Harris Technology Group Limited Annual Report 2017/18 | 1
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Contents
Chairman and CEO Letter
FY18 Summary
FY19 Strategy
Directors’ Report
Remuneration Report
Auditor’s Independence Declaration
Corporate Governance Statement
Financial Statement
4
6
10
14
22
30
31
32
Notes to the Consolidated Financial Statements 36
Directors’ Declaration
Independent Auditor’s Report
Additional Information
66
67
71
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Harris Technology Group Brands
Harris Technology Group Growth Strategy
Focus on Sales
and building
the brands in
the market
Strategic
partnership to
strengethen
M2C strategy
Emphasis on
Systemisation
to reduce costs
Ensure all sites
are Mobile &
Tablet-
Enabled to
increase
visibility
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Chairman and CEO Letter
Dear Shareholders,
Harris Technology Group Limited (the Company) and its controlled entities (the Group) present its results
for the financial year ended 30 June 2018 (“FY18”).
During the FY18 year the Group incurred a comprehensive loss of $2.08 million from revenues of $45.77
million.
The results reflect a difficult trading environment experienced by the Anyware distribution business, the
Group’s key revenue and cost contributor. In particular, the results reflect a decrease in revenue
contributions from Anyware, which has historically represented the Group’s largest revenue generator.
The performance of Anyware reflects the recent shift in market demand away from traditional PC
hardware products which Anyware supplies, towards newer generation products such as tablets and
hand held devices.
As outlined in last year’s Annual Report to shareholders, the Company undertook a review of its
operations with a particular focus on reducing costs wherever possible and attempting to find ways to
become more efficient.
Our initiatives to develop alternative business opportunities with innovative and efficient supply chain
strategies , in particular Manufacturer -to Consumer (M2C) via joint ventures were put on hold primarily
driven by our decision to give attention to the Anyware business and to preserve cash.
During the course of the FY18 year it became apparent to the Directors that the Anyware business was
failing to perform to an acceptable level, and despite close attention to increase sales opportunities and
further reduce costs, the business continued to underperform.
In essence the major contributing factors can be summarised as follows:
Saturation of market competitors and therefore fierce competition
Continuous shrinking margins of the IT B2B sector
Due to the competitive nature of the sector, cash flow pressures due to extended credit terms
to customers and long term stock holding
Infrastructure requirements to operate from multiple warehouses (notwithstanding recent wind
down of Adelaide warehouse and plans to close other locations)
The Directors took the view in the second operating quarter of the year that the Group should either
undertake acquisitions in this sector to compliment the Anyware business and build scale or alternatively
seek to divest of the business.
The Board undertook a comprehensive review of the Group’s operations, strategy and future direction,
in light of the competitive environment in which the Anyware distribution business operates, and the
challenges faced by the Anyware business during the year.
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The Company contracted an industry specialist in the M&A sector to assist to identify either opportunities
to consolidate other businesses into the Group, or in the alternative to seek potential buyers of the
business.
Subsequent to 30 June 2018, the Company announced to the market the sale of the Anyware business
to Leader Computers Pty Ltd, a national IT hardware distributor headquartered in Adelaide.
The key terms of the sale are:
The purchaser will acquire the majority of the inventory held by Anyware estimated at
approximately $4.5 million, account receivables, accounts payables and a goodwill amount of
$250,000 subject to certain conditions.
The purchaser will assume all liabilities related to employee entitlements.
The purchaser will acquire the Anyware business name including trademarks and domain
names and all customer and supplier database.
The purchaser will resume the current warehouse lease agreement in New South Wales in
connection with Anyware Business.
The expected date of settlement of the sale is 3 October 2018.
The sale of the business relieves certain financial pressures faced by the Group with Leader Computers
taking over staff and entitlements, lease of warehouses (save for the Dandenong warehouse premises in
Victoria that is still required in the short term) and allows the Group to conclude previous trade financing
arrangements with our bankers.
With the sale of this loss-making subsidiary, the Group can concentrate on its other main brand “Harris
Technology “, growing its sales and looking for complimentary businesses to acquire in the online sector.
