Annual Report
2021
Contents
Company Highlights
Chairman’s Report
Managing Director and CEO’s Report
Business Unit Overview
Directors’ Report
Directors’ Declaration
Auditor’s Independence Declaration
Independent Auditor’s Report
Financial Report
1
2
4
8
14
22
23
24
28
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 2021 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
https://www.engenco.com.au/investor-center/governance/.
Engenco Limited ABN 99 120 432 144
Engenco Limited and its controlled entities | Annual Report 2021
Company Highlights
Revenue – $’000
Revenue by Business Unit
2017
2018
2019
2020
2021
129,319*
157,336
174,850
178,063
165,593
FY21
Revenue
$165.6m
Rail and Road
Gemco Rail $78.6m
Convair $16.5m
Workforce Solutions
Momentum $12.5m
CERT Training $9.3m
Power and Propulsion
Drivetrain $42.7m
Hedemora $7.2m
0
30
60
90
120
150
180
Net Profit Before Tax – $’000
Dividends – Cents
2017
2018
2019
2020
2021
13,014
12,690
8,354*
10,150
8,269
2017
2018
2019
2020
2021
0.5
1.0
1.5
2.0
2.0
0
3
6
9
12
15
0
0.5
1.0
1.5
2.0
Net Assets – $’000
Operating Cash Flow – $’000
2017
2018
2019
2020
2021
57,011
73,218
84,075
88,594
94,328
2017
2018
2019
2020
2021
6,400
8,292
12,321
14,093
14,546
0
20
40
60
80
100
0
2
4
6
8
10
12
14
16
* 2017 figures for Revenue and Net Profit Before Tax are from continuing operations.
1
Chairman’s Report
Vince De Santis
For a piece of information to be desirable, it has to satisfy two criteria: it
has to be important, and it has to be knowable. (Warren Buffett)
It would be fair to say that the past year has been testing. It was
a year that began with the same elevated levels of uncertainty
with which we had ended the last and without really knowing how
it might end. In fact, no-one did. Travel restrictions, lockdowns,
working from home, supply chain disruption, customer hesitancy,
COVID contingency plans… On top of this, we had the non-COVID
impacts – skilled labour shortages, adverse weather events plus
a host of other day-to-day matters which come with running a
reasonably diverse business. We don’t offer these as excuses but
simply state the reality of what the Group and many other parts of
the business community has faced since those first weeks of 2020.
While the Company’s FY21 financial performance was adequate,
it was nonetheless disappointing however we have also been
fortunate that throughout the pandemic thus far, most of Engenco’s
business units operate in sectors which have been categorised as
essential services. The fall in revenue and profit before tax over the
past three financial years has been frustrating, and our return on
capital employed (ROCE) has also declined over this period from
17% to 10% which is unsatisfactory.
These factors do not exactly paint a great picture but there are as
they say, two sides to every coin and there have has also been other
parts of Engenco’s performance with which we are pleased, where
the trends are positive and from which we have a solid base on
which to go forward.
Cash Generation
During FY21, the net cash generated from our operations was just
over $14.5 million, an almost half a million dollar improvement on
the prior year.
Investment
We continued our capital investment program with $9.9 million
spent on acquiring non-current assets bringing the aggregate cash
expenditure on capital items over the past 4 years to just over
$30 million dollars.
Dividends Maintained
During our 2016 Annual General Meeting, we said we would not pay
a dividend until we were satisfied that the profit we had just made
in FY16 was repeatable and that Engenco’s capital base and credit
facilities were sound. In the following year, we paid a final dividend
of 0.5 cents per share which was doubled in the year after that.
This was increased to 1.5 cents the next year and during the last
two years, we have declared dividends of 2 cents comprising
an interim dividend of 0.5 cent per share and a final dividend of
1.5 cents each. The dividend we have just declared (payable on
28 September 2021) is part of an almost $22 million total dividend
cash return paid to our shareholders over the past 4 years.
Debt Free
Notwithstanding our capital investment program and dividend
returns to shareholders, our consistent operating cashflow has
enabled the Company to remain debt free at 30 June with a net
cash balance of over $12 million and a $20 million undrawn credit
facility with National Australia Bank which is not due to mature until
October 2023.
People
Great vision without great people is irrelevant. (Jim Collins)
Over the past year the restricted ability to freely move between our
facilities and visit our customers’ premises has been tough however
our employees have demonstrated great resilience, creativity
and dedication in serving our customers for which we extend our
sincere appreciation.
We have maintained our focus on the Group’s “people and culture”
program notwithstanding that the pandemic has made the delivery
of some initiatives a little more challenging than usual. While
it may be cliché, we know that at the end of the day, Engenco’s
future success depends upon ensuring that we have people who
have the right blend of skills and experience, are committed to our
customers and to each other, and whose behaviour and values are
aligned with those of the Company.
Achieving this requires us to provide a safe working environment.
Some sections of the Group are doing an outstanding job while
in other parts of the business, our safety performance requires
considerable improvement, and we continue to strive for better
outcomes under our “MakeSafe” program which has now been
running for a number of years.
2 | Engenco Limited and its controlled entities | Annual Report 2021
Eureka!
In May of this year, we announced the acquisition of Eureka 4WD
Training Pty Ltd which was completed as scheduled on 1 July. Apart
from the new business opportunities it will create, the Eureka
transaction represents another important milestone for Engenco as it’s
the first business acquisition we have undertaken for quite some time.
We are determined to ensure that the
Eureka business and its people are
smoothly integrated into our Workforce
Solutions division and realise the benefits
from this business combination.
What’s Ahead
Our budgeted capital expenditure for FY22 is focussed more on
sustainment and will be lower than the levels of the past couple
of years as we look to generate growth and efficiencies from the
capital that has been previously deployed.
Following on from our purchase of Eureka 4WD Training, we remain
on the lookout for other strategic acquisition opportunities provided
that sellers are reasonable and realistic in their expectations.
And we will continue to focus on the development of our people
and to create an environment in which they are safe, challenged,
respected and valued.
Our key goals remain for the year ahead – to make Engenco a
company for whom great people want to work; to be a trusted
and valued provider of high-quality products and services to our
customers; and to generate superior returns for our investors in a
sustainable and responsible manner.
Remember, when there’s nothing clever to do, the mistake
lies in trying to be clever. (Howard Marks)
While we are focussed on reversing the decline in our return on
capital employed, we expect that FY22 will be a year of stabilisation
rather than one of any material financial improvement.
Vince De Santis
Chairman
NET PROFIT
AFTER TAX
$12.0m
3
Managing Director
and CEO’s Report Kevin Pallas
Our multi-year growth strategy to build a stronger platform through
expanding our range of goods and services, together with investment in
people, capacity and innovation, continued.
This was a year in which external factors including the pandemic
interrupted the positive developments and growth trajectory
of preceding years although, in the scheme of things, progress
continued and we delivered a solid result.
Our effective response to the COVID-19 environment demonstrated
the benefits of our efforts to build a high-performance culture
across the business. The leadership development structures that
we had introduced enabled us to work coherently at executive and
operational levels.
We successfully navigated the early stages
of the pandemic and responded dynamically
to the need for social distancing, contact
tracing and site hygiene.
Working closely with our staff, suppliers and customers we ensured
that all government health requirements were met, and kept our
people safe. Many of our customers are essential services and,
as we were able to make changes flexibly, we were resilient and
maintained productivity. It is pleasing that throughout the year
and across a workforce of more than 600, no staff member tested
positive for the virus during the financial year, however one tested
positive in New South Wales during recent weeks.
Highlights of the year included the strong performance of our
Gemco Rail Gladstone facility, which was above expectations. This
facility opened in January 2020 to service rail rollingstock contracts
and the bulk materials market, and we have since invested in an
underfloor wheel lathe, increasing capability and capacity. The
$2 million purchase of land and a facility at Kalgoorlie in April 2021
has expanded capacity for Drivetrain, enabling us to service more
fully the hard rock mining industry which is benefiting from high
commodity prices.
At the end of the financial year, we announced the acquisition of
Eureka 4WD Training Pty Ltd. This Western Australian training
business is being integrated as part of our Workforce Solutions
division and we have significant opportunity to expand it through
our national platform.
Consolidated revenue decreased 7% to $165.6 million, compared
to $178.1 million in the previous year, reflecting a combination
of adverse factors. This included the effects of pandemic-related
supply chain delays, adverse weather and rail network disruption
which slowed the volume of maintenance in the rail freight sector,
soft coal mining sector demand, skilled labour shortages, and travel
restrictions which affected our domestic and overseas business
development activities.
Net profit before tax, which included the sale of non-core
wagons raising $2.2 million, reduced 18.6% to $8.3 million from
$10.2 million. Net profit after tax was $12.0 million after taking into
account progressive recognition of past tax losses, 10.4% lower
than $13.4 million in the previous year.
Capital expenditure continued to focus on growth assets,
decreasing slightly to $9.6 million compared to $13.8 million in
FY20 which was a year of major capital investment. The Company
has no debt. Our $10 million undrawn bank facility has been
expanded to $20 million and extended to October 2023.
Engenco has a strong balance sheet and completed the year with
$12.1 million net cash. We maintained prudent management of
working capital, anticipating possible supply chain shortages. Net
4 | Engenco Limited and its controlled entities | Annual Report 2021
RAIL ANDROADPOWER AND PROPULSIONWORKFORCESOLUTIONS operating cash flow remained strong at $14.5 million, in line with
$14.1 million in the previous year.
Return on capital employed (ROCE) was slightly lower at 10%.
Rail and Road
Across our operations, the Gemco business demonstrated
stability and continued to generate strong customer support. Our
investment to build scale and a sustainable platform is succeeding,
reflected in a changing revenue mix which favours strong
relationships with customers and larger, long-term contracts.
At Gladstone, we completed a program of works expanding the
facility, and volumes of rollingstock maintenance progressed above
plan. This solid stream of business enabled us to realise efficiencies.
Although operations at Forrestfield performed well, demand from
mining customers for bearing and wheelshop work reduced from
the prior year, as a large project was not repeated. The pandemic
restricted meetings with customers to progress new projects,
and we experienced similar issues in other states. During the last
quarter, demand increased to pre-pandemic levels.
As part of its infrastructure growth initiatives, the Australian
government announced a 1700km Inland Rail project which will
connect Melbourne to Brisbane through regional areas. This
represents a significant growth opportunity for our rail-focused
businesses, and we are following its progress to capitalise on
unfolding opportunities.
Convair revenue increased as the delivery of several Feldbinder
aluminium tankers from Germany were carried into FY21. Supply
disruptions were well managed as demand for dry bulk tankers
and spare parts grew during the year following strong activity in
the infrastructure and construction sectors . We are continuing
to improve steel tanker design and production efficiency,
responding to customers’ demand for high-quality locally
manufactured products.
Power and Propulsion
Drivetrain revenues were lower as soft rock mining customers
deferred discretionary spending, extending maintenance cycles,
although the market improved in the last quarter of the year.
Demand from hard rock mining customers remained strong. While
inventory levels were increased to manage supply chain risk, market
consolidation and a trend toward customers sourcing parts globally
impacted product sales. The Group’s Adelaide workshop, founded
5
Managing Director and CEO’s Report continued
to support local Tier 1 mining customers, completed the first major
machine overhaul for a key client in the first half.
We continued to rationalise branches across the Drivetrain
network to drive efficiency and meet customer requirements for
local presence. We relocated work previously managed in Sydney
to Newcastle, expanding our facility to accommodate operations
personnel. Our plan is to invest in locations where industrial
demand is strong, such as Kalgoorlie where our new operation
is in ‘start up’ mode. Here, we have completed comprehensive
research on potential customers’ requirements for our equipment
maintenance services, and marketing commenced in the last
quarter of the year. We are continuing to attract new customers, as
our brand is well respected in the industry for high quality work and
customer service.
We further expanded the Drivetrain range of technical products
and services. New products have gained traction in the mining
industry, including the Kovatera UT99 underground utility vehicle,
which through Drivetrain’s in-country development efforts has been
customised for Australian mining specifications and conditions.
