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AVA GROUP
ANNUAL REPORT 2020
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ABN 67 064 089 318
DIRECTORS
David Cronin, Chairman and Non-Executive Director
Mark Stevens, Non-Executive Director
Mike McGeever, Non-Executive Director
Robert Broomfield, Group Chief Executive Officer and Executive Director
COMPANY SECRETARIES
Leigh Davis, Kim Clark
REGISTERED OFFICE & PRINCIPAL PLACE OF BUSINESS
10 Hartnett Close, Mulgrave, Victoria 3170, Australia
Telephone: +61 3 9590 3100
Facsimile: +61 3 9590 8000
Email: investor@theavagroup.com
SHARE REGISTRY
Boardroom Pty Ltd Grosvenor Place, Level 12, 225 George Street, Sydney,
NSW 2000, Australia
Telephone (within Australia): 1300 737 760
Telephone (outside Australia): +61 2 9290 9600
Facsimile: +61 2 9279 0664
STOCK EXCHANGE
Ava Risk Group Limited shares are quoted on the Australian Securities
Exchange (ASX). ASX Code: AVA
BANKERS
Westpac Banking Corporation 275 Kent Street, Sydney, NSW 2000, Australia
AUDITORS
Ernst & Young Level 23, 8 Exhibition Street, Melbourne, Victoria 3000, Australia
WEBSITE
www.theavagroup.com
Information correct as at 31 August 2020.
ANNUAL REPORT 2020
AVA GROUP
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CHAIRMAN’S REPORT
FINANCIAL HIGHLIGHTS
ABOUT AVA GROUP
TECHNOLOGY DIVISION
SERVICES DIVISION
FINANCIAL STATEMENTS
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03
AVA GROUP
ANNUAL REPORT 2020
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Dear Fellow Shareholders,
For Ava Risk Group Limited (Ava Group), FY2020 has been one of focus and
transformation.
From right sizing and streamlining operations, to delivering profitable
growth and positive cash flow - an unrelenting focus on enhancement and
improvement during the last financial year has transformed our business,
opened new market opportunities and delivered record revenues and
profitability.
FY2020 | Highlights
Despite the global challenges that have come with COVID-19, Ava Group’s
achievements during FY2020 have underpinned a positive financial result
and delivered a platform for continued growth and expansion.
Key highlights for the financial year include:
•
•
•
•
•
•
Record revenues combined with cost management initiatives to deliver
EBITDA and net profits
Continued expansion of the Services Division (Ava Global) through
existing and new clients, and expanded service offering
Commencement of deliveries for the Indian Ministry of Defence (IMoD)
Network Security Project - contributing $4.8 million in revenue
Multiple orders for perimeter protection technology (FFT) at high security
government and commercial sites across the United States, Middle East
and Europe
Strong commercial interest in our new conveyor health monitoring
solution (Aura IQ) with multiple Proof of Value trials underway, and
Growing sales of access control and locking products (BQT), underpinned
by $3.4 million of orders from the Australian Department of Defence.
Ava Group’s engineering and development teams have also remained
focussed on performance upgrades of our intrusion detection and access
control solutions - with customer deployments and competitive testing
continuing to demonstrate a superior competitive position.
04
ANNUAL REPORT 2020
AVA GROUP
Strong Financial Performance
Ava Group’s total revenue for the 2020 financial year increased by 46% to a
record $46.1 million, continuing the Company’s strong year on year revenue
performance despite the uncertain global economic climate. EBITDA from
operations improved from a loss of $2.9 million to a profit $7.4 million.
The Company remains focussed on managing operating costs which were
down 9% compared to the prior year. Due to revenue and gross margin
growth, combined with operating cost reductions, net profit after tax (NPAT)
showed a significant turnaround - from a $4.7 million loss in FY2019 to a
profit of $4.9 million in FY2020.
As at June 2020, Ava Group’s total cash balance was $7.703 million - up
from $3.082 million at the beginning of the financial year.
COVID-19 | Challenges and Opportunities
Managing the impacts of COVID-19 and mitigating the challenges and
uncertainty that the pandemic continues to create is a key focus of both
Board and Management. The health and safety of our staff and customers
around the globe remains a paramount priority and we continue to support
them to maintain appropriate safety measures based on local conditions.
Despite COVID-19 related global challenges within the air freight sector, the
Services Division has successfully maintained and increase its full suite of
services to its customer base and continues to perform strongly - increasing
its revenue, margin and customer diversification during Q4 FY2020.
In fact, COVID-19 restrictions provided Ava Global with the opportunity to
innovate and offer a range of bespoke cargo and charter aircraft solutions
to ensure it could continue to deliver currency, precious metals and other
valuable goods for its customers.
Recent consolidation within the secure global logistics sector is also creating
opportunities for Ava Global to secure new customers and further increase
its share of addressable client spend.
The Technology Division has been impacted by some order delays associated
with the pandemic. Supply chains have also experienced some delays,
while international travel for commissioning systems and attending to
maintenance services remains a challenge. Some of our major system
integrator customers have also had their programs to deploy at end user
sites delayed.
While we have seen some improvement to these challenges, we continue
to monitor this rapidly changing situation and adapt our operating strategy
appropriately. Pleasingly, during these uncertain times, we expect that the
IMoD project will continue to deliver strong revenue and profit growth in
FY2021.
05
AVA GROUP
ANNUAL REPORT 2020
Dear Fellow Shareholders
Chairman and CEO Report
Board and Management
Chairman and CEO Report
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Dear Fellow Shareholders
The 2018 financial year was one of significant milestones for
Ava Risk Group Limited (Ava) as we took a number of steps
to secure our position as a global leader in risk management
solutions including enhancing our portfolio of products and
continuing to drive innovation across the Company.
The 2018 financial year was one of significant milestones for
Ava Risk Group Limited (Ava) as we took a number of steps
to secure our position as a global leader in risk management
solutions including enhancing our portfolio of products and
continuing to drive innovation across the Company.
In FY18, our engineering and product development teams
remained focussed on significant performance upgrades
for our range of highly reliable detection and access control
products. Customer deployments and competitive testing
have proven our superior competitive position, while our
security solutions continued to gain international recognition.
While Ava Group’s Board and Management have been navigating the
challenges of COVID-19, we have also remained focussed on improving
and optimising the business to ensure that the right skills and expertise are
in place to support our strategic ambitions. To that end, the Board worked
closely with the Senior Management Team to agree a change of management
within the Technology Division.
In FY18, our engineering and product development teams
remained focussed on significant performance upgrades
for our range of highly reliable detection and access control
products. Customer deployments and competitive testing
have proven our superior competitive position, while our
security solutions continued to gain international recognition.
In July, Ava Group announced that Technology Division Chief Operating
Officer Rob Broomfield would replace Scott Basham, following his resignation
as Group CEO. I would like to take the opportunity to thank Scott for his
contribution to implementing our transformation strategy and wish him well
in his future endeavours.
In April 2018, BQT Solutions was selected over billion-
dollar access control competitors to be awarded a best in
show award at the global security conference, ISC West,
USA, while FFT Aura Ai-2 received the MTP Gold Medal
Following the appointment of Mike McGeever as Chairman of Ava Group’s
at Securex in April for its next generation fibre perimeter
international valuables and logistics subsidiary, the addition of Grant Angwin to
protection technology.
the Ava Global management team has further expanded the depth of skills and
experience within the Services Division - especially in the precious metals sector.
Under the helm of Services Division CEO Chris Fergus and reporting directly
to the Ava Group Board, the Services Division is being led by three of the
most experienced people in the industry today.
Our Services Division continues to build a market leading
position in the international valuables logistics sector and is
already a trusted partner of a number of major companies
in the precious metals and wholesale banknote markets.
In December 2017, we finalised our merger with leading
high security access control and secure logistics provider,
MaxSec Group Limited (ASX: MSP). In February 2018, Chris
Fergus was promoted to the role of Group CEO, and in May
2018 we changed our name to better reflect our expanded
product and solutions offerings.
In April 2018, BQT Solutions was selected over billion-
In December 2017, we finalised our merger with leading
dollar access control competitors to be awarded a best in
high security access control and secure logistics provider,
show award at the global security conference, ISC West,
MaxSec Group Limited (ASX: MSP). In February 2018, Chris
USA, while FFT Aura Ai-2 received the MTP Gold Medal
Fergus was promoted to the role of Group CEO, and in May
at Securex in April for its next generation fibre perimeter
2018 we changed our name to better reflect our expanded
protection technology.
product and solutions offerings.
Around the world, Ava Group customers rely on our
products, technologies and expertise to help protect their
perimeters, facilities and supply chains, and keep their assets
and people safe and secure. With our customers facing
growing protection needs, we’ve remained committed to
supporting them with the most advanced and affordable
security and risk management solutions available.
Around the world, Ava Group customers rely on our
products, technologies and expertise to help protect their
perimeters, facilities and supply chains, and keep their assets
and people safe and secure. With our customers facing
growing protection needs, we’ve remained committed to
supporting them with the most advanced and affordable
security and risk management solutions available.
Our Services Division continues to build a market leading
position in the international valuables logistics sector and is
already a trusted partner of a number of major companies
in the precious metals and wholesale banknote markets.
We also continued to invest in the people, culture and systems
that underpin our Company. Our culture is somewhat unique
and a key element of our ongoing success. We are a truly
diverse company, with employees from 16 nationalities
working in our 17 offices across the globe. We are proud of our
ability to attract and retain great talent and will continue to
invest in our people and culture as the Company grows.
Governance
Financially, FY18 didn’t meet our internal expectations
due to certain end user and customer contract delays.
Sales revenue for 2018 financial year grew 54% to $19.8
million. Earnings before interest, taxes, depreciation and
amortisation (EBITDA) from operations improved from a
loss of $7.5 million, to a loss of $2.9 million. Net profit after
tax (NPAT) improved from a loss of $7.8 million in FY17, to a
loss of $3.2 million. At 30 June 2018, our total cash balance
was $5.9 million and the Company is debt free.
Financially, FY18 didn’t meet our internal expectations
due to certain end user and customer contract delays.
Sales revenue for 2018 financial year grew 54% to $19.8
million. Earnings before interest, taxes, depreciation and
amortisation (EBITDA) from operations improved from a
loss of $7.5 million, to a loss of $2.9 million. Net profit after
tax (NPAT) improved from a loss of $7.8 million in FY17, to a
loss of $3.2 million. At 30 June 2018, our total cash balance
was $5.9 million and the Company is debt free.
These improving results demonstrate the benefits of
global scale and operating leverage of our business model.
By executing our strategy, we delivered solid operating
margins, improved cash flow and a record backlog,
leaving the Company well positioned for a significant
improvement in FY19.
These improving results demonstrate the benefits of
global scale and operating leverage of our business model.
By executing our strategy, we delivered solid operating
margins, improved cash flow and a record backlog,
leaving the Company well positioned for a significant
improvement in FY19.
A key activity of the Board is to work closely with the
Executive Team to balance near-term performance and
investment in long-term growth opportunities. Given the
significant opportunity in front of the business, reinvesting a
percentage of our revenues and cash funds to drive market
penetration and geographic growth is key to our strategy.
Realising a return on these investments may take months
or years, resulting in a trade-off of profit today for revenue
growth tomorrow. The Board and Executive Team spend
considerable time formulating and monitoring the execution
of these plans to optimise outcomes for shareholders.
A key activity of the Board is to work closely with the
Executive Team to balance near-term performance and
investment in long-term growth opportunities. Given the
significant opportunity in front of the business, reinvesting a
percentage of our revenues and cash funds to drive market
penetration and geographic growth is key to our strategy.
We also continued to invest in the people, culture and systems
that underpin our Company. Our culture is somewhat unique
and a key element of our ongoing success. We are a truly
diverse company, with employees from 16 nationalities
working in our 17 offices across the globe. We are proud of our
ability to attract and retain great talent and will continue to
invest in our people and culture as the Company grows.
We would like to thank our long-time shareholders for their
ongoing commitment and support. Like most Australian
companies that have set out to build a leading global
business, Ava Group has made its way to success through
multiple challenges. Without the solid backing of our
shareholders, we could not have delivered high security
systems in more than 60 countries. We would also like to
welcome our new shareholders and recognise the trust and
confidence you have placed in our leadership.
The Board remains committed to conducting business in accordance with
high governance standards as we focus on ensuring Ava Group has a
contemporary approach to corporate business and ethics. During the year
we introduced a Corporate Whistleblower Policy and an updated Anti-
Bribery and Corruption Policy aimed at continuing to ensure we maintain the
highest ethical standards in all that we do. While our policies and practices
are consistent in all substantial aspects with good corporate governance
practice in Australia, we will continue to review areas for refinement and
improvement in the coming year.
We would like to thank our long-time shareholders for their
ongoing commitment and support. Like most Australian
companies that have set out to build a leading global
business, Ava Group has made its way to success through
multiple challenges. Without the solid backing of our
shareholders, we could not have delivered high security
systems in more than 60 countries. We would also like to
Finally, on behalf of my fellow Directors, I would also like to thank the Ava
welcome our new shareholders and recognise the trust and
Group team for your ongoing commitment and hard work. I also thank our
confidence you have placed in our leadership.
customers and shareholders for your continued loyalty and support.
We are confident and optimistic about the future. We believe
our strategy combined with our people, performance and
portfolio of world leading products and solutions will keep
this Company strong for many years to come.
I am confident that Ava Group’s strategy, people, performance and portfolio
of world leading products and solutions provides a solid platform for further
success in FY2021 and beyond.
CHRIS FERGUS
CEO
We are confident and optimistic about the future. We believe
our strategy combined with our people, performance and
portfolio of world leading products and solutions will keep
this Company strong for many years to come.
DAVID CRONIN
Chairman
David L Cronin
DAVID CRONIN
Chairman
Chairman
CHRIS FERGUS
CEO
Realising a return on these investments may take months
or years, resulting in a trade-off of profit today for revenue
growth tomorrow. The Board and Executive Team spend
considerable time formulating and monitoring the execution
of these plans to optimise outcomes for shareholders.
06
Ava Risk Group Limited Annual Report 3
Ava Risk Group Limited Annual Report 3
ANNUAL REPORT 2020
AVA GROUP
“DESPITE THE GLOBAL CHALLENGES THAT HAVE COME
WITH COVID-19, AVA GROUP’S ACHIEVEMENTS DURING
FY2020 HAVE UNDERPINNED A POSITIVE FINANCIAL
RESULT AND DELIVERED A PLATFORM FOR CONTINUED
GROWTH AND EXPANSION.”
OPERATING
COSTS
9%
REVENUE UP
46%
$
$
NPAT
$4.9 million
CASH BALANCE
$7.7 million
Ava Group’s
Aura IQ conveyor
monitoring
technology has
been recognised
as a finalist in two
categories of the
2020 Queensland
Mining Awards –
Best New Product
Launch Award and
Collaboration Award
in conjunction with
Mining3.
07
AVA GROUP
ANNUAL REPORT 2020
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$46,131
2019
2018
2017
$31,602
$19,817
$12,896
(AUD,000)
$7,429
(AUD,000)
$4,942
$(2,861)
$(2,941)
$(7,505)
$(4,729)
$(3,179)
$(7,820)
(AUD,000)
$(3,315)
$5,956
$889
2020
2019
2018
2017
2020
2019
2018
2017
2020
2019
2018
2017
$(2,749)
(AUD,000)
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2020
32%
2019
52%
2018
72%
2017
113%
2020
$7,703
2019
$3,082
2018
$5,910
2017
$6,945
BQT
FFT
Ava
Global
BQT
Ava
Global
FFT
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ANNUAL REPORT 2020
AVA GROUP
(AUD,000)
09
AVA GROUP
ANNUAL REPORT 2020
Ava Risk Group Limited (Ava) is a market leader of risk management
services and technologies, trusted by some of the most security conscious
commercial, industrial, military and government customers in the world.
Operating across two divisions, Ava Group brings together three highly
compatible security related entities (Future Fibre Technologies, BQT
Solutions and Ava Global Logistics), each with world leading technology,
services and exceptional people.
Technology Division
Future Fibre Technologies (FFT) manufactures a complete portfolio of fibre
optic intrusion detection and location products for the protection of high
value assets and critical infrastructure.
BQT Solutions (BQT) is a specialist in the development, manufacture
and supply of high quality, high security card and biometric readers,
electromechanical locks and related electronic security products.
Services Division
Ava Global Logistics provides secure international logistics of high value
assets on a fully insured door-to-door basis. This includes armoured vehicle
collection and delivery at origin and destination, secure storage, commercial
and chartered air and sea freight and customs brokerage services.
Focus on Cyber Security
Ava Group welcomes the release of the Cyber Security Strategy 2020
which outlines Australia’s approach to protecting Australians from growing
cyber threats. An effective Cyber Security Strategy can only be implemented
through strong partnerships that drive cyber resilience. Having shared our insights
and experience with Government in relation to data network infrastructure
protection, with our SecureLink systems being rolled out globally to protect more
than 40,000 kms of sensitive data networks, we look forward to working together
to create a world leading cyber security infrastructure for Australia.”
Mark Stevens
Non-Executive Director
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ANNUAL REPORT 2020
AVA GROUP
Through decades of innovation, Ava Group continues to build on its comprehensive portfolio of premium security services
and technologies for the most complex and demanding markets.
Perimeter
Perimeter
Intrusions
Intrusions
Access
Perimeter
Control
Intrusions
Readers
Perimeter
Risk
Consulting
Intrusions
Data
Data
Network
Network
Tapping
Tapping
Pipeline
Pipeline
Interference
Interference
Data
Biometric
Network
Solutions
Tapping
High
Pipeline
Security
Interference
Locking
Data
Network
Banknotes
Tapping
Pipeline
Precious
Interference
Metals
Conveyor
Conveyor
Monitoring
Monitoring
Conveyor
Custom
Encryption
Monitoring
Conveyor
High Risk
Valuables
Monitoring
TECHNOLOGY
DIVISION
SERVICES
DIVISION
Locations
With an experienced team spread across six continents, Ava Group provides market and industry expertise directly to its
customers. With its technology protecting thousands of sites, Ava Group is proven to deliver first class risk solutions that
surpass the expectations of its customers, end users and partners.
11
AVA GROUP
ANNUAL REPORT 2020
Ava Group’s perimeter technology (FFT) and access control solutions
(BQT) continue to gain international recognition as the security solutions
of choice for industries and governments worldwide.
FY2020 Highlights | FFT
The realisation of a number of years of focussed effort to secure and start
the delivery of the Indian Ministry of Defence contract was a FY2020
highlight for many reasons. Not only is the project a milestone for FFT in terms
of scale, but also marks a new capability for the fulfilment and licencing of our
intrusion detection technology. The ability to deploy our solutions in a more
innovative and appropriate way on large infrastructure deals such as this create
new opportunities for FFT on a global basis and expands our “Go to Market”
options for major projects in the future. It also demonstrates that FFT’s range
of fibre optic technologies are sufficiently mature that we are able to transfer
manufacturing to partners under licence for significant international installations,
whilst ensuring the company’s IP is fully protected. While the Aura platform
remains central to FFT’s perimeter intrusion detection solution set, the platform’s
capabilities continue to create opportunities in adjacent markets and technology
partnerships. Aura IQ is a great example of this - having worked with Mining3
to develop a conveyor health monitoring solution for the mining sector. We have
also received interest from other fibre optic technology companies to OEM the
Aura platform. The continuous improvement of our software (FOSS) and how we
harness the potential of machine learning remains a key focus for our development
team. FFT’s extensive and growing library of fibre optic sensing events means
that we have the capability to be able to continue to use this in conjunction with
machine learning to reduce nuisance alarms and further differentiate our perimeter
intrusion detection technology from other solutions on the market.”
Robert Broomfield
Group Chief Executive Officer
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ANNUAL REPORT 2020
AVA GROUP
Snapshot | Indian MOD Contract |
Value US$11.9M+ (A$16.5M+)
•
•
Large scale supply of FFT’s SecureLink technology to protect more than
40,000kms of data communications cables for the Indian Ministry of
Defence.
FFT licenced technology to in-country manufacturing partner SFO
Technologies Private Limited (SFO).
• Total contract value estimated at US$11.9M (A$16.5M).
• Revenues received as at 30 June 2020 total A$4.8M
•
•
Balance of the project expected to be recognised in FY2021
(circa A$11.7M).
Additional revenue from a subsequent seven year spares and
maintenance contract with an estimated value of a further US$3.4M
(A$4.7M).
• Contract establishes FFT technology in growing cyber security market.
•
Fulfilment and licencing model offers low working capital, low risk and
high margin GTM approach.
FOSS 5.0 | Machine Learning
Throughout the COVID-19 pandemic, FFT’s software development team has
continued to maintain output of significant enhancements. This has resulted
in the release of FOSS 5.0, the software platform that will be integrated with
machine learning and innovative data capture tools to continuously improve
event classification and reduce nuisance alarms. With access to a growing
library of labelled fibre optic sensing events, FOSS variants will be able to
be continuously retrained to recognise new events as they are identified by
FFT systems installed globally. Upgrades of classification capabilities are a
planned extension available to FFT customers as part of an expanding range
of comprehensive maintenance offerings, which include cyber assurance
testing applied to all FFT software releases.
13
AVA GROUP
ANNUAL REPORT 2020
Aura IQ Update | Conveyor
Health Monitoring
In a recent Proof of Value (POV) Trial with a large multinational group,
Aura IQ was used to monitor a 1.7km conveyor located in an underground
coal mine in Queensland. The cost of personnel to check and maintain
the conveyor, plus unscheduled stoppages was significant. Once installed,
Aura IQ substantially reduced planned and unplanned maintenance, along
with man hours for monitoring and maintaining the conveyor. The life-time
of rollers was also prolonged and reduced conveyor downtime resulted
in increased utilisation and revenue. In terms of business outcomes, the
estimated financial benefits/costs savings per year were estimated to
be A$37.1 million per annum, with utilisation time up by 5%*. Intangible
outcomes included enhanced occupational health, hygiene and safety
risk management, remote monitoring and alerts, removal of subjective
assessment of roller condition, possible monitoring of additional elements of
the drive units and future productivity enhancements through data analytics.
These types of outcomes are indicative of how Aura IQ can increase
productivity, maintenance efficiency and cost savings. Since its launch,
interest in Aura IQ has been significant with a diverse portfolio of rollout
opportunities spread across six regions, 21 countries and five industry sectors
- totalling over $50+ million in potential total contract value.
*Based on forecasted benefits from Production and Maintenance Cost Analysis.
Three POV
Trials
successfully
completed
Europe / Asia
Six POV
Trials
underway
Africa / Asia /
Oceania / LATAM
In a recent POV Trial for a major mining
company with 10 sites, Aura IQ identified
a specific conveyor linestand issue that
traditional conveyor monitoring techniques
would have been unable to detect. Final
POV Trial Technical Report indicated
overall success criteria of 93.3%,
exceeding expectations.
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ANNUAL REPORT 2020
AVA GROUP
FFT HAS MORE THAN 2,500 SYSTEMS PROTECTING
TRANSPORT, GOVERNMENT, MILITARY, MINING, OIL &
GAS, AND UTILITY ASSETS ACROSS 69 COUNTRIES.
$1B+
ADDRESSABLE
MARKET
65-80%
GROSS
MARGIN
2,500+
FFT
SYSTEMS DEPLOYED
PRODUCTS &
SERVICES MODEL
FFT’s Aura platform is being
used by technology partners
for new applications such as to
monitor power cables under the
streets in major cities and across
rivers. Most power cables have
a fibre optic cable integrated
into their construction to allow
monitoring of temperature. This
fibre can also be used to monitor
for disturbances near the cable
such as manhole covers in
cities and boat activities around
submarine cable.
15
AVA GROUP
ANNUAL REPORT 2020
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FY2020 Highlights | BQT
BQT’s FY2020 focus has been the consolidation of production activities
and streamlining of operations in our Auckland facility. Right-sizing the
BQT business has not only improved the bottom line, but allowed us to better
support our customers by bringing management and operations together under
one roof. Securing $3.4 million of orders from the Department of Defence was a
highlight and key milestone - demonstrating the Australian Government’s ongoing
commitment to BQT’s high security reader solutions. BQT enjoys a long-term
working relationship with government departments in Australia and we look
forward to that continuing. To support the delivery of large-scale contracts, BQT
is now actively employing engineering, sales and support staff. As we consolidate
BQT’s distribution network in partnership with some of the largest players in the
locking market, we anticipate our current supply agreements with both ASSA
ABLOY and dormakaba will deliver a significant uptick in sales and extend our
reach into new territories and markets.”
Matthew Nye-Hingston
Head of BQT Technology & Director BQT Operations
BQT secures $3.4M Department of
Defence Contracts
In May, Ava Group announced that an order had been received from
Australia’s Department of Defence for its high-security, custom encrypted,
access control technology. Recent contracts will see more than 12,000 BQT
readers deployed nationally across defence facilities and bases. With the first
systems despatched in May, the balance is expected to be fulfilled by the
end of H1 FY2021. BQT has long been the provider of choice for advanced
mission-critical technology solutions to protect vital national infrastructure
and as such has enjoyed a long-term relationship with major government
agencies both in Australia and around the world. This new contract also
demonstrates the suitability of BQT’s access control solutions for large scale
programs that require close working relationships between the manufacturer,
installer and end user.
