APPENDIX 4E AND
FINANCIAL STATEMENTS
DTI Group Ltd
30 June 2017
RESULTS FOR ANNOUNCEMENT TO THE MARKET
ASX announcement
29 August 2017
DTI FY17 Results
Summary and Highlights
Revenue of $15.9 million (FY16: $16.2 million)
EBITDA of $(3.0) million (FY16: $3.6 million)
Underlying EBITDA of $0.5 million (FY16: $2.8 million)
NPAT of $(5.8) million (FY16: $31,558)
Revenue was adversely impacted by project delays however was in-line with market
guidance
EBITDA was adversely impacted by revenue lag, increased development and
operational support associated with new products introduced during the year and a
change in the manner in which Research & Development grant income is treated
NPAT was adversely impacted by increased amortisation associated with increased
spending on product development and a reduction in the expected useful lives of
existing products. The reduced estimated useful life was in part caused by the new
products introduced by DTI
$11.5 million capital raising completed
Successfully launched new digital recorder (MDR6), train data recorder (TDR6) and
range of passenger information displays and passenger announcement systems
Completed first five trainset deliveries for Sydney Metro project
DTI records its largest ever contracted order book, in excess of $30 million
(2016 : $13.5 million)
Financial Performance
DTI Group Ltd (DTI) today announced its results for the year ended 30 June 2017. DTI
recorded an EBITDA loss of $3.0 million (FY16: $3.6 million) on revenue of $15.9 million
(FY16: $16.2 million). The result was adversely impacted by delayed revenue resulting from
project delays, higher development and support costs associated with launching new
products and a change in the manner in which Research & Development (R&D) grant
income is treated. Historically, R&D grant income has been treated as income, resulting in
increased EBITDA. In FY17 DTI has adopted treatment whereby grant income receivable
related
that capitalised
expenditure.
to previously capitalised expenditure
first offset against
is
DTI Group Ltd | ABN 15 069 791 091
31 Affleck Rd | Perth Airport WA 6105
T +61 8 9479 1195 | F +61 8 9479 1190
www.dti.com.au
ASX announcement
Non-recurring costs of $1.8 million associated with impairment charges, establishment of a
warranty provision, and marketing costs associated with establishing a new market
contributed to the negative earnings result. In addition, DTI has adjusted underlying EBITDA
by net research and development expense of $1.6 million (2016: $1.1 million income) to
provide a comparable underlying EBITDA between FY17 and FY16.
DTI reported a full-year net loss after tax of $5.8 million for FY17 compared to a net profit
after tax of $31,558 for the previous corresponding period.
The full year result reflects the impact of a transitional year for DTI on a number of fronts.
During FY17 DTI has launched a range of new products including:
MDR6 - its sixth generation digital recorder for bus and light rail vehicles;
TDR6 - a digital recorder designed to comply with heavy rail operating conditions; and
innovative new passenger information displays and associated equipment.
In addition the Company increased its presence in the rail sector, increasing its contracted
order book in this sector from $10.1 million at the end of FY16 to $27 million at 30 June
2017. A combination of increased effort on product development and the increased
engineering and support required to service the rail sector has resulted in a reduction in
project margins.
DTI has continued to increase its contracted order book, develop new products and service
new customers throughout the year.
DTI has negligible debt and cash at 30 June of $3.2 million. DTI recorded negative cash
from operations of $3.6 million due to increased working capital associated with larger rail
contracts, delays experienced in collection of receivables and a build-up in inventory to
support contracted work.
DTI has been lost time injury (“LTI”) free since 2015 and has a LTI frequency rate (“LTIFR”)
of zero.
Pipeline and Order Book
DTI currently enjoys a contracted order book in excess of $30 million which has consistently
increased half-on-half since June 2015 and by over 80 per cent since 31 December 2016.
During FY17 DTI has been successful in acquiring significant term contracts in the rail sector
to complement its already strong position in the bus sector.
DTI has an identified Opportunity Pipeline in excess of $450 million which is expected to be
awarded over the next four to five years. The rail sector contributes approximately 85 per
cent of this pipeline with the balance in the bus and law enforcement sectors. Europe,
Middle East and Africa (EMEA) are a strong geographic focus for the business with in excess
of 60 per cent of the Opportunity Pipeline sourced in this region.
DTI Group Ltd | ABN 15 069 791 091
31 Affleck Rd | Perth Airport WA 6105
T +61 8 9479 1195 | F +61 8 9479 1190
www.dti.com.au
ASX announcement
FY18 Strategy focus
FY17 was a transitional year for DTI, launching a range of new products, incurring significant
research and development expenditure and increasing its penetration into the rail sector.
The significant investment in Research & Development ($7.1 million) and the working capital
intensity ($3.0 million) associated with rail projects has consumed a large proportion of the
recent capital raising. DTI intends to maximise its earnings potential in FY18 by pursuing the
following strategic platform:
Grow revenue:
Stabilise
Production Costs:
Cost Down
Products:
Operating costs
Outlook
DTI has consistently grown its contracted order book over the past
two years. DTI now has a number of multi-year contracts in place
providing a sustainable revenue base and is well placed to grow
revenue from an increasing number of short term opportunities
During FY17 DTI launched 19 new products including recorders,
cameras and passenger information displays. The unit costs
associated with initial delivery of these products was high relative to
long-run production costs adversely impacting gross margin. With
production design complete and DTI able to commit to production
runs in economic order quantities, unit costs are expected to
reduce.
Following stabilisation of production costs, DTI engineers have
initiated cost down engineering to reduce the component and
manufacturing costs of its products. This process is estimated to
reduce manufacturing costs by up to 25 per cent.
During the past 24 months DTI operating costs have increased as
the company developed its new range of products. Since 30 June
2017 DTI has taken action to reduce operating costs by $1.3 million
and expects to reduce its cost base by a further $1.0 million over
the course of the year.
DTI is operating in a growth market underwritten by strong public and private sector demand
with increased opportunities arising from changes in technology and development of new
products. DTI has a highly scalable business model capable of growing revenue by
leveraging its core technology platform. DTI has converted opportunities in the sector into a
growing contracted order book which positions the Company strongly for future revenue
growth.
DTI Group Ltd | ABN 15 069 791 091
31 Affleck Rd | Perth Airport WA 6105
T +61 8 9479 1195 | F +61 8 9479 1190
www.dti.com.au
ASX announcement
Board and Management changes
During the year DTI enhanced its management team by creating an Executive Management
Team and appointing a new Chief Executive Officer, Chief Financial Officer and General
Manager of Operations. The Board is confident that this team has the skills and expertise to
return the business to profitability.
Mr Chris Morris, DTI’s inaugural Chairperson, has advised the Board of his decision to
relinquish the role of Chairperson. Mr Neil Goodey, currently a Non-Executive Director, has
agreed to assume the role of Chairperson of the Company. Mr Morris will continue as a
member of the Board as a Non-Executive Director. The Board thanks Mr Morris for his
considerable support and guidance over the past six years and congratulates Mr Goodey on
his appointment.
For further
+61 8 9273 2905 or email peter.tazewell@dti.com.au
information please contact Peter Tazewell, Chief Executive Officer on
About DTI Group
DTI develops and provides world-leading surveillance and commuter communication
systems technology and services to the mobile transit industry worldwide. Core technology
development and system design activities are undertaken from the Company’s head office in
Perth, Australia.
DTI Group Ltd | ABN 15 069 791 091
31 Affleck Rd | Perth Airport WA 6105
T +61 8 9479 1195 | F +61 8 9479 1190
www.dti.com.au
Appendix 4E
For the period ended 30 June 2017
DTI Group Ltd
Results for announcement to the market
Appendix 4E
Preliminary Final Report
Period Ended 30 June 2017
Name of entity
DTI Group Ltd
ABN or equivalent company reference
Period ended (‘Current Period’)
15 069 791 091
30 June 2017
Previous corresponding period: 30 June 2016
Extracts from this report for announcement to the market
Revenues from ordinary activities
Down
2.2%
to
15,867.7
Profit/(loss) from ordinary activities after tax
attributable to members
Down
n/a
to
(5,847.9)
Net profit/(loss) after tax for period attributable to
members
Down
n/a
to
(5,847.9)
$000s
Dividends (distributions)
Final dividend
Interim Dividend
Record date for determining
entitlements to the dividend
Amount per security
Franked amount per
security
nil
nil
N/A
N/A
N/A
Brief explanation of any of the figures reported above and short details of any bonus or cash issue or
other item(s) of importance not previously released to the market:
Not applicable
Commentary on Results
For commentary on the results of DTI Group Ltd refer to the announcement relating to the release
of the DTI Group Ltd results in conjunction with the details and explanations provided herewith and
in the accompanying financial statements for the year ended 30 June 2017.
Appendix 4E
For the period ended 30 June 2017
Ratios and Other measures
NTA backing
Net tangible asset backing per
ordinary security
Dividends
Date the dividend is payable
Record date to determine
entitlements to the dividend
Amount per security
Final Dividend:
Current year
Previous year
Interim Dividend:
Current year
Previous year
Total Dividends
Total Dividend:
Current year
Previous year
DTI Group Ltd
Current Period
Previous corresponding
Period
$0.134
$0.124
N/A
N/A
Amount per security
Franked amount per
security
nil
nil
nil
nil
nil
nil
nil
nil
Amount per security
Total amount ($000s)
nil
nil
nil
nil
Control gained over entities having material effect
During the year ended 30 June 2017 there was no control gained over entities having material
effect on the financial results or financial position of the Consolidated Entity.
Loss of control of entities having material effect
During the year ended 30 June 2017 there was no loss of control over entities having material
effect on the financial results or financial position of the Consolidated Entity.
Audit Status
This report is based on financial statements that have been audited. There is no dispute or
qualification of the financial statements. The Independent auditor’s report is included in the 2017
Audited Annual Report.
Raj Surendran
Chief Financial Officer
29 August 2017
Perth, Western Australia
Annual Report 2017
D T I
G R O U P L T D
A B N 1 5 0 6 9 7 9 1 0 9 1
2017 Year End Report
Contents
Directors’ Report ................................................................................................................................. 3
Audited Remuneration Report ....................................................................................................... 15
Consolidated Statement of Profit or Loss and Other Comprehensive Income .................. 25
Consolidated Statement of Financial Position ........................................................................... 26
Consolidated Statement of Changes in Equity .......................................................................... 27
Consolidated Statement of Cash Flows ...................................................................................... 28
Notes to the Consolidated Financial Statements ...................................................................... 29
Directors’ Declaration ...................................................................................................................... 66
Auditor’s Report ................................................................................................................................ 67
Auditor’s Independence Declaration ............................................................................................ 73
Corporate directory .......................................................................................................................... 74
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
P a g e | 2
Directors’ Report
The Directors present their report, together with the consolidated financial statements of the Group
comprising of DTI Group Limited (“DTI” or “the Company”) and its subsidiaries for the financial year ended
30 June 2017 and the auditor’s report thereon.
Directors
The directors of the Company at any time during or since the end of the financial year are:
Chris Morris
Non-Executive Chairperson
Qualifications & Experience:
Chris Morris was appointed as Non-Executive Chairperson of DTI on
29 June 2011 and served in that role for six years.
Mr Morris has worked across the global finance and securities industry for
more than 30 years. He co-founded Computershare Limited in 1978 and
oversaw its listing on ASX in 1994. Chris’s long-term strategic vision and
passion
transforming
Computershare from an Australian business into a successful global
public company.
industry have been
instrumental
the
for
in
Mr Morris chairs the Remuneration and Nominations Committee.
Other Directorships:
Mr Morris is a Non-Executive Director of Computershare Limited and is
the Non-Executive Chairperson of Smart Parking Limited.
Peter Tazewell
Managing Director
Qualifications & Experience:
Peter Tazewell was appointed to the role of Managing Director of DTI on
1 December 2016.
Mr Tazewell is a qualified chartered accountant with over 30 years’ of
varied management, financial and corporate experience including finance,
accounting, corporate strategy, purchase/supply and
identification
evaluation and execution of significant corporate transactions.
Education:
Memberships:
Bachelor of Commerce – University of Western Australia
Fellow of the Institute of Chartered Accountants
Other Directorships:
None
Richard Johnson
Executive Director
Qualifications & Experience:
Richard Johnson joined DTI as General Manager in 2005 and was
appointed to the Board as an Executive Director on 9 August 2011. He
has served as a director of the Company for six years.
Mr Johnson has more than 20 years’ experience in the transit technology
sector. Prior to joining DTI, he held senior management positions at ERG
Limited which developed, supplied and managed integrated fare collection
systems for the transit industry around the world.
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
P a g e | 3
Directors’ Report
Education:
Bachelor of Science (Electrical Engineering) - University of Calgary
Master of Engineering Studies – University of Western Australia
Master of Business Administration - University of Western Australia
Other Directorships:
None
Glyn Denison
Non-Executive Director
Qualifications & Experience:
Glyn Denison was appointed to the Board of DTI on 19 January 2004 with
executive responsibilities
Mr Denison
relinquished his executive responsibilities in December 2006 and has
remained on the Board as a Non-Executive Director. Mr Denison has
been a director of the Company for over 13 years.
for business development.
Mr Denison has over 30 years’ experience in the development of
international distribution of technical products for the public transport
industry, including senior roles at ERG Limited. Mr Denison has extensive
knowledge of the public transit sector, including the existing customer
base of DTI and its business partners.
Mr Denison is a member of the Remuneration and Nominations
Committee and the Audit, Risk and Compliance Committee.
Education:
Bachelor of Engineering – University of Western Australia
Diploma in Business and Administration – Curtin University
Other Directorships:
Mr Denison is a Non-Executive Chairman of OBJ Ltd, McDowall Affelck
Pty Ltd and Wesbuilders Cooperative Limited.
Neil Goodey
Non-Executive Director
Qualifications & Experience:
Neil Goodey co-founded DTI in 1995 and held the position of Managing
Director until 2008. Mr Goodey has been a director for over 22 years.
Over the last 25 years Mr Goodey has founded and managed a number of
successful technology-driven companies, including DTI. He created the
software-focused vision for DTI and worked directly with the Company’s
engineering team to develop DTI’s products and underlying intellectual
property.
Mr Goodey is a member of
Committee and the Audit, Risk and Compliance Committee.
the Remuneration and Nominations
Other Directorships:
None
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 4
Directors’ Report
Jeremy King
Independent Non-Executive Director
Qualifications & Experience:
Jeremy King is a corporate lawyer and was appointed to the Board of DTI
on 29 June 2011. He is qualified as a lawyer in Western Australia and
England and Wales and has been a director of DTI for six years.
Mr King has over 15 years’ experience in domestic and international legal,
financial and corporate matters. He has extensive corporate experience,
particularly in relation to cross-border private equity and leveraged buy-out
acquisitions, as well as acting for banks, financial institutions and
corporate issuers in respect of various debt and equity capital raisings.
Mr King is a member of the Remuneration and Nominations Committee
and Chairperson of the Audit, Risk and Compliance Committee.
Education:
Bachelor of Laws – University of Western Australia
Other Directorships:
Mr King is a Non-Executive Director of Transcendence Technologies Ltd,
HER Resources Ltd, Red Mountain Mining Ltd, Cott Oil and Gas Ltd,
Smart Parking Limited and Pure Minerals Limited.
Mr King was formerly a Non-Executive Director of CEB Resources plc and
Orca Energy Limited and Chairperson of Continuation Investments Ltd.
The above named directors held office during the whole of the financial year and since the end of the
financial year except for Mr Tazewell who was appointed to the Board on 1 December 2016.
Company Secretary
Bruce Mitchell
Mr Mitchell joined DTI in 2012 as Chief Financial Officer and Company Secretary and held the position of
Company Secretary at the end of the financial year. He holds a Bachelor of Accounting Science (Honours)
from the University of South Africa, and a Bachelor of Commerce from the University of Natal. Mr Mitchell
resigned as Company Secretary on 10 July 2017.
Raj Surendran
Mr Raj Surendran was appointed as Company Secretary and Chief Financial Officer of the Company on
10 July 2017 and held that position at the date of this report. Mr Surendran is a qualified accountant and
holds a Masters of Business Administration from the University of Western Australia.
