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Annual Report 2015

Plain-text annual report

EMPIRE D L IM ITE D AND ITS CON TRO LLED ENTI TIES Annual Financial Report FOR TH E Y EA R EN DED 3 0 JU NE 2 0 1 5 ABN 81 090 503 843 Contents CORPORATE DIRECTORY HIGHLIGHTS & RESULTS CHAIRMAN & CEO REVIEW DIRECTORS’ REPORT REMUNERATION REPORT CASE STUDIES CORPORATE GOVERNANCE STATEMENT CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME CONSOLIDATED STATEMENT OF FINANCIAL POSITION CONSOLIDATED STATEMENT OF CASH FLOWS CONSOLIDATED STATEMENT OF CHANGES IN EQUITY NOTES TO THE FINANCIAL STATEMENTS 1. CORPORATE INFORMATION 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 3. SEGMENT REPORTING 4. REVENUES 5. ADMINISTRATION EXPENSES 6. FINANCE EXPENSES 7. INCOME TAX 8. EARNINGS PER SHARE 9. CASH AND CASH EQUIVALENTS 10. TRADE AND OTHER RECEIVABLES 11. WORK IN PROGRESS 12. OTHER CURRENT ASSETS 13. INVESTMENTS IN ASSOCIATES 14. PROPERTY, PLANT AND EQUIPMENT 15. INTANGIBLE ASSETS 16. EMPLOYEE BENEFITS 17. TRADE AND OTHER PAYABLES DIRECTORS’ DECLARATION AUDITOR’S INDEPENDENCE DECLARATION INDEPENDENT AUDIT REPORT SHAREHOLDER ANALYSIS OTHER INFORMATION FOR SHAREHOLDERS 18. BORROWINGS 19. PROVISIONS 20. OTHER LIABILITIES 21. RESERVES 22. ISSUED CAPITAL 23. DIVIDENDS 24. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES 25. FINANCIAL INSTRUMENTS 26. COMMITMENTS AND CONTINGENCIES 27. INVESTMENT IN CONTROLLED ENTITY 28. ACQUISITIONS 29. AUDITOR’S REMUNERATION 30. PARENT ENTITY INFORMATION 31. RELATED PARTY TRANSACTIONS 32. DEFERRED VENDOR PAYMENTS 33. EVENTS AFTER REPORTING DATE 40 40 50 51 51 52 52 56 57 59 59 59 60 61 63 66 69 5 6 8 15 20 30 35 36 37 38 39 70 71 72 72 73 74 75 79 81 84 84 86 87 88 89 89 91 92 93 96 100 — 4 EMPIRED LTDEMPIRED LTDCorporate Directory Directors Mel Ashton (Non-Executive Chairman) Richard Bevan (Non-Executive Director) John Bardwell (Non-Executive Director) Chris Ryan (Non-Executive Director) Russell Baskerville (Managing Director & CEO) Company Secretary Mark Waller Registered Office Level 13 Septimus Roe Square 256 Adelaide Terrace PERTH WA 6000 Telephone No: +618 9223 1234 Fax No: +618 9223 1230 Legal Advisers Jackson McDonald Lawyers Level 17, 225 St Georges Terrace PERTH WA 6000 Auditors Grant Thornton Audit Pty Ltd Level 1, 10 Kings Park Road WEST PERTH WA 6005 Share Register Computershare Investor Services Pty Ltd Level 11, 172 St Georges Terrace PERTH WA 6000 Company Number A.C.N: 090 503 843 Country of Incorporation Australia Company Domicile and Legal Form Empired Limited is the parent entity and an Australian Company limited by shares ASX Code EPD Principle Places of Business Perth Level 13 Septimus Roe Square 256 Adelaide Terrace PERTH WA 6000 Telephone No: Fax No: +618 9223 1234 +618 9223 1230 Melbourne Level 5, 257 Collins Street MELBOURNE VIC 3000 Sydney Level 12, 9 Hunter Street SYDNEY NSW 2000 Adelaide Level 2, 8 Leigh Street ADELAIDE SA 5000 Website www.empired.com Brisbane Level 11, 79 Adelaide Street BRISBANE QLD 4000 Wellington Level 7, Intergen House 126 Lambton Quay PO Box 5428 WELLINGTON 6145 Telephone No: +64 4 472 2021 Fax No: +64 4 472 2027 Seattle 2035 158th Court NE Suite 100 Bellevue, WA, 98008 USA Singapore 36 Armenian Street #05-12 SINGAPORE 179934 — 5 ANNUAL REPORT 2015 Highlights & Results Record Reported Financial Results • Record Revenue of $130 million up 94% • Record EBITDA of $11 million up 94% • Record Net Profit Before Tax of $6 million up 117% • Record Net Profit After Tax of $5 million up 135% • 1Record Earnings Per Share of 4.8 cents up 85% • Cash at 30 June 2015 of $9.6 million • Second half Revenue of $80 million • Annualised expense savings of $3 million per annum to benefit FY16 Strategic Highlights • Secured $65m of strategic annuity based contracts • Regional diversification into New Zealand, US and during the second half. Singapore. • Grew staff numbers from 419 to 919 FTEs across the • Secured major contracts in high growth services year. including Data Insights, IOT and Cloud. • Integration of all Australian businesses within Empired. • Secured multi-million dollar contracts for the • Acquired Intergen Limited to become one of the consumption based usage (as-a-service) of Empired’s largest dedicated Microsoft partners in the Asia internally developed and owned software as a service IP. Pacific region. Forward Looking Highlights • FY16 Revenue guidance of $155m to $175m • Key investments have positioned Empired to capitalise underpinned by H2 ‘Run-Rate’. on structural shifts within the industry around Social, • Enter FY16 with highest level of contracted Revenue Mobile, Analytics and Cloud supported by multi- in our history. million dollar contracts and in-house IP. • Conservative approach to cash, decision to withhold • Shift to consumption based computing is accelerating. dividend payment and accelerated debt reduction Empired Managed Services is benefiting strongly ensures strong balance sheet to support organic and from this shift with referenceable multi-million dollar acquisitive growth. consumption based managed services contracts. • Expecting EBITDA margin improvements through • Positioned to deliver strong organic growth and overhead leverage and expense savings. potential for acquisitive growth during FY16. • Strong pipeline of major strategic contracts to be • Predicting strong top line growth and margin awarded within coming 12 months to support improvements to deliver solid growth in earnings and organic growth in FY16 and increase contracted cash flow in FY16. Revenue into FY17. 1Percentage change based on normalised results as detailed in the FY14 Annual Report. — 6 EMPIRED LTDEMPIRED LTDRevenue $120,000,000 $100,000,000 $80,000,000 $60,000,000 $40,000,000 $20,000,000 $0 NPAT $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $0 EBITDA $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $0 2010 2011 2012 2013 2014 2015 2010 2011 2012 2013 2014 2015 EPS S T N E C 5 4 3 2 1 0 2010 2011 2012 2013 2014 2015 2010 2011 2012 2013 2014 2015 Note: All FY14 growth figures in graphs are based on FY14 normalised results as detailed in the FY14 Annual Report. — 7 ANNUAL REPORT 2015Chairman & CEO Review Dear Shareholders, On behalf of your Board of Directors we are proud to present We also experienced strong ‘run-rate’ organic growth through the the Empired Limited 2015 annual report. The 2015 financial year expansion of services under existing contracts and a range of new has been pivotal in the growth and development of Empired, professional services engagements. with targeted investments to enhance our strategic positioning, a material change to the scale and nature of Empired’s operations The combination of both our strategic and ‘run-rate’ organic and a year in which we again report record financial results in all growth has resulted in Empired expanding its billable workforce key metrics. across Australia and New Zealand by 100 staff organically during the 6 months to 30 June 2015. Acquisitive growth during the year was underpinned by the transformational acquisition of Intergen Limited which, combined Throughout the year we have experienced uncertain broader with our existing capability, positions Empired as an industry leader economic conditions and Empired’s business model has continued in the provision of Microsoft solutions across Australia and New to prove its resilience through the defensive nature of its revenue Zealand. The acquisition also introduced a substantial increase to streams. Our contracted revenue has grown substantially and our our contestable markets and geographic diversification, with $50m of annualised revenue and circa 300 staff located in New Zealand, opportunity to continue this trend has expanded, as organisations look to external service providers for efficiency, productivity and plus a developing presence in North America. competitive advantage in how they run and maintain their core business systems. Our organic growth in 2015 has also been pleasing. In the 2014 annual report we spoke about contesting $100m in major strategic contracts, of which we achieved an impressive success rate securing $65m in new large strategic contracts during the year. All of these contracts represent new annuity based contracted “Empired is well positioned to continue to deliver strong growth in FY16.” revenue to Empired with blue-chip enterprise clients that present During a year that experienced such transformational growth and further opportunity for us to expand the services being provided. change in the company, we are delighted to report that yet again Importantly, we are seeing most of our new engagements we have delivered record financial results. Revenue was up 88% to encompass multiple service lines, rather than many of our historical $130m (FY14 $69m), EBITDA was up 56% to $11m (FY14 $7m), NPAT managed services contracts which were confined to a single service was up 39% to $5.2m and Earnings per Share was up 13% to $0.048. stream. This substantiates that our customers are recognising the value our expanded service offering can bring to their businesses. It is important to note that included in our results are one-off expenses of $2.3m relating to acquisition and integration costs, — 8 EMPIRED LTDEMPIRED LTDRussell Baskerville Managing Director & CEO with estimated annualised expense savings of $3m relating to the introduced a number of initiatives to align, support and build integration activities completed during the period. upon our culture, some of which include regular communications from our leadership and middle management, opportunities for Whilst our strong growth has been working capital intensive, staff to address the broader staff group and the development of we have funded our organic growth solely from our current ‘stories’ to assist our broader management and team leaders in balance sheet, minimising equity dilution for our shareholders and their communication. We have introduced an office of innovation leveraging the EPS upside into FY16. We have closed the year with to foster creativity and initiative across our organisation and a a healthy cash balance and are in a position to continue to fund framework to ensure all our staff have exposure to our clients and organic growth. feel a part of our growth and success. Empired is well positioned to continue to deliver strong growth We are also introducing specific individual and team KPI’s that are in FY16. We enter FY16 with 919 staff up from 419 staff at the designed to drive cultural alignment, regular staff surveys that are start of the financial year. This, combined with our second half based on Net Promoter Score and regular customer satisfaction performance of $80m in revenue, provides confidence in our FY16 measures that allow customers to provide feedback on our culture revenue guidance of $155m to $175m. The result of integration and their perception of our brand experience. activities has introduced $3m of annualised expense savings, plus a more stable and mature operation that is expected to deliver It is these initiatives, along with the evolution of our customer improved margins at the gross profit, EBITDA and NPAT lines. service portfolio, that together drive our capability, personality and We have delivered on a number of key strategic initiatives during ultimately allow us to build a sustainable winning culture. FY15 that will underpin our success both into FY16 and for years to come. We have diversified our business by geography and industry, we have strongly grown the level of contracted annuity Making the small changes that support the big ones We made great progress in continuing to evolve and mature our revenue, introduced a number of IP based solutions and positioned organisational platform during the year. our business to take advantage of the key structural shifts in our industry around the prolific use of social, mobile, analytics and cloud. Our most strategic achievement has been the integration of all “Empired is centred on one common purpose; to achieve ‘Tomorrow’s Advantage, Delivered Today’.” Australian operations. This included phasing out all acquired Australian brands and transitioning to the Empired brand, restructuring our sales organisation to maximise our opportunity to sell a broader set of integrated services into our common client base, integrating our leadership and management teams and transitioning all of our business processes and systems into one common Enterprise Resource Planning system. Building on a winning culture Rapid expansion not only places pressure on operational processes This has led to a range of significant commercial benefits including and systems, but changes the fundamental personality of an the ability to sell an expanded set of integrated services to our organisation as a range of new leaders, management and staff customers, improved scalability, expense savings, improved service from a myriad of backgrounds and cultures are brought together quality and consistency, a single source of truth for historical into one organisation. information and significantly enhanced business visibility enabling forward planning and management. Rather than adopt a rigid philosophy of cultural assimilation, we have sought to embrace, encourage and learn from a range of very successful organisations and individuals in their own right. Consequently, our culture continues to change as our organisation evolves and matures. We have spent time as a team understanding what common “Our most strategic achievement has been the integration of all Australian operations.” themes exist within the companies we have acquired, what made Empired has undergone a rebranding exercise, revitalising our them successful and how we can embrace and build upon these to visual identity and associated purpose and values to reflect a more shape the broader Empired culture and organisational personality. contemporary organisation in line with the increased maturity and scale of our organisation today. Over the coming year there will be We centre on one common purpose; to achieve ‘Tomorrow’s a major focus on increasing our brand profile and broader market Advantage, Delivered Today’ using our ‘Initiative, Innovation and and industry engagement. Growth’ to build solutions that deliver efficiency, productivity and competitive advantage for our clients. We achieved ISO20000 certification, the premier standard for the delivery of enterprise managed services and enhanced our national practices Supporting this we have shaped our values and desired brand model to leverage internal IP, know how, enforce common practices experiences to match the fundamental behaviours expected from and optimise resource utilisation across Australia and New Zealand. Empired to make us “easy to do business with” and “easy to work for”. Our operations in Melbourne and Sydney have relocated from This is easy to say but far more difficult to engrain. We have multiple office locations to a single office in each region of a — 10 EMPIRED LTDEMPIRED LTD professional standard representative of a young, innovative We are making key investments in the development of our Data company that is well credentialed to provide solutions to some of Insights practice, a practice that is already delivering major Big Data the world’s largest organisations. Analytics projects for some of the largest organisations in the world. Empired is well placed to capitalise on the massive opportunity We have also completed the planning and contracting work to that exists around Analytics. We have relevant experience with facilitate a move from four offices to a single office in Perth. This global organisations in Infrastructure and Connectivity, real time facility will include a state of the art National Operations Centre data systems including big data sets combined with expertise that will not only be the heart of our managed services operation, in predictive analysis, systems integration and action orientated but also a compelling centrepiece for prospective clients and insights. This is a relatively unique combination of skills in the important to securing new blue-chip managed services contracts. current market and with the rapidly growing Internet of Things (IOT) we are confident that our investments in this area will lead to We implemented a range of systems targeted at optimising our sustainable high growth in this practice over the coming years. investment in human capital. This included the implementation of a single KPI management system, delivering an online employee Complementing the Analytics practice is our investments in portal to manage training and career development programs and Microsoft’s Dynamics offerings (Enterprise Resource Planning and the continued adoption of the SFIA framework (considered the leading Customer Relationship Management systems). These systems touch IT industry framework for career management) across our staff. almost every aspect of corporate operations and store a wealth It is all of the operational initiatives above combined that provide Dynamics space, combined with our expertise in real-time big data Empired with a scalable platform that allows us to continue to grow uniquely positions us to provide organisations with deep insight our business aggressively, whilst ensuring we have the appropriate into their business operations and market opportunities. Empired controls and systems in place to deliver this growth in a low risk, profitable and consistent manner whilst continuing to ensure the have won a raft of awards with Microsoft in this area and of note were named 2015 Microsoft Dynamics partner of the year in New of organisational data. Our credentials and experience in the highest levels of customer service. Positioning and investing in the future We continue to see a fundamental structural shift in how individuals and businesses alike embrace technology. These key themes can broadly be categorised into a number of major technology phenomena; the use of Social technology services and its increasing adoption in enterprise; the prolific use of Mobile applications and their increased usability through high speed mobile communications and low cost, high powered portable devices; Analytics being driven through the explosion of data generated by organisations today and the advent of the Internet of Things (IOT); plus the increasingly rapid transition to the Cloud. These trends are commonly referred to as SMAC. Zealand; the third year we have secured this high profile accolade in a row. We were also recognised as an Inner Circle Dynamics Partner for both Australia and New Zealand at the recent Microsoft Worldwide Partner Conference in Orlando. “Empired has identified SMAC trends early and has been busy investing and developing capability to maximise our opportunity as a result of these key structural shifts in our market.” The SMAC trends are fundamentally changing the business invested early to ensure we capture market share through this landscape. They are providing organisations with new ways to period of change. Our capability in this field was recognised by engage their customers, a better understanding of the buying Microsoft when we were one of only a handful of organisations behaviour of their customers, new opportunities to create in Australia to be awarded a position on their invitation-only CSP competitive advantage over their competition, new ways to (Cloud Service Provider) program. The Cloud market presents a vast opportunity and again we have attract and engage staff and opportunities to deliver a significant productivity improvements within their organisations that didn’t previously exist. Our enterprise managed services business has evolved in line with market trends and now includes the ability to offer service integration and cloud brokerage services. These services Empired has identified these trends early and has been busy complement and extend our mature IT Service Management investing and developing capability to maximise our opportunity as capability, which is already proven across an extensive range of a result of these key structural shifts in our market. major government and corporate organisations. These services are now part of our core offerings and components of them are Empired was recently named by Microsoft as one of only two ‘Red included in almost all of our implementation and managed services Carpet’ Enterprise Mobility Suite (EMS) partners in Australia. EMS engagements. is Microsoft’s fastest growing software suite globally and Microsoft predict the size of the EMS market opportunity to exceed that of We have developed a range of IP and expertise around the Microsoft their major productivity suite Office 365. Azure cloud platform. Additionally, we have assisted a range of clients Empired has also invested in developing a range of IP and know-how actively providing managed services to a number of large clients in the development and delivery of integrated mobile applications, that are operating critical infrastructure from the cloud platform. across Australia in their migration to the Azure cloud and are another high growth opportunity in the Mobility landscape. — 11 ANNUAL REPORT 2015 Mel Ashton Non-Executive Chairman To complement this we have also invested in our own high Our focus over the coming year is to capitalise on the key availability private cloud platform ‘flexScale’, which provides the investments we have made. We will bed in our new management opportunity for clients to operate critical enterprise systems in an and operating model, deliver on our talent management and Empired owned and managed private cloud environment. We can human capital strategies, continue to refine our sales model and go then fully integrate this offering using a range of processes and to market strategies and importantly, deliver on our commitments systems that Empired has developed to allow us to provide services to our clients. seamlessly between our platform and a range of other major public cloud platforms, including Microsoft Azure. We believe that for the We are confident that this focus during the current year will foreseeable future, enterprises will elect to implement technology enhance the profile of our brand, drive a clear purpose and solutions via a hybrid cloud