Appendix 4E
Summary Financial Report
Results for Announcement to the Market
For the financial year ended 30 June 2019
Consolidated Group
Year ended
30 June 2019
Year ended
30 June 2018
Variance to
prior year
$'000
7,701
$'000
$'000
%
3,833
3,868
101%
(5,996)
(5,754)
(242)
(4%)
Revenues from ordinary activities
Profit / (loss) after tax from ordinary
activities attributable to members
Net profit/ (loss) attributable to members
(5,996)
(5,168)
(828)
(16%)
Net tangible assets / (liabilities) per
security (cents)
1.7
1.3
Dividends and distributions
Details of any dividend or distribution reinvestment plans in operation: N/A
The company has not declared, and does not propose to pay, any dividends for year ended 30 June 2019.
1
(ASX: EVS)Envirosuite Limited Level 19, 240 Queen Street Brisbane QLD 4000ACN: 122 919 948 www.envirosuite.com 2019 Annual Report
Contents
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Chairman’s LetterAuditor’s ReportCEO ReportShareholder InformationDirectors’ ReportCorporate DirectoryCorporate Governance StatementFinancial StatementsNotes to the Financial StatementsDirectors’ Declaration Chairman's Letter
Chairman’s Letter
I am pleased to present the Annual Report for Envirosuite Limited and its
subsidiaries (the Group) for the 2019 Financial Year. In last year’s letter I said that
we were preparing for the journey and now I am pleased to report that we are
clearly on that journey as we seek to become the ‘go-to’ provider for environmental
platform solutions for industry and governments globally.
I am very pleased with what the Group has
accomplished in the last two years since we
became a pureplay technology company. We are
still in the very early days of our growth with less
than a 1% market share of our identified market.
Year in Review
Our last year has been about growth. We set a
high-level two-year target and budget at the
commencement of the 2019 financial year to
build the Group out to deliver steep revenue
growth without compromising the stability of the
business. We have been periodically reviewing
and detailing that plan further to allow us to
adapt to the circumstances of opportunity and
market trends that we observe in practice.
At the end of August 2018 we announced a $10m
capital raise from institutional and high net
worth investors led by Bell Potter Securities.
This was a defining milestone for us that we had
set for ourselves twelve months prior. Following
divestment of our consulting business in June
2017, we decided that we would use the runway
provided from the cash proceeds of the sale to
take the small technology business that we had
global, in an effort to gain initial commercial
traction and momentum sufficient to secure the
interest and willingness of capital markets to
support the next leg of our continued growth.
We have always acknowledged that as a small
listed company we must grow and we must
have a significant and meaningful story to tell
so that investors can buy into in anticipation
of multiplying their wealth as we deliver on our
growth milestones.
Since the two-tranche capital raise completed
in September 2018, we have traded up to 19c
on volume post the capital raise representing a
more than 250% increase on the 7.5c raise price.
Whilst it is good to see a share price moving in
the right direction the Board and management
are focused on building a much more significant
and sustainable growth in shareholder value
through progressively improving the Group’s
fundamentals.
ARR
We see annuity revenue growth as key in realising
the Group value drivers that are provided
by high margin recurring and compounding
growth. We are still doing the hard yards at this
point primarily selling our solution directly to
individual sites. We are starting to see and we
are working hard to heighten the productivity
of our sales efforts through multi-site sales and
enterprise level sales. Each of these presents a far
greater ROI than direct and discreet sales, even
though the compounding effect of each sales
person’s results will continue to drive significant
percentage growth from the current low base.
We hit our ARR growth target at the top-line
adding $3.1m against at target of $3m for the
year. This concludes the second consecutive year
of 100% ARR growth in a targeted plan of three
Page 2 Chairman's Letter
years in a row. Unfortunately, with additional attrition arising
from the run-off of non-core business our net figure did not
keep pace with the target though we see this as a short-term
setback against a longer term sustained growth setting.
In certain industry and geographic sectors our technology is
still a step ahead of the pace of market adoption which is why
we have consolidated our focus to mining, waste and waste
water. In these areas we see that industry is in-step with our
technology offering and is actively looking to adopt real-time
monitoring with predicative capability.
Our emerging third sector of environmental smart cities
(or regional monitoring), applies where a particular local
authority or EPA is initiating a sensor network to track and
monitor air quality and identification of problem sources
over their jurisdiction. Our two deployments in the Middle
East are each expanding and have provided an excellent
reference case from which we can familiarise other cities
that are looking at adopting similar solutions. It is certainly
conceivable that in future most cities globally will deploy a
sensor and software platform such as Envirosuite to visualise,
report and manage air quality and other environmental
factors for the benefit of their citizens.
Corporate Strategy
The Company has had a strong history of augmenting organic
growth with strategic acquisitions. The focus in the last two
years has been on establishment and traction in our targeted
geographies and having now achieved that it makes sense to
assess the potential acquisition targets that we are coming
into contact with in our normal course of business. These
may include equipment focused groups that we can purchase
on product multiples and transition to subscription models
through packaging the equipment with Envirosuite to offer
a comprehensive solution, or other software groups that
may have an attractive client base in a particular region of
interest.
We are working proactively with external advisors to screen
and assess a global list of opportunities with a view to moving
on targets that present a compelling ROI to add incremental
ARR relative to the time and investment in generating the
equivalent ARR organically.
Our team has a strong track record of successfully integrating
acquisitions post transaction and going into the 2020 financial
year the Group is well poised to consider these opportunities.
While acquisitions are one path to value the Board is highly
selective and would only pursue an acquisition in the coming
year if there is a compelling commercial opportunity that
presents.
Board
In October 2018 our co-founder and major shareholder Robin
Ormerod resigned his board role to enable him to focus on his
executive role as Chief Scientist and Head of the Research and
Development team. Robin remains highly active in this key
role with the domain knowledge being the key value driver
to our platform and new applications globally presenting
opportunities to deepen the value-add that our solutions
provide to clients. The Directors thank Robin for his trust and
confidence that allowed him to step away from the board
and for his continued dedication to the support and growth
of the Group. Soon after we appointed Hugh Robertson to the
Board, Hugh has immense expertise in Capital Markets and
a strong understanding in what is required in managing the
needs of a fast-growing small cap, certainly a key contribution
to the Board.
The Year Ahead
With the continued efforts of our team, the 2020 financial
year will be the year of deepening relationships with major
groups including governments, equipment suppliers and
major corporations in our target industry verticals. A single
enterprise execution could lead to the next leg of our ARR
growth milestone and while we have demonstrated that our
existing run-rate business can incrementally achieve the
FY20 target, our plan is to pursue these larger opportunities
in parallel.
I thank shareholders for their support and investment in a
growth story that is ultimately providing the immense dual
positives of improved air quality for communities globally
and ease of compliance and productivity optimisation for
industry, while adopting best practice corporate social
sustainability.
Although as much hard work lies before us as behind us, we
enter the coming financial year with more confidence than
ever in our future growth potential.
Sincerely,
David Johnstone, Chairman
23 August 2019
Envirosuite Limited Annual Report 2019Page 3 CEO Report
CEO Report
The 2019 financial year proved to be a very successful one for the Company. We
have continued along our target growth trajectory for the second year in a row.
This has been enabled by the operational framework that we put in place twelve
months ago and we have continued this expansion to enable the sustained
growth of the company over the coming financial year.
Growth
We are now two years into a three-year plan
that was launched in July 2017 following the
Company’s divestment of its consulting business
in order to become a pure-play technology
company. Comparing then with now we have:
•
•
•
Quadrupled the number of clients from 25 to
over 100.
Increased Annual Recurring Revenue by
370%.
Established entities
countries.
in
five overseas
Agility and vigilance to position the business
strategy to exploit market niches is crucial to the
success of any smaller company. In the past two
years as a technology company we have tested
our market offering in various models and modes
of selling, and in different geographies and
industry sectors.
We have now settled on a model that allows for
continued success and growth. We have organised
the Company into four business units to address
the market regions: Europe and Middle East,
North America, South America, and Asia Pacific.
After testing the solution in various industries,
we concluded that our most valuable initial key
target industry sectors are Mining, and Waste
and Wastewater. The confluence of technical
and commercial fit, regulatory and corporate
social sustainability drivers overlaid with the ever
present need to improve productivity means that
these sectors provide a compelling environment
for our solution. After testing a partner-led sales
model in some areas, we have decided to pursue
a direct sales approach until we have completed
expanding our solution and reference cases.
Following direct sales success we believe that
the right type of partners will be found with EPCs
(Engineering, Procurement and Construction
groups) and in total system integrators.
In FY18 we hit our internal target of 100%
growth in ARR and then in August last year we
externalised our 100% growth target for FY19 and
FY20. We reaffirm our targeted ARR of $12 million
by the end of June 2020.
Year Highlights in Review
Company Highlights from the FY19 year include
the following events:
•
•
•
•
•
Capital markets – The Company successfully
raised $10 million in August 2018 to help fund
expansion into our four sales regions.
New Sales – $3.1 million in new ARR tracking
to our growth target.
First multi-site licence – We received our
first sale of a multi-site (three sites) licence
with Southern Water in the UK.
Deepening our market offering to Solution-
as-a-Service – Due to market demand, we
decided to broaden our market offering
by providing a full end-to-end solution
(software
and
implementation services). This extends a
pure Software-as-a-Service platform and
deepens our client relationships.
hardware,
platform,
E-nose (‘Electronic nose’) device – Post
the acquisition of Odotech, the Company
the
technologies of both
combined
companies
improved,
to produce an
smaller and far cheaper sensor, branded
“Envirosense”. This e-nose model
is
deployed in the ambient environment and
Page 4 CEO Report
Signing three new UK Water Authorities to complement
Thames Water (Southern Water, Welsh Water, and
Yorkshire Water).
• Winning TATA Steel (Wales). This is a new sector for the
EMEA market team and provides entry into one of the
world’s biggest steel producers.
•
•
•
Development of the Company’s relationship with
Veolia’s headquarters in Paris. There have been two new
projects signed with Veolia during the year, with further
significant opportunities with this key player in the
global waste and wastewater sector expected to emerge
in the near future.
A steady build-up of “business-as-usual” WWTP projects
in Spain.
Successful conversion of the Kuwait City trial into a $1.2
million project with $275,000 ARR. This project has now
gone live with the rollout of the e-nose devices and it
has been the catalyst for EVS to create the new e-nose
sensor as well as the new solution for regional or city-
wide monitoring.
North America
•
•
The consolidation of the Odotech Canadian and
Envirosuite USA business units to form the one North
American Envirosuite Region. There was considerable
focus on migrating existing Odotech clients onto the
Envirosuite platform. It is intended that the Odowatch
platform will be discontinued during the coming year,
completing the integration of Odotech into Envirosuite.
in Kentucky. This work
R&D work continued with the US EPA at an industrial
complex
investigated new
measurement technologies and models to track sources
of toxic and greenhouse gas leaks from industrial
processes and storages
in real time. Envirosuite
contributed backward trajectory modelling, a standard
part of our offering, with successful results.
• We saw significant growth in new clients adopting our
wastewater solutions and an increased number of
projects in the solid waste industry, especially Landfill.
Our solution is highly relevant to this industry given its
odour issues.
• Work continued on testing the viability of the Envirosuite
solution in the Oil and Gas sector.
Right: Envirosuite’s
new Regional
Software Platform
and an Envirosense
unit. They work
together to visualise
odour and air quality
issues across cities
or regions.
allows clients to create a dense network of sensors,
delivering a comprehensive IOT solution.
•
•
•
•
•
•
New Regional Software platform – For the Kuwait
project we developed and deployed a new EVS solution
that extends our offering beyond a specific operational
site. Our city-wide (Regional) solution allows for larger
scale implementations and provides visualisation and
functions at a regional or city level.
Two Middle Eastern city-wide projects - During the
June quarter the Company delivered the two biggest
projects in its history. These were the city-wide projects
in the Middle East (Doha and Kuwait). It is worth noting
that both of these projects could grow further in scope
in the medium term.
First China project – The Company secured its first win
for a project in China. This will be delivered as a proof-
of-concept for Veolia’s international operations in China.
The EVS solution will need to be modified to comply with
the Chinese regulatory requirements and therefore will
act as a precursor to future projects in China.
Odotech client migration – The remaining clients,
acquired in the purchase of the assets of Odotech Inc
in December 2017, were migrated to the Envirosuite
platform, and with that the integration of the Odotech
company structure into Envirosuite was completed.
New entity in Colombia – During the year the Company
established an entity
in Colombia. Working with
Austrade, this entity has opened multiple leads in the
local Colombian market, which includes the Company’s
biggest client Cerrejon.
The above highlights reinforce the broadening and growth of
the Company over the course of another formative year as we
build a global foundation to deliver our solutions.
Regions
The Company operates through market-facing business units
organised by region. A brief update on the activities of each
region follows:
Europe and Middle East
•
The head office for the European and Middle Eastern
(EMEA) region is located in Madrid and has grown over
the year by focusing on the UK, Spain, France, and Middle
Eastern markets. Progress during the year included:
Envirosuite Limited Annual Report 2019Page 5 CEO Report
South America
Market Sectors
•
•
•
Carbones del Cerrejon became Envirosuite’s largest
client. During the year Cerrejon implemented new
solutions in the Water Quality and Groundwater Pressure
area.
Envirosuite established its new entity in Colombia to
focus on the Colombian and wider mining industry,
complimented by a publicity launch in three Colombian
cities with the assistance of Austrade.
Further wins in heavy industry, mining and agriculture
(factory farming) were recorded in Chile.
Asia Pacific
During the past two years the Company’s focus has been
on regions outside Australia with sales resources posted
overseas to help develop those regions. However, there was
still progress made:
•
•
•
South Australia Water extending their project to cover
additional sites.
The signing of Canterbury Council (NZ)
New sales resources were hired in the last quarter
to start building up the sales pipeline, and ready the
company for expansion in the Asia Pacific region during
the coming year.
From an ARR perspective, the Company now has four regions
with nearly identical ARR numbers:
The Company has maintained focus on the following industry
sectors:
• Waste and Wastewater, and their adjacencies:
o Factory Farming
o Landfill
o Composting
o Pulp and Paper
•
•
Mining
Smart Cities
(Wastewater and Agriculture) account
It is seen from Figure 3 that the Mining and Odour-related
industries
for
approximately 75% of total ARR. The growth in ARR occurred
during the year was almost exclusively accounted for by
these industries.
Waste &
Wastewater
Mining
Agriculture
Regulatory
Industrial
Ports
Europe & Middle East
ANZ
North America
South America
Figure 3: Total ARR by Industry Sector
Figure 1: Total ARR by Region
As seen from Figure 2 the growth in ARR during the year was
almost entirely in the three overseas regions, with Europe
and North America leading the way.
Waste &
Wastewater
Mining
Agriculture
Regulatory
Ports
Europe & Middle East
Figure 4: FY19 ARR Growth by Industry Sector
North America
South America
ANZ
Figure 2: FY19 ARR Growth by Region
As part of a strategic review the Company engaged an external
advisory group to perform a comprehensive estimate of
the total addressable market for the current Envirosuite
solutions, by industry verticals and by regions. The result of
this work showed that this addressable market is well over
$1 billion annually in our two current industry targets alone.
This market mapping and underlying detail is being used to
help drive our regional market focus.
Page 6 $66m
$460m
$232m
$87m
$289m
$100m $75m
CEO Report
Australia
Asia
North
America
South
America
Europe
Africa Middle
East
$1.3bn
Mining
$302m
Smart Cities
$333m
Wastewater
$674m
Figure 5:
Addressable
markets in key
verticals.
Staff
We have built up the team over the last two years from 25 FTE
at the commencement of the 2017 financial year to 70 people
globally at the close of the 2019 financial year. This includes
the recent hiring of senior level of management in areas such
as Sales and General Management, Project Delivery and
Global Marketing. Otherwise most of this growth has been in
sales and client facing support roles to sustain and service our
revenue growth. As far as this organic growth is concerned,
we expect the growth rate in staff numbers to taper down in
the coming year as we have now formed a strong base from
which we can continue to achieve our targeted growth rate.
I would like to thank all our staff for their efforts over the
past year. A high growth rate always adds extra stress and
pressure on employees and our people have responded to
this challenge with dedication, positivity and focus.
The Coming Year
For the coming year the Company has maintained the same
target as for the previous two years, to double its ARR. This
target is therefore to achieve $12 million ARR by the end of
June 2020. While it is acknowledged that this is an ambitious
goal, there are several new activities that the Company
intends to undertake and to achieve during the coming year.
This strategy will involve a “business as usual” approach
for the majority of our sales force focused on the various
sectors by region as per Figure 5. This BaU approach will
be supplemented with a small group focused on winning
business via other initiatives such as:
• Multi-site and Corporate level deals – we have hired
resources to focus exclusively on this area as we believe
it is the fastest way to achieve rapid expansion.
•
Solution broadening – we are investigating ways to
attract a bigger “share of wallet” from our existing
client base. This will see us broadening our solution
functionality to enable us to expand
into more
operational areas of our clients’ business, making
our solution a “need to have” versus a “nice to
have”. Examples include deepening our solution in
in creating
water management
in
operational modelling
for pipeline corrosion
for mines, and
wastewater collection.
•
•
Target a new industry sector (Oil and Gas). There has
been considerable preparatory work performed in this
area during last year in the US market.
The Company may consider acquisitions if we identify
opportunities to rapidly increase our client base through
acquisition of a company with a solution that can be
swapped out with Envirosuite.
Mining
Odour
Smart
Cities
Oil & Gas
Region
ANZ
Europe
Middle East
North America
South America
Asia
Future prospects
Initial Sales
Expanding Sales
Furthermore, we are expanding in two target areas this year.
We are building up our sales team in ANZ to begin focusing
on Asia Pacific including China. At the same time, we are
strengthening our team in the Middle East as we continue
to see bigger project opportunities in that region, which
also results in a lumpy win rate when measured by ARR. We
therefore do not expect our growth to be linear over time.
Over the past year we have delivered two of these large
projects, however these types of projects do not come along
at regular intervals.
We continue to be excited by the potential of rapid growth
in our target markets and the difference the Envirosuite
solution can make to the ability of industry and communities
to co-exist.
Peter White, CEO
23 August 2019
Envirosuite Limited Annual Report 2019Page 7Percent020406080100
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 2019.
Directors
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 Chairman)
Peter White (Director and Chief Executive Officer)
Adam Gallagher (Director and Company Secretary)
Hugh Robertson (Non-executive Director) -
Appointed 1 November 2018
Robin Ormerod (Managing Director and Chief Scientist) -
Retired as Director on 28 September 2018
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.
The Group recorded a cash balance of $7,563,721 as at 30
June 2019 (June 2018: $3,648,000).
Notwithstanding the negative operating cash flow and
recurring losses recorded during the year, given the group’s
budgeted profit targets and availability of capital investment
(if required), the Directors are of the view that the group will
continue to be able to pay its debts as and when they fall
due.
It is on the basis of the group’s ability to achieve budgeted
profit targets and availability of capital investment (if
required), that the Directors have prepared the financial
report on a going concern basis.
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.
Incorporating proprietary sensors into the market
offering to complement the software platform.
Principal activities and significant changes in
nature of activities
2. Completion of the integration of the assets of Odotech
Inc (assets acquired on 19 December 2017).
During the year the principal continuing activities of
the Group consisted of the development and sale of
environmental management technology solutions.
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
Total trading revenues for the Group for the financial year
ending 30 June 2019 were $7,115,712 (2018: $3,152,592). Net
loss after tax from continuing operations was $5,996,257
(2018: $5,754,656). Significant expenditure items affecting
operating results for the 2019 financial year include costs
associated with the integration of the assets of Odotech
Inc and establishment of companies and operations in new
geographic territories, costs associated with the capital raise
completed in October 2018 and funding working capital for
growth including recruitment costs.
Financial Position
The net assets of the consolidated Group have increased
from $8,585,852 at 30 June 2018 to $12,328,924 as at 30 June
2019. The Group received gross proceeds of $10,000,000
from a capital raise completed during the reporting period.
3. Number of employees growing from 55 at 30 June 2018
to 70 at 30 June 2019.
4. Robin Ormerod retiring as an officeholder though
continuing his executive role as Chief Scientist.
