XRF SCIENTIFIC LIMITED
ABN 80 107 908 314
ANNUAL FINANCIAL REPORT
FOR THE YEAR ENDED 30 JUNE 2018
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 | 2018 ANNUAL REPORT 1
FINANCIAL RESULTS SUMMARY
Sales up 13%
Net Profit After Tax up 29%
24,248
2,639
20,504 21,050 21,508
1,537
1,024
794
15
16
17
18
Sales Revenue ($'000)
16
18
15
Net Profit After Tax ($'000)
17
Underlying Profit Before Tax* up 12%
Earnings Per Share up 33%
3,905
2.0
3,040
2,464
2,197
1.2
0.8
0.6
15
16
17
18
Underlying Profit Before Tax ($'000)
16
18
15
Earnings Per Share (Cents)
17
* Non-IFRS financial measure. Refer to page 5 for reconciliation to net profit before tax.
2 XRF SCIENTIFIC LIMITED | 2018 ANNUAL REPORT
CHAIRMAN’S LETTER
Dear Shareholder
The last twelve months have been a period of major
The Board has noted the increasing focus upon
changes for the Company. They have been part of a
introducing and maintaining higher standards of
planned programme to consolidate our position as a
corporate governance for listed public companies,
major laboratory services business in both Australia
both small and large which have been the subject of
and overseas.
Major steps are underway with the expansion of our
business in Europe – mainly in Germany, Belgium,
wide publicity. These will apply to XRF Scientific
alongside the larger companies listed on the
Australian Stock Exchange.
France and the UK. A major, specific project is
The staff, led by the Managing Director, Vance
underway in Germany and should enhance the
Stazzonelli, have done an excellent
job
in
export returns of the business. Canada and the USA
challenging circumstances during the last financial
are important markets which are being and will
year and the company is looking to improve returns
continue to be serviced from Australia and our office
to shareholders in 2018-19.
in Canada. We do not anticipate being adversely
affected by the spat between the USA and China over
tariffs. We are a major buyer of Chinese raw material
products and expect to remain so.
This is my last year as a Director and Chair of the
Company and I’m confident that the Board and
management team will be able to expand, grow
strongly and deliver
improved returns to the
The Company’s plant
in Melbourne has been
shareholders in 2018-19 and beyond.
significantly upgraded and will play an ever-
important part in expanding the business and
improving profitability.
Unfortunately, over the last twelve months, the
Company’s share price has languished between 16-
22 cents per share. Measures are being
implemented to improve sales and profitability. One
of the aims is to form the basis for lifting the share
price for the benefit of our loyal shareholders.
Kenneth Baxter
Chairman
XRF SCIENTIFIC LIMITED | 2018 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 2018.
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
Vance Stazzonelli (since 22 February 2018)
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
2018
$
2017
$
321,181
401,476
In addition to the above dividends, since the end of the financial year the directors have declared the payment of a
fully franked final dividend of 0.3 cents per share to be paid on 19 October 2018 out of retained earnings at 30 June
2018.
4 XRF SCIENTIFIC LIMITED | 2018 ANNUAL REPORT
DIRECTORS’ REPORT
REVIEW OF OPERATIONS
A review of the operations of the economic entity during the financial year and the results of those operations
found that, during the year, the economic entity continued to engage in its principal activity and the results and
financial position are disclosed in the attached financial statements.
The consolidated entity has produced a Net Profit After Tax (NPAT) of $1,024,007 for the year ended 30 June 2018,
compared with $793,851 for the previous year.
Details of the results for the financial year ended 30 June 2018 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 2018
June 2017
over prior year
$
$
24,304,543
21,508,891
1,024,007
793,851
0.8
0.8
0.6
0.6
2,463,669
2,196,581
%
13
29
33
33
12
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 expensed
June 2018
June 2017
$
1,502,092
217,730
-
743,847
-
$
968,429
113,167
162,339
841,335
111,311
Underlying profit before tax
2,463,669
2,196,581
OPERATING RESULTS
XRF Scientific Ltd (“XRF” or “Company”) is pleased to report its June 2018 full-year results to shareholders. The
Company has generated revenue of $24.3m and Net Profit After Tax of $1,024k, which increased by 29% on FY17.
Underlying profit before tax has increased by 12% on the PCP to $2,464k, before expensing costs associated with
acquisitions, R & D and expansion of the Precious Metals Division. Acquisition-related costs were $218k during
the year, compared to $113k in the PCP, which related to the acquisition and integration of Scancia into the group,
including the factory closure in Canada and the cost of relocating production to Perth.
The Board has determined to maintain the dividend payout ratio for the year at approximately 40% of NPAT,
declaring a final fully franked dividend of 0.3 cents per share.
In general, activity in the second half was slower than the first, which was mainly linked to a lower level of mining
exploration activity, as reflected in lower Consumable product sales. Looking forward to FY19 we are expecting a
significant improvement to results. Activity in July has been strong, and we are maintaining a good sales order
book for long lead-time production items.
XRF SCIENTIFIC LIMITED | 2018 ANNUAL REPORT 5
DIRECTORS’ REPORT
OPERATING RESULTS continued
The Company’s cash position was $0.4m as at 30 June 2018 and has improved to $0.6m as at 31 July 2018. Short-
term borrowings have increased from $54k as at 30 June 2017 to $1.4m as at 30 June 2018. This is mainly due to
the reclassification of the $1.1m building loan for the Company’s precious metals factory in Melbourne, which had
an initial three-year term, and will now be renegotiated prior to the expiry in November 2018. Debt increased
during the year due to the finalisation of a $1.2m purchase of equipment for the precious metals factory, which
was commissioned in late November 2017. $0.5m of this loan value was to refund the Company for a deposit paid
to the supplier in FY17. The new equipment significantly expands our precious metals fabrication capabilities, into
product areas not previously accessible.
The Consumables Division experienced a 9% increase in sales activity, with revenue of $7.5m and profit before tax
of $1.6m for the year. Revenue in the 2H was $3.4m vs $4.1m in 1H, with June being slower than previous years,
which can typically be a busy month as customers in Australia close their operating budgets. However, activity in
July has already started very strongly, with $1m in sales invoiced for the month, which is at record levels. The
demand is being generated from mining customers globally, across a range of commodities.
