EVZ Limited
Annual Financial Report
For the year ended 30 June 2018
ACN 010 550 357
Page | 1
Chairmans Report
During the 2018 Financial Year the EVZ Group again delivered improved financial outcomes from operations
compared to 2017. The key points were as follows:
Revenues from ordinary activities increased by 25% to $64.9 million for 2018.
Net profit before tax from ordinary operations was $2.5 million.
EVZ completed a successful capital raising to further assist in the strengthening of the financial base,
and to continue our growth in earnings from existing activities. The capital raising was made possible
with the participation of our largest shareholders including Thorney Investment Group Australia, in
addition to several new sophisticated investors to EVZ.
Activities of the four operating divisions are summarised below:
Brockman Engineering continues to be a lead player in petrochemical and water tank construction,
maintenance and piping fabrication sector. Brockman’s significant tender pipeline and increase in
secured contacts provides a consistent and stable outlook now and into 2019.
Syfon Systems again produced a strong financial performance during the 2018 financial year. Syfon is
the market dominant siphonic drainage provider in Australia and Malaysia that consistently produces
strong financial results. New projects and client base expansion in other parts of the Asia, including
Vietnam are now developing and will provide further diversity of revenue streams and growth.
TSF Engineering finalised the Trigeneration power station project at Melbourne Airport. No new work
is intended for this division.
TSF Maintenance Services provides power generation breakdown and maintenance services. The 2018
financial year result involved a restructure of the business which led to a small operational loss.
However, the business is now well placed to return to profitability in the 2019 financial year.
I would like to thank our loyal shareholders for their support and welcome new shareholders who have joined
us on the expectation of improved value from growth in operational turnover and profitability. The Directors
and Management of EVZ limited are totally committed to furthering the success gained to date and achieving
greater and more successful outcomes in the future.
I would also like to thank the senior management teams and their people for their ongoing commitment to
their quality products and customers and who represent the EVZ Group in the best possible way in doing so. I
also thank my fellow Directors Rob Edgley and Ian Luck.
I commend the 2018 Annual Report to you.
Sincerely
Graham Burns
Chairman
Page | 2
Annual Financial Report
2018
Contents
Section
Page
Chairmans Report .............................................................................................................................. 2
Contents ............................................................................................................................................ 3
Corporate Directory ........................................................................................................................... 4
Directors’ Report ............................................................................................................................... 5
Corporate Governance Statement .................................................................................................... 14
Auditor’s Independence Declaration................................................................................................. 23
Consolidated Statement of Profit or Loss .......................................................................................... 24
Consolidated Statement of Comprehensive Income .......................................................................... 25
Consolidated Statement of Financial Position ................................................................................... 26
Consolidated Statement of Changes in Equity ................................................................................... 27
Consolidated Statement of Cash Flows ............................................................................................. 28
Notes to the Consolidated Financial Statements ............................................................................... 29
Directors’ Declaration ...................................................................................................................... 70
Independent Auditors’ Report .......................................................................................................... 71
Additional Shareholder Information ................................................................................................. 77
Page | 3
Corporate Directory
Directors
G Burns
R Edgley
I Luck
(Non-Executive Chairman)
(Non-Executive Director)
(Non-Executive Director)
Chief Executive Officer
S Farthing
Chief Financial Officer &
Company Secretary
P van der Wal
Registered & principal office
Share registry
Auditors
115 | 838 Collins Street
Melbourne Vic 3008
Telephone: (03) 9545 5288
Facsimile: (03) 9542 6061
Email: pieter.vanderwal@evz.com.au
Computershare Investor Services Pty Ltd
452 Johnston Street
Abbotsford Vic 3067
Telephone: 1300 137 328
Facsimile: 1300 137 341
Crowe Horwath Melbourne
Level 17
181 William Street
Melbourne Vic 3000
Bankers
Commonwealth Bank of Australia
Stock exchange listing
Australian Securities Exchange Limited
(Home Exchange – Melbourne)
ASX Code: EVZ
Page | 4
Directors’ Report
The Directors present their report on the financial statements of the Company and economic entity for the
year ended 30 June 2018. 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:
Graham Burns
Robert Edgely
Ian Luck (appointed 3 July 2017)
Maxwell Findlay (resigned 3 July 2017)
Information on directors
Details of the Directors of the Company in office at the date of this report are:
Graham Burns
Appointed 1 February 2008 – Non-Executive Chairman. Mr Burns was appointed
Chairman on 5 July 2016.
Mr Burns, age 63, 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 FAICD, is a member of the Remuneration, Audit and Nomination Committees.
Interest in Shares: 80,000,000 ordinary shares
Robert Edgley
Appointed 26 August 2011 – Non-Executive Director.
Mr Edgley, age 53, 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 Chairman of the Audit Committee and a member of the Remuneration and
Nomination Committees.
Interest in Shares: 22,957,142 ordinary shares.
Page | 5
Directors’ Report (continued)
Information on directors (continued)
Ian Luck
Appointed 3 July 2017– Non-Executive Director.
Mr Luck, age 66, has significant experience in the Engineering and Construction Sector
with 40 years’ experience in business leadership in Australia. His career features a
balanced blend of complex business leadership, strategy and governance roles that focus
on creating high performing teams to deliver outstanding growth and profitability. He
currently is a Non-Executive Director of McConnell Dowell (an Australian design and
construction group). Previously he has been the Managing Director of Baulderstone and
a key manager in Leighton Contractors.
Mr Luck has a B Tech. Civil Engineering, a FIE Aust and a CPEng
Mr Luck is a member of the Audit Committee and Nomination Committee and Chairman
of the Remuneration Committee.
Interest in Shares: 5,000,000 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: 15
G Burns
R Edgley
I Luck (Appointed 3 July 2017)
M Findlay (Resigned 3 July 2017)
Remuneration Committee Meetings
Total number of meetings held: 8
I Luck (Appointed 3 July 2017)
G Burns
R Edgley
M Findlay (Resigned 3 July 2017)
No. Attended
15
15
14
1
No. Held
Whilst a Director
15
15
14
1
No. Attended
8
8
8
-
No. Held
Whilst a Member
8
8
8
-
Page | 6
Directors’ Report (continued)
Audit Committee Meetings
Total number of meetings held: 3
R Edgley – Chairman
I Luck (Appointed 3 July 2017)
G Burns
M Findlay (Resigned 3 July 2017)
No. Attended
3
3
3
-
No. Held
Whilst a Member
3
3
3
-
There were no meetings of the Nomination Committee held during the year.
Company secretary
The Company Secretary is Pieter van der Wal. He was appointed 4 September 2017. Mr van der Wal has a
Bachelor of Business and is a Chartered Accountant with company secretarial experience.
Ian Wallace was Company Secretary until he resigned on 4 September 2017.
Principal activities
The economic entity operates in the engineering and energy services sectors and its principal activities are:
• 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.
• 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, installation and maintenance of clean energy solutions, base and back-up power generation
equipment, communications equipment, marine installations and provision of mobile generation
capabilities.
Operating results
The net profit for the economic entity for the year after income tax expense was $2,341,980 compared to a
net profit after income tax expense in 2017 of $3,609,689 but which included an accounting profit from debt
forgiveness of $7,285,000.
The following significant achievements occurred during and subsequent to the financial year:
• Revenues from ordinary activities increased by 25% to $64.9 million for 2018.
• The contracted order book for work to complete increased 123% to $77 million.
• Successful raising of $6.5m before costs of new equity. $3.2m was raised in September 2017 and March
2018 and a further $3.3m was raised subsequent to year end in September 2018. See further at the
subsequent events note below.
• Continued to expand its customer, product and geographic base from an increased investment in business
development.
Dividends
No dividends were declared or paid during the year.
Page | 7
Directors’ Report (continued)
Changes in state of affairs
There was no change in the state of affairs.
Subsequent events
Subsequent to balance date on 30 August 2018 the Company held an extraordinary general meeting at which
the shareholders approved a capital raising to issue an additional 15% of shares. This equated to 124,540,791
new shares with the shares being issued on 4 September 2018. This brings total shares on issue to 954,812,736.
The shares were issued at $0.028 (2.8 cents) which equates to $3.5 million raised before costs.
Funds from the capital raising are being used to support working capital requirements for the Company’s
expanded project base. In particular, the company restructured its banking facility by paying down its core
debt from $6.0 million to $3.3 million and simultaneously issuing additional bank guarantees for $2.7 million.
There have not been any other 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 the financial year.
Future developments
The Group will continue its focus on investing in growth across all its businesses and the reduction/retirement
of debt.
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.
Environmental regulation
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.
Auditors’ independence declaration
As required under Section 307C of the Corporations Act 2001, EVZ Limited has obtained an Independence
Declaration from its auditors, Crowe Horwath. This is included on page 23 of this financial report.
Page | 8
Directors’ Report (continued)
Remuneration Report
This report details the nature and amount of remuneration for each Director of the Company and for Key
Management Personnel.
Remuneration Policy
The remuneration policy of the Company 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 to 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 and is predominantly measured by comparing actual growth against 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.
The Remuneration Committee set certain key performance indicators for the key Executives in the Group to
determine eligibility for short term incentive payments. The key performance indicators were both quantitative
and qualitative measures. Short term incentives paid/payable for the year were $218,195 (2017: $Nil).
Long term incentives, linked with performance rights issued under the Companys’ Directors’ and Employees’
Benefits Plan, were not met during the year and no performance rights, options or shares were issued.
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.
Page | 9
Directors’ Report (continued)
Remuneration Report (continued)
The Remuneration Committee may seek independent advice in determining appropriate fee structures for
Directors.
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.
There were no share-based payments during the year.
Performance Based Remuneration
During the year to 30 June 2018, performance based remuneration paid/payable totalled $218,195 (2017:$Nil).
Short term performance based payments were based on achieving certain key performance indicators which
were quantitative measures based on business profitability and improvement in forward work in hand. Both
measures are considered to be drivers of shareholder value.
Page | 10
Directors’ Report (continued)
Remuneration Report (continued)
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.
