Appendix 4E
Summary Financial Report
Results for announcement to the market
For the financial year ended 30 June 2020
Revenues from ordinary activities
Profit/(loss) after tax from ordinary activities attributable
to members
Net profit/(loss) attributable to members
Net tangible assets/(liabilities) per security (cents)
Consolidated Group
Year ended 30
June 20201
Year ended 30
June 2019
Variance to prior year
$’000
23,857
(18,236)2
(18,236)2
2.5
$’000
7,701
(5,996)
(5,996)
1.7
$’000
16,156
(12,240)
(12,240)
-
%
210%
(204%)
(204%)
-
The net tangibles asset backing per security of 2.5 cents presented above is inclusive of right-of-use assets and liabilities. The net tangible
asset per security, as at 30 June 2020, would reduce to 1.9 cents if right-of use assets were excluded, and right-of-use liabilities were
included in the calculation
1 -
Includes 4 months of the operational result of the EMS business which was acquired on 28 February 2020
2 - Includes transaction and integration costs connected with the EMS acquisition of $2.3m, amortisation of intangibles from EMS acquisition of $0.9m, and non-cash share-
based payments of $3.2m
Dividends and distributions
The company has not declared, and does not propose to pay, any dividends for year ended 30 June 2020.
Details of any dividend or distribution reinvestment plans in operation: N/A
Other
Revenues as well as the profit/(loss) from ordinary activities includes 4 months of the operational result of the EMS which was acquired on
28 February 2020. The result is also impacted by transaction and integration costs connected with the acquisition of $2.3m, amortisation
of intangibles from the EMS acquisition of $0.9m, and non-cash share based payments of $3.2m. Please refer to the Directors’ Report and
the investor presentation released by the Company today on the ASX for pro-forma analysis of the operating result.
Additional Appendix 4E disclosure requirements and commentary on significant features of the operating performance, results of
segments, business combination, trends in performance, foreign entities and other factors affecting the results for the period are
contained in the 2020 Annual Report, including the Chairman’s Letter and CEO Report.
This document should be read in conjunction with the 2020 Annual Report, including Chairman’s Letter and CEO Report, and any public
announcements made in the period by Envirosuite Limited in accordance with the continuous disclosure requirements of the Corporations
Act 2001 (Cth) and the ASX Listing Rules.
This report is based on consolidated financial statements which have been audited by PKF Brisbane Audit.
Envirosuite Limited
Suite 1, Level 10, 157 Walker St
North Sydney NSW 2060
(ASX: EVS) ACN: 122 919 948
www.envirosuite.com
Phone: (02) 8484 5819
2020
Annual Report
O U R V I S I O N
We harness the power of
environmental intelligence,
so industries grow sustainably,
and communities thrive.
O U R M I S S I O N
At Envirosuite, we are
We are driven to create world-leading technology
solutions that produce actionable insights from
environmental data so our customers can realise their
full potential.
O U R VA L U E S
Our company is built on a strong culture of challenging
the status quo, empowering our people to excel and
being accessible and responsive to our customers.
Innovative
Accountable
Customer Centric
O U R D I F F E R E N C E
We’re not just another one-dimensional environmental
compliance management platform.
Complex environmental science is at the core
of every Envirosuite innovation. We empower our users
with deep insights into their operations that are easy to
understand, so they can make informed decisions to optimise
their operations, grow sustainably and engage meaningfully
with their communities.
We are the only Environmental Intelligence provider that
develops, sells, supports and runs an integrated suite of
software, hardware and service solutions across air, weather,
odour, water, noise and vibration.
Source
emissions
& location
Air
Quality
Corrosion
Noise
Environmental
Intelligence
Odour
Vibration
Water
Dust
Envirosuite Annual Report 2020
What is Environmental Intelligence?
Environmental Intelligence harnesses the
power of big data, artificial intelligence
and analytics to produce real-time
visualisations, predictive modelling
and actionable insights that enable
companies, governments and
communities to make fast, confident
decisions that optimise operational
and environmental outcomes.
t i n u o u s Environmental D
a
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n
ial Intellig e
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A
Scie
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t
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I
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i
o
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Actionable
Insights
Industry Ex p e r
e
t i s
CO N T E N T S
Strategic Report
Directors’ Report
Financial Report
02 Our Business
14 Directors’ Report
04 A transformational acquisition
19 Remuneration Report
06 Chairman’s Report
26 Auditor’s Declaration
08 CEO’s Report
27 Financial Statements
32 Notes to the Financial Statements
58 Directors’ Declaration
59 Auditor’s Report
64 Shareholder Information
66 Corporate Directory
1
Envirosuite Annual Report 2020Strategic Report / Directors’ Report / Financial Report
Our Business
Leading growth, innovation and
disruption in Environmental Intelligence
Envirosuite is building a global business with a vision to empower industries to
harness the power of environmental intelligence.
Every day, we’re focused on creating, building and growing our existing markets, new markets
and new solutions to solve complex environmental impact challenges.
Our strategy is to become the digital ecosystem for environmental intelligence to deliver
unique advanced insights with balanced and sustainable outcomes for our customers, their
communities, our people and shareholders.
Our key value drivers:
Deep Scientific Knowledge
At the heart of our business is our connection with
science and its application to the environment and our
customers. We are skilled meteorologists, data scientists,
mathematicians, engineers, noise officers, radar specialists
and industry experts. Our deep domain knowledge enables
us to deliver products and solutions to solve our customers
most difficult problems.
Environmentally and Socially Conscious
We value our contribution to our people and their
wellness as well as helping our customers achieve their
environmental, social and governance goals and challenges
through our products. With the sustainability movement
growing, Envirosuite is focused on supporting our customers
in their business operations and environmental decision
making, aided by emerging technologies underpinned by AI
and advanced analytics.
Platform of Choice and Trusted Partner
Every day, we work with the world’s leading companies,
industry opinion leaders and consultants across our product
and sector portfolio to bring shared knowledge, insights
and innovation to the market. With a focus on customer-led
innovation, we are committed to becoming the platform
of choice for environmental intelligence and providing our
customers with long-term value.
Market leadership
We collect, match, enhance and translate large volumes of
environmental data across water, air, noise and vibration
with meteorological forecasts to harness the power of
environmental intelligence for our customers.
Our platforms assist the worlds largest airports, mines,
water networks and industrial clients to make informed
decisions about their regulatory compliance, community
engagement and asset optimisation. Together with
hardware and services, our platforms harness the power
of environmental intelligence so industries grow and
communities thrive.
This report is our first annual report post our acquisition of
EMS Brüel & Kjær. As part of this monumental step in our
company’s future direction we are proud to present this
year’s report.
Talent
We have a passionate, collaborative and culturally diverse
team of over 270 people with a global reach across 11
countries. The Envirosuite team are driven by a collective
desire to develop the best solutions to solve complex
problems for our customers and bring Envirosuite to the
world. With an aspiration to be an employer of choice, we
will continue to evolve our work culture and environment to
attract homegrown and world-class talent.
Innovation
With a unique combination of science and technology,
and focus on environmental impact across a diverse set of
sectors, we are obsessed with building solutions that our
customers love. Discovery and curiosity are in our DNA,
so we are constantly working to deepen and broaden
our offering, bringing new environmental intelligence
innovations reliably and faster to market. We continually
invest in our research and development business and
partner with the world’s leading universities to bring
solutions that make a positive impact.
2
Envirosuite Annual Report 2020
Customer Reach
We count many of the world’s leading companies across
Airports, Cities, Construction, Industrial, Mining, Waste
and Wastewater as our customers. We have over 500
customers across six continents with our solutions spanning
the furthest reaches from Nuuk, Greenland all the way to
Hobart, Australia. Supporting thousands of instruments
and our cloud-based solutions 24 hours a day, 7 days a week,
in every conceivable climate – deserts, snow, tropics, cities,
monsoons, extreme weather and temperature range.
500+
customers
Airports
Cities
Mining
Waste & Wastewater
Industrial
Construction
Other
ARR percentage by Region
North
America
27%
EMEA
34%
South
America
4%
APAC
35%
Envirosuite’s Solution as a Service is the perfect union of
software, hardware and services to collect, synthesise
and visualise large volumes of flight tracks, noise events,
meteorological forecasts, air emissions, community
complaints, flight plans and more – every single day.
Customers typically choose Envirosuite to help with
compliance but stay with us because we enable them
to unlock value beyond compliance monitoring. We
provide end-to-end solutions for our customer to
optimise operations, engage with their communities
and regulators, and deliver on their strategic initiatives,
helping to enhance hundreds of billions of dollars of
facilities and infrastructure globally.
Envirosuite processes and stores more than
500,000 radar flights per day
We receive data from over 250 radar sensors,
covering 95% around the world
Between 50,000 and 60,000 ASDi (Aircraft
Situation Display to Industry) flight track records
are formed and stored
More than 290 meteorological forecast models
executed each day, over 55 geographic locations
Over 8350 real-time meteorological models
executed every day
3
Envirosuite Annual Report 2020Strategic Report / Directors’ Report / Financial Report
A transformational acquisition
We are proud to present the new
Envirosuite, an integration of two
Australian environmental technology
leaders as we seek to bring the power
of environmental intelligence to our
customers and their communities.
FY2020 has been a year of transformation for Envirosuite,
a large part of this was the acquisition of EMS Brüel &
Kjær (EMS), completed on 28 February.
Following a successful integration which took us up to 1 June 2020,
we are focused on building the global leader in Environmental
Intelligence. In parallel, the business has been focused on
maintaining operational and capital performance in a more
challenging economic environment.
From Australia to the world
The growth of Envirosuite from a small consulting company in
the 2000’s (Pacific Environment) to a scale up environmental
technology company in 2016/17 has been an exciting journey. As a
global leader in air quality and odour, Envirosuite had long coveted
a strategic entry into the noise and vibration sectors to create
a true and complete offering across all media of environmental
media.
EMS had a similar DNA to Envirosuite, starting as a small
Australian business in 1990 as Lochard and growing to truly
become the global leader in noise and vibration monitoring. Whilst
they have expanded into adjacent markets in recent years such as
mining and construction, the primary attractiveness of the EMS
business was the strong market share in airport noise monitoring.
EMS had a strong share of the global airport market, with over
200 airports in their portfolio and outstanding renewal revenue
base. We saw this as a great opportunity to expand their market
to the remaining 400+ General Aviation (GA) airports which have
noise monitoring requirements, but also capitalise on the growing
trend of ‘Green Airports’ emerging in countries like China, where
air, water and noise monitoring are being mandated by regulators.
The addition of EMS’s strength in noise monitoring rounds out the
capability required to offer comprehensive real-time environmental
intelligence solutions (i.e. covering air, water, and noise). Indeed,
we are already seeing many examples of our respective customers
looking at expanding their offerings across both companies’
respective capabilities as we work on combining our platforms
together.
The complimentary geographies and customer base of EMS was
also attractive to EVS as we seek to grow a truly global footprint.
Envirosuite had an established presence in China and South
America, where EMS is less established, allowing growth in EMS’s
core airport market, as well as mining. EMS has strength in the
Scandinavian and French market, which is an area that EVS has a
less established presence.
The combination of EMS and EVS will provide a truly global,
established sales force with multiple contracts across key sectors
and geographies.
As we brought both businesses together in March 2020, we set out
to develop a combined vision and mission as well as our values to
achieve lasting cultural change. Both businesses have a rich DNA
in helping industries to grow as well as facilitating the coexistence
with surrounding communities. We feel our new vision, mission
and values is truly representative of the history and future of both
businesses, and now the new Envirosuite.
4
Envirosuite Annual Report 2020 5
Envirosuite Annual Report 2020Strategic Report / Directors’ Report / Financial Report Chairman’s Report
“Envirosuite has entrenched
its position as a leading global
provider of environmental
intelligence solutions and is
firmly positioned to actively
and successfully pursue its high
growth agenda.”
David Johnstone
Chairman
Dear Fellow Shareholders,
The 2020 financial year has been a highly transformative period
for your company. After undertaking a series of well executed
and highly strategic major corporate transactions during the
year, Envirosuite has become a truly global environmental
technology group, offering its customers the ability to go beyond
environmental compliance and make fast, confident decisions that
optimise their operation and environmental outcomes.
This has entrenched Envirosuite’s position as a leading global
provider of environmental intelligence solutions and firmly
positioned the company to actively and successfully pursue its high
growth agenda.
Major transformative corporate events during the period included
a facilitated and quantified entry into China, the licensing of
SeweX, the acquisition of EMS Brüel & Kjær Holdings (EMS), and
the acquisition of AqMB.
Despite the intense focus required to complete all these
transactions, as well as the external impact of the COVID-19
pandemic, Envirosuite also achieved significant organic growth.
Acquisition of EMS
The acquisition of EMS has given Envirosuite additional global scale
and access to a vast existing market in the noise and vibration
vertical, as well as increasing our annual revenues by more than
500 per cent. EMS already serves more than 200 of the world’s
600-plus major airports and we are now seeking to materially
grow market share by providing new innovations to the global
airport customer base.
While it has been well publicised that the airline industry has
suffered greatly as a result of the COVID-19 pandemic, the
global airport market itself is distinct and resilient. Airports
are essentially monopoly businesses in each region and their
operations are heavily regulated. Envirosuite is still mission critical
in enabling and supporting the airports around the world to meet
their regulatory obligations regardless of flight volumes.
From our own platform data, we have observed that, with the
move to remote working, people are noticing flight noise more than
ever. As flight volumes start to return, we anticipate that this trend
6
Envirosuite Annual Report 2020 Our People
I am extremely proud of our team across every region and what we
do for our more than 500 customers globally. Enabling some of the
world’s largest industries including mining, water treatment and
transport to become environmentally intelligent on the scale that
we do now is tremendously powerful for the good of communities
and sustainably optimised industrial productivity.
I would like to thank Adam Gallagher for his tireless efforts
over the past eight years as a Director, Company Secretary and
consultant to the business. Adam’s input, passion and drive has
helped shape what Envirosuite is today and what it will be into the
future. Using external consultants, the board has commenced the
process of identifying candidates with the appropriate expertise
and experience to fill the current Non-Executive Director vacancies
that exist.
Thank you to all our stakeholders including our shareholders,
our customers, our staff, strategic commercial and corporate
partners. The continued support, custom and efforts of all of
our stakeholders will translate into another year of positive
transformation and increased value for all.
David Johnstone
Chairman
27 August 2020
will continue. This is likely to heighten the demand for our solutions
and drive demand for new innovations to assist airports to further
engage with their communities and regulators.
Materially extending our customer value proposition
With our operating platform and offering now firmly in place,
FY21 will see Envirosuite partnering with our customers in new
ways - taking out relationships beyond compliance and deeper into
their operations.
We are well advanced in embedding the power of our unique
SeweX Intellectual Property (IP) in the Envirosuite platform
to model the impact and effect of chemicals in waterpipe
infrastructure networks to extend and prolong the life of these
assets. To complement the incorporation of SeweX into our value
proposition, we are transitioning our recently acquired AqMB IP
and assets into products that will allow our wastewater treatment
customers to better understand and optimise their chemical
inputs. Once operational, this will open up another major channel
of commercial opportunities.
Our initial study of AqMB’s benefits to customers indicated a cost
saving of up to 35 per cent for a typical treatment plant facility.
This presents an opportunity for Envirosuite to embed itself deeper
in an industry sector that is already increasingly subscribing to the
Envirosuite platform for the management of odour issues.
Outlook
With a series of transformative strategic corporate transactions
now successfully bedded down we are extremely well placed to
take the newly consolidated and single Envirosuite Group into
FY21 and beyond.
Whilst it is impossible to predict the future impact of COVID-19,
our operations and customer base have so far proved resilient.
We have a high growth agenda in the rapidly growing sector of
environmental intelligence, and we are excited to share our story
and our solutions with customers and capital markets. We have
welcomed an increased institutional shareholder base that joins
the significant holdings of the board and management and we are
working together to increase company value for all shareholders.
We are facing the future with unprecedented optimism and
confidence.
7
Envirosuite Annual Report 2020Strategic Report / Directors’ Report / Financial Report CEO’s Report
“We continue to lay the
foundations for long-term,
sustainable growth. With
our ongoing transformation,
Envirosuite is uniquely
positioned and rapidly evolving
into a high growth, scalable
Australia technology innovator
and industry-defining disruptor
with a huge opportunity to
enrich our global footprint.”
Peter White
CEO
Dear Shareholders,
FY20 was one of intense strategic focus and successful execution
which saw Envirosuite establish all the necessary building blocks
to achieve strong future growth as a global leader in the rapidly
expanding sector of Environmental Intelligence.
Envirosuite now has the scale, technology, software, partners,
talent and geographic reach to move aggressively towards
achieving our ambitious targets for FY21 and beyond.
To achieve this position despite the global disruption and
uncertainty surrounding the COVID-19 pandemic is a credit to
the entire Envirosuite team and augurs extremely well for our
future success.
FY20 Highlights
In the past 12 months, Envirosuite has been transformed and
strengthened by the following events and initiatives:
Acquisition of the EMS Brüel & Kjær (EMS) business in
February 2020
Launch into China with major strategic partners and a
quantified runway
Extension of our future technology roadmap into “Smart
Water” by:
- strategic partnership with Queensland University for
licencing SeweX technology
- acquisition of AqMB water processing technology
Building out the management and executive team with
several key new hires
Increase in the run-rate revenue from
$8mil to more than $55m per annum
Increase in the number of customers
served from 100 to more than 500
Increase in staff from
80 to 270 people
$55m+
500+
270
$8m
100
80
2019
2020
2019
2020
2019
2020
Run Rate
Customers
Staff
8
Envirosuite Annual Report 2020
EMS acquisition accelerating growth
The targeted acquisition of EMS increased the scale of
Envirosuite’s business by a factor of five tmes.
Incorporating the technology into Envirosuite’s platform will
provide for an on-going subscription-based offering with a highly
compelling return on investment (ROI) proposition for our customers.
The acquisition has taken Envirosuite into the environmental
noise and vibration disciplines which expand our deep experience
in air quality, dust, odour and water. It has created a business
with scale, strong recurring revenue and the geographic footprint
to deliver our vision of creating the world’s leading end-to-end
Environmental Intelligence software platform and ecosystem for
our existing and future customers.
The integration of the EMS business into Envirosuite began on 1
March 2020 and finished in May 2020, on time and on budget with
projected operational synergies in the order of $11m per annum by
the end of calendar year 2020.
The year ahead will see us move to fully capitalise on the strategic
advantage gained from the EMS acquisition, which will form a
major pillar of our growth going forward.
Entry into the China market
Envirosuite has long sought to find the appropriate Chinese
partner to make an effective entry into China. It achieved this
in September 2019 through a partnership with ZZL Pty Ltd. The
new partnership agreement allowed Envirosuite to confidently
and rapidly establish a dedicated entity and team in China to take
advantage of the Chinese government’s long-term “Beautiful
China” initiative, of which air and water quality is a key focus
across the country.
Envirosuite is now very well positioned to provide its full range of
technology solutions to the China market across each of its key
focus sectors of airports, waste and wastewater, mining, and
industrial cities.
From a standing start in November 2019, Envirosuite has already
received more than $5m in new sales orders as a result of the
new China partnership. This achievement in new market share
sets a strong foundation and solid track record to gain the higher
quantum orders that the Company is now actively pursuing.
Materially expanding our offering and depth in Water
Technology
Envirosuite’s product vision is to help our customer unlock value
beyond compliance, by going deeper and broader into operations
to help optimise performance and output. The Company has
invested in two important and customer-focused new technology
areas in the Water sector.
SeweX
In November 2019, the Company signed an exclusive global IP
licence agreement with UniQuest, the University of Queensland’s
commercialisation arm, to take their award-winning SeweX
technology to a global market. Our development team is now
building on the existing SeweX model and integrating it into
Envirosuite’s real-time platform to address the escalating multi-
billion dollar corrosion challenges facing sewerage and collection
networks around the world.
The addition of SeweX to Envirosuite’s wastewater solutions is
aimed at significantly reducing core operating and capital costs
for network operators through predicting corrosion and odour-risk
priority areas, as well as calibrating and optimising chemical dosing
for wastewater treatment.
To date SeweX has been successfully trialled by the University of
Queensland in projects with several major water authorities.
AqMB
After a successful trial in the second half of FY20, Envirosuite
acquired AqMB, a R&D software company that developed software
technology specifically designed – and now shown – to materially
increase processing efficiencies by reducing chemical and energy
operating costs in wastewater treatment plants by up to 35
per cent. AqMB combines deterministic modelling and machine
learning for calibration to create a digital twin for performance
forecasting of chemical and biological processes in water
treatment plants to predict and optimise operations.
For Envirosuite’s existing and future wastewater treatment plant
customers, this acquisition takes Envirosuite well beyond the
compliance orientated nature of odour management solutions,
and into our customers core operations helping them to directly
address two of their most significant and universal challenges.
