EUROZ ANNUAL REPORT 2017
Euroz Limited
001
2017
Annual Report
002
CORPORATE DIRECTORY
EUROZ ANNUAL REPORT 2017
REGISTERED OFFICE
Level 18 Alluvion
58 Mounts Bay Road
PERTH WA 6000
Telephone:
Facsimile:
Email:
Website:
(08) 9488 1400
(08) 9488 1477
info@euroz.com
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
Level 11
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 (Retired)
Executive Director
Rob Black
Executive Director
COMPANY SECRETARY
Anthony Hewett
Greg Chessell
Executive Director
Russell Kane
Executive Director
Simon Yeo
Executive Director
Anthony Brittain
Executive Director
001
CONTENTS
EUROZ ANNUAL REPORT 2017
EXECUTIVE CHAIRMAN’S REPORT
ORGANISATIONAL CHART
BOARD OF DIRECTORS
STOCKBROKING AND CORPORATE FINANCE
MANAGING DIRECTOR’S REPORT
EUROZ SECURITIES DIRECTOR’S PROFILES
FUNDS MANAGEMENT
WESTOZ FUNDS MANAGEMENT
PRODIGY INVESTMENT PARTNERS
FLINDERS INVESTMENT PARTNERS
WEALTH MANAGEMENT
ENTRUST PRIVATE WEALTH MANAGEMENT
EUROZ COMMUNITY ACTIVITIES
FINANCIAL REPORT
002
003
006
008
008
010
013
013
014
015
016
016
017
018
Euroz Limited is a diversified
financial services company
002
EUROZ ANNUAL REPORT 2017
Executive Chairman’s Report
Euroz Limited is a diversified financial
services company.
Euroz Limited has reported a solid improvement in profitability
over the past year with a net profit after tax of $17.9 million.
The Directors have declared a final fully franked dividend of
5.5 cents per share. When combined with the interim dividend
of 1.75 cents this amounts to a total of 7.25 cents per share fully
franked for the full year.
This result was driven by a strong Equity Capital Markets
(“ECM”) contribution from Euroz Securities Limited (“Euroz
Securities”) which raised $865 million for our corporate clients
this financial year.
We are proud that in our 17 year history we have generated
significant cash returns and paid over $193 million in fully franked
dividends to our shareholders.
Shareholders are aware that during the past few years we have
sought to incrementally diversify our business by building our
funds and wealth management businesses. Developing these
businesses has required capital, time and patience but if successful
we remain confident we will transform our overall business into a
much stronger, more diversified and valuable Company.
Our diversification strategy has been twofold:
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.
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.
Stockbroking
Euroz Securities
Euroz Securities contributed the bulk of our cash profitability
this year.
Euroz Securities has been recognised as the leading ECM issuer
in the Western Australian market place this financial year and this
major market position in our capital markets holds us in good
stead for the future. This transactional upside in Euroz Securities
remains a very important lever for our overall business and we
were reassured to see it performing strongly this year.
ASX broking volumes during the past year were volatile and
only marginally up for the year, still well below normal long
term averages. This reflects our view that Western Australia
and commodity prices are only in a modest early cycle recovery
at this stage.
Funds Management
Westoz Funds Management
The Listed Investment Companies Westoz Investment Company
Limited (“WIC”) and Ozgrowth Limited (“OZG”) continue to be
interlinked with their investment universe of Western Australia and
Western Australian connected companies.
WIC and OZG reported gross investment returns of 20.1% and
19.4% respectively for the financial year. This is particularly pleasing
when compared to the Accumulation Index performance over the
same period which increased only 3.6%.
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 the higher share prices of WIC and
OZG contributed to our Group profitability (on a non cash basis)
by $5.7 million.
Prodigy Investment Partners
Prodigy Investment Partners Limited (“Prodigy”) was established
In July 2014 as a platform to create a quality, multi boutique funds
management business.
The first of these boutique partnerships, Flinders Investment
Partners Pty Ltd (“Flinders”) was launched in July 2015. The
Flinders team has delivered positive absolute performance in a
difficult market, however performance relative to competitors has
been challenging in the short term.
The second partnership, Dalton Street Capital Pty Ltd (“Dalton
Street”), was launched in July 2016. Dalton Street is headed by
former senior Credit Suisse executives Alan Sheen and Nick
Selvaratnam. We are very pleased to see solid returns of 8.7% in
their first year, significantly ahead of all of their competitors. We
are optimistic that their acceptance on a number of investment
platforms, strong investor interest in alternative investments and
solid recent returns will provide good inflows to the fund.
Our Prodigy strategy is requiring significant time and patience and
requires a confluence of factors (time, consistency, performance
and sectoral interest) to come together to achieve the fund inflows
our first class team has been tasked to produce.
Wealth Management
Entrust Private Wealth Management
Entrust Private Wealth Management Pty Ltd (“Entrust”) was
acquired in July 2015 to provide a wealth management platform
for all of our businesses. We aim to grow this business organically
but also believe we have an excellent wealth offering to acquire
other wealth management businesses and also attract wealth
advisers from competitors.
We are excited by the expertise in wealth management Entrust
has bought to the firm and it was only four months ago that our
Entrust wealth managers were co-located alongside our Euroz
brokers. We believe that both businesses can now better cross
pollinate their strengths and grow recurring revenue together.
Entrust has a significant high net worth client base with Funds
Under Management (“FUM”) of $712 million at financial year end
which combined with our Euroz Securities FUM creates a business
currently managing $950 million for clients
EUROZ ANNUAL REPORT 2017
003
Summary
We are pleased that our Western Australian markets have improved modestly to enable us to
report a solid increase in profits and dividends while we implement our diversification strategy.
Growing our 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 2017 was $1.2 billion, an increase of 24.7%
from the previous year.
Staff ownership has increased to 48% over the course of the year and as always is a very good
indicator of the commitment of our team who remain your company’s greatest asset.
I would like to again 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
Organisational Chart
EUROZ LIMITED
ASX CODE: EZL
STOCKBROKING
AND CORPORATE
FINANCE
100%
Euroz Securities
FUNDS
MANAGEMENT
80%
100%
Prodigy Investment
Partners
Westoz Funds
Management
WEALTH
MANAGEMENT
100%
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
?
(40.5% Equity Stake)
(27.2% Equity Stake)
004
EUROZ ANNUAL REPORT 2017
Euroz Limited Profit Before Tax & Net Profit After Tax
60
50
40
30
20
10
0
-10
-20
n
o
i
l
l
i
m
$
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
Profit before tax
Net profit after tax
Year
Euroz Limited Dividend History
0
3
5
2
0
2
5
1
0
1
5
0
e
r
a
h
s
r
e
p
s
t
n
e
c
30
25
20
15
10
5
0
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
2H Dividend per share
1H Dividend per share
Year
1
0
2
0
3
0
4
0
5
0
6
0
7
0
8
0
9
0
0 1
1
1
2
1
3
1
4
1
5
1
6
1
7
1
EUROZ ANNUAL REPORT 2017
005
Euroz Limited NTA per share
e
r
a
h
s
r
e
p
s
t
n
e
c
100
80
60
40
20
0
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
Cents per share
Year
Euroz Group Funds Under Management (FUM)*
)
m
$
A
(
M
U
F
$1,300
$1,200
$1,100
$1,000
$900
$800
$700
$600
$500
$400
$300
$200
$100
$0
Total $1,143m
Total $1,205m
Total $923m
Total $962m
31/12/15
30/6/16
31/12/16
30/6/17
Funds
Management
($255m)
Entrust
Wealth
Management
($713m)
WIC ($136m)
OZG ($67m)
PFM ($24m)
Flinders ($12m)
Dalton St ($16m)
Entrust ($713m)
Euroz ($237m)
Euroz Securities
Wealth Management
($237m)
006
EUROZ ANNUAL REPORT 2017
Board of Directors
Euroz Limited Directors Profiles
ANDREW MCKENZIE
EXECUTIVE CHAIRMAN
JAY HUGHES
EXECUTIVE DIRECTOR
DOUG YOUNG
EXECUTIVE DIRECTOR
Andrew is Executive Chairman of Euroz
Limited and Euroz Securities Limited
and is an Executive Director of Westoz
Funds Management, Dalton Street Capital,
Prodigy Investment Partners and Flinders
Investment Partners. Andrew is also a
board member of the Stockbrokers and
Financial Advisors Association of Australia
(SAFAA) 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 an
individual member (MSAFAA) of SAFAA
and the Australian Institute of Company
Directors (AICD).
Jay has worked in stockbroking since 1986,
starting his career on the trading floor.
He is Non-Executive Chairman of Westoz
Investment Company and Ozgrowth
Limited and an Executive Director of
Westoz Funds Management, Euroz
Securities Limited and Prodigy Investment
Partners. He is an Institutional Advisor
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 member (MSAFAA) of SAFAA.
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 was
an Executive Director of Euroz Limited
and Euroz Securities Limited. He holds a
Bachelor of Commerce from UWA and is a
Fellow and Graduate of FINSIA. Doug was
formerly the Chairman of the Audit and
Risk Committee.
Retired on 1 July 2017
RUSSELL KANE
EXECUTIVE DIRECTOR
SIMON YEO
EXECUTIVE DIRECTOR
GREG CHESSELL
EXECUTIVE DIRECTOR
Russell has worked in the stockbroking
industry since 1994 and joined Euroz
Securities in 2001. Russell is an Executive
Director of Euroz Limited and Euroz
Securities Limited. 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.
Simon has worked in the Stockbroking
industry since 1993. In November 2000
he established the Private Client Division
of Euroz Securities Limited before
moving to a specialised role within our
Institutional Sales division in 2013. Simon
is an Executive Director of Euroz Limited
and Euroz Securities Limited. Simon holds
a Bachelor of Commerce from UWA and
was previously a chartered accountant.
He is also on the board of The Australian
Chamber Orchestra (ACO). Simon is the
Chairman of the Audit and Risk Committee.
Greg is the Head of Research at Euroz
Securities Limited 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 Limited. 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 and Risk Committee.
EUROZ ANNUAL REPORT 2017
007
ANTHONY BRITTAIN
EXECUTIVE DIRECTOR
ROB BLACK
EXECUTIVE DIRECTOR
Rob has been working in the stockbroking
industry since 1995 and has spent time
based in Sydney, Melbourne and London.
Rob is the Managing Director of Euroz
Securities and Head of our Institutional
Sales division and is responsible for
servicing domestic and international
institutions. Rob is a Director of Entrust
Private Wealth Management Pty Ltd. Rob
holds a Bachelor of Business in Finance
and Accounting and is a Graduate of AICD.
Anthony is the Chief Operating and
Financial Officer and an Executive
Director of Euroz Limited, Euroz
Securities Limited, Entrust Private
Wealth Management, Prodigy Investment
Partners, Flinders Investment Partners
and Dalton Street Capital. Prior to joining
Euroz, Anthony spent 7 years with a WA
based stockbroker. Anthony started his
career with KPMG (and antecedent firm
Touche Ross) with transfers to Guam and
Singapore. He then worked in London
and Singapore for 7 years with a UK fund
manager. Anthony holds a Bachelor of
Commerce from UWA, is a member of
Chartered Accountants Australia and New
Zealand (CA), holds a Graduate Diploma
in Applied Finance and Investment from
FINSIA, is a Graduate of AICD and is a
member (MSAFAA) of SAFAA. Anthony is a
member of the Audit and Risk Committee.
008
008
EUROZ ANNUAL REPORT 2017
EUROZ ANNUAL REPORT 2017
Stockbroking and Corporate Finance
Managing Director’s Report
The 2016/17 Financial Year was a stellar year for
Euroz Securities
Euroz Securities Limited (“Euroz Securities”) reported a Net Profit
after Tax to the group of approximately $9.2 million, significantly
higher than the previous year’s contribution of $3.5 million.
This was achieved on the back of a solid increase in the level of
corporate activity with our team raising $865 million of new capital
for our corporate clients from over 20 major transactions. This
outstanding result was reflected in our league rankings over the
period, with Euroz Securities being ranked number 1 in terms of
ECM transactions for WA based companies (WA Business news
iQ FY17).
Brokerage levels were slightly subdued reflecting what was a
generally softer overall sentiment and market in our investment
universe during the year.
