XRF SCIENTIFIC LIMITED
ABN 80 107 908 314
ANNUAL FINANCIAL REPORT
FOR THE YEAR ENDED 30 JUNE 2017
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
53
54
58
60
XRF SCIENTIFIC LIMITED | 2017 ANNUAL REPORT 1
FINANCIAL RESULTS SUMMARY
Sales up 2%
Net Profit After Tax down 48%
21,666
20,504 21,050 21,508
2,639
2,441
1,537
794
14
15
16
17
Sales Revenue ($'000)
15
17
14
Net Profit After Tax ($'000)
16
Underlying Profit Before Tax* down 28%
Earnings Per Share down 50%
3,881
3,905
3,040
2.0
1.8
2,197
1.2
0.6
14
15
16
17
Underlying Profit Before Tax ($'000)
15
17
14
Earnings Per Share (Cents)
16
* Non-IFRS financial measure. Refer to page 5 for reconciliation to net profit before tax.
2 XRF SCIENTIFIC LIMITED | 2017 ANNUAL REPORT
CHAIRMAN’S LETTER
in
the continued expansion
The net profit after tax for the year is $0.8m and the
total dividends paid are 0.24 cents per share, fully
franked. The result was disappointing, but in light
of
the Northern
Hemsiphere and rationalistion and cost savings in
the Australian operations, the outcome has been
satisfactory. The Company felt the effects of serious
downturns
in the operations of some of our
customers. However, in the first quarter of the
2018 financial year, orders have increased and
demand appears to be picking up.
tight
financial controls.
in Melbourne and
The senior management team has continued to
It will be
exercise
maximising the output from the newly installed
equipment
to
profitably exploit new markets. It is the Board’s and
to deliver a
managements primary objective
credible financial result in the 2018 financial year,
consistent with the the Company’s medium to long
term strategic growth plan.
is seeking
Dear Shareholder,
Ongoing fallout from the collapse of the mining
exploration sector continued into the 2017 financial
year. At the same time, geo-political uncertainty
involving China and the USA continued to affect
mineral prices and exploration activity. It was not
helped by tensions between North Korea and other
Asia-Pacific trading nations.
XRFS was able to maintain its customer base and
strengthen its positions in the EEC and North
American markets. Both regions remain key to the
Company’s future profitability. Already the German
and other northern European markets are bringing
new orders over a broader product range.
The Australian market showed stability throughout
the early parts of the financial year with growth
starting to improve in the flux markets.
The substantial upgrading of the precious metals
division in Melbourne, using cash reserves and a
small amount of debt, has been completed. The
move to new premises has consolidated this
division. Its customer base was maintained during
the
the
installation of the new equipment. We are confident
it will contribute to increased profitability in the
2018 financial year.
the existing plant and
transfer of
The increased demand for lithium placed cost
pressures on our core flux business. A number of
cost saving initiatives have been implemented to
ensure
this division remains profitable and
competitive. XRF Scientific continues to match its
competitors and retain longstanding customers.
Kenneth Baxter
Chairman
XRF SCIENTIFIC LIMITED | 2017 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 2017.
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
2017
$
401,476
-
2016
$
925,098
268,037
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 0.24 cents per share to be paid on 29 September 2017 out of retained earnings at 30
June 2017.
4 XRF SCIENTIFIC LIMITED | 2017 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 $793,851 for the year ended 30 June 2017,
compared with $1,537,264 for the previous year.
Details of the results for the financial year ended 30 June 2017 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
Increase /
(decrease)
June 2017
June 2016
over prior year
$
$
21,508,891
21,336,164
793,851
1,537,264
0.6
0.6
1.2
1.2
2,196,581
3,040,092
%
1
(48)
(49)
(49)
(28)
1 Non-IFRS financial information. Normalised for unusual amounts recorded in the P&L. Refer below for details:
Profit before tax
Acquisition related costs
Precious metals factory relocation expenses
Precious metals division expansion costs
Research and development costs
Underlying profit before tax
OPERATING RESULTS
June 2017
June 2016
$
968,429
113,167
162,339
841,335
111,311
$
2,373,420
172,740
211,399
184,666
97,867
2,196,581
3,040,092
XRF Scientific Ltd (“XRF” or “Company”) is pleased to report its June 2017 full-year results to shareholders. The
Company has generated revenue of $21.5m and Net Profit After Tax of $0.8m. Underlying profit before tax of
$2.2m (2016: $3.0) was delivered, before expensing costs associated with acquisitions, R & D and expansion of the
Precious Metals Division. The primary reasons for the reduction in profits were the full-scale commencement of
the new office in Germany in August, as well as weak conditions in the North American market.
The Board has determined to maintain the dividend payout ratio for the year at 40% of NPAT, declaring a final fully
franked dividend of 0.24 cents per share. The size of the dividend has been affected by the decision of the Board to
commit to the investment in the expansion of the Precious Metals Division, being a larger capacity factory in
Melbourne, which we own, and the establishment of the German division’s sales and distribution network. This
investment is positioning XRF to deliver greater market share and improved margins across the precious metals
product range.
Whilst only a small operating cash flow of $156k was recorded, this is due to acquisition-related costs expensed,
increasing stock requirements in Europe, a working capital injection into Scancia, and a general increase in
working capital requirements for the Precious Metals division expansion. The cash at bank position has increased
from $833k as at 30 June 2017 to $1.70m as at 31 August 2017.
XRF SCIENTIFIC LIMITED | 2017 ANNUAL REPORT 5
DIRECTORS’ REPORT
OPERATING RESULTS continued
The Consumables Division recorded a Profit Before Tax of $1.74m. The result was slightly reduced on last year’s
result of $1.83m, due to the impact of lithium prices on total production costs. For the time being, raw material
prices have stabilised and, therefore, as has the investment required in inventory. As announced on 31 March
2017, XRF acquired the remaining 50.01% interest in Canadian flux producer Scancia for $0.4m, which was for the
cost of the shares and an initial working capital injection. The extensive integration effort is continuing and we
have been working to improve the production plant in Canada. It is planned that the plant will be relocated to the
Division’s main production facility in Perth during the year. Scancia’s flux product is physically different to the
existing granular products that are currently being produced in Australia, which will provide a mechanism for
expansion into different markets.
During the period for which Scancia was under XRF’s full ownership, the business generated a small loss of $23k
before tax. It is expected that these small losses will continue, until such time as production is moved to Perth,
where significant cost savings will be generated.
The Capital Equipment Division generated a Profit Before Tax of $70k, which was down on the prior year’s result
of $170k. Sale of gas fusion machines remained steady whilst orders for electric fusion machines are continuing
to expand. The Division’s flux weighing machines are starting to gain traction and a number of installations were
completed. During the June half, a relaunch was made of the single position xrWeigh flux weighing system. The
marketing launch of the new xrFuse 1 electric fusion machine also occurred, which is expected to start shipping
in the next few months. Additional products are scheduled for release during FY18 to further expand the
Division’s range.
