More annual reports from Euroz Limited:
2023 ReportPeers and competitors of Euroz Limited:
Curtis Banks Group PLCA N N U A L
R E P O R T
2 0 2 0
EUROZ LIM ITED
E U R O Z I S A D I V E R S I F I E D
F I N A N C I A L S E R V I C E S C O M P A N Y
ANNUAL RE PORT 2020
1
F I N A N C I A L Y E A R 2 0 2 0
H I G H L I G H T S
GROUP FUM
MARKET CAPITALISATION
DIVIDENDS
FULLY FRANKED DIVIDENDS IN 20 YEARS
CASH & INVESTMENTS
NET LOSS AFTER TAX
1. As at 30 June 2020
$1.55b
$166.58m
7.75cps
$235m
$111m
-$1.35m
2
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CONTENTS
PAGE
CORPORATE DIRECTORY
Corporate Directory
Executive Chairman’s Report
Euroz Limited Board Of Directors
Euroz Group Structure
3
4
8
10
Euroz Securities Limited – Managing Director’s Report 12
Corporate Transactions
Euroz Securities Limited – Director Profiles
Entrust Wealth Management
Westoz Funds Management
Euroz Charitable Foundation
Financial Report
Additional Information
Euroz Limited Contact Details
13
14
17
18
20
23
84
86
REGISTERED OFFICE AND
PRICIPAL PLACE OF BUSINESS
Level 18 Alluvion
58 Mounts Bay Road
PERTH WA 6000
Telephone:
Facsimile:
Email:
+61 8 9488 1400
+61 8 9488 1477
info@euroz.com
SHARE REGISTRY
Computershare Investor
Services Pty Ltd
Level 11
172 St Georges Terrace
PERTH WA 6000
Telephone:
1300 787 575
AUDITORS
PKF Perth
Chartered Accountants
Level 4
35 Havelock Street
WEST PERTH WA 6005
Telephone:
+61 8 9426 8999
BANKERS
Westpac Banking Corporation
109 St George’s Terrace
PERTH WA 6000
SECURITIES EXCHANGE LISTINGS
Euroz Limited shares are listed
on the Australian Securities Exchange
(ASX: EZL)
WEBSITE ADDRESS
www.euroz.com
CORPORATE GOVERNANCE STATEMENT
www.euroz.com/investor-relations/corporate-governance
BOARD OF DIRECTORS
Andrew McKenzie
Executive Chairman
Jay Hughes
Executive Director
Greg Chessell
Executive Director
Russell Kane
Executive Director
Simon Yeo
Executive Director
Anthony Brittain
Executive Director
Robert Black
Executive Director
COMPANY SECRETARY
Anthony Hewett
ANNUAL RE PORT 2020
3
C H A I R M A N ’ S
R E P O R T
OUR IMPENDING MERGER
WITH HARTLEYS WILL
DELIVER POSITIVE OUTCOMES
FOR SHAREHOLDERS AND
CLIENTS ALIKE.
Our established Euroz Securities,
Entrust Wealth Management and
Westoz Funds Management businesses
performed well in a volatile market
and contributed to solid underlying
profitability of $6.5 million.
Our headline profitability can be
summarised as follows: Underlying
“cash” profits of approximately $6.5
million plus $0.3 million “non-cash”
after tax profits from the mark-to-
market of investments were offset by
-$8.2 million “non-cash” after tax losses
(mostly relating to Prodigy closure
costs) resulting in a $1.35 million net
loss after tax attributable to members.
Solid underlying cash profitability and
the realisation of some of our fund
investments enabled your Directors to
declare and pay a final fully franked
dividend of 6 cents per share (cps)
which combined with the interim
dividend of 1.75 cps brings the full year
dividend to 7.75 cps (previous year
6.75 cps).
4
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“
Solid underlying cash profitability and the realisation of some
of our fund investments enabled your Directors to declare and
pay a final fully franked dividend of 6 cents per share (cps).
“
The emergence of COVID-19 saw a
shift in how Euroz and its businesses
approached their activities. Whilst the
implementation of travel restrictions
and social distancing meant a shift to
remote working arrangements and
virtual client and investor interactions,
our strong culture of remote working
and ability to respond quickly to
changing circumstances meant that
overall engagement remained high and
the services we provided to our clients
did not change. Volatility in markets
saw Euroz Securities record improved
brokerage through March and April as
investors sought to take advantage of
the change in conditions.
Group Funds Under Management
(FUM) remained steady at $1.55 billion
($1.58 billion last year). FUM growth
was impacted to a degree by the
emerging COVID-19 pandemic and the
removal of approximately $119 million
of Prodigy related FUM. The closure of
the Prodigy businesses was completed
in June 2020 and all of the funds were
either closed or transferred to
new managers.
Overall, COVID-19 had minimal impact
on the services offered by Euroz other
than how we delivered them to our
clients. Declines in markets during
the early months of the second half
of FY20 saw a logical decrease in
the market value of our FUM and
impacted revenues in Entrust Wealth
Management and Westoz Funds
Management in the short term,
however a resurgent market in the last
quarter saw these drivers recover to
more normalised levels.
On 19 June 2020, Euroz announced
that it had entered into an agreement
to acquire 100% of the issued capital
in Hartleys Limited (Hartleys). Since
that date, the takeover bid process has
been completed and the process of
merging Euroz Securities and Hartleys
Limited (renamed Euroz Hartleys
Limited) is well underway. The merger
of the two businesses will create a
significantly stronger company with
a solid balance sheet, critical scale,
sustainable revenues and significant
cost and operational synergies. We
strongly believe the merger will deliver
positive outcomes for clients and
shareholders alike and positions the
combined business well for the future.
Andrew McKenzie
Executive Chairman
ANNUAL RE PORT 2020
5
E U R O Z L I M I T E D
P R O F I T B E F O R E T A X &
N E T P R O F I T A F T E R T A X
YEAR
Profit before tax
Net profit after tax
attributable to members
E U R O Z L I M I T E D
D I V I D E N D H I S T O R Y
YEAR
1H Dividend per share
2H Dividend per share
EUROZ LIM ITED
N
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6
-20.0-10.00.010.020.030.040.050.060.0Profit Before TaxNet Profit After Tax1920181716151413121110090807060504030201$ million$ MILLIONCENTS PER SHARECENTS PER SHAREYEAR1H Dividend per shareYEARProfit before tax0.05.010.015.020.025.030.02H Dividend Per Share1H Dividend Per Share19201817161514131211100908070605040302010.020.040.060.080.0100.0Cents Per Share1920181716151413121110090807060504030201Cents Per ShareEuroz Limited NTA Per ShareYEAREntrust ($969m)OZG ($71m)WIC ($143m)Euroz ($370m)$1.55 billion in FUM in Funds and Wealth ManagementNote 1. PFM ($24m) Precision Funds Management removed from 01/07/2017 as no longer a corporate authorised representativeNote 2. Removal of Flinders Investment Partners, Dalton Street Capital and Equus Point Capital FUMEUROZ LIMITED PROFIT BEFORE TAX & NET PROFIT AFTER TAXEUROZ LIMITED DIVIDEND HISTORYEUROZ LIMITED NTA PER SHAREFUM (A$m)YEAREuroz Securities Wealth Management ($370m)Entrust Wealth Management ($969m)Funds Management ($214m)DEC 15JUN 16DEC 16JUN 17DEC 17JUN 18DEC 18DEC 19JUN 19JUN 201,2001,4001,6002004006008001,000Net profit after tax attributable to members2H Dividend per shareEUROZ GROUP FUNDS UNDER MANAGEMENT ANNUAL REPORT 2020 1110 EUROZ LIMITED-20.0-10.00.010.020.030.040.050.060.0Profit Before TaxNet Profit After Tax1920181716151413121110090807060504030201$ million$ MILLIONCENTS PER SHARECENTS PER SHAREYEAR1H Dividend per shareYEARProfit before tax0.05.010.015.020.025.030.02H Dividend Per Share1H Dividend Per Share19201817161514131211100908070605040302010.020.040.060.080.0100.0Cents Per Share1920181716151413121110090807060504030201Cents Per ShareEuroz Limited NTA Per ShareYEAREntrust ($969m)OZG ($71m)WIC ($143m)Euroz ($370m)$1.55 billion in FUM in Funds and Wealth ManagementNote 1. PFM ($24m) Precision Funds Management removed from 01/07/2017 as no longer a corporate authorised representativeNote 2. Removal of Flinders Investment Partners, Dalton Street Capital and Equus Point Capital FUMEUROZ LIMITED PROFIT BEFORE TAX & NET PROFIT AFTER TAXEUROZ LIMITED DIVIDEND HISTORYEUROZ LIMITED NTA PER SHAREFUM (A$m)YEAREuroz Securities Wealth Management ($370m)Entrust Wealth Management ($969m)Funds Management ($214m)DEC 15JUN 16DEC 16JUN 17DEC 17JUN 18DEC 18DEC 19JUN 19JUN 201,2001,4001,6002004006008001,000Net profit after tax attributable to members2H Dividend per shareEUROZ GROUP FUNDS UNDER MANAGEMENT ANNUAL REPORT 2020 1110 EUROZ LIMITED
E U R O Z L I M I T E D
N T A P E R S H A R E
E
R
A
H
S
R
E
P
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T
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C
)
m
$
A
(
M
U
F
YEAR
E U R O Z G R O U P
F U N D S U N D E R M A N A G E M E N T
$1.55 billion in FUM in Funds and Wealth Management
1,600
1,400
1,200
1,000
800
600
400
200
Funds
Management
($214m)
Euroz
Securities
($370m)
Entrust
Wealth
Management
($969m)
DEC 15
JUN 16
DEC 16
JUN 17
DEC 17
JUN 18
DEC 18
JUN 19
DEC 19
JUN 20
Note 1.
PFM ($24m) Precision Funds Management
removed from 01/07/2017 as no longer a corporate
authorised representative
Note 2. Removal of Flinders Investment Partners, Dalton Street
Capital and Equus Point Capital FUM
YEAR
WIC ($143m)
Euroz ($370m)
OZG ($71m)
Entrust ($969m)
ANNUAL RE PORT 2020
7
-20.0-10.00.010.020.030.040.050.060.0Profit Before TaxNet Profit After Tax1920181716151413121110090807060504030201$ million$ MILLIONCENTS PER SHARECENTS PER SHAREYEAR1H Dividend per shareYEARProfit before tax0.05.010.015.020.025.030.02H Dividend Per Share1H Dividend Per Share19201817161514131211100908070605040302010.020.040.060.080.0100.0Cents Per Share1920181716151413121110090807060504030201Cents Per ShareEuroz Limited NTA Per ShareYEAREntrust ($969m)OZG ($71m)WIC ($143m)Euroz ($370m)$1.55 billion in FUM in Funds and Wealth ManagementNote 1. PFM ($24m) Precision Funds Management removed from 01/07/2017 as no longer a corporate authorised representativeNote 2. Removal of Flinders Investment Partners, Dalton Street Capital and Equus Point Capital FUMEUROZ LIMITED PROFIT BEFORE TAX & NET PROFIT AFTER TAXEUROZ LIMITED DIVIDEND HISTORYEUROZ LIMITED NTA PER SHAREFUM (A$m)YEAREuroz Securities Wealth Management ($370m)Entrust Wealth Management ($969m)Funds Management ($214m)DEC 15JUN 16DEC 16JUN 17DEC 17JUN 18DEC 18DEC 19JUN 19JUN 201,2001,4001,6002004006008001,000Net profit after tax attributable to members2H Dividend per shareEUROZ GROUP FUNDS UNDER MANAGEMENT ANNUAL REPORT 2020 1110 EUROZ LIMITED
B O A R D O F
D I R E C T O R S
EUROZ LIMITED DIRECTORS PROFILES
AN D REW M C K ENZ IE
EXECU TIV E CHAIRMA N
JAY HUGH ES
EXECUTIVE DIRECTOR
Andrew is Executive Chairman of Euroz
Limited, Euroz Securities Limited and the
Euroz Charitable Foundation Pty Ltd.
Andrew is an Executive Director of Prodigy
Investment Partners Limited and a board
member of the PLC Foundation and the Perth
Children’s Hospital Foundation. He is a former
board member of Westoz Funds Management
Pty Ltd, Dalton Street Capital Pty Ltd, Flinders
Investment Partners Pty Ltd, Equus Point
Capital Pty Ltd and the Stockbrokers and
Financial Advisers Association of Australia
(SAFAA) and a former PLC Council member.
Andrew holds a Bachelor of Economics from
the University of Western Australia (UWA) and
is an individual member (MSAFAA) of SAFAA.
Jay has worked in stockbroking since 1986,
starting his career on the trading floor.
He is Non-Executive Chairman of Westoz
Funds Management Pty Ltd, Westoz
Investment Company Limited and Ozgrowth
Limited and an Executive Director of Euroz
Securities Limited and Prodigy Investment
Partners Limited. He is an Institutional Adviser
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 is
an individual member (MSAFAA) of SAFAA.
S IM O N YEO
EXECU TIV E DIRECTOR
R OB ERT BLACK
EXECUTIVE DIRECTOR
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.
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
a member of our Institutional Sales division
and is responsible for servicing domestic and
international institutions. Rob is a Director
of Entrust Wealth Management. Rob holds
a Bachelor of Business in Finance and
Accounting from Edith Cowan University and
is a Graduate of the Australian Institute of
Company Directors (AICD).
8
EUROZ LIM ITED
RUSSE LL KAN E
E X EC UTIVE D IR E CTOR
A NT HON Y BR IT TAI N
EXECUTIVE DIRECTOR
Anthony is the Chief Operating and Financial
Officer and an Executive Director of Euroz
Limited, Euroz Securities Limited, Entrust
Wealth Management Pty Ltd and Prodigy
Investment Partners Limited. He is a former
board member of Dalton Street Capital Pty
Ltd, Flinders Investment Partners Pty Ltd
and Equus Point Capital Pty Ltd. Prior to
joining Euroz, Anthony spent 7 years with
Hartleys Limited and JDV. Anthony started
his career with KPMG (and antecedent firm
Touche Ross) and then worked in London
and Singapore for 7 years with a UK fund
manager, Newton Investment Management
during which it was acquired by BNY Mellon.
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 an individual member (MSAFAA)
of SAFAA. Anthony is a member of the Audit
and Risk Committee. Anthony is a member
of the professional conduct tribunal of the
SAFAA and is a panel member of the Markets
Disciplinary Panel (MDP) of the Australian
Securities and Investment Commission (ASIC).
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.
GREG CHESSEL L
E X EC UTIVE D IR E CTOR
Greg is a Director in the Corporate Finance
Team of Euroz Securities, a role he has
performed for three years. Greg was previously
Head of Research at Euroz, a position he held
since Euroz Securities commenced operations
in 2000. Greg worked as geologist in WA for
10 years 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.
ANNUAL RE PORT 2020
9
E U R O Z G R O U P
S T R U C T U R E
E U R O Z L I M I T E D
ASX CODE: EZL
S T O C K B R O K I N G ,
C O R P O R A T E F I N A N C E A N D
W E A LT H M A N A G E M E N T
F U N D S
M A N A G E M E N T
EUROZ
SE CUR ITIES
100%
E NTRU ST
WE ALTH
M ANAG EM ENT
100%
WESTOZ
FU N DS
MAN AGEMEN T
100%
MANAGER
OZG ROWTH
LIMITE D
ASX CODE: OZG
40.58% Equity Stake
WESTOZ
IN VE STMENT
COMPA NY LIMITED
ASX CODE: WIC
26.25% Equity Stake
10
EUROZ LIM ITED
ANNUAL RE PORT 2020
11
EUROZ SECURITIES LIMITED
M A N A G I N G D I R E C T O R ’ S
R E P O R T
THE 2020 YEAR WAS AT
TIMES A VOLATILE YEAR FOR
EUROZ SECURITIES. OUR TEAM
DELIVERED A NET PROFIT
AFTER TAX OF APPROXIMATELY
$6.5 MILLION, SIGNIFICANTLY
UP ON THE PREVIOUS YEAR’S
RESULT OF $4.7 MILLION.
This was on the back of an increase in
brokerage revenues of over 30%, an
increase in Funds Under Management
(FUM) to $370 million, and Equity Capital
Market (ECM) fees generated on the back
of over $1 billion of new equity raised
for clients over the year (vs $469 million
raised during the year before).