Our private client advisors are seeing continued benefits flowing
on from the integration of Entrust Private Wealth Management
Pty Ltd (“Entrust”), allowing them to offer full wealth and
financial services across our client base whilst retaining our
core competency in small to mid-cap, predominately Western
Australian based stocks. Euroz Securities and Entrust are now co-
located on the same dealing room floor.
Pleasingly the core Euroz Securities Funds Under Management
(“FUM”) grew by over 24% during the year, and we look forward to
reporting future FUM growth over coming periods.
Combined with Entrust, Euroz Securities continues its progression
to be able to offer the pre-eminent wealth advisory service in
Western Australia.
Our institutional dealing division saw increased levels of turnover
during the year and the team continues to leverage off its long
term, trusted client relationships in providing sales and execution
services to our domestic and overseas institutional clients.
All our efforts and corresponding successes are a result of our core
research division where we remain fortunate to have a team of
long serving, highly rated research professionals.
Post balance sheet date, we have witnessed an encouraging
pickup in commodity and base metals prices, fuelling a renewed
positive investment sentiment. With these continued tailwinds in
place, and leveraging off our highly talented and aligned staff, I am
confident we will be in a position to report continued success in
coming periods.
Rob Black
Managing Director
EUROZ ANNUAL REPORT 2017
009
Supporting our clients on major
transactions during FY17
Ranked #1 in WA based equity capital raisings1
Off-market takeover offer
$50 million
Financial Advisor
Euroz Securities Ltd
Oct 16
Cash takeover by Nomura
Research Institute
$349 million
Corporate Broker
Euroz Securities Ltd
Dec 16
Placement
$80 million
Joint Lead Manager
Euroz Securities Ltd
Jul 16
IPO & Placement
$130 million
Lead Manager
Euroz Securities Ltd
Jul 16, Apr 17
Placement
$250 million
Co Lead Manager
Euroz Securities Ltd
Aug 16
Placement
$10.9 million
Joint Lead Manager
Euroz Securities Ltd
Aug 16
Placement
$40 million
Lead Manager
Euroz Securities Ltd
Sep 16
TROY RESOURCES LIMITED
Placement & ANREO
$40.7 million
Joint Lead Manager
Euroz Securities Ltd
Sep 16
Placement
$20 million
Joint Lead Manager
Euroz Securities Ltd
Sep 16
IPO
$25 million
Lead Manager
& Underwriter
Euroz Securities Ltd
Oct 16
Entitlement Issue
Placement & ANREOs
$6.1 million
Lead Manager & Underwriter
Euroz Securities Ltd
Oct 16
$213.8 million
Joint Lead Manager & Joint
Underwriter Euroz Securities
Ltd
Nov 16, Apr 17
Placement
$12 million
Lead Manager
Euroz Securities Ltd
Nov 16
Placement
$6.8 million
Joint Lead Manager
Euroz Securities Ltd
Jan 17
IPO
$5.1 million
Lead Manager
Euroz Securities Ltd
Feb 17
Placement
$16 million
Lead Manager
Euroz Securities Ltd
Mar 17
Placement
$20.6 million
Lead Manager
Euroz Securities Ltd
Apr 17
Placement
$9.3 million
Lead Manager
Euroz Securities Ltd
Apr 17
IPO
$25 million
Lead Manager & Underwriter
Euroz Securities Ltd
Apr 17
Placement
$4.9 million
Lead Manager
Euroz Securities Ltd
May 17
1. Source: WA Business News iQ FY17
010
EUROZ ANNUAL REPORT 2017
Stockbroking and Corporate Finance
Euroz Securities Limited Director’s Profiles
GAVIN ALLEN
EXECUTIVE DIRECTOR
BRIAN BATES
EXECUTIVE DIRECTOR
BRIAN BERESFORD
EXECUTIVE DIRECTOR
Gavin is a Research Analyst with 13
years experience specialising in detailed
analysis and research of mid cap industrial
companies. 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 Chartered Accountants Australia and
New Zealand (CA) and holds a Chartered
Financial Analyst (CFA) designation.
Brian has over 19 years of experience
in stockbroking, investment and
superannuation management. Brian holds
a Bachelor of Commerce from UWA, and
was previously a chartered accountant.
Brian is a senior member of the Private
Client Division and offers a comprehensive
wealth management service to high net
worth individuals.
Brian is the Head of our Corporate Finance
Division. 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, a Bachelor of Commerce
and Bachelor of Laws from UWA.
JON BISHOP
EXECUTIVE DIRECTOR
TIM BUNNEY
EXECUTIVE DIRECTOR
ANDREW CLAYTON
EXECUTIVE DIRECTOR
Jon is a Research Analyst focused on
both the mining and oil and gas sectors.
He has more than 10 years technical
and commercial experience within the
petroleum and minerals industries and a
further 10 years experience in the financial
services industry. Jon holds a Bachelor
of Science (Hons) in Geology from UWA,
as well as a Graduate Diploma in Applied
Finance and Investment from FINSIA.
Tim has been working in the stockbroking
industry since 2010 and is a member
of our Institutional Sales Division. He
holds a Bachelor of Commerce from
Curtin University majoring in finance and
management. He is currently undertaking
post graduate study in geology and
finance. Tim is a member of SAFAA
institutional broking committee.
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
FINSIA.
EUROZ ANNUAL REPORT 2017
011
TONY KENNY
EXECUTIVE DIRECTOR
BEN LAIRD
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 acquired by Macquarie
Bank. Prior to joining Euroz, Tony was
a founding partner and an Executive
Director of Blackswan Equities. Tony was
a senior member of our Private Client
Division. Tony is also a Director of Precision
Funds Management Pty Ltd and Precision
Opportunities Fund Ltd.
Resigned 30 June 2017
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
FINSIA and a Chartered Financial Analyst
(CFA) designation.
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.
JAMES MACKIE
EXECUTIVE DIRECTOR
NICK MCGLEW
EXECUTIVE DIRECTOR
CAMERON MURRAY
EXECUTIVE DIRECTOR
James has been working in the
stockbroking industry since 1998. James
services high net worth investors and is
a senior member of our Private Client
Division. He holds a Bachelor of Commerce
from Curtin University and a Graduate
Diploma from FINSIA.
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 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 Division.
Cameron has 20 years-experience in
financial services and is a senior member
of our Private Client Division. Having
graduated from Curtin University with
a Bachelor of Commerce majoring in
Accounting and Finance he has been at
Euroz since 2003. He has continued his
studies through FINSIA and has completed
a Graduate Diploma in Applied Finance
and Investment.
012
EUROZ ANNUAL REPORT 2017
Stockbroking and Corporate Finance
Euroz Securities Limited Director’s Profiles continued...
LUCAS ROBINSON
EXECUTIVE DIRECTOR
PETER SCHWARZBACH
EXECUTIVE DIRECTOR
BEN STATHAM
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
UWA with a double major in Finance and
Marketing and a minor in Business Law.
Peter has been working in the stockbroking
industry since 2006 and is a member of
our Institutional Sales Division. He holds a
Bachelor of Commerce from UWA and has
completed a Graduate Diploma in Applied
Finance and Investment from FINSIA. Peter
is also a Chartered Accountant and prior to
joining Euroz was a senior accountant at a
Perth chartered accounting firm.
Ben completed a Bachelor of Economics
from UWA before commencing
employment with Macquarie Bank in
2000 where he left for Euroz in 2009 as
one of their top advisors. Ben is a senior
member of our Private Client Division and
services high net worth families. Ben holds
a Graduate Diploma from FINSIA.
RYAN STEWART
EXECUTIVE DIRECTOR
CHRIS WEBSTER
EXECUTIVE DIRECTOR
TIM WEIR
EXECUTIVE DIRECTOR
Ryan has worked in the stockbroking
industry for over 17 years and is a senior
member of our Private Client Division,
He started his career in Finance at
BankWest as a member of the Equipment
Finance Division servicing predominantly
resource companies. His first broking
role started in 2000 at D J Carmichael
and he commenced at Euroz in 2003.
His role includes servicing his high net
worth private client base and also actively
participating in the Euroz Charitable
Foundation.
Chris is the Head of our Private Client
Division. Chris has worked in financial
services since 2003 holding a variety of
positions in sales, operations, risk and
compliance both in Perth and London.
Chris is a Director of Entrust Private
Wealth Management Pty Ltd. Chris holds
a Bachelor of Commerce from UWA, a
Graduate Diploma of Applied Finance and
a Graduate Diploma of Applied Corporate
Governance. Chris is a member (MSAFAA)
of SAFAA and an Associate of the
Governance Institute of Australia (ACIS).
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 was a senior member of our
Private Client Division. He managed 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.
Resigned 30 June 2017
The Directors of Euroz Limited are also
Directors of Euroz Securities Limited.
EUROZ ANNUAL REPORT 2017
013
Funds Management
Westoz Funds Management Pty Ltd
Westoz Funds Management Pty Ltd
(“WFM”) is responsible for $202 million of
funds under management at 30 June 2017.
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 the target level
of 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 paid $138 million in
dividends to shareholders since inception.
PHILLIP REES
EXECUTIVE DIRECTOR
DERMOT WOODS
EXECUTIVE DIRECTOR
Mr Philip Rees is an Executive Director
of Westoz Funds Management Pty Ltd
and is responsible for the operation and
development of the manager’s business.
Mr Dermot Woods is an Executive Director
of Westoz Funds Management Pty Ltd and
oversees the construction of its investment
portfolios.
Mr Rees has worked in a range of roles
focused on Australian investment markets
for the last 29 years. He has previously
managed large institutional investment
portfolios and developed several early
stage investment opportunities until he
joined Westoz in April 2005.
Mr Woods joined Westoz Funds
Management Pty Ltd in 2007. He has
previously worked as an industrial analyst
for Euroz Securities Limited and prior to
this role, as a fund manager specialising in
European equities.
014
EUROZ ANNUAL REPORT 2017
Funds Management
Prodigy Investment Partners
Prodigy Investment Partners Limited
(“Prodigy”) is a multi-boutique investment
management business. Prodigy is an 80/20
partnership between the Euroz Group 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
Pty Ltd (“Flinders”) and Dalton Street
Capital Pty Ltd (“Dalton Street”).
Flinders is a specialist Small Companies
investment manager, with principals Dr
Andrew Mouchacca, Richard Macdougall
and Naheed Rahman. Significant progress
has been made in positioning Flinders to
gain market share in specific retail and
institutional markets over the past year.
Dalton Street is a specialist Absolute
Return investment manager, established
in June 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.
STEPHEN TUCKER
EXECUTIVE CHAIRMAN
LEWIS BEARMAN
CHIEF OPERATING OFFICER
Steve has over 25 years’ experience in
financial services. Steve started his career
with MLC, 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, where he is Executive
Chairman. 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). Lewis has
held senior positions in operations, funds
management, and various other teams.
Lewis joined Prodigy Investment Partners
Limited (“Prodigy”) in 2015 as Chief
Operating Officer and is a Director of
Prodigy.
AMAN KASHYAP
WHOLESALE SALES DIRECTOR
GUY BALLARD
DIRECTOR OF DISTRIBUTION
Aman brings over 16 years of financial
services experience specialising in asset
management sales. During this time, he
has held senior positions in distribution
at Ophir Asset Management, NAB Asset
Management and ANZ Wealth where his
key focus was developing and executing
the sales strategy for asset management in
the institutional, HNW and retail investment
markets. Aman joined Prodigy Investment
Partners Limited (“Prodigy”) in early
2017 as Wholesale Sales Director and is
responsible for fund raising efforts in the
Institutional, Private Wealth and Family
Office markets for Prodigy boutique
partners.
Guy has worked in financial services for
over 16 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 Investment Partners
Limited in 2016 as Director of Distribution
and is responsible for funds under
management growth across our boutiques.