16
ANNUAL REPORT 2020
AVA GROUP
Teaming up with ASSA ABLOY
and dormakaba
In addition to a distribution agreement with dormakaba Canada to supply the
YG80 ORCA lock into the North American market, ASSA ABLOY Germany
is now a direct customer of BQT’s locking products. The new supply
agreement with the locking industry leader will cover European countries
and anticipate extending the relationship to extend to the emerging Indian
and other markets. Prior to the impact of the COVID-19 pandemic, BQT Q3
FY2020 sales to ASSA ABLOY increased by more than 270% compared to
the same period last year. BQT also continues to expand its relationship with
dormakaba - both in terms of product range and distribution reach - with a
view to securing a global distribution agreement during FY2021.
BQT has tens of
thousands of highend
access control card
readers, biometric
terminals, electro-
mechanical locks and
related security devices
installed at over 3,500
sites worldwide.
The YG80 ORCA lock is the most advanced BQT roller door and gate lock
developed to date and succeeds the YG10 - winner ISC West’s 2018 SIA
New Product Showcase Award.
45-60%
GROSS
MARGIN
$600M+
ADDRESSABLE
MARKET
CUSTOM
& OFF THE
SHELF
PRODUCTS
3,500+
SITES
High security BQT
readers are being
deployed at one of
New Zealand’s largest
prisons. Waikeria
Prison is located on
a 1,200-hectare site
near Te Awamutu in
the Waikato. Delivered
through System
Integrator Honeywell
Fire & Security, the
contract marks the
first project win for
BQT in New Zealand
and creates further
opportunities for the
roll-out of its access
control systems in
correctional facilities
across the country.
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Ava Group’s Services Division (Ava Global) continues to expand its
presence in the secure international logistics sector for the transport of
banknotes and precious metals across the globe on a fully insured door-
to-door basis.
We are delighted with the trajectory of Ava Global’s business performance
since its inception in 2016. FY2020 was in many ways a transformational
year with particularly strong Q4 FY2020 growth in the Americas, Europe and
Africa - despite the logistical challenges posed by the COVID-19 pandemic. Having
established good momentum, further investment in our business development
capabilities in key client sectors and in the Asia region will enable us to further
leverage Ava Global’s strong and scalable operational capability and growing
reputation.”
Chris Fergus
Chief Executive Officer – Ava Global
Ava Global | Snapshot
Partnership
model
Service capability in more than
100 countries
through a strategic
partner network
Risk management
Comprehensive insurance
and in-house risk
management team
Technology
Bespoke operating system for
secure logistics
Global
storage
For international client base of
mines, refiners,
banks and
bullion traders
Global Footprint
24 hour sales and operational
coverage from offices around
the globe
Expertise:
+150 years
of industry expertise across the
leadership team
Blue chip clients
Major mining, banking, refining
and wholesale currency
referencesertise across the
leadership team
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ANNUAL REPORT 2020
AVA GROUP
Ava Global Logistics | Key Sectors
$
FINANCIAL
INSTITUTIONS
Secure transport of cash and
precious metals with a global
network of trusted service
providers. Secure storage and
inventory management of
precious metals and secure
storage and processing of cash.
REFINERIES
MINING
Bespoke and secure
international logistics support
for the transport of refined and
pre-refined precious metals
around the world.
Secure international logistics
support in the transport of
pre-refined precious metals
around the world from mines
to refineries with detailed risk
management assessment.
BULLION TRADERS
Secure transport from refineries
or a secure storage location to
central banks, investment banks,
investment banks or jewellery
manufacturers.
GOVERNMENT &
CENTRAL BANKS
Secure international logistics
support for large-scale foreign
currency and precious metal
movements. Secure storage
and inventory management
of precious metals and secure
storage and processing of cash.
CONSULTING
A dedicated risk manager
and risk management team
providing pre-feasibility and
feasibility studies to support
supply chain management,
supported by the experience
and market intelligence from
Ava Group’s global strategic
partner network.
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ANNUAL REPORT 2020
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Strong Performance During
Challenging Times
Despite the reduction in airfreight capacity around the world due to
COVID-19, Ava Global’s Q4 FY2020 revenues totalled $9.7 million - up $3.5
million on the previous quarter, while full year FY2020 revenues were up by
$9.2 million over the prior corresponding period. FY2020 gross margins also
improved by 6% to 27% compared with FY2019. EBITDA improved by $2.5
million to $2.4 million.
Revenue and EBITDA 2017 to 2020
E
U
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V
E
R
S
E
L
A
S
30
25
20
15
10
5
0
3
2
1
0
(1)
(2)
(3)
(4)
E
B
I
T
D
A
2017 2018 2019 2020
SALES REVENUE
EBITDA
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ANNUAL REPORT 2020
AVA GROUP
Market Consolidation Creates
New Opportunities
With major buyers of secure logistics services estimated to spend more than
$1 billion per annum, the recent consolidation of service providers is expected
to create opportunities for Ava Global to secure new customers and further
increase its share of addressable client spend. In May, Ava Global announced
that its Services Division had been awarded a 12-month contract with a
Central Bank for the secure transportation of banknotes which will generate
estimated annual revenue of $2.1 million. Additional service agreements
were also executed with three Commercial Banks and another Central Bank.
These new agreements helped increase Ava Global’s total addressable client
spend to more than $145 million. Growth in FY2021 is expected to come from
a combination of the annualised impact of recent customer wins and the
anticipated growth of Ava Global’s pipeline and new opportunities.
“ON FEBRUARY 26,
BRINKS
ANNOUNCED
THE PLANNED
ACQUISITION OF
G4S
CASH OPERATIONS IN
17 MARKETS,
WITH CLOSINGS
PLANNED IN
MULTIPLE PHASES
THROUGHOUT
2020. BASED
ON FAVOURABLE
CURRENCY
TRANSLATION AND
OTHER POSITIVE
ADJUSTMENTS,
THE COMPANY
EXPECTS TO PAY
APPROXIMATELY
$835
MILLION
FOR THE ENTIRE
TRANSACTION,
INCLUDING
APPROXIMATELY
$420
MILLION
TO COMPLETE
THE REMAINING
TRANSACTIONS IN
13 MARKETS.”
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Experienced Directors Join Ava
Global Board
Following the appointment of Mike McGeever as Non-Executive Chairman of
Ava Global in July 2019, Ava Group announced that Grant Angwin would join
its Services Division Board as Non-Executive Director and Senior Precious
Metals Advisor. Both Mike and Grant have contributed extensive industry
expertise and client knowledge to Ava Global over the past year and helped
propel the Division’s performance. Mike’s record of having grown UAE based
Transguard Group into one of the largest Security and Cash Management
businesses in the region ensured that opportunities from his extensive
network would enhance Ava Global’s growing pipeline of opportunities. Prior
to joining the Ava Global Board, Grant was President of Asahi Refining NA,
the world’s largest gold and silver refiner and worked for Johnson Matthey
holding various senior management positions before leading its sale to Asahi
Refining. Grant is also the former Chairman of the London Bullion Market
Association (LBMA) and sits on the ICE Benchmark PMOC for the LBMA
Gold and Silver prices.
Given Ava Global’s existing footprint and capability in the precious metals sector,
Grant’s Angwin’s appointment and extensive global network and experience will
add significant support to our strategic ambitions in this key market sector.”
Mike McGeever
Chairman – Ava Global
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ANNUAL REPORT 2020
AVA GROUP
$1B+
ADDRESSABLE
MARKET
21-27%
IMPROVING GROSS
MARGIN WITH
FURTHER ECONOMIES
OF SCALE
OPPORTUNITIES
PARTNERS IN
100+
COUNTRIES
RECURRING
SERVICES
MODEL
NEW FY2020 CLIENTS INCLUDED CENTRAL
BANKS, MINING COMPANIES, PRECIOUS
METAL REFINERS AND COMMERCIAL BANKS
23
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ANNUAL REPORT 2020
AVA GROUP
01: DIRECTORS’ REPORT
02: REMUNERATION REPORT
(AUDITED)
26
36
03: AUDITOR’S INDEPENDENCE
53
DECLARATION
04: CONSOLIDATED STATEMENT 54
OF COMPREHENSIVE INCOME
05: CONSOLIDATED STATEMENT 56
OF FINANCIAL POSITION
06: CONSOLIDATED STATEMENT 58
OF CHANGES IN EQUITY
07: CONSOLIDATED STATEMENT 59
OF CASH FLOWS
08: NOTES TO THE FINANCIAL
60
STATEMENTS
09: DIRECTORS’ DECLARATION
116
10: INDEPENDENT AUDITOR’S
117
REPORT
11:
SHAREHOLDER
INFORMATION
123
25
AVA GROUP
ANNUAL REPORT 2020
Directors’ Report
The directors present their report together with the financial report of the
Consolidated Entity (referred to hereafter as the “Group” or “Consolidated
Entity”) consisting of Ava Risk Group Limited (referred to hereafter as
the “Company” or “Ava Risk Group”) and the entities it controlled for the
financial year ended 30 June 2020 and auditor’s report thereon.
Directors
The names of directors in office at any time during or since the end of the
year are detailed in the table below.
The directors have been in office since the start of the year to the date of this
report unless otherwise stated.
Information on Company Directors and Company
Secretary
The qualifications, experience and special responsibilities of each person
who has been a director of Ava Risk Group at any time since 1 July 2019
to the date of this report is provided below with details of the company
secretary as at the year end.
Name, qualifications, and
independence status
Experience, special responsibilities and
other directorships
David Cronin
Chairman of the Board
(Appointed 31 August 2018)
Non-Executive Director
(Appointed 10 April 2018)
David has over 24 years professional
experience and 15 years of international
experience at the director/chairman board
level. David is presently the Managing
Director of the investment & consulting
group Pierce Group Asia where he is
responsible for its technology focussed
corporate development and investment
activities.
Previous to his role at Pierce Group
Asia, David was an investment manager
for the London listed Guinness Peat
Group PLC and Director of M&A for its
technology focussed division. Working for
several large financial and non-financial
institutions, David has been involved
in various advisory, executive level and
board positions with several early to mid-
stage technology companies.
01:
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ANNUAL REPORT 2020
AVA GROUP
Name, qualifications, and
independence status
David Cronin
(continued)
Mike McGeever
Non-Executive Director
Appointed 8 August 2018
Experience, special responsibilities and other directorships
David has extensive knowledge of Ava Risk Group and the security markets that it
services. He has more than 10 years of board level experience within Ava Risk Group,
having previously served as a Director and Chairman of Ava Risk Group prior to its IPO.
Mr McGeever has over 35 years’ experience in the military, facilities and securities
sectors. Prior to his retirement in 2015, Mr McGeever was the Managing Director
and founder of Transguard Group LLC, a UAE based security and facilities
management company and one of the largest security companies in the world,
employing 55,000 staff. Prior to that he held senior positions in a range of security
and facilities focussed companies.
Mr McGeever has a Master of Business Administration from the University of
Portsmouth (England).
Mark Stevens
Non-Executive Director
Appointed 11 March 2015
With more than 30 years of experience in senior management roles with multi-
national corporations, Mark is a seasoned executive with broad experience in sales
and general management in the telecommunications and Information technology
sector.
Mark has held senior positions with Nortel Networks Inc., Aircom International
Limited, ECI Telecom Ltd, Transmode Systems AB, and more recently Infinera
Corporation. He has lived and worked in Europe, the United States, Singapore and
Australia. Mark holds a Master of Business Administration from the University
of Melbourne, a Bachelor of Engineering degree from Monash University and is a
Graduate Member of the Australian Institute of Company Directors.
Scott Basham is an experienced security industry specialist. As a proven sales and
business development executive, in addition to overseeing Ava Risk Group global
strategy and operations, Mr Basham, also leads the global technology sales and
marketing teams.
Scott is an internationally experienced corporate executive who has a wealth
of knowledge and experience of the security industry, gained from 20 years of
involvement on major project teams for global technology organisations, working with
manufacturing facilities worldwide.
Scott`s expertise encompasses leadership and general management of multiple ANZ
business units, strategic sales and business development, international marketing and
communications throughout Asia and the Pacific, as well as commercial, operational
and program management.
Robert is an experienced business executive with more than 25 years of management
experience including the past 20 years in senior positions within companies operating
in the security industry.
Prior to joining Ava Risk Group, he was with Vision Systems Limited, where he served
as the General Manager of Asia Pacific for their Fire and Security systems. In addition
to his international sales and marketing success, Robert has extensive experience in
operations management, including product engineering, procurement, manufacturing
and operations.
Robert has previously had 10 years’ experience with IBM in Australia and the United
States.
Scott Basham
Group Chief Executive Officer
Executive Director
Appointed 12 March 2019
Resigned 09 Jul 2020
Robert Broomfield
Chief Operating Officer
(COO) – Technology (12
February 2018 – 09 July
2020)
Group Chief Executive Officer
(Appointed 10 July 2020)
Executive Director
Appointed 27 February 2008
27
AVA GROUP
ANNUAL REPORT 2020
Joint Company Secretaries
Leigh Davis CPA, B. Bus, MBA, GAICD
Appointed 20 February 2015
Leigh is a CPA with more than 25 years’ finance and accounting experience across a range of industries including energy,
technology and telecommunications. Leigh has served as Chief Financial Officer and Company Secretary of both ASX
listed and private companies and has previously held Commercial Finance and Corporate Reporting roles in Australia,
the United Kingdom and Europe for NYSE, NASDAQ and FTSE listed companies. Leigh holds a Bachelor of Business
(Accounting) degree, and an MBA from London Business School. He is also a graduate of the Australian Institute of
Company Directors.
Kim Clark
Appointed 20 January 2017
Kim is an experienced business professional with 23 years’ experience in the banking and finance industries and 6
years as a Company Secretary (in-house) of an ASX300 company. Her experience includes debt and capital raising,
risk management, mergers and acquisitions, compliance and governance. Kim currently acts as Company Secretary to
various ASX listed and unlisted companies in Australia and is the Head of Corporate Services for Boardroom Pty Limited’s
Queensland office.
Directors’ Meetings
The number of meetings of the board of directors and of each board committee held during the financial year and the
number of meetings attended by each director are:
Board of Directors’
Meetings
Meetings of Audit & Risk
Committee (ARC)
Meetings of
Remuneration &
Nomination Committee
(REM)
Eligible to
Attend
Attended
Eligible to
Attend
Attended
Eligible to
Attend
Attended
15
15
15
15
15
15
15
15
15
14
6
6
6
-
-
6
6
6
-
-
3
3
3
-
-
3
3
3
-
-
D Cronin
M Stevens
M McGeever
S Basham
R Broomfield
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ANNUAL REPORT 2020
AVA GROUP
Committee membership
As at the date of this report, the company had an Audit & Risk Committee, and a Remuneration & Nomination Committee
of the Board of Directors. Members acting on the committees of the Board during the year were:
Audit Committee
M Stevens (Chairman)
D Cronin
M McGeever
Remuneration & Nomination Committee
M McGeever (Chairman)
D Cronin
M Stevens
Gender Diversity Policy
The Remuneration & Nomination Committee is responsible for setting the diversity policy of the Company.
The Committee has established a diversity policy for the Company, which is disclosed on the Company website.
Measurable objectives for achieving gender diversity have been set with the Company assessing annually both the
objectives and the entity’s progress in achieving them. The Company has set an objective to increase the representation of
women across the business to 25%, women in key executive level positions to 25%,and women on the Board to 20%.
There has been a 5% increase in the number of positions held by women across the business year on year, with the level
of representation of women across the business now at 24%. Whilst Ava Risk Group particularly focuses on narrowing the
gap in gender representation across all levels, it strives for equal development opportunities for all employees, irrespective
of gender, cultural, physical capabilities or other differences.
Directors’ Interests in shares or options
As at the date of this report, the interests of the directors in the shares and options of Ava Risk Group, both direct and
indirect, are as detailed below:
Number of
ordinary shares
Number of
performance rights
Number of options
over ordinary shares
D Cronin
M Stevens
M McGeever
R Broomfield
32,463,070
1,018,396
5,805,000
3,107,359
200,000
200,000
200,000
212,842
Principal Activities
The principal activities of the Consolidated Entity during the financial year were:
•
•
•
the provision of security technology products for perimeter intrusion detection solutions;
the provision of security access control products; and
the international valuable logistics services division which is operated under Ava Global DMCC.
-
-
-
-
29
AVA GROUP
ANNUAL REPORT 2020
Operating and Financial Review
Operating Results for the Year
The consolidated profit after income tax attributable to the members of Ava Risk Group is $4.942 million
(2019: loss of $4.720 million).
Operating and Financial Review
Highlights
•
•
Revenue from ordinary activities of $46.131 million for the twelve months to 30 June 2020 a 46% increase on
FY2019 ($31.602 million).
Gross margin of 48% (FY2019: 43%) as a result of higher contribution to Group sales from lower margin Services
Division sales more than offset by improved margins in the Technology Division driven by full margin IMoD licence
fee income.
•
Operating expenses excluding depreciation and amortisation of $15.213 million (FY2019 $16.601 million) due to:
•
A reduction in advertising & marketing costs compared to the prior year
• Foreign exchange impact of a weaker USD on revenues and certain foreign based expenditure
• A reduction in travel and entertainment costs as a result of COVID19 related travel restrictions
•
A reduction in facilities and office costs through business operations restructuring which resulted in office
closures, and the impact of AASB16 new accounting standard changes on the classification of office lease
expenditure
• Net profit from ordinary activities of $4.942 million, a 205% improvement on FY2019 loss of $4.729 million.
•
Positive earnings before interest, taxes, depreciation and amortisation (EBITDA) of $7.429 million - a 360%
improvement on FY2019 EBITDA loss of $2.861 million.
•
Net assets of $25.415 million (FY2019 $20.244 million) due to working capital changes and operating profits.
Financial Results
Financially, FY2020 was a transformative year for the business, with continued rapid revenue growth, and a focus on cost
containment and efficient use of resources, the business has now broken ground to produce EBITDA profits and significant
net profit, following years of losses. We are well placed for further growth and profit improvement in FY2021, despite the
economic challenges that the coronavirus pandemic presents.
Total sales revenue for the 2020 financial year grew a pleasing 46% to a record $46.131 million, continuing the company’s
strong year on year revenue growth despite the uncertain global economic climate. EBITDA from operations improved
from a loss of $2.861 million to a profit $7.429 million. The business kept a close focus on managing its operating costs
which were down 9% compared to the prior year. Net profit after tax (NPAT) experienced a significant turnaround to a
profit of $4.942 million in FY2020, from a loss of $4.729 million in FY2019, due to the revenue and gross margin growth
and operating costs reductions. Our total cash balance also increased from $3.082 million at the start of the year to
$7.703 million by year end.
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ANNUAL REPORT 2020
AVA GROUP
Operating Review
Around the world, Ava Group customers rely on our products, technologies and expertise to help protect their perimeters,
facilities and supply chains, and keep their assets and people safe and secure. With our customers facing growing
protection needs, we’ve remained committed to supporting them with the most advanced and affordable security and risk
management solutions available. Our customer focus, strengthening market position and reputation was evidenced by the
announcement of a number of key milestones and contract wins across numerous strategic sectors and territories during
the year. Key achievements included:
• Growth of existing client revenues in our international logistics business unit
• Signing of several new clients to our international logistics business unit
•
•
•
The commencement of deliveries for the IMoD Project, contributing $4.781 million in revenue during the financial
year
A number of orders relating to the protection of perimeters at high security government and commercial sites
across the United States, Middle East, and Europe
Growing sales of our range of BQT access control and locking products, underpinned by a recent $3.4 million order
from the Australian Department of Defence
In FY2020, our engineering and product development teams remained focussed on performance upgrades for our range
of highly reliable intrusion detection and access control products. Customer deployments and competitive tests have
proven our superior competitive position, while our security solutions continued to gain international interest.
Our unique Aura IQ conveyor belt condition monitoring solution is gaining commercial interest. During the year we
conducted a number of Proof of Value (POV) trials for mining houses and bulk material handling facilities around the
globe. Many more are now underway and with this solution opening a new $300+ million addressable market for the
Company we anticipate continued success and sales interest in this new and exciting solution in FY2021.
Our Services Division continues to build a market leading position in the international valuables logistics sector and is
already a trusted partner of a number of major companies in the precious metals and wholesale banknote markets. The
division performed particularly well during the final quarter of the financial year, able to buck the broader economic
trends, to significant grow its revenues compare to the same time last year. With industry consolidation occurring, the
business is well placed to benefit from customers that need to or want to diversify their international logistics supply
chain risk.
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ANNUAL REPORT 2020
We also continued to invest in the people, culture and systems that underpin our Company. Our culture is somewhat
unique and a key element of our ongoing success. We are a truly diverse company, with employees from many different
nationalities working in our offices across the globe. We are proud of our ability to attract and retain great talent and will
continue to invest in our people and culture as the Company grows.
Outlook
At Ava Group, we are confident and optimistic about the future. We believe our strategy, combined with our people,
performance and portfolio of world leading products and solutions will keep the Company strong for many years to come.
Ava Group is well on track for continued substantial growth in FY2021 and will be focussed upon:
•
•
•
•
•
Continuing to grow our share of spending from our existing logistics customers and continuing to win business in
this market from new clients
Continuing to build and convert a material sales pipeline for our technology products, through ever improving focus
and practices for new business development activity
Successful completion of several major ‘proof of value’ validation trials already underway for our Aura IQ conveyor
health monitoring solution
Continued product and service innovation, with a focus on after-market support of our installed products and
solutions, as well as migrating or upgrading our existing installed base of customers to the latest released versions
of our market leading technologies
Managing our operational cost base, growing economies of scale from our operating capability, and optimising our
asset utilisation
Whilst the Group has seen an impact on our business to date as a result of the COVID-19 outbreak which was declared
a pandemic by the World Health Organization in March 2020, the outbreak and the response of Governments in dealing
with the pandemic is interfering with general activity levels within the community, the economy and the operations of our
business. The scale and duration of these developments remain uncertain. As at the date of this report however they are
not having a material impact on our earnings, cash flow and financial condition.
It is not possible to estimate the impact of the outbreak’s near-term and longer effects or Governments’ varying efforts
to combat the outbreak and support businesses. This being the case, we do not consider it practicable to provide a
quantitative or qualitative estimate of the potential impact of this outbreak on the Group at this time.
On 09 July 2020 Scott Basham provided the Company notice of his intention to step down as CEO and Executive Director
of the Company. Robert Broomfield has been appointed to the role of Group Chief Executive Officer effective from Scott’s
resignation.
The Company will also continue to consider acquisition targets that support and drive future growth.
Other than the matters noted above there has been no matter or circumstance, which has arisen subsequent to 30 June
2020 that has significantly affected or may significantly affect the operations of the consolidated entity, or the results of
those operations, or the state of affairs of the consolidated entity.
Robert Broomfield
Chief Executive Officer
31 August 2020
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ANNUAL REPORT 2020
AVA GROUP
Significant changes in the state of affairs
During the financial year there were no significant changes in the state of affairs of the Consolidated Entity.
After balance date events
On 09 July 2020 Scott Basham provided the Company notice of his intention to step down as CEO and Executive Director
of the Company. Robert Broomfield has been appointed to the role of Group Chief Executive Officer effective from Scott’s
resignation.
No other matters or circumstances have arisen since the end of the financial year that have significantly affected or may
significantly affect the operations of the Consolidated Entity, the results of those operations, or the state of affairs of the
consolidated entity in future financial years.
Likely developments
Likely development of the operations of the Group are encompassed in the Operating and Financial Review section of this
report.
Environmental regulation and performance
The Consolidated Entity’s operations are not subject to any significant environmental Commonwealth or State regulations
or laws. The Group has complied with all environmental regulations to which it is subject.
Dividends paid, recommended or declared
No dividends were paid, declared or recommended since the start of the financial year. (2019: Nil).
Share options granted to directors and executives
There were no options over unissued ordinary shares granted by Ava Risk Group during or since the financial year end to
directors and executives. Under the terms of an agreement between the Company and Scott Basham, the Company may
issue up to 500,000 share options to Mr. Basham at an exercise price of 15 cents and an expiry date of 31 December 2021,
subject to performance conditions being met prior to his final date of employment with the Company of 09 September
2020.
Further details regarding options granted as remuneration are provided in the Remuneration Report below.
Shares under option
Unissued ordinary shares of Ava Risk Group under option at the date of this report are as follows:
Date options granted
Number of unissued ordinary
shares under option
Expiry date of the options
10-Nov-17
29-Nov-17
14-Mar-18
14-Mar-18
14-Mar-18
Exercise
price of
share
options
$0.21
$0.12
$0.13
$0.15
200,000
2,000,000
1,500,000
1,500,000
3,000,000
$0.20
No option holder has any right under the options to participate in any other share issue of the company.
