Annual Report 2011
30 June 2011
For personal use only
EGH LIMITED and controlled entities
Table of Contents
CONTENTS
Chairman’s Review
Directors’ Report
Auditors’ Independence Declaration
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Cash Flows
Consolidated Statement of Changes in Equity
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Corporate Directory
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EGH ANNUAL REPORT 2011
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EGH LIMITED and controlled entities
Chairman’s Review
On behalf of Directors, I present the Annual Report of
Eureka Group Holdings Limited (the Group or Company)
for the year ended 30 June 2011.
-
The Group reported EBITDA for FY 2011 of negative
$48k (FY 2010: negative $510k) and a net loss after tax
for FY 2011 of $1,051k (FY 2010: $1,061k). This is a
disappointing result after entering the year on a positive
note with the acquisition of Eureka Care Communities
Pty Ltd and its management team.
the disappointing
Despite
in
restructuring terms has achieved significant milestones,
particularly in the first quarter of FY 2012. Details of
these milestones, which are expected to have a positive
impact during FY 2012 are as follows:
the Group,
result,
- For July and August 2011, the Group has positive
EBITDA despite incurring restructuring costs. As at
the end of September 2011,
the majority of
restructuring costs have been absorbed by the
business. The Group is now virtually in its merged
form and is in a management and operational sense
performing on a substantially improved basis.
- Various operating divisions of the Group have
historically been operated as stand alone
businesses. Each had its own accounting system
and
team. The various systems were not
compatible, leading to administrative inefficiency.
The trading entities, with the exception of Village
Care Pty Ltd have now been merged and have one
system and team. Through these changes, the
Group is able to apportion more resources towards
village manager support and significantly less on
administrative
management
duplications. The transition has been a complex and
time
of
redundancies and contract break costs, significant
improvements in operating performance are being
seen post July 1 and expected throughout FY 2012.
consuming,
excluding
staffing
costs
and
but
- The Board engaged leading management rights
agent Resort Brokers Pty Ltd to review the valuation
methodology of the carrying values of various
management rights held by the Group. This has
provided the Group with a framework to value the
management rights it holds. As a result, the Group
took a provision for impairment of some of the rights
through the profit and loss. The review undertaken
by Resort Brokers indicates that on an overall basis
the management rights owned by the Group are
valued at around $1.7m higher than they are
recorded in the consolidated balance sheet. Under
AASB 138, the Group is unable to revalue these
rights. Accordingly, in our annual report and in the
future, we will be providing a note to the accounts
setting out our belief of
the
management
valuation
methodology was also used, albeit on a very
conservative basis, to determine the identifiable
intangible assets (management rights contracts)
from the acquisition of Eureka Care Communities
Pty Ltd. The valuation methodology is predicated
primarily upon the profitability and remaining term of
each contract.
the value of
rights
held.
The
In the latter part of FY 2011, the Group undertook a
review of all management contracts, service
contracts, leases and general expenses. The Group
also completed (with the exception of one major
client) the changeover to villages being managed
on an independent contractor basis. It should be
noted that occupancy in villages managed on an
independent contractor basis currently average
approximately 92%, while villages managed on an
employees basis currently average approximately
78%. The Group’s
is
approximately 86%.
occupancy
overall
Furthermore, a number of service contracts have
been terminated and a number of leases terminated
/ renegotiated where they were unprofitable for the
Group. A review of charges to all tenants has been
undertaken to ensure no over / under charging. The
merger of the divisions into one office has also led
to isolation of any extraneous costs that whilst
minor individually can in aggregate sum to a
material amount throughout the course of a financial
year.
Directors consider the Group to now be very lean,
but with more focus on village manager support and
significantly less corporate overhead. We feel these
changes give the Group the opportunity to return to
profitability after a number of false dawns.
- At
the upcoming Annual General Meeting,
resolutions will be put to shareholders to approve
the secured and unsecured
certain
convertible note issue previously advised to the
market. The Group awaits
final
subscription monies to complete this transaction.
receipt of
terms of
Other Notable Events
The three month restructure mentioned above has been
led by Greg Rekers, Kerry Potter and Sharon
Alderwick. The attention to detail, determination and
effort put in by the team has enabled the various difficult
processes being undertaken in a period of significant
change. The efforts of this team to date have been
exceptional. To this end, Mr Rekers and Mr Potter, who
have been consulting to the Group, have been appointed
Executive Director
and Director of Operations
respectively. Sharon Alderwick has been appointed
General Manager. These appointments are effective 1
September 2011 and relate to SCV Manager Pty Ltd –
the main operating entity of the Group.
On 10 August 2010, the Company held a general
meeting to vote the following:
-
-
-
-
to change the name of the Company in September
2010 to Eureka Group Holdings Limited and the
Company’s ASX code to EGH.
to refresh the Company’s new share issuance cap
(per listing rule 7.1).
to make share-based payments to Andrew Kemp
and Pamela Pointon.
to raise capital in the form of ordinary shares in the
Company and convertible notes from sophisticated
EGH ANNUAL REPORT 2010
3
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EGH LIMITED and controlled entities
Chairman’s Review
shareholders
subordinated loans; and
for working capital and
to repay
-
to consolidate the ordinary shares of the Company
on the basis that each 10 ordinary shares be
consolidated into one ordinary share.
Early in the FY 2011, EGH acquired Eureka Care
Communities Pty Ltd. This provided a number of quality
management contracts to the Group. These contracts
remain an
the business despite
management change and divisional mergers. The
contracts have performed
in accordance with
expectations.
important part of
The Group entered into a memorandum of understanding
with Bloomer Constructions Qld Pty Ltd (BCQ). This
transaction remains on foot with the Group and BCQ
awaiting tax advice from third parties in respect of the
merger.
National Australia Bank extended the Group’s banking
facilities to 31 March 2012. During FY 2011, the Group
reduced bank debt to $3,999k from $4,429k. Further
reductions to this debt are being undertaken through sale
of assets held for sale.
Outlook
The board and management believe that the internal
merger of the individual divisions will have a significant
positive effect on the business on a going forward
basis. With new management in place, the Group has
received its first three applications for appointment as
franchisee / sub licensee. The first of these is working
through a 90 day trial period to settle the terms of the
individual licenses. Further, of the villages held for sale,
one is under contract, and we have received offers for
two others on terms acceptable to the board. These
asset sales will, along with improved trading, significantly
improve
the overall position of the company. The
strengthening of the village manager network in the
Group, along with the significant lowering of corporate
overhead is expected to result in successful FY 2012.
Lachlan McIntosh
Chairman
EGH ANNUAL REPORT 2011
4
For personal use only
EGH LIMITED and controlled entities
Directors’ Report
Directors present their report on Eureka Group Holdings
and controlled entities (EGH or the Consolidated Entity)
for the year ended 30 June 2011.
1.
PRINCIPAL ACTIVITIES
The principal activities of the Consolidated Entity during
the year were:
• Provision of specialist property asset management
services targeting the management of all asset
classes of retirement accommodation;
• Providing accommodation and tailored services to a
broad market of retiree residents with discretionary
and non-discretionary spend characteristics; and
• Project Management
2.
REVIEW OF OPERATIONS AND RESULTS
The year ended 30 June 2011 was a difficult and
frustrating one. There were a number of board and
management changes during
the year, which are
reflected in an overall result EBITDA loss of $48k, and
net loss after tax of $1,051k.
The Board has now settled on what it believes is the long
term management team for the group and feels that the
frustration of continuing restructure will now come to an
end on successful terms after a number of false starts.
As discussed in the chairman’s report, virtually the whole
company is now operating from one platform with more
focus on the village manager and less on head office
costs. As also discussed, the company has (apart from
one major client) completed the move to independent
contractors from employees managing the village. This
change has made the administration of the Group much
simpler and provides a more predictable revenue stream
than when employees are engaged. The group is now
progressing franchising, with 3 potential franchisees
doing 90 day trials pre contract, and asset sales are
progressing to lower debt.
Overall, the board feels that the changes made will lead
to a successful 2012 financial year.
3. SIGNIFICANT CHANGES
IN THE STATE OF
AFFAIRS
In the final months of 2011 and the opening months of
2012, the group merged all of its operations, barring
Village Care into the one trading entity. It is expected
Village care will be merged by the end of October 2011.
As discussed in the Chairman’s report, this merger has
cut out significant head office cost and eliminated
duplications caused by having similar operating entities
trading separately. For financial year 2012, this will lead
to the company only having one business segment.
This has been an important step in the restructuring
process of the Group
4. DIVIDENDS
No dividends have been paid during the year (2010: $nil).
No dividends for FY 2011 have been recommended at
the date of this report.
5. CAPITAL STRUCTURE
The number of ordinary shares on issue at 30 June 2011
was 37,857,460.
6. SHARE OPTIONS
During the year there were 1,190,000 options registered
to Mike Bosel (875,000), Loretta Byers (65,000) and Mike
Hayes (250,000). Of
these options 875,000 were
cancelled on 16 May 2011. The 65,000 options allocated
to Loretta Byers had a strike price on a post-consolidated
basis of between $1.15 and $1.30 and expired on 14 July
2011. No further options were issued during this period.
7. LIKELY DEVELOPMENTS AND EXPECTED
RESULTS
As outlined above, the Company continued a restructure
in order to turnaround the business. The restructure has
first expected;
been significantly more difficult
however,
the
that
restructure will ultimately be successful.
the company remains confident
that
8. SUBSEQUENT EVENTS
• The Company has raised $210k through a convertible
note issuance since 30 June 2011.
• The Company has one asset held for sale under
contract and offers for two more.
• Other than as disclosed in this report no other matter
or circumstance has arisen since the end of the
financial year that has significantly affected, or may
significantly
entity’s
the
operations, the results of those operations or the
consolidated entity’s state of affairs, in subsequent
financial years.
consolidated
affect,
9. ENVIRONMENTAL REGULATION
The consolidated entity’s operations are not subject to
any particular or significant environmental regulation
under a law of the Commonwealth or of a State or
Territory.
10. INDEMNIFICATION AND
OFFICERS OR AUDITORS
INSURANCE OF
During or since the end of the financial year the
consolidated entity has not given any indemnity or
entered into any agreement to indemnify any person who
is or has been an officer or an auditor of the Company.
During the financial year the consolidated entity has paid
insurance premiums in respect of Directors’ and officers’
liability for current and former Directors and officers.
EGH ANNUAL REPORT 2011
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EGH LIMITED and controlled entities
Directors’ Report
11. NON-AUDIT SERVICES
PAUL FULLOON – NON EXECUTIVE DIRECTOR
During the year, the Company’s auditor, PKF Chartered
Accountants, did not perform any non-audit services.
12. PROCEEDINGS ON BEHALF OF THE COMPANY
No person has applied for leave of Court to bring
proceedings on behalf of the Company or intervene in
any proceedings to which the Company is a party for the
purposes of
the
Company for all or any part of those proceedings. The
Company was not a party to any such proceedings
during the year.
taking responsibility on behalf
if
13. DIRECTORS AND MEETINGS ATTENDED
The names of all Directors who held office since the
beginning of the year together with the numbers of
meetings the Company’s Directors held during the year,
and the numbers of meetings attended by each Director
are:
Paul Fulloon is an Executive Director of Albion Business
Centre Pty Ltd a Brisbane based consultancy specializing
in the restructuring of small businesses.
He holds an Advanced Diploma of Business (Accounting)
from Victoria University of Technology. He has been the
Accountant/Company Secretary and Director a number of
public corporations and has been a member of statutory
committees.
DAVID ROSENBLUM – NON EXECUTIVE DIRECTOR
David has had over 20 years of corporate advisory
experience specialising in corporate development and
corporate turnaround. He works in a very hands-on
manner with key people in client businesses.
He holds a Bachelor of Commerce degree from the
University of Queensland. He has enjoyed substantial
retail,
experience across most
service
new
technology and franchising.
including
industries, marine, manufacturing,
industries
Director's
Meetings
Audit
Committee
Meetings
RETIRED DIRECTORS
JURY WOWK – FORMER NON EXECUTIVE
CHAIRMAN
Name
Held Attend Held Attend
Paul Fulloon
12
12
Andrew
Kemp
Lachlan
McIntosh
Jury Wowk*
David
Rosenblum*
12
12
12
12
8
12
4
1
1
1
1
1
1
1
1
1
0
0
*Both Jury Wowk and David Rosenblum attended all meetings that they
were able to attend as directors.
14. INFORMATION ON DIRECTORS
The details of each Director’s qualifications, experience
and special responsibilities for those in office during the
year are:
LACHLAN MCINTOSH – NON EXECUTIVE CHAIRMAN
is a Member of
Lachlan McIntosh has a Bachelor of Commerce degree
and
Institute of Chartered
the
Accountants in Australia. He specialises in corporate
finance and mergers and acquisitions. He has had
substantial experience in the real estate and retirement
significant
accommodation
experience in the franchising industries and mining
services industries.
along with
industry
Lachlan is also the Managing Director of 22 Capital Pty.
Ltd. and Director of ASX listed Industrea Limited (since
April 2004).
Jury Wowk was appointed Chairman of the board in
November 2010 and completed his appointment on 17
May 2011.