EUROZ ANNUAL REPORT 2017
015
Funds Management
Flinders Investment Partners
ANDREW MOUCHACCA
PARTNER AND PORTFOLIO MANAGER
RICHARD MACDOUGALL
PARTNER AND PORTFOLIO MANAGER
NAHEED RAHMAN
PARTNER AND DEPUTY PORTFOLIO MANAGER
Andrew began his career in investment
management in 1999. Before establishing
Flinders Investment Partners Pty Ltd,
Andrew was Senior Investment Manager
with the institutional focused fund
manager Contango Asset Partners (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 Investment Partners Pty Ltd,
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 joining
Flinders Investment Partners Pty Ltd,
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
Alan is a co-founder of Dalton Street
Capital Pty Ltd. 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 Pty Ltd. Nick was previously
Managing Director and Head of Equities,
most recently with investment bank
Credit Suisse. Nick has over 26 years
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. He graduated as a Civil Engineer.
016
EUROZ ANNUAL REPORT 2017
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 (“FUM”) of $712m at 30
June 2017.
Entrust was acquired by Euroz Limited in
July 2015. Entrust employs 23 staff, including
11 advisers, 3 para-planners and a portfolio
administration team.
During the 2017 financial year (FY17) the
management team focus was on growing
the FUM and we are pleased to report
growth in FUM of 22.5% for the financial year.
We have been progressing the roll out of our
private wealth offering across Euroz Securities
Limited (“Euroz Securities”), evaluating advisor
acquisition opportunities and progressing
organic growth opportunities in the High
Net Worth (“HNW”), Not-for-Profit and
Self Managed Super Fund (“SMSF”) sector.
We are pleased to report the final phases of
all trading integration with Euroz Securities
has been seamless and the cost synergies
have been realised in 2017 financial year.
Euroz Securities now provide all trading
IT, compliance and finance functions to
Entrust which allows our team to focus on
client service delivery and important growth
initiatives. Entrust reported a net profit after
tax for FY17.
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 Securities balance sheet and brand
in the Perth market.
GRAEME YUCKICH
EXECUTIVE CHAIRMAN
ANDREW FRY
MANAGING DIRECTOR
Andrew joined Entrust Private Wealth
Management Pty Ltd in January 2003 and
was appointed Managing Director in July
2014. He holds a Bachelor of Commerce
and was admitted as a Chartered
Accountant by the Chartered Accountants
Australia and New Zealand (CA) in 1996.
Graeme has been advising clients on
their financial needs for 29 years. He
graduated from UWA in 1984, completed
his professional year while working for
Ernst and Whinney, and was admitted as
a Chartered Accountant by the Chartered
Accountants Australia and New Zealand
(CA) in 1988. In 1990, he completed a
Diploma in Financial Planning from
Deakin University.
Graeme established Entrust Private Wealth
Management Pty Ltd in August 2002.
The goal was to combine the knowledge
and strategy of financial planning with
direct investment ownership and portfolio
management.
CHRISTIAN GOLDING
EXECUTIVE DIRECTOR
BRAD GORDON
EXECUTIVE DIRECTOR
ROWAN JONES
EXECUTIVE DIRECTOR
Christian has worked in a variety of advice
and senior management roles since
1999 and is currently responsible for the
group’s adviser business strategy. He
is a Certified Financial Planner, holds a
Postgraduate Diploma in Applied Finance
and Investment (FINSIA) and a Bachelor of
Economics from UWA.
Brad joined Entrust Private Wealth
Management Pty Ltd as a Senior
Investment Adviser in January 2003 and
was appointed an Executive Director in
November of that year. He has almost 30
years experience in the financial services
industry; in financial planning, stockbroking
and trustee services. Brad is a Senior
Associate of FINSIA, a member of the
Financial Planning Association (DipFP FPA)
and also a member of AICD. Brad is also a
recognised Self-Managed Superannuation
Fund Specialist and a Tax (financial)
adviser under the Tax Practitioners Board.
Rowan joined Entrust Private Wealth
Management Pty Ltd in January 2008
and was appointed an Executive Director
in September 2016. He holds a Bachelor
of Commerce from Curtin University, a
Graduate Diploma of Applied Finance
and Investment (FINSIA) and he is a Self
Managed Superannuation Fund Specialist
advisor through the SMSF Association.
Prior to joining Entrust, Rowan spent ten
years as a professional sportsperson in
the AFL with the West Coast Eagles
Football Club.
EUROZ ANNUAL REPORT 2017
017
Euroz Community Activities
Euroz Charitable Foundation
Euroz are proudly West Australian focused and 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 10 years the Euroz Charitable Foundation has donated
in excess of $955,000 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:
018
EUROZ ANNUAL REPORT 2017
EUROZ ANNUAL REPORT 2017
2017
Financial Report
For the year ended 30 June 2017
019
CONTENTS
DIRECTORS’ REPORT
AUDITOR’S INDEPENDENCE DECLARATION
CONSOLIDATED STATEMENT OF PROFIT
OR LOSS AND OTHER COMPREHENSIVE INCOME
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
CONSOLIDATED STATEMENT OF CASH FLOWS
NOTES TO THE FINANCIAL STATEMENTS
DIRECTORS’ DECLARATION
INDEPENDENT AUDITOR’S REPORT
020
033
034
035
036
037
038
067
068
020
EUROZ ANNUAL REPORT 2017
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 2017.
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 DIRECTORS
Jay Hughes
Doug Young (retired 1 July 2017)
Greg Chessell
Russell Kane
Simon Yeo
Anthony Brittain
Robert Black (appointed 1 August 2017)
Company Secretary
Anthony Hewett was appointed Company Secretary on 19
June 2017 replacing Tracey Everitt who held the position since
15 December 2016. Prior to this, the position was held by Chris
Webster. Mr Hewett holds a Master of Business Law, a Graduate
Diploma in Applied Corporate Governance and is a Fellow of both
the Institute of Chartered Secretaries and Administrators and the
Governance Institute of Australia and a member (MSAFAA) of the
Stockbrokers and Financial Advisers Association of Australia.
Review of operations
Principal activities
During the year the principal activities of the Euroz Group
consisted of:
(a) Stockbroking (including Corporate Finance);
(b) Funds Management;
(c)
Investing; and
(d) Wealth Management.
Review of results
The consolidated group has a consolidated pre tax profit of
$24.1 million (2016: $2.1 million) for the year ended 30 June 2017.
The consolidated net profit after tax was $17.9 million compared
with the 2016 year consolidated net profit after tax of $2.6 million.
This result represents basic earnings per share of 12.30 cents
(2016: 1.61 cents).
The Directors have declared a final dividend of 5.5 cents per share
fully franked which combined with the interim dividend of
1.75 cents per share, represents a total dividend of 7.25 cents per
share fully franked.
Stockbroking & Corporate Finance Activities
Principal Trading
Funds Management
Investment Income
Wealth Management
Segment revenues
Segment results
2017
$
40,189,022
8,126,664
3,406,028
3,208,618
6,849,394
2016
$
25,191,033
4,470,979
1,840,837
4,342,621
6,079,397
2017
$
9,018,228
548,044
2016
$
3,323,044
1,058,429
(1,817,750)
(1,852,145)
9,322,250
860,590
(592,331)
624,021
61,779,726
41,924,867
17,931,362
2,561,018
The major driver of this improved result was a strong Equity Capital Markets (“ECM”) contribution from our Euroz Securities Limited
(“Euroz Securities”) business which raised $865 million of new equity this financial year. Westoz Investment Company Limited and
Ozgrowth Limited have reported gross investment performance for the year of 20.1% and 19.4% respectively. The mark to market share
prices of these companies can have a major accounting effect on our reported profits and this year has contributed approximately $5.7
million to our headline profitability. Entrust Private Wealth Management Pty Ltd (“Entrust”) reported 22.5% growth in Funds Under
Management (“FUM”) with FUM of $712 million at year-end.
EUROZ ANNUAL REPORT 2017
021
Directors’ Report
Operating and Financial Review
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.
• 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:
Disclosure of operations
The consolidated group is principally involved in the following
activities:
(a) Stockbroking & Corporate Finance Activities;
(b) Funds Management;
(c)
Investing; and
(d) Wealth Management.
Our operations are conducted over several locations with Perth,
Western Australia (WA) 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 Finance Activities
The Euroz Securities stockbroking operation comprises 4 main
divisions as follows:
i. Equities Research
• Highly rated research from market leading research
team of 6 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
- 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
Company Reports: Detailed analysis on companies
as opportunities emerge
ii.
Institutional Dealing
• 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
-
-
-
-
-
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
advisors 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 $237 million (2016:
$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 advisors to provide quality investment and trading
advice
•
Specialised broking allows:
-
-
Close interaction between research analysts
and private client advisors
Timely communication of ideas with clients
•
Sophisticated investors are able to participate in many
of our corporate capital raisings
iv. Corporate Finance
•
•
The Euroz Securities 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
022
EUROZ ANNUAL REPORT 2017
Directors’ Report
(b) Funds Management
Stockbroking & Corporate Finance Activities
Westoz Funds Management Pty Ltd (“WFM”) is responsible
for FUM of $202 million (2016: $180 million). 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 $137.8 million in dividends to
shareholders since inception.
Prodigy Investment Partners Limited (“Prodigy”) 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 2015 via the Flinders Emerging
Companies Fund. The second boutique, Dalton Street Capital Pty
Ltd (“Dalton”) was launched in 2016 via the Dalton Street Absolute
Return Fund.
(c) Investing
Euroz Limited owns significant shareholdings in Westoz
Investment Company Limited (WIC.ASX) totalling 27.2% and
Ozgrowth Limited (OZG.ASX) totalling 40.5%. 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 also invested in the Flinders Emerging
Companies Fund and Dalton Street Absolute Return Fund.
(d) Wealth Management
In July 2015, Euroz Limited acquired Entrust Private Wealth
Management Pty Ltd (“Entrust”) which has a 14 year track
record as a leading wealth management business. The strategy
in acquiring Entrust was to leverage an established wealth
management business with long term ongoing revenues as a
platform for further acquisitions and organic growth. The past year
has seen further integration of these operations with the rest of
our businesses to realise operational synergies and develop strong
links with our stockbroking operations.
Entrust has a significant high net worth client base with
FUM of $712 million (2016: $581 million).
Disclosure of operations — Profit
Net profit after tax for Financial Year (FY) 2017 was $17.9 million
up from $2.6 million in FY 2016.
Disclosure of operations - Sales
Revenue has increased by 47.5% to $61.8 million from $41.9 million
predominantly driven by strong ECM contribution from Euroz
Securities Limited business and a modest early cycle recovery in
our Western Australian and commodity related markets.
Stockbroking and corporate finance activities revenue was up by
59.5% to $40.2 million from $25.2 million. The increase was mainly
driven by increase in the ECM raisings in our Corporate Finance
division. Euroz Securities was involved in 22 (2016:22) ECM
transactions this year raising $865 million (2016: $307 million).
(a) Principal Trading
Revenue from Principal Trading increased by 80.0% to $8.1 million
from to $4.5 million.
(b) Funds Management
Revenue from Funds Management increased by 88.9% to
$3.4 million from $1.8 million predominantly as a result of a
performance fee received from Westoz managed funds and also
in line with increase in FUM.
(c) Investment Income
Investment income decreased by 25.6% to $3.2 million from
$4.3 million mainly due to reduction in dividends from WIC
and OZG.
(d) Wealth Management
Revenue from Entrust increased by 11.5% to $6.8 million from
$6.1 million. This increase is due to increasing FUM.
Disclosure of business strategies and prospects -
Growth
Euroz Securities has enjoyed the modest recovery in the resources
cycle with significant growth in ECM activity raising $865 million.
Westoz Funds Management has provided solid investment returns
for its two listed investment company mandates to generate
improved management and performance fees.
In July 2015, Euroz acquired Entrust which has now been fully
integrated alongside Euroz Securities Private Client operations and
we believe that both businesses will continue to cross–pollinate
their strengths and grow recurring revenue.
Prodigy has partnerships with two separate boutique funds,
Flinders and Dalton for both retail and wholesale investors. Their
long term strategy is to provide a steady base of diverse ongoing
management fee revenues with potential performance fee upside.
Flinders has received upgraded research ratings for its Flinders
Emerging Companies Fund but a more challenging small cap
market this year has hindered FUM growth in the short term.
Dalton Street Capital aims to deliver absolute returns in all market
conditions and can report solid returns of 8.7% to 30 June 2017.
We are encouraged that Dalton Street Capital has been accepted
on several investment platforms and is gaining significant support
in the private client market due to its ability to deliver uncorrelated
investment returns.
