ASHLEY SERVICES GROUP ANNUAL REPORT 2017
1
Ashley Services Group Limited Annual Report 2017
CHAIRMAN AND MANAGING DIRECTOR’S REVIEW ---------------------------------------------------------------- 3
DIRECTORS’ REPORT --------------------------------------------------------------------------------------------------------- 9
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 ------------- 31
CONSOLIDATED STATEMENT OF FINANCIAL POSITION ----------------------------------------------------------- 32
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ------------------------------------------------------------ 33
CONSOLIDATED STATEMENT OF CASH FLOW ----------------------------------------------------------------------- 34
NOTES TO THE FINANCIAL STATEMENTS ---------------------------------------------------------------------------- 35
ASX ADDITIONAL INFORMATION --------------------------------------------------------------------------------------- 70
CORPORATE DIRECTORY -------------------------------------------------------------------------------------------------- 72
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
2
Chairman and Managing Director’s Review
MR IAN PRATT AND MR ROSS SHRIMPTON
FY17 has in many ways been a transformational year for Ashley Services Group, a year where, in line with the
outcomes of the strategic review announced on 1 March 2017, the Company has successfully repositioned
itself as a Labour Hire company, albeit one with a small, focused, complementary Training division.
The challenges of successfully reducing the size of our Training division have been well managed, our cost base
has adjusted downwards to reflect this reduction in the overall scale of our organisation, and our Labour Hire
division has continued to perform strongly throughout FY17.
The Labour Hire division has delivered a solid lift in profit on the back of pleasing revenue growth in the Action
Workforce brand and a significant 70% revenue lift for the Concept Engineering brand. Equally pleasing is our
continued improvement in the all-important area of Safety, where our labour hire businesses continue to
evidence industry-leading results for our employees and our corporate partners, as a direct result of our
continued innovation across our Workplace Health & Safety programmes.
The Training division delivered a breakeven result across the second half despite the impact of numerous exit
costs relating to the restructuring of our Training division, including redundancies, leave balance payouts and
refund/credit activity relating to the wind down of exited brands and/or regions.
Corporate costs for FY17 saw a strong full year reduction of $0.7m or 13% and an 8% reduction for 2H17
relative to the first half as we adjusted our cost base downwards to reflect the reduced size of our organisation
with a scaled back Training division. This right sizing of our costs will continue throughout FY18 and beyond as
we pursue every opportunity to remove unnecessary costs from our business and improve our efficiencies.
Cash flow has been well managed throughout FY17 despite the numerous challenges and significant payments
related to the scaling back of our Training division, delivering a positive $3.1 million net cash from operating
activities. In line with this, we have ended the year with a zero Net Debt position which provides us with a
secure platform for future investment and growth. We have also extended our working capital facility by a
further 12 months to 29 October 2018 on the same terms, which are outlined in this annual report. This
working capital facility is through Shrimpton Holdings Pty Limited, a company associated with Ross Shrimpton,
Managing Director, and with shareholders of the Group.
With a simplified and strengthened balance sheet, zero debt and strong cash flows we are well positioned to
capitalise on a positive business environment with stable employment opportunities. The Ashley Services team
of 220 committed team members have continued to deliver for the Company during FY17 and we are
confident we have the right team in place to lead us on to future success.
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
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Chairman and Managing Director’s Review
We look forward to further improvement across FY18 driven by continued revenue growth across all brands in
our Labour Hire division and increased efficiency dividends as we leverage superior technology investments
across the Labour Hire division. Our Training division focus is ensuring a strong culture of compliance sits
above everything we do, to position it for future profitable growth in late FY18 and beyond. Corporate costs
will continue to be addressed throughout the year ahead as we continue to target further reductions in our
cost base.
Assuming we continue to see these trends remain on track at the half year, we anticipate we will be revisiting
the dividend policy with a view to returning to dividend payments in FY18.
LABOUR HIRE DIVISION
FY17 again saw our Labour Hire division build on its impressive safety record, with our FY17 Lost Time Injury
Frequency rate (LTIFR) of 0.42 representing our best ever performance and our fifth consecutive year with an
LTIFR of 1.01 or lower. With an average LTIFR of 0.78 over the last five years, such a sustained display of
excellence is testament to our focus on safety, with our Workplace Health & Safety programmes, which lie
behind this performance, at industry best practice standard. Every one of our Labour Hire offices nationally is
ISO Safety, Quality and Environmentally certified, underpinning our Safety First program.
Action Workforce experienced a 12% growth in revenue, with a number of new customers coming on board,
strong growth across many of our pre-existing customers by increasing share and annualisation of prior year
contract wins. The average tenure of our Top 20 customers at 4.9 years is a strong pointer to our customers’
satisfaction with our performance and we remain buoyed by a promising pipeline of opportunities to deliver in
the shape of future profitable contract wins.
Concept Engineering’s growth has been exemplary across FY17, delivering a 70% revenue increase, with new
customers, strong growth from pre-existing customers and annualisation of prior year contract wins. A
promising sales pipeline, continued annualisation of FY17 contract wins, along with the general strength of the
infrastructure, transport and construction sectors has us confident of further profitable growth in FY18 and
beyond.
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
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Chairman and Managing Director’s Review
Blackadder Recruitment, whilst producing modest top line growth and solid bottom line profitability, remains
a big growth opportunity within our portfolio and we look forward to an improved FY18 and beyond under the
leadership of its new GM.
The Labour Hire division will also benefit from a substantial efficiency dividend across FY18 and into the future,
with the implementation of a new candidate and customer database integrating into an automated rostering
tool, with implementation scheduled ahead of our seasonal peak in November and December. This enhanced
technology, which will include a candidate smartphone App, will provide us with real time data enabling us to
better serve our customers and candidates. Along with the significant investment we have already made into
our Payroll and Billing systems, our Labour Hire brands will be well placed to further exceed both our
customers’ and our candidate’s expectations and to continue to provide superior customer service to both.
TRAINING DIVISION
The Training division has been successfully restructured, now with a far reduced range of qualifications on
scope, across a reduced geographical distribution, as we focus our activity on those regions with viable funding
contracts. Accordingly, we continue with meaningful training operations in both WA and QLD, whist continuing
to train out earlier funding through our Victorian operations which is also continuing to operate successfully on
a fee for service basis. We will continue to seek out further government funding opportunities as they arise,
primarily, at least in the short term, across these three active markets.
This restructure has in part been achieved through a series of asset sales. Two separate agreements facilitated
the asset sales of the Integracom businesses in WA, SA and NSW to companies and individuals associated with
the previous owner of Integracom. A further agreement with another training organisation delivered a similar
asset sale of the former SILK Education & Training business which we have now exited and which is disclosed in
these accounts as a discontinued operation.
Whilst the consideration underlying the asset sale agreements was minimal, these transactions greatly assisted
the Company by significantly reducing its liabilities across these former training businesses, particularly in the
area of employee liabilities, with many former employees transferring across to the new owners and also in
the transfer of future lease obligations.
In addition to these asset sales, the Company has also facilitated ongoing training requirements through an
alternate training provider.
As part of the completion of the Training restructure we have determined it appropriate to fully provide for, by
way of a finalisation cost, the $0.7 million previously advised as being withheld by the NSW Department of
Industry, Skills and Regional Development (NSW Department) in relation to ongoing performance monitoring
matters, given the passage of time and despite ongoing negotiations underway to resolve this matter.
We will continue to invest significantly to ensure a culture of compliance sits above everything we do in our
Training division, to make certain our processes and practices protect our position in the industry as a highly
trusted, quality training partner for our customers, students, and also for the relevant government authorities
who control many aspects of the training sector and its associated government funding schemes.
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
5
Chairman and Managing Director’s Review
DISCUSSION ON RESULTS
Earnings and result
Earnings
Net profit after tax (“NPAT”) for the financial year of the Group was a loss of $6.0 million (2016: $69.6 million
loss). This loss includes a $0.5m loss from discontinued operations and a $10.7 million net expense before tax
for various significant items including impairment of intangible assets ($5.5m), impairment of PP&E ($3.5m),
Training division refunds from prior periods relating mainly to Victorian rectification activity ($1.4m), Training
division restructuring expenses ($0.7m) and Settlement of ongoing performance monitoring matters with the
NSW Department ($0.7m), partially offset by a $1.1 million profit arising from the cancellation of shares issued
on acquisition.
NPAT for the financial year from continuing operations was a loss of $5.4 million.
Revenues
Revenue from continuing operations at $314.7 million grew by $37.8 million (14%) from the prior period.
Labour hire revenues increased by $40.6 million (16%) to $289.2 million, with 70% growth in the Concept
Engineering brand adding to a strong lift of 12% for Action Workforce.
Training revenues decreased $2.8 million (10%) to $25.5 million with declines across most locations but most
severe in NSW and Victoria with the conclusion of their funding contracts in early Q3.
Earnings before interest taxes depreciation and amortisation (“EBITDA”)
Statutory EBITDA (excluding discontinued operations) was a loss of $5.0 million (2016: loss of $70.2 million). The
current year result includes impairment of intangible assets ($5.5m), impairment of PP&E ($3.5m), Training
division refunds from prior periods relating mainly to Victorian rectification activity ($1.4m), Training division
restructuring expenses ($0.7m) and Settlement of ongoing performance monitoring matters with the NSW
Department ($0.7m), partially offset by a $1.1 million profit arising from the cancellation of shares issued on
acquisition.
Statutory EBITDA1
Reassessment of value of deferred consideration liabilities
Impairment of Intangible assets/other assets
Restructuring expense
Cancellation of Shares issued on acquisition
Training division refunds from prior periods relating mainly to
Victorian rectification activity
NSW Department finalisation costs
Net underlying adjustments
Underlying EBITDA
NOTES:
FY17
$million
(5.0)
-
9.0
0.7
(1.1)
1.4
0.7
10.7
5.7
FY16
$million
(70.2)
(3.5)
66.0
-
-
-
-
62.5
(7.7)
1.
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.
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
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Chairman and Managing Director’s Review
Excluding these adjustments, underlying EBITDA for the current period was a $5.7 million profit (FY16: loss of
$7.7 million) comprising:
a. Labour hire. EBITDA of $7.8 million was $2.9 million (59%) above the prior period (FY16: $4.9 million
profit) on the back of a revenue lift of 16% (FY17 $289.2m v FY16 $248.6m) with a 12% lift for Action
Workforce and a significant 70% lift in revenue for the Concept Engineering brand.
b. Training. EBITDA of $2.9 million (FY16: $6.9 million loss), with 2H17 producing a breakeven result
following the completion of the scaling back of the Training division.
c. Corporate costs for FY17 at $5.0 million saw a pleasing full year reduction of $0.7m or 12% (FY17 $5.0m
v FY16 $5.7m) with significant reductions across staffing costs ($0.5m) and legal fees ($0.2m).
Statement of financial position
The Group balance sheet was impacted by the various write downs largely undertaken at the end of first half
FY17, including the impairment of intangible assets ($5.5m) and impairment of PP&E ($3.5m), partially offset by
a $1.1 million profit arising from the cancellation of shares issued on acquisition.
