A N N U A L
R E P O R T
TABLE OF
CONTENTS
FINANCIAL REPORT
CORPORATE INFORMATION
SHARE AND SHAREHOLDER INFORMATION
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116
Financial Reports
Directors’ Report
Auditor’s Independence Declaration
Remuneration Report (Audited)
Corporate Governance Statement
Financial Statements
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flow
Notes to the Financial Statements for year ended 30 June 2018
Note 1: Corporate Information
Note 2: Summary of Significant Accounting Policies
Note 3: Significant Accounting Judgements, Estimates and Assumptions
Note 4: Business Combinations
Note 5: Segment information
Note 6: Revenue, Other Income and Expenses
Note 7: Income Tax Expense
Note 8: Earnings per Share
Note 9: Dividends
Note 10: Cash and Cash Equivalents
Note 11: Trade and Other Receivables
Note 12: Property Plant and Equipment
Note 13: Intangible Assets
Note 14: Other Assets
Note 15: Trade and Other Payables
Note 16: Tax
Note 17: Provisions and other liabilities
Note 18: Loans and Borrowings
Note 19: Issued Capital and Reserves
Note 20: Capital and Leasing Commitments
Note 21: Cash Flow Information
Note 22: Related Party Disclosures
Note 23: Financial Risk Management
Note 24: Auditors’ Remuneration
Note 25: Information relating to Energy Action Limited (“the parent entity”)
Note 26: Events After the reporting period
Director’s Declaration
Independent audit report to members of Energy Action Limited
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Directors’ Report
Your Directors present their report, together with the financial statements
for Energy Action Limited (the “Company”) and its consolidated entities (the
“Group”), for the financial year ended 30 June 2018.
The names and details of the Company’s Directors in office during the
financial year and until the date of this report are as follows. Directors were
in office for this entire period unless otherwise stated.
Murray Bleach (Non-Executive Chairman)
Qualifications – Bachelor of Arts (Financial Studies) and Master of
Applied Finance - Macquarie University, Institute of Chartered Accountants,
Graduate Member of the Australian Institute of Company Directors.
Experience – Board Member since 2012, Chairman since 2015
Special Responsibilities – Member of each of the Audit & Risk
Management, Nomination and Remuneration Committees
Directorships held in other listed entities currently and during the three prior
years to the current year: Carlton Investments Ltd – Independent Non-
Executive Director (appointed 2 December 2014)
Other Directorships and interests - Director of Suicide Prevention
Australia, Partner in Alfred Street Investment Partners, Member of Advisory
Board for Derwent Executive, Non-Executive Director of IFM Investors,
Chairman of AddVenture Fund.
PAUL Meehan (Non-Executive Director)
Qualifications – Diploma of Law (SAB), University of Sydney
Experience – Board member since 2003
Special Responsibilities – Member of each of the Audit & Risk
Management, Nomination and Remuneration Committees.
Directorships held in other listed entities currently and during the three prior
years to the current year: nil
Other Directorships and interests - Director of Meehans Solicitors Pty
Ltd, Non-executive Director of Commercial First Realty Pty Ltd T/as LJ
Hooker Commercial Macarthur.
Nitin Singhi (Independent Non-Executive director)
Qualifications – Bachelor of Economic and Master of Laws – University of
Sydney, Member of the Australian Institute of Company Directors
Experience – Board Member since 2015
Special Responsibilities – Chairman of each of the Audit & Risk
Management and Nomination Committees and a member of the
Remuneration Committees.
| 4
Energy Action Limited (ACN 137 363 636) Directorships held in other listed entities currently and during the three prior
years to the current year: nil
Other Directorships and interests - Managing Director of Horizon Private
Capital Partners, Director of TiE Sydney, Director of Sport and Leisure
Education Group Pty Limited.
Mark de Kock (Non-Executive Director)
Qualifications – Bachelor of Science (First Class Honours) in Electronic
Engineering from University College London, Executive MBA from the
Australian Graduate School of Management, Member of the Institution of
Engineering and Technology.
Experience – Nominee Director since 2015, appointment recommended by
Microequities Asset Management.
Special Responsibilities – Member of each of the Audit & Risk
Management and Remuneration Committee
Directorships held in other listed entities currently and during the three prior
years to the current year: nil
Other Directorships and interests – Director, Frontier DC Ltd.
John Mackay AM (Independent Non-Executive director)
Qualifications – Bachelor of Arts Administration / Economics from
University of Canberra, Honourary Doctorate from University of Canberra.
Experience – Board Member since July 2017
Special Responsibilities – Member of each of the Audit & Risk
Management and Nomination Committees and Chair of the Remuneration
Committee.
Directorships held in other listed entities currently and during the three prior
years to the current year: Speedcast International – Independent Non-
Executive Chairman (appointed to the Board in 2013 and as Chairman in
2014), Independent Non-executive Chairman, CommsChoice Group Ltd,
formerly Director of CIC Australia (now part of Peet Limited).
Other Directorships and interests – Chairman of the National Arboretum
Foundation, Director of Total Energy Pty Limited.
Interests in the shares and options of the Company and related
bodies corporate
As at the date of this report, the interests of the directors in the shares and
options of Energy Action Limited were:
| 5
Energy Action 2018 Annual Report Murray Bleach
Paul Meehan
Nitin Singhi
Mark de Kock
John Mackay AM
Number of
ordinary shares
Number of options
over ordinary shares
1,881,645
4,798,993
3,000
-
58,470
-
-
-
-
-
COMPANY SECRETARY
The following person held the position of Company Secretary at the end of
the financial year:
Anna Sandham – Bachelor of Economics, University of Sydney, Graduate
Diploma of Applied Corporate Governance, Governance Institute of
Australia, Chartered Secretary
DIVIDENDS
Dividends recommended:
Cents per share
$
Ordinary shares
Final 2018 dividend recommended to be paid 27 September 2018
Final 2017 dividend paid 21 September 2017
4.00
1.40
1,038,165
363,358
OPERATING AND
FINANCIAL REVIEW
The Board presents the 2018 Operating and Financial Review, which has
been designed to provide shareholders with a clear and concise overview
of Energy Action’s operations, financial position, business strategies and
prospects. The review also provides contextual information, including the
impact of key events that have occurred during the FY18 financial year and
material business risks faced by the business so that shareholders can
make an informed assessment of the results and prospects of the Group.
| 6
Energy Action Limited (ACN 137 363 636) $
OUR BUSINESS MODEL
Energy Action’s core business strategy and purpose is:
“To help our clients understand, and take control of, their energy needs”
Energy Action’s principal activities are providing integrated energy
management services to a diverse range of commercial, industrial and
small and medium sized business customers. Energy Action provides the
following services:
• Help clients get the best energy deal in the current market using a
range of procurement methodologies;
• Manage client energy contracts, including account management, liaison
with their retailer, validating their bill, ensuring they are on the right
tariff, and helping them to understand how they are using energy;
• Help clients reduce their energy consumption, which is good for their
bottom line and good for the environment; and,
• Help clients become more self-sufficient with their energy needs by
installing solar or other on-site generation solutions.
Initially founded in 2000, Energy Action listed on the Australian Securities
Exchange on 13 October 2011.
2018 FINANCIAL PERFORMANCE
The Group generated a statutory net profit after tax (NPAT) of $2.59 million
for the year ended 30 June 2018 compared to a statutory NPAT of $1.77
million for the year ended 30 June 2017, an increase of 46%.
Operating NPAT for the year ended 30 June 2018 was $2.59 million, a 3%
increase from the prior year Operating NPAT of $2.52 million. Revenues
declined by 5% with strong growth in Procurement (+15%) offset by
declines in Contract Management and Environmental Reporting (CMER)
of 9% and Projects and Advisory Services (PAS) of 15%. PAS revenues
declined following a decision to de-emphasize the low margin supply and
install business and focus on the higher margin core consulting work.
Good cost control coupled with improved margins following the changes in
PAS sales emphasis resulted in a 3% increase in Operating NPAT versus
the prior period. The focus on core margin improvement and strong cost
control resulted in an increase in Operating EBITDA margin to 18.3%, an
increase of 1.2 percentage points.
Operating Cash Flow was $6.9 million was up 91% compared to the prior
period reflecting the strong underlying cash generation in the business and
the ongoing focus on working capital management, particularly receivables
collection. This strong cash generation enabled the repayment of $4.1
million of gross debt ($3.1 million net of cash on hand) during the year.
A fully franked dividend of 4.00 cents per share was declared on 16 August
2018, payable on 27th September 2018. This reflects a 186% increase over
the prior period and reflects the increase in Statutory Profit and strong cash
flow generated during the year.
There were no significant items in the FY18 financial year.
| 7
Energy Action 2018 Annual Report A reconciliation of the Group’s Statutory to Operating Net Profit and EBITDA
is shown in the table below:
NPAT
EBITDA
$
30 June
2018
30 June
2017
Variance
30 June
2018
30 June
2017
Variance
Statutory results
2,588,357
1,772,970
46%
5,703,603
4,731,322
21%
Add back Significant Items
after tax:
Deferred consideration*
Restructuring costs**
Operating profit after tax /
Operating EBITDA
-
-
392,811
-100%
355,408
-100%
-
-
392,811
-100%
507,725
-100%
2,588,357
2,521,189
3%
5,703,603
5,631,858
1%
Prior year significant items were:
* Deferred consideration relating to the acquisition of Energy Advice required to be expensed for accounting purposes
**Costs associated with restructuring including redundancies.
Key Financial Metrics
Revenue
Operating EBITDA
FY18
FY17
Variance
$31.17m
$32.96m
$5.70m
$5.63m
-5%
1%
Operating EBITDA margin
18.3%
17.1%
1.2 ppt
Operating NPAT
Operating Cashflow1
Statutory NPAT
Earnings per share (Operating)1
Earnings per share (Statutory)
$2.59m
$2.52m
$6.9m
$3.6m
$2.59m
$1.77m
9.97cps
9.71cps
9.97cps
6.83cps
3%
91%
46%
3%
46%
Dividend per share full year
4.00cps
1.40cps
186%
1Operating Cash Flow is defined as Operating Cash Flow before Interest, Tax and Significant Items
| 8
Energy Action Limited (ACN 137 363 636) FINANCIAL POSITION AND
CASHFLOWS
Operating Cash Flow of $6.9 million was up 91% versus the prior period,
with the conversion of Operating EBITDA into cash of 121%. This reflected
the strong underlying cash generative nature of the business plus a
continued focus on working capital management, and debtors in particular.
Net assets increased from $12.6 million at 30 June 2017 to $14.9 million at
30 June 2018 mainly as a result of the Statutory Profit generated of $2.59
million.
The Company has a five year, $12 million multi-option facility agreement,
expiring October 2019. Funds can be provided under the facility as loans,
bank guarantees or as letters of credit. As at 30 June 2018, the Company
had utilised $5.3 million of the facility comprising a loan of $5.1 million and
bank guarantees principally in relation to rental properties of $0.2 million.
The strong operating cash flow enabled gross debt to be reduced by
$4.1 million during the year. The Group had $1 million of unrestricted
cash at bank at 30 June 2018, and total undrawn facilities and cash of
approximately $7.7 million. This reflects an increase of $3.1 million over the
available borrowing facilities as at 30 June 2017.
| 9
Energy Action 2018 Annual Report Reconciliation of Operating Cash Flow before interest, tax and
significant items
30 June 2018
30 June 2017
Statutory operating cash flow
5,257,589
(1,416,108)
Add back:
Taxes paid
Interest paid / received
Cash flows related to significant
items
Operating cash flow before
interest, tax and significant
items
Operating EBITDA
Operating cash flow as % of
Operating EBITDA
OPERATING REVIEW AND
HIGHLIGHTS
Revenue $
Procurement
CMER
PAS
Other revenue
Total Revenue
1,150,702
1,116,918
468,118
418,816
-
3,481,958
6,876,409
3,601,584
5,703,603
5,631,858
121%
64%
Revenue
Revenue by Product line is set out in the table below:
FY18
FY17
vs FY17 $
vs FY17 %
9,279,290
8,079,593
1,199,697
15,145,890
16,695,501
(1,549,611)
6,637,696
7,788,714
(1,151,018)
110,948
393,295
(282,347)
31,173,824
32,957,103
(1,783,279)
15%
-9%
-15%
-72%
-5%
| 10
Energy Action Limited (ACN 137 363 636) Revenue and other income for the full year decreased by $1.78 million (or
5%) from $32.96 million to $31.17 million.
The highlights per product line as outlined below:
Procurement
• Procurement revenues increased 15% over the full year as a result
of higher $/MWH and an increase in average contract duration to 26
months. Auction numbers were slightly up compared to the previous
period.
• Structured Products revenues increased strongly with seven new
clients added this financial year. This service is increasingly being seen
as an excellent way for large business clients to effectively manage
their electricity price risk.
• Growth was also recorded in Tariffs and Electricity Tenders, offset by a
decline in Gas Tenders due to the lack of affordably priced gas in the
marketplace.
Contract Management & Environmental Reporting (CMER)
• Overall CMER revenue declined 9% versus FY17 with sites under
management in the core Energy Metrics service declining by circa 800
sites over the year. A number of strategies have been put into place to
halt this decline including introducing more competitive pricing and the
Q4 launch of “Energy Metrics Insight” a service offering an automated,
simplified and lower priced option to clients.
• The rate of decline in the number of Energy Metrics sites under
management has slowed in the second half, with site numbers
relatively stable since January 2018.
• As previously advised in the FY18 half year results, a bureau services
contract that expired on 28th February 2018 with a large corporate
client for approximately 3,100 sites was not renewed. Whilst this
resulted in a reduction in revenue this did not have a material impact on
the full year financial results.
• Embedded Networks business grew revenues by over 100% to
$428,000. Tenancies under management grew from 750 in FY17 to
1,378 at the end of June as new centres were added.
| 11
Energy Action 2018 Annual Report Project & Advisory Services (PAS)
• PAS revenues declined by 15% vs FY17, with a decision to focus
on higher margin consulting work, and to de-emphasise and phase
out supply and install head contractor project work. This has been
somewhat offset by growth in core project management, energy policy
consulting, and Opteemise, a service providing continuous monitoring
and tuning of energy performance in commercial buildings.
Operating expenditure
Strong cost management actions resulted in a decrease in costs of 2%
compared to the prior period. Employment costs were approximately $1
million lower than the previous period with a number of activities now
performed by our offshore business processing outsourcing partner and
other third parties. Incentive payments were also lower as Company wide
financial targets were not achieved.
There has been an increase in marketing spend to increase visibility of the
Energy Action brand.
Forward revenue
Forward revenue has reduced from $51.4 million as at June 30 2017 to
$46.5 million at the end of FY18. The reduction is largely in CMER due to
the reduction in site numbers noted above. Traditionally, Energy Metrics
was sold on a five year term. However, in recent periods, clients are looking
to align the contract length of Energy Metrics contracts with their retail
electricity contract, resulting in a shortening in average contract lengths.
This has also contributed to the lower forward revenue at year end.
Procurement forward revenue has increased with longer contracts recently
being signed, and higher $/MWH.
| 12
Energy Action Limited (ACN 137 363 636)
Operational Key Performance Indicators
FY18
FY17
% change
1,306
20.3
+0.3%
+5.8 mths
1.57
-5.7%
30 June 2018
31 Dec 2017
Procurement
No. of successful AEX auctions
Average AEX contract duration
(months)
TWhs sold via Auction
(annualised equivalent)
Average $/MWh
Total Auction bid value1
No. of electricity tender events
No. of gas tender events
Contract Management & Energy
Reporting (CMER)
Sites under current contract2
Energy Metrics
Bureau services
Data only contracts (MP / MDA)
Total Metrics sites under contract
Average Metrics contract duration
(months)
Embedded Network tenancies
under management
Projects & Advisory Services
Contracted future orders
Total Company Future
contracted revenue
1,311
26.1
1.48
$88.85
$285m
47
52
5,492
987
1,648
8,127
41.0
1,378
$5.3m
$46.5m
$85.52
$227m
40
67
5,882
4,246
1,722
1,030
$4.2m
$51.4m
+3.9%
+26%
+18%
-22%
No.
-390
-3,259
-74
+26%
-10%
| 13
11,850
-3,723
43.0
-2 months
1 Electricity component of contract only, i.e. excluding network and other charges
2 Does not include contracts which are signed, but yet to commence service delivery.
Energy Action 2018 Annual Report BUSINESS STRATEGY AND
PROSPECTS FOR FUTURE
FINANCIAL YEARS
Energy Action’s purpose is to:
“Help our clients understand and take control of their energy needs.”
Energy Action has strengths in the following areas:
• Procurement methodologies that cover the whole business client gas
and electricity segments, from SME’s to some of the largest energy
users in Australia;
• Supply and demand side expertise;
• Expert capability and knowledge;
• National reach and market leading products and services; and
• Market leading products and services.
The current economic conditions and external environment of high energy
prices is positive for Energy Action, with increasing demand from clients
for solutions to mitigate the impact of high energy prices. Energy Action
is unique amongst our competitors in being able to deliver not only a
competitive energy cost outcome to clients, but also using our in-house
expertise to assist clients to reduce consumption and thus costs.
Energy Action’s immediate focus is to:
• Refresh Energy Metrics with new offerings and competitive pricing
• Develop an Integrated Energy Plan for clients
• Develop new products and services to grow the business including:
○ Extending the AEX platform to other energy related products and
services;
○ Facilitating corporate power purchase agreements between clients
and developers; and,
○ Extending Structured Products to target mid-tier clients.
• Continue to automate and streamline processes through digitisation.
Risks to achieving financial outcomes in relation to future prospects
Energy Action identifies major risks using an enterprise wide risk program.
Energy Action faces a wide variety of risks due to the nature of the industry
it which it operates. In relation to each risk, Energy Action has in place
actions to reduce the likelihood of the risk eventuation and / or to reduce,
as far as practicable, the adverse consequences of the risk should it occur.
Many of the risks are influenced by factors external to, and beyond the
control of Energy Action. Details of Energy Action’s main risks and the
related mitigations are set out below:
| 14
Energy Action Limited (ACN 137 363 636) Risk
Risk Description
Regulatory risk
The risk of unforeseen changes
in government policy or regulation
impacting ongoing operations.
Recent developments regarding the
National Energy Guarantee and the
Australian Domestic Gas Security
Mechanism highlight the importance
to energy customers of understanding
developments in the policy area.
Failure to deliver against
customer obligations.
The risk that Energy Action is unable
to meet its contractual obligations to
customers for the delivery of services.
Increasing competition
The risk that Energy Action is unable to
differentiate from competitors.
Earnings and Cash Flow
The risk of failing to maintain adequate
earnings and funding to finance growth
objectives and to generate adequate
returns for shareholders.
Occupational Health &
Safety (OH&S)
The risk of not operating safely and in
accordance with relevant legislation
leading to an employee injury.
Employee engagement
and performance
The risk of failing to attract and retain
the best talent available.
Potential consequences and
mitigation strategies
Potential earnings impacts of
unpredicted policy or regulatory
changes to be mitigated by ongoing
monitoring of the political/regulatory
environment.
Potential earnings and reputational
impact from failure to deliver
contracted services mitigated
by completed review of service
delivery capabilities, development
of risk management plans and
implementation of continuous
improvement programmes.
Potential earnings impact from
lost sales countered by expanded
product offerings from procurement
through to energy monitoring and
energy efficiency projects. Examples
include Corporate Power Purchasing
Agreements, mid-market Structured
Products and the client Integrated
Energy Plan.
Potential earnings impact mitigated
by improved operational performance,
timely and transparent market
disclosures and maintenance of
strong relationships with banks and
shareholders.
Potential for employee injury and
Company reputation addressed
by OH&S systems and practices.
Mitigated by ongoing training and
updates to OH&S policies.
Impacts on performance due to
unavailability of talent mitigated by
staff development plans, succession
plans and remuneration strategies.
| 15
Energy Action 2018 Annual Report Loss of key staff
Legal risk – Competition
and consumer law or
terms of the company’s
AFS licence.
The risk of company performance
declining due to key staff either leaving
or being unavailable unexpectedly or
due to high turnover of non-key staff
hampering performance due to training
lead times.
The risk of legal action following
a breach of the Competition and
Consumer Act or the terms of Energy
Action’s Australian Financial Services
Licence.
Cyber Security Risk
Cyber-attack or similar event involving
unauthorised access to EAX’s IT
systems leading to denial of systems
and/or corruption of data.
Customer Retention/
Acquisition
Failure to attract and retain sufficient
customers to sustain the business
Unethical Sales Conduct
The risk of unethical sales practices
resulting in lost business or in legal
action.
Mitigated by staff reviews,
identification of points of vulnerability,
cross training and succession
planning.
Likelihood of breaches reduced by
training of all outward facing staff
in Consumer and Competition Law
requirements. AFSL compliance
system in place. Procedures in
place for monitoring and reporting of
breaches and potential breaches.
Security review of key systems and
processes has been completed.
Recommendations were commenced
during FY18 with no high rated
vulnerabilities being identified post
implementation.
Mitigated by restructuring of the
sales business into regional sales
teams, creation of the position of
Product Manager for Energy Metrics,
increased marketing activity and the
adoption of an account management
model for servicing high value
customers.
The level of scrutiny of sales
practices for energy businesses has
increased due to electricity and gas
prices being at near record levels.
This risk is mitigated by ongoing sales
training, reviews of sales procedures
and the confirmation of an ethical
sales culture.
| 16
Energy Action Limited (ACN 137 363 636) ENVIRONMENTAL ISSUES
The Group’s operations are not regulated by any significant environmental
regulation under a law of the Commonwealth or of a state or territory.
Energy Action is committed to environmental best practice, and to the
continual improvement of its environmental performance, recognising
its obligations both locally and globally, to the present and succeeding
generations. Energy Action aims to lead in defining best environmental
practice, and will set its own demanding standards where none exist.
Energy Action is committed to implementing the requirements of all
applicable Commonwealth, State and local environmental legislation
and regulations and, where possible, exceeding any relevant minimum
requirements.
Energy Action aims to raise the environmental awareness of the public,
governments, industry, and the general community by promoting the
concept of ecological sustainability and by openly recognising the ongoing
need to move toward an ecologically sustainable future.