We continue to implement our modest diversification strategy
and are pleased our Western Australian markets have improved
sufficiently to enable us to declare a solid increase in dividends
to our shareholders and pay 7.25 cents per share in fully franked
dividends for the year.
The Directors believe that Euroz Group has 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.
EUROZ ANNUAL REPORT 2017
023
Of the total dividends paid during the year, $34,246 (2016: $6,129)
was paid to the Euroz Share Trust and is undistributed. Therefore, it
has been eliminated on consolidation.
Significant changes in the state of affairs
There have been no significant changes in the state of affairs of
the consolidated group during the year other than the acquisition
of 1,900,000 treasury shares on-market.
Share options
There were no options on issue at 30 June 2017 and 30 June 2016.
Environmental regulation
The consolidated group is not subject to significant environmental
regulation in respect of its operations.
Events after reporting date
The Directors are not aware of any matter or circumstance
subsequent to 30 June 2017 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.
Directors’ Report
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 to $119
million at 30 June 2017 from $114 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, is $31 million at 30 June 2017 compared to $35
million at 30 June 2016.
During the past nine 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, our
multi boutique Prodigy business and Entrust as a platform for our
future wealth management ambitions.
Our group remains in an extremely sound financial position with
cash and investments of $117 million (including the Pershing
security deposit of $5 million) as at 30 June 2017. We have a pre
final dividend Net Tangible Assets (NTA) of 75¢ per share and no
debt. Euroz has a proud history of consistent profits and dividends
having paid $193 million in fully franked dividends in every
consecutive half year for the past 17 years.
The Directors believe the Company is in a strong and stable
financial position to expand and grow its current operations.
Earning per share
Basic earnings per share
Diluted earnings per share
Dividends – Euroz Limited
2017
cents
12.30
12.03
2016
cents
1.61
1.61
Dividends paid or provided for during the financial year were as
follows:
Interim ordinary dividend
of 1.75 cents (2016: 1.75
cents) per fully paid
ordinary share was paid on
25 January 2017.
Provision for final ordinary
dividend for 30 June
2017 of 5.5 cents (2016:
2.25 cents) per fully paid
ordinary share paid on
28 July 2017.
2017
$
2016
$
2,817,314
2,816,281
8,854,416
3,622,711
11,671,730
6,438,992
024
EUROZ ANNUAL REPORT 2017
Directors’ Report
Information on
Directors
Particulars of
Directors’ interests
in shares of Euroz
Limited
Director
Experience
Special responsibilities and qualifications
Ordinary shares*
A McKenzie
Executive Chairman
Mr McKenzie has
worked in the
stockbroking
industry since 1991.
J Hughes
Director
Mr Hughes has
worked in the
stockbroking
industry since 1986.
D Young
Director (retired 1 July
2017)
Mr Young has worked
in corporate finance
since 1984.
G Chessell
Director
Mr Chessell has
worked in the
stockbroking
industry since 1996.
R Kane
Director
S Yeo
Director
Mr Kane has worked
in the stockbroking
industry since 1994.
Mr Yeo has worked
in the stockbroking
industry since 1993.
Executive Chairman of Euroz Limited and Euroz Securities
12,286,971
Executive Director of Westoz Funds Management, Prodigy
Investment Partners, Flinders Investment Partners and Dalton
Street Capital
Member of Euroz Limited Remuneration Committee
Member of Euroz Securities Underwriting Committee
Holds a Bachelor of Economics Degree from the University of
the Western Australia (“UWA”)
Member (MSAFAA) of the Stockbrokers and Financial Advisers
Association of Australia (SAFAA)
Executive Director of Euroz Limited, Euroz Securities, Westoz
Funds Management and Prodigy Investment Partners
12,377,832
Executive Chairman of Westoz Investment Company and
Ozgrowth Limited
Member of Euroz Limited Remuneration Committee
Member of Euroz Securities Underwriting Committee
Holds a Graduate Diploma in Applied Finance and Investment
from FINSIA and is a member (MSAFAA) of SAFAA
Executive Director of Euroz Limited and Euroz Securities
Not applicable **
Chairman of Euroz Limited Audit & Risk Committee
Member of Euroz Securities Underwriting Committee
Holds a Bachelor of Commerce degree from UWA, a Graduate
Diploma in Applied Finance from FINSIA, a Fellow of FINSIA and
a Fellow of CPA Australia (FCPA)
Executive Director of Euroz Limited and Euroz Securities
4,576,243
Member of Euroz Limited Audit & Risk Committee
Head of Research at Euroz Securities and our senior resources
analyst
Holds a Bachelor of Applied Science in Geology and a Graduate
Diploma in Business
Executive Director of Euroz Limited and Euroz Securities
3,111,652
Member of Euroz Securities Underwriting Committee
Institutional Dealer at Euroz Securities responsible for servicing
both domestic institutions and high net worth clients
Holds a Bachelor of Business from Edith Cowan University
Executive Director of Euroz Limited and Euroz Securities
4,358,264
Member of Euroz Limited Audit & Risk Committee
Established the Private Client division of 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
EUROZ ANNUAL REPORT 2017
025
Directors’ Report
Information on
Directors
Particulars of
Directors’ interests
in shares of Euroz
Limited
Director
Experience
Special responsibilities and qualifications
Ordinary shares*
A Brittain
Director
Mr Brittain has
worked in the
funds management
and stockbroking
industry since 1992.
R Black
Director (appointed
1 August 2017)
Mr Black has worked
in stockbroking
industry since 1993.
Executive Director of Euroz Limited, Euroz Securities, Entrust
Private Wealth Management, Prodigy Investment Partners,
Flinders Investment Partners and Dalton Street Capital
517,313
Chief Operating and Financial Officer
Member of Euroz Limited Audit and Risk Committee
Member of Euroz Securities Compliance Committee
Member of Euroz Securities Underwriting Committee
Holds a Bachelor of Commerce degree from UWA, a member
of the Chartered Accountants Australia and New Zealand (CA),
holds a Graduate Diploma in Applied Finance and Investment
from FINSIA, a Graduate member of the Australian Institute
of Company Directors (AICD) and is a member (MSAFAA) of
SAFAA
Executive Director of Euroz Limited, Euroz Securities and
Entrust Private Wealth Management
3,637,000
Managing Director of Euroz Securities
Head of Euroz Securities Institutional Sales
Member of Euroz Limited Remuneration Committee
Member of Euroz Securities Underwriting Committee
Member of Euroz Securities Compliance Committee
Holds a Bachelor of Business Degree, and is a Graduate member
of the AICD
*Balance as at the date of signing the report and total shares includes shares allocated under the Performance Rights Plan.
**Mr D Young retired on 1 July 2017; shareholding disclosure is not required as he is no longer a Director of Euroz Limited.
026
EUROZ ANNUAL REPORT 2017
Directors’ Report
Meetings of Directors
The number of meeting of the Company’s Board of Directors held during the year ended 30 June 2017 and the number of meetings
attended by each Director were:
Director
Director Meetings
Committee Meetings
Number
eligible to
attend
Number
attended
Number
eligible to
attend
Number
attended
Number
eligible to
attend
Number
attended
Audit
Remuneration
Andrew McKenzie
Jay Hughes
Doug Young (retired 1 July 2017)
Greg Chessell
Russell Kane
Simon Yeo
Anthony Brittain
Remuneration Report (audited)
22
22
22
22
22
22
22
22
22
22
21
21
22
22
-
-
3
3
-
2
2
-
-
3
2
-
2
2
2
2
-
-
-
-
-
2
2
-
-
-
-
-
This Remuneration Report outlines the Key Management Personnel (KMP) remuneration arrangements of the Company and the
consolidated group in accordance with the requirements of the Corporations Act 2001 and its regulations. For the purposes of this
report KMP of the consolidated group are defined as those persons having authority for the strategic management and direction of the
consolidated 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 group’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.
Revenue (including gains on fair value movements
in investment entities)
2013
$
2014
$
2015
$
2016
$
2017
$
45,979,616
78,176,940
38,898,781
41,924,867
70,652,849
Net profit / (loss) after tax
Share price at year end
11,122,304
26,547,100
(7,130,652)
2,561,018
17,931,362
1.00
1.30
1.00
0.79
1.08
Dividends paid or recommended
9,352,340
16,261,272
7,886,167
6,438,992
11,671,730
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 ANNUAL REPORT 2017
027
Directors’ Report
Directors’ fees
Discretionary bonus
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:
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%) 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
Advisors who are paid a commission may also be paid 5% of their
total monthly brokerage portfolio administration revenue or 25%
of corporate finance introduction fees in equity. The shares issued
will only vest to the employee after 3 years subsequent service
following the initial year of service.
• Participation in the profit share pool
• Commission
• Discretionary Bonus
Profit share pool – Euroz Securities
Directors and executives 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 Limited) are also entitled to participate in the profit share
pool. In these circumstances two members assess the performance
of the third member.
Commission
Private Client Advisors are paid a commission in addition to a base
salary and superannuation. This is calculated on a sliding scale.
Eligible Private Client Advisors are also invited to participate in the
Performance Rights Plan based on certain performance hurdles set
out in the employment contract.
028
EUROZ ANNUAL REPORT 2017
Directors’ Report
Details of remuneration
Details of the nature and amount of each element of the emoluments of each KMP of the Group are set out in the following tables.
2017
Andrew McKenzie
Jay Hughes
Doug Young
(retired 1 July 2017)
Greg Chessell
Russell Kane
Simon Yeo
Robert Black
Phil Rees
Anthony Brittain
Short-term
Base
salary
Profit
Share/bonus
$
$
244,658
231,496
244,998
259,998
259,998
259,998
259,643
220,341
250,203
495,000
495,000
326,250
225,000
326,250
296,250
386,250
198,750
183,750
Post-
Employment
Share Based
Payment
Superannuation
Performance
Rights
$
34,956
34,366
34,616
19,616
19,616
19,616
19,616
33,776
29,056
$
82,500
82,500
54,063
45,625
60,938
53,438
67,188
40,938
34,063
Other
benefits
$
27,951
19,572
20,347
11,183
16,212
18,356
15,454
14,526
16,580
Total
$
885,065
862,934
680,274
561,422
683,014
647,658
748,151
508,331
513,652
Performance
related
$
65%
67%
56%
48%
57%
54%
61%
47%
42%
Total
2,231,333
2,932,500
160,181
245,234
521,253
6,090,501
Current Directors did not receive any Directors fees.
2016
Andrew McKenzie
Jay Hughes
Doug Young
Greg Chessell
Russell Kane
Simon Yeo
Robert Black
Phil Rees
Anthony Brittain
Short-term
Base
salary
Profit
Share/bonus
$
$
195,000
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
Post-
Employment
Share Based
Payment
Superannuation
Performance
Rights
$
$
30,000
35,000
35,000
35,000
19,308
19,308
17,662
34,172
30,000
41,250
41,250
26,875
26,875
33,750
28,750
35,000
24,375
18,750
Other
benefits
$
21,507
20,402
23,386
16,189
15,697
17,043
15,036
9,342
16,108
Total
$
467,757
466,652
387,761
388,064
416,947
390,793
407,535
293,716
309,858
Performance
related
$
47%
47%
36%
38%
42%
38%
47%
29%
30%
Total
1,695,481
1,146,567
154,710
255,450
276,875
3,529,083
Current Directors did not receive any Directors fees.
EUROZ ANNUAL REPORT 2017
029
Directors’ Report
Service agreements
Simon Yeo, 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.
Andrew McKenzie, Executive Chairman
• Term of contract - ongoing employment contract,
• Term of contract - ongoing employment contract,
• Base salary, inclusive of superannuation for the year ended
30 June 2017 of $275,000 (2016 - $225,000) plus profit share,
• Payment on termination of employment by the employer,
other than for gross misconduct three months’ salary.
Anthony Brittain, Director
• Term of contract - ongoing employment contract,
• Base salary, inclusive of superannuation for the year ended
30 June 2017 of $275,000 (2016 - $200,000) plus bonus,
• Base salary, inclusive of superannuation for the year ended
30 June 2017 of $275,000 (2016 - $225,000) plus profit share,
• Payment on termination of employment by the employer,
other than for gross misconduct three months’ salary.