5. Appointment of Hugh Robertson as a non-executive
Director.
6. New office opened in Colombia.
Events after the reporting period
No 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.
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.
Additional comments on expected results of certain
operations of the Group are included in this annual report
under the Chairman’s Statement and CEO’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, in which the group operates.
Page 8
Directors' Report
Peter White – B. Maths.
Director and Chief Executive Officer
(Appointed 10 July 2017)
Information on Directors
David Johnstone
Chairman
(Appointed 10 February 2014)
Experience and expertise
David is an experienced executive and chairman who has
been actively involved in business for more than 35 years,
successfully starting, owning and operating a vast range
of businesses. With experience gained nationally and
internationally in tech start-ups, selling, licensing, merging
and acquiring businesses, having also arranged funding for
management buy outs along with the successful placement/
listing of companies on the London Stock Exchange and
the Australian Stock Exchange. David is a keen investor,
chairman and advisor to various technology companies in
the communications, finance, insurance, risk management
and sporting sectors, which are investing and advancing
technology to the forefront of their respective industries.
Other current directorships of listed companies
None
Experience and expertise
Peter’s interest is in using technology to benefit businesses
and his specialty is in growing technology companies and
teams, using his deep experience in technology sales and
operational management. Over the past 32 years he has
held executive and sales management positions in global
technology companies including Hewlett Packard, Motorola,
Siemens and Tandem Computers. He has extensive
global experience gained through international business
development roles in Asia, Europe and the USA.
Peter has a particular skillset and experience in selling
innovative and large, technology deals. This has included
individual deals worth hundreds of millions of dollars, as
well as application software deals to several governments,
as well as some of the world’s biggest banks and
telecommunication carriers.
Former directorships of listed companies in last 3 years
Other current directorships of listed companies
None
Special responsibilities
None
Former directorships of listed companies in last 3 years
Member of the Audit and Risk Management Committee
Chairman of the Remuneration and Nomination Committee
None
Interest in shares and options
3,339,118 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.
Special responsibilities
Member of the Audit and Risk Management Committee
Chairman of the Remuneration and Nomination Committee
Interest in shares and options
7,091,340 ordinary shares held by an associated entity.
2,000,000 unlisted options to subscribe for ordinary shares
in Envirosuite Limited.
Envirosuite Limited Annual Report 2019Page 9 Directors' Report
Adam Gallagher – B Econ, M Com, Grad Dip Info Sys,
Grad Dip Applied Corp Gov
Director and Company Secretary
(Appointed 18 October 2012)
Experience and expertise
Adam has strong technology sector knowledge and
experience across corporate transactions, sales
management, finance and capital market operations
through nearly twenty years of commercial, IT and
investment experience. Adam is a strategist who is known
for his corporate problem solving acumen, to both resolve
impediments to, and optimise opportunities for, true
shareholder value creation. His particular passion for
technology arises from a career interest in the convergence
of applied creative, commercial and scientific efforts that
bring about positive change. Adam has worked in corporate
banking, private equity, early stage technologies, stock
exchanges, digital media, communications 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 also
a Director of CCP Technologies Limited (ASX:CT1).
Hugh Roberston
Director
(1 November 2018)
Experience and expertise
Hugh Robertson has over 30 years experience in the
financial services sector and equity markets. Hugh is an
experienced company director across a broad range of
businesses with a concentration on small cap industrial
stocks.
His more recent directorships include AMA Group Limited
(ASX:AMA), Centrepoint Alliance Limited (ASX:CAF),TasFoods
Limited (ASX:TFL), Hub24 Limited (ASX:HUB) and is currently
on the board of Longtable Limited (ASX:LON).
Other current directorships of listed companies
Longtable Limited (ASX:LON)
Former directorships of listed companies in last 3 years
None
Special responsibilities
Adam holds a Bachelor of Economics, Masters in Commerce,
Graduate Diploma in Information Systems and a Graduate
Diploma in Applied Corporate Governance.
None
Interest in shares
Other current directorships of listed companies
9,157,620 ordinary shares held by an associated entity
Director of CCP Technologies Limited (ASX:CT1).
Interest in options
Former directorships of listed companies in last 3 years
Nil
None
Special responsibilities
Chairman of the Audit and Risk Management Committee
Member of the Remuneration and Nomination Committee
Interest in shares and options
602,941 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.
Company Secretary
Mr. Gallagher is the Company Secretary and held the
position for the duration 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 2019, and the numbers of meetings attended by each director were:
Full Meetings of Directors
Audit and Risk
Management Committee (*)
Remuneration and
Nomination Committee (*)
2019 Meetings
Adam Gallagher
David Johnstone
Peter White
Robin Ormerod
Hugh Robertson
A
13
13
13
4
5
B
13
13
13
4
7
A
2
2
-
-
-
B
2
2
-
-
-
A
2
2
-
-
-
B
2
2
-
-
-
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).
* - The committee charters provides for 2 meetings to be held each year per committee. In addition to formal meetings the members meet informally
on a regular basis and discuss matters within the charter. Each committee Chair provides a report to the board at each monthly board meeting.
Shares under option
Unissued ordinary shares of Envirosuite Limited under option at the date of this report are as follows:
Grant date
Expiry date
Issue price of shares ($)
Number under option
17-Apr-12
05-Dec-14
17-Feb-15
17-Feb-15
09-Dec-15
16-Nov-15
09-Dec-15
23-Oct-18
25-Oct-18
09-Apr-20
12-Nov-19
01-Apr-20
03-Feb-21
09-Dec-19
10-Nov-20
09-Dec-19
11-May-22
30-Oct-22
0.055
0.07
0.09
0.11
0.12
0.16
0.18
0.10
0.16
2,000,000
2,000,000
1,000,000
1,250,000
3,000,000
333,333
3,000,000
2,000,000
750,000
Total
15,333,333
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
5,600,000 shares were issued during the financial year on the exercise of options. No amounts are unpaid on any of the shares
Lapse of options post balance date
No options have lapsed post balance date.
Envirosuite Limited Annual Report 2019Page 11 Directors' Report
Indemnification and insurance of officers or auditor
During the financial year, Envirosuite Limited paid a
premium of $58,512 (2018: $43,422) 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
No proceedings have been brought or intervened in on
behalf of the company with leave of the Court under section
237 of the Corporations Act 2001.
Non audit services
No non-audit services were provided by PKF Brisbane Audit
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 33.
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.
The report is structured as follows:
a. Key management personnel (KMP) covered in this
report
b. Principles used to determine the nature and amount of
remuneration and link to performance
c. Details of remuneration
d. Service agreements
e. Share based compensation
f.
g.
h. Other transactions with key management personnel
Shareholdings of management personnel
Loans to key management personnel
A. Key management personnel covered in this
report
Non-executive and executive directors (see pages 9 to 10 for
details about each director)
David Johnstone
Peter White
Adam Gallagher
Hugh Robertson (appointed 1 November 2018)
Robin Ormerod (retired 28 September 2018
Other key management personnel
Name
Position
Clinton Lander
Chief Financial Officer
B. 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.
Some of the directors have received incentive share options
in prior years, 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
Page 12
Directors' Report
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 who hold
an employee contract with the Company.
(ii) Retirement allowances for directors
statutory superannuation entitlements.
Short Term Incentive (STI): During the initial 24 months
from commencement of his employment on 10 July 2017,
Mr White receives 5% of the value of the first year of license
fee revenues from new Envirosuite sales, with claw back
provisions should the licensee default.
There are no retirement allowances for directors of the
Group.
A termination payment of six months applies in the event of
change in control.
(iii) Executive pay
A notice period of three months applies on termination.
The executive pay and reward framework generally has
three components:
(v) Company Secretary
•
•
•
base pay and benefits, including superannuation;
short-term incentives linked to the attainment of
performance targets; and
long-term incentives through options and / or
performance rights to subscribe for ordinary shares in
the company.
The combination of these comprises an executive’s total
remuneration.
Base pay
Base pay is structured as a total remuneration 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.
Superannuation
Retirement benefits are delivered under the Australian
superannuation legislation at 9.5% of base salary for the
financial year ended 30 June 2019, 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. Refer to sections (iv) and (vi) below
for details.
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 or via
Performance Rights that convert to ordinary shares on
attainment of applicable performance criteria. Refer to
sections (iv) and (vi) below for details.
The CEO works with the Remuneration and Nominations
Committee and the full board to develop appropriate terms
for new and re-contracting employees.
(iv) Chief Executive Officer’s remuneration
Mr White earns a base salary of $300,000 inclusive of
The Company Secretary fee is 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 assisting in the management
of corporate transactions together with the Company’s
advisors, investor communications, and undertaking various
other 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.
(vi) Chief Financial Officer
Mr Lander earns a base cash salary of $220,000 plus
statutory superannuation entitlements.
Short Term Incentive (STI): For the 2019 and 2020 financial
years, Mr Lander is eligible for a STI of $20,000 per annum
based on the company’s performance against Annual
Recurring Revenue.
Long term Incentive (LTI):
On 2 July 2018 Mr Lander was issued 2,049,180 performance
rights that vest and convert to ordinary shares on 15 May 2020.
These performance rights are forfeited if Mr Lander ceases
employment with the Company prior to the vesting date.
On 23 October 2018 Mr Lander was granted 2,000,000 share
options with 50% vesting on the first anniversary of his
employment with the Company and 50% vesting on the
second anniversary. These options have an exercise price of
10 cents, which was double the Company’s share price on
the day his employment commenced.
C. 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, Company Secretary and Chief Financial Officer of
Envirosuite Limited.
(ii) Changes since the end of the reporting period
There have been no changes in the officeholders since the
end of the reporting period.
Envirosuite Limited Annual Report 2019Page 13 Directors' Report
(iii) Key management personnel (KMP) of the Group and other executives of the Company and the Group
2019
Short-term employee benefits
Cash
Salary
and fees
$
Cash
bonus
$
Super-
annuation
$
Other
$
Long term
benefits
Long
service
Leave
$
Directors
Peter White - CEO
David Johnstone
Hugh Robertson
(appointed 1 November 2018)
Managing director
279,474
115,297
100,000
40,000
Robin Ormerod
(retired 28 September 2018)
73,333
Director and company secretary
Adam Gallagher
160,000
Other key management
personnel
Clinton Lander – CFO
216,896
16,573
Total key management
personnel compensation
869,703
131,870
-
-
-
-
-
-
-
-
-
-
-
20,532
-
-
5,019
-
20,267
45,818
-
-
-
-
-
-
-
Share-based payments
Shares
$
Options
$
Total
$
-
-
-
-
-
-
-
-
-
-
415,303
100,000
40,000
78,352
160,000
54,266
22,015
330,017
54,266
22,015
1,123,672
2018
Short-term employee benefits
Cash
Salary
and fees
$
Cash
bonus
$
Super-
annuation
$
Other
$
Long term
benefits
Long
service
Leave
$
Share-based payments
Shares
$
Options
$
Total
$
Directors
Peter White - CEO
(appointed 10 July 2017)
David Johnstone
Managing director
Robin Ormerod
Director and company secretary
Adam Gallagher
Other key management
personnel
Clinton Lander – CFO
(appointed 15 May 2018)
274,568
41,729
100,000
300,000
160,000
16,923
-
-
-
-
Total key management
personnel compensation
851,491
41,729
-
-
-
-
-
-
20,015
-
20,049
-
1,608
41,672
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
336,312
100,000
320,049
160,000
18,531
934,892
Further breakdown of the components of Mr White’s and Mr Lander’s remuneration is detailed above in Section B (iv) and (vi)
respectively in the Remuneration Report.
There are no post-employment benefits provided.
Page 14 Directors' Report
Remuneration at risk
STI and LTI awards are considered as “at risk” remuneration. Of the KMP, only the Executive KMP being the CEO and CFO have
“at risk” remuneration. The proportion of each Executive KMP’s remuneration that was at risk during the year ended 30 June
2019 is detailed below.
Mr Peter White – 33% at risk
Mr Clinton Lander – 29% at risk
Linking Executive Remuneration to Performance
Envirosuite uses the STI to focus the Executive KMP on achieving the company’s main Key Performance Indicator (KPI), which in
the company’s current growth phase is growing the company’s Annual Recurring Revenues (ARR).
In addition to the use of the STI, Envirosuite grants LTI’s to Executive KMP to align executive remuneration with shareholder
returns.
D. 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 & Director
Clinton Lander - Chief Financial Officer
10 July 2017
15 May 2018
$300,000
$241,003
E. Share based compensation
(i) Options (including performance rights)
No options were issued during the 2018 financial year.
Each of Mr Johnstone, Mr Gallagher and Mr White hold options in the company that were issued in prior financial years
following shareholder approval. Options issued to Directors are intended to align the personal interests of the Directors with
the interests of shareholders.
During the 2019 financial year:
•
•
•
2,049,180 performance rights were issued on 2 July 2018 to Mr Clinton Lander.
2,000,000 share options were issued on 23 October 2018 to Mr Clinton Lander.
750,000 share options were issued to other non key management personnel.
The options issued to employees 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
subsequent shareholder approval either as required, or as sought by the Board, 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 32 to the
financial statements.
Envirosuite Limited Annual Report 2019Page 15 Directors' Report
2019
Directors of Envirosuite
Limited
Peter White
David Johnstone
Adam Gallagher
Hugh Robertson
Other key managment
personnel
Clinton Lander
2018
Directors of Envirosuite
Limited
Peter White
(Appointed 10 July 2017)
David Johnstone
Adam Gallagher
Robin Ormerod
Other key managment
personnel
Clinton Lander
(Appointed 15 May 2018)
Balance
at start of
the year
7,000,000
4,000,000
8,500,000
-
-
Granted as
compensation
Exercised
Forfeited/
Other
Balance at
end of the
year
Vested and
exercisable Unvested
-
-
2,000,000
2,000,000
4,000,000
4,000,000
(4,500,000)
4,000,000
4,000,000
-
-
-
-
-
-
-
-
-
-
2,000,000
(5,000,000)
-
-
-
-
-
-
2,000,000
1,000,000
1,000,000
Balance
at start of
the year
Granted as
compensation Exercised
Forfeited/
Other
Balance at
end of the
year
Vested and
exercisable Unvested
7,050,000
4,000,000
6,500,000
2,000,000
-
-
-
-
-
-
-
-
-
-
-
(50,000)
7,000,000
7,000,000
-
4,000,000
4,000,000
2,000,000 ^
8,500,000
8,500,000
(2,000,000) ^
-
-
-
-
-
-
-
-
-
-
^ includes off market transfer during the year. On 29 September 2017, Adam Gallagher purchased Robin Ormerod’s 2,000,000 unlisted options
for $27,044 based on an external Black & Scholes valuation – refer Appendix 3B lodged 29/09/2017.
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.
(ii) Shares
No shares were granted to key management personnel during the year.
F. 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.
Page 16 Directors' Report
2019
Directors of Envirosuite Limited
Peter White
David Johnstone
Adam Gallagher
Hugh Robertson (Appointed 1 November 2018)
Other key management personnel
Clinton Lander (Appointed 15 May 2017)
Balance
at start of
the year
Granted as
compensation
Other
changes
during the
year
Balance at
end of the
year
2,091,340
1,844,118
352,941
-
-
-
-
-
-
-
*5,000,000
**1,495,000
**250,000
9,157,620
7,091,340
3,339,118
602,941
9,157,620
*650,000
650,000
*Changes arose during the year through off market transactions.
**Changes arose during the year from a combination of on-market and off-market transactions.
2018
Directors of Envirosuite Limited
Peter White (appointed 10 July 2017)
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
1,988,399
1,250,000
56,683,589
250,000
-
-
-
-
-
*102,941
**594,118
2,091,340
1,844,118
*(5,387,039)
51,296,550
*102,941
352,941
-
-
Other key management personnel
Clinton Lander (Appointed 15 May 2017)
-
*Changes arose during the year through off market transactions.
**Changes arose during the year from a combination of on-market and off-market transactions.
G. Loans to key management personnel
There were no loans to key management personnel during the reporting period
H. Other transactions with key management personnel
Mr David Johnstone is a Director and Chairman of the Company. His fees are paid to DOAK Pty Ltd, a related party.
Mr Adam Gallagher is a Director and the Company Secretary of the Company. His fees are paid to Famile Pty Ltd, a related
party.
There were no transactions with key management personnel of Envirosuite Limited, other than those disclosed at Section C(iii)
of this Director’s report, during this reporting period.
This Director’s report, incorporating the Remuneration Report, is signed in accordance with a resolution of the Board of Directors.
*END OF REMUNERATION REPORT*
David Johnstone, Chairman
23 August 2019
Envirosuite Limited Annual Report 2019Page 17
Corporate Governance Statement
Statement Of Corporate
Governance Practice 2019
ENVIROSUITE Limited (“EVS” or “the Company”) Approach to Corporate Governance and Responsibility
The EVS board of Directors is committed to the principles underpinning good corporate governance, applied in a manner
which is most suited to EVS, and to best addressing the directors’ accountability to security holders and other stakeholders.
This is supported by a commitment to the highest standards of legislative compliance and financial and ethical behaviour.
The Company continues to address directors’ accountability to stakeholders in a manner consistent with the Company’s
individual circumstances enhanced through the introduction of publicly available policies and procedures which are designed
to foster a culture of transparency in the way EVS is directed and managed.
As a measure of its stated commitment to good corporate governance principles, the board will continue to:
•
•
Review and continually improve its governance practices; and
Monitor developments in good corporate governance.
Report on Compliance with the ASX Corporate Governance Principles and Recommendations 3rd Edition
The ASX Listing Rules require listed companies to issue a statement disclosing the extent to which they have followed the ASX
Corporate Governance Principles and Recommendations 3rd Edition (“Recommendations”) which took effect for reporting
periods commencing on 1 July 2014.
The Company has elected to publish its Statement of Corporate Governance Practices in its Annual Report and will lodge the
Appendix 4G that sets out a Key to Disclosures - Corporate Governance Council Principles and Recommendations. This will be
lodged on the same date as the Annual Report of the Company.
Listed companies must identify the recommendations that have not been followed and provide reasons for the Company’s
decision. Where a recommendation has been followed for only part of the period the company must state the period during
which it had been followed.
As detailed within this Statement of Corporate Governance Practices; EVS considers its governance practices comply with:
•
•
each of the ASX Corporate Governance Principles (“Principles”); and
the Recommendations, except for those detailed, and for the reasons outlined, in this Report.
For the reasons expressed within this statement, EVS has elected not to adopt Recommendations 2.2 and 2.4. Several
Recommendations have not been fully adopted and the reasons for that and the extent to which EVS does comply with the
Recommendations are also set out in this statement. EVS is a relatively small company and accordingly the Directors consider
that many of the corporate governance guidelines intended to apply to larger companies are not practical.
This statement outlines the:
•
•
Principles and Recommendations identified by the ASX as underlying good corporate governance; and
The corporate governance practices of EVS during the financial year, except where stated otherwise.
Principle 1: Lay solid foundations for management and oversight.
Companies should establish and disclose the respective roles and responsibilities of board and management and how their
performance is monitored and evaluated.
Recommendation 1.1:
The Company should disclose:
•
•
the respective roles and responsibilities of the board and management; and
those matters expressly reserved to the board and those delegated to management.
Formalisation of board and management functions
The board has formalised its roles and responsibilities into a Corporate Governance Charter. The Charter clearly defines the
matters that are reserved for the board and those that the board has delegated to management.
In summary the broad functions of the EVS board include:
Page 18 Corporate Governance Statement
•
•
•
•
•
•
oversight of the Company, including its control and accountability systems;
setting the Company’s major goals including the strategies and financial objectives to be implemented by management;
appointing, removing and managing the Chief Executive Officer;
ratifying the appointment and where appropriate the removal of the Chief Financial Officer and/or Company Secretary;
input into and final approval of management’s development of corporate strategy and performance objectives;
reviewing and ratifying systems of risk management and internal compliance and control, codes of conduct and legal
compliance;
• monitoring senior management’s performance and implementation of strategy, and ensuring that appropriate resources
are available;
•
•
•
approving and monitoring the progress of major capital expenditure, capital management and acquisitions and
divestitures;
approving and monitoring financial and other reporting; and
corporate governance.
