www.empired.com
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7
EMPIRED Ltd.
ABN 81 090 503 843
Annual Report
2007
EMPIRED Ltd.
ABN 81 090 503 843
corporate directory
DiRectoRs
Mel Ashton (Chairman)
legAl ADviseRs
McKenzie Moncrieff lawyers
David taylor (Non – executive Director)
level 5, 37 St Georges tce
Russell Baskerville (Managing Director & Ceo)
perth WA 6000
compAny secRetARy
Craig J Ferrier
RegisteReD office
469 Murray Street
peRtH WA 6000
telephone No: +618 9321 9401
Fax No: +618 9321 9402
compAny numbeR
A.C.N:
090 503 843
AsX coDe epD
countRy of incoRpoRAtion
Australia
AuDitoRs
ernst & Young
the ernst & Young Building
11 Mounts Bay Road
peRtH WA 6000
shARe RegisteR
Computershare Investor Services pty ltd
level 2, 45 St Georges tce
perth WA 6000
pRinciple plAce of business
Perth
469 Murray Street
peRtH WA 6000
telephone No: +618 9321 9401
Fax No: +618 9321 9402
compAny Domicile AnD legAl foRm
empired limited is the parent entity and an Australian
Melbourne
470 Collins Street
Company limited by shares
MelBouRNe VIC 3000
telephone No: +613 8610 0700
Fax No: +613 8610 0701
Website
www.empired.com
Contents
KEY ACHIEVEMENTS
RESULTS
CHAIRMAN AND CEO REVIEW
DIRECTORS’ REPORT
FINANCE REPORT
Income Statement
Balance Sheet
Cash Flow Statement
Statement of Changes in Equity
Notes to the Financial Statements
AUDITOR’S INDEPENDENCE DECLARATION
INDEPENDENT AUDIT REPORT
DIRECTORS’ DECLARATION
SHAREHOLDING ANALYSIS
Page
4
5
6
10
18
19
20
21
22
23
69
70
71
72
KEY ACHIEVEMENTS
EMPIRED LTD Annual Report 2007
$7,080,596
$93,163
$00,155
1.1c
58%
Sales Revenue
EBITDA
NPAT
Earnings Per Share
Year on Year Revenue Growth
8
7
6
5
4
3
2
1
FY05
FY06
FY07
Series 1
EMPIRED LTD Annual Report 2007
RESULTS
• Revenue of $7,080,596 up 58% against 2006 financial year, EBITDA of $493,163
and NPAT of $400,155 from continuing operations
• Divestment of BigRedSky Limited through a return of capital to shareholders,
immediately creating positive cash flow and profitability from continuing operations
• Secured two multi year recurring revenue contracts for the provision of IT
outsourcing services to Oxiana Limited and Anvil Mining Australia Pty Limited
Investment for future growth
• Expanded senior management team, increased sales resources and grew billable
staff numbers
• Expanded Victorian operation with the appointment of additional resources
• Investment in Empired’s Operations Centre, providing improved capability in the
delivery of IT Outsourcing services that deliver recurring revenue and multi year
contracts
• Expanded service offerings with the introduction of Data Management services
• Developed clear growth strategy
• Prepared the company for listing on the ASX
5
EMPIRED LTD Annual Report 2007
Chairman and CEO Review
6
EMPIRED LTD Annual Report 2007
Dear Shareholder
It is with great pride that we present Empired’s inaugural annual report as a listed company to you. Results from
continuing operations were above our expectations with revenue growing to $7.08 Million, a 58% increase on the
previous financial year, EBITDA and NPAT of $493,163 and $400,155 respectively and importantly both exceeding
Empired’s budgeted 2007 figures.
There is no question that this year has been very satisfying, yet it is just the beginning. During the year we have created
the basis to grow our company. This has been achieved by the divestment of Empired’s non core business, development
of a clear plan for growth, investment in key areas of Empired’s operations and the preparation and subsequent listing of
Empired Limited on the Australian Securities Exchange. All of this, whilst outperforming all our key financial measures,
from continuing operations, set for the 2007 financial year.
The year was again a pivotal step in the history of Empired. A review of operations was undertaken resulting in a strong
clear direction to develop a world class Australian IT Services business. Empired has successfully grown its IT Services
business year on year since 2002, when it first entered the IT Services market.
Laying the Foundations
We embarked on divesting Empired’s interests in businesses outside of its core and profitable IT Services operation. This
was undertaken through a return of capital to shareholders by way of an in-specie distribution of wholly owned subsidiary
BigRedSky Limited. The transaction was concluded on 23 July 2007, providing a clean commencement to the 2008
financial year.
Upon divestment, Empired immediately began its journey as a dedicated and focused IT Services organisation that is
both profitable and has positive cash flow.
A decision was made for Empired to seek listing of its shares on the Australian Securities Exchange (ASX). Much of the
planning and corporate activity for this was done in the 2007 financial year, with a prospectus released to the market in
August 2007 for the issue of 10 Million shares to raise $3 Million dollars.
Today we write this letter to you as an ASX listed IT Services business, confident that the foundations the Board and
Management sought are now in place.
The listing of Empired on the ASX provides us with additional funding to enable us to implement our growth strategy.
With our strengthened Balance Sheet and enhanced public profile we are confident that we are well placed to deliver on
Empired’s key objectives.
Enterprise Strategy & Architecture
Service Desk
I
S
N
O
T
U
L
O
S
I
E
S
R
P
R
E
T
N
E
Programme & Project Management
Collaboration Solutions
Data Management
Advanced Infrastructure
I
S
N
O
T
U
L
O
S
G
N
C
R
U
O
S
T
U
O
I
Desktop Management
Server Management
Network & Communications Management
Storage Management
Contracting Solutions
Security & Administration
Current Services Portfolio
New Services Planned for the 2008 financial year
7
Chairman and CEO review (cont’d)
EMPIRED LTD Annual Report 2007
Investing for the future
In line with laying the corporate foundations of our company we identified key areas of investment in Empired’s IT
Services business for the 2007 financial year. These investments will assist us to achieve sustainable year on year
growth, provide improved services to our customers and a business model that generates strong earnings.
We commenced by investing in our direct sales and marketing activity, securing two senior sales resources plus the
appointment of an additional General Manager to drive national growth. This investment will underpin organic growth in
the 2008 financial year and is already delivering new business opportunities. Of note two multi year recurring revenue
contracts were secured for the provision of IT outsourcing services to Oxiana Limited and Anvil Mining Australia Pty
Limited.
Our breadth of services was increased with the introduction of our Data Management Practice. Strong demand for
these services has been experienced with this division being profitable in its first year of operation. A national services
partnership was secured with global Data Management specialist NettApp and new customers were attracted including
Shell Australia and Racing and Wagering WA. Cross selling of these new services into Empired’s existing customers was
also successful. It is expected that this demand will continue and that this practice will have significant profit contribution
to Empired’s growth in the 2008 financial year.
Importantly we recognised the need to secure long term recurring revenue through Empired’s Operations division that
provides managed services to our customers. Investment in our people, toolsets and processes has led to improved
customer satisfaction, new customers being secured and importantly the level of contracted recurring revenue growing
153% between the 1st July 2006 and the 1st of July 2007.
In addition to these key investments, Empired has focused on attracting and retaining the best possible people and has
overseen staff numbers increase by 80% between the 1st July 2006 and the 1st of July 2007. This substantial increase
in billable staff numbers will assist Empired in delivering on its improved revenue and earnings growth ambitions during
the 2008 financial year.
A Clear Plan for Growth
For the 2008 financial year Empired has a well defined plan to grow operations across Australia and deliver improved
earnings and shareholder value.
8
EMPIRED LTD Annual Report 2007
Regional diversification is aimed at expanding the markets in which we operate, reducing geographic reliance and
improving our national coverage. This will be delivered through an investment in resources in our Victorian office,
leveraging our national partnerships and where appropriate opportunities present, expanding into new regions through
earnings accretive acquisitions.
We also plan to deepen our current services through investing in training, forging partnerships with leading technology
specialists and continuously striving to attract and retain the highest quality, innovative and driven professionals from our
industry.
We will also broaden our services to improve opportunities to cross sell into existing customers, ensure our technical
leadership and continue to provide points of differentiation. New service offerings that will be introduced to Empired’s
services portfolio include “Enterprise Strategy & Architecture” and “Collaboration Solutions”.
Recurring Revenue @ 1 July 2006 and 1 July 2007
2500000
2000000
1500000
1000000
500000
0
153%
2006
2007
In addition Empired will focus on the development of long term recurring revenue through the provision of Managed
Services. The investment in this area in 2007 enables us to provide world class managed services. This not only
provides an opportunity to aggressively drive new business but to ensure we retain and grow our current recurring
revenue streams.
Focused on Delivering Value
Delivering on our goals means delivering value to our stakeholders. This starts with improving our current services,
seizing opportunities to introduce new services and capitalising on introducing these services to existing customers in
existing locations. It is extended by creating value propositions to attract new clients in new locations.
It is an exciting time to be a part of Empired, our staff are presented with great opportunities, our customers will enjoy
expanded and improved services and to our shareholders, you are served by an experienced dedicated board and a
proven driven management team that are all aligned to the common goal of value creation and improvement.
On behalf of the board of directors we thank our staff for their dedication, without which we would not be here today, our
customers for your commitment and trust and you our shareholders for your patience, loyalty and support.
Yours Sincerely,
Russell Baskerville
Chief Executive Officer
Mel Ashton
Chairman
9
EMPIRED LTD Annual Report 2007
Director’s Report
The directors present their report together with the financial report of Empired Limited (“the Company”) and the
consolidated financial report of the consolidated entity, being the Company and its controlled entities, for the year ended
30 June 2007.
The names of the Company’s directors in office during the year and until the date of this report are as below. Directors
were in office for this entire period unless stated.
Directors
Name
Age
Experience and special responsibilities
Mel Ashton
Chairman
49 Mel Ashton is a Chartered Accountant with over 25 years experience. For
a majority of that time he has specialised in Corporate Reconstruction. Mel
established his own practice in Western Australia, which has grown to be a market
leader.
Mel’s experience covers a wide range of industries and he consults to a number
of Executives and Entrepreneurs as a business mentor.
Mel is a Fellow of the Australian Institute of Company Directors and a Fellow of the
Institute of Chartered Accountants in Australia.
Mel’s other appointments include:
Regional Councilor and former State Chairman of the WA Branch of Institute of
Chartered Accountants
Director and Vice President of the Fremantle Football Club Ltd
Chairman of Venture Minerals Limited
Chairman of Gryphon Minerals Ltd
Chairman of Empire Beer Group Limited
10
EMPIRED LTD Annual Report 2007
Name
Age
Experience and special responsibilities
David Taylor
Non - executive Director
65
David has extensive commercial experience with a banking and marketing
background. During the nineties he held positions as General Manager of the
principal operating divisions of BankWest. He was also Chairman of BankWest
subsidiaries TrustWest and TW Nominees during that period.
He currently holds the position of Chairman of both Perth Market Authority and
Forest Products Commission and is a non-executive director of HBF Financial
Services
David is a Fellow of the Australian Institute of Company Directors.
Russell Baskerville
Managing Director & CEO
29 Mr Baskerville is an experienced business professional and has worked in the
IT industry for in excess of 10 years. He has extensive knowledge in both the
strategic growth and development of technology businesses balanced by strong
commercial and corporate skills.
Prior to joining Empired, Mr Baskerville was a founding member of Tusk
Technologies Pty Ltd, which was acquired by the company in March 2002. He was
also the founder and Managing Director of Procom Holdings Pty Ltd, a company
established to provide technical service and support to merchant banking facilities
on behalf of the larger banks in Australia. Mr Baskerville currently holds non-
executive directorships with Procom Holdings Pty Ltd and BigRedSky Limited.
45 Mr Ferrier holds a Bachelor of Business and is a CPA with approximately 20 years
experience gained at chief financial officer and company secretary level. He has
worked within a broad range of sectors including mining and exploration, venture
capital, manufacturing and information technology. He is the principle of Seincorp
Pty Ltd, a consultancy providing specialist company secretarial and corporate
advisory services. He is also a non-executive director of BigRedSky Limited and
ASX listed pieNETWORKS Limited.
Craig Ferrier
Company secretary
Principal Activities
The principal activities of the consolidated entity during the year have comprised:
• The continued operation of its IT infrastructure services business resulting in the provision of services covering
software systems, consulting and infrastructure design and deployment.
• The ongoing development of the BigRedSky online Recruitment Management System and sales and marketing
activities associated with commercialising this technology.
The company demerged the BigRedSky operations in July 2007 leaving the IT infrastructure services business as the
company’s only continuing operation.
Other than as described above there were no significant changes in the nature of the activities carried out during the
year.
Number of Employees
At 30 June 2007 the Company employed 75 staff.
Significant changes in the state of affairs
There were no significant changes in the state of affairs during the year. A special resolution put before shareholders
on the 23rd of July 2007, was passed to enable the company to demerge the BigRedSky business to focus on its core
competency of IT infrastructure services. This resulted in a decrease to the net assets of $621,491 for the consolidated
group.
11
EMPIRED LTD Annual Report 2007
Director’s Report (cont’d)
Events subsequent to reporting date
There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction
or event of a material and unusual nature likely, in the opinion of the directors of the Company, to affect significantly the
operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity, in
future financial years other than as set out below:
A special resolution put before shareholders on the 23rd of July 2007, was passed to enable the company to
demerge the BigRedSky business to focus on its core competency of IT infrastructure services.
The Company has issued Directors and Key Executives share options in July 2007. This was subject to shareholder
approval at an extraordinary shareholder meeting on the 23rd of July 2007. 3,600,000 options were granted on the
23rd of July 2007.
The company has raised $3,000,000 (net of $2,650,000 after costs) from an initial public offering. The company
listed on ASX on the 19th of October 2007.
Environmental Regulation
The consolidated entity’s operations are not subject to any significant environmental regulations under either
Commonwealth or State Legislation.
Dividends
The directors of Empired Limited do not recommend the payment of a dividend and no dividends have been paid or
declared since the commencement of the year.