Due to the significant expansion activities underway, the Precious Metals Division recorded a loss before tax of
$575k vs a profit before tax of $551k in the prior year. These costs included relocation expenses of the Melbourne
factory of $113k, the start-up loss of the new Germany office of $882k and R&D expensed of $111k. In November
2016, the Division moved its precious metals manufacturing facility from Epping VIC to the Company-owned
facility in Campbellfield VIC. By and large, the move was very successful and a minimal amount of production
time was lost. The business is now fully established in the new facility and significant production advances have
been made. The internal refining plant has been commissioned which has improved metal quality, as well as
reduced lead times and costs from external refining. Product quality in general has been improved, especially for
the labware range. The labware range has also been expanded to cater for new customer requirements, in
particular customers in Europe. Additional equipment is expected to be commissioned throughout FY18, to
further expand manufacturing capabilities to produce new products.
The expansion into Germany via the new office is progressing well, which commenced full-scale operations in
August 2016. Whilst the office generated a large loss, revenue has been growing at a steady rate and during FY18
it is expected that the business will reach a monthly break-even level. The marketing efforts in Germany are
expected to result in the addition of hundreds of new customers to our database. Revenue grew in the second half
of FY17 to $416k vs $193k that was achieved in the first half of FY17. Through the expertise acquired from the
team in Germany, XRF is now manufacturing a number of new precision platinum components, which will allow us
to expand revenue significantly. In this field, a number of large opportunities are currently being progressed as
aggressively as possible. Our team in Germany have also been critical to improving our production facility in
Melbourne, given their extensive technical experience with platinum product manufacturing.
Conditions continued to prove difficult in our Canada office, with a slight improvement in the second half bringing
the business to a break-even position for the full-year, compared to the loss position of $37k it was in as at 31
December. It is expected that the addition of the Scancia product portfolio will help the business improve its
position in FY18.
6 XRF SCIENTIFIC LIMITED | 2017 ANNUAL REPORT
DIRECTORS’ REPORT
OPERATING RESULTS continued
Acquisitions still remain a possibility, however the main priority is to bring the Germany office into a break-even
position, and ensuring an appropriate return is delivered on the new factory in Melbourne. Growing international
sales is also a key priority, both via our own offices and our distribution network. During the year a number of new
distributors were added in countries such as Japan, India, Indonesia and China. New distributors added over the
past few years are adding positively to XRF’s revenue base, which should near the $1m mark next year for those
new distributors added.
We continue to take action to ensure our costs are correctly monitored and in line with our current level of
activities. Whilst FY17 was a difficult transition year for the Company, it is expected that FY18 will be significantly
better.
MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR
A final dividend of 0.24 cents per share fully franked was declared on 24 August 2017, bringing the total dividend
for the year to 0.24 cents per share fully franked (FY16: 0.5 cents per share fully franked), with a record date of 15
September 2017 and payment date of 29 September 2017.
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 2016 to
30 June 2017 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 2017 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 | 2017 ANNUAL REPORT 7
DIRECTORS’ REPORT
INFORMATION ON DIRECTORS
Kenneth Baxter
Date of appointment:
Qualifications:
Chairman (Non-Executive)
5 July 2005 (12 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
1,215,623 fully paid ordinary shares
Director (Non-Executive)
Date of appointment:
7 June 2004 (13 years)
Qualifications:
Experience:
Bachelor of Science, Bachelor of Economics
Has over 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 Industries Council of WA
Other current directorships:
Private companies only
Former directorships in last 3 years: Private companies only
Special responsibilities:
Technical consultant to XRF Chemicals Pty Ltd
No. of shares:
David Kiggins
8,400,000 fully paid ordinary shares
Director (Non-Executive)
Date of appointment:
1 May 2012 (5 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 Ltd, Finance Director and Company Secretary at
Global Construction Services Ltd. 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:
212,900 fully paid ordinary shares
Fred Grimwade
Date of appointment:
Qualifications:
Director (Non-Executive)
1 May 2012 (5 years)
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 Ltd; Non-Executive Director of Select Harvests Ltd, Australian
United Investment Company Ltd and other private companies
Former directorships in last 3 years: Chairman of Troy Resources Ltd, Fusion Retail Brands Pty Ltd; Non-Executive Director of
NewSat 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 | 2017 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 and holds a Graduate
Diploma of Applied Corporate Governance.
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 2017 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
12
13
13
A
3
**
3
3
B
3
**
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 | 2017 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
Chairman
Non-Executive Directors
Committee Chairman
Executive pay
$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 | 2017 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 for 2017 is $70,000.
There were five categories of STI performance measure (plus a discretionary component) for the year ended 30
June 2017. 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 (20%)
Leadership (10%)
Group financial performance (40%)
Compliance and risk management (5%)
Discretionary (20%)
Stakeholder & associated business relations (5%)
XRF SCIENTIFIC LIMITED | 2017 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. A range of strategic targets were met, a key business acquisition was 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. However, due to
the Group’s reduced financial performance in comparison to the prior period, it was decided by the Remuneration
Committee that no bonus would be paid to the CEO for the 30 June 2017 financial year. Bonus payments to other
key management personnel were 100% discretionary and awarded based on the successful integration of the new
Canadian subsidiary, Gestion Scancia. These amounts were accrued at 30 June 2017 and paid in August 2017.
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:
2017
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
2016
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
Short-term
employment
Long-term
Post-
Long
Cash
Cash
Super-
Service
Termination
Salary
Bonuses
Other
annuation
Leave
benefits
$
$
$
$
$
79,452
50,228
57,534
57,534
244,748
254,529
155,000
409,529
654,277
-
-
-
-
-
-
6,393
6,393
6,393
-
* 171,000
-
-
7,548
4,772
5,466
5,466
171,000
23,252
-
-
-
171,000
24,180
15,332
39,512
62,764
Post-
-
-
-
-
-
5,205
3,016
8,221
8,221
-
-
-
-
-
-
-
-
-
Short-term
employment
Long-term
Long
Cash
Cash
Super-
Service
Termination
Salary
Bonuses
Other
annuation
Leave
benefits
$
$
$
$
$
72,498
45,310
52,108
52,108
222,024
253,699
152,385
406,084
628,108
-
-
-
-
-
-
* 163,029
-
-
6,887
4,304
4,950
4,950
163,029
21,091
27,397
** 28,219
9132
36,529
36,529
-
28,219
191,248
29,385
15,344
44,729
65,820
-
-
-
-
-
4,897
2,869
7,766
7,766
-
-
-
-
-
-
-
-
-
Total
$
87,000
226,000
63,000
63,000
439,000
283,914
179,741
463,655
902,655
Total
$
79,385
212,643
57,058
57,058
406,144
343,597
179,730
523,327
929,471
*
Technical services provided by consultancy (such as technical sales and support, analytical method development).