In the coming year Envirosuite will launch its new solution
incorporating the AqMB technology and target its compelling ROI
case to a global list of more than 25,000 wastewater treatment
plant sites that could benefit from the product.
Operational Overview
The Company’s FY20 financial results were materially affected
both positively and negatively by the acquisition of EMS, as well
as the China partnership and various costs associated with
establishing Envirosuite’s growth platform for the future. Total
revenue rose by almost 210% to $23.9m reflecting the inclusion of
post-acquisition revenues from EMS, the new China operations
and organic growth from Envirosuite’s original operations. Gross
profit rose almost 240% to $7.4m. Net loss after tax was $18.2m
compared to a loss of $6.0m the previous year.
As foreshadowed in the Company’s most recent sales update, the
FY20 result includes the full impact of the costs associated with
the acquisition of the EMS business, payments associated with the
China partnership deal and various other costs. This has enabled
Envirosuite to start FY21 as a fully integrated company with no
anticipated material additional restructuring or integration costs.
Leadership at Envirosuite
During the latter half of FY20, Envirosuite consolidated its
executive team, appointing experienced General Managers for
each of our five geographic regions, a General Counsel who will
also take on the responsibilities of Company Secretary, as well as
recruiting a highly experienced Chief Operating Officer, and Chief
Financial Officer, These C-level appointments add a wealth of
global technology experience and investment finance to our team.
I would also like to thank Robin Ormerod, a founder of Envirosuite
who has decided to retire, although he will continue to provide
expert consulting services to Envirosuite. Robin has a deep love
of science and is passionate about applying this to solving the
problems of our customers. Over the years Robin has been
instrumental in the shaping of Envirosuite’s product portfolio and
corporate direction. He continually strived to improve our offerings
for the benefit of our customers and his focus has ensured that
Envirosuite remains ahead of its competitors.
Balancing global focus with local market needs
During the year, Envirosuite adopted an organisational model
where the five major geographical regions (Asia Pacific, China,
North America, South America, and Europe and Middle East
(EMEA)) are responsible for sales and deployment.
9
Envirosuite Annual Report 2020Strategic Report / Directors’ Report / Financial Report
The Australia-based teams are responsible for R&D, corporate
management and support functions. The business now has mainly
six industry sector focuses: Airports, Mining, Industrial, Waste and
Wastewater, Cities, and Construction.
The following graphs show the current revenue run-rate breakdown
by Region and by industry sector.
Over the next three years we expect the key growth sectors to
be Waste and Water, Heavy Industry, and Mining. We anticipate
that the major growth regions will be China, Asia Pacific and
North America.
The effects of COVID-19 and airports resilience
The COVID-19 pandemic has impacted many participants in the
airports sector, most notably airlines. Fortunately for Envirosuite,
the requirement to monitor noise is mandated by local legislation
and is not connected to flight volume. We have seen some pressure
on our airport customers, that has led to delays of new spend on
short-term capital projects. Our recurring airport revenue base has
remained very firm and largely unaffected. The airport business
historically has very low churn in recurring revenues of less than 1%
and the pandemic has shown true resilience in this business.
While we already serve some 35% of the world’s major airports,
we believe that we are only scratching the surface of the airport
market opportunity. We are developing new offerings which
we expect will be highly attractive to the post-COVID airport
markets. These solutions focus on engagement with the
community, as well as value added services to help the airports in
times of reduced staffing.
1 Based on Serviceable Addressable Market (SAM) as determined
based on Company research. The sizing has been calculated based
on the number of serviceable sites, multiplied by average deal size
with the applicable sector.
Envirosuite ARR A$43M at March 2020
Airports
72%
Cities
Mining
Waste & Wastewater
Industrial
Construction
Other
7%
6%
6%
4%
3%
2%
ARR by Region
at March 2020
EMEA
North America
South America
APAC
34%
27%
4%
35%
10
Envirosuite Annual Report 2020
FY21 and beyond
We are in an exciting stage of the Company’s journey as we move
on from integration and bed down our industry leading IP. With
the establishment of the China platform, the integration of EMS
complete, the licensing of SeweX and acquisition of AqMB, the
major focus we have for FY21 is to leverage these platforms and
technologies to significantly grow the customer and recurring
revenue base.
While always attuned to possibilities that may present themselves
in the market, we have have a mission to create world-leading
technology solutions that produce actionable insights from
environmental data so our customers can realise their full
potential. We believe that the foundations laid over the past year,
combined with the work performed in years prior, will allow the
Company to achieve $100m of revenue on a run-rate basis in the
next three years and continue to capture a significant portion of
the $2.3bn market1 in the years ahead by going deeper with our
customers; broadening our technology roadmap and capabilities;
and pursuing additional growth in under-developed markets and
geographies. This strategy is summarised below
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We harness the power of environmental intelligence, so industries grow sustainably, and communities thrive.
We are driven to create world-leading technology solutions that produce actionable insights from environmental data so our
customers can realise their full potential.
Transform
Scale
Expand
Today
Years 1,2
Year 3 onwards
• Optimise operating model to
• Drive our product portfolio deeper
• Expand corporate partnerships
increase focus on scalable, higher
margin solutions
• Cement our market leadership in
the emerging EI market
• Simplify our technology stack for
future growth and innovation
into customer operations
and M&A opportunities
• Increase our sales velocity
• Increase addressable market
• Drive continued operational
excellence
through new products
Innovation
Operational
excellence
People and
Culture
Marketing
& Sales
digitalisation
Sensor
differentiation
Corporate
partnerships
11
Envirosuite Annual Report 2020Strategic Report / Directors’ Report / Financial Report
Pictured: Kathryn Turner
Modelling Engineer, Brisbane, Australia
12
Envirosuite Annual Report 2020 Figure 5:
Addressable
markets in key
verticals.
Staff
$66m
$460m
$232m
$87m
$289m
$100m $75m
$1.3bn
CEO Report
Envirosuite Limited Annual Report 2019
Customers:
Mining
$302m
• Accelerate growth by increasing lifetime value with our
current customers.
Smart Cities
• Focus on expansion opportunities and delivery, so that
$333m
our customers choose to do more business with us,
more often.
• Deepen our relationship with our current customers.
• Take our end-to-end environmental intelligence
Wastewater
$674m
offerings to our 500+ customers.
Australia
Asia
North
America
South
America
Markets:
Europe
Africa Middle
East
• Growing our business in under-penetrated markets and
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.
•
functionality to enable us to expand
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
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
in
for pipeline corrosion
operational modelling
water management
for mines, and
wastewater collection.
geographies.
•
•
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.
• Continue cementing our China strategy and business,
which is evident in our recent wins and AqMB trial with
Yinghai in Beijing.
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.
• Focus on direct market entry in Asian markets such
as India and growing environmental demand in
wastewater and mining.
Product innovation:
Mining
Odour
Smart
Cities
Oil & Gas
Region
ANZ
Europe
• Develop a culture of user-led research and development,
experimentation and fast delivery to meet the needs of
our customers to provide long term value.
• Investing in underlying technology to support rapid
deployment, strengthened security and scalability.
Middle East
North America
South America
Asia
Initial Sales
Expanding Sales
Future prospects
• Putting the customers at the centre of our product
development to meet and exceed expectations by
providing proactive environmental intelligence solutions
to help them on their digitalisation journey.
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
I am very proud of the work that the entire Envirosuite team has
therefore do not expect our growth to be linear over time.
delivered this last year. We have proved that we can grow and
Over the past year we have delivered two of these large
operate at scale, even during unprecedented times. We are now
projects, however these types of projects do not come along
into the next phase of our transformation as we work to deliver
at regular intervals.
on our mission to create world-leading technology solutions that
We continue to be excited by the potential of rapid growth
produce actionable insights from environmental data so that our
in our target markets and the difference the Envirosuite
customers can realise their full potential. I have every confidence
solution can make to the ability of industry and communities
to co-exist.
we will succeed.
Peter White, CEO
Peter White
23 August 2019
CEO
27 August 2020
13
Page 7Percent020406080100Envirosuite Annual Report 2020Strategic Report / Directors’ Report / Financial 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 2020.
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) – Resigned 31 July 2020
Hugh Robertson (Non-executive Director)
Zhigang Zhang (Non-executive Director) - Appointed 6 December 2019
Directors have been in office since the start of the financial year to the date of this report unless otherwise stated.
Particulars of each director’s experience and qualifications are set out later in this report.
Principal activities and significant changes in nature of activities
During the year the principal continuing activities of the Group consisted of the development and sale of environmental management
technology solutions. On 6 September 2019, the Group announced that it had entered into an agreement with ZZL Pty Ltd resulted in
the Group establishing an entity, team and office in China. On 28 February 2020, the Group completed its acquisition of EMS Bruel &
Kjaer Holdings (“EMS”). The acquisition provided the Group with additional environmental technology solutions and exposure to the
airport sector.
Operating results and review of operations for the year
Operating Results
The operating results of the Group are presented below and reflect four months activity of the EMS business that was acquired on 28
February 2020.
A$000
Recurring revenue
Non-recurring revenue
Other revenue
Total revenue
Cost of revenue
Gross profit
Operating expenses
Other income/(expense)
Operating deficit
Net Loss after tax
Recurring revenue as % of total revenue
Gross profit %
FY20
17,915
5,418
524
23,857
(16,463)
7,394
(25,616)1
(155)
(18,377)
(18,236)
75.1%
31.0%
FY19
3,644
3,472
585
7,701
(4,996)
2,705
(8,869)
101
(6,063)
(5,996)
47.3%
35.1%
Movement
14,271
1,946
(61)
16,156
(11,467)
4,689
(16,747)
(256)
(12,314)
(12,240)
+27.8%
-4.9%
1 - Includes transaction and integration costs connected with the EMS acquisition of of $2.3m, amortisation of intangibles from EMS acquisition of $0.9m, and share-based
payments of $3.2m.
Total revenues for the Group for the financial year ending 30 June 2020 was $23.9m (2019: $7.7m) with recurring revenues of $17.9m
(2019: $3.6m). The Group’s China operations, which commenced in December 2019, began to contribute revenue during the current
financial year with total revenue of $3.0m, which was primarily from non-recurring equipment sales which are the part of the initial
entry into the market. The increase in recurring revenue was attributable to organic growth from the Envirosuite platform as well as the
acquisition of EMS. Recurring revenues represented 75% of total revenue, a significant increase over the prior comparable period as FY19
had some large one-off project related income items, while FY20 project related income was subdued due to COVID-19 travel restrictions
and the impact on the airports sector.
Net loss after tax was $18.2m (2019: loss of $6.0m) with the 2020 financial year impacted by $5.5m in one-off and non-cash items
comprised of $2.3m of costs associated with the acquisition and integration of the assets of EMS business, and $3.2m of non-cash share
based payment expense for options and performance rights issued to Directors and employees which include options issued to Zhigang
14
Envirosuite Annual Report 2020 Zhang in connection with the agreement with ZZL Pty Ltd. While the allotment of options incurs a non-cash expense in accordance with
the accounting standards, if all the options issued to Directors and employees are exercised the Company would receive a total of $13.7m
in cash.
After adjusting for one-off and non-cash items, operating expenses were $11.2m higher in FY20 over the prior comparable period of which
$8.0m is attributable to the inclusion of the EMS business and an additional $0.9m from amortisation of intangibles acquired as part of
the EMS acquisition. The Group has also continued to invest in the development of the technology and people as part of broadening of the
Envirosuite platform.
Earnings before interest, tax, depreciation and amortisation (EBITDA)
EBITDA is calculated by adding back depreciation, amortisation and interest from net loss before tax. Adjusted EBITDA also adds back
share-based compensation expense, foreign currency gains and losses, capitalised internally developed software costs, and transaction
and integration costs connected with acquisitions which are seen as non-recurring. Adjusted EBITDA excludes the impacts of adopting
AASB 16 as the application of the standard results in operating expenses being excluded from EBITDA. EBITDA and Adjusted EBITDA are
non-GAAP measures that are key financial measure used by management to assess the performance of the underlying business.
A$000
Net loss after tax
Add back: Tax expense / (benefit)
Add back: Net finance expense / (income)
Add back: Depreciation and amortisation
EBITDA
Less: AASB 16 Depreciation & interest
Less: R&D costs capitalised
Add back: Share-based payments
Add back: Foreign currency losses/(gains)
Add back: Transaction and integration costs
FY20
(18,236)
(230)
89
3,241
(15,136)
(656)
(1,873)
3,154
155
2,263
FY19
(5,996)
67
(134)
1,240
(4,823)
-
(1,385)
13
(101)
-
Movement
(12,240)
(297)
223
2,001
(10,313)
(656)
(488)
3,141
256
2,263
Adjusted EBITDA
(12,093)
(6,296)
(5,797)
In June 2020, the Company announced restructuring of its operations as a result of the integration of the EMS business, which included
the removal of over 40 roles from the combined businesses. The Group expects to generate positive Adjusted EBITDA on a go-forward
basis by March 2021.
Financial Position
The net assets of the consolidated Group have increased from $12.3m at 30 June 2019 to $126.0m as at 30 June 2020. The Group
received gross proceeds of $98.0m from capital raises completed during the reporting period, including $84.0m raised in February 2020
in connection with the acquisition of EMS. On 28 February 2020, the Company acquired EMS for $107.1m, of which $74.2m was paid in
cash from the capital raised with the residual paid in equity and options issued to Macquarie Capital and the minority shareholders of
EMS Bruel & Kjaer Holdings Pty Ltd that were valued at $32.9m.
A$000
Cash and cash equivalents
Current assets
Current liabilities
Net current assets
Total assets
Net assets
Net cash from / (used in) operating activities
FY20
24,385
39,412
(23,791)
15,621
157,070
125,985
(11,259)
FY19
7,564
9,565
(3,351)
6,214
15,850
12,329
(4,315)
Movement
16,821
29,847
(20,440)
9,407
141,220
113,656
(6,944)
Cash and cash equivalents increased as a result of the cash proceeds raised from the capital issued during the year after reducing for
the proceeds paid for the EMS business. As at 30 June 2020, there was still $4.2m due to be paid as final closing payments in relation to
working capital adjustments determined post-completion. This obligation has been included on the balance sheet within trade and other
payables and will reduce cash in H1 FY21.
15
Envirosuite Annual Report 2020Strategic Report / Directors’ Report / Financial Report Cash used in operating activities increased by $6.9m as a result of the investments made in building out the platform during the financial
period as well as the integration costs incurred connected with the EMS acquisition. Noting the additional cash raised during the financial
period, combined with the cost reduction initiatives announced by the Company in June 2020 the Directors are of the view that the Group
will continue to be able to pay its debts as and when they fall due and have prepared the financial report on a going concern basis.
Significant changes in the state of affairs
On 28 February 2020, the Group completed the acquisition of EMS Bruel & Kjaer Holdings Pty Ltd. The acquisition was funded from
gross proceeds raised through the issuance of additional shares, as well as the issuance of shares to Macquarie Corporate Holdings and
minority shareholders of EMS. The EMS business provided the Group with additional capabilities in noise and vibration monitoring and
significantly increased the size of its operations globally.
As a result of the COVID-19 pandemic, airports around the world reduced operations due to reduction in flight volumes. Approximately
75% of the revenues from the EMS business is received from customers that own or manage airports, of which approximately 85% is
recurring revenue and only 15% relates to one-off capital expenditure on discrete projects. While the reduction in airport traffic has
delayed new capital spend and thus had a negative impact on non-recurring project and product revenue generated by the Group in FY20,
it did not have a material impact on recurring revenue or the Group’s ability to continue as a going concern.
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.
Events after the reporting period
On 17th August 2020, the Company acquired 100% of water modelling R&D technology software company AqMB Holdings Pty Ltd for a
total consideration of A$1.35m. No other matters or circumstances other than those disclosed in this report 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.
Information on Directors
David Johnstone, Chairman
(appointed 10 February 2014)
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. David has 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.
Member of the Audit and Risk Management Committee, Chairman of the Audit and Risk Management Committee (from 1 August 2020),
Chairman of the Remuneration and Nomination Committee.
Peter White, Director and Chief Executive Officer
(appointed 10 July 2017)
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.
Chairman of the Remuneration and Nomination Committee
Adam Gallagher, Director and Company Secretary
(appointed 18 October 2012 / Resigned 31 July 2020)
Adam has strong technology sector knowledge and experience across corporate transactions, sales management, finance and capital
market operations through nearly 20 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
16
Envirosuite Annual Report 2020 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
an Executive Director of Constellation Technologies Limited (ASX:CT1).
Adam holds a Bachelor of Economics, Masters in Commerce, Graduate Diploma in Information Systems and a Graduate Diploma in
Applied Corporate Governance.
Chairman of the Audit and Risk Management Committee (through 31 July 2020), Member of the Audit and Risk Management Committee
(from 1 August 2020), Committee Member of the Remuneration and Nomination Committee
Hugh Roberston, Director
(appointed 1 November 2018)
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).
Zhigang Zhang, Director
(appointed 6 December 2019)
Mr Zhang has worked in the water remediation and the environmental protection industry in China and overseas for over 30 years. Since
2014, Mr Zhang has held the role of General Manager of Beijing BHZQ Environmental Engineering Technologies Co., Ltd. Prior to his
current role, he held Senior Management positions at a number of environmental protection companies including: Standard Waters Co.
Ltd where he was an Executive Director and the CEO; China Water Holdings Limited (Singapore) where he held the position of Chairman
and General Manager; Beijing Herocan Environmental Engineering Technology Co., Ltd where he was the Chairman and General
Manager; and Beijing Bi-Leaf Environmental Engineering Co., Ltd where he was the Chief Engineer and General Manager.
Mr Zhang was appointed as Non-Executive Director of Phoslock Environmental Technologies Limited (ASX: PET) in June 2017 following an
investment in PET announced 10 April 2018 and is currently the Deputy Chairman.
Directors equity participation and other relevant interests
As of the date of this report, Directors have relevant interests in ordinary shares, as well as options and performance rights to subscribe
for ordinary shares in Envirosuite Limited, as outlined in the following table. Each option entitles the holder to subscribe for one ordinary
share of Envirosuite Limited subject to the holder paying the exercise price. Each performance right entitles the holder to receive one
ordinary share upon certain vesting conditions being met.
Executive Directors
Peter White
Adam Gallagher
Non-Executive Directors
David Johnstone
Hugh Robertson
Zhigang Zhang
Ordinary Shares
Options
Performance Rights (*)
9,237,681
4,639,526
6,815,459
18,935,279
25,292,682
5,000,000
7,500,000
5,000,000
5,000,000
12,500,000
4,000,000
-
-
-
-
* - Performance Rights were issued as part of Executive’s compensation package and are subject to vesting, forfeiture, and other conditions applied to grants or awards to Executive.
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 2020,
and the numbers of meetings attended by each director were as follows:
2020 Meetings
Adam Gallagher
David Johnstone
Peter White
Hugh Robertson
Zhigang Zhang
Full Meetings of Directors
Audit and Risk Management
Committee (*)
Remuneration and Nomination
Committee (*)
A
15
15
15
12
4
B
15
15
15
15
5
A
4
4
-
-
-
B
4
4
-
-
-
A
4
4
-
-
-
B
4
4
-
-
-
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.
17
Envirosuite Annual Report 2020Strategic Report / Directors’ Report / Financial Report Shares under option
Unissued ordinary shares of Envirosuite Limited under option at the date of this report are as follows:
Grant date
16-Nov-15
23-Oct-18
25-Oct-18
25-Nov-19
25-Nov-19
28-Feb-20
28-Feb-20
19-Mar-20
Total
Expiry date
Exercise price ($)
Number under option
10-Nov-20
11-May-22
30-Oct-22
5-Dec-21
31-Mar-22
28-Feb-23
28-Feb-23
1-Apr-23
0.16
0.10
0.16
0.40
0.15
0.20
0.25
0.40
333,333
2,000,000
750,000
22,500,000
26,250,000
75,000,000
20,000,000
1,000,000
147,833,333
In November 2019, following the passing of the relevant resolutions by shareholders at the Annual General Meeting, the Company issued a
total of 48,750,000 options to Directors and nominees of ZZL Pty Ltd in connection with the entry into China. In February 2020, following
the passing of resolutions by shareholders at a general meeting, the Company issued 95,000,000 options to Macquarie Capital and
minority shareholders in connection with the acquisition of EMS.
No option holder has any right under the options to participate in any other share issue of the Company or any other related entity.
During the financial year, 10,700,000 shares were issued on the exercise of options. No amounts are unpaid on any of the shares. No
options have lapsed post balance date.
Indemnification and insurance of officers or auditor
During the year, the Group paid insurance premiums for a Directors and Officers Liability Insurance Policy. This policy covers Directors and
Officers of the Group. In accordance with normal commercial practices under the terms of the insurance contracts, the disclosure of the
nature of the liabilities insured against and the amount of the premiums are prohibited by the policy.