• Payment on termination of employment by the employer,
other than for gross misconduct three months’ salary.
Jay Hughes, Director
• Term of contract - ongoing employment contract,
Robert Black, Director
• Term of contract ongoing employment contract,
• Base salary, inclusive of superannuation for the year ended
30 June 2017 of $275,000 (2016 - $200,000) plus profit share,
• Base salary, inclusive of superannuation for the year ended
30 June 2017 of $275,000 (2016 - $225,000) plus profit share,
• Payment on termination of employment by the employer,
other than for gross misconduct three months’ salary.
• Payment on termination of employment by the employer,
other than for gross misconduct three months’ salary.
Doug Young, Director (retired 1 July 2017)
• Term of contract - ongoing employment contract,
Phil Rees, Director Westoz Funds Management Pty Ltd
• Term of contract - ongoing employment contract,
• Base salary, inclusive of superannuation for the year ended
30 June 2017 of $250,000 (2016 - $200,000) plus bonus,
• Base salary, inclusive of superannuation for the year ended
30 June 2017 $275,000 (2016 - $225,000) plus profit share,
• Payment on termination of employment by the employer,
other than for gross misconduct – three months’ salary.
• Payment on termination of employment by the 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 2017 of $275,000 (2016 - $225,000) plus profit share,
• Payment on termination of employment by the employer,
other than for gross misconduct three months’ salary.
Russell Kane, Director
• Term of contract - ongoing employment contract,
• Base salary, inclusive of superannuation for the year ended
30 June 2017 of $275,000 (2016 - $225,000) plus profit share,
• Payment on termination of employment by the employer,
other than for gross misconduct three months’ salary.
030
EUROZ ANNUAL REPORT 2017
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:
2017
Ordinary Shares
A McKenzie
J Hughes
D Young (retired 1 July 2017)
G Chessell
R Kane
S Yeo
R Black
P Rees
A Brittain
Total
2016
Ordinary Shares
A McKenzie
J Hughes
D Young (retired 1 July 2017)
G Chessell
R Kane
S Yeo
R Black
P Rees
A Brittain
Total
Balance at
1 July 2016
Received
via PRP (i)
Granted as
remuneration
Bought
& (sold)
Balance at
30 June 2017
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
45,371,872
155,513
155,513
102,497
70,688
102,497
93,072
121,347
62,441
57,728
921,296
-
-
-
-
-
-
-
-
-
-
70,000
-
-
22,650
15,000
-
60,544
19,327
-
12,138,971
12,303,832
4,734,540
4,558,243
3,089,652
4,206,264
3,531,347
1,400,527
517,313
187,521
46,480,689
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
(i) These shares are held by the Euroz Share Trust and are currently vesting in accordance with the Euroz Performance Rights Plan (PRP).
EUROZ ANNUAL REPORT 2017
031
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:
2017
Performance Rights
A McKenzie
J Hughes
D Young (retired 1 July 2017)
G Chessell
R Kane
S Yeo
R Black
P Rees
A Brittain
Total
2016
Performance Rights
A McKenzie
J Hughes
D Young (retired 1 July 2017)
G Chessell
R Kane
S Yeo
R Black
P Rees
A Brittain
Total
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 PRP. Rights are granted on 1 July each year and vest on 30 June.
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 are subject to a 4 year vesting period. Total fair values of performance
rights issued in the year amounts to $1,058,057 (2016: $501,189).
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.
032
EUROZ ANNUAL REPORT 2017
Directors’ Report
Indemnifying officers and auditor
During the financial year, Euroz Limited paid a premium of $410,491 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 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
Auditor’s independence declaration
$
50,700
The lead auditor’s independence declaration for the year ended 30 June 2017 has been received and follows the Directors report.
This report is made in accordance with a resolution of the Directors.
Andrew McKenzie
Executive Chairman
Date: 31 August 2017
Jay Hughes
Executive Director
EUROZ ANNUAL REPORT 2017
033
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 2017, 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
31 AUGUST 2017
WEST PERTH
Page | 16
034
EUROZ ANNUAL REPORT 2017
Consolidated Statement of Profit or Loss
and Other Comprehensive Income
Revenue
Profit / (loss) on fair value movement on investments
Employee benefits expense
Depreciation and amortisation expenses
Regulatory expenses
Legal, professional and consultancy expenses
Conference and seminar expenses
Brokerage and underwriting expense
Communication expenses
Carrying amount of principal trading securities sold
Other expenses
Notes
4
2017
$
61,779,726
8,873,123
2016
$
41,924,867
(5,247,301)
(27,412,316)
(19,603,342)
(236,178)
(193,657)
(1,119,534)
(950,209)
(165,793)
(199,375)
(905,619)
(731,882)
(4,005,216)
(4,724,972)
(327,840)
(296,672)
(7,334,783)
(3,480,060)
(4,939,496)
(4,481,274)
Profit / (Loss) before income tax expense
Income tax (expense) / benefit
5
6
24,133,620
(6,202,258)
2,088,577
472,441
Profit / (Loss) after income tax expense for the year
17,931,362
2,561,018
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
-
-
17,931,362
2,561,018
(1,439,805)
19,371,167
17,931,362
(1,439,805)
19,371,167
17,931,362
12.30
12.03
(999,399)
3,560,417
2,561,018
(999,399)
3,560,417
2,561,018
1.61
1.61
34
34
The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes.
EUROZ ANNUAL REPORT 2017
035
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
Notes
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
22
2017
$
41,152,236
1,855,645
5,049,119
1,218,294
2016
$
34,202,416
1,549,678
5,826,554
1,148,305
49,275,294
42,726,953
5,000,000
9,215,893
56,915,440
650,583
7,558,090
10,208,552
5,000,000
8,050,076
47,121,275
485,863
8,575,166
10,152,312
89,548,558
79,384,692
138,823,852
122,111,645
3,346,290
3,251,272
11,767,285
18,364,847
1,114,687
43,016
1,157,703
1,204,171
444,699
5,541,116
7,189,986
815,465
276,344
1,091,809
19,522,550
8,281,795
119,301,302
113,829,850
103,246,026
105,226,509
2,217,421
15,893,316
1,159,364
8,159,633
121,356,763
114,545,506
(2,055,461)
(715,656)
Total equity
119,301,302
113,829,850
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
036
EUROZ ANNUAL REPORT 2017
Consolidated Statement of Changes in Equity
Balance at 1 July 2015
99,533,415
658,175
11,032,079
33,743
111,257,412
Issued
capital
Share based
payment
reserve
Retained
earnings
Non-
controlling
interest
Total
$
$
$
$
$
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
Balance at 1 July 2016
105,226,509
1,159,364
8,159,633
(715,656)
113,829,850
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
Total contributions by
and distributions to owners
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
Total contributions by
and distributions to owners
-
-
6,870,312
(933,008)
(244,210)
-
-
-
-
-
(1,964,883)
(15,600)
-
-
-
-
-
-
-
501,189
-
-
-
-
-
1,058,057
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)
-
(6,432,863)
19,371,167
(1,439,805)
17,931,362
19,371,167
(1,439,805)
17,931,362
100,000
100,000
-
-
-
-
(1,964,883)
(15,600)
1,058,057
(11,637,484)
-
(11,637,484)
-
-
-
-
-
-
-
-
(1,980,483)
1,058,057
(11,637,484)
100,000
(12,459,910)
Balance at 30 June 2017
103,246,026
2,217,421
15,893,316
(2,055,461)
119,301,302
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
EUROZ ANNUAL REPORT 2017
037
Consolidated Statement of Cash Flows
Notes
2017
$
2016
$
Cash flows from operating activities
Receipts from customers (inclusive of goods and services tax)
Payments to suppliers and employees (inclusive of goods and services tax)
Interest received
Proceeds from sale of trading shares
Income taxes
Payments for trading shares
Net cash flows from operating activities
33
Cash flows from investing activities
Payment of stamp duty on intangibles acquisition
Payments for investment in WIC & OZG
Payments for management 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
31
49,657,515
(34,800,663)
14,856,852
380,145
8,103,956
(2,079,389)
(5,345,630)
15,915,934
33,061,485
(31,613,563)
1,447,922
784,177
4,470,767
(1,664,629)
(3,047,431)
1,990,807
(56,238)
(1,698,577)
-
(215,102)
(1,600,000)
(7,000,000)
3,075,861
(400,898)
-
(1,964,883)
-
4,008,239
(383,812)
49,978
(933,007)
(1,529,978)
Net cash flows from / (used in) investing activities
(2,644,735)
(6,003,682)
Cash flows from financing activities
Dividends paid
Share buy-back
Proceeds from share issue in related entity
(6,405,779)
(15,600)
100,000
(6,581,969)
(244,210)
-
Net cash flows from / (used in) financing activities
(6,321,379)
(6,826,179)
Net increase / (decrease) in cash and cash equivalents
Cash and cash equivalents at 1 July
6,949,820
34,202,416
(10,839,053)
45,041,470
Cash and cash equivalents at 30 June
7
41,152,236
34,202,416
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
Notes to the financial statements
038
EUROZ ANNUAL REPORT 2017
CONTENTS
NOTE 1. STATEMENT OF SIGNIFICANT
ACCOUNTING POLICIES
NOTE 2. SIGNIFICANT ACCOUNTING ESTIMATES
AND JUDGEMENTS
NOTE 3. SEGMENT INFORMATION
NOTE 4. REVENUE
039
045
046
048
NOTE 20. DEFERRED TAX LIABILITIES
NOTE 21. LONG TERM PROVISIONS
NOTE 22. CONTRIBUTED EQUITY
NOTE 23. DIVIDENDS
NOTE 5. PROFIT BEFORE INCOME TAX EXPENSE
048
NOTE 24. FINANCIAL INSTRUMENTS
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
048
050
050
051
051
051
051
NOTE 13. INVESTMENT ENTITIES AT FAIR VALUE
051
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
052
053
053
054
054
054
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
054
054
055
056
057
059
059
059
060
060
061
062
063
063
063
064
066
066
EUROZ ANNUAL REPORT 2017
039
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 31 August 2017. 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 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 2017 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.
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.
(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.
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
The acquisition method of accounting is used to account for
business combinations regardless of whether equity instruments
or other assets are acquired.
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.
040
EUROZ ANNUAL REPORT 2017
Notes to the Financial Statements
Note 1. Statement of significant accounting policies (continued)
(c) Business combinations (continued)
(f) Inventories
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, and 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:
• 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.
•
Interest income is recognised as it accrues.
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.
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.
(i) 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.
• Dividend revenue is recognised when the right to receive a
dividend has been established.
All revenue is stated net of the amount of Goods and Services Tax
(GST), where applicable.
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.
(e) Receivables
(j) Leasehold improvements
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
who provides a trust account facility as part of the clearing and
settlement service.
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.
(k) 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.
EUROZ ANNUAL REPORT 2017
041
Notes to the Financial Statements
Note 1. Statement of significant accounting policies (continued)
(l) 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 Securities (Australia) Pty Ltd
who provides a trust account facility as part of the clearing and
settlement service.
(m) 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.
(n) 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.
converts to plan shares that are subject to a 3 year
service condition. The Board may, at their discretion
accelerate the vesting period.
(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.
(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.
(p) 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.
(o) Employee benefits
(q) Earnings per share
(i) Wages, salaries and annual leave
(i) Basic earnings per share
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.
(v) Options/performance rights
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. At the end of year 1, the performance right
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. The
potential impact of issuing treasury shares externally is
considered when calculating diluted earnings per share.
(r) 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.
042
EUROZ ANNUAL REPORT 2017
Notes to the Financial Statements
Note 1. Statement of significant accounting policies (continued)
(r) Fair value measuremnet (continued)
Initial recognition and 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.
(s) 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.
(t) 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.
(u) 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.
(v) 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.
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.
Classification and subsequent measurement
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.
(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.
Investments held as inventories are classified in this manner.
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. Investments in managed
investment schemes are recognised at fair value through
profit or loss on initial recognition.
(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.
EUROZ ANNUAL REPORT 2017
043
Notes to the Financial Statements
Note 1. Statement of significant accounting policies (continued)
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.
(x) 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.
(y) 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.
