2019
ANNUAL
REPORT
ENERGY ACTION LIMITED
ABN 90 137 363 636
TABLE OF
CONTENTS
CORPORATE INFORMATION
FINANCIAL REPORT
CORPORATE GOVERNANCE POLICY
SHARE AND SHAREHOLDERS INFORMATION
3
4
80
81
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Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
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 (resigned 30 June 2019)
Paul Meehan – Non Executive Director
Mark de Kock – Independent 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
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Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
Financial Report for the Year Ended 30 June 2019
Directors’ Report ............................................................................................................................................................ 5
Auditor’s Independence Declaration ............................................................................................................................ 15
Remuneration Report (Audited) ................................................................................................................................... 16
Financial Statements ................................................................................................................................................... 25
Consolidated Statement of Comprehensive Income .................................................................................................... 25
Consolidated Statement of Financial Position .............................................................................................................. 26
Consolidated Statement of Changes in Equity ............................................................................................................. 27
Consolidated Statement of Cash Flow ......................................................................................................................... 28
Notes to the Financial Statements for year ended 30 June 2019 ................................................................................ 29
Note 1: Corporate Information...................................................................................................................................... 29
Note 2: Summary of Significant Accounting Policies .................................................................................................... 29
Note 3: Significant Accounting Judgements, Estimates and Assumptions ................................................................... 45
Note 4: Segment information ....................................................................................................................................... 46
Note 5: Revenue, Other Income and Expenses ........................................................................................................... 47
All material revenues are generated in Australia.......................................................................................................... 47
Note 5: Revenue, Other Income and Expenses (continued) ........................................................................................ 48
Note 6: Income Tax Expense ....................................................................................................................................... 49
Note 7: Earnings per Share ......................................................................................................................................... 50
Note 8: Dividends ......................................................................................................................................................... 51
Note 9: Cash and Cash Equivalents ............................................................................................................................ 52
Note 10: Trade and Other Receivables ........................................................................................................................ 52
Note 10: Trade and Other Receivables (Continued) .................................................................................................... 53
Note 11: Property Plant and Equipment ....................................................................................................................... 54
Note 12: Intangible Assets ........................................................................................................................................... 55
Note 13: Other Assets .................................................................................................................................................. 56
Note 14: Trade and Other Payables ............................................................................................................................ 57
Note 15: Tax ................................................................................................................................................................ 58
Note 16: Provisions and other liabilities ....................................................................................................................... 59
Note 17: Loans and Borrowings ................................................................................................................................... 59
Note 18: Issued Capital and Reserves ......................................................................................................................... 60
Note 19: Capital and Leasing Commitments ................................................................................................................ 64
Note 20: Cash Flow Information................................................................................................................................... 65
Note 21: Related Party Disclosures ............................................................................................................................. 66
Note 21: Related Party Disclosures (Continued).......................................................................................................... 67
Note 22: Financial Risk Management .......................................................................................................................... 67
Note 22: Financial Risk Management (Continued) ....................................................................................................... 68
Note 22: Financial Risk Management (continued) ....................................................................................................... 69
Note 23: Auditors’ Remuneration ................................................................................................................................. 71
Note 24: Information relating to Energy Action Limited (“the parent entity”) ................................................................. 71
Note 25: Events After the reporting period ................................................................................................................... 72
Director’s Declaration ................................................................................................................................................... 73
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Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
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 2019.
Directors
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 and Nomination & 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 - Partner in Alfred Street Investment Partners, 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 and Nomination & 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 & Remuneration Committees.
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 (Independent 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 of Microequities from 2015 – February 2019. Non-executive Director from February 2019 to
June 2019. Independent Non-executive Director since 1 July 2019.
Special Responsibilities – Member of each of the Audit & Risk Management and Nomination & 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, Frontier Data Centre Ltd.
John Mackay (Independent Non-Executive Director, resigned 30 June 2019)
Qualifications – Bachelor of Arts Administration / Economics from University of Canberra, Honourary Doctorate from University
of Canberra.
Experience – Board Member from July 2017 until June 2019
Special Responsibilities – Prior to his resignation, a 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).
P a g e | 5
Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
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:
Number of ordinary shares
Number of options over
ordinary shares
Murray Bleach
Paul Meehan
Nitin Singhi
Mark de Kock
2,700,700
4,792,846
3,000
50,000
-
-
-
-
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 recommended:
Ordinary shares
Final 2019 dividend
Interim 2019 dividend
Final 2018 dividend paid 27 September 2018
Cents per share
NIL
NIL
4.00
$
NIL
NIL
1,038,165
Operating and Financial Review
The Board presents the 2019 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 FY19 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.
Our business model
Energy Action’s core business strategy and purpose is:
“To help our clients understand, and take control of, their energy needs”
We have the power to help business save on energy costs, reduce emissions and increase the value of their assets. Our power
comes from:
Our expertise ‐ a national team with knowledge and capability to offer better ways of buying, using and generating
energy
Our independence ‐ to fight for a better deal, ensure “apples” to “apples” comparison and that retailers and providers
deliver what they promise
Our systems and processes ‐ that ensure automated and reliable delivery of valuable information, validated bills, tariff
reviews and insights.
Energy Action’s principal activities are providing integrated energy management services to a diverse base of Commercial,
Industrial and small and medium sized business customers. Energy Action provides the following services:
Broking or Consulting using a range of procurement methodologies including auctions (via the Australian Energy
Exchange), tenders (small and large market), progressive and structured purchasing, corporate power purchase
agreements ;
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;
Manage and identify opportunities to lower usage and emissions with business and building monitoring, audits and
energy efficiency initiatives;
Help clients generate and manage self-sufficiency with solar and batteries or corporate power purchase agreements;
Help clients increase the value of their assets with embedded networks, microgrids, solar and building ratings
improvements
Initially founded in 2000, Energy Action listed on the Australian Securities Exchange on 13 October 2011.
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Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
2019 financial performance
The Group generated a statutory net profit/(loss) after tax (NPAT) of ($12.09) million for the year ended 30 June 2019, a
decline compared to a statutory NPAT of $3.26 million for the year ended 30 June 2018.The FY19 results included significant
items of $13.1 million (FY18:NIL), resulting in operating net profit after tax for the year ended 30 June 2019 of $1.01 million,
compared to $3.26 million for the pcp, a decrease of 69%.
A reconciliation of the Group’s Statutory NPAT to Operating NPAT and EBITDA is shown in the table below:
$
Statutory balance after tax
Add back Significant Items after
tax:
Strategic Review
Restructuring costs*
Accelerated D&A**
Other Significant item***
Impairment of Goodwill
Impairment of Software
30 June 2019
(12,092,885)
NPAT
30 June 2018
(Restated)
3,260,674
Variance
30 June 2019
-471%
(10,028,320)
EBITDA
30 June 2018
(Restated)
6,664,056
Variance
-250%
265,086
657,229
1,252,357
72,500
9,944,796
906,250
-
-
-
-
-
-
-100%
-100%
-100%
-100%
-100%
-100%
365,634
906,523
-
100,000
9,944,796
1,250,000
-
-
-
-
-
-
6,664,056
-100%
-100%
0%
-100%
-100%
-100%
-62%
Operating balance after tax
* Costs associated with restructuring and closure of rental premises
**Accelerated Depreciation & Amortisation on specific items of Software and Customer Relationships
***Cost for PAS onerous projects
1,005,334
3,260,674
-69%
2,538,633
Key Financial Metrics
Revenue
Operating EBITDA
Operating EBITDA margin
Operating NPAT
Operating Cash flow1
Statutory NPAT
FY19
$24.80m
$2.54m
10.2%
$1.01m
$3.9m
-$12.09m
FY18
(Restated)
$31.77m
$6.66m
21%
$3.26m
$6.9m
$3.26m
Variance
-22%
-62%
-10.8 ppt
-69%
-43%
-471%
1Operating Cash Flow is defined as Operating Cash Flow before Interest, Tax and Significant Items
Revenues
Revenues declined by 22% versus the previous period, with a decline in Procurement 35%, a decline in Contract
Management and Environmental Reporting (CMER) 7% and decline in Projects and Advisory Services (PAS) of 36%, in line
with the repositioning of the PAS division.
Revenue $
FY19
Procurement
CMER
PAS
Total Revenue
6,419,299
14,165,024
4,216,777
24,801,100
FY18
(Restated)
9,872,786
15,256,838
6,637,696
31,767,320
vs FY18 $
vs FY18 %
(3,453,487)
(1,091,814)
(2,420,919)
(6,966,220)
-35%
-7%
-36%
-22%
Revenue for the full year decreased from $31.77 million to $24.80 million mainly as a result of the following:
Procurement revenues declined 35%, driven by a 34.9% decrease in the number of Auctions performed to 854 (down
from 1,311 in the pcp) and a decrease in the average $/MWh of 12.7% to $77.53. In line with our contracting
guidance, contract duration was 25.9 months largely in line with the pcp of 26.1 months. Tariffs and Tenders also saw
a decline in volumes, and structured products declined 4%.
Contract Management and Environmental Reporting (CMER) revenue declined by 7% with a decline of -793 in the
sites under management in Metrics services, offset by the gain in Bureau Services from the retail billing services
provided to CS Energy. Work is continuing to improve the customer value of the CMER service and arrest this decline
including a refreshed portal, the introduction of Metrics for small sites, and improved service delivery. Embedded
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Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
Networks tenancies under management grew from 1,378 in June 2018 to 2,377 at the end of June 2019 as 999 new
centres were added.
PAS revenues decreased $2.4 million, 36% vs the pcp across the full range of services with operating performance
impacted by high staff turnover and the repositioning of the PAS division being announced on 2 April 2019. All
activity relating to head contracting on projects, project management, independent commissioning agent and
engineering contracts (including upgrades), which were often underperforming areas of the PAS division will cease.
The newly positioned Advisory division will focus on optimising energy efficiency for commercial buildings, as well as
environmental reporting and NABERS rating services for property portfolio clients. The decline in revenues was
somewhat offset by lower costs of goods sold, down $1.07 million, with reduced project delivery.
Operating expenditure
Operating overheads (net of significant items) totalled $19.8 million, compared to $22.2 million, a reduction of $2.4 million
(12%), with the action to adopt a leaner management structure and reduce operating costs. The good cost control has partially
offset the decline in revenue resulting a decline in EBITDA margin to 10.2%, down 10.8 percentage points. In particular:
Employment costs were $1.6 million lower than pcp primarily as a result of :
o A flattening of the management structure reducing leadership by 5 FTE and resulting in forecasted savings
in excess of $1 million per annum from FY20, with some savings achieved in the second half of FY19.
o
o
o
The Company continues to expand its offshore resources replacing on-shore transactional roles as
appropriate with 17 FTE in FY19.
The number of employees in the PAS business reduced by 27 FTE.
Investment in recruiting additional operational staff, often with relevant industry experience, to underpin
service delivery improvements and ensure improved customer service outcomes.
Closure of 4 rental premises, with consolidation of 3 office locations into Sydney and Melbourne and the Perth office
relocating into a flexible serviced office. This will result in cost savings of approximately $0.2 million per annum.
Reduction of Directors fees by 40% resulting in annualised savings of $0.126 million effective 1 February 2019.
Ongoing strict cost control across all discretionary spend areas.
A decline in operating D&A (net of significant items) of $0.6 million with accelerated depreciation and amortisation
from the reassessment of customer relationships and specific software useful life to 30 June 2019. (FY18: $1.56 million)
Cashflows
Operating Cash flow was $3.9 million, down 43% on pcp, however continuing the strong underlying cash generation in the
business. The Company has continued an ongoing focus on working capital management, achieving an operating cash flow
conversion of 155% to operating EBITDA.
Reconciliation of Operating Cash Flow before interest, tax and significant items
Statutory operating cash flow
2,702,643
5,273,306
30 June 2019
30 June 2018
(Restated)
Add back:
Taxes paid
Interest paid / (received)
Cash flows related to significant items
168,952
405,679
666,088
1,150,702
468,118
-
Operating cash flow before interest, tax and significant items
3,943,362
6,892,126
Operating EBITDA
2,538,633
6,664,056
Operating cash flow as % of Operating EBITDA
155%
103%
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Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
The group incurred capital expenditure of $1.85 million during the year, of which $1.73 million was on IT projects,
predominately completing the renewal of the enhancement of the Group’s core Customer and Contract Management
platforms.
The Company has signed a two year, $9.55 million market rate loan agreement, expiring September 2021 as an extension of the
facility agreement with the bank, on substantially the same terms and conditions as its previous Facility agreement. Funds can
be provided under the facility as loans, bank guarantees or as letters of credit with $9.3 million available to be utilised for
liquidity purposes. The facility limit was reduced from $12 million to $9.3 million during FY19, reducing liquidity by $2.7 million.
