Corporate Directory
Directors
Thomas Stianos (Non-Executive Chairman)
John Bardwell (Non-Executive Director)
Richard Bevan (Non-Executive Director)
Cristiano Nicolli (Non-Executive Director)
Russell Baskerville (Managing Director & CEO)
Company Secretary
David Hinton
Registered Office
Level 7
The Quadrant
1 William Street
Perth WA 6000
Telephone No: +618 6333 2200
Fax No: +618 6333 2323
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
Legal Advisers
Jackson McDonald Lawyers
Level 17, 225 St Georges Terrace
Perth WA 6000
Auditors
Grant Thornton Audit Pty Ltd
Level 43, 152 -158 St Georges Terrace
Perth WA 6000
Share Register
Computershare Investor Services Pty Ltd
Level 11, 172 St Georges Terrace
Perth WA 6000
Website
www.empired.com
ASX Code
EPD
Principal Places of Business
Perth
Level 7, The Quadrant
1 William Street
Perth WA 6000
Adelaide
Level 2
8 Leigh Street
Adelaide SA 5000
Melbourne
Level 5
Brisbane
Level 11
257 Collins Street
Melbourne VIC 3000
79 Adelaide Street
Brisbane QLD 4000
Seattle
2010 156th Ave NE
Suite 210
Bellevue, WA, 98007
USA
Sydney
Level 12
9 Hunter Street
Sydney NSW 2000
Wellington
Level 4,
89 Willis Street
Wellington 6011
Contents
Corporate Directory
Inside front cover
Chairman & CEO Review
Directors’ Report
Remuneration Report
Corporate Governance Statement
2
4
11
19
Consolidated Statement of Profit or Loss
and Other Comprehensive Income
20
Consolidated Statement of
Financial Position
21
Consolidated Statement of Cash Flows 22
Consolidated Statement of
Changes in Equity
Notes to the Financial Statements
Directors’ Declaration
Auditor’s Independence Declaration
Independent Audit Report
Shareholding Analysis
Other Information for Shareholders
23
24
59
60
61
65
68
EMPIRED LIMITED | ANNUAL REPORT | 2019
1
Chairman & CEO Review
Thomas Stianos
NON-EXECUTIVE CHAIRMAN
Russell Baskerville
MANAGING DIRECTOR & CEO
To our fellow Shareholders,
On behalf of your board of directors, we present the
Empired Limited 2019 annual report, in what has been a
challenging year for our business. We are however confident
in the company’s outlook and management and the Board
are focused on executing a plan to improve operating
debt through improved cash flows and profit. A significant
reduction in Capital Expenditure will also lead to lower
depreciation and amortisation expense which is turn will
improve Net Profit After Tax. This combined with an active
share buy-back will provide a sound framework for increased
earnings per share.
performance and deliver value to our shareholders.
Management are focused on the execution of this plan,
Empired Limited’s financial results for the year ended
30 June 2019 are in line with our guidance provided on
having already commenced and actioned a number of
activities which will continue over the coming year.
2 July 2019 with revenue of $176m and Underlying Earnings
Empired is well placed to benefit from the continued growth
Before Interest Tax Depreciation and Amortisation (EBITDA)
in the Information Technology sector especially with the
of $15.3m (1). Reported Net Profit After Tax (NPAT) was a
growing trends that are today dominated by the adoption of
loss of $15.3m, including a non-cash impairment charge
technology to support business growth and transformation.
of $25.4m. Net Debt at 30 June 2019 was $14.3m and is
Our aspiration is to be the digital solutions partner of choice
expected to decline materially throughout the course of FY20
across Australia & New Zealand consistently delivering
(prior to the adoption of AASB 16 Leases).
innovation and business value to our clients underpinned by
The non-cash impairment charge predominately relates to
strong financial performance.
software assets that are now being superseded through new
Empired is confident of the success of our SaaS based
technologies and changes in market trends.
Cohesion platform. Cohesion is Empired’s proprietary
A comprehensive review has been undertaken with clear
priorities and targets set for the FY20 financial year to
deliver much improved operational performance. This has
included a review of the balance sheet, capital management,
operating costs, and investment in sales growth. We are
committed to deliver revenue growth whilst reducing
overhead expenses and achieving a significant reduction
in capital expenditure. These improvements will reduce net
cloud-based system for the provision of Enterprise Content
and Collaboration Management (ECCM) and is the leading
platform for delivery of these services to the New Zealand
Government. During the year Empired grew Cohesion SaaS
users from 7,000 to 11,500 on the back of a major contract
win with Oranga Tamariki (OT) – Ministry for Children. We
are now providing a range of additional services to OT and
expect the relationship to continue to grow in FY20.
2
EMPIRED LIMITED | ANNUAL REPORT | 2019CHAIRMAN & CEO REVIEW We have invested in the development of Cohesion on
Our pipeline of large multi-year contracts is very healthy,
the Microsoft Azure platform and Office365 platform in
and we will be competing on approximately $200m in
readiness for its launch in Australia. We have established a
strategic opportunities throughout FY20. We have invested
dedicated software sales function in Australia and developed
in the right assets and have positioned Empired to compete
a solid pipeline of Cohesion opportunities that we will
and win in this market. Accordingly, we expect that we
contest in the near term.
will capture our share of the market and deliver long term
We have a strong relationship with Microsoft, where we
growth.
are highly respected and considered the leading consulting
Our recent actions and renewed focus on operational
partner across Australia and New Zealand. During the year
improvement are an important reset in the company
Empired’s Microsoft Dynamics business performed strongly,
direction and establishes a strong platform from which to
up 20% in Australia and up 10% in NZ (up 30% half on half
execute much improved operational performance.
in NZ) and is Empired’s highest margin business.
We believe that growth combined with overhead cost
We have had a period of solid growth across the Australian
reductions and improved cash generation will deliver
East Coast, where we have delivered around 10% growth
shareholders an attractive investment proposition and create
year on year for the 3 years up to the end of FY18. FY19
sustainable value in both the short and long term.
growth was modest, up only 2% however we are confident
that a range of growth initiatives being implemented now
will re-ignite our expansion in the Australian East Coast.
We along with our board and leadership team would like
to thank all of our staff, clients and shareholders for their
support in our pursuit of building a highly respected and
A highlight of the New Zealand performance was a new,
successful company.
Yours faithfully
Thomas Stianos
NON-EXECUTIVE CHAIRMAN
Russell Baskerville
MANAGING DIRECTOR & CEO
$10m+ contract with the Department of Internal Affairs (DIA)
in New Zealand. The contract involves Empired working
with DIA to re-imagine how New Zealand citizens access
government services in a secure online system, to build the
system and then to run and enhance it for up to seven years.
DIA today is one of Empired’s largest clients.
During the year 63% of revenue was either recurring in
nature or was generated from multi-year contracts. This
provides a stable, predictable base of revenue at the start
of each financial year improving our predictability and
significantly enhancing our year on year growth prospects.
These revenues improve the defensive nature of our business
because our clients continue to rely on Empired to run and
maintain their business-critical technology assets during
periods of low investment.
Throughout the year we have invested in our managed
services offerings to capitalise on the rapid adoption of cloud
technologies. We have seen dramatic changes in the nature
of our client’s technology environments and the way in which
they consume software and services. We are confident that
these investments ensure that we have a modern solution
that meets today’s needs of our clients.
(1) FY19 EBITDA Underlying of $15.3m is a non AIFRS number that is reconciled to the reported result in note 3.
3
EMPIRED LIMITED | ANNUAL REPORT | 2019CHAIRMAN & CEO REVIEW 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 2019.
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
Thomas Stianos
Non-Executive Chairman - Age 65
Richard Bevan
Non-Executive Director - Age 53
Mr Stianos joined the board as a Non-Executive on
Mr Bevan joined the board as a Non-Executive director on
29 November 2016 and was appointed Chairman on
31 January 2008 with corporate and senior management
1 July 2018. Mr Stianos is widely recognised as one of the
experience including various directorship’s and CEO/MD
most successful and experienced leaders in the IT industry.
roles in ASX listed and private companies, and was appointed
He is also a member of the Remuneration and Nomination
Chairman on 29 November 2016 to 30 June 2018. Mr Bevan
Committee. Mr Stianos was previously the Managing Director
is also a member of the Audit and Risk Committee and the
of SMS Management & Technology Limited.
Remuneration and Nomination Committee. Mr Bevan brings
He has also previously held senior positions with the
Department of Premier and Cabinet, Department of
experience in the execution and integration of mergers,
acquisitions and other major corporate transactions.
Justice, and Department of Treasury & Finance. Mr Stianos
Mr Bevan has been involved in a number of businesses in
holds a Bachelor of Applied Science from the University
areas as diverse as healthcare, construction and engineering,
of Melbourne and is a Fellow of the Australian Institute of
resources and information services. Mr Bevan’s roles within
Company Directors.
Other current directorships of listed entities
these businesses have included strategic operational
management, implementing organic growth strategies,
business integration and raising capital in both public and
• Gale Pacific Limited
private markets.
Previous directorships (last 3 years)
Other current directorships of listed entities
• Inabox Group Limited
• Cassini Resources Limited
Russell Baskerville
Managing Director & CEO - Age 41
John Bardwell
Non-Executive Director - Age 59
Mr Baskerville is an experienced business professional and
has worked in the IT industry for in excess of 15 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
Mr Bardwell has had a long career in the financial services
and IT sectors through a variety of senior leadership
positions. Mr Bardwell’s previous executive experience
includes Head of IT Services at Bankwest, Managed Services
Director at Unisys West and as the General Manager of
Delivery Services at Empired Ltd prior to his appointment to
the Board as a non-executive Director on 26 November 2011.
Mr Bardwell is Chairman of the Audit and Risk Committee.
for ten years and has successfully listed the company on ASX
Mr Bardwell holds a Bachelor of Business and a Graduate
and made a number of successful acquisitions. Mr Baskerville
Diploma in Applied Finance and Investment. He is a
was previously a Non Executive Director of BigRedSky
Limited, successfully developed and commercialised a SaaS
Graduate Member of the Australian Institute of Company
Directors and a Fellow of the Financial Services Institute of
delivered eRecruitment tool prior to the company being
Australasia.
acquired by Thomson Reuters.
Previous directorships of listed entities (last 3 years)
• None
Mr Bardwell is a Board Member of Swancare Group, a
specialist provider of retirement living and aged-care
services, where he is also Chair of the Business Development
Committee.
Previous directorships of listed entities (last 3 years)
• None
5
EMPIRED LIMITED | ANNUAL REPORT | 2019DIRECTORS’ REPORT
Cristiano Nicolli
Non-Executive Director - Age 65
COMPANY SECRETARY
David Hinton
CFO & Company Secretary - Age 56
Mr Nicolli joined the Board on 22 October 2018.
Mr Hinton joined Empired in May 2016. He has had over 10
Mr Nicolli has had extensive career as an influential leader
years experience in the technology sector having previously
and successful businessman in the technology sector, he has
held the position of CFO and Company Secretary of ASX
extensive corporate and ASX listed company experience,
listed Amcom Telecommunications. Prior to Amcom he held
and is a sought after non-executive director. Mr Nicolli is the
a senior executive role in a large diversified listed company
Chairman of the Remuneration and Nomination Committee
and also worked at Ernst & Young.
and a member of the Audit and Risk Committee. He was the
Group Managing Director and CEO of UXC Limited from 2003
to 2016 when UXC Limited was sold to global IT firm CSC.
Mr Hinton holds a Bachelor of Business degree, is a Fellow of
the Institute of Chartered Accountants, is a graduate of the
Australian Institute of Company Directors and is a member
During that time Mr Nicolli was instrumental in leading the
of the Governance Institute of Australia. He is also Finance
growth and development of UXC to delivering revenue of
Director of not for profit Auspire - Australia Day Council WA.
$750m, employing 3,000 staff and being widely recognised
Mr Hinton is a non-executive director of ASX listed Heramed
as the largest and one of the most respected ASX listed IT
Limited and a Flag Officer of Royal Perth Yacht Club Inc.
company’s in Australia.
Mr Nicolli is also a non-executive director of ASX/ NZX listed
Vista Group International Limited (VGL) a global market
leader that provides software solutions across the global film
industry and ASX listed Otherlevels Holdings Limited (OLV).
Mr Nicolli is also Treasurer of NFP Charity Kadasig Aid and
Development.
Mr Nicolli is a Fellow of the Australian Institute of Company
Directors (FAICD), a past member of the New Zealand Society
of Accountants and holds a Bachelor of Management &
Business Studies.
Other current directorships of listed entities
• Vista Group International Limited
• Otherlevels Holdings Limited
Previous directorships of listed entities (last 3 years)
• UXC Limited
6
EMPIRED LIMITED | ANNUAL REPORT | 2019DIRECTORS’ REPORT DIRECTORS’ MEETINGS
The number of Directors meetings and the number of meetings attended by each Director during the year are:
No. of Meetings
Directors
attended as a
Director during
the year ended
30 June 2019
No. of Audit
Committee
Meetings held
while a Director
No. of Audit
Committee
meetings
attended during
the year ended
30 June 2019
No. of Directors
Meetings held
while a Director
12
12
12
12
7
5
12
12
12
12
7
4
2
2
2
2
1
1
2
2
2
2
1
1
No. of
Remunertion
and Nomination
committee
meetings held
during the year
ended
30 June 2019
No. of
Remuneration
and Nomination
Committee
meetings
attended during
the year ended
30 June 2019
No. of Audit and
Risk Committee
meetings held
during the year
ended
30 June 2019
No. of Audit and
Risk Committee
meetings
attended during
the year ended
30 June 2019
-
2
2
-
2
-
-
2
2
-
2
-
-
-
1
1
1
-
-
-
1
1
1
-
Name of Director
Russell Baskerville
Thomas Stianos
Richard Bevan
John Bardwell
Cristiano Nicolli
Chris Ryan
Name of Director
Russell Baskerville
Thomas Stianos
Richard Bevan
John Bardwell
Cristiano Nicolli
Chris Ryan
On 14 February 2019 the Audit and Risk Committee was established, that superceded the Audit Committee. Also on this
date, a Remuneration and Nomination Committee was formed.
7
EMPIRED LIMITED | ANNUAL REPORT | 2019DIRECTORS’ REPORT OPERATING AND FINANCIAL REVIEW
Review of operations
Empired Limited is an international IT Services Provider with a broad range of capabilities and a reputation for delivering
enterprise class IT services and solutions. Established in 1999, Empired is a publicly listed company (ASX: EPD) formed
in Western Australia.
With a team of approximately 1,000 people located across Australia, New Zealand and USA, Empired has built a reputation for
service excellence and is a leading provider of business technology solutions to both government and private sectors. We work
with clients to deliver high quality solutions to meet their business requirements.
Our flexible service delivery approach has enabled Empired to secure clients that range from medium size entities through
to large enterprise and Government agencies.
The business operates as two segments:
• Australia
• New Zealand - which includes USA
Review of financial results
Revenue overall increased by 1% to $176m.
Earnings before interest, tax depreciation and amortisation (EBITDA Underlying) for the financial year decreased to $15.3m
from $17.0m.
The net loss after tax of ($15.3m) included a non-cash impairment charge of $25.4m. The non-cash impairment charge was as a
result of a review of the carrying value of assets.
The financial results are summarised in the following table:
$m
Revenue
EBITDA Underlying
Depreciation & amortisation
EBIT
Interest (net)
Net profit before tax
Impairment losses
Once off costs
Result before tax
Income tax
Net profit/ (loss) after tax
EBITDA Underlying/ Revenue %
Basic EPS (cents)
1H 19
2H 19
88.6
8.2
(4.4)
3.8
(0.6)
3.2
-
-
3.2
(1.0)
2.2
9.3%
87.4
7.1
(4.1)
3.0
(0.8)
2.2
(25.4)
(1.5)
(24.6)
7.0
(17.5)
8.1%
2019
176.0
15.3
(8.5)
6.8
(1.4)
5.4
(25.4)
(1.5)
(24.6)
6.0
(15.3)
8.7%
(9.56)
2018
174.3
17.0
(8.2)
8.8
(1.3)
7.5
-
(0.6)
6.9
(2.0)
4.9
9.8%
3.06
8
EMPIRED LIMITED | ANNUAL REPORT | 2019DIRECTORS’ REPORT Operating results by Segment
$m
Revenue
Australia
New Zealand
Inter-segment
Segment Revenue
EBITDA Underlying
Australia
New Zealand
Segment EBITDA Underlying
1H 19
2H 19
2019
2018
60.4
28.8
(0.6)
88.6
5.0
3.2
8.2
56.1
32.1
(0.8
87.4
3.5
3.6
7.1
116.5
60.9
(1.4)
176.0
8.4
6.8
15.3
116.7
59.2
(1.6)
174.3
11.1
5.4
16.5
For the financial year ended 30 June 2019 the Australian segment decreased revenue by 0.15% to $116.5m and recorded
a Segment EBITDA Underlying of $8.4m. The revenue for the New Zealand segment increased by 3% to $60.9m and
reported a Segment EBITDA Underlying of $6.8m.