Jury was a Partner of and is currently a consultant to
HWL Ebsworth Lawyers. From 1987 to 1989, Jury
performed the role of Operations Manager at Plaspak Pty
Ltd gaining valuable hands on practical experience in the
management of the company’s operations.
Jury has a Bachelor of Arts Degree and a Bachelor of
Laws Degree from the University of Sydney. He is also a
Law Society of New South Wales Accredited Specialist in
the
Business Law and an Associate Member of
Australian Institute of Company Directors.
Jury has also held the position of Non-Executive Director
at HomeLeisure Ltd.
Jury resigned from EGH on 17 May 2011.
ANDREW KEMP – FORMER NON EXECUTIVE
DIRECTOR
Andrew was appointed to the role of Non Executive
Director in March 2004. Andrew is an Executive Director
of Huntington Group Pty Ltd, a Brisbane based corporate
advisory firm.
He holds a Bachelor of Commerce degree from the
University of Melbourne and is a Chartered Accountant.
After working for KPMG and Littlewoods Chartered
Accountants in Melbourne and Sydney, Andrew joined
AIFC, the then merchant banking affiliate of the ANZ
Banking Group in Sydney in 1978. From 1979 until 1985,
Andrew was Queensland Manager of AIFC. He then
joined North Queensland based Coutts Group as General
Manager early in 1985 and continued with this group until
January 1987 when he formed Huntington Group.
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EGH LIMITED and controlled entities
Directors’ Report
Since 1980, Andrew has structured and implemented the
ASX listing of 11 companies in addition to other corporate
advisory. He joined the board of SCV Group on March
2004. He has held Directorships of the following listed
entities during the last three years: PTB Group Limited
since December 2004; Silver Chef Limited since April
2005; Trojan Equity Limited (Chairman) since May 2005;
and S8 Limited from February 2004 to January 2007.
Andrew resigned from EGH on 11 February 2011.
15. EXECUTIVE MANAGEMENT
The details of each executive management personnel’s
qualifications, experience and special responsibilities for
those in office during the year are:
MIKE BOSEL – CHIEF EXECUTIVE OFFICER
Mike was appointed CEO in July 2010 and completed his
appointment on 16 May 2011.
MIKE HAYES – NATIONAL OPERATIONS MANAGER
Mike was appointed National Operations Manager in July
2010 and completed his appointment on 14 June 2011.
GREG REKERS – EXECUTIVE DIRECTOR
(PROPERTY)
Greg leads the company’s real estate activities. Greg is
also a director of Navigator Property Group (NPG), a
consultancy specialising
the areas of property
in
development and project marketing.
Greg worked for PRD Gold Coast, a national and
international property marketing company where he was
a leading project salesman. Upon departing PRD, Greg
continued to be highly successful in providing project
marketing services to numerous property developers,
which then led to the creation of NPG.
KERRY POTTER – DIRECTOR OF OPERATIONS
Kerry is the company’s Chief Operating Officer. Kerry is
also a director of Navigator Property Group, a
consultancy specialising
the areas of property
in
development and project marketing.
Kerry worked with the Commonwealth public service in
1987 where he had been a director of the Government’s
real estate arm. Kerry then became the Director of
Project Marketing for PRD Gold Coast, a successful
national and international organisation. After leaving
PRD, Kerry became CEO of Raine and Horne
Queensland and Chesterton International. Kerry then
became the principal and hands-on director of numerous
development residential and commercial projects for
various consortia in the period 2000 to 2007.
SHARON ALDERWICK – GENERAL MANAGER
Sharon Alderwick has been involved with Residential
Property Management and working with large rent rolls
positions
in Business Development
for the past 15 years. For eight of those years she had
held
and
Management, overseeing staff and running of the rent
roll. Her prior experience is in accountancy. Sharon
brings to our Company a vast knowledge of Property
Management and along with her attention to detail is a
valuable asset.
LORETTA BYERS – CEO VILLAGE CARE
Loretta was appointed to the role of CEO of Village Care
in February 2000.
Loretta has over 30 years’ experience in the aged care
and retirement sectors. Her previous roles have included
Director of Nursing, nursing home proprietor and
Managing Director of 50 villages with 6,000 residents.
Loretta joined the Company as part of the Company’s
acquisition of Village Care.
Loretta retired 11 December 2010.
EGH ANNUAL REPORT 2011
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EGH LIMITED and controlled entities
Directors’ Report
16. REMUNERATION REPORT
(a) KEY MANAGEMENT PERSONNEL
The names of persons who were key management personnel of EGH Limited at any time during the financial year are
shown in the following table. Key management personnel are defined as those who have a direct impact on the strategic
direction of the Company.
Name
Directors
Paul Fulloon
Andrew Kemp
Executives
Mike Bosel
Mike Hayes
Loretta Byers
Greg Rekers
Kerry Potter
Role
Period in role
Non-Executive Director
Non-Executive Director
Lachlan McIntosh
Non-Executive Director
Jury Wowk
Non-Executive Chairman
David Rosenblum
Non-Executive Director
05/12/08 – ongoing
15/03/04 – 11/02/11
20/07/09 – ongoing
30/11/10 – 17/05/11
17/05/11 – ongoing
Chief Executive Officer
05/07/10 – 16/05/11
National Operations Manager
05/07/10 – 14/06/11
CEO of Village Care
01/02/00 – 11/12/10
Executive Director – Property
17/05/11 – ongoing
Sharon Alderwick
General Manager
Director of Operations
17/05/11 – ongoing
17/05/11 – ongoing
(b) PRINCIPLES OF COMPENSATION OF KEY MANAGEMENT PERSONNEL
Compensation of key management personnel comprise fees determined having regard to industry practice and the need to
obtain appropriately qualified independent persons.
Compensation of key management personnel is determined by the Board. Consideration is given to normal commercial
rates of remuneration for similar levels of responsibility and to the Company’s financial performance. Emoluments comprise
salaries, bonuses, and contributions to superannuation funds, options and shares.
While all executives have detailed job descriptions with identified key performance indicators against which annual reviews
are compared, there is no direct relationship between the benefits contained in the employment contracts and the
Company’s performance in the year under review or the 2011 financial year.
The Board continually reviews management’s performance and its own performance having regard to company
performance and shareholder wealth.
EGH ANNUAL REPORT 2011
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EGH LIMITED and controlled entities
Directors’ Report
(c) REMUNERATION FOR THE YEAR
Remuneration provided by the Company to Directors and executives during the financial year is shown in the following
table:
Year ending 30 June 2011
Short Term
Salary & Fees
$
Bonus
$
Post
Employment
Superannuation
$
Share Based*
Total
Shares
$
$
Directors
Paul Fulloon
Andrew Kemp
Lachlan McIntosh
David Rosenblum
Jury Wowk
Total
Executives
Mike Bosel
Loretta Byers
Pamela Pointon
Paul Dolan
Mike Hayes
Greg Rekers
Kerry Potter
Sharon Alderwick
Total
23,534
11,200
37,255
5,600
25,105
102,694
304,890
238,477*
-
29,718
180,498
92,015
92,015
66,346
1,003,959
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
10,000
-
-
-
10,000
-
21,463
-
2,675
16,245
-
-
5,971
46,354
23,534
11,200
37,255
5,600
25,105
102,694
304,890
259,940
-
32,393
206,743
92,015
92,015
72,317
-
-
-
-
-
-
-
-
-
1,060,313
The shares issued in the period were ordinary shares in the Company.
*This figure includes payments for annual and long service leave pursuant to the executives retirement on 11 December 2010
Year ending 30 June 2010
Short Term
Salary & Fees
$
Bonus
$
Post
Employment
Superannuation
$
Share Based
Total
Options
$
$
Directors
Paul Fulloon
Andrew Kemp
Lachlan McIntosh
Andrea Slingsby
Total
Executives
Loretta Byers
Pamela Pointon
Paul Dolan
Cate Please
Garry Myrtle
Total
78,000
-
-
27,759
105,759
204,595
129,000
96,537
35,773
15,678
481,583
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,360
5,360
72,913
15,000
8,688
3,894
1,661
102,156
-
26,400
60,000
-
86,400
-
50,000
-
-
-
50,000
78,000
26,400
60,000
33,119
197,519
277,508
194,000
105,225
39,667
17,339
633,739
EGH ANNUAL REPORT 2011
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EGH LIMITED and controlled entities
Directors’ Report
(d) NUMBER OF SHARES HELD: DIRECTORS AND EXECUTIVES
Balance
1 July
2010 *
Received as
Remuner-
ation *
Shares
Acquired *
Options
Exercised*
Net
Change
Other *
Balance
30 June
2011*
Held in
Escrow
61,334
-
30,000
-
-
Directors:
Andrew Kemp
Paul Fulloon
221,347
246,401
-
-
Lachlan McIntosh
3,404,167
2,447,607
Jury Wowk
David Rosenblum
Total
Executives:
Mike Bosel
Mike Hayes
Loretta Byers
Greg Rekers
Kerry Potter
Sharon Alderwick
Total
375,572
210,253
-
-
4,001,086
2,694,008
91,334
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
307,735
529,082
-
-
2,477,607
5,881,774
-
-
375,572
-
2,785,342
6,786,428
-
-
-
-
-
-
-
-
-
-
-
-
-
-
* Figures for FY2011 are adjusted for the 1:10 share consolidation
(e) NUMBER OF OPTIONS HELD: DIRECTORS AND EXECUTIVES
Balance
1 July
2010
Received as
Remuner-
ation
Options
Exercised
(1)
Net
Change
Other
Balance
30 June
2011
Total vested
as at
30 June
2011
Held in
Escrow
Directors:
Andrew Kemp
Paul Fulloon
Lachlan McIntosh
Jury Wowk
David Rosenblum
Total
Executives:
Loretta Byers
Mike Bosel
Mike Hayes
Total
-
-
-
-
-
-
-
-
-
-
-
-
65,000*
-
-
65,000
-
875,000**
250,000
1,125,000
*these options expired on 14 July 2011
**these options were cancelled on 16 May 2011.
17. AUDITORS INDEPENDENCE DECLARATION
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(875,000)
-
(875,000)
65,000
-
250,000
315,000
65,000
-
250,000
315,000
The auditor’s independence declaration under Section 307C is included in this report on page 16.
18. DECLARATION
This report is made in accordance with a resolution of the Directors.
Lachlan McIntosh
Chairman
Dated this 30th day of September, 2011
EGH ANNUAL REPORT 2011
10
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-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
For personal use only
EGH LIMITED and controlled entities
Security Holder Information
Distribution of Securities as at 28 September 2011
Number
of
Securities
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total Security Holders
No of
Shareholders
Marketable Shares
There were 381 holders of less than a marketable parcel of 6,330
shares holding a total of 445,627 shares.
Voting Rights
Ordinary Shares carry voting rights of one vote per share.
Options carry no voting rights.
249
125
31
71
59
535
Twenty Largest Ordinary Shareholders at 28 September 2011
No of Ordinary Shares
Held
% of Issued Share
Capital
22 CAPITAL PTY LTD
M R & S J GORDON PTY LTD
CO-INVESTOR CAPITAL PARTNERS PTY LTD*
BYDAND CAPITAL PTY LIMITED*
CO-INVESTOR CAPITAL PARTNERS PTY LIMITED*
WAVET FUND NO 2 PTY LTD*
KATHLAC PTY LIMITED
WAVET FUND NO 2 PTY LTD*
ESCOR INVESTMENTS PTY LTD
VBS INVESTMENTS PTY LTD
CO-INVESTOR CAPITAL PARTNERS (NZ LIMITED)
CONTEMPLATOR PTY LTD
ACN 002 938 614 LIMITED
PAMELA ANN POINTON
PPK INVESTMENT HOLDINGS PTY
DSCC HOLDINGS PTY LTD
BYDAND CAPITAL PTY LIMITED*
QFM NOMINEES PTY LTD
MR STEVE WALKER + MRS SUZAN SARAH WALKER
DEAL CITY PTY LIMITED
Total
* Separate Holdings
4,275,000
3,342,378
2,452,760
2,113,020
1,972,850
1,840,234
1,447,607
1,145,834
1,120,160
1,107,945
1,032,912
800,000
750,000
708,334
700,000
618,442
546,053
500,000
376,000
375,572
11.29%
8.83%
6.48%
5.58%
5.21%
4.86%
3.82%
3.03%
2.96%
2.93%
2.73%
2.11%
1.98%
1.87%
1.85%
1.63%
1.44%
1.32%
0.99%
0.99%
27,225,101
71.90%
EGH ANNUAL REPORT 2011
11
For personal use only
EGH LIMITED and controlled entities
Security Holder Information
Largest Option Holders at 28 September 2011
No of Options Held
Mike Hayes
Total
250,000
250,000
% of Issued
Options
100%
100%
Securities
September 2011
in which Directors have a Relevant
Interest at 28
Ordinary Shares
Options
Lachlan McIntosh
Paul Fulloon
David Rosenblum
Total
5,851,744
-
-
5,851,744
-
-
-
-
EGH ANNUAL REPORT 2011
12
For personal use only
EGH LIMITED and controlled entities
Corporate Governance
INTRODUCTION
This statement outlines the key corporate governance
practices that are in place for the Group and to which
both the Board collectively and the Directors individually
are committed. In formulating and adopting its corporate
governance principles, the Directors have adopted and
complied with ASX Corporate Governance Principles and
Recommendations, 2nd edition.