No indemnities have been given or insurance premiums paid, during or since the end of the financial year for the auditor of the 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
Fees paid or payable to PKF Brisbane Audit, being the auditor the Group for non-audit and other assurance work, during the year ending
30 June 2020 totaled $112,724 (2019: nil). Amounts paid to PKF and its related practices for non-audit and other assurance work totaled
$198,207 (2019: 22,496)
Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the auditor are outlined
in note 5 to the financial statements.
The directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another person or firm
on the auditor’s behalf), is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001.
The directors are of the opinion that the services as disclosed in note 5 to the financial statements do not compromise the external
auditor’s independence requirements of the Corporations Act 2001 for the following reasons:
• all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the auditor;
and
• none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for
Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including reviewing or auditing the
auditor’s own work, acting in a management or decision-making capacity for the company, acting as advocate for the company or
jointly sharing economic risks and rewards
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 26.
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, unless otherwise stated.
18
Envirosuite Annual Report 2020 Remuneration Report
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 covered in this report
b. Principles used to determine the nature and amount of remuneration and link to performance
c. Share-based compensation
d. Details of remuneration
e. Shareholdings of key management personnel
f. Loans to key management personnel
g. Other transactions with key management personnel
Key management personnel covered in this report
A.
The remuneration disclosures in this report cover the following persons who were classified as Key Management Personnel (KMP) of the
Group during the 2020 financial year. KMP (as defined in AASB 124 Related Party Disclosures) are those persons who, directly or indirectly,
have authority and responsibility for planning, directing and controlling major activities of the Group.
Executives
Peter White
Clinton Lander
Matthew Patterson
Jason Cooper
Adam Gallagher
Non-Executive Directors
David Johnstone
Hugh Robertson
Zhigang Zhang
Chief Executive Officer and Director
Chief Financial Officer (departed 29 May 2020)
Chief Financial Officer (appointed 2 June 2020)
Chief Operating Officer (appointed 1 July 2020)
Company Secretary and Director (resigned 31 July 2020)
Chairperson
(appointed 6 December 2019)
B.
Principles used to determine the nature and amount of remuneration
Executive pay
(i)
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 seeks to align 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 seeks to ensure that executive reward satisfies the following key criteria for good governance practices:
• competitiveness
• shareholder alignment
• performance
• transparency and simplicity
• capital management
The Group has structured an executive remuneration framework that it believes is market competitive and complementary to the
objectives of the organisation.
The executive pay and reward framework generally has three components:
19
Envirosuite Annual Report 2020Strategic Report / Directors’ Report / Financial Report Fixed remuneration
Base Pay
• Executives are offered a competitive base pay that comprises the fixed component
Performance-based remuneration
Short-term Incentives (STI)
of pay and rewards.
• There are no guaranteed base pay increases included in any executives’ contracts.
• Retirement benefits are delivered under the Australian superannuation legislation at
9.5% of base salary for the financial year ended 30 June 2020, up to the maximum
superannuation contribution base.
• 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
• STI is provided to certain executives equivalent to 10-30% of their base pay, where payment
is dependent upon satisfaction of certain performance conditions. STI is provided in form of
cash
• For executives other than Executive KMPs, in the prior year the performance conditions were
based around an achievement of new ARR contracts awarded. From FY20, the performance
conditions are typically based on a combination of new ARR contracts awarded, revenue,
EBITDA and personal targets.
Long-term incentives (LTI)
• LTI is provided to certain executives equivalent to 10% of their base pay, where
the award is dependent upon satisfaction of certain performance conditions and
payment is dependent upon the executive remaining employed by the Company
during the vesting period which is typically 2 years.
• Executive KMP are awarded LTIs upon entering into an employment contract with
the Company where vesting conditions are split between remaining employed by the
Company and share price performance. Details of these awards to Executive KMP
are discussed further below.
• LTI is provided 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.
Remuneration and other terms of employment for executive key management personnel are formalised in service or employee
agreements. Each of these agreements provides for the provision of performance related cash bonuses, when eligible. All service
agreements are reviewed annually by the directors.
Chief Executive Officer’s remuneration
During FY20, Mr White earned a base salary of $300,000 inclusive of statutory superannuation entitlements. In addition, Mr White
was entitled to an STI of 5% of the value of the first year of license fee component from new Envirosuite sales, with claw back provisions
should the licensee default.
On 1 July 2020 Mr White and the Company entered into a new employment agreement under which Mr White earns a base salary of
$300,000 plus statutory superannuation entitlements. Under the new employment agreement, Mr White is entitled to an STI of 30%
Base Pay based on the Group meeting stated EBITDA targets (1/3), Sale Order Growth (1/3) and Mr White meeting certain stated
personal objectives (1/3). Mr White is eligible for an additional STI of up to $20,000 subject to short-term EBITDA targets being met. In
addition, Mr White is entitled to the following Performance Rights as an LTI (subject to shareholder approval at the next Annual General
Meeting of the Company) covering the period 1 July 2020 and expiring 30 June 2023:
• 1,000,000 fully paid ordinary shares, in the event that the Company’s share price as listed on the Australian Securities Exchange
(ASX) reaches $0.50 per share and remains at or above $0.50 per share for a continuous period of 30 days thereafter;
• 1,000,000 fully paid ordinary shares if the Company’s share price as listed on the ASX reaches $0.75 per share and remains at or
above $0.75 per share for a continuous period of 30 days thereafter;
• 1,000,000 fully paid ordinary shares if the Company’s share price as listed on the ASX reaches $1.00 per share and remains at or
above $1.00 per share for a continuous period of 30 days thereafter;
• 500,000 fully paid ordinary shares upon the Executive remaining in the Company’s employment as at 30 June 2021, and a further
500,000 fully paid ordinary shares upon the Executive remaining in the Company’s employment as at 30 June 2022.
These new share-based incentive arrangements are still subject to shareholder approval.
A termination payment of six months applies in the event of change in control and a notice period of three months applies on termination.
20
Envirosuite Annual Report 2020 Chief Financial Officer
Clinton Lander was the Chief Financial Officer until 31 May 2020:
• Fixed Remuneration: For the entire FY19 financial year and through to 29 February 2020, Mr Lander earned a base cash salary of
$220,000 plus statutory superannuation entitlements. For the period of 1 March 2020 to 29 May 2020, Mr Lander was entitled to a
base cash salary of $30,000 per month plus statutory superannuation entitlements.
• STI: For the 2019 and 2020 financial years, Mr Lander was eligible for a STI of $20,000 per annum based on the company’s
performance against Annual Recurring Revenue (‘ARR’).
• 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.
Matthew Patterson was appointed the Chief Financial Officer on 2 June 2020 and receives the following compensation:
• Fixed Remuneration: Base cash salary of $280,000 plus statutory superannuation entitlements.
• STI: Eligible for an STI equivalent to 30% of his base pay based on the company’s performance against new ARR, revenue, EBITDA, and
personal targets. Mr Patterson is eligible for an additional STI of up to $20,000 subject to short-term EBITDA targets being met.
• LTI: From the 3rd year of employment and onwards, Mr Patterson is eligible to an LTI equivalent to 10% of his base pay based on the
company’s performance against new ARR, revenue, EBITDA and personal targets.
On 2 June 2020, Mr Patterson was issued 2,000,000 Performance Rights that vest and convert to fully paid ordinary shares as follows:
• 1,000,000 fully paid ordinary shares of which 50% vest on the first anniversary of Mr Patterson’s employment with the Company and
50% vest on the second anniversary;
• 500,000 fully paid ordinary shares that vest in the event that the Company’s share price as listed on the Australian Securities
Exchange (ASX) reaches $0.25 per share and remains at or above $0.25 per share for a continuous period of 30 days thereafter before
30 June 2022; and
• 500,000 fully paid ordinary shares that vest in the event that the Company’s share price as listed on the Australian Securities
Exchange (ASX) reaches $0.40 per share and remains at or above $0.40 per share for a continuous period of 30 days thereafter
before 30 June 2022.
Chief Operating Officer
Jason Cooper was appointed the Chief Operating Officer on 1 July 2020. The Group did not have a Chief Operating Officer prior to this
date. Mr Cooper receives the following compensation:
• Fixed Remuneration: Base cash salary of $280,000 plus statutory superannuation entitlements.
• STI: Eligible for an STI equivalent to 30% of his base pay based on the company’s performance against new ARR, revenue, EBITDA, and
personal targets.
• LTI: From the 3rd year of employment and onwards, Mr Cooper is eligible to an LTI equivalent to 10% of his base pay based on the
company’s performance against new ARR, revenue, EBITDA and personal targets.
On 1 July 2020 Mr Cooper was issued 2,000,000 Performance Rights that vest and convert to fully paid ordinary shares as follows:
• 1,000,000 fully paid ordinary shares of which 50% vest on the first anniversary of Mr Cooper’s employment with the Company and
50% vest on the second anniversary;
• 500,000 fully paid ordinary shares that vest in the event that the Company’s share price as listed on the Australian Securities
Exchange (ASX) reaches $0.25 per share and remains at or above $0.25 per share for a continuous period of 30 days thereafter; and
• 500,000 fully paid ordinary shares that vest in the event that the Company’s share price as listed on the Australian Securities
Exchange (ASX) reaches $0.40 per share and remains at or above $0.40 per share for a continuous period of 30 days thereafter.
Company Secretary
Mr Gallagher was the Company Secretary for the entire financial year for which he earned a fee of $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.
On 30 June 2020, the Company announced that Mr Gallagher was resigning from the Board effective 31 July 2020 and would be stepping
down as Company Secretary effective 31 August 2020. Ms Rachel Ormiston, Envirosuite General Counsel, assumed the additional role of
Corporate Secretary on 24 August 2020. Due to the increased size of the management team post the acquisition of EMS Bruel & Kjaer
Holdings Pty Ltd, and the fact that Ms Ormiston is not a director of the Group, Ms Ormiston is not deemed to be a KMP of the Group.
The Company has agreed to retain Mr. Gallagher’s services for a monthly fee of $15,000 per month plus GST from 1 August 2020 to 31
December 2020.
21
Envirosuite Annual Report 2020Strategic Report / Directors’ Report / Financial Report Non-executive directors
(ii)
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.
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.
Non-executive director’s fees are determined within an aggregate directors’ fee pool limit. The current pool limit is $400,000 per annum
which is unchanged from the prior year. The following fees apply:
Fees per Annum
Chair
Other Directors
Committee Chair
Committee Member
FY20
$90,000
$60,000
$10,000
nil
FY19
$90,000
$60,000
$10,000
nil
No fees as described above are paid to Directors who hold an employment contract with the Company.
C.
Share-based compensation
Options and Performance Rights
(i)
The Group issues Options and Performance Rights to employees to provide long-term incentives for employees to deliver value to
shareholders by aligning interests and conserving cash. The Group also issues options to Directors to align the personal interests with that
of the shareholders.
Each option provides the right to acquire one ordinary share in Envirosuite Limited for a stated exercise price, subject to the relevant
vesting conditions being met. Each Performance Right provides the right to acquire one ordinary share in Envirosuite Limited subject to
the relevant vesting rights being met. Options and Performance Rights carry no voting rights or entitlements to receive dividends.
Mr Johnstone, Mr Gallagher and Mr White each hold options in the Company that were issued in prior financial years following
shareholder approval.
During the 2020 financial year:
• 5,000,000 options were issued on 25 November 2019 to each of Mr Johnstone, Mr White, and Mr Robertson (15,000,000 options in
total) with an exercise price of $0.40 per share
• 7,500,000 options were issued on 25 November 2019 to Mr Gallagher with an exercise price of $0.40 per share
• 12,500,000 options were issued on 25 November 2019 to Mr Zhang with an exercise price of $0.15 per share
• 2,000,000 performance rights were issued on 2 June 2020 to Mr Matthew Patterson.
• 3,405,266 performance rights were issued to other non-KMP 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.
All options granted, once converted to ordinary shares, carry standard dividend and voting rights available to ordinary shareholders.
Details of options and Performance Rights 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 16 to the financial
statements.
22
Envirosuite Annual Report 2020 Options
Executive Director
P. White
Balance at
Start of
Year
Granted
Exercised
Forfeited /
Other
Balance
at End of
Year
Vested and
Exercisable
Unvested
2020
2,000,000
5,000,000 (2,000,000)
2019
7,000,000
-
(5,000,000)
A. Gallagher
2020
4,000,000
7,500,000 (4,000,000)
(resigned 31 July 2020)
2019
8,500,000
Other Executives
C. Lander
2020
2,000,000
-
-
(departed 29 May 2020)
M. Patterson
(appointed 2 June 2020)
Non-Executive Director
D. Johnstone
H. Robertson
(appointed 1 Nov 2018)
Z. Zhang
(appointed 6 Dec 2019)
2019
2020
2019
-
-
-
2,000,000
-
-
2020
4,000,000 5,000,000 (4,000,000)
2019
4,000,000
-
2020
2019
2020
2019
-
-
-
-
5,000,000
-
12,500,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,000,000
5,000,000
2,000,000
2,000,000
7,500,000
7,500,000
(4,500,000)
4,000,000
4,000,000
(2,000,000)*
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,000,000
1,000,000
1,000,000
-
-
-
-
5,000,000
5,000,000
4,000,000
4,000,000
5,000,000
5,000,000
-
12,500,000
-
-
-
-
-
-
-
-
-
-
12,500,000
-
* - departed Envirosuite during the year, options not included as part of balance at end of year.
Performance rights
Executive Director
Balance at
Start of
Year
Granted
Vested
Forfeited /
Other
Balance
at End of
Year
C. Lander
2020
2,049,180
-
(2,049,180)
(departed 29 May 2020)
M. Patterson
(appointed 2 June 2020)
2019
2020
2019
-
-
-
2,049,180
2,000,000
-
-
-
-
-
-
-
-
-
2,049,180
2,000,000
-
Shares
(ii)
No shares were granted to key management personnel during the year.
Details of remuneration
D.
The table below sets out Executive and Non-Executive KMP remuneration for the financial year ending 30 June 2020 and the prior year
comparative period in accordance with the requirements of the Accounting Standards and the Corporations Act (Cth). The table reflects
the accounting value of remuneration attributable to KMP, derived from the various components of compensation.
KMP include the CEO, CFO and Directors of the Company. Mr Gallagher is listed as an Executive Director due to his role as Company
Secretary. Mr Jason Cooper was appointed Chief Operating Officer and joined the Group on 1 July 2020. Mr Cooper is an Executive KMP
and details of his remuneration are provided in section (B)(i) above. As Mr Cooper officially started with the Company after the end of the
financial reporting period, there is no remuneration to disclose in the table below under the Accounting Standards.
23
Envirosuite Annual Report 2020Strategic Report / Directors’ Report / Financial Report Salary and
fees (incl
superannuation)
$
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
300,006
300,006
160,000
160,000
-
78,352
296,109
237,163
24,371
-
100,000
100,000
60,000
40,000
35,000
-
STI
$
73,446
115,297
-
-
-
-
24,762
16,573
-
-
-
-
-
-
-
-
Other
Performance
rights
Options
Total
$
-
-
-
-
-
-
47,445
54,266
9,001
-
-
-
-
-
-
-
$
$
371,210
744,662
-
415,303
556,815
716,815
-
-
-
160,000
-
78,352
5,794
415,648
22,015
330,017
-
-
33,372
-
371,210
471,210
-
100,000
371,210
431,210
-
40,000
526,881
561,881
-
-
-
-
-
-
-
41,538
-
-
-
-
-
-
-
-
-
Executive Director
P. White
A. Gallagher
(resigned 31 July 2020)
R. Ormerod
(retired 28 Sept 2018)
Other Executives
C. Lander
(resigned 29 May 2020)
M. Patterson
(appointed 2 June 2020)
Non-Executive Director
D. Johnstone
H. Robertson
(appointed 1 Nov 2018)
Z. Zhang
(appointed 6 Dec 2019)
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.
Shareholdings of key management personnel
E.
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.
Balance at Start
of Year
Granted as
compensation
Exercise
of options
granted as
compensation
Other changes
during the year
Balance at end
of the year
2020
2019
2020
2019
2020
2019
2020
2019
7,091,340
2,091,340
602,941
352,941
-
-
-
-
650,000
2,049,180
-
-
-
-
-
-
2,000,000
146,341
5,000,000
-
4,000,000
36,585
9,237,681
7,091,340
4,639,526
-
-
-
-
-
250,000
602,941
(650,000)
2,049,180
650,000
650,000
-
-
-
-
# of shares
Executive Director
P. White
A. Gallagher
(resigned 31 July 2020)
Other Executives
C. Lander
(departed 29 May 2020)
M. Patterson
(appointed 2 June 2020)
24
Envirosuite Annual Report 2020 # of shares
Non-Executive Director
D. Johnstone
H. Robertson
(appointed 1 Nov 2018)
Z. Zhang
(appointed 6 Dec 2019)
Balance at Start
of Year
Granted as
compensation
Exercise
of options
granted as
compensation
Other changes
during the year
Balance at end
of the year
2020
2019
2020
2019
2020
2019
3,339,118
1,844,118
9,157,620
-
-
-
-
-
-
-
-
-
4,000,000
(523,659)
-
-
-
-
-
1,495,000
9,777,659
9,157,620
6,815,459
3,339,118
18,935,279
9,157,620
25,292,682
25,292,682
-
-
Loans to key management personnel
F.
There were no loans to key management personnel during the reporting period
Other transactions with key management personnel
G.
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 was a Director and the Company Secretary of the Company. His fees are paid to Famile Pty Ltd, a related party.
Mr Gallagher resigned as a Director on 31 July 2020 and resigned Company Secretary effective from 24 August 2020. The Company has
entered into a consulting arrangement with Famile Pty Ltd to 31 December 2020.
There were no transactions with key management personnel of Envirosuite Limited, other than those disclosed at Section D(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
27 August 2020
25
Envirosuite Annual Report 2020Strategic Report / Directors’ Report / Financial Report 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 2020, 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.
This declaration is in respect of Envirosuite Limited and the entities it controlled during the year.
PKF BRISBANE AUDIT
SHAUN LINDEMANN
PARTNER
BRISBANE
27 AUGUST 2020
Consolidated Income Statement and
Statement of Comprehensive Income
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 2 0
Consolidated Group
Trading revenue
Other revenue
Total operating revenue
Cost of revenue
Gross profit
Operating expenses
Sales and marketing
Product development
General and administrative
Total operating expenses
Other income and expense
Operating deficit
Net finance income / (expense)
Net loss before tax
Income tax (expense) / benefit
Net loss after tax
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
Notes
4
5
5
2020
$’000
23,333
524
23,857
(16,463)
7,394
(8,078)
(3,235)
(14,303)
(25,616)
(155)
2019
$’000
7,116
585
7,701
(4,996)
2,705
(3,981)
(525)
(4,363)
(8,869)
101
(18,377)
(6,063)
(89)
(18,466)
230
(18,236)
(464)
(464)
134
(5,929)
(67)
(5,996)
(121)
(121)
Total comprehensive income/(loss) for the year
(18,700)
(6,117)
Net (loss)/profit attributed to:
Equity holders of Envirosuite Limited
Total comprehensive (loss)/income attributable to:
Equity holders of Envirosuite Limited
(18,236)
(5,996)
(18,700)
(6,117)
Basic earnings / (loss) per share
Diluted earnings / (loss) per share
23
23
Cents
(2.94)
(2.94)
Cents
(1.62)
(1.68)
The accompanying notes form part of these financial statements.
27
Envirosuite Annual Report 2020Strategic Report / Directors’ Report / Financial Report Consolidated Statement of
Financial Position
A S AT 3 0 J U N E 2 0 2 0
Consolidated Group
ASSETS
Current Assets
Cash and cash equivalents
Trade and other receivables
Other assets
Inventories
Total current assets
Non-current Assets
Property, plant and equipment
Right of use assets
Deferred tax assets
Intangible assets
Other assets
Total non-current assets
TOTAL ASSETS
LIABILITIES
Current Liabilities
Trade and other payables
Revenue in advance
Employee benefit provisions
Lease liabilities and other borrowings
Total current liabilities
Non-current Liabilities
Employee benefit provisions
Lease liabilities and other borrowings
Deferred tax liabilities
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.
28
Notes
7
8
10
9
11
12
6
13
10
14
15
12
15
12
6
16
17
17
2020
$’000
24,385
10,730
1,195
3,102
39,412
3,304
3,743
1,250
108,939
422
117,658
157,070
13,010
3,230
6,203
1,348
23,791
230
3,059
4,005
7,294
31,085
125,985
155,908
11,740
(41,663)
125,985
2019
$’000
7,564
1,501
172
328
9,565
277
-
453
5,555
-
6,285
15,850
1,201
1,483
625
42
3,351
63
107
-
170
3,521
12,329
36,060
132
(23,863)
12,329
Envirosuite Annual Report 2020 Consolidated Statement of
Changes in Equity
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 2 0
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
At 1 July 2019
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
Transaction costs of capital raising (inc. tax effect)
Shares issued / to be issued to employees
Employee share options - value of employee services
Share options issued – EMS acquisition
Shares options expired
Total transactions with owners and other transfers
At 30 June 2020
The accompanying notes form part of these financial statements.