Whilst net assets at $20.0 million as at 30 June 2017 were broadly in line with the half year position (1H17 $20.6
million), they were down from $27.1 million at 30 June 2016 due largely to the various write downs outlined
above.
As at 30 June 2017, the Group had a $5 million working capital facility through Shrimpton Holdings Pty Limited,
a company associated with Ross Shrimpton, Managing Director, and with shareholders of the Group. Shrimpton
Holdings Pty Limited has fixed and floating charges over the Group’s assets, subject to conditions outlined by a
separate agreement between Ashley Services Group Limited and Shrimpton Holdings Pty Limited and in line with
the conditions outlined in the ASX Listing Rule Waiver as granted 3 April 2017, and subsequently revised on 17
July 2017, following the extension of the Facility Agreement out for a further year to 29 October 2018.
As at 30 June 2017, the working capital facility was undrawn (30 June 2016, Nil).
Cash Flow
Operating cash flow (from continuing operations) represented a significant improvement on prior year,
delivering an inflow of $3.1 million (FY16 $1.0m inflow), and pleasingly strengthened across the second half
(2H17: $1.7 million inflow, 1H17: $1.4 million inflow), despite the impact of numerous exit costs relating to the
scale back process in the Training division, including redundancies, leave balance payouts and refund/credit
activity relating to wind down of exited brands and/or regions.
Capital expenditure at $0.7 million was minimal throughout FY17, with a $1 million inflow from the sale of the
assets of the WA & SA Integracom business and a $0.6 million outflow in relation to an earlier vendor earn out
payment, delivering an overall net cash flow for FY17 of $2.7 million.
DIVIDEND
During the financial year ended 30 June 2017, the Group has not declared or paid any dividends. Additionally,
no dividends were declared or paid in respect of the financial year ended 30 June 2016.
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
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Chairman and Managing Director’s Review
EVENTS SUBSEQUENT TO BALANCE DATE
Subsequent to year end, the Company has extended its $5 million working capital facility through Shrimpton
Holdings Pty Limited, a company associated with Ross Shrimpton, Managing Director, and with shareholders of
the Group, out for a further year to 29 October 2018.
Ian Pratt
Chairman
Ross Shrimpton
Managing Director
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
8
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 2017.
1. 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
Chairman
Managing Director
Mr Chris McFadden
Mr Marc Shrimpton
Executive Director
Executive Director
Mr Stewart Cummins
Managing Director
Appointed / Resigned
Appointed 1 October 2015
Appointed 12 October 2000; Managing Director to 15
February 2016, Non-Executive Director from 15 February
2016 to 23 January 2017 and Managing Director again from
23 January 2017
Appointed 6 April 2017
Appointed Alternative Director on 31 July 2014, Executive
Director 1 October 2015 and resigned 20 April 2017
Appointed 15 February 2016 and resigned 26 September
2016
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 Ross Shrimpton | Managing Director (since 23 January 2017) (previously Non-Executive
Director from 15 February 2016 and Managing Director to 15 February 2016)
Qualifications | BComm (UNSW), CA, MAICD
Experience | Ross is the founder and 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. Ross has 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 Chartered Accountants Australia and New Zealand and a member of the
Australian Institute of Company Directors.
Ross is a member of the Nominations, Audit & Risk Management and Remuneration Committees.
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
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Directors’ Report
Mr Chris McFadden | Executive Director (from 6 April 2017)
Qualifications | BBus (UTS), FCPA, GAICD
Experience | Chris was appointed Chief Financial Officer of Ashley Services Group in January 2017
and was appointed Executive Director in April 2017. Chris was formerly CFO at Ross Human
Directions Limited (ASX: RHD), a company principally involved in the provision of temporary
labour and recruitment services. Most recently Chris was CFO of Australian fashion brand, sass &
bide, a division of Myer. Prior to this, he was CFO of Staples Australia, Senior Commercial
Manager at Woolworths Limited, CFO of Ross Human Directions Limited, and Asia Pacific CFO
of The Nuance Group.
Chris is a Fellow of CPA Australia and a Graduate of the Australian Institute of Company Directors.
Chris is a member of the Nominations, 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 Chris McFadden
Number
of Shares Held
Shareholding
%
15,060
86,046,305
0
0.01
59.76
0.00
Note:
1. 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).
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 Pratt
Mr Ross Shrimpton
Mr Chris McFadden1
Mr Marc Shrimpton2
Company
Date from
Date to
Nil
Nil
Nil
Nil
-
-
-
-
-
-
-
-
Mr Stewart Cummins3
Vocation Limited
1 May 2015
16 December 2015
Chris McFadden was appointed a director on 6 April 2017.
Note:
1.
2. Marc Shrimpton resigned as a director on 20 April 2017.
3.
Stewart Cummins resigned as a director on 26 September 2016.
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
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Directors’ Report
Principal activities
The principal activities of the Group during the financial year were the provision of labour hire (including
recruitment) and training services.
During financial year 2017, in line with the outcomes of the strategic review announced on 1 March 2017, the
Company has successfully repositioned itself as a Labour Hire company, albeit one with a small, focused,
complementary Training division.
Accordingly, the scaling back of the Training division has been a significant change in the nature of the Group’s
principal activities during the financial year.
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.
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:
Table 4: Meeting Attendance
Board Meetings
Audit & Risk
Management
Committee
Meetings
Remuneration
Committee
Meetings
Nomination
Committee
Meetings
Held4 Attended
Held
Attended
Held
Attended
Held
Attended
Mr Ian Pratt
Mr Ross Shrimpton
Mr Chris McFadden1
Mr Marc Shrimpton2
Mr Stewart Cummins3
12
12
2
11
4
12
11
2
11
4
5
5
1
4
5
5
1
4
4
4
1
3
4
4
1
3
1
1
-
1
1
1
-
1
N/A
N/A
N/A
N/A
N/A
N/A
Chris McFadden was appointed a director on 6 April 2017.
Note:
1.
2. Marc Shrimpton resigned as a director on 20 April 2017.
3.
4. Meetings held during the period the individual held office.
Stewart Cummins resigned as a director on 26 September 2016.
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
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Directors’ Report
2. BUSINESS REVIEW
Operating results
The consolidated loss of the Group attributable to
income tax
equity holders after providing for
loss of
amounted
$69,626,000).
$5,969,000
(2016:
to
The Group did not declare any dividends in relation
to the year ended 30 June 2017.
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
in the operations of the
Likely developments
consolidated entity in future financial years and the
expected results of those operations are referred to
generally in the Chairman and Managing Director’s
Review.
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 2017, except as follows:
On 26 July 2017, the Company announced it had
extended its $5 million working capital facility
through Shrimpton Holdings Pty Limited, a company
associated with Ross Shrimpton, Managing
Director, and with shareholders of the Group, out
for a further year to 29 October 2018.
Marc Shrimpton resigned 7 July 2017 as General
Manager Blackadder Recruitment and his 206,842
Performance Rights were cancelled
for Nil
consideration.
Ongoing Litigation
(ASH)
Ashley Services Group Limited
is the
respondent in a class action that was commenced in
the Federal Court of Australia (NSW Registry) on 1
December 2016 on behalf of a group of
shareholders. The allegations against ASH include
that its prospectus, dated 7 August 2014, contained
certain misstatements
in
contravention of the Corporations Act 2001 (Cth),
omissions
and
that ASH contravened the continuous disclosure
provisions and that it engaged in misleading and
deceptive conduct during the period August 2014 to
April 2015. ASH
is vigorously defending this
proceeding. The potential liability and costs in
respect of the proceeding cannot be accurately
assessed at this time.
Ashley Services Group Limited (ASH) is also the
plaintiff in proceedings lodged in the Supreme Court
of NSW on 18 May 2017 against the State of New
South Wales (Department of Industry Skills and
Regional Development)
seeking payment of
outstanding monies owed by the NSW Government.
The matter was adjourned on 23 August 2017 for
further directions on 20 September 2017. A
settlement in principle has been reached which will
see these proceedings discontinued on finalisation
of the related settlement deed.
3. OTHER INFORMATION
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 no further
Performance Rights to senior executives and
cancelled 1,390,878 Performance Rights for Nil
consideration following various employees leaving
the company.
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.
Neither the previous auditor, Grant Thornton, nor
the current auditor, HLB Mann Judd, provided any
non-audit services during the year ended 30 June
2017.
Details of the amounts paid to either the previous
or current auditors (Grant Thornton and HLB Mann
Judd respectively) for audit services provided during
the year are outlined in Note 4 to the financial
statements.
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
12
Directors’ Report
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.
Non-Executive Director remuneration;
details of remuneration;
executive service agreements;
share-based compensation; and
additional information.
d. Environmental issues
a.
Key management personnel
The Group’s operations are not regulated by any
significant environmental regulation under a law of
the Commonwealth or of a state or territory.
The following persons acted as Directors of the
Group or as key management personnel during the
financial year:
e. 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 insurance policies prohibit disclosure of the
premiums payable under the policies and details of
the insured liabilities.
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.
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;
Executive Directors:
Ross Shrimpton (from 23 January 2017)
Chris McFadden (from 6 April 2017)
Marc Shrimpton (until 20 April 2017); and
Stewart Cummins (until 26 September 2016)
Non-Executive Directors:
Ross Shrimpton (until 23 January 2017); and
Ian Pratt
Other key management personnel:
Chris McFadden (Chief Financial Officer,
appointed 13 January 2017);
Paul Rixon (General Manager, Labour Hire);
Marc Shrimpton (General Manager Blackadder
Recruitment, resigned 7 July 2017); and
Paul Brittain (Chief Financial Officer, resigned
17 February 2017); and
Brett O’Connor (General Manager, Training,
resigned 20 September 2016)
Key management personnel
include both the
Directors and other key management personnel
named above.
b.
Principles used to determine the nature and
amount of remuneration
is
that
to ensure
The objective of the Group’s executive reward
for
framework
performance is competitive and appropriate for the
results delivered. The framework seeks to align
executive reward with achievement of strategic
for
objectives and
shareholders.
the creation of value
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;
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
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Directors’ Report
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 for earning rewards;
and
provides recognition for contribution to the
business.
The framework provides a mix of fixed and variable
pay, and a blend of short and long-term incentives,
albeit the LTI scheme has been temporarily
suspended for the financial years 2017 and 2018.
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
provides further information on the role of this
committee.
Executive pay
The executive pay and reward framework has three
components:
base pay and benefits, including
superannuation;
short-term performance incentives, provided
in cash; and
long-term
through
incentives provided
participation in the Ashley Services Group
Performance Rights Share Plan, albeit the LTI
scheme has been temporarily suspended for
the financial years 2017 and 2018.
The combination of these comprises the executive’s
total remuneration.
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
14
Directors’ Report
Table 5: Key components of senior executive remuneration framework in place during the year ended 30 June 2017.
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.
‘At risk’ award opportunity for the
achievement of annual
performance objectives linked to
annual financial targets and non-
financial goals set by individual.
In light of the loss for financial years
ended 30 June 2016 and 2017 and the
reduced share price, the Board and the
Remuneration Committee have
temporarily suspended the LTI scheme
for the financial years 2017 and 2018.
Accordingly there was no award of
performance rights to senior
executives in relation to the year
ended 2017 nor will any be awarded in
relation to the year 2018.
