Appendix 4E
Summary Financial Report
Results for Announcement to the Market
For the financial year ended 30 June 2017
2017
$’000
2016
Variance to prior year
$’000
$’000
%
Operating revenue
16,211
17,809
(1,598)
(8.9)
Revenue – continuing operations
161
-
161
()
Revenue – discontinued operations
16,050
17,809
(1,759)
(10)
Attributable (loss)/profit after tax
(4,336)
(1,606)
(2,730)
(170)
(Loss)/profit from continuing operations after tax
(2,272)
(54)
(2,218)
(4,107)
Loss from discontinued operations
(2,064)
(1,552)
(512)
(33)
Net margin (%)
Basic (loss)/earnings per share (cents)
(26%)
(2.0)
(9%)
(1.1)
-
(20.7)
(0.9)
(81)
Net operating cash inflows
(1,922)
774
(2,696)
(348)
Dividends per share
Net tangible assets / (liabilities) per security (cents)
-
0.1
-
1.0
-
-
-
-
Additional Appendix 4E disclosure requirements can be found in the notes to the 2017 Envirosuite Limited
Consolidated Financial Statements included in the Annual Report.
This report is based on the consolidated financial statements that have been audited by WPIAS Pty Ltd with the
Independent Auditor’s Report included in the financial statements.
1
EnviroSuite Limited Level 19, 240 Queen Street Brisbane QLD 4000(ASX: EVS) ABN: 42 122 919 948 www.envirosuite.com 2017
Annual
Report
ABN: 42 122 919 948
Envirosuite Limited Annual Report 2017
Contents
02
Chairman’s Letter
04
Managing Director’s Report
08
Director’s Report
22
Corporate Governance Statement
27
Financial Statements
31
Notes to the Financial Statements
83
Directors’ Declaration
84
Auditor’s Report
91
Shareholder Information
94
Corporate Directory
Page 1 Chairman's Letter
Chairman’s Letter
Our strategic vision has long been to bulk up the consulting
business through organic growth and acquisition and to realise
the value through a sale to catapult the technology business
with a strong balance sheet. Over the period from 2012 to 2016
we increased the size of the consulting practice by nearly 200%
and with the technology having proved itself domestically and
abroad we felt that the timing was right to divest our consulting
practice inclusive of Waste Solutions Australia and DLA
Environmental Services that we acquired through the course of
the 2014 calendar year.
With the help of our advisors we ran a competitive process
in which we sought an acquirer that would not only provide
the desired financial outcome and present a good fit for our
consulting teams, but also a strong global partner that would
dedicate real resources, structure and energy to assist us
in securing new Envirosuite clients globally. The selected
purchaser, Environmental Resources Management (ERM) is an
excellent partner for Envirosuite with a global reach into our
key target markets, through more than 160 offices in over 40
countries and territories, 4,500 staff, and a client list that boasts
more than 50 per cent of the Global Fortune 500 companies.
Since completing the transaction at the end of the 2017
financial year, we are no longer a hybrid group with two distinct
business models, we are now a well-funded and highly focused
technology business with a proprietary platform offering
excellent industry solutions in a rapidly growing global space,
with blue chip clients and global distribution partners. We are
very excited about our future prospects and we’re working
extremely hard on multiple fronts to pursue the opportunities
that we have in front of us.
We are very pleased to welcome back Mr Peter White to the
role of Chief Executive Officer and Executive Director. Peter
played a formative role in the successful development and
commercialisation of the Envirosuite platform and his return
to the company is valuable and timely. Working together with
our Co-Founder and Managing Director, Mr Robin Ormerod we
believe we have the key pillars of leadership covered in regard
to the knowledge and experience required across commercial,
IT, and the science that drives our technology. Our scientific
expertise is, and will continue to be our key differentiator. We
have decades of industry knowledge and practical experience
embedded in the Envirosuite platform that cannot be easily or
quickly replicated.
Our teams in the USA and Europe have quickly built an
impressive pipeline in a relatively short time from a standing
start. We are confident in the pipeline conversion going forward
with recent new sales that have emerged in each of our key
markets. The opportunity in the USA particularly, cannot be
underestimated with the level of interest and very early sales
Dear Shareholder,
I am pleased to present the Annual Report for Envirosuite
Limited and its subsidiaries (the Group) for the 2017 Financial
Year.
The completion of the sale of our consulting practice in June
this year completes a long journey for the Group to become a
focused, global, world leading Software-as-a-Service (SaaS)
Technology company.
Since the smarts of our boutique air consulting business began
progressively producing a unique software application well
over a decade ago, our Group has been an increasing hybrid of
traditional consulting services and a developing technology
business. In mid-2014, with the commencement of the re-
build of Envirosuite, this process accelerated with significant
investment to produce a world-leading, scalable platform ready
for global deployment, which is now our central focus.
Page 2 Chairman's Letter
we have seen from the various regulatory bodies that we are
working with. Gaining significant traction in this market is one
of our key commercial goals for the 2018 financial year.
Our overriding focus from this point is the global
commercialisation of the Envirosuite platform. All of our
resources are focused on developing new business and we
move forward with strong market knowledge and multiple
opportunities. Key opportunities that we’ve disclosed to the
market in the past, including Thames Water, South Coast Air
Quality Management District and others, are all progressing
well. Larger organisations and particularly government feature
a longer sales cycle however the prize is big and worth chasing.
It is also key to note that while these larger opportunities are
progressing, they provide significant reference cases for other
prospective clients, and we have seen several new sales and
other opportunities emerge as a result.
As part of the key focus on business development, our
development team is continually cycling the learnings from our
customers back into the evolution of the Envirosuite platform to
ensure it continues to lead the market.
The consulting sale process necessarily required a significant
focus for the majority of the 2017 financial year, as did the
management of the consulting team and the establishment
of our Envirosuite people in Europe and the USA. With those
major items now successfully completed we have only one
concentrated focus in the growth of our technology business.
I sincerely thank my fellow Directors that have worked extremely
hard to bring about and complete the sale transaction and the
co-operation agreement with ERM, which is nothing less than
transformational for the Group and sets us up for a very bright
future. I would also like to thank our people, both our consulting
teams that have now joined with our valued partner ERM, and
our Envirosuite team that have demonstrated their talents and
commitment to the group through their efforts in the last year.
The ultimate reward is ahead of us as we endeavor to grow the
value of the company in multiples.
We also thank all of our shareholders both our longer term and
those that have supported us in the capital raisings completed
in recent years. We are intent on delivering significant
shareholder value from our efforts going forward and effectively
communicating our progress to the market.
David Johnstone
Chairman
31 August 2017
Envirosuite Limited Annual Report 2017Page 3 Managing Director's Report
Managing Director’s Report
Our Team
We have a product development team of around ten people
including programmers, implementation specialists, technical
support and product development management. Envirosuite
has been a ground-up, in-house development phenomenon
that embeds a huge amount of scientific and industry expertise
combined with some outstanding IT smarts. The team continues
to work hard to evolve the platform with ever-increasing capability
aligned to our target industries.
We maintain a vigilant eye on the competitive landscape and see
no direct competition emerging as yet on a whole product basis,
but with some partial competitors who sell a small part of our
offering. We know that our success will create followers. However,
any imitator would encounter many huge challenges and would take
a considerable time to overcome them as there are so many layers
of deep knowledge that cannot be easily or quickly acquired and
incorporated into a new platform.
Indeed, we have competed and won against some of the world’s
largest and best known software providers to gain some of our
largest wins to date. We do see, particularly in Australia, a handful
of small operators developing value-add style applications to
supplement their core consulting work, which is how we essentially
started nearly 15 years ago. However, we believe we have a solid
multi-year head start on these operators with respect to the depth,
breadth and capacity for reliable, rapidly implemented global roll-
out that we have worked so hard and long to develop.
Our front line direct sales efforts are led by three individuals, two of
whom I introduced in last year’s report. Those two are Matt Scholl
and Chaim Kolominskas. Matt is now full-time in the US, based
near Silicon Valley, running a team of three in direct sales, including
himself, and working also with regional partners. Chaim is working
with our partners in Europe and is also engaged in strategic direct
sales.
In the US, Matt has made some great headway with regulators in a
relatively short time. It speaks volumes about where our offering
sits in the market that an Australian consulting-turned-technology
business can enter the US, in what is perceived to be one of the most
technologically advanced, rules-driven and competitive markets
globally, and go straight to the front row in the main arena.
I was present at initial meetings with some of the state and regional
regulatory bodies in California. Dedicated career executives and
technical specialists had never seen anything quite like Envirosuite
and were effusive in their praise and excitement about how they can
bring our product into the heart of their operations across multiple
functions. The California Air Resources Board itself has an annual
operating budget of USD $1.8bn and it is just one of the groups that
we’re now working with. As well as the regulatory organisations, our
US team is also making inroads into wastewater treatment, open cut
mining and oil refineries.
In Europe, beginning with Thames Water in 2016, we have sought to
capitalise on this success by pursuing other wastewater treatment
plant (WWTP) clients in Europe and with great success to date such
that we believe this is an emerging key market vertical for us. We
are now working with industry to push our offering further into
Dear Shareholder,
I believe we are now reaching a positive tipping point from which we
will quickly reach new heights. It has been a long journey, with more
hard work to be done however, after the many years of hard work
that we’ve undertaken to transform a consulting business to a SaaS
model, it is now difficult to appreciate the potential heights of the
opportunities before us.
On track
In the 2016 Annual Report I related our plans for the 2017 financial
year, to establish key people in the US and Europe and develop our
partner network. Our people are now established in those regions,
having hit the ground permanently early this calendar year. They
have built out since then with a handful of very targeted and key
appointments.
We held our first global team conference in July this year to pull the
whole team together. This meeting was a very worthwhile exercise
that we’ve never previously undertaken, having had far more people
and two quite distinct businesses in consulting and technology. Now
as a pure play SaaS business with a strong, unified team, we have
the core elements for success: a proven product, a receptive global
market with gateway reference clients and sales, and a skilled,
experienced team across the key business functions.
Page 4 Managing Director's Report
the operational requirements for WWTP operators. By increasing
the relevance of our offering at the operational level as well as
environmental, we believe that we’ll both capture a far larger market
and be in a position to justify an upward revision of our pricing.
In the Asia Pacific region, incorporating Australia and New Zealand,
we are working with our existing customers in the region to grow
out from the individual sites held with global groups. The initial
reach and track record of successful operations provides the basis to
broaden the roll-out within those groups. In addition, we are steadily
bringing on new opportunities across new sectors. For example,
we are looking at new applications in landfill gas to optimise both
the environmental performance and the production of electricity
from gas emissions harvested from landfills. There are a number of
global groups in this space that account for the majority of the power
generation sites globally and we are seeking to partner with these
groups to develop another strong vertical for Envirosuite.
Each region now reports directly to CEO Peter White under whose
stewardship we have great confidence in pursuing and procuring
the larger business connections that we wish to make at this point
in our growth. Peter is already working closely with our partners
in each region, many of whom he has had prior contact with, as
well as others such as ERM with whom he is already making good
headway. Peter has a career history of closing major enterprise and
government deals in the ICT space and is the right person to lead the
team to capitalise on the many doors of opportunity that are now
open for us.
Our Products
The Envirosuite software platform is a proprietary cloud-based,
monitoring, management and reporting platform that is offered
on a SaaS basis. Decades of environmental, engineering and
mathematical expertise are embedded in the platform. Clients
traditionally employ consulting groups to obtain reports developed
from field monitoring projects and modelling. The traditional
method is slow, relatively labour-intensive, expensive, and
retrospective in nature. It remains the industry standard for a
particular type of deliverable, often used for planning, impact
assessment, auditing and investigative activities.
On the other hand, Envirosuite offers the type of analytical power
provided by consultancy engagements, but generated at the
click of a button in real-time. It provides instant insights into past,
present and future conditions affecting the user’s decision space,
guiding actions that are better informed and faster. The predictive
capability, in particular, well demonstrates the great value of our
offering as it can be used to manage future operations to optimise
environmental, regulatory, operational and financial outcomes for
our clients. ‘Prevention is better than cure’ and to that effect we offer
a tool that our clients use to prevent unwanted outcomes such as
regulatory breaches and the resulting fines, community backlashes
from unwanted pollutants, noise and odours, while also creating
efficiencies and optimising production outcomes.
With our assistance the client selects the functionalities that they
want from the Envirosuite platform and the various features are
switched on or off by our implementation team according to the
client specifications. From the client perspective, we describe the
platform as modular, depending on the chosen functionalities that
may include monitoring, modelling, analysis (such as back-tracking
to identify pollution sources), forecasting and various reporting
formats. Generally, a combination of these functions is implemented
for each client. The platform is designed for rapid implementation
which can take from a few hours to a few days depending on the
degree of configuration required.
The Envirosuite platform sits between the data feeds and the user.
The data feeds for environmental monitoring are provided by
hardware devices that are positioned in the field to capture data
on the air quality indicators of interest. Many of our clients already
have a hardware network in place, and in those cases we can
simply implement the Envirosuite platform remotely and maintain
it without even having to physically visit the site. Where a client
requires a turnkey solution including hardware we can facilitate
that through our panel of external hardware providers and local
experts whom we contract in as required. Going forward, we are
looking at packaging the hardware together with the maintenance
and Envirosuite licence fees as a single monthly Saas fee. This would
increase our overall margins and augment the relationship with the
client. We believe that this approach could bring another significant
step-up in group revenues and opportunities in the next phase of
our growth.
To illustrate the application for Envirosuite, it is useful to gain an
appreciation of what we call the ‘Incident Intelligence’ module. This
module ties together the various features noted above and employs
the backtracking functionality to pinpoint the source of the pollutant
or nuisance agent (such as odour or dust) that has led to a complaint
from the community.
Complaints, or ‘nuisance complaints’ as they are known in the
industry, are complaints from members of the public about odour,
dust, noise or other pollutants that cause nuisance to them. The
person complaining may cite a particular operator nearby as the
culprit, be it a refinery, wastewater treatment plant, agricultural
facility or other likely suspect. The regulator then may send an
investigating officer out to the area to try to confirm the problem
and find its source. Often the problem has gone by the time they
arrive and so there is significant time and cost wasted. This can
occur many times over.
The regulator may seek answers from the operator(s) in question to
help establish the background to the complaint as a step towards
corrective action or prosecution. This may involve an investigation
that results in loss of production time, fines or increased operating
restrictions which translates to loss of production and significant
financial cost. Tasked with this project, a traditional consultant
could form an opinion for a particular operator or regulator about an
isolated event or series of events but it could take weeks depending
on the complexity of the situation.
Envirosuite on the other hand can provide an answer
comprehensively and immediately for each event, thus saving all
stakeholders the trouble and cost that would ensue otherwise,
and coming quickly to a clearer picture. The Incident Intelligence
function also sets up a work flow ticket each time to ensure that
there is an accountable set of actions aimed at resolving the
problem.
Envirosuite Limited Annual Report 2017Page 5 Managing Director's Report
Managing Director's Report
Importantly, Envirosuite can establish which operator, in an
area where there are multiple operators, most likely caused the
complaint to occur. Sometimes one operator is suspected while it
is actually another operator in the area that is to blame. The parties
are generally held to be guilty or suspect unless they can prove
otherwise, and with Envirosuite they can substantially do that very
easily.
Envirosuite can show the levels of the relevant elements – dust,
noise etc., at that time to determine if the operator was complying
with their operating parameters. Furthermore, using Envirosuite’s
predictive capability, operators can anticipate when complaints
are more likely to occur and if possible, modify their forward
operating schedules to limit their impact or notify regulators or the
community in advance. In conjunction with some of our clients,
such as operators of multiple wastewater treatment sites, we
have conducted comprehensive cost-benefit analysis showing
that Envirosuite yields a return of 400-600%. This is based on the
direct cost of operating odour control systems with and without
the benefit of Envirosuite’s prediction of community complaint
risk, and does not include indirect benefits such as improved
stakeholder relations. The word is now starting to get around in
the industry and we are receiving more and more enquiries from
wastewater operators across Europe and the US. We’re focusing on
this vertical and looking at adding simple features to our platform
that will monitor corrosive factors and other elements critical to
plant operators, thus embedding Envirosuite further into our clients’
operations.
It is important to note as a heads up for the future strategic
directions of the product that any data feed, regardless of whether
it is environmental in nature or not, can potentially be an input to
be processed by the Envirosuite platform and incorporated into the
monitoring, predictive, visualisation and reporting functionalities.
This point leads us to our many and varied opportunities with the
different regulators in the US. The US Environmental Protection
Agency and the various state and district regulators that operate
in league with it, constitute a huge and powerful system involving
hundreds of organisations. We have started on the West Coast,
forming relationships in California, Arizona and Oregon. We are
working at the state and regional levels to firstly create awareness
of Envirosuite and secondly develop initial projects that we can
work on to demonstrate our capabilities. We are at the second stage
now and we have no less than twenty different projects that we are
either currently working on or have been asked to quote on. Some of
these opportunities include replacing existing in-house dashboards
with Envirosuite, which is seen as a far more powerful and user-
friendly platform for data visualisation, in addition to forecasting,
investigation and reporting features. Some other applications we
are working on are aimed at predicting forest fire hazards and other
natural events that are novel for Envirosuite though well within our
existing capabilities to deliver.
We are working with government, which is traditionally slow, though
we are seeing some rapid pockets of uptake already. This bodes well
for the broader roll-out that we are seeking. We certainly aim to push
hard in this sector, and now with the help of our well-connected
and influential partners, we are looking to move this groundswell of
Envirosuite enthusiasm across the US with a compelling offering that
will entrench itself in this regulatory market.
Our Partners
Over the past twelve months we have added very significantly to our
partnership base, which now includes large global consulting groups
including HDR and ERM, as well as smaller consulting groups such as
Odournet and software resellers GlobeOwl and others. All partners
contribute to sales and broader awareness of Envirosuite through
their respective client and contact networks.
At the very end of the 2017 financial year, ERM - the world’s largest
environmental consultancy - became a key strategic partner,
expressing strong interest in including Envirosuite in its offering of
third party technologies to a global clientele. The strategy is backed
by an existing internal structure for introducing new technologies to
their consulting projects. ERM’s global leadership is committed to a
working partnership and regional representation dedicated to our
joint efforts. We are now implementing a joint business plan for Asia
Pacific as well as working with ERM representatives in the US.
We are receiving an increase in inbound partnering enquiries from
groups wishing to run with Envirosuite in their respective territories.
We recently signed a new partner in Sweden that we believe will
generate a number of wins in the 2018 financial year. With increased
interest we have reviewed and tightened our selection criteria to
ensure that the time and effort investment we make in procuring,
orientating and maintaining any prospective partner will produce a
strong financial return for the business.
We will continue to select new partners and deepen our engagement
with existing partners which is a key strategic objective for the 2018
financial year and beyond. Our direct sales resources will have a
two-pronged approach – firstly to get the most out of our partners,
and secondly to pursue the more complex, higher-value enterprise
sales. We expect with this strategy to create run-rate wins while we
work on the big fish deals that will deliver the great leaps forward in
company value.
Our Clients
Our current client list is an impressive resume that includes all of
the world’s largest miners, several global services groups and the
largest and most well-known groups in environmental regulation
and wastewater treatment. Like any other IT startup, we’ve done
the hard yards of development, initial pilot launch, securing a
handful of trials, converting those to initial sales, and developing
further site-based sales with global groups. Now we’re at the point
where we are pursuing the global roll-outs. We are a startup that
has now reached the critical expansion stage where sales start to go
exponential. During the 2018 financial year we are confident that we
can sign up more Envirosuite revenues than the total in the last five
financial years since the pilot launch in 2011. We have not before had
the luxury of focus, resources, market knowledge, product maturity
and partners that we now possess. We believe the combination of
these elements together with our dedicated, incentivised and hard-
working team will deliver the outcomes we seek.
Related parties
Some comment has been made in the past about the payments that
go to members of my family, as per the annual financial reports. I
acknowledge that there has probably been less detail disclosed in
the past about the true nature of the situation than might be helpful
Page 6 Managing Director's Report
for us. The disclosure in the reports has been strictly limited to that
required by statute. In this section, I would like to provide some
background that I trust is helpful.
period, and here I particularly praise Adam for his huge dedication,
were of immense and critical value and we are largely here today
because of their commitment to the Group.
Kristin Zeise and I founded Pacific Air & Environment in the mid-
1990s. Kristin is a chemical engineer and I am a meteorologist.
We built the company up over 12 years, along the way starting
an R&D project which has evolved to become today’s Envirosuite
product. Until September last year, Kristin and I had charged the
company jointly through our personal services business. We are now
contracted individually as employees.
We have five children between us, two of whom work for Envirosuite.
Kristin’s son Ian Edgehill is our Communications Manager and is
highly skilled and experienced in this area, having a background in
journalism and digital marketing with globally known companies
in Europe. His efforts to promote the company globally through
conferences, print media and online channels have led to significant
awareness of Envirosuite and the realisation of direct returns
through the generation of client and partner leads.
My son Alex Ormerod runs his own graphic design and photography
business that on occasion services a number of private and ASX
listed companies. He employs a talented team that is responsible
for Envirosuite’s branding, website development and maintenance,
marketing collateral, statutory reports and announcements. Until
the divestment in June 2017, the team did the same for Pacific
Environment and DLA. His business invoices Envirosuite at standard
market rates with a substantial discount due to the ongoing work.
His business issues monthly itemised, time-based invoices which the
Chairman of our Remuneration Committee reviews before payment
is made.
Notwithstanding the legitimacy and quality of the work that these
family members do, the company is very mindful of related party
transactions. Kristin and I are kept at arm’s length from these
engagements, particularly in the process of determining their
remuneration.
With our family’s wealth, career, reputation and legacy defined
by, and dependent on, this business and its future value, I would
argue that the incentive for me and my family to perform is intense.
My family invested heavily in saving the company from impending
insolvency 7 years ago, with my debts still to be repaid to the bank.
Kristin and I have never received any more than token cash payment
for the sale of our consulting business to Pacific Environment Ltd
at the initial rollup phase, which coincided with the global financial
crisis and a squeeze on investment funds. We are highly driven, and
expect the highest standards of performance from the team, and
above all ourselves, as we work towards much-needed gains for all
shareholders.
Special thanks
While I have paid some homage to certain individuals noted
above there are several people who I would like to sincerely thank
for their efforts in the last twelve months for putting us in this
tremendous position for realising our true potential. They include
my fellow directors David Johnstone and Adam Gallagher. These
two gentlemen have stood by the group and persisted to act in the
best interests of all shareholders through some very trying times in
the past. Their guidance and direct efforts through the divestment
My partner in life and business, Kristin Zeise. Kristin as co-founder
of the group continues to push us all forward and also lead from
the front. The exercising of her connections and knowledge of the
US market, particularly with the regulatory regime, has guided and
provided access to the highest levels which has set us up for our
great future in that vertical.
I would also like to thank our Envirosuite team which has historically
played second fiddle to the high touch business that is (or ‘was’
in our case) environmental consulting. It is wonderful that our
product development, marketing and sales teams now have
centre stage. We have a very talented team. In particular, I want to
mention two people who were at the initiation of the R&D project
in 2004 that led to today’s Envirosuite. They are Dr Peter D’Abreton
and Mitchell Farquhar, who have stayed with the project over all
those years. Peter is a meteorologist and our R&D intellectual
powerhouse driving many of the technical ideas and techniques
that are so valuable to the product. Mitch is a chemical engineer
who cut the first code many years ago and is now a highly valued
implementation expert for the team. The dedication shown by
Peter and Mitch through many trying times is a testament to their
character and to the compelling nature of the professional challenge
we have thrown down with Envirosuite.
I would like to thank ERM for a well-run transaction process and a
mutually rewarding outcome which I see as a great starting point
for our joint pursuits in future. Our consulting team, including
Pacific Environment Pty Ltd and DLA Environmental Services Pty
Ltd, is also deserving of much praise, having built up the respective
companies over two decades to collectively become one of the best
environmental consultancy businesses in the southern hemisphere.
I wish all team members the very best in their careers with the
world’s leading environmental consulting group, ERM.
Thank you to CCZ Statton Equities for leading the successful capital
raisings and their on-going support over the last two financial years.
We look forward to repaying those efforts by providing significant
return to the investors who have come into the group over that
period. We also thank our capital markets advisors TMT Partners
and our legal advisors Addisons Lawyers, particularly for their
guidance and efforts to complete the sale transaction.
Thank you to all shareholders, and if you’ve come this far on the
journey, I strongly encourage you to join me in seeing what’s around
the corner.
Robin Ormerod
Managing Director & Founder
31 August 2017
Envirosuite Limited Annual Report 2017Page 7 Directors' Report
Directors’ Report
Your directors present their report, together with the financial statements of the consolidated entity
(referred to hereafter as the Group) consisting of Envirosuite Limited (ABN: 42 122 919 948) (referred to
hereafter as the Company) and its controlled entities, for the financial year ended 30 June 2017.
Directors
expect to receive in full through the course of the 2018 financial year.
The following persons were directors of the Company at any time
during, or since the end of, the financial year up to the date of this
report:
David Johnstone (Non-executive Director for the full year and
appointed as Non-executive Chairman 1 September 2016)
Robin Ormerod (Managing Director)
Adam Gallagher (Director and Company Secretary)
Murray d’Almeida (resigned 1 September 2016)
Peter White (Appointed 10 July 2017)
Directors have been in office since the start of the financial year to
the date of this report unless otherwise stated.
Particulars of each director’s experience and qualifications are set
out later in this report.
Principal activities and significant changes in nature of
activities
During the year the principal continuing activities of the Group
consisted of the provision of environmental consulting and
technology services. On 26 June 2017 the sale of the Group’s
consulting practice was completed and the company is now
exclusively focused on the development and sale of its technology
platform.
Dividends paid or recommended
No dividends were paid by the Company to members during the
financial year. No dividends were recommended or declared for
payment, but not paid, to members during the financial year.
Operating results and review of operations for the year
Operating Results
As the main operating business formed part of the consulting
sale transaction that completed on 26 June 2017 and as such
all revenues including those denoted to technology sales were
treated as discontinued operations in the annual accounts. The
annualised subscription revenues that relate to technology as at 30
June were $1,574,476. Net loss after tax from continuing operations
was $2,272,000 compared to $54,000 in the prior year. Significant
expenditure items affecting operating results for the 2017 financial
year include advisor fees, redundancies and other one-off payments
relating to the sale transaction, and the establishment costs
associated with setting up the respective teams in the USA and
Europe.
Financial Position
The net assets of the consolidated Group have decreased from
$14,807,000 at 30 June 2016 to $13,852,000 as at 30 June 2017. Cash
at bank was $11,470,504 with an additional $565,000 held in escrow,
pending finalisation of post-completion items, that the Directors
Further discussion is contained in the Chairman’s Statement and
Managing Director’s Report of this Annual Report.
Significant changes in the state of affairs
Significant changes in the state of affairs of the Group during the
financial year were as follows:
1.
2.
3.
4.
5.
On 26 June 2017 the Group sold its 100% equity interests in
its subsidiaries, Pacific Environment Holdings Pty Ltd, Pacific
Environment Operations Pty Ltd and DLA Environmental
Services Pty Ltd for the gross amount of $15 million to
Environmental Resource Management (ERM). This divestment
of the entire consulting practice means the company is now a
pure Software-as-a-service (SaaS) technology business. The
consulting practice accounted for the majority of historical
group revenues. For further details refer to note 8 to the
financial statements.
At settlement $500,000 from the gross proceeds were directed
to ERM for allocation to their identified partners in the Pacific
Environment consulting practice, bank debt was repaid and
other amounts relating to the transaction were settled.
The convertible note that was held by Mr Robin Ormerod was
finalised through full and final conversion of the remaining
balance on 10 October 2016.
83 staff left the group as part of the sale of the consulting
practice. The headcount is currently circa 30 people.
Expenditure of investment monies raised from the Institutional
Placement completed in October 2016 included the
establishment of business development teams in Europe and
the USA.
Events after the reporting period
1.