10-Nov-20
31-Dec-20
31-Dec-21
31-Dec-21
31-Dec-21
33
AVA GROUP
ANNUAL REPORT 2020
Shares issued on exercise of options
No ordinary shares of Ava Risk Group were issued during or since the end of the financial year as a result of the exercise of
an option.
There are no amounts unpaid on shares issued on exercise of options.
Performance rights
During the year Non-Executive Directors David Cronin, Mark Stevens, and Michael McGeever were each granted
200,000 performance rights at a total fair value of $10,000 per person. The performance rights vest on 01 September
2020 subject to the Company’s market traded share price being at least 22 cents on the vesting date.
Scott Basham (Executive Director and CEO - resigned 09 July 2020) was granted 334,957 performance rights at a total
fair value of $38,520 as part of remuneration. The performance rights were granted in two equal tranches, vesting on 31
August 2021 and 31 August 2022 with vesting conditions relating to continuity of employment and achievement of agreed
performance KPIs.
Robert Broomfield (Executive Director and COO - appointed Group CEO 10 July 2020) was granted 344,379 performance
rights at a total fair value of $39,603 as part of remuneration. The performance rights were granted in two equal tranches,
vesting on 31 August 2021 and 31 August 2022 with vesting conditions relating to continuity of employment and
achievement of agreed performance KPIs
Leigh Davis (CFO) was issued 280,245 performance rights granted at a total fair value of $30,827 as part of remuneration.
The performance rights were granted in two equal tranches, vesting on 31 August 2021 and 31 August 2022 with vesting
conditions relating to continuity of employment and achievement of agreed performance KPIs.
Matthew Nye-Hingston (Head of BQT Technology & Director BQT Operations) was issued 204,054 performance rights
granted at a total fair value of $23,446 as part of remuneration. The performance rights were granted in two equal
tranches, vesting on 31 August 2021 and 31 August 2022 with vesting conditions relating to continuity of employment and
achievement of agreed performance KPIs.
Unissued ordinary shares of Ava Risk Group under performance rights at the date of this report are as follows:
Date performance rights
granted
Number of unissued ordinary
shares under rights
01-Jul-2018
01-Jul-2018
23-Sep-2019
23-Sep-2019
28-Oct-2019
28-Oct-2019
31-Oct-2019
31-Oct-2019
31-Oct-2019
112,972
84,176
365,714
365,916
468,939
468,942
58,309
58,309
600,000
Exercise
price of
peformance
rights
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
Expiry date of the
performance rights
01-Jul-2021
01-Jul-2021
31-Aug-2021
31-Aug-2022
31-Aug-2021
31-Aug-2022
31-Aug-2021
31-Aug-2022
01-Sept-2020
No performance rights holder has any right under the performance rights to participate in any other share issue of the
company.
After balance date, on 15 July 2020, Robert Broomfield and Leigh Davis were issued 112,972 and 84,176 ordinary shares
34
ANNUAL REPORT 2020
AVA GROUP
in the company as a result of the exercise of performance rights that vested for both employees on 01 July 2020. The
performance rights were granted as part of remuneration for FY2019.
Proceedings on behalf of the Consolidated Entity
No person has applied for leave of Court to bring proceedings against the Consolidated Entity.
Indemnification and Insurance of Directors and Officers
Ava Risk Group maintains a Directors and Officers insurance policy that, subject to some exceptions provides insurance
cover to past, present and future directors and officers of the Consolidated Entity and its subsidiaries. The Company has
paid a premium for the policy.
In addition, under the Constitution of the Company, and to the extent permitted by law, each director of the Company
is indemnified by the Company against liability incurred to another person (other than the Company or related body
corporate) except where the liability arises out of conduct involving a lack of good faith. Accordingly, each director is
indemnified against any liability for costs and expenses incurred by the director in defending proceedings, whether civil or
criminal, in which judgement is given in favour of the director or in which the director is acquitted, or in connection with an
application in relation to such proceedings in which a court grants relief to the officer under the Corporations Act 2001.
Indemnification of auditors
To the extent permitted by law, the Company has agreed to indemnify its auditors Ernst & Young Australia, as part of
the terms of its annual engagement agreement against claims by third parties arising from the audit (for an unspecified
amount). No payments have been made to indemnify Ernst & Young during or since the financial year.
The Company has not otherwise during or since the financial year, indemnified or agreed to indemnify a director or auditor
of the Company or any related body corporate against a liability incurred as a director or auditor.
Rounding of amounts
In accordance with ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, the amounts in
the directors’ report and in the financial report have been rounded to the nearest one thousand dollars, or in certain cases,
to the nearest dollar (where indicated).
35
AVA GROUP
ANNUAL REPORT 2020
02:
The directors present the Consolidated Entity’s 2020 remuneration report
which details the remuneration information for Ava Risk Group Executive
Directors, Non-Executive Directors and other key management personnel.
1. Details of key management personnel (KMP)
(i) Non-Executive Directors
David Cronin
Mark Stevens
Mike McGeever
(ii) Executive Directors
Scott Basham
Robert Broomfield
Chairman (Non-Executive) – appointed
31 August 2018
(Appointed as Non-Executive Director
on 10 April 2018)
Non-Executive Director – appointed 11
March 2015
Non-Executive Director – appointed 8
August 2018
Group Chief Executive Officer (CEO),
appointed 12 March 2019 and Executive
Director - appointed 12 March 2019 and
resigned 09 July 2020
Chief Operating Officer – Technology
(COO) and Executive Director –
appointed 27 February 2008 (appointed
to role of Group Chief Executive Officer
(CEO) effective from 10 July 2020).
(Iii) Other Key Management Personnel
Leigh Davis
Christopher Fergus
James Alston
Mathew Nye-Hingston
Group Chief Financial Officer (CFO) and
Company Secretary
Chief Executive Officer (CEO) – Services
Division
Chief Operating Officer & Chief Financial
Officer – Services Division
Head of BQT Technology & Director BQT
Operations
)
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e
t
i
d
u
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t
r
o
p
e
R
n
o
i
t
a
r
e
n
u
m
e
R
36
ANNUAL REPORT 2020
AVA GROUP
1. Details of key management personnel (KMP) (continued)
A KMP are those persons having authority and responsibility for planning, directing and controlling the activities of the
entity, directly or indirectly, including any director (whether executive or otherwise) of that entity.
There were no other changes to KMP after reporting date and before the date the financial report was authorised for
issue.
2. Remuneration policies
The board policy for determining the nature and amount of remuneration of key management personnel is agreed by the
Board of Directors as a whole, after receiving recommendations from the Remuneration and Nomination Committee. The
Remuneration and Nomination Committee currently comprises three members of the Board of Directors. All members are
Non-Executive Directors.
The Board or the Remuneration and Nomination Committee may engage external consultants to provide independent
advice where it considers it appropriate to ensure that the Company attracts and retains talented and motivated directors
and employees who can enhance Company performance through their contributions and leadership. During the year
ended 30 June 2020 neither the Board nor the committee engaged any external consultants.
Non-Executive Director remuneration arrangements
The remuneration of Non-Executive Directors (NEDs) consists of directors’ fees, which includes attendance at Committee
meetings. NEDs do not receive retirement benefits other than compulsory superannuation scheme contributions.
Each NED, excluding the Chairman receives a base fee of $65,000 per annum exclusive of post-retirement benefits for
being a director of the Company. The Non-Executive Chairman receives a base fee of $65,000 per annum exclusive of
post-retirement benefits for his role as director and Chairman of the Board of Directors. To support the business during
economic uncertainty due to the coronavirus pandemic, each NED temporarily reduced their base fee by 20% during the
period 01 April 2020 to 30 June 2020.
As part of their remuneration NEDs receive share options or performance rights in the Company and are encouraged to
hold shares in the Company. This is in line with the Company’s overall remuneration philosophy and aligns NEDs with
shareholder interests.
The remuneration of NEDs for the year ended 30 June 2020 and 30 June 2019 is detailed in Tables 1 and 2 respectively of
this report.
The Company’s constitution and the ASX listing rules specify that the NED fee pool shall be determined from time to time
by a general meeting. The Company’s current aggregate fee pool is $250,000 per year.
Executive remuneration arrangements
For executives, the Company provides a remuneration package that incorporates both cash-based remuneration and
share-based remuneration. The contracts for service between the Company and executives are on a continuing basis
the terms of which are not expected to change in the immediate future. Share-based remuneration is conditional upon
continuing employment and achievement of certain KPIs, thereby aligning executive and shareholder interests.
Fixed Remuneration
The level of fixed remuneration is set so as to provide a base level of remuneration, which is both appropriate to the
position and is competitive in the market. Salary packages are subject to local regulatory labour laws. In United Arab
Emirates (UAE), gratuity benefits upon termination in UAE are calculated on base salary. Health insurance provision by
the employer is a regulatory requirement in UAE and is included in the salary packaging of KMP based there. Australian
based salary packages are in line with Australian labour laws for superannuation and long-service leave.
To support the business during economic uncertainty due to the coronavirus pandemic, each Australian based executive
temporarily reduced their fixed remuneration by 20% during the period 01 April 2020 to 30 June 2020.
37
AVA GROUP
ANNUAL REPORT 2020
2. Remuneration policies (continued)
Short-Term Incentive (STI)
The objective of the STI program is to link the achievement of the Group’s annual operational targets with the
remuneration received by the executives charged with meeting those targets. The total potential STI available is set at a
level that provides sufficient reward to the executive for exceeding the operational targets and at such a level that the cost
to the Group is reasonable in the circumstances.
Actual STI payments granted to each executive depend on the extent to which specific annual operational targets set at
the beginning of the financial year are met or exceeded. The CEO’s targets are set by the Remuneration and Nomination
Committee. The targets for all other executives are set by the CEO.
STI rewards are assessed annually by the Remuneration and Nomination Committee and are usually paid in cash,
performance rights or share options. Vesting conditions are decided upon on a case by case basis.
Long-Term Incentive (LTI)
Long-term incentives are provided to certain employees through the issuance of options or performance rights.
The options or performance rights are designed to provide long-term incentives for employees to deliver long-term
shareholder returns.
The options or performance rights are usually issued for nil or nominal consideration and are granted in accordance with
the Company’s Employee Equity Incentive Plan (EIP).
Options are issued for a specified period and are convertible into ordinary shares. The exercise price of the options or
performance rights are determined by the Directors having regards to the market price of a share on invitation date, grant
date, or another specified date after grant close and desirable performance hurdles that are aligned with shareholder
interests. All options and performance rights expire on the earlier of their expiry date or three months after termination of
the employee’s employment subject to Board’s discretion. Options and performance rights do not vest until any vesting or
performance criteria set at granting have been met in accordance with the terms and conditions of the EIP.
There are no voting or dividend rights attached to the options and performance rights. Voting rights will attach to the
ordinary shares when the options or performance rights have been exercised. Unvested options or performance rights
cannot be transferred and will not be quoted on the ASX.
38
ANNUAL REPORT 2020
AVA GROUP
3. Executive contractual arrangements
The Company has entered into service agreements with the following key management personnel:
Scott Basham
Contract of Employment
Group Chief Executive Officer &
Executive Director
Appointed 12 March 2019
Resigned 09 July 2020
Scott Basham is employed by Ava Risk Group as a permanent, full-time employee.
Mr Basham commenced his position with Ava Risk Group in March 2019. His base salary in
FY2020 was AU$275,000 inclusive of superannuation. He has a notice period of 2 months. In
accordance with the provisions of his employment contract Mr Basham served notice on the
Company effective 09 July 2020 of his intention to resign. His notice period will end on 09
September 2020.
Performance Conditions
The contract provides for a bonus of up to 40% of base salary inclusive of superannuation, which
is payable in cash and performance rights and is conditional upon meeting pre-defined KPI’s by
the executive which are selected and assessed by the Board.
Mr Basham has accrued a bonus of AU$2,750 in cash in the 2020 financial year.
In addition to the above, following his resignation, the Company has entered an Agreement with
Mr Basham to allow for a further 2 month’s salary to be paid at the end of his notice period and
the issue of 250,000 options vesting on 31 December 2020 with an exercise price of 15 cents
and an expiry date of 31 December 2021 and 250,000 options vesting on 30 June 2021 with an
exercise price of 15 cents and an expiry date of 31 December 2021 subject to certain performance
conditions to be met during the notice period.
Christopher Fergus
Contract of Employment
Chief Executive Officer – Services
Division
Appointed 01 February 2016
Christopher Fergus is employed by Ava Global DMCC as a permanent, full-time employee.
Mr. Fergus commenced employment with Ava Global DMCC in February 2016
His base salary is AED840,000 (AU$341,214) per annum inclusive of superannuation and
allowances.
He has a notice period of 8 weeks.
Performance Conditions
For FY2020, the contract provides for a bonus of up to AED456,000 (AU$185,199) inclusive
of superannuation, which is payable in cash and is conditional upon meeting quarterly EBITDA
targets by the executive as set and assessed by the Board.
Mr Fergus has accrued a cash bonus for financial year 2020 of AED 456,000 (AU$185,199).
In addition Ava Global DMCC has a performance plan which allows for senior employees of the
Company to share in a pooled allocation of up to 32.7% of the exit value of Ava Global DMCC in
excess of AU$5 million or the debt and equity funding provided to Ava Global to run the business,
whichever is greater. In addition, the plan provides for a shared annual bonus pool of 32.7% of the
net profits that the Ava Global business unit generates, after allowing for all costs and expenses,
including the amount of this shared annual bonus pool. The incentives are payable in cash condi-
tional upon achievement of divisional net profits by the executives. Up to 17.2% of the exit value
and net profits of Ava Global business unit has been allocated to Mr Fergus. The performance
plan expires if the executive resigns from their employment or is terminated by the Company
within the first 3 years. Otherwise the performance plan terminates on 1 February 2021.
Mr Fergus has accrued a bonus of AED 1,088,458 (AU$434,595) in cash in the 2020 financial
year in relation to the performance plan.
In addition to the above Mr Fergus has been awarded a discretionary bonus payment of AED
354,707 (AU$141,626) for FY2020.
39
AVA GROUP
ANNUAL REPORT 2020
3. Executive contractual arrangements (continued)
Robert Broomfield
Contract of Employment
Group Chief Executive Officer &
Executive Director
Appointed 10 July 2020
Chief Operating Officer –
Technology for the period 1 July
2019 – 09 July 2020.
Robert Broomfield is employed by Ava Risk Group as a permanent, full-time employee.
Mr Broomfield commenced his position with Ava Risk Group in July 2006. His current base sal-
ary is AU$282,735 inclusive of superannuation. He has a notice period of 3 months. There were
no changes to the conditions of Mr Broomfield’s contract, including renumeration, following his
appointment as Group Chief Executive Officer on 10 July 2020.
Performance Conditions
The contract provides for a bonus of up to 40% of base salary inclusive of superannuation, which
is payable in cash and performance rights and is conditional upon meeting pre-defined KPI’s by
the executive.
Effective of 1 March 2019, an additional bonus of AU$20,000 was awarded in respect of receipt
of the first IMoD PO received. The bonus is payable only when the IMoD cash receipts exceed
AU$200,000. The bonus amount was earnt during FY2020 and paid to Mr Broomfield in July
2020.
Also, effective 1 March 2019, an additional bonus of AU$50,000 is payable at the end of FY2020
(or at the Board’s discretion) when the IMoD cash receipts exceed AU$1 million. This bonus
amount is accrued and remains unpaid at reporting date.
Mr Broomfield has accrued a further cash bonus of AU$16,399 in relation to the achievement of
KPIs as part of STI remuneration. In addition, performance rights with a fair value of AU$39,603
were granted in the 2020 financial year in relation to KPIs relevant to LTIs that vest over two
years on the condition that there are 2 years of continuous service from grant date.
Leigh Davis
Contract of Employment
Chief Financial Officer & Company
Secretary
Leigh Davis is employed by Ava Risk Group as a permanent, full-time employee.
Mr Davis commenced his position with Ava Risk Group in February 2015 and is employed on
a current base salary of AU$230,081, inclusive of superannuation. He has a notice period of 2
months.
Performance Conditions
The contract provides for a bonus up to 40% of base salary, inclusive of superannuation, which is
payable in cash and performance rights upon meeting pre-defined KPI’s by the executive.
In FY2020, Mr Davis has accrued a cash bonus of AU$14,910 relating to the achievement of KPIs
as part of STI remuneration. In addition, performance rights with a fair value of AU$30,827 were
granted in the financial year 2020 in relation to KPIs relevant to LTIs that vest over two years on
the condition that there are 2 years of continuous service from grant date.
40
ANNUAL REPORT 2020
AVA GROUP
3. Executive contractual arrangements (continued)
James Alston
Contract of Employment
Chief Financial Officer & Chief
Operating Officer – Services
Division
Appointed 01 February 2016
James Alston is employed by Ava Global DMCC as a permanent, full-time employee.
Mr. Alston commenced employment with Ava Global DMCC in February 2016.
His base salary is AED600,000 (AU$241,294) per annum inclusive of superannuation and
allowances.
He has a notice period of 3 months.
Performance Conditions
For FY2020, the contract provides for a bonus of up to AED240,000 (AU$95,833) inclusive
of superannuation, which is payable in cash and is conditional upon meeting quarterly EBITDA
targets by the executive as set and assessed by the Board.
Mr Alston has accrued a cash bonus for financial year 2020 of AED 240,000 (AUD $95,833).
In addition Ava Global DMCC has a performance plan which allows for senior employees of the
Company to share in a pooled allocation of up to 32.7% of the exit value of Ava Global DMCC
in excess of AU$5 million or the debt and equity funding provided to Ava Global to run the
business, whichever is greater. In addition, the plan provides for a shared annual bonus pool of
32.7% of the net profits that the Ava Global business unit generates, after allowing for all costs
and expenses, including the amount of this shared annual bonus pool. The incentives are payable
in cash conditional upon achievement of divisional net profits by the executives. 3.5% of the exit
value and net profits of Ava Global business unit has been allocated to Mr Alston. The perfor-
mance plan expires if the executive resigns from their employment or is terminated by the Com-
pany within the first 3 years. Otherwise the performance plan terminates on 1 February 2021.
Mr Alston has accrued a bonus of AED 221,489 (AU$88,435) in cash in the 2020 financial year
in relation to the performance plan.
In addition to the above Mr Alston has been awarded a discretionary bonus payment of AED
72,179 (AU$28,819) for FY2020.
Matthew Nye-Hingston
Contract of Employment
Head of BQT Technology & Direc-
tor BQT Operations
Matthew Nye-Hingston is employed by BQT Solutions (NZ) Ltd as a permanent, full-time
employee.
Mr Nye-Hingston commenced his position with BQT Solutions (NZ) Ltd in July 2019 and is
employed on a current base salary of NZ$175,000, inclusive of superannuation. He has a notice
period of 8 weeks.
Performance Conditions
The contract provides for a bonus up to 40% of base salary, inclusive of superannuation, which is
payable in cash and performance rights upon meeting pre-defined KPI’s by the executive.
In FY2020, Mr Nye-Hingston has accrued a cash bonus of NZ$11,200 relating to the
achievement of KPIs as part of STI remuneration. In addition, performance rights with a fair value
of AU$22,446 were granted in the financial year 2020 in relation to KPIs relevant to LTIs that
vest over two years on the condition that there are 2 years of continuous service from grant date.
41
Post Employment
Long Term
Other
Benefits#
Super-
annuation
Termination
benefits
Long Service
Leave
AVA GROUP
ANNUAL REPORT 2020
Remuneration of Key Management Personnel
Table 1: Remuneration for the year ended 30 June 2020
Short-term
Cash Bonus
$
-
-
-
-
Salary and
Fees
$
Non-Executive Directors
D. Cronin(i)
M. Stevens
61,750
61,750
M. McGeever(ii)
58,800
182,300
Sub-total
Non-Executive
Directors
Executives
S. Basham(v)
241,298
2,750
R. Broomfield
245,295
81,374
L. Davis
199,614
14,910
$
-
-
-
-
-
-
-
$
-
5,866
-
5,866
20,578
20,658
20,931
C. Fergus(vii)
341,214
761,420
31,696
37,316
J. Alston
M. Nye-
Hingston
Sub-total
executive KMP
241,294
213,087
79,326
23,571
161,532
10,481
2,121
-
1,430,247
1,084,022
113,143
123,054
Totals
1,612,547
1,084,022
113,143
128,920
(i) Appointed as Chairman on 31 August 2018.
(ii) Appointed as Non-Executive Director on 8 August 2018.
(iii) Resigned as a Non-Executive Director on 31 August 2018.
(iv) Resigned as Non-Executive Director on 8 August 2018.
$
-
-
-
-
-
-
-
-
-
-
-
Share-based
Payment
(performance
rights)
Total
Performance
Related
$
$
%
$
-
-
-
-
10,000
71,750
10,000
77,616
10,000
68,800
30,000
218,166
14%
13%
15%
5%
28%
14%
65%
38%
10%
987
6,111
14,952
280,565
26,984
380,422
5,717
20,618
261,790
-
-
-
-
-
1,171,646
557,278
8,713
182,847
12,815
71,267
2,834,548
12,815
101,267
3,052,714
(v) Appointed as Group Chief Executive Officer on 12 March 2019. Resigned on 09 July 2020.
(vi) Mr Broomfield had a 15% salary reduction during FY2019. The reduction in long service leave showing as a negative is reflective of that change.
(vii) Appointed as Group CEO and Executive Director on 12 February 2018. Subsequently resigned as Group CEO and Executive Director on 12 March 2019 and commenced role as CEO - Services
Division. There were no Directors fees paid to Mr Fergus during FY2019. Remuneration is reflective of his role as Group CEO and subsequently CEO - Services Division.
(viii) Resigned on 3 March 2019.
# Other benefits include allowances for housing, car and school fees applicable to salary packages in the UAE.
42
ANNUAL REPORT 2020
AVA GROUP
Remuneration of Key Management Personnel (continued)
Table 2: Remuneration for the year ended 30 June 2019
Short-term
Cash Bonus
Post Employment
Long Term
Other
Benefits#
Super-
annuation
Termination
benefits
Long Service
Leave
Share-based
Payment
(performance
rights)
Total
Performance
Related
$
%
Salary and
Fees
$
Non-Executive Directors
D. Cronin(i)
M. Stevens
36,000
26,400
M. McGeever(ii)
26,400
4,400
2,809
96,009
T. Winters(iii)
F. Davis(iv)
Sub-total
Non-Executive
Directors
Executives
$
-
-
-
-
-
-
S. Basham(v)
75,669
18,000
R. Broomfield(vi)
288,582
32,816
L. Davis
210,120
20,707
C. Fergus(vii)
309,924
M. Horton(viii)
171,043
-
-
316,054
151,942
Sub-total
executive KMP
1,055,338
71,523
467,996
47,634
Totals
1,151,347
71,523
467,996
50,827
(i) Appointed as Chairman on 31 August 2018.
(ii) Appointed as Non-Executive Director on 8 August 2018.
(iii) Resigned as a Non-Executive Director on 31 August 2018.
(iv) Resigned as Non-Executive Director on 8 August 2018.
$
-
-
-
-
-
-
-
-
-
$
-
2,508
-
418
267
3,193
6,515
20,208
20,911
-
-
$
-
-
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
36,000
28,908
26,400
4,818
3,076
99,202
$
-
-
-
-
-
-
-
-
100,184
(5,049)
11,548
348,105
4,631
8,605
264,974
27,962
19,235
-
-
653,940
342,220
46,779
20,153
1,709,423
46,779
20,153
1,808,625
0%
0%
0%
0%
0%
18%
13%
11%
0%
0%
(v) Appointed as Group Chief Executive Officer on 12 March 2019. Resigned on 09 July 2020.
(vi) Mr Broomfield had a 15% salary reduction during FY2019. The reduction in long service leave showing as a negative is reflective of that change.
(vii) Appointed as Group CEO and Executive Director on 12 February 2018. Subsequently resigned as Group CEO and Executive Director on 12 March 2019 and commenced role as CEO - Services
Division. There were no Directors fees paid to Mr Fergus during FY2019. Remuneration is reflective of his role as Group CEO and subsequently CEO - Services Division.
(viii) Resigned on 3 March 2019.
# Other benefits include allowances for housing, car and school fees applicable to salary packages in the UAE.
43
AVA GROUP
ANNUAL REPORT 2020
4. Relationship between remuneration and Company performance
(a) Remuneration not dependent on satisfaction of performance condition
The Non-Executive Directors’ remuneration policy is not directly related to Company performance. The board seeks to
align remuneration policies to the long-term creation of wealth by the Company for shareholders.
(b) Remuneration dependent on satisfaction of performance condition
A portion of the Executive Remuneration is based on attainment of performance conditions. Performance-based
remuneration includes short-term cash bonuses (STIs). Performance-based remuneration granted to key management
personnel has regard to Company performance over a 12-month period.
