ANNUAL
REPORT 2019
Managing Director & CEO’s Report
Business Unit Overview
Chairman’s Report
s Company Highlights
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Directors’ Report
Directors’ Declaration
Financial Report
Auditor’s Independence Declaration
Independent Auditor’s Report
This Annual Report includes the Engenco Limited’s Directors’
Report, the Annual Financial Report and Independent Audit
Report for the financial year ended 30 June 2019 lodged with
the Australian Securities and Investments Commission and
ASX Limited. The Annual Report is available on the Engenco
website www.engenco.com.au. A copy of our full Corporate
Governance Statement and ASX Appendix 4G outlining
compliance with ASX Corporate Governance Principles and
Recommendations is available on our website at engenco.
com.au//investor-centre/corporate-governance-statement.
Engenco Limited ABN 99 120 432 144
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Engenco Limited and its controlled entities – Annual Report 2019
Revenue
$’000
FY17
FY18
FY19
EBITDA
$’000
FY17
FY18
FY19
$12,785
Net Assets
$’000
FY17
FY18
FY19
$129,319
$157,336
$174,850
$16,627
$57,011
$73,218
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$84,075 C
$17,320
Basic Earnings Per Share
Cents
FY17
FY18
FY19
2.67c
5.74c
4.54c
Dividend
Cents
FY17
FY18
FY19
0.5c
1.0c
1.5c
REVENUE
INCREASED
BY
11.1%
Engenco Limited and its controlled entities – Annual Report 2019
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Vince De Santis
We believe the results of our collective efforts over the past few years speak for
themselves but you, our shareholders, will be the ultimate judge.
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To those of you who are familiar with the contents of
previous Engenco Annual Reports, annual general
meeting materials and investor presentations, I offer
you a friendly word of caution – many key elements of
what you are about to read will sound familiar. A cynic
might say “repetitive and boring”, but we would prefer
to describe it as “highly convicted and consistent”.
We believe the results of our collective efforts over
the past few years speak for themselves but you, our
shareholders, will be the ultimate judge.
As another year ends, the “Engenco flywheel”
keeps turning…
“WeendedFY19inaverysoundfinancial
position with more than $23 million in
cash, no debt and an undrawn $10 million
revolving credit facility with National
Australia Bank.”
Our net profit before tax was comparable to that
achieved in the prior year (FY19: $12.7m v FY18:
$13.0m), assisted by the one-off gain generated on
the sale of most of the Group’s rail wagon fleet. While
we had aimed for higher profitability in FY19, we did
continue building the capacity and capability of the
Engenco group of businesses for which many of the
benefits will be realised in future periods, so it was
also pleasing that we have been able to do this and
maintain our profitability at the same time.
We are periodically quizzed about the Company’s
relatively substantial carry forward tax losses and
while we cannot alter the events which unfortunately
lead to their generation, it is good that we are now
able to utilise these losses to enhance returns to our
shareholders and bolster Engenco’s cash position. It
is due to the ongoing confidence in the Company’s
future financial performance that under the application
of relevant accounting standards, we were obliged
to increase the amount of the carry forward tax
losses that are now recognised on the Company’s
balance sheet.
Given the Company’s strong financial position, we
were also very pleased to reward our shareholders
with a 50% increase in the final dividend from
1 cent, to 1.5 cents per share. And with our healthy
franking account balance, this dividend will again be
fully franked.
I would like to draw your attention to one other set
of metrics, namely the Company’s return on capital
employed (or “ROCE”) . This removes the effect
of any perceived “free hit” derived from the use of
our carry forward tax losses. While slightly down
on FY18’s ROCE of 18%, we were pleased with
this year’s outcome of 15% given the relatively high
proportion of assets held in cash.
With the Australian stock market at or near record
highs, interest rates at historic lows and other key
economic indicators such as GDP, inflation and
unemployment all looking relatively weak, it would
not be unreasonable to be somewhat confused
on how the Australian economy may fare over the
next year. And of course we must deal with a highly
interconnected “global economy” and the ever
present risks that external shocks pose, some “on
the radar” and others completely unforeseeable, in
both the Australian and overseas markets in which
Engenco operates.
We have been spruiking the virtues of a strong
balance sheet for quite some time and our position
has not changed. To coin an often used phrase, we
remain alert but are by no means alarmed and given
the relatively small share which Engenco occupies in
many of the markets in which it operates, we remain
excited about the opportunities that lay ahead of us to
keep profitably developing and growing the business.
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Engenco Limited and its controlled entities – Annual Report 2019
Investing in
our future
And finally, to our shareholders, we really do
appreciate your decision to allocate some of your
investment capital to our company. To the many long
term shareholders who have supported us as well as
more recent entrants onto our share register, it gives
us great pleasure in being able to report another year
of solid achievement and present a sound foundation
from which we continue with the next stage of
the climb.
As a new year begins, the “Engenco flywheel”
continues to gather momentum.
Vince De Santis
Chairman
It may be stating the bleeding obvious but the key
to our continued success lies in the hands of our
people. We are confident that a number of key
personnel appointments over the past year together
with the ongoing investment in our “people and
culture” programs will deliver very positive outcomes
as we continue to build our human capacity and
foster a high performance environment throughout
the business.
As a company, we continue to evolve and mature
and Engenco is a vastly different looking business
to what it was only a few short years ago for which
we are immensely proud. And for this we extend our
sincere thanks and appreciation to all those Engenco
men and women who come to work each day to
deliver superior service and value to our customers.
We also wish to thank their families for the support
they provide to our people. To that end, the provision
of a safe and secure workplace and being an
“employer of choice” continue to be two of our key
organisational objectives.
To our customers, we once again thank you for the
trust and confidence you place in Engenco and
allowing us to service your requirements to the best
of our abilities.
Engenco Limited and its controlled entities – Annual Report 2019
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Business Unit Overview
38.9% of total revenue
Revenue $’000
FY18
FY19
EBITDA $’000
FY18
FY19
$54,196
$68,009
$9,462
$12,425
Key Operations
• Locomotive and wagon maintenance and
refurbishment service
• Rail sector wheelset, bearing and bogie services
• Engineering, design and manufacturing services
Achievements
• Positive revenue trajectory driven by expansion of heavy
maintenance activities and modernised wheel bearing
refurbishment facility
• Increased capacity via east coast expansion, including
agreement to establish new Central Queensland facility
• Continued establishment of alliances with globally
recognised OEM partners
Outlook
Our customer satisfaction and service delivery has led to
increased service outsourcing, supporting the positive
trajectory for the business. Continued expansion of activities
on the East coast is expected to contribute positively to the
business in the future.
27.4% of total revenue
Revenue $’000
FY18
FY19
EBITDA $’000
FY18
FY19
Key Operations
• Mobile powertrain genuine component and spare
parts distribution
• Through-life support solutions
• Technical products and provision of engineering services
Achievements
• Refined business structures to focus on growth
opportunities in the mining, transport, energy and
defence industries
• Investments in strategic inventory and expansion of the
$52,915
$47,902
$7,977
product range
$5,563
• The successful introduction of a range of
innovative products
Outlook
Growth prospects include: expanded technical services and
products in the mining sector; new specialist services in the
gas compression market; and ongoing support for the Collins
Class Submarine life-extension program.
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Engenco Limited and its controlled entities – Annual Report 2019
13.5% of total revenue
Revenue $’000
FY18
FY19
EBITDA $’000
FY18
FY19
$19,001
$23,685
$3,000
$2,837
6.6% of total revenue
Revenue $’000
FY18
FY19
EBITDA $’000
FY18
FY19
$1,967
$12,280
$11,475
$3,590
9.8%
of total revenue
$15,593
$17,128
$1,437
$1,540
Revenue $’000
FY18
FY19
EBITDA $’000
FY18
FY19
Key Operations
• Highly skilled rail operations personnel
• Track protection services
• Rail infrastructure maintenance services
Achievements
• Successful completion of major rail upgrade project in
South Australia
• Continues to build on its reputation as an employer of
choice and a prime provider of supplementary rail personnel
Outlook
With the continued industry growth, Momentum is well
positioned to contribute to nation-building projects, working
closely with “tier 1” infrastructure customers.
Key Operations
• Registered Training Organisation (RTO)
• Nationally recognised training services
• Development and implementation of training programs
Achievements
• Renewal of Registered Training Organisation (RTO)
Registration by ASQA
• Government funded training initiatives providing growth
prospects
• Roll-out of technology to progress the “Paperless
RTO” strategy
Outlook
Growing demand for rail operations training and certification in
line with multiple long-term National rail projects.
Key Operations
• Manufacture of dry bulk goods tankers for road transportation
• Distribution of imported aluminium dry bulk tankers
• Maintenance, repair and overhaul, parts sales and
servicing capability
Achievements
• Lean manufacturing initiatives (including a new tanker design)
resulting in improved production efficiency
• Capitalised on strong demand for tankers from the numerous
construction and infrastructure projects around Australia
Outlook
Focus on maintaining production efficiency improvements
and providing a higher quality product ensuring high levels of
customer satisfaction.
Engenco Limited and its controlled entities – Annual Report 2019
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Kevin Pallas
A high-performance culture is growing across the business and in support of
this a Group People and Culture Plan was introduced during the year.
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It has been another successful year for Engenco, with
several positive outcomes and further developments
for expansion. Having further strengthened our
balance sheet and with increasing financial reserves
and growing revenue streams, the Group is entering an
exciting phase of development.
Positive momentum from several periods of improving
financial performance continued in the 2019 financial
year with consolidated revenue of $174.9m for the
year, representing a 11.1% increase over the previous
year, and a Compound Annual Growth Rate (CAGR)
of 6.9% over a four-year period. The revenue mix
changed somewhat in response to our focus on
driving long-term repeatable business, and this had
some impact on margin performance. Consolidated
Group EBITDA performance of $16.6m and NPBT of
$12.7m for the year were at a similar level compared
to the outstanding performance last year, and this
repeatability is a pleasing outcome. Net profit after
tax was $14.2m, this result included the positive
benefit of again increasing the partial recognition of
our tax losses. FY18 was the first year tax losses
against future profits were partially recognised, having
a significant one-off impact on the FY18 Net profit
after tax.
“ The Group continued to generate positive
cashflowduringtheyearandremained
debt free whilst having access to an
undrawn facility of $10m with the NAB. For
the year net cash increased by $15.1m,
partly contributed to by the sale of
surplus assets.”
Net cash flow provided by operations was $12.3m,
up from $8.3m last year. Capital expenditure levels
in total were lower compared to the previous year’s
2019: $3m (2018: $3.6m), however the focus was on
growth assets acquisition which accounted for around
three-quarters of the total capex. The year ended in a
healthy cash balance of $23.4m.
A high-performance culture is growing across the
business and in support of this a Group People and
Culture Plan was introduced during the year. This
initiative includes leadership development structures
and enterprise-wide individual performance plans,
driving clear alignment between expectations and
actions. Additionally, a focus on succession planning
helps de-risk a relatively thin executive team and
supports the long-term growth aspirations of
the Company.
It is pleasing to report that continued vigilance and
the importance placed on a safe work environment
has resulted in an improving safety KPI trend. Group
Lost Time Injury Frequency Rate decreased from
4.90 to 2.07, a year-on-year reduction of 57%.
Further improvements are being driven and recent
risk reviews pre- and post-injury have resulted in
task modification, the introduction of automated
technology and continuing employee education.
The Company is committed to managing risks in an
integrated, systematic and practical manner and as
such the Group HSEQ Action Plan and Corporate
Risk Registers are continuously reviewed with a view
to currency and mitigation actions. The Group HSEQ
team with the assistance of site management and
staff conducted 25 comprehensive site-based WHS
audits and 47 internal process audits during FY19. All
non-conformances, opportunities for improvement and
any independently reported issues throughout the year
are consolidated into the Group HSEQ Action Plan for
continual management review.
The Group’s multi-year strategy to expand its range
of goods and services, and investment in people,
plant and technology is delivering long-term benefits
on several fronts. These initiatives have ensured
higher quality revenue, greater operational efficiency
and financial stability for the business at a time of
transition toward new growth opportunities. During
this expansion phase, more moderate margins have
been generated, and some development costs have
been absorbed. These investments are however an
important step forward for the Group as we continue
our growth and profitability improvement journey.
Good penetration of the market has also supported
an expansion of the Group’s Newcastle facilities in
New South Wales by Gemco, CERT and Drivetrain,
including additional coal rail rollingstock fleet
maintenance work, and increased servicing capacity
for mobile mining machinery.
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Engenco Limited and its controlled entities – Annual Report 2019
Developing
our people
Gemco Rail’s growth plans included the establishment
of new maintenance capacity on the East coast
which was met with a very positive response from
customers. Consequently during the year, our Telarah
facility rapidly reached capacity on day shift, whilst
the flexible and high-quality services provided by
Gemco have ensured on-going customer support and
further growth is expected in the Hunter Valley region.
Similarly, our modernised wheel bearing refurbishment
facility in Western Australia allows economic
refurbishment of heavy haul rolling stock bearings,
resulting in very good growth of this revenue stream
historically focussed on the non-bulk freight market.
In Central Queensland, we are establishing a wheel
bearing and wagon maintenance workshop to service
the bulk materials rail market in the region. This facility
will support continued expansion of rail rollingstock
maintenance services along Australia’s East coast,
enabling the Company to service more long-term
contracts including those recently won.
Our people focused businesses, CERT Training and
Momentum Rail, provide diversity of income for the
Group. During the year CERT Training achieved
Australian Skills Quality Authority (ASQA) registration
renewal, a great outcome following additional
investment in compliance and quality. With further
focus on government funded training and having
expanded training facilities in Newcastle and Victoria,
CERT has begun to benefit from improving demand
for rail vocational training. Momentum enjoyed a stable
level of labour-hire revenue from regular customers in
the rail operations segment, and completed a large
lower margin project towards the end of FY19.
Drivetrain’s revenue and margin performance
deteriorated in the year as several factors including
a lower Australian dollar and increased pricing
competition affected the mature product lines that
Drivetrain has historically relied upon.
Engenco Limited and its controlled entities – Annual Report 2019
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Improved direct marketing of an expanded range of
Drivetrain technical services and products, particularly
to mining and mining contracting businesses, has
resulted in deeper customer relationships and greater
demand for Drivetrain’s goods and services. New
specialist products and services for the engine and
gas compression market have been well-received and
open further opportunities with customers.
Additionally, the introduction of the UT99
underground mining utility vehicle into the Drivetrain
product range opens long-term maintenance
prospects after the lower margin capital sales
are realised.
As the Hedemora Sweden business shifts focus
to monetisation of the HS Turbocharger range,
collaboration opportunities on fuel and turbocharger
technology opportunities are evolving. Appointment
of a USA based sales team member is also driving
turbocharger sales activity in the Americas, whilst the
Swedish team has been successful with several new
installations in Europe and Asia.
Convair’s solid performance in the year reflected a
buoyant Australian construction industry which was
evident throughout the period. Increased revenue
resulted in better profitability as margins remained
moderate, whilst constant re-investment in lean
manufacturing initiatives has ensured that Convair
remains competitive against imported alternatives.
“ Our multi-year investment strategy
isalreadydeliveringbenefitsand
providesasolidplatformforsignificant
long-term growth.”
Vitally important are the everyday efforts, support
and progress of our people – the leaders, managers,
technicians and administrative staff – all of whom
continue to grow in confidence and all of whom I am
immensely proud and honoured to lead. Through
the support of a well-engaged board of directors we
have invested to establish a stronger, more focused
business with the personnel, products and services
to become a great choice for customers in our
core markets.
Kevin Pallas
Managing Director and CEO
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Engenco Limited and its controlled entities – Annual Report 2019
Demonstrating
Capability
Engenco Limited and its controlled entities – Annual Report 2019
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The directors present their report, together with the
consolidated financial statements of the Group, comprising
of Engenco Limited (“the Company”) and its controlled
entities, for the financial year ended 30 June 2019 and the
auditor’s report thereon.
Directors
The directors of the Company at any time during or since the
end of the financial year are:
Vincent De Santis
BCom, LLB (Hons)
CHAIRMAN SINCE 24 MARCH 2016, NON‑EXECUTIVE DIRECTOR SINCE
19 JULY 2010, MEMBER OF AUDIT AND RISK COMMITTEE SINCE
31 JULY 2013.
Vince was the Managing Director of the Elphinstone Group
up until December 2018. He initially joined the Elphinstone
Group in 2000 as the Group’s Legal Counsel and Finance &
Investment Manager. During his time with the Group, Vince
also served as a director of various subsidiary and joint
venture companies including William Adams Pty Ltd, Gekko
Systems Pty Ltd and APac Energy Rental Pte Ltd. Prior to
that, he was a Senior Associate in the Energy, Resources
& Projects team at national law firm Corrs Chambers
Westgarth, based in Melbourne. Vince is also a member of
the University of Tasmania’s North West Advisory Board and
the Tasmanian Rhodes Scholarship Selection Committee.
Kevin Pallas
BCom, MAICD
MEMBER OF THE BOARD SINCE 17 DECEMEBER 2014, MANAGING
DIRECTOR & CEO SINCE 1 FEBRUARY 2015.
Kevin possesses senior management and leadership
experience through an extensive career in engineering,
mining supplies, metals and manufacturing industries.
Holding a Bachelor of Commerce degree, Kevin specialised
in the areas of financial and cost accounting systems’
design and development, and operational and commercial
management for a number of multinationals in South Africa,
New Zealand, Singapore and Australia prior to joining the
Group in 2007. He served in the position of Chief Financial
Officer from 1 March 2013 to 31 January 2015. In February
2015, Kevin was appointed Managing Director and Chief
Executive Officer.
Dale Elphinstone OA
FAICD
NON‑EXECUTIVE DIRECTOR SINCE 19 JULY 2010.
Dale is the Executive Chairman of the Elphinstone Group
which he founded in 1975. Dale has considerable experience
in the engineering, manufacturing and heavy machinery
industries and among other things is one of the longest serving
Caterpillar dealer principals in Australia, having acquired the
Caterpillar dealership in Victoria and Tasmania in 1987. Dale
is the Co-Chair of the Joint Commonwealth and Tasmanian
Economic Council and was a director of the Tasmanian
Health Organisation North-West until 30 June 2015. He was
a director of Caterpillar subsidiary, Caterpillar Underground
Mining Pty Ltd until December 2008 and of the formerly
publicly listed Queensland Gas Company Limited from
October 2002 to November 2008. Dale was also a director of
ASX listed National Hire Group Limited until December 2011.
