XRF SCIENTIFIC LIMITED
ABN 80 107 908 314
ANNUAL FINANCIAL REPORT
FOR THE YEAR ENDED 30 JUNE 2016
CONTENTS
CHAIRMAN’S LETTER
DIRECTORS’ REPORT
AUDITOR’S INDEPENDENCE DECLARATION
CONSOLIDATED STATEMENT OF PROFIT
OR LOSS AND OTHER COMPREHENSIVE
INCOME
CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
CONSOLIDATED STATEMENT OF
CASH FLOWS
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
DIRECTORS’ DECLARATION
AUDITOR’S REPORT
SHAREHOLDER INFORMATION
CORPORATE DIRECTORY
3
4
17
18
19
20
21
22
54
56
58
60
XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT 1
FINANCIAL RESULTS SUMMARY
Sales up 3%
Net Profit After Tax down 42%
22,496
21,666
20,504 21,050
3,813
2,639
2,441
1,537
13
14
15
16
Sales Revenue ($'000)
13
14
15
16
Net Profit After Tax ($'000)
Operating Cash Flow down 90%
Earnings Per Share down 42%
4,131
4,124
2.9
2,612
425
2.0
1.8
1.2
13
14
15
16
13
14
15
16
Operating Cash Flow ($'000)
Earnings Per Share (Cents)
2 XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT
CHAIRMAN’S LETTER
Dear Shareholder,
The worldwide trading pressures that commenced
Movements in the Australian dollar have been
in the 2013-14 financial year continued into 2015-16
managed and the higher import costs have been
and put pressure on the Company to strengthen
offset by
the competiveness of
the current
and, where appropriate, expand its business.
exchange rates which has assisted exports.
The Board’s decision to retain a strong cash
The net profit for the year is $1,537,264 and the
position with no debt was vindicated in that it
total dividends paid are 0.5 cents per share, fully
enabled a major upgrade of
the Melbourne
franked. The result was not as good as had been
Precious Metals plant to proceed. The work should
originally hoped for. However, a range of factors,
be completed by the end of October 2016. It is
especially in the Australian market, contributed to
anticipated there will be positive earnings results in
overall business uncertainty and weaker trading
2017.
conditions in all but the building and construction
Importantly,
the Company has been able
to
sectors.
strengthen its position in Europe – especially in
The senior management team has been diligent in
Germany – with the establishment of an office in
ensuring tight financial control, exploitation of new
Karlstein and the appointment of two highly
markets, delivering a credible result while also
respected and competent staff with extensive,
delivering on the Company’s medium to long term
long-standing
European
and
international
strategic growth plan.
experience.
To date the Consumables, Precious Metals and
Capital Equipment divisions remain strong and XRF
Scientific has been able to match its competitors
and retain longstanding customers. Along with all
of its competitors, the Company was adversely
affected by a spike in the price of lithium, which is
an input into some consumable products. Very
recent discoveries of lithium suggest the prices will
stabilise and, in the medium to longer term,
decline.
Kenneth Baxter
Chairman
XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT 3
FINANCIAL RESULTS SUMMARY
DIRECTORS’ REPORT
Your directors present their report on the company XRF Scientific Limited and its controlled entities for the
financial year ended 30 June 2016.
DIRECTORS
The names of the directors in office at any time during or since the end of the financial year are:
Kenneth Baxter (Chairman)
David Brown
David Kiggins
Fred Grimwade
Directors have been in office since the start of the financial year to the date of this report unless otherwise stated.
PRINCIPAL ACTIVITY
The principal activity of the economic entity during the financial year was the business of manufacturing and
marketing precious metal products, specialised chemicals and instruments for the scientific, analytical and
mining industries.
No significant change in the nature of these activities occurred during the year.
DIVIDENDS – XRF SCIENTIFIC LIMITED AND CONTROLLED ENTITIES
Dividends paid to members during the financial year were as follows:
Final dividend for the year
Interim dividend
2016
$
925,098
268,037
2015
$
1,453,727
660,785
In addition to the above dividends, since the end of the financial year the directors have declared the payment of a
fully franked final dividend of 0.3 cents per share to be paid on 30 September 2016 out of retained earnings at 30
June 2016.
4 XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT
DIRECTORS’ REPORT
REVIEW OF OPERATIONS
A review of the operations of the economic entity during the financial year and the results of those operations
found that during the year, the economic entity continued to engage in its principal activity and the results and
financial position are disclosed in the attached financial statements.
The consolidated entity has produced a Net Profit After Tax (NPAT) of $1,537,264 for the year ended 30 June 2016,
compared with $2,639,463 for the previous year.
Details of the results for the financial year ended 30 June 2016 are as follows:
Total revenue and other income
NPAT
Basic earnings per share – (cents per share)
Diluted earnings per share – (cents per share)
Underlying profit before tax 1
June 2016
June 2015
Increase / (decrease)
over prior year
$
$
21,336,164
20,947,295
1,537,264
2,639,463
1.2
1.2
2.0
2.0
3,040,092
3,905,276
%
2
(42)
(42)
(42)
(22)
1 Non-IFRS financial information. Normalised for non-operational adjustments. Refer below for details.
OPERATING RESULTS
XRF Scientific Ltd (“XRF” or “Company”) is pleased to report its June 2016 full-year results to shareholders. The
Company has generated revenue and other income of $21.3m and Net Profit After Tax of $1.5m. Underlying profit
before tax of $3.0m was delivered, before expensing costs associated with acquisitions, R & D and expansion of
the Precious Metals Division.
The Directors have confirmed that a final dividend of 0.3 cents per share, fully franked, will be payable with a
record date of 16 September 2016 and payment date of 30 September 2016. In conjunction with the interim
dividend already paid, this provides a dividend payout ratio of 43%. The Board is committed to its strategic
investment in the Precious Metals division which is expected to deliver significant growth and improve
shareholder return in the medium term. This investment in capital assets and operations in Melbourne, combined
with the establishment of our German and European operations, will be cash flow negative in the short term and
as a consequence the Board has reduced the annual dividend payout ratio in order to invest in this growth.
Conditions for the Capital Equipment Division improved in the second half of the year. The first half delivered a
loss before tax of $112k, which was turned into a profit before tax of $170k for the full-year. The result included an
obsolete stock write off of $28k in relation to an outgoing product line. The new office in Belgium, via the
acquisition of Socachim SPRL, contributed to the improved result in the second half.
The division launched an exciting new product for the automated weighing of XRF flux, the “xrWeigh Carousel”.
The initial response from customers has been strong, which is expected to translate into sales in FY17. XRF is
continuing its product development activities which will see the division busy with R & D throughout next year.
The Consumables Division generated a steady result, delivering profits before tax of $1.83m, as compared to
$1.93m in the PCP. Cost of goods sold increased throughout the period, due to increased lithium chemical costs,
which is an input into some of XRF’s consumable products. The increased lithium costs are expected to have an
effect on both revenue and costs in FY17. Inventory for the Consumables product line increased by $0.7m, as
compared to 30 June last year, as a result of the increased cost of lithium and our commitment to carry more
buffer stock of raw materials to ensure our customers do not suffer any supply interruption issues.
XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT 5
DIRECTORS’ REPORT
OPERATING RESULTS continued
The Precious Metals Division delivered a statutory profit of$0.55m. Underlying profit before tax was $1.04m after
adjusting for expansion and relocation costs. Whilst overall order levels remained reasonable, sales were
negatively affected in certain areas such as North America.
As announced in November 2015, the Company is making a significant investment in its Precious Metals division,
specifically in the capital assets and operations in Melbourne and in the establishment of our German and
European operations. We have purchased a significantly larger facility in Melbourne and are commencing final
commissioning which we expect to deliver operational capacity in September. The focus in 2017 will be in
enhancing our product quality and expanding production into new product lines through a wide scale product and
manufacturing improvement program, in line with our expansion goals. Of the $3.3m expansion budget previously
announced, $2.3m has been spent as at 30 June. It is anticipated that this budget will be expanded in FY17, to
cater for additional production equipment to meet anticipated increases in demand.
The XRF presence in Germany was established in April with the setup of new offices. The main German operations
commenced in August and will deliver improved technical and sales expertise in targeting both the German and
the wider European markets. The new team in Germany has been assembled to provide the distribution
mechanism for one of the key target markets that requires the enhanced products, commencing with regular
platinum labware products. It will also provide the base for the sale into Europe of a new range of platinum
products that XRF will be manufacturing and marketing in the near future. Most of these highly specialised
products will be for industries unrelated to mining, which will further reduce revenue exposure to the sector, and
diversify the Company’s product range. This represents a major investment in the region and is not expected to be
cash flow positive until FY18.
During the year, total costs of $491k were expensed in relation to the Division’s expansion. The major components
were $98k in R & D for manufacturing process improvements and $211k in relocation costs, which included a
non-cash write off of $160k in leasehold improvements from the old Melbourne factory. The new German office
also incurred a loss of $170k, resulting from initial establishment and start-up operational costs.
In early December 2015, the acquisition of Socachim SPRL was completed for total consideration of €500,000.
Socachim was founded in 1994 by Mr Michel Davidts, and has been a distributor of XRF’s products since 1998. The
business is located in Brussels, Belgium and currently sells XRF’s products throughout Europe and Northern
Africa. With the large majority of Socachim’s revenue being derived from XRF’s products, the business changed its
name to XRF Scientific Europe. Alongside XRF Scientific Americas (formerly Kitco Labware), it formed the
Company’s second international office, allowing XRF to provide customers and distributors with 24-hour direct
support. The new European division is managed by Frederic Davidts, who is highly regarded in the industry and
one of the world’s leading experts in fusion sample preparation.
The acquisition of this new European office provides another platform to grow international revenue, which is key
to the Company’s growth strategy. Under XRF’s ownership, additional resources are being deployed to grow
fusion product sales throughout Europe. Additional high quality bolt-on acquisitions are currently under review,
which there is a possibility of completing in 2016.
As at 31 August 2016, the Company’s cash position was $3.0m, which has decreased from $6.76m as at 30 June
2015, following payments for acquisitions, dividends, product development costs and the Precious Metals Division
expansion. Long-term debt is currently $1.1m, which was for partial funding of the new precious metals factory in
Melbourne. During the year, positive operating cash flow was recorded of $425k. Working capital requirements
increased through the period, due to increased inventory level requirements of $1m. Alongside the impact of
lithium prices on the Consumables Division, additional stock was being held by the Capital Equipment Division of
$219k, from increased sales levels and new product lines. Sales levels were also buoyant in May and June, which
combined delivered 22% of the year’s revenue and therefore increased debtors as at 30 June.
6 XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT
DIRECTORS’ REPORT
OPERATING RESULTS continued
Looking forward to FY17, the Group’s firm focus is on growing international revenue, particularly in sectors not
related to mining. Non-mining revenue has grown to around 30% and it is XRF’s aim to significantly increase this
percentage. The expansion of the Precious Metals Division, new product developments and acquisitions will be the
key growth projects for the year ahead. Whilst market conditions continue to remain difficult, XRF is confident of
standing out amongst its peers, as a company that remains profitable throughout the cycle.
MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR
A final dividend of 0.3 cents per share fully franked was declared on 26 August 2016, bringing the total dividend for
the year to 0.5 cents per share fully franked (FY15: 1.2 cents per share fully franked), with a record date of 16
September 2016 and payment date of 30 September 2016.
There were no other events subsequent to the reporting date which have significantly affected or may significantly
affect the XRF Scientific Limited operations, results or state of affairs in future years.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS
Likely results in the operations of the economic entity and the expected results of those operations in the future
financial year have not been included in this report, as the disclosure of such information may lead to commercial
prejudice to the economic entity.
SIGNIFICANT CHANGES IN STATE OF AFFAIRS
There have been no significant changes in the affairs of the Group.
ENVIRONMENTAL REGULATION
All companies within the Group continued to comply with all environmental requirements. Wherever possible,
carbon emissions have been limited, and new production techniques adopted to reduce energy use.
The Directors have considered compliance with the National Greenhouse and Energy Reporting Act 2007 which
requires entities to report greenhouse gas emissions and energy use. For the measurement period 1 July 2015 to
30 June 2016 the directors have assessed that there are no current reporting requirements, but the Company may
be required to do so in the future. The economic entity is also subject to the environmental regulations under the
laws of the Commonwealth or of a State or Territory in which it operates. The Directors are not aware of any
breaches of these regulations.
CORPORATE GOVERNANCE DISCLOSURE
The Group’s Corporate Governance Statement for the year ended 30 June 2016 can be found at:
http://www.xrfscientific.com/corporate-governance/
The statement also summarises the extent to which the Group has complied with the Corporate Governance
Council’s recommendations.
XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT 7
DIRECTORS’ REPORT
INFORMATION ON DIRECTORS
Kenneth Baxter
Date of appointment:
Qualifications:
Chairman (Non-Executive)
5 July 2005 (11 years)
Bachelor of Economics, Fellow of Australian Institute of Management and Fellow of the
Australian Institute of Company Directors
Experience:
Part time Commissioner with the Australian Government Productivity Commission; former
Chairman of PNG Energy Developments Ltd, TFG International Pty Ltd, and the Australian
Dairy Corporation & Thai Dairy Industries Ltd; former Director of the Hydro Electric
Corporation of Tasmania, and Air Niugini Ltd; former Secretary of Department of Premier
Other current directorships:
Private companies only
& Cabinet Victoria
Former directorships in last 3 years: Chairman of PNG Energy Developments Ltd, PNG Sustainable Infrastructure Ltd and
Infraco Asia Developments Pte Ltd; Director of Dairy NSW and other private companies
Special responsibilities:
Chairman of the Board, member of the Audit & Governance and Remuneration Committees
No. of shares:
David Brown
670,623 fully paid ordinary shares
Director (Non-Executive)
Date of appointment:
7 June 2004 (12 years)
Qualifications:
Experience:
Bachelor of Science, Bachelor of Economics
Has 40 years of experience in research and development and manufacturing of X-Ray Flux
chemicals; formerly Chief Chemist for Swan Brewery Co. Ltd and Chairman of Scientific
Other current directorships:
Private companies only
Former directorships in last 3 years: Private companies only
Industries Council of WA
Special responsibilities:
Technical consultant to XRF Chemicals Pty Ltd
No. of shares:
David Kiggins
8,213,300 fully paid ordinary shares
Director (Non-Executive)
Date of appointment:
1 May 2012 (4 years)
Qualifications:
Bachelor of Science (Hons), member of the Institute of Chartered Accountants of England
Experience:
Ten years at Arthur Andersen, working in audit and business consulting in the UK,
and Wales, member of the Institute of Chartered Secretaries and Administrators, and
member of Australian Institute of Company Directors
Australia, Africa and the Middle East; formerly GM Business Development and Company
Secretary at Automotive Holdings Group Limited, Finance Director and Company Secretary
at Global Construction Services Limited. Currently the Chief Financial Officer at Heliwest
Other current directorships:
Private companies only
Former directorships in last 3 years: Private companies only
Special responsibilities:
Chairman of the Audit & Governance Committee, member of the Remuneration Committee
No. of shares:
Fred Grimwade
212,900 fully paid ordinary shares
Director (Non-Executive)
Date of appointment:
1 May 2012 (4 years)
Qualifications:
Bachelor of Commerce and Law, Master of Business Administration, Fellow of the
Governance Institute of Australia, Fellow of the Australian Institute of Company Directors,
and Life Member of the Financial Services Institute of Australasia
Experience:
Has held general management positions at Colonial Agricultural Company, the Colonial
Group, Western Mining Corporation and Goldman, Sachs & Co. Currently a Principal and
Executive Director of Fawkner Capital.