platform, of which Empired is well direction throughout our organisation, build on our positioning positioned to deliver. in the market and our ability to drive large deals across all of the regions in which we operate. Finally, we have also developed a suite of services to accelerate the implementation of cloud platforms and our own IP for the As a result of this focus we expect improved margins, strong cash delivery of annuity based cloud applications. A great example of conversion, a strengthened balance sheet and record financial this is our ‘Cohesion’ platform. Based on Microsoft technologies, results in all key measures. it is an Enterprise Content and Records Management system that fast-tracks the transition of content and records management to the cloud. During the year Empired secured a $12m contract with the Ministry for Primary Industry to provide this service and we are very excited about its prospects both locally and internationally. “We are confident that the investments we have made have positioned Empired for long term sustainable success.” Well placed for an exciting success Over the last three years our company has grown phenomenally; We continue to assess the market for complimentary acquisitions that will accelerate our strategy and strengthen our positioning from $46m in revenue to $130m, from 208 staff to 919 staff, from around the key market opportunities being introduced by the 2 offices in Australia to 11 offices in 4 countries and ‘run-rate’ SMAC trends. revenue guidance for FY16 of $155m to $175m. This has been an incredible journey and we remain at the early positioned Empired for long term sustainable success. We see a stages of our growth trajectory. The structural shifts around SMAC rapidly growing market opportunity and are sharply focused on are creating huge opportunities for new services and new market capturing market share and translating this into long term value for We are confident that the investments we have made have entrance alike. It is changing the way in which businesses operate all of our key stakeholders. and is providing opportunities for organisations like Empired to assist some of the largest and most respected companies in the We would like to thank our staff, board, partners and clients for world to fundamentally transform their core business and operating their support and commitment to Empired. We recognise that it is models, to take advantage of a world that is underpinned by incumbent on Empired to deliver on our commitments to all of you technology, data and connected devices. and as your leaders we strive to ensure that we all collectively enjoy great success together. A common theme in our recent annual reports is that we continue to see volatile economic conditions at both a micro and macro To our shareholders and other capital market stakeholders, your level. This year has been no different and we expect again that support and commitment has been outstanding. We thank you for FY16 will be similar, we are however confident in our market your support and active involvement and assure you of our firm positioning and the alignment of our services to growth segments of the market. We have diversified our business considerably, focus on value creation for all of our stakeholders alike. limiting our exposure to any particular set of services, geographic Our future has never been brighter and we are looking forward to region, industry or clients. Alongside this we have focused on another exciting, successful year together. driving up the level of annuity revenue in our business and go into FY16 with the highest level of contracted revenue in our history. Yours Sincerely The result of these initiatives provides us with confidence that we go into FY16 positioned for success. We have a proven track record of navigating challenging economic conditions whilst delivering pleasing financial performance. This year we operate a business that presents a lower risk profile and are confident in our ability to continue to deliver on this track record. Russell Baskerville Mel Ashton Managing Director & CEO Non-Executive Chairman — 13 ANNUAL REPORT 2015Directors’ Report The directors present their report on the consolidated entity comprising Empired Limited (“the Company”) and its controlled entities (“the Group”) for the year ended 30 June 2015. The names of the Company’s directors in office during the year and until the date of this report are detailed below. Directors were in office for this entire period unless stated otherwise. Directors Name Age Experience and special responsibilities Mel Ashton 57 Mr Ashton is a Fellow of the Australian Institute of Company Directors and a Fellow of the Institute of Chartered Non-Executive Chairman Accountants in Australia and has over 30 years corporate experience in a wide range of industries. Other current directorships: - Gryphon Minerals Limited - Venture Minerals Limited Previous directorships (last 3 years): - Renaissance Minerals Limited - Resource Development Group Limited - Barra Resources Limited Russell Baskerville 37 Mr Baskerville is an experienced business professional and has worked in the IT industry for in excess of 15 Managing Director & CEO years. He has extensive knowledge in both the strategic growth and development of technology businesses balanced by strong commercial and corporate skills including strategy development and execution, IPOs, capital raisings, divestments, mergers and acquisitions. Mr Baskerville has been the Managing Director of Empired for ten years and has successfully listed the company on ASX and made a number of successful acquisitions. Mr Baskerville was previously a Non Executive Director of BigRedSky Limited successfully developing and commercialising a SaaS delivered eRecruitment tool prior to the company being acquired by Thomson Reuters. Previous directorships (last 3 years): - None — 15 ANNUAL REPORT 2015 Directors Name Richard Bevan Non-Executive Director Age Experience and special responsibilities 49 Mr. Bevan joined the board as a Non-Executive director on 31 January 2008 with corporate and senior management experience including various directorship’s and CEO/MD roles in ASX listed and private companies. Mr Bevan’s brings experience in the execution and integration of mergers, acquisitions and other major corporate transactions. Mr Bevan has been involved in a number of businesses in areas as diverse as healthcare, construction and engineering, resources and information services. Mr Bevan’s roles within these businesses have included strategic operational management, implementing organic growth strategies, business integration and raising capital in both public and private markets. Other current directorships: - Cassini Resources Limited Previous directorships (last 3 years): - Metals of Africa Limited John Bardwell Non-Executive Director 55 Mr Bardwell has had a long career in the financial services and IT sectors through a variety of senior leadership positions. Previous executive experience includes Head of IT Services at Bankwest, Managed Services Director at Unisys West and more recently as the General Manager of Delivery Services at Empired Ltd prior to his appointment to the Board as a Non-Executive Director. Mr Bardwell holds a Bachelor of Business and a Graduate Diploma in Applied Finance and Investment. He is a Graduate Member of the Australian Institute of Company Directors and a Fellow of the Financial Services Institute of Australasia. Chris Ryan Non Executive Director 52 Mr Ryan joined the Board on 1 May 2015. He has had extensive executive and corporate advisory experience in Human Resources across a broad range of industries. This includes 10 years leading the Group HR function for diversified industrial business Wesfarmers, where he led the people aspects of major acquisitions and integrations, including the Coles Group transaction. Through his advisory practice Mr Ryan advises Boards and CEOs on HR strategy, executive remuneration and executive talent management. Previously he has been an independent director of ASX listed Resource Development Group. Mr Ryan holds a Bachelor of Business, is a graduate member of the Australian Institute of Company Directors, a Fellow of the Australian Institute of Management and a Fellow of the Australian Human Resources Institute. He holds the honorary title of Adjunct Professor with Curtin University Business School where he pursues the connection of industry with education, and is a member of the Advisory Board of the university’s School of Management. Previous directorships (last 3 years): - Resource Development Group Limited — 16 EMPIRED LTDEMPIRED LTD Company Secretary Name Age Experience and special responsibilities Mark Waller CFO & Company Secretary 35 Mr Waller has responsibility for ensuring the necessary operational and financial processes and infrastructure are in place to support the strategic direction and continued growth of Empired. Mr Waller holds a degree in business from Curtin University majoring in Accounting and Business Law and is a Certified Practicing Accountant. Mr Waller has worked in the Professional Services sector for over fifteen years and also brings experience from directorships with IT companies involved in early stage development and commercialization to eventual sale to working for Ernst & Young. Mr Waller was previously a Non Executive Director of BigRedSky Limited successfully developing and commercialising a SaaS delivered eRecruitment tool prior to the company being acquired by Thomson Reuters. Directors’ Meetings The number of Directors’ meetings and the number of meetings attended by each Director during the year are: Name of Director Russell Baskerville Mel Ashton Richard Bevan John Bardwell Chris Ryan No. of meetings held while a Director No. of Meetings Attended as a Director during the year ended 30 June 2015 No. of Audit meetings Attended during the year ended 30 June 2015 2 2 2 2 - 6 6 6 6 2 6 6 6 5 2 — 17 ANNUAL REPORT 2015 COLOUR PALETTE Here is a guide to assist you when using colours in different scenarios: 116 296 Here is a guide to assist you when using colours in different scenarios: 165 306 COLOUR PALETTE 296 (40%) PANTONE: COATED STOCK PANTONE: ALL STOCK PANTONE: ALL STOCK PANTONE: ALL STOCK PANTONE: ALL STOCK CMYK CMYK CMYK CMYK CMYK 116 296 306 165 296 (40%) PANTONE: COATED STOCK PANTONE: ALL STOCK PANTONE: ALL STOCK PANTONE: ALL STOCK PANTONE: ALL STOCK 0 18 100 0 90 75 55 70 45 33 30 0 80 5 5 0 0 75 95 0 CMYK CMYK CMYK CMYK CMYK RGB RGB RGB RGB RGB 0 18 100 0 90 75 55 70 45 33 30 0 80 5 5 0 0 75 95 0 RGB RGB RGB RGB RGB 252 206 0 8 26 40 148 155 162 0 177 224 252 206 0 255 104 29 8 26 40 148 155 162 0 177 224 255 104 29 HEX HEX HEX HEX HEX HEX HEX HEX HEX HEX FFCE00 081A28 949BA2 00B1E0 FF681D FFCE00 081A28 949BA2 00B1E0 FF681D 115 PANTONE: UNCOATED STOCK 115 PANTONE: UNCOATED STOCK This chart is a visual representation explaining the hierarchy of our colour palette COLOUR BALANCE This chart is a visual representation explaining the hierarchy of our colour palette COLOUR BALANCE Principal Activities The principal activity of the consolidated entity during the year is the continued operation of its IT services business resulting in the provision of services covering software systems, consulting and infrastructure design and deployment. Revenue by Industry Government (23%) ICT (15%) Manufacturing & transport (7%) Other (8%) Wholesale & Retail Trade (5%) Health & Education (8%) Finance & Insurance (12%) Energy & Natural Resources (22%) Based on second half 2015 Financial Year results There were no significant changes in the nature of the activities carried out during the year. Financial Position The net assets of the consolidated group have increased by $18,248,824 from 30 June 2014 to $52,715,140. This is largely due Significant changes in the state of affairs On the 31st of October 2014 Empired Limited (“Empired”) acquired to the following factors: 100% of the shares in Intergen Limited (“Intergen”) for $17.4 million. - The acquisition of Intergen - Improved operating performance of the Group - Issue of shares 4,265,204 shares were issued during the year as part of the purchase price to acquire Intergen. During the past four financial years, the group has invested in Events subsequent to reporting date There are no events to report subsequent to reporting date. Environmental Regulation The consolidated entity’s operations are not subject to any significant environmental regulations under a law of the Commonwealth or State or Territory in Australia. infrastructure to secure its long-term success. In particular, strategic investments have been made in growth by acquisition as well as expanding investment in key business segments. The Company’s holdings in associated companies and joint venture entities have increased by $30,267,072 to $47,453,244. Dividends The directors do not recommend payment of a dividend (2014: 1 cent). — 18 EMPIRED LTDEMPIRED LTD COLOUR PALETTE Here is a guide to assist you when using colours in different scenarios: 116 296 306 165 296 (40%) PANTONE: COATED STOCK PANTONE: ALL STOCK PANTONE: ALL STOCK PANTONE: ALL STOCK PANTONE: ALL STOCK CMYK CMYK CMYK CMYK CMYK 0 18 100 0 90 75 55 70 45 33 30 0 80 5 5 0 0 75 95 0 RGB RGB RGB RGB RGB 252 206 0 8 26 40 148 155 162 0 177 224 255 104 29 FFCE00 081A28 949BA2 00B1E0 FF681D 115 PANTONE: UNCOATED STOCK This chart is a visual representation explaining the hierarchy of our colour palette COLOUR BALANCE Operating Results for the Year The net profit after tax from continuing operations for the year for The directors in accordance with the advice from the audit committee are satisfied that non-audit services provided during the consolidated entity is $5,273,514 (2014: $3,793,491). Refer to the year did not compromise the external auditors independence the operational results within the Chairman and CEO Review. in accordance with APES 110:Code of Ethics for Professional Accountants set by the Accounting Professional and Ethical Likely Developments Any likely developments are disclosed in the Chairman and CEO Standards Board. Review. Share Options and Performance Rights Granted to Directors and Officers Performance Rights were granted to Executive Officers under the Long Term Incentive Plan. Information relating to the grants is at note 16 to the financial statements. Indemnities given and insurance premiums paid to auditors and officers During the year, Empired Limited paid a premium to insure officers of the Group. The officers of the Group covered by the insurance policy include all directors. The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought Unissued Shares At the date of this report, there were 500,000 unissued ordinary against the officers in their capacity as officers of the Group, and any other payments arising from liabilities incurred by the officers shares under options. Refer to note 16 of the financial statements in connection with such proceedings, other than where such for more detail. Option holders do not have any right, by virtue liabilities arise out of conduct involving a wilful breach of duty by of the option, to participate in any share issue of the Company or the officers or the improper use by the officers of their position or any related body corporate or in the interest issue of any other registered scheme. of information to gain advantage for themselves or someone else to cause detriment to the Group. Shares Issued as a result of the exercise of options 400,000 share options were exercised during the financial year. Details of the amount of the premium paid in respect of the insurance policies is not disclosed as such disclosure is prohibited HEX HEX HEX HEX HEX Refer to note 16 for details. under the terms of the contract. Share issues during the year 14,000,000 shares were issued during the year to raise capital for The Group has not otherwise, during or since the end of the financial year, except to the extent permitted by law, indemnified or the acquisition of Intergen Limited. Refer to note 22 for details. agreed to indemnify any current or former officer or auditor of the Auditor’s Independence Declaration The lead Auditor’s Independence Declaration for the year ended 30 June 2015 has been received and can be found on page 92 of the financial report. Non-Audit Services Grant Thornton Audit Pty Ltd was engaged to perform the due Group against a liability incurred as such by an officer or auditor. Proceedings on behalf of the company No person has applied for leave of court to bring proceedings on behalf of the company or intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for all or any part of those proceedings. diligence of Intergen Limited prior to acquisition and appointed to The company was not a party to any such proceedings during the provide tax compliance services. year. Contracted Revenue in the 2015 Financial Year Multi Year Contracts Additional Services from Multi Year Contracts New Clients / Individual Contracts FY12 FY13 FY14 FY15 — 19 ANNUAL REPORT 2015 COLOUR PALETTE Here is a guide to assist you when using colours in different scenarios: 116 296 306 165 296 (40%) PANTONE: COATED STOCK PANTONE: ALL STOCK PANTONE: ALL STOCK PANTONE: ALL STOCK PANTONE: ALL STOCK CMYK CMYK CMYK CMYK CMYK 0 18 100 0 90 75 55 70 45 33 30 0 80 5 5 0 0 75 95 0 RGB RGB RGB RGB RGB 252 206 0 8 26 40 148 155 162 0 177 224 255 104 29 HEX HEX HEX HEX HEX Here is a guide to assist you when using colours in different scenarios: COLOUR PALETTE FFCE00 081A28 949BA2 00B1E0 FF681D 115 PANTONE: UNCOATED STOCK This chart is a visual representation explaining the hierarchy of our colour palette COLOUR BALANCE 115 PANTONE: UNCOATED STOCK 116 296 306 165 296 (40%) PANTONE: COATED STOCK PANTONE: ALL STOCK PANTONE: ALL STOCK PANTONE: ALL STOCK PANTONE: ALL STOCK CMYK CMYK CMYK CMYK CMYK 0 18 100 0 90 75 55 70 45 33 30 0 80 5 5 0 0 75 95 0 RGB RGB RGB RGB RGB 252 206 0 8 26 40 148 155 162 0 177 224 255 104 29 HEX HEX HEX HEX HEX FFCE00 081A28 949BA2 00B1E0 FF681D This chart is a visual representation explaining the hierarchy of our colour palette COLOUR BALANCE Remuneration Report (Audited) The board seeks to set aggregate remuneration at a level that provides the company with the ability to attract and retain directors This report outlines the remuneration arrangements in place of the highest calibre, whilst incurring a cost that is acceptable to for Non-Executive Directors, the Executive Director and other shareholders. Key Management Personnel of Empired Limited (the Company), prepared in accordance with the Corporation Act 2001 and Structure Corporations Regulations 2001. The constitution and the ASX Listing Rules specify that the aggregate remuneration of non-executive directors shall be Remuneration Philosophy The performance of the Company depends upon the quality of its determined from time to time by a general meeting. An amount not exceeding the amount determined is then divided between directors and executives. To prosper, the Company must attract, the directors as agreed. The latest determination was at the Annual motivate and retain highly skilled directors and executives. General Meeting held on the 27th of November 2014 when shareholders approved an aggregated remuneration of $500,000 To this end, the Company embodies the following principles in its per year. remuneration framework: • Provide competitive rewards to attract high calibre executives; by shareholders and the manner in which it is apportioned • Link executive rewards to shareholder value; amongst directors is reviewed from time to time. The Board • Have a portion of certain executive’s remuneration ‘at risk’, considers advice from external consultants as well as the fees dependent upon meeting pre-determined performance paid to non-executive directors of comparable companies when benchmarks; and undertaking the annual review process. The amount of aggregated remuneration sought to be approved • Establish appropriate, demanding performance hurdles for variable executive remuneration. Remuneration Committee Due to the structure of the Board, a separate remuneration The remuneration of Non-Executive Directors, the Executive Director and other Key Management Personnel for the period ended 30 June 2015 is detailed in the table in Section E. committee is not considered to add any efficiencies to the process of determining the levels of remuneration for the Directors and key B. EXECUTIVE REMUNERATION Objective executives. The Board considers that it is more appropriate that it The company aims to reward executives with a level and mix of set aside time at Board meetings to address matters that would remuneration commensurate with their position and responsibilities normally fall to the remuneration committee. within the company and so as to: Remuneration Structure In accordance with the best practice corporate governance, the • Reward executives for company, business unit and individual performances against targets set by reference to appropriate structure of non-executive director and executive remuneration is benchmarks; separate and distinct. A. NON-EXECUTIVE DIRECTOR REMUNERATION Objective • 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. Headcount by Region East Coast, Australia (27%) West Coast, Australia (34%) New Zealand (36%) USA (3%) — 20 EMPIRED LTDEMPIRED LTD COLOUR PALETTE Here is a guide to assist you when using colours in different scenarios: 116 296 306 165 296 (40%) COLOUR PALETTE Here is a guide to assist you when using colours in different scenarios: 252 206 0 8 26 40 148 155 162 0 177 224 255 104 29 252 206 0 8 26 40 148 155 162 0 177 224 255 104 29 PANTONE: COATED STOCK PANTONE: ALL STOCK PANTONE: ALL STOCK PANTONE: ALL STOCK PANTONE: ALL STOCK CMYK CMYK CMYK CMYK CMYK 0 18 100 0 90 75 55 70 45 33 30 0 80 5 5 0 0 75 95 0 RGB RGB RGB RGB RGB HEX HEX HEX HEX HEX FFCE00 081A28 949BA2 00B1E0 FF681D 115 PANTONE: UNCOATED STOCK 116 296 306 165 296 (40%) PANTONE: COATED STOCK PANTONE: ALL STOCK PANTONE: ALL STOCK PANTONE: ALL STOCK PANTONE: ALL STOCK CMYK CMYK CMYK CMYK CMYK 0 18 100 0 90 75 55 70 45 33 30 0 80 5 5 0 0 75 95 0 RGB RGB RGB RGB RGB HEX HEX HEX HEX HEX FFCE00 081A28 949BA2 00B1E0 FF681D 115 PANTONE: UNCOATED STOCK This chart is a visual representation explaining the hierarchy of our colour palette COLOUR BALANCE This chart is a visual representation explaining the hierarchy of our colour palette COLOUR BALANCE Revenue by Country Australia (64%) New Zealand (30%) USA (6%) Based on second half 2015 Financial Year results Structure In determining the level of remuneration paid to senior executives Variable Remuneration - Short Term Incentive (STI) Objective of the company, the Board took into account available benchmarks The objective of the STI program is to link the achievement of the and prior performance. Group’s operational targets with the remuneration received by the Remuneration consists of the following key elements: - Fixed Remuneration - Variable Remuneration - Short Term Incentive (STI); and - Long Term Incentive (LTI). 