PRINCIPLE 1
LAY SOLID FOUNDATIONS FOR MANAGEMENT AND
OVERSIGHT
Functions and Responsibilities of the Board
fulfill
times
The Board will at all
its overriding
responsibility to act honestly, conscientiously and fairly,
in accordance with the law, and in the interests of
Shareholders, its employees and those with whom it
deals. The Board of Directors is responsible for the
review and approval of the strategic direction of EGH and
for the oversight and monitoring of its business and
affairs. In addition, it is responsible for those matters
reserved to it by law and reserves to itself the following
matters and all power and authority in relation to those
matters:
• Oversight of the Group including its control and
accountability systems;
• Reviewing and overseeing the operation of systems
of risk management and internal compliance and
control, codes of ethics and conduct, and legal and
regulatory compliance;
• Monitoring Senior Management’s performance and
implementation of strategy, and ensuring appropriate
resources are available;
•
•
•
•
•
Approving and monitoring the progress of major
capital expenditure, capital management, and
acquisitions and divestments;
Approving and monitoring
reporting;
financial and other
Performance of investment and treasury functions;
The overall corporate governance of the Group
including the strategic direction, establishing goals
for management and monitoring the achievement of
these goals; and
To assist in the execution of its responsibilities, the
Board has the authority to establish Committees
(and delegate powers accordingly) to consider such
matters as it may consider appropriate.
•
•
•
•
increased where
the Board considers
There must be at least four Directors and this may
be
that
additional expertise is required in specific areas or
when an outstanding candidate is identified. As at
the date of this report the Company has only three
Directors and is in the process of filling the fourth
position with an appropriate candidate;
The Chairman must be a non-executive Director who
is also Independent;
At least half of the Board must be non-executive
Directors at least two of whom must also be
Independent;
The composition of the current board is temporarily
different to the above principles and is expected to
remain so during its restructuring. The board has
appointed Lachlan McIntosh as Non-executive
Chairman. Lachlan is a non-executive Director but is
not independent. The Board has taken into account
the fact Lachlan specialises in corporate finance,
corporate
restructurings and
turnarounds and
mergers and acquisitions; and
The Company has a majority of
independent
Directors, with both David Rosenblum and Paul
Fulloon being independent Directors. The blend of
experience and skills assembled on the Company’s
board is considered appropriate for a company of
EGH’s size and business structure, particularly at
this stage of its commercial development. The
Board will continue to monitor the independence of
Directors as the activities of the Company progress.
Each Director has the right to seek independent
legal or other professional advice at the Company’s
expense. Prior approval from the Chairman is
required but may not be unreasonably withheld or
delayed.
Committees
The Board may establish Committees to assist it in
carrying out its function and for its effective and efficient
for each
performance, and will adopt a charter
Committee established dealing with the scope of its
responsibility and relevant administrative and procedural
arrangements. Best practice recommendations by the
ASX recommend the establishment of formal Audit,
the
Remuneration and Nomination Committees;
responsibilities normally delegated to the Remuneration
and Nomination committees are included in the charter of
the Board.
PRINCIPLE 3
PROMOTE ETHICAL AND RESPONSIBLE DECISION
MAKING
PRINCIPLE 2
Ethical Standards and Values
STRUCTURE THE BOARD TO ADD VALUE
The composition of the Board is determined according to
the following principles:
•
The Board must comprise members with a broad
range of experience, expertise, skills and contacts
relevant to the Group and its business (See Director
Profiles);
All Directors and Officers of EGH must act with the
utmost integrity and objectivity, striving at all times to
enhance the reputation and performance of the Company
and, where possible, act in accordance with the interests
of Shareholders, staff, clients and all other stakeholders
of EGH. The Directors must comply with the Code of
Ethics in the exercise of their duties.
EGH ANNUAL REPORT 2011
13
For personal use only
EGH LIMITED and controlled entities
Corporate Governance
Dealings in Securities
The Constitution permits Directors to acquire Securities in
the Company. Company policy prohibits any dealing in,
in
or procuring
accordance with the Code of Conduct for Transactions in
Securities.
in Securities except
the dealing
PRINCIPLE 4
reported on a monthly basis against budget, and revised
forecasts for the year are prepared regularly.
Price Sensitive Information, and generally all information
reasonably required by an investor to make an informed
assessment of the Group’s activities and results, are
reported to the ASX in accordance with continuous
disclosure requirements, which are considered as a
standing agenda item at each regular meeting of the
Audit Committee as well as of the Board.
SAFEGUARD INTEGRITY IN FINANCIAL REPORTING
Quality and integrity of personnel
The Audit Committee is established by the Board to
assist it and report to it in relation to the matters with
which it is charged with responsibility. The role of the
Audit Committee is to advise on the establishment and
maintenance of a framework of internal controls and
appropriate ethical standards for the management of the
Group. It also gives the Board additional assurance
regarding the quality and reliability of financial information
prepared for use by the Board in determining policies or
for inclusion in the financial report. The Audit Committee
has responsibility for reviewing the risk management
framework and policies within the Group and monitoring
their implementation. Details of meetings and members
are provided in the annual report.
The Audit Committee currently has three members,
Lachlan McIntosh (Chairman), David Rosenblum and
Paul Fulloon. The blend of experience and skills
assembled on the Committee is considered appropriate
for EGH at this stage of its development.
The CEO and CFO must each provide a statement to the
Board with any financial report to the effect that the
Company’s risk management and internal compliance
and control system is operating efficiently and effectively
in all material respects.
Financial Reporting
The external auditors are selected according to criteria
set by
include most
significantly:
the Audit Committee which
•
•
•
The lack of any current or past connection or
association with the Group or with any member of
Senior Management that could in any way impair, or
be seen to carry with it any risk of impairing, the
independent external view they are required to take
in relation to the Group;
Their general reputation
independence and
probity and professional standing within the business
community; and
for
Their knowledge of the industry within which the
Group operates.
Audit staff employed by the external audit partner,
including the partner or other principal with overall
responsibility for the engagement, are required to be
rotated periodically, and in any event at intervals not
exceeding five years, so as to avoid any risk of impairing
the independent external view that the external auditors
are required to take in relation to the Group.
The Board approves an annual budget prepared by
Management and reviewed and commented on by the
Audit Committee. Actual results, including profit and loss
statement, balance sheet and cashflow statement, are
The Company’s policies are detailed in the Operating
Policies and Procedures. Written confirmation of
compliance with policies
from all staff
members. Formal appraisals are conducted at least
annually for all employees.
is obtained
Investment appraisal
EGH has clearly defined guidelines
for capital
expenditure. These include annual budgets, detailed
appraisal, and review procedures, levels of authority and
due diligence requirements where businesses are being
acquired or divested.
Operating unit controls
Financial controls and procedures, including information
systems controls are detailed in the Group Operating
Policies and Procedures Manuals.
PRINCIPLE 5
MAKE TIMELY AND BALANCED DISCLOSURE
The Board understands and respects
that prompt
disclosure of price sensitive information is integral to the
efficient operation of the ASX’s securities market and
complies with guideline of continuous and ongoing
disclosure.
PRINCIPLE 6
RESPECT THE RIGHTS OF SHAREHOLDERS
to ensure
Information
is communicated
The Board aims
that Shareholders are
informed of all major developments affecting the Group’s
to
state of affairs.
Shareholders through the distribution of financial reports,
announcements
shareholder
newsletters and a comprehensive website. Shareholders
are encouraged to attend the Annual General Meeting at
which the Company’s auditors are also present to answer
shareholders questions. The Company complies with the
Guidelines for this principle.
the ASX,
through
PRINCIPLE 7
RECOGNISE AND MANAGE RISK
The Board and Management are responsible for the
identification of significant business risks and review of
the major risks affecting each business segment and
development of strategies to mitigate these risks. Major
business risks arise from such matters as actions by
competitors, changes in government policy and use of
information systems.
EGH ANNUAL REPORT 2011
14
For personal use only
EGH LIMITED and controlled entities
Corporate Governance
The CEO and CFO must each provide a statement to the
Board with any financial report to the effect that the
Company’s risk management and internal compliance
and control system is operating efficiently and effectively
in all material respects.
PRINCIPLE 8
REMUNERATE FAIRLY AND RESPONSIBLY
EGH’s current practices in this area will be regularly
reviewed to ensure compliance with the Guidelines.
fully
Remuneration of Directors and Executives
disclosed in the annual report.
is
EGH ANNUAL REPORT 2011
15
For personal use only
EGH LIMITED and controlled entities
Auditors Independence Declaration
Lead auditor’s independence declaration under Section 307C of the Corporations Act 2001
To: The Directors of Eureka Group Holdings Limited
I declare to the best of my knowledge and belief, in relation to the audit for the financial year ended 30 June 2011 there
have been:
•
•
no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to
the audit, and
no contraventions of any applicable code of professional conduct in relation to the audit.
Albert Loots
Partner
PKF Chartered Accountants
Dated this 30th day of September, 2011
Tel: 61 7 3226 3555 | Fax: 61 7 3226 3500 | www.pkf.com.au
PKF | ABN 83 236 985 726
Level 6, 10 Eagle Street | Brisbane | Queensland 4000 | Australia
GPO Box 1078 | Brisbane | Queensland 4001
PKF East Coast Practice is a member of PKF Australia Limited a national association of independent chartered accounting and consulting firms each trading as PKF. The East Coast
Practice has offices in NSW, Victoria and Brisbane. PKF Australia Limited is a member of PKF International, an association of legally independent chartered accounting and consulting
firms.
Liability limited by a scheme approved under Professional Standards Legislation
EGH ANNUAL REPORT 2010
16
For personal use only
EGH LIMITED and controlled entities
Consolidated Statement of Comprehensive Income
FOR THE YEAR ENDED 30 JUNE 2011
Note
30 June 2011
$
30 June 2010
$
Total Revenue 3
14,099,699
11,247,998
Consolidated
Expenses
Cost of goods sold
Impairment - Management rights
Impairment - Trade receivables
Employee expenses
Finance costs
Community operating expenses
Marketing expenses
Consultancy expenses
7,739,587
1,715,959
264,406
-
-
59,799
2,238,410
1,726,930
759,102
678,037
356,144
4,912,142
29,074
187,111
277,160
790,947
Depreciation & amortisation expenses 4
243,908
113,028
Lease expenses
Amortisation of borrowing costs
Other expenses
Total Expenses
330,000
592,005
667
(239,568)
2,912,632
1,258,339
15,151,090
11,794,729
Loss before income tax expense
(1,051,391)
(546,731)
Income tax expense
5
-
-
Loss from continuing operations
(1,051,391)
(546,731)
Loss from discontinued operations after income tax 31
-
(515,115)
Loss for the period
(1,051,391)
(1,061,846)
Other comprehensive income
-
-
Total Comprehensive Income for the period
(1,051,391)
(1,061,846)
Basic earnings per share (dollars per share)
Diluted earnings per share (dollars per share)
22
22
(0.0297)
(0.0297)
(0.0556)
(0.0556)
The consolidated statement of comprehensive income is to be read in conjunction with the accompanying notes.
EGH ANNUAL REPORT 2010
17
For personal use only
EGH LIMITED and controlled entities
Consolidated Statement of Financial Position
AS AT 30 JUNE 2011
Current Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Non-current assets held for sale
Financial asset
Other
Total Current Assets
Non Current Assets
Property, plant and equipment
Intangible assets
Total Non Current Assets
Total Assets
Current Liabilities
Trade and other payables
Other financial liabilities
Provisions
Total Current Liabilities
Non Current Liabilities
Provisions
Total Non Current Liabilities
Total Liabilities
Net Assets
Equity
Share capital
Accumulated losses
Total Equity
Consolidated
Note
30 June 2011
$
30 June 2010
$
6
7
8
9
10
12
13
14
17
15
15
368,747
579,334
38,371
342,694
414,089
55,415
2,530,983
2,935,787
-
62,601
14,198
106,378
3,580,036
3,868,561
1,158,423
424,867
5,412,780
5,586,279
6,571,203
6,011,146
10,151,239
9,879,707
2,609,641
2,759,995
5,815,872
6,045,922
138,228
229,683
8,563,741
9,035,600
16,488
16,488
27,156
27,156
8,580,229
9,062,756
1,571,010
816,951
18
42,300,014
40,494,564
(40,729,004)
(39,677,613)
1,571,010
816,951
The consolidated statement of financial position is to be read in conjunction with the accompanying notes.