Since its launch in Australia, Tier 1 customers have placed orders
including our first fleet size sale, which will be delivered in FY22. We
have a strong pipeline of prospects as we build the country-wide
fleet size and begin the support task.
Sales of products for the defence industry and maintenance of
submarines were consistent through the year, with submarines
moving through a low in the maintenance cycle.
Hedemora Turbo & Diesel reported significant sales of HS
Turbocharger technology for the turbocharger retrofit market,
including the retrofit of locomotives for customers in Eastern
Europe and Mongolia, but it was unable to capitalise on all
opportunities as the pandemic restricted travel. Following several
years of marketing, we are excited by the opportunities that have
opened up in Russia and Eastern Europe. These countries have a
high proportion of ageing diesel engines which are ideal retrofit
opportunities, and there is significant interest among engine
and locomotive manufacturers in Hedemora’s HS Turbocharger
technology for new builds. First retrofit orders are also expected
in the USA, where we are investing in a new branch to capitalise
on opportunities.
Workforce Solutions
During 2020 we brought our people-focused businesses,
CERT and Momentum Rail, under a single Executive General
Manager to drive growth. This was a timely decision that enabled
us to realise integration synergies and adapt effectively for
COVID-19 restrictions.
COVID-19 impacted our CERT business significantly as strict social
distancing requirements were maintained, reducing classes.
However, we were able to pivot to customer focused solutions such
as online training, which helped differentiate our services.
We are innovating across our workforce businesses to generate
revenue, directly solving customers’ need for skilled people, as
supply chains tightened and labour shortages emerged as an
6 | Engenco Limited and its controlled entities | Annual Report 2021
indirect impact of the pandemic. By training new market entrants
for customers, we are expanding their available labour pool.
Momentum Rail experienced a strong first half with increased
demand for rail services labour, although this softened in the
second half, particularly in Western Australia.
Acquisition of Perth-based Eureka 4WD Training Pty Ltd
was completed on 1 July 2021. This road-focused business
complements the rail transport training provided by CERT, as it
offers specialist four-wheel drive vehicle training for commercial,
industrial and mining customers. It currently serves the Western
Australian market and using the strong brand equity we expect to
progressively expand its services nationally through our network.
High-performance Culture
Over several years we have invested to build accountability and
leadership qualities and to create a high-performance culture.
This included introduction of a Group people and culture plan,
constructive leadership development structures and enterprise-
wide individual performance plans, which helped to align
expectations and actions.
We are committed to developing the capability, leadership and
management skills of our people, encouraging diversity, inclusion
and a sense of achieving positive outcomes at a company and
personal level. Our Diversity Committee is highly representative
and has delivered meaningful initiatives such as an unconscious
bias education programme. We are training more apprentices,
encouraging our leadership teams and positioning Engenco as an
employer of choice.
The development of better safety practices and a strong safety
culture where our people take more personal responsibility for
maintaining a safe workplace continued. Through a focus on
advancing safety leadership across the group, the Total Recordable
Injury Frequency rate decreased from 35.54 to 25.72.
Through education and awareness initiatives and investment in
industry-leading software, we have built tangible defences against
the threat of cyber-crime. In addition, our IT team have worked hard
to continually improve security systems in the ever increasingly
complex world of online computing.
Outlook
While trading conditions and supply chains performance remain
unpredictable, we believe this is temporary and anticipate a return
to more normal patterns of demand as state lockdowns and travel
restrictions reduce. We continue to build scale and structures that
support the continued growth of the business, and enter the new
financial year with a healthy order book.
Our Gemco business is performing well and has further significant
development potential. Customer demand is robust, and we expect
ongoing growth in traditional and new business streams as we drive
forward our efficiency and growth strategies. We are benefiting
from investments in new and expanded capabilities at Forrestfield
and Gladstone, and plan to expand our Altona facility in the new
financial year. We anticipate that the positive trend of the fourth
quarter of FY21 will continue.
The Drivetrain business has positive momentum and an increased
order volume for the coming year. Demand for submarine
maintenance is expected to improve, and defence sector sales
are steady. In Europe and North America, we are excited by the
prospects of capitalising on the HS Turbocharger retrofit market,
anticipating that new orders in FY22 will build a strong foundation
for ongoing growth including in the OEM market.
Our people businesses are evolving to capitalise on the
opportunities provided by greater acceptance of online training,
and customers are keenly engaging in our integrated solutions
offerings. Our industry leading “street-to-seat” programme aims
to encourage trainees into learning rail skills and to alleviate the
critical shortage of personnel in the industry. The acquisition
of Eureka 4WD Training Pty Ltd signals our increasing training
capability and intent to leverage this business through our
national network.
As more companies move to reduce carbon emissions, we expect
to benefit through being an early participant in the electrification
of heavy equipment, helping the industry to become more carbon
efficient. In line with increasing global focus on sustainability, our
Drivetrain business will invest in the launch of a battery electric
Kovatera utility vehicle. This news has been well received by
customers, with marketing and product development already
underway. We expect to see at least one fully electric version
operating before the end of the 2021 calendar year.
In closing, I would like to thank our leadership teams and all of
our staff for their disciplined focus on safety and meeting our
customers’ needs during these uncertain times. I would also like to
thank my fellow directors for their counsel and unwavering support.
Kevin Pallas
Managing Director and CEO
FY21 TOTAL
REVENUE
$165.6m
7
Business Unit Overview
Rail & Road
Gemco Rail is a leading independent provider of rollingstock maintenance,
products and services for the Australian and New Zealand rail markets.
Our national network of modern, well
equipped, strategically located facilities
coupled with proven industry knowledge
provides our clients with the confidence
that Gemco is a reliable, competent
supplier of high quality products
and services.
Revenue $’000
NPBT $’000
,
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Achievements
● Successful navigation of a year of
disruption to supply chains with
uninterrupted support to our customers,
keeping their assets working.
● Expanded capital investment in railway
wheel maintenance capabilities
with the successful commissioning
of new computer controlled wheel
machining equipment.
● Launch and implementation of Gemco
Rail’s “People and High-Performance
Culture” focussed 2030 Strategic Plan
reflecting Engenco’s strategic pillars.
Outlook
● Leveraging recent capital investments
in our east and west coast operations,
increasing capacity, is expected
to realise improving returns in the
periods ahead.
● Further expansion of strategic alliances
with recognised technology partners to
further broaden Gemco’s product range.
FY20 FY21
FY20 FY21
8 | Engenco Limited and its controlled entities | Annual Report 2021
TURBO & DIESEL
Expansion into Gladstone,
Queensland
Gemco Rail’s Gladstone rollingstock
maintenance facility, strategically
located within the Queensland rail
network between Brisbane and Cairns,
has been supporting our Queensland
customers since January 2020. Strong
demand for railway wheelset machining
outstripped capacity, and we invested
in a new German built CNC underfloor
wheel lathe that supplements our
existing wheelset machining capacity,
and provides the capability of machining
locomotive, railway wagon and
even railway passenger rollingstock
wheelsets in-situ, eliminating the need
to remove individual wheelsets from
the bogie. The Group also invested in a
new CNC axle lathe capable of holding a
complete wheelset assembly to perform
axle machining and wheel boring. These
additional capabilities position our
Gladstone facility well to capture an
increasing share of the total rollingstock
wheelset market in Queensland and
demonstrates Gemco’s commitment to
our long-term growth strategies.
Rail & Road
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.
Revenue $’000
NPBT $’000
Achievements
● Successful management of supply
challenges in key markets through FY21.
● Innovative customer specific solutions in
Australia and New Zealand.
Outlook
● Demand for locally produced and
maintained customer specific quality
solutions increased in the last quarter
of FY21 and this is expected to continue
into FY22.
● Introduction of innovative products in an
expanded range of offerings.
Three Tanker Road
Train Combination
Convair partners with its customers
to help solve their problems,
by listening and understanding
their needs. Convair’s innovative
design approach has a positive
track record of taking new
ideas and achieving unexpected
outcomes. Recently by using
performance based standards
regulations, Convair produced
an innovative three tanker road
train combination. This resulted
in a 20% productivity increase
for the customer, reducing the
number of movements on the road.
Fewer movements also lowered
greenhouse gas emissions and
improved performance against
safety standards.
9
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6
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FY20 FY21
FY20 FY21
9
Business Unit Overview
Power & Propulsion
Kalgoorlie expansion – Western
Australia
Drivetrain continues to work closely with our national
customers to understand their local support needs.
Customer engagement and detailed market analysis
identified the opportunity to establish a Drivetrain branch
in Kalgoorlie. We invested in workshop and warehouse
capacity to support demand in the region, and expanded
the field service fleet to support customers onsite. Whilst
still in start-up mode in FY21, customer orders have been
strong since operations commenced.
Introducing Kovatera to Australia
Drivetrain identified the Kovatera underground utility
vehicle as a solution to Australian mining operations’
need to improve performance and reduce the cost of their
light vehicles. Drivetrain introduced the KT200 vehicle to
Australia and adapted it to Australian conditions, improving
the driveline set up to suit decline mining and ramp
operations. The vehicle has proven durable, with a lifecycle
well beyond that of current automotive style vehicles, with
improved carrying capacity and low operating costs.
The KT200’s high carrying capacity of 2.7 tonnes was a
key factor behind Drivetrain’s sale of several vehicles to an
Australian contractor supplying a number of underground
mines. Over the year, the vehicles impressed both the
contractor and the owner/operator of those mines. This led
to a significant fleet order starting the transition towards
using the Kovatera KT200 as the underground light vehicle
of choice.
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.
Achievements
● Kovatera utility mining
vehicle sales increased
during the period, with fleet
size orders received for
delivery in FY22.
● Continued investment in the
development of our “People
and High-Performance
Culture Plan”.
● Opened Kalgoorlie branch
aligning with “customer first”
approach.
Revenue $’000
NPBT $’000
,
1
0
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6
4
$
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6
7
6
2
4
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Outlook
● Increasing Kovatera sales with
through-life support including
a battery-powered electric
model.
● Continued customer demand
for overhaul projects
including additional activity
at Kalgoorlie.
● Supply and installation of gas
power generation contracts
won in FY21.
● Ongoing support for the
Collins Class Submarine Life
of Type Extension program.
FY20 FY21
FY20 FY21
10 | Engenco Limited and its controlled entities | Annual Report 2021
Power & Propulsion
TURBO & DIESEL
Hedemora Turbo and Diesel is the original manufacturer of Hedemora
Turbochargers and Hedemora Diesel Engines.
Hedemora Diesel is a well-known brand
of engines used in a wide range of
applications. The turbocharger solutions for
engines with power output of 720-4200kw,
can be retrofitted to gain higher
performance. Operating out of Sweden,
Hedemora Turbo and Diesel provide full
maintenance, development and spare
parts services for customers in all parts of
the world.
Revenue $’000
NPBT $’000
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FY20 FY21
FY20 FY21
Achievements
● Proven environmental and efficiency
benefits from installation of Hedemora
turbochargers.
● Proven delivery and application of
turbochargers for Mongolian railways.
● Record number of new Turbocharger
sales and deliveries in FY21.
● Continued support for global customers
utilising Hedemora Diesel engines.
Outlook
● Momentum generated in the last
financial year is expected to drive growth
in market share of retrofit turbochargers
in Europe and the United States.
● Development of opportunities with
engine and locomotive OEMs for the
installation of HS Turbochargers on
newly built equipment.
● Ongoing support for the Collins Class
Submarine Life of Type Extension
program.
Proven product
outcomes driving new
opportunities
Hedemora Turbo and Diesel
(Hedemora) has been working with
its long-time customer Ulan-Bator
Railways (UBZD) since 2014 to provide
improved solutions that meet the
operating conditions in Mongolia. Trials
achieved improved reliability and about
5% fuel efficiency improvement, which
resulted in Hedemora being nominated
as the preferred supplier. Orders
are now being received on a regular
basis, including an order of 20 units
for completion in FY22. In total, it is
expected that 62 engines will be fitted
with HS 5800 before the completion of
the project in FY23.
This successful project has opened
new opportunities in the region. UBZD
have agreed to use HS 5800 on 38 new
locomotives from the large Russian
locomotive producer Kolomna, which
will also trial two engines in Mongolia.