MEETINGS OF DIRECTORS
The number of meetings of Directors (including meetings of committees of
Directors) held during the year and the number of meetings attended by
each Director was as follows:
Board
Meeting
Audit & Risk
Committee
Remuneration
Committee
Nomination
Committee
No. Eligible
to attend
No.
Attended
No. Eligible
to attend
No.
Attended
No. Eligible
to attend
No.
Attended
No. Eligible
to attend
No.
Attended
Murray Bleach
Paul Meehan
Nitin Singhi
Mark de Kock
John Mackay
11
11
11
11
11
11
11
11
11
10
4
4
4
1
4
4
4
4
1
4
2
2
2
2
2
2
2
2
2
2
1
1
1
0
1
1
1
1
0
1
INDEMNIFYING OFFICERS OR
AUDITOR
During or since the end of the financial year, the Company has given an
indemnity or entered into an agreement to indemnify, or paid or agreed to
pay insurance premiums as follows:
• The Company has paid premiums to insure each of the Directors
against liabilities for costs and expenses incurred by them in defending
legal proceedings arising from their conduct while acting in the capacity
of Director of the Company, other than conduct involving a wilful breach
of duty in relation to the Company.
| 17
Energy Action 2018 Annual Report Ernst & Young
200 George Street
Sydney NSW 2000 Australia
GPO Box 2646 Sydney NSW 2001
Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
ey.com/au
Auditor’s Independence Declaration to the Directors of Energy Action
Limited
As lead auditor for the audit of Energy Action Limited for the financial year ended 30 June 2018, I
declare to the best of my knowledge and belief, there have been:
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Energy Action Limited and the entities it controlled during the financial
• To the extent permitted by law, the Company has agreed to indemnify
its auditors, Ernst & Young, as part of the terms of its audit engagement
agreement against claims by third parties arising from the audit (for an
unspecified amount). No payment has been made to indemnify Ernst &
Young during or since the financial year.
PROCEEDINGS ON
BEHALF OF COMPANY
No person has applied for leave of Court to bring proceedings on behalf of
the Company or intervene in any proceedings to which the Company is a
party for the purpose of taking responsibility on behalf of the Company for
all or any part of those proceedings. The Company was not a party to any
such proceeding during the year.
NON-AUDIT SERVICES
The Board of Directors, in accordance with advice from the audit and risk
management committee, 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 the audit
committee prior to commencement to ensure they do not adversely
affect the integrity and objectivity of the auditor; and,
the nature of the services provided does not compromise the general
principles relating to auditor independence in accordance with APES
110: Code of Ethics for Professional Accountants set by the Accounting
Professional and Ethical Standards Board.
The following fees were paid or payable to Ernst & Young for non-audit
services provided during the year ended 30 June 2018:
Review of LTI plan
Other services
Total
$
13,500
-
13,500
year.
Ernst & Young
Ryan Fisk
Partner
16 August 2018
| 18
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Energy Action Limited (ACN 137 363 636)
Ernst & Young
200 George Street
Sydney NSW 2000 Australia
GPO Box 2646 Sydney NSW 2001
Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
ey.com/au
Auditor’s Independence Declaration to the Directors of Energy Action
Limited
As lead auditor for the audit of Energy Action Limited for the financial year ended 30 June 2018, I
declare to the best of my knowledge and belief, there have been:
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Energy Action Limited and the entities it controlled during the financial
year.
Ernst & Young
Ryan Fisk
Partner
16 August 2018
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Remuneration Report (Audited)
1. REMUNERATION
FRAMEWORK
The directors present the Remuneration Report for Energy Action Limited
(“Company”) and its consolidated entities (“Group”) for the year ended 30
June 2018.
1.1. Role of the Remuneration Committee
The Remuneration Committee ensures that the remuneration of directors
and senior executives is consistent with market practice and sufficient to
ensure that the Group can attract, develop and retain the best individuals.
The committee review directors’ fees, and remuneration of the CEO and
senior executives against the market, Group and individual performance.
The committee consisted of four non-executive directors, namely Nitin
Singhi (Chairman), Murray Bleach, Mark de Kock and Paul Meehan. The
committee charter is available on the Group’s website.
The committee oversees governance procedures and policy on
remuneration including:
• General remuneration practices,
• Performance management,
• Bonus and incentive schemes, and
• Recruitment and termination.
Through the committee, the board ensures the company’s remuneration
philosophy and strategy continues to be designed to:
• Attract, develop and retain Board and executive talent,
• Create a high performance culture by driving and rewarding executives
for achievement of the Group’s strategy and business objectives, and
Link incentives to the creation of shareholder value.
•
In undertaking its work, the committee seeks advice as required.
1.2. Key Management Personnel
Key Management Personnel (“KMP”) are those persons having authority
and responsibility for planning, directing and controlling the activities of
the entity, directly or indirectly, including any director of the Company or
subsidiaries. The following persons were KMPs during the financial year.
Unless otherwise indicated, they were KMPs for the entire year.
Non-Executive directors
Non-Executive Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive directors
1.2.1.
Murray Bleach
Paul Meehan
Nitin Singhi
Mark de Kock
John Mackay AM
1.2.2.
Ivan Slavich
Michael Fahey
Chief Executive Officer
Chief Operating Officer &
Chief Financial Officer
| 20
Energy Action Limited (ACN 137 363 636)
1.3. Remuneration Consultants
Where necessary, the Board seeks advice from independent experts and
advisors including remuneration consultants. Remuneration consultants
are used to ensure that remuneration packages are appropriately structured
and are consistent with comparable roles in the market. Remuneration
consultants are approved by, and recommendations provided directly to,
non-executive directors (the remuneration committee). When remuneration
consultants are engaged, the remuneration committee ensures that the
appropriate level of independence exists from the Group’s management.
EY undertook review of the performance rights and options plan this year.
1.4.
Long term incentive scheme
Purpose and type of equity awarded
The Group operates a long term incentive scheme (LTI) for its senior
executives. The LTI is governed by the Performance Rights and Options
Plan (PROP), under which performance rights (not options) are granted to
participants. Each performance right entitles the participant to one share in
Energy Action for nil consideration at the time of vesting subject to meeting
the conditions outlined below.
The LTI aligns key employee awards with sustainable growth in shareholder
value over time. It also plays an important role in employee recruitment and
retention.
Number of instruments awarded
As at 30 June 2018, the PROP accounted for 2.8% (FY17 1.6%) of issued
securities of the Group, made up of 725,578 (FY17 415,456) performance
rights.
Valuation
The fair value of any LTI grant is a determined by an external valuation at
the time of the grant.
Performance hurdles
For the 2018 LTI allocation, the two performance hurdles that apply to the
Performance Rights for vesting were:
•
•
an Earnings Per Share (EPS) component (75% weighting) achieved by
comparing the Company’s Actual Operating EPS for the year ending on
the relevant test date to the Company’s Budget Operating EPS ending
on the relevant test date. Fifty percent of the performance right that is
subject to the relative performance hurdle vests if the actual Operating
EPS meets 95% of the Budgeted Operating EPS. One hundred percent
will vest if the actual performance meets or exceeds the Budgeted
Operating EPS. If the actual EPS is between 95% and 100% of
Budgeted Operating EPS, the percentage that will vest is determined
on a linear basis.
a Total Shareholder Return (TSR) component (25% weighting)
achieved by comparing the Company’s total compounded return to
the total compounded return of the S&P/ASX300 (Index) for the year
ending on the relevant test date. Fifty percent of the performance
| 21
Energy Action 2018 Annual Report 2. REMUNERATION
right that is subject to the relative performance hurdle vests if the
EAX total compounded return is equal to the total compounded return
of the Index over the vesting period. One hundred percent will vest
if EAX achieves a total compounded return of 1.10 times the total
compounded return of the Index over the vesting period. If EAX’s total
return is in between the total compounded return of the Index and 1.10
times the total compounded return of the Index, the percentage that will
vest will be determined on a linear basis.
LTI Outcomes
Neither the TSR nor EPS hurdles were met for the year ending 30 June
2018. The Energy Action TSR for the period 1 July 2017 to 30 June 2018
was negative 6.67% compared to the benchmark ASX300 index which
returned positive 8.54%. Accordingly, no rights will vest in 2018.
Fees payable to non-executive directors
2.1.
Fees paid to non-executive directors reflect the demands which are made
on, and the responsibilities of, directors. Directors’ fees are reviewed
annually by the board. Directors who chair or are members of a committee
do not receive fees for these services.
The board considers the advice of independent remuneration consultants
to ensure directors’ fees are appropriate and in line with the market. The
chairman’s fees are determined independently to the fees of directors
and are based on comparative roles in the market. The chairman is not
present at any discussion relating to the determination of his remuneration.
Directors’ fees are determined within an aggregate fee pool limit approved
by shareholders. This is currently set at $400,000 per annum.
The annual fee structure for non-executive directors for the year ended 30
June 2018, including superannuation, was as follows:
Base Fee
Non-Executive Chairman
Non-Executive Directors
$
75,000
60,000
The above fees include committee membership. The tables at the end of
this remuneration report provide details of fees paid during the financial
year to each non-executive director.
The non-executive directors and chairman fees for FY 2018 remained the
same as FY 2017.
| 22
Energy Action Limited (ACN 137 363 636) Chief Executive Officer
Chief Operating Office/Chief
Financial Officer
Senior executives
2.2.
The framework for the remuneration of senior executives consists of a mix
of fixed and variable remuneration. The components are:
• Base remuneration package and benefits, inclusive of superannuation
(Total Fixed Remuneration)
• Short-Term Incentive – based on the Group’s, team and individual
performance and results delivered against pre-determined Key
Performance Indicators (KPIs)
Long Term Incentive – governed by the Performance Rights and
Options Plan (PROP)
•
The combination of the above components comprises the executive’s total
remuneration.
The Group undertakes a market benchmarking analysis and provide
recommendations. The market analysis considers the target total
remuneration opportunity as well as its core components and the mix of
those components. In addition, the information also contains a view on
market and emerging trends in executive remuneration structures and
the mix of fixed and performance based remuneration arrangements. The
agreed remuneration mix for the CEO and CFO for the year ended 30 June
2018 was:
Fixed Component
Bonus Component
LTI Component
69%
80%
25%
14%
6%
6%
Short-Term Incentive (STI)
The STI is based upon performance against the Group financial
performance and results from the Group’s performance review process.
Mid-year and final year performance reviews measure performance against
established KPI’s and criteria which are compiled in a matrix comprising
Group and individual components. The specific company measures include
profitability, revenue growth and customer satisfaction. Individual measures
are developed having regard to functional plans and targets, aligned to the
company strategy.
The outcome of the performance review process is a rating, applied to each
of these three components for an individual, culminating in a percentage
(capped at 125%). The final percentage allocated to each person is then
applied to the STI potential to determine the actual STI payment to be
made to an individual.
The performance matrix used to determine actual STI earnings against the
STI potential for the CEO and CFO is:
| 23
Energy Action 2018 Annual Report Chief Executive Officer
Chief Operating Office/Chief
Financial Officer
Ivan Slavich
Michael Fahey
3. SERVICE AGREEMENTS
Company
Individual
70%
70%
30%
30%
The Board is responsible for assessing the performance of the CEO. The
CEO is responsible for assessing the performance of other executives.
Bonus payments are made annually, where applicable, in September in
relation to the preceding year.
The actual percentage of STI potential and LTI potential earned by the CEO
and COO/CFO for the year ended 30 June 2018 was:
% of Bonus Potential
% LTI Potential
0%
0%
0%
0%
The STI potential for each individual is set at the beginning of the year,
having regard to service agreement terms and conditions, and relates
to the appropriate extent of the at-risk component of the executive’s
remuneration. The broader company performance criteria ensure that an
overall management focus is maintained by the executives, however the
inclusion of individual criteria is also necessary to ensure that each person
is recognised and rewarded for their individual contribution and efforts.
Payment of any individual KPI achievement is conditional on the Group
meeting a minimum threshold Operating Profit.
On appointment, all non-executive directors enter into an agreement which
outlines obligations and minimum terms and conditions. Remuneration
and other terms of employment for the CEO and other key management
personnel are formalised in employment agreements. Each of these
agreements specify the components of remuneration to which they are
entitled and outline base salary, eligibility for incentives and other benefits
including superannuation. Key terms for the CEO and CFO are as follows:
Name
Ivan Slavich
Fixed Component
Termination*
On-going (no fixed term)
3 months base salary termination by
Michael Fahey
On-going (no fixed term)
company or 3 months termination by
executive
12 weeks base salary termination by
company or 12 weeks termination by
executive
* Termination benefits are payable at the option of the company in lieu of notice, other than termination for cause.
| 24
Energy Action Limited (ACN 137 363 636) Individual
4. REMUNERATION TABLES
4.1. Remuneration table for the year ended 30 June 2018
Details of remuneration of directors and KMP of the Group for the 2018
financial year are set out in the following table.
The KMP are considered to be the CEO and COO/CFO only.
Short Term
Benefits
Post
Employment
Benefits
Long Term
Benefits
Share
Based
Payments
Total
Non-executive
Directors
Cash salary
and fees
Cash
bonus
Non-
monetary
benefits
Murray Bleach
68,493
Paul Meehan
54,795
Nitin Singhi
54,795
Mark de Kock
54,795
John Mackay
54,795
Sub-total
287,673
Executives
Ivan Slavich
387,500
Michael Fahey
333,388
Sub-total
720,888
Total
1,008,561
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Super
6,507
5,205
5,205
5,205
5,205
27,327
20,049
20,049
40,098
67,425
Termination
benefits
Long
service
leave
Performance
rights
Total
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
75,000
60,000
60,000
60,000
60,000
315,000
3,263
410,812
2,446
355,883
5,709
766,695
5,709
1,081,695
| 25
Energy Action 2018 Annual Report 4.2. Remuneration table for the year ended 30 June 2017
Details of remuneration of directors and KMP of the Group for the 2017
financial year are set out in the following table.
The KMP are considered to be the CEO and COO/CFO only.
Short Term
Benefits
Post
Employment
Benefits
Long Term
Benefits
Share
Based
Payments
Termination
benefits
Long
service
leave
Performance
rights
Total
Total
75,000
59,701
61,315
60,000
60,000
316,016
-
-
-
-
-
-
Super
6,507
5,206
5,320
5,205
5,205
27,443
-
-
-
-
-
-
Non-executive
Directors
Cash salary
and fees
Cash
bonus
Non-
monetary
benefits
Murray Bleach
68,493
Paul Meehan
54,495
Ronald Watts1
55,995
Nitin Singhi
54,795
Mark de Kock
54,795
Sub-total
288,573
Executives
Scott Wooldridge2
131,036
-
-
-
-
-
-
-
Ivan Slavich3
74,219
50,0004
Michael Fahey
313,290
35,000
Sub-total
518,545
85,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
9,084
165,000
4,904
19,616
-
-
33,604
165,000
18,281
323,401
-
-
129,123
367,906
18,281
820,430
Total
807,118
85,000
61,047
165,000
18,281
1,136,446
1 Ronald Watts resigned 30 June 2017
2 Scott Wooldridge resigned 18 November 2016. Performance rights that had met performance hurdles in previous years were
vested and allocated to Mr Wooldridge upon leaving the Company
3 Ivan Slavich appointed 3 April 2017
4 Ivan Slavich bonus subject to satisfactory completion of probation in October 2017
| 26
Energy Action Limited (ACN 137 363 636) Relative Proportion of Remuneration
The relative proportion of remuneration of KMP that was linked to
performance and those that were fixed are as follows:
Fixed
Remuneration
At Risk – Cash
Bonus/Other
At Risk -
Securities
Non-executive Directors
2018 %
2017 %
2018 %
2017 %
2018 %
2017 %
Murray Bleach
Dr. Ronald Watts
Paul Meehan
Nitin Singhi
Mark de Kock
Executives
Scott Wooldridge^
Ivan Slavich^^
Michael Fahey
100
100
100
100
100
-
69
80
100
100
100
100
100
79
61
72
-
-
-
-
-
-
-
-
-
-
-
-
25
14
39
13
N/A
N/A
N/A
N/A
N/A
-
6
6
N/A
N/A
N/A
N/A
N/A
21
N/A
14
^ Resigned as a Chief Executive Officer effective 18 November 2016
^^Commenced as Chief Executive Officer effective 3 April 2017
Performance holdings of key management personnel.
The following table lists any Performance Rights which are still to vest, or
have yet to expire:
Grant date
Number
Date vested and
exercisable
Expiry
date
Exercise
price
Value per
Performance Right
at grant date
12 March 2018*
47,024
31 August 2020 (1)
12 March 2018*
125,000
31 August 2021 (1)
12 March 2018*
250,000
31 August 2021 (2)
N/A
N/A
N/A
$0.00
$0.00
$0.00
* Denotes Performance Rights for which no consideration is payable on exercise.
(1) Performance Rights which were granted to Michael Fahey
(2) Performance Rights which were granted to Ivan Slavich
$0.58
$0.58
$0.58
| 27
Energy Action 2018 Annual Report Fair value of Performance Rights
4.3.
The fair value of each Performance Right is estimated on the date the
Performance Rights are granted using a Monte Carlo Simulation valuation
model. The following assumptions were considered in the valuation of
Performance Rights issued during the year ended June 30, 2018:
Grant date share price ($)
Exercise price ($)
Dividend yield
Expected volatility
Risk-free interest rate
Life of Option (1)
$0.685
$0.00
1.40c per share, growing at 10% per year
50%
1.98%
3 years
(1) Performance Rights will be exercised immediately upon vesting as there
is no exercise price.
All Performance Rights granted for the benefit of the Chief Executive Officer
have a four-year vesting period. Retention Performance Rights granted
for the benefit of the Chief Operating Officer/Chief Financial Officer have a
four-year vesting period. All Performance Rights granted for the benefit of
other employees vest in equal proportions on an annual basis over three
years. The Performance Rights are exercisable immediately at vesting date,
subject to achievement of the relevant performance hurdles.
The following tables outline the movements in Performance Rights
balances of Directors and the KMP during the 2018 financial year, and
those Performance Rights which have vested at the year-end.
422,024 performance rights were issued to KMP during the 2018 financial
year.
Total value of performance rights issued:
30 June
2018
Balance at
1 July 2017
Granted $
Grant Date
Rights
vested &
transferred
Options
cancelled/
forfeited/
other
Options
expired
without
exercise
I. Slavich
$
-
$
144,918
12/3/2018
$
-
$
(32,109)
M. Fahey
13,800
99,880
12/3/2018
(13,800)
(24,108)
Total
13,800
244,798
(13,800)
(56,217)
$
-
-
-
Net
change
Balance
at end of
period $
$
$
112,809
112,809
61,972
75,772
174,781
188,581
| 28
Energy Action Limited (ACN 137 363 636)
Total number of performance rights issued:
30 June
2018
Balance at
1 July 2017
Granted $
Grant Date
Rights
vested &
transferred
Options
cancelled/
forfeited/
other
Options
expired
without
exercise
Balance
at end
of
period $
Net
change
No.
No.
No.
No.
No.
No.
No.
I. Slavich
-
250,000
12/3/2018
-
(46,875)
M. Fahey
14,000
172,024
12/3/2018
(14,000)
(35,194)
Total
14,000
422,024
(14,000)
(82,069)
-
-
-
203,125
203,125
122,830
136,830
325,955
339,955
Shareholdings of key
management personnel
30 June 2018
Directors
Murray Bleach
Paul Meehan
Nitin Singhi
John Mackay AM
Executives
Ivan Slavich
Michael Fahey
Total
Balance 1 July 2017
Net change Balance 30 June 2018
1,881,645
4,798,993
3,000
32,660
-
-
-
25,810
219,214
110,000
-
14,000
1,881,645
4,798,993
3,000
58,470
329,214
14,000
6,935,512
149,810
7,085,322
| 29
Energy Action 2018 Annual Report Shareholdings of key
management personnel
30 June 2017
Balance 1 July 2016
Net change
Balance 30 June 2017
Directors
Murray Bleach
Dr. Ronald Watts
Paul Meehan
Nitin Singhi
John Mackay AM
Executives
Ivan Slavich
Michael Fahey
Total
273,155
1,608,490
1,730,371
4,798,993
3,000
-
-
-
2,018
-
-
32,660
219,214
-
1,881,645
1,732,389
4,798,993
3,000
32,660
219,214
-
6,805,519
1,862,382
8,667,901
Transactions with related parties:
Transactions between related parties are on normal commercial terms and
conditions no more favourable than those available to other parties unless
otherwise stated. Outstanding balances at year end are unsecured and
interest free. No guarantees have been provided or received.
The following transactions occurred with related parties:
Consolidated Group
2018
$
2017
$
Key Management Personnel
Derwent Executive1 – recruitment services rendered
22,000
84,150
1Related party as Murray Bleach serves on the Advisory Board of Derwent Executive
| 30
Energy Action Limited (ACN 137 363 636) 4.4. Company Performance
The Group results for the financial year ended 30 June 2018 was a
Statutory Profit after tax of $2.6 million compared to a profit of $1.8 million
in the prior year.
FY18
FY17
FY16
FY15
FY14
Revenue & other income ($000’s)
31,174
32,957
33,978
32,049
25,655
Net profit / (loss) after tax ($000’s)
2,588
1,773
(449)
(2,148)
3,512
Operating profit after tax ($000’s)
2,588
2,521
3,520
2,395
4,504
Earnings per share – Operating
9.97 cents
9.71 cents
13.56 cents
9.22 cents
17.29 cents
Market capitalisation
$18.2m
$19.5m
$30.6m
$23.9m
$81.3m
Closing share price
$0.70
$0.75
$1.18
$0.92
$3.15
This director’s report is signed in accordance with a resolution of the Board
of Directors.
Mr Murray Bleach
Director
Dated: 16 August 2018
| 31
Energy Action 2018 Annual Report Corporate Governance Statement
Energy Action Limited (“Energy Action”) is committed to the achievement
of superior financial performance and long-term prosperity, while meeting
stakeholders’ expectations of sound corporate governance practices. The
Energy Action Board determines the corporate governance arrangements.