Operating Results for the Year
The net profit after tax from continuing operations for the year for the consolidated entity is $400,155 (2006:
$1,004,151). The loss after tax for discontinued operations for the consolidated entity is ($2,610,401).
Likely Developments
Further information about the likely developments in the operations of the consolidated entity and the expected results
of those operations for future years has not been included in this report because disclosure of the information would be
likely to result in unreasonable prejudice to the consolidated entity.
Share Options
Share Options Granted to Directors and Officers
As per shareholder approval during the financial year 750,000 options over ordinary shares were granted to Russell
Baskerville and 250,000 options over ordinary shares were granted to each of Mel Ashton and David Taylor or their
specified nominees.
As per shareholder approval post the end of the financial year 1,100,000 options were granted to Russell Baskerville,
600,000 options to Mel Ashton, and 350,000 options to David Taylor or their specified nominees.
Unissued Shares
At the date of this report, there were 8,161,476 unissued ordinary shares under options (4,561,476 at the reporting
date). Refer to Note 14 of the financial statements for more detail. Option holders do not have any right, by virtue of
the option, to participate in any share issue of the company or any related body corporate or in the interest issue of any
other registered scheme.
12
EMPIRED LTD Annual Report 2007
Shares Issued as a result of the exercise of options
No share options have been exercised in the period, or to the date of this report.
Share issues during the year
2,000,000 shares were issued during the year at $0.15 per share to raise $300,000. The funds were used to pay for
the listing costs the company incurred prior to listing on ASX.
Auditor’s independence declaration to the directors of Empired Limited
The directors have received an Independence Declaration from Ernst & Young the auditors of Empired Limited and it is
attached at page 69.
Non-Audit Services
Non-Audit services provided by the entity’s Auditor can be found at note 26. The Directors are satisfied that the provision
of non-audit services is compatible with the standard of independence for auditors imposed by the Corporations Act. The
nature and scope of each non-audit service provided means that auditor independence was not compromised.
Indemnification of Officers and Directors
The Directors, Secretary and certain former directors of Empired Limited have been indemnified by the company in
respect of their potential liability to third parties. The Company does not have a policy of insurance to provide for such
liabilities in place at this stage.
Remuneration Report
This report outlines the remuneration arrangements in place for directors and executives of Empired Limited (the
company).
Remuneration Philosophy
The performance of the company depends upon the quality of its directors and executives. To prosper, the company
must attract, motivate and retain highly skilled directors and executives.
To this end, the company embodies the following principles in its remuneration framework:
• Provide competitive rewards to attract high calibre executives;
• Link executive rewards to shareholder value;
• Have a portion of certain executive’s remuneration ‘at risk’, dependant upon meeting pre-determined performance
benchmarks; and
• Establish appropriate, demanding performances hurdles for variable executive remuneration.
Remuneration Committee
Due to the structure of the Board, a separate remuneration committee is not considered to add any efficiencies to the
process of determining the levels of remuneration for the Directors and key executives. The Board considers that it is
more appropriate that it set aside time at Board meetings to address matter that would normally fall to the remuneration
committee.
Remuneration Structure
In accordance with the best practice corporate governance, the structure of non-executive director and executive
remuneration is separate and distinct.
13
EMPIRED LTD Annual Report 2007
Director’s Report (cont’d)
Non-executive director remuneration
Objective
The board seeks to set aggregate remuneration at a level that provides the company with the ability to attract and retain
directors of the highest calibre, whilst incurring a cost that is acceptable to shareholders.
Structure
The constitution and the ASX Listing Rules specify that the aggregate remuneration of non-executive directors shall be
determined from time by a general meeting. An amount not exceeding the amount determined is then divided between
the directors as agreed. The latest determination was at the Annual General Meeting held on the 17th of November 2006
when shareholders approved an aggregated remuneration of $175,000 per year.
The amount of aggregated remuneration sought to be approved by shareholders and the manner in which it is
apportioned amongst directors is reviewed from time to time. The Board considers advice from external consultants as
well as the fees paid to non-executive directors of comparable companies when undertaking the annual review process.
The remuneration of non-executive directors for the period ending 30 June 2007 is detailed in Table 1 of this report.
Executive director remuneration
Objective
The company aims to reward executives with a level and mix of remuneration commensurate with their position and
responsibilities within the company and so as to:
• Reward executives for company, business unit and individual performances against targets set by reference to
appropriate benchmarks;
• Align the interests of executives with those of shareholders;
• Link rewards with the strategic goals and performance of the company; and
• Ensure total remuneration is competitive by market standards.
Structure
In determining the level of remuneration paid to senior executives of the company, the Board took into account available
benchmarks and prior performance.
Remuneration consists of the following key elements:
• Fixed Remuneration
• Variable Remuneration
• Short Term Incentive (STI); and
• Long Term Incentive (LTI).
The proportion of fixed remuneration and variable remuneration (potential short term and long term incentives) is
established for each senior executive by the Board. Table 1 details the fixed and variable components (%) of the
executive directors of the company.
Fixed Remuneration
Objective
Fixed remuneration is reviewed annually by the Remuneration Committee. The process consists of a review of
companywide, business unit and individual performance, relevant comparative remuneration in the market and internally
and, where appropriate, external advice on policies and practices. As noted above, the Committee has access to
external advice independent of management.
1
EMPIRED LTD Annual Report 2007
Structure
Senior executives are given the opportunity to receive their fixed (primary) remuneration in a variety of forms including
cash and fringe benefits such as motor vehicles and expense payment plans. It is intended that the manner of payment
chosen will be optimal for the recipient without creating undue cost for the group.
The fixed remuneration component of the company executives is detailed in Table 1.
Variable Remuneration - Short Term Incentive (STI)
Objective
The objective of the STI program is to link the achievement of the Group’s operational targets with the remuneration
received by the executives charged with meeting those targets.
Structure
Actual STI payments granted to the company executives depend on the extent to which specific operating targets set at
the beginning of the financial year are met. The operational targets consist of a number of Key Performance Indicators
(KPIs) covering both financial and non-financial measures of performance. Typically included are measures such as
contribution to net profit after tax, customer service, risk management, and leadership/team contribution.
Any STI payments are subject to the approval of the Remuneration Committee. Payments made are delivered as a cash
bonus in the following reporting period. No STI payments were made during or since the end of the financial period.
Variable Pay - Long Term Incentive (LTI)
Objective
The objective of the LTI plan is to reward senior executives in a manner that aligns this element of remuneration with the
creation of shareholder wealth.
As such, LTI grants are only made to executives who are able to influence the generation of shareholder wealth and thus
have a direct impact on the Group’s performance against the relevant long term performance hurdle.
Structure
LTI grants to executives are delivered in the form of options.
Relationship of rewards to performance
The only performance related condition was in relation to options, which was listing the company on ASX. This condition
has been satisfied. There are no other performace related rewards.
Table 2 provides details of options granted and the value of options granted, exercised and lapsed during the year.
Employment Contracts
The CEO, Mr. Baskerville, is employed under contract. The current employment contract commenced on 1 July 2005
and is a rolling twelve month contract.
• Mr. Baskerville receives fixed remuneration of $200,000 per annum at balance date.
• Mr. Baskerville may resign from his position and thus terminate his contact by giving three months written notice.
• Any options not exercised within 30 days of termination will be forfeited.
• The company may terminate this employment agreement by providing three months written notice or providing
payment in lieu of the notice period (based on the fixed component of Mr. Baskerville’s remuneration).
• The company may terminate the contact at any time without notice if serious misconduct has occurred. Where the
termination with cause occurs the CEO is only entitled to that portion of remuneration that is fixed, and only up to the
date of the termination.
15
Director’s Report (cont’d)
EMPIRED LTD Annual Report 2007
Table 1: Directors remuneration for the year ended 30 June 2007 and 30 June 2006
Primary benefits
Post Employment
Equity
Options
Total
% Performance
related
Salary
& Fees
Cash STI
LTI
Superannuation
M. Ashton
Chairman
2007
2006
50,000
25,000
R. Baskerville
Chief Executive
2007
2006
200,000
165,000
D. Taylor
Non-executive
Director
2007
2006
5,000
2,083
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,000
-
56,000
25,000
12,750
30,800
212,750
195,800
25,000
10,416
6,000
-
36,000
12,499
-
-
-
-
-
-
Table 2: Options granted as part of remuneration
Grant date
Grant number
Average Value
per option at
Value of options
granted during
Total value of
options granted,
%
remuneration
grant date
the year
exercised and
consisting of
lapsed during
options for the
year
year
M. Ashton
17/11/2006
250,000
R. Baskerville
17/11/2006
750,000
D. Taylor
17/11/2006
250,000
0.024
0.017
0.024
6,000
6,000
10.71
12,750
12,750
5.99
6,000
6,000
16.67
Directors Meetings
The number of Directors meetings and the number of meetings attended by each Director during the year are:
Name of Director
No. of Meetings Held
No. of Meetings Attended as a Director
while a Director
during the year ended 30 June 2007
Russell Baskerville
Mel Ashton
David Taylor
13
13
13
13
13
13
16
EMPIRED LTD Annual Report 2007
Director’s interests
The following table sets out each Directors (including their related parties) interest in shares and options of the company
as at the end of the financial year:
Director
Russell Baskerville
Mel Ashton
David Taylor
Ordinary Shares
Options
4,614,031
2,550,000
-
-
850,000
600,000
Signed in accordance with a resolution of directors.
Russell Baskerville
Managing Director
26th of October 2007
17
EMPIRED LTD Annual Report 2007
Empired Limited
and its Controlled Entities
Annual Financial Report
For the Year Ended 30 June 2007
18
EMPIRED LTD Annual Report 2007
Income Statement
FOR THE YEAR ENDED 30 JUNE 2007
Continuing Operations
Revenue
Rendering of services
Cost of Sales
Gross profit
Other Income
Legal expenses
Marketing expenses
Occupancy expenses
Employee expenses
Finance costs
Depreciation expenses
Other expenses
Notes
CONSOLIDATED
PARENT
2007
$
2006
$
2007
$
2006
$
4
7,080,596
4,470,118
7,080,596
4,470,118
(4,907,888)
(3,080,716)
(4,907,888)
(3,080,716)
2,172,708
1,389,402
2,172,708
1,389,402
4
9,150
10,118
9,150
10,118
(36,384)
(786)
(2,681)
(2,244)
(36,384)
(786)
(2,681)
(2,244)
(61,569)
(61,194)
(61,569)
(61,194)
(1,153,224)
(348,602)
(1,153,224)
(348,602)
(16,159)
(76,849)
(7,623)
(50,249)
(16,159)
(74,872)
(7,623)
(44,733)
(436,736)
(219,332)
(438,709)
(224,847)
Profit before income tax
400,155
707,596
400,155
707,596
Income tax (expense) / benefit relating to ordinary
activities
5
Profit/Loss after tax from continuing
operations
-
296,555
-
296,555
400,155
1,004,151
400,155
1,004,151
Profit / (loss) from discontinued operations
6
(2,610,401)
(805,753)
(2,610,401)
(805,753)
Loss after tax attributable to members of the
Company
(2,210,246)
198,399
(2,210,246)
198,399
Earnings per share (cents per share)
Basic for profit for the year attributable to ordinary
shareholders of the parent
Basic for profit from continuing operations attributable to
ordinary equity holders of the parent
Diluted for profit for the year attributable to ordinary equity
holders of the parent
Diluted for profit from continuing operations attributable to
ordinary equity holders of the parent
Dividends per share (cents per share)
(6.1)
1.1
(6.1)
1.0
-
0.6
2.9
0.5
2.7
-
19
Balance Sheet
AS AT 30 JUNE 2007
ASSETS
Current Assets
Trade and other receivables
Inventories
Prepayments
Assets classified as held for Sale
Total Current Assets
Non-Current Assets
Other financial assets
Property, plant and equipment
Intangible assets & goodwill
Total Non-current assets
TOTAL ASSETS
LIABILITIES
Current Liabilities
Bank overdraft
Trade and other payables
Interest-bearing loans and borrowings
Income tax payable
Provisions
Unearned revenue
Liabilities directly associated with assets
classified as held for sale
EMPIRED LTD Annual Report 2007
Notes
CONSOLIDATED
PARENT
2007
$
2006
$
2007
$
2006
$
9
10
11
6
24
12
13
8
15
16
17
17
18
6
1,355,037
1,025,578
1,355,037
1,025,578
-
93,364
1,448,401
1,596,325
4,830
71,248
1,101,656
-
-
93,364
1,448,401
1,596,325
4,830
71,248
-
3,044,726
1,101,656
3,044,726
1,101,656
-
-
325,108
256,680
372,369
304,390
374,345
233,985
1,866,958
3,985,576
-
2,118,619
2,192,066
4,242,256
676,759
2,726,949
5,236,792
5,343,912
3,721,485
3,828,605
412,591
844,047
70,197
-
127,290
202,517
1,656,643
1,964
567,036
73,128
36,338
91,560
112,199
882,225
412,591
844,047
70,197
-
127,290
202,517
1,656,643
1,964
567,036
73,128
36,338
91,560
112,199
882,225
974,834
-
974,834
-
Total Current Liabilities
2,631,477
882,225
2,631,477
882,225
Non-current Liabilities
Interest-bearing loans and borrowings
16
67,478
23,799
419,129
375,450
Total Non-current Liabilities
67,478
23,799
419,129
375,450
TOTAL LIABILITIES
2,698,955
906,024
3,050,606
1,257,675
NET ASSETS
EQUITY
Issued capital
Employee equity benefits reserve
Accumulated losses
TOTAL EQUITY
2,537,837
4,437,888
670,880
2,570,930
19
19
19
5,936,265
5,659,623
5,936,265
5,659,623
56,602
23,049
56,602
23,049
(3,455,030)
(1,244,784)
(5,321,988)
(3,111,742)
2,537,837
4,437,888
670,880
2,570,930
20
EMPIRED LTD Annual Report 2007
Cash Flow Statement
FOR THE YEAR ENDED 30 JUNE 2007
Notes
CONSOLIDATED
PARENT
2007
$
2006
$
2007
$
2006
$
Cash flows from operating activities
Receipts from customers
7,957,076
4,960,703
7,957,076
4,960,703
Payments to suppliers and employees
(8,372,590)
(4,976,165)
(8,372,590)
(4,966,220)
Borrowing costs
Income tax rebate
Income tax paid
Receipt of government grants
Interest received
(24,860)
(11,727)
(24,860)
(11,727)
332,726
338,686
332,726
338,686
(36,338)
(63,130)
(36,338)
(63,130)
-
10,385
12,437
3,129
-
10,385
12,437
3,129
Net cash flows from/(used in) operating activities 8(iii)
(133,601)
263,933
(133,601)
273,877
Cash flows from investing activities
Purchase of property, plant and equipment
(275,831)
(159,201)
(275,831)
(159,201)
Purchase of other financial assets
-
(3,500)
-
(3,500)
Net cash flows from/(used in) investing activities
(275,831)
(162,701)
(275,831)
(162,701)
Cash flows from financing activities
Proceeds from issue of shares
Payment of share issue and capital raising costs
300,000
(23,358)
-
-
300,000
(23,358)
-
-
Payment of finance lease liabilities
(49,998)
(50,974)
(49,998)
(50,974)
Proceeds from borrowings
172,160
59,447
172,160
59,447
Net cash flows from/(used in) financing activities
398,804
8,472
398,804
8,472
Net increase/(decrease) in cash and cash equivalents
(10,628)
109,704
(10,628)
109,704
Net foreign exchange differences
-
-
-
-
Cash and cash equivalents at beginning of period
(1,964)
(111,668)
(1,964)
(111,668)
Cash and cash equivalents at end of period
8
(12,592)
(1,964)
(12,592)
(1,964)
21
Statement of Changes in Equity
FOR THE YEAR ENDED 30 JUNE 2007
EMPIRED LTD Annual Report 2007
At 30 June 2007
5,936,265
(3,455,030)
Attributable to equity holders of the
parent
Total equity
Issued
capital
$
Retained
earnings
$
Employee Equity
Benefits
Reserve
$
$
5,659,623
(1,443,182)
370
4,216,810
-
-
-
198,399
-
-
5,659,623
(1,244,784)
(23,358)
-
-
(2,210,246)
300,000
-
-
-
-
-
-
-
22,679
23,049
-
-
-
-
33,553
56,602
198,399
-
22,679
4,437,888
(23,358)
(2,210,246)
300,000
-
33,553
2,537,837
Attributable to equity holders of the
parent
Total equity
Issued
capital
$
Retained
Earnings
$
Employee Equity
Benefits
Reserve
$
$
5,659,623
(3,310,141)
370
2,349,852
-
-
-
198,399
-
-
5,659,623
(3,111,742)
(23,358)
-
-
(2,210,246)
300,000
-
-
-
-
-
-
-
22,679
23,049
-
-
-
-
33,553
56,602
198,399
-
22,679
2,570,930
(23,358)
(2,210,246)
300,000
-
33,553
670,879
CONSOLIDATED
At 1 July 2005
Profit for the year
Exercise of options
Cost of share-based payments
At 30 June 2006
Share raising costs
Profit for the year
Issue of share capital
Exercise of options
Cost of share-based payments
PARENT
At 1 July 2001
Profit for the year
Exercise of options
Cost of share-based payments
At 30 June 2006
Share raising costs
Profit for the year
Issue of share capital
Exercise of options
Cost of share-based payments
At 30 June 2007
5,936,265
(5,321,988)
22
EMPIRED LTD Annual Report 2007
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2007
1 CORPORATE INFORMATION
The financial report of Empired Ltd for the year ended 30 June 2007 was authorised for issue in accordance with a
resolution of the directors on 26 October 2007.