Cash flow
The following table summarises the cash flow for the financial year ended 30 June 2019:
$m
EBITDA Underlying
Non cash items
Tax paid
Working capital and once off items
Operating cash flow
Interest paid (net)
Purchases of P&E and intangibles
Repayment of borrowings
Proceeds from borrowings
Change in cash
1H 19
2H 19
8.2
0.5
(0.4)
(7.6)
0.7
(0.7)
(5.6)
(2.1)
1.0
(6.7)
7.1
0.1
(0.5)
1.1
7.8
(0.6)
(5.2)
(7.4)
4.3
(1.1)
2019
15.3
0.6
(0.9)
(6.5)
8.5
(1.3)
(10.8)
(9.5)
5.3
(7.8)
2018
17.0
(0.2)
(0.8)
(0.5)
15.5
(1.4)
(8.9)
(4.4)
13.4
14.2
Operating cash flow for the financial year ended 30 June 2019 was $8.5m compared to $15.5m the previous financial year.
The adverse variance is attributable to lower profitability and adverse capital movements.
Payments for the purchases of plant & equipment and intangibles increased from $8.9m to $10.8m.
9
EMPIRED LIMITED | ANNUAL REPORT | 2019DIRECTORS’ REPORT
Financial position and capital structure
The balance sheet as at 30 June 2019 is summarised below:
$m
Cash
Receivables and WIP
Other
Current Assets
Plant & Equipment
Intangibles and other
Non Current Assets
Trade and other payables
Borrowings
Provisions and other
Current Liabilities
Borrowings
Other
Non Current Liabilities
Net Assets / Equity
Net debt (Nd)
Gearing (Nd/(Nd+Equity))
JUNE 2019
DEC 2018
JUNE 2018
5.6
35.1
2.3
42.9
6.2
59.7
65.9
16.7
2.4
8.1
27.2
17.4
2.3
19.7
61.9
14.3
19%
6.7
35.5
2.1
44.3
15.4
67.7
83.0
15.9
2.2
7.6
25.7
19.9
2.6
22.6
79.1
15.4
16%
13.4
36.0
2.4
51.7
16.9
64.7
81.6
22.7
2.4
8.6
33.7
20.3
3.0
23.3
76.4
9.3
11%
Net debt increased during the financial year from $9.3m to $14.3m with gearing increasing from 11% to 19%.
Risk
As part of the planning process the Company has identified the risks that could potentially have an adverse impact on the
performance of the Company. The Company has in place policies and procedures to monitor and manage these risks which
can be broadly categorised as:
• General macro economic risks
• Business risks
• Operational risks
• Financial risks
Commentary on strategy and prospects is included in the Chairman and CEO Review.
10
EMPIRED LIMITED | ANNUAL REPORT | 2019DIRECTORS’ REPORT
Dividends
The directors do not recommend payment of a dividend
(2018: nil).
Likely Developments
officers of their position or of information to gain advantage
for themselves or someone else to cause detriment to the
Group.
Details of the amount of the premium paid in respect of
the insurance policies is not disclosed as such disclosure is
Any likely developments are disclosed in the Chairman and
prohibited under the terms of the contract.
CEO Review.
Performance Rights Granted to Directors
and Officers
Executive Officers were granted 1,586,000 Performance
Rights under the Long Term Incentive Plan. Information
relating to the grants is detailed in the notes to the financial
statements.
Significant changes in the state of affairs
An impairment change of $25,352,785 was made during
the financial year leading the company to record a net loss
after tax of $15,311,847, a reduction in total equity from
$76,375,298 to $61,921,491 as at 30 June 2019.
Auditor
The lead auditor’s Independence Declaration for the year
ended 30 June 2019 has been received and can be found on
page 60 of the financial report.
Non-Audit Services
The directors are satisfied that the provision of non-
audit services is compatibale with the general standard
of independence for auditors imposed by the by the
Corporations Act 2001 . The nature and scope of the
type of non-audit service provided means that auditor
independence was not compromised.
Grant Thornton received or are due to receive $22,768 for
the provision of tax compliance services.
Indemnification and insurance of directors
and officers
During the year, Empired Limited paid a premium to insure
directors and officers of the Group.
The liabilities insured are legal costs that may be incurred in
defending civil or criminal proceedings that may be brought
against the officers in their capacity as officers of the Group,
and any other payments arising from liabilities incurred by
the officers in connection with such proceedings, other than
where such liabilities arise out of conduct involving a wilful
breach of duty by the officers or the improper use by the
The Company has agreed, to the extent permitted by law,
to indemnify each Director and Company Secretary of the
Company against any and all reasonable liabilities incurred in
respect of or arising out of any act in the course of their role
as an officer of the Company.
The Company has not agreed to indemnify the auditor of
the Company, however a controlled entity has provided an
indemnity to the auditor of that controlled entity for losses
arising from false or misleading information provided or
third party claims except to the extent such amounts are
determined to have been caused by the auditor’s fraud.
Significant events after the reporting date
There have been no significant events to report subsequent
to reporting date.
REMUNERATION REPORT (AUDITED)
The Directors of Empired Limited present the Remuneration
Report (“the Report”) for the Company and its controlled
entities for the year ended 30 June 2019 (“FY19”). This Report
forms part of the Directors’ Report and has been audited in
accordance with section 300A of the Corporations Act 2001 .
Remuneration Philosophy
The performance of the Company depends upon the quality
of its directors and executives. To prosper, the Company
must attract, motivate and retain highly skilled directors and
executives.
To this end, the Company embodies the following principles
in its remuneration framework:
• Provide competitive rewards to attract and retain high
calibre executives;
• Link executive rewards to shareholder value;
• Have a material portion of certain executive’s
remuneration ‘at risk’, dependent upon meeting
pre-determined performance benchmarks; and
• Establish appropriate, demanding performance hurdles for
variable executive remuneration.
11
EMPIRED LIMITED | ANNUAL REPORT | 2019DIRECTORS’ REPORT Linking remuneration ‘at risk’ to Company
performance
The Group recorded a net loss after tax of $15.3m for the
year ended 30 June 2019 compared to a net profit after tax
of $4.9m in the previous financial year. Earnings per share
decreased 24% to (9.56) cents per share.
Remuneration Structure
In accordance with the best practice corporate governance,
the structure of non-executive director and executive
remuneration is separate and distinct.
A. Non-Executive Director
Remuneration
Objective
The board seeks to set aggregate remuneration at a level
that provides the company with the ability to attract and
retain directors of the highest calibre, whilst incurring a cost
that is acceptable to shareholders.
Structure
The constitution and the ASX Listing Rules specify that the
aggregate remuneration of non-executive directors shall
be determined from time to time by a general meeting.
An amount not exceeding the amount determined is
then divided between the directors as agreed. The latest
determination was at the Annual General Meeting held on
27 November 2014 when shareholders approved an
aggregate remuneration of $500,000 per year.
The amount of aggregated remuneration sought to be
approved by shareholders and the manner in which it is
apportioned amongst directors is reviewed from time to
time. The Board considers advice from external consultants
as well as the fees paid to non-executive directors of
comparable companies when undertaking the annual
review process.
B. Executive Remuneration
Objective
The company aims to reward executives with a level and
mix of remuneration commensurate with their position and
responsibilities within the company and so as to:
• Reward executives for company, business unit and
individual performances against targets set by reference to
appropriate benchmarks;
• Align the interests of executives with those of shareholders;
• Link rewards with the strategic goals and performance of
the Company; and
• Ensure total remuneration is competitive by market
standards.
Structure
In determining the level of remuneration paid to senior
executives of the company, the Board took into account
available benchmarks and prior performance.
Remuneration consists of the following key elements:
• Fixed Remuneration
• Variable Remuneration
» Short Term Incentive (STI); and
» Long Term Incentive (LTI).
The proportion of fixed remuneration and variable
remuneration (potential short term and long term incentives)
is established for each senior executive by the Remuneration
and Nomination Committee and the Board. The table in
Section E below details the fixed and variable components of
the executives of the company.
Fixed Remuneration
The remuneration of Non-Executive Directors, the Executive
Director and other Key Management Personnel for the
Objective
period ended 30 June 2019 is detailed in the table in
Fixed remuneration is reviewed annually by the board.
Section E.
12
The process consists of a review of companywide, business
unit and individual performance, relevant comparative
remuneration in the market and internally, and where
appropriate, external advice on policies and practices.
As noted above, the Board has access to external advice
independent of management.
EMPIRED LIMITED | ANNUAL REPORT | 2019DIRECTORS’ REPORT Structure
Structure
Senior executives are given the opportunity to receive their
LTI grants to executives are delivered in the form of
fixed remuneration in a variety of forms including cash and
performance rights.
fringe benefits such as motor vehicles. It is intended that the
manner of payment chosen will be optimal for the recipient
without creating undue cost for the group.
The table in Sections F and G provide details of performance
rights granted and the value of equity instruments granted
and lapsed during the year. The performance rights were
The fixed remuneration component of the company
issued for nil consideration. Each performance right entitles
executives is detailed in the table in Section E.
the holder to subscribe for one fully paid ordinary share
Variable Remuneration - Short Term
Incentive (STI)
Objective
in the entity based on achieving vesting conditions at a nil
exercise price, and up to 1.5 ordinary shares should Stretch
Performance Measures be achieved.
During the financial year, 2,321,000 Performance Rights
were issued under the Long Term Incentive Plan on terms
The objective of the STI program is to link the achievement
and conditions determined and approved by the Board
of the Group’s performance and operational targets with
of Directors. The number of Performance Rights offered is
the remuneration received by the executives charged with
based upon the share price of the company at the end of the
meeting those targets.
Structure
Actual STI paid to the company executives depend on
the extent to which specific operating targets set at the
beginning of the financial year are met. The targets consist
financial year.
The vesting conditions selected are designed to align
remuneration with the objective of creating shareholder
value over the long-term. The performance measures that
have been chosen are:
of a number of Key Performance Indicators (KPIs) covering
• Basic Earnings per Share (EPS) adjusted for any abnormal
both financial and non-financial measures of performance.
costs or transaction costs due to its sensitive nature,
Typically included are measures such as revenue, profitability,
EPS targets are disclosed retrospectively should the
customer service, risk management, and leadership/team
Performance Rights vest.
contribution.
• Return on Equity (ROE), a measure of the net profit after
Any STI payments are subject to the approval of the Board.
tax for the financial year ended 30 June 2021 divided by
Payments made are delivered as a cash bonus in the
total equity as at 30 June 2021. Due to its sensitive nature,
following financial year. In respect to the 2019 financial year
ROE targets are disclosed retrospectively should the
no STI will be paid to Key Managemnt Personnel.
Performance Rights vest.
• Absolute Total Shareholder Return is measured over the
period 1 July 2018 to 30 June 2021.
Variable Pay - Long Term
Incentive (LTI)
Objective
The objective of the LTI plan is to reward senior executives in
a manner that aligns this element of remuneration with the
objective of creating shareholder wealth.
As such, LTI grants are only made to executives who are able
to influence the generation of shareholder wealth and thus
have a direct impact on the Group’s performance.
13
EMPIRED LIMITED | ANNUAL REPORT | 2019DIRECTORS’ REPORT Number
928,400
Performance
Measures
FY 2021 Basic
Below Threshold
Threshold achieved
Target achieved
Stretch achieved
464,200
FY 2021 Return on Equity
Below Threshold
Threshold achieved
Target achieved
Stretch achieved
Absolute TSR
Below Threshold
Threshold achieved
Target achieved
Stretch achieved
928,400
(1) Vesting to occur on a pro-rata basis
Structure
% Vesting(1)
Vesting Dates
1 September 2021
0%
50%
100%
150%
0%
50%
100%
150%
0%
50%
100%
150%
1 September 2021
1 September 2021
Should an employee leave Empired then Performance Rights are retained on a pro-rata basis for the duration of employment
completed during the term of the Performance Right, except where continuing employment is a vesting condition or where
employment is summarily terminated unless raised at the Boards discretion.
Where Performance Rights vest the holder of the Performance Right has until 30 September 2023 to exercise the Performance Right.
Should the Directors consider that a Change of Control in the company has occurred or is likely to occur then Performance Rights
will automatically vest on the basis one fully paid ordinary share for each Performance Right held with Board discretion to provide
up to 1.5 fully paid ordinary shares for each Performance Right held.
Consequence of performance on shareholder wealth
In considering the Group’s performance and benefits for shareholder wealth, the Board have regard to the following metrics in
respect of the current financial year and the previous three financial years:
Item
EPS (cents)
Dividends (cents per share)
Net profit (loss)($000)
Share price ($)
2019
2018
2017
2016
2015
(9.56)
-
(14,826)
0.27
3.06
-
4,685
0.51
2.42
-
3,122
0.54
(1.47)
-
(1,545)
0.34
4.82
-
5,233
0.77
As a consequence of the FY19 performance, of the Company has not paid any STI to key management personnel or related
Performance Rights in respect to the FY19 financial year as performance conditions were not achieved.
14
EMPIRED LIMITED | ANNUAL REPORT | 2019DIRECTORS’ REPORT C. Key Management Personnel
D. Service Agreements
(i) Directors
Russell Baskerville - Managing Director
The following persons were directors of Empired Limited
• Terms of Agreement – commenced 1 July 2019, until
during the financial year to date of report:
terminated by either party, with six months notice.
T Stianos
Non-executive Chairman
• Fees – fixed remuneration $600,000 per annum with an STI
R Bevan
Non-executive Director
J Bardwell
Non-executive Director
C Nicolli
Non-executive Director from
22 October 2018
C Ryan
Non-executive Director to
27 November 2018
R Baskerville
Managing Director
and LTI bonus allocation to be determined by the Board.
Thomas Stianos - Non-Executive Chairman
• Terms of Agreement – appointed 29 November 2016.
• Fee – fixed $120,000 per annum.
Richard Bevan - Non-Executive Director
• Terms of Agreement - appointed 31 January 2008.
• Fee – fixed $90,000 per annum.
(ii) Other key management personnel
John Bardwell - Non-Executive Director
The following persons also had authority and responsibility
• Terms of Agreement – appointed 26 September 2011.
for planning, directing and controlling the activities of the
Group during the financial year:
S Bright
Chief Operating Officer
D Hinton
Chief Financial Officer and
• Fee – fixed $75,000 per annum.
Cristiano Nicolli - Non-Executive Director
• Terms of Agreement – appointed 22 October 2018.
Company Secretary
• Fee – fixed $75,000 per annum.
(iii) Remuneration of Key Management Personnel
Secretary
David Hinton - Chief Financial Officer and Company
Information regarding key management personnel
compensation for the year ended 30 June 2019 is provided in
the table in Section E of this remuneration report.
• Terms of Agreement – commenced 12 April 2016, until
terminated by either party, with three months notice.
• Salary – fixed remuneration $433,500 per annum with an
additional STI cash bonus target of 25% of base fees and
LTI bonus target of 40%# of base fees.
Simon Bright – Chief Operating Officer
• Terms of Agreement – commenced 1 July 2016, until
terminated by either party, with three months notice.
• Salary – fixed remuneration NZ$469,200 per annum with
an STI cash bonus target of 30% of base fees and LTI bonus
target of 40%# of base fees
# As provided by the Empired Long Term Incentive Plan Rules, should stretch targets be achieved then the LTI benefit could be 50% higher.
15
EMPIRED LIMITED | ANNUAL REPORT | 2019DIRECTORS’ REPORT
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:
Short term benefits
Non-cash
Benefits
Salary
& Fees
Cash
STI
Post-
employment
Super-
annuation
Share-based
payments (1)
Total
%
Performance
related
% of STI
achieved
Year
Non-Executive
Directors
T. Stianos
2019
109,589
R. Bevan
C. Nicolli
(from 22 Oct 2018)
C. Ryan
(to 27 Nov 2018)
J. Bardwell
Executive Directors
2018
2019
2018
2019
2018
2019
2018
2019
2018
54,795
82,193
82,192
53,260
-
31,250
60,000
68,493
54,795
-
-
-
-
-
-
-
-
-
-
R. Baskerville
2019
644,453
9,168
-
-
-
-
-
-
-
-
-
-
-
Key Management
2018
600,000
11,579
149,679
10,411
5,205
7,808
7,808
5,060
-
-
-
6,507
5,205
-
-
-
-
-
-
-
-
-
-
120,000
60,000
90,001
90,000
58,320
-
31,250
60,000
75,000
60,000
-
-
209,554
863,174
131,212
892,470
D. Hinton
2019
413,675
10,200
-
2018
388,128
12,633
52,388
S. Bright
2019
438,747
17,342
-
2018
418,804
12,179
63,564
28,207
36,872
13,222
8,420
112,614
564,696
59,645
549,666
113,956
583,268
60,997
563,964
(1) Comprises the share payment expense recognised in the reporting period for performance rights on issue.