During the last year, lithium prices remained relatively stable, as did production costs for our consumable
products. The Scancia flux factory in Quebec was closed in October 2017 and the equipment was shipped to the
division’s main factory in Perth. The production plant was recommissioned during the second half and is now in
full-scale production. It is expected that the new micro-beads flux product offering will allow XRF to expand its
market share in FY19.
The Capital Equipment Division improved again during the second half, delivering a profit before tax of $181k for
the year, as opposed to $70k in the PCP. The main driver of this improvement has been the strong level of electric
fusion machine orders, which are manufactured in the Perth factory. Results are expected to improve strongly in
FY19, as the factory in Perth is maintaining an order book of more than three months for electric fusion machines.
The launch of the “xrFuse 1” one-position fusion machine has been highly successful, with numerous units
already sold. The machine is a good sample preparation partner for smaller benchtop x-ray spectrometers, which
are increasing in popularity. The sale of gas fusion machines is continually improving, with a good order book now
being maintained. In late November, a new machine, the “Phoenix GO” was launched. Advances in our R & D
program have allowed for this new product to be released, which uses gas only, without the need for oxygen or
compressed air for operation. The machine is aimed at the lower pricing end of the market, and is ideally suited
for cost-conscious users, with savings available both on the initial infrastructure and ongoing operating costs.
Sales are progressing well, with machines sold into Europe, South America and Southern Africa.
The Precious Metals Division delivered a profit before tax of $56k for the year, as compared to a loss of $575k in
the PCP, which includes the result for the Germany office. The significant turnaround in results was due to
increased sales activity, and non-recurring relocation costs of the precious metals factory that were in the PCP.
The factory in Melbourne has been extremely busy, expanding its product portfolio and capabilities, in line with the
sales activity occurring in Germany. New products are being developed both for the traditional labware portfolio
and precision customised platinum products.
Sales development at our office in Germany is progressing well, which achieved $1.86m of revenue during the
year as compared to $609k last year. The office is still in a loss position, which amounted to $743k for the year,
compared to $841k for last year. The size of the loss was increased due to forex differences caused by the
strength of the Euro against the AUD, which was on average 5.7% stronger during the year. Offsetting against this
loss is $232k in gross profits that were made by other parts of the group, as a result of sales made directly by the
Germany office and new customers introduced to other parts of the group.
6 XRF SCIENTIFIC LIMITED | 2018 ANNUAL REPORT
DIRECTORS’ REPORT
OPERATING RESULTS continued
Our current expectation is still that the office will be breaking even on a monthly basis within this calendar year.
XRF’s precision products are experiencing a strong level of acceptance in the European markets, with the first
order for an aerospace customer delivered in November. Late in FY18, our margins started to expand, with new
significant customers being acquired in the Labware and Glass industry markets. July was its best performance
yet with revenue of EUR 102k and its monthly loss reduced to EUR 28k (unaudited), compared to the average of
EUR 43k in FY18.
MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR
A final dividend of 0.3 cents per share fully franked was declared on 28 August 2018, bringing the total dividend for
the year to 0.3 cents per share fully franked (FY17: 0.24 cents per share fully franked), with a record date of 5
October 2018 and payment date of 19 October 2018.
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 2017 to
30 June 2018 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 2018 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 | 2018 ANNUAL REPORT 7
DIRECTORS’ REPORT
INFORMATION ON DIRECTORS
Kenneth Baxter
Date of appointment:
Qualifications:
Chairman (Non-Executive)
5 July 2005 (13 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 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 (14 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
8,670,894 fully paid ordinary shares
Director (Non-Executive)
Date of appointment:
1 May 2012 (6 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 (6 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; 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 | 2018 ANNUAL REPORT
DIRECTORS’ REPORT
INFORMATION ON DIRECTORS continued
Vance Stazzonelli
Date of appointment:
Qualifications:
Experience:
Managing Director
22 February 2018 (6 months)
Bachelor of Commerce (Professional Accounting)
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. On 22 February 2018, he was appointed as Managing Director.
Other current directorships:
Private companies only
Former directorships in last 3 years: Private companies only
Special responsibilities:
N/A
No. of shares:
450,000 fully paid ordinary shares
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
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 2018 were as
follows:
Kenneth Baxter
David Brown
David Kiggins
Fred Grimwade
Vance Stazzonelli *
Full meetings of Directors
Meetings of committees -
Audit & Governance,
Remuneration
A
13
13
13
13
4
B
13
13
13
13
4
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.
*
= Attended 4 meetings as Managing Director after appointment on 22 February 2018. The prior 9 meetings
were attended as Chief Executive Officer.
** = Not a member of the relevant Committee.
XRF SCIENTIFIC LIMITED | 2018 ANNUAL REPORT 9
DIRECTORS’ REPORT
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. Its 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
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.
Managing director
On 22 February 2018, the Chief Executive Officer was appointed as Managing Director. No additional remuneration
will be paid to Mr Stazzonelli as part of the appointment, and his contracted terms of employment remained
unchanged.
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.
10 XRF SCIENTIFIC LIMITED | 2018 ANNUAL REPORT
DIRECTORS’ REPORT
REMUNERATION REPORT (Audited) continued
(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. 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
(ii) Executive
Kenneth Baxter
Chairman
Vance Stazzonelli
Managing Director
David Brown
David Kiggins
Non-Executive Director
Andrew Watson
Chief Financial Officer
Non-Executive Director
Fred Grimwade
Non-Executive Director
Fixed Remuneration
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 Managing Director, 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 Managing Director for 2018 is $70,000. There were five categories
of STI performance measure (plus a discretionary component) for the year ended 30 June 2018. 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:
Group financial performance (40%)
Leadership (10%)
Stakeholder & associated business relations (5%)
Execution of business growth strategy (20%)
Compliance and risk management (5%)
Discretionary (20%)
XRF SCIENTIFIC LIMITED | 2018 ANNUAL REPORT 11
DIRECTORS’ REPORT
REMUNERATION REPORT (Audited) continued
(b) Details of remuneration continued
The Remuneration Committee considered the performance of the Managing Director 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 current level of financial performance, it was decided by the Remuneration
Committee that no bonus would be paid to the Managing Director for the 30 June 2018 financial year.
