EVZ Limited
Annual Report 2013

Plain-text annual report

EVZ Limited and Controlled Entities Annual Report 2013 CONTENTS CORPORATE DIRECTORY CHAIRMAN’S REPORT CEO’S REPORT DIRECTORS’ REPORT DIRECTORS’ REPORT - REMUNERATION REPORT CORPORATE GOVERNANCE STATEMENT AUDITOR’S INDEPENDENCE DECLARATION CONSOLIDATED STATEMENT OF PROFIT OR LOSS 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 AND FORMING PART OF THE ACCOUNTS DIRECTORS’ DECLARATION INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS ADDITIONAL SHAREHOLDER INFORMATION 3 4 5 7 11 15 23 26 27 28 29 30 31 63 64 66 EVZ LIMITED Annual Report FY13 l 1 2 l EVZ LIMITED Annual Report FY13 Corporate Directory DIRECTORS Max Findlay (Non-Executive Chairman) Graham Burns (Non-Executive Director) Rob Edgley (Non-Executive Director) Raelene Murphy (appointed 28/9/12) (Non-Executive Director) M Findlay, Chairman G Burns R Edgley R Murphy CHIEF EXECUTIVE OFFICER Scott Farthing (appointed 24/9/12) S Farthing CHIEF FINANCIAL OFFICER and COMPANY SECRETARY Ian Wallace REGISTERED & PRINCIPAL OFFICE 15 Clifford Street HUNTINGDALE VIC 3166 Telephone: (03) 9545 5288 Facsimile: (03) 9558 9944 Email: corporate@evz.com.au SHARE REGISTRY Computershare Investor Services Pty Ltd 452 Johnston Street, ABBOTSFORD. VIC. 3067 Telephone: 1300 137 328 Facsimile: 1300 137 341 AUDITORS Advantage Advisors Level 7 114 William Street MELBOURNE Vic 3000 BANKERS Commonwealth Bank of Australia STOCK EXCHANGE LISTING Australian Securities Exchange Limited (Home Exchange – Melbourne) ASX Code: EVZ EVZ LIMITED Annual Report FY13 l 3 Chairman’s Report The 2013 financial year for EVZ Limited was a period of profitable stabilisation and setting the foundations for growth in coming years. In the year, the company reduced its revenue slightly to $57.2M (FY12: $62.6M) with earnings before interest, tax, depreciation and amortisation increasing to $3.16M (FY12: $0.85M). In competitive market conditions operations have stabilised after a period of restructure to enter a renewal phase with a new CEO. Scott Farthing commenced as our CEO in September 2012 leading the operations of the company to deliver growth across all market sectors in addition to the implementation of the clean energy strategy developed by the Board. As the energy strategy continues to be progressed, the Board is committed to executing a program of change promoting growth across all of the businesses to ensure reliable future growth in conjunction with our senior staff. In particular, I am pleased to report that: • the Syfon business continues its geographic expansion into Western Australia and Asia with positive results already being achieved. • Brockman has recently undergone management change, with a view to greater penetration in other geographic and industry sectors. The new General Manager is having immediate success with a significant increase in the tender pipeline. • a concerted and successful marketing focus has also been implemented within the TSF Maintenance business which has provided a number of new contracts and an improved recurring revenue base for the Group. • the Melbourne Airport project in TSF Engineering has commenced construction and TSF Engineering continues to expand its tender pipeline. Our work in hand has increased during the year by more than 40% giving rise to further stability as these projects are successfully executed. The management teams in each of our businesses are working with stronger operational processes to deliver more consistently to our clients. Strategic Development During the year the Board developed a strategy to invest in growing a clean energy business focusing on the Co-generation and Tri-generation sector and recurring revenue streams from the associated operating and maintenance. Co-generation and Tri-generation systems provide an alternative low cost and environmentally sustainable source of energy to large electricity consumers in Australia’s manufacturing and building sectors. Greater certainty in environmental policy with the new Federal Government is likely to expand investment in the clean energy industry. During the year, we commenced the design and construction of a major tri-generation plant for Melbourne Airport. This project, coupled with the award- winning Charlestown Square Shopping Centre tri-generation project, demonstrates our capability on which we can grow to become the leading provider in this sector. Reinvesting for Growth As part of repositioning itself for growth, EVZ is focusing on a debt reduction regime along with rebuilding cash reserves to fund investment in its profitable and growth businesses. The Directors have therefore determined that it would be financially prudent to not pay a dividend for FY13. The Board’s goal of delivering a sustainable dividend stream reflecting the earnings profile and capital needs of EVZ’s businesses remains a top priority. Appointment of new Director During the year Raelene Murphy was appointed to the Board as a Non-Executive Director. Raelene is a Director of 333 Management, a consultancy specialising in the provision of management capability for operational, strategic and financial advice. Her background is in managing diverse groups and financial and operational improvement, both as an advisor and in CEO and CFO roles across a number of industry sectors, including building and construction in the private and public arena. Conclusion Lastly, I would like to thank our shareholders for their continued support over the past twelve months as the Company continues to restructure itself building foundations and reinvesting in growth to create a more profitable business. Market conditions have been and continue to remain very difficult. However, the operational initiatives implemented over FY13 have put EVZ on a much better footing to respond, take advantage of growth opportunities, and increase shareholder value. Max Findlay Chairman 4 l EVZ LIMITED Annual Report FY13 CEO’s Report I am pleased to report that EVZ Limited has delivered an improved financial and operational performance in 2013. We are encouraged by the good progress made and return to profitability after a year of restructure and strategic change. The results show an improved performance derived from stronger operational management in conjunction with the introduction of our clean energy strategy. Lower revenues resulted from rationalisation in non-strategic sectors. The creation and early phase implementation of the clean energy strategy during the year has led to new market opportunities for the Group in the manufacturing and building sectors. Our energy generation offering allows large electricity consumers to gain substantial operating, financial and environmental benefits. Increasing demand for clean, cost effective, reliable and environmentally sensitive power generation options is evident confirming our strategic investment and future growth prospects in the sector. We have progressively improved the financial health of the business with a view to more deeply integrating our new strategic direction and making further operational improvements in a very competitive marketplace. Improved project management accompanied by stronger and more frequent reporting is achieving more reliable time and cost outcomes feeding into greater client satisfaction. Our safety performance continues to improve. Our Safety for Life program is reaching out to staff at all levels reinforcing safety as our number one priority. The conversations in our business are changing to a heightened awareness of the hazards and management of our site activities to reduce the risk of injury. Syfon Systems has continued to build strength in the water sector, gaining market share in the domestic market whilst building a stronger and more geographically diverse business in Asia. Our strategic focus on the higher margin mega-projects sector in Asia is delivering profitable results that are expected to increase further as our geographic expansion plan is executed. The engineering sector, primarily through Brockman Engineering, faced competitive local market conditions during the year. Our ongoing performance continues to be underpinned by long term operations and maintenance contracts accounting for more than one third of our annual revenue. Recently commenced new management is providing strategic leadership in the business that is specifically focusing on expanding our national project reach and capability that will derive profitable growth. EVZ is committed to further investment in this business which is seen as a significant contributor to shareholder value. TSF Engineering has commenced delivery of the Melbourne Airport Tri-generation Plant that will provide clean energy to Melbourne’s international gateway from 2015. The project is a component in the transformation to the clean energy generation sector that is expected to grow as the environmental and financial benefits of co-generation and tri-generation to the Australian manufacturing and large scale building sector become more widely recognised. Looking ahead, we have started building foundations for the future. There is more work to do and with the continued commitment of our directors and staff results will build. Finally, I would like to thank all our directors and staff for their commitment and contribution over the last year. We are on a journey that will continue to position the company. Scott Farthing Chief Executive Officer EVZ LIMITED Annual Report FY13 l 5 6 l EVZ LIMITED Annual Report FY13 Directors’ Report The Directors present their report on the financial statements of the Company and economic entity for the year ended 30 June 2013. In order to comply with the provisions of the Corporations Act, the Directors report as follows: DIRECTORS The following persons were Directors of the Company during the financial year and up to the date of this report: Maxwell FINDLAY Graham BURNS Robert EDGLEY Raelene MURPHY (appointed 28/9/12) Peter JONES (resigned 28/8/12) INFORMATION ON DIRECTORS Details of the Directors of the Company in office at the date of this report are: Maxwell Findlay Appointed 14 May 2008 – Non-Executive Chairman. Mr Findlay, age 69, was the Managing Director of Programmed Maintenance Services Limited from 1988 to 2008 and accumulated significant and relevant experience in the strategy, planning, management and marketing of a growing industrial organisation. Mr Findlay holds a Bachelor’s degree in Economics and is a Fellow of the Australian Institute of Company Directors. Mr Findlay is a member of the Audit Committee, Nomination Committee and Remuneration Committee. Interest in Shares: 1,644,500 ordinary shares. Graham Burns Appointed 1 February 2008 – Non-Executive Director. Mr Burns, age 58, has extensive managerial skills and experience in the property, retail and manufacturing sectors. He is currently the Chief Executive of Hunter Land which is a significant industrial developer in regional New South Wales. Mr Burns is Chairman of the Remuneration Committee and a member of the Nomination Committee. Interest in Shares: 9,017,021 ordinary shares. Robert Edgley Appointed 26 August 2011 – Non-Executive Director. Mr Edgley, age 48, holds a Bachelor’s degree in Economics from Monash University together with a second degree in Japanese language. Mr Edgley’s career has been predominantly focused in International Finance and Investment Banking in Australia, the UK and throughout Asia. Mr Edgley has significant experience and skills in strategic planning, performance management and marketing and has proven abilities in building businesses. Mr Edgley is a member of the Audit, Remuneration and Nomination Committees. Interest in Shares: 3,341,232 ordinary shares. EVZ LIMITED Annual Report FY13 l 7 Directors’ Report Raelene Murphy Appointed 28 September 2012 – Non-Executive Director. Ms Murphy, age 53, acted as the Interim CEO for EVZ from 10 February 2012 until the commencement of Scott Farthing as Group CEO on 24 September 2012. Ms Murphy specialises in the provision of management capability for operational, strategic and financial advice. Her background is in managing diverse groups and financial and operational performance improvement across a number of industry sectors, including building and construction and in the private and public arena. Ms Murphy has been appointed Chairperson of the Audit Committee and is a member of the Nomination Committee. Interest in Shares: 42,500 ordinary shares. DIRECTORS’ MEETINGS The following table sets out the number of Directors’ Meetings (including meetings of any committee of Directors) held during the financial year and the number of meetings attended by each Director (whilst they were a Director or Committee member): DIRECTORS’ MEETINGS Total number of meetings held: M Findlay – Chairman G Burns R Edgley R Murphy (appointed 28/9/12) P Jones (resigned 28/8/12) No. Attended 14 14 14 9 3 REMUNERATION COMMITTEE MEETINGS Total number of meetings held: G Burns – Chairman M Findlay R Edgley (appointed 28/9/12) P Jones (resigned 28/8/12) No. Attended 4 4 2 1 14 No. Held Whilst a Director 14 14 14 9 3 4 No. Held Whilst a Member 4 4 2 1 AUDIT COMMITTEE MEETINGS Total number of meetings held: R Murphy – Chairperson (appointed 28/9/12) M Findlay R Edgley P Jones – (resigned 28/8/12) No. Attended 2 3 3 1 3 No. Held Whilst a Member 2 3 3 1 There were no meetings of the Nomination Committee held during the year. 8 l EVZ LIMITED Annual Report FY13 Directors’ Report COMPANY SECRETARY The Company Secretary is Ian Wallace. Mr Wallace is a Chartered Accountant with accounting and company secretarial experience in listed and unlisted companies. PRINCIPAL ACTIVITIES The economic entity operates in the energy and engineering services sectors and its principal activities are: • Design, installation and maintenance of clean energy solutions, base and back-up power generation equipment, communications equipment, marine installations and provision of mobile generation capabilities. • Design and installation of syfonic roof drainage systems to major buildings including airports, shopping centres and sporting venues throughout Australia and South East Asia. • Design, manufacture, service and maintenance of large steel tanks for use in the water, petrochemical and chemical industries. • Design, construction, on-site installation, maintenance and shutdown engineering services to the mining, wood chip, petrochemical, aluminium, glass, cement, defence and agriculture industries. OPERATING RESULTS The net profit for the economic entity for the year after income tax expense was $889,768 compared to a net loss after income tax expense in 2012 of $14,149,900. The FY2013 results show a significant improvement in performance derived from stronger operational management of each subsidiary business in conjunction with the introduction of the clean energy strategy. Lower revenues resulted from rationalisation in non-strategic sectors resulting in improved earnings. Introduction of the clean energy strategy during the period has led to new project opportunities for the Group in the manufacturing and building sectors. Clean energy generation offering allows large electricity consumers to gain substantial operating, financial and environmental benefits. Increasing demand for clean, cost effective, reliable and environmentally sensitive power generation options is evident confirming strategic investment and future growth prospects in the sector. Improved operational management and focused strategic business development has provided gains in a competitive marketplace that are expected to continue in future years. Syfon Systems has continued to build strength in the water sector, rapidly gaining market share in the domestic market whilst building a stronger and more geographically diverse business in Asia. The strategic focus on the higher margin mega-projects sector in Asia is delivering strong results that are expected to increase further as the geographic expansion plan is executed. The engineering sector, primarily through Brockman Engineering, met competitive local market conditions during the year. Ongoing performance continues to be underpinned by long term operations and maintenance contracts accounting for more than one third of the annual revenue. Recently commenced new management is providing strategic leadership in the business that will specifically focus on expanding the geographic project reach and capability that will derive profitable growth. TSF Engineering has commenced delivery of the Melbourne Airport Tri-generation Plant that will provide clean energy to Melbourne’s international gateway from 2015. The project is a component in the transformation to the clean energy generation sector that is expected to grow as the environmental and financial benefits of co-generation and tri-generation to the Australian manufacturing and large scale building sector become more widely recognised. EVZ LIMITED Annual Report FY13 l 9 Directors’ Report DIVIDENDS No dividends were declared or paid during the year. REVIEW OF ACTIVITIES During the year under review the Company: • Continued to roll out its clean energy strategy to targeted clients. • Faced difficult trading conditions resulting from the prevailing economic conditions which have resulted in delays in the awarding and commencement of contracted work. • Continued to expand its customer, product and geographic base from an increased investment in business development. CHANGES IN STATE OF AFFAIRS There was no change in the state of affairs. SUBSEQUENT EVENTS There have not been any matters or circumstances, other than those referred to in the financial statements or notes thereto, that have arisen since the end of the financial year, that have significantly affected, or may significantly affect, the operations of the economic entity, the results of those operations, or the state of affairs of the economic entity in future financial years after this financial year. FUTURE DEVELOPMENTS The Group will continue its focus on building its clean energy solutions strategy. Introduction of the clean energy strategy during the period has led to new project opportunities for the Group in the manufacturing and building sectors. Clean energy generation offering allows large electricity consumers to gain substantial operating, financial and environmental benefits. Increasing demand for clean, cost effective, reliable and environmentally sensitive power generation options is evident confirming strategic investment and future growth prospects in the sector. PROCEEDINGS ON BEHALF OF THE COMPANY No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under Section 237 of the Corporations Act 2001. SHARE OPTIONS There are no share options. ENVIRONMENTAL REGULATIONS The economic entity is not subject to any significant environmental regulations under a Commonwealth, State or Territory Law. INSURANCE OF OFFICERS During the financial year the Company insured the Directors and Officers of the Company against legal costs that may be brought against the Directors and Officers in their capacity as Officers of the Company. The policy provides for confidentiality with respect to its premium. NON-AUDIT SERVICES During the current and prior year there were no non-audit services provided by the Company’s Auditors. AUDITOR’S INDEPENDENCE DECLARATION As required under Section 307C of the Corporations Act 2001, EVZ Limited has obtained an Independence Declaration from its auditors, Advantage Advisors. This is included on page 23 of this financial report. 