** Payment of excess annual leave accrued by the employee.
12 XRF SCIENTIFIC LIMITED | 2017 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 11. 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
2017
2016
2017
2016
2017
2016
Other key management personnel
Vance Stazzonelli
Andrew Watson
100%
96%
91%
94%
-
4%
9%
6%
–
–
–
–
Options issued as part of total remuneration
No options have been issued in 2016 or 2017 as part of total remuneration.
Voting and comments made at the company’s 2016 Annual General Meeting
The company received validly appointed proxies of 93% of “yes” votes on its remuneration report for the 2016
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
2012/13
5,142,299
2013/14
3,358,127
2014/15
3,477,167
2015/16
2,318,737
2016/17
982,440
2.9
1.8
2.0
1.2
0.6
Share
Cents
1.7
1.1
0.7
0.5
0.24
Cents
$
31
21
21
18
17
40,968,700
27,752,990
27,752,990
24,088,645
22,750,387
(d) Share-based compensation
There was no share based compensation to any Director or Key Management Personnel for the years ended
30 June 2016 and 2017. 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 11. Although some of the performance criteria were met by the CEO, it was mutually
decided that a bonus would not be met due to the financial result. A discretionary bonus was paid to the CFO.
XRF SCIENTIFIC LIMITED | 2017 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 2016
trades
June 2017
670,623
8,213,300
212,900
400,000
450,000
545,000
186,700
-
-
-
1,215,623
8,400,000
212,900
400,000
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 2017. Base salary is $262,000 per annum
(effective 1 July 2017), 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 1 July 2017. Base salary is $159,650 per annum
(effective 1 July 2017), 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 | 2017 ANNUAL REPORT
DIRECTORS’ REPORT
REMUNERATION REPORT (Audited) continued
(h) Remuneration consultants
No remuneration consultants were used in the years ended 30 June 2017 and 30 June 2016.
(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 $115,169 (2016: $114,029). 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 2017 and 30 June 2016.
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 2017 are outlined in the following table. 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
Consolidated
2017
$
2016
$
104,858
43,790
-
95,285
44,568
11,838
BDO Réviseurs d'Entreprises Soc. Civ. SCRL (Belgium)
Audit and review of financial reports
Taxation services
25,764
10,121
15,188
8,256
BDO AG Wirtschaftsprüfungsgesellschaft (Germany)
Taxation services
11,797
15,222
BDO LLP (UK)
Audit and review of financial reports
8,949
-
Total remuneration for audit and other services
205,279
190,357
The Board is satisfied that the auditors of the Company, BDO Audit (WA) Pty Ltd remain independent.
XRF SCIENTIFIC LIMITED | 2017 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
27 September 2017
16 XRF SCIENTIFIC LIMITED | 2017 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 2017, 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, 27 September 2017
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 2017
Revenue from continuing operations
Cost of sales
Gross profit
Other income
Share of profit / (loss) 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
2017
$
2016
$
5
21,540,489
21,132,846
(12,660,291)
(12,551,843)
8,880,198
8,581,003
5
7
36,994
(68,592)
150,570
52,748
(6,095,043)
(4,895,343)
(894,582)
(844,237)
(46,309)
968,429
(174,578)
(781,129)
(706,372)
(28,057)
2,373,420
(836,156)
Profit after income tax from continuing operations attributable to
equity holders of XRF Scientific Limited
793,851
1,537,264
Other comprehensive income
Items that will be classified to profit or loss
Foreign currency translation differences
Total comprehensive income for the year
22(a)
(36,250)
757,601
(29,165)
1,508,099
Total comprehensive income attributable to equity holders of XRF
Scientific Limited
757,601
1,508,099
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
0.6
0.6
1.2
1.2
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 | 2017 ANNUAL REPORT
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2017
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
Short-term borrowings
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
2017
$
2016
$
8
9
10
11
13
14
12
15
16
17
18
19
20
833,405
3,304,773
4,634,866
4,033,113
4,875,783
4,023,542
484,879
258,403
10,828,933
11,619,831
7,239,487
5,832,007
15,942,626
15,227,483
-
700,184
607,890
409,966
23,882,297
22,077,346
34,711,230
33,697,177
1,632,859
1,109,254
422,247
54,499
191,518
40,931
418,663
-
106,110
144,246
2,342,054
1,778,273
1,198,737
1,111,500
282,574
124,768
251,495
148,937
1,606,079
1,511,932
3,948,133
3,290,205
30,763,097
30,406,972
21
22(a)
22(b)
18,584,489
18,584,489
678,791
715,041
11,499,817
11,107,442
30,763,097
30,406,972
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying
notes.
XRF SCIENTIFIC LIMITED | 2017 ANNUAL REPORT 19
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2017
30 JUNE 2017 – CONSOLIDATED
Issued Share
Capital
Share Option
Reserve
$
$
Foreign
Currency
Translation
Reserve
$
Retained Profits
Total
$
$
Balance at 1 July 2016
18,584,489
759,243
(44,202)
11,107,442
30,406,972
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
-
-
-
-
-
-
-
-
-
-
-
-
-
(36,250)
(36,250)
793,851
-
793,851
793,851
(36,250)
757,601
-
-
-
-
(401,476)
(401,476)
-
(401,476)
(401,476)
Balance at 30 June 2017
18,584,489
759,243
(80,452)
11,499,817
30,763,097
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 year
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
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
20 XRF SCIENTIFIC LIMITED | 2017 ANNUAL REPORT
CONSOLIDATED STATEMENT OF CASH FLOWS
AS AT 30 JUNE 2017
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
Net cash inflow (outflow) from operating activities
Cash flows from investing activities
Payments for property, plant and equipment
Payment for acquisition of business
Payments for research and development
Proceeds from sale of property, plant and equipment
Net cash inflow (outflow) from investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of 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
Note
Consolidated
2017
$
2016
$
30
24
21,078,302
20,683,866
(20,255,402)
(19,348,691)
(113,167)
(46,309)
(537,031)
29,788
156,181
(172,740)
(28,057)
(786,267)
76,953
425,064
(1,841,573)
(3,120,139)
(45,663)
(322,771)
109,473
(457,732)
(220,678)
-
(2,100,534)
(3,798,549)
141,737
1,111,500
(267,276)
-
(401,476)
(1,193,135)
(527,015)
(81,635)
3,304,773
6,759,893
(2,471,368)
(3,455,120)
Cash and cash equivalents at the end of the financial period
8
833,405
3,304,773
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
XRF SCIENTIFIC LIMITED | 2017 ANNUAL REPORT 21
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
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 2017 was authorised for issue in accordance with
a resolution of the directors on 27 September 2017 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 2017 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. 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.