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:
2018
Non-executive directors
Kenneth Baxter
David Brown
David Kiggins
Fred Grimwade
Sub-total non-executive directors
Executive directors
Vance Stazzonelli **
Sub-total executive directors
Other key management personnel
Andrew Watson
Sub-total key management personnel
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
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
262,000
262,000
159,650
159,650
666,398
-
-
-
-
-
-
-
-
-
-
-
* 171,000
-
-
7,548
4,772
5,466
5,466
171,000
23,252
-
-
-
-
171,000
24,890
24,890
15,167
15,167
63,309
Post-
-
-
-
-
-
5,342
5,342
3,036
3,036
8,378
-
-
-
-
-
-
-
-
-
-
Short-term
employment
Long-term
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
-
-
-
-
-
5,205
3,016
8,221
8,221
-
-
-
-
-
-
-
-
-
Total
$
87,000
226,000
63,000
63,000
439,000
292,232
292,232
177,853
177,853
909,085
Total
$
87,000
226,000
63,000
63,000
439,000
283,914
179,741
463,655
902,655
*
Technical services provided by consultancy (such as technical sales and support, analytical method development).
** Appointed as Managing Director on 22 February 2018. There were no changes to remuneration or other contracted employment terms.
12 XRF SCIENTIFIC LIMITED | 2018 ANNUAL REPORT
DIRECTORS’ REPORT
REMUNERATION REPORT (Audited) continued
(b) Details of remuneration continued
Percentage of performance related compensation of total remuneration
Certain executive 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:
Executive personnel
Vance Stazzonelli
Andrew Watson
Fixed Remuneration
At risk - STI
At risk - LTI
2018
2017
2018
2017
2018
2017
100%
100%
100%
96%
-
-
-
4%
–
–
–
–
Options issued as part of total remuneration
No options have been issued in 2017 or 2018 as part of total remuneration.
Voting and comments made at the company’s 2017 Annual General Meeting
The company received validly appointed proxies of 98% of “yes” votes on its remuneration report for the 2017
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
2013/14
3,358,127
2014/15
3,477,167
2015/16
2,318,737
2016/17
982,440
2017/18
1,598,268
1.8
2.0
1.2
0.6
0.8
Share
Cents
1.1
0.7
0.5
0.24
0.3
Cents
$
21
21
18
17
16
27,752,990
27,752,990
24,088,645
22,750,387
22,081,257
(d) 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 Managing Director,
it was mutually decided that a bonus would not be paid due to the financial result.
XRF SCIENTIFIC LIMITED | 2018 ANNUAL REPORT 13
DIRECTORS’ REPORT
REMUNERATION REPORT (Audited) continued
(e) 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
Vance Stazzonelli
Securities Trading Policy
Balance at 1
On-market
Balance at 30
July 2017
trades
June 2018
1,215,623
8,400,000
212,900
400,000
450,000
-
270,894
-
-
-
1,215,623
8,670,894
212,900
400,000
450,000
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.
Dividends received by key management personnel
Details of dividends received 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
Vance Stazzonelli
(f) Service Agreements
2018
2017
2,917
20,160
511
960
1,080
2,012
32,898
639
1,200
1,350
Remuneration for the Managing Director and Chief Financial Officer is set out in service agreements, which are
detailed below:
Vance Stazzonelli, Managing Director of XRF Scientific Limited
Terms of agreement – Ongoing employment contract effective 1 July 2017. Base salary is $270,000 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 $170,000 per annum
(effective 1 July 2018), 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 | 2018 ANNUAL REPORT
DIRECTORS’ REPORT
REMUNERATION REPORT (Audited) continued
(g) Share-based compensation
There was no share-based compensation to any Director or Key Management Personnel for the years ended
30 June 2017 and 2018. The Company has not adopted an employee share option scheme.
(h) Remuneration consultants
No remuneration consultants were used in the years ended 30 June 2018 and 30 June 2017.
(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 $115,975 (2017: $115,169). No amounts were
outstanding at the end of the year.
(j) Loans to directors and executives
No loans were made to directors and executives during the financial years ended 30 June 2018 and 30 June 2017.
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 2018 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
BDO Réviseurs d'Entreprises Soc. Civ. SCRL (Belgium)
Audit and review of financial reports
Taxation services
BDO Canada s.r.l. (Canada)
Taxation services
BDO AG Wirtschaftsprüfungsgesellschaft (Germany)
Taxation services
BDO LLP (UK)
Audit and review of financial reports
Total remuneration for audit and other services
Consolidated
2018
$
2017
$
119,201
47,146
1,224
30,791
6,611
104,858
43,790
-
25,764
10,121
16,094
3,655
-
11,797
8,609
229,676
8,949
208,934
The Board is satisfied that the auditors of the Company, BDO Audit (WA) Pty Ltd remain independent.
XRF SCIENTIFIC LIMITED | 2018 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.
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
28 August 2018
16 XRF SCIENTIFIC LIMITED | 2018 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 2018, 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, 28 August 2018
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 2018
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
Profit after income tax from continuing operations attributable to equity
holders of XRF Scientific Limited
Other comprehensive income
Items that will be classified to profit or loss
Foreign currency translation differences
Total comprehensive income for the year
Note
Consolidated
2018
$
2017
$
5
24,250,362
21,540,489
(14,595,450)
(12,660,291)
9,654,912
8,880,198
5
7
54,181
-
36,994
(68,592)
(6,423,795)
(6,095,043)
(961,916)
(722,718)
(98,572)
1,502,092
(478,085)
(894,582)
(844,237)
(46,309)
968,429
(174,578)
1,024,007
793,851
22(a)
258,567
1,282,574
(36,250)
757,601
Total comprehensive income attributable to equity holders of XRF
Scientific Limited
1,282,574
757,601
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)
31
31
0.8
0.8
0.6
0.6
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 | 2018 ANNUAL REPORT
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2018
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
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
2018
$
2017
$
8
9
10
11
13
14
15
16
17
18
18
19
20
415,374
833,405
4,119,689
4,634,866
7,611,983
4,875,783
414,802
484,879
12,561,848
10,828,933
8,487,225
7,239,487
15,964,438
15,942,626
916,544
700,184
25,368,207
23,882,297
37,930,055
34,711,230
1,519,838
1,632,859
1,510,310
1,385,922
166,793
366,158
422,247
54,499
191,518
40,931
4,949,021
2,342,054
883,409
278,176
94,959
1,198,737
282,574
124,768
1,256,544
1,606,079
6,205,565
3,948,133
31,724,490
30,763,097
21
22(a)
22(b)
18,584,489
18,584,489
937,358
678,791
12,202,643
11,499,817
31,724,490
30,763,097
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying
notes.