This will provide savings in borrowing costs of $48,000 per annum.
As at 30 June 2019, the Company had utilised $5.96 million of the facility comprising a loan of $5.72 million and bank
guarantees principally in relation to rental properties and guarantee provided on project works of $0.24 million. The Group had
$1.6 million of unrestricted cash at bank at 30 June 2019, and total undrawn facilities and cash of approximately $4.9 million.
Net debt was maintained in FY19, $4,381,959 as at 30 June 19, an increase of $118,112 over pcp.
Other
A Nil dividend was declared on 27 February, 2019 and 28 August, 2019 with a priority of reducing net debt as well as investing
in continuing to automate and streamline processes through digitisation and support the Company’s commercial focus on
scalable, platform-based services that add value to our clients.
The effective tax rate of 8.0% was primarily due to the addback of the goodwill impairment in addition to the change in the
corporate tax rate from 30% to 27.5% as at 1 July 2018. This change resulted in a reduction of deferred tax liabilities of $0.169
million which has been included as a reduction in income tax expense.
The Group incurred significant items totaling $13,098,219. Of this amount $12,170,575 (93%) were non-cash items. These
significant items net of tax effect were:
Impairment of goodwill of $9,944,796 related to previous acquisitions. A formal assessment of the carrying value of
Goodwill has been undertaken. This assessment resulted in an impairment of 100% of Goodwill.
Impairment of software of $906,250. A formal assessment of the carrying value of Software has been undertaken.
This assessment resulted in an impairment of $1.25 million of Software (before tax).
Accelerated amortization of customer relationships intangibles of $846,140 related to previous acquisitions and
Accelerated amortization of software of $406,217. The Company has assessed the useful life of Customer
Relationships and Software Development costs. This has resulted in the acceleration of Customer Relationship
amortisation and specific Software Development amortisation to finish at the 30 June 2019.
Costs associated with an organisational restructure of $657,229 relates to the restructuring of the PAS division, the
flatter management structure, and the closure of the rental premises in Sydney and Melbourne. Costs associated with
the strategic review of $265,086.
Costs associated with PAS onerous project of $72,500.
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Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
Forward revenue
The opening balance of forward revenue has been restated to $38.5 million at June 2018 as a result of the adoption of AASB 15
Revenue from Contracts with Customers. Auction revenue is now recognised in full at the time of the Contract, and accordingly
there is no longer any additional revenue recognised over the term of the contract for this line of business. Forward revenue for
the year ending 30 June 2019 has declined to $25.1 million with Procurement and CMER forward revenue declining with new
contract sales lower than roll-off revenue. The Company continues to focus on improving acquisitions, retentions, customer
service and enhancing the Contract Management & Environmental Reporting offering.
Operational Key Performance Indicators
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
FY19
FY18
% change
854
25.9
0.81
$77.53
$136m
27
32
1,311
26.1
1.48
$88.85
$285m
47
52
-34.9%
-0.2 mths
-45.3%
-12.7%
-52.3%
-42.6%
-38.5%
No.
-793
+922
-33
+96
+2.0 mths
+999
+1,095
-46%
Contract Management & Energy Reporting (CMER)
30 June 2019
30 June 2018
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
Total sites
Total Company Future contracted revenue
4,699
1,909
1,615
8,223
43.0
2,377
10,600
$25.1m
5,492
987
1,648
8,127
41.0
1,378
9,505
$38.5m
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.
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Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
Operational Performance
Following the completion of the Strategic Review and the appointment of John Huggart as CEO in January 2019, the company
focused on five key priorities to stabilise the company and focus on delivering its strong market position in core energy
procurement and monitoring services and streamline the delivery of its energy efficiency solutions. The success of these key
priorities include:
“Back to Basics”
Progress
Sales
Growth
Working with the mid-market sales team to
accelerate acquisitions and retention of
customers. A substantive change in sales and
service model for the team has commenced.
First two phases of project has been completed.
Retention rates for customers from January to June
have increased substantively due to improved sales
and sales management. For the three months June to
August the number of auctions exceed the prior year.
The delivery of retail billing project which has
now been completed.
Complete and in BAU.
Capability
The delivery of the replacement of Group’s
core Customer and Contract Management
Platforms.
The project is in the final stages of completion, with a
planned “hypercare” period to follow and ensure any
remaining system or training gaps are rapidly
addressed.
The refresh of the Metrics platform for
retention and growth in CMER.
Complete and in BAU.
Service
Improve customer interactions and delivery to
achieve improved retention and net promoter
outcomes.
Continue to improve the operating margins of
the PAS division, develop partnerships to
assist with delivery of services to customers
and strong performance and cost
management.
Profit
Service delivery remains a continued focus to ensure
customer expectations are met. Milestone reporting
including Network Tariff Reviews and Budget estimates
have now been on time for the past three months.
Decision made to re-position PAS to Advisory Services,
referral partners appointed for work previously
undertaken by PAS. Benefits of a leaner and flatter
leadership team with lower cost and continued cash
and cost focus balanced with investment in ensuring
support for recruiting skilled service delivery team and
building capability.
Engagement Building a high performance culture.
Significant improvement in engagement score to 65%.
Corporate Highlights
There have been a number of key operational highlights in the period that include:
Sales :
In the second half of FY19 the mid-market sales team has worked to accelerate the acquisition and retention of
customers. A substantive change in the sales and service model has been achieved including the establishment of a
campaign sales team and key deliverables. The results of this activity is seeing early improvements expected to continue
to rebuild into FY20.
An increase in embedded network tenancies under management of 999 (72%);
Completion of the Energy Strategy to guide the development of Stage 1 of Western Sydney Airport, a $5.3 billion
Federal Government investment due to be operational in 2026. The strategy incorporated both demand and supply
side measures to deliver an energy investment model for the Airport.
Capability :
The successful implementation of a large scale energy retailer billing system and customer portal on behalf of CS Energy.
The implementation is a multi-year contract, which involved the successful transfer and billing of several hundred sites
in less than three months. It is a scalable application of an improved project deployment approach, market leading
technology and energy data management processes to a growing market segment that was previously not accessible
to Energy Action;
Replacement the Group’s core Customer and Contract Management platforms in the final stages of completion. This
platform is expected to deliver key efficiencies and automation. The refresh of the Metrics platform for retention and
growth in CMER. This included a portal refresh as well as adding the functionality to view SME sites on the portal.
P a g e | 11
Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
Profit :
The reposition of the PAS division to eliminate loss-making activity and support the Company’s commercial focus on
scalable, platform-based services that add value to our clients.
Flattening of the management structure reducing leadership by 5 FTE and resulting in forecasted annual savings in
excess of $1 million per annum from FY20, with savings flowing from the second half of FY19.
Expansion of the Business Processing Offshore team to 17 Full Time Equivalent (FTE) replacing on-shore transactional
roles as appropriate.
Closure of 4 leased premises, with consolidation of 3 office locations into Sydney and Melbourne and the Perth office
relocating into a flexible serviced office. This will result in forecasted cost savings of $0.2 million per annum
Continued focus on Operating Cash Flow with the conversion of Operating EBITDA to Operating Cash Flow a healthy
155%.
Culture :
Establishment of Cultural Transformation Program to diagnose and enhance the organisational culture. Significant improvement
has been achieved in engagement with a June 2019 survey demonstrating a strong improvement.
Business strategy and prospects for future financial years
The new strategic priorities are “Foundations for Growth” with the primary aim of leveraging the value and efficiencies from
systems investment, exit from un-profitable activities and improved focus on core business with the plan to increase the future
contracted revenue.
Priorities
“Foundations for Growth”
Sales
Growth
Continuing with sales and customer management programs to lift retention rates and acquisition
across all customer segments. Launch new products to key customer segments, including expansion
of progressive purchasing clients and environmental reporting
Continue to develop the scalable platform to capture additional efficiencies and eliminate remaining
legacy systems
Capability
Continued improvements in Metrics platform for customers to meet existing and emerging customer
demand and develop energy insights underpinned by data management and analysis
Enhanced capability to assist small market customers
Service
Profit
Improve customer interactions and delivery to achieve improved retention and net promoter
outcomes
Maintain disciplined performance management and cost control, lift the value of forward revenue,
leverage the efficiencies of the newly built core systems and ensure Advisory business achieves
commercial outcomes.
Engagement Building and maintaining a high performance culture
The Company is not providing formal earnings guidance.
P a g e | 12
Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
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 in 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:
Risk
Risk Description
Potential consequences and mitigation strategies
Customer
Retention/Acquisi
tion
Failure to attract and retain
sufficient customers to sustain
the business
Increasing
competition
The risk that Energy Action is
unable to differentiate from
competitors.
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.
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.
Major initiative completed during FY19 examining all aspects of sales activity
and identifying actions and plans to increase customer retention and
acquisition. Implementation of results completed mostly in FY19 with
monitoring and ongoing review continuing into FY20.
Review of service offerings undertaken during FY19 and identifying services to
be discontinued and increasing focus on services to be retained. Examples
include Energy Procurement, mid-market Structured Products and Contract
Management and Energy Reporting services.
Potential earnings and reputational impact from failure to deliver contracted
services to be mitigated by exit from unprofitable markets, improved business
processes for delivery of ongoing services, including the replacement of Energy
Action’s core Customer and Contract Management platforms, and increased
risk management planning for customer outcomes.
Mitigated by implementation of a focused back to basics strategy to establish
the core foundation for scale and growth including. This includes the decision
to re-position PAS, a leaner management structure, improve sales growth,
improve company capability, improve service delivery and employee
engagement through building a high performance culture. In addition,
mitigated by improved visibility of key performance indicators and drivers of
performance, timely and transparent market disclosures, and maintenance of
strong relationships with banking partners and shareholders.
Occupational
Health & Safety
(OH&S)
Employee
engagement and
performance
Loss of key staff
Legal risk –
Competition and
consumer law or
terms of the
company’s AFS
licence.
Cyber Security
Risk
The risk of not operating safely
and in accordance with relevant
legislation leading to an
employee injury.
Potential for employee injury and Company reputation addressed by OH&S
systems and practices. Mitigated by ongoing training and updates to OH&S
policies. OH&S risk also reduces consequent to Energy Action Advisory
restructure with the exiting (in progress) of projects including site works.
The risk of failing to attract and
retain the best talent available.
Impacts on performance due to unavailability of talent mitigated by staff
development plans, succession plans and remuneration strategies.
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-attack or similar event
involving unauthorised access to
EAX’s IT systems leading to denial
of systems and/or corruption of
data.
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.
Procedures for systems recovery are in place including off site storage of data.
Systems restoration completed within 24 hours where a cyber breach has
occurred.
P a g e | 13
Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
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
9
9
9
9
9
9
8
9
8
9
4
4
4
4
4
4
4
4
4
3
2
2
2
2
2
2
2
2
2
1
1
1
1
0
1
1
1
1
0
0
Murray Bleach
Paul Meehan
Nitin Singhi
Mark de Kock
John Mackay
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.
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;
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; and
no fees were paid or payable to Ernst & Young for non-audit services provided during the year ended 30 June 2019.
P a g e | 14
Energy Action 2019 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 2019, 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
28 August 2019
15
ENERGY ACTION LIMITED
ABN 90 137 363 636
Remuneration Report (Audited)
The directors present the Remuneration Report for Energy Action Limited (“Company”) and its consolidated entities (“Group”)
for the year ended 30 June 2019.
1. REMUNERATION FRAMEWORK
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.
1.2.1. Non-Executive directors
Murray Bleach
Paul Meehan
Nitin Singhi
Mark de Kock
John Mackay AM
Non-Executive Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director (resigned effective 30 June 2019)
1.2.2. Senior executives (not directors of the board)
John Huggart
Tracy Bucciarelli
Ivan Slavich
Michael Fahey
Chief Executive Officer (appointed 1 January 2019)
Chief Financial Officer (appointed 18 February 2019)
Chief Executive Officer (resigned effective 21 December 2018)
Chief Operating Officer & Chief Financial Officer (resigned effective 27
February 2019)
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Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
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. No remuneration consultants were used 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 2019, the PROP accounted for 0.1% (FY18 2.8%) of issued securities of the Group, made up of 33,334
(FY18 725,578) 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 2019 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 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 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’a 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 2019. The Energy Action TSR for the period 1 July
2018 to 30 June 2019 was negative 42.8% compared to the benchmark ASX300 index which returned positive 6.8%.
Accordingly, no rights will vest in 2019.