Details of remuneration for the year ended 30 June 2018
The remuneration for each Director and each of Key Management Personnel of the economic entity during the
year was as follows:
Page | 11
DirectorsShort-term employee benefitsPost-employment benefitsSalaryFeesSuperannuation ContributionsOtherTotal2018$ $ $ $ G Burns- 80,000 - - 80,000 M Findlay (resigned 3 July 2017)- - - - - R Edgley - 50,000 - - 50,000 I Luck (appointed 3 July 2017)- 50,000 - - 50,000 - 180,000 - - 180,000 2017G Burns- 80,000 - - 80,000 M Findlay (resigned 3 July 2017)- 35,000 - - 35,000 R Edgley - 35,000 - - 35,000 - 150,000 - - 150,000 Key management personnel of the economic entityShort-term employee benefitsPost-employment benefitsSalary Profit share & bonus Non cash benefits Superannuation ContributionsTermination benefitsTotal2018$ $ $ $ S Farthing(Chief Executive Officer)355,041 135,750 - 20,049 - 510,840 I Wallace (resigned 4 September 2017)(Chief Financial Officer & Company Secretary)85,747 - - 8,146 58,587 152,479 P van der Wal (appointed 4 September 2017)(Chief Financial Officer & Company Secretary)175,631 - - 16,652 - 192,283 A Bellgrove(General Manager, Syfon Systems)274,977 23,645 23,353 20,049 - 342,023 C Bishop(General Manager, Brockman Engineering)262,469 58,800 - 25,480 - 346,749 I Whitford(General Manager, TSF Maintenance Services)168,950 - - 16,050 - 185,000 1,322,814 218,195 23,353 106,426 58,587 1,729,374
Directors’ Report (continued)
Remuneration Report (continued)
Remuneration and other terms of employment for key Executives are formalised 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.
Additional disclosures relating to key management personnel
The number of ordinary shares held by each Key Management Personnel of the Group during the financial year
is as follows:
Page | 12
Short-term employee benefitsPost-employment benefitsSalary Profit share & bonus Non cash benefits Superannuation ContributionsTermination benefitsTotal2017$ $ $ $ S Farthing(Chief Executive Officer)356,027 - 2,802 18,973 - 377,802 I Wallace (resigned 4 September 2017)(Chief Financial Officer & Company Secretary)204,660 - - 16,833 - 221,493 A Bellgrove(General Manager, Syfon Systems)266,099 - 28,431 32,772 - 327,302 C Bishop(General Manager, Brockman Engineering)251,235 - - 24,658 - 275,893 I Whitford(General Manager, TSF Maintenance Services)168,950 - 15,000 16,050 - 200,000 1,246,971 - 46,233 109,286 - 1,402,490 2018Balance at beginning of yearGranted as remunerationOther ChangesBalance at end of yearG Burns48,380,141 - 31,619,859 80,000,000 M Findlay (resigned 3 July 2017)4,007,228 - (65,106) 3,942,122 R Edgley10,543,473 - 12,413,669 22,957,142 I Luck (appointed 3 July 2017)- - 5,000,000 5,000,000 S Farthing8,762,785 - 2,877,698 11,640,483 I Wallace (resigned 4 September 2017)211,387 - - 211,387 P van der Wal (appointed 4 September 2017)- - 1,000,000 1,000,000 C Bishop- - - - A Bellgrove12,405,493 - - 12,405,493 I Whitford- - - - 84,310,507 - 52,846,120 137,156,627 2017Balance at beginning of yearGranted as remunerationOther ChangesBalance at end of yearG Burns11,210,652 37,169,489 48,380,141 M Findlay (resigned 3 July 2017)1,644,500 2,362,728 4,007,228 R Edgley3,741,232 6,802,241 10,543,473 S Farthing3,109,375 5,653,410 8,762,785 I Wallace (resigned 4 September 2017)75,008 136,379 211,387 C Bishop- - - A Bellgrove4,401,949 8,003,544 12,405,493 I Whitford- - - 24,182,716 - 60,127,791 84,310,507
Directors’ Report (continued)
Remuneration Report (continued)
This concludes the remuneration report, which has been audited
Signed in accordance with a resolution of the Board of Directors.
Director – G Burns
Signed at Melbourne this 27th day of September 2018.
Page | 13
Corporate Governance Statement
For the year ended 30 June 2018
Introduction
The Board of the Company is committed to protecting shareholders’ interests and ensuring investors are fully
informed about the performance of the company’s business. The Directors have undertaken 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 policies and practices of the company are in accordance with the ASX Corporate Governance Council’s
“Corporate Governance Principles and Recommendations – 3rd Edition”.
Unless otherwise indicated, the best practice principles of the ASX Corporate Governance Council and
suggested disclosures, have been adopted by the company for the year ended 30 June 2018 as relevant to the
size and complexity of the company and its operations.
The Corporate Governance Statement is current at the date of approval of the annual report and has been
approved by the Board of Directors.
Principle 1: Lay Solid Foundations for Management and Oversight
Recommendation 1.1: Respective roles and responsibilities of the Board and management.
The 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.
establish, monitor and modify the corporate strategies of the company;
ensure proper corporate governance;
The key responsibilities of the Board are to:
•
•
• 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.
Page | 14
Corporate Governance Statement (continued)
For the year ended 30 June 2018
Recommendation 1.2: Directors Appointment
Non-Executive Directors appointed during the year hold office until the next annual general meeting, where
they must stand for re-election. Each year one third of the Board of Directors (excluding the Managing Director)
must retire and if they wish seek re-election at the annual general meeting. Board support for a Director’s re-
election is not automatic and is subject to satisfactory Director performance.
Appropriate background checks are undertaken before a Director is nominated. At the annual general meeting
shareholders are provided with all material information concerning the Director seeking election or re-election.
Recommendation 1.3: Terms of Appointment
The Company has written agreements with all senior executives setting out the terms of their appointment.
Written agreements have now been implemented for all new director appointments. The duties of the
Directors as detailed above were provided to all directors.
Recommendation 1.4: Company Secretary
The appointment and removal of the Company Secretary is a decision of the Board. The Company Secretary is
accountable directly to the Board, through the Chairman, on all matters relating to the proper functioning of
the Board and is responsible for ensuring compliance with Board procedures and governance matters. All
Directors have direct access to the Company Secretary.
Recommendation 1.5: 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.
•
•
•
•
Page | 15
Corporate Governance Statement (continued)
For the year ended 30 June 2018
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
2018
2017
No.
25
-
-
%
7
-
-
No.
18
-
-
%
8
-
-
This includes both employees and specific contractors engaged by the Group.
Recommendation 1.6: Board and Committee Performance
The Board and its committees undertook self-assessment in accordance with their relevant charters during the
financial year. The Chairman 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.
Recommendation 1.7: Senior Executive Performance
Reviews of the performance of Senior Executives are undertaken annually against established key performance
indicators. At the same time goals and targets for the coming year are discussed and implemented. The annual
evaluation of the CEO’s performance is a specific function of the Remuneration Committee.
Principle 2: Structure the Board to Add Value
Recommendation 2.1: 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 2.2 and 2.3: Board Composition
The Company’s Board is comprised of Non-Executive Directors.
Details of Directors and relevant skills are detailed in the following tables:
Page | 16
Corporate Governance Statement (continued)
For the year ended 30 June 2018
Details of Directors
Director
Graham Burns
Robert Edgley
Ian Luck
Maxwell Findlay
Term in Office
Appointed 1 February 2008
Appointed 26 August 2011
Appointed 3 July 2017
Appointed 14 May 2008 –
Resigned 3 July 2017
Qualifications
FAICD
BEc
B Tech. Civil
Engineering
BEc, FAICD
Status
Independent
Independent
Independent
Independent
Areas of competence and skills of the Board of Directors
Area
Leadership
Competence and skills
Business leadership
Public listed company experience
Business & Finance
Sustainability and Stakeholder management
Accounting expertise
Business strategy
Corporate turnarounds
Corporate financing
Mergers and acquisitions
Risk management
Commercial agreements
Corporate governance
Remuneration
Market and Industry
Financial services expertise
International
Geographical experience and international business
management
Recommendation 2.4: Director Independence
All Directors 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.
Page | 17
Corporate Governance Statement (continued)
For the year ended 30 June 2018
Directors are encouraged to be long term shareholders in the company. Directors shareholdings are disclosed
in the annual report. Any change in Directors’ shareholdings are disclosed in accordance with ASX Listing Rules.
The Company’s policies allow Directors to seek independent advice at the Company’s expense.
Recommendation 2.5: Independence of Chairman
The chairman, Graham Burns, 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. The role of Chairman is
independent to the role of CEO, which is held by Scott Farthing. There is a clear division of responsibility
between these roles.
Recommendation 2.6: Induction and Training
Any new Director will receive a letter of appointment. Directors are provided access to the company’s policies
including the Board’s Charter. At Board meetings Directors receive regular updates and also undertake site
visits, attend customer and financier meetings as required. These assist Directors to keep abreast of relevant
market and industry developments.
Principle 3: Act Ethically and Responsibly
Recommendation 3.1: Code of Conduct
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
Principle 4: Safeguard Integrity in Corporate Reporting
Recommendation 4.1: 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.
The audit committee consists of:
•
Robert Edgley - Chairperson
•
Ian Luck (appointed 3 July 2017)
• Graham Burns
• Max Findlay (resigned 3 July 2017)
Page | 18
Corporate Governance Statement (continued)
For the year ended 30 June 2018
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
identifying risk areas.
•
•
•
Recommendation 4.2: CEO and CFO Assurance
The CEO and CFO have provided to the Board formal declarations 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.
Recommendation 4.3: Auditor Attendance
The Company’s Auditor is Crowe Horwath. The Auditor has and will continue to attend the Annual General
Meeting in order to be available to answer questions relating to the audit raised by security holders.
Principle 5: Make Timely and Balanced Disclosure
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.
•
•
Page | 19
Corporate Governance Statement (continued)
For the year ended 30 June 2018
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: Website
The Company has a website which includes details of the Company and the operating entities in the Group.
The website also includes the Company’s annual report which contains within it the Company’s Corporate
Governance statement. The Company is currently updating this website to include a separate Corporate
Governance page.
Recommendation 6.2: Communications with investors
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.
•
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.
Recommendation 6.3: Participation at meetings by security holders
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 Corporate Governance Principles and Recommendations in respect of notices of meetings;
providing sufficient time and adequate opportunity at meetings for shareholders to ask questions and
make comments to the Board, 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.
•
•
The current size of the Company prohibits technology such as live webcasting and meetings across multiple
venues linked by live telecommunications. The Company allows electronic lodgment of proxies for its meetings.
Recommendation 6.4: Electronic communication
The Company provides security holders with the option to receive communications from the entity and its
security registry, such as notice of meetings, explanatory memorandums, proxy forms and annual reports
electronically. A corporate email address is provided via the website to allow security holders to communicate
with the Company.
