Group in the
financial
preparation
statements. The accounting policies have been
consistently applied unless otherwise stated.

consolidated

the

Going concern

The consolidated financial statements have been
prepared on a going concern basis.

Adoption of new and revised Accounting
Standards

The Group adopted all of the new, revised or
amended Accounting Standards and Interpretations
issued by the Australian Accounting Standards Board
(“AASB”) that are mandatory for the current
reporting period. The adoption of these Accounting
Standards and Interpretations did not have any
significant impact on the financial performance or
position of the Group.

Statement of compliance

f. New Accounting Standard and Interpretations

The consolidated financial statements are general
purpose financial statements which have been
prepared in accordance with the Corporations Act
2001 and Australian Accounting Standards (including
Australian Accounting Interpretations) adopted by
the Australian Accounting Standards Board. The
consolidated financial statements of the Group also
comply with
International Financial Reporting
Standards (‘IFRS’) adopted by the International
Accounting Standards Board. The Group is a for-
profit entity for the purposes of preparing the
financial statements.

consolidated

statements were
financial
The
authorised for issue by the Board of Directors on
30August 2016.

Basis of preparation

The consolidated financial statements have been
prepared on an accruals basis and are based on
historical costs, except for the measurement at fair
value of selected non-current assets, financial assets
and financial liabilities as disclosed in this note. Cost
is based on the fair values of the consideration given
in exchange for assets. All amounts are presented in
Australian dollars, unless otherwise noted.

In accordance with ASIC Corporations (Rounding in
Financial / Directors’ Reports) Instrument 2016/191,
amounts in the financial report are rounded off to
the nearest thousand dollars unless otherwise
indicated.

not yet adopted

new

standards

Certain
and
accounting
interpretations have been published that are not
mandatory for 30 June 2016 reporting periods and
have not been early adopted by the Group. The
Group’s assessment of the impact of these new
standards and interpretations is set out below.

There are no other standards that are not yet
effective and that are expected to have a material
in the current or future
impact on the entity
reporting periods and on
future
foreseeable
transactions.

AASB 9: Financial Instruments (December 2014)

AASB 9
introduces new requirements for the
classification and measurement of financial assets
and liabilities. These requirements improve and
simplify
for classification and
measurement of financial assets compared with the
requirements of AASB 139. The main changes are:

the approach

Financial assets that are debt instruments
will be classified based on: (i) the objective
of the entity’s business model for managing
the
assets;
the
characteristics of the contractual cash
flows.

financial

and

(ii)

b) Allows an irrevocable election on initial
recognition to present gains and losses on
investments in equity instruments that are
not held for trading in other comprehensive
loss).
income (instead of

in profit or

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Notes to the Financial Statements

for particular

‘fair value through other
income’ measurement
simple debt

Dividends in respect of these investments
that are a return on investment can be
recognised in profit or loss and there is no
impairment or recycling on disposal of the
instrument.
Introduces a
comprehensive
category
instruments.
Financial assets can be designated and
measured at fair value through profit or
if doing so
loss at
eliminates or
reduces a
measurement or recognition inconsistency
that would arise from measuring assets or
liabilities, or recognising the gains and
losses on them, on different bases.

initial recognition
significantly

e) Where the fair value option is used for
financial liabilities the change in fair value is
to be accounted for as follows:

the change attributable to changes in credit
risk are presented in Other Comprehensive
Income (‘OCI’); and
the remaining change is presented in profit or
loss.



If this approach creates or enlarges an accounting
mismatch in the profit or loss, the effect of the
changes in credit risk are also presented in profit or
loss. Otherwise, the following requirements have
generally been carried forward unchanged from
AASB 139 into AASB 9:



classification and measurement of financial
liabilities; and
derecognition requirements for financial assets
and liabilities.

This standard and its consequential amendments are
applicable to annual reporting periods beginning on
or after 1 January 2018 (i.e. the Group’s 30 June
2019 year-end). Management’s assessment of these
amendments is that they will have no material
impact on the Group’s transactions or balances
recognised in the financial statements.

AASB 15: Revenue from Contracts with Customers

AASB 15 replaces AASB 118: Revenue, AASB 111:
Construction Contracts and some revenue-related
Interpretations:






the basis

Establishes a new revenue recognition model;
changes
for deciding whether
revenue is to be recognised over time or at a
point in time;
provides new and more detailed guidance on
element
specific
arrangements, variable pricing, rights of return,
warranties and licensing); and
expands and
revenue.

improves disclosures about

(e.g., multiple

topics

AASB 15 is applicable to annual reporting periods
beginning on or after 1 January 2018 (i.e. the
Group’s 30 June 2019 year-end). Management’s
assessment of these amendments is that they will
have no material impact on the Group’s transactions
or balances recognised in the financial statements.

AASB 16: Leases

AASB 16 replaces AASB 117: Leases, was issued in
February 2016 and is effective for periods beginning
on or after 1 January 2019. AASB 16:



replaces AASB 117 Leases and some lease-
related Interpretations;
requires all leases to be accounted for ‘on-
balance sheet’ by lessees, other than short-
term and low value asset leases;
provides new guidance on the application of
the definition of lease and on sale and lease
back accounting;
largely retains the existing lessor accounting
requirements in AASB 117; and
requires new and different disclosures about
leases.

AASB 16 is applicable to annual reporting periods
beginning on or after 1 January 2019 (i.e. the
Group’s 30 June 2020 year-end). Management have
yet to undertake a detailed assessment of the
impact of AASB 16. However, based on the entity’s
preliminary assessment, the likely impact on the first
time adoption of the Standard for the year ending
30 June 2020 includes:



there will be an increase in lease assets and
financial liabilities recognised on the balance
sheet;
the reported equity will reduce as the carrying
lease assets will reduce more
amount of

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Notes to the Financial Statements



quickly than the carrying amount of lease
liabilities;
EBIT in the statement of profit or loss and other
comprehensive income will be higher as the
implicit interest in lease payments for former
off balance sheet leases will be presented as
part of finance costs rather than being included
in operating expenses; and
operating cash outflows will be lower and
financing cash flows will be higher in the
statement of
as principal
repayments on all lease liabilities will now be
included
in financing activities rather than
operating activities.

flows

cash

g. Business combinations

Business combinations occur where an acquirer
obtains control over one or more businesses and
result in the consolidation of its assets and liabilities.

A business combination is accounted for by applying
the acquisition method, unless it is a combination
involving entities or businesses under common
control.
The business combination will be
accounted for from the date that control is attained,
whereby the fair value of the identifiable assets
acquired and
contingent
liabilities) assumed are recognised (subject to
certain limited exceptions).

(including

liabilities

from

contingent

When measuring the consideration transferred in
the business combination, any asset or liability
resulting
consideration
arrangement is also included. Subsequent to initial
recognition, contingent consideration classified as
equity
its subsequent
settlement
for within equity.
Contingent consideration classified as an asset or
liability is remeasured in each reporting period to
fair value, recognising any change to fair value in
profit or loss, unless the change in value can be
identified as existing at acquisition date.

is not remeasured and
is accounted

All transaction costs incurred in relation to the
business combination are recognised as expenses in
the statement of profit or
loss and other
comprehensive income when incurred.

The acquisition of a business may result in the
recognition of goodwill or a gain from a bargain
purchase.

On 1 July 2014, the group acquired a number of
related entities. This business combination was
treated as a common control transaction, as the
conditions
in AASB 3: Business Combinations
(Appendix B) applied, in that all businesses were
controlled by the same party before and after the
transaction, and the control was not considered
transitory.

Basis of consolidation

The Group financial statements consolidate those of
Ashley Services Group Limited and all of
its
subsidiaries as of 30 June 2016. Ashley Services
Group Limited controls a subsidiary if it is exposed,
or has
its
involvement with the subsidiary and has the ability
to affect those returns through its power over the
subsidiary. All subsidiaries have a reporting date of
30 June.

to variable

returns

rights,

from

All transactions and balances between Group
companies are eliminated on
consolidation,
including unrealised gains and losses on transactions
between Group companies.
Where unrealised
losses on intra-group asset sales are reversed on
consolidation, the underlying asset is also tested for
impairment from a group perspective. Amounts
reported in the financial statements of subsidiaries
have been adjusted where necessary to ensure
consistency with the accounting policies adopted by
the Group.

Profit or loss and other comprehensive income of
subsidiaries acquired or disposed of during the year
are
the effective date of
acquisition, or up to the effective date of disposal, as
applicable.

recognised

from

Non-controlling
interests, presented as part of
equity, represent the portion of a subsidiary’s profit
or loss and net assets that is not held by the Group.
The Group attributes total comprehensive income or
loss of subsidiaries between the owners of the
parent and the non-controlling interests based on
their respective ownership interests.

Revenue and other income

Revenue is measured at the fair value of the
consideration received or receivable after taking into
account any discounts allowed. All revenue is stated

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Notes to the Financial Statements

net of the amount of GST. Below are the specific
accounting policies adopted by the Group:

to the interests of the business is recognised in the
financial statements.

Training revenue

Revenue from training courses is recognised in
proportion to the stage of completion of the training
course.

Where work has been undertaken, and has not yet
been billed or claimed from the relevant sponsoring
is
authority, a “Work
recognised within
after
“Other
adjusting for an estimate of potentially unsuccessful
claims.

in Progress” balance

receivables”

Labour hire

Labour hire revenue is recognised upon delivery of
the service to the customers or in the instance of
placement fees at the time the employee has been
placed.