The following table sets out the performance conditions used for performance-linked incentive payments:
KMP
CEO
CEO/CFO/COO/ Head of
BQT Technology & Director
BQT Operations
CEO/CFO/COO/ Head of
BQT Technology & Director
BQT Operations
CEO/COO/ Head of BQT
Technology & Director BQT
Operations
Performance conditions
Sales performance management
Year-on-year Revenue growth
Assessment
Partially met
Not met
Year-on-year EBITDA growth
Not met
Entering into significant new distribution and partner
agreements
Met
CFO/COO/CEO/ Head of
BQT Technology & Director
BQT Operations
Systems improvements, Improvements in operational
ratios, management of risk and general compliance
with policies
Partially met
Service Division CEO/
Services Division COO&CFO
Year-on-year EBITDA growth, based on quarterly
divisional EBTIDA targets
Service Division CEO/
Services Division COO&CFO
Ava Global DMCC Performance Plan - Achievement
of divisional net profits after tax
Met
Met
These performance conditions are selected to align the goals and incentives of the KMP with the creation of shareholder
wealth during the relevant period.
Quantitative financial performance conditions are assessed against the Consolidated Entity’s financial report for the
year. Other performance conditions are assessed by the CEO, or in the case of the CEO’s performance conditions, the
Board giving consideration to outcomes achieved, external influences and a range of other qualitative factors. These
assessments ensure clearly defined and objective assessment of financial and quantitative targets and promote fair and
reasonable judgements in respect of qualitative performance conditions.
44
ANNUAL REPORT 2020
AVA GROUP
4. Relationship between remuneration and Company performance (continued)
The following table summarises the results of the cash based bonuses awarded in FY20:
2020
Maximum cash
bonus
S. Basham
R Broomfield (i)
L Davis
M Nye-Hingston
C Fergus
J Alston
$
55,000
126,547
46,016
32,754
761,420
213,087
Amount
awarded
$
2,750
86,396
14,910
10,481
761,420
213,087
Achieved
Forfeited
%
5%
68%
32%
32%
100%
100%
%
95%
32%
68%
68%
0%
0%
The following table summarises the results of the performance rights awarded and allocated in FY20:
Number of
performance rights
awarded
Number of
performance rights
allocated based on
FY20 KPIs (ii)
Performance rights
allocated
Forfeited
S Basham
R Broomfield
Leigh Davis
M Nye-Hingston
334,957
344,379
280,245
204,054
16,748
99,870
90,800
68,210
%
5%
29%
32%
33%
%
95%
71%
68%
67%
(i) Cash bonus includes $70,000 in incentives for achievement of cash receipts targets for the IMoD project.
(ii) Reflects performance rights allocated at the end of FY20 based on achievement of FY20 performance conditions. These
performance rights will vest 50% by 31 August 2021 and 50% by 31 August 2022 dependent on the KMP remaining in office.
Assessment of these executives’ achievement of their performance conditions was conducted during August 2020. The
cash bonuses associated with the achievement of these awards relating to FY2020 will be paid during the financial year
FY2021.
45
AVA GROUP
ANNUAL REPORT 2020
4. Relationship between remuneration and Company performance (continued)
(c) Impact of Company’s performance on shareholder wealth
The following table summarises Company performance and key performance indicators:
2020
2019
2018
2017
2016
Revenues and other income excluding
interest income ($’000)
46,640
31,673
20,275
13,360
15,126
% increase/(decrease) in revenue
47%
56%
52%
(10)%
(23)%
Profit/(Loss) before tax ($’000)
4,947
(4,729)
(4,241)
(7,820)
(5,805)
% increase/(decrease) in profit before tax
205%
(12)%
46%
(35)%
(369)%
Change in share price (%)
Share price
Dividend paid to shareholders ($’000)
Return of capital ($’000)
3%
0.155
-
-
30%
0.15
-
-
(18)%
(71)%
(42)%
0.12
0.14
0.48
-
-
-
-
-
-
Total remuneration of KMP
3,052,714
1,808,625
1,485,805
1,723,166
1,013,500
Total performance based remuneration
1,185,289
91,676
10,000
117,400
65,273
46
ANNUAL REPORT 2020
AVA GROUP
5. Key management personnel’s share-based compensation
Share options issued
There were no share options granted during the year.
Performance rights issued
During the financial year, 1,763,635 performance rights were issued to KMP.
Scott Basham was issued 334,957 performance rights on 31 October 2019 at a total fair value of $38,520 (fair value per
right $0.115) as part of remuneration based on achieving KPIs. The performance rights were issued in two equal tranches,
vesting on 31 August 2021 and 31 August 2022 with vesting conditions relating to achievement of STI/LTI performance
KPIs and continuity of employment. Share based expense for the period relating to the performance rights amounts to
$14,952.
Robert Broomfield was issued 344,379 performance rights on 31 October 2019 at a total fair value of $39,603 (fair value
per right $0.115) as part as part of remuneration based on achieving KPIs. The performance rights were issued in two
equal tranches, vesting on 31 August 2021 and 31 August 2022 with vesting conditions relating to achievement of STI/LTI
performance KPIs and continuity of employment. Share based expense for the period relating to the performance rights
amounted to $15,373. In addition, there were share based expense for the period relating to the performance rights issued
to Mr. Broomfield in prior financial years which amounted to $11,611.
Leigh Davis was issued 280,245 performance rights on 23 September 2019 at a total fair value of $30,827 (fair value per
right $0.115) as part of remuneration based on achieving KPIs. The performance rights were issued in two equal tranches,
vesting on 31 August 2021 and 31 August 2022 with vesting conditions relating to achievement of STI/LTI performance
KPIs and continuity of employment. Share based expense for the period relating to the performance rights amounted to
$11,966. In addition, there were share based expense for the period relating to the performance rights issued to Mr. Davis
in prior financial years which amounted to $8,652.
Matthew Nye-Hingston was issued 204,054 performance rights on 23 September 2019 at a total fair value of $22,446
(fair value per right $0.115) as part of remuneration based on achieving KPIs. The performance rights were issued in two
equal tranches, vesting on 31 August 2021 and 31 August 2022 with vesting conditions relating to achievement of STI/LTI
performance KPIs and continuity of employment. Share based expense for the period relating to the performance rights
amounted to $8,713.
David Cronin, Mark Stevens, and Michael McGeever were each granted 200,000 performance rights at a total fair value
of $10,000 per person. The performance rights were issued on 31 October 2019 and vest on 01 September 2020 subject
to the Company’s market traded share price being at least 22 cents.
47
AVA GROUP
ANNUAL REPORT 2020
6. Key management personnel’s equity holdings
(a) Number of options held by key management personnel:
2020
Balance at
beginning of
Period
1 July 19
Executives
S Basham(i)
-
R Broomfield
1,750,000
L Davis
-
C Fergus(ii)
200,000
J. Alston
M. Nye-
Hingston
-
-
Sub-total
1,950,000
Total
1,950,000
Granted as
remuneration
Granted
other
Net Change
Other#
Balance at
End of Period
Vested at 30 June 2020
30 June 20
Exercisable
Not
Exercisable
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,750,000)
-
-
-
-
-
-
-
-
-
-
200,000
200,000
-
-
-
-
(1,750,000)
200,000
200,000
(1,750,000)
200,000
200,000
-
-
-
-
-
-
-
-
(i) Appointed as Group Chief Executive Officer and Executive Director on 12 March 2019
(ii) Resigned as Group CEO and Executive Officer on 12 March 2019. Appointed as CEO - Services Division on 12 March 2019
# Includes lapsed and forfeitures.
2019
Balance at
beginning of
Period
1 July 18
Executives
S Basham(i)
-
R Broomfield
1,750,000
L Davis
-
C Fergus(ii)
200,000
M Horton(iii)
600,000
Sub-total
2,550,000
Total
2,550,000
Granted as
remuneration
Granted
other
Net Change
Other#
Balance at
End of Period
Vested at 30 June 2019
30 June 19
Exercisable
Not
Exercisable
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,750,000
1,750,000
-
-
200,000
200,000
(600,000)
-
-
(600,000)
1,950,000
1,950,000
(600,000)
1,950,000
1,950,000
-
-
-
-
-
-
-
(i) Appointed as Group Chief Executive Officer and Executive Director on 12 March 2019
(ii) Resigned as Group CEO and Executive Officer on 12 March 2019. Appointed as CEO - Services Division on 12 March 2019
(iii) Resigned on 3 March 2019
# Includes lapsed and forfeitures
48
ANNUAL REPORT 2020
AVA GROUP
6. Key management personnel’s equity holdings (continued)
(b) Number of shares held by key management personnel (direct and indirect)
Shares held in Ava Risk Group
2020
Non-Executive Directors
D Cronin
M Stevens(ii)
M McGeever(ii)
Sub-total
Executives
Balance at
beginning of
Period
1 July 19
Granted as
remuneration
On exercise of
options
Net Change
Other#
Balance at End
of Period
30 June 20
32,463,070
-
-
-
32,463,070
518,396
-
-
500,000
1,018,396
4,105,000
-
-
1,700,000
5,805,000
37,086,466
-
-
2,200,000
39,286,466
S Basham(ii) (iii) (v)
100,000
-
-
-
100,000
R Broomfield
L Davis
C Fergus(iv)
J. Alston
M. Nye-Hingston
Sub-total
Total
(i) Off market transfer.
(ii) On-market purchase.
2,994,387
-
-
-
2,994,387
200,000
-
-
-
200,000
3,285,204
-
-
-
3,285,204
-
-
-
-
-
-
-
-
-
-
6,579,591
-
-
-
6,579,591
43,666,057
-
-
2,200,000
45,866,057
(iii) Appointed as Group Chief Executive Officer and Executive Director on 12 March 2019.
(iv) Resigned as Group CEO and Executive Director on 12 March 2019.
(v) Resigned as Group CEO and Executive Director on 09 July 2020.
49
AVA GROUP
ANNUAL REPORT 2020
6. Key management personnel’s equity holdings (continued)
During July 2020 the Company issued Robert Broomfield and Leigh Davis 112,972 ordinary shares and 84,176 ordinary
shares respectively as a result of the 30 June 2020 tranche of performance rights vesting.
2019
Non-Executive Directors
D Cronin(i)
M Stevens(ii)
M McGeever
Sub-total
Executives
Balance at
beginning of
Period
1 July 18
Granted as
remuneration
On exercise of
options
Net Change
Other#
Balance at End
of Period
30 June 19
42,129,036
-
-
(9,665,966)
32,463,070
400,000
-
-
118,396
518,396
4,105,000
-
-
-
4,105,000
46,634,036
-
-
(9,547,570)
37,086,466
S Basham(ii) (iii) (v)
-
-
-
100,000
100,000
R Broomfield
L Davis(ii)
C Fergus(iv)
J. Alston
M. Nye-Hingston
Sub-total
Total
(i) Off market transfer.
(ii) On-market purchase.
2,994,387
-
-
-
2,994,387
100,000
-
-
100,000
200,000
3,285,204
-
-
-
3,285,204
-
-
-
-
-
-
-
-
-
-
6,379,591
-
-
200,000
6,579,591
53,013,627
-
-
(9,347,570)
43,666,057
(iii) Appointed as Group Chief Executive Officer and Executive Director on 12 March 2019.
(iv) Resigned as Group CEO and Executive Director on 12 March 2019.
(v) Resigned as Group CEO and Executive Director on 09 July 2020.
50
ANNUAL REPORT 2020
AVA GROUP
6. Key management personnel’s equity holdings (continued)
(c) Number of performance rights held by key management personnel
2020
Balance at
beginning of
Period
Granted as
remuneration
(iii)
Forfeited /
lapsed
Vested
balance at end
of year
Unvested and
balance at end
of year
Value of
performance
rights granted
during the year
at grant date
1 July 19
30 June 20
30 June 20
200,000
200,000
200,000
600,000
-
-
-
-
-
200,000
-
200,000
-
200,000
10,000
10,000
10,000
-
600,000
30,000
Non-Executive Directors
D Cronin(ii)
M Stevens(ii)
M McGeever(ii)
Sub-total
Executives
S Basham(i)
R Broomfield(i)
L Davis(i)
-
-
-
-
-
334,957
-
-
334,957
225,944
168,352
344,379
-
280,245
-
112,972
84,176
457,351
364,421
M Nye-HIngston(i)
-
204,054
-
-
204,054
Sub-total
Total
394,296
1,163,635
-
197,148
1,360,783
394,296
1,763,635
-
197,148
1,960,783
38,520
39,603
30,827
22,446
131,396
161,396
(i) The performance rights were granted in two equal tranches, vesting on 31 August 2021 and 31 August 2022 with vesting conditions relating to continuity of employment.
(ii) The performance rights were granted on 31 October 2019 with vesting condition of the Company’s share price being at least 22 cents per share on 01 September 2020.
(iii) The performance rights granted as remuneration in FY2020 reflects the number awarded. Refer to section 4 (b) above for the allocation of performance rights assessed in August 2020.
During July 2020 the Company issued Robert Broomfield and Leigh Davis 112,972 ordinary shares and 84,176 ordinary
shares respectively as a result of the 01 July 2020 tranche of rights vesting.
2019
Balance at
beginning of
Period
Granted as
remuneration
Forfeited/lapsed
Unvested and
balance at end of
year
Value of
performance
rights granted
during the year at
grant date
Executives
R Broomfield
L Davis
Total
1 July 18
225,944
168,352
394,296
30 June 19
$
225,944
168,352
394,296
-
-
-
225,944
168,352
394,296
27,792
20,708
48,500
51
AVA GROUP
ANNUAL REPORT 2020
7. Other transactions with key management personnel
During the current and previous financial year, the Group transacted with related entities of directors, other than in their
capacity as director as follows:
The Consolidated Entity purchased consulting services from Pierce Group Asia Pte Limited and Pierce CIM PTE LTD,
related entities through Chairman and Non-Executive Director, David Cronin, for an amount of $296,625 (2019:
$425,538). Accounts Payable balance at 30 June 2020 totals $Nil (FY2019: $1,470). The terms of these arrangements
were on an arm’s length basis in the normal course of business and included amounts related to our employee, contractors
and administration and general office expenses provided by the related entities for the benefit of the Consolidated Entity.
During the year, there were no other transactions with directors or management personnel.
8. Voting and comments made at the Company’s 2019 Annual General Meeting
(AGM)
At the Company’s most recent AGM, a resolution to adopt the prior year remuneration report was put to the vote and at
least 98.6% of ‘yes’ votes were cast for adoption of that report. No comments were made on the remuneration report that
was considered at the AGM.
End of the remuneration report
Auditor’s independence declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 in relation
to the audit for the financial year is provided with this report.
Non-audit services
Non-audit services are approved by resolution of the Audit and Risk Committee and approval is provided in writing to the
Board of Directors. Non-audit services were provided by the auditors of entities in the Consolidated Group during the year,
namely Ernst & Young during 2020 and during 2019, as detailed below. The directors are satisfied that the provision of
the non-audit services during the year by the auditor is compatible with the general standard of independence for auditors
imposed by the Corporations Act 2001.
2020
$
2019
$
90,000
111,000
-
-
90,000
111,000
Amounts paid and payable for non-audit services:
* Tax compliance and tax advice services
* Assurance related services
Total auditors’ remuneration for non-audit services
Signed in accordance with a resolution of the directors.
Robert Broomfield
Chief Executive Officer
31 August 2020
52
ANNUAL REPORT 2020
AVA GROUP
Auditor’s Independence Declaration
Ernst & Young
8 Exhibition Street
Melbourne VIC 3000 Australia
GPO Box 67 Melbourne VIC 3001
Tel: +61 3 9288 8000
Fax: +61 3 8650 7777
ey.com/au
Auditor’s Independence Declaration to the Directors of Ava Risk Group
Limited
As lead auditor for the audit of the financial report of Ava Risk Group Limited for the financial year ended
30 June 2020, I declare to the best of my knowledge and belief, there have been:
(a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation
to the audit; and
(b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Ava Risk Group Limited and the entities it controlled during the financial
year.
Ernst & Young
Richard Bembridge
Partner
31 August 2020
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
53
53
AVA GROUP
ANNUAL REPORT 2020
04:
Consolidated Statement of
Comprehensive Income
For the year ended 30 June 2020
Consolidated
Revenue and other income
Revenue from contracts with customers
Other income
Less: Expenses
Cost of raw materials and consumables
used
Employee benefit expenses
Research and development
Advertising and marketing
Travel and entertainment
Facilities and office
Compliance, legal, and administration
Provision for impairment of receivables
Finance costs
Foreign exchange gains/(losses)
Other expenses
Profit/(Loss) for the year before
income tax
Note
4
4
2020
$'000
46,131
509
2019
$'000
31,602
84
46,640
31,686
(24,055)
(17,947)
(10,488)
(10,552)
(953)
(141)
(684)
(597)
(1,175)
(138)
(70)
(180)
(787)
(1,184)
(424)
(1,119)
(1,093)
(1,260)
(90)
(1,867)
(14)
117
(982)
(41,693)
(36,415)
4,947
(4,729)
Depreciation and amortisation expenses
11,12,14
(2,425)
Income tax (expense)/benefit
5
(5)
-
Profit/(Loss) for the year
4,942
(4,729)
Profit/(Loss) for the year attributable
to:
Equity holders of the parent company
4,942
(4,720)
Non-controlling interest
Other comprehensive income for the
year, net of tax
Items that may be reclassified subsequently
to profit and loss
Exchange differences on translation of
foreign operations, net of tax
-
(9)
4,942
(4,729)
1
(294)
e
m
o
c
n
I
e
v
i
s
n
e
h
e
r
p
m
o
C
f
o
t
n
e
m
e
t
a
t
S
d
e
t
a
d
i
l
o
s
n
o
C
54
ANNUAL REPORT 2020
AVA GROUP
Consolidated Statement of Comprehensive Income (continued)
For the year ended 30 June 2020
Items that will not be reclassified subsequently to profit and loss
Exchange differences on translation of foreign operations, net of tax, attributable to
non-controlling interests
Total other comprehensive income/(loss) for the year
Note
2020
$'000
-
1
Consolidated
2019
$'000
(93)
(387)
Total comprehensive income/(loss) for the year
4,943
(5,116)
Total comprehensive income/(loss) attributable to:
Equity holders of the parent company
Non-controlling interests
Profit/(Loss) per share for loss attributable to the ordinary equity holders of the company:
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
The above statement of comprehensive income should be read in conjunction with the accompanying notes.
4,943
-
4,943
2.11
Cents
2.03
Cents
(5,014)
(102)
(5,116)
(2.22)
Cents
(2.22)
Cents
55
AVA GROUP
ANNUAL REPORT 2020
05:
Consolidated Statement of
Financial Position
As at 30 June 2020
Consolidated
Note
2020
$'000
2019
$'000
f
o
t
n
e
m
e
t
a
t
S
d
e
t
a
d
i
l
o
s
n
o
C
n
o
i
t
i
s
o
P
l
i
a
c
n
a
n
F
i
ASSETS
Current Assets
Cash and cash equivalents
Receivables
Contract assets
Inventories
Other current assets
Total Current Assets
Non-Current Assets
Plant and equipment
Intangible assets
Right of use assets
Other non-current assets
Total Non-Current Assets
TOTAL ASSETS
LIABILITIES
Current Liabilities
Payables
Contract liabilities
Lease liabilities
Provisions
Total Current Liabilities
Non-Current Liabilities
Provisions
Lease liabilities
Contract liabilities
Total Non-Current Liabilities
TOTAL LIABILITIES
NET ASSETS
7
8
8
9
10
11
12
14
10
15
15
14
17
17
14
15
7,703
5,970
2,451
3,931
272
20,327
644
12,043
654
12
13,353
33,680
3,082
4,864
110
4,492
389
12,937
846
12,713
-
21
13,580
26,517
5,392
4,038
431
305
1,375
7,503
53
408
301
762
8,265
25,415
452
-
1,456
5,946
59
-
268
327
6,273
20,244
56
ANNUAL REPORT 2020
AVA GROUP
Consolidated Statement of Financial Position (continued)
As at 30 June 2020
EQUITY
Contributed equity
Accumulated losses
Reserves
Equity attributable to owners of the parent
Non-controlling interest
TOTAL EQUITY
The above statement of financial position should be read in conjunction with the accompanying notes.
Consolidated
Note
2020
$'000
2019
$'000
18
58,349
58,226
(30,635)
(35,520)
(2,299)
25,415
(2,462)
20,244
-
-
25,415
20,244
57
AVA GROUP
ANNUAL REPORT 2020
06:
For the year ended 30 June 2020
Consolidated Statement of Changes in Equity
Share
Capital
Share
based
payment
Reserve
Foreign
Exchange
Translation
Reserve
Other
Equity
Reserves
Accum-
ulated
Losses
Total
Equity
Total
attrib-
utable to
owners
of parent
Non-
contr-
olling
interest
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
At 1 July 2019
58,226
1,014
(429)
(3,047)
(35,520)
20,244
Effect of adoption of new accounting
standards (Note 1)
(57)
(57)
At 1 July 2019 adjusted
58,226
1,014
(429)
(3,047)
(35,577)
20,187
Profit for the year
Other comprehensive income/(loss)
Total comprehensive income for the year
-
-
-
Transactions with owners in their capacity as owners
Shares issued
Share issue costs
Share -based payments
Total transactions with owners in their
capacity as owners
125
(2)
-
123
-
-
-
-
-
162
162
-
1
1
-
-
-
-
-
-
-
-
-
-
-
4,942
4,942
-
1
4,942
4,943
-
-
-
-
125
(2)
162
285
Balance at 30 June 2020
58,349
1,176
(428)
(3,047)
(30,635)
25,415
-
-
-
-
-
-
-
-
-
-
-
20,244
(57)
20,187
4,942
1
4,943
125
(2)
162
285
25,415
55,187
934
(135)
(2,083)
(30,800)
23,103
444
23,547
At 1 July 2018
Loss for the year
Other comprehensive income/(loss)
Total comprehensive income for the
year
-
-
-
Transactions with owners in their capacity as owners
Compulsory acquisition
Shares issued
Share issue costs
Share based payments
Share buy-back
Total transactions with owners in their
capacity as owners
-
3,290
(176)
-
(75)
3,039
-
-
-
-
-
-
80
-
80
-
(294)
(294)
-
-
-
(4,720)
(4,720)
(9)
(4,729)
-
(294)
(93)
(387)
(4,720)
(5,014)
(102)
(5,116)
-
-
-
-
-
-
(916)
-
-
-
(48)
(964)
-
-
-
-
-
-
(916)
(324)
(1,240)
3,290
(176)
80
-
-
-
(123)
(18)
2,155
(342)
3,290
(176)
80
(141)
1,813
Balance at 30 June 2019
58,226
1,014
(429)
(3,047)
(35,520)
20,244
-
20,244
The above statement of changes in equity should be read in conjunction with the accompanying notes.
58
ANNUAL REPORT 2020
AVA GROUP
Consolidated Statement of Cash Flows
Consolidated
Note
2020
$’000
2019
$’000
42,319
31,523
548
582
(36,849)
(35,419)
(5)
(54)
(16)
13
-
-
(14)
13
07:
For the year ended 30 June 2020
Cash flow from operating activities
Receipts from customers
Receipts from government grants and other tax incentives
Payments to suppliers and employees
Tax paid
Lease interest paid
Finance costs paid
Interest received
Net cash flows from/(used in) operating activities
5,956
(3,315)
Cash flow from investing activities
Payment for intangible assets
Payment for plant and equipment
Payment for investment in MaxSec
Net cash flows from/(used in) investing activities
Cash flow from financing activities
Proceeds from share issue
Share issue expenses
Share buy-back in MaxSec
Share buy-back in Ava Risk Group
Payment of lease liabilities
Net cash flows from/(used in) financing activities
Net increase/(decrease) in cash and cash equivalents
Net foreign exchange differences on cash
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
The above statement of cash flows should be read in conjunction with the accompanying notes.
(930)
(147)
(1,067)
(193)
-
(1,240)
(1,077)
(2,500)
125
(2)
-
-
(301)
(178)
4,701
(80)
3,082
7,703
7
3,290
(176)
(66)
(75)
-
2,973
(2,842)
14
5,910
3,082
59
AVA GROUP
ANNUAL REPORT 2020
1. Statement of significant
accounting policies
The following is a summary of significant accounting policies adopted by
the Consolidated Entity in the preparation and presentation of the financial
report. The accounting policies have been consistently applied, unless
otherwise stated.
1.1. Basis of preparation of the financial report
The financial report is a general purpose financial report, which has been
prepared in accordance with the requirements of the Corporations Act 2001,
Australian Accounting Standards, Interpretation and other authoritative
pronouncements of the Australian Accounting Standards Board.
The financial report covers Ava Risk Group and controlled entities as
a Consolidated Entity. Ava Risk Group is a Company limited by shares,
incorporated and domiciled in Australia whose shares are publicly traded on
the Australian Securities Exchange. Ava Risk Group is a for-profit entity for
the purpose of preparing the financial statements.