Empired Limited is a company limited by shares incorporated in Australia.
The nature of the operation and principal activities of the Group are described in note 3.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Preparation
The financial report is a general-purpose financial report, which has been prepared in accordance with the
requirements of the Corporations Act 2001 and applicable Australian Accounting Standards. The financial report has
also been prepared on a historical cost basis, except for available-for-sale financial assets that have been measured
at fair value.
The financial report is presented in Australian dollars and all values are rounded to the nearest thousand unless
otherwise stated.
(b) Statement of compliance
The financial report complies with Australian Accounting Standards, which include Australian equivalents to
International Financial Reporting Standard (‘AIFRS’). The financial report also complies with international financial
standards (‘IFRS’).
In the current year the Group has adopted all of the new and revised Standards and Interpretations issued by the
Australian Accounting Standards Board (AASB) and the Urgent Issues Group that are relevant to its operations and
effective for annual reporting periods beginning on 1 July 2006. The adoption of these new and revised Standards
and Interpretations did not have any effect on the financial position or performance of the Group.
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet
effective have not been adopted by the Group for the annual reporting period ending 30 June 2007. These are
outlined in the table below.
23
EMPIRED LTD Annual Report 2007
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2007
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(b) Statement of compliance (cont’d)
Reference
Title
Summary
Amendments arise
from the release
in August 2005 of
AASB 7 Financial
Instruments:
Disclosures.
Amending standard
issued as a
consequence of AASB
Interpretation 11
Group and Treasury
Share Transactions.
Amending standard
issued as a
consequence of AASB
Interpretation 12
Service Concession
Arrangements.
Application
date for
Group*
1 July 2007
Application
date of
standard*
1 January
2007
Impact on Group financial
report
AASB 7 is a disclosure
standard so will have
no direct impact on the
amounts included in the
Group’s financial statements.
However, the amendments
will result in changes to
the financial instrument
disclosures included in the
Group’s financial report.
1 March
2007
This is consistent with the
Group’s existing accounting
policies for share-based
payments so will have no
impact
1 July 2007
1 July 2008
1 January
2008
As the Group currently
has no service concession
arrangements or public-
private-partnerships (PPP),
it is expected that this
Interpretation will have
no impact on its financial
report.
1 January
2009
Amending standard
issued as a
consequence of
AASB 8 Operating
Segments
1 July 2009
AASB 8 is a disclosure
standard so will have
no direct impact on the
amounts included in the
Group’s financial statements.
However the new standard
may have an impact on
the segment disclosures
included in the Group’s
financial report.
AASB
2005-10
AASB
2007-1
AASB
2007-2
AASB
2007-3
Amendments
to Australian
Accounting
Standards [AASB
132, AASB 101,
AASB 114, AASB
117, AASB 133,
AASB 139, AASB
1, AASB 4, AASB
1023 & AASB
1038]
Amendments
to Australian
Accounting
Standards arising
from AASB
Interpretation 11
[AASB 2]
Amendments
to Australian
Accounting
Standards arising
from AASB
Interpretation 12
[AASB 1, AASB
117, AASB 118,
AASB 120, AASB
121, AASB 127,
AASB 131 & AASB
139]
Amendments
to Australian
Accounting
Standards arising
from AASB 8
[AASB 5, AASB 6,
AASB 102, AASB
107, AASB 119,
AASB 127, AASB
134, AASB 136,
AASB 1023 &
AASB 1038]
2
EMPIRED LTD Annual Report 2007
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2007
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(b) Statement of compliance (cont’d)
Application
date for
Group*
1 July 2007
1 July 2009
Application
date of
standard*
1 July 2007
1 January
2009
Impact on Group financial
report
As the Group does not
anticipate changing any of
its accounting policy choices
as a result of the issue of
AASB 2007-4 this standard
will have no impact on the
amounts included in the
Group’s financial statements.
Changes to disclosure
requirements will have
no direct impact on the
amounts included in the
Group’s financial statements.
However the new standard
may have an impact on the
disclosures included in the
Group’s financial report.
As the Group does not
currently construct or
produce any qualifying
assets which are financed
by borrowings the revised
standard will have no
impact.
1 July 2007
Refer to AASB 2007-4
above.
1 July 2007
1 January
2007
Refer to AASB 2005-10
above.
1 July 2007
1 January
2009
Refer to AASB 2007-3
above.
1 July 2009
Reference
Title
Summary
AASB
2007-4
Amendments
to Australian
Accounting
Standards arising
from ED 151 and
Other Amendments
AASB
2007-6
AASB
2007-7
AASB 7
Amendments
to Australian
Accounting
Standards arising
from AASB 123
[AASB 1, AASB
101, AASB 107,
AASB 111, AASB
116 & AASB 138
and Interpretations
1 & 12]
Amendments
to Australian
Accounting
Standards [AASB
1, AASB 2, AASB
4, AASB 5, AASB
107 & AASB 128]
Financial
Instruments:
Disclosures
AASB 8
Operating
Segments
The standard is a
result of the AASB
decision that,
in principle, all
accounting policy
options currently
existing in IFRS should
be included in the
Australian equivalents
to IFRS and the
additional Australian
disclosures should
be eliminated, other
than those considered
particularly
relevant in the
Australian reporting
environment.
Amending standard
issued as a
consequence of
AASB 123 (revised)
Borrowing Costs.
Amending standard
issued as a
consequence of AASB
2007-4.
New standard
replacing disclosure
requirements of AASB
132.
This new standard
will replace AASB
114 Segment
Reporting and adopts
a management
approach to segment
reporting.
25
EMPIRED LTD Annual Report 2007
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2007
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(b) Statement of compliance (cont’d)
Application
date for
Group*
1 July 2007
Application
date of
standard*
1 January
2007
Impact on Group financial
report
AASB 101 is a disclosure
standard so will have
no direct impact on the
amounts included in the
Group’s financial statements.
However, the revised
standard may result in
changes to the disclosures
included in the Group’s
financial report.
1 January
2009
Refer to AASB 2007-6 above.
1 July 2009
Reference
Title
Summary
AASB 101
(revised
October 2006)
Presentation
of Financial
Statements.
AASB 123
(revised June
2007)
Borrowing
Costs
The revised standard
includes some text from
IAS 1 that is not in the
existing AASB 101 and
has fewer additional
Australian disclosure
requirements than the
existing AASB 101.
AASB 123 previously
permitted entities
to choose between
expensing all borrowing
costs and capitalizing
those that were
attributable to the
acquisition, construction
or production of a
qualifying asset. The
revised version of AASB
23 requires borrowing
costs to be capitalized
if they are directly
attributable to the
acquisition, construction
or production of a
qualifying asset.
26
EMPIRED LTD Annual Report 2007
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2007
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(b) Statement of compliance (cont’d)
Reference
Title
Summary
AASB
Interpretation
134
Interim Financial
Reporting and
Impairment
AASB
Interpretation 2
Group and
Treasury Share
Transactions
AASB
Interpretation
129
Service
Concession
Arrangements
AASB
Interpretation
129 (revised
June 2007)
Service
Concession
Arrangements:
Disclosures
IFRIC
Interpretation
13
Customer
Loyalty
Programmes
Addresses an
inconsistency between
AASB 134 Interim
Financial Reporting
and the impairment
requirements relating to
goodwill in AASB 136
Impairment of Assets
and equity instruments
classified as available
for sale in AASB 139
Financial Instruments:
Recognition and
Measurement
Specifies that a
share-based payment
transaction in which an
entity receives services
as consideration for its
own equity instruments
shall be accounted for
as equity-settled.
Clarifies how operators
recognize the
infrastructure as a
financial asset and/or
an intangible asset – not
as property, plant and
equipment.
The revised
interpretation was
issued as a result of the
issue of Interpretation
12 and requires specific
disclosures about
service concession
arrangements entered
into by an entity,
whether as a concession
provider or a concession
operator.
Deals with the
accounting for customer
loyalty programmes,
which are used by
companies to provide
incentives to their
customers to buy their
products or use their
services.
Application
date for
Group*
1 July 2007
Application
date of
standard*
1 November
2006
Impact on Group financial
report
The prohibitions on reversing
impairment losses in AASB
136 and AASB 139 to take
precedence over the more
general statement in AASB
134 that interim reporting
is not expected to have
any impact on the Group’s
financial report.
1 March
2007
Refer to AASB 2007-1
above.
1 July 2007
1 January
2008
Refer to AASB 2007-2
above.
1 July 2008
1 January
2008
Refer to AASB 2007-2
above.
1 July 2008
1 July 2008 The Group does not have
1 July 2008
any customer loyalty
programmes and as such
this interpretation is not
expected to have any impact
on the Group’s financial
report.
27
EMPIRED LTD Annual Report 2007
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2007
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(b) Statement of compliance (cont’d)
Reference
Title
Summary
Application
date of
standard*
Impact on Group financial
report
Application
date for
Group*
IFRIC
IAS 19 – The
Aims to clarify how to
1 January
The Group does not have
1 July 2008
Interpretation
Asset Ceiling:
determine in normal
2008
a defined benefit pension
14
Availability
circumstances the
of Economic
limit on the asset that
Benefits and
an employer’s balance
Minimum
Funding
sheet may contain in
respect of its defined
Requirements
benefit pension plan.
plan and as such this
interpretation will not have
an impact on the Group’s
financial report.
(c) Basis of consolidation
The consolidated financial statements comprise the financial statements of Empired Limited and its subsidiaries as
at 30 June each year (‘the Group’).
The financial statements of subsidiaries are prepared for the same reporting period as the parent company, using
consistent accounting policies.
Adjustments are made to bring into line any dissimilar accounting policies that may exist.
All intercompany balances and transactions, including unrealised profits arising from intra-group transactions, have
been eliminated in full. Unrealised losses are eliminated unless costs cannot be recovered.
Subsidiaries are consolidated from the date on which control is transferred to the group and cease to be
consolidated from the date on which control is transferred out of the Group.
Where there is loss of control of a subsidiary, the consolidated financial statements include the results for the part of
the reporting period during which Empired Limited has control.
Tusk Technologies Pty Ltd has been included in the consolidated financial statements using the purchase method of
accounting, which measures the acquiree’s assets and liabilities at their fair value at acquisition date. Accordingly,
the consolidated financial statements include the results of Tusk Technologies Pty Ltd for the full financial year. The
purchase consideration has been allocated to the assets and liabilities on the basis of the fair value at the date of
acquisition.