Interest revenue

Interest revenue is recognised using the effective
interest method, which for floating rate financial
assets is the rate inherent in the instrument.

Dividend revenue

Dividend revenue is recognised when the right to
receive a dividend has been established, usually on
declaration of the dividend / distribution.

Other income

Other income primarily includes administration costs
recovered. Revenue is recognised in line with the
costs incurred.

Intangible assets

Goodwill

Goodwill is initially recognised as the difference
between the fair value of consideration, and the fair
value of net assets acquired less any accumulated
impairment losses.

The value of goodwill is recognised on acquisition of
the business.

The Group adopts the full goodwill method. The fair
value of the interests in the business is determined
using valuation
the
maximum use of market
information where
available. Under this method, goodwill attributable

techniques which make

Goodwill is tested for impairment annually and is
allocated to the Group’s cash-generating units or
group of cash-generating units, which represent the
lowest level at which goodwill is monitored but
where such level is not larger than an operating
segment. Gains and losses on the disposal of equity
include the carrying amount of goodwill related to
the entity sold.

Changes in the ownership interest in a subsidiary are
accounted for as equity transactions and do not
affect the carrying amounts of goodwill.

Other intangibles

Intangibles acquired by the group are stated at cost
impairment
less accumulated amortisation and
losses. Amortisation is charged to the profit or loss
on a straight line basis over the estimated useful life.

Estimated useful life of intangibles is as follows:

Customer relationships

7 years

Licenses

5 years

Intellectual property

Course material

5 - 7 years

Intangible assets, such as Brands, which are deemed
to have an indefinite useful life are not amortised,
but are assessed for impairment annually, within the
they are attributed. Where
CGU
impairment is recognised, it is recorded in the profit
or loss in the period the impairment is identified.

to which

Income tax

The income tax expense (income) for the year
comprises current income tax expense (income) and
deferred tax expense (income).

Current income tax expense charged to profit or loss
is the tax payable on taxable income. Current tax
liabilities (assets) are therefore measured at the
amounts expected to be paid to (recovered from)
the relevant taxation authority.

Deferred income tax expense reflects movements in
deferred tax asset and deferred tax liability balances
during the year as well as unused tax losses.

Current and deferred income tax expense (income)
is charged or credited directly to equity instead of

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Notes to the Financial Statements

profit or loss when the tax relates to items that are
credited or charged directly to equity.

Except for business combinations, no deferred
income tax is recognised from the initial recognition
of an asset or liability where there is no effect on
accounting or taxable profit or loss.

Deferred tax assets and liabilities are calculated at
the tax rates that are expected to apply to the
period when the asset is realised or the liability is
settled and their measurement also reflects the
manner in which management expects to recover or
settle the carrying amount of the related asset or
liability.

relating

tax assets

Deferred
temporary
differences and unused tax losses are recognised
only to the extent that it is probable that future
taxable profit will be available against which the
benefits of the deferred tax asset can be utilised.

Where temporary differences exist in relation to
investments in subsidiaries, branches, associates,
and joint ventures, deferred tax assets and liabilities
are not recognised where the timing of the reversal
of the temporary differences can be controlled and
it is not probable that the reversal will occur in the
foreseeable future.

Current tax assets and liabilities are offset where a
legally enforceable right of set-off exists and it is
intended that net settlement or simultaneous
realisation and settlement of the respective asset
and liability will occur. Deferred tax assets and
liabilities are offset where: (a) a legally enforceable
right of set-off exists; and (b) the deferred tax assets
and liabilities relate to income taxes levied by the
same taxation authority on either the same taxable
entity or different taxable entities where
is
intended that net settlement or simultaneous
realisation and settlement of the respective asset
and liability will occur in future periods in which
significant amounts of deferred tax assets or
liabilities are expected to be recovered or settled.

Tax consolidation

Ashley Services Group Limited and its wholly owned
Australian subsidiaries have formed an income tax
consolidated
consolidation
legislation. Each entity in the group recognises its
own current and deferred tax assets and liabilities.

group under

tax

Such taxes are measured using the ‘standalone
Current tax
taxpayer’ approach to allocation.
liabilities (assets) and deferred tax assets arising
from unused tax losses and tax credits in the
subsidiaries are immediately transferred to head
entity. The group notified the Australian Taxation
Office
tax
consolidation group to apply from 1 July 2003. The
income tax consolidated group has entered a tax
funding arrangement whereby each company in the
Group contributes to the income tax payable by the
Group in proportion to their contributions to the
Group’s taxable income.

formed an

it has

income

that

Differences between the amounts of net tax assets
and liabilities derecognised and the net amounts
recognised pursuant to the funding arrangement are
recognised as either a contribution by, or
distribution, to the head entity.

Cash and cash equivalents

Cash and cash equivalents include cash on hand,
deposits held at call with banks, other short term
highly liquid investments with original maturities of
three months or less, and bank overdrafts. Bank
overdrafts are shown with short term borrowings in
current liabilities on the balance sheet.

Trade and other receivables

Trade and other receivables include amounts due
in the
from customers for services performed
ordinary course of business. Receivables expected
to be collected within 12 months of the end of the
reporting period are classified as current assets. All
other receivables are classified as non-current
assets.

Trade and other receivables are initially recognised
at
fair value and subsequently measured at
amortised cost using the effective interest method,
less any provision for impairment.

The recoverability of trade receivables is reviewed
on an ongoing basis.
Amounts which are
determined not to be recoverable are written off by
reducing the carrying amount to its recoverable
amount, the difference is charged to the statement
of profit or loss and other comprehensive income in
that period.

A provision for impairment of trade recoverable is
recognised when there is objective evidence that the

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Notes to the Financial Statements

group is unable to collect part or all of the amounts
due. Factors such as previous trading relationship,
financial position, and probability of recoverability
are considered when determining the extent the
debtor is impaired.

Plant and equipment

Each class of plant and equipment is carried at cost,
less where applicable, any accumulated depreciation
and impairment losses.

Plant and equipment is stated at historical cost less
accumulated depreciation and any accumulated
impairment losses.

The depreciable amount of
is
depreciated on a straight line basis, over the useful
asset’s life to the Group commencing from the time
the assets are held ready for use.

fixed assets

The annual depreciation rates used for each class of
depreciable assets are:

Class of fixed assets


Computer equipment
Office equipment
Furniture and fittings

Motor vehicles
Training equipment

Leasehold improvements

Depreciation rate

20%
20%
20%

18.75%
33.33%

20% - 40%

lives are determined by reference

In the case of leasehold improvements, expected
useful
to
comparable owned assets or over the term of the
lease, if shorter.

The carrying amount of plant and equipment is
reviewed annually at the end of the reporting period
by the Directors to ensure it is not in excess of the
recoverable amount of these assets.

The recoverable amount is assessed on the basis of
the expected net cash flows that will be received
from the asset’s employment and subsequent
disposal. The expected net cash flows have been
discounted to their present values in determining
recoverable amounts.

An asset’s carrying amount
is written down
immediately to its recoverable amount if the asset’s
carrying amount
its estimated
recoverable amount.

is greater than

Gains and losses on disposals are determined by
comparing proceeds with carrying amount. These
gains or losses are recognised immediately in profit
or loss.

Trade and other payables

Trade and other payables represent the liabilities for
goods and services received by the Group that
remain unpaid at the end of the reporting period.
The balance is recognised as a current liability with
the amounts normally paid within 30 days of
recognition of the liability.

Employee benefits

Provision is made for the Group’s liability for the
employee benefits arising from services rendered by
employees to the end of the reporting period.
Employee benefits that are expected to be settled
within one year have been measured at the amounts
expected to be paid when the liability is settled.
Employee benefits payable later than one year have
been measured at the present value of the
estimated future cash outflows to be made for those
benefits. In determining the liability, consideration
is given to employee wage
increases and the
probability that the employee may not satisfy
flows are
vesting requirements.
discounted using market yields on HQ corporate
bonds with terms to maturity that match the
expected timing of cash flows.

Those cash

Provisions

Provisions are recognised when the Group has a
legal or constructive obligation, as a result of past
events, for which it is probable that an outflow of
economic benefits will result and that outflow can
be reliably measured. Provisions are measured at
the best estimate of the amounts required to settle
the obligation at the end of the reporting period.

Borrowings

Loans and borrowings are initially recognised at the
fair value of the consideration received, net of
transaction costs. They are subsequently measured
at amortised cost using the effective
interest
method.

Fees paid on the establishment of loan facilities are
recognised as transaction costs of the loan to the
extent that it is probable that some or all of the
facility will be drawn down.

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Notes to the Financial Statements

Impairment of assets

At the end of each reporting period, the Group
assesses whether there is any indication that an
asset may be impaired.

including dividends

The assessment will include considering external
internal sources of
sources of information and
information
from
received
subsidiaries, deemed to be out of pre-acquisition
profits. If such an indication exists, an impairment
test is carried out on the asset by comparing the
recoverable amount of the asset, being the higher of
the asset’s fair value less costs to sell, and its value
in use, to the asset’s carrying amount. Any excess of
the asset’s carrying value over
its recoverable
amount is recognised immediately in profit or loss,
unless the asset is carried at a revalued amount.
Any impairment loss of a revalued asset is treated as
a revaluation decrease.

Where it is not possible to estimate the recoverable
amount of an individual asset, the Group estimates
the recoverable amount of the cash-generating unit
to which the asset belongs.