F. Directors’ and Key Management Personnel Equity Holdings
Shares held in Empired Limited
-
-
-
-
-
-
-
-
-
-
24.3%
31.5%
19.9%
20.4%
19.5%
22.1%
-
-
-
-
-
-
-
-
-
-
-
50.0%
-
50.0%
-
50.0%
All equity transactions with directors and executives, other than those arising from the vesting of performance rights and as part
of remuneration, have been entered into under terms and conditions no more favourable than those the entity would have
adopted if dealing at arm’s length.
Balance
01-Jul-18
Vesting of
Performance Rights
Net Change
Other
Balance
30-Jun-19
Directors
R. Baskerville
T. Stianos
R. Bevan
C. Nicolli
C. Ryan
J. Bardwell
Total
Key Management
D. Hinton
S. Bright
Total
9,095,622
143,200
79,800
190,000*
60,000
4,099,904
13,668,526
52,093
150,877
202,970
29,661
-
-
-
-
-
29,661
-
-
-
-
-
-
100,000
-
150,000
250,000
-
(135,000)
(135,000)
9,125,283
143,200
79,800
290,000
60,000
4,249,904
13,948,187
52,093
15,877
67,970
* Mr Nicolli held a relevant interest in 190,000 Ordinary shares at the date of his appointment.
16
EMPIRED LIMITED | ANNUAL REPORT | 2019DIRECTORS’ REPORT Performance Rights held in Empired Limited
Performance rights are issued for nil consideration and do not have an exercise price. The movements and balances of
performance rights for the financial year are summarised in the below table.
Directors
R. Baskerville
Key Management
D. Hinton
S. Bright
Total
Balance
01-Jul-18
Granted as
remuneration
Lapsed
Vested
Balance
30-June-19
2,193,487
880,000
(357,280)
(29,661)
2,686,546
802,848
789,848
3,786,183
353,000
353,000
1,586,000
(96,970)
(96,970)
(551,220)
-
-
(29,661)
1,058,878
1,045,878
4,791,302
Performance Rights granted to the Executive Team are under the Company’s Long Term Incentive Plan. Refer to the notes to the
financial statements for more detail regarding the plan.
Performance Rights granted as part of remuneration:
2019
Non- Executive
Executive Directors
Key Management
2018
Non- Executive
Executive Directors
Key Management
Grant Date
Number
granted as
remuneration
Average Value
per right at
grant date
Value of rights
granted during
the year
-
-
-
-
11/12/2018
16/07/2018
16/07/2018
-
-
-
-
880,00
353,000
353,000
-
-
-
-
$0.30
$0.39
$0.39
-
-
-
-
$ 268,243
$ 138,370
$ 138,370
Grant Date
Number
granted as
remuneration
Average Value
per right at
grant date
Value of rights
granted during
the year
-
-
-
-
6/12/2017
14/09/2017
14/09/2017
-
-
-
-
852,00
318,000
330,000
-
-
-
-
$0.49
$0.63
$0.63
-
-
-
-
$ 291,299
$ 138,847
$ 143,972
T. Stianos
R. Bevan
C. Nicolli
J. Bardwell
R. Baskerville
D. Hinton
S. Bright
T. Stianos
R. Bevan
C. Nicolli
J. Bardwell
R. Baskerville
D. Hinton
S. Bright
17
EMPIRED LIMITED | ANNUAL REPORT | 2019DIRECTORS’ REPORT
G. Performance Hurdles for Performance Rights vested during
the financial year
The Company from time to time grants Performance Rights to executives under the Empired Executive Long Term Incentive
Plan. In the case of grants to the Managing Director, shareholder approval is sought at the Annual General Meeting prior
to Performance Rights being granted. As stated in the applicable Notice of Meeting, to convene the members meeting to
approve the grant of Performance Rights, the details of the performance hurdles are subject to members' approval. Should the
performance hurdle be satisfied then the Company will disclose the details in the subsequent Remuneration Report.
During the financial year 49,278 Performance Rights vested and a corresponding number of ordinary shares were issued as a
result of achieving the relevant performance hurdle as follows:
Performance Hurdle
Sustainability - as determined by the Board in respect of FY18 performance
Achieved No. of Performance Rights
49,278
The Performance Rights vested represent 7% of the issuance of the Performance Rights in FY16, the balance of 93% was forfeited.
H. Voting and comments made at the company’s 2018 Annual General Meeting
The company did not receive any specific feedback at the AGM on its remuneration report.
End of Remuneration Report
Signed in accordance with a resolution of directors.
Russell Baskerville
Managing Director
12 August 2019
18
EMPIRED LIMITED | ANNUAL REPORT | 2019DIRECTORS’ REPORT 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
The Group’s Corporate Governance Statement for the
Group’’) have adopted the third edition of the Corporate
financial year ended 30 June 2019 was approved by the
Governance Principles and Recommendations which was
Board on 8 August 2019. The Corporate Governance
released by the ASX Corporate Governance Council on
Statement is available on Empired’s website at
27 March 2014 and became effective for financial years
www.empired.com/Investor- Centre/Corporate-Governance/.
beginning on or after 1 July 2014.
Consolidated Statement of Profit or
Loss & Other Comprehensive Income
For the year ended 30 June 2019
Revenue from contracts with customers
Cost of services
Gross Profit
Other income
Adminstration expenses
Marketing expenses
Occupancy expenses
Impairment expenses
Loss on disposal of assets
Other expenses
Operating (loss)/profit
Finance expenses
(Loss)/profit before income tax
Income tax benefit/(expense)
(Loss)/profit for the year
Other comprehensive income/ (loss), net of income tax
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translating foreign operations
Total comprehensive (loss)/ income for the year
Earnings per share (cents per share):
Basic loss per share
Basic loss per share
Notes
4
5
4
2019
$
2018
$
176,014,365
174,310,863
(110,364,007)
(110,808,860)
65,650,358
63,502,003
60,239
37,909
6(a)
(53,233,038)
(48,063,572)
(553,557)
(796,427)
(5,821,152)
(5,556,385)
6(b)
(25,352,785)
-
(706,077)
-
(14,361)
(831,763)
(19,956,012)
8,277,404
8
9
(1,394,816)
(21,350,828)
6,038,981
(15,311,847)
(1,348,691)
6,928,713
(2,046,403)
4,882,310
486,157
(14,825,690)
(196,813)
4,685,497
10
10
(9.56)
(9.56)
3.06
2.96
20
EMPIRED LIMITED | ANNUAL REPORT | 2019CONSOLIDATED STATEMENT
Consolidated Statement
of Financial Position
As at 30 June 2019
ASSETS
Current Assets
Cash and cash equivalents
Trade and other receivables
Work in progress
Contract assets
Other current assets
Total Current Assets
Non-Current Assets
Plant and equipment
Intangible assets
Deferred tax asset
Total Non-Current Assets
TOTAL ASSETS
LIABILITIES
Current Liabilities
Trade and other payables
Income tax payable
Borrowings
Provisions
Deferred revenue
Contract liabilities
Total Current Liabilities
Non-Current Liabilities
Borrowings
Provisions
Total Non-Current Liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Retained profits
TOTAL EQUITY
Notes
2019
$
2018
$
11
12
13
14
15
9
17
18
19
18
19
21
20
5,551,971
22,985,739
-
12,136,933
2,273,771
13,364,679
25,092,381
10,894,165
-
2,352,168
42,948,414
51,703,393
6,236,263
51,539,561
8,160,143
16,949,293
62,712,777
2,004,609
65,935,967
81,666,679
108,884,381
133,370,072
16,685,941
22,247,580
35,705
2,409,260
5,925,436
-
2,158,205
502,472
2,381,231
6,254,407
2,293,310
-
27,214,547
33,679,000
17,413,416
2,334,927
20,327,773
2,988,001
19,748,343
23,315,774
46,962,890
56,994,774
61,921,491
76,375,298
54,204,746
3,425,657
4,291,088
54,204,746
2,285,107
19,885,445
61,921,491
76,375,298
21
EMPIRED LIMITED | ANNUAL REPORT | 2019CONSOLIDATED STATEMENT Consolidated Statement
of Cash Flow
For the year ended 30 June 2019
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Income tax paid
Notes
2019
$
2018
$
197,638,807
188,570,926
(188,288,868)
(172,221,895)
(854,150)
(812,491)
Net cash flows from operating activities
11(b)
8,495,789
15,536,540
Cash flows from investing activities
Purchase of intangibles
Purchase of plant and equipment
Net cash flows used in investing activities
Cash flows from financing activities
Finance costs
Repayment of borrowings
Repayment of finance lease liabilities
Proceeds from borrowings
Net cash flows (used in)/ from financing activities
Net (decrease)/ 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
(9,948,374)
(8,153,440)
(794,540)
(735,158)
(10,742,914)
(8,888,598)
(1,336,888)
(8,779,869)
(718,425)
5,260,794
(5,574,388)
(1,349,361)
(3,396,923)
(998,186)
13,285,957
7,541,487
(7,821,513)
14,189,429
8,805
13,364,679
20,163
(844,913)
11(a)
5,551,971
13,364,679
22
EMPIRED LIMITED | ANNUAL REPORT | 2019CONSOLIDATED STATEMENT Consolidated Statement
of Changes in Equity
For the year ended 30 June 2019
Balance at 1 July 2017
Profit for the year
Other comprehensive (loss)
Share-based payments
Balance at 30 June 2018
Adjustment for adoption of AASB 9
Loss for the year
Other comprehensive gain
Share-based payments
Balance at 30 June 2019
-
-
-
Issued
Capital
$
Retained
Profits
$
Foreign
Currency
Translation
Reserve
$
Employee
Equity
Benefits
Reserve
$
Total Equity
$
54,204,746
15,003,135
100,137
1,971,698
71,279,716
-
-
-
4,882,310
-
-
-
(196,813)
54,204,746
19,885,445
(96,676)
-
-
410,085
4,882,310
(196,813)
410,085
2,381,783
76,375,298
-
-
-
-
(282,510)
(15,311,847)
-
-
486,157
-
654,393
-
-
-
(282,510)
(15,311,847)
486,157
654,393
54,204,746
4,291,088
389,481
3,036,176
61,921,491
23
EMPIRED LIMITED | ANNUAL REPORT | 2019CONSOLIDATED STATEMENT
Notes to the Financial Statements
For the year ended 30 June 2019
1. CORPORATE INFORMATION
The financial report of Empired Limited for the year ended
30 June 2019 was authorised for issue in accordance with a
resolution of the directors on 12 August 2019.
Empired Limited, whose shares are publicly traded on the
Australian Securities Exchange, is a company incorporated
in Australia. The financial report includes the consolidated
financial statements and notes of Empired Limited and
The adoption of AASB 9 has not had a significant effect on
the Group’s accounting policies related to financial liabilities.
Trade receivables is the only financial asset that has been
impacted by the adoption of the standard, specifically the
measurement basis for the impairment of trade receivables.
AASB 9 replaces the ‘incurred loss’ model in AASB 139 with
an ‘expected credit loss’ (ECL) model. The new impairment
model applies to financial assets measured at amortised cost.
This includes trade receivables and cash and cash equivalents
controlled entities.
in Empired’s case.
2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Under AASB 9, loss allowances are measured on either
12-month ECLs or Lifetime ECLs. 12-month ECLs result from
possible default events within the 12 months after reporting
date and Lifetime ECLs result from all possible default events
over the expected life of a financial instrument. The Group
(a) General information and statement of compliance
has elected to measure loss allowances on a 12-month ECL
The consolidated general purpose financial statements
basis.
of the Group have been prepared in accordance
When determining the credit risk for trade receivables the
with the requirements of the Corporations Act 2001,
Group uses quantitative and qualitative information and
Australian Accounting Standards and other authoritative
analysis, based on the Group’s historical experience and
pronouncements of the Australian Accounting Standards
informed credit assessment, as well as forward-looking
Board. Compliance with Australian Accounting Standards
information. The adoption of AASB 9 has resulted in an
results in compliance with the International Financial
increase to the provision for doubtful debts of $403,599, an
Reporting Standards (‘IFRS’) as issued by the International
increase to deferred tax assets of $121,080 and a decrease to
Accounting Standards Board (IASB). Empired Limited is a
opening retained earnings of $282,510.
for-profit entity for the purpose of preparing the financial
statements.
The financial report has been prepared on an accruals basis,
AASB 15 Revenue from Contracts with Customers
and is based on historical costs modified where applicable,
AASB 15 introduces a 5-step process for revenue recognition
by measurement at fair value of selected non-current assets,
from contracts with customers. The standard requires that
financial assets and financial liabilities. The financial report is
revenue be recognised when the performance obligation
presented in Australian dollars.
(b) New and revised standards that are effective
for these financial statements
is met, namely when the promised good or service is
transferred to the customer. AASB 15 replaces all previous
revenue related accounting standards. AASB 15 has been
retrospectively applied with no impact to comparative
figures, with the cumulative effect of initial recognition as an
A number of new and revised standards are effective for
adjustment to the opening balance of retained earnings at 1
the current reporting period, accounting polices have been
July 2018. The application of AASB 15 has only been applied
updated, no retrospective adjustments have taken place as a
to contracts that are incomplete as at 1 July 2018.
result of adopting these standards. Information on these new
standards is presented below.
AASB 9 Financial Statements
AASB 9 sets out requirements for recognising and measuring
financial assets, financial liabilities and some contracts to buy
or sell non-financial items. The standard replaces AASB 139
Financial Instruments: Recognition and Measurement.
AASB 15 does not include any guidance on how to account
for loss contracts. Accordingly, such contracts are accounted
for using the guidance in AASB 137 ‘Provisions, Contingent
Liabilities and Contingent Assets’.
25
EMPIRED LIMITED | ANNUAL REPORT | 2019NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED JUNE 2019
Under AASB 137, the assessment of whether a provision
The estimated impact of this impending change as at
needs to be recognised takes place at the contract level and
30 June 2019 can be summarised as follows: introduction of
there are no segmentation criteria to apply. As a result, there
a right-of-use asset of $16.7m, an increase in borrowings of
are some instances where loss provisions recognised in the
$19.2m and a reduction in provisions of $2.5m.
past have not been recognised under AASB 15 because the
contract as a whole is profitable. In addition, when two or
more contracts entered into at or near the same time are
required to be combined for accounting purposes, AASB 15
requires the Group to perform the assessment of whether the
contract is onerous at the level of the combined contracts.
The Group also notes that the amount of loss accrued in
respect of a loss contract under AASB 111 takes into account
The Group is planning to adopt AASB 16 on 1 July 2019
using the Standard’s modified retrospective approach.
Under this approach the cumulative effect of initially
applying AASB 16 is recognised as an adjustment to equity
at the date of initial application. Comparative information
is not re-stated.
AASB Interpretation 23 Uncertainty over Income Tax
an appropriate allocation of overheads. This contrasts with
Treatment
AASB 137 where loss accruals may be lower as they are
based on the identification of ‘unavoidable costs’.
A contract asset is defined as right to consideration in
exchange for goods or services that has transferred to a
customer, when that right is conditioned on something
other than the passage of time, for example our future
performance.
A contract liability is an obligation to transfer goods or
services to a customer for which consideration has been
received from the customer (or payment is due) but the
transfer has not yet been completed.
The application of AASB 15 is not materially different from
the previous standard in terms of revenue recognition. The
application did not impact the way in which the Group
accounts for revenues.
(c) Impact of standards issued but not yet applied
New and revised accounting standards and amendments
that are currently issued for future reporting periods that are
relevant to the Group
AASB 16 Leases
AASB 16 replaces AASB 117 Leases and some lease-related
Interpretations. In summary, AASB 16:
• requires all leases to be accounted for ‘on-balance sheet’
by lessees, other than short-term and low value asset
leases;
• provides new guidance on the application of the definition
of lease and on sale and lease back accounting;
• largely retains the existing lessor accounting requirements
in AASB 117; and
• requires new and different disclosures about leases.