Ordinary shares
Reserves
Retained losses
Total Equity
$’000
26,282
$’000
251
-
-
-
10,000
(453)
231
-
-
9,778
36,060
-
(121)
(121)
-
-
10
27
(35)
2
132
$’000
(17,947)
(5,996)
-
(5,996)
-
-
45
-
35
80
(23,863)
$’000
8,586
(5,996)
(121)
(6,117)
10,000
(453)
286
27
-
9,860
12,329
36,060
132
(23,863)
12,329
-
-
-
121,617
(2,992)
1,223
-
-
-
119,848
155,908
-
(18,236)
(18,236)
(464)
(464)
-
-
(427)
3,202
9,313
(16)
12,072
11,740
-
(464)
(18,236)
(18,700)
-
-
420
-
-
16
436
(41,663)
121,617
(2,992)
1,216
3,202
9,313
-
132,356
125,985
29
Envirosuite Annual Report 2020Strategic Report / Directors’ Report / Financial Report Consolidated Statement of
Cash Flows
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 2 0
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Other revenue
Taxes paid
Interest received
Interest paid
Consolidated Group
June 2020
June 2019
Notes
$’000
$’000
29,043
8,405
(40,636)
(13,362)
(11,593)
(4,957)
504
(197)
110
(83)
524
-
139
(21)
Net cash (used in) operating activities
21
(11,259)
(4,315)
(176)
(65,394)
(65)
-
(2,398)
(1,385)
-
50
(67,968)
(1,400)
-
(3)
98,001
(2,149)
95,849
16,622
199
7,564
24,385
-
(32)
10,174
(544)
9,598
3,883
33
3,648
7,564
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
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.
30
Envirosuite Annual Report 2020 CO N T E N T S
Notes to Financial Statements
32
41
42
42
43
44
45
46
46
46
47
48
49
(1.) Summary of significant accounting policies
(2.) Financial risk management
(3.) Segment information
(4.) Revenue
(5.) Expenses
(6.) Tax
(7.) Cash and cash equivalents
(8.) Trade and other receivables
(9.) Inventories
(10.) Other assets
(11.) Property, plant and equipment
(12.) Right of use assets and lease liabilities
(13.) Intangible assets
50
50
51
52
52
53
54
55
56
56
57
57
(14.) Trade and other payables
(15.) Employee benefit
(16.) Issued capital
(17.) Reserves and retained losses
(18.) Commitments and contingencies
(19) Related party disclosures
(20.) Business combinations
(21.) Cash flow statement reconciliation
(22.) Share based payments
(23.) Earning per share
(24.) Subsequent events
(25.) Parent entity financial information
31
Envirosuite Annual Report 2020Strategic Report / Directors’ Report / Financial Report Notes to Financial Statements
For the Financial Year Ended 30 June 2020
NNootteess ttoo FFiinnaanncciiaall SSttaatteemmeennttss
For the Financial Year Ended 30 June 2020
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. Parent entity financial information is disclosed in Note 25.
The financial statements were authorised for issue on 27 August 2020 by the directors of the company.
1.
((aa))
Summary of significant accounting policies
BBaassiiss ooff pprreeppaarraattiioonn
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.
CCoommpplliiaannccee wwiitthh IIFFRRSSss aass iissssuueedd bbyy tthhee IIAASSBB
Compliance with Australian Accounting Standards ensures that this Financial Report complies with International Financial
Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). Consequently, this Financial
Report is compliant with IFRS.
BBaassiiss ooff MMeeaassuurreemmeenntt
Except for cash flow information, the financial statements have been prepared on an accruals basis and are based on historical
cost, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and
financial liabilities.
CCoommppaarraattiivvee PPeerriiooddss
Comparative periods presented in these financial statements have been restated to align with current year presentation with
the exception of the impacts of adopting AASB 16 Leases as at 1 July 2019 where comparatives have not been restated.
CCrriittiiccaall aaccccoouunnttiinngg eessttiimmaatteess aanndd jjuuddggeemmeennttss
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. The following are:
Measurement of ECL allowance for trade receivables - The measurement of the ECL allowance for trade receivables
relies on estimates of expected credit losses to be incurred for trade receivables taking into account historical losses
and the financial condition of the customer. Refer to Note 1(j) for further discussion.
Impairment of goodwill and other intangible assets – the Group tests goodwill and other intangible assets, including
capitalised software development costs, for impairment in accordance with the accounting policy stated in note 1(o).
These calculations require the use of assumptions regarding the future profitability of the cash generating units to
which the goodwill and intangibles have been allocated, as well as future cash flows related to the intangible asset.
Refer to Note 13 for details of the assumptions used in determining the value in use and fair value of goodwill and
other intangible assets.
Valuation of options – the Group has issued share options in connection with the acquisition of EMS Bruel & Kjaer
Holdings as well as to employees and Directors as compensation for services. The valuation of these options is based
on using a Black-Scholes valuation model that relies on various assumptions Including the beta of the stock and
dividends.
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.
•
•
•
•
32
Envirosuite Annual Report 2020
NNootteess ttoo FFiinnaanncciiaall SSttaatteemmeennttss
For the Financial Year Ended 30 June 2020
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. Parent entity financial information is disclosed in Note 25.
The financial statements were authorised for issue on 27 August 2020 by the directors of the company.
Summary of significant accounting policies
1.
((aa))
BBaassiiss ooff pprreeppaarraattiioonn
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.
CCoommpplliiaannccee wwiitthh IIFFRRSSss aass iissssuueedd bbyy tthhee IIAASSBB
Report is compliant with IFRS.
BBaassiiss ooff MMeeaassuurreemmeenntt
financial liabilities.
CCoommppaarraattiivvee PPeerriiooddss
Compliance with Australian Accounting Standards ensures that this Financial Report complies with International Financial
Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). Consequently, this Financial
Except for cash flow information, the financial statements have been prepared on an accruals basis and are based on historical
cost, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and
Comparative periods presented in these financial statements have been restated to align with current year presentation with
the exception of the impacts of adopting AASB 16 Leases as at 1 July 2019 where comparatives have not been restated.
CCrriittiiccaall aaccccoouunnttiinngg eessttiimmaatteess aanndd jjuuddggeemmeennttss
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. The following are:
•
•
•
•
Measurement of ECL allowance for trade receivables - The measurement of the ECL allowance for trade receivables
relies on estimates of expected credit losses to be incurred for trade receivables taking into account historical losses
and the financial condition of the customer. Refer to Note 1(j) for further discussion.
Impairment of goodwill and other intangible assets – the Group tests goodwill and other intangible assets, including
capitalised software development costs, for impairment in accordance with the accounting policy stated in note 1(o).
These calculations require the use of assumptions regarding the future profitability of the cash generating units to
which the goodwill and intangibles have been allocated, as well as future cash flows related to the intangible asset.
Refer to Note 13 for details of the assumptions used in determining the value in use and fair value of goodwill and
other intangible assets.
Valuation of options – the Group has issued share options in connection with the acquisition of EMS Bruel & Kjaer
Holdings as well as to employees and Directors as compensation for services. The valuation of these options is based
on using a Black-Scholes valuation model that relies on various assumptions Including the beta of the stock and
dividends.
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.
1.
•
Summary of significant accounting policies (continued)
COVID-19 Pandemic – Judgement has been exercised in considering the impacts of the COVID-19 pandemic has or may
have on group. This consideration extends to the nature of services offered, customers, supply chains, staffing and
geographical regions in which the Group operates in. Other than addressed above or in specific notes, there does not
appear either any significant impact upon the financial statements or any significant uncertainties with respect to
events or conditions which may impact the group unfavorably as a reporting date or subsequently as a result of the
COVID-19 Pandemic. The board continues to actively monitor the situation
((bb))
PPrriinncciipplleess ooff ccoonnssoolliiddaattiioonn
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 19 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.
((cc))
BBuussiinneessss CCoommbbiinnaattiioonnss
Business combinations occur where an acquirer obtains control over one or more businesses. The acquisition method of
accounting is used to account for all business combinations, unless it is a combination involving entities or businesses under
common control. The business combination will be accounted for from the date that control is attained, whereby the fair value
of identifiable assets acquired and liabilities (including contingent liabilities) assumed is recognised (subject to certain limited
exemptions).
When measuring the consideration transferred in the business combination, any asset or liability resulting from a contingent
consideration arrangement is also included. Subsequent to initial recognition, contingent consideration classified as equity is
not remeasured and its subsequent settlement is accounted for within equity. Contingent consideration classified as an asset
or liability is remeasured in each reporting period to fair value, with changes in fair value recognised in profit or loss, unless the
change in fair value can be identified as existing at acquisition date.
All transaction costs incurred in relation to business combinations, other than those associated with the issue of a financial
instrument, are recognised as expenses in the profit and loss when incurred. The acquisition of a business may result in the
recognition of goodwill or a gain from a bargain purchase.
Goodwill 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.
Adjustments may be made to fair value of net identifiable assets acquired and to goodwill after the acquisition date if
additional information is obtained about facts and circumstances related to the acquired business that existed at the
acquisition date. However, no further adjustments are made to the acquisition balance sheet and initial goodwill recognised
beyond one year from the acquisition date. 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.
33
Envirosuite Annual Report 2020Strategic Report / Directors’ Report / Financial Report
1.
((dd))
Summary of significant accounting policies (continued)
FFoorreeiiggnn ccuurrrreennccyy ttrraannssllaattiioonn
Functional and presentation currency
The functional currency of each of the Group’s entities is measured using the currency of the primary economic environment
in which that entity operates. The consolidated financial statements are presented in Australian dollars, which is the parent
entity’s functional currency.
Transactions and balances
Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the
transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary items measured
at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured
at fair value are reported at the exchange rate at the date when fair values were determined.
Exchange differences arising on the translation of monetary items are recognised in profit or loss, except where deferred in
equity as a qualifying cash flow or net investment hedge.
Group companies
The financial results and position of foreign operations, whose functional currency is different from the Group’s presentation
currency, are translated as follows:
•
•
•
assets and liabilities are translated at exchange rates prevailing at the end of the reporting period;
income and expenses are translated at average exchange rates for the period; and
retained earnings are translated at the exchange rates prevailing at the date of the transaction.
Exchange differences arising on translation of foreign operations with functional currencies other than Australian dollars are
recognised in other comprehensive income and included in the foreign currency translation reserve in the statement of financial
position. The cumulative amount of these differences is reclassified into profit or loss in the period in which the operation is
disposed of.
((ee))
SSeeggmmeenntt rreeppoorrttiinngg
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.
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.
((ff))
RReevveennuuee rreeccooggnniittiioonn
The following is a summary of the revenue recognition for each revenue stream:
Recurring revenue
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 as
the services are provided.
Non recurring revenue
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.
34
Envirosuite Annual Report 2020
Summary of significant accounting policies (continued)
1.
((dd))
FFoorreeiiggnn ccuurrrreennccyy ttrraannssllaattiioonn
Functional and presentation currency
1.
(i)
Summary of significant accounting policies (continued)
RReevveennuuee rreeccooggnniittiioonn ((ccoonnttiinnuueedd))
Government grants and rebates
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
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.
Interest income
at fair value are reported at the exchange rate at the date when fair values were determined.
Interest income is recognised on a time proportion basis using the effective interest method.
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.
Contract assets and liabilities
Group companies
currency, are translated as follows:
The financial results and position of foreign operations, whose functional currency is different from the Group’s presentation
•
•
•
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.
((ee))
SSeeggmmeenntt rreeppoorrttiinngg
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.
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.
((ff))
RReevveennuuee rreeccooggnniittiioonn
The following is a summary of the revenue recognition for each revenue stream:
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 as
Recurring revenue
the services are provided.
Non recurring revenue
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.
Where the Group provides services to customers and the consideration is unconditional, a receivable is recognised as accrued
income and included within Trade and other receivables. Where the customer pays upfront for services that have not yet been
provided, a contract liability is recognised, which is disclosed on the face of the balance sheet as Revenue in Advance.
(ii)
EEmmppllooyyeeee bbeenneeffiittss
Employee benefits includes wages and salaries, bonuses, annual leave and long service leave. Certain employees are awarded
share based payments in the form of options and/or performance rights, which entitle the employee to shares in Envirosuite
Limited upon certain vesting conditions being met.
A liability is recognised for employee benefits in the period that the service is performed where the Group has a present legal
or constructive obligation to pay the amount as a result of past service provided by the employee, and the obligation can be
estimated reliably.
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 and long service leave where the employee has a current entitlement is recognised in the provision
for employee benefits. All other short-term employee benefit obligations are presented as payables.
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 Executive Performance Rights Plan. Information relating to these schemes is set out
in note 22.
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 Executive Performance Rights Plan, performance rights are issued to employees providing them
with a right to shares for no cash consideration. Under this plan, the Company has the right to settle the performance right
for cash rather than issue equity. The expense for these performance rights is recognised over the vesting period with an
offsetting increase to share-based payment reserves. When equity is issued upon vesting of performance rights, the share-
based payment reserve is transferred to ordinary shares.
35
Envirosuite Annual Report 2020Strategic Report / Directors’ Report / Financial Report
1.
((gg))
Summary of significant accounting policies (continued)
EEmmppllooyyeeee bbeenneeffiittss ((ccoonnttiinnuueedd))
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.
((hh))
IInnccoommee ttaaxx
Income tax expense comprises current and deferred tax. It is recognised in profit or loss except to the extent that it relates to
a business combination, or items recognised directly in Other Comprehensive Income or in equity. In this case, the tax is also
recognised in other comprehensive income or directly in equity, respectively.
Current Tax
Current 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 Tax
Deferred tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well as
unused tax losses.
Deferred 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, deferred tax is not recognised
for:
•
•
•
temporary differences on the initial recognition of an asset or liability in a transaction that is not business combination
and that neither affects accounting nor taxable profit nor loss;
temporary differences related to investments in subsidiaries, associates, and joint arrangements to the extent that
the Company is able to control the timing of reversal of the temporary differences and it is probable that they will not
reverse in the foreseeable future; and
taxable temporary differences arising on the initial recognition of goodwill.
Deferred 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.
Goods and Service Tax
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.
36
Envirosuite Annual Report 2020
Summary of significant accounting policies (continued)
1.
((gg))
EEmmppllooyyeeee bbeenneeffiittss ((ccoonnttiinnuueedd))
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.
((hh))
IInnccoommee ttaaxx
Current Tax
Deferred Tax
unused tax losses.
for:
•
•
•
a business combination, or items recognised directly in Other Comprehensive Income or in equity. In this case, the tax is also
recognised in other comprehensive income or directly in equity, respectively.
Current 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 tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well as
Deferred 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, deferred tax is not recognised
temporary differences on the initial recognition of an asset or liability in a transaction that is not business combination
the Company is able to control the timing of reversal of the temporary differences and it is probable that they will not
reverse in the foreseeable future; and
taxable temporary differences arising on the initial recognition of goodwill.
Deferred 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.
Goods and Service Tax
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.
1.
((ii))
Summary of significant accounting policies (continued)
CCaasshh aanndd ccaasshh eeqquuiivvaalleennttss
The Group classifies petty cash, cash balances and term deposits with financial institutions that have a term of 90 days or
less as cash and cash equivalents.
((jj))
TTrraaddee aanndd ootthheerr rreecceeiivvaabblleess
The Group has a single business model for its financial assets whose objective is hold the assets to collect contractual cash
flows that are solely payments of principal and interest. Financial assets include trade receivables which are initially recognized
when they are originated. Trade receivables are typically due within 30 to 90 days of the invoice being issued and are initially
measured at the transaction price.
Income tax expense comprises current and deferred tax. It is recognised in profit or loss except to the extent that it relates to
Impairment
and that neither affects accounting nor taxable profit nor loss;
• it is probable that the customer will enter bankruptcy or other financial reorganisation.
temporary differences related to investments in subsidiaries, associates, and joint arrangements to the extent that
Measurement of ECLs
The Group recognises loss allowance for expected credit loss (ECLs) on trade receivables and contract assets. The Company
measures loss allowances using the simplified approach under AASB 9, which is an amount equal to lifetime ECLs. Loss
allowances for trade receivables and contract assets are always measured at an amount equal to lifetime ECLs.
When determining whether the credit risk of a trade receivable has increased significantly since initial recognition and when
estimating ECLs, the Group considers reasonable and supportable information that is relevant and available without undue
cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group’s historical
experience and informed credit assessment and including forward-looking information. In assessing credit risk, customers were
disaggregated based on various industry groups, location and customer size.
The Group assumes that the credit risk on a trade receivable has increased significantly if it is more than 90 days past due.
The Group considers a financial asset to be in default when:
• significant financial difficulty of the customer;
• a breach of contract such as a default or being more than 90 days past due; or
ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls
(i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the
Company expects to receive). ECLs are discounted at the effective interest rate of the financial asset.
Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets.
The gross carrying amount of a financial asset is written off when the Group has no reasonable expectations of recovering a
financial asset in its entirety or a portion thereof.
((kk))
IInnvveennttoorriieess
The Group acquires and manufactures environmental monitors and sensors and related parts, which are initially accounted
for as inventory. Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the
first-in, first-out principle. Provisions are made to write down slow-moving, excess and obsolete items to net realisable value,
based on an assessment of technological and market developments and on an analysis of historical and projected usage with
regard to quantities on hand.
Where monitors and sensors are used for demonstration purposes or when customers enter into a contract to use monitors
and sensors where the Group retains ownership, the monitor and sensor is transferred from Inventories to Property, plant and
equipment and is depreciated on a straight-line basis over its useful life. If the monitor and sensor is returned at the end of
the contract, it is not transferred back to Inventories but is retained in Property, plant and equipment. The cost to install the
equipment at the customer’s site is expensed as incurred.
((ll))
PPrrooppeerrttyy,, ppllaanntt aanndd eeqquuiippmmeenntt
Recognition and measurement
Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment
losses. Subsequent expenditure is capitalised only when it is probable that the future economic benefits associated with the
expenditure will flow to the Group. If significant parts of an item of property, plant and equipment have different useful lives,
they are accounted for as separate items (major components) of property, plant and equipment. Any gain and loss on disposal
of an item of property, plant and equipment is recognised in profit or loss.
37
Envirosuite Annual Report 2020Strategic Report / Directors’ Report / Financial Report
1.
((mm))
Summary of significant accounting policies (continued)
PPrrooppeerrttyy,, ppllaanntt aanndd eeqquuiippmmeenntt ((ccoonnttiinnuueedd))
Depreciation
Depreciation is calculated to write off the cost of property, plant and equipment less their estimated residual values using the
straight-line basis over their estimated useful lives, and is generally recognised in profit or loss. Leased assets are depreciated
over the shorter of the lease term and their useful lives unless it is reasonably certain that the Company will obtain ownership
by the end of the lease term. Land is not depreciated. The estimated useful lives of property, plant and equipment for the
current period is as follows:
•
•
•
•
•
Computer equipment
4 years
Furniture and fixtures
5 - 10 years
Leasehold improvements
Remaining life of the lease (3 - 5 years)
Terminals
5 years
Right-of-use assets
lower of economic or lease life
((nn))
RRiigghhtt ooff uussee aasssseett
Right of use assets are measured at cost and comprise the amount that is recognised for the lease liability on initial recognition
(refer to Note 1(q)) less any lease incentives received, and including direct costs and restoration-related costs. Right of use
assets include leased buildings and data centers and are depreciated over the life of the lease which is 5 – 7 years. The Group
does not recognise a right of use asset for short term or low value leases, instead the expense is recognised over the lease
term as appropriate as part of operating expenses in the income statement.
((oo))
IInnttaannggiibbllee aasssseettss
Intangible assets include acquired intangible assets as part of asset acquisitions and business combinations, as well as
internally developed software costs. The estimated useful lives of intangible assets for the current period is as follows:
Internally developed software
7 years
•
•
Acquired software
• Customer relationships
•
Brand value
Software development costs
5 years
5 years
5 years
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.
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.
Impairment
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.
38
Envirosuite Annual Report 2020
Summary of significant accounting policies (continued)
PPrrooppeerrttyy,, ppllaanntt aanndd eeqquuiippmmeenntt ((ccoonnttiinnuueedd))
1.