P a g e | 17
Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
2. REMUNERATION
2.1. Fees payable to non-executive directors
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 2019, including superannuation, was
as follows:
Base fee
Non-Executive Chairman
Non-Executive Directors
$ FY19
(1 Feb 19-30 June 19)
45,000
36,000
$ FY19
(1 July 18 – 31 Jan 19)
75,000
60,000
$ FY18
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 FY19 was reduced by 40% effective 1 February 2019, reducing costs
by $0.126M per annum.
2.2. Senior executives
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 2019 was:
Fixed Component
Chief Executive Officer (Ivan Slavich)
Chief Executive Officer (John Huggart)
Chief Operating Office/Chief Financial Officer
(Michael Fahey)
Chief Financial Officer (Tracy Bucciarelli)
69%
80%
78%
85%
Notes
1 Ivan Slavich resigned 21 December 2018
2 John Huggart appointed 1 January 2019
3 Michael Fahey resigned 27 February 2019
4 Tracy Bucciarelli appointed 18 February 2019
STI Bonus
Component
25%
20%
16%
15%
LTI Component
6%
0%
6%
0%
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Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
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:
Company
70%
70%
70%
Individual
30%
30%
30%
70%
30%
Chief Executive Officer (Ivan Slavich)
Chief Executive Officer (John Huggart)
Chief Operating Officer/Chief Financial Officer
(Michael Fahey)
Chief Financial Officer (Tracy Bucciarelli)
Notes
1 Ivan Slavich resigned 21 December 2018
2 John Huggart appointed 1 January 2019
3 Michael Fahey resigned 27 February 2019
4 Tracy Bucciarelli appointed 18 February 2019
In FY19 the company 70% is made up of Company NPAT 50%, Client NPS 10% and Employee engagement 10%
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
2019 was:
% of Bonus
Potential
0%
0%
0%
0%
% LTI Potential
0%
0%
0%
0%
Ivan Slavich
John Huggart
Michael Fahey
Tracy Bucciarelli
Notes
1 Ivan Slavich resigned 21 December 2018
2 John Huggart appointed 1 January 2019
3 Michael Fahey resigned 27 February 2019
4 Tracy Bucciarelli appointed 18 February 2019
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.
P a g e | 19
Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
3.
Service agreements
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
Term of agreement
Termination*
John Huggart
On-going (no fixed term)
Tracy Bucciarelli
On-going (no fixed term)
3 months base salary termination
by company or 3 months
termination by executive
3 months base salary termination
by company or 3 months
termination by executive
* Termination benefits are payable at the option of the company in lieu of notice, other than termination for cause.
Remuneration tables
4.1 Remuneration table for the year ended 30 June 2019
Details of remuneration of directors and executive KMP of the Group for the 2019 financial year are set out in the
following table. The executive KMP are considered to be the CEO, COO/CFO and CFO only.
$
Short Term Benefits
Post
Long Term Benefits
Share Based
Total
Employment
Benefits
Payments
Non-executive
Cash salary
Cash
Non-
Super
Termination
Long service
Performance
Total
directors
and fees
bonus
monetary
benefits
leave
rights
Murray Bleach
Paul Meehan
John Mackay
Nitin Singhi
Mark de Kock
57,078
45,662
45,662
45,662
45,662
Sub-total
239,726
Executives
Ivan Slavich1
John Huggart2
Michael Fahey3
Tracy Bucciarelli4
Sub-total
Total
210,707
300,270
326,373
205,890
1,043,240
1,282,966
-
-
-
-
-
-
-
-
-
-
benefits
-
-
-
-
-
-
-
-
-
-
5,422
4,338
4,338
4,338
4,338
22,774
20,716
20,531
21,922
19,329
82,498
105,272
-
-
-
-
-
-
110,000
141,032
251,032
251,032
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(3,263)
-
(2,446)
-
(5,709)
(5,709)
62,500
50,000
50,000
50,000
50,000
262,500
338,160
320,801
486,881
225,219
1,371,061
1,633,561
Notes
1 Ivan Slavich resigned 21 December 2018
2 John Huggart appointed 1 January 2019
3 Michael Fahey resigned 27 February 2019
4 Tracy Bucciarelli appointed 18 February 2019
P a g e | 20
Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
4.2 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.
$
Non-executive
directors
Murray Bleach
Paul Meehan
John Mackay
Nitin Singhi
Mark de Kock
68,493
54,795
54,795
54,795
54,795
Sub-total
287,673
Executives
Ivan Slavich
Michael Fahey
Sub-total
Total
387,500
333,388
720,888
1,008,561
Short Term Benefits
Post-
Long term benefits
Share based
Total
employment
benefits
payments
Cash salary
and fees
Cash
bonus
Non-
Super
Termination
Long service
Performance
Total
monetary
benefits
benefits
leave
rights
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,507
5,205
5,205
5,205
5,205
27,327
20,049
20,049
40,098
67,425
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
75,000
60,000
60,000
60,000
60,000
315,000
3,263
2,446
5,709
5,709
410,812
355,883
766,695
1,081,695
Nitin Singhi is a consultant of Horizon Services Trust, which was paid $116,875 in FY19 (FY18 nil). Horizon Services Trust
provided consulting services in relation to the strategic review, the renegotiation of the banking facility and the PAS
repositioning, and introduction of new partners.
Relative Proportion of Remuneration
The relative proportion of remuneration of KMP that was linked to performance and those that were fixed are as follows:
Non-executive
directors
Murray Bleach
Paul Meehan
John Mackay
Nitin Singhi
Mark de Kock
Executives
Ivan Slavich^
John Huggart^^
Michael Fahey^^^
Tracy Bucciarelli^^^^
Fixed Remuneration
At Risk – Cash Bonus/Other
At Risk - Securities
2019
%
100
100
100
100
100
69
100
78
100
2018
%
100
100
100
100
100
69
-
80
-
2019
%
-
2018
%
-
-
-
-
-
25
-
16
-
-
-
-
-
25
-
14
-
2019
%
N/A
N/A
N/A
N/A
N/A
6
-
6
-
2018
%
N/A
N/A
N/A
N/A
N/A
6
-
6
-
^ Resigned as a Chief Executive Officer effective 21 December 2018
^^ Commenced as Chief Executive Officer effective 1 January 2019
^^^ Resigned as Chief Operating Officer and Chief Financial Officer effective 27 February 2019
^^^^ Commenced as Chief Financial Officer effective 27 February 2019
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Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
Performance rights of key management personnel.
There were NIL Performance Rights for key management personnel as at 30 June 2019 (FY18 422,024 Performance Rights).
Fair value of Performance Rights
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 tables outline the movements in Performance Rights balances of Directors and the KMP during the 2019 financial
year, and those Performance Rights which have vested at the year-end.
No performance rights were issued to KMP during the 2019 financial year.
Total value of performance rights issued:
30 June 2019
Balance at
1 July 2018
$
I. Slavich
112,809
M. Fahey
75,772
Total
188,581
Rights
Granted
Grant Date
vested &
transferred
$
-
-
-
$
-
-
-
Total number of performance rights issued:
30 June 2019
Balance at
1 July 2018
Rights
Granted
Grant Date
vested &
transferred
No.
No.
I. Slavich
203,125
M. Fahey
136,830
Total
339,955
-
-
-
No.
-
-
-
Options
cancelled/
forfeited/
other
$
(112,809)
(75,772)
(188,581)
Options
cancelled/
forfeited/
other
No.
(203,125)
(136,830
(339,955)
Options
expired
without
exercise
$
-
-
-
Options
expired
without
exercise
No.
-
-
-
Net change
Balance at
end of period
$
(112,809)
(75,772)
(188,581)
$
-
-
-
Net change
Balance at end
of period
No.
No.
(203,125)
(136,830)
(339,955)
-
-
-
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Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
Shareholdings of key
management personnel
30 June 2019
Directors
Murray Bleach
Paul Meehan*
Nitin Singhi
John Mackay AM **
Mark de Kock
Executives
Ivan Slavich
John Huggart
Michael Fahey
Tracy Bucciarelli
Total
Balance 1 July
2018
Net change
Transfer from
Eplan
KPM resigned
Balance 30 June
2019
1,881,645
4,792,846
3,000
58,470
-
329,214
-
14,000
-
819,055
-
-
-
50,000
-
-
-
-
7,079,175
869,055
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(329,214)
-
(14,000)
-
2,700,700
4,792,846
3,000
58,470
50,000
-
-
-
-
(343,214)
7,605,016
** John Mackay resigned as director effective 30 June 2019
Shareholdings of key
management personnel
30 June 2018
Directors
Murray Bleach
Paul Meehan*
Nitin Singhi
John Mackay AM
Mark de Kock
Executives
Ivan Slavich
Michael Fahey
Total
*Corrected as at 30 June 2018
Balance 1 July
2017
Net change
Transfer from
Eplan
KPM resigned
Balance 30 June
2018
1,881,645
4,798,993
3,000
32,660
-
-
(6,147)
-
25,810
-
219,214
110,000
-
-
6,935,512
129,663
-
-
-
-
-
-
14,000
14,000
-
-
-
-
-
-
-
-
1,881,645
4,792,846
3,000
58,470
-
329,214
14,000
7,079,175
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Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
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:
Key Management Personnel
Derwent Executive1 – recruitment services rendered
Horizon Services Trust2 – business consulting
Total Key Management Personnel
Consolidated Group
2019
$
-
116,875
116,875
2018
$
22,000
-
22,000
1Related party as Murray Bleach served on the Advisory Board of Derwent Executive (to 18 October 2018)
2Nitin Singhi is a consultant of Horizon Services Trust, which was paid $116,875 in FY19 (FY18 nil). Horizon Services Trust
provided consulting services in relation to the strategic review, the renegotiation of the banking facility and the PAS
repositioning, and introduction of new partners.
4.3 Company Performance
The Group results for the financial year ended 30 June 2019 was a Statutory loss after tax of $12.09 million compared to a
profit of $3.26 million in the prior year.
Revenue & other income
($000’s)
Net profit / (loss) after tax
($000’s)
Operating profit after tax
($000’s)
Earnings per share –
Operating
FY19
24,801
FY18
(Restated)
31,767
FY17
FY16
FY15
32,957
33,978
32,049
(12,093)
3,261
1,773
(449)
(2,148)
1,005
3,261
2,521
3,520
2,395
3.87 cents
12.56 cents
9.71 cents
13.56 cents
9.22 cents
Market capitalisation
$10.4m
$18.2m
$19.5m
$30.6m
$23.9m
Closing share price
$0.40
$0.70
$0.75
$1.18
$0.92
This director’s report is signed in accordance with a resolution of the Board of Directors.