Other current directorships:
Chairman of CPT Global Limited; Chairman of Troy Resources Limited;
Non-Executive Director of Select Harvests Limited, Australian United Investment Company
Limited, NewSat Limited and other private companies
Former directorships in last 3 years: Chairman of Fusion Retail Brands Pty Ltd and other private companies
Special responsibilities:
Chairman of the Remuneration Committee, member of the Audit & Governance Committee
No. of shares:
400,000 fully paid ordinary shares
8 XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT
DIRECTORS’ REPORT
COMPANY SECRETARIES
Vance Stazzonelli, B.Comm, CPA – Vance has held the role of Company Secretary since June 2008.
Andrew Watson, B.Comm, CA – Andrew was appointed Joint Company Secretary in August 2013.
OTHER KEY MANAGEMENT
Vance Stazzonelli (Chief Executive Officer – XRF Scientific Limited)
Vance joined XRF Scientific as Chief Financial Officer in October 2009. He was subsequently appointed to Chief
Operating Officer in January 2011 and then Chief Executive Officer in August 2012
Andrew Watson (Chief Financial Officer – XRF Scientific Limited)
Andrew joined XRF Scientific as Group Accountant in August 2012 and was promoted to Chief Financial Officer in
July 2014. He is a member of the Chartered Accountants Australia and New Zealand.
MEETINGS OF DIRECTORS
The number of meetings held by the Board of Directors including meetings of the committees of the Board and
the number of meetings attended by each of the Directors during the financial year ended 30 June 2016 were as
follows:
Kenneth Baxter
David Brown
David Kiggins
Fred Grimwade
Full meetings of Directors
Meetings of committees -
Audit, Corporate Governance
& Remuneration
A
13
13
13
13
B
13
13
12
13
A
3
**
3
3
B
2
**
3
3
A = Meetings held during the time the director held office or was a member of the Committee during the year
B = Meetings attended
** = Not a member of the relevant Committee
REMUNERATION REPORT (Audited)
(a) Principles used to determine the nature and amount of remuneration.
Remuneration governance
The Remuneration Committee is a committee of the Board. Their objective is to ensure that remuneration policies
and structures are fair and competitive and aligned with the long-term interests of the company. It is primarily
responsible for making recommendations to the Board on:
the over-arching executive remuneration framework
operation of the incentive plans which apply to the executive team, including key performance indicators and
performance hurdles
remuneration levels of executive directors and other key management personnel, and
non-executive director fees
XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT 9
DIRECTORS’ REPORT
REMUNERATION REPORT (Audited) continued
Non-executive directors
Fees and payments to non-executive directors reflect the demands which are made on, and the responsibilities of,
the directors. Non-executive directors’ fees and payments are reviewed periodically by the Board.
The Chairman’s fees are determined independently to the fees of non-executive directors based on comparative
roles in the external market. The Chairman is not present at any discussions relating to determination of his own
remuneration. The Chairman’s remuneration is inclusive of committee fees.
Non-executive directors may receive share options.
Directors’ fees
The current base remuneration was last reviewed in July 2016. The maximum currently stands at $400,000 per
annum and was approved by shareholders at the Annual General Meeting in November 2012.
Base director fees
From 15 November 2012
From 1 July 2016
Chairman
Non-Executive Directors
Committee Chairman
Executive pay
$80,000
$50,000
$7,500
$87,000
$55,000
$8,000
The executive pay and reward framework has three components:
1. Base pay and benefits, including superannuation
2. Short-term performance incentives, and
3. Long-term incentives.
It is Board policy to review key management annually, and adjust such compensation taking into account the
manager’s performance, the performance of the entity which they manage, and the performance of the Group of
companies.
Where appropriate, there is a direct link between financial performance (profit or growth) to key managers’
compensation by way of bonus, which is assessed under a weighted balanced scorecard method, as set out by the
Remuneration Committee at the start of each year. This method is accepted by the Board as being an appropriate
incentive for encouraging key management personnel to reach targets that are in excess of budgeted growth.
(i) Base Pay
Executives are offered a competitive base pay that forms the fixed component of pay. Base pay for executives is
reviewed annually to ensure the executive’s pay is competitive with the market. An executive’s pay is reviewed on
promotion.
(ii) Benefits
Executives may receive benefits including car/mileage allowance.
(iii) Superannuation
Retirement benefits of 9.5% of the base pay are delivered to the individual super fund of the executive’s choice.
(iv) Short-term performance incentives
Bonuses may be paid on the performance of the individual entity based on full year performance for the financial
year. In most instances bonus payments are based on the achievement of a percentage of that year’s budget and
targets/objectives being met. A short term incentive (STI) pool is available for executives during the annual review,
which is subject to caps that are in place.
10 XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT
DIRECTORS’ REPORT
REMUNERATION REPORT (Audited) continued
Using a profit target ensures variable reward is only available when value has been created for shareholders and
when profit is consistent with the business plan. Specific details of key management personnel bonuses can be
found under the service contracts section of this report.
(v) Long-term incentives
There are no specific long term incentives in place, however the matter is currently being considered by the
Remuneration Committee.
(vi) Assessing performance and claw-back of remuneration
The Board is currently reviewing the Executive Performance Reward Policy with regards to the following: in the
event of serious misconduct or a material misstatement in the Group’s financial statements, the Board may
cancel or defer remuneration and may also claw back performance-based remuneration paid in previous financial
years.
(b) Details of remuneration
(i) Non-Executive
Kenneth Baxter
David Brown
David Kiggins
Fred Grimwade
Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
(ii) Other Key Management Personnel
The following persons also had authority and responsibility for planning, directing and controlling the activities of
the Group:
Vance Stazzonelli
Andrew Watson
Fixed Remuneration
Chief Executive Officer
Chief Financial Officer
The level of fixed remuneration is set as to provide base level of remuneration which is both appropriate to the
position and its competitive market. Fixed remuneration is reviewed annually by the Remuneration Committee
based on market rates, as well as having regard to the Company, divisional and individual performance. The fixed
remuneration of other key management personnel is contained in information that follows.
Variable Remuneration (Short-Term Incentive)
To assist in achieving the objective of retaining a high quality executive team, the Remuneration Committee links
the nature and amount of the executive emoluments to the Company’s financial and operating performance.
For the CEO, variable remuneration is calculated based on an assessment of key performance indicators using a
weighted balanced scorecard method, as set out by the Remuneration Committee at the start of each year. The
maximum amount payable to the CEO is $70,000.
There were five categories of STI performance measure (plus a discretionary component) for the year ended 30
June 2016. Those measures were chosen to provide a balance between corporate, individual, operational,
strategic, financial and behavioural aspects of performance. The weighting assigned to each of the performance
measures was as follows:
Execution of business growth strategy (30%)
Leadership (10%)
Group financial performance (30%)
Compliance and risk management (5%)
Discretionary (20%)
Stakeholder & associated business relations (5%)
XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT 11
DIRECTORS’ REPORT
REMUNERATION REPORT (Audited) continued
(b) Details of remuneration continued
The Remuneration Committee considered the performance of the CEO against the performance measures
outlined above. While the Group’s financial performance reduced in comparison to the prior period, a range of key
strategic targets were met. A number of business acquisitions were successfully completed and internal
expansion plans are on schedule. All compliance obligations were met throughout the year with no reported
issues and relationships with internal and external stakeholders were well managed.
It was decided that $27,397 (plus superannuation of 9.5%) would be paid, which is approximately 43% of the
maximum amount payable. Bonus payments to other key management personnel were 100% discretionary. These
amounts were accrued at 30 June 2016 and paid in August 2016.
Amounts of remuneration
Details of the remuneration of directors and the key management personnel (as defined in AASB 124 Related
Party Disclosures) of XRF Scientific Limited are set out in the following:
Post-
employment
Short-term Benefits
Benefits
Long-term Benefits
Cash
Salary
$
Cash
Super-
Bonuses
Other
annuation
$
$
Long
Service
Leave
$
Termination
benefits
$
72,498
45,310
52,108
52,108
222,024
253,699
152,385
406,084
628,108
-
-
-
-
-
27,397
9,132
36,529
36,529
-
2 163,029
-
-
163,029
3 28,219
-
28,219
191,248
6,887
4,304
4,950
4,950
21,091
29,385
15,344
44,729
65,820
Post-
employment
-
-
-
-
-
4,897
2,869
7,766
7,766
-
-
-
-
-
-
-
-
-
Short-term Benefits
Benefits
Long-term Benefits
Cash
Salary
$
Cash
Super-
Bonuses
Other
annuation
$
$
Long
Service
Leave
$
Termination
benefits
$
71,374
44,607
51,300
51,300
218,581
237,443
137,846
375,289
593,870
-
-
-
-
-
-
-
-
-
-
2 154,860
-
-
154,860
-
-
-
154,860
6,781
4,238
4,874
4,874
20,767
22,557
13,095
35,652
56,419
-
-
-
-
-
3,912
2,952
6,864
6,864
-
-
-
-
-
-
-
-
-
Total
$
79,385
212,643
57,058
57,058
406,144
343,597
179,730
523,327
929,471
Total
$
78,155
203,705
56,174
56,174
394,208
263,912
153,893
417,805
812,013
2016 1
Non-executive directors
Kenneth Baxter
David Brown
David Kiggins
Fred Grimwade
Sub-total non-executive directors
Other key management personnel
Vance Stazzonelli
Andrew Watson
Sub-total key management personnel
2015
Non-executive directors
Kenneth Baxter
David Brown
David Kiggins
Fred Grimwade
Sub-total non-executive directors
Other key management personnel
Vance Stazzonelli
Andrew Watson
Sub-total key management personnel
1 The year ended 30 June 2016 had 27 fortnightly pay periods, while the prior corresponding period had 26.
2 Technical services provided by consultancy (such as technical sales and support, analytical method development).
3 Payment of excess annual leave accrued by the employee.
12 XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT
DIRECTORS’ REPORT
REMUNERATION REPORT (Audited) continued
(b) Details of remuneration continued
Percentage of performance related compensation of total remuneration
Certain key management personnel are paid performance bonuses in addition to set remuneration amounts. The
Board of Directors have set these bonuses to encourage growth and profitability. Bonuses are paid as per the
conditions set out in page 10. The relative proportions of remuneration that are linked to performance and those
that are fixed are as follows:
Fixed Remuneration
At risk - STI
At risk - LTI
2016
2015
2016
2015
2016
2015
Other key management personnel
Vance Stazzonelli
Andrew Watson
91%
100%
94%
100%
9%
6%
–
–
–
–
–
–
Options issued as part of total remuneration
No options have been issued in 2015 or 2016 as part of total remuneration.
Voting and comments made at the company’s 2015 Annual General Meeting
The company received validly appointed proxies of 99% of “yes” votes on its remuneration report for the 2015
financial year. The remuneration resolution was carried on a show of hands. The company did not receive any
specific feedback at the AGM or throughout the year on its remuneration practices.
(c) Shareholder Wealth
The following is a summary of key shareholder wealth statistics for the Company over the past 5 years (listed
since 2006).
Dividends
Declared Per
Share Price
Market
Capitalisation
EBIT
$
Earnings Per
Share
Cents
2011/12
4,809,646
2012/13
5,142,299
2013/14
3,358,127
2014/15
3,477,167
2015/16
2,318,737
2.8
2.9
1.8
2.0
1.2
Share
Cents
1.5
1.7
1.1
0.7
0.5
Cents
$
26
31
21
21
18
33,494,179
40,968,700
27,752,990
27,752,990
24,088,645
(d) Share-based compensation
There was no share based compensation to any Director or Key Management Personnel for the years ended
30 June 2015 and 2016. The Company has not adopted an employee share option scheme.
(e) Bonuses
Each individual Key Management Personnel performance bonus was discussed and reviewed against the
requirements set out on page 10. It was agreed that the proposed performance bonuses met these conditions,
specifically individual performance against agreed Key Performance Indicators.
XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT 13
DIRECTORS’ REPORT
REMUNERATION REPORT (Audited) continued
(f) Shares held by key management personnel
Details of equity instruments (other than options and rights) held directly, indirectly or beneficially by key
management personnel and their related parties are as follows:
Name
Directors of XRF Scientific Limited
Kenneth Baxter
David Brown
David Kiggins
Fred Grimwade
Other key management personnel
Vance Stazzonelli
Balance at 1
On-market
Balance at 30
July 2015
trades
June 2016
610,623
8,213,300
212,900
400,000
60,000
-
-
-
670,623
8,213,300
212,900
400,000
320,000
130,000
450,000
Securities Trading Policy
The Company has adopted a policy that imposes certain restrictions on Directors and employees trading in the
securities of the Company. The restrictions have been imposed to prevent trading in contravention of the insider
trading provisions of the Corporations Act.
Option holdings
There were no options over ordinary shares in the company held during the financial year by directors of XRF
Scientific Limited or other key management personnel of the Group.
(g) Service Agreements
Remuneration for the Chief Executive Officer and Chief Financial Officer is set out in service agreements, which
are detailed below:
Vance Stazzonelli, Chief Executive Officer of XRF Scientific Limited
Terms of agreement – Ongoing employment contract effective 1 July 2012. Base salary is $254,400 per annum
(effective 1 July 2016), plus superannuation benefits of 9.5%. Payment of a termination benefit on early
termination by the Company, other than for gross misconduct, equal to six months full pay. Notice period by the
employee of six months. Payment of bonuses is based on a range of strategic, financial, operational, personnel,
and Board-related key performance indicators.