As with all its business activities, Energy Action is proactive in respect
of corporate governance and puts in place those arrangements which it
considers are in the best interests of shareholders, and consistent with its
responsibilities to other stakeholders.
This statement:
•
reports against the 3rd edition of the ASX Corporate Governance
Council’s Principles and Recommendations (ASX Principles) and the
practices detailed in this Statement are current as at 16 August 2018;
and
has been approved by the Board and is available of Energy Action’s
website at http://www.energyaction.com.au/about/corporate-governance
•
The table at the end of this statement provides cross references between
the disclosures and statements in this Corporate Governance statement
and the relevant ASX Principles.
1. THE BOARD
The Board operates in accordance with the general principles set out in its
Charter which can be viewed in the Corporate Governance section of the
Company’s website.
1.1. Role of the Board
The role of the Board is to create sustainable shareholder wealth in a
manner consistent with the Company’s constitution and principles of
good corporate governance. The Board achieves this by representing
the interests of shareholders in setting and overseeing the company’s
values, direction, strategies, financial objectives and performance within
a framework of prudent and effective controls for the assessment and
management of risk. The Board has adopted a formal charter of Directors’
functions and matters that are delegated to management, having regard to
the recommendations in the Principles.
An outline of the Board’s responsibilities under the charter is set out below:
Strategic Direction
• Oversight of the strategic direction for Energy Action and endorsing
Energy Action’s strategy developed by the Chief Executive Officer
(CEO);
• Decision making in relation to matters of a sensitive or extraordinary
nature;
• Providing advice and counsel to management on a periodic and ad hoc
basis; and,
• Ensuring management implement the policies and decisions of the
Board.
| 32
Energy Action Limited (ACN 137 363 636)
Governance
• Undertaking all reasonable measures to ensure best practice corporate
governance;
• Monitoring the performance of the CEO and approving senior
management remuneration policies and practices; and,
• Reporting to shareholders.
Compliance
• Undertaking all reasonable measures to ensure that appropriate
compliance frameworks and controls are in place and are operating
effectively; and,
• Approving and monitoring the effectiveness of and compliance with
policies governing the operations of Energy Action.
Risk Management
• Monitoring the integrity of internal control and reporting systems; and,
• Monitoring strategic risk management systems, including the review of
processes for identifying areas of significant business risk, monitoring
risk management policies and procedures, monitoring insurance
coverage and oversight of internal controls and review of major
assumptions used in the calculation of significant risk exposure.
Operating Performance
• Approving decisions concerning the capital of Energy Action, including
capital restructures;
• Reviewing and approving the annual operating budget, the annual and
half-yearly statutory financial statements and monitoring the financial
results on an on-going basis; and,
• Determining dividend policy and approving dividends.
Operational Development
• The appointment of the CEO and the approval of the succession plan;
and,
• Endorsing the appointment of the CEO’s direct reports.
The Energy Action Constitution
The Energy Action Constitution is Energy Action’s key governance
document. The Board ensures that it and Energy Action complies with the
provisions of the Constitution.
Compliance with Laws
Energy Action recognises that it must comply with the Corporations Act, as
well as all other applicable laws. The ASX Listing Rules are also applicable.
Examples of applicable areas of regulation include:
• AFSL Compliance;
• Occupational health and safety legislation;
• Employment related laws;
• Environmental protection legislation;
• Anti-discrimination legislation;
• Taxation legislation; and,
• Competition and Consumer Act 2010.
| 33
Energy Action 2018 Annual Report As a company which is planning to operate in other jurisdictions, Energy
Action recognises that it must ensure that it is aware of and complies with
all applicable laws in those jurisdictions.
At least once each year, the Directors will review this Charter and approve
any required amendments including those required to comply with the ASX
Principles.
1.2. Composition of the Board
It is intended that the Board should comprise a majority of non-executive
Directors with a broad range of skills, expertise and experience, consistent
with the Energy Action Diversity & Inclusion Policy.
The appointment and removal of Directors is governed by Energy Action’s
Constitution. Under Energy Action’s Constitution the Board must comprise
of a minimum of three (3) Directors. The Board is responsible for selecting
and approving its own candidates to fill any casual vacancies that may arise
on the Board with the assistance of the Nomination Committee. Directors
who have been appointed to fill casual vacancies must offer themselves for
re-election at the next annual general meeting of Energy Action. In addition,
at each annual general meeting, at least one Director must be a candidate
for re-election and no Director shall serve more than three years without
being a candidate for re-election.
There have been no changes to the Board in the past financial year.
The Board is a five member Board comprising 5 non-executive Directors
of which 2 are independent (Nitin Singhi and John Mackay). This is in line
with the Board seeking to sustain and improve shareholder value by adding
independent Directors progressively.
The Company Secretary is accountable directly to the Board, through the
Chairman, on all matters to do with the proper functioning of the Board.
Independence
1.3.
The independence of Directors is determined by objective criteria
acknowledged as being desirable to protect investor interests and optimise
the financial performance and returns to investors. The Board regularly
assesses the independence of its Directors. In determining the status of
a Director, Energy Action considers that a Director is independent when
he or she is independent of management and free of any business or
other relationship that could materially interfere with, or could reasonably
be perceived to interfere with the exercise of unfettered and independent
judgement. Energy Action’s criteria for assessing independence is in line
with standards set by the Principles.
The Board requires each Director to disclose any new information, matter
or relationship which could, or could reasonably be perceived to, impair
the Director’s independence, as soon as these come to light. All material
personal interests are verified at each Board meeting under a standing
agenda item.
| 34
Energy Action Limited (ACN 137 363 636) Mr Nitin Singhi and Mr John Mackay AM are considered to be independent
directors under the guidelines in ASX Principle 2. Mr Paul Meehan is not
regarded as independent under the guidelines in ASX Principle 2 nor the
criteria adopted by the Company, as he is a substantial shareholder and
has been a director of the company since inception in 2003. Mr Murray
Bleach is not regarded as independent under the guidelines in ASX
Principle 2 and the criteria adopted by the Company, as he is a substantial
shareholder. Mr Mark de Kock is not regarded as independent under the
guidelines in ASX Principle 2 and the criteria adopted by the Company, as
he is a Nominee Director whose appointment was recommended by one
of Energy Action’s major shareholders, Microequities Asset Management.
Prior to his appointment, the Board considered Mr de Kock’s experience
and believe he can contribute to the company’s strategy and growth.
Accordingly the Company does not meet Recommendations 2.4 the
ASX Principles, insofar as the majority of the Board are not independent
directors. Despite this, the Board considers that its composition is
appropriate for the size and scale of the Company and its activities, and
that the Company benefits from the skills, knowledge and experience of
Mr Bleach, Mr Meehan, and Mr de Kock individually and collectively. Mr
Bleach and Mr Meehan also consider that they bring quality independent
judgement to bear on all relevant issues falling within the scope of non-
executive directors, notwithstanding their substantial interests in shares of
the Company. Mr de Kock is subject to the same duty of care and diligence
as other non-executive directors to discharge his duties in good faith in the
proper interests of the company as a whole and for a proper purpose. Mr de
Kock is required not to place himself in a position where a potential conflict
of interest could occur. All directors are required to excuse themselves from
any discussions in which a potential conflict of interest is perceived. The
Chairman and Independent Chairman of the Audit and Risk Management
Committee will resolve and make the final decision on any conflict of
interest matter.
The Company does not meet Recommendation 2.5 of the ASX Principles
as the Chair is not an independent Director. Despite this, the Board
considers that there is an appropriate culture of openness and constructive
challenge that allows for a diversity of views to be considered by the Board.
The Board considers Nitin Singhi to be the senior independent Director who
fulfils the role of chair whenever the chair is conflicted.
The Board also has procedures in place to ensure it operates independently
of management. Non-executive Directors meet together periodically in
the absence of executives of the company to discuss the operation of the
Board and a range of other matters.
The Board believes the separation of the roles of Chairman and Chief
Executive Officer and the composition of the Board comprising 2
independent and 3 non-independent Directors is appropriate.
Directors’ shareholdings are set out in the Remuneration Report.
| 35
Energy Action 2018 Annual Report Term of office and re-election of Directors
1.4.
At appointment, each non-executive Director of Energy Action has received
a letter of appointment which details the key terms of their appointment,
including their powers, rights and obligations. Energy Action’s senior
executives, including the CEO, have formalised job descriptions and, as
with all Energy Action employees, letters of appointment.
The Board has established a Nomination Committee which as at 30 June
2018 consisted of an independent Chairman, Nitin Singhi, Murray Bleach
and Paul Meehan.
A copy of the Nomination Committee Charter which sets out the roles and
responsibilities of the Committee is available on the company’s website.
In making recommendations to the Board regarding the appointment of
Directors, the Nomination Committee assesses the appropriate mix of
skills, experience and expertise required by the Board and assesses the
extent to which the required skills and experience are represented on the
Board. When a vacancy exists, the Nomination Committee determines the
selection criteria based on the skills deemed necessary. The Committee
identifies potential candidates, and if appropriate, will utilise an external
consultant to assist in identifying potential candidates. The Board then
appoints the most suitable candidate.
The company will undertake appropriate background checks and screening
checks prior to nominating a Director for election by shareholders and
provides to shareholders all material information in its possession
concerning the Director standing for election or re-election in the
explanatory notes to accompany the notice of meeting.
New Directors will participate in an induction program to assist them to
understand Energy Action’s business and the particular issues it faces.
All Directors are elected by shareholders at the Annual General Meeting
following their appointment and thereafter subject to re-election at least
once every three years.
1.5. Access to information and independent advice
The Board collectively has the right to seek independent professional
advice as it sees fit. Each Director individually has the right to seek
independent professional advice, subject to the approval of the Chairman.
All Directors have direct access to the Company Secretary.
Directors also have complete access to the senior management team. In
addition to regular reports by senior management to the Board meetings,
Directors may seek briefings from senior management on specific matters
and are entitled to request additional information at any time when they
consider it appropriate.
| 36
Energy Action Limited (ACN 137 363 636) 2. BOARD COMMITTEES
Members
Role
Responsibilities
Composition
The Board generally operates as a whole across the range of its
responsibilities but, to increase its effectiveness, uses committees where
closer attention to particular matters is required. The role of the Board
Committees is to make recommendations to the Board on matters set out
in each Committee’s Charter. The Charters for each of the Audit & Risk
Management, Remuneration and Nomination Committees are available on
the corporate governance section of the Company’s website.
The Audit & Risk Management Committee (ARMC) and the Remuneration
& Nomination Committees composition as at 30 June 2018 are set out
below. Details regarding the number of Board meetings and Committee
meetings held during the year and the attendance of each member is set
out in the Directors’ Report.
2.1. Audit & Risk Management Committee
The Audit & Risk Management Committee as at 30 June 2018 comprises
Nitin Singhi (independent non-executive Chairman), Murray Bleach (non-
executive Director), John Mackay (independent non-executive Director)
and Paul Meehan (non-executive Director). Nitin Singhi is Chairman of
the Committee. The Board aims to progressively appoint independent
Directors onto the Committee.
The ARMC’s role is to assist the Board in fulfilling its responsibility for
overseeing the quality and integrity of the accounting, audit, financial and
risk management practices of Energy Action.
The ARMC’s responsibilities include:-
• Review the internal control and compliance systems of Energy Action;
• Monitor the integrity of the financial statements of Energy Action;
• Consider significant financial reporting issues and judgements made in
connection with Energy Action’s financial statements;
• Monitor and review the performance of the external audit function and
make recommendations to the Board;
• Monitor compliance by the Company with legal and regulatory
requirements; and,
• Where appropriate, and at least twice a year, meet privately with the
external auditor to discuss any matters that the Committee or the
External Auditor believe should be discussed privately.
A copy of the ARMC Charter and Risk Management and Audit Policy is
available on the Company’s website
The Committee is chaired by an independent non-executive Director
and currently comprises five non-executive Directors, two of whom are
independent Directors and financially literate. The Chairman of the Board
is not permitted to chair the committee. Mr Nitin Singhi is Chairman of the
committee. The Committee met on four (4) occasions during the year to 30
June 2018. Please refer to the Directors’ Report for more information on
members, including attendance at committee meetings.
| 37
Energy Action 2018 Annual Report Consultation
External Auditor
Members
Role
Responsibilities
The CEO and Chief Financial Officer (CFO) are invited to attend all
committee meetings. Other members of management may also attend by
invitation. The committee has access to financial and legal advisers as
it considers appropriate. The committee also meets separately with the
external auditor to ensure the committee can be satisfied that the auditors
have had the full cooperation of management in conducting the audit
functions and to give the auditor the opportunity to raise any matters of
concern. The external auditor must monitor its independence and report to
the committee every six months that it has remained independent.
The external auditor is appointed by the Board and approved by
shareholders in accordance with the requirements of the Corporations Act.
The ARMC is responsible for reviewing the terms of appointment of the
external auditor and for making recommendations to the Board regarding
the appointment of the external auditor. It is the Company’s policy to require
that the external audit partner be rotated within 5 years from the date of
appointment. Significant permissible non-audit assignments awarded to
the external auditor must be approved in advance by the ARMC (or its
chairman between meetings). All non-audit assignments are to be reported
to the ARMC every six months. The Board and the ARMC are of the view
that, at the present time, Ernst & Young is best placed to provide the
Company’s audit services. Ernst & Young is a top tier professional services
firm. It has provided audit services to the Group since its listing and is
familiar with its structure and assets. The external auditor is required to be
independent from the Company and Energy Action. Ernst & Young meets
this requirement. The external auditor will attend Energy Action’s annual
meeting and will be available to answer shareholder questions on the
conduct of the audit, and the preparation and content of the auditor’s report.
2.2. Remuneration Committee
The Remuneration Committee, as at 30 June 2018 comprises five non-
executive Directors being John Mackay (independent non-executive
Chairman), Nitin Singhi (independent non-executive Director), Murray
Bleach (non-executive Director), Paul Meehan (non-executive Director)
and Mark de Kock (non-executive Director). John Mackay AM is Chairman
of the committee. The Board aims to progressively appoint independent
Directors onto the Committee.
The role of the Committee is to oversee remuneration matters to ensure
they are in line with strategic goals and enable the Company to attract
and retain high calibre executives and Directors who will create value for
shareholders.
The responsibilities of the Committee in respect of remuneration include:
• Ensure Directors and executives are fairly and responsibly remunerated
having regard to the performance of the Company, the performance of
the executives and the general remuneration environment;
• Assisting the Board in determining an appropriate remuneration
framework for senior management and remuneration, recruitment,
retention and termination policies;
| 38
Energy Action Limited (ACN 137 363 636) Composition
Consultation
Charter
Members
Role
Responsibilities
• Making recommendations to the Board on the Chief Executive Officer’s
remuneration, (including short and long term incentive plans and
performance targets); and,
Liaising with external advisors on remuneration-related matters, if and
when external remuneration advice is needed.
•
For further information in regards to the Company’s remuneration
framework, please refer to the Remuneration Report, including a detailed
description of the structure of non-executive Directors’ remuneration and
senior executives’ remuneration.
The Committee is chaired by an independent non-executive Director
and currently comprises five non-executive Directors, two of whom are
independent Directors and financially literate. The Chairman of the Board
is not permitted to chair the committee. Mr John Mackay is Chairman of
the Committee. The Committee met on two occasions during the year to
30 June 2018. Please refer to the Directors’ Report for more information on
members, including attendance at committee meetings
The committee may obtain information from, and consult with, management
and external advisers, as it considers appropriate.
The Remuneration Committee’s charter which sets out further details on the
role and duties of the committee is available in the corporate governance
section of the Company’s website.
2.3. Nomination Committee
The Nomination Committee, as at 30 June 2018 comprised four non-
executive Directors being Nitin Singhi (independent non-executive
Chairman), Murray Bleach (non-executive director), John Mackay
(independent non-executive Director) and Paul Meehan (non-executive
director). Nitin Singhi is Chairman of the committee. The Board aims to
progressively appoint independent Directors onto the committee.
The role of the committee is to oversee matters and policies to ensure
succession planning, recruitment, appointment and remuneration of non-
executive Directors. The Committee met once during the financial year.
The responsibilities of the committee in respect of Nomination include:
• Review and recommend to the Board the size and composition of the
Board; including review of Board succession plans and the succession
of the Chairman and CEO;
• Review and recommend to the Board the criteria for Board
membership, including assessment of necessary and desirable
competencies of Board members;
• Review Board membership and make recommendations to the Board
regarding its membership; and,
| 39
Energy Action 2018 Annual Report Composition
Consultation
Charter
• Assist the Board as required in relation to the performance evaluation
of the Board, its committees and individual Directors, and in developing
and implementing plans for identifying, assessing and enhancing
Director competencies.
The committee is chaired by an independent non-executive Director
and currently comprises four non-executive directors, 2 of whom are
independent directors. Please refer to the Directors’ Report for more
information on members, including attendance at committee meetings.
The committee may obtain information from, and consult with, management
and external advisers, as it considers appropriate.
The Nomination Committee’s charter which sets out further details on the
role and duties of the committee is available in the corporate governance
section of the Group’s website.
3. PERFORMANCE
EVALUATION AND
REMUNERATION
Performance Evaluation
3.1.
The Nominations Committee is responsible for determining the process
for evaluating Board Performance. Evaluations are normally undertaken
annually and the process led by the Chairman. The evaluation was
undertaken in November 2017.
The annual performance review involves all Directors completing a
questionnaire including allowance for additional comments or raising any
issues relating to the Board’s or a committee’s operation. The results of the
review are reviewed by the Chairman and discussed with Board members
as a whole at an appropriate Board meeting. The purpose of the review is
to assess the strengths and weakness of the Board and Committees, and
identify areas that might be improved. The findings of the performance
review are considered by the Board and continue to be taken into account
in identifying and nominating new candidates for appointment as Director,
and in planning and conducting Board and committee matters. Directors are
able to raise concerns regarding an individual Director’s performance with
the Chairman at any time during the year.
The performance of the Chief Executive Officer (CEO) is reviewed by the
Board on a periodic basis. The Chairman co-ordinates the comments of all
directors to provide a written assessment to the CEO. This is supported by
half year verbal reviews by the Chairman.
The performance of the Company’s senior executives is reviewed by
the Chief Executive Officer as part of the annual remuneration review
process and reported to the Remuneration Committee. The reviews usually
take place in July/August of each year. Further details regarding the
remuneration review process are set out in the Remuneration Report.
3.2. Director and Executive Remuneration
Remuneration levels are competitively set to attract and retain
appropriately qualified and experienced personnel. Performance, duties
| 40
Energy Action Limited (ACN 137 363 636) 4. RISK MANAGEMENT AND
INTERNAL CONTROLS
and responsibilities, market comparison and independent advice are all
considered as part of the remuneration process. The total remuneration
paid to Directors and key management personnel for the year ended 30
June 2018 is set out in the Remuneration Report.
Directors’ fees are reviewed annually and are benchmarked against fees
paid to Directors of similar organisations. Non-executive Directors are not
provided with retirement benefits other than statutory superannuation and
do not participate in employee incentive schemes or bonus payments. The
remuneration packages of senior executives comprise salary and short-
term incentives (i.e. bonus).
To ensure that Energy Action’s senior executives properly perform their
duties, the following procedures are in place:
• Performance is formally assessed twice each year as part of Energy
Action’s formal employee performance review process; the full year
achievement review takes place in July at the end of the financial year;
• All employees are assessed in terms of their achievement of agreed
KPI’s (both financial and non-financial) for the period;
• There is a strong link between the outcomes of this performance review
process and the subsequent remuneration review as outlined in the
Remuneration Report; and,
• Executives are provided with access to continuing education to update
and enhance their skills and knowledge.
4.1. Risk Management Framework
Energy Action has a formalised risk management framework. The
identification and effective management of risk, including calculated risk
taking is viewed as an essential part of the Company’s approach to creating
long term shareholder value. Compliance with risk management policies
is monitored by the ARMC. The Risk Management and Audit Policy is
included on the Groups website.
As part of its risk monitoring duties, the ARMC is required to:
• Oversee and approve risk management, internal compliance and
control policies and procedures of the Company;
• Oversee the design and implementation of the risk management and
internal control systems
• Regularly monitor risk management reports provided by management;
and,
• Assess at regular intervals whether Energy Action’s internal financial
control systems, risk management policies and risk management
systems are adequate.
Internal controls framework
4.2.
Energy Action has a robust risk management framework in place for
identifying, assessing, monitoring and managing its risks. A key component
of the framework is a periodical Operational Risk Self-Assessment (ORSA)
whereby management workshop key risks and controls in place and their
effectiveness. Findings resulting from this assessment are reported to
| 41
Energy Action 2018 Annual Report the ARMC, which in turn reports on this to the Board. During the year,
management has reported to the ARMC as to the manner in which it
manages its material risks, the effectiveness of the framework and the
results of the annual ORSA.
Considerable importance is placed on maintaining a strong control
environment through an organisation structure with clearly drawn lines of
accountability and authority.
At this point in time, the Board is of the opinion that the structure of the
Company does not warrant an internal audit function as the Company’s
internal audit function is carried out by the Audit & Risk management
Committee. This policy is subject to ongoing review.
The Board of Energy Action has received assurance from the CEO and
CFO that their confirmation given to the Board in respect of the integrity of
financial statements is founded on a sound system of risk management and
internal control which implements the policies adopted by the Board and
that the system is operating in all material respects in relation to financial
reporting risks.
5. ENERGY ACTION
GOVERNANCE POLICIES
Integrity, ethical standards and compliance
5.1.
Energy Action is committed to being a good corporate citizen and has a
robust framework of policies to achieve this. These include:
• The practices necessary to maintain confidence in the company’s
integrity;
• The practices necessary to take into account their legal obligations and
the reasonable expectations of their stakeholders; and,
• The responsibility and accountability of individuals for reporting and
investigating reports of unethical practices.
Energy Action has established a Code of Conduct for its Directors and
employees which forms the basis for ethical behaviour and is the framework
that provides the foundation for maintaining and enhancing the Company’s
reputation. The objective of the Code is to ensure that all stakeholders and
the broader community can be confident that the Company conducts its
affairs honestly in accordance with ethical values and practices.