Page | 20
Corporate Governance Statement (continued)
For the year ended 30 June 2018
The Company allows electronic lodgment of proxies for its meetings.
Principle 7: Recognise and Manage Risk
Recommendation 7.1: Risk Committee
Overall risk management is the responsibility of the Audit Committee and covered within that Committee’s
Charter.
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 and 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. In
addition a monthly risk report is tabled at the Board meeting for consideration.
Recommendation 7.2: Risk Management Framework
Given the relatively small and centralised management team, the nature of the business of the company and
that a majority of independent Directors sit on the audit committee, the Board is continuously kept informed
of the effectiveness of the company’s internal control systems. In addition a monthly risk report is tabled at
the Board meeting for consideration.
Recommendation 7.3: Internal Audit
The Company does not currently have any internal audit function. The Board considers that given the
Company’s current size there is no benefit in having an internal audit function. Independent advice will be
sought as necessary. The Board has overall responsibility for the identification, assessment, management and
monitoring of the risks faced by the company.
Recommendation 7.4: Risk Management
The Board monitors its exposure to all risks, including economic, environmental and social sustainability risks
on a monthly basis. Any material business risks will be disclosed in the annual report, which also outlines the
activities, performance, financial position of the Company and its businesses.
Principle 8: Remunerate Fairly and Responsibly
Recommendation 8.1 and 8.2: Remuneration Committee and Policies
The company has a duly appointed remuneration committee. The committee operates pursuant to the
remuneration committee charter.
Ian Luck (appointed as Chairman on 3 July 2017)
The remuneration committee consists of:
•
• Graham Burns
•
Rob Edgley
• Max Findlay (resigned 3 July 2017)
Page | 21
Corporate Governance Statement (continued)
For the year ended 30 June 2018
The Company’s approach to remuneration is set out in the Remuneration Report contained within this annual
report.
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.
•
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, under the Directors’ and Employees’ Benefits Plan, with shares,
performance rights and/or options and bonuses as part of their remuneration and incentive package.
There are no Executive Directors.
Recommendation 8.3: Equity based remuneration scheme
There is currently in place an 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:
•
•
•
who is selected by the Board to participate in the Plan.
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
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.
Page | 22
Auditor Independence Declaration Under
S307C 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 2018 there have
been no contraventions of
I.
II.
The auditor independence requirements as set out in the Corporations Act 2001 in relation to the
audit; and
Any applicable code of professional conduct in relation to the audit.
CROWE HORWATH MELBOURNE
DAVID MUNDAY
Partner
Melbourne, Victoria
27 September 2018
Crowe Horwath Melbourne is a member of Crowe Horwath International, a Swiss verein. Each member of Crowe Horwath is a separate and independent legal
entity. Liability limited by a scheme approved under Professional Standards Legislation. Liability limited other than for the acts or omissions of financial services
licensees.
The title ‘Partner’ conveys that the person is a senior member within their respective division, and is among the group of persons who hold an equity interest
(shareholder) in its parent entity, Findex Group Limited. The only professional service offering which is conducted by a partnership is the Crowe Horwath external
audit division. All other professional services offered by Findex Group Limited are conducted by a privately owned organisation and/or its subsidiaries.
Consolidated Statement of Profit or Loss
For the year ended 30 June 2018
The above consolidated statement of profit or loss should be read in conjunction with the accompanying notes.
Page | 24
Notes20182017 $ $Continuing OperationsRevenue64,928,395 51,902,016Cost of Sales(51,793,049) (41,949,860)Gross Profit13,135,346 9,952,156Other Income2(a)96,694 93,345Administration and business development costs(8,700,181) (9,474,695)Corporate costs(1,427,327) (1,127,360)Debt Forgiveness11- 7,285,000Impairment of other assets- (67,786)Impairment of plant and equipment- (64,132)Profit before finance costs and income tax3,104,532 6,596,528Net finance costs2(c)(619,721) (1,193,433)Profit before income tax from continuing operations2,484,811 5,403,095Income tax (expense)/benefit3(142,831) (1,793,406)Profit/(Loss) for the year attributed to members after tax2,341,980 3,609,689Earnings Per ShareCentsCentsOverall Operations:Basic earnings per share170.3161.470Diluted earnings per share170.3091.464Continuing Operations:Basic earnings per share 170.3161.470Diluted earnings per share 170.3091.464Economic Entity
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2018
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
Page | 25
Notes20182017 $ $Profit/(Loss) for the year after tax 2,341,980 3,609,689 Other comprehensive income:Items that may be reclassified subsequently to profit or loss:Exchange differences arising on translation of foreign operations16(b) 203,941 (172,609)Total comprehensive income for the year attributable to owners of the company2,545,921 3,437,080 Economic Entity
Consolidated Statement of Financial Position
As at 30 June 2018
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
Page | 26
Notes20182017 $ $Current AssetsCash and cash equivalents221,706,883 1,551,970 Trade and other receivables416,939,999 11,858,174 Inventories51,971,101 1,607,744 Financial assets6178,570 28,487 Deferred tax assets8691,500 - Total current assets21,488,053 15,046,375 Non-current assetsTrade and other receivables-non current41,587,673 1,119,934 Plant and equipment73,869,464 3,777,140 Deferred tax assets-non current81,940,631 2,668,652 Intangibles912,072,010 12,072,010 Total non-current assets19,469,778 19,637,736 Total Assets40,957,831 34,684,111 Current liabilitiesTrade and other payables1012,233,514 10,819,022 Tax liabilities8103,542 79,970 Short-term borrowings11511,529 1,085,286 Provisions132,986,944 2,666,446 Total current liabilities15,835,529 14,650,724 Non-current liabilitiesLong-term borrowings126,000,000 6,033,330 Deferred tax liabilities849,200 45,198 Provisions-non current13121,903 386,834 Total non-current liabilities6,171,103 6,465,362 Total Liabilities22,006,632 21,116,086 Net Assets18,951,199 13,568,025 EquityIssued Capital1453,272,129 50,434,876 Reserves16(58,476)(262,417)Accumulated losses16(34,262,454)(36,604,434)Total Equity18,951,199 13,568,025 Economic Entity
Consolidated Statement of Changes in Equity
For the year ended 30 June 2018
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
Page | 27
Ecomomic EntityIssued CapitalAccumulated LossesForeign Currency Translation ReserveTotalAs at 30 June 2018$$$$Balance at 1 July 201750,434,876(36,604,434)(262,417)13,568,025Total comprehensive profit for periodProfit/(loss) for period- 2,341,980- 2,341,980Foreign currency translation reserve- -203,941203,941Total comprehensive income for period- 2,341,980203,9412,545,921Transactions with owners, recorded directly in equity:Shares issued3,282,506- - 3,282,506Share Issue Costs(445,253)- - (445,253) Dividends- - - - Balance at 30 June 201853,272,129(34,262,454)(58,476)18,951,199As at 30 June 2017Issued CapitalAccumulated LossesForeign Currency Translation ReserveTotal$$$$Balance at 1 July 201646,088,909(40,214,123)(89,808)5,784,978Total comprehensive profit for periodProfit/(loss) for period- 3,609,689- 3,609,689Foreign currency translation reserve- - (172,609)(172,609)Total comprehensive income for period- 3,609,689(172,609)3,437,080Transactions with owners, recorded directly in equity:Shares issued4,682,614--4,682,614Share Issue Costs(336,647)(336,647)Dividends---- Balance at 30 June 201750,434,876(36,604,434)(262,417)13,568,025
Consolidated Statement of Cash Flows
For the year ended 30 June 2018
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
Page | 28
Notes20182017 $ $Cash flows from operating activitiesReceipts from customers (inclusive of GST)65,230,179 56,292,930 Payments to suppliers and employees (inclusive of GST)(65,944,908)(59,977,746)Interest received3,999 3,505 Finance costs(623,720)(1,196,938)Income tax paid(78,735)(163,227)Net cash provided by / (used in) operating activities22(1,413,185)(5,041,476)Cash flows from investing activitiesProceeds from sale of plant and equipment(1,208)175,198 Purchase of plant and equipment(762,961)(367,162)Net cash used in investing activities(764,169)(191,964)Cash flows from financing activitiesProceeds from equity raising2,982,506 4,682,614 Share issue costs(145,253)(336,647)Proceeds from / (repayment) of other loans(448,950)1,000,000 Payments for lease financing(56,036)(122,131)Net cash provided/(used) by financing activities2,332,267 5,223,836 Net increase/(decrease) in cash held154,913 (9,604)Cash at beginning of the period1,551,970 1,561,574 Cash at end of the period221,706,883 1,551,970 Economic Entity
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
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 and Interpretations issued by the Australian Accounting Standards
Board and the Corporations Act 2001, as appropriate for for-profit orientated entities. These financial
statements also comply with International Financial Reporting Standards as issued by the International
Accounting Standards Board.
They have been consistently applied unless otherwise stated.
The financial report has been prepared on an accruals basis and is based on historical costs.
(a)
Accounting policies
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.
Page | 29
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
1.
(a)
Summary of significant accounting policies (continued)
Principles of consolidation (continued)
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 profit or loss
and other 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.
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 profit or loss and
other 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 (benefit) for the year comprises current income tax expense (income) and
deferred tax expense (benefit). 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 (benefit) 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.
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 probable 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.
Page | 30
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
1.
(b)
Summary of significant accounting policies (continued)
Income tax (Continued)
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.
(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.
The carrying amount of inventories is reviewed annually by Directors to ensure it is not in excess of the
recoverable amount from these assets.
(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
Page | 31
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
1.
(e)
Summary of significant accounting policies (continued)
Plant and equipment (continued)
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 probable 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 either a
straight-line or diminishing value 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.
Page | 32
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
1.
(g)
Summary of significant accounting policies (continued)
Financial instruments
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.
(h)
Impairment of assets
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.
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
Page | 33
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
1.
(h)
Summary of significant accounting policies (continued)
Impairment of assets (continued)
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.
(i)
(j)
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.
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.
Exchange differences arising on the translation of monetary items are recognised in the income
statement.
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.
Page | 34
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
1.
(k)
Summary of significant accounting policies (continued)
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.
Defined contribution plans
Contributions to defined superannuation plans are expensed when incurred.
Share based payments
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 three months or less and which are subject to insignificant
risk of changes in value, and bank overdrafts. Bank overdrafts are shown within short-term borrowings
in current liabilities on the balance sheet.
(n)
(o)
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).
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 used 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.
Page | 35
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
1.