This capital raising figure was a result
of a number of high calibre clients
entrusting Euroz Securities with their
equity financing requirements, including
Carnarvon Petroleum, Orecorp,
Omni Bridgeway, Mincor Resources,
NRW Holdings, Saltlake Potash,
Emerald Resources, Cosol Ltd, AFG,
Chalice Gold Mines, Legend Mining,
and Aeris Resources.
Like every other business globally, the
Covid 19 pandemic bought incredible
challenges for both our business, our staff
members and their families.
As a testament to all our staff, and in
particular our operations team, many
of us seamlessly evolved to remote
working conditions as required, where
we continued to operate as normal and
provide sound advice to all our clients
over an incredibly tumultuous period in
global equity markets.
These results can only be generated
through the diligent and ongoing
efforts of our talented 67 staff members
across our 4 primary departments of
Private Wealth Management, Research,
Corporate Finance, Institutional Sales,
and Operations. The whole team lifted
over the year and the services provided
to our clients and the subsequent
financial results delivered are a pleasing
measure of this, and I genuinely thank
and congratulate all staff for what was
achieved during the year.
The upcoming merger of Euroz Securities
with Hartleys is a step change for our
business going forward. This exciting
development, which continues a
consolidation theme following our earlier
mergers with Blackswan Equities and
Entrust Private Wealth Management,
will see Euroz Hartleys Limited become
the most significant and dominant
Stockbroking, Wealth Management and
Corporate Finance firm in the state. All
clients will benefit from an increased
and more diversified service offering,
and shareholders will benefit from
the combined synergies and earnings
potential from the new group.
I look forward to reporting on the
progress of the merged group in the
periods to come.
Rob Black
Managing Director
12
EUROZ LIM ITED
EUROZ SECURITIES LIMITED
C O R P O R A T E
T R A N S A C T I O N S
SUPPORTING OUR CLIENTS ON MAJOR TRANSACTIONS DURING FY2020.
P L A C E M E N T
$79 MILLION
J O I N T L E A D
M A N A G E R
Euroz Securities Ltd
JUL 19
P L A C E M E N T
$13.3 MILLION
L E A D M A N A G E R &
B O O K R U N N E R
P L A C E M E N T
& A N R E O
$139 MILLION
J O I N T L E A D
M A N A G E R
T W O - T R A N C H E
P L A C E M E N T
$17 MILLION
C O - L E A D M A N A G E R &
J O I N T B O O K R U N N E R
Euroz Securities Ltd
Euroz Securities Ltd
Euroz Securities Ltd
AUG 19
OCT 19
NOV 19
P L A C E M E N T
P L A C E M E N T
$30 MILLION
J O I N T L E A D M A N A G E R
& J O I N T B O O K R U N N E R
$120 MILLION
C O - M A N A G E R
T W O - T R A N C H E
P L A C E M E N T
$23.5 MILLION
J O I N T L E A D M A N A G E R
T W O - T R A N C H E
P L A C E M E N T
$75 MILLION
L E A D M A N A G E R &
B O O K R U N N E R
Euroz Securities Ltd
Euroz Securities Ltd
Euroz Securities Ltd
Euroz Securities Ltd
NOV 19
NOV 19
DEC 19
JAN 20
I P O
$12 MILLION
L E A D M A N A G E R
& U N D E R W R I T E R
Euroz Securities Ltd
T W O - T R A N C H E
P L A C E M E N T
$20 MILLION
J O I N T L E A D
M A N A G E R
P L A C E M E N T
& A N R E O
$60 MILLION
C O - L E A D M A N A G E R
P L A C E M E N T
$30 MILLION
J O I N T L E A D M A N A G E R
& B O O K R U N N E R
Euroz Securities Ltd
Euroz Securities Ltd
Euroz Securities Ltd
JAN 20
APR 20
MAY 20
MAY 20
P L A C E M E N T
P L A C E M E N T
$13.5 MILLION
L E A D M A N A G E R
& B O O K R U N N E R
$20 MILLION
L E A D M A N A G E R
Euroz Securities Ltd
Euroz Securities Ltd
P L A C E M E N T
& A N R E O
$40 MILLION
J O I N T L E A D M A N A G E R ,
B O O K R U N N E R &
U N D E R W R I T E R
Euroz Securities Ltd
T W O - T R A N C H E
P L A C E M E N T & S P P
$60 MILLION
L E A D M A N A G E R
& U N D E R W R I T E R
Euroz Securities Ltd
MAY 20
JUN 20
JUN 20
JUN 20
ANNUAL RE PORT 2020
13
E U R O Z
S E C U R I T I E S
DIRECTORS PROFILES
ANDR EW CLAYTON
BR IA N B ERESFO R D
CA MER ON MUR R AY
EXEC UTIV E DIR E CTOR
EXEC UTIVE DIRECTOR
EXECUTIVE DIRECTOR
Andrew is a Research Analyst specialising
in resource companies. He worked as a
geologist for six years in both exploration
and mine roles in a variety of commodities
including gold and graphite. He has been
in the stockbroking industry since 1995.
Andrew holds a Bachelor of Science
(Hons) in Geology from Melbourne
University as well as a Diploma in Finance
from FINSIA.
HEAD OF CORPORATE FINANCE
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.
Cameron has over 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.
Cameron is an accredited Designated
Trading Representative (DTR) and
Responsible Executive (RE) of Euroz
Securities. Cameron has completed
and successfully passed the FASEA
professional qualifications required to act
as a financial adviser.
BRIAN BATES
BE N STATHA M
CH RI S WEB STER
EXEC UTIV E DIR E CTOR
EXEC UTIVE DIRECTOR
Brian has over 20 years of experience
in stockbroking, investment and
superannuation management. Brian holds
a Bachelor of Commerce from UWA, and
was previously a chartered accountant
before moving in to investment
management. Brian is a senior member
of the Private Client Division and offers
a comprehensive wealth management
service to high net worth individuals.
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 in Applied Finance
and Investment from FINSIA.
EXECUTIVE DIRECTOR
HEAD OF PRIVATE CLIENTS
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 Managing Director of Entrust
Wealth Management and a Director of the
Euroz Charitable Foundation. Chris holds
a Bachelor of Commerce from UWA, a
Graduate Diploma of Applied Finance and
a Graduate Diploma of Applied Corporate
Governance. Chris is an individual
member (MSAFAA) of SAFAA. Chris has
completed and successfully passed the
FASEA professional qualifications required
to act as a financial adviser.
14
EUROZ LIM ITED
DAVI D RI LEY
JA MES MACK IE
N ICK MCGLEW
E X EC UTIVE D IR E CTOR
EXEC UTIVE DIRECTOR
EXECUTIVE DIRECTOR
David has worked in the Euroz Corporate
Finance team since 2012. Prior to joining
Euroz, David was a senior consultant at
Ernst & Young. David is a member of the
Chartered Accountants Australia and
New Zealand (CA) and holds a Graduate
Diploma of Applied Finance through
Kaplan Professional Education. David has
also completed a Graduate Diploma of
Mineral Exploration Geoscience from the
Curtin University School of Mines and also
holds a Bachelor of Commerce/Science
from the University of Western Australia.
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 in Applied Finance and
Investment from FINSIA.
Nick has over 25 years’ experience in
mergers, acquisitions, equity raisings,
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
(First Class Honours) and a Master of
Laws from New York University. Nick is a
senior member of our Corporate Finance
Division.
GAVI N ALLEN
E X EC UTIVE D IR E CTOR
Gavin is a Research Analyst with 16
years experience specialising in detailed
analysis and research of mid cap industrial
companies. Prior to joining Euroz, Gavin
held a senior position 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.
JO N B ISHO P
EXEC UTIVE DIRECTOR
HEAD OF RESEARCH
PE TER SC HWAR ZB AC H
EXECUTIVE DIRECTOR
CO-HEAD OF INSITUTIONAL SALES
Jon is the Head of Euroz’ Research
Department. His role as an analyst is
focused on the mining, renewable energy
and oil and gas sectors. He has more
than 10 years technical and commercial
experience within the petroleum and
minerals industries and over 13 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.
Peter is the Co-Head of the Institutional
Sales Division and has been working in the
stockbroking industry since 2006. Peter
has completed a Bachelor of Commerce
from the University of Western Australia
along with a Graduate Diploma in Applied
Finance and Investment from FINSIA.
Peter is also a member of the Institute of
Chartered Accountants Australia and New
Zealand and prior to joining Euroz was a
senior accountant at a Perth Chartered
Accounting firm.
ANNUAL RE PORT 2020
15
E U R O Z
S E C U R I T I E S
DIRECTORS PROFILES
PAUL COOPER
TI M BU NNEY
EXEC UTIV E DIR E CTOR
EXEC UTIVE DIRECTOR
Paul has background in both stockbroking
and investment banking. Prior to equities
dealing he spent time based in Sydney
and Singapore providing structured debt
financing to resource companies. Paul
holds a Bachelor of Commerce, as well
as furthering his education through the
Chartered Financial Analyst program and
Chinese language studies.
CO -HEAD OF INS ITUT IONAL SALE S
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.
RYAN STEWA RT
EXECUTIVE DIRECTOR
Ryan has worked in the broking industry
for 19 years and is a Senior Private Client
Advisor. He commenced at Euroz in 2003
and in that time has built a predominantly
high net worth private client base.
TIM LYONS
EXEC UTIV E DIR E CTOR
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 acquired by Macquarie Bank.
16
EUROZ LIM ITED
E N T R U S T W E A L T H M A N A G E M E N T
D I R E C T O R S
ENTRUST DIRECTORS
ENTRUST WEALTH MANAGEMENT
PTY LTD (ENTRUST) WAS
FOUNDED IN 2002. ENTRUST WAS
ACQUIRED BY EUROZ LIMITED IN
JULY 2015 AND PROVIDES HIGH
NET WORTH, FAMILY OFFICE, NOT-
FOR-PROFIT & SMSF CLIENTS WITH
TAILORED STRATEGIC FINANCIAL
PLANNING & INVESTMENT ADVICE.
ENTRUST HAS CLIENT FUNDS
UNDER MANAGEMENT (FUM) OF
$969M AT 30 JUNE 2020.
During the 2020 financial year (FY20) the
management teams focus was on growing
the FUM and we are pleased to report
growth in FUM of 9.9% for the financial
year despite a significant disruption to
markets from Covid-19.
Through a combination of revenue growth
and strong focus on cost reduction,
Entrust reported an improvement in
profitability versus the prior year.
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.
We continue to pursue bolt on
acquisitions and have evaluated numerous
adviser acquisition opportunities during
the period.
AN D REW F RY
EXECUTIVE DIRECTOR
B RA D GO RDO N
EXECUTIVE DIRECTOR
Andrew joined Entrust Wealth
Management Pty Ltd in January 2003
and has previously served as Managing
Director and Executive Chairman. He
holds a Bachelor of Commerce from
Murdoch University and was admitted as
a Chartered Accountant by the Chartered
Accountants Australia and New Zealand
(CA) in 1996.
Brad joined Entrust 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 over 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 JONES
E X EC UTIVE D IR E CTOR
D UNCA N MACK IN TOSH
EXECUTIVE DIRECTOR
PH IL GEOR GE
EXECUTIVE DIRECTOR
Rowan joined Entrust 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 from FINSIA and he is
a Self Managed Superannuation Fund
Specialist adviser 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.
Rowan has completed and successfully
passed the FASEA professional
qualifications required to act as a
financial adviser.
Duncan joined Entrust Wealth
Management Pty Ltd in July 2015 and
brings over 20 years of experience in
the industry. Duncan performed the role
of Chief Investment Officer for Entrust
before stepping down to focus on his
client base. He is a CFA Charterholder and
holds a Bachelor of Commerce from the
University of Western Australia. Duncan
has also completed a Graduate Diploma
of Applied Finance and a Diploma of
Financial Planning.
After 10 years with Macquarie Bank,
Phil joined with Entrust Wealth
Management Pty Ltd in 2014. He holds
a Bachelor of Science from University
of Western Australia (UWA) and a
Graduate Diploma in Applied Finance
and Investment from the Securities
Institute of Australia (SIA).
ANNUAL RE PORT 2020
17
F U N D S M A N A G E M E N T
D I R E C T O R S
WESTOZ DIRECTORS
WESTOZ FUNDS MANAGEMENT
PTY LTD (WFM) WAS
ESTABLISHED IN 2005 AND IS
RESPONSIBLE FOR $215 MILLION
OF FUNDS UNDER MANAGEMENT
AT 30 JUNE 2020.
WFM manages the portfolios of two
listed investment companies, Westoz
Investment Company Limited (WIC)
and Ozgrowth Limited (OZG). WIC
commenced its investment activities in
2005 and OZG commenced in 2008.
Each company’s objective is to generate a
positive return over the medium to long-
term, regardless of the movements of the
broader share market, from an actively
managed portfolio of small to mid-cap
ASX listed investments and provide
shareholders with a consistent stream
of dividends. Stocks selected within the
portfolios are generally outside the Top
100 and will typically have a connection
to Western Australia whether it be
through their assets, operations and/or
management.
WIC and OZG have paid $167 million in
fully franked dividends to shareholders
since inception.
DERMOT WOODS
EXEC UTIV E DIR E CTOR
P HI LL I P REES
NON-EXECUTIVE DIRECTOR
Mr Dermot Woods is an Executive
Director of Westoz Funds Management
Pty Ltd and oversees the construction
of its investment portfolios. 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.
In August 2018 Mr Philip Rees transitioned
to a Non-Executive Director role. Prior
to this, Mr Philip Rees was an Executive
Director of Westoz Funds Management
Pty Ltd and was responsible for the
operation and development of the
manager’s business. Mr Rees has worked
in a range of roles focused on Australian
investment markets for the last 30
years. He has previously managed large
institutional investment portfolios and
developed several early stage investment
opportunities until he joined Westoz in
April 2005. Mr Rees remains actively
engaged within WFM and is on the
Investment Committee.
18
EUROZ LIM ITED
ANNUAL RE PORT 2020
19
E U R O Z C H A R I T A B L E
F O U N D A T I O N
20
EUROZ LIM ITED
IN 2006, THE EUROZ CHARITABLE
FOUNDATION WAS FORMED IN
A PRIVATE ANCILLARY FUND
STRUCTURE THROUGH WHICH
EUROZ AND ITS STAFF COULD
MAKE DONATIONS, INVEST THESE
FUNDS, MAKE DISTRIBUTIONS
TO WORTHY CHARITIES AND
CONTRIBUTE TO OUR BROADER
COMMUNITY. SINCE ITS
INCEPTION, THE FOUNDATION
HAS DONATED IN EXCESS OF
$2 MILLION TO OVER 100
INDIVIDUAL CHARITIES AND
WORHTY CAUSES.
In mid-February Euroz Securities
donated $221,949 to the Foundation
after holding its second and very
successful Commission for a Cause Day.
The Foundation donated an additional
$3,051 towards the total amount to bring
the final figure to $225,000.
This amount was divided equally
between Perth Children’s Hospital
Foundation (PCHF), Street Connect and
the Minderoo Foundation – Fire Fund
who all received a total of $75,000 each.
Perth Children’s Hospital Foundation
are deploying their funds to support
medical research into the early
intervention to prevent respiratory illness
in children. PCHF continues to strive to
make a positive impact on the enormous
burden of childhood respiratory disease
in Australia.
Street Connect was able to successfully
secure a replacement bus for their
homeless outreach program. Street
Connect is a program that aims to make
connections with marginalised young
people who gather regularly in public
places and engage them in positive
life changes.
Minderoo Foundation – Fire Fund have
continued to support the rebuilding
of communities ravaged by the
2019/2020 bushfires. Minderoo have
deployed temporary accommodation
units on the ground across Kangaroo
Island and NSW and have funded over
300 volunteers to help with clean-up
activities across NSW, Victoria and
South Australia.
The emergence of the COVID-19
pandemic in Australia had an almost
immediate effect on the operations
of charities within Western Australia.
The controls put in place by the State
government also meant the cancellation
of a number of key events around Perth
including the Euroz Big Walk for the
Perth Children’s Hospital Foundation.
It is likely that the impact of the COVID-19
pandemic within the charitable space will
be felt for a significant period of time and
our Foundation will continue to support
worthy local charities during these
difficult times.
The Euroz Charitable Foundation has
been delighted to support the following
charities in recent years:
ANNUAL RE PORT 2020
21
22
EUROZ LIM ITED
2 0 2 0
F I N A N C I A L
R E P O R T
For the year ended 30 June 2020
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
PAGE
24
38
39
41
42
43
44
79
80
ANNUAL R EPORT 2020
ANNUAL RE PORT 2020
23
23
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2020
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 2020.