(d) Property, plant and equipment
Plant and equipment is stated at cost less accumulated depreciation and any impairment in value.
Depreciation is calculated on a straight-line basis over the estimated useful life of the asset as follows:
Buildings & Improvements
Leasehold Improvements
Furniture & Fittings
Computer Hardware
Computer Software
DV
DV
DV
DV
SL
7.5 – 20 yrs
5 – 20 yrs
3 – 20 yrs
3 – 5 yrs
1 – 2.5 yrs
28
EMPIRED LTD Annual Report 2007
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2007
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(d) Property, plant and equipment (cont’d)
Impairment
The carrying values of plant and equipment are reviewed for impairment when events or changes in circumstances
indicate the carrying value may not be recoverable.
For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the
cash-generating unit to which the asset belongs.
If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets or
cash-generating units are written down to their recoverable amount.
The recoverable amount of plant and equipment is the greater of fair value less costs to sell and value in use. In
assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount
rate that reflects current market assessments of the time value of money and the risks specific to the asset.
Impairment losses are recognised in the income statement in the cost of sales line item.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are
expected to arise from the continued used of the asset.
Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal
proceeds and the carrying amount of the item) is included in the income statement in the period the item is
derecognised.
(e) Borrowing costs
Borrowing costs are recognised as an expense when incurred.
(f) Goodwill
Goodwill on acquisition is initially measured at cost being the excess of the cost of the business combination over
the acquirer’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities.
Following initial recognition, goodwill is measured at cost less any accumulated impairment losses.
Goodwill is not amortised.
Goodwill is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that
the carrying value may be impaired.
As at the acquisition date, any goodwill acquired is allocated to each of the cash-generating units expected to benefit
from the combination’s synergies.
Impairment is determined by assessing the recoverable amount of the cash-generating unit to which the goodwill
relates.
Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised.
Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of,
the goodwill associated with the operation disposed of is included in the carrying amount of the operation when
determining the gain or loss on disposal of the operation.
Goodwill disposed of in this circumstance is measured on the basis of the relative values of the operation disposed
of and the portion of the cash-generating unit retained.
29
EMPIRED LTD Annual Report 2007
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2007
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(g) Intangible Assets
Acquired both separately and from a business combination
Intangible assets acquired separately are capitalised at cost. Following initial recognition, the cost model is applied
to the class of intangible assets.
Where amortisation is charged on assets with finite lives, this expense is taken to the income statement through the
‘amortisation expenses’ line item.
Intangible assets, excluding development costs, created within the business are not capitalised and expenditure is
charged against profits in the period in which the expenditure is incurred.
Research and development costs
Research costs are expensed as incurred.
Development expenditure incurred on an individual project is carried forward when its future recoverability can
reasonably be regarded as assured.
Following the initial recognition of the development expenditure, the cost model is applied requiring the asset to be
carried at cost less any accumulated amortisation and accumulated impairment losses.
A summary of the policies applied to the Group’s intangible assets is as follows:
Useful lives
Method used
Internally generated/
Acquired
Patents and Licences
Development Costs
Indefinite
Finite
Not depreciated or revalued
6 years- Straight line
Acquired
Internally generated
Impairment test /
Recoverable amount testing
Annually and where an indicator of
impairment exists
Amortisation methods reviewed at
each financial year-end; Reviewed
annually for indicator of impairment
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net
disposal proceeds and the carrying amount of the asset and are recognised on the income statement when the
asset is derecognised.
(h) Recoverable amount of assets
At each reporting date, the Group assesses whether there is any indication that an asset may be impaired. Where
an indicator of impairment exists, the Group makes a formal estimate of recoverable amount. Where the carrying
amount of an asset exceeds its recoverable amount the asset is considered impaired and is written down to its
recoverable amount.
Recoverable amount is the greater of fair value less costs to sell and value in use. It is determined for an individual
asset, unless the asset’s value in use cannot be estimated to be close to its fair value less costs to sell and it does
not generate cash inflows that are largely independent of those from other assets or groups of assets, in which
case, the recoverable amount is determined for the cash-generating unit to which the asset belongs.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre tax
discount rate that reflects current market assessments of the time value of money and the risks specific to the
asset.
30
EMPIRED LTD Annual Report 2007
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2007
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(i) Investments
All investments are initially recognised at cost, being the fair value of the consideration given and including
acquisition charges associated with the investment.
The fair value is based on the net assets of the investment at balance date.
(j) Inventories
Inventories are valued at the lower of cost and net realisable value.
Costs incurred in bringing each product to its present location and condition are accounted for as follows:
Raw materials - purchase cost on a first-in, first-out basis; and
Finished goods and work-in-progress - cost of direct materials and labour and a proportion of manufacturing
overheads based on normal operating capacity but excluding borrowing costs.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of
completion and the estimated costs necessary to make the sale.
(k) Trade and other receivables
Trade receivables, which generally have 30-45 day terms, are recognised and carried at original invoice amount less
an allowance for any uncollectible amounts.
An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are
written off when identified.
(l) Cash and cash equivalents
Cash and short-term deposits in the balance sheet comprise cash at bank and in hand and short-term deposits with
an original maturity of three months or less.
For the purposes of the Cash Flow Statement, cash and cash equivalents consist of cash and cash equivalents as
defined above, net of outstanding bank overdrafts.
(m) Interest-bearing loans and borrowings
All loans and borrowings are initially recognised at cost, being the fair value of the consideration received net of
issue costs associated with the borrowing.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using
the effective interest method. Amortised cost is calculated by taking into account any issue costs, and any discount
or premium on settlement.
Gains and losses are recognised in the income statement when the liabilities are derecognised and as well as
through the amortisation process.
(n) Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event,
it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and
a reliable estimate can be made of the amount of the obligation.
Where the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the
reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense
relating to any provision is presented in the income statement net of any reimbursement.
31
EMPIRED LTD Annual Report 2007
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2007
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(n) Provisions (cont’d)
If the effect of the time value of money is material, 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, where
appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the
passage of time is recognised as a finance cost.
(o) Employee leave benefits
(i) Wages, salaries, annual leave and sick leave
Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave
expected to be settled within 12 months of the reporting date are recognised in other payables in respect of
employee’s services up to reporting date. They are measured at the amounts expected to be paid when the liabilities
are settled. Liabilities for non-accumulating sick leave are recognised when the leave is taken and are measured at
the rates paid or payable.
(ii) Long service leave
The liability for long service leave is recognised in the provision for employee benefits and measured as the present
value of expected future payments to be made in respect of services provided by employees up to the reporting
date using the projected unit credit method. Consideration is given to expected future wage and salary levels,
experience of employee departures, and periods of service. Expected future payments are discounted using market
yields at the reporting date on national government bonds with terms to maturity and currencies that match, as
closely as possible, the estimated future cash outflows.
(p) Share-based payment transactions
The Group provides to employees (including directors) of the Group in the form of share-based payment
transactions, whereby employees render services in exchange for shares or rights over shares (‘equity-settled
transactions’).
There are currently two plans in place to provide these benefits:
(i) The Empired Employee Share Option Plan (ESOP), which provides to all employees excluding directors, and
(ii) The Empired Executive Share Option Plan (ESOP), which provides benefits to directors and senior executives.
The cost of these equity-settled transactions with employees is measured by reference to the fair value at the date
at which they are granted. The fair value is determined using a binomial model further details are given in note 14.
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the
period in which the performance conditions are fulfilled, ending on the date on which the relevant employees become
fully entitled to the award (‘vesting date’).
The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects
(i) the extent to which the vesting period has expired and (ii) the number of awards that, in the opinion of the
directors of the Group, will ultimately vest. This opinion is formed based on the best available information at balance
date. No adjustment is made for the likelihood of market performance conditions being met as the effect of these
conditions is included in the determination of fair value at grant date.
Where the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms
had not been modified. In addition, an expense is recognised for any increase in the value of the transaction as a
result of the modification, as measured at the date of modification.
Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any
expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for
the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new
award are treated as if they were a modification of the original award, as described in the previous paragraph.
32
EMPIRED LTD Annual Report 2007
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2007
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(p) Share-based payment transactions (cont’d)
The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of
earnings per share (see note 7).
(q) Leases
Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the
leased item, are capitalised at the inception of the lease at the fair value of the leased property or, if lower, at the
present value of the minimum lease payments.
Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve
a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against
income.
Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease
term.
Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as
operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of
the leased asset and recognised over the lease term on the same bases as the lease income.
Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the
lease term.
(r) Revenue
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the
revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is
recognised:
Rendering of services
Revenue from the provision of services is recognised when the service has been provided.
Maintenance, Hosting and Support fees
Revenue from maintenance, hosting and support is recognised and bought to account over the time it is earned.
Unexpired revenue is recorded as unearned income.
Interest received
Revenue is recognised as the interest accrues (using the effective interest method, which is the rate that exactly
discounts estimated future cash receipts through the expected life of the financial instrument) to the net carrying
amount of the financial asset.
(s) Government grants
Government grants are recognised at their fair value where there is reasonable assurance that the grant will be
received and all attaching conditions will be complied with.
When the grant relates to an expense item, it is recognised as income over the periods necessary to match the
grant on a systematic basis to the costs that it is intended to compensate.
Where the grant relates to an asset, the fair value is credited to a deferred income amount and is released to the
income statement over the expected useful life of the relevant asset by equal annual instalments.
33
EMPIRED LTD Annual Report 2007
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2007
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(t) Income tax
Deferred income tax is provided on all temporary differences at the balance sheet date between the tax bases of
assets and liabilities and their carrying amounts for the financial reporting purposes.
Deferred income tax liabilities are recognised for all taxable temporary differences:
• except where the deferred income tax liability arises from the initial recognition of an asset or liability in a
transaction that is not a business combination and, at the time of the transaction, affects neither the accounting
profit nor taxable profit or loss; and
•
in respect of taxable temporary differences associated with investments in subsidiaries, associates and
interests in joint ventures, except where the timing of the reversal of the temporary differences can be
controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused
tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against
which the deductible temporary differences, and the carry-forward of unused tax assets and unused tax losses
can be utilised:
• except where the deferred income tax asset relating to the deductible temporary differences arises from the
initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of
the transaction, affects neither the accounting profit nor taxable profit or loss; and
•
in respect of deductible temporary differences associated with investments in subsidiaries, associates and
interests in joint ventures, deferred tax assets are only recognised to the extent that it is probable that the
temporary differences will reverse in the foreseeable future and taxable profit will be available against which the
temporary differences can be utilised.
The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the
extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred
income tax asset to be utilised.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year
when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or
substantively enacted at the balance sheet date.
Income taxes relating to items recognised directly in equity are recognised in equity and not in the income
statement.
(u) Other taxes
Revenues, expenses and assets are recognised net of the amount of GST except:
• where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in
which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item
as applicable; and
receivables and payables are stated with the amount of GST included.
•
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or
payables in the balance sheet.
3
EMPIRED LTD Annual Report 2007
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2007
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(u) Other taxes (cont’d)
Cash flows are included in the Cash Flow statement on a gross basis and the GST component of cash flows arising
from investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified
as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the
taxation authority.
(v) Significant accounting judgements, estimates and assumptions
Impairment of goodwill and intangibles with indefinite useful lives
The group determines whether goodwill and intangibles with indefinite useful lives are impaired at least on an annual
basis. This requires an estimation of the recoverable amount of the cash-generating unit to which the goodwill and
intangibles with indefinite useful lives are allocated. The assumptions used in this estimation of recoverable amount
and carrying amount of goodwill and intangibles with indefinite useful lives are discussed in note 23.
35
EMPIRED LTD Annual Report 2007
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2007
3 SEGMENT INFORMATION
The Group’s primary reporting format is business segments.
The operating businesses are organised and managed separately according to the nature of the products and
services provided, with each segment representing a strategic business unit that offers different products and
serves different markets. There is only one geographical segment.
The company operates in the software contract service industry within Australia. The company operates in the
following 2 segments:
Services
Designs, builds and implements software and hardware infrastructure for large corporate
companies.
Software
Development and implementation of BigRedSky, an online recruitment program for the corporate,
academic and government sectors.
Segment accounting policies
Segment accounting policies are the same as the company’s accounting policies described in note 1. No
intersegment sales or transfers have occurred.
Business segments
The following tables present revenue and profit information and certain asset and liability information regarding
business segments for the years ended 30 June 2007 and 2006.