The Interpretation addresses the accounting for income
taxes when tax treatments involve uncertainty that affects
the application of AASB 112 and does not apply to taxes or
levies outside the scope of AASB 112, nor does it specifically
include requirements relating to interest and penalties
associated with uncertain tax treatments. The Interpretation
specifically addresses the following:
• Whether an entity considers uncertain tax treatments
separately
• The assumptions an entity makes about the examination of
tax treatments by taxation authorities
• How an entity determines taxable profit (tax loss), tax
bases, unused tax losses, unused tax credits and tax rates
• How an entity considers changes in facts and
circumstances.
An entity has to determine whether to consider each
uncertain tax treatment separately or together with one or
more other uncertain tax treatments. The approach that
better predicts the resolution of the uncertainty should
be followed. The interpretation is effective for annual
reporting periods beginning on or after 1 January 2019,
but certain transition reliefs are available. The Group will
apply the interpretation from its effective date. Since
the Group operates in several tax jurisdictions applying
the Interpretation may affect its consolidated financial
statements. In addition, the Group may need to establish
processes and procedures to obtain information that is
necessary to apply the interpretation on a timely basis.
At the date of authorisation of these financial statements,
several new, but not effective, Standards and amendments to
existing Standards, and interpretations have been published
by the AASB. None of these Standards or amendments to
existing Standards have been adopted early by the Group.
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EMPIRED LIMITED | ANNUAL REPORT | 2019NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED JUNE 2019
Management anticipates that all relevant pronouncements
Impairment
will be adopted for the first period beginning on or after
the effective date of the pronouncement. New Standards,
amendments and Interpretations not adopted in the current
year have not been disclosed as they are not yet expected to
have a material impact on the Group’s financial statements.
(d) Basis of consolidation
The Group financial statements consolidate those of the
Parent Company and all of its subsidiaries as of 30 June 2019.
The carrying values of plant and equipment are reviewed
for impairment when events or changes in circumstances
indicate the carrying value may not be recoverable. For
an asset that does not generate largely independent cash
inflows, the recoverable amount is determined for the
cash-generating unit to which the asset belongs. If any such
indication exists and where the carrying values exceed the
estimated recoverable amount, the assets or cash-generating
units are written down to their recoverable amount.
The Parent controls a subsidiary if it is exposed, or has rights,
The recoverable amount of plant and equipment is the
to variable returns from its involvement with the subsidiary
greater of fair value less costs to sell and value in use. In
and has the ability to affect those returns through its power
assessing value in use, the estimated future cash flows are
over the subsidiary. All subsidiaries have a reporting date of
discounted to their present value using a pre-tax discount
30 June 2019.
All transactions and balances between Group companies are
eliminated on consolidation, including unrealised gains and
losses on transactions between Group companies. Where
unrealised 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 subsidiaries have been adjusted
where necessary to ensure consistency with the accounting
policies adopted by the Group.
Profit or loss and other comprehensive income of subsidiaries
rate that reflects current market assessments of the time
value of money and the risks specific to the asset. An item
of plant and equipment is derecognised upon disposal or
when no future economic benefits are expected to arise
from the continued used of the asset. Any gain or loss arising
on derecognition of the asset (calculated as the difference
between the net disposal proceeds and the carrying amount
of the item) is included in profit or loss in the period the item
is derecognised.
(f) Borrowing costs
acquired or disposed of during the year are recognised from
Borrowing costs are recognised as an expense when incurred
the effective date of acquisition, or up to the effective date
except where incurred in relation to qualifying assets where
of disposal, as applicable.
borrowing costs are capitalised.
Non-controlling interests, presented as part of equity,
represent the portion of a subsidiary’s profit or loss and net
(g) Goodwill
assets that is not held by the Group. The Group attributes
total comprehensive income or loss of subsidiaries between
the owners of the parent and the non-controlling interests
based on their respective ownership interests.
(e) Plant and equipment
Plant and equipment is stated at cost less accumulated
depreciation and any impairment in value. Depreciation is
calculated on a straight line basis over the estimated useful
life of the asset as follows:
Leasehold Improvements 5 – 20 yrs
Furniture & Fittings
1 – 15 yrs
Computer Hardware
1 – 8 yrs
Goodwill on acquisition is initially measured at cost being
the excess of the cost of the business combination over the
acquirer’s interest in the net fair value of the identifiable
assets, liabilities and contingent liabilities.
Following initial recognition, goodwill is measured at cost
less any accumulated impairment losses.
Goodwill is reviewed for impairment, annually or more
frequently if events or changes in circumstances indicate
that the carrying value may be impaired. Goodwill is not
amortised.
As at the acquisition date, any goodwill acquired is allocated
to each of the cash-generating units expected to benefit
from the combination’s synergies. Impairment is determined
by assessing the recoverable amount of the cash-generating
27
EMPIRED LIMITED | ANNUAL REPORT | 2019NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED JUNE 2019
unit to which the goodwill relates. Where the recoverable
Following the initial recognition of the development
amount of the cash-generating unit is less than the carrying
expenditure, the cost model is applied requiring the asset
amount, an impairment loss is recognised.
to be carried at cost less any accumulated amortisation and
Where goodwill forms part of a cash-generating unit and
accumulated impairment losses.
part of the operation within that unit is disposed of, the
Software
goodwill associated with the operation disposed of is
included in the carrying amount of the operation when
determining the gain or loss on disposal of the operation.
Costs incurred in developing software are capitalised where
future financial benefits can be reasonably assured. It is
probable that the expected future economic benefits that
Goodwill disposed of in this circumstance is measured on the
are attributable to the asset will flow to the entitiy, and
basis of the relative values of the operation disposed of and
the cost of the asset can be measured reliably. These costs
the portion of the cash-generating unit retained.
include employee costs incurred on development along with
appropriate portion of relevant overheads.
(h) Intangible Assets Other Than Goodwill
Amortisation is calculated on a straight-line basis depending
Amortisation is calculated on a straight-line basis over the
on the useful life of the asset.
estimated useful life of the asset as follows:
Software assets are treated for impairment where an
Software
Other
1 - 7 yrs
3 - 7 yrs
indicator of impairment exists. The carrying amount of
software is considered either individually or collectively in
regard to estimated future cash flows. An impairment charge
is raised where the value in the use exceeds the carrying
Acquired both separately and from a business combination
amount.
Intangible assets acquired separately are capitalised at cost.
Following initial recognition, the cost model is applied to the
class of intangible assets.
Where amortisation is charged on assets with finite lives, this
expense is taken to the statement of profit or loss through
the ‘amortisation expenses’ line item.
Intangible assets, excluding development costs, created
within the business are not capitalised and expenditure
is charged against profits in the period in which the
expenditure is incurred.
Intangible assets are tested for impairment where an
indicator of impairment exists and in the case of indefinite
lived intangibles annually, either individually or at the cash
generating unit level. Useful lives are also examined on an
annual basis and adjustments, where applicable, are made on
a prospective basis.
Research and development costs
Research and development costs are expensed as incurred.
Gains or losses arising from derecognition of an intangible
asset are measured as the difference between the net
disposal proceeds and the carrying amount of the asset
and are recognised in profit or loss when the asset is
derecognised.
(i) Impairment of non-financial assets
At each reporting date, the Group assesses whether there
is any indication that an asset may be impaired. Where an
indicator of impairment exists, the Group makes a formal
estimate of recoverable amount. Where the carrying amount
of an asset exceeds its recoverable amount the asset is
considered impaired and is written down to its recoverable
amount.
Recoverable amount is the greater of fair value less costs
to sell and value in use. It is determined for an individual
asset, unless the asset’s value in use cannot be estimated
to be close to its fair value less costs to sell and it does not
generate cash inflows that are largely independent of those
Development expenditure incurred on an individual project
from other assets or groups of assets, in which case, the
is carried forward when its future recoverability can be
recoverable amount is determined for the cash-generating
reasonably assured.
unit to which the asset belongs.
In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre tax discount
rate that reflects current market assessments of the time
value of money and the risks specific to the asset.
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EMPIRED LIMITED | ANNUAL REPORT | 2019NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED JUNE 2019
(j) Operating segments
Financial assets at amortised cost
The Group has more than one reportable operating segment
Financial assets are measured at amortised cost if the assets
identified by and used by the Chief Executive Officer (chief
meet the following conditions (and are not designated as
operating decision maker).
FVTPL):
(k) Financial instruments
Recognition, and derecognition
Financial assets and financial liabilities are recognised when
the Group becomes a party to the contractual provisions of
the financial instrument.
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. A financial liability is derecognised when it is
extinguished, discharged, cancelled or expires.
Classification and initial measurement of financial assets
Except for those trade receivables that do not contain a
significant financing component and are measured at the
transaction price in accordance with AASB 15, all financial
assets are initially measured at fair value adjusted for
transaction costs (where applicable). Financial assets, other
than those designated and effective as hedging instruments,
are classified into the following categories:
• amortised cost
• fair value through profit or loss (FVTPL)
• fair value through other comprehensive income (FVOCI).
In the periods presented the corporation does not have any
financial assets categorised as FVOCI.
The classification is determined by both:
• the entity’s business model for managing the financial
asset
• the contractual cash flow characteristics of the financial
asset.
All income and expenses relating to financial assets that
are recognised in profit or loss are presented within finance
costs, finance income or other financial items, except for
impairment of trade receivables which is presented within
other expenses.
• they are held within a business model whose objective is
to hold the financial assets and collect its contractual cash
flows
• the contractual terms of the financial assets give rise
to cash flows that are solely payments of principal and
interest on the principal amount outstanding.
After initial recognition, these are measured at amortised
cost using the effective interest method. Discounting is
omitted where the effect of discounting is immaterial. The
Group’s cash and cash equivalents, trade and most other
receivables fall into this category of financial instruments
under AASB 9.
Impairment
AASB 9’s impairment requirements use more forward-
looking information to recognise expected credit losses
– the ‘expected credit loss (ECL) model’. This replaced AASB
139’s ‘incurred loss model’. Instruments within the scope of
the new requirements included loans and other debt- type
financial assets measured at amortised cost and FVOCI,
trade receivables, contract assets recognised and measured
under AASB 15 and loan commitments and some financial
guarantee contracts (for the issuer) that are not measured at
fair value through profit or loss.
Recognition of credit losses is no longer dependant on the
Group first identifying a credit loss event. Instead the Group
considers a broader range of information when assessing
credit risk and measuring expected credit losses, including
past events, current conditions, reasonable and supportable
forecasts that affect the expected collectability of the future
cash flows of the instrument.
In applying this forward-looking approach, a distinction is
made between:
• financial instruments that have not deteriorated
significantly in credit quality since initial recognition or that
have low credit risk (‘Stage 1’) and
• financial instruments that have deteriorated significantly in
credit quality since initial recognition and whose credit risk
is not low (‘Stage 2’)
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EMPIRED LIMITED | ANNUAL REPORT | 2019NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED JUNE 2019
‘Stage 3’ would cover financial assets that have been
Where discounting is used, the increase in the provision due
objective evidence of impairment at the reporting date.
to the passage of time is recognised as a finance cost.
’12-month expected credit losses’ are recognised for the
No liability is recognised if an outflow of economic resources
first category while ‘lifetime expected credit losses’ are
as a result of present obligations is not probable. Such
recognised for the second category.
situation are disclosed as contingent liabilities unless the
Measurement of the expected credit losses is determined
by a probability-weighted estimate of credit losses over the
outflow of resources is remote.
expected life of the financial instrument.
(o) Employee benefits
(l) Trade and other receivables
(i) Short-term employee benefits
Liabilities for wages and salaries, including non-monetary
The Group makes use of a simplified approach in accounting
benefits, and accumulating sick leave expected to be settled
for trade and other receivables as well as contract assets and
within 12 months of the reporting date are recognised in
records the loss allowance as lifetime expected credit losses.
respect of employees’ services up to the reporting date.
These are expected shortfalls in contractual cash flows,
They are measured at the amounts expected to be paid when
considering the potential for default at any point during
the liabilities are settled. Expenses for non-accumulating
the lifetime of the financial instrument. In calculating, the
sick leave are recognised when the leave is taken and are
Group uses its historical experience, external indicators and
measured at the rates paid or payable.
forward-looking information to calculate expected credit
losses using a provision matrix.
(m) Cash and cash equivalents
(ii) Other long-term employee benefits
The Group’s liabilities for annual leave and long service
leave are included in other long term benefits as they are
not expected to be settled wholly within twelve (12) months
Cash and short-term deposits in the statement of financial
after the end of the period in which the employees render
position comprise cash at bank, in hand and short-term
the related service. They are measured at the present value
deposits with an original maturity of three months or less net
of the expected future payments to be made to employees.
of bank overdrafts.
(n) Provisions, Contingent Assets and Liabilities
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past event,
it is probable that an outflow of resources embodying
economic benefits will be required to settle the obligation
and a reliable estimate can be made of the amount of the
obligation.
Where the Group expects some or all of a provision to be
reimbursed, for example under an insurance contract, the
reimbursement is recognised as a separate asset but only
when the reimbursement is virtually certain. The expense
relating to any provision is presented in the profit or loss net
The expected future payments incorporate anticipated
future wage and salary levels, experience of employee
departures and periods of service, and are discounted at
rates determined by reference to market yields at the end
of the reporting period on high quality corporate bonds
published by Milliman Australia/G100 that have maturity
dates that approximate the timing of the estimated future
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 presents employee benefit obligations as current
liabilities in the statement of financial position if the Group
does not have an unconditional right to defer settlement
for at least twelve (12) months after the reporting period,
irrespective of when the actual settlement is expected to
of any reimbursement.
take place.
If the effect of the time value of money is material,
provisions are determined by discounting the expected
future cash flows at a pre-tax rate that reflects current
market assessments of the time value of money and,
where appropriate, the risks specific to the liability.
(p) Share-based payment transactions
The Group provides remuneration to certain employees, including
directors, of the Group in the form of share-based payment
transactions, whereby employees render services in exchange for
shares or rights over shares (‘equity-settled transactions’).
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EMPIRED LIMITED | ANNUAL REPORT | 2019NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED JUNE 2019
The cost of these equity-settled transactions with employees
Capitalised leased assets are depreciated over the shorter of
is measured by reference to the fair value at the date at
the estimated useful life of the asset or the lease term.
which they are granted. The fair value is measured using a
variation of the binomial option pricing model that takes into
account the terms and conditions on which the instruments
were granted and the current likelihood of achieving
the specified target. Further, the cost of equity-settled
transactions is recognised, together with a corresponding
increase in the Employee Equity Benefits Reserve, over the
period in which the performance conditions are fulfilled,
ending on the date on which the relevant employees
become fully entitled to the award (‘vesting date’).
The cumulative expense recognised for equity-settled
transactions at each reporting date until vesting date reflects
the extent to which the vesting period has expired and the
number of awards that, in the opinion of the directors of
the Group, will ultimately vest. This opinion is formed based
on the best available information at reporting date. No
adjustment is made for the likelihood of market performance
Leases where the lessor retains substantially all the risks
and benefits of ownership of the asset are classified as
operating leases. Initial direct costs incurred in negotiating
an operating lease are added to the carrying amount of the
leased asset and recognised over the lease term on the same
bases as the lease income.
Operating lease payments are recognised as an expense in
the consolidated profit or loss on a straight-line basis over
the lease term.
(r) Revenue from Contracts with Customers
Revenue arises mainly from IT consulting services and
product and license revenue.
To determine whether to recognise revenue, the Group
follows a 5-step process:
conditions being met as the effect of these conditions is
1. Identifying the contract with a customer
included in the determination of fair value at grant date.
Where the terms of an equity-settled award are modified,
as a minimum an expense is recognised as if the terms had
not been modified. In addition, an expense is recognised
2. Identifying the performance obligations
3. Determining the transaction price
4. Allocating the transaction price to the performance
for any increase in the value of the transaction as a result of
obligations
the modification, as measured at the date of modification.
Where an equity-settled award is cancelled, it is treated as if
it had vested on the date of cancellation, and any expense
not yet recognised for the award is recognised immediately.
However, if a new award is substituted for the cancelled
award, and designated as a replacement award on the date
that it is granted, the cancelled and new award are treated
as if they were a modification of the original award, as
described in the previous paragraph.
(q) Leases
Finance leases, which transfer to the Group substantially all
5. Recognising revenue when/as performance obligation(s)
are satisfied.