Murray Bleach
Director
Dated: 28 August 2019
P a g e | 24
Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
Financial Statements
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2019
Note
Consolidated Group
2019
$
24,631,210
169,890
2018
(Restated)
$
31,656,372
110,948
24,801,100
31,767,320
(3,410,880)
(4,482,181)
5
5.1
5.2
(12,701,589)
(14,266,148)
(1,344,865)
(1,248,300)
(373,527)
(313,028)
(4,431,606)
(4,793,607)
(9,944,796)
(1,250,000)
(365,634)
(1,006,523)
-
-
-
-
(10,028,320)
6,664,056
(914,641)
(1,535,080)
(1,727,389)
-
(12,670,350)
5,128,976
5.3
12
12
5.4
5.5
5.6
(474,553)
(530,032)
(13,144,903)
4,598,944
6
1,052,018
(1,338,270)
(12,092,885)
3,260,674
Revenue from Contracts with Customers
Other income
Total Revenue
Cost of goods and services sold
Employee benefits expense
Rental expense
Travel costs
Administration expenses
Impairment of goodwill
Impairment of software
Strategic review
Restructuring costs ***
EBITDA*
Depreciation and amortisation expense
One-off Accelerated 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
1,427
(2,373)
Total comprehensive profit / (loss) for the period attributable
to owners of the parent entity
(12,091,458)
3,258,301
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
7
7
Cents
(46.59)
(46.59)
Cents
12.56
12.28
* EBITDA = Earnings before Interest, Tax, Depreciation & Amortisation
** EBIT = Earnings before Interest & Tax
*** Costs associated with restructuring, closure of rental premises and PAS onerous projects
The accompanying notes form part of these financial statements
P a g e | 25
Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
Consolidated Statement of Financial Position
For the year ended 30 June 2019
Note
Consolidated Group
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
2019
$
1,608,515
3,495,883
74,638
4,463,137
9,642,173
86,043
257,283
2,935,228
3,264,423
-
-
6,542,977
16,185,150
2,531,845
1,168,528
3,700,373
234,402
5,688,471
868,145
6,791,018
10,491,391
5,693,759
9
10
15
13
10
11
13
12
12
12
14
16
16
17
15
18b
6,537,906
170,833
(1,006,800)
2018
(Restated)
$
1,171,288
3,838,586
56,738
5,914,216
10,980,828
91,358
529,890
3,289,971
3,959,113
9,944,796
1,167,090
18,982,218
29,963,046
2,606,507
1,000,837
3,607,344
354,256
4,997,225
2,071,216
7,422,697
11,030,041
18,933,005
6,537,906
318,226
12,124,250
18f
(9,610)
(7,567)
1,430
(39,810)
5,693,759
18,933,005
The accompanying notes form part of these financial statements
P a g e | 26
Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
Consolidated Statement of Changes in Equity
For the year ended 30 June 2019
Consolidated Group
Note
Ordinary
Issued Share
Capital
Share Based
Payments
Reserve
Retained
Earnings
Foreign
currency
translation
reserve
Interest
Swap
Reserve
Total
$
$
$
$
$
$
6,537,906
262,768
9,226,934 (37,437)
(24,165)
15,966,006
-
-
-
-
-
-
-
3,260,674
- - 3,260,674
-
-
(2,373)
(2,373)
-
- 3,260,674
(2,373)
-
3,258,301
-
55,458
-
-
-
(363,358)
-
16,598
16,598
-
-
55,458
(363,358)
-
-
6,537,906
318,226
12,124,250
(39,810)
(7,567)
18,933,005
6,537,906
318,226
12,124,250
(39,810)
(7,567)
18,933,005
Balance at 30 June 2017
(Restated)
Profit/(Loss) attributable to
owners of parent entity
Foreign currency translation
reserve
18d
Total comprehensive income
Interest rate hedging reserve
18f
Share based payments
18c
Dividends paid or provided for
8
Balance at 30 June 2018
(Restated)
Balance at 30 June 2018
(Restated)
Profit/(Loss) attributable to
owners of parent entity
Foreign currency translation
reserve
18d
-
-
-
(12,092,885)
- - (12,092,885)
-
-
41,240
-
-
41,240
(12,051,645)
Total comprehensive income
-
- (12,092,885)
41,240
Interest rate hedging reserve
Share based payments
18f
18c
-
-
-
(147,393)
-
-
Dividends paid or provided for
8
-
-
(1,038,165)
-
(2,043)
(2,043)
-
-
-
-
(147,393)
(1,038,165)
Balance at 30 June 2019
6,537,906
170,833
(1,006,800)
1,430
(9,610)
5,693,759
The accompanying notes form par t of these financ ial s tatem ents
P a g e | 27
Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
Consolidated Statement of Cash Flow
For the year ended 30 June 2019
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Restructuring costs
Strategic review
Share based payments share purchase
Interest received
Interest paid
Income tax paid
Note
Consolidated Group
2019
$
2018
(Restated)
$
29,169,796
36,346,684
(25,226,434)
(29,311,779)
(393,728)
(272,360)
-
-
-
(142,779)
6,974
8,539
(412,653)
(476,657)
(168,952)
(1,150,702)
Net cash (used in) / provided by operating activities
20a
2,702,643
5,273,306
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 acc ompany ing notes form par t of these financ ial s tateme nts
11
12
8
20b
9
9
(122,760)
(177,101)
(1,728,212)
(1,567,339)
(1,850,972)
(1,744,440)
(1,038,165)
(363,358)
623,721
(4,100,000)
(414,444)
(4,463,358)
437,227
(934,492)
1,171,288
2,105,780
1,608,515
1,171,288
P a g e | 28
Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
Notes to the Financial Statements for year ended 30 June 2019
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 2019. The financial statements were authorised for
issue in accordance with a resolution of the directors on 28 August 2019.
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.
Note 2: Summary of Significant Accounting Policies
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. 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 Australian Accounting Standards and AASB Interpretations and change in the
Company accounting policy as of 1 July 2018:
– AASB 15 Revenue from Contracts with Customers
– AASB 9 Financial Instruments
–
Sales Commission Expense
The impact on the Group’s retained earnings as at FY19, FY18 and FY17 was as follows:
P a g e | 29
Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
Note 2: Summary of Significant Accounting Policies (Continued)
Retained earnings, as previously reported
Retained earnings, restated (B/F)
Changes arising from the application of AASB 15
(note a)
FY18
Full Year
Jun 18
$
(Restated)
-
9,226,934
593,496
FY17
Full Year
Jun 17
$
(Restated)
5,830,890
-
6,392,509
Changes arising from the application of AASB 9
-
-
(note b)
Changes in relation to sales commissions expense (note c)
366,957
(1,541,017)
Tax impact of the above (note 15)
NPAT impact
Profit/(Loss) for the period (as previously reported)
Dividend paid
Retained earnings, restated
(288,136)
672,317
2,588,357
(363,358)
(1,455,448)
3,396,044
-
-
12,124,250
9,226,934
P a g e | 30
Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
Note 2: Summary of Significant Accounting Policies (Continued)
The impact on the Group’s financial position as at 30 June 2018 was as follows:
Consolidated Group
30 Jun 2018
(As reported)
$
$
AASB 15
AASB 9
Sales
Adjustment
Adjustment
(Note a)
(Note b)
$
$
Commission
Expense
(Note c)
$
30 Jun 2018
(Restated)
$
1,171,288
3,838,586
56,738
-
-
-
-
-
-
-
-
-
1,171,288
3,838,586
56,738
2,374,044
4,111,610
-
(571,438)
5,914,216
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Current tax asset
Other assets
TOTAL CURRENT ASSETS
7,440,656
4,111,610
-
(571,438)
10,980,828
NON-CURRENT ASSETS
Trade and other receivables
Property, plant and equipment
Other assets
Software Development
Goodwill
Customer relationships
91,358
529,890
-
-
339,389
3,289,971
3,959,113
9,944,796
1,167,090
-
-
-
-
-
-
-
-
-
-
-
91,358
529,890
(339,389)
3,289,971
-
-
-
3,959,113
9,944,796
1,167,090
TOTAL NON-CURRENT ASSETS
16,031,636
3,289,971
-
(339,389)
18,982,218
TOTAL ASSETS
23,472,292
7,401,581
-
(910,827)
29,963,046
CURRENT LIABILITIES
Trade and other payables
Short Term provisions
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Other long term provisions
Loans and Borrowings
Deferred tax liabilities
1,927,698
1,000,837
2,928,535
354,256
4,997,225
-
-
-
-
-
327,632
2,220,474
-
678,809
2,606,507
-
-
-
-
-
-
1,000,837
678,809
3,607,344
-
-
354,256
4,997,225
(476,890)
2,071,216
TOTAL NON-CURRENT LIABILITIES
5,679,113
2,220,474
-
(476,890)
7,422,697
TOTAL LIABILITIES
8,607,648
2,220,474
-
201,919
11,030,041
NET ASSETS
EQUITY
Issued capital
Share based payments reserve
14,864,644
5,181,107
-
(1,112,746)
18,933,005
6,537,906
318,226
-
-
-
-
-
-
6,537,906
318,226
Retained earnings
8,055,889
5,181,107
-
(1,112,746)
12,124,250
Interest Swap Reserve
(7,567)
Foreign currency translation reserve
(39,810)
-
-
-
-
-
-
(7,567)
(39,810)
TOTAL EQUITY
14,864,644
5,181,107
-
(1,112,746)
18,933,005
P a g e | 31
Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
Note 2: Summary of Significant Accounting Policies (Continued)
The impact on the Group’s financial position as at 30 June 2017 was as follows:
Consolidated Group
30 Jun 2017
(As reported)
$
$
AASB 15
AASB 9
Sales
Adjustment
Adjustment
(Note a)
(Note b)
$
$
Commission
Expense
(Note c)
$
30 Jun 2017
(Restated)
$
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Current tax asset
Other assets
2,105,780
5,992,413
877
-
-
-
2,221,521
3,736,988
TOTAL CURRENT ASSETS
10,320,591
3,736,988
NON-CURRENT ASSETS
Trade and other receivables
Property, plant and equipment
Other assets
Software Development
Goodwill
Customer relationships
91,358
744,273
-
-
549,478
2,655,520
3,312,004
9,944,796
1,406,174
TOTAL NON-CURRENT ASSETS
16,048,083
2,655,520
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,105,780
5,992,413
-
877
(815,396)
5,143,113
(815,396)
13,242,183
-
-
91,358
744,273
(594,004)
2,610,994
3,312,004
9,944,796
1,406,174
(594,004)
18,109,599
TOTAL ASSETS
26,368,674
6,392,508
-
(1,409,400)
31,351,782
CURRENT LIABILITIES
Trade and other payables
Short Term provisions
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Other long term provisions
Loans and Borrowings
Deferred tax liabilities
2,717,042
1,374,146
4,091,188
320,180
9,015,005
-
-
-
-
-
372,339
1,917,752
TOTAL NON-CURRENT LIABILITIES
9,707,524
1,917,752
-
131,617
2,848,659
-
-
-
-
-
-
1,374,146
131,617
4,222,805
-
-
320,180
9,015,005
(462,305)
1,827,786
(462,305)
11,162,971
TOTAL LIABILITIES
13,798,712
1,917,752
-
(330,688)
15,385,776
NET ASSETS
EQUITY
Issued capital
Share based payments reserve
12,569,962
4,474,756
-
(1,078,712)
15,966,005
6,537,906
262,768
-
-
-
-
-
-
6,537,906
262,768
Retained earnings
5,830,890
4,474,756
-
(1,078,712)
9,226,934
Interest Swap Reserve
Foreign currency translation reserve
(24,165)
(37,437)
-
-
-
-
-
-
(24,165)
(37,437)
TOTAL EQUITY
12,569,962
4,474,756
-
(1,078,712)
15,966,006
P a g e | 32
Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
Note 2: Summary of Significant Accounting Policies (Continued)
The impact on the Group’s comprehensive income as at 30 June 2018 was as follows:
Consolidated Group
FY18
AASB 15
AASB 9
Sales
FY18
(As reported)
Adjustment
Adjustment
$
(Note a)
(Note b)
$
$
Commission
Expense
(Restated)
$
(Note c)
$
Continuing operations
Revenue
Other income
Total Revenue
Cost of goods and services sold
Employee benefits expense
Rental expense
Travel expenses
Administration expenses
EBITDA
31,062,876
593,496
110,948
-
31,173,824
593,496
(4,466,526)
(14,648,760)
(1,248,300)
(313,028)
(4,793,607)
-
-
-
-
-
5,703,603
593,496
Depreciation and amortisation
(1,535,080)
-
EBIT
Financing costs
4,168,523
593,496
(530,032)
-
Profit / (Loss) before income tax
3,638,491
593,496
Income tax expense
(1,050,134)
(178,049)
Profit / (Loss) for the year attributable to
members of the parent entity
2,588,357
415,447
Other comprehensive income/(loss) for the
period, net of tax, that may be reclassified
subsequently to profit or loss:
Exchange differences on translation of foreign
operations
Interest Swap Reserve
-
(2,373)
-
-
Total comprehensive income for the year
attributable to members of the parent entity
2,585,984
415,447
Earnings per share:
Basic earnings per share for the year attributable
to ordinary equity holders of the parent
Diluted earnings per share for the year
attributable to ordinary equity holders of the
parent
9.97
9.95
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
31,656,372
110,948
31,767,320
(15,655)
(4,482,181)
382,612
(14,266,148)
-
-
-
(1,248,300)
(313,028)
(4,793,607)
366,957
6,664,056
-
(1,535,080)
366,957
5,128,976
-
(530,032)
366,957
4,598,944
(110,087)
(1,338,270)
256,870
3,260,674
-
-
-
(2,373)
256,870
3,258,301
Cents
12.56
12.53
-
-
P a g e | 33
Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
Note 2: Summary of Significant Accounting Policies (Continued)
(a) AASB 15 Revenue from Contracts with Customers
AASB 15 introduced revised guidance which will require revenue from certain procurement activities to be recognised in
the period in which the procurement activity is undertaken.
Energy Action reviewed its accounting policy in light of this guidance and performed analysis on each revenue line item. It
was determined that procurement revenue relating to Auction and Commission Based Tenders previously recognised over
the term of the underlying energy contract will be recognised on finalisation of the related energy procurement contract.
Accordingly, revenue will be recognised upfront once the Auction is complete and contracts signed between the retailer
and the customer. Upon completion of the Auction, the amount recognised as contract assets are reclassified to trade
receivables. The commercial and payment terms of the contract term remain unchanged with payments being received
over the life of the contract. Accordingly, a contract asset called “Revenue not invoiced” has been created to recognise the
difference between revenue recognised and the amount invoiced.