Andrew Watson, Chief Financial Officer of XRF Scientific Limited
Terms of agreement – Ongoing employment contract effective 24 July 2014. Base salary is $155,000 per annum
(effective 1 July 2016), plus superannuation benefits of 9.5%. Payment of a termination benefit on early
termination by the Company, other than for gross misconduct, equal to three months full pay. Notice period by
the employee of three months. Payment of bonuses is based on a range of strategic, financial, operational,
personnel, and Board-related key performance indicators.
No other key management personnel are currently employed under service contracts.
14 XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT
DIRECTORS’ REPORT
REMUNERATION REPORT (Audited) continued
(h) Remuneration consultants
No remuneration consultants were used in the years ended 30 June 2016 and 30 June 2015.
(i) Other transactions with key management personnel
Premises were rented from a related entity of Director David Brown during the financial year. These properties
were rented on normal commercial terms and conditions, totalling $114,029 (2015: $112,012). No amounts were
outstanding at the end of the year. As the sole director of XRF Chemicals Pty Ltd, Vance Stazzonelli is currently
guarantor on a lease in Osborne Park.
(j) Loans to directors and executives
No loans were made to directors and executives during the financial years ended 30 June 2016 and 30 June 2015.
End of remuneration report (Audited).
NON-AUDIT SERVICES
Details of the non-audit services provided by the Company’s external auditor BDO Audit (WA) Pty Ltd and its
related practices during the year ended 30 June 2016 are outlined in the following table. Based on advice from the
Company’s Audit and Governance Committee, the Directors are satisfied that the provision of non-audit services is
compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The
nature and the scope of each type of non-audit service provided means that auditor independence was not
compromised.
During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its
related practices and non-related audit firms:
BDO Audit (WA) Pty Ltd
Audit and review of financial reports
Taxation services
Other services
BDO Réviseurs d'Entreprises Soc. Civ. SCRL(Belgium)
Audit and review of financial reports
Taxation services
BDO AG Wirtschaftsprüfungsgesellschaft (Germany)
Taxation services
Consolidated
2016
$
2015
$
104,813
103,779
49,025
13,022
47,420
11,089
18,377
9,990
18,114
-
-
-
Total remuneration for audit and other services
213,341
162,288
The Board is satisfied that the auditors of the Company, BDO Audit (WA) Pty Ltd remain independent.
XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT 15
DIRECTORS’ REPORT
OPTIONS
No unissued ordinary shares of XRF Scientific Limited remain under option at the date of this report.
INSURANCE OF DIRECTORS AND OFFICERS
During the financial year, the company paid insurance premiums to insure the directors and officers of the
company and its Australian–based controlled entities, and general managers of each of the divisions of the Group.
The liabilities insured are legal costs that may be incurred in defending civil or some criminal proceedings that
may be brought against the officers in their capacity as officers of entities in the Group, and any other payments
arising from liabilities incurred by the officers in connection with such proceedings. This does not include such
liabilities that arise from conduct involving a wilful breach of duty by the officers or the improper use by the
officers of their position or of information to gain advantage for themselves or someone else or to cause detriment
to the company. It is not possible to apportion the premium between amounts relating to the insurance against
legal costs and those relating to other liabilities.
PROCEEDINGS ON BEHALF OF OR INVOLVING THE ECONOMIC ENTITY
No person has applied for leave of Court under section 237 of the Corporations Act 2001 for leave to bring
proceedings on behalf of the company or intervene in any proceedings to which the company is a party for the
purpose of taking responsibility on behalf of the company for all or any part of those proceedings.
No proceedings have been brought or intervened in on behalf of the company with leave of the Court under section
237 of the Corporations Act 2001.
AUDITOR’S INDEPENDENCE DECLARATION
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is
set out on page 17.
AUDITOR
BDO Audit (WA) Pty Ltd continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of directors and signed for and on behalf of the Board by:
Kenneth Baxter
Chairman
Perth
22 September 2016
16 XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT
Tel: +61 8 6382 4600
Fax: +61 8 6382 4601
www.bdo.com.au
38 Station Street
Subiaco, WA 6008
PO Box 700 West Perth WA 6872
Australia
DECLARATION OF INDEPENDENCE BY GLYN O'BRIEN TO THE DIRECTORS OF XRF SCIENTIFIC LIMITED
As lead auditor of XRF Scientific Limited for the year ended 30 June 2016, I declare that, to the best of
my knowledge and belief, there have been:
1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
2. No contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of XRF Scientific Limited and the entities it controlled during the period.
Glyn O'Brien
Director
BDO Audit (WA) Pty Ltd
Perth, 22 September 2016
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN
77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK
company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under
Professional Standards Legislation, other than for the acts or omissions of financial services licensees.
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2016
Revenue from continuing operations
Cost of sales
Gross profit
Other income
Share of profit of investments accounted for using the equity method
Administration expenses
Other expenses
Occupancy expenses
Finance costs
Profit before income tax
Income tax expense
Note
Consolidated
2016
$
2015
$
5
21,132,846
20,670,839
(12,551,843)
(11,972,857)
8,581,003
8,697,982
5
150,570
52,748
257,829
18,627
(4,895,343)
(4,003,642)
(781,129)
(706,372)
(28,057)
(714,603)
(611,733)
(1,272)
2,373,420
3,643,188
7
(836,156)
(1,003,725)
Profit after income tax from continuing operations attributable to equity
holders of XRF Scientific Limited
1,537,264
2,639,463
Other comprehensive income
Items that will be classified to profit or loss
Foreign currency translation differences
Total comprehensive income for the year
22(a)
(29,165)
121,960
1,508,099
2,761,423
Total comprehensive income attributable to equity holders of XRF Scientific
Limited
1,508,099
2,761,423
Earnings per share for the year attributable to equity holders of
XRF Scientific Limited
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
32
32
1.2
1.2
2.0
2.0
The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction
with the accompanying notes.
18 XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2016
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Inventories
Other assets
Total Current Assets
NON-CURRENT ASSETS
Property, plant and equipment
Intangible assets
Investments accounted for using the equity method
Deferred tax asset
Total Non-Current Assets
Total Assets
CURRENT LIABILITIES
Trade and other payables
Provisions
Other current liabilities
Current income tax liability
Total Current Liabilities
NON-CURRENT LIABILITIES
Long-term borrowings
Deferred tax liability
Provisions
Total Non-Current Liabilities
Total Liabilities
Net Assets
EQUITY
Issued capital
Reserves
Retained profits
Total Equity
Note
Consolidated
2016
$
2015
$
8
9
10
11
13
14
12
15
16
17
18
19
20
3,304,773
6,759,893
4,033,113
3,182,240
4,023,542
2,560,227
258,403
297,889
11,619,831
12,800,249
5,832,007
3,400,626
15,227,483
14,641,537
607,890
409,966
555,142
430,425
22,077,346
19,027,730
33,697,177
31,827,979
1,109,254
418,663
106,110
144,246
961,649
503,836
130,371
101,349
1,778,273
1,697,205
1,111,500
251,495
148,937
1,511,932
-
233,073
132,410
365,483
3,290,205
2,062,688
30,406,972
29,765,291
21
22(a)
22(b)
18,584,489
18,257,772
715,041
744,206
11,107,442
10,763,313
30,406,972
29,765,291
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying
notes.
XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT 19
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2016
30 JUNE 2016 – CONSOLIDATED
Issued Share
Capital
Share Option
Reserve
$
$
Foreign Currency
Translation
Reserve
$
Retained Profits
Total
$
$
Balance at 1 July 2015
18,257,772
759,243
(15,037)
10,763,313
29,765,291
Profit for the period
Other comprehensive income / (loss)
Total comprehensive income / (loss) for the period
Transactions with Equity Holders in their capacity as Equity
Holders
Ordinary shares issued, net of transaction costs
Dividends paid
-
-
-
326,717
-
326,717
-
-
-
-
-
-
-
(29,165)
(29,165)
1,537,264
-
1,537,264
1,537,264
(29,165)
1,508,099
-
-
-
-
(1,193,135)
(1,193,135)
326,717
(1,193,135)
(866,418)
Balance at 30 June 2016
18,584,489
759,243
(44,202)
11,107,442
30,406,972
30 JUNE 2015 – CONSOLIDATED
Issued
Share Capital
Share Option
Reserve
$
$
Foreign Currency
Translation
Reserve
$
Retained Profits
Total
$
$
Balance at 1 July 2014
18,257,772
759,243
(136,997)
10,238,362
29,118,380
Profit for the year
Other comprehensive income / (loss)
Total comprehensive income / (loss) for the period
Transactions with Equity Holders in their capacity as Equity
Holders
Dividends paid
-
-
-
-
-
-
-
-
-
-
-
121,960
121,960
2,639,463
-
2,639,463
2,639,463
121,960
2,761,423
-
-
(2,114,512)
(2,114,512)
(2,114,512)
(2,114,512)
Balance at 30 June 2015
18,257,772
759,243
(15,037)
10,763,313
29,765,291
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
20 XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT
CONSOLIDATED STATEMENT OF CASH FLOWS
AS AT 30 JUNE 2016
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Payment of expenses relating to business acquisitions
Finance costs
Income taxes paid
Interest received
Note
Consolidated
2016
$
2015
$
20,683,866
21,440,738
(19,348,691)
(16,100,928)
(172,740)
(262,088)
(28,057)
(1,272)
(786,267)
(1,091,926)
76,953
139,196
Net cash inflow (outflow) from operating activities
30
425,064
4,123,720
Cash flows from investing activities
Payments for property, plant and equipment
Payment for acquisition of business
Payments for research and development
Payments for intangibles
Return of capital from investments accounted for under the equity method
Proceeds from sale of property, plant and equipment
Net cash inflow (outflow) from investing activities
Cash flows from financing activities
Proceeds from borrowings
Dividends paid
Net cash inflow (outflow) from financing activities
Cash and cash equivalents at the beginning of the financial period
Net increase (decrease) in cash and cash equivalents
(3,120,139)
(296,325)
24
(457,732)
(1,022,480)
(220,678)
(252,271)
-
-
-
(11,613)
119,785
11,819
(3,798,549)
(1,451,085)
1,111,500
-
(1,193,135)
(2,114,512)
(81,635)
(2,114,512)
6,759,893
6,201,770
(3,455,120)
558,123
Cash and cash equivalents at the end of the financial period
8
3,304,773
6,759,893
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT 21
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have
been consistently applied to all the years presented.
(a) Basis of preparation
The financial report of XRF Scientific Limited for the year ended 30 June 2016 was authorised for issue in accordance with
a resolution of the directors on 22 September 2016 and covers XRF Scientific Limited as an individual entity as well as the
consolidated entity consisting of XRF Scientific Limited and its subsidiaries.
These financial statements are presented in the Australian currency.
XRF Scientific Limited is a company limited by shares incorporated in Australia and is a for-profit entity whose shares are
publicly traded on the Australian Stock Exchange.
These general purpose financial statements have been prepared in accordance with Australian Standards, other
authoritative pronouncements of the Australian Accounting Standards Board, Australian Accounting Interpretations and
the Corporations Act 2001.
Compliance with IFRS
The financial statements of XRF Scientific Limited also comply with International Financial Reporting Standards as issued
by the International Accounting Standards Board.
Historical cost convention
These financial statements have been prepared under the historical cost convention.
Critical accounting estimates
The preparation of financial statements requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a
higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial
statements, are disclosed in note 3.
Financial statement presentation
The following significant accounting policies have been adopted in the preparation and presentation of the financial report.
(b) Principles of consolidation
(i) Subsidiaries
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of XRF Scientific Limited
(“company” or “parent company”) as at 30 June 2016 and the results of all subsidiaries for the year then ended.
XRF Scientific Limited and its subsidiaries together are referred to in this report as the Group or the consolidated entity.
The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its investment with the
entity and has the ability to affect those returns through its power to direct the activities of the entity.
All controlled entities have a 30 June financial year end.
The consolidated financial statements are prepared by combining the financial statements of all entities that comprise the
consolidated entity, being the company (the parent company) and its subsidiaries as defined in AASB 127 ‘Consolidated and
Separate Financial Statements’. Consistent accounting policies are employed in the preparation and presentation of the
consolidated financial statements. On acquisition, the assets, liabilities and contingent liabilities of a subsidiary are
measured at their fair values at the date of acquisition. Any excess of the cost of acquisition over the fair values of the
identifiable net assets acquired is recognised as goodwill. If, after reassessment, the fair values of the identifiable net
assets acquired exceed the cost of acquisition, the deficiency is credited to profit or loss in the period of acquisition.
The consolidated financial statements include the information and results of each subsidiary from the date on which the
company obtains control and until such time as the company ceases to control such entities. All intercompany balances
and transactions between entities in the economic entity, including any unrealised profits or losses, have been eliminated
on consolidation.
Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated.
Accounting policies of subsidiaries are consistent with the policies adopted by the Group.
22 XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
(ii) Investments in associates and joint-ventures
Investment in associates is accounted for using the equity method of accounting in the consolidated financial statements.
Under the equity method, the investment in the associates is carried in the consolidated statement of financial position at
cost plus post-acquisition changes in the Group’s share of net assets of the associate.
After application of the equity method, the Group determines whether it is necessary to recognise any additional
impairment loss with respect to the Group’s net investment in the associate.
The Group's share of the associate post-acquisition profits or losses is recognised in the statement of profit or loss and
other comprehensive income. The cumulative post-acquisition movements are adjusted against the carrying amount of the
investment. When the Group's share of losses in the associate equals or exceeds its interest in the associate, including any
unsecured long-term receivables and loans, the Group does not recognise further losses, unless it has incurred
obligations or made payments on behalf of the associate.
The reporting dates of the associate and the Group are identical and the associate’s accounting policies conform to those
used by the Group for like transactions and events in similar circumstances.
(iii) Changes in ownership interests
The Group treats transactions with non-controlling interests that do not result in a loss of control as transactions with
equity owners of the Group. A change in ownership interest results in an adjustment between the carrying amounts of the
controlling and non-controlling interests to reflect their relative interests in the subsidiary. Any difference between the
amount of the adjustment to non-controlling interests and any consideration paid or received is recognised in a separate
reserve within equity attributable to owners of XRF Scientific Limited.
When the Group ceases to have control, joint control or significant influence, any retained interest in the entity is re-
measured to its fair value with the change in carrying amount recognised in profit or loss. The fair value is the initial
carrying amount for the purposes of subsequently accounting for the retained interest as an associate, jointly controlled
entity or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that
entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that
amounts previously recognised in other comprehensive income are reclassified to profit or loss.