EGH ANNUAL REPORT 2010
18
For personal use only
EGH LIMITED and controlled entities
Consolidated Statement of Cash Flows
FOR THE YEAR ENDED 30 JUNE 2011
Cash Flows from Operating Activities
Receipts from customers
Payments to suppliers & employees
Interest received
Finance costs
Consolidated
30 June 2011
30 June 2010
Note
$
$
14,796,904
13,578,823
(15,560,779)
(13,432,489)
1,661
(535,576)
5,126
(532,119)
Net Cash flow used in operating activities
19(b)
(1,297,790)
(380,659)
Cash Flows from Investing Activities
Payments for property, plant and equipment
Refund from acquisition of Griffith Financial Investment
Proceeds from sale of management rights and managers
unit
Payment for subsidiary, net of cash acquired
Payments for intangible assets
(117,355)
14,198
380,000
(75,395)
(14,198)
428,989
(201,000)
-
-
(435,716)
Net cash flow used in investing activities
75,843
(96,320)
Cash Flows from Financing Activities
Proceeds/(repayments) from borrowings
Proceeds from share issues
Payments for share issue costs
Net cash flow from financing activities
Net increase/ (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of financial year
433,000
830,000
(15,000)
1,248,000
26,053
342,694
Cash and cash equivalents at end of financial year
19(a)
368,747
(384,000)
815,000
(39,767)
391,233
(85,746)
428,440
342,694
The consolidated statement of cash flows is to be read in conjunction with the accompanying notes.
EGH ANNUAL REPORT 2010
19
For personal use only
EGH LIMITED and controlled entities
Consolidated Statement of Changes in Equity
FOR THE YEAR ENDED 30 JUNE 2011
2011
Balance at 1 July 2010
Total comprehensive loss for the year
Debt converted into equity
Shares issued during the period
Capital raising cost
Balance at 30 June 2011
2010
Balance at 1 July 2009
Total comprehensive loss for the year
Debt converted into equity
Shares issued during the period
Share option reserve
Capital raising cost
Balance at 30 June 2010
Consolidated
Share Capital
$
Accumulated Losses
$
Total
$
40,494,564
-
1,025,047
795,000
(14,597)
42,300,014
39,701,432
-
20,000
1,163,200
(320,301)
(69,767)
40,494,564
(39,677,613)
816,951
(1,051,391)
(1,051,391)
-
1,025,047
-
-
795,000
(14,597)
(40,729,004)
1,571,010
(38,615,767)
1,085,665
(1,061,846)
(1,061,846)
-
20,000
-
1,163,200
-
(320,301)
-
(69,767)
(39,677,613)
816,951
The above consolidated statement of changes in equity is to be read in conjunction with the attached notes.
EGH ANNUAL REPORT 2010
20
For personal use only
EGH LIMITED and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2011
1.
INTRODUCTION
EGH Limited (covering the financial statements of EGH
Limited and all of its subsidiaries) (EGH or the Group or
the Consolidated Entity) for the year ended 30th June
2011 is a company incorporated in Australia.
Operations and principal activities
Operations comprise property management of Senior
Independent Living Communities.
Currency
The financial report is presented in Australian dollars
and rounded to the nearest dollar.
Registered office
‘River Tower’, Level 1, 20, Pidgeon Close, West End,
Queensland, Australia, 4001.
Authorisation of financial report
The financial report was authorised for issue on 30
September 2011 by the Directors. The Directors have
the power to amend the financial report after issue.
2. SUMMARY OF ACCOUNTING POLICIES
a) OVERALL POLICY
The principal accounting policies adopted by EGH
Limited comprising the parent entity EGH Limited and
its subsidiaries are stated in order to assist in the
general understanding of the financial report.
The consolidated financial report is a general purpose
financial report which has been prepared in accordance
with Australian Accounting Standards and
the
Corporations Act 2001.
Compliance with IFRS ensures the financial report,
comprising the financial statements and notes thereto,
complies with
International Financial Reporting
Standards (IFRS).
b) CONSOLIDATION POLICY
This financial report covers both EGH Limited as an
individual entity (Company) and the consolidated entity
consisting of EGH Limited and its controlled entities.
EGH Limited is the ultimate parent entity.
The consolidated financial statements incorporate the
assets and liabilities of all entities controlled by EGH
Limited as at 30 June 2011 and the results of all
controlled entities for the year then ended wherein the
effects of all transactions between entities in the
consolidated entity are eliminated in full. EGH Limited
and its controlled entities together are referred to in this
financial report as the consolidated entity.
indirectly,
Subsidiaries are entities controlled by the Company.
Control exists when the Company has the power,
directly or
financial and
operating policies of an entity so as to obtain benefits
from its activities. In assessing control, potential voting
rights that presently are exercisable or convertible are
taken into account. The financial statements of
to govern
the
subsidiaries are included in the financial report from the
date that control commences until the date that control
ceases.
c) REVENUE RECOGNITION
MANAGEMENT FEES AND CATERING REVENUE
The consolidated entity is entitled to receive a fee from
unit owners for managing the units under management
services agreements. The consolidated entity also
receives a fee from the tenants of the units for the
provision of catering services. Revenue is recognised
when the services are provided.
SALE OF GOODS
Revenue from the sale of land and other units that have
been acquired is recognised when the relevant contract
of sale becomes unconditional.
Revenue from the licensing of intellectual property is
recognised when the licensing agreement becomes
unconditional.
RENTAL INCOME
Rental income is brought to account on a straight line
basis in accordance with the terms of the underlying
agreement.
d) REVENUE RECOGNITION
INTEREST REVENUE
Interest revenue is recognised on a proportional basis
taking into account the interest rates applicable to the
financial assets.
e) INCOME TAX
Income tax in the statement of comprehensive income
for
the periods presented comprises current and
deferred tax. Income tax is recognised in the statement
of comprehensive income except to the extent that it
relates to items recognised directly in equity, in which
case it is recognised in equity.
Current tax is the expected tax payable on the taxable
income for the year, using tax rates enacted or
substantially enacted at the balance sheet date, and
any adjustment to tax payable in respect of previous
years.
Deferred tax is provided using the balance sheet liability
method, providing for temporary differences between
the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for
taxation purposes. The amount of deferred tax provided
is based on the expected manner of realisation or
settlement of the carrying amount of assets and
liabilities, using tax rates enacted or substantively
enacted at the balance sheet date.
f) CASH AND CASH EQUIVALENTS
For the purpose of the statement of cash flows, cash
includes cash at bank and on hand as well as highly
liquid investments with short periods to maturity which
EGH ANNUAL REPORT 2010
21
For personal use only
EGH LIMITED and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2011
are readily convertible to cash on hand and are subject
to an insignificant risk of changes in value, net of
outstanding bank overdrafts.
g) TRADE AND OTHER RECEIVABLES
Trade debtors are recognised at the amounts due and
collectable in the time frame set out in the sales
contract.
Other receivables are recognised at the amount due
and are also generally due within 30 days.
Recoverability is reviewed on an ongoing basis. Debts
that are known to be uncollectible are written off. A
provision for doubtful debts is raised when significant
doubt as to collection exists.
h) PROPERTY PLANT & EQUIPMENT
Fixed Assets are recognised at cost. Depreciation and
amortisation is calculated on the straight line (SL) or
diminishing value (DV) basis so as to write off the net
cost of each item of property, plant and equipment over
its expected useful life to the consolidated entity. Rates
used for each class of asset are:
Class
Rate
Method
Plant and equipment
25-50%
SL/DV
Manager units
Leasehold improvements
Plans, patent and trademarks
2.5%
20%
20%
SL
SL
SL
i) IMPAIRMENT OF ASSETS
At each reporting period the consolidated entity reviews
the carrying amounts of its tangible and intangible
assets to determine whether there is any indication that
those assets have suffered an impairment loss. If any
such indication exists, the recoverable amount of the
asset is estimated in order to determine the impairment
loss (if any). Where the asset does not generate cash
flows that are independent from other assets, the
consolidated entity estimates the recoverable amount of
the cash-generating unit to which the asset belongs. A
cash-generating unit will be the smallest identifiable
group of assets that generate cash flows largely
independent of the cash inflows of other assets or
group of assets.
An impairment loss will be recognised whenever the
carrying amount of an asset, or its cash-generating unit,
exceeds its recoverable amount. Impairment losses will
be recognised in the statement of comprehensive
income unless they relate to a revalued asset, where
the impairment loss will be treated in the same way as
a revaluation decrease to the extent of revaluation
increment exists.
j) PROVISIONS
Provisions are recognised when the consolidated entity
has a present obligation,
future sacrifice of
economic benefits is probable, and the amount of the
provision can be measured reliably.
the
The amount recognised as a provision is the best
estimate of the consideration required to settle the
present obligation at reporting date, taking into account
the risks and uncertainties surrounding the obligation.
k) INVENTORIES
Inventories comprise catering stock only.
Catering stock is valued at the lower of cost and net
realisable value.
l) INTANGIBLES
Only intangibles that have been purchased or paid for
by the consolidated entity are recognised in the
accounts. Internally generated intangibles such as
management
the
consolidated entity has constructed are not recognised
in the accounts.
rights on Communities
that
Plans and trademarks are amortised using the straight-
line method over 5 years being the estimated useful life.
Management rights and letting rights are carried at the
lower of cost or recoverable amount. The management
rights and letting rights are amortised using the straight
line method over 40 years being the estimated useful
life.
the cost of
the excess of
initial recognition, goodwill
Goodwill on acquisition is initially measured at cost
the business
being
combination over the acquirer’s interest in the net fair
value of the identifiable assets, liabilities and contingent
liabilities. Following
is
measured at cost less any accumulated impairment
losses. Goodwill is reviewed for impairment, annually or
more frequently if events or changes in circumstances
indicate that the carrying value may be impaired. As at
the acquisition date, any goodwill acquired is allocated
to each of the cash-generating units expected to benefit
from the combination’s synergies. Impairment is
determined by assessing the recoverable amount of the
cash-generating unit to which the goodwill relates.
Where the recoverable amount of the cash-generating
unit is less than the carrying amount, an impairment
loss is recognised.
m) TRADE AND OTHER PAYABLES
These amounts represent liabilities for goods and
services provided to the consolidated entity prior to the
end of the financial year and which are unpaid at that
date. The amounts are unsecured and are generally
settled within 30-60 days.
n) FINANCIAL ASSETS AND LIABILITIES
financial
Non-derivative
comprise
investments in equity and debt securities, trade and
other receivables, cash and cash equivalents, loans
and borrowings, and trade and other payables.
instruments
Non-derivative financial instruments are recognised
initially at fair value plus, for instruments not at fair
value through profit or loss, any direct attributable
transaction costs. Subsequent to initial recognition non-
derivative
instruments are measured as
described below.
financial
A financial instrument is recognised if the Consolidated
Entity becomes a party to the contractual provisions of
the instrument. Financial assets are derecognised if the
EGH ANNUAL REPORT 2010
22
For personal use only
EGH LIMITED and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2011
if
the
from
financial asset expire or
Consolidated Entity’s contractual rights to the cash
flows
the
Consolidated Entity transfers the financial asset to
another party without retaining control or substantially
all risks and rewards of the asset. Regular purchases
and sales of financial assets are accounted for at trade
date i.e. the date that the Consolidated Entity commits
itself to purchase or sell the asset. Financial liabilities
are derecognised if the Consolidated Entity’s obligation
specified in the contract expire or are discharged or
cancelled.
o) FINANCIAL ASSETS AT FAIR VALUE THROUGH
PROFIT OR LOSS
initial recognition. Financial
An instrument is classified as at fair value through profit
and loss if it is held for trading or is designated as such
instruments are
upon
designated at fair value through profit or loss if the
group manages such investments and makes purchase
in
and sale decisions based on
risk
accordance with
initial
management or
recognition,
are
recognised in profit or loss when incurred. Financial
instruments at fair value through profit or loss are
measured at fair value, and changes are recognised in
profit or loss.
the Group’s documented
investment strategy. Upon
costs
transaction
attributable
fair value
their
p) AVAILABLE FOR SALE ASSETS
Available-for-sale assets are non derivative financial
assets that are either not suitable to be classified into
other categories of financial assets due to there nature,
or they are designated as such by management. The
comprise investments in the equity of other entities
where there is neither a fixed maturity nor fixed or
determinable payments.
payments to be made in respect of services provided by
employees up to the reporting date. Consideration is
given for expected future wage and salary levels,
experience of employee departures and periods of
service. Expected future payments are discounted
using market yields as at the reporting date on national
government bonds with the terms to maturity that
match, as closely as possible, the estimated future cash
outflows.
t) FINANCE COSTS
Finance costs incurred whilst seniors’ Communities are
under construction are capitalised in the period in which
they are incurred. Once each project is completed and
ready for sale, subsequent finance costs are expensed
when incurred. All other finance costs are expensed
when incurred. Finance costs include interest on short-
long-term borrowings, amortisation of
term and
discounts or premiums
to borrowings,
amortisation of ancillary costs in connection with the
arrangement of borrowings and finance lease charges.
relating
u) GOODS AND SERVICES TAX
Revenues, expenses and assets are recognised net of
the amount of goods and services tax (GST), except:
• where the amount of GST incurred is not recoverable
from the taxation authority, it is recognised as part of
the cost of acquisition of an asset or as part of an
item of expense; or
• for payables which are recognised inclusive of GST.
