Euroz Limited
2016 Annual Report
PO Box Z5036
T: +61 8 9488 1400
Level 18 Alluvion
St Georges Terrace
F: +61 8 9488 1477
58 Mounts Bay Road
Perth 6831
PERTH WA 6000
Western Australia
euroz.com
Euroz Limited
ACN 000 364 465
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Contents
Euroz Limited Contact Details
EUROZ LIMITED ANNUAL REPORT 2016
EUROZ LIMITED ANNUAL REPORT 2016
77
Corporate Directory
Executive Chairman’s Report
Organisational Chart
Board of Directors
Stockbroking and Corporate Finance
Managing Director’s Report
Euroz Securities Operating Divisions
Euroz Securities Director’s Profiles
Funds Management
Westoz Funds Management
Prodigy Investment Partners
Wealth Management
Entrust Private Wealth Management
Euroz Community Activities
Financial Report
1
2
3
6
8
8
9
10
13
13
14
16
16
17
19
EUROZ SECURITIES LIMITED
Level 18 Alluvion
58 Mounts Bay Road
Perth 6831
PO Box Z5036
St Georges Terrace
T: +61 8 9488 1400
F: +61 8 9488 1477
Euroz Securities Limited
ACN 089 314 983
AFSL 243302
PERTH WA 6000
Western Australia
eurozsecurities.com
Participant of the ASX Group
WESTOZ FUNDS MANAGEMENT PTY LTD
Level 18 Alluvion
58 Mounts Bay Road
Perth 6831
PO Box Z5036
St Georges Terrace
T: +61 8 9321 7877
F: +61 8 9321 8288
PERTH WA 6000
Western Australia
westozfunds.com.au
Westoz Funds Management Pty Ltd
ACN 106 677 721
AFSL 285607
OZGROWTH LIMITED
Level 18 Alluvion
58 Mounts Bay Road
Perth 6831
PO Box Z5036
St Georges Terrace
T: +61 8 9321 7877
F: +61 8 9321 8288
PERTH WA 6000
Western Australia
ozgrowth.com.au
Ozgrowth Limited
ACN 126 450 271
WESTOZ INVESTMENT COMPANY LIMITED
Level 18 Alluvion
58 Mounts Bay Road
Perth 6831
PO Box Z5036
St Georges Terrace
T: +61 8 9321 7877
F: +61 8 9321 8288
PERTH WA 6000
Western Australia
westoz.com.au
ACN 113 332 942
Westoz Investment Company Limited
PRODIGY INVESTMENT PARTNERS LIMITED
FLINDERS INVESTMENT PARTNERS PTY LTD
Level 23
Goldfields House
1 Alfred Street
SYDNEY NSW 2000
Level 15
385 Bourke Street
MELBOURNE
VIC 3000
Level 23
Goldfields House
1 Alfred Street
SYDNEY NSW 2000
DALTON STREET CAPITAL PTY LTD
T: +61 2 8651 3490
prodigyinvest.com.au
Prodigy Investment Partners Limited
ACN 600 471 430
AFSL 466173
T: +61 3 9909 2690
flindersinvest.com.au
Flinders Investment Partners Pty Ltd
ACN 604 121 271 AFSL 466173
Flinders Investment Partners Pty Ltd is a
Corporate Authorised Representative of
Prodigy Investment Partners Limited.
T: +61 2 8651 3490
Dalton Street Capital Pty Ltd
ACN 609 114 034 AFSL 466173
Dalton Street Capital Pty Ltd is a Corporate
Authorised Representative of Prodigy
daltonstreetcapital.com
Investment Partners Limited.
ENTRUST PRIVATE WEALTH MANAGEMENT PTY LTD
Level 18 Alluvion
PO Box Z5034
58 Mounts Bay Road
Perth 6831
PERTH WA 6000
Western Australia
entrustpwm.com.au
T: +61 8 9476 3900
F: +61 8 9321 6333
E: info@entrustpwm.com.au
Entrust Private Wealth Management Pty Ltd
ACN 100 088 168
AFSL 222152
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EUROZ LIMITED ANNUAL REPORT 2016
1
Corporate Directory
Registered Office
Level 18 Alluvion
58 Mounts Bay Road
PERTH WA 6000
Telephone: (08) 9488 1400
Facsimile: (08) 9488 1477
Email:
info@euroz.com
Website: www.euroz.com
Auditor
PKF Mack
Chartered Accountants
Level 4
35 Havelock Street
WEST PERTH WA 6005
Telephone: 08 9426 8999
Bankers
Westpac Banking Corporation
109 St Georges Terrace
PERTH WA 6000
Share Registry
Computershare Investor
Services Pty Ltd
172 St Georges Terrace
PERTH WA 6000
Telephone: 1300 787 575
Securities Exchange Listings
Euroz Limited shares are listed on
the Australian Securities Exchange
(ASX: EZL).
Corporate Governance
Statement
www.euroz.com/investor-relations/
corporate-governance
Board Of Directors
Andrew McKenzie
Executive Chairman
Jay Hughes
Executive Director
Doug Young
Executive Director
Greg Chessell
Executive Director
Russell Kane
Executive Director
Simon Yeo
Executive Director
Anthony Brittain
Executive Director
Company Secretary
Chris Webster
2
EUROZ LIMITED ANNUAL REPORT 2016
Executive Chairman’s Report
Euroz Limited is a diversified financial
services company.
Funds Management
Westoz Funds Management
Euroz Limited reported a turnaround in profitability in the past
year with a net profit after tax of $2.56 million.
The Directors have declared a final fully franked dividend
of 2.25 cents per share. When combined with the interim
dividend of 1.75 cents this amounts to a total of 4 cents per
share fully franked for the full year.
This turnaround in profitability in the past financial year was
driven by a second half improvement in Euroz Securities and a
rebound in our resource related markets.
Our Western Australian focus has delivered excellent returns
to shareholders over time and through a number of business
cycles. In our 16 year history we have generated significant
cash flow and paid over $181.7 million in fully franked dividends
to our shareholders.
In the context of our historical experience the past two years
have continued to be challenging but these quieter markets
have provided us the opportunity to build our funds and
wealth management businesses. Developing these businesses
has required capital, time and patience but we remain
confident we are transforming our overall business into a much
stronger, more sustainable and valuable Company.
Our strategy during the past two difficult years has
been twofold:
The Listed Investment Companies Westoz Investment
Company (“WIC”) and Ozgrowth Limited (“OZG”) are
interlinked with their investment universe of Western Australia
and Western Australian connected companies. Whilst
commodity prices have rebounded in the second half, Western
Australia continues to feel the wider effects of the downturn
from the past resources boom.
An improved second half helped WIC and OZG report gross
investment returns of 0.4% and 2.6% respectively for the
financial year.
Our significant long term investments in WIC and OZG will
continue to have a material effect on our reported profitability.
During the past financial year, despite positive performance,
the slightly lower share prices of WIC and OZG affected our
Group profitability by $4.8 million.
Investors should be reminded of the potential performance
fees these funds can generate and that increases in the share
prices of WIC and OZG can also have a very positive effect on
our profitability.
Prodigy Investment Partners
Prodigy Investment Partners (“PIP”) was established In
July 2014 as a platform to create a multi boutique funds
management business.
– Retain our core team of experienced staff so we
can enjoy the excellent transactional upside all our
businesses experience in strong commodities and
equities markets.
The first of these boutique partnerships, Flinders Investment
Partners was launched in July 2015. This specialist small
companies manager is headed by Andrew Mouchacca and
Richard Macdougall.
– Establish and grow our recurring revenues in wealth
and funds management which will not only protect us
during inevitable downturns in our markets but create
significant shareholder value over time.
This diversification strategy has been funded and launched
during very difficult times and being able to pay modest
dividends of 4 cents per share fully franked for this past
financial year is a reflection of the underlying strength of
our businesses.
Stockbroking
Euroz Securities
Our Euroz Securities business experienced a solid uplift
in profitability versus the previous year driven by an
improvement in corporate revenues.
Our team delivered Equity Capital Market (“ECM”) raisings
of $306.6 million versus $143 million in the previous year.
Broking volumes and ECM activity in our markets over the
past year were still well below normal long term averages
but we can report an improved pipeline of activity in the new
financial year with initial public offerings and mergers and
acquisition mandates in both the resources and industrial
sectors.
A number of these larger raisings did not settle until July 2016
which has given us an excellent start to the new financial year.
We are pleased the Flinders Emerging Companies Fund has
been approved by Zenith and Lonsec and most importantly
returned 23.9% from inception (31 August 2015) to 30 June
2016. These independent research approvals, establishment
of the fund on a number of wrap platforms, excellent first year
performance by the fund and the overwhelmingly positive
feedback our distribution team are receiving from the market
are significant milestones. It takes time to establish a brand
and track record and we are confident funds will steadily flow
into this product.
The second partnership, Dalton Street Capital, was launched
in May 2016. Dalton Street is headed by former senior Credit
Suisse executives Alan Sheen and Nick Selvaratnam. We
believe the strong growth in alternative asset classes will
continue and this absolute return fund has the track record
and credentials to capitalise on this trend.
Our Prodigy strategy has the potential to add significant value
to our Group and whilst it will take time and patience to evolve
we have absolute confidence in the first class team that will
deliver on our objectives.
Wealth Management
Entrust Private Wealth Management
Entrust was acquired in July 2016 to provide a wealth
management platform for our business. We aim to grow this
business organically and believe we have an excellent offering
to attract quality advisers.
EUROZ LIMITED ANNUAL REPORT 2016
EUROZ LIMITED ANNUAL REPORT 2016
3
3
EUROZ LIMITED
ASX CODE: EZL
A diversified financial services company
STOCKBROKING
AND CORPORATE
FINANCE
FUNDS
MANAGEMENT
WEALTH
MANAGEMENT
100%
80%
100%
100%
Euroz Securities
Prodigy Investment
Partners
Westoz Funds
Management
Entrust Private Wealth
Management
Manager
Manager
Dalton
Street
Capital
Flinders
Investment
Partners
Future
Investment
Partner
Ozgrowth Limited
Westoz Investment
Company Limited
ASX CODE: OZG
ASX CODE: WIC
DALTON STREET CAPITAL
?
(38.8% Equity Stake)
(26.2% Equity Stake)
I would like to thank our staff, clients and shareholders for
their patience and support in building a Company with an
increasing base of underlying revenues whilst still retaining
transaction based upside across a wider variety of diversified
businesses.
ANDREW MCKENZIE
Executive Chairman
We are excited by the wealth management expertise Entrust
has bought to the firm and in particular the opportunity to
offer professional and sophisticated advice to clients across all
of our businesses.
During the year we have integrated the operations of Entrust
with our wider business and achieved a number of forecast
business synergies.
Entrust has a significant high net worth client base with FUM
of $581 million at 30 June 2016 which combined with existing
Euroz Securities FUM creates a business currently managing
$762 million for clients.
Summary
The Directors are pleased with the progress achieved to
transform our business over the past year. We have managed
to maintain profitability and pay dividends whilst we build a
number of new businesses, all in a Western Australian market
which on balance is still relatively subdued.
As we evolve, growing our total funds under management
(FUM) across all of our businesses is a key objective and will
be an important measure of our future success. Total group
FUM as at 30 June 2016 was $962 million.
Our strong staff ownership of 42% has been critical in our past
success and remains the foundation for our team approach to
all of our businesses.
4
EUROZ LIMITED ANNUAL REPORT 2016
Euroz Limited profit before tax & net profit after tax
60
50
40
30
20
10
0
n
o
i
l
l
i
m
$
-10
-20
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
2012
2013
2014 2015
2016
Profit before tax
Net profit after tax
Euroz Limited dividend history
e
r
a
h
s
r
e
p
s
t
n
e
C
30
25
20
15
10
5
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
2012
2013
2014 2015
2016
2H Dividend per share
1H Dividend per share
Euroz Limited NTA per share
100
80
60
40
20
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
2012
2013
2014 2015
2016
Cents per share
n
o
i
l
l
i
m
$
EUROZ LIMITED ANNUAL REPORT 2016
5
Euroz Group Funds Under Management (FUM)*
$1,000
$900
$800
$700
$600
$500
$400
$300
$200
$100
$0
)
m
A
$
(
M
U
F
*As at 30 June 2016
Ozgrowth $58m
Westoz Investment Company $122m
Flinders Investment Partners $8m
Dalton Street Capital $2m
Entrust $581m
Euroz Securities $191m
Total $962 MILLION FUM
6
EUROZ LIMITED ANNUAL REPORT 2016
Board of Directors
Andrew McKenzie
Executive Chairman
Jay Hughes
Executive Director
Doug Young
Executive Director
Andrew is Executive Chairman of
Euroz Limited and Euroz Securities, an
Executive Director of Westoz Funds
Management, Prodigy Investment
Partners, Flinders Investment Partners,
and Dalton Street Capital. He is a
board member of the Stockbrokers
Association of Australia (SAA) and
the PLC Foundation, as well as a
PLC Council member. Andrew holds
a Bachelor of Economics from the
University of Western Australia (UWA),
is a member (Master Stockbroking)
of the Stockbrokers Association
of Australia and was previously an
Associate of the Financial Services
Institute of Australasia (FINSIA) and
the Australian Institute of Company
Directors (AICD).
Jay has worked in stockbroking since
1986, starting his career on the trading
floor. He is Executive Chairman of
Westoz Investment Company and
Ozgrowth and an Executive Director
of Westoz Funds Management, Euroz
Securities and Prodigy Investment
Partners. He is an Institutional Dealer
specialising in promoting Australian
stocks to international clients.
Jay holds a Graduate Diploma in
Applied Finance and Investment
from the Financial Services Institute
of Australasia (FINSIA). He was
recognised as an affiliate of the
ASX in December 2000 and was
admitted in May 2004 as a Practitioner
Member (Master Stockbroking) of the
Stockbrokers Association of Australia
(SAA).
Doug has over 30 years of corporate
finance experience, covering
mergers and acquisitions, debt
and equity raisings in domestic
and international financial markets,
corporate restructuring and other
corporate finance transactions. Doug
is an Executive Director of Euroz
Limited and Euroz Securities. He
holds a Bachelor of Commerce from
the University of Western Australia
(UWA) and is a fellow and graduate
of the Financial Services Institute of
Australasia (FINSIA). Doug is Chairman
of the Audit Committee.
Greg Chessell
Executive Director
Greg is the Head of Research at Euroz
Securities and is our senior resources
analyst. He spent 10 years working as
a geologist in WA prior to entering
the stockbroking industry in 1995.
Greg is an Executive Director of Euroz
Limited and Euroz Securities. Greg
holds a Bachelor of Applied Science
in Geology from the University of
Technology, Sydney (UTS) and a
Graduate Diploma in Business from
Curtin University. Greg is a member of
the Audit Committee.
EUROZ LIMITED ANNUAL REPORT 2016
7
Board of Directors
Russell Kane
Executive Director
Simon Yeo
Executive Director
Anthony Brittain
Executive Director
Russell has worked in the stockbroking
industry since 1994, and joined
Euroz Securities in 2001. Russell is a
Director of Euroz Limited and Euroz
Securities. He holds a Bachelor of
Business from Edith Cowan University
and is responsible for servicing
both domestic institutions and high
net worth clients, with a particular
emphasis on WA based resources
and industrials stocks. Russell is
a Responsible Executive of Euroz
Securities.
Simon has worked in the Stockbroking
industry since 1993. In November
2000 he established the Private Client
Division of Euroz Securities before
moving to a specialised role within
our Institutional Sales team in 2013.
Simon is an Executive Director of Euroz
Limited and Euroz Securities. Simon
holds a Bachelor of Commerce from
the University of Western Australia
(UWA) and was previously a chartered
accountant and Member of the
Institute of Chartered Accountants
(CA). He is also on the board of The
Australian Chamber Orchestra (ACO).
Simon is a member of the Audit
Committee.
Anthony is the Chief Operating and
Financial Officer and an Executive
Director of Euroz Limited, Euroz
Securities, Entrust Private Wealth
Management, Prodigy Investment
Partners, Flinders Investment Partners
and Dalton Street Capital. Prior to
joining Euroz, Anthony spent 7 years
at a WA stockbroker and 7 years in
London and Singapore with a UK fund
manager. Anthony holds a Bachelor
of Commerce from the University
of Western Australia (UWA), is a
member of the Institute of Chartered
Accountants (CA), holds a Graduate
Diploma in Applied Finance and
Investment from the Financial Services
Institute of Australasia (FINSIA), is a
Graduate of the Australian Institute
of Company Directors and is a
member (Master Stockbroking) of the
Stockbrokers Association of Australia
(SAA).
8
EUROZ LIMITED ANNUAL REPORT 2016
Stockbroking and Corporate Finance
Whilst this renewed sentiment in our investment world is
clearly well received and looks to continue for the foreseeable
period, Euroz Securities is actively seeking to smooth out our
earnings profile by growing recurring base revenue streams,
while still maintaining our proven and significant leverage to
Western Australian transactional business.
The integration of Entrust Private Wealth Management
has been an important component in growing our wealth
management business. Our Private Client Advisers now have
access to all the tools and knowledge to offer their clients a
full suite of professional financial services.
A Euroz Securities Private Client Adviser can offer their
clients a quality suite of the best in class wealth management
offerings and direct access to our in-house core WA focussed
research and corporate products.
Our research team has again been at the forefront of bringing
in new, profitable, investment ideas to the group, with
coverage on 23 new stocks being initiated over the period.
The institutional sales team has witnessed a renewed interest
in resources and mining related stocks seeing clients returning
to the sector.
Corporate revenues were also stronger in the second half of
the financial year. Euroz Securities raised over $300 million of
new equity for some 20 companies in FY’16 versus $142 million
the previous year.
In summary, the core Euroz Securities team has remained in
place over what has been a relatively tough period. That team
is now poised and ready to execute significant transactions
coming into what looks like an improving macro environment
in our core areas of focus.
ROB BLACK
Managing Director
Managing Director’s Report
The 2016 Financial Year is best described as a story of
two halves for Euroz Securities.
The first half saw a continuation of the previous year’s theme
of low commodity prices, a depressed Western Australian
economy and continued overall poor sentiment which
weighed heavily on our trading and corporate activity.
Since January, driven by higher gold and base metal prices,
we have witnessed a significant and sustained turnaround
in our core area of the market, resulting in greatly improved
corporate activity and an improvement in trading activity.
For the year, Euroz Securities recorded a Net Profit after Tax of
$3.5 million versus the 2015 contribution of $1.8 million.
EUROZ LIMITED ANNUAL REPORT 2016
9
Stockbroking and Corporate Finance
Euroz Securities Operating Divisions
Research
Corporate Finance
– Team of seven experienced analysts with access to the
– Our corporate business is focused on developing strong,
latest online news and financial information
long term relationships with our clients
– Based on fundamental analysis, strict financial
– Clients are provided with specialised Corporate
modelling and regular company contact
– Goal: Identify and maximise equity investment
opportunities for our clients
– Approach: Intimate knowledge of the companies we
cover
– Coverage: Broad cross section of mostly WA connected
industrial and resource companies
– Research Products
» Morningnote: Overnight market updates
» Company Reports: Detailed analysis on companies as
opportunities emerge
» Weekly Informer: Compilation of all company reports
throughout the preceding week
» Quarterly and/or Semiannual Review: Regular
coverage on midcap companies in book format
Advisory services in:
» Capital Raisings
» Mergers and Acquisitions
» Strategic Planning and Reviews
» Privatisation and Reconstructions
– Established track record in raising equity capital via:
» Initial Public Offerings (IPO)
» Placements
» Rights Issues
Private Client Dealing
Institutional Sales
– Team of highly experienced and qualified private client
– Largest institutional dealing desk based in Western
advisers
Australia
– Extensive research support - high quality research on
WA based resource and industrial companies enable
our advisers to provide quality investment and trading
advice
– Access to highly rated, independent blue chip,
international and macro research.