(z) 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.
(iii) Available-for-sale financial assets
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.
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.
(w) 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.
044
EUROZ ANNUAL REPORT 2017
Notes to the Financial Statements
Note 1. Statement of significant accounting policies (continued)
(aa) New standards and interpretations
The Australian Accounting Standards Board (‘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.
AASB No.
Title
Application date
of standard
Issue date
AASB 9
Financial Instruments
1 January 2018
December 2014
AASB 2010-7 Amendments arising from Accounting Standards arising from AASB 9
1 January 2018
September 2012
(December 2010)
AASB 2014-1 Amendments to Australian Accounting Standards
Part E - Financial Instruments
Part E -
1 January 2018
June 2014
AASB 2014-5 Amendments to Australian Accounting Standard Arising From AASB
1 January 2018
December 2014
15
AASB 2014-7 Amendments to Australian Accounting Standard Arising From AASB
1 January 2018
December 2014
9 (December 2014)
AASB 2015-8 Amendments to Australian Accounting Standards – Effective Date of
1 January 2018
October 2015
AASB 15
AASB 2015-10 Amendments to Australian Accounting Standards – Effective Date of
1 January 2018
December 2015
Amendments to AASB 10 and AASB 128.
AASB 2016-1 Amendments to Australian Accounting Standards – Recognition of
Deferred Tax Assets for Unrealised Losses [AASB 112]
1 January 2017
February 2016
AASB 2016-2 Amendments to Australian Accounting Standards – Disclosure
1 January 2017
March 2016
Initiative: Amendments to AASB 107
AASB 2016-3 Amendments to Australian Accounting Standards – Clarifications to
1 January 2018
May 2016
AASB 15
AASB 2016-5 Amendments to Australian Accounting Standards – Classification and
1 January 2018
July 2016
Measurement of Share-based Payment Transactions [AASB 2]
AASB 2017-1 Amendments to Australian Accounting Standards – Transfers of
1 January 2018
February 2017
Investment Property, Annual Improvements 2014-2016 Cycle and
Other Amendments
AASB 2017-2 Amendments to Australian Accounting Standards – Further Annual
1 January 2017
February 2017
Improvements 2014-2016 Cycle
AASB 15
Revenues from Contracts with Customers
1 January 2018
October 2015
AASB 16
Leases
1 January 2019
February 2016
IFRIC 23
Uncertainty over Income Tax Treatments
1 January 2019
June 2017
The consolidated group has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the 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.
The group has made an initial assessment of the impact on AASB 9 – Financial Instruments, AASB 15 – Revenue from Contracts with
Customers and AASB 16 – Leases and does not expect material impact to the Group’s net profit and net assets. Additional disclosures will
be expected in line with the new requirements.
Several other amendments to standards and interpretations on or after 1 July 2017 have also not been applied and the Group does not
expect material impact to the annual and half year consolidated financial statements.
EUROZ ANNUAL REPORT 2017
045
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
In addition, the goodwill on the acquisition of Entrust totalling
$5,639,200 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 2017 amounted to 8.85%. The
Board have assessed that there is no indication the goodwill is
impaired.
(v) Intangible assets
At each reporting date, the consolidated group compares the
carrying values and market values of investments 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.
Upon acquisition of Entrust, Euroz acquired $1,736,240 in other
intangible assets consisting 3 separate client portfolios. 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 2017
amounted to 8.85%. The Board have assessed that there is no
indication these assets are impaired.
(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.
(iv) Goodwill
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 2017, 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 2017 amounted
to 8.85%. The Board have assessed that there is no indication the
goodwill is impaired.
046
EUROZ ANNUAL REPORT 2017
Notes to the Financial Statements
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 Finance Activities
Stockbroking business offering trading of Australian securities,
post trade reporting, corporate finance opportunities, provision
of company research.
Principal Trading
Principal trading relates to the purchase and sale of securities
by the consolidated group.
Funds Management
The consolidated group provides funds management services.
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.
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.
EUROZ ANNUAL REPORT 2017
047
Notes to the Financial Statements
Note 3. Segment information (continued)
Segment Performance
2017
Stockbroking
& Corporate
Finance
Activities
Principal
Trading
Funds
Management
Investment
Income
Wealth
Management
Unallocated
Total
$
$
$
Sales and other fees
39,724,001
8,103,956
3,359,285
$
$
$
$
-
Interest revenue
Other revenues
424,413
40,608
1,072
21,636
46,743
154,222
-
3,054,396
6,783,667
9,979
55,748
Total segment revenue
40,189,022
8,126,664
3,406,028
3,208,618
6,849,394
Segment net
operating profit/(loss)
after tax
Depreciation and
amortisation
Gain/(Loss) on fair
value of investments
9,018,228
548,044
(1,817,750)
9,322,250
860,590
196,220
-
39,828
-
-
1,223,040
-
7,661,404
130
-
Segment assets
36,734,909
5,049,120
6,558,166
85,633,936
4,847,721
Fair value of
investments
-
5,049,120
-
66,131,333
Capital expenditure
396,779
-
1,516
-
-
2,603
Segment liabilities
5,349,262
40,760
831,221
12,487,612
813,695
Sales and other fees
24,742,067
4,470,767
1,796,959
$
$
$
$
-
Interest revenue
Other revenues
448,066
900
212
-
43,878
323,958
-
4,018,663
6,026,121
2,591
50,685
Total segment revenue
25,191,033
4,470,979
1,840,837
4,342,621
6,079,397
Segment net operating
profit/(loss) after tax
Depreciation and
amortisation
Gain/(Loss) on fair
value of investments
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
Fair value of
investments
-
5,826,554
Capital expenditure
383,812
-
-
-
-
-
55,171,351
-
Segment liabilities
2,723,922
114,551
445,541
4,374,091
623,690
-
-
-
-
-
-
-
-
-
-
-
57,970,909
636,429
3,712,388
61,779,726
17,931,362
236,178
8,884,444
138,823,852
71,180,453
400,898
19,522,550
-
-
-
-
-
-
-
-
-
-
-
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
383,812
8,281,795
2016
Stockbroking
& Corporate
Finance
Activities
Principal
Trading
Funds
Management
Investment
Income
Wealth
Management
Unallocated
Total
$
$
$
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 2017 approximately 9.3% (2016: 14%) of the consolidated group’s external revenue was derived from
management fees, performance fees and dividends from Ozgrowth Limited and Westoz Investment Company Limited.
048
EUROZ ANNUAL REPORT 2017
Notes to the Financial Statements
Note 4. Revenue
Revenue from operating activities
Brokerage
Underwriting and placement fees
Performance and management fees
Wealth management fees
Proceeds on sale of principal trading shares
Corporate retainers
Other income
Interest received
Other revenue
Dividend received
2017
$
15,276,166
19,383,590
5,850,861
6,022,957
8,103,759
3,333,281
2016
$
14,344,812
9,517,349
1,743,561
5,153,627
4,454,572
1,752,399
57,970,614
36,966,320
636,429
105,802
3,066,881
818,705
131,603
4,008,239
3,809,112
4,958,547
Total Revenue
61,779,726
41,924,867
Note 5. Profit before income tax expense
Rental expenses relating to operating lease
Superannuation expense
Share based payments – PRP
Share based payments – Other
Note 6. Income tax
The components of tax expense comprise:
Current tax
Deferred tax
2017
$
1,854,769
1,133,418
1,058,057
-
2016
$
1,992,946
1,054,437
501,189
250,000
2017
$
2016
$
4,220,734
1,981,524
1,632,285
(2,104,726)
6,202,258
(472,441)
EUROZ ANNUAL REPORT 2017
049
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% (2016: 30%)
7,240,086
626,573
2017
$
2016
$
Add tax effect of:
- other non-allowable items
Less tax effect of:
- other
- franked dividends received
2,074,715
145,725
9,314,801
772,298
12,403
3,100,140
57,153
1,187,586
Income tax attributable to entity
6,202,258
(472,441)
The applicable weighted average effective tax rates are as follows:
25.70%
(22.62%)
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
Charge to equity
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
7,759,701
(1,981,524)
665,226
6,443,403
4,699,929
2,329,272
730,500
7,759,701
375,494
55,928
431,422
439,971
243,294
683,265
1,114,687
(26,700)
402,194
375,494
423,877
16,064
439,971
815,465
050
EUROZ ANNUAL REPORT 2017
Notes to the Financial Statements
Note 6. Income tax (continued)
iii. Deferred tax assets
Movement in temporary difference 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
Charge to equity
Recognised in the statement of profit or loss
Balance at 30 June
Tax consolidation legislation
2017
$
2016
$
5,792,631
(2,765,263)
3,027,368
702,290
225,177
927,467
2,080,245
665,226
857,784
3,603,255
7,558,090
3,795,921
1,996,710
5,792,631
549,958
152,332
702,290
750,591
730,500
599,154
2,080,245
8,575,166
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
2017
$
2016
$
41,152,236
34,202,416
2017
$
2016
$
1,855,645
1,549,678
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.
EUROZ ANNUAL REPORT 2017
051
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)
2017
$
527,000
4,244,220
277,899
2016
$
527,000
6,430,656
(1,131,102)
Total
5,049,119
5,826,554
(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
Total
Note 11. Long term receivable
Security deposit
2017
$
766,246
452,048
2016
$
952,541
195,764
1,218,294
1,148,305
2017
$
2016
$
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 schemes
Fair value adjustments (i)
Total
(i) The fair value adjustment is based on the closing unit value of the scheme.
Note 13. Investment entities at fair value
2017
$
8,600,000
615,893
2016
$
7,000,000
1,050,076
9,215,893
8,050,076
2017
$
2016
$
Listed ordinary shares in investment entities at fair value through profit or loss
56,915,440
47,121,275
Reconciliation
Reconciliation of the fair values at the beginning and end of the current financial
year are set out below:
Opening fair value
Additions
Revaluation increments / (decrements)
47,121,275
1,698,577
8,095,588
53,769,308
215,102
(6,863,135)
Closing fair value
56,915,440
47,121,275
Investment entities encompass listed entities – Westoz Investment Company Limited and Ozgrowth Limited. While the consolidated
group is deemed to control these entities, exemption from consolidation is obtained as the Company meets the definition of investment
entity under AASB 2013-5 – Investment Entities. Accordingly, these investments are fair valued.
052
EUROZ ANNUAL REPORT 2017
Notes to the Financial Statements
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
Reconciliations
2017
$
537,301
(138,655)
398,646
76,167
(26,929)
49,238
255,699
(148,192)
107,507
163,770
(68,579)
95,192
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
650,583
485,863
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:
2017
Carrying amount at 1 July 2016
Additions
Depreciation / amortisation expense
Leasehold
improvements
Plant and
equipment
$
196,964
295,694
(94,012)
$
288,899
105,204
(142,166)
Total
$
485,863
400,898
(236,178)
Carrying amount at 30 June 2017
398,646
251,937
650,583
2016
Carrying amount at 1 July 2015
Additions
Acquired from a business combination
Assets written-off
Depreciation / amortisation expense
Leasehold
improvements
Plant and
equipment
$
76,604
215,560
(49,978)
(40)
(45,182)
$
241,218
168,252
-
(4,565)
(116,006)
Total
$
317,822
383,812
(49,978)
(4,605)
(161,188)
Carrying amount at 30 June 2016
196,964
288,899
485,863
EUROZ ANNUAL REPORT 2017
053
Notes to the Financial Statements
Note 15. Deferred tax assets
Deferred tax asset (Note 6)
2017
$
2016
$
7,558,090
8,575,166
Deferred tax assets are recognised only to the extent that it is probable that future taxable profits can be generated.
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)
Addition
Balance
2017
$
8,472,312
1,736,240
10,208,552
2017
$
8,430,477
-
41,835
2016
$
8,430,477
1,721,835
10,152,312
2016
$
2,833,112
5,597,365
-
8,472,312
8,430,477
As referred to in note 31, in the financial year ended 30 June 2016 Euroz Limited acquired $5,597,365 in goodwill on the acquisition of a
business. 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 2017, 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)
Addition
Balance
2017
$
1,721,835
-
14,405
2016
$
-
1,721,835
-
1,736,240
1,721,835
In addition, in the financial year ended 30 June 2016 Euroz Limited acquired $1,736,240 in other intangible assets on the acquisition of a
business. These intangibles consist of 3 separate assets as follows:
Client portfolio A
Client portfolio B
Client portfolio C
$
500,000
80,000
1,156,240
1,736,240
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.