(q)
(r)
Summary of significant accounting policies (continued)
Comparative figures
When required by Accounting Standards, comparative figures have been adjusted to conform to changes
in presentation for the current financial year.
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 2018, a provision for impairment of $13,644 (2017: $32,447) was raised against receivables
from continuing operations. There is no provision raised for impairment against work in progress (2017:
$150,000).
Recognition of deferred tax assets
The Group has recognised deferred tax assets in relation to Provisions and Other payables of $1,280,163
(2017: $560,459) and Un-recouped tax losses $1,351,968 (2017: $2,108,193).
The realisation of these deferred tax assets is dependent upon generating sufficient taxable profit in the
coming years.
The Group has projected its profits over the next five years and believes that future taxable profit will
be available against which the benefits of the deferred tax assets can be utilised.
Construction contracts and work-in-progress
Construction profits and losses are recognised on the stage-of-completion basis and measured by
comparing construction contract costs incurred to date against expected final costs and recoveries of
the construction contract.
Expected final costs are estimated following an assessment of each contract and a determination of
expected costs still to be incurred.
Whilst expected final costs can vary, the Group believes that the expected final costs in its various
construction contracts are appropriate at 30 June 2018.
(s)
Going concern
The financial report for the year ended 30 June 2018 has been prepared on a going concern basis, which
assumes continuity of normal business activities and realisation of assets and the settlement of liabilities
in the ordinary course of business.
Page | 36
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
1.
Summary of significant accounting policies (continued)
(t)
New and amended accounting standards
Adoption of new and revised accounting standards
In the current year, the Group has adopted all of the new and revised Standards and Interpretations
issued by the Australian Accounting Standards Board (the AASB) that are relevant to its operations and
effective for the current annual reporting period. There has been no material impact of these changes
on the Group's accounting policies.
New accounting standards and interpretations not yet adopted
The following standards, amendments to standards and interpretations are relevant to current
operations. They are available for early adoption but have not been applied by the Group in this Financial
Report.
AASB 9 – Financial Instruments
This standard replaces AASB 139 Financial Instruments: Recognition and Measurement. AASB 9 includes
revised guidance on the classification and measurement of financial instruments, including a new
expected credit loss model for calculation of impairment on financial assets, and new general hedge
accounting requirements. It also carries forward guidance on recognition and derecognition of financial
instruments from AASB 139.
The standard will become mandatory for reporting periods beginning on or after 1 July 2018. The Group
has not early adopted the standard. Retrospective application is required with some exceptions.
The Group does not have any existing hedges but has undertaken an assessment of the classification and
measurement impacts of the new standard and does not expect the new standard to have a significant
impact on the measurement or classification of its financial assets and liabilities.
AASB 15 – Revenue from Contracts with Customers
AASB 15 changes the way revenue is recognised and provides for a significant increase in the disclosure
requirements for the business.
The core principle of AASB 15 is that an entity shall recognise revenue when control of a good or service
transfers to a customer rather than on transfer of risks and rewards.
AASB 15 will become mandatory for reporting periods beginning on or after 1 July 2018. Therefore, AASB
15 will be applied for the first time in the 2019 Financial Report. The standard permits either a full
retrospective or a modified retrospective approach for the adoption.
Page | 37
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
1.
Summary of significant accounting policies (continued)
(t)
New and Amended Accounting Standards (continued)
Significant judgments and estimates are used in determining the impact, such as the assessment of the
probability of customer approval of variations and acceptance of claims, estimation of project
completion date and assumed levels of project execution productivity. The implementation project is
ongoing and therefore all impacts are current estimates which are subject to finalisation prior to final
implementation.
Construction revenue:
The contractual terms and the way in which the Group operates its construction contracts is
predominantly derived from projects containing one performance obligation. Contracted revenue will
continue to be recognised over time, however the new standard provides new requirements for variable
consideration such as incentives, as well as accounting for claims and variations as contract modifications
which all impart a higher threshold of probability for recognition. Revenue is currently recognised when
it is probable that work performed will result in revenue whereas under the new standard, revenue is
recognised when it is highly probable that a significant reversal of revenue will not occur for these
modifications.
Services revenue:
Services revenue arises from maintenance and other services supplied to infrastructure assets and
facilities which may involve a range of services and processes. Under AASB 15, these are predominantly
to be recognised over time with reference to inputs on satisfaction of the performance obligations. The
services that have been determined to be one performance obligation are highly inter-related and
fulfilled over time therefore revenue continues to be recognised over time. As with construction
revenue, incentives, variations and claims exist which are subject to the same higher threshold criteria
of only recognising revenue to the extent it is highly probable that a significant reversal of revenue will
not happen.
Tender costs & contract costs:
Currently under AASB 111 Construction Contracts, costs incurred during the tender process across the
group are generally expensed. Under the new standard costs can only be capitalised if they are both
expected to be recovered and either would not have been incurred if the contract had not been won or
if they are intrinsic to the delivery of a project.
Disclosure and presentation:
The new standard also introduces expanded disclosure requirements and changes in presentation,
particularly in relation to key judgements and future revenue expected to be generated. These are
expected to change the nature and extent of the Group’s disclosure about its revenue from contracts
with customers and associated assets, particularly in the year of adoption of the new standard.
Page | 38
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
1.
Summary of significant accounting policies (continued)
(t)
New and Amended Accounting Standards (continued)
Conclusion
The Group has analysed each major ongoing contract and determined the higher recognition thresholds
in the new standard are similar to the current conservative revenue recognition standards and processes
within the group. Therefore, it does not expect any material impacts from implementation of the new
standard.
The new standard also introduces expanded disclosure requirements and changes in presentation,
particularly in relation to key judgements and future revenue expected to be generated. These are
expected to change the nature and extent of the Group’s disclosure about its revenue from contracts
with customers and associated assets, particularly in the year of adoption of the new standard.
AASB 15 needs to be implemented either fully retrospectively, which would require restatement of
comparatives, or using the cumulative effect method, which would not require a restatement of
comparatives, upon the effective date of 1 July 2018. AASB 15 contains a number of practical expedients
for the full retrospective approach including the option to omit the restatement impact of completed
contracts that begin and end within the same annual reporting period and/or completed at the beginning
of the earliest period presented.
The Group is in the process of assessing the available options for transition but expects to adopt a
modified retrospective approach on 1 July 2018.
AASB 16 – Leases
AASB 16 Leases specifies how to recognise, measure and disclose leases. The standard provides a single
lessee accounting model, requiring lessees to recognise right-of-use assets and lease liabilities for almost
all leases. The exceptions being short-term (less than 12 months) and low value leases. Lessor accounting
remains similar to the current standard – i.e. lessors continue to classify leases as finance or operating
leases. AASB 16 applies to annual reporting periods beginning on or after 1 January 2019 and replaces
AASB 117 Leases and the related interpretations.
As at the reporting date, the group has non-cancellable operating lease commitments of $2.165 million,
refer to Note 25: Operating lease commitments.
The Group manages its owned and leased assets to ensure there is an appropriate level of equipment to
meet its current obligations and to tender for new work. The decision as to whether to lease or purchase
an asset is dependent on a broad range of considerations at the time including financing, risk
management and operational strategies following the anticipated completion of a project.
To date, management has focused on the identification of the provisions of the standard which will
most impact the Group and is in the process of determining whether any additional arrangements in
excess of the current portfolio will be considered as a lease, together with a review of the lease
contracts and financial reporting systems
implementation date:
in place. The following
impacts are expected on
Page | 39
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
1.
Summary of significant accounting policies (continued)
(t)
New and Amended Accounting Standards (continued)
• Total assets and total liabilities will increase, due to the recognition of a “Right of Use Asset” and a
“Lease Liability” grossing up the assets and liabilities in the Consolidated Statement of Financial
Position. As at 30 June 2018 the value of the gross up is estimated at $1.832 million;
•
Interest expense will increase due to the effective interest rate implicit in the lease, where the
interest expense component is higher on early years of the lease;
• Depreciation charge will increase as the right of use assets is recognised;
•
Lease rental expenses will decrease due to the recognition of interest and depreciation noted
above; and
• Operating cash flows will be higher as repayment of the principle portion of all lease liabilities will
be classified as financing activities.
AASB 16 needs to be implemented retrospectively, either with the restatement of comparatives or with
the cumulative impact of application recognised as at 1 July 2019 under the modified retrospective
approach. AASB 16 contains a number of practical expedients, one of which permits the classification of
existing contracts as leases under current accounting standards to be carried over to AASB 16. Under the
modified retrospective approach, on a leaseby-lease basis, the right of use of an asset may be deemed
to be equivalent to the liability at transition or calculated retrospectively as at inception of the lease.
The Group is in the process of assessing the available options for transition but expects to adopt a
modified retrospective approach on 1 July 2019.
The financial report was authorised for issue on 27 September 2018 by the Board of Directors.
Page | 40
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
Page | 41
20182017 $ $2.Profit/(loss) from continuing operations(a)Other incomeSundry income96,694 93,345 96,694 93,345 (b)ExpensesBad debts (36,651) 290,928 Impairment - receivables 46,195 (80,848) Total employee costs 31,814,107 31,535,892 Defined contribution superannuation expense 2,450,151 2,238,567 Foreign exchange losses/(gains) 203,941 (136,953)Losses on sale of plant and equipment 3,846 208,789 Operating lease payments 1,143,273 920,376 Depreciation of plant and equipment 670,637 795,069 Impairment - Work in Progress - 150,000 Impairment - plant and equipment - 64,132 (c)Net finance costs:Finance costs 623,720 1,196,938 Interest income (3,999) (3,505)Net finance costs from continuing operations 619,721 1,193,433 3.Income tax(a)The prima facie tax on profit before income tax from continuing operations is reconciled to income tax as follows:Profit/(Loss) before Income Tax2,484,8115,403,095Income tax calculated at 30% (2017: 30%)745,4431,620,929Tax effect of permanent differences(272,010)23,834Under provision/(over provision) in prior years266,82066,736Recognition of additional tax losses(703,731)- Taxation expense - offshore subsidiary106,30981,907Income tax expense/(benefit)142,8311,793,406The applicable weighted average effective tax rates are:6%33%(b)The components of tax expense comprise:Current tax595,715(850,621)Deferred tax(15,973)2,577,291Under provision/(over provision) in prior years266,82066,736Recognition of additional tax losses(703,731)- 142,8311,793,406Economic Entity
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
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.