– Specialised broking allows
» Close interaction between research analysts and
private client advisers
» Timely communication of ideas with clients
– Sophisticated investors are able to participate in many
of our corporate capital raisings
– We pride ourselves on offering a tailored service to our
clients based on:
» Quality research
» Personalised service
» Wealth creation
– Client services
» Exclusive web based research
» Web based access to market leading IRESS products
» Portfolio Admnistration Services
– Team of nine institutional dealers with an extensive
client base of Australian and International investors
– Distribution network strength - long standing
relationships with major institutional investors in the
small to mid cap market
– Western Australia’s geographic isolation makes it
difficult for institutional investors to maintain close
contact with companies based here - investors can rely
on our “on the ground” information
– Institutional dealing team “highly focused” on providing
the following services:
» Quality advice and idea generation
» Efficient execution
» Regular company contact
» Site visits
» Roadshows
10
EUROZ LIMITED ANNUAL REPORT 2016
Stockbroking and Corporate Finance
Euroz Securities Director’s Profiles
Rob Black
Managing Director
Andrew Clayton
Executive Director
Ben Laird
Executive Director
Rob has been working in the
stockbroking industry since 1995
and has spent time based in Sydney,
Melbourne and London. Rob is Head of
Institutional Sales and is responsible for
servicing domestic and international
institutions. He is also a Director of
Entrust Private Wealth Management.
Rob holds a Bachelor of Business
in Finance and Accounting, and is a
graduate of the Australian Institute of
Company Directors (AICD).
Andrew is a research analyst
specialising in resource companies.
He has worked in the stockbroking
industry since 1994. Andrew holds a
Bachelor of Science (Hons) in Geology
from Melbourne University, as well as a
Diploma in Finance from the Financial
Services Institute of Australia (FINSIA).
Ben has worked in the stockbroking
industry since 2001. He is a research
analyst responsible for covering
industrial companies. He holds a
Bachelor of Science, a Post Graduate
Diploma in Finance from the Financial
Services Institute of Australasia
(FINSIA) and a Chartered Financial
Analyst (CFA) designation.
Brian Bates
Executive Director
Brian Beresford
Executive Director
Chris Webster
Executive Director
Brian has over 16 years experience
in stockbroking, investment and
superannuation management. Brian
is a qualified Chartered Accountant,
which he attained during employment
with Ernst and Young, and holds a
Bachelor of Commerce. Brian is a
senior member of our Private Client
Division and offers a comprehensive
wealth management service to high
net worth individuals.
Brian is the Head of Corporate Finance.
Prior to joining Euroz in 2011, Brian
was a Partner at PwC where he led the
Corporate Finance and M&A practice
in Western Australia. He has provided
corporate advice to clients across the
resources, mining services, engineering
and technology sectors for over 20
years. Brian holds a Masters in Finance
from London Business School, and a
Bachelor of Commerce and Bachelor
of Laws from the University of Western
Australia (UWA).
Chris is the Head of Private Clients,
and also a Director of Entrust Private
Wealth Management. Chris has worked
in the Financial Services Industry since
2003 holding a variety of positions in
Sales, Operations, Risk and Compliance
with Euroz in Perth and Deutsche
Bank in London. Chris holds a Bachelor
of Commerce from the University of
Western Australia (UWA), a Graduate
Diploma of Applied Finance and
a Graduate Diploma of Applied
Corporate Governance. Chris is a
Master Practitioner of the Stockbrokers
Association of Australia (MSAA)
and an Associate of the Governance
Institute of Australia (ACIS).
EUROZ LIMITED ANNUAL REPORT 2016
11
Stockbroking and Corporate Finance
Euroz Securities Director’s profiles (continued)
Gavin Allen
Executive Director
Jamie Mackie
Executive Director
Jon Bishop
Executive Director
Gavin is a senior research analyst with
12 years experience specialising in
detailed analysis of mid cap industrial
stocks. Prior to joining Euroz, Gavin
was a senior manager in the Corporate
Finance division of a major accounting
firm, specialising in the financial
analysis of mergers and acquisitions.
Gavin holds a Bachelor of Commerce,
is a member of the Institute of
Chartered Accountants in Australia
(CA) and holds a Chartered Financial
Analyst (CFA) designation..
Jamie has been working in the
stockbroking industry since 1998.
Jamie is a senior member of our
Private Client Division and services
high net worth investors. He holds a
Bachelor of Commerce from Curtin
University and a Graduate Diploma
from the Financial Services Institute of
Australasia (FINSIA).
Jon is a resource analyst focused
upon both the mining and oil and gas
sectors. He has more than 10 years
technical and commercial experience
within the petroleum and minerals
industries. Jon has 10 years experience
in the finance industry. Jon holds a
Bachelor of Science (Hons) in Geology
from the University of Western
Australia (UWA), as well as a Graduate
Diploma in Applied Finance and
Investment from the Financial Services
Institute of Australia (FINSIA).
Lucas Robinson
Executive Director
Nick McGlew
Executive Director
Peter Schwarzbach
Executive Director
Lucas has been advising in the
stockbroking industry since 1998.
Lucas is a senior member of our
Private Client Division and manages
a variety of clients including high net
worth investors. He holds a Bachelor
of Commerce from the University
of Western Australia (UWA) with a
double major in Finance and Marketing
and a minor in Business Law.
Nick has over 15 years experience in
mergers, acquisitions, corporate and
commercial law and corporate finance
with major firms in Australia and the
United States. He holds a Bachelor
of Economics from the University of
Western Australia (UWA), a Bachelor
of Laws from Bond University and
a Master of Laws from New York
University (NYU). Nick is a senior
member of our Corporate Finance
Department.
Peter has been working in the
stockbroking industry since 2006 and
is a member of our Institutional Sales
Department. He holds a Bachelor of
Commerce from the University of
Western Australia (UWA) and has
completed a Graduate Diploma in
Applied Finance and Investment
from the Financial Services Institute
of Australia (FINSIA). Peter is also a
Chartered Accountant and prior to
joining Euroz was a senior accountant
at a Perth chartered accounting firm.
12
EUROZ LIMITED ANNUAL REPORT 2016
Stockbroking and Corporate Finance
Euroz Securities Director’s profiles (continued)
Tony Kenny
Executive Director
Tim Weir
Executive Director
Tim Lyons
Executive Director
Tony has worked in stockbroking since
1996, starting his career at Porter
Western Limited and served as a
partner of the business until it was
aquired by Macquarie Bank. Prior to
joining Euroz Tony was a founding
partner and an Executive Director of
Blackswan Equities. Tony is a senior
member of our Private Client Division.
Tony is also a Director of Precision
Funds Management Pty Ltd and the
Precision Opportunities Fund Ltd.
Tim has completed a Bachelor of
Business in Economics and Finance.
He began his stockbroking career with
Porter Western Limited in 1993 as a
Private Client Adviser and served as
a partner of the business until it was
acquired by Macquarie Bank in 1999.
Tim is a senior member of our Private
Client Division. He manages a high
net worth client base and served as
an Executive Director at Blackswan
Equities Ltd prior to joining Euroz.
Tim is also a Director of Precision
Funds Management Pty Ltd and the
Precision Opportunities Fund Ltd.
Tim has worked in the stockbroking
industry for over 25 years and is a
senior member of our Private Client
Division. Tim was previously Executive
Chairman of Blackswan Equities where
his role included maintaining the firm’s
corporate relationships and servicing
his high net worth private client base.
Tim was also a partner at Porter
Western Limited until it was aquired by
Macquarie Bank.
The Directors of Euroz Limited are also
Directors of Euroz Securities Limited.
EUROZ LIMITED ANNUAL REPORT 2016
13
Funds Management
Westoz Funds Management
Westoz Funds Management Pty Ltd (“WFM”) is responsible
for $180 million of funds under management as at 30 June
2016. It manages funds under mandate from two listed
investment companies; Westoz Investment Company Limited
(“WIC”) and Ozgrowth Limited (“OZG”).
WIC commenced its investment activities in May 2005,
with OZG commencing in January 2008. Both investment
mandates focus on the generation of positive portfolio returns
from investment in small to mid cap ASX listed securities,
generally with a connection to Western Australia. Both
portfolio’s have produced returns in excess of comparable
equity benchmarks.
WIC and OZG have now paid $128 million in fully franked
dividends to shareholders since inception.
Phil Rees
Executive Director
Dermot Woods
Executive Director
Phil is an Executive Director of the
manager and is responsible for the
operation and development of the
manager’s business.
Phil has worked in a range of roles
focused on Australian investment
markets for the last 28 years. He has
previously managed large institutional
investment portfolios and developed
several early stage investment
opportunities until he joined Westoz in
April 2005.
Dermot is an Executive Director
of the manager and oversees the
construction of its investment
portfolios.
Dermot joined Westoz Funds
Management in 2007. He has
previously worked as an industrial
analyst for Euroz Securities and
prior to this role, as a fund manager
specialising in European equities.
14
EUROZ LIMITED ANNUAL REPORT 2016
Funds Management
Prodigy Investment Partners
Prodigy Investment Partners Limited (Prodigy) is a multi-
boutique investment management business. Prodigy is an
80/20 partnership between Euroz and Mr Steve Tucker.
Prodigy looks to partner with talented investment
management executives in an innovative partnership business
model. Prodigy’s focus is on creating boutiques that employ
limited capacity, high value adding strategies. We believe
these strategies are increasingly attractive to the market, and
with limited capacity, allow us to include a performance based
component in the pricing.
Prodigy has two partner boutique managers: Flinders
Investment Partners and Dalton Street Capital.
Prodigy Investment Partners
Flinders is a specialist Small Companies investment manager,
with principals Andrew Mouchacca, Richard Macdougall and
Naheed Rahman. The Flinders Emerging Companies Fund has
posted excellent returns versus the market and its competitors
since it began in August 2015. Significant progress has been
made in positioning Flinders to gain market share in specific
retail and institutional markets over the past year.
Dalton Street Capital is a specialist Absolute Return
investment manager, established in May 2016. Its principals
are Alan Sheen and Nick Selvaratnam, who were colleagues
at Credit Suisse. Dalton Street’s approach is predominantly
quantitatively based. Alan has successfully run this strategy
for over 10 years, delivering strong absolute returns, with low
correlation to traditional asset classes. We believe that this
is an attractive strategy in the high net wealth and retiree
markets.
Steve Tucker
Executive Chairman
Lewis Bearman
Chief Operating Officer
Steve has over 25 years’
experience in financial
services. Steve started his
career with MLC, and worked
in superannuation, ran MLC’s
advice networks, led MLC
Investments and finally took
over as CEO in 2004. Steve
was appointed to the Group
Executive of NAB in 2009,
responsible for MLC and
NAB Wealth. Most recently
Steve founded Prodigy
Investment Partners, where
he is Executive Chairman as
well as Chariman of Flinders
Investment Partners and
Dalton Street Capital. Steve is
also Independent Chairman
of Koda Capital, and a Non
Executive Director of The
Banking and Finance oath.
Lewis brings over 30 years of
financial services experience.
He held senior roles at
Perennial Investment Partners
(2003 to 2014), including
Chief Operating Officer and
Chief Executive Officer. Lewis
spent 17 years with County
Investment Management
(later becoming INVESCO),
where he held senior
positions in their operations,
funds management, fixed
income and foreign exchange
teams. Lewis joined Prodigy
Investment Partners in 2015
as Chief Operating Officer,
and is a Director of Prodigy
and Flinders Investment
Partners.
Andrew Bruce
Sales and Marketing
Director
Andrew has over 30 years’
industry experience. He
has held senior roles with
Prudential Group and
National Australia Bank’s
investment management
business, where he was
responsible for Sales and
Marketing. Andrew moved to
boutique manager Perennial
Investment Partners in
2002 as one of the original
partners, responsible for
global institutional sales and
client management. In 2015,
he joined Prodigy as Sales
and Marketing Director.
Guy Ballard
Director of Distribution
Guy has worked in Financial
Services for over 15 years.
In this time he held senior
distribution roles with
both BT Financial Group
(2001 – 2005) and MLC
(2006 – 2016) where his
key focus was developing
and executing the sales
strategy for the asset
management, platform and
margin lending businesses
targeting the Independent
Financial Advice market. Guy
joined Prodigy in 2016 as
Director of Distribution and is
responsible for FUM growth
across our boutiques.
EUROZ LIMITED ANNUAL REPORT 2016
15
Funds Management
Flinders Investment Partners
Andrew Mouchacca
Partner and Portfolio Manager
Richard Macdougall
Partner and Portfolio Manager
Naheed Rahman
Partner and Deputy Portfolio Manager
Flinders Investment Partners
Flinders Investment Partners
Flinders Investment Partners
Andrew began his career in investment
management in 1999. Before
establishing Flinders, Andrew was
Senior Investment Manager with the
institutional focused fund manager
Contango Asset Management (1999-
2014). He was the Portfolio Manager
of the Small Companies Fund (2009
– 2014) and specialised in the analytical
coverage of a range of sectors. His
analytical experience has focused on
the emerging companies through his
involvement in dedicated products in
both the small and microcap universe.
Richard began his career in investment
management in 1985. Before
establishing Flinders, Richard was a
Partner and Portfolio Manager with the
Australian Equities boutique Perennial
Growth (2005 to 2015). Prior to this,
Richard was a founding executive of
Contango Asset Management and
a Director of Salomon Smith Barney
Australia. He has spent time offshore
including roles as Head of Research
at ANZ Securities New Zealand and
Managing Director of ANZ Securities
UK.
Naheed began his career in investment
management in 2006. Prior to Flinders,
Naheed was an Investment Analyst
at Contango Asset Management for
over seven years, working closely
with Andrew Mouchacca, where he
covered several sectors primarily with
an emerging companies focus. He
began his career at Warakirri Asset
Management as a Portfolio Analyst,
conducting fund manager research as
well as the dealing of securities.
Dalton Street Capital
Alan Sheen
Partner and Portfolio Manager
Nick Selvaratnam
Partner and Portfolio Manager
Dalton Street Capital
Dalton Street Capital
Alan is a co-founder of Dalton Street
Capital. Most recently, Alan was Head
of Proprietary Trading for Credit
Suisse Australia managing systematic
investing and trading across the
Asia Pacific region. Alan’s previous
roles included Portfolio Manager
at AMP Capital Investors, Chief
Investment Officer at Challenger Ltd
and Chief Investment Officer and
Managing Director at Austock Asset
Management. In these roles Alan has
been responsible for managing very
large portfolios and businesses. Alan
commenced trading equities, futures
and options in 1996.
Nick is a co-founder of Dalton Street
Capital. Nick is a highly awarded
equities analyst and business manager,
most recently Managing Director and
Head of Equities with Credit Suisse.
Nick has over 24 years of direct
experience in investment banking
across equities research, sales, trading
and equity capital markets as well as
managing successful top-tier teams
across cash equities (research, sales
& trading), derivatives, prime services
and capital markets. Nick’s experience
prior to investment banking includes
8 years as a Chartered Accountant in
England and Australia.
16
EUROZ LIMITED ANNUAL REPORT 2016
Wealth Management
Entrust Private Wealth Management
Entrust Private Wealth Management Pty Ltd (Entrust)
commenced in 2002 and provides its clients with financial
planning and tailored investment advice. Entrust has client
funds under management of $581m at 30 June 2016.
Entrust was acquired by Euroz Limited in July 2015. Entrust
employs 26 staff, including 11 advisers, 4 para-planners and a
portfolio administration team.
During the 2016 financial year (FY16) the management team
focus was on maintaining operational performance, delivering
cost synergies through integration with Euroz, rolling out a
private wealth offering across Euroz Securities, evaluating
adviser acquisition opportunities and progressing organic
growth opportunities.
We are pleased to report the integration with Euroz has been
seamless and a significant part of the cost synergies have
been realised with the balance to be realised in 2017 financial
year. Euroz now provide IT, compliance and finance functions
to Entrust which allows our team to focus on client service
delivery and important growth initiatives. The Entrust result for
FY16 was impacted by various one off costs associated with
the merger.
Entrust’s primary focus is to continue organic growth
opportunities in the HNW and Not for Profit sector and
leverage the existing capability in the SMSF sector, the fastest
growing component of the Australian superannuation system.
Entrust can also see substantial scope for value adding adviser
acquisition opportunities that complement the existing
business by utilising the strength of the Euroz balance sheet
and brand in the Perth market.
Graeme Yukich
Executive Chairman
Andrew Fry
Managing Director
Brad Gordon
Director
Graeme has been advising clients
on their financial needs for over
22 years. He graduated from the
University of Western Australia (UWA)
in 1984, completed his professional
year while working for Ernst and
Whinney. Graeme was admitted as a
Chartered Accountant by the Institute
of Chartered Accountants (CA) in
1988. In 1990, he completed a Diploma
in Financial Planning from Deakin
University.
Andrew joined Entrust in January
2003 and was appointed a Director
in November of that year. He holds
a Bachelor of Commerce and was
admitted as a Chartered Accountant
by the Institute of Chartered
Accountants (CA) in 1996.
Andrew has over 20 years experience
in stockbroking and wealth
management.
Brad joined Entrust as a Senior
Investment Adviser in January 2003
and was appointed a Director in
November of that year. He has over
23 years experience in the financial
services industry, stockbroking,
financial planning and trustee
services. Brad is a Senior Associate
of the Financial Services Institute of
Australasia (FINSIA), a member of the
Financial Planning Association (FPA)
and also a member of the Australian
Institute of Company Directors (AICD).
EUROZ LIMITED ANNUAL REPORT 2016
17
Euroz Community Activities
Euroz Charitable Foundation
Euroz are proudly West Australian focused and we believe we
have an obligation to give back to Western Australian charities
in need.
In 2007, the Euroz Charitable Foundation was formed in
a Private Ancillary Fund (PAF) structure through which
Euroz could make donations, invest these funds and make
distributions to worthy charities and contribute to the broader
community.
The businesses within Euroz and many of our staff members
have made consistent donations to the Foundation.
The funds of the Foundation continue to contribute and make
a difference to Western Australian charities.
During the past 9 years the Euroz Charitable Foundation has
donated in excess of $830,000 to a broad range of charities in
Western Australia. In addition to financial support, employees
of the Euroz Group are encouraged to volunteer their time to
charities in and around their communities.
The Euroz Charitable Foundation has been delighted to
support the following charities, amongst others, during the
past financial year:
f o r
k i ds at PMH and Rotary pro j e c t
s
18
EUROZ LIMITED ANNUAL REPORT 2016
EUROZ LIMITED ANNUAL REPORT 2016
19
Annual Report
2016 Financial Report For the year ending 30 June
CONTENTS
Directors' Report
Auditor’s Independence Declaration
Consolidated Statement of Profit or Loss and
Other Comprehensive Income
20
33
34
Consolidated Statement of Financial Position
35
Consolidated Statement of Changes In Equity
36
Consolidated Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report
37
38
71
72
20
EUROZ LIMITED ANNUAL REPORT 2016
Directors’ Report
The Directors present their report on the consolidated group
consisting of Euroz Limited and the entities it controlled at the
end of, or during the year ended 30 June 2016.
The following persons were Directors of Euroz Limited
(“Euroz”) at any time during or since the end of the financial
year and up to the date of this report:
Executive Chairman
Andrew McKenzie – Executive Chairman
Executive Directors
Jay Hughes – Director
Doug Young – Director
Greg Chessell – Director
Russell Kane – Director
Simon Yeo – Director
Anthony Brittain – Director (appointed 27 November 2015)
Company Secretary
Chris Webster held the position of Company Secretary at
the end of the financial year. Chris was appointed Company
Secretary in January 2013. Chris has worked in the Financial
Services Industry since 2003 holding a variety of positions in
Sales, Operations, Risk and Compliance with Euroz in Perth
and Deutsche Bank in London.
Review of operations
Principal activities
During the year the principal activities of Euroz consisted of:
(a) Stockbroking;
(b) Funds Management;
(c) Investing; and
(d) Wealth Management.
Review of results
The consolidated group has incurred a consolidated pre-tax
profit of $2.1 million (2015 loss: $12.2 million) for the year
ended 30 June 2016.
The consolidated net profit after tax was $2.6 million
compared with the 2015 year consolidated net loss after tax of
$7.1 million. This result represents basic earnings per share of
1.61 cents versus loss of 4.66 cents in the 2015 year.
The Directors have declared a final dividend of 2.25 cents per
share fully franked which, combined with the interim dividend
of 1.75 cents per share, represents a total dividend of 4.0 cents
per share fully franked.
Stockbroking & Corporate Activities
Principal Trading
Funds Management
Investment Income
Wealth Management
Segment revenues
Segment results
2016
$
25,191,033
4,470,979
1,840,837
4,342,621
6,079,397
2015
$
25,787,206
3,882,298
3,440,074
5,789,203
-
41,924,867
38,898,781
2016
$
3,323,044
1,058,429
(1,852,145)
(592,331)
624,021
2,561,018
2016
$
723,910
(112,170)
1,634,124
(9,376,516)
-
(7,130,652)
These results have been achieved through modest contributions from most divisions of the business in difficult market conditions.