If the ownership interest in a jointly-controlled entity or an associate is reduced but joint control or significant influence is
retained, only a proportionate share of the amounts previously recognised in other comprehensive income are reclassified
to profit or loss where appropriate.
(c) Segment reporting
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 Chief Executive Officer.
(d) Foreign currency translation
Functional and presentation currency
The functional currency of each Group entity is measured using the currency of the primary economic environment in
which that entity operates. The consolidated financial statements are presented in Australian dollars which is the parent
entity’s functional and presentation currency.
Transaction and balances
Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the
transaction. Foreign currency monetary items are translated at the year-end exchange rate.
Exchange differences arising on the translation of monetary items are recognised in the income statement, except where
deferred in equity as a qualifying cash flow or net investment hedge. The differences taken to equity are recognised in
profit or loss on disposal of the net investment.
XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT 23
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange
rate as at the date of the initial transaction, and are recognised in the profit or loss.
Group Companies
The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary currency
economy) that have a functional currency different from the presentation currency are translated into the presentation
currency as follows.
Assets and liabilities for each statements of financial position presented are translated at the closing rate at the date of
that statement of financial position. Income and expenses for each profit or loss item are translated at average exchange
rates. All resulting exchange differences are recognised in other comprehensive income.
(e) Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of
returns, trade allowances and amounts collected on behalf of third parties. Revenue is recognised for major business
activities as follows:
(i) Sale of goods
Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer and the
costs incurred or to be incurred in respect of the transaction can be measured reliably. Risks and rewards of ownership
are considered passed to the buyer at the time of delivery of goods to the customer.
(ii) Interest income
Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial
assets.
(iii) Dividends
Dividend revenue is recognised when the right to receive a dividend has been established.
(iv) Rendering of services
Revenue from rendering of services is recognised by reference to the stage of completion of a contract. Stage of
completion is measured by reference to labour hours incurred to date as a percentage of total estimated labour hours for
each contract. When the contract outcome cannot be estimated reliably, revenue is recognised only to the extent of the
expenses recognised that are recoverable.
(f)
Income tax
The income tax expense or revenue for the period is the tax payable on the current years taxable income based on the
national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to
temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial
statements.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the
assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantially enacted for each
jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences
to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the
initial recognition of an asset or a liability.
No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction,
other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable
profit or loss.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of
investments in controlled entities where the parent is able to control the timing of the reversal of the temporary differences
and it is probable that the differences will not reverse in the foreseeable future.
Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in
equity.
24 XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
XRF Scientific Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation
legislation. The head entity, XRF Scientific Limited, and the controlled entities in the tax consolidated group account for
their own deferred tax amounts. Current tax is accounted for by each subsidiary entity, which is then consolidated up into
the tax consolidated group, as per the tax sharing agreement. In addition to its own share of current and deferred tax
amounts, XRF Scientific Limited also recognises the current tax liabilities (or assets) and the deferred tax assets arising
from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated group. Assets or
liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts receivable
from or payable to other entities in the Group. Income tax is allocated under the separate taxpayer within group approach.
Details about the tax funding agreement are disclosed in note 7.
(g) Leases
Leases of property, plant and equipment where the entity has substantially all the risks and rewards of ownership are
classified as finance leases. Finance leases are capitalised at the lease’s inception at the lower of fair value of the leased
property and the present value of the minimum lease payments. The corresponding rental obligations, net of finance
charges, are included in other long-term payables. Each lease payment is allocated between the liability and finance cost.
The finance cost is charged to the profit or loss over the lease period so as to produce a constant periodic rate of interest
on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases
are depreciated over the shorter of the asset’s useful life and the lease term.
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as
operating leases (note 26(a)(i)). Payments made under operating leases (net of any incentives received from the lessor) are
charged to the profit or loss on a straight-line basis over the period of the lease. Lease income from operating leases is
recognised in income on a straight-line basis over the lease term.
(h) Business combinations
The acquisition method of accounting is used to account for all business combinations, including business combinations
involving entities or businesses under common control, regardless of whether equity instruments or other assets are
acquired. The consideration transferred for the acquisition of a subsidiary comprises the fair values of the assets
transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred also
includes the fair value of any contingent consideration arrangement and the fair value of any pre-existing equity interest in
the subsidiary. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values
at the acquisition date. On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the
acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net identifiable
assets.
The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the
acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the Group’s share of the net
identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable
assets of the subsidiary acquired and the measurement of all amounts has been reviewed, the difference is recognised
directly in profit or loss as a bargain purchase.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their
present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate
at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.
Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are
subsequently re-measured to fair value with changes in fair value recognised in profit or loss.
All purchase consideration is recorded at fair value at the acquisition date. Contingent payments classified as debt are
subsequently re-measured through profit or loss.
Acquisition-related costs are expensed as incurred.
Non-controlling interests in an acquiree are recognised either at fair value or at the non-controlling interest’s
proportionate share of the acquiree’s net identifiable assets. This decision is made on an acquisition-by-acquisition basis.
XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT 25
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
If the Group recognises previous acquired deferred tax assets after the initial acquisition accounting is completed there
will no longer be any adjustment to goodwill. As a consequence, the recognition of the deferred tax asset will increase the
Group’s net profit after tax.
(i)
Impairment of assets
Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for
impairment or more frequently if events or changes in circumstances indicate that they might be impaired.
Other assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds
its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use.
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately
identifiable cash inflows which are largely independent of the cash flows from other assets or groups of assets (cash-
generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of
the impairment at each reporting date.
(j) Cash and cash equivalents
For cash flow statement presentation purposes, cash and cash equivalents includes cash on hand, deposits held at call
with financial institutions, other short-term, highly liquid instruments with original maturities 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, and
bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the Statement of Financial Position.
(k) Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective
interest rate method, less provision for doubtful debts.
Trade receivables are due for settlement no more than 90 days from the date of recognition. Collectability of trade
receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable are written off to the income
statement. A provision for impairment of receivables is established when there is objective evidence that the Company will
not be able to collect all amounts due according to the original terms of receivables. Another indicator that determines the
trade receivable is impaired is if the party is deemed to be bankrupt.
The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated
future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not
discounted if the effect of discounting is immaterial. The movement in the provision is recognised in the income statement.
(l)
Inventories
Raw materials and stores, work in progress and finished goods
Raw materials and stores, work in progress and finished goods are stated at the lower of cost and net realisable value.
Cost comprises of direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure,
the latter being allocated on the basis of normal operating capacity. Costs are assigned to individual items of inventory on
the basis of weighted average costs. Costs of purchased inventory are determined after deducting rebates and discounts.
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.
(m)
Investments and other financial assets
Classification
The Company classifies its investments in the following categories: other financial assets, loans and receivables. The
classification depends on the purpose for which the investments were acquired. Management determines the classification
of its investments at initial recognition.
26 XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
(i) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an
active market. They arise when the Company provides money, goods or services directly to a debtor with no intention of
selling the receivable. They are included in current assets, except for those with maturities greater than 12 months after
the reporting date which are classified as non-current assets. Loans and receivables are included in receivables in the
Statement of Financial Position (note 9).
(ii) Recognition and derecognition
Regular purchases and sales of investments are recognised on trade-date – the date on which the Company commits to
purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets
not carried at fair value through profit or loss.
Financial assets are derecognised when the rights to receive the cash flows from the financial assets have expired or have
been transferred and the Company has transferred substantially all the risks and rewards of ownership.
(iii) Subsequent measurement
Loans and receivables are carried at amortised cost using the effective interest method.
Changes in the fair value of monetary securities denominated in a foreign currency and classified as available-for-sale are
analysed between translation differences resulting from changes in amortised cost of the security and other changes in
the carrying amount of the security. The translation differences are recognised in profit or loss and other changes in
carrying amount are recognised in equity.
Changes in the fair value of other monetary and non-monetary securities classified as available-for-sale are recognised in
equity. When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments
recognised in equity are included in the income statement as gains and losses from investment securities.
Details of how the fair value of financial instruments is determined is discussed in note 2.
(iv) Fair value
The fair value of quoted investments are based on current bid prices. If the market for a financial asset is not active (or for
unlisted securities), the Company establishes fair value by using valuation techniques. These include the use of recent
arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis,
and option pricing models making maximum use of market inputs and relying as little as possible on entity-specific inputs.
(v) Impairment
The Company assesses at each balance date whether there is objective evidence that a financial asset or group of financial
assets is impaired.
If there is evidence of impairment for any of the Group’s financial assets carried at amortised cost, the loss is measured as
the difference between the asset’s carrying amount and the present value of estimated future cash flows, excluding future
credit losses that have not been incurred. The cash flows are discounted at the financial asset’s original effective interest
rate. The loss is recognised in the profit or loss.
(n) Fair value estimation
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for
disclosure purposes.
The carrying amount less impairment provision of trade receivables and payables are assumed to approximate their fair
values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash
flows at the current market interest rate that is available to the Company for similar financial instruments.
XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT 27
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
(o) Property, plant and equipment
Property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is
directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or
recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the
item will flow to the Company and the cost of the item can be measured reliably. All other repairs and maintenance are
charged to profit or loss during the financial period in which they are incurred.
Depreciation is calculated using a mixture of the straight line and diminishing value methods to allocate their cost, net of
their residual values, over their estimated useful lives, as follows:
Plant and Equipment
Furniture, Fixtures and Fittings
Motor Vehicles
Office Equipment
5%-40%
5%-20%
15%-25%
5%-66.67%
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date. An asset’s
carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its
estimated recoverable amount (note 1(i)).
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the
profit or loss.
(p)
Intangible assets
(i) Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Company’s share of the net
identifiable assets of the acquired subsidiary/associate/business at the date of acquisition. Goodwill on acquisitions of
subsidiaries and businesses is included in intangible assets. Goodwill on acquisitions of associates is included in
investments in associates. Goodwill is not amortised. Instead, goodwill is tested for impairment annually or more
frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated
impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the
entity sold.
Goodwill is assigned to cash-generating units for the purpose of impairment testing. Each of those cash-generating units
represents the Company’s investment in each country of operation by each primary-reporting segment (note 14(a)).
(ii) Patents, trademarks and licences
Patents, trademarks and licences have a finite useful life and are carried at cost less accumulated amortisation and
impairment losses. Amortisation is calculated using the straight-line method to allocate the cost of patents, trademarks
and licences over their estimated useful lives, which vary from 3 to 20 years.
(iii) Research and development
Research expenditure is recognised as an expense as incurred. Costs incurred on development projects (relating to the
design and testing of new or improved products) are recognised as intangible assets when it is probable that the project
will be a success considering its commercial and technical feasibility and its costs can be measured reliably.
The expenditure capitalised comprises all directly attributable costs, including costs of materials, services, direct labour
and an appropriate proportion of overheads. Other development expenditures that do not meet these criteria are
recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an
asset in a subsequent period. Capitalised development costs are recorded as intangible assets and amortised from the
point at which the asset is ready for use on a straight-line basis over its useful life, which varies from 1 to 4 years.
(q) Trade and other payables
These amounts represent liabilities for goods and services provided to the Company prior to the end of the financial year
which are unpaid. The amounts are unsecured and are usually paid within 60 days of recognition.
28 XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
(r) Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured
at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is
recognised in profit or loss over the period of the borrowings using the effective interest method. Fees paid on the
establishment of loan facilities, which are not incremental costs relating to the actual draw-down of the facility, are
recognised as prepayments and amortised on a straight-line basis over the term of the facility.
Borrowings are removed from the Statement of Financial Position when the obligation specified in the contract is
discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been
extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or
liabilities assumed, is recognised in other income or other expenses.
Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement of the
liability for at least 12 months after the reporting date.
(s) Borrowing costs
Borrowing costs incurred for the construction of any qualifying asset are capitalised during the period of time that is
required to complete and prepare the asset for its intended use or sale.
All other borrowing costs are recognised as an expense in profit or loss in the period in which they are incurred.
(t) Provisions
Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the
present obligation at the reporting date. The discount rate used to determine the present value reflects current market
assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the
passage of time is recognised as an interest expense.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined
by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with
respect to any one item included in the same class of obligations may be small.
Provisions for legal claims, service warranties and make good obligations are recognised when the Group has a present
legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to
settle the obligation and the amount has been reliably estimated.
(u) Employee benefits
(i) Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be settled wholly within
12 months of the reporting date are recognised in other payables in respect of employees’ services up to the reporting date
and are measured at the amounts expected to be paid when the liabilities are settled.
(ii) Other long-term employee benefit obligations
The liability for long service leave is recognised in the provision for employee benefits 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, experiences of employee
departures and periods of service. There amounts are not expected to be settled wholly within 12 months of the reporting
date.
Expected future payments are discounted using market yields at the reporting date on corporate bonds with terms to
maturity and currency that match, as closely as possible, the estimated future cash outflows.
(iii) Retirement benefit obligations
The amount charged to profit or loss in respect of superannuation represents the contributions made by the Group to
superannuation funds as nominated by the individual employee.
Contributions made by the Company to employee superannuation funds are charged as expenses when incurred.
XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT 29
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
(iv) Termination benefits
Termination benefits are payable when employment is terminated before the normal retirement date, or when an
employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits when it
is demonstrably committed to either terminating the employment of current employees according to a detailed formal plan
without possibility of withdrawal or providing termination benefits as a result of an offer made to encourage voluntary
redundancy. Benefits falling due more than 12 months after reporting date are discounted to present value.
(v) 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 from the
proceeds. Incremental costs directly attributable to the issue of new shares or options for the acquisition of a business are
not included in the cost of acquisition as part of the purchase consideration
If the entity reacquires its own equity instruments, e.g. as the result of a share buy-back, those instruments are deducted
from equity and the associated shares are cancelled. No gain or loss is recognised in the profit or loss and the
consideration paid including any directly attributable incremental costs (net of income taxes) is recognised directly in
equity.
(w) Dividends
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion
of the entity, on or before the end of the financial year but not distributed at reporting date.
(x) Goods and services tax
Revenues, expenses and assets are recognised net of the amount of associated goods and services tax (GST), unless the
GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of
the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST
recoverable from, or payable to, the taxation authority is included with other receivables or payables in the statement of
financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities
which are recoverable from, or payable to, the taxation authority, are presented as operating cash flows.
(y) Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to equity holders 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, adjusted for bonus elements in ordinary shares issued during the 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 shares assumed to have been issued for no consideration in relation to dilutive potential
ordinary shares.