Hedemora is excited by the opportunity
to demonstrate its ability to become
Kolomna’s supplier of choice for
turbochargers for its D49 engines.
11
Business Unit Overview
Workforce Solutions
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 coordinates the
planning, implementation and
management of 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, Wingfield, Thornton and
Port Melbourne, Momentum Rail’s
strategic presence is well placed to
service the rail and resource sectors.
Revenue $’000
NPBT $’000
9
1
4
4
1
$
,
2
0
5
2
1
$
,
8
1
5
,
1
$
6
5
4
,
1
$
Achievements
● Employment and career development
pathways into rail infrastructure.
● “Seat to Street” programs for new
entrant workers, including female and
indigenous workers, seeking a career
in train driving/shunting.
● Implementation of a fully customised
workforce management system that
automates the recruitment, rostering,
time sheets and client approval
processes.
Outlook
● Momentum Rail will continue to
drive efficiencies throughout the
business by adopting LEAN process
methodology, with particular focus
on delivering safety, quality and
sustainable workforce solutions that
are easily scalable.
Education to Employment
Program “Street to Seat”
Collaboration between the CERT Training and
Momentum Rail businesses has driven the
success of the recent Street to Seat, Education
to Employment program for the Workforce
Solutions division. The program, which sees
the enrolment of students into training courses
before they are recruited for positions with
Momentum Rail, is undertaken in partnership
with Pacific National.
The Street to Seat program works by supporting
students through targeted training aligned
to current vacancies within Pacific National’s
workforce. The education qualifications,
provided exclusively by CERT Training, prepares
candidates for work placement within Pacific
National managed by Momentum Rail. The
final step involves the students receiving their
qualifications before they are employed by
Momentum Rail to work at Pacific National.
Underpinning the success of the program is
the targeted recruitment strategy undertaken
by the Workforce Solutions team to attract
a range of diverse candidates currently
underrepresented in rail, such as females and
Indigenous Australians who are mentored
through government supported training and
career development pathways.
FY20 FY21
FY20 FY21
12 | Engenco Limited and its controlled entities | Annual Report 2021
Workforce Solutions
CERT Training (CERT) 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,
Sydney, Newcastle, Ipswich, Adelaide,
Brisbane, Melbourne, and Bunbury with the
flexibility to train on-site Australia wide.
Revenue $’000
NPBT $’000
,
5
1
2
0
1
$
5
8
2
9
$
,
5
9
9
,
1
$
7
7
2
,
1
$
FY20 FY21
FY20 FY21
Achievements
● Optimised student learning,
accessibility and experience through
development of online training
programs, electronic assessments and
blended learning options.
● CERT became the first registered
training organisation to be approved by
major rail network operators to take a
number of training programs online.
● Successfully securing an exclusive
contract to deliver all training and
education services for outsourced SA
metropolitan rail network.
Outlook
● We expect to capitalise on growing
demand across the rail corridor,
expanding our scope to develop within
the high-risk, traffic management and
construction markets, while investing
in new and emerging technologies that
enhance student and client experiences
and outcomes.
Adelaide Rail New
Customer Success
2021 saw CERT Training achieve new
heights when it was awarded an exclusive
training contract with Keolis Downer
Adelaide, following the privatisation of the
Adelaide Metro Rail System. The three-year
contact grants CERT Training exclusive
rights to deliver training for individuals
working on the Adelaide Rail Network.
Over the next two years, CERT Training
will provide education to more than
100 new train drivers and 60 passenger
service assistants for the Adelaide Rail
Network. This project offers exciting
opportunities to increase CERT’s brand
awareness and achieve a stronghold
position in the competitive Adelaide rail
training landscape. This is expected to
create opportunities for Momentum Rail
personnel as part of a larger Workforce
Solutions approach.
To meet the Keolis Downer staff education
and rail personnel training requirements,
CERT Training has similarly expanded
our Adelaide based team with additional
training and support staff. Several of
the new team members have extensive
Adelaide Rail Network experience and were
previously employed by the Department of
Infrastructure and Transport in Adelaide.
13
TRAINING 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 2021 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 time, 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
Tasmanian Gas Pipeline Pty Ltd, the Tasmanian Development Board
and the Tasmanian Rhodes Scholarship Selection Committee.
Kevin Pallas
BCom, MAICD
MEMBER OF THE BOARD SINCE 17 DECEMBER 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 AO
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 was the Co-Chair of the
Joint Commonwealth and Tasmanian Economic Council from
2014 – 2017 and remains Chair of the industry members of this
Council. From 2020 – 2021 he was a member of the Tasmanian
Premier’s Economic and Social Recovery Advisory 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
Chiropractic Board of Australia.
Scott Cameron
BCom, CA ANZ, FAICD
INDEPENDENT NON-EXECUTIVE DIRECTOR AND MEMBER OF
THE AUDIT AND RISK COMMITTEE SINCE 1 SEPTEMBER 2020,
CHAIRMAN OF THE AUDIT AND RISK COMMITTEE SINCE
18 NOVEMBER 2020.
Scott has more than 27 years’ experience in senior management
with exposure to a broad range of relevant industry sectors. He
commenced his professional career at PricewaterhouseCoopers and
then spent 27 years with leading Malaysian listed industrial services
conglomerate, Sime Darby Berhad in various roles including
Finance Director and then Managing Director of Australian based
Caterpillar Dealer, Hastings Deering. Prior to his retirement from
executive management at the end of 2019, Scott had spent the last
13 years as an Executive Vice-President of Sime Darby Industrial.
Ross Dunning AC
BE (Hons), BCom, FIE Aust, FIRSE, RPEQ
RETIRED AS INDEPENDENT NON-EXECUTIVE DIRECTOR
AND CHAIRMAN OF AUDIT AND RISK COMMITTEE ON
18 NOVEMBER 2020.
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
14 | Engenco Limited and its controlled entities | Annual Report 2021
Directors’ Report
From left: Dale Elphinstone, Vincent De Santis, Kevin Pallas, Alison von Bibra, Ross Dunning and Scott Cameron.
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.
Company Secretaries
Paul Burrows
BCom, CA, GAICD
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 are:
Board Member
Vincent De Santis
Kevin Pallas
Dale Elphinstone
Alison von Bibra
Scott Cameron
Ross Dunning
Director
Meetings
Audit and Risk
Committee Meetings
12/12
12/12
12/12
12/12
10/10
4/4
3/4
4/4
–
4/4
3/3
2/2
Directors’ Shareholdings
The directors’ shareholding of ordinary shares as at 30 June 2021
are:
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.
Meredith Rhimes
BA, LLB
COMPANY SECRETARY SINCE 30 MARCH 2020.
Meredith is a lawyer with over 15 years’ experience, including
working in private practice and in-house for a multinational
corporation. Meredith holds a Bachelor of Arts from Queen’s
University (Canada) and a Bachelor of Laws from Western
University (Canada) and has practiced law in Canada, the United
Arab Emirates and Australia.
Vincent De Santis
Kevin Pallas
Dale Elphinstone
Alison von Bibra
Scott Cameron
Ross Dunning
Ordinary
Shares
378,951
87,632
208,505,773
34,793
163,500
182,948
15
Principal Activities
The Group provides a diverse range of engineering services and products through three business streams: Rail & Road, Power & Propulsion
and Workforce Solutions. Engenco businesses specialise in:
● Maintenance, repair and overhaul of powertrain, propulsion, heavy duty engines and gas compression systems;
● Maintenance, repair and overhaul of locomotives;
● Manufacture and maintenance of wagons, carriages and associated rail equipment;
● Project management, training and workforce provisioning; and
● Manufacture and supply of road transport and storage tankers for dry bulk products.
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 500 people (full-time equivalent) in over twenty locations in two countries.
Group Overview
Operating and Financial Review
Operating Results
The Group reported a net profit after tax, including non-controlling
interests, of $11,961,000 for the year ended 30 June 2021. The
consolidated result for the year is summarised as follows:
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.
Revenue
EBIT1
Net profit before tax
Profit after tax
Net operating cash flow
Net assets
Net cash / (debt)
2021
$’000
2020
$’000
165,593
178,063
9,713
8,269
11,961
14,546
94,328
12,091
11,596
10,150
13,423
14,093
88,594
14,134
1 EBIT is earnings before finance costs and income tax expense.
Note – EBIT is a non-IFRS financial measure, which has not been subject to
review or audit by the Group’s external auditors. This measure is 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 section of this report.
Dividends
Since the end of the previous financial year, the Board declared
a final dividend of 1.5 cents per ordinary share (fully franked)
on 18 August 2020 and subsequently paid the dividend on
29 September 2020.
On 17 February 2021, the Board resolved to declare an interim
dividend of 0.5 cents per share (fully franked) and subsequently
paid this dividend on 19 March 2021.
On 18 August 2021, 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 28 September 2021.
Events Subsequent to Reporting Date
On 27 May 2021, the Company’s subsidiary, Engenco Investments
Pty Ltd, entered into an agreement to acquire 100% of the
share capital of registered training organisation (RTO), Eureka
4WD Training Pty Ltd and its controlled entities (Eureka) for a
consideration of $4,500,000. The acquisition was completed on
16 | Engenco Limited and its controlled entities | Annual Report 2021
Directors’ Report (continued)RAIL ANDROADPOWER AND PROPULSIONWORKFORCESOLUTIONS 1 July 2021. Refer to Note 26 – Events Subsequent to Report Date
for details.
acting as an advocate for the Group or jointly sharing risks
and rewards.
On 18 August 2021, 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 28 September 2021.
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:
Advisory services
AUDIT AND REVIEW OF FINANCIAL
STATEMENTS
TOTAL PAID TO KPMG
2021
$
19,498
19,498
332,027
351,525
Lead Auditor’s Independence Declaration
The lead auditor’s independence declaration is set out on page 23
and forms part of the Directors’ Report for the financial year ended
30 June 2021.
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.
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 2021.
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 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 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,
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.
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’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, including net profit before tax for the given year
and improvements in the key safety measure of Total Recordable
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
● 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.
Revenue
129,399,000
157,336,000 174,850,000 178,063,000 165,593,000
NPAT attributable to members
8,309,000
18,003,000
14,227,000
13,423,000
11,961,000
2017
$
2018
$
2019
$
2020
$
2021
$
EBIT
Operating income growth1
Share price at year-end
% Change in share price
Capital employed2
Return on capital employed3
Dividends paid
9,117,000
13,490,000
13,012,000
11,596,000
9,713,000
N/A
$0.21
N/A
48%
$0.49
133%
(4%)
$0.42
(14%)
(11%)
$0.45
7%
(16%)
$0.53
18%
57,269,000
68,825,000
77,779,000
99,338,000 100,225,000
16%
–
20%
17%
12%
10%
1,567,000
3,134,000
6,268,000
6,268,000
1 Operating income growth is the movement in EBIT year-on-year
2 Capital employed is total assets less current liabilities (excluding deferred tax assets). Comparative figures have been adjusted for the exclusion of deferred tax assets.
3 Return on capital employed is EBIT over capital employed
18 | Engenco Limited and its controlled entities | Annual Report 2021
Directors’ Report (continued) Non-Executive Directors
Total compensation for all non-executive directors was last voted upon by shareholders at the 2019 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).