36
EMPIRED LTD Annual Report 2007
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2007
3 SEGMENT INFORMATION (cont’d)
2007 Business Segment Information
Business Segments
Revenue
Segment revenue
External revenue
Total segment revenue
Unallocated revenue
Total consolidated revenue
Results
Segment result
Unallocated expenses
Consolidated entity profit(loss) from ordinary
activities before income tax revenue
Income tax (expense) revenue
Consolidated entity profit/(loss) from
ordinary activities after income tax revenue
Assets
Segment assets
Unallocated assets
Total assets
Liabilities
Segment liabilities
Unallocated liabilities
Total liabilities
Other Segment Information
Acquisition of segment plant & equipment
Depreciation
Amortisation
Impairment
Continuing
Operations
Discontinued
Operations
Services
2007
$
Software
2007
$
Eliminations
2007
$
Total
Operations
Consolidated
2007
$
7,080,596
7,080,596
911,991
911,991
400,155
(2,610,401)
-
-
3,640,467
1,596,325
-
-
1,724,121
974,834
-
-
200,400
76,849
-
-
72,791
41,380
505,122
1,168,446
-
-
-
-
-
-
-
-
-
-
-
-
7,992,587
7,992,587
10,385
8,002,972
(2,210,246)
-
(2,210,246)
-
(2,210,246)
5,236,792
-
5,236,792
2,698,955
-
2,698,955
273,191
118,229
505,122
1,168,446
37
EMPIRED LTD Annual Report 2007
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2007
3 SEGMENT INFORMATION (cont’d)
2006 Business Segment Information
Business Segments
Services
Software
Eliminations
Continuing
Operations
Discontinued
Operations
Revenue
Segment revenue
External revenue
Total segment revenue
Unallocated revenue
Total consolidated revenue
Results
Segment result
4,470,118
4,470,118
506,441
506,441
-
-
707,596
(805,753)
Unallocated expenses
-
-
Consolidated entity profit(loss) from ordinary
activities before income tax revenue
Income tax revenue
Consolidated entity profit/(loss) from
ordinary activities after income tax revenue
Assets
Segment assets
2,621,813
2,722,099
Unallocated assets
-
-
Total assets
Liabilities
Segment liabilities
597,298
308,727
Unallocated liabilities
Total liabilities
Other Segment Information
-
-
Acquisition of segment plant & equipment
Depreciation
Amortisation
143,281
69,573
15,920
7,733
539,914
-
-
-
-
-
-
-
-
-
-
-
-
Total
Operations
Consolidated
2006
$
4,976,559
4,976,559
15,566
4,992,125
(98,157)
-
(98,157)
296,555
198,398
5,343,912
-
5,343,912
906,025
-
906,025
159,201
77,306
539,914
38
EMPIRED LTD Annual Report 2007
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2007
4 REVENUES
CONSOLIDATED
PARENT
2007
$
2006
$
2007
$
2006
$
7,080,596
4,470,118
7,080,596
4,470,118
7,080,596
4,470,118
7,080,596
4,470,118
2,295
-
6,855
9,150
2,034
8,084
-
10,118
2,295
-
6,855
9,150
2,034
8,084
-
10,118
7,089,746
4,480,236
7,089,746
4,480,236
Sales Revenue
Services
Other Revenue
Interest
Government grants
Other
5
INCOME TAX
Major components of income tax expense for the years ended 30 June 2007 and 2006 are:
Income Statement
Current income
Current income tax charge
Research & Development Rebate Receivable
Deferred income tax
Relating to origination and reversal of
temporary differences
Income tax expense reported in income
statement
-
-
-
-
36,338
(332,893)
-
(296,555)
-
-
-
-
36,338
(332,893)
-
(296,555)
39
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2007
5 INCOME TAX (cont’d)
EMPIRED LTD Annual Report 2007
Prima facie tax on operating profit
calculated at 30%
Add tax effect of:
Non-deductible expenses
Amortisation of trademark
Development expenditure
Entertainment
CONSOLIDATED
PARENT
2007
$
2006
$
2007
$
2006
$
(663,074)
(29,447)
(663,074)
(29,447)
(663,074)
(29,447)
(663,074)
(29,447)
2,099
13,731
2,099
13,731
356
-
3,848
356
61,750
4,409
356
-
3,848
356
61,750
4,409
Timing differences not bought to account
513,186
40,046
513,186
40,046
Prior year tax losses utilised
-
(54,507)
-
(54,507)
Addition to prior year losses
172,819
-
172,819
-
Research and Development offset
Income tax expense / (revenue)
-
-
-
(332,893)
(296,555)
(296,555)
-
-
-
(332,893)
(296,555)
(296,555)
Deferred tax assets and liabilities as a result of temporary differences
Deferred Tax Assets
Deferred Tax Liabilities
Current tax receivable
Income tax losses
58,824
283,466
58,824
273,231
(47,351)
(59,992)
(47,351)
(59,992)
-
296,556
-
296,556
Deferred tax asset arising from tax losses of the parent company has not been recognised at reporting date. This
is as a result of the consolidated entity not being able to satisfy the carried forward losses rules as a result of the
demerge of the BigRedSky business.
Revenue losses
Capital losses
Tax consolidation
-
260,876
10,235
10,235
-
-
260,876
-
Effective 1 July 2002, for the purposes of income taxation, Empired Limited and its 100% subsidiaries formed a tax
consolidated group. The head entity of the consolidated group is Empired Limited.
The head entity is responsible for tax liabilities of the group. Intra group transactions are ignored for tax purposes
and there is a single return lodged on behalf of the group.
Empired Limited formally notified the Australian Taxation Office of its adoption of the tax consolidation regime upon
lodgement of its 30 June 2003 consolidated tax return.
There was a tax funding agreement formalised at 30 June 2003. Under this tax funding agreement Empired Limited
is responsible for the tax liabilities of the group.
No tax amounts have been recognised as part of the consolidated group.
0
EMPIRED LTD Annual Report 2007
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2007
6 DISCONTINUED OPERATIONS
Post balance sheet date the Board of Directors decided to dispose of the BigRedSky talent management software
business. A sale agreement was entered into on the 1st of July 2007.
The disposal of BigRedSky to BigRedSky Limited and the subsequent return of capital to shareholders in the form of
shares in BigRedSky Limited was executed on the 23rd of July 2007. As at 30 June 2007 the assets and liabilities
associated with the business are classified as assets and liabilities held for sale.
The results of the Discontinued operations are presented below:
Revenue
Amortisation
Impairment
Other expenses
Loss Before Tax from discontinued operations
Income tax (expense) / benefit relating to discontinued operations
Loss for the year from discontinued operations
The major classes of assets and liabilities of BigRedSky are as follows:
Assets
Cash
Intangibles
Property, plant and equipment
Inventories
Prepayments
Trade and other receivables
Assets classified as held for sale
Liabilities
Trade creditors
Other payables
Interest bearing liabilities
Provisions
Other
Liabilities Directly associated with assets classified as held for sale
Net Assets attributable to discontinued operations
2007
$
913,227
(505,122)
(1,168,446)
(1,850,060)
(2,610,401)
-
(2,610,401)
2007
$
400,000
834,846
89,174
5,200
16,425
250,681
1,596,326
(51,031)
(134,285)
(74,133)
(64,511)
(650,875)
(974,835)
621,491
1
EMPIRED LTD Annual Report 2007
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2007
6 DISCONTINUED OPERATIONS (cont’d)
The net cash flows of BigRedSky are as follows:
Operating activities
Investing activities
Financing activities
2007
$
357,931
-
42,756
Net cash inflow / (outflow)
400,687
Consideration receivable
Present Value of deferred sales proceeds
Total disposal consideration
Less net assets disposed of
Loss in disposal before income tax
Income tax expense
Loss on disposal after income tax
2007
$
621,491
621,491
621,491
-
-
-
The Proceeds on the sale were equal to the book value of the related net assets.
As such no impairment expense was recognised on the reclassification of these
operations as held for sale.
Earnings per share (cents per share)
2007
2006
Basic from discontinued operations
Diluted from discontinued operations
-7.2
-7.2
-2.4
-2.4
2
EMPIRED LTD Annual Report 2007
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2007
7 EARNINGS PER SHARE
Basic earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary equity
holders of the parent by the weighted average number of ordinary shares outstanding during the year.
Diluted earnings per share amounts are calculated by dividing net profit attributable to ordinary equity holders of the
parent by the weighted average number of ordinary shares outstanding during the year plus the weighted average
number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into
ordinary shares.
The following represents the income and share data used in the basic and diluted earnings per share computations:
CONSOLIDATED
2007
$
2006
$
Net profit attributable to ordinary equity holders of the parent from continuing
operations
400,155
1,004,151
Profit / (loss) attributable to ordinary equity holders of the parent from
discontinued operations
(2,610,401)
(805,753)
Net profit attributable to ordinary equity holders of the parent
(2,210,246)
198,399
2007
Thousands
2006
Thousands
Weighted average number of ordinary shares for basic earnings per share
36,210
34,210
Effect of dilution:
Share options
Weighted average number of ordinary shares adjusted for the effect of dilution
4,561
2,313
40,771
36,523
3
EMPIRED LTD Annual Report 2007
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2007
8 CASH AND CASH EQUIVALENTS
(i) Reconciliation of Cash
For the purposes of the statement of cash flows, cash includes cash on hand and cash in banks. Cash at the end of
the year as shown in the statement of cash flows is reconciled to the related items in the balance sheet as follows:
Consolidated
Parent
2007
($)
2006
($)
2007
($)
2006
($)
Cash assets
Bank accounts
250
152
250
383,258
(2,116)
383,258
Invoice debtor facility
(396,100)
-
(396,100)
152
(2,116)
-
(12,592)
(1,964)
(12,592)
(1,964)
Overdraft in continuing operations
(412,592)
(1,964)
(412,592)
(1,964)
Bank accounts in discontinuing operations
400,000
(12,592)
-
400,000
-
(1,964)
(12,592)
(1,964)
(ii) Financing facilities available
At reporting date the following facilities were available but not used:
Bank Overdraft
-
247,884
-
247,884
Invoice Discounting Facility
453,900
-
453,900
-
The Invoice Discounting Facility has a total limit of $850,000.
EMPIRED LTD Annual Report 2007
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2007
8 CASH AND CASH EQUIVALENTS (cont’d)
(iii) Reconciliation of net cash flows from operating activities to operating profit (loss) after income tax
Operating profit\(loss) after income tax
(2,210,246)
198,399
(2,210,246)
198,399
Depreciation
Amortisation
Write down\(up) of investment in subsidiary
Impairment of deferred expenditure
Option Plan Expense
Loss on disposal of assets
Changes in assets and liabilities net of effects of
purchases and disposals of controlled entities:
(Increase)/decrease in net trade debtors
118,229
77,306
116,253
71,790
505,122
539,914
505,122
539,914
-
1,168,446
33,554
-
-
-
22,679
2,765
1,976
23,081
1,168,446
33,554
-
-
22,679
2,438
(508,860)
193,333
(508,860)
193,333
(Increase)/decrease in other receivables
336,226
19,531
336,226
(Increase)/decrease in other assets
(224,859)
(10,090)
(224,859)
(Increase)/decrease in prepayments
(22,116)
8,708
(22,116)
2,293
(146)
8,708
(Increase)/decrease in unbilled income
(156,825)
97,242
(156,825)
97,242
(increase)/decrease in deferred R & D
441,205
(831,000)
441,205
(831,000)
Increase/(decrease) in trade creditors
Increase/(decrease) in audit fees
Increase/(decrease) in other creditors
Increase/(decrease) in unexpired interest
62,256
(3,500)
86,199
8,516
64,994
2,500
108,257
(3,550)
62,256
(3,500)
86,199
8,516
64,994
2,500
108,257
(3,550)
Increase/(decrease) in accrued liabilities
143,342
(23,832)
143,342
(23,832)
Increase/(decrease) in unearned income
90,318
(209,651)
90,318
(209,651)
Increase/(decrease) in income tax
(36,338)
(26,792)
(36,338)
(26,792)
Increase/(decrease) in provision for employee
entitlements
35,730
33,221
35,730
33,221
Net cash used in operating activities
(133,601)
263,934
(133,601)
273,878
5
EMPIRED LTD Annual Report 2007
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2007
9 TRADE AND OTHER RECEIVABLES (CURRENT)
Trade receivables
Provision for doubtful debts
Term Deposit Receivable
Unbilled Income
CONSOLIDATED
PARENT
2007
$
2006
$
2007
$
2006
$
1,195,857
686,997
1,195,857
686,997
-
-
-
-
1,195,857
686,997
1,195,857
686,997
-
159,013
3,500
2,187
-
159,013
3,500
2,187
Research & Development Rebate Receivable
-
332,893
-
332,893
Withholding tax receivable
167
-
167
-
1,355,037
1,025,578
1,355,037
1,025,578
Trade receivables are non-interest bearing and are
generally on 30-day terms.
10 INVENTORIES
Online Job Ads held for Sale (at cost)
Total inventories at lower of cost and net realisable
value
-
-
4,830
4,830
-
-
4,830
4,830
11 OTHER ASSETS
Current
Prepayments
93,364
71,248
93,364
71,248
Total current other assets
93,364
71,248
93,364
71,248
6
EMPIRED LTD Annual Report 2007
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2007
12 PROPERTY, PLANT AND EQUIPMENT
Plant and Equipment
At cost
CONSOLIDATED
PARENT
2007
($)
2006
($)
2007
($)
2006
($)
728,399
639,692
728,399
533,919
Accumulated depreciation
(403,290)
(383,012)
(403,291)
(299,934)
Net carrying amount of plant and equipment
325,108
256,680
325,108
233,985
Assets are held as security for hire purchase
contracts.
Plant and Equipment
Movements during the year:
Opening balance 1 July 2006
256,680
177,550
256,680
149,012
Additions
Disposals
275,831
159,201
275,831
159,201
-
(2,768)
-
(2,438)
Assets included in discontinued operations held for
sale (note 6)
Depreciation expense relating to assets included in
discontinued operations held for sale (note 6)
(89,174)
(41,380)
-
-
(89,174)
(41,380)
-
-
Depreciation expense
(76,849)
(77,303)
(76,849)
(71,790)
Closing balance 30 June 2007
325,108
256,680
325,108
233,985
7
EMPIRED LTD Annual Report 2007
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2007
13 INTANGIBLE ASSETS & GOODWILL
Year ended 30 June 2007
CONSOLIDATED
Development
costs1
$
Patents and
licenses
$
Goodwill2
$
Total
$
PARENT
Total
$
At 1 July 2006,
net of accumulated amortisation
2,116,276
2,342
1,866,958
3,985,576
2,118,618
Additions
Impairment
Amortisation
At 30 June 2006,
389,795
(1,168,447)
-
-
(503,934)
(1,188)
Intangible assets included in discontinued
operations held for sale (note 6)
(833,690)
(1,154)
-
-
-
-
389,795
389,795
(1,168,447)
(1,168,447)
(505,122)
(505,122)
(834,844)
(834,844)
net of accumulated amortisation
-
-
1,866,958
1,866,958
-
At 1 July 2006
Cost (gross carrying amount)
3,855,037
13,389
1,866,958
5,735,384
3,037,427
Accumulated amortisation and impairment
(1,738,761)
(11,047)
-
(1,749,808)
(1,209,896)
Net carrying amount
2,116,276
2,342
1,866,958
3,985,576
1,827,531
At 30 June 2007
Cost (gross carrying amount)
4,244,832
13,389
1,866,958
6,125,179
4,258,221
Accumulated amortisation and impairment
(3,411,142)
(12,235)
Intangible assets included in discontinued
operations held for sale (note 6)
(833,690)
(1,154)
-
-
(3,423,377)
(3,423,377)
(834,844)
(834,844)
-
-
1,866,958
1,866,958
-
1 Internally generated
2 Purchased as part of business combinations
8
EMPIRED LTD Annual Report 2007
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2007
13 INTANGIBLE ASSETS & GOODWILL (cont’d)
Year ended 30 June 2006
At 1 July 2005,
CONSOLIDATED
Development
costs1
$
Patents and
licenses
$
Goodwill2
$
Total
$
PARENT
Total
$
net of accumulated amortisation
1,824,002
3,528
1,866,958
3,694,488
1,827,531
Additions
Impairment
Amortisation
At 30 June 2006,
831,000
-
-
-
(538,726)
(1,186)
-
-
-
831,000
831,000
(539,912)
(539,912)
net of accumulated amortisation
2,116,276
2,342
1,866,958
3,985,576
2,118,619
At 1 July 2005
Cost (gross carrying amount)
3,024,037
13,389
1,866,958
4,904,384
3,037,427
Accumulated amortisation and impairment
(1,200,035)
(9,861)
-
(1,209,896)
(1,209,896)
Net carrying amount
1,824,002
3,528
1,866,958
3,694,488
1,827,531
At 30 June 2006
Cost (gross carrying amount)
3,855,037
13,389
1,866,958
5,735,384
3,868,427
Accumulated amortisation and impairment
(1,738,761)
(11,047)
-
(1,749,808)
(1,749,808)
2,116,276
2,342
1,866,958
3,985,576
2,118,619
1 Internally generated
2 Purchased as part of business combinations
Development costs have been capitalised at cost. This intangible asset has been assessed as having a finite life
and is amortised using the straight line method over a period of 6 years. If an impairment indication arises, the
recoverable amount is estimated and an impairment loss is recognised to the extent that the recoverable amount is
lower than the carrying amount.