The post-transaction completion accounts that determine the
mutually agreed net working capital figure as at the completion
date (26 June 2017) are currently being finalised between the
Company and ERM. The Company will either pay or receive an
amount in respect to the difference between this net working
capital figure and the net working capital figure stated in
the sale contract. The Directors do not anticipate that the
amount will be material and expect to finalise this process in
accordance with the terms of the sale contract.
2. Mr Peter White was appointed as Chief Executive Officer and
Director on 10 July 2017.
No other matters or circumstances have arisen since the end of
the financial year that significantly affected, or could significantly
affect, the operations of the consolidated Group, the results of those
operations, or the state of affairs of the consolidated Group in future
financial years.
Page 8 Directors' Report
Likely developments and expected results of operations
There are no likely developments in the operations of the Group that
were not finalised at the date of this report.
Robin Ormerod – B Sc (Hons)
Managing Director
Experience and expertise
Additional comments on expected results of certain operations of
the Group are included in this annual report under the Chairman’s
Statement and Managing Director’s Report.
Environmental regulation
The Group is not subject to any significant environmental regulation
under a law of the Commonwealth or of a State or Territory.
Information on Directors
David Johnstone
Chairman
Experience and expertise
Mr. Johnstone is an experienced executive who has been actively
involved in business for more than 31 years. He has successfully
started, owned and operated a vast range of businesses. With
experience gained nationally and internationally in selling, licensing,
merging and acquiring businesses he has arranged significant
funding for management buy outs, leveraged buyouts along with
the successful placement/listing of companies on the London Stock
Exchange and the Australian Stock Exchange. Mr. Johnstone, whilst
consulting to ASX listed Centrepoint Alliance Ltd, was previously
Group Head of Corporate Development and prior to that CEO of
Centrepoint Alliances’ largest subsidiary Professional Investment
Services Ltd. He was also CEO of Bartercard Ltd after he successfully
sold and merged Trade Ltd, a business he founded with Bartercard
Ltd. Mr. Johnstone is a past Chairman of the International Reciprocal
Trade Association, a Global Industry Association, which is based
in the USA. He continues to provide consulting and non-executive
director services to medium to large businesses in the financial
services, IT, property development, and franchising sectors.
Mr. Johnstone’s specialties include: Financial Services, Funding,
Investment, Corporate Development, Mergers & Acquisitions,
Negotiations, Resolution of Company Disputes, Leadership
Mentoring, and Non-Executive Directorships
Other current directorships of listed companies
None
Mr. Ormerod co-founded Pacific Air & Environment (PAE), the
foundation business of Envirosuite, in 1995 and helped lead it to a
successful and respected position among air quality consultancies
in Australia. He directed PAE’s research and development
activities, which created the precursor to Envirosuite’s Envirosuite
technology. He has developed a wide national and international
network of business and scientific contacts over his 36 years doing
business in the environmental space. He was Envirosuite Limited’s
Director of Innovation and R&D and the company’s Air Quality &
Meteorology Practice Leader. He now leads the R&D group and is
active in promoting Envirosuite to businesses, government and
research organisations.
Mr. Ormerod is a Certified Consulting Meteorologist, accredited
by the American Meteorological Society, and is well known in his
profession. In 2004 he was presented with the Distinguished Service
Award and Life Membership by the Clean Air Society of Australia &
New Zealand for contributions over many years.
He was twice (1985 and 1988) elected to local government (Logan
City Council, Queensland) where he served on finance, planning,
health and environment committees.
Other current directorships of listed companies
None
Former directorships of listed companies in last 3 years
None
Special responsibilities
None
Interest in shares
56,683,589 shares comprising:
(i) 29,942,535 held by R. Ormerod (both legally and beneficially);
(ii) 26,741,054 held by Zeise Ormerod Superannuation Fund
(registered holders: Robin Ormerod, K. Zeise) of which R. Ormerod is
beneficially entitled to 13,370,527.
Former directorships of listed companies in last 3 years
Interest in shares and options
None
Special responsibilities
Member of the Audit and Risk Management Committee
Chairman of the Remuneration and Nomination Committee
2,000,000 unlisted options to subscribe for ordinary shares in
Envirosuite Limited.
Adam Gallagher –B Econ, M Com, Grad Dip Info Sys, Grad Dip
Applied Corp Gov.
Director and Company Secretary
Interest in shares and options
Experience and expertise
1,250,000 ordinary shares held by an associated entity.
4,000,000 unlisted options held by an associated entity to subscribe
for ordinary shares in Envirosuite Limited.
Adam has strong Technology sector knowledge and experience
across M&A transactions, finance and capital markets
operations through nearly twenty years of commercial, IT and
investment experience. Adam has worked in major banks, early
Envirosuite Limited Annual Report 2017Page 9 Directors' Report
stage businesses, stock exchanges, digital media, communications, private equity and listed companies. For the last ten years he has
predominantly worked with expansion stage technology businesses both listed and unlisted as an officeholder, advisor and investor. In
addition to his roles with Envirosuite Limited, Adam is a Director of CCP Technologies Limited (ASX:CT1) that he helped bring to market and
he also has seven years of funds management experience as a microcap investment manager.
Adam holds a Bachelor of Economics, Masters in Commerce, Graduate Diploma in Information Systems and a Graduate Diploma in Applied
Corporate Governance.
Other current directorships of listed companies
Director of CCP Technologies Limited (ASX:CT1)
Former directorships of listed companies in last 3 years
None
Special responsibilities
Chairman of the Audit and Risk Management Committee
Member of the Remuneration and Nomination Committee
Interest in shares and options
250,000 ordinary shares held by an associated entity.
6,500,000 unlisted options held by an associated entity to subscribe for ordinary shares in Envirosuite Limited.
Company Secretary
Mr. Gallagher is the Company Secretary and held the position at the end of the financial year.
Page 10
Directors' Report
Meetings of directors
The numbers of meetings of the Company’s Board of directors and committees of the Board held during the year ended 30 June 2017, and
the numbers of meetings attended by each director were:
Full Meetings of Directors
Audit and Risk
Management Committee
Remuneration and
Nomination Committee
A
0
18
18
18
B
4
18
18
18
A
-
2
2
-
B
-
2
2
-
A
-
1
1
-
B
-
1
1
-
Murray d’Almeida
Adam Gallagher
David Johnstone
Robin Ormerod
A - Number of meetings attended. B - Number of meetings held during the time the director held office or was a member of the committee
during the year (number eligible to attend).
Shares under option
Unissued ordinary shares of Envirosuite Limited under option at the date of this report are as follows:
Expiry date
Issue price of shares ($)
Number under option
12-Nov-18
12-Nov-20
09-Apr-20
19-Apr-18
12-Nov-19
31-Oct-18
14-Jul-20
01-Apr-20
04-Feb-21
31-Oct-18
09-Dec-19
31-Oct-18
31-Oct-18
10-Nov-20
09-Dec-19
31-Oct-18
10-Feb-18
05-Feb-18
10-Feb-18
05-Feb-18
10-Feb-18
05-Feb-18
05-Feb-18
0.03
0.05
0.06
0.06
0.07
0.08
0.09
0.09
0.11
0.12
0.12
0.15
0.16
0.16
0.18
0.20
0.55
0.75
0.75
1.00
1.00
1.25
1.50
5,000,000
1,000,000
2,000,000
6,025,000
2,000,000
1,000,000
600,000
1,000,000
4,600,000
1,500,000
3,000,000
1,500,000
2,000,000
1,000,000
3,000,000
2,000,000
100,000
250,000
780,000
150,000
100,000
150,000
100,000
Total 39,855,000
Envirosuite Limited Annual Report 2017Page 11 Directors' Report
No option holder has any right under the options to participate in any other share issue of the Company or any other related entity.
Shares issued on the exercise of options
No shares have been issued on the exercise of options during the financial year. No amounts are unpaid on any of the shares.
Lapse of options post balance date
8,726,666 lapsed on 4 July 2017 in accordance with their terms of issue. The details were announced to the ASX on 4 July 2017.
Indemnification and insurance of officers or auditor
During the financial year, Envirosuite Limited paid a premium of $43,752 (2016: $34,813) to insure the 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 entities in the Group, and any other payments arising from liabilities incurred by the officers in connection
with such proceedings. This does not include such liabilities that arise from conduct involving a willful breach of duty by the officers or the
improper use by the officers of their position or of information to gain advantage for themselves or someone else or to cause detriment to the
Company. It is not possible to apportion the premium between amounts relating to the insurance against legal costs and those relating to
other liabilities.
No indemnities have been given or insurance premiums paid, during or since the end of the financial year for the auditor of the consolidated
Group.
Proceedings on behalf of the Company
During the financial year a claim was made against the Company by RFC Ambrian Limited (RFC) in relation to an alleged services contract.
The Company lodged a defence strongly disputing the claim including the validity of the contract and the work that was alleged to have been
undertaken by the claimant. The parties mediated the dispute and a decision was made by the directors to resolve the claim commercially
to avoid further costs. The matter has now been resolved on a final basis for payment of $150,000.
No other person has applied for leave of the Court to bring proceedings on behalf of the Company, or to intervene in any proceedings to
which the Company is a party, for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings.
Other than described above, the Company was not a party to any such proceedings during the year.
Non audit services
During the year ended 30 June 2017 WPIAS Pty Ltd provided non-audit services to the Company in regard to assisting the company with due
diligence enquiries in relation to the sale of the consulting practice. No other non-audit services were provided by WPIAS Pty Ltd during the
financial year.
Auditor’s independence declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 84.
Legislative Instrument 2016/191 - Rounding of amounts
The Company is an entity to which Legislative Instrument 2016/191 applies and accordingly amounts in the financial statements and
directors’ report have been rounded to the nearest thousand dollars.
Remuneration report (audited)
The information provided in this remuneration report has been audited as required by section 308(3C) of the Corporations Act 2001.
Page 12 Directors' Report
A. Principles used to determine the nature and amount of remuneration
The objective of the Group’s executive reward framework is to ensure reward for performance is competitive and appropriate for the results
delivered. The framework aligns executive reward with achievement of strategic objectives and the creation of value for shareholders, and
conforms to market practice for delivery of reward.
The Board ensures that executive reward satisfies the following key criteria for good reward governance practices:
•
•
•
•
•
competitiveness
shareholder alignment
performance
transparency and simplicity
capital management
The Group has structured an executive remuneration framework that is market competitive and complementary to the objectives of the
organisation.
(i) Non-executive directors
Fees and payments to non-executive directors reflect the demands which are made on, and the responsibilities of, the directors. Non-
executive directors’ fees and payments are reviewed annually by the Board.
The directors have received incentive share options subject to certain terms and conditions determined by the Board.
Non-executive director’s fees are determined within an aggregate directors’ fee pool limit. The current pool limit is $400,000 per annum. The
following fees apply:
Base fees (net of GST)
Chair
$90,000
Other directors
$60,000
Directors appointed to chair a board committee are paid an additional fee of $10,000 per committee. No additional fees are paid to non-chair
members of the committees.
No fees as described above are paid to Directors that hold an employee contract with the Company.
(ii) Retirement allowances for directors
There are no retirement allowances for directors of the Group.
(iii) Executive pay
The executive pay and reward framework generally has three components:
•
•
•
base pay and benefits, including superannuation;
short-term incentives linked to the attainment of performance targets; and
long-term incentives through participation in various Envirosuite Limited Employee Share and Option schemes.
The combination of these comprises an executive’s total remuneration.
Base pay
Base pay is structured as a total employment cost package which may be delivered as a combination of cash and prescribed non-financial
benefits at the executives’ discretion.
Executives are offered a competitive base pay that comprises the fixed component of pay and rewards.
There are no guaranteed base pay increases included in any executives’ contracts.
Envirosuite Limited Annual Report 2017Page 13
Directors' Report
Superannuation
Retirement benefits are delivered under the Australian superannuation legislation at 9.5% of base salary for the financial year ended 30 June
2017, up to the maximum superannuation contribution base.
Short-term incentives
Short-term incentives are provided to certain executives, where payment is dependent on the satisfaction of performance conditions.
Long-term incentives
Long-term incentives have been provided from time to time to certain executives via various allotments of options to subscribe for ordinary
shares in the Company.
As there are only a very small number of executives in the Group, during the 2017 financial year, when required, the Directors collectively
determined each individual remuneration package taking into account their role, duties, capacity to add value and alignment to shareholder
value. Going forward the CEO (appointed 10 July 2017) will work with the Remuneration Committee and the full board to develop appropriate
terms for new and re-contracting employees.
(iv) Managing Director’s remuneration
The Managing Director, Mr Robin Ormerod was paid under an Independent Contract with a related entity, ROKZAir Pty Ltd, operated by Mr
Robin Ormerod and Ms Kristin Zeise. The fee was $33,333 per month plus GST and was based on two people (Personnel: Robin Ormerod and
Kristin Zeise) full time, pro rata for part time work. For the year ended 30 June 2017 an amount of $133,332 had been paid to ROKZair Pty Ltd
during the financial year.
Mr Ormerod was paid through ROKZAir Pty Ltd up until 31 October 2016. From 1 November 2016, Mr Ormerod became an employee of the
Company on a base salary of $300,000 plus superannuation at the standard capped rate of $19,615.60. In addition he is eligible to receive a
cash bonus that is based on the share price appreciation over each financial year as follows:
20% of base salary for each 100% increase in the 30 day VWAP (Volume Weighted Average Price) as at 30 June 2016 as compared to the 30 day
VWAP as at 30 June 2017 and so on for subsequent financial years. No bonus is payable for the year ended 30 June 2017 under this provision.
A notice period of three months applies on termination.
Mr Ormerod also received interest on an interest bearing convertible loan (refer note 19 to the financial report). The convertible note was
finalised on 10 October 2016 by full conversion of the outstanding balance to fully paid ordinary shares.
(vi) Company Secretary
From 1 September 2016 the Company Secretary fee was set at $7,500 per month on a contract basis. The role includes a number of additional
accountabilities beyond what is generally expected from a Company Secretary including managing corporate transactions together with
the Company’s advisors, investor relations, and undertaking various executive and management duties as required by the business that are
within the incumbent’s skill-set.
As a relatively small company the Directors believe that it is beneficial to have a hard-working and multi-disciplined team of officeholders to
support and guide management.
B. Details of remuneration
(i) Amounts of remuneration
Details of the remuneration of the directors, the key management personnel of the Group (as defined in AASB 124 Related Party Disclosures)
and specified executives of the Company and the Group are set out in the following tables.
The key management personnel of the Group are the Directors and Company Secretary of Envirosuite Limited.
(ii) Changes since the end of the reporting period
Mr Peter White was appointed to the board as an Executive Director on 10 July 2017. Mr White was also appointed to the role of Chief
Executive Officer, the details of which are set out in the announcement released to the ASX on 10 July 2017. Mr White does not receive any
additional remuneration in relation to his Directorship.
No other changes to the Board have been made since the end of the reporting period.
Page 14 Directors' Report
(iii) Key management personnel of the Group and other executives of the Company and the Group
2017
Short-term employee benefits
Cash
Salary
and fees
$
Non-
monetary
benefits
$
Super-
annuation
$
Other
$
Long term
benefits
Long
service
Leave
$
Directors
Murray d’Almeida
(resigned 1 September 2016)
David Johnstone
Managing director
Robin Ormerod
Director and company secretary
Adam Gallagher
Other key management personnel
Peter White
15,000
93,337
200,000
143,333
-
-
-
-
-
-
Total key management personnel
compensation
451,670 -
-
-
-
-
-
-
-
-
13,077
-
-
13,077
-
-
-
-
-
-
*Amount includes the cash value of shares issued to Peter White on 12 September 2016.
In addition to the above Key Management Personnel received consulting fees per the table contained in section G.
2016
Short-term employee benefits
Cash
Salary
and fees
$
Non-
monetary
benefits
$
Super-
annuation
$
Other
$
Long term
benefits
Long
service
Leave
$
Directors
Murray d’Almeida
David Johnstone
Managing director
Robin Ormerod
Director and company secretary
Adam Gallagher
Other key management personnel
Peter White
(left the company 27 May 2016)*
60,000
55,000
-
60,000
344,318
-
-
-
-
-
Total key management personnel
compensation
519,318 -
-
-
-
-
-
-
-
-
-
-
36,901
36,901
-
-
-
-
-
-
*Amount does not include the cash value of shares issued to Peter White on 12 September 2016.
Share-based payments
Shares
$
Options
$
Total
$
-
-
-
-
802
15,802
26,113
119,450
23,534
236,611
23,534
166,867
165,000*
-
165,000
165,000
73,983
703,730
Share-based payments
Shares
$
Options
$
Total
$
-
-
-
-
55,215
115,215
40,684
95,684
32,947
32,947
35,312
95,312
*150,000
3,607
534,826
150,000
167,765
873,984
Envirosuite Limited Annual Report 2017Page 15 Directors' Report
No portion of remuneration for directors Mr d’Almeida, Mr Johnstone and Mr Gallagher was linked to performance during the financial
year. Mr Ormerod’s remuneration includes short and long term incentives linked to performance as detailed above in Section A(iv) of the
Remuneration Report.
C. Service Agreements
On appointment to the Board, all directors enter into a service agreement with the Company in the form of a letter of appointment. The letter
summarises the Board policies and terms, including compensation, relevant at the time of their appointment to the office of director.
Remuneration and other terms of employment for other key management personnel are also formalised in service or employee agreements.
Each of these agreements provides for the provision of performance related cash bonuses, when eligible.
All current appointments for key management personnel are listed below. All service agreements are reviewed annually by the directors.
Name
Key management personnel
Commencement date *
Annual base salary including
superannuation **
Peter White – Chief Executive Officer & Executive Director
10 July 2017
$300,000
Robin Ormerod - Managing Director
1 November 2016
$319,615.60
* Mr Ormerod entered into an employment agreement for his Managing Director’s role on 1 November 2016 having previously contracted through an
associated entity.
D. Share based compensation
(i) Options
All of the Directors and several of the senior management personnel hold options in the company.
There are no current Share or Option schemes in place. No options were issued during the 2017 financial year.
The options issued in prior financial years were designed to provide long-term incentives for employees to deliver value to shareholders by
aligning interests and conserving cash reserves. Option allotments were at the Board’s discretion and no individual had a contractual right to
receive options or to receive any guaranteed benefits.
All options granted, once converted to ordinary shares, carry standard dividend and voting rights available to ordinary shareholders.
Details of options over ordinary shares in the Company provided as remuneration to each director of Envirosuite Limited and each of the key
management personnel of the parent entity and the Group are set out below. When exercisable, each option is convertible into one ordinary
share in Envirosuite Limited. Further information on the options is set out in Note 35 to the financial statements.
Page 16 Directors' Report
2017
Balance
at start of
the year
Granted as
compensation Exercised
Forfeited
Balance at
end of the
year
Vested and
exercisable Unvested
Directors of Envirosuite Limited
Murray d’Almeida (resigned 1 Sept 2016)
10,000,000
David Johnstone
Robin Ormerod
Adam Gallagher
2016
4,000,000
2,000,000
6,500,000
Balance
at start of
the year
-
-
-
-
-
-
-
-
5,500,000
10,000,000
4,500,000
-
-
-
4,000,000
4,000,000
2,000,000
2,000,000
6,500,000
6,500,000
-
-
-
-
Granted as
compensation Exercised
Forfeited
Balance at
end of the
year
Vested and
exercisable Unvested
Directors of Envirosuite Limited (formerly Pacific Environment Limited)
Murray d’Almeida
David Johnstone
Robin Ormerod
Adam Gallagher
7,000,000
2,000,000
-
4,500,000
3,000,000
2,000,000
2,000,000
2,000,000
Other key management personnel of the Group
Peter White
(left the company 27/5/2016)*
7,050,000
-
-
-
-
-
-
-
-
-
-
-
10,000,000
5,000,000
5,000,000
4,000,000
2,000,000
-
-
4,000,000
2,000,000
6,500,000
4,500,000
2,000,000
7,050,000
7,050,000
-
*Peter White rejoined the company as Chief Executive Officer and Director on 10 July 2017 and as at 30 June 2017 held 7,050,000
options as per the 2016 table above.
The assessed fair value at grant date of options granted to the individuals is allocated equally over the period from grant date to vesting date,
and the amount is included in the remuneration tables above. Fair values at grant date are determined using a Black & Scholes option pricing
model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected
price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option.
No options granted to key management personnel were exercised during the 2017 financial year.
(ii) Shares
To finalise the Company’s contractual obligations to Mr Peter White under his previous employment agreement it was agreed that Mr White
be issued shares at an acquisition value of $165,000 at the last closing share price prior to the date of issue. On 12 September 2016 this
agreement was settled by the issue of 1,987,952 ordinary shares. No other shares were granted to key management personnel during the
year.
Envirosuite Limited Annual Report 2017Page 17 Directors' Report
E. Shareholdings of Key Management Personnel
The numbers of shares in the Company held during the financial year by each director of Envirosuite Limited and other key management
personnel of the Group, including their personally related parties, are set out below.
2017
Directors of Envirosuite Limited
Murray d’Almeida (resigned 1 Sept 2016)
David Johnstone
Robin Ormerod
Adam Gallagher
Balance
at start of
the year
Granted as
compensation
Other
changes
during the
year
Balance at
end of the
year
-
-
40,489,947
-
-
-
-
-
-
*1,250,000
1,250,000
*16,193,642
#56,683,589
*250,000
#250,000
*Changes arose during the year through off market transactions.
# Note that the members register maintained by an external share registry provider is yet to be updated for this transfer. During the year 1,250,000 shares were
acquired by Scintilla Strategic Investments Limited, a company of which Adam Gallagher was a director and shareholder. Mr Gallagher subsequently resigned
as director and remains a minority holder through a related party.
Balance
at start of
the year
Granted as
compensation
Other
changes
during the
year
Balance at
end of the
year
2016
Directors of Envirosuite Limited
Murray d’Almeida
David Johnstone
Robin Ormerod (refer Robin Ormerod Interest in Shares)
24,378,720
Adam Gallagher
-
Other key management personnel of the Group
Peter White (left the company 27 May 2016) *
220,447
1,200,000
-
-
-
-
-
-
-
-
-
16,111,227
40,489,947
-
-
-
1,420,447
*Peter White rejoined the company as Chief Executive Officer and Director on 10 July 2017 and as at 30 June 2017 Mr White held 1,988,399 shares.
F. Loans to key management personnel
There were no loans to key management personnel during the reporting period
G. Other transactions with key management personnel
Managing Director, Mr Robin Ormerod, and employee, Ms Kristin Zeise, are directors and shareholders of ROKZair Pty Ltd. This entity
provided the Group with consultancy services during the reporting period. As noted in section A (iv) this contract ended on the 31 October
2016 and was superceded by new employment agreements for Mr Ormerod and Ms Zeise.
Mr Adam Gallagher is a Director and the Company Secretary of the Company. His fees are paid to Famile Pty Ltd, a related party. In addition
to his core Directorship and Company Secretary functions, Mr Gallagher provided additional services to the Company in relation to corporate
transaction management, strategic partnerships, equity and debt funding management and procurement, market communications and
fulfilling executive duties as required by the business that were within his skill-set and experience. This contract ended on 31 August 2016 and
was superseded by a new company secretarial agreement that incorporated the provision of these existing services (refer Section A (v)).
Page 18 Directors' Report
Murray d’Almeida was a Director and Chairman of the Company until 1 September 2016. His fees were paid to MC Consultancy Pty Ltd an
associated entity.
In July 2017 the Directors resolved (with Mr Gallagher abstaining) to award a one-off payment of $35,000 (plus GST) to Mr Gallagher or his
nominated entity, in acknowledgement of his efforts relating to the management and completion of the sale of the consulting practice to
ERM as well as undertaking a number of additional executive and management duties beyond the scope of his existing services contract as
were required by the Group during the financial year.
The Directors also resolved (with Mr Ormerod abstaining) to award a one-off payment of $25,000 (plus GST) to Mr Ormerod or his nominated
entity, in respect to procuring the purchaser and his efforts in relation to completing the transaction.
Aggregate amounts of each of the above types of other transactions with key management personnel of Envirosuite Limited:
Amounts recognised as expense
Consultancy fees - ROKZair Pty Ltd*
Consultancy fees - Famile Pty Ltd
Consultancy services - MC Consultancy Pty Ltd
2016
$
2015
$
133,332
16,000
30,000
197,748
96,000
120,000
179,332
413,748
* Refer to Managing Director’s Remuneration for further information. From 1 November 2016 Mr Ormerod and Ms Zeise entered into employment contracts
with the group and no further fees were paid during the 2017 financial year to ROKZair Pty Ltd.
This Director’s report, incorporating the Remuneration Report, is signed in accordance with a resolution of the Board of Directors.
David Johnstone
Chairman
31 August 2017
Envirosuite Limited Annual Report 2017Page 19 Corporate Governance Statement
Corporate Governance Statement
Envirosuite Limited is listed on the Australian Securities Exchange (ASX). Accordingly, unless otherwise stated in this document, the Board’s
corporate governance arrangements comply with the recommendations of the ASX Corporate Governance Council (including the 2014
amendments) as well as current standards of best practice. The Corporate Governance statement is current as at 30 June 2017 and has been
approved by the Board.
Envirosuite Limited (the Company) and its board of directors (the Board) are committed to achieving and demonstrating the highest
standards of corporate governance. The Board continues to review the framework and practices to ensure they meet the interests of
shareholders. The Company and its controlled entities together are referred to as “the Group” or “the Company” in this statement.
Information about the Company and its governance can be found on the company’s website at www.envirosuite.com.
Principle 1
Lay solid foundations for management and oversight
The Company’s Board of Direct ors (“the Board”) has adopted a Corporate Governance Charter (“the Corporate Governance Charter”)
which details the functions reserved to the Board. A copy of the Corporate Governance Charter is published on the Group’s website.
The Board’s broad functions are to:
•
•
•
•
chart strategy and set financial targets for the Group;
monitor the implementation and execution of strategy and performance against financial targets;
appoint and oversee the performance of executive management; and
generally take an effective leadership role in relation to the Group.
The Company’s senior executives are charged with the day to day management of the Company.
The Company’s process for evaluating the performance of its senior executives is set out in Section 2.8 of the Corporate Governance Charter.
A formal performance evaluation of senior executives in accordance with the procedure provided for in the Corporate Governance Charter
took place during the reporting period. In addition, on-going informal evaluation is undertaken by the Company’s Chairman and Managing
Director.
There are written agreements with each director and senior executives setting out the terms of their appointment.
Principle 2
Structure the Board to add value
A majority of the Board were not independent directors (as defined in the guidance notes to the Recommendations) for the reporting period.
David Johnstone who is the Chairman of the Board, is the sole independent director of the Company. Adam Gallagher is not independent as
he holds the role of Company Secretary.
The Board believes that the number of directors and composition of the Board is appropriate given the size of the Company and the nature of
the Company’s operations. As the Company continues to grow the composition of the Board will be reviewed and further appointments may
be made as appropriate.
During the reporting period the roles of Chairman and Managing Director were not exercised by the same individual.
The Company’s process for evaluating the performance of the Board, its committees and individual directors is set out in Section 2.8 of the
Corporate Governance Charter.
The tenure, interests, relevant skills, experience and expertise possessed by each of the Company’s directors are set out in the Directors’
Report. The Board considers that during the reporting period only David Johnstone was an independent director. The Board has adopted the
definition of “Independent Director” in Section 2.4 of the Corporate Governance Charter. The Board considers that Adam Gallagher is not an
independent director because he is a material supplier of company secretarial and advisory services to the Company. Robin Ormerod is not
considered an independent director as he is a substantial shareholder and is employed in an executive capacity. Murray D’Almeida resigned
as a Director on 1 September 2016. He held the title of Executive Chairman until 14th June 2016 when he became a Non-Executive Chairman.
Page 22 Corporate Governance Statement
On the grounds that he held an executive role in the Company during the past 3 years, he was not considered as independent.
The period of office held by each director is set out in the Directors’ Report.
Informal performance evaluations of the board, its committees and directors took place during the reporting period. The nature and
appropriateness of the performance evaluation processes will be reviewed periodically in line with the growth of the Group.