The board has delegated responsibility to the Chief Executive Officer for:
•
developing and implementing corporate strategies and making recommendations on significant corporate strategic
initiatives;
• maintaining an effective risk management framework and keeping the board and market fully informed about material
risks;
•
developing the Group’s annual budget, recommending it to the board for approval and managing day to day operations
within the budget;
• managing day to day operations in accordance with standards for social and ethical practices which have been set by the
board; and
•
approval of capital expenditure and business transactions within predetermined limits set by the board.
Recommendation 1.2:
•
•
The Company should undertake appropriate checks before appointing a person or putting forward to security holders
a candidate for election as a director; and
provide all material information in its possession relevant to enabling security holders to make an informed decision
on whether or not to elect or re-elect a director.
Director’s appointment
EVS performs appropriate checks of any person to be appointed a director, either by the board or nominated by Security
Holders.
A nominated person is required to disclose to the board any information sought regarding their overall character and ability to
fulfil his or her responsibilities as a Director.
Where a candidate is standing for election or re-election as a Director, the Company will provide information regarding their
qualifications, experience and skills that they bring to the board together with details of any other listed company or otherwise
material directorships currently held. If standing for the first time the Company will also advise if there were any material
adverse information revealed by the checks the Company has performed about the candidate together with any interest,
position, association or relationship that might influence, or reasonably be perceived to influence, in a material respect his
or her capacity to bring an independent judgement to bear on issues before the board and to act in the best interests of the
Company and its security holders generally; and a statement to the effect that if the board considers that the candidate will, if
elected, qualify as an independent director. Where a candidate seeks election or re-election the board will issue a statement as
to whether it supports the election or re-election of the candidate.
Procedure for selection and appointment of new directors
The process for appointing a director with EVS is that, when a vacancy exists, the board identifies candidates with the
appropriate expertise and experience, using external consultants as appropriate. The most suitable candidate is appointed
but must stand for election at the next annual general meeting following their appointment.
The process for re-election of a director is in accordance with the Company’s Constitution, which requires that each year, at
least one-third of the directors (excluding a managing director) retire from office at the Annual General Meeting. The retiring
directors may be eligible for re-election.
Envirosuite Limited Annual Report 2019Page 19 Corporate Governance Statement
Recommendation 1.3:
Companies should have a written agreement with each director and senior executive setting out the terms of their
appointment.
Agreements with Directors and senior executives
EVS ensures that all Directors and senior executives enter into written agreements setting out the terms of their appointment
to ensure that they have a clear understanding of their roles and responsibilities and of the Company’s expectations of them.
Material terms of contracts with the Group are included in the remuneration report which is published in the Annual Report.
Recommendation 1.4:
The company secretary of a listed entity should be accountable directly to the board, through the chair, on all matters to
do with the proper functioning of the board.
Company Secretary
The Company Secretary is accountable directly to the Board. The Company Secretary advises the board on all governance
matters, ensures board policies and procedures are followed, despatches timely board papers, accurately records the minutes
of meetings and assists in the induction and professional development of directors. The appointment or removal of the
Company Secretary is a matter for the board.
Recommendation 1.5:
The Company should:
•
•
•
have a diversity policy which includes requirements for the board or a relevant committee of the board to set
measurable objectives for achieving gender diversity set by the board or a relevant committee of the board in
accordance with the Company’s diversity policy and its progress towards achieving them;
disclose that policy or a summary of it; and
disclose at the end of each reporting period the measurable objectives for achieving gender diversity set by the board
or the relevant committee of the board in accordance with the Company’s diversity policy and its progress towards
achieving them and the respective proportions of men and women on the board, in senior executive positions and
across the whole organisation.
Diversity
The board recognises the benefits of achieving an appropriate mix of diversity on its board and throughout the Company
as a means of enhancing the Company’s performance and organisational capabilities. The board is committed to ensuring
adherence to diversity and has adopted a formal diversity policy that is set out and published in Section 5 of the Group’s
Corporate Governance Charter. The board and management has adopted a broad view of what constitutes meaningful
diversity and is proud to employ a team of people with a diverse mix of skills, experiences, perspectives, cultural backgrounds,
gender and age.
Measurement of diversity objectives
EVS aims to achieve an appropriate mix of diversity on its board, in senior management and throughout the organisation. The
EVS board has determined that no specific measurable objectives will be established until the number of employees and level
of activities of the Company increases to a level sufficient to enable meaningful and achievable objectives to be developed.
Women employees
EVS has four directors including the CEO, all of which are male. The Chief Financial Officer is also male. EVS has six female
employees as at the date of this report.
Recommendation 1.6:
The Company should:
•
•
have and disclose the process for periodically evaluating the performance of the board, its committees and individual
directors; and
disclose, in respect of each reporting period whether a performance evaluation was undertaken.
Page 20
Corporate Governance Statement
Board Performance Evaluation
In prior reporting periods the board has adopted an ongoing, self-evaluation process to measure its own performance, that of
individual directors and the performance of its committee functions during the reporting period.
During the period a third party service provider was engaged to facilitate a performance survey and feedback review of each of
the directors. The review process involved an anonymous 360 degree self and peer review. The survey questionnaire covered
a variety of competencies including commercial astuteness, communication, decision-making, leadership, planning and
organisation, relationships, stakeholder focus and strategic thinking.
The individual reports detailed the variances in the self and peer assessments that included both point scoring and written
feedback through which were identified areas of strengths and growth opportunities for each director. The Chairman met
individually with each director to discuss their reports and the results for the Chairman.
The directors have each committed to consciously address any areas of growth opportunities identified with improvement to
be measured against the results of the reports from the same process conducted during the next reporting report.
In addition to the formal review process outlined above, the Chairman meets periodically with the individual directors to
discuss the performance of the board and each director. The Chairman’s performance is also evaluated by the directors. In
addition, an evaluation is undertaken by the Chairman of the contribution made of directors retiring by rotation prior to the
board endorsing their candidature.
The review process involves consideration of all of the board’s key areas of responsibility and accountability and is based on
an amalgamation of factors including capability skill levels, understanding of industry complexities, risks and challenges, and
value adding contribution to the overall management of the business.
Recommendation 1.7:
A listed entity should:
•
•
have and disclose a process for periodically evaluating the performance of its senior executives; and
disclose, in relation to each reporting period, whether a performance evaluation was undertaken in the reporting
period in accordance with that process.
The Company has a formal process for evaluating the performance of all staff including the senior executives. The Chief
Executive Officer conducts formal periodical performance evaluations for his direct reports that include the Chief Financial
Officer, Chief Technical Officer, Client Services Manager and the General Managers for Europe and the Americas. The
performance of each of the CEO’s direct reports are considered against their contracted KPIs and the extent to which they have
achieved the budgets for which they are directly responsible.
The Board conducts an annual performance review of the Chief Executive Officer. The review considers the performance of
the CEO against their KPIs that includes assessing the performance of the business against company budgets and strategic
objectives as well as other measures designed to protect and grow shareholder value.
For the first time the board implemented a third party facilitated process to evaluate the non-financial performance of the
Chief Executive Officer. The same process and facilitator utilised by the board outlined in the previous section of this statement
was adopted and extended to include reviews by the direct reports to the Chief Executive Officer. The process delivered a
comprehensive report contrasting the detailed performance feedback of the management team and the board members with
the self-assessment of the Chief Executive Officer. The Chairman met with the Chief Executive Officer to work through the
report and discuss various focus areas for improvement.
The board intends to conduct this review process on-going during each reporting period and the Remuneration and
Nominations Committee is currently considering how the non-financial performance measures will be incorporated into the
determination of future remuneration incentives for the Chief Executive Officer and potentially for broadening to include other
company executives.
Principle 2: Structure the board to add value.
Companies should have a board of an appropriate size, composition, skills and commitment to enable it to discharge its
duties effectively.
Recommendation 2.1:
The board should have a nomination committee and structure that committee so that it:
•
•
has at least three (3) members and consists of a majority of independent directors; and
is chaired by an independent chair, who is not chair of the board;
Envirosuite Limited Annual Report 2019Page 21 Corporate Governance Statement
and disclose:
•
•
•
the nomination committee charter;
the members of the committee;
at the end of each reporting period the number of times the committee met throughout the period and the individual
attendances of the members at those meetings;
Alternatively, if there is no nomination committee disclose that fact and the processes it employs to address board
succession issues and to ensure that the board has the appropriate balance of skills, knowledge, experience, independence
and diversity to enable it to effectively discharge its duties and responsibilities effectively.
Establishment of nomination committee
EVS has a formal Remuneration and Nomination committee which is a sub-committee of the board however for practical
considerations associated with the small size of the Company, and the make-up of the board, the Company has elected not to
adopt each of the sub-recommendations set out in Recommendation 2.1.
The Committee consists of only two directors and the Chair of the Committee is also the Chair of the board. The Company
believes that the Committee members are the best qualified members of the Board to effectively perform the functions of the
Committee in accordance with the Charter which is published on the Company’s website. The number of meetings held in each
financial year and the attendance at those meetings is disclosed in the Company’s Annual Report.
The Committee meets informally on a regular basis and the Chair of the Committee reports to the board at each regular
monthly meeting of the directors on any new or updated matters.
Recommendation 2.2:
The board should have and disclose a board skills matrix setting out the mix of skills and diversity that the board currently
has or is looking to achieve.
Skills matrix
EVS has identified the skills and competency of each board member.
EVS has elected not to adopt Recommendation 2.2 as it considers that its current practices of identifying skills and
competency are an efficient means of meeting the needs of the Company, particularly having regard to the fact that EVS 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.
While a formal matrix is not in use, the board regularly discusses the appropriate mix of skills and diversity and is collectively
mindful of the recommendation and the requirements for the company as it continues to grow the scale of its operations.
Recommendation 2.3:
The Company should disclose:
•
•
the names of the directors considered by the board to be independent directors.
If a director has an interest, position, association or relationship which may influence or cast doubts about his or
her independence, but the board is of the opinion that it does not compromise the independence of the direct,
the Company should disclose the nature of the interest, position, association or relationship in question and the
explanation of why the board is of that opinion; and
•
the length of service of each director.
Independence
An EVS director will be considered independent where he or she is:
•
•
independent of management, that is a non-executive director; and
free from any business or other relationship that could materially interfere with, or could reasonably be perceived to
materially interfere with, the exercise of his or her unfettered and independent judgement.
Materiality is assessed on a case-by-case basis by reference to the director’s individual circumstances rather than general
materiality thresholds.
The EVS board has made its own assessment to determine the independence of each director on the board. It is the board’s
view that during the year that the Chairman, Mr David Johnstone and director, Mr Hugh Robertson can be considered both non-
executive and independent. Mr Adam Gallagher by virtue of his role as Company Secretary cannot be considered non-executive
Page 22 Corporate Governance Statement
and therefore not independent, and similarly Mr Peter White and Mr Robin Ormerod (up to his retirement on 28 September
2018) cannot be considered non-executive nor independent, on account of their executive employment contracts, as well as Mr
Ormerod being a major shareholder.
In view of the size of the Company and the nature of its activities, the board considers that the current mix of skills, experience,
qualifications and experience on the board is consistent with the short to medium term interests of the Company. The board
will continue to evaluate the appropriate make-up of the board and monitor the requirements for independent directors in the
context of the Company’s communicated objectives.
The disclosure recommendations in Recommendation 2.3 are disclosed in the Director’s Report as part of each Annual Report.
Recommendation 2.4:
The majority of the board should be independent directors.
Composition of the board
The EVS board currently comprises two (2) executive directors and two (2) non-executive director. As noted in the previous
section, Adam Gallagher is only technically considered executive by virtue of his role as Company Secretary. The two non-
executive directors are also considered to be independent. The executive directors are not considered to be independent
due to their contractual relationships with the Company and (until his retirement on 28 September 2018) the substantial
shareholding in the Company of the Managing Director, Mr Robin Ormerod.
The desirable composition of the board is based on the following factors:
•
•
•
•
the Company’s constitution provides for the number of directors to be not less than three (3) and not more than ten (10) as
determined by directors from time to time;
the board is cognisant that the position of Chairman should where possible be held by a non-executive director.
Consistent with the Company’s objective that the board should encompass a broad range of relevant expertise, the
present board consists of directors with a collective of diverse skills, qualifications and experience and further details are
provided in the Director’s Report.
The board considers that the individual Directors draw on their professional expertise, experience and skill-sets to make
measured, considered and balanced decisions in the best interests of the Company.
There is no shareholding requirement imposed upon directors under the Company’s Constitution; however, all of the directors
of EVS hold shares or options either directly or indirectly in the Company.
Details of all holdings by directors in the Company in accordance with disclosure requirements are included within the
Directors Report contained within the EVS Annual Report.
Recommendation 2.5:
The chair should be an independent director.
Chairman
The Chairman is elected by the board.
The current Chairman, Mr David Johnstone, was appointed as a non-executive director in February 2014 and elected Chairman
in September 2016.
The appointment of Mr David Johnstone as Chairman resulted in an independent non-executive director acting as Chair from 2
September 2016.
The board will continue to assess the requirements of this recommendation in the context of the Company’s individual
circumstances and its communicated long-term objectives.
Separation of roles of Chair and CEO
For the year ended 30 June 2019, and at each point during the reporting period, the roles of Chairman and Chief Executive
Officer were held by different people.
Recommendation 2.6:
An entity should have a program for the induction of new directors and provide appropriate professional development
opportunities to all board members in order to develop and maintain the skills and knowledge needed to effectively
perform their duties as a director.
Envirosuite Limited Annual Report 2019Page 23 Corporate Governance Statement
Induction program
Procedures for induction of new directors are in place to allow new directors to participate fully and actively in board decision
making at the earliest opportunity.
All directors are offered an induction program appropriate to their experience upon appointment so as to familiarise them
with matters relating to the business, strategy and any current issues under consideration by the board. This program consists
of written background material on the Company, its products, services and operations, scheduled meetings with the Chairman
and Chief Executive Officer of the Company.
Director education
The board encourages directors to continue their education by participating in applicable workshops and seminars and
attending site visits and undertaking relevant external education.
The Company Secretary provides directors with on-going information on corporate governance matters and other relevant
and practical information to assist them in the discharge of their duties and obligations.
Board briefings and agendas
Board agendas are structured throughout the year in order to ensure that each of the significant responsibilities of the board is
addressed.
Prior to each meeting, Directors receive financial, operational and strategy reports from senior management who are available
both prior to and during meetings as requested to discuss reports with, and provide insights to, the board.
Access to information
All directors have access to company records and information, and receive regular detailed financial and operational reports
from senior management.
The Company Secretary is available to all Directors for consultation on points of corporate governance, the Company
constitution and the law. In addition, the Chairman and other Directors consult with each other and the Chief Financial Officer,
and may confer and request additional information from any EVS employee or consultant. Management are available to
discuss reports, and any issue arising, with the board as required.
Term of office, skills, experience and expertise of each director
The qualifications, experience and expertise of the directors, and the respective terms of office held by individual directors,
are set out in the Directors Report contained within the Annual Report.
Independent professional advice
EVS has in place a procedure whereby, after appropriate consultation, directors are entitled to seek independent professional
advice, at the expense of EVS, to assist them to carry out their duties as directors. The policy of EVS provides that any such
advice is made available to all directors.
Principle 3: Promote ethical and responsible decision-making.
The entity should act ethically and responsibly.
Recommendation 3.1:
The Company should:
•
•
Establish a code of conduct for its directors, senior executives and employee; and
disclose that code or a summary of it.
Code of conduct
EVS is committed to the operation of its business in a manner that meets or exceeds the ethical, legal, commercial and public
expectations that society has of the Company and the industry in which it operates.
The board has approved a Code of Conduct that applies to all directors, executives, management and employees without
exception.
The Code of Conduct is designed to ensure that:
Page 24 Corporate Governance Statement
•
•
•
high standards of corporate and individual behaviour are observed by all EVS directors, executives, management and
employees in the context of their respective roles and the performance of their duties with EVS.
directors, executives, management and employees are aware of their responsibilities to EVS under the terms of their
appointment or contract of employment; and
all of the stakeholders of the Company can be guided by the stated values and policies of EVS.
In summary, the Code provides that all directors and senior executives must:
•
•
•
•
•
•
act honestly, in good faith and in the best interests of the company;
use due care, skill and diligence in fulfilling their duties;
use the power of their position for a proper purpose, in the interest of the company;
not make improper use of information acquired by virtue of their position;
not allow personal interest, or those of associates, to conflict with the interest of the company;
exercise independent judgement and actions;
• maintain the confidentiality of company information acquired by virtue of their position;
•
•
not engage in conduct likely to bring discredit to the company; and
comply at all times with both the spirit and the letter of the law, as well as, policies of the company.
Principle 4: Safeguard integrity of financial reporting.
Entities should have formal and rigorous processes that independently verify and safeguard the integrity of its corporate
reporting.
Recommendation 4.1:
The board should have an audit committee and structure that committee so that it:
•
•
has at least three (3) members and consists of a majority of independent directors; and
is chaired by an independent chair, who is not chair of the board;
and disclose:
the audit committee charter;
•
•
the members of the committee and their experience and qualifications;
at the end of each reporting period the number of times the committee met throughout the period and the individual
attendances of the members at those meetings;
Alternatively, if there is no audit committee disclose that fact and the processes it employs that independently verify and
safeguard the integrity of its corporate reporting, including the processes for the appointment and removal of the external
auditor and the rotation of the audit engagement partner.
Establishment of audit committee
EVS has a formal Audit and Risk Management committee which is a sub-committee of the board however for practical
considerations associated with the small size and scale of the Company, and the make-up of the board, the Company has
elected not to adopt each of the sub-recommendations set out in Recommendation 4.1.
The Committee consists of only two directors and the Chair of the Committee is not the Chair of the board. The Company
believes that the Committee members are the best qualified members of the Board to effectively perform the functions of
the Committee in accordance with the Charter which is published on the Company’s website. The board considers that the
technical skills, qualifications and experience represented by the involvement of members Mr David Johnstone and Mr Adam
Gallagher are most suited to the effective discharge of these responsibilities.
The number of meetings held in each financial year and the attendance at those meetings is disclosed in the Annual Report.
The board will continue to monitor the requirements of this recommendation in the context of the Company’s prevailing
position and circumstances.
Audit committee – terms of reference
Notwithstanding, the EVS Audit and Risk Management Committee role and responsibilities, composition, structure and
membership requirements are detailed in a formalised Audit and Risk Management charter that is available on the Company’s
website.
Envirosuite Limited Annual Report 2019Page 25 Corporate Governance Statement
Reflecting the relative small size of the Company the Audit and Risk Management Committee is responsible for:
•
•
•
•
•
•
•
reviewing the annual and half year financial reporting carried out by EVS;
reviewing the accounting policies of EVS;
reviewing the scope and audit programmes of the external auditors and any material issues arising from these audits;
oversee the independence of external auditors and determining procedures for the rotation of audit partners; and
the sufficiency of, and compliance with, ethical guidelines and company policies affecting corporate governance, financial
reporting and corporate control together with compliance with laws and external regulations;
identification of the full range of actual or potential risk exposures which are material to EVS; and
the effectiveness of the group’s risk management systems and strategies.
Meetings
The members of the Audit and Risk Management committee meet informally on a monthly basis to review and manage risks
and reporting and report on those matters at each monthly board meeting. Formal meetings of the committee are held prior to
the release of the Half Year and Annual Reports and as required to fulfil its obligations.
Reporting
The committee members converse as and when required on matters relevant to the audit function.
Engagement and rotation of external auditor
The board is responsible for nominating the external auditor. If the board recommends a change in external auditor, the
board’s nomination of external auditors requires Security holder approval. The board approves the compensation of the
external auditor.
The board meets with the external auditor throughout the year to review the adequacy of the existing external audit
arrangements with particular emphasis on scope, quality and independence of the audit.
It has been determined by the board that the external auditor will not provide services to the Company where the auditor
would:
•
•
•
•
•
•
•
•
•
•
have a mutual or conflicting interest with the Company;
be in a position where they audit their own work;
function as management of the Company; or
have their independence impaired or perceived to be impaired in any way.
Specifically, the external auditor will not normally provide the following types of services to the Company:
bookkeeping or other services relating to the accounting records of the Group;
financial information or information technology systems design or implementation;
appraisal and valuation services, fairness opinions or contributions in kind reports;
actuarial services;
internal audit outsourcing services;
• management functions, including temporary staff assignments or human resource services, including recruitment of
senior management;
•
•
broker or dealer services, investment advisor, corporate finance or investment banking services; and
legal and litigation support services.