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.
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.
There are no guaranteed base
pay increases in any executives’
employment contracts.
Paid in cash within 30 days of
finalisation of Audited Annual
Report.
Table 6: Key features of the senior executive STI plan for FY17
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 performance measures must also be met to earn an STI payment.
What
are
performance
conditions?
the
Measures
Senior Executives
Financial measures
(100% of STI opportunity)
Assessed against:
Budget EBITDA for the individual’s area of influence
for the financial year.
20% payable for achievement of 90% of budget.
Remaining 80% payable on a straight line pro rata
basis for performance from 90% to 120% of budget.
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.
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
15
Directors’ Report
Table 7: Key features of the senior executive FY16 LTI plan
Note that LTI plan has been suspended for both FY17 and FY18
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.
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 FY16 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
EPS Target
Actual proforma EPS for the financial year ended 30 June 2015
8.7 cents
10% growth FY16
10% growth FY17
10% growth FY18
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 end of 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 end of 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 2017
16
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 2018
The remuneration committee has approved a similar Short Term Incentive (STI) plan for the year ended 30 June
2018, based upon budget targets for that annual period.
In light of the loss for the financial years ended 30 June 2016 and 2017 and the reduced share price, the Board
and the Remuneration Committee have temporarily suspended the LTI scheme for the financial years 2017 and
2018. Accordingly there was no award of performance rights to senior executives in relation to the year ended
2017 nor will any be awarded in relation to the year 2018.
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
17
Directors’ Report
c. Non-executive Director remuneration and Board performance review
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 2017 due to the focus during
FY17, in line with the outcomes of the strategic review announced on 1 March 2017, on the repositioning of the
Company as a Labour Hire company, albeit one with a small, focused, complementary Training division.
d. Details of remuneration
Details of remuneration of the Directors and other key management personnel of Ashley Services Group are set
out in the tables on pages 18 to 20.
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
Ross Shrimpton
Chris McFadden
Marc Shrimpton4
Paul Rixon
Base Salary $1
Target STI %2
Target LTI %2, 3
300,000
450,000
275,000
275,000
-
50
50
50
-
50
30
50
Term of
agreement
Ongoing
Ongoing
Ongoing
Ongoing
Notice Period
6 months
6 months
6 months
6 months
Base salary is on an annual basis and includes superannuation contributions.
Note:
1.
2. Maximum annual award as a percentage of annual salary.
3.
4. Marc Shrimpton resigned as an Executive Director on 20 April 2017 but continued on as General Manager Blackadder Recruitment
This plan has been suspended for the financial years ended 30 June 2017 and 30 June 2018.
for the balance of FY17. Subsequent to year end, Marc resigned 7 July 2017 as General Manager Blackadder Recruitment.
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
18
Directors’ Report
Table 9: Statutory key performance indicators of the group over the last three years1
Profit / (Loss) for the year attributable to members ($000)
Basic earnings per share (cents)
Dividend payments ($000)
2017
2016
2015
(5,969)
(4.08)
-
(69,626)
(46.42)
-
13,676
9.65
6,150
Dividend payout ratio (%)
Decrease in share price (%)2
Total KMP incentives as percentage of profit/(loss) for the year (%)
Note:
1. Three years used since Ashley Services Group Pty Limited listed on 21 August 2014.
2. Decrease in share price (%) is year-end share price relative to prior year-end, other than 2015 which is relative to IPO price $1.66.
(70.9)
(63.0)
-
-
-
-
45.0
(64.2)
1.8
Table 10: 2017 – Remuneration of Key Management Personnel
2017
Name
Non-executive Directors
Ian Pratt5
Executive Director
Ross Shrimpton6
Chris McFadden7
Marc Shrimpton8
Stewart Cummins9
Other key management
personnel
Brett O’Connor10
Paul Rixon11
Paul Brittain12
ST1 employee benefits
Cash salary
& fees
$
Salary non-
cash
$
ST1 employee
bonus
S
PE2 benefits
Super-
annuation
$
150,685
173,300
191,780
255,384
238,472
176,502
259,803
343,890
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
14,315
16,464
18,219
19,616
6,538
4,904
19,616
13,077
LT3 employee
benefit
Total4
Performa
nce based
Remunera
tion
$
-
-
-
-
-
$
%
165,000
189,764
209,999
275,000
245,010
181,406
279,419
356,967
-
-
-
-
-
-
-
1,789,816
Total
Note:
1. ST – Short-term.
2. PE – Post-employment.
3. LT – Long-term. Details of the long term incentive plan are included in the Directors’ report, pages 16 to 17. 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 2017.
1,902,565
112,749
-
-
4. Amounts included in the above table include amounts paid to key management from all entities.
5. During the year tax advisory fees have also been paid to Trood Pratt & Co (Company in which Ian Pratt is a Partner).
6. Reappointed Managing Director 23 January 2017, previously Non-Executive Director from 15 February 2016. These amounts
represent remuneration earned across both roles during the 2017 financial year.
7. Chris McFadden commenced as Chief Financial Officer on 13 January 2017 and moved to Executive Director on 6 April 2017. These
amounts represent remuneration from the date he commenced with the Group, rather than the date he was appointed Director.
8. Marc Shrimpton resigned as an Executive Director on 20 April 2017 but continued on as General Manager Blackadder Recruitment
for the balance of FY17. These amounts represent remuneration earned across both roles during the 2017 financial year.
Subsequent to year end, Marc resigned 7 July 2017 as General Manager Blackadder Recruitment.
9. Resigned 26 September 2016.
10. Resigned 20 September 2016.
11. Novated car lease refund of $4,419 included in these figures.
12. Resigned 17 February 2017.
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
19
Directors’ Report
Table 11: 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
19,308
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
-
-
-
-
-
-
-
-
-
1. ST – Short-term.
2. PE – Post-employment.
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. During the year tax advisory fees have also been paid to Trood Pratt & Co (Company in which Ian Pratt is a Partner).
6. Ceased as Directors 1 October 2015 and included to that date.
7. Commenced as Director 1 October 2015 and inclusive from that date.
8. 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.
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.
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
20
Directors’ Report
e.
Shares held by key management personnel
The number of ordinary shares in the Company during the 2017 reporting period held by each of the Group’s key
management personnel, including their related parties are set out below:
Table 12: Shares held by Key Management Personnel
Name
Ian Pratt
Ross Shrimpton1
Chris McFadden2
Marc Shrimpton3
Paul Rixon
Stewart Cummins4
Brett O’Connor5
Paul Brittain6
Balance at start of
the year
15,060
86,046,305
-
1,917,423
41,416
600,000
47,440
18,000
Shares Disposed
-
Change from KMP
-
Balance at end of the year
15,060
-
-
-
-
(600,000)
-
-
-
-
-
-
-
(47,440)
(18,000)
86,046,305
-
1,917,423
41,416
-
-
-
Total
Note:
1. This includes shares owned directly by Ross Shrimpton (9,857), Catherine Shrimpton (wife of Ross Shrimpton, 60,858,282), their family
88,685,644
88,020,204
(600,000)
(65,440)
companies (22,178,166) and shares purchased on behalf of Andrew (1,500,000) and Dean Shrimpton (1,500,000).
2. Chris McFadden was appointed Chief Financial Officer on 13 January 2017 and a director on 6 April 2017.
3. Marc Shrimpton resigned as an Executive Director on 20 April 2017 but continued on as General Manager Blackadder Recruitment for
the balance of FY17. Subsequent to year end, Marc resigned 7 July 2017 as General Manager Blackadder Recruitment.
4. Resigned 26 September 2016.
5. Resigned 20 September 2016.
6. Resigned 17 February 2017.
f.
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.
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
21
Directors’ Report
g.
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 Nil performance rights (2016: 1,561,668).
The number of Performance Rights awarded to executive directors and Key Management Personnel is set out
below:
Table 13: Performance Rights held by Executive Directors and Key Management Personnel
Name
Ross Shrimpton
Chris McFadden
Marc Shrimpton1
Paul Rixon
Stewart Cummins2
Brett O’Connor3
Paul Brittain4
Balance at start of the year
-
Performance Rights Granted
-
Balance at end of the year
-
-
206,842
344,736
-
549,053
502,326
-
-
-
-
(549,053)
(502,326)
-
206,842
344,736
-
-
-
Total
Note:
3. Subsequent to year end, Marc Shrimpton resigned 7 July 2017 as General Manager Blackadder Recruitment and his 206,842
1,602,957
551,578
(1,051,379)
Performance Rights were cancelled for Nil consideration.
4. Resigned 26 September 2016.
5. Resigned 20 September 2016.
6. Resigned 17 February 2017.
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.
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
22
Directors’ Report
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 2017.
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, 31 August 2017
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
23
AUDITOR’S INDEPENDENCE DECLARATION
As lead auditor for the audit of the consolidated financial report of Ashley Services Group Limited for
the year ended 30 June 2017, I declare that, to the best of my knowledge and belief, there have been
no contraventions of:
(a)
the auditor independence requirements as set out in the Corporations Act 2001 in relation to the
audit; and
(b)
any applicable code of professional conduct in relation to the audit.
This declaration is in relation to the Ashley Services Group Limited and the entities it controlled during
the period.
Sydney, NSW
31 August 2017
S P James
Director
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
24
Corporate Governance Statement
A Corporate Governance Statement has been
adopted by the Board on 30 August 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
27%
88%
70%
82%
58%
66%
73%
12%
30%
18%
42%
34%
During the financial year ending 30 June 2017 the
Company submitted
its annual report to the
Workplace Gender Equality Agency and is again
compliant with the Workplace Gender Equality Act
2012 (Act).
The performance of the Board and Senior Executives
in the 2017 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 2017
25
Directors’ Declaration
1.
In the opinion of the Directors of Ashley Services Group Limited:
a. 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 2017 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
b. 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.
2. The Directors have been given the declarations required by Section 295A of the Corporations Act 2001
from the Chief Executive Officer and Chief Financial Officer for the financial year ended 30 June 2017.
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, 31 August 2017
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
26
ASHLEY SERVICES GROUP LIMITED
ACN 094 747 510
INDEPENDENT AUDITOR’S REPORT
To the Members of Ashley Services Group Limited
REPORT ON THE AUDIT OF THE FINANCIAL REPORT
Opinion
We have audited the financial report of Ashley Services Group Limited (“the Company”) and its controlled
entities (“the Group”), which comprises the consolidated statement of financial position as at 30 June
2017, the consolidated statement of profit or loss and other comprehensive income, the consolidated
statement of changes in equity and the consolidated statement of cash flows for the year then ended,
and notes to the financial statements, including a summary of significant accounting policies, and the
directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations
Act 2001, including:
(a)
giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its financial
performance for the year then ended; and
(b)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting
Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (“the
Code”) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other
ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our
audit of the financial report of the current period. These matters were addressed in the context of our
audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
27
ASHLEY SERVICES GROUP LIMITED
ACN 094 747 510
INDEPENDENT AUDITOR’S REPORT (continued)
Key Audit Matter
How our audit addressed the key audit matter
Revenue recognition
Refer to Note 1 (Accounting policies) and Note 2 (Revenue and other income)
Labour hire revenue is the most significant
account balance in the Consolidated
Statement of Profit or Loss and Other
Comprehensive Income.