The procedure for the selection and appointment of new directors and the re-election of incumbent directors, and the Board’s policy for the
nomination and appointment of directors, is contained in Section 2.7 of the Corporate Governance Charter.
Principle 3
Promote ethical and responsible decision-making
A code of conduct for the Company’s directors is contained in Section 3 of the Corporate Governance Charter. The stated objective of the
Code is to give the Company’s directors mandatory directions to follow when performing their duties, to enable them to achieve the highest
possible standards in meeting their obligations, and to give them a clear understanding of best practice in corporate governance.
The Company has a general code of conduct for employees that is reviewed and updated to ensure it is current, appropriate and effective in
assisting and guiding employees to feel safe, respected and empowered in their roles.
The Company has a Diversity Policy which is contained in Section 5 of the Corporate Governance Charter. The Diversity Policy does not
include requirements for the Board to establish measurable objectives for achieving gender diversity or for the Board to assess annually both
the objectives and progress in achieving them. The Diversity Policy states however that:
•
•
•
the Group is committed to employing and retaining the best technical and non-technical staff based on their capacity to perform well
for the Group;
all employment decisions within the Group will be based upon choosing the best person for the position irrespective of race, religion,
gender, age, or any other irrelevant point of difference; and
all advancement and reward decisions within the Group will be based upon what is best for each individual person taking into account
the needs of the Company, irrespective of race, religion, gender, age, or any other irrelevant point of difference.
The Diversity Policy further states that:
•
The Board considers that:
i.
ii.
it is satisfied that current employment, advancement and reward decisions regarding staff within the Group are made irrespective
of race, religion, gender, age, etc., therefore no measureable objectives have been put in place at this time to specifically change or
increase staff diversity, and;
since gender is one of a large number of attributes that the Board considers when appointing new Directors and with a small
Board at present no measureable objectives are to be put in place at this time to specifically change or increase gender diversity
on the Board.
The Board reviews the group diversity periodically, and:
i.
ii.
if there is any noticeable decrease in diversity of staff at any level across the Company, or;
the size of the Board increases to five or more members, then;
measureable diversity objectives will be put in place. During the reporting period there were no women on the board. The proportion of
females in the Group is 16% and in senior executive positions is 20%. In addition to gender diversity, the Group also employs staff from a
number of ethnic backgrounds and different age groups.
As mentioned above, a copy of the Corporate Governance Charter is published on the Group’s website.
Envirosuite Limited Annual Report 2017Page 23 Corporate Governance Statement
Principle 4
Safeguard integrity in financial reporting
The Board had an Audit and Risk Management Committee and a charter for that committee during the period. A copy of that charter is
published on the Group’s website. Names of the members of the Audit Committee and the number of times they met throughout the period
are contained in the Directors’ Report. The Audit and Risk Management Committee, contrary to Recommendation 4.1, was not chaired by an
independent Director however the Chair of the Committee is not chair of the Board;
To the extent that the composition of the Audit and Risk Management Committee did not comply with the Recommendations the Board
believes this is justified due to the small size of the Company and the Board and the relevant qualifications and experience of the Committee
members.
The Board appointed the auditor (Williams Partners Independent Audit Specialists) at the 2012 AGM. The firm became a corporate entity
and now operates as WPIAS Pty Ltd (“WPIAS”). WPIAS’s policy is to rotate the audit engagement partner and quality control reviewer at least
every five years for a period of at least two years.
Given its small size the Company does not have a formal internal audit function. The audit and risk management functions are performed
by a combination of the management risk committee that meets monthly, or otherwise as required, and reports to the Audit and Risk
Management subcommittee of the Board.
In regard to Recommendation 4.3, the Company relies on the provisions in the Corporations Act for the auditor’s (or their representative’s)
attendance at the Annual General Meeting. Their active participation in the meeting is encouraged by the notice of meeting and Chairman’s
script that both identifies the auditor and invites security holders to ask the auditor questions relevant to the audit.
Principle 5
Make timely and balanced disclosure
Requirements relating to ASX continuous disclosure are contained in paragraph 2.16(a) of the Corporate Governance Charter. The Company’s
directors have each entered into a contract with the Company pursuant to which they have undertaken to advise the Company of all dealings
by them in the Company’s securities and of interests in contracts relating to the Company’s securities.
Principle 6
Respect the rights of security holders
The Company has a policy regarding informing shareholders of all major activities affecting the Company. That policy is contained in Section
2.16 of the Corporate Governance Charter. Essentially Section 2.16 covers continuous disclosure, preparation and dissemination of the
annual report to shareholders, and conduct of the Company’s annual general meeting.
Principle 7
Recognise and manage risk
The Board’s policy in relation to risk management is set out in Section 2.15 of the Corporate Governance Charter.
Section 2.15 provides that:
•
•
•
•
the Audit and Risk Management Committee reports to the Board on material business risks and mitigation strategies. Contrary to
Recommendation 7.1 the committee is comprised of only 2 directors. The Chair is not an independent director however they are not the
Chairman of the Group;
the Board reviews the Audit and Risk Management Committee’s reports;
the Company’s management is charged with implementing any risk mitigation strategies identified; and
the Group’s Managing Director, Company Secretary and Chief Financial Officer are charged with ensuring the Group’s risk management
and internal compliance and control systems are operating efficiently and effectively in all material respects, and must report to the
Board on any matters incidental to the preparation of the Group’s annual financial accounts.
Page 24 Corporate Governance Statement
The Group’s Managing Director (MD) and Chief Financial Officer (CFO) have provided a declaration to the Board in accordance with section
295A Corporations Act.
Envirosuite is a relatively small publicly listed company by comparison to other listed entities which is reflected by the size of its operations,
board structure and composition. Given its size the Company considers that it does not have exposure to economic, environmental or social
sustainability risks.
The Board has reviewed the entity’s risk management framework during the reporting period to satisfy itself that it continues to be sound.
Principle 8
Remunerate fairly and responsibly
The Board has a Remuneration and Nomination Committee and a copy of the Remuneration and Nomination Committee charter is
published on the Company’s website. Due to the small size of the company the Remuneration Committee consists of only two board
members which the board acknowledges is contrary to Recommendation 8.1. The Chair of the committee is an independent director in
accordance with the recommendation.
The Committee’s responsibilities include making recommendations to the Board on appropriate remuneration, both the amount
and its composition, for executive and non-executive directors, the Chairman, and the Managing Director, as well as reviewing the
recommendations of the Managing Director in relation to appropriate remuneration for direct reports to the Managing Director.
The Group’s senior executives are remunerated by a combination of salary and performance-based incentive options.
The company’s directors have each been issued with incentive options, subject to shareholder approval as required. The Board recognises
that the grant of options to directors is contrary to the guidelines in Recommendation 8.3 of the ASX Corporate Governance Council’s
Principles and Recommendations. However:
•
•
the issue of options as part of the remuneration packages of directors is an established practice of junior public listed companies, and
provides those companies with a means of conserving cash whilst attracting and properly rewarding directors; and
the exercise prices for the options issued to directors are designed to align any return to those directors with enhanced shareholder
value in the form of an increased price of the Company’s shares.
Details of the Group’s remuneration policies are set out in the Remuneration Report contained in the Directors’ Report.
No schemes exist for retirement benefits for non-executive directors, other than statutory superannuation.
The Company has a policy on prohibiting entering into transactions in associated products which limit the economic risk of participating
in unvested entitlements under any equity-based remuneration schemes. This is contained in section 4.14 of the Corporate Governance
Charter.
Names of the members of the Remuneration and Nomination Committee and the number of times they met throughout the reporting period
are contained in the Directors’ Report. The remuneration and nomination committee charter provides for two meetings to be held each year
although the committee only met once formally this year, the Committee is active throughout the year and the members meet informally on
a regular basis to review and discuss matters within the charter.
Envirosuite Limited Annual Report 2017Page 25 Auditor's Independence Declaration
26
Auditor's Independence Declaration Pacific Environment Limited Annual Report 2016
Page 26 Consolidated Statement of Profit or Loss and Other Comprehensive Income
Consolidated Statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
Continuing Operations
Revenue
Interest income
Client and project related costs
Employee benefits expense
Consultants expense
Travel expense
Rental expense
Directors’ expense
Over provision of prior year R&D Tax Incentive
Depreciation and amortisation expense
Write off of software
Finance costs
Net Foreign Exchange loss
Other expenses
(Loss)/profit before income tax
Income tax (expense)/benefit
(Loss)/profit for the year from continuing operations
Discontinued Operations
Loss from discontinued operations after tax
Net profit/(loss) for the year
Other comprehensive income
Other comprehensive income for the year, net of tax
Total comprehensive income/(loss) for the year
Net (loss)/profit attributed to:
Equity holders of Envirosuite Limited
Total comprehensive (loss)/income attributable to:
Equity holders of Envirosuite Limited
(Loss)/earnings per share from continuing and discontinued operations
attributable to the ordinary equity holders of Envirosuite Limited
Basic (loss)/earnings per share from continuing and discontinued operations
Diluted (loss)/earnings per share from continuing and discontinued operations
Basic (loss)/earnings per share from continuing operations
Diluted (loss)/earnings per share from continuing operations
Basic loss per share from discontinued operations
The accompanying notes form part of these financial statements.
Consolidated Group
2017
$’000
2016
$’000
161
6
(83)
(888)
(658)
(63)
(26)
(173)
(93)
(11)
(226)
(80)
(2)
(278)
(2,414)
142
(2,272)
(2,064)
(4,336)
-
2
-
(13)
(478)
(2)
-
(155)
1,705
(17)
-
(118)
-
(499)
425
(479)
(54)
(1,552)
(1,606)
-
-
(4,336)
(1,606)
(4,336)
(1,606)
(4,336)
(1,606)
Cents
Cents
(2.0)
(2.0)
(1.1)
(1.1)
(0.9)
(1.1)
(1.1)
0.1
0.1
(1.2)
Notes
4
6
6
6
6
7
8
23
23
34
34
34
34
34
Envirosuite Limited Annual Report 2017Page 27
Consolidated Statements
Consolidated Statement of Financial Position
AS AT 30 JUNE 2017
ASSETS
Current Assets
Cash and cash equivalents
Trade and other receivables
Other assets
Inventories
Total current assets
Non-current Assets
Property, plant and equipment
Deferred tax asset
Intangible assets
Total non-current assets
Total Assets
LIABILITIES
Current Liabilities
Trade and other payables
Borrowings
Provisions
Total current liabilities
Non-current Liabilities
Trade and other payables
Borrowings
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Issued capital
Reserves
Retained losses
Total equity attributable to equity holders of Envirosuite Limited
The accompanying notes form part of these financial statements.
Consolidated Group
Notes
2017
$’000
2016
$’000
9
10
11
12
13
20
14
15
16
17
18
19
20
21
22(b)
23(a)
23(b)
11,471
866
146
-
12,483
13
246
3,782
4,041
1,338
4,258
112
340
6,048
2,442
489
12,997
15,928
16,524
21,976
2,403
-
237
2,640
-
-
-
31
31
2,671
13,853
26,281
700
(13,129)
13,853
3,062
1,656
998
5,716
-
1,314
-
139
1,453
7,169
14,807
22,828
772
(8,793)
14,807
Page 28 Consolidated Statement of Profit or Loss and Other Comprehensive Income
Consolidated Statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
Consolidated Group
At 1 July 2015
Comprehensive income
Profit for the year
Other comprehensive income for the year
Total comprehensive income for the year
Transactions with owners, in their capacity as owners, and other transfers
Shares issued on partial conversion of Convertible Loan
Shares issued to employees on exercising of options
Issue of shares (Institutional Placement)
Transaction costs of capital raising
Shares to be issued to employees
Employee share options – value of employee services
Total transactions with owners and other transfers
At 30 June 2016
Comprehensive income
Loss for the year
Other comprehensive income for the year
Total comprehensive loss for the year
Transactions with owners, in their capacity as owners, and other transfers
Shares issued on partial conversion of Convertible Loan
Shares issued to employees on exercising of options
Issue of shares (Institutional Placement)
Transaction costs of capital raising
Shares issued/to be issued to employees
Employee share options – value of employee services
Total transactions with owners and other transfers
At 30 June 2017
The accompanying notes form part of these financial statements.
Ordinary
shares
$’000
Reserves
$’000
Retained
losses
$’000
Total
Equity
$’000
19,820
503
(7,187)
13,136
-
-
-
810
18
2,150
(120)
150
-
3,008
22,828
-
-
-
450
-
3,000
(162)
165
-
3,453
26,281
-
-
-
-
-
-
-
67
202
269
772
-
-
-
-
-
-
-
(165)
93
(72)
700
(1,606)
1,606)
-
-
(1,606)
(1,606)
-
-
-
-
-
-
-
810
18
2,150
(120)
217
202
3,277
(8,793)
14,807
(4,336)
(4,336)
-
-
(4,336)
(4,336)
-
-
-
-
-
-
-
450
-
3,000
(162)
-
93
3,381
(13,129)
13,852
Envirosuite Limited Annual Report 2017Page 29
Consolidated Statements
Consolidated Statement of Cash Flows
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
Consolidated Group
Notes
2017
$’000
2016
$’000
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Other revenue
Interest received
Interest paid
17,865
(21,217)
(3,352)
1,570
11
(151)
Net cash provided by operating activities
33(a)
(1,922)
30
8
Cash flows from investing activities
Payments for property, plant and equipment
Payments for acquisition of business
Payments for intangible assets
Proceeds from sale of property, plant and equipment
Proceeds from sale of business
Payments for sale of business
Net cash used in investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Proceeds from issue of shares
Share issue transaction costs
Net cash provided by financing activities
Net (decrease)/increase in cash and cash equivalents
Decrease in cash from sale of business
Cash and cash equivalents at the beginning of the financial year
Cash and cash equivalents at the end of the financial year
9(a)
The accompanying notes form part of these financial statements.
20,654
(20,817)
(163)
1,180
14
(257)
774
(359)
(948)
(213)
(992)
(1,615)
(1,267)
18
15,000
(222)
11,976
-
(2,690)
3,000
(210)
100
10,154
(21)
1,338
11,471
-
-
-
(2,574)
570
(1,145)
2,168
(150)
1,443
(357)
-
1,695
1,338
Page 30 Contents Page
Contents
32
44
47
47
48
49
50
51
52
52
53
53
54
55
57
58
58
59
(1.) Summary of significant accounting policies
(2.) Financial risk management
(3.) Segment information
(4.) Revenue
(5.) Other income
(6.) Expenses
(7.) Income tax expense
(8.) Discontinued operations
(9.) Current assets – Cash and cash equivalents
(10.) Current assets – Trade and other receivables
(11.) Current assets – Other assets
(12.) Current assets – Inventories
(13.) Non-current assets – Property, plant and equipment
(14.) Non-current assets – Intangible assets
(15.) Current liabilities – Trade and other payables
(16.) Current liabilities – Borrowings
(17.) Current liabilities – Provisions
(18.) Non-current liabilities – Trade and other payables
59
61
62
62
64
65
65
66
66
67
68
69
70
71
72
73
74
80
(19.) Non-current liabilities – Borrowings
(20.) Tax
(21.) Non-current liabilities – Provisions
(22.) Issued Capital
(23.) Reserves and retained losses
(24.) Dividends
(25.) Key management personnel compensation
(26.) Remuneration of auditors
(27.) Contingencies
(28.) Commitments
(29.) Related party transactions
(30.) Business combinations
(31.) Interest in Subsidiaries
(32.) Events occurring after the reporting period
(33.) Cash flow statement reconciliation
(34.) Earnings / (losses) per share
(35.) Share based payments
(36.) Parent entity financial information
Envirosuite Limited Annual Report 2017Page 31 Notes to the Financial Statements
Notes to Financial Statements
For the Financial Year Ended 30 June 2017
These consolidated financial statements and notes represent those of Envirosuite Limited
(previously known as Pacific Environment Limited) and controlled entities (the “Consolidated
Group” or “Group”).
The separate financial statements of the parent entity, Envirosuite Limited, have not been
presented within this financial report as permitted by the Corporations Act 2001.
The financial statements were authorised for issue on 31 August 2017 by the directors of the
company.
1. Summary of significant accounting policies
Basis of preparation
The consolidated financial statements are general purpose financial statements that have been
prepared in accordance with Australian Accounting Standards and Interpretations of the
Australian Accounting Standards Board and the Corporations Act 2001. The Group is a for-
profit entity for financial reporting purposes under Australian Accounting Standards.
Australian Accounting Standards set out accounting policies that the Australian Accounting
Standards Board has concluded would result in financial statements containing relevant and
reliable information about transactions, events and conditions. Material accounting policies
adopted in the preparation of these financial statements are presented below and have been
consistently applied unless stated otherwise.
Except for cash flow information, the financial statements have been prepared on an accruals
basis and are based on historical costs, modified, where applicable, by the measurement at fair
value of selected non-current assets, financial assets and financial liabilities.
(a) Principles of consolidation
The consolidated financial statements incorporate all of the assets, liabilities and results of the
parent (Envirosuite Limited) and all of the subsidiaries. Subsidiaries are entities the parent
controls. The parent controls an entity when it is exposed to, or has rights to, variable returns
from its involvement with the entity and has the ability to affect those returns through its power
over the entity.
A list of subsidiaries is contained in note 31 to the financial statements.
The assets, liabilities and results of all subsidiaries are fully consolidated into the financial
statements of the Group from the date on which control is obtained by the Group. The
consolidation of a subsidiary is discontinued from the date that control ceases.
Intercompany transactions, balances and unrealised gains or losses on transactions between
entities in the Consolidated Group are eliminated in full on consolidation. Accounting policies
of subsidiaries have been changed and adjustments made where necessary to ensure
consistency with the policies adopted by the Group.
Investments in subsidiaries are accounted for at cost in the individual financial statements of
Envirosuite Limited.
Business Combinations
Business combinations occur where an acquirer obtains control over one or more businesses.
The acquisition method of accounting is used to account for all business combinations, unless
it is a combination involving entities or businesses under common control. The business
combination will be accounted for from the date that control is attained, whereby the fair value
of identifiable assets acquired and liabilities (including contingent liabilities) assumed is
recognised (subject to certain limited exemptions).
When measuring the consideration transferred in the business combination, any asset or
liability resulting from a contingent consideration arrangement is also included. Subsequent to
initial recognition, contingent consideration classified as equity is not remeasured and its
subsequent settlement is accounted for within equity. Contingent consideration classified as an
asset or liability is remeasured in each reporting period to fair value, with changes in fair value
recognised in profit or loss, unless the change in fair value can be identified as existing at
acquisition date.
All transaction costs incurred in relation to business combinations, other than those associated
with the issue of a financial instrument, are recognised as expenses in the profit and loss when
incurred. The acquisition of a business may result in the recognition of goodwill or a gain from
a bargain purchase.
Goodwill
the excess of the sum of:
Goodwill is carried at cost less any accumulated impairment losses. Goodwill is calculated as
(i)
(ii)
(iii)
the consideration transferred;
any non-controlling interests; and
the acquisition date fair value of any previously held equity interest; over the
acquisition date fair value of net identifiable assets acquired.
Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill is not
amortised. Instead, goodwill is tested for impairment annually or more frequently if events or
changes in circumstances indicate that it might be impaired, and is carried at cost less
accumulated impairment losses.
Gains and losses on the disposal of an entity include the carrying amount of goodwill relating
to the entity sold.
Goodwill is allocated to cash generating units for the purpose of impairment testing. The
allocation is made to those cash-generating units or groups of cash-generating units that are
expected to benefit from the business combination in which the goodwill arose.
Changes in the ownership interests in a subsidiary that do not result in a loss of control are
accounted for as equity transactions and do not affect the carrying amount of goodwill.
(b) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to
the chief operating decision maker. The chief operating decision maker, who is responsible for
allocating resources and assessing performance of the operating segments, has been identified
as the Managing Director and the board of directors. Refer Note 3 for segment information.
The Group aggregates two or more operating segments when they have similar economic
characteristics, and the segments are similar in each of the following respects:
• nature of the products and services;
• nature of the production processes;
•
type or class of customer for the products and services;
• methods used to distribute the products or provide the services; and if applicable
• nature of the regulatory environment.
Operating segments that meet the quantitative criteria as prescribed by AASB 8 are reported
separately. However, an operating segment that does not meet the quantitative criteria is still
reported separately where information about the segment would be useful to users of the
financial statements.
(c) Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Amounts
disclosed as revenue are net of returns, trade allowances, rebates and amounts collected on
behalf of third parties.
Page 32
Notes to the Financial Statements
When measuring the consideration transferred in the business combination, any asset or
liability resulting from a contingent consideration arrangement is also included. Subsequent to
initial recognition, contingent consideration classified as equity is not remeasured and its
subsequent settlement is accounted for within equity. Contingent consideration classified as an
asset or liability is remeasured in each reporting period to fair value, with changes in fair value
recognised in profit or loss, unless the change in fair value can be identified as existing at
acquisition date.
All transaction costs incurred in relation to business combinations, other than those associated
with the issue of a financial instrument, are recognised as expenses in the profit and loss when
incurred. The acquisition of a business may result in the recognition of goodwill or a gain from
a bargain purchase.
Goodwill
Goodwill is carried at cost less any accumulated impairment losses. Goodwill is calculated as
the excess of the sum of:
(i)
(ii)
(iii)
the consideration transferred;
any non-controlling interests; and
the acquisition date fair value of any previously held equity interest; over the
acquisition date fair value of net identifiable assets acquired.
Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill is not
amortised. Instead, goodwill is tested for impairment annually or more frequently if events or
changes in circumstances indicate that it might be impaired, and is carried at cost less
accumulated impairment losses.
Gains and losses on the disposal of an entity include the carrying amount of goodwill relating
to the entity sold.
Goodwill is allocated to cash generating units for the purpose of impairment testing. The
allocation is made to those cash-generating units or groups of cash-generating units that are
expected to benefit from the business combination in which the goodwill arose.
Changes in the ownership interests in a subsidiary that do not result in a loss of control are
accounted for as equity transactions and do not affect the carrying amount of goodwill.
(b) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to
the chief operating decision maker. The chief operating decision maker, who is responsible for
allocating resources and assessing performance of the operating segments, has been identified
as the Managing Director and the board of directors. Refer Note 3 for segment information.
The Group aggregates two or more operating segments when they have similar economic
characteristics, and the segments are similar in each of the following respects:
• nature of the products and services;
• nature of the production processes;
•
type or class of customer for the products and services;
• methods used to distribute the products or provide the services; and if applicable
• nature of the regulatory environment.
Operating segments that meet the quantitative criteria as prescribed by AASB 8 are reported
separately. However, an operating segment that does not meet the quantitative criteria is still
reported separately where information about the segment would be useful to users of the
financial statements.
(c) Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Amounts
disclosed as revenue are net of returns, trade allowances, rebates and amounts collected on
behalf of third parties.
Envirosuite Limited Annual Report 2017Page 33
Notes to the Financial Statements
The Group recognises revenue when the amount of revenue can be reliably measured, it is
probable that future economic benefits will flow to the entity and specific criteria have been met
for each of the Group's activities as described below. The amount of revenue is not considered
to be reliably measurable until all contingencies relating to the sale have been resolved. The
Group bases its estimates on historical results, taking into consideration the type of customer,
the type of transaction and the specifics of each arrangement.
Revenue is recognised for the major business activities as follows:
(i) Prebilled activities
Where the subscription is required to be provided over multiple periods, the contract is prebilled
and revenue is recognised on a monthly basis over the term of the subscription.
(ii) Interest income
Interest income is recognised on a time proportion basis using the effective interest method.
(d) Government grants and rebates
Grants and rebates from the government are recognised at their fair value where there is a
reasonable assurance that the grant or rebate will be received and the Group will comply with
all the attached conditions.
Government grants and rebates relating to costs are deferred and recognised as income over
the period necessary to match them with the costs that they are intended to compensate.
Government grants and rebates relating to the purchase of property, plant and equipment and
the development of IT and software capital costs are included in non-current liabilities as
deferred income and are credited to income on a straight line basis over the expected lives of
the related assets.
(e)
Income tax
The income tax expense/(income) for the year comprises current income tax expense/(income)
and deferred tax expense/(income).
Current income tax expense charged to the profit or loss is the tax payable on taxable income.
Current tax liabilities/(assets) are measured at the amounts expected to be paid to/(recovered
from) the relevant taxation authority.
Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability
balances during the year as well as unused tax losses.
Deferred income tax is provided in full, using the liability method, on temporary differences
arising between the tax bases of assets and liabilities and their carrying amounts in the
consolidated financial statements. However, the deferred income tax is not accounted for if it
arises from initial recognition of an asset or liability in a transaction other than a business
combination that at the time of the transaction affects neither accounting nor taxable profit nor
loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or
substantially enacted by the reporting date and are expected to apply when the related deferred
income tax asset is realised or the deferred income tax liability is settled.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses
only if it is probable that future taxable amounts will be available to utilise those temporary
differences and losses.
Deferred tax assets and liabilities are offset when a legally enforceable right of set-off exists
and when the deferred tax balances relate to the same taxation authority. Current tax assets
and tax liabilities are offset where the entity has a legally enforceable right to offset and intends
either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Envirosuite Limited and its wholly-owned Australian controlled entities except Envirosuite
Holdings Pty Ltd have implemented the tax consolidation legislation. As a consequence, these
entities are taxed as a single entity and the deferred tax assets and liabilities of these entities
are set off in the consolidated financial statements. In addition to its own current and deferred
tax amounts, Envirosuite Limited also recognises the current tax liabilities and the deferred tax
amounts arising from unused tax losses and unused tax credits assumed from controlled
entities in the tax Consolidated Group.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to
items recognised in other comprehensive income or directly in equity. In this case, the tax is
also recognised in other comprehensive income or directly in equity, respectively.
(f) Leases
Leases of property, plant and equipment where the Group, as lessee, has substantially all the
risks and rewards of ownership, are classified as finance leases (note 28). Finance leases are
capitalised at the lease's inception at the fair value of the leased property or, if lower, the present
value of the minimum lease payments. The corresponding rental obligations, net of finance
charges, are included in other short term and long term payables. Each lease payment is
allocated between the liability and finance cost. The finance cost is expensed over the lease
period so as to produce a constant periodic rate of interest on the remaining balance of the
liability for each period. The property, plant and equipment acquired under finance leases is
depreciated over the asset's useful life or over the shorter of the asset's useful life and the lease
term if there is no reasonable certainty that the Group will obtain ownership at the end of the
lease term.
Leases in which a significant portion of the risks and rewards of ownership are not transferred
to the Group as lessee are classified as operating leases (note 28). Payments made under
operating leases (net of any incentives received from the lessor) are expensed on a straight
line basis over the period of the lease.
(g)
Impairment of assets
At the end of each reporting period, the Group assess whether there is any indication that an
asset may be impaired. The assessment will include the consideration of external and internal
sources. If such an indication exists, an impairment test is carried out on the asset by comparing
the assets carrying value to its recoverable amount being the higher of an asset's fair value
less costs to sell and value in use. For the purposes of assessing impairment, assets are
grouped at the lowest levels for which there are separately identifiable cash inflows which are
largely independent of the cash inflows from other assets or groups of assets (cash generating
units).
Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation
and are tested annually for impairment, or more frequently if events or changes in
circumstances indicate that they might be impaired.
(h) Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial
institutions, other short term, highly liquid investments with original maturities of three months
or less that are readily convertible to known amounts of cash and which are subject to an
insignificant risk of changes in value.
(i) Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised
cost using the effective interest method, less provision for impairment. Trade receivables are
generally due for settlement within 30 - 90 days. They are presented as current assets unless
collection is not expected for more than 12 months after the reporting date.
(j)
Inventories
Inventories are measured at the lower of cost and net realisable value.
(k)
Investments and other financial assets
(i) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments
that are not quoted in an active market. They are included in current assets, except for those
with maturities greater than 12 months after the reporting date which are classified as non-
Page 34
Notes to the Financial Statements
tax amounts, Envirosuite Limited also recognises the current tax liabilities and the deferred tax
amounts arising from unused tax losses and unused tax credits assumed from controlled
entities in the tax Consolidated Group.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to
items recognised in other comprehensive income or directly in equity. In this case, the tax is
also recognised in other comprehensive income or directly in equity, respectively.