Alison von Bibra
BSc, MBA
INDEPENDENT NON‑EXECUTIVE DIRECTOR AND MEMBER OF THE AUDIT
AND RISK COMMITTEE SINCE 17 JANUARY 2017.
Alison has held key positions at a number of organisations
including almost 10 years at ASX listed multi-national,
CSL Limited. During her time at CSL, Alison’s roles
included Senior Director, Human Resources based
in the USA and General Manager, Human Resources
located at the company’s Melbourne head office. Alison
also has experience in a range of board roles including
among others, the Dental Board of Australia, the Ballarat
General Cemeteries Trust, CSL Superannuation Fund and
Westernport Regional Water Corporation. She is currently a
Member of the Chiropratic Board of Australia.
Ross Dunning AC
BE (Hons), BCom, FIE Aust, FIRSE, RPEQ
INDEPENDENT NON‑EXECUTIVE DIRECTOR AND MEMBER OF AUDIT AND
RISK COMMITTEE SINCE 8 NOVEMBER 2010, CHAIRMAN OF AUDIT AND
RISK COMMITTEE SINCE 21 FEBRUARY 2017.
Ross has extensive exposure to the rail industry having
served as the Commissioner for Railways in Queensland,
President of the Australian Railways Association and
Managing Director of Evans Deakin Industries Limited (the
predecessor to the ASX listed company, Downer EDI Limited).
Ross has been awarded the Companion of the Order of
Australia and has held non-executive positions with a number
of ASX listed companies including Toll Holdings Limited and
Downer EDI Limited, Government owned corporations in
Queensland and New South Wales and on unlisted public
companies. Ross is also chairman of the Board of Indec Ltd.
Engenco Limited and its controlled entities – Annual Report 2019
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Directors’ Reportfor the year ended 30 June 2019
From left: Dale Elphinstone, Vincent De Santis, Kevin Pallas, Alison von Bibra and Ross Dunning.
Meetings of Directors
The number of directors’ meetings (including meeting of committees of directors) and number of meetings attended by each of
the directors of the Company during the financial year were:
Board Member
Vincent De Santis
Kevin Pallas
Dale Elphinstone
Alison von Bibra
Ross Dunning
Directors’ Shareholdings
The directors’ shareholding of ordinary shares as at 30 June 2019 were:
Vincent De Santis
Kevin Pallas
Dale Elphinstone
Alison von Bibra
Ross Dunning
Director Meetings
Audit and Risk
Committee
Meetings
12/12
12/12
11/12
11/12
12/12
4/4
–
–
4/4
4/4
Ordinary Shares
378,951
72,632
202,406,914
34,793
182,948
Engenco Limited and its controlled entities – Annual Report 2019
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Andrew Nightingale
BCom, LLB
COMPANY SECRETARY SINCE 1 AUGUST 2018.
Andrew is a lawyer with over 10 years’ experience, including
working for a corporate regulator, an ombudsman and
a variety of in house teams. Andrew holds a Bachelor of
Laws and a Bachelor of Commerce from the University of
Otago, and has practiced law in the United Kingdom and
New Zealand.
Company Secretary
Paul Burrows
BCom, CA, GAICD
COMPANY SECRETARY AND CHIEF FINANCIAL OFFICER SINCE
10 DECEMBER 2018.
Paul has vast experience in ASX listed entities and
global businesses. He holds a Bachelor of Commerce
degree, is a Chartered Accountant and is a Graduate of
the Australian Institute of Company Directors. Paul has
significant experience in corporate governance, mergers
and acquisitions and financial reporting in high growth
environments together with hands-on experience in the
implementation of system and process improvements.
Linda Dillon
BCom, CA, CS, GDipAppFin, DipInvestRel
COMPANY SECRETARY AND CHIEF FINANCIAL OFFICER FROM
6 APRIL 2018 TO 1 AUGUST 2018.
Linda previously gained deep experience as a CFO and
Company Secretary of a number of ASX Listed entities and
multinational groups in a wide range of industries. Linda
holds a Bachelor of Commerce degree, a Graduate Diploma
in Applied Finance, a Diploma in Investor Relations, and is a
Chartered Accountant and Chartered Secretary.
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Engenco Limited and its controlled entities – Annual Report 2019
Directors’ Reportfor the year ended 30 June 2019
Principal Activities
Principal Activities
The Group provides a diverse range of engineering
The Group provides a diverse range of engineering services and products through two business streams: Power & Propulsion
services and products through two business streams:
and Rail & Road. Engenco businesses specialise in:
Power & Propulsion and Rail & Road. Engenco businesses
specialise in:
• Maintenance, repair and overhaul of powertrain, propulsion, heavy duty engines and gas compression systems;
● Maintenance, repair and overhaul of powertrain,
• Maintenance, repair and overhaul of locomotives;
● Manufacture and supply of road transport and storage
● Project management, training and workforce
tankers for dry bulk products.
provisioning; and
• Manufacture and maintenance of wagons, carriages and associated rail equipment;
propulsion, heavy duty engines and gas compression
systems;
• Project management, training and workforce provisioning;
● Maintenance, repair and overhaul of locomotives;
• Leasing of wagons and other rail equipment; and
● Manufacture and maintenance of wagons, carriages and
• Manufacture and supply of road transport and storage tankers for dry bulk products.
associated rail equipment;
The Group operates globally and employs over 600
people (full time equivalent) in over twenty locations in
three countries.
The Group services a diverse client base across the defence,
resources, marine, power generation, rail, heavy industrial
and infrastructure sectors.
The Group services a diverse client base across the defence, resources, marine, power generation, rail, heavy industrial and
infrastructure sectors.
The Group operates globally and employs over 600 people (full time equivalent) in over twenty locations in three countries.
Group Overview
Group Overview
Rail and Road
Power and Propulsion
Drivetrain
Hedemora
Gemco Rail
Total Momentum
CERT
Convair
Engenco Limited and its controlled entities – Annual Report 2019
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Engenco Annual Report 2019 11
Drivetrain
Drivetrain’s services span the complete engineering product
life-cycle for heavy mobile powertrain systems, large-frame
turbochargers, heavy diesel and gas power generation and
gas compression equipment.
Services include:
• Maintenance, repair, and overhaul
• Design, installation and commissioning
• Genuine component and spare parts distribution
• Field service
• Technical and engineering services in remote locations
• Equipment life extension
Drivetrain has facilities and service centres in eight locations
in the ANZ region.
Gemco Rail
Gemco Rail has been a well-known supplier of quality
services and products to the rail sector for many years.
Building on this solid reputation and experience, the business
specialises in providing fleet-management services to
national rail operators and in the manufacture, refurbishment
and overhaul of rail equipment. Gemco Rail provides wagon
and locomotive scheduled and ad-hoc maintenance services
and manufactures custom designed and engineered new
and refurbished wagons, bogie component parts and
associated rail equipment. Gemco Rail also supplies a broad
range of rail track maintenance equipment and parts.
Services include:
• Manufacture and maintenance of freight wagons, other
rollingstock and rail equipment
• Locomotive and wagon maintenance, repair and overhaul
• Fleet asset management
• Custom maintenance, modification, retrofit and upgrades
• Bogie, wagon and wheel refurbishment
• Field service crews
• Train inspections
• RailBAM acoustic analysis
The flagship facility in Forrestfield WA is complemented by
other facilities strategically located on main lines in Victoria,
South Australia and New South Wales.
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Engenco Limited and its controlled entities – Annual Report 2019
Directors’ Reportfor the year ended 30 June 2019
Total Momentum (Momentum Rail)
Momentum Rail offers a range of
workforce provisioning services
from providing skilled individuals to
fully-supervised and equipped crews
to carry out rail track construction,
maintenance and upgrades.
Momentum Rail plan, implement
and manage safe working solutions
for rail clients, from hand-signallers
and lookouts to highly experienced
Principal Protection Officers and
Locomotive Drivers. Operating out of
branches in Forrestfield WA, Royal
Park SA, Thornton NSW and Port
Melbourne VIC, Momentum Rail’s
strategic presence is well placed to
service the rail and resource sectors.
Centre for Excellence in Rail Training
(CERT Training)
CERT Training is a registered training
organisation (RTO) that provides
responsive, flexible and innovative
training, assessment and recertification
services to the Australian rail industry.
CERT delivers nationally accredited
and industry-based training programs
on a regular basis, and provides
customised courses to suit individual
business needs. The business has
training centres in Perth, Port Hedland,
Sydney, Newcastle, Ipswich, Royal
Park, Melbourne and Bunbury with the
flexibility to train on-site Australia wide.
Convair Engineering (Convair)
Convair designs and manufactures
tankers for the transportation of dry
bulk products by road and rail. The
business repairs, maintains and
supplies spare parts for all makes of
dry bulk tankers and offers distribution,
service and repair of compressors
and ancillary equipment used in
the support of dry bulk materials
handling. Convair is an agent for
Feldbinder Spezialfahrzeugwerke
GmbH of Germany, supplementing
the company’s range of products
with aluminium dry bulk tankers
and stainless steel liquid tankers.
With its manufacturing facility based
in Melbourne, Convair services
customers throughout Australia and
New Zealand.
A group of diverse industrial businesses built
on solid engineering capabilities
Engenco Limited and its controlled entities – Annual Report 2019
15
Operating and Financial Review
Operating Results
The Group reported a net profit after tax, including non-controlling interests, of $14,227,000 for the year ended 30 June 2019.
The consolidated result for the year is summarised as follows:
Revenue
EBITDA2
EBIT1
Profit / (loss) after tax
Net operating cash flow
Net assets
Net cash / (debt)
2019
$’000
2018
$’000
174,850
157,336
16,627
13,012
14,227
12,321
84,075
23,408
17,320
13,490
18,003
8,292
73,218
8,318
1 EBIT is earnings before finance costs and income tax expense.
2 EBITDA is EBIT before depreciation and amortisation.
Note – EBIT and EBITDA are non-IFRS financial measures, which have not been subject to review or audit by the Group’s external auditors. These
measures are presented to assist understanding of the underlying performance of the Group.
Review of Principal Businesses
Disclosure of information regarding principal business
performance and likely developments has been made in the
Chairman’s and Managing Director’s sections of this report.
Significant Changes in the State of Affairs
In the opinion of the directors there were no significant
changes in the state of affairs of the Group that occurred
during the financial year under review.
Dividends
Since the end of the previous financial year, the Board
declared a final dividend of 1 cent per ordinary share (fully
franked) on 29 August 2018 and subsequently paid the
dividend on 27 September 2018.
On 21 August 2019, the Board resolved to declare
a final dividend of 1.5 cents per share (fully franked).
Payment of the dividend to shareholders will take place on
26 September 2019.
Events Subsequent to Reporting Date
On 21 August 2019, the Board resolved to declare
a final dividend of 1.5 cents per share (fully franked).
Payment of the dividend to shareholders will take place in
26 September 2019.
Other than the above, there has not arisen, in the interval
between the end of the financial year and the date of this
report, any item, transaction or event which would have a
material effect on the financial statements of the Group at
30 June 2019.
Environmental Regulation
Group operations are subject to significant environmental
regulation under Commonwealth, State and international law,
including noise, air emissions and the use, handling, haulage
and disposal of dangerous goods and wastes.
The Group follows practices that minimise adverse
environmental impacts and comply with environmental
requirements.
The Board is not aware of any significant breaches during the
periods covered by this report nor does it consider the Group
is subject to any material environmental liabilities.
National Greenhouse and Energy Reporting Guidelines
The Group’s environmental obligations are regulated under
both Federal and State law. The Group is not subject to
the conditions imposed by the registration and reporting
requirements of the National Greenhouse and Energy
Reporting Act 2007.
Indemnification and Insurance of Officers
The Company has indemnified and paid premiums to
insure each of the Company’s directors and executives
against liabilities for costs and expenses incurred by them in
16
Engenco Limited and its controlled entities – Annual Report 2019
Directors’ Reportfor the year ended 30 June 2019
Lead Auditor’s Independence Declaration
The lead auditor’s independence declaration is set out on
page 25 and forms part of the Directors’ Report for the
financial year ended 30 June 2019.
Rounding Off
The Group is of a kind referred to in ASIC Corporations
(Rounding in Financial/Directors’ Reports) Instrument
2016/191 dated 1 April 2016 and in accordance with that
Instrument, amounts in the consolidated financial statements
and Directors’ Report have been rounded off to the nearest
thousand dollars, unless otherwise stated.
defending any legal proceedings arising out of their conduct
while acting in their capacity, other than conduct involving a
wilful breach of duty in relation to the Company.
Non‑Audit Services
During the year KPMG, the Group’s auditor, has performed
certain other services in addition to the audit and review of
the financial statements.
The Board has considered the non-audit services provided
during the year by the auditor and is satisfied that the
provision of those non-audit services during the year by the
auditor is compatible with, and did not compromise, the
auditor independence requirements of the Corporations Act
2001 for the following reasons:
• All non-audit services were subject to the corporate
governance procedures adopted by the Group and have
been reviewed by the Audit and Risk Committee to ensure
they do not impact the integrity and objectivity of the
auditor; and
• The non-audit services provided do not undermine the
general principles relating to auditor independence as
set out in APES 110 Code of Ethics for Professional
Accountants, as they did not involve reviewing or
auditing the auditor’s own work, acting in a management
or decision making capacity for the Group, acting
as an advocate for the Group or jointly sharing risks
and rewards.
Details of the amounts paid to the auditor of the Group,
KPMG Australia, and its network firms for audit and
non-audit services provided during the year are set
out below:
SERVICES OTHER THAN AUDIT AND
REVIEW OF FINANCIAL STATEMENTS:
Other Services
Taxation compliance services
Advisory services
AUDIT AND REVIEW OF
FINANCIAL STATEMENTS
TOTAL PAID TO KPMG
2019
$
4,580
11,495
16,075
344,117
360,192
Engenco Limited and its controlled entities – Annual Report 2019
17
Remuneration Report – Audited
Remuneration Policy
This report details the nature and amount of remuneration
for all directors and key executives of the Group who have a
strategic commercial impact upon the Group’s activities.
The Board’s policy for determining the nature and amount of
remuneration for board members and key executives of the
Group is as follows:
• All executive directors and key executives receive a salary
package comprised of a base salary, short-term incentive
and superannuation.
• The Board reviews executive packages annually by
reference to the Group’s performance, executive
performance and comparable market information.
• The performance objectives of each executive are agreed
at the beginning of each fiscal year and recorded via the
annual Short-Term Incentive Plan. These performance
objectives are based predominantly on achievement
of the Board approved budget targets for the given
year and improvements in the key safety measure of
Lost Time Injury Frequency Rate. Performance against
other recorded objectives is also monitored and linked
to the achievement of the Group’s strategy and overall
development. Other than those made under the
Short-Term Incentive Plan, incentive payments are at
the discretion of the Board of Directors. All performance
objectives are aligned with increasing shareholder value.
• The directors and key executives receive a
superannuation guarantee contribution required by the
government (which was 9.5% during the year) and do not
receive any other retirement benefits. Some individuals,
however, may choose to sacrifice part of their salary to
increase superannuation contributions.
• All remuneration paid to directors and executives is valued
at cost to the Group and expensed.
• The Board policy is to remunerate non-executive directors
at market rates for time, commitment and responsibilities.
The Board determines payments to non-executive
directors and reviews their remuneration annually,
based on market practice, duties and accountability.
The maximum aggregate amount of fees that can be
paid to non-executive directors is subject to approval
by shareholders.
• To align directors’ interests with shareholder interests, the
directors are encouraged to hold shares in the Company.
Performance Conditions Linked to Remuneration
The remuneration level for key management personnel
is based on a number of factors, including skills and
qualifications, achievements of performance metrics and
demonstrated management capability. The contracts for
service between the Group and key management personnel
are on a continuing basis.
Consequences of Performance on Shareholder Wealth
No short-term performance benefits have been awarded in
the current financial year related to the achievement of the
annual Short-Term Incentive Plan.
The following table shows the gross revenue, profits and
dividends for the last 5 years for Engenco Limited, as well as
the share prices at the end of the respective financial years.
18
Engenco Limited and its controlled entities – Annual Report 2019
Directors’ Reportfor the year ended 30 June 2019
Revenue
133,834,000
135,318,000
129,399,000
157,336,000
174,850,000
NPAT attributable to members
(27,593,000)
3,828,000
8,309,000
18,003,000
14,227,000
2015
$
2016
$
2017
$
2018
$
2019
$
EBITDA
EBIT
Operating income growth1
Share price at year-end
% Change in share price
Capital employed2
Return on capital employed3
Dividends paid
(20,668,000)
11,078,000
12,765,000
17,320,000
16,627,000
(30,128,000)
5,503,000
9,117,000
13,490,000
13,012,000
(241%)
$0.10
(17%)
n/a
$0.10
0%
66%
$0.21
121%
48%
$0.49
133%
(4%)
$0.42
(14%)
46,448,000
49,988,000
57,565,000
74,400,000
85,145,000
(65%)
–
11%
–
16%
18%
15%
–
1,567,000
3,134,000
1 Operating income growth is the movement in EBIT year-on-year
2 Capital employed is total assets less current liabilities
3 Return on capital employed is EBIT over capital employed
Non-Executive Directors
Total compensation for all non-executive directors was last voted upon by shareholders at the 2010 Annual General Meeting.
The base fee for the Chairperson is $160,000 per annum. Base fees for other non-executive directors do not exceed $80,000
per annum.
Directors’ base fees cover all main board activities. Non-executive director members who sit on a committee receive an
additional fee of $6,000 per annum. Non-executive director members who hold the position of Chairperson on a committee
receive an additional fee of $6,000 per annum. Non-executive directors do not receive performance-related compensation and
are not provided with retirement benefits apart from statutory superannuation (paid in addition to the base fees noted above).
Engenco Limited and its controlled entities – Annual Report 2019
19
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Engenco Limited and its controlled entities – Annual Report 2019
Directors’ Reportfor the year ended 30 June 2019
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Engenco Limited and its controlled entities – Annual Report 2019
21
Remuneration Report – Audited (cont’d)
Loans to Key Management Personnel and their Related Parties
The balance of loans to key management personnel and their related parties outstanding as at 30 June 2019 is $NIL
(2018: $NIL).
Service Contracts
The employment conditions of most key management personnel are formalised in contracts of employment. The employment
contract does not stipulate a term of employment period but does stipulate a notice period for resignation and periods of
remuneration and conditions under termination. Termination payments are not payable on resignation or dismissal for serious
misconduct. In the instance of serious misconduct, the Company can terminate employment at any time.