The patent acquired has been granted for a minimum of fifty years by the relevant government agency with the
option of renewal at the end of this period based on whether the entity meets certain predetermined targets. In view
of the small cost to acquire this asset, it was decided to amortise over six years.
Prior to the classification of BigRedSky as a discontinued operation, the recoverable amount was determined as
value in use using a discounted rate of 12.75%. The impairment loss of $1,168,446 represents the write down of
that intangible asset based on a discounted cash flow valuation and testing for obsolescence in the cash-generating
unit. The impairment loss has been recognised in the income statement in the line item ‘Loss for the year from
discontinued operations’.
Goodwill has been tested for impairment, this is detailed at note 23.
No impairment loss was charged for continuing operations in the 2007 financial year (note 23).
9
EMPIRED LTD Annual Report 2007
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2007
14 EMPLOYEE BENEFITS
(a) Empired employee share option plan
The Group has an employee share options plan (ESOP) for the granting of non-transferable options to employees and
senior executives to assist in motivating and retaining employees.
Options issued under the ESOP will vest on the sooner of one of the following conditions being satisfied:
(i) on the second anniversary, one third of the grant of options;
(ii) on the third anniversary, two thirds of the grant of options;
(iii) on the fourth anniversary, all of the grant of options; or
(iv) a takeover offer or bid in respect of Empired shares is made in accordance with the Corporations Act and the
Board recommends that shareholders accept the offer.
Other relevant terms and conditions applicable to options granted under the ESOP include:
-
-
any vested options that are unexercised on the fifth anniversary of their grant date will expire; and
upon exercise, options will be settled in ordinary shares of Empired Limited on the basis of one share for each
option exercised.
On the 22nd of February 2007, 414,389 options were granted with a fair value as follows:
Options
138,136
138,132
138,121
414,389
Fair value per option
Exercise price per option
$0.015
$0.011
$0.009
$0.30
$0.35
$0.40
The options were granted over ordinary shares and are exercisable upon meeting vesting conditions outlined above
and until their expiry on 22 February 2012.
The fair value of the options are estimated at the date of grant using a binomial model. The following table gives the
assumptions made in determining the fair value of the options granted in the year to 30 June 2007.
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
Expected life of option (years)
Option exercise price ($)
2007
-
40%
5.80%
5 years
$0.30, $0.35, $0.40
Share price at grant date ($) (Net Asset Backing)
$0.11
The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that
may occur.
The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may
also not necessarily be the actual outcome.
No other features of options granted were incorporated into the measurement of fair value.
During the year ended 30 June 2007, no options were exercised over ordinary shares.
50
EMPIRED LTD Annual Report 2007
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2007
14 EMPLOYEE BENEFITS (cont’d)
The following table illustrates the number (No.) and weighted average exercise prices (WAEP) of share options issued
under the ESOP.
2007
No.
2007
WAEP
2006
No.
2006
WAEP
Outstanding at the beginning of the year
277,550
$0.35
-
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year
414,389
$0.35
308,070
$0.35
(15,463)
$0.35
(30,520)
$0.35
-
-
-
-
Outstanding at the end of the year
676,476
$0.35
277,550
$0.35
Exercisable at the end of the year
-
-
-
-
The outstanding balance as at 30 June 2007 is represented by:
• 277,550 options over ordinary shares with an average exercise price of $0.35 each, exercisable upon meeting
the above conditions and until 31 July 2010;
• 398,926 options over ordinary shares with an average exercise price of $0.35 each, exercisable upon meeting
the above conditions and until 22 February 2012
The weighted average contractual life for the share options outstanding as at 30 June 2007 is 4 years (2006: 4
years).
Share options issued under the ESOP and outstanding at the end of the year have the following exercise prices:
Expiry Date
31-Jul-2010
31-Jul-2010
31-Jul-2010
22-Feb-2012
22-Feb-2012
22-Feb-2012
Total
Exercise
price
2007
No.
2006
No.
$0.30
$0.35
$0.40
$0.30
$0.35
$0.40
94,364
94,364
91,593
91,593
91,593
91,593
132,981
132,977
132,968
-
-
-
676,476
277,550
51
EMPIRED LTD Annual Report 2007
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2007
14 EMPLOYEE BENEFITS (cont’d)
(b) Empired executive share option plan
The Group has an executive share option plan (ESOP) for the granting of non-transferable options to certain directors
and senior executives to assist in motivating and retaining executives.
Options issued under the ESOP will vest on the sooner of one of the following conditions being satisfied:
(i) on the second anniversary of the grant of the options;
(ii) a takeover offer or bid in respect of Empired shares is made in accordance with the Corporations Act and the
Board recommends that shareholders accept the offer.
Other relevant terms and conditions applicable to options granted under the ESOP include:
(a) any vested options that are unexercised on the fifth anniversary of their grant date will expire;
(b) upon exercise, options will be settled in ordinary shares of Empired Limited; and
(c) options are issued to executives subject to successful ASX listing which has occurred post balance date.
On 28 July 2006, 600,000 options were granted with a fair value as follows:
Options
200,000
200,000
200,000
600,000
Fair value per option
Exercise price per option
$0.037
$0.028
$0.022
$0.20
$0.25
$0.30
The options were granted over ordinary shares and are exercisable upon meeting vesting conditions outlined above
and until their expiry on 28 July 2011.
On 17 November 2006, 500,000 options were granted with a fair value as follows:
Options
166,666
166,666
166,668
500,000
Fair value per option
Exercise price per option
$0.031
$0.023
$0.018
$0.20
$0.25
$0.30
The options were granted over ordinary shares exercisable upon meeting vesting conditions outlined above and until
their expiry on 17 November 2011.
On 17 November 2006, 750,000 options were granted with a fair value as follows:
Options
750,000
750,000
Fair value per option
Exercise price per option
$0.017
$0.25
The options were granted over ordinary shares and are exercisable upon meeting the vesting conditions outlined
above and until their expiry on 17 November 2010.
52
EMPIRED LTD Annual Report 2007
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2007
14 EMPLOYEE BENEFITS (cont’d)
(b) Empired executive share option plan (cont’d)
The fair value of the options are estimated at the date of grant using a binomial model. The following table gives the
assumptions made in determining the fair value of the options granted in the year to 30 June 2006.
28 July 2007
(600,000)
17 November 2007
(500,000)
17 November 2007
(750,000)
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
Expected life of option (years)
Option exercise price ($)
-
40%
5.9%
5 years
-
40%
5.74%
5 years
$0.20, $0.25, $0.30 $0.20, $0.25, $0.30
Share price at grant date ($) (Net Asset Backing)
$0.13
$0.12
-
40%
5.74%
4 years
$0.25
$0.12
The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that
may occur.
The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may
also not necessarily be the actual outcome.
No other features of options granted were incorporated into the measurement of fair value.
During the year ended 30 June 2007, no options were exercised over ordinary shares.
The following table illustrates the number (No.) and weighted average exercise prices (WAEP) of share options issued
under the ESOP.
2007
No.
2007
WAEP
2006
No.
2006
WAEP
Outstanding at the beginning of the year
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year
2,035,000
1,850,000
$0.25
$0.25
235,000
1,800,000
-
-
-
-
-
-
Outstanding at the end of the year
3,885,000
$0.25
2,035,000
Exercisable at the end of the year
235,000
$0.25
235,000
$0.25
$0.25
$0.25
$0.25
$0.25
As at 30 June 2007 there were 3,885,000 options over ordinary shares with an average exercise price of $0.25
each, exercisable upon meeting the conditions outlined above and until their expiry dates as set out in the table
below.
The weighted average contractual life for the share options outstanding as at 30 June 2007 is 3.58 years (2006:
between 1 and 5 years).
Share options issued under the ESOP and outstanding at the end of the year have the following average exercise
prices:
Expiry Date
Exercise price
2007 No.
2006 No.
26 November 2007
23 November 2009
28 November 2010
23 March 2011
28 July 2011
17 November 2010
17 November 2011
Total
$0.25
$0.25
$0.25
$0.25
$0.25
$0.25
$0.25
135,000
100,000
700,000
135,000
100,000
700,000
1,100,000
1,100,000
600,000
750,000
500,000
-
-
-
3,885,000
2,035,000
53
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2007
15 TRADE AND OTHER PAYABLES (CURRENT)
EMPIRED LTD Annual Report 2007
Trade payables
Audit fees payable
Superannuation payable
GST payable
PAYG payable
Accrued liabilities
Credit cards payable
CONSOLIDATED
PARENT
2007
$
2006
$
2007
$
2006
$
290,297
228,041
290,297
228,041
13,000
90,349
98,955
91,965
16,500
58,977
78,280
65,664
13,000
90,349
98,955
91,965
226,694
94,639
226,694
32,787
24,936
32,787
16,500
58,977
78,280
65,664
94,639
24,936
844,047
567,036
844,047
567,036
Included in the above are aggregate amounts payable
to the following related parties:
Owing to directors and director related entities
24,709
127,700
24,709
127,700
Trade payables are non-interest bearing and are normally settled on 30-day terms.
For terms and conditions relating to related parties refer to note 27.
The net of GST payable and GST receivable and Superannuation payable and is remitted to the appropriate body on
a quarterly basis. PAYG payable is remitted to the appropriate body on a monthly basis.
5
EMPIRED LTD Annual Report 2007
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2007
16 INTEREST-BEARING LOANS AND BORROWINGS
Current
Obligations under finance leases and hire
purchase contracts (note 21)
Obligations under premium funding contracts
Non-current
Obligations under finance leases and hire
purchase contracts (note 21)
Loan from Employee
Loan from Subsidiary
Effective
interest
rate %
CONSOLIDATED
PARENT
2007
$
2006
$
2007
$
2006
$
46,423
23,774
34,272
38,856
46,423
23,774
34,272
38,856
70,197
73,128
70,197
73,128
67,478
20,299
67,478
20,299
-
-
3,500
-
3,500
-
351,651
351,651
67,478
23,799
419,129
375,450
Hire Purchase Contracts
Hire purchase contract maturity ranges from June 2008 to June 2010.
Finance facilities available
At reporting date, the following financing facilities had been
negotiated and were available:
Total facilities:
- Bank overdraft
CONSOLIDATED
PARENT
2007
$
2006
$
2007
$
2006
$
-
250,000
-
250,000
- Invoice discounting facility
850,000
-
850,000
-
Facilities used at reporting date
- Bank overdraft
-
(2,116)
-
(2,116)
- Invoice discounting facility
(396,099)
-
(396,099)
-
Facilities unused at reporting date
- Bank overdraft
- Invoice discounting facility
-
247,884
-
247,884
453,901
-
453,901
-
Bank overdrafts
The bank overdrafts are secured by a floating charge over assets of the Group.
Invoice discounting facility
The invoice discounting facility is secured by the debtors ledger and a floating charge over assets of the Group.
55
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2007
17 PROVISIONS
EMPIRED LTD Annual Report 2007
Current
Employee entitlements
Tax payable
18 UNEARNED REVENUE
Current
Unearned Revenue
CONSOLIDATED
PARENT
2007
$
2006
$
2007
$
2006
$
127,290
91,560
127,290
91,560
-
36,338
-
36,338
127,290
127,898
127,290
127,898
CONSOLIDATED
PARENT
2007
$
2006
$
2007
$
2006
$
202,517
112,199
202,517
112,199
202,517
112,199
202,517
112,199
19 ISSUED CAPITAL AND RESERVES
Ordinary Shares
Issued and fully paid
Issued and fully paid
Movement in ordinary shares on
the issue
At 1 July 2005
CONSOLIDATED
PARENT
2007
$
5,936,265
5,936,265
2006
$
2007
$
5,659,623
5,936,265
5,659,623
5,936,265
2006
$
5,659,623
5,659,623
No.
Price ($)
Value ($)
No.