Directors’ and Key Executive Officers’ Remuneration Details for Year Ended 30 June 2021
Details of the nature and amount of each major element of remuneration for each director of the Company, and other key management personnel of the Group, are:
Short-Term
Salary and
Fees
$
Non-
Monetary
$
Performance
Benefit
$
Sub-total
$
Post
Employment
Super-
annuation
Benefit
$
Long-Term
Long Service
Leave
$
Termination
Benefit
$
% Remun-
eration
Performance
Related
Total
$
DIRECTORS
NON-EXECUTIVE DIRECTORS
V De Santis
Chairman
D Elphinstone1
A von Bibra
S Cameron2
R Dunning3
SUB – TOTAL NON-EXECUTIVE
DIRECTORS’ REMUNERATION
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
166,000
166,000
80,000
80,000
86,000
86,000
72,662
–
36,582
92,000
441,244
424,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
166,000
166,000
80,000
80,000
86,000
86,000
72,662
–
36,582
92,000
441,244
424,000
15,770
15,770
7,600
7,600
8,170
8,170
6,906
–
3,462
8,740
41,908
40,280
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
181,770
181,770
87,600
87,600
94,170
94,170
79,568
–
40,044
100,740
483,152
464,280
–
–
–
–
–
–
–
–
–
–
–
–
1
9
2
0
|
E
n
g
e
n
c
o
L
m
i
i
t
e
d
a
n
d
i
t
s
c
o
n
t
r
o
l
l
e
d
e
n
t
i
t
i
e
s
|
A
n
n
u
a
l
R
e
p
o
r
t
2
0
2
1
Short-Term
Salary and
Fees
$
Non-
Monetary
$
Performance
Benefit
$
EXECUTIVE DIRECTORS
K Pallas
Managing Director & CEO
SUB – TOTAL EXECUTIVE
DIRECTORS’ REMUNERATION
2021
2020
2021
2020
TOTAL DIRECTORS’ REMUNERATION
2021
2020
478,046
451,203
478,046
451,203
919,290
875,203
–
–
–
–
–
–
–
146,082
–
146,082
–
146,082
1,021,285
86,609
EXECUTIVES
P Burrows
Chief Financial Officer &
Company Secretary
TOTAL EXECUTIVE OFFICERS’
REMUNERATION
TOTAL DIRECTORS’ AND EXECUTIVE
OFFICERS’ REMUNERATION
2021
251,737
13,388
–
265,125
30,019
2020
2021
2020
2021
2020
267,599
251,737
267,599
1,171,027
1,142,802
–
50,864
13,388
–
–
50,864
318,463
265,125
318,463
13,388
–
1,184,415
30,254
30,019
30,254
97,662
–
196,946
1,339,748
116,863
1 Fees for the services of D Elphinstone were paid via agreements with Elphinstone Group (Aust) Pty Ltd which is a related party of the Company.
2 S Cameron was appointed on 1 September 2020.
3 R Dunning retired on 18 November 2020.
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 2021 is $NIL (2020: $NIL).
Post
Employment
Super-
annuation
Benefit
$
25,735
46,329
25,735
46,329
67,643
Sub-total
$
478,046
597,285
478,046
597,285
919,290
Long-Term
Long Service
Leave
$
Termination
Benefit
$
% Remun-
eration
Performance
Related
Total
$
21,388
14,254
21,388
14,254
21,388
14,254
–
–
–
–
21,388
14,254
–
–
–
–
–
–
–
–
–
–
–
–
525,169
657,868
525,169
657,868
1,008,321
1,122,148
–
22.2%
–
22.2,%
–
13.0%
295,144
–
348,717
295,144
348,717
1,303,465
1,470,865
14.6%
–
14.6%
–
13.4%
Directors’ Report (continued)Remuneration Report - Audited (continued)
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
S Cameron
R Dunning
P Burrows
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
Ongoing director agreement
N/A – Non-Executive Director
Permanent employment contract
3 months’ pay
Options and Rights Over Equity Instruments Granted
In the 2020 and 2021 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 related 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 non-material in nature.
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:
2021
V De Santis
K Pallas
D Elphinstone
A von Bibra
S Cameron
R Dunning
P Burrows
*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 19 August 2021
Balance
1 July 2020
Received as
compensation
Other changes*
378,951
87,632
208,233,656
34,793
–
182,948
–
–
–
–
–
–
–
–
Balance
30 June 2021
378,951
87,632
–
–
272,117
208,505,773
–
163,500
–
11,965
34,793
163,500
182,948
11,965
21
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 29 to 66 and the Remuneration Report on pages 18 to 21
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 2021 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 2021.
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 19 August 2021
22 | Engenco Limited and its controlled entities | Annual Report 2021
Directors’ Declaration Auditor’s Independence Declaration
23
23 KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under Professional Standards 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 2021 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. KPM_INI_01 PAR_SIG_01 PAR_NAM_01 PAR_POS_01 PAR_DAT_01 PAR_CIT_01 KPMG Suzanne Bell Partner Melbourne 19 August 2021 Independent Auditor’s Report
24 | Engenco Limited and its controlled entities | Annual Report 2021
24 | Engenco Limited and its controlled entities | Annual Report 2021
24 KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation. 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 2021 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 2021 • 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 • Directors’ Declaration. The Group consists of 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 (including Independence Standards) (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. 2525
25 Key Audit Matters Key Audit Matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial Report of the current period. 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 from Rendering of Services ($38,008k) and Construction Contracts ($73,524k) Refer to Note 4 to the Financial Report The key audit matter How the matter was addressed in our audit Revenue recognition from Rendering of Services and Construction Contracts is a key audit matter due to the financial significance to the Group’s financial results and the significant audit effort we applied. Significant audit effort was driven from the judgement we applied to assess the Group’s over time recognition of services and construction contract revenue using an estimation of costs to complete based on comparable historical profit margins. In particular, we focussed on the high degree of estimation uncertainty in relation to the profit margin estimate due to the bespoke nature of the Group’s business and customer contracts. These assessments can be inherently subjective, therefore we involved our senior audit team members in assessing this key audit matter. Our procedures included: • We evaluated the Group’s accounting policy for the recognition of services and construction contract revenue against the requirements of the accounting standards. • We obtained an understanding of the Group’s processes regarding recognition of services and construction contract revenue. We tested key controls such as the Automated matching and approval of sales order, sales invoice and delivery docket in relation to revenue entered into the Group’s IT system, involving our IT specialists; Approval of credit notes; Authorisation of new customers; and Management’s review of the recoverability of costs of incomplete revenue contracts. • To assess the Group’s over time recognition of services and construction contract revenue, for a sample of contracts not completed at reporting date, we: - Inspected relevant features and key terms of revenue contracts, including pricing, deliverables and the timetable; - Compared the actual costs incurred during the reporting period to underlying documents such as supplier invoices and employee timesheet records; - Challenged the Group’s estimate of the profit margin and the expected cost to complete with relevant historical data such as actual costs incurred and actual contract revenue from similar service orders and construction contracts during the current and previous reporting periods; and - We compared past estimates of costs to 26 | Engenco Limited and its controlled entities | Annual Report 2021
Independent Auditor’s Report (continued) 26 complete to actual results to identify those assumptions at higher risk of bias, unpredictability or inconsistency in application. • Involving our data analytics specialists, we checked a sample of revenue from rendering of services and construction contracts throughout the year to the invoice and the Group’s cash receipts from customers on an individual transaction basis. • We assessed the revenue disclosures in the financial report using our understanding obtained from our testing and against the requirements of accounting standards. Other 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 and Company’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. 27
27 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: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of our Auditor’s Report. Report on the Remuneration Report Opinion In our opinion, the Remuneration Report of Engenco Limited for the year ended 30 June 2021, 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 21 of the Directors’ report for the year ended 30 June 2021. 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 19 August 2021 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
29
30
31
32
67
69
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 – Leases and Commitments
Note 12 – Other Assets
Note 13 – Property, Plant and Equipment
Note 14 – Net Tangible Assets
Note 15 – Intangible Assets
Note 16 – Trade and Other Payables
Note 17 – Financial Liabilities
Note 18 – Provisions
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
33
33
37
38
42
43
44
47
47
48
49
49
50
51
52
52
53
54
55
55
56
57
58
59
63
65
65
28 | Engenco Limited and its controlled entities | Annual Report 2021
Consolidated Financial Statements Table of Contentsfor the year ended 30 June 2021 Consolidated Statement of Profit or Loss and
Other Comprehensive Income
for the year ended 30 June 2021
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 BEFORE INCOME TAX
Income tax benefit / (expense)
TOTAL PROFIT FOR THE PERIOD
Profit attributable to:
Owners of the Company
Non-controlling interest
OTHER COMPREHENSIVE INCOME
Items that may be reclassified subsequently to profit:
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)
The notes on pages 33 to 66 are an integral part of the consolidated financial statements.
Consolidated Group
2021
$’000
2020
$’000
165,593
178,063
4,796
3,991
(82,226)
(60,122)
(7,096)
(1,113)
(1,444)
(830)
(1,550)
(1,140)
(2,843)
(85)
(7,662)
8,269
3,692
11,961
11,961
–
11,961
2,915
5,269
(88,238)
(63,175)
(6,937)
(139)
(1,446)
(1,189)
(1,437)
(1,174)
(3,139)
(1)
(9,222)
10,150
3,273
13,423
13,423
–
13,423
(14)
(14)
459
459
11,947
13,882
11,947
–
11,947
Cents
3.82
13,882
–
13,882
Cents
4.28
Note
4
4
5
5
6
7
29
Consolidated Statement of Financial Position
as at 30 June 2021
Consolidated Group
2021
$’000
2020
$’000
Note
8
9
4
10
6
12
13
11
6
15
16
4
17
6
11
18
11
18
6
12,091
23,736
4,160
45,834
91
–
1,648
87,560
23,557
19,293
15,612
340
58,802
146,362
16,292
2,380
–
5
3,901
7,947
30,525
17,109
4,206
194
21,509
52,034
94,328
14,447
26,369
4,897
41,843
56
658
3,960
92,230
18,837
20,246
12,159
127
51,369
143,599
17,227
2,690
971
–
3,338
7,876
32,102
18,414
4,042
447
22,903
55,005
88,594
20
302,774
302,719
503
15,858
517
10,165
(218,978)
(218,978)
100,157
(5,829)
94,328
94,423
(5,829)
88,594
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Contract assets
Inventories
Current tax assets
Financial assets
Other current assets
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Property, plant and equipment
Right-of-use assets
Deferred tax assets
Intangible assets
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Contract liabilities
Financial liabilities
Current tax liabilities
Lease liabilities
Provisions
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Lease 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 33 to 66 are an integral part of the consolidated financial statements.
30 | Engenco Limited and its controlled entities | Annual Report 2021
Consolidated Statement of Financial Positionas at 30 June 2021
Consolidated Statement of Changes in Equity
for the year ended 30 June 2021
Consolidated Group
Share
Capital
$’000
Accum-
ulated
Losses*
$’000
Foreign
Currency
Translation
Reserve
$’000
Profit
Reserve
$’000
BALANCE AT 1 JULY 2019
302,719
(215,306)
2,433
Adjustment from adoption of
AASB 16
ADJUSTED BALANCE AT
1 JULY 2019
COMPREHENSIVE INCOME
Profit / (loss)
Other comprehensive income,
net of tax
TOTAL COMPREHENSIVE INCOME
–
(3,095)
–
302,719
(218,401)
2,433
–
–
–
(577)
14,000
–
–
(577)
14,000
TRANSACTIONS WITH OWNERS OF THE COMPANY
Contributions and Distributions:
Dividends paid
TOTAL CONTRIBUTIONS AND
DISTRIBUTIONS
–
–
–
–
BALANCE AT 30 JUNE 2020
302,719
(218,978)
(6,268)
(6,268)
10,165
58
–
58
–
459
459
–
–
517
Non-
controlling
Interest
$’000
Sub-Total
$’000
Total
Equity
$’000
89,904
(5,829)
84,075
(3,095)
–
(3,095)
86,809
(5,829)
80,980
13,423
459
13,882
(6,268)
(6,268)
94,423
–
–
–
–
–
13,423
459
13,882
(6,268)
(6,268)
(5,829)
88,594
Consolidated Group
Share
Capital
$’000
Accum-
ulated
Losses*
$’000
Foreign
Currency
Translation
Reserve
$’000
Profit
Reserve
$’000
Non-
controlling
Interest
$’000
Sub-Total
$’000
Total
Equity
$’000
BALANCE AT 1 JULY 2020
302,719
(218,978)
10,165
517
94,423
(5,829)
88,594
COMPREHENSIVE INCOME
Profit / (loss)
Other comprehensive income,
net of tax
TOTAL COMPREHENSIVE INCOME
–
–
–
TRANSACTIONS WITH OWNERS OF THE COMPANY
Contributions and Distributions:
Employee share purchase plan
Dividends paid
TOTAL CONTRIBUTIONS AND
DISTRIBUTIONS
55
–
55
–
–
–
–
–
–
BALANCE AT 30 JUNE 2021
302,774
(218,978)
11,961
–
11,961
–
11,961
(14)
(14)
(14)
11,947
–
(6,268)
(6,268)
15,858
–
–
–
55
(6,268)
(6,213)
–
–
–
–
–
–
11,961
(14)
11,947
55
(6,268)
(6,213)
503
100,157
(5,829)
94,328
*The Group has initially applied AASB 16: Leases from 1 July 2019, using the modified retrospective approach. Under this approach, comparative information is not
restated and the cumulative effect of initially applying AASB 16 is recognised in retained earnings at the date of initial application. See Note 11.