XRF SCIENTIFIC LIMITED | 2018 ANNUAL REPORT 19
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2018
30 JUNE 2018 – CONSOLIDATED
Issued Share
Capital
Share Option
Reserve
$
$
Foreign Currency
Translation
Reserve
$
Retained Profits
Total
$
$
Balance at 1 July 2017
18,584,489
759,243
(80,452)
11,499,817
30,763,097
Profit for the period
Other comprehensive income
Total comprehensive income for the period
Transactions with Equity Holders in their capacity as
Equity Holders
Ordinary shares issued, net of transaction costs
Dividends paid
-
-
-
-
-
-
-
-
-
-
-
-
-
258,567
258,567
1,024,007
-
1,024,007
1,024,007
258,567
1,282,574
-
-
-
-
(321,181)
(321,181)
-
(321,181)
(321,181)
Balance at 30 June 2018
18,584,489
759,243
178,115
12,202,643
31,724,490
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 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
-
-
-
-
-
-
-
-
-
-
-
-
-
(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
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
20 XRF SCIENTIFIC LIMITED | 2018 ANNUAL REPORT
CONSOLIDATED STATEMENT OF CASH FLOWS
AS AT 30 JUNE 2018
Note
Consolidated
2018
$
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
29
24,839,074
21,078,302
(23,358,770)
(20,255,402)
(202,730)
(98,572)
(373,616)
2,397
807,783
(113,167)
(46,309)
(537,031)
29,788
156,181
(1,701,725)
(1,841,573)
-
(232,619)
13,616
(45,663)
(322,771)
109,473
(1,920,728)
(2,100,534)
18
18
1,175,000
(158,905)
(321,181)
694,914
141,737
(267,276)
(401,476)
(527,015)
833,405
3,304,773
(418,031)
(2,471,368)
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
Cash and cash equivalents at the end of the financial period
8
415,374
833,405
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
XRF SCIENTIFIC LIMITED | 2018 ANNUAL REPORT 21
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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 2018 was authorised for issue in accordance with
a resolution of the directors on 28 August 2018 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 2018 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 benefit 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 | 2018 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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 Managing Director.
(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 Statement of Profit or Loss and
Other Comprehensive Income, 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 | 2018 ANNUAL REPORT 23
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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 | 2018 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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 25(a)). 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 | 2018 ANNUAL REPORT 25
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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 Statement of
Profit or Loss and Other Comprehensive Income. 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 Statement of Profit
or Loss and Other Comprehensive Income.
(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 | 2018 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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 Statement of Profit or Loss and Other Comprehensive Income 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 reporting 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 | 2018 ANNUAL REPORT 27
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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
Property Improvements
Motor Vehicles
Office Equipment
2%-40%
4%-25%
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 | 2018 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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 | 2018 ANNUAL REPORT 29
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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 | 2018 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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 2018
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. There will be no significant impact on the Group on the adoption of this
standard.
(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.
XRF SCIENTIFIC LIMITED | 2018 ANNUAL REPORT 31
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
(vi) 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. There will be no
significant impact on the Group on the adoption of this standard.
NOTE 2: FINANCIAL RISK MANAGEMENT
The Group’s activities expose it to a variety of financial risks; market risk (including foreign exchange risk, price risk, 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 and other 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
Group sensitivity
30 June 2018
30 June 2017
CAD
EUR
USD
CAD
EUR
USD
113,528
566,277
482,665
197,838
809,789
437,772
1,692
79,569
52,884
70,925
18,896
168,303
Based on the financial instruments held at 30 June 2018, 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 $135,214 lower / $165,262 higher (2017: $149,795
lower / $183,082 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 | 2018 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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 2018 the Group had no variable interest rate debt, therefore consider fair value interest rate risk minimal.
Group sensitivity
At 30 June 2018, 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 $6,732 higher / lower (2017:
$981 higher / lower), mainly as a result of higher/lower interest income from cash and cash equivalents. Cash and cash
equivalent balances at 30 June 2018 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
2018
$
2017
$
415,374
833,405
4,117,736
4,603,159
1,953
31,707
4,535,063
5,468,271
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
days
days
Days
Total
2018
2,919,884
838,994
182,309
176,549
4,117,736
2017
3,161,176.
723,288
405,662
347,954.
4,638,080.
XRF SCIENTIFIC LIMITED | 2018 ANNUAL REPORT 33
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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 2018
$
$
$
$
$
$
Carrying
Amount
(assets)/
liabilities
$
Non-derivatives
Trade and other payables
Property loan
Plant & equipment loan
Motor vehicle loan
Plant & equipment loan
Total non-derivatives
As at 30 June 2017
Non-derivatives
Trade and other payables
Property loan
Plant & equipment loan
Motor vehicle loan
Total non-derivatives
986,931
1,127,733
24,195
6,096
133,500
2,278,455
-
-
24,195
6,096
133,500
163,791
-
-
24,195
6,096
267,000
297,291
-
-
-
-
667,500
667,500
1,168,922
19,479
24,195
6,096
1,128,692
-
19,479
24,195
6,096
49,770
-
1,127,733
48,389
12,192
1,188,314
-
-
24,195
6,096
30,291
-
-
-
-
-
-
-
-
-
-
-
986,931
1,127,733
72,585
18,288
1,201,500
986,931
1,111,500
69,653
17,584
1,070,594
3,407,037
3,256,262
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
The Group had access to the following undrawn borrowing facilities at the end of the reporting period:
Bank overdraft facility
Bank guarantee facility
Consolidated
2018
$
2017
$
483,713
313,245
796,958
649,677
1,459,634
2,109,311
(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
$2,269,330
Fair value
$2,373,128
34 XRF SCIENTIFIC LIMITED | 2018 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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 and FY18 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.