10 l EVZ LIMITED Annual Report FY13 Directors’ Report - Remuneration Report REMUNERATION REPORT This report details the nature and amount of remuneration for each Director of EVZ Limited and for key management personnel. Remuneration policy The remuneration policy of EVZ Limited has been designed to align Director and Executive remuneration with shareholder and business objectives by providing a fixed remuneration component and where appropriate offering specific short and long-term incentives based on key performance areas affecting the economic entity’s financial results. The Board believes the remuneration policy to be appropriate and effective in its ability to attract and retain the best Directors and Executives to govern and manage the economic entity, as well as create goal congruence between Directors, Executives and Shareholders. Executive remuneration The Board’s policy for determining the nature and amount of remuneration for key senior Executives for the economic entity is as follows: • The remuneration policy, setting the terms and conditions for Executive officers, was developed by the Remuneration Committee and approved by the Board after seeking professional advice where appropriate from independent external consultants. • All Executives receive a base salary (which is based on factors such as length of service and experience), superannuation, fringe benefits and where appropriate performance incentives. The Remuneration Committee reviews Executive remuneration packages annually with reference to the economic entity’s performance, each Executive’s performance and comparable information from industry sectors and listed companies in similar industries. The performance of each Executive is measured against criteria agreed with each Executive and is based predominantly on forecast growth of the economic entity’s profits and shareholders’ value. Bonuses and incentives will be linked to predetermined performance criteria. The Board may, however, exercise its discretion in relation to approving incentives, bonuses and options, and can recommend changes to the Remuneration Committee’s recommendations. Any changes must be justified by reference to measurable performance criteria. The policy is designed to attract the highest calibre of Executives and reward them for performance that results in long-term growth in shareholder wealth. During the year to 30 June 2013 no incentives were paid to Executives of the economic entity (2012: $Nil). Executives receive a superannuation guarantee contribution as required by the Government and do not receive any other retirement benefits. Individuals may choose to sacrifice part of their salary to increase payments towards superannuation. All remuneration paid to Executives is valued at the cost to the Company and expensed. Director remuneration The Board’s policy is to remunerate Non-Executive Directors at appropriate market rates. The Remuneration Committee recommends the fee structure for Non-Executive Directors which will be determined by reference to market practice, duties performed, time, commitment and accountability. Director fees are reviewed annually by the Remuneration Committee. The Remuneration Committee may seek independent advice in determining appropriate fee structures for Directors. EVZ LIMITED Annual Report FY13 l 11 Directors’ Report - Remuneration Report The maximum aggregate amount of fees payable to Non-Executive Directors is subject to approval by shareholders at the Annual General Meeting. Fees for Non-Executive Directors are not linked to the performance of the economic entity. However, to align Directors’ interests with shareholder interests, the Directors are encouraged to hold shares in the Company and may be able to participate in any employee share/option plan introduced. All remuneration paid to Directors is valued at the cost to the Company and expensed. Shares and options issued as part of remuneration Shareholders had previously approved the EVZ Directors’ and Employees’ Benefits Plan (the “Plan”) which allows employees, Directors and others (“Eligible Persons”) to be granted shares, options and performance rights in the Company. The object of this Plan is to help the Company recruit, reward, retain and motivate its employees and Directors. Such shares, options and performance rights would be offered only to those Eligible Persons entitled to receive an invitation. Those Eligible Persons would be: • a Director or Secretary of a Group Company; • an employee in permanent full-time or permanent part-time employment of a Group Company; or • a contractor to a Group Company who is selected by the Board to participate in the Plan. Invitations to Eligible Persons will be made by the Board and may be made subject to such conditions and rules as the Board determines, including: • In the case of Options, the exercise period, the exercise price and the exercise conditions. • In the case of Shares, the issue price payable on acceptance of the application by the Company and issue of the shares and any other specific terms and conditions of issue. • In the case of Performance Rights, the performance criteria and the performance period in which those performance criteria must be satisfied. The issue of any securities (including options or performance rights) issued to any Director or their associates will still require shareholder approval under ASX Listing Rule 10.14. The maximum number of shares issued pursuant to the Plan would be not more than 5% of the equity interests in the Company. During the year, 500,000 fully paid ordinary shares were issued under plan to Mr S Farthing. The shares, issued at 6.4 cents per share, related to an agreed allotment under the terms of an executed employment agreement with Mr Farthing. Shares were issued following completion of the necessary probationary period. There were no other share-based payments in the year ended 30 June 2013. Performance based remuneration During the year to 30 June 2013, there was no performance based remuneration paid. Company performance, Shareholder wealth and Directors’ and Executives’ remuneration The remuneration policy has been tailored to increase goal congruence between shareholders and Directors and Executives. 12 l EVZ LIMITED Annual Report FY13 Directors’ Report - Remuneration Report Details of remuneration for the year ended 30 June 2013 The remuneration for each Director and each of key management personnel of the economic entity during the year was as follows: Directors 2013 M Findlay G Burns R Edgley R Murphy (appointed 28/9/12) P Jones (resigned 28/8/12) Short Term Employee Benefits Fees Salary $ $ 120,000 - 45,000 - 45,000 - 33,750 - 7,500 - 251,250 - Post Employment Benefits Superanuation Contributions $ - - - - - - Directors 2012 M Findlay P Jones G Burns R Edgley (appointed 26/8/11) - - - - - 110,000 45,000 45,000 38,188 238,188 - - - - - Total $ 120,000 45,000 45,000 33,750 7,500 251,250 110,000 45,000 45,000 38,188 238,188 EVZ LIMITED Annual Report FY13 l 13 Directors’ Report - Remuneration Report Key management personnel of the economic entity Short Term Employee Benefits Post Employment Benefits Salary 2013 S Farthing (Chief Executive Officer – appointed 24/9/12) I Wallace (Chief Financial Officer and Company Secretary) A Bellgrove (General Manager Syfon Systems Group) M Goddard (General Manager Brockman Engineering Pty Ltd) A Green (General Manager TSF Engineering Group) C Flanagan (Manager, TSF Maintenance Pty Ltd) $ 275,792 218,946 266,643 251,178 239,942 180,435 Share based Remuneration $ 32,000 - - - - - Non cash benefits $ 859 12,147 22,782 13,204 - - 12,669 25,000 15,775 20,518 21,365 16,200 Superanuation Contributions $ Termination Benefits $ Total $ 321,320 256,093 305,200 284,900 261,307 196,635 1,625,455 - - - - - - - 1,432,936 32,000 48,992 111,527 Ms Murphy acted as interim Chief Executive Officer from 1 July 2012 to 24 September 2012. Ms Murphy was engaged on a contract basis through 333 Management Pty Ltd. Fees paid to 333 Management Pty Ltd relating to Ms Murphy’s engagement as interim Chief Executive Officer were $77,172. Further fees of $150,000 were paid/payable to 333 Consulting Management Pty Ltd for other consulting services. 2012 A Powis (Chief Executive Officer – retired 23/3/12) I Wallace (Chief Financial Officer and Company Secretary) A Bellgrove (General Manager Syfon Systems Group) M Goddard (General Manager Brockman Engineering Pty Ltd A Green (General Manager TSF Engineering Group) S Fairbairn (General Manager, EVZ Energy Pty Ltd) J Gonzalez (General Manager, National Engineering Pty Ltd – retired 13/1/12) 252,126 191,570 266,643 265,416 239,953 123,853 91,826 1,431,387 - - - - - - 13,067 16,729 6,445 3,709 - 9,303 - 16,625 50,000 15,775 15,775 21,295 11,147 25,894 157,200 - - - - - 439,018 258,299 288,863 284,900 261,248 144,303 117,720 49,253 156,511 157,200 1,794,351 Ms Murphy acted as interim Chief Executive Officer from 4 February 2012. Ms Murphy was engaged on a contract basis through 333 Management Pty Ltd. Fees paid to 333 Management Pty Ltd relating to Ms Murphy’s engagement as interim Chief Executive Officer were $252,166. Remuneration and other terms of employment for key Executives are formalized in employment service agreements. Each of these agreements may provide for the provision of other benefits including car allowances. These agreements have no fixed term. There are no other standard termination provisions excluding notice periods. Notice periods are generally between three and six months. Signed in accordance with a resolution of the Board of Directors. Director - M Findlay Signed at Melbourne this 20th day of September 2013. 14 l EVZ LIMITED Annual Report FY13 Corporate Governance Statement for the year ended 30 June 2013 Introduction The board of EVZ Limited is committed to protecting shareholders’ interests and ensuring investors are fully informed about the performance of the company’s business. The directors have under- taken to perform their duties with honesty, integrity, care and diligence, according to the law and in a manner that reflects the highest standards of corporate governance. The directors have established the processes to protect the interests and assets of shareholders and to ensure the highest standard of integrity and corporate governance of the company. The Australian Securities Exchange Corporate Governance Council sets out best practice recommendations including corporate governance practices and suggested disclosures. ASX Listing Rules require companies to disclose the extent to which they have complied with the ASX recommendations and to give reasons for not following them. Unless otherwise indicated, the best practice recommendations of the ASX Corporate Governance Council, including corporate governance practices and suggested disclosures, have been adopted by the company for the year ended 30 June 2013 as relevant to the size and complexity of the company and its operations. The board has adopted a formal board charter, audit committee charter, remuneration committee charter, nomination committee charter, external communications policy, continuous disclosure policy, securities trading policy and code of conduct for Directors and Officers. PRINCIPLE 1: LAY A SOLID FOUNDATION FOR MANAGEMENT AND OVERSIGHT Recommendation 1.1: Companies should establish the functions reserved to the board and those delegated to senior executives and disclose those functions The EVZ Limited board charter sets out the function and responsibilities of the board. The directors of the company are accountable to shareholders for the proper management of business and affairs of the company. The key responsibilities of the board are to: • establish, monitor and modify the corporate strategies of the company; • ensure proper corporate governance; • monitor and evaluate the performance of management of the company; • ensure that appropriate risk management systems, internal control and reporting systems and compliance frameworks are in place and are operating effectively; • assess the necessary and desirable competencies of board members, review board succession plans, evaluate its own performance and consider the appointment and removal of directors; • consider executive remuneration and incentive policies, the company’s recruitment, retention and termination policies and procedures for senior management and the remuneration framework for non-executive directors; • monitor financial performance; • approve decisions concerning the capital, including capital restructures, and dividend policy of the company; and • comply with the reporting and other requirements of the law. The board delegates responsibility for day-to-day management of the company to the chief executive officer (CEO), subject to certain financial limits. The CEO must consult the board on matters that are sensitive, extraordinary, of a strategic nature or matters outside the permitted financial limits. EVZ LIMITED Annual Report FY13 l 15 Corporate Governance Statement for the year ended 30 June 2013 Recommendation 1.2: Companies should disclose the process for evaluating the performance of senior executives The company has a duly appointed remuneration committee. The committee operates pursuant to the remuneration committee charter. The primary responsibilities of the remuneration committee are: • Establish appropriate remuneration policies for directors, the CEO and other senior executives which are effective in attracting and/or retaining the best directors and executives to monitor and manage EVZ Limited, whilst ensuring goal congruence between shareholders, directors and ex- ecutives. • Ensuring appropriate disclosure of remuneration in line with the Corporations Act, ASX Listing Rules and Corporate Governance guidelines. All senior executives were reviewed during the financial year in accordance with the general process of review. In addition, pursuant to the board charter, the board conducted an annual re- view of itself during the financial year, taking into account developments, trends and standards set in the external market place. PRINCIPLE 2: STRUCTURE THE BOARD TO ADD VALUE Recommendation 2.1: A majority of the board should be independent directors During the financial year, the board comprised of four directors, all of whom, including the chairman, are non-executive and independent directors. Profiles of the directors are set out in this annual report. All directors are subject to retirement by rotation in accordance with the Company’s constitution but may stand for re-election by the shareholders. The composition of the board is determined by the board and, where appropriate, external advice is sought. The board has adopted the following principles and guidelines in determining the composition of the board: To be independent, a director ought to be non-executive and: • not a current executive of the company; • ideally not held an executive position in the company in the previous three years; • not a nominee or associate of a shareholder holding more than 10% of the company’s shares; • not significantly involved in the value chain of the organisation, either upstream or downstream; and • not a current advisor to the company receiving fees or some other benefit, except for approved director’s fees. Recommendation 2.2: The chair should be an independent director The chairman, Max Findlay, is an independent director. He is responsible for the leadership of the board and he has no other positions that hinder the effective