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 5
Directors’ Report
Directors’ meetings
The number of directors’ meetings (including meetings of committees of directors) and number of meetings
attended by each of the directors of the Company during the financial year are:
Directors
C Morris
PJ Tazewell1
R Johnson
G Denison
N Goodey
J King
Board of Directors
Held
Attended
9
4
9
9
9
9
7
4
9
9
9
9
Remuneration and Nomination
Committee
Audit, Risk and Compliance
Committee
Held
2
2
2
2
Attended
Held
Attended
1
2
2
2
4
4
4
4
4
4
1
Four Board meetings have been held since Mr Tazewell was appointed to the Board on 1 December 2016.
Principal activities
The principal activities of the Group during the course of the financial year were the development,
manufacture and supply of integrated surveillance, passenger communication systems, and fleet
management solutions for the global mass transit industry and other related markets.
There were no significant changes in the nature of the activities of the Group during the year.
Operating and Financial Review
Overview
DTI is a global leader in the supply of sophisticated transit communication systems to the global mass transit
industry. DTI’s customers are transit agencies, transit vehicle manufacturers, law enforcement authorities
and high-value freight operators. The Company offers the following products and services:
Advanced surveillance solutions – specialised hardware systems, incorporating video, audio, GPS
tracking, communications and high-speed recording technology; supported by sophisticated device and
data management software to provide comprehensive, fleet-wide, CCTV and vehicle management
solutions.
Passenger communication solutions – specialised hardware systems, incorporating real time passenger
information through graphical and high brightness displays as well as public address and hearing aid
loop communications, passenger emergency communications, driver awareness systems incorporating
live viewing of passengers, and infotainment systems; supported by sophisticated device and content
management software to provide a comprehensive, fleet-wide, passenger information management
solution.
Managed services – back-end control room communications and infrastructure comprising wide-area
urban surveillance, driver development and risk mitigation, video management, vehicle data analysis
and monitoring, schedule adherence analysis, IT infrastructure, help desk, technical support and
monitoring, and first line maintenance.
DTI markets and distributes its product range to customers worldwide, both directly and in conjunction with a
network of integrators and business partners.
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 6
Directors’ Report
Shareholder returns
The table below sets out summary information about the Group’s earnings and movement in shareholder
wealth for the five years to 30 June 2017.
Revenue
EBITDA
Net profit/(loss) after tax
Share price at start of year
Share price at end of year
Dividends
Basic (loss)/
earnings per share
$
$
$
$
$
cps
cps
Return on Capital Employed %
FY17
FY16
FY15
FY14
FY13
15,867,660
16,216,338
14,705,897
19,798,072
19,496,642
(3,024,987)
3,645,667
1,529,197
3,076,060
3,002,098
(5,847,874)
31,558
690,511
1,115,975
1,625,184
0.39
0.17
-
(5.32)
(13.5)
0.29
0.39
-
0.03
22.7
n/a
0.29
-
0.14
n/a
n/a
-
1.46
10.08
38.53
n/a
n/a
-
14.90
43.32
Net profit amounts have been calculated in accordance with Australian Accounting Standards (AASBs).
Review of Financial Condition
FY17 Financial Performance
During the year ended 30 June 2017 DTI recorded revenue of $15.9 million (2016: $16.2 million). This
represents a 1.9 per cent reduction compared to the prior year and is attributed to delays in meeting revenue
recognition thresholds under its customer contracts. DTI’s revenue continues to be largely dependent upon
capital projects and there is a strong focus on increasing revenue from maintenance and recurring
equipment sales. Revenue from these sources was $7.5 million (2016: $8.9 million) which represents a
16 per cent decrease compared to the prior year.
DTI recorded negative EBITDA of $3.0 million for the year ended 30 June 2017 (2016: $3.6 million).
Reported EBITDA was adversely impacted by identification and impairment of unrecoverable assets and the
significant investment made by DTI in researching and developing new products and the subsequent
expensing of a portion of these costs. These matters are further elaborated in the discussion on Underlying
EBITDA below.
Administration expenses of $4.8 million (2016: $4.5 million) increased by 7.3 per cent compared to the prior
year. This increase is largely attributable to increased head count, professional and consulting fees.
Employee benefits expense of $7.1 million (2016: $4.6 million) was 54 per cent higher than the prior year
reflecting the increased employee numbers engaged in product development.
Research and Development (R&D) continues to be a strong focus of the business with $7.1 million
(2016: $3.2 million) committed to these activities during the year. While R&D will remain a key focus of the
business in the future, the R&D spend during FY17 was elevated due to the large number of new products
developed and delivered during this year.
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 7
Directors’ Report
Underlying EBITDA
During the year DTI recorded a number of non-recurring expenses attributed to events from earlier reporting
periods. In order to present an underlying EBITDA result, these items have been identified in the following
table:
Reconciliation of Underlying EBITDA
Statutory EBIT
Depreciation/Amortization
Reported EBITDA
Foreign Exchange losses
Net R&D income / expense
Impairment
Initial Warranty provision
Business Development costs
Product margin
Underlying EBITDA1
Net R&D income / expense
Initial warranty provision:
Impairment:
Business Development Costs
Product Margin
$
(4,827,070)
1,802,083
(3,024,987)
165,680
1,550,854
519,584
146,051
491,301
614,117
462,600
R&D Grant
in capitalised
income was recorded as a reduction
expenditure, to the extent possible, rather than as income recorded to the
Profit and Loss Statement as in prior years.
During the financial period it was identified that a warranty provision had
not been raised in relation to past sales. DTI has raised a provision of
$134,299 to cover product sales at year end. Warranty claims for the
current year have been expensed throughout the course of the financial
year.
DTI regularly reviews the capitalised value of intangible assets to confirm
that the carrying value can be recovered against future product sales.
Where a product has become obsolete or is determined not to generate
sufficient sales to support the carrying value then the intangible asset is
impaired. In addition DTI also investigated long-standing receivables and
determined unrecoverable amounts. These receivables have also been
impaired.
During FY17 DTI incurred certain business development costs associated
with supporting its distribution channel in certain markets. This support
has been discontinued since 1 July 2017
DTI experienced higher costs of manufactured product, and a
corresponding reduction in gross margin, associated with manufacturing
new products in volumes below economic quantities. DTI expects to
move to economic production volumes in 1Q FY18.
1 Underlying EBITDA excludes non-recurring costs and foreign exchange losses.
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 8
Directors’ Report
Cash Flow
DTI generated negative cash flow from operations of $3.6 million during the financial year. Net cash in flow
for the year was $2.5 million. Key impacts on net cash flow included:
i) Continued investment in R&D activities amounting to $7.1 million;
ii)
Increased working capital intensity, primarily associated with rail projects, amounting to $3.0 million; and
iii) $11.5 million capital raising completed in December 2016.
Rail projects typically have a larger investment in engineering and design and can be subject to delays
outside of DTI’s control. The working capital intensity of these rail projects gives rise to irregular cash flows.
DTI recorded an improved cash position at year end, primarily attributed to the $11.5 million capital raising
during the year.
Financial Position
As at the end of the financial year, DTI maintained a strong financial position with positive cash reserves of
$3.1 million and high levels of liquid working capital. DTI has no term debt and the only financial
indebtedness relates to equipment finance leases. The Directors consider that the current level of working
capital is sufficient to support the current operations of the Company.
As described in the Financial Statements, DTI continues to be in breach of its financial covenants with ANZ
Banking Group Limited (ANZ) due to the negative earnings result in FY17. DTI continues to work ANZ to
resolve this issue.
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 9
Directors’ Report
Review of principal business
DTI services the global mass transit market and during the financial period determined that it service a single
market. As a result, DTI has discontinued the practise of segment reporting on the basis of geographic
regions. The principal underlying drivers for DTI business are:
i)
Increased public and private investment in public transport infrastructure;
ii) Requirement for improved security and surveillance on mass transit systems; and
iii) Increased demand for passenger information systems on mass transit systems.
DTI considers these are strong drivers of demand for its products and services which will continue into FY18
and beyond.
Investments for future performance
DTI completed a major investment in new products which resulted in increased R&D costs and a lag in
revenue as these new products were introduced to market. This contributed to the Group’s net loss for the
year. While R&D activities will continue to be a focus for DTI, it is considered that the level of R&D spend will
be reduced in FY18.
Operational performance
Throughout FY17 DTI won a number of significant new contracts on the basis of its unique product offering.
During this period DTI was awarded contracts to provide surveillance and other associated equipment for
London Underground, Virgin Trains and London Midland. Also during FY17, DTI formalised its close working
relationship with Alstom Transport by entering into a long-term Framework Agreement for the supply of on-
train communication and associated equipment.
DTI continues to provide long-term maintenance and support services to municipal transit authorities in
Australia (Brisbane City Council, Public Transit Authority of Western Australia, Department of Planning,
Transport and Infrastructure of South Australia, and Action Bus (Canberra)) and in the UK. DTI is also
continuing to supply its mobile video surveillance solutions to long term customers in San Francisco and
Philadelphia.
Throughout FY17 DTI made significant investment in new products, primarily for deployment on Alstom
trains for the Sydney Metro project. Deliveries of these products (by train-set) commenced in FY17 and will
continue throughout FY18 and into FY19.
During FY17 DTI completed deliveries of equipment to Dallas Area Rapid Transit Authority, the installation of
which will be completed in 1H FY18.
DTI successfully completed an external surveillance audit for its ISO9001:2008 Quality Assurance
certification by Bureau Veritas. The ISO9001 accreditation provides further assurance to customers that
they receive the very best in quality and service from our company and will cater to broadening business
opportunities globally.
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 10
Directors’ Report
Significant changes in state of affairs
During the financial year DTI undertook a placement and entitlement’s issue (Capital Raising) which raised
$11.5 million. The proceeds of this Capital raising were applied to: reduction of bank debt, R&D activities
and working capital requirements.
Other than as set out above, in the opinion of the directors, there were no significant changes in the state of
affairs of the Group that occurred during the financial year under review.
Outlook
Opportunity Pipeline
DTI continues to enjoy strong demand for its products and services
and an Opportunity Pipeline exceeding $450 million. FY17 was a
challenging year for the Group with a significant investment made in
developing new products that have positioned the business strongly to
drive future revenue growth. Importantly, awareness of DTI and its
product range is growing in the key markets of UK, Europe and North
America where the majority of the Opportunity Pipeline is weighted.
The EMEA market,
underpinned by ongoing investment in the UK rail sector.
in particular, continues
to grow strongly
Order Book
Chart 2: Company Data
Business Strategies
Chart 1: Company Data
Recent contract awards have seen DTI increase its
pro-forma contracted order book to in excess of
$30 million at 30 June 2017, an 80 per cent
increase compared to 31 December 2016. This is
the highest value of contracted work ever recorded
by DTI and supports the business for strong
revenue growth over future years.
While the volume of contracted work is strongly
weighted towards rail contracts, DTI has also
increased its contracted bus work since December.
DTI’s business strategy has been to continually innovate by applying leading edge technology to the transit
industry and developing innovative new products and solutions. DTI has successfully developed a number
of new products during FY17 including a multi-use digital video recorder (DVR) for bus, light-rail and rail
uses, a heavy duty DVR designed for heavy rail, a transit audio communication system for integrated
platform and on-vehicle communications and a 48” LCD passenger information display for presenting video
and dynamic images.
While DTI will continue its strategy of developing innovative new products, there is now a requirement to
invest in significant marketing efforts to maximise the current investment in these new products.
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 11
Directors’ Report
Future Developments
Having regard to its current balance of contracted work DTI expects to deliver improved revenue during
FY18. The opportunity to win new contracted work from its range of new products is strong and DTI is
focussed on building its backlog of contracted work in order to demonstrate strong future revenue.
Dividends
In respect of the financial year ended 30 June 2017, no interim dividend was paid and the directors have
determined that no final dividend will be paid.
Events since the end of the financial year
There has not arisen, in the interval between the end of the financial year and the date of this report, any
item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the
Company, to affect significantly the operations of the Group, the results of those operations, or the state of
affairs of the Group, in future financial years.
Likely developments and expected results of operations
The Group will continue to pursue its policy of developing communications and passenger information
technologies for the global mass transit market. DTI remains confident in its outlook as it seeks to drive
growth via its strong pipeline of opportunities. The Group’s ongoing investment in R&D aims to strive for
continued innovation and market leadership of the products and services that DTI offers to the global mass
transit industry and other related markets.
Further information about likely developments in the operations of the Group has not been included in this
report because disclosure of the information would be likely to result in unreasonable prejudice to the Group.
Environmental regulation
The Company is not subject to any specific environmental regulation. 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. The Directors have assessed that there are no current reporting
requirements, but the Company may be required to do so in the future.
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 12
Directors’ Report
Directors’ interests
The relevant interest of each director in the shares, debentures, interests in registered schemes and rights or
options over such instruments issued by the companies within the Group and other related bodies corporate,
as notified by the directors to the ASX in accordance with S205G(1) of the Corporations Act 2001, at the date
of this report is as follows:
Ordinary Shares
DTI Group Limited
Options over Ordinary
Shares
Rights over Ordinary Shares
C Morris
PJ Tazewell
R Johnson
G Denison
N Goodey
J King
24,549,506
150,000
494,908
3,030,495
6,575,198
451,701
Nil
Nil
Nil
Nil
Nil
nil
Nil
Nil
Nil
Nil
Nil
Nil
Indemnification of officers and auditors
The Company has also agreed to indemnify the current directors of its controlled entities for all liabilities to
another person (other than the Company or a related body corporate) that may arise from their position,
except where the liability arises out of conduct involving a lack of good faith. The agreement stipulates that
the Company will meet the full amount of any such liabilities, including costs and expenses.
During the financial year, the Company paid a premium in respect of a contract insuring the Directors of the
Company and all executive officers of the Company against a liability incurred as such Director, secretary or
executive officer to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits
disclosure of the nature of the liability and the amount of the premium.
The Company has not otherwise, during or since the financial year, indemnified or agreed to indemnify an
officer or auditor of the Company or of any related body corporate against a liability incurred as such an
officer or auditor.
Non-audit services
The Board is satisfied that the provision of non-audit services during the year is compatible with the general
standard of independence for auditors imposed by the Corporations Act 2001. The Directors are satisfied
that the services disclosed below did not compromise the external auditor’s independence for the following
reasons:
All non-audit services are reviewed and approved by Board prior to commencement to ensure they do
not conversely affect the integrity and objectivity of the auditor.
The nature of the services provided does not compromise the general principles relating to auditor
independence as set out in the APES Code of Ethics for Professional Accountants.
The total fees for non-audit services paid to the auditor or related practices of the auditor during the year
ended 30 June 2017 were $9,210 (2016: $7,896) in relation to UK Tax services and the DTI Share Plan.
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 13
Directors’ Report
Proceedings on behalf of the Company
No person has applied to the court under section 237 of the Corporations Act 2001 for leave to bring
proceedings on behalf of the Company, or to 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 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
The auditor’s independence declaration is set out on page 72 and forms part of the directors’ report for the
financial year ended 30 June 2017.
Corporate Governance Statement
The Board of DTI is responsible for the corporate governance of the company and its subsidiaries. The
Board has governance oversight of all matters relating to the strategic direction, corporate governance,
policies, practices, management and operations of DTI with the aim of delivering value to its Shareholders
and respecting the legitimate interests of other stakeholders, including employees, customers and suppliers.
Under ASX Listing Rule 4.10.3, DTI is required to provide in its annual report details of where shareholders
can obtain a copy of a corporate governance statement, disclosing the extent to which the Company has
followed the ASX Corporate Governance Council Principles and Recommendations in the reporting period.
DTI has published its corporate governance statement on the “Corporate Governance” page of its web site at
www.dti.com.au
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 14
Directors’ Report
Audited Remuneration Report
This Remuneration Report, which forms part of the Directors' Report, sets out information about the
remuneration of Key Management Personnel (KMP) of the Group for the financial year ended 30 June 2017.