The financial report is presented in Australian dollars and all values are
rounded to the nearest thousand dollars ($’000) unless otherwise stated
under the option available to the Company under ASIC Corporations
(Rounding in Financial/Directors’ Reports) Instrument 2016/191. The
Company is an entity to which this legislative instrument applies.
The consolidated financial statements of Ava Risk Group for the year ended
30 June 2020 were authorised for issue in accordance with a resolution of
the directors on 31 August 2020.
Compliance with IFRS
The consolidated financial statements of Ava Risk Group also comply
with the International Financial Reporting Standards (IFRS), issued by the
International Accounting Standards Board (IASB).
Historical cost convention
The financial report has been prepared under the historical cost convention,
as modified by revaluations to fair value for certain classes of assets as
described in the accounting policies.
Significant accounting estimates
The preparation of financial report requires the use of certain estimates and
judgements in applying the Group’s accounting policies. Those estimates and
judgements significant to the financial report are disclosed in Note 2.
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60
ANNUAL REPORT 2020
AVA GROUP
1. Statement of significant accounting policies (continued)
1.2. Going concern
The financial report has been prepared on a going concern basis which assumes the Group will have sufficient cash to
pay its debts as and when they become payable for a period of at least 12 months from the date the financial report was
authorised for issue. The Group reported an after-tax profit of $4.942 million for the year (2019: loss $4.729 million)
and its total assets exceed total liabilities by $25.415 million (2019: $20.244 million) with cash of $7.703 million (2019:
$3.082 million).
The COVID-19 outbreak was declared a pandemic by the World Health Organization in March 2020.
The Company has not seen a significant impact on our business to date. The outbreak and the response of Governments
in dealing with the pandemic is interfering with general activity levels within the community, the economy and the
operations of our business. The scale and duration of these developments remain uncertain as at the date of this report.
It is not possible to estimate the impact of the outbreak’s near-term and longer effects or Governments’ varying efforts
to combat the outbreak and support businesses. This being the case, we do not consider it practicable to provide a
quantitative or qualitative estimate of the potential impact of this outbreak on the Group at this time.
1.3. Principles of consolidation
The consolidated financial statements are those of the Consolidated Entity, comprising the financial statements of the
parent entity and of all entities which the parent entity controls. The group controls an entity when it is exposed, or has
rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power
over the entity.
Business combination
The Group accounts for business combinations using the acquisition method when control is transferred to the Group.
The consideration transferred in the acquisition is measured at fair value, as are the identifiable net assets acquired.
Acquisition costs are expensed as incurred, except if related to the issue of debt or equity securities.
The Group recognises identifiable assets acquired and liabilities assumed in a business combination regardless of whether
they have previously been recognised in the acquiree’s financial statements prior to the acquisition. Assets acquired and
liabilities assumed are measured at their acquisition-date fair values.
Goodwill is stated after separate recognition of identifiable intangible assets. It is calculated as the excess of the sum of:
(a) fair value of consideration transferred,
(b) the recognised amount of any non-controlling interest in the acquiree, and
(c) the acquisition-date fair value of any existing equity interest in the acquiree, over the acquisition-date fair values of
identifiable net assets.
If the fair values of identifiable net assets exceed the sum calculated above, the excess amount (i.e. gain on a bargain
purchase) is recognised in profit or loss immediately.
Goodwill is tested annually for impairment.
61
AVA GROUP
ANNUAL REPORT 2020
1. Statement of significant accounting policies (continued)
Subsidiaries
The financial statements of subsidiaries are prepared for the same reporting period as the parent entity, using consistent
accounting policies. Adjustments are made to bring into line any dissimilar accounting policies, which may exist.
Transactions eliminated on consolidation
All inter-company balances and transactions, including any unrealised profits or losses have been eliminated on
consolidation. Subsidiaries are consolidated from the date on which control is established and are de-recognised from the
date that control ceases. Equity interests in a subsidiary not attributable directly or indirectly to the Group are presented
as non-controlling interests.
Non-controlling interests
Non-controlling interests in the results of subsidiaries are shown separately in the consolidated statement of
comprehensive income and consolidated statement of financial position respectively.
1.4 Changes to the Group’s accounting policies
New and amended standards and interpretations
The Group applied AASB16 Leases for the first time. The nature and effect of the changes as a result of adoption of this
new accounting standard is described below.
Several other amendments and interpretations apply for the first time during the year, but do not have an impact on
the consolidated financial statements of the Group. The Group has not early adopted any standards, interpretations or
amendments that have been issued but are not yet effective.
AASB 16 Leases
AASB 16 Leases supersedes AASB 117 Leases, AASB Interpretation 4 Determining whether an Arrangement contains a
Lease, AASB Interpretation 115 Operating Leases-Incentives and AASB Interpretation 127 Evaluating the Substance of
Transactions Involving the Legal Form of a Lease. The standard sets out the principles for the recognition, measurement,
presentation and disclosure of leases and requires lessees to account for most leases on the balance sheet.
The Group applies for the first time, AASB 16 Leases, electing the modified retrospective approach. As such, the
cumulative effect of initial application is recognised in retained earnings at 1 July 2019 and the comparative financial
statements are not re-stated.
62
ANNUAL REPORT 2020
AVA GROUP
1. Statement of significant accounting policies (continued)
The effect of adopting AASB 16 is, as follows:
Impact on the statement of financial position (increase/(decrease)) as at 1 July 2019
Assets
Right-of-use assets
Total assets
Liabilities
Lease liabilities
Total liabilities
Equity
Accumulated losses
Total equity
$’000
945
945
1,002
1,002
(57)
(57)
Nature of the effect of adoption of AASB 16 Leases
The Group has lease contracts for various premises, vehicles and other equipment. Before the adoption of AASB 16, the
Group classified each of its leases (as lessee) at the inception date as either a finance lease or an operating lease. A lease
was classified as a finance lease if it transferred substantially all of the risks and rewards incidental to ownership of the
leased asset to the Group; otherwise it was classified as an operating lease.
Finance leases were capitalised at the commencement of the lease at the inception date fair value of the leased asset
or, if lower, at the present value of the minimum lease payments. Lease payments were apportioned between interest
(recognised as finance costs) and reduction of the lease liability. In an operating lease, the leased asset was not
capitalised and the lease payments were recognised as operating expenses in the statement of comprehensive income on
a straight-line basis over the lease term.
Upon adoption of AASB 16, the Group applied a single recognition and measurement approach for all leases where the
Group is the lessee, except for short-term leases and leases of low-value assets. The standard provides specific transition
requirements and practical expedients, which have been applied by the Group.
Leases previously classified as finance leases
There were no leases previously classified as finance leases in the current or prior reporting period therefore there were no
reclassifications.
Leases previously accounted for as operating leases
The Group recognised right-of-use assets and lease liabilities for those leases previously classified as operating leases,
except for short-term leases and leases of low-value assets. The right-of-use assets for most leases were recognised
based on the carrying amount as if the standard had always been applied, using the incremental borrowing rate at the
date of initial application. Lease liabilities were recognised based on the present value of the remaining lease payments,
discounted using the incremental borrowing rate at the date of initial application.
63
AVA GROUP
ANNUAL REPORT 2020
1. Statement of significant accounting policies (continued)
The Group also applied the available practical expedients wherein it:
• Used a single discount rate to a portfolio of leases with reasonably similar characteristics
•
•
Applied the short-term leases exemptions to leases with a lease term that ends within 12 months of the date of
initial application
Applied the exemption to not recognise right of use assets and lease liabilities for leases of low value (underlying
asset value of $10,000 or less) and do not contain a purchase option
• Excluded the initial direct costs from the measurement of the right-of-use asset at the date of initial application
• Used hindsight in determining the lease term where the contract contains options to extend or terminate the lease
• Relied on its assessment of whether leases are onerous immediately before the date of initial application
The lease liabilities as at 1 July 2019 can be reconciled to the operating lease commitments as of 30 June 2019 as follows:
Operating lease commitments as at 30 June 2019
Less:
Commitments relating to short-term leases
Commitments relating to leases of low-value assets
Incremental weighted average borrowing rate as at 1 July 2019
Discounted operating lease commitments at 1 July 2019
Add:
Payments in optional extension periods not recognised as at 30 June 2019
Lease liabilities as at 1 July 2019
Summary of new accounting policies
$’000
746
(8)
(68)
6.34%
546
456
1,002
Set out below are the new accounting policies of the Group upon adoption of AASB 16:
Right-of-use assets
The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is
available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses,
and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease
liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any
lease incentives received. Unless the Group is reasonably certain to obtain ownership of the leased asset at the end of the
lease term, the recognised right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated
useful life and the lease term. Right-of-use assets are subject to impairment.
Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease
payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed
payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts
expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase
option reasonably certain to be exercised by the Group and payments of penalties for terminating a lease, if the lease term
64
ANNUAL REPORT 2020
AVA GROUP
1. Statement of significant accounting policies (continued)
reflects the Group exercising the option to terminate. The variable lease payments that do not depend on an index or a
rate are recognised as expense in the period on which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Group uses the lessee’s incremental borrowing rate at the lease
commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date,
the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made.
In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a
change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset.
Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to its short-term leases of office space and storage
locations (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain
a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that
are considered of low value (i.e., below $10,000). Lease payments on short-term leases and leases of low-value assets are
recognised as expense on a straight-line basis over the lease term.
Significant judgement in determining the lease term of contracts with renewal options
The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an
option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the
lease, if it is reasonably certain not to be exercised.
The Group has the option, under some of its leases to lease the assets for additional terms of three to four years. The
Group applies judgement in evaluating whether it is reasonably certain to exercise the option to renew. That is, it
considers all relevant factors that create an economic incentive for it to exercise the renewal. After the commencement
date, the Group reassesses the lease term if there is a significant event or change in circumstances that is within its
control and affects its ability to exercise (or not to exercise) the option to renew (e.g., a change in business strategy).
Impact on the statement of profit or loss, increase/(decrease) in profit before tax for the year ended 30 June 2020 arising from:
Depreciation expense
Rental, car lease and IT equipment expenses
Finance costs
Decrease in profit before tax
There is no material impact to basic or diluted EPS.
Impact on the statement of cash flows (increase/(decrease)) for the year ended 30 June 2020:
Net cash flows from operating activities
Net cash flows from financing activities
$’000
(304)
355
(54)
(3)
$’000
301
(301)
65
AVA GROUP
ANNUAL REPORT 2020
1. Statement of significant accounting policies (continued)
1.5 Summary of significant accounting policies
a) Revenue
The Group has two divisions – Technology and Services, with the following main revenue streams
• Technology:
• design and manufacture of fibre optic intrusion detection systems (FFT- Perimeter Security Products),
design and manufacture of electro-mechanical locks, biometrics and access control cards, card readers and
biometric terminals (BQT Product),
• Services:
•
secure international logistics and storage for high value assets, and risk consultancy services (Logistics or Ava
Global).
i. Sales of Goods
Access Control Product
The Group’s contracts with customers for the sale of equipment is one performance obligation. Revenue from sale of
equipment is recognised at the point in time when control of the equipment is transferred to the customer, which is on
despatch or on delivery, dependent on the delivery terms.
Perimeter Security Product
Some contracts have multiple elements, such as hardware, software and rendered services.
When there is more than one performance obligation in the contract, revenue is allocated to each performance obligation
on the basis of relative standalone selling prices. Revenue from the sale of the equipment is recognised at a point in time,
on despatch or upon delivery. Revenue from rendered services including installation services and extended warranties are
recognised over time, as described below.
i.1. Variable consideration
Certain distribution agreements include volume rebates which give rise to variable consideration. Rebates are offset
against amounts payable by the customer on subsequent purchases. To estimate the variable consideration to which it
will be entitled, the Group applied the ‘most likely amount method’ for contracts with a single volume threshold and the
‘expected value method’ for contracts with more than one volume threshold. The selected method that best predicts the
amount of variable consideration was primarily driven by the number of volume thresholds contained in the contract.
i.2. Warranty provisions
The Group generally provides warranties for general repairs of defects that existed at the time of sale, as required by law.
As such, most warranties are assurance-type warranties, which the Company accounts for under AASB 137 Provisions,
Contingent Liabilities and Contingent Assets.
However, in some contracts, the Group provides extended warranties. These warranties are service-type warranties and,
therefore, are accounted for as a separate performance obligation to which the Group allocates a portion of the revenue
based on the relative standalone selling price. Revenue is subsequently recognised over time based on the time elapsed.
66
ANNUAL REPORT 2020
AVA GROUP
1. Statement of significant accounting policies (continued)
i.3.
Licencing fees
The Group have generated income from a new revenue stream, licensing fees, in the year ended 30 June 2020, within the
Perimeter Security segment. Revenue is recognised at a point in time when licence activation is available to the customer.
This corresponds with the point that the customer can direct the use of, and obtain substantially, all of the remaining
benefits from the licence at the point in time at which the licence transfers.
ii. Rendering of services
Perimeter Security Product
The Group’s Perimeter Security product division provides installation services. These services are sold either separately or
bundled together with the sale of equipment to a customer. The installation services can be obtained from other providers
and do not significantly customise or modify the Perimeter security product. There are two performance obligations in a
contract for bundled sales of equipment and installation services, because the Group promises to transfer equipment and
provide installation services are capable of being distinct and separately identifiable.
Revenue from installation services is recognised over time, using an input method to measure progress towards complete
satisfaction of the service, because the customer simultaneously receives and consumes the benefits provided by the
Group.
Secure Logistics
The international logistics business enters contracts with its customers to transport or store high-risk valuables, precious
metals and currency, and selects sub-contractors to transport the goods. In these contracts, the Group is primarily
responsible for fulfilling the promise to provide the logistics and storage services, each of these services are separate
performance obligations.
Management considered the application of principal versus agent on adoption to AASB 15 and determined that the Group
is the principal as it controls the service. As such revenue is recorded gross in the statement of comprehensive income.
The logistics services are required to recognise revenue over time as the customer simultaneously receives and consumes
the benefit as the entity performs the service (i.e. another entity would not need to re-perform the service, for example
distance already travelled).
Contract balances
The timing of revenue recognition may differ from the contract payment schedule, resulting in revenue that has been
earned but not billed. These amounts are included in contract assets. Amounts billed in accordance with contracts with
customers, but not yet earned, are recorded as contract liabilities. Contract liabilities are recognised as revenue when the
Group performs under the contract.
iii. Government grants
Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be
received, and the group will comply with all attached conditions.
Government grants are recognised as income over the period to match the costs the grant intends to compensate.
Government grants relating to intangible assets are credited to the asset carrying value and recognised in the profit or loss
over the period and proportions in which amortisation expense on those assets is recognised.
iv. Interest income
Interest income is recognised when it becomes receivable on a proportionate basis taking into account the interest rates
applicable to the financial assets.
67
AVA GROUP
ANNUAL REPORT 2020
1. Statement of significant accounting policies (continued)
v. Dividends
Dividends are recognised as revenue when the right to receive payment is established.
vi. Other revenues
Other operating revenues are recognised as they are earned, and goods or services provided.
b) Foreign currency translations and balances
Functional and presentation currency
The financial statements of each entity within the Consolidated Entity are measured using the currency of the primary
economic environment in which that entity operates (the functional currency). The consolidated financial statements are
presented in Australian dollars which is the Consolidated Entity’s presentation currency.
Transactions and balances
Transactions in foreign currencies of entities within the consolidated group are translated into functional currency at the
rate of exchange ruling at the date of the transaction.
Foreign currency monetary items that are outstanding at the reporting date (other than monetary items arising under
foreign currency contracts where the exchange rate for that monetary item is fixed in the contract) are translated using
the spot rate at the end of the financial year.
Except for certain foreign currency hedges, all resulting exchange differences arising on settlement or re-statement are
recognised as income and expenses for the financial year.
Foreign subsidiaries
Entities that have a functional currency different to the presentation currency are translated as follows:
• Assets and liabilities are translated at the closing rate on reporting date;
•
Income and expenses are translated at actual exchange rates or average exchange rates for the period, where
appropriate; and
• All resulting exchange differences are recognised in other comprehensive income.
c) Income tax and other taxes
The income tax expense or benefit is the tax payable on the current period’s taxable income based on the applicable
income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary
differences and to unused tax losses.
Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered
from or paid to the taxation authorities based on the current period’s taxable income. The tax rates and tax laws used to
compute the amount are those that are enacted or substantively enacted by the reporting date.
Deferred tax is provided on all temporary differences at the reporting date between the tax bases of assets and liabilities
and their carrying amounts for financial reporting purposes.
Deferred tax liabilities are recognised for all taxable temporary differences except:
when the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability
in a transaction that is not a business combination and that, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss; or
in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in
joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable that
the temporary differences will not reverse in the foreseeable future.
•
•
68
ANNUAL REPORT 2020
AVA GROUP
1. Statement of significant accounting policies (continued)
Deferred tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and
unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible
temporary differences and the carry forward of unused tax credits and unused tax losses can be utilised, except:
•
•
When the deferred income tax asset relating to the deductible temporary difference arises from the initial
recognition of an asset or liability in a transaction that is not a business combination and, at the time of the
transaction, affects neither the accounting profit nor taxable profit or loss; or
In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests
in joint ventures, deferred tax assets are recognised only to the extent that it is probable that the temporary
differences will reverse in the foreseeable future and taxable profit will be available against which the temporary
differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no
longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised.
Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has
become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is
realised, or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the
reporting date.
Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax
assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the
same taxation authority.
Tax benefits acquired as part of a business combination, but not satisfying the criteria for separate recognition at that
date, would be recognised subsequently if new information about facts and circumstances changed. The adjustment
would either be treated as a reduction to goodwill (as long as it does not exceed goodwill) if it was incurred during the
measurement period or in profit or loss.
d) Tax consolidation legislation
Effective from 20 November 2018 Ava Risk Group have implemented the tax consolidation legislation and have formed a
tax consolidated group with FFT Mena Pty Ltd, MaxSec Group Pty Ltd, BQT Solutions (Australia) Pty Ltd, 4C Satellites Ltd
and BQT Intelligent Security Systems Pty Ltd, with Ava Risk Group Limited as the head entity.
(ii) Goods and services tax (including other indirect taxes such as Value Added Tax in foreign jurisdictions) (GST)
Revenues, expenses and purchased assets are recognised net of the amount of GST except:
•
When the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in
which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as
applicable; and
•
Receivables and payables, which are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or
payables in the statement of financial position.
Cash flows are presented in the statement of cash flows on a gross basis, except for the GST component of investing and
financing activities, which are disclosed as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation
authority.
69
AVA GROUP
ANNUAL REPORT 2020
1. Statement of significant accounting policies (continued)
e) Impairment of non-financial assets
The Group assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication
exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount.
Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely
independent of those from other assets or groups of assets. If this is the case, recoverable amount is determined for the
cash-generating unit to which the asset belongs. An asset’s recoverable amount is the higher of an asset’s or the cash
generating unit’s (CGU) fair value less costs of disposal and its value in use. The recoverable amount is determined for
an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other
assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is
considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount
rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining
fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be
identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted
share prices for publicly traded companies or other available fair value indicators.
The Group bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately
for each of the Group’s CGUs to which the individual assets are allocated. These budgets and forecast calculations
generally cover a period of five years. A long-term growth rate is calculated and applied to project future cash flows after
the fifth year.
Impairment losses of continuing operations are recognised in the statement of profit or loss in expense categories
consistent with the function of the impaired asset.
For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is an indication
that previously recognised impairment losses no longer exist or have decreased. If such indication exists, the Group
estimates the asset’s or CGU’s recoverable amount. A previously recognised impairment loss is reversed only if there
has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss
was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount,
nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been
recognised for the asset in prior years. Such reversal is recognised in the profit or loss.
Goodwill is tested for impairment annually as at 30 June and when circumstances indicate that the carrying value may be
impaired.
Impairment is determined for goodwill by assessing the recoverable amount of each CGU (or group of CGUs) to which
the goodwill relates. When the recoverable amount of the CGU is less than its carrying amount, an impairment loss is
recognised. Impairment losses relating to goodwill cannot be reversed in future periods.
Intangible assets with indefinite useful lives are tested for impairment annually as at 30 June at the CGU level, as
appropriate, and when circumstances indicate that the carrying value may be impaired.
f) Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand and short-term deposits with an original maturity of three
months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of
changes in value.
For the purposes of the Statement of Cash Flows, cash and cash equivalents consist of cash and cash equivalents
as defined above, net of outstanding bank overdrafts. Bank overdrafts are included within interest-bearing loans and
borrowings in current liabilities on the balance sheet.
70
ANNUAL REPORT 2020
AVA GROUP
1. Statement of significant accounting policies (continued)
g) Inventories
Inventories are valued at the lower of average cost and net realisable value. The cost of manufactured products includes
direct material, direct labour and a proportion of manufacturing overheads based on normal operating capacities. Net
realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion
and the estimated costs necessary to make the sale.
h) Plant and equipment
Plant and equipment is stated at historical cost less accumulated depreciation and any accumulated impairment losses.
Depreciation is calculated on a straight line or diminishing balance basis over the estimated useful life of the specific
assets as follows:
Plant and Equipment
Office furniture and equipment
Motor vehicles
Computer equipment
Production plant and equipment
Demonstration equipment
i) Leases
2020
Years
2-10
5
2-7
2-10
2-5
2019
Years
2-10
5
2-7
2-10
2-5
The Group assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the
right to control the use of an identified asset for a period of time in exchange for consideration.
Group as a lessee.
The Group applies a single recognition and measurement approach for all leases, except for short-term leases and leases
of low-value assets. The Group recognises lease liabilities to make lease payments and right-of-use assets representing
the right to use the underlying assets.
j) Right-of-use assets
The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is
available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses,
and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease
liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any
lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term
and the estimated useful lives of the assets, as follows:
• Office Space and IT Equipment 3 to 5 years
• Motor vehicles 3 to 5 years
If ownership of the leased asset transfers to the Group at the end of the lease term or the cost reflects the exercise of a
purchase option, depreciation is calculated using the estimated useful life of the asset.
The right-of-use assets are also subject to impairment. Refer to the accounting policies in section (m) Impairment of non-
financial assets.
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1. Statement of significant accounting policies (continued)
ii) Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease
payments to be made over the lease term. The lease payments include fixed payments (including in- substance fixed
payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts
expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase
option reasonably certain to be exercised by the Group and payments of penalties for terminating the lease, if the lease
term reflects the Group exercising the option to terminate. Variable lease payments that do not depend on an index or
a rate are recognised as expenses (unless they are incurred to produce inventories) in the period in which the event or
condition that triggers the payment occurs.
In calculating the present value of lease payments, the Group uses the lessee’s incremental borrowing rate at the lease
commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement
date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments
made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease
term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to
determine such lease payments) or a change in the assessment of an option to purchase the underlying asset.
The Group’s lease liabilities are included in Lease liabilities in the Statement of financial position (see Note 14).
iii) Short-term leases and leases of low-value assets.
The Group applies the short-term lease recognition exemption to its short-term leases (i.e., those leases that have a lease
term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease
of low-value assets recognition exemption to leases that are considered to be low value. Lease payments on short-term
leases and leases of low- value assets are recognised as expense on a straight-line basis over the lease term.
k) Intangibles
Trademarks and Licences
Trademarks and Licences are recognised at cost of acquisition. Trademarks and Licences have a finite life and are
amortised on a systematic basis, matched to the future economic benefits over the life of the asset, less any impairment
losses.
Research and development
Expenditure on research activities is recognised as an expense when incurred.
Development expenditures on an individual project are recognised as an intangible asset when the Group can
demonstrate:
• The technical feasibility of completing the intangible asset so that the asset will be available for use or sale
•
Its intention to complete and its ability and intention to use or sell the asset
• How the asset will generate future economic benefits
• The availability of resources to complete the asset
• The ability to measure reliably the expenditure during development
Capitalised development expenditure is stated at cost less accumulated amortisation and accumulated impairment
losses. Amortisation is calculated using a straight-line method to allocate the cost of the intangible assets over their
estimated useful lives. Amortisation commences when the intangible asset is available for use between 5 and 10 years
depending on the product type. During the period of development, the asset is tested for impairment annually.
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1. Statement of significant accounting policies (continued)
Customer base and customer contracts acquired through a business combination are recorded at their fair value at the
date of acquisition. Customer lists are amortised on a straight-line basis over the period of expected benefit (5 years).
Contracts are amortised on a straight-line basis over the period of expected benefit (3 years).
Patents
Patents are initially recognised at the cost on acquisition. Patents have a finite life and are amortised on a systematic basis
matched to the future economic benefits over the life of the asset, less any impairment losses. Amortisation of the patents
commences on approval of the patent and is matched to the timing of economic benefits flowing to the Company from
the application of the technology. Patents are reviewed for impairment at the end of the financial year and more frequently
when an indication of impairment exists. Any impairment charge is recorded separately. Patents are amortised over a
period of 3-10 years.
Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal
proceeds and the carrying amount of the asset and are recognised in the statement of comprehensive income when the
asset is derecognised.
l) Trade and other payables
Trade and other payables are carried at amortised cost and due to their short-term nature they are not discounted. They
represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and
arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services.