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
Greg Chessell
Russell Kane
Simon Yeo
Anthony Brittain
Robert Black
COMPANY SECRETARY
Anthony Hewett continues in his role as Company Secretary. Mr Hewett is a Chartered Secretary and holds a Master of Business Law
(MBusLaw) from Curtin University and a Graduate Diploma in Applied Corporate Governance (GradDipACG) from the Governance
Institute of Australia. Mr Hewett is a Fellow of the Institute of Chartered Secretaries and Administrators (FCSA), a Fellow of the Governance
Institute of Australia (FGIA), a Master Member (MSAFAA) of the Stockbrokers and Financial Advisers Association of Australia (SAFAA)
and a member of the Australian Institute of Company Directors (AICD).
PRINCIPAL ACTIVITIES
During the year the principal activities of Euroz consisted of:
(a)
Stockbroking & Corporate Finance;
(b)
Funds Management;
(c) Wealth Management; and
(d)
Investing.
REVIEW OF RESULTS
The consolidated entity reports a modest -$1.4 million net loss for the financial year ended 30 June 2020 (2019: net loss $0.1 million).
This result represents basic loss per share of $0.87cents (2019: loss per share of $0.07 cents).
The major factor in this headline loss is the previously reported and mostly “non cash” write downs associated with the closure of the
Prodigy business. The Group’s headline profitability can be summarised as follows: Underlying “cash” profits of $6.5 million plus $0.3 million
“non cash” after tax profits from mark-to-market of investments were offset by -$8.2 million “non-cash” after tax losses (mostly relating to
Prodigy closure costs) resulting in a -$1.4 million net loss after tax attributable to members.
Solid underlying cash profitability and the realisation of some of our fund investments enables your Directors to declare and pay a final
fully franked dividend of 6 cents per share (“cps”) which combined with the interim dividend of 1.75 cps brings the full year dividend to
7.75 cps (2019: 6.75 cps).
REVIEW OF OPERATIONS (INCLUDES DISCONTINUED OPERATION)
Stockbroking & Corporate Finance
Principal Trading
Funds Management
Wealth Management
Investment Income
Segment revenues
2020
$
34,475,737
17,983,641
4,119,374
9,087,234
3,655,774
2019
$
29,564,518
16,148,035
4,038,405
8,801,676
2,972,469
Segment results
2020
$
2019
$
5,796,529
(1,477,852)
9,262,456
1,830,264
(11,060,947)
4,074,625
1,940,445
(2,763,869)
2,249,613
(7,510,414)
69,321,760
61,525,103
4,350,450
(2,009,600)
24
EUROZ LIM ITED
REVIEW OF OPERATIONS (CONT’D)
Group Funds Under Management (“FUM”) remained steady at $1.55 billion ($1.58 billion last year). FUM growth was impacted by the
removal of approximately $119 million of Prodigy related FUM and to a degree by the emerging COVID-19 pandemic. Our Euroz Securities
Limited (“Euroz Securities”) business raised $1.05 billion of new equity this financial year for our corporate clients versus $469 million in the
prior period.
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, business
strategies and prospects for future financial years. This information complements and supports the report presented herein.
DISCLOSURE OF OPERATIONS
The consolidated group is principally involved in the following activities:
(a) Stockbroking & Corporate Finance;
(b) Funds Management;
(c) Wealth Management; and
(d) Investing.
Our operations are conducted over several locations with Perth, Western Australia (WA) being our main office. In March 2020, the Group
concluded a strategic review of the investment in Prodigy which resulted in the decision to discontinue the Funds Management operations
in Sydney, New South Wales and Melbourne, Victoria. Details of our operations are outlined below:
(a) Stockbroking & Corporate Finance
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:
-
-
-
-
Company Reports: Detailed analysis on companies as opportunities emerge
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 companies in book format
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
Western Australia’s geographic isolation makes it difficult for institutional investors to maintain close contact with
companies based here - investors can rely on our “on the ground” information
Institutional dealing team “highly focused” on providing the following services:
-
-
-
-
-
Quality advice and idea generation
Efficient execution
Regular company contact
Site visits
Roadshows
ANNUAL RE PORT 2020
25
DIRECTORS’ REPORT (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 DISCLOSURE OF OPERATIONS (CONT’D)
(a) Stockbroking & Corporate Finance (cont’d)
iii.
Private Clients
•
•
•
•
•
•
•
Significant capacity to support new issues and construct quality retail share registers
Substantial “high net worth” client base (s.708 compliant investors)
Exposure to high net worth clients via in-house conferences and one-on-one presentations
Team of highly experienced and qualified private client advisers providing a broader investment offering for clients
of Euroz. Our wealth management service provides strategic investment advice, superannuation advice, investment
management and portfolio administration service
Funds Under Management “FUM” of $370 million (2019: $357 million) with the majority on our in-house portfolio
administration service
Extensive research support - high quality research on WA based resource and industrial companies enable our advisers
to provide quality investment and trading advice
Specialised broking allows:
-
-
Close interaction between research analysts and private client advisers
Timely communication of ideas with clients
•
Sophisticated investors are able to participate in many of our corporate capital raisings
iv.
Corporate Finance
•
•
The corporate finance team is focused on developing strong, long term relationships with our clients
Clients are provided with specialised Corporate Advisory services in:
-
-
-
-
Equity Capital Raisings and Underwriting
Mergers and Acquisitions
Strategic Planning and Reviews
Privatisation and Reconstructions
•
Established track record in raising equity capital via:
-
-
-
Initial Public Offerings (IPO)
Placements
Rights Issues
(b) Funds Management
Westoz Funds Management Pty Ltd (“WFM”) is responsible for managing FUM of $215 million (2019: $227 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.
In the past 15 years, WIC and OZG have returned $167 million in fully franked dividends to their shareholders.
Prodigy Investment Partners Limited (“Prodigy”) was a funds management partnership with Euroz owning 80% and Mr Steve
Tucker, Executive Chairman, owning 20%. In March 2020, the Group concluded a strategic review of the investment in Prodigy which
resulted in the decision to discontinue the following operations:
•
•
•
FIP Management Services Pty Ltd (formerly Flinders Investment Partners Pty Ltd) (“Flinders”)
DSC Investment Management Pty Ltd (formerly Dalton Street Capital Pty Ltd) (“Dalton”)
EPC Investment Management Pty Ltd (formerly Equus Point Capital Pty Ltd) (“Equus”)
Industry headwinds, increasing barriers to entry and an inability to achieve sufficient scale all had a major influence on this decision.
(c) Wealth Management
In July 2015, Euroz acquired Entrust Wealth Management Pty Ltd (“Entrust”) which has a 17-year track record as a leading wealth
management business. The strategy in acquiring Entrust is 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 a modest improvement in funds
under management in line with our growth strategy.
Entrust has a significant high net worth client base with FUM of $969 million (2019: $881 million).
26
EUROZ LIM ITED
DIRECTORS’ REPORT (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 DISCLOSURE OF OPERATIONS (CONT’D)
(d)
Investing
Euroz Limited owns significant shareholdings of 26.25% in WIC and 40.58% in OZG. The investment focus of these funds is on small
to mid-cap ASX securities with a general connection to Western Australia.
DISCLOSURE OF OPERATIONS – PROFIT
Net loss after tax attributable to members was -$1.4 million compared to -$0.1 million in the 2019 financial year. Underlying “cash”
profits of approximately $6.5 million plus $0.3 million “non-cash” after tax profits from the mark-to-market of investments were offset by
-$8.2 million “non-cash” after tax losses (mostly relating to Prodigy closure costs) resulting in a -$1.4 million net loss after tax attributable
to members.
DISCLOSURE OF OPERATIONS – SALES
Revenue has increased by 12.67% to $69.3 million from $61.5 million (inclusive of revenue from discontinued operations). We would
categorise this year’s underlying profitability as a reasonable result in somewhat challenging markets.
(a) Stockbroking & Corporate Finance
Stockbroking and Corporate Finance revenue was up by 16.61% to $34.5 million from $29.6 million. Euroz Securities managed
36 (2019:18) Equity Capital Market (“ECM”) transactions this year raising $1.05 billion (2019: $469 million). FUM growth in our private
client business continues to make progress and was up 3.5% to $369.7 million.
(b) Principal Trading
Revenue from Principal Trading increased by 11.4% to $18 million from $16.1 million.
(c) Funds Management
Revenue from Funds Management increased by 2% to $4.1 million from $4.0 million in the prior year. Revenue predominantly
included management fees received from WFM managed funds. Westoz Investment Company Limited (“WIC”) and Ozgrowth
Limited (“OZG”) have performed well in challenging and volatile markets. Their respective gross investment performance of -1.7%
and 7.0% for the financial year compares to -7.2% for the All Ordinaries Accumulation Index and 1.8% for the Small Resources
Accumulation Index for the same period. Whilst there was no performance fee income to the manager during this period we remain
optimistic on resources and Western Australia in general and the opportunity for outperformance in the coming year.
(d) Wealth Management
Wealth Management revenue increased slightly by 3.2% to $9.1 million from $8.8 million. Entrust reported a pleasing improvement
in FUM of 10%. We are pleased with the quality and stability of the Entrust offering at a time of significant change in the Wealth
Management landscape. Entrust is well positioned for continued growth.
(e)
Investment Income
Investment income increased by 23% to $3.65 million (2019: $3 million).
DISCLOSURE OF BUSINESS STRATEGIES AND PROSPECTS - GROWTH
Our aim is to build real diversification of revenues into our overall business. We are cognisant that we need to significantly grow our wealth
management FUM. Group FUM remained steady at $1.55 billion (2019: $1.58 billion) however, FUM growth was impacted by the removal of
approximately $119 million of Prodigy related FUM and to a degree by the emerging COVID-19 pandemic.
In March 2020, the Group concluded a strategic review of the investment in Prodigy which resulted in the decision to discontinue the
following operations:
•
•
•
FIP Management Services Pty Ltd (formerly Flinders Investment Partners Pty Ltd) (“Flinders”)
DSC Investment Management Pty Ltd (formerly Dalton Street Capital Pty Ltd) (“Dalton”)
EPC Investment Management Pty Ltd (formerly Equus Point Capital Pty Ltd) (“Equus”)
These funds managed by these boutiques have either been wound up or transferred to other managers.
On 17 July 2020, Euroz announced it has entered into a binding bid implementation agreement for an off-market takeover of 100% of
Hartleys Limited (“Hartley”). The transaction is expected to be completed by October 2020 following which Hartleys will be renamed
“Euroz Hartleys Limited”.
The merger of Euroz Securities into Euroz Hartleys will create a financial services company with a strong balance sheet, critical scale,
strong operational synergies with solid recurring and transactional revenues delivering a positive outcome for clients and shareholders
alike.
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 management businesses whilst still retaining the transaction-based upside of our traditional
stockbroking business and performance fee upside from our funds management business.
ANNUAL RE PORT 2020
27
DIRECTORS’ REPORT (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 DISCLOSURE OF BUSINESS STRATEGIES AND PROSPECTS - MATERIAL BUSINESS RISKS
Due to the impact of Coronavirus (COVID-19) pandemic, the past year continues the trend of extremely volatile trading conditions.
Like many businesses we adapted quickly to remote working and our continued provision of key client services and operations.
We have experienced record trading months with the volatility of the markets. However significant economic concerns remain within
the community.
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 have decreased to $114.3 million at 30 June 2020 from $117.8 million at 30 June 2019. 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
$31.9 million at 30 June 2020 (30 June 2019: $25.1 million).
During the past twelve 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 WFM 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 $111 million (including the Pershing security
deposit of $5 million) as at 30 June 2020. We have a Net Tangible Assets (NTA) of 64¢ per share and no debt. Euroz has a proud history
of consistent profits and dividends having paid a total of $235 million in fully franked dividends over the past 20 years.
The Directors believe the Company is in a strong and stable financial position to expand and grow its current operations.
Loss per share
Basic loss per share
Diluted loss per share
DIVIDENDS – EUROZ LIMITED
Dividends paid or provided for during the financial year were as follows:
Interim ordinary dividend of 1.75 cents (2019: 1.75 cents) per fully paid ordinary share was
paid on 21 February 2020.
Provision for final ordinary dividend for 30 June 2020 of 6 cents (2019: 5 cents) per fully
paid ordinary share paid on 7 August 2020.
2020
Cents
(0.87)
(0.84)
2019
Cents
(0.07)
(0.07)
2020
$
2019
$
2,838,449
2,817,314
9,751,095
8,049,469
12,589,544
10,866,783
Of the total dividends paid during the year, $4,140 (2019: $7,816) was paid to the Euroz Share Trust and is undistributed. Therefore, it has
been eliminated on consolidation.
STATE OF AFFAIRS
There have been no significant changes in the state of affairs of the consolidated group during the year other than the discontinuance of
fund management’s operations of Flinders, Dalton and Equus as well as the acquisition of 1,940,740 treasury shares on-market and the
vesting of 1,075,630 shares under the Performance Rights Plan.
SHARE OPTIONS
There were no options on issue at 30 June 2020 and 30 June 2019.
ENVIRONMENTAL REGULATION
The consolidated group is not subject to significant environmental regulation in respect of its operations.
EVENTS AFTER REPORTING DATE
On 17 July 2020, Euroz and Hartleys entered into a binding bid implementation agreement whereby Euroz has agreed to make an
off-market takeover offer to acquire 100% of the issued capital in Hartleys (Offers).
28
EUROZ LIM ITED
DIRECTORS’ REPORT (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 EVENTS AFTER REPORTING DATE (CONT’D)
Under the Offers, holders of Hartleys shares will be entitled to receive 3.3033304 new Euroz shares (rounded up) for every Hartleys share
accepted into the Offers. This equates to the issue of approximately 33 million Euroz shares as consideration for the acquisition of 100%
Hartleys, with Hartleys shareholders to own up to approximately 17% of the combined group.
The transaction is expected to be completed by October 2020 with the integration of the two business to commence shortly thereafter.
The impact of the Coronavirus (COVID-19) pandemic is ongoing and while it has not significantly impacted the Group up to 30 June 2020,
it is not practicable to estimate the potential impact, positive or negative, after the reporting date. The situation is rapidly developing and is
dependent on measures imposed by the Australian Government and other countries, such as maintaining social distancing requirements,
quarantine, travel restrictions and any economic stimulus that may be provided.
The Directors are not aware of any other matter or circumstance subsequent to 30 June 2020 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
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.
Information on
Directors
Director
A McKenzie
Executive
Chairman
Experience
Mr McKenzie has
worked in the
stockbroking industry
since 1991.
J Hughes
Director
Mr Hughes has worked
in the stockbroking
industry since 1986.
G Chessell
Director
Mr Chessell has worked
in the stockbroking
industry since 1996.
Particulars of Directors’
interests in shares of
Euroz Limited
Ordinary shares*
13,036,008
Special responsibilities and qualifications
Executive Chairman of Euroz Limited and Euroz Securities
Executive Director of Prodigy Investment Partners, FIP Management
Services Pty Ltd, DSC Investment Management Pty Ltd and EPC
Investment Management Pty Ltd
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”) and is a Master Member (MSAFAA)
of SAFAA
Executive Director of Euroz Limited, Euroz Securities, Westoz Funds
Management and Prodigy Investment Partners
13,128,317
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 Master Member (MSAFAA) of SAFAA
Executive Director of Euroz Limited and Euroz Securities
5,067,695
Member of Euroz Limited Audit & Risk Committee
Established the Research Division of Euroz Securities which he
headed up until October 2017 before moving to Corporate Finance
team
Holds a Bachelor of Applied Science in Geology and a Graduate
Diploma in Business
ANNUAL RE PORT 2020
29
DIRECTORS’ REPORT (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 LIKELY DEVELOPMENTS (CONT’D)
Information on
Directors
Director
R Kane
Director
Experience
Mr Kane has worked
in the stockbroking
industry since 1994.
Special responsibilities and qualifications
Executive Director of Euroz Limited and Euroz Securities
Member of Euroz Securities Underwriting Committee
Particulars of Directors’
interests in shares of
Euroz Limited
Ordinary shares*
3,501,647
S Yeo
Director
Mr Yeo has worked
in the stockbroking
industry since 1993.
A Brittain
Director
Mr Brittain has
worked in the funds
management and
stockbroking industry
since 1992.