The Code sets the standards for dealing ethically with employees,
investors, customers, regulatory bodies and the financial and wider
community, and the responsibility and accountability of individuals for
reporting and investigating reports of unethical behaviour.
A full copy of the Code of Conduct is posted on the Corporate Governance
section of the Group’s website.
Directors are provided with Board reports in advance of Board meetings
which contain sufficient information to enable informed discussion of all
agenda items.
| 42
Energy Action Limited (ACN 137 363 636) The Board has the responsibility for the integrity of Energy Action’s financial
reporting. To assist the Board in fulfilling its responsibility, the processes
discussed below have been adopted with a view to ensuring that the
Company’s financial reporting is a truthful and factual presentation of
Energy Action’s financial performance and position.
5.2. Dealing in Securities
The Company has in place a formal Security Trading Policy which regulates
the manner in which Directors and staff involved in the management of the
Company can deal in Company securities. It requires that they conduct their
personal investment activities in a manner that is lawful and avoids conflicts
between their own interests and those of the Company and contains all
contents suggested in the ASX Corporate Governance Principles and
Recommendations.
The policy specifies trading blackouts as the periods during which trading
securities cannot occur. Trading is always prohibited if the relevant person
is in possession of non-public price sensitive information regarding the
Company. A copy of the current Security Trading Policy is available on the
Company’s website.
5.3. Diversity & Inclusion
The Company has in place the Diversity & Inclusion Policy. The Policy
includes requirements for the Board to establish measurable objectives for
achieving gender diversity and for the Board to assess annually both the
objectives and progress in achieving them. The objectives set by the Board,
which are included in the Policy, are as follows:
• Selecting and appointing Directors from a diverse pool of talent by
developing an appointment process for future Directors that takes
diversity of background into account, in addition to previous Board and
leadership experience and experience in a specified field.
• Considering the Diversity & Inclusion Policy when assessing, selecting
•
•
and making recommendations to the Board on senior executive
appointments. In considering these recommendations the Board is also
required to take into account the objectives of this policy.
Implementing policies and training which address impediments to
diversity in the workplace.
Implementing initiatives designed to identify, support and develop
talented individuals with leadership potential to prepare them for senior
management and Board positions. For example, in the case of gender
diversity, such initiatives include:
○ mentoring programs; and,
○ supporting the promotion of talented women into management
positions.
• Networking opportunities.
•
Identifying ways to entrench diversity as a cultural priority across the
group.
• Setting targets for women’s participation in the Board, senior
management and across all employees and report such in the Annual
Report.
| 43
Energy Action 2018 Annual Report Energy Action strives for diversity and respects the unique contributions that
may be made by employees with diverse backgrounds, experiences and
perspectives. Energy Action strongly believes diversity allows the provision
of exceptional customer service to an equally diverse community. In order
to attract and retain a diverse workforce and, in turn, a broad and varied
customer base, Energy Action is committed to providing an environment in
which all employees are treated with fairness and respect, and have equal
access to opportunities available in the workplace.
Energy Action’s approach is about being flexible in the way we think, act
and work. It is part of our on-going commitment to develop an inclusive
workforce by recognising and accommodating individual circumstances and
our work commitments.
Diversity in general:
• Energy Action currently has specific flexible working arrangements
with 8 employees representing 6.5 % of total staff (male & female
employees).
• Energy Action has in its employment staff from 19 different cultural
backgrounds.
The Board set the following measurable objectives for achieving diversity
for the reporting year:
• Ensuring the Remuneration Committee actively monitors all aspects
of diversity at each meeting and where elements of diversity need
improvement that improvement targets are met.
• Ensure that our merit-based system remains the only mechanism
adopted when employees, managers, senior managers, national
managers, senior executives and Directors are appointed.
• Ensure that applicants continue to be selected from diverse candidate
pools and continue to be interviewed by a diverse selection interview
panel.
All of the above items were successfully in operation during the year ended
30 June 2018. As at 30 June 2018, there were no women on the Board or
Executive Committee, 40% of management positions were filled by women
and 43% of employees are female. A copy of the Code of Conduct, Trading
Policy and Diversity & Inclusion Policy is available on the Company’s
Website.
5.4. Health, safety and environment
The Company has continued its emphasis on health and safety in the
workplace with the aim of ensuring that people achieve outcomes in a safe
manner, thereby contributing to operational effectiveness and business
sustainability. The Company has an occupational health and safety policy
and a new management system in place. MANGO, a web based safety
management tool for housing safety information, record keeping and
incident reporting was introduced across the PAS division. The Company’s
safety performance is reported regularly to the Board to assist the Board
in monitoring compliance with the Company’s policy and the relevant
regulatory requirements.
| 44
Energy Action Limited (ACN 137 363 636) During FY2018 there were no reported environmental incidents and no Lost
Time Injuries.
5.5. Continuous disclosure and communications with shareholders
The Company is committed to providing relevant and timely information
to its shareholders and to the broader market, in accordance with its
obligations under the ASX continuous disclosure regime. The Board
has a Disclosure Policy, details of which are accessible in the Corporate
Governance section on the Company’s website. The policy includes
procedures for dealing with potentially price-sensitive information which
includes referral to the CEO, CFO and Company Secretary and sometimes
the Board for a determination as to disclosure required. The ASX liaison
person is the Company Secretary of Energy Action.
Energy Action has adopted a Communication Policy. The cornerstone of
this policy is the delivery of timely and relevant information as described
below:
•
Investors receive an annual report and updates which keep them
informed of Energy Action’s performance and operations.
• Shareholders are able to provide their email address to Energy
Action’s share registry, Link Market Services Limited to enable all
communications from the company to be received electronically.
Contact details for Link Market Services Limited are on the company’s
website.
• After lodging market-sensitive information with ASX, Energy Action’s
policy is to place the information on its website, including annual and
half year results announcements and investor presentations as soon
as practically possible. Energy Action’s website (energyaction.com.au)
contains recent announcements, presentations and past and current
reports to shareholders.
• Domestic investor road shows are held periodically throughout
Australia. Where they contain new information, investor and road show
presentations are released to the ASX and included on the Group’s
website.
• For formal meetings, an explanatory memorandum on the resolutions is
included with the notice of meeting. Presentations by the chairman and
CEO are webcast.
• Full copies of notices of meetings are placed on the Energy Action
website. Unless specifically stated in the notice of meeting, all holders
of fully paid securities are eligible to vote on all resolutions. In the event
that shareholders cannot attend formal meetings, they are able to lodge
a proxy on line in accordance with the Corporations Act.
| 45
Energy Action 2018 Annual Report ASX CORPORATE GOVERNANCE COUNCIL’S PRINCIPLES AND RECOMMENDATIONS
ASX Principle
Reference^
Compliance
PRINCIPLE 1 – LAY SOLID FOUNDATIONS FOR MANAGEMENT AND OVERSIGHT
1.1
A listed entity should disclose:
a.
the respective roles and responsibilities of its
Board and management; and,
those matters expressly reserved to the Board
and those delegated to management.
b.
1.2
A listed entity should:
a. undertake appropriate checks before
appointing a person, or putting forward to
security holders a candidate for election, as a
Director; and,
b. provide security holders with all material
information in its possession relevant to a
decision on whether or not to elect or re-elect a
Director.
1.1
1.4
A listed entity should have a written agreement with
each Director and senior executive setting out the
terms of their appointment.
1.4 and 2018
Remuneration
Report
1.3
1.4
1.2
5.3
The Company Secretary of a listed entity should
be accountable directly to the Board, through
the Chair, on all matters to do with the proper
functioning of the Board.
1.5
A listed entity should:
a. have a diversity policy which includes
requirements for the Board or a relevant
committee of the Board to set measurable
objectives for achieving gender diversity and
to assess annually both the objectives and the
entity’s progress in achieving them;
b. disclose that policy or a summary of it; and,
c. disclose as at the end of each reporting period
the measurable objectives for achieving
gender diversity set by the Board or a relevant
Committee of the Board in accordance with
the entity’s diversity policy and its progress
towards achieving them, and either:
1.
the respective proportions of men and women
on the Board, in senior executive positions and
across the whole organisation (including how
the entity has defined “senior executive” for
these purposes); or
Comply
Comply
Comply
Comply
Comply
| 46
Energy Action Limited (ACN 137 363 636) ASX Principle
Reference^
Compliance
1.6
1.7
2.
if the entity is a “relevant employer” under the
Workplace Gender Equality Act, the entity’s
most recent “Gender Equality Indicators”, as
defined in and published under that Act
A listed entity should:
a. have and disclose a process for periodically
evaluating the performance of the Board, its
committees and individual Directors; and
b. disclose, in relation to each reporting
period, whether a performance evaluation
was undertaken in the reporting period in
accordance with that process
A listed entity should:
a. have and disclose a process for periodically
evaluating the performance of its senior
executives; and,
b. disclose, in relation to each reporting
period, whether a performance evaluation
was undertaken in the reporting period in
accordance with that process.
PRINCIPLE 2 – STRUCTURE THE BOARD TO ADD VALUE
3.1
Comply
3.2
Comply
2.1
2.2
2.3
The Board of a listed entity should:
a. have a nomination committee which:
1. has at least three members, a majority of
whom are independent Directors; and
is chaired by an independent Director, and
disclose:
the charter of the committee
the members of the committee; and
3.
4.
5. as at the end of each reporting period, the
2.
number of times the committee met throughout
the period and the individual attendances of the
members at those meetings
A listed entity should have and disclose a Board
skills matrix setting out the mix of skills and
diversity that the Board currently has or is looking
to achieve in its membership
A listed entity should disclose:
a.
the names of the Directors considered by the
Board to be independent Directors;
if a Director has an interest, position,
association or relationship of the type
described in Box 2.3 but the Board is of
b.
2.3
Comply except for
2.1(a)(1)
As at 30 June 2018,
the Committee has
four Directors, two of
whom are independent
Directors.
1.2
Comply
1.3 and 2018
Directors’ report
Comply
| 47
Energy Action 2018 Annual Report ASX Principle
Reference^
Compliance
the opinion that it does not compromise the
independence of the Director, the nature of the
interest, position, association or relationship in
question and an explanation of why the Board
is of that opinion; and
the length of service of each Director
c.
2.4
A majority of the Board of a listed entity should be
independent Directors.
1.3
Do not comply
As at 30 June 2018, do
not comply as the Board
has five Directors, two of
whom are independent
Directors.
1.3
Partially comply
As at 30 June 2018 the
chair of the Board is not
an independent Director.
1.4
Comply
2.5
2.6
The chair of the Board of a listed entity should be
an independent Director and, in particular, should
not be the same person as the CEO of the entity.
A listed entity should have a program for inducting
new Directors and provide appropriate professional
development opportunities for Directors to develop
and maintain the skills and knowledge needed to
perform their role as Directors effectively.
PRINCIPLE 3 – ACT ETHICALLY AND RESPONSIBLY
3.1
A listed entity should:
a. have a code of conduct for its Directors, senior
executives and employees; and
b. disclose that code or a summary of it.
5.1
Comply
PRINCIPLE 4 – SAFEGUARD INTEGRITY IN CORPORATE REPORTING
4.1
The Board of a listed entity should:
a. have an Audit Committee which:
1. has at least three members, all of whom are
non-executive Directors and a majority of
whom are independent Directors; and
is chaired by an independent Director, who is
not the chair of the Board,
2.
2.1
3.
4.
and disclose:
the charter of the committee;
the relevant qualifications and experience of
the members of the committee; and
Comply except for 4.1(a)
(1)
As at 30 June 2018, the
Committee comprised
of two independent and
three non-independent
Directors.
| 48
Energy Action Limited (ACN 137 363 636)
ASX Principle
Reference^
Compliance
4.2
5.
in relation to each reporting period, the number
of times the committee met throughout the
period and the individual attendances of the
members at those meetings.
The Board of a listed entity should, before it
approves the entity’s financial statements for a
financial period, receive from its CEO and CFO
a declaration that, in their opinion, the financial
records of the entity have been properly maintained
and that the financial statements comply with
the appropriate accounting standards and give
a true and fair view of the financial position and
performance of the entity and that the opinion
has been formed on the basis of a sound system
of risk management and internal control which is
operating effectively.
4.2
Comply
4.3
A listed entity that has an AGM should ensure that
its external auditor attends its AGM and is available
to answer questions from security holders relevant
to the audit.
PRINCIPLE 5 – MAKE TIMELY AND BALANCED DISCLOSURE
5.1
A listed entity should:
a. have a written policy for complying with its
continuous disclosure obligations under the
Listing Rules; and,
b. disclose that policy or a summary of it.
2.1
Comply
5.5
Comply
PRINCIPLE 6 – RESPECT THE RIGHTS OF SECURITY HOLDERS
6.1
6.2
6.3
6.4
A listed entity should provide information about
itself and its governance to investors via its
website.
A listed entity should design and implement an
investor relations program to facilitate effective two-
way communication with investors.
A listed entity should disclose the policies
and processes it has in place to facilitate and
encourage participation at meetings of security
holders.
A listed entity should give security holders the
option to receive communications from, and send
communications to, the entity and its security
registry electronically.
5.5
5.5
5.5
5.5
Comply
Comply
Comply
Comply
| 49
Energy Action 2018 Annual Report ASX Principle
Reference^
Compliance
PRINCIPLE 7 – RECOGNISE AND MANAGE RISK
7.1
The Board of a listed entity should:
a. have a committee or committees to oversee
2.1, 4.1, 4.2
Comply except for 7.1(a)
(1)
risk, each of which:
As at 30 June 2018, the
Committee comprised
of two independent and
three non-independent
Directors.
4.2
4.2
Comply
Comply
2.
1. has at least three members, a majority of
whom are independent Directors; and
is chaired by an independent Director,
and disclose:
the charter of the committee;
the members of the committee; and
3.
4.
5. as at the end of each reporting period, the
number of times the committee met throughout
the period and the individual attendances of the
members at those meetings;
The Board or a committee of the Board should:
a.
review the entity’s risk management framework
at least annually to satisfy itself that it
continues to be sound; and
b. disclose, in relation to each reporting period,
whether such a review has taken place.
A listed entity should disclose:
a.
if it has an internal audit function, how the
function is structured and what role it performs;
or
if it does not have an internal audit function,
that fact and the processes it employs for
evaluating and continually improving the
effectiveness of its risk management and
internal control processes.
b.
7.2
7.3
7.4
A listed entity should disclose whether it has any
material exposure to economic, environmental
and social sustainability risks and, if it does, how it
manages or intends to manage those risks.
PRINCIPLE 8 – REMUNERATE FAIRLY AND RESPONSIBLY
4.1, 4.2
Comply
8.1
The Board of a listed entity should:
a. have a remuneration committee which:
1. has at least three members, a majority of
whom are independent Directors; and
is chaired by an independent Director,
and disclose:
the charter of the committee;
the members of the committee; and
3.
4.
2.
2.2
Comply except for 8.1(a)
(1)
As at 30 June 2018,
the Remuneration
Committee comprised
two independent and
three non-independent
Directors.
| 50
Energy Action Limited (ACN 137 363 636) ASX Principle
Reference^
Compliance
8.2
8.3
5. as at the end of each reporting period, the
number of times the committee met throughout
the period and the individual attendances of the
members at those meetings.
A listed entity should separately disclose its policies
and practices regarding the remuneration of
non-executive Directors and the remuneration of
executive Directors and other senior executives.
2.2
Comply
A listed entity which has an equity-based
remuneration scheme should:
a. have a policy on whether participants are
5.2 and 2018
Remuneration
Report
Comply
permitted to enter into transactions (whether
through the use of derivatives or otherwise)
which limit the economic risk of participating in
the scheme; and
b. disclose that policy or a summary of it.
All references are to sections of this Corporate Governance Statement unless otherwise stated
| 51
Energy Action 2018 Annual Report Financial Statements
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2018
Revenue
Other income
Total Revenue
Cost of goods and services sold
Employee benefits expense
Deferred consideration on acquisitions
Acquisition, transaction and restructuring related costs
Rental expense
Travel costs
Administration expenses
EBITDA*
Depreciation and amortisation expense
EBIT**
Financing costs
Profit before income tax
Income tax expense
Profit / (loss) for the period attributable to owners of the
parent entity
Other comprehensive profit / (loss) net of income tax
that may be reclassified subsequently to profit and loss
Exchange differences on translation of foreign operations
Total comprehensive profit / (loss) for the period
attributable to owners of the parent entity
Gain / (loss) per share:
Basic gain/(loss) per share for the year attributable to
ordinary equity holders of the parent
Diluted gain/(loss) per share for the year attributable to
ordinary equity holders of the parent
*EBITDA = Earnings before Interest, Tax, Depreciation & Amortisation
** EBIT = Earnings before Interest & Tax
Note
5&6
6
6
4
6
6
6
6
6
6
7
8
8
Consolidated Group
2018
$
2017
$
31,062,876
32,563,808
110,948
393,295
31,173,824
(4,466,526)
32,957,103
(5,931,570)
(14,648,760)
(15,665,277)
-
-
(392,811)
(507,725)
(1,248,300)
(1,176,810)
(313,028)
(675,694)
(4,793,607)
(3,875,894)
5,703,603
4,731,322
(1,535,080)
(1,510,210)
4,168,523
(530,032)
3,638,491
(1,050,134)
2,588,357
(2,373)
2,586,984
Cents
9.97
9.71
3,221,112
(539,378)
2,681,734
(908,764)
1,772,970
(3,307)
1,769,666
Cents
6.83
6.76
| 52
Energy Action Limited (ACN 137 363 636) Consolidated Statement of Financial Position
For the year ended 30 June 2018
ASSETS
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Current tax asset
Other assets
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Trade and other receivables
Property, plant and equipment
Other assets
Other Intangible assets
Goodwill
Customer relationships
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Short-term provisions
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Other long-term provisions
Loans and Borrowings
Deferred tax liability
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Share based payments reserve
Retained earnings
Interest rate hedging reserve
Foreign currency translation reserve
TOTAL EQUITY
The accompanying notes form part of these financial statements
Note
10
11
16
14
11
12
14
13
13
13
15
17
17
18
16
19b
Consolidated Group
2018
$
2017
$
1,171,288
3,838,586
56,738
2,374,044
7,440,656
91,358
529,890
339,389
3,959,113
9,944,796
1,167,090
16,031,636
23,472,292
1,927,698
1,000,837
2,928,535
354,256
4,997,225
327,632
5,679,113
8,607,648
14,864,644
6,537,906
318,226
8,055,889
(7,567)
(39,810)
2,105,780
5,992,413
877
2,221,521
10,320,591
91,358
744,273
549,478
3,312,004
9,944,796
1,406,174
16,048,083
26,368,674
2,717,042
1,374,146
4,091,188
320,180
9,015,005
372,339
9,707,524
13,798,712
12,569,962
6,537,906
262,768
5,830,890
(24,165)
(37,437)
14,864,644
12,569,962
| 53
Energy Action 2018 Annual Report Consolidated Statement of Changes in Equity
For the year ended 30 June 2018
Ordinary
Issued
Share
Capital
Share
Based
Payments
Reserve
Foreign
currency
translation
reserve
Interest
Swap
Reserve
Retained
Earnings
Total
$
12,006,279
1,772,970
(3,307)
$
-
-
-
Consolidated Group
Note
$
$
$
$
Balance at 30 June 2016
6,537,906
530,998
4,971,505
(34,130)
Profit/(Loss) attributable to owners
of parent entity
Foreign currency translation
reserve
Interest rate hedging reserve
Total comprehensive income
-
-
-
-
-
-
-
-
1,772,970
-
-
(3,307)
-
-
(24,165)
(24,165)
1,772,970
(3,307)
(24,165)
1,745,498
Share based payments
19
-
(268,230)
-
Dividends paid or provided for
-
-
(913,585)
-
-
-
-
(268,230)
(913,585)
Balance at 30 June 2017
6,537,906
262,768
5,830,890
(37,437)
(24,165)
12,569,962
Profit/(Loss) attributable to owners
-
-
2,588,357
-
2,588,357
of parent entity
Foreign currency translation
reserve
Interest rate hedging reserve
Total comprehensive income
Share based payments
Dividends paid or provided for
19
9
-
-
-
-
-
-
-
-
-
(2,373)
-
(2,373)
-
-
16,598
16,598
2,588,357
(2,373)
16,598
2,602,582
55,458
-
-
(363,358)
-
-
-
55,458
(363,358)
Balance at 30 June 2018
6,537,906
318,226
8,055,889
(39,810)
(7,567)
14,864,644
The accompanying notes form part of these financial statements
| 54
Energy Action Limited (ACN 137 363 636)
Consolidated Statement of Cash Flow
For the year ended 30 June 2018
Consolidated Group
Note
2018
$
2017
$
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers (inclusive of GST)
36,346,684
35,163,840
Payments to suppliers and employees (inclusive of GST)
(29,327,496)
(31,502,849)
Payments for deferred consideration
4
Restructuring costs
Interest received
Share based payments share purchase
Interest paid
Income tax paid
-
-
8,539
(142,779)
(476,657)
(3,142,000)
(339,958)
8,557
(59,407)
(427,373)
(1,150,702)
(1,116,918)
Net cash (used in) / provided by operating activities
21
5,257,589
(1,416,108)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment
Software development costs
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid by parent entity
Bank loan drawn down/(repayment)
Net cash (used in) / provided by financing activities
Net (decrease)/increase in cash held
Cash (including restricted cash) at beginning of
financial year
Cash (including restricted cash) at end of financial year
The accompanying notes form part of these financial statements
12
13
9
18
10
10
(161,384)
(335,927)
(1,567,339)
(1,385,646)
(1,728,723)
(1,721,573)
(363,358)
(4,100,000)
(4,463,358)
(934,492)
2,105,780
(913,585)
4,950,000
4,036,415
898,734
1,207,046
1,171,288
2,105,780
| 55
Energy Action 2018 Annual Report
Notes to the Financial Statements for
year ended 30 June 2018
NOTE 1: CORPORATE
INFORMATION
The consolidated financial statements and notes represent those of
Energy Action Limited and it’s Controlled Entities (the “consolidated group”
or “group” or ‘’EAX’’) for the year ended 30 June 2018. The financial
statements were authorised for issue in accordance with a resolution of the
directors on 16 August 2018.