V De Santis
K Pallas
D Elphinstone
A von Bibra
R Dunning
P Burrows
L Dillon
G Campbell
Terms of Agreement
Termination Benefit
Ongoing director agreement
N/A – Non-Executive Director
Permanent employment contract
8 weeks’ pay
Ongoing director agreement
N/A – Non-Executive Director
Ongoing director agreement
N/A – Non-Executive Director
Ongoing director agreement
N/A – Non-Executive Director
Permanent employment contract
Permanent employment contract
Permanent employment contract
3 months’ pay
3 months’ pay
8 weeks’ pay
Options and Rights Over Equity Instruments Granted
In the 2018 and 2019 financial years no executive directors, non-executive directors or key management personnel had any
options or rights.
Other Transactions with Key Management Personnel
A number of key management personnel, or their relates parties, hold positions in other entities that result in them having control
or joint control over the financial or operating policies of those entities.
A number of these entities transacted with the Group during the year. The terms and conditions of the transactions with key
management personnel and their related parties were no more favourable than those available, or which might reasonably be
expected to be available, on similar transactions to non-key management personnel related entities on an arm’s-length basis.
From time to time, directors of the Group, or their related entities, may purchase goods from the Group. These purchases are on
the same terms and conditions as those entered into by other Group employees or customers and are trivial in nature.
22
Engenco Limited and its controlled entities – Annual Report 2019
Directors’ Reportfor the year ended 30 June 2019
Movements in Shares
The movement during the reporting period in the number of ordinary shares in Engenco Limited held, directly, indirectly or
beneficially, by each key management person, including their related parties, is as follows:
2019
V De Santis
K Pallas
D Elphinstone
A von Bibra
R Dunning
P Burrows
L Dillon
G Campbell
Balance
1 July 2018
Received as
compensation
Other
changes*
Balance
30 June 2019
378,951
72,632
202,406,914
34,793
182,948
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
378,951
72,632
202,406,914
34,793
182,948
–
–
–
*Other changes represent shares that were purchased or sold during the year.
This report of the directors is made in accordance with a resolution of the Board of Directors.
Vincent De Santis
Chairman
Dated 22 August 2019
Engenco Limited and its controlled entities – Annual Report 2019
23
Directors’ Declaration
1. In the opinion of the directors of Engenco Limited (the Company):
a. the consolidated financial statements and notes that are set out on pages 31 to 73 and the Remuneration Report on
pages 18 to 23 in the Directors’ Report, are in accordance with the Corporations Act 2001, including:
i. giving a true and fair view of the Group’s financial position as at 30 June 2019 and of its performance for the financial
year ended on that date; and
ii. complying with Australian Accounting Standards and the Corporations Regulations 2001; and
b. 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. The directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Chief
Executive Officer and Chief Financial Officer for the financial year ended 30 June 2019.
3. The directors draw attention to Note 1 to the financial statements, which includes a statement of compliance with
International Financial Reporting Standards.
Signed in accordance with a resolution of the directors:
Vincent De Santis
Chairman
Dated 22 August 2019
24
Engenco Limited and its controlled entities – Annual Report 2019
Directors’ Declarationfor the year ended 30 June 2019
Engenco Limited and its controlled entities – Annual Report 2019
25
Auditor’s Independence Declarationfor the year ended 30 June 2019 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Liability limited by a scheme approved under ProfessionalStandards Legislation.Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001 To the Directors of Engenco Limited I declare that, to the best of my knowledge and belief, in relation to the audit of Engenco Limited for the financial year ended 30 June 2019 there have been: i.no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and ii.no contraventions of any applicable code of professional conduct in relation to the audit. KPMG Suzanne Bell Partner Melbourne 22 August 2019 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Liability limited by a scheme approved under ProfessionalStandards Legislation.Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001 To the Directors of Engenco Limited I declare that, to the best of my knowledge and belief, in relation to the audit of Engenco Limited for the financial year ended 30 June 2019 there have been: i.no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and ii.no contraventions of any applicable code of professional conduct in relation to the audit. KPMG Suzanne Bell Partner Melbourne 22 August 2019 26
Engenco Limited and its controlled entities – Annual Report 2019
Independent Auditor’s Reportfor the year ended 30 June 2019 KPMG, an Australianpartnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.Liability limited by a scheme approved under Professional Standards Legislation. Independent Auditor’s Report To the shareholders of Engenco Limited Report on the audit of the Financial Report Opinion We have audited the Financial Report of Engenco Limited (the Company). In our opinion, the accompanying Financial Report of the Company is in accordance with the Corporations Act 2001, including: •giving a true and fair view of the Group’s financial position as at 30 June 2019 and of its financial performance for the year ended on that date; and •complying with Australian Accounting Standards and the Corporations Regulations 2001. The Financial Report comprises: •Consolidated statement of financial position as at 30 June 2019; •Consolidated statement of profit or loss and other comprehensive income, Consolidated statement of changes in equity, and Consolidated statement of cash flows for the year then ended; •Notes including a summary of significant accounting policies; and •Directors’ Declaration. The Group consists of the Engenco Limited (the Company) and the entities it controlled at the year-end or from time to time during the financial year. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report. We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the Financial Report in Australia. We have fulfilled our other ethical responsibilities in accordance with the Code. KPMG, an Australianpartnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.Liability limited by a scheme approved under Professional Standards Legislation. Independent Auditor’s Report To the shareholders of Engenco Limited Report on the audit of the Financial Report Opinion We have audited the Financial Report of Engenco Limited (the Company). In our opinion, the accompanying Financial Report of the Company is in accordance with the Corporations Act 2001, including: •giving a true and fair view of the Group’s financial position as at 30 June 2019 and of its financial performance for the year ended on that date; and •complying with Australian Accounting Standards and the Corporations Regulations 2001. The Financial Report comprises: •Consolidated statement of financial position as at 30 June 2019; •Consolidated statement of profit or loss and other comprehensive income, Consolidated statement of changes in equity, and Consolidated statement of cash flows for the year then ended; •Notes including a summary of significant accounting policies; and •Directors’ Declaration. The Group consists of the Engenco Limited (the Company) and the entities it controlled at the year-end or from time to time during the financial year. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report. We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the Financial Report in Australia. We have fulfilled our other ethical responsibilities in accordance with the Code.
Engenco Limited and its controlled entities – Annual Report 2019
27
Key Audit Matters The Key Audit Matter we identified is: •Revenue recognition Key Audit Matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial Report of the current period. This matter was addressed in the context of our audit of the Financial Report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on this matter. Revenue recognition ($174,850k) Refer to Note 4 to the Financial Report The key audit matter How the matter was addressed in our audit Revenue recognition was a key audit matter for us due to the multiple revenue streams and the financial significance of the amount. The Group’s revenue consists of various revenue streams comprising maintenance, repair and overhaul of powertrain systems, manufacture and maintenance of wagons and associated rail equipment, leasing of wagons, manufacture and supply of road and storage tankers and training and workforce provisioning services within the rail industry. This necessitated greater involvement by the audit team to determine appropriate revenue recognition including timing and measurement. In addition, the Group has applied AASB 15 Revenue from Contracts with Customers, from 1 July 2018. As disclosed in Note 1(i)(II) to the Financial Report, revenues from rendering of services and construction contracts are recognised over time based on the management’s determination of stage of completion towards satisfaction of performance obligations and estimation of total contract revenue and costs. The recognition of these amounts involves management’s judgemental assessment and estimation. Given the significance of changes to the accounting standard for Revenue, additional audit effort was applied to the revenue recognition and the related disclosures. Our procedures included: •evaluating the appropriateness of the Group’s revenue recognition policies against the requirements of AASB 15 Revenue from Contracts with Customers (“AASB 15”); •for samples of revenue transactions, we checked the underlying records and inspected the terms and conditions of the revenue contract for consistency with the Group’s policies and procedures for timing and measurement of revenue recognition; •comparing cash receipts to revenue recognised during the period; •testing samples of revenue transactions from immediately before and immediately after year end, across different revenue streams, comparing the year in which the revenue was recognised to terms of the underlying contract; •evaluating the contract performance in relation to the recognition of revenue and cost accruals for samples of on-going contracts as at the year-end; •testing samples of credit notes issued post year-end to identify any significant reversals of revenue recognised pre year-end; •assessment of samples of customer contracts to evaluate the change, if any, in revenue recognition in accordance with the transition impact of AASB 15; and •assessment of the additional disclosures relating to the adoption of AASB 15 against the requirements of the accounting standard. 28
Engenco Limited and its controlled entities – Annual Report 2019
Independent Auditor’s Reportfor the year ended 30 June 2019Other Information Other Information is financial and non-financial information in Engenco Limited’s annual reporting which is provided in addition to the Financial Report and the Auditor’s Report. The Directors are responsible for the Other Information. Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not express an audit opinion or 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. In doing so, we 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. We are required to report if we conclude that there is a material misstatement of this Other Information, and based on the work we have performed on the Other Information that we obtained prior to the date of this Auditor’s Report we have nothing to report. Responsibilities of the Directors for the Financial Report The Directors are responsible for: •preparing the Financial Report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001; •implementing necessary internal control to enable the preparation of a Financial Report that gives a true and fair view and is free from material misstatement, whether due to fraud or error; and •assessing the Group’s ability to continue as a going concern and whether the use of the going concern basis of accounting is appropriate. This includes disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless they either intend to liquidate the Group and Company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the Financial Report Our objective is: •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 Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error. They 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 the Financial Report. A further description of our responsibilities for the audit of the Financial Report is located at the Auditing and Assurance Standards Board website at http://www.auasb.gov.au/auditors_responsibilities/ar2.pdf. This description forms part of our Auditor’s Report.
Engenco Limited and its controlled entities – Annual Report 2019
29
Report on the Remuneration Report Opinion In our opinion, the Remuneration Report of Engenco Limited for the year ended 30 June 2019, complies with Section 300A of the Corporations Act 2001. Directors’ 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 responsibilities We have audited the Remuneration Report included in pages 18 to 23 of the Directors’ report for the year ended 30 June 2019. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. KPMG Suzanne Bell Partner Melbourne 22 August 2019 Consolidated Financial Statements Table of Contents
for the year ended 30 June 2019
Contents
Consolidated Statement of Profit or Loss and Other
Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Shareholder Information
Corporate Directory
31
32
33
34
74
77
Notes to the Consolidated Financial Statements
Note 1 – Significant Accounting Policies
Note 2 – Controlled Entities
Note 3 – Operating Segments
Note 4 – Revenue and Other Income
Note 5 – Expenses
Note 6 – Tax
Note 7 – Earnings Per Share
Note 8 – Cash and Cash Equivalents
Note 9 – Trade and Other Receivables
Note 10 – Inventories
Note 11 – Other Current Assets
Note 12 – Property, Plant and Equipment
Note 13 – Net Tangible Assets
Note 14 – Intangible Assets
Note 15 – Trade and Other Payables
Note 16 – Financial Liabilities
Note 17 – Provisions
Note 18 – Capital and Leasing Commitments
Note 19 – Contingent Liabilities
Note 20 – Issued Capital and Reserves
Note 21 – Parent Entity Disclosures
Note 22 – Cash Flow Information
Note 23 – Financial Risk Management
Note 24 – Related Party Transactions
Note 25 – Auditor’s Remuneration
Note 26 – Events Subsequent to Reporting Date
35
35
42
43
49
50
51
54
54
55
56
56
57
58
59
60
60
61
62
63
64
65
66
67
71
73
73
30
Engenco Limited and its controlled entities – Annual Report 2019
Consolidated Statement of Profit or Loss and Other Comprehensive Income
for the year ended 30 June 2019
Revenue
Other income
Changes in inventories of finished goods and work in progress
Raw materials and consumables used
Employee benefits expense
Depreciation and amortisation expense
Impairment of inventory
Finance costs
Subcontract freight
Repairs and maintenance
Insurances
Rent and outgoings
Foreign exchange movements
Other expenses
PROFIT / (LOSS) BEFORE INCOME TAX
Income tax benefit / (expense)
TOTAL PROFIT / (LOSS) FOR THE PERIOD
Profit / (loss) attributable to:
Owners of the Company
Non-controlling interest
OTHER COMPREHENSIVE INCOME
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of overseas subsidiaries
Other comprehensive income for the period, net of tax
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD
Total comprehensive income attributable to:
Owners of the Company
Non-controlling interest
EARNINGS PER SHARE
Basic & Diluted earnings per share (cents per share)
From continuing operations:
Basic & Diluted earnings per share (cents per share)
Consolidated Group
2019
$’000
2018
$’000
174,850
157,336
2,869
2,630
(81,805)
(63,822)
(3,615)
(571)
(322)
(765)
(1,072)
(1,276)
(6,900)
(22)
1,335
5,004
(74,413)
(54,918)
(3,830)
(90)
(476)
(913)
(1,178)
(1,063)
(5,983)
28
(7,489)
(7,825)
12,690
1,537
14,227
13,014
4,989
18,003
14,227
18,003
–
–
14,227
18,003
409
409
(229)
(229)
14,636
17,774
14,636
17,774
–
–
14,636
17,774
Cents
4.54
Cents
5.74
4.54
5.74
Notes
4
4
5
5
6
7
7
The notes on pages 35 to 73 are an integral part of the consolidated financial statements.
Engenco Limited and its controlled entities – Annual Report 2019
31
Consolidated Statement of Financial Position
as at 30 June 2019
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Inventories
Current tax assets
Other current assets
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Property, plant and equipment
Deferred tax assets
Intangible assets
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Financial liabilities
Current tax liabilities
Provisions
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Provisions
Deferred tax liabilities
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Profit reserve
Accumulated losses
TOTAL EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY
Non-controlling interest
TOTAL EQUITY
The notes on pages 35 to 73 are an integral part of the consolidated financial statements.
Consolidated Group
2019
$’000
2018
$’000
Notes
8
9
10
6
11
12
6
14
15
16
6
17
17
6
23,702
30,312
36,574
30
2,026
92,644
8,656
28,275
33,944
–
3,315
74,190
11,732
16,839
7,366
200
19,298
111,942
5,575
248
22,662
96,852
19,408
15,453
294
25
7,070
26,797
523
547
1,070
27,867
84,075
338
132
6,529
22,452
488
694
1,182
23,634
73,218
20
302,719
302,719
58
2,433
(351)
271
(215,306)
(223,592)
89,904
(5,829)
84,075
79,047
(5,829)
73,218
32
Engenco Limited and its controlled entities – Annual Report 2019
Consolidated Financial Statementsfor the year ended 30 June 2019
Consolidated Statement of Changes in Equity
for the year ended 30 June 2019
Consolidated Group
Share
Capital
$’000
Accumulated
Losses
$’000
Profit
Reserve
$’000
BALANCE AT 1 JULY 2017
302,719
(239,757)
–
–
18,003
(1,838)
1,838
Profit / (loss)
Transfer to profit reserve
Other comprehensive income,
net of tax
TOTAL COMPREHENSIVE INCOME
–
–
–
–
TRANSACTIONS WITH OWNERS OF THE COMPANY
Contributions and Distributions:
Dividends paid
TOTAL CONTRIBUTIONS
AND DISTRIBUTIONS
–
–
–
–
BALANCE AT 30 JUNE 2018
302,719
(223,592)
(1,567)
(1,567)
271
Foreign
Currency
Translation
Reserve
$’000
(122)
–
–
Sub-Total
$’000
62,840
18,003
–
Non-
controlling
Interest
$’000
(5,829)
–
–
–
–
–
–
Total Equity
$’000
57,011
18,003
–
(229)
17,774
(1,567)
(1,567)
–
–
(1,567)
(1,567)
(351)
79,047
(5,829)
73,218
–
–
16,165
1,838
(229)
(229)
(229)
17,774
BALANCE AT 1 JULY 2018
302,719
(223,592)
271
(351)
79,047
(5,829)
73,218
–
(645)
–
–
(645)
–
(645)
302,719
(224,237)
271
(351)
78,402
(5,829)
72,573
Adjustments from adoption of
AASB 9 & AASB 15
ADJUSTED BALANCE AT
1 JULY 2018
COMPREHENSIVE INCOME
Profit / (loss)
Transfer to profit reserve
Other comprehensive income,
net of tax
–
–
–
–
14,227
–
(5,296)
5,296
–
–
8,931
5,296
TOTAL COMPREHENSIVE INCOME
TRANSACTIONS WITH OWNERS OF THE COMPANY
Contributions and Distributions:
Dividends paid
TOTAL CONTRIBUTIONS
AND DISTRIBUTIONS
–
–
–
–
BALANCE AT 30 JUNE 2019
302,719
(215,306)
(3,134)
(3,134)
2,433
–
–
409
409
–
–
14,227
–
409
14,636
(3,134)
(3,134)
–
–
–
–
–
–
14,227
–
409
14,636
(3,134)
(3,134)
58
89,904
(5,829)
84,075
The notes on pages 35 to 73 are an integral part of the consolidated financial statements.
Engenco Limited and its controlled entities – Annual Report 2019
33
Consolidated Statement of Cash Flows
for the year ended 30 June 2019
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Payments to suppliers and employees
Interest received
Finance costs
Income tax paid
Consolidated Group
2019
$’000
2018
$’000
Notes
189,462
172,013
(176,355)
(162,987)
74
(322)
(538)
30
(476)
(288)
NET CASH FROM / (USED IN) OPERATING ACTIVITIES
22(b)
12,321
8,292
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of non-current assets
Purchase of non-current assets
NET CASH FROM / (USED IN) INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid
Release of funds on deposit
Repayment of borrowings
NET CASH FROM / (USED IN) FINANCING ACTIVITIES
Net increase / (decrease) in cash and cash equivalents
Cash (net of bank overdrafts) at beginning of financial year
CASH (NET OF BANK OVERDRAFTS) AT END OF FINANCIAL YEAR
22(a)
The notes on pages 35 to 73 are an integral part of the consolidated financial statements.
7,301
(3,076)
4,225
(3,134)
1,678
–
(1,456)
15,090
8,318
23,408
801
(3,905)
(3,104)
(1,567)
–
(4,000)
(5,567)
(379)
8,697
8,318
34
Engenco Limited and its controlled entities – Annual Report 2019
Consolidated Financial Statementsfor the year ended 30 June 2019
Notes to the Consolidated Financial Statements
for the year ended 30 June 2019
Note 1 – Significant Accounting Policies
Except for the changes explained here within, the Group has
consistently applied the following accounting policies to all
periods presented in these consolidated financial statements.
Reporting Entity
Engenco Limited (the ‘Company’) is domiciled in Australia.