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 (ECU)
Executive Director of Euroz Limited and Euroz Securities
4,921,463
643,633
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
Executive Director of Euroz Limited, Euroz Securities, Entrust
Wealth Management, Prodigy Investment Partners, FIP Management
Services Pty Ltd, DSC Investment Management Pty Ltd and
EPC Investment Management Pty Ltd
Chief Operating and Financial Officer
Member of Euroz Limited Audit and Risk Committee
Member of Euroz Securities and Entrust Wealth Management
Compliance Committee
Member of Prodigy Investment Partners Risk and 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 (GAICD) of AICD and a Master Member
(MSAFAA) of SAFAA
R Black
Director
Mr Black has worked in
stockbroking industry
since 1993.
Executive Director of Euroz Limited, Euroz Securities and
Entrust Wealth Management
4,643,646
Managing Director of Euroz Securities
Member of Euroz Limited Remuneration Committee
Member of Euroz Securities Underwriting Committee
Member of Euroz Securities Compliance Committee
Holds a Bachelor of Business Degree from ECU and is a
Graduate member (GAICD) of AICD
*Balance as at the date of signing the report and total shares includes shares allocated under the Performance Rights Plan.
30
EUROZ LIM ITED
DIRECTORS’ REPORT (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 MEETINGS OF DIRECTORS
The numbers of meetings of the Company’s Board of Directors held during the year ended 30 June 2020 and the numbers of meetings
attended by each Director were:
Director
Directors Meetings
Committee Meetings
Andrew McKenzie
Jay Hughes
Greg Chessell
Russell Kane
Simon Yeo
Anthony Brittain
Robert Black
Number eligible
to attend
22
Number
attended
22
Number eligible
to attend
-
Number
attended
-
Number eligible
to attend
2
Number
attended
2
Audit
Remuneration
22
22
22
22
22
22
22
22
20
22
22
22
-
3
-
3
3
-
-
3
-
3
3
-
2
-
-
-
-
2
2
-
-
-
-
2
REMUNERATION REPORT (AUDITED)
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 Company, as well as the share price at the
end of the respective financial years.
2016
$
2017
$
2018
$
2019
$
2020
$
Revenue (including gains on fair value movements in
investment entities and discontinued operations)
41,924,867
70,372,892
92,087,944
47,548,618
70,908,770
Net profit / (loss) after tax attributable to members
3,560,417
19,371,167
31,263,812
(107,685)
(1,354,726)
Share price at year end
Dividends paid or recommended
0.79
1.08
1.25
1.25
1.03
6,438,992
11,671,730
17,708,832
10,866,783
12,589,544
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
Directors’ fees
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.
ANNUAL RE PORT 2020
31
DIRECTORS’ REPORT (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 REMUNERATION REPORT (CONT’D)
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. Base pay is also reviewed upon promotion or
additional responsibilities.
There is no guarantee of base pay increases fixed in any senior executive or Directors contracts.
Executives are offered a competitive salary that comprises of a base salary inclusive of superannuation and a combination of some of the
following short term incentives, dependant on the terms of the individual employment contract:
•
•
•
Participation in the profit share pool
Commission
Discretionary bonus
Profit share pool – 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.
Discretionary bonus
Executives and other staff members who do not participate in the profit share pool are paid a discretionary bonus based on the
profitability of the Company. Similar to the profit share pool, the distribution of the discretionary bonus is also leveraged to the individual’s
performance and is made as a combination of cash (75%) and equity (25%) as detailed below in “Equity based payments”.
Equity based payments
The 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 based payments. The shares
issued will only vest to the employee after 3 years subsequent service following the initial year of service.
32
EUROZ LIM ITED
DIRECTORS’ REPORT (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 REMUNERATION REPORT (CONT’D)
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.
Short-term
Profit
Share/bonus
Base salary
$
$
246,092
250,000
253,997
253,997
253,997
250,000
250,000
225,000
337,500
337,500
210,000
187,500
187,500
337,500
157,500
172,500
Post-
Employment
Share Based
Payment
Other
benefits Superannuation
Performance
Rights
$
23,569
25,708
19,384
19,557
22,279
18,508
20,491
10,551
$
25,000
25,000
21,003
21,004
21,003
25,000
25,000
25,000
133,438
133,438
65,000
95,000
71,250
114,063
50,313
63,438
Total
$
765,599
771,646
569,384
577,058
556,029
745,071
503,304
496,489
Performance
related
62%
61%
48%
49%
47%
61%
41%
48%
2020
Andrew McKenzie
Jay Hughes
Greg Chessell
Russell Kane
Simon Yeo
Robert Black
Anthony Brittain
Dermot Woods
Total
1,983,083
1,927,500
160,047
188,010
725,940
4,984,580
Current Directors did not receive any Directors fees.
Short-term
Profit
Share/bonus
Base salary
$
$
243,149
250,000
254,469
250,000
254,469
254,469
250,000
225,000
234,308
281,250
281,250
127,500
180,000
142,500
270,000
93,750
120,000
-
Post-
Employment
Share Based
Payment
Other
benefits Superannuation
Performance
Rights
$
21,922
25,461
17,961
18,022
20,167
17,085
18,755
9,153
8,975
$
25,000
25,000
20,531
25,000
20,531
20,531
25,000
25,000
9,688
120,313
120,313
57,500
91,250
65,625
99,063
43,438
54,063
105,625
Total
$
691,634
702,024
477,961
564,272
503,292
661,148
430,943
433,216
358,596
Performance
related
58%
57%
39%
48%
41%
56%
32%
40%
29%
2019
Andrew McKenzie
Jay Hughes
Greg Chessell
Russell Kane
Simon Yeo
Robert Black
Anthony Brittain
Dermot Woods
Phil Rees*
Total
2,215,864
1,496,250
157,501
196,281
757,190
4,823,086
*Retired and ceased to be a KMP on 31 August 2018 after which he received a Director’s fee as a Non-Executive Director of WFM.
All other current Directors did not receive any Directors fees.
ANNUAL RE PORT 2020
33
DIRECTORS’ REPORT (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020
REMUNERATION REPORT (CONT’D)
SERVICE AGREEMENTS
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
Base salary, inclusive of superannuation for the year ended 30 June 2020 of $275,000 (2019 - $275,000) plus profit share
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
Base salary, inclusive of superannuation for the year ended 30 June 2020 of $275,000 (2019 - $275,000) plus profit share
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 2020 of $275,000 (2019 - $275,000) 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 2020 of $275,000 (2019 - $275,000) plus profit share
Payment on termination of employment by the employer, other than for gross misconduct three months’ salary
Simon Yeo, Director
•
•
•
Term of contract – ongoing employment contract
Base salary, inclusive of superannuation for the year ended 30 June 2020 of $275,000 (2019 - $275,000) 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 2020 of $275,000 (2019 - $275,000) plus bonus
Payment on termination of employment by the employer, other than for gross misconduct – three months’ salary
Robert Black, Director
•
•
•
Term of contract – ongoing employment contract
Base salary, inclusive of superannuation for the year ended 30 June 2020 of $275,000 (2019 - $275,000) plus profit share
Payment on termination of employment by the employer, other than for gross misconduct – three months’ salary
Dermot Woods, Director Westoz Funds Management Pty Ltd
Term of contract – ongoing employment contract
Base salary, inclusive of superannuation for the year ended 30 June 2020 of $250,000 (2019 - $250,000) plus bonus
Payment on termination of employment by the employer, other than for gross misconduct – three months’ salary
•
•
•
34
EUROZ LIM ITED
DIRECTORS’ REPORT (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 REMUNERATION REPORT (CONT’D)
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:
2020
Ordinary shares
A McKenzie
J Hughes
G Chessell
R Kane
S Yeo
R Black
A Brittain
D Woods
2019
Ordinary shares
A McKenzie
J Hughes
G Chessell
R Kane
S Yeo
R Black
A Brittain
P Rees
D Woods
Balance at
1 July 2019
Received
via PRP (i)
Net change
other *
Bought &
(sold)**
Balance at
30 June 2020
12,680,051
12,690,912
4,740,280
3,353,006
4,609,197
4,275,630
590,062
818,275
114,795
114,795
71,428
63,775
63,775
114,795
53,571
58,673
43,757,413
655,607
-
-
-
-
-
-
-
-
-
50,000
149,969
141,216
84,866
120,000
187,643
-
-
12,844,846
12,955,676
4,952,924
3,501,647
4,792,972
4,578,068
643,633
876,948
733,694
45,146,714
Balance at
1 July 2018
Received
via PRP (i)
Net change
other *
Bought &
(sold)**
Balance at
30 June 2019
12,501,269
12,512,130
4,636,160
3,252,586
4,421,281
3,773,306
563,801
1,474,907
-
78,782
78,782
35,714
50,420
39,916
75,630
26,261
-
-
-
-
-
-
-
-
-
-
818,275
100,000
100,000
68,406
50,000
148,000
426,694
-
(474,906)
-
12,680,051
12,690,912
4,740,280
3,353,006
4,609,197
4,275,630
590,062
1,000,001
818,275
43,135,440
385,505
818,275
418,194
44,757,414
* Net change reflects commencement or cessation as a KMP.
** Inclusive of shares allocated in Dividend Reinvestment Plan (DRP).
(i)
These shares are held by the Euroz Share Trust and are currently vesting in accordance with the Euroz Performance Rights Plan (PRP).
ANNUAL RE PORT 2020
35
DIRECTORS’ REPORT (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 REMUNERATION REPORT (CONT’D)
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:
2020
Performance Rights
A McKenzie
J Hughes
G Chessell
R Kane
S Yeo
R Black
A Brittain
D Woods
2019
Performance Rights
A McKenzie
J Hughes
G Chessell
R Kane
S Yeo
R Black
A Brittain
D Woods
Granted as
remuneration
Vested
1
1
1
1
1
1
1
1
8
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(8)
Granted as
remuneration
Vested
1
1
1
1
1
1
1
1
8
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(8)
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 to KMPs in the year amounts to $725,940 (2019: $757,190).
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
36
EUROZ LIM ITED
DIRECTORS’ REPORT (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
Euroz Limited has a Deed of Indemnity for all the Directors and Officers of the Company against all losses or liabilities incurred by each
Director and Officer in their capacities as Directors and Officers of the Company. The Company agreed to indemnify and keep indemnified
the Directors and Officers against all liabilities by the Directors and Officers as a Director and Officer of the Company to the extent
permitted under the Corporations Act 2001.
During the financial year, Euroz Securities Limited paid a premium on behalf of the Group to insure the Directors and Officers of the
Company. The liabilities insured include costs and expenses that may be incurred in defending civil or criminal proceedings that may be
brought against the Directors and Officers in their capacity as Directors and Officers of the Company.
INDEMNIFICATION OF AUDITORS
The Company has not indemnified the auditor and has not paid an insurance premium to insure 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 Perth. 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 Perth 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
The lead auditor’s independence declaration for the year ended 30 June 2020 has been received and follows the Directors’ report.
This report is made in accordance with a resolution of the Directors.
$
48,400
Andrew McKenzie
Executive Chairman
Date: 20 August 2020
Robert Black
Executive Director
ANNUAL RE PORT 2020
37
DIRECTORS’ REPORT (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020
AUDITOR’S INDEPENDENCE DECLARATION
FOR THE YEAR ENDED 30 JUNE 2020
PKF Perth
TO THE DIRECTORS OF EUROZ LIMITED
In relation to our audit of the financial report of Euroz Limited for the year ended 30 June 2020, 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.
This declaration is in respect of Euroz Limited and the entities it controlled during the financial year.
PKF PERTH
SIMON FERMANIS
AUDIT PARTNER
20 AUGUST 2020
WEST PERTH
WESTERN AUSTRALIA
Level 4, 35 Havelock Street, West Perth, WA 6005
PO Box 609, West Perth, WA 6872
T: +61 8 9426 8999 F: +61 8 9426 8900 www.pkfperth.com.au
PKF Perth is a member firm of the PKF International Limited family of legally independent firms and does not accept any responsibility or liability for the
actions or inactions of any individual member or correspondent firm or firms.
Liability limited by a scheme approved under Professional Standards Legislation.
38
EUROZ LIM ITED
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND
OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2020
Revenue from continuing operations
4
67,545,324
59,952,695
Notes
2020
$
2019
$
Gain / (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
Stockbroking expenses
Communication expenses
Impairment expenses
Carrying amount of principal trading securities sold
Other expenses
Profit / (Loss) before income tax expense from continuing operations
Income tax benefit
Profit / (Loss) after income tax expense for the year from continuing operations
Loss after income tax expense for the year from discontinued operations
5
6
7
1,587,010
(27,444,866)
(1,331,240)
(423,714)
(859,283)
(670,544)
(3,911,055)
(266,796)
(3,130,000)
(21,036,260)
(4,066,366)
5,992,210
1,979,426
7,971,636
(13,976,485)
(23,126,714)
(340,598)
(484,050)
(443,995)
(839,162)
(3,193,983)
(223,449)
-
(13,107,836)
(4,701,295)
(484,872)
95,922
(388,950)
(3,621,186)
(1,620,650)
Profit / (Loss) after income tax expense for the year
4,350,450
(2,009,600)
Other comprehensive income
Other comprehensive income net of tax
Total comprehensive income / (loss) for the year
Profit / (Loss) for the year is attributable to:
Non-controlling interest
Owners of Euroz Limited
Total comprehensive income / (loss) for the year is attributable to:
Continuing operations
Discontinued operations
Non-controlling interest
Continuing operations
Discontinued operations
Owners of Euroz Limited
-
-
4,350,450
(2,009,600)
5,705,176
(1,354,726)
(1,901,915)
(107,685)
4,350,450
(2,009,600)
(220,563)
5,925,739
5,705,176
8,192,199
(9,546,925)
(1,354,726)
(20,898)
(1,881,017)
(1,901,915)
(368,052)
260,367
(107,685)
4,350,450
(2,009,600)
ANNUAL RE PORT 2020
39
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND
OTHER COMPREHENSIVE INCOME (CONT’D)
FOR THE YEAR ENDED 30 JUNE 2020
Earnings / (loss) per share for profit / (loss) from continuing operations
attributable to the owners of Euroz Limited
Basic (loss) / earnings per share (cents)
Diluted (loss) / earnings per share (cents)
Earnings / (loss) per share for profit / (loss) from discontinued operations
attributable to the owners of Euroz Limited
Basic (loss) / earnings per share (cents)
Diluted (loss) / earnings per share (cents)
Earnings / (loss) per share for profit / (loss) attributable to the owners of Euroz
Limited
Basic loss per share (cents)
Diluted loss per share (cents)
Notes
35
35
35
35
35
35
2020
$
5.26
5.09
(6.13)
(5.93)
(0.87)
(0.84)
2019
$
(0.24)
(0.23)
0.17
0.16
(0.07)
(0.07)
The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes.