The amounts are unsecured and are usually paid within terms negotiated with suppliers.
m) Financial instruments – initial recognition and subsequent measurement
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity
instrument of another entity.
Financial Assets
Initial recognition and measurement
Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value through other
comprehensive income (OCI), and fair value through profit or loss.
The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow
characteristics and the Group’s business model for managing them. With the exception of trade receivables that do not
contain a significant financing component or for which the Group has applied the practical expedient, the Group initially
measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss,
transaction costs. Trade receivables that do not contain a significant financing component or for which the Group has
applied the practical expedient are measured at the transaction price determined under AASB 15. Refer to significant
accounting policies in section 1.5 (a) Revenue.
In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give
rise to cash flows that are ‘solely payments of principal and interest (SPPI)’ on the principal amount outstanding. This
assessment is referred to as the SPPI test and is performed at an instrument level.
The Group’s business model for managing financial assets refers to how it manages its financial assets in order to
generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows,
selling the financial assets, or both.
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1. Statement of significant accounting policies (continued)
Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or
convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Group
commits to purchase or sell the asset.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in four categories:
• Financial assets at amortised cost (debt instruments)
• Financial assets at fair value through OCI with recycling of cumulative gains and losses (debt instruments)
•
Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses upon
derecognition (equity instruments)
• Financial assets at fair value through profit or loss
The Group only holds financial assets at amortised cost.
Financial assets at amortised cost (debt instruments)
This category is the most relevant to the Group. The Group measures financial assets at amortised cost if both of the
following conditions are met:
The financial asset is held within a business model with the objective to hold financial assets in order to collect
contractual cash flows; and
The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of
principal and interest on the principal amount outstanding.
Financial assets at amortised cost are subsequently measured using the effective interest rate (EIR) method and are
subject to impairment. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or
impaired.
The Group’s financial assets at amortised cost includes cash and cash equivalents, and trade receivables.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily
derecognised (i.e. removed from the Group’s consolidated statement of financial position) when:
• The rights to receive cash flows from the asset have expired; Or
•
The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the
received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either
(a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither
transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through
arrangement, it evaluates if, and to what extent, it has retained the risks and rewards of ownership. When it has neither
transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the
Group continues to recognise the transferred asset to the extent of its continuing involvement. In that case, the Group also
recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects
the rights and obligations that the Group has retained.
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1. Statement of significant accounting policies (continued)
Impairment of financial assets
The Group recognises an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value
through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the
contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective
interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements
that are integral to the contractual terms.
For trade receivables and contract assets, the Group applies a simplified approach in calculating ECLs. Therefore, the
Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each
reporting date. The Group has established a provision matrix that is based on its historical credit loss experience, adjusted
for forward-looking factors specific to the debtors and the economic environment. COVID19 macro-economic conditions
have been considered but are not forecast to have any material impacts.
The Group considers a financial asset in default when contractual payments are 90 days past due. However, in certain
cases, the Group may also consider a financial asset to be in default when internal or external information indicates
that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account any credit
enhancements held by the Group. A financial asset is written off when there is no reasonable expectation of recovering
the contractual cash flows.
Financial Liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and
borrowings or payables.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of
directly attributable transaction costs.
The Group’s financial liabilities include trade and other payables, lease liabilities, and loans and borrowings.
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an
existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an
existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original
liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the profit
or loss.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial
position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on
a net basis, to realise the assets and settle the liabilities simultaneously.
n) Borrowing costs
Borrowing costs can include interest expense calculated using the effective interest method, finance charges in respect of
lease liabilities, and exchange differences arising from foreign currency borrowings to the extent that they are regarded as
an adjustment to interest costs. Borrowing costs are expensed as incurred, except for borrowing costs incurred as part of
the cost of the construction of a qualifying asset which are capitalised until the asset is ready for its intended use or sale.
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1. Statement of significant accounting policies (continued)
o) Provisions and employee benefits
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is
probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation.
When the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the
reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense
relating to any provision is presented in the statement of comprehensive income net of any reimbursement.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects the
risks specific to the liability.
Warranty provisions
Provision is made for the estimated liability on all products and services still under warranty at balance date. This
provision is estimated having regard to prior service warranty experience. In calculating the liability at balance date,
amounts were not discounted to their present value as the effect of discounting was not material. In determining the level
of provision required for warranties, the Group has made judgments in respect of the expected performance and the costs
of fulfilling the warranty. Historical experience and current knowledge have been used in determining this provision. The
initial estimate of warranty-related costs is revised annually.
Employee Entitlements
(i) Wages, salaries, annual leave, long service leave and personal leave expected to be settled within 12 months
Liabilities for wages and salaries, including non-monetary benefits, annual leave and any other employee benefits
expected to be settled within 12 months of the reporting date are recognised in respect of employees’ services up to the
reporting date. They are measured at the amounts expected to be paid when the liabilities are settled. Expenses for non-
accumulating personal leave are recognised when the leave is taken and are measured at the rates paid or payable.
(ii) Long service leave and annual leave expected to be settled after 12 months
The liability for long service leave and annual leave expected to be settled after 12 months is recognised and measured
as the present value of expected future payments to be made in respect of services provided by employees up to the
reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels,
experience of employee departures, and periods of service. Expected future payments are discounted using market yields
at the reporting date on high quality corporate bonds with terms to maturity and currencies that match, as closely as
possible, the estimated future cash outflows.
(iii) Short-term Incentive payments (STI’s)
The Consolidated Entity recognises a provision when an STI is payable, to the extent that it is probable, in accordance with
the employee’s contract of employment, and the amount can be reliably measured.
(iv) Long-term Incentive payments (LTI’s)
The Consolidated Entity recognises a provision when an LTI is payable, to the extent that it is probable, in accordance with
the employee’s contract of employment, and the amount can be reliably measured.
(v) Pensions and other post-employment benefits
The Company contributes to defined contribution superannuation/pension funds on behalf of employees in respect of
employee services rendered during the year. These superannuation/pension contributions are recognised as an expense
in the same period when the employee services are received. Generally, contributions are made at applicable local
jurisdiction statutory rates where relevant.
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1. Statement of significant accounting policies (continued)
(vi) Termination benefits
Termination benefits are payable when employment of an employee or group of employees is terminated before the
normal retirement date, or when the entity provides termination benefits as a result of an offer made and accepted in
order to encourage voluntary redundancy.
The Consolidated Entity recognises a provision for termination benefits when the entity can no longer withdraw the offer
of those benefits, or if earlier, when the termination benefits are included in a formal restructuring plan that has been
announced to those affected by it.
p) Share-based payment transactions
Equity settled transactions:
The Group provides benefits to its employees (including senior executives) in the form of share-based payments, whereby
employees render services in exchange for share options or performance rights (equity-settled transactions).
The cost of these equity-settled transactions with employees is measured by reference to the fair value of the equity
instruments at the date at which they are granted. The fair value is determined by using a Black-Scholes model.
In valuing equity-settled transactions, no account is taken of any vesting conditions, other than conditions linked to the
price of the shares of Ava Risk Group (market conditions) if applicable.
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period
in which the performance and/or service conditions are fulfilled (the vesting period), ending on the date on which the
relevant employees become fully entitled to the award (the vesting date).
At each subsequent reporting date until vesting, the cumulative charge to the statement of comprehensive income is the
product of:
(i) the grant date fair value of the award;
(ii) the current best estimate of the number of awards that will vest, taking into account such factors as the likelihood of
employee turnover during the vesting period and the likelihood of non-market performance conditions being met; and
(iii) the expired portion of the vesting period.
The charge to the statement of comprehensive income for the period is the cumulative amount as calculated above less
the amounts already charged in previous periods. There is a corresponding entry to equity.
Until an award has vested, any amounts recorded are contingent and will be adjusted if more or fewer awards vest than
were originally anticipated to do so. Any award subject to a market condition is considered to vest irrespective of whether
or not that market condition is fulfilled, provided that all other conditions are satisfied. No expense is recognised for
awards that do not ultimately vest, except for awards where vesting is only conditional upon a market condition.
If the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been
modified. An additional expense is recognised for any modification that increases the total fair value of the share-based
payment arrangement, or is otherwise beneficial to the employee, as measured at the date of modification.
If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet
recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award and
designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were
a modification of the original award, as described in the previous paragraph.
q) Contributed equity
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are
shown in equity as a deduction, net of tax, from the proceeds.
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ANNUAL REPORT 2020
1. Statement of significant accounting policies (continued)
r) Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing:
•
the profit / loss attributable to owners of the Company, excluding any costs of servicing equity other than ordinary
shares,
• by the weighted average number of ordinary shares outstanding during the financial year.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the 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 additional ordinary shares that would have been outstanding assuming the
conversion of all dilutive potential ordinary shares.
The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of diluted
earnings per share.
s) Parent entity financial information
The financial information for the parent entity, Ava Risk Group Limited, has been prepared on the same basis as the
consolidated financial statements, except as set out below.
(i) Investments in subsidiaries, associates and joint venture entities
Investments in subsidiaries are accounted for at cost less impairment charge in the financial statements of Ava Risk Group
Limited. Dividends received are recognised in the parent entity’s profit or loss.
t) Comparatives
Where necessary, comparative information has been reclassified and repositioned for consistency with current year
disclosures.
u) Rounding of amounts
The parent entity and the Consolidated Entity have applied the relief available under ASIC Corporations (Rounding in
Financial/Directors’ Reports) Instrument 2016/191 and accordingly, the amounts in the consolidated financial statements
and in the directors’ report have been rounded to the nearest thousand dollars, or in certain cases, to the nearest dollar
(where indicated).
v) Foreign Exchange rates
The presentation currency of the Group is Australian dollars.
Transactions in foreign currencies are initially recorded in the functional currency at the exchange rates ruling at the date
of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of
exchange prevailing at reporting date.
All differences in the financial reports are taken to the statement of comprehensive income.
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2. Significant accounting judgements, estimates and assumptions
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including
expectations of future events that may have a material impact on the entity and that are believed to be reasonable under
the circumstances.
(a) Critical accounting estimates and assumptions
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition,
seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
(i) Impairment of tangible and intangibles assets
The Group determines whether tangible and intangible assets are impaired at least on an annual basis by evaluating
whether indicators of impairment exist in relation to the continued use of the asset by the Consolidated Entity. Goodwill
is tested for impairment on at least an annual basis. Impairment triggers include declining product or manufacturing
performance, technology changes, adverse changes in the economic or political environment or future product
expectations. If an indicator of impairment exists, the Group estimates the asset’s recoverable amount. An asset’s
recoverable amount is the higher of an asset’s fair value less costs of disposal and its value in use (“VIU”). The recoverable
amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent
of those from other assets or groups of assets. When the carrying amount of an asset exceeds its recoverable amount, the
asset is considered impaired and is written down to its recoverable amount.
Refer to note 13 for further details.
(ii) Measuring trade receivables
The Group considers trade receivables ability to pay including timing and the amount of payment. In considering ability to
pay consideration is given to macro-economic, and industry specific conditions, as well as any information known about
specific customer risks. COVID19 global economic impacts, have not had a material impact on the Group’s measurement
of trade receivables.
(iii) Share-based payment transactions
The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity
instruments at the date at which they are granted. The fair value is determined using a Black-Scholes model, with the
assumptions detailed in Note 23.
(iv) Capitalisation of development costs
Judgement is required using the criteria outlined in note 1(i), where expenditure meets the definition of development.
The Group capitalises costs for development projects. Initial capitalisation of costs is based on management’s judgement
that technological and economic feasibility is confirmed when the development project has reached a defined milestone
according to an established project management model. In determining the amounts to be capitalised, management
makes assumptions regarding the expected future cash generation of the project and the expected period of benefits.
Capitalised development costs have a finite life and are amortised on a systematic basis over the expected life of the asset
and cease at the earlier of the date that the asset is classified as held for sale and the date that the asset is derecognised.
Costs capitalised include direct payroll and payroll related costs of employees’ time spent on the development projects.
(v) Leased assets and liabilities
The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an
option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the
lease, if it is reasonably certain not to be exercised.
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2. Significant accounting judgements, estimates and assumptions
(continued)
The Group has some lease contracts that include extension and termination options. The Group applies judgement in
evaluating whether it is reasonably certain whether or not to exercise the option to renew or terminate the lease. That is,
it considers all relevant factors that create an economic incentive for it to exercise either the renewal or termination. After
the commencement date, the Group reassesses the lease term if there is a significant event or change in circumstances
that is within its control and affects its ability to exercise or not to exercise the option to renew or to terminate (e.g.
construction of significant leasehold improvements or significant customisation to the leased asset).
The Group included the renewal period as part of the lease term for some office leases with shorter non-cancellable
period (i.e., three to five years). Furthermore, the periods covered by termination options are included as part of the lease
term only when they are reasonably certain not to be exercised.
Refer to Note 14 for information on potential future rental payments relating to periods following the exercise date of
extension and termination options that are not included in the lease term.
(vi) Leases - Estimating the incremental borrowing rate
The Group cannot readily determine the interest rate implicit in the lease, therefore, it uses its incremental borrowing rate
(IBR) to measure lease liabilities. The IBR is the rate of interest that the lessee would have to pay to borrow over a similar
term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a
similar economic environment. The IBR therefore reflects what the lessee ‘would have to pay’, which requires estimation
when no observable rates are available (such as for subsidiaries that do not enter into financing transactions) or when
they need to be adjusted to reflect the terms and conditions of the lease. The Group estimates the IBR using observable
inputs (such as market interest rates) when available and is required to make certain entity-specific estimates (such as
the subsidiary’s stand-alone credit rating).
3. Segment Information
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing
performance of the operating segments has been identified as the Board of Directors of Ava Risk Group Limited.
The Group’s segments were based on three separately identifiable products.
The Group operates in perimeter security, access control solutions, and international valuable logistics, which are its
reportable segments. These divisions offer different products and services and are managed separately because they
require different technology and marketing strategies.
The following summary describes the operations of each reportable segment:
Product type
Reportable segment
Operations
Technology
Perimeter Security
Global leader in fibre optic intrusion detection systems; perimeter intrusions, oil
and gas pipeline third party interference and data network tapping and tampering
Access Control
Systems
Providing secure, reliable smart card reader and card systems, biometric solutions,
electric locking and access control products
Services
International
Valuable Logistics
Global provider of secure international logistics of high-risk valuables, precious
metals and currency
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ANNUAL REPORT 2020
AVA GROUP
3. Segment Information (continued)
2020
Revenue and other income
External customers
Interest Income
Other income
Intersegment revenue
Segment revenue and other income
Depreciation and amortisation expenses
Finance costs
Income tax
EBITDA
Segment operating proft/(loss)
2019
Revenue and other income
External customers
Interest Income
Other income
Intersegment revenue
Segment revenue and other income
Depreciation and amortisation expenses
Finance costs
Income tax
EBITDA
Segment operating loss
Perimeter
Security
Access
Control
Solutions
International
Valuable
Logistics
Eliminations
$’000
$’000
$’000
$’000
Total
$’000
16,768
4,304
25,059
-
46,131
135
437
399
17,739
(1,052)
(51)
(5)
4,270
3,297
9
22
160
4,495
(1,142)
(142)
-
774
(501)
-
37
455
25,551
(231)
(8)
-
2,385
2,146
(131)
-
(1,014)
(1,145)
-
131
-
-
-
Perimeter
Security
Access
Control
Solutions
International
Valuable
Logistics
Eliminations
$’000
$’000
$’000
$’000
13
496
-
46,640
(2,425)
(70)
(5)
7,429
4,942
Total
$’000
11,470
4,253
15,879
-
31,602
98
11
867
12,446
(720)
(14)
-
(2,656)
(3,292)
1
60
-
4,314
(342)
(86)
-
(113)
(540)
-
-
-
15,879
(805)
-
-
(92)
(897)
(86)
-
(867)
(953)
-
86
-
-
-
13
71
-
31,686
(1,867)
(14)
-
(2,861)
(4,729)
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ANNUAL REPORT 2020
3. Segment Information (continued)
Geographic information
Revenue
Australia
APAC (excluding Australia)
India
MENA
Europe
United States of America
Rest of world
Total external revenue by region
2020
$’000
1,871
4,187
6,594
1,990
21,456
6,237
3,796
46,131
2019
$’000
2,817
2,467
-
1,978
14,017
7,671
2,652
31,602
Revenue from one customer in the International Valuable Logistics division amounted to $9.845 million (FY2019: $5.296
million) and revenue from one customer in the Perimeter Security division amounts to $4.962 million (FY2019: no
customer greater than 10% of total revenue).
Non-current operating assets
Australia
United Arab Emirates
Rest of world
Total non-current assets by region
2020
$’000
10,193
1,681
1,225
13,099
2019
$’000
5,894
5,871
998
12,763
Non-current assets for this purpose consist of property, plant and equipment, right-of-use assets, and intangible assets.
Reconciliation of non-current assets
Non-current operating assets
Customer contracts intangible assets
Other non-current assets
Total non-current assets
2020
$’000
13,099
242
12
13,353
2019
$’000
12,763
796
21
13,580
Customer contracts of $242k (FY2019: $796k) have been excluded from the geographical split as the asset is composed
of customers from Australia and a variety of geographical regions.
82
ANNUAL REPORT 2020
AVA GROUP
4. Revenues from continuing operations and other income
Revenue from contracts with customers
Revenue from sales of goods
Revenue from licence fees
Revenue from provision of services
Total revenue from contracts with customers
Other income
Interest
Government grants and incentives
Gains on foreign exchange - realised
Other Income
Total other income
2020
$’000
14,704
4,781
26,646
46,131
13
465
-
31
509
Consolidated
2019
$’000
14,576
-
17,026
31,602
13
-
-
71
84
Total Revenues and other income
46,640
31,686
Disaggregation of revenue
Timing of revenue recognition
Goods transferred at a point in time
Services transferred over time*
Total disaggregation of revenue
* Includes services revenues from Technology Division as well as Services Division
2020
$’000
19,485
26,646
46,131
Consolidated
2019
$’000
14,576
17,026
31,602
83
AVA GROUP
ANNUAL REPORT 2020
4. Revenues from continuing operations and other income
(continued)
Performance obligations
The Group has contract liabilities in relation to services including extended warranty, support, commissioning and training
which have been invoiced in advance with the services yet to be provided. Refer to note 15 for further details.
The transaction price allocated to the remaining performance obligations (unsatisfied or partially unsatisfied) as at 30
June are as follows:
Contract liabilities
Expected to be recognised as revenue within 1 year
Expected to be recognised as revenue after 1 year
Total
2020
$’000
430
301
731
2019
$’000
452
268
720
84
ANNUAL REPORT 2020
AVA GROUP
5. Income tax
(a) Components of tax expense/(benefit):
Current tax
Deferred tax
Under provision in prior year
(b) Prima facie tax payable
The prima facie tax payable on profit/(loss) before income tax is
reconciled to the income tax expense/(benefit) as follows:
Profit / (loss) before tax from continuing operations
Income tax expense / (benefit) calculated at the tax rate of
27.5% (2019: 27.5%)
Non-deductible expenses
Difference in tax rates in foreign subsidiaries
Tax incentives
Utilisation of withholding tax credits*
Utilisation of carried forward tax losses / unbooked tax losses
Other
Income tax expense/(benefit)
(c) Deferred income tax related to items charged or credited
directly to equity
2020
$’000
-
-
5
5
4,947
1,360
52
(558)
-
(165)
(779)
95
5
Decrease/(Increase) in deferred tax assets
-
2019
$’000
-
-
-
-
(4,729)
(1,300)
25
(44)
(4)
-
1,323
-
-
-
*The Group received tax credits of $0.165 million (2019: $nil) in relation to Indian withholding taxes paid on licence fee
income invoiced in relation to its IMoD project. These tax credits are available to be used by the Company in the tax year
in which they are received.
Management assessed deferred tax assets and liabilities for the reporting period 30 June 2020 and their recoverability
based on the forecasted taxable profits. Tax losses in Australia can be carried forward indefinitely subject to the
satisfaction of either the continuity of ownership test or the alternative business continuity test. Management deemed
it appropriate not to recognise any additional deferred tax assets due to uncertainty on whether those assets would be
utilised against future profits generated in Australia and in foreign jurisdictions. Management will continue to assess this
position each reporting period.
The Group has unutilised tax losses that arose in Australia of $23.328 million (2019: $25.019 million). In addition, the
Group has tax losses totalling $11.123 million (2019: $10.326 million) in respect of foreign subsidiaries. The Group is
currently assessing the status of carried forward losses with respect of its foreign subsidiaries.
85
AVA GROUP
ANNUAL REPORT 2020
6. Earnings/(Loss) per share
The following reflects the income used in the basic and diluted loss per share computations:
(a) Profit/(Loss) used in calculating earnings per share
For basic and diluted loss per share:
Net profit/(loss) from continuing operations attributable to
ordinary equity holders of the parent
(b) Weighted average number of shares
Weighted average number of ordinary shares used as the de-
nominator in calculating basic earnings per share
Adjustments for calculation of diluted earnings per share
Dilutive share options / performance rights
(c) Loss per share
Basic profit/(loss) per share
Diluted Profit/(loss) per share
2020
$’000
4,942
2020
Number
Consolidated
2019
$’000
(4,720)
2019
Number
234,252,180
212,469,281
8,728,715
242,980,895
2020
Cents
2.11
2.03
-
212,469,281
2019
Cents
(2.22)
(2.22)
Basic loss per share amounts are calculated by dividing net profit/(loss) for the year attributable to ordinary equity
holders of the parent by the weighted average number of ordinary shares outstanding during the year.
Diluted loss per share amounts are calculated by dividing the net profit/(loss) attributable to ordinary equity holders of
the parent by the weighted average number of ordinary shares outstanding during the year plus the weighted average
number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary
shares.
197,148 ordinary shares were issued in July 2020 as the result of dilutive performance rights being exercised by KMP.
Since reporting date there have been no other transactions involving ordinary shares or potential ordinary shares that
would significantly change the number of ordinary shares or potential ordinary shares outstanding between the reporting
date and the date of completion of these financial statements.
86
ANNUAL REPORT 2020
AVA GROUP
2020
$’000
7,703
7,703
4,942
2,425
162
(484)
138
(1,971)
(104)
(1,106)
126
561
1,354
(87)
5,956
162
Consolidated
2019
$’000
3,082
3,082
(4,729)
1,867
80
(363)
90
-
39
(183)
84
75
(188)
(87)
(3,315)
80
7. Cash and cash equivalents
Cash at bank and on hand
(a) Reconciliation of net profit/(loss) after tax to net cash flow
used in operations
Profit/(Loss) for the year after tax
Adjustment for non-cash income and expense items:
Depreciation and amortisation
Share-based payments (equity settled)
Unrealised foreign exchange
Bad debts written off and provision for impairment of receivable
Accrued income from licence fees
Other
Changes in assets and liabilities
(Increase)/decrease in assets:
Trade and other receivables
Other assets
Inventories
Increase/(decrease) in liabilities:
Trade and other payables
Provisions
Net cash from / (used in) operating activities
(b) Non-cash financing and investing activities
Share-based payments
The Group’s exposure to interest rate risk is discussed in Note 20. The maximum exposure to credit risk at the end of the
reporting period is the carrying amount of each class of cash and cash equivalents and receivables mentioned above.
87
AVA GROUP
ANNUAL REPORT 2020
8. Receivables
Trade receivables - current
Contract assets (a)
Provision for expected credit loss (b,c)
Security deposits and bonds
Other receivables (d)
Carrying amount of trade and other receivables
Movements in the expected credit loss provision were as follows:
At 1 July
Charge for the year
Amounts written off
At 30 June
(a) Contract assets
2020
$’000
5,918
2,451
(244)
8,125
59
237
8,421
107
138
(1)
244
Consolidated
2019
$’000
4,651
110
(107)
4,654
64
256
4,974
35
90
(18)
107
Contract assets relate to goods and services which had been provided by the Company to the customer (and satisfied the
performance obligations in line with AASB 15) but had not been billed due to the terms agreed with the customer. Hence,
contract assets arise because of the timing difference between revenue recognition and the contractual payment schedule.
(b) Provision for impairment
The Company has impaired a further $138k of receivables in financial year ended 30 June 2020 (2019: $90k).
In line with AASB 9 Financial Instruments, an expected credit loss assessment was performed with no additional
impairment recognised at 30 June 2020.
88
ANNUAL REPORT 2020
AVA GROUP
8. Receivables (continued)
(c) Past due but not impaired
As at 30 June 2020, trade receivables past due but not considered impaired are: $0.625 million (2019: $1.831 million).
Trade receivables ageing analysis at 30 June 2020 is as follows:
Not past due
Past due 1 – 30 days
Past due 31 – 60 days
Past due 61 – 90 days
Past due more than 91 days
(d) Other receivables
Gross
Impairment
Gross
Impairment
2020
$’000
6,865
886
35
231
352
8,369
2020
$’000
-
-
-
-
(244)
(244)
2019
$’000
2,716
1,423
295
89
238
4,761
2019
$’000
-
-
-
-
(107)
(107)
These amounts relate primarily to government grants $102k (2019: $nil), other indirect tax refunds due from various
international tax jurisdictions $65k (2019: $127k) and other sundry debtors.