Accounting policies of subsidiaries are consistent with the policies adopted by the Group.
22 XRF SCIENTIFIC LIMITED | 2017 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
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
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 | 2017 ANNUAL REPORT 23
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
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 in the accounting period in which the services are rendered.
(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 | 2017 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
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 | 2017 ANNUAL REPORT 25
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
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 | 2017 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
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 | 2017 ANNUAL REPORT 27
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
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.
For the purpose of impairment testing, goodwill is allocated to the consolidated entity’s cash generating units identified
according to business and geographical segments (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.
(iv) Customer lists
The customer lists were acquired as part of a business combination. They are recognised at their fair value at the date of
acquisition and subsequently amortised on a straight-line basis over the estimated useful lives, between 3 to 5 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 | 2017 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
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 | 2017 ANNUAL REPORT 29
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
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 | 2017 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
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 2017
reporting periods and have not been early adopted by the Group. The Group’s assessment of the impact of these new
Standards and Interpretations is set out below. In all cases the Group intends to apply these standards from the
application date as indicated below.
(i) 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.
(ii) 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.
(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.
XRF SCIENTIFIC LIMITED | 2017 ANNUAL REPORT 31
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
(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.
(vii) IFRIC 23 Uncertainty over Income Tax Treatments (effective from 1 January 2019)
When assessing whether a taxation authority will accept an uncertain tax treatment, entities must assume that a tax audit
will be conducted, with the taxation authority having full knowledge of all relevant information when conducting the tax
audit. If it is not probable that a taxation authority will accept an uncertain income tax position, the effect of the uncertainty
is to be reflected in determining the income tax expense and deferred tax assets and liabilities using either the ‘most likely
amount’ method or the ‘expected value’ method. The probability of being selected for a tax audit is not factored in when
assessing the probability of the taxation authority accepting an uncertain tax position, or in measuring the tax balances. If
it is probable that the taxation authority will accept the income tax position, income tax expense and deferred tax balances
will be measured consistently with the tax treatments to be used in the income tax returns/filings. Due to the recent
release of this interpretation, the entity has not made an assessment of the impact of this interpretation.
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, cash flow
risk, fair value risk and interest rate risk); credit risk; and liquidity 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:
Trade receivables
Trade payables
Deferred and contingent consideration payable
Loan to associate
Group sensitivity
30 June 2017
30 June 2016
CAD
EUR
USD
CAD
EUR
USD
197,838
809,789
437,772
118,953
423,049
400,802
70,925
18,896
168,303
7,129
-
-
-
-
-
-
-
83,950
22,279
10,500
-
22,198
-
-
Based on the financial instruments held at 30 June 2017, 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 $149,795 lower / $183,082 higher (2016: $119,981
lower / $146,643 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 | 2017 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
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 market 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 2017 the Group had no variable interest rate debt, therefore consider fair value interest rate risk minimal.
Group sensitivity
At 30 June 2017, 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 $981 higher / lower (2016:
$3,828 higher / lower), mainly as a result of higher/lower interest income from cash and cash equivalents. Cash and cash
equivalent balances at 30 June 2017 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
2017
$
2016
$
833,405
4,603,159
31,707
3,304,773
3,853,432
179,681
5,468,271
7,337,886
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
2017
3,161,176..
723,288
405,662
347,954..
4,638,080..
2016
2,784,590..
733,793
78,105
283,866..
3,880,354..
XRF SCIENTIFIC LIMITED | 2017 ANNUAL REPORT 33
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
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 2017
$
$
$
$
$
$
Carrying
Amount
(assets)/
liabilities
$
Non-derivatives
Trade and other payables
Property loan
Plant & equipment loan
Motor vehicle loan
Total non-derivatives
As at 30 June 2016
Non-derivatives
Trade and other payables
Property loan
Deferred consideration
Total non-derivatives
1,168,922
19,479
24,195
6,096
1,218,692
-
19,479
24,195
6,096
49,770
-
1,127,733
48,389
12,192
1,188,314
-
-
24,195
6,096
30,291
737,639
19,479
15,670
772,788
-
19,479
-
19,479
-
38,958
-
38,958
-
1,127,733
-
1,127,733
-
-
-
-
-
-
-
-
-
1,168,922
1,166,691
120,974
30,480
1,168,922
1,111,500
113,139
28,598
2,487,067
2,422,159
737,639
1,205,649
15,670
737,639
1,111,500
15,670
1,958,958
1,864,809
The Group had access to the following undrawn borrowing facilities at the end of the reporting period:
Bank overdraft facility
Bank guarantee facility
Consolidated
2017
$
2016
$
649,677
1,459,634
2,109,311
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 current and 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
$1,253,237
Fair value
$1,281,793
34 XRF SCIENTIFIC LIMITED | 2017 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
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 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. The Group has recognised a deferred tax asset relating to
the start-up losses incurred during FY17 by the new German division. The Group has concluded that the tax losses will be
recovered against the estimated future taxable income based on the approved business plans and budgets of the German
division.
(d) Fair value of investment in associate
In accordance with AASB 3, the Group re-measured their investment in an associated entity to fair value, on the date that
100% control was obtained. The fair value was determined through the present value of expected future cash flows. Refer
to details in note 24.