Procedures are in place governing approval of any non-audit work before the commencement of any engagement.
The board has elected to adopt a policy which is consistent with the primary and secondary rotation obligations regarding
auditors such that:
•
•
the lead or review audit partner’s responsibilities may not be performed by the same person for longer than five (5)
consecutive years (“primary rotation obligation”); and
the lead or review audit partner’s responsibilities may not be performed by the same person for more than five (5) out of
seven (7) consecutive years (“secondary rotation obligation”).
In addition, the board requires a minimum of two (2) consecutive years “cooling off” period before an auditor undergoing
rotation can return to playing a significant role in the audit of the Company.
Mr Shaun Lindemann of PKF Brisbane Audits was the lead audit partner for EVS for the year ended 30 June 2019.
Page 26 Corporate Governance Statement
The lead signing and review External Audit Partner attends that part of board meetings pertaining to audit matters by standing
invitation.
Number of meetings and names of attendees
The details of the formal Audit and Risk Management committee meetings held during each financial year including the
number of meetings and the names of the attendees are disclosed in the Annual Report.
Recommendation 4.2:
The board should, before it approves the entity’s financial statements, receive from the Chief Executive Officer (or equivalent)
and the Chief Financial Officer (or equivalent) a declaration that the financial records of the entity have been properly
maintained and such declaration be provided in accordance with Section 295A of the Corporations Act and the declaration is
founded on a sound system of risk management and internal control and that the system is operating effectively in all material
respects in relation to financial reporting risks.
CEO and CFO assurance
The Chief Executive Officer and the Chief Financial Officer of EVS report in writing to the board that:
•
•
consolidated financial statements of EVS and its controlled entities for each half year and full financial year present a true
and fair view, in all material respects, of the Group’s financial condition and operational results and are in accordance with
accounting standards; and
declarations provided in accordance with Section 295A of the Corporations Act are founded on a sound system of risk
management and internal control, and that the system is operating effectively in all material respects in relation to
financial reporting risks.
The board has received assurance from the Chief Executive Officer and the Chief Financial Officer under Recommendation 4.2
in respect of each financial year. This assurance is provided in accordance with the process outlined in this Statement.
Recommendation 4.3:
The Company should ensure that its external auditor attends its AGM and is available to answer questions from security
holders pertaining to the audit.
External auditor attendance at AGM
EVS seeks to ensure that the lead audit partner or his representative attends the AGM in order to be available to answer
questions from security holders pertaining to the audit.
Principle 5: Make timely and balanced disclosure.
Entities should make timely and balanced disclosure of all matters concerning it that a reasonable person would expect to
have a material effect on the price or value of its securities.
Recommendation 5.1:
Establish written policies and procedures designed to ensure compliance with ASX Listing Rule disclosure requirements
and to ensure accountability at a senior level for that compliance and disclose those policies or a summary of those
policies.
The EVS board is committed to keeping its security holders, and the market, fully informed of major developments having an
impact on the Company.
Comprehensive procedures are in place to identify matters that are likely to have a material effect on the price, or value of EVS
securities and to ensure those matters are notified to the ASX in accordance with ASX disclosure requirements.
The Chief Executive Officer and the board are responsible for scrutinising events and information to determine whether the
disclosure of the information is required in order to maintain the market integrity of the Company’s shares listed on the ASX.
The Company Secretary is responsible for lodging all communications with the ASX.
Principle 6: Respect the rights of security holders.
The entity should respect the rights of security holders by providing them with appropriate information and facilities to
allow them to exercise those rights effectively.
Envirosuite Limited Annual Report 2019Page 27 Corporate Governance Statement
Recommendation 6.1:
The Company should provide information about itself and its governance to investors via its website.
Security holder communication policy
EVS recognises the rights of security holders to be informed of matters, in addition to those prescribed by law, which affect
their investments in the Company.
EVS is committed to:
•
•
•
dealing fairly, transparently and openly with both current and prospective security holders;
the use of available channels and cost effective technologies to reach security holders who may be geographically
dispersed and in order to communicate with all security holders; and
facilitating participation in Security holder meetings and dealing promptly with Security holder enquiries.
EVS communicates information to security holders through:
•
•
•
•
•
•
the annual report;
disclosures to the ASX and ASIC;
notices and explanatory memorandum of annual general meetings and general meetings;
occasional letters from the Chief Executive Officer to inform security holders of key matters of interest;
the Company’s website; and
opt-in email notifications of ASX announcements and other news items relevant to their interest in the Company.
Recommendation 6.2:
The Company should design and implement an investor relations program to facilitate effective two-way communication
with investors.
Investor relations program
EVS employs a communications manager whose role is to manage effective internal and external communications for clients,
shareholders, staff, industry and other stakeholders. During the period and from time to time the group retains the services of
external Investor Relations advisors and implements strategies and communication activities with the aim of encouraging and
facilitating investor interest and engagement with the Company.
The Directors and Chief Executive Officer meet regularly with and make themselves available to investors for the purpose of
providing effective two-way communication.
Recommendation 6.3:
The Company should disclose the policies and processes it has in place to facilitate and encourage participation at meeting
of security holders.
The board encourages active participation by security holders at each Annual General Meeting, or other general meetings, to
ensure a high level of accountability and understanding of EVS’s strategy, performance and goals.
Consistent with best practice, important issues are presented to security holders as single resolutions expressed in plain,
unambiguous language. Proceedings are held in a locality, and at a readily accessible venue, conducive to maximising the
number of security holders present, and able to participate, at the meeting. In addition to the formal aspects of the meeting,
the CEO may present an overview of the Company in a separate presentation or provide a demonstration of the Company’s
software products. Security holders are provided with opportunities of asking the board questions that they may have
including those regarding the management of the Company.
Recommendation 6.4:
A listed entity should give security holders the option to receive communications from, and send communications to, the
entity and its security registry electronically.
Electronic communications from shareholders for the submission of queries, comments and voting including proxy forms,
are encouraged by both the Company and its security registry provider Boardroom Limited. On the each ASX announcement
the Company displays a dedicated email address for investors to contact. Documents including holding statements, Annual
Reports and proxy forms are mainly conveyed by email unless otherwise requested by the shareholder.
Page 28 Corporate Governance Statement
Principle 7: Recognise and manage risk.
Companies should establish a sound risk management framework and periodically review the effectiveness of that
framework.
Recommendation 7.1:
The board should have a risk committee and structure that committee so that it:
•
•
has at least three (3) members and consists of a majority of independent directors; and
is chaired by an independent chair, who is not chair of the board;
and disclose:
•
•
•
the risk committee charter;
the members of the committee;
at the end of each reporting period the number of times the committee met throughout the period and the individual
attendances of the members at those meetings;
Alternatively, if there is no risk committee or the committee does not satisfy the recommend structure, disclose that fact
and the processes it employs for overseeing the entity’s risk management framework.
Risk committee
EVS has elected to combine and delegate the functions of primary Audit and Risk oversight to the Audit and Risk Management
Committee that are set out and governed by the Audit and Risk Management Charter that is available on the Company’s
website.
Given the make-up of the board in regard to the mix of executive and non-executive members and their respective skill-sets,
the audit committee is made up of only two directors and the Chair of the committee is not the Chairman of the board however
that Chair is not regarded as an independent director. The names of the Committee members as well as the details of the
Committee meetings are disclosed in the Company’s Annual Report.
Although EVS has not fully adopted Recommendation 7.1, it considers that its existing practices, detailed within this Statement
and the Audit and Risk Management charter, are an efficient means of meeting the needs of the Company, particularly having
regard to the fact that EVS 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.
The board will however, continue to monitor the requirements of this recommendation in the context of the Company’s
prevailing position and circumstances.
Recommendation 7.2:
The board should:
•
•
review the risk management framework at least annually to satisfy itself that it continues to be sound; and
disclose, in relation to each reporting period, whether a review has taken place.
Oversight and management of material business risks
The board of EVS:
•
•
•
recognise that effective management of risk is an integral part of good management and vital to the continued growth
and success of EVS;
is responsible for the oversight of the Group’s risk management and control framework including the development of
risk profiles as part of the overall business and strategic planning process including budgeting, decision making (e.g.
investment appraisal), monitoring and reporting, project management and internal controls; and
has implemented a policy framework designed to ensure that the Group’s risks are identified, analysed, evaluated,
monitored, and communicated within the organisation on an ongoing basis, and that adequate controls are in place and
functioning effectively.
The EVS risk management and control policy framework incorporates the maintenance of appropriate policies, procedures and
guidelines which address the Company’s unique operating environment and is utilised by the board as a means of identifying
opportunities and avoiding or mitigating losses in the context of its business.
Envirosuite Limited Annual Report 2019Page 29 Corporate Governance Statement
During the previous reporting period, due to the change in scale and nature of the Company operations from the previous
reporting periods, the Company developed a new Risk Register in collaboration with an external Risk management specialist
to facilitate the process. The resulting Risk Register was subsequently approved and adopted by the board and a process
reinstated whereby the management risk oversight and reporting processes feed into the Audit and Risk Management
committee and the board. The Risk Register has been formally reviewed by the Audit and Risk Management Committee in
conjunction with the board and Chief Executive Officer. The Risk Register and the ongoing reporting against the register, have
been updated with minor amendments to address the incremental scaling of the business since the previous reporting report.
The Chief Executive Officer has ultimate responsibility for the control and management of operational risk and the
implementation of avoidance or mitigation measures within the Group and may delegate control of these risks to the
appropriate level of management at each location.
The Chief Executive Officer’s approach to management of risk as part of key business processes includes consideration,
identifying, managing and monitoring uncertainties and vulnerabilities that might impact on the achievement of our corporate
goals and reputation.
Recommendation 7.3:
The Company should disclose:
•
•
if it has an internal audit function, how that function is structured and what role it performs; or
if it does not have an internal audit function, that fact and the processes it employs for evaluating and continually
improving the effectiveness of its risk management and internal control processes.
Internal audit function and review of risk management framework
EVS 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. As such it is not practical to have an internal audit function.
Through the Risk register, the risk management processes undertaken by management and the Audit and Risk Management
committee, the board regularly monitors the operational and financial performance of the Company and the economic entity
against budget and other key performance measures. The board also receives and reviews advice on areas of operational and
financial risk and develops strategies, in conjunction with management, to mitigate those risks.
Management reports to the board on the effectiveness of the Company’s management of its material business risks in respect
of each financial year. This report was undertaken in accordance with the process outlined in this Statement.
Recommendation 7.4:
The company should disclose whether it has any material exposure to economic, environmental and social sustainability
risks and, if it does, how it manages or intends to manage those risks.
EVS is cognisant that the business community should address matters of economic, environmental and social sustainability
and the need to be transparent on these matters to enable investors to properly assess investment risk.
EVS 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 and operations the Company considers that it does not have
specific material exposures to economic, environmental or social sustainability risks.
Principle 8: Remunerate fairly and responsibly.
An entity should pay director remuneration sufficient to attract and retain high quality directors and design its executive
remuneration to attract, retain and motivate high quality senior executives and to align their interests with the creation of
value for security holders
Recommendation 8.1:
The board should establish a remuneration committee.
The remuneration committee should be structured so that it:
•
•
has at least three (3) members and consists of a majority of independent directors; and
is chaired by an independent chair, who is not chair of the board;
and disclose:
•
the remuneration committee charter;
Page 30 Corporate Governance Statement
•
•
the members of the committee;
at the end of each reporting period the number of times the committee met throughout the period and the individual
attendances of the members at those meetings;
Alternatively, if there is no remuneration committee or the committee does not satisfy the recommend structure, disclose
that fact and the processes it employs for setting the level and composition of remuneration for directors and senior
executives and ensuring that such remuneration is appropriate and not excessive.
Establishment of remuneration committee
EVS has a formal Remuneration and Nomination committee which is a sub-committee of the board however for practical
considerations associated with the small size and scale of the Company, and the make-up of the board, the Company has
elected not to adopt each of the sub-recommendations set out in Recommendation 8.1.
The committee consists of only two directors and the Chair of the committee is also the Chair of the board. The Company
believes that the committee members are the best qualified members of the Board to effectively perform the functions of the
committee in accordance with the Charter which is published on the Company’s website. The number of meetings held in each
financial year and the attendance at those meetings is disclosed in the Company’s Annual Report.
The details of the responsibilities and functions of the committee is set out in the charter and in summary the committee is
responsible for giving due consideration to the overall remuneration policies and strategies and strategies of the Company
during the conduct of its regular committee meetings and by appropriate recourse to relevant market data and, where
applicable, to external executive remuneration consultants.
Recommendation 8.2:
An entity should separately disclose its policies and practices regarding the remuneration of non-executive directors’ and
the remuneration of executive directors and other senior executives.
Executive director and non-executive director remuneration
The aggregate remuneration of non-executive directors is approved by security holders.
Individual directors’ remuneration is determined by the board, within the approved aggregate total. In determining the
appropriate level of director’s fees, data from surveys undertaken of other public companies similar in size or market section to
EVS is taken into account.
Non-executive directors of EVS are:
•
•
not entitled to participate in performance based remuneration practices unless approved by security holders.
currently remunerated by means of the payment of cash benefits in the form of directors’ fees or alternatively by issue of
securities in lieu of cash benefits provided it is approved by security holders.
EVS does not currently have in place a retirement benefit scheme or allowance for its non-executive directors, except for the
payment of superannuation, as required by law.
A review of the compensation arrangements for the Chief Executive Officer and Senior Executives is conducted by the
Remuneration and Nomination committee at formal and informal committee meetings. A formal review is performed at least
annually and is based upon criteria including individual performance, market rates paid for similar positions and the results of
the Company during the relevant period.
The broad remuneration policy objective of EVS is to ensure that the emoluments provided properly reflect the person’s duties
and responsibilities and is designed to attract, retain and motivate executives of the highest possible quality and standard to
enable the organisation to succeed.
The board ensures that any payments of equity based executive remuneration is made in accordance with the broad
remuneration policy objectives of the Company.
EVS is committed to making timely disclosure of all relevant information relating to its remuneration practices and policies.
Policy disclosure
The Company’s policies relating to the remuneration of Directors and Senior Executives and the level of their remuneration are
detailed annually in the Directors’ Report contained within the Annual Report and Notes to and forming part of the Financial
Statements.
Envirosuite Limited Annual Report 2019Page 31 Corporate Governance Statement
Recommendation 8.3:
An entity which has an equity-based remuneration scheme should:
•
•
have a policy on whether participants are permitted to enter into transactions (whether through the use of derivatives
or otherwise) which limit the economic risk of participating in the scheme; and
disclose that policy or a summary of it.
Remuneration scheme
As at the reporting date the Company has not implemented a formal equity-based remuneration scheme. A small select
number of key executives have equity-based incentives set out in their individual contracts that involve potential equity
payments at the Company’s discretion in lieu of cash for performance bonuses and the issue of performance rights. The
aggregate amounts of these incentives are not material and there are no restrictions placed on the ordinary shares that may be
issued under these arrangements.
In the event that the board determines that it is in the best interests of security holders to implement a formal equity-based
remuneration scheme, the scheme will be designed to ensure that it does not limit the economic risk and that it meets
requirements of Section 206J of the Corporations Act.
Page 32 Auditor's Independence Declaration
AUDITOR’S INDEPENDENCE DECLARATION
UNDER SECTION 307C OF THE CORPORATIONS ACT 2001
TO THE DIRECTORS OF ENVIROSUITE LIMITED
I declare that, to the best of my knowledge and belief, during the year ended 30 June 2019, there have
been no contraventions of:
(a)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(b)
any applicable code of professional conduct in relation to the audit.
PKF BRISBANE AUDIT
SHAUN LINDEMANN
PARTNER
23RD AUGUST 2019
BRISBANE
Envirosuite Limited Annual Report 2019Page 33
Consolidated Statements
Consolidated Statement of Profit or Loss and Other Comprehensive Income
FOR THE YEAR ENDED 30 JUNE 2019
Continuing Operations
Trading revenue
Other revenue
Total operating revenue
Cost of revenue
Gross profit
Operating expenses
Sales and marketing
General and administration
Due diligence and acquisition costs - Odotech
Total operating expenses
Foreign currency (losses) / gains
Operating deficit
Depreciation and amortisation
Net finance income
Net loss before tax
Income tax (expense) / benefit
Loss for the year from continuing operations
Discontinued Operations
Profit / (Loss) from discontinued operations
Net loss for the year
Other comprehensive income
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign operations
Other comprehensive income for the year, net of tax
Year ended
Year ended
Notes
30 June 2019
$’000
30 June 2018
$’000
4
6
6
7,116
585
7,701
(5,521)
2,180
(3,981)
(3,168)
-
(7,149)
101
(4,868)
(1,217)
156
(5,929)
(67)
(5,996)
-
(5,996)
(121)
(121)
3,152
681
3,833
(1,607)
2,226
(3,643)
(3,944)
(178)
(7,765)
12
(5,527)
(383)
132
(5,778)
24
(5,754)
586
(5,168)
(61)
(61)
Total comprehensive income/(loss) for the year
(6,117)
(5,229)
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
Basic (loss) / earnings per share from continuing operations
Basic (loss) / earnings per share from discontinued operations
Diluted (loss) / earnings per share from continuing and discontinued operations
Diluted (loss) / earnings per share from continuing operations
Diluted (loss) / earnings per share from discontinued operations
The accompanying notes form part of these financial statements.
(5,996)
(5,168)
(6,117)
(5,229)
Cents
Cents
(1.62)
(1.62)
-
(1.68)
(1.68)
-
(2.24)
(2.49)
0.25
(2.21)
(2.46)
0.25
31
31
31
31
31
31
Page 34 Consolidated Statements
Consolidated Statement of Financial Position
AS AT 30 JUNE 2019
Consolidated Group
Notes
30 June 2019
$’000
30 June 2018
$’000
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 assets
Intangible assets
Total non-current assets
TOTAL ASSETS
LIABILITIES
Current Liabilities
Trade and other payables
Revenue in advance
Provisions
Borrowings
Total current liabilities
Non-current Liabilities
Provisions
Borrowings
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Retained losses
Total equity
The accompanying notes form part of these financial statements.
9
10
11
12
13
19
14
15
18
17
16
17
16
20
21
21
7,564
1,501
172
328
9,565
277
453
5,555
6,285
3,648
1,386
166
109
5,309
290
414
5,107
5,811
15.850
11,120
1,201
1,483
625
42
3,351
63
107
170
3,521
12,329
36,060
132
(23,863)
12,329
902
851
508
74
2,335
45
154
199
2,534
8,586
26,282
251
(17,947)
8,586
Envirosuite Limited Annual Report 2019Page 35 Consolidated Statements
Consolidated Statement of Changes in Equity
FOR THE YEAR ENDED 30 JUNE 2019
At 1 July 2017
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 / to be issued to employees
Employee share options settled - value of employee services
Total transactions with owners and other transfers
Consolidated Group
Ordinary
shares
$’000
26,282
Reserves
$’000
Retained
losses
$’000
700
(13,127)
Total
Equity
$’000
13,854
-
-
-
-
-
-
-
(61)
(61)
-
(388)
(388)
(5,168)
(5,168)
-
(61)
(5,168)
(5,230)
-
348
348
-
(39)
(39)
At 30 June 2018
26,281
251
(17,947)
8,586
Ordinary
shares
$’000
26,282
Reserves
$’000
Retained
losses
$’000
251
(17,947)
Total
Equity
$’000
8,586
-
-
-
-
(5,996)
(5,996)
(121)
(121)
-
(121)
(5,996)
(6,117)
10,000
(453)
231
-
-
9,778
36,060
-
-
10
27
(35)
2
132
-
-
45
-
35
80
10,000
(453)
286
27
-
9,860
(23,863)
12,329
At 1 July 2018
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
Issue of shares (Institutional Placement)
Transaction costs of capital raising (inc. tax effect)
Shares issued / to be issued to employees
Employee share options - value of employee services
Shares options expired
Total transactions with owners and other transfers
At 30 June 2019
The accompanying notes form part of these financial statements.