performance of this role. Recommendation 2.3: The roles of chair and CEO should not be exercised by the same individual The role of chairman is held by Max Findlay whilst the role of CEO is held by Scott Farthing (from 24 September 2012) and by Raelene Murphy on an interim basis prior to that date. 16 l EVZ LIMITED Annual Report FY13 Corporate Governance Statement for the year ended 30 June 2013 Recommendation 2.4: The board should establish a nomination committee The company has a duly appointed nomination committee. The committee operates pursuant to a nomination committee charter. The charter sets out the responsibilities of the committee including reviewing board succession plans to ensure an appropriate balance of skills and expertise, developing policies and procedures for the appointments of directors and identifying directors with appropriate qualifications to fill board committee vacancies. The term of non-executive directorships is set out in the company’s constitution. Given the size of the board, the board has determined it appropriate for the nomination committee to consist of the full board of directors. Recommendation 2.5: Companies should disclose the process for evaluating the performance of the board, its committees and individual directors The board and its committees undertook self-assessment in accordance with their relevant charters during the financial year. Max Findlay conducts annual one-on-one personal performance discussions with each of the individual directors. The board was provided with all company information it needed in order to effectively discharge its responsibilities and were entitled to, and did, request additional information when considered necessary or desirable. PRINCIPLE 3: PROMOTE ETHICAL AND RESPONSIBLE DECISION-MAKING Recommendation 3.1: Companies should establish a code of conduct and disclose the code or a summary of the code to guide the directors, CEO, the chief financial officer (CFO) and other key executives in responsible decision-making The company has developed codes of conduct to guide all of the company’s employees, particularly directors, the CEO, the CFO and other senior executives, in respect of ethical behaviour. These codes are designed to maintain confidence in the company’s integrity and the responsibility and accountability of all individuals within the company for reporting unlawful and unethical practices. These codes of conduct embrace such areas as: • conflicts of interest • corporate opportunities • confidentiality • fair dealing and trade practices • protection of assets • compliance with laws, regulations and industry codes • ‘whistle-blowing’ • security trading • commitment to and recognition of the legitimate interests of stakeholders EVZ LIMITED Annual Report FY13 l 17 Corporate Governance Statement for the year ended 30 June 2013 Recommendation 3.2: Companies should establish a policy concerning trading in company securities by directors, senior executives and employees and disclose the policy Directors and Officers are encouraged to be long-term holders of the company’s shares. For Directors and Officers, the company has adopted a formal securities trading policy. Directors and Officers may not deal in any of the company’s securities at any time if they have inside information. A director or officer may not trade in securities during black-out periods as determined by the board of directors. These periods generally relate to periods prior to the release to the ASX of the half-yearly and annual results or where the directors are aware of any price sensitive information. A director or officer may trade in securities at other times only if they are personally satisfied that they are not in possession of inside information. Directors and Officers must immediately advise the company secretary in writing of the details of completed transactions. Such notification is necessary whether or not prior authority has been required. The secretary must maintain a register of securities transactions. The company must comply with its obligations to notify the ASX in writing of any changes in the holdings of securities or interest in securities by directors. PRINCIPLE 4: SAFEGUARD THE INTEGRITY IN FINANCIAL REPORTING Recommendation 4.1: The board should establish an audit committee The board-appointed audit committee operates in accordance with the audit committee charter. The details of the committee meetings held during the year and attendance at those meetings are detailed in the directors’ meeting schedule in the directors’ report. Recommendation 4.2: The audit committee should be structured so that it consists only of non-executive directors, consists of a majority of independent directors, is chaired by an independent chair, who is not chair of the board, and has at least three members The composition of the company’s audit committee was consistent in all aspects relating to recommendation 4.1. The audit committee consists of: • Raelene Murphy (Chairperson) (appointed 28/9/12) • Max Findlay • Robert Edgley Each of the members of the committee is an independent, non-executive director and the chairman of the committee is not the chairman of the board. The CEO and the CFO/company secretary may attend the meetings at the invitation of the committee. All members of the committee are financially literate (i.e. they are able to read and understand financial statements) and have an understanding of the industry in which the company operates. The audit committee provides an independent review of: • financial information produced by the company; • the accounting policies adopted by the company; • the effectiveness of the accounting and internal control systems and management reporting which are designed to safeguard company assets; • the quality of the external audit functions; • external auditor’s performance and independence as well as considering such matters as replacing the external auditor where and when necessary; and 18 l EVZ LIMITED Annual Report FY13 • identifying risk areas. Corporate Governance Statement for the year ended 30 June 2013 Recommendation 4.3: The audit committee should have a formal charter A formal audit committee charter has been adopted by the board. This charter sets out the roles, responsibilities, composition, structure and membership requirements of the audit committee. PRINCIPLE 5: MAKE TIMELY AND BALANCED DISCLOSURE Recommendation 5.1: Companies should establish written policies and procedures designed to ensure compliance with ASX Listing Rules disclosure requirements and to ensure accountability at a senior executive level for that compliance and disclose those policies The board recognises that the company, as an entity listed on the ASX, has an obligation to make timely and balanced disclosure in accordance with the requirements of the Australian Securities Exchange Listing Rules and the Corporations Act 2001. The board also is of the view that an appropriately informed shareholder base and market is essential to an efficient market for the company’s securities. The board is committed to ensuring that shareholders and the market have timely and balanced disclosure of matters concerning the company. In demonstration of this commitment, the company has adopted a formal external communications policy including a continuous disclosure policy. In order to ensure the company meets its obligations of timely disclosure of such information, the company has adopted the following policies: • immediate notification to the ASX of information concerning the company that a reasonable person would expect to have a material effect on the price or value of the company’s securities as prescribed under listing rule 3.1, except where such information is not required to be disclosed in accordance with the exception provisions of the listing rules; • the company has a website where all relevant information disclosed to the ASX will be promptly placed on the website following receipt of confirmation from the ASX and, where it is deemed desirable, released to the wider media; and • the company will not respond to market rumours or speculation, except where required to do so under the listing rules. Based on information provided to the company secretary by directors, officers and employees, the company secretary is responsible for determining which information is to be disclosed and for the overall administration of this policy. PRINCIPLE 6: RESPECT THE RIGHTS OF SHAREHOLDERS Recommendation 6.1: Companies should design a communications policy for promoting effective communication with shareholders and encouraging their participation at general meetings and disclose that policy The board recognises that shareholders are the beneficial owners of the company and respects their rights and is continually seeking ways to assist shareholders in the exercise of those rights. The board also recognises that as owners of the company the shareholders may best contribute to the company’s growth, value and prosperity if they are appropriately informed. To this end the board seeks to empower shareholders by: • communicating effectively with shareholders; • enabling shareholders to have access to balanced and understandable information about the company and its operations; and • promoting shareholder participation in general meetings. EVZ LIMITED Annual Report FY13 l 19 Corporate Governance Statement for the year ended 30 June 2013 All shareholders are entitled to receive a copy of the company’s annual report. In addition, the company’s website will provide opportunities to shareholders to access company announcements, media releases and financial reports. The board is committed to assisting shareholders’ participation in meetings and has adopted the following measures: • adoption of the ASX Corporate Governance Council’s recommendation and guidelines as published in the Council’s Principles of Good Governance and Best Practice Recommendations in respect of notices of meetings; and • ensuring that a representative of the company’s external auditor, subject to availability, is present at all annual general meetings and that shareholders have adequate opportunity to ask questions of the auditor at that meeting concerning the audit and preparation and content of the auditor’s report. PRINCIPLE 7: RECOGNISE AND MANAGE RISK Recommendation 7.1: Companies should establish policies for the oversight and management of material business risks and disclose a summary of those policies The board has overall responsibility to all stakeholders for the identification, assessment, management and monitoring of the risks faced by the company. The company currently has informal policies and procedures for risk management but the audit committee seeks to ensure compliance with regulatory requirements. The operational risks are managed at the senior management level and escalated to the board for direction where the issue is exceptional, non-recurring or may impose a material financial or operational burden on the company. The relatively small size of the company means that communication and decision-making is predominantly centralised allowing early identification of risks by senior management. It also allows senior management to respond to each risk as appropriate without the need for a written risk management policy. Recommendation 7.2: The board should require management to design and implement the risk management and internal control system to manage the company’s material business risks and report to it on whether those risks are being managed effectively. The board should disclose that management has reported to it as to the effectiveness of the company’s management of its material business risks Given the relatively small and centralised management team, the nature of the business of the company and that a majority of independent directors sits on the audit committee, the board is continuously kept informed of the effectiveness of the company’s internal control systems. The board continues to formalise risk management policies. In addition, the CEO and CFO have informed the board that the integrity of the financial statements is founded on a system of risk management and internal control which supports the policies adopted by the board and that the company’s risk management and internal control system is operating effectively in all material respects to manage the company’s material business risks. 20 l EVZ LIMITED Annual Report FY13 Corporate Governance Statement for the year ended 30 June 2013 PRINCIPLE 8: REMUNERATE FAIRLY AND RESPONSIBLY Recommendation 8.1: The board should establish a remuneration committee The company has a duly appointed remuneration committee. The committee operates pursuant to the remuneration committee charter. The remuneration committee consists of: • Graham Burns (Chairman) • Max Findlay • Rob Edgley (appointed 28/9/12) The primary responsibilities of the remuneration committee are: • Establish appropriate remuneration policies for directors, the CEO and other senior executives which are effective in attracting and/or retaining the best directors and executives to monitor and manage EVZ Limited, whilst ensuring goal congruence between shareholders, directors and executives. • Ensuring appropriate disclosure of remuneration in line with the Corporations Act, ASX Listing Rules and Corporate Governance guidelines. Recommendation 8.2: Companies should clearly distinguish the structure of non-executive directors’ remuneration from that of executive directors and senior executives Non-executive directors are remunerated by way of fees. They may receive options (subject to shareholder approval) but there is no scheme for retirement benefits, other than statutory superannuation. Executives are paid a salary and may be provided with shares and/or options and bonuses as part of their remuneration and incentive package. There are no executive directors. EVZ LIMITED Annual Report FY13 l 21 Corporate Governance Statement for the year ended 30 June 2013 DIVERSITY POLICY The Group’s ultimate success is under-pinned by its employees. To maximise success, the Group encourages a diverse population of employees within its operations. Diversity is defined to include race, ethnicity, gender, sexual orientation, socio-economic status, culture, age, physical ability, education, skill levels, family status, religious, political and other beliefs and work styles. The Group recognises that differences in ideas, backgrounds, patterns of thinking and approaches to work can generate value for the Group’s stakeholders: its customers, shareholders, personnel and the communities in which it operates. It is the Group’s policy to promote these differences within a productive, inclusive and performance-based environment in which everybody feels valued, where their skills are fully utilised, their performance is recognised, professional accountability is expected and organisational goals are met. The Group’s approach to diversity is based on the following objectives: • retain, promote and hire the best people possible, focusing on actual and potential contribution in terms of performance, competence, collaboration and professional accountability; • foster an inclusive culture and ensure that current and future employee opportunities are based on competence and performance, irrespective of race, ethnicity, gender, sexual orientation, socio-economic status, culture, age, physical ability, education, family status, religious, political and other beliefs and work styles. This includes being intolerant of behaviour that denigrates or otherwise diminishes such attributes or that discriminates on the basis of such attributes; • create and manage appropriate human resource processes which take a unified and talent-based approach to recruitment, training and development, performance management, retention and succession planning; • provide a fair level of reward in order to attract and retain high calibre people – and build a culture of achievement by providing a transparent link between reward and performance; and • be compliant with all mandatory diversity reporting requirements. The Group’s Measurable Objective and Current Gender Profile: The Group’s measurable objective for increasing gender diversity is to increase the representation of women at all levels of its organisation over time. The Group’s progress towards achieving that objective, along with the proportion of women employees within the Group, women in senior executive positions and women non-executive directors, is set out in the table below: Measure Women employees Women senior executives * Women non-executive directors 2013 No. 16 0 1 % 6 0 25 2012 No. 24 1 0 % 8 20 0 (cid:1) This includes both employees and specific contractors engaged by the Group. 