v
40
EUROZ LIM ITED
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2020
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
Current tax receivable
Total current assets
NON-CURRENT ASSETS
Financial assets
Investments
Investment entities at fair value
Plant and equipment
Deferred tax assets
Intangible assets
Rights of use asset
Total non-current assets
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Current tax liabilities
Short term provisions
Lease liability
Total current liabilities
NON-CURRENT LIABILITIES
Deferred tax liabilities
Long term provisions
Lease liability
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Retained earnings
Equity attributable to the owners of Euroz Limited
Non-controlling interest
TOTAL EQUITY
Notes
8
9
10
11
19
12
13
14
15
16
17
21
18
19
20
21
22
23
21
2020
$
41,106,390
2,368,924
7,164,665
1,418,940
-
2019
$
27,383,046
1,934,887
7,430,215
1,379,065
217,140
52,058,919
38,344,353
5,216,699
599,790
56,998,090
472,987
9,464,820
9,798,785
4,556,400
5,000,000
13,136,978
58,016,264
715,152
6,960,607
10,178,785
-
87,107,571
94,007,786
139,166,490
132,352,139
3,639,785
2,548,489
13,090,873
879,398
1,772,881
-
11,446,094
-
20,158,545
13,218,975
946,875
72,656
3,653,897
1,313,068
24,680
-
4,673,428
1,337,748
24,831,973
14,556,723
114,334,517
117,795,416
24 (a)
24 (g)
102,167,440
4,869,667
7,267,597
114,304,704
101,333,244
3,846,281
18,503,754
123,683,279
29,813
(5,887,863)
114,334,517
117,795,416
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
ANNUAL RE PORT 2020
41
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2020
Balance at 1 July 2018
102,343,793
2,646,774
29,470,406
(3,985,948)
130,475,025
Issued Capital
$
Share Based
Payment Reserve
$
Retained
Earnings
$
Non-Controlling
Interest
$
Total
$
(107,685)
(1,901,915)
(2,009,600)
(107,685)
(1,901,915)
(2,009,600)
Loss for the period
Total comprehensive loss for the period
Transactions with owners, recorded
directly in equity
Shares issued during the period
Vested shares under employee
share plan
Treasury shares
Share issue cost
Share based payments
Dividends to equity holders
Total contributions by and
distributions to owners
-
-
-
494,685
(1,494,734)
(10,500)
-
-
-
-
-
(494,685)
-
-
1,694,192
-
(10,858,967)
(1,010,549)
1,199,507
(10,858,967)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,494,734)
(10,500)
1,694,192
(10,858,967)
(10,670,009)
Balance at 30 June 2019
101,333,244
3,846,281
18,503,754
(5,887,863)
117,795,416
Balance at 1 July 2019
Adjustment for change in accounting
policy (Note 1)
101,333,244
3,846,281
18,503,754
(5,887,863)
117,795,416
Balance 1 July 2019 - restated
-
-
(46,036)
-
(46,036)
101,333,244
3,846,281
18,457,718
(5,887,863)
117,749,380
Loss for the period
Total comprehensive loss for the period
-
-
Transactions with owners, recorded
directly in equity
Shares issued during the period
1,639,362
(1,354,726)
5,705,176
4,350,450
(1,354,726)
5,705,176
4,350,450
-
212,500
1,851,862
Reclassification of subsidiary share
capital
Vested shares under employee
share plan
Treasury shares
Share issue cost
Share based payments
Dividends to equity holders
Total contributions by and
distributions to owners
-
902,234
(1,707,400)
-
-
-
2,749,999
-
-
-
-
-
(12,585,394)
-
-
-
-
-
-
2,749,999
-
(1,707,400)
-
1,925,620
(12,585,394)
834,196
1,023,386
(9,835,395)
212,500
(7,765,313)
-
-
-
-
(902,234)
-
-
1,925,620
Balance at 30 June 2020
102,167,440
4,869,667
7,267,597
29,813
114,334,517
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
42
EUROZ LIM ITED
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2020
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
Notes
2020
$
2019
$
46,627,655
(37,160,919)
9,466,736
265,238
6,505,285
195,551
(4,152,186)
44,555,436
(37,920,386)
6,635,050
572,511
16,092,302
(8,350,953)
(11,196,545)
Net cash flows from operating activities
33
12,280,624
3,752,365
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for investment in WIC & OZG
Payments for management investment schemes
Receipts from disposal of management investment schemes
Dividends and trust distributions received
Transfer to financial assets
Payments for plant and equipment
(164,750)
(250,020)
11,452,043
2,975,099
(216,699)
(159,049)
-
(2,000,000)
2,876,534
2,934,506
-
(364,281)
Net cash flows from investing activities
13,636,624
3,446,759
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid
Payments for treasury shares
Repayment of lease liabilities
Interest paid on lease liabilities
Proceeds from share issue
Share issue cost
Net cash flows used in financing activities
(10,883,769)
(1,707,400)
(1,076,592)
(165,505)
1,639,362
(17,701,016)
(1,494,731)
-
-
-
-
(10,500)
(12,193,904)
(19,206,247)
Net increase / (decrease) in cash and cash equivalents
13,723,344
(12,007,123)
Cash and cash equivalents at 1 July
27,383,046
39,390,169
Cash and cash equivalents at 30 June
8
41,106,390
27,383,046
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
ANNUAL RE PORT 2020
43
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
CONTENTS
PAGE
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
NOTE 2: SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS
NOTE 3: SEGMENT INFORMATION
NOTE 4: REVENUE
NOTE 5: PROFIT / (LOSS) BEFORE INCOME TAX EXPENSE FROM CONTINUING OPERATIONS
NOTE 6: INCOME TAX
NOTE 7: DISCONTINUED OPERATIONS
NOTE 8: CASH AND CASH EQUIVALENTS
NOTE 9: TRADE AND OTHER RECEIVABLES
NOTE 10: INVENTORIES
NOTE 11: OTHER CURRENT ASSETS
NOTE 12: FINANCIAL ASSETS
NOTE 13: INVESTMENTS
NOTE 14: INVESTMENT ENTITIES AT FAIR VALUE
NOTE 15: PLANT AND EQUIPMENT
NOTE 16: DEFERRED TAX ASSETS
NOTE 17: INTANGIBLE ASSETS
NOTE 18: TRADE AND OTHER PAYABLES
NOTE 19: CURRENT TAX ASSETS AND LIABILITIES
NOTE 20: SHORT TERM PROVISIONS
NOTE 21: RIGHTS OF USE ASSET AND LEASE LIABILITY
NOTE 22: DEFERRED TAX LIABILITIES
NOTE 23: LONG TERM PROVISIONS
NOTE 24: CONTRIBUTED EQUITY
NOTE 25: DIVIDENDS
NOTE 26: FINANCIAL INSTRUMENTS
NOTE 27: REMUNERATION OF AUDITORS
NOTE 28: CONTINGENT LIABILITIES
NOTE 29: COMMITMENTS FOR EXPENDITURE
NOTE 30: RELATED PARTIES
NOTE 31: INVESTMENTS IN CONTROLLED ENTITIES
NOTE 32: EVENTS SUBSEQUENT TO REPORTING DATE
NOTE 33: RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES
NOTE 34: NON-CASH INVESTING AND FINANCING ACTIVITIES
NOTE 35: (LOSS) / EARNINGS PER SHARE
NOTE 36: PARENT ENTITY DISCLOSURES
NOTE 37: COMPANY DETAILS
45
56
57
59
60
60
62
63
63
63
63
63
64
64
64
65
65
66
66
66
67
67
67
67
69
69
72
72
73
73
75
76
76
77
77
78
78
44
EUROZ LIM ITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
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 20 August 2020. 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 and Chi - X, 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 2020 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.
ANNUAL RE PORT 2020
45
1.
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
Accounting policies (cont’d)
(b)
Income tax (cont’d)
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.
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 from contracts with customers
Revenue is recognised at an amount that reflects the consideration to which the consolidated entity is expected to be entitled
in exchange for transferring goods or services to a customer. For each contract with a customer, the consolidated entity:
identifies the contract with a customer; identifies the performance obligations in the contract; determines the transaction
price which takes into account estimates of variable consideration and the time value of money; allocates the transaction
price to the separate performance obligations on the basis of the relative stand-alone selling price of each distinct good or
service to be delivered; and recognises revenue when or as each performance obligation is satisfied in a manner that depicts
the transfer to the customer of the goods or services promised.
Variable consideration within the transaction price, if any, reflects concessions provided to the customer such as discounts,
rebates and refunds, any potential bonuses receivable from the customer and any other contingent events. Such estimates
are determined using either the ‘expected value’ or ‘most likely amount’ method. The measurement of variable consideration
is subject to a constraining principle whereby revenue will only be recognised to the extent that it is highly probable that a
significant reversal in the amount of cumulative revenue recognised will not occur. The measurement constraint continues
until the uncertainty associated with the variable consideration is subsequently resolved. Amounts received that are subject to
the constraining principle are initially recognised as deferred revenue in the form of a separate refund liability.
Brokerage revenue
Brokerage revenue from share trading is considered to be derived from a single obligation being the completion of a share
trading transaction. Accordingly, at the completion of the transaction the revenue is recognised.
External trail commission classified as brokerage is also considered a distinct service and does not involve other promised
goods or services. Therefore, revenue is recognised at the completion of the service.
46
EUROZ LIM ITED
NOTES TO THE FINANCIAL STATEMENTS (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 1.
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
Accounting policies (cont’d)
(d) Revenue recognition (cont’d)
Underwriting, placement fees and corporate retainers
Corporate retainers relate to the service fee for work performed such as corporate advisory services. This service is
considered a distinct performance obligation and accordingly revenue is recognised as the service is completed in
accordance with the engagement mandate.
Placement fees are fees charged on raising capital for clients. This is determined to be the single performance obligation and
revenue is recognised as the service is completed in accordance with the engagement mandate.
Underwriting fees are derived upon the satisfactory completion of the engagement criteria which may be the execution of a
capital raising or the sale of a pre-determined number of shares for a client. The performance obligation is determined to be
the completion of the capital raise or sale of the shares and revenue is recognised as the service is completed in accordance
with the engagement mandate.
The payment terms in relation to this source of revenue is 7 days.
Performance and management fees
Performance fee income is derived from investment management agreements based on the performance of an underlying
fund over a contracted period of time. If the fund performance exceeds a specified threshold the performance fee payable is
determined and recorded as revenue at the conclusion of the performance period. The performance obligation is determined
to be singular being to achieve a certain performance target over a specified period.
Management fee income is derived from investment management agreements whereby a monthly management fee is
payable based on the fund value. The performance obligation is the monthly management of the fund and revenue is
recorded monthly following the completion of the month.
The payment terms in relation to this source of revenue is 7 days.
Wealth management fees
Wealth management fee income is typically derived from agreements with clients individually whereby a monthly
management fee is payable based on the portfolio value or some other agreed fee for service. The performance obligation is
the monthly management of the portfolio and revenue is recorded monthly following the completion of the month.
Proceeds from the sale of investments
Share trading revenue from the sale of stocks in the jobbing account is recognised on the day the security is traded. Revenue
comprises the gross proceeds on sale of the security. The single performance obligation is the sale of the security.
Interest
Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the
amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate,
which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the
net carrying amount of the financial asset.
Other revenue
Other revenue is recognised when it is received or when the right to receive payment is established.
(e) Receivables
Trade receivables are recognised as current receivables as they are generally settled within 30 days from the date of
recognition. Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible
are written off. The consolidated entity has applied the simplified approach to measuring expected credit losses, which uses
a lifetime expected loss allowance. To measure the expected credit losses, trade receivables have been grouped based on
days overdue.
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.
(f)
Inventories
Inventories are stocks held in the operating (house) account at year end. All inventory is held at fair value. Refer to Note 1(v)
financial assets at fair value through profit or loss.
ANNUAL RE PORT 2020
47
NOTES TO THE FINANCIAL STATEMENTS (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 1.
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
Accounting policies (cont’d)
(g) 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.
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
Leasehold improvements
Plant and equipment
Depreciation Rate
25%
25 – 33%
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are
included in the statement of profit or loss. When revalued assets are sold, amounts included in the revaluation reserve relating
to the asset are transferred to retained earnings.
(h)
Leasehold improvements
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.
(i)
Leases
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.
(j)
Trade and other payables
Trade and other payables 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 payables 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.
(k) 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.
(l) 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.
(m) Finance costs
Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs are expensed in the
period in which they are incurred.
(n) Provisions
Provisions are recognised when the Company has a present (legal or constructive) obligation as a result of a past event, it
is probable the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the
obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present
obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. If the time value of
money is material, provisions are discounted using a current pre-tax rate specific to the liability. The increase in the provision
resulting from the passage of time is recognised as a finance cost.
48
EUROZ LIM ITED
NOTES TO THE FINANCIAL STATEMENTS (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 1.
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
Accounting policies (cont’d)
(o) Employee benefits
(i) Wages, salaries and annual leave
Liabilities for wages, salaries and annual leave expected to be settled within 12 months of the reporting date are
recognised in respect of employees’ services up to the reporting date and are measured at the amounts expected to
be paid when the liabilities are settled.
(ii)
Employee benefits payable later than one year
Employee benefits payable later than one year have been measured at the present value of the estimated future cash
outflows to be made for those benefits. There have been no changes to the method used to calculate this liability.
(iii) Superannuation
Contributions are made by the consolidated group to superannuation funds as stipulated by statutory requirements
and are charged as expenses when incurred.
(iv) Employee benefit on costs
Employee benefit on costs, including payroll tax, are recognised and included in employee benefits liabilities and costs
when the employee benefits to which they relate are recognised as liabilities.
(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 is 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 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.
(q) Earnings per share
(i)
Basic earnings per share
Basic earnings per share is determined by dividing the net profit after income tax attributable to members of the
Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of
ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during
the year.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into
account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary
shares and the weighted average number of shares assumed to have been issued for no consideration in relation
to dilutive potential ordinary shares. The potential impact of issuing treasury shares externally is considered when
calculating diluted earnings per share.
ANNUAL RE PORT 2020
49
NOTES TO THE FINANCIAL STATEMENTS (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 1.
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
Accounting policies (cont’d)
(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.
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)
Investments and Other Financial Assets
Investments and other financial assets are initially measured at fair value. Transaction costs are included as part of the initial
measurement, except for financial assets at fair value through profit or loss. Such assets are subsequently measured at either
amortised cost or fair value depending on their classification. Classification is determined based on both the business model
within which such assets are held and the contractual cash flow characteristics of the financial asset unless, an accounting
mismatch is being avoided.
Financial assets are derecognised when the rights to receive cash flows have expired or have been transferred and the
consolidated entity has transferred substantially all the risks and rewards of ownership. When there is no reasonable
expectation of recovering part or all of a financial asset, its carrying value is written off.
50
EUROZ LIM ITED
NOTES TO THE FINANCIAL STATEMENTS (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 1.
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
Accounting policies (cont’d)
(v)
Investments and Other Financial Assets (cont’d)
Financial assets at fair value through profit or loss
Financial assets not measured at amortised cost or at fair value through other comprehensive income are classified as
financial assets at fair value through profit or loss. Typically, such financial assets will be either: (i) held for trading, where they
are acquired for the purpose of selling in the short-term with an intention of making a profit, or a derivative; or (ii) designated
as such upon initial recognition where permitted. Fair value movements are recognised in profit or loss.
Financial assets at fair value through other comprehensive income
Financial assets at fair value through other comprehensive income include equity investments which the consolidated entity
intends to hold for the foreseeable future and has irrevocably elected to classify them as such upon initial recognition.
Impairment of financial assets
The consolidated entity recognises a loss allowance for expected credit losses on financial assets which are either measured
at amortised cost or fair value through other comprehensive income. The measurement of the loss allowance depends upon
the consolidated entity’s assessment at the end of each reporting period as to whether the financial instrument’s credit risk
has increased significantly since initial recognition, based on reasonable and supportable information that is available, without
undue cost or effort to obtain.
Where there has not been a significant increase in exposure to credit risk since initial recognition, a 12-month expected credit
loss allowance is estimated. This represents a portion of the asset’s lifetime expected credit losses that is attributable to a
default event that is possible within the next 12 months. Where a financial asset has become credit impaired or where it is
determined that credit risk has increased significantly, the loss allowance is based on the asset’s lifetime expected credit
losses. The amount of expected credit loss recognised is measured on the basis of the probability weighted present value of
anticipated cash shortfalls over the life of the instrument discounted at the original effective interest rate.
For financial assets measured at fair value through other comprehensive income, the loss allowance is recognised within other
comprehensive income. In all other cases, the loss allowance is recognised in 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.
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)
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.
ANNUAL RE PORT 2020
51
NOTES TO THE FINANCIAL STATEMENTS (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 1.
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
Accounting policies (cont’d)
(z)
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.
(aa) Discontinued operations
In March 2020, the Group have concluded a strategic review of the investment in Prodigy which has resulted in the decision
to discontinue the operations of the three subsidiaries, as follows:
•
•
•
FIP Management Services Pty Ltd (Note 31)
DSC Investment Management Pty Ltd (Note 31)
EPC Investment Pty Ltd (Note 31)
The results of discontinued operations are presented separately on the face of the statement of profit or loss and other
comprehensive income.
52
EUROZ LIM ITED
NOTES TO THE FINANCIAL STATEMENTS (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 1.