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 The proportion of fixed remuneration and variable remuneration both financial and non-financial measures of performance. Typically (potential short term and long term incentives) is established for included are measures such as contribution to net profit after each senior executive by the Board. The table in Section E below tax, customer service, risk management, and leadership/team details the fixed and variable components (%) of the executives of contribution. the company. Fixed Remuneration Objective Any STI payments are subject to the approval of the Board. Payments made are delivered as a cash bonus in the following financial year. For the 2015 financial year 100% of the STI cash Fixed remuneration is reviewed annually by the board. The process bonus has been paid to executives (2014: 96%). 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 Variable Pay - Long Term Incentive (LTI) Objective practices. As noted above, the Board has access to external advice The objective of the LTI plan is to reward senior executives in a independent of management. manner that aligns this element of remuneration with the creation of shareholder wealth. Structure Senior executives are given the opportunity to receive their fixed As such, LTI grants are only made to executives who are able to (primary) remuneration in a variety of forms including cash and influence the generation of shareholder wealth and thus have a fringe benefits such as motor vehicles and expense payment plans. direct impact on the Group’s performance against the relevant long It is intended that the manner of payment chosen will be optimal term performance hurdle. for the recipient without creating undue cost for the group. Structure The fixed remuneration component of the company executives is LTI grants to executives are delivered in the form of performance detailed in the table in Section E. rights (2014: performance rights). — 21 ANNUAL REPORT 2015COLOUR PALETTE Here is a guide to assist you when using colours in different scenarios: 116 296 306 165 296 (40%) PANTONE: COATED STOCK PANTONE: ALL STOCK PANTONE: ALL STOCK PANTONE: ALL STOCK PANTONE: ALL STOCK CMYK CMYK CMYK CMYK CMYK 0 18 100 0 90 75 55 70 45 33 30 0 80 5 5 0 0 75 95 0 RGB RGB RGB RGB RGB 252 206 0 8 26 40 148 155 162 0 177 224 255 104 29 HEX HEX HEX HEX HEX FFCE00 081A28 949BA2 00B1E0 FF681D 115 PANTONE: UNCOATED STOCK This chart is a visual representation explaining the hierarchy of our colour palette COLOUR BALANCE COLOUR PALETTE Here is a guide to assist you when using colours in different scenarios: 116 296 306 165 296 (40%) PANTONE: COATED STOCK PANTONE: ALL STOCK PANTONE: ALL STOCK PANTONE: ALL STOCK PANTONE: ALL STOCK CMYK CMYK CMYK CMYK CMYK 0 18 100 0 90 75 55 70 45 33 30 0 80 5 5 0 0 75 95 0 RGB RGB RGB RGB RGB 252 206 0 8 26 40 148 155 162 0 177 224 255 104 29 HEX HEX HEX HEX HEX FFCE00 081A28 949BA2 00B1E0 FF681D 115 PANTONE: UNCOATED STOCK This chart is a visual representation explaining the hierarchy of our colour palette COLOUR BALANCE The table in Section C provides details of performance rights and options granted and the value of equity instruments granted, exercised and lapsed during the year. The performance rights were issued free of charge. Each performance right entitles the holder to subscribe for one fully paid ordinary share in the entity based on achieving vesting conditions at a nil exercise price. For further details of the terms and conditions including the service and performance criteria that must be met refer to note 16. Consequence of performance on shareholder wealth In considering the Group’s performance and benefits for shareholder wealth, the Board have regard to the following indices in respect of the current financial year and the previous four financial years: Item EPS (cents) Dividends (cents per share) Net profit/(loss) ($000) Share price ($) 2015 4.8198 - 5,233 0.77 2014 2013 2012 2011 4.3266 1.00 3,793 0.60 2.3640 0.50 2,137 0.62 2.5876 - 1,273 0.22 0.4358 - 202 0.28 C. KEY MANAGEMENT PERSONNEL (i) Directors The following persons were directors of Empired Limited during the financial year: • M Ashton • R Bevan • J Bardwell • C Ryan (Appointed 1 May 2015) • R Baskerville (ii) Other key management personnel The following persons also had authority and responsibility for planning, directing and controlling the activities of the Group during the financial year: • M Waller (Chief Financial Officer and Company Secretary) • R McCready (Chief Operating Officer) (iii) Remuneration of Key Management Personnel Information regarding key management personnel compensation for the year ended 30 June 2015 is provided in table in Section E of this remuneration report. Revenue by Region East Coast (31%) NZ (30%) USA (6%) West Coast (33%) — 22 Based on second half 2015 Financial Year results EMPIRED LTDEMPIRED LTD— 23 ANNUAL REPORT 2015(iv) Option holdings of directors and executives The movement during the reporting period in the number of options over ordinary shares in Empired Limited held, directly, indirectly or beneficially, by each of the key management person, including their related parties, is as follows: 30 June 2015 Directors R. Baskerville M. Ashton R. Bevan C. Ryan J. Bardwell Executives M. Waller R McCready Total Balance at beg of period 01-Jul-14 Granted as Remuneration Options Exercised/ disposed Net Change Other Balance at end of period 30-Jun-15 Not Vested & Not Exercisable Vested & Exercisable - - - - - - 500,000 500,000 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 500,000 500,000 - - - - - - - - - - - - - - 500,000 500,000 (v) Shareholdings of Directors and Executives Shares held in Empired Limited All equity transactions with directors 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 2015 Balance 01-Jul-14 Granted as Remuneration On Exercise of Options Net Change Other Balance 30-June-15 Ord Pref Ord Pref Directors R. Baskerville M. Ashton R. Bevan C. Ryan J. Bardwell Total Executives M. Waller R. McCready Total - - - - - - - - - (50,400) 9,846,833 - - 17,000 - - - 17,000 4,099,904 (33,400) 13,963,737 (178,695) - 1,689,375 325,000 (178,695) 2,014,375 - - - - - - - - - 9,097,233 - - - 4,099,904 13,197,137 1,343,070 200,000 1,543,070 - - - - - - - - - 800,000 - - - - 800,000 525,000 125,000 650,000 — 24 EMPIRED LTDEMPIRED LTD D. SERVICE AGREEMENTS Russell Baskerville – Managing Director Terms of Agreement – commenced 1 July 2005, until terminated by either party. Salary – base $450,000 per annum with an additional STI cash bonus capped at 25% of base fees and LTI bonus capped at 25% of base fees. Termination – three months written notice or three months remuneration in lieu. Mel Ashton – Chairman Terms of Agreement - appointed 21 December 2005, until terminated by either party. Fee – fixed $87,500 per annum. Richard Bevan – Non Executive Director Terms of Agreement – appointed 31 January 2008, until terminated by either party. Fee – fixed $60,000 per annum. John Bardwell – Non Executive Director Terms of Agreement – appointed 26 September 2011, until terminated by either party. Fee – fixed $60,000 per annum. Chris Ryan – Non Executive Director Terms of Agreement – appointed 1 May 2015, until terminated by either party. Fee – fixed $60,000 per annum. Mark Waller – Company Secretary and Chief Financial Officer Terms of Agreement – commenced 18 April 2005, until terminated by either party. Salary – base $316,454 per annum with an additional STI cash bonus capped at 30% of base fees and LTI bonus capped at 25% of base fees. Termination – one month’s written notice or one month’s remuneration in lieu. Rob McCready – Chief Operating Officer Terms of Agreement – commenced 3 October 2011, until terminated by either party. Salary – base $316,454 per annum with an additional STI cash bonus capped at 30% of base fees and LTI bonus capped at 25% of base fees. Termination – one month’s written notice or one month’s remuneration in lieu. Revenue Profile by Line of Business Apps & Consulting Services Infrastructure Services 2015 2014 73% 27% 53% 47% 2013 24% 76% 0% 25% 50% 75% 100% — 25 Here is a guide to assist you when using colours in different scenarios: COLOUR PALETTE COLOUR PALETTE Here is a guide to assist you when using colours in different scenarios: 116 296 306 165 PANTONE: COATED STOCK 116 PANTONE: ALL STOCK 296 PANTONE: ALL STOCK 306 PANTONE: ALL STOCK 165 296 (40%) 296 PANTONE: ALL STOCK (40%) PANTONE: COATED STOCK PANTONE: ALL STOCK PANTONE: ALL STOCK PANTONE: ALL STOCK PANTONE: ALL STOCK CMYK CMYK CMYK CMYK CMYK CMYK 0 18 100 0 90 75 55 70 CMYK CMYK 45 33 30 0 CMYK 80 5 5 0 CMYK 0 75 95 0 0 18 100 0 RGB 90 75 55 70 RGB 45 33 30 0 RGB 80 5 5 0 RGB 0 75 95 0 RGB 252 206 0 RGB RGB 8 26 40 148 155 162 RGB 0 177 224 RGB 255 104 29 RGB 8 26 40 HEX HEX 081A28 148 155 162 HEX 0 177 224 HEX 255 104 29 HEX 949BA2 HEX HEX 00B1E0 FF681D HEX 081A28 949BA2 00B1E0 FF681D 252 206 0 HEX HEX FFCE00 FFCE00 115 PANTONE: UNCOATED STOCK 115 PANTONE: UNCOATED STOCK This chart is a visual representation explaining the hierarchy of our colour palette COLOUR BALANCE COLOUR BALANCE This chart is a visual representation explaining the hierarchy of our colour palette ANNUAL REPORT 2015COLOUR PALETTE Here is a guide to assist you when using colours in different scenarios: 116 296 306 165 296 (40%) PANTONE: COATED STOCK PANTONE: ALL STOCK PANTONE: ALL STOCK PANTONE: ALL STOCK PANTONE: ALL STOCK CMYK CMYK CMYK CMYK CMYK 0 18 100 0 90 75 55 70 45 33 30 0 80 5 5 0 0 75 95 0 RGB RGB RGB RGB RGB 252 206 0 8 26 40 148 155 162 0 177 224 255 104 29 HEX HEX HEX HEX HEX FFCE00 081A28 949BA2 00B1E0 FF681D 115 PANTONE: UNCOATED STOCK This chart is a visual representation explaining the hierarchy of our colour palette COLOUR BALANCE Revenue Profile by Line of Business Apps & Consulting Services Infrastructure Services 2015 2014 2013 $0 $50,000,000 $100,000,000 $150,000,000 $200,000,000 E. DETAILS OF REMUNERATION Details of the nature and amount of each element of the remuneration of each Key Management Personnel (`KMP’) of Empired Limited are shown in the table below: Name of Employee Year Short Term Benefits Salary & Fees Cash STI Post Employment Superannuation Share-based Payments $ 87,500 75,000 54,795 45,872 10,000 - 55,662 50,000 2015 2014 2015 2014 2015 2014 2015 2014 $ - - - - - - - - $ - - 5,205 4,243 - - 4,338 - $ - - - - - - - - Total $ 87,500 75,000 60,000 50,115 10,000 - 60,000 50,000 % Perfomance Related % of Cash STI vested during the year - - - - - - - - - - - - - - - - 2015 2014 450,000 360,000 250,000 180,188 - - 367,875 106,650 1,067,875 646,838 57.86% 44.35% 100% 100% 2015 2014 2015 2014 316,453 306,987 94,936 92,171 316,451 298,341 94,936 78,345 30,063 28,419 30,063 27,596 — 26 192,375 48,600 633,827 476,177 45.33% 29.57% 136,125 48,600 577,575 452,882 40.01% 28.03% 100% 100% 100% 100% Non-executive Directors M. Ashton Non-Executive Chairman R. Bevan Non-Exectuive Director C. Ryan Non-Executive Director J. Bardwell Non-Executive Director Executive Directors R. Baskerville Chief Executive Key Management M. Waller Company Secretary and Chief Financial Officer R. McCready Chief Operating Officer EMPIRED LTDEMPIRED LTD Performance Linked Compensation Earnings per share and time vesting conditions are two types of targets considered in setting the share-based payments. F. OTHER INFORMATION Options granted to the Executive Team are under the executive share option plan (ESOP1). All options refer to options over ordinary shares of the Company, which are exercisable on a one-for-one basis under the terms of the agreements. Non-Executive Directors are not entitled to participate in the plan. Refer to Note 16(a) for the vesting conditions. No options were granted during the financial year (2014: nil). Performance Rights granted to the Executive Team are under the Company’s Performance Rights Plan. Each performance right granted under this plan is subject to both performance criteria based on absolute EPS and a vesting period. Refer to note 16(c) for more detail regarding the plan. Options and Performance Rights granted as part of remuneration: 2015 Grant Date Grant Number Average Value per option at grant date Value of options granted during the year ($) Total value of options granted during year ($) Non-Executive Directors M. Ashton R. Bevan C. Ryan J. Bardwell - - - - - - Executive Directors R. Baskerville R. Baskerville 25/08/2014 27/11/2014 600,000 1,050,000 Key Management M. Waller M. Waller R. McCready 25/08/2014 28/01/2015 28/01/2015 400,000 600,000 600,000 - - - $0.65 $0.70 $0.65 $0.61 $0.61 - - - 72,563 275,625 48,375 136,125 136,125 - - - 72,563 275,625 48,375 136,125 136,125 2014 Grant Date Grant Number Average Value per option at grant date Value of options granted during the year ($) Total value of options granted during year ($) Non-Executive Directors M. Ashton R. Bevan J. Bardwell - - - - - - - - - - - - - - - Executive Directors R. Baskerville 31/10/2013 900,000 $0.78 106,650 106,650 Key Management M. Waller R. McCready 24/03/2014 24/03/2014 600,000 600,000 $0.53 $0.53 48,600 48,600 48,600 48,600 — 27 ANNUAL REPORT 2015 F. OTHER INFORMATION Director’s and Key Management Personnel Equity Holdings The following table sets out a summary of each Director’s (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 Richard Bevan John Bardwell Chris Ryan Key Management Mark Waller Rob McCready Ordinary Shares 9,846,833 - - 4,099,904 17,000 Ordinary Shares 1,689,375 325,000 Options Performance Rights - - - - - Options - 500,000 2,350,000 - - - - Performance Rights 1,450,000 1,450,000 G. VOTING AND COMMENTS MADE AT THE COMPANY’S 2014 ANNUAL GENERAL MEETING Empired Limited received 100% of “yes” votes on its remuneration report for the 2014 financial year. The Company did not receive any specific feedback at the AGM on its remuneration report Signed in accordance with a resolution of Directors. Russell Baskerville Managing Director & CEO 27th August 2015 — 28 EMPIRED LTDEMPIRED LTD— 29 ANNUAL REPORT 2015CASE STUDY: Business & Productivity Solutions “The collaboration capabilities delivered by the Empired solution has led to a more enriched and productive team environment between staff and researchers.” Our client is one of the largest and most successful medical Working in collaboration with the client, Empired rapidly designed research institutes in Australia, comprising a dedicated and a number of components of the solution and lead the various work diverse team of more than 500 staff and students and actively streams by providing expertise from across the Empired portfolio. collaborates with researchers from over 30 countries globally. They Empired’s multidiscipline, tailored solution has positively impacted had no existing methods for enabling collaboration between their a range of areas within the client’s business. The communications researchers, who are often based in geographically dispersed team now has a modern, effective and responsive platform for locations around the world. communicating news and announcements and promote funding activities across the organisation. The limitations were imposed by a lack of controllable software and environments. This, when coupled with the organisations The IT Services team can quickly on-board staff and researchers inability to provide easily accessible content areas where staff into the environment, with a single account providing access to the and researchers can find, consume and use institute resources, intranet, collaboration portal, exchange mailbox, staff directory and had created a barrier for collaboration and effective information Yammer. All staff and researchers are now using modern, browser consumption. based tools that are no longer limited by the technology or environment. They can also quickly and effectively create, manage As a result, Office 365 was identified as an ideal platform to both and share information in a centralised location, which can be revitalise the intranet and provide meaningful methods to promote dispersed across the organisation through the use of Yammer and document management, collaboration and ideation. While the new features of Office 365, such as Delve and Groups. client had determined that Office 365 was the platform of choice, they had not been able to design the platform to effectively deliver the various technologies in a cohesive, consistent manner. The collaboration capabilities delivered by the Empired solution has led to a more enriched and productive team environment between staff and researchers. The opportunities for knowledge sharing and dynamic social engagement continues to increase the effectiveness of the client’s research efforts, while positively influencing the community. — 30 EMPIRED LTDCASE STUDY: Applications & Consulting “The service has been so successful that since commencement the customer has added further applications to the scope knowing that they can rely on Empired to provide the service they need to fully support their business.” Our client, a large integrated resources business, had a diverse The service is based around the Empired National Operations range of over 170 applications that were critical to the company Centre, which provides 24x7 coverage to support the client’s from both a revenue earning and compliance perspective, in the operations. Being a leveraged centre, Empired can also provide this management of field operations spanning mining, processing, rail coverage at an attractive and competitive price point. The contract and plant. These applications were developed and supported by builds off the deep domain expertise in resources and utilises the numerous vendors and internal teams and the level and quality of mature and sophisticated support model in place at Empired. support was inconsistent. The customer required a partner able to simplify and improve the quality of the support in a sustainable Since being awarded the contract, Empired has successfully manner. transitioned over 170 applications with the customer noting the improved support. The service has been so successful that since Through a competitive tender process that was contested by a commencement the customer has added further applications to number of multinational companies, Empired was selected as the the scope knowing they can rely on Empired to provide the level partner to provide this complex managed service. The selection of service they need to support their business. Empired continues was on the back of an impressive record of successfully delivering to provide significant project services to the customer and always multi-million technology solutions along with unmatched depth strives to ensure a high level of customer satisfaction, one of and breadth that Empired had built through organic growth and Empired’s key service values. acquisition. — 31 ANNUAL REPORT 2015CASE STUDY: Infrastructure Services “Empired’s mature services model, leveraging an end to end ISO 20000 certified service management framework, has enabled the client to embark on an ambitious evolution of the Information Management support of their core business.” Our client, a global Oil and Gas exploration and development Working with the client, Empired has adopted and adapted company, required a service delivery partner who could its mature service management framework to rapidly evolve bring best practice to deliver stability and structure to their the client’s delivery management framework. This has enabled Information Management environment, while enabling new them to deliver operational services according to agreed service generation service support across cloud, managed infrastructure levels with their business, enhancing end user experience and managed applications. and satisfaction, as well as providing demonstrable returns in To enable the business to achieve its vision of being the premier Oil and Gas exploration and development company in their Empired’s mature services model, leveraging an end to end chosen geography, the Information Management function ISO 20000 certified service management framework, has also needed to be a strategic enabler through delivery of high enabled the client to embark on an ambitious evolution of the quality information management services and delivery of world Information Management support of their core business. efficiency of operations and reduced risks. leading solutions. Empired’s Infrastructure Services team is responsible for critical partner to deliver, implement and support their systems managing the core information management systems covering for both their corporate environment and services associated Service Management, Server, Communications/Networking, a with their dynamic Oil and Gas exploration business. This 24/7 Call Centre and a managed application portfolio across engagement has enabled Empired to develop a new regional on premise, public and private cloud solutions. Additionally, delivery location in South East Asia, opening new markets and Over the next five years the client will work with Empired as a Empired is engaged to provide thought leadership and innovation aligned to a targeted portfolio of transformation projects through the input of our Solutions Architecture group. opportunities. — 32 EMPIRED LTD — 33 ANNUAL REPORT 2015Corporate Governance Statement The Board is committed to achieving and demonstrating the highest standards of corporate governance. As such, Empired Limited and its Controlled Entities (‘‘the Group’’) have