The net amount of GST recoverable from, or payable
to,
included as part of
receivables or payables.
taxation authority
the
is
v) COMPARATIVES
Where necessary, comparative figures have been
adjusted to conform with changes in presentation in the
current year.
q) OTHER NON-DERIVATIVE FINANCIAL
INSTRUMENTS
w) SHARE BASED PAYMENTS
financial
non-derivative
Other
are
measured at amortised cost using the effective interest
method less any impairment losses. These comprise all
trade payables.
instruments
r) EMPLOYEE BENEFITS
WAGES AND SALARIES AND ANNUAL LEAVE – SHORT
TERM
Liabilities for wages and salaries and annual leave are
recognised, and are measured as
the amounts
expected to be paid when the liabilities are settled
inclusive of on-costs. Sick leave is non-vesting and is
expensed as paid.
s) LONG SERVICE LEAVE – LONG TERM
A liability for long service leave expected to be settled
within 12 months of the reporting date is recognised
and is measured as the amounts expected to be paid
when the liabilities are settled. The liability for long
service leave expected to be settled more than 12
months from the reporting date is recognised and
measured as the present value of expected future
The entity has allocated to its employees and Directors,
shares and share options as part of their remuneration
packages. AASB 2 “Share Based Payments” require
that these payments and also payments made to other
counterparties in return for goods and services be
measured at the more readily determinable fair value of
the good/service or the fair values of the equity
instrument. This amount is expensed in the statement
of comprehensive income.
Where the grant date and the vesting date are different
the total expenditure calculated is allocated between
the two dates taking into account the terms and
conditions attached
the
the
counterparties as well as management’s assumptions
about probabilities of payments and compliance with
and attainment of the set out terms and conditions.
instruments and
to
x) LEASES
Operating
expense on a straight line basis over the lease term.
lease payments are recognised as an
EGH ANNUAL REPORT 2010
23
For personal use only
EGH LIMITED and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2011
y) NEW ACCOUNTING STANDARDS AND
INTERPRETATIONS NOT YET ADOPTED
The following Australian Accounting Standards have
been issued or amended and are applicable to the
parent and consolidated entity but are not yet effective.
They have not been adopted in the preparation of the
financial statements at the reporting date. A discussion
of those requirements and their impact on the Group
follows:
Revised AASB 9: 'Financial Instruments' – revised and
consequential amendments to other accounting
standards resulting from its issue.
AASB 9 – This revised standard provides guidance on
the classification and measurement of financial assets,
which is the first phase of a multi-phase project to
replace AASB 139 Financial Instruments: Recognition
and Measurement. Changes in the fair value of
investments in equity securities that are not part of a
trading activity may be reported directly in equity, but
upon realisation those accumulated changes in value
are not recycled to the statement of comprehensive
income. Changes in the fair value of all other financial
assets carried at fair value are reported in the
statement of comprehensive income.
AASB13: 'Fair Value Measurement'. This standard
establishes a single course of guidance for determining
the fair value of assets and liabilities. The consolidated
entity has yet to determine to potential effect of this
standard.
AASB 10: 'Consolidated Financial Statements'. This
standard replaces the part of AASB 27: 'Consolidated
and Separated Financial Statements' and is applicable
for the annual period beginning 1 January 2013. This
new standard introduces a new definition of control that
determines which entities are consolidated. This new
definition of control may potentially lead to the
consolidation of entities that were not previously
included in the Consolidated Group resulting in more
assets and liabilities on the books.
AASB 2010-5 Further Amendments to Australian
Accounting Standards arising from the Annual
Improvements Project.
AASB 2010-5 – These amendments affect various
AASBs resulting in minor changes for presentation,
disclosure, recognition and measurement purposes.
The Group does not anticipate early adoption of any of
the above reporting requirements and does not expect
these requirements to have any material effect of the
Group's financial statements.
z) ACCOUNTING STANDARDS ADOPTED DURING
THE YEAR
The Consolidated Entity adopted the following new
Accounting Standard and Interpretations during the
period:
to Australian
AASB 2009-5
Accounting Standards arising
the Annual
Improvements Project. Amendments are made to AASB
5, 8, 101, 107, 117, 118, 136 & 139.’
‘Further Amendments
from
AASB 2009-8 ‘Amendments to Australian Accounting
Standards – Company Cash-settled Share-based
Payment Transactions’.
AASB 2009-10 ‘Amendments to Australian Accounting
Standards – Classification of Rights Issues’.
Interpretation 19 Extinguishing Financial Liabilities
with Equity Instruments.
There were no material impacts on the financial
statements or performance of the Consolidated Entity.
aa) TAX CONSOLIDATION
The Company and its wholly-owned Australian resident
entities have formed a tax-consolidation group with
effect from 1 July 2003 and are therefore taxed as a
single entity from that date. The head entity within the
tax-consolidation group is EGH Limited.
the
Current tax expense/income, deferred tax liabilities and
deferred assets arising from temporary differences of
the members of
tax-consolidation group are
recognised in the separate financial statements of the
members of the tax-consolidation group using the
‘separate taxpayer within group’ approach by reference
to the carrying amounts of assets and liabilities in the
separate financial statements of each entity and the tax
values applying under tax consolidation.
tax
losses of
from unused
Any current tax liabilities (assets) and deferred tax
the
assets arising
subsidiaries is assumed by the head entity in the tax-
consolidation group and are
the
Company as amounts payable (receivable) to /(from)
other entities
in
conjunction with any tax funding arrangement amounts
(refer below). Any difference between these amounts is
recognised by the Company as an equity contribution or
distribution.
tax-consolidation group
recognised by
the
in
The Company recognised deferred tax assets arising
from unused tax losses of the tax-consolidation group
to the extent that it is probable that future taxable profits
of the tax-consolidation group will be available against
which the asset can be utilised.
Any subsequent period adjustments to deferred tax
assets arising from unused tax losses as a result of
revised assessments of the probability of recoverability
is recognised by the head entity only.
Nature of tax funding arrangements and tax sharing
arrangements
the
respect of
tax amounts.
The head entity in conjunction with other members of
the tax-consolidation group has entered into a tax
funding
funding arrangement which sets out
obligations of members of the tax-consolidation group
in
funding
arrangements require payments to/ from the head entity
to the current tax liability/ (asset) assumed to be the
tax asset
head entity and any
assumed by the head entity, resulting in the head entity
recognising an inter-entity receivable / (payable) equal
in amount to the tax liability/ (asset) assumed. The
inter-entity receivables/ (payables) are at call.
tax-loss deferred
The
tax
EGH ANNUAL REPORT 2010
24
For personal use only
EGH LIMITED and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2011
Contributions to fund the current tax liabilities are
payable as per the tax funding arrangement and reflect
the timing of the head entity’s obligation to make
payments for tax liabilities to the relevant authorities.
The head entity, in conjunction with other members of
the tax-consolidated group, has also entered into a tax
sharing agreement.
tax sharing agreement
provides for the determination of the allocation of
income tax liabilities between the entities should the
head entity default on its tax payment obligations.
The
ab) USE OF JUDGEMENTS AND ESTIMATES
to make
financial statements
requires
The preparation of
management
judgements, estimates and
assumptions that affect the application of accounting
policies and the reported amounts of assets, liabilities,
income and expenses. Actual results may differ from
these estimates. Estimates and underlying assumptions
are reviewed on an ongoing basis. Revisions to
accounting estimates are recognised in the period in
which the estimate is revised and in any future periods
affected.
In particular, information about significant areas of
estimation uncertainty and critical
in
applying accounting policies that have most significant
effect on the amount recognised in the financial
statements are described in the following notes:
judgements
• Note 6 - Trade and other receivables
• Note 7 - Inventories
• Note 8 – Non-current assets held for sale
• Note 13 – Intangible assets
• Note 15 - Provisions
The carrying amount of these items is disclosed in the
abovementioned notes.
ac) CAPITAL MANAGEMENT
The Consolidated Entity considers its share capital and
retained earnings as capital.
When managing capital, the objective is to ensure the
Consolidated Entity continues as a going concern, as
well as to maintain optimum returns to shareholders
and benefits for other stakeholders. The Consolidated
Entity also aims to maintain a capital structure that
ensures the lowest cost of capital available to the entity.
The Consolidated Entity does not have any specific
capital targets and nor is it subject to any external
capital restrictions. The board and senior management
meet monthly and review in detail the current cash
position and cashflow
to
planned expansions and takes the necessary action to
ensure sufficient funds are available.
forecasts having regard
ad) GOING CONCERN
The financial report has been prepared on a going
concern basis. This basis presumes that funds will be
available to finance future operations and that the
realisation of assets and liabilities will occur in the
normal course of business.
The Company incurred a net loss of $1,051k for the
year ended 30 June 2011. In addition:
•
•
•
its
liabilities exceeded
the Company’s current
current assets by $4,984k.
the Company is forecasting an operational cash flow
surplus of $257k for the 12 months (September
2011 to August 2012) excluding realisation of assets
held for sale.
the Company, based on the above, appears to have
a working capital deficiency of $4,727k for the next
twelve months.
These conditions give rise to a material uncertainty that
may cast significant doubt as to whether the Company
can continue as a going concern.
The following steps have been taken to address the
going concern uncertainty:
•
•
•
•
the Company believes it retains the support of the
NAB and is confident that its facilities will be
extended to 31 December 2012, thereby reducing
the working capital deficiency by $3,999k.
the Company believes it retains the support of the
major shareholder loan providers and is confident
that facilities will be extended as required thereby
reducing the working capital deficiency by up to
$1,816k.
transferring
the Company
approximately $750k in short-term loans into non-
current convertible notes.
the Company expects to realise its remaining
assets held for sale prior to end of June 2012. As
noted earlier in the report, one village is under
contract for $480k and offers totaling $750k have
been received for two other villages. Each of these
offers is in line or above book value.
final stages of
is
The Directors are confident of ongoing support from the
existing shareholders, shareholder loan providers and
the NAB.
The above actions would change the $4,727k working
capital deficiency
into a positive working capital
position.
As a result the Directors believe that the going concern
basis of preparation is appropriate, and accordingly
have prepared the financial report on this basis.
The going concern basis presumes that funds will be
available to finance future operations and that the
realisation of assets and liabilities will occur in the
normal course of business.
Should the consolidated entity be unable to continue as
a going concern, it may be required to realise its assets
and extinguish its liabilities other than in the ordinary
course of business, and at amounts that differ from
those stated in the financial statements.
to
This financial report does not include any adjustments
the recoverability and classification of
relating
recorded asset amounts or
the amounts or
classification of liabilities and appropriate disclosures
that may be necessary should the consolidated entity
be unable to continue as a going concern.
EGH ANNUAL REPORT 2010
25
For personal use only
EGH LIMITED and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2011
Note 3: Revenue
Sale of goods (units in Seniors communities)
Catering
Gain on sale of managers units
Other operating revenue
Total Operating Revenue
Rendering Services
Rent
Management
Total Service Revenue
Non Operating revenue
Interest Revenue
Reversal Impairment of Management Rights
Sale of management rights and managers unit
Gain on bargain purchase through business combination
Total Non Operating Revenue
Total Revenue
Note 4: Items included in profit/(loss)
Profit from ordinary activities before income tax
expense includes the following specific items:
Consolidated
30 June 2011
$
30 June 2010
$
-
1,443,640
-
3,151,950
4,595,590
57,944
2,043,216
12,513
318,441
2,432,114
4,537,126
4,558,982
9,096,108
4,268,343
4,246,668
8,515,011
1,661
5,126
- 215,430
80,317
-
300,873
109,924
296,416
408,001
14,099,699
11,247,998
Consolidated
30 June 2011
$
30 June 2010
$
Payments under operating leases
330,000
522,240
Interest Expense
- Director related entities
- Other
Total Interest Expense
Amortisation
- Management rights
Total Amortisation
Depreciation
- Plant & equipment
- Manager units
Total Depreciation
Gain on sale of managers units
Gain on disposal of equipment
9,523
462,964
472,487
97,251
97,251
91,719
54,938
146,657
109,924
(7,678)
12,751
408,891
421,642
42,570
42,570
55,458
15,000
70,458
12,513
(26,475)
EGH ANNUAL REPORT 2011
26
For personal use only
EGH LIMITED and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2011
Note 5: Income Tax
The components of tax expense comprise:
Current Tax
Deferred tax expense not previously brought to account
Deferred tax expense on temporary differences current year
De-recognition of deferred tax balances
Under/(over) provision for tax
Loss from ordinary Activities before income tax expense
Income Tax calculated at 30%
Tax effect on permanent differences
- Entertainment
- Options Expense
- Amortisation of intangibles
-Gain on re-measurement of equity investment due to
business combination
Under provision for income tax in prior year
Deferred tax asset not previously brought to account
Tax losses not recognised
De-recognition of deferred tax balances
Income Tax Expense
Consolidated
30 June 2011
$
30 June 2010
$
-
-
-
-
-
-
(1,051,391)
(315,417)
-
-
-
-
-
-
(546,731)
(164,019)
74
-
108,497
-
-
12,771
(88,925)
-
-
-
-
-
295,771
151,248
-
-
-
-
Tax Losses
Unused tax losses for which no deferred tax asset has been
recognised
Potential tax benefit at 30%
34,960,020
10,488,006
33,845,444
10,153,633
EGH ANNUAL REPORT 2011
27
For personal use only
EGH LIMITED and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2011
Note 6: Receivables
Trade & other debtors
Provision for doubtful debts
Total Receivables
*The provision in allowance for doubtful debt is presented in Note 20a.