The term Key Management Personnel refers to those persons having authority and responsibility for
planning, controlling and directing the activities of the consolidated entity, directly or indirectly, including any
director (whether executive or otherwise) of the consolidated entity. Any reference to “Executives” in this
report refers to those KMP who are not Non-Executive Directors. The prescribed details for each person
covered by this report are detailed below under the following headings:
Key management personnel
Remuneration policy
Remuneration structure
Relationship between the remuneration policy and company performance
Remuneration of directors and key management personnel
Key terms of employment contracts
Key management personnel equity holdings
Key Management Personnel
The directors and other Key Management Personnel of the consolidated entity during or since the end of the
financial year were:
Non-Executive Directors
The following persons acted as non-executive directors of the Company during the financial year:
Mr C Morris
(Chairperson)
Mr G Denison
Mr N Goodey
Mr J King
Unless otherwise stated, the named persons held their current position for the whole of the financial year and
since the end of the financial year.
DTI Executives
The following persons were employed as Group executives during the financial year:
Mr P Tazewell
Mr JM Florenti
Mr R Johnsonii
Mr B Mitchelliii
Mr A Oldlandiv
Mr R Surendraniv
(Chief Executive Officer and Managing Director)
(Chief Operating Officer)
(Executive Director - Commercial)
(Chief Financial Officer/Company Secretary)
(General Manager - Operations)
(Chief Financial Officer/Company Secretary)
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 15
Directors’ Report
Audited Remuneration Report
Except as noted below, the abovenamed persons held their current position for the whole of the financial
year and since the end of the financial year.
i)
ii)
iii)
iv)
Mr JM Florent ceased employment with the Company on 16 November 2016 and ceased to be a
KMP from that date.
Mr R Johnson was Chief Executive Officer and Managing Director up until 1 December 2016.
Mr B Mitchell ceased employment with the Company on 24 July 2017 and ceased to be a KMP
from that date.
Messrs Oldland and Surendran joined the Company on 27 February 2017 and 10 July 2017
respectively in the stated roles and were designated KMPs from those respective dates.
Remuneration Policy
Non-Executive Directors
Non-Executive Directors receive a Board fee and fees for chairing or participating on Board committees, as
set out below. They do not receive performance-based pay or retirement allowances. The fees are inclusive
of superannuation. The Chairman does not receive additional fees for participating in or chairing
committees. Fees are reviewed annually by the Nominations and Remuneration Committee.
The Chairman of the Board receives a fixed fee of $50,000 per annum. Other Non-Executive Directors each
receive an annual Board fee of $30,000 plus an additional $5,000 per annum for membership of the Audit,
Risk and Compliance Committee. A further fee of $5,000 per annum is paid to the chairman of the Audit,
Risk and Compliance Committee. No additional fees apply with respect to the Nominations and
Remuneration Committee. The maximum annual aggregate Directors’ fee pool limit is $250,000.
All Non-Executive Directors have entered into a service agreement with the Company in the form of a letter
of appointment. The letter summarises various matters relating to the appointment including the position’s
role and responsibilities, time commitments, remuneration and expenses, outside interests, securities dealing
policy and the treatment of confidential information. These matters are consistently applied for each Non-
Executive Director.
DTI Executives
The Company’s remuneration policy for DTI executives is to fairly and responsibly reward them having
regard to the performance of the Group, the performance of the executive and prevailing remuneration
expectations in the market.
The Company also seeks to establish remuneration structures which align the interests of its key
management personnel with the interests of the Company and its shareholders. DTI has established a
Management Compensation Plan (MCP) under which certain executives are entitled to receive short-term
incentives (STI) and long term incentives (LTI) based on the delivery of key Group and individual outcomes,
and the profitability of the DTI Group. At present, only Mr Tazewell and Mr Johnson are participants of the
MCP.
Other DTI executives do not have a formal STI or LTI component of their remuneration package however
they may receive a cash bonus as a STI, at the discretion of the Board.
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 16
Directors’ Report
Audited Remuneration Report
As detailed in this report, no DTI executives received any STI or LTI payments in respect of FY17.
The amount of compensation for current and future periods for DTI executives is based on consideration of
market factors, comparison to peers and reference to the individual’s experience and performance. Overall,
remuneration policies are subject to the discretion of the Board and can be changed to reflect the
competitive market and business conditions when in the interest of the Company and shareholders.
Performance Evaluation
Each DTI executive is subject to a review of their individual performance each year in accordance with the
Company’s Development and Appraisal Process. This process usually takes place in September each year.
During the financial year the performance of all DTI executives was evaluated, other than Messrs Oldland,
Surendran and Tazewell who joined the company after this date.
Remuneration Structure
DTI executive
The remuneration structure for DTI executives participating in the MCP is based on the concept of a total
package target (TPT) assuming budgeted financial performance is achieved and the participants performed
satisfactorily. If the business and/or the participants perform below standard then the total remuneration will
be less. If financial performance exceeds budget and there is above average performance by the CEO then
the package can increase by up to 18.75 per cent of the TPT. The TPT comprises three components:
i)
ii)
iii)
A fixed component, representing base salary plus superannuation, which comprises 75 per cent of
the TPT;
a variable component, represented by a STI paid as a cash bonus, which comprises 12.5 per cent of
the TPT. This component can increase to 25 per cent of the fixed component for exceptional
performance; and
a variable component, represented by a LTI in the form of an equity issue of DTI shares, which
comprises 12.5 per cent of the TPT. This component can increase to 33.3 per cent of the fixed
component for exceptional performance.
The STI and LTI are determined following the finalisation of the audited annual financial results. If
employment has ceased for any reason on or before the date when the STI and LTI are paid or are due for
payment, eligibility to receive the STI and LTI lapses. The participants may elect to receive the STI payment
in equity securities, subject to shareholder approval.
In the event of serious misconduct or a material misstatement in the Company’s financial statements, the
Board can cancel or defer performance-based remuneration and may also claw back performance-based
remuneration paid in previous financial years.
The Board of DTI Group reserves the right not to pay an STI or LTI if financial performance, earnings per
share and/or operational performance have not met the expectations of the Board.
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 17
Directors’ Report
Audited Remuneration Report
The remuneration structure for DTI executives not participating in the MCP is based on a fixed component,
representing base salary plus superannuation. DTI Executives may be granted a cash bonus at the
discretion of the Board.
Fixed Component
Fixed remuneration comprises base salary, employer superannuation contributions and other allowances
and non-cash benefits. Each Executive’s fixed remuneration is reviewed and benchmarked annually.
Variable Component – STI and LTI
Variable remuneration for participants in the MCP comprises STIs linked to Company and individual
performance over one year, and LTIs linked to performance over a period greater than a year.
The following table sets out the maximum variable remuneration each Executive Officer could have
achieved, on an annualised basis, in FY17, expressed as a percentage of total remuneration, if maximum
performance was achieved for the STI and LTI components of their variable components.
Executives
Fixed
Variable – STI
Variable – LTI
2017
2016
2017
2016
2017
2016
Peter Tazewell
Managing Director
Jean-Michel Florent
Chief Operating Officer
Richard Johnson
Executive Director
Bruce Mitchell
Chief Financial Officer
Andy Oldland
General Manager - Operations
Raj Surendran
Chief Financial Officer
63.3
n/a
15.8
n/a
20.9
n/a
100.0
100.0
n/a
n/a
n/a
n/a
63.2
63.2
15.8
15.8
21.0
21.0
100.0
100.0
n/a
100.0
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Key Performance indicators (KPIs) for incentive payments
Performance against the KPIs for incentive payments are as follows:
Incentive Metric
Weighting (%)
Test
70.0
Achievement of Budgeted EBITDA
Outcome
Below target
30.0
Successful project execution, achievement of anticipated margins,
Business expansion, service levels and product reliability
Below target
50.0
Compared to prior year
Below target
50.0
Leadership, replicability and character
At target
STI
STI
LTI
LTI
Budgeted
EBITDA
Other
-
subjective
EPS
accretion
Other
–
subjective
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 18
Directors’ Report
Audited Remuneration Report
Relationship between
performance
the
remuneration policy and company
One of the directors’ remuneration objectives is to align the interests of its key management personnel with
the interests of the Company and its shareholders. In FY17 this was achieved through the participation of
the Company’s two principal executives in the MCP which placed a material proportion of executives’
remuneration at risk. It is intended to introduce an incentive plan for other executives in the future.
As noted previously, no awards of STI will be made to DTI executives in relation to FY17. Refer Table on
page 20 for further remuneration details of key management personnel.
The relationship between remuneration and DTI’s performance for the following executive KMPs are set out
below.
Peter Tazewell
ST Incentive cash bonus based on the achievement of budgeted EBITDA (50 per cent weighting),
achievement of revenue, profit before and after tax and operating and investing cash flow (20 per cent
weighting) and the achievement of other criteria including expansion and diversification, business plans
and strategy (30 per cent weighting). The composition of the cash bonus is 12.5 per cent of the package
guide or up to 25 per cent of the base salary for exceptional performance.
LT Incentive based on the achievement of earnings per share performance compared to the previous
period (50 per cent weighting)and non-financial performance including shareholder and broker
relationships, communication and presentation skills, board-reporting and management information
systems, risk assessment and problem solving, forward thinking and innovative mindset (50 per cent
weighting). The LT Incentive forms 12.5 per cent of the package guide or up to 33.3 per cent of the base
salary for exceptional performance.
The board has decided that Mr Tazewell was ineligible for any STI or LTI awards for FY 17 as he had not
served a full year in his role.
Richard Johnson
Cash bonus based on the achievement of budgeted EBITDA (70 per cent weighting) and the
achievement of other criteria including projects and margins, business expansion, service levels and
product reliability (30 per cent weighting). The composition of the cash bonus is 12.5 per cent of the
package guide or up to 25 per cent of the base salary for exceptional performance.
LT Incentive based on the achievement of earnings per share performance compared to the previous
period (50 per cent weighting) and non-financial performance including leadership, replicability and
character (50 per cent weighting). The LT Incentive forms 12.5 per cent of the package guide or up to
33 per cent of the base salary for exceptional performance.
Mr Johnson was awarded a share based payment of $9,034 (54,750 shares) as an LTI in FY 17 however this
was not accrued for in the financial year and has yet to be paid. This award was due to Richard meeting
28 per cent of his subjective criteria of leadership, replicability and character.
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 19
Directors’ Report
Remuneration of directors and key management personnel
Details of the elements comprising the remuneration of the Company’s key management personnel are set
out in the following table. The table does not include the following components of remuneration because
they were not part of the remuneration package offered to Executives during FY16:
Short term cash profit sharing bonuses;
Payments made to KMP in respect of a period before or after the person held the KMP position;
Long term incentives distributed in cash;
Post employment benefits other than superannuation; and
Non-monetary benefits.
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 20
Directors’ Report
Audited Remuneration Report
Short-term Benefits
Employment
Benefits
Post
Long-term
Share Based
Benefits
Payments
Proportion
Total
Performance
related
Salary &
fees
STI
Total
annuation
Service
Super-
Long
benefits
Leave
$
$
$
$
$
$
$
%
175,000
12,183
187,183
0.0%
Executive Directors
PJ Tazewell
(MD & CEO)
R Johnson 1
(Executive Director)
2017
2016
2017
2016
Non - Executive Directors
C Morris
G Denison
N Goodey
J King
Executive officers
JM Florent 2
(COO)
B Mitchell 3
(CFO/Co. Secretary)
A Oldland
(GM - Operations)
Total
Total
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
175,000
-
247,760
-
-
-
-
247,760
244,800
9,000
253,800
50,000
50,000
35,000
35,000
31,964
31,964
40,000
40,000
124,147
-
-
-
-
-
-
-
-
-
50,000
50,000
35,000
35,000
31,964
31,964
40,000
40,000
124,147
240,272
1,043
241,315
175,000
-
175,000
173,333
10,000
183,333
52,051
-
930,922
-
-
-
52,051
-
930,922
815,369
20,043
835,412
-
-
5,954
5,954
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
19,615
19,308
-
-
-
-
3,036
3,036
-
-
7,519
19,308
17,373
17,256
4,945
-
64,670
58,908
-
-
-
9,034
282,363
12,000
291,062
-
-
-
-
-
-
-
-
50,000
50,000
35,000
35,000
35,000
35,000
40,000
40,000
(2,507)
129,159
2,507
263,130
-
192,373
2,343
202,932
-
-
56,996
-
-
3.2%
7.2%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
n/a
1.3%
0.0%
6.1%
0.0%
-
5,954
5,954
6,527
1,008,073
16,850
917,124
1.
2.
3.
4.
5.
Richard Johnson was awarded a STI of $9,000 and a LTI of $12,000 for performance during the 2016 financial year, which were accrued in the 2016
financial year. Richard Johnson was awarded a LTI of $9,034 for performance during the 2017 financial year which was not accrued in the 2017
financial year as the amount is immaterial.
Jean-Michel Florent (COO) was awarded a discretionary cash bonus of $1,043 for performance during the 2016 financial year, which was accrued in
the 2016 financial year. On 15 April 2016, he was issued with 115,000 shares in the Company for no cash consideration pursuant to the terms of the
DTI Employee Share Plan (DESP). Mr Florent ceased to be a KMP on 16 November 2016.
Bruce Mitchell (CFO) was awarded a discretionary cash bonus of $10,000 subsequent to the end of the 2016 financial year for performance during
the 2016 financial year, which was not accrued in the 2016 financial year. On 15 April 2016, he was issued with 107,500 shares in the Company for
no cash consideration pursuant to the terms of the DTI Employee Share Plan (DESP). Mr Mitchell ceased to be a KMP on 24 August 2017.
Peter Tazewell commenced as MD & CEO on 1 December 2016.
Andy Oldland commenced as GM Operations on 27 February 2017.
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 21
Directors’ Report
Audited Remuneration Report
Key terms of employment contracts
The Company has formal employment contracts with each of its former and continuing executives as set out
below:
Name
Fixed
Remuneration
Peter Tazewell
$325,000
Richard Johnson
$262,800
Jean-Michel Florent
$235,109
Bruce Mitchell
Andy Oldland
Raj Surendran
$175,000
$219,000
$240,900
MCP Participant
Duration
Notice Period
Yes*
Yes*
No
No
No
No
Ongoing
Ongoing
Ceased
Ceased
Ongoing
Ongoing
Four weeks
Four weeks
Eight weeks
Four weeks
Four weeks
Four weeks
Termination
Benefits
None
None
None
None
None
None
* Refer page 17 and 18 for details of MCP plan and criteria.
The Company also has letters of appointment with each of its Non-executive directors.
Loans to Key management personnel
There are no loans from the Company to a KMP.
Key management personnel equity holdings
The movement during the reporting period in the number of shares in DTI Group Limited held directly,
indirectly or beneficially, by each key management person, including related parties, is as follows:
2017
Balance at
Granted as
On Exercise of
Net Other
Balance at
1 July 2016
Remuneration
No.
No.
Options
No.
Change
30 June 2017
No.
No.
Directors
C Morris
P Tazewell
R Johnson
G Denison
N Goodey
J King
Executives
JM Florent 1
B Mitchell
A Oldland
R Surendran
18,048,144
-
494,908
2,887,638
6,575,198
369,573
642,000
527,050
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,501,362
24,549,506
150,000
-
142,857
-
82,128
150,000
494,908
3,030,495
6,575,198
451,701
(115,000)
6,785
n/a
533,835
-
-
-
-
-
1
Mr Florent ceased to be a KMP on 16 November 2016 and the presentation in this table may not indicate the status of his
shareholding at the end of the relevant reporting period. Shares allocated to Mr Florent under the DTI Employee Share Plan
did not vest and his entitlement to these shares has lapsed.
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 22
Directors’ Report
Audited Remuneration Report
2016
Balance at
Granted as
On Exercise of
Net Other
Balance at
1 July 2015
Remuneration
No.
No.
Options
No.
Change
30 June 2016
No.
No.
Directors
C Morris
R Johnson
G Denison
N Goodey
J King
Executives
JM Florent
B Mitchell
18,048,144
469,908
2,887,638
6,575,198
350,000
-
-
-
-
-
527,000
249,000
115,000
107,500
-
-
-
-
-
-
-
-
25,000
-
-
19,573
18,048,144
494,908
2,887,638
6,575,198
369,573
-
170,550
642,000
527,050
DTI Employee Share Plan
The DTI Employee Share Plan (DESP) has been established to permit shares to be issued by the Company
to employees for no cash consideration. All permanent employees (excluding directors) who have been
continuously employed by the group for a period of at least one year are eligible to participate in the scheme.