adopted the third edition of the Corporate Governance Principles and Recommendations which was released by the ASX Corporate Governance Council on 27 March 2014 and became effective for financial years beginning on or after 1 July 2014. The Group’s Corporate Governance Statement for the financial year ending 30 June 2015 is dated as at 30 June 2015 and was approved by the Board on 20 August 2015. The Corporate Governance Statement is available on Empired’s website at www.empired.com/investor-centre/Corporate-Governance/. — 35 ANNUAL REPORT 2015 Consolidated Statement of Profit or Loss and Other Comprehensive Income For The Year Ended 30 June 2015 Continuing operations Revenue Cost of Sales Gross Profit Other Income Administration expenses Marketing expenses Occupancy expenses Finance expenses Other expenses Profit before income tax Income tax expense Profit for the year Other comprehensive income, net of income tax Items that may be reclassified subsequently to profit or loss: Exchange differences on translating foreign operations Total comprehensive income for the period Earnings per share (cents per share) Basic earnings per share Diluted earnings per share Notes 4 4 5 6 7 2015 $ 128,312,973 (84,088,897) 44,224,076 1,856,825 (32,353,566) (394,583) (4,529,703) (1,439,240) (1,352,091) 6,011,718 (738,204) 5,273,514 2014 $ 66,798,695 (45,805,277) 20,993,418 2,125,562 (14,816,092) (170,028) (2,474,585) (802,190) (530,955) 4,325,130 (531,639) 3,793,491 (40,632) 5,232,882 - 3,793,491 Notes 2015 2014 8 8 4.8198 4.7964 4.3266 4.2574 This Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes. — 36 EMPIRED LTDEMPIRED LTD Consolidated Statement of Financial Position As At 30 June 2015 ASSETS Current Assets Cash and cash equivalents Trade and other receivables Work in progress Other current assets Total Current Assets Non-Current Assets Investments in associates Plant and equipment Intangible assets Deferred tax asset Total Non-Current assets TOTAL ASSETS LIABILITIES Current Liabilities Trade and other payables Borrowings Deferred Vendor Payments Provisions Other Liabilities Total Current Liabilities Non-Current Liabilities Borrowings Deferred Vendor Payments Provisions Deferred tax liability Other Liabilities Total Non-Current Liabilities TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Reserves Retained profits TOTAL EQUITY Notes 9 10 11 12 13 14 15 7 17 18 32 19 20 18 32 19 7 20 22 21 2015 $ 9,604,422 26,774,194 6,841,395 2,250,139 45,470,150 337,879 22,296,610 48,610,206 4,679,807 75,924,502 121,394,652 24,915,391 6,731,484 5,560,782 4,450,921 200,883 2014 $ 8,062,006 11,134,232 3,254,637 784,062 23,234,937 - 12,785,700 27,801,166 2,226,705 42,813,571 66,048,508 9,837,270 3,464,781 2,551,850 1,999,040 - 41,859,461 17,852,941 15,563,645 5,510,782 519,855 4,489,197 736,572 26,820,051 68,679,512 52,715,140 37,779,130 1,369,627 13,566,383 52,715,140 9,722,679 857,150 358,426 2,790,996 - 13,729,251 31,582,192 34,466,316 24,362,663 711,604 9,392,049 34,466,316 This Statement of Financial Position should be read in conjunction with the accompanying notes. — 37 ANNUAL REPORT 2015 Consolidated Statement of Cash Flows For The Year Ended 30 June 2015 Cash flows from operating activities Receipts from customers Payments to suppliers and employees Borrowing costs Income tax (paid)/received Interest received Notes 2015 $ 116,696,022 (110,621,090) (1,141,718) (24,399) 128,484 Net cash flows from operating activities 9 (iii) 5,037,299 Cash flows from investing activities Purchase of plant and equipment Acquisition of subsidiaries net of cash Deferred payment in relation to business acquisition of prior year Net cash flows used in investing activities Cash flows from financing activities Repayment of borrowings Payment of capital raising costs Proceeds from issue of shares Dividends paid Repayment of finance lease liabilities Proceeds from borrowings Net cash flows from financing activities Net increase in cash and cash equivalents Effect of exchange rate fluctuations on cash held Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period 9 This Statement of Cash Flows should be read in conjunction with the accompanying notes. (11,491,199) (8,849,617) (2,744,700) (23,085,516) (8,824,363) (564,506) 13,815,917 (1,099,180) (1,537,981) 17,985,817 19,775,704 1,727,487 (185,071) 8,062,006 9,604,422 2014 $ 65,004,969 (59,879,767) (735,276) 756,057 125,562 5,271,545 (6,254,678) (14,555,814) (1,743,000) (22,553,492) (3,086,147) - 15,329,643 (339,591) (849,464) 12,203,599 23,258,040 5,976,093 - 2,085,913 8,062,006 — 38 EMPIRED LTDEMPIRED LTD Consolidated Statement of Changes in Equity For The Year Ended 30 June 2015 Foreign Currency Translation Reserve Employee Equity Benefits Reserve Issued Capital Retained Earnings $ $ Balance at 30 June 2013 8,779,678 6,024,878 Prior Period Adjustment Profit for the year Other comprehensive income Cost of share-based payments Options exercised Issue of shares Dividends Paid Transaction Cost - - - - 670,000 15,500,000 - (587,015) (86,729) 3,793,491 - - - - (339,591) - Balance at 30 June 2014 24,362,663 9,392,049 $ - - - - - - - - - - Profit for the year Other comprehensive income Cost of share-based payments Options exercised Issue of shares Dividends Paid Transaction Cost - - - 120,000 13,695,917 5,273,514 - - - - - (1,099,180) (399,450) - - (40,632) - - - - - Total Equity $ 15,265,682 (86,729) 3,793,491 - 250,478 670,000 15,500,000 (339,591) (587,015) 34,466,316 5,273,514 (40,632) 698,655 120,000 13,695,917 (1,099,180) (399,450) $ 461,126 - - - 250,478 - - - - 711,604 - - 698,655 - - - - Balance at 30 June 2015 37,779,130 13,566,383 (40,632) 1,410,259 52,715,140 This Statement of Changes in Equity should be read in conjunction with the accompanying notes. — 39 ANNUAL REPORT 2015 1. Corporate Information AASB 2012-3 is applicable to annual reporting periods beginning on or after 1 January 2014 and has been adopted in this financial The financial report of Empired Ltd for the year ended 30 June report. The adoption of these amendments has not had a material 2015 was authorised for issue in accordance with a resolution of impact on the Group as the amendments merely clarify the existing the directors on 27 August 2015. requirements in AASB 132. Empired Limited is a company limited by shares incorporated in Australia. The financial report includes the consolidated financial AASB 2013-3 Amendments to AASB 136 – Recoverable Amount Disclosures for Non-Financial Assets statements and notes of Empired Limited and controlled entities. These narrow-scope amendments address disclosure of 2. Summary of significant accounting policies (a) General information and statement of compliance The consolidated general purpose financial statements of the information about the recoverable amount of impaired assets if that amount is based on fair value less costs of disposal. When developing IFRS 13 Fair Value Measurement, the IASB decided to amend IAS 36 Impairment of Assets to require disclosures about the recoverable amount of impaired assets. The IASB noticed however that some of the amendments made Group have been prepared in accordance with the requirements of in introducing those requirements resulted in the requirement the Corporations Act 2001, Australian Accounting Standards and being more broadly applicable than the IASB had intended. These other authoritative pronouncements of the Australian Accounting amendments to IAS 36 therefore clarify the IASB’s original intention Standards Board. Compliance with Australian Accounting Standards that the scope of those disclosures is limited to the recoverable results in full compliance with the International Financial Reporting amount of impaired assets that is based on fair value less costs of Standards (‘IFRS’) as issued by the International Accounting disposal. Standards Board (IASB). Empired Limited is a for-profit entity for the purpose of preparing the financial statements. AASB 2013-3 makes the equivalent amendments to AASB 136 The financial report has been prepared on an accruals basis, beginning on or after 1 January 2014. The adoption of these and is based on historical costs modified where applicable, by amendments in this financial report has not had a material impact measurement at fair value of selected non-current assets, financial on the Group as they are largely of the nature of clarification of assets and financial liabilities. existing requirements. Impairment of Assets and is applicable to annual reporting periods The financial report is presented in Australian dollars. AASB 2014-1 Amendments to Australian Accounting (b) New and revised standards that are effective for these financial statements A number of new and revised standards are effective for the Standards (Part A: Annual Improvements 2010-2012 and 2011-2013 Cycles) Part A of AASB 2014-1 makes amendments to various Australian Accounting Standards arising from the issuance by the IASB of current reporting period, however there was no need to change International Financial Reporting Standards Annual Improvements accounting polices or make retrospective adjustments as a result of to IFRSs 2010-2012 Cycle and Annual Improvements to IFRSs 2011- adopting these standards. Information on these new standards is 2013 Cycle. Among other improvements, the amendments arising presented below. from Annual Improvements to IFRSs 2010-2012 Cycle: AASB 2012-3 Amendments to Australian Accounting Standards – Offsetting Financial Assets and Financial Liabilities AASB 12 integrates and makes consistent the disclosure requirements for various types of investments, including AASB 2012-3 adds application guidance to AASB 132 to address unconsolidated structured entities. It introduces new disclosure inconsistencies identified in applying some of the offsetting criteria requirements about the risks to which an entity is exposed from its of AASB 132, including clarifying the meaning of “currently has a involvement with structured entities. legally enforceable right of set-off” and that some gross settlement systems may be considered equivalent to net settlement. • clarify that the definition of a ‘related party’ includes a management entity that provides key management personnel — 40 Notes to the Financial StatementsFor The Year Ended 30 June 2015EMPIRED LTD • services to the reporting entity (either directly or through a account for amounts related to rate regulation in accordance with group entity) their previous GAAP. Accordingly, an entity that applies AASB 14 • amend AASB 8 Operating Segments to explicitly require the may continue to apply its previous GAAP accounting policies for disclosure of judgements made by management in applying the recognition, measurement, impairment and derecognition of the aggregation criteria its regulatory deferral account balances. This exemption is not available to entities who already apply Australian Accounting Among other improvements, the amendments arising from Annual Standards. Improvements to IFRSs 2011-2013 Cycle clarify that an entity should assess whether an acquired property is an investment The effective date is for annual reporting periods beginning on or property under AASB 140 Investment Property and perform a separate assessment under AASB 3 Business Combinations to after 1 January 2016. determine whether the acquisition of the investment property When AASB 14 becomes effective for the first time for the year constitutes a business combination. ending 30 June 2017, it will not have any impact on the Company. Part A of AASB 2014-1 is applicable to annual reporting periods beginning on or after 1 July 2014. The adoption of these AASB 15 Revenue from Contracts with Customers AASB 15 replaces AASB 118: Revenue, AASB 111 Construction amendments has not had a material impact on the Group as they Contracts and some revenue-related Interpretations. In summary, are largely of the nature of clarification of existing requirements. AASB 15: AASB 12 integrates and makes consistent the disclosure • establishes a new revenue recognition model; requirements for various types of investments, including • changes the basis for deciding whether revenue is to be unconsolidated structured entities. It introduces new disclosure recognised over time at a point in time; requirements about the risks to which an entity is exposed from its • provides a new and more detailed fuidance on specific topics involvement with structured entities. (eg multiple element arrangements, variable pricing, rights of (c) Impact of standards issued but not yet applied New and revised accounting standards and amendments that are return and warranties); and • expands and improves disclosures about revenue. currently issued for future reporting periods that are relevant to the The Company is yet to undertake a detailed assessment of the Company include: AASB 9 Financial Instruments AASB 9 introduces new requirements for the classification and measurement of financial assets and liabilities. These requirements improve and simplify the approach for classification and measurement of financial assets compared with the requirements of AASB 139. The effective date is for annual reporting periods beginning on or impact of AASB 15. However, based on the Company’s preliminary assessment, the Standard is not expected to have a material impact on the transactions and balances recognised in the financial statements when it is first adopted for the year ending 30 June 2018. AASB 2014-3 Amendments to Australian Accounting Standards – Accounting for Acquisitions of Interests in Joint Operations This amendment impacts on the use of AASB 11 when acquiring an interest in a joint operation. after 1 January 2018. The effective date is for annual reporting periods beginning on or after 1 January 2016. The Company is yet to undertake a detailed assessment of the impact of AASB 9. However, based on the Company’s preliminary assessment, When these amendments are first adopted for the year ending 30 the Standard is not expected to have a material impact on the June 2017, there will be no material impact on the transactions and transactions and balances recognised in the financial statements when it is first adopted for the year ending 30 June 2019. balances recognised in the financial statements. AASB 2014-4 Amendments to Australian Accounting Standards – Clarification of Acceptable Methods of Depreciation and AASB 14 Regulatory Deferral Accounts AASB 14 permits first-time adopters of Australian Accounting Amortisation The amendments to AASB 116 prohibit the use of a revenue-based Standards who conduct rate-regulated activities to continue to depreciation method for property, plant and equipment. Additionally, — 41 ANNUAL REPORT 20152. Summary of Significant Accounting Policies (Continued) the amendments provide guidance in the application of the Company and all of its subsidiaries as of 30 June 2015. The Parent diminishing balance method for property, plant and equipment. controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability The effective date is for annual reporting periods beginning on or to affect those returns through its power over the subsidiary. All after 1 January 2016. subsidiaries have a reporting date of 30 June. When these amendments are first adopted for the year ending 30 All transactions and balances between Group companies are June 2017, there will be no material impact on the transactions and balances recognised in the financial statements. eliminated on consolidation, including unrealised gains and losses on transactions between Group companies. Where unrealised AASB 2014-9 Amendments to Australian Accounting Standards – Equity Method in Separate Financial Statements losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a group perspective. Amounts reported in the financial statements of The amendments introduce the equity method of accounting subsidiaries have been adjusted where necessary to ensure as one of the options to account for an entity’s investments in consistency with the accounting policies adopted by the Group. subsidiaries, joint ventures and associates in the entity’s separate financial statements. Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are recognised from the effective date The effective date is for annual reporting periods beginning on or of acquisition, or up to the effective date of disposal, as applicable. after 1 January 2016. When these amendments are first adopted for the year ending 30 portion of a subsidiary’s profit or loss and net assets that is not held June 2017, there will be no material impact on the financial statements. by the Group. The Group attributes total comprehensive income or Non-controlling interests, presented as part of equity, represent the AASB 2014-10 Amendments to Australian Accounting Standards – Sale or Contribution of Assets between an Investor loss of subsidiaries between the owners of the parent and the non- controlling interests based on their respective ownership interests. and its Associate or Joint Venture The amendments address a current inconsistency between AASB Business Combinations The Group applies the acquisition method in accounting for business 10 Consolidated Financial Statements and AASB 128 Investments in combinations. The consideration transferred by the Group to obtain Associates and Joint Ventures (2011). The amendments clarify that, on control of a subsidiary is calculated as the sum of the acquisition- a sale or contribution of assets to a joint venture or associate or on a loss of control when joint control or significant influence is retained in date fair values of assets transferred, liabilities incurred and the equity interests issued by the Group, which includes the fair value a transaction involving an associate or a joint venture, any gain or loss of any asset or liability arising from a contingent consideration recognised will depend on whether the assets or subsidiary constitute arrangement. Acquisition costs are expensed as incurred. a business, as defined in AASB 3 Business Combinations. Full gain or loss is recognised when the assets or subsidiary constitute a business, The Group recognises identifiable assets acquired and liabilities whereas gain or loss attributable to other investors’ interests is assumed in a business combination regardless of whether they recognised when the assets or subsidiary do not constitute a business. have been previously recognised in the acquiree’s financial The effective date is for annual reporting periods beginning on or assumed are generally measured at their acquisition-date fair values. statements prior to the acquisition. Assets acquired and liabilities after 1 January 2016. Goodwill is stated after separate recognition of identifiable intangible assets. It is calculated as the excess of the sum of (a) When these amendments are first adopted for the year ending 30 fair value of consideration transferred, (b) the recognised amount June 2017, there will be no material impact on the financial statements. of any non-controlling interest in the acquire, and (c) acquisition- date fair value of any existing equity interest in the acquiree, over (d) Basis of consolidation The Group financial statements consolidate those of the Parent the acquisition-date fair values of identifiable net assets. If the fair values of identifiable net assets exceed the sum calculated above, — 42 Notes to the Financial StatementsFor The Year Ended 30 June 2015EMPIRED LTDthe excess amount (i.e. gain on a bargain purchase) is recognised in profit or loss immediately. (e) Property, plant and equipment Plant and equipment is stated at cost less accumulated depreciation and any impairment in value. (f) Borrowing costs Borrowing costs are recognised as an expense when incurred except where incurred in relation to qualifying assets where borrowing costs are capitalised. (g) Goodwill Goodwill on acquisition is initially measured at cost being the Depreciation is calculated on a diminishing value, except computer software which is on a straight-line basis, over the estimated useful excess of the cost of the business combination over the acquirer’s interest in the net fair value of the identifiable assets, liabilities and life of the asset as follows: contingent liabilities. • Buildings & Improvements DV 7.5 – 20 yrs Following initial recognition, goodwill is measured at cost less any • Leasehold Improvements DV 5 – 20 yrs accumulated impairment losses. • Furniture & Fittings DV 3 – 20 yrs • Computer Hardware DV 2 – 5 yrs • Computer Software SL 1 – 5 yrs 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. 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 For an asset that does not generate largely independent cash combination’s synergies. inflows, the recoverable amount is determined for the cash- generating unit to which the asset belongs. Impairment is determined by assessing the recoverable amount of If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets or cash-generating Where the recoverable amount of the cash-generating unit is less units are written down to their recoverable amount. than the carrying amount, an impairment loss is recognised. the cash-generating unit to which the goodwill relates. The recoverable amount of plant and equipment is the greater of fair Where goodwill forms part of a cash-generating unit and part value less costs to sell and value in use. In assessing value in use, the of the operation within that unit is disposed of, the goodwill estimated future cash flows are discounted to their present value using associated with the operation disposed of is included in the a pre-tax discount rate that reflects current market assessments of carrying amount of the operation when determining the gain or the time value of money and the risks specific to the asset. loss on disposal of the operation. An item of property, plant and equipment is derecognised upon Goodwill disposed of in this circumstance is measured on the basis disposal or when no future economic benefits are expected to arise of the relative values of the operation disposed of and the portion from the continued used of the asset. of the cash-generating unit retained. Any gain or loss arising on derecognition of the asset (calculated as (h) Intangible Assets the difference between the net disposal proceeds and the carrying amount of the item) is included in the statement of profit or loss in Acquired both separately and from a business combination Intangible assets acquired separately are capitalised at cost. the period the item is derecognised. Following initial recognition, the cost model is applied to the class of intangible assets. — 43 ANNUAL REPORT 20152. Summary of Significant Accounting Policies (Continued) Where amortisation is charged on assets with finite lives, this Recoverable amount is the greater of fair value less costs to sell expense is taken to the statement of profit or loss through the and value in use. It is determined for an individual asset, unless the ‘amortisation expenses’ line item. 