(f) Leases
Leases of property, plant and equipment where the Group, as lessee, has substantially all the
risks and rewards of ownership, are classified as finance leases (note 28). Finance leases are
capitalised at the lease's inception at the fair value of the leased property or, if lower, the present
value of the minimum lease payments. The corresponding rental obligations, net of finance
charges, are included in other short term and long term payables. Each lease payment is
allocated between the liability and finance cost. The finance cost is expensed over the lease
period so as to produce a constant periodic rate of interest on the remaining balance of the
liability for each period. The property, plant and equipment acquired under finance leases is
depreciated over the asset's useful life or over the shorter of the asset's useful life and the lease
term if there is no reasonable certainty that the Group will obtain ownership at the end of the
lease term.
Leases in which a significant portion of the risks and rewards of ownership are not transferred
to the Group as lessee are classified as operating leases (note 28). Payments made under
operating leases (net of any incentives received from the lessor) are expensed on a straight
line basis over the period of the lease.
(g)
Impairment of assets
At the end of each reporting period, the Group assess whether there is any indication that an
asset may be impaired. The assessment will include the consideration of external and internal
sources. If such an indication exists, an impairment test is carried out on the asset by comparing
the assets carrying value to its recoverable amount being the higher of an asset's fair value
less costs to sell and value in use. For the purposes of assessing impairment, assets are
grouped at the lowest levels for which there are separately identifiable cash inflows which are
largely independent of the cash inflows from other assets or groups of assets (cash generating
units).
Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation
and are tested annually for impairment, or more frequently if events or changes in
circumstances indicate that they might be impaired.
(h) Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial
institutions, other short term, highly liquid investments with original maturities of three months
or less that are readily convertible to known amounts of cash and which are subject to an
insignificant risk of changes in value.
(i) Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised
cost using the effective interest method, less provision for impairment. Trade receivables are
generally due for settlement within 30 - 90 days. They are presented as current assets unless
collection is not expected for more than 12 months after the reporting date.
(j)
Inventories
Inventories are measured at the lower of cost and net realisable value.
(k)
Investments and other financial assets
(i) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments
that are not quoted in an active market. They are included in current assets, except for those
with maturities greater than 12 months after the reporting date which are classified as non-
Envirosuite Limited Annual Report 2017Page 35
Notes to the Financial Statements
current assets. Loans and receivables are included in trade and other receivables (note 10) in
the consolidated statement of financial position.
(ii) Recognition and de-recognition
Investments are initially recognised at fair value plus transaction costs for all financial assets
not carried at fair value through profit or loss. Financial assets carried at fair value through profit
or loss are initially recognised at fair value, and transaction costs are expensed in the statement
of comprehensive income. Financial assets are derecognised when the rights to receive cash
flows from the financial assets have expired or have been transferred and the Group has
transferred substantially all the risks and rewards of ownership.
(iii) Subsequent measurement
Loans and receivables are carried at amortised cost using the effective interest method.
(iv) Impairment
The Group assesses at each reporting date whether there is objective evidence that a financial
asset or group of financial assets is impaired.
(l) Plant and equipment
Plant and equipment is measured on the cost basis and therefore carried at cost less
accumulated depreciation and any accumulated impairment. Cost includes expenditure that is
directly attributable to the acquisition of the items. In the event the carrying amount of plant and
equipment is greater than the estimated recoverable amount, the carrying amount is written
down immediately to the estimated recoverable amount and impairment losses are recognised
in profit or loss. A formal assessment of recoverable amount is made when impairment
indicators are present (refer Note 1(g) for details of impairment).
Subsequent costs are included in the asset's carrying amount or recognised as a separate
asset, as appropriate, only when it is probable that future economic benefits associated with
the item will flow to the Group and the cost of the item can be measured reliably. The carrying
amount of any component accounted for as a separate asset is derecognised when replaced.
All other repairs and maintenance are recognised in the profit or loss during the financial period
in which they are incurred.
The carrying amount of plant and equipment is reviewed annually by directors to ensure it is
not in excess of the recoverable amount from these assets. The recoverable amount is
assessed on the basis of the expected net cash flows that will be received from the asset’s
employment and subsequent disposal. The expected net cash flows have been discounted to
their present values in determining recoverable amounts.
Depreciation
Depreciation is calculated using the straight line method to allocate their cost or re-valued
amounts, net of their residual values, over their estimated useful lives or, in the case of
leasehold improvements and certain leased plant and equipment, the shorter lease term as
follows:
•
•
•
vehicles
furniture, fittings and equipment
leased plant and equipment
3 - 8 years
2 - 20 years
3 - 11 years
The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the
end of each reporting period.
An asset's carrying amount is written down immediately to its recoverable amount if the asset's
carrying amount is greater than its estimated recoverable amount.
(m) Intangible assets other than Goodwill
(i) Trademarks and licences
Trademarks and licences have a finite useful life and are carried at cost less accumulated
amortisation and impairment losses. Amortisation is calculated using the straight-line method
to allocate the cost of trademarks and licences over their estimated useful lives, which vary
from 3 to 20 years.
(ii)
IT development and software
Costs incurred in developing products or systems and costs incurred in acquiring software and
licenses that will contribute to future period financial benefits through revenue generation and/or
cost reduction are capitalised to software and systems.
Costs capitalised include external direct costs of materials and service and direct payroll and
payroll related costs of employees' time spent on the project. Amortisation is calculated on a
straight line basis over 10 years.
(iii) Research and development
Research expenditure is recognised as an expense as incurred. Costs incurred on
development projects (relating to the design and testing of new or improved products) are
recognised as intangible assets when it is probable that the project will, after considering its
commercial and technical feasibility, be completed and generate future economic benefits and
its costs can be measured reliably. The expenditure capitalised comprises all directly
attributable costs, including costs of materials, services, direct labour and an appropriate
proportion of overheads. Other development expenditures that do not meet these criteria are
recognised as an expense as incurred. Development costs previously recognised as an
expense are not recognised as an asset in a subsequent period. Capitalised development costs
are recorded as intangible assets and amortised from the point at which the asset is ready for
use on a straight line basis over its useful life, which is currently 10 years.
(n) Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the
end of financial year which are unpaid. The amounts are unsecured and are usually paid within
30 to 90 days of recognition. Trade and other payables are presented as current liabilities
unless payment is not due within 12 months from the reporting date. They are recognised
initially at their fair value and subsequently measured at amortised cost using the effective
interest method.
(o) Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings
are subsequently measured at amortised cost. Any difference between the proceeds (net of
transaction costs) and the redemption amount is recognised in the statement of comprehensive
income over the period of the borrowings using the effective interest method. Fees paid on the
establishment of loan facilities are recognised as transaction costs of the loan to the extent that
it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred
until the draw down occurs. To the extent there is no evidence that it is probable that some or
all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services
and amortised over the period of the facility to which it relates.
The fair value of the liability portion of a convertible bond is determined using a market interest
rate for an equivalent non-convertible bond. This amount is recorded as a liability on an
amortised cost basis until extinguished on conversion or maturity of the bonds. The remainder
of the proceeds is allocated to the conversion option. This is recognised and included in
shareholders' equity, net of income tax effects.
Borrowings are removed from the statement of financial position when the obligation specified
in the contract is discharged, cancelled or expired. The difference between the carrying amount
of a financial liability that has been extinguished or transferred to another party and the
consideration paid, including any non-cash assets transferred or liabilities assumed, is
recognised in other income or finance costs.
Borrowings are classified as current liabilities unless the Group has an unconditional right to
defer settlement of the liability for at least 12 months after the reporting date.
Page 36
Notes to the Financial Statements
to allocate the cost of trademarks and licences over their estimated useful lives, which vary
from 3 to 20 years.
(ii)
IT development and software
Costs incurred in developing products or systems and costs incurred in acquiring software and
licenses that will contribute to future period financial benefits through revenue generation and/or
cost reduction are capitalised to software and systems.
Costs capitalised include external direct costs of materials and service and direct payroll and
payroll related costs of employees' time spent on the project. Amortisation is calculated on a
straight line basis over 10 years.
(iii) Research and development
Research expenditure is recognised as an expense as incurred. Costs incurred on
development projects (relating to the design and testing of new or improved products) are
recognised as intangible assets when it is probable that the project will, after considering its
commercial and technical feasibility, be completed and generate future economic benefits and
its costs can be measured reliably. The expenditure capitalised comprises all directly
attributable costs, including costs of materials, services, direct labour and an appropriate
proportion of overheads. Other development expenditures that do not meet these criteria are
recognised as an expense as incurred. Development costs previously recognised as an
expense are not recognised as an asset in a subsequent period. Capitalised development costs
are recorded as intangible assets and amortised from the point at which the asset is ready for
use on a straight line basis over its useful life, which is currently 10 years.
(n) Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the
end of financial year which are unpaid. The amounts are unsecured and are usually paid within
30 to 90 days of recognition. Trade and other payables are presented as current liabilities
unless payment is not due within 12 months from the reporting date. They are recognised
initially at their fair value and subsequently measured at amortised cost using the effective
interest method.
(o) Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings
are subsequently measured at amortised cost. Any difference between the proceeds (net of
transaction costs) and the redemption amount is recognised in the statement of comprehensive
income over the period of the borrowings using the effective interest method. Fees paid on the
establishment of loan facilities are recognised as transaction costs of the loan to the extent that
it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred
until the draw down occurs. To the extent there is no evidence that it is probable that some or
all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services
and amortised over the period of the facility to which it relates.
The fair value of the liability portion of a convertible bond is determined using a market interest
rate for an equivalent non-convertible bond. This amount is recorded as a liability on an
amortised cost basis until extinguished on conversion or maturity of the bonds. The remainder
of the proceeds is allocated to the conversion option. This is recognised and included in
shareholders' equity, net of income tax effects.
Borrowings are removed from the statement of financial position when the obligation specified
in the contract is discharged, cancelled or expired. The difference between the carrying amount
of a financial liability that has been extinguished or transferred to another party and the
consideration paid, including any non-cash assets transferred or liabilities assumed, is
recognised in other income or finance costs.
Borrowings are classified as current liabilities unless the Group has an unconditional right to
defer settlement of the liability for at least 12 months after the reporting date.
Envirosuite Limited Annual Report 2017Page 37
Notes to the Financial Statements
(p) Borrowing costs
Borrowing costs incurred for the construction of any qualifying asset are capitalised during the
period of time that is required to complete and prepare the asset for its intended use or sale.
Other borrowing costs are expensed.
(q) Provisions
Provisions for legal claims and make good obligations are recognised when the Group has a
present legal or constructive obligation as a result of past events, it is probable that an outflow
of resources will be required to settle the obligation and the amount has been reliably estimated.
Provisions are not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required
in settlement is determined by considering the class of obligations as a whole. A provision is
recognised even if the likelihood of an outflow with respect to any one item included in the same
class of obligations may be small.
Provisions are measured at the present value of management's best estimate of the
expenditure required to settle the present obligation at the reporting date. The discount rate
used to determine the present value reflects current market assessments of the time value of
money and the risks specific to the liability. The increase in the provision due to the passage of
time is recognised as interest expense.
(r) Foreign Currency Transactions and Balances
Functional and presentation currency
The functional currency of each of the Group’s entities is measured using the currency of the
primary economic environment in which that entity operates. The consolidated financial
statements are presented in Australian dollars, which is the parent entity’s functional currency.
Transactions and balances
Foreign currency transactions are translated into functional currency using the exchange rates
prevailing at the date of the transaction. Foreign currency monetary items are translated at the
year-end exchange rate. Non-monetary items measured at historical cost continue to be carried
at the exchange rate at the date of the transaction. Non-monetary items measured at fair value
are reported at the exchange rate at the date when fair values were determined.
Exchange differences arising on the translation of monetary items are recognised in profit or loss,
except where deferred in equity as a qualifying cash flow or net investment hedge.
Group companies
The financial results and position of foreign operations, whose functional currency is different from
the Group’s presentation currency, are translated as follows:
–
–
–
assets and liabilities are translated at exchange rates prevailing at the end of the reporting
period;
income and expenses are translated at average exchange rates for the period; and
retained earnings are translated at the exchange rates prevailing at the date of the
transaction.
Exchange differences arising on translation of foreign operations with functional currencies other
than Australian dollars are recognised in other comprehensive income and included in the foreign
currency translation reserve in the statement of financial position. The cumulative amount of these
differences is reclassified into profit or loss in the period in which the operation is disposed of.
(s) Employee benefits
(i) Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits and annual leave expected
to be settled within 12 months after the end of the period in which the employees render the
related service are recognised in respect of employees' services up to the end of the reporting
period and are measured at the amounts expected to be paid when the liabilities are settled.
The liability for annual leave is recognised in the provision for employee benefits. All other short-
term employee benefit obligations are presented as payables.
(ii) Other long-term employee benefit obligations
The liability for long service leave and annual leave which is not expected to be settled within
12 months after the end of the period in which the employees render the related service is
recognised in the provision for employee benefits and measured as the present value of
expected future payments to be made in respect of services provided by employees up to the
end of the reporting period. Consideration is given to expected future wage and salary levels,
experience of employee departures and periods of service. Expected future payments are
discounted using market yields at the end of the reporting period on Australian Corporate bonds
with terms to maturity and currency that match, as closely as possible, the estimated future
cash outflows.
(iii) Share based payments
Share based compensation benefits are provided to employees and directors via the
Envirosuite Limited Employee Share Option Plan and the Envirosuite Limited Employee Share
Plan. Information relating to these schemes is set out in note 35.
The fair value of options granted under the Envirosuite Limited Employee Share Option Plan is
recognised as an employee benefit expense with a corresponding increase in equity. The total
amount to be expensed is determined by reference to the fair value of the options granted,
which includes any market performance conditions but excludes the impact of any service and
non-market performance vesting conditions and the impact of any non-vesting conditions.
Non-market vesting conditions are included in assumptions about the number of options that
are expected to vest. The total expense is recognised over the vesting period, which is the
period over which all of the specified vesting conditions are to be satisfied. At the end of each
period, the entity revises its estimates of the number of options that are expected to vest based
on the non-marketing vesting conditions. It recognises the impact of the revision to original
estimates, if any, in profit or loss, with a corresponding adjustment to equity.
Under the Envirosuite Limited Employee Share Plan, shares issued to employees for no cash
consideration vest immediately on grant date. On this date, the market value of the shares
issued is recognised as an employee benefits expense with a corresponding increase in equity.
(iv) Termination benefits
Termination benefits are payable when employment is terminated before the normal retirement
date, or when an employee accepts voluntary redundancy in exchange for these benefits. The
Group recognises termination benefits when it is demonstrably committed to either terminating
the employment of current employees according to a detailed formal plan without possibility of
withdrawal or providing termination benefits as a result of an offer made to encourage voluntary
redundancy. Benefits falling due more than 12 months after reporting date are discounted to
present value.
(t) Contributed equity
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity
as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue
of new shares or options for the acquisition of a business are not included in the cost of the
acquisition as part of the purchase consideration.
If the entity reacquires its own equity instruments, for example as the result of a share buyback,
those instruments are deducted from equity and the associated shares are cancelled. No gain
Page 38
Notes to the Financial Statements
(s) Employee benefits
(i) Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits and annual leave expected
to be settled within 12 months after the end of the period in which the employees render the
related service are recognised in respect of employees' services up to the end of the reporting
period and are measured at the amounts expected to be paid when the liabilities are settled.
The liability for annual leave is recognised in the provision for employee benefits. All other short-
term employee benefit obligations are presented as payables.
(ii) Other long-term employee benefit obligations
The liability for long service leave and annual leave which is not expected to be settled within
12 months after the end of the period in which the employees render the related service is
recognised in the provision for employee benefits and measured as the present value of
expected future payments to be made in respect of services provided by employees up to the
end of the reporting period. Consideration is given to expected future wage and salary levels,
experience of employee departures and periods of service. Expected future payments are
discounted using market yields at the end of the reporting period on Australian Corporate bonds
with terms to maturity and currency that match, as closely as possible, the estimated future
cash outflows.
(iii) Share based payments
Share based compensation benefits are provided to employees and directors via the
Envirosuite Limited Employee Share Option Plan and the Envirosuite Limited Employee Share
Plan. Information relating to these schemes is set out in note 35.
The fair value of options granted under the Envirosuite Limited Employee Share Option Plan is
recognised as an employee benefit expense with a corresponding increase in equity. The total
amount to be expensed is determined by reference to the fair value of the options granted,
which includes any market performance conditions but excludes the impact of any service and
non-market performance vesting conditions and the impact of any non-vesting conditions.
Non-market vesting conditions are included in assumptions about the number of options that
are expected to vest. The total expense is recognised over the vesting period, which is the
period over which all of the specified vesting conditions are to be satisfied. At the end of each
period, the entity revises its estimates of the number of options that are expected to vest based
on the non-marketing vesting conditions. It recognises the impact of the revision to original
estimates, if any, in profit or loss, with a corresponding adjustment to equity.
Under the Envirosuite Limited Employee Share Plan, shares issued to employees for no cash
consideration vest immediately on grant date. On this date, the market value of the shares
issued is recognised as an employee benefits expense with a corresponding increase in equity.
(iv) Termination benefits
Termination benefits are payable when employment is terminated before the normal retirement
date, or when an employee accepts voluntary redundancy in exchange for these benefits. The
Group recognises termination benefits when it is demonstrably committed to either terminating
the employment of current employees according to a detailed formal plan without possibility of
withdrawal or providing termination benefits as a result of an offer made to encourage voluntary
redundancy. Benefits falling due more than 12 months after reporting date are discounted to
present value.
(t) Contributed equity
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity
as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue
of new shares or options for the acquisition of a business are not included in the cost of the
acquisition as part of the purchase consideration.
If the entity reacquires its own equity instruments, for example as the result of a share buyback,
those instruments are deducted from equity and the associated shares are cancelled. No gain
Envirosuite Limited Annual Report 2017Page 39
Notes to the Financial Statements
or loss is recognised in the profit or loss and the consideration paid including any directly
attributable incremental costs (net of income taxes) is recognised directly in equity.
(u) Dividends
Provision is made for the amount of any dividend declared, being appropriately authorised and
no longer at the discretion of the entity, on or before the end of the financial year but not
distributed at balance date.
(v) Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing:
•
the profit attributable to equity holders of the Company, excluding any costs of servicing
equity other than ordinary shares
• by the weighted average number of ordinary shares outstanding during the financial
year, adjusted for bonus elements in ordinary shares issued during the year.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per
share to take into account:
•
•
the after income tax effect of interest and other financing costs associated with dilutive
potential ordinary shares, and
the weighted average number of additional ordinary shares that would have been
outstanding assuming the conversion of all dilutive potential ordinary shares.
(w) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless
the GST incurred is not recoverable from the taxation authority. In this case it is recognised as
part of the cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable.
The net amount of GST recoverable from, or payable to, the taxation authority is included with
other receivables or payables in the statement of financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from
investing or financing activities which are recoverable from, or payable to the taxation authority,
are presented as operating cash flows included in receipts from customers or payments to
suppliers.
Envirosuite Limited and its wholly owned Australian controlled entities except Envirosuite
Holdings Pty Ltd are grouped for GST.
(x) Rounding of amounts
The Company is of a kind referred to in legislative instrument 2016/191, issued by the Australian
Securities and Investments Commission, relating to the ''rounding off'' of amounts in the
financial report. Amounts in the financial report have been rounded off in accordance with that
instrument to the nearest thousand dollars, or in certain cases, the nearest dollar.
(y) Critical accounting estimates and judgements
The directors evaluate estimates and judgements incorporated into the financial statements
based on historical knowledge and best available current information. Estimates assume a
reasonable expectation of future events and are based on current trends and economic data,
obtained both externally and within the Group.
Key estimates
–
Impairment of goodwill and other intangible assets
The Group tests annually whether goodwill has suffered any impairment in accordance with the
accounting policy stated in note 1(g). The recoverable amounts of subsidiaries have been
determined based on value in use calculations. These calculations require the use of
assumptions. Refer to note 14 for details of these assumptions and the potential impact of
changes to the assumptions.
–
Income taxes
The Group’s accounting policy for taxation requires management’s judgement as to the types
of arrangements considered to be a tax on income in contrast to an operating cost. Judgement
is also required in assessing whether deferred tax assets and certain deferred tax liabilities are
recognised on the statement of financial position. Deferred tax assets, including those arising
from un-recouped tax losses, capital losses and temporary differences are recognised only
where it is considered more likely than not that they will be recovered, which is dependent on
the generation of sufficient future taxable profits.
Assumptions about the generation of future taxable profits depend on management’s estimates
of future cash flows. These depend on estimates of future sales volumes, operating costs,
capital expenditure, dividends and other capital management transactions. Judgements are
also required about the application of income tax legislation. These judgements and
assumptions are subject to risk and uncertainty, hence there is a possibility that changes in
circumstances will alter expectations, which may impact the amount of deferred tax assets and
deferred tax liabilities recognised on the statement of financial position and the amount of other
tax losses and temporary differences not yet recognised. In such circumstances, some or all of
the carrying amounts of recognised deferred tax assets and liabilities may require adjustment,
resulting in a corresponding credit or charge to the statement of comprehensive income.
–
Fair value of share options
In calculating the fair value of the director and employee share options, the Company has made
a number of assumptions in determining the inputs for the Black-Scholes option pricing module.
Refer to note 35(i) for details of these assumptions.
–
Fair value of convertible instruments
In calculating the fair value of the convertible instruments, the Company has made a number
of assumptions in determining the inputs for the fair value discount model. The discount rate
applied was 11%, which was assessed as being an appropriate representation of the rate at
which funds would have been borrowed had the Company been required to borrow the funds
in the market, as well as the various risks and rewards associated with the convertible
instruments.
After determining the fair value of the convertible instruments issued, the excess of the principal
was treated as an additional equity instrument, representing the fair value of the option to
convert associated with the convertible instruments. In accordance with AASB 139, the fair
value of the option to convert is required to be unwound over the period on which the
instruments are on offer. During the year, $13,697 (2016: $109,686) was recognised as an
interest expense in the consolidated statement of comprehensive income of the Group.
– Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary differences if management
considers that it is probable that future taxable profits will be available to utilise those temporary
differences. Sufficient management judgement is required to determine the amount of deferred
tax assets that can be recognised, based upon the likely timing and the level of future taxable
profits over the next two years together with future tax planning strategies.
Page 40
Notes to the Financial Statements
Key estimates
–
Impairment of goodwill and other intangible assets
The Group tests annually whether goodwill has suffered any impairment in accordance with the
accounting policy stated in note 1(g). The recoverable amounts of subsidiaries have been
determined based on value in use calculations. These calculations require the use of
assumptions. Refer to note 14 for details of these assumptions and the potential impact of
changes to the assumptions.
–
Income taxes
The Group’s accounting policy for taxation requires management’s judgement as to the types
of arrangements considered to be a tax on income in contrast to an operating cost. Judgement
is also required in assessing whether deferred tax assets and certain deferred tax liabilities are
recognised on the statement of financial position. Deferred tax assets, including those arising
from un-recouped tax losses, capital losses and temporary differences are recognised only
where it is considered more likely than not that they will be recovered, which is dependent on
the generation of sufficient future taxable profits.
Assumptions about the generation of future taxable profits depend on management’s estimates
of future cash flows. These depend on estimates of future sales volumes, operating costs,
capital expenditure, dividends and other capital management transactions. Judgements are
also required about the application of income tax legislation. These judgements and
assumptions are subject to risk and uncertainty, hence there is a possibility that changes in
circumstances will alter expectations, which may impact the amount of deferred tax assets and
deferred tax liabilities recognised on the statement of financial position and the amount of other
tax losses and temporary differences not yet recognised. In such circumstances, some or all of
the carrying amounts of recognised deferred tax assets and liabilities may require adjustment,
resulting in a corresponding credit or charge to the statement of comprehensive income.
–
Fair value of share options
In calculating the fair value of the director and employee share options, the Company has made
a number of assumptions in determining the inputs for the Black-Scholes option pricing module.
Refer to note 35(i) for details of these assumptions.
–
Fair value of convertible instruments
In calculating the fair value of the convertible instruments, the Company has made a number
of assumptions in determining the inputs for the fair value discount model. The discount rate
applied was 11%, which was assessed as being an appropriate representation of the rate at
which funds would have been borrowed had the Company been required to borrow the funds
in the market, as well as the various risks and rewards associated with the convertible
instruments.
After determining the fair value of the convertible instruments issued, the excess of the principal
was treated as an additional equity instrument, representing the fair value of the option to
convert associated with the convertible instruments. In accordance with AASB 139, the fair
value of the option to convert is required to be unwound over the period on which the
instruments are on offer. During the year, $13,697 (2016: $109,686) was recognised as an
interest expense in the consolidated statement of comprehensive income of the Group.
– Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary differences if management
considers that it is probable that future taxable profits will be available to utilise those temporary
differences. Sufficient management judgement is required to determine the amount of deferred
tax assets that can be recognised, based upon the likely timing and the level of future taxable
profits over the next two years together with future tax planning strategies.
Envirosuite Limited Annual Report 2017Page 41
Notes to the Financial Statements
Key Judgements
Provision for impairment of receivables
A provision for impairment of receivables of nil was considered necessary as at the end of the
2017 reporting period (2016:$66,000).
(z) New accounting standards for application in future periods
Accounting Standards and Interpretations issued by the AASB that are not yet mandatorily
applicable to the Group, together with an assessment of the potential impact of such
pronouncements on the Group when adopted in future periods, are discussed below:
–
AASB 9: Financial Instruments and associated Amending Standards (applicable to
annual reporting periods beginning on or after 1 January 2018).
The Standard will be applicable retrospectively (subject to the provisions on hedge
accounting outlined below) and includes revised requirements for the classification and
measurement of
instruments, revised recognition and derecognition
requirements for financial instruments and simplified requirements for hedge
accounting.
financial
The key changes that may affect the Group on initial application include certain
simplifications to the classification of financial assets, simplifications to the accounting
of embedded derivatives, upfront accounting for expected credit loss, and the
irrevocable election to recognise gains and losses on investments in equity instruments
that are not held for trading in other comprehensive income. AASB 9 also introduces
a new model for hedge accounting that will allow greater flexibility in the ability to hedge
risk, particularly with respect to hedges of non-financial items. Should the entity elect
to change its hedge policies in line with the new hedge accounting requirements of the
Standard, the application of such accounting would be largely prospective.
Although the directors anticipate that the adoption of AASB 9 may have an impact on
the Group’s financial instruments, including hedging activity, it is impracticable at this
stage to provide a reasonable estimate of such impact.
–
AASB 15: Revenue from Contracts with Customers (applicable to annual reporting
periods commencing on or after 1 January 2018, as deferred by AASB 2015-8:
Amendments to Australian Accounting Standards – effective date of AASB15).
When effective, this Standard will replace the current accounting requirements
applicable to revenue with a single, principles-based model. Except for a limited
number of exceptions, including leases, the new revenue model in AASB 15 will apply
to all contracts with customers as well as non-monetary exchanges between entities in
the same line of business to facilitate sales to customers and potential customers.
The core principle of the Standard is that an entity will recognise revenue to depict the
transfer of promised goods or services to customers in an amount that reflects the
consideration to which the entity expects to be entitled in exchange for the goods or
services. To achieve this objective, AASB 15 provides the following five-step process:
-
-
-
-
and
-
identify the contract(s) with a customer;
identify the performance obligations in the contract(s);
determine the transaction price;
allocate the transaction price to the performance obligations in the contract(s);
The head entity, Envirosuite Limited, accounts for tax of the consolidated group as if it was a
recognise revenue when (or as) the performance obligations are satisfied.
The transitional provisions of this Standard permit an entity to either: restate the
contracts that existed in each prior period presented per AASB108: Accounting
Policies, Changes in Accounting Estimates and Errors (subject to certain practical
expedients in AASB15); or recognise the cumulative effect of retrospective application
of incomplete contracts on the date of initial application. There are also enhanced
disclosure requirements regarding revenue.