EUROZ LIMITED ANNUAL REPORT 2016
21
Directors’ Report
Operating and financial review
ii. Institutional Sales
The purpose of this review is to set out information that
shareholders may require to assess Euroz’s operations,
financial position, and business strategies and prospects for
future financial years. This information complements and
supports the report presented herein.
Disclosure of operations
The consolidated group is principally involved in the following
activities:
(a) Stockbroking & Corporate Activities;
(b) Funds Management;
(c) Investing; and
(d) Wealth Management
Our operations are conducted over several locations with
Perth, Western Australia being our main office. Other offices
are in Sydney, New South Wales and Melbourne, Victoria
focusing on Funds Management opportunities. Details of our
operations are outlined below:
(a) Stockbroking & Corporate Activities
Our stockbroking operation comprises 4 main divisions as
follows:
i. Equities Research
• Highly rated research from market leading
research team of 7 analysts
• Our views are highly regarded by Australian and
international institutional investors
• Access to the latest online news and financial
information
•
Based on fundamental analysis, strict financial
modelling and regular company contact
– Goal: Identify and maximise equity
investment opportunities for our clients
– Approach: Intimate knowledge of the
companies we cover
– Coverage: Broad cross section of mostly
WA based industrial & resource companies
•
Research Products:
– Morning Note: Overnight market updates
– Company Reports: Detailed analysis on
companies as opportunities emerge
– Weekly Informer: Compilation of all
company reports throughout the preceding
week
– Quarterly and / or Semi-annual Review:
Regular coverage on mid-cap companies in
book format
• One of the largest institutional small to mid-cap
dealing desks in the Australian market
•
Extensive client base of Australian and
International institutional investors with
strong relationships with small company fund
managers
• Distribution network strength - long standing
relationships with major institutional investors in
the small to mid-cap market
• Western Australia’s geographic isolation
makes it difficult for institutional investors to
maintain close contact with companies based
here - investors can rely on our “on the ground”
information
•
Institutional dealing team “highly focused” on
providing the following services:
– Quality advice and idea generation
– Efficient execution
– Regular company contact
– Site visits
– Roadshows
iii. Private Clients
• A unique and predominantly “high net worth”
client base (s.708 compliant investors)
•
•
•
•
•
Significant capacity to support new issues and
construct quality retail share registers
Exposure to high net worth clients via in-house
conferences and one-on-one presentations
Team of highly experienced and qualified
private client advisers providing a broader
investment offering for clients of Euroz. With
a wealth management service which provides,
strategic investment advice, superannuation
advice, investment management and portfolio
administration service
Funds Under Management (FUM) of $191 million
with the majority on our in-house portfolio
administration service
Extensive research support - high quality
research on WA based resource and industrial
companies enable our advisers to provide
quality investment and trading advice
•
Specialised broking allows:
– Close interaction between research analysts
and private client advisers
– Timely communication of ideas with clients
•
Sophisticated investors are able to participate in
many of our corporate capital raisings
22
EUROZ LIMITED ANNUAL REPORT 2016
Directors’ Report
Operating and financial review (continued)
(d) Wealth Management
iv. Corporate Finance
• Our corporate finance business is focused on
developing strong, long term relationships with
our clients.
• Clients are provided with specialised Corporate
Advisory services in:
– Equity Capital Raisings and Underwriting
– Mergers and Acquisitions
– Strategic Planning and Reviews
– Privatisation and Reconstructions
•
Established track record in raising equity
capital via:
– Initial Public Offerings (IPO)
– Placements
– Rights Issues
(b) Funds Management
Westoz Funds Management Pty Ltd (“WFM”) is responsible
for $180 million of FUM at 30 June 2016. It manages funds
under mandate from two listed investment companies; Westoz
Investment Company Limited (“WIC”) and Ozgrowth Limited
(“OZG”). Both companies have enjoyed competitive portfolio
returns since inception.
WIC commenced its investment activities in May 2005,
with OZG commencing in January 2008. Both investment
mandates focus on the generation of the target level of returns
from investment in small to mid-cap ASX listed securities,
generally with a connection to Western Australia. Both
portfolios have produced returns in excess of comparable
equity benchmarks.
WIC and OZG have now paid $128.3 million in dividends to
shareholders since inception.
Prodigy Investment Partners Limited (“Prodigy”) (formerly
Westoz Investment Management Limited) is a funds
management partnership formed with Euroz owning 80%
and Mr Steve Tucker, Executive Chairman, owning 20%.
The first boutique funds management partnership, Flinders
Investment Partners Pty Ltd (“Flinders”) was launched in
August 2015 via the Flinders Emerging Companies Funds. The
second boutique, Dalton Street Capital Pty Ltd (“Dalton”) was
launched in May 2016 via the Dalton Street Absolute Return
Fund.
(c) Investing
Euroz Limited owns significant shareholdings in Westoz
Investment Company Limited (WIC.ASX) totalling 26.41%
and Ozgrowth Limited. (OZG.ASX) totalling 38.81%. The
investment focus of these funds is on small to mid-cap ASX
listed securities, generally with a connection to Western
Australia.
Euroz Limited has seed investment positions with Flinders
Emerging Companies Fund and Dalton Street Absolute
Return Fund.
On 13 July 2015, Euroz Limited completed the acquisition
of 100% of the ordinary shares of Entrust Private Wealth
Management Pty Ltd (“Entrust”) for a consideration of
5,450,000 Euroz shares, fair valued to $5,450,000 and cash
consideration totalling $2,350,000, giving a total consideration
of $7,800,000.
Entrust has a 13 year track record as a leading wealth
management business. The past year has seen the integration
of these operations with the rest of our businesses to realise
operational synergies and develop strong links with our
stockbroking operations.
Disclosure of operations — Profit
Net profit after tax for Financial Year (FY) 2016 was $2.6
million up from a loss of $7.1 million in FY 2015.
The Directors are pleased that our Euroz Securities and
Westoz Funds Management divisions remained modestly
profitable despite difficult market conditions in our Western
Australian and resource related markets.
The market value of our investments in the WIC and OZG
can have a material impact on our reported profitability.
Shareholders should be aware that non-cash fluctuations
in these investments at each reporting date do not affect
our underlying profitability, cash generation or ability to pay
dividends.
Disclosure of operations — Sales
Revenue has increased by 7.7% from $38.9 million to $41.9
million predominantly driven by the acquisition of Entrust,
second half of the year improvement in Euroz Securities
Limited and a rebound in our resource related markets.
Stockbroking & corporate activities
Stockbroking and corporate activities revenue was down by
2.3% from $25.8 million in FY2015 to $25.2 million in FY 2016
as result of lower brokerage volumes. Reduced brokerage
in equities trading reflects the depressed equities market
volumes in small to mid-cap equities. The decrease was
however offset by an increase in the Equity Capital Market
(“ECM”) raisings in our Corporate Finance division. Euroz
Securities was involved in 22 (2015: 7) ECM transactions this
year raising $306.6 million (2015: $143 million).
(a) Principal Trading
Revenue from Principal Trading increased by 15.2% from $3.9
million in FY 2015 to $4.5 million in FY 2016.
(b) Funds Management
Revenue from Funds Management decreased by 46.5% from
$3.4 million in FY 2015 to $1.8 million in FY 2016, reflecting
lower FUM and higher cash allocations.
(c) Investment Income
Investment income decreased by 25.0% from $5.8 million in FY
2015 to $4.3 million in FY 2016 due to the decrease in market
values in WIC and OZG.
EUROZ LIMITED ANNUAL REPORT 2016
23
Directors’ Report
Stockbroking & corporate activities (continued)
(d) Wealth Management
Wealth management income since the acquisition of Entrust
was $6.1 million.
Disclosure of business strategies and
prospects — Growth
This year’s result was achieved in particularly challenging
market conditions in the first half and the Directors are
pleased that we were still able to generate underlying profits
before fair value movements on investments and pay 4 cents
per share in fully franked dividends for the year.
Entrust as a platform for our future wealth management
ambitions.
Our Company remains in an extremely sound financial position
with cash and investments of $100.2 million (including the
security deposit of $5 million) as at 30 June 2016. We have
Net Tangible Assets (NTA) of 65 cents per share and no debt.
Euroz has a proud history of consistent profits and dividends
having paid $181.7 million in fully franked dividends in the last
16 years.
The Directors believe the Company is in a strong and stable
financial position to expand and grow its current operations.
With effect from 13 July 2015, Euroz acquired Entrust. This was
a major growth initiative that seeks to leverage an established
wealth management business with long term ongoing
revenues as a platform for further acquisitions and organic
growth.
Earnings per share
Basic earnings per share
Diluted earnings per share
2016
Cents
1.61
1.61
2015
Cents
(4.66)
(4.66)
Prodigy launched two separate boutique funds Flinders
Investment Partners and Dalton Street Capital for both retail
and wholesale investors. The long term strategy for these, is
to provide a steady base of diverse ongoing management fee
revenues with potential performance fee upside.
The Directors believe that Euroz has now laid the foundations
for our strategy to build a more consistent base of underlying
recurring revenues through our growing wealth and funds
management businesses whilst still retaining the transaction
based upside of our traditional stockbroking business.
Disclosure of business strategies and
prospects—Material business risks
The past year continues the trend of extremely volatile trading
conditions. Like many businesses we have experienced solid
trading months which are often then undermined by any
combination of uncertainties. These may take the form of
economic concerns, political instability, inflation and growth
concerns, and / or alternating commodity price movements.
Given this backdrop and the increasingly competitive
landscape it has created, we are pleased with our overall
results for the financial year. Our entire team has worked hard
to manage our costs and generate profits and dividends for
shareholders.
Financial position
The net assets of the consolidated group has increased from
$111.3 million at 30 June 2015 to $113.8 million at 30 June 2016.
The Company and consolidated group’s financial performance
has enabled it to continue to pay dividends to shareholders
during the year while maintaining a healthy working capital
ratio. The consolidated group’s working capital, being current
assets less current liabilities, has decreased from $44.8 million
in 2015 to $35.5 million in 2016.
During the past eight years the Company has invested in
expanding each of its business units to secure its long term
success. In particular it has increased its strategic investments
in the investment products of Westoz Funds Management Pty
Ltd, launched the multi boutique Prodigy model and acquired
Dividends – Euroz Limited
Dividends paid or provided for during the financial year were
as follows:
Interim ordinary dividend of
1.75 cents (2015: 1.75 cents) per
fully paid ordinary share was
paid on 15 January 2016.
Provision for final ordinary
dividend for 30 June 2016 of
2.25 cents (2015:
3.25 cents) per fully paid
ordinary share paid on 5
August 2016.
2016
$
2015
$
2,816,281
2,694,038
3,622,711
5,192,129
6,438,992
7,886,167
Of the total dividends paid during the year, $6,129 (2015:
$9,458) was paid to the Euroz Share Trust (in relation to
the Euroz Performance Rights Plan) and is undistributed.
Therefore, it has been eliminated on consolidation.
Significant changes in the state of affairs
On 13 July 2015, Euroz Limited completed the acquisition
of 100% of the ordinary shares of Entrust Private Wealth
Management for a consideration of 5,450,000 Euroz shares,
fair valued to $5,450,000 and cash consideration totalling
$2,350,000, giving a total consideration of $7,800,000.
Share options
There were no options on issue at 30 June 2016 and
30 June 2015.
Environmental regulation
The consolidated group is not subject to significant
environmental regulation in respect of its operations.
24
EUROZ LIMITED ANNUAL REPORT 2016
Directors’ Report
Events after reporting date
The Directors are not aware of any matter or circumstance
subsequent to 30 June 2016 that has significantly affected, or
may significantly affect:
(a) the consolidated group’s operations in future financial
years; or
(b) the results of those operations in future financial years; or
(c) the consolidated group’s state of affairs in future financial
years.
Likely developments and expected
results of operations
The Directors are confident that a strong statement of financial
position and established business platforms will support the
Company in increasingly volatile market conditions.
Further information on likely developments in the operations
of the consolidated group and the expected results of
operations have not been included in this report because the
Directors believe it would be likely to result in unreasonable
prejudice to the consolidated group.
EUROZ LIMITED ANNUAL REPORT 2016
25
Directors’ Report
Information on Directors
Particulars
of Directors’
interests in
shares of
Euroz Limited
Director
Experience
Special responsibilities and qualifications
Ordinary shares*
Mr Chessell has
worked in the
stockbroking industry
since 1996.
Member of Audit & Risk Committee
Head of Research of our 100% owned subsidiary Euroz
Securities and is our senior resources analyst.
Holds a Bachelor of Applied Science in geology and a
Graduate Diploma Business qualification.
A McKenzie
Executive
Chairman
Mr McKenzie has
worked in the
stockbroking industry
since 1991.
J Hughes
Director
D Young
Director
G Chessell
Director
R Kane
Director
S Yeo
Director
Mr Hughes has worked
in the stockbroking
industry since 1986.
Mr Young has worked
in corporate finance
since 1984.
Mr Kane has worked
in the stockbroking
industry since 1994.
Mr Yeo has worked
in the stockbroking
industry since 1993.
A Brittain
Director
(appointed
27 Nov 2015)
Mr Brittain has
worked in the
funds management
and stockbroking
industries since 1992.
Member of Remuneration Committee
Member of Underwriting Committee
Holds a Bachelor of Economics Degree, is a member
(Master Stockbroking) of the Stockbrokers Association of
Australia and Fellow of the Australian Institute of Company
Directors.
Chairman of Remuneration Committee
Member of Underwriting Committee
Holds a Graduate Diploma in Applied Finance and
Investment from FINSIA and is a member (Master
Stockbroking) of the Stockbrokers Association of Australia.
Chairman of Audit & Risk Committee
Member of Underwriting Committee
Holds a Bachelor of Commerce degree from the University
of Western Australia and a Graduate Diploma in Applied
Finance from FINSIA, is a Fellow of FINSIA and a Fellow of
the Australian Society of Certified Practising Accountants.
Member of Underwriting Committee
Institutional Dealer in our 100% owned subsidiary, Euroz
Securities responsible for servicing both domestic
institutions and high net worth clients.
Holds a Bachelor of Business from Edith Cowan University.
Member of Audit & Risk Committee
Established the Private Client division of our 100% owned
subsidiary, Euroz Securities, which he headed up until
October 2013 before moving to a specialised role within the
Institutional Dealing team.
Holds a Bachelor of Commerce degree from UWA.
Member of Compliance Committee
Member of Underwriting Committee
Chief Operating and Financial Officer
Holds a Bachelor of Commerce degree from the University
of Western Australia, is a member of the Chartered
Accountants Australia and New Zealand (CA), holds a
Graduate Diploma in Applied Finance and Investment from
FINSIA, is a Graduate of the Australian Institute of Company
Directors and is a member (Master Stockbroking) of the
Stockbrokers Association of Australia (SAA).
*Total shares includes shares granted under the Performance Rights Plan
11,973,458
12,148,319
4,632,043
4,464,905
2,982,155
4,113,192
459,585
26
EUROZ LIMITED ANNUAL REPORT 2016
Directors’ Report
Meetings of Directors
The numbers of meetings of the Company's Board of Directors held during the year ended 30 June 2016, and the numbers of
meetings attended by each Director were:
Director
Directors Meetings
Committee Meetings
Number eligible
to attend
Number
attended
Number
eligible to
attend
Number
attended
Number
eligible to
attend
Number
attended
Audit
Remuneration
25
25
25
25
25
25
13
25
22
21
22
23
23
13
-
-
2
2
-
2
-
-
-
2
2
-
2
-
2
2
-
-
-
-
-
2
2
-
-
-
-
-
Andrew McKenzie
Jay Hughes
Doug Young
Greg Chessell
Russell Kane
Simon Yeo
Anthony Brittain
(appointed 27 Nov 2015)
Remuneration Report (audited)
This Remuneration Report outlines the Key Management Personnel (KMP) remuneration arrangements of the Company and the
Group in accordance with the requirements of the Corporations Act 2001 and its regulations. For the purposes of this report
KMP of Euroz are defined as those persons having authority for the strategic management and direction of the group including
any Director (whether executive or otherwise) of the parent company.
Key Management Personnel Remuneration
Remuneration packages are set at levels that are intended to attract and retain executives capable of managing the consolidated
entity’s operations. The board undertakes regular reviews of its performance and the performance of the board against
expectations made at the start of the year. Performance related bonuses are available to KMP based on their performance and
that of the Company.
Remuneration Policy
The remuneration policy has been designed to align the interests of shareholders, Directors and executives. Euroz remunerates
its Directors, executives and other employees by way of a fixed base salary, commission and a combination of short and long
term incentives. The Company believes this policy to have been effective in increasing shareholder wealth since inception.
The following table shows the gross revenue, profits and dividends for the last five years for the listed entity, as well as the share
price at the end of the respective financial years.
2012
$
2013
$
2014
$
2015
$
2016
$
Revenue (including gains on fair value movements
in investment entities)
97,609,657
45,979,616
78,176,940
38,898,781
41,924,867
Net profit / (loss) after tax
Share price at year end
11,760,189
11,122,304
26,547,100 (7,130,652)
2,561,018
1.15
1.00
1.30
1.00
0.79
Dividends paid or recommended
11,895,469
9,352,340
16,261,272
7,886,167
6,438,992
The objective of the Company’s remuneration framework is to ensure reward for performance is competitive and appropriate to
the results delivered. The Board / Remuneration Committee ensure that executive rewards satisfy the following key criteria for
good reward governance practices:
– competitiveness and reasonableness
– acceptability to shareholders
– performance linked
– transparency
– capital management
EUROZ LIMITED ANNUAL REPORT 2016
27
Directors’ Report
Directors’ fees
Commission
Private Client Advisers are paid a commission on top of a base
salary and superannuation. This is calculated on a sliding scale.
Eligible Private Client Advisers are also invited to participate
in the Performance Rights Plan based on certain performance
hurdles set out in the employment contract.
Discretionary bonus
Executives and other staff members who do not participate
in the profit share pool are paid a discretionary bonus based
on the profitability of the Company. Similar to the profit
share pool, the distribution of the discretionary bonus is
also leveraged to the individual’s performance and is made
as a combination of cash (75%) and equity (25%) in the
Performance Rights Plan as detailed below in Equity Based
Payments.
Equity based payments
A Performance Rights Plan was established in 2014 as a long
term incentive to assist in the reward, retention and motivation
of Directors, executives and staff members. Eligible employees
are invited to participate in this plan and are awarded a
Performance right at the beginning of the year. There are three
separate long term incentives depending on the individual
employment contract as below:
– Profit share
– Discretionary bonus
– Commission
The Performance Right represents a right to be issued a
number of ordinary shares in Euroz to reflect 25% of the profit
share or the discretionary bonus that is paid to the participant.
Private Client Advisers who are paid a commission may also
be paid 5% of their total monthly brokerage and/or Portfolio
Administration Revenue or 25% of any corporate referral fee in
equity. The shares issued will only vest to the employee after 3
years subsequent service following the initial year of service.
No Directors fees are paid to Executive Directors.
Non-Executive Directors are paid a fixed base salary and
superannuation for their role on the Board.
Base pay
All Directors and executives are offered a competitive base
salary and superannuation. Base pay for senior executives is
reviewed semi annually by the Remuneration Committee to
ensure it is competitive with the market, and is also reviewed
upon promotion or additional responsibilities.
There is no guarantee of base pay increases fixed in any senior
executive or Directors contracts.
Executives are offered a competitive salary that comprises of
a base salary inclusive of superannuation and a combination of
some of the following short term incentives, dependant on the
terms of the individual employment contract:
– Participation in the profit share pool
– Commission
– Discretionary Bonus
Profit share pool
Directors and executives of Euroz Securities are invited
to participate in the profit share pool. The Remuneration
Committee determines the allocation of up to 40% pre tax
profit on an ongoing basis. In consultation with relevant
Department Heads, the Committee uses the following informal
criteria to assist in the allocation:
– Ability to perform individual tasks within the relevant
department
– Ability to add value and innovate beyond the job
standard specifications
– Development of new and existing client relationships
– Ability to interact with other relevant departments as
part of a larger team approach
– Relevant industry salary benchmarking
– General requirements to attract and retain staff.