9. Inventories
Raw materials and stores (at cost)
Work in progress (at cost)
Finished goods held for sale (at lower of cost and net realisable value)
Spares (at cost)
2020
$’000
1,268
1,105
1,200
358
3,931
Consolidated
2019
$’000
1,250
912
2,171
159
4,492
During FY2020, $17k (2019: $322k) was recognised as an expense for inventories carried at net realisable value. This is
recognised in cost of raw materials and consumables used.
89
AVA GROUP
ANNUAL REPORT 2020
10. Other assets
Current
Prepayments
Non-current
Non-current prepayments
Total Other assets
Prepayments are not interest bearing.
2020
$’000
272
12
284
Consolidated
2019
$’000
389
21
410
90
ANNUAL REPORT 2020
AVA GROUP
11. Non-current assets - plant and equipment
Computer
equipment
Motor
vehicles
Plant and
equipment
Office
furniture
and
equipment
Demon-
stration
equipment
Total
$’000
$’000
$’000
$’000
$’000
$’000
Year Ended 30 June 2020
Carrying amount at beginning
of year
Additions
Disposals
Depreciation charge for the year
Exchange adjustment
Carrying amount at end of year
At 30 June 2020
Cost
Accumulated depreciation and
impairment
Net carrying amount
Year Ended 30 June 2019
Carrying amount at beginning
of year
Additions
Disposals
Depreciation charge for the year
Exchange adjustment
Carrying amount at end of year
At 30 June 2019
Cost
Accumulated depreciation and
impairment
101
38
-
(52)
-
87
829
(742)
87
130
15
(1)
(46)
3
101
14
-
-
(3)
1
12
44
(32)
12
17
-
-
(4)
1
14
161
10
-
(62)
-
109
136
11
(10)
(76)
-
61
434
98
-
(157)
-
375
846
157
(10)
(350)
1
644
1,092
(983)
543
(482)
2,050
4,558
(1,675)
(3,914)
109
90
120
-
(51)
2
161
61
375
644
165
530
932
193
(3)
51
(2)
(153)
(282)
8
434
6
846
7
-
(28)
(8)
136
791
(690)
44
(30)
1,082
(921)
542
(406)
1,952
4,411
(1,518)
(3,565)
Net carrying amount
101
14
161
136
434
846
91
AVA GROUP
ANNUAL REPORT 2020
12. Non-current assets – intangible assets and goodwill
(a) Reconciliation of carrying amounts
Net carrying amount
5,428
1,016
4,406
388
805
12,043
Cost (gross carrying amount)
5,428
Accumulated amortisation
Accumulated impairment
charges
-
-
Year ended 30 June 2020
Carrying amount at beginning
of year
Additions
Disposals
Amortisation
Exchange adjustments
Carrying amount at end of year
At 30 June 2020
Year ended 30 June 2019
Carrying amount at beginning
of year
Additions
Disposals
Amortisation
Exchange adjustments
Carrying amount at end of year
At 30 June 2019
-
-
-
110
5,428
-
-
-
342
5,318
Goodwill
Trademarks Development
costs
Patents
Total
Acquired
customer
lists /
contracts
$’000
$’000
$’000
$’000
$’000
$’000
5,318
1,133
4,253
521
1,488
12,713
-
-
(134)
17
1,016
1,354
(338)
-
925
(5)
(782)
15
4,406
5
-
(138)
-
388
-
-
(717)
34
805
930
(5)
(1,771)
176
12,043
6,761
2,419
2,583
18,545
(2,355)
(1,884)
(1,778)
(6,355)
-
(147)
-
(147)
4,976
1,207
3,824
627
2,061
12,695
-
-
(129)
55
1,133
1,336
(203)
-
1,076
(37)
(645)
35
4,253
5,826
(1,573)
-
29
-
(135)
-
521
2,414
(1,746)
(147)
521
-
-
(676)
103
1,488
2,549
(1,061)
-
1,488
1,105
(37)
(1,585)
535
12,713
17,443
(4,583)
(147)
12,713
Cost (gross carrying amount)
5,318
Accumulated amortisation
Accumulated impairment charges
-
-
Net carrying amount
5,318
1,133
4,253
92
ANNUAL REPORT 2020
AVA GROUP
12. Non-current assets – intangible assets and goodwill (continued)
(b) Development costs
During the year ended 30 June 2020, the Group incurred additional gross development costs of $0.925 million (2019:
$1.076 million). During the year, it was decided to discontinue some development projects and the previously capitalised
costs of $5,000 were expensed (2019: $37,000).
(c) Revaluation of assets acquired in USD
Intangible assets acquired as part of the MaxSec takeover were acquired in USD and are therefore revalued at each
reporting period with a corresponding adjustment to the Foreign Exchange Translation Reserve.
93
AVA GROUP
ANNUAL REPORT 2020
13. Carrying value of non-financial assets
For assets excluding goodwill, an assessment is made each reporting period to determine whether there is an indicator of impairment.
Goodwill Allocation
International Secure Logistics
Access Control Solutions
(including locks and readers)
At 1 July 2019
Impact of foreign currency
At 30 June 2020
4,578
110
4,688
740
-
740
Total
5,318
110
5,428
As the International Secure Logistics division is denominated in US dollars, the goodwill at acquisition allocated to that
CGU has been recognised in US dollars and revalued at each reporting period with a corresponding adjustment to the
translation reserve.
Key assumptions and estimates
The recoverable amount of the cash-generating unit is determined based on value-in-use calculations, unless there is
evidence to support a higher fair value less cost of disposal.
The Group has three identifiable CGUs:
• Perimeter security
• Access control solutions
•
International valuable logistics
Each CGU was tested for impairment in accordance with the Group’s accounting policies, using a value in use methodology.
The impacts of COVID19 on future cash flows was considered when determining inputs for the value-in-use calculations.
Key Assumptions
Future cash flows
International Secure Logistics
VIU calculations, inclusive of working capital movements and forecast capital expenditure based
on financial projections approved by the Board for the first year, with detailed management
forecasts used in years 2 – 5, then reverting to a terminal value of 2%.
Discount rate:
A discount rate was applied to cash flow projection assessed to reflect the time value of money
and the perceived risk profile of the stage of the business.
Pre-tax discount rates:
• Perimeter security – 17.74%
• Access controls – 16.12%
• International Valuable Logistics – 13.94%
Post-tax discount rates:
• Perimeter security – 13.94%
• Access controls – 13.94%
• International Valuable Logistics – 13.94%
Revenue growth
Forecast growth in year 1 is based on Board approved projections, and detailed assessed
conversion of known revenue opportunities for the business. Years 2 – 5 assume modest growth
is achieved within existing business markets and geographies, along with expansion of the
business into new markets and geographies.
Gross margins
Forecasting consistent gross margins over the life of the model relative to historic gross margins achieved.
No impairment was recognised. The recoverable amount is not sensitive to any reasonably possible changes in assumptions.
94
ANNUAL REPORT 2020
AVA GROUP
14. Leases
Group as a lessee
The Group has lease contracts for office space, IT equipment and vehicles used in its operations. Leases of office space
and IT equipment generally have lease terms between 3 and 5 years, while motor vehicles generally have lease terms
between 3 and 4 years. The Group’s obligations under its leases are secured by the lessor’s title to the leased assets.
Generally, the Group is restricted from assigning and subleasing the leased assets. There are several lease contracts that
include extension and termination options and variable lease payments, which are further discussed below.
The Group also has certain leases of office space and IT equipment with lease terms of 12 months or less and leases
with low value. The Group applies the ‘short-term lease’ and ‘lease of low-value assets’ recognition exemptions for these
leases.
Amounts recognised in the statement of financial position and profit or loss
Set out below, are the carrying amounts of the Group’s right-of-use assets and lease liabilities and the movements during
the period:
Right-of-use assets
Office Space & IT
Equipment
Motor Vehicles
Total
Lease liabilities
As at 1 July 2019
925
20
945
$'000
$'000
$'000
Additions
Disposals
Depreciation expense
Interest expense
Payments
As at 30 June 2020
19
(34)
(287)
-
-
623
28
-
(17)
-
-
31
47
(34)
(304)
-
-
654
Set out below is the classification of lease liabilities:
Current
Non-Current
As at 30 June
$'000
1,002
47
(35)
-
54
(355)
713
2020
$'000
305
408
713
95
AVA GROUP
ANNUAL REPORT 2020
14. Leases (continued)
The following are the amounts recognised in profit or loss:
Depreciation expense of right-of-use assets
Interest expense on lease liabilities
Expense relating to short term and low value assets (included
in facilities and office costs)
Total amount recognised in profit and loss
2020
$'000
304
54
153
511
The Group had total cash outflows for leases of $355,000 in 2020. The Group also had non-cash additions to right-of-use
assets and lease liabilities of $47,000 in 2020.
The Group has several lease contracts that include extension and termination options. These options are negotiated
by management to provide flexibility in managing the leased-asset portfolio and align with the Group’s business needs.
Management exercises significant judgement in determining whether these extension and termination options are
reasonably certain to be exercised (Refer Note 2).
Set out below are the undiscounted potential future rental payments relating to periods following the exercise date of
extension and termination options that are not included in the lease term:
Within five years
More than five years
$’000
$’000
Total
$’000
2020
Extension options not expected to be exercised
221
26
247
96
ANNUAL REPORT 2020
AVA GROUP
15. Trade and other payables
Trade payables, accruals and other payables
Current
Trade payables
Accruals and other payables
2020
$'000
2,323
3,069
5,392
Trade, accruals and other payables are non-interest bearing and normally settled on 14 – 60 day terms.
Contract liabilities
Balance at 1 July
Deferred during year
Recognised as revenue during the year
Balance at 30 June
Expected to be recognised as revenue within 1 year
Expected to be recognised as revenue after 1 year
2020
$'000
720
859
(847)
732
431
301
732
2019
$'000
3,602
436
4,038
2019
$'000
691
247
(218)
720
452
268
720
Contract liabilities relate to deferred revenue for customers that have been billed in advance but the service has yet to be
provided. The contract liability balance represents performance obligations which have yet to be met and therefore have
not been recognised as revenue during the year.
Revenue recognised of $847k (2019: $218k) in the year represents performance obligations which have been met during
the financial year in relation to contract liabilities held at 30 June 2019.
16. Borrowings
The bank overdraft facility totalling $1 million is unused at reporting date. It is secured by 1st ranking fixed and floating
charges over the assets of Ava Risk Group.
Refer to note 20 for further details on minimum future lease payments.
(a) Assets pledged as security
All assets of the Group have been pledged as security for borrowings.
97
AVA GROUP
ANNUAL REPORT 2020
17. Provisions
(a) Movements in provisions
Movements in each class of provision during the financial year, other than provisions relating to employee benefits, are set
out below:
Current
Employee entitlements – annual leave
Employee entitlements – long service leave
Provision for warranty claims
Non-current
Employee entitlements – long service leave
Consolidated
At 1 July 2019
Arising during the year
Unused amounts reversed
At 30 June 2020
Current
Non-current
(b) Nature and timing of provisions
(i) Warranty provision
2020
$'000
704
411
260
1,375
53
53
2019
$'000
771
474
211
1,456
59
59
$'000
211
49
-
260
260
-
260
Refer to Note 1.5(o) for the relevant accounting policy and a discussion of the significant estimations and assumptions
applied in the measurement of product warranty provision. This amount includes predominantly provision booked for
probable claims by customers for product faults as well as provision for claimable warranty for other goods and services
sold by the Group.
(ii) Employee Entitlements
Refer to Note 1.5(o) for the relevant accounting policy and a discussion of the significant estimations and assumptions
applied in the measurement of long-service leave, which is part of this provision. This provision also includes provision
booked for employees who earn but are yet to use their vacation entitlements. This amount includes on-costs for pension
and superannuation, worker’s compensation insurance and payroll tax.
98
ANNUAL REPORT 2020
AVA GROUP
Consolidated
2020
$'000
58,349
58,349
Number of shares
234,115,568
1,250,000
-
235,365,568
211,094,439
(478,872)
23,500,001
-
234,115,568
2019
$'000
58,226
58,226
$'000
58,226
125
(2)
58,349
55,187
(75)
3,290
(176)
58,226
18. Contributed equity
(a) Ordinary shares
Ordinary share capital, issued and fully paid
(b) Movement in ordinary shares on issue
At 1 July 2019
Share issue(iii)
Share issue costs(iii)
At 30 June 2020
(b) Movement in ordinary shares on issue
At 1 July 2019
Share buyback and cancellation(i)
Share issue(ii)
Share issue costs(ii)
At 30 June 2019
(i) On 15 November 2018, Ava cancelled 478,872 shares bought back at a total of $75,331 in conjunction with the On
Market Buy Back as announced to shareholders on 17 July 2018. The On Market Buy Back concluded on 16 July 2019. No
further shares were bought back.
(ii) On 5 June 2019, Ava Risk Group completed a capital raise, issuing 23,500,001 shares at $0.14 per share, at a value of
$3.290 million.
(iii) On 21 May 2020, Ava Risk Group issued 1,250,000 shares at $0.10 per share, at a value of $125,000, in fulfilment of a
contractual agreement in relation to the MaxSec acquisition.
(c) Terms and conditions of contributed equity
Ordinary shares have the right to receive dividends as declared and, in the event of winding up the Company, to
participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on
shares held.
Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company.
(d) Share options
Employee share scheme
The Group continued to offer employee participation in share-based incentive schemes as part of the remuneration
packages for the employees of the Consolidated Entity. Refer to Note 23: Share Based Payments for detailed disclosures.
99
AVA GROUP
ANNUAL REPORT 2020
18. Contributed equity (continued)
No options have been issued between balance date and the date of this report. The Company has entered into an
agreement with Mr Basham that it may issue 250,000 options vesting on 31 Dec 2020 with an exercise price of 15 cents
and an expiry date of 31 December 2021 and 250,000 options vesting on 30 June 2021 with an exercise price of 15 cents
and an expiry date of 31 December 2021 subject to certain performance conditions to be met during his employment
notice period, which ends on 09 September 2020.
(i) Options over ordinary shares: The following options to purchase fully paid ordinary shares in the Company were
outstanding at 30 June 2020:
Date granted
Expiry date
Number of options
Exercise
price ($)
Balance at
start of the
year
Granted
during the
year
Exercised
during the
year
Vested and
exercisable
at end of the
year
Forfeited,
lapsed
and other
movements
during the
year
2020
15/03/2015
15/03/2020
$0.23
1,500,000
10/11/2017
10/11/2020
$0.21
200,000
29/11/2017
31/12/2020
$0.12
2,000,000
29/11/2017
19/05/2020
10/05/2018
19/05/2020
14/03/2018
31/12/2021
14/03/2018
31/12/2021
$0.10
$0.10
$0.13
$0.15
1,375,000
250,000
1,500,000
1,500,000
14/03/2018
31/12/2021
$0.20
3,000,000
Total
Weighted average exercise price
11,325,000
$0.16
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,500,000)
-
-
-
200,000
2,000,000
(1,375,000)
(250,000)
-
-
-
-
-
1,500,000
1,500,000
3,000,000
(3,125,000)
8,200,000
$0.16
$0.16
100
ANNUAL REPORT 2020
AVA GROUP
18. Contributed equity (continued)
Options over ordinary shares: The following options to purchase fully paid ordinary shares in the Company were
outstanding at 30 June 2019:
Date granted
Expiry date
Number of options
Exercise
price ($)
Balance at
start of the
year
Granted
during the
year
Exercised
during the
year
2019
15/03/2015
15/03/2020
$0.23
1,500,000
28/04/2017
28/04/2020
10/11/2017
10/11/2020
$0.23
$0.21
600,000
200,000
29/11/2017
31/12/2020
$0.12
2,000,000
29/11/2017
19/05/2020
10/05/2018
19/05/2020
14/03/2018
31/12/2021
14/03/2018
31/12/2021
$0.10
$0.10
$0.13
$0.15
1,375,000
250,000
1,500,000
1,500,000
14/03/2018
31/12/2021
$0.20
3,000,000
Total
Weighted average exercise price
(e) Performance rights
11,925,000
$0.16
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Vested and
exercisable
at end of the
year
Forfeited,
lapsed
and other
movements
during the
year
-
1,500,000
(600,000)
-
-
-
-
-
-
-
-
200,000
2,000,000
1,375,000
250,000
1,500,000
1,500,000
3,000,000
(600,000)
11,325,000
$0.23
$0.16
During the financial year 2020 1,763,634 performance rights (2019: 394,296) were issued to Key Management Personnel
as part of their remuneration package.
Date granted
Expiry date
Exercise
price ($)
Balance at
start of the
year
Granted
during the
year
Forfeited
and other
movements
during the
year
Vested and
excercisable
balance at
end of the
year
Unvested
balance at
end of the
year
2020
1/07/2018
01/07/2020
1/07/2018
01/07/2021
1/07/2018
01/07/2020
1/07/2018
01/07/2021
23/09/2019
31/08/2021
23/09/2019
31/08/2022
28/10/2019
31/08/2021
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
112,972
112,972
84,176
84,176
-
-
-
-
-
-
-
528,558
528,561
468,939
-
-
-
-
-
-
-
112,972
-
-
112,972
84,176
-
-
-
-
-
84,176
528,558
528,561
468,939
101
AVA GROUP
ANNUAL REPORT 2020
18. Contributed equity (continued)
Date granted
Expiry date
Exercise
price ($)
Balance at
start of the
year
Granted
during the
year
Forfeited,
lapsed
and other
movements
during the
year
Vested and
excercisable
balance at
end of the
year
28/10/2019
31/08/2022
31/10/2019
31/08/2021
31/10/2019
31/08/2022
31/10/2019
01/09/2020
$0.00
$0.00
$0.00
$0.00
-
-
-
-
468,942
339,667
339,669
600,000
Total
394,296
3,274,336
-
-
-
-
-
Unvested
balance at
end of the
year
468,942
339,667
339,669
600,000
-
-
-
-
197,148
3,471,484
During the year ended 30 June 2020 the Company granted performance rights as part of remuneration to Non-executive
Directors, other key management personnel and key employees. The vesting conditions of the performance rights are
based on key performance metrics and objectives being met. With the exception of the Non-executive Directors, the fair
value of the performance rights was based on a Black Scholes option pricing model. The fair value of the performance
rights for Non-executive directors were calculated using a binomial model.
•
•
•
•
Non-executive Directors were issued 600,000 performance rights, following approval of the shareholders at the
Company’s Annual General Meeting (AGM) on 31 October 2019. The performance rights have a share price target of $0.22
with a vesting date of 1 September 2020.
Executive Directors, Scott Basham and Robert Broomfield, were issued performance rights of 334,957 and 344,379
respectively, following approval of the shareholders at the AGM on 31 October 2019. The performance rights have
a nil exercise price and are split into two equal tranches, one vesting on 31 August 2021, with the second vesting on
31 August 2022.
Other key management personnel were issued a total of 484,299 performance rights. The performance rights have
a nil exercise price and are split into two equal tranches, one vesting on 31 August 2021, with the second vesting on
31 August 2022.
Other key employees were issued a total of 1,510,701 performance rights. The performance rights have a nil
exercise price and are split into two equal tranches, one vesting on 31 August 2021, with the second vesting on 31
August 2022.
Date granted
Expiry date
Exercise price
($)
Balance at start
of the year
Granted during
the year
Forfeited,
lapsed
and other
movements
during the year
Unvested and
exercisable
balance at end
of the year
2019
1/07/2018
01/07/2020
1/07/2018
01/07/2021
1/07/2018
01/07/2020
1/07/2018
01/07/2021
$0.00
$0.00
$0.00
$0.00
Total
102
-
-
-
-
-
112,972
112,972
84,176
84,176
394,296
-
-
-
-
-
112,972
112,972
84,176
84,176
394,296
ANNUAL REPORT 2020
AVA GROUP
18. Contributed equity (continued)
During the year ended 30 June 2019 the Company granted performance rights as part of remuneration to two key
management personnel, Leigh Davis (CFO) and Robert Broomfield (COO). The fair value was measured at a market price
for this remuneration. Fair value of the performance rights for Leigh Davis was $20,708 and for Robert Broomfield was
$27,792.
The performance rights are split into two equal tranches one of which vested on 01 July 2020 with the second tranche
vesting on 01 July 2021. The vesting conditions are based on continuity of employment. During July 2020 the Company
issued Robert Broomfield and Leigh Davis 112,972 ordinary shares and 84,176 ordinary shares respectively as a result of
the 01 July 2020 tranche of rights vesting.
(f) Capital management
When managing capital, management’s objective is to ensure the Consolidated Entity continues to maintain optimal
returns to shareholders and benefits for other stakeholders. Management also aims to maintain a capital structure that
ensures the lowest cost of capital available to the entity.
The Group’s debt and capital includes ordinary share capital and financial liabilities, supported by financial assets.
Management adjusts the capital structure to take advantage of favourable costs of capital or high returns on assets. As
the market is constantly changing, management may change the amount of dividends to be paid to shareholders, return
capital to shareholders, issue new shares or sell assets to reduce debt.
Management monitor capital through the gearing ratio (net debt / total capital). Net debt is calculated as total
borrowings (including trade and other payables) as shown in the balance sheet less cash and cash equivalents. The
gearing ratios based on continuing operations at 30 June 2020 and 2019 were as follows:
Total borrowings *
Less cash and cash equivalents
Net borrowings / (cash)
Total equity
Total capital
Gearing ratio
Consolidated
2020
$'000
2019
$'000
6,105
4,038
7,703
(1,598)
25,415
23,817
0%
3,082
956
20,244
21,200
5%
* Includes trade and other payables as well as leases. The Company had no borrowings at 30 June 2020.
No changes were made to the objectives, polices, or processes for managing capital during the year ended 30 June 2020.
103
AVA GROUP
ANNUAL REPORT 2020
19. Reserves
Nature and purpose of reserves
Share based payment reserve
The share based payment reserve is used to record the value of share-based payments provided to employees and
directors as part of their remuneration and options or performance rights granted as part of other agreements.
Foreign exchange translation reserve
This reserve is used to record the unrealised exchange differences arising on translation of a foreign entity and is not
distributable.
Other equity reserve
Other equity represents the difference between the fair value of ordinary shares issued to acquire non-controlling interest
and the initial value of non-controlling interests.
20. Financial risk management objectives and policies
The Group’s principal financial instruments comprise receivables, payables, bank overdraft, lease liabilities, cash and
short-term deposits.
Risk exposures and responses
The Group manages its exposure to key financial risks, including interest rate risk in accordance with the Group’s financial
risk management policy. The objective of the policy is to support the delivery of the Group’s financial targets whilst
protecting future financial security.
The main risks arising from the Group’s financial instruments are interest rate risk, currency risk, credit risk, and
liquidity risk. The Group uses different methods to measure and manage different types of risks to which it is exposed.
These include monitoring levels of exposure to interest rate risk and assessments of market forecasts for interest rate.
Monitoring levels of exposure to various foreign currencies and assessments of market forecasts for foreign currency
exchange rates. Ageing analyses and monitoring of specific credit allowances are undertaken to manage credit risk;
liquidity risk is monitored through the development of future rolling cash flow forecasts.
The Board reviews and agrees policies for managing each of the risks as summarised below.
Primary responsibility for identification and control of financial risks rests with the Audit & Risk Committee under the
authority of the Board. The board reviews and agrees policies for managing each of the risks identified below, including
hedging of foreign currency and interest rate risk, credit allowances, and future cash flow forecast projections.
104
ANNUAL REPORT 2020
AVA GROUP
20. Financial risk management objectives and policies (continued)
a) Interest rate risk
The Group’s main interest rate risk relates primarily to the Group’s cash and cash equivalents held in interest bearing
accounts.
At reporting date, the Group had the following mix of financial assets and liabilities exposed to Australian variable interest
rate risk.
Financial instruments
Interest bearing
Total carrying
amount
Weighted average
effective interest
rate
Fixed / variable
rate
30 June 2020
$'000
$'000
%
(i) Financial assets and liabilities
Cash
Lease liabilities
Total net financial assets
30 June 2019
(i) Financial assets
Cash
Total financial assets
7,703
(713)
6,990
3,082
3,082
7,703
(713)
6,990
3,082
3,082
0.01%
6.35%
0.64%
0.4%
0.4%
Variable
Fixed
Variable
The Group’s policy is to manage its finance costs using a mix of fixed and variable rate debt where possible. At 30 June
2020, the Group had no borrowings (2019: nil) and lease liabilities of $713,000. (2019: nil).
The Group constantly analyses its interest rate exposure. Within this analysis consideration is given to potential renewals
of existing positions, alternative financing, and the mix of fixed and variable interest rates.
The Group’s fixed rate borrowings comprising the leases are carried at amortised cost. They are therefore not subject to
interest rate risk as defined in AASB 7.