Impairment testing
goodwill and intangible assets with indefinite lives.

is performed annually

for

Comparative figures

required

When
Standards,
comparative figures have been adjusted to conform
to changes in presentation for the current financial
year.

Accounting

GST

Revenues, expenses and assets are recognised net of
the amount of GST, except where the amount of GST
incurred is not recoverable from the ATO.

Receivables and payables are stated inclusive of the
amount of GST receivable or payable. The net
amount of GST recoverable from, or payable to, the
ATO is included with other receivables or payables in
the balance sheet.

Cash flows are presented on a gross basis. The GST
components of cash flows arising from investing or
financing activities which are recoverable from, or
payable to, the ATO are presented as operating cash
flows
in receipts from customers or
included
payments to suppliers.

Significant management judgement in applying
accounting policies

the

financial

preparing

When
statements,
management undertakes a number of judgements,
estimates and assumptions about the recognition
and measurement of assets, liabilities, income and
expenses.

Significant management judgement

are

following

significant management
The
judgements in applying the accounting policies of
the Group that have the most significant effect on
the financial statements.

Determination of Cash Generating Units
purpose of impairment reviews

for

Determination of
the Cash Generating Units
(“CGUs”) for purpose of impairment reviews is a key
judgement made by management. Management
has undertaken a formal assessment of what
constitutes the CGUs, by identifying the smallest
identifiable group of assets that generates cash
inflows that are largely independent of the cash
inflows from other assets or group of assets, being
Training and Labour Hire.

Assessment of the IMF claim against the Group

Management has formally considered the potential
class action claim that may be brought against the
Group. Management’s view is that the potential
claim would be without substance, and likelihood of
any unfavourable material outcome resulting from
this claim is considered remote. Based on this
assessment, neither a provision, nor disclosure as a
contingent liability are considered necessary. (Refer
Note 28).

Recognition of deferred tax assets

The extent to which deferred tax assets can be
is based on an assessment of the
recognised
probability of the Group’s future taxable income
against which the deferred tax assets can be utilised.

Estimation uncertainty

Information about estimates and assumptions that
have the most significant effect on recognition and
measurement of assets,
income and
expenses is provided below. Actual results may be
substantially different.

liabilities,

Impairment

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

being achieved to be remote, and therefore a
provision has not been recognised in relation to this.

w. Dividends

A liability is recognised for the amount of any
dividend declared, being appropriately authorised
and no longer at the discretion of the entity, on or
before the end of the financial year but not
distributed at balance date.

Earnings per share

Basic earnings per share

Basic earnings per share is calculated by dividing the
profit attributable to equity holders of the Company,
after deducting any costs of servicing equity other
than ordinary shares, by the weighted average
number of ordinary shares outstanding during the
in
financial year, adjusted for bonus elements
ordinary shares issued during the year.

Diluted earnings per share

Diluted earnings per share adjusts the figures used
in determination of basic earnings per share to take
into account the after income tax effect of interest
and other financing costs associated with dilutive
potential ordinary shares and the weighted average
number of shares assumed to have been issued for
no consideration in relation to dilutive potential
ordinary shares.

Notes to the Financial Statements

In assessing impairment, management estimates the
recoverable amount of each asset or cash-
generating unit based on expected future cash flows
and uses an
interest rate to discount them.
Estimation uncertainty relates to assumptions about
future operating results and the determination of a
suitable discount rate. Both future operating results
and discount rates are discussed in Note 12. In
2016, the Group recognised an impairment loss on
goodwill and other intangible assets (see Note 12).

Useful lives of depreciable assets

Management reviews its estimate of the useful lives
of depreciable assets at each reporting date, based
on the expected utility of the assets. Uncertainties
in these estimates relate to technical obsolescence
that may change the utility of certain software and
IT equipment.

Business combinations

uses

valuation

techniques

in
Management
determining the fair values of the various elements
of a business combination (see Note 24). The fair
value of contingent consideration is dependent on
the outcome of many variables that affect future
profitability (see Note 29). The fair value of acquired
intangibles
to a number of
assumptions. This involves developing estimates
and assumptions consistent with how market
participants would price
identified asset.
Management bases its assumptions on observable
or benchmark data as far as possible but this is not
always available. In that case management uses the
best information available.

is also subject

the

Long service leave provisions

is given

leave, consideration

In determining the provision for employees’ long
service
the
probability an employee may not satisfy vesting
requirements. In doing this, management considers
the likelihood of employees reaching a qualifying
period of service and adjust the valuation for these
estimated probabilities.

Long term incentive plan

the

determining

senior
In
management’s
plan,
consideration is given to the probability the required
“earnings per share” performance requirement

provision
term

for
incentive

long

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Notes to the Financial Statements

REVENUE AND OTHER INCOME

Operating activities:
Labour hire revenue
Training revenue from continuing operations*

Other income:
Interest received
Sundry income

*Refer to note 22 for details of discontinued operations.

EXPENSES

2016
$000

248,612
32,220
280,832

37
1,040
1,077

2015
$000

261,038
43,045
304,083

381
318
689

Profit before income tax from continuing operations includes the following specific expenses:

Finance costs
Interest expense

Bank fees

Depreciation

Motor vehicles

Office equipment

Leasehold improvements

Amortisation

Customer contracts and relationships – amortisation

Customer contracts and relationships – impairment
Intellectual property

Course material

Licences

Impairment

Impairment of intangible assets

2016
$000

511

101

612

172

831

692

2015
$000

628

306

934

131

660

233

1,695

1,024

129

-
118

1,528

1,775

286

476
220

471

1,511

65,966

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Notes to the Financial Statements

AUDITOR’S REMUNERATION

Auditor of the parent entity – Grant Thornton

Audit and review of financial reports under the Corporations Act 2001

Financial due diligence services related to acquisitions

2016
$

232,000

2015
$

206,000

30,000

Total Remuneration

232,000

236,000

Other entities
In addition to the above, the related entities detailed in Note 25 have also paid
fees to the auditor, Grant Thornton and these are as follows:
Audit or review of financial reports under the Corporations Act 2001

45,000

95,000

INCOME TAX EXPENSE

Components of tax expense for continuing operations

Current tax expense

Deferred tax – origination and reversal of temporary differences

(Over)/under provision of tax in prior year

Income tax (credit)/expense

2016
$000
1,135

(5,615)

(2,433)

(6,913)

Reconciliation of prima facie tax on loss from ordinary activities to income tax expense

Net (loss)/profit before tax from continuing operations

Prima facie tax (credit)/expense on net profit from ordinary activities before
income tax at 30% (2015: 30%)

Add / (less):

Tax effect of:

– Entertainment

– Other

– Deferred vendor earn-out adjustment

– Impairment of intangibles

– Acquired intangibles

– (Over)/under provision of tax in prior year

Income tax (benefit)/expense

The tax rate used in the above reconciliation is the corporate tax rate of 30% payable by Australian corporate
entities on taxable profits under Australian tax law. There has been no change in the corporate tax rate when
compared with the previous reporting period.

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

2015
$000
3,103

3,029

6,151

2015
$000
20,395

2016
$000
(73,891)

(22,167)

6,118

(1,044)

19,790

(1,070)

(2,433)

(6,913)

6,151

Notes to the Financial Statements

KEY MANAGEMENT PERSONNEL DISCLOSURES

Key management personnel compensation for the year was as follows

Short-term employee benefits

Post-employment benefits
IPO related share based payments

Long-term employee benefits
Total

2016
$

2015
$

1,906,276

2,232,957

136,708
-

-
2,042,984

136,450
872,708

-
3,242,115

Individual director and key management personnel disclosures

Detailed remuneration disclosures are included in the Director’s Report. The relevant information can be
found in the Remuneration section of the report on page 19 to 21, Tables 8 to 10.

CASH AND CASH EQUIVALENTS

Cash on hand

Cash at bank

TRADE AND OTHER RECEIVABLES

Current

Trade receivables

Allowance for impairment of trade receivables

Other receivables

2016
$000
9

1,695

1,704

2016
$000

20,505

(1,055)

8,475

27,925

2015
$000
10

12,570

12,580

2015
$000

24,330

(803)

14,210

37,737

The ageing of trade receivables (before allowing for impairment of receivables) at year end is detailed
below

Current

Past due 0 – 30 days (not considered impaired)

Past due 31 – 60 days (not considered impaired)

Past due 60+ days (not considered impaired)

Past due 60+ days (considered impaired (b))

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

2016
$000
14,469

2,884

683

1,414

1,055

20,505

2015
$000
16,199

4,859

1,247

1,222

803

24,330

Notes to the Financial Statements

The movement in the allowance for doubtful accounts in respect of trade receivables is detailed below

Balance at beginning of year

Increase through business combinations

Increase/(decrease) in allowance recognised in profit or loss

Amounts written-off

Balance at end of year

OTHER ASSETS

Current

Prepayments

Deposits

10. PROPERTY PLANT AND EQUIPMENT

Motor vehicles

Cost

Accumulated depreciation

Office equipment

Cost

Accumulated depreciation

Leasehold improvements

Cost

Accumulated depreciation

Capital works in progress

Cost

Accumulated depreciation

Total property, plant and equipment

2016
$000
803

849

(597)

1,055

2016
$000

593

337

930

2016
$000

514

(306)

208

7,213

(3,870)

3,343

3,334

(1,239)

2,095

418

6,064

2015
$000
868

257

(128)

(194)

803

2015
$000

492

275

767

2015
$000

663

(300)

363

4,922

(2,719)

2,203

2,193

(303)

1,890

767

5,222

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Notes to the Financial Statements

a. Movement in carrying amounts of property, plant and equipment

2016
Balance at 1 July 2015

Additions

Disposals

Depreciation expense – continuing operations

Depreciation expense – discontinued operations

Balance at 30 June 2016

2015
Balance at 1 July 2014

Additions

Acquisition through business combination

Disposals

Depreciation expense

Balance at 30 June 2015

Motor
vehicles
$000
363

Office
equipment
$000
2,203

Leasehold
improvements
$000
1,890

Capital Work
In Progress
$000
767

2,125

(29)

(172)

(2)

208

(40)

(831)

(114)

3,343

1,019

(14)

(692)

(108)

2,095

(349)

418

Motor
vehicles
$000
365

Office
equipment
$000
1,314

Leasehold
improvements
$000
1,029

Capital Work
In Progress
$000
172

265

(136)

(131)

363

688

904

(24)

(680)

2,203

271

851

(261)

1,890

595

767

Total
$000
5,222

2,843

(83)

(1,695)

(224)

6,064

Total
$000
2,880

1,554

2,020

(160)

(1,072)

5,222

The Group’s property, plant and equipment are encumbered by a fixed and floating charge as security for the
group’s overdraft facility.