((mm))
Depreciation
Depreciation is calculated to write off the cost of property, plant and equipment less their estimated residual values using the
straight-line basis over their estimated useful lives, and is generally recognised in profit or loss. Leased assets are depreciated
over the shorter of the lease term and their useful lives unless it is reasonably certain that the Company will obtain ownership
by the end of the lease term. Land is not depreciated. The estimated useful lives of property, plant and equipment for the
current period is as follows:
Computer equipment
4 years
Furniture and fixtures
5 - 10 years
Leasehold improvements
Remaining life of the lease (3 - 5 years)
Terminals
5 years
Right-of-use assets
lower of economic or lease life
•
•
•
•
•
((nn))
RRiigghhtt ooff uussee aasssseett
Right of use assets are measured at cost and comprise the amount that is recognised for the lease liability on initial recognition
(refer to Note 1(q)) less any lease incentives received, and including direct costs and restoration-related costs. Right of use
assets include leased buildings and data centers and are depreciated over the life of the lease which is 5 – 7 years. The Group
does not recognise a right of use asset for short term or low value leases, instead the expense is recognised over the lease
term as appropriate as part of operating expenses in the income statement.
((oo))
IInnttaannggiibbllee aasssseettss
Intangible assets include acquired intangible assets as part of asset acquisitions and business combinations, as well as
internally developed software costs. The estimated useful lives of intangible assets for the current period is as follows:
Internally developed software
7 years
•
•
•
Acquired software
• Customer relationships
Brand value
5 years
5 years
5 years
Software development costs
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.
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.
Impairment
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
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.
1.
((pp))
Summary of significant accounting policies (continued)
TTrraaddee aanndd ootthheerr ppaayyaabblleess
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.
((qq))
LLeeaassee lliiaabbiilliittiieess
Lease liabilities are initially measured at the present value of the future lease payments at the commencement date of the
lease, discounted using the interest rate implicit in the lease (or if that rate cannot be readily determined, the lessee’s
incremental borrowing rate). Lease payments are allocated between principal and interest with the interest component
recognised in the income statement as part of finance expense. Any variable lease payments not included in the measurement
of the lease liability are recognised in the income statement within operating expenses in the period in which the event or
condition that triggers those payments occurs.
Lease liabilities are remeasured when there is a change in future lease payments arising from a change in lease term, an
assessment of an option to purchase the underlying asset, or a change in the estimated amounts payable under the lease.
When the lease liability is remeasured, a corresponding adjustment is made to the carrying value of the Right of use asset, or
in the income statement if the carrying value of the Right of use asset has been fully written down.
((rr))
PPrroovviissiioonnss
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
((ss))
CCoonnttrriibbuutteedd eeqquuiittyy
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.
((tt))
DDiivviiddeennddss
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.
((uu))
EEaarrnniinnggss ppeerr sshhaarree
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 and
by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements
in ordinary shares issued during the year.
value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for
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.
39
Envirosuite Annual Report 2020Strategic Report / Directors’ Report / Financial Report
1.
((vv))
Summary of significant accounting policies (continued)
RRoouunnddiinngg ooff aammoouunnttss
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.
((ww))
NNeeww aanndd aammeennddeedd ssttaannddaarrdd aaddoopptteedd bbyy tthhee GGrroouupp –– CChhaannggeess iinn AAccccoouunnttiinngg PPoolliicciieess
AASB 16 Leases
The Company has adopted AASB 16 Leases as of 1 July 2019. The new standard requires lessees to account for all leases within
the scope of the standard as finance leases with the recognition of a right-to-use asset and lease liability on the balance sheet
in connection with all former operating leases. The Group leases building space and data centres in various locations around
the world that may be required to be recognised on the balance sheet with depreciation of the right-to-use asset being
recorded within the statement of comprehensive income.
Transition
The new standard has been applied using the modified retrospective approach, with the cumulative effect of adopting AASB
16 being recognised in equity as an adjustment to the opening balance of retained earnings for the current period. Prior periods
have not been restated. The Group elected to use the transition practical expedient to not reassess whether a contract is, or
contains, a lease at 1 July 2019. Instead, the Group applied the standard only to contracts that were previously identified as
leases applying AASB 117 and AASB Interpretation 4 at the date of initial application.
Instead of performing an impairment review on the right-of-use assets at the date of initial application, the Group has relied
on its historic assessment as to whether leases were onerous immediately before the date of initial application of AASB16.
On transition, the Group recognised right of use assets of $209,000 and lease liabilities of $209,000. The impact of the AASB
16 adoption is presented below:
Total operating lease commitments disclosed at 30 June 2019
Leases with remaining lease term of less than 12 months
Adjustment
OOppeerraattiinngg lleeaasseess bbeeffoorree ddiissccoouunnttiinngg
Discounts using incremental borrowing rate
OOppeerraattiinngg lleeaassee lliiaabbiilliittiieess
TToottaall lleeaassee lliiaabbiilliittiieess rreeccooggnniisseedd uunnddeerr AAAASSBB 1166 aatt 11 JJuullyy 22001199
11 JJuullyy 22001199
$$’’000000
336
(30)
(67)
223399
(30)
220099
220099
40
Envirosuite Annual Report 2020
Summary of significant accounting policies (continued)
1.
((vv))
RRoouunnddiinngg ooff aammoouunnttss
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.
((ww))
NNeeww aanndd aammeennddeedd ssttaannddaarrdd aaddoopptteedd bbyy tthhee GGrroouupp –– CChhaannggeess iinn AAccccoouunnttiinngg PPoolliicciieess
AASB 16 Leases
The Company has adopted AASB 16 Leases as of 1 July 2019. The new standard requires lessees to account for all leases within
the scope of the standard as finance leases with the recognition of a right-to-use asset and lease liability on the balance sheet
in connection with all former operating leases. The Group leases building space and data centres in various locations around
the world that may be required to be recognised on the balance sheet with depreciation of the right-to-use asset being
recorded within the statement of comprehensive income.
Transition
The new standard has been applied using the modified retrospective approach, with the cumulative effect of adopting AASB
16 being recognised in equity as an adjustment to the opening balance of retained earnings for the current period. Prior periods
have not been restated. The Group elected to use the transition practical expedient to not reassess whether a contract is, or
contains, a lease at 1 July 2019. Instead, the Group applied the standard only to contracts that were previously identified as
leases applying AASB 117 and AASB Interpretation 4 at the date of initial application.
Instead of performing an impairment review on the right-of-use assets at the date of initial application, the Group has relied
on its historic assessment as to whether leases were onerous immediately before the date of initial application of AASB16.
On transition, the Group recognised right of use assets of $209,000 and lease liabilities of $209,000. The impact of the AASB
16 adoption is presented below:
Total operating lease commitments disclosed at 30 June 2019
Leases with remaining lease term of less than 12 months
Adjustment
OOppeerraattiinngg lleeaasseess bbeeffoorree ddiissccoouunnttiinngg
Discounts using incremental borrowing rate
OOppeerraattiinngg lleeaassee lliiaabbiilliittiieess
TToottaall lleeaassee lliiaabbiilliittiieess rreeccooggnniisseedd uunnddeerr AAAASSBB 1166 aatt 11 JJuullyy 22001199
11 JJuullyy 22001199
$$’’000000
336
(30)
(67)
223399
(30)
220099
220099
2.
Financial risk management
The Group is exposed to a variety of financial risks, principally related to credit, liquidity, and foreign currency 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.
((aa))
CCrreeddiitt rriisskk
The Group is exposed to the risk of a financial loss if a customer or counterparty to a financial instrument fails to meet its
contractual obligations. Credit risk arises principally from the Group’s receivables from customers. The Group’s maximum
exposure to credit risk at the balance date is the carrying amount of financial assets, net of any provisions for impairment and
excluding the value of any other collateral or other security.
The gross trade and other receivables balance at 30 June 2020 was $12,812,000 (2019: $1,557,000) and the aging analysis of
trade receivables is provided in Note 8. The Group exposure to credit risk is affected by the regions and industries the Group’s
customers operate in. The majority of the Group’s customers are airports and water and waste operators around the world
with a growing exposure to customers within the mining industry.
Trade receivables are managed on an ongoing basis. The Group does not have any material credit risk exposure to any single
debtor. Aging analysis and ongoing collectability reviews are performed and, when appropriate, an expected credit risk loss
provision is raised. Historically, the Group has not had any significant write-offs in its trade receivables, which includes the
historical period during which the EMS businesses operated prior to the acquisition in February 2020.
((bb))
LLiiqquuiiddiittyy rriisskk
Liquidity risk is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due. As at 30
June 2020, the Group had cash and cash equivalents of $24,385,000 (2019: $7,564,000). The Group generated net loss after
tax of $18,236,000 though this included $3,154,000 of non-cash share based payments and $2,263,000 of non-recurring
transition and integration costs related to the acquisition of EMS.
In June 2020, the Company announced head count reductions and other cost saving initiatives that are forecasted to reduce
overhead costs by $8 million. Based on the cash available to the Group and the cost saving initiatives already implemented,
the Board and management are of the view that the Company has sufficient liquidity to continue as a going concern for at
least the next 12 months without needing to raise additional capital.
((cc))
FFoorreeiiggnn ccuurrrreennccyy rriisskk
Foreign currency risk is the risk that the future cash flows of a financial instrument or forecasted transaction will fluctuate
because of changes in foreign exchange rates. The Group operates internationally and as such has exposure to foreign currency
movements. Approximately 67% of the Group’s revenue for the period ended 30 June 2020 was earned in foreign currency
(2019: 42%). The Group primarily has exposure to Euro (“EUR”), US dollars (“USD”), Canadian dollars (“CAD”), British pound
(“GBP”), and Chinese renminbi (“RMB”) from cash balances and trade receivables which are partially offset by trade and other
payables, employee provisions and borrowings in those currencies. The table below shows the impact to comprehensive income
before tax from a 10% increase and 10% decrease in the foreign currency exchange rate against the Australian dollar (“AUD”).
$’000
CAD
EUR
GBP
RMB
USD
Other
TToottaall
22002200
22001199
EExxppoouurree
((iinn AAUUDDee))
--1100%%
++1100%%
EExxppoouurree
((iinn AAUUDDee))
--1100%%
++1100%%
580
(220)
576
1,914
957
1,927
55,,773344
64
(24)
64
213
106
214
663377
(53)
20
(52)
(174)
(87)
(175)
((552211))
843
49
-
-
94
87
11,,007733
94
5
-
-
10
10
111199
(77)
(4)
-
-
(9)
(8)
((9988))
41
Envirosuite Annual Report 2020Strategic Report / Directors’ Report / Financial Report
3.
Segment information
The Group is organised into five geographic operating segments: Asia-Pacific ('APAC'), China, 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.
Segment assets and liabilities are not presented as they are not regular provided to the chief operating decision makers.
AAssiiaa PPaacciiffiicc
CChhiinnaa
EEMMEEAA
NNoorrtthh
AAmmeerriiccaa
SSoouutthh
AAmmeerriiccaa
CCoorrppoorraattee
TToottaall
22002200
$$‘‘000000
TTrraaddiinngg rreevveennuuee
Recurring revenue
Non recurring revenue
Other revenue
TToottaall ooppeerraattiinngg rreevveennuuee
6,322
454
-
66,,777766
148
3,271
9
33,,442288
5,540
433
-
55,,997733
4,676
541
-
55,,221177
Cost of revenue
GGrroossss pprrooffiitt
(4,091)
22,,668855
(3,347)
8811
(2,962)
33,,001111
(3,707)
11,,551111
Operating expenses
Other income/(expense)
OOppeerraattiinngg ddeeffiicciitt bbeeffoorree ttaaxx
Net finance income/(expense)
NNeett lloossss bbeeffoorree ttaaxx
(2,351)
-
333344
(11)
332233
(1,097)
-
((11,,001166))
(11)
((11,,002277))
(1,136)
-
11,,887755
-
11,,887755
(794)
-
771166
2
771188
1,228
720
-
11,,994488
(919)
11,,002299
(1,015)
-
1144
(4)
1100
-
-
516
551166
17,919
5,419
525
2233,,885588
(1,437)
((992211))
(16,463)
77,,339955
(19,222)
(155)
((2200,,229988))
(66)
((2200,,336644))
(25,616)
(155)
((1188,,337777))
(89)
((1188,,446666))
AAssiiaa PPaacciiffiicc
CChhiinnaa
EEMMEEAA
NNoorrtthh
AAmmeerriiccaa
SSoouutthh
AAmmeerriiccaa
CCoorrppoorraattee
TToottaall
1,309
94
1
11,,440044
(755)
664499
(373)
(12)
226644
-
226644
-
-
-
-
--
-
-
-
--
--
608
1,775
5
22,,338888
(969)
11,,441199
(1,113)
68
337744
-
337744
1,029
245
14
11,,228888
(1,490)
((220022))
(1,469)
(72)
((11,,774433))
2
((11,,774411))
22001199
$$‘‘000000
TTrraaddiinngg rreevveennuuee
Recurring revenue
Non recurring revenue
Other revenue
TToottaall ooppeerraattiinngg rreevveennuuee
Cost of revenue
GGrroossss pprrooffiitt
Operating expenses
Other income/(expense)
OOppeerraattiinngg ddeeffiicciitt bbeeffoorree ttaaxx
Net finance income/(expense)
NNeett lloossss bbeeffoorree ttaaxx
4.
Revenue
Recurring revenue
Non recurring revenue
TTrraaddiinngg rreevveennuuee
Research and development tax incentives
Other revenue
Profit on sale of fixed assets
OOtthheerr rreevveennuuee
698
1,358
-
22,,005566
(1,168)
888888
(750)
(17)
112211
-
112211
22002200
$$’’000000
17,915
5,418
2233,,333333
357
158
9
552244
-
-
565
556655
3,644
3,472
585
77,,770011
(614)
((4499))
(4,996)
22,,770055
(5,164)
134
((55,,007799))
132
((44,,994477))
(8,869)
101
((66,,006633))
134
((55,,992299))
22001199
$$’’000000
3,644
3,472
77,,111166
467
108
10
558855
TToottaall rreevveennuuee
2233,,885577
77,,770011
Research and development tax incentives included for the year ended 30 June 2020 are $356,560 (2019: $467,224).
42
Envirosuite Annual Report 2020
The Group is organised into five geographic operating segments: Asia-Pacific ('APAC'), China, 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.
Segment assets and liabilities are not presented as they are not regular provided to the chief operating decision makers.
AAssiiaa PPaacciiffiicc
CChhiinnaa
EEMMEEAA
AAmmeerriiccaa
AAmmeerriiccaa
CCoorrppoorraattee
TToottaall
NNoorrtthh
SSoouutthh
22002200
$$‘‘000000
TTrraaddiinngg rreevveennuuee
Recurring revenue
Non recurring revenue
Other revenue
TToottaall ooppeerraattiinngg rreevveennuuee
6,322
454
-
66,,777766
148
3,271
9
33,,442288
5,540
433
-
55,,997733
4,676
541
-
55,,221177
Cost of revenue
GGrroossss pprrooffiitt
(4,091)
22,,668855
(3,347)
(2,962)
8811
33,,001111
(3,707)
11,,551111
Operating expenses
Other income/(expense)
OOppeerraattiinngg ddeeffiicciitt bbeeffoorree ttaaxx
Net finance income/(expense)
NNeett lloossss bbeeffoorree ttaaxx
(2,351)
(1,097)
(1,136)
(794)
(1,015)
-
333344
(11)
332233
-
((11,,001166))
(11)
((11,,002277))
-
-
11,,887755
11,,887755
771166
-
2
771188
1,228
720
-
11,,994488
(919)
11,,002299
-
1144
(4)
1100
-
-
516
551166
17,919
5,419
525
2233,,885588
(1,437)
((992211))
(16,463)
77,,339955
(19,222)
(155)
(25,616)
(155)
((2200,,229988))
((1188,,337777))
(66)
(89)
((2200,,336644))
((1188,,446666))
22001199
$$‘‘000000
TTrraaddiinngg rreevveennuuee
Recurring revenue
Non recurring revenue
Other revenue
TToottaall ooppeerraattiinngg rreevveennuuee
Cost of revenue
GGrroossss pprrooffiitt
Operating expenses
Other income/(expense)
OOppeerraattiinngg ddeeffiicciitt bbeeffoorree ttaaxx
Net finance income/(expense)
NNeett lloossss bbeeffoorree ttaaxx
4.
Revenue
Recurring revenue
Non recurring revenue
TTrraaddiinngg rreevveennuuee
Research and development tax incentives
Other revenue
Profit on sale of fixed assets
OOtthheerr rreevveennuuee
AAssiiaa PPaacciiffiicc
CChhiinnaa
EEMMEEAA
AAmmeerriiccaa
AAmmeerriiccaa
CCoorrppoorraattee
TToottaall
NNoorrtthh
SSoouutthh
11,,440044
--
1,309
94
1
(755)
664499
(373)
(12)
226644
-
226644
-
-
-
-
--
-
-
-
608
1,775
5
22,,338888
(969)
11,,441199
(1,113)
68
337744
-
337744
--
1,029
245
14
11,,228888
(1,490)
((220022))
(1,469)
(72)
((11,,774433))
2
((11,,774411))
3,644
3,472
585
77,,770011
-
-
565
556655
134
132
(614)
((4499))
(4,996)
22,,770055
((55,,007799))
((66,,006633))
((44,,994477))
((55,,992299))
101
134
(750)
(5,164)
(8,869)
698
1,358
-
22,,005566
(1,168)
888888
(17)
112211
-
112211
22002200
$$’’000000
17,915
5,418
2233,,333333
357
158
9
552244
22001199
$$’’000000
3,644
3,472
77,,111166
467
108
10
558855
TToottaall rreevveennuuee
2233,,885577
77,,770011
Research and development tax incentives included for the year ended 30 June 2020 are $356,560 (2019: $467,224).
3.
Segment information
5.
Expenses
The Group categorises expenses within the Consolidated Income Statement based on the function of the expense. The table
below discloses expenses based on the nature of the expense.
CCoosstt ooff rreevveennuuee aanndd ooppeerraattiinngg eexxppeennsseess
Cost of revenue
Total operating expenses
TToottaall ccoosstt ooff rreevveennuuee aanndd ooppeerraattiinngg eexxppeennsseess
Total cost of revenue and operating expenses is comprised of:
Employment costs
Share based compensation
Consultants and contractors
Professional fees
Computer expenses
Equipment costs
Building costs
Director’s fees
Audit and audit related fees
Depreciation and amortisation (excl intangible asset – software
amortisation)
Other operating expenses
SSuubb--ttoottaall
Software development cost - capitalised
Intangible asset – software amortisation
RR&&DD ccoossttss ccaappiittaalliisseedd,, nneett
22002200
$$’’000000
(16,463)
(25,616)
((4422,,007799))
(20,618)
(3,154)
(2,613)
(2,060)
(2,453)
(4,682)
(567)
(265)
(216)
(2,154)
(4,083)
((4422,,886655))
1,873
(1,087)
778866
22001199
$$’’000000
(4,996)
(8,869)
((1133,,886655))
(7,754)
(13)
(1,132)
(281)
(660)
(1,740)
(610)
(210)
(59)
(116)
(1,551)
((1144,,112266))
1,385
(1,124)
226611
TToottaall ccoosstt ooff rreevveennuuee aanndd ooppeerraattiinngg eexxppeennsseess
((4422,,007799))
((1133,,886655))
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:
Audit and review of financial reports
Other assurance services
Other non-audit services
TToottaall rreemmuunneerraattiioonn ooff aauuddiittoorrss
22002200
$$’’000000
216
113
85
441144
22001199
$$’’000000
61
-
22
8833
Other assurance services include agreed-upon procedures in connection acquisitions made during the year. Other non-audit
services include payroll, tax return preparation and other related services.
43
Envirosuite Annual Report 2020Strategic Report / Directors’ Report / Financial Report
6.