The profit share payment is made as a combination of cash
(75%) and equity (25%) in the Performance Rights Plan as
detailed below in Equity Based Payments.
The three executives on the Remuneration Committee
(Andrew McKenzie, Jay Hughes and Robert Black, Executive
Directors of Euroz Securities) are also entitled to participate
in the profit share pool. In these circumstances two members
assess the performance of the third member.
28
EUROZ LIMITED ANNUAL REPORT 2016
Directors’ Report
Details of remuneration
Details of the nature and amount of each element of the emoluments of each KMP of Euroz are set out in the following tables.
Total
1,695,481
1,146,567
154,710
255,450
276,875
3,529,083
30,000
18,750
309,858
2016
Short-term
Base salary
$
Profit Share/
bonus
$
Other
benefits
$
Andrew McKenzie
195,000
Jay Hughes
Doug Young
Greg Chessell
Russell Kane
Simon Yeo
Robert Black
Phil Rees
Anthony Brittain
190,000
190,000
190,000
205,692
205,692
182,648
166,138
170,311
180,000
180,000
112,500
120,000
142,500
120,000
157,189
59,689
74,689
21,507
20,402
23,386
16,189
15,697
17,043
15,036
9,342
16,108
Current Directors did not receive any Directors fees.
2015
Short-term
Base salary
$
Profit Share/
bonus
$
Other
benefits
$
Andrew McKenzie
234,904
Jay Hughes
Doug Young
Greg Chessell
Russell Kane
Simon Yeo
Robert Black
Phil Rees
Anthony Brittain
234,904
230,120
230,120
246,120
246,120
240,228
214,946
213,627
90,000
90,000
60,000
52,500
75,000
75,000
82,500
45,000
52,500
25,495
18,659
26,088
14,432
14,852
17,692
14,245
12,788
15,781
Post
Employment
Share Based
Payment
Superannuation
Performance
Rights
Total
$
Performance
related
%
$
30,000
35,000
35,000
35,000
19,308
19,308
17,662
34,172
$
30,000
30,000
34,783
34,783
18,783
18,783
18,783
34,450
30,000
41,250
41,250
26,875
26,875
33,750
28,750
467,757
466,652
387,761
388,064
416,947
390,793
35,000
407,535
24,375
293,716
47%
47%
36%
38%
42%
38%
47%
29%
30%
Total
$
Performance
related
%
26,250
406,649
26,250
399,813
17,500
16,875
21,875
18,750
21,875
19,375
368,491
348,710
376,630
376,345
377,631
326,559
12,500
324,408
22%
23%
16%
15%
20%
20%
22%
14%
16%
Post
Employment
Share Based
Payment
Superannuation
Performance
Rights
Total
2,091,089
622,500
160,032
250,365
181,250
3,305,236
Current Directors did not receive any Directors fees.
EUROZ LIMITED ANNUAL REPORT 2016
29
Directors’ Report
Service agreements
Russell Kane, Director
Remuneration and other terms of employment for the Key
Management Personnel are formalised in service agreements.
Each of these agreements provide for the provision of
performance related cash bonuses and other benefits.
Notwithstanding the agreed salary in the service agreement,
the base salary may be reduced or increased based on trading
conditions. Other major provisions of the agreements relating
to remuneration are set out below.
• Term of contract - ongoing employment contract,
• Base salary, inclusive of superannuation for the year
ended 30 June 2016 of $225,000 (2015 - $225,000)
plus profit share,
• Payment on termination of employment by the
employer, other than for gross misconduct three
months’ salary.
Andrew McKenzie, Executive Chairman
Simon Yeo, Director
• Term of contract - ongoing employment contract,
• Term of contract - ongoing employment contract,
• Base salary, inclusive of superannuation for the year
ended 30 June 2016 of $225,000 (2015- $225,000) plus
profit share,
• Base salary, inclusive of superannuation for the year
ended 30 June 2016 of $225,000 (2015 - $225,000)
plus profit share,
• Payment on termination of employment by the
• Payment on termination of employment by the
employer, other than for gross misconduct - three
months’ salary.
employer, other than for gross misconduct - three
months’ salary.
Jay Hughes, Director
• Term of contract - ongoing employment contract,
• Base salary, inclusive of superannuation for the year
ended 30 June 2016 of $225,000 (2015 - $225,000)
plus profit share,
• Payment on termination of employment by the
employer, other than for gross misconduct - three
months’ salary.
Doug Young, Director
Anthony Brittain, Director
• Term of contract - ongoing employment contract,
• Base salary, inclusive of superannuation for the year
ended 30 June 2016 of $200,000 (2015 - $200,000)
plus bonus,
• Payment on termination of employment by the
employer, other than for gross misconduct - three
months’ salary.
Rob Black, Director Euroz Securities, Entrust Private Wealth
Management
• Term of contract - ongoing employment contract,
• Term of contract - ongoing employment contract,
• Base salary, inclusive of superannuation for the year
ended 30 June 2016 $225,000 (2015 - $225,000) plus
profit share,
• Base salary, inclusive of superannuation for the year
ended 30 June 2016 of $200,000 (2015 - $200,000)
plus profit share,
• Payment on termination of employment by the
• Payment on termination of employment by the
employer, other than for gross misconduct - three
months’ salary.
employer, other than for gross misconduct - three
months’ salary.
Greg Chessell, Director
• Term of contract - ongoing employment contract,
• Base salary, inclusive of superannuation for the year
ended 30 June 2016 of $225,000 (2015 - $225,000)
plus profit share,
• Payment on termination of employment by the
employer, other than for gross misconduct - three
months’ salary.
Phil Rees, Director Westoz Funds Management
• Term of contract – ongoing employment contract,
• Base salary, inclusive of superannuation for the year
ended 30 June 2016 of $200,000 (2015 - $200,000)
plus bonus,
• Payment on termination of employment by the
employer, other than for gross misconduct – three
months’ salary.
30
EUROZ LIMITED ANNUAL REPORT 2016
Directors’ Report
Shareholdings of Key Management Personnel
The movement during the reporting year in the number of shares in Euroz Limited held, directly, indirectly or beneficially, by each
member of KMP, including related parties, is as follows:
2016
Ordinary shares
A McKenzie
J Hughes
D Young
G Chessell
R Kane
S Yeo
R Black
P Rees
A Brittain
2015
Ordinary shares
A McKenzie
J Hughes
D Young
G Chessell
R Kane
S Yeo
R Black
P Rees
A Brittain
Balance at 1 July
2015
Received via PRP
(i)
Granted as
remuneration
Bought & (sold)
Balance at 30
June 2016
11,083,823
11,083,823
4,524,647
4,035,468
2,756,911
3,883,289
3,033,446
1,264,674
427,214
74,855
74,855
46,954
50,176
59,294
49,903
66,010
25,224
31,394
42,093,295
478,665
-
-
-
-
-
-
-
-
-
-
754,780
989,641
60,442
379,261
155,950
180,000
250,000
28,861
977
11,913,458
12,148,319
4,632,043
4,464,905
2,972,155
4,113,192
3,349,456
1,318,759
459,585
2,799,912
45,371,872
Balance at 1 July
2014
Received via PRP
(i)
Granted as
remuneration
Bought & (sold)
Balance at 30
June 2015
10,500,000
10,500,000
4,350,000
3,580,000
2,623,000
3,750,000
2,600,000
1,200,000
383,400
87,433
87,433
58,289
55,789
72,861
63,289
73,446
62,861
42,388
39,486,400
603,789
-
-
-
-
-
-
-
-
-
-
496,390
496,390
116,358
399,679
61,050
70,000
360,000
1,813
1,426
11,083,823
11,083,823
4,524,647
4,035,468
2,756,911
3,833,289
3,033,446
1,264,674
427,214
2,003,106
42,093,295
(i) These shares are held by the Euroz Share Trust and are currently vesting in accordance with the Euroz Performance Rights
Plan (PRP).
EUROZ LIMITED ANNUAL REPORT 2016
31
Directors’ Report
Performance Rights held by Key Management Personnel
The movement during the reporting period in performance rights in Euroz Limited held, directly, indirectly or beneficially, by each
KMP, including related parties, is as follows:
2016
Performance Rights
A McKenzie
J Hughes
D Young
G Chessell
R Kane
S Yeo
R Black
P Rees
A Brittain
2015
Performance Rights
A McKenzie
J Hughes
D Young
G Chessell
R Kane
S Yeo
R Black
P Rees
A Brittain
Granted as
remuneration
Vested
1
1
1
1
1
1
1
1
1
9
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(9)
Granted as
remuneration
Vested
1
1
1
1
1
1
1
1
1
9
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(9)
These performance rights were issued in accordance with the Performance Rights Plan.
Share based compensation
A performance right was issued to KMPs as part of their annual bonus / profit share plan. The fair value of each right is calculated
as 25% of each member’s bonus entitlement. The performance rights (and subsequent shares) are subject to a 4 year vesting
period. Total fair values of performance rights issued in the year amounts to $501,189 (2015: $391,197).
Loans Key Management Personnel
No loans were made to Directors of Euroz Limited and the KMPs of the consolidated group, including their personally related
entities during the year.
Remuneration Report - end.
32
EUROZ LIMITED ANNUAL REPORT 2016
Directors’ Report
Indemnifying officers and auditor
During the financial year, Euroz Limited paid a premium of $388,421 to insure the Directors and secretaries of the Company
and its Australian based controlled entities. The liabilities insured include costs and expenses that may be incurred in defending
civil or criminal proceedings that may be brought against the officers in their capacity as officers of entities in the consolidated
group. Euroz has not indemnified the auditor or paid any insurance premium on behalf of the auditor.
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 purpose of taking responsibility on behalf of the Company for all or any part of those
proceedings.
The Company was not a party to such proceedings during the year.
Non-audit services
The following non-audit services were provided by the group’s auditor, PKF Mack. The Directors are satisfied that the provision
of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations
Act 2001. The nature and scope of each type of non-audit service provided means that auditor independence was not
compromised. PKF Mack received or is due to receive the following amounts for the provision of non-audit services:
Tax Compliance and other
services
$
45,450
Auditor’s independence declaration
The lead auditor’s independence declaration for the year ended 30 June 2016 has been received and follows the Directors’
Report.
This report is made in accordance with a resolution of the Directors.
ANDREW MCKENZIE
Executive Chairman
DOUG YOUNG
Director
Date: 25 August 2016
EUROZ LIMITED ANNUAL REPORT 2016
33
Auditor’s Independence Declaration
AUDITOR’S INDEPENDENCE DECLARATION
TO THE DIRECTORS OF EUROZ LIMITED
In relation to our audit of the financial report of Euroz Limited for the year ended 30 June 2016, to the best of
my knowledge and belief, there have been no contraventions of the auditor independence requirements of the
Corporations Act 2001 or any applicable code of professional conduct.
PKF MACK
SIMON FERMANIS
PARTNER
25 AUGUST 2016
WEST PERTH,
WESTERN AUSTRALIA
Page | 16
34
EUROZ LIMITED ANNUAL REPORT 2016
Consolidated Statement of Profit or Loss
and Other Comprehensive Income
Revenue
Loss on fair value movement on investments
Employee benefits expense
Depreciation and amortisation expenses
Regulatory expenses
Consultancy expenses
Conference and seminar expenses
Brokerage and underwriting expense
Communication expenses
Carrying amount of principal trading securities sold
Other expenses
Note
2016
$
2015
$
4
41,924,867
38,898,781
(5,247,301)
(21,136,859)
(19,603,342)
(15,371,583)
(165,793)
(199,375)
(116,253)
(273,781)
(905,619)
(1,630,230)
(731,882)
(802,157)
(4,724,972)
(3,749,935)
(296,672)
(236,640)
(3,480,060)
(3,826,809)
(4,481,274)
(3,973,477)
Profit / (Loss) before income tax expense
Income tax (expense) / benefit
5
6
2,088,577
(12,218,943)
472,441
5,088,291
Profit / (Loss) after income tax expense for the year
2,561,018
(7,130,652)
Other comprehensive income
Other comprehensive income net of tax
TOTAL COMPREHENSIVE INCOME FOR THE YEAR
Profit / (Loss) for the year is attributable to:
Non-controlling interest
Owners of Euroz Limited
Total comprehensive income for the year is attributable to:
Non-controlling interest
Owners of Euroz Limited
Basic earnings per share
Diluted earnings per share
-
-
2,561,018
(7,130,652)
(999,399)
(91,257)
3,560,417
(7,039,395)
2,561,018
(7,130,652)
(999,399)
(91,257)
3,560,417
(7,039,395)
2,561,018
(7,130,652)
34
34
1.61
1.61
(4.66)
(4.66)
The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes.
EUROZ LIMITED ANNUAL REPORT 2016
35
Consolidated Statement of Financial Position
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
Total current assets
Non-current assets
Long term receivable
Investments
Investment entities at fair value
Plant and equipment
Deferred tax assets
Intangible assets
Total non-current assets
Total Assets
Current liabilities
Trade and other payables
Current tax liabilities
Short term provisions
Total current liabilities
Non-current liabilities
Deferred tax liabilities
Long term provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Equity attributable to the owners of Euroz Limited
Non-controlling interest
Total equity
Note
2016
$
2015
$
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
22
34,202,416
45,041,470
1,549,678
5,826,554
1,148,305
1,384,626
5,582,420
1,029,116
42,726,953
53,037,632
5,000,000
5,000,000
8,050,076
-
47,121,275
53,769,308
485,863
8,575,166
10,152,312
317,822
5,096,470
2,833,112
79,384,692
67,016,712
122,111,645
120,054,344
1,204,171
444,699
5,541,116
7,189,986
815,465
276,344
1,091,809
8,281,795
1,525,486
-
6,552,049
8,077,535
397,177
322,220
719,397
8,796,932
113,829,850
111,257,412
105,226,509
99,533,415
1,159,364
8,159,633
658,175
11,032,079
114,545,506
111,223,669
(715,656)
33,743
113,829,850
111,257,412
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
36
EUROZ LIMITED ANNUAL REPORT 2016
Consolidated Statement of Changes in Equity
Balance at 1 July 2014
90,924,294
266,978
25,948,183
-
117,139,455
Issued
capital
$
Share based
payment
reserve
$
Retained
earnings
$
Non-
controlling
interest
$
Total
$
Loss for the period
Total comprehensive income for the period
Transactions with owners, recorded directly in
equity
Shares issued during the period
Treasury shares
Share based payments
Dividends to equity holders
Total contributions by and distributions to
owners
-
-
9,034,366
(425,245)
-
-
-
-
-
-
391,197
(7,039,395)
(91,257)
(7,130,652)
(7,039,395)
(91,257)
(7,130,652)
125,000
9,159,366
-
-
-
(425,245)
391,197
(7,876,709)
-
(7,876,709)
8,609,121
391,197
(7,876,709)
125,000
1,248,609
Balance at 30 June 2015
99,533,415
658,175
11,032,079
33,743
111,257,412
Balance at 1 July 2015
99,533,415
658,175
11,032,079
33,743
111,257,412
Profit for the period
Total comprehensive income for the period
Transactions with owners, recorded directly in
equity
Shares issued during the period
Treasury shares
Share buy back
Share based payments
Dividends to equity holders
-
-
6,870,312
(933,008)
-
-
-
-
(244,210)
-
501,189
-
-
-
(6,432,863)
3,560,417
(999,399)
2,561,018
3,560,417
(999,399)
2,561,018
250,000
7,120,312
-
-
-
-
(933,008)
(244,210)
501,189
(6,432,863)
Total contributions by and distributions to
owners
5,693,094
501,189
(6,432,863)
250,000
11,420
Balance at 30 June 2016
105,226,509
1,159,364
8,159,633
(715,656)
113,829,850
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
-
-
-
-
-
-
-
EUROZ LIMITED ANNUAL REPORT 2016
37
Consolidated Statement of Cash Flows
Cash flows from operating activities
Receipts from customers (inclusive of goods and services tax)
33,061,485
28,725,358
Payments to suppliers and employees (inclusive of goods and services tax)
(31,613,563)
(27,221,891)
Note
2016
$
2015
$
Interest received
Proceeds from sale of trading shares
Income taxes (paid)
Payments for trading shares
1,447,922
1,503,467
784,177
4,470,767
1,674,775
3,842,298
(1,664,629)
(4,037,828)
(3,047,431)
(6,959,128)
Net cash flows (used in) / from operating activities
33
1,990,807
(3,976,416)
Cash flows from investing activities
Payments for investment in WIC & OZG
Payments for managed investment schemes
Dividends received
Payments for plant and equipment
Proceeds for plant and equipment
Payments for treasury shares
Cash acquired on the acquisition of a business
Net cash flows from / (used in) investing activities
Cash flows from financing activities
Dividends paid
Share buy-back
Payments of financial liabilities
Net cash flows from / (used in) financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at 1 July
(215,102)
(648,477)
(7,000,000)
-
4,008,239
5,191,190
(383,812)
(223,226)
49,978
-
(933,007)
(1,529,978)
(6,003,682)
(425,245)
5,824,004
9,718,246
(6,581,969)
(13,957,051)
(244,210)
-
-
(2,131,781)
(6,826,179)
(16,088,832)
(10,839,053)
(10,347,002)
45,041,470
55,388,472
Cash and cash equivalents at 30 June
7
34,202,416
45,041,470
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
38
EUROZ LIMITED ANNUAL REPORT 2016
Notes to the Financial Statements
CONTENTS
Note 1. Statement of significant accounting policies
Note 2. Significant accounting estimates and judgements
Note 3. Segment information
Note 4. Revenue
Note 5. Profit/(Loss) before income tax expense
Note 6. Income tax
Note 7. Cash and cash equivalents
Note 8. Trade and other receivables
Note 9. Inventories
Note 10. Other current assets
Note 11. Long term receivable
Note 12. Investments
Note 13. Investment entities at fair value
Note 14. Plant and equipment
Note 15. Deferred tax assets
Note 16. Intangible assets
Note 17. Trade and other payables
Note 18. Current tax liabilities
Note 19. Short term provisions
Note 20. Deferred tax liabilities
Note 21. Long term provisions
Note 22. Contributed equity
Note 23. Dividends
Note 24. Financial instruments
Note 25. Remuneration of auditors
Note 26. Contingent liabilities
Note 27. Commitments for expenditure
Note 28. Employee benefits
Note 29. Related parties
Note 30. Investments in controlled entities
Note 31. Business combination
Note 32. Events subsequent to reporting date
Note 33. Reconciliation of cash flows from operating activities
Note 34. Earnings per share
Note 35. Deed of cross guarantee
Note 36. Parent entity disclosures
Note 37. Company details
39
46
46
49
49
49
51
51
52
52
52
52
53
53
54
54
55
55
56
56
56
56
58
59
61
61
62
62
62
64
65
66
66
66
67
70
70
EUROZ LIMITED ANNUAL REPORT 2016
39
Notes to the Financial Statements
Note 1. Statement of significant accounting
policies
The financial report is a general purpose financial report that
has been prepared in accordance with Australian Accounting
Standards, other authoritative pronouncements as issued
by the Australian Accounting Standards Board and the
Corporations Act 2001 as appropriate for “for-profit” oriented
entities.
This financial report has been authorised by the Directors to
be issued on 25 August 2016. The Directors have the power to
amend and reissue the financial statements.
Euroz Limited is a listed public company, trading on the
Australian Securities Exchange, limited by shares, incorporated
and domiciled in Australia.
The acquisition method of accounting is used to account for
the acquisition of subsidiaries by the consolidated group.
A change in ownership interest without the loss of control is
accounted for as an equity transaction, where the difference
between the consideration transferred and the book value of
the share of the non-controlling interest acquired is recognised
directly in equity attributable to the parent.
Intercompany transactions, balances and unrealised gains
on transactions between group companies are eliminated.
Unrealised losses are also eliminated unless the transaction
provides evidence of the impairment of the asset transferred.
Accounting policies of subsidiaries have been changed where
necessary to ensure consistency with the policies adopted by
the consolidated group. All controlled entities have a 30 June
financial year end.
The financial report of Euroz Limited and controlled entities
(the group or consolidated group), complies with Australian
Accounting Standards and International Financial Reporting
Standards (IFRS) as issued by the International Accounting
Standards Board.
Separate financial information of the parent company has
been included in Note 36 as permitted by amendments to
the Corporations Act 2001. The financial report is presented
in Australian dollars which is the group’s functional and
presentation currency. Amounts are rounded to the nearest
dollar in accordance with Corporations (Rounding in Financial
/ Directors’ Reports) Instrument 2016/191.