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
Accounting policies (cont’d)
(aa) Discontinued operations (cont’d)
Impact of discontinued operations
As required under AASB 5, the financial performance of the above subsidiaries have been reclassed in the Statement of Profit
or Loss and Other Comprehensive Income as discontinued operations as follows:
As reported in
prior year Reclassification
2019
$
Reclassed
balance
2019
$
$
Revenue from continuing operations
61,525,103
(1,572,408)
59,952,695
Gain / (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
Stockbroking expenses
Communication expenses
Impairment expenses
Carrying amount of principal trading securities sold
Other expenses
(13,976,485)
-
(13,976,485)
(24,978,245)
1,851,531
(23,126,714)
(385,708)
(496,958)
(668,851)
(932,955)
(4,159,110)
(393,054)
-
(13,107,836)
(5,254,427)
45,110
12,908
224,856
93,792
965,127
169,606
-
-
553,132
(340,598)
(484,050)
(443,995)
(839,162)
(3,193,983)
(223,449)
-
(13,107,836)
(4,701,295)
Profit / (Loss) before income tax expense from continuing operations
Income tax benefit
(2,828,526)
2,343,654
(484,872)
818,926
(723,004)
95,922
Profit / (Loss) after income tax expense for the year from continuing operations
(2,009,600)
1,620,650
(388,950)
Profit/ (Loss) after income tax expense for the year from discontinued
operations
-
(1,620,650)
(1,620,650)
Profit / (Loss) after income tax expense for the year
(2,009,600)
Other comprehensive income
Other comprehensive income net of tax
Total comprehensive income / (loss) for the year
Profit / (Loss) the year is attributable to:
Non-controlling interest
Owners of Euroz Limited
-
(2,009,600)
(1,901,915)
(107,685)
(2,009,600)
-
-
-
-
-
-
(2,009,600)
-
(2,009,600)
(1,901,915)
(107,685)
(2,009,600)
Total comprehensive income / (loss) for the year is attributable to:
Continuing operations
Discontinued operations
Non-controlling interest
Continuing operations
Discontinued operations
Owners of Euroz Limited
(1,901,915)
-
(1,901,915)
1,881,017
(1,881,017)
-
(20,898)
(1,881,017)
(1,901,915)
(107,685)
(260,367)
(368,052)
-
260,367
(107,685)
(2,009,600)
-
-
260,367
(107,685)
(2,009,600)
ANNUAL RE PORT 2020
53
NOTES TO THE FINANCIAL STATEMENTS (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 1.
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
Accounting policies (cont’d)
(ab) Right-of-use assets
A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which
comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the
commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the
cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and
restoring the site or asset.
Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful
life of the asset, whichever is the shorter. Where the consolidated group expects to obtain ownership of the leased asset at
the end of the lease term, the depreciation is over its estimated useful life. Right-of use assets are subject to impairment or
adjusted for any remeasurement of lease liabilities.
The consolidated group has elected not to recognise a right-of-use asset and corresponding lease liability for short-term
leases with terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit
or loss as incurred.
(ac) Lease liabilities
A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present
value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or,
if that rate cannot be readily determined, the consolidated group’s incremental borrowing rate. Lease payments comprise
of fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts
expected to be paid under residual value guarantees, exercise price of a purchase option when the exercise of the option is
reasonably certain to occur, and any anticipated termination penalties. The variable lease payments that do not depend on an
index or a rate are expensed in the period in which they are incurred.
Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if
there is a change in the following: future lease payments arising from a change in an index or a rate used; residual guarantee;
lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an adjustment
is made to the corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use asset is fully
written down.
(ad) New standards and interpretations
The consolidated group has adopted all of the new and revised Standards and Interpretations issued by the Australian
Accounting Standards Board (the AASB) that are relevant to the ir operations and effective for the current year. Any new,
revised or amending Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.
The following new Accounting Standards and Interpretations are most relevant to the consolidated entity:
AASB 16 Leases
The consolidated entity has adopted AASB 16 from 1 July 2019. The standard replaces AASB 117 ‘Leases’ and for lessees
will eliminate the classifications of operating leases and finance leases. Subject to exceptions, a ‘right-of-use’ asset will be
capitalised in the statement of financial position, measured at the present value of the unavoidable future lease payments
to be made over the lease term. The exceptions relate to short-term leases of 12 months or less and leases of low-value
assets (such as personal computers and small office furniture) where an accounting policy choice exists whereby either a
‘right-of-use’ asset is recognised or lease payments are expensed to profit or loss as incurred. A liability corresponding to the
capitalised lease will also be recognised, adjusted for lease prepayments, lease incentives received, initial direct costs incurred
and an estimate of any future restoration, removal or dismantling costs. Straight-line operating lease expense recognition
will be replaced with a depreciation charge for the leased asset (included in operating costs) and an interest expense on the
recognised lease liability (included in finance costs). In the earlier periods of the lease, the expenses associated with the lease
under AASB 16 will be higher when compared to lease expenses under AASB 117. However, EBITDA (Earnings Before Interest,
Tax, Depreciation and Amortisation) results will be improved as the operating expense is replaced by interest expense and
depreciation in profit or loss under AASB 16. For classification within the statement of cash flows, the lease payments will
be separated into both a principal (financing activities) and interest (either operating or financing activities) component. For
lessor accounting, the standard does not substantially change how a lessor accounts for leases.
54
EUROZ LIM ITED
NOTES TO THE FINANCIAL STATEMENTS (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 1.
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
Accounting policies (cont’d)
(ad) New standards and interpretations (cont’d)
Impact of adoption
AASB 16 was adopted using the modified retrospective approach and as such the comparatives have not been restated. The
impact of adoption on opening retained profits as at 1 July 2019 was as follows:
Operating lease commitments as at 1 July 2019 (AASB 117)
Finance lease commitments as at 1 July 2019 (AASB 117)
Operating lease commitments discount based on the weighted average incremental borrowing rate
of 3.5% (AASB 16)
Short-term leases not recognised as a right-of-use asset (AASB 16)
Right-of-use assets (AASB 16)
Lease liabilities - current (AASB 16)
Lease liabilities - non-current (AASB 16)
Reduction in opening retained profits as at 1 July 2019
1 July 2019
$
6,131,095
-
(567,242)
-
5,563,853
(1,076,737)
(4,533,152)
(46,036)
New Accounting Standards and Interpretations not yet mandatory or early adopted
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
AASB 2014-10
Amendments to Australian Accounting Standards –
Sale or Contributions of Assets between an Investor and its
Associate or Joint Venture
AASB 2018-6
AASB 2018-7
AASB 2019-1
AASB 2019-2
AASB 2019-3
AASB 2019-5
AASB 2020-1
AASB 2020-2
Amendments to Australian Accounting Standards –
Definition of a Business
Amendments to Australian Accounting Standards –
Definition of Material
Amendments to Australian Accounting Standards –
References to the Conceptual Framework
Amendments to Australian Accounting Standards –
Implementation of AASB 1059
Amendments to Australian Accounting Standards –
Interest Rate Benchmark Reform
Amendments to Australian Accounting Standards –
Disclosure of the Effect of New IFRS Standards Not Yet
Issued in Australia
Amendments to Australian Accounting Standards –
Classification of Liabilities as Current or Non-current
Amendments to Australian Accounting Standards –
Removal of Special Purpose Financial Statements for
Certain For-Profit Private Sector Entities
Application date
of standard
Issue date
1 January 2022
December 2014
1 January 2020
December 2018
1 January 2020
December 2018
1 January 2020
May 2019
1 January 2020
September 2019
1 January 2020
October 2019
1 January 2020
November 2019
1 January 2022
March 2020
1 July 2021
March 2020
AASB 2020-3
AASB 2020-4
Amendments to Australian Accounting Standards –
Annual Improvements 2018 – 2020 and Other Amendment
Amendments to Australian Accounting Standards – Covid-19
Related Rent Concessions
AASB 17
Insurance Contracts
AASB 1059
Service Concession Arrangements: Grantors
AASB 1060
General Purpose Financial Statements – Simplified Disclosures for
For-Profit and Not-for-Profit Tier 2 Entities (Appendix C)
1 January 2022
June 2020
1 June 2020
June 2020
1 January 2021
1 January 2020
July 2017
July 2017
1 July 2021
March 2020
ANNUAL RE PORT 2020
55
NOTES TO THE FINANCIAL STATEMENTS (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 2.
SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS
Estimates and judgements incorporated in the financial statements are based on historical knowledge and best available current
information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data,
obtained both externally and within the group.
Key estimates and judgments
(i)
Impairment
At each reporting date, the consolidated group compares the carrying values and market values of 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.
(ii) Classification of inventories
The consolidated group has decided to classify investments in listed securities at fair value through profit and loss. 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 2020, goodwill totalling $2,803,345 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 2020 amounted to 9.66%. The Board
have assessed that there is no indication the goodwill is impaired.
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 2020 amounted to
9.66 %. The Board have assessed that there is no indication the goodwill is impaired.
(v)
Intangible assets
Upon acquisition of Entrust, Euroz acquired $1,356,240 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 2020 amounted to 9.66%. The Board have assessed that there is an impairment of $380,000 on Client portfolio C.
(vi)
Incremental borrowing rate
Where the interest rate implicit in a lease cannot be readily determined, an incremental borrowing rate is estimated to
discount future lease payments to measure the present value of the lease liability at the lease commencement date. Such a
rate is based on what the consolidated entity estimates it would have to pay a third party to borrow the funds necessary to
obtain an asset of a similar value to the right-of-use asset, with similar terms, security and economic environment.
(vii) Coronavirus (COVID-19 pandemic
Judgement has been exercised in considering the impacts that the Coronavirus (COVID-19) pandemic has had, or may have,
on the consolidated entity based on known information. This consideration extends to the nature of the products and services
offered, customers, supply chain, staffing and geographic regions in which the consolidated entity operates.
56
EUROZ LIM ITED
NOTES TO THE FINANCIAL STATEMENTS (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 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
Stockbroking business offering trading of Australian and international securities, post trade reporting, corporate finance and
advisory services and the 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.
Wealth Management
The consolidated group provides wealth management services including the portfolio administration of funds under management.
Investments
The consolidated group invests in listed and unlisted securities from which it derives dividends.
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.
ANNUAL RE PORT 2020
57
NOTES TO THE FINANCIAL STATEMENTS (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 3.
SEGMENT INFORMATION (CONT’D)
Segment performance
2020
Sales and other fees
Interest revenue
Other revenues
Stockbroking
& Corporate
Finance
Principal
Trading
Funds
Management
Wealth
Management
Investment
Income
$
$
$
$
34,128,828
17,957,327
4,094,441
9,065,151
$
-
185,974
160,935
1,120
25,194
24,933
-
16,357
5,726
44,296
3,611,478
Total
$
65,245,747
272,680
3,803,333
Total segment revenue
34,475,737
17,983,641
4,119,374
9,087,234
3,655,774
69,321,760
Segment net operating profit /
(loss) after tax
5,796,529
(1,477,852)
9,262,456
1,830,264
(11,060,947)
4,350,450
Depreciation and amortisation
1,070,587
-
296,017
9,680
-
1,376,284
Gain/(Loss) on fair value of
investments
Impairment expense
-
-
3,951,099
-
-
-
-
(2,364,089)
1,587,010
380,000
2,750,000
3,130,000
Segment assets
33,934,693
7,164,665
3,236,770
5,315,150
89,515,212
139,166,490
Fair value of investments
-
7,164,665
-
-
57,597,880
64,762,545
Segment liabilities
9,124,303
69,150
1,250,792
1,124,048
13,263,680
24,831,973
Stockbroking
& Corporate
Finance
Principal
Trading
Funds
Management
Wealth
Management
Investment
Income
2019
Sales and other fees
Interest revenue
Other revenues
$
$
$
$
29,000,464
16,092,302
3,982,476
8,776,753
404,885
159,169
5,873
49,860
55,929
-
20,938
3,985
$
-
86,694
Total
$
57,851,995
574,319
2,885,775
3,098,789
Total segment revenue
29,564,518
16,148,035
4,038,405
8,801,676
2,972,469
61,525,103
Segment net operating profit /
(loss) after tax
4,074,625
1,940,445
(2,763,869)
2,249,613
(7,510,414)
(2,009,600)
Depreciation and amortisation
303,069
-
Loss on fair value of investments
-
(3,899,611)
73,535
-
9,104
-
385,708
-
(10,076,874)
(13,976,485)
Segment assets
29,470,073
7,430,215
5,485,763
5,275,809
84,690,279
132,352,139
Fair value of investments
-
7,430,215
-
-
71,153,242
78,583,457
Segment liabilities
3,406,613
83,359
851,012
904,311
9,311,428
14,556,723
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 2020, approximately 7.49% (2019: 8.53%) of the consolidated group’s external revenue was derived
from management fees and dividends from Ozgrowth Limited and Westoz Investment Company Limited.
58
EUROZ LIM ITED
NOTES TO THE FINANCIAL STATEMENTS (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 4. REVENUE
Revenue from continuing operations
Revenue from discontinued operations
Disaggregation of revenue
The disaggregation of revenue is as follows:
30 June 2020
Brokerage
Stockbroking
& Corporate
Finance
$
17,382,349
Underwriting and placement fees
11,526,967
Performance and
management fees
Wealth management fees
Proceeds on sale of principal
trading shares
4,443,210
-
-
Corporate retainers
776,302
2020
$
67,545,324
1,776,436
2019
$
59,952,695
1,572,408
69,321,760
61,525,103
Principal
Trading
Funds
Management
Wealth
Management
Investment
$
-
-
-
-
17,957,326
-
$
-
-
4,094,441
-
-
-
$
1,020,528
365,460
-
7,679,163
-
-
$
-
-
-
-
-
-
Total
$
18,402,877
11,892,427
8,537,651
7,679,163
17,957,326
776,302
Other income
Interest received
Other revenue
Dividends and trust distributions
received
185,974
160,935
1,120
133
-
25,062
24,933
-
-
16,357
5,726
44,296
461
272,680
167,255
-
3,611,017
3,636,079
34,475,737
17,983,641
4,119,374
9,087,234
3,655,774
69,321,760
30 June 2019
Brokerage
Stockbroking
& Corporate
Finance
$
13,345,982
Underwriting and placement fees
11,259,626
Performance and
management fees
Wealth management fees
Proceeds on sale of principal
trading shares
1,889,943
-
-
Principal
Trading
Funds
Management
Wealth
Management
Investment
$
-
-
-
-
16,092,302
$
-
-
3,982,476
-
-
-
$
829,640
534,199
-
7,412,914
-
-
$
-
-
-
-
-
-
Total
$
14,175,622
11,793,825
5,872,419
7,412,914
16,092,302
2,504,914
Corporate retainers
2,504,914
-
Other income
Interest received
Other revenue
Dividends and trust distributions
received
404,884
158,419
5,873
1,129
750
48,731
55,929
-
-
20,939
3,984
86,694
-
574,319
163,532
-
2,885,775
2,935,256
29,564,518
16,148,035
4,038,405
8,801,676
2,972,469
61,525,103
ANNUAL RE PORT 2020
59
NOTES TO THE FINANCIAL STATEMENTS (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 5. PROFIT / (LOSS) BEFORE INCOME TAX EXPENSE FROM CONTINUING OPERATIONS
Profit / (loss) before income tax is determined after accounting for the following specific expenses:
Plant and equipment – depreciation
Leasehold improvements – amortisation
Rights of use asset – amortisation
Less depreciation and amortisation from discontinued operations
2020
$
2019
$
242,655
126,176
1,007,453
(45,044)
1,331,240
228,581
157,127
-
(45,110)
340,598
Finance costs
Interest and finance charges paid/payable on lease liabilities
165,505
-
Leases
Total rental expense relating to operating leases
Variable lease payment
Short term lease payments
Low value assets lease payments
Superannuation expense
Share based payments – PRP
Impairment expenses
Impairment – investment
Impairment – intangible asset
6.
INCOME TAX
The components of tax benefit / expense comprise:
Current tax
Other (i)
Deferred tax
Income tax benefit / expense is attributable to:
Expense / (benefit) from continuing operations
Expense / (benefit) from discontinued operations
Numerical reconciliation between tax expense and pre-tax accounting (loss) / profit
Profit / (loss) before income tax expense from continuing operations
Profit / (loss) before income tax expense from discontinued operations
-
34,249
770
-
1,813,452
-
-
-
1,058,927
1,180,700
1,900,220
1,682,575
2,750,000
380,000
-
-
2,570,078
-
(2,870,406)
3,663,983
(605,427)
(3,877,482)
(300,328)
(818,926)
(1,979,426)
1,679,098
(95,922)
(723,004)
(300,328)
(818,926)
5,992,210
(1,942,088)
4,050,122
(484,872)
(2,343,654)
(2,828,526)
Income tax using company’s tax rate of 30% (2019: 30%)
1,215,037
(848,558)
Add tax effect of:
- deferred tax not recognised on temporary differences
- other non-allowable items
(246,127)
82,333
1,051,243
344,557
1,187,664
683,663
60
EUROZ LIM ITED
NOTES TO THE FINANCIAL STATEMENTS (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 6.
INCOME TAX (CONT’D)
Less tax effect of:
- franked dividends received
Income tax benefit attributable to entity
2020
$
2019
$
1,351,571
1,502,589
(300,328)
(818,926)
(i) During the 2019 year, the Company has amended prior year tax returns for the years 2015 – 2018 in relation to the deductions
claimed for its contributions to the Employee Share Trust (EST). Previously, the Company had claimed these deductions as
the shares vested to the employees. The Company has changed this basis of deduction, to claiming it at the time of providing
the funding to EST by Euroz Limited. Accordingly, this has resulted in an additional taxation refund over these years and the
recognition of a deferred tax liability.