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 Managing Director.
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 Managing Director to make decisions about resources to be allocated to the segment and
assess its performance, and for which discrete financial information is available.
The Managing Director monitors segment performance based on profit before income tax expense. Segment results that are
reported to the Managing Director 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 Managing
Director 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 | 2018 ANNUAL REPORT 35
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
NOTE 4: SEGMENT INFORMATION continued
(b) Primary reporting format – business segments
Segment information provided to the Managing Director for the full-year ended 30 June 2018 is as follows:
Full-year ended 30 June 2018
Total segment revenue
Inter segment sales
Revenue from external customers
Profit before income tax expense
* Includes $122k of acquisition costs expensed (2017: Nil)
Full-year ended 30 June 2017
Total segment revenue
Inter segment sales
Revenue from external customers
Capital
Equipment
$
7,124,324
(600,266)
6,524,058
Precious Metals
Consumables
$
10,978,026
(786,643)
10,191,383
$
7,532,596
-
7,532,596
Total
$
25,634,946
(1,386,909)
24,248,037
181,496
55,590
* 1,594,042
1,831,128
6,316,245
(298,729)
6,017,516
8,950,963
(364,930)
8,586,033
6,904,731
-
6,904,731
22,171,939
(663,659)
21,508,280
Profit before income tax expense
69,628
(575,337)
1,739,356
1,233,647
Segment assets
At 30 June 2018
At 30 June 2017
Segment liabilities
At 30 June 2018
At 30 June 2017
Depreciation and amortisation expense
For the year ended 30 June 2018
For the year ended 30 June 2017
Capital expenditure
For the year ended 30 June 2018
For the year ended 30 June 2017
7,753,463
7,667,006
1,558,208
1,559,345
282,188
263,315
170,111
122,222
17,075,483
14,133,174
8,827,815
5,723,420
317,860
291,555
1,264,934
1,431,353
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
Deferred tax asset
Other corporate assets
Total assets
Total segment liabilities
Related party loan elimination
Deferred tax liability
Income tax provision
Other corporate liabilities
Total liabilities
36 XRF SCIENTIFIC LIMITED | 2018 ANNUAL REPORT
22,699,132
22,098,986
624,079
1,311,026
110,926
113,688
389,832
674,620
47,528,078
43,899,166
11,010,103
8,593,791
710,974
668,558
1,824,877
2,228,195
2018
$
2017
$
24,248,037
21,508,280
2,325
32,209
24,250,362
21,540,489
1,831,128
(329,036)
1,502,092
47,528,078
(10,351,760)
(180,558)
916,544
17,751
37,930,055
11,010,103
(5,989,707)
278,176
384,566
522,427
6,205,565
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
68,772
42,815
3,948,133
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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
2018
$
2017
$
24,247,966
21,508,191
2,396
32,298
24,250,362
21,540,489
1,911
1,271
50,999
54,181
1,388
24,234
11,372
36,994
Consolidated
2018
$
2017
$
317,055
245,749
562,804
102,806
188,977
291,783
286,685
231,885
518,570
68,601
180,356
248,957
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)
4,692,622
4,409,535
610,669
217,730
719,720
113,167
XRF SCIENTIFIC LIMITED | 2018 ANNUAL REPORT 37
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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 27.5% (2017: 30%)
Tax effect of amounts which are not deductible (taxable) in calculating taxable income:
Acquisition of business costs
Research and development expenditure
Sundry items
Adjustments for current tax of prior periods
Income tax expense
(c) Tax consolidation legislation
Consolidated
2018
$
2017
$
753,020
(220,758)
(54,177)
478,085
589,077
(259,139)
(155,360)
174,578
478,085
174,578
(216,360)
(290,218)
(4,398)
31,079
(220,758)
(259,139)
1,502,092
1,502,092
968,429
968,429
413,075
290,529
65,319
(62,841)
116,708
532,262
33,950
(88,135)
93,594
329,938
(54,177)
478,085
(155,360)
174,578
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 | 2018 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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
2018
$
370,022
45,352
415,374
2017
$
288,052
545,353
833,405
415,374
415,374
833,405
833,405
Cash at bank earns interest at floating rates based on daily bank deposit rates of between 0.01% to 0.60% pa (2017: 0.01% to
0.95% 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 an
interest rate of 2.35% pa (2017: 2.32% 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 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
2018
$
2017
$
4,141,059
4,638,080
(23,323)
1,953
(34,921)
31,707
4,119,689
4,634,866
1,021,303
1,128,950
176,549
347,954
1,197,852
1,476,904
(34,921)
11,598
(23,323)
(26,922)
(7,999)
(34,921)
During the 2018 financial year, the allowance for impaired receivables reduced by 11,598 (2017: $7,999 increase). This was due
to the settlement of a debt which was impaired in a prior period. $7,540 was received as part of the settlement. This amount has
been included as ‘other income’ in the statement of profit or loss and other comprehensive income.
(b) Past due but not impaired
As at 30 June 2018, trade receivables of the Group of $1,197,852 (2017: $1,476,904) 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 | 2018 ANNUAL REPORT 39
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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 (2017: Nil).
NOTE 10: CURRENT ASSETS – INVENTORIES
Raw materials and spare parts
Finished goods
Precious metals (general)
Platinum on loan (refer to note 17)
Consolidated
2018
$
2017
$
3,618,489
2,941,620
2,130,989
1,387,492
875,634
986,871
546,671
-
7,611,983
4,875,783
Raw materials, spare parts and finished goods have increased over the last 12 months to support production of a number of
additions to the Capital Equipment division’s product range.
Stock was valued at lower of cost and net realisable value on 30 June 2018 and 30 June 2017.