The Company’s registered office is at Level 22, 535 Bourke
Street, Melbourne, VIC 3000. These consolidated financial
statements comprise the Company and its subsidiaries
(collectively ‘the Group’ and individually ‘Group companies’).
The Group is a for-profit entity and is involved in the delivery
of a diverse range of engineering services and products.
Basis of Accounting
Statement of Compliance
The consolidated financial statements are general
purpose financial statements which have been prepared in
accordance with Australian Accounting Standards (AASBs)
adopted by the Australian Accounting Standards Board
(AASB) and the Corporations Act 2001. The consolidated
financial statements comply with International Financial
Reporting Standards (IFRS) adopted by the International
Accounting Standards Board (IASB).
The consolidated financial statements were authorised for
issue by the Board of Directors on 22 August 2019.
Functional and Presentation Currency
These consolidated financial statements are presented
in AUD, which is the Company’s functional currency. All
amounts have been rounded to the nearest thousand, unless
otherwise indicated.
Use of Judgements and Estimates
In preparing these consolidated financial statements,
management has made judgements, estimates and
assumptions that affect the application of the Group’s
accounting policies and the reported amounts of assets,
liabilities, income and expenses. Actual results may differ
from these estimates.
Estimates and underlying assumptions are reviewed
on an ongoing basis. Revisions to estimates are
recognised prospectively.
Assumptions and Estimation Uncertainties
Information about assumptions and estimation uncertainties
that may have a risk of resulting in a material adjustment
in the year ended 30 June 2019 is included in the
following notes:
• Note 4 – Revenue and Other Income. Revenue is
recognised as contract performance obligations are
satisfied. The total contract consideration is allocated to
the performance obligations based on their observable
stand alone selling prices.
• Note 6 – Tax. Balances disclosed in the financial
statements and the notes thereto, related to taxation, are
based on the best estimates of directors. These estimates
take into account both the financial performance and
position of the Company as they pertain to current income
taxation legislation, and the directors’ understanding
thereof. No adjustment has been made for pending or
future taxation legislation. The current income tax position
represents the directors’ best estimate, pending an
assessment by taxable authorities in relevant jurisdictions.
• Note 9 – Trade and Other Receivables. The expected
credit loss allowances for trade receivables are calculated
based on key assumptions that determine the weighted
average loss rates and overall loss allowance.
• Note 10 – Inventories. Inventory and WIP values are
determined using the net realisable value, where the cost
is in excess of this value.
Basis of Measurement
The consolidated financial statements have been prepared
on the historical cost basis except for non-derivative financial
instruments at fair value through profit or loss, which are
measured at fair value.
Going Concern
The consolidated financial statements have been prepared
on the going concern basis, which contemplates the
continuity of normal business activity, and the realisation of
assets and the settlement of liabilities in the ordinary course
of business.
Significant Accounting Policies
(a)
Basis of Consolidation
Non‑controlling interests
Non-controlling interests (NCI) are measured at their
proportionate share of the acquiree’s identifiable net assets
at the date of acquisition.
Changes in the Group’s interest in a subsidiary that
do not result in a loss of control are accounted for as
equity transactions.
Engenco Limited and its controlled entities – Annual Report 2019
35
Note 1 – Significant Accounting Policies (cont’d)
Subsidiaries
Subsidiaries are entities controlled by the Group. The Group
controls an entity when it is exposed to, or has the right to,
variable returns from its involvement with the entity and has
the ability to affect those returns through its power over the
entity. The financial statements of subsidiaries are included in
the consolidated financial statements from the date on which
control commences until the date on which control ceases.
Loss of control
When the Group loses control over a subsidiary, it
derecognises the assets and liabilities of the subsidiary,
and any related NCI and other components of equity. Any
resulting gain or loss is recognised in profit or loss. Any
interest retained in the former subsidiary is measured at fair
value when control is lost.
Interests in equity‑accounted investees
The Group’s interests in equity-accounted investees
comprise of interest in a joint venture.
A joint venture is an arrangement in which the Group has
joint control, whereby the Group has rights to the net assets
of the arrangement, rather than rights to its assets and
obligations for its liabilities.
Interest in the joint venture is accounted for using the equity
method. It is recognised initially at cost, which includes
transaction costs. Subsequent to initial recognition, the
consolidated financial statements include the Group’s share
of the profit or loss and other comprehensive income (OCI)
of equity-accounted investees, until the date on which joint
control ceases.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised
income and expenses arising from intra-group transactions,
are eliminated. Unrealised gains arising from transactions
with equity-accounted investees are eliminated against
the investment to the extent of the Group’s interest in the
investee. Unrealised losses are eliminated in the same way
as unrealised gains, but only to the extent that there is no
evidence of impairment.
(b)
Impairment
Non-financial assets
At each reporting date, the Group reviews the carrying
amounts of its non-financial assets (other than inventories
and deferred tax assets) to determine whether there is any
indication of impairment. If any such indication exists, then
the asset’s recoverable amount is estimated. Goodwill is
tested annually for impairment.
For impairment testing, assets are grouped together into
the smallest group of assets that generates cash inflows
from continuing use that are largely independent of the cash
inflows of other assets or cash generating units (CGUs).
Goodwill arising from a business combination is allocated to
CGUs or groups of CGUs that are expected to benefit from
the synergies of the combination.
The recoverable amount of an asset or CGU is the greater
of its value in use and its fair value less costs to sell. Value in
use is based on the estimated future cash flows, 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 or CGU. An
impairment loss is recognised if the carrying amount of an
asset or CGU exceeds its recoverable amount.
Impairment losses are recognised in profit or loss. They are
allocated first to reduce the carrying amount of any goodwill
allocated to the CGU, and then to reduce the carrying
amounts of the other assets in the CGU on a pro rata basis.
An impairment loss in respect of goodwill is not reversed.
For other assets, an impairment loss is reversed only to the
extent that the asset’s carrying amount does not exceed
the carrying amount that would have been determined, net
of depreciation or amortisation, if no impairment loss had
been recognised.
(c)
Foreign Currency
Foreign currency transactions
Transactions in foreign currencies are translated to the
respective functional currencies of Group companies at
exchange rates at the dates of the transactions. Monetary
assets and liabilities denominated in foreign currencies are
translated into the functional currency at the exchange rate
at the reporting date. Non-monetary assets and liabilities that
are measured at fair value in a foreign currency are translated
into the functional currency at the exchange rate when the
fair value was determined. Non-monetary items that are
measured based on historical cost in a foreign currency are
translated at the exchange rate at the date of the transaction.
Foreign currency differences are generally recognised in profit
or loss.
However, foreign currency differences arising from the
translation of the following items are recognised in OCI:
36
Engenco Limited and its controlled entities – Annual Report 2019
Notes to the Consolidated Financial Statementsfor the year ended 30 June 2019
• Fair Value through Other Comprehensive Income (FVTOCI)
equity investments (except on impairment in which case
foreign currency differences that have been recognised in
OCI are reclassified to profit or loss);
• A financial liability designated as a hedge of the net
investment in a foreign operation to the extent that the
hedge is effective; and
• Qualifying cash flow hedges to the extent that the hedges
are effective.
Foreign operations
The assets and liabilities of foreign operations, including
goodwill and fair value adjustments arising on acquisition, are
translated into the functional currency at the exchange rates
at the reporting date. The income and expenses of foreign
operations are translated into the functional currency at the
exchange rates at the dates of the transactions.
Foreign currency differences are recognised in OCI and
accumulated in the translation reserve, except to the extent
that the translation difference is allocated to NCI.
When a foreign operation is disposed of in its entirety or
partially such that control, significant influence or joint control
is lost, the cumulative amount in the translation reserve
related to that foreign operation is reclassified to profit or loss
as part of the gain or loss on disposal. If the Group disposes
of part of its interest in a subsidiary but retains control,
then the relevant proportion of the cumulative amount is
reattributed to NCI. When the Group disposes of only part
of an associate or joint venture while retaining significant
influence or joint control, the relevant proportion of the
cumulative amount is reclassified to profit or loss.
(d)
Finance Income and Finance Costs
The Group’s finance income and finance costs include:
• Interest income;
• Interest expense;
• The net gain or loss on financial assets at fair value
through profit or loss;
• The foreign currency gain or loss on financial assets and
financial liabilities; and
• Impairment losses recognised on financial assets (other
than trade receivables).
Interest income or expense is recognised using the effective
interest method.
Goods and Services Tax (GST)
(f)
Revenues, expenses and non-financial assets are recognised
net of the amount of GST, except where the amount of GST
incurred is not recoverable from the Tax Office. In these
circumstances the GST is recognised as part of the cost of
acquisition of the asset or as part of an item of the expense.
Receivables and payables in the Statement of Financial
Position are shown inclusive of GST.
Cash flows are presented in the Statement of Cash Flows on
a gross basis, except for the GST component of investing
and financing activities, which are disclosed as operating
cash flows.
Comparative Figures
(g)
When required by Accounting Standards, comparative
figures have been adjusted to conform to changes in
presentation for the current financial year.
When the Group applies an accounting policy retrospectively,
makes a retrospective restatement or reclassifies items in
its financial statements, a Statement of Financial Position
as at the beginning of the earliest comparative period will
be disclosed.
Rounding of Amounts
(h)
The Group has applied the relief available to it under
ASIC Corporations (Rounding in Financial/Directors’
Reports) Instrument 2016/191 and accordingly, amounts
in the financial statements and Directors’ Report have
been rounded off to the nearest thousand dollars (unless
otherwise indicated).
(i)
New Accounting Standards and Interpretations
New accounting standards adopted
The Group has adopted the new and revised Standards
and Interpretations issued by the Australian Accounting
Standards Board (the “AASB”) that are relevant to its
operations and effective for the current reporting period.
New and revised Standards and Interpretations effective
for the current reporting period that are relevant to the
Group include:
• Annual Improvements to IFRS’s 2014-2016 Cycle
(Amendments to IFRS 1 and IAS 28)
• IFRIC 22 Foreign Currency Transactions and
Advance Consideration
• AASB 9 Financial Instruments
Government Grants
(e)
Grants that compensate the Group for expenses incurred
are recognised in profit or loss on a systematic basis in the
periods in which the expenses are recognised.
• AASB 15 Revenue from Contracts with Customers
The following standards have a material impact on the
Group’s financial statements in the period of initial adoption.
Engenco Limited and its controlled entities – Annual Report 2019
37
Note 1 – Significant Accounting Policies (cont’d)
AASB 9: Financial Instruments
I.
AASB 9: Financial Instruments sets out requirements for
recognising and measuring financial assets, financial liabilities
and some contracts to buy or sell non-financial items.
This standard has replaced IAS 39 Financial Instruments:
Recognition and Measurement.
The Group has assessed the impact of the adoption of
AASB 9 on the Group’s consolidated financial statements.
The new standard has required the Group to revise its
accounting processes and internal controls related to
reporting financialinstruments.
As the Group currently does not apply hedge accounting for
its foreign currency transactions, this component of AASB 9
does not impact the consolidated financial statements unless
the Group decides to implement hedge accounting in future
reporting periods.
All other financial assets and liabilities measurement
categories under IAS 39 remain unchanged upon transition
to the new measurement categories of AASB 9. This also
resulted in no impact to these categories carrying amounts
upon transition.
Impairment (ECL):
AASB 9 replaces the ‘incurred cost’ model with an ‘expected
credit loss’ model. The new model uses a dual measurement
approach, under which the loss allowance is measured
as either:
• 12-month expected credit losses (result from possible
default events within the 12 months after the reporting
date); or
• Lifetime expected credit losses (result from all
possible default events over the expected life of a
financial instrument).
Classification and Measurement changes upon application
AASB 9 contains three principal classification categories for
financial assets:
A simplified approach is available for trade receivables,
contract assets and lease receivables, allowing or requiring
the recognition of lifetime expected credit losses at all times.
• Measured at Amortised Cost;
• Measured at Fair Value through Other Comprehensive
Income (FVOCI); and
• Measured at Fair Value through Profit or Loss (FVTPL).
Upon application previous categories of held to maturity,
loans and receivables, and available-for-sale are removed.
The requirements for financial liabilities are largely retained.
A financial asset is classified as being subsequently
measured at amortised cost if the asset is held within a
business model whose objective is to collect contractual
cash flows, and the contractual terms of the financial asset
give rise to cash flows that are solely payments of principal
and interest (SPPI).
The Group currently classifies its non-derivative financial
assets into the categories of FVTPL and loans and
receivables. With the removal of loans and receivables
category under AASB 9, loans and receivables will become
measured at amortised cost and be subject to the business
model and SPPI criterion assessments. There are no impacts
to the current carrying values of non-derivative financial
assets as a result of these measurement changes.
Upon application of the new standard, trade and other
receivables that were classified as loans and receivables
under IAS 39 are now classified at amortised cost. There
was no change to the carrying value of trade and other
receivables as a result of this change.
The Group previously only recognised a credit loss when
there was objective evidence that impairment had occurred.
The new expected credit loss model requires estimates of
12-month or lifetime expected credit losses to be recognised
upon initial recognition of the financial asset, and when there
is a significant change in credit risk.
Based on the Group’s assessment of historical provision
rates and forward-looking analysis, the impact on adoption
was an increase in the impairment provision of $645,000
recognised through opening retained earnings. An additional
specifically identified expected credit loss provision of
$203,000 was also recognised through opening retained
earnings, as a result of the transition impacts from AASB 15:
Revenue from Contracts with Customers (see II(ii)).
Loss allowance for trade and other
receivables balance as at 30 June 2018
Additional loss allowance for trade and
other receivables
Loss allowance for trade and other
receivables as at 1 July 2018 under
AASB 9
$’000
324
848
1,172
38
Engenco Limited and its controlled entities – Annual Report 2019
Notes to the Consolidated Financial Statementsfor the year ended 30 June 2019
Transition Impact on Retained Earnings
The general principle in AASB 9 is for retrospective
application of the standard upon initial application.
Retrospective application means that the new requirements
are applied to transactions, other events and conditions as if
those requirements had always been applied.
AASB 9 contains certain exemptions from full retrospective
application for the classification and measurement
requirements, including impairment. These include an
exemption from the requirement to restate comparative
information. If an entity does not restate comparative
information in prior periods, it recognises any difference
between the previous carrying amount and the carrying
amount at the date of initial application in the opening
retained earnings balance. Entities are allowed to restate
comparatives only if this is possible without the use
of hindsight.
The Group has taken the above exemption to not restate
comparative information for prior periods with respect to
classification and measurement (including impairment)
requirements. Differences in carrying amounts of financial
assets and liabilities resulting from the adoption of AASB 9
are recognised in retained earnings and reserves as at
1 July 2018. Accordingly, the comparative information
presented does not generally reflect the requirements of
AASB 9 but rather those of IAS 39. The impact of these
changes on the Group’s equity is as follows:
For table showing effect on retained earnings – see II.
AASB 15: Revenue from Contracts with Customers.
AASB 15: Revenue from Contracts
II.
with Customers
AASB 15: Revenue from Contracts with Customers
establishes a comprehensive framework for determining
whether, how much and when revenue is recognised.
The new standard replaced existing revenue recognition
guidance, including IAS 18 Revenue, IAS 11 Construction
Contracts and IFRIC 13 Customer Loyalty Programs.
Entities will apply a five-step model to determine when to
recognise revenue, and at what amount. The model specifies
that revenue should be recognised when (or as) an entity
transfers control of goods or services to a customer at the
amount to which the entity expects to be entitled. Depending
on whether certain criteria are met, revenue is recognised:
• Over time, in a manner that depicts the entity’s
performance; or
• At a point in time, when control of the goods or services is
transferred to the customer.
The Group has adopted AASB 15 using the Modified
Retrospective (Cumulative Effect) approach. As a result, the
Group has not restated its prior year comparatives. Instead,
the cumulative impact of adopting AASB 15 has been
adjusted through opening retained earnings.
The Group has elected to use the practical expedient for
contract modifications upon initial application of AASB 15.
This means that for contracts that were modified before the
beginning of the earliest period presented in the consolidated
financial statements, the Group will reflect the aggregate
effect of all contract modifications when identifying separate
performance obligations and determining and allocating the
transaction price on transition.
Sale of goods
(i)
The Group engages in the sale of spare parts and
components for various rail, road, powertrain and gas
compression industry sectors. Under IAS 18 the Group
recognised revenue from the sale of goods when the
significant risks and rewards of ownership had been
transferred to the customer, recovery of the consideration
was probable, the associated costs and possible return of
goods could be reliably estimated, there was no continuing
management involvement with the goods, and the amount of
revenue could be reliably measured. Revenue was measured
net of returns, trade discounts and volume rebates.
Under AASB 15, revenue is now recognised when a
customer obtains control of the goods. The Group did not
identify any material impact to the recognition of revenue on
the sale of goods domestically or internationally upon initial
adoption of AASB 15.
Rendering of services
(ii)
The Group performs a number of services to various industry
sectors, including maintenance, repairs and overhauls.
Under IAS 18 the Group recognised revenue from the
rendering of these services with reference to the stage of
completion of the transaction at the reporting date. The
stage of completion was assessed based on surveys of
work performed.
The Group identified one contract for the provision of
consultancy services (a non-standard service) as having
a material impact on the Group’s consolidated financial
statements arising from the adoption of AASB 15. The
new standard requires the revenue relating to satisfied
performance obligations to be recognised, which resulted in
an increase through opening retained earnings of $203,000.
The Group has determined this amount to be at credit risk,
and also raised the necessary expected credit loss provision
through opening retained earnings (see I).
Engenco Limited and its controlled entities – Annual Report 2019
39
Note 1 – Significant Accounting Policies (cont’d)
No other material impacts to the Group’s consolidated
financial statements were identified.
Rental income
(iii)
The Group leases out its fleet of rollingstock and certain
items of property, plant and equipment to customers.
Under IAS 18 rental income was recognised as revenue
on a straight-line basis over the term of the lease. Lease
incentives granted are recognised as an integral part of the
total rental income, over the term of the lease.
Customer contracts which fall within the scope of AASB 16:
Leases are not within scope for AASB 15. The Group’s rental
income will continue to be subject to the lessor accounting
requirements under AASB 16, and as there are limited
changes enacted under the new leasing standard for lessors,
the impact on the Group will be minimal.
Construction contracts
(iv)
The Group is involved in the manufacture of wagons,
carriages, rail equipment and dry bulk tankers. Under IAS
11 contract revenue included the initial amount agreed in
the contract plus any variations in contract work, claims
and incentive payments, to the extent that it is probable that
they would result in revenue and can be reliably measured.