Page 36
Consolidated Statements
Consolidated Statement of Cash Flows
FOR THE YEAR ENDED 30 JUNE 2019
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Other revenue
Interest received
Interest paid
Consolidated Group
Year ended 30
June 2019
$’000
Year ended 30
June 2018
$’000
Notes
8,405
(13,362)
(4,957)
524
139
(21)
3,060
(10,568)
(7,508)
1,425
129
(7)
Net cash (used in) operating activities
30
(4,315)
(5,961)
Cash flows from investing activities
Payments for property, plant and equipment
Payments for acquisition of business
Payments for intangible assets
Proceeds from sale of business
Payments for sale of business
Net cash (used in) / provided by 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
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Cash and cash equivalents at the end of the period
The accompanying notes form part of these financial statements.
(65)
-
(257)
(430)
(1,385)
(1,488)
50
-
375
(105)
(1,400)
(1,905)
-
(32)
10,174
(544)
9,598
3,883
33
3,648
7,564
144
(112)
-
-
32
(7,835)
12
11,471
3,648
Envirosuite Limited Annual Report 2019Page 37 Contents Page
Contents
39
51
54
56
56
57
58
59
59
60
61
61
61
62
63
64
64
(1.) Summary of significant accounting policies
(2.) Financial risk management
(3.) Segment information
(4.) Revenue
(5.) Net finance income
(6.) Expenses
(7.) Income tax expense
(8.) Discontinued operations
(9.) Cash and cash equivalents
(10.) Trade and other receivables
(11.) Other assets
(12.) Inventories
(13.) Property, plant and equipment
(14.) Intangible assets
(15.) Trade and other payables
(16.) Borrowings
(17.) Provisions
65
65
65
67
67
67
68
68
69
69
70
71
71
73
74
75
76
(18.) Revenue in advance
(19.) Tax
(20.) Issued Capital
(21.) Reserves and retained losses
(22.) Dividends
(23.) Key management personnel compensation
(24.) Remuneration of auditors
(25.) Contingencies
(26.) Commitments
(27.) Related party transactions
(28.) Business combinations
(29.) Interest in Subsidiaries
(30.) Cash flow statement reconciliation
(31.) Earnings / (losses) per share
(32.) Share based payments
(33.) Parent entity financial information
(34.) Subsequent events
Page 38
Notes to the Financial Statements
Notes to Financial Statements
For the Financial Year Ended 30 June 2019
These consolidated financial statements and notes represent those of Envirosuite 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 23 August 2019 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 29 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.
Refer to note 28 for business combinations.
1
Envirosuite Limited Annual Report 2019Page 39 Notes to the Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(a) Principles of consolidation (continued)
Goodwill
Goodwill is carried at cost less any accumulated impairment losses. Goodwill is calculated as the excess of the sum of:
•
•
•
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 Chief
Executive Officer and the board of directors. Refer Note 3 for segment information, which also describes the change in segments during the year.
Geographical segmentation is the primary basis of segmentation used by the Group.
Operating segments that meet the quantitative criteria as prescribed by AASB 8 Operating Segments 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 and revenue received in advance
The following is a summary of the revenue recognition for each revenue stream:
(i) Recurring revenue – this is comprised of platform subscription revenues and maintenance and support services related to monitoring equipment
provided by the group. These revenues are recognised over time being over the term of the contracts, based on the effort incurred by the group being as
the services are provided.
(ii) Non recurring revenue – this is comprised of revenue from one-off services provided by the group and from the sale of monitoring equipment.
Revenues from these activities are recognised at a point in time as the services are performed or equipment is delivered, in line with the performance
obligations implicit in the respective contracts. Revenue is recognised in line with the achievement of identified performance obligations per each specific
contract at amounts appropriate to the completion of the performance obligation.
Revenue received in advance is recognised when the Group has received a greater amount of revenue from the customer than it is entitled to recognise, in
accordance with the revenue recognition policies of the Group.
Interest income
Interest income is recognised on a time proportion basis using the effective interest method.
2
Page 40 Notes to the Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(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 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 16). 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 26). 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.
3
Envirosuite Limited Annual Report 2019Page 41 Notes to the Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(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
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-current assets. Loans and
receivables are included in trade and other receivables (note 10) in the consolidated statement of financial position.
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.
Subsequent measurement
Loans and receivables are carried at amortised cost using the effective interest method.
Impairment
The Group assesses at each reporting date whether there is objective evidence that a financial asset or group of financial assets is impaired.
4
Page 42 Notes to the Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(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
Leasehold improvements
3 - 8 years
2 - 20 years
3 - 11 years
3 - 5 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
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 7 years for each completed project module. Amortisation commences on each module only when
complete. Refer to Note 1 (x) for change in estimate relating to the useful life of software.
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 7 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.
5
Envirosuite Limited Annual Report 2019Page 43 Notes to the Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(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.
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.
(p) 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.
(q) 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.
6
Page 44 Notes to the Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(q) Foreign Currency Transactions and Balances (continued)
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.
(r) Employee benefits
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.
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.
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 32.
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.
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.
7
Envirosuite Limited Annual Report 2019Page 45 Notes to the Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(s) 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 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.
(t) 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.
(u) Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing:
the profit or loss 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.
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.
(v) 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.
(w) 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.
8
Page 46 (s) Contributed equity
Ordinary shares are classified as equity.
purchase consideration.
(t) Dividends
(u) Earnings per share
Basic earnings per share
Diluted earnings per share
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Notes to the Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(x) 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.
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
Key estimates
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 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.
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.
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.
The group has also performed a valuation of intangible software assets to assist management with its assessment of impairment. Refer to note 14 for the
details of these assumptions.
Changes in Accounting Policies & Estimates
This note describes the nature and effect of the adoption of AASB 9: Financial Instruments and AASB 15: Revenue from Contracts with Customers on the
Group’s financial statements and also discloses the new accounting policies that have been applied from 1 July 2018, where they are different to those
applied in prior periods.
Basic earnings per share is calculated by dividing:
the profit or loss 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.
(i) Change in accounting policies
Refer to Note 1 (y) New and amended standards adopted by the group – changes in accounting policies.
(ii) Change in accounting estimates
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.
(v) 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.
(w) 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.
During the period the useful life of the intangible assets - software was re-assessed. Based on the rate of advancement in technology and changing
environmental regulatory and compliance frameworks more broadly, the Group has determined that 7 years is a more appropriate useful life of software
(previously 10 years). This change to 7 years was effective from 1 July 2018.
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.
8
9
Envirosuite Limited Annual Report 2019Page 47 Notes to the Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Key Judgements
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 32 for details of these assumptions.
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.
Provision for impairment of receivables
A provision for impairment of receivables of $56,270 was considered necessary as at the end of the 2019 reporting period (2018: $40,612). Refer to note
10.
(y) New and amended standards adopted by the group – changes in accounting policies
There were two new standards adopted during the period. This note explains the impact of the adoption of AASB 9 Financial Instruments and AASB 15
Revenue from Contracts with Customers on the group’s financial statements and discloses the new accounting policies that have been applied from 1 July
2018.
AASB 9 Financial Instruments: (effective for 30 June 2019 reporting period)
This standard replaces AASB 139 and addresses the classification, measurement and recognition of financial assets and liabilities, introduces new rules
for hedge accounting and a new impairment model for financial assets. The group notes the following impacts from the adoption of the new standard on 1
July 2018. Adoption of AASB 9 has resulted in the reclassification of the following financial instruments:
Category
Cash and cash equivalents
Trade and other receivables
Trade and other payables
Loans and borrowings
Previously AASB 139
Loans and receivables
Loans and receivables
Other financial liabilities
Other financial liabilities
Currently AASB 9
Amortised cost
Amortised cost
Other financial liabilities
Other financial liabilities
AASB 9 replaces the ‘incurred loss’ model in AASB 9 with an ‘expected credit loss’ (ECL) model. The new impairment model applies to the group in
relation to financial assets classified at amortised cost, being the group’s trade receivables. Based on the group’s assessment of historical provision rates,
there is no material financial impact on the impairment provisions on adoption of this standard and no adjustment to retained earnings is required. For the
current period, the group has elected to measure loss allowances on trade receivables using a life-time expected loss model. The group has also used the
practical expedient of a provisions matrix using a single loss rate approach to approximate the expected credit losses. These provisions are considered
representative across all business and geographical segments of the group based on historical credit loss experience.
The standard requires that for financial liabilities designated at fair value through profit or loss (FVTPL) any change in fair value arising as a consequence
of a change in the company’s own credit risk should be recognised in other comprehensive income rather than profit or loss. The group’s financial liabilities
carried at FVTPL include deferred acquisition consideration.
The new hedge accounting rules have no impact on the group’s financial statements.
Following adoption of AASB 9 on 1 July 2018, there is no material impact on the group’s financial position and no restatement is required.
10
Page 48 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(y) New and amended standards adopted by the group – changes in accounting policies (Continued)
AASB 15 Revenue from Contracts with Customers: (effective for 30 June 2019 reporting period)
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 32 for details of these assumptions.
This standard addresses recognition of revenue. It replaces the previous revenue recognition guidance in AASB 118 Revenue and AASB 111 Construction
Contracts. The new standard is based on the principle that revenue is recognised when control of a good and service transfers to a customer.
Notes to the Financial Statements
The group adopted AASB 15 from 1 July 2018 which resulted in changes in accounting policies relating to the recognition of revenue. Management have
reviewed each of the group’s revenue streams under the five-step model outlined in AASB 15 and concluded adoption of AASB 15 has no material impact
on revenue recognition. Therefore, there is no requirement to restate revenue reported in prior periods. The details of the review process are outlined
below.
Accounting policies have been amended to ensure that the five-step method is applied consistently to revenue recognition processes across the group. To
assess the impact of AASB 15 on the group, each contract type was analysed, with the five-step method applied to assess the impact on revenue
recognition. The five-step method for recognising revenue from contracts with customers involves consideration of the following: 1. Identifying the contract
with the customer 2. Identifying performance obligations 3. Determining the transaction price 4. Allocating the transaction price to distinct performance
obligations 5. Recognising revenue.
The following is a summary of the revenue recognition for each revenue stream:
(i) Recurring revenue – this is comprised of platform subscription revenues and maintenance and support services related to monitoring equipment
provided by the group. These revenues are recognised over time being over the term of the contracts, based on the effort incurred by the group being as
the services are provided.
(ii) Non recurring revenue – this is comprised of revenue from one-off services provided by the group and from the sale of monitoring equipment.
Revenues from these activities are recognised at a point in time as the services are performed or equipment is delivered, in line with the performance
obligations implicit in the respective contracts. Revenue is recognised in line with the achievement of identified performance obligations per each specific
contract at amounts appropriate to the completion of the performance obligation.
New Accounting Standards, Interpretations and Amendments to published standards that are not yet effective
A number of new standards, amendments and interpretations to existing standards have been published by the Australian Accounting Standards Board
(AASB) that are effective for future periods and which the group will adopt when they become effective. None of these are expected to have a significant
effect on the consolidated financial statements of the group, except:
AASB 16 Leases: (effective for 30 June 2020 reporting period)
AASB 16 establishes principles for the recognition, measurement, presentation and disclosure of leases and supersedes AASB 117 Leases. AASB 16
eliminates the current dual accounting model for lessees which distinguishes between on-balance sheet finance leases and off-balance sheet operating
leases. The standard provides a single lessee accounting model, requiring lessees to recognise assets and liabilities for all leases, unless the lease term is
12 months or less or the underlying asset has a low value. The accounting for lessors will not significantly change. This standard will primarily affect
accounting for the group’s operating leases. AASB 16 Leases is effective for annual reporting periods beginning on or after 1 January 2019. The group is
not required to adopt this new standard until the annual reporting period ending 30 June 2020 and has not adopted it in the current financial report.
The group is finalising its assessment of the potential impact of the application of AASB 16 on its financial statements, including the potential impact of the
various transition provisions available to the group. At present, the group anticipates to adopt the modified retrospective approach in the year ending 30
June 2020 and will not restate comparative amounts. As the group has non cancellable operating lease commitments of $0.3M, the impact of the new
standard will result in a material right of use asset and lease liability measured at net present value, with the difference recorded in retained earnings on
application.
Due to the complexity involved in calculating the impact of AASB 16, management have not yet finalised this assessment, therefore no quantification of the
impact has been made. Calculation complexity has been impacted by key judgements, including the incremental borrowing rate used to discount lease
assets and liabilities and the uncertainties surrounding lease terms including potential rights of renewals (renewals are assessed on a lease by lease
basis).
Key Judgements
Fair value of share options
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.
Provision for impairment of receivables
A provision for impairment of receivables of $56,270 was considered necessary as at the end of the 2019 reporting period (2018: $40,612). Refer to note
(y) New and amended standards adopted by the group – changes in accounting policies
There were two new standards adopted during the period. This note explains the impact of the adoption of AASB 9 Financial Instruments and AASB 15
Revenue from Contracts with Customers on the group’s financial statements and discloses the new accounting policies that have been applied from 1 July
10.
2018.
AASB 9 Financial Instruments: (effective for 30 June 2019 reporting period)
This standard replaces AASB 139 and addresses the classification, measurement and recognition of financial assets and liabilities, introduces new rules
for hedge accounting and a new impairment model for financial assets. The group notes the following impacts from the adoption of the new standard on 1
July 2018. Adoption of AASB 9 has resulted in the reclassification of the following financial instruments:
Category
Cash and cash equivalents
Previously AASB 139
Loans and receivables
Trade and other receivables
Loans and receivables
Currently AASB 9
Amortised cost
Amortised cost
Trade and other payables
Other financial liabilities
Other financial liabilities
Loans and borrowings
Other financial liabilities
Other financial liabilities
AASB 9 replaces the ‘incurred loss’ model in AASB 9 with an ‘expected credit loss’ (ECL) model. The new impairment model applies to the group in
relation to financial assets classified at amortised cost, being the group’s trade receivables. Based on the group’s assessment of historical provision rates,
there is no material financial impact on the impairment provisions on adoption of this standard and no adjustment to retained earnings is required. For the
current period, the group has elected to measure loss allowances on trade receivables using a life-time expected loss model. The group has also used the
practical expedient of a provisions matrix using a single loss rate approach to approximate the expected credit losses. These provisions are considered
representative across all business and geographical segments of the group based on historical credit loss experience.
The standard requires that for financial liabilities designated at fair value through profit or loss (FVTPL) any change in fair value arising as a consequence
of a change in the company’s own credit risk should be recognised in other comprehensive income rather than profit or loss. The group’s financial liabilities
carried at FVTPL include deferred acquisition consideration.
The new hedge accounting rules have no impact on the group’s financial statements.
Following adoption of AASB 9 on 1 July 2018, there is no material impact on the group’s financial position and no restatement is required.
10
11
Envirosuite Limited Annual Report 2019Page 49 Notes to the Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(z) Parent entity financial information
The financial information for the parent entity, Envirosuite Limited, disclosed in note 33 has been prepared on the same basis as the consolidated financial
statements, except as set out below.
Investments in subsidiaries, associates and joint venture entities
Investments in subsidiaries are accounted for at cost in the financial statements of Envirosuite Limited.
Tax consolidation legislation
Envirosuite Limited and its wholly-owned Australian controlled entities 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.
(aa) Funding and liquidity
The group recorded a cash balance of $7,564,000 (June 2018: $3,648,000) as at 30 June 2019.
The Group recorded negative operating cash flows of $4,315,449 and recurring operating losses of $5,996,257.
Notwithstanding the negative operating cash flow and recurring losses recorded during the year, given the group's budgeted profit targets and availability of
capital investment (if required), the Directors are of the view that the group will continue to be able to pay its debts as and when they fall due.
It is on the basis of the group’s ability to achieve budgeted profit targets and availability of capital investment (if required), that the Directors have prepared
the financial report on a going concern basis.
12
Page 50 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
2. FINANCIAL RISK MANAGEMENT
(z) Parent entity financial information
statements, except as set out below.
The financial information for the parent entity, Envirosuite Limited, disclosed in note 33 has been prepared on the same basis as the consolidated financial
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 leases.
The totals for each category of financial instruments, measured in accordance with AASB 9 Financial Instruments as detailed in the accounting policies to
these financial statements, are as follows:
Notes to the Financial Statements
Investments in subsidiaries, associates and joint venture entities
Investments in subsidiaries are accounted for at cost in the financial statements of Envirosuite Limited.
Tax consolidation legislation
Envirosuite Limited and its wholly-owned Australian controlled entities 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.
(aa) Funding and liquidity
The group recorded a cash balance of $7,564,000 (June 2018: $3,648,000) as at 30 June 2019.
The Group recorded negative operating cash flows of $4,315,449 and recurring operating losses of $5,996,257.
Financial assets
Cash and cash equivalents
Trade and other receivables
Total financial assets
Financial liabilities
Trade and other payables
Borrowings (current and non-current)
Total financial liabilities
Financial risk management policies
Note
9
10
15
16
Consolidated Group
2018
2019
$’000
$’000
7,564
1,501
3,648
1,386
9,065
5,034
1,201
149
902
228
1,350
1,130
Notwithstanding the negative operating cash flow and recurring losses recorded during the year, given the group's budgeted profit targets and availability of
capital investment (if required), the Directors are of the view that the group will continue to be able to pay its debts as and when they fall due.
Specific financial risk exposures and management
It is on the basis of the group’s ability to achieve budgeted profit targets and availability of capital investment (if required), that the Directors have prepared
the financial report on a going concern basis.
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 risk and ageing
analysis for credit risk and liquidity risk.
The Chief Executive Officer (CEO) and Chief Financial Officer (CFO) are responsible for managing financial risk exposures of the Group. The board
provides written principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, credit risk, and
investment of excess liquidity.
Market risk
Foreign exchange risk
As the Group expands internationally, there is an increasing exposure to foreign exchange risk through customer contracts denominated in foreign
currencies. This exposure is managed through periodic review of customer price lists, relative to the Group base product price list denominated in
Australian dollars and are adjusted accordingly to account for any material movements in foreign currency exchange rates.
Price risk
The Group is not exposed to equity securities price risk. The Group is not exposed to commodity price risk.
12
13
Envirosuite Limited Annual Report 2019Page 51 Notes to the Financial Statements
2. FINANCIAL RISK MANAGEMENT (continued)
Cash flow and fair value interest rate risk
The Group has limited exposure to interest rate risk. With limited borrowings, the only remaining interest rate risk at reporting date arises from bank
deposits as follows:
2019
2018
Weighted
average
interest rate
%
Balance
$’000
Weighted
average
interest rate
%
Balance
$’000
Cash and cash equivalents
1.6%
7,564 1.3%
3,648
Net exposure to cash flow interest rate risk
7,564
3,648
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 2019, 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 or
loss for the year would have been $151,290 higher / $151,290 lower (2018: changes of -2% / +2%: $72,953 higher / $72,953 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:
At 30 June 2019
Financial assets
Cash and cash equivalents
Trade and other receivables
Financial liabilities
Trade and other payables
Borrowings
Total (increase) / decrease
Interest rate risk
Carrying
amount
$’000
-2%
Profit
$’000
Other
Equity
$’000
+2%
Profit
$’000
Other
Equity
$’000
7,564
1,501
(151)
-
-
-
151
-
1,201
149
-
-
-
-
-
-
-
-
-
-
(151)
- 151
-
14
Page 52 2. FINANCIAL RISK MANAGEMENT (continued)
Cash flow and fair value interest rate risk
2. FINANCIAL RISK MANAGEMENT (continued)
Credit risk
Notes to the Financial Statements
The Group has limited exposure to interest rate risk. With limited borrowings, the only remaining interest rate risk at reporting date arises from bank
deposits as follows:
2019
Weighted
average
interest rate
2018
Weighted
average
interest rate
Balance
Balance
%
$’000
%
$’000
Cash and cash equivalents
1.6%
7,564 1.3%
3,648
Net exposure to cash flow interest rate risk
7,564
3,648
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.
At 30 June 2019, 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 or
loss for the year would have been $151,290 higher / $151,290 lower (2018: changes of -2% / +2%: $72,953 higher / $72,953 lower), mainly as a result of
higher / lower interest income from cash and cash equivalents.