054
EUROZ ANNUAL REPORT 2017
Notes to the Financial Statements
Note 17. Trade and other payables
Other payables and accruals
2017
$
3,346,290
2016
$
1,204,171
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
Note 19. Short term provisions
Dividends
Employee entitlements (annual leave)
Employee entitlements (long service leave)
Total
Dividends
2017
$
3,251,272
2017
$
8,854,416
1,346,305
1,566,564
11,767,285
2016
$
444,699
2016
$
3,622,711
1,024,576
893,829
5,541,116
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 (i))
Carrying amount at 30 June
(i) The dividend reinvestment scheme was not operated in financial year 2017.
Note 20. Deferred tax liabilities
Deferred tax liability (Note 6)
Note 21. Long term provisions
Employee entitlements (long service leave)
2017
$
3,622,711
11,671,283
2016
$
5,192,129
6,438,992
(6,439,578)
(8,008,410)
8,854,416
3,622,711
2017
$
1,114,687
2017
$
43,016
2016
$
815,465
2016
$
276,344
EUROZ ANNUAL REPORT 2017
055
Notes to the Financial Statements
Note 22. Contributed equity
(a) Share capital
Ordinary shares
Issued and paid up capital consisting of
ordinary shares (net of treasury shares)
(b) Movements in ordinary share capital
2017
Shares
2016
Shares
2017
$
2016
$
156,654,382
158,574,382
103,246,026
105,226,509
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 through dividend reinvestment scheme
Shares bought back
At the end of the year
(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 through dividend reinvestment scheme
Shares bought back
At the end of the year
(d) Treasury shares
2017
Shares
158,574,382
(1,900,000)
-
-
(20,000)
2016
Shares
152,997,812
(1,125,000)
5,450,000
1,586,570
(335,000)
156,654,382
158,574,382
2017
$
105,226,509
(1,964,883)
-
-
(15,600)
2016
$
99,533,415
(933,008)
5,450,000
1,420,312
(244,210)
103,246,026
105,226,509
2017
Shares
2016
Shares
2017
$
2016
$
Balance of treasury shares at the end of the
reporting period
(4,335,000)
(2,435,000)
(4,465,952)
(2,500,958)
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 2017 (30 June 2016: NIL).
056
EUROZ ANNUAL REPORT 2017
Notes to the Financial Statements
Note 22. Contributed equity (continued)
(g) Share based payment reserve
The reserve records items recognised as expenses on valuation of share based payments. The movement in the current period totalling
$1,058,057 (2016: $501,189) 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
2017
$
1,159,364
1,058,057
2,217,421
2016
$
658,175
501,189
1,159,364
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 various Australian Financial
Services Licences and as a market participant of the Australian Securities Exchange 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
2017
$
2016
$
Interim dividend for the half year ended 31 December 2016 of 1.75 cents (2016 – 1.75 cents)
per fully paid ordinary share paid on 25 January 2017.
Fully franked based on tax paid @ 30%
2,817,314
2,816,281
Final dividend declared and provided for at 30 June 2017 of 5.5 cents (2016 – 2.25 cents)
per fully paid ordinary share paid on 28 July 2017.
Fully franked based on tax paid @ 30%
8,854,416
3,622,711
Total dividends provided for or paid
11,671,730
6,438,992
Of the total dividends paid during the year, $34,246 (2016: $6,129) was paid to the Euroz Share Trust and is undistributed.
Therefore, it has been eliminated on consolidation.
Franked dividends
The franked portions of the dividends recommended after 30 June 2017 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 2017.
2017
$
2016
$
Franking credits available for subsequent financial years based on a tax rate of 30%
(2016: 30%)
15,704,851
15,193,768
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 ANNUAL REPORT 2017
057
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
2017
$
3,346,290
2016
$
1,204,171
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 2017.
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 Securities (Australia) Pty Ltd 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
Impairment losses
None of the consolidated group’s receivables are past due date (2016: Nil).
Carrying Amount
2017
$
41,152,236
1,855,645
5,000,000
48,007,881
2016
$
34,202,416
1,549,678
5,000,000
40,752,094
058
EUROZ ANNUAL REPORT 2017
Notes to the Financial Statements
Note 24. Financial instruments (continued)
(b) Financial risk exposure and management (continued)
(iv) Financial instruments composition and maturity analysis
Weighted Average Effective
Interest Rate
Floating Interest
Rate
Non-Interest
Bearing
2017
%
2016
%
2017
$
2016
$
2017
$
2016
$
FINANCIAL ASSETS
Cash and cash equivalents
1.14
1.77
41,152,236
34,202,416
-
-
Trade and other Receivables
Financial assets held for
trading
Financial assets at fair value
through profit and loss
Other investments
Long term deposit
Total financial assets
FINANCIAL LIABILITIES
Trade and other payables
-
-
-
-
-
-
-
-
-
-
-
-
1,855,645
1,549,678
5,049,119
5,826,554
56,915,440
47,121,275
9,215,893
8,050,076
0.75
1.0
5,000,000
5,000,000
-
-
46,152,236
39,202,416
73,036,097
62,547,583
-
-
3,346,290
1,204,171
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).
2017
Assets
Investments
Total Assets
2016
Assets
Investments
Total Assets
Level 1
Level 2
Level 3
Total
71,035,145
71,035,145
145,307
145,307
-
-
71,180,452
71,180,452
Level 1
Level 2
Level 3
Total
60,707,290
60,707,290
290,615
290,615
-
-
60,997,905
60,997,905
(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%
2017
$
2016
$
323,066
274,417
(323,066)
(274,417)
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%
2017
$
2,491,315
(2,491,315)
2016
$
2,134,927
(2,134,927)
EUROZ ANNUAL REPORT 2017
059
Notes to the Financial Statements
Note 25. Remuneration of auditors
Audit services
Audit and review of financial reports for the Group Fees paid to PKF Mack firm
168,000
162,000
2017
$
2016
$
Other services
Tax compliance services
Other services
Note 26. Contingent liabilities
The parent entity and consolidated group had contingent liabilities at 30 June as follows:
36,200
14,500
50,700
32,950
12,500
45,450
2017
$
2016
$
Secured guarantees in respect of:
Operating lease of a controlled group entity
807,699
790,180
As detailed in note 11 the consolidated group has a deposit with Pershing Securities (Australia) Pty Ltd as part of Euroz Securities Limited
third party clearing arrangements. This deposit totalled $5,000,000 at reporting date (2016: $5,000,000).
The Group has no contingent assets at reporting date (2016: none).
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
2017
$
2016
$
1,357,195
3,205,972
-
1,284,348
4,243,421
127,218
Commitments not recognised in the financial statements
4,563,167
5,654,987
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 3, 20 Bond Street, Sydney NSW is for the period of 5 years commencing 1 December 2016
and expiring on 30 November 2021.
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.
060
EUROZ ANNUAL REPORT 2017
Notes to the Financial Statements
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
2017
$
2,955,885
2,955,855
2017
$
5,324,014
245,234
521,253
2016
$
2,194,749
2,194,749
2016
$
2,996,758
255,450
276,875
Total compensation
6,090,501
3,529,083
(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.
(d) Share-based payments
During the year a performance right was issued to 87 employees (2016: 72 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.
Transactions with related parties consisting of:
(i) Subsidiaries
- Loans advanced by Euroz Limited to subsidiaries
- Payments of dividends to Euroz Limited by subsidiaries
- Management fees charged by Euroz Securities Limited to subsidiaries
- Management fees charged by Prodigy Investment Partners Limited to subsidiaries
(ii) Other
- 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
2017
$
2016
$
12,610,616
10,300,000
1,651,790
731,262
2,768,925
2,062,232
920,000
6,089,701
3,450,000
1,685,229
381,654
3,947,426
1,736,952
6,609
EUROZ ANNUAL REPORT 2017
061
Notes to the Financial Statements
Note 29. Related parties (continued)
(e) Wholly-owned group transactions (continued)
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 2017 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:
2017
$
2016
$
Amounts recognised as revenue
Brokerage earned on Key Management Personnel accounts
38,259
41,442
Note 30. Investments in controlled entities
Name of entity
Country of
incorporation
Class of
shares
Equity holding Cost of parent entity’s
investment
2017 %
2016 %
2017 $
2016 $
Euroz Securities Limited
Detail Nominees Pty Ltd
Zero Nominees Pty Ltd (i)
Westoz Funds Management Pty Ltd
Euroz Employee Share Trust
Ozgrowth Limited*
Australia
Australia
Australia
Australia
Australia
Australia
Westoz Investment Company Limited*
Australia
Prodigy Investment Partners Limited
Blackswan Equities Limited (i)
Australia
Australia
Flinders Investment Partners Pty Ltd (ii)
Australia
Dalton Street Capital Pty Ltd (ii)
Blackswan Corporate Pty Ltd (i)
Australia
Australia
Blackswan Wealth Management Pty Ltd (i) Australia
WIM WA Resources Limited
WIM Small Cap Limited
Australia
Australia
Entrust Private Wealth Management Pty Ltd Australia
Prodigy Flinders Pty Ltd (ii)
Prodigy Corporate Pty Ltd (ii)
Prodigy DSC Pty Ltd (ii)
Australia
Australia
Australia
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
100
-
40.52
27.22
80
100
50
50
100
100
100
100
100
100
100
100
100 25,000,000 25,000,000
100
100
100
-
38.81
26.41
-
-
-
-
1,450,000
1,450,000
-
-
-
-
-
-
80
1,900,000
1,500,000
100 6,604,000 6,604,000
50
50
100
100
100
100
100
100
100
100
2
2
-
-
1
1
2
2
-
-
1
1
7,800,000
7,800,000
2
2
1
2
2
1
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
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 shares for the Group.
062
EUROZ ANNUAL REPORT 2017
Notes to the Financial Statements
Note 30. Investments in controlled entities (continued)
(f) Euroz Employee Share Trust - Vehicle established to acquire treasury shares on-market for distribution to eligible employees in
connection with the Performance Rights Plan.
(g) Prodigy Investment Partners Limited – 80/20 joint venture with former MLC CEO, 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.
(i) Blackswan Corporate Pty Ltd – The activities of the Blackswan group of entities were transferred over to Euroz Securities Limited.
(j) Blackswan Wealth Management Pty Ltd - The activities of the Blackswan group of entities were transferred over to Euroz Securities
Limited.
(k) Flinders Investment Partners Pty Ltd - Boutique fund manager specialising in investing in emerging companies. Prodigy Investment
Partners Limited, the controlling parent entered into a profit share arrangement with a trust resulting in a minority interest.
(l) Dalton Street Capital Pty Ltd - Boutique fund manager specialising in alternative investment strategies. Prodigy Investment Partners
Limited, the controlling parent entered into a profit share arrangement with a trust resulting in a minority interest.
(m) Entrust Private Wealth Management Pty Ltd - Wealth management business providing advice in relation to wealth management and
strategic financial planning support for the entire Euroz Group.
*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
In the prior year on 13 July 2015, Euroz Limited completed the acquisition of Entrust to further enhance its wealth management
capabilities.
Details of the acquisition is as follows:
ASSETS
Cash and cash equivalents
Receivables and other current assets
Deferred tax assets
Intangibles
Goodwill on acquisition
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
Net cash paid for subsidiary:
Cash consideration paid
Less: net cash acquired
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
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.
EUROZ ANNUAL REPORT 2017
063
Notes to the Financial Statements
Note 32. Events subsequent to reporting date
The Directors are not aware of any matter or circumstance subsequent to 30 June 2017 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 for the year
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
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)
2017
$
17,931,361
236,178
1,058,057
(7,661,408)
(3,075,861)
-
-
(305,964)
(69,989)
777,434
1,017,076
2,142,119
2,806,573
299,222
761,136
2016
$
2,561,018
165,793
501,189
5,813,059
(3,992,044)
4,605
(110,023)
(165,052)
(119,189)
(244,134)
(3,478,696)
(321,315)
444,699
418,288
512,609
Net cash from / (used in) operating activities
15,915,934
1,990,807
Note 34. Earnings per share
Basic earnings per share
Diluted earnings per share
Weighted average number of shares used as the denominator
Weighted average number of ordinary shares used as the denominator
in calculating basic earnings per share.