Revenue was then recognised in profit or loss with reference
to the stage of completion on the contract, which was
assessed based on surveys of work performed.
Under AASB 15, claims and variations will be included in
the contract accounting when they are approved. Revenue
can only be recognised over time if it satisfies one of three
criteria, otherwise revenue is to be recognised at a point
in time. Of the customer contracts reviewed as part of the
Group’s assessment process, there were no material impacts
identified on the Group’s consolidated financial statements
arising from the adoption of AASB 15.
RTO training
(v)
The Group’s RTO entity (CERT Training) delivers nationally
accredited and industry-based training courses. Under
IAS 18, the revenue from these services was recognised in
profit or loss on a systematic basis in the periods in which
the expenses are recognised.
There was no material impact on the current revenue
accounting for training under AASB 15, however slight
changes in accounting has been required to ensure
consistency across the Group.
Transition Impact on Retained Earnings
The Group has adopted AASB 15 using the Modified
Retrospective (Cumulative Effect) approach. As a result, the
Group is not required to restate its prior year comparatives.
Instead, the cumulative impact of adopting AASB 15 will be
adjusted through opening retained earnings.
The Group has elected to use the practical expedient for
contract modifications upon initial application of AASB 15.
This means that for contracts that were modified before the
beginning of the earliest period presented in the consolidated
financial statements, an entity may reflect the aggregate
effect of all contract modifications when identifying separate
performance obligations and determining and allocating the
transaction price on transition.
The following tables summarise the impacts of adopting the
new accounting standards on the Group’s retained earnings.
Retained earnings / accumulated losses
balance as previously reported at
30 June 2018
Transition adjustments for AASB 9
Transition adjustments for AASB 15
Retained earnings / accumulated
losses balance as at 1 July 2018 under
AASB 9 and AASB 15
$’000
(223,592)
(848)
203
(224,237)
Standards issued but not yet effective
AASB 16: Leases
AASB 16: Leases replaces the current AASB 117: Leases
standard with a mandatory effective date for the Group of
1 July 2019.
The key change under AASB 16, and impact on the Group,
is the requirement that operating leases be recognised
on-balance sheet through the recognition of a Right-of-Use
(ROU) Asset and Lease Liability. Lease expenditure is also
no longer recognised as operating expenditure, but instead
as depreciation and interest. This change directly impacts
EBITDA (earnings before finance costs, income tax expense,
and depreciation and amortisation), which is a key metric
used by the Group.
AASB 16 eliminates the current operating/finance lease
dual accounting model for leases. Instead, there is a single,
on-balance sheet accounting model, similar to current
finance lease accounting. The assessment of whether
40
Engenco Limited and its controlled entities – Annual Report 2019
Notes to the Consolidated Financial Statementsfor the year ended 30 June 2019
a contract contains a lease determines whether the
arrangement is recognised on- or off-balance sheet.
A contract is, or contains, a lease if the contract conveys
the right to control the use of an identified asset for a period
of time in exchange for consideration. There are three key
elements of the new lease definition, and all three must be
met in order for the contract to contain a lease and the entity
therefore be able to apply lease accounting under AASB 16:
• Contract contains an identified asset;
• The lessee obtains substantially all the economic benefits
from the use of the asset; and
• The lessee directs the use of the asset.
The Group has performed an impact assessment of AASB
16 had the standard been adopted as at 1 July 2019. In
summary, the estimated impact of the adoption of AASB
16 on the Balance Sheet as at 1 July 2019, is an increase
in assets (right-of-use asset) of between $16 million and
$18 million, inclusive of make good assets, and an increase
in liabilities (lease liability) of between $17 million and
$19 million.
The net difference between these balances would have
been recognised as an adjustment to equity. Assuming
no changes to the lease portfolio from 1 July 2019, the
estimated impact on profit for the year ended 30 June 2020
is expected to be immaterial for the Group.
The Group will be applying AASB 16 from 1 July 2019, using
the “modified retrospective” transition method whereby
the right-of-use asset has been calculated as its carrying
amount as if AASB 16 had been applied since the lease
commencement date, but discounted using the Group’s
incremental borrowing rate at the date of initial application.
A key assumption in determining this estimate is the lease
term and option assessment decision. Engenco considers an
option to extend a lease to be reasonably certain when the
extension date is within twelve months and no decision has
been made to terminate, or when there is a clear economic
incentive for extension, such as:
• Favourable contractual terms and conditions in the option
period compared to market rates;
• Leasehold improvements have recently been undertaken
and are likely to have significant residual value at the end
of the current lease period;
• Significant termination costs exist; or
• The underlying asset is important to the
Group’s operations.
Other key assumptions include discount rates, asset
retirement obligations and non-lease components.
Other Accounting Standards
The following new or amended standards are not expected
to have a significant impact on the Group’s consolidated
financial statements:
• IFRIC 23 Uncertainty over Income Tax Treatments
• Annual Improvements to IFRS’s 2015-2017 Cycle –
various standards
• Amendments to References to Conceptual Framework in
IFRS Standards
• Long-term Interest in Associates and Joint Ventures
(Amendments to IAS 28)
Under this method, there is no requirement to
restate comparatives.
When applying the modified retrospective approach to leases
previously classified as operating leases under AASB 117,
the Group can elect, on a lease-by-lease basis, whether
to apply a number of practical expedients on transition.
Engenco expects to apply a number of the practical
expedients and exemptions including:
• The application of a single discount rate to a portfolio of
leases with reasonably similar characteristics;
• Utilising previous assessments of onerous leases;
• Option to ‘grandfather’ the assessment of which contracts
are leases – AASB 16 lease accounting is only applied
to those contracts previously identified to contain a lease
under AASB 117. The new lease definition requirement is
only applied to those contracts entered into after the date
of initial application;
• Recognition exemption for short-term and low-value
leases – Leases which have a lease term of less than
12 months or are less than A$10,000 in annual value will
not be accounted for under AASB 16;
• The use of hindsight in determining the lease term.
Another practical expedient available to Group, is to not
separate non-lease components from lease components,
and instead account for each lease component and
any associated non-lease components as a single lease
component. The Group will not elect to combine lease and
non-lease components for its property leases. As such,
the calculated lease liability will exclude an estimate of the
stand-alone price of the non-lease component.
Engenco Limited and its controlled entities – Annual Report 2019
41
Note 2 – Controlled Entities
Note: Subsidiaries are indented beneath their parent entity
• Engenco Limited
– Convair Engineering Pty Ltd
– Engenco Logistics Pty Ltd
– Asset Kinetics Pty Ltd
– Engenco Investments Pty Ltd
– Australian Rail Mining Services Pty Ltd
– Centre for Excellence in Rail Training Pty Ltd
– EGN Rail Pty Ltd
– EGN Rail (NSW) Pty Ltd
– Midland Railway Company Pty Ltd
– Momentum Rail (Vic) Pty Ltd
– Momentum Rail (WA) Pty Ltd
– Sydney Railway Company Pty Ltd
– Greentrains Pty Ltd1 (formerly Greentrains Limited)
– Greentrains Leasing Pty Ltd
– Drivetrain Power and Propulsion Pty Ltd
– Drivetrain Australia Pty Ltd
– DTPP Energy Pty Ltd
– Drivetrain Philippines Inc.
– Drivetrain Singapore Pte Ltd
– Drivetrain Limited
– Drivetrain USA Inc.
– Hyradix Inc.
– Hedemora Investments AB
– Hedemora Turbo & Diesel AB
– Gemco Rail Pty Ltd
– Railway Bearings Refurbishment Services Pty Ltd
– New RTS Pty Ltd
– Hedemora Pty Ltd
– Industrial Powertrain Pty Ltd
– PC Diesel Pty Ltd
– Total Momentum Pty Ltd
Country of
Incorporation
Date of
Control
Percentage
Owned
2019
Percentage
Owned
2018
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Philippines
Singapore
New Zealand
USA
USA
Sweden
Sweden
Australia
Australia
Australia
Australia
Australia
Australia
Australia
1 Jul 06
1 Jul 06
1 Jul 06
18 Apr 07
30 Apr 07
30 Apr 07
30 Apr 07
30 Apr 07
30 Apr 07
30 Apr 07
30 Apr 07
30 Apr 07
17 Jul 09
18 Jun 08
1 Jul 06
1 Jul 06
25 May 10
1 Jul 07
1 Jul 07
1 Jul 07
31 Dec 08
31 Dec 08
1 Jul 06
1 Jul 06
1 Jul 07
1 Jul 07
3 Dec 08
1 Jul 06
1 Jul 07
1 Jul 06
30 Apr 07
100
100
100
100
100
100
100
100
100
100
100
100
81
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
81
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
1 Total Engenco Group ownership of Greentrains Pty Ltd is 81% (split between Engenco Investments Pty Ltd, 61%, and Engenco Ltd, 20%).
42
Engenco Limited and its controlled entities – Annual Report 2019
Notes to the Consolidated Financial Statementsfor the year ended 30 June 2019
Note 3 – Operating Segments
Basis of Segmentation
Identification of Reportable Segments
The Group has identified its operating segments based
on the internal reports that are reviewed and used by the
Managing Director/CEO (chief operating decision maker)
in assessing performance and determining the allocation
of resources.
The Group is managed primarily on the basis of service
offerings since the diversification of the Group’s operations
inherently have notably different risk profiles and performance
assessment criteria. Operating segments are therefore
determined on the same basis.
Types of Products and Services by Segment
The chief operating decision maker considers the business
from a Business Line perspective and has identified five (5)
reportable segments as follows:
Drivetrain
(a)
Drivetrain is a provider of technical sales and services
to the mining, oil & gas, rail, transport, defence, marine,
construction, materials handling, automotive, agriculture,
and power generation industries. A broad product and
service offering includes engine and powertrain maintenance,
repair and overhaul, new components and parts, fluid
connector products, power generation design and
construction, technical support, professional engineering and
training services.
Centre for Excellence in Rail Training (CERT Training)
(b)
CERT Training provides specialist rail training including
the provision of competency based training, issuing of
certificates of competency, rail incident investigation
training, security (transit guard) training, first aid training,
company inductions and course design, and management of
apprenticeship and trainee schemes to major infrastructure
and rail clients.
Convair Engineering (Convair)
(c)
Convair is a manufacturer of bulk pneumatic road tankers
and mobile silos for the carriage and storage of construction
materials, grains, and other dry bulk materials. Additional
services include maintenance, repair and overhaul, and
provisioning of ancillary equipment and spare parts sales.
Total Momentum (Momentum Rail)
(d)
Momentum Rail is a provider of personnel and project
management services to freight rail and mining rail
infrastructure managers. Services include professional
recruitment, training and workforce solutions, including
managing and provisioning track construction and
maintenance projects.
Gemco Rail
(e)
Gemco Rail specialises in the remanufacture and repair of
locomotives, wagons, bearings and other rail products for rail
operators and maintainers. Gemco Rail provides wheel-set,
bogie and in-field wagon maintenance and manufactures
new and refurbished wagons, bogie component parts,
customised remote controlled ballast car discharge gates,
and a range of rail maintenance equipment and spares.
All Other
(f)
This includes the parent entity, non-reportable segments and
consolidation / inter-segment elimination adjustments.
Basis of Reporting by Operating Segments
Basis of reporting
(a)
Unless stated otherwise, all amounts reported to the
Managing Director/CEO as the chief operating decision
maker with respect to operating segments are determined
in accordance with accounting policies that are consistent
to those adopted in the annual financial statements of
the Group.
Inter‑segment transactions
(b)
An internal transfer price is set for all inter-segment sales.
This price is set based on what would be realised in the
event the sale was made to an external party at arm’s length.
All such transactions are eliminated on consolidation of the
Group’s financial statements.
Segment assets
(c)
Unless indicated otherwise in the segment assets
note, deferred tax assets have not been allocated to
operating segments.
Segment liabilities
(d)
Liabilities are allocated to segments where there is nexus
between the incurrence of the liability and the operations
of the segment. Unless indicated otherwise in the segment
liabilities note, deferred tax liabilities have not been allocated
to operating segments.
Engenco Limited and its controlled entities – Annual Report 2019
43
Note 3 – Operating Segments (cont’d)
Information about Reportable Segments
Information related to each reportable segment is set out below. Segment EBITDA is used to measure performance because
management believes this information is the most relevant in evaluating the results of the respective segments relative to other
entities that operate in the same industries.
(i)
Segment Performance
Year ended 30 June 2019
Drivetrain
$’000
CERT Training
$’000
Convair
$’000
Momentum
Rail
$’000
Gemco Rail
$’000
All Other
$’000
Consolidated
Group
$’000
Reportable Segments
REVENUE
External revenue
47,737
11,429
17,128
23,526
67,980
165
–
46
–
–
–
159
–
29
–
6,976
3,334
74
174,776
3,733
74
Inter-segment revenue
Interest revenue
TOTAL SEGMENT
REVENUE
47,902
11,475
17,128
23,685
68,009
10,384
178,583
Reconciliation of segment revenue to Group revenue:
Inter-segment
elimination
TOTAL GROUP
REVENUE
SEGMENT EBITDA
–
–
–
–
–
(3,733)
(3,733)
47,902
5,563
11,475
1,967
17,128
1,540
23,685
2,837
68,009
12,425
6,651
(7,705)
174,850
16,627
Reconciliation of segment EBITDA to Group net profit / (loss) before tax:
Depreciation and
amortisation
Finance costs
TOTAL PROFIT /
(LOSS) BEFORE TAX
(391)
(14)
(79)
(33)
(286)
(4)
(29)
–
(2,109)
(3)
(721)
(268)
(3,615)
(322)
5,158
1,855
1,250
2,808
10,313
(8,694)
12,690
44
Engenco Limited and its controlled entities – Annual Report 2019
Notes to the Consolidated Financial Statementsfor the year ended 30 June 2019
Year ended 30 June 2018*
Reportable Segments
REVENUE
Drivetrain
$’000
CERT Training
$’000
Convair
$’000
Momentum
Rail
$’000
Gemco Rail
$’000
All Other
$’000
Consolidated
Group
$’000
External revenue
52,729
12,240
15,593
18,976
54,196
186
–
40
–
–
–
25
–
–
–
3,572
3,159
30
157,306
3,410
30
Inter-segment revenue
Interest revenue
TOTAL SEGMENT
REVENUE
52,915
12,280
15,593
19,001
54,196
6,761
160,746
Reconciliation of segment revenue to Group revenue:
Inter-segment
elimination
TOTAL GROUP
REVENUE
SEGMENT EBITDA
–
–
–
–
–
(3,410)
(3,410)
52,915
7,977
12,280
3,590
15,593
1,437
19,001
3,000
54,196
9,462
3,351
(8,146)
157,336
17,320
Reconciliation of segment EBITDA to Group net profit / (loss) before tax:
Depreciation and
amortisation
Finance costs
TOTAL PROFIT /
(LOSS) BEFORE TAX
(390)
(23)
(65)
(40)
(282)
(6)
(48)
(1)
(2,236)
(5)
(809)
(401)
(3,830)
(476)
7,564
3,485
1,149
2,951
7,221
(9,356)
13,014
*2018 comparatives have been restated for the current year classification of continuing and discontinued operations, and of identifiable operating
segments as non-reportable.
Engenco Limited and its controlled entities – Annual Report 2019
45
Note 3 – Operating Segments (cont’d)
(ii)
Segment Assets
As at 30 June 2019
Drivetrain
$’000
CERT Training
$’000
Convair
$’000
Momentum
Rail
$’000
Gemco Rail
$’000
All Other
$’000
Consolidated
Group
$’000
Reportable Segments
ASSETS
Segment assets
38,689
Capital expenditure
Investments
Intangibles
82
–
–
Reconciliation of segment assets to Group assets:
Segment eliminations
Unallocated Items:
Deferred tax assets
–
–
9,678
187
13,905
369
–
–
–
–
–
–
–
–
6,150
35,612
2,770
106,804
–
–
–
–
–
1,801
–
–
–
–
528
–
200
–
–
2,967
–
200
(5,395)
7,366
TOTAL ASSETS
38,771
9,865
14,274
6,150
37,413
3,498
111,942
As at 30 June 2018*
Reportable Segments
ASSETS
Drivetrain
$’000
CERT Training
$’000
Convair
$’000
Momentum
Rail
$’000
Gemco Rail
$’000
All Other
$’000
Consolidated
Group
$’000
Segment assets
35,239
11,747
Capital expenditure
Investments
Intangibles
261
–
–
57
–
–
Reconciliation of segment assets to Group assets:
Segment eliminations
Unallocated Items:
Deferred tax assets
–
–
–
–
16,459
1,200
8,248
101
–
–
–
–
–
–
–
–
32,364
(11,690)
1,393
–
–
–
–
561
–
248
–
–
TOTAL ASSETS
35,500
11,804
17,659
8,349
33,757
(10,881)
92,367
3,573
–
248
(4,911)
5,575
96,852
*2018 comparatives have been restated for the current year classification of continuing and discontinued operations, and of identifiable operating
segments as non-reportable.
46
Engenco Limited and its controlled entities – Annual Report 2019
Notes to the Consolidated Financial Statementsfor the year ended 30 June 2019
(iii)
Segment Liabilities
As at 30 June 2019
Reportable Segments
LIABILITIES
Drivetrain
$’000
CERT Training
$’000
Convair
$’000
Momentum
Rail
$’000
Gemco Rail
$’000
All Other
$’000
Consolidated
Group
$’000
Segment liabilities
49,359
1,047
2,528
835
76,247
(97,301)
32,715
Reconciliation of segment liabilities to Group liabilities:
Segment eliminations
Unallocated Items:
Deferred tax liabilities
–
–
–
–
–
–
–
–
–
–
–
–
(5,395)
547
TOTAL LIABILITIES
49,359
1,047
2,528
835
76,247
(97,301)
27,867
As at 30 June 2018*
Reportable Segments
LIABILITIES
Drivetrain
$’000
CERT Training
$’000
Convair
$’000
Momentum
Rail
$’000
Gemco Rail
$’000
All Other
$’000
Consolidated
Group
$’000
Segment liabilities
53,449
1,172
5,320
1,598
79,514
(113,202)
27,851
Reconciliation of segment liabilities to Group liabilities:
Segment eliminations
Unallocated Items:
Deferred tax liabilities
–
–
–
–
–
–
–
–
–
–
–
–
(4,911)
694
TOTAL LIABILITIES
53,449
1,172
5,320
1,598
79,514
(113,202)
23,634
*2018 comparatives have been restated for the current year classification of continuing and discounted operations, and of identifiable operating segments
as non-reportable.