The following table summarises the sensitivity of the Group's financial assets and financial liabilities to interest rate risk:
Interest rate risk
Carrying
amount
$’000
-2%
Profit
$’000
Other
Equity
$’000
+2%
Profit
$’000
Other
Equity
$’000
7,564
(151)
1,501
-
-
-
151
-
1,201
-
149
-
-
-
-
-
(151)
- 151
-
-
-
-
-
Group sensitivity
Summarised sensitivity analysis
At 30 June 2019
Financial assets
Cash and cash equivalents
Trade and other receivables
Financial liabilities
Trade and other payables
Borrowings
Total (increase) / decrease
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.
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
Liquidity risk
Consolidated Group
2019
$’000
2018
$’000
1,015
46
259
-
487
136
343
-
1,320
966
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.
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.
Consolidated Group
Within 1 Year
2019
$’000
2018
$’000
1 to 5 Years
2019
$’000
2018
$’000
Over 5 Years
2019
$’000
2018
$’000
Total
2019
$’000
2018
$’000
Financial liabilities due for payment
Trade and other payables
1,201
902
- - - - 1,201
902
Borrowings
42
88 107 140
- - 149 228
Total expected outflows
1,243
990 107 140
- - 1,350
1,130
Financial assets – cash flows realisable
Cash and cash equivalents
7,564
3,648
Trade and other receivables
1,501
1,386
-
-
-
-
-
-
-
7,564
3,648
-
1,501
1,386
Total anticipated inflows
9,065
5,034
- - - - 9,065
5,034
Net inflow/(outflow) on financial
instruments
7,822
4,044
(107)
(140)
- - 7,716
3,904
14
15
Envirosuite Limited Annual Report 2019Page 53 Notes to the Financial Statements
2. FINANCIAL RISK MANAGEMENT (continued)
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
(a) Description of the change
During the period, management reviewed the operating segments of the Group. As a result of the review, a change was made from one segment on a
product basis to five segments on a geographical basis.
(b) Description of segments
The Group is organised into four geographic operating segments: Asia-Pacific ('APAC'), North America, South America and Europe, Middle-East and
Africa ('EMEA') plus a central Corporate segment which contains costs that are managed centrally that are not allocated to the geographic segments.
These operating segments are based on the internal reports that are reviewed and used by the Board of Directors, (who are identified as the Chief
Operating Decision Makers) in assessing performance and in determining the allocation of resources.
(c) Segment performance
Year ended
30 June 2019
Continuing Operations
Trading revenue
Recurring revenue
Non recurring revenue
Other revenue
Total operating revenue
Cost of revenue
Gross profit
Operating expenses
Sales and marketing
General and administration
Due diligence and acquisition costs - Odotech
Total operating expenses
Foreign Currency (Losses) / Gains
Operating profit / (deficit) from continuing operations
Depreciation and amortisation
Net finance income
Operating profit / (deficit) before tax
APAC
$'000
Nth
America
$'000
Sth
America
$'000
EMEA
$'000
Corporate
(incl R&D)
$'000
Total
$'000
1,309 1,029 698 608
93 245 1,358 1,775
5
1 14
1,403 1,288 2,056 2,388
- 3,644
- 3,472
585
565
7,701
565
(755)
649
(1,490)
(969)
(202) 888 1,419
(1,168)
(1,139)
(575)
(5,521)
2,180
(327)
(46)
(1,223)
(235)
(450)
(300)
(1,040)
(73)
(940)
(2,514)
(3,981)
(3,168)
- - - - - -
(373)
(12)
263
(750)
(1,457)
(72)
(1,113)
(17) 68
(1,732) 121 374
(3,454)
134
(3,895)
(7,149)
101
(4,868)
-
(12)
- 2
263
(20)
(1,180)
- - 154
(4,921)
(1,742) 101 370
(4)
(1,217)
156
(5,929)
16
Page 54
2. FINANCIAL RISK MANAGEMENT (continued)
Fair value measurements
3. SEGMENT INFORMATION (Continued)
(c) Segment performance (Continued)
Notes to the Financial Statements
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
(a) Description of the change
(b) Description of segments
(c) Segment performance
Year ended
30 June 2019
Continuing Operations
Trading revenue
Recurring revenue
Non recurring revenue
Other revenue
Total operating revenue
Cost of revenue
Gross profit
Operating expenses
Sales and marketing
General and administration
Total operating expenses
Foreign Currency (Losses) / Gains
During the period, management reviewed the operating segments of the Group. As a result of the review, a change was made from one segment on a
product basis to five segments on a geographical basis.
The Group is organised into four geographic operating segments: Asia-Pacific ('APAC'), North America, South America and Europe, Middle-East and
Africa ('EMEA') plus a central Corporate segment which contains costs that are managed centrally that are not allocated to the geographic segments.
These operating segments are based on the internal reports that are reviewed and used by the Board of Directors, (who are identified as the Chief
Operating Decision Makers) in assessing performance and in determining the allocation of resources.
Nth
Sth
APAC
$'000
America
America
$'000
$'000
EMEA
$'000
Corporate
(incl R&D)
$'000
Total
$'000
1,309 1,029 698 608
- 3,644
93 245 1,358 1,775
- 3,472
1 14
5
565
585
1,403 1,288 2,056 2,388
565
7,701
(755)
(1,490)
(1,168)
(969)
(1,139)
(5,521)
649
(202) 888 1,419
(575)
2,180
(327)
(46)
(373)
(12)
(1,223)
(235)
(1,457)
(72)
(450)
(300)
(1,040)
(73)
(940)
(2,514)
(3,981)
(3,168)
(750)
(1,113)
(3,454)
(7,149)
(17) 68
134
101
Due diligence and acquisition costs - Odotech
- - - - - -
Operating profit / (deficit) from continuing operations
263
(1,732) 121 374
(3,895)
(4,868)
Depreciation and amortisation
Net finance income
Operating profit / (deficit) before tax
-
(12)
(20)
(4)
(1,180)
(1,217)
- 2
- - 154
156
263
(1,742) 101 370
(4,921)
(5,929)
Year ended
30 June 2018
Continuing Operations
Trading revenue
Recurring revenue
Non recurring revenue
Other revenue
Total operating revenue
Cost of revenue
Gross profit
Operating expenses
Sales and marketing
General and administration
Due diligence and acquisition costs - Odotech
Total operating expenses
Foreign Currency (Losses) / Gains
Operating profit / (deficit) from continuing operations
Depreciation and amortisation
Net finance income
Operating profit / (deficit) before tax
(b) Total segment assets
APAC
$'000
1,300
48
20
1,368
(624)
743
(247)
(185)
-
(432)
(1)
310
-
-
310
Nth
America
$'000
Sth
America
$'000
EMEA
$'000
Corporate
(incl R&D)
$'000
252
312
29
593
(20)
573
(365)
(321)
-
(686)
(1)
(114)
(1)
-
(115)
176
49
-
225
(143)
82
(829)
(171)
-
(1,001)
(9)
(928)
(3)
-
(931)
-
-
625
625
(78)
546
(1,013)
(2,761)
(178)
(3,952)
35
(3,370)
(374)
132
(3,612)
Total
$'000
2,254
897
681
3,833
(1,607)
2,226
(3,643)
(3,944)
(178)
(7,765)
12
(5,527)
(383)
132
(5,778)
526
488
8
1,023
(741)
282
(1,189)
(506)
-
(1,695)
(13)
(1,425)
(6)
-
(1,432)
Nth
APAC
$'000
America Sth America
$'000
$'000
EMEA
$'000
Corporate
(incl R&D)
$'000
Total
$'000
30 June 2018
30 June 2019
(c) Total segment liabilities
30 June 2018
30 June 2019
180
1,436
372
203
8,929
11,120
1,494
2,285
1,023
871
10,177
15,850
APAC
$'000
Nth
America
$'000
Sth
America
$'000
EMEA
$'000
Corporate
(incl R&D)
$'000
Total
$'000
405
3,025
318
635
(1,848)
2,534
422
5,765
1,003
2,253
(5,922)
3,521
16
17
Envirosuite Limited Annual Report 2019Page 55
Notes to the Financial Statements
4. REVENUE
From continuing operations
Recurring revenue
Non recurring revenue
Trading revenue
Other revenue
Research and development tax incentives
Other revenue
Profit on sale of fixed assets
Other revenue
Total revenue - continuing operations
Consolidated Group
2018
2019
$’000
$’000
3,644
3,472
2,567
585
7,116
3,152
467
108
10
562
111
8
585
681
7,701
3,833
Research and Development Tax Incentives
Research and Development Tax Incentives included for the year ended 30 June 2019 are $467,224 (2018: $1,305,944).
These R&D tax incentives are applicable to the 30 June 2018 financial year. Any such R&D tax incentives applicable to activities undertaken by the
company in the 30 June 2019 financial year will be included in the 2019-2020 financial statements and after issue of Notice of Assessment by the
Australian Taxation Office.
5. NET FINANCE INCOME
From continuing operations
Notes
Consolidated Group
2019
$’000
2018
$’000
Interest income - cash and short-term deposits
156
132
18
Page 56 Notes to the Financial Statements
6. EXPENSES
(Loss) / profit before income tax from continuing operations includes the following specific expenses:
Consolidated Group
2019
$’000
2018
$’000
3,644
2,567
3,472
585
7,116
3,152
467
562
108
111
10
8
585
681
7,701
3,833
Cost of revenue and operating expenses
Cost of revenue
Total operating expenses
Total cost of revenue and operating expenses
Total cost of revenue and operating expenses is comprised of:
Employee entitlements
Employee entitlements capitalised
Platform costs
Consultants and contractors - cost of sales
Consultants and contractors - sales and marketing
Equipment costs
Rental costs
Superannuation costs
Directors' fees
Auditors remuneration
Other operating expenses
Consolidated Group
2019
2018
$’000
$’000
(5,521)
(7,149)
(12,670)
(1,607)
(7,765)
(9,372)
(7,321)
1,385
(669)
(309)
(579)
(1,740)
(579)
(382)
(220)
(59)
(2,197)
(5,736)
1,488
(466)
(83)
(759)
(321)
(409)
(318)
(180)
(106)
(2,483)
Research and Development Tax Incentives
Research and Development Tax Incentives included for the year ended 30 June 2019 are $467,224 (2018: $1,305,944).
These R&D tax incentives are applicable to the 30 June 2018 financial year. Any such R&D tax incentives applicable to activities undertaken by the
company in the 30 June 2019 financial year will be included in the 2019-2020 financial statements and after issue of Notice of Assessment by the
Total cost of revenue and operating expenses excl. depreciation and amortisation
(12,670)
(9,372)
Notes
Consolidated Group
2019
$’000
2018
$’000
Depreciation and amortisation
Relating to:
Amortisation of software development costs
Depreciation of property, plant and equipment
Total depreciation and amortisation
Total cost of revenue and operating expenses
(1,124)
(93)
(341)
(42)
(1,217)
(383)
(13,887)
(9,755)
Interest income - cash and short-term deposits
156
132
4. REVENUE
From continuing operations
Recurring revenue
Non recurring revenue
Trading revenue
Other revenue
Research and development tax incentives
Other revenue
Profit on sale of fixed assets
Other revenue
Total revenue - continuing operations
Australian Taxation Office.
5. NET FINANCE INCOME
From continuing operations
18
19
Envirosuite Limited Annual Report 2019Page 57 Notes to the Financial Statements
7. INCOME TAX EXPENSE
Income tax benefit/(expense) from continuing operations
Income tax benefit/(expense) from discontinued operations
Total
The components of Income tax benefit / (expense) comprise:
Current tax
Deferred tax
(Under) / over provision of prior year tax
Income tax benefit / (expense)
Consolidated Group
2019
$’000
(67)
-
(67)
450
(407)
(110)
(67)
2019
$’000
2018
$’000
24
131
155
-
168
(13)
155
2018
$’000
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:
Prima facie tax payable on profit / loss from continuing operations before income tax at 27.5% (2018:27.5%)
(1,618)
(1,437)
Add:
Tax effect of:
- non-allowable items (including R&D expenditure)
- share options expensed during the year
- (under) / over provision for income tax in prior year
- Change in tax rate to 27.5%
- Adjustment to equity raising costs
- Losses not recognised
Less:
Tax effect of:
- R&D income non-assessable
Income tax (benefit) / expense
290
4
111
-
95
1,313
958
44
41
17
-
581
(128)
(359)
67
(155)
20
Page 58 7. INCOME TAX EXPENSE
8. DISCONTINUED OPERATIONS
Notes to the Financial Statements
Income tax benefit/(expense) from continuing operations
Income tax benefit/(expense) from discontinued operations
The components of Income tax benefit / (expense) comprise:
Total
Current tax
Deferred tax
(Under) / over provision of prior year tax
Income tax benefit / (expense)
Add:
Tax effect of:
- non-allowable items (including R&D expenditure)
- share options expensed during the year
- (under) / over provision for income tax in prior year
- Change in tax rate to 27.5%
- Adjustment to equity raising costs
- Losses not recognised
Less:
Tax effect of:
- R&D income non-assessable
Income tax (benefit) / expense
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:
Prima facie tax payable on profit / loss from continuing operations before income tax at 27.5% (2018:27.5%)
(1,618)
(1,437)
Consolidated Group
2019
$’000
(67)
-
(67)
450
(407)
(110)
(67)
2019
$’000
2018
$’000
24
131
155
-
168
(13)
155
2018
$’000
290
4
111
-
95
1,313
958
44
41
17
-
581
(128)
(359)
67
(155)
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 was subject to a net debt and working capital adjustment. The process to agree or determine the amount of the adjustment has been
completed. 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 and release of amounts in escrow pending certain conditions / events; and
transfer of various contracts
There were no income or expenses incurred in the current period relating to the discontinued operation sold during the year ended 30 June 2018.
Revenue & other income
Expenses
Profit / (loss) before income tax
Income tax benefit
Profit / (loss) after tax attributable to the discontinued operation
Gain on sale before income tax
Income tax expense
Gain on sale after income tax
Total Gain / (Loss) after tax attributable to the discontinued operation
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 inflow / (outflow) from investing activities
Net cash inflow / (outflow) from financing activities
Net cash increase / (decrease) incurred by the discontinued operation
9. CASH AND CASH EQUIVALENTS
Cash at bank and in hand
Risk exposure
Consolidated Group
2019
2018
$’000
$’000
-
-
-
-
-
-
-
-
-
2019
$’000
-
-
-
-
744
(174)
570
131
701
(115)
-
(115)
586
2018
$’000
-
(105)
-
(105)
Consolidated Group
2019
$’000
2018
$’000
7,564
3,648
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.
20
21
Envirosuite Limited Annual Report 2019Page 59 Notes to the Financial Statements
10. TRADE AND OTHER RECEIVABLES
Trade receivables
Provision for impairment of receivables
Held in Escrow – Sale of consultancy practice
Other receivables
Trade and other receivables
Impaired Trade Receivables
Note
Consolidated Group
2019
$’000
1,320
(56)
1,264
172
65
2018
$’000
966
(41)
925
190
271
1,501
1,386
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
2019
Trade & term receivables
Other receivables
Total
2018
Trade & term receivables
Other receivables
1,320
237
(56)
-
1,557
(56)
966
461
(41)
-
513
-
513
289
-
46
-
46
136
-
Total
1,427
(41)
289
136
Other receivables
5
-
5
3
-
3
254
-
502
237
254
739
340
-
198
461
340
659
These amounts are for rental bonds on leased properties, security deposits on hired equipment and working capital receivables.
Loans to related parties
No loans are outstanding to related parties.
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.
Financial assets classified as loans and receivables
Trade and other receivables - current
Total financial assets classified as loans and receivables
Note
Consolidated Group
2019
2018
$’000
$’000
1,501
1,386
1,501
1,386
22
Page 60 10. TRADE AND OTHER RECEIVABLES
11. OTHER ASSETS
Prepayments
12. INVENTORIES
At net realisable value
Work in progress
Finished goods
Total inventories
13. PROPERTY, PLANT AND EQUIPMENT
Notes to the Financial Statements
Consolidated Group
2018
2019
$’000
$’000
172
166
Consolidated Group
2019
$’000
2018
$’000
204
124
95
14
328
109
$'000
$'000
$'000
$'000
$'000
$'000
$'000
Consolidated Group
Note
Motor
Vehicles
Furniture
fittings and
equipment
Leased
Assets
Total
$’000
$’000
$’000
$’000
Year ended 30 June 2018
Opening net book amount
Additions
Disposals
Depreciation charge
Closing net book amount
At 30 June 2018
Cost or fair value
Accumulated depreciation
Net book amount
Year ended 30 June 2019
Opening net book amount
Exchange differences
Additions
Disposals
Depreciation charge
Closing net book amount
At 30 June 2019
Cost or fair value
Accumulated depreciation
Net book amount
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
14
117
(2)
(17)
112
129
(17)
112
112
(6)
108
(22)
(64)
128
192
(64)
128
-
203
-
(25)
14
320
(2)
(42)
178
290
203
(25)
332
(42)
178
290
178
-
17
-
(46)
290
(6)
125
(22)
(110)
149
277
195
(46)
387
(110)
149
277
Note
Consolidated Group
2019
$’000
2018
$’000
1,501
1,386
1,501
1,386
Total impairment losses recognised in the statement of comprehensive income was nil (2018:nil).
Included in disposals for the year ended 30 June 2019 is nil (2018: nil) of accumulated impairment losses.
Non-current assets pledged as security
The Group has no non-current assets pledged as security.
Consolidated Group
Note
2019
$’000
1,320
(56)
1,264
172
65
2018
$’000
966
(41)
925
190
271
1,501
1,386
Past Due but Not Impaired
(Days Overdue)
Gross
Amount
Past Due
Impaired
and
< 30
31 – 60
61 – 90
> 90
Within Initial
Trade Terms
1,320
237
(56)
-
1,557
(56)
966
461
(41)
-
513
-
513
289
-
46
-
46
136
-
254
502
237
254
739
340
198
461
-
-
5
-
5
3
-
3
1,427
(41)
289
136
340
659
These amounts are for rental bonds on leased properties, security deposits on hired equipment and working capital receivables.
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.
Trade receivables
Provision for impairment of receivables
Held in Escrow – Sale of consultancy practice
Other receivables
Trade and other receivables
Impaired Trade Receivables
2019
Total
2018
Total
Trade & term receivables
Other receivables
Trade & term receivables
Other receivables
Other receivables
Loans to related parties
No loans are outstanding to related parties.
Fair value and credit risk
Financial assets classified as loans and receivables
Trade and other receivables - current
Total financial assets classified as loans and receivables
22
23
Envirosuite Limited Annual Report 2019Page 61 Notes to the Financial Statements
14. INTANGIBLE ASSETS
Consolidated Group
Year ended 30 June 2018
Opening net book amount - 1 July 2018
Additions via business combination
Additions - capitalised
Disposals
Amortisation charge
Closing net book amount - 30 June 2018
At 30 June 2018
Cost or fair value
Accumulated amortisation
Net book amount
Year ended 30 June 2019
Opening net book amount - 1 July 2018
Additions via business combination
Additions - capitalised
Disposals
Amortisation charge
Closing net book amount - 30 June 2019
At 30 June 2019
Cost or fair value
Accumulated amortisation
Net book amount
Impairment tests for goodwill
Goodwill was acquired as part of the Odotech acquisition. Refer to note 28.
Goodwill
Impairment
Note
Goodwill
Intellectual
Property
Software
$’000
$’000
$’000
Total
$’000
3,782
177
1,488
-
(341)
5,107
3,782
-
1,488
-
(341)
.
4,930
-
161
-
-
-
161
161
-
-
16
-
-
-
16
16
-
5,510
(580)
5,687
(580)
161
16
4,930
5,107
161
179
-
-
-
340
340
-
16
-
-
-
-
16
16
-
4,930
-
1,386
-
(1,117)
.
5,199
5,107
179
1,386
-
(1,117)
5,555
6,896
(1,697)
7,252
(1,697)
340
16
5,199
5,555
2019
$’000
340
-
2018
$’000
161
-
340
161
28
28
24
Page 62 14. INTANGIBLE ASSETS
Consolidated Group
Year ended 30 June 2018
Opening net book amount - 1 July 2018
Additions via business combination
Additions - capitalised
Disposals
Amortisation charge
At 30 June 2018
Cost or fair value
Accumulated amortisation
Net book amount
Year ended 30 June 2019
Opening net book amount - 1 July 2018
Additions via business combination
Additions - capitalised
Disposals
Amortisation charge
At 30 June 2019
Cost or fair value
Accumulated amortisation
Net book amount
Impairment tests for goodwill
Goodwill
Impairment
Note
Goodwill
Software
Intellectual
Property
$’000
$’000
$’000
28
161
16
-
-
-
-
-
-
-
-
3,782
-
1,488
-
(341)
.