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Notes to the Financial Statements

11.

INTANGIBLE ASSETS

Goodwill

Cost

Reclassification to intellectual property

Impairment (note 12)

Net carrying value

Customer relationships/Licences

Cost

Impairment (note 12)

Accumulated amortisation

Net carrying value

Brand names

Cost

Impairment (note 12)

Reclassification from goodwill

Accumulated amortisation

Net carrying value

Intellectual property

Cost

Impairment (note 12)

Reclassification from goodwill

Accumulated amortisation

Net carrying value

Total intangible assets

2016
$000

66,256

(1,000)

(62,474)

2,782

2,062

(918)

(520)

624

3,798

(2,041)

842

2,599

7,471

(1,009)

158

(2,778)

3,842

9,847

Intangible assets – detailed reconciliation

2016
Balance at 1 July 2015

Capitalised course materials

Acquired through business combinations

Amortisation – continuing operations

Amortisation – discontinued operations
Impairment charge1
Balance at 30 June 2016
Note:

Customer
Relationships
and Licences2
$000
1,195

(129)

(442)

624

Goodwill
$000
66,174

(918)

(62,474)

2,782

Brand
Names3
$000
3,798

842

(2,041)

2,599

Intellectual
Property4
$000
5,049

1,301

158

(1,646)

(11)

(1,009)

3,842

1. See Note 12c.
2. Customer relationships have a remaining useful life of 5 years.
3. Brand names have an indefinite life and are not amortised.
4. Remaining useful life for Intellectual property is up to 5 years.

2015
$000

66,174

2,062

(476)

(391)

1,195

3,798

6,170

(1,121)

5,049

76,216

Total
$000
76,216

1,301

(1,775)

(11)

(65,966)

9,847

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Notes to the Financial Statements

2015
Balance at 1 July 2014

Purchased

Acquired through business combinations

Amortisation
Impairment charge1
Balance at 30 June 2015
Note:

Customer
Relationships
and Licences
$000
1,515

Brand Names
$000
-

Intellectual
Property
$000
257

500

(344)

(476)

1,195

3,798

1,268

4,215

(691)

5,049

Goodwill
$000
19,743

46,431

66,174

Total
$000
21,515

1,768

54,444

(1,035)

(476)

76,216

1. Relates to impairment of relationship with a major customer acquired through the Concept acquisition.

12.

IMPAIRMENT

Impairment

The consolidated entity tests whether goodwill and other intangible assets have suffered any impairment on an
annual basis, or more frequently, if required. As a result of the decrease in profitability within the Group,
detailed impairment reviews were performed at both 31 December 2015 and 30 June 2016.

The recoverable amounts of the cash-generating units (“CGUs”) were determined based on value-in-use
calculations, covering detailed forecasts for two years, followed by an extrapolation of expected cash flows for
the units’ remaining useful lives using the growth rates determined by management. The present value of the
expected cash flows of each segment is determined by applying a suitable discount rate.

Long term growth rates after the forecast period and discount rates used were as follows:

Training

Labour Hire

Terminal Growth rates

Pre tax discount rates

30 Jun 2016
2%

30 Jun 2015
2%

30 Jun 2016
16.9%

30 Jun 2015
16.9%

18.7%

The growth rates reflect management’s view of longer-term average growth rates for the respective sectors.
The discount rates reflect appropriate adjustments relating to market risk and specific risk factors of each unit.

Cash flow assumptions for the detailed forecast

Training division

The recoverable amount of the Training division has been determined based on a value in use calculation. That
calculation uses cash flow projections based on financial forecasts approved by management and the Board
covering a two-year period (FY17 to FY18), and a pre-tax discount rate of 16.9 per cent. Cash flows beyond that
period have been extrapolated using a 2 per cent growth rate. This growth rate is below the Reserve Bank of
Australia’s long-term average growth rate for Australia.

Management’s key assumption is that revenues for the Training division will grow 10%-12% per annum for
FY17 and FY18, as a result of an increase in student numbers combined with a diversification of revenue
streams, and stabilise thereafter.

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Notes to the Financial Statements

Labour Hire division

The recoverable amount of the Labour Hire division has been determined based on a value in use calculation.
That calculation uses cash flow projections based on financial forecasts approved by management for FY17 and
a pre-tax discount rate of 18.7 per cent. Cash flows beyond that period have been held constant, reflecting the
competitive nature of the industry.

Management’s key assumption is that revenues for the Labour Hire division will increase 8% in FY17, reflecting
the net impact of recent customer wins and losses. EBITDA margin is forecast at 1.9% (before corporate
overhead allocations).

Impairment charges

Management has also run various sensitivity scenarios, primarily reviewing sensitivity of outcomes to FY17
EBITDA forecasts, long term growth rates and discount rates. In respect of reasonably possible changes in the
key assumptions, major sensitivities are summarised as follows:

Change in VIU

Sustainable EBITDA margin; +/- $0.5 million each CGU

1% increase or decrease in long term growth rate

1% increase or decrease in pre tax discount rate

Labour hire CGU
$’M

+/-2.4

+/-0.7

+/-1.0

Training CGU
$’M
+/-3.0

+/-1.5

+/-1.7

As a result of the base case and scenario analysis as at 31 December 2015, an impairment charge totalling
$63.3 million was recorded in the first six months result. This was revised again at 30 June 2016 and a further
impairment of $2.7 million was recognised.

The total impairment charge of $66.0 million for the financial year ended 30 June 2016 was, split by CGU as
follows:

Training

Labour Hire

Total impairment charge for the year ended 30 June 2016

Goodwill
$’000
52,361

Other Intangibles
$’000
3,492

10,113

62,474

3,492

Total
$’000
55,853

10,113

65,966

Movements in the net carrying amount of goodwill and other intangibles are presented in note 11a.

The amount of goodwill, brand names and other intangibles remaining by CGU and subject to future
impairment testing is as follows:

2016

Training

Labour Hire

Total

Goodwill
$’000

2,782

Customer
Relationships/
Licences
$’000
-

624

Brand Names
$’000

Intellectual
Property
$’000

2,599

3,842

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Total
$’000

6,441

3,406

9,847

Notes to the Financial Statements

2015

Training

Labour Hire

Total

13. TAX BALANCES

Current assets

Income tax receivable

Non-current assets

Deferred tax assets (a)

Current tax liabilities

Income tax payable

Non-current liabilities

Deferred tax liabilities (a)

Goodwill
$’000

53,249

12,895

66,174

Customer
Relationships/
Licences
$’000
442

753

1,195

Brand Names
$’000

Intellectual
Property
$’000

3,798

5,049

2016
$000

2,838

7,590

Total
$’000

62,568

13,648

76,216

2015
$000

1,974

3,873

3,700

5,551

a. Deferred tax assets and liabilities

Deferred taxes arising from temporary differences and unused tax losses can be summarised as follows:

Balance at
Beginning of
the Year
$000

Recognised in
Other
comprehensive
income
$000

Recognised in
Business
Combination
$000

Recognised in
Profit & Loss
$000

Balance at
End of the
Year
$000

2016

Current assets

Trade, other receivables and other
assets

Non-current assets

Intangible assets

Property, plant and equipment

Current liabilities

Trade and other payables

Provision

2016 tax loss carried forward

Deferred tax asset

Total

(3,959)

(1,362)

2,805

827

(1,678)

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

1,610

(2,349)

(47)

549

(11)

753

1,538

1,176

5,615

(860)

3,558

2,365

1,176

3,890

Notes to the Financial Statements

2015

Current assets

Trade, other receivables and other
assets

Non-current assets

Intangible assets

Property, plant and equipment

Current liabilities

Trade and other payables

Provision

Total

14. TRADE AND OTHER PAYABLES

Current

Trade payables

Accrued expenses

GST payable

Sundry creditors

Balance at
Beginning of
the Year
$000

Recognised in
Other
comprehensive
income
$000

Recognised in
Business
Combination
$000

Recognised in
Profit & Loss
$000

Balance at
End of the
Year
$000

(1,264)

(461)

3,733

542

2,561

(2,695)

(3,959)

(1,264)

363

(928)

231

(1,362)

2,805

827

(1,210)

(3,029)

(1,678)

2016
$000

2,661

5,821

2,000

8,500

18,982

2015
$000

3,133

2,836

3,988

12,343

22,300

The average credit period on purchases of certain products is 30 days. No interest is charged on trade
payables. The group has financial risk management policies in place to ensure that all payables are paid within
the credit time frame.