22 l EVZ LIMITED Annual Report FY13 Auditor’s Independence Declaration Advantage Advisors Audit Partnership Audit & Assurance Services Level 7, 114 William Street Melbourne VIC 3000 Australia GPO Box 2266 Melbourne VIC 3001 Australia ABN 47 075 804 075 T +61 3 9274 0600 F +61 3 9274 0660 audit@advantageadvisors.com.au advantageadvisors.com.au AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001 TO THE DIRECTORS OF EVZ LIMITED I declare that, to the best of my knowledge and belief, during the year ended 30 June 2013 there have been: a) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and b) no contraventions of any applicable code of professional conduct in relation to the audit. ADVANTAGE ADVISORS AUDIT PARTNERSHIP CHARTERED ACCOUNTANTS JAMES RIDLEY PARTNER Dated in Melbourne on this 20th day of September 2013 EVZ LIMITED Annual Report FY13 l 23 Financial Statements EVZ Limited and Controlled Entities ABN 87 010 550 357 EVZ LIMITED Annual Report FY13 l 25 Consolidated Statement of Profit or Loss for the year ended 30 June 2013 Revenue Cost of sales Gross profit Other income Administration costs Business development costs Corporate costs Impairment of intangibles Results from operating activities Net finance costs Profit /(Loss) before income tax from continuing operations Income tax expense/(benefit) Profit/(Loss) from continuing operations Loss from discontinued operations after tax Profit/(Loss) for year Net Profit/(Loss) attributable to: Members of the parent entity Non-controlling interest Overall operations Basic earnings per share Diluted earnings per share Continuing operations Basic earnings per share Diluted earnings per share Discontinued operations Basic earnings per share Diluted earnings per share Notes Economic Entity 2013 $ 57,202,336 (45,067,324) Economic Entity 2012 $ 62,561,655 (50,443,540) 12,135,012 12,118,115 2(a) 2(c) 3 2 2(d) 17 17 17 17 17 17 90,981 (7,561,673) (1,459,145) (1,233,751) - 1,971,424 (1,229,749) 741,675 (148,093) 889,768 - 77,197 (9,393,577) (1,208,270) (1,789,224) (7,900,000) (8,095,759) (1,031,572) (9,127,331) (318,215) (8,809,116) (5,340,784) 889,768 (14,149,900) 889,768 - 889,768 (14,077,481) (72,419) (14,149,900) Cents per share Cents per share 0.43 0.43 0.43 0.43 - - (6.8) (6.8) (4.24) (4.24) (2.57) (2.57) The above consolidated statement of profit or loss should be read in conjunction with the accompanying notes. 26 l EVZ LIMITED Annual Report FY13 Consolidated Statement of Profit or Loss and Other Comprehensive Income for the year ended 30 June 2013 Profit/(Loss) for the year Other comprehensive income: Items that may be reclassified subsequently to profit or loss Exchange differences arising on translation of foreign operations Non-controlling interest Total comprehensive income/(loss) for the year attributable to owners of the company Total comprehensive income/(loss) for the year attributable to: Members of the parent entity Non-controlling interest Notes 16(b) Economic Entity 2013 $ 889,768 Economic Entity 2012 $ (14,149,900) 135,026 72,419 1,097,213 (4,421) - (14,154,321) 1,097,213 - 1,097,213 (14,081,902) (72,419) (14,154,321) The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes. EVZ LIMITED Annual Report FY13 l 27 Consolidated Statement of Financial Position as at 30 June 2013 CURRENT ASSETS Cash and cash equivalents Trade and other receivables Inventories Financial assets TOTAL CURRENT ASSETS NON-CURRENT ASSETS Trade and other receivables Plant and equipment Deferred tax assets Intangible assets Financial assets TOTAL NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables Tax liabilities Short-term borrowings TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Long-term borrowings Deferred tax liabilities Other long-term provisions TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Reserves Accumulated losses PARENT ENTITY Non-controlling interest TOTAL EQUITY Notes 22 4 5 6 4 7 8 9 6 10 8 11 12 8 13 14 16 16 Economic Entity 2013 $ 2,607,853 15,424,497 1,703,463 82,851 19,818,664 Economic Entity 2012 $ 4,303,530 11,551,418 1,892,032 - 17,746,980 387,796 5,586,374 3,404,715 19,989,290 27,604 29,395,779 49,214,443 12,268,452 29,391 11,758,306 24,056,149 176,188 49,588 55,934 281,710 24,337,859 430,220 6,273,610 3,187,157 19,989,290 114,554 29,994,831 47,741,811 8,743,638 - 4,439,843 13,183,481 9,608,139 19,838 1,182,982 10,810,959 23,994,440 24,876,584 23,747,371 46,055,159 (40,933) (21,137,642) 24,876,584 - 24,876,584 46,023,159 22,741 (22,226,110) 23,819,790 (72,419) 23,747,371 The above consolidated statement of financial position should be read in conjunction with the accompanying notes. 28 l EVZ LIMITED Annual Report FY13 Consolidated Statement of Changes in Equity for the year ended 30 June 2013 ECONOMIC ENTITY Issued Capital Accumulated Losses Capital Reserves $ 46,023,159 $ (22,226,110) $ 198,700 Foreign Currency Translation Reserve $ (175,959) Sub-Total $ 23,819,790 Non Controlling Interest $ (72,419) Total $ 23,747,371 30 June 2013 Balance at 1 July 2012 Total comprehensive loss for year Profit for year Transfer from capital reserve Foreign currency translation reserve Non-controlling interest Total comprehensive loss for year Transactions with owners, recorded directly in equity Shares issued Dividends Balance at 30 June 2013 30 June 2012 Balance at 1 July 2011 Total comprehensive loss for year Loss for year Foreign currency translation reserve Total comprehensive loss for year Transactions with owners, recorded directly in equity Shares issued Dividends Balance at 30 June 2012 - - - - - 889,768 198,700 - - (198,700) - - - 135,026 889,768 - 135,026 - - - 889,768 - 135,026 - 1,088,468 - (198,700) - 135,026 - 1,024,794 72,419 72,419 72,419 1,097,213 32,000 - 46,055,159 - - (21,137,642) - - - - - (40,933) 32,000 - 24,876,584 46,023,159 (8,148,629) 198,700 (171,538) 37,901,692 - - - - 32,000 - 24,876,584 37,901,692 - - - (14,077,481) - (14,077,481) - - - - (4,421) (14,077,481) (4,421) (72,419) - (14,149,900) (4,421) (4,421) (14,081,902) (72,419) (14,154,321) - - 46,023,159 - - (22,226,110) - - 198,700 - - (175,959) - - 23,819,790 - - (72,419) - - 23,747,371 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. EVZ LIMITED Annual Report FY13 l 29 Consolidated Statement of Cash Flows for the year ended 30 June 2013 Notes Economic Entity 2013 $ Economic Entity 2012 $ CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers (inclusive of GST) Payments to suppliers & employees (inclusive of GST) Income tax paid Interest received Finance costs NET CASH FLOWS PROVIDED/(USED) BY OPERATING ACTIVITIES 22(ii) CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of plant and equipment Purchase of plant and equipment Proceeds from disposal of controlled entity NET CASH FLOWS (USED) BY INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from bank loans Repayment of bank loans Proceeds from lease financing Payments for lease financing Proceeds from other loans NET CASH FLOWS PROVIDED/(USED) BY FINANCING ACTIVITIES NET DECREASE IN CASH HELD Cash at beginning of financial year CASH AT END OF FINANCIAL YEAR 22(i) 58,409,897 (56,906,095) (33,813) 68,726 (1,298,475) 240,240 24,800 (749,994) 196,075 (529,119) - (1,000,000) 148,637 (146,195) - (997,558) (1,286,437) 1,479,195 192,758 85,649,506 (85,593,828) (52,359) 108,256 (1,261,740) (1,150,165) 37,923 (2,185,066) - (2,147,143) 2,500,000 (1,812,500) 508,080 (195,944) 325,000 1,324,636 (1,972,672) 3,451,867 1,479,195 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. 30 l EVZ LIMITED Annual Report FY13 Notes to and forming part of the accounts for the year ended 30 June 2013 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This financial report includes the consolidated financial statements and notes of EVZ Limited and controlled entities (‘Economic Entity’ or ‘Group’). Basis of Preparation The financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001. Australian Accounting Standards set out accounting policies that the AASB has concluded would result in a financial report containing relevant and reliable information about transactions, events and conditions to which they apply. Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial Reporting Standards. Material accounting policies adopted in the preparation of this financial report are presented below. They have been consistently applied unless otherwise stated. The financial report has been prepared on an accruals basis and is based on historical costs, modified where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities. Accounting Policies (a) Principles of Consolidation A controlled entity is any entity EVZ Limited has the power to control the financial and operating policies of so as to obtain benefits from its activities. A list of controlled entities is contained in Note 29 to the financial statements. All controlled entities have a June financial year-end. All inter-company balances and transactions between entities in the economic entity, including any unrealised profits or losses, have been eliminated on consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistencies with those policies applied by the parent entity. Where controlled entities have entered or left the economic entity during the year, their operating results have been included/excluded from the date control was obtained or until the date control ceased. Business Combinations Business combinations occur where an acquirer obtains control over one or more businesses and results in the consolidation of its assets and liabilities. A business combination is accounted for by applying the acquisition method, unless it is a combination involving entities or businesses under common control. The acquisition method requires that for each business combination one of the combining entities must be identified as the acquirer (ie parent entity). The business combination will be accounted for as at the acquisition date, which is the date that control over the acquiree is obtained by the parent entity. At this date, the parent shall recognise, in the consolidated accounts, and subject to certain limited exceptions, the fair value of the identifiable assets acquired and liabilities assumed. In addition, contingent liabilities of the acquiree will be recognised where a present obligation has been incurred and its fair value can be reliably measured. The acquisition may result in the recognition of goodwill (refer to Note 1(i)) or a gain from a bargain purchase. The method adopted for the measurement of goodwill will impact on the measurement of any non-controlling interest to be recognised in the acquiree where less than 100% ownership interest is held in the acquiree. The acquisition date fair value of the consideration transferred for a business combination plus the acquisition date fair value of any previously held equity interest shall form the cost of the investment in the separate financial statements. Consideration may comprise the sum of the assets transferred by the acquirer, liabilities incurred by the acquirer to the former owners of the acquiree and the equity interests issued by the acquirer. Fair value uplifts in the value of pre-existing equity holdings are taken to the statement of comprehensive income. Where changes in the value of such equity holdings had previously been recognised in other comprehensive income, such amounts are recycled to profit or loss. EVZ LIMITED Annual Report FY13 l 31 Notes to and forming part of the accounts for the year ended 30 June 2013 Included in the measurement of consideration transferred is any asset or liability resulting from a contingent consideration arrangement. Any obligation incurred relating to contingent consideration is classified as either a financial liability or equity instrument, depending upon the nature of the arrangement. Rights to refunds of consideration previously paid are recognised as a receivable. Subsequent to initial recognition, contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. Contingent consideration classified as an asset or a liability is remeasured each reporting period to fair value through the statement of comprehensive income unless the change in value can be identified as existing at acquisition date. All transaction costs incurred in relation to the business combination are expensed to the statement of profit or loss and other comprehensive income. (b) Income Tax The income tax expense (revenue) for the year comprises current income tax expense (income) and deferred tax expense (income). Current income tax expense charged to the profit or loss is the tax payable on taxable income calculated using applicable income tax rates enacted, or substantially enacted, as at reporting date. Current tax liabilities (assets) are therefore measured at the amounts expected to be paid to (recovered from) the relevant tax authority. Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well as unused tax losses. Current and deferred income tax expense (income) is charged or credited directly to equity instead of the profit or loss when the tax relates to items that are credited or charged directly to equity. Deferred tax assets and liabilities are ascertained based on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets also result where amounts have been fully expensed but future tax deductions are available. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss. 32 l EVZ LIMITED Annual Report FY13 Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period where the asset is realised or the liability is settled, based on tax rates enacted or substantively enacted at reporting date. Their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability. Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probably that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised. Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be controlled and it is not probable that the reversal will occur in the foreseeable future. Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where a legally enforceable right of set-off exists, the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled. EVZ Limited and its wholly-owned Australian subsidiaries have formed an income tax consolidated group under the tax consolidation regime. Each entity in the group recognises its own current and deferred tax liabilities, except for any deferred tax liabilities resulting from unused tax losses and credits which are immediately assumed by EVZ Limited. The current tax liability of each group entity is then subsequently assumed by EVZ Limited. The group notified the Australian Taxation Office that it had formed an income tax consolidated group to apply from 7 June 2004. The tax consolidated group has entered a tax sharing arrangement 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. Notes to and forming part of the accounts for the year ended 30 June 2013 (c) Inventories Inventories are measured at the lower of cost and net realisable value. The cost of manufactured products includes direct materials, direct labour and an appropriate portion of variable and fixed overheads. Overheads are applied on the basis of normal operating capacity. Costs are assigned on the basis of weighted average costs. (d) Construction Contracts and Work in Progress Construction work in progress is valued at cost, plus profit recognised to date less any provision for anticipated future losses. Cost includes both variable and fixed costs relating to specific contracts, and those costs that are attributable to the contract activity in general and that can be allocated on a reasonable basis. Construction profits are recognised on the stage of completion basis and measured using the proportion of costs incurred to date as compared to expected actual costs. Where losses are anticipated they are provided for in full. Construction revenue has been recognised on the basis of the terms of the contract adjusted for any variations or claims allowable under the contract. (e) Plant and Equipment Each class of plant and equipment is carried at cost less where applicable, any accumulated depreciation and impairment losses. Plant and equipment is measured on the cost basis. The carrying amount of plant and equipment is reviewed annually by Directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the assets employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts. The cost of fixed assets constructed within the economic entity 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 income statement during the financial period in which they are incurred. Depreciation The depreciable amount of all fixed assets and capitalised lease assets, is depreciated on a straight-line basis over their useful lives to the economic entity commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements. The depreciation rates used for each class of depreciable assets are: Class of Fixed Asset • Plant and equipment Depreciation Rate 5 to 30% The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in the income statement. (f) Leases Leases of fixed assets where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal ownership, are transferred to entities in the economic entity are classified as finance leases. Finance leases are capitalised by recording an asset and a liability at the lower of the amounts equal to the fair value of the leased property or the present value of the minimum lease payments, including any guaranteed residual values. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period. Leased assets are depreciated on a straight-line basis over their estimated useful lives. Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged on a straight line basis over the period of the lease. Lease incentives under operating leases are recognised as a liability and amortised on a straight-line basis over the life of the lease term. EVZ LIMITED Annual Report FY13 l 33 Notes to and forming part of the accounts for the year ended 30 June 2013 (g) Financial instruments (h) Impairment of Assets Recognition and Initial Measurement Financial instruments, incorporating financial assets and financial liabilities, are recognised when the entity becomes a party to the contractual provisions of the instrument. Trade date accounting is adopted for financial assets that are delivered within timeframes established by marketplace convention. Financial instruments are initially measured at fair value plus transactions costs where the instrument is not classified as at fair value through profit or loss. Transaction costs related to instruments classified as at fair value through profit or loss are expensed to profit or loss immediately. Financial instruments are classified and measured as set out below. Derecognition Financial assets are derecognised where the contractual rights to receipt of cash flows expires or the asset is transferred to another party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised where the related obligations are either discharged, cancelled or expire. The difference between the carrying value of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss. Financial Assets Loans and Receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are stated at amortised cost using the effective interest rate method. Financial Liabilities Non-derivative financial liabilities are recognised at amortised cost, comprising original debt less principal payments and amortisation. Impairment At each reporting date, the group assesses whether there is objective evidence that a financial instrument has been impaired. Impairment losses are recognised in the income statement. At each reporting date, the group reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the income statement. Impairment testing is performed annually for goodwill and intangible assets with indefinite lives. Where it is not possible to estimate the recoverable amount of an individual asset, the group estimates the recoverable amount of the cash-generating unit to which the asset belongs. (i) Intangibles Goodwill Goodwill and goodwill on consolidation are initially recorded at the amount by which the purchase price for a business or for an ownership interest in a controlled entity exceeds the fair value attributed to its net assets at date of acquisition. Goodwill on the acquisitions of subsidiaries is included in intangible assets. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. (j) Foreign Currency Transactions and Balances Functional and Presentation Currency The functional currency of each of the group’s entities is measured using the currency of the primary economic environment in which that entity operates. The consolidated financial statements are presented in Australian dollars which is the parent entity’s functional and presentation currency. Transaction and Balances Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined. 34 l EVZ LIMITED Annual Report FY13 Notes to and forming part of the accounts for the year ended 30 June 2013 Exchange differences arising on the translation of monetary items are recognised in the income statement, except where deferred in equity as a qualifying cash flow or net investment hedge. Exchange differences arising on the translation of non-monetary items are recognised directly in equity to the extent that the gain or loss is directly recognised in equity; otherwise the exchange difference is recognised in the income statement. Group Companies The financial results and position of foreign operations whose functional currency is different from the group’s presentation currency are translated as follows: • assets and liabilities are translated at year-end exchange rates prevailing at that reporting date; • income and expenses are translated at average exchange rates for the period; and • retained profits are translated at the exchange rates prevailing at the date of the transaction. Exchange differences arising on translation of foreign operations are transferred directly to the group’s foreign currency translation reserve in the statement of financial position. These differences are recognised in the income statement in the period in which the operation is disposed. (k) Employee Benefits Provision is made for the economic entity’s liability for employee benefits arising from services rendered by employees to balance date. Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled, plus related on-costs. 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. The group operates an equity-settled share-based payment employee share scheme. The fair value of the equity to which employees become entitled is measured at grant date and recognised as an expense with a corresponding increase to an equity account. The shares issued under the employee share scheme vest immediately. (l) Provisions Provisions are recognised when the group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured. (m) Cash and Cash Equivalents Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of two months or less, and bank overdrafts. Bank overdrafts are shown within short-term borrowings in current liabilities on the balance sheet. (n) Revenue Revenue from the sale of goods is recognised upon the delivery of goods to customers. Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets. Contract revenue is recognised in accordance with Note 1(d). (o) Borrowing Costs Borrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take a substantial period of time to prepare for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are recognised in the income statement in the period in which they are incurred. (p) 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 balance sheet 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. (q) Comparative Figures When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. EVZ LIMITED Annual Report FY13 l 35 Notes to and forming part of the accounts for the year ended 30 June 2013 (r) Critical Accounting Estimates and Judgments The directors evaluate estimates and judgments incorporated into the financial report 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 – Impairment The group assesses impairment at each reporting date by evaluating conditions specific to the group that may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of the cash generating unit is determined. Value-in-use calculations performed in assessing recoverable amounts incorporate a number of key estimates. Refer Note 9 for key estimates used in the assessment of goodwill. At 30 June 2013, receivables from continuing operations were impaired by $84,304. No impairment has been recognised in respect of plant and equipment for the year ended 30 June 2013. (s) New and Amended Accounting Standards During the current year the Group adopted all of the new and revised Australian Accounting Standards and Interpretations applicable to its operations which became mandatory. There has been no financial impact on their adoption. Also refer to Note 33. The financial report was authorised for issue on 20 September 2013 by the Board of Directors. 36 l EVZ LIMITED Annual Report FY13 Notes to and forming part of the accounts for the year ended 30 June 2013 2. PROFIT/(LOSS) FROM CONTINUING OPERATIONS (a) OTHER INCOME Sundry income (b) EXPENSES Movement in employee benefits Bad debts Impairment – receivables Total employee costs Foreign exchange losses Losses on sale of plant and equipment Operating lease payments Depreciation of plant and equipment (c) NET FINANCE COSTS Finance costs – other persons Interest income – other persons Economic Entity 2013 $ Economic Entity 2012 $ 90,981 90,981 138,083 14,516 (190,704) 28,637,645 27,725 28,653 849,031 746,783 1,298,475 (68,726) 1,229,749 77,197 77,197 (102,040) 74,414 123,067 30,467,828 18,441 6,818 1,050,817 794,800 1,137,540 (105,968) 1,031,572 (d) LOSS FROM DISCONTINUED OPERATIONS In the prior year, the company sold its National Engineering business. The financial performance of the discontinued operation for the prior period, which is included in the comparative loss from discontinued operations per the Consolidated Statement of Profit or Loss and Other Comprehensive Income, is as follows: Revenue Other income Expenses Net finance costs Net loss from discontinued operations before tax Income tax benefit Loss from discontinued operations - - - - - - - - 10,507,278 51,625 (16,543,042) (5,984,139) (121,912) (6,106,051) 765,267 (5,340,784) EVZ LIMITED Annual Report FY13 l 37 Notes to and forming part of the accounts for the year ended 30 June 2013 3. INCOME TAX (a) The prima facie tax on profit/(loss) before income tax from continuing operations is reconciled to income tax as follows: Profit/(Loss) before Income Tax Income tax calculated at 30% (2012: 30%) Tax effect of permanent differences Under provision/(over provision) in prior years Taxation expense - offshore subsidiary Income tax expense/(benefit) The applicable weighted average effective tax rates are as follows: (b) The components of tax expense comprise: Current tax Deferred tax Under provision/(over provision) in prior years 4. TRADE AND OTHER RECEIVABLES Current Trade receivables Provision for impairment Amounts due from customers for construction contracts (refer Note 31) Retention receivables Other debtors and prepayments Non-Current Retention receivables Economic Entity 2013 $ Economic Entity 2012 $ 741,675 222,503 (445,338) 5,277 69,465 (148,093) (20%) (148,977) (4,393) 5,277 (148,093) 12,604,515 (84,304) 12,520,211 1,871,742 331,773 14,723,726 700,771 15,424,497 387,796 387,796 (9,127,331) (2,738,199) 2,369,881 26,064 24,039 (318,215) (3%) (221,040) (123,239) 26,064 (318,215) 9,507,649 (275,008) 9,232,641 1,280,701 165,148 10,678,490 872,928 11,551,418 430,220 430,220 All trade and other receivables are classified as financial assets (refer Note 27). Market practices provide for the retention of monies from progress and final billings on certain construction contracts. The monies are received after a contracted period of time has elapsed following completion of the construction. Current trade receivables are non-interest bearing and generally on 30 days’ terms. Non-current trade receivables are assessed for recoverability based on the underlying terms of the contract. A provision for impairment is recognised when there is objective evidence that an individual trade or term receivable is impaired. There are no other balances other than those impaired within trade and other receivables that contain assets that are impaired. It is expected these balances will be received when due. Impaired assets are provided for in full. 38 l EVZ LIMITED Annual Report FY13 Notes to and forming part of the accounts for the year ended 30 June 2013 4. TRADE AND OTHER RECEIVABLES (Continued) Credit Risk – Trade and Other Receivables The group has no significant concentration of credit risk with respect to any single counter party or group of counter parties. The class of assets described as Trade and Other Receivables is considered to be the main source of credit risk related to the group. On a geographical basis, the group has credit risk exposures in Australia and Asia given the substantial operations in those regions. The group’s exposure to credit risk for receivables at reporting date in those regions is as follows: Australia Asia Economic Entity 2013 $ 13,943,795 1,868,498 15,812,293 Economic Entity 2012 $ 10,691,471 1,290,167 11,981,638 The following table details the group’s trade and other receivables exposed to credit risk with ageing analysis and impairment provided for thereon. Amounts are considered as ‘past due’ when the debt has not been settled within the terms and conditions agreed between the group and the customer or counter party to the transaction. Receivables that are past due are assessed for impairment by ascertaining solvency of the debtors and are provided for where there are specific circumstances indicating that the debt may not be fully repaid to the group. Gross Amount $ Past Due and Impaired $ Past Due not Impaired (Days Overdue) > 61 days 31 - 60 days $ $ < 30 days $ Within Trading Terms $ Economic entity 2013 Trade and term receivables Other receivables 2012 Trade and term receivables Other receivables 15,195,826 700,771 15,896,597 11,383,718 872,928 12,256,646 84,304 - 84,304 1,923,611 - 1,923,611 404,602 - 404,602 1,512,154 - 1,512,154 11,271,155 700,771 11,971,926 275,008 - 275,008 2,419,911 - 2,419,911 887,741 - 887,741 726,432 - 726,432 7,074,626 872,928 7,947,554 The economic entity holds no financial assets with terms that have been negotiated, but which would otherwise be past due or impaired. Trade and other receivables pertaining to the Australian entities in the group, as disclosed in Note 32, are provided as security against the group’s bank facilities. Also refer Notes 11 and 12. EVZ LIMITED Annual Report FY13 l 39 Notes to and forming part of the accounts for the year ended 30 June 2013 5. INVENTORIES Current Raw materials and stores – at cost Economic Entity 2013 $ 1,703,463 1,703,463 Economic Entity 2012 $ 1,892,032 1,892,032 Inventories pertaining to the Australian entities in the group, as disclosed in Note 32, are provided as security against the group’s bank facilities. Also refer Notes 11 and 12. 6. FINANCIAL ASSETS Current assets Funds on deposit Non-current assets Funds on deposit 82,851 82,851 27,604 27,604 Funds on deposit represent a security deposit covering a guarantee for property lease obligations and security deposits against contract performance bonds. 7. PLANT AND EQUIPMENT Plant and equipment At cost Accumulated depreciation Movement in carrying amounts Carrying amount – opening balance Additions Disposals Depreciation Exchange rate adjustment Carrying amount – closing balance 9,984,690 (4,398,316) 5,586,374 6,273,610 749,994 (727,412) (746,783) 36,965 5,586,374 - - 114,554 114,554 10,007,235 (3,733,625) 6,273,610 6,029,408 2,185,066 (920,025) (1,020,403) (436) 6,273,610 Plant and equipment pertaining to the Australian entities in the group, as disclosed in Note 32, are provided as security against the group’s bank facilities. Also refer Notes 11 and 12. 40 l EVZ LIMITED Annual Report FY13 Notes to and forming part of the accounts for the year ended 30 June 2013 8. TAX ASSETS NON-CURRENT Deferred tax assets Deferred tax assets comprise: Provisions Other Un-recouped tax losses Economic Entity 2013 $ Economic Entity 2012 $ 3,404,715 670,918 50,868 2,682,929 3,404,715 The movement in deferred tax assets for each temporary difference during the year is as follows: Provisions Opening balance Credited/(expensed) to income account Other Opening balance Credited/(expensed) to income account Unrecouped tax losses Opening balance Tax losses recognised/(recouped) Prior year adjustment Closing balance TAX LIABILITIES CURRENT Income Tax NON-CURRENT Provision for deferred tax Opening balance Additional provisions raised during year Exchange rate movement Closing balance 647,555 23,363 670,918 78,627 (27,759) 50,868 2,460,975 227,231 (5,277) 2,682,929 3,404,715 29,391 49,588 19,838 27,250 2,500 49,588 3,187,157 647,555 78,627 2,460,975 3,187,157 1,061,674 (414,119) 647,555 92,556 (13,929) 78,627 922,972 1,527,871 10,132 2,460,975 3,187,157 - 19,838 18,068 1,846 (76) 19,838 EVZ LIMITED Annual Report FY13 l 41 Notes to and forming part of the accounts for the year ended 30 June 2013 9. INTANGIBLE ASSETS Goodwill on consolidation – at cost Less accumulated impairment Goodwill on acquisition – at cost Less accumulated impairment Movements in carrying amounts Goodwill on consolidation Opening balance Movement in the year Closing balance Goodwill on acquisition Opening balance Impairment – National Engineering Impairment – TSF Engineering Closing balance Economic Entity 2013 $ 3,282,532 - 3,282,532 Economic Entity 2012 $ 3,282,532 - 3,282,532 24,606,758 (7,900,000) 16,706,758 19,989,290 3,282,532 - 3,282,532 24,606,758 - (7,900,000) 16,706,758 24,606,758 (7,900,000) 16,706,758 19,989,290 3,282,532 - 3,282,532 26,060,244 (1,453,486) (7,900,000) 16,706,758 It has been determined that the balances of the goodwill have an indefinite life. The excess of the fair value of net assets over the purchase price of the businesses acquired has been allocated to goodwill rather than be allocated to other intangible assets. The acquisition of the businesses that generate the goodwill was determined on the abilities of the entities, as a whole, to generate future profits and hence other intangibles have not been recognised. Goodwill is allocated to cash-generating units which are based on the group’s individual companies. All businesses operate in the engineering services industry sector. Water Group – Syfon Systems Engineering Group – Brockman Engineering Energy Group - TSF Engineering Impairment 3,282,532 8,789,478 15,817,280 (7,900,000) 19,989,290 3,282,532 8,789,478 15,817,280 (7,900,000) 19,989,290 In the prior year the net carrying value of the goodwill relating to National Engineering of $1,453,486 was written off following the closure of the cash generating unit. Impairment Disclosures The EVZ Group assesses at each annual reporting date the potential impairment to the carrying value of Goodwill of the relevant cash generating unit (CGU). The recoverable amount of each CGU (Brockman Engineering, Syfon Systems and TSF Engineering) is determined based on value-in-use calculations. Value-in-use is calculated based on the present value of cash flow projections over a five year period adjusted for the estimated terminal value of the cash generating unit. The cash flows are discounted using a rate reflecting the Group’s weighted average cost of capital plus an appropriate margin for risk factors at the beginning of the budget period. All discount rates are pre-tax. 42 l EVZ LIMITED Annual Report FY13 Notes to and forming part of the accounts