Inventory expense
Inventories recognised as expense during the year ended 30 June 2018 amounted to $9,292,003 (2017: $8,235,143). The cost of
writing down inventories to net realisable value during the year ended 30 June 2018 was $nil (2017: $nil).
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
Closing amount
Consolidated
2018
$
68,589
-
346,213
414,802
2017
$
126,246
10,827
347,806
484,879
Consolidated
2018
$
2017
$
607,890
(68,592)
(539,298)
-
-
-
-
-
40 XRF SCIENTIFIC LIMITED | 2018 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
NOTE 13: NON-CURRENT ASSETS – PROPERTY, PLANT AND EQUIPMENT
Consolidated
At 30 June 2016
Cost or fair value
Accumulated depreciation
Net book amount
Year ended 30 June 2017
Opening net book amount
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
Year ended 30 June 2018
Opening net book amount
Additions
Foreign currency adjustment
Disposals
Depreciation charge
Closing net book amount
At 30 June 2018
Cost or fair value
Accumulated depreciation
Net book amount
Property
Plant &
Equipment
$
Motor
Improvement
Office
Vehicles
$
s
$
Equipment
$
Land &
Buildings
$
Total
$
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
3,368,116
119,536
186,471
733,712
(9,366)
(99,135)
(271,667)
3,908,131
6,017,173
(2,109,042)
3,908,131
3,908,131
1,569,626
19,511
(49,477)
(292,118)
5,155,673
7,372,355
(2,216,682)
5,155,673
-
42,923
-
(10,432)
(28,164)
123,863
215,798
(91,935)
123,863
123,863
64,061
0
(17,923)
(32,741)
137,260
216,034
(78,774)
137,260
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
904,711
(613,314)
1,823,217
10,430,994
-
(3,191,507)
291,397
1,823,217
7,239,487
291,397
1,823,217
71,922
(558)
(1,048)
(139,456)
0
0
0
0
7,239,487
1,872,527
18,313
(80,298)
(562,804)
8,487,225
1,148,818
222,257
1,823,217
1,533,395
(384,577)
1,148,818
536,574
(314,317)
1,823,217
11,481,575
-
(2,994,350)
222,257
1,823,217
8,487,225
1,470,095
(377,216)
1,092,879
1,092,879
166,918
(640)
(11,850)
(98,489)
All items of property, plant and equipment were recorded at cost as at 30 June 2018 and 30 June 2017.
XRF SCIENTIFIC LIMITED | 2018 ANNUAL REPORT 41
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
NOTE 14: NON-CURRENT ASSETS – INTANGIBLE ASSETS
Consolidated
At 30 June 2016
Cost or fair value
Research &
Development
Goodwill
$
$
Patents
trademarks
& other
rights
$
Total
$
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
Year ended 30 June 2018
Opening net book amount
Additions
Disposals
Foreign currency adjustment
Amortisation charge
Closing net book amount
At 30 June 2018
Cost or fair value
783,653
14,458,374
700,599
15,942,626
783,653
225,750
-
(1,967)
(188,977)
14,458,374
700,599
15,942,626
-
-
-
-
72,718
17,094
225,750
-
87,845
-
(102,806)
(291,783)
818,459
14,531,092
614,887
15,964,438
1,316,160
14,531,092
908,657
16,755,909
Accumulated amortisation and impairment
(497,701)
-
(293,770)
(791,471)
Net book amount
818,459
14,531,092
614,887
15,964,438
All intangible assets were recorded at cost as at 30 June 2018 and 30 June 2017.
(a)
Impairment tests for goodwill
Goodwill is allocated to the consolidated entity’s cash generating units (CGUs) identified according to business and geographical
segments.
Consumables CGU
Precious Metals CGU
Capital Equipment CGU
European Sales Office CGU
42 XRF SCIENTIFIC LIMITED | 2018 ANNUAL REPORT
Consolidated
2018
$
8,621,063
3,863,684
1,650,171
396,174
2017
$
8,613,049
3,821,660
1,650,171
373,494
14,531,092
14,458,374
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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 2019 are based on the Board-approved budget. The cash flows for 2020 to 2023 have been based on
extrapolating the 2019 forecast by using growth rates. Average growth rates of 3.20% (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 $3.4m invested between FY16 and FY18 as part of
expansion plans (excluding the $1.8m spent purchasing property). The annual growth rate is expected to be higher in the initial
years following completion of the project (FY20: 52%), 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)
3.20%
* 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
Should the 2018 forecast cash flows for the European Sales Office CGU be 70% lower than the Board-approved forecast, this
would result in a material impairment charge of $218,000 against the carrying value of goodwill. This reasonably possible
change in growth rates represent reasonably possible reductions in sales quantities of consumables, 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 and FY18 losses by German subsidiary
Business acquisition expenses
Depreciation of tangible assets
Accruals
Provisions
Net deferred tax assets
Movements:
Opening balance at 1 July
(Charged)/credited to profit or loss (note 7)
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
2018
$
2017
$
804
1,205
301,027
444,682
76,433
28,493
48,979
16,126
915,740
916,544
700,184
216,360
916,544
222,899
693,645
916,544
291,819
264,568
31,988
29,043
66,585
14,976
698,979
700,184
409,966
290,218
700,184
218,840
481,344
700,184
XRF SCIENTIFIC LIMITED | 2018 ANNUAL REPORT 43
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
NOTE 16: CURRENT LIABILITIES – TRADE AND OTHER PAYABLES
Trade payables
Sundry creditors and accruals
Employee benefits – annual leave (a)
Consolidated
2018
$
674,123
312,808
532,907
2017
$
791,423
377,499
463,937
1,519,838
1,632,859
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
Provision for platinum loan (a)
Long service leave (b)
Dividends payable to ordinary shareholders
Making good of leases
Other provisions
Consolidated
2018
$
2017
$
351,719
306,198
Consolidated
2018
$
2017
$
986,871
414,687
78,321
15,000
15,431
-
330,855
76,392
15,000
-
1,510,310
422,247
(a) Provision for platinum loan
In October 2017, XRF borrowed $386,383 of platinum metal, which is inventoried to facilitate manufacturing processes and
reduce lead times. The loan facility matures after 12 months and interest is calculated at market rates and payable annually. In
January 2018, an additional $600,488 was borrowed, increasing the total borrowed metal to $986,871. The second loan facility
matures after 12 months and interest is calculated at market rates and payable annually. At maturity, both facilities will be
renewed for additional terms or the platinum will be returned. These liabilities are offset by an inventory asset of $986,871.