15. BORROWINGS

Current

Secured liabilities

Bank overdraft (a)

Term facility (b)

Finance Leases (c)

2016
$000

102

2015
$000

226

Bank overdraft facility

Comprises a $15 million working capital facility with BankWest Limited, who have fixed and floating charges
over the Group’s assets.

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Notes to the Financial Statements

Term facility

At 30 June 2015, the Group had an $8 million term debt facility with BankWest Limited to finance potential
acquisition opportunities. This facility was closed during the financial year ended 30 June 2016.

Finance Leases

The Group has a small number of finance leases on company use motor vehicles. The asset carrying value of
these vehicles is $84,525 (2015: $156,572) and is included in Note 10.

Group credit facility

Total facilities at reporting date

Bank overdraft

Term facility

Used at reporting date

Bank overdraft

Unused at reporting date

Bank overdraft

Term facility

2016
$000

15,000

n/a

15,000

2015
$000

15,000

8,000

23,000

15,000

8,000

23,000

Restructuring of Group credit facilities subsequent to the balance date

Subsequent to year end, the Company has revised its funding arrangements by establishing an ‘evergreen’
invoice discount facility with a Big 4 bank at competitive rates. The BankWest debt facility reduced from $15
million to $10 million in August 2016 and will be reduced to $5 million over the next 4 months. This will
provide the Company with equivalent liquidity at comparable cost to the previous $15 million facility. The term
of the BankWest facility is unchanged (still 29 October 2017) and includes a similar covenant package, albeit
financial measures have been re-set to the Company’s current business plan.

Key terms of the revised facility agreement are outlined below:

Key terms

Facility limit

Expiration date for facility

Security

$10M from 17 August 2016 to 30 September 2016.
$8M from 1 October 2016 to 30 November 2016
$5M from 1 December 2016 to expiration

29 October 2017

The Bank has fixed and floating charges over the Group’s assets

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Notes to the Financial Statements

16. OTHER LIABILITIES

Current

Vendor earn-out liability (a)

Non-Current

Vendor earn-out liability (a)

Vendor earn-out liability

2016
$000

942

2015
$000

4,660

The Vendor earn-out liability comprises the fair value of estimated consideration payments payable to vendors
in relation to the acquisition of SILK on 30 April 2015. The liability is payable in September 2016, subject to
certain conditions.

During the financial year, the fair value of the Vendor earn-out liabilities in relation to the Integracom, Cantillon
and SILK acquisitions were re-assessed. This resulted in a $3.5 million reduction in the total Vendor earn-out
liability from $4.7 million to $1.2 million. $0.3 million was paid to the vendors of SILK during February 2016, in
accordance with the provisions of that Sale and Purchase Agreement.

17. PROVISIONS

Current

Employee benefits (a)

Provision for discontinued operation (b)

Total

Non-current

Employee benefits (a)

Provision for discontinued operation (b)

Total

a. Reconciliation of employee provisions

Opening balance

Add: acquired through business combination

Less: leave taken during the year

Add: leave provided for during the year

Closing balance

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

2016
$000

3,021

771

3,792

540

1,740

2,280

2016
$000

2,756

(557)

1,362

3,561

2015
$000

2,485

271

2015
$000

1,829

178

(788)

1,537

2,756

Notes to the Financial Statements

b. Provision for discontinued operation

During the final quarter of the financial year, the Board approved an orderly exit from the International student
business in Perth, Western Australia. This business was originally acquired through the Cantillon acquisition in
September 2014. The Group is fulfilling its obligations for the remaining students and working with third
parties to sub-let three separate properties associated with the business. However, at the time of this report,
no sub-leases are in place and the business has been disclosed as a discontinued operation.

There was no discontinued provision at 30 June 2015.The $2.5 million provision was provided for during year
ended 30 June 2016 and represents the discounted cost of future surplus lease obligations ($2.275 million),
together with other exit costs, primarily potential asset write offs and redundancies ($0.226 million).

18. SHARE CAPITAL

The Group does not have any share options on issue as at the date of this report. Details of share capital of the
group are as follows:

150,000,000 (Jun-15: 150,000,000) fully paid ordinary shares

Performance rights

30 Jun 2016
$000
149,929
30 Jun 2016
Number of rights
1,942,475

30 Jun 2015
$000
149,929
30 Jun 2015
Number of rights
380,787

Ordinary shares confer on their holders the right to participate in dividends declared by the Board. Ordinary
shares confer on their holders an entitlement to vote at any general meeting of the Company.

At 30 June 2015, the Group had issued 380,787 Performance rights. During the current year the Group issued
1,561,688 Performance Rights to employees. These Performance Rights were granted on the 25th September
2015 with a fair value of 52.5 cents per right. The terms of the Performance Plan have been outlined in the
Directors’ Report (Table 7) within this Annual Report.

The plan has been suspended for the financial year ending 30 June 2017.

19. COMMON CONTROL RESERVE

The common control reserve has arisen following the adoption of the pooling of interests method used to
account for the 1 July 2014 acquisition of the following entities:







ADV Services Pty Limited;
Ashley Institute Holdings Pty Limited;
TBRC Holdings Pty Limited;
Tracmin Pty Limited; and
Australian Institute of Vocational Development Pty Limited.

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Notes to the Financial Statements

20. EARNINGS PER SHARE

Net (loss)/profit after tax
Weighted number of ordinary shares outstanding during the year used in
calculating basic earnings per share (EPS)
Weighted number of ordinary shares outstanding during the year used in
calculating diluted earnings per share (EPS)

Basic earnings per share (cents) from continuing operations
Diluted earnings per share (cents) from continuing operations
Basic earnings per share (cents) from discontinued operations

Diluted earnings per share (cents) from discontinued operations
Basic earnings per share (cents) Total
Diluted earnings per share (cents) Total

2016
$000
(69,626)

2015
$000
13,676

150,000,000

141,618,754

150,000,000

141,747,074

(44.65)
(44.65)
(1.77)

(1.77)
(46.42)
(46.42)

10.06
10.05
(0.40)

(0.40)
9.66
9.65

As the Group has made a loss in the current year, the impact of the Performance Rights is anti-dilutive, and as
such has not been included in the calculation of the diluted EPS. There are 1,942,475 Performance Rights not
included in the calculation.

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Notes to the Financial Statements

21. SEGMENT INFORMATION

Management currently identifies the following segments:

Labour Hire; and
Training.



These segments are monitored by the Group’s management and by the Board and strategic decisions are made
based on these segment results.

2016

Revenue
From external customers

Segment revenue
Other income
Employment cost

Depreciation and amortisation expense
Finance costs

Other expenses
Impairment of intangibles
Deferred vendor earn-out adjustment
Segment Profit/(loss)

Unallocated items

(Loss) before income tax
Income tax benefit
Total comprehensive (loss) for the year from continuing operations

2015

Revenue
From external customers
Segment revenue
Other Income
Employment costs
Depreciation and amortisation expense
Finance costs
Other expenses
Deferred vendor earn-out adjustment
Segment profit/(loss)
Unallocated items
IPO and acquisition related costs

Profit before income tax
Income tax expense
Total comprehensive income for the year from continuing
operations

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Labour Hire
$000

248,612

248,612
1,034
(241,065)

(353)
(10)

(3,663)
(10,113)
-

(5,558)

Training
$000

32,220

32,220
5
(30,110)

(3,015)
(92)

(8,753)
(55,853)
3,482

(62,116)

Total
$000

280,832

280,832
1,039
(271,175)

(3,368)
(102)

(12,416)
(65,966)
3,482

(67,674)
(6,217)

(73,891)
6,913
(66,978)

Labour Hire
$000

Training
$000

Total
$000

261,038
261,038
446
(247,927)
(559)
(66)
(4,045)
-
8,887

43,045
43,045
(166)
(24,449)
(1,899)
(581)
(5,267)
7,790
18,473

304,083
304,083
280
(272,376)
(2,458)
(647)
(9,312)
7,790
27,360
(2,578)
(4,387)
20,395
(6,151)

14,244

Notes to the Financial Statements

No segments assets or liabilities are disclosed because there is no measure of segments assets or liabilities
regularly reported to Management and to the Board.

a. Information about major customers
Included in revenues from external customers are revenues of $118.0 million (2015: $117.4 million) which
arose from sales to 3 (2015: 3) of the Group’s customers whose individual revenue exceeds 10% of total
revenue in the Labour Hire segment. Sales to these 3 customers were $47.9 million, $42.5 million and $27.6
million respectively (2015: $47.3 million, $42.9 million and $27.2 million respectively).

There are no customers whose individual revenue exceeded 10% of total revenue in the Training segment in
either financial year.