for the year ended 30 June 2013 9. INTANGIBLE ASSETS (Continued) Budgets use estimated weighted average growth rates to project revenue. Costs are calculated taking into account historical gross margins as well as estimated weighted average inflation rates over the periods which are consistent with inflation rates applicable to the locations in which the businesses operate. The following assumptions were used in the value-in-use calculations: Syfon Systems Group Brockman Engineering Group TSF Engineering Group Growth Rates 2013 5% 5% 5% Discount Rates 2013 20% 20% 20% Growth Rates 2012 5% 5% 5% Discount Rates 2012 20% 20% 20% 10. TRADE AND OTHER PAYABLES Current – unsecured Trade payables Sundry payables and accrued expense Employee benefits Financial liabilities classified as trade and other payables Trade and other payables - current Less: Employee leave entitlements Financial liabilities as trade and other payables 11. BORROWINGS - SHORT TERM Bank loans – secured Bank overdraft – secured Lease liabilities (Note 24) – secured Other loans - unsecured Economic Entity 2013 $ Economic Entity 2012 $ 5,220,074 4,885,982 2,162,396 12,268,452 12,268,452 (2,162,396) 10,106,056 9,250,000 2,415,095 93,211 - 11,758,306 4,111,716 2,719,537 1,912,385 8,743,638 8,743,638 (1,912,385) 6,831,253 1,000,000 2,824,335 290,508 325,000 4,439,843 Bank Loans - Secured Bank loans are in the form of Commercial Bank Bill facilities. The maturity schedule for the Commercial Bank Bill facilities is as follows: Current 1 to 2 years 2 to 3 years Total Bank Loans 9,250,000 - - 9,250,000 1,000,000 7,750,000 1,500,000 10,250,000 EVZ LIMITED Annual Report FY13 l 43 Notes to and forming part of the accounts for the year ended 30 June 2013 11. BORROWINGS - SHORT TERM (Continued) The interest rates on outstanding Commercial Bank Bills totalling $6,750,000 have been fixed as follows: Commercial Bank Bills 2013 $ 4,250,000 2,500,000 6,750,000 Commercial Bank Bills 2012 $ 4,250,000 3,500,000 7,750,000 Interest Rates 2013 Interest Rates 2012 4.55% 3.63% 4.55% 5.67% The interest rates on Commercial Bank Bills totalling $2,500,000 are variable at balance date. Bank loans are secured by a registered equitable mortgage over the assets and undertakings of EVZ Limited and an unlimited guarantee from EVZ Limited’s Australian controlled entities: Syfon Systems Pty Ltd, Brockman Engineering Pty Ltd, NuSource Water Pty Ltd, A.C.N. 124919508 Pty Ltd (formerly National Engineering Pty Ltd), TSF Engineering Pty Ltd and TSF Maintenance Services Pty Ltd. Also refer to Note 32 for quantification of assets secured by Australian entities. At 30 June 2013 the economic entity has $Nil in undrawn commercial bill facilities (2012: $1,000,000). The Company has been unable to satisfy two of its three bank covenants at 30 June 2013. The Commonwealth Bank of Australia have, effective 30 June 2013, accepted the Company’s performance against the covenants and have not changed existing banking facilities. However, given the inability to meet those covenants, all bank loans have been classified as current at 30 June 2013. 12. BORROWINGS - LONG TERM Bank loans – secured Lease liabilities (Note 24) – secured Also refer to Note 11 for further information on bank loans. 13. OTHER LONG TERM PROVISIONS Non-current Employee benefits Closure costs Movement in employee benefits: Opening employee balance Provisions created/(utilised) during year Closing balance Economic Entity 2013 $ - 176,188 176,188 Economic Entity 2012 $ 9,250,000 358,139 9,608,139 55,934 - 55,934 167,862 (111,928) 55,934 167,862 1,015,120 1,182,982 177,319 (9,457) 167,862 A provision has been recognised for employee entitlements relating to long service leave. In calculating the present value of future cash flows in respect of long service leave, the probability of long service leave being taken is based on historical data. The measure and recognition criteria relating to employee benefits are disclosed in Note 1(k). The prior year closure provisions related to the estimated remaining costs associated with the closure of the National Engineering business. 44 l EVZ LIMITED Annual Report FY13 Notes to and forming part of the accounts for the year ended 30 June 2013 14. ISSUED CAPITAL Issued and paid up 208,439,414 ordinary shares (2012: 207,939,414 ordinary shares) – refer Note 14(a) (a) Issued and fully paid up ordinary shares Opening balance Conversion of employee shares Issue Closing balance – 30 June 2013 Opening balance Conversion of employee shares Issue Closing balance – 30 June 2013 Economic Entity 2013 $ Economic Entity 2012 $ 46,055,159 46,055,159 46,023,159 46,023,159 46,023,159 - 32,000 46,055,159 2013 No. 207,939,414 - 500,000 208,439,414 45,757,195 265,964 - 46,023,159 2012 No. 207,420,868 518,546 - 207,939,414 Ordinary shares participate in dividends and the proceeds on winding up of the parent entity in proportion to the number of shares held. At shareholders’ meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands. The ordinary shares have no par value. (b) Fully paid employee shares During the prior year, all employee shares were converted to ordinary fully paid shares. Opening balance Conversion of employee shares Closing balance – 30 June 2013 Opening balance Conversion of employee shares Closing balance – 30 June 2013 2013 $ - - - 2013 No. - - - 2012 $ 265,964 (265,964) - 2012 No. 518,546 (518,546) - EVZ LIMITED Annual Report FY13 l 45 Notes to and forming part of the accounts for the year ended 30 June 2013 14. ISSUED CAPITAL (Continued) c) Share options There are no share options on issue at 30 June 2013 (2012: Nil). (d) Capital management: Management controls the capital of the economic entity in order to maintain a good debt to equity ratio, provide shareholders with adequate returns and ensure the economic entity can fund its operations and continue as a going concern. The economic entity’s debt and capital includes ordinary share capital and financial liabilities, supported by financial assets. There are no externally imposed capital requirements. Management effectively manages the economic entity’s capital by assessing the economic entity’s financial risks and adjusting its capital structure in response to changes in these risks and in the market. These responses include the management of debt levels, distributions to shareholders and share issues. The economic entity’s gearing ratio is represented as net debt as a percentage of total capital and is determined as follows: • • Net debt is total bank borrowings less cash and cash equivalents. Total capital is total equity and net debt. As at 30 June 2013 the economic entity’s gearing ratio was 27% (2012: 29%). 15. DIVIDENDS Interim fully franked ordinary dividend Final fully franked ordinary dividend Balance of Franking Account Economic Entity 2013 $ - - - 1,847,610 Economic Entity 2012 $ - - - 1,848,776 46 l EVZ LIMITED Annual Report FY13 Notes to and forming part of the accounts for the year ended 30 June 2013 16. RESERVES AND ACCUMULATED LOSSES (a) Accumulated Losses Accumulated losses at the beginning of the financial year Transfer from capital reserves Net profit/(loss) attributable to members of the parent entity Accumulated losses at the end of the financial year (b) Reserves Capital Reserve Reserve at beginning of year Movement for year Reserves at end of year Foreign Currency Translation Reserve Reserve at beginning of year Movement for year Reserve at end of year Economic Entity 2013 $ (22,226,110) 198,700 889,768 (21,137,642) 198,700 (198,700) - (175,959) 135,026 (40,933) (40,933) Economic Entity 2012 $ (8,148,629) - (14,077,481) (22,226,110) 198,700 - 198,700 (171,538) (4,421) (175,959) 22,741 Capital reserves representing capital profits were transferred to accumulated losses during the year. 17. EARNINGS PER SHARE (a) Weighted average number of ordinary shares outstanding during the year used in calculation of Basic Earnings per Share (b) Weighted average number of ordinary shares outstanding during the year used in calculation of Diluted Earnings per Share 2013 No. 2012 No. 208,125,715 207,939,414 208,125,715 207,939,414 EVZ LIMITED Annual Report FY13 l 47 Notes to and forming part of the accounts for the year ended 30 June 2013 18. KEY MANAGEMENT PERSONNEL Names and positions of directors and key management personnel in office at any time during the financial year are: Mr M Findlay Mr G Burns Mr R Edgley Ms R Murphy (appointed 28/9/12) Mr S Farthing (appointed 24/9/12) Mr I Wallace Mr A Bellgrove Mr M Goddard Mr A Green Mr C Flanagan Ms R Murphy (resigned 24/9/12) Mr P Jones (resigned 28/8/12) Non-Executive Chairman Non-Executive Director Non-Executive Director Non-Executive Director Chief Executive Officer Chief Financial Officer and Company Secretary General Manager of Syfon Systems Group General Manager of Brockman Engineering General Manager of TSF Engineering Group Manager of TSF Maintenance Services Interim Chief Executive Officer Non-Executive Director Mr C Bishop commenced as General Manager of Brockman Engineering on 1 July 2013. Remuneration of key management personnel is: Short term employee benefits Post employment benefits Consulting fees Economic Entity 2013 $ 1,765,178 111,527 77,172 1,953,877 Economic Entity 2012 $ 1,718,828 313,711 252,166 2,284,705 Ms Murphy acted as interim Chief Executive Officer to 24 September 2012. Ms Murphy was engaged on a contract basis through 333 Management Pty Ltd. Fees paid to 333 Management Pty Ltd relating to Ms Murphy’s engagement as interim Chief Executive Officer were $77,172. Further fees totalling $150,000 were also paid to 333 Management Consulting Services Pty Ltd for other services. Also refer to disclosures in Note 20 for other transactions with directors and key management personnel. The number of ordinary shares held by each key management personnel of the Group during the financial year is as follows: 30 June 2013 M Findlay G Burns R Edgley Ms R Murphy (appointed 28/9/12) P Jones (resigned 28/8/12) S Farthing I Wallace M Goddard A Bellgrove A Green C Flanagan Balance at beginning of year 1,345,000 8,546,389 975,000 - 8,000,000 - 75,008 421,949 4,401,949 54,000 - 23,819,295 Granted as Remuneration - - - - - 500,000 - - - - - 500,000 Other Changes 299,500 452,632 1,825,000 42,500 (8,000,000) 500,000 - - - 78,000 6,500 (4,795,868) Balance at end of year 1,644,500 8,999,021 2,800,000 42,500 - 1,000,000 75,008 421,949 4,401,949 132,000 6,500 19,523,427 Since the end of the financial year, Directors have acquired a further 559,232 shares. 48 l EVZ LIMITED Annual Report FY13 Notes to and forming part of the accounts for the year ended 30 June 2013 18. KEY MANAGEMENT PERSONNEL (Continued) 30 June 2012 M Findlay P Jones (resigned 28/8/12) G Burns R Edgley (appointed 26/8/11) R Murphy (appointed 3/2/12, resigned 24/9/12) I Wallace M Goddard A Bellgrove A Green A Powis (retired 23/3/12) Balance at beginning of year 1,345,000 8,000,000 6,000,000 - Granted as Remuneration - - - - - 75,008 421,949 4,401,949 54,000 8,571,949 28,869,855 - - - - - - - There are no share options issued at 30 June 2013 (2012: Nil). Other Changes - - 2,546,389 975,000 - - - - - (8,571,949) (5,050,560) Balance at end of year 1,345,000 8,000,000 8,546,389 975,000 - 75,008 421,949 4,401,949 54,000 - 23,819,295 19. AUDITORS’ REMUNERATION Remuneration paid/payable to Auditors for: - audit or review of financial report - taxation services Economic Entity 2013 $ 74,635 - 74,635 Economic Entity 2012 $ 150,430 - 150,430 20. RELATED PARTY DISCLOSURES (a) The directors of EVZ Limited during the financial year were: Mr M Findlay Mr G Burns Mr R Edgley Ms R Murphy (appointed 28/9/12) Mr P Jones (resigned 28/8/12) (b) Transactions with director related entities • Consulting fees of $100,000 (2012: $105,000) were paid and $45,000 (2012: $25,000) is payable to M Findlay. • Consulting fees of $45,000 (2012: $45,000) were paid and $11,250 (2012: $11,250) is payable to G Burns. • Consulting fees of $45,000 (2012: $34,438) were paid and $3,750 (2012: $3,750) is payable to R Edgley. • Consulting fees of $22,500 (2012 $Nil) were paid and $11,250 (2012: $Nil) is payable to R Murphy. • Consulting fees of $18,750 (2012: $45,000) were paid and $Nil (2012: $11,250) is payable to Mr P Jones. EVZ LIMITED Annual Report FY13 l 49 Notes to and forming part of the accounts for the year ended 30 June 2013 21. SEGMENT REPORTING Segment Information Identification of reportable segments The group has identified its operating segments based on the internal reports that are reviewed and used by the board of directors (chief operating decision makers) in assessing performance and determining the allocation of resources. The group is managed primarily on the basis of product category and service offerings as the diversification of the group’s operations inherently have notably different risk profiles and performance assessment criteria. Operating segments are therefore determined on the same basis. Reportable segments disclosed are based on aggregating operating segments where the segments are considered to have similar economic characteristics and are also similar with respect to the following: • the products sold and/or services provided by the segment; • the manufacturing process; • the type or class of customer for the products or services; • the distribution method; and • any external regulatory requirements Types of products and services by segment i. Engineering The engineering segment designs, manufactures and installs large steel tanks, silos, cooling towers, pipe spooling, pressure vessels and fabricates structural steel. All products produced are aggregated as one reportable segment as the products are similar in nature, manufactured and distributed to similar types of customers and subject to a similar regulatory environment. The engineering segment is also involved in the installation process and provides ongoing support and maintenance for its products. Support is provided to existing customers for maintenance required for products under warranty. ii. Energy The energy segment designs and installs constant load power stations, back-up power generation equipment and sustainable/clean energy solutions. In addition, the segment services, maintains and hires all types of generators and associated equipment. iii. Water The water segment designs syfonic roof drainage systems for large and/or complex roof structures, supplies and installs fibreglass panel tanks and prefabricated hydraulic systems. Basis of accounting for purposes of reporting by operating segments i. Accounting policies adopted Unless stated otherwise, all amounts reported to the board of directors, being the chief decision makers with respect to operating segments, are determined in accordance with accounting policies that are consistent to those adopted in the annual financial statements of the Group. ii. Inter-segment transactions Inter-segment sales are based on values that would be realised in the event the sale was made to an external party at arm’s length. All such transactions are eliminated on consolidation of the Group’s financial statements. Inter-segment loans payable and receivable are initially recognised at the consideration received/to be received net of transaction costs. If inter-segment loans receivable and payable are not on commercial terms, these are not adjusted to fair value based on market interest rates. This policy represents a departure from that applied to the statutory financial statements. iii. Segment assets Where an asset is used across multiple segments, the asset is allocated to that segment that receives majority economic value from that asset. In the majority of instances, segment assets are clearly identifiable on the basis of their nature and physical location. 