Energy Action has historically experienced cancellation of Auction revenue during the contract period of approximately
7.3% based on the last 2 years of history. Accordingly it was assessed that 7.3% of the total values of contracts entered into
should be provided for on the balance sheet as a provision for cancellations on an ongoing basis. This has the effect of
reducing revenue and providing for the risk of cancellation, for the period between recognising revenue and invoicing the
retailer.
Energy Action has adopted the full retrospective approach to implement the standard since it allows for comparison of FY19
results to FY18 results on a like for like basis. This will result in a one-off acceleration of revenue. Management has
completed a full assessment by reviewing all contracts/arrangements. The finding indicates that the adoption of the new
revenue accounting policies resulted in an adjustment of $593,498 before tax in Jun 18 and $6,392,509 before tax in Jun
17.
As a practical expedient, Energy Action recognise the incremental costs of obtaining a contract as an expense when
incurred. From 1 July 2018 management has expensed sales representative and agents’ commissions upfront in line with
the revenue also being recognised upfront.
Other Procurement and Monitoring revenue, Project and Advisory Services (PAS) revenue is recognised in the accounting
period in which services are rendered and/or in accordance with the percentage of completion of the project.
(b) AASB 9 Financial Instruments
AASB 9 replaces the provisions of AASB 139 in relation to financial instruments and hedge accounting.
The key change to Energy Action’s financial report arising from this standard is in relation to the impairment of financial
assets (mainly receivables). AASB 9 effectively moves from an “incurred losses” model to an “expected losses” model, which
requires a forward-looking assessment of potential default events and losses over the life of these assets.
Energy Action evaluated the aged debtors trial balance on a monthly basis. An allowance for expected credit loss has been
calculated based on the forward-looking loss rates established for direct customers. Accounts with administrator appointed
or in liquidation will be fully provided for except where a reasonable estimate can be made of the recoverable amount. Nil
provision for retailers and metering companies based on history and due to minimal risk.
The adoption of AASB 9 did not have any material impact on the financial position or performance of the group.
(c) Sales Commissions Expense
In conjunction with the change in revenue recognition for auctions, management has also changed the current policy in
relation to sales commissions expense. The sales commissions expense relates to sales representatives and external agents
who are paid commission on sales contracts, predominately Auction and Metrics related. Historically sales representatives
commissions are paid upfront, held in the balance sheet as an asset and amortised over a period of time in line with the
average length of the contracts. This company policy change results in the adjustment of $366,955 before tax in Jun 18 and
($1,541,017) before tax in Jun 17.
P a g e | 34
Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
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 2019 are outlined in the table
below:
Standard/Interpretation
AASB 16 Leases
IFRIC 23 Uncertaininty over Income Tax Treatments (Australian
equivalent interpretation not yet issued)
AASB 17 Insurance Contracts
AASB Interpretation 23 Uncertainty over Income Tax Treatment
AASB 2017-6 Amendments to Australian Accounting Standards –
Prepayment Features with Negative Compensation
AASB 2018-2 Amendments to Australian Accounting Standards –
Plan Amendment, Curtailment or Settlement
AASB 2017-7 Amendments to Australian Accounting Standards –
Prepayment Features with Negative Compensation
AASB 2018-1 Amendments to Australian Accounting Standards –
Annual Improvements 2015-2017 Cycle
-
AASB 3 Business Combinations
-
AASB 11 Joint Arrangements
-
AASB 112 Income Taxes
-
AASB 123 Borrowing Costs
Effective for the
annual reporting
period beginning on
Expected to be initially
applied in the financial
year ending
January 1, 2019
January 1, 2019
January 1, 2019
January 1, 2019
January 1, 2019
June 30, 2020
June 30, 2020
June 30, 2020
June 30, 2020
June 30, 2020
January 1, 2019
June 30, 2020
January 1, 2019
June 30,2020
January 1, 2019
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 AASB 16 on future reporting periods:
Adoption of AASB 16, effective 1 January 2019, AASB 16 set out the principles for the recognition, measurement,
presentation and disclosure of leases. The new standard requires leasing contracts to be recognised on the balance sheet. A
distinction is no longer made between operating leases and finance leases. The directors expect this will result in an
increase in assets and liabilities, as well as a decrease in operating expenses (net of significant items) and an increase in
financial expenses.
The adoption of AASB 16 is likely to have a material impact on the financial position of the Group.
2.3
a.
Key Accounting Policies
Principles of Consolidation
The consolidated financial statements are comprised of the financial statements of the Group and its subsidiaries
as at 30 June 2019. 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
P a g e | 35
Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
Note 2: Summary of Significant Accounting Policies (Continued)
Generally, there is a presumption that a majority of voting rights results in control. To support this presumption
and 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(s) 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 consolidated
statement of comprehensive income from the date the Group gains control until the date the Group ceases to
control the subsidiary.
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 derecognises the related assets (including goodwill),
liabilities, non-controlling interest and other components of equity, while any resultant gain or loss is recognised in
profit or loss. Any investment retained is recognised at fair value.
b.
Business combinations
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as
the aggregate of the consideration transferred, which is measured at acquisition date fair value, and the amount of
any non-controlling interests in the acquiree. For each business combination, the Group elects whether to measure
the non-controlling interests in the acquiree at fair value or at the proportionate share of the acquiree’s
identifiable net assets. Acquisition-related costs are expensed as incurred and included in administrative expenses.
When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate
classification and designation in accordance with the contractual terms, economic circumstances and pertinent
conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the
acquiree.
Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition
date. 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 that is a financial instrument and within
the scope of AASB 9 Financial Instruments, is measured at fair value with the changes in fair value recognised in
the statement of profit or loss in accordance with IFRS 9. Other contingent consideration that is not within the
scope of AASB 9 is measured at fair value at each reporting date with changes in fair value recognised in profit or
loss.
P a g e | 36
Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
Note 2: Summary of Significant Accounting Policies (Continued)
c.
Goodwill
Goodwill is initially measured at cost (being the excess of the aggregate of the consideration transferred and the
amount recognised for non-controlling interests and any previous interest held over the net identifiable assets
acquired and liabilities assumed). If the fair value of the net assets acquired is in excess of the aggregate
consideration transferred, the Group re-assesses whether it has correctly identified all of the assets acquired and
all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognised at the
acquisition date. If the reassessment still results in an excess of the fair value of net assets acquired over the
aggregate consideration transferred, then the gain is recognised in profit or loss.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of
impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of
the Group’s cash-generating units that are expected to benefit from the combination, irrespective of whether
other assets or liabilities of the acquiree are assigned to those units.
Where goodwill has been allocated to a cash-generating unit (CGU) and part of the operation within that unit is
disposed of, the goodwill associated with the disposed operation is included in the carrying amount of the
operation when determining the gain or loss on disposal. Goodwill disposed in these circumstances is measured
based on the relative values of the disposed operation and the portion of the cash-generating unit retained.
d.
Income Tax and other taxes
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the
taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or
substantively enacted at the reporting date in the countries where the Group operates and generates taxable
income.
Current income tax relating to items recognised directly in equity is recognised in equity and not in the statement
of profit or loss. Management periodically evaluates positions taken in the tax returns with respect to situations in
which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and
liabilities and their carrying amounts for financial reporting purposes at the reporting date.
Deferred tax liabilities are recognised for all taxable temporary differences, except:
When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a
transaction that is not a business combination and, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss
In respect of taxable temporary differences associated with investments in subsidiaries, associates and
interests in joint arrangements, when the timing of the reversal of the temporary differences can be
controlled and it is probable that the temporary differences will not reverse in the foreseeable future
Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits
and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit
will be available against which the deductible temporary differences, and the carry forward of unused tax credits
and unused tax losses can be utilised, except:
When the deferred tax asset relating to the deductible temporary difference arises from the initial
recognition of an asset or liability in a transaction that is not a business combination and, at the time of
the transaction, affects neither the accounting profit nor taxable profit or loss
In respect of deductible temporary differences associated with investments in subsidiaries, associates
and interests in joint arrangements, deferred tax assets are recognised only to the extent that it is
probable that the temporary differences will reverse in the foreseeable future and taxable profit will be
available against which the temporary differences can be utilised
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is
no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be
utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent
that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
P a g e | 37
Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
Note 2: Summary of Significant Accounting Policies (Continued)
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the
asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively
enacted at the reporting date.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax
items are recognised in correlation to the underlying transaction either in OCI or directly in equity.
Tax benefits acquired as part of a business combination, but not satisfying the criteria for separate recognition at
that date, are recognised subsequently if new information about facts and circumstances change. The adjustment
is either treated as a reduction in goodwill (as long as it does not exceed goodwill) if it reflects new information
obtained about facts and circumstances that exist at the acquisition date that, if known, would have affected the
amount recognised at that date where recognised during the measurement period or recognised in profit or loss.
The Group offsets deferred tax assets and deferred tax liabilities if and only if it has a legally enforceable right to
set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to
income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities
which intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the
liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are
expected to be settled or recovered.
Other taxes
Revenues, expenses and assets are recognised net of the amount of GST except:
When the GST incurred on a sale or purchase of assets or services in not payable to or recoverable from
the taxation authority, in which case the GST is recognised as part of the revenue or the expense item or
as part of the cost of acquisition of the asset, as applicable
When receivables and payables 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. Commitments and contingencies are disclosed net of the amount
of GST recoverable from, or payable to, the taxation authority.
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.
e.
Plant and Equipment
Each class of plant and equipment is carried at cost or fair value as 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.
P a g e | 38
Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
Note 2: Summary of Significant Accounting Policies (Continued)
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.
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
Financial assets – initial recognition and subsequent measurement
Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value through
other comprehensive income (OCI), and fair value through profit or loss.
The Group recognises an allowance for expected credit losses (ECLs) for all receivables and contract assets. ECLs
are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk
since initial recognition, ECLs are provided for credit losses that result from default events that are possible within
the next 12-months (a 12-month ECL). For those credit exposures for which there has been a significant increase in
credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of
the exposure, irrespective of the timing of the default (a lifetime ECL).
P a g e | 39
Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
Note 2: Summary of Significant Accounting Policies (Continued)
For trade receivables and contract assets, the Group applies a simplified approach in calculating ECLs. Therefore,
the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at
each reporting date. The Group has established a provision matrix that is based on its historical credit loss
experience, adjusted for forward-looking factors specific to the debtors and the economic environment.
The Group adopted AASB 9 effectively moves from an “incurred losses” model to an “expected losses” model,
which requires a forward-looking assessment of potential default events and losses over the life of these assets.
The Group’s trade receivables do not contain a significant financing component, lifetime expected credit losses can
be recognised right on initial recognition. The Group elected to use the simplification method, hence a provision
matrix can be used.
The Group’s trade and other receivables are exposed to credit risk 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.
Financial Liabilities - Loans and borrowings
This is the category most relevant to the Group. After initial recognition, interest-bearing loans and borrowings are
subsequently measured at amortised cost using the Effective Interest Rate method. Gains and losses are
recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that
are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit or loss.
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 of disposal and its value in use. The recoverable amount 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 of disposal, recent market transactions are taken into account. If no such
transactions can be identified, an 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, which are prepared
separately for each of the Group’s CGUs to which the individual assets are allocated. These budgets and forecast
calculations generally cover a period of five years. 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 statement of profit or loss in expense categories
consistent with the function of the impaired asset, except for properties previously revalued with the revaluation
taken to Other Comprehensive Income (OCI). For such properties, the impairment is recognised in OCI up to the
amount of any previous revaluation.
For assets excluding goodwill and intangibles with indefinite useful life, an assessment is made at each reporting
date to determine whether there is an 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.
P a g e | 40
Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
Note 2: Summary Of Significant Accounting Policies (Continued)
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 statement of profit or loss 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 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, 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.
P a g e | 41
Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
Note 2: Summary Of Significant Accounting Policies (Continued)
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 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 the Group 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
The Group is in the business of providing procurement activity, contract management and environmental
reporting, embedded networks and advisory services. Revenue from contracts with customers is recognised when
controls of the services are transferred to the customer at an amount that reflects the consideration to which the
Group expects to be entitled in exchange for those services.
Revenue from Auction and Commission based tenders are recognised upfront once the Auction is complete and
contracts signed between the retailer and the customer. The commercial and payment terms of the contract term
remain unchanged with payments being received over the life of the contract. Accordingly, a contract asset called
“Revenue not invoiced” has been created to recognise the difference between revenue recognised and the amount
invoiced.
