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
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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
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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
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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
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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
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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
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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
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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
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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
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COLOUR PALETTE
FFCE00
081A28
949BA2
00B1E0
FF681D
115
PANTONE: UNCOATED STOCK
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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
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116
296
306
165
296
(40%)
COLOUR PALETTE
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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
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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
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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
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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
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COLOUR PALETTE
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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
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115
PANTONE: UNCOATED STOCK
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COLOUR BALANCE
COLOUR BALANCE
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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
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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,
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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.
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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
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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
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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
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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
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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
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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
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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.
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EMPIRED LTDEMPIRED LTD
www.empired.com