Note 7: Inventories
Catering inventory
Total Inventory
Note 8: Non-current Assets Held for Sale
Managers units
Management rights
Property, plant & equipment
Total Non-current Assets Held for Sale
Consolidated
30 June 2011
$
30 June 2010
$
641,327
(61,993)
579,334
920,870
(506,781)
414,089
Consolidated
30 June 2011
$
30 June 2010
$
38,371
38,371
55,415
55,415
Consolidated
30 June 2011
$
30 June 2010
$
1,453,723
1,041,451
35,809
2,530,983
2,414,149
460,846
60,792
2,935,787
The Directors have considered the capital adequacy requirements of EGH, including cash flows
pertaining to operations and capital transactions. The Directors will continue in an orderly manner to
divest the non-core assets which includes real estate and low contribution management rights. This
is anticipated to reduce existing debt levels over the next 6 - 12 months. EGH is the entity owner of
the managers units and the property plant & equipment. The management rights are split between
various entities within the Group.
Non-current Assets held for sale will be disposed of through traditional real estate markets. The
above assets relate to the strata segment of the business
Note 9: Financial Asset
Griffith Village short term loan
Griffith Village Investment
Total Financial Asset
Note 10: Other Current Assets
Prepayments
Total Other Current Assets
Consolidated
30 June 2011
$
30 June 2010
$
-
-
-
4,198
10,000
14,198
Consolidated
30 June 2011
$
30 June 2010
$
62,601
62,601
106,378
106,378
EGH ANNUAL REPORT 2011
28
For personal use only
EGH LIMITED and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2011
Note 11: Investment in Subsidiaries
Name of Entity
Country of
Formation or
Incorporation
Equity Holding
30 June
2011
%
30 June
2010
%
Cost of Parent Entity’s
Investment
30 June
2011
$
30 June
2010
$
SunnyCove Forest Lake Pty Limited
SCV Group Limited ATF SunnyCove Cairns
Unit Trust (acquired 18 December 2003)
SCV Group Limited ATF SunnyCove
Townsville Unit Trust (acquired 21 April 2004)
SCV Group Limited ATF SunnyCove Mackay
Unit Trust (acquired 23 August 2004)
Australia
100%
100%
Australia
100%
100%
Australia
100%
100%
-
10
10
-
10
10
Australia
100%
100%
100
100
SCV No. 1 Pty Ltd
SCV No. 2 Pty Ltd
SCV No. 3 Pty Ltd
Australia
100%
100%
Australia
100%
100%
Australia
100%
100%
SCV Services Pty Ltd
Australia
100%
100%
Australia
100%
100%
1
1
1
1
1
1
1
1
-
-
SCV Manager Pty Ltd
SCV Group Limited ATF SunnyCove Kelvin
Grove Unit Trust (acquired 22 November
2004)
Compton's Villages Australia Unit Trust
(acquired 16 February 2006)
Compton's Caboolture Pty Ltd (acquired 16
February 2006)
Village Care Pty Ltd (acquired 30 June 2008)
Village Life Management Limited (acquired
24th October 2008)*
Eureka Care Communities Pty Ltd ATF
Eureka Care Communities Unit Trust
(acquired 1 July 2010)
Australia
100%
100%
Australia
100%
100%
100
1
100
1
Australia
100%
100%
3,122,643
3,122,643
Australia
100%
100%
Australia
-
100%
1
-
1
106,387
Australia
100%
-
313,206
-
3,436,076
3,229,255
*Village Life Management Limited was deregistered on 15 June 2011.
Note 12: Property Plant & Equipment
Managers Units at Cost
Accumulated Depreciation
Plant & Equipment at Cost
Accumulated Depreciation
Total Property, Plant & Equipment
Consolidated
30 June 2011
$
840,580
(103,504)
737,076
1,097,752
(676,405)
421,347
1,158,423
30 June 2010
$
-
-
-
533,886
(109,019)
424,867
424,867
EGH ANNUAL REPORT 2011
29
For personal use only
EGH LIMITED and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2011
Movements during the year ending 30 June 2011
Manager's
Units
Plant &
Equipment
Leasehold
Improvements
Total
Consolidated
Opening Written Down Value
Additions at cost
Additions through business
acquisition
Disposals
Transfer from Non-current Assets
Held for Sale
Depreciation/Amortisation Expense
Closing Written Down Value
-
-
-
-
792,014
(54,938)
737,076
424,867
82,675
13,346
(15,827)
8,005
(91,719)
421,347
-
-
-
-
-
-
-
424,867
82,675
13,346
(15,827)
800,019
(146,657)
1,158,423
Movements during the year ending 30 June 2010
Manager's
Units
Plant &
Equipment
Leasehold
Improvements
Total
Consolidated
Opening Written Down Value
Additions at cost
Disposals
Transfer (to)/from Non-current
Assets Held for Sale
Depreciation/Amortisation Expense
Closing Written Down Value
549,534
-
-
(534,534)
(15,000)
-
357,521
75,395
(28,795)
76,204
(55,458)
424,867
-
-
-
-
-
-
907,055
75,395
(28,795)
(458,330)
(70,458)
424,867
Note 13: Intangible Assets
Intellectual property - at cost
Management rights - at cost
Impairment of Management Rights*
Adjustment for impairment of management rights held for sale
Less accumulated amortisation
Plans & trademarks - at cost
Less Accumulated amortisation
Sale Rolls
Franchise Costs
Goodwill
Total Intangible Assets
Consolidated
30 June 2011
$
30 June 2010
$
1
3,019,134
(264,406)
84,624
(123,192)
2,716,161
27,749
(26,411)
1,338
138,572
601,194
1,955,515
5,412,780
1
3,823,600
-
(194,281)
3,629,320
27,827
(26,383)
1,444
-
-
1,955,515
5,586,279
Goodwill relates to the Company’s acquisition of Village Care. Pursuant to AASB 136, the Company tested the carrying
value of goodwill through a value-in-use calculation. The key assumptions in the value-in-use calculation are: (1) cash
flows for Village Care were forecast for a 5-year period based on FY 2011 cash flows and grown at 3% per year; (2) a
continuation value was estimated based on forecast year 5 cash flow, a 3% continuation growth rate and a 25% discount
rate; and (3) each of the cash flows were discounted to their present value by a 25% discount rate and the mid-year
discounting convention.
EGH ANNUAL REPORT 2011
30
For personal use only
EGH LIMITED and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2011
Consolidated
Opening Written Down
Value
Reclassification of
Franchise Costs
Additions/(Sales) at cost
Additions via business
combination
Impairment of
management rights
Transfer to Non-current
Assets Held for Sale
Depreciation/
Amortisation Expense
Closing Written Down
Value
Consolidated
Opening Written Down
Value
Additions/Sales at cost
Franchise Asset
Reverse Impairment of
Management Rights
Transfer from Non-
current Assets Held for
Sale
Depreciation/
Amortisation Expense
Closing Written Down
Value
Movements during the year ending 30 June 2011
Intellectual
Property
$
Management
Rights
$
Plans &
Trademarks
$
Sale
Rolls
$
Franchise
Costs
$
Goodwill
$
Total
$
3,629,319
1,444
-
-
1,955,515 5,586,279
1
-
-
-
-
-
-
(561,194)
(102,960)
692,613
(179,782)
(678,518)
(83,318)
(106)
-
138,572
561,194
40,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
75,612
692,613
(179,782)
-
(678,518)
-
(83,424)
1
2,716,160
1,338
138,572
601,194
1,955,515 5,412,780
Movements during the year ending 30 June 2010
Intellectual
Property
$
Management
Rights
$
Plans &
Trademarks
$
Sale
Rolls
$
Franchise
Costs
$
Goodwill
$
Total
$
1
-
-
-
-
-
1
1,790,025
(93,859)
644,558
215,430
1,115,562
(42,397)
3,629,319
1,617
-
-
-
-
(173)
1,444
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,955,515 3,747,158
(93,859)
644,558
-
-
-
215,430
- 1,115,562
-
(42,570)
1,955,515 5,586,279
*As mentioned in the Chairman’s Review, pursuant to AASB 138, the Group is unable to revalue its management rights to their fair value; however, based on
the valuation methodology used by Resort Brokers, which takes into consideration the profitability and time remaining on each management rights contract, the
fair value of the Group’s management rights is approximately $5.7m which is approximately $1.7m greater than the carrying value of the Group’s management
right (as partly recorded in non-current assets held for sale – note 8 and partly in this note 13). The Company has also applied this valuation methodology to
determine the quantum of provisions for impairment of management rights across each cash generating unit.
Note 14: Trade & Other Payables
Trade creditors and accruals
Total Trade & Other Payables
Included in the above are aggregate amounts payable to
Director related entities.
Note 15: Provisions
Current
Annual Leave Entitlements
Non-Current
Long Service Leave Entitlements
Total Provisions
Consolidated
30 June 2011
$
30 June 2010
$
2,609,641
2,609,641
2,759,995
2,759,995
131,761
164,400
Consolidated
30 June 2011
$
30 June 2010
$
138,228
229,683
16,488
154,716
27,156
256,839
EGH ANNUAL REPORT 2011
31
For personal use only
EGH LIMITED and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2011
Note 16: Dividends
No dividends were paid or proposed during FY 2011 (FY 2010 - nil).
The balance of the franking account at 30 June 2011 was $nil (FY 2010 - $nil).
Note 17: Financial Liabilities
Current Liabilities
Commercial bills - secured
Shareholder Loans
Total Current Financial Liabilities
Total Financial Liabilities
Consolidated
30 June 2011
$
30 June 2010
$
3,999,000
1,816,872
5,815,872
5,815,872
4,429,000
1,616,922
6,045,922
6,045,922
NAB FACILITY – COMMERCIAL BILLS AND ADVANCES
TERMS AND CONDITIONS
As at 30 June 2011, The Company had drawn commercial advances and commercial bill facilities ($3.999 million limit)
from the National Australia Bank (“NAB”) secured by:
• Registered mortgages over managers’ units and other real estate at its Communities
• Deed of charge over the related management rights.
• Guarantee and indemnity given the EGH and its entities including (SCV Manager Pty Ltd, SCV No. 2 Pty Ltd,
•
SCV No. 3 Pty Ltd, SCV No. 4 Pty Ltd, Village Care Pty Ltd and Compton’s Caboolture Pty Ltd)
Fixed and floating charges over the assets of Comptons Caboolture Pty Ltd, EGH Limited, SCV Manager Pty Ltd,
SCV No. 2, SCV No. 3, Village Care Pty Ltd and SCV Services Pty Ltd.
As at 30 June 2011, the Company had the following banking covenants:
Interest Coverage Ratio of 3.0 times after 1 July 2011.
1.
2. Minimum Operating Leverage Ratio of 3.50 times at 30 June 2011, 3.50 times for quarter ending September
2010, and 3.0 times for quarter ending December 2011.
Further, the Company had to meet the following milestones:
1. By 30 April 2011, reduce the balance of the bill facility by a minimum of $130,000 (achieved);
2. By 30 June 2011, reduce the balance of the bill facility by a minimum of $280,000 ($250k achieved);
3. By 31 August 2011, reduce the balance of the bill facility by a minimum of $500,000 (not yet achieved);
4. By 31 October 2011, reduce the balance of the bill facility by a minimum of $750,000; and
5. By 31 December 2011, reduce the balance of the bill facility by a minimum of $1,729,000.
Based on contracts and offers on hand for the assets held for sale, the Company is confident of meeting the balance of
the above milestones.
This facility expires on 31 March 2012. It is the directors expectation that upon completion of the asset sale program
currently being undertaken, a long term facility on commercial terms be entered into with the NAB.
The above covenants were breached during the year however the company believes that it retains the support of the
NAB.
USED/UNUSED FACILITIES
Commercial bills - secured
Total NAB facilities
30 June 2011
Used
3,999,000
3,999,000
Unused
-
-
30 June 2010
Used
4,429,000
4,429,000
Unused
-
-
EGH ANNUAL REPORT 2011
32
For personal use only
EGH LIMITED and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2011
Note 18: Share Capital
30 June 2011
Number
30 June 2010
Number
30 June 2011
$
30 June 2010
$
Fully paid Ordinary shares (number of shares)
37,857,460
239,611,742
42,300,014
40,494,564
Opening Balance
Shares issued during the year:
Share option reserve
Shares issued at $0.012
Shares issued at $0.012
Shares issued at $0.012
Shares issued at $0.012
Shares issued at $0.012
239,611,742
141,011,744
40,494,564
39,701,432
-
-
-
(320,301)
-
37,083,332
-
445,000
-
6,250,000
-
75,000
-
29,016,666
-
348,200
-
6,250,000
-
75,000
-
20,000,000
-
240,000
Shares issued on 12/08/2010
123,514,793
-
1,645,222
-
Consolidation
Shares issued for conversion of redeemable
convertible notes
Shares issued at $0.080
Shares issued at $0.080
Shares issued at $0.080
Less: Share issue costs
(326,813,748)
-
-
-
732,173
-
109,825
-
312,500
-
25,000
-
250,000
-
20,000
-
250,000
-
20,000
-
-
-
(14,597)
(69,767)
Shares on issue at end of year
37,857,460
239,611,742
42,300,014
40,494,564
Options on issue at beginning of year
Options cancelled
Options exercisable at $0.20 vesting after 36 months continuous employment and
expiring three years from date of issue
Options exercisable at $0.25 vesting after 36 months continuous employment and
expiring three years from date of issue
Options exercisable at $0.25 vesting after 36 months continuous employment and
expiring three years from date of issue
Options cancelled upon resignation; this relates to the $0.20 vesting after 36 months
Options cancelled upon resignation; this relates to the $0.25 vesting after 36 months
Options exercised
Total options on issue
* Figures for FY2011 are adjusted for the 1:10 share consolidation
Ordinary shares
30 June 2011 30 June 2010
Number of Options
955,000*
9,550,000
(890,000)
250,000
650,000
250,000
(250,000)
(650,000)
-
-
-
-
-
-
-
-
315,000
9,550,000
Ordinary shares entitle the holder to participate in dividends and proceeds on winding up of the Company in proportion to
the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a
meeting in person or by proxy is entitled to one vote, and on a poll, each share is entitled to one vote.