The notes on pages 33 to 66 are an integral part of the consolidated financial statements.
31
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Payments to suppliers and employees
Interest received
Finance costs
Income tax paid
Consolidated Group
2021
$’000
2020
$’000
Note
191,113
198,138
(176,180)
(183,657)
12
(353)
(46)
72
(112)
(348)
NET CASH FROM / (USED IN) OPERATING ACTIVITIES
22 (b)
14,546
14,093
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of non-current assets
Purchase of non-current assets
Payment for purchase of non-current asset held in escrow
NET CASH FROM / (USED IN) INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid
Payment of lease liabilities
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 33 to 66 are an integral part of the consolidated financial statements.
3,920
(9,571)
–
(5,651)
(6,268)
(4,670)
(10,938)
(2,043)
14,134
12,091
1,140
(11,475)
(2,341)
(12,676)
(6,268)
(4,423)
(10,691)
(9,274)
23,408
14,134
32 | Engenco Limited and its controlled entities | Annual Report 2021
Consolidated Statement of Cash Flowsfor the year ended 30 June 2021 Notes to the Consolidated Financial Statements
for the year ended 30 June 2021
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 19 August 2021.
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 2021 is included in the following notes:
● Note 4 – Revenue and Other Income
● Note 6 – Tax
● Note 9 – Trade and Other Receivables
● Note 10 – Inventories
● Note 11 – Leases and Commitments
COVID-19 Considerations
The ongoing COVID-19 global pandemic has increased the
estimation uncertainty in the preparation of financial statements,
generally, due to the impact of the following key factors:
● the extent and duration of restrictive actions put in place by
governments as a response to the health emergency and to
contain the spread of the virus, and the follow-on effects this
has on industries, businesses and consumers;
● the extent and duration of the expected economic downturn.
This includes uncertainty relating to potential disruption to
capital markets, a deteriorating credit environment, higher
unemployment, heightened geo-political tensions, and changes
in consumer discretionary spending behaviours; and
● the effectiveness of government measures that have and
will be put in place to support businesses and consumers
through the changeable conditions, social disruption and
economic downturn.
During FY21, the Group experienced the following key impacts on
its operations and financial statements as a result of the COVID-19
global pandemic environmental factors:
● Governments took varying approaches to containment of the
virus in Australia and Europe, being Engenco’s key markets.
● In general, transportation, defence and mining activities, and
the support services thereto that Engenco provides, have been
considered an essential service and have continued without a
significant impact on Engenco’s main operations.
● Customer facing business operations that have been impacted
to some degree include CERT Training, whom provide training to
the rail industry in a classroom environment; and supply chain
disruptions and travel restrictions especially for Hedemora Turbo
& Diesel in Sweden and the USA, but also impeding domestic
business development activities across the Group.
● In Engenco’s key markets, governments put in place fiscal and
economic stimulus packages of varying natures as specific
markets experienced impacts from the pandemic.
In respect of these financial statements, the impact of the COVID-19
pandemic is primarily relevant to estimates of future performance
which is in turn relevant to the areas of recoverability of receivables
(Note 9), net realisable value of inventory (Note 10), impairment
of non-financial assets (right-of-use assets, Note 11 and property,
plant and equipment, Note 13) and recoverability of income tax
losses (Note 6).
In making estimates of future performance, the following
assumptions and judgements in relation to the potential impact of
COVID-19 have been applied by the Group. Actual results may differ
from these estimates under different assumptions and conditions.
● Engenco’s operations are nationally diverse across the Australian
states and regions, with material operations separated across all
of the major states.
33
Note 1 – Significant Accounting Policies (continued)
● It is expected that States will continue to be operating with
Transactions eliminated on consolidation
differing degrees of COVID-19 impacts and restrictions and our
diversity of operations will assist our continued operation as
COVID-19 responses change.
● The services the Group provides and the industries served
continue to be considered essential services, and sites continue
operating with strict COVID-19 safety plans in place. Operations
are expected to continue on a similar basis to those that have
been in place from the outset of the pandemic, which include a
degree of COVID-19 disruption, into the future until governments
decide that immunisation levels are adequate to manage the
health risks associated with the Pandemic. Government fiscal
and economic stimulus packages are expected to be maintained
or extended as required, but are phased out as economies return
to historical output levels in future periods.
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.
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.
Intra-group balances and transactions, and any unrealised income
and expenses arising from intra-group transactions, are eliminated.
(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 Other Comprehensive
Income (OCI):
34 | Engenco Limited and its controlled entities | Annual Report 2021
Notes to the Consolidated Financial Statements (continued)for the year ended 30 June 2021 ● 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);
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.
● 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.
(e) Government Grants
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.
(f) Goods and Services Tax (GST)
Revenues, expenses and non-financial assets are recognised net
of the amount of GST, except where the amount of GST incurred
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.
(g) Share Based Payments
The Group operates an employee share based purchase plan
that allows staff members, based on the Plan rules, to purchase
Engenco shares on the pre-tax basis and at a 5% market discount.
The value of the 5% discount benefit to which employees become
entitled is measured at grant date and recognised as an expense
over the minimum holding period, with a corresponding increase to
an equity account. The shares are valued at the volume-weighted
average price of the Company’s shares trade on the Australian
Securities Exchange during the five business days immediately
preceding the day the shares are issued.
(h) Comparative Figures
When required by Accounting Standards, comparative figures
have been adjusted to conform to changes in presentation for the
current financial year.
(i) Rounding of Amounts
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).
(j) 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:
● Definition of a Business (Amendments to AASB 3)
● Definition of a Material (Amendments to AASB 101)
● Disclosure of the Effect of New IFRS Standards not yet
issued in Australia (Amendments to AASB 1054 Australian
Additional Disclosures)
● Interest Rate Benchmark Reform (Amendments to AASB 9)
● IFRIC Agenda Decision: Configuration or customization costs in a
cloud computing arrangement
● Covid-19 Related Rent Concessions (Amendments to AASB 16)
35
Note 1 – Significant Accounting Policies (continued)
The new standards adopted did not have a material impact to
the Group.
and Other Amendments
● Amendments to Australian Standard Improvements 2018-2020
STANDARDS ISSUED BUT NOT YET EFFECTIVE
Other Accounting Standards
A number of new standards are effective for annual periods
beginning after 1 January 2021 and earlier application is permitted;
however, the Group has not early adopted the new or amended
statements in preparing these consolidated financial statements.
The following new or amended standards are not expected
to have a significant impact on the Group’s consolidated
financial statements:
● Classification of Liabilities as Current or Non-Current
(Amendments to AASB 101)
● Definition of Accounting Estimates (Amendments to IAS 8)
● Onerous Contracts – Cost of Fulfilling a Contract (Amendments
to AASB 137)
● Insurance Contracts (Amendments to AASB 17)
● Deferred Tax related to Assets and Liabilities arising from a
Single Transaction (Amendments to IAS 12)
● IFRIC Agenda Decision: Classification of debt with covenant as
current or non-current
36 | Engenco Limited and its controlled entities | Annual Report 2021
Notes to the Consolidated Financial Statements (continued)for the year ended 30 June 2021 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
– 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
– Turbochargers USA Inc.
– Hydradix 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
2021
Percentage
Owned
2020
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
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
Australia
25 May 10
Philippines
Singapore
New Zealand
1 Jul 07
1 Jul 07
1 Jul 07
USA
USA
31 Dec 08
31 Dec 08
Sweden
Sweden
Australia
Australia
Australia
Australia
Australia
Australia
Australia
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%).
37
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:
(a) Gemco Rail
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.
(b) Convair Engineering (Convair)
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.
(c) Drivetrain
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.
(d) Momentum Rail
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.
(e) Centre for Excellence in Rail Training (CERT Training)
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.
(f) All Other
This includes the parent entity, non-reportable segments and
consolidation / inter-segment elimination adjustments.
Basis of Reporting by Operating Segments
(a) Basis of reporting
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.
(b) Inter-segment transactions
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.
(c) Segment assets
Assets are allocated to segments where there is a nexus between
control and ownership of the asset and the operations of the
business. Segment assets are disclosed at the net of capital
expenditure, investments and intangibles. Unless indicated
otherwise in the segment assets note, deferred tax assets have not
been allocated to operating segments.
(d) Segment liabilities
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.
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.
38 | Engenco Limited and its controlled entities | Annual Report 2021
Notes to the Consolidated Financial Statements (continued)for the year ended 30 June 2021 (i) Segment Performance
Year ended 30 June 2021
Reportable Segments
REVENUE
External revenue
Inter-segment revenue
Interest revenue
Gemco Rail
$’000
Convair
$’000
Drivetrain
$’000
Momentum
Rail
$’000
CERT
Training
$’000
All Other
$’000
Group
$’000
78,572
16,459
42,635
12,444
9,233
–
–
–
–
36
5
58
–
52
–
6,238
1,018
7
165,581
1,164
12
TOTAL SEGMENT REVENUE
78,572
16,459
42,676
12,502
9,285
7,263
166,757
Reconciliation of segment revenue
to Group revenue:
Inter-segment eliminations
TOTAL GROUP REVENUE
SEGMENT EBITDA
Reconciliation of segment EBITDA to
Group net profit / (loss) before tax:
Depreciation and amortisation
Finance costs
NET PROFIT / (LOSS) BEFORE TAX
Year ended 30 June 2020
–
78,572
16,895
–
16,459
2,083
–
42,676
4,844
–
12,502
1,482
–
9,285
2,369
(1,164)
6,099
(1,164)
165,593
(10,864)
16,809
(4,566)
(746)
11,583
(452)
(92)
1,539
(1,058)
(160)
3,626
(25)
(1)
(296)
(78)
(699)
(367)
1,456
1,995
(11,930)
(7,096)
(1,444)
8,269
Reportable Segments
REVENUE
External revenue
Inter-segment revenue
Interest revenue
Gemco Rail
$’000
Convair
$’000
Drivetrain
$’000
Momentum
Rail
$’000
CERT
Training
$’000
All Other
$’000
Group
$’000
87,239
14,817
45,807
14,135
10,119
2
–
–
–
179
15
284
–
96
–
5,874
3,497
57
177,991
4,058
72
TOTAL SEGMENT REVENUE
87,241
14,817
46,001
14,419
10,215
9,428
182,121
Reconciliation of segment revenue
to Group revenue:
Inter-segment eliminations
TOTAL GROUP REVENUE
SEGMENT EBITDA
Reconciliation of segment EBITDA to
Group net profit / (loss) before tax:
Depreciation and amortisation
Finance costs
NET PROFIT / (LOSS) BEFORE TAX
–
87,241
16,933
(4,160)
(835)
11,938
–
14,817
1,564
–
46,001
5,531
–
14,419
1,552
–
10,215
1,528
(4,058)
5,370
(8,575)
(4,058)
178,063
18,533
(520)
(98)
946
(1,155)
(195)
4,181
(23)
(11)
1,518
(207)
(44)
1,277
(872)
(263)
(9,710)
(6,937)
(1,446)
10,150
39
Note 3 – Operating Segments (continued)
(ii) Segment Assets
As at 30 June 2021
Reconciliation of segment assets to Group assets:
Reportable Segments
ASSETS
Segment assets
Capital expenditure
Intangibles
Inter-segment eliminations
Unallocated items:
Deferred tax assets
TOTAL ASSETS
As at 30 June 2020
Reportable Segments
ASSETS
Segment assets
Capital expenditure
Intangibles
Inter-segment eliminations
Unallocated items:
Deferred tax assets
TOTAL ASSETS
Gemco Rail
$’000
Convair
$’000
Drivetrain
$’000
Momentum
Rail
$’000
CERT
Training
$’000
All Other
$’000
Group
$’000
8,883
289
36,601
322
–
–
–
–
–
–
4,401
5,711
37
–
–
–
23
–
–
–
13,722
4,874
340
124,754
9,938
340
–
–
(4,282)
15,612
59,829
9,172
36,923
4,438
5,734
18,936
146,362
Gemco Rail
$’000
Convair
$’000
Drivetrain
$’000
Momentum
Rail
$’000
CERT
Training
$’000
All Other
$’000
Group
$’000
12,962
40,767
7,973
11,478
(4,139)
124,702
391
155
–
–
–
–
–
–
–
–
–
–
55
–
–
–
2,778
127
–
–
11,115
127
(4,504)
12,159
63,397
13,353
40,922
7,973
11,533
(1,234)
143,599
55,436
4,393
–
–
–
–
–
55,661
7,736
–
Reconciliation of segment assets to Group assets:
40 | Engenco Limited and its controlled entities | Annual Report 2021
Notes to the Consolidated Financial Statements (continued)for the year ended 30 June 2021 (iii) Segment Liabilities
As at 30 June 2021
Reportable Segments
LIABILITIES
Segment liabilities
Gemco Rail
$’000
Convair
$’000
Drivetrain
$’000
Momentum
Rail
$’000
CERT
Training
$’000
All Other
$’000
Group
$’000
53,985
6,721
48,029
1,988
2,288
(56,889)
56,122
Reconciliation of segment liabilities to Group liabilities:
Inter-segment eliminations
Unallocated items:
Deferred tax liabilities
TOTAL LIABILITIES
As at 30 June 2020
Reportable Segments
LIABILITIES
Segment liabilities
–
–
–
–
–
–
–
–
–
–
–
–
(4,282)
194
53,985
6,721
48,029
1,988
2,288
(56,889)
52,034
Gemco Rail
$’000
Convair
$’000
Drivetrain
$’000
Momentum
Rail
$’000
CERT
Training
$’000
All Other
$’000
Group
$’000
52,755
8,410
49,598
3,947
6,991
(62,639)
59,062
Reconciliation of segment liabilities to Group liabilities:
Inter-segment eliminations
Unallocated items:
Deferred tax liabilities
TOTAL LIABILITIES
(iv) Geographical Information
–
–
–
–
–
–
–
–
–
–
–
–
(4,504)
447
52,755
8,410
49,598
3,947
6,991
(62,639)
55,005
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
(v) Major Customers
2021
$’000
2020
$’000
158,364
168,662
7,229
–
9,401
–
165,593
178,063
2021
$’000
134,597
11,747
18
2020
$’000
134,845
8,733
21
146,362
143,599
Revenue from one customer of the Group, across multiple segments, represents greater than 10% of the Group’s total revenue in the
current year.