Tax
((aa))
IInnccoommee ttaaxx eexxppeennssee // ((bbeenneeffiitt))
Current tax expense / (benefit)
Deferred tax expense / (benefit)
TToottaall iinnccoommee ttaaxx eexxppeennssee // ((bbeenneeffiitt))
22002200
$$’’000000
770
(1,000)
((223300))
22001199
$$’’000000
(340)
407
6677
RReeccoonncciilliiaattiioonn ooff iinnccoommee ttaaxx eexxppeennssee ttoo pprriimmaa ffaacciiee ttaaxx ppaayyaabbllee
((bb))
Prima facie tax expense on operating profit at 27.5% (2019: 27.5%)
(5,078)
(1,618)
TTaaxx eeffffeeccttss ooff iitteemmss wwhhiicchh aarree nnoonn--ddeedduuccttiibbllee // ((nnoonn--aasssseessssaabbllee)) iinn
ccaallccuullaattiinngg ttaaxxaabbllee iinnccoommee::
Non-allowable items (including R&D expenditure)
Non-assessable R&D income
Share options expensed during the year
Difference in offshore tax rates
AAdddd // ((lleessss))::
Over/(under) provision for income tax in prior year
Equity raising costs
Deferred tax valuation allowance increase
TToottaall iinnccoommee ttaaxx eexxppeennssee // ((bbeenneeffiitt))
((cc)) DDeeffeerrrreedd iinnccoommee ttaaxx
516
(98)
867
131
-
(95)
3,527
((223300))
290
(128)
4
-
111
95
1,313
6677
OOppeenniinngg
BBaallaannccee
$$’’000000
AAccqquuiirreedd iinn
bbuussiinneessss
ccoommbbiinnaattiioonn
$$’’000000
RReeccooggnniisseedd iinn
pprrooffiitt oorr lloossss
$$’’000000
CChhaarrggeedd
ddiirreeccttllyy ttoo
EEqquuiittyy
$$’’000000
EEffffeecctt ooff
ffoorreeiiggnn
eexxcchhaannggee
$$’’000000
DDeeffeerrrreedd TTaaxx
AAsssseett
$$’’000000
DDeeffeerrrreedd TTaaxx
LLiiaabbiilliittyy
$$’’000000
142
92
(42)
184
(1,503)
116
166
1,059
-
-
4,034
(3,660)
558888
-
-
-
-
-
-
-
-
412
-
-
-
441122
-
-
-
-
-
2
-
-
-
-
-
-
--
120
92
-
184
-
94
166
1,384
564
-
-
(42)
-
(5,692)
-
-
-
-
(1,729)
1,729
6,138
(5,763)
-
-
11,,225500
((44,,000055))
22002200
Trade and other receivables
Inventory
Property, plant and equipment
Right of use asset and Lease
liability
Intangible asset
Trade and other payables
Revenue in advance
Employee provisions
Issued capital
Net DTA / (DTL)
-
-
-
-
-
(24)
-
325
152
-
(22)
-
-
-
(4,188)
-
-
-
-
-
Tax losses
Valuation allowance
BBaallaannccee aass 3300 JJuunnee 22002200
1,251
(1,251)
445533
854
(854)
((44,,221100))
44
Envirosuite Annual Report 2020
6.
Tax
6.
Tax (continued)
((bb))
RReeccoonncciilliiaattiioonn ooff iinnccoommee ttaaxx eexxppeennssee ttoo pprriimmaa ffaacciiee ttaaxx ppaayyaabbllee
Prima facie tax expense on operating profit at 27.5% (2019: 27.5%)
(5,078)
(1,618)
TTaaxx eeffffeeccttss ooff iitteemmss wwhhiicchh aarree nnoonn--ddeedduuccttiibbllee // ((nnoonn--aasssseessssaabbllee)) iinn
((aa))
IInnccoommee ttaaxx eexxppeennssee // ((bbeenneeffiitt))
Current tax expense / (benefit)
Deferred tax expense / (benefit)
TToottaall iinnccoommee ttaaxx eexxppeennssee // ((bbeenneeffiitt))
ccaallccuullaattiinngg ttaaxxaabbllee iinnccoommee::
Non-allowable items (including R&D expenditure)
Non-assessable R&D income
Share options expensed during the year
Difference in offshore tax rates
AAdddd // ((lleessss))::
Over/(under) provision for income tax in prior year
Equity raising costs
Deferred tax valuation allowance increase
TToottaall iinnccoommee ttaaxx eexxppeennssee // ((bbeenneeffiitt))
((cc)) DDeeffeerrrreedd iinnccoommee ttaaxx
22002200
$$’’000000
770
(1,000)
((223300))
516
(98)
867
131
-
(95)
3,527
((223300))
22001199
$$’’000000
(340)
407
6677
290
(128)
4
-
111
95
1,313
6677
22001199
Trade and other payables
Employee provisions
Issued Capital
Net DTA / (DTL)
Tax losses
Valuation allowance
BBaallaannccee aass 3300 JJuunnee 22001199
OOppeenniinngg
BBaallaannccee
$$’’000000
21
314
79
-
1,238
(1,238)
441144
AAccqquuiirreedd iinn
bbuussiinneessss
ccoommbbiinnaattiioonn
$$’’000000
-
RReeccooggnniisseedd iinn
pprrooffiitt oorr lloossss
$$’’000000
(45)
CChhaarrggeedd
ddiirreeccttllyy ttoo
EEqquuiittyy
$$’’000000
-
EEffffeecctt ooff
ffoorreeiiggnn
eexxcchhaannggee
$$’’000000
-
DDeeffeerrrreedd TTaaxx
AAsssseett
$$’’000000
-
DDeeffeerrrreedd TTaaxx
LLiiaabbiilliittyy
$$’’000000
(24)
-
-
-
-
-
--
11
-
-
13
(13)
((3344))
-
73
-
-
-
7733
-
-
-
-
-
--
325
152
(24)
1,251
(1,251)
445533
-
-
24
-
-
--
The Group has unused tax losses of $22,105,394 (2019: $4,501,393) for which a valuation allowance has been placed against
the related deferred tax asset of $6,138,000 (2019: $1,251,000) and has not been recognised.
7.
Cash and cash equivalents
Cash at bank
Term deposits
CCaasshh aanndd ccaasshh eeqquuiivvaalleennttss
22002200
$$’’000000
20,266
4,119
2244,,338855
22001199
$$’’000000
7,564
-
77,,556644
AAccqquuiirreedd iinn
CChhaarrggeedd
EEffffeecctt ooff
OOppeenniinngg
BBaallaannccee
$$’’000000
bbuussiinneessss
RReeccooggnniisseedd iinn
ddiirreeccttllyy ttoo
ffoorreeiiggnn
DDeeffeerrrreedd TTaaxx
DDeeffeerrrreedd TTaaxx
ccoommbbiinnaattiioonn
pprrooffiitt oorr lloossss
EEqquuiittyy
$$’’000000
eexxcchhaannggee
$$’’000000
AAsssseett
$$’’000000
LLiiaabbiilliittyy
$$’’000000
Term deposits are with financial institutions with an investment grade rating and are for a term of 90 days or less. While the
Group is exposed to interest rate risk on cash and term deposits, the impact of fluctuations in market interest rates is not
material to the Group’s performance.
Trade and other receivables
22002200
Inventory
Property, plant and equipment
Right of use asset and Lease
liability
Intangible asset
Trade and other payables
Revenue in advance
Employee provisions
Issued capital
Net DTA / (DTL)
-
-
-
-
-
-
(24)
325
152
-
$$’’000000
(22)
-
-
-
-
-
-
-
-
Tax losses
Valuation allowance
BBaallaannccee aass 3300 JJuunnee 22002200
1,251
(1,251)
445533
854
(854)
((44,,221100))
$$’’000000
142
92
(42)
184
116
166
1,059
-
-
4,034
(3,660)
558888
(4,188)
(1,503)
-
-
-
-
-
-
-
-
-
-
-
412
-
-
-
-
-
2
-
-
-
-
-
-
--
120
92
-
184
-
94
166
1,384
564
6,138
(5,763)
(42)
(5,692)
-
-
-
-
-
-
-
-
-
(1,729)
1,729
441122
11,,225500
((44,,000055))
45
Envirosuite Annual Report 2020Strategic Report / Directors’ Report / Financial Report
8.
Trade and other receivables
Trade receivables
Provision for impairment
TTrraaddee rreecceeiivvaabblleess,, nneett
Accrued income
Held in escrow – sale of consultancy practice
Other debtors
TTrraaddee aanndd ootthheerr rreecceeiivvaabblleess
TTrraaddee rreecceeiivvaabbllee,, nneett aaggiinngg aannaallyyssiiss
Not past due
Past due 1-30 days
Past due 31-60 days
Past due 61-90 days
Past due more than 91 days
TToottaall
FFaaiirr vvaalluuee aanndd ccrreeddiitt rriisskk
22002200
$$’’000000
9,550
(2,082)
77,,446688
1,992
-
1,270
1100,,773300
4,154
1,077
983
577
677
77,,446688
22001199
$$’’000000
1,320
(56)
11,,226644
23
172
42
11,,550011
502
513
46
5
198
11,,226644
Due to the short term nature of these receivables, the carrying amount is assumed to approximate their fair value. The
maximum exposure to credit risk at the reporting date is the carrying amount of each class of receivables mentioned above.
The fair value of securities held for certain trade receivable is insignificant as is the fair value of any collateral sold or re-
pledged. Refer to note 2 for more information on the risk management policy of the Group. Management have considered the
impact of COVID-19 on trade and other receivables and do not anticipate a significant deterioration of recoverability beyond
the level of current provisioning.
9.
Inventories
Work in progress
Finished goods
IInnvveennttoorriieess
Inventories at carried at the lower of cost or net realisable value.
10.
Other assets
Prepayments
Deposits
OOtthheerr ccuurrrreenntt aasssseettss
Deposits
OOtthheerr nnoonn--ccuurrrreenntt aasssseettss
22002200
$$’’000000
982
2,120
33,,110022
22002200
$$’’000000
924
271
11,,119955
421
442211
22001199
$$’’000000
204
124
332288
22001199
$$’’000000
172
-
117722
-
--
Prepayments represent prepaid insurance, prepaid software licenses, and other prepaid expenses. Deposits include deposits
for building leases as well as cash backed bid and performance bond deposits. These deposits are pledged as security against
non-performance of the Group, including non-payment of rent, inability to deliver based on the bid submitted, or inability to
deliver based on a contract entered into with a customer.
46
Envirosuite Annual Report 2020
8.
Trade and other receivables
11.
Property, plant and equipment
Due to the short term nature of these receivables, the carrying amount is assumed to approximate their fair value. The
maximum exposure to credit risk at the reporting date is the carrying amount of each class of receivables mentioned above.
The fair value of securities held for certain trade receivable is insignificant as is the fair value of any collateral sold or re-
pledged. Refer to note 2 for more information on the risk management policy of the Group. Management have considered the
impact of COVID-19 on trade and other receivables and do not anticipate a significant deterioration of recoverability beyond
Trade receivables
Provision for impairment
TTrraaddee rreecceeiivvaabblleess,, nneett
Accrued income
Held in escrow – sale of consultancy practice
Other debtors
TTrraaddee aanndd ootthheerr rreecceeiivvaabblleess
TTrraaddee rreecceeiivvaabbllee,, nneett aaggiinngg aannaallyyssiiss
Not past due
Past due 1-30 days
Past due 31-60 days
Past due 61-90 days
Past due more than 91 days
TToottaall
FFaaiirr vvaalluuee aanndd ccrreeddiitt rriisskk
the level of current provisioning.
9.
Inventories
Work in progress
Finished goods
IInnvveennttoorriieess
10.
Other assets
Prepayments
Deposits
OOtthheerr ccuurrrreenntt aasssseettss
Deposits
OOtthheerr nnoonn--ccuurrrreenntt aasssseettss
Inventories at carried at the lower of cost or net realisable value.
22002200
$$’’000000
9,550
(2,082)
77,,446688
1,992
-
1,270
1100,,773300
4,154
1,077
983
577
677
77,,446688
22002200
$$’’000000
982
2,120
33,,110022
22002200
$$’’000000
924
271
11,,119955
421
442211
22001199
$$’’000000
1,320
(56)
11,,226644
23
172
42
11,,550011
502
513
46
5
198
11,,226644
22001199
$$’’000000
204
124
332288
22001199
$$’’000000
172
-
117722
-
--
Prepayments represent prepaid insurance, prepaid software licenses, and other prepaid expenses. Deposits include deposits
for building leases as well as cash backed bid and performance bond deposits. These deposits are pledged as security against
non-performance of the Group, including non-payment of rent, inability to deliver based on the bid submitted, or inability to
deliver based on a contract entered into with a customer.
Reconciliations of the carrying amounts of the various components of property, plant and equipment at the beginning and end
of the current year and prior year are presented in the table below. Refer to Note 20 for further details on the acquired
balances as part of the acquisition of EMS.
22002200
$$’’000000
CCoosstt vvaalluuee
Balance as at 1 June 2019
Acquired in business combination
Additions
Transfer from inventories
Disposals
Effect of foreign exchange
BBaallaannccee aass aatt 3300 JJuunnee 22002200
AAccccuummuullaatteedd ddeepprreecciiaattiioonn
Balance as at 1 June 2019
Acquired in business combination
Depreciation for the period
Disposals
Effect of foreign exchange
BBaallaannccee aass aatt 3300 JJuunnee 22002200
NNeett bbooookk vvaalluuee
FFuurrnniittuurree aanndd
ffiixxttuurreess
CCoommppuutteerr
eeqquuiippmmeenntt
TTeerrmmiinnaallss
LLeeaasseehhoolldd
iimmpprroovveemmeennttss
110
1,035
14
-
(29)
(24)
11,,110066
(39)
(829)
(70)
28
15
((889944))
221122
82
2,559
95
-
(2)
(30)
22,,770055
(25)
(2,030)
(104)
-
23
((22,,113355))
557700
-
8,617
-
449
(95)
(188)
88,,778844
-
(6,295)
(439)
95
140
((66,,550000))
22,,228844
194
96
68
-
-
2
336600
(46)
(12)
(64)
-
(1)
((112222))
223388
22001199
$$’’000000
CCoosstt vvaalluuee
Balance as at 1 June 2018
Additions
Disposals
Effect of foreign exchange
BBaallaannccee aass aatt 3300 JJuunnee 22001199
AAccccuummuullaatteedd ddeepprreecciiaattiioonn
Balance as at 1 June 2018
Depreciation for the period
Disposals
Effect of foreign exchange
BBaallaannccee aass aatt 3300 JJuunnee 22001199
NNeett bbooookk vvaalluuee
FFuurrnniittuurree aanndd
ffiixxttuurreess
CCoommppuutteerr
eeqquuiippmmeenntt
TTeerrmmiinnaallss
LLeeaasseehhoolldd
iimmpprroovveemmeennttss
69
76
(28)
(6)
111111
(10)
(45)
16
-
((3399))
7722
60
32
(10)
-
8822
(7)
(28)
10
-
((2255))
5577
-
-
-
-
--
-
-
-
-
--
--
203
17
(25)
-
119955
(25)
(46)
25
-
((4466))
114499
TToottaall
387
12,307
176
449
(125)
(240)
1122,,995544
(110)
(9,166)
(677)
123
178
((99,,665500))
33,,330044
TToottaall
332
125
(63)
(6)
338888
(42)
(119)
51
-
((111100))
227788
47
Envirosuite Annual Report 2020Strategic Report / Directors’ Report / Financial Report
12.
Right of use assets and lease liabilities
The Company adopted AASB 16 Leases effective 1 July 2019 applying the modified retrospective approach. Further details
regarding the impacts of adopting the new standard are discussed in Note 1(t).
RRiigghhtt ooff uussee aasssseettss
BBuuiillddiinnggss
Balance at 1 July 2019
Additions
Acquired in business combination
Depreciation
Effect of foreign exchange
Balance at end of period
DDaattaa cceennttrreess
Balance at 1 July 2019
Acquired in business combination
Depreciation
Effect of foreign exchange
Balance at end of period
TToottaall RRiigghhtt ooff uussee aasssseettss
22002200
$$’’000000
209
849
2,662
(457)
(36)
33,,222277
-
629
(89)
(24)
551166
33,,774433
Building leases for periods of less than 12 months and variable lease payments for recharge of overhead costs by the building
owner are included within Building costs as disclosed in Note 5.
Lease liabilities are included within lease liabilities and other borrowings on the Statement of Financial Position. Interest
expense on lease liabilities for FY20 was $158,000 and is included within finance costs on the Income Statement:
LLeeaassee lliiaabbiilliittiieess
Current
Non Current
Balance at end of period
22002200
$$’’000000
1,348
3,059
44,,440077
48
Envirosuite Annual Report 2020
12.
Right of use assets and lease liabilities
13.
Intangible assets
The Company adopted AASB 16 Leases effective 1 July 2019 applying the modified retrospective approach. Further details
regarding the impacts of adopting the new standard are discussed in Note 1(t).
Reconciliations of the carrying amounts of the various components of property, plant and equipment at the beginning and end
of the current year and prior year are presented in the table below. Refer to Note 20 for further details on the acquired
balances as part of the acquisition of EMS.
RRiigghhtt ooff uussee aasssseettss
Balance at 1 July 2019
BBuuiillddiinnggss
Additions
Acquired in business combination
Depreciation
Effect of foreign exchange
Balance at end of period
DDaattaa cceennttrreess
Balance at 1 July 2019
Acquired in business combination
Depreciation
Effect of foreign exchange
Balance at end of period
TToottaall RRiigghhtt ooff uussee aasssseettss
LLeeaassee lliiaabbiilliittiieess
Current
Non Current
Balance at end of period
22002200
$$’’000000
209
849
2,662
(457)
(36)
33,,222277
-
629
(89)
(24)
551166
33,,774433
22002200
$$’’000000
1,348
3,059
44,,440077
Building leases for periods of less than 12 months and variable lease payments for recharge of overhead costs by the building
owner are included within Building costs as disclosed in Note 5.
Lease liabilities are included within lease liabilities and other borrowings on the Statement of Financial Position. Interest
expense on lease liabilities for FY20 was $158,000 and is included within finance costs on the Income Statement:
22002200
$$’’000000
CCoosstt vvaalluuee
Balance as at 1 July 2019
Acquired in business combination
Additions
BBaallaannccee aass aatt 3300 JJuunnee 22002200
AAccccuummuullaatteedd ddeepprreecciiaattiioonn
Balance as at 1 July 2019
Amortisation for the period
BBaallaannccee aass aatt 3300 JJuunnee 22002200
NNeett bbooookk vvaalluuee
22001199
$$’’000000
CCoosstt vvaalluuee
Balance as at 1 July 2018
Acquired in business combination
Additions
BBaallaannccee aass aatt 3300 JJuunnee 22001199
AAccccuummuullaatteedd ddeepprreecciiaattiioonn
Balance as at 1 July 2018
Amortisation for the period
BBaallaannccee aass aatt 3300 JJuunnee 22001199
NNeett bbooookk vvaalluuee
GGooooddwwiillll
340
89,043
-
8899,,338833
-
-
--
8899,,338833
IInntteerrnnaallllyy
ddeevveellooppeedd
ssooffttwwaarree
AAccqquuiirreedd
SSooffttwwaarree
OOtthheerr
IInnttaannggiibblleess
6,896
-
1,873
88,,776699
(1,697)
(1,087)
((22,,778844))
55,,998855
-
9,233
166
99,,339988
-
(616)
((661166))
88,,778833
16
4,727
360
55,,110033
-
(315)
((331155))
44,,778888
GGooooddwwiillll
IInntteerrnnaallllyy
ddeevveellooppeedd
ssooffttwwaarree
AAccqquuiirreedd
SSooffttwwaarree
OOtthheerr
IInnttaannggiibblleess
161
179
-
334400
-
-
--
334400
5,510
-
1,386
66,,889966
(580)
(1,117)
((11,,669977))
55,,119999
-
-
-
--
-
-
--
--
16
-
-
1166
-
-
--
1166
TToottaall
7,252
103,002
2,399
111122,,665533
(1,697)
(2,017)
((33,,771144))
110088,,993399
TToottaall
5,687
179
1,386
77,,225522
(580)
(1,117)
((11,,669977))
55,,555555
Customer relationships with cost value of $4,557,000 are included within Other intangibles along with brand value and
intellectual property. Goodwill and other intangibles acquired during the year relate to the acquisition of the EMS business
and the acquisition of Beijing Hengliruiyuan Environmental Engineering Co. Ltd. Refer to Note 20 for further details of the
business combination.
IImmppaaiirrmmeenntt tteessttss
The Group has identified that there are five (5) regional Cash Generating Units which are aligned with the operating segments
disclosed in Note 3 and against which goodwill and other intangible assets are allocated and tested.
The recoverable amount of internally developed software is determined based on a relief-from-royalty method (value-in-use)
method, which 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. These calculations use revenue projections based on
financial forecasts approved by management covering a five year period with a terminal value included. A royalty rate of 7%
has been applied against these revenue projections to calculate the assumed royalty which is then discounted using a weighted
average cost of capital of 9.1% (FY19: 14.3%). Based on this calculation, there was no impairment charge to be recorded against
internally developed software (FY19: nil).
There was no impairment charge recorded against goodwill, software, or other intangible assets during FY20 (FY19: nil).
The COVID-19 pandemic has had an adverse global economic impact, however, it is not possible to accurately determine the
future nature, extent or duration of the impact on the group, material or otherwise, at the date of signing the financial
statements. The directors of the group have considered the potential impacts of COVID-19 and do not believe that based on
the information correctly available, it has a significant impact in the assessment of impairment at balance date.
49
Envirosuite Annual Report 2020Strategic Report / Directors’ Report / Financial Report
14.
Trade and other payables
Trade payables
GST / VAT Payable
Accrued expenses
Payable for EMS acquisition
Other liabilities
TToottaall ttrraaddee aanndd ootthheerr ppaayyaabblleess
15.