The following is a summary of the material accounting policies
adopted by the consolidated group in the preparation of
the financial report. The accounting policies have been
consistently applied, unless otherwise stated.
Basis of preparation
Reporting basis and conventions
The financial report has been prepared on an accruals basis
and is based on historical costs modified by the revaluation
of selected non-current assets, financial assets and financial
liabilities for which the fair value basis of accounting has been
applied.
Accounting policies
(a) Principles of consolidation
The consolidated financial statements incorporate the assets
and liabilities of all entities controlled by Euroz Limited
('Company' or 'parent entity') as at 30 June 2016 and the
results of all controlled entities for the year then ended. Euroz
Limited and its controlled entities together are referred to in
this financial report as the consolidated group.
Subsidiaries are all those entities over which the consolidated
group has control. The consolidated group controls an entity
when the consolidated group is exposed to, or has rights to,
variable returns from its involvement with the entity and has
the ability to affect those returns through its power to direct
the activities of the entity.
Subsidiaries are fully consolidated from the date on which
control is transferred to the consolidated group. They are
de-consolidated from the date that control ceases.
(b) Income tax
The income tax expense or benefit for the period is the
tax payable on that period’s taxable income based on the
applicable income tax rate for each jurisdiction, adjusted by
changes in deferred tax assets and liabilities attributable to
temporary differences, unused tax losses and the adjustment
recognised for prior periods, where applicable.
Deferred tax assets and liabilities are recognised for temporary
differences at the tax rates expected to apply when the assets
are recovered or liabilities are settled, based on those tax rates
that are enacted or substantively enacted, except for:
– When the deferred income tax asset or liability arises
from the initial recognition of goodwill or an asset
or liability in a transaction that is not a business
combination and that, at the time of the transaction,
affects neither the accounting nor taxable profits; or
– When the taxable temporary difference is associated
with interests in subsidiaries, associates or joint
ventures, and the timing of the reversal can be
controlled and it is probable that the temporary
difference will not reverse in the foreseeable future.
Deferred tax assets are recognised for deductible temporary
differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those
temporary differences and losses.
The carrying amount of recognised and unrecognised
deferred tax assets are reviewed at each reporting date.
Deferred tax assets recognised are reduced to the extent
that it is no longer probable that future taxable profits will be
available for the carrying amount to be recovered. Previously
unrecognised deferred tax assets are recognised to the extent
that it is probable that there are future taxable profits available
to recover the asset.
Deferred tax assets and liabilities are offset only where there is
a legally enforceable right to offset current tax assets against
current tax liabilities and deferred tax assets against deferred
tax liabilities; and they relate to the same taxable authority
on either the same taxable entity or different taxable entity’s
which intend to settle simultaneously.
40
EUROZ LIMITED ANNUAL REPORT 2016
Notes to the Financial Statements
Note 1. Statement of significant accounting
policies (continued)
Euroz Limited and its wholly-owned Australian subsidiaries
have formed an income tax consolidated group under the
Tax Consolidation Regime. The group formed an income
tax consolidated group to apply from 1 July 2003. The tax
consolidated group has entered a tax sharing agreement
whereby each company in the group contributes to the
income tax payable in proportion to their contribution to the
net profit before tax of the tax consolidated group.
(c) Business combinations
– Brokerage revenue earned from share trading on
behalf of clients is recognised on completion of the
transactions. That is, the day the security is traded, not
the day of settlement.
– Underwriting, management fees and corporate retainers
are brought to account when the fee in respect of the
services provided is receivable.
– Share trading revenue from the sale of stocks in the
jobbing account is recognised on the day the security is
traded. Revenue comprises the gross proceeds on sale
of the security.
The acquisition method of accounting is used to account
for business combinations regardless of whether equity
instruments or other assets are acquired.
– Interest income is recognised as it accrues.
– Dividend revenue is recognised when the right to
receive a dividend has been established.
The consideration transferred is the sum of the acquisition-
date fair values of the assets transferred, equity instruments
issued or liabilities incurred by the acquirer to former owners
of the acquiree and the amount of any non-controlling
interest in the acquiree. For each business combination, the
non-controlling interest in the acquiree is measured at either
fair value or at the proportionate share of the acquiree’ s
identifiable net assets. All acquisition costs are expensed as
incurred to profit or loss.
On the acquisition of a business, the consolidated group
assesses the financial assets acquired and liabilities assumed
for appropriate classification and designation in accordance
with the contractual terms, economic conditions, the
consolidated group’s operating or accounting policies and
other pertinent conditions in existence at the acquisition-date.
The difference between the acquisition-date fair value of
assets acquired, liabilities assumed and any non-controlling
interest in the acquiree and the fair value of the consideration
transferred and the fair value of any pre-existing investment
in the acquiree is recognised as goodwill. If the consideration
transferred and the pre-existing fair value is less than the fair
value of the identifiable net assets acquired, being a bargain
purchase to the acquirer, the difference is recognised as a gain
directly in profit or loss by the acquirer on the acquisition-
date, but only after a reassessment of the identification and
measurement of the net assets acquired, the non-controlling
interest in the acquiree, if any, the consideration transferred
and the acquirer’s previously held equity interest in the
acquirer.
Business combinations are initially accounted for on a
provisional basis. The acquirer retrospectively adjusts the
provisional amounts recognised and also recognises additional
assets or liabilities during the measurement period, based on
new information obtained about the facts and circumstances
that existed at the acquisition-date. The measurement period
ends on either the earlier of (i) 12 months from the date
of the acquisition or (ii) when the acquirer receives all the
information possible to determine fair value.
(d) Revenue recognition
Revenue is recognised when it is probable that the economic
benefits will flow to the entity and the revenue can be
reliably measured. Revenue is measured at the fair value of
consideration received or receivable. The following specific
recognition criteria must also be met before revenue is
recognised:
All revenue is stated net of the amount of goods and services
tax (GST), where applicable.
(e) Receivables
Trade receivables are recognised as current receivables as
they are generally settled within 30 days from the date of
recognition. Collectability of trade receivables is reviewed on
an ongoing basis. Debts which are known to be uncollectible
are written off. A provision for impairment is raised when
some doubt as to collection exists.
All trade receivables relating to brokerage and principal
trading have been transferred to Pershing Securities Australia
Pty Ltd (“Pershing”) who provides a trust account facility as
part of the clearing and settlement service.
(f) Inventories
Inventories are stocks held in the operating (jobbing) account
at year end. All inventory is held at fair value. Refer to Note 1
(u) (i) financial assets at fair value through profit or loss.
(g) Investments
Controlled entities are accounted for in the consolidated
financial statements as set out in Note 1 (a), excluding
investment entities (which are deemed to be controlled) which
are accounted for at fair value at reporting date.
Other securities are accounted for at fair value at reporting
date. Unrealised gains/losses on securities held for short
term investment are accounted for as set out in Note 1 (u) (i)
financial assets at fair value through profit or loss. Unrealised
gains/losses on securities held for long term investment are
accounted for as set out in Note 1 (u) (iii) available-for-sale
financial assets.
(h) Plant and equipment
Each class of plant and equipment is carried at cost as
indicated less, where applicable, any accumulated depreciation
and impairment losses.
The cost of fixed assets constructed within the consolidated
group includes the cost of materials, direct labour, borrowing
costs and an appropriate proportion of fixed and variable
overheads.
EUROZ LIMITED ANNUAL REPORT 2016
41
Notes to the Financial Statements
Note 1. Statement of significant accounting
policies (continued)
(h) Plant and equipment (continued)
Subsequent costs are included in the asset’s carrying amount
or recognised as a separate asset, as appropriate, only when
it is probable that future economic benefits associated with
the item will flow to the group and the cost of the item can
be measured reliably. All other repairs and maintenance are
charged to the statement of profit or loss during the financial
period in which they are incurred.
Depreciation
The depreciable amount of all fixed assets is depreciated
on a straight line basis over their useful lives to the residual
values commencing from the time the asset is held ready for
use. The depreciation rates used for each class of depreciable
assets are:
Class of Fixed Asset
Depreciation Rate
Leasehold improvements
Plant and equipment
25%
25 – 33%
The assets’ residual values and useful lives are reviewed, and
adjusted if appropriate, at each reporting date.
Gains and losses on disposals are determined by comparing
proceeds with the carrying amount. These gains and losses
are included in the statement of profit or loss. When revalued
assets are sold, amounts included in the revaluation reserve
relating to the asset are transferred to retained earnings.
(m) Options
The fair value of options in the shares of the Company issued
to Directors and other parties is recognised as an expense in
the financial statements in relation to the granting of these
options.
(n) Employee benefits
i. Wages, salaries and annual leave
Liabilities for wages, salaries and annual leave expected
to be settled within 12 months of the reporting date
are recognised in respect of employees’ services up to
the reporting date and are measured at the amounts
expected to be paid when the liabilities are settled.
ii. Employee benefits payable later than one year
Employee benefits payable later than one year have
been measured at the present value of the estimated
future cash outflows to be made for those benefits.
There have been no changes to the method used to
calculate this liability.
iii. Superannuation
Contributions are made by the consolidated group
to superannuation funds as stipulated by statutory
requirements and are charged as expenses when
incurred.
iv. Employee benefit on costs
Employee benefit on costs, including payroll tax, are
recognised and included in employee benefits liabilities
and costs when the employee benefits to which they
relate are recognised as liabilities.
(i) Leasehold improvements
v. Options/performance rights
The cost of improvements to or on leasehold properties
are amortised over the unexpired period of the lease or the
estimated useful life of the improvement to the consolidated
group, whichever is the shorter.
(j) Leases
Other operating lease payments are charged to the statement
of profit or loss in the periods in which they are incurred, as
this represents the pattern of benefits derived from the leased
assets.
(k) Trade and other creditors
Trade and other creditors also include other liabilities for
goods and services provided to the consolidated group prior
to the end of the financial year and which are unpaid. Due to
their short-term nature they are measured at amortised cost
and not discounted. The amounts are unsecured and are
usually paid within 30 days of recognition.
All trade creditors relating to brokerage and principal trading
have been transferred to Pershing who provides a trust
account facility as part of the clearing and settlement service.
(l) Dividends
Provision is made for the amount of any dividend declared
and authorised by the Directors on or before the end of the
financial year, but not distributed at reporting date.
The fair value of options/performance rights granted
is recognised as an employee benefit expense with
a corresponding increase in equity. The fair value is
measured at grant date.
The fair value of options at grant date is independently
determined using the Black-Scholes option pricing
model that takes into account the exercise price,
the term of the option, the vesting and performance
criteria, the impact of dilution, the non-tradeable
nature of the option, the share price at grant date and
expected price volatility of the underlying share, the
expected dividend yield and the risk-free interest rate
for the term of the option.
The fair value of performance rights are estimated
at grant date based on expectations of the bonus
that will be paid at year end to eligible employees.
Each performance right is subject to a 4 year vesting
condition.
vi. Profit-sharing
The consolidated group recognises a liability and an
expense for profit-sharing based on a formula that
takes into consideration the profit attributable to the
Company’s employees after certain adjustments.
42
EUROZ LIMITED ANNUAL REPORT 2016
Notes to the Financial Statements
Note 1. Statement of significant accounting
policies (continued)
(n) Employee benefits (continued)
vii. Termination benefits
The consolidated group recognises a liability and an
expense when the group demonstrates a commitment
to either terminate the employee before the normal
retirement date or provide termination benefits as
a result of an offer made to the employee prior to
retirement date.
(o) Cash and cash equivalents
For purposes of the statement of cash flows, cash and
cash equivalents includes deposits at call which are readily
convertible to cash on hand and are subject to an insignificant
risk of changes in value, net of outstanding bank overdrafts.
(p) Earnings per share
i. Basic earnings per share
Basic earnings per share is determined by dividing the
net profit after income tax attributable to members of
the Company, excluding any costs of servicing equity
other than ordinary shares, by the weighted average
number of ordinary shares outstanding during the
financial year, adjusted for bonus elements in ordinary
shares issued during the year.
ii. Diluted earnings per share
Diluted earnings per share adjusts the figures used in
the determination of basic earnings per share to take
into account the after income tax effect of interest
and other financing costs associated with dilutive
potential ordinary shares and the weighted average
number of shares assumed to have been issued for no
consideration in relation to dilutive potential ordinary
shares.
(q) Fair value measurement
When an asset or liability, financial or non-financial, is
measured at fair value for recognition or disclosure purposes,
the fair value is based on the price that would be received
to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement
date; and assumes that the transaction will take place either: in
the principle market; or in the absence of a principal market, in
the most advantageous market.
Fair value is measured using the assumptions that market
participants would use when pricing the asset or liability,
assuming they act in their economic best interest. For
non-financial assets, the fair value measurement is based
on its highest and best use. Valuation techniques that are
appropriate in the circumstances and for which sufficient data
are available to measure fair value, are used, maximising the
use of relevant observable inputs and minimising the use of
unobservable inputs.
Assets and liabilities measured at fair value are classified,
into three levels, using a fair value hierarchy that reflects the
significance of the inputs used in making the measurements.
Classifications are reviewed each reporting date and transfers
between levels are determined based on a reassessment
of the lowest level input that is significant to the fair value
measurement.
For recurring and non-recurring fair value measurements,
external valuers may be used when internal expertise is
either not available or when the valuation is deemed to be
significant. External valuers are selected based on market
knowledge and reputation. Where there is a significant change
in fair value of an asset or liability from one period to another,
an analysis is undertaken, which includes a verification of the
major inputs applied in the latest valuation and a comparison,
where applicable, with external sources of data.
(r) Fair value estimation
The fair value of financial assets and financial liabilities must be
estimated for recognition and measurement or for disclosure
purposes.
The fair value of financial instruments traded in active markets
(such as publicly traded derivatives, and trading and available-
for-sale securities) is based on quoted market prices at the
reporting date. The quoted market price used for financial
assets held by the consolidated group is the current bid price;
the appropriate quoted market price for financial liabilities is
the current ask price.
The fair value of financial instruments that are not traded in
an active market (for example, over-the-counter derivatives)
is determined using valuation techniques. The consolidated
group uses a variety of methods and makes assumptions that
are based on market conditions existing at each reporting
date. Quoted market prices or dealer quotes for similar
instruments are used for long-term debt instruments held.
Other techniques, such as estimated discounted cash flows,
are used to determine fair value for the remaining financial
instruments.
The nominal value less estimated credit adjustments of trade
receivables and payables are assumed to approximate their
fair values. The fair value of financial liabilities for disclosure
purposes is estimated by discounting the future contractual
cash flows at the current market interest rate that is available
to the consolidated group for similar financial instruments.
(s) Goods and services tax (GST)
Revenues, expenses and assets are recognised net of the
amount of GST, except where the amount of GST incurred
is not recoverable from the Australian Tax Office. In these
circumstances the GST is recognised as part of the cost of
acquisition of the asset or as part of an item of the expense.
Receivables and payables in the statement of financial position
are shown inclusive of GST.
Cash flows are presented in the statement of cash flows on a
gross basis, except for the GST component of investing and
financing activities, which are disclosed as operating cash
flows.
(t) Treasury Shares
Own equity instruments that are reacquired (treasury shares)
are recognised at cost and deducted from equity. No gain
or loss is recognised in profit or loss on the purchase, sale,
issue or cancellation of the group’s own equity instruments.
Any difference between the carrying amount and the
consideration, if reissued, is recognised in share-based
payments reserve.
EUROZ LIMITED ANNUAL REPORT 2016
43
Notes to the Financial Statements
Note 1. Statement of significant accounting
policies (continued)
(u) Financial instruments
The consolidated group classifies its investments in the
following categories: financial assets at fair value through
profit or loss, loans and receivables, and available-for-sale
financial assets. The classification depends on the purpose
for which the investments were acquired. Management
determines the classification of its investments at initial
recognition and re-evaluates this designation at each reporting
date.
Initial recognition and measurement
Financial assets and financial liabilities are recognised when
the consolidated group becomes a party to the contractual
provisions to the instrument. For financial assets, this is
equivalent to the date that the consolidated group commits
itself to either the purchase or sale of the asset (i.e.: trade date
accounting is adopted).
Financial instruments are initially measured at fair value plus
transaction costs, except where the instrument is classified
‘at fair value through profit or loss’, in which case transaction
costs are expensed to profit or loss immediately.
i.
Financial assets at fair value through profit or loss
This category has two sub-categories; financial
assets held for trading, and those designated at fair
value through profit or loss on initial recognition. A
financial asset is classified in this category if acquired
principally for the purpose of selling in the short term
or if so designated by management. The policy of
management is to designate a financial asset if there
exists the possibility it will be sold in the short term and
the asset is subject to frequent changes in fair value.
Assets in this category are classified as current assets
if they are either held for trading or are expected to be
realised within 12 months of the reporting date.
ii. Loans and receivables
Loans and receivables are non-derivative financial
assets with fixed or determinable payments that are
not quoted in an active market. They arise when the
consolidated group provides money, goods or services
directly to a debtor with no intention of selling the
receivable. They are included in current assets, except
for those with maturities greater than 12 months
after the reporting date which are classified as non-
current assets. Loans and receivables are included in
receivables in the statement of financial position.
Classification and subsequent measurement
iii. Available-for-sale financial assets
Financial instruments are subsequently measured at either
of fair value, amortised cost using the effective interest rate
method, or cost. Fair value represents the amount for which
an asset could be exchanged or a liability settled, between
knowledgeable, willing parties. Where available, quoted prices
in an active market are used to determine fair value. In other
circumstances, valuation techniques are adopted.
Amortised cost is calculated as:
– the amount at which the financial asset or financial
liability is measured at initial recognition;
– less principal repayments;
– plus or minus the cumulative amortisation of the
difference, if any, between the amount initially
recognised and the maturity amount calculated using
the effective interest method; and
– less any reduction for impairment.
The effective interest method is used to allocate interest
income or interest expense over the relevant period and is
equivalent to the rate that exactly discounts estimated future
cash payments or receipts (including fees, transaction costs
and other premiums or discounts) through the expected life
(or when this cannot be reliably predicted, the contractual
term) of the financial instrument to the net carrying amount of
the financial asset or financial liability. Revisions to expected
future net cash flows will necessitate an adjustment to the
carrying value with a consequential recognition of an income
or expense in profit or loss.
The consolidated group does not designate any interests
in subsidiaries, associates or joint venture entities as being
subject to the requirements of accounting standards
specifically applicable to financial instruments.
Available-for-sale financial assets, comprising principally
marketable equity securities, are non-derivatives that
are either designated in this category or not classified in
any of the other categories. They are included in non-
current assets.
Purchases and sales of investments are recognised
on trade-date being the date on which the
consolidated group commits to purchase or sell
the asset. Investments are initially recognised at
fair value plus transaction costs for all financial
assets not carried at fair value through profit or
loss. Financial assets are derecognised when the
rights to receive cash flows from the financial assets
have expired or have been transferred and the
consolidated group has transferred substantially all
the risks and rewards of ownership.
Available-for-sale financial assets and financial assets
at fair value through profit and loss are subsequently
carried at fair value. Loans and receivables are carried
at amortised cost using the effective interest method.
Realised and unrealised gains and losses arising from
changes in the fair value of the ‘financial assets at fair
value through profit or loss’ category are included in
the statement of profit or loss in the period in which
they arise. Unrealised gains and losses arising from
changes in the fair value of non-monetary securities
classified as available-for-sale investments revaluation
reserve are recognised in equity in the “available for
sale revaluation reserve”. When securities classified as
available-for-sale are sold or impaired, the accumulated
fair value adjustments are included in the statement
of profit or loss as gains and losses from investment
securities.
44
EUROZ LIMITED ANNUAL REPORT 2016
Notes to the Financial Statements
Note 1. Statement of significant accounting
policies (continued)
(u) Financial instruments (continued)
The fair values of quoted investments are based on
current bid prices. If the market for a financial asset is
not active (and for unlisted securities), the consolidated
group establishes fair value by using valuation
techniques. These include reference to the fair values
of recent arm’s length transactions, involving the same
instruments or other instruments that are substantially
the same, discounted cash flow analysis, and option
pricing methods refined to reflect the issuer’s specific
circumstances.
iv. Impairment of financial assets
The consolidated group assesses at each reporting
date whether there is objective evidence that a financial
asset or group of financial assets is impaired. In the
case of equity securities classified as available-for-sale,
a significant or prolonged decline in the fair value of
a security below its cost is considered in determining
whether the security is impaired. If any such evidence
exists for available-for-sale financial assets, the
cumulative loss – measured as the difference between
the acquisition cost and the current fair value, less
any impairment loss on that financial asset previously
recognised in profit and loss, is removed from equity
and recognised in the statement of profit or loss.