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 Intangible assets, excluding development costs, created within the largely independent of those from other assets or groups of assets, business are not capitalised and expenditure is charged against in which case, the recoverable amount is determined for the cash- profits in the period in which the expenditure is incurred. generating unit to which the asset belongs. Intangible assets are tested for impairment where an indicator of In assessing value in use, the estimated future cash flows are impairment exists and in the case of indefinite lived intangibles discounted to their present value using a pre tax discount rate that annually, either individually or at the cash generating unit level. reflects current market assessments of the time value of money and Useful lives are also examined on an annual basis and adjustments, the risks specific to the asset. where applicable, are made on a prospective basis. Research and Development Costs Research costs are expensed as incurred. ( j) Operating Segments The Group has more than one reportable operating segment identified by and used by the Chief Executive Officer (chief operating decision maker) in assessing the performance and Development expenditure incurred on an individual project is carried determining the allocation of resources. The Group however has forward when its future recoverability can be reasonably assured. aggregated the segments in accordance with the aggregation Following the initial recognition of the development expenditure, the cost model is applied requiring the asset to be carried at cost less (k) Financial Instruments criteria of AASB 8. any accumulated amortisation and accumulated impairment losses. Recognition, Initial Measurement and Derecognition Financial assets and financial liabilities are recognised when the Software Costs incurred in developing software are capitalised where future Group becomes a party to the contractual provisions of the financial instrument, and are measured initially at fair value adjusted by financial benefits can be reasonably be assured. These costs include transactions costs, except for those carried at fair value through employee costs incurred on development along with appropriate profit or loss, which are measured initially at fair value. Subsequent portion of relevant overheads. measurement of financial assets and financial liabilities are described Amortisation is calculated on a straight-line basis depending on the useful life of the asset. below. Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and all substantial risks and rewards are transferred. Gains or losses arising from derecognition of an intangible asset A financial liability is derecognised when it is extinguished, are measured as the difference between the net disposal proceeds discharged, cancelled or expires. and the carrying amount of the asset and are recognised on the statement of profit or loss when the asset is derecognised. Classification and Subsequent Measurement of Financial Assets For the purpose of subsequent measurement, financial assets other (i) Impairment of non-financial assets At each reporting date, the Group assesses whether there is any than those designated and effective as hedging instruments are classified into the following categories upon initial recognition: indication that an asset may be impaired. Where an indicator • loans and receivables of impairment exists, the Group makes a formal estimate of • financial assets at Fair Value Through Profit or Loss (‘FVTPL’) recoverable amount. Where the carrying amount of an asset • Held-To-Maturity (‘HTM’) investments; or • Available-For-Sale (‘AFS’) financial assets exceeds its recoverable amount the asset is considered impaired All financial assets except for those at FVTPL are subject to review and is written down to its recoverable amount. for impairment at least at each reporting date to identify whether there is any objective evidence that a financial asset or a group — 44 Notes to the Financial StatementsFor The Year Ended 30 June 2015EMPIRED LTDof financial assets is impaired. Different criteria to determine such by management. They comprise investments in the equity impairment are applied for each category of financial assets, which are of other entities where there is neither a fixed maturity nor fixed described below. All income and expenses relating to financial assets or determinable payments. Available-for-sale financial assets are that are recognised in profit or loss are presented within finance costs, included in non-current assets, except those which are expected to finance income or other financial items, except for impairment of mature within 12 months after the end of the reporting period. (All trade receivables which is presented within other expenses. other financial assets are classified as current assets). (i) Financial assets at fair value through profit or loss Financial assets at FVTPL include financial assets that are either classified as held for trading or that meet certain conditions and Classification and subsequent measurement of financial liabilities The Group’s financial liabilities include borrowings and trade and other payables. Financial liabilities are measured subsequently are designated at FVTPL upon initial recognition. All derivative at amortised cost using the effective interest method, except for financial instruments fall into this category, except for those financial liabilities held for trading or designated at FVTPL, that are designated and effective as hedging instruments, for which the carried subsequently at fair value with gains or losses recognised in hedge accounting requirements apply. Assets in this category are profit or loss. measured at fair value with gains or losses recognised in profit or loss. The fair values of financial assets in this category are determined by reference to active market transactions or using a Impairment At the end of each reporting period, the Group assesses valuation technique where no active market exists. whether there is objective evidence that a financial instrument (ii) Loans and receivables Loans and receivables are non-derivative financial assets with instruments, a significant or prolonged decline in the value of the instrument is considered to determine whether an impairment fixed or determinable payments that are not quoted in an active has arisen. Impairment losses are recognised in the statement of has been impaired. In the case of available-for-sale financial market. After initial recognition, these are measured at amortised comprehensive income. cost using the effective interest method, less provision for impairment. Discounting is omitted where the effect of discounting is immaterial. The Group’s trade and most other receivables fall into (l) Trade and other receivables Trade receivables, which generally have 30-45 day terms, are this category of financial instruments. recognised and carried at original invoice amount less an allowance for any uncollectible amounts. (iii) Held-to-maturity investments Held-to-maturity investments are non-derivative financial assets An impairment provision is recognised when there is objective evidence that the Group will not be able to collect the receivable. that have fixed maturities and fixed or determinable payments, and it is the Group’s intention to hold these investments to maturity. They are subsequently measured at amortised cost. Bad debts are written off when identified. (m) Cash and cash equivalents Cash and short-term deposits in the statement of financial position Held-to-maturity investments are included in non-current assets, comprise cash at bank, in hand and short-term deposits with an except for those which are expected to mature within 12 months original maturity of three months or less. after the end of the reporting period. (All other investments are classified as current assets). If during the period the Group sold For the purposes of the statement of cash flows, cash and cash or reclassified more than an insignificant amount of the held-to- equivalents consist of cash and cash equivalents as defined above, maturity investments before maturity, the entire held-to-maturity net of outstanding bank overdrafts. investments category would be tainted and reclassified as available-for-sale. (n) Interest-bearing loans and borrowings All loans and borrowings are initially recognised at cost, being the (iv) Available-for-sale financial assets Available-for-sale financial assets are non-derivative financial assets fair value of the consideration received net of issue costs associated with the borrowing. After initial recognition, interest-bearing loans that are either not suitable to be classified into other categories and borrowings are subsequently measured at amortised cost of financial assets due to their nature, or they are designated as using the effective interest method. Amortised cost is calculated by — 45 ANNUAL REPORT 20152. Summary of Significant Accounting Policies (Continued) taking into account any issue costs, and any discount or premium at rates determined by reference to market yields at the end of on settlement. Gains and losses are recognised in the statement of the reporting period on high quality corporate bonds published comprehensive income when the liabilities are derecognised and as by Milliman Australia/G100 (2014: government bonds) that have well as through the amortisation process. maturity dates that approximate the timing of the estimated future (o) Provisions Provisions are recognised when the Group has a present obligation cash outflows. Any re-measurements arising from experience adjustments and changes in assumptions are recognised in profit or loss in the periods in which the changes occur. The Group (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will presents employee benefit obligations as current liabilities in the statement of financial position if the Group does not have an be required to settle the obligation and a reliable estimate can be unconditional right to defer settlement for at least twelve (12) made of the amount of the obligation. months after the reporting period, irrespective of when the actual settlement is expected to take place. 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 (q) Share-based payment transactions The Group provides to employees (including directors) of the the reimbursement is virtually certain. The expense relating Group in the form of share-based payment transactions, whereby to any provision is presented in the profit or loss net of any employees render services in exchange for shares or rights over reimbursement. shares (‘equity-settled transactions’). If the effect of the time value of money is material, provisions are There are currently two plans in place to provide these benefits: determined by discounting the expected future cash flows at a pre- (i) The Empired Employee Share Option Plan (ESOP2), which tax rate that reflects current market assessments of the time value provides to all employees excluding directors, of money and, where appropriate, the risks specific to the liability. (ii) The Executive Share Option Plan (ESOP1), which provides Where discounting is used, the increase in the provision due to the benefits to directors and senior executives. passage of time is recognised as a finance cost. (p) Employee benefits The cost of these equity-settled transactions with employees is measured by reference to the fair value at the date at which they are (i) Short-term employee benefits Liabilities for wages and salaries, including non-monetary benefits, granted. The fair value is determined using a Black Scholes model. Further details are given in note 16. Further, the cost of equity-settled and accumulating sick leave expected to be settled within 12 months of the reporting date are recognised in respect of transactions is recognised, together with a corresponding increase in equity, over the period in which the performance conditions are employees’ services up to the reporting date. They are measured fulfilled, ending on the date on which the relevant employees become at the amounts expected to be paid when the liabilities are settled. fully entitled to the award (‘vesting date’). Expenses for non-accumulating sick leave are recognised when the leave is taken and are measured at the rates paid or payable. The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects the extent to (ii) Other long-term employee benefits The Group’s liabilities for annual leave and long service leave are which the vesting period has expired and the number of awards that, in the opinion of the directors of the Group, will ultimately included in other long term benefits as they are not expected to vest. This opinion is formed based on the best available information be settled wholly within twelve (12) months after the end of the at reporting date. No adjustment is made for the likelihood of market period in which the employees render the related service. They are performance conditions being met as the effect of these conditions is measured at the present value of the expected future payments included in the determination of fair value at grant date. to be made to employees. The expected future payments incorporate anticipated future wage and salary levels, experience Where the terms of an equity-settled award are modified, as a of employee departures and periods of service, and are discounted minimum an expense is recognised as if the terms had not been — 46 Notes to the Financial StatementsFor The Year Ended 30 June 2015EMPIRED LTDmodified. In addition, an expense is recognised for any increase in the value of the transaction as a result of the modification, as Rendering of services Revenue from the provision of services is recognised when the measured at the date of modification. service has been provided. Stage completion or percentage completion method is used to determine earned revenue for Where an equity-settled award is cancelled, it is treated as if it services that have fixed revenue 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 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 new award are treated as if they were a modification of the original recorded as unearned income. award, as described in the previous paragraph. The dilutive effect, if any, of outstanding options is reflected as Interest received Revenue is recognised as the interest accrues (using the effective additional share dilution in the computation of earnings per share interest method, which is the rate that exactly discounts estimated (see note 8). future cash receipts through the expected life of the financial instrument) to the net carrying amount of the financial asset. (r) Leases Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are (t) Foreign currency transactions The consolidated financial statements are presented in Australian capitalised at the inception of the lease at the fair value of the Dollars (‘$AUD’), which is also the functional currency of the Parent leased property or, if lower, at the present value of the minimum Company. lease payments. Foreign currency transactions are translated into the functional Lease payments are apportioned between the finance charges and currency using the exchange rates prevailing at the date of the reduction of the lease liability so as to achieve a constant rate of transaction. Foreign exchange gains and losses resulting from the interest on the remaining balance of the liability. Finance charges settlement of such transactions and from the re-measurement of are charged directly against income. monetary items at year end exchange rates are recognised in profit or loss. Non-monetary items are not retranslated at year-end and Capitalised leased assets are depreciated over the shorter of the are measured at historical cost (translated using the exchange rates estimated useful life of the asset or the lease term. at the date of the transaction), except for non-monetary items measured at fair value which are translated using the exchange Leases where the lessor retains substantially all the risks and benefits rates at the date when fair value was determined. of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added In the Group’s financial statements, all assets, liabilities and to the carrying amount of the leased asset and recognised over the transactions of Group entities with a functional currency other lease term on the same bases as the lease income. than the $AUD are translated into $AUD upon consolidation. The Operating lease payments are recognised as an expense in the functional currency of the entities in the Group has remained statement of comprehensive income on a straight-line basis over unchanged during the reporting period. the lease term. (s) Revenue Revenue is recognised to the extent that it is probable that the On consolidation, assets and liabilities have been translated into $AUD at the closing rate at the reporting date. Goodwill and fair value adjustments arising on the acquisition of a foreign entity economic benefits will flow to the Group and the revenue can be have been treated as assets and liabilities of the foreign entity and reliably measured. The following specific recognition criteria must translated into $AUD at the closing rate. Income and expenses also be met before revenue is recognised: have been translated into $AUD at the average rate over the reporting period. Exchange differences are charged or credited — 47 ANNUAL REPORT 20152. Summary of Significant Accounting Policies (Continued) to other comprehensive income and recognised in the currency Deferred income tax assets and liabilities are measured at the translation reserve in equity. On disposal of a foreign operation tax rates that are expected to apply to the year when the asset is the cumulative translation differences recognised in equity are realised or the liability is settled, based on tax rates (and tax laws) that reclassified to profit or loss and recognised as part of the gain or have been enacted or substantively enacted at the reporting date. loss on disposal. (u) Income tax Deferred income tax is provided on all temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for the financial reporting purposes. Income taxes relating to items recognised directly in equity are recognised in equity and not in the statement of comprehensive income. (v) Other taxes Revenues, expenses and assets are recognised net of the amount Deferred income tax liabilities are recognised for all taxable of GST except: temporary differences: • where the GST incurred on a purchase of goods and services • except where the deferred income tax liability arises from the is not recoverable from the taxation authority, in which case initial recognition of an asset or liability in a transaction that is the GST is recognised as part of the cost of acquisition of the not a business combination and, at the time of the transaction, asset or as part of the expense item as applicable; and affects neither the accounting profit nor taxable profit or loss; and • receivables and payables are stated with the amount of GST • in respect of taxable temporary differences associated with included. investments in subsidiaries, associates and interests in joint The net amount of GST recoverable from, or payable to, the ventures, except where the timing of the reversal of the taxation authority is included as part of receivables or payables in temporary differences can be controlled and it is probable the statement of financial position. that the temporary differences will not reverse in the foreseeable future. Cash flows are included in the statement of cash flows on a gross • deferred income tax assets are recognised for all deductible basis and the GST component of cash flows arising from investing temporary differences, carry-forward of unused tax assets and and financing activities, which is recoverable from, or payable to, unused tax losses, to the extent that it is probable that taxable the taxation authority are classified as operating cash flows. profit will be available against which the deductible temporary Commitments and contingencies are disclosed net of the amount differences, and the carry-forward of unused tax assets and of GST recoverable from, or payable to, the taxation authority. unused tax losses can be utilised: • except where the deferred income tax asset relating to the deductible temporary differences arises from the initial (w) Investments in associates Associates are those entities over which the Group is able to exert recognition of an asset or liability in a transaction that is not a significant influence but which are not subsidiaries. Investments in business combination and, at the time of the transaction, affects associates are accounted for using the equity method. neither the accounting profit nor taxable profit or loss; and • in respect of deductible temporary differences associated with Any goodwill or fair value adjustment attributable to the Group’s investments in subsidiaries, associates and interests in joint share in the associate is not recognised separately and is included ventures, deferred tax assets are only recognised to the extent in the amount recognised as investment. that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available The carrying amount of the investment in associates is increased or against which the temporary differences can be utilised. decreased to recognise the Group’s share of the profit or loss and other comprehensive income of the associate, adjusted where necessary to The carrying amount of deferred income tax assets is reviewed at ensure consistency with the accounting policies of the Group. each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or Unrealised gains and losses on transactions between the Group part of the deferred income tax asset to be utilised. and its associates are eliminated to the extent of the Group’s — 48 Notes to the Financial StatementsFor The Year Ended 30 June 2015EMPIRED LTDinterest in those entities. Where unrealised losses are eliminated, discount rate used in measuring its Australian dollar dominated the underlying asset is also tested for impairment. long term employee benefits from the Australian government bond rate to the high quality corporate bond rate. This change (x) Significant accounting judgements, estimates and was necessitated by developments in the Australian business assumptions Estimates and judgements are continually evaluated and are based environment that confirmed there is a sufficiently observable, deep and liquid market in high quality Australian corporate bonds to on historical experience and other factors, including expectations satisfy the requirements in AASB 119 Employee Benefits. The Group of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances. has concluded that this amendment has resulted in a ‘change in accounting estimate’ in accordance with AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors. Critical accounting estimates and assumptions The Group makes estimates and assumptions concerning the The Group increased the carrying amounts of other long term future. The estimates and assumptions that have a significant employee benefits by $37,204 during the current reporting period risk of causing a material adjustment to the carrying amounts of as a result of this change in accounting estimate. assets and liabilities within the next financial year are discussed below. The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policies. iv. Estimation of useful lives of assets The consolidated entity determines the estimated useful lives and related depreciation and amortisation charges for its property, i. Impairment of goodwill and intangibles with indefinite plant and equipment and finite life intangible assets. The useful useful lives The group determines whether goodwill and intangibles with lives could change significantly as a result of technical innovations or some other event. The depreciation and amortisation charge will indefinite useful lives are impaired at least on an annual basis. increase where the useful lives are less than previously estimated This requires an estimation of the recoverable amount of the lives, or technically obsolete or non-strategic assets that have been cash-generating unit to which the goodwill and intangibles with abandoned or sold will be written off or written down. 