Although the directors anticipate that the adoption of AASB 15 may have an impact on
the Group’s financial statements, it is impracticable at this stage to provide a
reasonable estimate of such impact.
–
AASB 16: Leases (applicable to annual reporting periods beginning on or after 1
January 2019).
When effective, this Standard will replace the current accounting requirements
applicable to leases in AASB 117: Leases and related Interpretations. AASB 16
introduces a single lessee accounting model that eliminates the requirement for leases
to be classified as operating or finance leases.
The main changes introduced by the new Standard include:
-
recognition of a right-to-use asset and liability for all leases (excluding short-
term leases with less than 12 months of tenure and leases relating to low-value
-
-
-
-
assets);
components;
depreciation of right-to-use assets in line with AASB 116: Property, Plant and
Equipment in profit or loss and unwinding of the liability in principal and interest
variable lease payments that depend on an index or a rate are included in the
initial measurement of the lease liability using the index or rate at the
commencement date;
by applying a practical expedient, a lessee is permitted to elect not to separate
non-lease components and instead account for all components as a lease; and
additional disclosure requirements.
The transitional provisions of AASB 16 allow a lessee to either retrospectively
apply the Standard to comparatives in line with AASB 108 or recognise the
cumulative effect of retrospective application as an adjustment to opening
equity on the date of initial application.
Although the directors anticipate that the adoption of AASB 16 will impact the
Group's financial statements, it is impracticable at this stage to provide a
reasonable estimate of such impact.
(aa) Parent entity financial information
The financial information for the parent entity, Envirosuite Limited, disclosed in note 36 has
been prepared on the same basis as the consolidated financial statements, except as set out
(i)
Investments in subsidiaries, associates and joint venture entities
Investments in subsidiaries are accounted for at cost in the financial statements of Envirosuite
(ii) Tax consolidation legislation
Envirosuite Limited and its wholly-owned Australian controlled entities except Envirosuite
Holdings Pty Ltd have implemented the tax consolidation legislation.
below.
Limited.
single entity.
In addition to its own current and deferred tax amounts, Envirosuite Limited also recognises the
current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and
unused tax credits assumed from controlled entities in the tax consolidated group.
All tax assets or liabilities arising under tax funding agreements with the tax consolidated
entities are assumed by the parent entity. The group does not allocate to each subsidiary its
tax assets or liabilities.
Page 42
Notes to the Financial Statements
Although the directors anticipate that the adoption of AASB 15 may have an impact on
the Group’s financial statements, it is impracticable at this stage to provide a
reasonable estimate of such impact.
–
AASB 16: Leases (applicable to annual reporting periods beginning on or after 1
January 2019).
When effective, this Standard will replace the current accounting requirements
applicable to leases in AASB 117: Leases and related Interpretations. AASB 16
introduces a single lessee accounting model that eliminates the requirement for leases
to be classified as operating or finance leases.
The main changes introduced by the new Standard include:
-
-
-
-
-
recognition of a right-to-use asset and liability for all leases (excluding short-
term leases with less than 12 months of tenure and leases relating to low-value
assets);
depreciation of right-to-use assets in line with AASB 116: Property, Plant and
Equipment in profit or loss and unwinding of the liability in principal and interest
components;
variable lease payments that depend on an index or a rate are included in the
initial measurement of the lease liability using the index or rate at the
commencement date;
by applying a practical expedient, a lessee is permitted to elect not to separate
non-lease components and instead account for all components as a lease; and
additional disclosure requirements.
The transitional provisions of AASB 16 allow a lessee to either retrospectively
apply the Standard to comparatives in line with AASB 108 or recognise the
cumulative effect of retrospective application as an adjustment to opening
equity on the date of initial application.
Although the directors anticipate that the adoption of AASB 16 will impact the
Group's financial statements, it is impracticable at this stage to provide a
reasonable estimate of such impact.
(aa) Parent entity financial information
The financial information for the parent entity, Envirosuite Limited, disclosed in note 36 has
been prepared on the same basis as the consolidated financial statements, except as set out
below.
(i)
Investments in subsidiaries, associates and joint venture entities
Investments in subsidiaries are accounted for at cost in the financial statements of Envirosuite
Limited.
(ii) Tax consolidation legislation
Envirosuite Limited and its wholly-owned Australian controlled entities except Envirosuite
Holdings Pty Ltd have implemented the tax consolidation legislation.
The head entity, Envirosuite Limited, accounts for tax of the consolidated group as if it was a
single entity.
In addition to its own current and deferred tax amounts, Envirosuite Limited also recognises the
current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and
unused tax credits assumed from controlled entities in the tax consolidated group.
All tax assets or liabilities arising under tax funding agreements with the tax consolidated
entities are assumed by the parent entity. The group does not allocate to each subsidiary its
tax assets or liabilities.
Envirosuite Limited Annual Report 2017Page 43
Notes to the Financial Statements
2. Financial risk management
The Group’s financial instruments consist mainly of deposits with banks, accounts receivable
and payable, loans to and from subsidiaries and other related parties, and borrowings in the
form of convertible notes, bank loans and leases.
The totals for each category of financial instruments, measured in accordance with AASB139
as detailed in the accounting policies to these financial statements, are as follows:
Financial assets
Cash and cash equivalents
Trade and other receivables
Loans receivable
Total financial assets
Financial liabilities
Trade and other payables
Current borrowings
Non-current borrowings
Total financial liabilities
Consolidated Group
Note
2017
$’000
2016
$’000
9
11,471
10(d)
10(d)
866
-
1,338
4,258
-
12,337
5,596
15(b)
2,403
16
19
-
-
2,403
3,062
1,656
1,314
6,032
Financial risk management policies
The Managing Director and Chief Financial Officer are responsible for managing financial risk
exposures of the Group.
Specific financial risk exposures and management
The Group's activities expose it to a variety of financial risks: market risk (including interest rate
risk), credit risk and liquidity risk. The Group uses different methods to measure different types
of risk to which it is exposed. These methods include sensitivity analysis in the case of interest
rate, and ageing analysis for credit risk and liquidity risk.
(a) Market risk
(i) Foreign exchange risk
The Group does not have any material exposure to foreign exchange risk.
(ii) Price risk
The Group is not exposed to equity securities price risk. The Group is not exposed to
commodity price risk.
(iii) Cash flow and fair value interest rate risk
Historically the Group's main interest rate risk arose from bank deposits, bank overdrafts and
long term borrowings. Borrowings issued at variable rates exposed the Group to cash flow
interest rate risk. Borrowings issued at fixed rates exposed the Group to fair value interest rate
risk if the borrowings are carried at fair value. The Group had a finance facility at variable
interest rates and long-term borrowings in the form of convertible notes at fixed interest rates,
thus exposing the Group to cash flow interest rate risk and fair value interest rate risk.
Borrowings were paid out on the sale of the consulting practice to ERM and therefore the only
remaining interest rate risk at reporting date arises from bank deposits as follows:
2017
2016
Weighted
average
interest
Weighted
average
interest
rate
%
2%
Balance
$’000
11,471
-
-
-
-
-
rate
%
1%
3%
11%
-
-
Balance
$’000
1,338
(937)
(450)
-
-
6%
(1,600)
Convertible instruments (interest bearing) – face
Cash and cash equivalents
Bank loans
value
Other loans – current
Other loans – non-current
Lease liabilities
Net exposure to cash flow interest rate risk
11,471
(1,649)
The Group manages its interest rate risk by analysing ‘what if’ scenarios simulated where the
Group calculates the impact on profit and loss of a defined interest rate shift. The scenarios are
run only for liabilities that represent the major interest bearing positions. The simulation is done
half yearly to verify that the maximum loss potential is within the limit given by management.
Group sensitivity
At 30 June 2017, if interest rates had decreased by 2% or increased by 2% from the year end
rates with all other variables held constant, post-tax profit for the year would have been
$160,594 higher / $160,594 lower (2016: changes of -2% / +2%: $5,607 higher / $5,607 lower),
mainly as a result of higher / lower interest income from cash and cash equivalents.
Summarised sensitivity analysis
liabilities to interest rate risk:
The following table summarises the sensitivity of the Group's financial assets and financial
Interest rate risk
At 30 June 2017
Financial assets
Cash and cash equivalents
Trade and other receivables
Financial liabilities
Trade and other payables
Borrowings
Total (increase) / decrease
(b) Credit risk
Carrying
amount
$’000
-2%
Profit
$’000
Other
Equity
$’000
+2%
Profit
$’000
Other
Equity
$’000
11,471
(161)
866
2,403
-
-
-
-
(161)
-
-
-
-
-
161
-
-
161
-
-
-
-
-
Credit risk is managed on a Group basis. Credit risk arises from credit exposures to customers,
including outstanding receivables and committed transactions. If customers are independently
rated, these ratings are used. Otherwise, if there is no independent rating, credit control
assesses the credit quality of the customer, taking into account its financial position, past
experience and other factors. Currently there are no individual credit limits set, however going
forward this will be considered by the Audit and Risk Committee and the Board to improve
controls over credit risk.
Page 44
Notes to the Financial Statements
2017
2016
Weighted
average
interest
rate
%
Weighted
average
interest
rate
%
Balance
$’000
2%
11,471
-
-
-
-
-
1%
3%
11%
-
-
Balance
$’000
1,338
(937)
(450)
-
-
6%
(1,600)
Cash and cash equivalents
Bank loans
Convertible instruments (interest bearing) – face
value
Other loans – current
Other loans – non-current
Lease liabilities
Net exposure to cash flow interest rate risk
11,471
(1,649)
The Group manages its interest rate risk by analysing ‘what if’ scenarios simulated where the
Group calculates the impact on profit and loss of a defined interest rate shift. The scenarios are
run only for liabilities that represent the major interest bearing positions. The simulation is done
half yearly to verify that the maximum loss potential is within the limit given by management.
Group sensitivity
At 30 June 2017, if interest rates had decreased by 2% or increased by 2% from the year end
rates with all other variables held constant, post-tax profit for the year would have been
$160,594 higher / $160,594 lower (2016: changes of -2% / +2%: $5,607 higher / $5,607 lower),
mainly as a result of higher / lower interest income from cash and cash equivalents.
Summarised sensitivity analysis
The following table summarises the sensitivity of the Group's financial assets and financial
liabilities to interest rate risk:
Interest rate risk
At 30 June 2017
Financial assets
Cash and cash equivalents
Trade and other receivables
Financial liabilities
Trade and other payables
Borrowings
Total (increase) / decrease
(b) Credit risk
Carrying
amount
$’000
-2%
Profit
$’000
Other
Equity
$’000
+2%
Profit
$’000
Other
Equity
$’000
11,471
(161)
866
2,403
-
-
-
-
(161)
-
-
-
-
-
161
-
-
161
-
-
-
-
-
Credit risk is managed on a Group basis. Credit risk arises from credit exposures to customers,
including outstanding receivables and committed transactions. If customers are independently
rated, these ratings are used. Otherwise, if there is no independent rating, credit control
assesses the credit quality of the customer, taking into account its financial position, past
experience and other factors. Currently there are no individual credit limits set, however going
forward this will be considered by the Audit and Risk Committee and the Board to improve
controls over credit risk.
Envirosuite Limited Annual Report 2017Page 45
Notes to the Financial Statements
The maximum exposure to credit risk at the reporting date is the carrying amount of the financial
assets as summarised above. For some trade receivables, given that the customers are
generally without external credit ratings, the Group obtains comfort in the form of executed
proposal agreements and quotations detailing fees and billing schedules.
The credit quality of financial assets that are neither past due nor impaired can be assessed by
reference to historical information about payment history and any default rates.
Trade receivables
Counterparties without external credit rating
• A customers (aged 0 – 30 days)
• B customers (aged 31 – 60 days)
• C customers (aged 61 – 120 days)
• D customers (aged 120+ days)
Total trade receivables
Consolidated Group
2017
$’000
2016
$’000
98
92
1
-
1,445
895
182
21
191
2,543
(c) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and the availability of
funding through an adequate amount of committed credit facilities to meet obligations when
due to close out market positions. The Group manages liquidity risk by continuously monitoring
forecast and actual cash flows.
Financing arrangements
The Group had access to the following undrawn borrowing facilities at the reporting date:
and improve operations and planning.
2017
$’000
2016
$’000
On 26 June 2017 the sale of the Group’s consulting practice was completed and the company
is one segment being the development and sale of its technology platform.
Floating rate
Bank overdraft facility
-
750
4. Revenue
Financial liability and financial asset maturity analysis
The table below analyses the Group's financial liabilities and assets into relevant maturity
groupings based on the remaining period at the reporting date to the contractual maturity date.
The amounts disclosed in the table are the contractual undiscounted cash flows.
Other loans
-
-
Total expected outflows
2,403
4,718
1,314
Financial assets – cash
flows realisable
Cash and cash equivalents
11,471
1,338
Trade and other receivables
866
4,258
Other investments
Amounts receivable from
related parties
-
-
-
-
Total anticipated inflows
12,337
5,596
Net inflow/(outflow)on
financial instruments
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,403
6,032
11,471
866
1,338
4,258
-
-
-
-
12,337
5,596
-
-
-
-
-
-
-
-
9,934
878
(1,314)
9,934
(436)
(d) Fair value measurements
The fair value of financial assets and financial liabilities must be estimated for recognition and
measurement or for disclosure purposes.
The carrying value less impairment provision of trade receivables and payables are assumed
to approximate their fair values due to their short-term nature. The fair value of financial
liabilities for disclosure purposes is estimated by discounting the future contractual cash flows
at the current market interest rate that is available to the Group for similar financial instruments.
3. Segment information
Historically the Group provided superior environmental consulting, advice, solutions and
services to help clients comply with environmental regulations, meet corporate responsibilities
From continuing operations
Sales revenue
Other revenue
Total revenue
Sales revenue
Total revenue
From discontinued operations
Consolidated Group
Notes
2017
$’000
2016
$’000
150
11
161
--
--
-
8
16,050
17,809
16,050
17,809
Within 1 Year
2016
2017
$’000
$’000
1 to 5 Years
2016
$’000
2017
$’000
Over 5 Years
2016
$’000
2017
$’000
Total
2017
$’000
2016
$’000
Consolidated Group
Financial liabilities due for
payment
Bank facilities and loans
-
511
Trade and other payables
2,403
3,062
Finance lease liabilities
Amounts payable to related
parties
-
-
712
433
-
-
-
427
-
887
-
-
-
-
-
-
-
-
-
-
2,403
-
-
938
3,062
1,599
433
Page 46
Notes to the Financial Statements
Other loans
-
-
Total expected outflows
2,403
4,718
Financial assets – cash
flows realisable
Cash and cash equivalents
11,471
1,338
Trade and other receivables
866
4,258
Other investments
Amounts receivable from
related parties
-
-
-
-
Total anticipated inflows
12,337
5,596
Net inflow/(outflow)on
financial instruments
9,934
878
-
-
-
-
-
-
-
-
-
1,314
-
-
-
-
-
(1,314)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,403
6,032
11,471
866
1,338
4,258
-
-
-
-
12,337
5,596
9,934
(436)
(d) Fair value measurements
The fair value of financial assets and financial liabilities must be estimated for recognition and
measurement or for disclosure purposes.
The carrying value less impairment provision of trade receivables and payables are assumed
to approximate their fair values due to their short-term nature. The fair value of financial
liabilities for disclosure purposes is estimated by discounting the future contractual cash flows
at the current market interest rate that is available to the Group for similar financial instruments.
3. Segment information
Historically the Group provided superior environmental consulting, advice, solutions and
services to help clients comply with environmental regulations, meet corporate responsibilities
and improve operations and planning.
On 26 June 2017 the sale of the Group’s consulting practice was completed and the company
is one segment being the development and sale of its technology platform.
4. Revenue
From continuing operations
Sales revenue
Other revenue
Total revenue
From discontinued operations
Sales revenue
Total revenue
Consolidated Group
Notes
2017
$’000
2016
$’000
150
11
161
--
--
-
8
16,050
17,809
16,050
17,809
Envirosuite Limited Annual Report 2017Page 47
Notes to the Financial Statements
5.
Other income
Government Grants:
&
Tax
Research
Development
Incentives
Under Provision of prior
year R&D Tax Incentive
Other income - Interest
Total other income
5(a)
2017
$’000
-
-
6
6
2016
$’000
1,663
42
2
1,707
(a) Research and Development Tax Incentives
Research and Development Tax Incentives included for the year ended 30 June 2017 are nil
(2016: $1,663,000).
Due to the sale of the consultancy practice, the work to determine the Government rebate for
research and development was delayed and therefore a reasonable estimate could not be
provided at reporting date. This is intended to be included in the 2017-2018 Financial year.
(Loss)/profit before income tax from continuing operations includes the following specific
6.
Expenses
expenses:
Consultants expense
Audit and accounting
Legal
Strategic consultancy
Total consultants expense
Depreciation
Plant and equipment
Total depreciation
Amortisation
Software
Other
Total amortisation
Finance costs
Corporate support and company secretarial
Plant and equipment under finance leases
Consolidated Group
Notes
2017
$’000
2016
$’000
187
78
128
265
658
-
-
-
11
-
11
11
80
13
14
198
20
35
225
478
-
-
-
17
-
17
17
118
874
419
Total depreciation and amortisation expense
Interest and finance charges paid/payable for financial liabilities
not at fair value through profit or loss
Rental expense relating to operating leases
Minimum lease payments
Impairment losses
Defined contribution superannuation expense
Share based payment expenses
35(d)
26
-
Page 48
Notes to the Financial Statements
6.
Expenses
(Loss)/profit before income tax from continuing operations includes the following specific
expenses:
Consolidated Group
Notes
2017
$’000
2016
$’000
Consultants expense
Audit and accounting
Corporate support and company secretarial
Legal
Strategic consultancy
Total consultants expense
Depreciation
Plant and equipment
Plant and equipment under finance leases
Total depreciation
Amortisation
Software
Other
Total amortisation
13
14
Total depreciation and amortisation expense
Finance costs
Interest and finance charges paid/payable for financial liabilities
not at fair value through profit or loss
Rental expense relating to operating leases
Minimum lease payments
Impairment losses
Defined contribution superannuation expense
Share based payment expenses
35(d)
187
78
128
265
658
-
-
-
11
-
11
11
80
198
20
35
225
478
-
-
-
17
-
17
17
118
26
-
874
419
Envirosuite Limited Annual Report 2017Page 49
Notes to the Financial Statements
7. Income tax expense
8. Discontinued Operations
(a) The components of Income tax benefit/(expense) comprise:
Current tax
Deferred tax
(Under)/over provision of prior year tax
Income tax benefit/(expense)
(b) Numerical reconciliation of income tax expense to prima facie tax payable
Prima facie tax on profit from continuing operations before income tax is reconciled to
income tax as follows:
Consolidated
Group
2017
$’000
2016
$’000
-
84
58
142
2017
$’000
-
(479)
(479)
2016
$’000
Prima facie tax payable on profit from continuing operations before income tax at 30%
(2016:30%)
(724)
128
Add:
Tax effect of:
- non-allowable items (including R&D expenditure)
- share options expensed during the year
- revaluation of assets not subject to income tax
- under-provision for income tax in prior year
Less:
Tax effect of:
- R&D income non-assessable
- adjustment to equity raising costs
- capital gain on disposal of PEO
- capital gain on disposal of DLA
- June 2017 due diligence costs (capital in nature)
- accounting loss on disposal of business
- R&D credit in P&L as govt grant (relates to 2016 ITR)
- movement on deferred tax asset / (liabilities) for sale on entities
- Losses not recognised
Income tax (benefit)/expense
92
28
(58)
28
767
125
(511)
(30)
-
-
-
492
(142)
479
Envirosuite Limited sold its 100% equity interests (the sale) in its subsidiaries, Pacific
Environment Holdings Pty Ltd, Pacific Environment Operations Pty Ltd and DLA Environmental
Services Pty Ltd (collectively known as “the consulting practice”) for $15 million to
Environmental Resource Management (ERM). The sale of the consulting practice to ERM
occurred on 26 June 2017 (the completion date) in accordance with a Share Sale and Purchase
Agreement (SPA).
The purchase price is subject to a net debt and working capital adjustment. The process to
agree or determine the amount of the adjustment is ongoing and incomplete. Further, there
are various post completion steps and ongoing terms and conditions set out in the SPA and
related agreements that must be completed, observed or complied with by Envirosuite Limited
after completion including, inter alia:-
the determination of Completion Accounts and Completion Statement in accordance
the determination and release of amounts in escrow pending certain conditions/events;
•
•
•
with the SPA;
and
transfers of various contracts.
The Directors are confident there are no known claims to or against Envirosuite Limited
currently which could give rise to a contingent liability and are confident the final settlement
adjustment will not be significantly material to the financial statements. However, whether
there are outstanding sale matters that could affect the gain on sale of discontinued operations,
the Group’s operations or the results of those operations in future financial years or the Group’s
state of affairs in future financial years, is uncertain.
The financial performance of the discontinued operation to the date of sale, which is included
in the profit/(loss) from discontinued operations per the statement of comprehensive income is
as follows:
Loss after tax attributable to the discontinued operation
Revenue & other income
Expenses
Loss before income tax
Income tax benefit
Gain on sale before income tax
Income tax expense
Gain on sale after income tax
Total Loss after tax attributable to the discontinued operation
(2,064)
(1,553)
The net cash flows of the discontinued operation, which have been incorporated into
the statement of cash flows, are as follows:
Net cash outflow from operating activities
Net cash outflow from investing activities
Net cash inflow/(outflow) from financing activities
Consolidated Group
2017
$’000
2016
$’000
16,050
17,809
(19,005)
(19,615)
(2,955)
(1,806)
179
254
(2,776)
(1,552)
1,219
(507)
712
-
-
-
2017
$’000
2016
$’000
(1553)
136
100
774
(2,574)
(1,443)
Page 50
Notes to the Financial Statements
8. Discontinued Operations
Envirosuite Limited sold its 100% equity interests (the sale) in its subsidiaries, Pacific
Environment Holdings Pty Ltd, Pacific Environment Operations Pty Ltd and DLA Environmental
Services Pty Ltd (collectively known as “the consulting practice”) for $15 million to
Environmental Resource Management (ERM). The sale of the consulting practice to ERM
occurred on 26 June 2017 (the completion date) in accordance with a Share Sale and Purchase
Agreement (SPA).
The purchase price is subject to a net debt and working capital adjustment. The process to
agree or determine the amount of the adjustment is ongoing and incomplete. Further, there
are various post completion steps and ongoing terms and conditions set out in the SPA and
related agreements that must be completed, observed or complied with by Envirosuite Limited
after completion including, inter alia:-
•
•
•
the determination of Completion Accounts and Completion Statement in accordance
with the SPA;
the determination and release of amounts in escrow pending certain conditions/events;
and
transfers of various contracts.
The Directors are confident there are no known claims to or against Envirosuite Limited
currently which could give rise to a contingent liability and are confident the final settlement
adjustment will not be significantly material to the financial statements. However, whether
there are outstanding sale matters that could affect the gain on sale of discontinued operations,
the Group’s operations or the results of those operations in future financial years or the Group’s
state of affairs in future financial years, is uncertain.
The financial performance of the discontinued operation to the date of sale, which is included
in the profit/(loss) from discontinued operations per the statement of comprehensive income is
as follows:
Revenue & other income
Expenses
Loss before income tax
Income tax benefit
Loss after tax attributable to the discontinued operation
Gain on sale before income tax
Income tax expense
Gain on sale after income tax
Consolidated Group
2017
$’000
2016
$’000
16,050
17,809
(19,005)
(19,615)
(2,955)
(1,806)
179
254
(2,776)
(1,552)
1,219
(507)
712
-
-
-
Total Loss after tax attributable to the discontinued operation
(2,064)
(1,553)
The net cash flows of the discontinued operation, which have been incorporated into
the statement of cash flows, are as follows:
Net cash outflow from operating activities
Net cash outflow from investing activities
Net cash inflow/(outflow) from financing activities
2017
$’000
2016
$’000
(1553)
136
100
774
(2,574)
(1,443)
Envirosuite Limited Annual Report 2017Page 51
Notes to the Financial Statements
Net cash decrease generated by the discontinued operation
1,517
(357)
9.
Current assets – Cash and cash equivalents
Cash at bank and in hand
Consolidated Group
2017
$’000
2016
$’000
11,471
1,338
(a) Reconciliation to cash at the end of the year
The above figures are reconciled to cash at the end of financial year as shown in the statement
of cash flows as follows:
Balances as above
Balance per statement of cash flows
(b) Risk exposure
Note
2017
$’000
11,471
11,471
2016
$’000
1,338
1,338
The Group’s exposure to interest rate risk is discussed in note 2. The maximum exposure to
credit risk at the reporting date is the carrying amount of each class of cash and cash
equivalents mentioned above.
10.
Current assets – Trade and other receivables
Trade receivables
Provision for impairment of receivables (note (a))
Research and Development Tax Incentive receivable
Held in Escrow – Sale of consultancy practice (note 8)
Working Capital Receivable (note 8)
Other receivables
2017
$’000
191
-
191
-
565
28
82
2016
$’000
2,609
(66)
2,543
1,663
-
-
52
866
4,258
8
8
(a) Impaired Trade Receivables
Past Due but Not
Impaired
(Days Overdue)
Gross
Amount
Past Due
and
Impaired
< 30
31 – 60
61 – 90
> 90
Within
Initial
Trade
Terms
$000
$000
$000
$000
$000
$000
$000
191
-
98
92
1
-
2017
Trade & term
receivables
Trade and other receivables
Page 52
Net cash decrease generated by the discontinued operation
1,517
(357)
9.
Current assets – Cash and cash equivalents
(a) Reconciliation to cash at the end of the year
Cash at bank and in hand
of cash flows as follows:
Balances as above
Balance per statement of cash flows
(b) Risk exposure
Trade receivables
Provision for impairment of receivables (note (a))
Research and Development Tax Incentive receivable
Held in Escrow – Sale of consultancy practice (note 8)
Working Capital Receivable (note 8)
Other receivables
The Group’s exposure to interest rate risk is discussed in note 2. The maximum exposure to
credit risk at the reporting date is the carrying amount of each class of cash and cash
equivalents mentioned above.
10.
Current assets – Trade and other receivables
Consolidated Group
2017
$’000
2016
$’000
11,471
1,338
Note
2017
$’000
11,471
11,471
2016
$’000
1,338
1,338
2017
$’000
191
191
-
-
565
28
82
866
2016
$’000
2,609
(66)
2,543
1,663
-
-
52
4,258
8
8
Notes to the Financial Statements
Other
receivables
Total
2016
Trade & term
receivables
Other
receivables
Total
675
866
2,609
1,715
4,324
-
-
66
-
66
-
98
-
92
895
144
-
-
895
144
-
1
38
-
38
-
-
21
-
21
675
675
1,445
1,715
3,160
The above figures are reconciled to cash at the end of financial year as shown in the statement
(a) Other receivables
These amounts are for rental bonds on leased properties, security deposits on hired equipment
and working capital receivables.
(b) Loans to related parties
No loans are outstanding to related parties.
(c) Fair value and credit risk
Due to the short term nature of these receivables, the carrying amount is assumed to
approximate their fair value.
The maximum exposure to credit risk at the reporting date is the carrying amount of each class
of receivables mentioned above. The fair value of securities held for certain trade receivable is
insignificant as is the fair value of any collateral sold or re-pledged. Refer to note 2 for more
information on the risk management policy of the Group and the credit quality of the Group's
trade receivables.
(d) Financial assets classified as loans and receivables
Trade and other receivables - Current
Total Financial Assets clarified as loans and receivables
11.
Other Assets
(a) Impaired Trade Receivables
Prepayments
12.
Current assets – Inventories
Amount
Impaired
< 30
31 – 60
61 – 90
> 90
Work in Progress at cost
Past Due but Not
Impaired
(Days Overdue)
Gross
Past Due
and
Within
Initial
Trade
Terms
2017
Trade & term
receivables
$000
$000
$000
$000
$000
$000
$000
191
-
98
92
1
-
Consolidated Group
Note
2017
$’000
866
866
2016
$’000
4,258
4,258
Consolidated Group
2017
$’000
146
2016
$’000
112
2016
$’000
340
2017
$’000
-
Trade and other receivables
Envirosuite Limited Annual Report 2017Page 53
Notes to the Financial Statements
13.