Impairment losses recognised in the statement of profit
or loss on equity instruments are not reversed through
the statement of profit or loss.
(v) Current / non-current classification
Assets and liabilities are presented in the statement of financial
position based on current and non-current classification.
An asset is current when: it is expected to be realised or
intended to be sold or consumed in normal operating cycle;
it is held primarily for the purpose of trading; it is expected to
be realised within twelve months after the reporting period;
or the asset is cash or cash equivalent unless restricted
from being exchanged or used to settle a liability for at least
twelve months after the reporting period. All other assets are
classified as non-current.
A liability is current when: it is expected to be settled in
normal operating cycle; it is held primarily for the purpose of
trading; it is due to be settled within twelve months after the
reporting period; or there is no unconditional right to defer the
settlement of the liability for at least twelve months after the
reporting period. All other liabilities are classified as
non-current.
Deferred tax assets and liabilities are always classified as
non-current.
(w) Contributed equity
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new
shares or options are shown in equity as a deduction, net of
tax, from the proceeds. Incremental costs directly attributable
to the issue of new shares or options, or for the acquisition of
a business, are included in the cost of the acquisition as part of
the purchase consideration.
(x) Impairment of non-financial assets
Goodwill and other intangible assets that have an indefinite
useful life are not subject to amortisation and are tested
annually for impairment or more frequently if events or
changes in circumstances indicate that they might be
impaired. Other non-financial assets are reviewed for
impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. An
impairment loss is recognised for the amount by which the
asset’s carrying amount exceeds its recoverable amount.
Recoverable amount is the higher of an asset’s fair value less
costs to sell and value-in-use. The value-in-use is the present
value of the estimated future cash flows relating to the asset
using a pre-tax discount rate specific to the asset or cash-
generating unit to which the asset belongs. Assets that do not
have independent cash flows are grouped together to form a
cash-generating unit.
(y) Intangible asset
Intangible assets acquired as part of a business combination,
other than goodwill, are initially measured at their fair value
at the date of the acquisition. Intangible assets acquired
separately are initially recognised at cost. Indefinite life
intangible assets are not amortised and are subsequently
measured at cost less any impairment. Finite life intangible
assets are subsequently measured at cost less amortisation
and any impairment. The gains or losses recognised in profit
or loss arising from the derecognition of intangible assets are
measured as the difference between net disposal proceeds
and the carrying amount of the intangible asset. The method
and useful lives of finite life intangible assets are reviewed
annually. Changes in the expected pattern of consumption or
useful life are accounted for prospectively by changing the
amortisation method or period.
Goodwill arises on the acquisition of a business. Goodwill
is not amortised. Instead, goodwill is tested annually for
impairment, or more frequently if events or changes in
circumstances indicate that it might be impaired, and is carried
at cost less accumulated impairment losses. Impairment
losses on goodwill are taken to profit or loss and are not
subsequently reversed.
(z) New standards and interpretations
The AASB has issued the following new and amended
accounting standards and interpretations that have mandatory
application dates for future reporting periods. The group has
decided against the early adoption of any of these standards,
and has not yet determined the potential impact on the
financial statements from the adoption of these standards and
interpretations.
The consolidated group has adopted all of the new, revised or
amending Accounting Standards and Interpretations issued by
the Australian Accounting Standards Board (‘AASB’) that are
mandatory for the current reporting period. The adoption of
these Accounting Standards and Interpretations did not have
a significant impact on the financial performance or position
of the consolidated group.
EUROZ LIMITED ANNUAL REPORT 2016
45
Notes to the Financial Statements
(z) New standards and interpretations (continued)
AASB No.
Title
AASB 9
Financial Instruments
AASB 2010-7 Amendments arising from Accounting Standards arising from AASB 9
(December 2010)
Issue date
Application
date of
standard
$
1 January 2018 December 2014
1 January 2018
September
2012
AASB 2014-1
Amendments to Australian Accounting Standards
Part D - Consequential Amendments arising from AASB 14 Regulatory
Deferral Accounts
Part E - Financial Instruments
Part D - 1
January 2016
Part E - 1
January 2018
June 2014
AASB 2014-3 Amendments to Australian Accounting Standard – Accounting for Acquisition
of Interest in Joint Operations [AASB 1 & AASB 11]
1 January 2016
August 2014
AASB 2014-4 Amendments to Australian Accounting Standard - Clarification of Acceptable
Methods of Depreciation and Amortisation (Amendments to AASB 116 and
AASB 138)
1 January 2016
August 2014
AASB 2014-5 Amendments to Australian Accounting Standard Arising From AASB 15
1 January 2018 December 2014
AASB 2014-7 Amendments to Australian Accounting Standard Arising From AASB 9
(December 2014)
AASB 2014-9 Amendments to Australian Accounting Standard - Equity Method in Separate
Financial Statements
1 January 2018 December 2014
1 January 2016 December 2014
AASB 2014-
10
Amendments to Australian Accounting Standard - Sale of Contribution of
Assets Between Investors and its Associates or Joint Venture
1 January 2018 December 2014
AASB 2015-1
Amendments to Australian Accounting Standards – Annual Improvements to
Australian Accounting Standards 2012–2014 Cycle
1 January 2016
January 2015
AASB 2015-2 Amendments to Australian Accounting Standards – Disclosure Initiative:
Amendments to AASB 101
AASB 2015-5 Amendments to Australian Accounting Standards – Investment Entities:
Applying the Consolidation Exception
AASB 2015-6 Amendments to Australian Accounting Standards – Extending Related Party
Disclosures to NFP Public Sector Entities
AASB 2015-7 Amendments to Australian Accounting Standards – Fair Value Disclosures of
Not-for-Profit Public Sector Entities
1 January 2016
January 2015
1 January 2016
January 2015
1 July 2016
March 2015
1 July 2016
July 2015
AASB 2015-8 Amendments to Australian Accounting Standards – Effective Date of AASB 15 1 January 2018
October 2015
AASB 2015-9 Amendments to Australian Accounting Standards – Scope and Application
Paragraphs
1 January 2016 November 2015
AASB 2015-
10
Amendments to Australian Accounting Standards – Effective Date of
Amendments to AASB 10 and AASB 128.
1 January 2018 December 2015
AASB 2016-1 Amendments to Australian Accounting Standards – Recognition of Deferred
Tax Assets for Unrealised Losses [AASB 112]
AASB 2016-2 Amendments to Australian Accounting Standards – Disclosure Initiative:
Amendments to AASB 107
1 January 2017
February 2016
1 January 2017
March 2016
AASB 2016-3 Amendments to Australian Accounting Standards – Clarifications to AASB 15
1 January 2018
May 2016
AASB 2016-4 Amendments to Australian Accounting Standards – Recoverable Amount of a
Non-Cash Generating Specialised Assets of Not-for-Profit Entities
AASB 14
AASB 15
AASB 16
Regulatory Deferral Account
Revenues from Contracts with Customers
Leases
AASB 1056
Superannuation Entities
AASB 1057
Application of Australian Accounting Standards
1 January 2017
June 2016
1 January 2016
June 2014
1 January 2018
October 2015
1 January 2019
February 2016
1 July 2016
June 2014
1 January 2016 November 2015
46
EUROZ LIMITED ANNUAL REPORT 2016
Notes to the Financial Statements
Note 2. Significant accounting estimates
and judgements
Estimates and judgements incorporated in the financial
statements are based on historical knowledge and best
available current information. Estimates assume a reasonable
expectation of future events and are based on current trends
and economic data, obtained both externally and within the
group.
Key estimates and judgments
i. Impairment
At each reporting date, the consolidated group
compares the carrying values and market values of
investment entities to determine whether there is any
indication of impairment. If impairment indicators
exist, any excess of the investment entity’s carrying
value over the recoverable amount is expensed to the
statement of profit or loss.
Where it is not possible to estimate the recoverable
amount of an individual asset, the consolidated
group estimates the recoverable amount of the cash-
generating unit to which the asset belongs.
ii. Classification of inventories
The consolidated group has decided to classify
investments in listed securities as held for trading.
These securities are accounted for at fair value. Any
increments or decrements in their value at year end are
charged or credited to the statement of profit or loss.
iii. Taxation
Judgement is required in assessing whether deferred
tax assets and certain deferred tax liabilities are
recognised on the statement of financial position.
Deferred tax assets, including those arising from
temporary differences and tax losses, are recognised
only where it is considered more likely than not they will
be recovered, which is dependent on the generation of
sufficient future taxable profits. Deferred tax liabilities
arising from temporary differences are recognised to
the extent that there are future profits.
In addition, the goodwill on the acquisition of
Entrust totalling $5,597,365 has been allocated to
the performance of this company as a whole. The
assumptions used for determining the recoverable
amount are based on past experience and expectations
for the future. Projected cash flows for each cash-
generated unit are discounted using an appropriate
discount rate and a value in use is determined over a
5 year life. The discount rate deemed applicable at 30
June 2016 amounted to 9.81%. The Board have assessed
that there is no indication the goodwill is impaired.
v. Intangible assets
Upon acquisition of Entrust, Euroz acquired $1,721,835
in other intangible assets consisting 3 separate
assets. These assets were tested for impairment. The
assumptions used for determining the recoverable
amount was based on past experience and
expectations for the future. Projected cash flows for
each cash-generated unit were discounted using
an appropriate discount rate and a value in use was
determined over a 5 year life. The discount rate deemed
applicable at 30 June 2016 amounted to 9.81%. The
Board have assessed that there is no indication these
assets goodwill are impaired.
Note 3. Segment information
Identification of reportable segments
The consolidated group has identified its operating segments
based on the internal reports that are reviewed and used by
the executive team (the chief operating decision makers) in
assessing performance and in allocating resources.
Types of products and services
Stockbroking & Corporate Activities
Stockbroking business offering trading of Australian securities,
corporate finance and the provision of company research.
Principal trading
Principal trading relates to the purchase and sale of securities
by the consolidated group.
iv. Goodwill
Funds management
Goodwill is tested for impairment annually or more
frequently if events or changes in circumstances
indicate that it might be impaired. For the purpose
of impairment testing, the goodwill on acquisition
of Blackswan Equities Limited is allocated to private
client broking cash-generating unit which represents
the lowest level at which it is monitored for internal
management purposes. At 30 June 2016, goodwill
totalling $2,833,112 has been allocated to the private
client broking cash-generated unit. The assumptions
used for determining the recoverable amount are
based on past experience and expectations for the
future. Projected cash flows for each cash-generated
unit are discounted using an appropriate discount
rate and a value in use is determined over a 5 year life.
The discount rate deemed applicable at 30 June 2016
amounted to 9.81%. The Board have assessed that there
is no indication the goodwill is impaired.
The consolidated group provides advice and the execution of
mandates in relation to funds management.
Investments
The consolidated group invests in listed and unlisted securities
from which it derives dividends.
Wealth Management
The consolidated group provides wealth management services
including the administration of funds under management.
Basis of accounting for purpose of reporting by operating
segments
The accounting policies used by the consolidated group
in reporting segments internally are consistent with those
adopted in the financial statements of the consolidated group,
unless otherwise stated.
EUROZ LIMITED ANNUAL REPORT 2016
47
Notes to the Financial Statements
Note 3. Segment information (continued)
Segment assets and liabilities
Where an asset is used across multiple segments, the asset is allocated to that segment that receives majority economic value
from that asset.
Liabilities are allocated to segments where there is a direct nexus between the liability and the operations of the segment.
Stockbroking &
Corporate
Activities
$
Principal
Trading
Funds
Management
Investment
Income
Wealth
Management
Unallocated
Total
$
$
$
$
$
$
-
6,026,121
2,591
50,685
2016
Sales and other
fees
24,742,067
4,470,767
1,796,959
Interest revenue
448,066
Other revenues
900
212
-
43,878
323,958
-
4,018,663
Total segment
revenue
Segment net
operating
profit/(loss)
after tax
Depreciation
and
amortisation
Gain/(Loss)
on fair value of
investments
25,191,033
4,470,979
1,840,837
4,342,621
6,079,397
3,323,044
1,058,429
(1,852,145)
(592,331)
624,021
155,541
-
10,252
-
-
565,758
-
(5,813,059)
-
-
Segment assets
31,240,962
5,826,554
4,064,447
77,673,140
3,306,541
-
5,826,554
383,812
-
-
-
-
-
55,171,351
-
2,723,922
114,551
445,541
4,374,091
623,690
-
-
-
-
-
-
-
-
-
-
-
37,035,914
818,705
4,070,248
41,924,867
2,561,018
165,793
(5,217,301)
122,111,645
60,997,905
-
8,281,795
1,784,369
1,423,336
(1,840,918)
-
624,021
-
1,990,808
(383,812)
16,195
49,978
(5,686,044)
-
-
-
-
-
-
-
(6,003,683)
(6,826,179)
(6,826,179)
Fair value of
investments
Capital
expenditure
Segment
liabilities
Cash flow
information
Net cash flow
from operating
activities
Net cash flow
from investing
activities
Net cash flow
from financing
activities
48
EUROZ LIMITED ANNUAL REPORT 2016
Notes to the Financial Statements
Note 3. Segment information (continued)
Segment performance
Stockbroking &
Corporate
Activities
$
Principal
Trading
Funds
Management
Investment
Income
Unallocated
Total
$
$
2015
Sales and other
fees
25,074,027
3,842,298
3,380,405
Interest revenue
713,179
-
59,669
-
40,000
-
$
-
638,013
5,151,190
Segment assets
34,462,677
5,582,420
3,059,467
76,949,780
25,787,206
3,882,298
3,440,074
5,789,203
723,910
(112,170)
1,634,124
(9,376,516)
113,149
-
3,104
-
-
(1,025,513)
-
(20,111,346)
-
142,666
3,192,734
-
-
-
-
53,769,308
80,560
-
360,307
5,243,891
(859,586)
(3,116,830)
-
-
Other revenues
Total segment
revenue
Segment net
operating
profit/(loss)
after tax
Depreciation
and
amortisation
Gain/(Loss)
on fair value of
investments
Fair value of
investments
Capital
expenditure
Segment
liabilities
Cash flow
information
Net cash flow
from operating
activities
Net cash flow
from investing
activities
Net cash flow
from financing
activities
5,681,338
40,000
(80,560)
4,502,713
(425,245)
9,718,246
-
-
-
-
(16,088,832)
(16,088,832)
Entity-wide disclosures
The consolidated group predominately operates with in the geographical region of Australia. Therefore, the total revenue and
non-current assets are reflected on the face of the financial statements.
During the year ended 30 June 2016 approximately 14% (2015: 19%) of the consolidated group’s external revenue was derived
from management fees and dividends from Ozgrowth Limited and Westoz Investment Company Limited.
$
$
-
-
-
-
-
-
-
-
-
-
-
-
32,296,730
1,410,861
5,191,190
38,898,781
(7,130,652)
116,253
(21,136,859)
120,054,344
53,769,308
223,226
8,796,932
(3,976,416)
EUROZ LIMITED ANNUAL REPORT 2016
49
Notes to the Financial Statements
Note 4. Revenue
Revenue from operating activities
Brokerage
Underwriting and management fees
Wealth Management fees
Proceeds on sale of principal trading shares
Corporate retainers
Other income
Interest received
Other revenue
Dividend received
Total Revenue
Note 5. Profit before income tax expense
Rental expenses relating to operating lease
Superannuation expense
Share based payments – PRP
Share based payments – Other
Write-off of fixed assets
Write-off of investment
Note 6. Income tax
The components of tax expense comprise:
Current tax
Deferred tax
2016
$
14,344,812
11,260,910
5,153,627
4,454,572
1,752,399
2015
$
16,626,934
11,005,474
-
3,842,298
822,023
36,966,320
32,296,729
818,705
131,603
4,008,239
4,958,547
41,924,867
2016
$
1,992,946
1,054,437
501,189
250,000
-
-
1,410,862
-
5,191,190
6,602,052
38,898,781
2015
$
1,837,796
797,118
391,197
125,000
131,977
15,000
2016
$
2015
$
1,632,285
1,691,318
(2,104,726)
(6,779,609)
(472,441)
(5,088,291)
50
EUROZ LIMITED ANNUAL REPORT 2016
Notes to the Financial Statements
Note 6. Income tax (continued)
Numerical reconciliation between tax expense and pre-tax accounting profit
Income tax using company’s tax rate of 30% (2015: 30%)
626,573
(3,665,683)
2016
$
2015
$
Add tax effect of:
- other non-allowable items
- other
Less tax effect of:
- other
- franked dividends received
145,725
-
121,703
13,046
772,298
(3,530,934)
57,153
1,187,586
(472,441)
-
1,557,357
(5,088,291)
The applicable weighted average effective tax rates are as follows:
(22.62%)
(41.64%)
Reconciliations
i. Gross movements
The overall movement in the deferred tax account is as follows:
Balance at 1 July
Recognised in statement of profit or loss
Balance at 30 June
ii. Deferred tax liability
Movement in temporary differences during the year
Fair value gain adjustments
Balance at 1 July
Recognised in the statement of profit or loss
Balance at 30 June
Other
Balance at 1 July
Recognised in the statement of profit or loss
Balance at 30 June
4,699,929
3,059,772
7,759,701
(2,079,680)
6,779,609
4,699,929
(26,700)
402,194
375,494
2,907,263
(2,933,963)
(26,700)
423,877
16,064
439,971
815,465
134,199
289,678
423,877
397,177
EUROZ LIMITED ANNUAL REPORT 2016
51
Notes to the Financial Statements
Note 6. Income tax (continued)
iii. Deferred tax assets
Movement in temporary differences during the year
Fair value gain adjustments
Balance at 1 July
Recognised in the statement of profit or loss
Balance at 30 June
Provisions
Balance at 1 July
Recognised in the statement of profit or loss
Balance at 30 June
Other
Balance at 1 July
Recognised in the statement of profit or loss
Balance at 30 June
2016
$
2015
$
3,795,921
1,996,710
5,792,631
549,958
152,332
702,290
750,591
1,329,654
2,080,245
8,575,166
-
3,795,921
3,795,921
961,782
(411,824)
549,958
-
750,591
750,591
5,096,470
Tax consolidation legislation
Euroz Limited and its wholly-owned Australian subsidiaries implemented the tax consolidation legislation as of 1 July 2003. The
accounting policy on implementation of the legislation is set out in Note 1(b). The impact on the income tax expense for the year
is disclosed in the tax reconciliation above.
The entities have also entered into a tax sharing and funding agreement. Under the terms of this agreement, the wholly-owned
entities reimburse Euroz Limited for any current income tax payable by Euroz Limited arising in respect of their activities. The
reimbursements are payable at the same time as the associated income tax liability falls due and have therefore been recognised
as a current tax-related receivable by Euroz Limited. In the opinion of the Directors, the tax sharing agreement is also a valid
agreement under the tax consolidation legislation and limits the joint and several liability of the wholly owned entities in the case
of a default by Euroz Limited.
Note 7. Cash and cash equivalents
Cash at bank and on hand
Note 8. Trade and other receivables
Trade receivables
2016
$
2015
$
34,202,416
45,041,470
2016
$
1,549,678
2015
$
1,384,626
All trade receivables relating to brokerage and principal trading have been transferred to Pershing Securities Australia Pty Ltd
(clearing participant on behalf of Euroz Securities Limited) who provides a trust account facility as part of the clearing and
settlement service.
52
EUROZ LIMITED ANNUAL REPORT 2016
Notes to the Financial Statements
Note 9. Inventories
Securities in unlisted companies (at cost) (i)
Trading securities in listed companies (at cost) (i)
Fair value adjustments (ii)
Total
(i ) These securities are held for trade purposes.
(ii) The fair value adjustment is based on the closing price of each investment at year end.
Note 10. Other current assets
Prepayments
Accrued income
Current tax asset
Total
Note 11. Long term receivable
2016
$
527,000
6,430,656
(1,131,102)
5,826,554
2015
$
527,000
6,699,270
(1,643,850)
5,582,420
2016
$
952,541
195,764
-
1,148,305
2016
$
2015
$
642,814
161,237
225,065
1,029,116
2015
$
Security deposit
5,000,000
5,000,000
Deposit held by Pershing Securities Australia Pty Ltd (clearing participant on behalf of Euroz Securities Limited).