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 | 2017 ANNUAL REPORT 35
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
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 2017 is as follows:
Full-year ended 30 June 2017
Total segment revenue
Inter segment sales
Revenue from external customers
Capital
Equipment
$
6,316,245
(298,729)
6,017,516
Precious Metals
Consumables
$
8,950,963
(364,930)
8,586,033
$
6,904,731
-
6,904,731
Total
$
22,171,939
(663,659)
21,508,280
Profit before income tax expense
69,628
(575,337)
1,739,356
1,233,647
Full-year ended 30 June 2016
Total segment revenue
Inter segment sales
Revenue from external customers
6,060,538
(333,249)
5,727,289
9,542,543
(494,018)
9,048,525
6,274,312
-
6,274,312
21,877,393
(827,267)
21,050,126
Profit before income tax expense
170,419
551,391
1,830,258
2,552,068
Segment assets
At 30 June 2017
At 30 June 2016
Segment liabilities
At 30 June 2017
At 30 June 2016
Depreciation and amortisation expense
For the year ended 30 June 2017
For the year ended 30 June 2016
Capital expenditure
For the year ended 30 June 2017
For the year ended 30 June 2016
7,667,006
7,196,477
1,559,345
1,097,573
263,315
210,496
122,222
142,827
14,133,174
13,123,810
5,723,420
4,009,897
291,555
222,900
1,431,353
2,802,485
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
Deferred tax liability
Other corporate liabilities
Total liabilities
36 XRF SCIENTIFIC LIMITED | 2017 ANNUAL REPORT
22,098,986
19,298,845
1,311,026
222,911
113,688
202,389
674,620
104,955
2017
$
21,508,280
32,209
21,540,489
1,233,647
(265,218)
968,429
43,899,166
(10,319,290)
315,626
-
700,184
115,544
34,711,230
8,593,791
(5,039,819)
282,574
111,587
3,948,133
43,899,166
39,619,132
8,593,791
5,330,381
668,558
635,785
2,228,195
3,050,267
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)
251,495
635,220
3,290,205
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
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
2017
$
2016
$
21,508,191
21,050,106
32,298
82,740
21,540,489
21,132,846
1,388
24,234
11,372
36,994
-
19,018
131,552
150,570
Consolidated
2017
$
2016
$
286,685
231,885
518,570
68,601
180,356
248,957
202,257
310,009
512,266
58,206
151,067
209,273
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)
4,409,535
3,437,459
719,720
113,167
606,611
172,740
XRF SCIENTIFIC LIMITED | 2017 ANNUAL REPORT 37
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
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% (2016: 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
2017
$
2016
$
589,077
(259,139)
(155,360)
174,578
812,952
40,890
(17,686)
836,156
174,578
836,156
(290,218)
31,079
(259,139)
22,468
18,422
40,890
968,429
968,429
2,373,420
2,373,420
290,529
712,026
33,950
(88,135)
-
93,594
329,938
(155,360)
174,578
51,822
(66,203)
50,004
106,193
853,842
(17,686)
836,156
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 | 2017 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
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
2017
$
288,052
545,353
833,405
2016
$
2,275,462
1,029,311
3,304,773
833,405
833,405
3,304,773
3,304,773
Cash at bank earns interest at floating rates based on daily bank deposit rates of between 0.01% to 0.95% pa (2016: 0.01% to
0.7% pa). 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 2.32% to 2.7% pa (2016: 2.12% to 2.7% 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
2017
$
2016
$
4,638,080
3,880,354
(34,921)
-
31,707
(26,922)
91,044
88,637
4,634,866
4,033,113
1,128,950
347,954
811,898
283,866
1,476,904
1,095,764
(26,922)
(7,999)
(34,921)
-
(26,922)
(26,922)
The consolidated entity has recognised $7,999 (2016: $26,922) in respect of impaired trade receivables during the year ended 30
June 2017. 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 2017, trade receivables of the Group of $1,476,904 (2016: $1,095,764) 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 | 2017 ANNUAL REPORT 39
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
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. 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 (2016: Nil).
NOTE 10: CURRENT ASSETS – INVENTORIES
Raw materials and spare parts
Finished goods
Provision for obsolescence
Consolidated
2017
$
3,488,292
1,387,491
-
2016
$
2,854,585
1,173,433
(4,476)
4,875,783
4,023,542
Stock was valued at lower of cost and net realisable value on 30 June 2017 and 30 June 2016.
Inventory expense
Inventories recognised as expense during the year ended 30 June 2017 amounted to $8,235,143 (2016: $8,053,387). The cost of
writing down inventories to net realisable value during the year ended 30 June 2017 was $nil (2016: $27,975).
NOTE 11: OTHER CURRENT ASSETS
Deposits paid
Accrued income
Prepayments (insurance policies, rates and other fees)
NOTE 12: INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
Opening amount
Share of net profit / (loss) of investments accounted for using the equity method
Conversion of investment to wholly-owned subsidiary (see note 24)
Closing amount
Consolidated
2017
$
126,246
10,827
347,806
484,879
2016
$
28,478
6,320
223,605
258,403
Consolidated
2017
$
607,890
(68,592)
(539,298)
2016
$
555,142
52,748
-
-
607,890
40 XRF SCIENTIFIC LIMITED | 2017 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 13: NON-CURRENT ASSETS – PROPERTY, PLANT AND EQUIPMENT
Plant &
Equipment
$
Motor
Vehicles
$
Property
Improvement
Office
s
$
Equipment
$
Land &
Buildings
$
4,364,696
(1,621,658)
2,743,038
144,944
(44,117)
100,827
592,983
(308,832)
284,151
2,743,038
1,028,930
(86,942)
(316,910)
3,368,116
100,827
38,363
284,151
60,412
-
(101,455)
(19,654)
119,536
(69,099)
174,009
547,674
(275,064)
272,610
272,610
191,109
(9,987)
(106,603)
-
-
-
-
1,823,217
-
-
347,129
1,823,217
Total
$
5,650,297
(2,249,671)
3,400,626
3,400,626
3,142,031
(198,384)
(512,266)
5,832,007
5,205,492
(1,837,376)
3,368,116
183,307
(63,771)
119,536
467,549
(293,540)
174,009
825,380
(478,251)
1,823,217
8,504,945
-
(2,672,938)
347,129
1,823,217
5,832,007
Consolidated
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
Year ended 30 June 2017
Opening net book amount
3,368,116
119,536
Additions (via business combination)
Additions (other)
Foreign currency adjustment
Disposals
Depreciation charge
Closing net book amount
At 30 June 2017
Cost or fair value
Accumulated depreciation
Net book amount
186,471
733,712
(9,366)
(99,135)
(271,667)
3,908,131
6,017,173
(2,109,042)
3,908,131
-
42,923
-
(10,432)
(28,164)
123,863
215,798
(91,935)
123,863
174,009
15,011
999,188
(1,050)
(10,603)
(83,676)
347,129
1,823,217
5,832,007
16,336
65,750
(945)
(1,810)
(135,063)
-
-
-
-
-
217,818
1,841,573
(11,361)
(121,980)
(518,570)
1,092,879
291,397
1,823,217
7,239,487
1,470,095
(377,216)
1,092,879
904,711
(613,314)
1,823,217
10,430,994
-
(3,191,507)
291,397
1,823,217
7,239,487
All items of property, plant and equipment were recorded at cost as at 30 June 2017 and 30 June 2016.
XRF SCIENTIFIC LIMITED | 2017 ANNUAL REPORT 41
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 14: NON-CURRENT ASSETS – INTANGIBLE ASSETS
Consolidated
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
Research &
Development
Goodwill
$
$
Patents
trademarks
& other
rights
$
Total
$
676,963
(85,923)
591,040
591,040
220,678
-
-
(150,327)
13,835,905
327,554
14,840,422
-
(112,962)
(198,885)
13,835,905
214,592
14,641,537
13,835,905
363,307
-
(4,861)
-
214,592
216,445
(347)
(3)
(58,946)
371,741
14,641,537
800,430
(347)
(4,864)
(209,273)
15,227,483
661,391
14,194,351
897,640
14,194,351
543,343
15,635,334
Accumulated amortisation and impairment
(236,249)
-
(171,602)
(407,851)
Net book amount
Year ended 30 June 2017
Opening net book amount
Additions (via business combination)
Additions (other)
Disposals
Foreign currency adjustment
Amortisation charge
Closing net book amount
At 30 June 2017
Cost or fair value
661,391
14,194,351
371,741
15,227,483
661,391
14,194,351
-
318,825
303,171
-
(553)
(180,356)
-
-
(54,802)
-
783,653
14,458,374
371,741
393,404
-
-
4,055
(68,601)
700,599
15,227,483
712,229
303,171
-
(51,300)
(248,957)
15,942,626
1,220,412
14,458,374
940,249
16,619,035
Accumulated amortisation and impairment
(436,759)
-
(239,650)
(676,409)
Net book amount
783,653
14,458,374
700,599
15,942,626
All intangible assets were recorded at cost as at 30 June 2017 and 30 June 2016.