Employee benefit
EEmmppllooyyeeee bbeenneeffiittss
CCuurrrreenntt
Opening balance 1 July
Acquired in business combination (refer note 20)
Additional provisions
Amounts used
Unused amounts reversed
BBaallaannccee aatt 3300 JJuunnee
NNoonn--ccuurrrreenntt
Opening balance 1 July
Acquired in business combination (refer Note 20)
Additional provisions
Amounts used
Unused amounts reversed
BBaallaannccee aatt 3300 JJuunnee
22002200
$$’’000000
3,478
544
671
4,181
4,136
1133,,001100
22002200
$$’’000000
625
4,058
1,633
(113)
-
66,,220033
63
246
-
(79)
-
223300
22001199
$$’’000000
527
-
-
-
674
11,,220011
22001199
$$’’000000
508
-
348
(231)
-
662255
45
-
18
-
-
6633
AAmmoouunnttss nnoott eexxppeecctteedd ttoo bbee sseettttlleedd wwiitthhiinn tthhee nneexxtt 1122 mmoonntthhss
The provision for long service leave includes an estimate of the entitlements for employees in Australia who are expected to
have completed seven to ten years of continuous employment depending on the state in which they reside. The entire amount
of long service leave for employees where there is an unconditional entitlement is presented as current, since the Group does
not have an unconditional right to defer settlement. Provision for long service leave where the entitlement only becomes
unconditional in a period beyond 12 months are presented as non-current.
50
Envirosuite Annual Report 2020
14.
Trade and other payables
16.
Issued capital
Trade payables
GST / VAT Payable
Accrued expenses
Payable for EMS acquisition
Other liabilities
TToottaall ttrraaddee aanndd ootthheerr ppaayyaabblleess
15.
Employee benefit
EEmmppllooyyeeee bbeenneeffiittss
CCuurrrreenntt
Opening balance 1 July
Additional provisions
Amounts used
Unused amounts reversed
BBaallaannccee aatt 3300 JJuunnee
NNoonn--ccuurrrreenntt
Opening balance 1 July
Additional provisions
Amounts used
Unused amounts reversed
BBaallaannccee aatt 3300 JJuunnee
Acquired in business combination (refer note 20)
Acquired in business combination (refer Note 20)
22002200
$$’’000000
3,478
544
671
4,181
4,136
1133,,001100
22002200
$$’’000000
625
4,058
1,633
(113)
-
66,,220033
63
246
(79)
-
-
223300
22001199
$$’’000000
527
-
-
-
674
11,,220011
22001199
$$’’000000
508
348
(231)
-
-
662255
45
-
18
-
-
6633
AAmmoouunnttss nnoott eexxppeecctteedd ttoo bbee sseettttlleedd wwiitthhiinn tthhee nneexxtt 1122 mmoonntthhss
The provision for long service leave includes an estimate of the entitlements for employees in Australia who are expected to
have completed seven to ten years of continuous employment depending on the state in which they reside. The entire amount
of long service leave for employees where there is an unconditional entitlement is presented as current, since the Group does
not have an unconditional right to defer settlement. Provision for long service leave where the entitlement only becomes
unconditional in a period beyond 12 months are presented as non-current.
Movements in the number of ordinary shares on issue during the financial year is presented in the following table.
MMoovveemmeennttss iinn oorrddiinnaarryy sshhaarreess
BBaallaannccee aatt 11 JJuullyy
Issue of ordinary shares - exercising of employee and director share options
Issue of ordinary shares - employee performance rights
Issue of ordinary shares - institutional and share placement
Issue of ordinary shares - acquisition of EMS
OOrrddiinnaarryy sshhaarreess oonn iissssuuee aatt 3300 JJuunnee
22002200
337700,,220022,,778800
10,700,000
4,252,861
504,530,265
135,000,000
11,,002244,,668855,,990066
22001199
223300,,993333,,887755
5,600,000
335,571
133,333,334
-
337700,,220022,,778800
OOppttiioonnss
For the year ended 30 June 2020, the Company issued the following options:
•
•
•
22,500,000 (2019: nil) issued to Directors with an exercise price of $0.40 each that expire in December 2021.
26,250,000 (2019: nil) issued to Directors and investors with an exercise price of $0.15 each that expire in March
2022.
1,000,000 (2019: 2,750,000) issued to employees at $0.40 each that expire in April 2023
In addition, in February 2020, the Company issued the following options as a portion of the consideration paid for the
acquisition of EMS:
•
•
75,000,000 options at $0.20 expiring in Feb 2023.
20,000,000 options at $0.25 expiring in Feb 2023.
Each option allows the holder to receive 1 ordinary share of Envirosuite Limited upon paying the exercise price prior to the
expiration date. 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 22.
At the 2019 Annual General Meeting held on 25 November 2019, shareholders approved the grant of up to 15,000,000 options
under the China Employee ESOP. These options are yet to be granted to any named employees. The options are expected to
be granted progressively and otherwise not later than 3 years from the date of approval. These options will expire on 31 March
2022 and will only vest on $10,000,000 in revenue (audited in accordance with international financial reporting standards)
being received into the wholly owned China subsidiaries of Envirosuite Limited by 31 December 2021.
SShhaarree bbaasseedd ppaayymmeennttss
Executive performance rights issued to employees for the year ended 30 June 2020 totaled 5,405,266 (30 June 2019: Nil). Each
Performance Right entitles the holder to receive one ordinary share of Envirosuite Limited upon certain vesting conditions
being met.
CCaappiittaall rriisskk mmaannaaggeemmeenntt
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.
As at 30 June 2020, the Group had cash and cash equivalents of $24,385,000 and no borrowings other than lease liabilities
recognised under AASB 16. The Group also has standing credit facility arrangements with banks of $479,000 (2019: $284,000)
of which $181,000 was available as at 30 June 2020 (2019: $118,000). The Group generated an operating cash outflow of
$11.3m for the year ending 30 June 2020 (2019: $4.3m). The Group focuses on rolling cash flow forecasts to ensure that it has
sufficient funding available from cash and cash equivalents to fund operations.
51
Envirosuite Annual Report 2020Strategic Report / Directors’ Report / Financial Report
17.
Reserves and retained losses
RReesseerrvveess
FFoorreeiiggnn eexxcchhaannggee ttrraannssllaattiioonn rreesseerrvvee
Balance 1 July
Effects of foreign exchange translation
FFoorreeiiggnn eexxcchhaannggee ttrraannssllaattiioonn rreesseerrvvee –– bbaallaannccee 3300 JJuunnee
SShhaarree--bbaasseedd ppaayymmeennttss rreesseerrvvee
Balance 1 July
Option expense
Transfer to retained losses
SShhaarree bbaasseedd ppaayymmeenntt rreesseerrvvee –– bbaallaannccee 3300 JJuunnee
TToottaall RReesseerrvveess
RReettaaiinneedd LLoosssseess
Opening retained losses
Transfer from employee shares reserve
Net profit/(loss) for the year
BBaallaannccee 3300 JJuunnee
NNaattuurree aanndd ppuurrppoossee ooff rreesseerrvveess
22002200
$$’’000000
(183)
(464)
((664477))
315
12,515
(443)
1122,,338877
1111,,774400
22002200
$$’’000000
(23,863)
436
(18,236)
((4411,,666633))
22001199
$$’’000000
(62)
(121)
((118833))
313
27
(25)
331155
113322
22001199
$$’’000000
(17,947)
80
(5,996)
((2233,,886633))
Foreign currency translation reserve
Exchange differences arising on translation of foreign controlled entities are recognised in other comprehensive income and
accumulated in a separate reserve within equity. The cumulative amount is reclassified to profit or loss when the net
investment is disposed of.
Share based payments reserve
The share based payments reserve is used to recognise the grant date fair value of options and performance rights issued to
employees and directors but not exercised and issued.
DDiivviiddeennddss
The Group has not paid or declared any dividends during the period (2019: nil). Franking credits available for subsequent
financial years based on a tax rate of 27.5% amount to nil (2019: nil).
18.
Commitments and contingencies
LLeeaassee ccoommmmiittmmeennttss::
The Group leases various offices under non-cancellable operating leases expiring within one to five years. From 1 July 2019, the
group has recognised right-of-use assets for these leases, except for short-term and low-value leases.
OOppeerraattiinngg lleeaassee ccoommmmiittmmeennttss
Within one year
Later than one year but not later than five years
TToottaall
22002200
$$’’000000
22001199
$$’’000000
-
-
--
118
219
333377
CCoonnttiinnggeenncciieess
The Group has potential exposure to guarantees it has issued to third parties in relation to the performance and obligation of
controlled entities with respect to property lease rentals and customer contractual obligations amounting to $2,127,863 (30
June 2019: $276,609).
52
Envirosuite Annual Report 2020
22002200
$$’’000000
(183)
(464)
((664477))
315
12,515
(443)
1122,,338877
1111,,774400
22002200
$$’’000000
(23,863)
436
(18,236)
((4411,,666633))
22001199
$$’’000000
(62)
(121)
((118833))
313
27
(25)
331155
113322
22001199
$$’’000000
(17,947)
80
(5,996)
((2233,,886633))
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
The share based payments reserve is used to recognise the grant date fair value of options and performance rights issued to
employees and directors but not exercised and issued.
DDiivviiddeennddss
The Group has not paid or declared any dividends during the period (2019: nil). Franking credits available for subsequent
financial years based on a tax rate of 27.5% amount to nil (2019: nil).
17.
Reserves and retained losses
RReesseerrvveess
Balance 1 July
FFoorreeiiggnn eexxcchhaannggee ttrraannssllaattiioonn rreesseerrvvee
Effects of foreign exchange translation
FFoorreeiiggnn eexxcchhaannggee ttrraannssllaattiioonn rreesseerrvvee –– bbaallaannccee 3300 JJuunnee
SShhaarree--bbaasseedd ppaayymmeennttss rreesseerrvvee
Balance 1 July
Option expense
Transfer to retained losses
SShhaarree bbaasseedd ppaayymmeenntt rreesseerrvvee –– bbaallaannccee 3300 JJuunnee
TToottaall RReesseerrvveess
RReettaaiinneedd LLoosssseess
Opening retained losses
Transfer from employee shares reserve
Net profit/(loss) for the year
BBaallaannccee 3300 JJuunnee
NNaattuurree aanndd ppuurrppoossee ooff rreesseerrvveess
Foreign currency translation reserve
investment is disposed of.
Share based payments reserve
18.
Commitments and contingencies
LLeeaassee ccoommmmiittmmeennttss::
Later than one year but not later than five years
OOppeerraattiinngg lleeaassee ccoommmmiittmmeennttss
Within one year
TToottaall
CCoonnttiinnggeenncciieess
June 2019: $276,609).
19.
Related party disclosures
KKeeyy mmaannaaggeemmeenntt ppeerrssoonnnneell
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 2020.
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
TToottaall KKMMPP ccoommppeennssaattiioonn
PPaarreenntt eennttiittyy
The parent entity within the Group is Envirosuite Limited
SSuubbssiiddiiaarriieess
EEnnttiittyy NNaammee
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.(1)
Beijing Enirosuite Environmental Science & Technology(1)
Hengli Ruiyan Environmental Engineering Co. Ltd(1)
AAccqquuiirreedd EEMMSS EEnnttiittiieess
Envirosuite Holdings No 2 Pty Ltd(2)
Envirosuite Australia No 2 Pty Ltd(3)
EMS Bruel & Kjaer Pty Ltd
EMS Bruel & Kjaer Inc
EMS Bruel & Kjaer Iberica S.A.
Envirosuite Denmark Aps(4)
EMS Bruel & Kjaer BV
Envirosuite UK Ltd(5)
EMS Bruel & Kjaer Korea Ltd
The Group leases various offices under non-cancellable operating leases expiring within one to five years. From 1 July 2019, the
group has recognised right-of-use assets for these leases, except for short-term and low-value leases.
EMS Bruel & Kjaer Taiwan Ltd
EMS Bruel & Kjaer Environmental Monitoring (Beijing) Ltd(1)
22002200
$$’’000000
1,071
44
-
2,260
33,,337755
22001199
$$’’000000
1,002
46
-
76
11,,112244
CCoouunnttrryy ooff
IInnccoorrppoorraattiioonn
3300 JJuunnee 22002200
%%
3300 JJuunnee 22001199
%%
Australia
Australia
USA
Spain
Canada
Chile
Colombia
China
China
Australia
Australia
Australia
USA
Spain
Denmark
Netherlands
United Kingdom
South Korea
Taiwan
China
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
-
-
-
-
-
-
-
-
-
-
The Group has potential exposure to guarantees it has issued to third parties in relation to the performance and obligation of
controlled entities with respect to property lease rentals and customer contractual obligations amounting to $2,127,863 (30
22002200
$$’’000000
22001199
$$’’000000
-
-
--
118
219
333377
(1)
(2)
(3)
(4)
(5)
These subsidiaries have a financial year-end of 31 December as required by local regulations. The Group has received
an exemption from ASIC from aligning the financial year end of these subsidiaries with that of the Envirosuite Limited,
being 30 June.
Formerly EMS Bruel & Kjaer Holdings Pty Ltd
Formerly EMS Bruel & Kjaer (Australia) Pty Ltd
Formerly EMS Bruel & Kjaer Denmark Aps
Formerly EMS Bruel & Kjaer UK Ltd
TTrraannssaaccttiioonnss wwiitthh ootthheerr rreellaatteedd ppaarrttiieess
There were no other transactions with related parties during the financial year. In the prior year, the Group paid $107k to
Solition Creative, a company controlled by Alex Ormerod, for Creative design services. Robin Omerod resigned from the
Board during the prior financial year and, therefore, transactions with Solition Creative are no longer deemed to be related
party transactions.
53
Envirosuite Annual Report 2020Strategic Report / Directors’ Report / Financial Report
20.
Business combinations
AAccqquuiissiittiioonn ooff EEMMSS BBrruueell && KKjjaaeerr HHoollddiinnggss PPttyy LLttdd
On 28 February 2020, the group acquired all the share capital of EMS Bruel & Kjaer Holdings Pty Ltd ("EMS") from
Macquaie Corporate Holdings Pty Ltd (“Macquarie”), Spectris Group Holdings Limited (“SGHL”) and minority shareholders.
EMS is a leading global environmental technology group, headquartered in Melbourne, with over 400 customers in 40
countries and approximately 200 staff. EMS specialises in environmental noise and vibration monitoring and is the
recognised market leader in addressing airport noise globally. The acquisition is part of the Group's overall strategy to
expand globally its environmental software operations in the technology industry. The acquistion consisted of a total
consideration pursuant to a share sale agreement of:
•
•
•
•
$70,000,000 cash, paid net of EMS debt and a working capital adjustment
80,000,000 new ordinary shares in Company
55,000,000 new ordinary shares in the Company pursuant to a referral agreement entered into with Macquarie
95,000,000 options over ordinary shares in the Company of which 75,000,000 have an exercise price of $0.20 per
share and 20,000,000 have an exercise price of $0.25 per share and an exercise period of three years from the
date of grant
All consideration shares issued per the share sale and referral agreement are subject to a twelve-month escrow period from
the acqusition date. Any shares issued pursuant to the exercise of consideration options will be escrowed for the balance of
the twelve months from the date of option grant.
AAccqquuiissiittiioonn BBaallaannccee SShheeeett
PPuurrcchhaassee ccoonnssiiddeerraattiioonn
Cash paid
Working capital adjustment to be paid
Shares issued at fair value
Options issued at fair value
Less: cash acquired
PPuurrcchhaassee ccoonnssiiddeerraattiioonn,, nneett
FFaaiirr vvaalluuee ooff iiddeennttiiffiiaabbllee nneett aasssseettss aaccqquuiirreedd
Trade and other receivables
Inventory
Property, plant and equipment
Right of use assets
Intangible assets
Deferred tax assets
Other assets
Trade and other payables
Revenue in advance
Lease liabilities
Employee benefits
Deferred tax liabilities
TToottaall ffaaiirr vvaalluuee ooff iiddeennttiiffiiaabbllee nneett aasssseettss aaccqquuiirreedd
RReessiidduuaall rreepprreesseennttiinngg GGooooddwwiillll
22002200
$$’’000000
70,000
4,181
23,625
9,313
(4,941)
110022,,117788
13,815
3,324
3,141
3,291
13,960
38
520
(9,926)
(2,633)
(3,666)
(4,304)
(4,280)
1133,,228800
8888,,889988
AAccqquuiissiittiioonn ooff BBeeiijjiinngg HHeenngglliirruuiiyyuuaann EEnnvviirroonnmmeennttaall EEnnggiinneeeerriinngg CCoo.. LLttdd
On 10 October 2019, the Group established a wholly own subsidiary in China called Beijing Envirosuite Science and
Technology Co. Ltd. On 25 December 2019, the Group, via its subsidiary Beijing Envirosuite Science and Technology Co. Ltd,
acquired 100% of the issued capital of Beijing Hengliruiyuan Environmental Engineering Co. Ltd (subsequently renamed
Hengli Ruiyan Environmental Engineering Co. Ltd), an environmental engineering company. Through acquiring 100% of the
issued capital of Beijing Hengliruiyuan Environmental Engineering Co. Ltd. ((subsequently renamed Hengli Ruiyan
Environmental Engineering Co. Ltd)), the Group has obtained control of the company. The acquisition is part of the Group's
strategy to accelerate its expansion into the Chinese market.
54
Envirosuite Annual Report 2020
20.
Business combinations
AAccqquuiissiittiioonn ooff EEMMSS BBrruueell && KKjjaaeerr HHoollddiinnggss PPttyy LLttdd
On 28 February 2020, the group acquired all the share capital of EMS Bruel & Kjaer Holdings Pty Ltd ("EMS") from
Macquaie Corporate Holdings Pty Ltd (“Macquarie”), Spectris Group Holdings Limited (“SGHL”) and minority shareholders.
EMS is a leading global environmental technology group, headquartered in Melbourne, with over 400 customers in 40
countries and approximately 200 staff. EMS specialises in environmental noise and vibration monitoring and is the
recognised market leader in addressing airport noise globally. The acquisition is part of the Group's overall strategy to
expand globally its environmental software operations in the technology industry. The acquistion consisted of a total
consideration pursuant to a share sale agreement of:
$70,000,000 cash, paid net of EMS debt and a working capital adjustment
80,000,000 new ordinary shares in Company
55,000,000 new ordinary shares in the Company pursuant to a referral agreement entered into with Macquarie
•
•
•
•
date of grant
All consideration shares issued per the share sale and referral agreement are subject to a twelve-month escrow period from
the acqusition date. Any shares issued pursuant to the exercise of consideration options will be escrowed for the balance of
the twelve months from the date of option grant.
Working capital adjustment to be paid
AAccqquuiissiittiioonn BBaallaannccee SShheeeett
PPuurrcchhaassee ccoonnssiiddeerraattiioonn
Cash paid
Shares issued at fair value
Options issued at fair value
Less: cash acquired
PPuurrcchhaassee ccoonnssiiddeerraattiioonn,, nneett
FFaaiirr vvaalluuee ooff iiddeennttiiffiiaabbllee nneett aasssseettss aaccqquuiirreedd
Trade and other receivables
Inventory
Property, plant and equipment
Right of use assets
Intangible assets
Deferred tax assets
Other assets
Trade and other payables
Revenue in advance
Lease liabilities
Employee benefits
Deferred tax liabilities
RReessiidduuaall rreepprreesseennttiinngg GGooooddwwiillll
TToottaall ffaaiirr vvaalluuee ooff iiddeennttiiffiiaabbllee nneett aasssseettss aaccqquuiirreedd
22002200
$$’’000000
70,000
4,181
23,625
9,313
(4,941)
110022,,117788
13,815
3,324
3,141
3,291
13,960
38
520
(9,926)
(2,633)
(3,666)
(4,304)
(4,280)
1133,,228800
8888,,889988
AAccqquuiissiittiioonn ooff BBeeiijjiinngg HHeenngglliirruuiiyyuuaann EEnnvviirroonnmmeennttaall EEnnggiinneeeerriinngg CCoo.. LLttdd
On 10 October 2019, the Group established a wholly own subsidiary in China called Beijing Envirosuite Science and
Technology Co. Ltd. On 25 December 2019, the Group, via its subsidiary Beijing Envirosuite Science and Technology Co. Ltd,
acquired 100% of the issued capital of Beijing Hengliruiyuan Environmental Engineering Co. Ltd (subsequently renamed
Hengli Ruiyan Environmental Engineering Co. Ltd), an environmental engineering company. Through acquiring 100% of the
issued capital of Beijing Hengliruiyuan Environmental Engineering Co. Ltd. ((subsequently renamed Hengli Ruiyan
Environmental Engineering Co. Ltd)), the Group has obtained control of the company. The acquisition is part of the Group's
strategy to accelerate its expansion into the Chinese market.
20.