NOTE 2: SUMMARY OF
SIGNIFICANT ACCOUNTING
POLICIES
Energy Action Limited (“the Parent”) is a company limited by shares
incorporated in Australia whose shares are publicly traded on the Australian
Securities Exchange. The Group is a for profit entity.
The nature of the operation and principal activities of the Group are
described in the directors’ report.
2.1. Basis of Preparation
The financial statements are general purpose financial statements that
have been prepared in accordance with Australian Accounting Standards,
Australian Accounting Interpretations, other authoritative pronouncements
of the Australian Accounting Standards Board (AASB) and the Corporations
Act 2001.
Material accounting policies adopted in the preparation of these financial
statements are presented below and have been consistently applied unless
otherwise stated.
The financial statements have been prepared on an accruals basis and are
based on historical costs, modified, where applicable, by the measurement
at fair value of selected non-current assets, financial assets and financial
liabilities. The financial report is presented in Australian dollars and all
values. The functional currency is also Australian dollars.
The financial report also complies with International Financial Reporting
Standards (IFRS) as issued by the International Accounting Standards
Board.
2.2. New Accounting Standards and interpretations
i. Changes in accounting policies
The accounting policies adopted are consistent with those of the previous
financial year except as follows:
The group has adopted the following new and amended Australian
Accounting Standards and AASB Interpretations as of 1 July 2017; none of
which had a material impact on the financial statements:
• AASB 2016-2 Amendments to Australian Accounting Standards –
Disclosure Initiative: Amendments to AASB 107
• AASB 2017-2 Amendments to Australian Accounting Standards –
Further Annual Improvements 2014-2016 Cycle
| 56
Energy Action Limited (ACN 137 363 636) Note 2: Summary Of Significant Accounting Policies (Continued)
ii. Accounting Standards and Interpretations issued but not yet
effective
Australian Accounting Standards and Interpretations that have recently
been issued or amended but are not yet effective and have not been
adopted by the Group for the annual reporting period ending 30 June 2018
are outlined in the table below:
Standard/Interpretation
Effective for the annual
reporting period
beginning on
Expected to be initially
applied in the financial
year ending
AASB 2016-1 Amendments to Australian Accounting
January 1, 2018
June 30, 2019
Standards – Recognition of Deferred Tax Assets for
Unrealised Losses [AASB 112]
AASB 9 Financial Instruments
January 1, 2018
AASB 15 Revenue from Contracts with Customers
January 1, 2018
AASB 2016-5 Amendments to Australian Accounting
January 1, 2018
June 30, 2019
June 30, 2019
June 30, 2019
Standards – Classification and Measurement of Share-
based Payment Transactions
AASB 2017-1 Amendments to Australian Accounting
January 1, 2018
June 30, 2019
Standards – Transfers of Investments Property, Annual
Improvements 2014-2016 Cycle and Other Amendments
AASB Interpretation 22 Foreign Currency Transactions and
January 1, 2018
June 30, 2019
Advance Consideration
AASB 16 Leases
January 1, 2019
IFRIC 23 Uncertaininty over Income Tax Treatments
January 1, 2019
(Australian-equivalent interpretation not yet issued)
June 30, 2020
June 30, 2020
With the exception of those noted below, the Directors have not yet
assessed whether the above amendments and interpretations will have a
material impact on the financial report of the Group in the year or period of
initial application.
Impact of AASB15 on future reporting periods:
Adoption of AASB15, to apply in FY2019, will require revenue from certain
procurement activities, primarily Auction revenue to be recognised in
the period in which the procurement activity is undertaken. Procurement
revenue currently recognised over the term of the underlying energy
contract will be brought forward and recognised on inception of the energy
procurement contract. This will result in a one-off acceleration of revenue.
| 57
Energy Action 2018 Annual Report Note 2: Summary Of Significant Accounting Policies (Continued)
Management has completed an initial assessment by reviewing a sample of
contracts/arrangements. Based on the work performed to date the finding
indicates that AASB15 is likely to have a material impact on the revenue
recognition of procurement revenue. Revenue generated from monitoring
and consultancy services is unlikely to have a material impact on the
financial statement for 30 June 2019.
Impact of AASB16 on future reporting periods:
Adoption of AASB16, to apply in FY2020, will require leases currently
treated as operating leases, such as rental of office premises, to be
recognised on the balance sheet. This change will impact the classification
of certain expenses such as rental expense, deprecation and financing
costs. Consequently, non IFRS measures such as EBITDA and EBIT
will also be impacted. Management has completed an initial assessment
review, and this change is expected to result in an increase of leased
assets and lease liabilities.
2.3. Key Accounting Policies
a. Principles of Consolidation
The consolidated financial statements comprise of the financial statements
of the Group and its subsidiaries as at 30 June 2018. Control is achieved
when the Group is exposed, or has rights, to variable returns from its
involvement with the investee and has the ability to affect those returns
through its power over the investee.
Specifically, the Group controls an investee if and only if the Group has:
• Power over the investee (i.e. existing rights that give it the current
ability to direct the relevant activities of the investee)
• Exposure, or rights, to variable returns from its involvement with the
investee, and
• The ability to use its power over the investee to affect its returns
When the Group has less than a majority of the voting or similar rights of
an investee, the Group considers all relevant facts and circumstances in
assessing whether it has power over an investee, including:
• The contractual arrangement with the other vote holders of the investee
• Rights arising from other contractual arrangements
• The Group’s voting rights and potential voting rights
The Group re-assesses whether or not it controls an investee if facts
and circumstances indicate that there are changes to one or more of the
three elements of control. Consolidation of a subsidiary begins when the
Group obtains control over the subsidiary and ceases when the Group
loses control of the subsidiary. Assets, liabilities, income and expenses of
a subsidiary acquired or disposed of during the year are included in the
statement of comprehensive income from the date the Group gains control
until the date the Group ceases to control the subsidiary.
| 58
Energy Action Limited (ACN 137 363 636) Note 2: Summary Of Significant Accounting Policies (Continued)
Profit or loss and each component of other comprehensive income (OCI)
are attributed to the equity holders of the parent of the Group and to the
non-controlling interests, even if this results in the non-controlling interests
having a deficit balance. When necessary, adjustments are made to the
financial statements of subsidiaries to bring their accounting policies
into line with the Group’s accounting policies. All intra-group assets and
liabilities, equity, income, expenses and cash flows relating to transactions
between members of the Group are eliminated in full on consolidation.
A change in the ownership interest of a subsidiary, without a loss of control,
is accounted for as an equity transaction. If the Group loses control over a
subsidiary, it:
• De-recognises the assets (including goodwill) and liabilities of the
subsidiary
• De-recognises the carrying amount of any non-controlling interests
• De-recognises the cumulative translation differences recorded in equity
• Recognises the fair value of the consideration received
• Recognises the fair value of any investment retained
• Recognises any surplus or deficit in profit or loss
• Reclassifies the parent’s share of components previously recognised
in OCI to profit or loss or retained earnings, as appropriate, as would
be required if the Group had directly disposed of the related assets or
liabilities
Subsidiaries are recorded as a component of other revenues in the
separate income statement of the parent entity, and do not impact the
recorded cost of the investment. Upon receipt of dividend payments from
subsidiaries, the parent will assess whether any indicators of impairment
of the carrying value of the investment in the subsidiary exist. Where such
indicators exist, to the extent that the carrying value of the investment
exceeds its recoverable amount, an impairment loss is recognised.
b. Business combinations
Business combinations occur where an acquirer obtains control over one or
more businesses.
A business combination is accounted for by applying the acquisition
method, unless it is a combination involving entities or businesses under
common control. The business combination will be accounted for from
the date that control is attained, whereby the fair value of the identifiable
assets acquired and liabilities (including contingent liabilities) assumed is
recognised (subject to certain limited exemptions).
When measuring the consideration transferred in the business combination,
any asset or liability resulting from a contingent consideration arrangement
is also included. Subsequent to initial recognition, contingent consideration
classified as equity is not remeasured and its subsequent settlement is
accounted for within equity. Contingent consideration classified as an asset
or liability is remeasured each reporting period to fair value, recognising
| 59
Energy Action 2018 Annual Report Note 2: Summary Of Significant Accounting Policies (Continued)
any change to fair value in profit or loss, unless the change in value can be
identified as existing at acquisition date.
All transaction costs incurred in relation to the business combination are
expensed to the statement of comprehensive income.
The acquisition of a business may result in the recognition of goodwill or a
gain from a bargain purchase.
c. Goodwill
Goodwill is carried at cost less accumulated impairment losses. Goodwill is
calculated as the excess of the sum of:
the consideration transferred;
i.
ii. any non-controlling interest; and
iii.
the acquisition date fair value of any previously held equity interest,
over the acquisition date fair value of net identifiable assets
acquired.
The acquisition date fair value of the consideration transferred for a
business combination plus the acquisition date fair value of any previously
held equity interest shall form the cost of the investment in the separate
financial statements.
Fair value uplifts in the value of pre-existing equity holdings are taken to the
statement of comprehensive income. Where changes in the value of such
equity holdings had previously been recognised in other comprehensive
income, such amounts are recycled to profit or loss.
Goodwill on acquisitions of subsidiaries is included in intangible assets.
Goodwill is tested for impairment annually and is allocated to the Group’s
cash-generating units or groups of cash-generating units, representing the
lowest level at which goodwill is monitored not larger than an operating
segment. Gains and losses on the disposal of an entity include the carrying
amount of goodwill related to the entity disposed of.
d. Income Tax and other taxes
The income tax expense (revenue) for the year comprises current income
tax expense (income) and deferred tax expense (income).
Current income tax expense charged to profit or loss is the tax payable on
taxable income. Current tax liabilities (assets) are measured at the amounts
expected to be paid to (recovered from) the relevant taxation authority.
Deferred income tax expense reflects movements in deferred tax asset and
deferred tax liability balances during the year as well unused tax losses.
Except for business combinations, no deferred income tax is recognised
from the initial recognition of an asset or liability, where there is no effect on
accounting or taxable profit or loss.
| 60
Energy Action Limited (ACN 137 363 636) Note 2: Summary Of Significant Accounting Policies (Continued)
Deferred tax assets and liabilities are calculated at the tax rates that are
expected to apply to the period when the asset is realised or the liability
is settled and their measurement also reflects the manner in which
management expects to recover or settle the carrying amount of the related
asset or liability.
Deferred tax assets relating to temporary differences and unused tax losses
are recognised only to the extent that it is probable that future taxable profit
will be available against which the benefits of the deferred tax asset can be
utilised.
Where temporary differences exist in relation to investments in subsidiaries,
branches, associates, and joint ventures, deferred tax assets and liabilities
are not recognised where the timing of the reversal of the temporary
difference can be controlled and it is not probable that the reversal will
occur in the foreseeable future.
Current tax assets and liabilities are offset where a legally enforceable
right of set-off exists and it is intended that net settlement or simultaneous
realisation and settlement of the respective asset and liability will occur.
Deferred tax assets and liabilities are offset where: (a) a legally enforceable
right of set-off exists; and (b) the deferred tax assets and liabilities relate
to income taxes levied by the same taxation authority on either the same
taxable entity or different taxable entities where it is intended that net
settlement or simultaneous realisation and settlement of the respective
asset and liability will occur in future periods in which significant amounts of
deferred tax assets or liabilities are expected to be recovered or settled.
Other taxes
Revenues, expenses and assets are recognised net of the amount of GST
except:
• When the GST incurred on a purchase of goods and services in not
recoverable from the taxation authority, in which case the GST is
recognised as part of the cost of acquisition of the asset or as part of
the expense item as applicable
• Receivables and payables, which are stated with the amount of GST
included
The net amount of GST recoverable from, or payable to, the taxation
authority is included as part of receivables or payables in the statement of
financial position.
Cash flows are included in the statement of cash flows on a gross basis
and 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 part of operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST
recoverable from, or payable to, the taxation authority.
e. Plant and Equipment
Each class of plant and equipment is carried at cost or fair value as
| 61
Energy Action 2018 Annual Report Note 2: Summary Of Significant Accounting Policies (Continued)
indicated less, where applicable, any accumulated depreciation and
impairment losses.
Plant and equipment are measured on the cost basis and therefore carried
at cost less accumulated depreciation and any accumulated impairment.
In the event the carrying amount of plant and equipment is greater than
the estimated recoverable amount, the carrying amount is written down
immediately to the estimated recoverable amount and impairment losses
are recognised either in profit or loss or as a revaluation decrease if the
impairment losses relate to a re-valued asset.
The carrying amount of plant and equipment is reviewed annually by
directors to ensure it is not in excess of the recoverable amount from these
assets. The recoverable amount is assessed on the basis of the expected
net cash flows that will be received from the asset’s employment and
subsequent disposal. The expected net cash flows have been discounted to
their present values in determining recoverable amounts.
Subsequent costs are included in the asset’s carrying amount or recognised
as a separate asset, as appropriate, only when it is probable that future
economic benefits associated with the item will flow to the Group and
the cost of the item can be measured reliably. All other repairs and
maintenance are charged to the statement of comprehensive income during
the financial period in which they are incurred.
Depreciation
The depreciable amount of all fixed assets including buildings and
capitalised lease assets, but excluding freehold land, is depreciated on
a straight-line basis over the asset’s useful life to the consolidated group
commencing from the time the asset is held ready for use. Leasehold
improvements are depreciated over the shorter of either the unexpired
period of the lease or the estimated useful lives of the improvements.
The depreciation rates used for each class of depreciable assets are:
Class of Fixed Asset
Computer equipment
Furniture and fittings
Depreciation Rate
25% - 33.3%
20%
The assets’ residual values and useful lives are reviewed, and adjusted if
appropriate, at the end of each reporting period.
An asset’s carrying amount is written down immediately to its recoverable
amount if the asset’s carrying amount is greater than its estimated
recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with
the carrying amount. These gains and losses are included in the statement
of comprehensive income. When re-valued assets are sold, amounts
included in the revaluation surplus relating to that asset are transferred to
retained earnings.
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Energy Action Limited (ACN 137 363 636)
Note 2: Summary Of Significant Accounting Policies (Continued)
f. Leases
Leases of fixed assets where substantially all the risks and benefits
incidental to the ownership of the asset, but not the legal ownership that is
transferred to entities in the consolidated group, are classified as finance
leases.
Finance leases are capitalised by recognising an asset and a liability at the
lower of the amounts equal to the fair value of the leased property or the
present value of the minimum lease payments, including any guaranteed
residual values. Lease payments are allocated between the reduction of the
lease liability and the lease interest expense for the period.
Leased assets are depreciated on a straight-line basis over the shorter of
their estimated useful lives or the lease term.
Lease payments for operating leases, where substantially all the risks and
benefits remain with the lessor, are recognised as expenses in the periods
in which they are incurred. Lease incentives under operating leases are
recognised as a liability and amortised on a straight-line basis over the
lease term. Estimated remediation costs at the conclusion of a lease are
accrued on a straight-line basis over the lease term.
g. Financial Instruments
Initial recognition and measurement
Financial assets within the scope of AASB 139 are classified as financial
assets at fair value through profit or loss, loans and receivables, held-to-
maturity investments, available-for-sale financial assets, or as derivatives
designated as hedging instruments in an effective hedge as appropriate.
The Group determines the classification of its financial assets at initial
recognition. The financial assets held by the Group during the past two
years only included loans and receivables and available-for-sale financial
assets.
Amortised cost is the amount at which the financial asset or financial
liability is measured at initial recognition less principal repayments and any
reduction for impairment, and adjusted for any cumulative amortisation
of the difference between that initial amount and the maturity amount
calculated using the effective interest method.
Fair value is determined based on current bid prices for all quoted
investments. Valuation techniques are applied to determine the fair value
for all unlisted securities, including recent arm’s length transactions,
reference to similar instruments and option pricing models.
The effective interest method is used to allocate interest income or interest
expense over the relevant period and is equivalent to the rate that discounts
estimated future cash payments or receipts (including fees, transaction
costs and other premiums or discounts) through the expected life (or when
this cannot be reliably predicted, the contractual term) of the financial
instrument to the net carrying amount of the financial asset or financial
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Energy Action 2018 Annual Report Note 2: Summary Of Significant Accounting Policies (Continued)
liability. Revisions to expected future net cash flows will necessitate an
adjustment to the carrying value with a consequential recognition of an
income or expense item in profit or loss.
i. Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market and are
subsequently measured at amortised cost. Loans and receivables are
included in current assets, where they are expected to mature within 12
months after the end of the reporting period.
ii. Available-for-sale financial assets
Available-for-sale financial assets are non-derivative financial assets
that are either not suitable to be classified into other categories of
financial assets due to their nature, or they are designated as such
by management. They comprise investments in the equity of other
entities where there is neither a fixed maturity nor fixed or determinable
payments. The only investments held by the Parent are in investments
in its subsidiaries.
As the investments are subsidiaries they are measured at cost,
when the financial asset is derecognised, the cumulative gain or loss
pertaining to that is recognised in the profit or loss.
Available-for-sale financial assets are included in non-current assets
where they are expected to be sold within 12 months after the end of
the reporting period. All other financial assets are classified as current
assets.
iii. Financial liabilities
Non-derivative financial liabilities (excluding financial guarantees) are
subsequently measured at amortised cost.
h. Impairment of Non-financial Assets
The Group assesses at each reporting date whether there is an indication
that an asset may be impaired. If any indication exists, or when annual
impairment testing for an asset is required, the Group estimates the asset’s
recoverable amount. An asset’s recoverable amount is the higher of an
asset’s or cash-generating unit’s (CGU) fair value less costs to sell and
its value in use and is determined for an individual asset, unless the asset
does not generate cash inflows that are largely independent of those from
other assets or groups of assets. When the carrying amount of an asset or
CGU exceeds its recoverable amount, the asset is considered impaired and
is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to
their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset.
In determining fair value less costs to sell, recent market transactions are
taken into account, if available. If no such transactions can be identified, an
| 64
Energy Action Limited (ACN 137 363 636)
Note 2: Summary Of Significant Accounting Policies (Continued)
appropriate valuation model is used. These calculations are corroborated
by valuation multiples, quoted share prices for publicly traded subsidiaries
or other available fair value indicators.
The Group bases its impairment calculation on detailed budgets and
forecast calculations. These budgets and forecast calculations generally
cover a period of five years. For longer periods, a long-term growth rate is
calculated and applied to project future cash flows after the fifth year.
Impairment losses of continuing operations, are recognised in the income
statement in expense categories consistent with the function of the impaired
asset.
For assets excluding goodwill, an assessment is made at each reporting
date whether there is any indication that previously recognised impairment
losses may no longer exist or may have decreased. If such indication
exists, the Group estimates the assets or CGUs recoverable amount. A
previously recognised impairment loss is reversed only if there has been
a change in the assumptions used to determine the asset’s recoverable
amount since the last impairment loss was recognised. The reversal
is limited so that the carrying amount of the asset does not exceed its
recoverable amount, nor exceed the carrying amount that would have been
determined, net of depreciation, had no impairment loss been recognised
for the asset in prior years. Such reversal is recognised in the income
statement unless the asset is carried at a revalued amount, in which case,
the reversal is treated as a revaluation increase.
The following assets have specific characteristics for impairment testing:
Goodwill
Goodwill is tested for impairment annually (as at 30 June) and when
circumstances indicate that the carrying value may be impaired.
Impairment is determined for goodwill by assessing the recoverable
amount of each CGU (or group of CGUs) to which the goodwill relates.
When the recoverable amount of the CGU is less than its carrying amount,
an impairment loss is recognised. Impairment losses relating to goodwill
cannot be reversed in future periods.
Intangible assets
Intangible assets with indefinite useful lives are tested for impairment
annually as at 30 June either individually or at the CGU level, as
appropriate, and when circumstances indicate that the carrying value may
be impaired.
Intangible assets with finite lives are amortised over the useful life and
assessed for impairment whenever there is an indication that the intangible
asset may be impaired. The amortisation period and the amortisation
method for any intangible asset with a finite useful life is reviewed at least
at each financial year end. Changes in the expected useful life or the
expected pattern of consumption of future economic benefits embodied in
the asset are accounted for by changing the amortisation period or method,
| 65
Energy Action 2018 Annual Report Note 2: Summary Of Significant Accounting Policies (Continued)
as appropriate, which is a change in accounting estimate. The amortisation
expense on intangible assets with finite lives is recognised in the Statement
of Comprehensive Income in the expense category consistent with the
function of the intangible asset.
i.
Intangible assets other than Goodwill
Software, research and development costs
Research costs are expensed as incurred. Development expenditures
including website development costs on an individual project are
recognised as an intangible asset when the Group can demonstrate:
• The technical feasibility of completing the intangible asset so that it will
be available for use or sale
Its intention to complete and its ability to use or sell the asset
•
• How the asset will generate future economic benefits
• The availability of resources to complete the asset
• The ability to measure reliably the expenditure during development
Following initial recognition of the development expenditure as an asset,
the asset is carried at cost less any accumulated impairment losses.
Amortisation of the asset begins when development is complete and the
asset is available for use. It is amortised over the period of expected future
benefit. Amortisation is expensed through the profit and loss. During the
period of development, the asset is tested for impairment annually.
The useful life of development costs is finite. It is amortised on a straight
line basis over its expected useful life. The development costs are internally
developed. The amortisation rates are as follows:
Software development costs 20%
Customer relationships
The useful life of customer relationships is finite. It is amortised on a straight
line basis over its expected useful life, which is between six and twelve
years.
j. Employee Benefits
Provision is made for the Group’s liability for employee benefits arising
from services rendered by employees to the end of the reporting period.