30 XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
(z) New accounting standards and interpretations
Certain new accounting Standards and Interpretations have been published that are not mandatory for 30 June 2016
reporting periods and have not been early adopted by the Group. The Group’s assessment of the impact of these new
Standards and Interpretations is set out below. In all cases the Group intends to apply these standards from the
application date as indicated below.
(i) AASB 2015-2 Amendments to Australian Accounting Standards - Disclosure Initiative: Amendments to AASB 101
(effective from 1 July 2016)
This standard makes amendments to AASB 101 Presentation of Financial Statements arising from the IASB’s Disclosure
Initiative Project. The amendments are designed to further encourage companies to apply professional judgment in
determining what information to disclose in the financial statements. The amendments also clarify that companies should
use professional judgment in determining where and in what order in formation is to be presented in the financial
disclosures.
There will be no significant impact on the Group on the adoption of this standard. The Group is currently conducting an
exercise of reviewing financial report disclosures.
(ii) AASB 15 Revenue from Contracts with Customers (effective from 1 July 2018)
The AASB has issued a new standard for the recognition of revenue. This will replace AASB 118 which covers contracts for
goods and services and AASB111 which covers construction contracts. The new standard is based on the principle that
revenue is recognised when control of a good or service transfers to a customer, so the notion of control replaces the
existing notion of risks and rewards. The standard permits a modified retrospective approach for the adoption. Under this
approach entities will recognise any applicable transitional adjustments in retained earnings on the date of the initial
application without restating the comparative period. Entities will only need to apply the new rules to contracts that are not
completed as of the date of initial application.
Management is currently assessing the impact of the new rules. At this stage, the Group is not in a position to estimate the
impact of the new rules on the Group’s financial statements. The Group will make more detailed assessments of the
impact over the next 12 months.
(iii) AASB 16 Leases (effective from 1 July 2019)
Lessee accounting
Lessees are required to recognise assets and liabilities for all leases with a term of more than 12 months, unless the
underlying asset is of a low value.
A lessee measures right-of-use assets similarly to other non-financial assets and lease liabilities similarly to other
financial liabilities.
Assets and liabilities arising from a lease are initially measured on a present value basis. The measurement includes
non-cancellable lease payments, and also includes payments to be made in optional periods if the lessee is
reasonably certain to exercise an option to extend the lease, or not to exercise an option to terminate the lease.
AASB 16 contains disclosure requirements for leases.
Lessor accounting
AASB 16 substantially carries forward the lessor accounting requirements in AASB 117. Accordingly, a lessor
continues to classify its leases as operating leases or finance leases, and to account for those two types of leases
differently.
AASB 16 also requires enhanced disclosures to be provided by lessors that will improve information disclosed about a
lessor’s risk exposure, particularly to residual value risk.
To the extent that the entity, as lessee, has significant operating leases outstanding at the date of initial application, 1 July
2019, right-of-use assets will be recognised for the amount of the unamortised portion of the useful life, and lease
liabilities will be recognised at the present value of the outstanding lease payments. Thereafter, earnings before interest,
depreciation, amortisation and tax (EBITDA) will increase because operating lease expenses currently included in EBITDA
will be recognised instead as amortisation of the right-of-use asset, and interest expense on the lease liability. However,
there will be an overall reduction in net profit before tax in the early years of a lease because the amortisation and interest
charges will exceed the current straight-line expense incurred under AASB 117 Leases. This trend will reverse in the later
years. There will be no change to the accounting treatment for short-term leases less than 12 months and leases of low
value items, which will continue to be expensed on a straight-line basis.
XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT 31
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
(iv) AASB 9 Financial Instruments (effective from 1 July 2018)
AASB 9 addresses the classification, measurement and derecognition of financial assets and financial liabilities and
introduces new rules for hedge accounting. In December 2014, the AASB made further changes to the classification and
measurement rules and also introduced a new impairment model. These latest amendments now complete the financial
instruments standard.
There will be no significant impact on the Group on the adoption of this standard.
(v) AASB 2016-1 Amendments to Australian Accounting Standards - Recognition of Deferred Tax Assets for Unrealised
Losses (AASB 112) (effective from 1 July 2017)
This standard amends AASB 112 Income Taxes to clarify the requirements on recognition of deferred tax assets for
unrealised losses on debt instruments measured at fair value.
There will be no significant impact on the Group’s results on the adoption of this standard.
(vi) AASB 2016-2 Amendments to Australian Accounting Standards - Disclosure Initiative: Amendments to AASB 107
(effective from 1 July 2017)
This standard amends AASB 107 Statement of Cash Flows to require entities preparing financial statements in accordance
with Tier 1 reporting requirements to provide disclosures that enable users of financial statements to evaluate changes in
liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes.
There will be no significant impact on the Group’s results on the adoption of this standard.
NOTE 2: FINANCIAL RISK MANAGEMENT
The Group’s activities expose it to a variety of financial risks; market risk (including foreign exchange risk, price risk and interest
rate risk); credit risk; liquidity risk and cash flow interest rate risk. The Group’s overall risk management program focuses on
the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the
Group.
Risk management is carried out by management under policies approved by the Board of Directors. Management identifies,
evaluates and hedges financial risks in close co-operation with the Company’s operating units. The Board provides guidance for
overall risk management, as well as written policies covering specific areas, such as mitigating foreign exchange, interest rate
and credit risks, use of financial instruments and investing excess liquidity.
(a) Market risk
(i) Foreign exchange risk
The Group is exposed to foreign currency risk on sales, purchases and borrowings that are denominated in a currency
other than the Australian Dollar. The currencies giving rise to this risk are predominantly Euros, the US Dollar, and the
Canadian Dollar.
Foreign currency risk arises where settlement of a trade receivable, payable or borrowings is denominated in a currency
that is not the entity’s functional currency, which may result in a foreign currency gain or loss. The Group seeks to mitigate
this risk by engaging in a majority of commercial transactions that are generally in AUD. The Group’s exposure to foreign
currency risk at the reporting date was as follows:
30 June 2016
30 June 2015
CAD
EUR
USD
CAD
EUR
USD
Trade receivables
Trade payables
Deferred and contingent consideration payable
Loan to associate
Group sensitivity
118,953
423,049
400,802
22,198
20,273
35,277
124,803
416,970
-
32,780
7,129
-
83,950
22,279
10,500
-
-
-
-
122,500
90,897
-
-
-
Based on the financial instruments held at 30 June 2016, had the Australian dollar strengthened / weakened by 10%
(based on historical reasonableness movements) against the exchange rates in the above tables, with all other variables
held constant, the Group’s post-tax profit for the year would have been $119,981 lower / $146,643 higher (2015: $52,967
lower / $64,738 higher), mainly as a result of foreign currency exchange gains/losses on translation of foreign currency
denominated financial instruments as detailed in the table above.
32 XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 2: FINANCIAL RISK MANAGEMENT continued
(ii) Price risk
As the Group does not have any investments in equities or commodities, its exposure to equities price risk and commodity
price risk is minimal.
While the Group uses commodities in its operations, customer commitments to spot rates purchased result in the Group’s
exposure to commodities price risk being immaterial.
(iii) Cash flow, fair value and interest rate risk
As at 30 June 2016 the Group had no variable interest rate debt, therefore consider fair value interest rate risk minimal.
Group sensitivity
At 30 June 2016, if interest rates had changed by -/+ 100 basis points (based upon forward treasury rates) from the year-
end rates with all other variables held constant, post-tax profit for the year would have been $3,828 higher / lower (2015:
$11,711 higher / lower), mainly as a result of higher/lower interest income from cash and cash equivalents. Cash and cash
equivalent balances at 30 June 2016 would have been higher/lower by the same amount.
(b) Credit risk
Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit risk arises from
cash and cash equivalents, trade receivables and other receivables. For banks and financial institutions, only independently rated
parties with a minimum rating of ‘A’ are accepted. The Group trades only with recognised, creditworthy third parties. In addition,
receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not significant.
Counterparties without external credit ratings are in majority existing customers (<6months) with no history of defaults (Group 2).
With respect to credit risk arising from the other financial assets of the Group, which comprise of cash and cash
equivalents, and trade and other receivables, the Group’s exposure to credit risk arises from the default of the counter party, with
a maximum exposure equal to the carrying amount of these financial assets.
There are no significant concentrations of credit risk within the Group at the reporting date.
The following table represents the Group’s exposure to credit risk:
Cash and cash equivalents (AA- rated)
Trade receivables, net of impairment provision (note 9) (Group 2)
Other receivables (external parties)
Consolidated
2016
$
2015
$
3,304,773
3,853,432
179,681
6,759,893
3,024,190
158,050
7,337,886
9,942,133
Credit risk exposure is not significantly different for any of the segments of the Group.
Details of impaired trade receivables, and trade receivables overdue but not impaired can be found at note 9. An analysis of
the Group’s consolidated trade receivables is as follows:
Current
Over 30
Over 60
Over 90
Total
days
days
days
2016
2,784,590..
733,793
78,105
283,866..
3,880,354..
2015
2,036,741..
621,824
196,042
169,583..
3,024,190..
XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT 33
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 2: FINANCIAL RISK MANAGEMENT continued
(c) Liquidity risk
The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank
overdrafts, bank loans, debentures, finance leases and hire purchase contracts. The below analyses the Group’s financial
liabilities into relevant maturity groupings based on the remaining period at the reporting date. The amounts disclosed in
the table are the contractual undiscounted cash flows. There have been no breaches or defaults on the repayment of debt.
Contractual maturities
of financial liabilities
Less than
6 months
6 – 12
months
Between 1
and 2
years
Between 2
and 5
years
Over 5
years
Total
contractual
cash flows
As at 30 June 2016
$
$
$
$
$
$
Carrying
Amount
(assets)/
liabilities
$
Non-derivatives
Trade and other payables
Interest-bearing loan
Deferred consideration
Contingent consideration
Total non-derivatives
As at 30 June 2015
Non-derivatives
Trade and other payables
Interest-bearing loan
Deferred consideration
Contingent consideration
Total non-derivatives
737,639
19,479
15,670
-
772,788
560,907
-
30,550
101,832
693,289
-
19,479
-
-
19,479
-
-
30,550
-
30,550
-
38,958
-
-
38,958
-
1,127,733
-
-
1,127,733
-
-
15,274
-
15,274
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
737,639
1,205,649
15,670
-
1,958,958
737,639
1,111,500
15,670
-
1,864,809
560,907
-
76,374
101,832
739,113
560,907
-
76,374
101,832
739,113
The Group had access to the following undrawn borrowing facilities at the end of the reporting period:
Bank overdraft facility
Bank guarantee facility
Consolidated
2016
$
2015
$
1,000,000
1,498,837
2,498,837
1,000,000
1,498,837
2,498,837
(d) Fair value estimation
The fair value bases of financial assets and financial liabilities are outlined in note 1(n).
All financial assets and liabilities have carrying values that are reasonable approximates of their fair values, for the
Consolidated Entity.
The fair values of non-current borrowings are based on discounted cash flows using a current borrowing rate. They are
classified as level 3 fair values in the fair value hierarchy due to the use of unobservable inputs, including own credit risk.
Carrying value
$1,111,500
Fair value
$1,139,778
34 XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 3: CRITICAL ACCOUNTING ESTIMATES AND SIGNIFICANT JUDGEMENTS
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including
expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the
circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition,
seldom equal the related 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.
(a) Estimated impairment of goodwill
The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated
in note 1(p). Please refer to note 14 for the details on impairment tests performed on goodwill.
(b) Capitalisation of development expenditures
The Group capitalises development costs where management considers it probable that the related projects will be
commercially and technically feasible and successful, in accordance with the accounting policy stated in note 1(p)(iii).
(c) Tax
The determination of the Group's provision for income tax as well as deferred tax assets and liabilities involves significant
judgements and estimates on certain matters and transactions, for which the ultimate outcome may be uncertain. If the
final outcome differs from the Group's estimates, such differences will impact the current and deferred income tax assets
and liabilities in the period in which such determination is made.
NOTE 4: SEGMENT INFORMATION
Operating Segments – AASB 8 requires a management approach under which segment information is presented on the same
basis as that used for internal reporting purposes. This is consistent to the approach used in previous periods.
Operating segments are reported in a uniform manner to which is internally provided to the chief operating decision maker. The
chief operating decision maker has been identified as the Chief Executive Officer.
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and
incur expenses, including those that relate to transactions with any of the Group’s other components. Each operating segment’s
results are reviewed regularly by the Chief Executive Officer to make decisions about resources to be allocated to the segment
and assess its performance, and for which discrete financial information is available.
The Chief Executive Officer monitors segment performance based on profit before income tax expense. Segment results that are
reported to the Chief Executive Officer include results directly attributable to a segment as well as those allocated on a
reasonable basis. Segment capital expenditure is the total cost incurred during the period to acquire property, plant and
equipment and intangible assets other than goodwill.
The consolidated entity has determined that strategic decision making is facilitated by evaluation of operations on the customer
segments of Capital Equipment, Precious Metals and Consumables. For each of the strategic operating segments, the Chief
Executive Officer reviews internal management reports on a monthly basis.
(a) Description of segments
The following summary describes the operations in each of the Group’s reportable segments:
Capital Equipment
Design, manufacture and service organisation, specialising in automated fusion equipment, high temperature test and
production furnaces, as well as general laboratory equipment.
Precious Metals
Manufactures products for the laboratory and platinum alloy markets.
Consumables
Produces and distributes consumables, chemicals and other supplies for analytical laboratories.
XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT 35
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 4: SEGMENT INFORMATION continued
(b) Primary reporting format – business segments
Segment information provided to the Chief Executive Officer for the full-year ended 30 June 2016 is as follows:
Full-year ended 30 June 2016
Total segment revenue
Inter segment sales
Revenue from external customers
Capital Equipment
Precious Metals
Consumables
$
6,060,538
(333,249)
5,727,289
$
9,542,543
(494,018)
9,048,525
$
6,274,312
-
6,274,312
Total
$
21,877,393
(827,267)
21,050,126
Profit before income tax expense
170,419
551,391
1,830,258
2,552,068
Full-year ended 30 June 2015
Total segment revenue
Inter segment sales
Revenue from external customers
5,695,161
(395,706)
5,299,455
9,975,471
(808,795)
9,166,676
6,037,457
-
6,037,457
21,708,089
(1,204,501)
20,503,588
Profit before income tax expense
632,620
1,492,269
1,929,631
4,054,520
Segment assets
At 30 June 2016
At 30 June 2015
Segment liabilities
At 30 June 2016
At 30 June 2015
Depreciation and amortisation expense
For the year ended 30 June 2016
For the year ended 30 June 2015
Capital expenditure
For the year ended 30 June 2016
For the year ended 30 June 2015
7,196,477
5,840,417
1,097,573
371,064
210,496
130,714
142,827
70,125
Revenue from external customers – segments
Unallocated revenue
Revenue from external customers – total
Profit before income tax expense – segments
Loss incurred by parent entity
Profit before income tax expense from continuing operations
Total segment assets
Related party loan elimination
Cash and cash equivalents
Investments accounted for using the equity method
Deferred tax asset
Other corporate assets
Total assets
Total segment liabilities
Related party loan elimination
Other corporate liabilities
Total liabilities
36 XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT
13,123,810
11,002,336
19,298,845
18,242,963
39,619,132
35,085,716
4,009,897
2,435,887
222,900
206,552
2,802,485
92,972
222,911
422,825
202,389
178,406
104,955
141,701
2016
$
21,050,126
82,720
21,132,846
2,552,068
(178,648)
2,373,420
39,619,132
(9,584,761)
2,525,859
607,890
409,966
119,091
33,697,177
5,330,381
(2,926,891)
886,715
3,290,205
5,330,381
3,229,776
635,785
515,672
3,050,267
304,798
2015
$
20,503,588
167,251
20,670,839
4,054,520
(411,332)
3,643,188
35,085,716
(10,666,046)
6,129,139
555,142
430,425
293,603
31,827,979
3,229,776
(1,881,148)
714,060
2,062,688
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 5: REVENUE
Revenue from continuing operations
Sale of goods
Interest received
Other income
Profit on sale of non-current assets
Recoveries
Other revenue
NOTE 6: EXPENSES
Profit/(loss) before income tax includes the following specific expenses
Depreciation
Depreciation (included in administration expenses)
Depreciation (included in cost of goods sold)
Total depreciation
Amortisation
Patents, trademarks and acquired customer lists (included in administration expenses)
Research and development (included in administration expenses)
Total amortisation
Other specific expenses
Consolidated
2016
$
2015
$
21,050,106
20,503,547
82,740
167,292
21,132,846
20,670,839
-
19,018
131,552
150,570
122
31,872
225,835
257,829
Consolidated
2016
$
2015
$
202,257
310,009
512,266
58,206
151,067
209,273
196,811
300,999
497,810
23,000
73,836
96,836
Employee benefits expenses (included in administration expenses)
Rental expense relating to operating leases (included in occupancy expenses)
Acquisition of business costs (included in other expenses)
3,437,459
2,842,286
606,611
172,740
533,951
262,088
XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT 37
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 7: INCOME TAX EXPENSE
(a)
Income tax expense
Current tax
Deferred tax
Adjustments for current tax of prior periods
Income tax expense is attributed to:
Profit from continuing operations
Deferred income tax expense included in income tax expense comprises:
Decrease (increase) in deferred tax assets (note 15)
(Decrease) increase in deferred tax liabilities (note 19)
(b) Numerical reconciliation of income tax expense to prima facie tax payable
Profit/(loss) from continuing operations before income tax expense
Tax at the Australian rate of 30% (2015: 30%)
Tax effect of amounts which are not deductible (taxable) in calculating taxable income:
Acquisition of business costs
Research and development expenditure
Tax loss for new German division not claimed in current financial year
Sundry items
Adjustments for current tax of prior periods
Income tax expense
(c) Tax consolidation legislation
Consolidated
2016
$
2015
$
812,952
40,890
(17,686)
836,156
997,973
62,971
(57,219)
1,003,725
836,156
1,003,725
22,468
18,422
40,890
1,876
61,095
62,971
2,373,420
2,373,420
3,643,188
3,643,188
712,026
1,092,956
51,822
(66,203)
50,004
106,193
853,842
78,626
(75,681)
-
(34,957)
1,060,944
(17,686)
836,156
(57,219)
1,003,725
XRF Scientific Limited and its wholly-owned Australian controlled entities elected to enter into the tax consolidation regime from
1 July 2005. The accounting policy in relation to this legislation is set out in note 1(f). The entities have entered into a tax funding
agreement under which the wholly-owned entities fully compensate XRF Scientific Limited for any current tax payable assumed
and are compensated by XRF Scientific Limited for any current tax receivable and deferred tax assets relating to unused tax
losses or unused tax credits that are transferred to XRF Scientific Limited under the tax consolidation legislation. The funding
amounts are determined by reference to the amounts recognised in the wholly-owned entities’ financial statements. The
amounts receivable/payable under the tax funding agreement are due upon receipt of the funding advice from the head entity,
which is issued as soon as practicable after the end of each financial year. The head entity may also require payment of interim
funding amounts to assist with its obligations to pay tax installments. The funding amounts are recognised as current
intercompany receivables or payables.
38 XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 8: CURRENT ASSETS – CASH AND CASH EQUIVALENTS
Cash at bank and on hand
Deposits at call
Reconciliation to cash at the end of the year
Balances as above
Balance per statements of cash flows
(a) Cash at bank and on hand
Consolidated
2016
$
2,275,462
1,029,311
3,304,773
2015
$
1,958,013
4,801,880
6,759,893
3,304,773
3,304,773
6,759,893
6,759,893
Cash at bank earns interest at floating rates based on daily bank deposit rates of between 0.01% to 0.7% pa (2015: 0.01% to
1.35%). Cash available for use is as reported above, with no restrictions applicable.
(b) Deposits at call
Short-term deposits are made for varying periods of between no set term and 4 months, depending on the immediate cash
requirements of the company, and earn interest at the respective short-term deposit rates. Deposits at call are subject to
interest rates between 2.12% to 2.7% pa (2015: 2.72% to 3.47% pa).
(c) Risk exposure
The Group’s exposure to interest rate risk is discussed in note 2. The maximum exposure to credit risk at the reporting date is
the carrying amount of each class of cash and cash equivalents mentioned above.
NOTE 9: CURRENT ASSETS – TRADE AND OTHER RECEIVABLES
Trade receivables
Allowance for impairment of receivables
Other receivables – From associated entity
Other receivables – From other external parties
Total trade and other receivables
Past due but not impaired
Up to 3 months
Up to 6 months
Allowance for impairment of receivables
Balance at 1 July
(Increase)/Decrease in allowance during the year
Balance at 30 June
(a)
Impaired trade receivables
Consolidated
2016
$
2015
$
3,880,354
3,024,190
(26,922)
91,044
88,637
-
95,175
62,875
4,033,113
3,182,240
811,898
283,866
1,095,764
-
(26,922)
(26,922)
817,866
169,583
987,449
(5,000)
5,000
-
The consolidated entity has recognised $26,922 (2015: reversed $5,000 of prior year impairment) in respect of impaired trade
receivables during the year ended 30 June 2016. This amount has been included as ‘other expenses’ in the statement of profit or
loss and other comprehensive income.
(b) Past due but not impaired
As at 30 June 2016, trade receivables of the Group of $1,095,764 (2015: $987,449) were past due but not impaired. These relate to
a number of independent customers for whom there is no recent history of default. The ageing analysis of these trade
receivables is in note 2. The other classes within trade and other receivables do not contain impaired assets and are not past
due. Based on the credit history of these classes, it is expected that these amounts will be received when due. The Group does
not hold any collateral in relation to these receivables.
XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT 39
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 9: CURRENT ASSETS – TRADE AND OTHER RECEIVABLES continued
(c) Other receivables
These amounts generally arise from transactions outside the usual operating activities of the Group. Refer to note 28 for terms
of the loan to the associated entity. All other receivables are subject to the same terms as trade receivables. Those terms have
been described in note 1(k).
(d) Effective interest rates and credit risk
Information concerning the effective interest rate and credit risk of both current and non-current receivables is set out in note 2.
(e) Non-current receivables
There are no non-current receivables in the current year (2015: Nil).
NOTE 10: CURRENT ASSETS – INVENTORIES
Raw materials
Finished goods
Provision for obsolescence
Consolidated
2016
$
2015
$
3,376,982
2,067,172
651,036
(4,476)
493,055
-
4,023,542
2,560,227
Stock was valued at lower of cost and net realisable value on 30 June 2016 and 30 June 2015.
Inventory expense
Inventories recognised as expense during the year ended 30 June 2016 amounted to $8,053,387 (2015: $7,764,364). The cost of
writing down inventories to net realisable value during the year ended 30 June 2016 was $27,975 (2015: $119,534).
NOTE 11: OTHER CURRENT ASSETS
Deposits paid
Accrued income
Prepayments (insurance policies, rates and other fees)
Consolidated
2016
$
28,478
6,320
223,605
258,403
2015
$
64,764
28,097
205,028
297,889
NOTE 12: INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
Set out below are the associates and joint ventures of the Group as at 30 June 2016 which, in the opinion of the directors, are
material to the Group. The entities listed below have share capital consisting solely of ordinary shares, which are held directly by
the Group. The country of incorporation or registration is also their principal place of business, and the proportion of ownership
interest is the same as the proportion of voting rights held.
% of ownership
Quoted
Place of
interest
Nature of
Measurement
fair value
Carrying
amount
Name of entity
business
2016
2015
relationship
method
2016
2015
2016
2015
Gestion Scancia Inc.
Canada
49.99
49.99
Associate 1
Equity
N/A 2
N/A 2
607,890
555,142
Total equity accounted investments
-
-
607,890
555,142
1 Scancia is a manufacturer of chemical x-ray fluxes, used for x-ray fluorescence analysis and is based in Quebec, Canada. Its
products complement the XRF’s existing range and the investment supports the Group’s international expansion strategy.
2 Private entity – no quoted price available.
40 XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 12: INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD continued
(a) Commitments and contingent liabilities in respect of associates and joint ventures
As at 30 June 2016, there are no contingent liabilities or commitments to provide funding for the capital commitments of
associates and joint venture entities (2015: Nil).
(b) Summarised financial information for associate
Gestion Scancia Inc. has a reporting date of 31 May. The different date does not have a material effect on the reportable
balances of the Group, so no adjustments have been made.
(i) Summarised balance sheet
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
Reconciliation to carrying amounts:
Opening net assets / (liabilities) 1 July
Total comprehensive income / (loss) for the period
Closing net assets
Group’s share in % of closing net assets
Group’s share in $ of closing net assets
Goodwill
Carrying amount
(ii) Summarised income statement
Revenue
Total comprehensive income / (loss)
Gestion Scancia Inc.
2016
$
2015
$
623,587
246,013
(530,853)
(193,903)
144,844
416,563
272,144
(416,140)
(229,789)
42,778
42,778
102,066
144,844
49.99%
72,408
535,482
607,890
(9,642)
52,420
42,778
49.99%
21,385
533,757
555,142
1,263,473
102,066
968,618
52,420
(c)
Individually immaterial joint venture
In addition to the interest in the associate disclosed above, the Group also had an interest in an individually immaterial joint
venture, XRock Automation Pty Ltd, which is accounted for using the equity method.
Aggregate carrying amount of individually immaterial joint venture
Aggregate amount of the Group’s share of:
Profit / (loss) from continuing operations
Post-tax profit / (loss) from discontinued operations
Other comprehensive income
Total comprehensive income / (loss)
(d) Group’s share of profit / (loss) of investments accounted for using the equity method
Gestion Scancia Inc.
XRock Automation Pty Ltd
XRock Automation Pty Ltd
2016
$
2015
$
-
-
-
-
-
-
-
(4,971)
-
(4,971)
2016
$
52,748
-
52,748
2015
$
25,728
(7,101)
18,627
XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT 41
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 13: NON-CURRENT ASSETS – PROPERTY, PLANT AND EQUIPMENT
Consolidated
Equipment
Motor Vehicles
Improvements
Equipment
Plant &
Property
Office
$
$
$
$
Land &
Buildings
$
Total
$
At 30 June 2014
Cost or fair value
Accumulated depreciation
Net book amount
Year ended 30 June 2015
Opening net book amount
Transfers between asset classes
Additions
Disposals
Depreciation charge
Closing net book amount
At 30 June 2015
Cost or fair value
Accumulated depreciation
Net book amount
Year ended 30 June 2016
Opening net book amount
Additions
Disposals
Depreciation charge
Closing net book amount
At 30 June 2016
Cost or fair value
Accumulated depreciation
Net book amount
4,165,835
(1,393,888)
2,771,947
157,652
(50,539)
107,113
579,383
(248,439)
330,944
649,699
(277,400)
372,299
2,771,947
107,113
330,944
372,299
35,000
254,327
(18,353)
(299,883)
2,743,038
4,364,696
(1,621,658)
2,743,038
2,743,038
1,028,930
(86,942)
(316,910)
3,368,116
5,205,492
(1,837,376)
3,368,116
-
37,959
(23,348)
(20,897)
100,827
144,944
(44,117)
100,827
100,827
38,363
-
24,060
(2,737)
(68,116)
284,151
592,983
(308,832)
284,151
284,151
60,412
-
(101,455)
(19,654)
119,536
183,307
(63,771)
119,536
(69,099)
174,009
467,549
(293,540)
174,009
-
12,209
(2,984)
(108,914)
272,610
547,674
(275,064)
272,610
272,610
191,109
(9,987)
(106,603)
347,129
825,380
(478,251)
347,129
-
-
-
-
-
-
-
-
-
-
-
-
-
1,823,217
-
-
1,823,217
5,552,569
(1,970,266)
3,582,303
3,582,303
35,000
328,555
(47,422)
(497,810)
3,400,626
5,650,297
(2,249,671)
3,400,626
3,400,626
3,142,031
(198,384)
(512,266)
5,832,007
1,823,217
8,504,945
-
(2,672,938)
1,823,217
5,832,007
All items of property, plant and equipment were recorded at cost as at 30 June 2016 and 30 June 2015.