Engenco Limited and its controlled entities – Annual Report 2019
47
Note 3 – Operating Segments (cont’d)
Geographical Information
(iv)
The geographical information analyses the Group’s revenue and assets by the Company’s country of domicile and other
countries. In presenting the geographical information, segment revenue has been based on the geographical location of the
selling party and segment assets were based on the geographical location of the assets.
Revenue
Australasia
Europe
United States of America
TOTAL REVENUE
Assets
Australasia
Europe
United States of America
TOTAL ASSETS
2019
$’000
2018
$’000
164,572
150,741
10,278
6,595
–
–
174,850
157,336
2019
$’000
100,016
11,900
26
2018
$’000
85,355
11,457
40
111,942
96,852
Major customers
(v)
Revenue from one customer of the Group, across multiple segments, represents greater than 10% of the Group’s total revenue
in the current year.
48
Engenco Limited and its controlled entities – Annual Report 2019
Notes to the Consolidated Financial Statementsfor the year ended 30 June 2019
Note 4 – Revenue and Other Income
Sale of Goods
Revenue is recognised at a point in time when a customer obtains control of the goods. Revenue is measured net of returns,
trade discounts and volume rebates.
Rendering of Services
Revenue is recognised as contract performance obligations are satisfied over time. The total contract consideration is allocated
to the performance obligations based on their observable stand alone selling prices.
Construction Contracts
Revenue is recognised as contract performance obligations are satisfied over time. The total contract consideration is allocated
to the performance obligations based on their observable stand alone selling prices. Claims and variations are included in the
contract consideration only when they are approved.
RTO Training
Revenue is recognised at the point in time when the performance obligation is satisfied.
Lease Rental Income
Rental income from leased plant and equipment is recognised on a straight-line basis over the term of the lease. Lease
incentives granted are recognised as an integral part of the total rental income, over the term of the lease.
SALES REVENUE
Sales of goods and services
Lease rental income
TOTAL SALES REVENUE
OTHER REVENUE
Interest received – external
TOTAL OTHER REVENUE
TOTAL REVENUE
OTHER INCOME
Gain on disposal of property, plant and equipment
Other gains
TOTAL OTHER INCOME
2019
$’000
2018
$’000
173,022
155,091
1,754
2,215
174,776
157,306
74
74
30
30
174,850
157,336
2,656
213
2,869
305
1,030
1,335
Engenco Limited and its controlled entities – Annual Report 2019
49
Note 4 – Revenue and Other Income (cont’d)
Set out below is the disaggregation of the Group’s revenue from contracts with customers:
Sale of goods
Rendering of services
Construction contracts
RTO training
Lease rental income
TOTAL SALES REVENUE
Consolidated Group
Revenue
Recognition
30 Jun 19
$’000
Point in time
Over time
Over time
Point in time
Over time
53,342
48,555
59,650
11,475
1,754
174,776
The Group did not identify a material impact to the recognition of revenue as a result of adopting AASB 15: Revenue from
Contracts with Customers. Details of assessment can be found in Note 1(i)(II).
Note 5 – Expenses
FINANCE COSTS
Interest – related parties
Other finance costs
TOTAL FINANCE COSTS
EMPLOYEE BENEFITS EXPENSE
Wages and salaries
Annual leave expense
Long service leave expense
Defined contribution plan
TOTAL EMPLOYEE BENEFITS EXPENSE
RENTAL EXPENSE ON OPERATING LEASES
Lease payments
TOTAL RENTAL EXPENSE ON OPERATING LEASES
2019
$’000
–
322
322
2018
$’000
43
433
476
56,793
48,720
2,364
454
4,211
1,938
490
3,770
63,822
54,918
5,013
5,013
4,555
4,555
50
Engenco Limited and its controlled entities – Annual Report 2019
Notes to the Consolidated Financial Statementsfor the year ended 30 June 2019
Note 6 – Tax
Tax Consolidation
Engenco Limited and its wholly-owned Australian
subsidiaries have formed an income tax consolidated group
under tax consolidation legislation. Each entity in the group
recognises its own current and deferred tax assets and
liabilities. Such taxes are measured using the ‘stand-alone
taxpayer’ approach to allocation. Current tax liabilities/assets
and deferred tax assets arising from unused tax losses and
tax credits in the subsidiaries are immediately transferred
to the head entity. The Group notified the Australian Tax
Office that it had formed an income tax consolidated group
to apply from 31 October 2007. The tax consolidated
group has entered into a tax funding arrangement whereby
each company in the Group contributes to the income tax
payable by the group in proportion to their contribution to the
group’s taxable income. Differences between the amounts
of net tax assets and liabilities derecognised and the net
amounts recognised pursuant to the funding arrangement
are recognised as either a contribution by, or distribution to
the head entity.
Income tax expense/benefit comprises current and deferred
tax. It is recognised in profit or loss except to the extent that
it relates to a business combination, or items recognised
directly in equity or OCI.
Current Tax
Current tax comprises the expected tax payable or
receivable on the taxable income or loss for the year, and
any adjustment to the tax payable or receivable in respect
of previous years. The amount of current tax payable or
receivable is the best estimate of the tax amount expected
to be paid or received that reflects uncertainty related to
income taxes, if any. It is measured using tax rates enacted
or substantively enacted at the reporting date. Current tax
also includes any tax arising from dividends.
Current tax assets and liabilities are offset only if certain
criteria are met.
Deferred Tax
Deferred tax is recognised in respect of temporary
differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the
amounts used for taxation purposes. Deferred tax is not
recognised for:
• Temporary differences on the initial recognition of
assets or liabilities in a transaction that is not a business
combination and that affects neither accounting nor
taxable profit or loss;
• Temporary differences related to investments in
subsidiaries, associates and joint arrangements to the
extent that the Group is able to control the timing of the
reversal of the temporary differences and it is probable
that they will not reverse in the foreseeable future; and
• Taxable temporary differences arising on the initial
recognition of goodwill.
Deferred tax assets are recognised for unused tax losses,
unused tax credits and deductible temporary differences to
the extent that it is probable that future taxable profits will
be available against which they can be used. Future taxable
profits are determined based on business plans for individual
subsidiaries in the Group. Deferred tax assets are reviewed
at each reporting date and are reduced to the extent that
it is no longer probable that the related tax benefit will be
realised; such reductions are reversed when the probability of
future taxable profits improves.
Unrecognised deferred tax assets are reassessed at each
reporting date and recognised to the extent that it has
become probable that future taxable profits will be available
against which they can be used.
Deferred tax is measured at the tax rates that are expected
to be applied to temporary differences when they reverse,
using tax rates enacted or substantively enacted at the
reporting date.
The measurement of deferred tax reflects the tax
consequences that would follow from the manner in which
the Group expects, at the reporting date, to recover or settle
the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset only if certain
criteria are met.
CURRENT
Income tax receivable /
(payable)
TOTAL
2019
$’000
2018
$’000
5
5
(132)
(132)
Engenco Limited and its controlled entities – Annual Report 2019
51
Note 6 – Tax (cont’d)
(a) The components of tax expense / (benefit) comprise:
Current income tax expense / (benefit)
– Current income tax expense / (benefit)
– Adjustment for prior years
Current income tax expense / (benefit)
– Origination and reversal of temporary differences
Income tax expense / (benefit) reported in the Statement of Profit or Loss and OCI
(b) A reconciliation between tax expense / (benefit) and the product of accounting
profit before income tax multiplied by the Group’s applicable income tax rate is
as follows:
Accounting profit / (loss) before tax
At the Company’s statutory domestic income tax rate of 30% (2018: 30%)
Add / (Less) tax effect of:
– Foreign tax rate adjustment
– Utilisation of tax losses not previously recognised
– Other non-allowable items
– Adjustment for prior years
– Movements in unrecognised temporary differences
– Other (DTA partial recognition of prior year loses)
Income tax expense / (benefit)
2019
$’000
2018
$’000
220
–
(79)
(456)
(1,757)
(1,537)
(4,454)
(4,989)
12,690
3,807
13,014
3,904
(49)
106
396
–
–
(5,797)
(1,537)
(957)
(6,369)
3,312
(456)
31
(4,454)
(4,989)
The tax receivable and payable relates to the Group companies outside the Australian Tax Consolidated Group.
52
Engenco Limited and its controlled entities – Annual Report 2019
Notes to the Consolidated Financial Statementsfor the year ended 30 June 2019
Consolidated Group
Opening
Balance
$’000
Balance
Acquired
$’000
(Credited)/
Charged to
Income
$’000
Charged
Directly to
Equity
$’000
Changes in
Tax Rate
$’000
Exchange
Differences
$’000
NON-CURRENT
Deferred tax liabilities:
Other
Balance at
30 June 2018
Other
Balance at
30 June 2019
Deferred tax assets:
Provisions
Accruals
Losses
Balance at
30 June 2018
Provisions
Accruals
Losses
Balance at
30 June 2019
72
72
694
694
295
–
–
295
1,121
–
4,454
5,575
–
–
–
–
–
–
–
–
–
–
–
–
826
826
(147)
(147)
826
–
4,454
5,280
(367)
–
1,756
1,389
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Other
$’000
(204)
(204)
–
–
–
–
–
–
402
–
–
Closing
Balance
$’000
694
694
547
547
1,121
–
4,454
5,575
1,156
–
6,210
402
7,366
The Company has estimated Australian carry forward operating tax losses of $79,142,794 at June 2019 (2018: $94,368,624)
which are not fully recognised. The ability to utilise the operating tax losses will be subject to satisfying relevant eligibility criteria
for the recoupment of carry forward tax losses.
An additional deferred tax asset of $5,797,000 was partially recognised in 2019 from previously unrecognised tax losses,
based on the probable nature that future taxable profits would be available against which the tax losses can be recovered and,
therefore, the related deferred tax asset can be realised.
Engenco Limited and its controlled entities – Annual Report 2019
53
Note 7 – Earnings Per Share
The calculation of basic earnings per share has been based on the following profit attributable to ordinary shareholders and
weighted-average number of ordinary shares outstanding.
The calculation of diluted earnings per share has been based on the following profit attributable to ordinary shareholders and
weighted-average number of ordinary shares outstanding after adjustment for the effects of all dilutive potential ordinary shares.
(a) RECONCILIATION OF EARNINGS TO PROFIT OR LOSS
Profit / (loss) for the year
(Profit) / loss for the year, attributable to non-controlling interest
Earnings used to calculate basic EPS
Earnings used in the calculation of dilutive EPS
(b) RECONCILIATION OF EARNINGS TO PROFIT OR LOSS FROM
CONTINUING OPERATIONS
Profit / (loss) for the year from continuing operations
(Profit) / loss for the year, attributable to non-controlling interest in respect of
continuing operations
Earnings used to calculate basic EPS from continuing operations
Earnings used in the calculation of dilutive EPS from continuing operations
(c) WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES OUTSTANDING DURING
THE YEAR USED IN CALCULATING BASIC EPS
Weighted average number of dilutive options outstanding
Weighted average number of ordinary shares outstanding during the year used in
calculating dilutive EPS
2019
$’000
2018
$’000
14,227
18,003
–
14,227
14,227
–
18,003
18,003
14,227
18,003
–
14,227
14,227
–
18,003
18,003
No.’000
No.’000
313,381
313,381
–
–
313,381
313,381
Note 8 – Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquid investments
with original maturities of three months or less, and bank overdrafts. Bank overdrafts, where the Group does not have the legal
right and the intention to settle on a net basis, are shown within short-term borrowings in current liabilities on the Statement of
Financial Position.
CASH AT BANK AND IN HAND
2019
$’000
23,702
23,702
2018
$’000
8,656
8,656
As at the reporting date, where the Group has the legally enforceable right of set-off and the intention to settle on a net basis
within its banking facilities, the Group has set-off bank overdrafts of $21,782,819 (2018: $26,239,011) against cash and cash
equivalents of $28,845,402 (2018: $31,192,557) resulting in a net positive cash position of $7,062,583 (2018: $4,953,546).
54
Engenco Limited and its controlled entities – Annual Report 2019
Notes to the Consolidated Financial Statementsfor the year ended 30 June 2019
Note 9 – Trade and Other Receivables
CURRENT
Trade receivables
Provision for impairment of receivables
Total trade receivables
Accrued income*
Sundry receivables
Total other receivables
2019
$’000
2018
$’000
28,045
26,338
(846)
(324)
27,199
2,875
238
3,113
26,014
1,983
278
2,261
TOTAL CURRENT TRADE AND OTHER RECEIVABLES
30,312
28,275
*Contract assets are disclosed within accrued income.
Expected Credit Loss Provision for Impairment of Receivables
(a)
The Group has established a Credit Management Policy under which each new customer application is analysed individually
for creditworthiness before the Group offers any form of credit, or any variation to the standard terms and conditions. Credit
facilities are generally offered on terms of 30 to 60 days from end of month. The Group’s review procedure includes the utilisation
of external ratings, credit agency information and other industry information. Credit limits are established and monitored for
each customer with any sales exceeding these limits requiring approval. The Group monitors the economic environments in
which it operates, and proactively takes any necessary actions to limit its credit exposure to customers and industries that are
experiencing economic volatility.
The Group has adopted the simplified approach when calculating its expected credit loss provisions. This allows the recognition
of lifetime expected credit losses at all times. This provision is reassessed when there is a significant change in credit risk. These
amounts have been included in the provision for impairment of accounts receivable.
The Group uses a provisions matrix to measure the expected credit losses of trade receivables from individual customers. Loss
rates are calculated using a “roll rate” method based on the probability of a receivable progressing through successive stages of
delinquency to write-off. Roll rates are calculated separately per operating segment. Loss rates are based on actual credit loss
experience over the past three years, which are adjusted where deemed necessary for economic factors to reflect differences
in economic conditions over which the historical data has been collected, current conditions and the Group’s view of economic
conditions over the expected lives of the receivables.
2019
Current (not past due)
1 – 30 days past due
31 – 60 days past due
61 – 90 days past due
More than 90 days past due
Total ECL Provision
Specific Provision
Total Provision
Weighted
average loss
rate
0.47%
2.99%
8.11%
15.96%
36.82%
Gross
carrying
amount
$’000
23,676
2,434
210
675
813
27,808
237
28,045
Loss
allowance
$’000
Credit
impaired
112
73
17
108
299
609
237
846
No
No
No
No
Yes
Yes
Engenco Limited and its controlled entities – Annual Report 2019
55
Note 9 – Trade and Other Receivables (cont’d)
2019
Loss allowance for trade and other receivables balance as at 30 June 2018
Additional loss allowance for trade and other receivables (AASB 9: Financial Instruments)
Loss allowance for trade and other receivables opening balance as a 1 July 2018
Utilised loss allowance for trade and other receivables
Additional loss allowance as at 30 June 2019
Loss allowance for trade receivables closing balance as at 30 June 2019
Loss
Allowance
$’000
324
848
1,172
(331)
5
846
Note 10 – Inventories
Inventories are measured at the lower of cost and net realisable value. The cost of finished goods includes direct materials,
direct labour and an appropriate portion of variable and fixed overheads included in bringing them to their existing location and
condition. Costs are assigned on the basis of weighted average costs.
The cost of raw materials includes all costs to transport the goods to a location ready for use including any duties and charges
on items purchased overseas.
CURRENT
At cost:
– Work in progress
– Finished goods
At net realisable value:
– Work in progress
– Finished goods
TOTAL INVENTORY
2019
$’000
2018
$’000
4,789
21,480
26,269
–
10,305
10,305
36,574
5,460
16,679
22,139
–
11,805
11,805
33,944
The Group has completed a comprehensive review of the carrying value of inventory. As a result of the review, inventory has
been impaired by $571,000 (2018: $90,000).
Note 11 – Other Current Assets
CURRENT
Other current assets
Prepayments
TOTAL CURRENT OTHER ASSETS
2019
$’000
2018
$’000
517
1,509
2,026
2,236
1,079
3,315
56
Engenco Limited and its controlled entities – Annual Report 2019
Notes to the Consolidated Financial Statementsfor the year ended 30 June 2019
Note 12 – Property, Plant and Equipment
Recognition and Measurement
Items of property, plant and equipment are measured at
cost less accumulated depreciation and any accumulated
impairment losses. If significant parts of an item of property,
plant and equipment have different useful lives, then they
are accounted for as separate items (major components) of
property, plant and equipment. Any gain or loss on disposal
of an item of property, plant and equipment is recognised in
profit or loss.
Subsequent Expenditure
Subsequent expenditure is capitalised only when it is
probable that the future economic benefits associated with
the expenditure will flow to the Group.
Depreciation
Depreciation is calculated to write off the cost of items of
property, plant and equipment less their estimated residual
values using the straight-line or diminishing returns method
over their estimated useful lives, and is generally recognised
in profit or loss. Leased assets are depreciated over the
shorter of the lease term and their useful lives unless it is
reasonably certain that the Group will obtain ownership by
the end of the lease term. Land is not depreciated.
The depreciation rates used for each class of depreciable
assets are:
Class of Property, Plant & Equipment
Leasehold improvements
Plant and equipment
Leased plant and equipment
Buildings
Depreciation
Rate
10% – 100%
5% – 67%
30% – 67%
2.50%
Depreciation methods, useful lives and residual values are
reviewed at each reporting date and adjusted if appropriate.
LAND AND BUILDINGS
Freehold land:
– At cost
TOTAL LAND
Buildings:
– At cost
– Less accumulated depreciation
TOTAL BUILDINGS
TOTAL LAND AND BUILDINGS
PLANT AND EQUIPMENT
Plant and equipment:
– At cost
– Accumulated depreciation and impairment
TOTAL PLANT AND EQUIPMENT
Leasehold improvements:
– At cost
– Accumulated depreciation
TOTAL LEASEHOLD IMPROVEMENTS
TOTAL PLANT AND EQUIPMENT
TOTAL PROPERTY, PLANT AND EQUIPMENT
2019
$’000
2018
$’000
53
53
806
(652)
154
207
53
53
806
(630)
176
229
80,933
82,854
(69,697)
(66,597)
11,236
16,257
3,557
(3,268)
289
11,525
11,732
3,260
(2,907)
353
16,610
16,839
*2018 comparatives have been restated for current year classification of asset classes.
Engenco Limited and its controlled entities – Annual Report 2019
57
Note 12 – Property, Plant and Equipment (cont’d)
Reconciliation of Carrying Amounts
(a)
Movement in the carrying amounts for each class of property, plant and equipment between the beginning and the end of the
current financial year.