Total revenue of $315.4 million comprises a
number of streams including:
•
•
• other income ($0.7 million).
labour hire revenue ($289.2 million);
training revenue ($25.5 million); and
We focussed on this matter due to the size
and magnitude of labour hire revenue, as
well as the higher level of inherent risk due
to the manual processes for inputting,
calculating, reviewing, and recording of the
labour hire revenue.
We assessed whether the Group’s accounting policies were
in compliance with Australian Accounting Standards.
We tested the Group’s process for recognising labour hire
revenue.
We tested labour hire revenue recognised in the period by
agreeing to timesheets, payroll reports, amounts billed and
subsequently received.
We issued audit confirmation requests to a sample of
customers to test the total revenue invoiced by the Group.
We tested the process for raising and authorising credit
notes throughout the financial year and immediately
subsequent to year end.
We compared the accuracy of hours on-billed as labour hire
revenue to amounts paid to employees, refer to employment
costs below.
We tested the correct cut-off and accrual of labour hire
revenue at year end.
Employment costs
Refer to Note 1 (Accounting policies)
Employment costs, both internal and
allocated externally, is one of the most
significant account balances in the
Consolidated Statement of Profit or Loss
and Other Comprehensive Income.
We tested the Group’s process for recognising employment
costs.
We tested the controls surrounding the authorisation of
changes in employee details, such as pay rates.
Total employment costs amount to $300.9
million.
We tested employment costs recognised in the period by
agreeing to timesheets, payroll reports, and amounts
subsequently paid.
We focussed on this matter due to the size
and magnitude of employment costs, as well
as the higher level of inherent risk due to the
manual processes for the volume of
inputting, calculating, reviewing, and
recording of the employment costs.
We analytically reviewed the labour hire margins from the
current and prior year.
We tested the cut-off and accrual of employment costs at
year end.
We tested whether PAYG amounts were deducted and
subsequently paid to the Australian Taxation Office.
We tested superannuation amounts paid by recalculation
and comparison to gross wages. We tested the subsequent
payment to the superannuation clearing house.
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
28
ASHLEY SERVICES GROUP LIMITED
ACN 094 747 510
INDEPENDENT AUDITOR’S REPORT (continued)
Information Other than the Financial Report and Auditor’s Report Thereon
The directors are responsible for the other information. The other information comprises the information
included in the Group’s annual report for the year ended 30 June 2017, but does not include the financial
report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial report or
our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a true
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and
for such internal control as the directors determine is necessary to enable the preparation of the financial
report that gives a true and fair view and is free from material misstatement, whether due to fraud or
error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with Australian Auditing Standards will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence the economic decisions of users taken
on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgement and maintain professional scepticism throughout the audit. We also:
•
•
•
Identify and assess the risks of material misstatement of the financial report, whether due to fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence
that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a
material misstatement resulting from fraud is higher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal
control.
Obtain an understanding of internal control relevant to the audit 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 Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
29
ASHLEY SERVICES GROUP LIMITED
ACN 094 747 510
INDEPENDENT AUDITOR’S REPORT (continued)
•
•
•
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the Group’s ability to continue as a going concern.
If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s
report to the related disclosures in the financial report or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of
our auditor’s report. However, future events or conditions may cause the Group to cease to
continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events in
a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the financial report. We are
responsible for the direction, supervision and performance of the Group audit. We remain solely
responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the directors, we determine those matters that were of most
significance in the audit of the financial report of the current period and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should
not be communicated in our report because the adverse consequences of doing so would reasonably
be expected to outweigh the public interest benefits of such communication.
REPORT ON THE REMUNERATION REPORT
Opinion 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 2017.
In our opinion, the Remuneration Report of Ashley Services Group Limited for the year ended 30 June
2017 complies with section 300A of the Corporations Act 2001.
Responsibilities
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.
HLB Mann Judd Assurance (NSW) Pty Ltd
Chartered Accountants
S P James
Director
Sydney, NSW
31 August 2017
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
30
Consolidated Statement of Profit or Loss and Other Comprehensive Income
For the financial year ended 30 June 2017
Note
30 Jun 2017
$000
30 Jun 2016
$000
Revenue
Other income
Employment costs
Depreciation and amortisation expense
Finance costs
Other expenses
Impairment of intangibles
Impairment of property, plant & equipment
Restructuring expense
Cancellation of shares issued on acquisition
NSW finalisation cost
Deferred vendor earn-out adjustment
Loss before income tax from continuing operations
Income tax credit
Loss for the year from continuing operations
Loss for the year from discontinued operations
Loss for the year
Other comprehensive income
Total comprehensive loss 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.
2
2
3
3
12
12
5
22
20
20
20
20
20
20
314,696
719
(300,849)
(1,854)
(717)
(10,079)
(5,486)
(3,530)
(678)
1,114
(738)
-
(7,402)
1,967
(5,435)
(534)
(5,969)
-
(5,969)
(3.72)
(3.72)
(0.36)
(0.36)
(4.08)
(4.08)
276,868
1,077
(270,871)
(3,443)
(611)
(14,625)
(65,966)
-
-
-
-
3,482
(74,089)
6,973
(67,116)
(2,510)
(69,626)
-
(69,626)
(44.75)
(44.75)
(1.67)
(1.67)
(46.42)
(46.42)
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
31
Consolidated Statement of Financial Position
As at 30 June 2017
Note
30 Jun 2017
$000
30 Jun 2016
$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
Current tax payable
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
Total Equity
7
8
13
9
10
13
11, 12
14
15
13
16
17
16
13
17
18
19
4,376
26,383
285
1,450
32,494
1,259
7,281
3,277
11,817
44,311
17,184
724
-
-
3,117
21,025
-
1,616
1,660
3,276
24,301
20,010
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
148,815
(57,687)
(71,118)
20,010
149,929
(57,687)
(65,142)
27,100
The accompanying notes form part of these financial statements.
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
32
Consolidated Statement of Changes in Equity
For the financial year ended 30 June 2017
For the year ended 30 June 2017
Balance at 1 July 2016
Loss for the period
Total comprehensive loss for the period
Transactions with owners in their capacity as
owners:
Cancellation of shares issued on acquisition
Prior year discrepancy
Balance at 30 June 2017
For the year ended 30 June 2016
Balance at 1 July 2015
Loss 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)
-
-
(1,114)
-
-
-
-
-
Retained
Earnings
$000
(65,142)
(5,969)
(5,969)
-
(7)
148,815
(57,687)
(71,118)
149,929
(57,687)
-
-
-
-
-
-
10,634
(69,626)
(69,626)
Total
$000
27,100
(5,969)
(5,969)
(1,114)
(7)
20,010
102,876
(69,626)
(69,626)
(6,150)
(65,142)
(6,150)
27,100
Balance at 30 June 2016
149,929
(57,687)
The accompanying notes form part of these financial statements.
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
33
Consolidated Statement of Cash Flows
For the financial year ended 30 June 2017
Operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Interest paid
Income taxes received
Net cash from continuing operations
Net cash used in discontinued operations
Net cash (used in)/from operating activities
Investing activities
Note
30 Jun 2017
$000
30 Jun 2016
$000
345,993
316,341
(345,302)
(316,660)
71
(567)
2,950
3,145
(200)
2,945
37
(340)
1,653
1,031
(1,258)
(227)
22
23
Payments for property, plant and equipment in continuing operations
(719)
(2,565)
Payments for property, plant and equipment in discontinued operations
22
Proceeds from sale of property, plant and equipment
Proceeds from sale of intangibles
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
Dividend paid
Net cash used in 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.
24
22
7
(6)
581
578
-
(605)
(171)
(102)
-
-
(102)
2,672
1,704
4,376
(305)
104
-
(1,301)
(307)
(4,374)
(89)
(35)
(6,151)
(6,275)
(10,876)
12,580
1,704
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
34
Notes to the Financial Statements
Table of Contents
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ---------------------------------------------------- 37
REVENUE AND OTHER INCOME ------------------------------------------------------------------------------- 45
EXPENSES ----------------------------------------------------------------------------------------------------------- 45
AUDITOR’S REMUNERATION ---------------------------------------------------------------------------------- 46
INCOME TAX CREDIT -------------------------------------------------------------------------------------------- 46
KEY MANAGEMENT PERSONNEL DISCLOSURES ---------------------------------------------------------- 47
CASH AND CASH EQUIVALENTS ------------------------------------------------------------------------------- 47
TRADE AND OTHER RECEIVABLES ---------------------------------------------------------------------------- 47
OTHER ASSETS ---------------------------------------------------------------------------------------------------- 48
PROPERTY, PLANT AND EQUIPMENT ------------------------------------------------------------------------ 48
INTANGIBLE ASSETS --------------------------------------------------------------------------------------------- 50
IMPAIRMENT ------------------------------------------------------------------------------------------------------ 51
TAX BALANCES ---------------------------------------------------------------------------------------------------- 53
TRADE AND OTHER PAYABLES -------------------------------------------------------------------------------- 55
BORROWINGS ----------------------------------------------------------------------------------------------------- 55
OTHER LIABILITIES------------------------------------------------------------------------------------------------ 56
PROVISIONS ------------------------------------------------------------------------------------------------------- 56
SHARE CAPITAL --------------------------------------------------------------------------------------------------- 57
COMMON CONTROL RESERVE -------------------------------------------------------------------------------- 58
EARNINGS PER SHARE ------------------------------------------------------------------------------------------- 58
SEGMENT INFORMATION -------------------------------------------------------------------------------------- 59
DISCONTINUED OPERATIONS --------------------------------------------------------------------------------- 60
CASH FLOW INFORMATION ----------------------------------------------------------------------------------- 61
BUSINESS COMBINATION -------------------------------------------------------------------------------------- 61
CONTROLLED ENTITIES ------------------------------------------------------------------------------------------ 62
PARENT ENTITY DISCLOSURES -------------------------------------------------------------------------------- 64
RELATED PARTY TRANSACTIONS ----------------------------------------------------------------------------- 65
SECURED AND CONTINGENT LIABILITIES ------------------------------------------------------------------- 65
FINANCIAL INSTRUMENTS ------------------------------------------------------------------------------------- 66
OPERATING LEASE COMMITMENTS ------------------------------------------------------------------------- 69
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
35
Notes to the Financial Statements
31.
32.
33.
EVENTS AFTER THE REPORTING DATE ---------------------------------------------------------------------- 69
EMPLOYEE SHARE RIGHTS PLAN------------------------------------------------------------------------------ 69
DIVIDENDS --------------------------------------------------------------------------------------------------------- 69
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
36
Notes to the Financial Statements
1.
SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
a. General information
The financial statements for the financial year ended
30 June 2017 cover Ashley Services Group Limited
and its controlled entities (“Ashley Services” or the
“Group”). Ashley Services Group is a public Company
listed on the Australian Securities Exchange (trading
incorporated and
under
domiciled in Australia.
the symbol “ASH”),
The following
is a summary of the material
accounting policies adopted by the Group in the
preparation of the consolidated financial statements.