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 15. ii. Share based payments The consolidated entity measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using Black-Scholes model taking into account the terms and conditions upon which the instruments were granted. The accounting estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact profit or loss and equity. iii. Long service leave provision The liability for long service leave is recognised and measured at the present value of the estimated future cash flows to be made in respect of all employees at the reporting date. In determining the present value of the liability, estimates of attrition rates and pay increases through promotion and inflation have been taken into account. During the current reporting period, the Group changed the — 49 ANNUAL REPORT 2015 3. Segment Reporting Management identifies its operating segments based on the Group’s geographical presence, which represent the main products and services provided by the Group. The Group’s four (4) main operating segments are: • Australia • New Zealand • USA • Singapore The revenues and profit generated by each of the Group’s operating segments and segment assets are summarised as follows: 2015 Revenue From external customers Segment revenues Segment operating EBITDA Segment assets 2014 Revenue From external customers Segment revenues Segment operating EBITDA Segment assets Australia New Zealand $ $ US $ 91,452,390 91,452,390 7,063,822 105,394,795 30,178,952 30,178,952 3,267,728 13,806,333 6,065,949 6,065,949 536,060 1,528,192 Australia New Zealand $ 66,798,695 66,798,695 14,639,568 66,048,508 $ - - - - US $ - - - - Singapore $ 616,682 616,682 11,150 665,332 Singapore $ - - - - Total $ 128,312,973 128,312,973 10,878,760 121,394,652 Total $ 66,798,695 66,798,695 14,639,568 66,048,508 The Group’s segment operating EBITDA reconciles to the Group’s profit before tax as presented in its financial statements as follows: Total reporting segment operating EBITDA Other income not allocated Other expenses not allocated Group operating profit Finance costs Depreciation and amortisation expenses Group profit before tax An analysis of the Group’s revenue for major product and service category is as follows: Services revenue Product and license revenue Group revenue — 50 2015 $ 10,878,760 1,854,204 (1,726,655) 11,006,309 (1,141,718) (3,852,873) 6,011,718 111,658,780 16,654,193 128,312,973 2014 $ 14,639,568 2,083,661 (9,659,783) 7,063,446 (735,276) (2,003,040) 4,325,130 56,899,667 9,899,028 66,798,695 Notes to the Financial StatementsFor The Year Ended 30 June 2015EMPIRED LTD4. Revenues Sales Revenue Services revenue Product and license revenue Total Sales Revenue Other Revenue Gain from derecognition of contingent consideration payable (a) Foreign exchange gain Interest Total Revenue 2015 $ 111,658,780 16,654,193 128,312,973 1,724,070 2,622 130,133 1,856,825 2014 $ 56,899,667 9,899,028 66,798,695 2,000,000 2,605 122,957 2,125,562 130,169,798 68,924,257 (a) The potential discounted amount payable in FY15 to the vendors of Intergen Limited under the share purchase agreement is $1,724,070. The fair value of the contingent consideration was valued at the time of acquisition based on a full year FY15 EBITDA performance target that was subsequently not achieved. As at 30 June 2015, the contingent consideration has been derecognised and a gain of $1,724,070 was included in other revenue. 5. Administration Expenses Profit before income tax includes the following specific expenses: Employee benefits Legal expenses Depreciation expenses Amortisation expenses Insurance Travel Corporate costs Total Administration Expenses 2015 $ 21,292,707 596,761 3,545,599 307,274 456,822 1,932,028 4,222,375 32,353,566 2014 $ 10,013,990 290,759 1,861,594 139,424 208,185 532,230 1,769,910 14,816,092 — 51 ANNUAL REPORT 2015 6. Finance Expenses Finance expenses for the year consist of the following: Interest expenses for borrowings at amortised cost Interest expenses for finance lease arrangements Bank charges Realised (gain) / loss Unrealised loss Total 7. Income Tax (a) Income tax expense The major components of income tax expense are: 2015 $ 1,027,963 113,754 275,715 (128,860) 150,668 1,439,240 2014 $ 635,308 99,969 63,110 3,803 - 802,190 Current income tax payable - prior year adjustment Deferred income tax relating to origination and reversal of temporary differences Deferred tax asset not previously brought to account Under provision in respect of prior years 2015 $ 128,536 679,801 - (70,133) 2014 $ - 559,626 (95,415) 67,428 Income tax expense reported in statement of comprehensive income 738,204 531,639 — 52 Notes to the Financial StatementsFor The Year Ended 30 June 2015EMPIRED LTD 7. Income Tax (Continued) (b) Amounts charged (credited) directly to equity Capital Raising transaction costs Deferred tax assets recognised on acquisition Deferred tax liabilities recognised on acquisition 2015 $ 165,057 1,275,833 (91,577) 1,349,313 2014 $ (253,342) 391,824 - 138,482 (c) Numerical Reconciliation between aggregate tax expense recognised in the comprehensive income statement and tax expense calculated per the statutory income tax rate Prima facie tax on operating profit calculated at 30% (2014: 30%) Adjust for tax effect of: Tax rate differential Non-deductible Expenses Other non-deductible expenses Change in Fair Value Consideration Foreign exchange differences R&D offset income tax variance Under provision in respect of prior years Income not assessable Recoupment of prior year tax losses not previously brought to account Deferred tax asset not previously brought to account Income tax expense reported in statement of comprehensive income 2015 $ 1,803,515 1,803,515 (26,290) 322,402 110,850 (517,221) 69,855 (314,719) (5,514) - (704,809) 135 738,204 2014 $ 1,297,539 1,297,539 - 224,490 - - - (362,403) 67,428 (600,000) - (95,415) 531,639 — 53 ANNUAL REPORT 2015 7. Income Tax (Continued) (d) Recognised deferred tax assets and liabilities Deferred income tax balances relate to the following: Opening Balance Recognised in Profit and Loss Recognised in Other Comprehensive Income Recognised in Business Combination Exchange Differences Closing Balance 30 June 2015 (i) Deferred tax liabilities Work in Progress Fixed Assets Other $ $ 976,391 1,814,605 - 895,343 711,281 - Gross deferred tax liabilities 2,790,996 1,606,624 (ii) Deferred tax assets Provisions Equity raising costs Borrowing costs s40-880 costs R&D Tax Offsets carried forward Trade and other receivables 12,000 229,390 24,285 - 924,684 34,597 Pension and other employee obligations 1,001,749 Other Tax losses - - 40,626 (93,358) (11,089) - 935,662 (110,519) 330,670 (7,167) (87,869) $ - - - - - 165,057 - - - - - - - $ - 91,577 - 91,577 73,596 93 - - - 128,786 553,629 7,167 512,564 $ - - - - (9,221) - - - - 2,787 25,055 - $ 1,871,734 2,617,463 - 4,489,197 117,001 301,182 13,196 - 1,860,346 55,651 1,911,103 - (3,367) 421,328 Gross deferred tax assets 2,226,705 996,956 165,057 1,275,835 15,254 4,679,807 — 54 Notes to the Financial StatementsFor The Year Ended 30 June 2015EMPIRED LTD 7. Income Tax (Continued) (d) Recognised deferred tax assets and liabilities (continued) Deferred income tax balances relate to the following: 30 June 2014 (i) Deferred tax liabilities Work in Progress Fixed Assets Other Opening Balance Recognised in Profit and Loss Recognised in Other Comprehensive Income Recognised in Business Combination $ $ 480,598 1,141,076 - 495,793 673,529 - $ - - - - - 253,342 - - - - - - $ - - - - - - - - - - 402,851 - Exchange Differences Closing Balance $ $ - - - - - - - - - - - - - 976,391 1,814,605 - 2,790,996 12,000 229,390 24,285 - 924,684 34,597 1,001,749 - 2,226,705 Gross deferred tax liabilities 1,621,674 1,169,322 (ii) Deferred tax assets Provisions Equity raising costs Borrowing costs s40-880 costs R&D Tax Offsets carried forward Trade and other receivables 10,950 39,790 20,662 5,334 216,476 - Pension and other employee obligations 572,189 Tax losses - 1,050 (63,742) 3,623 (5,334) 708,208 34,597 26,709 - Gross deferred tax assets 865,401 705,111 253,342 402,851 — 55 ANNUAL REPORT 2015 7. Income Tax (Continued) (e) Tax consolidation 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. 8. Earnings Per Share Basic earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share amounts are calculated by dividing 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: Net profit attributable to ordinary equity holders of the parent 5,273,514 3,793,491 2015 $ 2014 $ Weighted average number of ordinary shares for basic earnings per share 109,414 87,679 Effect of dilution: Share options Weighted average number of ordinary shares adjusted for the effect of dilution 534 109,948 1,425 89,104 2015 2014 Thousands Thousands — 56 Notes to the Financial StatementsFor The Year Ended 30 June 2015EMPIRED LTD9. 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 statement of financial position as follows: Term Deposit Cash at bank and in hand Notes (a) 2015 $ 11,624 9,592,798 9,604,422 2014 $ 575,208 7,486,798 8,062,006 (a) The effective interest rate on the short term deposits was 2.70% (2014: 2.85%) (ii) Financing facilities available At reporting date the following facilities were available and unused: Bank overdraft facility Other 6,780,000 1,641,591 - 1,909,000 8,421,591 1,909,000 A floating charge over the assets of the consolidated group has been provided for certain debts. Refer to note 18 for further details. — 57 ANNUAL REPORT 2015 9. Cash and Cash Equivalents (Continued) (iii) Reconciliation of net cash flows from operating activities to operating profit after income tax Operating profit after income tax Gain from derecognition of contingent consideration payable Depreciation Loss on disposal Option Plan Expense Unrealised gain/loss Movement in Investment in Associate Changes in assets and liabilities net of effects of purchases and disposals of controlled entities: Increase in receivables Increase in other assets Increase in prepayments Increase in creditors Increase/ (decrease) in other creditors Increase in accrued liabilities Increase in unearned income Increase / (decrease) in income tax payable Increase / (decrease) in provision for employee entitlements Net cash from operating activities (iv) Non-cash investing and financing activities Share Issue – Refer note 22 2015 $ 5,273,514 (1,724,070) 3,844,590 168 356,654 150,668 (113,656) (10,433,472) (1,262,191) (665,991) 1,205,332 5,565,481 1,684,483 8,541 708,083 439,165 5,037,299 2014 $ 3,793,491 - 2,001,018 - 105,248 - - (925,651) (956,657) (57,779) 1,036,833 (166,778) 705,602 88,582 (156,469) (195,895) 5,271,545 Acquisition of plant and equipment by means of finance lease 5,378,903 292,281 (v) Acquisition of Entities Refer note 28 (vi) Credit Standby Arrangements with Banks Refer note 18 — 58 Notes to the Financial StatementsFor The Year Ended 30 June 2015EMPIRED LTD 10. Trade and Other Receivables Gross Trade Receivables Provision for Doubtful Debts Trade receivables 2015 $ 2014 $ 26,965,409 (191,215) 11,134,232 - 26,774,194 11,134,232 Trade receivables are non-interest bearing and are generally on 30-day terms. (For further details on credit risk, refer to note 24). A provision for impairment is recognised when there is objective evidence that an individual trade is impaired. These amounts have been included in the other expenses item. There were no balances within trade and other receivables that contained assets that were impaired and past due in the prior year. Impaired assets are provided for in full in the current year. 11. Work in Progress Work in progress at cost 12. Other Current Assets Prepayments Other Receivables 2015 $ 2014 $ 6,841,395 3,254,637 2015 $ 1,982,157 267,982 2,250,139 2014 $ 602,184 181,878 784,062 — 59 ANNUAL REPORT 201513. Investments in Associates The Group holds 50% of the ordinary shares and voting rights in X4 Consulting Limited (“X4”). The executive management of X4 hold the other 50%. The Group has appointed one (1) of X4’s Board of Directors out of a total of four (4). Management has reassessed its involvement in X4 in accordance with AASB 10’s revised control definition and guidance. It has concluded that it has significant influence but not outright control. In making its judgement, management considered the Group’s voting rights, the relative size and dispersion of the voting rights held by other shareholders and the extent of recent participation by those shareholders in general meetings. Recent experience demonstrates that the Group is sufficiently prevented from having the practical ability to direct the relevant activities of X4 unilaterally. X4 Consulting Limited is not individually material to the Group. Summarised financial information of the Group’s share in X4 Consulting Limited is as follows: Profit from continuing operations Other comprehensive income Total comprehensive income Carrying amount of the Group’s interests in associates 2015 $ 99,823 - 99,823 337,879 2014 $ - - - - — 60 Notes to the Financial StatementsFor The Year Ended 30 June 2015EMPIRED LTD 14. Property, Plant and Equipment Lease Improvements At cost Accumulated depreciation Total Lease Improvements Computer Hardware At cost Accumulated depreciation Total Computer Hardware Computer Software At cost Accumulated depreciation Total Computer Software Equipment & Fittings At cost Accumulated depreciation Total Equipment & Fittings Leased equipment At cost Accumulated depreciation Total Leased equipment Total Plant and Equipment 2015 $ 3,711,524 (1,392,556) 2,318,968 17,013,890 (5,064,252) 2014 $ 1,406,521 (557,436) 849,085 11,010,720 (3,286,027) 11,949,638 7,724,693 9,044,319 (2,949,649) 6,094,670 1,947,783 (995,994) 951,789 1,940,450 (958,905) 981,545 22,296,610 5,665,647 (1,768,486) 3,897,161 556,778 (242,017) 314,761 - - - 12,785,700 — 61 ANNUAL REPORT 201514. Property, Plant and Equipment (Continued) 2015 Leased Equipment Lease Improvement Computer Hardware Computer Software Furniture, Equipment & Fittings $ $ $ $ Gross carrying amount Balance 1 July 2014 Additions Acquisition through business combination Disposals $ - 397,831 1,806,922 (264,303) 1,406,521 11,010,720 5,665,647 1,133,517 5,683,208 3,329,491 556,778 147,094 1,171,486 319,962 49,181 1,243,911 - - - - 18,639,666 10,691,141 4,591,462 (264,303) Balance 30 June 2015 1,940,450 3,711,524 17,013,890 9,044,319 1,947,783 33,657,966 Depreciation and impairment Balance 1 July 2014 Disposals Acquisition through business combination Depreciation - (557,436) (3,286,027) (1,768,485) (242,018) (5,853,966) 264,303 (766,663) (456,545) - (512,500) (322,620) - - (174,778) (37,869) (1,603,447) (1,143,295) - (572,462) (181,514) 264,303 (2,064,272) (3,707,421) Balance 30 June 2015 (958,905) (1,392,556) (5,064,252) (2,949,649) (995,994) (11,361,356) Carrying amount 30 June 2015 981,545 2,318,968 11,949,638 6,094,670 951,789 22,296,610 2014 Leased Equipment Lease Improvement Computer Hardware Computer Software Furniture, Equipment & Fittings $ $ $ $ Total $ Total $ Gross carrying amount Balance 1 July 2013 Additions Acquisition through business combination Disposals Balance 30 June 2014 Depreciation and impairment Balance 1 July 2013 Disposals Acquisition through business combination Depreciation Balance 30 June 2014 Carrying amount 30 June 2014 $ - - - - - - - - - - - 567,742 275,418 563,361 - 6,675,151 3,422,649 3,316,846 2,242,998 1,025,552 (6,829) - - 332,298 28,931 196,278 (729) 10,997,840 5,864,193 1,785,191 (7,558) 1,406,521 11,010,720 5,665,647 556,778 18,639,666 (129,495) (1,474,198) (1,254,119) (141,028) (2,998,840) - (282,362) (145,579) 5,537 (681,815) - - (1,135,551) (514,366) - (34,988) (66,002) 5,537 (999,165) (1,861,498) (557,436) (3,286,027) (1,768,485) (242,018) (5,853,966) 849,085 7,724,693 3,897,162 314,760 12,785,700 — 62 Notes to the Financial StatementsFor The Year Ended 30 June 2015EMPIRED LTD15. Intangible Assets Goodwill Cost Net carrying value Software Cost Amortisation Net carrying value Other Cost Amortisation Net carrying value Total intangibles 2015 $ 46,446,049 46,446,049 2,453,626 (613,061) 1,840,565 489,296 (165,704) 323,592 2014 $ 27,105,898 27,105,898 700,484 (255,236) 445,248 328,286 (78,266) 250,020 48,610,206 27,801,166 Goodwill assumptions have been detailed below. No impairment was recorded. During the financial year intangibles allocated as ‘other’ were recognised as part of the acquisition of Intergen Limited. Refer to note 28 for more information. — 63 ANNUAL REPORT 201515. Intangible Assets (Continued) Year end 30 June 2015 Balance at the beginning of the year Additions from business combinations Additions Disposals Amortisation charge Impairment losses Goodwill Software $ $ 27,105,898 19,340,151 - - - - 445,248 680,016 1,073,125 - (357,824) - Other $ 250,020 151,656 9,354 - (87,438) - Total $ 27,801,166 20,171,823 1,082,479 - (445,262) - Closing value at 30 June 2015 46,446,049 1,840,565 323,592 48,610,206 Year end 30 June 2014 Balance at the beginning of the year Additions from business combinations Additions Disposals Amortisation charge Impairment losses 11,296,386 15,809,512 - - - - 151,593 - 390,389 - (96,734) - 213,727 - 78,983 - (42,690) - 11,661,706 15,809,512 469,372 - (139,424) - Closing value at 30 June 2014 27,105,898 445,248 250,020 27,801,166 Intangible assets, other than goodwill, have finite lives and are required to be amortised over their expected lives. Goodwill has an infinite life. — 64 Notes to the Financial StatementsFor The Year Ended 30 June 2015EMPIRED LTD15. Intangible Assets (Continued) Impairment of Goodwill Goodwill acquired through business combinations has been allocated to the cash generating units for impairment testing. The recoverable amount of each of the cash generating units has been determined based on a value in use calculation. Value in use is calculated based on the present value of cash flow projections covering a five-year period. The discount rate applied to cash flow projections is 11.00% (2014: 14.75%) using a 3% growth rate (2014: 3%) that is the same as the average growth rate for the IT Infrastructure Services market sector. The recoverable amounts of the cash-generating units were determined based on value-in-use calculations, covering a detailed three-year forecast, followed by an extrapolation of expected cash flows for the units’ remaining useful lives using the growth rates determined by management. The present value of the expected cash flows of each segment is determined by applying a suitable discount rate. The growth rates reflect the long-term average growth rates for the product lines and industries of the segments (all publicly available) and growth in EBITDA expectations. The growth rate for online retailing exceeds the overall long-term average growth rates for Australia because this sector is expected to continue to grow at above-average rates for the foreseeable future. Management’s key assumptions include stable profit margins based on past experience in this market. The Group’s management believes that this is the best available input for forecasting this mature market. Cash flow projections reflect stable profit margins achieved immediately before the budget period. No expected efficiency improvements have been taken into account and prices and wages reflect publicly available forecasts of inflation for the industry. Based on sensitivity analysis calculated on changes in assumptions, apart from the considerations described in determining the value- in-use of the cash-generating units described above, management is not currently aware of any other probable changes that would necessitate changes in its key estimates. However, the estimate of EBITDA recorded within any of the service divisions is particularly sensitive to the growth and discount rate. If growth rates decrease and discount rates increased substantially, the company would commence to recognise impairment losses that would have to be recognised against goodwill. Carrying amount of goodwill The carrying amount of goodwill allocated to each CGU is as follows: Australia New Zealand Carrying amount of goodwill There is no impairment loss in the current or prior period. 