(b) 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
311,015
248,141
Consolidated
2018
$
2017
$
44 XRF SCIENTIFIC LIMITED | 2018 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
NOTE 18: CURRENT & NON-CURRENT LIABILITIES – LONG-TERM BORROWINGS
Property loan 1
Plant & equipment loan 2
Motor vehicle loan 3
Plant & equipment loan4
Consolidated
2018
2017
Current
Non-Current
Current
Non-Current
$
1,111,500
45,825
11,576
217,021
1,385,922
$
-
23,828
6,008
853,573
883,409
$
$
-
1,111,500
43,486
11,013
-
69,653
17,584
-
54,499
1,198,737
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
$1,127,733, calculated using current market interest rates. The carrying value of the loan is $1,111,500. 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 $71,879, calculated
using current market interest rates. The carrying value of the loan is $69,652. No specific covenants are 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 $18,110, calculated using current
market interest rates. The carrying value of the loan is $17,584. No specific covenants are applicable to this loan.
4 Consists of a five-year, interest bearing loan for $1,175,000, used to fund the purchase of equipment. Instalments are paid
monthly (including principal and interest), at a rate of 5.14% per annum. The lender holds first registered security over the
equipment acquired as security for the loan facility. The fair value of the loan is estimated to be $1,155,406, calculated using
current market interest rates. The carrying value of the loan is $1,070,594. No specific covenants are applicable to this loan.
Net debt reconciliation
Total borrowings at 1 July
Borrowings acquired via business combination
Proceeds from borrowings
Repayment of borrowings
Total borrowings at 30 June
NOTE 19: NON-CURRENT LIABILITIES – DEFERRED TAX LIABILITIES
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
2018
$
2017
$
1,253,236
1,111,500
-
1,175,000
(158,905)
2,269,331
267,275
141,737
(267,276)
1,253,236
Consolidated
2018
$
2017
$
245,538
19,446
13,192
278,176
282,574
(4,398)
278,176
232,445
37,581
12,548
282,574
251,495
31,079
282,574
XRF SCIENTIFIC LIMITED | 2018 ANNUAL REPORT 45
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
NOTE 20: NON-CURRENT LIABILITIES – PROVISIONS
Employee benefit – long service leave
NOTE 21: ISSUED CAPITAL
Issued capital
Ordinary shares fully paid
Total issued capital
Movements in ordinary share capital:
Date
Details
1 July 2016
Opening balance
30 June 2017
Closing balance
1 July 2017
Opening balance
30 June 2018
Closing balance
(a) Ordinary shares
Consolidated
2018
$
2017
$
94,959
124,768
Consolidated
Consolidated
2018
Shares
2017
Shares
2018
$
2017
$
133,825,803
133,825,803
18,584,489
18,584,489
133,825,803
133,825,803
18,584,489
18,584,489
Issue
Price
Number of
shares
133,825,803
133,825,803
133,825,803
133,825,803
$
18,584,489
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.
Consolidated
2018
$
2017
$
2,269,331
(415,374)
1,853,957
1,253,237
(833,405)
419,832
31,724,490
30,763,097
33,578,447
31,182,929
Net debt
Net debt
5.5%
1.3%
The gearing ratios at 30 June 2018 and 30 June 2017 were as follows:
Total borrowings
Less: cash and cash equivalents
Net debt / (positive cash position)
Total equity
Total equity plus net debt
Gearing ratio
46 XRF SCIENTIFIC LIMITED | 2018 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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
2018
$
2017
$
178,115
759,243
937,358
(80,452)
759,243
678,791
11,499,817
11,107,442
1,024,007
(321,181)
793,851
(401,476)
12,202,643
11,499,817
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
2018
$
2017
$
321,181
401,476
-
-
321,181
401,476
A fully franked dividend of 0.3 cents per share has been declared on ordinary shares post 30 June 2018.
Franked Dividends
Consolidated
2018
$
2017
$
Franking credits available for subsequent financial years based on a tax rate of 27.5% (2017: 30%)
4,920,196
4,644,490
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 2018 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 2018. 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 $152,285 (2017: $137,649).
XRF SCIENTIFIC LIMITED | 2018 ANNUAL REPORT 47
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
NOTE 24: CONTINGENCIES
At 30 June 2018, the consolidated entity had no material contingent liabilities in respect of claims, contingent considerations,
associates and joint ventures or any other matters.
NOTE 25: COMMITMENTS
(a) Lease commitments
Consolidated
2018
$
2017
$
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
431,063
579,575
417,146
599,110
1,010,638
1,016,256
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 2018 and January 2019 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 2018:
Bank overdraft facility
Bank guarantee facility
Consolidated
2018
$
483,713
313,245
796,958
2017
$
649,677
1,459,634
2,109,311
48 XRF SCIENTIFIC LIMITED | 2018 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
NOTE 26: 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 Canada s.r.l (Canada)
Taxation services
BDO AG Wirtschaftsprüfungsgesellschaft (Germany)
Taxation services
BDO LLP (UK)
Audit and review of financial reports
Consolidated
2018
$
2017
$
119,201
47,146
1,224
30,791
6,611
104,858
43,790
-
25,764
10,121
16,094
3,655
-
11,797
8,609
229,676
8,949
208,934
NOTE 27: RELATED PARTY TRANSACTIONS
(a) Parent entity
The ultimate parent and controlling entity is XRF Scientific Limited which at 30 June 2018 owns 100% of all subsidiaries listed in
note 28.
(b)
Interests in subsidiaries
Interests in subsidiaries are set out in note 28.