Price ($)
Value ($)
34,210,648
5,659,623
34,210,648
5,659,623
At 1 July 2006
34,210,648
5,659,623
34,210,648
5,659,623
Capital raising
Issue costs
2,000,000
0.15
300,000
2,000,000
0.15
300,000
(23,358)
(23,358)
At 30 June 2007
36,210,648
5,936,265
36,210,648
5,936,265
56
EMPIRED LTD Annual Report 2007
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2007
19 ISSUED CAPITAL AND RESERVES (cont’d)
The company has two share option schemes under which options to subscribe for the company’s shares have been
granted to certain executives and employees (refer note 14)
Other Reserves
CONSOLIDATED
PARENT
Employee equity
benefits reserve
$
Total
$
Employee equity
benefits reserve
$
Total
$
At 1 July 2005
370
370
370
370
Share based payment
At 30 June 2006
Share based payment
As at 30 June 2007
22,679
23,049
33,554
56,603
22,679
23,049
33,554
56,603
22,679
23,049
33,554
56,603
22,679
23,049
33,554
56,603
Nature and purpose of reserves
Employee equity benefits reserve
The employee share option and share plan reserve is used to record the value of equity benefits provided to
employees and directors as part of their remuneration. Refer to note 14 for further details of these plans.
Retained Earnings
At 1 July 2005
Profit for the year
At 30 June 2006
Loss for the year
At 30 JUNE 2007
CONSOLIDATED
$
PARENT
$
(1,443,182)
(2,913,343)
198,399
(1,244,784)
(2,210,246)
(3,455,030)
198,399
(3,111,742)
(2,210,246)
(5,321,988)
57
EMPIRED LTD Annual Report 2007
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2007
20 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group’s principal financial instruments comprise bank loans and hire purchase contracts, cash and short-term
deposits.
The main purpose of these financial instruments is to raise finance for the Group’s operations.
The Group has various other financial instruments such as trade debtors and trade creditors, which arise directly
from its operations.
It is, and has been throughout the period under review, the Group’s policy that no trading in financial instruments
shall be undertaken.
The main risks arising from the Group’s financial instruments are interest rate risk, liquidity risk, credit risk. The
board reviews and agrees policies for managing each of these risks and they are summarised below.
Interest rate risk
The Group’s exposure to market risk for changes in interest rates relates primarily to the Group’s long-term debt
obligations.
The Group’s policy is to manage its interest cost using a mix of fixed and variable rate debt.
At 30 June 2007, 100% of the Group’s borrowings are at a fixed rate of interest.
Foreign currency risk
The Group’s exposure to foreign currency risk is minimal.
Commodity price risk
The Group’s exposure to price risk is minimal.
Credit risk
The Group trades only with recognised, creditworthy third parties.
It is the Group policy that all customers who wish to trade on credit terms are subject to credit verification
procedures.
In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad
debts is not significant.
For transactions that are not denominated in the measurement currency of the relevant operating unit, the Group
does not offer credit terms without the specific approval of the Head of Credit Control.
With respect to credit risk arising from the other financial assets of the Group, which comprise cash and cash
equivalents, available-for-sale financial assets and certain derivative instruments, the Group’s exposure to credit
risk arises from default of the counter party, with a maximum exposure equal to the carrying amount of these
instruments.
There are no significant concentrations of credit risk within the Group.
Liquidity risk
The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank
overdrafts, invoice discounting facilities and hire purchase contracts.
58
EMPIRED LTD Annual Report 2007
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2007
21 FINANCIAL INSTRUMENTS
The fair values of the financial assets and financial liabilities approximate the carrying amounts.
Interest Rate Risk
Exposure to interest rate risks on financial assets and liabilities are summarised as follows:
2007
i) Financial Assets
Receivables – trade
Receivables – other
Total financial assets
ii) Financial liabilities
Invoice discounting facility
Accounts payables
Hire purchase
Short term loans
Total financial liabilities
2006
Floating
interest
rate
2007
$
Fixed
Interest
Rate
1 year or
less
2007
$
Fixed
Interest
Rate
Over 1 to
5 years
2007
$
Non-
interest
bearing
2007
$
Carrying
amount as
per statement
of financial
position
2007
$
Weighted
average
effective
interest rate
2007
-
-
-
-
-
-
-
-
-
-
-
396,099
-
-
-
-
-
-
1,195,857
1,195,857
159,180
159,180
1,355,037
1,355,037
-
-
-
16,492
412,591
9.99%
290,297
290,297
46,423
67,478
23,744
-
-
-
113,901
23,744
466,266
67,478
306,789
840,533
-
9.03%
7.83%
Floating
interest
rate
2006
$
Fixed
Interest
Rate
1 year or
less
2006
$
Fixed
Interest
Rate
Over 1 to
5 years
2006
$
Non-
interest
bearing
2006
$
Carrying
amount as
per statement
of financial
position
2006
$
Weighted
average
effective
interest rate
2006
iii) Financial Assets
Receivables – term deposit
Receivables – trade
Receivables – loans
Receivables – other
Total financial assets
iv) Financial liabilities
-
-
-
-
-
Bank Overdraft
2,116
Accounts payables
Hire purchase
Short term loans
-
-
-
-
-
-
-
-
-
-
3,500
-
3,500
1.25%
-
-
-
686,997
686,997
17,239
17,239
335,081
335,081
-
-
-
3,500
1,039,317
1,042,817
-
-
-
2,116
8.75%
228,041
228,041
37,432
21,473
-
41,858
-
3,500
58,905
45,358
Total financial liabilities
2,116
79,290
21,473
231,541
334,420
-
8.70%
7.28%
59
EMPIRED LTD Annual Report 2007
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2007
22 COMMITMENTS AND CONTINGENCIES
No contingent assets or liabilities as at 30 June 2007.
Commitments for Expenditure
CONSOLIDATED
PARENT
2007
$
2006
$
2007
$
2006
$
Hire Purchase
The consolidated entity has various computer
equipment on two hire purchase arrangements.
The lease is for a period of 35 months.
Not later than one year
Later than one year but not later than five years
54,872
73,022
37,432
21,473
54,872
73,022
Less: unexpired charges
(13,994)
(4,329)
(13,994)
37,432
21,473
(4,329)
113,900
54,576
113,900
54,576
46,422
67,478
31,954
18,192
46,422
67,478
31,954
18,192
113,900
50,146
113,900
50,147
Hire Purchase
Current (refer note 16)
Non Current (refer note 16)
Total Hire Purchase
Loan Repayments
The consolidated entity has borrowed the
necessary funds from CGU to finance insurance.
The terms of the loans are for 10 months each.
Not later than one year
25,632
41,858
25,632
41,858
Later than one year but not later than five years
-
-
-
-
Less: unexpired charges
(1,858)
(3,002)
(1,858)
(3,002)
23,774
38,856
23,774
38,856
Loan Repayments
Current (refer note 16)
23,774
38,856
23,774
38,856
Non Current (refer note 16)
-
-
-
-
Total Loan Repayments
23,774
38,856
23,774
38,856
Office premises are leased under non-cancellable operating leases for periods of 12 months ending 30 June 2008.
Their commitment can be seen below:
Operating Leases
Minimum lease payments under non-cancellable
operating leases according to the time expected to
elapse to the expected date of payment:
Not later than one year
119,521
113,102
119,521
113,102
Later than one year but not later than five years
-
-
-
-
119,521
113,102
119,521
113,102
60
EMPIRED LTD Annual Report 2007
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2007
23 IMPAIRMENT TESTING OF GOODWILL
Goodwill acquired through business combinations has been allocated to the individual cash generating units for
impairment testing. The recoverable amount of the IT Infrastructure Services cash generating unit has been
determined based on a value in use calculation. To calculate this, cash flow projections are based on financial
budgets approved by senior management covering a five-year period.
The discount rate applied to cash flow projections is 12.75% (2006: 12.75%) using a 12.7% growth rate (2006:
12.7%) that is the same as the average growth rate for the IT Infrastructure Services market sector.
Carrying amount of goodwill, patents and licences
CONSOLIDATED
IT Infrastructure Services
Segment
Total
PARENT
Total
2007
$
2006
$
2007
$
2006
$
2007
$
2006
$
Carrying amount of goodwill
1,886,958
1,886,958
1,886,958
1,886,958
-
-
Key assumptions used in value in use calculation for 30 June 2007 and 30 June 2006
The following describes each key assumption on which management has based its cash flow projections to
undertake impairment testing of goodwill, patents and licences.
Budgeted gross margins – the basis used to determine the value assigned to the budgeted gross margins is the
average gross margins achieved in the year immediately before the budgeted year increased for expected efficiency
improvements. Bond rates - the yield on a five-year government bond rate at the beginning of the budgeted year
is utilised and the value assigned to the key assumption is consistent with external information sources. Values
assigned to key assumptions reflect past experience, except for efficiency improvements which have been
estimated at 3% per annum.
Resources price inflation – the basis used to determine the value assigned to the resources price inflation is the
forecast price indices during the budget year for Australia. Key assumptions are consistent with external information
sources.
24 RELATED PARTY DISCLOSURE
Other Financial Assets
% Equity Interest
Investment ($)
Tusk Technologies Pty Ltd
BigRedSky Limited
Country of
2007
2006
Incorporation
Australia
Australia
%
100
100
%
100
-
2007
$
2006
$
372,367
2
374,345
-
372,369
374,345
The balance of the Tusk Technologies Pty Ltd loan as at 30 June 2007 is $351,651. This loan is unsecured does not
bear interest and is not repayable in the next 12 months. The investment in Tusk Technologies Pty Ltd is measured
at fair value at the 30th of June 2007. The revaluation downwards is recorded in the income statement.
Other than this related party loan there are no other related party transactions requiring disclosure.
61
EMPIRED LTD Annual Report 2007
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2007
25 EVENTS AFTER THE BALANCE SHEET DATE
There has not arisen in the interval between the end of the financial year and the date of this report any item,
transaction or event of a material and unusual nature likely, in the opinion of the directors of the Company, to affect
significantly the operations of the consolidated entity, the results of those operations, or the state of affairs of the
consolidated entity, in future financial years other than as set out below:
A special resolution put before shareholders on the 23rd of July 2007, was passed to enable the company to
demerge the BigRedSky business to focus on its core competency of IT infrastructure services. The effect of the
demerger was to reduce the net assets of the consolidated group by $621,491 with a resultant return of capital to
shareholders. The company has raised $3,000,000 (net of $2,650,000 after costs) and floated on the ASX. Listing
date was the 19th of October 2007.
26 AUDITORS’ REMUNERATION
CONSOLIDATED
PARENT
2007
$
2006
$
2007
$
2006
$
Amounts received or due and receivable by Ernst & Young
Australia for:
• an audit or review of the financial report of the entity
and any other entity in the consolidated entity
32,340
16,500
32,340
16,500
• other services in relation to the entity and any other
entity in the consolidated entity
* tax compliance
* assurance related
* special audits required by regulators
Amounts received or due and receivable by auditors other
than Ernst & Young Australia for:
22,293
21,200
22,293
21,200
-
7,470
-
-
-
7,470
-
-
62,103
37,700
62,103
37,700
• other non-audit services
4,000
-
4,000
-
• an audit or review of the financial report of subsidiary
entities
-
690
-
690
66,103
38,390
66,103
38,390
62
EMPIRED LTD Annual Report 2007
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2007
27 DIRECTOR AND EXECUTIVE DISCLOSURES
(a) Details of Directors and Executives
(i) Directors
Mr. M Ashton
Mr. R Baskerville
Mr. D Taylor
(ii) Executives
Mr. Craig Ferrier
Mr. Mark Waller
Mr. Greg Leach
Mr. Brendon Jarvis
Chairman (non-executive)
Managing Director
Director (non-executive)
Company Secretary
Chief Financial Officer
General Manager-Service Delivery
General Manager-Strategy
(b) Remuneration of Directors and Executives
(i) Remuneration Policy
The Remuneration Committee of the Board of Directors of Empired Limited is responsible for determining and
reviewing compensation arrangements for the directors, the chief executive officer and the executive team. The
Remuneration Committee assesses the appropriateness of the nature and amount of emoluments of such officers
on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring
maximum stakeholder benefit from the retention of a high quality board and executive team. Such officers are given
the opportunity to receive their base emolument in a variety of forms including cash and fringe benefits such as
motor vehicles and expense payment plans. It is intended that the manner of payment chosen will be optimal for the
recipient without creating undue cost for the company.
To assist in achieving these objectives, the Remuneration Committee links the nature and amount of executive
directors’ and senior executives’ emoluments to the company’s financial and operational performance. All directors
and senior executives have the opportunity to qualify for participation in the Employee Share Option Plan.
In addition, certain executives are entitled to bonuses payable upon the achievement of annual corporate profitability
measures. On a quarterly basis, after consideration of performance against KPI’s and an overall performance rating
for the company the individual performance of each executive is rated.
For the 2006 financial year, 68% of the STI cash bonus was paid to executives during the 2006 financial year. For
the 2007 financial year 73% of the STI cash bonus was paid to executives during the 2007 financial year. A cash
bonus of $72,915 was paid to Greg Leach on a quarterly basis during the year based on gross profit targets (2006:
$68,045).
It is the Remuneration Committee’s policy that employment agreements shall be entered into with the Chief Executive
Officer and all other executives. The current employment agreement is consistent for all executives. The agreement
has a 30 day notice period. The amount payable if the executive’s employment is terminated is calculated by
reference to a formula based on the number of years’ service.
The current employment agreement with the Chief Executive Officer has a three month notice period. The amount
payable if the Chief Executive Officer is terminated prior to the end of the agreement is calculated by reference to a
formula based on the number of years’ service.