P a g e | 42
Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
Note 2: Summary Of Significant Accounting Policies (Continued)
Auction contracts provide a customer with a right to cancel during the contract period. The Group estimates
cancellation of Auction revenue during the contract period of approximately 7.3% based on the last 2 years of
history. Accordingly it was assessed that 7.3% of the total values of contracts entered into should be provided for
on the balance sheet as a provision for cancellations on an ongoing basis. This has the effect of reducing revenue
and providing for the risk of cancellation, for the period between recognising revenue and invoicing the retailer.
Other Procurement and Monitoring revenue, Project and Advisory Services (PAS) revenue is recognised in the
accounting period in which services are rendered and/or in accordance with the percentage of completion of the
project. (Revenue is transferred over time)
The sales commission paid to sales representatives and external agent will be expensed up front in line with the
revenue also being recognised upfront.
n.
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).
In determining the spot exchange rate to use on initial recognition of the related asset, expense or income (or part
of it) on the derecognition of a non-monetary asset or non-monetary liability relating to advance consideration, the
date of the transaction is the date on which the Group initially recognises the non-monetary asset or non-monetary
liability arising from the advance consideration. If there are multiple payments or receipts in advance, the Group
determines the transaction date for each payment or receipt of advance consideration.
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
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Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
Note 2: Summary Of Significant Accounting Policies (Continued)
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.
Work-in-progress
o.
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.
p.
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 18.
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.
q.
Interest Rate Hedging
The Group uses derivative financial instruments, such as interest rate swaps to hedge its interest rate risks. Such
derivative financial instruments 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.
P a g e | 44
Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
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.
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.
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.
Revenue not invoiced and Provision for Cancellation
The Group adopted the full retrospective approach to implement AASB 15 Revenue from Contracts with Customers.
The revenue will be recognised upfront once the auction is complete and contracts signed between the retailer and
the customer. An asset “Revenue not invoice” has been created to recognise the difference between revenue
recognised and the amount invoiced. The total value of contracts entered into historically experienced cancellation of
auction revenue during the contract period. A provision for cancellations of 7.3% has been provided to reduce the risk
of cancellation. The assessment of historical cancellations is reviewed at each reporting period and revised
accordingly. As at 30 June 2019, holds a provision for 6.7% of the total value of revenue not invoiced.
P a g e | 45
Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
Note 4: 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.
Advisory Services (AS) will focus on optimizing energy efficiency for commercial buildings, as well as environmental
reporting and NABERS rating services for property portfolio clients. The Group will also continue to engage in embedded
networks implementation. All activity relating to head contracting on projects, project management, independent
commissioning agent and engineering contracts (including upgrades), which often were underperforming areas of the
former PAS division, will cease. The Group expects to complete a majority of the current order book related to these
activities by 30 June 2019 and will be referring any outstanding work to partners.
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.
Revenue by customer
There is no revenue with a single external customer that contributes more than 10% of total revenue.
P a g e | 46
Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
Note 5: Revenue, Other Income and Expenses
Year-ended
30 June 2019
Procurement Monitoring
$
$
Project
Advisory
Services
$
Total
$
Revenue from contracts with
customers
Other income
Year-ended
30 June 2018
(Restated)
Revenue from contracts with
customers
Other income
5.1
Timing of Revenue Recognition
Services transferred at a point in time
Services transferred over time
Total Revenue from contracts with customers
All material revenues are generated in Australia.
6,419,299
13,995,134
4,216,777
24,631,210
169,890
-
-
169,890
6,589,189
13,995,134
4,216,777
24,801,100
Procurement Monitoring
$
$
Project
Advisory
Services
$
Total
$
9,872,786
15,145,890
6,637,696
31,656,372
110,948
-
-
110,948
9,983,734
15,145,890
6,637,696
31,767,320
Consolidated Group
2019
$
2018
(Restated)
$
5,129,626
8,040,802
19,671,474
24,801,100
23,726,518
31,767,320
P a g e | 47
Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
Note 5: Revenue, Other Income and Expenses (continued)
5.2
Employee benefits
Salaries
Commissions
Superannuation
Share based payment expense
Other
Total Employment benefits
5.3
Administrative costs
Accounting, audit and tax fees
Advertising
Legal and professional fees
Telephone and internet
Computer maintenance costs
Bad debt expense *
Recruitment costs
Other expenses
Total Administrative costs
5.4
Depreciation and amortisation
Depreciation
Amortisation - Software
Amortisation - Customer relationships
Total Depreciation & amortisation
5.5
One-off Accelerated Depreciation and Amortisation
Accelerated Amortisation – Customer relationship
Accelerated Amortisation – Software
Accelerated Depreciation – Furniture and fitting
Total One-off Accelerated Depreciation and Amortisation
5.6
Financing costs / (income)
Interest income
Interest expenses
Borrowing costs
Note
Consolidated Group
2018
(Restated)
$
2019
$
10,501,458
11,332,295
223,376
445,165
1,098,749
1,275,709
(93,759)
82,457
971,765
1,130,522
12,701,589
14,266,148
225,049
198,235
253,496
470,536
125,606
92,804
99,677
204,219
1,992,418
1,763,038
(12,302)
100,768
118,579
112,989
1,629,083
1,851,018
4,431,606
4,793,607
238,409
375,767
676,232
920,230
-
239.083
914,641
1,535,080
1,167,090
496,671
63,628
1,727,389
-
-
-
-
(6,960)
(8,539)
372,192
452,070
109,321
86,501
Total Financing costs / (income)
*Bad debt exp included provision adjustment ($12,302), (FY18: actual bad debt write-off $37,349 net of provision
adjustment $63,419)
474,553
530,032
P a g e | 48
Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
Note 6: Income Tax Expense
Note
Consolidated Group
2019
$
2018
(Restated)
$
115,183
1,151,405
(7,224)
(56,564)
(169,010)
-
15
(990,967)
243,430
(1,052,018)
1,338,270
a.
The components of tax expense comprise:
Current tax
Current tax – under/(over) prior year
Tax rate change
Deferred tax
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 27.5% (2018: 30.0%)
(3,614,849)
1,379,683
Add Tax effect of :
Permanent Differences
—
—
Tax rate change
Share based payments/trust
—
—
—
Goodwill impairment
Other permanent differences
Prior year adjustments
Less Tax effect of :
Deductible Expense
—
Unbooked tax losses
Income tax attributable to entity
The applicable weighted average effective tax rates are as
follows:
(169,010)
(12,128)
2,734,819
16,374
(7,224)
-
(15,400)
-
25,557
(56,564)
-
4,994
(1,052,018)
1,338,270
8.00%
29.10%
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.
P a g e | 49
Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
Note 7: 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:
Net profit / (loss) attributable to ordinary equity holders of
the parent from continuing operations
Net profit / (loss) attributable to ordinary equity holders of
the parent for basic earnings
2019
$
2018
(Restated)
$
(12,092,885)
3,260,673
(12,092,885)
3,260,673
Net profit / (loss) attributable to ordinary equity holders of
the parent adjusted for the effect of dilutions
(12,092,885)
3,260,673
Weighted average number of ordinary shares for basic
earnings per share
Effect of dilution:
Performance rights
2019
No.
2018
No.
25,954,117
25,954,117
-
600,838
Weighted average number of ordinary shares adjusted for the
effect of dilution
25,954,117
26,554,955
Basic earnings / (loss) per share (Statutory)
Diluted Earnings / (loss) per share (Statutory)
(46.59)
(46.59)
12.56
12.28
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. Effect
of dilution: Performance rights 33,334 (FY18: 600,838).
Refer also to the Directors’ Report for further information on the calculation of Operating Profit.
P a g e | 50
Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
Note 8: Dividends
Dividends paid:
Final 2017 franked dividend of 1.40 cents per share
Final 2018 franked dividend of 4.00 cents per share
Note
Consolidated Group
2019
$
2018
(Restated)
$
-
363,358
1,038,165
-
1,038,165
363,358
a. Proposed final 2019 franked dividend of NIL cents per share
25
-
(Final 2018 franked dividend of 4.00 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
Subsequent to year end, the franking account would be reduced by the
proposed dividend reflected per (a) as follows:
7,829,912
6,834,935
-
-
168,952
1,150,702
(444,928)
(155,725)
7,553,936
7,829,912
-
(444,928)
7,553,936
7,384,984
Tax rates
From 1 July 2018 the tax rate at which paid dividends have been franked is 27.5% (2018: 30.0%), prior to this dividends were
franked at 30.0%. Dividends proposed will be franked at the rate of 27.5% (2018: 30.0%).
P a g e | 51
Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
Note 9: Cash and Cash Equivalents
Cash at bank*
Restricted cash**
Total Cash
Note
Consolidated Group
2019
$
2018
(Restated)
$
1,579,429
1,016,005
29,086
155,283
22
1,608,515
1,171,288
*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.
Note 10: Trade and Other Receivables
CURRENT
Trade receivables
Provision for expected credit loss
Total current trade receivables
NON-CURRENT
Bonds and security deposits
Note
Consolidated Group
2019
$
2018
(Restated)
$
3,767,945
4,153,454
(272,062)
(314,868)
22
3,495,883
3,838,586
22
86,043
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.
The Group policy stipulates that the receivable accounts with an administrator appointed or in liquidation or with 90
days+ outstanding – fully (100%) provided for except where a reasonable estimate can be made of the recoverable
amount. Accounts assigned to a debt collector – 50% provided. Direct customers – expected credit loss (ECL) model
based on risk associated with different ageing bucket. Retailers and Metering companies – no provision required,
historical evidence shows immaterial write-off of debt. Partially due to the pre-approval process for many of the
retailers which results in the amounts validated prior to invoicing. Disputed amounts owing which are in the process of
litigation will be provided for on a case by case basis depending on the probability of recovery.
ECL rates are applied to gross receivable balances after adjusting for any specific bad debts.
P a g e | 52
Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
Note 10: Trade and Other Receivables (Continued)
Past due but not impaired (days overdue)
Within
Total
Trade Terms
< 30
31–60
61–90
$
$
$
$
$
2019
Trade and term receivables
3,767,945
2,385,864
675,104
Expected credit loss allowance
272,062
0
4,370
3,495,883
2,385,864
670,734
2018
Trade and term receivables
4,153,454
2,969,261
Expected credit loss allowance
314,868
0
3,838,586
2,969,261
783,548
12,615
770,932
145,667
11,199
134,468
60,400
9,919
50,481
193,676
9,395
184,281
8,902
11,462
-2,560
Neither the Group nor parent entity holds any financial assets with terms that have been renegotiated, which would
otherwise be past due or impaired.
Revenue not invoiced is shown as net of provision for cancellation in Note 13.
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.
91+
$
367,634
247,098
120,536
331,344
280,872
50,472
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Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
Note 11: Property Plant and Equipment
Computer equipment:
At cost
Accumulated depreciation
Furniture and fittings:
At cost
Accumulated depreciation
Total Plant and Equipment
Note
Consolidated Group
2019
$
2018
$
2,026,141
1,996,467
(1,879,857)
(1,779,165)
146,284
217,302
1,422,999
1,640,552
(1,312,000)
(1,327,964)
110,999
312,588
257,283
529,890
a. Movements in Carrying Amounts
Movement in the carrying amounts for each class of property, plant and equipment between the beginning and the end of
the current financial year
Consolidated Group:
Balance at 1 July 2017
Additions
Assets disposed
Depreciation expense
Balance at 30 June 2018
Additions
Assets disposed
Depreciation expense
Accelerated Depreciation
Balance at 30 June 2019
Note
Computer
Equipment
Furniture
and Fittings
Total
$
$
$
201,503
542,770
744,273
174,261
2,840
177,101
(7,347)
(8,370)
(15,717)
5.4
(151,115)
(224,652)
(375,767)
217,302
312,588
529,890
65,272
57,488
122,760
-
(93,330)
(93,330)
(136,290)
(102,119)
(238,409)
(63,628)
(63,628)
146,284
110,999
257,283
5.4
5.5
P a g e | 54
Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
Note 12: Intangible Assets
Goodwill
Accumulated amortisation - goodwill
Net carrying value – goodwill
Customer relationships
Accumulated amortisation – customer relationship
Net carrying value – customer relationships
Software development costs
Impairment of software
Accumulated amortisation
Net carrying value – software development costs
Total intangibles
Consolidated Group
2018
$
9,944,796
2019
$
9,944,796
(9,944,796)
-
-
9,944,796
2,438,000
2,438,000
(2,438,000)
(1,270,910)
-
1,167,090
10,841,063
9,219,150
(1,250,000)
-
(6,326,640)
(5,260,037)
3,264,423
3,959,113
3,264,423
15,070,999
Goodwill
Customer
relationships
Software
Development
costs
Total
Intangibles
$
$
$
$
Consolidated Group:
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
G/(L) on Disposal
Amortisation charge
Closing value at 30 June 2018
Year ended 30 June 2018
-
-
-
-
1,567,339
1,567,339
-
-
5.4
-
(239,084)
(920,230)
(1,159,314)
9,944,796
1,167,090
3,959,113
15,070,999
Balance at the beginning of year
9,944,796
1,167,090
3,959,113
15,070,999
Internal development
G/(L) on Disposal
Impairment
Amortisation charge
One-off Accelerated Amortisation
Closing value at 30 June 2019
-
-
(9,944,796)
-
-
-
5.4
5.5
-
-
-
-
1,728,212
1,728,212
-
-
(1,250,000)
(11,194,796)
(676,232)
(676,232)
(1,167,090)
(496,671)
(1,663,761)
-
3,264,423
3,264,423
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.