22. DISCONTINUED OPERATION

During the final quarter of the financial year, the Board approved an orderly exit from the International student
business in Perth, Western Australia. This business was originally acquired through the Cantillon acquisition in
September 2014. The Group is fulfilling its obligations for the remaining students and working with third
parties to sub-let three separate properties associated with the business. The $2.6 million after tax loss
represents the trading loss incurred during the financial year ($0.9 million after tax), together with the costs of
termination ($1.7 million), which primarily represents the discounted cost of the future lease obligations:

Discontinued operation
Revenue

Other income
Employment cost
Depreciation and amortisation expense

Finance costs
Other expenses

Surplus lease provision
Other exit costs
(Loss) before income tax

Income tax credit
(Loss) after tax
Total comprehensive (loss) for the year

2016
$000

868

51
(803)
(236)

(3)
(1,149)

(2,275)
(236)
(3,783)

1,135
(2,648)
(2,648)

2015
$000

617

(1)
(789)
(48)

(11)
(579)

-
-
(811)

243
(568)
(568)

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Notes to the Financial Statements

Cash flows from the discontinued operation were:

Discontinued operation
Receipts from customers
Payments to suppliers and employees

Interest paid
Income taxes received/(paid)

Net cash (used in) operating activities
Payments for property, plant and equipment
Net cash (used in) investing activities

(Repayment) of external borrowings
Net cash (used in) financing activities

Net (decrease) in cash and cash equivalents

2016
$000

1,171
(2,187)

(3)
(1)

(1,020)
(278)
(278)

(35)
(35)

(1,333)

2015
$000

800
(1,552

(9)
214

(547)
(47)
(47)

(518)
(518)

(1,112)

23. CASH FLOW INFORMATION

Reconciliation of cash flow from operations to (loss)/profit after income tax

(Loss)/Profit for the year

Cash flows excluded from profit attributable to operating
activities

Adjustments for non-cash items:
- Depreciation and amortisation expense

- Bad and doubtful debts

- Loss on disposal of fixed assets

- Gain on reassessment of deferred consideration liabilities
- Impairment of intangibles

- IPO bonuses issued as shares

Changes in assets and liabilities

- Decrease /(increase) in trade and other receivables

- Increase in other assets

- (Increase)/decrease in deferred tax asset

- (Decrease)/increase in trade and other payables

- Increase in provisions

- Increase in current tax receivables

- (Decrease)/ increase in deferred tax liabilities

Net cash (used in)/from operating activities

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

2016
$000
(69,626)

3,706

849

(3,482)
65,966

8,950

(163)

(3,716)

(3,318)

3,316

(864)

(1,851)

(227)

2015
$000
13,676

2,583

(128)

(7,790)
-

811

(6,226)

(215)

847

2,525

748

(4,465)

2,128

4,513

Notes to the Financial Statements

24. BUSINESS COMBINATION

a. Current year acquisitions

The Group made no acquisitions during the financial year ended 30 June 2016.

The Group finalised the purchase price allocation for SILK during the financial year ended 30 June 2016. $1
million of $4,047,100 original goodwill was reallocated to brand names ($842,000) and Intellectual Property
($158,000).

b. Prior year acquisitions

The Group acquired 100% of the issued share capital and voting rights of Integracom, Cantillon and SILK during
the prior financial year. All these companies were Australian-based entities that operate within the training
sector. The objective of each acquisition was to:

Integracom - increase the Group’s market share in providing training in the telecommunications industry;
Cantillon - establish a foot print in the overseas student sector; and
SILK - increase the Group’s market share in providing training in the hospitality industry.

Details of the business combinations are as follows:

2015
Cash

Equity instruments
Fair value of contingent consideration

Total purchase consideration
Cash consideration
Cash acquired

Net cash outflow on purchase of subsidiaries
Assets & liabilities acquired
Cash and cash equivalents

Trade and other receivables
Property, plant and equipment

Trade and other payables
Provisions
Borrowings

Deferred tax liability
Brand names

Integracom
$000

30,108

10,000
8,648

48,756
(30,108)
90

(30,018)

1,222
1,533

(535)
(108)
(748)

(900)
3,700

Cantillon
$000

1,546

-
76

1,622
(1,546)
26

(1,520)

307
300

(289)
-
(553)

(364)
98

SILK*
$000

1,500

-
2,775

4,275
(1,500)
250

(1,250)

250

122
187

(261)
(70)
-

-
-

Total
$000

33,154

10,000
11,499

54,653
(33,154)
366

(32,788)

366

1,651
2,020

(1,085)
(178)
(1,301)

(1,264)
3,798

Intellectual property
4,215
Net identifiable assets
8,222
Goodwill on consolidation
46,431
* The Group had not yet finalised the purchase price allocation at 30 June 2015. This was subsequently finalised
in the 31 December 2015 interim financial report and $1 million of original goodwill was reallocated to brand
names ($842,000) and Intellectual Property ($158,000).

3,000
7,254
41,502

1,215
740
882

-
228
4,047

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Notes to the Financial Statements

Consideration transferred

Acquisition-related costs amounting to $0.75m were not included as part of consideration transferred and
were recognised as an expense in the consolidated statement of profit or loss and other comprehensive
income for the financial year ended 30 June 2015.

Identifiable net assets

The fair value accounting for the Integracom and Cantillon acquisitions were finalised in the year ended 30 June
2015. The fair value of accounting for the SILK acquisition was finalised in the year ended 30 June 2016.

The fair value of intangible assets acquired as part of the business combinations amounted to:





Integracom - $6.7m;
Cantillon - $1.3m; and
SILK - $1.0m.

Goodwill

Goodwill on all three acquisitions was allocated to the Training division cash-generating unit at 30 June 2015.

Contribution of acquisitions to the Group’s 2015 result

The contribution to Group revenues and net profits (after tax) for each of the above business combinations is
as follows:

2015

Integracom
Cantillon
SILK

Revenue
$000

10,153
617
766

Profits
$000

2,125
(568)
257

25. CONTROLLED ENTITIES

Set out below are the controlled entities of Ashley Services Group Limited:

Country of
incorporation

2016 percentage
owned
%

2015 percentage
owned
%

Action Arndell Park Pty Limited

Action Workforce NSW Pty Limited
Action Botany Pty Limited
Action James NSW Pty Limited

Action James (Qld) Pty Limited
Action James WCF Pty Limited

Action James Mascot Pty Limited
ADV1 Pty Limited
Action James Parramatta Pty Limited

Action James Western Suburbs Pty Limited
Action Job Support Pty Limited

Action Workforce Pty Limited
ADV2 Pty Limited
Action Workforce Victoria Pty Limited

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Australia

Australia
Australia
Australia

Australia
Australia

Australia
Australia
Australia

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
100
100

100
100

100
100
100

Notes to the Financial Statements

ADV3 Pty Limited

CP Action Electronics Pty Limited
CP Action Workforce Pty Limited
Integracom Holdings Pty Limited (formerly CP Med-WH Pty
Limited)

ADV4 Pty Limited

ECA Chullora Pty Limited
ADV5 Pty Limited

ADV6 Pty Limited
ECA Plastics Pty Limited
Executive Careers Australia Pty Limited

ADV8 Pty Limited
James Personnel Pty Limited
ADV7 Pty Limited

James Warehousing Pty Limited
Silk Group Holdings Pty Limited (formerly National Institute
of Training (NSW) Pty Limited)

Vocational Training Australia Pty Limited
Ashley Apprenticeship Network Pty Limited (formerly Precast
Concrete Labour Pty Limited)

Action Workforce AC Pty Limited

Action Workforce ACT Pty Limited
Action Workforce BAX1 Pty Limited

Action Workforce CAT Pty Limited
Action Workforce COLI Pty Limited
Action Workforce COS1 Pty Limited

Action Workforce COT Pty Limited
Action Workforce IMT Pty Limited

Action Workforce LIN1 Pty Limited
Action Workforce OS Pty Limited
Action Workforce OSI 1 Pty Limited

Action Workforce OST Pty Limited
Action Workforce T1 Pty Limited

Action Workforce T2 Pty Limited
Action Workforce VAPS Pty Limited
Action Workforce VER1 Pty Limited

Action Workforce VM Pty Limited
Action Workforce VPN Pty Limited
Action Workforce VPS Pty Limited

ADV9 Pty Limited
Advance BGT Pty Limited

Action MMX Pty Limited

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Country of
incorporation

2016 percentage
owned
%

2015 percentage
owned
%

Australia

Australia
Australia
Australia

Australia

Australia
Australia

Australia
Australia
Australia

Australia
Australia

Australia

Australia
Australia

Australia
Australia
Australia

Australia
Australia

Australia
Australia
Australia

Australia
Australia

Australia
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
100
100

100
100

100
100
100

100
100

100

100
100
100

100

100
100

100
100
100

100
100

100

100
100

100
100
100

100
100

100
100
100

100
100

100
100
100

100
100

100

Notes to the Financial Statements

Action WA Pty Limited
Tracmin Holdings Pty Limited (formerly Advance BW Pty
Limited)

Country of
incorporation
Australia

Australia

Advance GW Pty Limited
Advance KM Pty Limited
Advance LLA Pty Limited

Advance LSA Pty Limited
Advance MAN Pty Limited

Advance MIX Pty Limited
Advance TR Pty Limited
Advance WL Pty Limited

Advance WLE Pty Limited
Advance WLT Pty Limited
ASG Integracom (AUST) Holdings Pty Limited (formerly
Advance WMAM Pty Limited)
ASG Integracom (AUST) Pty Limited (formerly Advance
WMLF Pty Limited)

Advance WMPM Pty Limited

Advance Exchange Pty Limited
Concept Engineering (Aust) Pty Limited
Concept Employment (Aust) Pty Limited

AIVD Holdings Pty Limited
Australian Institute of Vocational Development Pty Limited