Non-current assets – Property, plant and equipment
Consolidated Group
Year ended 30 June 2016
Opening net book amount
Additions
Disposals
Transfer between classes
Depreciation charge
Closing net book amount
At 30 June 2016
Cost or fair value
Accumulated depreciation
Net book amount
Year ended 30 June 2017
Opening net book amount
Additions
Disposals
Disposals of Assets on sale of subsidiary
Depreciation charge
Closing net book amount
At 30 June 2017
Cost or fair value
Accumulated depreciation
Net book amount
Motor
Vehicles
$’000
Furniture
fittings and
equipment
$’000
Leased
Assets
$’000
58
-
-
72
(43)
87
199
(112)
87
87
-
(5)
(42)
(40)
-
-
-
589
326
(4)
(72)
(169)
670
1,620
(950)
670
670
215
(131)
(606)
(135)
13
14
(1)
13
1,964
158
-
-
(437)
1,685
2,480
(795)
1,685
1,685
-
-
(1,248)
(437)
-
-
-
-
Total
$’000
2,611
484
(4)
-
(649)
2,442
4,299
(1,857)
2,442
2,442
215
(136)
(1,896)
(612)
13
14
(1)
13
Total impairment losses recognised in the statement of comprehensive income was nil
(2016:nil).
Included in disposals for the year ended 30 June 2017 is nil (2016: nil) of accumulated
impairment losses.
Non-current assets pledged as security
Refer to note 19 for information on non-current assets pledged as security by the Group.
Page 54
Notes to the Financial Statements
14.
Non-current assets – Intangible assets
Consolidated Group
At 30 June 2015
Cost or fair value
Accumulated amortisation
Accumulated impairment
Net book amount
Year ended 30 June 2016
Opening net book amount
Acquisition of business
Cost capitalised *
Adjustments to goodwill on acquisition of business
Disposal of business
Amortisation charge **
Reversal of prior year impairment
Closing net book amount
At 30 June 2016
Cost or fair value
Accumulated amortisation
Accumulated impairment
Net book amount
Year ended 30 June 2017
Opening net book amount
Cost capitalised *
Write Off
Write off On
Amortisation charge **
Impairment charge (note (f))
Closing net book amount
At 30 June 2017
Cost or fair value
Accumulated amortisation
Accumulated impairment
Net book amount
Goodwill
$’000
Software
$’000
Other
$’000
10,696
-
(742)
9,954
9,954
-
-
316
-
-
-
10,270
11,012
-
(742)
10,270
10,270
-
-
(10,270)
-
-
-
-
-
-
-
3,913
(1,710)
(359)
1,844
1,844
-
1,267
-
-
(384)
-
2,727
5,180
(2,094)
(359)
2,727
2,727
1,612
(226)
(331)
-
3,782
4,022
(240)
-
3,782
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
$’000
14,609
(1,710)
(1,101)
11,798
11,798
-
1,267
316
-
(384)
-
12,997
16,192
(2,094)
(1,101)
12,997
12,997
1,612
(226)
(10,270)
(331)
-
3,782
4,022
(240)
-
3,782
* Software includes capitalised development costs being an internally generated intangible asset.
** Amortisation of $11,000 (2016: $384,000) is included in depreciation and amortisation expense in the consolidated statement of
comprehensive income.
Envirosuite Limited Annual Report 2017Page 55
Notes to the Financial Statements
14. Non-current assets – Intangible assets (continued)
14. Non-current assets – Intangible assets (continued)
(a)
Impairment tests for goodwill
Goodwill is allocated to the subsidiaries of the Group. A summary of the goodwill allocation is
presented below. All goodwill was written off during the year on sale of the consulting practice
to ERM.
2017
Goodwill
Impairment
2016
Goodwill
Impairment
Pacific Environment
Pty Ltd
$’000
-
DLA Environmental
Services Pty Ltd
$’000
-
-
-
-
-
Pacific Environment
Pty Ltd
$’000
8,357
DLA Environmental
Services Pty Ltd
$’000
2,655
(742)
7,615
-
2,655
Total
$’000
-
-
-
Total
$’000
11,012
(742)
10,270
The recoverable amount of each subsidiary was determined based on value-in-use
calculations. These calculations use cash flow projections based on financial budgets approved
by management covering a five year period. Cash flows beyond the five year period were
extrapolated using estimated growth rates. The growth rate does not exceed the long term
average growth rate for the business in which the subsidiary operates.
(b) Description of the Group’s Intangible Assets and Goodwill
Goodwill - After initial recognition, goodwill acquired in a business combination was measured
at cost less any accumulated impairment losses. Goodwill was not amortised but is subject to
impairment testing on an annual basis or whenever there is an indication of impairment.
Software - Software is carried at cost less accumulated amortisation and accumulated
impairment losses. This intangible asset has been assessed as having a finite life and is
amortised using the straight line method over a period of ten years. If an impairment indication
arises, the recoverable amount is estimated and an impairment loss is recognised to the extent
the recoverable amount is lower than the carrying amount.
(c)
Impairment tests for software
The recoverable amount of software is determined based on value-in-use calculations. These
calculations use cash flow projections based on financial budgets approved by management
covering a five year period. Cash flows beyond the five year period are extrapolated using
estimated growth rates. Cash flows exclude future software development costs as it is expected
these will be funded from other sources including R&D tax incentive refunds.
(d) Key assumptions used for value-in-use calculations
Following the completion of the sale of the consulting practice, the Group engaged an external
valuer to complete a valuation of the intellectual property owned by Envirosuite Holdings Pty
Ltd. The valuer concluded a fair value market value of $3,850,000.
In arriving at their valuation conclusion, the valuer considered a number of commonly used:
income, cash flow and balance sheet-based valuation methodologies and following discussions
with management, considered that the Relief from-Royalty, the Cost Approach, and the Implied
Market Value methodologies were the most appropriate approaches to adopt.
i) The Relief-from-Royalty method - This method is based on the theory that the intangible asset
owner would be willing to pay a reasonable royalty to use the intangible asset assuming that
they did not already own the asset.
ii) The Cost to Replicate Approach is based on the premise that a prudent investor would pay
no more for an asset than its replacement or reproduction costs (often referred to as “build or
buy”). The cost to replace the asset would include the cost of constructing a similar asset of
equivalent utility at prices applicable at the time of the valuation analysis.
iii) Implied Market Value Approach - For publicly listed companies, the implied value of
intangible assets can be calculated by subtracting the fair value of tangible assets and liabilities
from the company’s market valuation.
Following the application of these three valuation approaches the resulting valuations leading
to the concluded valuation is summarised in the table below.
Concluded Value of IP
Valuation Method
Value-in-use / Royalty Rate
Cost to replicate
Implied Market Value
Average value of IP (rounded)
(e)
Impairment charge
Concluded Value
($)
3,813,310
3,782,353
3,962,927
3,850,000
During the year ended 30 June 2017 and the year ended 30 June 2016 no impairment charges
were made against cash generating units.
15. Current liabilities – Trade and other payables
Consolidated Group
2017
$’000
749
-
94
1,560
2,403
2016
$’000
1,032
944
-
1,086
3,062
Trade payables
Acquisition deferred settlement (refer note 30)
Working capital payable (refer note 8)
Other payables
(a) Risk exposure
provided in note 2.
Information about the Group's and the parent entity's exposure to foreign exchange risk is
(b) Financial liabilities at amortised cost classified as trade and other payables
Page 56
Notes to the Financial Statements
14. Non-current assets – Intangible assets (continued)
(d) Key assumptions used for value-in-use calculations
Following the completion of the sale of the consulting practice, the Group engaged an external
valuer to complete a valuation of the intellectual property owned by Envirosuite Holdings Pty
Ltd. The valuer concluded a fair value market value of $3,850,000.
In arriving at their valuation conclusion, the valuer considered a number of commonly used:
income, cash flow and balance sheet-based valuation methodologies and following discussions
with management, considered that the Relief from-Royalty, the Cost Approach, and the Implied
Market Value methodologies were the most appropriate approaches to adopt.
i) The Relief-from-Royalty method - This method is based on the theory that the intangible asset
owner would be willing to pay a reasonable royalty to use the intangible asset assuming that
they did not already own the asset.
ii) The Cost to Replicate Approach is based on the premise that a prudent investor would pay
no more for an asset than its replacement or reproduction costs (often referred to as “build or
buy”). The cost to replace the asset would include the cost of constructing a similar asset of
equivalent utility at prices applicable at the time of the valuation analysis.
iii) Implied Market Value Approach - For publicly listed companies, the implied value of
intangible assets can be calculated by subtracting the fair value of tangible assets and liabilities
from the company’s market valuation.
Following the application of these three valuation approaches the resulting valuations leading
to the concluded valuation is summarised in the table below.
Concluded Value of IP
Valuation Method
Value-in-use / Royalty Rate
Cost to replicate
Implied Market Value
Average value of IP (rounded)
(e)
Impairment charge
Concluded Value
($)
3,813,310
3,782,353
3,962,927
3,850,000
During the year ended 30 June 2017 and the year ended 30 June 2016 no impairment charges
were made against cash generating units.
15. Current liabilities – Trade and other payables
Trade payables
Acquisition deferred settlement (refer note 30)
Working capital payable (refer note 8)
Other payables
Consolidated Group
2017
$’000
749
-
94
1,560
2,403
2016
$’000
1,032
944
-
1,086
3,062
(a) Risk exposure
Information about the Group's and the parent entity's exposure to foreign exchange risk is
provided in note 2.
(b) Financial liabilities at amortised cost classified as trade and other payables
Envirosuite Limited Annual Report 2017Page 57
Notes to the Financial Statements
Trade payables – current
Working capital payable
Other payables – current
Financial liabilities
16. Current liabilities – Borrowings
Secured
Bank loans
Lease liabilities
Total secured current borrowings
Unsecured
Convertible loan (refer note 19(a))
Total unsecured current borrowings
Total current borrowings
Note
15
8
15
Consolidated Group
2017
$’000
749
94
1,560
2,403
2016
$’000
1,032
-
2,030
3,062
Notes
28
Consolidated Group
2017
$’000
2016
$’000
-
-
-
-
-
-
511
712
1,223
433
433
1,656
(a) Security and fair value disclosures
Information about the security relating to each of the secured liabilities and the fair value of
each of the borrowings is provided in note 19.
(b) Risk exposures
Details of the Group's exposure to risks arising from current and non-current borrowings are
set out in note 2.
17. Current liabilities – Provisions
Opening balance at 1 July 2016
Provisions transferred in upon sale
Transferred out on sale to ERM
Amounts used
Balance at 30 June 2017
Provision
for Income
tax
Employee
Benefits
$’000
Deferred
Lease
Incentive
$’000
147
-
-
(147)
-
851
237
(729)
(122)
237
-
-
-
-
-
Total
$’000
998
237
(729)
(122)
237
Amounts not expected to be settled within the next 12 months
The current provision for long service leave includes all unconditional entitlements where
employees have completed ten years of service. The entire amount is presented as current,
since the Group does not have an unconditional right to defer settlement. However, based on
2016
$’000
139
2016
$’000
-
427
887
1,314
-
-
1,314
-
-
-
-
-
-
Consolidated Group
2017
$’000
2016
$’000
past experience, the Group does not expect all employees to take the full amount of accrued
long service leave or require payment within the next 12 months.
The following amounts reflect leave that is not to be expected to be taken or paid within the
next 12 months.
Long service
leave obligations
expected to be settled after 12
months (refer note 21)
18. Non-current liabilities – Trade and other payables
Consolidated Group
2017
$’000
31
2017
$’000
-
Acquisition
deferred
settlement
(refer note 30)
19. Non-current liabilities – Borrowings
Secured
Bank loans
Lease liabilities
Total secured non-current borrowings
Unsecured
Convertible loan (note (a))
Total unsecured non-current borrowings
Total non-current borrowings
(a)
Convertible loan
Interest bearing
convertible loan
Robin Ormerod
Date issued
Face value
$’000
Repayment Date
17/11/2010
-
30/06/2017
In November 2010, the Group secured a loan of $1.8 million. The loan was a fixed rate,
Australian-dollar denominated loan.
On 30 December 2012 the Company entered into a new Loan agreement to replace the existing
agreement that was due to expire on the 27 November 2013. The new loan expires on 30 June
2017. The loan is in the form of a convertible note arrangement with Mr Robin Ormerod.
The company may repay the loan earlier at its discretion. The effective interest rate of the loan
is 11% including a 2% discount that applies while the loan is not in default. The Financier may
convert some or all of the loan amount to shares at a share price calculated at the Volume
Weighted Average Price for the three months prior to the signing of the Loan deed, subject to
any necessary shareholder approval. The number of converted shares that can be traded is
restricted to 10% of the issued share capital of the Company per year in each of the first four
years.
On 10 October 2016, Robin Ormerod requested the final conversion of his convertible note with
the Group. The conversion of $450,000 of outstanding principal into fully paid shares in the
Page 58
Notes to the Financial Statements
past experience, the Group does not expect all employees to take the full amount of accrued
long service leave or require payment within the next 12 months.
The following amounts reflect leave that is not to be expected to be taken or paid within the
next 12 months.
Long service
leave obligations
expected to be settled after 12
months (refer note 21)
2017
$’000
31
18. Non-current liabilities – Trade and other payables
Consolidated Group
2017
$’000
-
Acquisition
(refer note 30)
deferred
settlement
19. Non-current liabilities – Borrowings
2016
$’000
139
2016
$’000
-
Secured
Bank loans
Lease liabilities
Total secured non-current borrowings
Unsecured
Convertible loan (note (a))
Total unsecured non-current borrowings
Total non-current borrowings
(a)
Convertible loan
Interest bearing
convertible loan
Robin Ormerod
Consolidated Group
2016
$’000
2017
$’000
-
-
-
-
-
-
427
887
1,314
-
-
1,314
Date issued
Face value
$’000
Repayment Date
17/11/2010
-
30/06/2017
In November 2010, the Group secured a loan of $1.8 million. The loan was a fixed rate,
Australian-dollar denominated loan.
On 30 December 2012 the Company entered into a new Loan agreement to replace the existing
agreement that was due to expire on the 27 November 2013. The new loan expires on 30 June
2017. The loan is in the form of a convertible note arrangement with Mr Robin Ormerod.
The company may repay the loan earlier at its discretion. The effective interest rate of the loan
is 11% including a 2% discount that applies while the loan is not in default. The Financier may
convert some or all of the loan amount to shares at a share price calculated at the Volume
Weighted Average Price for the three months prior to the signing of the Loan deed, subject to
any necessary shareholder approval. The number of converted shares that can be traded is
restricted to 10% of the issued share capital of the Company per year in each of the first four
years.
On 10 October 2016, Robin Ormerod requested the final conversion of his convertible note with
the Group. The conversion of $450,000 of outstanding principal into fully paid shares in the
Envirosuite Limited Annual Report 2017Page 59
Notes to the Financial Statements
Group was executed on 10 October 2016, which resulted in an issue of 13,353,115 new shares
and a reduction in the outstanding loan amount to Nil with an associated reduction in interest
charges to the Group.
On 10 May 2016, Robin Ormerod requested a partial conversion of his convertible note with
the Group. The conversion of $450,000 of outstanding principal into fully paid shares in the
Group was executed on 10 May 2016, which resulted in an issue of 13,353,115 new shares
and a reduction in the outstanding loan amount to $433,331 with an associated reduction in
interest charges to the Group.
On 20 October 2015, Robin Ormerod requested a partial conversion of his convertible note with
the Group. The conversion of $360,000 of outstanding principal into fully paid shares in the
Group was executed on 20 October 2015, which resulted in an issue of 10,682,492 new shares
and a reduction in the outstanding loan amount to $874,997 with an associated reduction in
interest charges to the Group.
The loan is determined to be a compound financial instrument under AASB132 (18), as it
combines features associated with both equity instruments and financial liabilities.
The convertible instruments are presented in the consolidated statement of financial position
as follows:
Face value of notes issues
Other equity securities – value of conversion rights
Interest expense*
Amortisation
Conversion to equity
Interest paid
Less: Interest owing (included in other payables)
Less: Convertible note liability included in current borrowings
Total convertible note liability included in non-current borrowings
Consolidated Group
2017
$’000
1,800
(109)
1,691
841
109
2016
$’000
1,800
(109)
1,691
822
93
(1,800)
(1,350)
(841)
-
-
-
-
(822)
434
(1)
(433)
-
* Interest expense is calculated by applying the effective interest rate of 11% (convertible loan)
to the face value of notes issued.
(b) Secured liabilities and assets pledged as security
The total secured liabilities (current and non-current) are as follows:
Bank overdraft
Bank loans
Lease liabilities
Total secured liabilities
Consolidated Group
2017
$’000
-
-
-
-
2016
$’000
-
937
1,600
2,537
19. Non-current liabilities – Borrowings (continued)
(b) Secured liabilities and assets pledged as security (continued)
Lease liabilities are effectively secured as the rights to the leased assets recognised in the
financial statements and revert to the lessor in the event of default.
The current and non-current allocation of the Group’s finance leases are as follows:
Consolidated Group
Note
2017
$’000
2016
$’000
28(b)
28(b)
-
-
-
712
887
1,599
Consolidated Group
2017
$’000
2016
$’000
Current
Finance lease
Non-current
Finance lease
Plant and equipment
Plant and equipment
Total lease liability
(c) Fair value
date.
(d) Risk exposures
provided in note 2.
20. Tax
Current
There is no difference between the carrying amounts and fair values of borrowings at balance
Information about the Group's exposure to interest rate and foreign currency changes is
Income tax receivable – Research & Development
-
1,663
Opening
Charged
Charged
Changes
Balance
$’000
to
directly to
Income
$’000
Equity
$’000
in Tax
Rate
$’000
Exchange
Differences
$’000
Closing
Balance
$’000
Deferred tax liabilities
Balance at 30 June 2016
Other
Balance at 30 June 2017
(92)
92
(92)
92
(92)
(92)
(92)
(92)
Page 60
Notes to the Financial Statements
19. Non-current liabilities – Borrowings (continued)
(b) Secured liabilities and assets pledged as security (continued)
Lease liabilities are effectively secured as the rights to the leased assets recognised in the
financial statements and revert to the lessor in the event of default.
The current and non-current allocation of the Group’s finance leases are as follows:
Current
Finance lease
Plant and equipment
Non-current
Finance lease
Plant and equipment
Total lease liability
(c) Fair value
Consolidated Group
Note
2017
$’000
2016
$’000
28(b)
28(b)
-
-
-
712
887
1,599
There is no difference between the carrying amounts and fair values of borrowings at balance
date.
(d) Risk exposures
Information about the Group's exposure to interest rate and foreign currency changes is
provided in note 2.
20. Tax
Current
Consolidated Group
2017
$’000
2016
$’000
Income tax receivable – Research & Development
-
1,663
Opening
Balance
$’000
Charged
to
Income
$’000
Charged
directly to
Equity
$’000
Changes
in Tax
Rate
$’000
Exchange
Differences
$’000
Closing
Balance
$’000
Deferred tax liabilities
Balance at 30 June 2016
Other
Balance at 30 June 2017
(92)
92
(92)
92
(92)
(92)
(92)
(92)
Envirosuite Limited Annual Report 2017Page 61
Notes to the Financial Statements
Opening
Balance
$’000
Charged
to
Income
$’000
Charged
directly to
Equity
$’000
Changes
in Tax
Rate
$’000
Exchange
Differences
$’000
Closing
Balance
$’000
Deferred tax assets
Provisions
Transaction costs on equity
issue
Other
Balance at 30 June 2016
298
29
118
-
23
(9)
350
109
Provisions
416
(270)
-
30
-
30
-
-
-
-
-
-
-
-
-
-
-
Transaction costs on equity
issues
Other
59
-
20
-
-
14
7
-
Balance at 30 June 2017
489
(263)
20
-
-
-
-
416
59
14
489
146
79
21
246
The amount of unused tax losses for which no deferred tax assets have been brought to
account:
Tax losses: operating losses $2,798,104 (2016: $2,374,493)
Tax losses: capital losses $Nil (2016: $961,807)
The benefits of the above unused tax losses will only be realised if the conditions for
deductibility set out in Note 1(e) occur. These amounts have no expiry date.
21. Non-current liabilities – Provisions
Employee
Benefits
$’000
139
55
Total
$’000
139
55
(163)
(163)
-
31
-
31
2017
Shares
2016
Shares
2017
$’000
2016
$’000
230,933,875
182,259,474
26,144
22,691
Opening balance at 1 July 2016
Additional provisions
Transferred on sale to ERM
Amounts used
Balance at 30 June 2017
22. Issued Capital
(a) Share capital
Ordinary shares
(notes (c) and (d))
Fully Paid
(b) Other equity securities
Value of conversion rights,
convertible loan (note (g))
Value of conversion rights, convertible notes
-
-
-
-
109
109
28
28
Total consolidated contributed equity
230,933,875
182,259,474
26,281
22,828
(c) Movements in ordinary shares
Date
Details
30/06/2015
Balance
15/09/2015
Shares issued to CEO per contract
22/10/2015
Partial conversion of convertible notes
08/12/2015
Conversion of employee options
09/05/2016
Institutional Placement
10/05/2016
Partial conversion of convertible notes
Less: Transaction costs of capital raising
30/06/2016
Balance
12/09/2016
Shares issued to ex-employee
10/10/2016
Final conversion of convertible notes
26/10/2016
Institutional Placement
Number of
shares
132,934,978
1,200,000
10,682,492
200,000
23,888,889
13,353,115
182,259,474
1,987,952
13,353,115
33,333,334
230,933,875
Issue
price
0.13
0.03
0.09
0.09
0.03
0.08
0.03
0.09
$’000
19,683
150
360
18
2,150
450
(120)
22,691
165
450
3,000
(162)
26,144
Less: Transaction costs of capital raising (inc. tax effect)
30/06/2017
Balance
(i) Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up
of the Company in proportion to the number of and amounts paid on the shares held.
Every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one
vote, and upon a poll each share is entitled to one vote.
As part of the termination agreement with former CEO Peter White ordinary shares to the value
of $650,000 were to be issued. On 12 September 2016, 1,987,952 ordinary shares were issued
valued at 8.3 cents per share. The total charge to Statement of Profit or Loss and other
Comprehensive Income for these shares occurred in FY2016.
The final tranche of the convertible notes was converted on 10 October 2016, 13,353,115
ordinary shares were issued to the value of $450,000.
During the year ended 30 June 2017, 33,333,334 shares were issued at 9 cents per share
through an institutional placement raising $3,000,000. Transaction costs for the capital raisings
were a net of $147,000 ($210,000 adjusted for tax effect of $63,000) There were also additional
tax effect adjustments on capital raising costs to total $162,000 in Transaction costs.
During the year ended 30 June 2016, 1,200,000 ordinary shares valued at 12.5 cents per share
were issued to the Chief Executive Officer as part of his employment contract for no
consideration. The total charge to the Statement of Profit or Loss and Other Comprehensive
Income in relation to these shares was $51,600 (FY2015 $98,400 was charged to the
Statement of Profit or Loss and Other Comprehensive Income in relation to these shares).
During the year ended 30 June 2016, 24,035,607 shares were issued upon partial conversion
of the convertible note to the value of $810,000.
During the year ended 30 June 2016, 200,000 shares were issued upon exercise of employee
options to the value of $18,000.
Page 62
Notes to the Financial Statements
Value of conversion rights,
convertible loan (note (g))
Value of conversion rights, convertible notes
-
-
-
-
109
109
28
28
Total consolidated contributed equity
230,933,875
182,259,474
26,281
22,828
(c) Movements in ordinary shares
Date
30/06/2015
Details
Balance
15/09/2015
Shares issued to CEO per contract
22/10/2015
Partial conversion of convertible notes
08/12/2015
Conversion of employee options
09/05/2016
Institutional Placement
10/05/2016
Partial conversion of convertible notes
Less: Transaction costs of capital raising
30/06/2016
Balance
12/09/2016
Shares issued to ex-employee
10/10/2016
Final conversion of convertible notes
26/10/2016
Institutional Placement
Less: Transaction costs of capital raising (inc. tax effect)
30/06/2017
Balance
(i) Ordinary shares
Number of
shares
132,934,978
1,200,000
10,682,492
200,000
23,888,889
13,353,115
182,259,474
1,987,952
13,353,115
33,333,334
230,933,875
Issue
price
0.13
0.03
0.09
0.09
0.03
0.08
0.03
0.09
$’000
19,683
150
360
18
2,150
450
(120)
22,691
165
450
3,000
(162)
26,144
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up
of the Company in proportion to the number of and amounts paid on the shares held.
Every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one
vote, and upon a poll each share is entitled to one vote.
As part of the termination agreement with former CEO Peter White ordinary shares to the value
of $650,000 were to be issued. On 12 September 2016, 1,987,952 ordinary shares were issued
valued at 8.3 cents per share. The total charge to Statement of Profit or Loss and other
Comprehensive Income for these shares occurred in FY2016.
The final tranche of the convertible notes was converted on 10 October 2016, 13,353,115
ordinary shares were issued to the value of $450,000.
During the year ended 30 June 2017, 33,333,334 shares were issued at 9 cents per share
through an institutional placement raising $3,000,000. Transaction costs for the capital raisings
were a net of $147,000 ($210,000 adjusted for tax effect of $63,000) There were also additional
tax effect adjustments on capital raising costs to total $162,000 in Transaction costs.
During the year ended 30 June 2016, 1,200,000 ordinary shares valued at 12.5 cents per share
were issued to the Chief Executive Officer as part of his employment contract for no
consideration. The total charge to the Statement of Profit or Loss and Other Comprehensive
Income in relation to these shares was $51,600 (FY2015 $98,400 was charged to the
Statement of Profit or Loss and Other Comprehensive Income in relation to these shares).
During the year ended 30 June 2016, 24,035,607 shares were issued upon partial conversion
of the convertible note to the value of $810,000.
During the year ended 30 June 2016, 200,000 shares were issued upon exercise of employee
options to the value of $18,000.
Envirosuite Limited Annual Report 2017Page 63
Notes to the Financial Statements
During the year ended 30 June 2016, 23,888,889 shares were issued at 9 cents per share
through an institutional placement raising $2,150,000. Transaction costs for the capital raisings
were a net of $120,000 ($150,000 adjusted for tax effect of $130,000).
(ii) Options
There were no options issued to directors during the year ended 30 June 2017 (2016:
9,000,000). There were no options issued to employees for the year ended 30 June 2017
(2016: 1,000,000) Information relating to the options, including details of options issued,
exercised and lapsed during the financial year and options outstanding at the end of the
financial year, is set out in note 35.
(iii) Share based payments
Certain shares were issued for no cash consideration for the provision of services, details of
which are shown in note 35.
(iv) Other equity securities
The amount shown for other equity securities is the value of the conversion rights relating to
the convertible instruments, details of which are shown in note 19(a).
(v) Capital risk management
The Group's objectives when managing capital are to safeguard its ability to continue as a going
concern, so that it can provide returns for shareholders and benefits for other stakeholders and
to maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of
dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets
to reduce debt.
Consistent with others in the industry, the Group monitors capital on the basis of the gearing
ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total
borrowings (including 'borrowings' and ‘trade and other payables' as shown in the statement of
financial position) less cash and cash equivalents. Total capital is calculated as ‘total equity' as
shown in the statement of financial position (including minority interest) plus net debt.