The accounting policies have been consistently
applied unless otherwise stated.
b.
Statement of compliance
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
International Financial Reporting
comply with
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
The
statements were
financial
authorised for issue by the Board of Directors on
31 August 2017.
Basis of preparation
c.
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.
d. Going concern
The consolidated financial statements have been
prepared on a going concern basis.
e. 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.
f. New Accounting Standard and Interpretations not
yet adopted
new
standards
and
accounting
Certain
interpretations have been published that are not
mandatory for 30 June 2017 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
impact on the entity in the current or future reporting
periods and on foreseeable future transactions.
AASB 9: Financial Instruments
introduces new requirements for the
AASB 9
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
a)
Financial assets that are debt instruments will
be classified based on: (i) the objective of the
entity’s business model for managing the
financial assets; and (ii) the characteristics of the
contractual cash flows.
b) Allows an
irrevocable election on
initial
losses on
recognition to present gains or
investments in equity instruments that are not
held for trading in other comprehensive income
(instead of in profit or loss). Dividends in respect
of these investments that are a return on
investment can be recognised in profit or loss
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
37
Notes to the Financial Statements
c)
d)
and there is no impairment or recycling on
disposal of the instrument.
Introduces a
through other
‘fair value
comprehensive income’ measurement category
for particular simple debt instruments.
Financial assets can be designated and
measured at fair value through profit or loss at
initial recognition if doing so eliminates or
significantly
reduces a measurement or
recognition inconsistency that would arise from
measuring assets or liabilities, or recognising the
gains or losses on them, on different bases.
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:
Establishes a new revenue recognition model;
changes the basis for deciding whether revenue
is to be recognised over time or at a point in
time;
topics
(e.g., multiple
provides new and more detailed guidance on
specific
element
arrangements, variable pricing, rights of return,
warranties and licensing); and
expands and
revenue.
improves disclosures about
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 there may be a potential
impact on the Training division and will undertake
further work to quantify this potential impact.
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
amount of lease assets will reduce more 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
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
38
Notes to the Financial Statements
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 cash flows as principal repayments
on all lease liabilities will now be included in
financing activities
than operating
activities.
rather
Business combinations
g.
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
liabilities (including contingent liabilities) assumed
are recognised (subject to certain limited exceptions).
to
initial
Subsequent
When measuring the consideration transferred in the
business combination, any asset or liability resulting
from a contingent consideration arrangement is also
included.
recognition,
contingent consideration classified as equity is not
remeasured and
is
Contingent
accounted
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.
its subsequent settlement
for within
equity.
All transaction costs incurred in relation to the
business combination are recognised as expenses in
loss and other
the statement of profit or
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.
h. Basis of consolidation
The Group financial statements consolidate those of
its
Ashley Services Group Limited and all of
subsidiaries as of 30 June 2017. Ashley Services
Group Limited controls a subsidiary if it is exposed, or
has rights, to variable returns from 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.
All transactions and balances between Group
companies are eliminated on consolidation, including
unrealised gains or 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 recognised from the effective date of acquisition,
or up to the effective date of disposal, as applicable.
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.
i.
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
net of the amount of GST. Below are the specific
accounting policies adopted by the Group:
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
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
39
Notes to the Financial Statements
authority, a “Work in Progress” balance is recognised
within “Other receivables” after adjusting for an
estimate of potentially unsuccessful claims.
Changes in the ownership interest in a subsidiary are
accounted for as equity transactions and do not affect
the carrying amounts of goodwill.
Labour hire
Other intangibles
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.
Intangibles acquired by the group are stated at cost
less accumulated amortisation and
impairment
losses. Amortisation is charged to the profit or loss
on a straight line basis over the estimated useful life.
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 State funding
employer rebates earned in relation to specified
categories of individuals.
j.
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 techniques which make the maximum
use of market information where available. Under
this method, goodwill attributable to the interests of
the business is recognised in the financial statements.
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 or losses on the disposal of equity
include the carrying amount of goodwill related to
the entity sold.
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 CGU
to which they are attributed. Where impairment is
recognised, it is recorded in the profit or loss in the
period the impairment is identified.
k.
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 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
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
40
Notes to the Financial Statements
management expects to recover or settle the carrying
amount of the related asset or liability.
Deferred tax assets relating to 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
in the
probable that the reversal will occur
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 it 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
tax
group under
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.
Such taxes are measured using the ‘standalone
taxpayer’ approach to allocation.
Current tax
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 that it
has formed an income 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.
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.
l.
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 consolidated statement of
financial position.
m. 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
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.
n.
Property, plant and equipment
Each class of property, plant and equipment is carried
at cost, less where applicable, any accumulated
depreciation and impairment losses.
Property, plant and equipment is stated at historical
cost
less accumulated depreciation and any
accumulated impairment losses.
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
41
Notes to the Financial Statements
The depreciable amount of fixed assets 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.
The annual depreciation rates used for each class of
depreciable assets are:
Class of fixed assets
Computer equipment
Office equipment
Depreciation rate
20 - 25%
20%
Furniture and fittings
Motor vehicles
Training equipment
Leasehold improvements
10%
18.75 - 25%
33.33%
20% - 40%
lives are determined by reference
In the case of leasehold improvements, expected
to
useful
comparable owned assets or over the term of the
lease, if shorter.
The carrying amount of property, 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
its estimated
carrying amount
recoverable amount.
is greater than
Gains or losses on disposals are determined by
comparing proceeds with carrying amount. These
gains or losses are recognised immediately in profit
or loss.
o.
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
p.
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 vesting requirements.
Those cash flows are discounted using market yields
on HQ corporate bonds with terms to maturity that
match the expected timing of cash flows.
q.
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.
r.
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.
Impairment of assets
s.
At the end of each reporting period, the Group
assesses whether there is any indication that an asset
may be impaired.
information and
including dividends
The assessment will include considering external
internal sources of
sources of
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
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
42
Notes to the Financial Statements
asset’s carrying value over its recoverable amount is
recognised immediately in profit or loss, unless the
asset
Any
is carried at a revalued amount.
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 is performed at least annually for
goodwill and intangible assets with indefinite lives.
required
Comparative figures
t.
When
Standards,
comparative figures have been adjusted to conform
to changes in presentation for the current financial
year.
Accounting
by
u. 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.
v.
Significant management judgement in applying
accounting policies
the
financial
preparing
statements,
When
management undertakes a number of judgements,
estimates and assumptions about the recognition and
measurement of assets,
income and
expenses.
liabilities,
Significant management judgement
are
following
The
significant management
judgements in applying the accounting policies of the
Group that have the most significant effect on the
financial statements.
Determination of Cash Generating Units for purpose
of impairment reviews
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
largely
independent of the cash inflows from other assets or
group of assets, being Training and Labour Hire.
that are
inflows
Assessment of the Class Action against the Group
is
that
(ASH)
include
Ashley Services Group Limited
the
respondent in a class action that was commenced in
the Federal Court of Australia (NSW Registry) on 1
December 2016 on behalf of a group of shareholders.
The allegations against ASH
its
prospectus, dated 7 August 2014, contained certain
misstatements and omissions in contravention of the
Corporations Act 2001 (Cth), that ASH contravened
the continuous disclosure provisions and that it
engaged in misleading and deceptive conduct during
the period August 2014 to April 2015. ASH is
vigorously defending this proceeding. The potential
liability and costs in respect of the proceeding cannot
be accurately assessed at this time, but the existence
of this matter has entailed the necessity for
disclosure as a contingent liability (Refer Note 28).
Recognition of deferred tax assets
The extent to which deferred tax assets can be
recognised
is based on an assessment of the
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
income and
measurement of assets,
expenses is provided below. Actual results may be
substantially different.
liabilities,
Impairment
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
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 2017, the
to discount
them.
rate
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
43
after deducting any costs of servicing equity other
than ordinary shares, by the weighted average
number of ordinary shares outstanding during the
financial year, adjusted for bonus elements
in
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
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
The
is
fair value of contingent consideration
dependent on the outcome of many variables that
affect future profitability (see Note 29). The fair value
of acquired intangibles is also subject to a number of
assumptions. This involves developing estimates and
assumptions consistent with how market participants
would price the 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
information
available.
the best
Long service leave provisions
In determining the provision for employees’ long
service leave, consideration is given to 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
long
determining
for
incentive
provision
term
senior
In
management’s
plan,
consideration is given to the probability the required
“earnings per share” performance requirement 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.
x.
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the
profit attributable to equity holders of the Company,
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
44
Notes to the Financial Statements
2. REVENUE AND OTHER INCOME
Operating activities:
Labour hire revenue
Training revenue from continuing operations1
Other income:
Interest received
Sundry income
Note:
1. Refer to note 22 for details of discontinued operations
3.
EXPENSES
2017
$000
289,198
25,498
314,696
70
649
719
Loss 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
Intellectual property
Course material
Impairment
Impairment of intangible assets
Impairment of PP&E
2017
$000
567
150
717
50
809
285
1,144
343
-
367
710
5,486
3,530
2016
$000
248,612
28,256
276,868
37
1,040
1,077
2016
$000
511
100
611
172
807
689
1,668
129
118
1,528
1,775
65,966
-
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
45
Notes to the Financial Statements
4. AUDITOR’S REMUNERATION
Auditor of the parent entity – Grant Thornton and HLB Mann Judd
Audit and review of financial reports under the Corporations Act 2001
- Grant Thornton1
Audit of financial reports under the Corporations Act 2001
- HLB Mann Judd2
Total Remuneration
Other entities
In addition to the above, the related entities detailed in Note 25 have also
paid fees to the auditor(s) as follows:
Audit and review of financial reports under the Corporations Act 2001
- Grant Thornton1
Audit of financial reports under the Corporations Act 2001
- HLB Mann Judd2
2017
$
2016
$
95,579
232,000
110,000
205,579
-
232,000
-
45,000
25,000
25,000
-
45,000
Note:
1. Grant Thornton Audit Pty Ltd resigned as auditor of the Company on 12 May 2017
2. HLB Mann Judd Assurance (NSW) Pty Limited were appointed auditor of the Company on 12 May 2017 subject to ASIC consent (granted
20 June 2017) to the resignation of Grant Thornton Audit Pty Ltd and ratification by shareholders at the company’s 2017 AGM.
5.
a.
INCOME TAX CREDIT
Components of tax credit for continuing operations
Current tax expense
Deferred tax – origination and reversal of temporary differences
Over provision of tax in prior year
Income tax credit
2017
$000
919
(1,774)
(1,112)
(1,967)
b. Reconciliation of prima facie tax on loss from ordinary activities to income tax expense
Net loss before tax from continuing operations
Prima facie tax (credit)/expense on net profit from ordinary activities before
income tax at 30% (2016: 30%)
Add / (less) Tax effect of:
– Entertainment
– Other
– Deferred vendor earn-out adjustment
– Impairment of intangibles
– Net intangibles adjustment
– Profit on cancellation of shares
– Acquired intangibles
– Over provision of tax in prior year
Income tax credit
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
2016
$000
1,154
(5,694)
(2,433)
(6,973)
2016
$000
(74,089)
2017
$000
(7,402)
(2,221)
(22,227)
6
2
-
1,646
46
(334)
-
(1,112)
(1,967)
10
1
(1,044)
19,790
-
-
(1,070)
(2,433)
(6,973)
46
Notes to the Financial Statements
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.