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:
Page | 42
Notes20182017 $ $4.Trade and other receivablesCurrentTrade receivables13,549,390 10,518,262 Provision for impairment(13,644) (32,447) 13,535,746 10,485,815 Amounts due from customers for construction contracts 311,853,116 391,626 Provision for Impairment31- (150,000) Retention receivables277,494 357,757 15,666,356 11,085,198 Other debtors and prepayments1,273,643 772,976 16,939,999 11,858,174 Non-CurrentRetention receivables1,587,673 1,119,934 1,587,673 1,119,934 Economic Entity20182017 $ $Australia13,458,518 9,036,412 Asia5,082,798 4,124,143 18,541,316 13,160,555 Economic Entity
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
4. TRADE & OTHER RECEIVABLES (continued)
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.
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.
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.
Funds on deposit represent security deposits covering a guarantee for property lease obligations and contract
performance bonds.
Page | 43
Gross AmountPast Due & ImpairedPast Due not Impaired (Days Overdue)Within Trading TermsEconomic Entity<30 Days31-60 Days>61 Days$$$$$$2018Trade & term receivables17,267,67313,6446,969,0904,410,8131,918,2413,955,885Other receivables1,273,643- - - - 1,273,643 18,541,31613,6446,969,0904,410,8131,918,2415,229,5282017Trade & term receivables12,387,579182,4472,544,756280,0881,229,7718,150,517Other receivables772,976- - - - 772,97613,160,555182,4472,544,756280,0881,229,7718,923,49320182017 $ $Provision for Impairment of ReceivablesOpening balance32,447113,295Charge for year(18,803)(80,848)Closing balance13,64432,4475.InventoriesCurrentRaw materials and stores - at cost1,971,1011,607,7441,971,1011,607,744Economic Entity6.Financial assetsFunds on deposit178,57028,487178,57028,487
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
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.
The movement in deferred tax assets for each temporary difference during the year is as follows:
Page | 44
20182017 $ $7.Plant and equipmentAt cost10,948,923 10,180,907 Accumulated depreciation(7,079,459) (6,403,767) 3,869,464 3,777,140 Movement in carrying amountsCarrying amount - opening balance3,777,140 4,688,822 Additions762,961 367,162 Disposals(5,054) (383,987) Depreciation(670,637) (795,069) Assets acquired - nil consideration- - Impairment- (64,132) Exchange rate adjustment5,054 (35,656) Carrying amount - closing balance3,869,464 3,777,140 Economic Entity8.Tax AssetsCurrent691,500- Non-current1,940,6312,668,652Deferred tax assets2,632,1312,668,652Deferred tax assets comprise:Provisions1,090,488511,369Other189,67549,090Un-recouped tax losses1,351,9682,108,1932,632,1312,668,652ProvisionsOpening balance511,369891,679Credited/(expensed) to income account579,119(380,310)Closing balance1,090,488511,369OtherOpening balance49,09060,571Credited/(expensed) to income account140,585(11,481)Closing balance189,67549,090
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
The company has considered it appropriate to not recognize in the financial accounts the benefit of all tax
losses available to the Company at the end of the financial year.
The company has extrapolated profit projections based on a 5% growth path. These projections support the
recovery of the carrying value of deferred tax assets at 30 June 2018 of $2,632,131 within a five year time
frame. The Directors consider this to be an acceptable timeframe for assessing the recovery of the carrying
value of deferred tax assets as probable.
As a result, tax losses not recognized at 30 June 2018 are $7,296,249. If these losses had been recognized at
30 June 2018 the net profit after tax would have increased by $2,188,875. Correspondingly the carrying values
of deferred tax assets in the Statement of Financial Position would increase by $2,188,875.
Page | 45
20182017 $ $8.Tax Assets (continued)Unrecouped tax lossesOpening balance2,108,1933,361,165Tax losses recognised/(recouped)(756,225)(1,252,972)1,351,9682,108,193Closing balance of tax assets2,632,1312,668,652Economic EntityTax LiabilitiesCurrentIncome Tax103,54279,970Non-CurrentProvision for deferred tax49,20045,198Opening balance45,19843,237Additional / (Reduction) in provisions raised during year(735)6,191Exchange rate movement4,737(4,230)Closing balance49,20045,198
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
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.
Page | 46
20182017 $ $9.Intangible assetsGoodwill on consolidation – at cost3,282,5323,282,532Less accumulated impairment- - 3,282,5323,282,532Goodwill on acquisition – at cost24,606,75824,606,758Less accumulated impairment(15,817,280)(15,817,280)8,789,4788,789,478Total Intangible assets12,072,01012,072,010Movements in carrying amountsGoodwill on consolidation:Opening balance3,282,5323,282,532Movement in the year- - Closing Balance3,282,5323,282,532Goodwill on acquistion:Opening balance8,789,4788,789,478Movement in the year- - Closing Balance8,789,4788,789,478Economic EntityGoodwill by individual company:Water Group - Syfon Systems3,282,5323,282,532Engineering Group - Brockman Engineering8,789,4788,789,478Energy Group - TSF Engineering15,817,28015,817,280Impairment - TSF Engineering(15,817,280)(15,817,280)12,072,01012,072,010
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
9.
Intangible assets (continued)
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.
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.
Other key assumptions in the value-in-use calculation include gross margin, additional allowances for
potential capital expenditure and normalisation of working capital changes. Due to the correlation of
these factors, assumptions for growth rates and discount rates are the most sensitive in the value-in-use
calculation.
The following assumptions were used in the value-in-use calculations:
Syfon Systems Group
Brockman Engineering
2018
2017
Growth
Rates
5%
5%
Discount
Rates
18%
18%
Growth
Rates
5%
5%
Discount
Rates
18%
18%
The risk factor incorporated in the discount rate is consistent with the prior year.
The growth rates used in the value-in-use calculations are conservative rates reflecting the minimum
expected growth in each of the relevant CGUs. These rates are based on forward work-in-hand levels,
weighted project prospects, consideration of future expected activities and giving consideration to
historical growth rates achieved.
Page | 47
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
9.
Intangible assets (continued)
Key estimates
The following sensitivity analysis was undertaken with respect to the value in use calculations and the
imbedded assumptions and estimates used in performing the impairment testing on the carrying value
of goodwill.
In performing impairment testing on the carrying values of goodwill, certain discount rates and growth
rates have been assumed as part of the value-in-use calculations.
The following table illustrates sensitivities to changes in those discount rates and growth rates. The
discount and growth rates used and the results of the sensitivity analysis are:
Page | 48
Impairment to carrying value of goodwill - sensitivity analysis:20182017Syfon Systems Group:Growth rates3%3%Discount rates25%25%Brockman Engineering:Growth rates3%3%Discount rates25%25%Value of impairment to carrying value of goodwill based on sensitivity analysis:$$Syfon Systems Group2,324,4912,160,413Brockman Engineering - - 2,324,4912,160,41320182017 $ $10.Trade and other payablesTrade payables7,347,3864,701,590Sundry payables and accrued expense4,886,128 6,117,432 12,233,51410,819,022Economic Entity
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
Bank loans - secured
During the prior year the Group’s financier, the Commonwealth Bank of Australia reduced its loans to the
Company by forgiving $7,285,000 in interest bearing loans and extended the maturity of the remaining facility
to 30 June 2020.
The interest rate on the remaining Bank Loans is variable at balance date. The interest on these loans is
charged at the prevailing bank bill rate plus an applicable line fee. Interest is payable monthly in arrears.
The facility contains the following covenants:
• Minimum annual EBITDA requirements for each of the remaining years in the facility term starting at
$1,800,000 for 2018 and increasing to $3,000,000 by 30 June 2020.
• Net Debt Cover Ratio commencing at 6:1 at 30 June 2018 reducing to 3:1 by 30 June 2020.
• An annual limit on capital expenditure to $1,000,000 without prior bank approval.
• An annual limit of Dividend distribution to 10 % of EBIT for the term of the facility without prior bank
approval.
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 and TSF Engineering Pty
Ltd. Also refer to Note 32 for quantification of assets secured by Australian entities.
At 30 June 2018, the economic entity has $ Nil in undrawn bank loan facilities (2017: Nil).
Other loans - secured
During the prior year, the Group arranged a term loan from the Directors and management for $1 million
to assist with the Group’s working capital position. The loan has an attached interest rate of 3.5%pa. The
loan is secured by a general security agreement and a put and call option over the assets and shares of
a 100% owned subsidiary, TSF Maintenance Services Pty Ltd.
In September 2017, the shareholders approved the conversion of $600,000 of this debt into 43,165,467
fully paid ordinary shares in the Company. The issue price for these shares was 1.39cents per share. The
maturity date for the remaining $400,000 loan has been extended to be repaid in two equal instalments
on 15 September 2018 and 15 December 2018. The 15 September instalment of $200,000 plus all
outstanding interest was paid on time.
Page | 49
Notes20182017 $ $11.Short-term borrowingsBank loans - secured- - Other Loans - secured448,950 1,000,000Lease liabilities - secured24.62,579 85,286 511,5291,085,286Economic EntityCurrent- - 1 to 2 years6,000,000- 2 to 3 years- 6,000,000Total bank loans6,000,0006,000,000
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
Also refer to Note 11, Short term borrowings and Note 30, subsequent events for further information on bank loans.
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 measurement and recognition criteria relating to employee benefits are disclosed in Note
1(k).
Page | 50
20182017 $ $12.Long-term borrowingsBank loans - secured6,000,000 6,000,000 Lease liabilities - secured24.- 33,330 6,000,0006,033,330 Economic Entity13.ProvisionsCurrentEmployee benefits2,986,9442,666,4462,986,9442,666,446Movement in employee benefits:Opening employee balance2,666,4463,081,940Provisions created/(utilised) during year320,498(415,494)Closing balance2,986,9442,666,446Non CurrentEmployee benefits21,903 386,834 Other non current provisions100,000 - 121,903 386,834 Movement in employee benefits:Opening employee balance386,834206,997Provisions created/(utilised) during year(364,931)179,837Closing balance21,903386,83414.Issued capitalIssued and paid up830,271,945 ordinary shares (2017: 678,810,138 ordinary shares) 14(a)53,272,12950,434,87653,272,12950,434,876(a)Issued and fully paid up ordinary sharesOpening balance50,434,87646,088,909Shares issued3,282,5064,682,614Share issue costs(445,253)(336,647)Closing balance53,272,12950,434,876
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
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. Subsequent to year end the economic entity completed a capital raising and
issued 124,540,791 additional shares taking total ordinary shares to 954,812,736.