50 l EVZ LIMITED Annual Report FY13 Notes to and forming part of the accounts for the year ended 30 June 2013 21. SEGMENT REPORTING (Continued) iv. Segment liabilities Liabilities are allocated to segments where there is a direct nexus between the incurrence of the liability and the operations of the segment. Tax liabilities are generally considered to relate to the Group as a whole and are not allocated. Segment liabilities include trade and other payables and certain direct borrowings. v. Unallocated items The following items of revenue, expenses, assets and liabilities are not allocated to operating segments as they are not considered part of the core operations of any segment: • Derivatives • Net gains on disposal of available-for-sale investments • Impairment of assets and other non-recurring items of revenue or expense • Income tax expense • Current tax liabilities • Other financial liabilities • Discontinuing operations Segment Reporting – Continuing Operations 30 June 2013 REVENUE External sales Inter-segment sales Total segment revenue Engineering $ 26,633,305 - 26,633,305 Energy $ 13,375,459 - 13,375,459 Water $ 17,193,572 - 17,193,572 Corporate $ - - - Total $ 57,202,336 - 57,202,336 Reconciliation of segment revenue to group revenue Inter-segment elimination Total group revenue - 57,202,336 Segment net profit before interest and tax 1,918,559 (224,231) 1,472,506 (1,195,410) 1,971,424 Reconciliation of segment result to group net profit before tax Unallocated items • Net finance costs Net profit before tax from continuing operations 1,229,749 741,675 30 June 2012 REVENUE External sales Inter-segment sales Total segment revenue Reconciliation of segment revenue to group revenue Inter-segment elimination Total group revenue 36,533,424 - 36,533,424 10,726,797 - 10,726,797 15,301,434 - 15,301,434 - - - 62,561,655 - 62,561,655 - 62,561,655 Segment net profit before interest and tax 1,511,026 (9,013,905) 1,193,082 (1,785,962) (8,095,759) Reconciliation of segment result to group net profit before tax Unallocated items • Net finance costs Net profit before tax from continuing operations 1,031,572 (9,127,331) The prior year comparative segment net profit before tax for the Energy segment includes a provision for the impairment of goodwill of $7,900,000. EVZ LIMITED Annual Report FY13 l 51 Notes to and forming part of the accounts for the year ended 30 June 2013 21. SEGMENT REPORTING (Continued) Secondary Reporting (including Discontinued Operations) 30 June 2013 ASSETS Segment assets Reconciliation of segment assets to group assets Inter-segment eliminations Total group assets Segment asset increases for the period Capital expenditure LIABILITIES Segment liabilities Reconciliation of segment liabilities to group liabilities Inter-segment eliminations Total group liabilities 30 June 2012 ASSETS Segment assets Reconciliation of segment assets to group assets Inter-segment eliminations Total group assets Segment asset increases for the period Capital expenditure LIABILITIES Segment liabilities Reconciliation of segment liabilities to group liabilities Inter-segment eliminations Total group liabilities Engineering $ Energy $ Water $ Corporate $ Total $ 21,268,725 13,497,438 11,752,186 31,289,712 77,808,061 (28,593,618) 49,214,443 119,516 119,516 256,505 256,505 351,125 351,125 22,848 22,848 749,994 749,994 24,992,766 18,864,376 3,836,241 9,408,959 57,102,342 (32,764,483) 24,337,859 21,410,896 13,125,686 10,785,407 40,421,708 85,743,697 (38,001,886) 47,741,811 322,538 322,538 1,427,350 1,427,350 435,178 435,178 - - 2,185,066 2,185,066 26,368,868 18,780,395 3,414,901 11,185,403 59,749,567 REVENUE BY GEOGRAPHICAL REGION Revenue, including revenue from discontinued operations, attributable to external customers is disclosed below, based on the location of the external customer: Australia Asia Total revenue Economic Entity 2013 $ 52,846,013 4,356,323 57,202,336 ASSETS BY GEOGRAPHICAL REGION The location of segment assets by geographical location of the assets is disclosed below: Australia Asia Total assets 52 l EVZ LIMITED Annual Report FY13 45,409,095 3,805,348 49,214,443 44,745,917 2,995,894 47,741,811 (35,755,127) 23,994,440 Economic Entity 2012 $ 70,686,075 2,382,858 73,068,933 Notes to and forming part of the accounts for the year ended 30 June 2013 22. STATEMENT OF CASH FLOWS (i) Cash balances comprise: Cash on hand Bank overdraft Closing cash balance (ii) Reconciliation of the operating profit/(loss) after tax to net cash flows from operations: Operating profit/(loss) after tax Gain/loss on sale of plant and equipment Employee share issue Gain on disposal of controlled entity Depreciation - plant & equipment Foreign currency translation Impairment - receivables Impairment – inventories Impairment - goodwill Changes in assets and liabilities adjusted for effects of acquisition/disposal of operations during financial year Increase/(Decrease) in provisions for employee entitlements (Increase)/Decrease in inventories (Increase)/Decrease in trade and other receivables (Increase)/Decrease in deferred tax assets Increase/(Decrease) in payables Increase/(Decrease) in deferred tax liabilities Net cash provided/(used) by operating activities (iii) Discontinued Operations The net cash flows of the discontinued operation, which have been incorporated into the statement of cash flows, are as follows: Net cash inflow/(outflow) from operating activities Net cash inflow/(outflow) from investing activities Net cash inflow/(outflow) from financing activities Net cash increase/(decrease) in cash generated by the discontinued operation Economic Entity 2013 $ 2,607,853 (2,415,095) 192,758 Economic Entity 2012 $ 4,303,530 (2,824,335) 1,479,195 889,768 28,653 32,000 (72,419) 746,783 98,061 (190,704) - - 138,083 188,569 (4,073,443) (217,558) 2,613,306 59,141 240,240 - - - - (14,149,900) 882,102 - - 1,020,403 (3,985) 265,026 (70,000) 9,353,486 (555,176) 33,768 5,624,647 (1,109,955) (2,442,351) 1,770 (1,150,165) (849,235) (9,285) 1,613,067 754,547 EVZ LIMITED Annual Report FY13 l 53 Notes to and forming part of the accounts for the year ended 30 June 2013 23. STANDBY ARRANGEMENTS AND UNUSED CREDIT FACILITIES Controlled entities in the economic entity have Contingent Liability Bank Guarantee facilities including a multi-option facility totalling $7,493,305 available to them as at 30 June 2013 (2012: $5,718,334). Of this total facility, $2,900,874 (2012: $1,521,115) remains unused and available for the controlled entities use as at 30 June 2013. The facilities are secured by a registered equitable mortgage over the assets and undertakings of all Australian companies in the economic entity. Controlled entities in the economic entity have Bank Overdraft facilities totalling $2,956,695 available to them as at 30 June 2013 (2012: $3,731,666). Of the total available facilities, $541,600 (2012: $907,331) remains unused and available for use. The facilities are secured by registered equitable mortgages over the assets and undertakings of all Australian companies in the economic entity. 24. LEASE COMMITMENTS Leases are payable as follows: Not later than 12 months Later than 12 months but not later than 2 years Later than 2 years but not later than 5 years Later than 5 years Future lease finance charges Lease liabilities recognised in the statement of financial position: Current Non-current Total lease liability Economic Entity 2013 $ Economic Entity 2012 $ 104,374 65,190 119,992 10,398 299,954 (30,555) 269,399 93,211 176,188 269,399 342,378 154,775 244,982 - 742,135 (93,488) 648,647 290,508 358,139 648,647 The weighted average interest rate implicit in these leases is 4.95% pa (2012: 7.55% pa). Leases pertain to various plant, equipment and motor vehicles and are secured against the asset to which they relate. 25. OPERATING LEASE COMMITMENTS Property Not later than 12 months Between 12 months but not later than 5 years Plant and equipment Not later than 12 months Between 12 months but not later than 5 years Total commitments not recognised in the financial statements 805,772 1,183,876 1,989,648 76,344 99,936 176,280 2,165,928 797,292 1,739,637 2,536,929 80,868 174,460 255,328 2,792,257 Property leases and plant and equipment leases are non-cancellable with a maximum five year term, with rent payable in advance. Property leases have contingent rental provisions within the lease agreement which require the minimum lease payments to be increased by at least the CPI per annum. Options exist to renew certain leases at the end of their lease term. With the approval of the lessors the property leases may be extended for further terms. 54 l EVZ LIMITED Annual Report FY13 Notes to and forming part of the accounts for the year ended 30 June 2013 26. CONTINGENT LIABILITIES Apart from drawn bank guarantee facilities (refer Note 23), there were no contingent liabilities as at 30 June 2013 (2012: Nil). 27. FINANCIAL INSTRUMENTS The Group’s financial instruments consist mainly of deposits with banks, local money market instruments, short-term investments, accounts receivable and payable, loans to and from subsidiaries, bank bills and leases. The main purpose of non-derivative financial instruments is to raise finance for group operations. (i) Treasury Risk Management The Board of Directors is responsible for monitoring treasury risk. Currency and interest rate exposures are reviewed regularly to ensure any risk associated with these exposures is minimized. (ii) Financial Risks The main risks the economic entity is exposed to through its financial instruments are interest rate risk, foreign currency risk, liquidity risk and credit risk. • Interest rate risk The majority of the economic entity’s borrowings take the form of bank accepted bills of exchange. Fixed interest bank loans account for 73% (2012: 76%) of the total bank loans currently outstanding. • Foreign currency risk The economic entity is exposed to fluctuations in foreign currencies arising from the sale and purchase of goods and services in currencies other than the economic entity’s measurement currency. The economic entity monitors its foreign exchange exposure on a regular basis. • Liquidity risk The economic entity manages liquidity risk by monitoring forecast cash flows and ensuring that adequate cash reserves are maintained. • Credit risk The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date to recognised financial assets, is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement of financial position and notes to the financial statements. The economic entity does not have any material credit risk exposure to any single receivable or group of receivables under financial instruments entered into by the economic entity. (a) Interest Rate Risk Exposures The economic entity’s exposure to interest rate risk and the effective weighted average interest rate for each class of financial assets and financial liabilities is set out opposite. Exposures arise predominantly from assets and liabilities bearing variable interest rates as the economic entity intends to hold fixed rate, assets and liabilities to maturity. EVZ LIMITED Annual Report FY13 l 55 2013 Financial Assets Cash and cash equivalents Trade and other receivables Financial assets Weighted average interest rate Financial Liabilities Trade and other payables Borrowings Lease liabilities Weighted average interest rate Net Financial Assets (Liabilities) 2012 Financial Assets Cash and cash equivalents Trade and other receivables Financial assets Weighted average interest rate Financial Liabilities Trade and other payables Borrowings Lease liabilities Notes to and forming part of the accounts for the year ended 30 June 2013 27. FINANCIAL INSTRUMENTS (Continued) Floating Interest Rate Fixed Interest Non Interest Bearing Total 1 year or less $ 1-5 years $ More than 5 years $ $ $ $ - - - - - - - - - - - - - - - - 2,415,095 - 2,415,095 - 9,250,000 93,211 9,343,211 - - 166,910 166,910 - - - - - - - 9,278 9,278 2,607,853 15,812,293 110,455 18,530,601 - 10,106,056 - - 10,106,056 2,607,853 15,812,293 110,455 18,530,601 - 10,106,056 11,665,095 269,399 22,040,550 10.23% 7.71% 4.95% 4.95% - - (2,415,095) (9,343,211) (166,910) (9,278) 8,424,545 (3,509,949) 4,303,530 - - 4,303,530 3.5% - 2,824,335 - 2,824,335 - - - - - - - - - - - 1,000,000 290,508 1,290,508 - 9,250,000 358,139 9,608,139 Weighted average interest rate Net Financial Assets (Liabilities) 10.58% 8.37% 8.57% 1,479,195 (1,290,508) (9,608,139) Reconciliation of Net Financials Assets/(Liabilities) to Net Assets Net financial assets/(liabilities) Add/(subtract) non-financial assets and liabilities: Inventories Plant and equipment Intangible assets Deferred tax assets Provisions Net Assets 56 l EVZ LIMITED Annual Report FY13 - - - - - - - - - - - 11,981,638 114,554 12,096,192 4,303,530 11,981,638 114,554 16,399,722 - - 6,831,253 325,000 - 7,156,253 6,831,253 13,399,335 648,647 20,879,235 4,939,939 (4,479,513) Economic Entity 2013 $ (3,509,949) Economic Entity 2012 $ (4,479,513) 1,703,463 5,586,374 19,989,290 3,404,715 (2,297,309) 24,876,584 1,892,032 6,273,610 19,989,290 3,187,157 (3,115,205) 23,747,371 Notes to and forming part of the accounts for the year ended 30 June 2013 27. FINANCIAL INSTRUMENTS (Continued) (b) Net fair value of financial assets and liabilities The net fair value of cash and cash equivalents and non-interest bearing monetary financial assets and financial liabilities of the economic entity approximate their carrying value. (c) Liquidity risk Refer to Note 27(a) for a maturity analysis of financial assets and liabilities. All floating interest rate balances and all non-interest bearing balances are current and due within 12 months. (d) Sensitivity analysis The interest rate on Commercial Bank Bills totalling $6,750,000 (2012: $7,750,000) has been fixed. The Group believes it has minimal exposure to interest rate risk. (e) Foreign currency risk Refer Note 21 for a breakdown of revenue and assets by geographical location. Whilst the economic entity monitors its foreeign exchange risk, it does not believe there is any material risk associtated with its foreign exchange exposure. (f) Price risk The ecomomic entity believes it has minimal exposure to price risk as costs of major materials and components are set at the time of project tender. 28. SHARE BASED PAYMENTS During the year, 500,000 fully paid ordinary shares were issued under the Directors’ and Employees’ Benefits Plan to Mr S Farthing. The shares, issued at 6.4 cents per share, related to an agreed allotment under the terms of an executed employment agreement with Mr Farthing. Shares were issued following completion of the necessary probationary period. There were no other share-based payments in the year ended 30 June 2013. 29. INVESTMENT IN CONTROLLED ENTITIES Name of Entity Country of Incorporation Class of Shares Equity Holdings 2012 2013 Syfon Systems Pty Ltd Syfon Systems Sdn Bhd Brockman Engineering Pty Ltd NuSource Water Pty Ltd Danum Engineering Pty Ltd A.C.N. 124919508 Pty Ltd (formerly National Engineering Pty Ltd) TSF Engineering Pty Ltd Syfon Systems Pte Ltd EVZ Engineering Pty Ltd Cellular Beams Pty Ltd EVZ Energy Pty Ltd Australia Malaysia Australia Australia Australia Australia Australia Singapore Australia Australia Australia Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% - 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 50% Cost of Parent Entity’s Investment 2012 $ 3,700,650 34,504 - - - 2013 $ 3,700,650 34,504 - - - - - - - - - 3,735,154 - - - - - - 3,735,154 EVZ Engineering Pty Ltd and NuSource Water Pty Ltd did not trade during the year. The shareholding in EVZ Energy Pty Ltd was sold during the year at carrying value. Following the sale of the EVZ Energy Pty Ltd business, Cellular Beams changed its name to EVZ Energy Pty Ltd. EVZ LIMITED Annual Report FY13 l 57 Notes to and forming part of the accounts for the year ended 30 June 2013 30. SUBSEQUENT EVENTS There have not been any matters or circumstances, other than that referred to in the financial statements or notes thereto, that have arisen since the end of the financial year, that have significantly affected, or may significantly affect, the operations of the economic entity, the results of those operations, or the state of affairs of the economic entity in future financial years after this financial year. 31. CONSTRUCTION CONTRACTS Aggregate amount of contract revenue recognised during the financial year Aggregate of contract costs incurred and profits recognised (including losses recognised) to date on contracts in progress Progress billings Amounts due from customers for contract work in progress Total receivable from customers for contract work in progress as included in Note 4 Retention Receivables as included in Note 4 Economic Entity 2013 $ 43,989,108 41,424,827 39,553,085 1,871,742 10,588,615 719,569 Economic Entity 2012 $ 50,607,910 35,675,938 34,395,237 1,280,701 7,372,787 595,368 32. DEED OF CROSS GUARANTEE During the financial year, a deed of cross guarantee between EVZ Ltd (Parent Entity) and TSF Engineering Pty Ltd, TSF Maintenance Services Pty Ltd, Brockman Engineering Pty Ltd, Danum Engineering Pty Ltd, A.C.N. 124919508 Pty Ltd (formerly National Engineering Pty Ltd), Syfon Systems Pty Ltd, NuSource Water Pty Ltd, EVZ Energy Pty Ltd (previously Cellular Beams Pty Ltd) and EVZ Engineering Pty Ltd (Group Entities) existed and relief is obtained from preparing financial statements for those Group Entities under ASIC Class Order 98/1418. Under the deed, EVZ Ltd and the Group Entities jointly guarantee to support the liabilities and obligations of the Group Entities. EVZ Ltd and the Group Entities are the only parties to the Deeds of Cross Guarantee and form the Closed Group. The following are the aggregate totals, for each category, relieved under the deed: Closed Group & Parties to Deed of Cross Guarantee Financial information in relation to: i. ii. iii. Statement of Profit or Loss and Other Comprehensive Income Profit/(Loss) before income tax Income tax expense/(benefit) Profit/(Loss) after income tax Profit/(Loss) attributable to members of the parent entity Retained Earnings Retained losses at the beginning of the year Profit/(Loss) after income tax Transfer from capital profits reserve Retained losses at the end of the year Statement of Financial Position Current assets Cash and cash equivalents Trade and other receivables Inventories Total current assets 2013 $ 486,063 (217,558) 703,621 703,621 (23,216,697) 703,621 198,700 (22,314,376) 2,391,685 13,943,390 1,402,085 17,737,160 2012 $ (15,282,947) (1,107,521) (14,175,426) (14,175,426) (9,041,271) (14,175,426) - (23,216,697) 4,103,859 10,095,982 1,488,787 15,688,628 58 l EVZ LIMITED Annual Report FY13 Notes to and forming part of the accounts for the year ended 30 June 2013 32. DEED OF CROSS GUARANTEE (Continued) Closed Group & Parties to Deed of Cross Guarantee 2012 $ 2013 $ Non-current assets Property, plant and equipment Deferred tax asset Other receivables Financial assets Intangible assets Total non-current assets Total assets Current liabilities Trade and other payables Short term borrowings Total current liabilities Non-current liabilities Long-term borrowings Long-term provisions and other payables Total non-current liabilities Total liabilities