Employee benefits that are expected to be settled within one year have
been measured at the amounts expected to be paid when the liability
is settled. Employee benefits payable later than one year have been
measured at the present value of the estimated future cash outflows to be
made for those benefits. In determining the liability, consideration is given
to employee wages increases and the probability that the employee may
satisfy vesting requirements. Those cash flows are discounted using market
yields on high quality corporate bonds with terms to maturity that match the
expected timing of cash flows.
k. Provisions
Provisions are recognised when the Group has a legal or constructive
obligation, as a result of past events, for which it is probable that an outflow
| 66
Energy Action Limited (ACN 137 363 636) Note 2: Summary Of Significant Accounting Policies (Continued)
of economic benefits will result and that outflow can be reliably measured.
When the Group expects some or all of a provision to be reimbursed, for
example, under an insurance contract, the reimbursement is recognised as
a separate asset, but only when the reimbursement is virtually certain. The
expense relating to any provision is present in the income statement net of
any reimbursement. Provisions are measured using the best estimate of the
amounts required to settle the obligation at the end of the reporting period.
Onerous contracts
An onerous contract is considered to exist where the company has a
contract under which the unavoidable cost of meeting the contractual
obligations exceed the economic benefits estimated to be received. Present
obligations arising under onerous contracts are recognised as a provision
to the extent that the present obligation exceeds the economic benefits
estimated to be received.
Restructuring
A restructuring provision is recognised when Energy Action has developed
a detailed formal plan for the restructuring and has raised a valid
expectation in those affected that it will carry out the restructuring by
starting to implement the plan or announcing its main features to those
affected by it. Future operating losses are not provided for.
l. Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, deposits available on
demand with banks, other short-term highly liquid investments with original
maturities of three months or less, and bank overdrafts. Bank overdrafts are
reported within short-term borrowings in current liabilities in the statement
of financial position.
m. Revenue and Other Income
Revenue is measured at the fair value of the consideration received or
receivable after taking into account any trade discounts and volume rebates
allowed.
Revenue recognition relating to the provision of services is recognised in
accordance with the contract terms, which matches the commission terms.
Auction and Metrics and Embedded Network Annuity revenue is recognised
progressively over the term of the contract (typically over 1-2 years for
Auctions and 4 years for Metrics). A portion of the Auction commission is
recognised upfront with the balance recognised over the contract term.
Other Procurement and Monitoring revenue, Project and Advisory Services
(PAS) revenue is recognised in the accounting period in which services are
rendered, in accordance with the percentage of completion of the project.
Revenue from cancellation fees are recognised upon receipt.
Interest revenue is recognised using the effective interest rate method.
All revenue is stated net of the amount of goods and services tax (GST).
| 67
Energy Action 2018 Annual Report Note 2: Summary Of Significant Accounting Policies (Continued)
n. Contract Acquisition Costs
The sales commission paid to sales employees is an incremental cost
directly related to obtaining or acquiring energy supply, monitoring or PAS
agreements. Sales employees are paid a base salary and an additional
commission for successfully executed agreements. The commission paid
to sales employees is calculated as a percentage of the commission or fee
paid to EAX. This commission is capitalised and is being amortised over the
term of the customer contract.
Upon adoption of AASB15, Revenue from Contracts with Customers, the
Group will amend its accounting policy on contract acquisition costs. From
1 July 2018, the contract acquisition costs will be expensed up front at the
inception of the energy contract.
o. Foreign Currency Transaction
The Group’s consolidated financial statements are presented in Australian
dollars, which is also the Parent’s functional currency. For each entity
the Group determines the functional currency and items included in the
financial statements of each entity are measured using that functional
currency. The Group uses the direct method of consolidation and has
elected to recycle the gain or loss that arises from using this method.
i. Transactions and balances
Transactions in foreign currencies are initially recorded by the Group’s
entities at their respective functional currency spot rates at the date the
transaction first qualifies for recognition.
Monetary assets and liabilities denominated in foreign currencies
are translated at the functional currency spot rates of exchange at
the reporting date. Differences arising on settlement or translation of
monetary items are recognised in profit or loss with the exception of
monetary items that are designated as part of the hedge of the Group’s
net investment of a foreign operation. These are recognised in other
comprehensive income until the net investment is disposed of, at which
time, the cumulative amount is reclassified to profit or loss. Tax charges
and credits attributable to exchange differences on those monetary
items are also recorded in other comprehensive income.
Non-monetary items that are measured in terms of historical cost in a
foreign currency are translated using the exchange rates at the dates
of the initial transactions. Non-monetary items measured at fair value
in a foreign currency are translated using the exchange rates at the
date when the fair value is determined. The gain or loss arising on
translation of non-monetary items measured at fair value is treated
in line with the recognition of gain or loss on change in fair value of
the item (i.e., translation differences on items whose fair value gain
or loss is recognised in other comprehensive income or profit or loss
are also recognised in other comprehensive income or profit or loss,
respectively).
| 68
Energy Action Limited (ACN 137 363 636)
Note 2: Summary Of Significant Accounting Policies (Continued)
Any goodwill arising on the acquisition of a foreign operation and any
fair value adjustments to the carrying amounts of assets and liabilities
arising on the acquisition are treated as assets and liabilities of the
foreign operation and translated at the spot rate of exchange at the
reporting date.
ii. Group companies
On consolidation, the assets and liabilities of foreign operations are
translated into dollars at the rate of exchange prevailing at the reporting
date and their statements of profit or loss are translated at exchange
rates prevailing at the dates of the transactions. The exchange
differences arising on translation for consolidation are recognised in
other comprehensive income. On disposal of a foreign operation, the
component of other comprehensive income relating to that particular
foreign operation is recognised in profit or loss.
p. Work-in-progress
When the outcome of a contract can be estimated reliably, contract revenue
and contract costs are recognised as revenue and expenses respectively
by reference to the stage of completion of the contract activity at the
balance sheet date. When the outcome of a contract cannot be estimated
reliably, contract revenue is recognised to the extent of contract costs
incurred that are likely to be recoverable. When it is probable that total
contract costs will exceed total contract revenue, the expected loss is
recognised as an expense immediately.
At the end of each accounting period the long term contracts percentage
completion is assessed individually and any unbilled percentage completion
is recognised as work in progress income for the period.
q. Share based payments
The Group provides benefits to employees in the form of equity settled
share based payments, whereby employees render services in exchange
for shares or rights over shares. The fair value of rights granted to eligible
employees under the Energy Action Performance Rights & Options
Plan (PROP) is recognised as an employee benefits expense, with a
corresponding increase in the employee equity benefits reserve. The fair
value is measured at grant date and recognised over the period in which
the employee becomes entitled to the PROP grant. The fair value at grant
date is determined by an independent valuer. Details of the fair value of
share based payment plans are set out in Note 19.
At the end of each reporting period, the Group revises its estimate of the
numbers of rights expected to vest. The amount recognised as an expense
is only adjusted when the rights do no vest due to non-market related
conditions.
Interest Rate Hedging
r.
The Group uses derivative financial instruments, such as interest rate
swaps to hedge its interest rate risks. Such derivative financial instruments
| 69
Energy Action 2018 Annual Report Note 2: Summary Of Significant Accounting Policies (Continued)
are initially recognised at fair value on the date on which a derivative
contract is entered into and are subsequently remeasured at fair value.
Derivatives are carried as financial assets when the fair value is positive
and as financial liabilities when the fair value is negative.
At the inception of the hedge relationship, the Group formally designates
and documents the hedge relationship to which it wishes to apply hedge
accounting and the risk management objective and strategy for undertaking
the hedge. The documentation includes identification of the hedging
instrument, the hedge item, the nature of the risk being hedged and how the
entity will assess the effectiveness of changes in the hedging instrument’s
fair value in offsetting the exposure to changes in the hedged item’s fair
value or cash flows attributable to the hedged risk.
To protect against adverse interest rate movement, the Group has entered
into an interest rate swap transaction for up to a maximum of $5 million to
fix at an effective interest rate of 3.38% (inclusive of margin) on the first
$5 million for the balance of the Multi-Option Facility Agreement ending 1
October 2019.
At the end of each reporting period, the Group assesses the hedge
effectiveness between hedged item and hedging instrument to determine
whether the risk management objective for the hedging relationship has
changed.
The estimates and 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.
| 70
Energy Action Limited (ACN 137 363 636) NOTE 3: SIGNIFICANT
ACCOUNTING JUDGEMENTS,
ESTIMATES AND ASSUMPTIONS
Impairment of goodwill and other intangible assets
The Group assesses impairment at the end of each reporting period
by evaluating conditions and events specific to the Group that may be
indicative of impairment triggers. Recoverable amounts of relevant assets
are reassessed using value-in-use calculations which incorporate various
key assumptions.
Share-based payment transactions
The Group measures the cost of equity-settled transactions with suppliers
with reference to the fair value of the equity instruments at the date at
which they are granted. Estimating fair value for share-based payment
transactions requires determining the most appropriate valuation model,
which is dependent on the terms and conditions of the grant. This estimate
also requires determining the most appropriate inputs to the valuation
model including the expected life of the share option, volatility and dividend
yield and making assumptions about them. The assumptions and models
used for estimating fair value for share-based payment transactions are
disclosed in Note 19.
Development costs
Development costs are capitalised in accordance with the accounting
policy in Note 2(i). Initial capitalisation of costs is based on management’s
judgement that technological and economic feasibility is confirmed, usually
when a product development project has reached a defined milestone
according to an established project management model. In determining the
amounts to be capitalised, management makes assumptions regarding the
expected future cash generation of the project, discount rates to be applied
and the expected period of benefits. This includes significant investments
in the development of software. The software is being enhanced and /or
developed for use within the business, improving operational efficiency.
Provision for impairment of receivables
Collectability of trade receivables is assessed on an ongoing basis. An
allowance for doubtful debts is established when there is objective evidence
the Energy Action will not be able to collect all amounts due. Management
uses its judgement in determining the level of doubtful debt provisioning,
considering historical analysis of bade debts trends and prevailing
economic circumstances.
Business Combinations
Acquisitions of businesses are accounted for using the acquisition
method. This method requires the application of fair values for both the
consideration and the assets and liabilities acquired. The calculation of fair
value is often based on estimates and judgements including future cash
flows, revenue streams and value in use calculations.
Onerous Contracts
Energy Action’s policy for onerous contracts is stated in Note 2(k). The
application of this policy requires management to make certain estimates
and assumptions as to future events and circumstances in relation to costs
to meet contractual obligations.
| 71
Energy Action 2018 Annual Report
Note 3: Significant Accounting Judgements, Estimates and Assumptions
(Continued)
Employee benefits
Employee benefits are predominantly annual leave and long service leave.
In determining these provisions, management makes assumptions in
regards to future wage increases, and the probability that employees may
satisfy vesting requirements for long service leave
Work in progress
Energy Action performs services under contracts that last longer than one
reporting period. For these contracts, revenue and costs are recognised
on a percentage of completion basis. Percentage of completion by project
is estimated by the project relevant project manager based on their
assessment of completion versus milestones.
| 72
Energy Action Limited (ACN 137 363 636) NOTE 4: BUSINESS
COMBINATIONS
Information on prior year acquisition
4.1.
Acquisition of Energy Advice
The last instalment of deferred consideration of $3.142m was made in
FY17. The deferred expense recognised in the last 12 month period to
30 June 2018 was Nil (FY17 $392,811). All deferred payments have been
fully expensed and no expense associated with this transaction has been
recognised in FY18.
4.2.
Total amounts of deferred consideration expense and
acquisition expense
Consolidated Group
Deferred consideration
Energy Advice
Total deferred consideration expense
2018
$
-
-
2017
$
392,811
392,811
| 73
Energy Action 2018 Annual Report
NOTE 5: SEGMENT
INFORMATION
Identification of reportable segments
The Group has identified one reportable operating segment, which
provides electricity and gas procurement services, Contract Management
& Environmental Reporting (CMER) services, and sustainability services in
Australia. The types of services provided are detailed below.
Types of Services
Energy Action’s principal activities are providing integrated energy
management services to a diverse base of commercial and industrial
customers. Its core services are:
• Energy procurement: specialised buying and negotiation strategies,
utilising reverse auctions, bespoke tender models and advising on
structured products;
• CMER: manage client energy contracts, including account
management, liaison with their retailer, validating their bill, ensuring the
right tariff and helping them to understand how they are using energy;
and,
• Energy efficiency and sustainability; Projects and Advisory Services
(PAS).
The Australian Energy Exchange (AEX) electricity and gas procurement
service is an online, real time and reverse auction platform for business
customers which provides the opportunity to competitively obtain energy
supply contracts from various energy providers.
Energy Metrics is an independent CMER platform which transforms energy
data into usable business intelligence that is easy to understand and
essential for improving overall business efficiency.
The types of CMER services include energy consumption monitoring and
costing, energy emissions monitoring, contract administration, detailed
technical reporting, desktop energy efficiency review and additional
reporting and monitoring.
Projects & Advisory Services (PAS) is the energy efficiency and
sustainability partnering service, which aims to improve and manage on site
level of energy efficiency, through the use of innovative energy efficiency
and energy management methodologies. The various services include
metering intelligence, sub metering, carbon footprint measurement and
reduction advice, Australian Standard Level 2 compliance energy audits,
project feasibility studies and supporting onsite power generation projects
such as co-generation and tri-generation units from prefeasibility through to
commissioning.
In the table below revenue is analysed by service line, however overall the
performance of the business is monitored as one.
Accounting Policies and inter-segment transaction
The accounting policies used by the Group in the reporting segment
internally are the same as those contained in Note 2 to the accounts.
| 74
Energy Action Limited (ACN 137 363 636)
Note 5: Segment Information (Continued)
Revenue by customer
There is no revenue with a single external customer that contributes more
than 10% of total revenue.
Year ended 30 June 2018
Procurement
$
Monitoring
$
Project Advisory
Services
$
Total
$
Sales to external customers
9,279,290
15,145,890
6,637,696
31,062,876
9,279,290
15,145,890
6,637,696
31,062,876
Year ended 30 June 2017
Procurement
$
Monitoring
$
Project Advisory
Services
$
Total
$
Sales to external customers
8,079,593
16,695,501
7,788,714
32,563,808
8,079,593
16,695,501
7,788,714
32,563,808
| 75
Energy Action 2018 Annual Report NOTE 6: REVENUE, OTHER
INCOME AND EXPENSES
Revenue
Sales revenue
Other income
Total Revenue
Consolidated Group
2018
$
31,062,876
110,948
31,173,824
2017
$
32,563,808
393,295
32,957,103
| 76
Energy Action Limited (ACN 137 363 636) Note 6: Revenue, Other Income and Expenses (continued)
Consolidated Group
Note
Employee benefits
Salaries
Commissions
Superannuation
Share based payment expense
Other
Total Employment benefits
Administrative costs
Accounting, audit and tax fees
Advertising
Legal and professional fees
Telephone and internet
Computer maintenance costs
Bad debt expense
Recruitment costs
Travel costs
Rental expense
Other expenses
Total Administrative costs
Depreciation and amortisation
Depreciation
Amortisation - Software
Amortisation - Customer relationships
Total Depreciation & Amortisation
Significant Item Costs
Deferred payments for acquisitions
4
Restructure costs
Total Significant Items
Financing costs / (income)
Interest income
Interest expenses
Borrowing costs
Total Financing costs / (income)
2018
$
11,332,295
820,501
1,282,982
82,457
1,130,525
14,648,760
198,235
470,536
92,804
204,219
1,763,038
100,768
112,989
313,028
1,248,300
1,851,018
6,354,935
375,767
920,230
239,083
1,535,080
-
-
-
(8,539)
452,070
86,501
530,032
2017
$
12,357,351
805,863
1,392,122
(203,230)
1,313,171
15,665,277
203,993
239,803
132,353
500,862
945,571
141,074
238,246
675,694
1,176,810
1,473,992
5,728,398
392,007
879,120
239,083
1,510,210
392,811
507,725
900,536
(8,557)
452,652
95,283
539,378
| 77
Energy Action 2018 Annual Report NOTE 7: INCOME TAX EXPENSE
a. The components of tax expense comprise:
Current tax
Current tax – under/(over) prior year
Deferred tax
Note
16
b. The prima facie tax on profit from ordinary
activities before income tax is reconciled to
the income tax as follows:
Prima facie tax (benefit) / payable on profit /
(loss) from ordinary activities before income
tax at 30% (2017: 30%)
Add Tax effect of :
Permanent Differences
• Deferred consideration
• Share based payments/trust
• Other permanent differences
• Accounting R&D
• Prior year adjustments
Less Tax effect of :
Deductible Expense
• R&D Benefit
• Unbooked tax losses
Income tax attributable to entity
Consolidated Group
2018
$
1,151,405
(56,564)
(44,706)
1,050,134
2017
$
1,050,787
18,204
(160,227)
908,764
1,091,547
804,520
-
(15,400)
25,557
-
(56,564)
-
4,994
1,050,134
117,845
(60,969)
81,815
90,165
18,204
(120,220)
(22,596)
908,764
The applicable weighted average effective
28.86%
33.89%
tax rates are as follows:
Energy Action Limited and its 100% owned subsidiaries formed a tax consolidated group with effect from 3 March 2009. Energy
Action Limited is the head entity of the tax consolidated group.
| 78
Energy Action Limited (ACN 137 363 636) NOTE 8: EARNINGS PER SHARE
Basic earnings per share amounts are calculated by dividing net profit for
the year attributable to ordinary equity holders of the parent by the weighted
average number of ordinary shares outstanding during the year.
Diluted earnings per share amounts are calculated by dividing the net
profit attributable to ordinary equity holders of the parent (after adjusting
for interest on the convertible preference shares) by the weighted average
number of ordinary shares outstanding during the year plus the weighted
average number of ordinary shares that would be issued on conversion of
all dilutive potential ordinary shares into ordinary shares.
The following reflects the income and share data used in the basic diluted
earnings per share computations:
2018
$
2017
$
Net profit / (loss) attributable to ordinary equity holders of
2,588,357
1,772,970
the parent from continuing operations
Net profit / (loss) attributable to ordinary equity holders of
2,588,357
1,772,970
the parent for basic earnings
Net profit / (loss) attributable to ordinary equity holders of
the parent adjusted for the effect of dilutions
2,588,357
1,772,970
2018
No.
2017
No.
Weighted average number of ordinary shares for basic
25,954,117
25,954,117
earnings per share
Effect of dilution:
Share options and performance rights
Weighted average number of ordinary shares adjusted for
the effect of dilution
Basic earnings / (loss) per share (Statutory)
Diluted Earnings / (loss) per share (Statutory)
707,714
26,661,831
9.97
9.71
268,188
26,222,305
6.83
6.76
There have been no other transactions involving ordinary shares or
potential ordinary shares between the reporting date and the date of
completion of these financial statements.
Under the accounting standards, losses are not diluted. The dilution
calculation has been performed to enable users of these financial
statements to determine the impact of the dilution on both Statutory and
Operating Profit per share. Refer also to the Directors’ Report for further
information on the calculation of Operating Profit.
| 79
Energy Action 2018 Annual Report NOTE 9: DIVIDENDS
Consolidated Group
Dividends paid:
Final 2016 franked dividend of 3.52 cents per share
Final 2017 franked dividend of 1.40 cents per share
Note
2018
$
-
363,358
363,358
a. Proposed final 2018 franked dividend of 4.00 cents
26
1,038,165
2017
$
913,585
-
913,585
363,358
per share
(Final 2017 franked dividend of 1.40 cents per share)
b. Balance of franking account at year end adjusted for
franking credits arising from:
• Opening balance
• Opening balance adjustment
• Payment of provision for income tax
• Dividends recognised as receivables and franking
debits arising from payment of proposed dividends,
and franking credits that may be prevented from
distribution in subsequent financial years
6,834,935
-
1,150,702
(155,725)
6,091,677
57,752
1,077,041
(391,536)
7,829,911
6,834,935
Subsequent to year end, the franking account would be
(444,928)
(155,725)
reduced by the proposed dividend reflected per (a) as
follows:
7,610,784
6,679,210
Tax rates
The tax rate at which paid dividends have been franked is 30% (2017:
30%). Dividends proposed will be franked at the rate of 30% (2017: 30%).
| 80
Energy Action Limited (ACN 137 363 636) NOTE 10: CASH AND CASH
EQUIVALENTS
Cash at floating rates*
Restricted cash**
Total Cash
Consolidated Group
2018
$
1,016,005
155,283
1,171,288
2017
$
1,954,669
151,111
2,105,780
*Cash at bank earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying
periods of between one day and three months, depending on the immediate cash requirements of the Group, and earn interest
at the respective short-term deposit rates.
**Refers to cash held in the Energy Action Employee Share Trust, an entity used to manage employee equity plans as well as
cash bank guarantee held by the bank.
| 81
Energy Action 2018 Annual Report 2017
$
NOTE 11: TRADE AND OTHER
RECEIVABLES
CURRENT
Trade receivables
Provision for impairment
Total current trade receivables
NON-CURRENT
Bonds and security deposits
Consolidated Group
2018
$
4,153,454
(314,868)
3,838,586
2017
$
6,208,932
(216,519)
5,992,413
91,358
91,358
a. Provision for Impairment of Receivables
Current trade and term receivables are non-interest bearing and generally
on 30 to 90-day terms.
Credit risk
The Group has no significant concentration of credit risk with respect to any
single counterparty or group of counterparties other than those receivables
specifically provided for and mentioned within Note 11. The class of assets
described as “trade and other receivables” is considered to be the main
source of credit risk related to the Group.
The following table details the Group’s trade and other receivables exposed
to credit risk (prior to collateral and other credit enhancements) with ageing
analysis and impairment provided for thereon. Amounts are considered
as “past due” when the debt has not been settled, with the terms and
conditions agreed between the Group and the customer or counterparty to
the transaction. Receivables that are past due are assessed for impairment
by ascertaining solvency of the debtors and are provided for where there
are specific circumstances indicating that the debt may not be fully repaid to
the Group.
The balances of receivables including overdue are considered to be fully
recoverable. Customers have trading terms varying between 30 - 90 days.
| 82
Energy Action Limited (ACN 137 363 636)
Note 11: Trade and Other Receivables (Continued)
Past due but not impaired (days overdue)
< 30
31–60
61–90
91+
Trade Terms
Within Initial
Net
Amount
Past
due and
Impaired
$
$
$
$
$
$
$
2018
Trade and term receivables
2017
Trade and term receivables
3,838,586
314,868
783,548
60,400
8,902
331,344
2,969,260
5,992,413
216,519
1,196,571
508,372
289,443
430,957
3,783,589
Neither the Group nor parent entity holds any financial assets with terms
that have been renegotiated, which would otherwise be past due or
impaired.
b. Collateral Held as Security
Current trade and term receivables are non-interest bearing and generally
on 30 to 90-day terms.