During the prior year 15,000,000 Unlisted Options were issued in connection with the Capital Raising
during the year. The Unlisted Options were issued for nil cash consideration. The Unlisted Options are
exercisable at $0.02 per share and expire 4 years after their issue date (7 June 2017).
(c)
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 borrowings less cash and cash equivalents.
•
Total capital is total equity and net debt.
As at 30 June 2018 the economic entity’s gearing ratio was 21% (2017: 29%).
Page | 51
2018201714.Issued capital (continued)(a)Issued and fully paid up ordinary shares (continued)No. of sharesNo. of sharesOpening balance678,810,138210,548,789Shares issued151,461,807468,261,349Closing balance 830,271,945678,810,138Economic Entity(b)Share optionsNo. of optionsNo. of optionsOpening balance15,000,00015,000,000Options issued- - Closing balance 15,000,00015,000,00015.DividendsInterim fully franked ordinary dividend - - Final fully franked ordinary dividend - - Total dividends- - Balance of franking account1,813,7971,813,797
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
18. Key management personnel
Names and positions of Directors and Key Management Personnel in office at any time during the
financial year are:
Mr G Burns
Mr R Edgley
Mr I Luck (appointed 3 July 2017)
Mr M Findlay (resigned 3 July 2017)
Non-Executive Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
Mr S Farthing
Mr P van der Wal (appointed 4 September 2017) Chief Financial Officer and Company Secretary
Chief Financial Officer and Company Secretary
Mr I Wallace (resigned 4 September 2017)
General Manager of Syfon Systems Group
Mr A Bellgrove
General Manager of Brockman Engineering
Mr C Bishop
General Manager of TSF Maintenance Services
Mr I Whitford
Chief Executive Officer
Page | 52
20182017 $ $16.Reserves and accumulated losses(a)Accumulated Losses:Accumulated losses at the beginning of the financial year(36,604,434)(40,214,123)Net profit/(loss) attributable to members of the parent entity2,341,9803,609,689Accumulated losses at the end of the financial year(34,262,454)(36,604,434)(b)Reserves:Foreign Currency Translation and Share Option Reserves:Reserves at beginning of year(262,417)(89,808)Movement for year - Foreign Currency Translation Reserve203,941 (172,609)Reserves at end of year(58,476)(262,417)Economic Entity17.Earnings per share(a)Weighted average number of ordinary shares outstanding during the year used in calculation of Basic Earnings per Share742,238,800245,565,708(b)Weighted average number of ordinary shares outstanding during the year used in calculation of Diluted Earnings per Share757,238,800246,634,202
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
Refer to disclosures in Note 20 for other transactions with Directors and Key Management Personnel.
Refer to disclosures in the Directors report for the number of ordinary shares held by each Key
Management Personnel of the Group during the financial year.
There are no share options issued at 30 June 2018 (2017: Nil).
Remuneration Policy
The remuneration policy of the Company 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 to 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.
Page | 53
20182017 $ $18.Key management personnel (continued)Remuneration of Key Management Personnel is:20182017 $ $Short term employee benefits1,802,9491,443,204Post-employment benefits106,426109,2861,909,3741,552,490Economic Entity
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
18. Key management personnel (continued)
The Remuneration Committee set certain key performance indicators for the key Executives in the
Group. The key performance indicators were both quantitative and qualitative measures. Certain
Executives met some of these key performance indicators and the Remuneration Committee approved
short term incentive payments of $218,195 (2017: $Nil). Long term incentives, linked with performance
rights issued under the EVZ Directors’ and Employees’ Benefits Plan, were not met during the current
year and no performance rights, options or shares were issued in respect of the current year.
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.
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.
Page | 54
20182017 $ $19.Auditors RemunerationRemuneration paid/payable to auditors for:audit or review of financial report 112,000 109,000 taxation services- - 112,000 109,000 Economic Entity
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
20. Related party disclosures
(a)
(b)
The Directors of EVZ Limited during the financial year were:
• Mr G Burns
• Mr R Edgley
• Mr I Luck (appointed 3 July 2017)
• Mr M Findlay (resigned 3 July 2017)
Transactions with Director related entities
• G Burns: Directors fees paid of $143,083 (2017: $41,125) and $26,667 (2017: $89,750) is payable.
•
•
• M Findlay: Directors fees paid of $123,379 (2017: $46,121) and $Nil (2017: $123,379) is payable.
R Edgely: Directors fees paid of $78,125 (2017: $42,709) and $8,333 (2017: $36,458) is payable.
I Luck: Directors fees paid of $41,667 (2017: $Nil) and $8,333 (2017: $Nil) is payable.
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.
Page | 55
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
21.
Segment reporting (continued)
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
maker 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.
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:
• Impairment of assets and other Non-recurring items of revenue or expense
• Income tax expense
• Current tax liabilities
• Other financial liabilities
Page | 56
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
21.
Segment reporting (continued)
Page | 57
Segment Reporting - Continuing OperationsEngineeringEnergyWaterCorporateTotal(a)Twelve months ended 30 June 2018: $ $ $ $ $RevenueExternal sales37,833,603 5,573,629 21,521,163 -64,928,395 Total segment revenue37,833,603 5,573,629 21,521,163 - 64,928,395 Reconciliation of segment revenue to group revenue:Total group revenue37,833,603 5,573,629 21,521,163 -64,928,395 Segment net profit /(loss) before interest and tax2,237,539 (228,540)2,672,858 (1,577,325)3,104,532 Reconciliation of net profit before interest and tax to group net profit/(loss) before taxUnallocated itemsNet finance costs from continuing operations(619,721)Net profit/(loss) before tax from continuing operations2,484,811 Included in segment net profit before interest and tax:Depreciation370,646 62,458 233,531 4,002 670,637 Impairment:Receivables - - 46,195 - 46,195
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
21.
Segment reporting (continued)
Page | 58
Segment Reporting - Continuing OperationsEngineeringEnergyWaterCorporateTotal(b)Twelve months ended 30 June 2017: $ $ $ $ $RevenueExternal sales25,629,563 6,247,444 20,025,009 -51,902,016 Inter-segment sales-----Total segment revenue25,629,563 6,247,444 20,025,009 0 51,902,016 Reconciliation of segment revenue to group revenue:Inter-segment elimination-----Total group revenue25,629,563 6,247,444 20,025,009 -51,902,016 Segment net profit /(loss) before interest and tax592 (995,013)1,704,664 5,886,285 6,596,528 Reconciliation of net profit before interest and tax to group net profit/(loss) before taxUnallocated itemsOther non-operating - Net finance costs from continuing operations(1,193,433)Net profit/(loss) before tax from continuing operations5,403,095 Included in segment net profit before interest and tax:Depreciation411,980 119,010 262,218 1,861 795,069 Impairment:Other Assets-67,786 --67,786 Plant and Equipment-64,132 --64,132 Work in Progress---150,000 150,000 Receivables16,656 -(97,504)-(80,848)Goodwill----0
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
21.
Segment reporting (continued)
Page | 59
Secondary Segment Reporting - Including Discontinued Operations(a)Twelve months ended 30 June 2018:EngineeringEnergyWaterCorporateTotalSegment AssetsSegment Assets20,064,479 1,954,531 19,385,680 32,636,880 74,041,570 Inter-segment elimination(33,083,739)Total Group Assets40,957,831 Segment asset increases for the period:Capital Expenditure493,100 109,092 145,133 15,636 762,961 493,100 109,092 145,133 15,636 762,961 Segment LiabilitiesSegment liabilities22,059,758 24,217,449 4,697,870 6,681,543 57,656,620 Inter-segment elimination(35,649,988)Total Group Liabilities22,006,632 (b)Twelve months ended 30 June 2017:EngineeringEnergyWaterCorporateTotalSegment AssetsSegment Assets21,357,858 (2,735,104)15,850,098 32,299,642 66,772,494 Inter-segment elimination(32,088,383)Total Group Assets34,684,111 Segment asset increases for the period:Capital Expenditure159,042 82,301 125,819 -367,162 159,042 82,301 125,819 - 367,162 Segment LiabilitiesSegment liabilities25,452,599 19,231,821 3,792,556 7,193,667 55,670,643 Inter-segment elimination(34,554,557)Total Group Liabilities21,116,086
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
21
SEGMENT REPORTING (Continued)
Major customers
The Group has a number of customers to whom it provides products and services. In the current year, the
Group has a single customer in the Engineering segment who accounts for 22 % (2017: 23% in the Engineering
segment) of external revenue. There are no other significant client accounts.
Page | 60
Revenue by Geographical Segment20182017 $ $Australia57,486,001 44,495,372 Asia 7,442,394 7,406,644 Total Revenue 64,928,395 51,902,016 Assets by Geographical Segment20182017 $ $Australia32,776,818 27,797,039 Asia 8,181,013 6,887,072 Total Assets 40,957,831 34,684,111 Economic EntityEconomic EntityRevenue, including revenue from discontinued operations, attributable to external customers is disclosed below, based on the location of the external customer:The location of segment assets by geographical location of the assets is disclosed below:
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
Standby arrangements and unused credit facilities
23.
Controlled entities in the economic entity have Contingent Liability Bank Guarantee facilities and Letter of
Credit Facilities totaling $2,800,000 available to them as at 30 June 2018 (2017: $2,800,000). Of this total
facility, $2,617,633 has been utilised and $182,367 (2017: $536,132) remained unused and available for the
controlled entities use as at 30 June 2018. The facilities are secured by a registered equitable mortgage over
the assets and undertakings of all Australian companies in the economic entity.
In addition to the above facility, the economic entity has provided a cash backed bank guarantee of $292,199
(2017: nil) as performance security on a major project. The bank guarantee is secured by a term deposit of the
same amount.
For further information on bank guarantees, please also refer to Note 30, subsequent events.
Page | 61
20182017 $ $22.Consolidated statement of cash flowsCash balances comprise:Cash on hand1,706,883 1,551,970Bank overdraft- - Closing cash balance1,706,883 1,551,970Reconciliation of the operating profit after tax to net cash flows from operations:Operating profit after tax2,341,980 3,609,689Loss on sale of plant and equipment3,846 208,789Depreciation - plant & equipment670,637 795,069Debt forgiveness- (7,285,000)Foreign currency translation203,941 (136,953)Impairment/(write back) - receivables46,195 (80,848)Impairment - plant and equipment- 64,132Impairment - Work in Progress- 150,000Gain on acquisition of fixed assets- - Changes in assets and liabilities adjusted for effects of acquisition/disposal of operations during financial year:Increase/(Decrease) in provisions for employee entitlements(44,434) (235,657)(Increase)/Decrease in inventories(363,357) 157,137(Increase)/Decrease in trade and other receivables(5,780,211) (345,360)(Increase)/Decrease in deferred tax assets40,524 1,644,763Increase/(Decrease) in payables1,444,122 (3,574,614)Increase/(Decrease) in tax liabilities23,572 (12,623)Net cash provided/(used) by operating activities(1,413,185) (5,041,476)Economic Entity
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
The weighted average interest rate implicit in these leases is 5.37 pa (2017: 4.33% pa). Leases pertain to
various plant, equipment and motor vehicles and are secured against the asset to which they relate.