6. KEY MANAGEMENT PERSONNEL DISCLOSURES
a.
Key management personnel compensation for the year was as follows
Short-term employee benefits
Post-employment benefits
Total
2017
$
1,789,816
112,749
1,902,565
2016
$
1,906,276
136,708
2,042,984
Individual director and key management personnel disclosures
b.
Detailed remuneration disclosures are included in the Directors’ Report. The relevant information can be found
in the Remuneration section of the report on page 18 to 20, Tables 8 to 11.
7.
CASH AND CASH EQUIVALENTS
Cash on hand
Cash at bank
8.
TRADE AND OTHER RECEIVABLES
Current
Trade receivables
Allowance for impairment of trade receivables
Other receivables
2017
$000
5
4,371
4,376
2017
$000
22,930
(1,250)
4,703
26,383
2016
$000
9
1,695
1,704
2016
$000
20,505
(1,055)
8,475
27,925
a. 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 2017
2017
$000
15,954
5,118
608
-
1,250
22,930
2016
$000
14,469
2,884
683
1,414
1,055
20,505
47
Notes to the Financial Statements
b.
The movement in the allowance for doubtful accounts in respect of trade receivables is detailed below
Balance at beginning of year
Increase in allowance recognised in profit or loss
Amounts written-off
Balance at end of year
9. OTHER ASSETS
Current
Prepayments
Deposits
Bank guarantee1
Note:
2017
$000
1,055
489
(294)
1,250
2017
$000
692
33
725
1,450
2016
$000
803
849
(597)
1,055
2016
$000
593
337
-
930
1. As at balance date the company had bank guarantees of $559,193 relating to property leases. The $725,000 represents a restricted bank
account to cover the company’s total available guarantee facility of $723,618.
10. PROPERTY, PLANT AND EQUIPMENT
Motor vehicles
Cost
Accumulated impairment
Accumulated depreciation
Office equipment
Cost
Accumulated impairment
Accumulated depreciation
Leasehold improvements
Cost
Accumulated impairment
Accumulated depreciation
Capital works in progress
Cost
Accumulated depreciation
Total property, plant and equipment
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
2017
$000
475
(115)
(360)
-
7,239
(2,124)
(4,318)
797
3,091
(1,291)
(1,602)
198
264
-
264
1,259
2016
$000
514
-
(306)
208
7,213
-
(3,870)
3,343
3,334
-
(1,239)
2,095
418
-
418
6,064
48
Notes to the Financial Statements
a. Movement in carrying amounts of property, plant and equipment
2017
Balance at 1 July 2016
Additions/(transfers)
Disposals
Depreciation expense – continuing operations
Depreciation expense – discontinued operations
Impairment
Balance at 30 June 2017
2016
Balance at 1 July 2015
Additions/(transfers)
Disposals
Depreciation expense – continuing operations
Depreciation expense – discontinued operations
Balance at 30 June 2016
Motor
vehicles
$000
208
Office
equipment
$000
3,343
Leasehold
improvements
$000
2,095
Capital
Work In
Progress
$000
418
3
(154)
22
(65)
(50)
-
652
(224)
(809)
(41)
(115)
(2,124)
-
797
(243)
(285)
(81)
(1,291)
198
Total
$000
6,064
523
(532)
(1,144)
(122)
(3,530)
-
-
-
-
264
1,259
Motor
vehicles
$000
363
Office
equipment
$000
2,203
Leasehold
improvements
$000
1,890
Capital Work
In Progress
$000
767
48
(29)
(172)
(2)
208
2,125
(40)
(807)
(138)
3,343
1,019
(14)
(689)
(111)
2,095
(349)
-
-
-
418
Total
$000
5,223
2,843
(83)
(1,668)
(251)
6,064
The Group’s property, plant and equipment are encumbered by a fixed and floating charge as security for the
group’s working capital facility (Refer Note 15).
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
49
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
Reclassification from goodwill
Impairment (note 12)
Net carrying value
Intellectual property
Cost
Purchase
Reclassification from goodwill
Impairment (note 12)
Accumulated amortisation
Net carrying value
Total intangible assets
a. Intangible assets – detailed reconciliation
Customer
Relationships
and Licences2
$000
624
Goodwill
$000
2,782
-
-
-
-
(129)
-
495
2017
Balance at 1 July 2016
Capitalised course materials
Amortisation – continuing operations
Impairment charge1
Balance at 30 June 2017
Note:
1. See Note 12b.
2. Customer relationships have a remaining useful life of 5 years.
2,782
2017
$000
66,256
(1,000)
(62,474)
2,782
2,062
(918)
(649)
495
3,798
842
(4,640)
-
7,471
204
158
(3,896)
(3,937)
-
3,277
Brand
Names
$000
2,599
-
-
(2,599)
-
Intellectual
Property
$000
3,842
204
(1,159)
(2,887)
-
2016
$000
66,256
(1,000)
(62,474)
2,782
2,062
(918)
(520)
624
3,798
842
(2,041)
2,599
7,471
-
158
(1,009)
(2,778)
3,842
9,847
Total
$000
9,847
204
(1,288)
(5,486)
3,277
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
50
Notes to the Financial Statements
2016
Balance at 1 July 2015
Capitalised course materials
Acquired through business combinations
Amortisation – continuing operations
Amortisation – discontinued operations
Impairment charge1
Goodwill
$000
66,174
-
(918)
-
-
(62,474)
Balance at 30 June 2016
Note:
1. See Note 12b.
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.
2,782
12.
IMPAIRMENT
a.
Impairment
Customer
Relationships
and Licences
$000
1,195
Brand Names
$000
3,798
-
-
(129)
-
(442)
624
-
842
-
-
(2,041)
2,599
Intellectual
Property
$000
5,049
1,301
158
Total
$000
76,216
1,301
82
(1,646)
(1,775)
(11)
(1,009)
3,842
(11)
(65,966)
9,847
The consolidated entity tests whether goodwill and other intangible assets have suffered any impairment on an
annual basis, or more frequently, if required.
Training division
As a result of the loss of key state funding contracts within the Training division for 2017 in NSW and Victoria, a
detailed impairment review of the Training cash-generating unit (“CGU”) was performed at 31 December 2016.
The recoverable amounts of the Training CGU was determined as the higher of fair value less costs of disposal
and value-in-use calculations.
The Training division was not successful in securing material 2017 state funding contracts in its two key trading
states of Victoria and NSW. Consequently, management has implemented plans to significantly scale back the
scope and size of its training business. As a result, the future cash flows from the training business have been
estimated to be negligible.
On this basis the recoverable amount has been calculated based on fair value less costs of disposal. This has been
determined based on the currently concluding transaction, being that related to WA/SA Integracom, which was
known as at 31 December 2016. The recoverable amount was therefore $1.0 million, being the purchase price
of $1.065 million less known costs of $65k, leaving $0.6 million for Course Materials (Intellectual Property) and
$0.4 million for PP&E, and the Training division assets were written down to these values as at 31 December
2016.
This purchase price, being an agreed selling price, is reflective of the fair value since it has been established
through negotiation between two unrelated parties. In considering the fair value hierarchy in AASB 13: Fair Value
Measurement, this is considered to be Level 2, since it is best characterised as a “market-corroborated input”.
Payment of the purchase price of $1.065 million was made on 27th February 2017.
All other non-current assets of the Training CGU have been impaired.
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
51
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 14% in FY18, reflecting
the net impact of recent customer wins and losses. EBITDA margin is forecast at 2.7% (before corporate overhead
allocations).
The recoverable amounts of the 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:
Labour Hire
Terminal Growth rates
30 Jun 2017
0%
30 Jun 2016
0%
Pre-tax discount rates
30 Jun 2017
18.7%
30 Jun 2016
18.7%
The growth rate reflects management’s view of longer-term average growth rates for the respective sectors. The
discount rate reflects appropriate adjustments relating to market risk and specific risk factors of each unit.
Impairment charges
b.
As a result of the analysis, an impairment charge of $8.3 million has been recorded in the FY17 results, in the
Training CGU as follows:
2017
Training
Labour Hire
Goodwill*
$’000
Other
Intangibles
$’000
5,486
-
5,486
PP&E
$’000
2,866
664
3,530
Total
$’000
8,352
664
9,016
-
-
-
Total impairment charge for the year ended 30 June 2017
* All goodwill related to the Training CGU has been impaired previously.
These movements have reduced the net carrying amount of goodwill and other intangibles to $3.3 million as
presented in note 11.
2016
Training
Labour Hire
Total impairment charge for the year ended 30 June 2016
Goodwill
$’000
52,361
10,113
62,474
Other
Intangibles
$’000
3,492
-
3,492
PP&E
$’000
-
-
-
Total
$’000
55,853
10,113
65,966
Movements in the net carrying amount of goodwill and other intangibles are presented in note 11a.
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
52
Notes to the Financial Statements
The amount of goodwill, brand names and other intangibles remaining by CGU and subject to future
impairment testing is as follows:
2017
Training
Labour Hire
Total
2016
Training
Labour Hire
Total
Goodwill
$’000
-
2,782
2,782
Goodwill
$’000
-
2,782
2,782
Customer
Relationships/
Licences
$’000
-
495
495
Customer
Relationships/
Licences
$’000
-
624
624
Brand Names
$’000
Intellectual
Property
$’000
-
-
-
-
-
-
Brand Names
$’000
Intellectual
Property
$’000
2,599
-
2,599
3,842
-
3,842
Total
$’000
-
3,277
3,277
Total
$’000
6,441
3,406
9,847
c. Sensitivity analysis
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
+/-2.5
+/-1.0
+/-1.2
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)
2017
$000
285
2016
$000
2,838
7,281
7,590
-
-
1,616
3,700
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
53
Notes to the Financial Statements
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
2017
Current assets
Trade, other receivables and other
assets
(2,349)
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
(860)
-
3,558
2,365
1,176
3,890
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,108
(1,241)
860
592
775
(1,456)
(105)
1,774
-
592
4,333
909
1,071
5,664
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
(3,959)
(1,362)
11
2,805
827
-
(1,678)
-
-
-
-
-
-
-
-
1,610
(2,349)
(47)
-
-
-
-
(47)
549
(11)
753
1,538
1,176
5,615
(860)
-
3,558
2,365
1,176
3,890
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
Deferred tax asset
Total
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
54
Notes to the Financial Statements
14. TRADE AND OTHER PAYABLES
Current
Trade payables
Accrued expenses
GST payable
Sundry creditors
2017
$000
2,003
5,502
2,177
7,502
17,184
2016
$000
2,661
5,821
2,000
8,500
18,982
The average credit period on purchases of certain products and services 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
Working capital facility
Finance Leases (a)
Bank guarantee (b)
a.