No collateral or security is held by the company for loans or receivables.
The accompanying notes form part of these financial statements
| 83
Energy Action 2018 Annual Report
NOTE 12: PROPERTY PLANT
AND EQUIPMENT
Consolidated Group
2018
$
2017
$
Note
Computer equipment:
At cost
Accumulated depreciation
Furniture and fittings:
At cost
Accumulated depreciation
Total Plant and Equipment
1,996,467
1,827,612
(1,779,165)
(1,626,109)
217,302
201,503
1,640,552
1,637,712
(1,327,964)
(1,094,942)
312,588
529,890
542,770
744,273
Movements in Carrying Amounts
a.
Movement in the carrying amounts for each class of property, plant and
equipment between the beginning and the end of the current financial year
Computer
Equipment
$
Furniture and
Fittings
$
Total
$
Consolidated Group:
Balance at 1 July 2016
232,171
569,066
801,237
Additions
Assets disposed
115,644
222,160
337,804
(2,761)
-
(2,761)
Depreciation expense
(143,551)
(248,456)
(392,007)
Balance at 30 June 2017
201,503
542,770
744,273
Additions
Assets disposed
174,261
2,840
177,101
(7,347)
(8,370)
(15,717)
Depreciation expense
(151,115)
(224,652)
(375,767)
Balance at 30 June 2018
217,302
312,588
529,890
| 84
Energy Action Limited (ACN 137 363 636) NOTE 13: INTANGIBLE ASSETS
Goodwill
Customer relationships
Accumulated amortisation
Net carrying value – customer
relationships
Software development costs
Accumulated amortisation
Net carrying value – software
development costs
Total intangibles
Consolidated Group:
Year ended 30 June 2016
Consolidated Group
2018
$
2017
$
9,944,796
9,944,796
2,438,000
2,438,000
(1,270,910)
(1,031,826)
1,167,090
1,406,174
9,219,150
7,654,189
(5,260,037)
(4,342,185)
3,959,113
3,312,004
15,070,999
14,662,974
Goodwill
$
Customer
relationships
$
Software
Development costs
$
Total
Intangibles
$
Balance at the beginning of year
9,944,796
1,645,257
2,805,478
14,395,531
Internal development
Amortisation charge
-
-
-
1,385,646
1,385,646
(239,083)
(879,120)
(1,118,203)
Closing value at 30 June 2017
9,944,796
1,406,174
3,312,004
14,662,974
Year ended 30 June 2017
Balance at the beginning of year
9,944,796
1,406,174
3,312,004
14,662,974
Internal development
Disposal
Amortisation charge
-
-
-
-
-
1,567,339
1,567,339
(2,378)
(2,378)
(239,084)
(917,852)
(1,156,936)
Closing value at 30 June 2018
9,944,796
1,167,090
3,959,113
15,070,999
| 85
Energy Action 2018 Annual Report Note 13: Intangible Assets (continued)
Intangible assets, excluding goodwill, have finite useful lives. The
current amortisation charges for intangible assets are included
under depreciation and amortisation expense in the statement of
comprehensive income.
Refer to Note 2 for capitalisation policy.
13 (a) Impairment testing of goodwill
For the year ended 30 June 2018, Goodwill acquired through business
combinations with indefinite lives has been allocated to one Cash
Generating Unit (CGU).
Energy Action has one reportable operating segment, being ‘the
provision of electricity procurement services, CMER services, and project
advisory services in Australia’. Therefore goodwill will be allocated across
Energy Action’s sole operating segment.
The recoverable amount of Goodwill has been determined on a value in
use calculation using cash flow projections based on the Board approved
budget for the year ended 30 June 2019 extrapolated for 4 years.
The discount rate applied to cash flow projections is a pre-tax rate
of 19.6% (post tax 13.7%) and the cash flows beyond the approved
budgets are extrapolated using 1% growth rate and terminal growth rate
of nil.
| 86
Energy Action Limited (ACN 137 363 636)
NOTE 14: OTHER ASSESTS
Consolidated Group
CURRENT
Prepayments
Work in progress
Contract acquisition costs
NON CURRENT
Contract acquisition costs
2018
$
937,364
865,241
571,439
2,374,044
339,389
339,389
2017
$
1,047,072
593,814
580,635
2,221,521
549,478
549,478
Contract acquisition costs represent sales commissions paid to sales
employees. Sales commissions are calculated and paid on a quarterly basis
to sales employees. These costs are recognised progressively in line with
revenue from procurement and contract management services, typically
over two to five years.
| 87
Energy Action 2018 Annual Report NOTE 15: TRADE AND
OTHER PAYABLES
CURRENT
Unsecured liabilities:
Trade payables
Other payables and accrued expenses
a. Financial liabilities at amortised
cost classified as trade and other
payables
Trade and other payables:
• Total current
Consolidated Group
2018
$
2017
$
Note
559,164
291,926
1,368,534
2,425,116
1,927,698
2,717,042
1,927,698
2,717,042
Financial liabilities as trade and other
23
1,927,698
2,717,042
payables
Terms and conditions of the above financial liabilities:
•
• Other payables are non-interest bearing and have an average term of six months
Trade payables are non-interest bearing and are normally settled on 30 or 60 day terms
| 88
Energy Action Limited (ACN 137 363 636)
NOTE 16: TAX
CURRENT
Income Tax Asset
Consolidated Group
2018
$
56,738
2017
$
877
Opening
Balance
$
Charged to
Income
$
Charged directly
to Equity
$
Closing
Balance
$
Consolidated Group:
Deferred Tax 2018
Provisions
Accruals
Fixed assets
Customer relationships
Prepaid commissions
Work in progress
Share Based Payments
Deferred Tax 2017
Provisions
Accruals
Fixed assets
Customer relationships
Prepaid commissions
Work in progress
Share Based Payments
590,087
214,869
(257,607)
(421,852)
(341,232)
(176,498)
19,894
(372,339)
574,398
270,218
(322,755)
(493,577)
(351,444)
(229,565)
20,159
(64,725)
(81,696)
138,932
71,725
67,490
(83,056)
(3,962)
44,707
15,689
(55,349)
65,148
71,725
10,212
53,067
(265)
(532,566)
160,227
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
525,362
133,173
(118,675)
(350,127)
(273,742)
(259,554)
15,932
(327,632)
590,087
214,869
(257,607)
(421,852)
(341,232)
(176,498)
19,894
(372,339)
| 89
Energy Action 2018 Annual Report NOTE 17: PROVISIONS AND
OTHER LIABILITIES
Analysis of total provisions
CURRENT
Annual leave
Long service leave
NON-CURRENT
Long service leave
Consolidated Group
2018
$
758,605
242,232
2017
$
923,448
450,698
1,000,837
1,374,146
354,256
354,256
320,180
320,180
Provision for Long-term Employee Benefits
A provision has been recognised for employee entitlements relating to
long service leave. In calculating the present value of future cash flows in
respect of long service leave, the probability of long service leave being
taken is based on historical data. The measurement and recognition criteria
relating to employee benefits have been included in Note 2.
| 90
Energy Action Limited (ACN 137 363 636)
NOTE 18: LOANS AND
BORROWINGS
Multi-Option Facility Agreement
Less capitalised debt
establishment fees
Consolidated Group
2018
$
5,100,000
(102,775)
2017
$
9,200,000
(184,995)
4,997,225
9,015,005
During the year ending 30 June 2015, Energy Action entered into $12
million multi-option secured debt facility, expiring October 2019. The
facility has a five year term and is available to fund future purchase price
instalments of the Energy Advice acquisition and for general corporate
purposes. Funds can be utilised in the form of loans, bank guarantees and
letters of credit.
Funds advanced under the facility are secured by a charge over the assets
of the Group, and includes Interest Cover and Gearing ratios.
Debt establishment fees are capitalised and amortised over the life of the
loan facility.
Utilization of the facility is summarised in the following table:
Financing facilities
Consolidated Group
2018
$
2017
$
Loan facilities
12,000,000
12,000,000
Amounts utilised
Borrowings
Bank guarantees
Total amounts utilised
Total amounts unutilised
5,100,000
189,617
5,289,617
6,710,383
9,200,000
128,620
9,328,620
2,671,380
| 91
Energy Action 2018 Annual Report NOTE 19: ISSUED CAPITAL
AND RESERVES
Fully paid ordinary shares
a. Ordinary Shares (number)
At the beginning of the reporting
period:
Movement in the year:
Consolidated Group
2018
$
6,537,906
6,537,906
2017
$
6,537,906
6,537,906
Consolidated Group
2018
No.
2017
No.
25,954,117
25,954,117
-
-
At the end of the reporting period
25,954,117
25,954,117
b. Ordinary Shares ($)
At the beginning of the reporting
period:
Movement in the year:
Consolidated Group
2018
No.
2017
No.
6,537,906
6,537,906
-
-
At the end of the reporting period
6,537,906
6,537,906
Ordinary shares participate in dividends and the proceeds on winding-up of
the parent entity in proportion to the number of shares held.
At the shareholders’ meetings each ordinary share is entitled to one vote
when a poll is called, otherwise each shareholder has one vote on a show
of hands.
c. Share based payments reserve
Share-based payment transactions:
The share-based payment reserve is used to recognise the value of equity-
settled share-based payment provided to employees.
| 92
Energy Action Limited (ACN 137 363 636) Note 19: Issued Capital and Reserves (Continued)
On 12 March 2018, 592,707 performance rights were granted to senior
executives and certain other employees under the Performance Rights
& Options Plan (PROP). Vesting only occurs when and if service and
performance conditions are met.
The service condition is such that the employee must be employed by
Energy Action at the time any performance rights vest.
The Performance Conditions comprise two tests, the Earnings per Share
(EPS) and Total Shareholder Return (TSR) tests, which are described
below.
The number of Performance Rights allocated to an individual which may
vest will be determined by reference to:
•
•
an Earnings Per Share (EPS) component achieved by comparing the
Company’s Actual Operating EPS for the year ending on the relevant
test date to the Company’s Budget Operating EPS for the year ending
on the relevant test date (Target 1); and
a Total Shareholder Return (TSR) component achieved by comparing
the Company’s total compounded return to the total compounded return
of the S&P/ASX300 (Index) for the year ending on the relevant test date
(Target 2).
75% of Performance Rights
Earnings Per Share Target (EPS)
(“Target 1 Entitlement”)
25% of Performance Rights
Total Shareholder Return (TSR)
(“Target 2 Entitlement”)
Target 1
Available Performance
Rights
Target 2
Available Performance
Rights
Actual Operating EPS
LESS THAN 94.9 % of
Budget Operating EPS
Actual Operating EPS
EQUALS 95% of Budget
Operating EPS
Nil
50%
Actual Operating EPS
EQUALS (OR GREATER
THAN) Budget Operating
EPS
Vesting will occur on a
linear basis between 50%
and up to a maximum of
100%
Company Total
Compounded TSR LESS
THAN Total Compounded
TSR of the Index
Company Total
Compounded TSR
EQUALS Total
Compounded TSR of the
Index
Company Total
Compounded TSR
BETWEEN EQUAL TO
AND 1.10 TIMES Total
Compounded TSR of the
Index
0%
50%
Vesting will occur on a
linear basis between 50%
and 100%
Company Total
Compounded TSR 1.10
TIMES Total Compounded
TSR of the Index
100%
| 93
Energy Action 2018 Annual Report Note 19: Issued Capital and Reserves (Continued)
Awards have been granted with a 3 year vesting period ending 30 June
2020. The details and fair values of performance rights granted during the
year was as follows:
3 Year
EPS $
0.6693
TSR $
0.3244
A Monte Carlo simulation valuation technique has been adopted to value
the performance rights at grant date. The fair value of performance rights
granted during the year ended 30 June 2018 was estimated on the date of
grant using the following assumptions:
Dividends
Expected volatility (%)
Risk-free interest rate (%)
Share price ($)
FY18 1.40 cents, 10% pa growth thereafter
50
1.98% (2 year), 2.08% (3 year)
0.685
For the year ended 30 June 2018, the Group has recognised $82,457 of
share-based payment expense in the statement of comprehensive income
(30 June 2017: ($203,230)). Share based payments expense is net of
reversals due to non-achievement of targets (EPS targets) and forfeitures in
the case of terminated employees.
d. Foreign currency translation reserve
Exchange differences arising on translation of the foreign controlled entity
are taken to the foreign currency translation reserve, as described in Note
2. The reserve is recognised in profit or loss when the net investment is
disposed of.
e. Capital Management
The Group’s capital includes ordinary share capital. Management controls
the capital of the Group in order to maintain a prudent debt to equity ratio,
provide the shareholders with adequate returns and ensure that the Group
can fund its operations and continue as a going concern. This includes
adjusting dividend payments to shareholders and equity attributable to the
entity holders of the parent.
There is an externally imposed capital requirement of $50,000 to be held in
cash, as a requirement of holding an Australian Financial Services Licence.
The way management controls Group’s capital is by assessing the Group’s
financial risks and adjusting its capital structure in response to changes in
those risks and in the market. The responses include the management of
debt levels, distributions to shareholders and share issues.
Interest Rate Hedging Reserve
f.
Exposure to interest rate risk arises on financial assets recognised at
reporting date whereby a future change in interest rates will affect future
| 94
Energy Action Limited (ACN 137 363 636)
Note 19: Issued Capital and Reserves (Continued)
cash flows or the fair value of fixed rate financial instruments. The Group’s
exposure to the risk of changes in market interest rates relates primarily
to the Group’s borrowings balances with floating interest rates. Interest
rate risk is managed using a mix of terms on the bank borrowings and the
interest rate swap hedging instrument.
To protect against adverse interest rate movement, the Group has entered
into an interest rate swap transaction for up to a maximum of $5 million
to fix at an effective interest rate of 3.38% on the first $5 million for the
balance of the Multi-Option Facility Agreement ending 1 October 2019.
At the end of each reporting period, the Group assesses the hedge
effectiveness between hedged item and hedging instrument to determine
whether the risk management objective for the hedging relationship has
changed as described in note 2.
There have been no changes in the strategy adopted by management to
control the capital of the Group since the prior year. The Group includes
within net debt, trade and other payables including provision for income
tax, less cash and cash equivalents. Bank guarantees are excluded from
this calculation. The gearing ratios for the year ended 30 June 2018 and 30
June 2017 are as follows:
Note
18
10
Consolidated Group
2018
No.
2017
No.
4,997,225
9,015,005
(1,171,288)
(2,105,780)
3,825,937
6,909,225
14,864,644
12,569,962
26%
55%
Bank loans
Less cash and cash equivalents
Net debt / (cash)
Total Equity
Gearing percentage (%)
Gearing as measured by total net debt divided by total equity was 26% as at 30 June 2018 and 55% at 30 June 2017
| 95
Energy Action 2018 Annual Report NOTE 20: CAPITAL AND
LEASING COMMITMENTS
a. Operating Lease Commitments
Non-cancellable property
operating leases contracted for
but not recognised in the financial
statements
Payable – minimum lease
payments:
•
•
not later than 12 months
between 12 months and 5
years
Parramatta office
Sydney office
Brisbane office
Melbourne office
Note
Consolidated Group
2018
No.
2017
No.
788,726
1,467,507
870,072
928,874
2,256,233
1,798,946
The property leases are non-cancellable leases with a maximum 5 year
term with rent payable monthly in advance. Contingent rental provisions
within the lease agreement require the minimum lease payments shall
be increased by the lower of CPI or between 4-5% per annum. An option
exists to renew a number of leases at the end of the term for a maximum
of five years.
b. Bank Guarantees
The Group acquired Energy Advice in prior period and the acquisition
included deferred consideration arrangement. The final deferred
consideration payment of $3,142,000 was made to the Energy Advice
vendors on 18 August 2016. The bank guarantee related to this payment
has subsequently been cancelled.
The Group has provided the following bank guarantees at 30 June 2018
for regional offices:
Consolidated Group
Note
2018
No.
97,297
126,210
31,323
19,250
274,080
2017
No.
97,297
126,210
31,323
19,250
274,080
| 96
Energy Action Limited (ACN 137 363 636) NOTE 21: CASH FLOW
INFORMATION
a. Reconciliation of Cash Flow from Operations with Profit after
Income Tax
Profit after income tax
• Depreciation and amortisation
• Share based payments expense
• Other non-cash items
Changes in assets and liabilities, net of the effects of
purchase and disposal of subsidiaries:
Consolidated Group
2018
No.
2,588,357
1,535,080
55,458
-
2017
No.
1,772,970
1,510,210
(203,230)
57
(increase)/decrease in trade and term receivables
2,153,828
(1,028,492)
•
•
•
•
•
(increase)/decrease in prepayments and other assets
increase/(decrease) in trade payables and accruals
increase/(decrease) in deferred taxes
increase/(decrease) in provisions
Cash flow from operations
139,786
(780,117)
(100,567)
(334,236)
(434,196)
(2,897,659)
(160,227)
24,459
5,257,589
(1,416,108)
b. Reconciliation of liabilities arising from financing activities
2017
$
Cashflow
$
Acquisition
$
Foreign
exchange
movement
$
Fair value
changes
$
2018
$
Long term borrowings
9,200,000
(4,100,000)
Total liability from financing
activities
9,200,000
(4,100,000)
-
-
-
-
-
-
5,100,000
5,100,000
| 97
Energy Action 2018 Annual Report NOTE 22: RELATED PARTY
DISCLOSURES
The financial statements include the financial statements of the Group and
the subsidiaries listed in the following table:
a. Controlled Entities Consolidated
Country of Incorporation
Percentage Owned (%)*
Subsidiaries of Energy Action Limited:
Eactive Consulting Pty Limited
Energy Action (Australia) Pty Limited
EAIP Pty Limited
ACN 087 790 770 Pty Limited
Exergy Holdings Pty Limited
Exergy Australia Pty Limited
Exergy New Zealand Limited
Energy Advice Pty Ltd
* Percentage of voting power is in proportion to ownership
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
Australia
2018
100%
100%
100%
100%
100%
100%
100%
100%
2017
100%
100%
100%
100%
100%
100%
100%
100%
b. The Group’s main related parties are as follows:
i. Key management personnel: Any person(s) having authority
and responsibility for planning, directing and controlling the
activities of the entity, directly or indirectly, including any director
(whether executive or otherwise) of that entity, are considered key
management personnel.
For details of disclosures relating to key management personnel,
refer to the Remuneration Report contained in the Director’s Report.
ii. Other related parties:
Other related parties include entities controlled by the ultimate parent
entity and entities over which key management personnel exercise
significant influence.
The Group procures recruitment services on an arms-length basis
from Derwent Executive. Murray Bleach is a member of the Advisory
Board of Derwent Executive. $22,000 was paid in FY18 (FY17
$84,150)
c. Compensation of Key Management Personnel (KMP)
Refer to the Remuneration Report contained in the Director’s Report for
details of the remuneration paid or payable to each member of the Group’s
key management personnel for the year ended 30 June 2018.
The totals of remuneration paid to KMP of the Group during the year are as
follows:
| 98
Energy Action Limited (ACN 137 363 636)
Note 22: Related Party Disclosures (Continued)
Consolidated Group
2018
No.
1,008,561
-
5,709
67,425
2017
No.
892,118
165,000
18,281
61,047
1,081,695
1,136,446
Short-term employee benefits
Long-term employee benefits
Share based payments
Post-employment benefits –
superannuation
Total Compensation
The amounts disclosed in the table are the amounts recognised as an expense during the reporting period relating to KMP.
d. The ultimate parent
Energy Action Limited is the ultimate parent based and listed in Australia.
| 99
Energy Action 2018 Annual Report NOTE 23: FINANCIAL RISK
MANAGEMENT
The Group’s principal financial liabilities comprise borrowings, trade and
other payables. The main purpose of these financial liabilities is to finance the
Group’s operations. The Group has trade and other receivables, and cash
and short-term deposits that arrive directly from its operations.
The totals for each category of financial instruments, measured in
accordance with AASB 139 as detailed in the accounting policies to these
financial statements, are as follows:
Consolidated Group
Note
2018
No.
2017
No.
Financial assets
Cash and cash equivalents, including restricted cash
Receivables
Bond and security deposits
Tax Receivable
Total financial assets
Financial liabilities
Loans and Borrowings
Trade & Other payables
Total financial liabilities
10
11
11
16
18
15
1,171,288
3,838,586
91,358
56,738
2,105,780
5,992,413
91,358
877
5,157,970
8,190,428
4,997,225
1,927,698
6,924,923
9,015,005
2,717,042
11,732,047
Financial Risk Management Policies
The Audit and Risk Management Committee (ARMC) has been delegated
responsibility by the Board of Directors for, amongst other matters, monitoring
and managing financial risk exposures of the Group. The ARMC monitors
the Group’s financial risk management policies and exposures and approves
financial transactions within the scope of its authority. It also reviews the
effectiveness of internal controls relating to financing risk and interest rate
risk. The ARMC meets at least three times a year and minutes of the ARMC
are reviewed by the Board.
The ARMC’s overall risk management strategy seeks to assist the
consolidated group in meeting its financial targets, while minimising potential
adverse effects on financial performance. Its functions include the review of
the credit risk policies and future cash flow requirements.
Specific Financial Risk Exposures and Management
The main risks the Group is exposed to through its financial instruments are
credit risk, liquidity risk and market risk consisting of interest rate risk.
| 100
Energy Action Limited (ACN 137 363 636) Note 23: Financial Risk Management (Continued)
a. Credit Risk
Credit risk is the risk that a counterparty will not meet its obligations under
a financial instrument or customer contract, leading to a financial loss. The
Group is exposed to credit risk from its operating activities (primarily for trade
receivables) and from its financing activities, including deposits with banks
and financial institutions, and other financial instruments.