TBRC Holdings Pty Limited
The Blackadder Recruitment Company Pty Limited
ADV Services Pty Limited
Training Support Group Pty Limited
Advance Recruitments Pty Limited
Ashley Institute Holdings Pty Limited
Ash Pty Limited
Capra Ryan Online Learning Pty Limited
Tracmin Pty Limited
Integracom Unit Trust1
Cantillon Holdings Pty Limited2
College of Innovation and Industry Skills Pty Limited3
Global Education and Training Group Pty Limited4
AWF Training 1 Pty Limited5
AWF Training 2 Pty Limited5
AWF Training 3 Pty Limited5
AWF Training 4 Pty Limited5
AWF Training 5 Pty Limited5

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Australia
Australia
Australia

Australia
Australia

Australia
Australia
Australia

Australia

Australia
Australia
Australia

Australia
Australia

Australia
Australia
Australia

Australia
Australia

Australia
Australia
Australia

Australia
Australia

Australia
Australia
Australia

Australia
Australia
Australia
Australia
Australia

2016 percentage
owned
%
100

2015 percentage
owned
%
100

100

100
100
100

100
100

100
100
100

100

100
100
100

100
100

100
100
100

100
100

100
100
100

100
100

100
100
100

100
100
100
100
100

100

100
100
100

100
100

100
100
100

100

100
100
100
100
100

100
100
100

100
100

100
100
100

100
100

100
100
100

-
-
-
-
-

Notes to the Financial Statements

Country of
incorporation

2016 percentage
owned
%

2015 percentage
owned
%

Notes:
1. Integracom Unit Trust was acquired on 21 August 2014.
2. Cantillon Holdings Pty Limited was a company incorporated on 19 September 2014.
3. College of Innovation and Industry Skills Pty Limited (Cantillon) was a company acquired on 25 September 2014.
4. Global Education and Training Group Pty Limited (SILK) was a company acquired on 30 April 2015.
5. These new companies were incorporated on 24 September 2015.

26. PARENT ENTITY DISCLOSURES

Financial position

Assets

Current assets
Non-current assets
Total assets

Liabilities
Current liabilities

Non-current liabilities
Total liabilities
Net assets

Equity
Share capital
Retained earnings

Total equity

Statement of profit or loss and other comprehensive income

(Loss)/Profit for the year
Other comprehensive income

Total comprehensive (loss)/income

2016
$000

92
22,513
22,605

-
-
22,605

92,242
(69,637)

22,605

2016
$000

(65,966)
-

(65,966)

2015
$000

92
88,479
88,571

-
-
88,571

92,242
(3,671)

88,571

2015
$000

(3,674)
-

(3,674)

Contingent liabilities of the Parent Entity

The Parent entity had no contingent liabilities as at 30 June 2016. The Parent entity is aware that IMF Bentham
Limited (“IMF”) announced on 17 August 2015 that is proposed to fund claims of certain ASH shareholders
against the Company for alleged misstatements or omissions in its prospectus dated 7 August 2014 (see Note
28 for more detail).

Commitments for expenditure for the Parent entity

d.
The Parent entity had nil committed expenditure as at 30 June 2016 (30 June 2015: nil).

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Notes to the Financial Statements

27. RELATED PARTY TRANSACTIONS

Parent company

There is no ultimate parent company for Ashley Services Group Limited.

Transactions with related entities

b.
Transactions between related parties are on normal commercial terms and conditions no more favourable than
those available to other parties unless otherwise stated.

Transactions with related parties are as follows:

Rent paid or payable to Shrimpton Holdings Pty Limited as trustee for the Shrimpton Family
Trust, an entity which is controlled by Mr Ross Shrimpton for the head office at Arndell Park,
New South Wales

Loan balances from entities associated with Mr Ross Shrimpton. These are unsecured and
non-interest bearing loans. These loans were largely extinguished as a result of the
restructure which occurred since reporting date.
Fees payable to PKF Lawler Corporate Finance Pty Limited (of which Vince Fayad is a Director)
for services related to IPO, Interim Chief Financial Officer and sundry financial services

Fees payable to Trood Pratt & Co (of which Ian Pratt is a Partner) for taxation services

28. SECURED AND CONTINGENT LIABILITIES

The Group had no contingent liabilities at 30 June 2016.

For assets pledged as security for borrowing facilities see Note 15.

2016
$

2015
$

205,088

197,200

210,000

17,900
97,364

308,994
138,203

The Group has become aware that IMF Bentham Limited (“IMF”) announced on 17 August 2015 that is
proposed to fund claims of certain ASH shareholders against the Company for alleged misstatements or
omissions in its prospectus dated 7 August 2014.

The Group has ceased discussions with IMF Bentham in relation to its proposed class action. No legal
proceedings have been served.

The Company denies any liability and believes there is no proper foundation for any such claim. The Company
would vigorously defend any proceedings if ever commenced.

29. FINANCIAL INSTRUMENTS

Significant accounting policies

Details of the significant accounting policies and methods adopted, including the criteria for recognition, the
basis of measurement and the basis on which income and expenses are recognised, in respect of each class of
financial asset and financial liability are disclosed in Note 1 to the financial statement.

Financial risk management objectives

The Board of Directors has overall responsibility for the establishment and oversight of the Group’s financial
management framework. The Board has an established Audit and Risk Management Committee which is
responsible for developing and monitoring the Group’s financial management policies. The Committee
provides regular reports to the Board of Directors on its activities.

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Notes to the Financial Statements

The Audit and Risk Management Committee oversees how management monitors compliance with risk
management policies and procedures and reviews the adequacy of the risk management framework in relation
to the risks.

The main risks arising from the Group’s financial instruments are market risk (including fair value interest rate
risk), credit risk and liquidity risk. The Board reviews and approves policies for managing each of these risks.

The Audit and Risk Management Committee oversees how management monitors compliance with risk
management policies and procedures and review the adequacy of the risk management framework in relation
to the risks. The Group does not enter into or trade financial instruments, including derivative financial
instruments, for speculative purpose.

c. Market risk

Interest rate risk

The Group is exposed to interest rate risk associated with borrowed funds at floating interest rates. During the
financial year, risks associated with interest rate movements were monitored by the Board; however, no
hedging instruments were considered necessary to manage the risk.

The Group’s exposures to interest rates on financial assets and financial liabilities are detailed in the liquidity
risk management section of this note.

Interest rate sensitivity

The sensitivity analyses below have been determined based on the exposure to interest rates at the reporting
date and the stipulated change taking place at the beginning of the financial year and held constant throughout
the reporting period. A 100 basis point increase or decrease is used when reporting interest rate risk internally
to key management personnel and represents management’s assessment of the possible change in interest
rates.

At the reporting date, if interest rates had been 100 basis points higher or lower and all other variables were
held constant, the effect on the Group would be as follows:

Change in profit

Increase in interest rates of 1%

Decrease in interest rates of 1%

Change in equity

Increase in interest rates of 1%

Decrease in interest rates of 1%

Credit risk

2016
$000

(16)

2015
$000

124

(124)

124

(124)

Credit risk refers to the risk that a counterparty will default on its contractual obligations, resulting in financial
loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties and
obtaining sufficient collateral where appropriate, as a means of mitigating the risk of financial loss from
defaults.

Trade receivables consist of a large number of customers. Ongoing credit evaluation is performed on the
financial condition of accounts receivable.

The carrying value of trade receivables recorded in the financial statements, net of any impairment allowances,
represents the Group’s maximum exposure to credit risks.

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Notes to the Financial Statements

The Group does not have any significant credit risk exposure to any single counterparty or any group of
counterparties having similar characteristics. The credit risk on liquid funds is limited because the counter
parties are a reputable bank with high quality external credit ratings.

The maximum credit risk exposure of financial assets is their carrying amount in the financial statements.

Liquidity risk management

Ultimate responsibility for liquidity risk management rests with the Managing Director and Board of Directors,
who have built an appropriate liquidity risk management framework for the management of the Group’s short,
medium and long-term funding and liquidity management requirements.

The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing
facilities by continuously comparing actual cash flows with forecasts and matching the maturity profiles of
financial assets and liabilities. Included in Note 15 is a listing of additional undrawn facilities that the Group has
at its disposal to further reduce liquidity risk.

Liquidity and interest risk tables

The following table details the Group’s remaining contractual maturity for its non-derivative financial liabilities.
The table has been presented based on the undiscounted cash flows of financial liabilities based on the earliest
date on which the Group may be required to pay. The table includes both interest and principal cash flows.

Financial liabilities

2016
Trade and other payables
Borrowings – bank

Finance leases
Other liabilities – Vendor earn-
out

Total

2015
Trade and other payables

Borrowings – bank
Finance leases
Other liabilities – Vendor earn-
out

Total

Weighted average
effective interest
rate %

Within 1 year
$000

1 to 5 years
$000

Over 5 years
$000

n/a
4.45%

n/a

18,982
-

102

942
20,026

-
-

Weighted average
effective interest
rate %

Within 1 year
$000

1 to 5 years
$000

Over 5 years
$000

n/a

4.4%
n/a

n/a

22,300

-
226

-
22,526

-
-

4,660
4,660

-
-

Total
$000

18,982
-

102

942
20,026

Total
$000

22,300

-
226

4,660
27,186

Fair value of financial instruments

Financial assets and financial liabilities measured at fair value in the statement of financial position are grouped
into three levels of a fair value hierarchy. The three levels are defined based on the observability of significant
inputs to the measurement, as follows:



level 1 – the fair value of financial assets and financial liabilities with standard terms and conditions and
traded on active liquid markets is determined with reference to quoted market prices;

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Notes to the Financial Statements



level 2 – the fair value of other financial assets and liabilities is determined in accordance with generally
accepted pricing models based on discounted cash flow analysis using prices from observable current
market transactions; and
level 3 – where quoted prices are not available, use is made of discounted cash flow analysis using the
applicable yield curve for the duration of the instruments for non-optional derivatives, and option pricing
models for optional derivatives.