42 XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 14: NON-CURRENT ASSETS – INTANGIBLE ASSETS
Consolidated
At 30 June 2014
Cost or fair value
Accumulated amortisation and impairment
Net book amount
Year ended 30 June 2015
Opening net book amount
Transfers between asset classes
Additions
Disposals
Foreign currency adjustment
Amortisation charge
Closing net book amount
At 30 June 2015
Cost or fair value
Accumulated amortisation and impairment
Net book amount
Year ended 30 June 2016
Opening net book amount
Additions
Disposals
Foreign currency adjustment
Amortisation charge
Closing net book amount
At 30 June 2016
Cost or fair value
Accumulated amortisation and impairment
Net book amount
Research &
Development
Goodwill
$
$
Patents
trademarks
& other
rights
$
Total
$
990,607
(542,999)
13,023,197
(30,000)
447,608
12,993,197
216,131
(90,014)
126,117
14,229,935
(663,013)
13,566,922
447,608
(35,000)
252,268
-
-
(73,836)
591,040
676,963
(85,923)
591,040
12,993,197
126,117
13,566,922
-
751,265
-
91,443
-
13,835,905
-
111,615
(140)
-
(23,000)
214,592
(35,000)
1,115,148
(140)
91,443
(96,836)
14,641,537
13,835,905
327,554
14,840,422
-
(112,962)
(198,885)
13,835,905
214,592
14,641,537
591,040
220,678
13,835,905
463,307
-
-
(150,327)
-
(4,861)
-
661,391
14,294,351
214,592
116,445
(347)
(3)
(58,946)
271,741
14,641,537
800,430
(347)
(4,864)
(209,273)
15,227,483
897,640
(236,249)
14,294,351
443,343
15,635,334
-
(171,602)
(407,851)
661,391
14,294,351
271,741
15,227,483
All intangible assets were recorded at cost as at 30 June 2016 and 30 June 2015.
(a)
Impairment tests for goodwill
Goodwill is allocated to the consolidated entity’s cash generating units (CGU’s) identified according to business and geographical
segments. A segment-level summary of the goodwill allocation is presented below.
Consumables CGU
Precious Metals CGU
Capital Equipment CGU
European Sales Office CGU
Consolidated
2016
$
8,288,237
3,880,956
1,650,171
474,987
2015
$
8,288,237
3,897,497
1,650,171
-
14,294,351
13,835,905
XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT 43
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 14: NON-CURRENT ASSETS – INTANGIBLE ASSETS continued
(b) Significant estimate: key assumptions used for value-in-use calculations
The recoverable amount of a CGU is determined based on value-in-use calculations which require the use of assumptions. The
calculations use cash flow projections based on financial budgets approved by the Board covering a five-year period. Average
growth rate of 3.20% (see below) used does not exceed the long-term average growth rates for the industry in which each CGU
operates. The average growth rate for Precious Metals (Canada) of 15.88% is determined on the basis of historical performance
and expected market opportunity. The pre-tax discount rate of 15% reflects specific risks relating to the relevant CGU.
Precious
Metals
Precious
Metals
European
Capital
Sales Office
Consumables
(Australia)
(Canada)
Equipment
(Belgium)
Net Profit (% average annual growth rate)
3.20%
3.20%
15.88%
3.20%
3.20%
(c) Sensitivity to change in assumptions
If the average budgeted net profit growth rate used in the value-in-use calculation for the Precious Metals CGU in Canada is
reduced by 50%, the Group would have had to recognise an impairment charge against the carrying amount of goodwill of
$360,000. The reasonably possible change in growth rate represents a reasonably possible reduction in sales quantity of capital
equipment. Management believes that no other reasonably possible change in any of the above key assumptions would cause
the carrying values to materially exceed recoverable amounts.
(d)
Impairment charge
No impairment charges have been deemed necessary for the current period.
NOTE 15: NON-CURRENT ASSETS – DEFERRED TAX ASSETS
The balance comprises temporary differences attributable to:
Amounts recognised directly in equity:
Share issue expenses
Amounts recognised in profit or loss:
Employee benefits
Business acquisition expenses
Depreciation of tangible assets
Accruals
Provisions
Other
Net deferred tax assets
Movements:
Opening balance at 1 July
(Charged)/credited to profit or loss (note 7)
(Charged)/credited to equity
Closing balance at 30 June
Deferred tax assets expected to be recovered within 12 months
Deferred tax assets expected to be recovered after more than 12 months
44 XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT
Consolidated
2016
$
2015
$
1,906
18,056
239,600
48,533
31,140
62,614
24,419
1,754
408,060
409,966
430,425
(22,468)
2,009
409,966
192,121
217,845
409,966
219,144
107,446
33,836
37,819
15,000
(876)
412,369
430,425
432,301
(1,876)
-
430,425
168,880
261,545
430,425
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 16: CURRENT LIABILITIES – TRADE AND OTHER PAYABLES
Trade payables
Deferred consideration
Sundry creditors and accruals
Employee benefits – annual leave (a)
Consolidated
2016
$
424,102
15,670
313,537
355,945
1,109,254
2015
$
176,107
76,374
384,800
324,368
961,649
Terms and conditions of trade payables vary between suppliers, however terms of trade are generally 30 days.
(a) Amounts not expected to be settled within the next 12 months
The entire obligation is presented as current, since the Group does not have an unconditional right to defer settlement. However,
based on past experience, the Group does not expect all employees to take the full amount of accrued leave within the next 12
months. The following amounts reflect leave that is not expected to be taken within the next 12 months:
Annual leave obligations expected to be settled after 12 months
(b) Foreign exchange risk exposure
Information about the Group’s exposure to foreign exchange risk is provided in note 2.
NOTE 17: CURRENT LIABILITIES – PROVISIONS
Long service leave (a)
Dividends payable to ordinary shareholders
Making good of leases (b)
Deferred payments
Consolidated
2016
$
2015
$
234,924
214,083
Consolidated
2016
$
297,300
71,363
50,000
-
418,663
2015
$
273,702
78,302
50,000
101,832
503,836
(a) Amounts not expected to be settled within the next 12 months
The current provision for long service leave includes all unconditional entitlements where employees have completed the
required period of service and also those where employees are entitled to pro-rata payments in certain circumstances. The
entire amount is presented as current, since the Group does not have an unconditional right to defer settlement. Based on past
experience, the Group does not expect all employees to take the full amount of accrued long service leave or require payment
within the next 12 months. The following amounts reflect leave that is not to be expected to be paid within the next 12 months:
Long service leave obligations expected to be settled after 12 months
Consolidated
2016
$
2015
$
222,975
205,276
(b) Making good of leases provision
XRF Scientific Limited is required to restore leased premises to their original condition at the end of the respective lease terms.
A provision has been recognised for the present value of the estimated expenditure required for general repairs to premises. All
amounts provided for have been expensed in full through the profit or loss as occupancy expenses.
XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT 45
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 18: NON-CURRENT LIABILITIES – LONG-TERM BORROWINGS
Interest-bearing loan 1
Consolidated
2016
$
2015
$
1,111,500
-
1 Consists of a three-year, interest-only loan for $1,111,500, used to fund the purchase of a property in Campbellfield, Victoria,
which commenced on 27 November 2015. Interest is paid monthly, at a rate of 3.505% per annum. The lender holds a fixed and
floating charge over the assets of XRF Scientific and its subsidiaries (including the property acquired) as security for the loan
facility. The fair value of the loan is estimated to be $1,139,778, calculated using current market interest rates.
NOTE 19: NON-CURRENT LIABILITIES – DEFERRED TAX LIABILITIES
The balance comprises temporary differences attributed to:
Amounts recognised in profit or loss
Research and development
Depreciation
Other
Net deferred tax liabilities
Movements:
Opening balance at 1 July
Charged/(credited) to profit or loss (note 7)
Closing balance 30 June
NOTE 20: NON-CURRENT LIABILITIES – PROVISIONS
Employee benefit – long service leave
Consolidated
2016
$
2015
$
198,417
40,949
12,129
251,495
233,073
18,422
251,495
177,312
38,280
17,481
233,073
171,978
61,095
233,073
Consolidated
2016
$
2015
$
148,937
132,410
46 XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 21: ISSUED CAPITAL
Issued capital
Ordinary shares fully paid
Total issued capital
Consolidated
Consolidated
2016
Shares
2015
Shares
2016
$
2015
$
133,825,803
132,157,097
18,584,489
18,257,772
133,825,803
132,157,097
18,584,489
18,257,772
Effective 1 July 1998 the corporations legislation abolished the concept of authorised capital and par value of shares.
Accordingly these are not disclosed.
Movements in ordinary share capital:
Date
1 July 2014
30 June 2015
1 July 2015
Opening balance
Closing balance
Opening balance
Details
1 December 2015
1 December 2015
Shares issued to previous owners of Socachim
Less: Share issue costs (less deferred tax)
30 June 2016
Closing balance
(a) Ordinary shares
Issue
Price
$0.20
Number of
shares
132,157,097
132,157,097
132,157,097
1,668,706
-
133,825,803
$
18,257,772
18,257,772
18,257,772
331,405
(4,688)
18,584,489
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the
number of and amount paid on the shares held.
On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon
a poll each share is entitled to one vote.
(b) Dividend reinvestment plan
The parent entity does not have a dividend reinvestment plan in place.
(c) Capital risk management
The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern, so that it can continue
to provide returns to shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the
cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to
shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
The gearing ratios at 30 June 2016and 30 June 2015 were as follows:
Total borrowings
Less: cash and cash equivalents
Net debt / (positive cash position)
Total equity
Total equity plus net debt
Gearing ratio
Consolidated
2016
$
2015
$
1,111,500
-
(3,304,773)
(6,759,893)
(2,193,273)
(6,759,893)
30,406,972
29,765,291
28,213,699
23,005,398
Net cash
(7.8%)
Net cash
(29.4%)
XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT 47
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 22: RESERVES AND RETAINED PROFITS
(a) Reserves
Foreign currency translation reserve
Share-based payments reserve
Balance 30 June
(b) Retained Profits
Movements in retained profits were as follows:
Balance 1 July
Net profit for the year
Dividends paid or provided for
Balance 30 June
(c) Nature and purpose of reserves
Foreign currency translation reserve
Consolidated
2016
$
2015
$
(44,202)
759,243
715,041
(15,037)
759,243
744,206
10,763,313
10,238,362
1,537,264
2,639,463
(1,193,135)
(2,114,512)
11,107,442
10,763,313
The foreign currency translation reserve is used to recognise the unrealised gains and losses arising from the consolidation of
subsidiaries denominated in currencies other than Australian dollars.
Share-based payment reserve
The share-based payments reserve is used to recognise the value of equity-settled share-based payments.
NOTE 23: DIVIDENDS
Final dividend for the year ended 30 June 2015 of 0.7 cent per share paid on 25 September 2015
Interim dividend for the year ended 30 June 2016 of 0.2 cent per share paid on 4 March 2016
Total dividends provided for or paid
Consolidated
2016
$
2015
$
925,098
268,037
1,453,727
660,785
1,193,135
2,114,512
A fully franked dividend of 0.3 cents per share has been declared on ordinary shares post 30 June 2016.
Franked Dividends
Consolidated
2016
$
2015
$
Franking credits available for subsequent financial years based on a tax rate of 30% (2015: 30%)
4,622,363
4,217,846
The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for:
(a)
(b)
(c)
franking credits that will arise from the payment of the amount of the provision for income tax;
franking debits that will arise from the payment of dividends recognised as a liability at the reporting date; and
franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date.
The consolidated amounts include franking credits that would be available to the parent entity if distributable profits of
subsidiaries were paid as dividends.
The franked portions of the final dividends recommended after 30 June 2016 will be franked out of existing franking credits or
out of franking credits arising from the payment of income tax in the year ended 30 June 2016. The impact on the franking
account of the dividend recommended by the directors since year end, but not recognised as a liability at year end, will be a
reduction in the franking account of $172,062 (2015: $396,471).
48 XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 24: BUSINESS COMBINATIONS
(a) Summary of acquisition
On 1 December 2015 XRF Scientific Limited acquired Socachim SPRL, a business based in Brussels, Belgium. Socachim was
founded in 1994 by Mr Michel Davidts, and has been a distributor of XRF’s products throughout Europe and Northern Africa.
Details of the purchase consideration, the net assets acquired and goodwill are as follows:
(i) Purchase consideration:
Cash paid upfront
Shares issued to former owners
Total purchase consideration
The assets and liabilities recognised as a result of the acquisition are as follows:
Goodwill
Trade and other receivables
Inventories
Customer List
Cash
Property, plant and equipment
Other assets
Trade and other payables
Current income tax liability
2016
$
400,213
331,405
731,618
363,307
345,835
251,911
100,000
58,926
21,573
26,875
(404,921)
(31,888)
731,618
The goodwill is attributable to Socachim’s strong position and profitability in trading in the sample preparation market and
synergies expected to arise after the Company’s acquisition of the business. None of the goodwill is expected to be deductible
for tax purposes.
(ii) Revenue and profit contribution
The acquired business contributed revenues of $2.6m and net profit before tax of $222k to the Group for the period 1 December
2015 to 30 June 2016.
If the acquisition had occurred on 1 July 2015, consolidated revenue and consolidated net profit before tax for the period ended
30 June 2016 would have been $23.0m and $2.5m respectively. These amounts have been calculated using the Group’s
accounting policies.
(iii) Acquisition related costs
Direct costs relating to the acquisition of Socachim of $66,707 are included “other expenses” in the consolidated statement of
profit or loss and other comprehensive income.
(iv) Purchase consideration – cash outflow
Included in the payments for acquisition of businesses in the investing activities section of the cash flow statement are the
following:
Outflow of cash to acquire businesses:
Cash consideration for Socachim (net of cash acquired)
Cash consideration for Laval Lab Fusion Machines and Flux 1
Total outflow of cash - investing activities
1 Immaterial acquisition. Acquisition of Fusion Machines and Flux business segments, based in Quebec, Canada.
2016
$
341,287
116,445
457,732
XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT 49
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 25: CONTINGENCIES
At 30 June 2016, the consolidated entity had no material contingent liabilities in respect of claims, contingent considerations,
associates and joint ventures or any other matters.
NOTE 26: COMMITMENTS
(a) Lease commitments
Commitments in relation to non-cancellable operating leases contracted for at the reporting date but not recognised as
Consolidated
2016
$
2015
$
liabilities, payable:
Within one year
Later than one year but not later than five years
Later than five years
532,087
374,845
-
466,984
466,584
-
906,932
933,568
Operating leases have been have been taken out for a number of sites, office facilities and a fleet of light motor vehicles.
Operating leases typically run for a period of between 3 and 5 years with an option to renew the lease after that date. Lease
payments for sites and office facilities are generally increased on an annual basis in line with market related / consumer price
index increases.
XRF Labware Pty Ltd has lease agreements with external suppliers for the provision of 88kg of platinum, which is used for
working capital purposes. The lease agreements are renewed annually and fees are paid on the current market price of
platinum. The current annual agreements will expire on various dates during the year ending 30 June 2017.