Reconciliations
i.
Gross movements
The overall movement in the deferred tax account is as follows:
Balance at 1 July
Recognised in statement of profit or loss
Balance at 30 June
ii.
Deferred tax liability
Movement in temporary differences during the year:
Fair value gain adjustments
Balance at 1 July
Recognised in the statement of profit or loss
Balance at 30 June
Other
Balance at 1 July
Recognised in the statement of profit or loss
Balance at 30 June
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
Recognised in the statement of profit or loss
Balance at 30 June
2020
$
2019
$
5,647,539
2,870,406
8,517,945
1,770,057
3,877,482
5,647,539
446,308
(411,096)
35,212
866,760
44,903
911,663
2,073,457
(1,627,149)
446,308
584,144
282,616
866,760
946,875
1,313,068
3,150,224
(857,532)
2,292,692
2,617,564
(1,528,846)
1,088,718
243,156
2,907,068
3,150,224
1,123,263
1,494,301
2,617,564
1,192,819
4,890,591
6,083,410
3,061,239
(1,868,420)
1,192,819
9,464,820
6,960,607
ANNUAL RE PORT 2020
61
NOTES TO THE FINANCIAL STATEMENTS (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 6.
INCOME TAX (CONT’D)
Tax consolidation legislation
Euroz Limited and its wholly-owned Australian subsidiaries implemented the tax consolidation legislation as of 1 July 2003. The
accounting policy on implementation of the legislation is set out in Note 1(b). The impact on the income tax expense for the year is
disclosed in the tax reconciliation above.
The entities have also entered into a tax sharing and funding agreement. Under the terms of this agreement, the wholly-owned
entities reimburse Euroz Limited for any current income tax payable by Euroz Limited arising in respect of their activities. The
reimbursements are payable at the same time as the associated income tax liability falls due and have therefore been recognised as
a current tax-related receivable by Euroz Limited. In the opinion of the Directors, the tax sharing agreement is also a valid agreement
under the tax consolidation legislation and limits the joint and several liability of the wholly-owned entities in the case of a default by
Euroz Limited.
7.
DISCONTINUED OPERATIONS
In March 2020, the Group have concluded a strategic review of the investment in Prodigy which has resulted in the decision to
discontinue the operations of the three subsidiaries, as follows:
•
•
•
FIP Management Services Pty Ltd (Note 31)
DSC Investment Management Pty Ltd (Note 31)
EPC Investment Management Pty Ltd (Note 31)
The results of the subsidiaries operations for the year are presented below:
Financial performance information
Revenue
Employee benefits expense
Depreciation and amortisation expenses
Regulatory expenses
Legal, professional and consultancy expenses
Conference and seminar expenses
Stockbroking & Portfolio management expenses
Communication expenses
Other expenses from ordinary activities
2020
$
2019
$
1,776,436
1,572,408
(2,023,635)
(45,044)
(20,481)
(101,101)
(36,689)
(1,138,152)
(107,776)
(245,646)
(1,851,531)
(45,110)
(12,908)
(224,856)
(93,792)
(965,127)
(169,606)
(553,132)
Loss before income tax
(1,942,088)
(2,343,654)
Income tax benefit / (expense)
(1,679,098)
723,004
Loss after income tax expense from discontinued operations
(3,621,186)
(1,620,650)
Assets
Cash
Other current assets
Plant and equipment
Deferred tax asset
Liabilities
Trade and other payables
Short term provisions
Deferred tax liability
Other non-current liabilities
Net assets (liabilities) directly associated to the subsidiaries classified as discontinued
6
-
-
-
6
-
-
-
-
-
6
34,403
218,857
72,094
1,679,383
2,004,737
417,525
200,348
283
11,262,805
11,880,961
(9,876,224)
62
EUROZ LIM ITED
NOTES TO THE FINANCIAL STATEMENTS (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 7.
DISCONTINUED OPERATIONS (CONT’D)
Cash flow information
Net cash from / (used in) operating activities
Net cash used in investing activities
Net cash from / (used in) investing activities
Net decrease in cash and cash equivalents from discontinued operations
8. CASH AND CASH EQUIVALENTS
Cash at bank and on hand
9. TRADE AND OTHER RECEIVABLES
2020
$
2019
$
1,126,637
(1,245,879)
(1,100)
(1,159,934)
(34,397)
(12,583)
1,238,667
(19,795)
41,106,390
27,383,046
Trade receivables
2,368,924
1,934,887
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.
10.
INVENTORIES
Securities in unlisted companies (at cost) (i)
Trading securities in listed companies (at cost) (i)
Fair value adjustments (ii)
Total
(i) These securities are held at fair value through profit or loss.
(ii) The fair value adjustment is based on the closing price of each investment at year end.
11. OTHER CURRENT ASSETS
Prepayments
Accrued income
Total
12.
FINANCIAL ASSETS
Security deposit
Financial guarantee – term deposit
345,733
4,586,992
2,231,940
785,965
8,363,410
(1,719,160)
7,164,665
7,430,215
1,043,453
375,487
1,004,599
374,466
1,418,940
1,379,065
5,000,000
216,699
5,000,000
-
5,216,699
5,000,000
Security deposit is held by Pershing Securities (Australia) Pty Ltd (clearing participant on behalf of Euroz Securities Limited).
ANNUAL RE PORT 2020
63
NOTES TO THE FINANCIAL STATEMENTS (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 13.
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.
14.
INVESTMENT ENTITIES AT FAIR VALUE
2020
$
2019
$
500,040
99,750
11,856,063
1,280,915
599,790
13,136,978
2020
$
2019
$
Listed ordinary shares in investment entities at fair value through profit or loss
56,998,090
58,016,264
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)
Closing fair value
58,016,264
67,586,696
164,750
(1,182,924)
-
(9,570,432)
56,998,090
58,016,264
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.
15. 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
2020
$
2019
$
413,396
(321,264)
92,132
283,238
(212,301)
70,937
697,265
(469,005)
228,260
105,437
(23,779)
81,658
679,101
(430,938)
248,163
276,548
(136,324)
140,224
586,881
(344,747)
242,134
107,433
(22,802)
84,631
472,987
715,152
64
EUROZ LIM ITED
NOTES TO THE FINANCIAL STATEMENTS (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 15. PLANT AND EQUIPMENT (CONT’D)
Reconciliations
Reconciliations of the carrying amounts of each class of plant and equipment at the beginning and end of the current and previous
financial years are set out below:
2020
Carrying amount at 1 July 2019
Additions
Disposal
Depreciation / amortisation expense
Leasehold
improvements
$
Plant and
equipment
$
248,163
-
(29,855)
(126,176)
466,989
159,049
(2,528)
(242,655)
Total
$
715,152
159,049
(32,383)
(368,831)
Carrying amount at 30 June 2020
92,132
380,855
472,987
2019
Carrying amount at 1 July 2018
Additions
Depreciation / amortisation expense
266,804
138,486
(157,127)
469,775
225,795
(228,581)
736,579
364,281
(385,708)
Carrying amount at 30 June 2019
248,163
466,989
715,152
16. DEFERRED TAX ASSETS
Deferred tax asset (Note 6)
9,464,820
6,960,607
Deferred tax assets are recognised only to the extent that it is probable that future taxable profits can be generated.
2020
$
2019
$
17.
INTANGIBLE ASSETS
Goodwill (refer (a) below)
Other intangible assets (refer (b) below)
(a)
Split of goodwill:
Goodwill on acquisition of Blackswan
Goodwill on acquisition of Entrust
2020
$
2019
$
8,442,545
1,356,240
8,442,545
1,736,240
9,798,785
10,178,785
2,803,345
5,639,200
2,803,345
5,639,200
8,442,545
8,442,545
Both goodwill balances are deemed to have an indefinite useful life and accordingly an impairment test was performed at reporting
date. Based on this assessment at 30 June 2020, no impairment was considered necessary. Note 2 (iv) contains additional
information on this assessment.
While the Blackswan group of companies were deregistered in the prior period, the Blackswan operating unit was integrated into Euroz
Securities Limited upon the initial acquisition and therefore, this deregistration had an insignificant impact on the goodwill balance.
ANNUAL RE PORT 2020
65
NOTES TO THE FINANCIAL STATEMENTS (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 17.
INTANGIBLE ASSETS (CONT’D)
(b) Other intangible assets
1,356,240
1,736,240
2020
$
2019
$
Split of other intangible assets:
Client portfolio A
Client portfolio B
Client portfolio C (i)
500,000
80,000
776,240
500,000
80,000
1,156,240
1,356,240
1,736,240
(i) The carrying value of all 3 assets was assessed at reporting date for impairment and an impairment of $380,000 was
noted for Client portfolio C. Note 2(v) contains further information on this impairment assessment.
18. TRADE AND OTHER PAYABLES
2020
$
2019
$
Other payables and accruals
3,639,785
1,772,881
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.
19.
CURRENT TAX ASSETS AND LIABILITIES
Tax receivable
Provision for taxation
20. SHORT TERM PROVISIONS
Dividends
Employee benefits (annual leave)
Employee benefits (long service leave)
Total
Dividends
2020
$
-
2,548,489
2020
$
9,751,095
1,483,615
1,856,163
2019
$
217,140
-
2019
$
8,049,469
1,476,971
1,919,654
13,090,873
11,446,094
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
Carrying amount at 30 June
2020
$
8,049,469
12,589,545
(10,887,919)
2019
$
14,891,518
10,866,783
(17,708,832)
9,751,095
8,049,469
66
EUROZ LIM ITED
NOTES TO THE FINANCIAL STATEMENTS (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 21. RIGHTS OF USE ASSET AND LEASE LIABILITY
Leased building
Accumulated amortisation
Rights of use asset
Lease liability – current
Lease liability – non current
Reconciliation of right of use asset:
Balance as at 1 July
Adoption of AASB 16
Disposals
Amortisation expense
Balance as at 30 June
2020
$
5,974,870
(1,418,470)
4,556,400
879,398
3,653,897
2020
$
-
5,563,853
-
(1,007,453)
4,556,400
2019
$
-
-
-
-
-
2019
$
-
-
-
-
-
The above rights of use asset and lease liability relates to:
•
•
•
The lease on the premises at Level 18 Alluvion, 58 Mounts Bay Road is for the period of 15 years commencing 2 July 2010 and
expiring on 1 July 2025.
The licence on the premises at Level 9, 20 Bond Street, Sydney NSW is for the period of 5 years commencing 15 December
2018 and expiring on 14 December 2023.
The licence on the premises at Level 15, 385 Bourke Street, Melbourne is for the period of 8 years commencing 1 June 2015
and expiring on 31 May 2022.
22. DEFERRED TAX LIABILITIES
Deferred tax liability (Note 6)
23. LONG TERM PROVISIONS
Employee benefits (long service leave)
24. CONTRIBUTED EQUITY
(a) Share capital
2020
$
2019
$
946,875
1,313,068
2020
$
2019
$
72,656
24,680
Ordinary shares
Issued and paid up capital consisting of ordinary shares
(net of Treasury shares)
154,147,541
155,012,651
102,167,440
101,333,244
2020
Shares
2019
Shares
2020
$
2019
$
ANNUAL RE PORT 2020
67
NOTES TO THE FINANCIAL STATEMENTS (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 24. CONTRIBUTED EQUITY (CONT’D)
(b) Movements in ordinary share capital
At the beginning of the reporting period
Acquisition of Treasury shares
Vested shares under Performance Rights Plan
At the end of the year
(c) Movements in ordinary share capital
At the beginning of the reporting period
Shares issued during the period
Acquisition of Treasury shares
Vested shares under Performance Rights Plan
Share issue cost
At the end of the year
(d) Treasury shares
2020
Shares
2019
Shares
155,012,651
(1,940,740)
1,075,630
155,879,961
(1,265,500)
398,190
154,147,541
155,012,651
2020
$
2019
$
101,333,244
1,639,362
(1,707,400)
902,234
-
102,343,793
-
(1,494,734)
494,685
(10,500)
102,167,440
101,333,244
2020
Shares
2019
Shares
2020
$
2019
$
Balance of Treasury shares at the end of the
reporting period
(6,841,841)
(5,976,731)
7,137,510
6,328,138
Treasury shares were acquired by the 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 2020 (30 June 2019: Nil).
(g) Share based payments reserve
The reserve records items recognised as expenses on valuation of share based payments. The movement in the current
period totalling $1,925,620 (2019: $1,694,192) 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
Vested shares under Performance Rights Plan
2020
$
3,846,281
1,925,620
(902,234)
2019
$
2,646,774
1,694,192
(494,685)
Balance on share based payments reserve at 30 June
4,869,667
3,846,281
68
EUROZ LIM ITED
NOTES TO THE FINANCIAL STATEMENTS (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 24. CONTRIBUTED EQUITY (CONT’D)
(h) Capital management
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 throughout the year.
25. DIVIDENDS
Ordinary shares
Interim dividend for the half year ended 31 December 2019 of 1.75 cents
(2019 – 1.75 cents) per fully paid ordinary share paid on 21 February 2020.
Fully franked based on tax paid @ 30%
Final dividend declared and provided for at 30 June 2020 of 6 cents
(2019 – 5 cents) per fully paid ordinary share paid on 7 August 2020.
Fully franked based on tax paid @ 30%
Total dividends provided for or paid
2020
$
2019
$
2,838,449
2,817,314
9,751,095
8,049,469
12,589,544
10,866,783
Of the total dividends paid during the year, $4,140 (2019: $7,816) 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 2020 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 2020.
2020
$
2019
$
Franking credits available for subsequent financial years based on
a tax rate of 30% (2019: 30%)
12,258,670
16,473,643
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.
26. FINANCIAL INSTRUMENTS
(a) Financial risk management
The group’s financial instruments consist of deposits with banks, trade receivables and payables, short term investments
and long term 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.
ANNUAL RE PORT 2020
69
NOTES TO THE FINANCIAL STATEMENTS (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 26. FINANCIAL INSTRUMENTS (CONT’D)
(b) Financial risk exposure and management (cont’d)
(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
2020
$
2019
$
3,639,785
1,772,881
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 2020.
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 (2019: Nil).
Carrying Amount
2020
$
2019
$
41,106,390
2,368,924
5,216,699
27,383,046
1,934,887
5,000,000
48,692,013
34,317,933
70
EUROZ LIM ITED
NOTES TO THE FINANCIAL STATEMENTS (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 26. FINANCIAL INSTRUMENTS (CONT’D)
(b) Financial risk exposure and management (cont’d)
(iv) Financial instruments composition and maturity analysis
FINANCIAL ASSETS
Cash and cash equivalents
Trade and other receivables
Financial assets held for trading
Financial assets at fair value through
profit and loss
Other investments
Long term deposit
Weighted Average
Effective Interest Rate
2019
%
2020
%
Floating Interest Rate
Non-Interest Bearing
2020
$
2019
$
2020
$
2019
$
0.57
1.39 41,106,390 27,383,046
-
-
-
-
-
2,368,924
7,164,665
-
1,934,887
7,430,215
0.08
0.75
-
-
- 56,998,090 58,016,264
13,136,978
-
-
5,216,699 5,000,000
599,790
-
Total financial assets
46,323,089 32,383,046
67,131,469 80,518,344
FINANCIAL LIABILITIES
Trade and other payables
Lease liability
(v)
Fair value hierarchy
3.5
-
4,533,295
4,533,295
-
-
-
3,639,785
-
1,772,881
-
3,639,785
1,772,881
The following table details the consolidated group’s 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 liabilities that are not based on observable market data (unobservable inputs).
2020
Assets
Level 1
$
Investments and Inventories
63,653,255
1,109,290
Level 2
Level 3
$
$
-
-
Total
$
64,762,545
64,762,545
63,653,255
1,109,290
Level 1
Level 2
Level 3
Total
Total Assets
2019
Assets
Investments and Inventories
77,611,380
972,077
Total Assets
77,611,380
972,077
-
-
78,583,457
78,583,457
ANNUAL RE PORT 2020
71
NOTES TO THE FINANCIAL STATEMENTS (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 26. FINANCIAL INSTRUMENTS (CONT’D)
(b) Financial risk exposure and management (cont’d)
(vi) 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%
2020
$
324,262
(324,262)
2019
$
226,681
(226,681)
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%
27. REMUNERATION OF AUDITORS
Audit services
Audit and review of financial reports for the Group
Fees paid to PKF Perth firm
Other services
Tax compliance services
Other services
28. CONTINGENT LIABILITIES
The parent entity and consolidated group had contingent liabilities at 30 June as follows:
Secured guarantees in respect of:
Operating lease of a controlled group entity
2020
$
2,266,689
(2,266,689)
2019
$
2,750,421
(2,750,421)
2020
$
2019
$
187,500
173,000
41,700
6,700
32,105
8,580
48,400
40,685
2020
$
2019
$
1,013,514
1,013,514
As detailed in note 12 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 (2019: $5,000,000).