EGH ANNUAL REPORT 2011
33
For personal use only
EGH LIMITED and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2011
Options
In FY 2010, EGH Limited issued 955,000 (or 9,550,000 pre-consolidation) options for nil consideration to executives. Of
these, 890,000 (or 8,900,000 pre-consolidation) were cancelled on 26 August 2010 due to the departure of the
executives to whom the options were granted. The remaining 65,000 (or 650,000 pre-consolidation) expired on 14 July
2011.
In August 2010, the Company issued options to two executives Michael Bosel and Michael Hayes. Michael Bosel was
issued with 250,000 (or 2,500,000 pre-consolidation) options expiring on 2 July 2013, exercisable into ordinary shares in
the Company at 20 cents (or 2.0 cents pre-consolidation) and 625,000 options expiring on 2 July 2013, exercisable into
ordinary shares in the Company at 25 cents (or 2.5 cents pre-consolidation). These options were cancelled on 16 May
2011 upon the resignation of Mike Bosel. Michael Hayes was issued with 250,000 options expiring on 2 July 2013 and
exercisable into ordinary shares in the Company at 25 cents (or 2.5 cents pre-consolidation). Below is a table showing
the key terms of the options issued during FY 2011
Option
Holder
Mike
Bosel
Mike
Bosel
Mike
Hayes
# of
Options
(pre
consol)
# of
Options
(post
consol)
Issue
Date
Expiry
Date
Term
Risk-
free
Rate
Share
Price on
Issue
Date
Strike
Price
Volatility
Price
Per
Option
2,500,000
250,000
2-Jul-10 2-Jul-13
3.0
4.46%
0.130
0.200
138.0% 0.00951
6,250,000
625,000
2-Jul-10 2-Jul-13
3.0
4.46%
0.130
0.250
138.0% 0.00914
2,500,000
250,000
2-Jul-10 2-Jul-13
3.0
4.46%
0.130
0.250
138.0% 0.00914
EGH ANNUAL REPORT 2011
34
For personal use only
EGH LIMITED and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2011
Note 19: Cash Flow Information
(a) Reconciliation of cash
Cash at Bank and on hand
(b) Reconciliation of profit/(loss) for the period to net
cash flow from operating activities
Loss for the period
Depreciation and amortisation
Impairment - Management rights
Impairment - Goodwill
Gain on bargain purchase
Reversal Impairment
Borrowing costs amortised
Movement in provision in Doubtful Debts
Interest accrual on Loans
Loss on sale of plant and equipment
Gain on sale of Managers unit
Gain on sale of Management rights
(Increase)/decrease in:
- trade and other receivables
- inventories
- other current assets
Increase/(decrease) in:
- payables
- provision for employee benefits
Net cash flow from operating activities
(c) Businesses Acquired
Aggregate purchase consideration:
Cash and cash equivalents
Total Aggregate Purchase Consideration
Aggregate fair value of assets and liabilities acquired:
Cash
Other Identifiable Assets Acquired
Total Aggregate Fair Value of Assets and Liabilities Acquired
Goodwill on acquisition
Outflow of cash
Note 20: Financial Instruments
Overall Policy
Consolidated
30 June 2011
$
30 June 2010
$
368,747
342,694
(1,051,391)
243,908
167,507
96,899
(296,416)
-
667
(444,787)
472,487
-
-
(109,924)
(165,245)
17,044
43,778
(170,193)
(102,124)
(1,297,790)
(1,061,846)
113,028
-
-
-
(215,430)
(239,568)
90,690
145,918
26,475
(12,508)
(80,317)
(71,905)
20,968
(29,539)
941,565
(8,190)
(380,659)
313,206
313,206
-
-
111,919
497,703
609,622
296,416
201,287
-
-
-
-
-
The Board of Directors have overall responsibility for the establishment and oversight of the risk management
framework. The Board of Directors are responsible for developing and monitoring risk management policy. Risk
management policy is to identify and analyse the risks faced by the entity, to set limits and controls, and to monitor risks
and adherence to limits. Risk management policy and systems are reviewed regularly to reflect changes in market
conditions and Company’s activities. The Company aims to develop a disciplined and constructive control environment in
which all employees understand their roles and obligations.
EGH ANNUAL REPORT 2011
35
For personal use only
EGH LIMITED and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2011
a) Credit risk
Credit risk arises principally from the Consolidated Entity’s receivables and cash and cash equivalents.
Maximum exposure to credit risk
Cash and cash equivalents
Trade and other receivables
Consolidated
30 June 2011
$
30 June 2010
$
368,747
579,334
948,081
342,694
414,089
756,783
The Consolidated Entity monitors and follows-up its accounts receivable to ensure collections are being made promptly
in accordance with contractual terms and conditions and actively pursues amounts past due.
Where applicable, an allowance for impairment has been made, that represents the estimate of impairment losses in
respect to trade and other receivables. The Consolidated Entity has no concentrations of credit risk that have not been
provided for. The Consolidated Entity has not provided for the remaining amounts past due as management believes
these amounts will be recoverable.
The ageing of trade receivables at the reporting date was:
Due 0-30 Days
Past Due 30-60 Days
Past Due 60-90 Days
Past due 90 + Days
Total
Movement in allowance for doubtful debts
Opening allowance
Impairment provision written off
Increase to doubtful debts
Closing allowance
b)
Liquidity Risk
Consolidated
30 June 2011
30 June 2010
Gross
Allowance
Gross
Allowance
135,821
19,443
16,537
469,526
641,327
-
-
-
(61,993)
(61,993)
201,082
17,296
31,006
671,486
920,870
-
-
-
(506,781)
(506,781)
Consolidated
30 June 2011
$
30 June 2010
$
506,781
( 482,231)
37,443
61,993
416,091
(59,799)
150,489
506,781
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The
Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to
meet its liabilities when due. This process involves the review and updating of cash flow forecasts and, when necessary,
the obtaining of credit standby arrangements and loan facilities.
Contractual maturity analysis for financial instrument liabilities:
2011
CONSOLIDATED
Trade payables
Sundry creditors & accruals
Commercial bills
Shareholder Loans
Total
Contractual Repayment
Amount
1,055,449
1,554,192
3,999,000
1,816,872
8,425,513
1 - 3
months
1,055,449
1,554,192
500,000
-
3,109,641
3 - 6
months
-
-
1,099,000
-
1,099,000
6 – 12+
months
-
-
2,400,000
1,816,872
4,216,872
EGH ANNUAL REPORT 2011
36
For personal use only
EGH LIMITED and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2011
2010
CONSOLIDATED
Trade payables
Sundry creditors & accruals
Commercial bills
Shareholder Loans
Total
c)
Market Risk
Contractual Repayment
Amount
1 - 3
months
3 - 6
months
6 – 12+
months
2,410,182
349,813
4,429,000
1,616,922
8,805,917
1,801,520
349,813
4,429,000
-
6,580,333
608,662
-
-
-
608,662
-
-
-
1,616,922
1,616,922
Market risk is the risk that changes in market prices such as interest rates will affect the Consolidated Entity’s income or
the value of its holdings of financial instruments. The objective of market risk management is to manage and control
market risk exposures within acceptable parameters, while optimising the return.
d)
Interest Rate Risk
The Consolidated Entity’s exposure to market interest rates relates primarily to the Group’s current debt obligations. No
interest rate swaps had been entered into during the term of the facility.
The Consolidated Entity constantly analyses its interest rate exposure. Within this analysis consideration is given to
potential renewals of existing positions, alternative financing, alternate hedging positions and the mix of fixed and
variable interest rates.
Sensitivity analysis for movement in interest rates:
Variable rate instruments
Consolidated
1% increase in interest rates – effect on profit after tax &
equity*
1% decrease in interest rates – effect on profit after tax &
equity*
*Assuming a 30% tax rate
e)
Fair Value
30 June 2011
$
30 June 2010
$
(36,303)
(37,759)
36,303
37,759
The carrying amount of the Consolidated Entity’s financial assets and financial liabilities approximate their fair value.
Note 21: Commitments for Expenditure
a)
Operating Leases
Minimum lease payments under non-cancellable operating leases for the provision of office space, equipment, linen
services and community leases are estimated to be:
Within 1 year
Greater than 1 year but not longer than 5 years
Greater than 5 years
Total
Consolidated
30 June 2011
$
327,074
1,308,294
2,634,488
4,269,856
30 June 2010
$
386,549
1,315,175
2,961,561
4,663,285
The amount disclosed for the lease of office space does not include any adjustments for CPI or market rental reviews
EGH ANNUAL REPORT 2011
37
For personal use only
EGH LIMITED and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2011
Note 22: Earnings Per Share
Net loss used in calculating basic earnings per share
Net loss used in calculating diluted earnings per share
Weighted average number of ordinary shares used in
calculating basic earnings per share adjusted for
consolidation
Consolidated
30 June 2011
$
30 June 2010
$
(1,051,391)
(1,051,391)
(1,061,848)
(1,061,848)
35,396,851
19,085,941
Weighted average number of ordinary shares & potential
ordinary shares used in calculating diluted earnings per share
Basic earnings per share (dollars per share)
Diluted earnings per share (dollars per share)
35,396,851
19,085,941
(0.0297) Cents
(0.0297) Cents
(0.0556) Cents
(0.0556) Cents
Note 23: Related Parties
Number of Shares Held: Directors and Executives
Balance
1 July
2010 *
Received
as
Remuner-
ation *
Shares
Acquired *
Options
Exercised*
Net
Change
Other *
Balance
30 June
2011*
Held in
Escrow
61,334
-
30,000
-
-
Specified Directors:
Andrew Kemp
221,347
246,401
Paul Fulloon
-
-
Lachlan McIntosh
3,404,167
2,447,607
Jury Wowk
David Rosenblum
Total
Executives:
Mike Bosel
Mike Hayes
Loretta Byers
Greg Rekers
Kerry Potter
Sharon Alderwick
Total
375,572
-
-
-
4,001,086
2,694,008
91,334
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
* Figures for FY2011 are adjusted for the 1:10 share consolidation
-
-
-
-
-
-
-
-
-
-
-
-
-
307,735
529,082
-
-
2,477,607
5,881,774
-
-
375,572
-
2,785,342
6,786,428
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
EGH ANNUAL REPORT 2011
38
For personal use only
EGH LIMITED and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2011
Number of Options Held: Directors and Executives
Balance
1 July
2010
Received as
Remuner-
ation
Options
Exercised
(1)
Net
Change
Other
Balance
30 June
2011
Total vested
as at
30 June
2011
Held in
Escrow
Specified Directors:
Andrew Kemp
Paul Fulloon
Lachlan McIntosh
Jury Wowk
David Rosenblum
Total
Executives:
Loretta Byers
Mike Bosel
Mike Hayes
Total
-
-
-
-
-
-
-
-
-
-
-
-
65,000*
-
-
65,000
-
875,000**
250,000
1,125,000
*these options expired on 14 July 2011
**these options were cancelled on 16 May 2011.
For further detail of the options, please refer to note 18.
Related Party Transactions
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(875,000)
-
(875,000)
65,000
-
250,000
315,000
65,000
-
250,000
315,000
-
-
-
-
-
-
-
-
-
-
During the financial year Kathlac, an entity associated with Lachlan McIntosh, has loaned the company $208,105.74 on
interest-free terms.
During the financial year Sothertons, (of which Lachlan McIntosh is a shareholder) received tax advice related fees of
$19,708.50 on commercial terms.
Gladstone, Griffith and Elizabeth Vale, managed by Eureka on commercial terms are part-owned by Lachlan McIntosh.
Former Chairman Jury Wowk made loans to the company totalling $65,000 as at 30 June 2011. Including interest, as at
30 June 2011, Mr. Wowk was owed $69,583.90 in respect of these loans.
Note 24: Ultimate Parent Entity
The parent entity within the group is EGH Limited, which is the ultimate parent entity within Australia.
Note 25: Share Based Payments
In August 2010 the Company paid the following Share based payments as voted on in the Company’s EGM on 10
August 2010:
Recipient
Amount of Payment
Share Price ($)
Share Price at
Announcement ($)
22 Capital Pty Ltd
150,000
Pamela Pointon
Andrew Kemp
50,000
36,960
0.15
0.15
0.15
0.13
0.13
0.13
Note 26: Contingent Liability
The Directors are of the opinion that provisions are not required in respect of these matters, as it is not probable that a
future sacrifice of economic benefits will be required or the amount is not capable of reliable measurement.