Credit risk is managed through the maintenance of procedures (such
procedures include the utilisation of systems for the approval, granting
and renewal of credit limits, regular monitoring of exposures against such
limits and monitoring of the financial stability of significant customers
and counterparties), ensuring to the extent possible, that customers
and counterparties to transactions are of sound credit worthiness. Such
monitoring is used in assessing receivables for impairment. Credit terms are
generally 30 to 90 days from the invoice date.
Risk is also minimised through investing surplus funds in financial institutions
that maintain a high credit rating. The institutions selected are determined by
the Board.
The maximum exposure to credit risk by class of recognised financial assets
at the end of the reporting period excluding the value of any collateral or
other security held, is equivalent to the carrying value and classification of
those financial assets (net of any provisions) as presented in the statement of
financial position.
The Group has no significant concentrations of credit risk with any single
counterparty or group of counterparties. Details with respect to credit risk of
trade and other receivables are provided in Note 11.
Trade and other receivables that are neither past due nor impaired are
considered to be of high credit quality. Aggregates of such amounts are as
detailed in Note 11.
b. Liquidity risk
Liquidity risk arises from the possibility that the Group might encounter
difficulty in settling its debts or otherwise meeting its obligations related
to financial liabilities. The Group manages this risk through the following
mechanisms:
•
preparing forward looking cash flow analysis in relation to its operational,
investing and financing activities;
obtaining funding from a variety of sources;
•
• maintaining a reputable credit profile;
• managing credit risk related to financial assets;
•
•
only investing surplus cash with major financial institutions; and
comparing the maturity profile of financial liabilities with the realisation
profile of financial assets
| 101
Energy Action 2018 Annual Report Note 23: Financial Risk Management (Continued)
Within 1 Year
1 to 5 Years
Over 5 Years
Total
2018
$
2017
$
2018
$
2017
$
2018
$
2017
$
2018
$
2017
$
-
-
4,997,225
9,015,005
1,927,698
2,717,042
-
-
1,927,698
2,717,042
4,997,225
9,015,005
1,016,005
1,954,669
155,283
151,111
3,838,586
5,992,413
-
-
-
-
-
-
-
-
91,358
91,358
56,738
877
-
-
5,066,612
8,099,070
91,358
91,358
3,138,914
5,382,028
(4,905,867)
(8,923,647)
-
-
-
-
-
-
-
-
-
-
-
-
4,997,225
9,015,005
1,927,698
2,717,042
-
6,924,923
11,732,047
-
-
-
-
-
-
-
1,016,005
2,100,187
155,283
5,593
3,838,586
5,992,413
91,358
91,358
56,738
877
5,157,970
8,190,428
(1,766,953)
(3,541,619)
Financial liabilities
due for payment
Bank loans
Trade and other
payables (excluding
est. annual leave)
Total expected
outflows
Financial assets —
cash flows realisable
Cash and cash
equivalents
Restricted cash
Trade, term and loans
receivables
Bonds and security
deposits
Tax asset
Total anticipated
inflows
Net (outflow)/inflow on
financial instruments
c. Interest rate risk
Interest rate risk arises as a result of changes in market interest rates and
will affect the future cash flows. The Group manages its interest rate risk by
having a variety of borrowing terms from 30 days to 180 days and hedging $5
million of loan amounts via an interest rate swap. Cash and cash equivalents
are all on short term deposits. As at 30 June 2018, the Group had bank loans
of $5.1 million comprising of $0.1 million on 30 day terms at 3.24% and $5.0
million on 3.38% fixed interest for 1.25 years (Multi-option Facility Agreement
ending on 1 October 2019). At the end of each reporting period, the Group
assesses the hedge effectiveness between hedged item and hedging
instrument to determine whether the risk management objective for the
hedging relationship has changed. The interest rate hedge effectiveness was
assessed as at 30 June 2018, $8k was recognised in interest rate reserve
in the balance sheet (30 June 2017: $24k). As at 30 June 2017, the Group
had bank loans of $9.2 million comprising of $6.2 million on 30 day terms at
2.87% and $3.0 million on 3.38% fixed interest for 2.25 years.
| 102
Energy Action Limited (ACN 137 363 636)
Note 23: Financial Risk Management (Continued)
d. Market risk
Market risk is the risk that the fair value of future cash flows of a financial
instrument will fluctuate because of changes in market prices. Market prices
for Energy Action Limited comprise interest rate risk. Financial instruments
affected by interest risk include cash at bank.
i.
Interest Rate Risk
Exposure to interest rate risk arises on financial assets recognised
at reporting date whereby a future change in interest rates will affect
future cash flows or the fair value of fixed rate financial instruments.
The Group’s exposure to the risk of changes in market interest rates
relates primarily to the Group’s borrowings balances with floating
interest rates.
Interest rate risk is managed using a mix of terms on the bank
borrowings and the interest rate swap referred to in Note 23(c)
above. The company has insignificant other balances that have
interest payment terms.
ii. Sensitivity Analysis
The following table illustrates sensitivities to the Group’s exposures
to changes in interest rates. The table indicates the impact on how
profit and equity values reported at balance date would have been
affected by changes in the relevant risk variable that management
considers to be reasonably possible. These sensitivities assume
that the movement in a particular variable is independent of other
variables, and the other assumptions remain consistent with prior
years.
Consolidated Group
Increase/decrease in basis points
$
Profit before tax
$
Year ended 30 June 2018
Year ended 30 June 2017
Year ended 30 June 2016
+/- 100
+/- 100
+/- 100
+/- 73,390
+/- 68,540
+/- 73,310
The assumed movement in basis points for the interest rate sensitivity analysis is based on currently observable
market environment, showing a significantly lower volatility than in prior years.
| 103
Energy Action 2018 Annual Report
Note 23: Financial Risk Management (Continued)
Fair Values
Fair value estimation
The carrying value of financial assets and financial liabilities is materially the
same as the fair value.
The fair values of the following financial assets and liabilities have been
determined based on the following methodologies and assumptions:
i. Cash and cash equivalents, trade and other receivables and trade and
other payables are short-term instruments whose carrying value are
deemed to be equivalent to fair value. Trade and other payables exclude
amounts provided for relating to annual leave which is not considered a
financial instrument.
ii. Term receivables generally reprice to a market interest rate every 6
months, and fair value therefore approximates carrying value.
iii. Bank borrowings entered into an interest rates swap hedging instrument,
fair value assessment every 6 months
Financial liabilities are classified into Levels:
Level 1
Level 2
Level 3
those items traded with quoted prices in active markets for
identical liabilities
those items with significantly observable inputs other than quoted
process in active markets
those with unobservable inputs
Fair Values
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
FY18
FY17
Financial Liabilities
Bank loans
-
4,997,225
-
-
9,015,005
-
| 104
Energy Action Limited (ACN 137 363 636)
NOTE 24: AUDITORS’
REMUNERATION
The auditor for Energy Action Limited is Ernst & Young
Consolidated Group
2018
$
2017
$
Amounts received or due and receivable by Ernst & Young (Australia) for:
• An audit or review of the financial report of the entity and any other
149,900
146,965
entity in the consolidated group
• Other services in relation to the entity and any other entity in the
13,500
-
consolidated group
•
Tax services (Fringe benefit tax)
-
163,400
6,075
153,040
| 105
Energy Action 2018 Annual Report NOTE 25: INFORMATION
RELATING TO ENERGY ACTION
LIMITED (“THE PARENT ENTITY”)
The following information has been extracted from the books and records of
the parent and has been prepared in accordance with Accounting Standards.
Parent
Note
2018
$
2017
$
STATEMENT OF FINANCIAL POSITION
ASSETS
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Issued capital
Retained earnings
Total Equity
Profit of the parent entity
Total comprehensive income of the parent entity
11,161,174
14,560,537
25,721,711
(7,820,914)
(8,017,128)
8,839,702
14,799,620
23,639,322
(4,836,178)
(12,877,274)
(15,838,042)
(17,713,452)
(8,005,600)
(1,878,069)
9,883,669
(6,723,394)
(6,723,394)
(8,161,626)
2,235,756
5,925,870
(5,414,625)
(5,414,625)
| 106
Energy Action Limited (ACN 137 363 636) NOTE 26: EVENTS AFTER THE
REPORTING PERIOD
A fully franked dividend in respect of the 12 month period to 30 June 2018
of 4.00 cents per share was declared on 16 August 2018, payable on 27th
September 2018.
Energy Action issued an ASX release on 6th August 2018 to advise that
the Group would commence a strategic review. The Board of Directors has
decided to conduct a review of the various strategic options available to the
Company to maximise value for its shareholders. The Board has appointed
PwC to assist it with this review which will encompass assessing the potential
sale, joint venture or merger of the Company with or to another organisation.
While the review is underway, Energy Action remains firmly committed to
growing its pipeline of contract opportunities and targeting bottom line growth
through adapting its products and services to meet the needs of its clients in
a changing energy market.
The Company will keep shareholders fully informed in accordance with its
continuous disclosure obligations.
Except for the above issues, no other matters or circumstances have arisen
since the end of the financial year which significantly affected or could
significantly affect the operations of the consolidated group, the results of
those operations, or the state of affairs of the consolidated group in future
financial years.
| 107
Energy Action 2018 Annual Report Director’s Declaration
In accordance with a resolution of the Directors of Energy Action Limited, I
state that:
1.
In the opinion of the Directors:
a. The financial statements and notes of Energy Action Limited for
the financial year ended 30 June 2018 are in accordance with the
Corporations Act 2001, including:
i. giving a true and fair view of its financial position as at 30 June
2018 and performance
ii. complying with Accounting Standards (including the Australian
Accounting Interpretations) and the Corporations Regulations
2001
b. The financial statements and notes also comply with International
Financial Reporting Standards as disclosed in Note 2.1
c. There are reasonable grounds to believe that the Company will be
able to pay its debts as and when they become due and payable
2. This declaration has been made after receiving the declarations
required to be made to the Directors in accordance with section 295A of
the Corporations Act 2001 for the financial year ended 30 June 2018.
On behalf of the board
Mr Murray Bleach
Director
Dated: 16 August 2018
| 108
Energy Action Limited (ACN 137 363 636) Ernst & Young
200 George Street
Sydney NSW 2000 Australia
GPO Box 2646 Sydney NSW 2001
Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
ey.com/au
Independent Auditor's Report to the Members of Energy Action Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Energy Action Limited (the Company) and its subsidiaries
(collectively the Group), which comprises the consolidated statement of financial position as at 30 June
2018, the consolidated statement of comprehensive income, consolidated statement of changes in equity
and consolidated statement of cash flows for the year then ended, notes to the financial statements,
including a summary of significant accounting policies, and the directors' declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act
2001, including:
a)
b)
giving a true and fair view of the consolidated financial position of the Group as at 30 June 2018
and of its consolidated financial performance for the year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting
Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the
Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other
ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the financial report of the current year. These matters were addressed in the context of our audit
of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate
opinion on these matters. For each matter below, our description of how our audit addressed the matter
is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the
Financial Report section of our report, including in relation to these matters. Accordingly, our audit
included the performance of procedures designed to respond to our assessment of the risks of material
misstatement of the financial report. The results of our audit procedures, including the procedures
performed to address the matters below, provide the basis for our audit opinion on the accompanying
financial report.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
2
Carrying value of intangible assets
Why significant
How our audit addressed the key audit matter
As required by Australian Accounting Standards,
the Group performs an annual impairment
assessment of its goodwill balances.
Our audit procedures included the following:
Assessed the Group’s determination of the
appropriate Cash Generating Units (CGU).
Other intangible assets comprise customer
relationships and capitalised system
development costs which were assessed by the
Group for indicators of impairment. If indicators
of impairment exist during the year, an
impairment test for these assets is also
performed.
The carrying value of intangible assets was
considered to be a key audit matter due to the
magnitude of the balance in the consolidated
statement of financial position and the
significant judgments and assumptions involved
in the assessment of indicators of impairment
and impairment tests.
Refer to Note 13 of the financial report for the
related disclosures.
Evaluated the Group’s assessment for indicators
of impairment for the other intangible assets
For the impairment test performed, we assessed
the appropriateness of the board approved cash
flow forecast and assumptions therein, including
performing a sensitivity analysis of key
assumptions and evaluated whether a reasonably
possible change in assumptions could result in an
impairment of the carrying value of the assets.
Considered the historical accuracy of the Group’s
cash flow forecasts against based on actual cash
performance in recent years.
We tested the mathematical integrity of the
impairment model.
Considered the adequacy of the financial report
disclosures contained in Note 13 of the financial
report.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
3
Recognition of revenue
Why significant
How our audit addressed the key audit matter
The Group generates revenue from projects that
may cross multiple financial periods. Australian
Accounting Standards require the Group to
estimate the amount of revenue to be recognised
in the current financial period. This assessment
is dependent upon the project costs incurred at
the end of the reporting period relative to the
estimated total project costs. There is significant
judgment exercised by the Group in determining
the valuation of work in progress to be recorded.
Refer to Note 2(m) within the financial report for
a summary of the Group’s policy.
The contracting terms used can vary significantly
between contracts and involve judgment in the
recognition of revenue and valuation of work in
progress. As a result, this was a key audit
matter.
Our procedures included the following:
Assessed whether the Group recognised revenue
in accordance with Australian Accounting
Standards
Selected a sample of contracts to determine
whether revenue was recognised in accordance
with the contract terms and the Group’s revenue
recognition policies.
Assessed the appropriateness of the estimated
project costs for significant projects through
discussions with project managers and obtained
project questionnaires which includes project
status update and costs to complete analysis for
a sample of contracts to assess the cost inputs
used to estimate the percentage of completion.
Tested the mathematical accuracy of revenue
and contract profit recognised based on the
percentage of completion for all contracts.
Considered the disclosures contained within Note
6 of the financial report.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
4
5
Information Other than the Financial Statements and Auditor’s Report
The directors are responsible for the other information. The other information comprises the information
included in the Group's 2018 Annual Report other than the financial report and our auditor's report
thereon. We obtained the Directors' Report that is to be included in the Annual Report, prior to the date
of this auditor's report, and we expect to obtain the remaining sections of the Annual Report after the
date of this auditor's report.
Our opinion on the financial report does not cover the other information and we do not and will not
express any form of assurance conclusion thereon, with the exception of the Remuneration Report and
our related assurance opinion.
In connection with our audit of the financial report, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial report or
our knowledge obtained in the audit or otherwise appears to be materially misstated.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a true
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for
such internal control as the directors determine is necessary to enable the preparation of the financial
report that gives a true and fair view and is free from material misstatement, whether due to fraud or
error.
In preparing the financial report, the directors are responsible for assessing the Group's ability to
continue as a going concern, disclosing, as applicable, matters relating to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise As part of an audit
in accordance with the Australian Auditing Standards, we exercise professional judgment and maintain
professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial report, whether due to fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence
that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a
material misstatement resulting from fraud is higher than for one resulting from error, as fraud
may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s
report to the related disclosures in the financial report or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our
auditor’s report. However, future events or conditions may cause the Group to cease to continue as
a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events in a
manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the financial report. We are
responsible for the direction, supervision and performance of the Group audit. We remain solely
responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated to the directors, we determine those matters that were of most
significance in the audit of the financial report of the current year and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should
not be communicated in our report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
4
5
Information Other than the Financial Statements and Auditor’s Report
The directors are responsible for the other information. The other information comprises the information
included in the Group's 2018 Annual Report other than the financial report and our auditor's report
thereon. We obtained the Directors' Report that is to be included in the Annual Report, prior to the date
of this auditor's report, and we expect to obtain the remaining sections of the Annual Report after the
date of this auditor's report.
Our opinion on the financial report does not cover the other information and we do not and will not
express any form of assurance conclusion thereon, with the exception of the Remuneration Report and
our related assurance opinion.
In connection with our audit of the financial report, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial report or
our knowledge obtained in the audit or otherwise appears to be materially misstated.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a true
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for
such internal control as the directors determine is necessary to enable the preparation of the financial
report that gives a true and fair view and is free from material misstatement, whether due to fraud or
error.
In preparing the financial report, the directors are responsible for assessing the Group's ability to
continue as a going concern, disclosing, as applicable, matters relating to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise As part of an audit
in accordance with the Australian Auditing Standards, we exercise professional judgment and maintain
professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial report, whether due to fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence
that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a
material misstatement resulting from fraud is higher than for one resulting from error, as fraud
may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s
report to the related disclosures in the financial report or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our
auditor’s report. However, future events or conditions may cause the Group to cease to continue as
a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events in a
manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the financial report. We are
responsible for the direction, supervision and performance of the Group audit. We remain solely
responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated to the directors, we determine those matters that were of most
significance in the audit of the financial report of the current year and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should
not be communicated in our report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
6
Report on the Audit of the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in the directors' report for the year ended 30 June
2018.
In our opinion, the Remuneration Report of Energy Action Limited for the year ended 30 June 2018,
complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration
Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an
opinion on the Remuneration Report, based on our audit conducted in accordance with Australian
Auditing Standards.
Ernst & Young
Ryan Fisk
Partner
Sydney
16 August 2018
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Report on the Audit of the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in the directors' report for the year ended 30 June
In our opinion, the Remuneration Report of Energy Action Limited for the year ended 30 June 2018,
complies with section 300A of the Corporations Act 2001.
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
2018.
Responsibilities
Auditing Standards.
Ernst & Young
Ryan Fisk
Partner
Sydney
16 August 2018
6
Corporate Information
ACN: 137 363 636
DIRECTORS
Murray Bleach – Non-executive Chairman
Nitin Singhi – Independent Non-executive Director
John Mackay AM – Independent Non-executive Director
Paul Meehan – Non Executive Director
Mark de Kock – Non-Executive Director
COMPANY SECRETARY
Anna Sandham
REGISTERED OFFICE AND
PRINCIPAL PLACE OF BUSINESS
Level 5, 56 Station Street
Parramatta NSW 2150
SHARE REGISTER
Link Market Services Limited
Level 12
680 George Street
Sydney, NSW 2000
Energy Action Limited shares (EAX) are listed on the Australian Securities
Exchange (ASX)
SOLICITORS
DLA Piper
No. 1 Martin Place
Sydney NSW 2000
BANKERS
Commonwealth Bank of Australia
Level 3, 101 George Street
Parramatta NSW 2150
AUDITORS
Ernst & Young
200 George Street
Sydney NSW 2000
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
| 115
Energy Action 2018 Annual Report
Share and Shareholder Information
Shareholder Information required by the Australian Securities Exchange
Limited (ASX) Listing Rules and not disclosed elsewhere in the Report is
set out below.
1. Substantial shareholders
The number of securities held by substantial shareholders and their
associates as lodged with the ASX are set out below:
Name
Number of Shares
Current Interest
Latest Notice Date
Mr Murray Bleach & related entities
Microequities Asset
Management Pty Ltd
1,717,329
5,185,244
6.62%
19.98%
05/09/2016
23/08/2016
Mr Paul Meehan & related entities
4,727,091
18.21%
18/11/2013
Mr Stephen Twadell & related entities
1,946,209
Dr Ron Watts & related entities
2,245,280
7.50%
8.65%
13/11/2012
13/11/2012
2. Number of security holders and securities on issue
EAX has 25,954,117 fully paid ordinary shares on issue which are held by
547 shareholders.
3. Voting rights
At a meeting of members, each member who is entitled to attend and vote
may attend and vote in person or by proxy, attorney or representative. On
a show of hands, very person present who is a member, proxy, attorney or
representative shall have one vote on a poll, every member who is present
or by proxy, attorney or representative shall have one vote for each fully
paid share held.
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Energy Action Limited (ACN 137 363 636) Category / Range
1 – 1,000
1,001 – 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Rank
Name
1
2
3
4
5
6
7
4. Distribution of security holders
The following table summarises the distribution of quoted securities as at
24 September 2018:
Number of shareholders
128
224
72
92
31
%
23.40
40.95
13.16
16.82
5.67
5. Unmarketable parcel of shares
The number of shareholders holding less than a marketable parcel
of ordinary shares is 75. 602 fully paid ordinary shares comprises a
marketable parcel at EAX’s closing share price of $0.83 on 24 September
2018.
6. Twenty largest shareholders of quoted equity securities as at 24
September 2018
Details of the 20 largest shareholders of quoted securities by registered
shareholding are:
No. of Shares
2,900,698
MEEHANTEAM PTY LTD
MICROEQUITIES ASSET MANAGEMENT PTY LTD
2,760,361
J P MORGAN NOMINEES AUSTRALIA LIMITED
HOLYOAKE INVESTMENTS PTY LTD
TOVEELEN PTY LTD
MR MURRAY EDWARD BLEACH &
MRS NORMA LEIGH EDWARDS
2,500,347
1,774,127
1,696,209
1,608,490
% IC
11.18
10.64
9.63
6.84
6.54
6.20
AMARINA SYSTEMS PTY LTD
1,197,063
4.61
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Energy Action 2018 Annual Report Rank
Name
No. of Shares
% IC
8
9
10
11
12
13
14
15
16
17
18
19
20
ANACACIA PTY LIMITED
J & C ALLEN SUPERANNUATION FUND PTY LTD
MR EDWARD JAMES HANNA
JASPER SUPERANNUATION FUND PTY LTD
MR BARRY DENTON
ACRES HOLDINGS PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
MR IVAN ROMAN SLAVICH & MRS ANNA SLAVICH
AMARINA SYSTEMS PTY LIMITED
EQUITAS NOMINEES PTY LIMITED
LONGRO PTY LTD
DR GEOFFREY PHILLIP BENT &
MRS GABRIELLE MARY BENT
FSG (HOLDING) PTY LTD
881,784
875,833
611,387
552,553
505,305
410,000
374,380
329,214
293,300
290,582
264,750
246,299
217,956
Total
20,290,638
Balance of register
5,663,479
3.40
3.37
2.36
2.13
1.95
1.58
1.44
1.27
1.13
1.12
1.02
0.95
0.84
78.18
21.82
Grand total
25,954,117
100.00
7. On market buy-back
There is no current on market buy-back.
8. Securities exchange listing
Energy Action Limited’s shares are traded on the Australian Securities
Exchange under the ticker code “EAX”.
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Energy Action Limited (ACN 137 363 636)