(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.
Consumables CGU
Precious Metals CGU
Capital Equipment CGU
European Sales Office CGU
42 XRF SCIENTIFIC LIMITED | 2017 ANNUAL REPORT
Consolidated
2017
$
8,613,049
3,821,660
1,650,171
373,494
2016
$
8,288,237
3,880,956
1,650,171
474,987
14,458,374
14,294,351
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
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
forecast cash flows for 2018 are based on the board-approved budget. The cash flows for 2019 to 2022 have been based on
extrapolating the 2018 forecast by using growth rates. Average growth rates of 3.20% - 4.90% (see below) used do not exceed the
long-term average growth rates for the industries in which each CGU operates. The value in use model for the Precious Metals
CGU incorporates significant growth representing the forecast return on the $3.3m invested during FY16 and FY17 as part of
expansion plans. The annual growth rate is expected to be higher in the initial years following completion of the project (FY19
87.13% and FY20 53.99%), then normalising to 3.20% in the following years. The pre-tax discount rate of 12.62% reflects specific
risks relating to the relevant CGU.
Net Profit (% average annual growth rate)
4.90%
* 3.2%
3.20%
3.20%
* Average growth rate excludes the forecast return from the expansion project noted above
Consumables
Precious Metals
Equipment
Office (Belgium)
Capital
European Sales
(c) Sensitivity to change in assumptions
If the forecast results from the board-approved Precious Metals expansion plan were forecast to be 80% lower, the value in use
for the CGU would decrease by $1.9m. As a result, the Group would have had to recognise an impairment charge against the
carrying amount of goodwill of $230,000. Should the 2018 forecast cash flows for the Capital Equipment CGU be 30% lower than
the board-approved forecast, this would result in an impairment charge of $290,000 against the carrying value of goodwill.
These reasonably possible changes in growth rates represent reasonably possible reductions in sales quantities of precious
metals and capital equipment. Management believes that no other reasonably possible changes 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
Amounts recognised directly in equity:
Share issue expenses
Amounts recognised in profit or loss:
Employee benefits
DTA recognised on FY17 loss by Germany subsidiary
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
Consolidated
2017
$
2016
$
1,205
1,906
291,714
264,568
31,988
29,043
66,585
14,976
105
698,979
700,184
409,966
290,218
-
700,184
218,840
481,344
700,184
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
XRF SCIENTIFIC LIMITED | 2017 ANNUAL REPORT 43
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 16: CURRENT LIABILITIES – TRADE AND OTHER PAYABLES
Trade payables
Deferred consideration
Sundry creditors and accruals
Employee benefits – annual leave (a)
Consolidated
2017
$
791,423
-
377,499
463,937
2016
$
424,102
15,670
313,537
355,945
1,632,859
1,109,254
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)
Consolidated
2017
$
2016
$
306,198
234,924
Consolidated
2017
$
330,855
76,392
15,000
422,247
2016
$
297,300
71,363
50,000
418,663
(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
2017
$
2016
$
248,141
222,975
(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.
44 XRF SCIENTIFIC LIMITED | 2017 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 18: NON-CURRENT LIABILITIES – LONG-TERM BORROWINGS
Property loan 1
Plant & equipment loan 2
Motor vehicle loan 3
Consolidated
2017
$
2016
$
1,111,500
1,111,500
69,653
17,584
-
-
1,198,737
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 Melbourne. 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
$1,133,844, calculated using current market interest rates. The carrying value of the loan is $1,111,500 (non-current). Covenants
applicable to the loan include: maintaining a group interest cover ratio of 3x; group shareholder funds to be no less than 85% of
the previous year’s closing balance; and maintaining a capital ratio of 50%. The Group has met all covenant requirements to
date.
2 Consists of a three-year, interest-bearing loan for $134,042, used to fund the purchase of plant and equipment. Instalments
are paid monthly (including principal and interest), at a rate of 5.25% per annum. The lender holds first registered security over
the plant and equipment acquired as security for the loan facility. The fair value of the loan is estimated to be $118,174,
calculated using current market interest rates. The carrying value of the loan is $113,139 ($43,486 current / $69,653 non-
current). There are no covenants applicable to this loan.
3 Consists of a three-year, interest-bearing loan for $33,902, used to fund the purchase of a motor vehicle. Instalments are paid
monthly (including principal and interest), at a rate of 4.99% per annum. The lender holds first registered security over the
vehicle acquired as security for the loan facility. The fair value of the loan is estimated to be $29,775, calculated using current
market interest rates. The carrying value of the loan is $28,598 ($11,013 current / $17,585 non-current). There are no covenants
applicable to this loan.
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
2017
$
2016
$
232,445
37,581
12,548
282,574
251,495
31,079
282,574
198,417
40,949
12,129
251,495
233,073
18,422
251,495
Consolidated
2017
$
2016
$
124,768
148,937
XRF SCIENTIFIC LIMITED | 2017 ANNUAL REPORT 45
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 21: ISSUED CAPITAL
Issued capital
Ordinary shares fully paid
Total issued capital
Consolidated
Consolidated
2017
Shares
2016
Shares
2017
$
2016
$
133,825,803
133,825,803
18,584,489
18,584,489
133,825,803
133,825,803
18,584,489
18,584,489
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
Details
1 July 2015
Opening balance
1 December 2015
1 December 2015
30 June 2016
1 July 2016
30 June 2017
Shares issued to previous owners of Socachim
Less: Share issue costs (less deferred tax)
Closing balance
Opening balance
Closing balance
(a) Ordinary shares
Number of
shares
132,157,097
1,668,706
-
133,825,803
133,825,803
133,825,803
Issue
Price
$0.20
$
18,257,772
331,405
(4,688)
18,584,489
18,584,489
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 2017 and 30 June 2016 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
2017
$
2016
$
1,253,237
1,111,500
(833,405)
(3,304,773)
419,832
(2,193,273)
30,763,097
30,406,972
31,182,929
28,213,699
Net cash
Net cash
1.3%
(7.8%)
46 XRF SCIENTIFIC LIMITED | 2017 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
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
2017
$
2016
$
(80,452)
759,243
678,791
(44,202)
759,243
715,041
11,107,442
10,763,313
793,851
1,537,264
(401,476)
(1,193,135)
11,499,817
11,107,442
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 prior financial year, paid in the current financial year
Interim dividend for the current financial year, paid in the current financial year
Total dividends provided for or paid
Consolidated
2017
$
401,476
-
2016
$
925,098
268,037
401,476
1,193,135
A fully franked dividend of 0.24 cents per share has been declared on ordinary shares post 30 June 2017.