Business combinations (continued)
AAccqquuiissiittiioonn BBaallaannccee SShheeeett
PPuurrcchhaassee ccoonnssiiddeerraattiioonn
Cash paid
Less: cash acquired
PPuurrcchhaassee ccoonnssiiddeerraattiioonn,, nneett
FFaaiirr vvaalluuee ooff iiddeennttiiffiiaabbllee nneett aasssseettss aaccqquuiirreedd
Trade and other receivables
TToottaall ffaaiirr vvaalluuee ooff iiddeennttiiffiiaabbllee nneett aasssseettss aaccqquuiirreedd
95,000,000 options over ordinary shares in the Company of which 75,000,000 have an exercise price of $0.20 per
share and 20,000,000 have an exercise price of $0.25 per share and an exercise period of three years from the
RReessiidduuaall rreepprreesseennttiinngg ggooooddwwiillll
21.
Cash flow statement reconciliation
RReeccoonncciilliiaattiioonn ooff nneett pprrooffiitt // ((lloossss)) aafftteerr ttaaxx ttoo nneett ccaasshh ffllooww ffrroomm ooppeerraattiioonnss
PPrrooffiitt//((lloossss)) aafftteerr ttaaxx
Add back: Depreciation and amortisation
Add back: Finance expense / (income)
Add back: Foreign exchange loss / (gain)
Add back: Non-cash share based payments
SSuubb--ttoottaall
CChhaannggeess iinn ooppeerraattiinngg aasssseettss aanndd lliiaabbiilliittiieess
(Increase) / decrease in trade and other debtors
(Increase) / decrease in inventories
(Increase) / decrease in other assets
(Increase) / decrease in deferred tax
Increase / (decrease) in trade creditors
Increase / (decrease) in other liabilities
Increase / (decrease) in provision for income taxes payable
Increase / (decrease) in other provisions
NNeett ccaasshh iinnffllooww // ((oouuttffllooww)) ffrroomm ooppeerraattiinngg aaccttiivviittiieess
22002200
$$’’000000
461
(216)
224455
101
110011
114444
22002200
$$’’000000
((1188,,223366))
3,241
15
155
3,154
((1111,,667711))
(1,986)
550
(26)
(125)
717
(158)
-
1,440
((1111,,225599))
22001199
$$’’000000
((55,,999966))
1,217
(23)
(101)
54
((44,,884499))
(345)
(219)
(6)
100
904
(38)
2
136
((44,,331155))
Cash flow from operating activities excludes cash paid to suppliers and employees that are capitalised as internally
developed software within intangible assets. These cash flows are included as cash paid for intangible assets.
NNoonn--ccaasshh ttrraannssaaccttiioonnss
Refer to Note 20 for shares issued in the acquisition of EMS during the financial year.
55
Envirosuite Annual Report 2020Strategic Report / Directors’ Report / Financial Report
22.
Share based payments
The Group issued options and performance rights to employees and Directors as compensation for services provided. As part
of the acquisition of EMS in February 2020, the Group also issued shares and options as partial consideration for the
acquisition as disclosed in Note 20.
PPeerrffoorrmmaannccee RRiigghhttss
The Company issues performance rights to employees that provide them with the right to acquire shares for no
consideration upon certain vesting conditions being met, including remaining employed with the Company, and/or share
price performance. There was 5,405,266 Performance Rights issued during the year (2019: 5,997,180).
EEmmppllooyyeeee sshhaarree ooppttiioonn ppllaann aanndd sscchheemmee
The establishment of the Employee Share Option Plan was approved by the Board prior to the IPO of Envirosuite Limited
(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.
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.
OOppttiioonnss oouuttssttaannddiinngg aass aatt 3300 JJuunnee 22001188
Granted
Forfeited
Exercised
Expired
OOppttiioonnss oouuttssttaannddiinngg aass aatt 3300 JJuunnee 22001199
Granted
Forefeited
Exercised
Expired
OOppttiioonnss oouuttssttaannddiinngg aass aatt 3300 JJuunnee 22002200
NNuummbbeerr ooff ooppttiioonnss
WWeeiigghhtteedd aavveerraaggee
eexxeerrcciissee pprriiccee
2277,,118833,,333333
2,750,000
-
(5,600,000)
(9,000,000)
1155,,333333,,333333
144,750,000
(750,000)
(10,700,000)
(800,000)
114477,,883333,,333333
00..1111
0.10
-
0.04
0.15
00..1111
0.23
0.11
0.11
0.09
00..2233
As at 30 June 2020, there were 121,583,333 options (2019: 14,333,333) that were exercisable at a weighted average price of
$0.25 per share (2019: $0.11 per share).
23.
Earnings per share
In calculating earnings per share, there were no adjustments made to net loss after tax or comprehensive loss for the period.
WWeeiigghhtteedd aavveerraaggee nnuummbbeerr ooff sshhaarreess uusseedd iinn ddeennoommiinnaattoorr
BBaassiicc eeaarrnniinnggss ppeerr sshhaarree
Effect of dilution from:
Share options issued
DDiilluutteedd eeaarrnniinnggss ppeerr sshhaarree
22002200
nnuummbbeerr
22001199
nnuummbbeerr
661199,,889966,,779922
337700,,220022,,778800
-
661199,,889966,,779922
14,195,572
335566,,000077,,220088
56
Envirosuite Annual Report 2020
The Group issued options and performance rights to employees and Directors as compensation for services provided. As part
of the acquisition of EMS in February 2020, the Group also issued shares and options as partial consideration for the
acquisition as disclosed in Note 20.
PPeerrffoorrmmaannccee RRiigghhttss
The Company issues performance rights to employees that provide them with the right to acquire shares for no
consideration upon certain vesting conditions being met, including remaining employed with the Company, and/or share
price performance. There was 5,405,266 Performance Rights issued during the year (2019: 5,997,180).
EEmmppllooyyeeee sshhaarree ooppttiioonn ppllaann aanndd sscchheemmee
The establishment of the Employee Share Option Plan was approved by the Board prior to the IPO of Envirosuite Limited
(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.
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.
OOppttiioonnss oouuttssttaannddiinngg aass aatt 3300 JJuunnee 22001188
OOppttiioonnss oouuttssttaannddiinngg aass aatt 3300 JJuunnee 22001199
Granted
Forfeited
Exercised
Expired
Granted
Forefeited
Exercised
Expired
OOppttiioonnss oouuttssttaannddiinngg aass aatt 3300 JJuunnee 22002200
$0.25 per share (2019: $0.11 per share).
23.
Earnings per share
BBaassiicc eeaarrnniinnggss ppeerr sshhaarree
Effect of dilution from:
Share options issued
DDiilluutteedd eeaarrnniinnggss ppeerr sshhaarree
NNuummbbeerr ooff ooppttiioonnss
eexxeerrcciissee pprriiccee
WWeeiigghhtteedd aavveerraaggee
2277,,118833,,333333
2,750,000
-
(5,600,000)
(9,000,000)
1155,,333333,,333333
144,750,000
(750,000)
(10,700,000)
(800,000)
114477,,883333,,333333
00..1111
0.10
-
0.04
0.15
00..1111
0.23
0.11
0.11
0.09
00..2233
22002200
nnuummbbeerr
22001199
nnuummbbeerr
661199,,889966,,779922
337700,,220022,,778800
-
14,195,572
661199,,889966,,779922
335566,,000077,,220088
22.
Share based payments
23.
Earnings per share (continued)
There are 147,833,333 in share options issued but not included in diluted earnings per share as these would have an
antidilutive effect on earnings per share. These potential ordinary shares are antidilutive as their conversion to ordinary
shares would decrease loss per share. If these share options were included in the calculation of diluted earnings per share,
the weighted average number of shares used in the denominator would be 767,730,125.
24.
Subsequent events
On 17th August 2020, the Company acquired 100% of water modelling R&D technology software company AqMB Holdings
Pty Ltd for a total consideration of A$1.35m. No other matters or circumstances have arisen since the end of the financial
year that significantly affected, or could significantly affect, the operations of the consolidated Group, the results of those
operations, or the state of affairs of the consolidated Group in future financial years.
25.
Parent entity financial information
PPaarreenntt eennttiittyy ffiinnaanncciiaall ssttaatteemmeennttss
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. Non-current assets includes investment in subsidiaries which are
accounted for at cost value less impairment.
SSttaatteemmeenntt ooff FFiinnaanncciiaall PPoossiittiioonn
AAsssseettss
Current assets
Non-current assets
TToottaall AAsssseettss
LLiiaabbiilliittiieess
Current liabilities
Non-current liabilities
TToottaall LLiiaabbiilliittiieess
EEqquuiittyy
Issued capital
Reserves
Retained losses
TToottaall EEqquuiittyy
As at 30 June 2020, there were 121,583,333 options (2019: 14,333,333) that were exercisable at a weighted average price of
IInnccoommee SSttaatteemmeenntt aanndd SSttaatteemmeenntt ooff CCoommpprreehheennssiivvee IInnccoommee
Profit / (loss) after tax
Total comprehensive profit / (loss)
In calculating earnings per share, there were no adjustments made to net loss after tax or comprehensive loss for the period.
WWeeiigghhtteedd aavveerraaggee nnuummbbeerr ooff sshhaarreess uusseedd iinn ddeennoommiinnaattoorr
22002200
$$’’000000
13,448
142,487
115555,,993355
4,639
-
44,,663399
155,537
12,388
(16,629)
115511,,229966
22002200
$$’’000000
(5,095)
(5,095)
22001199
$$’’000000
183
24,349
2244,,553322
134
-
113344
36,060
315
(11,977)
2244,,339988
22001199
$$’’000000
(231)
(231)
57
Envirosuite Annual Report 2020Strategic Report / Directors’ Report / Financial Report
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 27 to 65 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 2020 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
DDaavviidd JJoohhnnssttoonnee,, CChhaaiirrmmaann
27 August 2020
58
Envirosuite Annual Report 2020
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 27 to 65 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 2020 and of the
performance for the year ended on that date of the Consolidated Group; and
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF ENVIROSUITE LIMITED
(b)
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due
Report on the Financial Report
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
Opinion
DDaavviidd JJoohhnnssttoonnee,, CChhaaiirrmmaann
27 August 2020
We have audited the accompanying financial report of Envirosuite Limited (the company), which comprises
the consolidated statement of financial position as at 30 June 2020, the consolidated income statement and
statement of 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 2020
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. Our responsibilities under those
standards are further described in the auditor’s responsibilities for the audit of the financial report section of
our report.
We 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 auditor independence requirements of
the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence
Standards) (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.
59
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 each matter below, our description of how our audit addressed these matters
is provided in that context.
1. Carrying amount of intangible assets with finite useful lives
Why significant
How our audit addressed the key audit matter
As at 30 June 2020 the carrying value of intangible
assets with finite useful lives was $19,555,000 (2019:
$5,199,000), as disclosed in Note 13.
The consolidated entity’s accounting policy in respect
of intangible assets with finite useful lives is outlined in
Note 1.
The carrying amount of intangible assets with finite
useful lives is a key audit matter due to:
•
•
the significant audit effort required to test the
carrying amount of intangible assets with finite
useful lives; and
the level of judgement applied in evaluating
management’s assessment of impairment.
As outlined in Notes 1 and 13, management assessed
the carrying amount of intangible assets with finite
useful lives 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 with finite
useful lives, 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 with finite useful lives 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 impact of the COVID-19
pandemic on all key assumptions
assessing the appropriateness of the related
disclosures in Note 13.
60
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 each matter below, our description of how our audit addressed these matters
is provided in that context.
1. Carrying amount of intangible assets with finite useful lives
Why significant
How our audit addressed the key audit matter
As at 30 June 2020 the carrying value of intangible
assets with finite useful lives was $19,555,000 (2019:
$5,199,000), as disclosed in Note 13.
The consolidated entity’s accounting policy in respect
of intangible assets with finite useful lives is outlined in
Note 1.
The carrying amount of intangible assets with finite
useful lives is a key audit matter due to:
•
•
the significant audit effort required to test the
carrying amount of intangible assets with finite
useful lives; and
the level of judgement applied in evaluating
management’s assessment of impairment.
As outlined in Notes 1 and 13, management assessed
the carrying amount of intangible assets with finite
useful lives 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 with finite
useful lives, 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 with finite useful lives 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 impact of the COVID-19
pandemic on all key assumptions
•
assessing the appropriateness of the related
disclosures in Note 13.
2. Business combination – including allocation of goodwill
Why significant
How our audit addressed the key audit matter
During the year, the consolidated entity acquired the
shares of EMS Bruel & Kjaer Holdings Pty Ltd.
In assessing this key audit matter, we involved senior
audit team members who understand the industry.
As disclosed in Note 13 & 20, as part of the business
combination transaction, the consolidated entity
allocated the purchase price, net of cash $102,178,000
to the following balances:
• Provisional goodwill: $88,898,000
• Other intangible assets: $13,960,000
•
Tangible assets: $3,508,000
• Deferred tax liability: $(4,188,000)
Provisional goodwill allocated in the purchase
represents 56% of total assets for the consolidated
entity.
Business combination – including allocation of goodwill
is a key audit matter due to:
•
•
•
the material size of provisional goodwill
recorded;
the significant audit effort required to test the
consolidated entity’s acquisition of EMS Bruel
& Kjaer Holdings Pty during the year; and
the level of judgement applied in evaluating
management’s assessment of provisional
goodwill allocated in the purchase.
Our audit procedures included, amongst others:
•
•
•
•
•
•
•
•
•
review of purchase documentation including
contracts and share sale agreements;
obtaining a detailed understanding of the
acquired business including reviewing due
diligence procedures and reports;
assessing the appropriateness of the external
experts purchase price allocation report,
including the valuation methodology of the
assets acquired;
assessing the expertise and experience of the
external expert engaged by management;
reviewing management’s fair value assessment
of the assets and liabilities acquired;
reviewing management’s assessment of the fair
value of the consideration paid, including
reviewing the fair value of options granted as
part of the consideration paid;
reviewing management’s assessment of the
identifiable intangible assets identified as part of
the acquisition and the useful lives of assets
identified;
assessment of management’s goodwill
allocation as part of each practice acquisition;
and
assessing the appropriateness of the
disclosures in relation to both the business
combination and intangible assets acquired
included in Notes 1, 13 & 20.
Other Information
Those charged with governance are responsible for the other information in the annual report. Other
information is financial and non-financial information in the annual report of the consolidated entity for the
year ended 30 June 2020, 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, accordingly, the auditor does
not and will not express an audit opinion or any form of assurance conclusion thereon, with the exception of
the remuneration report.
61
In connection with our audit of the financial report, our responsibility is to read the other information. In doing
so, we 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.
We are required to report if we conclude that there is a material misstatement of this other information in the
financial report and based on the work we have performed on the other information that we obtained prior
the date of this auditor’s report we have nothing to report.
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 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 the
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.
Auditor’s Responsibilities for the Audit of the Financial Report
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. We also:
•
Identify and assess the risks of material misstatement of the financial report, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. 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.
• Obtain an understanding of internal control relevant to the audit 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 consolidated entity’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the Directors.
• 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.
62
In connection with our audit of the financial report, our responsibility is to read the other information. In doing
so, we 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.
We are required to report if we conclude that there is a material misstatement of this other information in the
financial report and based on the work we have performed on the other information that we obtained prior
the date of this auditor’s report we have nothing to report.
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 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 the
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.
Auditor’s Responsibilities for the Audit of the Financial Report
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.
• 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.
• 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 consolidated entity financial report.
We are responsible for the direction, supervision and performance of the consolidated entity up 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.
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, actions taken to eliminate
threats or safeguards applied.
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 the 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 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
Opinion
As part of an audit in accordance with Australian Auditing Standards, we exercise professional judgement
and maintain professional scepticism throughout the audit. We also:
We have audited the remuneration report included in the directors’ report for the year ended Tuesday, 30
June 2020.
•
Identify and assess the risks of material misstatement of the financial report, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. 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.
• Obtain an understanding of internal control relevant to the audit 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 consolidated entity’s internal control.
In our opinion, the remuneration report of Envirosuite Limited for the year ended 30 June 2020, complies
with section 300A of the Corporations Act 2001.
Responsibilities
The Directors of the company are responsible for the preparation and presentation of the remuneration
report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an
opinion on the remuneration report, based on our audit conducted in accordance with Australian Auditing
Standards.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the Directors.
PKF BRISBANE AUDIT
• 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.
SHAUN LINDEMANN
PARTNER
27 AUGUST 2020
BRISBANE, AUSTRALIA
63
Shareholder Information
Shareholder information
The shareholder information set out below was applicable as at 18 August 2020
1. Shareholding
DDiissttrriibbuuttiioonn ooff eeqquuiittyy sseeccuurriittiieess
Analysis of numbers of equity security holders by size of holding:
SSiizzee ooff hhoollddiinngg
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
SShhaarreess
OOppttiioonnss
60
404
459
1,501
932
33,,335566
-
-
-
-
19
1199
The number of shareholdings held in less than marketable parcels
286,264
SSuubbssttaannttiiaall hhoollddeerrss
Substantial holders in the Company are set out below:
OOrrddiinnaarryy sshhaarreess
National Nominees Limited
Macquarie Corporate Holdings
VVoottiinngg RRiigghhttss
The voting rights attaching to each class of equity securities are set out below
NNuummbbeerr hheelldd
PPeerrcceennttaaggee
87,131,875
80,000,000
8.50%
7.81%
OOrrddiinnaarryy sshhaarreess
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.
OOppttiioonnss
Options carry the standard voting rights available to ordinary shareholders when converted to ordinary shares.
64
Envirosuite Annual Report 2020
The shareholder information set out below was applicable as at 18 August 2020
Shareholder information
1. Shareholding
DDiissttrriibbuuttiioonn ooff eeqquuiittyy sseeccuurriittiieess
Analysis of numbers of equity security holders by size of holding:
SSiizzee ooff hhoollddiinngg
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
SShhaarreess
OOppttiioonnss
60
404
459
1,501
932
33,,335566
-
-
-
-
19
1199
NNuummbbeerr hheelldd
PPeerrcceennttaaggee
87,131,875
80,000,000
8.50%
7.81%
The number of shareholdings held in less than marketable parcels
286,264
SSuubbssttaannttiiaall hhoollddeerrss
Substantial holders in the Company are set out below:
OOrrddiinnaarryy sshhaarreess
National Nominees Limited
Macquarie Corporate Holdings
VVoottiinngg RRiigghhttss
OOrrddiinnaarryy sshhaarreess
OOppttiioonnss
The voting rights attaching to each class of equity securities are set out below
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 carry the standard voting rights available to ordinary shareholders when converted to ordinary shares.
1. Shareholding (continued)
TTwweennttyy llaarrggeesstt qquuootteedd eeqquuiittyy sseeccuurriittyy hhoollddeerrss
The names of the twenty largest holders of quoted equity securities are listed below:
NNaammee
National Nominees Limited
Macquarie Corporate Holdings
HSBC Custody Nominees
Citicorp Nominees Pty Limited
BNP Paribas Noms Pty Ltd
Mr Robin Ormerod & Ms Kristin Zeise
Rubi Holdings Pty Ltd
Coalwell Pty Limited
The Adams McLean
Mr Zhigang Zhang
Fifty Second Celebration Pty
Thirty-Fifth Celebration Pty
Mr Ningping Ma
Mr Robin Ormerod
Bungeeltap Pty Ltd
Fordholm Consultants Pty Ltd
Spectris Group Holdings Ltd
Mr Peter White
Jasforce Pty Ltd
Robinson House Pty Ltd
UUnnqquuootteedd eeqquuiittyy sseeccuurriittiieess
Envirosuite Limited unlisted options
NNuummbbeerr hheelldd
PPeerrcceennttaaggee
87,131,875
80,000,000
35,819,347
32,304,095
25,973,285
25,413,549
21,200,000
20,700,000
20,250,000
20,146,341
19,000,000
15,241,171
14,946,341
13,229,342
12,828,279
10,000,000
10,000,000
7,000,000
6,918,751
5,759,800
8.50%
7.81%
3.50%
3.15%
2.53%
2.48%
2.07%
2.02%
1.98%
1.97%
1.85%
1.49%
1.46%
1.29%
1.25%
0.98%
0.98%
0.68%
0.68%
0.56%
448833,,886622,,117766
4477..2222%%
NNuummbbeerr hheelldd
148,583,333
65
Envirosuite Annual Report 2020Strategic Report / Directors’ Report / Financial Report
Corporate Directory
Envirosuite Limited
ABN: 42 122 919 948
Board of Directors
Peter White
David Johnstone
Chief Executive Officer
Chairman
Hugh Robertson
Director
Zhigang Zhang
Director
Company Secretary
Rachel Ormiston
Registered office and
principal place of business
Suite 1, Level 10, 157 Walker St
North Sydney NSW 2060
Phone: 02 8484 5819
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