Consolidated Group
Freehold
Land
$’000
Buildings
$’000
Leasehold
Improvements
$’000
Plant and
Equipment*
$’000
BALANCE AT 1 JULY 2017
Additions
Disposals
Depreciation expense
BALANCE AT 30 JUNE 2018
Additions
Disposals
Depreciation expense
BALANCE AT 30 JUNE 2019
53
–
–
–
53
–
–
–
53
207
–
–
(31)
176
–
–
(22)
154
539
183
–
(369)
353
296
–
(360)
289
*2018 comparatives have been restated for current year classification of asset classes.
Note 13 – Net Tangible Assets
Net tangible assets per ordinary share: 313,380,943 shares (2018: 313,380,943 shares )
Total
$’000
17,376
3,573
(464)
(3,646)
16,839
2,967
(4,592)
(3,482)
16,577
3,390
(464)
(3,246)
16,257
2,671
(4,592)
(3,100)
11,236
11,732
2019
Cents
26.5
2018
Cents
23.6
58
Engenco Limited and its controlled entities – Annual Report 2019
Notes to the Consolidated Financial Statementsfor the year ended 30 June 2019
Note 14 – Intangible Assets
Recognition and measurement
Goodwill arising on the acquisition of subsidiaries is
measured at cost less accumulated impairment losses.
Expenditure on research activities is recognised in profit or
loss as incurred.
Development expenditure is capitalised only if the
expenditure can be measured reliably, the product or process
is technically and commercially feasible, future economic
benefits are probable and the Group intends to and has
sufficient resources to complete development and to use
or sell the asset. Otherwise, it is recognised in profit or loss
as incurred. Subsequent to initial recognition, development
expenditure is measured at cost less accumulated
amortisation and any accumulated impairment losses.
Other intangible assets, including customer relationships,
patents and trademarks, and computer software, that
are acquired by the Group and have finite useful lives are
measured at cost less accumulated amortisation and any
accumulated impairment losses.
Subsequent expenditure
Subsequent expenditure is capitalised only when it increases
the future economic benefits embodied in the specific
asset to which it relates. All other expenditure, including
expenditure on internally generated goodwill and brands, is
recognised in profit or loss as incurred.
Amortisation
Amortisation is calculated to write off the cost of intangible
assets less their estimated residual values using the
reducing-balance method over their estimated useful lives,
and is generally recognised in profit or loss. Goodwill is
not amortised.
The estimated useful lives for current and comparative
periods are as follows:
Class of Intangible Asset
Customer-related intangibles
Patents and trademarks
Development costs
Other intangible assets
Useful Life
3-10 years
Up to 13 years
Life of project
5-8 years
Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.
OTHER IDENTIFIABLE INTANGIBLES
Cost:
Opening balance
Additions
Closing balance
Accumulated amortisation:
Opening balance
Amortisation for the year
Closing balance
NET BOOK VALUE
TOTAL INTANGIBLE ASSETS
At cost
Accumulated amortisation and impairment
NET BOOK VALUE
2019
$’000
2018
$’000
12,993
12,959
85
34
13,078
12,993
(12,745)
(12,561)
(133)
(184)
(12,878)
(12,745)
200
248
13,078
12,993
(12,878)
(12,745)
200
248
Intangible assets have finite useful lives. The current amortisation charges for intangible assets are included under depreciation
and amortisation expense in the Consolidated Statement of Profit or Loss and OCI.
Engenco Limited and its controlled entities – Annual Report 2019
59
Note 15 – Trade and Other Payables
Trade and other payables represent the liability outstanding at the end of the reporting period for goods and services received
by the Group during the reporting period which remains unpaid. The balance is recognised as a current liability if expected to be
settled within 12 months.
CURRENT
Unsecured liabilities:
Trade payables
Sundry payables and accrued expenses
Deferred income*
TOTAL TRADE AND OTHER PAYABLES
*Contract liabilities are disclosed within deferred income.
Note 16 – Financial Liabilities
2019
$’000
2018
$’000
15,571
11,953
2,686
1,151
2,730
770
19,408
15,453
Non-Derivative Financial Liabilities – Measurement
Other non-derivative financial liabilities are initially measured at fair value less any directly attributable transaction costs.
Subsequent to initial recognition, these liabilities are measured at amortised cost using the effective interest method.
Non-Derivative Financial Liabilities – Recognition and Derecognition
The Group initially recognises loans and debt securities issued on the date when they are originated. All other financial liabilities
are initially recognised on the trade date, when the entity becomes a party to the contractual provisions of the instrument.
The Group derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire.
Financial liabilities are offset, and the net amount presented in the Statement of Financial Position when, and only when, the
Group has a legally enforceable right to offset the amounts and intends either to settle them on a net basis or to realise the asset
and settle the liability simultaneously.
CURRENT
Secured liabilities:
Bank overdrafts
TOTAL CURRENT FINANCIAL LIABILITIES
Note
22(a)
2019
$’000
2018
$’000
294
294
338
338
Information about the Group’s exposure to interest rate, foreign currency and liquidity risk is included in Note 23 – Financial
Risk Management.
(a)
Collateral Provided
Bank facility
The bank facility with National Australia Bank is comprised of $10.0m Revolving Credit Facility, $6m Bank Guarantee Facility,
$0.6m Credit Card Facility and $0.5m Set off Facility. These facilities are secured against the Australian assets of the Group. The
facility expires on 20 November 2021.
60
Engenco Limited and its controlled entities – Annual Report 2019
Notes to the Consolidated Financial Statementsfor the year ended 30 June 2019
The bank facility of $2.0m with the Commonwealth Bank of Australia (CBA) was secured by a cash deposit into a secured bank
account. The facility expired on 30 June 2019.
Related party debt and facility
The related party debt facility with Elph Pty Ltd (Elph) was terminated 20 November 2018.
Defaults and breaches
There were no defaults or breaches during the year ended 30 June 2019 on any of the above mentioned facilities.
Lease liabilities
Lease liabilities are secured by underlying leased assets.
(b)
Debt Facilities and Credit Standby Arrangements
A summary of the Group’s loan facilities is provided in the table below:
NAB Revolving Credit Facility
CBA Working Capital Multi
Option Facility
Swedish Overdraft Facility (SEK)**
Elph Funding Facility
Facility
Available
2019
$’000
16,600
–
920
–
17,520
Facility
Used
2019
$’000
–
–
–
–
–
Maturity
Dates
2019
Nov-21
Expired
Dec-19
Expired
Facility
Available
2018
$’000
–
Facility
Used
2018
$’000
–
Maturity
Dates
2018
Interest
Basis
–
Floating
2,000*
1,420
Jun-19
Floating
906
10,000
12,906
–
–
Dec-18
Floating
Apr-19
Fixed
1,420
*Comprises net bank overdrafts, off balance sheet bank guarantees and business credit cards and other trade products.
**Facility is denominated in SEK, and presented in AUD above.
Note 17 – Provisions
Provisions are determined by discounting the expected
future cash flows at a pre-tax rate that reflects current
market assessments of the time value of money, and the
risks specific to the liability. The unwinding of the discount is
recognised as a finance cost.
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.
Restructuring
A provision for restructuring is recognised when the Group
has approved a detailed and formal restructuring plan,
and the restructuring either has commenced or has been
announced publicly. Future operating losses are not provided
for. Restructuring provisions include make-good costs and
redundancies announced before the reporting date.
Site Restoration
A provision for site restoration in respect of contaminated
land, and the related expense, is recognised when the land is
found to be contaminated.
Onerous Contracts
A provision for onerous contracts is measured at the present
value of the lower of the expected cost of terminating the
contract and the expected net cost of continuing with
the contract. Before a provision is established, the Group
recognises any impairment loss on the assets associated
with that contract (see Note 1(b)). The Group has identified
loss making contracts which are non-cancellable. The
obligation for expected future losses has been provided for
as at the reporting date.
Other Provisions
Other provisions relate to various categories including
provisions for warranty costs and other costs required to be
incurred under contractual obligations.
Engenco Limited and its controlled entities – Annual Report 2019
61
Note 17 – Provisions (cont’d)
Long Service
Leave
Employee
Benefits
$’000
Annual Leave
Employee
Benefits
$’000
Consolidated Group
Onerous
Contracts
$’000
Restructuring
$’000
2,714
454
–
(230)
2,938
2,415
523
2,938
2,797
2,364
–
(2,194)
2,967
2,967
–
2,967
236
96
–
–
332
332
–
332
9
–
–
(9)
–
–
–
–
Other
$’000
1,261
246
–
(151)
1,356
1,356
–
1,356
Total
$’000
7,017
3,160
–
(2,584)
7,593
7,070
523
7,593
BALANCE AT 1 JULY 2018
Provisions raised
Transfer in / (out)
Provisions used
BALANCE AT 30 JUNE 2019
Current
Non-current
BALANCE AT 30 JUNE 2019
Note 18 – Capital and Leasing Commitments
Determining Whether an Arrangement Contains a Lease
At inception of an arrangement, the Group determines
whether such an arrangement is or contains a lease.
At inception or on reassessment of an arrangement that
contains a lease, the Group separates payments and other
consideration required by the arrangement into those for
the lease and those for other elements on the basis of their
relative fair values. If the Group concludes for a finance lease
that it is impracticable to separate the payments reliably, then
an asset and a liability are recognised at an amount equal
to the fair value of the underlying asset; subsequently, the
liability is reduced as payments are made and an imputed
finance cost on the liability is recognised using the Group’s
incremental borrowing rate.
Leased Assets
Leases of property, plant and equipment that transfer to the
Group substantially all the risks and rewards of ownership
are classified as finance leases. The leased assets are
measured initially at an amount equal to the lower of their fair
value and the present value of the minimum lease payments.
Subsequent to initial recognition, the assets are accounted
for in accordance with the accounting policy applicable to
that asset.
Assets held under other leases are classified as operating
leases and are not recognised in the Group’s Statement of
Financial Position.
Lease Payments
Payments made under operating leases are recognised
in profit or loss on a straight-line basis over the term of
the lease. Lease incentives received are recognised as an
integral part of the total lease expense, over the term of
the lease.
Minimum lease payments made under finance leases are
apportioned between the finance expense and the reduction
of the outstanding liability. The finance expense is allocated
to each period during the lease term so as to produce a
constant periodic rate of interest on the remaining balance of
the liability.
The Group also leases a number of sites under operating
leases which include land and buildings for the purpose of
operating its business. The leases typically run for a period
of between 3 and 10 years, sometimes with an option to
renew the leases after that date. None of the leases include
contingent rentals.
62
Engenco Limited and its controlled entities – Annual Report 2019
Notes to the Consolidated Financial Statementsfor the year ended 30 June 2019
LEASES AS A LESSEE
(a) Finance Lease Commitments
As at 30 June 2019, the Group is not a party to any finance lease arrangements (2018: NIL).
(b) Operating Lease Commitments
Non-cancellable operating leases contracted for but not capitalised in the financial statements
Payable – minimum lease payments:
– not later than 12 months
– between 12 months and 5 years
– greater than 5 years
2019
$’000
2018
$’000
4,250
9,440
2,528
16,218
4,500
11,558
4,253
20,311
During the year-ended 30 June 2019, $5,013,000 was recognised as an expense in the Statement of Profit or Loss and OCI in
respect of operating leases (2018: $4,555,000).
(c) Contractual Commitments
At 30 June 2019, the Group had not entered into any contractual commitments for the acquisition of property, plant and
equipment and other intangible assets (2018: NIL).
LEASES AS A LESSOR
(d) Operating Lease Receivables
Receivable – minimum lease payments:
– not later than 12 months
– between 12 months and 5 years
– greater than 5 years
2019
$’000
2018
$’000
630
687
193
1,510
1,358
1,553
316
3,227
The Group leases out portions of its fleet of rollingstock as well as other select items of property, plant and equipment to
customers. At the end of the reporting period, the future minimum lease payments under non-cancellable leases are receivable
as shown above.
Note 19 – Contingent Liabilities
There are a number of legal claims and exposures which arise from the ordinary course of business. There is significant
uncertainty as to whether a future liability will arise in respect to these items. The amount of the liability, if any, which may arise
cannot be reliably measured at the reporting date.
The Group has arranged for its bankers to guarantee its performance to third parties. The maximum amount of these guarantees
at 30 June 2019 is $1,289,974 (2018: $1,419,512).
Engenco Limited and its controlled entities – Annual Report 2019
63
Note 20 – Issued Capital and Reserves
(a)
Share Capital
313,380,943 (2018: 313,380,943) fully paid ordinary shares
2019
$’000
302,719
302,719
2018
$’000
302,719
302,719
Ordinary shares
Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity. Income tax
relating to transaction costs of an equity transaction are accounted for in accordance with AASB 112: Income Taxes.
At beginning of reporting period
AT REPORTING DATE
2019
No.
2018
No.
313,380,943
313,380,943
313,380,943
313,380,943
Ordinary shares are eligible to participate in dividends and the proceeds on winding up of the parent entity in proportion to the
number of shares on issue.
At 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.
(b)
Nature and Purpose of Reserves
Foreign currency translation reserve
The foreign currency translation reserve records exchange differences arising on translation of overseas subsidiaries.
Profit reserve
The profit reserve comprises a transfer of net profits and characterises profits available for distribution as dividend in future years.
Dividends
(c)
After the reporting date, the following final dividend was declared by the board of directors. The dividend has not been
recognised as a liability as at 30 June 2019, and there are no tax consequences.
(a) FINAL DIVIDEND DECLARED
1.5 cents per ordinary share (2018: 1 cent)
(b) FRANKING CREDIT BALANCE
2019
$’000
2018
$’000
4,701
3,134
Amount of franking credits available to shareholders of Engenco Limited for subsequent financial
years are:
Franking account balance as at the end of the financial year at 30% (2018: 30%)
9,239
10,582
64
Engenco Limited and its controlled entities – Annual Report 2019
Notes to the Consolidated Financial Statementsfor the year ended 30 June 2019
Note 21 – Parent Entity Disclosures
As at, and throughout the financial year ended, 30 June 2019 the parent entity of the Group was Engenco Limited. The ultimate
controlling party of the Company at reporting date was Elph Investments Pty Ltd, incorporated in Australia.
(a) Financial Position of Parent Entity at year end
ASSETS
Current assets
Non-current assets
TOTAL ASSETS
LIABILITIES
Current liabilities
Non-current liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Profit reserve
Accumulated losses
TOTAL EQUITY
(b) Result of Parent Entity
Profit / (loss) for the year
Other comprehensive income
TOTAL COMPREHENSIVE INCOME / (LOSS) FOR THE PERIOD
(c) Parent Entity Guarantees in respect of the debts of its subsidiaries
2019
$’000
2018
$’000
12,643
17,153
29,796
22,884
275
23,159
6,637
2,903
31,461
34,364
27,205
4,624
31,829
2,535
302,720
302,720
2,433
271
(298,516)
(300,456)
6,637
2,535
4,373
(3,014)
–
–
4,373
(3,014)
The parent entity acts as guarantor for debt facilities. Details of these facilities can be found in Note 16(a) – Financial Liabilities.
(d) Parent Entity Contingent Liabilities
At 30 June 2019, the parent entity has no significant contingent liabilities (2018: NIL).
(e) Parent Entity Capital Commitments for acquisition of property, plant and equipment
At 30 June 2019, the parent entity had not entered into any contractual commitments for the acquisition of property, plant and
equipment and other intangible assets (2018: NIL).
Engenco Limited and its controlled entities – Annual Report 2019
65
Note 22 – Cash Flow Information
(a)
Reconciliation of Cash at End of Financial Year
Cash and cash equivalents
Bank overdrafts
CASH (NET OF BANK OVERDRAFTS) AT END OF FINANCIAL YEAR
Note
8
16
2019
$’000
23,702
(294)
23,408
2018
$’000
8,656
(338)
8,318
(b)
Reconciliation of Cash Flow from Operating Activities with Profit / (Loss) after Income Tax
PROFIT / (LOSS) AFTER INCOME TAX
Adjustments for non-cash items:
– Depreciation
– Other intangibles amortisation
–
(Reversal of) / impairment losses on inventory
– Movement in ECL provision
– Net finance costs
–
Income tax expense / (benefit)
– Gain on sale of property, plant and equipment
Changes in:
–
–
–
–
–
(Increase) / decrease in trade and other receivables
(Increase) / decrease in prepayments
(Increase) / decrease in inventories
Increase / (decrease) in trade payables and accruals
Increase / (decrease) in provisions
Cash provided by / (used in) operating activities
– Net interest paid
–
Income taxes paid
CASH FLOW PROVIDED BY / (USED IN) OPERATIONS
2019
$’000
2018
$’000
14,227
18,003
3,482
133
571
5
248
(1,537)
(2,656)
14,473
(1,997)
(429)
(3,201)
3,684
577
13,107
(248)
(538)
12,321
3,646
184
90
–
446
(4,989)
(305)
17,075
(2,226)
(144)
(5,094)
(424)
(161)
9,026
(446)
(288)
8,292
2019
$’000
294
294
(c)
Reconciliation of Financial Liabilities in Financing Activities
Bank Overdraft
TOTAL FINANCIAL LIABILITIES
2018
$’000
338
338
Cash Flows
$’000
–
–
Non-Cash
Changes
$’000
(44)
(44)
66
Engenco Limited and its controlled entities – Annual Report 2019
Notes to the Consolidated Financial Statementsfor the year ended 30 June 2019
Note 23 – Financial Risk Management
The Group’s financial instruments consist mainly of investments, accounts receivable and payable, loans from external and
related parties and leases.
FINANCIAL ASSETS
Cash and cash equivalents
Trade and other receivables
FINANCIAL LIABILITIES
Financial liabilities at amortised cost:
– Trade and other payables
– Borrowings
Note
8
9
15
16
2019
$’000
2018
$’000
23,702
30,312
54,014
8,656
28,275
36,931
19,048
15,453
294
338
19,702
15,791
Treasury Risk Management
i.
Management, consisting of senior executives of the Group, discusses and monitors financial risk exposure and evaluates
treasury management strategies in the context of current economic conditions and forecasts. Management’s overall risk
management strategy seeks to assist the Group in meeting its financial targets, while minimising potential adverse effects on
financial performance. Management operates under the supervision of members of the Board of Directors. Risk management
transactions are approved by senior management personnel.
Financial Risk Exposures and Management
ii.
The main risks the Group is exposed to through its financial instruments are interest rate risk, currency risk, liquidity risk and
credit risk.