41
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. Revenue is 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.
Sale of Goods
The Group engages in the sale of spare parts and components
for various rail, road, powertrain and gas compression industry
sectors. 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
The Group performs a number of services to various industry
sectors, including maintenance, repairs and overhauls. 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
The Group is involved in the manufacture of wagons, carriages,
rail equipment and dry bulk tankers. 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
The Group’s RTO entity (CERT Training) delivers nationally
accredited and industry-based training courses. Revenue is
recognised at the point in time when the performance obligation
is satisfied.
Lease Rental Income
The Group leases out its fleet of rollingstock and certain items
of property, plant and equipment to customers in the form of
operating lease arrangements. 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
2021
$’000
2020
$’000
164,867
714
165,581
176,993
998
177,991
12
12
72
72
165,593
178,063
2,508
2,288
4,796
396
2,519
2,915
42 | Engenco Limited and its controlled entities | Annual Report 2021
Notes to the Consolidated Financial Statements (continued)for the year ended 30 June 2021 Set out below is the disaggregation of the Group’s revenue from contracts with customers:
Revenue Stream
Sale of goods
Rendering of services
Construction contracts
RTO training
Lease rental income
TOTAL SALES REVENUE
Revenue
Recognition
Point in time
Over time
Over time
Point in time
Over time
2021
$’000
44,050
38,008
73,524
9,285
714
165,581
2020
$’000
48,902
42,165
75,711
10,215
998
177,991
Contract Assets and Liabilities
Contract assets are recognised as the right to consideration in exchange for work completed on construction contracts and services
rendered but not billed on the reporting date. Contract liabilities are recognised when the Group has an obligation to transfer goods or
services to a customer for which the entity has received consideration from the customer.
Contract assets
Contract liabilities
Note 5 – Expenses
FINANCE COSTS
Finance costs – leases
Other finance costs
TOTAL FINANCE COSTS
EMPLOYEE BENEFITS EXPENSE
Wages and salaries
Annual leave expense
Long service leave expense
Restructuring
Defined contribution plan
TOTAL EMPLOYEE BENEFITS EXPENSE
RENTAL EXPENSE ON OPERATING LEASES
Operating lease payments*
TOTAL RENTAL EXPENSE ON OPERATING LEASES
2021
$’000
4,160
2,380
2021
$’000
1,091
353
1,444
52,474
2,932
133
163
4,420
60,122
1,861
1,861
2020
$’000
4,897
2,690
2020
$’000
1,236
210
1,446
55,279
2,608
417
512
4,359
63,175
1,508
1,508
* The operating lease payments expense disclosed above relates to outgoings, short term and low value leases (all of which are not lease accounted or contained
within Note 11).
43
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.
Estimates and Judgements
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.
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.
44 | Engenco Limited and its controlled entities | Annual Report 2021
Notes to the Consolidated Financial Statements (continued)for the year ended 30 June 2021 CURRENT
Income tax receivable / (payable)
TOTAL CURRENT INCOME TAX
(a) The components of tax expense / (benefit) comprise:
Current income tax expense / (benefit)
– Current income tax expense / (benefit)
Deferred 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 before tax
At the Company’s statutory domestic income tax rate of 30% (2020: 30%)
Add / (Less) tax effect of:
– Foreign tax rate adjustment
– Utilisation of tax losses – Australia
– Losses for which no deferred tax asset is recognised
–
Instant asset write-off
– Adjustments for prior years
– Other non-allowable items
– Movements in recognised temporary differences
– Other (deferred tax asset partial recognition of prior year loses)
Income tax expense / (benefit)
The tax receivable and payable relates to the Group companies outside the Australian Tax Consolidated Group.
2021
$’000
2020
$’000
86
86
56
56
2021
$’000
2020
$’000
(187)
190
(3,505)
(3,692)
(3,463)
(3,273)
8,269
2,481
(57)
(1,915)
(3)
(984)
5
118
168
(3,505)
(3,692)
10,150
3,045
45
(2,931)
16
–
–
15
185
(3,648)
(3,273)
45
Note 6 – Tax (continued)
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
Other
$’000
Closing
Balance
$’000
NON-CURRENT
Deferred tax liabilities:
Other
BALANCE AT 30 JUNE 2020
Other
BALANCE AT 30 JUNE 2021
Deferred tax assets:
Provisions
Accruals
Losses
BALANCE AT 30 JUNE 2020
Provisions
Accruals
Losses
BALANCE AT 30 JUNE 2021
547
547
447
447
1,156
–
6,210
7,366
2,301
–
9,858
12,159
–
–
–
–
–
–
–
–
–
–
–
–
(100)
(100)
(253)
(253)
(285)
–
3,648
3,363
(52)
–
3,505
3,453
–
–
–
–
1,322
–
–
1,322
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
108
–
–
108
–
–
–
–
447
447
194
194
2,301
–
9,858
12,159
2,249
–
13,363
15,612
The Company has estimated Australian carry forward operating tax losses of $59,267,654 at June 2021 (2020: $69,548,820) 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 $3,505,287 was partially recognised in 2021 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.
46 | Engenco Limited and its controlled entities | Annual Report 2021
Notes to the Consolidated Financial Statements (continued)for the year ended 30 June 2021 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 for the year
(Profit) for the year, attributable to non-controlling interest
Earnings used to calculate basic EPS
Earnings used in the calculation of dilutive EPS
(b) 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
2021
$’000
2020
$’000
11,961
–
11,961
11,961
13,423
–
13,423
13,423
No. ’000
No. ’000
313,464
313,381
–
–
313,464
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
2021
$’000
12,091
12,091
2020
$’000
14,447
14,447
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 $9,353,806 (2020: $24,539,135) against cash and cash equivalents of
$19,115,522 (2020: $33,399,238) resulting in a net positive cash position for these accounts of $9,761,716 (2020: $8,860,103).
47
Note 9 – Trade and Other Receivables
CURRENT
Trade receivables
Provision for impairment of receivables
TOTAL TRADE RECEIVABLES
Sundry receivables
TOTAL OTHER RECEIVABLES
TOTAL CURRENT TRADE AND OTHER RECEIVABLES
2021
$’000
2020
$’000
23,903
(259)
23,644
92
92
26,586
(365)
26,221
148
148
23,736
26,369
(a) Expected Credit Loss Provision for Impairment of Receivables
The Group has 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.
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.
Weighted
average
loss rate
%
0.26%
1.96%
6.19%
16.11%
37.56%
2021
Gross
carrying
amount
$’000
21,296
1,788
97
509
213
23,903
–
23,903
Loss
allowance
$’000
56
35
6
82
80
259
–
259
Weighted
average
loss rate
%
0.26%
2.82%
9.66%
12.24%
41.63%
2020
Gross
carrying
amount
$’000
24,574
965
3
672
308
26,522
64
26,586
Loss
allowance
$’000
Credit
impaired
64
27
–
82
128
301
64
365
No
No
No
No
Yes
Yes
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
48 | Engenco Limited and its controlled entities | Annual Report 2021
Notes to the Consolidated Financial Statements (continued)for the year ended 30 June 2021 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
2021
$’000
2020
$’000
4,063
31,558
35,621
–
10,213
10,213
45,834
4,395
27,796
32,191
–
9,652
9,652
41,843
The Group has completed a comprehensive review of the carrying value of inventory, taking into consideration microeconomic factors. As a
result of the review, inventory was impaired by $1,113,000 (2020: $139,000).
Note 11 – Leases and Commitments
Leasing activities and accounting policy
Engenco leases various properties and equipment. Property leases
typically are for a period of 3 to 10 years and often have extension
options and equipment leases are typically for a period of 3 to 5
years. The Group accounts for these leases under AASB 16: Leases.
AASB 16, requires that operating leases be recognised on-balance
sheet through the recognition of a Right-of-Use (ROU) Asset and
Lease Liability. Lease expenditure is recognised as depreciation
and interest.
Under AASB 16 there is a single, on balance sheet accounting
model. The assessment of whether 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
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.
Judgements and Estimates
The Group applies judgement to determine the lease term for some
contracts in which it is a lessee that includes renewal options.
The assessment of whether the Group is reasonably certain to
exercise such options impacts on the lease term, which significantly
affects the amount of lease liabilities and right-of-use assets
recognised. In determining the lease term, management considers
all facts and circumstances that create an economic incentive to
exercise an extension term. Extension options are only included
in the lease term if the lease is reasonably certain to be extended.
The assessment is reviewed if a significant event or change in
circumstance occurs which affects this assessment and that is
within the control of the lessee.
Engenco applies 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;
● 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 that is available to the 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 has
49
Note 11 – Leases and Commitments (continued)
not elected to combine lease and non-lease components for its property leases. As such, the calculated lease liability excludes an estimate
of the stand-alone price of the non-lease component.