2015 $ 27,105,898 19,340,151 46,446,049 2014 $ 27,105,898 - 27,105,898 — 65 ANNUAL REPORT 201516. Employee Benefits (a) Empired employee share option plan The Group has an executive share option plan (ESOP1) for the granting of options to certain directors and senior executives to assist in motivating and retaining executives. Options issued under the ESOP1 will vest on the sooner of one of the following conditions being satisfied: • on the second anniversary of the grant of the options; • 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 ESOP1 include: • any vested options that are unexercised on the third anniversary of their grant date will expire; and • upon exercise, options will be settled in ordinary shares of Empired Limited. s The following table illustrates the number (No.) and weighted average exercise prices (WAEP) of share options issued under the ESOP1. As at 30 June 2015 there were 500,000 options over ordinary shares with an average exercise price of $0.40 each, exercisable upon meeting the conditions outlined above and until their expiry dates as set out in the table below. Outstanding at the beginning of the year Granted during the year Forfeited during the year Exercised during the year Expired during the year Outstanding at the end of the year Exercisable at the end of the year 2015 No. 900,000 - - (400,000) - 500,000 250,000 2015 WAEP $0.40 - - $0.40 - $0.40 $0.40 2014 No. 3,050,000 - - (2,150,000) - 900,000 250,000 The weighted average contractual life for the share options outstanding as at 30 June 2015 is 1.15 years (2014: 1.38 years). Share options issued under the ESOP1 and outstanding at the end of the year have the following average exercise prices: Expiry Date 01 December 2014 20 February 2016 20 February 2017 Total Exercise Price $0.40 $0.40 $0.40 2015 No. - 250,000 250,000 500,000 — 66 2014 WAEP $0.35 - - $0.30 - $0.40 $0.40 2014 WAEP 400,000 250,000 250,000 900,000 Notes to the Financial StatementsFor The Year Ended 30 June 2015EMPIRED LTD 16. Employee Benefits (Continued) (b) The total expense relating to ESOP in 2015 was $356,655 (2014: $105,248) (c) Empired Performance Rights Plan During 2015 certain employees were eligible to participate in the Company’s Performance Rights Plan. Each performance right granted under this plan is subject to both performance criteria based on absolute EPS and a vesting period. Unvested performance rights lapse on the employee’s termination, subject to Board discretion. Each performance right has nil consideration, with each performance right converting to one ordinary share subject to the satisfaction of the performance criteria. The performance rights are unquoted and non- transferrable. There are voting and dividend rights attached to the shares once converted, but not the performance rights. Performance rights and weighted average exercise prices are as follows for the reporting periods presented: Outstanding at the beginning of the year Granted during the year Forfeited during the year Exercised during the year Expired during the year Outstanding at the end of the year 2015 No. 3,770,000 4,450,000 - (1,450,000) - 6,770,000 2015 WAEP - - - - - - 2014 No. 1,350,000 2,740,000 (320,000) - - 3,770,000 2014 WAEP - - - - - - The weighted average share price at the date of exercise was $0.74. The fair values of the performance rights plan granted were determined using a variation of the binomial option pricing model that takes into account factors specific to the share incentive plans, such as the vesting period. The performance condition related to the performance rights plan, being a market condition, has been incorporated into the measurement by means of actuarial modelling. The following principal assumptions were used in the valuation: Grant date Vesting period ends Share price at date of grant Volatility Option life Dividend yield Risk free investment rate Fair value at grant date Exercise price at date of grant Exercisable from / to Issue 1 Issue 2 Issue 3 Issue 4 Issue 5 29/11/2012 10/04/2013 1/10/2013 31/10/2013 24/03/2014 1/07/2016 1/07/2016 30/09/2017 1/07/2017 1/07/2017 $0.40 40% $0.50 40% $0.69 40% $0.78 40% $0.53 40% 2-4 years 2-4 years 2-4 years 2-4 years 2-4 years - 3.15 - 3.28 - 3.85 - 3.94 - 4.17 $36,000 $56,813 $145,230 $106,650 $97,200 $- - $- - $- - $- - $- - — 67 ANNUAL REPORT 2015 16. Employee Benefits (Continued) (c) Empired Performance Rights Plan (continued) Grant date Vesting period ends Share price at date of grant Volatility Option life Dividend yield Risk free investment rate Fair value at grant date Exercise price at date of grant Exercisable from / to Issue 6 Issue 7 Issue 8 Issue 9 Issue 10 25/08/2014 30/04/2015 $0.65 40% 0-1 years - 3.44 31/10/2014 31/10/2017 $0.75 40% 27/11/2014 28/01/2015 1/07/2018 1/07/2018 $0.70 40% $0.61 40% 2/03/2015 1/07/2018 $0.70 40% 2-4 years 2-4 years 2-4 years 2-4 years - 3.29 - 3.11 - 2.61 - 2.5 $120,938 $342,000 $275,625 $272,250 $157,500 $- - $- - $- - $- - $- - The weighted average remaining contractual life is 1.4917 years. The underlying expected volatility was determined by reference to historical data of the Company’s shares over a period of time. No special features inherent to the options granted were incorporated into measurement of fair value. — 68 Notes to the Financial StatementsFor The Year Ended 30 June 2015EMPIRED LTD 17. Trade and Other Payables Trade payables Superannuation payable Tax Office amounts payable Accrued liabilities Credit cards payable Other Fringe Benefits Tax payable Unearned Revenue 2015 $ 8,843,468 1,297,501 6,782,382 3,451,714 1,139,789 495,092 - 2,905,445 24,915,391 2014 $ 3,590,267 981,696 1,543,081 1,968,725 55,439 468,744 2,987 1,226,331 9,837,270 Included in the above are aggregate amounts payable to the following related parties: Owing to Directors and Director related entities 55,000 44,458 Trade payables are non-interest bearing and are normally settled on 30-day terms. The net of GST payable and GST receivable is remitted to the appropriate body on a monthly basis. Superannuation is paid in the month following the end of each quarter. — 69 ANNUAL REPORT 2015 18. Borrowings Current Designated at FVTPL: Obligations under NZ-Dollar bank loan Carrying amount at amortised cost Obligations under finance leases and hire purchase contracts Obligations under premium funding contracts Obligations under bank loan Non-current Designated at FVTPL: Obligations under NZ-Dollar bank loan Carrying amount at amortised cost Obligations under finance leases and hire purchase contracts Obligations under bank loan 2015 $ 1,577,402 2,159,774 125,181 2,869,127 6,731,484 2014 $ - 741,769 134,605 2,588,407 3,464,781 3,143,465 - 3,470,264 8,949,916 15,563,645 353,888 9,368,791 9,722,679 Hire Purchase Contracts Hire purchase contract maturity ranges from July 2015 to June 2018. Leased assets are held as security. Finance facilities available A new facility was established as at 30 June 2015. The total limit of this facility is $27,341,418. This facility shall be reviewed on an annual basis with the existing financial covenants of EBITDA and current ratio being tested quarterly. In addition the Debt to EBITDA and EBITDA to total debt service are also tested quarterly. The Bank of Western Australia holds a fixed floating charge over Australian company assets up to the limit of the facility. ANZ Bank New Zealand holds a fixed floating charge over company assets of Intergen Limited in New Zealand up to the limit of the facility. — 70 Notes to the Financial StatementsFor The Year Ended 30 June 2015EMPIRED LTD 18. Borrowings (Continued) Finance facilities available At reporting date, the following financing facilities had been negotiated and were available: Total facilities Facilities used at reporting date Facilities unused at reporting date 19. Provisions Year end 30 June 2015 Balance at the beginning of the year Additional provisions Amounts used Closing value at 30 June 2015 Analysis of total provisions Current Provision for Annual Leave Provision for Long Service Leave Non-current Provision for Long Service Leave 2014 $ 13,866,198 (11,957,198) 1,909,000 Total $ 2,357,466 7,096,377 (4,483,067) 4,970,776 2014 $ 1,846,541 152,499 1,999,040 358,426 358,426 2015 $ 27,341,418 (18,919,827) 8,421,591 Annual Leave Long Service Leave $ 510,925 477,551 (74,870) 913,606 2015 $ 4,057,170 393,751 4,450,921 519,855 519,855 $ 1,846,541 6,618,826 (4,408,197) 4,057,170 — 71 ANNUAL REPORT 201520. Other Liabilities Lease Incentives Current Non-current 2015 $ 200,883 736,572 937,455 2014 $ - - - During the year the Company secured lease incentives in the form of initial rent-free periods and fitout contribution for the Sydney office. The remaining value of lease incentives is recognised as a liability and will be reduced by allocating the incentives to the rental expense over the term of the lease. 21. Reserves Opening balance as at 1 July 2013 Share option expense Issue of performance rights Closing balance as at 30 June 2014 Share option expense Issue of performance rights Exchange differences arising on translating the foreign operations Closing balance as at 30 June 2015 Foreign Currency Translation Reserve Employee Equity Benefits Reserve Total Reserves $ - - - - - - (40,632) (40,632) $ 461,126 105,248 145,230 711,604 356,655 342,000 - $ 461,126 105,248 145,230 711,604 356,655 342,000 (40,632) 1,410,259 1,369,627 — 72 Notes to the Financial StatementsFor The Year Ended 30 June 2015EMPIRED LTD22. Issued Capital Ordinary Shares fully paid 37,779,130 24,362,663 2015 $ 2014 $ Movement in ordinary shares on issue At 1 July 2013 Issue of shares Conversion of options At 30 June 2014 Issue of shares Conversion of options At 30 June 2015 Movement in ordinary shares on issue At beginning of the reporting period 27 September 2013 1 November 2013 31 July 2014 22 September 2014 2 December 2014 27 May 2015 Conversion of options 24 September 2013 28 November 2013 29 November 2013 31 July 2014 At 30 June 2015 No. 67,918,049 25,000,000 2,150,000 95,068,049 19,265,204 850,000 115,183,253 2015 No. 95,068,049 - - 450,000 14,000,000 4,765,204 500,000 - - - 400,000 115,183,253 Value ($) 8,779,678 14,912,985 670,000 24,362,663 13,296,467 120,000 37,779,130 2014 No. 67,918,049 16,979,511 8,020,489 - - - - 2,050,000 50,000 50,000 - 95,068,049 Ordinary shares entitle the holder to participate in dividends, and carry one vote per share. These shares have no par value. • • • • • On 31 July 2014, the company issued 450,000 shares for the vesting of Performance Rights and 400,000 shares on the exercise of options at $0.30 per share. On 22 September 2014, the company issued 14,000,000 shares at $0.75 to raise capital for the acquisition of Intergen Limited. On 2 December 2014, the company issued 500,000 shares at $0.76 for the vesting of Performance Rights. On 2 December 2014, the company issued 4,265,204 shares at $0.75 to vendors of Intergen Limited. On 27 May 2015, the company issued 500,000 shares for the vesting of Performance Rights. — 73 ANNUAL REPORT 2015 22. Issued Capital (Continued) Capital Management Management controls the capital of the Group in order to maintain a sustainable debt to equity ratio, generate long-term shareholder value and ensure that the Group can fund its operations and continue as a going concern. The Group’s debt and capital include ordinary share capital, convertible performance rights and employee options, supported by financial assets. There are no externally imposed capital requirements, except for the covenant on the bank overdraft referred to in note 18. Management effectively manages the Group’s capital by assessing the Group’s financial risks and adjusting its capital structure in response to changes in these risks and in the market. These responses include the management of debt levels, distributions to shareholders and share issues. There have been no changes in the strategy adopted by management to control the capital of the Group since the prior year. The gearing ratios for the years ended 30 June 2015 and 30 June 2014 are as follows: Note Consolidated Group 2015 Consolidated Group 2014 Total Borrowings Less cash and cash equivalents 18 9(i) Net Debt Issued Capital Total Capital Gearing ratio 23. Dividends (a) Distributions Paid Final franked dividend of nil cents (2014: 1 cents) Interim franked dividend of nil cents (2014: 0 cents) $ 22,295,129 (9,604,422) 12,690,707 37,779,130 50,469,837 25.15% 2015 $ - - - $ 13,187,462 (8,062,006) 5,125,456 24,362,663 29,488,119 17.38% 2014 $ 959,180 - 959,180 (b) Franking Credit Balance Balance of franking account at year end at 30% available to the shareholders of Empired Limited for subsequent financial years Franked dividends paid were franked at the tax rate of 30%. 152,580 758,950 — 74 Notes to the Financial StatementsFor The Year Ended 30 June 2015EMPIRED LTD24. Financial Risk Management Objectives and Policies The Group’s principal financial instruments consist of bank loans and hire purchase contracts, cash, short-term deposits, trade receivables, trade payables, loans and hire purchases. The main purpose of the financial liabilities 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, foreign currency risk and credit risk. The board reviews and agrees policies for managing each of these risks and they are summarised below. Market risk Interest rate risk Exposure to market interest rates is limited to the Group’s cash balances and bank borrowings at variable interest rates. Finance leases and hire purchase agreements entered into are purchased at fixed interest rates. Cash balances are disclosed at note 9. Refer to note 25 for detail of the Group’s exposure to interest rate risks on financial assets and liabilities. The following table illustrates the sensitivity of profit and equity to a reasonably possible change in interest rates of +/- 1% (2014: +/- 1%). These changes are considered to be reasonably possible based on observation of current market conditions. The calculations are based on a change in the average market interest rate for each period, and the financial instruments held at each reporting date that are sensitive to changes in interest rates. All other variables are held constant. Profit for the year Equity $ +1% (88,805) (35,879) $ -1% 88,805 35,879 $ +1% - - $ -1% - - 30 June 2015 30 June 2014 Foreign currency risk The Group has exposure to foreign currency risk as a result of its New Zealand, USA and Singapore based subsidiaries having the majority of trade debtors and trade creditors denominated in a currency other than the respective functional currencies. Trade creditor transactions for Australian subsidiaries may be entered into in foreign currency and fluctuations in these currencies may have a minor impact on the Company’s financial results. The exchange rates are closely monitored within the Group. — 75 ANNUAL REPORT 2015 24. Financial Risk Management Objectives and Policies (Continued) Foreign currency risk (continued) Foreign currency denominated financial assets and liabilities which expose the Group to currency risk are disclosed below. The amounts shown are those reported to key management translated into $AUD at the closing rate: NZD USD SGD 2015 $ 8,070,073 (8,777,953) (707,880) 2014 $ - - - 2015 $ 1,099,363 (136,676) 962,687 2014 $ - - - 2015 $ 634,251 - 634,251 2014 $ - - - Financial Assets Financial Liabilities Total Exposure The following table illustrates the sensitivity of profit in regards to the Group’s financial assets and financial liabilities and the $NZD/$AUD exchange rate, $USD/$AUD exchange rate and $SGD/$AUD exchange rate ‘all other things being equal’. It assumes a +/- 10% change of the $AUD/$NZD exchange rate, a +/- 10% change of the $AUD/$USD exchange rate, and a +/- 10% change of the $AUD/$SGD exchange rate (2014: 0%). These percentages have been determined based on the average market volatility in exchange rates in the previous twelve (12) months. The sensitivity analysis is based on the Group’s foreign currency financial instruments held at each reporting date. There is no effect on equity. If the $AUD had strengthened against the respective currencies by 10% (2014: 10%) then this would have had the following impact: 30 June 2015 30 June 2014 NZD $ (70,788) - USD $ 96,269 - SGD $ 63,425 - Total $ 88,906 - If the $AUD had weakened against the respective currencies by 10% (2014: 10%) then this would have had the following impact: 30 June 2015 30 June 2014 NZD $ 70,788 - USD $ (96,269) - SGD $ (63,425) - Total $ (88,906) - Exposures to foreign exchange rates vary during the year depending on the volume of overseas transactions. Nonetheless, the analysis above is considered to be representative of the Group’s exposure to currency risk. Commodity price risk The Group’s exposure to price risk is minimal. — 76 Notes to the Financial StatementsFor The Year Ended 30 June 2015EMPIRED LTD 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. Customers that fail to meet the Group’s creditworthiness may transact with the group only on a prepayment basis. 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 Chief Financial Officer. 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. Exposure to credit risk The Group’s maximum exposure to credit risk at the report date was: Cash and cash equivalents (note 9) Trade and other receivables (note 10) The ageing of the Group’s non-impaired trade receivables at reporting date was: Not past due Past due 0-30 days Past due 31-60 days Past due 60 days 2015 $ 9,604,422 26,774,194 36,378,616 2015 $ 20,865,139 4,020,351 673,927 1,214,777 26,774,194 2014 $ 8,062,006 11,134,232 19,196,238 2014 $ 8,802,645 909,504 930,532 491,551 11,134,232 The group expects to be able to recover all outstanding debts that have not been provided for impairment. — 77 ANNUAL REPORT 2015 24. Financial Risk Management Objectives and Policies (Continued) Liquidity risk The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts and hire purchase contracts. The Group manages liquidity risk by forecasting and monitoring cash flows on a continuing basis. As at 30 June 2015, the Group’s financial liabilities have contractual maturities (including interest payments where applicable) as summarised below: 30 June 2015 Overdraft Facility Insurance premium funding loan Other bank borrowings Finance lease obligations Trade and other payables Total 0-12 Months $ 5,667 125,181 4,440,860 2,159,774 8,843,468 15,574,950 1 - 5 years 5+ years $ - - 10,824,951 3,470,264 - 14,295,215 $ - - 1,268,432 - - 1,268,432 This compares to the maturity of the Group’s financial liabilities in the previous reporting periods as follows: 30 June 2014 Insurance premium funding loan Other bank borrowings Finance lease obligations Trade and other payables Total 0-12 Months $ 134,606 2,588,407 741,769 3,590,267 7,055,049 1 - 5 years 5+ years $ - 7,300,080 353,888 - 7,653,968 $ - 2,068,712 - - 2,068,712 The above amounts reflect the contractual undiscounted cash flows, which may differ to the carrying values of the liabilities at the reporting date. — 78 Notes to the Financial StatementsFor The Year Ended 30 June 2015EMPIRED LTD25. Financial Instruments The fair value of financial assets and liabilities is considered to approximate their carrying values. The tables below reflect the undiscounted contractual settlement terms for financial instruments of a fixed period of maturity, as well as management’s expectations of the settlement period for all other financial instruments. As such, the amounts may not reconcile to the statement of financial position. Interest Rate Risk Exposure to interest rate risks on financial assets and liabilities are summarised as follows: 2015 Floating interest rate Fixed Interest Rate 1 year or less Fixed Interest Rate Over 1 to 5 years Non-interest bearing Carrying amount as per balance sheet Weighted average effective interest rate i) Financial Assets Term deposit Cash $ - 9,591,471 Loans and receivables - $ 11,624 - - Total financial assets 9,591,471 11,624 ii) Financial liabilities – at amortised cost Overdraft Facility Accounts payable Hire purchase Short term loans Bank Loan Total financial liabilities 5,667 - - - - - - 2,159,774 125,181 4,440,860 $ - - - - - - 3,470,264 - 12,093,383 $ $ - 1,327 26,774,194 11,624 9,592,798 26,774,194 26,775,521 36,378,616 - 8,843,468 - - - 5,667 8,843,468 5,630,038 125,181 16,534,243 2.70% 0.85% - - - 3.71% 5.30% 4.13% 5,667 6,725,815 15,563,647 8,843,468 31,138,597 — 79 ANNUAL REPORT 201525. Financial Instruments (Continued) 2014 Floating interest rate Fixed Interest Rate 1 year or less Fixed Interest Rate Over 1 to 5 years Non-interest bearing Carrying amount as per balance sheet Weighted average effective interest rate i) Financial Assets Term deposit Term deposit Term deposit Cash $ 223,070 - 308,567 7,486,549 Loans and receivables - $ - 43,570 - - - Total financial assets 8,018,186 43,570 ii) Financial liabilities – at amortised cost Overdraft Facility Accounts payable Hire purchase Short term loans Bank Loan Total financial liabilities - - - - - - - - 741,769 134,606 2,588,407 $ - - - - - - - - 353,887 - 9,368,791 $ - - - 250 11,134,232 $ 223,070 43,570 308,567 7,486,799 11,134,232 11,134,482 19,196,238 - 3,590,267 - - - - 3,590,267 1,095,656 134,606 11,957,198 1.97% 4.67% 3.68% 1.07% - - - - 8.40% 6% 5.04% 3,464,782 9,722,678 3,590,267 16,777,727 - — 80 Notes to the Financial StatementsFor The Year Ended 30 June 2015EMPIRED LTD26. Commitments and Contingencies No contingent assets or liabilities as at 30 June 2015. Commitments for Expenditure A. Hire Purchase The consolidated entity has various computer equipment on hire purchase arrangements. The lease is for a period of 36 months. Not later than one year Later than one year but not later than five years Less: unexpired charges Hire Purchase Current Non-Current Total Hire Purchase B. 