The Group often enters into transactions involving a range of
the Group’s products and services. Revenue which represent
income arising in the course of the Groups ordinary activities
is recognised by reference to each distinct performance
obligation promised in the contract with customers when or
as the Group transfers the control of the goods or services
promised in a contract and the customer obtains control
of the goods or services. Depending on the substance of
the respective contract with customers, the control of the
promised goods or services may transfer over time or at a
the risks and benefits incidental to ownership of the leased
point in time.
item, are capitalised at the inception of the lease at the fair
value of the leased property or, if lower, at the present value
of the minimum lease payments.
Lease payments are apportioned between the finance
charges and reduction of the lease liability so as to achieve
a constant rate of interest on the remaining balance of the
liability. Finance charges are charged directly against income.
A contract with customer exists when the contract has
commercial substance, the Group and its customer has
approved the contract and intend to perform their respective
obligations, the Groups and the customers rights regarding
the goods or services to be transferred and the payment
terms can be identified, and it is probable that the Group
will collect the consideration to which it will be entitled to in
exchange of those goods or services.
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EMPIRED LIMITED | ANNUAL REPORT | 2019NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED JUNE 2019
Recognition and Measurement
Control over the goods or services are transferred over time
At the inception of each contract with customer, the Group
and revenue is recognised over time if:
assesses the contract to identify distinct performance
(i) The customer simultaneously receives and consumes the
obligations, being the units of account that determine
benefits provided by the Groups performance as the Group
when and how revenue from the contract with customer
performs;
is recognised. A performance obligation is a promise to
transfer a distinct good or service (or a series of distinct
goods or services that are substantially the same and that
have the same pattern of transfer) to the customer that is
explicitly stated in the contract and/ or implied in the Groups
customary business practises. A good or service is distinct if:
(i) The customer can either benefit from the good or service
on its own or together with other readily available resources;
and
(ii)The Groups performance creates or enhances a customer-
controlled asset; or
(iii) The Groups performance does not create an asset with
alternative use and the Group has a right to payment for
performance completed to date.
Revenue for a performance obligation that is not satisfied
over time is recognised at the point in time at which the
customer obtains control of the promised goods or services.
(ii) The good or service is separately identifiable from other
SaaS
promises in the contract (e.g. the good or service is not
integrated with, or significantly modify, or highly interrelate
with, other goods or services promised in the contract).
If a good or service is not distinct, the Group combines
it with other promised goods or services until the Group
identifies a distinct performance obligation consisting a
distinct bundle of goods or services.
Revenue is measured at the amount of consideration
to which the Group expects to be entitled in exchange
for transferring the promised goods or services to the
customers, excluding amounts collected on behalf of
third parties such as sales and service taxes or goods and
services taxes. If the amount of consideration varies due to
discounts, rebates, credits, incentives, performance bonuses,
penalties or other similar items, the Group estimates the
amount of consideration that it expects to be entitled
based on the expected value or the most likely outcome
but the estimation is constrained up to the amount that
is highly probable of no significant reversal in the future.
If the contract with customer contains more than one
distinct performance obligation based on the relative
stand-alone selling prices of the goods or services promised
in the contract. If a standalone selling price is not directly
Revenue is derived from providing customers access to
group platforms and is recognised in accordance with the
terms of contracts provided in the subscription agreement.
The SaaS and related support revenue (if any) is recognised
over time, being the subscription period, as the customer
simultaneously receives and consumes the benefit of
accessing the platform.
Access to the platforms is not considered distinct from other
performance obligations, such as set-up and support, as
access to any platform alone does not allow the customer
to obtain substantially all the benefits of the access, and is
therefore accounted for as a single performance obligation.
Consideration received can be variable in nature, based upon
customer usage in excess of contractually agreed units. The
variable consideration is included in the transaction price at
the company’s best estimate, using either an expected value
or most likely outcome, whichever provides the best estimate
and is included in revenue to the extent that it is highly
probable that there will be no significant reversal of the
cumulative amount of revenue when any price uncertainty is
resolved.
Product and License Revenue
observable, the Group will need to estimate it using adjusted
Revenue from the sale of product and software licenses
market assessment approach, expected cost plus a margin
is recognised when or as the Group transfers control of
approach and residual approach.
The consideration allocated to each performance obligation
the assets to the customer. Invoices for goods or services
transferred are due upon receipt by the customer.
is recognised as revenue when or as the customer obtains
Professional Services
control of the goods or services. At the inception of each
contract with customer, the Group determines whether
control of the goods or services for each performance
obligation is transferred over time or at a point.
Revenue from professional services for a fixed fee or time
and material is recognised when or as the Group transfers
control of the assets to the customer. Invoices for goods or
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EMPIRED LIMITED | ANNUAL REPORT | 2019NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED JUNE 2019 services transferred are due upon receipt by the customer.
Deferred income tax liabilities are recognised for all taxable
Revenue is recognised over time as the work is performed. As
temporary differences:
costs are generally incurred uniformly as the work progresses
and are considered to be proportionate to the entity’s
performance.
(s) Foreign currency transactions
The consolidated financial statements are presented in
• except where the deferred income tax liability arises from
the initial recognition of an asset or liability in a transaction
that is not a business combination and, at the time of
the transaction, affects neither the accounting profit nor
taxable profit or loss; and
Australian Dollars (‘$AUD’), which is also the functional
• in respect of taxable temporary differences associated with
currency of the Parent Company.
Foreign currency transactions are translated into the
functional currency using the exchange rates prevailing at
the date of the transaction. Foreign exchange gains and
losses resulting from the settlement of such transactions
investments in subsidiaries, associates and interests in joint
ventures, except where the timing of the reversal of the
temporary differences can be controlled and it is probable
that the temporary differences will not reverse in the
foreseeable future.
and from the re-measurement of monetary items at year
• Deferred income tax assets are recognised for all
end exchange rates are recognised in profit or loss. Non-
deductible temporary differences, carry-forward of unused
monetary items are not retranslated at year-end and are
tax assets and unused tax losses, to the extent that it is
measured at historical cost (translated using the exchange
probable that taxable profit will be available against which
rates at the date of the transaction), except for non-
the deductible temporary differences, and the carry-
monetary items measured at fair value which are translated
forward of unused tax assets and unused tax losses can be
using the exchange rates at the date when fair value was
utilised:
determined.
In the Group’s financial statements, all assets, liabilities and
transactions of Group entities with a functional currency
other than the $AUD are translated into $AUD upon
consolidation. The functional currency of the entities in the
Group has remained unchanged during the reporting period.
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 have been treated as assets and liabilities of
the foreign entity and translated into $AUD at the closing
rate. Income and expenses have been translated into $AUD
at the average rate over the reporting period. Exchange
differences are charged or credited to other comprehensive
income and recognised in the currency translation reserve
in equity. On disposal of a foreign operation the cumulative
translation differences recognised in equity are reclassified
to profit or loss and recognised as part of the gain or loss on
disposal.
(t) 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.
» except where the deferred income tax asset relating to
the deductible temporary differences arises from the
initial recognition of an asset or liability in a transaction
that is not a business combination and, at the time of
the transaction, affects neither the accounting profit nor
taxable profit or loss; and
» in respect of deductible temporary differences
associated with investments in subsidiaries, associates
and interests in joint ventures, deferred tax assets are
only recognised to the extent that it is probable that
the temporary differences will reverse in the foreseeable
future and taxable profit will be available against which
the temporary differences can be utilised.
The carrying amount of deferred income tax assets is
reviewed at each reporting date and reduced to the extent
that it is no longer probable that sufficient taxable profit will
be available to allow all or part of the deferred income tax
asset to be utilised.
The tax expense recognised in profit or loss compromises
the sum of deferred tax and current tax not recognised in
other comprehensive income. The calculation of current tax
is based on tax rates and tax laws that have been enacted
or substantially enacted by the end of the reporting period.
Deferred taxes are calculated using the balance sheet liability
method.
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EMPIRED LIMITED | ANNUAL REPORT | 2019NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED JUNE 2019 (u) Other taxes
Critical accounting estimates and assumptions
The Group makes estimates and assumptions concerning the
Revenues, expenses and assets are recognised net of the
future. The estimates and assumptions that have a significant
amount of GST except:
• where the GST incurred on a purchase of goods and
services is not recoverable from the taxation authority,
in which case the GST is recognised as part of the cost of
acquisition of the asset or as part of the expense item as
applicable; and
• receivables and payables are stated with the amount of
GST included.
The net amount of GST recoverable from, or payable to,
the taxation authority is included as part of receivables or
payables in the statement of financial position. Cash flows are
included in the statement of cash flows on a gross basis and
the GST component of cash flows arising from investing and
financing activities, which is recoverable from, or payable to,
the taxation authority are classified as operating cash flows.
risk of causing a material adjustment to the carrying
amounts of 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.
(i) Impairment of goodwill and intangibles with
indefinite useful lives
The Group determines whether goodwill and intangibles
with indefinite useful lives are impaired at least on an
annual basis. This requires an estimation of the recoverable
amount of the cash-generating unit to which the goodwill
and intangibles with indefinite useful lives are allocated. The
assumptions used in this estimation of recoverable amount
and carrying amount of goodwill and intangibles with
indefinite useful lives are discussed in note 15.
Commitments and contingencies are disclosed net of the
amount of GST recoverable from, or payable to, the taxation
(ii) Share based payments
authority.
(v) Equity and reserves
The Group 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 measured by using a variation of the binomial
Share capital represents the nominal (par) value of shares
option pricing model that takes into account the terms
that have been issued.
Other components of equity include the following:
• translation reserve - compromises foreign currency
translation differences arising from the translation of
financial statements of the Group’s foreign entities into
and conditions on which the instruments were granted
and the current likelihood of achieving the specified target.
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
AUD.
and equity.
Retained earnings includes all current and prior period
(iii) Long service leave provision
retained profits and share-based employee remuneration.
The liability for long service leave is recognised and
measured at the present value of the estimated future
(w) Significant accounting judgements, estimates
and assumptions
cash flows to be made in respect of all employees at the
reporting date. In determining the present value of the
Estimates and judgements are continually evaluated and are
based on historical experience and other factors, including
liability, estimates of attrition rates and pay increases through
promotion and inflation have been taken into account.
expectations of future events that may have a financial
The Group uses the high quality corporate bond rate as
impact on the entity and that are believed to be reasonable
the discount rate when measuring its Australian dollar
under the circumstances.
dominated long term employee benefits.
34
EMPIRED LIMITED | ANNUAL REPORT | 2019NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED JUNE 2019
(iv) Estimation of useful lives of assets
(v) Recognition of deferred tax assets
The Group determines the estimated useful lives and related
The extent to which deferred tax assets can be recognised
depreciation and amortisation charges for its property,
is based on an assessment of the probability that future
plant and equipment and finite life intangible assets. The
taxable income will be available against which the deductible
useful lives could change significantly as a result of technical
temporary differences and tax loss carry-forwards can be
innovations or some other event. The depreciation and
utilised. In addition, significant judgement is required in
amortisation charge will increase where the useful lives are
assessing the impact of any legal or economic limits or
less than previously estimated lives, or technically obsolete or
uncertainties in various tax jurisdictions.
non-strategic.
3 SEGMENT REPORTING
Management identifies its operating segments based on the Group's geographical presence, which represent the main products
and services:
• Australia
• New Zealand
The revenues and profit generated by each of the Group’s operating segments and segment assets are summarised as follows:
2019
Revenue
From external customers
From other segment
Total
Segment profit (EBITDA) prior to underlying adjustments
Segment profit (Underlying EBITDA)
Impairment
Segment assets
Segment non-current assets
2018
Revenue
From external customers
From other segment
Total
Segment profit (EBITDA) prior to underlying adjustments
Segment profit (underlying EBITDA)
Segment assets
Segment non-current assets
Australia
$
New Zealand
$
Elimination
$
Total
$
115,504,559
60,509,806
-
176,014,365
1,019,631
427,972
(1,447,603)
-
116,524,190
60,937,778
(1,447,603)
176,014,365
7,325,359
8,442,350
17,343,902
74,353,328
56,564,601
6,475,178
6,849,935
8,008,883
34,531,053
9,371,367
116,056,995
58,253,868
13,800,537
15,292,285
25,352,785
108,884,381
65,935,968
174,310,863
-
-
-
-
-
618,968
960,252
(1,579,220)
-
116,675,963
59,214,120
(1,579,220)
174,310,863
11,062,236
11,598,267
96,367,754
56,716,370
5,351,882
5,374,109
37,002,318
24,950,309
16,414,118
16,972,376
133,370,072
81,666,679
-
-
-
35
EMPIRED LIMITED | ANNUAL REPORT | 2019NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED JUNE 2019 The Group’s segment operating EBITDA reconciles to the Group’s profit before tax as presented in the financial statements
as follows:
Total reporting segment operating underlying EBITDA
Less:
Finance costs (net)
Depreciation and amortisation expenses
One off costs
Impairment
Group profit/ (loss) before tax
4. REVENUE FROM CONTRACTS WITH CUSTOMERS
Revenue
Services revenue
Product and license revenue
Total revenue from contracts with customers
Other Income
Interest
Total revenue and other income
Geographical markets
Australia
Services revenue
Product and license revenue
New Zealand
Services revenue
Product and license revenue
Total revenue from contracts with customers
Timing of revenue recognition
Services Revenue
Transferred at a point in time
Transferred over time
Product and license revenue
Transferred at a point in time
Transferred over time
2019
$
2018
$
15,292,285
16,972,376
(1,334,577)
(8,464,003)
(1,491,748)
(25,352,785)
(21,350,828)
(1,310,782)
(8,160,262)
(558,258)
(14,361)
6,928,713
2019
$
2018
$
159,398,897
16,615,468
157,092,408
17,218,455
176,014,365
174,310,863
60,239
37,909
176,074,604
174,348,772
103,879,098
11,625,460
103,559,810
12,497,182
55,519,798
4,990,008
53,532,598
4,721,273
176,014,365
174,310,863
88,785,722
70,613,175
14,033,939
2,581,530
89,194,947
67,897,461
15,484,565
1,733,890
Total revenue from contracts with customers
176,014,365
174,310,863
Customers generally pay for amounts billed on a 30 day basis. Contract assets and contract liabilities remained relatively constant.
36
EMPIRED LIMITED | ANNUAL REPORT | 2019NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED JUNE 2019
5. COST OF SERVICES
The comparative for cost of services shown in the Statement of Profit or Loss and Other Comprehensive Income has been reduced
by $3,246,604 with employment benefits expenses increased by $1,447,084 and other administration expenses increased by
$1,799,520 as shown in note 6. The amendment to the comparative has been made for consistency purposes as a result of minor
changes in the operation of the business. The table below discloses what was previously reported in the Financial Report for the
period ending 30 June 2019 to what is now reported.