Note 12. Investments
Cost of investment in managed investment scheme
Fair value adjustments (i)
Total
(i) The fair value adjustment is based on the closing unit value of the scheme.
2016
$
7,000,000
1,050,076
8,050,076
2015
$
-
-
-
EUROZ LIMITED ANNUAL REPORT 2016
53
Notes to the Financial Statements
Note 13. Investment entities at fair value
Listed ordinary shares in investment entities at fair value through profit or loss
47,121,275
53,769,308
Reconciliation
Reconciliation of the fair values at the beginning and end of the current financial
year are set out below:
2016
$
2015
$
Opening fair value
Additions
Revaluation increments / (decrements)
Closing fair value
Note 14. Plant and equipment
Leasehold improvements
At cost
Less: Accumulated amortisation
Software
At cost
Less: Accumulated depreciation
Office equipment
At cost
Less: Accumulated depreciation
Furniture, fixtures and fittings
At cost
Less: Accumulated depreciation
Total
53,769,308
215,102
(6,863,135)
47,121,275
73,232,177
648,477
(20,111,346)
53,769,308
2016
$
241,607
(44,643)
196,964
62,246
(24,168)
38,078
242,171
(113,959)
128,212
196,424
(73,815)
122,609
485,863
2015
$
103,421
(26,817)
76,604
43,392
(26,001)
17,391
193,586
(109,601)
83,985
176,912
(37,070)
139,842
317,822
54
EUROZ LIMITED ANNUAL REPORT 2016
Notes to the Financial Statements
Note 14. Plant and equipment (continued)
Reconciliations
Reconciliations of the carrying amounts of each class of plant and equipment at the beginning and end of the current and
previous financial years are set out below:
2016
Carrying amount at 1 July 2015
Additions
Disposals
Assets written-off
Depreciation / amortisation expense
Carrying amount at 30 June 2016
2015
Carrying amount at 1 July 2014
Additions
Acquired from a business combination
Assets written-off
Depreciation / amortisation expense
Carrying amount at 30 June 2015
Note 15. Deferred tax assets
Leasehold
improvements
$
Plant and
equipment
$
76,604
215,560
(49,978)
(40)
(45,182)
196,964
6,493
77,609
-
-
(7,498)
76,604
241,218
168,252
-
(4,565)
(116,006)
288,899
191,599
143,748
146,603
(131,977)
(108,755)
241,218
Total
$
317,822
383,812
(49,978)
(4,605)
(161,188)
485,863
198,092
221,357
146,603
(131,977)
(116,253)
317,822
Reconciliations of the carrying amounts of each class of plant and equipment at the beginning and end of the current and
previous financial years are set out below:
Deferred tax asset (Note 6)
Note 16. Intangible assets
Goodwill (refer (a) below)
Other intangible assets (refer (b) below)
(a) Goodwill
Opening balance
Acquired on the acquisition of business (refer to note 31)
Amortisation
Balance
2016
$
8,575,166
2016
$
8,430,477
1,721,835
10,152,312
2,833,112
5,597,365
-
2015
$
5,096,470
2015
$
2,833,112
-
2,833,112
-
2,833,112
-
8,430,477
2,833,112
EUROZ LIMITED ANNUAL REPORT 2016
55
Notes to the Financial Statements
Note 16. Intangible assets (continued)
As referred to in note 31, Euroz Limited acquired $5,597,365 in goodwill on the acquisition of a business during the period. The
Directors deem this to be an indefinite life intangible asset and accordingly perform an impairment assessment at reporting date.
Based on this assessment at 30 June 2016, no impairment was considered necessary. Note 2 (iv) contains additional information
on this assessment.
(b) Other intangible assets
Opening balance
Acquired on the acquisition of business (refer to note 31)
Amortisation
Balance
2016
$
-
1,721,835
-
1,721,835
2015
$
-
-
-
-
In addition, Euroz Limited acquired $1,721,835 in other intangible assets on the acquisition of a business during the period. These
intangibles consist of 3 separate assets as follows:
Client portfolio A
Client portfolio B
Client portfolio C
$
500,000
80,000
1,141,835
1,721,835
Upon acquisition, Client portfolio A pre-acquisition had been impaired by $358,053 (gross value - $858,053). The carrying value
of all 3 assets was assessed at reporting date for impairment and no impairment was considered necessary. Note 2 (v) contains
further information on this impairment assessment.
Note 17. Trade and other payables
Other payables and accruals
2016
$
1,204,171
2015
$
1,525,486
All trade creditors relating to brokerage and principal trading have been transferred to Pershing Securities Australia Pty Ltd who
provides a trust account facility as part of the clearing and settlement service.
Note 18. Current tax liabilities
Provision for taxation
2016
$
444,699
2015
$
-
56
EUROZ LIMITED ANNUAL REPORT 2016
Notes to the Financial Statements
Note 19. Short term provisions
Dividends
Employee entitlements (annual leave)
Employee entitlements (long service leave)
Total
Dividends
2016
$
3,622,711
1,024,576
893,829
5,541,116
2015
$
5,192,129
707,050
652,870
6,552,049
This provision represents the dividend declared by the board before the reporting date and to be paid out to shareholders
subsequent to year end.
Movements in each class of provisions, other than employee benefits, are set out below:
Carrying amount at 1 July
Additional provisions recognised
Amounts paid out (including through dividend reinvestments)
Carrying amount at 30 June
Note 20. Deferred tax liabilities
Deferred tax liability (Note 6)
Note 21. Long term provisions
Employee entitlements (long service leave)
Note 22. Contributed equity
(a) Share Capital
Ordinary shares
Issued and paid up capital consisting of
ordinary shares (net of treasury shares)
2016
$
5,192,129
6,438,992
2015
$
13,702,841
7,886,167
(8,008,410)
(16,396,879)
3,622,711
5,192,129
2016
$
815,465
2016
$
276,344
2015
$
397,177
2015
$
322,220
2016
Shares
2015
Shares
2016
$
2015
$
158,574,382
152,997,812
105,226,509
99,533,415
EUROZ LIMITED ANNUAL REPORT 2016
57
Notes to the Financial Statements
Note 22. Contributed equity (continued)
(b) Movements in ordinary share capital
At the beginning of the reporting period
Acquisition of Treasury shares
Shares issued as consideration to acquire Entrust Private Wealth Management
Pty Ltd
Shares issued as consideration to acquire Blackswan Equities Limited
Shares issued through dividend reinvestment scheme
Shares bought back
At the end of the reporting period
(c) Movements in ordinary share capital
At the beginning of the reporting period
Acquisition of Treasury shares
Shares issued as consideration to acquire Entrust Private Wealth Management
Pty Ltd
Shares issued as consideration to acquire Blackswan Equities Limited
Shares issued through dividend reinvestment scheme
Shares bought back
At the end of the reporting period
2016
Shares
2015
Shares
152,997,812
(1,125,000)
5,450,000
-
1,586,570
(335,000)
146,153,785
(410,000)
-
5,200,000
2,054,027
-
158,574,382
152,997,812
2016
Shares
2015
Shares
99,533,415
(933,008)
5,450,000
-
1,420,312
(244,210)
90,924,294
(425,245)
-
6,604,000
2,430,366
-
105,226,509
99,533,415
2016
Shares
2015
Shares
2016
$
2015
$
(d) Treasury shares
Balance of treasury shares at the end of the
reporting period
(2,435,000)
(1,310,000)
(2,500,958)
(1,567,950)
Treasury shares were acquired by Employee Share Trust at various times during the year. The acquisition of Treasury shares
forms part of the Performance Right Plan.
(e) Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to
the number of and amounts paid on the shares held. Ordinary shares have no par value.
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 upon
a poll each share is entitled to one vote.
(f) Options
There were no options on issue at 30 June 2016 (30 June 2015: NIL).
58
EUROZ LIMITED ANNUAL REPORT 2016
Notes to the Financial Statements
Note 22. Contributed equity (continued)
(g) Share based payments reserve
The reserve records items recognised as expenses on valuation of share based payments. The movement in the current period
totalling $501,189 (2015: $391,197) relates to the vesting expense related to the fair value of performance rights issued in the prior
year and the current year in connection with the Performance Rights Plan.
Balance on share based payment reserve at 1 July
Recognised during the year
Balance on share based payments reserve at 30 June
(h) Capital management
2016
$
658,175
501,189
1,159,364
2015
$
266,978
391,197
658,175
The Directors primary objective is to maintain a capital structure that ensures the lowest cost of capital available to the group. At
reporting date, the group has no external borrowings and significant cash reserves. As the holder of AFSLs and as a participant
of the ASX the group is exposed to externally imposed capital requirements, which have been complied with at year end and
throughout the year.
Note 23. Dividends
Ordinary shares
Interim dividend for the half year ended 31 December 2015 of 1.75 cents
(2015 – 1.75 cents) per fully paid ordinary share paid on 15 January 2016.
Fully franked based on tax paid @ 30%
Final dividend declared and provided for at 30 June 2016 of 2.25 cents
(2015 – 3.25 cents) per fully paid ordinary share paid on 5 August 2016.
Fully franked based on tax paid @ 30%
2016
$
2015
$
2,816,281
2,694,038
3,622,711
5,192,129
Total dividends provided for or paid
6,438,992
7,886,167
Of the total dividends paid during the year, $6,129 (2015: $9,458) was paid to the Euroz Share Trust (related to the Euroz
Performance Rights Plan) and is undistributed. Therefore, it has been eliminated on consolidation.
Franked dividends
The franked portions of the dividends recommended after 30 June 2016 will be franked out of existing franking credits or out of
franking credits arising from the payment of income tax in the year ending 30 June 2016.
Franking credits available for subsequent financial years based on a tax rate of 30%
(2015: 30%)
2016
$
2015
$
15,193,768
11,279,279
These dividends are fully-franked and therefore, there are no income tax consequences for the owners of Euroz Limited.
The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for:
(a) franking credits that will arise from the payment of the current tax liability
(b) franking debits that will arise from the payment of dividends recognised as a liability at the reporting date
(c) franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date, and
(d) franking credits that may be prevented from being distributed in subsequent financial years.
The consolidated amounts include franking credits that would be available to the parent entity if distributable profits of
controlled entities were paid as dividends.
EUROZ LIMITED ANNUAL REPORT 2016
59
Notes to the Financial Statements
Note 24. Financial instruments
(a) Financial risk management
The group’s financial instruments consist of deposits with banks, trade receivables and payables, short term investments and
available for sale investments. Derivative financial instruments are not used by the group. Senior executives meet regularly to
analyse and monitor the financial risk associated with the financial instruments used by the group.
(b) Financial risk exposure and management
i. Interest rate risk
The group has no borrowings and therefore is not exposed to interest rate risk associated with debt. The group has
significant cash reserves and the interest income earned from these cash reserves will be affected by movements in the
interest rate. A sensitivity analysis has been provided in the note to illustrate the effect of interest rate movements on
interest income earned.
ii. Liquidity risk
The group manages liquidity risk using forward cash flow projections, maintaining cash reserves and having no
borrowings or debt.
Trade and other payables are expected to be paid as follows:
Less than 1 month
iii. Credit risk
2016
$
1,204,171
2015
$
1,525,486
The maximum exposure to credit risk, excluding the value of any collateral or security, at reporting date is the carrying
amount of the financial assets disclosed in the statement of financial position. There is no collateral or security held for
those assets at 30 June 2016.
Credit risk arises from exposure to customers and deposits with banks. Senior management monitors its exposure to
customers on a regular basis to ensure recovery and repayment of outstanding amounts. Cash deposits are only made
with Australian based banks. All trade debtors relating to brokerage and principal trading have been transferred to
Pershing who provides a trust account facility as part of the clearing and settlement service. Trade receivables are usually
paid within 30 days.
The carrying amount of the consolidated entity’s financial assets represents the maximum credit exposure.
The consolidated entity’s maximum exposure to credit risk at the reporting date was:
Cash and cash equivalents
Receivables
Long term deposit
2016
$
2015
$
34,202,416
45,041,470
1,549,678
1,384,626
5,000,000
40,752,094
5,000,000
51,426,096
60
EUROZ LIMITED ANNUAL REPORT 2016
Notes to the Financial Statements
Note 24. Financial instruments (continued)
Impairment losses
None of the consolidated group’s receivables are past due date (2015: Nil).
iv. Financial instruments composition and maturity analysis
Weighted
Average
Effective
Interest Rate
2016
%
2015
%
Floating Interest
Rate
Non-Interest
Bearing
2016
$
2015
$
2016
$
2015
$
1.77
2.19
34,202,416
45,041,470
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,549,678
1,384,626
5,826,554
5,582,420
47,121,275
53,769,308
8,050,076
-
-
-
Financial Assets
Cash and cash
equivalents
Trade and other
Receivables
Financial assets held
for trading
Financial assets at fair
value through profit
and loss
Other investments
Long term deposit
1.0
1.25
5,000,000
5,000,000
Total financial assets
Financial Liabilities
Trade and other
payables
39,202,416
50,041,470
62,547,583
60,736,354
-
-
-
-
1,204,171
1,525,486
The following table details the consolidated entities fair value of financial instruments categorised by the following levels:
Level 1: Quoted prices (unadjusted) in active markets for identical assets and liabilities
Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly
(as prices) or indirectly (derived from prices)
Level 3: Inputs for the assets or liability that are not based on observable market data (unobservable inputs)
Level 1
Level 2
Level 3
Total
2016
Assets
Investments
Total Assets
2015
Assets
Investments
Total Assets
60,707,290
60,707,290
290,615
290,615
59,061,113
59,061,113
290,615
290,615
-
-
-
-
60,997,905
60,997,905
59,351,728
59,351,728
EUROZ LIMITED ANNUAL REPORT 2016
61
Notes to the Financial Statements
Note 24. Financial instruments (continued)
v. Sensitivity analysis
Assuming all variables remain constant and the interest rate fluctuated by 1% at year end the effect on the consolidated
group’s equity and profit as follows:
Increase by 1%
Decrease by 1%
2016
$
274,417
2015
$
350,290
(274,417)
(350,290)
Assuming all variables remain constant and the equity market fluctuated by 5% at year end the effect on the group’s
equity and profit is as follows:
Increase by 5%
Decrease by 5%
Note 25. Remuneration of auditors
2016
$
2015
$
3,049,895
2,967,586
(3,049,895)
(2,967,586)
2016
$
2015
$
Audit services
Audit and review of financial reports for the Group Fees paid to PKF Mack firm
162,000
136,000
Other services
Tax compliance services
Other services
Note 26. Contingent liabilities
The parent entity and consolidated group had contingent liabilities at 30 June 2016 as follows:
Secured guarantees in respect of:
Operating lease of a controlled group entity
32,950
12,500
45,450
24,500
10,000
34,500
2016
$
2015
$
790,180
1,321,126
As detailed in note 11 the consolidated group has a deposit with Pershing as part of Euroz Securities Limited third party clearing
arrangements. This deposit totalled $5,000,000 at reporting date (2015: $5,000,000).
Legal proceedings were filed on 22 January 2016 in the Supreme Court of Western Australia on behalf of two former clients of
Euroz Securities Limited. Euroz Securities Limited and Entrust Private Wealth Management Pty Ltd are two of four Australian
Financial Services Licence (AFSL) holders jointly named in the Writ of Summons. The total value of the claim is $2,400,000. At
this point in time it is not clear what the gross and net contingent liability of this action is to Euroz Securities Limited and Entrust
Private Wealth Management Pty Ltd.
62
EUROZ LIMITED ANNUAL REPORT 2016
Notes to the Financial Statements
Note 27. Commitments for expenditure
(a) Operating leases
Commitments for minimum lease payments in relation to non cancellable operating
leases are payable as follows:
Within one year
Later than one year but not later than five years
Later than five years
2016
$
2015
$
1,284,348
4,243,421
127,218
1,232,415
5,393,288
261,699
Commitments not recognised in the financial statements
5,654,987
6,887,402
The lease on the premises at Level 18, 54-58 Mounts Bay Road is for the period of 10 years commencing 2 July 2010 and expiring
on 1 July 2020.
The licence on the premises at Level 23, Goldfields House, 1 Alfred Street, Sydney NSW is for the period of 5 years commencing
13 June 2014 and expiring on 31 October 2019.
The licence on the premises at Level 16, 385 Bourke Street, Melbourne is for the period of 8 years commencing 1 June 2015 and
expiring on 31 May 2022.
Note 28. Employee benefits
Employee benefit and related on-costs liabilities
Provision for employee entitlements
Aggregate employee benefit and related on costs liabilities
Note 29. Related parties
(a) Key Management Personnel compensation
Short-term employee benefits
Post-employment benefits
Share based payments
2016
$
2,194,749
2,194,749
2015
$
1,682,140
1,682,140
2016
$
2015
$
2,996,758
2,873,621
255,450
276,875
250,365
181,250
3,529,083
3,305,236
(b) Individual Key Management Personnel compensation disclosure
Information regarding individual KMP compensation and some equity instruments disclosures as required by Corporations
Regulation is provided in the remuneration report section of the Directors’ Report.
Apart from the details disclosed in this note, no KMP has entered into a material contract with the group since the end of the
previous financial year and there were no material contracts involving KMP interest existing at year end.
(c) Parent entity
The ultimate parent entity within the group is Euroz Limited.
EUROZ LIMITED ANNUAL REPORT 2016
63
Notes to the Financial Statements
Note 29. Related parties (continued)
(d) Share-based payments
During the year a performance right was issued to 72 employees (2015: 76 employees). This performance right entitles the
holder to a number of shares in Euroz Limited calculated as 25% of their bonus entitlement for the year. At point of issue, these
performance rights are subject to a 4 year vesting period. The fair value of each performance right is calculated as 25% of the
individual’s bonus entitlement.
(e) Wholly-owned group transactions
Wholly owned group
The wholly owned group consists of Euroz Limited and its wholly owned controlled entities. See Note 30.
Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to
other parties unless otherwise stated.
2016
$
2015
$
Transactions with related parties consisting of:
vi. Subsidiaries
– Loans advanced by Euroz Limited to subsidiaries
– Payments of dividends to Euroz Limited by subsidiaries
6,089,701
8,495,488
3,450,000
1,750,000
– Payments of dividends to Euroz Securities Limited by subsidiaries
– Loans advanced by Prodigy Investment Partners Limited to subsidiary
– Loans advanced by WIM WA Resources Limited to subsidiary
– Management fees charged by Euroz Securities Limited to subsidiaries
– Management fees charged by Prodigy Investment Partners Limited to
subsidiaries
ii. Other
-
-
19,007
1,685,229
381,654
80,000
47,819
-
-
-
– Dividends received by Euroz Limited from investment entities
– Management fee received by the Euroz Group from investment entities
– Performance fee received by the Euroz Group from investment entities
3,947,426
1,736,952
6,609
5,151,190
2,210,600
-
Ownership interests in related parties
Interests held in the following classes of related parties are set out in note 30.
Other transactions with Directors and specified Executives
During the year ended 30 June 2016 the Directors and KMP transacted share business through Euroz Securities Limited on
normal terms and conditions.
Aggregate amounts of the above transactions with Directors and KMP of the consolidated group:
Amounts recognised as revenue
Brokerage earned on Key Management Personnel accounts
41,442
50,922
2016
$
2015
$
64
EUROZ LIMITED ANNUAL REPORT 2016
Notes to the Financial Statements
Note 30. Investments in controlled entities
Name of entity
Country of
incorporation
Class of
shares
Equity holding
Cost of parent entity’s
investment
2016 %
2015 %
2016 $
2015 $
Euroz Securities Limited
Detail Nominees Pty Ltd
Zero Nominees Pty Ltd (i)
Westoz Funds Management Pty Ltd
Euroz Employee Share Trust
Ozgrowth Limited
Australia
Ordinary
Australia
Ordinary
Australia
Ordinary
Australia
Ordinary
Australia
Ordinary
Australia
Ordinary
Westoz Investment Company Limited
Australia
Ordinary
Prodigy Investment Partners Limited
Blackswan Equities Limited (i)
Australia
Ordinary
Australia
Ordinary
Flinders Investment Partners Pty Ltd (ii)
Australia
Ordinary
Dalton Street Capital Pty Ltd (ii)
Blackswan Corporate Pty Ltd (i)
Australia
Ordinary
Australia
Ordinary
Blackswan Wealth Management Pty Ltd (i)
Australia
Ordinary
WIM WA Resources Ltd
WIM Small Cap Ltd
Australia
Ordinary
Australia
Ordinary
Entrust Private Wealth Management Pty Ltd
Australia
Ordinary
Prodigy Flinders Pty Ltd (ii)
Prodigy Corporate Pty Ltd (ii)
Prodigy DSC Pty Ltd (ii)
Australia
Ordinary
Australia
Ordinary
Australia
Ordinary
The ultimate parent entity in the wholly owned group is Euroz Limited.