The Group has no contingent assets at reporting date (2019: Nil).
72
EUROZ LIM ITED
NOTES TO THE FINANCIAL STATEMENTS (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 29. COMMITMENTS FOR EXPENDITURE
Operating leases
Commitments for minimum lease payments in relation to noncancellable operating leases
are payable as follows:
Within one year
Later than one year but not later than five years
Later than five years
Commitments not recognised in the financial statements
2020
$
2019
$
-
-
-
-
1,196,175
4,934,920
-
6,131,095
The lease on the premises at Level 18 Alluvion, 58 Mounts Bay Road is for the period of 15 years commencing 2 July 2010 and
expiring on 1 July 2025.
The licence on the premises at Level 9, 20 Bond Street, Sydney NSW is for the period of 5 years commencing 15 December 2018 and
expiring on 14 December 2023.
The licence on the premises at Level 15, 385 Bourke Street, Melbourne is for the period of 8 years commencing 1 June 2015 and
expiring on 31 May 2022.
The lease commitment has been included as part of lease liabilities for the year ended 30 June 2020. Refer to note 21.
30. RELATED PARTIES
(a) Key Management Personnel compensation
Short-term employee benefits
Post-employment benefits
Share based payments
Total compensation
2020
$
4,070,630
188,010
725,940
2019
$
3,869,615
196,281
757,190
4,984,580
4,823,086
(b)
Individual Key Management Personnel (KMP) 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 81 employees (2019: 86 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.
ANNUAL RE PORT 2020
73
NOTES TO THE FINANCIAL STATEMENTS (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 30. RELATED PARTIES (CONT’D)
(e) Wholly-owned group transactions
Whollyowned group
The whollyowned group consists of Euroz Limited and its whollyowned controlled entities. See Note 31.
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
Impairment of intercompany loan by Euroz Limited to subsidiaries
Impairment of intercompany loan 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
Ownership interests in related parties
Interests held in controlled entities are set out in note 31.
Other transactions with Directors and specified Executives
2020
$
2019
$
3,351,937
7,575,000
1,761,454
2,174,607
15,696,648
15,641,791
17,714,442
8,850,000
1,599,705
1,514,379
-
-
2,912,157
2,836,800
3,304,512
3,898,806
734 849
83,668
During the year ended 30 June 2020 the Directors and KMP transacted share business through Euroz Securities Limited on
normal terms and conditions.
Aggregate amounts of the above transactions with Directors and KMP of the consolidated group:
Amounts recognised as revenue
Brokerage earned on Key Management Personnel accounts
2020
$
2019
$
33,602
29,504
74
EUROZ LIM ITED
NOTES TO THE FINANCIAL STATEMENTS (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 31.
INVESTMENTS IN CONTROLLED ENTITIES
Name of entity
Country of
incorporation
Class of
shares
Euroz Securities Limited
Detail Nominees Pty Ltd
Zero Nominees Pty Ltd (i)
Westoz Funds Management Pty Ltd
Euroz Employee Share Trust
Ozgrowth Limited*
Westoz Investment Company Limited*
Prodigy Investment Partners Limited
FIP Management Services Pty Ltd (formerly
Flinders Investment Partners Pty Ltd) (ii)
DSC Investment Management Pty Ltd
(formerly Dalton Street Capital Pty Ltd) (ii)
EPC Investment Management Pty Ltd
(formerly Equus Point Capital Pty Ltd) (ii)
WIM WA Resources Limited
WIM Small Cap Limited
Entrust Wealth Management Pty Ltd
Prodigy Flinders Pty Ltd (ii)
Prodigy Corporate Pty Ltd (ii)
Prodigy DSC Pty Ltd (ii)
Prodigy EPC Pty Ltd (ii)
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Australia
Ordinary
Australia
Ordinary
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Equity holding
2020
%
2019
%
100
100
100
100
-
100
100
100
100
-
40.58
26.25
40.58
27.30
80
50
50
50
100
100
100
100
100
100
100
80
50
50
50
100
100
100
100
100
100
100
Cost of parent entity’s
investment
2020
$
2019
$
25,000,000
-
-
25,000,000
-
-
1,450,000
1,450,000
-
-
-
-
2
2
2
1
1
-
-
-
1,900,000
2
2
2
1
1
7,800,000
7,800,000
2
2
1
1
2
2
1
1
* 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.
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.
(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) Entrust Wealth Management Pty Ltd – Wealth management business providing advice in relation to wealth management and
strategic financial planning support for the entire Euroz Group.
(h) Prodigy Investment Partners Limited – 80/20 joint venture with Mr Steve Tucker to create a multi boutique funds
management business. Prodigy had partnerships with three separate boutique funds, Flinders, Dalton and Equus. In
March 2020, the Company announced the closure of Prodigy operations, including the partnership with the three
separate boutiques.
(i)
(j)
FIP Management Services Pty Ltd (formerly Flinders Investment Partners Pty Ltd) – Boutique fund manager launched in
August 2015 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. In March 2020, the Company
announced the closure of Prodigy operations, including the partnership with Flinders Investment Partners boutique fund.
DSC Investment Management Pty Ltd (formerly Dalton Street Capital Pty Ltd) – Boutique fund manager launched in
May 2016 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. In March 2020, the Company
announced the closure of Prodigy operations, including the partnership with Dalton Street Capital Pty Ltd boutique fund.
ANNUAL RE PORT 2020
75
NOTES TO THE FINANCIAL STATEMENTS (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 31.
INVESTMENTS IN CONTROLLED ENTITIES (CONT’D)
(k) EPC Investment Management Pty Ltd (formerly Equus Point Capital Pty Ltd) – Boutique fund manager launched in
August 2018 specialising in a systematic market neutral strategy. Prodigy Investment Partners Limited, the controlling
parent entered into a profit share arrangement with a trust resulting in a minority interest. In March 2020, the Company
announced the closure of Prodigy operations, including the partnership with Equus Point Capital Pty Ltd boutique fund.
32. EVENTS SUBSEQUENT TO REPORTING DATE
On 17 July 2020, Euroz and Hartleys entered into a binding bid implementation agreement whereby Euroz has agreed to make an
off-market takeover offer to acquire 100% of the issued capital in Hartleys.
Under the agreement, holders of Hartleys shares will be entitled to receive 3.3033304 new Euroz shares (rounded up) for every
Hartleys share accepted into the offer. This equates to the issue of approximately 33 million Euroz shares as consideration for the
acquisition of 100% Hartleys, with Hartleys shareholders to own up to approximately 17% of the combined group.
The transaction is expected to be completed by October 2020 with the integration of the two business to commence
shortly thereafter.
The impact of the Coronavirus (COVID-19) pandemic is ongoing and while it has not significantly impacted the Group up to
30 June 2020, it is not practicable to estimate the potential impact, positive or negative, after the reporting date. The situation is
rapidly developing and is dependent on measures imposed by the Australian Government and other countries, such as maintaining
social distancing requirements, quarantine, travel restrictions and any economic stimulus that may be provided.
Other than the above, the Directors are not aware of any matter or circumstance subsequent to 30 June 2020 that has
significantly affected, or may significantly affect:
(a)
(b)
(c)
the consolidated group’s operations in future financial years; or
the results of those operations in future financial years; or
the consolidated group’s state of affairs in future financial years.
33. RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES
Profit / (Loss) for the year
Adjustments for:
Depreciation and amortisation
Impairment expenses
Share based payments
Unrealised loss / (gain) arising from investing activity investments
Loss on disposal of property, plant and equipment
Loss on sale of investment in managed investment schemes
Interest paid on lease liabilities
Distributions received from investing activity investments
Distributions received in lieu of units
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)
2020
$
2019
$
4,350,450
(2,009,600)
1,376,284
3,130,000
2,138,120
2,364,089
32,381
790,380
165,505
(2,975,099)
(636,379)
(434,038)
(39,875)
265,550
(2,504,213)
1,866,904
2,765,628
(366,193)
(8,870)
385,708
-
1,694,192
10,076,872
-
-
-
(2,934,506)
-
246,174
2,724,170
5,424,872
(2,532,949)
(2,864,370)
(5,292,397)
(1,344,533)
178,732
Net cash from operating activities
12,280,624
3,752,365
76
EUROZ LIM ITED
NOTES TO THE FINANCIAL STATEMENTS (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 34. NON-CASH INVESTING AND FINANCING ACTIVITIES
Share issued under employee share plan
Addition to the right-of-use assets
Conversion of debt to equity
35.
(LOSS) / EARNINGS PER SHARE
Earnings / (loss) per share for profit / (loss) from continuing operations attributable to
the owners of Euroz Limited
Basic (loss) / earnings per share (cents)
Diluted (loss) / earnings per share (cents)
Earnings / (loss) per share for profit / (loss) from discontinued operations attributable
to the owners of Euroz Limited
Basic (loss) / earnings per share (cents)
Diluted (loss) / earnings per share (cents)
Earnings / (loss) per share for profit / (loss) attributable to the owners of Euroz Limited
Basic loss per share (cents)
Diluted loss per share (cents)
2020
$
1,925,620
5,563,853
212,500
2019
$
1,694,192
-
-
7,701,973
1,694,192
2020
Cents
5.26
5.09
(6.13)
(5.93)
(0.87)
(0.84)
2020
Number
2019
Cents
(0.24)
(0.23)
0.17
0.16
(0.07)
(0.07)
2019
Number
Weighted average number of shares used as the denominator
Weighted average number of ordinary shares used as the denominator in calculating
basic loss / earnings per share.
155,685,590
155,865,028
Weighted average number of ordinary shares and potential ordinary shares (including
treasury shares) used as the denominator in calculating diluted loss / earnings per share.
160,989,382
160,989,382
The (loss) / profit after tax figures used to calculate the loss / earnings per share for both the basic and diluted calculations was the
same as the profit figure from Consolidated Statement of Profit and Loss.
ANNUAL RE PORT 2020
77
NOTES TO THE FINANCIAL STATEMENTS (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 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
Share based payment reserve
Total equity
Financial performance
Profit for the year
Total comprehensive income
2020
$
2019
$
23,853,677
24,771,887
100,172,204
124,025,881
110,928,938
135,700,825
12,507,794
940,930
13,448,724
8,049,827
1,261,600
9,311,427
102,083,528
3,686,355
101,387,434
21,213,709
4,807,274
110,577,157
3,788,255
126,389,398
(4,788,391)
3,508,376
(4,788,391)
3,508,376
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
The parent entity and some of its subsidiaries are party to a deed of cross guarantee under which each company guarantees the
debts of the others. No deficiencies of assets exist in any of these subsidiaries.
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2020 and 30 June 2019.
Capital commitments – Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2020 and 30 June 2019.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the consolidated entity, as disclosed in note 1, except
for the following:
•
•
•
Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
Investments in associates are accounted for at cost, less any impairment, in the parent entity.
Dividends received from subsidiaries are recognised as other income by the parent entity.
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
78
EUROZ LIM ITED
NOTES TO THE FINANCIAL STATEMENTS (CONT’D)FOR THE YEAR ENDED 30 JUNE 2020 DIRECTORS’ DECLARATION
FOR THE YEAR ENDED 30 JUNE 2020
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 2020 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 Executive Chairman 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.
This declaration is made in accordance with a resolution of the Board of Directors.
Andrew McKenzie
Executive Chairman
Date: 20 August 2020
Robert Black
Executive Director
ANNUAL RE PORT 2020
79
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF EUROZ LIMITED
FOR THE YEAR ENDED 30 JUNE 2020
PKF Perth
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 2020, 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 direc
year.
In our opinion the financial report of Euroz Limited is in accordance with the Corporations Act 2001, including:
i)
ii)
and of its performance for the year ended on that date; and
Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Independence
We are independent of the consolidated entity in accordance with the auditor independence requirements of
the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the
Code.
Key Audit Matter
A key audit matter 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 audit opinion on this
matter. Our description of how our audit addressed the matter is provided in that context.
Level 4, 35 Havelock Street, West Perth, WA 6005
PO Box 609, West Perth, WA 6872
T: +61 8 9426 8999 F: +61 8 9426 8900 www.pkfperth.com.au
PKF Perth is a member firm of the PKF International Limited family of legally independent firms and does not accept any responsibility
or liability for the actions or inactions of any individual member or correspondent firm or firms.
Liability limited by a scheme approved under Professional Standards Legislation.
80
EUROZ LIM ITED
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF EUROZ LIMITED
FOR THE YEAR ENDED 30 JUNE 2020
PKF Perth
Carrying 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 $9,798,785 as disclosed in Note 17.
In assessing this key audit matter, our audit
procedures included;
determining
the carrying amount of
intangible assets by comparing the value in
use model with generally accepted
valuation methodology and accounting
standard requirements.
Challenging the key assumptions used in
- assessing the reasonableness of the
anticipated future inflows from each
cash generating unit;
- evaluating the adequacy of the
discount rate set by management.
Conducting sensitivity analysis on key
assumptions.
Assessing
related disclosures.
the appropriateness of
the
respect of intangibles is outlined in Notes 1 (y) and
(z). As disclosed intangibles including goodwill
have an indefinite useful life.
The carrying amount of intangible assets is a key
audit matter due to the level of judgement applied
key
determining
impairment.
As outlined in Notes 2(iv) and 2(v), management
assessed the carrying amount of intangible assets
through impairment testing utilising a value in use
model in which significant judgements are applied
in
assumptions. These
assumptions include the assessment of future
earnings before interest and tax, growth expected
to be achieved, as well as applying an appropriate
discount
in
determining the underlying assumptions in the
model have a significant impact on the carrying
amount of intangible assets and accordingly the
amount of any impairment charge to be recorded
in the current financial year.
judgements made
factor. The
Other Information
Those charged with governance are responsible for the other information. The other information comprises
not include the financial report and our
Our opinion on the financial report does not cover the other information and accordingly we do not express
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 and, in
doing so, consider whether the other information is materially inconsistent with the financial report or our
knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
ANNUAL RE PORT 2020
81
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF EUROZ LIMITED (CONT’D)
FOR THE YEAR ENDED 30 JUNE 2020
PKF Perth
The Directors of the Company are responsible for the preparation of the financial report that gives a true and
fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such
internal control as the Directors determine is necessary to enable the preparation of the financial report that
gives a true and fair view and is free from material misstatement, whether due to fraud or error.
In preparing the financial report, the Directors are responsible for assessing the c
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the Directors either intend to liquidate the consolidated entity or to cease
operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from
material misstatement, wh
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. We also:
Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient
and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
and related disclosures made by the Directors.
on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that
to the related
disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our
future events or conditions may cause the consolidated entity to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the disclosures,
and whether the financial report represents the underlying transactions and events in a manner that
achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the consolidated entity to express an opinion on the group financial report. We are
responsible for the direction, supervision and performance of the group audit. We remain solely responsible
for our audit opinion.
82
EUROZ LIM ITED
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF EUROZ LIMITED (CONT’D)
FOR THE YEAR ENDED 30 JUNE 2020
PKF Perth
We communicate with the Directors regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we identify
during our audit.
We also provide the Directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats
or safeguards applied.
From the matters communicated with the Directors, we determine those matters that were of most significance
in the audit of the financial report of the current period and are therefore the key audit matters. We describe
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
In our opinion, the Remuneration Report of Euroz Limited for the year ended 30 June 2020 complies with
section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration
Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an
opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing
Standards.
PKF PERTH
SIMON FERMANIS
AUDIT PARTNER
20 AUGUST 2020
WEST PERTH
WESTERN AUSTRALIA
ANNUAL RE PORT 2020
83
ASX ADDITIONAL INFORMATION
AS AT 20 AUGUST 2020
A) DISTRIBUTION OF SHAREHOLDERS
Analysis of number of shareholders by size of holding.
Range
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 Over
Total
Number of holders holding less than a marketable parcel: 210 at $1.12 per unit
B) TOP HOLDERS
The twenty largest holders of ordinary fully paid shares are listed below.
Holders
346
416
250
575
162
Units
137,147
1,229,193
1,988,340
19,224,539
139,939,023
1,749
162,518,242
Ordinary Shares
Rank Name
1
2
3
4
5
6
7
8
9
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
CPU SHARE PLANS PTY LTD
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