P a g e | 55
Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
Note 12: Intangible Assets (continued)
12 (a) Impairment testing of goodwill and other intangible assets
For the year ended 30 June 2019, 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 the cash generating unit (CGU) has been determined on a value in use calculation using cash flow
projections. These cash flow projections have been based on a forecast for the next two years. This has then been
extrapolated for a further 3 years.
The discount rate applied to cash flow projections is a 17.6% post tax, 24.3% pre-tax (FY18: 13.2% post tax, 9.69% pre-tax)
and the cash flows beyond the next two calendar year forecasts are extrapolated using 0% growth rate (FY18: 1%) and
terminal growth rate of nil (FY18: nil).
The increase in the discount rate is due to an additional risk premium as a result of the decreased profitability during the
year and associated business risk.
A detailed analysis and formal testing was performed as at 31 December 2018. With indicators of impairment during the
reporting period, the Company undertook a formal assessment of goodwill. The impairment of goodwill resulted in an
impairment of 100% of goodwill to the value of $9.94 million. The balance of goodwill as at 30 June 2019 is NIL. In addition,
a formal testing was performed as at 30 June 2019, with indicators of impairment, resulting in an impairment to other
intangible assets to the value of $1.25 million.
12 (b) Accelerate amortisation
For the year ended 30 June 2019, the company has assessed the useful life of Customer Relationships and Software
Development costs. Due to the loss of significant customers, the Company has revisited the expected useful life of customer
relationships to 30 June 2019. With Business Transformation Program (BTP) expected to be in use from the next financial
year, the expected useful life of Enact related assets was reduced to finish at 30 June 2019.
This has resulted in the accelerated of Customer Relationship amortisation and specific Software Development depreciation
until the 30 June 2019.
Note 13: Other Assets
CURRENT
Prepayments
Work in progress*
Revenue not invoiced*
NON CURRENT
Revenue not invoiced*
* These represents conditional contract asset as on 30 June 2019. (Note 3)
Consolidated Group
2019
$
2018
(Restated)
$
271,199
948,836
937,365
865,241
3,243,102
4,111,610
4,463,137
5,914,216
2,935,228
3,289,971
2,935,228
3,289,971
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Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
Note 14: Trade and Other Payables
CURRENT
Unsecured liabilities:
Trade payables
Other payables and accrued expenses
Consolidated Group
2019
$
2018
(Restated)
$
695,339
559,164
1,836,506
2,047,343
2,531,845
2,606,507
a.
Financial liabilities at amortised cost classified as trade
and other payables
Trade and other payables:
- Total current
2,531,845
2,606,507
Financial liabilities as trade and other payables
22
2,531,845
2,606,507
Terms and conditions of the above financial liabilities:
– Trade payables are non-interest bearing and are normally settled on 30 or 60 day terms
– Other payables are non-interest bearing and have an average term of six months
P a g e | 57
Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
Note 15: Tax
CURRENT
Income tax asset
NON-CURRENT
Note
Consolidated Group
2019
$
2018
(Restated)
$
22
74,638
56,738
Opening
Balance
AASB 15
& Sales
Commissi
on
Expense
FY17
Adjusted
Opening
Balance
Tax rate
change
True-up
to Tax
Return
Charge to
Income
Closing
Balance
$
$
$
$
Consolidated
Group
Deferred Tax
2019
Provisions
Accruals
Fixed assets
Customer
relationships
Prepaid
commissions
710,018
390,473
(118,675)
(350,127)
(54,153)
Work in progress
(259,554)
Share Based
Payments
Sundry
Revenue not
invoiced
Deferred Tax
2018
15,932
-
(2,405,130)
(2,071,216)
-
-
-
-
-
-
-
-
-
-
710,018
(58,288)
(10,564)
(147,180)
493,986
390,473
(32,539)
-
(75,311)
282,623
(118,675)
9,890
-
488,029
379,244
(350,127)
29,177
-
320,950
-
(54,153)
41
53,658
(17,925)
(18,379)
(259,554)
21,630
-
3,737
(234,187)
15,932
(1,328)
-
(13,656)
948
-
-
-
48,399
48,399
(2,405,130)
200,428
-
383,924
(1,820,778)
(2,071,216)
169,011
43,094
990,966
(868,145)
Provisions
590,087
27,943
618,030
Accruals
214,869
39,485
254,354
Fixed assets
Customer
relationships
Prepaid
commissions
(257,607)
-
(257,607)
(421,852)
-
(421,852)
(341,232)
422,820
81,588
Work in progress
(176,498)
-
(176,498)
Share Based
Payments
Sundry
Revenue not
invoiced
19,894
-
19,894
-
-
-
- (1,945,696)
(1,945,696)
(372,339)
(1,455,447)
(1,827,786)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
91,986
710,018
136,119
390,473
138,932
(118,675)
71,725
(350,127)
(135,740)
(54,153)
(83,056)
(259,554)
(3,962)
15,932
-
-
(459434) (2,405,130)
(243,430)
(2,071,216)
P a g e | 58
Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
Note 16: Provisions and other liabilities
Analysis of total provisions
Current
Restructuring Provision
Annual leave
Long service leave
Non-current
Long service leave
Consolidated Group
Note
2019
$
2018
$
382,705
588,084
-
758,605
197,738
242,232
1,168,528
1,000,837
234,402
234,402
354,256
354,256
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.
Note 17: Loans and Borrowings
Market Rate Loan Facility (FY18: Multi-Option Facility Agreement)
Less capitalised debt establishment fees
Note
Consolidated Group
2019
$
2018
$
5,723,721 5,100,000
(35,250) (102,775)
22
5,688,471 4,997,225
Energy Action entered into a total loan commitment of $9.55 million with the CBA on 8 May 2019, including a market rate
loan facility of $9 million, bank guarantee facility of $0.3 million and corporate card facility of $0.25 million. The facility was
extended during the year for a two year term expiring 29 September 2021. This facility was reduced from the previous $12.0
million facility limit at the request of Energy Action, decreasing liquidity by $2.8 million.
As at 30 June 2019, Energy Action had utilised $5.7 million of market rate loan and $0.238 million bank guarantees. The
carrying value of the loans and borrowings materially approximate fair value. Funds advanced under the facility are secured
by a charge over the assets of the Group, and includes Interest Cover and Gearing ratios.
Utilisation of the facility is summarised in the following table:
P a g e | 59
Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
Note 17: Loans & Borrowings (Continued)
Financing facilities
Loan facilities (excluding corporate card facility)
9,300,000
12,000,000
Consolidated Group
2019
$
2018
$
Amounts utilised
Borrowings
Bank guarantees – non cash
Total amounts utilised
Total amounts unutilised
Note 18: Issued Capital and Reserves
Fully paid ordinary shares
5,723,721
5,100,000
237,667
189,617
5,961,388
5,289,617
3,338,612
6,710,383
Consolidated Group
2019
$
6,537,906
2018
$
6,537,906
6,537,906
6,537,906
Consolidated Group
2019
No.
2018
No.
a.
Ordinary Shares (number)
At the beginning of the reporting period:
25,954,117
25,954,117
Movement in the year:
-
-
At the end of the reporting period
25,954,117
25,954,117
Consolidated Group
2019
$
2018
$
b.
Ordinary Shares ($)
At the beginning of the reporting period:
6,537,906
6,537,906
Movement in the year
-
-
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.
P a g e | 60
Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
Note 18: Issued Capital and Reserves (Continued)
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.
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
25% of Performance Rights
Earnings Per Share Target (EPS)
(“Target 1 Entitlement”)
Total Shareholder Return (TSR) (“Target 2
Entitlement”)
Target 1
Actual Operating EPS
LESS THAN 94.9 % of
Budget Operating EPS
Actual Operating EPS
EQUALS 95% of Budget
Operating EPS
Available Performance
Rights
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%
Target 2
Available Performance
Rights
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
Company Total
Compounded TSR 1.10
TIMES Total Compounded
TSR of the Index
0%
50%
Vesting will occur on a
linear basis between 50%
and 100%
100%
P a g e | 61
Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
Note 18: 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:
EPS $
TSR $
3 Year
0.6693
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 2019, the Group has recognised ($93,759) of share-based payment expense in the statement of
comprehensive income (30 June 2018: $82,457). Share based payments expense is net of reversals due to non-
achievement of targets (EPS targets) and forfeitures in the case of terminated employees.
Share Based Payment Reserve
Note
at the beginning of the reporting period
Share based payment expenses
Employee shares
PROP payment
Transfer cash to Employee Shared Trust
Movement in the year
At the end of the reporting period
Consolidated Group
2019
$
2018
$
318,226
262,768
(93,759)
82,457
-
111,109
(53,634)
-
-
(138,108)
(147,393)
55,458
170,833
318,226
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.
Foreign Currency Translation Reserve
Note
at the beginning of the reporting period
Foreign currency translation reserve write off
Foreign currency translation entry (current period)
Movement in the year
At the end of the reporting period
Consolidated Group
0
$
0
$
(39,810)
(37,437)
39,641
-
1,599
(2,373)
41,240
(2,373)
1,430
(39,810)
P a g e | 62
Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
Note 18: Issued Capital and Reserves (Continued)
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.
f.
Interest Rate Hedging Reserve
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 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 Market
Rate Loan Facility Agreement. Interest rate swap transaction of $5 million expiring 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. For the year ended 30 June 2019, the interest rate hedging reserve was $9,610 (FY18: $7,567)
Interest Rate Hedging Reserve
Note
at the beginning of the reporting period
Interest rate hedging entry (reverse prior period)
Interest rate hedging entry (current period)
Movement in the year
At the end of the reporting period
Consolidated Group
0
$
0
$
(7,567)
(24,165)
7,567
24,165
(9,610)
(7,567)
(2,043)
16,598
(9,610)
(7,567)
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 2019 and 30
June 2018 are as follows:
Bank loans
Less cash and cash equivalents
Net debt / (cash)
Total Equity
Gearing percentage (%)
Note
17
9
Consolidated Group
2019
$
2018
(Restated)
$
5,688,471
4,997,225
(1,608,515)
(1,171,288)
4,079,956
3,825,937
5,693,759
18,933,005
72%
20%
Gearing as measured by total net debt divided by total equity was 72% as at 30 June 2019 and 20% at 30 June 2018.
P a g e | 63
Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
Note 19: 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
Note
Consolidated Group
2019
$
2018
$
668,864
788,726
796,787
1,467,507
1,465,651
2,256,233
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.
The Group has provided the following bank guarantees at 30 June 2019 for regional offices:
–
–
–
–
Parramatta office
Sydney office
Brisbane office
Melbourne office
Note
Consolidated Group
2019
$
2018
$
145,347
97,297
-
126,210
31,323
31,323
19,250
19,250
195,920
274,080
P a g e | 64
Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
Note 20: Cash Flow Information
a. Reconciliation of Cash Flow from Operations with Profit after Income Tax
Strategic review
Restructuring costs
Depreciation and amortisation
Share based payments expense
Amortisation of borrowing costs
Impairment of goodwill
Impairment of software
Profit after income tax
–
–
–
–
–
–
–
-
Changes in assets and liabilities, net of the effects of purchase and disposal of
subsidiaries:
–
–
–
–
–
Cash flow from operations
(increase)/decrease in prepayments and other assets
increase/(decrease) in trade payables and accruals
(increase)/decrease in trade and term receivables
increase/(decrease) in deferred taxes
increase/(decrease) in provisions
Restructuring Asset write off
Consolidated Group
2019
$
2018
(Restated)
$
(12,092,885)
3,260,674
2,642,030
1,535,080
(147,392)
55,458
68,875
-
9,944,796
1,250,000
93,274
520,145
93,331
-
-
-
-
-
1,888,584
2,153,828
265,254
(290,393)
(1,220,971)
(820,667)
(764,400)
187,569
(312,005)
(334,236)
2,702,643
5,273,306
b. Reconciliation of liabilities arising from financing activities
Total liability from
financing activities
Opening
Balance
Cash flow
Acquisition
Foreign
exchange
movement
Fair value
changes
Non-cash changes
FY19
Long term borrowings
FY18
Long term borrowings
$
$
5,100,000
623,721
9,200,000
(4,100,000)
$
-
-
$
-
-
$
-
-
Closing
Balance
$
5,723,721
5,100,000
P a g e | 65
Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
Note 21: 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
Employee Share Trust
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
Australia
Australia
2019
100%
100%
100%
100%
100%
100%
100%
100%
100%
2018
100%
100%
100%
100%
100%
100%
100%
100%
100%
* Percentage of voting power is in proportion to ownership
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.