(c) Directors and key management compensation
Short-term employee benefits
Post-employment benefits
Long-term benefits
Consolidated
2018
$
837,398
63,309
8,378
909,085
2017
$
831,670
62,764
8,221
902,655
No other post-employment or termination benefits have been provided. Detailed remuneration disclosures are available in the
remuneration report from pages 10-15.
(d) Loans to key management personnel
There were no loans to any key management personnel during either of the years ended 30 June 2017 or 30 June 2018.
(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 $115,975 (2017: $115,169). 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.
XRF SCIENTIFIC LIMITED | 2018 ANNUAL REPORT 49
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
NOTE 28: 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
2018
%
2017
%
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
NOTE 29: RECONCILIATION OF PROFIT AFTER INCOME TAX TO NET CASH FLOW PROVIDED
BY OPERATING ACTIVITIES
Profit for the year
Depreciation and amortisation
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 from operating activities
NOTE 30: SHARE-BASED PAYMENTS
There were no share-based payments during the year ended 30 June 2018 (2017: Nil).
Consolidated
2018
$
1,024,007
854,587
58,007
-
(2,850)
515,177
(2,736,200)
70,077
(216,360)
(128,021)
325,227
(4,398)
(24,725)
1,073,255
807,783
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
50 XRF SCIENTIFIC LIMITED | 2018 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
NOTE 31: 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
2018
Cents
2017
Cents
0.8
0.8
0.6
0.6
$
$
(c) Reconciliations of earnings used in calculation earnings per share
Profit attributable to the ordinary equity holders of the company
1,024,007
793,851
(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
133,825,803
Number
Number
NOTE 32: 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
Retained earnings
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 2018 or 30 June 2017.
NOTE 33: EVENTS OCCURRING AFTER THE REPORTING DATE
2018
$
2017
$
8,015,499
6,343,558
21,357,808
19,724,573
12,717,756
11,012,869
13,021,474
11,314,160
18,584,489
18,584,489
1,040,077
721,275
(11,288,230)
(10,895,351)
8,336,336
8,410,413
(246,036)
174,338
(71,698)
(265,218)
179,627
(85,591)
Dividend
A final dividend of 0.3 cents per share fully franked was declared on 28 August 2018, bringing the total dividend for the year to
0.3 cents per share fully franked (FY17: 0.24 cents per share fully franked), with a record date of 5 October 2018 and payment
date of 19 October 2018.
Other events
There were no other events subsequent to the reporting date which have significantly affected or may significantly affect the XRF
Scientific Limited operations, results or state of affairs in future years.
XRF SCIENTIFIC LIMITED | 2018 ANNUAL REPORT 51
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52 XRF SCIENTIFIC LIMITED | 2018 ANNUAL REPORT
DIRECTORS’ DECLARATION
FOR THE YEAR ENDED 30 JUNE 2018
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 2018 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 28th day of August 2018
XRF SCIENTIFIC LIMITED | 2018 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 2018, 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 2018 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.
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.
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
Goodwill impairment assessment
Key audit matter
How the matter was addressed in our audit
As disclosed in Note 14 of the financial report,
Our procedures included, but were not limited to the
goodwill represents a significant balance
following:
recorded in the statement of financial position.
Under Australian Accounting Standards goodwill
is required to be tested annually for impair
ment.
This was determined to be a key audit matter
due to the significance of goodwill to the
Group’s financial position and due to the de
termination of the "Value in Use" of each cash
generating unit (CGU) and whether or not an
impairment charge is necessary, involving judge
ments 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.
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
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 assess
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
(cid:127)
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 2018, 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 10 to 15 of the directors’ report for the
year ended 30 June 2018.
In our opinion, the Remuneration Report of XRF Scientific Limited, for the year ended 30 June 2018,
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, 28 August 2018
SHAREHOLDER INFORMATION
Additional information (as at 31 July 2018) 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 Shares2
15,563,994
13,316,641
10,017,201
8,670,894
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.
2 Based on information available to the Company, including substantial holding announcements released to the market.
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
89
99
314
143
692
–
–
–
–
–
–
58 XRF SCIENTIFIC LIMITED | 2018 ANNUAL REPORT
SHAREHOLDER INFORMATION
TOP 20 SHAREHOLDERS
No.
Holder name
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
NATIONAL NOM LTD
SKYE ALBA PL
KORBER, MICHAEL KARL
BNP PARIBAS NOMS PL
D & GD BROWN NOM PL 1
EVELIN INV PL
J P MORGAN NOM AUST LTD
TZELEPIS NOM PL
PROSSOR, STEPHEN W + F C
GREAT WESTERN CAP PL
JGH METZ PL
BETA GAMMA PL
BROWN, DAVID + GLENYS D 1
DAVIDTS, FREDERIC
BOYLES, DAVID LEROY
BROWN, JEFFREY D + P N
CREEL PL
G & E PROPS PL
IMAJ PL
KLARIE PETER
Number of
Ordinary Shares
15,563,994
Percentage of
Ordinary Shares
11.63%
13,316,641
10,017,201
7,820,000
7,000,000
6,300,000
5,342,676
3,280,000
2,669,767
2,649,578
2,000,480
2,000,000
1,670,894
1,668,706
1,500,000
1,392,977
1,230,069
1,120,000
1,000,000
890,576
9.95%
7.49%
5.84%
5.23%
4.71%
3.99%
2.45%
1.99%
1.98%
1.49%
1.49%
1.25%
1.25%
1.12%
1.04%
0.92%
0.84%
0.75%
0.67%
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.
88,433,559
66.08%
RESTRICTED SECURITIES
There are currently no restricted securities.
NON-MARKETABLE PARCELS
Class of Security
Ordinary shares
Number of Securities
Number of Holders
21,948
56
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 | 2018 ANNUAL REPORT 59
CORPORATE DIRECTORY
DIRECTORS
Kenneth Baxter (Non-Executive Chairman)
David Brown (Non-Executive Director)
David Kiggins (Non-Executive Director)
Fred Grimwade (Non-Executive Director)
Vance Stazzonelli (Managing Director since 22 February 2018)
COMPANY SECRETARIES
Vance Stazzonelli
Andrew Watson
KEY MANAGEMENT PERSONNEL
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 | 2018 ANNUAL REPORT