Finance Leases
2017
$000
-
-
724
724
2016
$000
-
102
-
102
The Group had a small number of finance leases on company use motor vehicles, but none at 30 June 2017. The
asset carrying value of these vehicles is Nil as at 30 June 2017 (2016: $84,525) and is included in Note 10.
b. Bank Guarantee
As at balance date the company had bank guarantees of $559,193 relating to property leases. The $723,618
represents an interest free loan provided to the company by Shrimpton Holdings Pty Limited to cover the
company’s total available guarantee facility of $723,618.
c. Group credit facility
Total facilities at reporting date
Working capital facility
Used at reporting date
Bank overdraft
Unused at reporting date
Bank overdraft
Term facility
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
2017
$000
5,000
5,000
-
-
5,000
n/a
5,000
2016
$000
15,000
15,000
-
-
15,000
n/a
15,000
55
Notes to the Financial Statements
Subsequent to year end FY16, the Company 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 further reduced to $5 million from 1 December 2016.
On 30 January 2017, the Group was notified that the $5.0 million working capital facility had been assigned by
Bankwest to Shrimpton Holdings Pty Limited, a company associated with Ross Shrimpton, Managing Director,
and with shareholders of the Group.
As at 30 June 2017, the Group’s $5 million working capital facility through Shrimpton Holdings Pty Limited,
remained in place. Shrimpton Holdings has fixed and floating charges over the Group’s assets, subject to
conditions outlined by a separate agreement between Ashley Services Group Limited and Shrimpton Holdings
Pty Limited in line with the ASX Listing Rule Waiver as granted 3 April 2017.
On 26 July 2017, the Company announced it had extended its $5 million working capital facility through
Shrimpton Holdings Pty Limited, out for a further year to 29 October 2018, in line with the conditions outlined in
the revised ASX Listing Rule Waiver as granted 17 July 2017.
16. OTHER LIABILITIES
Current
Vendor earn-out liability (a)
Non-Current
Vendor earn-out liability (a)
a. Vendor earn-out liability
2017
$000
-
-
2016
$000
942
-
The Vendor earn-out liability as at 30 June 2016 comprised the fair value of estimated consideration payments
payable to vendors in relation to the acquisition of SILK on 30 April 2015. $0.6 million was paid out to the vendors
in August 2016, $0.1 million used to offset debtor write-offs, with the balance of $0.2 million written back to
profit during financial year ended 30 June 2017.
17. PROVISIONS
Current
Employee benefits (a)
Provision for discontinued operation (b)
Total
Non-current
Employee benefits (a)
Provision for discontinued operation (b)
Total
2017
$000
2,570
547
3,117
158
1,502
1,660
2016
$000
3,021
771
3,792
540
1,740
2,280
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
56
Notes to the Financial Statements
a. Reconciliation of employee provisions
Opening balance
Less: leave taken during the year
Add: leave provided for during the year
Closing balance
b. Provision for discontinued operation
2017
$000
3,561
(1,502)
669
2,728
2016
$000
2,756
(557)
1,362
3,561
During the second half of financial year ended 30 June 2017, the Board approved an orderly exit from the
international and domestic hospitality student business originally acquired through the SILK acquisition in April
2015. The Group has fulfilled its obligations for the remaining students and the Registered Training Organisation
(“RTO”) has been deregistered through the Australian Skills Quality Authority (“ASQA”).
The $2.05 million provision at end 30 June 2017 (2016: $2.511 million) represents the discounted cost of future
surplus lease obligations.
18. SHARE CAPITAL
The Company 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:
143,975,904 (Jun-16: 150,000,000) fully paid ordinary shares
Performance rights
a. Ordinary shares
30 Jun 2017
$000
148,815
30 Jun 2017
Number of rights
551,578
30 Jun 2016
$000
149,929
30 Jun 2016
Number of rights
1,942,456
The reduction in Share Capital from 150,000,000 shares ($149.9m) at 30 Jun 16 to 143,975,904 shares ($148.8m)
at 30 June 17 is the result of the cancellation of 6,024,096 shares issued by way of consideration to fund the
purchase of Integracom as approved by shareholders at the AGM of 9 November 2016.
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.
b. Performance rights
As at 30 June 2015, the Group had issued 380,788 Performance rights. During the financial year ended 30 June
2016 the Group issued 1,561,668 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.
During the financial year ended 30 June 2017 the Group has cancelled 1,390,878 Performance Rights for Nil
consideration following various employees leaving the company.
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 financial years ended 30 June
2016 and 30 June 2017.
The plan has been suspended for the financial years ending 30 June 2017 and 30 June 2018.
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
57
Notes to the Financial Statements
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.
20. EARNINGS PER SHARE
Net loss 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
2017
$000
(5,969)
2016
$000
(69,626)
146,143,917
150,000,000
146,143,917
(3.72)
150,000,000
(44.75)
(3.72)
(0.36)
(0.36)
(4.08)
(4.08)
(44.75)
(1.67)
(1.67)
(46.42)
(46.42)
With the Group making a current year loss, the Performance Rights impact is anti-dilutive, and as such has not
been included in the calculation of the diluted EPS. 551,578 Performance Rights not included in the calculation.
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
58
Notes to the Financial Statements
21. SEGMENT INFORMATION
The Group’s management identifies two operating segments, Labour Hire and Training, representing the main
products and services provided by the Group. During the financial year ended 30 June 2017, there have been no
changes from prior periods in the measurement methods used to determine operating segments and reported
segment profit or loss. The revenues and profit generated by each of the Group’s operating segments are
summarised as follows:
2017
Revenue
From external customers
Segment revenue
Other income
Employment cost
Depreciation and amortisation expense
Finance costs
Other expenses
Impairment of intangibles
Impairment of PP&E
Restructuring expense
Selective reduction of capital and cancellation of shares
NSW Department finalisation costs
Segment Profit/(loss)
Unallocated items
(Loss) before income tax
Income tax benefit
Total comprehensive (loss) for the year from continuing operations
2016
Revenue
From external customers
Segment revenue
Other Income
Employment costs
Depreciation and amortisation expense
Finance costs
Other expenses
Impairment of intangibles
Deferred vendor earn-out adjustment
Segment profit/(loss)
Unallocated items
Profit before income tax
Income tax expense
Total comprehensive (loss) for the year from continuing operations
Labour Hire
$000
289,198
289,198
636
(279,192)
(385)
(10)
(2,833)
-
(664)
-
-
-
6,750
Labour Hire
$000
248,612
248,612
1,034
(241,065)
(353)
(10)
(3,663)
(10,113)
-
(5,558)
Training
$000
25,498
25,498
10
(19,332)
(1,267)
-
(4,739)
(5,486)
(2,866)
(678)
1,114
(738)
(8,484)
Training
$000
28,256
28,256
5
(26,916)
(2,988)
(91)
(8,209)
(55,853)
3,482
(62,314)
Total
$000
314,696
314,696
646
(298,524)
(1,652)
(10)
(7,572)
(5,486)
(3,530)
(678)
1,114
(738)
(1,734)
(5,668)
(7,402)
1,967
(5,435)
Total
$000
276,868
276,868
1,039
(267,981)
(3,341)
(101)
(11,872)
(65,966)
3,482
(67,872)
(6,217)
(74,089)
6,973
(67,116)
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
59
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 $118.3 million (2016: $118.0 million) which arose
from sales to 3 (2016: 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 $54.6 million, $33.1 million and $30.6 million respectively
(2016: $47.9 million, $42.5 million and $27.6 million respectively).
There are no customers whose individual revenue exceeded 10% of total revenue in the Training segment in
either financial year.
22. DISCONTINUED OPERATIONS
b. Financial year ended 30 June 2017: SILK
During the second half of the financial year ended 30 June 2017, the Board approved an orderly exit from the
international and domestic hospitality student business originally acquired through the SILK acquisition in April
2015. The Group has fulfilled its obligations for the remaining students and the Registered Training Organisation
(“RTO”) has been deregistered through the Australian Skills Quality Authority (“ASQA”). The $534,000 (SILK
$138,000, Cantillon $396,000) represents the after tax trading loss incurred during the financial year.
c. Financial year ended 30 June 2016: Cantillon
During the final quarter of the financial year ended 30 June 2016, the Board approved an orderly exit from the
international student business in Perth, Western Australia, originally acquired through the Cantillon acquisition
in September 2014. The Group has fulfilled its obligations for the remaining students and the RTO has been
deregistered through ASQA. The $2.5 million after tax loss represents the trading loss incurred during the
financial year ($0.8 million after tax), together with the costs of termination ($1.7 million), which primarily
represents the discounted cost of the future lease obligations, along with a minor $0.1m contribution from the
SILK business discontinued in 2017 and now included in prior year comparatives.
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
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
2017
$000
845
1
(1,265)
(65)
-
(216)
-
-
(700)
166
(534)
(534)
2016
$000
4,832
51
(3,997)
(263)
(4)
(1,693)
(2,275)
(236)
(3,585)
1,075
(2,510)
(2,510)
60
Notes to the Financial Statements
Cash flows from the discontinued operations were:
Discontinued operation
Receipts from customers
Payments to suppliers and employees
Interest paid
Income taxes 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
23. CASH FLOW INFORMATION
Reconciliation of cash flow from operations to loss after income tax
Loss 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
- (Profit)/Loss on disposal of fixed assets
- Gain on reassessment of deferred consideration liabilities
- Impairment of intangibles
- Impairment of PP&E
- Cancellation of shares issued on acquisition
- Changes in assets and liabilities
- Decrease in trade and other receivables
- Decrease /(increase) in other assets
- (Increase)/decrease in deferred tax asset
- Decrease in trade and other payables
- (Decrease)/ increase in provisions
- Increase in current tax receivables
- Decrease in deferred tax liabilities
Net cash (used in)/from operating activities
24. BUSINESS COMBINATION
2017
$000
1,769
(1,930)
-
(39)
(200)
(6)
(6)
-
-
(206)
2017
$000
(5,969)
1,919
194
(46)
(338)
5,486
3,530
(1,114)
1,393
205
309
(1,798)
(1,295)
2,553
(2,084)
2,945
2016
$000
4,963
(6,176)
(3)
(42)
(1,258)
(305)
(305)
(35)
(35)
(1,598)
2016
$000
(69,626)
3,706
849
6
(3,482)
65,966
-
-
8,950
(163)
(3,716)
(3,318)
3,316
(864)
(1,851)
(227)
The Group made no acquisitions during the financial year ended 30 June 2017 and also the previous financial
year ended 30 June 2016. Final vendor earn-out payments were made during the current and prior year relating
to acquisitions from prior periods.