Movements in the Period
RIGHT-OF-USE ASSETS
Property
Equipment
TOTAL RIGHT-OF-USE ASSETS
LEASE LIABILITIES
Property
Equipment
TOTAL LEASE LIABILITIES
Current lease liabilities
Non-current lease liabilities
(a) Leases as a Lessor
1 Jul 2020
$’000
Additions
$’000
Depreciation
$’000
Modifications/
De-recognition
$’000
30 Jun 2021
$’000
19,932
314
20,246
2,265
751
3,016
(3,818)
(219)
(4,037)
45
23
68
18,424
869
19,293
1 Jul 2020
$’000
Additions
$’000
Payments
$’000
Modifications/
De-recognition
$’000
30 Jun 2021
$’000
21,428
324
21,752
3,338
18,414
2,223
737
2,960
(3,216)
(203)
(3,419)
(323)
40
(283)
20,112
898
21,010
3,901
17,109
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 which are receivable are shown below.
OPERATING LEASE RECEIVABLES
Receivable – minimum lease payments:
– not later than 12 months
– between 12 months and 5 years
– greater than 5 years
Note 12 – Other Assets
CURRENT
Other current assets
Prepayments
TOTAL CURRENT OTHER ASSETS
50 | Engenco Limited and its controlled entities | Annual Report 2021
2021
$’000
2020
$’000
115
436
–
551
503
486
65
1,054
2021
$’000
2020
$’000
232
1,416
1,648
2,691
1,269
3,960
Notes to the Consolidated Financial Statements (continued)for the year ended 30 June 2021 Note 13 – 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. Land is
not depreciated.
The depreciation rates used for each class of depreciable assets are:
Class of Property, Plant & Equipment
Buildings
Leasehold improvements
Plant and equipment
Depreciation Rate
2.5%
10%-100%
5%-67%
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
– At cost
– Less accumulated depreciation and impairment
TOTAL PLANT AND EQUIPMENT
LEASEHOLD IMPROVEMENTS
– At cost
– Accumulated depreciation
TOTAL LEASEHOLD IMPROVEMENTS
TOTAL PROPERTY, PLANT AND EQUIPMENT
2021
$’000
2020
$’000
5,520
5,520
2,200
(695)
1,505
7,025
88,842
(74,574)
13,908
7,123
(4,499)
2,624
23,557
2,578
2,578
806
(668)
138
2,716
85,436
(72,145)
13,291
6,726
(3,896)
2,830
18,837
51
Note 13 – Property, Plant and Equipment (continued)
(a) Reconciliation of Carrying Amounts
Movement in the carrying amounts for each class of property, plant and equipment between the beginning and the end of the current
financial year.
BALANCE AT 30 JUNE 2019
Additions
Disposals
Impairment
Depreciation expense
BALANCE AT 30 JUNE 2020
Additions
Disposals
Depreciation expense
BALANCE AT 30 JUNE 2021
Consolidated Group
Freehold Land
$’000
Buildings
$’000
Leasehold
Improvements
$’000
Plant and
Equipment
$’000
53
2,525
–
–
–
2,578
2,942
–
–
5,520
154
–
–
–
(16)
138
1,394
–
(27)
1,505
289
3,170
–
–
(629)
2,830
424
(27)
(603)
2,624
11,236
5,420
(722)
(195)
(2,448)
13,291
5,178
(2,132)
(2,429)
13,908
Total
$’000
11,732
11,115
(722)
(195)
(3,093)
18,837
9,938
(2,159)
(3,059)
23,557
Note 14 – Net Tangible Assets
The Group’s Net Tangible Assets (NTA) is calculated as the net of net assets (excluding net deferred tax, non-controlling interest and
intangible assets) over fully paid ordinary shares. There was no change to the Group’s approach to calculating NTA.
Net tangible assets per ordinary share: 313,489,018 shares (2020: 313,380,943 shares )
2021
Cents
27.0
2020
Cents
26.2
Note 15 – 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.
52 | Engenco Limited and its controlled entities | Annual Report 2021
Notes to the Consolidated Financial Statements (continued)for the year ended 30 June 2021 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 and impairment:
Opening balance
Amortisation for the year
Closing balance
NET BOOK VALUE
TOTAL INTANGIBLE ASSETS
At cost
Accumulated amortisation and impairment
NET BOOK VALUE
2021
$’000
2020
$’000
13,110
277
13,387
13,078
32
13,110
(12,983)
(12,878)
(64)
(105)
(13,047)
(12,983)
340
127
13,387
(13,047)
340
13,110
(12,983)
127
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.
Note 16 – 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
TOTAL TRADE AND OTHER PAYABLES
2021
$’000
2020
$’000
13,539
2,753
16,292
14,390
2,837
17,227
53
Note 17 – Financial Liabilities
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 receivables 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
Forward contract
TOTAL CURRENT FINANCIAL LIABILITIES
Note
22(a)
2021
$’000
2020
$’000
–
–
–
313
658
971
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 the National Australia Bank (NAB) is comprised of a $20,000,000 Revolving Credit Facility, $6,000,000 Bank
Guarantee Facility, $600,000 Credit Card Facility and $500,000 Set-off Facility. These facilities are secured against the Australian assets of
the Group. The revolving credit facility expires on 31 October 2023, with the other facilities renewed annually.
Defaults and breaches
There were no defaults or breaches during the year ended 30 June 2021 on any of the above mentioned facilities.
(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*
– Swedish Overdraft Facility
(SEK)**
Facility
Available
2021
$’000
27,100
935
28,035
Facility
Used
2021
$’000
Maturity
Dates
2021
Facility
Available
2020
$’000
Facility
Used
2020
$’000
Maturity
Dates
2020
Interest
Basis
–
–
–
Oct-23
16,600
Nov-21
Floating
Dec-21
935
17,535
–
–
Dec-20
Floating
* 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
54 | Engenco Limited and its controlled entities | Annual Report 2021
Notes to the Consolidated Financial Statements (continued)for the year ended 30 June 2021 Note 18 – 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
closure costs and redundancies announced before the reporting date.
Makegood
A provision has been recognised for makegood obligations at the end of the lease term for leased property. The Group calculates the
provisions on the present value of future cash flows in respect of meeting contract obligations.
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.
Consolidated Group
Long
Service
Leave
Employee
Benefits
$’000
2,986
133
(241)
2,878
2,389
489
2,878
Annual
Leave
Employee
Benefits
$’000
3,270
2,932
(2,430)
3,772
3,772
–
3,772
Onerous
Contracts
$’000
Restruc-
turing
$’000
Makegood
$’000
215
–
(74)
141
141
–
141
74
50
(81)
43
43
–
43
3,584
255
–
3,839
122
3,717
3,839
Other
$’000
1,789
848
(1,157)
1,480
1,480
–
1,480
Total
$’000
11,918
4,218
(3,983)
12,153
7,947
4,206
12,153
BALANCE AT 1 JULY 2020
Provisions raised
Provisions used
BALANCE AT 30 JUNE 2021
Current
Non-current
BALANCE AT 30 JUNE 2021
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 2021 is $1,166,687 (2020: $1,166,687).
55
Note 20 – Issued Capital and Reserves
(a) Share Capital
313,489,018 (2020: 313,380,943) fully paid ordinary shares
2021
$’000
302,774
302,774
2020
$’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
Employee share purchase plan
AT REPORTING DATE
2021
No.
2020
No.
313,380,943
313,380,943
108,075
–
313,489,018
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.
Employee Share Purchase Plan
At the 2020 Annual General Meeting, shareholders approved an Employee Share Purchase Plan (ESPP). The ESPP is available to all eligible
employees each year to acquire ordinary shares in the Company from future remuneration (before tax). Shares to be issued or transferred
under the ESPP will be valued at a 5% discount to the volume-weighted average price of the Company’s shares traded on the Australian
Securities Exchange during the five business days immediately preceding the day the shares are issued. Shares issued under the ESPP
are not allowed to be sold, transferred or otherwise disposed of until the earlier of an initial three-year period, or the participant ceasing
continuing employment with the Company.
The value of shares issued under the ESPP that was recognised during the year was $55,000.
(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 dividends in future years.
(c) Dividends
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 2021, and there are no tax consequences.
(a) INTERIM DIVIDEND DECLARED
0.5 cents per ordinary share (2020: 0.5 cents)
(b) FINAL DIVIDEND DECLARED
1.5 cents per ordinary share (2020: 1.5 cents)
(c) FRANKING CREDIT BALANCE
2021
$’000
2020
$’000
1,567
1,567
4,730
4,701
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% (2020: 30%)
3,867
6,553
56 | Engenco Limited and its controlled entities | Annual Report 2021
Notes to the Consolidated Financial Statements (continued)for the year ended 30 June 2021 Note 21 – Parent Entity Disclosures
As at, and throughout the financial year ended, 30 June 2021 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 for the year
Other comprehensive income
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD
2021
$’000
2020
$’000
2,300
49,529
51,829
10,963
3,887
14,850
36,979
15,476
41,929
57,405
25,726
2,602
28,328
29,077
302,774
15,858
302,719
10,166
(281,653)
(283,808)
36,979
29,077
14,115
–
14,115
15,665
–
15,665
(c) Parent Entity Guarantees in respect of the debts of its subsidiaries
The parent entity acts as guarantor for debt facilities. Details of these facilities can be found in Note 17(a) – Financial Liabilities.
(d) Parent Entity Contingent Liabilities
At 30 June 2021, the parent entity has no significant contingent liabilities (2020: NIL).
(e) Parent Entity Capital Commitments for acquisition of property, plant and equipment
At 30 June 2021, the parent entity had not entered into any contractual commitments for the acquisition of property, plant and equipment
and other intangible assets (2020: NIL).
57
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
17
(b) Reconciliation of Cash Flow from Operating Activities with Profit / (Loss) after Income Tax
PROFIT AFTER INCOME TAX
Adjustments for non-cash items:
– Depreciation
– Other intangibles amortisation
–
–
Impairment losses on inventory
Impairment of property, plant and equipment
– 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
2021
$’000
12,091
–
12,091
2021
$’000
11,961
7,040
56
1,113
–
(76)
341
(3,692)
(2,508)
14,235
6,847
(148)
(3,875)
(2,360)
234
14,933
(341)
(46)
2020
$’000
14,447
(313)
14,134
2020
$’000
13,423
6,742
105
139
195
(140)
40
(3,273)
(396)
16,835
(787)
240
(5,408)
344
3,257
14,481
(40)
(348)
CASH FLOW PROVIDED BY / (USED IN) OPERATIONS
14,546
14,093
(c) Reconciliation of Financial Liabilities in Financing Activities
Bank overdrafts
TOTAL FINANCIAL LIABILITIES
2020
$’000
Cash Flows
$’000
313
313
–
–
Non-Cash
Flows
$’000
(313)
(313)
2021
$’000
–
–
58 | Engenco Limited and its controlled entities | Annual Report 2021
Notes to the Consolidated Financial Statements (continued)for the year ended 30 June 2021 Note 23 – Financial Risk Management
The Group’s financial instruments consist mainly of accounts receivable and payable, forward contracts, contract assets and liabilities,
and leases.
FINANCIAL ASSETS
Cash and cash equivalents
Trade and other receivables
Contract assets
Forward contracts
FINANCIAL LIABILITIES
Trade and other payables
Borrowings
Contract liabilities
Forward contracts
Lease liabilities
Note
2021
$’000
2020
$’000
8
9
4
16
17
4
11
12,091
23,736
4,160
–
39,987
16,292
–
2,380
–
21,010
39,682
14,447
26,369
4,897
658
46,371
17,227
313
2,690
658
21,752
42,640
The Group measures Trade and other receivables along with Trade
and other payables at amortised costs. The Group designates
certain derivatives as hedging instruments to hedge the variability
in cash flows associated with highly probable forecast transactions
arising from changes in foreign exchange rates. The Group initially
measures derivatives at fair value. Subsequent to initial recognition,
derivatives are measured at fair value, and any changes therein are
recognised in profit or loss.
At inception of the designated hedging relationship, the Group
documented the risk management objective and strategy for
undertaking the hedge. The Group also documented the economic
relationship between the hedged item and the hedging instrument,
including whether the changes in cash flows of the hedged item
and hedging instrument are expected to offset each other.
i. Treasury Risk Management
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.
ii. Financial Risk Exposures and Management
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.
a.