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.
26.
Contingent liabilities
Apart from drawn bank guarantee facilities (refer Note 23), there were no contingent liabilities as at 30
June 2018 (2017: Nil).
For further information on bank guarantees, please also refer to Note 30, subsequent events.
Page | 62
20182017 $ $24.Lease commitmentsLeases are payable as follows:Not later than 12 months66,129 90,189 Later than 12 months but not later than 2 years- 10,268 Later than 2 years but not later than 5 years- 23,523 Later than 5 years- - 66,129 123,980 Future lease finance charges(3,550) (5,364) 62,579 118,616 Lease liabilities recognised in the statement of financial position:Current62,579 85,286 Non-current- 33,330 Total lease liability62,579118,616Economic Entity25.Operating lease commitmentsProperty:Not later than 12 months676,841 566,680 Between 12 months but not later than 5 years728,320 984,686 1,405,161 1,551,366 Plant and equipment:Not later than 12 months329,700 284,362 Between 12 months but not later than 5 years430,005 549,789 759,705 834,151 Total commitments not recognised in the financial statements2,164,866 2,385,517
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
27.
Financial instruments
The Group’s financial instruments consist mainly of deposits with banks, 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)
(ii)
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.
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
Of the total economic entity’s borrowings, $6,000,000 take the form of bank loans. All bank loans
are scheduled to mature on 30 June 2020. The interest cost for these bank loans is comprised of a
fixed line fee plus the prevailing bank bill rate. The interest cost on the other borrowing of $400,000
is fixed at 3.5%.
•
•
•
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 below. 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. The table below shows the Group’s interest rate risk exposure as
at 30 June.
Page | 63
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
27.
Financial instruments (continued)
Page | 64
Economic EntityFloating Interest rateNon Interest BearingTotal< 1 year1 to 5 years> 5 years$$$$$$2018Financial assetsCash & cash equivalents- - - - 1,706,883 1,706,883 Trade & other receivables- - - - 18,527,672 18,527,672 Financial assets- - - - 178,570 178,570 Total financial assets- - - - 20,413,125 20,413,125 Weighted average interest rate0.00%0.00%Financial liabilitiesTrade & other payables- - - - 12,337,056 12,337,056 Borrowings6,000,000 448,950 - - - 6,448,950 Lease liabilities- 62,579 - - - 62,579 Total financial liabilities6,000,000 511,529 - - 12,337,056 18,848,585 Weighted average interest rate6.95%3.73%0.00%Net financial assets/(liabilities)(6,000,000) (511,529) - - 8,076,069 1,564,540 2017Financial assetsCash & cash equivalents- - - - 1,551,970 1,551,970 Trade & other receivables- - - - 12,978,108 12,978,108 Financial assets- - - - 28,487 28,487 Total financial assets- - - - 14,558,565 14,558,565 Weighted average interest rate0.00%0.00%Financial liabilitiesTrade & other payables- - - - 10,898,992 10,898,992 Borrowings6,000,000 1,000,000 - - - 7,000,000 Lease liabilities- 85,286 33,330 - - 118,616 Total financial liabilities6,000,000 1,085,286 33,330 - 10,898,992 18,017,608 Weighted average interest rate6.95%3.56%4.33%0.00%0.00%Net financial assets/(liabilities)(6,000,000) (1,085,286) (33,330) - 3,659,573 (3,459,043) Fixed Interest20182017 $ $Reconciliation of Net Financials Assets/(Liabilities) to Net AssetsNet financial assets/(liabilities)1,564,540 (3,459,043) Add/(subtract) Non-financial assets and liabilities:Inventories1,971,101 1,607,744Plant and equipment3,869,464 3,777,140Intangible assets12,072,010 12,072,010Deferred tax assets2,632,131 2,668,652Provisions(3,158,047) (3,098,478)Net Assets18,951,199 13,568,025Economic Entity
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
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)
(d)
(e)
(f)
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 except for Retention Receivables totaling $1,865,167
(refer Note 4) are current and due within 12 months.
Sensitivity Analysis
The interest rate on Bank loans is variable. The Group believes it has minimal exposure to interest rate
risk for the remainder of the facility term given the current economic stability in interest rates.
Foreign Currency Risk
Refer Note 21 for a breakdown of revenue and assets by geographic location. Whilst the economic entity
monitors its foreign exchange risk, it does not believe there is any material risk associated with its foreign
exchange exposure.
Price Risk
The economic 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
There were no share based payments in the year ended 30 June 2018.
29.
Investment in controlled entities
Name of entity
Country of
incorporation
Class of shares
Equity holdings
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
TSF Engineering Pty Ltd
Syfon Systems Pte Ltd
EVZ Engineering Pty Ltd
Syfon International Pty Ltd
Australia
Malaysia
Australia
Australia
Australia
Australia
Australia
Singapore
Australia
Australia
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
2018
2017
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Cost of parent entity’s
investment
2018
$
3,700,650
34,504
-
-
-
-
-
-
-
-
2017
$
3,700,650
34,504
-
-
-
-
-
-
-
-
3,735,154
3,735,154
NuSource Water Pty Ltd, Danum Engineering Pty Ltd, A.C.N. 124919508 Pty Ltd, EVZ Engineering Pty Ltd,
and Syfon International Pty Ltd did not trade during the year.
Page | 65
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
30.
Subsequent events
Subsequent to balance date on 30 August 2018 the Company held an extraordinary general meeting at
which the shareholders approved a capital raising to issue an additional 15% of shares. This equated to
124,540,791 new shares with the shares being issued on 4 September 2018. This brings total shares on
issue to 954,812,736. The shares were issued at $0.028 (2.8 cents) which equates to $3.5 million raised
before costs. Funds from the capital raising are being used to support working capital requirements for
the company’s expanded project base. In particular, the Company restructured its banking facility by
paying down its core debt from $6.0 million to $3.3 million and simultaneously issuing additional bank
guarantees for $2.7 million.
There have not been any other 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 the financial year.
32. Deed of cross guarantee
During the financial year;
• a deed of cross guarantee between EVZ Ltd (Parent Entity) and TSF Engineering Pty Ltd, Brockman
Engineering Pty Ltd, Danum Engineering Pty Ltd, A.C.N. 124919508 Pty Ltd, Syfon Systems Pty Ltd,
NuSource Water Pty Ltd, Syfon International 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.
• The EVZ Group gave as security for a loan from TSF Corporation Pty Ltd, the shares and assets of TSF
Maintenance Services Pty Ltd [TSFM] (Refer Note 11). A further condition of loan was the
deconsolidation/removal of TSFM from the Deed of Cross Guarantee. This condition was satisfied during
the year.
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:
Page | 66
20182017 $ $31.Construction contractsAggregate amount of contract revenue recognised during the financial year51,925,062 39,199,192 Aggregate of contract costs incurred and profits recognised (including losses recognised) to date on contracts in progress 35,689,892 59,004,728 Progress billings34,652,593 59,841,741 Receipts in advance815,817 1,078,639 Amounts due from customers for contract work in progress1,853,116 241,626 Total receivable from customers for contract work in progress as included in Note 49,011,058 6,503,759 Retention receivables as included in Note 41,865,167 1,477,691
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
32. Deed of cross guarantee (continued)
Page | 67
20182017 $ $Financial information in relation to:(i)Statement of Profit or Loss and Other Comprehensive IncomeProfit/(Loss) before income tax1,821,227 5,339,681 Deconsolidation of TSF Maintenance Services Pty Ltd- (3,261,867) Income tax (expense)/benefit(36,521) (1,644,763) Profit/(Loss) after income tax1,784,706 433,051 Profit/(Loss) attributable to members of the parent entity1,784,706 433,051 (ii)Retained EarningsRetained losses at the beginning of the year(41,525,433) (41,958,484) Profit/(Loss) after income tax1,784,706 433,051 Retained losses at the end of the year(39,740,727) (41,525,433) (iii)Statement of Financial PositionCurrent assetsCash and cash equivalents1,273,467 1,084,472 Trade and other receivables12,933,267 7,240,205 Inventories930,987 763,779 Financial assets- - Total current assets15,137,721 9,088,456 Non-current assetsProperty, plant and equipment3,206,371 3,157,094 Deferred tax asset1,899,652 2,627,673 Other receivables553,626 3,192,887 Financial assets- - Intangible assets12,242,295 12,242,295 Total non-current assets17,901,944 21,219,949 Total assets33,039,665 30,308,405 Current liabilitiesTrade and other payables and provisions13,428,431 11,180,857 Short-term borrowings46,744 73,464 Total current liabilities13,475,175 11,254,321 Non-current liabilitiesLong-term borrowings6,000,000 6,024,192 Long-term provisions and other payables33,088 4,120,449 Total non-current liabilities6,033,088 10,144,641 Total liabilities19,508,263 21,398,962 Net assets13,531,402 8,909,443 EquityIssued capital53,272,129 50,434,876 Retained losses(39,740,727) (41,525,433) 13,531,402 8,909,443 Closed Group & Parties to Deed of Cross Guarantee
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
33.
Parent entity disclosures
Information relating to the Parent Entity, EVZ Limited, is as follows:
(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, 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, Syfon International Pty Ltd
(previously EVZ Energy 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.
Page | 68
20182017 $ $(i)Financial PositionAssetsCurrent assets371,512 773,978 Non-current assets23,122,731 22,383,028 Total assets23,494,243 23,157,006 LiabilitiesCurrent liabilities659,641 1,183,997 Non-current liabilities6,021,902 6,009,670 Total liabilities6,681,543 7,193,667 Net assets16,812,700 15,963,339 EquityIssued capital53,272,142 50,434,876 Accumulated losses(36,459,442) (34,471,537) Total equity16,812,700 15,963,339 (ii)Financial performanceComprehensive incomeProfit/(Loss) for the year(1,987,905) 4,951,805 Transfer from capital profits reserve- - Total comprehensive income/(loss)(1,987,905) 4,951,805 Parent Entity
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
34.