Total
$’000
3,782
177
1,488
-
(341)
161
-
16
-
5,510
(580)
5,687
(580)
161
16
4,930
5,107
28
161
179
-
-
-
16
-
-
-
-
4,930
1,386
-
-
.
5,107
179
1,386
-
(1,117)
(1,117)
340
-
16
-
6,896
(1,697)
7,252
(1,697)
Notes to the Financial Statements
14. INTANGIBLE ASSETS (continued)
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 with a
terminal value applied. Cash flows exclude future software development costs as it is expected these will be funded from other sources including R&D tax
incentive refunds.
Key assumptions used for value-in-use calculations
The Group applied a valuation method consistent with that applied by the external valuer engaged by Envirosuite Ltd at the 2018 year end to assess the
carrying value of the software intangible assets for impairment. The valuation concluded a fair value market value of $5,650,000 as at 30 June 2019.
(2018: $5,000,000). This exceeds the current carrying value of $5,199,000.
In arriving at this valuation conclusion, the Group considered a number of commonly used methods: income, cash flow and balance sheet-based valuation
methodologies. Consistent with prior year, it was considered that the Relief from-Royalty (value-in-use) method, was the most appropriate approach to
adopt for the valuation.
•
The Relief-from-Royalty method - This method is based on the theory that the intangible asset owner would be willing to pay a
reasonable royalty to use the intangible asset assuming that they did not already own the asset.
The value in use model used a 5 year discounted cash flow with terminal value and included the following significant observable inputs; weighted average
cost of capital 14.3%, royalty rate 7% and earnings growth rate of 5%.
Concluded Value of Intangible Assets - Software
Valuation Method
Value-in-use / Royalty Rate
Weighted
Concluded
Value ($)
5,650,000
Closing net book amount - 30 June 2018
161
16
4,930
5,107
Closing net book amount - 30 June 2019
340
16
5,199
5,555
Goodwill was acquired as part of the Odotech acquisition. Refer to note 28.
15. TRADE AND OTHER PAYABLES
340
16
5,199
5,555
Impairment charge
During the year ended 30 June 2019 and the year ended 30 June 2018 no impairment charges were made against cash generating units.
2019
$’000
340
-
2018
$’000
161
-
340
161
Trade payables
Other payables
Risk exposure
Information about the Group's and the parent entity's exposure to foreign exchange risk is provided in note 2.
Consolidated Group
2019
2018
$’000
$’000
527
674
275
627
1,201
902
24
25
Envirosuite Limited Annual Report 2019Page 63 Notes to the Financial Statements
16. BORROWINGS
Current
Current
Lease liabilities - secured
Premium Funding - Insurance
Total current borrowings
Non-current
Lease liabilities - secured
Other payables
Total non-current borrowings
Total borrowings - current and non-current
Risk exposures
Details of the Group's exposure to risks arising from current and non-current borrowings are set out in note 2.
17. PROVISIONS
Current
Employee Benefits
Opening balance at 1 July
Additional provisions
Amounts used
Unused amounts reversed
Balance at 30 June 2019 - Current
Non-current
Employee Benefits
Opening balance at 1 July
Additional provisions
Amounts used
Unused amounts reversed
Balance at 30 June 2019 - Non-current
Amounts not expected to be settled within the next 12 months
Consolidated Group
2018
2019
$’000
$’000
42
-
42
98
9
107
149
2019
$’000
508
348
(231)
-
42
32
74
140
14
154
228
2018
$’000
237
517
(183)
(64)
625
508
2019
$’000
2018
$’000
45
18
63
31
17
-
(3)
45
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 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
2019
$’000
63
2018
$’000
45
26
Page 64
Details of the Group's exposure to risks arising from current and non-current borrowings are set out in note 2.
16. BORROWINGS
Current
Current
Lease liabilities - secured
Premium Funding - Insurance
Total current borrowings
Non-current
Lease liabilities - secured
Other payables
Total non-current borrowings
Total borrowings - current and non-current
Risk exposures
17. PROVISIONS
Current
Employee Benefits
Opening balance at 1 July
Additional provisions
Amounts used
Unused amounts reversed
Non-current
Employee Benefits
Opening balance at 1 July
Additional provisions
Amounts used
Unused amounts reversed
Balance at 30 June 2019 - Current
Balance at 30 June 2019 - Non-current
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 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
2019
$’000
42
-
42
98
9
107
149
2019
$’000
508
348
(231)
-
45
18
63
2018
$’000
42
32
74
140
14
154
228
2018
$’000
237
517
(183)
(64)
31
17
-
(3)
45
625
508
2019
$’000
2018
$’000
2019
$’000
63
2018
$’000
45
Consolidated Group
18. REVENUE IN ADVANCE
Revenue in advance
Refer to note 1c for accounting policy for revenue in advance.
19. TAX
Deferred tax assets
Provisions
Transaction costs on equity issue
Other
Balance at 30 June 2018
Provisions
Transaction costs on equity issues
Other
Notes to the Financial Statements
Consolidated Group
2019
$’000
2018
$’000
1,483
851
Opening
Balance
Charged to
Income
$’000
$’000
Charged
directly to
Equity
$’000
Changes in
Tax Rate
Exchange
Differences
Closing
Balance
$’000
$’000
$’000
146
79
21
154
-
-
246
154
-
-
-
-
314
79
21
(22)
-
. 95
-
(45)
18
-
-
18
-
-
-
-
(4)
-
-
(4)
33
(22)
-
11
314
79
21
414
325
152
(24)
453
Balance at 30 June 2019
414
(67)
95
The amount of unused tax losses for which no deferred tax assets have been brought to account:
Tax losses: operating losses $4,547,514 (2018: $4,501,393)
Tax losses: capital losses $Nil (2018: $Nil)
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.
20. ISSUED CAPITAL
Movements in ordinary shares
Date
Details
30-Jun-18
Balance
24-Aug-18
31-Aug-18
4-Oct-18
5-Nov-18
31-Dec-18
13-Mar-19
22-Mar-19
30-Jun-19
Shares issued to employee - exercised options
Less: transaction costs of capital raising (inc. tax effect)
Institutional placement
Less: transaction costs of capital raising (inc. tax effect)
Institutional placement
Less: transaction costs of capital raising (inc. tax effect)
Shares issued to employee - Performance rights
Less: transaction costs of capital raising (inc. tax effect)
Add Back: transaction costs of capital raising - Tax effect
Shares issued to employee - exercised options
Less: transaction costs (inc. tax effect)
Shares issued to employee - exercised options
Less: transaction costs (inc. tax effect)
Less: transaction costs of capital raising - Tax effect
Number of
shares
230,933,875
Issue
price
5,000,000
0.03
34,640,080
0.075
98,693,254
0.075
335,571
0.081
220,000
380,000
0.09
0.09
$’000
26,282
150
(1)
2,598
(145)
7,402
(396)
27
(2)
121
20
(2)
34
(2)
(26)
30-Jun-19
Balance
370,202,780
36,060
26
27
Envirosuite Limited Annual Report 2019Page 65
Notes to the Financial Statements
20. ISSUED CAPITAL (Continued)
Options
Options issued to employees for the year ended 30 June 2019 totalled 2,750,000 (30 June 2018: Nil).
•
•
2,000,000 options at $0.10 expiring in May 2022.
750,000 options at $0.16 expiring in October 2022.
There were no options issued to directors during the year ended 30 June 2019 (2018: Nil).
issued, exercised and lapsed during the financial year and options outstanding at the end of the financial year, is set out in note 32.
Information relating to the options, including details of options
Share based payments
Certain shares were issued for no cash consideration for the provision of services, details of which are shown in note 32.
Other equity securities
The amount shown for other equity securities is the value of the conversion rights relating to historic convertible instruments.
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 cash held divided by total
capital. Net cash held is calculated as total cash held less borrowings (including 'borrowings' as shown in the statement of financial position). Total capital
is calculated as ‘total equity' as shown in the statement of financial position (including minority interest) plus or minus net cash held.
The gearing ratios at 30 June 2019 and 30 June 2018 were as follows:
Cash and cash equivalents
Less: borrowings
Net cash held
Total equity
Total capital
Gearing Ratio
Note
9
16
Consolidated Group
2018
2019
$’000
$’000
7,564
(149)
3,648
(228)
7,415
3,420
12,329
4,914
8,586
5,166
151%
66%
28
Page 66 20. ISSUED CAPITAL (Continued)
Options
Options issued to employees for the year ended 30 June 2019 totalled 2,750,000 (30 June 2018: Nil).
•
•
2,000,000 options at $0.10 expiring in May 2022.
750,000 options at $0.16 expiring in October 2022.
There were no options issued to directors during the year ended 30 June 2019 (2018: Nil).
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 32.
Certain shares were issued for no cash consideration for the provision of services, details of which are shown in note 32.
The amount shown for other equity securities is the value of the conversion rights relating to historic convertible instruments.
Share based payments
Other equity securities
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 cash held divided by total
capital. Net cash held is calculated as total cash held less borrowings (including 'borrowings' as shown in the statement of financial position). Total capital
is calculated as ‘total equity' as shown in the statement of financial position (including minority interest) plus or minus net cash held.
The gearing ratios at 30 June 2019 and 30 June 2018 were as follows:
Cash and cash equivalents
Less: borrowings
Net cash held
Total equity
Total capital
Gearing Ratio
Note
9
16
Consolidated Group
2019
$’000
7,564
(149)
2018
$’000
3,648
(228)
7,415
3,420
12,329
4,914
8,586
5,166
151%
66%
Notes to the Financial Statements
21. RESERVES AND RETAINED LOSSES
Reserves
Foreign exchange translation reserve
Movements
Balance 1 July
Effects of foreign exchange translation
Foreign exchange translation reserve - balance 30 June
Share-based payments reserve
Movements
Balance 1 July
Reallocation of prior year option payouts
Option expense
Transfer to retained losses
Share-based payments reserve - balance 30 June
Total of reserves
Retained losses
Movements
Opening retained losses
Transfer from employee shares reserve
Net profit / (loss) for the year
Balance 30 June
Nature and purpose of reserves
Foreign currency translation reserve
Consolidated Group
2019
$’000
2018
’000
(182)
(61)
(61)
(121)
(182)
-
(61)
(61)
314
313
313
-
27
(25)
314
132
2019
$’000
700
(38)
-
(349)
313
252
2018
$’000
(17,947)
80
(5,996)
(13,129)
349
(5,168)
(23,863)
(17,948)
Exchange differences arising on translation of foreign controlled entities are recognised in other comprehensive income and accumulated in a separate
reserve within equity. The cumulative amount is reclassified to profit or loss when the net investment is disposed of.
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.
22. DIVIDENDS
The Group has not paid or declared any dividends during the period (2018: nil). Franking credits available for subsequent financial years based on a tax
rate of 27.5% amount to Nil (2018: nil).
23. 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 2019.
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
Share-based payments
Total KMP compensation
2019
$’000
1,002
46
-
76
2018
$’000
893
42
-
-
1,124
935
28
29
Envirosuite Limited Annual Report 2019Page 67 Notes to the Financial Statements
24. 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:
PKF Brisbane Audit
Audit and other assurance services
Audit and review of financial reports
- current year
- prior year
Other assurance services
Other services
Other services provided by PKF network firm (PKF Attest Legal y Fiscal, S.L)
Total remuneration
25. CONTINGENCIES
Contingent liabilities
The Group had contingent liabilities at 30 June 2019 in respect of:
Guarantees
Consolidated Group
2019
$
2018
$
61
-
-
71
35
-
22
14
83
120
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 and customer contractual obligations amounting to $276,609 (30 June 2018: $103,982).
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 or non performance of customer contractual obligations.
Escrows
Pursuant to Envirosuite Limited’s sale of its 100% equity interest 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”) on 26 June 2017, a portion of the proceeds from sale
were held in escrow pending finalisation of net debt and working capital adjustments.
As at reporting date, an amount remains held in escrow pending transfer of one contract.
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 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.
Litigation
There are no litigation proceedings in process at the reporting date.
30
Page 68 24. 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
26. COMMITMENTS
Lease commitments:
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.
Notes to the Financial Statements
Other services provided by PKF network firm (PKF Attest Legal y Fiscal, S.L)
22
14
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
27. RELATED PARTY TRANSACTIONS
83
120
Parent entities
The parent entity within the Group is Envirosuite Limited
Subsidiaries
Interests in subsidiaries are set out in note 29.
Key management personnel
Disclosures relating to key management personnel are set out in note 23.
Transactions with other related parties
The following transactions occurred with other related parties:
Consolidated Group
2019
$’000
2018
$’000
118
219
337
296
336
633
Consolidated Group
2018
2019
$’000
$’000
Related Business
Related Party
Service Provided
Soliton Creative
Alex Ormerod
Creative design services
107
166
Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties, unless
otherwise stated.
firms:
PKF Brisbane Audit
Audit and other assurance services
Audit and review of financial reports
- current year
- prior year
Other assurance services
Other services
Total remuneration
25. CONTINGENCIES
Contingent liabilities
Consolidated Group
2019
$
2018
$
61
-
-
71
35
-
The Group had contingent liabilities at 30 June 2019 in respect of:
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 and customer contractual obligations amounting to $276,609 (30 June 2018: $103,982).
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 or non performance of customer contractual obligations.
Pursuant to Envirosuite Limited’s sale of its 100% equity interest 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”) on 26 June 2017, a portion of the proceeds from sale
were held in escrow pending finalisation of net debt and working capital adjustments.
As at reporting date, an amount remains held in escrow pending transfer of one contract.
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 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
Guarantees
Escrows
uncertain.
Litigation
There are no litigation proceedings in process at the reporting date.
30
31
Envirosuite Limited Annual Report 2019Page 69 Notes to the Financial Statements
28. BUSINESS COMBINATIONS
On 19 December 2017, the group acquired the assets of Odotech Inc and 100% of the issued capital of Odotech spA, an environmental technology
company.
On 5 December 2017 the Group incorporated Odotech Canada which holds the assets acquired. The business and company offer a full line of
technological services and solutions for proactive management of environmental problems encountered by industries and municipal services.
The acquisition is part of the Group's overall strategy to expand globally its environmental software operations in the technology industry.
Through acquiring 100% of the issued capital of Odotech spA (Chile), the group has obtained control of the company.
The incorporation and acquisition of the Odotech Inc business (Chile and Canada) involved the purchase of the Odotech technology and client base.
The group has finalised the acquisition accounting for the transaction. Goodwill was adjusted from $161,000 to $341,000 in the period ending 31
December 2018 as a result of measurement period adjustments.
Finalised
Reported
30 June 2019 30 June 2018
Fair Value
$'000
Fair Value
$'000
442
(12)
442
(12)
430
430
256
186
14
39
57
63
16
6
(60)
(32)
(15)
(440)
90
340
430
435
186
14
39
57
63
16
6
(60)
(32)
(15)
(440)
269
161
430
(430)
(430)
Odotech Inc and Odotech spA (Chile)
Purchase consideration:
Cash
Less: cash retained in Odotech spA (Chile)
Less:
Accounts receivable
Work in progress
Prepayments
Taxes
Inventory
Property, plant and equipment
Intellectual property
Deposits
Payables
Employee benefits
Accrued liabilities
Deferred revenues
Identifiable assets acquired and liabilities assumed
Goodwill
Purchase consideration settled in cash
Cash outflow on acquisition
32
Page 70 28. BUSINESS COMBINATIONS
company.
On 19 December 2017, the group acquired the assets of Odotech Inc and 100% of the issued capital of Odotech spA, an environmental technology
On 5 December 2017 the Group incorporated Odotech Canada which holds the assets acquired. The business and company offer a full line of
technological services and solutions for proactive management of environmental problems encountered by industries and municipal services.
The acquisition is part of the Group's overall strategy to expand globally its environmental software operations in the technology industry.
Through acquiring 100% of the issued capital of Odotech spA (Chile), the group has obtained control of the company.
The incorporation and acquisition of the Odotech Inc business (Chile and Canada) involved the purchase of the Odotech technology and client base.
The group has finalised the acquisition accounting for the transaction. Goodwill was adjusted from $161,000 to $341,000 in the period ending 31
December 2018 as a result of measurement period adjustments.
Odotech Inc and Odotech spA (Chile)
Purchase consideration:
Cash
Less: cash retained in Odotech spA (Chile)
Less:
Accounts receivable
Work in progress
Prepayments
Taxes
Inventory
Deposits
Payables
Employee benefits
Accrued liabilities
Deferred revenues
Property, plant and equipment
Intellectual property
Identifiable assets acquired and liabilities assumed
Goodwill
Purchase consideration settled in cash
Cash outflow on acquisition
Finalised
Reported
30 June 2019 30 June 2018
Fair Value
Fair Value
$'000
$'000
442
(12)
430
435
186
14
39
57
63
16
6
(60)
(32)
(15)
269
161
430
442
(12)
430
256
186
14
39
57
63
16
6
(60)
(32)
(15)
90
340
430
(440)
(440)
(430)
(430)
Notes to the Financial Statements
29. INTEREST IN SUBSIDIARIES
Information about Controlled Entities
Controlled Entities Consolidated
Country of incorporation
30 June 2019 30 June 2018
Percentage Owned
%
%
Parent Entity
Envirosuite Limited
Subsidiaries of Envirosuite Limited
Envirosuite Operations Pty Ltd
Envirosuite Holdings Pty Ltd
Envirosuite Corp
Envirosuite Europe Sociedad Limitada
Envirosuite Canada Inc.*
Envirosuite Chile SpA**
Envirosuite Colombia S.A.S***
*Previously known as 9370-3007 Quebec Inc.
**Previously known as Odotech spA, also known as Odotech Chile
***Envirosuite Colombia S.A.S is wholly owned by Envirosuite Chile SpA
Australia
Australia
Australia
United States of America
Spain
Canada
Chile
Colombia
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
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.
30. CASH FLOW STATEMENT RECONCILIATION
Reconciliation of net profit / (loss) after tax to net cash flows from operations
Consolidated Group
(Loss) / profit for the year
Depreciation and amortisation
Non cash employee benefits expense – share based payments
Accrued interest - receivable
Net loss on sale of non-current assets
Sale of business
Net effect of exchange rate changes
Changes in operating assets and liabilities
(Increase) / decrease in trade and other debtors
(Increase) / decrease in inventories & work in progress
(Increase) / decrease in other asset
(Increase) / decrease in deferred tax asset
Increase / (decrease) in trade creditors
Increase / (decrease) in other operating liabilities
Increase / (decrease) in provision for income taxes payable
Increase / (decrease) in other provisions
2019
$’000
(5,996)
1,217
54
(23)
1
-
(101)
(345)
(219)
(6)
100
904
(38)
2
136
2018
$’000
(5,168)
383
159
(3)
2
130
(12)
(479)
134
(6)
(199)
(1,384)
187
10
284
Net cash inflow from operating activities
(4,315)
(5,961)
32
33
Envirosuite Limited Annual Report 2019Page 71 Notes to the Financial Statements
30. CASH FLOW STATEMENT RECONCILIATION (Continued)
Net debt reconciliation
Net debt
Cash and cash equivalents
Borrowings - repayable within one year (incl overdraft)
Borrowings - repayable after one year
Net debt
Cash and cash equivalents
Gross debt - fixed interest rate
Gross debt - variable interest rate
Net debt
Net debt as at 30 June 2018
Cash flows
Foreign exchange adjustments
Other non-cash movements
Net debt as at 30 June 2019
Non-cash financing and investing activities
Share issues
Refer Note 20 for details of shares issued during the year.
Finance leases
Consolidated Group
2019
$’000
7,564
(42)
(107)
2018
$’000
3,648
(74)
(154)
7,415
3,420
7,564
(149)
-
3,648
(228)
-
7,415
3,420
Liabilities from financing
activities
Borrowing
due within 1
year
$’000
Borrowing
due after 1
year
$’000
Cash / bank
overdraft
$’000
Total
$’000
3,648
(74)
(154)
3,420
3,883
33
-
32
-
-
47
-
-
3,962
33
-
7,564
(42)
(107)
7,415
During the year the Group did not acquire any plant and equipment by means of finance leases (2018:Nil).