Share based payment expense reversal of $71,314 related to KMP’s
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 no longer a member of the Advisory Board of Derwent Executive from 18 October 2018. Nil amount was
paid in FY19 (FY18 $22,000)
Nitin Singhi is a consultant of Horizon Services Trust, which was paid $116,875 in FY19 (FY18 nil). Horizon
Services Trust provided consulting services in relation to the strategic review, the renegotiation of the
banking facility and the PAS repositioning, and introduction of new partners.
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 2019.
The totals of remuneration paid to KMP of the Group during the year are as follows:
Short-term employee benefits
Long-term employee benefits
Share based payments
Post-employment benefits – superannuation
Total Compensation
Consolidated Group
2019
$
2018
$
1,282,966
1,008,561
251,032
-
105,272
-
5,709
67,425
1,639,270
1,081,695
P a g e | 66
Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
Note 21: Related Party Disclosures (Continued)
The amounts disclosed in the table are the amounts recognised as an expense during the reporting period relating to KMP.
The ultimate parent
d.
Energy Action Limited is the ultimate parent based and listed in Australia.
Note 22: 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 9 as detailed in the accounting
policies to these financial statements, are as follows:
Note
9
10
10
13
17
14
Consolidated Group
2019
$
2018
(Restated)
$
1,608,515
1,171,288
3,495,883
3,838,586
86,043
91,358
6,178,330
7,401,581
11,368,771 12,502,813
5,688,471
4,997,225
2,531,845
2,606,507
8,220,316
7,603,732
Financial assets
Cash and cash equivalents, including restricted cash
Receivables
Bond and security deposits
Revenue not invoiced
Total financial assets
Financial liabilities
Loans and Borrowings
Trade & Other payables
Total financial liabilities
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.
P a g e | 67
Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
Note 22: 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
10.
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 10.
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
P a g e | 68
Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
Note 22: Financial Risk Management (continued)
Within 1 Year
1 to 5 years
Over 5 years
Total
2019
2018
2019
2018
2019
2018
$
$
$
$
$
$
2019
$
2018
(Restated)
$
Consolidated Group
Financial liabilities
due for payment
Bank loans
50,573
49,223 5,688,471
4,997,225
-
-
5,739,044
5,046,448
Trade and other
payables (excluding
est. annual leave)
Total expected
outflows
Financial assets —
cash flows realisable
Cash and cash
equivalents
2,531,845
2,606,507
-
-
-
-
2,531,845
2,606,507
2,582,418
2,655,730
5,688,471
4,997,225
-
-
8,270,889
7,652,955
1,579,429
1,016,005
-
-
-
-
1,579,429
1,016,005
Restricted cash
29,086
155,283
-
-
-
-
29,086
155,283
Trade, term and loans
receivables
Work in progress
Bonds and security
deposits
3,495,883
3,838,586
-
-
-
-
3,495,883
3,838,586
948,836
865,241
-
-
-
-
948,836
865,241
-
-
86,043
91,358
-
-
86,043
91,358
Revenue not invoiced
3,243,102
4,111,610
2,935,228 3,289,971
-
-
6,178,330
7,401,581
Total anticipated
inflows
Net (outflow)/inflow
on financial
instruments
b.
Interest rate risk
9,296,336 9,986,725
3,021,271 3,381,329 -
- 12,317,607 13,368,054
6,713,918
7,330,995
(2,667,200)
(1,615,896)
-
-
4,046,718
5,715,099
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 loan rollover 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 2019, the
Group had bank loans of $5.7 million comprising of $0.7 million on 90 day terms at 2.74% and $5.0 million on 3.38% fixed
interest expiring 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 2019, $10k was recognised in
interest rate reserve in the balance sheet (30 June 2018: $8k). 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.
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 net
of cash.
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.
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Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
Note 22: Financial Risk Management (continued)
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.
Year ended 30 June 2019
Year ended 30 June 2018
Increase/decrease in
basis points
Consolidated Group
Profit before tax
$
+/- 100
+/- 100
$
-/+ 56,495
-/+ 73,390
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.
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 those items traded with quoted prices in active markets for identical liabilities
Level 2 those items with significantly observable inputs other than quoted process in active markets
Level 3 those with unobservable inputs
Fair Values
FY19
FY18
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
Financial Liabilities
Bank loans
5,688,471
-
-
4,997,225
-
-
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Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
Note 23: Auditors’ Remuneration
The auditor for Energy Action Limited is Ernst & Young
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
entity in the consolidated group
— Other services in relation to the entity and any other entity in the
consolidated group
Consolidated Group
2019
$
2018
$
208,400
146,965
-
13,500
208,400
163,400
Note 24: 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.
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
Note
Parent
2018
(Restated)
$
2019
$
16,600,039
14,455,480
3,448,650
14,560,537
20,048,689
29,016,017
(10,422,300)
(10,118,695)
(7,471,939)
(8,008,194)
(17,894,239)
(18,126,890)
(8,005,600)
(8,005,600)
5,851,149
(2,883,528)
(2,154,450)
(10,889,127)
3,539,746
(8,045,708)
3,539,746
(8,045,708)
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Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
Note 25: Events After the reporting period
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.
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Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
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 2019 are
in accordance with the Corporations Act 2001, including:
i.
ii.
giving a true and fair view of its financial position as at 30 June 2019 and performance
complying with Accounting Standards (including the Australian Accounting Interpretations)
and the Corporations Regulations 2001
b.
c.
The financial statements and notes also comply with International Financial Reporting Standards as
disclosed in Note 2.1
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 2019.
On behalf of the board
Murray Bleach
Director
28 August 2019
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Energy Action 2019 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
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
2019, 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)
giving a true and fair view of the consolidated financial position of the Group as at 30 June 2019
and of its consolidated financial performance for the year ended on that date; and
b)
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.
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:
Assessing 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.
During the year the Group has recognised
impairment of $9.94 million and $1.25 million in
respect of the Goodwill and other intangible assets
balances, respectively.
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 12 of the financial report for the
related disclosures.
Evaluating the Group’s assessment of indicators
of impairment for the other intangible assets.
For the impairment test performed, assessing
the appropriateness of the board approved cash
flow forecast and assumptions therein, including
performing a sensitivity analysis of key
assumptions and evaluating whether a
reasonably possible change in assumptions could
result in an impairment of the carrying value of
the assets.
We considered the historical accuracy of the
Group’s cash flow forecasts against 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 12 of the financial
report.
Recognition of revenue
Why significant
How our audit addressed the key audit matter
AASB 15 Revenue from Contracts with Customers
is the new Australian Accounting Standard relating
to revenue recognition and became effective for
the Group from 1 July.
Under AASB 15, revenue from procurement
activities relating to commission based tenders of
the Group is recognised in the period in which the
procurement activity is undertaken. This
treatment is different to that previously applied by
the Group and has resulted in a $3.4 million
transitional adjustment impacting the opening
retained earnings disclosed in note 2.2(i) of the
financial report.
The Group generates revenue from projects that
may cross multiple financial periods. For such
contracts, AASB 15 requires the Group to
recognise revenue over the period of time as and
when customers receive and consume the benefits
resulting from the satisfaction of underlying
performance obligations identified within the
contracts.
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:
Assessing whether the Group’s revenue
recognition policy is in line with the requirements
of the new revenue recognition standard.
Selecting a sample of contracts to determine
whether revenue was recognised in accordance
with the contract terms and the Group’s revenue
recognition policies.
Assessing the appropriateness of the estimated
project costs for significant projects through
discussions with project managers and obtaining
a sample of project questionnaires. These
questionnaires which include a project status
update and costs to complete analysis for the
respective contract and support the estimate of
the percentage of completion.
Assessing the recoverability of work in progress
for the outstanding projects through testing of
subsequent billings and cash receipts.
We tested the mathematical accuracy of revenue
and contract profit recognised based on the
percentage of completion for all contracts.
In testing the transition to the new accounting
standard:
Refer to Note 2(m) within the financial report for a
summary of the Group’s policy.
o We obtained an understanding of the Group’s
process for implementing AASB 15.
o We selected key contracts with the
customers on a sample basis and reviewed
them to ensure that the application of the
policy is in line with the requirements of
AASB 15.
o We tested the completeness of the
population of contracts included in the
transition adjustment.
o Tested the mathematical accuracy of
transition adjustments.
Considered the adequacy of the disclosures
contained within Notes 2.2(i) and 5 of the
financial report.
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 2019 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 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.
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
2019.
In our opinion, the Remuneration Report of Energy Action Limited for the year ended 30 June 2019,
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
28 August 2019
ENERGY ACTION LIMITED
ABN 90 137 363 636
Corporate Governance Policy
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 17 October 2019; and
has been approved by the Board and is available of Energy Action’s website at
http://www.energyaction.com.au/about/corporate-governance
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Energy Action 2019 Annual Report
ENERGY ACTION LIMITED
ABN 90 137 363 636
Shareholder Information as at 25 September 2019
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
Mr Bruce Duncan MacFarlane and Ms Linda
Ann Millar
Mr Murray Bleach & related entities
Microequities Asset Management Pty Ltd
Mr Paul Meehan & related entities
Mr Stephen Twadell & related entities
1,686,895
2,684,435
4,772,313
4,727,091
1,946,209
Current
Interest1
6.50%
10.34%
18.38%
18.21%
7.50%
Latest Notice
Date
27/06/2019
23/04/2019
02/04/2019
18/11/2013
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 498 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.
4. Distribution of security holders
The following table summarises the distribution of quoted securities as at 25 September 2019:
Range
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and Over
5. Unmarketable parcel of shares
No. of holders
126
198
57
86
27
%
25.51
40.08
11.54
17.41
5.47
The number of shareholders holding less than a marketable parcel of ordinary shares is 173. A
unmarketable parcel comprises of 1,785 fully paid ordinary shares based on EAX’s closing share price of
$0.28 on 25 September 2019.
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ENERGY ACTION LIMITED
ABN 90 137 363 636
6.
Twenty largest shareholders of quoted equity securities as at 25 September 2019
Details of the 20 largest shareholders of quoted securities by registered shareholding are:
Rank
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Name
MEEHANTEAM PTY LTD
MR MURRAY EDWARD BLEACH & MRS NORMA LEIGH EDWARDS
MICROEQUITIES ASSET MANAGEMENT PTY LTD
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
HOLYOAKE INVESTMENTS PTY LTD
TOVEELEN PTY LTD
ACRES HOLDINGS PTY LTD
MILLAR & MACFARLANE PTY LTD
J & C ALLEN SUPERANNUATION FUND PTY LTD
MR BRUCE DUNCAN MACFARLANE & MS LINDA ANN MILLAR
MR EDWARD JAMES HANNA
EQUITAS NOMINEES PTY LIMITED
JASPER SUPERANNUATION FUND PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
MR BARRY DENTON
MR IVAN ROMAN SLAVICH & MRS ANNA SLAVICH
BOND STREET CUSTODIANS LIMITED
DR GEOFFREY PHILLIP BENT & MRS GABRIELLE MARY BENT
EMERALD SHARES PTY LIMITED
AMARINA SYSTEMS PTY LIMITED
25 Sep 2019
2,900,698
2,427,545
2,326,873
2,320,000
1,774,127
1,696,209
1,200,000
968,361
875,833
803,082
611,387
592,582
552,553
479,380
370,131
329,214
251,000
246,299
225,000
220,331
21,170,605
4,783,512
25,954,117
%IC
11.18
9.35
8.97
8.94
6.84
6.54
4.62
3.73
3.37
3.09
2.36
2.28
2.13
1.85
1.43
1.27
0.97
0.95
0.87
0.85
81.57
18.43
100.00
Total
Balance of register
Grand total
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 2019 Annual Report