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 Later than one year but not later than five years Less: unexpired charges Loan Repayments Current Non-Current Total Loan Repayments 2015 $ 2,361,923 3,654,264 (386,148) 5,630,039 2,159,774 3,470,264 5,630,039 132,192 - (7,011) 125,181 125,181 - 125,181 2014 $ 795,023 370,896 (70,263) 1,095,656 741,768 353,888 1,095,656 142,678 - (8,073) 134,605 134,605 - 134,605 — 81 ANNUAL REPORT 2015 26. Commitments and Contingencies (Continued) C. Operating leases Office premises are leased under non-cancellable operating leases for periods as follows: Location Level 13, 256 Adelaide Terrace, Perth Suite 11A, Level 11, 79 Adelaide Street, Brisbane Level 5 & 10, 257 Collins Street, Melbourne Level 2, 8 Leigh Street, Adelaide Level 2, 1292 Hay Street, West Perth Level 12, 9 Hunter Street, Sydney Level 5, 56 William Street, Perth Level 4, 110 William Street, Perth Level 2, 15 Huron Street, Takapuna Beach, Auckland Unit 7, Airport Business Park, 92 Russley Road, Christchurch 126 Lambton Quay, Wellington 6A Willowbank, Dunedin 2035 158th Court NE, Suite 100, Bellevue, WA, 98008, USA 36 Armenian Street, #05-12, Singapore 179934 Their commitment can be seen below: Terms Expires on 31 October 2015 Expires 1 June 2017 Expires 31 August 2020 Expires 14 March 2017 Expires 30 June 2016 Expires 1 March 2020 Expires 17 April 2018 Expires on 31 October 2015 Expires 30 November 2015 Expires 31 March 2019 Expires 31 December 2016 Expires 31 October 2019 Expires 31 July 2020 Expires 31 May 2017 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 Later than one year but not later than five years Later than five years Total 2015 $ 3,903,468 13,687,713 3,431,862 21,023,043 2014 $ 2,256,357 3,521,244 - 5,777,601 — 82 Notes to the Financial StatementsFor The Year Ended 30 June 2015EMPIRED LTD26. Commitments and Contingencies (Continued) The Company has in place term deposit backed or facility backed bank guarantees in relation to rental premises listed below: Level 13, 256 Adelaide Terrace, Perth Level 4, 110 William Street, Perth Level 4, 110 William Street, Perth Level 5 & 10, 257 Collins Street, Melbourne Suite 11A, Level 11, 79 Adelaide Street, Brisbane Suite 11A, Level 11, 79 Adelaide Street, Brisbane Level 2, 8 Leigh Street, Adelaide Level 2, 8 Leigh Street, Adelaide Level 9, 37 York Street, Sydney Level 9, 37 York Street, Sydney Level 2, 1292 Hay Street, West Perth Level 2, 1292 Hay Street, West Perth Level 9, 451 Little Bourke Street, Melbourne Level 12, 9 Hunter Street, Sydney Level 5, 56 William Street, Perth, WA 6000 Level 2, 15 Huron Street, PO Box 331-328 Takapuna Beach, Auckland Unit 7, Airport Business Park, 92 Russley Road, Christchurch 2015 $ 414,175 - - 166,375 129,777 - - - - - 24,509 - - 373,441 86,829 121,438 106,800 2014 $ 366,428 40,000 40,000 76,175 129,777 119,246 78,672 78,672 114,000 114,000 24,509 24,509 184,000 - - - - Maximum amount the bank may call 1,423,344 1,389,988 — 83 ANNUAL REPORT 201527. Investment in Controlled Entity Country of Incorporation Australia Australia Australia Australia Australia Australia Australia New Zealand New Zealand New Zealand Singapore USA % Equity Interest Investment ($) 2015 % 100 100 100 100 100 - 100 100 100 100 100 100 - 2014 % 100 100 100 100 100 100 - - - - - - - 2015 $ 2014 $ 358,355 9,679,427 359,661 9,679,427 17,984,334 17,984,334 2,243,652 2,243,650 10 - - 17,187,465 1 - - - 10 10 - - - - - - 47,453,244 30,267,092 Tusk Technologies Pty Ltd Conducive Pty Ltd OBS Pty Ltd eSavvy Pty Ltd i5 Software Pty Ltd Piaxo Pty Ltd Intergen Business Solutions Pty Ltd Intergen Limited Intergen X4 Holdings Limited Intergen USA Limited Empired Singapore Pte Ltd Intergen North America Limited 28. Acquisitions On the 31st of October 2014, Empired Limited acquired 100% of the issued share capital in Intergen Limited (“Intergen”) for $17.4 million. Intergen is a tier 1 IT Services company that delivers business outcomes to medium and large companies of all industries across New Zealand, Australia and North America, using the full range of Microsoft Solutions. In addition, Intergen, which employs approximately 370 staff, is a leader in Microsoft Enterprise Planning (“ERP”) services, introducing a new service offering to Empired in a large and high growth market. The acquisition strategically positions Empired as the largest provider of Microsoft based application services in the Australasian region. The increased scale will improve Empired’s positioning to secure larger contracts with larger clients and the increased staff numbers will allow more efficient use of resources. Under the terms of the transaction, Empired will pay an undiscounted purchase price of $17.4 million over a three year period with $5 million paid on the completion date through a combination of cash and equity. The remaining $12.4 million is subject to FY15 and FY16 EBITDA performance with $2 million due on 30 April 2015, $5.2 million due on 30 April 2016 and the final $5.2m due on 30 April 2017. The fair value of the FY15 contingent consideration payment was based on a probablility weighting in line with forecasts at the time. FY15 performance conditions were not met and hence the discounted contingent consideration of $1.7 million has been derecognised. A gain of $1.7 million has been included in other revenue accordingly. — 84 Notes to the Financial StatementsFor The Year Ended 30 June 2015EMPIRED LTD28. Acquisitions (Continued) The acquisition had the following effect on the consolidated entity’s assets and liabilities: Net tangible assets acquired Cash Receivables Work in progress Other assets Property, plant and equipment Other investments Deferred tax assets Short term bank debt Trade and other payables Deferred revenue Employee liabilities Deferred tax liability Other liabilities Other identifiable assets acquired Developed assets Non-compete clause Customer relationship Goodwill Total consideration Deferred payments Performance Rights issued as consideration Shares issued as consideration Cash and cash equivalents acquired Net cash outflow on acquisition Acquisition costs charged to expenses Net cash paid relating to acquisition Fair Value $ 564,274 6,977,592 553,430 920,696 2,527,191 224,226 1,275,833 (4,699,760) (5,024,928) (1,670,572) (2,966,574) (91,577) (1,574,188) (2,984,357) 680,016 29,121 122,535 831,672 19,340,151 17,187,466 (12,131,334) (342,000) (3,195,917) (564,274) 953,941 498,402 1,452,343 Goodwill Goodwill of $19,340,151 is primarily related to growth expectations, expected future profitability, the substantial skill and expertise of Intergen’s workforce and expected cost synergies. Goodwill has been allocated to cash-generating units at 30 June 2015. The goodwill that arose from this business combination is not expected to be deductible for tax purposes. — 85 ANNUAL REPORT 2015 28. Acquisitions (Continued) Contribution to group results Intergen incurred a profit before tax of $2.7 million for the 8 months from 1 November 2014 to the reporting date. If Intergen had been acquired on 1 July 2014, revenue of the Group for 2015 would have been $147 million, and profit before tax for the year would have decreased by $2.8 million. 29. Auditor’s Remuneration Amounts received or due and receivable by auditors of the parent entity: Audit and review of financial statements Grant Thornton Australia Overseas Grant Thornton network firms Remuneration for audit and review of financial statements Other Services Grant Thornton Australia: Taxation compliance Due diligence services Overseas Grant Thornton network firms: Due diligence services Total other services remuneration Total auditor’s remuneration 2015 $ 186,764 85,804 272,568 27,073 153,678 21,779 202,530 475,098 2014 $ 121,805 - 121,805 9,000 107,169 116,169 237,974 — 86 Notes to the Financial StatementsFor The Year Ended 30 June 2015EMPIRED LTD 30. Parent Entity Information As at and throughout the financial year ended 30 June 2015, the parent entity of the Group was Empired Limited. Statement of financial position Current assets Total assets Current liabilities Total liabilities Issued capital Employee equity benefits reserve Retained profits Total equity Statement of comprehensive income Profit for year Other comprehensive income Total comprehensive income Parent entity contingent liability disclosure has been referenced at note 26. 2015 $ 17,218,630 86,155,127 24,428,518 46,961,325 37,779,130 1,410,258 4,414 39,193,802 2015 $ (1,828,912) - (1,828,912) 2014 $ 10,264,401 52,638,513 11,327,961 24,631,237 24,362,663 711,604 2,933,009 28,007,276 2014 $ 977,701 - 977,701 — 87 ANNUAL REPORT 201531. Related Party Transactions The Group’s related parties includes its associate, subsidiaries and key management. Unless otherwise stated, none of the transactions incorporate special terms and conditions and no guarantees were given or received. Outstanding balances are usually settled in cash. Transactions with subsidiaries The balance of the Tusk Technologies Pty Ltd loan as at 30 June 2015 is $352,865. This loan is unsecured does not bear interest and is not repayable in the next 12 months. The balance of the Conducive Pty Ltd loan as at 30 June 2015 is $4,609,906. This loan is unsecured does not bear interest and is not repayable in the next 12 months. The balance of the OBS Pty Ltd loan as at 30 June 2015 is $1,256,579. This loan is unsecured does not bear interest and is not repayable in the next 12 months. The balance of the eSavvy Pty Ltd loan as at 30 June 2015 is $516,393. This loan is unsecured does not bear interest and is not repayable in the next 12 months. The balance of the Empired Singapore Pte Ltd loan as at 30 June 2015 is $644,353. This loan is unsecured does not bear interest and is not repayable in the next 12 months. The balance of the Intergen Limited loan as at 30 June 2015 is $189,925. This loan is unsecured does not bear interest and is not repayable in the next 12 months. The balance of the Intergen Business Solutions Pty Ltd loan as at 30 June 2015 is $3,320,905. This loan is unsecured does not bear interest and is not repayable in the next 12 months. Other than this related party loan there are no other related party transactions requiring disclosure. Transactions with associates Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. During the financial year, the Group received $3,744 in revenue from its associate, X4 Consulting Limited. Transactions with key management personnel Key management of the Group are the executive members of Empired’s Board of Directors and members of the Executive Team. Refer to the Remuneration Report for compensation made to executive directors and other members of key management personnel. — 88 Notes to the Financial StatementsFor The Year Ended 30 June 2015EMPIRED LTD 32. Deferred Vendor Payments Current Non-Current Total 2015 $ 5,560,782 5,510,782 11,071,564 2014 $ 2,551,850 857,150 3,409,000 Included in the above are deferred vendor payments for the acquisition of Intergen Limited of $5.2 million and $5.2 million payable in FY2016 and FY2017 respectively (refer to Note 28). Also included in the above are deferred vendor payments for the acquisition of eSavvy Pty Ltd of $357,150 and $357,150 payable in FY2016 and FY2017 respectively. 33. Events After Reporting Date No adjusting or significant non-adjusting events have occurred between the reporting date and the date of authorisation. — 89 ANNUAL REPORT 2015Directors’ Declaration The directors of the company declare that: 1. The consolidated financial statements and notes, are in accordance with the Corporations Act 2001 and: a. comply with Accounting Standards; and b. give a true and fair view of the financial position as at 30 June 2015 and of the performance for the year ended on that date of the consolidated group; 2. The Chief Executive Officer and Chief Financial Officer have each declared that: a. the financial records of the company for the financial year have been properly maintained in accordance with s286 of the Corporations Act 2001; b. the financial statements and notes for the financial year comply with the Accounting Standards; and c. the financial statements and notes for the financial year give a true and fair view. 3. There are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable. 4. Note 2 confirms that the consolidated financial statements also comply with International Financial Reporting Standards. This declaration is made in accordance with a resolution of the Board of Directors. On behalf of the Board Russell Baskerville Managing Director 27th of August 2015 — 91 ANNUAL REPORT 2015Level 1 10 Kings Park Road West Perth WA 6005 Correspondence to: PO Box 570 West Perth WA 6872 T +61 8 9480 2000 F +61 8 9322 7787 E info.wa@au.gt.com W www.grantthornton.com.au Auditor’s Independence Declaration To the Directors of Empired Limited In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of Empired Limited for the year ended 30 June 2015, I declare that, to the best of my knowledge and belief, there have been: a b no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and no contraventions of any applicable code of professional conduct in relation to the audit. GRANT THORNTON AUDIT PTY LTD Chartered Accountants C A Becker Partner - Audit & Assurance Perth, 27 August 2015 Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389 ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited. Liability limited by a scheme approved under Professional Standards Legislation. Liability is limited in those States where a current scheme applies. — 92 92 EMPIRED LTDEMPIRED LTD Level 1 10 Kings Park Road West Perth WA 6005 Correspondence to: PO Box 570 West Perth WA 6872 T +61 8 9480 2000 F +61 8 9322 7787 E info.wa@au.gt.com W www.grantthornton.com.au Independent Auditor’s Report To the Members of Empired Limited Report on the financial report We have audited the accompanying financial report of Empired Limited (the “Company”), which comprises the consolidated statement of financial position as at 30 June 2015, the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information and the directors’ declaration of the consolidated entity comprising the Company and the entities it controlled at the year’s end or from time to time during the financial year. Directors’ responsibility for the financial report The Directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001. The Directors’ responsibility also includes such internal control as the Directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. The Directors also state, in the notes to the financial report, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, the financial statements comply with International Financial Reporting Standards. Auditor’s responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require us to comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389 ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited. Liability limited by a scheme approved under Professional Standards Legislation. Liability is limited in those States where a current scheme applies. — 93 93 ANNUAL REPORT 2015 An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. Auditor’s opinion In our opinion, a the financial report of Empired Limited is in accordance with the Corporations Act 2001, including: i ii giving a true and fair view of the consolidated entity’s financial position as at 30 June 2015 and of its performance for the year ended on that date; and complying with Australian Accounting Standards and the Corporations Regulations 2001; and b the financial report also complies with International Financial Reporting Standards as disclosed in the notes to the financial statements. Report on the remuneration report We have audited the remuneration report included in pages 20 to 28 of the directors’ report for the year ended 30 June 2015. The Directors of the Company are responsible for the preparation and presentation of the remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in accordance with Australian Auditing Standards. Auditor’s opinion on the remuneration report In our opinion, the remuneration report of Empired Limited for the year ended 30 June 2015, complies with section 300A of the Corporations Act 2001. — 94 94 GRANT THORNTON AUDIT PTY LTD Chartered Accountants C A Becker Partner - Audit & Assurance Perth, 27 August 2015 95 EMPIRED LTDEMPIRED LTD GRANT THORNTON AUDIT PTY LTD Chartered Accountants C A Becker Partner - Audit & Assurance Perth, 27 August 2015 — 95 95 ANNUAL REPORT 2015 Shareholder 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 30th June 2015. a. Distribution of Shareholding Size of Shareholding 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 - MAX Total Number of Shareholders 119 491 248 495 101 1,454 % 0.07 1.06 1.74 13.93 83.20 100.00 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. Shareholder Number of Shares held Australian Ethical Smaller Companies Trust Baskerville Investments Pty Ltd Thorney Investment Group Australia Pty Ltd Contango Asset Management Ltd 11,310,479 8,250,059 7,024,924 5,855,000 % 9.8 7.2 6.1 5.1 — 96 EMPIRED LTDEMPIRED LTDc. Twenty Largest Shareholders The names of the twenty largest shareholders as at 30 June 2015 are: Name National Nominees Limited Baskerville Investments Pty Ltd UBS Nominees Pty Ltd Citicorp Nominees Pty Limited Zero Nominees Pty Ltd HSBC Custody Nominees (Australia) Limited Mr Gregory David Leach Mr John Alexander Bardwell Navigator Australia Ltd Mr Tony John Alan Stewart BNP Paribas Noms Pty Ltd J P Morgan Nominees Australia Limited Uniplex Constructions Pty Ltd Equitas Nominees Pty Limited <2874398 A/C> Mr David John Cawthorn HSBC Custody Nominees (Australia) Limited - A/C 2 Bardwell Superannuation Fund Pty Ltd Ice Cold Investments Pty Ltd Three Zebras Pty Ltd Mrs Kym Garreffa Number of Shares held % 17,857,652 15.50 8,230,059 7,024,924 5,312,556 5,250,000 4,398,920 3,300,000 3,000,000 2,988,115 2,449,843 2,035,076 1,713,072 1,600,000 1,499,521 1,474,231 1,333,334 1,099,904 1,000,000 1,000,000 966,167 7.15 6.10 4.61 4.56 3.82 2.86 2.60 2.59 2.13 1.77 1.49 1.39 1.30 1.28 1.16 0.95 0.87 0.87 0.84 Total 73,533,374 63.84 The twenty members holding the largest number of shares together held a total of 63.84% of issued capital. — 97 ANNUAL REPORT 2015Shareholder Analysis d. Issued Capital (i) Ordinary Shares The fully paid issued capital of the company consisted of 115,183,253 shares held by 1454 shareholders. Each share entitles the holder to one vote. The number of shareholdings held in less than marketable parcels is 33. (ii) Unquoted Equity No options were issued in the year under the Company share options plan. 4,450,000 performance rights were issued under the company’s LTI plan. Options do not have any voting rights. e. On-Market Buy-Back There is no current on-market buy-back. f. Company Secretary The Company Secretary is Mr Mark Waller. g. Registered Office The registered office of Empired Ltd is: Level 13, Septimus Roe Square 256 Adelaide Terrace PERTH WA 6000 Telephone: +61 8 9223 1234 — 99 ANNUAL REPORT 2015Other Information for Shareholders In accordance with Listing Rule 4.10 of the Australian Stock Changes to your shareholder details, such as a change of name or Exchange Limited, the Directors provide the following information address, or notification of your tax file number or direct credit of not elsewhere disclosed in this report. dividend advice can be made by printing out the forms you need, 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: 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 • The annual report is distributed to shareholders who elect Investor Centre in Melbourne: 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 The Registrar Computershare Investor Services Pty Ltd information about the operation of the Company during Level 11, 172 St Georges Terrace the year, changes in the state of affairs of the Company Perth WA 6000 and details of future developments, in addition to the other Telephone +61 8 9323 2000 disclosures required by the Corporations Act; Facsimile +61 8 9323 2033 • The half-year report contains summarised financial Website www-au.computershare.com/investor 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 ANNUAL GENERAL MEETING The 2015 Annual General Meeting of Empired Limited will be held at: Securities and Investments Commission and the Australian Blue Water Function Room Stock Exchange; and Finbar Group Limited • The Company’s internet website at www.empired.com is at 11am on Monday, 16 November 2015 regularly updated and provides details of recent material announcements by the Company to the stock exchange, Formal notice of the meeting will be circulated to shareholders Level 6, 181 Adelaide Terrace, East Perth WA 6004 annual reports and general information on the Company separate to this report. 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 STOCK EXCHANGE LISTING Empired Limited shares are listed on the Australian Stock Exchange strategy and goals. Important issues are presented to the shareholders as single resolutions. (ASX:EPD). The home exchange is Perth. INTERNET ACCESS TO INFORMATION Empired maintains a comprehensive Investor Relations section on its website at www.empired.com/Investors/ All shares are recorded on the principal share register of Empired Limited, held by Computershare Investor Services Pty Limited at the following street address: You can also access comprehensive information about security Computershare Investor Services Pty Ltd Level 11, 172 St Georges Terrace holdings at the Computershare Investor Centre at Perth, WA 6000 www-au.computershare.com/investor/ By registering with Computershare’s free Investor Centre service you can enjoy direct access to a range of 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. — 100 EMPIRED LTDEMPIRED LTD www.empired.com 

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