Net assets Equity Issued capital Reserves Retained losses 5,253,187 3,404,715 1,278,416 97,952 20,159,575 30,193,845 47,931,005 12,284,002 11,737,464 24,021,466 112,822 55,934 168,756 24,190,222 23,740,783 46,055,159 - (22,314,376) 23,740,783 5,306,333 3,187,157 1,015,733 97,952 20,159,575 29,766,750 45,455,378 7,985,934 3,996,948 11,982,882 9,284,352 1,182,982 10,467,334 22,450,216 23,005,162 46,023,159 198,700 (23,216,697) 23,005,162 33. NEW AND AMENDED ACCOUNTING STANDARDS The AASB has issued a number of new and amended Accounting Standards and Interpretations that have mandatory application dates for future reporting periods, some of which are relevant to the Group. The Group has decided not to early adopt any of the new and amended pronouncements. The Group’s assessment of the new and amended pronouncements that are relevant to the Group but applicable in future reporting periods is set out below: • AASB 9: Financial Instruments (January 2015) and the relevant amending standards (applicable for annual reporting periods commencing on or after 30 June 2016). These Standards are applicable retrospectively and include revised requirements for the classification and measurement of financial instruments, as well as recognition and derecognition requirements for financial instruments. EVZ LIMITED Annual Report FY13 l 59 Notes to and forming part of the accounts for the year ended 30 June 2013 33. NEW AND AMENDED ACCOUNTING STANDARDS (Continued) The key changes made to accounting requirements include: − simplifying the classifications of financial assets into those carried at amortised cost and those carried at fair value; − simplifying the requirements for embedded derivatives; − removing the tainting rules associated with held-to-maturity assets; − removing the requirements to separate and fair value embedded derivatives for financial assets carried at amortised cost; − allowing an irrevocable election on initial recognition to present gains and losses on investments in equity instruments that are not held for trading in other comprehensive income. Dividends in respect of these investments that are a return on investment can be recognised in profit or loss and there is no impairment or recycling on disposal of the instrument; − requiring financial assets to be reclassified where there is a change in an entity’s business model as they are initially classified based on: (a) the objective of the entity’s business model for managing the financial assets; and (b) the characteristics of the contractual cash flows; and − requiring an entity that chooses to measure a financial liability at fair value to present the portion of the change in its fair value due to changes in the entity’s own credit risk in other comprehensive income, except when that would create an accounting mismatch. If such a mismatch would be created or enlarged, the entity is required to present all changes in fair value (including the effects of changes in the credit risk of the liability) in profit or loss. The company has not yet been able to reasonably estimate the impact of these pronouncements on its financial statements. • AASB 1053: Application of Tiers of Australian Accounting Standards and AASB 2010–2: Amendments to Australian Accounting Standards arising from Reduced Disclosure Requirements [AASB 1, 2, 3, 5, 7, 8, 101, 102, 107, 108, 110, 111, 112, 116, 117, 119, 121, 123, 124, 127, 128, 131, 133, 134, 136, 137, 138, 140, 141, 1050 & 1052 and Interpretations 2, 4, 5, 15, 17, 127, 129 & 1052] (applicable for annual reporting periods commencing on or after 1 July 2013). AASB 1053 establishes a revised differential financial reporting framework consisting of two tiers of financial reporting requirements for those entities preparing general purpose financial statements: - - Tier 1: Australian Accounting Standards; and Tier 2: Australian Accounting Standards – Reduced Disclosure Requirements. Tier 2 of the framework comprises the recognition, measurement and presentation requirements of Tier 1, but contains significantly fewer disclosure requirements. • AASB 10: Consolidated Financial Statements, AASB 11: Joint Arrangements, AASB 12: Disclosure of Interests in Other Entities, AASB 127: Separate Financial Statements (August 2011), AASB 128: Investments in Associates and Joint Ventures (August 2011) and AASB 2011–7: Amendments to Australian Accounting Standards arising from the Consolidation and Joint Arrangements Standards (applicable for annual reporting periods commencing on or after 1 January 2013). AASB 10 replaces parts of AASB 127 (March 2008, as amended) and Interpretation 112: Consolidation – Special Purpose Entities. AASB 10 provides a revised definition of control and additional application guidance so that a single control model will apply to all investees. The Company has not yet been able to reasonably estimate the impact of this Standard on its financial statements. • AASB 11 replaces AASB 131: Interests in Joint Ventures (July 2004, as amended). AASB 11 requires joint arrangements to be classified as either “joint operations” (where the parties that have joint control of the arrangement have rights to the assets and obligations for the liabilities) or “joint ventures” (where the parties that have joint control of the arrangement have rights to the net assets of the arrangement). Joint ventures are required to adopt the equity method of accounting (proportionate consolidation is no longer allowed). 60 l EVZ LIMITED Annual Report FY13 Notes to and forming part of the accounts for the year ended 30 June 2013 33. NEW AND AMENDED ACCOUNTING STANDARDS (Continued) • AASB 12 contains the disclosure requirements applicable to entities that hold an interest in a subsidiary, joint venture, joint operation or associate. AASB 12 also introduces the concept of a “structured entity”, replacing the “special purpose entity” concept currently used in Interpretation 112, and requires specific disclosures in respect of any investments in unconsolidated structured entities. This Standard will affect disclosures only and is not expected to significantly impact the company. To facilitate the application of AASBs 10, 11 and 12, revised versions of AASB 127 and AASB 128 have also been issued. These Standards are not expected to significantly impact the Company. • AASB 13: Fair Value Measurement and AASB 2011–8: Amendments to Australian Accounting Standards arising from AASB 13 (applicable for annual reporting periods commencing on or after 1 January 2013). AASB 13 defines fair value, sets out in a single Standard a framework for measuring fair value, and requires disclosures about fair value measurement. AASB 13 requires: - - inputs to all fair value measurements to be categorised in accordance with a fair value hierarchy; and enhanced disclosures regarding all assets and liabilities (including, but not limited to, financial assets and financial liabilities) measured at fair value. These Standards are not expected to significantly impact the Company. • AASB 119: Employee Benefits (September 2011) and AASB 2011–10: Amendments to Australian Accounting Standards arising from AASB 119 (applicable for annual reporting periods commencing on or after 1 January 2013). These Standards introduce a number of changes to accounting and presentation of defined benefit plans. The Company does not have any defined benefit plans and so is not impacted by the amendment. AASB 119 (September 2011) also includes changes to: (a) require only those benefits that are expected to be settled wholly before 12 months after the end of the annual reporting period in which the employees render the related service to be classified as short-term employee benefits. All other employee benefits are to be classified as either other long-term employee benefits, post-employment benefits or termination benefits, as appropriate; and the accounting for termination benefits that require an entity to recognise an obligation for such benefits at the earlier of: (b) (i) (ii) (iii) where for an offer that may be withdrawn – when the employee accepts; where for an offer that cannot be withdrawn – when the offer is communicated to affected employees; and where the termination is associated with a restructuring of activities under AASB 137 and if earlier than the first two conditions – when the related restructuring costs are recognised. The Company has not yet been able to reasonably estimate the impact of these changes to AASB 119. EVZ LIMITED Annual Report FY13 l 61 Notes to and forming part of the accounts for the year ended 30 June 2013 34. PARENT ENTITY DISCLOSURES Information relating to the Parent Entity, EVZ Limited, is as follows: (i) Financial Position Assets Current assets Non-current assets Total assets Liabilities Current liabilities Non-current liabilities Total liabilities Equity Issued capital Accumulated losses Reserves Total equity (ii) Financial Performance Comprehensive income Profit/(Loss) for the year Transfer from capital profits reserve Total comprehensive income/(loss) Parent Entity 2013 $ Parent Entity 2012 $ 128,080 23,261,632 23,389,712 779,676 25,391,552 26,171,228 9,395,197 13,762 9,408,959 1,554,734 9,630,669 11,185,403 46,055,159 (32,074,406) - 13,980,753 46,023,159 (31,236,034) 198,700 14,985,825 (1,037,072) 198,700 (838,372) (15,258,114) - (15,258,114) (iii) Guarantees entered into by the parent entity in relation to the debts of its subsidiaries A deed of cross guarantee between EVZ Ltd (Parent Entity) and TSF Engineering Pty Ltd, TSF Maintenance Services Pty Ltd, Brockman Engineering Pty Ltd, Danum Engineering Pty Ltd, A.C.N. 124919508 Pty Ltd (formerly National Engineering Pty Ltd), Syfon Systems Pty Ltd, NuSource Water Pty Ltd, EVZ Energy Pty Ltd (previously Cellular Beams Pty Ltd) and EVZ Engineering Pty Ltd (Group Entities) is enacted and relief was obtained from preparing financial statements for those Group Entities under ASIC Class Order 98/1418. Under the deed, EVZ Ltd and the Group Entities jointly guarantee to support the liabilities and obligations of the Group Entities. EVZ Ltd and the Group Entities are the only parties to the Deeds of Cross Guarantee and form the Closed Group. There are no contingent liabilities of the Parent Entity or commitments for the acquisition of property, plant and equipment by the Parent Entity. 35. COMPANY DETAILS The registered office and principal place of business of EVZ Limited is 15 Clifford Street, Huntingdale, 3166. The principal place of business of Syfon Systems Pty Ltd is 22 Hargreaves St, Huntingdale, 3166 The principal place of business of Brockman Engineering Pty Ltd is 340 Forest Rd, Corio, 3214 The principal place of business of TSF Engineering Pty Ltd is Unit A, 31-33 Sirius Road, Lane Cove, 2066 The principal place of business of TSF Maintenance Services Pty Ltd is Unit A, 31-33 Sirius Road, Lane Cove, 2066 62 l EVZ LIMITED Annual Report FY13 Directors’ Declaration The Directors of EVZ Limited declare that: (a) 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; (b) the financial statements are in compliance with International Financial Reporting Standards, as stated in Note 1 to the financial statements; (c) in the Directors’ opinion, the financial statements and notes thereto are in accordance with the Corporations Act 2001, including compliance with accounting standards and giving a true and fair view of the financial position and performance of the consolidated entity; and (d) the Directors have been given the declarations required by s.295A of the Corporations Act 2001. At the date of this declaration, the Company is within the class of companies affected by ASIC Class Order 98/1418. The nature of the deed of cross guarantee is such that each company which is party to the deed guarantees to each creditor payment in full of any debt in accordance with the deed of cross guarantee. In the Directors’ opinion, there are reasonable grounds to believe that the Company and the companies to which the ASIC Class Order applies, as detailed in Note 32 to the financial statements will, as a group, be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee. SIGNED in accordance with a resolution of the Board of Directors made pursuant to s.295(5) of the Corporations Act 2001. Director - M Findlay Signed at Melbourne this 20th day of September 2013. EVZ LIMITED Annual Report FY13 l 63 Independent Auditor's Report to the members of EVZ Limited Advantage Advisors Audit Partnership Audit & Assurance Services Level 7, 114 William Street Melbourne VIC 3000 Australia GPO Box 2266 Melbourne VIC 3001 Australia ABN 47 075 804 075 T +61 3 9274 0600 F +61 3 9274 0660 audit@advantageadvisors.com.au advantageadvisors.com.au INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF EVZ LIMITED Report on the Financial Report We have audited the accompanying financial report of EVZ Limited and its controlled entities, which comprises the statement of financial position as at 30 June 2013, the statement of profit or loss and the statement of profit or loss and other comprehensive income, the statement of changes in equity and the statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the year’s end or from time to time during the financial year. Directors’ Responsibility for the Financial Report The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards. Auditor’s Responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the company’s preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 64 l EVZ LIMITED Annual Report FY13 Independent Auditor's Report to the members of EVZ Limited INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF EVZ LIMITED (Continued) Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of EVZ Limited on 20th September 2013, would be in the same terms if given to the directors as at the time of this auditor’s report. Opinion In our opinion: (a) the financial report of EVZ Limited is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2013 and of its performance for the year ended on that date; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001. (b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1. Report on the Remuneration Report We have audited the Remuneration Report included in pages (cid:2)(cid:2) to 1(cid:1) of the directors’ report for the year ended 30 June 2013. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Opinion In our opinion, the Remuneration Report of EVZ Limited for the year ended 30 June 2013, complies with section 300A of the Corporations Act 2001. ADVANTAGE ADVISORS AUDIT PARTNERSHIP CHARTERED ACCOUNTANTS JAMES RIDLEY PARTNER Dated in Melbourne on this 20th day of September 2013. EVZ LIMITED Annual Report FY13 l 65 Additional shareholders’ information as at 31 August 2013 1. Substantial Shareholders UBS Nominees Pty Ltd 2. Distribution of Shareholding Range of Holding 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and over Number of shareholders with less than a marketable parcel of $500 at $0.055 per unit 3. Names of the 20 largest shareholders UBS Nominees Pty Ltd 1. Smithley Super Pty Ltd (Smith Super Fund A/c) 2. Cameron Richard Pty Ltd (Superannuation Fund A/c) 3. 4. Powis Enterprises Pty Ltd (Powis Super Fund A/c) 5. Myall Resources Pty Ltd (Myall Group Super Fund A/c) 6. 7. 8. 9. Airlie Beach Holdings Pty Limited (Burns Family A/c) BA & LE Amarant Pty Ltd (BA & LE Amarant P/L S/F A/c) Linwierik Super Pty Ltd (Linton Super Fund A/c) CJ Arms Superannuation Fund Pty Ltd (CJ Arms Super Fund A/c) Airlie Beach Holdings Pty Ltd (ABI Super Fund A/c) 10. Mr Adam Bernard Bellgrove (Ingodwi Family A/c) 11. Mr Keith Andrew Fagg & Mrs Heather Elizabeth Fagg (KA & HE Fagg S/Fund A/c) 12. 13. Onmell Pty Ltd (ONM PBSF A/c) 14. 15. 16. 17. 18. 19. 20. BT Portfolio Services Limited (Juchima Super Fund A/c) Pershing Australia Nominees Pty Ltd (Blue Ocean Equities A/c) Rangeworthy Pty Ltd (The Edgley Family A/c) Powis Enterprises Pty Ltd (Powis Family A/c) DIP Holdings Pty Ltd NLA Investments Pty Ltd (N & L Allen Family A/c) TRB Management Pty Ltd (Bowden Super Fund A/c) 15,603,089 Ordinary Shares No. of Shareholders Ordinary Shares 289 789 285 658 200 2,221 Shares held 15,603,089 7,000,000 6,863,412 5,942,365 5,198,760 5,000,000 5,000,000 4,582,247 4,570,178 4,400,000 4,059,001 3,999,021 3,612,581 3,285,654 3,200,000 2,825,000 2,629,584 2,600,000 2,576,853 2,409,000 95,356,745 1,265 % Holding 7.49 3.36 3.29 2.85 2.49 2.40 2.40 2.20 2.19 2.11 1.95 1.92 1.73 1.58 1.54 1.36 1.26 1.25 1.24 1.16 45.75 4. Voting Rights A registered holder of shares in the company may attend general meetings of the company in person or by proxy and on a poll may exercise one vote for each share held. There are no voting rights attached to options for ordinary shares until the options have been exercised. 5. Unlisted Options There are no unlisted options on issue. 66 l EVZ LIMITED Annual Report FY13 Additional shareholders’ information as at 31 August 2013 6. General The name of the Company Secretary is Ian Wallace. The address of the principal registered office is: 15 Clifford Street, Huntingdale, Victoria, 3166 Telephone Number: (03) 9545 5288 Facsimile Number: (03) 9558 9944 Email:corporate@evz.com.au A register of securities is kept at Computershare Investor Services Pty Ltd, 452 Johnston Street, Abbotsford, Victoria, 3067. Telephone Number: 1300 137 328 7. Stock Exchange Listing The company’s ordinary securities are listed on the Australian Securities Exchange Limited. EVZ LIMITED Annual Report FY13 l 67 

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