Employees may elect not to participate in the scheme.
The shares are recognised at the closing share price on the grant date (31c on 15 April 2016) as an issue of
treasury shares by the trust and as part of employee benefit costs over the period the shares vest. The
shares vest one third per year on the anniversary date of 15 April over the subsequent three years.
DTI Capital Pty Ltd (Trustee), a wholly owned subsidiary of the Company, has been appointed by the
Company to act as the trustee of the DESP. The Company has issued 2,000,000 DESP shares to the
Trustee to hold for the benefit of employees until the DESP shares cease to be subject to any vesting
conditions, at which time the DESP shares will be transferred to the employee or sold on behalf of the
employee, with the sale proceeds remitted to the employee.
Treasury shares are shares in the Company that are held by DTI Capital Ltd for the purpose of issuing
shares under the DESP. The shares are held as treasury shares until such time as they are vested.
Forfeited DESP shares may be reallocated in subsequent grants.
Other Transactions with KMP
Computershare Investor Services Pty Limited provides share registry service to DTI. Chris Morris (Non-
Executive Chairman of DTI) is also a Non-Executive Director of Computershare Limited. DTI paid
Computershare Investor Services Pty Limited a total amount of $52,380 during the current year. An amount
of $29,001 (2016:nil) was paid in relation to the capital raising and $23,379 (2016:$16,829) relates to normal
trading activities. Transactions with Computershare Investor Services Pty Limited are based on normal
commercial terms and conditions.
.
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 23
Directors’ Report
Audited Remuneration Report
Reliance on External Remuneration Consultants
There has not been any reliance on external remuneration consultants.
Adoption of Remuneration Report
At the 2016 Annual General Meeting, the resolution adopting the 2016 Remuneration Report was carried
unanimously.
The Company received more than 80.6 per cent of “yes” votes on its Remuneration Report for the 2016
financial year. The Company did not receive any specific feedback at the Annual General Meeting or
throughout the year on its remuneration practices.
This concludes the remuneration report, which has been audited.
Signed in accordance with a resolution of the Directors made pursuant to section 298(2) of the Corporations
Act 2001.
PETER TAZEWELL
Managing Director
29 August 2017, Perth, Australia
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 24
Financial Statements
Consolidated Statement of Profit or Loss and Other Comprehensive Income
for the year ended 30 June 2017
Note
2017
$
2016
$
Sales Revenue
Cost of Goods Sold
Gross Margin
Operational Overheads
Impairment costs
Other Income
Corporate Overheads
Depreciation/amortisation
Net interest and finance (loss)/gain
(Net Loss) / Profit Before Tax
Tax expense
(Net Loss) / Profit After Tax
Other comprehensive income
Items that may be reclassified to profit or loss:
Exchange differences
Total other comprehensive income / (loss)
Total comprehensive loss for the period
Total comprehensive loss is attributable to:
Owners of DTI Group Ltd
(Loss)/earnings per share for (loss)/income
attributable to the ordinary equity holders of
the Company:
Basic (loss) / earning per share (cents per share)
Diluted (loss) / earning per share (cents per share)
2
2
2
3
15,867,660
(12,093,221)
3,774,439
(2,675,437)
(519,584)
1,194,021
(4,798,426)
(1,802,083)
(75,729)
(4,902,799)
(945,075)
(5,847,874)
16,216,338
(9,666,831)
6,549,507
(2,161,932)
-
3,730,354
(4,472,262)
(1,060,299)
130,597
2,715,965
(2,684,407)
31,558
587,176
587,176
(5,260,698)
(56,729)
(56,729)
(25,171)
(5,260,698)
(25,171)
21
21
(5.32)
(5.32)
0.03
0.03
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with
the accompanying notes.
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
P a g e | 2 5
Financial Statements
Consolidated Statement of Financial Position
as at 30 June 2017
Note
2017
$
2016
$
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
Total current assets
Non-current assets
Other receivables
Property, plant and equipment
Intangible assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Borrowings
Provisions
Current tax liabilities
Total current liabilities
Non-current liabilities
Borrowings
Provisions
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained profits
Total equity
4
5
8
5
9
10
6
7
11
3
7
11
3
13
16
16
3,139,852
11,814,282
8,000,144
234,272
23,188,550
285,195
996,688
5,607,876
6,889,759
30,078,309
5,774,436
489,032
1,021,005
402,246
7,686,719
16,564
83,454
1,451,927
1,551,945
9,238,664
20,839,645
633,489
8,655,529
5,844,736
132,274
15,266,028
389,786
1,089,929
4,370,112
5,849,827
21,115,855
4,015,498
186,035
665,154
194,710
5,061,397
305,077
34,369
1,021,205
1,360,651
6,422,048
14,693,807
24,969,359
654,185
(4,783,899)
20,839,645
13,723,974
(94,142)
1,063,975
14,693,807
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 26
Financial Statements
Consolidated Statement of Changes in Equity
for the year ended 30 June 2017
Contributed
Equity
$
Employee
Share Plan
Reserve
$
Foreign
Currency
Translation
Reserve
$
Retained
Earnings/
(Accumula-
ted Losses)
$
Total
$
At 30 June 2015
13,723,974
Profit for the year
Other comprehensive
income/(loss)
Total comprehensive
income/(loss) for the year
Transactions with
owners in their capacity
as owners
Shares issued to
employees
Issue of share capital
–
–
–
–
–
–
–
–
–
(78,637)
1,032,417
14,677,754
–
31,558
31,558
(56,727)
–
(56,727)
(56,727)
31,558
(25,169)
41,222
–
–
–
–
–
41,222
–
At 30 June 2016
13,723,974
41,222
(135,364)
1,063,975
14,693,807
Loss for the year
Other comprehensive
income
Total comprehensive
income/(loss) for the year
Transactions with
owners in their capacity
as owners
Recognition of share-
based payments
Issue of share capital
Capital raising costs
–
–
–
–
–
–
–
(5,847,874)
(5,847,874)
587,176
–
587,176
587,176
(5,847,874)
(5,260,698)
–
11,565,561
(320,176)
161,151
–
–
–
–
–
–
–
–
161,151
11,565,561
(320,176)
At 30 June 2017
24,969,359
202,373
451,812
(4,783,899)
20,839,645
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 27
Financial Statements
Consolidated Statement of Cash Flows
for the year ended 30 June 2017
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
R&D grant received
Interest paid
Tax paid
Net cash (outflow) / inflow from operating
activities
Cash flows from investing activities
Payments for plant and equipment
Payments for intangible assets
Payment of term deposit
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds from issues of shares
Share issue expenses
Proceeds from borrowings
Repayment of borrowings
Net cash inflow from financing activities
Note
2017
$
2016
$
14,221,566
(19,902,012)
37,263
2,440,024
(112,993)
(306,817)
15,978,596
(16,632,064)
91,540
991,861
(17,926)
(219,292)
12(b)
(3,622,969)
192,715
(448,153)
(4,669,320)
–
(5,117,473)
(852,146)
(3,392,153)
400,063
(3,844,236)
11,565,561
(320,176)
257,885
(243,401)
11,259,869
5,635
–
510,356
(84,990)
431,001
2,519,427
(3,220,520)
633,489
(13,064)
3,139,852
3,839,829
14,180
633,489
Net increase / (decrease) in cash and cash
equivalents
Cash and cash equivalents at the beginning of the
year
Effect of foreign exchange on opening balances
Cash and cash equivalents at the end of the year
12(a)
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 28
Notes to the Consolidated Financial Statements
Note 1: Segment information
Operating segments were reported in a manner consistent with the internal reporting provided to the chief
operating decision maker. The chief operating decision maker was designated as the Board which was
responsible for assessing the financial performance and position of the group, and making strategic
decisions.
Following an internal restructure of the organisation and the appointment of a new Chief Executive Officer
(CEO) in December 2016, the CODM is now identified as the Chief Executive Officer (CEO) who monitors
one business unit being the DTI Group Limited (DTI) as a consolidated entity as opposed to three reportable
segments in the prior year.
The new organisational structure has created an integrated and streamlined reporting structure up to the
CODM. The CODM currently monitors the operating results of the consolidated group and organises its
business activities and product lines to serve the global mass transit industry. The performance of the
consolidated group is evaluated based on Earnings before Interest, Taxes, Depreciation and Amortisation
(“EBITDA”) which is measured in accordance with the Group’s accounting policies.
Pursuant to AASB 136 Impairment of Assets, management has performed an impairment analysis on the
previously reported segments and determined there is no impairment on this arising out the change in
segment reporting.
The following is an analysis of the Group’s revenue and results from continuing operations by reportable
segment. The comparative results have been adjusted to conform to changes in the presentation of the
current period.
Segment Revenues and Results
Sales Revenue
Cost of Goods Sold
Gross Margin (First)
Gross Margin (First) %
Operational Overheads
Impairment of Development and Project Costs
Gross Margin (Final)
Gross Margin (Final) %
Other Income
Corporate Overheads
EBITDA
Depreciation/amortisation
EBIT
Net Interest and finance (loss)/gain
Net (Loss) / Profit Before Tax
Tax expense
Net (Loss) / Profit After Tax
2017
$
2016
7$
15,867,660
(12,093,221)
3,774,439
24%
(2,675,437)
(519,584)
579,418
4%
1,194,021
(4,798,426)
(3,024,987)
(1,802,083)
(4,827,070)
(75,729)
(4,902,799)
(945,075)
(5,847,874)
16,216,338
(9,666,831)
6,549,507
40%
(2,161,932)
–
4,387,575
27%
3,730,354
(4,472,262)
3,645,667
(1,060,299)
2,585,368
130,597
2,715,965
(2,684,407)
31,558
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
P a g e | 2 9
Notes to the Consolidated Financial Statements
Note 1: Segment information (cont’d)
Segment Assets and Liabilities
Total Assets & Liabilities
Consolidated total assets
Consolidated total liabilities
Geographical Assets
Australia
Others
Geographical Liabilities
Australia
Others
Major customers
2017
$
2016
$
30,078,309
9,238,664
21,115,855
6,422,048
22,053,963 18,935,606
8,024,346 2,180,249
30,078,309
21,115,855
8,102,508
1,136,156
9,238,664
5,870,923
551,125
6,422,048
DTI supplies goods and services to a broad range of customers in the transit industry. During the reporting
period, two (2016: one) major customers accounted for in excess of 25 per cent (2016: 26 per cent) of group
revenue.
Note 2: Revenue and expenses
Accounting Policy
Revenues are recognised at fair value of the consideration received net of the amount of GST or value
added tax payable to the taxation authorities. Sales revenue represents sales of products or services. Sales
of products are recognised when the significant risks and rewards of ownership of the goods have passed to
the buyer and can be measured reliably. Risks and rewards are considered passed to the buyer at the time
of delivery of the goods to the customer.
Service revenue is recognised when the fees in respect of services rendered are earned, usually when
services have been provided to customers.
Interest income is recognised on a time proportion basis using the effective interest method.
(a) Revenue
Revenue from sale of goods
Revenue from the rendering of services
(b) Other Income
R&D grant (i)
2017
$
2016
$
13,214,665
2,652,995
15,867,660
13,642,242
2,574,096
16,216,338
1,194,021
3,730,354
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
P a g e | 3 0
Notes to the Consolidated Financial Statements
Note 2: Revenue and expenses (cont’d)
(i) Government grants
Government grants are assistance by the government in the form of transfers of resources to the Company
in return for past or future compliance with certain conditions relating to the operating activities of the entity.
Government grants include government assistance where there are no conditions specifically relating to the
operating activities of the Company other than the requirement to operate in certain regions or industry
sectors. Government grants relating to income are recognised as income over the periods necessary to
match them with the related costs and grants relating to assets are regarded as a reduction in asset.
Government grants that are receivable as compensation for expenses or losses already incurred or for the
purpose of giving immediate financial support to the Company with no future related costs are recognised as
income of the period in which it becomes receivable.
The requirements of AASB 120: Government Grants, R&D Grant Income, requires that income earned from
the grant in relation to expenditure on capitalised intangible assets, are offset against the value of those
intangible assets. This is done after reducing it by the amount of amortisation recognised in the financial year
as follows:
R&D grant income earned in current year
R&D grant income related to prior years
R&D grant income offset (included in Note 10)
R&D grant income recognised in the Statement of
Profit or Loss and Other Comprehensive Income
(c)
(d)
(e)
(f)
Net finance costs
Interest expense
Interest received
Share-based payment expense
Employee share based payment expense
Depreciation and amortisation expense
Depreciation
Amortisation
Impairment expense
Inventory
Capitalised research and development
2017
$
3,108,001
-
(1,913,980)
2016
$
1,475,525
3,069,412
(814,583)
1,194,021
3,730,354
2017
$
2016
$
(112,993)
37,264
(75,729)
(18,020)
148,617
130,597
(161,151)
(41,222)
(545,963)
(1,256,120)
(1,802,083)
(337,229)
(723,070)
(1,060,299)
(258,128)
(261,456)
(519,584)
–
–
–
(g)
Employee benefits – Wages & Salaries
(7,506,765)
(4,656,116)
(h)
Foreign exchange losses
(165,680)
(294,814)
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 31
Notes to the Consolidated Financial Statements
Note 3: Income tax
Current tax
Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the
taxable profit or tax loss for the period. It is calculated using tax rates and tax laws that have been enacted or
substantively enacted by reporting date. Current tax for current and prior periods is recognised as a liability
(or asset) to the extent that it is unpaid (or refundable).
Deferred tax
Deferred tax is accounted for using the comprehensive balance sheet liability method in respect of temporary
differences arising from differences between the carrying amount of assets and liabilities in the financial
statements and the corresponding tax base of those items.
In principle, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets
are recognised to the extent that it is probable that sufficient taxable income will be available against which
deductible temporary differences or unused tax losses and tax offsets can be utilised. However, deferred tax
assets and liabilities are not recognised if the temporary differences giving rise to them arise from the initial
recognition of assets and liabilities (other than as a result of a business combination) which affects neither
taxable income nor accounting profit. Furthermore, a deferred tax liability is not recognised in relation to
taxable temporary differences arising from goodwill.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in associates
and are only recognised to the extent that it is probable that there will be sufficient taxable profits against
which to utilise the benefits of the temporary differences and that they are expected to reverse in the
foreseeable future.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s)
when the asset and liability giving rise to them are realised or settled, based on tax rates (and tax laws) that
have been enacted or substantively enacted by reporting date. The measurement of deferred tax liabilities
and assets reflects the tax consequences that would follow from the manner in which the Company expects,
at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation
authority and the Company intends to settle its current tax assets and liabilities on a net basis.
Current and deferred tax for the period
Current and deferred tax is recognised as an expense or income in the consolidated statement of profit or
loss and other comprehensive income, except when it relates to items credited or debited directly to equity,
in which case the deferred tax is also recognised directly in equity, or where it arises from the initial
accounting for a business combination, in which case it is taken into account in the determination of goodwill
or excess.