Credit standing arrangements with banks
Credit facility
Amount used
Undrawn facility
2019
$’000
284
(166)
2018
$’000
273
(170)
118
103
34
Page 72 30. CASH FLOW STATEMENT RECONCILIATION (Continued)
Net debt reconciliation
31. EARNINGS / (LOSSES) PER SHARE
Basic earnings / (losses) per share
Notes to the Financial Statements
Basic earnings / (losses) per share attributable to the ordinary equity holders of the Company
From continuing operations
From discontinued operations
Diluted earnings / (losses) per share
Diluted earnings / (losses) per share attributable to the ordinary equity holders of the Company
From continuing operations
From discontinued operations
Reconciliation of earnings used in calculating earnings / (losses) per share
Profits / (losses) attributable to the ordinary equity holders of the Company used in calculating basic earnings / (losses) per share
From continuing operations
From discontinued operations
Weighted average number of shares used as the denominator
Consolidated Group
2019
cents
2018
cents
(1.62)
-
(2.49)
0.25
(1.68)
-
(2.46)
0.25
2019
$’000
2018
$’000
(5,996)
-
(5,754)
586
2019
Number
2018
Number
7,564
(42)
(107)
7,415
Weighted average number of ordinary shares used as the denominator in calculating basic earnings / (losses) per share
370,202,780
230,933,875
Weighted average number of ordinary shares used as the denominator in calculating diluted earnings / (losses) per share
356,007,208
233,996,138
Information concerning the classification of securities
Options
During the year the Group did not acquire any plant and equipment by means of finance leases (2018:Nil).
Credit standing arrangements with banks
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.
Cash and cash equivalents
Borrowings - repayable within one year (incl overdraft)
Borrowings - repayable after one year
Net debt
Net debt
Net debt
Cash and cash equivalents
Gross debt - fixed interest rate
Gross debt - variable interest rate
Net debt as at 30 June 2018
Cash flows
Foreign exchange adjustments
Other non-cash movements
Net debt as at 30 June 2019
Non-cash financing and investing activities
Refer Note 20 for details of shares issued during the year.
Share issues
Finance leases
Credit facility
Amount used
Undrawn facility
Liabilities from financing
activities
Borrowing
due within 1
Borrowing
due after 1
year
$’000
year
$’000
Cash / bank
overdraft
$’000
Total
$’000
3,648
(74)
(154)
3,420
3,883
33
-
32
-
-
47
-
-
3,962
33
-
Consolidated Group
2019
$’000
7,564
(42)
(107)
2018
$’000
3,648
(74)
(154)
7,415
3,420
7,564
(149)
-
3,648
(228)
-
7,415
3,420
2019
$’000
284
(166)
2018
$’000
273
(170)
118
103
34
35
Envirosuite Limited Annual Report 2019Page 73 Notes to the Financial Statements
32. SHARE BASED PAYMENTS
Employee share option plan
The establishment of the Employee Share Option Plan was approved by the Board prior to the IPO of Envirosuite Ltd (formerly: 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.
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.
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.
Options outstanding as at 30 June 2018
Granted
Forfeited
Exercised
Expired
Options outstanding as at 30 June 2019
Options exercisable as at 30 June 2019
Options exercisable as at 30 June 2018
Number
Weighted
average
exercise price
27,183,333
0.11
2,750,000
-
(5,600,000)
(9,000,000)
0.10
-
0.04
0.15
15,333,333
0.11
14,333,333
26,733,333
0.11
0.11
The weighted average remaining contractual life of share options outstanding at the end of the period was 1.07 years (2018: 1.45 years).
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 2019, no options were issued to directors and 2,750,000 options were issued to employees. (2018: Nil)
Shares issued to employees - value of services
There were 335,571 shares issued in the year ending 30 June 2019. (2018: Nil)
36
Page 74 32. SHARE BASED PAYMENTS
Employee share option plan
The establishment of the Employee Share Option Plan was approved by the Board prior to the IPO of Envirosuite Ltd (formerly: 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.
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.
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.
Options outstanding as at 30 June 2018
Granted
Forfeited
Exercised
Expired
Options outstanding as at 30 June 2019
Options exercisable as at 30 June 2019
Options exercisable as at 30 June 2018
Fair value of options granted
Notes to the Financial Statements
32. SHARE BASED PAYMENTS (Continued)
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 settled under employee share option plan
Shares issued to employees – value of services
Shares to be issued to employees – value of services
Total share based payment expense
33. PARENT ENTITY FINANCIAL INFORMATION
Consolidated Group
2019
$’000
27
27
-
54
2018
$’000
159
-
-
159
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.
Statement of financial position
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Non-current liabilities
Total liabilities
Equity
Issued capital
Reserves
Retained losses
Total equity
Number
Weighted
average
exercise price
27,183,333
0.11
2,750,000
-
(5,600,000)
(9,000,000)
0.10
-
0.04
0.15
15,333,333
0.11
14,333,333
26,733,333
0.11
0.11
The weighted average remaining contractual life of share options outstanding at the end of the period was 1.07 years (2018: 1.45 years).
Statement of profit or loss and other comprehensive income
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 2019, no options were issued to directors and 2,750,000 options were issued to employees. (2018: Nil)
Shares issued to employees - value of services
There were 335,571 shares issued in the year ending 30 June 2019. (2018: Nil)
(Loss) / profit for the year
Total comprehensive (loss) / profit for the year
2019
$’000
2018
$’000
183
24,349
226
14,679
24,532
14,905
134
-
134
-
134
134
36,060
315
(11,977)
26,282
313
(11,824)
24,399
14,770
2019
$’000
(231)
(231)
2018
$’000
328
328
36
37
Envirosuite Limited Annual Report 2019Page 75 Notes to the Financial Statements
33. PARENT ENTITY FINANCIAL INFORMATION (Continued)
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 and customer contractual obligations amounting to $276,609. (2018: $103,982)
Contingent liabilities of the parent entity
The parent entity did not have any other contingent liabilities as at 30 June 2019 (2018:nil)
Contractual commitments
The parent entity did not have any other contractual commitments as at 30 June 2019 (2018:nil)
34. SUBSEQUENT EVENTS
No 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.
38
Page 76 33. PARENT ENTITY FINANCIAL INFORMATION (Continued)
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 and customer contractual obligations amounting to $276,609. (2018: $103,982)
Contingent liabilities of the parent entity
The parent entity did not have any other contingent liabilities as at 30 June 2019 (2018:nil)
Contractual commitments
The parent entity did not have any other contractual commitments as at 30 June 2019 (2018:nil)
34. SUBSEQUENT EVENTS
No 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.
Directors Declaration
DIRECTORS DECLARATION
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 34 to 76 are in accordance with the Corporations Act 2001 , and:
i.
comply with Australian Accounting Standards, the Corporations Regulations 2001 and other mandatory professional
reporting requirements; and
ii.
give a true and fair view of the financial position as at 30 June 2019 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.
The directors have been given the declarations by the chief executive office and chief financial officer required by section 295A of the
Corporations Act 2001
David Johnstone
Chairman
23 August 19
David Johnstone, Chairman
23 August 2019
38
39
Envirosuite Limited Annual Report 2019Page 77 INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF ENVIROSUITE LIMITED
Report on the Financial Report
Opinion
We have audited the accompanying financial report of Envirosuite Limited (the company), which comprises
the consolidated statement of financial position as at 30 June 2019, the consolidated statement of profit or
loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated
statement of cash flows for the year then ended, notes comprising a summary of significant accounting
policies and other explanatory information, and the directors’ declaration of the company and the
consolidated entity comprising the company and the entities it controlled at the year’s end or from time to
time during the financial year.
In our opinion, the financial report of Envirosuite Limited is in accordance with the Corporations Act 2001,
including:
i)
Giving a true and fair view of the consolidated entity’s financial position as at 30 June 2019
and of its performance for the year ended on that date; and
ii)
Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we
comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to
obtain reasonable assurance about whether the financial report is free from material misstatement. Our
responsibilities under those standards are further described in the Auditor’s Responsibility section of our
report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Independence
We are independent of the consolidated entity in accordance with the Corporations Act 2001 and the ethical
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for
Professional Accountants (the code) that are relevant to our audit of the financial report in Australia. We
have also fulfilled our other ethical responsibilities in accordance with the Code.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our
audit of the financial report of the current period. These matters was addressed in the context of our audit of
the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion
on these matters. For the matters below, our description of how our audit addressed these matters is
provided in that context.
1. Carrying amount of intangible assets - software
Why significant
How our audit addressed the key audit matter
As at 30 June 2019 the carrying value of intangibles -
software was $5,199,000
(2018: $4,930,000), as
In assessing this key audit matter, we involved senior
audit team members who understand the industry.
disclosed in Note 14.
Our audit procedures included, amongst others:
The consolidated entity’s accounting policy in respect of
intangible assets - software is outlined in Note 1.
The carrying amount of intangible assets - software is a
key audit matter due to:
•
•
the significance of the balance (being 33% of
total assets); and
the level of judgement applied in evaluating
management’s assessment of impairment.
As outlined in Notes 1 and 14, management assessed
the carrying amount of intangible assets - software
through impairment testing utilising a value in use model
in which significant judgements are applied in
determining key assumptions. The judgements made in
determining the underlying assumptions in the model
have a significant impact on the carrying amount of
intangible assets - software, and accordingly the amount
of any impairment charge, to be recorded in the current
financial year.
•
evaluating management’s methodology for
determining the carrying amount of intangible
assets by comparing the value in use model
with generally accepted valuation methodology
and accounting standard requirements;
•
conducting sensitivity analysis on key
assumptions such as weighted average cost of
capital (WACC) and growth rates, within
reasonable foreseeable ranges;
•
challenging the key assumptions used in the
value in use model by:
- assessing growth rates used in comparison to
historical results
- evaluating the WACC rate used in
comparison to market and industry information
- assessing yearly revenue forecasts in
comparison to historical results and approved
available
budgets
•
assessing the appropriateness of the related
disclosures in Note 14.
Page 78
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF ENVIROSUITE LIMITED
Report on the Financial Report
Opinion
We have audited the accompanying financial report of Envirosuite Limited (the company), which comprises
the consolidated statement of financial position as at 30 June 2019, the consolidated statement of profit or
loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated
statement of cash flows for the year then ended, notes comprising a summary of significant accounting
policies and other explanatory information, and the directors’ declaration of the company and the
consolidated entity comprising the company and the entities it controlled at the year’s end or from time to
time during the financial year.
including:
In our opinion, the financial report of Envirosuite Limited is in accordance with the Corporations Act 2001,
i)
Giving a true and fair view of the consolidated entity’s financial position as at 30 June 2019
and of its performance for the year ended on that date; and
ii)
Complying with Australian Accounting Standards and the Corporations Regulations 2001.
We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we
comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to
obtain reasonable assurance about whether the financial report is free from material misstatement. Our
responsibilities under those standards are further described in the Auditor’s Responsibility section of our
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
Basis for Opinion
report.
opinion.
Independence
We are independent of the consolidated entity in accordance with the Corporations Act 2001 and the ethical
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for
Professional Accountants (the code) that are relevant to our audit of the financial report in Australia. We
have also fulfilled our other ethical responsibilities in accordance with the Code.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our
audit of the financial report of the current period. These matters was addressed in the context of our audit of
the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion
on these matters. For the matters below, our description of how our audit addressed these matters is
provided in that context.
1. Carrying amount of intangible assets - software
Why significant
How our audit addressed the key audit matter
As at 30 June 2019 the carrying value of intangibles -
software was $5,199,000
(2018: $4,930,000), as
disclosed in Note 14.
The consolidated entity’s accounting policy in respect of
intangible assets - software is outlined in Note 1.
The carrying amount of intangible assets - software is a
key audit matter due to:
•
•
the significance of the balance (being 33% of
total assets); and
the level of judgement applied in evaluating
management’s assessment of impairment.
As outlined in Notes 1 and 14, management assessed
the carrying amount of intangible assets - software
through impairment testing utilising a value in use model
in which significant judgements are applied in
determining key assumptions. The judgements made in
determining the underlying assumptions in the model
have a significant impact on the carrying amount of
intangible assets - software, and accordingly the amount
of any impairment charge, to be recorded in the current
financial year.
In assessing this key audit matter, we involved senior
audit team members who understand the industry.
Our audit procedures included, amongst others:
•
•
•
•
evaluating management’s methodology for
determining the carrying amount of intangible
assets by comparing the value in use model
with generally accepted valuation methodology
and accounting standard requirements;
conducting sensitivity analysis on key
assumptions such as weighted average cost of
capital (WACC) and growth rates, within
reasonable foreseeable ranges;
challenging the key assumptions used in the
value in use model by:
- assessing growth rates used in comparison to
historical results
- evaluating the WACC rate used in
comparison to market and industry information
available
- assessing yearly revenue forecasts in
comparison to historical results and approved
budgets
assessing the appropriateness of the related
disclosures in Note 14.
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2. Disclosure of the group’s funding and liquidity position
Why significant
How our audit addressed the key audit matter
The financial report of Envirosuite Limited discloses
the group’s funding and liquidity position, which is an
event or condition that may cast doubt on the entity’s
ability to continue as a going concern.
As disclosed in Note 1, the event or condition was
noted as being negative operating cash flows and
recurring operating losses. Also disclosed are the
reasons why the Directors do not believe that this
event or condition leads to the conclusion that a
material uncertainty exists.
Disclosure of the funding and liquidity position of the
group is a key audit matter due to:
•
the significant audit effort and judgement
required to test the appropriateness of the
going concern basis and evidence
supporting this assumption.
In assessing this key audit matter our work included,
but was not limited to, the following procedures:
•
•
•
discussion with those charged with
governance on their assessment of going
concern and probability of the success of any
future potential capital investment;
reviewing the cash flow forecasts provided by
management and challenging the
assumptions therein in to ensure consistency
with management’s stated business and
operational objectives, and checking the
calculation to ensure the accuracy of the
underlying financial data;
assessing the probability of receipt of
sufficient cash resources in order to fund
working capital for at least the relevant period
of assessment.
Other Information
The Directors are responsible for the other information. The other information comprises the information
included in the consolidated entity’s Annual Report, but does not include the financial report and our auditor’s
report thereon.
Our opinion on the financial report does not cover the other information and we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the financial report or our
knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we
have performed, we conclude that there is a material misstatement of this other information, we are required
to report that fact. We have nothing to report in this regard.
Directors’ Responsibilities for the Financial Report
The Directors of the company are responsible for the preparation of the financial report that gives a true and
fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such
internal control as the Directors determine is necessary to enable the preparation of the financial report that
gives a true and fair view and is free from material misstatement, whether due to fraud or error. In Note 1,
the Directors also state, in accordance with Australian Accounting Standard AASB 101 Presentation of
Financial Statements, that the financial report complies with International Financial Reporting Standards.
In preparing the financial report, the Directors are responsible for assessing the consolidated entity’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and using a going
concern basis of accounting unless the Directors either intend to liquidate the consolidated entity or to cease
operations, or have no realistic alternative but to do so.
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Auditor’s Responsibilities for the Audit of the Financial Report
Our responsibility is to express an opinion on the financial report based on our audit. Our objectives are to
obtain reasonable assurance about whether the financial report as a whole is free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Australian Auditing Standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individual or in aggregate, they
could reasonably be expected to influence the economic decisions of users taken on the basis of this
financial report.
As part of an audit in accordance with Australian Auditing Standards, we exercise professional judgement
and maintain professional scepticism throughout the audit.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial report.
The procedures selected depend on the auditor’s judgement, including assessment of the risks of material
misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the
auditor considers internal control relevant to the entity’s preparation of the financial report that gives a true
and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the entity’s internal control.
The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial
report.
We conclude on the appropriateness of the Directors’ use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions
that may cast significant doubt on the consolidated entity’s ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the
related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future
events or conditions may cause the consolidated entity to cease to continue as a going concern.
We evaluate the overall presentation, structure and content of the financial report, including the disclosures,
and whether the financial report represents the underlying transactions and events in a manner that achieves
fair presentation.
We obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the consolidated entity to express an opinion on the financial report. We are responsible for
the direction, supervision and performance of the audit. We remain solely responsible for our audit opinion.
We communicate with the Directors regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we identify
during our audit.
The Auditing Standards require that we comply with relevant ethical requirements relating to audit
engagements. We also provide the Directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters
that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the Directors, we determine those matters that were of most
significance in the audit of the financial report of the current period and are therefore key audit matters. We
describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the
matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in
Page 81
our report because the adverse consequences of doing so would reasonably be expected to outweigh the
public interest benefits of such communication.
Report on the Remuneration Report
We have audited the Remuneration Report included in the directors’ report for the year ended 30 June 2019.
The Directors of the company are responsible for the preparation and presentation of the Remuneration
Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an
opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing
Standards.
Opinion
In our opinion, the Remuneration Report of Envirosuite Limited for the year ended 30 June 2019, complies
with section 300A of the Corporations Act 2001.
PKF BRISBANE AUDIT
SHAUN LINDEMANN
PARTNER
23 AUGUST 2019
BRISBANE, AUSTRALIA
Page 82
Shareholder Information
SHAREHOLDER INFORMATION
The shareholder information set out below was applicable as at 20 August 2019
1. SHAREHOLDING
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
36
188
238
823
501
Options
-
-
-
-
11
1,786
11
The number of shareholdings held in less than marketable parcels
155,328
Substantial holders
Substantial holders in the Company are set out below:
Ordinary Shares
Robin Ormerod & Kristin Zeise
Robin Ormerod
Voting Rights
Number held Percentage
26,437,208
19,609,342
7.14%
5.30%
The voting rights attaching to each class of equity securities are set out below
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.
Options
Options carry the standard voting rights available to ordinary shareholders when converted to ordinary shares.
1
Envirosuite Limited Annual Report 2019Page 83 Shareholder Information
1. SHAREHOLDING (continued)
Twenty largest quoted equity security holders
The names of the twenty largest holders of quoted equity securities are listed below:
Name
Robin Ormerod & Kristin Zeise
Robin Ormerod
Bungeeltap Pty Ltd
Thirty-Fifth Celebration Pty Ltd
Fordholm Consultants Pty Ltd
J P Morgan Nominees Australia Pty Ltd
Jasforce Pty Ltd
National Nominees Pty Ltd
Robinson House Pty Ltd
Peter White
Honne Investments Pty Ltd
Indcorp Consulting Group Pty Ltd
Rubi Holdings Pty Ltd
HSBC Custody Nominees Pty Ltd
Charlotte B Pty Ltd
Radell Pty Ltd
Coterie Nominees Pty Ltd
Buduva Pty Ltd
Graeme James Cureton
Wilbow Group Equities Pty Ltd
Unquoted equity securities
Envirosuite Limited unlisted options
Ordinary shares
Number held
Percentage
of issued
26,437,208
19,609,342
8,550,620
7,910,000
7,500,000
6,854,419
5,670,000
5,551,417
5,295,400
5,000,000
5,000,000
5,000,000
4,460,000
4,050,311
4,000,000
3,000,000
3,000,000
3,000,000
2,700,000
2,666,667
7.14%
5.30%
2.31%
2.14%
2.03%
1.85%
1.53%
1.50%
1.43%
1.35%
1.35%
1.35%
1.20%
1.09%
1.08%
0.81%
0.81%
0.81%
0.73%
0.72%
135,255,384
36.54%
Number held
15,333,333
2
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Shareholder Information
Corporate Directory
Envirosuite Limited
ABN: 42 122 919 948
Board of Directors
Peter White
David Johnstone
Chief Executive Officer
Chairman
Hugh Robertson
Adam Gallagher
Director
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, New South Wales 2000
Phone: 02 9290 9600
Auditor
PKF Brisbane Audit
Level 6, 10 Eagle Street,
Brisbane, Queensland 4000
Phone: 07 3839 9733
Stock Exchange Listing
Envirosuite Limited shares are listed on the
Australian Securities Exchange (Code EVS)
Website Address
www.envirosuite.com
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