Interest Rate Risk
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 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:
59
Note 23 – Financial Risk Management (continued)
FLOATING RATE INSTRUMENTS
Bank overdrafts
TOTAL FLOATING RATE INSTRUMENTS
b. Liquidity Risk
2021
$’000
2020
$’000
–
–
313
313
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
2021
$’000
2020
$’000
2021
$’000
2020
$’000
2021
$’000
2020
$’000
2021
$’000
2020
$’000
FINANCIAL LIABILITIES DUE FOR PAYMENT
Trade and other payables
Bank overdrafts and loans
Contract liabilities
Forward contracts
Lease liabilities
16,292
–
2,380
–
3,901
17,227
313
2,690
658
3,338
TOTAL EXPECTED OUTFLOWS
22,573
24,226
c. Currency Risk
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
13,973
13,973
14,668
14,668
3,136
3,136
3,746
3,746
16,292
–
2,380
–
21,010
39,682
17,227
313
2,690
658
21,752
42,640
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.
d. Credit Risk
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 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
60 | Engenco Limited and its controlled entities | Annual Report 2021
Notes to the Consolidated Financial Statements (continued)for the year ended 30 June 2021 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
Contract assets
Forward contracts
FINANCIAL LIABILITIES
Trade and other payables
Loans and borrowings
Contract liabilities
Forward contracts
Lease liabilities
Consolidated Group
2021
Carrying Value
$’000
2021
Fair Value
$’000
2020
Carrying Value
$’000
2020
Fair Value
$’000
12,091
23,736
4,160
–
39,987
16,292
–
2,380
–
21,010
39,682
12,091
23,736
4,160
–
39,987
16,292
–
2,380
–
21,010
39,682
14,447
26,369
4,897
658
46,371
17,227
313
2,690
658
21,752
42,640
14,447
26,369
4,897
658
46,371
17,227
313
2,690
658
21,752
42,640
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.
● 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.
61
Note 23 – Financial Risk Management (continued)
iv. Sensitivity Analysis
a.
Interest Rate Risk and Currency Risk
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.
b.
Interest Rate Sensitivity Analysis
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.
c. Currency Risk Sensitivity Analysis
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%
2021
$’000
2020
$’000
(35)
35
529
(529)
(32)
32
497
(497)
The Group does not currently hedge against foreign exchange movements in net assets of its Swedish subsidiaries.
v. Capital Management
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 2021 and 2020 are as follows:
Total borrowings
Net debt / (cash)
Total equity
TOTAL EQUITY AND NET DEBT
GEARING RATIO
2021
$’000
–
(12,091)
94,328
82,237
(13%)
2020
$’000
313
(14,134)
88,594
74,460
(16%)
The gearing ratio is negative as the Group had positive Net Cash. As at 30 June 2021 it remained negative, albeit at a reduced level largely
due to the cash utilisation in the current financial year.
62 | Engenco Limited and its controlled entities | Annual Report 2021
Notes to the Consolidated Financial Statements (continued)for the year ended 30 June 2021 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.
(i) Key Management Personnel Compensation
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
2021
$
2020
$
1,184,415
1,339,748
97,662
116,863
–
–
21,388
14,254
1,303,465
1,470,865
Compensation of the Group’s key management personnel includes salaries, superannuation and post-employment benefits.
(ii) Key Management Personnel Transactions
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.
63
Note 24 – Related Party Transactions (continued)
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:
Related Party
Director
Elphinstone Group (Aust) Pty Ltd1
D Elphinstone
William Adams Pty Ltd2
United Equipment Pty Ltd3
Southern Prospect Pty Ltd4
Elphinstone Pty Ltd5
Gekko Systems Pty Ltd6
D Elphinstone
D Elphinstone
D Elphinstone
D Elphinstone
D Elphinstone
Revenue/(Cost) for the year
ended 30 June
Receivable/(Payable) as at
30 June
2021
$
(91,502)
(1,824)
2020
$
(218,397)
(864)
(658,790)
(634,210)
9,924
598,275
62,935
52,509
1,177,869
–
2021
$
(17,285)
–
(3,847)
547
216,711
–
2020
$
(9,058)
–
(20,670)
7,131
6,345
–
1 Director fees and travel expense reimbursements were paid to Elphinstone Group (Aust) Pty Ltd for the services of Dale Elphinstone (Non-Executive Director). Legal
service fees were also paid to Elphinstone Group (Aust) Pty Ltd during the year. Dale Elphinstone is Chairman of this entity.
2 Goods were purchased from William Adams Pty Ltd during the period. Dale Elphinstone is the Chairman and a director.
3 Goods were purchased from and sold to United Equipment Pty Ltd in the period. Dale Elphinstone is a director of this entity.
4 Goods were sold to Southern Prospect Pty Ltd during the period. Dale Elphinstone is the Chairman of this entity.
5 Goods were sold to Elphinstone Pty Ltd during the period. Dale Elphinstone is a director and the Chairman of this entity.
6 Goods were sold to Gekko Systems Pty Ltd during the period. Dale Elphinstone is a director of this entity.
(b) Other Related Party Transactions
The Group has the following balances outstanding at the reporting date in relation to transactions with related parties:
Related Party Transactions
Current receivables (parent entity):
Receivables from subsidiaries
2021
$’000
2020
$’000
468
314
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.
64 | Engenco Limited and its controlled entities | Annual Report 2021
Notes to the Consolidated Financial Statements (continued)for the year ended 30 June 2021 Note 25 – Auditor’s Remuneration
AUDIT AND REVIEW SERVICES
Auditors of the Company
– KPMG Australia – audit and review of financial statements
– KPMG Overseas – audit and review of financial statements
Other auditors
– Audit and review of financial statements
TOTAL AUDIT AND REVIEW SERVICES
OTHER SERVICES
Auditors of the Company
– KPMG Australia – in relation to advisory service
– KPMG Overseas – in relation to taxation compliance services
TOTAL OTHER SERVICES
OTHER AUDITORS
– Assurance Services
TOTAL OTHER SERVICES
2021
$
2020
$
300,000
290,000
32,027
30,965
9,230
341,257
15,592
336,557
19,498
–
19,498
–
7,078
7,078
–
–
36,025
36,025
Note 26 – Events Subsequent to Reporting Date
Acquisition of Eureka 4WD Training Pty Ltd
On 27 May 2021, the Company’s subsidiary, Engenco Investments Pty Ltd, entered into an agreement to acquire 100% of the share capital of
registered training organisation (RTO), Eureka 4WD Training Pty Ltd and its controlled entities (Eureka) for a consideration of $4,500,000.
The acquisition was completed on 1 July 2021.
Eureka is a Perth based market-leading RTO focussed on providing certified four-wheel-drive vehicle training to the industrial, mining
and consumer markets. The company also undertakes heavy road vehicle licensing training. The acquisition price for Eureka represents a
multiple of 2.6 times the company’s FY20 EBITDA, and is expected to be earnings per share accretive for the Group in FY22. The purchase
price includes an earn-out component and will be funded via a combination of cash and new equity to be issued to the vendors.
Details of the purchase consideration:
Cash paid
Issue of shares (shares issued: 1,869,404)
Deferred consideration
TOTAL PURCHASE CONSIDERATION
$’000
2,500
1,000
1,000
4,500
65
Note 25 – Auditor’s Remuneration (continued)
The fair values of the identifiable assets and liabilities acquired as at the date of acquisition were:
ASSETS ACQUIRED:
Trade and other receivables
Other current assets
Property, plant and equipment
TOTAL ASSETS ACQUIRED
LIABILITIES ACQUIRED:
Trade and other payables
Contract liabilites
Borrowings
Provisions
Current tax liabilities
Deferred tax liabilities
TOTAL LIABILITIES ACQUIRED
NET IDENTIFIABLE ASSETS
Add:
Technology
Customer contracts
Brand names
Goodwill arising on acquisition
TOTAL PURCHASE CONSIDERATION, NET OF CASH ACQUIRED
$’000
217
73
1,633
1,923
42
120
216
57
76
454
965
958
41
329
495
2,611
4,434
Goodwill arose on the acquisition of Eureka due to the combination of the consideration paid for the business and the net assets acquired,
less values attributed to other intangibles in the form of Technology, Customer Relationships and Brand Names. The value of goodwill
represents the future benefit arising from the expected future earnings, synergies and personnel assumed via the acquisition. None of the
goodwill is expected to be deductible for tax purposes.
The business combination post year end has been provisionally accounted for due to working capital adjustments still being finalised.
(a) Analysis of cash flows on acquisition
OUTFLOW OF CASH TO ACQUIRE SUBSIDIARY, NET OF CASH ACQUIRED:
Cash consideration
Less: Cash balance acquired
NET CASH OUTFLOW – INVESTING ACTIVITIES
Dividend Declaration
$’000
2,500
66
2,434
On 18 August 2021, 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 28 September 2021.
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 2021.
66 | Engenco Limited and its controlled entities | Annual Report 2021
Notes to the Consolidated Financial Statements (continued)for the year ended 30 June 2021 Shareholder Information
Additional Information for Listed Companies at 9 August 2021.
The following information is provided in accordance with the ASX Listing Rules.
1. Shareholding
(a) Distribution of shareholders
Category (size of holding)
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – and over
No. of
Shareholders
No. Ordinary
Shares
38,055
780,260
1,060,038
8,242,408
167
272
133
229
103
305,237,661
96.79%
%
0.01%
0.25%
0.34%
2.61%
(b) The number of shareholdings held in less than marketable parcels (less than $500 in value) is 23,260.
(c) 20 largest shareholders – ordinary shares
904
315,358,422
100.00%
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 P/L
Marford Group Pty Ltd
Mr Hugh William Maguire & Mrs Susan Anne Maguire
Mr Neville Leslie Esler & Mrs Cheryl Anne Esler
HSBC Custody Nominees (Australia) Limited
Mr Dennis Graham Austin & Mrs Marilyn Alice Austin
Strategic Value Pty Ltd
Neko Super Pty Ltd
Mr Hugh William Maguire
Prussner Investments Pty Ltd
Dr Jared Charles Lawrence
BFA Super Pty Ltd
Rayneman Enterprises Pty Ltd
Delacorp Pty Ltd
Mrs Margaret Jane Lindemann & Mr Luke Charles Lindemann
Robroz Pty Ltd
T B I C Pty Ltd
Number of
Ordinary
Fully Paid
Shares Held
% Held
of Issued
Ordinary
Capital
110,070,536
34.90%
98,435,237
33,966,932
19,056,468
4,058,797
3,734,600
1,904,935
1,649,056
1,545,000
1,538,400
1,463,190
1,300,000
1,170,688
1,133,807
944,950
934,702
934,702
900,000
700,000
655,000
31.21%
10.77%
6.04%
1.29%
1.18%
0.61%
0.52%
0.49%
0.49%
0.46%
0.41%
0.37%
0.36%
0.30%
0.30%
0.30%
0.29%
0.22%
0.21%
286,097,000
90.71%
67
(d) Shareholders holding in excess of 5% of issued capital were listed in the holding company’s register as follows:
Shareholder
Elph Investments Pty Ltd
Elph Pty Ltd
Thorney Investment Group Pty Ltd
RAC & JD Brice Superannuation P/L
(e) Voting Rights
No. Ordinary Shares
110,070,536
98,435,237
33,966,932
19,056,468
%
34.90%
31.21%
10.77%
6.04%
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 names of the Company Secretaries are:
Paul Burrows
Meredith Rhimes
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:
Automic Group
Level 5, 126 Phillip Street
Sydney NSW 2000
GPO Box 5193
Sydney NSW 2001
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.
68 | Engenco Limited and its controlled entities | Annual Report 2021
Shareholder Information 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
Automic Group
Level 5
126 Phillip Street
Sydney NSW 2000
GPO Box 5193
Sydney NSW 2001
T: +61 (0)2 8072 1400
hello@automicgroup.com.au
automic.group.com.au
Corporate Directory
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
Scott Cameron
BCom, CA ANZ, FAICD
Independent Non-Executive Director
Company Secretaries
Paul Burrows
BCom, CA, GAICD
Company Secretary
Meredith Rhimes
BA, LLB
Company Secretary
69
www.engenco.com.au