Cost of services
Employment benefit expenses
Other administration expenses
6. EXPENSES
(a) Administration expenses
Employee benefits (not included in cost of sales)
Depreciation expenses
Amortisation expenses
Other administration expenses
(b) Impairment expenses
Plant and equipment (refer Note 14)
Intangible assets (refer Note 15)
Trade and other receivables
7. EMPLOYEE BENEFITS EXPENSE
Employee benefits included in cost of sales
Employee benefits included in administration expenses
12 months to
30 June 2018
Change
110,808,860
(3,246,604)
29,664,510
10,238,800
1,447,084
1,799,520
Previously
reported
12 months to
30 June 2018
114,055,464
28,217,426
8,439,280
2019
$
32,723,546
4,043,395
4,420,608
12,045,489
2018
$
29,664,510
4,571,722
3,588,540
10,238,800
53,233,038
48,063,572
7,614,851
17,029,201
708,734
25,352,785
-
-
-
-
2019
$
94,107,823
32,723,546
2018
$
95,751,863
29,664,510
126,831,369
125,416,373
37
EMPIRED LIMITED | ANNUAL REPORT | 2019NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED JUNE 2019 8. FINANCE EXPENSE
Interest expenses - bank borrowings
Interest expenses - finance leases and hire purchase
Interest expenses - other
9. INCOME TAX
(a) Income tax expense
2019
$
1,330,432
46,011
18,373
2018
$
1,308,425
40,266
-
1,394,816
1,348,691
The major components of tax expense and the reconciliation of the expected tax expense based on the domestic effective tax rate
of Empired Ltd at 30% (2018: 30%) and the reported tax expense in profit or loss are as follows:
Current income tax payable
Deferred income tax relating to origination and reversal of temporary differences
Origination and reversal of temporary differences
Under provision in respect of prior years
Income tax reported in profit or loss
2019
$
451
-
(6,086,495)
47,063
(6,038,981)
2018
$
857,149
1,365,204
(175,950)
-
2,046,403
(b) Numerical reconciliation between aggregate tax expense calculated per the statutory income tax rate
recognised in the comprehensive income statement and tax expense
2019
$
2018
$
(21,350,828)
6,928,713
(6,405,248)
58,663
196,318
5,736
174,591
(116,104)
-
47,063
-
(6,038,981)
2,079,518
(102,038)
-
-
215,743
(36,949)
-
(183,780)
73,909
2,046,403
Accounting profit before income tax
Income Tax Expense to Accounting Profit
Domestic tax rate for Empired Ltd (30%)
Tax rate differential
Employee option expense
Amortisation of intangibles
Other expenditure not allowed for income tax purposes
Foreign exchange differences
R&D offset income tax variance
Under provision in respect of prior years
Other income for income tax purposes
Income tax expense
38
EMPIRED LIMITED | ANNUAL REPORT | 2019NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED JUNE 2019
(c) Recognised deferred tax assets and liabilities
Deferred income tax balances at 30 June 2019 relate to the following:
(i) Deferred tax liabilities
Contract assets
Fixed assets
Trade & other receivables
Other
Gross deferred tax liabilities
(ii) Deferred tax assets
Provisions
Equity raising costs
Borrowing costs
R&D offset carried forward
Fixed assets
Trade & other receivables
Employee obligations
Other
Tax losses
Gross deferred tax assets
Deferred income tax balances relate to the following:
2019
$
2018
$
3,140,945
-
-
36,416
3,177,361
1,038,256
106,227
1,595
3,745,620
2,778,803
63,882
2,159,093
29,545
1,414,485
2,874,258
3,030,446
24,495
24,848
5,954,048
1,064,224
193,460
3,269
4,100,040
-
2,482
2,102,834
12,514
479,833
11,337,506
7,958,656
Opening
Balance
$
Recognised in
Profit and Loss
$
Recognised in
Other
Comprehensive
Income
$
Exchange
Differences
$
30 June 2019
Deferred tax liabilities
Contract assets
Fixed assets
Trade & other receivables
Other
2,874,258
3,030,446
24,495
24,849
266,686
(3,030,447)
(24,495)
9,235
Gross deferred tax liabilities
5,954,048
(2,779,021)
Deferred tax assets
Provisions
Equity raising costs
Borrowing costs
R&D offset carried forward
Fixed assets
Trade & other receivables
Employee obligations
Other
Tax losses
Gross deferred tax assets
1,064,225
193,460
3,269
4,100,040
-
2,482
2,102,835
12,514
479,833
7,958,657
2,004,609
(25,968)
(87,233)
(1,674)
(354,420)
2,769,360
61,423
30,369
13,930
854,625
3,260,411
6,039,432
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,333
2,333
-
-
-
-
9,443
(23)
25,889
3,100
80,027
118,436
116,103
Closing
Balance
$
3,140,944
-
-
36,417
3,177,361
1,038,257
106,227
1,595
3,745,620
2,778,803
63,881
2,159,093
29,544
1,414,485
11,337,504
8,160,143
39
EMPIRED LIMITED | ANNUAL REPORT | 2019NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED JUNE 2019 (c) Recognised deferred tax assets and liabilities (continued)
Opening
Balance
$
Recognised in
Profit and Loss
$
Recognised in
Other Income
$
Exchange
Differences
$
30 June 2019
Deferred tax liabilities
Contract assets
Fixed assets
Trade & other receivables
Other
2,606,793
3,369,352
-
49,470
Gross deferred tax liabilities
6,025,615
Deferred tax assets
Provisions
Equity raising costs
Borrowing costs
R&D offset carried forward
Trade & other receivables
Other
Tax losses
3,269,110
331,361
7,397
4,840,625
18,845
2,602
747,305
267,465
(338,302)
24,495
(24,621)
(70,963)
(101,508)
(137,901)
(4,128)
(740,585)
(16,345)
9,431
(269,182)
Gross deferred tax assets
9,217,245
(1,260,218)
Closing
Balance
$
2,874,258
3,030,446
24,495
24,849
-
(604)
-
-
(604)
5,954,048
(543)
-
-
-
(18)
481
1,710
1,630
3,167,059
193,460
3,269
4,100,040
2,482
12,514
479,833
7,958,657
-
-
-
-
-
-
-
-
-
-
-
-
-
(d) Tax consolidation
Effective 1 July 2002, for the purposes of income taxation, Empired Limited and its 100% Australian owned 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.
40
EMPIRED LIMITED | ANNUAL REPORT | 2019NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED JUNE 2019 10. EARNINGS PER SHARE
Basic earnings per share amounts are calculated by dividing net (loss)/ profit for the year attributable to ordinary equity holders
of the parent.
The following represents the income and share data used in the basic and diluted earnings per share computations:
Net (loss)/ profit attributable to ordinary equity holders of the parent
Weighted average number of ordinary shares for basic earnings per share
Effect of Dilution:
Performance rights
Weighted average number of ordinary shares adjusted for the effect of dilution
2019
$
(15,311,847)
160,127
6,481,636
6,641,763
2018
$
4,882,310
159,751
5,184
164,935
As the group incurred a loss for the period, the options on issue have an anti-dilutive effect, therefore the diluted EPS is equal to
the basic EPS. A total of 2,730,369 (2018: 5,184,000) performance rights which could potentially dilute EPS in the future have been
excluded from the diluted EPS calculation because they are anti-dilutive for the current year presented.
11. CASH AND CASH EQUIVALENTS
(a) Reconciliation of cash
For the purpose of the statement of cash flows, cash includes cash at bank and in hand net of bank overdraft. Cash at the end
of the period as shown in the statement of cash flows is reconciled to the related items in the statement of financial position as
follows:
Cash at bank and in hand
2019
$
5,551,971
5,551,971
2018
$
13,364,679
13,364,679
(b) Reconciliation of net cash flows from operating activities to profit after income tax
(Loss)/ profit after income tax
Finance expenses (net)
Depreciation and amortisation
Impairment losses
Share payment expense
Changes in assets and liabilities net of effects of purchases and disposals of:
(Increase) / decrease in receivables
(Increase) / decrease in contract assets
Increase / (decrease) in trade creditors and other payables
Increase / (decrease) in contract liabilities
(Increase) / decrease in deferred tax asset
Increase / (decrease) in provisions
Net cash from operating activities
2019
$
(15,311,847)
1,334,578
8,464,003
25,352,785
654,393
2,545,732
(1,242,767)
(6,028,406)
(135,104)
(6,155,534)
(982,044)
8,495,789
2018
$
4,882,310
1,310,782
8,160,262
14,361
410,096
(1,186,739)
(1,441,258)
3,824,789
(984,753)
1,187,021
(640,331)
15,536,540
41
EMPIRED LIMITED | ANNUAL REPORT | 2019NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED JUNE 2019
12. TRADE AND OTHER RECEIVABLES
Current
Gross trade receivables
Allowance for credit losses (refer Note 23)
Other receivables
2019
$
23,542,062
(997,876)
441,553
2018
$
25,104,980
(165,920)
153,321
22,985,739
25,092,381
Trade receivables are non-interest bearing and are generally on 30-day terms. A provision for impairment is recognised when
there is objective evidence that an amount is considered not collectible.
13. OTHER CURRENT ASSETS
Prepayments
2019
$
2018
$
2,273,771
2,352,168
14. PLANT AND EQUIPTMENT
2019
Gross carrying amount
Balance 1 July 2018
Additions
Disposals
Exchange differences
Balance 30 June 2019
Depreciation and impairment
Balance 1 July 2018
Disposals
Impairment losses
Depreciation
Balance 30 June 2019
Carrying amount 30 June 2019
Leased
equipment
$
Leasehold
improvements
$
Computer
hardware
$
Furniture,
Equipment &
Fittings
$
Total
$
39,506
-
(39,506)
-
-
(35,031)
39,506
-
(4,475)
-
-
6,015,328
520,255
(113,982)
26,408
21,073,555
253,138
2,603,290
21,147
29,731,679
794,540
(13,357,042)
(1,170,777)
(14,681,307)
63,778
60,491
150,677
6,448,009
8,033,429
1,514,151
15,995,590
(2,059,565)
106,605
(75)
(579,037)
(9,599,274)
9,245,225
(3,238,656)
(3,167,683)
(2,532,072)
(6,760,388)
(1,088,516)
(12,782,386)
933,327
(19,476)
(292,202)
(466,867)
10,324,663
(3,258,207)
(4,043,397)
(9,759,327)
3,915,937
1,273,041
1,047,284
6,236,263
During the financial year an impairment charge of $7,614,851 (inclusive of disposed assets) was raised following a review of
the year end carrying values and the value in use of the assets. The assessment of value in use considered a number of factors
impacting future cash flows including general technological change and obsolescence and strategic direction of the Group. There
were no impairment charges reversed during the current or previous financial year in relation to property, plant and equipment.
42
EMPIRED LIMITED | ANNUAL REPORT | 2019NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED JUNE 2019
2018
Gross carrying amount
Balance 1 July 2017
Additions
Disposals
Exchange differences
Balance 30 June 2018
Depreciation and impairment
Balance 1 July 2017
Disposals
Impairment losses
Depreciation
Leased
equipment
$
Leasehold
improvements
$
Computer
hardware
$
Furniture,
Equipment &
Fittings
$
Total
$
39,506
6,062,054
20,505,974
2,638,019
29,245,553
-
-
-
3,815
(29,917)
(20,624)
673,190
(1,607)
(104,002)
58,153
(2,487)
(90,395)
735,158
(34,011)
(215,021)
39,506
6,015,328
21,073,555
2,603,290
29,731,679
(32,787)
(1,518,972)
(5,877,590)
-
(2,244)
-
15,564
(556,586)
429
1,257
(3,736,521)
13,580
(850,326)
1,559
(276,371)
36,622
(8,279,675)
18,380
(4,571,722)
50,631
Balance 30 June 2018
(35,031)
(2,059,565)
(9,599,274)
(1,088,516)
(12,782,386)
Carrying amount 30 June 2018
4,475
3,955,763
11,474,281
1,514,774
16,949,293
15. INTANGIBLE ASSETS
2019
Gross carrying amount
Balance 1 July 2018
Additions
Disposals
Exchange differences
Balance 30 June 2019
Depreciation and impairment
Balance 1 July 2018
Disposals
Amortisation
Impairment losses
Exchange differences
Balance 30 June 2019
Goodwill
$
Software
$
Other
$
Total
$
46,446,049
-
-
-
24,486,954
9,948,374
(7,687,527)
135,253
46,446,049
26,883,054
-
-
-
-
-
-
(8,291,525)
7,136,002
(4,420,608)
(16,477,675)
261,173
(21,792,633)
355,462
-
(249,303)
56,391
162,550
(284,163)
249,302
-
-
(124,598)
(159,459)
71,288,465
9,948,374
(7,936,830)
191,644
73,491,653
(8,575,688)
7,385,304
(4,420,608)
(16,477,675)
136,576
(21,952,092)
Carrying amount 30 June 2019
46,446,049
5,090,421
3,091
51,539,561
Intangible assets, other than goodwill, have finite lives and are required to be amortised over their expected lives. Goodwill has an
infinite life. Goodwill assumptions have been detailed below. No impairment was recorded.
During the financial year an impairment charge of $17,029,201 was raised following a review of the year end carrying values and
the value in use of the assets. The assessment considered a number of factors impacting the carrying values including general
technological change and obsolescence and strategic direction of the Company. There were no impairment charges reversed
during the current or previous financial year in relation to intangible assets.
43
EMPIRED LIMITED | ANNUAL REPORT | 2019NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED JUNE 2019
2018
Gross carrying amount
Balance 1 July 2017
Additions
Exchange differences
Balance 30 June 2018
Depreciation and impairment
Balance 1 July 2017
Amortisation
Exchange differences
Balance 30 June 2018
Goodwill
$
Software
$
46,446,049
-
-
16,153,436
8,332,703
815
Other
$
355,462
-
-
Total
$
62,954,947
8,332,703
815
46,446,049
24,486,954
355,462
71,288,465
-
-
-
-
(4,625,726)
(3,511,144)
(154,655)
(276,772)
(77,396)
70,005
(4,902,498)
(3,588,540)
(84,650)
(8,291,525)
(284,163)
(8,575,688)
Carrying amount 30 June 2018
46,446,049
16,195,429
71,299
62,712,777
Goodwill
Goodwill acquired through business combinations with indefinite lives are allocated to the Australian and New Zealand cash
generating units.
Australia
New Zealand
Total carrying amount of goodwill
2019
$
27,105,898
19,340,151
46,446,049
2018
$
27,105,898
19,340,151
46,446,049
The Group performed the annual impairment test in June 2019. The Group considers the relationship between its equity
market capitalisation and the net assets as shown on the balance sheet, among other factors, when reviewing for indicators of
impairment. No indicators of impairment are noted. In considering the carrying value of goodwill, the Directors have adopted
a value in use methodology to determine the recoverable amounts of each CGU which confirms that no impairment charge is
necessary.
The recoverable amount of each CGU has been determined based on a value in use calculation that uses the cash flow budgets
over a one year period, followed by an extrapolation of expected cash flows for the CGUs over a four year period using the
growth rates determined by management and the assumptions outlined below. The present value of the expected cash flows and
a terminal value for each segment is determined by applying a suitable discount rate.
Key assumptions used in value in use calculations and sensitivity to changes in assumptions
Managements key assumption is that stable economic conditions prevail for the foreseeable future. Cash flow projections reflect
stable profit margins previously achieved and that no material deterioration in the cash margin are anticipated. The sensitivity
analysis undertaken considers each key assumption in isolation and does not take into account any remedial action that may be
taken if, for example, margins were to deteriorate.
The calculation of value in use for each CGU is most sensitive to the following assumptions:
Gross profit margins - are based upon FY20 budgets and margins achieved in the current year. Gross profit margins are the
most sensitive variable to the value in use calculation. However, a reasonable possible change is not likely to cause a material
impairment. If gross profit margins were to reduce by more than 200 basis points in Australia or by more than 500 basis points in
New Zealand without any compensating adjustment to cash flows then it is likely that a goodwill impairment charge would occur.
44
EMPIRED LIMITED | ANNUAL REPORT | 2019NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED JUNE 2019 Cost price inflation – has been based upon publicly available inflationary data.
Growth rate estimates – It is acknowledged that technological change, macro-economic factors and action of competitors can
have an impact on growth rate assumptions. Growth rates for revenue and costs have been assumed post year 5 at 3%. If terminal
growth was to reduce to zero, in real terms, then it is estimated that a goodwill impairment charge is unlikely.
Discount rates – represent the current market risks, taking into consideration the time value of money and specific risks not
incorporated in the cash flow forecasts. The discount rate is based upon the weighted average cost of capital (WACC). WACC
is assessed taking into account the expected return on investment by investors, the cost of debt servicing plus beta factors for
industry risk. The Directors have adopted a WACC of 14.6% which is applied to the pre-tax cash flows after replacement capital
expenditure of each CGU.
16. EMPLOYEE BENEFITS
The total expense relating to equity-settled share-based payment transactions in 2019 was $654,393 (2018: $410,085).
During 2019 certain employees were eligible to participate in the Company’s Performance Rights Plan. Each performance right
granted under this plan is subject to both a performance criteria and a vesting period. At termination of a performance rights
holder’s employment, unvested performance rights are retained on a pro-rata basis with the balance forfeited. Each performance
right is issued for nil consideration, with each performance right converting to one fully paid ordinary share upon vesting. The
performance rights are unquoted. There are no voting or dividend rights attaching to the performance rights. Performance rights
vest upon a change of control in the Company.
The following summarises the number and movement in performance rights for the reporting periods:
Outstanding at the beginning of the year
Granted during the year
Forfeited during the year
Vested during the year
Outstanding at the end of the year
2019
No.
5,184,166
2,321,000
(974,252)
(49,278)
6,481,636
2018
No.
5,023,659
2,075,000
(443,192)
(1,471,301)
5,184,166
A summary of the performance criteria and vesting dates is as follows:
Number of Performance
Rights
Number of
Ordinary
Vesting Date
Hurdle description
587,576
587,576
1,175,150
380,067 *
380,067 *
768,133 *
380,067
889,200 *
444,600 *
889,200 *
587,576
587,576
1,175,150
570,101
570,101
1,152,200
380,067
1,333,800
666,900
1,333,800
31 August 2019
31 August 2019
31 August 2019
30 August 2020
30 August 2020
30 August 2020
30 August 2020
1 September 2021
1 September 2021
1 September 2021
FY18 Basic EPS
FY19 Basic EPS
Relative Total Shareholder Return
FY19 Basic EPS
FY20 Basic EPS
Relative Total Shareholder Return
Sustainability measure
FY21 Basic EPS
FY21 Return on Equity
Absolute TSR
6,481,636
8,357,271
* For these Tranches should a change of control of the Company occur in accordance with the Long Term Incentive Plan Rules the
Directors have the discretion to issue up to 1.5 ordinary shares per Performance Right.