The gearing ratios at 30 June 2017 and 30 June 2016 were as follows:
Total borrowings
Less: cash and cash equivalents
Net debt (cash)/debt
Total equity
Total capital
Gearing Ratio
23. Reserves and retained losses
(a) Reserves
Employee shares reserve (a)
Share-based payments reserve (b)
Consolidated Group
Note
15,16,18,19
2017
$’000
2,403
2016
$’000
6,032
9
(11,471)
(1,338)
(9,068)
14,096
5,028
N/A
4,694
14,807
19,501
24%
Consolidated Group
2017
$’000
-
700
700
2016
’000
165
607
772
ended 30 June 2017.
follows:
Short-term employee benefits
Post-employment benefits
Other long term benefits
Recognition of employee shares to be issued
Movements (a) :
Balance 1 July
Transfer to equity
Balance 30 June
Movements (b) :
Balance 1 July
Option expense
Transfer to retained losses
Balance 30 June
(b) Retained losses
Movements
Opening retained losses
Net profit/(loss) for the year
Balance 30 June
(c) Nature and purpose of reserves
(i) Employee shares reserve
granted but not yet issued.
(ii) Share based payments reserve
The employee shares reserve is used to recognise the fair value of employee shares that are
The share based payments reserve is used to recognise the grant date fair value of options
issued to employees and directors but not exercised.
24. Dividends
The Group has not paid or declared any dividends during the period (2016: nil). Franking credits
available for subsequent financial years based on a tax rate of 30% amount to Nil (2016: nil).
25. Key management personnel compensation
Refer to the remuneration report contained in the directors’ report for details of the remuneration
paid or payable to each member of the Group’s key management personnel (KMP) for the year
The totals of remuneration paid to KMP of the company and the Group during the year are as
165
(165)
-
-
607
93
-
700
98
165
(98)
165
405
202
-
607
2017
$’000
2016
$’000
(8,793)
(4,336)
(7,187)
(1,606)
(13,129)
(8,793)
2017
$’000
2016
$’000
452
13
-
519
37
-
Page 64
Notes to the Financial Statements
Movements (a) :
Balance 1 July
Recognition of employee shares to be issued
Transfer to equity
Balance 30 June
Movements (b) :
Balance 1 July
Option expense
Transfer to retained losses
Balance 30 June
(b) Retained losses
Movements
Opening retained losses
Net profit/(loss) for the year
Balance 30 June
165
-
(165)
-
607
93
-
700
98
165
(98)
165
405
202
-
607
2017
$’000
2016
$’000
(8,793)
(4,336)
(7,187)
(1,606)
(13,129)
(8,793)
(c) Nature and purpose of reserves
(i) Employee shares reserve
The employee shares reserve is used to recognise the fair value of employee shares that are
granted but not yet issued.
(ii) Share based payments reserve
The share based payments reserve is used to recognise the grant date fair value of options
issued to employees and directors but not exercised.
24. Dividends
The Group has not paid or declared any dividends during the period (2016: nil). Franking credits
available for subsequent financial years based on a tax rate of 30% amount to Nil (2016: nil).
25. Key management personnel compensation
Refer to the remuneration report contained in the directors’ report for details of the remuneration
paid or payable to each member of the Group’s key management personnel (KMP) for the year
ended 30 June 2017.
The totals of remuneration paid to KMP of the company and the Group during the year are as
follows:
Short-term employee benefits
Post-employment benefits
Other long term benefits
2017
$’000
2016
$’000
452
13
-
519
37
-
Envirosuite Limited Annual Report 2017Page 65
Notes to the Financial Statements
Share-based payments
Total KMP compensation
(i) Short-term employee benefits
74
539
318
874
These amounts include fees and benefits paid to the Chair and directors as well as all salary,
paid leave benefits, fringe benefits and cash bonuses awarded to executive directors and other
KMP.
(ii) Post-employment benefits
These amounts are the current year’s estimated cost of providing for the Group’s
superannuation contributions made during
together with salary sacrifice
superannuation.
the year
(iii) Other long-term benefits
These amounts represent long service leave benefits accruing during the year, long-term
disability benefits and deferred bonus payments.
(iv) Share-based payments
These amounts represent the expense related to the participation of KMP in equity-settled
benefit schemes as measured by the fair value of the options, rights and shares granted during
the year.
Further information in relation to KMP remuneration can be found in the directors’ report.
(iii) Litigation
26. Remuneration of auditors
During the year the following fees were paid or payable for services provided by the auditor of
the parent entity, its related practices and non-related audit firms:
(a) WPIAS Pty Ltd
Audit and other assurance services
Audit and review of financial reports
- current year
- prior year
Other assurance services
Total auditors remuneration
27.
Contingencies
(a) Contingent liabilities
2017
$
2016
$
100,000
100,000
60,000
-
2,538
102,538
160,000
The Group had contingent liabilities at 30 June 2017 in respect of:
(i) Guarantees
The Group has potential exposure to guarantees it has issued to third parties in relation to the
performance and obligation of controlled entities with respect to property lease rentals
amounting to $84,000 (2016: $238,592).
No liability has been recognised by the Group in relation to these financial guarantees as the
guarantees are in the event of default on the property leases’ terms and conditions.
(ii) Escrows
Envirosuite Limited sold its 100% equity interests (the sale) in its subsidiaries, Pacific
Environment Holdings Pty Ltd, Pacific Environment Operations Pty Ltd and DLA Environmental
Services Pty Ltd (collectively known as “the consulting practice”) for $15 million to
Environmental Resource Management (ERM). The sale of the consulting practice to ERM
occurred on 26 June 2017 (the completion date) in accordance with a Share Sale and Purchase
Agreement (SPA).
The purchase price is subject to a net debt and working capital adjustment. The process to
agree or determine the amount of the adjustment is ongoing and incomplete. Further, there
are various post completion steps and ongoing terms and conditions set out in the SPA and
related agreements that must be completed, observed or complied with by Envirosuite Limited
after completion including, inter alia:-
the determination of Completion Accounts and Completion Statement in accordance
the determination and release of amounts in escrow pending certain conditions/events;
•
•
•
with the SPA;
and
transfers of various contracts.
The Directors are confident there are no known claims to or against Envirosuite Limited
currently which could give rise to a contingent liability and are confident the final settlement
adjustment will not be significantly material to the financial statements. However, whether
there are outstanding sale matters that could affect the gain on sale of discontinued operations,
the Group’s operations or the results of those operations in future financial years or the Group’s
state of affairs in future financial years, is uncertain.
There are no litigation proceedings in process at the reporting date.
The Group has no capital expenditure contracted for at the reporting date but not recognised
The Group leases various offices under non-cancellable operating leases expiring within two
to five years. The leases have varying terms, escalation clauses and renewal rights. On
renewal, the terms of the leases are renegotiated.
28. Commitments
(a) Capital commitments
as liabilities in the reporting period.
(b) Lease commitments:
(i) Non-cancellable operating leases
Commitments for minimum lease
payments in relation to non-
cancellable operating leases are
payable as follows:
Within one year
Later than one year but not later
than five years
2017
$’000
179
350
529
2016
$’000
494
373
867
Page 66
Notes to the Financial Statements
Services Pty Ltd (collectively known as “the consulting practice”) for $15 million to
Environmental Resource Management (ERM). The sale of the consulting practice to ERM
occurred on 26 June 2017 (the completion date) in accordance with a Share Sale and Purchase
Agreement (SPA).
The purchase price is subject to a net debt and working capital adjustment. The process to
agree or determine the amount of the adjustment is ongoing and incomplete. Further, there
are various post completion steps and ongoing terms and conditions set out in the SPA and
related agreements that must be completed, observed or complied with by Envirosuite Limited
after completion including, inter alia:-
•
•
•
the determination of Completion Accounts and Completion Statement in accordance
with the SPA;
the determination and release of amounts in escrow pending certain conditions/events;
and
transfers of various contracts.
The Directors are confident there are no known claims to or against Envirosuite Limited
currently which could give rise to a contingent liability and are confident the final settlement
adjustment will not be significantly material to the financial statements. However, whether
there are outstanding sale matters that could affect the gain on sale of discontinued operations,
the Group’s operations or the results of those operations in future financial years or the Group’s
state of affairs in future financial years, is uncertain.
(iii) Litigation
There are no litigation proceedings in process at the reporting date.
28. Commitments
(a) Capital commitments
The Group has no capital expenditure contracted for at the reporting date but not recognised
as liabilities in the reporting period.
(b) Lease commitments:
(i) Non-cancellable operating leases
The Group leases various offices under non-cancellable operating leases expiring within two
to five years. The leases have varying terms, escalation clauses and renewal rights. On
renewal, the terms of the leases are renegotiated.
Commitments for minimum lease
payments in relation to non-
cancellable operating leases are
payable as follows:
Within one year
Later than one year but not later
than five years
2017
$’000
179
350
529
2016
$’000
494
373
867
Envirosuite Limited Annual Report 2017Page 67
Notes to the Financial Statements
Included in the above is a lease of the Brisbane Office held in the name of Pacific Environment
Operations Pty Ltd. A transfer of that lease from Pacific Environment Operations Pty Ltd was a
condition of the sale contract with ERM and is required to retain the tenancy post the sale to
ERM. The transfer is currently in the process of being finalised with the assistance of the
Company’s legal representatives and is expected to be completed by the end of the September
quarter 2017.
(ii) Finance leases
Commitments in relation to finance leases are payable as follows:
Within one year
Later than one year but not later than five years
Later than five years
Minimum lease payments
Less: Future finance charges
Present value of minimum lease payments
Representing lease liabilities:
Current
Non-current
Note
2017
$’000
2016
$’000
-
-
-
-
-
-
-
-
-
789
957
-
1,746
(147)
1,599
712
887
1,599
16
19
All remaining finance leases were required to be paid out on settlement on the sale of the
consulting practice to ERM. The remaining leases at reporting date were for assets owned by
the discontinued operations and as such the payout amount of $71,203.95 has been included
in Trade and Other payables and subsequently paid out on 7th August 2017.
29.
Related party transactions
i.
Parent entities
The parent entity within the Group is Envirosuite Limited (previously known as Pacific
Environment Limited).
30. Business combinations
ii.
Subsidiaries
Interests in subsidiaries are set out in note 31.
iii.
Key management personnel
Disclosures relating to key management personnel are set out in note 25.
iv.
Transactions with other related parties
The following transactions occurred with other related parties:
Purchases of services
Consultancy services – ROKZair Pty Ltd
Consultancy services – DG Capital Partners
Consultancy services – Famile Pty Ltd
Creative services – Soliton Creative
Consultancy services - MC Consultancy Pty Limited
Marketing services - Ian Edgehill
Consolidated Group
2017
$’000
2016
$’000
133
-
16
355
30
12
395
72
24
157
120
59
Other transactions
Interest paid on convertible loan – R Ormerod
Final conversion of convertible note
14
450
109
810
Transactions between related parties are on normal commercial terms and conditions no more
favourable than those available to other parties, unless otherwise stated.
v.
Outstanding balances arising from transactions with other related parties
The following balances are outstanding at the reporting date in relation to transactions with
other related parties:
Current payables
Purchase of services
Beginning of the year
Loans repaid
Other - Amortisation
End of the year
vi.
Borrowings from related parties
2017
$’000
63
2017
$’000
433
(450)
17
-
2016
$’000
95
2016
$’000
1,227
(810)
16
433
There is no allowance for impaired receivables in relation to any outstanding balances from
related parties. During the year no expense has been recognized in respect of impaired
receivables due from related parties.
Acquisition of Business – DLA Environmental Services
On 1 October 2014, DLA Environmental Services Pty Ltd, a wholly owned subsidiary of Pacific
Environment Limited, acquired the assets of DLA Environmental (DLA) as a going concern.
Purchase consideration:
- Cash
- Deferred consideration (i)
Less:
Property, plant and equipment
Employee benefits
assumed
Identifiable assets acquired and liabilities
Goodwill (ii)
Fair value
$’000
1,021
1,654
2,675
101
(81)
20
2,655
(i)
The consideration paid to acquire DLA consisted of deferred payments if maintainable
profits targets were met. In November 2015 based on reaching profit targets, total
payment due less adjustment was $853,078. The difference between the estimated
Page 68
Notes to the Financial Statements
Other transactions
Interest paid on convertible loan – R Ormerod
Final conversion of convertible note
14
450
109
810
Transactions between related parties are on normal commercial terms and conditions no more
favourable than those available to other parties, unless otherwise stated.
v.
Outstanding balances arising from transactions with other related parties
The following balances are outstanding at the reporting date in relation to transactions with
other related parties:
Current payables
Purchase of services
vi.
Borrowings from related parties
Beginning of the year
Loans repaid
Other - Amortisation
End of the year
2017
$’000
63
2017
$’000
433
(450)
17
-
2016
$’000
95
2016
$’000
1,227
(810)
16
433
There is no allowance for impaired receivables in relation to any outstanding balances from
related parties. During the year no expense has been recognized in respect of impaired
receivables due from related parties.
30. Business combinations
Acquisition of Business – DLA Environmental Services
On 1 October 2014, DLA Environmental Services Pty Ltd, a wholly owned subsidiary of Pacific
Environment Limited, acquired the assets of DLA Environmental (DLA) as a going concern.
Purchase consideration:
- Cash
- Deferred consideration (i)
Less:
Property, plant and equipment
Employee benefits
Identifiable assets acquired and liabilities
assumed
Goodwill (ii)
Fair value
$’000
1,021
1,654
2,675
101
(81)
20
2,655
(i)
The consideration paid to acquire DLA consisted of deferred payments if maintainable
profits targets were met. In November 2015 based on reaching profit targets, total
payment due less adjustment was $853,078. The difference between the estimated
Envirosuite Limited Annual Report 2017Page 69
Notes to the Financial Statements
first payment of $826,883 and the actual first payment was recognised in the profit and
loss.
In November 2016 a final payment of $891,829 was made. The difference between
the estimated payment of $826,883 as disclosed in the 30/6/2016 financial report and
the actual payment made of $891,829 was a profit-target adjustment and was
recognised in the profit and loss.
Acquisition of Business – Waste Solutions Australia
On 1 May 2014, Pacific Environment Operations Pty Ltd acquired the assets of Waste Solutions
Australia (WSA) as a going concern.
Purchase consideration:
- Cash
- Deferred consideration (i)
Less:
Property, plant and equipment
Employee benefits
Identifiable assets acquired and liabilities assumed
Goodwill (ii)
Fair value
$’000
220
350
570
63
(42)
21
549
(i)
The consideration paid to acquire WSA consisted of deferred payments if maintainable
profits targets are met.
In June 2016, a payment of $82,907 was made in relation to the first deferred payment.
The difference between the estimated first payment of $116,667 and the actual first
payment was recognised in the profit and loss.
In May 2015, a payment of $50,000 was made in relation to the first deferred payment.
The difference between the estimated first payment of $116,667 and the actual first
payment was recognised in the profit and loss.
On 23 June 2017 a final payment of $110,192 was made. The difference between the
estimated payment of $116,667 was disclosed in the 30/6/2016 financial report and the
actual payment made of $110,192 was a profit-target adjustment and was recognised
in the profit and loss.
31.
Interest in Subsidiaries
(a) Information about Controlled Entities
Controlled Entities Consolidated
Note
Country of incorporation
Percentage
Owned ($) *
2017
%
2016
%
Parent Entity
Envirosuite Limited
(i)
Australia
100
100
Subsidiaries of Envirosuite Limited
Envirosuite Operations Pty Ltd
Envirosuite Holdings Pty Ltd
Envirosuite Corp
Pacific Environment Pty Ltd
Pacific Environment Holdings Pty Ltd
DLA Environmental Services Pty Ltd
(ii)
(iii)
(iv)
(v)
(v)
(v)(vi)
United States of America
Australia
Australia
Australia
Australia
Australia
100
100
100
-
-
-
100
-
100
100
100
100
* Percentage of voting power in proportion to ownership
(i) Previously known as Pacific Environment Limited.
(ii) Previously known as Envirosuite Pty Ltd
(iii) Incorporated 31 March 2017
(iv) Previously known as Metriqa Corp
(v) These companies were sold to a third party, Environmental Resource Management (ERM)
on 26 June 2017. Refer Note 8.
(vi) Previously known as Pacific Environment Operations Pty Ltd.
Subsidiary financial statements used in the preparation of these consolidated financial
statements have also been prepared as at the same reporting date as the Group’s financial
statements.
(b) Significant Restrictions
There are no significant restrictions over the Group’s ability to access or use assets, and settle
liabilities of the Group other than those imposed by the financier(s).
32.
Events occurring after the reporting period
The financial statements were authorised for issue by the Board of Directors on 31 August
2017.
•
•
•
Below are items outstanding on the sale to ERM that could affect:
the Group's operations in future financial years, or
the results of those operations in future financial years, or
the Group's state of affairs in future financial years.
i.
Set out in the Share Purchase Agreement are related agreements that must be
completed, observed or complied with by the company after Completion occurs,
including the preparation and determination of the Completion Accounts and
Completion Statement.
The total Purchase Price of the sale to ERM of $15,000,000 was paid by ERM on 26
June 2017. The purchase price is subject to a net debt and working capital adjustment
that involves a payment between the two parties for the difference between the agreed
working capital figure set out in the Share Purchase Agreement and the actual figure
given by the Completion accounts. The process to determine and agree on the amount
of the adjustment is due to be completed between the two parties in accordance with
the sale contract. Although the exact amount will still be unknown as at the signing date
of the accounts, the Company does not expect the amount to be significantly material.
ii.
As per the Solicitor’s representation letter, there are no known claims to or against
Envirosuite that would give rise to a contingent liability. Any known amounts payable
to ERM at 30 June 2017 have been recognised in Trade and Other payables (refer to
notes 8 and 27)
iii. Mr Peter White was appointed as Chief Executive Officer and Director on 10 July 2017.
Page 70
Notes to the Financial Statements
Envirosuite Operations Pty Ltd
Envirosuite Holdings Pty Ltd
Envirosuite Corp
Pacific Environment Pty Ltd
Pacific Environment Holdings Pty Ltd
DLA Environmental Services Pty Ltd
(ii)
(iii)
(iv)
(v)(vi)
(v)
(v)
Australia
Australia
United States of America
Australia
Australia
Australia
100
100
100
-
-
-
100
-
100
100
100
100
* Percentage of voting power in proportion to ownership
(i) Previously known as Pacific Environment Limited.
(ii) Previously known as Envirosuite Pty Ltd
(iii) Incorporated 31 March 2017
(iv) Previously known as Metriqa Corp
(v) These companies were sold to a third party, Environmental Resource Management (ERM)
on 26 June 2017. Refer Note 8.
(vi) Previously known as Pacific Environment Operations Pty Ltd.
Subsidiary financial statements used in the preparation of these consolidated financial
statements have also been prepared as at the same reporting date as the Group’s financial
statements.
(b) Significant Restrictions
There are no significant restrictions over the Group’s ability to access or use assets, and settle
liabilities of the Group other than those imposed by the financier(s).
32.
Events occurring after the reporting period
The financial statements were authorised for issue by the Board of Directors on 31 August
2017.
Below are items outstanding on the sale to ERM that could affect:
•
•
•
the Group's operations in future financial years, or
the results of those operations in future financial years, or
the Group's state of affairs in future financial years.
i.
Set out in the Share Purchase Agreement are related agreements that must be
completed, observed or complied with by the company after Completion occurs,
including the preparation and determination of the Completion Accounts and
Completion Statement.
The total Purchase Price of the sale to ERM of $15,000,000 was paid by ERM on 26
June 2017. The purchase price is subject to a net debt and working capital adjustment
that involves a payment between the two parties for the difference between the agreed
working capital figure set out in the Share Purchase Agreement and the actual figure
given by the Completion accounts. The process to determine and agree on the amount
of the adjustment is due to be completed between the two parties in accordance with
the sale contract. Although the exact amount will still be unknown as at the signing date
of the accounts, the Company does not expect the amount to be significantly material.
ii.
As per the Solicitor’s representation letter, there are no known claims to or against
Envirosuite that would give rise to a contingent liability. Any known amounts payable
to ERM at 30 June 2017 have been recognised in Trade and Other payables (refer to
notes 8 and 27)
iii. Mr Peter White was appointed as Chief Executive Officer and Director on 10 July 2017.
Envirosuite Limited Annual Report 2017Page 71
Notes to the Financial Statements
33.
Cash flow statement reconciliation
(a) Reconciliation of net profit after tax to net cash flows from operations
(Loss)/profit for the year
Depreciation and amortisation
Non cash employee benefits expense – share based payments
Accrued interest - receivable
Amortised interest on convertible note rights
Acquisition earn out expense target not met
Net loss on sale of non-current assets
Sale of business
Loan forgiveness
Tax effect share transaction costs in equity
Due Diligence Costs Sale of Business
Changes in operating assets and liabilities
Decrease in trade and other debtors
Decrease/(increase) in inventories
Increase in deferred tax asset
(Decrease)/increase in deferred tax liabilities
(decrease)/Increase in trade creditors
(decrease)/Increase in other operating liabilities
(decrease)/Increase in provision for income taxes payable
(decrease)/Increase in other provisions
Net cash inflow from operating activities
(b) Non-cash financing and investing activities
(i) Share issues
2017
$’000
2016
$’000
(4,336)
(1,606)
1,226
93
(4)
17
-
-
(3,818)
18
1,187
3,525
340
243
-
(114)
569
(147)
(722)
(1,922)
1,033
419
-
16
(63)
(4)
-
-
30
-
1,143
(33)
(139)
(92)
(88)
(101)
147
104
774
Undrawn facility
100
4,157
During 2016, the ANZ facility was increased to $6,591,050 incorporating an increase to the
facility for the earn out on the acquisition of the DLA Environmental Services business.
Note 33(b) As a result of the sale of the consulting practice (refer note 8) and repayment of
various facilities, the ANZ facility was reduced in June 2017 to $184,000 being a Standby Letter
of Credit or Guarantee Facility of $84,000 and a commercial card facility of $100,000.
34. Earnings / (losses) per share
(a) Basic earnings / (losses) per share
Basic earnings / (losses) per share
attributable to the ordinary equity
holders of the Company
From continuing operations
From discontinued operations
Benefits/(losses) attributable to the
ordinary equity holders of the
Company used in calculating basic
earnings / (losses) per share
From continuing operations
From discontinued operations
2017
cents
(1.4)
(0.6)
2.0
2017
$’000
(3,033)
(1,303)
2016
cents
0.1
(1.2)
1.1
2016
$’000
200
(1,806)
(b) Diluted earnings / (losses) per share
The diluted earnings / (losses) per share is equal to the basic earnings / (losses) per share, as
per AASB 131.
(c) Reconciliation of earnings used in calculating earnings / (losses) per share
During the year ended 30 June 2017, 13,353,115 ordinary shares to the value of $450,000
were issued as the final conversion of the convertible notes at 3.37 cents per share. In addition
1,987,952 shares to the value of $165,000 were issued to the former Chief Executive Officer
on termination of his employment contract at 8.3 cents per share.
During the year ended 30 June 2016, 24,035,607 ordinary shares to the value of $810,000
were issued as partial conversion of the convertible note at 3.37 cents per share. In addition
1,200,000 shares were issued to the Chief Executive Officer as per his employment contract at
12.5 cents per share.
(ii) Finance leases
During the year the Group did not acquire any plant and equipment by means of finance leases
2017:Nil (2016: $106,000).
(i) Options
(iii) Credit standing arrangements with banks
Credit facility
Amount used
2017
$’000
2016
$’000
184
6,591
84
2,434
(d) Weighted average number of shares used as the denominator
Weighted average number of
ordinary shares used as the
denominator in calculating basic
earnings/(losses) per share
(e) Information concerning the classification of securities
2017
Number
2016
Number
215,566,333
146,700,414
Options granted to employees under the Envirosuite Limited Employee Share Option Plan are
not considered to be potential ordinary shares, as including such securities in the calculation
would result in a decreased earnings per share. The options have not been included in the
determination of basic earnings per share.
(ii) Convertible instruments
Convertible instruments issued are not considered to be potential ordinary shares, as including
such securities in the calculation would result in a decreased earnings per share. The
instruments have not been included in the determination of basic earnings per share.
Page 72
Notes to the Financial Statements
Undrawn facility
100
4,157
During 2016, the ANZ facility was increased to $6,591,050 incorporating an increase to the
facility for the earn out on the acquisition of the DLA Environmental Services business.
Note 33(b) As a result of the sale of the consulting practice (refer note 8) and repayment of
various facilities, the ANZ facility was reduced in June 2017 to $184,000 being a Standby Letter
of Credit or Guarantee Facility of $84,000 and a commercial card facility of $100,000.
34. Earnings / (losses) per share
(a) Basic earnings / (losses) per share
Basic earnings / (losses) per share
attributable to the ordinary equity
holders of the Company
From continuing operations
From discontinued operations
2017
cents
(1.4)
(0.6)
2.0
(b) Diluted earnings / (losses) per share
The diluted earnings / (losses) per share is equal to the basic earnings / (losses) per share, as
per AASB 131.
(c) Reconciliation of earnings used in calculating earnings / (losses) per share
Benefits/(losses) attributable to the
ordinary equity holders of the
Company used in calculating basic
earnings / (losses) per share
From continuing operations
From discontinued operations
2017
$’000
(3,033)
(1,303)
2016
cents
0.1
(1.2)
1.1
2016
$’000
200
(1,806)
(d) Weighted average number of shares used as the denominator
Weighted average number of
ordinary shares used as the
denominator in calculating basic
earnings/(losses) per share
2017
Number
2016
Number
215,566,333
146,700,414
(e) Information concerning the classification of securities
(i) Options
Options granted to employees under the Envirosuite Limited Employee Share Option Plan are
not considered to be potential ordinary shares, as including such securities in the calculation
would result in a decreased earnings per share. The options have not been included in the
determination of basic earnings per share.
(ii) Convertible instruments
Convertible instruments issued are not considered to be potential ordinary shares, as including
such securities in the calculation would result in a decreased earnings per share. The
instruments have not been included in the determination of basic earnings per share.
Envirosuite Limited Annual Report 2017Page 73
Notes to the Financial Statements
35.
Share based payments
(a) Employee share option plan
The establishment of the Pacific Environment Limited Employee Share Option Plan was
approved by the Board prior to the IPO of Pacific Environment Limited. The plan is designed to
provide long term incentives for employees and executive directors to deliver long term
shareholder returns. Participation in the plan is at the Board's discretion and no individual has
a contractual right to participate in the plan or to receive any guaranteed benefits.
The amount of options that will vest depends on the individual contracts agreed by Envirosuite
Limited. Once vested, the options remain exercisable for a period of up to seven years after the
grant date. When exercisable, each option is convertible into one ordinary share on the day of
the next Board meeting or within 15 business days, whichever is earlier. The exercise price of
options is pre-determined in the individual option agreements.
(b) Executive share option scheme
Options were issued to employees under the Envirosuite Limited Executive Share Option
Scheme. Under this scheme, options granted vest as specified under the individual option. The
options are not forfeitable but lapse on the date specified in the individual option agreement. If
an employee ceases employment the options vest immediately and the employee has seven
days to exercise the option at the current market price or the original exercise price, whichever
is greater. If the employee does not exercise the options, the options lapse.
Set out on the following pages are summaries of options granted.
(c)
Employee share plan
Under the Envirosuite Limited Employee Share Plan, Shares issued to employees for no cash
consideration vest immediately on grant date. On this date, the market value of the shares
issued is recognized as an employee benefits expense with a corresponding increase in equity.