Company details
The registered office and principal place of business of:
EVZ Limited is
115/838 Collins Street, Docklands, Victoria 3008
Principal place of business of:
Brockman Engineering Pty Ltd is
87 St Georges Road, Norlane, 3214
Australia
Syfon Systems Pty Ltd is
22 Hargreaves St, Huntingdale, 3166
Australia
Syfon Systems Sdn Bhd is
6 & 8, Jalan Angklung 33/20, Shah Alam Technology Park
40460 Shah Alam, Selangor Darul Ehsan
Malaysia
Syfon Systems Pte Ltd is
10 Anson Road, #18-17, International Plaza
Singapore 079903
TSF Engineering Pty Ltd is
Unit F41, 16 Mars Rd, Lane Cove West, 2066
Australia
TSF Maintenance Services Pty Ltd is
Unit F41, 16 Mars Rd, Lane Cove West, 2066
Australia
Page | 69
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;
the financial statements are in compliance with International Financial Reporting Standards, as stated in
Note 1 to the financial statements;
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
the Directors have been given the declarations required by s.295A of the Corporations Act 2001.
(b)
(c)
(d)
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 – G Burns
Signed at Melbourne this 27th day of September 2018.
Page | 70
Independent Auditor’s Report to the
Members of EVZ Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of EVZ Limited (the Company) and its subsidiaries (the Group),
which comprises the consolidated statement of financial position as at 30 June 2018, the consolidated
statement of profit or loss, the consolidated statement of comprehensive income, the consolidated
statement of changes in equity and the consolidated statement of cash flows for the year then ended, and
notes to the financial statements, including a summary of significant accounting policies, and the
directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act
2001, including:
(a)
giving a true and fair view of the Group’s financial position as at 30 June 2018 and of its
financial performance for the year then ended; and
(b)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting
Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the
Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other
ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Crowe Horwath Melbourne is a member of Crowe Horwath International, a Swiss verein. Each member of Crowe Horwath is a separate and independent legal entity. Liability limited
by a scheme approved under Professional Standards Legislation. Liability limited other than for the acts or omissions of financial services licensees.
The title ‘Partner’ conveys that the person is a senior member within their respective division, and is among the group of persons who hold an equity interest (shareholder) in its parent
entity, Findex Group Limited. The only professional service offering which is conducted by a partnership is the Crowe Horwath external audit division. All other professional services
offered by Findex Group Limited are conducted by a privately owned organisation and/or its subsidiaries.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report of the current period. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters.
Key Audit Matter
How we addressed the Key Audit Matter
Impairment assessment of goodwill – Note 9
The Group has recognised goodwill of
$12,072,010 in the consolidated statement of
financial position at 30 June 2018. Goodwill
has an indefinite life and its carrying value is
assessed at least annually for impairment by
the directors.
Goodwill is allocated to cash generating units
based on the Group’s individual companies.
The impairment assessment involves
significant judgement of the cash generating
units in respect of factors such as:
Budgeted revenue and costs;
Discounts rates; and
Long term growth rates.
We focussed on this area as a key audit
matter due to the high degree of estimation
uncertainty and judgement required by the
directors to assess whether impairment is
required for goodwill and the sensitivity of the
recoverable amount of each cash generating
unit to changing variables.
Recoverability of deferred tax assets – Note 8
The Group has recognised deferred tax assets
of $2,632,131 in the consolidated statement of
financial position at 30 June 2018, which
substantially arise from current and prior year
taxable losses.
The recognition and disclosure of deferred tax
assets is a key audit matter due to the
recognition involving judgement by
management as to the likelihood of their
realisation. Realisation is dependent on a
We challenged the directors’ assumptions that
support their position on impairment assessment
as follows:
Obtained the Group’s value in use model
and agreed amounts to the most recent
approved budget;
Assessed the accuracy of prior forecasts
against historical actuals to inform our
evaluation of the reliability of forecast
amounts included in the value in use
model;
Reviewed the reasonableness of
assumptions in the value in use model
including the determination of the values
assigned to long term revenue growth and
discount rates;
Performed sensitivity analysis on all cash
generating units in the following main
areas: revenue growth, gross margin and
discount rate; and
Assessed the Group’s disclosures of the
quantitative and qualitative considerations
in relation to the impairment assessments.
Our procedures included, amongst others,
evaluating management’s assessment of the
sufficiency of future taxable profits to recoup
prior taxable losses. This evaluation included:
Comparing management’s prior forecasts
of future profits to historical results;
Considering the sensitivities of the taxable
profit forecasts; and
Reviewing the reasonableness of
assumptions underlying forecasts; and
Key Audit Matter
How we addressed the Key Audit Matter
number of factors including whether there will
be sufficient forecast taxable profits in future
periods to support recognition.
Assessing the adequacy of the income tax
disclosures in the financial statements,
setting out the basis for determining the
value of the deferred tax balance and the
basis of recognition of the deferred tax
asset.
Revenue recognition from construction contracts – Note 31
During the financial year, $51,925,062 of the
Group’s revenue related to revenue from
construction contracts. Where these contracts
have a long-term duration, revenue and
margin is recognised based on the stage of
completion of individual contracts.
Revenue and margin is predominantly
calculated on the proportion of total costs
incurred at the reporting date compared to
management’s estimation of total costs of the
contract. These calculations usually involve a
high level of estimation and judgement, in
particular relating to:
Forecasts of total cost to complete at
initiation of the contract; and
Revision to total forecast costs that occur
during the performance of the contract or
that are expected to occur to complete
the contract.
Our procedures included, amongst others:
Reviewing the Group’s estimation process
(including the monitoring of project costs
and management’s review of stage of
completion) used in determining the
amounts of revenue and costs recognised
in the Group’s financial report;
Testing over a sample of contracts to
review application of the review process, on
which detailed substantive testing
procedures were performed. Our sample
was selected based on a set of criteria
including high value contracts, loss making
contracts and contracts with significant
claims in advance. For each sample
selected we performed the following:
o Tested the claims and contract costs
to underlying supporting
documentation;
o Examined the projected cost to
complete forecast by comparing actual
costs to date to approved contract
budgets, obtaining an understanding of
the costs required to complete the
project through detailed discussions
with project management and review
of project progress documentation;
and
Assessing the Group’s ability to forecast
margins on contracts by analysing the
accuracy of previous margin forecasts to
actual outcomes.
Other Information
The directors are responsible for the other information. The other information comprises the
information included in the Group’s annual report for the year ended 30 June 2018, but does not
include the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors 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 preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgement and maintain professional scepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the financial report, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of
not detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or
the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the Group’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by the directors.
• Conclude on the appropriateness of the directors’ use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the Group’s ability to
continue as a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor’s report to the related disclosures in the financial
report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our auditor’s report. However, future
events or conditions may cause the Group to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and
events in a manner that achieves fair presentation.
• Obtains sufficient appropriate audit evidence regarding the financial information of the entities
or business activities within the Group to express an opinion on the group financial report.
The auditor is responsible for the direction, supervision and performance of the group audit.
The auditor remains solely responsible for the audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during the audit.
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated with the directors, we determine those matters that were of
most significance in the audit of the financial report of the current period and are therefore the key
audit matters. We describe these matters in the auditor’s report unless law or regulation
precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in the auditor’s report because the adverse
consequences of doing so would reasonably be expected to outweigh the public interest benefits of
such communication.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included on pages 9 to 13 of the Directors’ Report for the
year ended 30 June 2018.
In our opinion, the Remuneration Report of EVZ Limited, for the year ended 30 June 2018, complies
with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
CROWE HORWATH MELBOURNE
DAVID MUNDAY
Partner
27 September 2018
Additional Shareholder Information
As at 12 September 2018
1.
Substantial shareholders
Name
UBS NOMINEES PTY LTD
BOND STREET CUSTODIANS LIMITED
Ordinary shares
182,429,645
77,964,435
2.
Distribution of Shareholding
3.
Names of 20 Largest Shareholders
Page | 77
Range of HoldingNo of ShareholdersUnits Held1to1,000280134,569 1,001to5,0006841,720,104 5,001to10,0002341,761,770 10,001to100,00049917,857,129 100,001and over287933,339,164 1984954,812,736 Number of shareholders with less than a marketable parcel of $500 at $0.034/unit12934,732,373 RankNameHolding% Held1UBS NOMINEES PTY LTD182,429,64519.112BOND STREET CUSTODIANS LIMITED 77,964,4358.173AIRLIE BEACH HOLDINGS PTY LIMITED 45,000,0004.714ONMELL PTY LTD 26,434,6192.775HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED25,510,3302.676MYALL RESOURCES PTY LTD 25,000,0002.627BT PORTFOLIO SERVICES LIMITED 24,752,4982.598TAYCO INVESTMENTS PTY LTD24,560,2612.579RUSTICA PTY LTD23,181,8182.4310H&C TRUONG PTY LTD 23,143,7822.4211THIRD RETURN SUPER PTY LTD 20,000,0002.0912RANGEWORTHY PTY LTD 19,363,9602.0313TRAVERTINE HOLDINGS PTY LTD18,000,0001.8914AUST EXECUTOR TRUSTEES LTD 17,964,2851.8815ARCHWIN PTY LTD 17,008,3761.7816AIRLIE BEACH HOLDINGS PTY LIMITED 17,000,0001.7817HARRINGTON PARTNERS FUND 1 PTY LTD 12,700,0001.3318MR ADAM BELLGROVE + MRS ANDREA BELLGROVE 12,400,0001.3019STF ENTERPRISES PTY LTD11,640,4831.2220POWIS SUPERANNUATION PTY LTD 11,500,0001.20Total top 20 holders of ordinary fully paid shares635,554,49266.56Total remaining holders balance319,258,24433.44Total ordinary shares954,812,736100.00
Additional Shareholder Information (continued)
As at 12 September 2018
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.
General
The name of the Company Secretary is Pieter van der Wal.
The address of the principal registered office is:
115 / 838 Collins Street,
Docklands Vic 3008
Telephone Number:
Facsimile Number:
Email: pieter.vanderwal@evz.com.au
(03) 9545 5288
(03) 9542 6061
A register of securities is kept at:
Computershare Investor Services Pty Ltd
452 Johnston Street
Abbotsford, Victoria, 3067
Telephone Number: 1300 137 328
6.
Stock Exchange Listing
The Company’s ordinary securities are listed on the Australian Securities Exchange Limited.
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www.evz.com.au
Page | 79