63
EMPIRED LTD Annual Report 2007
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2007
27 DIRECTOR AND EXECUTIVE DISCLOSURES (cont’d)
(ii) Remuneration of Directors and Executives
Primary
Post Employment
Equity
Other
Total
Salary & Fees
$
Cash
Bonus
$
Non Monetary
benefits
$
Superannuation
$
Retirement
benefits
$
Options
$
Directors
30 June 2007
R. Baskerville
200,000
50,004
5,004
255,008
165,000
25,002
2,083
-
192,085
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
25,000
25,000
-
-
10,417
-
10,17
-
-
-
-
-
-
-
-
-
$
-
-
-
$
212,750
56,004
36,004
12,750
6,000
6,000
2,750
-
30,758
30,800
-
-
-
-
-
-
-
195,800
25,002
12,500
-
30,800
-
233,302
Appointed 21st of December 2005
Appointed 21st of December 2005
Salary & Fees
$
Cash Bonus
$
Superannuation
$
Options
$
Total
$
117,487
150,000
141,079
25,519
-
10,574
72,915
-
-
-
12,697
-
747
875
8,700
-
128,808
223,790
162,476
25,519
3,085
72,915
23,271
10,322
50,59
98,248
150,000
8,600
21,632
-
8,842
68,045
-
-
-
774
-
5,700
9,500
-
-
112,790
227,545
9,374
21,632
278,79
68,05
9,616
15,200
371,31
M. Ashton
D. Taylor
Total
Remuneration
Directors:
30 June 2006
R.Baskerville
M. Ashton
David Taylor
Total
Remuneration
Directors:
Mel Ashton
David Taylor
Executives
30 June 2007
M. Waller
G. Leach
B. Jarvis
C. Ferrier
Total
Remuneration
Executives:
30 June 2006
M. Waller
G. Leach
B. Jarvis
C. Ferrier
Total
Remuneration
Executives:
6
EMPIRED LTD Annual Report 2007
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2007
27 DIRECTOR AND EXECUTIVE DISCLOSURES (cont’d)
(c) Remuneration options: Granted and vested during the year
During the financial year options were granted as equity compensation benefits under the executive share option
plan (ESOP) to certain directors and executives as disclosed below. The options were issued free of charge. Each
option entitles the holder to subscribe for one fully paid ordinary share in the entity at an exercise price of $0.20,
$0.25 and 0.30. For further details of the terms and conditions including the service and performance criteria that
must be met refer to note 14.
Granted
Terms & Conditions for each Grant
30 June 2007
No.
Grant Date
Value per option at
grant date
($)
Exercise price per
share
($)
Expiry Date
Directors
R. Baskerville
750,000
17/11/2006
0.017
0.25
17/11/2010
M. Ashton
D. Taylor
Executives
M. Waller
G. Leach
B. Jarvis
250,000
17/11/2006
0.031, 0.023, 0.018
0.20, 0.25, 0.30
17/11/2011
250,000
17/11/2006
0.031, 0.023, 0.018
0.20, 0.25, 0.30
17/11/2011
64,038
22/02/2007
0.015,0.011,0.009
0.30,0.35,0.40
22/02/2012
75,000
22/02/2007
0.015,0.011,0.009
0.30,0.35,0.40
22/02/2012
300,000
28/07/2006
0.037,0.028,0.022
0.20,0.25,0.30
28/07/2011
Total
1,689,038
Granted
Terms & Conditions for each Grant
30 June 2006
No.
Grant Date
Value per option at
grant date
($)
Exercise price per
share
($)
Expiry Date
Directors
R. Baskerville
700,000
29/11/2005
0.025,0.019,0.014
0.20,0.25,0.30
29/11/2010
Executives
M. Waller
M. Waller
G. Leach
G. Leach
300,000
23/03/2006
0.005,0.043,0.038
0.20,0.25,0.30
23/03/2011
50,000
01/08/2005
0.038,0.043,0.050
0.30,0.35,0.40
01/08/2010
500,000
23/03/2006
0.025,0.018,0.014
0.20,0.25,0.30
23/03/2011
75,000
01/08/2005
0.038,0.043,0.050
0.30,0.35,0.40
01/08/2010
Total
1,625,000
65
EMPIRED LTD Annual Report 2007
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2007
27 DIRECTOR AND EXECUTIVE DISCLOSURES (cont’d)
(d) Option holdings of directors and executives
Balance at beg
of period
01-Jul-06
Granted as
Remuneration
Options
Exercised
Net
Change
Other #
Balance
at end of
period
30-Jun-07
Not Vested
& Not
Exercisable
Vested &
Exercisable
30 June 2007
Directors
R. Baskerville
700,000
750,000
M. Ashton
D. Taylor
Executives
M. Waller
G. Leach
B. Jarvis
C. Ferrier
-
-
250,000
250,000
350,000
575,000
64,038
75,000
-
300,000
35,000
-
-
-
Total
1,660,000
1,689,038
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,450,000
1,450,000
250,000
250,000
250,000
250,000
414,038
414,038
650,000
650,000
300,000
300,000
-
-
-
-
-
-
-
-
-
-
35,000
-
3,314,038
3,314,038
35,000
Balance at beg
of period
01-Jul-05
Granted as
Remuneration
Options
Exercised
Net
Change
Other #
Balance
at end of
period
30-Jun-06
Not Vested
& Not
Exercisable
Vested &
Exercisable
30 June 2006
Directors
R. Baskerville
M. Ashton
D. Taylor
Executives
M. Waller
G. Leach
B. Jarvis
C. Ferrier
-
-
-
-
-
-
35,000
-
700,000
-
-
350,000
575,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
700,000
700,000
-
-
-
-
350,000
350,000
575,000
575,000
-
-
-
-
-
-
-
-
-
-
-
-
35,000
-
1,625,000
1,625,000
35,000
Total
35,000
1,625,000
66
EMPIRED LTD Annual Report 2007
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2007
27 DIRECTOR AND EXECUTIVE DISCLOSURES (cont’d)
(e) Shareholdings of Directors and Executives
Shares held in Empired Limited
30 June 2007
Balance
01-Jul-06
Granted as
Remuneration
On Exercise of
Options
Net Change
Other
Balance
30-June-07
Ord
Pref
Ord
Pref
Ord
Pref
Ord
Pref
Ord
Pref
Directors
Mr. R Baskerville
4,220,841
Mr. M Ashton
Mr. D Taylor
-
-
Total
4,220,841
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
668,428
-
-
668,428
-
-
-
-
4,889,269
-
-
4,889,269
-
-
-
-
30 June 2006
Balance
01-Jul-05
Granted as
Remuneration
On Exercise of
Options
Net Change
Other
Balance
30-June-06
Ord
Pref
Ord
Pref
Ord
Pref
Ord
Pref
Ord
Pref
Directors
Mr. R Baskerville
1,640,841
Mr. M Ashton
Mr. D Taylor
-
-
Total
1,640,841
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,580,000
-
-
2,580,000
-
-
-
-
4,220,841
-
-
4,220,841
-
-
-
-
All equity transactions with directors and other than those arising from the exercise of remuneration options have
been entered into under terms and conditions no more favourable than those the entity would have adopted if
dealing at arm’s length.
30 June 2007
Balance
01-Jul-06
Granted as
Remuneration
On Exercise of
Options
Net Change
Other
Balance
30-June-07
Ord
Pref
Ord
Pref
Ord
Pref
Ord
Pref
Ord
Pref
Specified
Executives
M. Waller
G. Leach
B. Jarvis
810,001
2,987,558
-
Total
3,797,559
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
673,810
563,476
200,000
1,437,286
-
-
-
-
1,483,811 -
3,551,034 -
200,000 -
5,234,845 -
67
EMPIRED LTD Annual Report 2007
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2007
27 DIRECTOR AND EXECUTIVE DISCLOSURES (cont’d)
(e) Shareholdings of Directors and Executives
30 June 2006
Balance
01-Jul-05
Granted as
Remuneration
On Exercise of
Options
Net Change
Other
Balance
30-June-06
Ord
Pref
Ord
Pref
Ord
Pref
Ord
Pref
Ord
Pref
Executives
M. Waller
G. Leach
-
2,987,558
Total
2,987,558
28 DIVIDENDS
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
810,001
-
810,001
-
-
-
810,001
2,987,558
3,797,559
-
-
-
There were no Dividends paid or provided for during the year.
68
69
70
71
EMPIRED LTD Annual Report 2007
Directors’ Declaration
In accordance with a resolution of the directors of Empired Limited, I state that:
In the opinion of the directors:
(a) the financial statements and notes of the company and of the consolidated entity are in accordance with the
Corporations Act 2001, including:
(i) giving a true and fair view of the company’s and consolidated entity’s financial position as at 30 June 2007
and of their performance for the year ended on that date; and
(ii) complying with Accounting Standards and 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.
This declaration is made after receiving the declarations required to be made by the directors in accordance with
section 295A of the Corporations Act 2001 for the financial year ended 30 June 2007.
On behalf of the Board
Russell Baskerville
26th of October 2007
72
EMPIRED LTD Annual Report 2007
Shareholding Analysis
In accordance with Listing Rule 4.10 of the Australia Stock Exchange Limited, the Directors provide the following
shareholding information which was applicable as at 19th October 2007.
a. Distribution of Shareholding
SIZE OF SHAREHOLDING
NUMBER OF SHAREHOLDERS
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10001 - 100,000
100,001 - MAX
TOTAL
0
3
127
223
24
417
%
0.00
0.03
2.03
17.99
79.95
100.00
b. Substantial Shareholders
The following are registered by the Company as substantial shareholders, having declared a relevant interest in the
number of voting shares shown adjacent as at the date of giving the notice.
SHAREHOLDERS
Mr Russell Baskerville
Mr Gregory Leach
c. Twenty Largest Shareholders
The names of the twenty largest shareholders are:
NAME
Mr Russell Baskerville
Mr Gregory Leach
Uniplex Constructions Pty Ltd
Thames Holdings Pty Ltd
Mr David Cawthorn
Daccsar Pty Ltd
Ms Kym Garreffa
Measured Investments Limited
Mr John Bardwell
Mr Mark Patton
Topsfield Pty Ltd
Mr Anthony Farrell
Mr Gregory Bandy
Green Frog Nominees Pty Ltd
Mr Mark Waller
Mr Kevin Flynn
GRD Limited
Trovex Pty Ltd
Jaffa Perth Pty Ltd
Mr Mark Waller
TOTAL
NUMBER
4,614,031
3,551,034
NUMBER OF SHARES HELD
4,614,031
3,504,225
2,333,414
2,109,582
2,000,000
1,563,387
1,306,167
1,200,000
1,000,000
965,475
895,000
802,500
800,000
750,000
666,667
650,000
600,000
600,000
579,048
547,144
%
10
7.7
%
9.98
7.58
5.05
4.57
4.32
3.28
2.83
2.60
2.16
2.09
1.94
1.74
1.72
1.62
1.44
1.41
1.30
1.30
1.25
1.18
27,486,641
59.48
The twenty members holding the largest number of shares together held a total of 59.48% of issued capital.
73
EMPIRED LTD Annual Report 2007
Shareholding Analysis (cont’d)
d. Issued Capital
The fully paid issued capital of the company consisted of 46,210,648 shares held by 417 shareholders.
Each share entitles the holder to one vote.
e. On-Market Buy-Back
There is no current on-market buy-back.
f. Company Secretary
The Company Secretary is Mr Craig Ferrier.
g. Registered Office
The registered office of Empired Ltd is
469 Murray Street, Perth WA 6000
h. Other Offices
The other offices are:
HEAD OFFICE
469 Murray Street
Perth WA 6000
Telephone + 61 8 9321 9401
Melbourne
Level 3
470 Collins Street
Melbourne VIC 300
Telephone +61 3 8610 0700
7
EMPIRED LTD Annual Report 2007
OTHER INFORMATION FOR SHAREHOLDERS
In accordance with Listing Rule 4.10 of the Australian
Stock Exchange Limited, the Directors provide the
following information not elsewhere disclosed in this
report.
functions to manage your personal investment details. You
can create and manage your own portfolio of investments,
check your security holding details, display the current
value of your holdings and amend your details online.
SHAREHOLDER COMMUNICATIONS
The Board of Directors aims to ensure that shareholders
are informed of all major developments affecting the
Company’s state of affairs. Information is communicated
to shareholders
as follows:
– The annual report is distributed to shareholders who
elect to receive the document. A copy of the full annual
report is available free of charge, upon request, from
the Company. The Board ensures that the annual report
includes relevant information about the operation of the
Company during the year, changes in the state of affairs
of the Company and details of future developments,
in addition to the other disclosures required by the
Corporations Act;
– The half-year report contains summarised financial
information and a review of the operations of the
Company during the period. The half-year financial
report is prepared in accordance with the requirements
of Accounting Standards and the Corporations Act, and
is lodged with the Australian Securities and Investments
Commission and the Australian Stock Exchange; and
– The Company’s internet website at www.empired.com is
regularly updated and provides details of recent material
announcements by the Company to the stock exchange,
annual reports and general information on the Company
and its business. The Board encourages full participation
of shareholders at the Annual General Meeting to ensure
a high level of accountability and identification with the
Company’s strategy and goals. Important issues are
presented to the shareholders as single resolutions.
INTERNET ACCESS TO INFORMATION
Empired maintains a comprehensive Investor Relations
section on its website at
www.empired.com/index.php?page=corpgovernance
You can also access comprehensive information about
security holdings at the Computershare Investor Centre at
www-au.computershare.com/investor/
By registering with Computershare’s free Investor Centre
service you can enjoy direct access to a range of
Changes to your shareholder details, such as a change of
name or address, or notification of your tax file number or
direct credit of dividend advice can be made by printing
out the forms you need, filling them in and sending the
changes back to the Computershare Investor Centre.
SHARE REGISTRY ENQUIRIES
Shareholders who wish to approach the Company on any
matter related to their shareholding should contact the
Computershare Investor Centre in Melbourne:
The Registrar
Computershare Investor Services Pty Ltd
Level 2, 45 St Georges Tce
Perth WA 6000
Telephone +61 8 9323 2000
Facsimile +61 8 9323 2033
Website www-au.computershare.com/investor
ANNUAL GENERAL MEETING
The 2007 Annual General Meeting of Empired Limited will
be held in the:
The Melbourne Hotel
942 Hay Street, Perth WA 6000
at 9.30am on Wednesday, 28 November 2007.
Formal notice of the meeting is enclosed with this report.
STOCK EXCHANGE LISTING
Empired Limited shares are listed on the Australian Stock
Exchange (ASX:EPD). The home exchange is Perth.
All shares are recorded on the principal share register of
Empired Limited, held by Computershare Investor Services
Pty Limited at the following street address:
Computershare Investor Services Pty Ltd
Level 2, 45 St Georges Tce
Perth WA 6000
75
www.empired.com
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EMPIRED Ltd.
ABN 81 090 503 843
Annual Report
2007