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 32
Notes to the Consolidated Financial Statements
Note 3: Income tax (cont’d)
(a)
Income tax expense
Current tax expense
Deferred tax
Adjustments for current tax of prior periods
(b) Numerical reconciliation of income tax (benefit)/expense
to prima facie tax payable
Profit before income tax expense
Prima facie tax (benefit)/payable on profit at 30% (2016:30%)
Tax effect of:
R&D tax incentive
R&D amendments – grant Income
Other
Other non-deductible
Under/over (prior year adjustments and deferred tax)
Effect of lower/higher statutory income tax rate - UK and USA
Deferred taxes previously unrecognised
Deferred taxes not brought to account
(c) Deferred income tax balances recognised in the accounts
Deferred tax liabilities
Work in progress
Unrealised foreign exchange gain
Property, plant and equipment
Interest receivable
Other
Project WIP
Set off of deferred tax liabilities
Net recognised deferred tax liability
Deferred tax assets
Annual leave provision
Property, plant and equipment
Long service leave provision
Accrued audit fees and other creditors
Superannuation provision
Patents
Capital raising fees
Provision for diminution in trading stock
Provision for doubtful debts
Tax losses carried forward
Set off of deferred tax liabilities
Unrealised foreign exchange gain/losses
Deferred tax asset not brought to account as realisation
is not probable
Net recognised deferred tax assets
2017
$
2016
$
402,246
430,722
112,107
945,075
847,897
480,614
1,355,896
2,684,407
(4,902,799)
(1,470,840)
2,715,965
814,790
1,785,243
–
(1,469)
186,435
(22,134)
171,174
(3,083)
299,749
945,075
(2,172,934)
–
(10,617)
–
–
(287,165)
1,018,789
(1,451,927)
237,560
–
52,377
58,290
53,781
10,503
156,657
48,900
2,295
603,442
(1,018,789)
90,679
(295,696)
–
973,757
(322,405)
(228,352)
13,265
1,389,865
5,935
37,552
2,684,407
(1,509,469)
(43,968)
(10,617)
(17,123)
(7,339)
–
567,311
(1,021,205)
179,595
20,384
29,048
13,144
48,660
10,503
83,917
41,400
2,296
75,424
(567,311)
62,940
–
–
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 33
Notes to the Consolidated Financial Statements
Note 3: Income tax (cont’d)
Net deferred tax assets are be brought to account when it is probable that immediate sufficient tax profits will
be available against which temporary differences and tax losses can be utilised.
(d) Current tax liabilities
Income tax payable
Franking credits available for this financial year is $5,978 (2016:$818).
(e) Reconciliation
The overall movement in deferred tax account is as
follows:
Opening balance
Charge to statement of profit or loss and other
comprehensive income
Closing balance
Note 4: Cash and cash equivalents
Cash
Petty Cash
2017
$
2016
$
402,246
194,710
2017
$
2016
$
(1,021,205)
(430,722)
(380,305)
(640,900)
(1,451,927)
(1,021,205)
2017
$
3,139,718
134
3,139,852
2016
$
633,224
265
633,489
Note 5: Trade and other receivables
Trade receivables and other receivables are recorded at amounts due less any allowance for doubtful debts.
Significant Estimate
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be
uncollectible are written off. An allowance account (provision for impairment of trade receivables) is used
when there is objective evidence that the Company will not be able to collect all amounts due according to
the original terms of receivables. The amount of the allowance 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 amount of the allowance is recognised in the profit or loss.
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 34
Notes to the Consolidated Financial Statements
Note 5: Trade and other receivables (cont’d)
Current
Trade receivables
Accrued debtors
R&D grant/income tax receivable
Non-current
Accrued debtors
(a) Impaired trade receivables
2017
$
2016
$
8,603,337
102,944
3,108,001
11,814,282
5,882,968
116,862
2,655,699
8,655,529
285,195
389,786
At 30 June 2017 current trade receivables of the Group with a nominal value of $7,651 (2016: $7,651) were
impaired.
It was assessed that no portion of these receivables is expected to be recovered and the full amount has
been provided for.
Movements in the provision for impairment of
receivables are as follows:
Opening at 1 July
Receivable written off during the year as uncollectable
Closing at 30 June
2017
$
7,651
–
7,651
2016
$
7,651
–
7,651
The creation and release of the provision for impaired receivables has been included in ‘other expenses’ in
the statement of profit or loss and other comprehensive income. Amounts charged to the allowance account
are generally written off when there is no expectation of recovering additional cash.
(b) Past due but not impaired
At 30 June 2017 trade receivables of $2,159,232 (2016: $3,138,858) were past due, but not impaired. These
relate to a number of independent customers for whom there is no recent history of default. DTI is confident
that these receivables are collectible and are active in the management and reduction of these overdue
amounts. The ageing analysis of these trade receivables is as follows:
Up to 3 months
3 to 6 months
Over 6 months
2017
$
2016
$
728,314
340,450
1,090,468
2,159,232
1,168,342
440,826
1,529,690
3,138,858
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 35
Notes to the Consolidated Financial Statements
Note 5: Trade and other receivables (cont’d)
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 trade receivables, it is expected that these amounts will be received
when due. The Group does not hold any collateral in relation to these receivables.
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 other classes, it is expected that these amounts will be received when
due. The Group does not hold any collateral in relation to these receivables.
Current amount of receivables that would otherwise be pass due
(c) Foreign exchange and interest rate risk
Information on the Group’s exposure to foreign currency risk and interest rate risk in relation to trade and
other receivables is provided in Note 14.
(d) Fair value and credit risk
Due to the short-term nature of current receivables, their carrying amount is assumed to approximate their
fair value. Credit risk is assessed at the time a customer applies to open a credit account with the Group and
is monitored thereafter on a regular basis. Management assesses the credit quality of the customer, taking
into account its financial position, past experience, trade references, external rating where obtained and
other factors then sets credit limits. The compliance with credit limits by customers is regularly monitored by
management.
(e) Fair value of financial instruments
Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value.
Fair value hierarchy
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can
access at the measurement date.
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or
liability, either directly or indirectly.
Level 3: Unobservable inputs for the asset or liability.
2017 Consolidated
Assets
Accrued debtor
Total assets
2016 Consolidated
Assets
Accrued debtor
Total assets
Level 1
$
Level 2
$
Level 3
$
Total
$
–
–
–
–
388,139
388,139
388,139
388,139
Level 1
$
Level 2
$
Level 3
$
Total
$
–
–
–
–
506,648
506,648
506,648
506,648
There were no transfers between levels during the financial years.
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 36
Notes to the Consolidated Financial Statements
Note 5: Trade and other receivables (cont’d)
The carrying amounts of trade and other receivables and trade and other payables are assumed to
approximate their fair values due to their short-term nature.
The fair value of financial liabilities is estimated by discounting the remaining contractual maturities at the
current market interest rate that is available for similar financial liabilities.
Valuation techniques for fair value measurements categorised within Level 2 and Level 3
The accrued debtor amount relates to a sale to a customer of equipment which is being paid off in
instalments. The loan is being repaid over a ten-year period to June 2021 and is interest-free. The fair value
of $388,139 (2016:$506,648) has been calculated based on cash flows discounted using a rate of 9 per cent.
The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class
of receivables set out above.
The Level 3 assets unobservable inputs and sensitivity are as follows:
2017
Description
Accrued debtor
2016
Description
Accrued debtor
Unobservable
Inputs
Discount rate
Range
(Weighted Average)
9.0% to 10.0%
Unobservable
Inputs
Discount rate
Range
(Weighted Average)
10.0% to 11.0%
Sensitivity
1% change would
increase/decrease fair
value by $3,561
Sensitivity
1% change would
increase/decrease fair
value by $6,563
Note 6: Trade and other payables
Trade payables and other accounts payable are recognised when the Company becomes obliged to make
future payments resulting from the purchase of goods and services. The amounts are unsecured and are
usually paid within 60 to 90 days of recognition.
Trade payables
Other payables
ATO and HMRC (including PAYG)
Superannuation liability
FBT liability
Payroll tax liability
Risk exposure
2017
$
2016
$
5,054,932
275,507
152,370
179,270
49,898
62,459
5,774,436
3,471,592
323,860
(21,444)
162,199
13,382
65,909
4,015,498
Information about the Group’s exposure to foreign exchange is provided in Note 14.
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 37
Notes to the Consolidated Financial Statements
Note 7: Borrowings
In December 2015 and April 2016, the Company negotiated chattel mortgage loans with the ANZ bank to
finance the purchase of specialised technical equipment for R&D. The total amount utilised under the facility
is $517,735 at interest rates of 3.99 per cent and 3.90 per cent respectively. The loans are repayable
monthly over a 36 month period.
In June 2017, the Company financed its insurance premiums through Monument Premium Funding with the
funds to be repaid within the next 12 months.
2017
$
2016
$
24,385
271,233
193,414
489,032
16,564
–
16,564
17,547
168,488
–
186,035
40,948
264,129
305,077
Current Secured:
Net carrying amount – Capital Finance Australia Ltd loan
Net carrying amount – ANZ Ltd loan
Net carrying amount – Monument Premium Funding
Non-current Secured:
Net carrying amount – Capital Finance Australia Ltd loan
Net carrying amount – ANZ Ltd loan
Further information on loans to related parties is set out in Note 22.
The loans were based on normal commercial terms and conditions.
Refer to Note 14 for risk exposures and risk management details.
Refer to Note 15 for capital management details.
Accounting Policy
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 transactions costs)
and the redemption amount is recognised in the consolidated statement of profit or loss and other
comprehensive income over the period of the borrowings using the effective interest method. Fees paid on
the establishment of loan facilities, which are not an incremental cost 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.
Financing Facility
Asset financing facilities of $800,000 were available at 30 June 2017 of which $517,735 (2016:$491,112)
was utilised in the current financial year.
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 38
Notes to the Consolidated Financial Statements
Note 8: Inventories
Raw materials / unassembled stock
Work in progress
Impairment of inventory (i)
Provision for inventory obsolescence (ii)
2017
$
6,944,172
1,478,087
(258,128)
(163,987)
8,000,144
2016
$
4,148,998
1,834,858
–
(139,120)
5,844,736
(i)
(ii)
An impairment adjustment of $258,128 was provided for finished goods relating to projects that were
not deemed to be recoverable.
A provision for inventory obsolescence was established in prior years. It was re-assessed and
increased this financial year by $24,867 (2016:$58,477) and is included in the cost of goods sold in
the statement of profit or loss and other comprehensive income. In determining the obsolescence
provision management reviewed all inventory items and assessed future demand for these items
along with projected maintenance requirements for the support of existing contracts over the coming
years.
Accounting Policy
Inventories are valued at the lower of cost and net realisable value. Costs are assigned to inventory on hand
by the method most appropriate to each particular class of inventory, with the majority being valued on a
weighted average basis by location. 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.
Note 9: Property, plant and equipment
Buildings
At cost
Less accumulated depreciation
Workshop and R&D plant and equipment
At cost
Less accumulated depreciation
Office equipment and software
At cost
Less accumulated depreciation
Motor vehicles
At cost
Less accumulated depreciation
2017
$
2016
$
124,826
(59,303)
65,523
1,518,122
(901,579)
616,543
1,329,517
(1,073,444)
256,073
214,891
(156,342)
58,549
119,668
(45,702)
73,966
1,229,329
(587,822)
641,507
1,175,315
(878,787)
296,528
214,891
(136,963)
77,928
Written Down Value
996,688
1,089,929
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 39
Notes to the Consolidated Financial Statements
Note 9: Property, plant and equipment (cont’d)
Buildings
At cost
Less accumulated depreciation
Workshop and R&D plant and equipment
At cost
Less accumulated depreciation
Office equipment and software
At cost
Less accumulated depreciation
Motor vehicles
At cost
Less accumulated depreciation
2017
$
2016
$
124,826
(59,303)
65,523
1,518,122
(901,579)
616,543
1,329,517
(1,073,444)
256,073
214,891
(156,342)
58,549
119,668
(45,702)
73,966
1,229,329
(587,822)
641,507
1,175,315
(878,787)
296,528
214,891
(136,963)
77,928
Written Down Value
996,688
1,089,929
Movements in carrying amounts:
Buildings
Balance at the beginning of the year
Additions
Depreciation expense
Carrying amount at the end of the year
Workshop and R&D plant and equipment
Balance at the beginning of the year
Additions
Depreciation expense
Carrying amount at the end of the year
Office equipment and software
Balance at the beginning of the year
Additions
Depreciation expense
Carrying amount at the end of the year
Motor vehicles
Balance at the beginning of the year
Additions
Depreciation expense
Carrying amount at the end of the year
73,966
5,158
(13,600)
65,523
641,507
289,807
(314,771)
616,543
296,528
157,759
(198,214)
256,073
77,928
–
(19,379)
58,549
85,933
–
(11,967)
73,966
161,835
637,109
(157,437)
641,507
224,270
215,037
(142,779)
296,528
101,038
–
(23,110)
77,928
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 40
Notes to the Consolidated Financial Statements
Note 9: Property, plant and equipment (cont’d)
Accounting Policy
Plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is
directly attributable to the acquisition of the items.
Depreciation is provided on property, plant and equipment. Depreciation is calculated on either a diminishing
value or straight line basis so as to allocate the net cost or other re-valued amount of each asset over its
estimated useful life or in the case of certain leased plant and equipment the shorter lease term.
The following estimated useful lives are used in the calculation of depreciation:
plant and equipment – 2.5 to 5 years;
motor vehicles under finance lease – 5 years;
buildings – 10 years.
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 41
Notes to the Consolidated Financial Statements
Note 10: Intangible assets
Development
Costs
$
Goodwill
Patents
Total
$
$
$
At 30 June 2017
Cost (gross carrying amount)
Accumulated amortisation
Impairment expense
R&D grant income not recognisable
Net carrying amount
Movements in carrying amounts
Balance at 1 July 2016
Additions
Amortisation expense
Impairment expense
R&D grant income not recognisable
Net carrying amount
At 30 June 2016
Cost (gross carrying amount)
Accumulated amortisation
R&D grant income not recognisable
Net carrying amount
Movements in carrying amounts
Balance at 1 July 2015
Additions
Amortisation expense
R&D grant income not recognisable
Net carrying amount
Accounting Policy
13,078,526
(4,797,373)
(261,456)
(2,728,563)
5,291,134
4,128,417
4,549,451
(1,211,298)
(261,456)
(1,913,980)
5,291,134
8,529,075
(3,586,075)
(814,583)
4,128,417
2,364,504
3,277,720
(699,224)
(814,583)
4,128,417
2,432
–
–
–
2,432
2,432
–
–
–
–
2,432
2,432
–
–
2,432
2,432
–
–
–
2,432
428,074
(113,764)
–
-
314,310
239,263
119,869
(44,822)
–
–
314,310
308,205
(68,942)
–
239,263
150,612
112,498
(23,847)
–
239,263
13,509,032
(4,911,137)
(261,456)
(2,728,563)
5,607,876
4,370,112
4,669,320
(1,256,120)
(261,456)
(1,913,980)
5,607,876
8,839,712
(3,655,017)
(814,583)
4,370,112
2,517,548
3,390,218
(723,071)
(814,583)
4,370,112
Amortisation of Capitalised Development Costs
In prior financial period, DTI has reassessed the accounting estimates of the amortisation of its Capitalised
Development Costs. DTI has determined that a straight line basis in accordance with AASB108 para.40, is a
more appropriate method rather than amortisation based on the revenue method.
Amortisation of Capitalised Development Costs (cont’d)
During 2016, there was a change in accounting estimates resulting in amortisation estimates being $699,224
rather than $270,252.
Impairment of assets
At each reporting date, the entity reviews the carrying amounts of its assets to determine whether there is
any indication that those assets have suffered an impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 42
Notes to the Consolidated Financial Statements
Note 10: Intangible assets (cont’d)
Where the asset does not generate cash flows that are independent from other assets, the entity estimates
the recoverable amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use,
the estimated future cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset for which
the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying
amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An
impairment loss is recognised in profit or loss immediately, unless the relevant asset is carried at fair value,
in which case the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is
increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying
amount does not exceed the carrying amount that would have been determined had no impairment loss
been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is
recognised in profit or loss immediately, unless the relevant asset is carried at fair value, in which case the
reversal of the impairment loss is treated as a revaluation increase.
Intangibles
Internally generated intangible assets, excluding capitalised development costs, are not capitalised and
expenditure is recognised in profit or loss in the year in which the expenditure is incurred.
Capitalised Development Costs
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 and direct labour. 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.
The intangible assets that were in existence as at 30 June 2012 have been assessed as having a finite life
and are amortised using the straight line method over a period of four years. Intangible assets arising after 1
July 2012 were amortised in proportion to the sales of the commercial units they relate to, as this was
deemed to be a more accurate and reasonable basis. Due to changes in accounting standards, as of 1 July
2015, the intangible assets in existence have been assessed as having a finite life and are amortised using
the straight line method over a period of years dependant on the estimate of which they will bring commercial
benefit.
The carrying value of an intangible asset arising from development expenditure is tested for impairment
annually when the asset is not yet available for use, or more frequently when an indication of impairment
arises during the reporting period. All other intangible assets are tested for impairment whenever events or
changes in circumstances indicate that the company amount may not be recoverable.