Franked Dividends
Consolidated
2017
$
2016
$
Franking credits available for subsequent financial years based on a tax rate of 30% (2016: 30%)
4,644,490
4,622,363
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 2017 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 2017. 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 $137,649 (2016: $172,062).
XRF SCIENTIFIC LIMITED | 2017 ANNUAL REPORT 47
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 24: BUSINESS COMBINATIONS
On 1 April 2017, XRF Scientific Limited acquired the remaining 50.01% of the shares in Gestion Scancia Inc. (“Scancia”), which
then became a wholly owned subsidiary. Scancia is a manufacturer of chemical x-ray fluxes, used for x-ray fluorescence
analysis and is based in Quebec, Canada. The business was established on the basis of a unique automated manufacturing
process. The micro-bead type flux produced by Scancia is different to XRF’s granular flux, which complements the Company’s
product range.
The Company has reported provisional amounts for goodwill, intangibles and property, plant & equipment acquired as part of
the purchase of Scancia, as fair value assessments have not been finalised.
Details of the purchase consideration, the net assets acquired and goodwill are as follows:
(i) Purchase consideration:
Additional cash paid to shareholders of Scancia
Value of XRF’s investment in Scancia prior to acquisition
Total purchase consideration
The assets and liabilities recognised as a result of the acquisition are as follows:
Goodwill
Intellectual property
Customer lists
Trade and other receivables
Inventories
Cash
Property, plant and equipment
Interest-bearing loans
Trade and other payables
2017
$
85,992
539,298
625,290
318,825
245,878
147,526
49,465
28,316
40,329
217,818
(345,941)
(76,926)
625,290
The goodwill is attributable to the sales potential of Scancia’s products, which complement XRF’s existing range, and the
production 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 $184k and net loss before tax of $23k to the group for the period 1 April 2017 to
30 June 2017.
If the acquisition had occurred on 1 July 2016, consolidated revenue and consolidated net profit before tax for the period ended
30 June 2017 would have been $22.0m and $948k respectively. These amounts have been calculated using the group’s
accounting policies.
(iii) Acquisition related costs
Direct costs relating to the acquisition of Scancia of $113,167 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 Scancia
Less: Cash acquired through acquisition of Scancia
Net cash outflow
48 XRF SCIENTIFIC LIMITED | 2017 ANNUAL REPORT
2017
$
85,992
(40,329)
45,663
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 24: BUSINESS COMBINATIONS continued
(vi) Critical accounting estimate and significant judgement - Fair value of investment in associate
The fair value of the 49.99% investment in Gestion Scancia is a Level 3 fair value. The following summarises quantitative
information about the significant unobservable inputs:
Description
Unobservable inputs
Range of inputs
Relationship of inputs to fair value
Investment in
Associate
Profit Growth rate
10%
A change in the Profit Growth rate by 1% would increase /
decrease the fair value by $12,269.
Terminal Value
4 times multiple
Discount Rate
12.62%
If the terminal value was based on a 3 times multiple then the fair
value would decrease by $63,080.
A change in the discount rate by 1% would increase / decrease the
fair value by $20,590.
(vi) Critical accounting estimate and significant judgement - Fair value of intangibles acquired in a business combination
The intangible assets acquired are recognised at their fair value on the date of acquisition. The fair value of acquired intangibles
was determined using the following key assumptions:
Customer lists: Assumed level of future revenue and assumed gross margin contributions.
Intellectual property: Estimated costs of developing and replicating the acquired technology internally.
NOTE 25: CONTINGENCIES
At 30 June 2017, 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
Consolidated
2017
$
2016
$
Commitments in relation to non-cancellable operating leases contracted for at the reporting date but not recognised as
liabilities, payable:
Within one year
Later than one year but not later than five years
417,146
599,110
1,016,256
532,087
374,845
906,932
Operating leases 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 107kg 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 between September 2017 and August 2018 and will be
renewed accordingly.
(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 2017:
Bank overdraft facility
Bank guarantee facility
Consolidated
2017
$
649,677
1,459,634
2,109,311
2016
$
1,000,000
1,498,837
2,498,837
XRF SCIENTIFIC LIMITED | 2017 ANNUAL REPORT 49
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 26: COMMITMENTS continued
(c) Capital commitments
As part of the expansion of the Labware division, the Group has committed to the purchase of manufacturing equipment valued
at approximately $1.2m. A $462k deposit (40% of contract) was paid to the supplier during the 30 June 2017 financial year, with
55% to be paid upon loading onto the sea vessel and the remaining 5% payable on commissioning and installation.
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
BDO LLP (UK)
Audit and review of financial reports
Consolidated
2017
$
2016
$
104,858
43,790
-
25,764
10,121
95,285
44,568
11,838
15,188
8,256
11,797
15,222
8,949
205,279
-
190,357
NOTE 28: RELATED PARTY TRANSACTIONS
(a) Parent entity
The ultimate parent and controlling entity is XRF Scientific Limited which at 30 June 2017 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
2017
$
831,670
62,764
8,221
902,655
2016
$
855,885
65,820
7,766
929,471
No other post-employment or termination benefits have been provided. Detailed remuneration disclosures are available in the
remuneration report from pages 9-15.
(d) Loans to key management personnel
There were no loans to any key management personnel during either of the years ended 30 June 2016 or 30 June 2017.
(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, totaling $115,169 (2016: $114,029). 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.
50 XRF SCIENTIFIC LIMITED | 2017 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
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
XRF Scientific Europe SPRL
XRF Scientific Europe GmbH
XRF Scientific UK Ltd
Precious Metals Engineering (WA) Pty Ltd
XFlux Pty Ltd
Gestion Scancia Inc
Country of
Incorporation
Australia
Australia
Australia
Australia
Canada
Belgium
Germany
United Kingdom
Australia
Australia
Canada
Class of
shares
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
The proportion of ownership interest is equal to the proportion of voting power held.
Entity holding
2017
%
2016
%
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
49.99
NOTE 30: RECONCILIATION OF PROFIT AFTER INCOME TAX TO NET CASH FLOW PROVIDED
BY OPERATING ACTIVITIES
Profit for the year
Depreciation and amortisation
Share of JV equity (profits) / losses
Net exchange differences
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 2017 (2016: Nil).