A contingent liability of $40,000 exists due to current bank guarantee facilities in place secured by the Company.
EGH ANNUAL REPORT 2011
39
For personal use only
EGH LIMITED and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2011
Note 27: Auditors’ Remuneration
Audit and review services
Total
Note 28: Subsequent Events
Consolidated
30 June 2011
$
30 June 2010
$
56,500
56,500
53,205
53,205
The company has raised $210k through a convertible note issuance.
The Company has one non-current asset held for sale under contract and offers for two more.
Other than as disclosed in this report no other matter or circumstance has arisen since the end of the financial year that
has significantly affected, or may significantly affect, the consolidated entity’s operations, the results of those operations
or the consolidated entity’s state of affairs, in subsequent financial years.
Note 29: Parent Entity Disclosures
Information relating to EGH Limited (parent entity),
Results of the parent entity
Consolidated
30 June 2011
$
30 June 2010
$
Loss for the period
Other comprehensive income
Total comprehensive income for the period
(1,730,649)
(2,049,714)
-
-
(1,730,649)
(2,049,714)
Financial position of parent entity at year end
Current assets
Total assets
Current liabilities
Total liabilities
Total equity of the parent entity comprising of:
Share capital
Revaluation reserve
Retained earnings
Total equity
(1,503,083)
6,270,015
6,014,188
11,318,449
1,127,055
12,042,545
6,967,926
12,042,545
42,235,014
40,494,563
-
-
(43,188,753)
(41,218,856)
(953,739)
(724,096)
In the process of finalising the annual report it was discovered that the incorrect comparatives were used in the 4E
lodged on 31 August 2011. The incorrect comparative figures were only reported at note 19 in Appendix 4E 2011.
EGH ANNUAL REPORT 2011
40
For personal use only
EGH LIMITED and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2011
Note 30: Segment Information
The consolidated entity operates within three business segments all of which involve the management of Seniors’
Communities. The consolidated entity operates only in Australia and is divided into the portfolios of various types of
management agreements which management regularly reviews, as follows:
•
Strata / Leasehold – individual investors where income is derived from letting fees, caretaking fees & catering
services.
• Retail / Wholesale – the wholesale segment derives management fees based on occupancy rates, whereas the
retail segment operates under a managed investment scheme. Please note the Retail segment has now been re-
classified as Discontinued Operations due to the breakdown of the Managed Investment Schemes.
•
Village Care Ltd – the Village care model works under the Deferred Management Fee (DMF) structure
• Management Lease – typically lease type arrangements whereby EGH derives a management fee based on
revenue / profitability of the portfolio. The agreements are typically with larger operators (YVE) and individual
owners.
Strata/Leasehold
Retail/Wholesale
30-Jun-11
30-Jun-10
30-Jun-11
30-Jun-10
Management Lease
30-Jun-11
30-Jun-10
Village Care
Discontinued Operations
Total
30-Jun-11
30-Jun-10
30-Jun-11
30-Jun-10
30-Jun-11
30-Jun-10
Revenue
External
Total
Unallocated revenue
- Interest
Total Revenue
Segment Result
Profit/(Loss)
Unallocated corporate items
- Interest expense
Profit from ordinary activities
before income tax
Net Profit/(Loss)
Assets
Segment assets
Unallocated corporate assets
Total Assets
Liabilities
Segment Liabilities
Unallocated corporate liabilities
Total Liabilities
Other information
Depreciation
Amortisation
Impairment - Debtors
Impairment - Inventories
Impairment - Intangibles
Fixed Assets Additions
5,398,937
5,398,937
3,241,123
3,241,123
1,840,777
1,840,777
726,297
726,297
5,420,713
5,420,713
5,510,941
5,510,941
1,331,271
1,331,271
1,384,667
1,384,667
26,317
(25,522)
28,146
(113,587)
(287,079)
(92,953)
263,191
(76,628)
6,723,990
4,095,779
256,505
117,278
233,319
639,009
-
309,096
-
220,534
-
-
2,133,468
2,134,323
372,848
2,742,644
120,953
97,251
-
-
264,406
96,020
-
-
(482,231)
-
-
-
-
-
-
-
-
-
-
6,523
-
-
-
-
-
-
-
-
-
-
-
-
-
-
209,479
-
25,247
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,727,167
2,727,167
(515,115)
-
-
-
-
-
-
-
-
13,991,698
13,991,698
106,340
1,661
14,099,699
13,590,195
13,590,195
379,843
5,126
13,975,164
30,575
(609,479)
(472,487)
(1,051,391)
(823,805)
438,770
(678,035)
(1,061,846)
(1,051,391)
(1,061,846)
9,347,282
803,957
10,151,239
6,347,380
3,532,327
9,879,707
1,541,487
7,038,742
8,580,229
2,742,644
6,320,112
9,062,756
146,200
97,251
-
-
264,406
96,020
-
6,523
(482,231)
-
209,479
-
EGH ANNUAL REPORT 2011
41
For personal use only
EGH LIMITED and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2011
Note 31: Discontinued Operations
Results of discontinued operation
Revenue
Expenses
Results from operating activities
Income tax expense
Results from operating activities, net of income tax
Loss for the period
Basic earnings (loss) per share (cents)
Diluted earnings (loss) per share (cents)
Cash flows from discontinued operation
Net cash from operating activities
Net cash from investing activities
Net cash from financing activities
Net cash from (used in) discontinued operation
Consolidated
30 June 2011
$
30 June 2010
$
-
-
-
-
-
-
-
-
-
-
-
-
2,727,167
(3,242,282)
(515,115)
-
(515,115)
(515,115)
(0.22)
(0.22)
(525,825)
-
-
(525,825)
EGH ANNUAL REPORT 2011
42
For personal use only
EGH LIMITED and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2011
Note 32: Business Combination
On 1 July 2011, the Company acquired 100% of the units of Eureka Care Communities Pty Ltd as trustee of the Eureka
Care Communities Unit Trust (Eureka). Eureka holds the management rights for 11 profitable wholesale villages. The
acquired business provided a number of quality management contracts to the Company.
The acquired business has contributed the following the Company from 1 July 2010 to 30 June 2011:
Revenue
Profit
Reserves
$ 3,090,171
$ 169,883
$ nil
Details of the net assets acquired and goodwill are as follows:
Purchase consideration
Fair value of new identifiable assets acquired (refer below)
Gain on re-measurement of equity investment due to business combination
$
313,206
609,622
296,416
The Company was able to negotiate a favourable purchase price for Eureka. An independent valuation of the
management rights held by the acquired entity was subsequently carried out. The valuation was found to be higher than
the purchase consideration. The resulting gain has been recognised in the Statements of Comprehensive Income.
The assets and liabilities arising from the acquisition are as follows:
Cash
Trade receivables
Other assets
Plant & equipment
Management rights
Trade payables
Other liabilities
Net liabilities acquired
Acquiree's
Carrying
Amount
$
111,919
1,041
4,393
11,600
-
(28,355)
(183,586)
(82,988)
Fair Value
$
111,919
1,041
4,393
11,600
692,610*
(28,355)
(183,586)
609,622
*The quantum of identifiable intangible assets to bring to account, for the management rights acquired in
ECC, was determined by estimating the fair value of the management rights under advice of Resort Brokers
Australia Pty Ltd who assisted with the valuation of each management rights contract in accordance with
generally used market metrics. The generally-used market metrics for valuation of management rights are:
(1) determining the net operating cash flow of the management rights on an owner-operator basis; and (2)
determining an appropriate discount rate to apply to the owner-operator cash flows.
EGH ANNUAL REPORT 2011
43
For personal use only
EGH LIMITED and controlled entities
Directors’ Declaration
FOR THE YEAR ENDED 30 JUNE 2011
In the directors' opinion:
a)
b)
c)
d)
the attached financial statements and notes thereto comply with the Corporations Act 2001, the Accounting
Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements;
the attached financial statements and notes thereto comply with International Financial Reporting
Standards as issued by the International Accounting Standards Board as described in note 1 to the
financial statements;
the attached financial statements and notes thereto give a true and fair view of the consolidated entity's
financial position as at 30 June 2011 and of its performance for the financial year ended on that date;
there are reasonable grounds to believe that the company will be able to pay its debts as and when they
become due and payable; and
The Directors have been given a declaration by the Managing Director and Financial Controller of the consolidated entity
required by Section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of directors made pursuant to section 295(5) of the Corporations Act 2001.
Lachlan McIntosh
Director
Dated this 30th day of September, 2011
EGH ANNUAL REPORT 2011
44
For personal use only
EGH LIMITED and controlled entities
Independent Auditor's Report
FOR THE YEAR ENDED 30 JUNE 2011
INDEPENDENT AUDIT REPORT TO MEMBERS OF EUREKA GROUP HOLDINGS LIMITED
To the members of Eureka Group Holdings Limited
We have audited the accompanying financial report of Eureka Group Holdings Limited ("EGH Limited") which comprises
the statement of financial position as at 30 June 2011, the statement of comprehensive income, the statement of
changes in equity and the statement of cash flows for the year then ended, notes comprising a summary of significant
accounting policies, other explanatory information, and the directors’ declaration of EGH Limited (the company) and the
consolidated entity. The consolidated entity comprises the company and the entities it controlled at the year’s end or
from time to time during the financial year.
Directors’ Responsibility for the Financial Report
The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in
accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the
directors determine is necessary to enable the preparation of the financial report that is free from material misstatement,
whether due to fraud or error. In Note 2, the directors also state, in accordance with Accounting Standard AASB 101
Presentation of Financial Statements, that the financial statements comply with International Financial Reporting
Standards.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in
accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical
requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about
whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material
misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity’s preparation and fair presentation of the financial report in order to
design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall
presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the
directors of EGH Limited, would be in the same terms if given to the directors as at the time of this auditor’s report.
Tel: 61 7 3226 3555 | Fax: 61 7 3226 3500 | www.pkf.com.au
PKF | ABN 83 236 985 726
Level 6, 10 Eagle Street | Brisbane | Queensland 4000 | Australia
GPO Box 1078 | Brisbane | Queensland 4001
The PKF East Coast Practice is a member of the PKF International Limited network of legally independent member firms. The PKF East Coast Practice is also a member of the PKF
Australia Limited national network of legally independent firms each trading as PKF. PKF East Coast Practice has offices in NSW, Victoria and Brisbane. PKF East Coast Practice
does not accept responsibility or liability for the actions or inactions on the part of any other individual member firm or firms.
Liability limited by a scheme approved under Professional Standards Legislation.
EGH ANNUAL REPORT 2011
45
For personal use only
EGH LIMITED and controlled entities
Independent Auditor's Report
FOR THE YEAR ENDED 30 JUNE 2011
Auditor’s Opinion
In our opinion:
(a)
the financial report of EGH Limited and the consolidated entity is in accordance with the Corporations Act 2001,
including:
(i)
(ii)
giving a true and fair view of the Company’s and consolidated entity’s financial position as at 30 June
2011and of their performance for the year ended on that date; and
complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and
the Corporations Regulations 2001; and
(b)
the consolidated financial statements and notes also comply with International Financial Reporting Standards as
disclosed in Note 2.
Report on the Remuneration Report
We have audited the Remuneration Report included in pages 8 to 10 of the directors’ report for the year ended 30 June
2011. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in
accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
Opinion
In our opinion, the Remuneration Report of EGH Limited for the year ended 30 June 2011, complies with section 300A of
the Corporations Act 2001.
Emphasis of Matter
Without qualifying our opinion, we draw attention to Note 2 (ad) in the financial report which indicates that the
consolidated entity incurred a net loss of $1,051,391 during the year ended 30 June 2011 and, as of that date, has a net
current asset deficiency of $4,983,705 and was in breach of its banking covenants as disclosed in note 17. These
conditions, along with other matters as set forth in Note 2 (ad), indicate the existence of a material uncertainty which may
cast significant doubt about the consolidated entity's ability to continue as a going concern.
PKF
Chartered Accountants
Albert Loots
Partner
Dated at Brisbane this 30th day of September 2011
EGH ANNUAL REPORT 2011
46
For personal use only
EGH LIMITED and controlled entities
Corporate Directory
FOR THE YEAR ENDED 30 JUNE 2010
Postal Address
PO BOX 5538, West End Qld 4104
Board of Directors
Lachlan McIntosh (Non - Executive Chairman)
David Rosenblum
Paul Fulloon
Company Secretary
James Fay
Solicitors
HWL Ebsworth
Level 2 Brisbane
500 Queen St,
Brisbane Qld 4000
Tel:
Fax:
07 3002-6790
1300 368 717
Auditors
PKF Chartered Accountants
Level 6, 10 Eagle Street
Brisbane Qld 4000
Tel:
Fax:
07 3226-3555
07 3226-3500
Share Registry
Link Market Services – Brisbane
Level 12, 300 Queen Street
Brisbane Qld 4000
Call Centre
Fax
02 8280-7454
07 3228-4999
Listing Details
ASX Limited Brisbane
Code: Shares - EGH
EGH ANNUAL REPORT 2011
47
For personal use only