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 43
Notes to the Consolidated Financial Statements
Note 10: Intangible assets (cont’d)
A summary of the policies applied to the Group’s intangible assets is as follows:
Policy
Useful lives
Amortisation methods
used
Internally generated or
acquired
Impairment testing
Patents
Finite
Amortised over the period
of expected future benefits
from the related project on
a straight-line basis
Development Costs
Finite
Amortised over the period
of expected future benefits
from the related product
on a straight-line basis
Acquired
Internally generated
Annually and more
frequently when an
indication of impairment
exists
Annually for assets not yet
available for use and more
frequently when an
indication of impairment
exists. The amortisation
method is reviewed at
each financial year end
Significant estimates: Useful life of Patents and Development cost
Patents have been assessed as having a useful life and are amortised using the straight line method over a
period of 10 years. The patents have been granted for between 15 and 20 years by the relevant government
agency.
Gains or losses arising from de-recognition of an intangible asset are measured as the difference between
the net disposal proceeds and the carrying amount of the assets and are recognised in profit or loss when
the asset is derecognised.
Description of the Group’s Intangible Assets
(a) Development costs
Development costs are carried at cost less accumulated amortisation and accumulated impairment losses.
The total amount of development costs of $13,078,526 has been subject to impairment testing. If an
impairment indication arises, the recoverable amount is estimated and an impairment loss is recognised to
the extent that the recoverable amount is lower than the carrying amount. The Board has determined to
impair certain assets by $261,456 (2016:nil) to amounts that are substantiated by net realisable value.
(b) Goodwill
Goodwill has been externally acquired and is carried at cost less accumulated impairment losses. The
goodwill arose on the acquisition of the remaining 50.5 per cent of Virtual Observer Pty Ltd on 28 June 2012
and represents the difference between the purchase price and the net liabilities.
(c) Patents
Patents have been externally acquired and are carried at cost less accumulated impairment losses. This
intangible asset has been assessed as having a useful life and is amortised using the straight line method
over a period of 10 years. The patents have been granted for between fifteen and twenty years by the
relevant government agency. If an impairment indication arises, the recoverable amount is estimated and an
impairment loss is recognised to the extent that the recoverable amount is lower than the carrying amount.
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 44
Notes to the Consolidated Financial Statements
Note 10: Intangible assets (cont’d)
(d) Impairment
Significant estimate: key assumptions used for value-in-use calculations
During the period DTI undertook an organisational restructure designed to establish an executive
management team and allocate operational responsibilities within the functional areas of the business. As a
result of this restructure, DTI now reports as a single Operating Segment as opposed to three reportable
segments in the prior year. Whilst the segments have been assessed and changes have been made, there is
no perceived change to the cash generating units of the business.
For the purpose of impairment testing, intangibles are allocated to one cash-generating units (CGU). As a
result of this restructure the CGU and aggregate carrying amounts were restructured to fall in line with the
Group operations, cash-flow, management and reporting changes as disclosed above.
The aggregate carrying amounts allocated to one CGU
6,889,759
2017
$
2016
$
–
The aggregate carrying amounts allocated to three CGUs
Australasia
EMEA
America
–
–
–
6,889,759
5,445,553
403,065
1,209
5,849,827
The recoverable amount of intangible assets has been determined using the value in use method. Value in
use has been derived from calculating the discounted net cash flows expected to be derived from the asset.
The cash flow for 2018 has been based on the actual 2017 results, which is reasonable with a conservative
approach used for budgeting by management. The cash flow for 2018 has been based on the 2018 budget
which has been approved by the Board. Key assumptions underpinning the cash flow are: Revenue growth –
year on year 10 per cent; Terminal value of 5 per cent; Average gross margins of 36 per cent and minimal
capital expenditure.
The cash flows for 2019 to 2022 have been based on extrapolating 2018 by using an inflation/growth rate of
10 per cent. Cash flows have been estimated over five years, as beyond five years would be difficult to
support and justify. The cash flows have excluded cash flow from financing activity (interest) and non-cash
items (depreciation). A pre-tax discount factor of 12.85 per cent has been used.
The following table sets out the sensitivity of key assumptions adopted to the carrying value of the
Company’s Intangible Assets under the Impairment Assessment:
Assumptions
2018 Revenue
Revenue growth
Gross Profit Margin
Discount rate
Terminal Value growth rate
Sensitivity
Negative
Impact ($m)
Positive
Impact ($m)
±10.0%
±0.5%
±2.0%
±0.5%
±0.5%
9.1
3.1
5.7
0.9
2.9
7.8
3.2
17.1
1.2
2.5
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 45
Notes to the Consolidated Financial Statements
Note 11: Provisions
Current
Employee entitlements – long service leave
Employee entitlements – annual leave
Provision for warranty
Non-current
Employee entitlements – long service leave
Accounting Policy
2017
$
2016
$
91,136
795,570
134,299
1,021,005
62,459
602,695
–
665,154
83,454
34,369
Provision is made for benefits accruing to employees in respect of wages and salaries, annual leave, long
service leave, and sick leave when it is probable that settlement will be required and they are capable of
being measured reliably. Provisions made in respect of wages and salaries, annual leave, long service leave
and sick leave expected to be settled within 12 months are measured at their nominal values using the
remuneration rate expected to apply at the time of settlement.
The provision for warranty claims represents the present value of the directors’ best estimate of the future
outflow of economic benefits that will be required under the group’s obligations for warranties under local
sale of goods legislation. The estimate has been made on the basis of historical warranty trends and may
vary as a result of new materials, altered manufacturing processes or other events affecting product quality.
Note 12: Notes to the cash flow statement
For statement of cash flow purposes, cash and cash equivalents includes cash on hand and deposits held at
call with financial institutions.
(a) Reconciliation of cash
For the purpose of the cash flow statement, cash includes cash on hand and in banks and short term
deposits with banks. Cash at the end of the financial year as shown in the cash flow statement is reconciled
to the related items in the statement of financial position as follows:
Australian Dollar bank accounts
British Sterling bank accounts
US Dollar bank accounts
Euro bank accounts
Petty cash
2017
$
820,680
93,363
1,900,285
325,390
134
3,139,852
2016
$
236,999
97,671
189,366
109,188
265
633,489
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 46
Notes to the Consolidated Financial Statements
Note 12: Notes to the cash flow statement (cont’d)
(b) Reconciliation of (loss) / profit after income tax to the net cash used in operating activities
Net (loss)/profit after tax
Non-cash items:
Depreciation and amortisation
Employee share plan expense
Impairment expense
R&D grant income not recognisable
Exchange differences on foreign operations
Change in operating assets and liabilities
Increase in trade and other receivables
Increase in inventories
Increase in other assets
Increase in trade and other payables
Increase in provision
Increase in tax liabilities
Increase in deferred tax
Net outflow from operating activities
Non-cash financing and investing activities
2017
$
2016
$
(5,847,874)
31,558
1,802,083
161,151
261,456
1,913,980
595,671
(3,054,162)
(2,155,408)
(101,998)
1,758,938
404,936
207,536
430,722
(3,622,969)
1,060,299
41,222
-
814,583
(146,815)
(2,204,308)
(1,232,650)
(1,634)
801,062
193,788
194,710
640,900
192,715
Shares were issued to employees on the conversion of options under the DTI Employee Option Plan
(refer Note 17: Share-based payments).
Note 13: Contributed equity
2017
No.
2017
$
2016
No.
2016
$
Ordinary shares
Balance at the beginning of financial year
Issued of share capital
Shares issued in terms of employee share plan
Capital raising costs
Treasury shares
Balance at the end of the financial year
91,627,118
33,044,461
–
–
–
124,671,579
13,723,974
11,565,561
–
(320,176)
–
24,969,359
91,627,118
–
2,000,000
–
(2,000,000)
91,627,118
13,723,974
–
–
–
–
13,723,974
Fully paid ordinary shares carry one vote per share and carry the right to dividends.
Ordinary shares have no par value and the Company does not have a limited amount of authorised capital
Employee Share Plan
The DTI Employee Share Plan (DESP) has been established by the Board to permit shares to be issued by
the Company to employees for no cash consideration and has been put in place by the Company. All
permanent employees (excluding directors) who have been continuously employed by the group for a
period of at least one year are eligible to participate in the scheme. Employees may elect not to participate
in the scheme.
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 47
Notes to the Consolidated Financial Statements
Note 13: Contributed equity (cont’d)
The shares are recognised at the closing share price on the grant date (31c on 15 April 2016) as an issue
of treasury shares by the trust and as part of employee benefit costs over the period the shares vest. The
share vest one third per year on the anniversary date of 15 April over the next three years.
DTI Capital Pty Ltd (Trustee), a wholly owned subsidiary of the Company, has been appointed by the
Company to act as the trustee of the DESP. The Company has issued 2,000,000 DESP shares to the
Trustee to hold for the benefit of employees until the DESP shares cease to be subject to any vesting
conditions, at which time the DESP shares will be transferred to the employee or sold on behalf of the
employee, with the sale proceeds remitted to the employee.
Treasury shares are shares in the Company that are held by DTI Capital Ltd for the purpose of issuing
shares under the DESP. The shares are held as treasury shares until such time as they are vested.
Forfeited DESP shares may be reallocated in subsequent grants (refer Note 17).
Accounting Policy
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or
options are shown in equity as a deduction, net of tax, from the proceeds. If the Company re-acquires its own
equity instruments, for example as a 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 profit or loss and the consideration
paid including any directly attributable incremental costs (net of income taxes) is recognised directly in
equity.
Note 14: Financial risk management
The Group’s principal financial instruments are cash, trade and other receivables, trade and other payables,
and borrowings. The main purpose of these financial instruments is to raise finance for the Group’s
operations. The Group has various other financial assets and liabilities such as trade and other receivables
and trade payables, which arise directly from its operations. The Group does not enter into derivative
transactions. The main risks arising from the Group’s financial instruments are interest rate risk, liquidity risk,
credit risk and foreign exchange risk. The Board reviews and agrees policies for managing each of these
risks.
The following table details the Group’s exposure to interest rate risk as at 30 June 2017. The amounts
disclosed in the table are the contractual undiscounted cash flows. The payables cash flows equal their
carrying balances as the impact of discounting is not significant.
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
P a g e | 4 8
Notes to the Consolidated Financial Statements
Note 14: Financial risk management (cont’d)
Maturing
1 Year or
Less
$
Over 1 to 2
Years
$
Over 2
Years
$
Total
Contractual
Cash Flows
$
Total
Carrying
Value
$
Weighted
Average
Active
Interest
Rate
%
30 June 2017
Financial Liabilities
Fixed rate
Other borrowings
Non-interest
bearing
Payables
30 June 2016
Financial Liabilities
Fixed rate
Other borrowings
Non-interest
bearing
Payables
Net Fair Value
507,117
16,923
5,777,436
6,284,553
–
16,923
Maturing
–
–
–
524,040
505,596
6.7%
5,777,436
6,301,476
5,777,436
6,283,032
–
1 Year or
Less
$
Over 1 to 2
Years
$
Over 2
Years
$
Total
Contractual
Cash Flows
$
Total
Carrying
Value
$
Weighted
Average
Active
Interest
Rate
%
202,446
209,136
100,452
512,034
491,112
4.3%
4,015,498
4,217,944
–
209,136
–
100,452
4,015,498
4,527,532
4,015,498
4,506,610
–
The carrying amount of financial assets and financial liabilities recorded in the financial statements
represents their respective net fair values, determined in accordance with the accounting policies disclosed
in Note 24.
Credit Risk Exposure
The Group's maximum exposure to credit risk at reporting date in relation to each class of recognised
financial assets is the carrying amount of those assets as disclosed in the statement of financial position.
There are no historical default rates in respect of receivables. Cash balances and term deposits are held with
financial institutions of minimum AA ratings.
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 49
Notes to the Consolidated Financial Statements
Note 14: Financial risk management (cont’d)
Foreign Exchange Risk
The Company has transactions in currencies other than Australian Dollars which carry receivables and
payables in the respective currency. These financial instruments are not hedged. The Company’s exposure
to foreign currency risk at the end of the reporting period, expressed in Australian dollars, was as follows:
USD
$
423,765
3,985,984
(4,241,787)
167,962
0.77
30 June 2017
EUR
$
325,390
1,861,763
(22,274)
2,165,419
0.67
GBP
$
93,363
1,909,039
(334,987)
1,667,415
0.59
USD
$
189,366
3,304,942
(2,396,970)
1,097,338
0.74
30 June 2016
EUR
$
109,188
663,805
(118,297)
654,696
0.67
GBP
$
97,672
234,013
(2,583,029)
(2,251,344)
0.52
Cash
Trade and other debtors
Trade and other payables
Exchange rates
Interest Rate Risk
The Company's loan and lease arrangements are subject to fixed interest rates and therefore would not have
been impacted by any increase/decrease in interest rates during the current year.
Profit is sensitive to higher/lower interest income from cash and cash equivalents and term deposits as a
result of changes in interest rates. At year end the Company’s bank account was earning interest of 1.68 per
cent (2016:1.05 per cent).
Liquidity Risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The
Board's approach to managing liquidity is to ensure, as far as possible, that the Group will always have
sufficient liquidity to meet its liabilities when due. As at 30 June 2017 and the date of this report, the Group
has sufficient liquid assets to meet its financial obligations.
Sensitivity Analysis
Interest Rate Risk
The Company's loan and lease arrangements are subject to fixed interest rates and therefore would not have
been impacted by any increase/decrease in interest rates during the current year. Accordingly, an increase in
interest rates would not have impacted the Company's interest expense.
Movements in interest rates on the Company’s bank accounts and term deposits would not have a significant
impact on the Company’s result for the year.
Foreign Exchange Rate Risk
Based on the financial instruments held at 30 June 2017, had the Australian dollar weakened by 5 per cent
against the US Dollar, Euro and British Sterling, with all other variables held constant, the Group’s pre-tax
profit for the year would have been $288,252 (2016:$27,861) lower. If the Australian dollar had strengthened
the corresponding impact would be an increase in pre-tax profit by the same amount.
Price Risk
Investments held are not listed or traded in active markets and therefore no price risk arises.
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 50
Notes to the Consolidated Financial Statements
Note 15: Capital management
The Company’s objectives when managing capital are to:
safeguard their ability to continue as a going concern, so that they can continue to provide returns for
shareholders and benefits for other stakeholders; and
maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to
shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
Under the terms of the major borrowing facilities with Australia and New Zealand Banking Group Limited
(ANZ) that were entered into in December 2015 and then revised in August 2016, the group is required to
comply with the following financial covenants:
the Debt to EBITDA ratio not to exceed 2.75, and
the Borrowing Base Ratio not to exceed 40 per cent.
The value of Debt to be used in the Debt to EBITDA ratio calculation is the sum of the utilization of the
overdraft, asset finance and guarantee ANZ facilities.
The Borrowing Base Ratio is the ratio of the amount owing under the ANZ facility to the sum of eligible stock
and eligible debtors.
Due to the classification of project surety bonds as debt, the Company has been in technical breach since
31 December 2016. ANZ has advised that it will take no recovery action as a result of this technical breach,
with the next review of the facility due 30 September 2017.
As at 30 June 2017, the Debt to EBITDA ratio was negative 1.60 (2016:0.53) and the Borrowing Base Ratio
was 10 per cent (2016:16 per cent).
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 51
Notes to the Consolidated Financial Statements
Note 16: Reserves and accumulated losses
Reserves
Employee Share Plan reserve
Foreign currency translation reserve
Employee Share Plan Reserve
Balance 1 July
Arising on share-based payments
Balance 30 June
2017
$
2016
$
202,373
452,170
654,543
41,222
161,151
202,373
41,222
(135,364)
(94,142)
–
41,222
41,222
Employee Share Plan Reserve records as an expense over the 3 year vesting period, the value of the DTI
Employee Share Plan shares issued. The expense for the current financial year is for the full year
(2016: pro-rated amount from 15 April to 30 June 2017).
Foreign currency translation reserve
Balance 1 July
Currency translation differences – current year
Balance 30 June
2017
$
2016
$
(135,364)
587,176
451,812
(78,637)
(56,727)
(135,364)
The foreign currency translation reserve is used to record exchange differences arising from the translation
of the financial statements of foreign subsidiaries.