(b) Financing arrangements
The Group has an overdraft facility of $1,000,000 as a safeguard on working capital requirements. An additional $1,600,000
facility is utilised for bank guarantees. The Group’s undrawn borrowing facilities were as follows as at 30 June 2016:
Bank overdraft facility
Bank guarantee facility
Consolidated
2016
$
1,000,000
1,498,837
2,498,837
2015
$
1,000,000
1,498,837
2,498,837
50 XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 27: REMUNERATION OF AUDITORS
During the year the following fees were paid or payable for services provided by the auditor of the Company, its related practices
and non-related audit firms:
BDO Audit (WA) Pty Ltd
Audit and review of financial reports
Taxation services
Other services
BDO Réviseurs d'Entreprises Soc. Civ. SCRL (Belgium)
Audit and review of financial reports
Taxation services
BDO AG Wirtschaftsprüfungsgesellschaft (Germany)
Taxation services
Consolidated
2016
$
2015
$
104,813
49,025
13,022
103,779
47,420
11,089
18,377
9,990
18,114
-
-
-
213,341
162,288
NOTE 28: RELATED PARTY TRANSACTIONS
(a) Parent entity
The ultimate parent and controlling entity is XRF Scientific Limited which at 30 June 2016 owns 100% of all subsidiaries listed in
note 29.
(b)
Interests in subsidiaries
Interests in subsidiaries are set out in note 29.
(c) Directors and key management compensation
Short-term employee benefits
Post-employment benefits
Long-term benefits
Consolidated
2016
$
855,885
65,820
7,766
929,471
2015
$
748,730
56,419
6,864
812,013
No other post-employment or termination benefits have been provided. Detailed remuneration disclosures are available in the
remuneration report from pages 9-14.
(d) Loans to key management personnel
There were no loans to any key management personnel during either of the years ended 30 June 2015 or 30 June 2016.
(e) Other transactions with key management personnel
Premises were rented from a related entity of Director David Brown during the financial year. These properties were rented on
normal commercial terms and conditions, totalling $114,029 (2015: $112,012). No amounts were outstanding at the end of the
year.
All directors of XRF Chemicals Pty Ltd are guarantors on a lease in Osborne Park. Vance Stazzonelli is currently the sole
director.
(f)
Loan to associate
On 17 February 2014, XRF Scientific Limited loaned CAD$79,984 to associated entity, Gestion Scancia Inc. The interest rate is set
at 10% per annum and is calculated on a monthly basis. Repayments will occur upon the lender’s request at any time beyond 6
months of the commencement date.
XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT 51
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 29: SUBSIDIARIES
The consolidated financial statements incorporate the assets, liabilities, and results of the following subsidiaries in accordance
with the accounting policy described in note 1(b):
Name of entity
XRF Chemicals Pty Ltd
XRF Labware Pty Ltd
XRF Technology (WA) Pty Ltd
XRF Technology (VIC) Pty Ltd
XRF Scientific Americas Inc 1
XRF Scientific Europe SPRL
XRF Scientific Europe GmbH
XRF Scientific UK Ltd
Precious Metals Engineering (WA) Pty Ltd
XFlux Pty Ltd
Country of
Incorporation
Australia
Australia
Australia
Australia
Canada
Belgium
Germany
United Kingdom
Australia
Australia
Class of
shares
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
1 Formerly known as KPL Scientific Inc. Renamed on 1 July 2015.
The proportion of ownership interest is equal to the proportion of voting power held.
Entity holding
2016
%
2015
%
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
-
-
100
100
NOTE 30: RECONCILIATION OF PROFIT AFTER INCOME TAX TO NET CASH FLOW PROVIDED
BY OPERATING ACTIVITIES
Consolidated
2016
$
2015
$
1,537,264
2,639,463
721,539
(52,748)
7,800
594,646
(18,627)
21,857
-
(178,205)
187,812
161,624
(850,873)
(1,463,315)
39,485
20,459
147,605
42,896
18,422
(24,260)
(68,646)
425,064
349,420
12,174
685,015
417,500
(86,963)
1,876
(329,781)
(151,172)
61,095
(27,511)
132,933
4,123,720
Profit for the year
Depreciation and amortisation
Share of JV equity (profits) / losses
Net exchange differences
Adjustment for deferred acquisition costs in creditors and provisions
Net operating assets of acquired businesses reclassified as investing activities
Net (gain) loss on sale of non-current assets
(Increase) decrease in trade and other debtors
(Increase) decrease in inventories
(Increase) decrease in other current asset
(Increase) decrease in deferred tax asset
(Decrease) increase in trade and other creditors
(Decrease) increase in provision for income taxes
(Decrease) increase in provision for deferred income tax
(Decrease) increase in other liabilities
(Decrease) increase in other provisions
Net cash inflow (outflow) from operating activities
NOTE 31: SHARE-BASED PAYMENTS
There were no share-based payments during the year ended 30 June 2016 (2015: Nil).
52 XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 32: EARNINGS PER SHARE
(a) Basic earnings per share
Profit attributable to the ordinary equity holders of the company
(b) Diluted earnings per share
Profit attributable to the ordinary equity holders of the Company
Consolidated
2016
Cents
2015
Cents
1.2
1.2
2.0
2.0
$
$
(c) Reconciliations of earnings used in calculation earnings per share
Profit attributable to the ordinary equity holders of the company
1,537,264
2,639,463
(d) Weighted average number of shares used as the denominator
Weighted average number of ordinary shares used as the denominator in calculating basic
earnings per share
133,126,318
132,157,097
Number
Number
NOTE 33: PARENT ENTITY FINANCIAL INFORMATION
(a)
Summary financial information
The individual financial statements for the parent entity show the following aggregate amounts:
Statement of Financial Position
Current assets
Total assets
Current liabilities
Total liabilities
Shareholder’s equity
Issued capital
Reserves
Accumulated losses
Profit or (loss) for the year
2016
$
2015
$
6,416,015
8,191,951
19,710,727
21,501,022
10,530,363
11,230,596
10,825,301
11,507,772
18,584,489
18,257,772
709,221
734,043
(10,408,284)
(8,998,565)
8,885,426
9,993,250
(216,584)
(220,449)
Total comprehensive income / (loss) for the year
(216,584)
(220,449)
(b) Contingent liabilities of the parent entity
The parent entity did not have any contingent liabilities as at 30 June 2016 or 30 June 2015.
NOTE 34: EVENTS OCCURRING AFTER THE REPORTING DATE
Dividend
A final dividend of 0.3 cents per share fully franked was declared on 26 August 2016, bringing the total dividend for the year to
0.5 cents per share fully franked (FY15: 1.2 cents per share fully franked), with a record date of 16 September 2016 and payment
date of 30 September 2016.
Other events
There were no other events subsequent to the reporting date which have significantly affected or may significantly affect the XRF
Scientific Limited operations, results or state of affairs in future years.
XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT 53
DIRECTORS’ DECLARATION
FOR THE YEAR ENDED 30 JUNE 2016
XRF Scientific Limited and its controlled entities
ACN 107 908 314
The directors of the company declare that:
1.
The financial statements, comprising the consolidated statement of profit or loss and other comprehensive
income, consolidated statement of financial position, consolidated statement of cash flow, consolidated
statement of changes in equity and accompanying notes, are in accordance with the Corporations Act 2001
and:
(a)
(b)
Comply with Accounting Standards and the Corporations Regulations 2001 and other mandatory
professional reporting requirements after 2001; and
Give a true and fair view of the consolidated entity’s financial position as at 30 June 2016 and of
its performance for the year ended on that date.
2.
In the directors’ opinion there are reasonable grounds to believe that the company will be able to pay its
debts as and when they become due and payable.
3.
The directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer as
required by section 295A.
4.
The company has included in the notes to the financial statements an explicit and unreserved statement of
compliance with International Financial Reporting Standards.
This declaration is made in accordance with a resolution of the Board of Directors and is signed for and on behalf
of the directors by.
Kenneth Baxter
Chairman
Dated this 22nd day of September 2016
54 XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT
This page has been left blank intentionally.
Tel: +61 8 6382 4600
Fax: +61 8 6382 4601
www.bdo.com.au
38 Station Street
Subiaco, WA 6008
PO Box 700 West Perth WA 6872
Australia
INDEPENDENT AUDITOR’S REPORT
To the members of XRF Scientific Limited
Report on the Financial Report
We have audited the accompanying financial report of XRF Scientific Limited, which comprises the
consolidated statement of financial position as at 30 June 2016, the consolidated statement of profit or
loss and other comprehensive income, the consolidated statement of changes in equity and the
consolidated statement of cash flows for the year then ended, notes comprising a summary of
significant accounting policies and other explanatory information, and the directors’ declaration of the
consolidated entity comprising the company and the entities it controlled at the year’s end or from
time to time during the financial year.
Directors’ Responsibility for the Financial Report
The directors of the company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
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 Note 1(a), the directors also state, in accordance with Accounting Standard AASB 101
Presentation of Financial Statements, that the financial statements comply with International
Financial Reporting Standards.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our
audit in accordance with Australian Auditing Standards. Those standards require that we comply with
relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain
reasonable assurance about whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial report. The procedures selected depend on the auditor’s judgement, including the
assessment of the risks of material misstatement of the financial report, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the company’s
preparation of the financial report that gives a true and fair view in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the company’s internal control. An audit also includes evaluating the appropriateness
of accounting policies used and the reasonableness of accounting estimates made by the directors, as
well as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN
77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK
company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under
Professional Standards Legislation, other than for the acts or omissions of financial services licensees.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations
Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, which
has been given to the directors of XRF Scientific Limited, would be in the same terms if given to the
directors as at the time of this auditor’s report.
Opinion
In our opinion:
(a) the financial report of XRF Scientific Limited is in accordance with the Corporations Act 2001,
including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2016
and of its performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(b) the financial report also complies with International Financial Reporting Standards as disclosed in
Note 1(a).
Report on the Remuneration Report
We have audited the Remuneration Report included in pages 9 to 15 of the directors’ report for the
year ended 30 June 2016. The directors of the company are responsible for the preparation and
presentation of the Remuneration Report in accordance with section 300A of the Corporations Act
2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit
conducted in accordance with Australian Auditing Standards.
Opinion
In our opinion, the Remuneration Report of XRF Scientific Limited for the year ended 30 June 2016
complies with section 300A of the Corporations Act 2001.
BDO Audit (WA) Pty Ltd
Glyn O’Brien
Director
Perth, 22 September 2016
SHAREHOLDER INFORMATION
Additional information (as at 31 August 2016) required by the ASX Listing Rules and not disclosed elsewhere in
this Annual Report is set out below:
SUBSTANTIAL SHAREHOLDINGS
The number of shares held by substantial shareholders and their associates is as follows:
Shareholder
Private Portfolio Managers
Skye Alba Pty Ltd
National Australia Bank Limited
D & GD Brown Nominees Pty Ltd 1
Number of
Ordinary Shares
14,255,265
13,316,641
9,096,216
8,213,300
1 D & GD Brown Nom PL is a company owned by David Brown and his wife. David Brown is a director of XRF Scientific Limited.
NUMBER OF OPTION HOLDERS
Class of Security
Nil
VOTING RIGHTS
Number of Holders
-
In accordance with the Constitution of the Company and the Corporations Act 2001 (Cth), every member present in
person or by proxy at a general meeting of the members of the Company has:
• On a vote taken by a show of hands, one vote; and
• On a vote taken by a poll, one vote for every fully paid ordinary share held in the Company
A poll may be demanded at a general meeting of the members of the Company in the manner permitted by the
Corporations Act 2001 (Cth).
DISTRIBUTION OF SHARE AND OPTION HOLDERS
Distribution of Shares & Options
1-1,000
1,000-5,000
5,001-10,000
10,001-100,000
100,001 and above
Number of
Holders of
Ordinary Shares
Number of
Holders of
Options
47
107
116
357
140
767
–
–
–
–
–
–
58 XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT
SHAREHOLDER INFORMATION
TOP 20 SHAREHOLDERS
No.
Holder name
Number of
Ordinary Shares
Percentage of
Ordinary Shares
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
NATIONAL NOM LTD
SKYE ALBA PL
BNP PARIBAS NOMS PL
J P MORGAN NOM AUST LTD
D & GD BROWN NOM PL 1
EVELIN INV PL
TZELEPIS NOM PL
PARSONS JOHN GRAHAM
PROSSOR STEPHEN W + F C
GREAT WESTERN CAP PL
PARSONS JULIE ANN
ABN AMRO CLEARING SYDNEY
BETA GAMMA PL
J G H METZ PL
DAVIDTS FREDERIC
KORBER MICHAEL KARL
CREEL PL
KLARIE PETER
METZ JORG + CARR WENDY J
G & E PROPS PL
15,031,075
13,316,641
7,984,000
7,515,669
7,513,300
6,300,000
3,280,000
2,828,439
2,669,767
2,649,578
2,500,000
2,379,208
2,000,000
1,888,480
1,668,706
1,500,000
1,200,000
1,190,576
1,133,637
1,120,000
11.23%
9.95%
5.97%
5.62%
5.61%
4.71%
2.45%
2.11%
1.99%
1.98%
1.87%
1.78%
1.49%
1.41%
1.25%
1.12%
0.90%
0.89%
0.85%
0.84%
1 D & GD Brown Nom PL is a company owned by David Brown and his wife. David Brown is a director of XRF Scientific Limited.
85,669,076
64.02%
RESTRICTED SECURITIES
There are currently no restricted securities.
NON-MARKETABLE PARCELS
Class of Security
Ordinary shares
Number of Securities
Number of Holders
29,262
60
UNQUOTED SECURITIES
The Company does not have any unquoted securities.
ON-MARKET BUY BACK
The Company does not have a current on-market buy-back scheme.
XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT 59
CORPORATE DIRECTORY
DIRECTORS
Kenneth Baxter (Chairman)
David Brown
David Kiggins
Fred Grimwade
COMPANY SECRETARIES
Vance Stazzonelli
Andrew Watson
KEY MANAGEMENT PERSONNEL
Vance Stazzonelli (Chief Executive Officer)
Andrew Watson (Chief Financial Officer)
REGISTERED OFFICE
98 Guthrie Street
Osborne Park WA 6017
Tel: +61 8 9244 0600
Fax: +61 8 9244 9611
COMPANY AUDITOR
BDO Audit (WA) Pty Ltd
38 Station Street
Subiaco WA 6008
BANKERS
Westpac Banking Corporation
109 St George Terrace
Perth WA 6000
SOLICITORS
HWL Ebsworth
Level 11, Westralia Plaza
167 St Georges Terrace
Perth WA 6000
SHARE REGISTRY
Security Transfer Registrars
770 Canning Highway
Applecross WA 6153
Tel: +61 8 9315 2333
Fax: +61 8 9315 2233
WEBSITE
www.xrfscientific.com
ASX
Company Code: XRF
60 XRF SCIENTIFIC LIMITED | 2016 ANNUAL REPORT