The Company’s Audit and Risk Committee has overall responsibility for the establishment and oversight of the Group’s risk
management framework, and is responsible for developing and monitoring the Group’s risk management policies.
The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate
risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed
regularly to reflect changes in market conditions and the Group’s activities. The Group, through its training and management
standards and procedures, aims to maintain a disciplined and constructive control environment in which all employees
understand their roles and obligations.
The Audit and Risk Committee oversees how management monitors compliance with the Group’s risk management policies and
procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Group.
Interest Rate Risk
a.
Exposure to interest rate risk arises on financial liabilities 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.
Currently the Group’s operations are financed using a mixture of fixed and floating rate debt. The Group is not currently entered
into any interest rate swaps to fix its floating rate debt.
The variable interest rate borrowings exposes the Group to interest rate risk which will impact future cash flows and interest
charges and is indicated by the following floating interest rate financial liabilities:
Engenco Limited and its controlled entities – Annual Report 2019
67
Note 23 – Financial Risk Management (cont’d)
FLOATING RATE INSTRUMENTS
Bank Overdrafts
Total
2019
$’000
294
294
2018
$’000
338
338
Liquidity Risk
b.
Liquidity risk is the risk that the Group will encounter difficulty in meeting its obligations associated with its financial liabilities that
are settled by delivering cash or another financial asset. The Group manages this risk through the following mechanisms:
• Preparing forecast cash flow analysis in relation to its operational, investing and financing activities;
• Monitoring undrawn credit facilities;
• Obtaining funding from a variety of sources;
• Managing credit risk related to financial assets; and
• Monitoring the maturity profile of financial liabilities.
The following table reflects an undiscounted contractual maturity analysis for financial liabilities.
Cash flows realised from financial assets reflect management’s expectations as to the timing of realisation. Actual timing may
therefore differ from that disclosed. The timing of cash flows presented in the table to settle financial liabilities reflects the earliest
contractual settlement dates and does not reflect management’s expectations that banking facilities will be rolled forward.
Financial Liability Maturity Analysis
Consolidated Group
Within 1 Year
1 to 5 Years
Over 5 Years
Total
2019
$’000
2018
$’000
2019
$’000
2018
$’000
2019
$’000
2018
$’000
2019
$’000
2018
$’000
FINANCIAL LIABILITIES DUE FOR PAYMENT
Bank overdrafts and loans
294
338
Trade and other payables
19,408
15,453
Total Expected Outflows
19,702
15,791
–
–
–
–
–
–
–
–
–
–
–
–
294
338
19,408
15,453
19,702
15,791
Currency Risk
c.
The Group is exposed to currency risk to the extent that there is a mismatch between the currencies in which sales, purchases
and borrowings are denominated and the AUD functional currency of the Group.
The majority of financial liabilities and assets of the Group are denominated in the functional currency of the operational location.
These are primarily Australian Dollars and Swedish Krona.
Credit Risk
d.
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its
contractual obligations, and arises principally from the Group’s receivables from customers and investments in debt securities.
Credit risk is managed through the maintenance of procedures (such procedures include monitoring of exposures, payment
cycles and monitoring of the financial stability of significant customers and counter parties) ensuring to the extent possible, that
68
Engenco Limited and its controlled entities – Annual Report 2019
Notes to the Consolidated Financial Statementsfor the year ended 30 June 2019
customers and counter-parties to transactions are of sound credit worthiness. Such monitoring is used in assessing receivables
for impairment. Credit terms differ between each key business but are generally 30 to 60 days from end of month.
Where the Group is unable to ascertain a satisfactory credit risk profile in relation to a customer or counter-party, then risk
may be further managed through title retention clauses over goods or obtaining security by way of personal or commercial
guarantees over assets of sufficient value which can be claimed against in the event of any default. The Group has established
procedures to ensure Personal Property Securities Act 2009 (Cth) registration is performed for all relevant assets.
The maximum exposure to credit risk by class of recognised financial assets at balance date, excluding the value of any
collateral or security held, is equivalent to the carrying value and classification of those financial assets (net of any provisions) as
presented in the Consolidated Statement of Financial Position.
On a geographical basis the Group has significant credit risk exposures in Australia given the substantial operations in this
region. Details with respect of the credit risk of Trade and Other Receivables can be found in Note 9.
Trade and other receivables that are neither past due or impaired are considered to be of high credit quality. Aggregates of such
amounts are detailed in Note 9 – Trade and Other Receivables.
Balances held with banks are with AA rated financial institutions, details of these holdings can be found in Note 8 – Cash and
Cash Equivalents.
iii.
Net Fair Values
Fair Value Estimation
The fair values of financial assets and financial liabilities are presented in the following table and can be compared to their
carrying values as presented in the Statement of Financial Position. Fair values are those amounts at which an asset could be
exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction.
Fair values derived may be based on information that is estimated or subject to judgment, where changes in assumptions may
have a material impact on the amounts estimated. Estimates, judgments and the associated assumptions have been detailed
below. Where possible, valuation information used to calculate fair value is extracted from the market, with more reliable
information available from markets that are actively traded. In this regard, fair values for listed securities are obtained from quoted
market bid prices.
FINANCIAL ASSETS
Cash and cash equivalents
Trade and other receivables
FINANCIAL LIABILITIES
Trade and other payables
Loans and borrowings
Consolidated Group
2019
Carrying
Value
$’000
23,702
30,312
54,014
2019
Fair Value
$’000
23,702
30,312
54,014
2018
Carrying
Value
$’000
8,656
28,275
36,931
2018
Fair Value
$’000
8,656
28,275
36,931
19,408
19,408
15,453
15,453
294
294
338
338
19,702
19,702
15,791
15,791
The fair values disclosed in the above table have been determined based on the following methodologies:
• Cash and cash equivalents, trade and other receivables and trade and other payables are short-term instruments in nature
whose carrying value is equivalent to fair value.
Engenco Limited and its controlled entities – Annual Report 2019
69
Note 23 – Financial Risk Management (cont’d)
• Loans and borrowings have carrying values equivalent to fair value. The majority of these facilities have floating rates
and those that are fixed are expected to be held to maturity and as such when discounted bear little resemblance to the
carrying value.
iv.
Sensitivity Analysis
Interest Rate Risk and Currency Risk
a.
The following tables illustrate sensitivities to the Group’s exposures to changes in interest rates and foreign currency exchange
rates. The tables indicate 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.
Interest Rate Sensitivity Analysis
b.
The Group is not sensitive to the effect on earnings and equity as a result of changes in the interest rate as at reporting date, the
Group does not carry any debt balances subject to a floating interest rate.
Currency Risk Sensitivity Analysis
c.
The effect on earnings and equity as a result of changes in the value of the Australian Dollar to the Swedish Krona, with all other
variables remaining constant would be as follows:
CHANGE IN EARNINGS
–
Improvement in AUD to SEK by 5%
– Decline in AUD to SEK by 5%
CHANGE IN EQUITY
–
Improvement in AUD to SEK by 5%
– Decline in AUD to SEK by 5%
2019
$’000
(16)
16
(467)
467
2018
$’000
(15)
15
(472)
472
The Group does not currently hedge against foreign exchange movements in net assets of its Swedish subsidiaries.
Capital Management
v.
Management monitors the capital of the Group in an effort to maintain an appropriate debt to equity ratio, provide the
shareholders with adequate returns and ensure that the Group can fund its operations. The Group’s debt and capital includes
ordinary shares and financial liabilities. The gearing ratios as at 30 June 2019 and 2018 are as follows:
Total Borrowings
Net Debt / (Cash)
Total Equity
TOTAL EQUITY AND NET DEBT
GEARING RATIO
2019
$’000
294
2018
$’000
338
(23,408)
(8,318)
84,075
60,667
73,218
64,900
(28%)
(11%)
70
Engenco Limited and its controlled entities – Annual Report 2019
Notes to the Consolidated Financial Statementsfor the year ended 30 June 2019
Note 24 – Related Party Transactions
(a)
Transactions with Key Management Personnel
Short-term employee benefits
Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected
to be paid if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by
the employee and the obligation can be estimated reliably.
Defined contribution plans
Obligations for contributions to defined contribution plans are expensed as the related service is provided. Prepaid contributions
are recognised as an asset to the extent that a cash refund or a reduction in future payments is available.
Other long-term employee benefits
The Group’s net obligation in respect of long-term employee benefits is the amount of future benefit that employees have
earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value.
Remeasurements are recognised in profit or loss in the period in which they arise.
Termination benefits
Termination benefits are expensed at the earlier of when the Group can no longer withdraw the offer of those benefits and when
the Group recognises costs for a restructuring. If benefits are not expected to be settled wholly within 12 months of the reporting
date, then they are discounted.
Key Management Personnel Compensation
(i)
The totals of remuneration paid to key management personnel during the year (including termination benefits) are as follows:
Short-term employee benefits
Post-employment benefits
Termination benefits
Other long-term benefits
TOTAL
2019
$’000
2018
$’000
1,080,650
1,195,236
107,638
106,831
80,000
13,302
–
11,702
1,281,590
1,313,769
Compensation of the Group’s key management personnel includes salaries, superannuation and post-employment benefits.
Key Management Personnel Transactions
(ii)
A number of key management personnel, or their related parties, hold positions in other companies that result in them having
control or significant influence over these companies.
A number of these companies transacted with the Group during the year. The terms and conditions of these transactions were
no more favourable than those available, or which might reasonably be expected to be available, in similar transactions with
non-key management personnel related companies on an arm’s length basis.
From time to time directors of the Group, or their related entities, may buy goods from the Group. These purchases are on the
same terms and conditions as those entered into by other Group employees or customers.
The aggregate value of transactions and outstanding balances related to key management personnel and entities over which
they have control or significant influence were as follows:
Engenco Limited and its controlled entities – Annual Report 2019
71
Note 24 – Related Party Transactions (cont’d)
Revenue / (Cost) for the year
ended 30 June
Receivable / (Payable) as at
30 June
Related Party
Elph Pty Ltd1
Elphinstone Group (Aust)
Pty Ltd2
Director
2019
$
2018
$
V De Santis/D Elphinstone
(91,135)
(279,824)
V De Santis/D Elphinstone
(384,530)
(471,807)
William Adams Pty Ltd3
V De Santis/D Elphinstone
(1,943)
(115,615)
2019
$
–
2018
$
–
(8,030)
(1,738)
(38,489)
3,904
United Equipment Pty Ltd4
V De Santis/D Elphinstone
(408,987)
(350,958)
(12,534)
(37,799)
Southern Prospect Pty Ltd5
D Elphinstone
75,128
–
9,526
–
Elphinstone Pty Ltd6
D Elphinstone
2,949,281
3,697,372
329,021
20,531
1 Line Fees and interest were incurred and paid to Elph Pty Ltd in relation to the related party funding facility with the Group. Dale Elphinstone is a director
and the Chairman of this entity. Vincent De Santis was also a director of Elph Pty Ltd during the period, resigning 21 December 2018.
2 Director fees and travel expense reimbursements were paid to Elphinstone Group (Aust) Pty Ltd for the services of Dale Elphinstone (Non-Executive
Director) and Vincent De Santis (Chairman). Legal service fees were also paid to Elphinstone Group (Aust) Pty Ltd during the year. Dale Elphinstone is
Chairman of this entity. Vincent De Santis was also a director of Elph Pty Ltd during the period, resigning 21 December 2018.
3 Goods were purchased from and sold to William Adams Pty Ltd during the period. Dale Elphinstone is the Chairman and a director. Vincent De Santis
was also a director of Williams Adams Pty Ltd during the period, resigning 21 December 2018.
4 Goods were purchased from and sold to United Equipment Pty Ltd in the period. Dale Elphinstone is a director of this entity.
5 Goods were sold to Southern Prospect Pty Ltd during the period. Dale Elphinstone is the Chairman of this entity.
6 Goods were sold to Elphinstone Pty Ltd during the period. Dale Elphinstone is a director and the Chairman of this entity.
(b)
The Group has the following balances outstanding at the reporting date in relation to transactions with related parties:
Other Related Party Transactions
Related Party Transaction
Current receivables (parent entity):
Receivables from subsidiaries
2019
$’000
2018
$’000
524
502
The intercompany loans extended from Engenco Limited to its wholly owned subsidiaries are extended on the following terms:
Term: Revolving Facility repayable when subsidiary is in a position to do so or as otherwise decided by the Company.
Rate:
Fixed rate reviewable quarterly.
72
Engenco Limited and its controlled entities – Annual Report 2019
Notes to the Consolidated Financial Statementsfor the year ended 30 June 2019
Note 25 – Auditor’s Remuneration
Audit and Review Services
Auditors of the Company
– KPMG Australia – audit and review of financial statements
– KPMG Australia – audit and review of financial statements
TOTAL AUDIT AND REVIEW SERVICES
Other Services
Auditors of the Company
– KPMG Australia – in relation to taxation compliance services
– KPMG Australia – in relation to advisory services
– KPMG Overseas – in relation to taxation compliance services
TOTAL OTHER SERVICES
2019
$
2018
$
314,221
270,000
29,896
40,980
344,117
310,980
4,580
11,495
–
16,075
2,772
–
11,062
13,834
Note 26 – Events Subsequent to Reporting Date
On 21 August 2019, the Board resolved to declare a final dividend of 1.5 cents per share (fully franked). Payment of the dividend
to shareholders will take place in 26 September 2019.
Other than the above, there has not arisen, in the interval between the end of the financial year and the date of this report, any
item, transaction or event which would have a material effect on the financial statements of the Group at 30 June 2019.
Engenco Limited and its controlled entities – Annual Report 2019
73
Additional Information for Listed Companies at 11 August 2019
The following information is provided in accordance with the ASX Listing Rules.
1.
(a)
Shareholding
Distribution of shareholders
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – and over
No. of
shareholders
133
174
126
232
105
770
%
0.01%
0.18%
0.32%
2.51%
No. Ordinary
Shares
26,273
552,204
1,007,065
7,854,066
96.98% 303,941,335
100% 313,380,943
(b)
The number of shareholdings held in less than marketable parcels (less than $500 in value) is 129.
74
Engenco Limited and its controlled entities – Annual Report 2019
Shareholder Informationfor the year ended 30 June 2019
(c)
20 largest shareholders – ordinary shares
Position
Name
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Elph Investments Pty Ltd
Elph Pty Ltd
UBS Nominees Pty Ltd
RAC & JD Brice Superannuation Pty Ltd
HSBC Custody Nominees (Australia) Limited
Marford Group Pty Ltd
Mr Clarence John Kelly, & Mrs Robyn Suzanne Kelly
Mr Hugh William Maguire, & Mrs Susan Anna Maguire
JP Morgan Nominees Australia Limited
Mr Neville Leslie Esler, & Mrs Cheryl Anne Esler
Mr Dennis Graham Austin, & Mrs Marilyn Alice Austin
Strategic Value Pty Ltd (TAL SUPER A/C)
Neko Super Pty Ltd
Mr Hugh William Maguire
Jared Charles Lawrence
Prussner Investment Pty Ltd
T B I C Pty Ltd
Mrs Margaret Jane Lindemann, & Mr Luke Charles Lindemann
Exldata Pty Ltd
BFA Super Pty Ltd
Number of
Ordinary Fully
Paid Shares Held
% Held of
Issued Ordinary
Capital
109,060,536
93,346,378
23,802,310
18,575,886
12,673,705
4,387,029
3,655,000
3,410,000
3,327,593
2,396,925
1,645,000
1,536,400
1,520,304
1,300,000
1,053,661
1,010,000
1,000,000
950,000
765,000
595,027
34.80%
29.79%
7.60%
5.93%
4.04%
1.40%
1.17%
1.08%
1.06%
0.76%
0.52%
0.49%
0.49%
0.41%
0.34%
0.32%
0.32%
0.30%
0.24%
0.19%
286,010,754
91.25%
Shareholders holding in excess of 10% of issued capital were listed in the holding company’s register
(d)
as follows:
Shareholder
Elph Investments Pty Ltd
Elph Pty Ltd
No. of Ordinary
Shares
109,060,536
93,346,378
%
34.80%
29.79%
Engenco Limited and its controlled entities – Annual Report 2019
75
Voting Rights
(e)
Each ordinary share is entitled to one vote when a poll is called, otherwise each member present at a meeting or by proxy has
one vote on a show of hands.
2. The name of the Company Secretaries are:
Paul Burrows
Andrew Nightingale
3. The address of the principal registered office in Australia is:
Level 22, 535 Bourke Street, Melbourne, VIC 3000
4. Registers of securities are held at the following address:
Level 9, Suite 913, 530 Little Collins Street, Melbourne VIC 3000
5. Securities Exchange Listing
Quotation has been granted for all the ordinary shares of the Company on all Member Exchanges of the ASX Limited.
6. Unquoted Securities
N/A.
7. Other Information
Engenco Limited, incorporated and domiciled in Australia, is a publicly listed company limited by shares.
76
Engenco Limited and its controlled entities – Annual Report 2019
Shareholder Informationfor the year ended 30 June 2019
Company Secretary
Paul Burrows
BCom, CA, GAICD
Company Secretary
Andrew Nightingale
BCom, LLB
Company Secretary
Auditors
KPMG
Tower Two
Collins Square
727 Collins Street
Melbourne VIC 3000
T: +61 (0)3 9288 5555
F: +61 (0)3 9288 6666
Share Registry
Security Transfer Australia Pty Ltd
Level 9, Suited 913
530 Little Collins Street
Melbourne VIC 3000
T: +61 (0)3 9628 2200
F: +61 (0)8 9315 2233
Corporate Office
Engenco Limited
Level 22
535 Bourke Street
Melbourne VIC 3000
T: +61 (0)3 8620 8900
F: +61 (0)3 8620 8999
investor.relations@engenco.com.au
www.engenco.com.au
Registered Office
Engenco Limited
Level 22
535 Bourke Street
Melbourne VIC 3000
T: +61 (0)3 8620 8900
F: +61 (0)3 8620 8999
Directors
Vincent De Santis
BCom, LLB (Hons)
Non-Executive Chairman
Kevin Pallas
BCom, MAICD
Managing Director & CEO
Dale Elphinstone OA
FAICD
Non-Executive Director
Alison von Bibra
BSc, MBA
Independent Non-Executive Director
Ross Dunning AC
BE (Hons), BCom, FIE Aust, FIRSE, RPEQ
Independent Non-Executive Director
Engenco Limited and its controlled entities – Annual Report 2019
77
Corporate Directoryfor the year ended 30 June 2019
www.engenco.com.au