Retained earnings/(accumulated losses)
Movements in retained profits were as
follows:
Balance 1 July
Net (loss)/profit for the year
Balance 30 June
2017
$
2016
$
1,063,975
(5,847,874)
(4,783,899)
1,032,417
31,558
1,063,975
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 52
Notes to the Consolidated Financial Statements
Note 17: Share-based payments
Shares in the DTI Employee Share Plan (DESP) were issued to employees. Details of the DESP are in
Note 13. No share based payments were made during the year ended 30 June 2017.
Opening Balance
Shares Granted
Shares allocated
Shares vested to employees
Shares forfeited
Shares available/
Closing Balance
2017
Allocated
1,891,000
–
–
–
(255,000)
Avail. To
Allocate
109,000
–
–
–
255,000
2016
Allocated
–
–
1,891,000
–
–
Avail. To
Allocate
–
2,000,000
(1,891,000)
–
–
1,636,000
364,000
1,891,000
109,000
These represent total fair value of shares to be issued under the DESP.
The former share option plan has been replaced by the new DTI Employee Share Plan. There are no longer
any share options on issue.
Note 18: Capital and leasing commitments
Leased assets classified as finance leases are recognised as assets. The amount initially brought to account
is the present value of minimum lease payments. Finance leased assets are amortised on a diminishing
value basis over the estimated useful life of the asset.
Finance lease payments are allocated between interest expense and reduction of lease liability over the term
of the lease. The interest expense is determined by applying the interest rate implicit in the lease to the
outstanding lease liability at the beginning of each lease payment period. Leases in which a significant
portion of the risks and rewards of ownership are not transferred to the Company as lessee, are classified as
operating leases (Note 9). Payments made under operating leases (net of any incentives received from the
lessor) are charged to the consolidated statement of profit or loss and other comprehensive income on a
straight-line basis over the period of the lease.
(a) Finance lease commitments
The Company signed two motor vehicle leases commencing in April 2014 and three motor vehicle leases
commencing in November 2014. The leases are with Capital Finance Australia Ltd for a period of five years
with lease payments paid monthly in advance. There are no terms of renewal, purchase options or escalation
clauses in respect of the leases.
In December 2015 and April 2016, DTI negotiated chattel mortgage loans with the ANZ bank to finance the
purchase of specialised technical equipment for R&D. The total amount utilised under the facility is $517,735
at interest rates of 3.99% and 3.90% respectively. The loans are repayable monthly over a 36 month period.
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 53
Notes to the Consolidated Financial Statements
Note 18: Capital and leasing commitments (cont’d)
Minimum finance lease payable:
Not later than 1 year
Later than 1 year but not later than 5 years
Minimum lease payments
Future finance charges
Present value of minimum lease payments
(b) Operating lease commitments
2017
$
2016
$
480,875
43,165
524,040
(18,444)
505,596
202,427
323,954
526,381
(35,269)
491,112
The Company signed an operating lease in June 2012 for the land on which the office and workshop
facilities are situated with a lease term of 5 years, with the option to extend for a further 5 years. The
Company does not have the option to purchase the leased asset at the expiry of the lease. The Company
was offered an early lease sign-on benefit in August 2016, which extended the lease until 2022.
DTI EMEA Ltd signed an operating lease in November 2014 for the lease, commencing 1 January 2015, of
office space for DTI EMEA Ltd in the UK with a lease term of 5 years. The Company does not have the
option to purchase the leased asset at the expiry of the lease.
Non-cancellable operating lease payable:
Not later than 1 year
Later than 1 year but not later than 5 years
Note 19: Contingent liabilities
2017
$
2016
$
138,946
466,665
605,611
146,220
592,997
739,217
2017
$
2016
$
Bank guarantees for unconditional undertaking of contracts
400,063
400,063
The Company has given bank guarantees relating to performance requirements of contracts.
Under the contract for the lease of land on which the office and workshop facilities are situated, the Company
may at some future point (at the option of the Lessor) be required to “make good” the land and remove the
building and any improvements thereon. The Lessor is required to give four years notice of any such
requirement. A bank guarantee in relation to this contract of $107,800 (2016:$107,800) is included in the
amounts above.
Note 20: Events occurring after the reporting period
No matters or circumstance have arisen that have significantly affected, or may significantly affect, the
operations of DTI Group Ltd, the results of those operations or the state of affairs of DTI Group Ltd in
subsequent years that is not otherwise disclosed in this report.
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 54
Notes to the Consolidated Financial Statements
Note 21: Earnings per share
Basic Earnings per Share
Basic earnings per share is calculated by dividing:
the profit or loss attributable to owners of the company, excluding any costs of servicing equity other
than ordinary shares;
by the weighted average number of ordinary shares outstanding during the financial year,
adjusted for bonus elements in ordinary shares issued during the year.
Diluted Earnings per Share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take
into account:
the after income tax effect of interest and other financing costs associated with dilutive potential ordinary
shares; and
the weighted average number of additional ordinary shares that would have been outstanding assuming
the conversion of all dilutive potential ordinary shares.
(Loss)/Earnings per share
Basic (loss)/earnings per share (cents per share)
Diluted (loss)/earnings per share (cents per share)
Reconciliation of earnings used in calculating earnings per
share
The following reflects the income and share data used in the
calculations of basic and diluted earnings per share:
Net earnings used in calculating basic and diluted earnings per
share
Weighted average number of shares used as the denominator
Weighted average number of ordinary shares used in calculating
basic earnings per share
Weighted average additional shares issued during the period
Adjusted weighted average number of ordinary shares used in
calculating diluted earnings per share
2017
Cents per
Share
2016
Cents per
Share
(5.32)
(5.32)
2017
$
0.03
0.03
2016
$
(5,847,874)
31,558
2017
Number of
Shares
2016
Number of
Shares
91,627,118
18,301,836
91,627,118
–
109,928,954
91,627,118
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 55
Notes to the Consolidated Financial Statements
Note 22: Related-party transactions
(a) Key management personnel
Compensation by category:
key management personnel
Short-term benefits
Long-term benefits
Post-employment benefits
Share based payments
2017
$
2016
$
930,922
5,954
64,670
6,527
1,008,073
835,412
5,954
58,908
16,850
917,124
Investor Services Pty Limited provides share
to DTI. Chris
Computershare
Morris (Non-Executive Chairman of DTI) is also a Non-Executive Director of Computershare Limited. DTI
paid Computershare Investor Services Pty Limited a total amount of $52,380 during the current year. An
amount of $29,001 (2016: nil) was paid in relation to the capital raising and $23,379 (2016: $16,829) relates
to normal trading activities. Transactions with Computershare Investor Services Pty Limited are based on
normal commercial terms and conditions.
registry service
Detailed remuneration disclosures are provided in the remuneration report on pages 14 to 23.
(b) Subsidiaries
The consolidated financial statements include the following subsidiaries:
Name
Incorporation
Shares
DTI Capital Pty Ltd
Virtual Observer Pty Ltd
DTI EMEA Ltd (ii)
DTI USA Holdings Inc
DTI USA Inc (i)
Australia
Australia
UK
USA
USA
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
(i) This entity is owned by DTI USA Holdings Inc.
Equity
%
2017
2016
100
100
100
100
100
100
100
100
100
100
(ii) On 11 July 2017, DTI EMEA Ltd incorporated a wholly owned subsidiary in South Africa, Digital
Technology International (SA) Proprietary Limited.
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 56
Notes to the Consolidated Financial Statements
Note 23: Parent entity financial information: DTI Group Ltd
The individual financial statements for the parent entity show the following amounts:
Statement of Financial Position
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Non-current liabilities
Total liabilities
Net Assets
Shareholders’ equity:
Issued capital
Employee share plan reserve
(Accumulated losses)/retained earnings
Total Equity
Statement of Profit or Loss and
Other Comprehensive Incomes
Loss for the year
Other comprehensive loss
Total comprehensive loss
2017
$
2016
$
15,522,564
13,492,442
29,015,006
12,359,821
8,618,500
20,978,321
6,523,732
1588,341
8,145,036
20,869,970
5,220,060
1,064,456
6,284,516
14,693,805
24,969,359
202,373
(4,301,762)
20,869,970
13,723,974
41,222
928,609
14,693,805
(5,230,371)
–
(5,230,371)
(381,026)
–
(381,026)
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 57
Notes to the Consolidated Financial Statements
Note 24: Summary of significant accounting policies
Statement of Compliance
This financial report includes the consolidated financial statements and notes of the Group. The financial
report is a general purpose financial report which has been prepared in accordance with the Corporations
Act 2001, Australian Accounting Standards, Australian Accounting Interpretations, and other authoritative
pronouncements of the Australian Accounting Standards Board. The Group’s financial statements and
accompanying notes also comply with International Financial Reporting Standards (IFRS).
DTI is a for-profit company limited by shares incorporated in Australia whose shares have been publicly
traded on the Australian Securities Exchange from 9 December 2014.
The financial statements were authorised as per
29 August 2017.
the Directors’ declaration on page 65 dated
Basis of Preparation
The financial report has been prepared on the basis of historical cost. Cost is based on the fair values of the
consideration given in exchange for assets. In the application of IFRS management is required to make
judgments, estimates and assumptions about carrying values of assets and liabilities that are not readily
apparent from other sources.
The estimates and associated assumptions are based on historical experience and various other factors that
are believed to be reasonable under the circumstance, the results of which form the basis of making the
judgments. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimate is revised if the revision affects only that period,
or in the period of the revision and future periods if the revision affects both current and future periods.
Refer to Note 24(h) for future disclosure on significant accounting estimates and judgement.
Accounting Policies
Accounting policies are selected and applied in a manner which ensures that the resulting financial
information satisfies the concepts of relevance and reliability, thereby ensuring that the substance of the
underlying transactions or other events is reported.
The accounting policies set out below have been applied in preparing the financial statements for the year
ended 30 June 2017 and the comparative information presented in these financial statements for the year
ended 30 June 2016.
The following significant accounting policies have been adopted in the preparation and presentation of the
financial report:
(a) Principles of consolidation
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group
controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with
the entity and has the ability to affect those returns through its power to direct the activities of the entity.
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 58
Notes to the Consolidated Financial Statements
Note 24: Summary of significant accounting policies (cont’d)
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are
deconsolidated from the date that control ceases.
The acquisition method of accounting is used to account for business combinations by the Group.
Intercompany transactions, balances and unrealised gains on transactions between Group companies are
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment
of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure
consistency with the policies adopted by the Group.
(b) Investment and other financial assets
The Company classifies its financial assets as 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.
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 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 trade and other receivables (Note 5 & 7) in the statement of financial
position.
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.
Loans and receivables are carried at amortised cost using the effective interest method.
The Company assesses at each reporting date whether there is objective evidence that a financial asset or
group of financial assets is impaired.
(c) Financial instruments issued by the Company
Debt and equity instruments are classified as either liabilities or as equity in accordance with the substance
of the contractual arrangement.
Transaction costs arising on the issue of equity instruments are recognised directly in equity as a reduction
of the proceeds of equity instruments to which the costs relate. Transaction costs are costs that are incurred
directly in connection with the issue of those equity instruments and which could not have been incurred had
those instruments not been issued.
(d) Foreign currency
Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of
the primary economic environment in which the entity operates (‘the functional currency’).
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 59
Notes to the Consolidated Financial Statements
Note 24: Summary of significant accounting policies (cont’d)
The consolidated financial statements are presented in Australian dollars, which is the Company’s functional
and presentation currency.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates at the
dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such
transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at
year end exchange rates are generally recognised in profit or loss. They are deferred in equity if they relate
to qualifying cash flow hedges and qualifying net investment hedges or are attributable to part of the net
investment in a foreign operation.
Foreign exchange gains and losses that relate to borrowings are presented in the consolidated statement of
profit or loss in finance costs. All other foreign exchange gains and losses are presented in the income
statement on a net basis within other income or other expenses.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange
rates at the date when the fair value was determined. Translation differences on assets and liabilities carried
at fair value are reported as part of the fair value gain or loss.
(d) Foreign currency (cont’d)
For example, translation differences on non-monetary assets and liabilities such as equities held at fair value
through profit or loss are recognised in profit or loss as part of the fair value gain or loss and translation
differences on non-monetary assets such as equities classified as available-for-sale financial assets are
recognised in other comprehensive income.
Group companies
The results and financial position of foreign operations (none of which has the currency of a hyperinflationary
economy) that have a functional currency different from the presentation currency are translated into the
presentation currency as follows:
assets and liabilities for each statement of financial position presented are translated at the closing rate
at the date of that statement of financial position;
income and expenses for each statement of profit or loss and other comprehensive income are
translated at average exchange rates (unless this is not a reasonable approximation of the cumulative
effect of the rates prevailing on the transaction dates, in which case income and expenses are
translated at the dates of the transactions); and
all resulting exchange differences are recognised in other comprehensive income.
(e) Goods and services tax
Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except:
where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part
of the cost of acquisition of the asset or as part of the item of expense; or
for receivables and payables which are recognised inclusive of GST.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of
receivables or payables.
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 60
Notes to the Consolidated Financial Statements
Note 24: Summary of significant accounting policies (cont’d)
Cash flows are included in the statement of cash flows on a gross basis. The GST component of cash flows
arising from investing and financing activities which is recoverable from, or payable to, the taxation authority
is classified as operating cash flows.
(f) Comparative Figures
Where required by Accounting Standards, comparative figures have been adjusted to conform to changes in
presentation for the current financial year.
(g) New accounting standards and Australian accounting interpretations
New and amended accounting standards adopted
The Group has applied the following standards and amendments for the first time for their annual reporting
period commencing 1 July 2016:
AASB 2015-4 Amendments to Australian Accounting Standards.
Financial Reporting Requirements for Australian Groups with a Foreign Parent.
The adoption of this standard does not have any impact on DTI.
New accounting standards and interpretations not yet adopted
Certain new accounting standards and interpretations have been published that are not mandatory for
30 June 2017 reporting periods and have not yet been applied in the financial report. The Group’s
assessment of the impact of these new standards and interpretations is set out below.
Application
Date of
Standard
1 Jan 18
Application
Date for
Group
(Year ended)
30 Jun 19
1 Jan 18
30 Jun 19
AASB
Amendment
AASB 9
Affected
Standard(s)
Financial
Instruments
AASB 15
Revenue
from
contracts
with
customers
Nature of Change
to Accounting
Policy
Changes to
classification and
measurement
requirements of
financial
instruments and
hedge accounting
New standard for
the recognition of
revenue based on
the principle
that revenue is
recognised when
control of a good or
service transfers to
a customer
Impact
While the group has yet
to undertake a detailed
assessment of the
changes, no significant
impact is anticipated.
Management is
currently assessing the
impact of the new rules.
At this stage, the group
is not able to estimate
the impact of the new
rules on the group’s
financial statements.
The group will make
more detailed
assessments of the
impact over the next 12
months.
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 61
Notes to the Consolidated Financial Statements
Note 24: Summary of significant accounting policies (cont’d)
AASB
Amendment
Interpretation 22 Foreign
Affected
Standard(s)
Currency
Transactions
and Advance
Consideration
Nature of Change
to Accounting
Policy
Where foreign
currency
consideration is
received or paid in
advance under
AASB 121 The
Effects of Changes
in Foreign
Exchange Rates,
the interpretation
clarifies that the
related asset,
expense or income
is recognised using
the exchange rate
on the date that the
non-monetary asset
(prepayment) or
non-monetary
liability (deferred
income) is initially
recognised.
Application
Date of
Standard
1 Jan 18
Application
Date for
Group
(Year ended)
30 Jun 19
Impact
The entity currently
recognises assets,
expenses and income
arising from advance
receipts and payments
in a foreign currency at
the exchange rate on
the date that they
qualify for recognition
under Australian
Accounting Standards
(i.e. the date that the
prepayment and
deferred income
amounts are
derecognised). Any
difference between the
amounts recognised
for assets, expenses
and income and the
related prepayment
and deferred income is
recognised in profit or
loss.
From 1 July 2018,
assets, expenses and
income will be
recognised on
derecognition of
prepayments and
deferred income at the
exchange rate on the
date that the
prepayment or
deferred income was
originally paid or
received.
Comparatives will not
be restated.