12/11/2019
$0.07
2,000,000
-
2,000,000
2,000,000
09/12/2019
$0.12
4,500,000
1,500,000
3,000,000
3,000,000
09/12/2019
$0.18
4,500,000
1,500,000
3,000,000
3,000,000
10/02/2018
$0.75
250,000
250,000
250,000
Expiry date
Exercise
price
Balance at
the start of
the year
Granted
during the
year
Exercised
during the
year
Number
Number
Number
Forfeited
during the year
Number
Balance at
the end of
the year
Number
Vested and
exercisable
at the end of
the year
Number
Directors and Company Secretary of Envirosuite Limited
31/10/2018
08/05/2017
$0.05
500,000
500,000
-
-
2017
Grant date
27/11/2012
1/11/2013
Tranche 1
Tranche 2
Tranche 3
Tranche 1
Tranche 2
Tranche 3
Tranche 1
Tranche 2
27/11/2014
25/11/2015
Tranche 1
Tranche 2
14/01/2008
04/02/2008
Tranche 1
Tranche 2
Tranche 3
Tranche 1
Tranche 2
Tranche 3
Tranche 4
Tranche 1
Tranche 2
Tranche 3
Tranche 4
27/11/2012
Tranche 1
04/02/2008
12/09/2008
Tranche 1
Tranche 2
Tranche 1
Tranche 2
Tranche 1
Tranche 2
1/11/2013
31/10/2018
27/11/2014
31/10/2019
Former directors of Envirosuite Limited
05/02/2018
04/12/2009
05/02/2018
04/02/2008
05/02/2018
Other employees
08/05/2017
10/02/2018
12/12/2008
10/02/2018
09/04/2012
09/04/2020
$0.08
1,000,000
$0.12
1,500,000
$0.16
2,000,000
$0.10
1,000,000
$0.15
1,500,000
$0.20
2,000,000
$0.10
1,000,000
$0.15
1,000,000
$0.75
$1.00
$1.25
$0.75
$1.00
$1.25
$1.50
$0.75
$1.00
$1.25
$1.50
$0.75
$1.00
$0.55
$0.75
$0.06
$0.06
150,000
50,000
50,000
50,000
50,000
50,000
50,000
50,000
50,000
50,000
50,000
100,000
100,000
100,000
100,000
500,000
500,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,000,000
1,000,000
1,500,000
1,500,000
2,000,000
2,000,000
1,000,000
1,000,000
1,500,000
1,500,000
2,000,000
2,000,000
1,000,000
1,000,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
150,000
150,000
50,000
50,000
50,000
50,000
50,000
50,000
50,000
50,000
50,000
50,000
100,000
100,000
100,000
100,000
500,000
500,000
50,000
50,000
50,000
50,000
50,000
50,000
50,000
50,000
50,000
50,000
100,000
100,000
100,000
100,000
500,000
500,000
$0.03
300,000
300,000
-
-
10/02/2018
$0.75
330,000
330,000
330,000
Page 74
Notes to the Financial Statements
2017
Grant date
Expiry date
Exercise
price
Balance at
the start of
the year
Granted
during the
year
Exercised
during the
year
Number
Number
Number
Forfeited
during the year
Number
Balance at
the end of
the year
Number
Vested and
exercisable
at the end of
the year
Number
Directors and Company Secretary of Envirosuite Limited
08/05/2017
$0.05
500,000
31/10/2018
27/11/2012
1/11/2013
Tranche 1
Tranche 2
Tranche 3
Tranche 1
Tranche 2
27/11/2014
25/11/2015
Tranche 1
Tranche 2
14/01/2008
04/02/2008
Tranche 1
Tranche 2
Tranche 3
1/11/2013
31/10/2018
Tranche 1
Tranche 2
Tranche 3
27/11/2014
31/10/2019
12/11/2019
$0.07
2,000,000
09/12/2019
$0.12
4,500,000
09/12/2019
$0.18
4,500,000
10/02/2018
$0.75
250,000
05/02/2018
Former directors of Envirosuite Limited
04/12/2009
05/02/2018
Tranche 1
Tranche 2
Tranche 3
Tranche 4
04/02/2008
05/02/2018
Tranche 1
Tranche 2
Tranche 3
Tranche 4
27/11/2012
Tranche 1
Other employees
04/02/2008
12/09/2008
Tranche 1
Tranche 2
12/12/2008
10/02/2018
Tranche 1
Tranche 2
09/04/2012
09/04/2020
Tranche 1
Tranche 2
08/05/2017
$0.03
300,000
10/02/2018
$0.75
330,000
10/02/2018
$0.08
1,000,000
$0.12
1,500,000
$0.16
2,000,000
$0.10
1,000,000
$0.15
1,500,000
$0.20
2,000,000
$0.10
1,000,000
$0.15
1,000,000
$0.75
$1.00
$1.25
$0.75
$1.00
$1.25
$1.50
$0.75
$1.00
$1.25
$1.50
150,000
50,000
50,000
50,000
50,000
50,000
50,000
50,000
50,000
50,000
50,000
$0.75
$1.00
$0.55
$0.75
$0.06
$0.06
100,000
100,000
100,000
100,000
500,000
500,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
500,000
-
-
-
-
-
-
-
-
1,000,000
1,000,000
1,500,000
1,500,000
2,000,000
2,000,000
1,000,000
1,000,000
1,500,000
1,500,000
2,000,000
2,000,000
1,000,000
1,000,000
-
-
-
-
-
2,000,000
2,000,000
1,500,000
3,000,000
3,000,000
1,500,000
3,000,000
3,000,000
-
-
-
-
-
-
-
-
-
-
-
-
250,000
250,000
150,000
150,000
50,000
50,000
50,000
50,000
50,000
50,000
50,000
50,000
50,000
50,000
50,000
50,000
50,000
50,000
50,000
50,000
50,000
50,000
50,000
50,000
300,000
-
-
-
-
-
-
-
-
-
330,000
330,000
100,000
100,000
100,000
100,000
500,000
500,000
100,000
100,000
100,000
100,000
500,000
500,000
Envirosuite Limited Annual Report 2017Page 75
Notes to the Financial Statements
Tranche 3
Tranche 4
12/11/2012
12/11/2018
Tranche 1
Tranche 2
Tranche 3
12/11/2012
12/11/2020
Tranche 1
Tranche 2
01/04/2013
19/04/2018
Tranche 1
Tranche 2
Tranche 3
Tranche 4
01/04/2014
01/04/2020
Tranche 1
Tranche 2
14/07/2014
14/07/2020
Tranche 2
Tranche 3
Tranche 4
04/02/2015
04/02/2021
Tranche 1
Tranche 2
Tranche 3
Tranche 4
11/11/2015
10/11/2020
$0.06
$0.06
500,000
500,000
$0.03
1,666,667
$0.03
$0.03
$0.05
$0.05
1,666,667
1,666,667
500,000
500,000
$0.06
1,287,500
$0.06
1,287,500
$0.06
1,725,000
$0.06
1,725,000
$0.09
$0.09
$0.09
$0.09
$0.09
500,000
500,000
200,000
200,000
200,000
$0.11
1,337,500
$0.11
1,087,500
$0.11
1,087,500
$0.11
1,087,500
Tranche 1
Tranche 2
Tranche 3
Total
$0.16
$0.16
$0.16
45,655,000
Weighted average exercise price
$0.13
333,333
333,333
333,334
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
500,000
500,000
500,000
500,000
1,666,667
1,666,667
1,666,667
1,666,667
1,666,667
1,666,667
500,000
500,000
500,000
500,000
500,000
500,000
500,000
500,000
1,725,000
1,725,000
1,725,000
1,725,000
500,000
500,000
500,000
500,000
200,000
200,000
200,000
200,000
-
-
1,337,500
1,337,500
1,087,500
1,087,500
1,087,500
1,087,500
-
-
333,333
333,333
333,333
333,3334
-
-
- 5,800,000
39,855,000
36,613,333
-
$0.13
$0.13
$0.13
Page 76
Notes to the Financial Statements
2016
Grant date
Expiry date
Exercise
price
12/11/2012
12/11/2018
Balance at
the start of
the year
Granted
during the
year
Exercised
during the
year
Forfeited
during the
year
Number
Number
Number
Number
Balance at
the end of
the year
Number
Vested and
exercisable
at the end of
the year
Number
Tranche 1
Tranche 2
Tranche 3
12/11/2012
12/11/2020
Tranche 1
Tranche 2
01/04/2013
19/04/2018
Tranche 1
Tranche 2
Tranche 3
Tranche 4
01/04/2014
01/04/2020
Tranche 1
Tranche 2
14/07/2014
14/07/2020
Tranche 2
Tranche 3
Tranche 4
04/02/2015
04/02/2021
Tranche 1
Tranche 2
Tranche 3
Tranche 4
11/11/2015
10/11/2020
Tranche 1
Tranche 2
Tranche 3
Total
Weighted average exercise price
$0.03
$0.03
$0.03
$0.05
$0.05
$0.06
$0.06
$0.06
$0.06
$0.09
$0.09
$0.09
$0.09
$0.09
$0.11
$0.11
$0.11
$0.11
$0.16
$0.16
$0.16
1,666,667
1,666,667
1,666,666
500,000
500,000
1,287,500
1,287,500
1,725,000
1,725,000
500,000
500,000
200,000
200,000
200,000
1,337,500
1,087,500
1,087,500
1,087,500
333,333
333,333
333,334
45,655,000
$0.13
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,666,667
1,666,667
1,666,667
1,666,667
1,666,666
1,666,666
500,000
500,000
500,000
500,000
1,287,500
1,287,500
1,287,500
1,287,500
1,725,000
1,725,000
1,725,000
1,725,000
500,000
500,000
200,000
200,000
200,000
500,000
500,000
200,000
-
-
1,337,500
1,337,500
1,087,500
1,087,500
1,087,500
1,087,500
333,333
333,333
333,334
-
-
333,333
-
-
5,800,000
39,855,000
36,613,333
$0.13
$0.13
$0.13
Envirosuite Limited Annual Report 2017Page 77
Notes to the Financial Statements
2016
Grant date
Expiry date
Exercise
price
Balance at the
start of the
year
Granted
during the
year
Exercised
during the
year
Forfeited
during the year
Number
Number
Number
Number
Balance at the
end of the year
Number
Vested and
exercisable at
the end of the
year
Number
Directors and Company Secretary of Pacific Environment Limited
-
-
-
-
-
-
-
-
-
-
08/05/2017
$0.05
500,000
31/10/2018
27/11/2012
1/11/2013
Tranche 1
Tranche 2
Tranche 3
1/11/2013
Tranche 1
Tranche 2
Tranche 3
31/10/2018
27/11/2014
31/10/2019
Tranche 1
Tranche 2
27/11/2014
12/11/2019
25/11/2015
Tranche 1
Tranche 2
09/12/2019
09/12/2019
1,000,000
1,500,000
2,000,000
1,000,000
1,500,000
2,000,000
1,000,000
1,000,000
2,000,000
$0.08
$0.12
$0.16
$0.10
$0.15
$0.20
$0.10
$0.15
$0.07
$0.12
$0.18
-
-
4,500,000
4,500,000
Former directors of Pacific Environment Limited
14/01/2008
10/02/2018
$0.75
250,000
04/02/2008
05/02/2018
Tranche 1
Tranche 2
Tranche 3
Tranche 4
04/12/2009
05/02/2018
Tranche 1
Tranche 2
Tranche 3
Tranche 4
27/11/2012
08/05/2017
Other employees
$0.75
$1.00
$1.25
$1.50
$0.75
$1.00
$1.25
$1.50
$0.03
200,000
100,000
100,000
50,000
50,000
50,000
50,000
50,000
300,000
04/02/2008
10/02/2018
$0.75
330,000
12/09/2008
10/02/2018
Tranche 1
Tranche 2
12/12/2008
10/02/2018
Tranche 1
Tranche 2
09/04/2012
09/04/2020
Tranche 1
Tranche 2
Tranche 3
Tranche 4
$0.75
$1.00
$0.55
$0.75
$0.06
$0.06
$0.06
$0.06
100,000
100,000
100,000
100,000
500,000
500,000
500,000
500,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
500,000
500,000
1,000,000
1,000,000
1,500,000
1,500,000
2,000,000
2,000,000
1,000,000
1,000,000
1,500,000
1,500,000
2,000,000
2,000,000
1,000,000
1,000,000
2,000,000
4,500,000
4,500,000
-
-
-
-
-
250,000
250,000
200,000
100,000
100,000
50,000
50,000
50,000
50,000
50,000
200,000
100,000
100,000
50,000
50,000
50,000
50,000
50,000
300,000
300,000
330,000
330,000
100,000
100,000
100,000
100,000
500,000
500,000
500,000
500,000
100,000
100,000
100,000
100,000
500,000
500,000
500,000
500,000
Page 78
Expiry date
Exercise
price
Balance at the
start of the
year
Granted
during the
year
Exercised
during the
year
Forfeited
during the year
Vested and
Balance at the
exercisable at
end of the year
the end of the
Number
Number
Number
Number
Number
year
Number
2016
Grant date
Expiry date
Exercise
price
Balance at the
start of the
year
Granted
during the
year
Exercised
during the
year
Forfeited
during the year
Number
Number
Number
Number
Balance at the
end of the year
Number
Vested and
exercisable at
the end of the
year
Number
Notes to the Financial Statements
12/11/2012
12/11/2018
Tranche 1
Tranche 2
Tranche 3
12/11/2012
12/11/2020
Tranche 1
Tranche 2
01/04/2013
19/04/2018
Tranche 1
Tranche 2
Tranche 3
Tranche 4
01/04/2014
01/04/2020
Tranche 1
Tranche 2
Tranche 3
Tranche 4
14/07/2014
14/07/2020
Tranche 1
Tranche 2
Tranche 3
Tranche 4
04/02/2015
04/02/2021
Tranche 1
Tranche 2
Tranche 3
Tranche 4
11/11/2015
10/11/2020
$0.03
$0.03
$0.03
$0.05
$0.05
$0.06
$0.06
$0.06
$0.06
$0.09
$0.09
$0.09
$0.09
$0.09
$0.09
$0.09
$0.09
$0.11
$0.11
$0.11
$0.11
$0.16
$0.16
$0.16
1,666,667
1,666,667
1,666,666
500,000
500,000
1,287,500
1,287,500
1,725,000
1,725,000
500,000
500,000
500,000
500,000
200,000
200,000
200,000
200,000
1,337,500
1,337,500
1,337,500
1,337,500
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
333,333
333,333
333,333
-
-
-
-
-
-
-
-
-
-
-
-
-
200,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
500,000
500,000
-
-
-
-
-
1,666,667
1,666,667
1,666,667
1,666,667
1,666,666
1,666,666
500,000
500,000
500,000
500,000
1,287,500
1,287,500
1,287,500
1,287,500
1,725,000
1,725,000
1,725,000
-
500,000
500,000
-
-
-
200,000
200,000
200,000
500,000
-
-
-
-
-
-
-
1,337,500
1,337,500
250,000
1,087,500
250,000
1,087,500
250,000
1,087,500
-
-
-
333,333
333,333
333,333
-
-
-
-
-
-
37,605,000
10,000,000
200,000
1,750,000
45,655,000
25,567,500
$0.12
$0.15
$0.09
$0.10
$0.13
$0.14
04/02/2008
10/02/2018
$0.75
330,000
330,000
330,000
Tranche 1
Tranche 2
Tranche 3
Total
Weighted
average
exercise price
Directors and Company Secretary of Pacific Environment Limited
08/05/2017
$0.05
500,000
500,000
500,000
09/12/2019
09/12/2019
-
-
4,500,000
4,500,000
Former directors of Pacific Environment Limited
04/02/2008
05/02/2018
14/01/2008
10/02/2018
$0.75
250,000
250,000
250,000
2016
Grant date
27/11/2012
1/11/2013
Tranche 1
Tranche 2
Tranche 3
1/11/2013
Tranche 1
Tranche 2
Tranche 3
Tranche 1
Tranche 2
25/11/2015
Tranche 1
Tranche 2
Tranche 1
Tranche 2
Tranche 3
Tranche 4
Tranche 1
Tranche 2
Tranche 3
Tranche 4
Tranche 1
Tranche 2
Tranche 1
Tranche 2
Tranche 1
Tranche 2
Tranche 3
Tranche 4
31/10/2018
31/10/2018
27/11/2014
31/10/2019
27/11/2014
12/11/2019
04/12/2009
05/02/2018
27/11/2012
08/05/2017
Other employees
12/09/2008
10/02/2018
12/12/2008
10/02/2018
09/04/2012
09/04/2020
$0.08
$0.12
$0.16
$0.10
$0.15
$0.20
$0.10
$0.15
$0.07
$0.12
$0.18
$0.75
$1.00
$1.25
$1.50
$0.75
$1.00
$1.25
$1.50
$0.03
$0.75
$1.00
$0.55
$0.75
$0.06
$0.06
$0.06
$0.06
1,000,000
1,500,000
2,000,000
1,000,000
1,500,000
2,000,000
1,000,000
1,000,000
2,000,000
200,000
100,000
100,000
50,000
50,000
50,000
50,000
50,000
300,000
100,000
100,000
100,000
100,000
500,000
500,000
500,000
500,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,000,000
1,000,000
1,500,000
1,500,000
2,000,000
2,000,000
1,000,000
1,000,000
1,500,000
1,500,000
2,000,000
2,000,000
1,000,000
1,000,000
2,000,000
4,500,000
4,500,000
200,000
100,000
100,000
50,000
50,000
50,000
50,000
50,000
100,000
100,000
100,000
100,000
500,000
500,000
500,000
500,000
-
-
-
-
-
200,000
100,000
100,000
50,000
50,000
50,000
50,000
50,000
100,000
100,000
100,000
100,000
500,000
500,000
500,000
500,000
300,000
300,000
Envirosuite Limited Annual Report 2017Page 79
Notes to the Financial Statements
The weighted average remaining contractual life of share options outstanding at the end of the
period was 1.45 years (2016: 2.21 years).
(i) Fair value of options granted
The assessed fair value at grant date of options granted is allocated equally over the period
from the grant date to the vesting date. The fair value at grant date is independently determined
using a Black Scholes option pricing model that takes into account the exercise price, the term
of the option, the impact of dilution, the share price at grant date and expected price volatility
of the underlying share, the expected dividend yield and the risk free interest rate for the term
of the option.
During financial year 2017, no options were issued to directors and no options were issued to
employees. In financial year 2016, 9,000,000 options were issued to directors and 1,000,000
options were issued to employees.
(d) Shares issued to employees - value of services
During the year ended 30 June 2017, 13,353,115 ordinary shares to the value of $450,000
were issued as the final conversion of the convertible notes at 3.37 cents per share. In addition
1,987,952 shares to the value of $165,000 were issued to the former Chief Executive Officer
on termination of his employment contract at 8.3 cents per share.
35. Share based payments (continued)
(e) Expenses arising from share based payment transactions
Total expenses arising from share based payment transactions recognised during the period
as part of employee benefit expense were as follows:
Options issued under employee
share option plan
Shares issued to employees –
value of services
Shares to be issued to employees –
value of services
Total purchase consideration
2017
$’000
93
-
-
93
2016
$’000
202
52
165
419
(f) Liabilities arising from share based payment transactions
Total payables at reporting date arising from share based payment transactions are as follows:
Shares to be issued to employees – value of services
36.
Parent entity financial information
2017
$’000
-
2016
$’000
165
The following information has been extracted from the books and records of the parent entity
and has been prepared in accordance with Australian Accounting Standards.
2017
$’000
2016
$’000
634
15,463
16,111
1,662
9,626
11,288
1,617
1,617
-
-
794
53
847
-
26,281
700
22,828
772
(12,501)
(13,159)
14,480
10,441
2017
$’000
-
657
2016
$’000
(200)
(200)
(a) Statement of financial position
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Non-current liabilities
Total liabilities
Equity
Investment in subsidiaries
Issued Capital
Reserves
Retained losses
Total equity
Non-current assets and non-current liabilities in the parent entity include intercompany
payables and receivables. Legacy balances in these intercompany accounts were written off
during the year ended 30 June 2017 as part of the sale of the consulting businesses, in
accordance with Deeds of Forgiveness entered into between the relevant entities. There was
no impact to the financial statements of the Consolidated Group as a result of these
transactions.
(b) Statement of profit or loss and other comprehensive income
(Loss)/profit for the year
Total comprehensive (loss)/profit for the year
(c) Guarantees entered into by the parent entity
The parent entity has potential exposure to guarantee it has issued to third parties in relation
to its performance and obligations with respect to property lease rentals amounting to $84,000
(2016: $217,325)
(d) Contingent liabilities of the parent entity
Envirosuite Limited sold its 100% equity interests (the sale) in its subsidiaries, Pacific
Environment Holdings Pty Ltd, Pacific Environment Operations Pty Ltd and DLA Environmental
Services Pty Ltd (collectively known as “the consulting practice”) for $15 million to
Environmental Resource Management (ERM). The sale of the consulting practice to ERM
occurred on 26 June 2017 (the completion date) in accordance with a Share Sale and Purchase
Agreement (SPA).
The purchase price is subject to a net debt and working capital adjustment. The process to
agree or determine the amount of the adjustment is ongoing and incomplete. Further, there
are various post completion steps and ongoing terms and conditions set out in the SPA and
related agreements that must be completed, observed or complied with by Envirosuite Limited
after completion including, inter alia:-
Page 80
Notes to the Financial Statements
(a) Statement of financial position
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Non-current liabilities
Total liabilities
Equity
Investment in subsidiaries
Issued Capital
Reserves
Retained losses
Total equity
2017
$’000
2016
$’000
634
15,463
16,111
1,617
-
1,617
1,662
9,626
11,288
794
53
847
-
-
26,281
700
22,828
772
(12,501)
(13,159)
14,480
10,441
Non-current assets and non-current liabilities in the parent entity include intercompany
payables and receivables. Legacy balances in these intercompany accounts were written off
during the year ended 30 June 2017 as part of the sale of the consulting businesses, in
accordance with Deeds of Forgiveness entered into between the relevant entities. There was
no impact to the financial statements of the Consolidated Group as a result of these
transactions.
(b) Statement of profit or loss and other comprehensive income
(Loss)/profit for the year
Total comprehensive (loss)/profit for the year
2017
$’000
-
657
2016
$’000
(200)
(200)
(c) Guarantees entered into by the parent entity
The parent entity has potential exposure to guarantee it has issued to third parties in relation
to its performance and obligations with respect to property lease rentals amounting to $84,000
(2016: $217,325)
(d) Contingent liabilities of the parent entity
Envirosuite Limited sold its 100% equity interests (the sale) in its subsidiaries, Pacific
Environment Holdings Pty Ltd, Pacific Environment Operations Pty Ltd and DLA Environmental
Services Pty Ltd (collectively known as “the consulting practice”) for $15 million to
Environmental Resource Management (ERM). The sale of the consulting practice to ERM
occurred on 26 June 2017 (the completion date) in accordance with a Share Sale and Purchase
Agreement (SPA).
The purchase price is subject to a net debt and working capital adjustment. The process to
agree or determine the amount of the adjustment is ongoing and incomplete. Further, there
are various post completion steps and ongoing terms and conditions set out in the SPA and
related agreements that must be completed, observed or complied with by Envirosuite Limited
after completion including, inter alia:-
Envirosuite Limited Annual Report 2017Page 81
Notes to the Financial Statements
•
•
•
the determination of Completion Accounts and Completion Statement in accordance
with the SPA;
the determination and release of amounts in escrow pending certain conditions/events;
and
transfers of various contracts.
The Directors are confident there are no known claims to or against Envirosuite currently which
could give rise to a contingent liability and are confident the final settlement adjustment will not
be significantly material to the financial statements. However, whether there are outstanding
sale matters that could affect the gain on sale of discontinued operations, the Group’s
operations or the results of those operations in future financial years or the Group’s state of
affairs in future financial years, is uncertain. The parent entity did not have any other contingent
liabilities as at 30th June 2017 (2016:Nil)
(e) Contractual commitments
The parent entity did not have any other contingent liabilities as at 30 June 2017 (2016:nil)
Directors Declaration
For the financial year ended 30 June 2017
In accordance with a resolution of the directors of Envirosuite Limited, the directors of the
company declare that:
(a) the financial statements and notes set out on pages 27 to 82 are in accordance with the
Corporations Act 2001, and:
(i) comply with Australian Accounting Standards, and
(ii) give a true and fair view of the financial position as at 30 June 2017 and of the
performance for the year ended on that date of the Consolidated Group; and
(b)
there are reasonable grounds to believe that the Company will be able to pay its debts as
and when they become due and payable.
David Johnstone
Chairman
31 August 2017
Page 82
Directors Declaration
Directors Declaration
For the financial year ended 30 June 2017
In accordance with a resolution of the directors of Envirosuite Limited, the directors of the
company declare that:
(a) the financial statements and notes set out on pages 27 to 82 are in accordance with the
Corporations Act 2001, and:
(i) comply with Australian Accounting Standards, and
(ii) give a true and fair view of the financial position as at 30 June 2017 and of the
performance for the year ended on that date of the Consolidated Group; and
(b)
there are reasonable grounds to believe that the Company will be able to pay its debts as
and when they become due and payable.
David Johnstone
Chairman
31 August 2017
Envirosuite Limited Annual Report 2017Page 83
Page 84 Page 85 Page 86 Page 87 Page 88 Page 89 Shareholder Information
The shareholder information set out below was applicable as at 30 June 2017.
1. Distribution of equity securities
Analysis of numbers of equity security holders by size of holding:
Holding
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Class of equity
Ordinary shares
Shares
Options
15
157
170
580
295
1,217
-
-
-
3
33
36
Page 90
Shareholder Information
Shareholder Information
The shareholder information set out below was applicable as at 30 June 2017.
1. Distribution of equity securities
Analysis of numbers of equity security holders by size of holding:
Holding
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Class of equity
Ordinary shares
Shares
Options
15
157
170
580
295
1,217
-
-
-
3
33
36
Envirosuite Limited Annual Report 2017Page 91
Shareholder Information
2. Equity security holders
(a) Twenty largest quoted equity security holders
The names of the twenty largest holders of quoted equity securities are listed below:
Name
Robin Ormerod
Robin Ormerod & Kristin Zeise
National Nominees Limited
Radell Pty Ltd
Austral Capital Pty Ltd
HSBC Custody Nominees
Mrs Jean Ellen Vincent & Mr Anthony
Alan Vincent
Coterie Nominees Pty Ltd
WS Dobson Pty Ltd
Mr Peter James White & Mrs Eva Maria
White
Northstar Global Pty Ltd
Mr Ziou Fang
HSBC Custody Nominees
Meis Supertee Pty Ltd
Scintilla Strategic
Mrs Christine Quye
Amma Fep Pty Ltd
Cryptogenix Services Pty Ltd
Herft Accounting Australia
Hawgood Pty Ltd
Ordinary shares
Number held
Percentage of issued
shares
30,192,535
26,741,054
15,670,561
5,007,579
5,000,000
4,773,222
4,301,050
3,000,000
2,748,333
1,988,399
1,900,000
1,870,000
1,805,714
1,800,000
1,625,000
1,501,949
1,500,000
1,470,429
1,468,149
1,375,000
13.07%
11.58%
6.79%
2.17%
2.17%
2.07%
1.86%
1.30%
1.19%
0.86%
0.82%
0.81%
0.78%
0.78%
0.70%
0.65%
0.65%
0.64%
0.64%
0.60%
115,738,974
50.12%
Page 92
(b) Unquoted equity securities
Shareholder Information
Number held
EnviroSuite Limited unlisted options
39,855,000
(c) Substantial holders
Substantial holders in the Company are set out below:
Ordinary Shares
Number held
Percentage
Robin Ormerod & Kristin Zeise
Robin Ormerod & Kristin Zeise
30,192,535
26,741,054
13.07%
11.58%
3. Voting rights
The voting rights attaching to each class of equity securities are set out below
(a) Ordinary shares
Every member present at a meeting in person or by proxy shall have one vote and upon a poll
each share shall have one vote.
(b) Convertible notes
Convertible notes do not carry any voting rights.
(c) Options
Options carry the standard voting rights available to ordinary shareholders when converted to
ordinary shares.
Envirosuite Limited Annual Report 2017Page 93
Shareholder Information
Corporate Directory
Envirosuite Limited
ABN: 42 122 919 948
Board of Directors
Peter White
CEO & Executive Director
David Johnstone
Chairman
Robin Ormerod
Managing Director
Adam Gallagher
Director
Company Secretary
Adam Gallagher
Registered office and
principal place of business
Level 19, 240 Queen Street,
Brisbane, Queensland 4000
Phone: 07 3004 6400
Share Registry
Boardroom Pty Limited
Level 12, 225 George Street
Sydney NSW 2000
Phone: 02 9290 9600
Auditor
WPIAS Pty Ltd
4 Helensvale Road
Helensvale, Queensland 4212
Phone: 07 5580 4700
Stock Exchange Listing
Envirosuite Limited shares are listed on the
Australian Securities Exchange (Code EVS)
Website Address
www.envirosuite.com
Page 94