45
EMPIRED LIMITED | ANNUAL REPORT | 2019NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED JUNE 2019
The fair values of the performance rights is measured using a variation of the binomial option pricing model that takes into
account the terms and conditions on which the instruments were granted and the current likelihood of achieving the specified
target. The following principal assumptions were used in the valuation of performance rights issued in the financial year:
Grant date
Vesting period ends
Share price at date of grant
Term
Fair value at grant date
Performance rights granted
16 July 2018
11 December 2018
1 September 2021
1 September 2021
$0.39
3 yrs
$276,740
1,441,000
$0.30
3 yrs
$268,243
880,000
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.
17. TRADE AND OTHER PAYABLES
Trade payables
Other payables
Included in the above are aggregate amounts payable to the following related parties:
Owing to directors and director related entities
Trade payables are non-interest bearing and are normally settled on 30-day terms.
18. BORROWINGS
Current
Designated at amortised cost:
Obligations under bank loan
Obligations under NZ-Dollar bank loan
Obligations under finance leases and hire purchase contracts
Obligations under premium funding contracts
Non-current
Designated at amortised cost:
Obligations under bank loan
Obligations under NZ-Dollar bank loan
46
2019
$
5,358,019
11,327,922
16,685,941
2018
$
10,744,831
11,502,749
22,247,580
2019
$
-
2018
$
55,000
2019
No.
2018
No.
1,200,000
1,200,000
669,612
376,534
163,114
640,559
245,935
294,737
2,409,260
2,381,231
15,069,770
2,343,646
17,413,416
17,445,255
2,882,518
20,327,773
EMPIRED LIMITED | ANNUAL REPORT | 2019NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED JUNE 2019 Summary of facilities
At reporting date, the following financing facilities were available:
Bank loans
Facility used at reporting date
Facility unused at reporting date
Bank guarantees
Facility used at reporting date
Facility unused at reporting date
Bank finance leases
Facility used at reporting date
Facility unused at reporting date
Summary of covenants
The bank debt facilities comprise:
2019
No.
2018
No.
23,413,259
22,989,396
(19,283,028)
(22,168,332)
4,130,231
821,064
3,500,000
(2,626,630)
873,370
3,500,000
(2,573,283)
926,717
4,000,000
4,000,000
-
-
4,000,000
4,000,000
• non-revolving term debt of $8,413,259 maturing in February 2021 with quarterly principal repayments;
• borrowing base facility of $15,000,000, drawn to $10,869,770 at 30 June 2019. This facility matures in February 2021;
• bank guarantee facility of $3,500,000 maturing in February 2021; and
• lease facility of $4,000,000 maturing in February 2021
The term debt, borrowing base and bank guarantee facilities can be drawn in Australian or New Zealand dollars.
The bank facilities are subject to the customary borrowing terms and conditions of a bank facility of this kind. The financial
covenants that apply include debt service coverage ratio, leverage ratio and maximum borrowing base utilisation as a percentage
of certain trade debtors.
Security arrangements
Security for the above bank facilities has been provided as follows:
• Registered General Security Interest provided by Empired Limited and Intergern Limited;
• Specific Security deed over the shares in the subsidiaries of Empired Limited; and
• Cross guarantee and indemnity provided by each group entity.
47
EMPIRED LIMITED | ANNUAL REPORT | 2019NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED JUNE 2019 19. PROVISIONS
Year end 30 June 2019
Balance at the beginning of the year
Discounting adjustment
Additional provisions
Amounts used
Closing value at 30 June 2019
Analysis of total provisions:
Current
Provision for Annual Leave
Provision for Long Service Leave
Provision for Lease Incentives
Non-current
Provision for Long Service Leave
Provision for Lease Incentives
20. RESERVES
Lease
Incentives
$
3,400,275
-
-
(935,731)
2,464,544
Annual Leave
$
Long Service
Leave
$
4,353,145
(8,453)
7,895,467
(8,098,137)
4,142,022
1,488,988
-
453,426
(288,617)
1,653,797
2019
$
4,142,022
919,191
864,223
5,925,436
734,606
1,600,321
2,334,927
Total
$
9,242,408
(8,453)
8,348,893
(9,322,485)
8,260,363
2018
$
4,353,145
945,979
955,283
6,254,407
543,009
2,444,992
2,988,001
Foreign Currency
Translation Reserve
$
Employee Equity
Benefits Reserve
$
Total Reserves
$
Opening balance as at 1 July 2017
Exchange differences arising on translation of foreign operations
Share-based payments
Closing balance as at 30 June 2018
Exchange differences arising on translation of foreign operations
Share-based payments
Closing balance as at 30 June 2019
100,137
(196,813)
-
(96,676)
486,157
-
389,481
1,971,698
-
7,895,467
2,381,783
-
654,393
3,036,176
2,071,835
(196,813)
410,085
2,285,107
486,157
654,393
3,425,657
48
EMPIRED LIMITED | ANNUAL REPORT | 2019NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED JUNE 2019
21. ISSUED CAPITAL
Ordinary Shares fully paid
Movement in ordinary shares on issue
At 1 July 2017
Issue of ordinary shares (net of issue costs)
At 30 June 2018
Issue of ordinary shares (net of issue costs)
At 30 June 2019
2019
$
2018
$
54,204,746
54,204,746
No.
158,606,618
1,471,301
160,077,919
49,278
Value ($)
54,204,746
54,204,746
-
160,127,197
54,204,746
Ordinary shares entitle the holder to participate in dividends, and carry one vote per share. These shares have no par value.
On 3 July 2018, the company issued 49,278 ordinary shares for the vesting of Performance Rights.
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 and convertible performance rights, supported by financial assets.
There are no externally imposed capital requirements, except for the covenants on the bank facilities.
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 2019 and 30 June 2018 are as follows:
Note
18
11(a)
Consolidated
Group
2019
$
Consolidated
Group
2018
$
19,822,676
(5,551,971)
14,270,705
54,204,746
68,475,451
19%
22,709,004
(13,364,679)
9,344,325
54,204,746
63,549,071
11%
Total Borrowings
Less cash and cash equivalents
Net Debt
Issued Capital
Total Capital
Gearing ratio
22. DIVIDENDS
Balance of franking account at year end at 30% available to the shareholders of Empired Limited
for subsequent financial years
24,841
24,841
2019
$
2018
$
49
EMPIRED LIMITED | ANNUAL REPORT | 2019NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED JUNE 2019
23. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group’s principal financial instruments consist of bank loans, cash, trade receivables and trade payables.
The main purpose of the financial liabilities is to raise finance for the Group’s operations. Financial instruments such as trade
debtors and trade creditors, which arise directly from its operations.
The Group has a 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.
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 11.
Refer to note 23 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%
(2018: +/- 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.
Year end 30 June 2019
30 June 2019
30 June 2018
Foreign currency risk
Profit for the year
Equity
$
+1%
99,895
(65,410)
$
-1%
(99,895)
65,410
$
+1%
99,895
(65,410)
$
-1%
(99,895)
65,410
The Group has exposure to foreign currency risk as a result of its New Zealand, USA and Singapore based subsidiaries having
trade debtors and trade creditors denominated in a currency other than the functional currency. 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.
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:
Financial Assets
Financial Liabilities
Net Exposure
NZD
USD
SGD
2019
$
2018
$
12,177,993
9,629,754
(5,029,652)
(5,143,590)
7,148,341
4,486,164
2019
$
566,866
(48,005)
518,861
2018
$
570,376
-
570,376
2019
$
3,826
(1,799)
2,027
2018
$
49,312
(23,261)
26,051
50
EMPIRED LIMITED | ANNUAL REPORT | 2019NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED JUNE 2019 23. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)
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 (2018: 10%). 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% (2018: 10%) then this would have had the following
impact:
Year end 30 June 2019
30 June 2019
30 June 2018
NZD
$
714,834
448,616
USD
$
51,886
57,038
SGD
$
203
2,605
If the $AUD had weakened against the respective currencies by 10% (2018: 10%) then this would have had the following impact:
Year end 30 June 2019
30 June 2019
30 June 2018
NZD
$
(714,834)
(448,616)
USD
$
(51,886)
(57,038)
SGD
$
(203)
(2,605)
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 commodity price risk is minimal.
Credit risk
The Group trades only with recognised, creditworthy third parties.
It is the Group policy that 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.
There are no material 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 and
available-for-sale financial assets, 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.
51
EMPIRED LIMITED | ANNUAL REPORT | 2019NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED JUNE 2019 Exposure to credit risk
The Group’s maximum exposure to credit risk at the report date was:
Cash and cash equivalents (note 11 )
Trade and other receivables (note 12 )
The aging of the Group’s non-impaired trade receivables at reporting date was:
2019
$
5,551,971
22,985,739
28,537,710
2018
$
13,364,679
25,092,381
38,457,060
30 June 2019
Expected credit loss rate
Gross carrying amount
Lifetime expected credit loss
30 June 2018
Expected credit loss rate
Gross carrying amount
Lifetime expected credit loss
Trade receivables past due
More than
30 days
More than
60 days
More than
90 days
Total
1.0%
2,932,281
29,323
6.0%
466,013
27,961
35.0%
309,129
108,195
22,544,186
174,897
Trade receivables past due
More than
30 days
More than
60 days
More than
90 days
Total
1.0%
2,297,151
22,972
6.0%
764,590
45,875
35.0%
519,827
181,939
24,939,060
261,465
Current
0.1%
18,836,762
9,418
Current
0.1%
21,357,492
10,679
The closing balance of the trade receivables less allowances at 30 June 2019 reconciles with trade receivables:
Opening balance of provision for doubtful debts
Amounts recognised through opening retained earnings
Opening estimated credit losses 1 July 2018
Receivables written off during the year (note 23)
Estimated credit losses provided in year
Expected credit loss at 30 June 2019
$
165,920
367,263
533,183
(154,300)
618,993
997,876
52
EMPIRED LIMITED | ANNUAL REPORT | 2019NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED JUNE 2019 Liquidity risk
The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of short and long
term debt. The Group manages liquidity risk by forecasting and monitoring cash flows on a continuing basis.
As at 30 June 2019, the Group’s financial liabilities have contractual maturities (including interest payments where applicable) as
summarised:
Year end 30 June 2019
Insurance premium funding loan
Bank borrowings
Finance leases and hire purchase obligations
Trade and other payables
Total
0-12 Months
$
168,921
1,944,396
390,698
16,685,941
1 - 5 years
$
-
19,805,854
-
-
19,189,956
19,805,854
This compares to the maturity of the Group’s financial liabilities in the previous reporting periods as follows:
Year end 30 June 2018
Insurance premium funding loan
Bank borrowings
Finance leases and hire purchase obligations
Trade and other payables
Total
0-12 Months
$
306,847
2,848,672
254,551
22,247,580
1 - 5 years
$
-
21,223,430
-
-
25,657,650
21,223,430
5+ years
$
-
-
-
-
-
5+ years
$
-
-
-
-
-
The above amounts reflect the contractual undiscounted cash flows, which may differ to the carrying values of the liabilities at the
reporting date.
24. FINANCIAL ASSETS AND LIABILITIES
Note 2 (k) provides a description of each category of financial assets and financial liabilities and the related accounting policies.
The carrying amount of financial assets and financial liabilities in each category are as follows:
Financial assets
Non-current assets
Work in progress
Contract assets
Cash and cash equivalents
Trade and other receivables
Total assets
2019
$
57,775,824
-
12,136,933
5,551,971
22,985,739
2018
$
79,662,070
10,894,165
-
13,364,679
25,092,381
98,450,467
129,013,295
53
EMPIRED LIMITED | ANNUAL REPORT | 2019NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED JUNE 2019
Financial liabilities
Current borrowings
Non-current borrowings
Current provisions
Non-current provisions
Deferred revenue
Contract liabilities
Trade and other payables
Total liabilities
2019
$
2,409,260
17,413,416
5,925,436
2,334,927
-
2,158,205
16,685,941
46,927,185
2018
$
2,381,231
20,327,773
6,254,407
2,988,001
2,293,310
-
22,247,580
56,492,302
All loans and borrowings are initially recognised at cost, being the fair value of the consideration received net of issue costs
associated with the borrowing. After initial recognition, interest bearing loans and borrowings are subsequently measured at
amortised cost using the effective interest method. Amortised cost is calculated by taking into account any issue costs, and any
discount or premium on settlement. Gains and losses are recognised in profit or loss when the liabilities are derecognised and as
well as through the amortisation process.
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:
Weighted
average
effective
interest rate
1.25%
2019
i) Financial Assets
Floating
interest rate
Fixed interest
rate
Non-interest
bearing
Carrying
amount as per
balance sheet
Cash and cash equivalents
5,551,971
Trade and other receivables
-
Total financial assets
5,551,971
ii) Financial liabilities – at amortised cost
Trade and other payables
Finance leases and hire
purchase obligations
Insurance premium funding
loan
-
-
-
Bank Loans
21,750,250
-
-
-
-
376,534
163,114
-
-
22,985,739
22,985,739
5,551,971
22,985,739
28,537,710
16,685,941
16,685,941
-
-
-
376,534
163,114
21,750,250
38,975,839
4.84%
3.56%
4.27%
Total financial liabilities
21,750,250
539,648
16,685,941
54
EMPIRED LIMITED | ANNUAL REPORT | 2019NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED JUNE 2019
Weighted
average
effective
interest rate
1.25%
2018
i) Financial Assets
Floating
interest rate
Fixed interest
rate
Non-interest
bearing
Carrying
amount as per
balance sheet
Cash and cash equivalents
13,364,679
Trade and other receivables
-
Total financial assets
13,364,679
ii) Financial liabilities – at amortised cost
Trade and other payables
Finance leases and hire
purchase obligations
Insurance premium funding
loan
-
-
-
Bank Loans
24,072,102
-
-
-
-
245,935
294,737
-
-
25,092,381
25,092,381
13,364,679
25,092,381
38,457,060
22,247,580
22,247,580
-
-
-
245,935
294,737
24,072,102
46,860,354
4.84%
4.75%
4.00%
Total financial liabilities
24,072,102
540,672
22,247,580
26. COMMITMENTS AND CONTINGENCIES
Contingent Asset
The Group has brought a claim against a software vendor relating to a third party warranty claim. Management are unable to
estimate the expected value of the claim and the probability of re-coupment is remote.
Contingent Liability
From time to time, Empired Ltd is subject to claims and/ or complaints from third parties and a contingent liability arose
during the financial year arising from the ordinary course of its business. As per AASB 137 Provisions, Contingent Liabilities and
Contingent Assets, this has not been recognised in the financial statements.
Commitments for Expenditure
Operating leases
Office premises are leased under non-cancellable operating leases. Their commitment can be seen below:
Minimum lease payments under non-cancellable operating leases according to the time expected
to elapse to the date of payment:
Not later than one year
Later than one year but not later than five years
Later than five years
Total
Contingent Liabilities
Bank guarantees
Bank guarantees outstanding at year end
Total
2019
$
2018
$
5,991,355
14,094,360
2,883,249
22,968,964
5,194,852
14,563,884
3,010,675
22,769,411
2019
$
2018
$
-
-
2,626,630
2,573,283
55
EMPIRED LIMITED | ANNUAL REPORT | 2019NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED JUNE 2019
27. INVESTMENT IN CONTROLLED ENTITY
Tusk Technologies Pty Ltd
Conducive Pty Ltd
OBS Pty Ltd
eSavvy Pty Ltd
i5 Software Pty Ltd (a)
Intergen Business Solutions Pty Ltd
Intergen Limited
Intergen X4 Holdings Limited
Intergen USA Limited
Intergen ESS Limited (b)
Empired Singapore Pte Ltd
Intergen North America Limited
(a) Entity deregistered during the year.