The following sensitivity analysis is based on the interest rate risk exposures in existence at the reporting date.
At 30 June 2020, and at 30 June 2019, if interest rates had moved, as illustrated in the table below, with all other variables
held constant, post tax profit / (losses) and equity would have been affected as follows:
105
AVA GROUP
ANNUAL REPORT 2020
20. Financial risk management objectives and policies (continued)
Judgments of reasonably
possible movements*
Consolidated
+ 1/2% (50 basis points)
- 1/2% (50 basis points)
Post Tax Profit
Equity
Higher/(Lower)
Higher/(Lower)
2020
$’000
28
(28)
2019
$’000
11
(11)
2020
$’000
28
(28)
2019
$’000
11
(11)
* A 50 basis point increase and a 50 basis point decrease is used and represents management’s assessment of the
reasonably possible change in interest rates.
b) Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of
changes in foreign exchange rates. The Group’s exposure to the risk of changes in foreign exchange rates relates primarily
to the Group’s operating activities, and cash balances.
The Group’s exposure to foreign currency risk at the end of the reporting period, expressed in Australian dollars was as
follows:
USD EXPOSURE
30 June 2020
Cash and cash equivalents
Trade and other receivables
Trade and other payables
Total exposure
30 June 2019
Cash and cash equivalents
Trade and other receivables
Trade and other payables
Total exposure
Foreign currency sensitivity
A$’000
2,582
4,321
(575)
6,328
698
2,328
(432)
2,594
The following tables demonstrate the sensitivity to a reasonably possible change in the USD exchange rate with all other
variables held constant. The impact on the Group’s profit before tax is due to changes in the fair value of monetary assets
and liabilities. The Group’s exposure to foreign currency changes for all other currencies is not material.
106
ANNUAL REPORT 2020
AVA GROUP
20. Financial risk management objectives and policies (continued)
USD EXPOSURE
30 June 2020
30 June 2019
c) Credit risk
% Change in rate
Effect on profit/(loss)
after tax
Effect on equity
10%
-10%
10%
-10%
A$’000
459
(459)
188
(188)
A$’000
459
(459)
188
(188)
Credit risk arises from the financial assets of the Group, which comprise cash and cash equivalents, trade and other
receivables (including contract assets). The Group’s exposure to credit risk arises from potential default of the counter
party, with a maximum exposure equal to the carrying amount of these instruments, net of any provisions for impairment
of those assets. Exposure at balance date is addressed in each applicable note.
The Group does not hold any credit derivatives to offset its credit exposure.
The Group trades only with recognised, creditworthy third parties, and as such collateral is not requested nor is it the
Group’s policy to securitise its trade and other receivables.
It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures
including an assessment of their financial position, past experience and industry reputation.
In addition, receivable balances are monitored on an ongoing basis.
d) Liquidity risk
Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities.
The Group monitors its risk of a shortage of funds using cash flow forecasting and liquidity planning.
The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of variety of
equity and debt instruments.
The table below analyses the Group’s financial liabilities into relevant maturity groupings based on their contractual
maturities for all non-derivatives financial liabilities.
The amounts disclosed in the table are the contractual undiscounted cash flows.
The remaining contractual maturities of the Group’s financial liabilities are:
107
AVA GROUP
ANNUAL REPORT 2020
20. Financial risk management objectives and policies (continued)
12 months or less
1-5 years
Over 5 years
Consolidated
2020
$'000
2019
$'000
5,697
4,038
408
-
-
-
Total contractual cash flows
6,105
4,038
Fair value
The fair value of financial assets and financial liabilities approximate their carrying amounts as disclosed in the
consolidated statement of financial position and notes to the consolidated financial statements.
108
ANNUAL REPORT 2020
AVA GROUP
21. Related party disclosure
(a) Subsidiaries
The consolidated financial statements include the financial statements of Ava Risk Group and the subsidiaries listed in the
following table.
Name
Parent Entity
Country of Incorporation
Principal Activity
% Equity Interest
2020
2019
Ava Risk Group Ltd
Australia
Manufacture and sale of security systems
100
100
Subsidiaries of Ava Risk Group Ltd
FFT MENA Pty Ltd
Australia
Holding company
Future Fibre Technologies (US) Inc.
USA
Sales Support and other services
MaxSec Group Pty Ltd
Australia
Holding company
100
100
100
100
100
100
Subsidiaries of FFT MENA Pty Ltd
Future Fibre Technologies MENA
FZ-LLC
U.A.E
Sales Support and other services
100
100
Future Fibre Technologies Europe AG
Switzerland
Sales Support and other services
Future Fibre Technologies Europe Ltd
United Kingdom
Sales Support and other services
FFT India Pvt Ltd
India
Sales Support and other services
100
100
100
100
100
100
Subsidiaries of MaxSec Group Pty Ltd
BQT Intelligent Security
Systems Pty Ltd
Australia
Access Control
60
60
4C Satellites Ltd
Australia
BQT Solutions (Australia) Pty Ltd
Australia
BQT Solutions (SEA) Pte Ltd
Singapore
Access Control
Access Control
Access Control
BQT Solutions (UK) Ltd
United Kingdom
Access Control
Subsidiaries of BQT Solutions (SEA) Pte Ltd
60
100
100
100
60
100
100
100
BQT Solutions (NZ) Ltd
New Zealand
Access Control
100
100
Subsidiaries of BQT Solutions (UK) Ltd
Ava Global DMCC
BQT Solutions America Inc
U.A.E
USA
Subsidiaries of Ava Global DMCC
Secure international logistics
Access Control
Ava Germany GmbH
Ava USA Inc
Germany
USA
Secure international logistics
Secure international logistics
100
100
100
100
100
100
100
100
109
AVA GROUP
ANNUAL REPORT 2020
21. Related party disclosure (continued)
Transactions between the Company and its subsidiaries principally arise from the granting of loans and the provision of
sales support and other services. All transactions undertaken during the financial year with subsidiaries are eliminated in
the consolidated financial statements.
(b) Ultimate parent
Ava Risk Group Ltd is the ultimate Australian parent entity and the ultimate parent of the Group.
(c) Key management personnel
Details relating to key management personnel, including remuneration paid, are included in Note 22.
(d) Terms and conditions of transactions with related parties
Sales to and purchases from related parties are made in arm’s length transactions both at normal market prices and on
normal commercial terms unless otherwise stated.
22. Key management personnel
a) Compensation for Key Management Personnel
Short-term employee benefits
Post-employment and other long-term benefits
Termination benefits
Share-based payments
Total compensation
b) Loans to/from Key Management Personnel
Consolidated
2020
$
2,809,712
141,735
-
101,267
3,052,714
2019
$
1,690,866
97,606
-
20,153
1,808,625
There were no loans to directors or key management personnel during the year ending 30 June 2020 (2019: nil).
c) Other transactions and balances with Key Management Personnel and their related parties
Directors
During the current and previous financial year, the Group transacted with related entities of directors, other than in their
capacity as director as follows:
The Consolidated Entity purchased consulting services from Pierce Group Asia Pte Limited and Pierce CIM PTE LTD,
related entities through Chairman and Non-Executive Director, David Cronin, for an amount of $296,625 (2019:
$425,538). Accounts Payable balance at 30 June 2020 totals $Nil (FY2019: $1,470). The terms of these arrangements
were on an arm’s length basis in the normal course of business and included amounts related to our employee, contractors
and administration and general office expenses provided by the related entities for the benefit of the Consolidated Entity.
Key Management Personnel
There were no other transactions with other KMP during the year ended 30 June 2020 (2019: none).
110
ANNUAL REPORT 2020
AVA GROUP
23. Share-based payments
a) Recognised share-based payment expenses
The expense recognised for employee and corporate services received during the year is shown in the table below:
Expense arising from equity-settled share-based payment
transactions:
Corporate services
Performance rights
b) Types of share-based payments
Consolidated
2020
$’000
-
162
162
2019
$’000
60
20
80
In FY2020, the Company granted performance rights as part of remuneration to three Non-Executive directors David
Cronin, Mark Stevens, and Michael McGeever as well as four senior executives, Scott Basham, Robert Broomfield, Leigh
Davis, and Matthew Nye-Hingston. The fair value of each performance right was calculated using an option pricing model
as discussed below.
The performance rights issued to the Non-Executive directors vest on 01 September 2020 subject to the Company’s
market traded share price being at least 22 cents. Those issued to the senior executives are split into two equal tranches
one of which will vest at 31 August 2021 with the second tranche vesting on 31 August 2022. The vesting conditions are
based on achievement of pre-defined performance KPIs and continuity of employment.
Refer to point (e) for the model inputs relating to the fair value of the performance rights.
In FY2019, the Company granted performance rights as part of remuneration to two senior executives, Leigh Davis (CFO)
and Robert Broomfield (COO). The fair value of each performance right was calculated using an option pricing model as
discussed below.
The performance rights are split into two equal tranches one of which will vest at 01 July 2020 with the second tranche
vesting on 01 July 2021. The vesting conditions are based on achievement of pre-defined performance KPIs and continuity
of employment.
Refer to point (e) for the model inputs relating to the fair value of the performance rights.
c) Summaries of performance rights granted
The following table illustrates the number of performance rights held at year end and movements during the financial year
2020:
Outstanding at the beginning of the year
Granted during the year
Outstanding at the end of the year
2020
Number
394,296
3,274,336
3,668,632
2019
Number
-
394,296
394,296
During July 2020 the Company issued 197,148 ordinary shares as a result of the performance rights vesting (refer to Note
18 (e) for further details).
111
AVA GROUP
ANNUAL REPORT 2020
23. Share-based payments (continued)
d) Option and performance rights pricing models
The fair value of the equity-settled share options or performance rights granted is estimated as at the date of grant using
a Black-Scholes model taking into account the terms and conditions upon which the options or performance rights were
granted. The fair value is derived from the Black-Scholes model using the closing share price of Ava Risk Group ordinary
shares on grant date, Australian Government Long-term bond interest rates as published by the Reserve Bank of Australia
as a proxy for the risk-free interest rate, having regard for the bond maturity that is most closely aligned to the period of
time remaining until the options/performance rights expiry date, and the option/performance rights exercise prices and
quantities as noted above. Historical price volatility was used to estimate expected price volatility, over the expected life
of the performance rights.
The model inputs for performance rights granted during the year ended 30 June 2020, in respect of remuneration
included:
Number of performance rights
granted
Fair value of performance rights
granted
528,558
528,561
468,939
468,942
339,667
339,669
600,000
$58,141
$58,145
$46,895
$46,895
$39,062
$39,062
$30,000
Exercise price:
Grant date:
Expiry date:
$ -
$ -
$ -
$ -
$ -
$ -
$ -
23-Sep-19
23-Sep-19
28-Oct-19
28-Oct-19
31-Oct-19
31-Oct-19
31-Oct-19
31-Aug-21
31-Aug-22
31-Aug-21
31-Aug-22
31-Aug-21
31-Aug-22
1-Sep-20
Share price at grant date:
$0.110
$0.110
$0.100
$0.100
$0.115
$0.115
$0.115
Expected price volatility of the
Company’s shares:
92.30%
92.30%
92.30%
92.30%
92.30%
92.30%
80.00%
Expected dividend yield:
0%
0%
0%
0%
0%
0%
0%
Risk-free interest rate:
0.99%
0.99%
0.99%
0.99%
0.99%
0.99%
0.86%
The model inputs for performance rights granted during the year ended 30 June 2019, in respect of remuneration
included:
Number of performance rights granted
Fair value of performance rights granted
Exercise price:
Grant date:
Expiry date:
Share price at grant date:
Expected price volatility of the Company’s shares:
Expected dividend yield:
Risk-free interest rate:
There were no share options issued in financial year 2020 (2019: nil).
112
197,148
197,148
$24,250
$24,250
$ -
$ -
1-Jul-18
1-Jul-18
01-Jul-20
01-Jul-21
$0.115
92.3%
0%
0.99%
$0.115
92.3%
0%
0.99%
ANNUAL REPORT 2020
AVA GROUP
24. Contingencies
The Ava Global performance plan allows for senior employees of Ava Global to share in a pooled allocation of up to 32.7%
of the exit value of Ava Global in excess of AU$5 million or the debt and equity funding provided to Ava Global to run the
business, whichever is greater. In addition, the plan provides for a shared annual bonus pool of 32.7% of the net profits
that the Ava Global business unit generates, after allowing for all costs and expenses, including the amount of this shared
annual bonus pool. The incentives are payable in cash conditional upon meeting pre-defined KPIs by the executives. The
performance plan expires if the executive resigns of their employment is terminated by the Company within the first 3
years. Otherwise the performance plan terminates on 1 February 2021.
Other than the above the Group had no contingencies at 30 June 2020 (2019: None).
25. Events after the balance sheet date
Whilst the Group has seen an impact on our business to date as a result of the COVID-19 outbreak which was declared
a pandemic by the World Health Organization in March 2020, the outbreak and the response of Governments in dealing
with the pandemic is interfering with general activity levels within the community, the economy and the operations of our
business. The scale and duration of these developments remain uncertain. As at the date of this report however they are
not having a material impact on our earnings, cash flow and financial condition.
It is not possible to estimate the impact of the outbreak’s near-term and longer effects or Governments’ varying efforts
to combat the outbreak and support businesses. This being the case, we do not consider it practicable to provide a
quantitative or qualitative estimate of the potential impact of this outbreak on the Group at this time.
There has been no other matters or circumstances, which have arisen since 30 June 2020 that has significantly affected
or may significantly affect:
(a) the operations, in financial years subsequent to 30 June 2020, of the Consolidated Entity, or
(b) the results of those operations, or
(c) the state of affairs, in financial years subsequent to 30 June 2020, of the Consolidated Entity.
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26. Parent Entity Information
(a) Summary financial information
The individual financial statements for the parent entity show the following aggregate amounts:
Ava Risk Group Limited:
Summarised statement of financial position
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Equity
Contributed capital
Share-based payment reserve
Accumulated losses
Total equity
Ava Risk Group Limited:
Summarised statement of comprehensive income
Profit/(loss) for the year
Other comprehensive income for the year
Total comprehensive income of the parent entity
2020
$’000
14,740
19,943
34,683
4,260
403
4,663
30,020
58,349
1,171
(29,500)
30,020
2020
$’000
3,511
-
3,511
2019
$’000
10,107
19,287
29,394
3,125
45
3,170
26,224
58,226
1,009
(33,011)
26,224
2019
$’000
1,208
-
1,208
(b) Guarantees entered into by the parent entity
The parent entity has not provided any financial guarantees in respect of subsidiaries entities.
(c) Contingent liabilities of the parent entity
The parent entity did not have any contingent liabilities as at 30 June 2020 or 30 June 2019. For information about
guarantees given by the parent entity, please see above.
(d) Contractual commitments for the acquisition of property, plant or equipment
As at 30 June 2020, the parent entity had no contractual commitments for the acquisition of property, plant or equipment
(30 June 2019: None).
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27. Auditor’s remuneration
The auditor of Ava Risk Group is for the year ended 30 June 2020 was Ernst & Young.
Auditor’s renumeration
Amounts received or due and receivable by the company’s
auditor Ernst & Young (Australia) for:
- Fees for auditing the statutory financial report of the
parent covering the group and auditing the statutory
financial reports of any controlled entities
- Fees for assurance services that are required by legislation
to be provided by the auditor
- Fees for other assurance and agreed-upon-procedures
services under other legislation or contractual
arrangements where there is discretion as to whether the
service is provided by the auditor or another firm
Fees for other services
- Tax compliance and tax advice services
Total fees to Ernst & Young (Australia)
Amounts received or due and receivable by other member
firms of Ernst & Young (Australia) for:
- Audit and review of the financial statements
Consolidated
2020
$
2019
$
267,000
253,000
-
-
-
90,000
357,000
Consolidated
2020
$
22,500
22,500
-
-
-
111,000
364,000
2019
$
21,500
21,500
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09:
’
s
r
o
t
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e
r
i
D
n
o
i
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a
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a
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e
D
l
In accordance with a resolution of the directors of Ava Risk Group Limited, I
state that:
1. In the opinion of the directors:
(a) the financial statements, notes and the additional disclosures included
in the directors’ report designated as audited, of the Company and of the
Consolidated Entity are in accordance with the Corporations Act 2001,
including:
(i) giving a true and fair view of the Company’s and Consolidated Entity’s
financial position as at 30 June 2020 and of their performance for the year
ended on that date; and
(i) complying with Accounting Standards and Corporations Regulations
2001, and other mandatory professional reporting requirements;
(ii) also comply with International Financial Reporting Standards as stated in
Note 1(a) of the consolidated financial statements; and
(b) there are reasonable grounds to believe that the Company will be able to
pay its debts as and when they become due and payable.
2. This declaration has been made after receiving the declarations required
to be made by the chief executive officer and chief financial officer to the
directors in accordance with section 295A of the Corporations Act 2001 for
the financial year ending 30 June 2020.
On behalf of the Board
David Cronin
Chairman
Melbourne, 31 August 2020
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Ernst & Young
8 Exhibition Street
Melbourne VIC 3000 Australia
GPO Box 67 Melbourne VIC 3001
Tel: +61 3 9288 8000
Fax: +61 3 8650 7777
ey.com/au
Independent Auditor's Report to the Members of Ava Risk Group Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Ava Risk Group Limited (the Company) and its subsidiaries
(collectively the Group), which comprises the consolidated statement of financial position as at
30 June 2020, the consolidated statement of comprehensive income, consolidated statement of changes
in equity and consolidated statement of cash flows for the year then ended, 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 consolidated financial position of the Group as at 30 June 2020 and
of its consolidated financial performance for the year ended on that date; 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
(including Independence Standards) (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 year. These matters were addressed in the context of our audit
of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate
opinion on these matters. For each matter below, our description of how our audit addressed the matter
is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the
Financial Report section of our report, including in relation to these matters. Accordingly, our audit
included the performance of procedures designed to respond to our assessment of the risks of material
misstatement of the financial report. The results of our audit procedures, including the procedures
performed to address the matters below, provide the basis for our audit opinion on the accompanying
financial report.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
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1. Carrying value of property, plant and equipment (PPE), right of use assets (ROU) and intangible
assets (including goodwill)
Why significant
How our audit addressed the key audit matter
PPE totalling $0.6 million, ROU totalling $0.7 million,
intangible assets totalling $6.6 million and goodwill
totalling $5.4 million represent significant balances
recorded on the consolidated statement of financial
position, relative to total assets.
The Group has three identifiable cash generating units
(“CGUs”):
•
•
•
Perimeter security
Access control solutions – locks and readers
International valuable logistics.
The recoverability of PPE, ROU and intangible assets
(including goodwill) is contingent on future cash flows
which are established using significant judgements
including revenue growth and profit margin.
In line with AASB 136 Impairment of Assets, the Group
performed the annual impairment test using a value in
use discounted cash flow model for each CGU that
includes goodwill. Additionally, as indicators of
impairment were identified by the Group in the CGU
with no goodwill, an impairment assessment was
performed for all three CGUs.
Our assessment of the Group’s impairment test
performed was a key audit matter because the
assessment process is complex and highly
judgemental.
In addition, the key underlying assumptions are
affected by expected future market or economic
conditions. The associated assets are also significant to
the overall financial statements.
The Group’s disclosures are included in Note 13 of the
consolidated financial report which specifically explain
the key operating assumptions used.
The audit procedures we performed included the
following:
We evaluated the Group’s assessment of impairment
indicators and identification of CGUs.
We obtained the Group’s discounted cash flow (“DCF”)
models for the three CGUs and evaluated the
assumptions and methodologies used with the
involvement of our valuation specialists.
In respect of the Group’s DCF impairment models for
each CGU we:
•
•
•
•
•
•
•
•
•
Agreed the underlying cash flow projections to
Board approved forecasts;
Tested the mathematical accuracy;
Compared revenue growth and profit margins to
historically achieved results;
Considered the historical accuracy of the Group’s
cash flow forecasts;
Assessed the Group’s COVID-19 related
assumptions for CGUs expected to be impacted by
COVID-19;
Assessed the Group’s assumptions for terminal
growth rates in comparison to economic and
industry forecasts;
Assessed the reasonableness of sustaining capital
expenditure forecasts in line with historical levels
and current business strategy;
Assessed discount rates through comparing the
cost of capital for the Group with comparable
businesses; and
Considered earnings multiples against comparable
companies as a valuation cross check.
We performed sensitivity analysis in respect of the
revenue growth assumptions, which were considered
to have the most significant impact on carrying values,
to ascertain the extent of changes in those
assumptions which would be required for the PPE and
intangible assets (including goodwill) to be impaired.
We assessed the likelihood of these changes in
assumptions arising.
We assessed the adequacy of the Group’s financial
report disclosures regarding the impairment testing
approach, key assumptions and sensitivity analysis.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
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2. Revenue recognition
Why significant
How our audit addressed the key audit matter
In line with AASB 15 Revenue from contracts with
customers (“AASB 15”), the Group’s contracts with
customers for sale of equipment is one performance
obligation. Some contracts have multiple elements,
such as sale of equipment and rendered services. When
there is more than one performance obligation in the
contract, revenue is allocated to each performance
obligation on the basis of relative standalone selling
prices.
Revenue recognition accounting policies of the Group’s
revenue streams can be found at Note 1.5 of the
consolidated financial report.
Judgement is involved in determining whether the
criteria for revenue recognition has been met and that
revenue is recognised in the correct period including
consideration of transactions occurring close to
balance sheet date.
Revenue recognition was considered a key audit matter
due to assessing the timing of revenue recognition of
the Group’s different revenue streams, including the
new licence fees revenue stream.
The audit procedures we performed included the
following:
• We assessed the terms of material new customer
contracts to determine the appropriateness of the
Group’s revenue recognition accounting policies
relating to the requirements of AASB 15.
• We tested the key controls in place to ensure
product sales were appropriately recognised in
accordance with the Group’s revenue recognition
policy.
• We tested the amount of product sales for a
sample of revenue transactions during the year, by
agreeing to sales contracts, delivery
documentation and receipts from customers.
• We verified the amount of licence fee revenue for
a sample of revenue transactions during the year,
by agreeing to sale invoices, customer
acknowledgement and receipts from customers.
• We tested the amount of logistics services revenue
for a sample of revenue transactions for the
period, by agreeing to sales invoices and delivery
and shipping documentation.
• We assessed a sample of post year end credit
notes and considered whether these related to
product sales or service-based revenue recognised
in the 2020 financial year.
•
Our procedures included selecting a sample of
sales transactions recorded both prior to and
subsequent to balance sheet date to assess
whether product sales and service-based revenue
were recognised in the appropriate period.
• We also assessed the adequacy of the Group’s
revenue disclosures in the consolidated financial
report.
Information Other than the Financial Report and Auditor’s Report
The directors are responsible for the other information. The other information comprises the information
included in the Company’s 2020 Annual Report 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, with the exception of the Remuneration Report and
our related assurance opinion.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
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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 Group’s ability to
continue as a going concern, disclosing, as applicable, matters relating 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 the 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.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
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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, actions taken to eliminate
threats or safeguards applied.
From the matters communicated to the directors, we determine those matters that were of most
significance in the audit of the financial report of the current year 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 Audit of the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 36 to 52 of the directors' report for the year
ended 30 June 2020.
In our opinion, the Remuneration Report of Ava Risk Group Limited for the year ended 30 June 2020,
complies with section 300A of the Corporations Act 2001.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
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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.
Ernst & Young
Richard Bembridge
Partner
Melbourne
31 August 2020
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
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Shareholder Information
11:
Distribution of equity securities (as at 19 August 2020)
Ordinary share capital
235,562,716 fully paid ordinary shares are held by 1,291 individual shareholders.
All issued ordinary shares carry one vote per share and carry the rights to dividends.
The numbers of shareholders, by size of holding, in each class are:
Size of shareholding
Number of holders
Ordinary shares held
% of issued capital
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
236
273
162
458
162
1,291
85,621
829,534
1,288,345
17,750,831
215,608,385
235,562,716
0.04%
0.35%
0.55%
7.54%
91.53%
100.00%
The number of shareholders holding less than a marketable parcel of 2,173 shares (based on the share price of $0.23 on 19
August 2020) is 319 and they hold 213,811 shares.
Substantial shareholders (as at 19 August 2020)
The substantial shareholders who have notified the Company in accordance with section 671B of the Corporations Act
2001 are:
Name Of Shareholder
Number Of Shares
% Of Issued Capital
PANDON HOLDINGS PTE LIMITED
VALWREN PTY LTD
BARNABY INVESTMENTS PTY LTD
ALKASAB UNITED COMPANY FOR GENERAL
TRADING W.L.L
32,270,536
14,133,800
11,853,886
24,061,609
82,319,831
13.70%
6.00%
5.03%
10.21%
34.94%
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Shareholder Information (continued)
Twenty largest shareholders (as at 19 August 2020)
Rank
Name of Shareholder
Number of shares
% of issued capital
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
BELL POTTER NOMINEES LTD
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