The Directors consider that the carrying amounts of financial assets and financial liabilities recorded at
amortised cost in the financial statements approximate their fair values.

The valuation used for instruments categorised as Level 2 and 3 are described below:

Contingent consideration (level 3)

Under the terms of the transaction with the vendors of Concept, Integracom, Cantillon and SILK there were
various earn out payments, which are subject to revenue and profit targets depending upon the individual
acquisition.

The fair value of contingent consideration is estimated using the present value technique. The fair value is
estimated by probability-weighting the estimated future cash outflows, adjusting for risk and discounting at
6%. The probability-weighted cash outflows before discounting have been assessed as follows:






in relation to the acquisition of Concept, nil (out of an original maximum of $450,000)
in relation to the acquisition of Integracom, nil (out of an original maximum of $15 million)
in relation to the acquisition of Cantillon, nil (out of an original maximum of $745,000)
in the relation to the acquisition of SILK, $1.25 million, of which $0.3 million was paid in February
2016 and the remainder will be payable in September 2016, subject to certain conditions.

The discount rate used of 6% is based on the Group’s estimated incremental borrowing rate for unsecured
liabilities at the reporting date, and therefore reflects the Group’s credit position. The effects on the fair value
of risk and uncertainty in the future cash flows are dealt with by adjusting the estimated cash flows rather than
adjusting the discount rate.

30. OPERATING LEASE COMMITMENTS

Leases as lessee

Non-cancellable operating lease rentals are payable as follows:

Leases as lessee
Less than one year

Between one and five years
Total

2016
$000

2,897

5,303
8,200

2015
$000

2,461

5,423
7,884

The Group leases a number of offices under operating leases. The leases run over varying periods, some with
option periods. Some of the leases have fixed rate rental periods, and some have market rate rental
adjustments.

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Notes to the Financial Statements

Of these obligations, $1.8 million has already been expensed as part of the loss from discontinued operations.

31. EVENTS AFTER THE REPORTING DATE

No matters or circumstances have arisen since the end of the financial year which significantly affected or
could significantly affect the operations of the Group, the results of those operations, or the state of affairs of
the Group in future financial years, except for the following:

Subsequent to year end, the Company has revised its funding arrangements by establishing an ‘evergreen’
invoice discount facility with a Big 4 bank at competitive rates. The BankWest debt facility reduced from
$15 million to $10 million in August 2016 and will be reduced to $5 million over the next 4 months. This will
provide the Company with equivalent liquidity at comparable cost to the previous $15 million facility. The term
of the BankWest facility is unchanged (still 29 October 2017) and includes a similar covenant package, albeit
financial measures have been re-set to the Company’s current business plan.

Key terms of the revised facility agreement are outlined in Note 15 to the financial statements.

In addition, on 19 August 2016 the Company served legal proceedings filed in the Supreme Court of New South
Wales against Holmes Management Group Pty Limited, the vendor of the Integracom telecommunications
training business acquired in August 2014. These proceedings relate to alleged breaches of warranties under
the Unit Sale and Purchase Agreement for the acquisition. It is not possible at this time to quantify the likely
financial impact of these proceedings.

32. EMPLOYEE SHARE RIGHTS PLAN

The Company implemented a performance rights share plan for its executives, which operated during the
financial years ended 30 June 2015 and 30 June 2016. The terms of the 2016 Performance Plan have been
outlined in the Directors’ Report (Table 7) within this Annual Report. For details of Performance Rights issued
during the financial year, see Note 18.

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Notes to the Financial Statements

33. DIVIDENDS

a. Ordinary shares

Record Date

Payment Date

Cents Per
Share

Franked Amount
Per Share (Cents)

Final Dividend – 2015

4 September 2015

25 September 2015

4.1

No dividends were declared or paid in relation to the year ended 30 June 2016.

Franking credits

Franking credits available for subsequent financial years based on a tax rate of
30% (2015: 30%)

2016
$000

2015
$000

3,869

6,562

The balance of the franking accounts includes:







franking credits that arose from the payment of the amount of the provision for income tax;
franking debits that arise from the refund of the amount of the provision for income tax;
franking debits that arise from the payment of dividends recognised as a liability at the reporting date;
and
franking credits that arise from the receipt of dividends recognised as receivables at the reporting date.

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

ASX Additional Information

Set out below is additional information as required by the ASX Limited Listing Rules and not disclosed
elsewhere in this report. This information is effective as at 8 August 2016.

Number of security holders and securities on issue

Quoted equity securities

Ashley Services has on issue 150,000,000 fully paid ordinary shares which are held by 684 shareholders.

Voting rights

Quoted equity securities

The voting rights attached to fully paid ordinary shares are that on a show of hands, every member present, in
person or proxy, has one vote and upon a poll, each share shall have one vote.

Distribution of security holders

Quoted equity securities

Ordinary fully paid ordinary shares

Holding

1 – 1,000
1,001 – 5,000
5,001 – 10,000

10,001 – 100,000
100,001 and over
Total

Unmarketable parcel of shares

Number of shareholders

Number of shares

159
151
85

221
68
684

124,333
364,038
681,580

7,904,650
140,925,399
150,000,000

0.08
0.24
0.45

5.27
93.95
100.00

The number of shareholders holding less than a marketable parcel of Fully Paid Ordinary shares is 240 with a
total number of shares held is 237,489.

Substantial Shareholders

The number of securities held by substantial shareholders and their associates are set out below:

Fully Paid Ordinary Shares

Name
Ross Shrimpton and his related entities.1
National Nominees Limited ATF Australian Ethical Investments

Number

92,060,544
16,109,959

61.37%
10.74%

1. Includes shares held non-beneficially in trust on behalf of Holmes Management Group Pty Limited (6,024,096).

Unquoted equity securities

There are no unquoted shares.

On-market buy-back

There is no current on-market buy-back.

Twenty largest shareholders

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

ASX Additional Information

Fully paid ordinary shares

Details of the 20 largest shareholders of quoted securities (grouped) by registered shareholding are:

Name
Mrs Catherine Shrimpton

Action James Holdings Pty Limited
National Nominees Limited
Holmes Management Group Pty Ltd

JJC Group (Aust) Pty Ltd
Mr Craig Graeme Chapman

Yellow Diamond Pty Ltd
HSBC Custody Nominees (Australia) Limited
Aust Executor Trustees Ltd

Mr Marc Shrimpton
Mr Dean Michael Shrimpton

Mr Andrew Douglas Shrimpton
Mr Marcus Andrew Levy and Vanessa Sanchez-Levy
Hishenk Pty Ltd

Nicola Jagusch
Aust Executor Trustees Ltd
Friendlyfly Pty Ltd

Kingston Properties Pty Limited
Mr Gerald Francis Pauley and Mr Michael James Pauley

Mr Stewart George Cummins
Total

Annual General Meeting

Number of shares
60,858,282

22,178,166
16,109,959
6,024,096

3,755,832
2,375,432

2,572,084
2,345,937
1,582,009

1,500,000
1,500,000

1,500,000
1,189,717
1,150,000

1,103,072
874,575
700,000

679,618
639,199

600,000

%
40.57%

14.79%
10.74%
4.02%

2.51%
1.58%

1.71%
1.56%
1.05%

1.00%
1.00%

1.00%
0.79%
0.77%

0.74%
0.58%
0.47%

0.45%
0.43%

0.40%

129,237,978

86.16%

The annual general meeting of the Company will be held at the company’s offices at Level 10, 92 Pitt Street
Sydney NSW 2000 at 10.00am on Wednesday 9 November 2016. Shareholders who are unable to attend the
meeting are encouraged to complete and return their proxy form that will accompany the notice of meeting.

ASHLEY SERVICES GROUP ANNUAL REPORT 2016

Bankers

BankWest
Level 16
45 Clarence Street
Sydney NSW 2000
Telephone: + 61 2 9276 8000
Facsimile: 1300 453 796

Share Registry

Link Market Services Limited
Central Park, Level 4
152 St Georges Terrace
Perth WA 6000
Telephone: +61 1300 554 474
Facsimile: +61 2 9287 0303
Website: www.linkmarketservices.com.au

Website

www.ashleyservicesgroup.com.au

ASX Code

ASH

Corporate Directory

Non-Executive Directors

Mr Ian Pratt (Chairman)
Mr Ross Shrimpton

Executive Directors

Mr Marc Shrimpton
Mr Stewart Cummins – Managing Director and
CEO

Company Secretary

Mr Ron Hollands

Registered Office

Level 10
92 Pitt Street
Sydney NSW 2000

Australian Company Number

094 747 510

Australian Business Number

92 094 747 510

Auditors

Grant Thornton Audit Pty Ltd
Level 17
383 Kent Street
Sydney NSW 2000
Telephone: + 61 2 8297 2400
Facsimile: + 61 2 9299 4445

Legal Adviser

Herbert Smith Freehills
Level 34
161 Castlereagh St
Sydney NSW 2000
Telephone: + 61 2 9225 5000
Facsimile: + 61 2 9322 4000

ASHLEY SERVICES GROUP ANNUAL REPORT 2016