(b) Acts as trustee for the Intergen Limited Employee Share Scheme Trust
28. AUDITORS’ 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
% Equity Interest
Country of
Incorporation
2019
%
2018
%
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
New Zealand
New Zealand
New Zealand
Singapore
USA
100
100
100
100
-
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
2019
$
147,331
47,740
195,071
2018
$
167,221
88,182
255,403
Grant Thornton Australia: Taxation compliance
15,763
14,950
Overseas Grant Thornton network firms:
Taxation compliance
Total other services remuneration
Total auditor’s remuneration
7,005
22,768
217,839
6,510
21,460
276,863
56
EMPIRED LIMITED | ANNUAL REPORT | 2019NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED JUNE 2019 29. PARENT ENTITY INFORMATION
As at, and throughout, the financial year ended 30 June 2019 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
Accumulated (losses)
Total equity
Statement of profit or loss and other comprehensive income
(Loss)/ profit after tax
Total comprehensive (loss)/ income
2019
$
27,036,947
64,713,909
18,783,667
2018
$
38,968,038
86,948,970
26,123,081
37,253,803
47,494,549
54,204,744
3,036,176
(29,780,814)
27,460,106
54,204,744
2,381,783
(17,132,106)
39,454,421
(12,366,189)
(12,366,189)
2,683,777
2,683,777
The Parent Entity has issued the following guarantees in relation to the debts of its subsidiaries:
1. Pursuant to Class Order 98/1418, Empired Limited and OBS Pty Ltd have entered into a deed of cross guarantee on or about
14 November 2013. The effect of the deed is that Empired Limited has guaranteed to pay any deficiency in the event of
winding up of OBS Pty Ltd. OBS Pty Ltd has also given a similar guarantee in the event that Empired Limited is wound up.
The Closed Group financial information is not disclosed as it is not materially different to the above information for Empired
Limited, the Parent Entity.
2. Empired Limited, eSavvy Pty Ltd, Conducive Pty Ltd, OBS Pty Ltd, i5 Software Pty Ltd, Tusk Technologies Pty Ltd, Intergen
Business Solutions Pty Ltd and Intergen Limited have entered into a cross guarantee and indemnity in favour of the senior
lender to the Group in respect to bank facilities provided to the Group by the senior lender. During the financial year
i5 Software Pte Ltd was released from the cross guarantee and indemnity.
57
EMPIRED LIMITED | ANNUAL REPORT | 2019NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED JUNE 2019 30. RELATED PARTY TRANSACTIONS
The Group's related parties includes its 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 key management personnel
Key management of the Group are the executive members of Empired’s Board of Directors and members of the Executive Team.
Key management personnel remuneration includes the following expenses:
Short-term employee benefits
Post-employment benefits
Share-based payment
Total compensation paid to key management personnel
2019
$
1,878,371
71,215
436,124
2,385,710
2018
$
1,960,736
63,510
251,854
2,276,100
31. EVENTS AFTER THE REPORTING DATE
No significant non-adjusting events have occurred between the reporting date and the date of authorisation.
58
EMPIRED LIMITED | ANNUAL REPORT | 2019NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED JUNE 2019
DIRECTOR’S DECALARATION
Directors’ Declaration
In accordance with a resolution of the directors of Empired Limited, I state that:
1. In the opinion of the directors,
(a) the financial statements and notes of Empired Limited for the financial year ended 30 June 2019 are in accordance with the
Corporations Act 2001, including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2019 and of its performance
(ii) complying with Accounting Standards and the Corporations Regulations 2001;
(b) the financial statements and notes also comply with International Financial Reporting Standards as disclosed in Note 2(a); and
(c) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and
payable.
2. This declaration has been made after receiving the declarations required to be made to the directors by the Chief Executive
Officer and Chief Financial Officer in accordance with section 295A of the Corporations Act 2001 for the financial year ended
30 June 2019.
On behalf of the Board
Russell Baskerville
Managing Director
12 August 2019
59
EMPIRED LIMITED | ANNUAL REPORT | 2019 AUDITOR’S INDEPENDENCE DECLARATION
Auditor’s Independence Declaration
Central Park, Level 43
152-158 St Georges Terrace
Perth WA 6000
Correspondence to:
PO Box 7757
Cloisters Square
Perth WA 6000
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 2019, 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
L A Stella
Partner – Audit & Assurance
Perth, 12 August 2019
Grant Thornton Audit Pty Ltd ACN 130 913 594
a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389
www.grantthornton.com.au
‘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.
61
60
EMPIRED LIMITED | ANNUAL REPORT | 2019
Independent Audit Report
INDEPENDENT AUDIT REPORT
Central Park, Level 43
152-158 St Georges Terrace
Perth WA 6000
Correspondence to:
PO Box 7757
Cloisters Square
Perth WA 6000
T +61 8 9480 2000
F +61 8 9480 2050
E info.wa@au.gt.com
W www.grantthornton.com.au
Independent Auditor’s Report
To the Members of Empired Limited
Report on the audit of the financial report
Opinion
We have audited the financial report of Empired Limited (the Company) and its subsidiaries (the Group), which comprises
the consolidated statement of financial position as at 30 June 2019, 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, and notes to the consolidated financial statements, including a summary of significant accounting
policies, and the Directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including:
a giving a true and fair view of the Group’s financial position as at 30 June 2019 and of its performance for the year
ended on that date; and
b complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are
further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are
independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and
the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for
Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled
our other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in
forming our opinion thereon, and we do not provide a separate opinion on these matters.
Grant Thornton Audit Pty Ltd ACN 130 913 594
a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389
www.grantthornton.com.au
‘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.
62
61
EMPIRED LIMITED | ANNUAL REPORT | 2019
INDEPENDENT AUDIT REPORT
Independent Audit Report (continued)
Key audit matter
How our audit addressed the key audit matter
Revenue recognition – Note 2(r) and Note 4
For the year ended 30 June 2019, the group recorded
$176,014,365 (2018: $174,310,863) in revenue from a
combination of fixed price and variable contracts including
product sales. Revenue is recognised in accordance with
AASB 15 “Revenue from Contracts with Customers”.
Revenue derived from the delivery of services may be
complex and involves significant management judgement due
to revenue to being recognised when performance obligations
are satisfied. The audit team is required to obtain sufficient
audit evidence as to whether the assumptions used by
management to recognise revenue are reasonable and
accurate in accordance with ASA 540 Auditing for Accounting
Estimates.
This area is a key audit matter due to the complexity
associated with service revenue as well as the presumed risk
of fraud in revenue.
Our procedures for significant revenue streams included,
amongst others:
Understanding and documenting the design of internal
controls and performing test of key controls for their
operational effectiveness on revenue recognition for
material fixed and variable revenue streams;
Testing on a sample basis fixed price and variable
contracts to supporting documentation to ensure revenue
recognition was accurate, recorded in the correct period
and compliant with AASB 15;
Reviewing the progress of fixed price contracts to
supporting documentation and agreeing revenue
recognition was appropriately applied over a period of time
consistent to the requirements of AASB 15; and
Assessing the adequacy of Group’s presentation and
disclosures in the financial statements.
Carrying value of goodwill – Note 2(h) and Note 15
The Group has recorded goodwill totalling $46,446,049 (2018:
$46,446,049) at 30 June 2019 across two Cash Generating
Units (CGU).
Goodwill is required to be assessed for impairment annually
by management as prescribed in AASB 136 “Impairment of
Assets”.
Our procedures included, amongst others:
Understanding and documenting management’s process
and controls related to the assessment of impairment,
including management’s identification of CGUs and the
calculation of the recoverable amount for each CGU;
Management test each CGU for impairment by comparing
their carrying amounts against their recoverable amounts
determined by either, the greater of its fair value less costs to
sell and its value in use.
Evaluating the value-in-use models against the
requirements of AASB 136 “Impairment of Assets”,
including consultation with our valuation auditor’s expert;
This area is a key audit matter due to the significant balance
carried by the Company that management have assess using
estimates and judgement. The Company use the discounting
cash flow model (value in use) to determine their recoverable
value, in doing so, consider the following key inputs;
forecasted budgeted financial performance;
estimated growth rates;
working capital adjustments;
estimated capital expenditure;
discount rate; and
terminal value.
-
-
Reviewing management’s value-in-use calculations to:
Test the mathematical accuracy of the calculations;
Evaluate management’s ability to perform accurate
estimates;
Test forecast cash inflows and outflows to be derived
by the CGUs assets; and
Agree discount rates applied to forecast future cash
flows.
-
-
Performing sensitivity analysis on the significant inputs
and assumptions made by management in preparing its
calculation; and
These estimates and judgements requires specific valuation
expertise and analysis.
62
Assessing the adequacy of financial statements
disclosures.
63
EMPIRED LIMITED | ANNUAL REPORT | 2019
Independent Audit Report (continued)
INDEPENDENT AUDIT REPORT
Information other than the financial report and auditor’s report thereon
The Directors are responsible for the other information. The other information comprises the information included in the
Group’s annual report for the year ended 30 June 2019, but does not include the financial report and our auditor’s report
thereon.
Our opinion on the financial report does not cover the other information and we do not express any form of assurance
conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or
otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors 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 and for 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.
In preparing the financial report, the Directors are responsible for assessing the Group’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
Auditor’s responsibilities for the audit of the financial report
Directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
Auditor’s responsibilities for the audit of the financial report
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material
Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions
Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
of users taken on the basis of this financial report.
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions
of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance
Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our
A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance
auditor’s report.
Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our
auditor’s report.
Report on the remuneration report
Report on the remuneration report
Opinion on the remuneration report
Opinion on the remuneration report
We have audited the Remuneration Report included in pages 15 to 23 of the Directors’ report for the year ended 30 June
We have audited the Remuneration Report included in pages 11 to 18 of the Directors’ report for the year ended 30 June
2019.
2019.
In our opinion, the Remuneration Report of Empired Limited, for the year ended 30 June 2019 complies with section
In our opinion, the Remuneration Report of Empired Limited, for the year ended 30 June 2019 complies with section
300A of the Corporations Act 2001.
300A of the Corporations Act 2001.
Responsibilities
The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance
with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report,
based on our audit conducted in accordance with Australian Auditing Standards.
64
63
GRANT THORNTON AUDIT PTY LTD
Chartered Accountants
L A Stella
Partner – Audit & Assurance
Perth, 12 August 2019
EMPIRED LIMITED | ANNUAL REPORT | 2019
INDEPENDENT AUDIT REPORT
Independent Audit Report (continued)
Responsibilities
The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance
with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report,
based on our audit conducted in accordance with Australian Auditing Standards.
Grant Thornton Audit Pty Ltd
Chartered Accountants
L A Stella
Partner – Audit & Assurance
Perth, 12 August 2019
64
65
EMPIRED LIMITED | ANNUAL REPORT | 2019
SHAREHOLDING ANALYSIS
Shareholding Analysis
In accordance with Listing Rule 4.10 of ASX Limited, the Directors provide the following shareholding information which was
applicable as at 29th July 2019.
a. Distribution of Shareholding
Size of Shareholding
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10001 - 100,000
100,001 - max
Total
b. Substantial Shareholders
Number of
shareholders
136
487
287
471
133
%
0.04
0.86
1.37
10.25
87.48
1,514
100.00
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
National Nominees Ltd ACF Australian Ethical Investment Limited
Tiga Trading Pty Ltd
Microequities Asset Management Pty Ltd
Baskerville Investments Pty Ltd
Number of
shares held
24,381,400
23,106,794
13,308,937
7,450,059
%
15.23
14.43
8.31
6.21
65
EMPIRED LIMITED | ANNUAL REPORT | 2019
SHAREHOLDING ANALYSIS
c. Twenty Largest Shareholders
Name
NATIONAL NOMINEES LIMITED
UBS NOMINEES PTY LTD
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
ZERO NOMINEES PTY LTD
BASKERVILLE INVESTMENTS PTY LTD
BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD DRP
MR JOHN ALEXANDER BARDWELL
BNP PARIBAS NOMS (NZ) LTD
ICE COLD INVESTMENTS PTY LTD
GABRIELLA NOMINEES PTY LTD
BRANDONS TRUSTEE COMPANY LIMITED
MR GREGORY DAVID LEACH
NEWECONOMY COM AU NOMINEES PTY LIMITED <900 ACCOUNT>
BASKERVILLE INVESTMENTS PTY LTD
MICROEQUITIES ASSET MANAGEMENT PTY LTD
MR MARK EDWARD WALLER
MR TONY JOHN ALAN STEWART
BARDWELL SUPERANNUATION FUND PTY LTD
UNIPLEX CONSTRUCTIONS PTY LTD
MCCUSKER HOLDINGS PTY LTD
Total
Number of
shares held
30,756,035
23,106,794
12,770,384
8,728,605
7,780,000
3,644,809
3,150,000
2,325,000
1,962,275
1,600,000
1,570,517
1,370,000
1,315,510
1,288,983
1,211,726
1,206,229
1,134,921
1,099,904
1,065,500
1,000,000
%
19.21
14.43
7.98
5.45
4.86
2.28
1.97
1.45
1.23
1.00
0.98
0.86
0.82
0.80
0.76
0.75
0.71
0.69
0.67
0.62
108,087,192
67.50
The twenty members holding the largest number of shares together held a total of 67.5% of issued capital.
d. Issued Capital
(i) Ordinary Shares
The fully paid issued capital of the company consisted of 160,127,197 shares held by 1,514 shareholders.
Each share entitles the holder to one vote.
The number of shareholdings held in less than marketable parcels is 103.
(ii) Unquoted Equity
No options were issued in the year under the company share options plan
2,321,000 performance rights were issued under the company’s LTI plan
Options do not have any voting rights.
66
EMPIRED LIMITED | ANNUAL REPORT | 2019
e. On-Market Buy-Back
There is currently an on-market buy-back in place.
f. Company Secretary
The Company Secretary is Mr David Hinton
g. Registered Office
The registered office of Empired Ltd is:
Level 7, The Quadrant
1 William Street
Perth WA 6000
Telephone +61 8 6333 2200
SHAREHOLDING ANALYSIS
67
EMPIRED LIMITED | ANNUAL REPORT | 2019
OTHER INFORMATION FOR SHAREHOLDERS
Other Information For Shareholders
In accordance with Listing Rule 4.10 of the ASX Limited, the Directors provide the following information not elsewhere disclosed
in this report.
SHAREHOLDER COMMUNICATIONS
The Board of Directors aims to ensure that shareholders are informed of all major developments affecting the Company’s state of
affairs. Information is communicated to shareholders as follows:
• The annual report is distributed to shareholders who elect to receive the document. A copy of the full annual report is available
free of charge, upon request, from the Company. The Board ensures that the annual report includes relevant information
about the operation of the Company during the year, changes in the state of affairs of the Company and details of future
developments, in addition to the other disclosures required by the Corporations Act;
• The half-year report contains summarised financial information and a review of the operations of the Company during the
period. The half-year financial report is prepared in accordance with the requirements of Accounting Standards and the
Corporations Act, and is lodged with the Australian Securities and Investments Commission and the Australian Stock Exchange;
and
• The Company’s internet website at www.empired.com is regularly updated and provides details of recent material
announcements by the Company to the stock exchange, annual reports and general information on the Company and its
business. The Board encourages full participation of shareholders at the Annual General Meeting to ensure a high level of
accountability and identification with the Company’s strategy and goals. Important issues are presented to the shareholders as
single resolutions.
INTERNET ACCESS TO INFORMATION
Empired maintains a comprehensive Investor Relations section on its website at
www.empired.com/Investors/
You can also access comprehensive information about security holdings at the Computershare Investor Centre at
www-au.computershare.com/Investor/
By registering with Computershare’s free Investor Centre service you can enjoy direct access to a range of 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.
Changes to your shareholder details, such as a change of name or address, or notification of your tax file number or direct
credit of dividend advice can be made by printing out the forms you need, filling them in and sending the changes back to the
Computershare Investor Centre.
68
EMPIRED LIMITED | ANNUAL REPORT | 2019
OTHER INFORMATION FOR SHAREHOLDERS
SHARE REGISTRY ENQUIRIES
Shareholders who wish to approach the Company on any matter related to their shareholding should contact the Computershare
Investor Centre in Melbourne:
The Registrar
Computershare Investor Services Pty Ltd Level 11, 172 St Georges Terrace
Perth WA 6000
Telephone +61 8 9323 2000
Facsimile +61 8 9323 2033
Website www-au.computershare.com/investor
ANNUAL GENERAL MEETING
The 2019 Annual General Meeting of Empired Limited will be held at:
Canning Room, Adina Apartment Hotel
33 Mounts Bay Road in Perth
at 11am on Thursday, 28 November 2019
Formal notice of the meeting will be circulated to shareholders separate to this report.
STOCK EXCHANGE LISTING
Empired Limited shares are listed on the Australian Securities Exchange (ASX:EPD). The home exchange is Perth.
All shares are recorded on the principal share register of Empired Limited, held by Computershare Investor Services Pty Limited at
the following street address:
Computershare Investor Services Pty Ltd
Level 11, 172 St Georges Terrace
Perth, WA 6000
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