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 62
Notes to the Consolidated Financial Statements
Note 24: Summary of significant accounting policies (cont’d)
Application
Date of
Standard
1 Jan 19
Application
Date for
Group
(Year
ended)
30 Jun 20
AASB
Amendment
AASB 16
Affected
Standard(s)
Leases
Nature of Change
to Accounting
Policy
AASB 16 eliminates
the operating and
finance lease
classifications for
leases currently
accounted for under
AASB 117 Leases. It
instead requires an
entity to bring most
leases onto its
balance sheet in a
similar way to how
existing finance
leases are treated
under AASB 117.
An entity will be
required to recognise
a lease liability and a
right of use asset in
its balance sheet for
most leases. There
are some optional
exemptions for
leases with a period
of 12 months or less
and for low value
leases.
Impact
To the extent that the
entity, as lessee, has
operating leases
outstanding at the date
of initial application, 1
January 2019, right-of-
use assets will be
recognised for the
amount of the
unamortised portion of
the useful life, and the
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 EBITA 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. The
Group will make a more
detailed assessment of
the impact over the next
12 months.
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 63
Notes to the Consolidated Financial Statements
Note 24: Summary of significant accounting policies (cont’d)
(h) Significant accounting estimates and judgements
Revenue recognition
In accordance with the accounting policy detailed in Note 2 the Company recognises revenue at the fair
value of the consideration received (net of the amount of GST payable) when the significant risks and reward
of ownership of the goods have passed to the buyer at the time of the delivery of goods to the customer, or
when services rendered are provided to customers. At 30 June 2017 management has determined that the
profits on the contracts have been recognised in the correct reporting period and that there are no future
losses on any contracts that should be recognised at 30 June 2017.
Inventory obsolescence
Inventories are accounted for in accordance with the accounting policy detailed in Note 8. Where the net
realisable value of inventory is lower than its cost the Company recognises a provision for inventory
obsolescence. Where stock has been held for three consecutive years with no movement and/or stock sold
in a 12 month period is less than 20 per cent of the stock on hand, a provision for obsolescence is taken up.
At 30 June 2017 management has determined that a provision for inventory obsolescence of $163,987
(2016:$139,120) is still required for inventory where net realisable value is lower than its cost.
Development costs capitalised
Development costs have been capitalised in accordance with the accounting policy detailed in Note 10.
At 30 June 2017 management has assessed that all of the net capitalised development expenditure carried
forward at year end, of $5,291,133 (2016:$4,128,417), comprises all directly attributable costs, including
costs of materials, services, direct labour and an appropriate proportion of overheads.
Amortisation of intangible assets
Intangible assets are amortised over their useful lifes (5 to 10 years). Amortisation commences when the
asset is available for commercial sale.
Share-based payment transactions
The Company measures the cost of equity-settled transactions with employees by reference to the fair value
of the equity instruments at the dated at which they are granted. The fair value is the ASX share price.
Impairment
The Group assesses impairment at each reporting date by evaluating conditions specific to the Group that
may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset
is determined. The recoverable amounts of assets are calculated using a number of assumptions as
disclosed in Note 10.
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 64
Notes to the Consolidated Financial Statements
Note 24: Summary of significant accounting policies (cont’d)
(i) Auditor’s remuneration
BDO Audit (WA) Pty Ltd
Remuneration of the auditors of the entities for:
Auditing or reviewing the current year financial report
Auditing or reviewing the half year review
BDO LLP
Remuneration of the auditors of the entities for:
Auditing or reviewing the current year’s financial report
Non-audit services performed by BDO during the year
comprise:
DTI EMEA Ltd Tax Consulting
Employee Share Plan Consulting
2017
$
2016
$
50,000
25,771
75,771
49,045
15,590
64,635
21,497
17,979
8,610
600
6,271
1,625
Note 25: Company information
DTI Group Ltd is a listed public company (ASX: DTI), incorporated and operating in Australia.
Registered office and principal place of business
31 Affleck Road
Perth Airport, WA, 6105
Tel: (08) 9479 1195
Internet: www.dti.com.au
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 65
Directors’ Declaration
In the opinion of the Directors of DTI Group Ltd ("Company"):
1
2
3
The financial statements and accompanying notes set out on pages 24 to 64 are in accordance with
the Corporations Act 2001, and:
(i)
(ii)
comply with Accounting Standards, the Corporations Regulations 2001 and other mandatory
professional reporting requirements; and
give a true and fair view of the consolidated entity’s financial position as at 30 June 2017 and of
its performance for the year ended on that date.
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.
The Company has included in the notes to the financial statements an explicit and unreserved
Statement of Compliance with International Financial Reporting Standards.
The directors have been given the declarations by the managing director / chief executive officer and chief
financial officer required by section 295A of the Corporations Act 2001.
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:
Peter Tazewell
Managing Director
29 August 2017, Perth, Australia
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
P a g e | 6 6
Auditor’s 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
INDEPENDENT AUDITOR'S REPORT
To the members of DTI Group Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of DTI Group Limited (the Company) and its subsidiaries (the
Group), which comprises the consolidated statement of financial position as at 30 June 2017, the
consolidated statement of profit and loss and other comprehensive income, the consolidated statement
of changes in equity and the consolidated statement of cash flows for the year then ended, and notes
to the financial report, including a summary of significant accounting policies and the directors’
declaration.
In our opinion the accompanying financial report of the Group, is in accordance with the Corporations
Act 2001, including:
(i)
Giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its
financial performance for the year ended on that date; and
(ii)
Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the Corporations
Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s
APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance
with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been
given to the directors of the Company, would be in the same terms if given to the directors as at the
time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
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
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
P a g e | 6 7
Auditor’s Report
Recoverability of inventory
Key audit Matter
How the matter was addressed in our report
Inventories, as disclosed in note 8 of the
financial report are a significant asset of
the Group and at 30 June 2017
representing 27% of total assets.
In accordance with AASB 102 Inventories,
inventories shall be measured at the
lower of cost and net realisable value. As
a consequence, management have raised
a provision for inventory obsolescence.
This area is considered a key audit matter
given the nature of inventories, the total
value held and the level of management
judgement involved in provisioning for
obsolescence.
Our procedures included, but were not limited to:
Selecting a sample from the inventory list and
agreeing to purchase invoices to ensure
inventory items are initially recorded at their
acquisition cost;
Assessing the net realisable value of
inventories, by selecting items on a sample
basis and comparing to the estimated selling
price (less estimated costs of completion and
estimated selling costs);
Assessing management’s estimation of costs to
complete work in progress and anticipated
selling costs of inventory based on sales
contracts;
Reviewing the inventory aging report to
understand the nature and amount of any
inventory provisioning for aged inventory;
Making enquiries of management regarding
obsolete and slow moving inventory items,
including inspecting the condition of inventory
on hand to confirm saleability; and
Assessing the adequacy of financial report
disclosures.
Recoverability of trade receivables
Key audit Matter
How the matter was addressed in our report
Trade receivables as disclosed in note 5 of
the financial report represent a
significant asset to the Group as at 30
June 2017.
This area is considered a key audit matter
due to the significant increase in trade
receivables, declining sales and
significant management judgement in
estimating the collectability of amounts
overdue past agreed upon credit terms.
Our procedures included, but were not limited to:
Checking on a sample basis that receivables
recognised at 30 June 2017 have been paid
subsequent to reporting date;
Reviewing terms and conditions for customers
that have renegotiated payment terms with
the Group;
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
P a g e | 6 8
Auditor’s Report
Challenging management’s assumptions
regarding the level provisioning against the
ageing of receivables; and
Assessing the adequacy of financial report
disclosures.
Capitalisation of intangible assets
Key audit Matter
How the matter was addressed in our report
Our procedures included, but were not limited to:
Holding discussions with management to
understand the nature and feasibility of key
projects as 30 June 2017;
Evaluating the key assumptions used for
estimates made in capitalising development
costs, including assessment of whether
capitalised costs related to the development
phase of the project, the generation of
probable future economic benefits and the
useful economic life attributed to the asset;
On a sample basis, agreeing costs capitalised
during the year met the development costs
criteria; and
Assessing the adequacy of financial report
disclosures.
As disclosed in note 10, development
costs of $5,291,133 have been
capitalised as an Intangible Asset,
including development costs of
$4,549,451 capitalised during the year.
The capitalisation of these internally
generated development costs is a key
audit matter due to the significance of
the costs capitalised and the specific
criteria that are required to be met for
capitalisation under the accounting
standard AASB 138 Intangibles.
This involves management judgement
such as with respect to technical
feasibility, intention and ability to
complete the intangible asset, ability
to use or sell the asset, generation of
future benefits and the ability to
measure the costs reliably and whether
costs, including payroll costs, were
directly attributable to relevant
projects.
In addition, management judgement is
also required in estimation of useful
lives of the completed projects.
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
P a g e | 6 9
Auditor’s Report
Recoverability of intangible assets
Key audit Matter
How the matter was addressed in our report
Note 10 to the financial report discloses
the individual intangible assets and the
assumptions used by the Group in testing
these assets for impairment.
This was determined to be a key audit
matter as management’s assessment of
the recoverability of the intangible assets
is supported by a value in use cash flow
forecast which requires estimates and
judgements about future performance.
These include judgements and estimates
over the expectation of future revenues,
anticipated gross profit margin, growth
rates expected and the discount rate
applied.
Our procedures included, but were not limited to the
following:
• Assessing the appropriateness of the Group’s
categorisation of Cash Generating Units (CGUs)
and the allocation of assets to the carrying
value of CGUs based on our understanding of
the Group’s business and the Group’s internal
reporting;
•
Evaluating management’s ability to
accurately forecast cash flows by assessing the
precision of the prior year forecasts against
actual outcomes;
• Challenging key inputs used in the discounted
cash flows calculations including the
following:
In conjunction with our valuation
specialist, comparing the discount rate
utilised by management to an
independently calculated discount
rate;
Comparing growth rates with historical
data and economic and industry
growth forecast;
Comparing the Group’s forecast cash
flows to the board approved budget;
Performing sensitivity analysis on the
revenue, growth rates and gross profit
margins and discount rates; and
Evaluating the adequacy of related disclosures in
the financial report.
Other information
The directors are responsible for the other information. The other information comprises the
information contained in annual financial report for the year ended 30 June 2017, but does not include
the financial report and our auditor’s report thereon, which we obtained prior to the date of this
auditor’s report, and the annual report, which is expected to be made available to us after that date.
Our opinion on the financial report does not cover the other information and we do not express any
form of assurance conclusion thereon.
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
P a g e | 7 0
Auditor’s Report
In connection with our audit of the financial report, our responsibility is to read the other information
identified above 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 on the other information that we obtained prior to the date
of this auditor’s report, 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.
When we read the annual report, if we conclude that there is a material misstatement therein, we are
required to communicate the matter to the directors and will request that it is corrected. If it is not
corrected, we will seek to have the matter appropriately brought to the attention of users for whom
our report is prepared.
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(cid:65535)
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 at:
http://www.auasb.gov.au/auditors_files/ar2.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 15 to 24 of the directors’ report for the(cid:65535)
year ended 30 June 2017.
In our opinion, the Remuneration Report of DTI Group Limited, for the year ended 30 June 2017,
complies with section 300A of the Corporations Act 2001.
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
P a g e | 7 1
Auditor’s Report
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
Dean Just
Director
Perth, 29 August 2017
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
P a g e | 7 2
Auditor’s 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 DEAN JUST TO THE DIRECTORS OF DTI GROUP LTD
As lead auditor of DTI Group Ltd for the year ended 30 June 2017, I declare that, to the best of my
knowledge and belief, there have been:
1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
2. No contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of DTI Group Ltd and the entities it controlled during the period.
Dean Just
Director
BDO Audit (WA) Pty Ltd
Perth, 28 August 2017
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 73
Corporate directory
Directors
Neil Goodey
Peter Tazewell
Richard Johnson
Glyn Denison
Chris Morris
Jeremy King
Non-Executive Chairman
Managing Director and Chief Executive Officer
Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Company Secretary
Raj Surendran
Registered and
Principal Office
Auditor
Share Registrar
Corporate Advisor
Bankers
31 Affleck Road
Perth Airport WA 6105
Telephone: (08) 9479 1195
Facsimile: (08) 9479 1190
Website: www.dti.com.au
BDO Audit (WA) Pty Ltd
38 Station Street
Subiaco WA 6008
Computershare Investor Services Pty Limited
Yarra Falls
452 Johnston Street
Abbotsford Vic 3067
Pendulum Capital Pty Limited
Level 1, 5 Ord Street
West Perth WA 6005
Telephone:
08 9282 5400
Australia and New Zealand Banking Group Limited
Allendale Square
77 St Georges Terrace
Perth WA 6000
Stock Exchange Listing
DTI Group Ltd shares are listed on the Australian Securities Exchange
(ASX code: DTI)
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
Page | 74
Additional ASX Information
The shareholder information set out below was applicable at 28 August 2017.
Ordinary Share Capital
126,671,579 fully paid ordinary shares held by 1,164 individual shareholders. All issued ordinary shares
carry one vote per share and are entitled to dividends.
Distribution of Holders of Equity Securities
Size of Holding
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
Number of
Shareholders
Percentage of
Shareholding
36
353
263
408
104
1,164
0.00
0.77
1.67
11.65
85.91
100.00
There were 251 holders of less than a marketable parcel of ordinary shares.
Twenty Largest Registered Shareholders
Name
INVIA CUSTODIAN PTY LIMITED
JP MORGAN NOMINEES AUSTRALIA LIMITED
BLUEKARA PTY LTD
INDUCAM NV/C
LEGRANDE INVESTMENTS PTY LTD
LTC MANAGEMENT PTY LTD
MR GLYN DENISON
DTI CAPITAL PTY LTD
MR NEIL EDWARD GOODEY
FINESHORE PTY LTD
WOOD STREET PTY LTD
BOND STREET CUSTODIANS LIMITED
SUPER RAB PTY LTD
BERNVILLE PTY LTD
ANNAPURNA PTY LTD
THE STEPHENS GROUP PTY LTD
DALCREST INVESTMENT PTY LTD
HOLDEX NOMINEES PTY LTD
MR NINO ANDONIO TUFILLI
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
Number of
Shares
24,209,506
23,061,233
4,646,880
3,648,869
3,358,485
2,453,785
1,955,660
1,952,975
1,928,318
1,894,683
1,785,227
1,400,000
1,400,000
1,300,000
1,250,000
1,237,108
1,191,664
1,179,034
1,144,599
1,133,416
Percentage of
Issued Shares
19.11
18.21
3.67
2.88
2.65
1.94
1.54
1.54
1.52
1.50
1.41
1.11
1.11
1.03
0.99
0.98
0.94
0.93
0.90
0.89
Total
82,131,442
64.84
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
P a g e | 7 5
Substantial Shareholders
The names of substantial shareholders which have notified the Company in accordance with section 671B of
the Corporations Act 2001 are:
Name
Finico Pty Ltd & Associates
UIL Limited
Neil Goodey
Adam Smith Asset Management
Voting Rights
Fully Paid Ordinary Shares
Number
24,549,506
12,468,750
6,575,198
6,435,343
%
19.38
9.84
5.20
5.08
Subject to any special rights or restrictions attached to any class or classes of shares in the Company, at a
general meeting every holder of shares present in person or by proxy, body corporate representative or
attorney has one vote on a show of hands and one vote for each Share held on a poll.
Votes are cast by a show of hands unless a poll is demanded. The chairperson of the meeting or least five
Shareholders entitled to vote on the resolution or shareholders with at least 5 per cent of the votes that may
be cast on the resolution may demand a poll.
Escrowed Shares
The number of shares subject to voluntary escrow is nil (2016: Nil).
On-market Buyback
The Company is not currently conducting an on-market buyback of its shares.
Company Secretary
Raj Surendran
Registered and
Principal Office
Share Registrar
31 Affleck Road
Perth Airport WA 6105
Telephone: (08) 9479 1195
Facsimile: (08) 9479 1190
Website: www.dti.com.au
Computershare Investor Services Pty Limited
Yarra Falls
452 Johnston Street
Abbotsford Vic 3067
D T I G R O U P L T D – A N N U A L R E P O R T 2 0 1 7
P a g e | 7 6