Consolidated
2017
$
793,851
767,527
-
18,705
16,699
13,895
(601,753)
(852,241)
(226,476)
(290,218)
523,605
(103,315)
31,079
85,408
(20,585)
156,181
2016
$
1,537,264
721,539
(52,748)
7,800
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
XRF SCIENTIFIC LIMITED | 2017 ANNUAL REPORT 51
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
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
2017
Cents
2016
Cents
0.6
0.6
1.2
1.2
$
$
(c) Reconciliations of earnings used in calculation earnings per share
Profit attributable to the ordinary equity holders of the company
793,851
1,537,264
(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
133,825,803
133,126,318
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
Total comprehensive income / (loss) for the year before tax
Tax benefit / (expense)
Total comprehensive income / (loss) for the year after tax
(b) Contingent liabilities of the parent entity
The parent entity did not have any contingent liabilities as at 30 June 2017 or 30 June 2016.
2017
$
2016
$
6,343,558
6,416,015
19,724,573
19,710,727
11,012,869
10,530,363
11,314,160
10,825,301
18,584,489
18,584,489
721,275
709,221
(10,895,351)
(10,408,284)
8,410,413
8,885,426
(265,218)
179,627
(85,591)
(178,649)
(37,935)
(216,584)
NOTE 34: EVENTS OCCURRING AFTER THE REPORTING DATE
Dividend
A final dividend of 0.24 cents per share fully franked was declared on 24 August 2017, bringing the total dividend for the year to
0.24 cents per share fully franked (FY16: 0.5 cents per share fully franked), with a record date of 15 September 2017 and
payment date of 29 September 2017.
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.
52 XRF SCIENTIFIC LIMITED | 2017 ANNUAL REPORT
DIRECTORS’ DECLARATION
FOR THE YEAR ENDED 30 JUNE 2017
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 2017 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 27th day of September 2017
XRF SCIENTIFIC LIMITED | 2017 ANNUAL REPORT 53
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 Audit of the Financial Report
Opinion
We have audited the financial report of XRF Scientific Limited (the Company) and its subsidiaries (the
Group), which comprises the consolidated statement of financial position as at 30 June 2017, the
consolidated statement of profit or loss and other comprehensive income, the consolidated statement
of changes in equity and the consolidated statement of cash flows for the year then ended, and notes
to the financial report, including a summary of significant accounting policies and the directors’
declaration.
In our opinion the accompanying financial report of the Group, is in accordance with the Corporations
Act 2001, including:
(i)
Giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its
financial performance for the year ended on that date; and
(ii)
Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the Financial
Report section of our report. We are independent of the Group in accordance with the Corporations
Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s
APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance
with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been
given to the directors of the Company, would be in the same terms if given to the directors as at the
time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our 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
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report of the current period. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters.
Goodwill impairment assessment
Key audit matter
How the matter was addressed in our audit
As disclosed in Note 14 of the financial report, goodwill
Our procedures included, but were not limited to the
amounted to $14,458,374 and represents a significant
following:
balance recorded in the statement of financial
position.
This was determined to be a key audit matter as the
determination of the "Value in Use" of each cash
generating unit (CGU) and whether or not an
impairment charge is necessary, involved judgements
by management about the future growth rates of the
business in each CGU, discount rates applied to future
cash flow forecasts for each CGU and sensitivities of
inputs and assumptions used in the cash flow models.
•
•
Critically evaluating the Group’s
categorisation of CGUs and the allocation of
assets to the carrying value of CGU’s;
Obtaining the group’s value in use model and
agreeing amounts to a combination of board
approved budgets and committed future
plans;
•
Corroborating the assumptions for the key
inputs in the value in use model for the
forecast revenue, costs, discount rates and
terminal growth rates by comparing forecasts
to historical actuals;
•
•
Using our valuation specialists to recalculate
management’s discount rate based on
external data were available;
Performing a sensitivity analysis on the key
financial assumptions in the models. These
included revenue forecasts, multipliers used
in the terminal year of cash flows, and the
discount rates applied; and
•
Evaluating the adequacy of the related
disclosures in the financial report.
Other information
The directors are responsible for the other information. The other information comprises the
information in the Group’s annual report for the year ended 30 June 2017, but does not include the
financial report and the auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or has no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website (http://www.auasb.gov.au/Home.aspx) at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf
This description forms part of our auditor’s report.
Report on the Remuneration Report
Opinion 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 2017.
In our opinion, the Remuneration Report of XRF Scientific Limited, for the year ended 30 June 2017,
complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with
Australian Auditing Standards.
BDO Audit (WA) Pty Ltd
Glyn O’Brien
Director
Perth, 27 September 2017
SHAREHOLDER INFORMATION
Additional information (as at 12 September 2017) 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
Michael Karl Korber
D & GD Brown Nominees Pty Ltd 1
Washington H Soul Pattinson & Co Ltd
Number of
Ordinary Shares
16,427,313
13,316,641
8,797,908
8,400,000
7,910,411
1 D & GD Brown Nominees Pty Ltd 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
97
105
343
137
729
–
–
–
–
–
–
58 XRF SCIENTIFIC LIMITED | 2017 ANNUAL REPORT
SHAREHOLDER INFORMATION
TOP 20 SHAREHOLDERS
No.
1
Holder name
NATIONAL NOM LTD
Number of
Ordinary Shares
18,917,045
Percentage of
Ordinary Shares
14.14%
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
SKYE ALBA PL
KORBER MICHAEL KARL
BNP PARIBAS NOMS PL
D & GD BROWN NOM PL 1
EVELIN INV PL
TZELEPIS NOM PL
PROSSOR STEPHEN W + F C
GREAT WESTERN CAP PL
J P MORGAN NOM AUST LTD
BETA GAMMA PL
JGH METZ PL
DAVIDTS FREDERIC
BOYLES DAVID LEROY
BROWN DAVID + GLENYS D 1
BNP PARIBAS NOM PL
KLARIE PETER
CREEL PL
METZ JORG + CARR WENDY J
G & E PROPS PL
13,316,641
8,797,908
7,910,411
7,000,000
6,300,000
3,280,000
2,669,767
2,649,578
2,593,463
2,000,000
1,888,480
1,668,706
1,500,000
1,400,000
1,294,151
1,290,576
1,230,069
1,133,637
1,120,000
9.95%
6.57%
5.91%
5.23%
4.71%
2.45%
1.99%
1.98%
1.94%
1.49%
1.41%
1.25%
1.12%
1.05%
0.97%
0.96%
0.92%
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.
87,960,432
65.73%
RESTRICTED SECURITIES
There are currently no restricted securities.
NON-MARKETABLE PARCELS
Class of Security
Ordinary shares
Number of Securities
Number of Holders
32,082
61
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 | 2017 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
86 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 | 2017 ANNUAL REPORT