(i) Owned by Euroz Securities Limited
(ii) Owned by Prodigy Investment Partners Limited
100 25,000,000 25,000,000
100
100
100
100
-
100
100
100
-
38.81
26.41
38.77
26.21
80
100
50
50
100
100
100
100
100
100
100
100
80
100
100
-
100
100
100
100
-
-
-
-
-
-
-
-
1,450,000
1,450,000
-
-
-
-
-
-
1,500,000
500,000
6,604,000
6,604,000
2
2
-
-
1
1
7,800,000
2
2
2
2
-
-
-
1
1
-
-
-
-
A brief description of each entity (unless inactive and dormant) is as follows:-
(a) Euroz Limited – Group holding company listed on the Australian Securities Exchange. Euroz Limited manages cash and
investments including significant positions in Ozgrowth Limited and Westoz Investment Company Limited.
(b) Euroz Securities Limited – Financial Services company providing stockbroking services with a focus on Western Australian
companies.
(c) Westoz Funds Management Pty Ltd – Manages the mandates for two listed investment companies, Ozgrowth Limited and
Westoz Investment Company Limited with a focus on investing in opportunities with a Western Australian connection.
(d) Zero Nominees – Custodian company holding shares on behalf of clients of Euroz Securities Limited.
(e) Detail Nominees - Dormant company that was previously used to for settlement obligation in relation to Euroz Securities.
(f) Euroz Employee Share Trust vehicle established to acquire treasury shares on-market for distribution to eligible employees
in connection with the Euroz Performance Rights Plan.
(g) Prodigy Investment Partners Limited – A 80/20 joint venture with Mr Steve Tucker to create a multi boutique funds
management business. The first boutique funds management partnership was launched in August 2015 with Flinders
Investment Partners Pty Ltd. The second boutique, Dalton Street Capital Pty Ltd was launched in May 2016.
(h) Blackswan Equities Limited – The activities of the Blackswan group of entities were transferred over to Euroz Securities
Limited in the last financial year.
(i) Blackswan Corporate Pty Ltd – The activities of the Blackswan group of entities were transferred over to Euroz Securities
Limited in the last financial year.
EUROZ LIMITED ANNUAL REPORT 2016
65
Notes to the Financial Statements
Note 30. Investments in controlled entities (continued)
(j) Blackswan Wealth Management Pty Ltd - The activities of the Blackswan group of entities were transferred over to Euroz
Securities Limited in the last financial year.
(k) Flinders Investment Partners Pty Ltd - Boutique fund manager specialising in investing in emerging companies.
(l) Entrust Private Wealth Management Pty Ltd - Wealth management business providing wealth management and strategic
financial planning advice to clients.
(m) Dalton Street Capital Pty Ltd - Boutique fund manager specialising in alternative investment strategies.
(n) Prodigy Flinders Pty Ltd – Entity to facilitate profit sharing arrangements with Flinders Investment Partners.
(o) Prodigy DSC Pty Ltd – Entity to facilitate profit sharing arrangements with Dalton Street Capital.
(p) Prodigy Corporate Pty Ltd – Entity to facilitate profit sharing arrangement with boutique entities.
*Although Ozgrowth Limited and Westoz Investment Company Limited are controlled entities, exemption from consolidation was derived from the
adoption of AASB 2013-5 Investment Entities.
Note 31. Business combination
On 13 July 2015, Euroz Limited completed the acquisition of Entrust to further enhance its wealth management capabilities.
Details of the acquisition are as follows:
Assets
Cash and cash equivalents
Receivables and other current assets
Deferred tax assets
Intangibles (refer note 16 (b))
Goodwill on acquisition (refer note 16 (a))
Liabilities
Trade and other current liabilities
Current tax liabilities
Provisions
Fair value of net assets acquired
Representing:
Cash
Shares issued
Fair value of consideration paid to vendors
Fair value
$
820,022
710,396
314,176
1,721,835
3,566,429
5,597,365
9,163,794
776,807
60,601
526,386
1,363,794
7,800,000
2,350,000
5,450,000
7,800,000
66
EUROZ LIMITED ANNUAL REPORT 2016
Notes to the Financial Statements
Note 31. Business combination (continued)
Net cash paid for subsidiary:
Cash consideration paid
Less: net cash acquired
2,350,000
(820,022)
1,529,978
The fair values in relation to the acquisition have been finalised.
The consideration paid consists of 5,450,000 shares in Euroz Limited fair valued to $5,450,000 and cash totaling $2,350,000.
Note 32. Events subsequent to reporting date
The Directors are not aware of any matter or circumstance subsequent to 30 June 2016 that has significantly affected, or may
significantly affect:
(a) the consolidated group’s operations in future financial years: or
(b) the results of those operations in future financial years: or
(c) the consolidated group’s state of affairs in future financial years.
Note 33. Reconciliation of cash flows from operating activities
Profit / (Loss) for the period
Adjustments for:
Depreciation and amortisation
Share based payments
Unrealised loss / (gain) arising from fair value of investment entities
Dividends received from investment entities (investing activity)
Write-off of fixed assets
Write-off of investments
Other non-cash item
Changes in assets and liabilities
Decrease / (increase) in trade and other receivables
Decrease / (increase) in other current assets
Decrease / (Increase) in inventories
Decrease / (Increase) in deferred tax assets
Increase / (decrease) in trade and other payables
Increase / (decrease) in current tax liabilities
Increase / (decrease) in deferred tax liabilities
Increase / (decrease) in provisions (excluding dividends)
Net cash from / (used in) operating activities
2016
$
2,561,018
165,793
501,189
5,813,059
(3,992,044)
4,605
-
(110,023)
(165,052)
(119,189)
2015
$
(7,130,652)
116,253
391,197
20,111,346
(5,151,190)
131,977
15,000
-
(461,664)
112,833
(244,134)
(2,583,844)
(3,478,696)
(4,134,688)
(321,315)
444,699
418,288
512,609
(333,128)
(2,542,551)
(2,644,285)
126,980
1,990,807
(3,976,416)
EUROZ LIMITED ANNUAL REPORT 2016
67
Notes to the Financial Statements
Note 34. Earnings per share
Basic earnings per share
Diluted earnings per share
Weighted average number of shares used as the denominator
2016
Cents
1.61
1.61
2015
Cents
(4.66)
(4.66)
Weighted average number of ordinary shares used as the denominator in calculating
basic earnings per share.
159,130,663
152,973,466
Weighted average number of ordinary shares and potential ordinary shares (including
treasury shares) used as the denominator in calculating diluted earnings per share.
159,473,115
153,077,010
The profit after tax figures used to calculate the earnings per share for both the basic and diluted calculations was the same as
the profit figure from statement of profit or loss.
Note 35. Deed of cross guarantee
The following entities are party to a deed of cross guarantee entered into on 19 June 2015 under which each company
guarantees the debts of the others:
Euroz Limited
Blackswan Equities Ltd
By entering into the deed, the wholly-owned entity has been relieved from the requirement to prepare financial statements and
Directors’ Report under Class Order 98/1418 (as amended) issued by the Australian Securities and Investments Commission
(‘ASIC’).
The above companies represent a ‘Closed Group’ for the purposes of the Class Order, and as there are no other parties to the
deed of cross guarantee that are controlled by Euroz Limited, they also represent the ‘Extended Closed Group’.
Set out below is a consolidated statement of profit or loss and other comprehensive income and statement of financial position
of the ‘Closed Group’.
68
EUROZ LIMITED ANNUAL REPORT 2016
Notes to the Financial Statements
Note 35. Deed of cross guarantee (continued)
CLOSED GROUP STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Revenue
Unrealised loss on investments
Employee benefits expense
Depreciation and amortisation expenses
Regulatory expenses
Consultancy expenses
Conference and seminar expenses
Brokerage and underwriting expense
Communication expenses
Carrying amount of principal trading securities sold
Other expenses
2016
$
9,474,137
2015
$
8,308,822
(5,345,571)
(20,872,520)
18,852
(1,123)
(74,664)
(129,478)
-
-
-
(1,030,813)
(620,012)
(423,276)
(2,759)
(165,034)
(151,158)
(7,391)
(46,196)
(6,470)
(65,800)
(114,993)
Profit / (loss) before income tax expense
Income tax benefit
2,291,328
(13,546,775)
1,236,982
5,994,854
Profit / (loss) after income tax expense for the year
3,528,310
(7,551,921)
Other comprehensive income
Other comprehensive income, net of tax
Total comprehensive income for the year
-
-
3,528,310
(7,551,921)
EUROZ LIMITED ANNUAL REPORT 2016
69
Notes to the Financial Statements
Note 35. Deed of cross guarantee (continued)
CLOSED GROUP STATEMENT OF FINANCIAL POSITION
Current assets
Cash and cash equivalents
Inventories
Other current assets
Total current assets
Non current assets
Plant and equipment
Investments in subsidiaries
Other investments
Financial assets
Deferred tax assets
Total non current assets
Total assets
Current liabilities
Trade and other payables
Current tax liabilities
Short term provisions
Total current liabilities
Non-current liabilities
Deferred tax liabilities
Total non current assets
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Total equity
2016
$
14,447,816
2,447,646
69,526
2015
$
22,819,524
2,527,149
42,288
16,964,988
25,388,961
8,876
9,998
32,250,002
32,250,002
56,171,351
44,969,307
6,070,694
6,002,396
8,495,488
3,872,562
100,503,319
89,597,357
117,468,307
114,986,318
171,007
396,787
3,622,711
167,561
-
5,192,129
4,190,505
5,359,690
396,352
396,352
-
-
4,586,857
5,359,690
112,881,450
109,626,628
105,184,245
99,510,043
1,144,960
6,552,245
653,657
9,462,928
112,881,450
109,626,628
70
EUROZ LIMITED ANNUAL REPORT 2016
Notes to the Financial Statements
Note 36. Parent entity disclosures
Financial position
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Non-current liabilities
Total liabilities
Equity
Issued capital
Retained earnings
Reserves
2016
$
2015
$
13,144,250
21,682,004
103,807,345
92,915,425
116,951,595
114,597,429
4,027,587
353,774
4,381,361
5,218,054
-
5,218,054
105,184,246
99,324,043
6,241,028
9,401,675
Share Based Payment Reserve
1,144,960
653,657
Total equity
112,570,234
109,379,375
Financial performance
Profit / (loss) for the year
Other comprehensive income
3,464,347
(7,609,174)
-
-
Total comprehensive income
3,464,347
(7,609,174)
Note 37. Company details
The registered office and principal place of business address of the Company is:
Euroz Limited
Level 18 Alluvion
58 Mounts Bay Road
PERTH WA 6000
EUROZ LIMITED ANNUAL REPORT 2016
71
Directors’ Declaration
The Directors declare that:
1.
The financial statements, notes and additional disclosures included in the Directors’ Report and designated as audited, are in
accordance with the Corporations Act 2001 and:
(a) comply with Accounting Standards and Corporations Regulations 2001;
(b) give a true and fair view of the Company's and consolidated group's financial position as at 30 June 2016 and of their
performance for the year ended on that date;
(c) the financial statements are in compliance with International Financial Reporting Standards, as stated in note 1 to the
financial statements.
2. The Chief Executive Officer and Chief Financial Officer have declared in accordance with section 295A of the Corporations
Act 2001 that:
(a) the financial records of the Company for the financial year have been properly maintained in accordance with section
286 of the Corporations Act 2001;
(b) the financial statements and notes for the financial year comply with Accounting Standards; and
(c) the financial statements and notes for the financial year give a true and fair view;
3.
In the Directors' opinion there are reasonable grounds to believe that the Company will be able to pay its debts as and when
they become due and payable.
4. At the date of this declaration, there are reasonable grounds to believe that the members of the extended closed group
will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross
guarantee described in note 35.
This declaration is made in accordance with a resolution of the Board of Directors.
ANDREW MCKENZIE
Executive Chairman
DOUG YOUNG
Director
Date: 25 August 2016
72
EUROZ LIMITED ANNUAL REPORT 2016
Independent Auditor’s Report
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF
EUROZ LIMITED
Report on the Financial Report
We have audited the accompanying financial report of Euroz Limited (the company) and it’s controlled
entities (the consolidated entity), which comprises the consolidated statement of financial position as at 30
June 2016, the consolidated statement of profit or loss and other comprehensive income, the consolidated
statement of changes in equity and the consolidated statement of cash flows for the year then ended,
notes comprising a summary of significant accounting policies and other explanatory information, and the
directors’ declaration of the company. 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 gives a true and fair view and is free from material misstatement, whether due to fraud or error.
In Note 1, the directors also state, in accordance with 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 company’s preparation of the
financial report that gives a true and fair view in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’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.
Page | 56
EUROZ LIMITED ANNUAL REPORT 2016
73
Independent Auditor’s Report
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act
2001.
Opinion
In our opinion:
(a)
the financial report of Euroz Limited is in accordance with the Corporations Act 2001, including:
(i)
giving a true and fair view of the consolidated entity’s financial position as at 30 June 2016
and of its performance for the year ended on that date; and
(ii)
complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(b)
the financial report also complies with International Financial Reporting Standards as disclosed in
Note 1.
.
Report on the Remuneration Report
We have audited the Remuneration Report included in the directors’ report for the year ended 30 June
2016. 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 Euroz Limited for the year ended 30 June 2016, complies with
section 300A of the Corporations Act 2001.
PKF MACK
SIMON FERMANIS
PARTNER
25 AUGUST 2016
WEST PERTH,
WESTERN AUSTRALIA
Page | 57
74
EUROZ LIMITED ANNUAL REPORT 2016
EUROZ LIMITED ANNUAL REPORT 2016
75
Shareholder Information
Ordinary shares at 31 August 2016
a) Distribution of shareholders
Ordinary fully paid shares:
Range
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001-9,999,999,999
TOTAL Holders
b) Top holders
Total holders
Units % of issued capital
310
459
273
718
179
127,711
1,366,491
2,178,151
24,920,613
132,396,416
0.08
0.85
1.35
15.48
82.24
1,939
160,989,382
100.00
The twenty largest holders of ordinary fully paid shares are listed below:
No
Shareholder
1
2
3
4
5
7
6
8
9
10
11
12
13
14
15
16
17
18
19
20
ZERO NOMINEES PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
MRS CATHERINE PATRICIA MCKENZIE
J P MORGAN NOMINEES AUSTRALIA LIMITED
ICE COLD INVESTMENTS PTY LTD
MR ANDREW MCKENZIE + MRS CATHERINE MCKENZIE
ICE COLD INVESTMENTS PTY LTD
MR SIMON DAVID YEO + MRS JENNIFER DALE YEO
MR ROBERT HIRZEL BLACK
ICON HOLDINGS PTY LTD
CPU SHARE PLANS PTY LTD
WESTRADE RESOURCES PTY LTD
MRS MELANIE JANE CHESSELL
BNM HOLDINGS PTY LTD
ICE COLD INVESTMENTS PTY LTD
MRS CATHERINE ELIZABETH KANE
REEF INVESTMENTS PTY LTD
MRS FRANCES ELIZABETH YUKICH
MRS JODI CLAYTON
MR GREGORY CHESSELL + MRS MELANIE CHESSELL
Total
Remaining holders balance
Shares
20,465,090
7,750,642
5,950,000
4,012,478
4,000,000
3,624,392
3,202,500
3,000,000
2,865,000
2,480,151
2,248,406
2,157,269
2,070,272
2,020,100
2,000,000
2,000,000
1,920,954
1,869,124
1,850,000
1,777,350
77,263,728
83,725,654
%
12.71
4.81
3.70
2.49
2.48
2.25
1.99
1.86
1.78
1.54
1.40
1.34
1.29
1.25
1.24
1.24
1.19
1.16
1.15
1.10
47.99
52.01
76
EUROZ LIMITED ANNUAL REPORT 2016
Contents
Euroz Limited Contact Details
EUROZ LIMITED ANNUAL REPORT 2016
EUROZ LIMITED ANNUAL REPORT 2016
77
Corporate Directory
Funds Management
Executive Chairman’s Report
Westoz Funds Management
Organisational Chart
Board of Directors
Prodigy Investment Partners
Wealth Management
Stockbroking and Corporate Finance
Entrust Private Wealth Management
Managing Director’s Report
Euroz Community Activities
Euroz Securities Operating Divisions
Financial Report
Euroz Securities Director’s Profiles
1
2
3
6
8
8
9
10
13
13
14
16
16
17
19
EUROZ SECURITIES LIMITED
Level 18 Alluvion
58 Mounts Bay Road
PERTH WA 6000
PO Box Z5036
St Georges Terrace
Perth 6831
Western Australia
T: +61 8 9488 1400
F: +61 8 9488 1477
eurozsecurities.com
Euroz Securities Limited
ACN 089 314 983
AFSL 243302
Participant of the ASX Group
WESTOZ FUNDS MANAGEMENT PTY LTD
Level 18 Alluvion
58 Mounts Bay Road
PERTH WA 6000
PO Box Z5036
St Georges Terrace
Perth 6831
Western Australia
T: +61 8 9321 7877
F: +61 8 9321 8288
westozfunds.com.au
Westoz Funds Management Pty Ltd
ACN 106 677 721
AFSL 285607
OZGROWTH LIMITED
Level 18 Alluvion
58 Mounts Bay Road
PERTH WA 6000
PO Box Z5036
St Georges Terrace
Perth 6831
Western Australia
T: +61 8 9321 7877
F: +61 8 9321 8288
ozgrowth.com.au
Ozgrowth Limited
ACN 126 450 271
WESTOZ INVESTMENT COMPANY LIMITED
Level 18 Alluvion
58 Mounts Bay Road
PERTH WA 6000
PO Box Z5036
St Georges Terrace
Perth 6831
Western Australia
T: +61 8 9321 7877
F: +61 8 9321 8288
westoz.com.au
Westoz Investment Company Limited
ACN 113 332 942
PRODIGY INVESTMENT PARTNERS LIMITED
Level 23
Goldfields House
1 Alfred Street
SYDNEY NSW 2000
FLINDERS INVESTMENT PARTNERS PTY LTD
Level 15
385 Bourke Street
MELBOURNE
VIC 3000
DALTON STREET CAPITAL PTY LTD
Level 23
Goldfields House
1 Alfred Street
SYDNEY NSW 2000
T: +61 2 8651 3490
prodigyinvest.com.au
Prodigy Investment Partners Limited
ACN 600 471 430
AFSL 466173
T: +61 3 9909 2690
flindersinvest.com.au
Flinders Investment Partners Pty Ltd
ACN 604 121 271 AFSL 466173
Flinders Investment Partners Pty Ltd is a
Corporate Authorised Representative of
Prodigy Investment Partners Limited.
T: +61 2 8651 3490
daltonstreetcapital.com
Dalton Street Capital Pty Ltd
ACN 609 114 034 AFSL 466173
Dalton Street Capital Pty Ltd is a Corporate
Authorised Representative of Prodigy
Investment Partners Limited.
ENTRUST PRIVATE WEALTH MANAGEMENT PTY LTD
Level 18 Alluvion
58 Mounts Bay Road
PERTH WA 6000
PO Box Z5034
Perth 6831
Western Australia
T: +61 8 9476 3900
F: +61 8 9321 6333
E: info@entrustpwm.com.au
entrustpwm.com.au
Entrust Private Wealth Management Pty Ltd
ACN 100 088 168
AFSL 222152
EUR 10966 - EUROZ Annual Report 2016 COVER.indd 2
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Euroz Limited
2016 Annual Report
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Level 18 Alluvion
58 Mounts Bay Road
PERTH WA 6000
PO Box Z5036
St Georges Terrace
Perth 6831
Western Australia
T: +61 8 9488 1400
F: +61 8 9488 1477
euroz.com
Euroz Limited
ACN 000 364 465
EUR 10966 - EUROZ Annual Report 2016 COVER.indd 1
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