2017
cents
12.30
12.03
2017
number
2016
cents
1.61
1.61
2016
number
157,436,897
159,130,663
Weighted average number of ordinary shares and potential ordinary shares (including
treasury shares) used as the denominator in calculating diluted earnings per share.
160,990,695
159,473,115
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.
064
EUROZ ANNUAL REPORT 2017
Notes to the Financial Statements
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 Limited
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 2016/785 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’.
CLOSED GROUP STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Revenue
Unrealised gain / (loss) on investments
Employee benefits expense
Depreciation and amortisation expenses
Regulatory expenses
Legal, professional and consultancy expenses
Communication expenses
Carrying amount of principal trading securities sold
Other expenses
Profit before income tax expense
Income tax benefit/(expense)
2017
$
2016
$
16,942,023
9,474,137
8,971,560
(5,345,571)
-
(245)
(64,126)
(117,845)
(140)
(3,364,794)
(668,768)
21,697,665
(2,009,047)
18,852
(1,123)
(74,664)
(129,478)
-
(1,030,813)
(620,012)
2,291,328
1,236,982
Profit after income tax expense for the year
19,688,618
3,528,310
Other comprehensive income
Other comprehensive income, net of tax
-
-
Total comprehensive income for the year
19,688,618
3,528,310
EUROZ ANNUAL REPORT 2017
065
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
2017
$
10,047,865
2,656,698
890,398
13,594,961
2016
$
14,447,816
2,447,646
69,526
16,964,988
-
8,876
33,650,199
32,250,002
65,131,136
12,610,616
3,793,328
56,171,351
6,002,396
6,070,694
115,185,279
100,503,319
128,780,240
117,468,307
63,703
3,251,272
8,854,416
12,169,391
171,007
396,787
3,622,711
4,190,505
396,517
396,517
396,352
396,352
12,565,908
4,586,857
116,214,332
112,881,450
103,258,624
105,184,245
2,186,787
10,768,921
1,144,960
6,552,245
116,214,332
112,881,450
066
EUROZ ANNUAL REPORT 2017
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
2017
$
2016
$
13,594,961
118,685,279
132,280,240
13,144,250
103,807,345
116,951,595
12,169,390
396,518
12,565,908
4,027,587
353,774
4,381,361
103,258,624
105,184,246
14,268,921
6,241,028
Share Based Payment Reserve
2,186,787
1,144,960
Total equity
Financial performance
Profit / (loss) for the year
Other comprehensive income
119,714,332
112,570,234
19,699,176
3,464,347
-
-
Total comprehensive income
19,699,176
3,464,347
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 ANNUAL REPORT 2017
067
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 2017 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
Director
Date: 31 August 2017
Jay Hughes
Executive Director
068
EUROZ ANNUAL REPORT 2017
Independent Auditor’s Report
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF EUROZ LIMITED
Report on the Financial Report
Opinion
We have audited the accompanying financial report of Euroz Limited (the company), which comprises the
consolidated statement of financial position as at 30 June 2017, the consolidated statement of profit or loss
and other comprehensive income, the consolidated statement of changes in equity and the consolidated
statement of cash flows for the year then ended, notes comprising a summary of significant accounting
policies and other explanatory information, and the directors’ declaration of the company and the
consolidated entity comprising the company and the entities it controlled at the year’s end or from time to
time during the financial year.
In our opinion the financial report of 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 2017
and of its performance for the year ended on that date; and
ii)
Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we
comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to
obtain reasonable assurance about whether the financial report is free from material misstatement. Our
responsibilities under those standards are further described in the Auditor’s Responsibility section of our
report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Independence
We are independent of the consolidated entity in accordance with the Corporations Act 2001 and the ethical
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for
Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We
have also fulfilled our other ethical responsibilities in accordance with the Code.
Key Audit Matter
Key audit matters are those matters that, in our professional judgement, were of most significance in our
audit of the financial report of the current year. This matter was addressed in the context of our audit of the
financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
this matter. Our description of how our audit addressed the matter is provided in that context.
Page | 56
EUROZ ANNUAL REPORT 2017
069
Independent Auditor’s Report
Carry value and impairment of intangible assets
Why significant
How our audit addressed the key audit matter
At reporting date, the consolidated entity has
capitalised intangible assets including goodwill
totalling $10,208,552 as disclosed in Note 16.
Under Australian Accounting Standards, an entity
shall assess whether at the end of the reporting
period there is any indication that its intangible
assets are impaired. If any such indication exists,
the entity shall estimate the recoverable amount
of the asset. At year end, the consolidated entity
has concluded that there were no impairment
triggers. As a
impairment was
result no
recognised during the year.
The assumptions of indicators of impairment are
highly judgemental and include modelling key
assumptions and estimates based on past and
current performance that may be impacted by
future performance and economic conditions.
judgements and estimates
Key assumptions,
used in the consolidated entity’s assessment of
impairment of intangible assets are set out in the
financial report in Note 2 (iv) and (v).
We evaluated the assumptions, methodologies and
conclusions used by the consolidated entity in
particular, those relating to the determination of
each Cash Generating Unit (“CGU”), forecast
inflows and inputs used to formulate them.
This included assessing the reasonableness of the
significant assumptions
the discount
rates adopted in the consolidated entity’s models
and performing sensitivity analysis on
the
consolidated entity’s inputs.
including
the
We assessed
anticipated future inflows from each CGU.
reasonableness of
the
We also considered the adequacy of the financial
report disclosures concerning
judgemental
nature of the consolidated entity’s assessment of
impairment of these intangible assets. These key
assumptions, judgements and estimates are set
out in the financial report in Note 2 (iv) and (v).
the
Other Information
Other information is financial and non-financial information in the annual report of the consolidated entity
which is provided in addition to the Financial Report and the Auditor’s Report. The directors are responsible
for Other Information in the annual report.
The Other Information we obtained prior to the date of this Auditor’s Report was the Director’s report. The
remaining Other Information is expected to be made available to us after the date of the Auditor’s Report.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, the auditor does
not and will not express an audit opinion or any form of assurance conclusion thereon, with the exception of
the Remuneration Report.
In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In
doing so, we consider whether the Other Information is materially inconsistent with the Financial Report or
our knowledge obtained in the audit, or otherwise appears to be materially misstated.
We are required to report if we conclude that there is a material misstatement of this Other Information in
the Financial Report and based on the work we have performed on the Other Information that we obtained
prior the date of this Auditor’s Report we have nothing to report.
Directors’ Responsibilities for the Financial Report
The Directors of the company are responsible for the preparation of the financial report that gives a true and
fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such
internal control as the Directors determine is necessary to enable the preparation of the financial report that
gives a true and fair view and is free from material misstatement, whether due to fraud or error. In Note 1,
the Directors also state, in accordance with Australian Accounting Standard AASB 101 Presentation of
Financial Statements, that the financial report complies with International Financial Reporting Standards.
Page | 57
070
EUROZ ANNUAL REPORT 2017
Independent Auditor’s Report
In preparing the financial report, the Directors are responsible for assessing the consolidated entity’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and using a
going concern basis of accounting unless the Directors either intend to liquidate the consolidated entity or to
cease operations, or have no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our responsibility is to express an opinion on the financial report based on our audit. Our objectives are to
obtain reasonable assurance about whether the financial report as a whole is free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Australian Auditing Standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they
could reasonably be expected to influence the economic decisions of users taken on the basis of this
financial report.
As part of an audit in accordance with Australian Auditing Standards, we exercise professional judgement
and maintain professional scepticism throughout the audit.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial report.
The procedures selected depend on the auditor’s judgement, including assessment of the risks of material
misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the
auditor considers internal control relevant to the entity’s preparation of the financial report that gives a true
and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the entity’s internal control.
The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness
of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial
report.
We conclude on the appropriateness of the Directors’ use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions
that may cast significant doubt on the consolidated entity’s ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the
related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future
events or conditions may cause the consolidated entity to cease to continue as a going concern.
We evaluate the overall presentation, structure and content of the financial report, including the disclosures,
and whether the financial report represents the underlying transactions and events in a manner that
achieves fair presentation.
We obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the consolidated entity to express an opinion on the financial report. We are responsible for
the direction, supervision and performance of the audit. We remain solely responsible for our audit opinion.
We communicate with the Directors regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we identify
during our audit.
Page | 58
EUROZ ANNUAL REPORT 2017
071
Independent Auditor’s Report
The Auditing Standards require that we comply with relevant ethical requirements relating to audit
engagements. We also provide the Directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters
that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the Directors, we determine those matters that were of most
significance in the audit of the financial report of the current period and are therefore key audit matters. We
describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the
matter or when, in extremely rare circumstances, we determine that a matter should not be communicated
in our report because the adverse consequences of doing so would reasonably be expected to outweigh the
public interest benefits of such communication.
Report on the Remuneration Report
Opinion
We have audited the Remuneration Report included in the directors’ report for the year ended 30 June
2017.
In our opinion, the Remuneration Report of Euroz Limited for the year ended 30 June 2017 complies with
section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration
Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an
opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing
Standards.
PKF MACK
SIMON FERMANIS
PARTNER
31 AUGUST 2017
WEST PERTH
Page | 59
072
EUROZ ANNUAL REPORT 2017
Shareholder information
Ordinary Shares at 31 August 2017
(a) Distribution of Shareholders
Analysis of number of shareholders by size of holding:
Range
1-1,000
1,001-5000
5,001-10,000
10,001-100,000
100,001 Over
Rounding
Total
Holders
298
421
240
611
185
Units
115,853
1,262,458
1,915,673
21,032,283
136,663,115
% Units
0.07
0.78
1.19
13.06
84.89
0.01
1,755
160,989,382
100.00
(b) Top HOLDERS
The twenty largest holders of ordinary fully paid shares are listed below:
No
Shareholder
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
MR JAY EVAN DALE HUGHES
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
MRS CATHERINE PATRICIA MCKENZIE
J P MORGAN NOMINEES AUSTRALIA LIMITED
ICE COLD INVESTMENTS Pty Ltd
CPU SHARE PLANS Pty Ltd
MR ANDREW MCKENZIE + MRS CATHERINE MCKENZIE
ICE COLD INVESTMENTS Pty Ltd
BNP PARIBAS NOMINEES Pty Ltd HUB24 CUSTODIAL SERV LTD DRP
MR SIMON DAVID YEO + MRS JENNIFER DALE YEO
MR JAY HUGHES + MRS LINDA HUGHES
JEUNE Pty Ltd
MR ROBERT HIRZEL BLACK
ICON HOLDINGS Pty Ltd
WESTRADE RESOURCES Pty Ltd
MRS MELANIE JANE CHESSELL
BNM HOLDINGS Pty Ltd
ICE COLD INVESTMENTS Pty Ltd
MRS CATHERINE ELIZABETH KANE
20
CITICORP NOMINEES PTY LIMITED
Total
Remaining Holders Balance
Total
Shares
7,560,000
6,869,042
5,950,000
5,825,660
4,000,000
3,955,265
3,772,392
3,202,500
3,169,000
3,000,000
2,950,031
2,900,000
2,865,000
2,480,151
2,147,269
2,070,272
2,020,100
2,000,000
2,000,000
1,984,883
%
4.70
4.27
3.70
3.62
2.48
2.46
2.34
1.99
1.97
1.86
1.83
1.80
1.78
1.54
1.33
1.29
1.25
1.24
1.24
1.23
70,721,565
43.93
90,267,817
56.07
160,989,382
100.00
EUROZ ANNUAL REPORT 2017
073
Euroz Limited Contact Details
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 3
20 Bond Street
SYDNEY NSW 2000
FLINDERS INVESTMENT PARTNERS PTY LTD
Level 15
385 Bourke Street
MELBOURNE
VIC 3000
DALTON STREET CAPITAL PTY LTD
Level 3
20 Bond 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
074
EUROZ ANNUAL REPORT 2017
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 Limited
euroz.com
ACN 000 364 465