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
61
Notes to the Financial Statements
25. CONTROLLED ENTITIES
Set out below are the controlled entities of Ashley Services Group Limited:
Country of
incorporation
2017 percentage
owned
%
2016 percentage
owned
%
Action Arndell Park Pty Limited
Action Botany Pty Limited
Action James (Qld) Pty Limited
Action James Mascot Pty Limited
Action James NSW Pty Limited
Action James Parramatta Pty Limited
Action James WCF Pty Limited
Action James Western Suburbs Pty Limited
Action Job Support Pty Limited
Action MMX Pty Limited
Action WA Pty Limited
Action Workforce AC Pty Limited
Action Workforce ACT Pty Limited
Action Workforce BAX1 Pty Limited
Action Workforce CAT Pty Limited
Action Workforce COL1 Pty Limited
Action Workforce COS1 Pty Limited
Action Workforce COT Pty Limited
Action Workforce IMT Pty Limited
Action Workforce LIN1 Pty Limited
Action Workforce NSW Pty Limited
Action Workforce OS Pty Limited
Action Workforce OSI 1 Pty Limited
Action Workforce OST Pty Limited
Action Workforce Pty Limited
Action Workforce T1 Pty Limited
Action Workforce T2 Pty Limited
Action Workforce VAPS Pty Limited
Action Workforce VER1 Pty Limited
Action Workforce Victoria Pty Limited
Action Workforce VM Pty Limited
Action Workforce VPS Pty Limited
ADV Services Pty Limited
ADV1 Pty Limited
ADV2 Pty Limited
ADV3 Pty Limited
ADV4 Pty Limited
ADV5 Pty Limited
ADV6 Pty Limited
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
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
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
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
62
Notes to the Financial Statements
Country of
incorporation
2017 percentage
owned
%
2016 percentage
owned
%
ADV7 Pty Limited
ADV8 Pty Limited
ADV9 Pty Limited
Advance BGT Pty Limited
Advance Exchange Pty Limited
Advance GW Pty Limited
Advance GX Pty Ltd
Advance KM Pty Limited
Advance LLA Pty Limited
Advance MAN Pty Limited
Advance MIX Pty Limited
Advance Recruitments Pty Limited
Advance WL Pty Limited
Advance WLE Pty Limited
Advance WLT Pty Limited
Advance WMPM Pty Limited
AIVD Holdings Pty Limited
ASG Integracom (AUST) Holdings Pty Limited
ASG Integracom (AUST) Pty Limited
Ash Pty Limited
Ashley Apprenticeship Network Pty Limited
Ashley Institute Holdings Pty Limited
Australian Institute of Vocational Development Pty Limited
AWF Training 1 Pty Limited
AWF Training 2 Pty Limited
AWF Training 3 Pty Limited
AWF Training 4 Pty Limited
AWF Training 5 Pty Limited
Cantillon Holdings Pty Limited2
Capra Ryan Online Learning Pty Limited
College of Innovation and Industry Skills Pty Limited3
Concept AWF Pty Limited (formerly Advance TR Pty Limited)
Concept Employment (Aust) Pty Limited
Concept Engineering (Aust) Pty Limited
Concept Project Resources Pty Limited (formerly Action
Workforce VPN Pty Limited)
CP Action Electronics Pty Limited
CP Action Workforce Pty Limited
ECA Chullora Pty Limited
ECA Plastics Pty Limited
Executive Careers Australia Pty Limited
Global Education and Training Group Pty Limited4
Integracom Holdings Pty Limited
Integracom Unit Trust1
James Personnel Pty Limited
James Warehousing Pty Limited
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
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
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
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
63
Notes to the Financial Statements
Country of
incorporation
Australia
2017 percentage
owned
%
100
Qualitas Education Pty Limited (formerly Advance LSA Pty
Limited)
Silk Group Holdings Pty Limited
TBRC Holdings Pty Limited
The Blackadder Recruitment Company Pty Limited
Tracmin Holdings Pty Limited
Tracmin Pty Limited
Training Support Group Pty Limited
Vocational Training Australia Pty Limited
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.
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100
100
100
100
100
100
100
2016 percentage
owned
%
100
100
100
100
100
100
100
100
26. PARENT ENTITY DISCLOSURES
a.
Financial position
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Common control reserve
Accumulated losses
Total equity
b.
Statement of profit or loss and other comprehensive income
Loss for the year
Other comprehensive income
Total comprehensive loss
2017
$000
92
17,028
17,120
724
-
724
16,396
148,815
(57,687)
(74,732)
16,396
2017
$000
(5,095)
-
(5,095)
2016
$000
92
22,513
22,605
-
-
-
22,605
149,929
(57,687)
(69,637)
22,605
2016
$000
(65,966)
-
(65,966)
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
64
Notes to the Financial Statements
c.
Contingent liabilities of the Parent Entity
The Parent entity had one contingent liability as at 30 June 2017.
Ashley Services Group Limited (ASH) is the respondent in a class action that was commenced in the Federal Court
of Australia (NSW Registry) on 1 December 2016 on behalf of a group of shareholders (see Note 28 for more
detail).
d.
Commitments for expenditure for the Parent entity
The Parent entity had Nil committed expenditure as at 30 June 2017 (30 June 2016: Nil).
27. RELATED PARTY TRANSACTIONS
a.
Parent company
There is no ultimate parent company for Ashley Services Group Limited.
b.
Transactions with related entities
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 and outgoings 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 Wales1
Loan balances from entities associated with Mr Ross Shrimpton. These are unsecured and
non-interest bearing loans and are in place as security for the Bank Guarantee facility provided
through Bankwest.
Interest paid to Shrimpton Holdings Pty Limited, an entity which is controlled by Mr Ross
Shrimpton
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
Note:
20172
$
20162
$
436,540
205,088
723,618
78,402
-
97,808
-
-
17,900
97,364
1. 2017 amount includes Rent/Outgoings payment for FY17 ($214,717) and prepayment for FY18 ($221,823) whilst 2016 amount is for
FY16 Rent/Outgoings payment only.
2. All amounts as shown are exclusive of GST.
28. SECURED AND CONTINGENT LIABILITIES
For assets pledged as security for borrowing facilities see Note 15.
Ashley Services Group Limited (ASH) is the respondent in a class action that was commenced in the Federal Court
of Australia (NSW Registry) on 1 December 2016 on behalf of a group of shareholders. The allegations against
ASH include that its prospectus, dated 7 August 2014, contained certain misstatements and omissions in
contravention of the Corporations Act 2001 (Cth), that ASH contravened the continuous disclosure provisions
and that it engaged in misleading and deceptive conduct during the period August 2014 to April 2015. ASH is
vigorously defending this proceeding. The potential liability and costs in respect of the proceeding cannot be
accurately assessed at this time, but the existence of this matter has entailed the necessity for disclosure as a
contingent liability.
The Group had no other contingent liabilities at 30 June 2017.
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
65
Notes to the Financial Statements
29. FINANCIAL INSTRUMENTS
a.
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.
b.
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.
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:
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
66
Notes to the Financial Statements
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
2017
$000
73
(73)
73
(73)
2016
$000
125
(125)
125
(125)
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.
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.
d.
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
2017
Trade and other payables
Borrowings – working capital facility
Bank guarantee (refer Note 15)
Total
Weighted average
effective interest
rate %
n/a
5.85%
0%
Within 1 year
$000
1 to 5 years
$000
Over 5 years
$000
17,184
-
724
17,908
-
-
-
-
-
-
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
Total
$000
17,184
-
724
17,908
67
Notes to the Financial Statements
Weighted average
effective interest
rate %
Within 1 year
$000
1 to 5 years
$000
Over 5 years
$000
n/a
4.45%
n/a
n/a
18,982
-
102
942
20,026
-
-
-
-
-
-
-
-
-
-
Total
$000
18,982
-
102
942
20,026
2016
Trade and other payables
Borrowings – bank
Finance leases
Other liabilities – Vendor earn-out
Total
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;
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 SILK there was an earn out payment which was subject
to revenue and profit targets.
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 in relation to the acquisition of
SILK as Nil (out of an original maximum of $1.25 million).
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.
The Vendor earn-out liability as at 30 June 2016 comprised the fair value of estimated consideration payments
payable to vendors in relation to the acquisition of SILK on 30 April 2015. $0.6 million was paid out to the vendors
in August 2016, $0.1 million used to offset debtor write-offs, with the balance of $0.2 million written back to
profit during financial year ended 30 June 2017. (Refer to Note 16).
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
68
Notes to the Financial Statements
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
2017
$000
2,148
3,612
5,760
2016
$000
2,897
5,303
8,200
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.
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:
On 26 July 2017, the Company announced it had extended its $5 million working capital facility through
Shrimpton Holdings Pty Limited, a company associated with Ross Shrimpton, Managing Director, and with
shareholders of the Group, out for a further year to 29 October 2018.
Marc Shrimpton resigned 7 July 2017 as General Manager Blackadder Recruitment and his 206,842 Performance
Rights were cancelled for Nil consideration.
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.
The plan has been suspended for the financial years ending 30 June 2017 and 30 June 2018. No Performance
Rights were issued during the financial year ended 30 June 2017, see Note 18.
33. DIVIDENDS
a. Ordinary shares
No dividends were declared or paid in relation to the year ended 30 June 2017, nor in relation to the previous
year ended 30 June 2016.
b.
Franking credits
Franking credits available for subsequent financial years based on a tax rate of 30%
(2016: 30%)
2017
$000
2016
$000
1,027
3,869
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 2017
69
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 31 July 2017.
Number of security holders and securities on issue
Quoted equity securities
Ashley Services has on issue 143,975,904 fully paid ordinary shares which are held by 639 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
160
144
68
192
75
639
123,866
332,226
529,553
6,945,352
136,044,907
143,975,904
%
0.09
0.23
0.37
4.82
94.49
100.00
The number of shareholders holding less than a marketable parcel of Fully Paid Ordinary shares is 336 with a
total number of shares held is 652,327.
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
National Nominees Limited ATF Australian Ethical Investments
Number
86,046,305
13,573,166
%
59.76%
9.43%
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 2017
70
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
JJC Group (Aust) Pty Ltd
Yellow Diamond Pty Ltd
Mr Craig Graeme Chapman
HSBC Custody Nominees (Australia) Limited
Aust Executor Trustees Ltd
Valueinvest Pty Ltd
Mr Andrew Douglas Shrimpton
Mr Dean Michael Shrimpton
Mr Marc Shrimpton
Hishenk Pty Ltd
Mr Marcus Andrew Levy and Vanessa Sanchez-Levy
Mr Gerald Francis Pauley and Mr Michael James Pauley
My Referral Network Pty Ltd
Ms Hui Tan
Wide Eagle Pty Ltd
Kingston Properties Pty Limited
Friendlyfly Pty Ltd
Total
Annual General Meeting
Number of shares
60,858,282
22,178,166
13,573,166
3,755,832
2,572,084
2,375,432
2,350,573
1,582,009
1,567,396
1,500,000
1,500,000
1,500,000
1,450,000
1,189,717
1,091,799
853,807
800,000
800,000
679,618
630,000
%
42.27%
15.40%
9.43%
2.61%
1.79%
1.65%
1.63%
1.10%
1.09%
1.04%
1.04%
1.04%
1.01%
0.83%
0.76%
0.59%
0.56%
0.56%
0.47%
0.44%
122,807,881
85.30%
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 Thursday 2 November 2017. 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 2017
71
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)
Executive Directors
Mr Ross Shrimpton – Managing Director
Mr Chris McFadden
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
HLB Mann Judd
Level 19
207 Kent Street
Sydney NSW 2000
Telephone: + 61 2 9020 4000
Facsimile: + 61 2 9020 4190
Legal Adviser
Addisons Lawyers
Level 12
60 Carrington Street
Sydney NSW 2000
Telephone: + 61 2 8915 1000
Facsimile: + 61 2 8916 2000
ASHLEY SERVICES GROUP ANNUAL REPORT 2017
72