Additionally, the Group will be looking at its M2C opportunities that have been placed on hold for many
months as well as other new opportunities
On behalf of the Board, we thank you for your ongoing support. We look forward to meeting with
those of you who are able to attend our upcoming Annual General Meeting.
Yours sincerely
Andrew Plympton
Non-Executive Chairman
Melbourne, 27 September, 2018
Garrison Huang
Managing Director
Melbourne, 27 September, 2018
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FY18 Summary
Full year profit and loss summary
Revenue from continuing operations
Sales revenue
Other revenue
Total revenue
Total comprehensive (loss)/profit
FY18
($m)
45.66
0.11
45.77
(2.06)
FY17
($m)
Change
($m)
51.07
0.01
51.08
(3.06)
(5.41)
0.10
(5.31)
1.00
Revenue and Cost of Sales
$4,000,000
$3,500,000
$3,000,000
$2,500,000
$2,000,000
$1,500,000
$1,000,000
$500,000
$-
Total Revenue ($)
Direct Costs
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Full year profit and loss summary - underlying
Non-statutory financial results include:
Gross profit
Loss before income tax
Total comprehensive (loss) / profit
Operating costs
Direct costs
Other costs and expenses
FY18
($m)
6.19
(2.06)
(4.13)
(39.47)
(8.37)
FY17
($m)
Change
($m)
9.07
(2.85)
(6.22)
(41.99)
(12.13)
2.88
(0.79)
(2.09)
2.52
(3.76)
Balance Sheet
Cash and cash equivalents
Inventories
Property, plant and equipment
Intangible assets
Net assets
30 Jun 18
($m)
30 Jun 17
($m)
1.78
6.34
0.73
-
2.22
7.24
0.84
0.02
(2.92)
(1.63)
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Cash position
Cash and cash equivalents of $1,783,506 at 30 June 2018
Based on the cash position at end of FY18 and as a result of a stringent budgeting process, the
company believes it is in a position to meet planned operational and capital expenditure
throughout FY19.
CASH AND CASH EQUIVALENTS FOR JUNE 2017 TO JUNE 2018 (000'S)
$2,219
$1,421
$1,118
$929
$1,784
$000's
Jun-17
$2,219
Sep-17
$1,118
Dec-17
$1,421
Mar-18
$929
Jun-18
$1,784
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Management Team
Garrison Huang
Executive Director & Chief Executive Officer
20 years’ experience in management in the IT Importing
and Distributing industry
Co-Founder of Anyware Corporation Pty Ltd – a leading IT
accessory distributor with well-established importing &
distribution channels
Appointed Executive Director and Chief Executive Officer
on 19 July 2016
Bob Xu
Executive Director
Founder of successful import and distribution company
AZA International
Business Director for Anyware Corporation Pty Ltd since
2012
Appointed Executive Director on 19 July 2016
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FY19 Strategy
Growth of
revenue
Operationally
profitable
Capitalising and growing on monthly revenue position
Continual improvement in business processes to improve
our position
Joint Venture
Establish JV partner to facilitate and strengthen M2C
strategy
Seek appropriate acquisition opportunities
Acquisitions
With the merged entity, Wholesales and Online
properties can be integrated into the operating model
and deliver ongoing revenue growth
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The M2C opportunity
- Cross Border Direct Shipping with Local Presence
In FY18 the Group established two joint ventures in Hong Kong based on the
M2C business model and started the operations. The (M2C) model consists of
drop-shipping orders from manufacturers directly to consumers. In Harris
Technology Group’s case, the Group will be able to leverage its strong existing business
relationships in China, allowing products to be sourced directly from manufacturers in
China and presented to consumers via Australian major e-commerce platforms such as
eBay and Amazon. This venture will have a strong Australian presence and an Australian
based customer support and warranty team.
The Group’s The M2C venture provides a number of cost benefits. The model effectively
compresses the supply chain, ensuring competitive pricing and maximised
cost saving. Little to zero stock holding will be required, as due to the drop
ship element of the model inventory cost will only be incurred once a sale
has been completed. Sales will be paid for by consumers upfront, ensuring
each sale is cash flow positive. The structure and resources of the Group’s
joint venture partner in Shenzhen and Guangzhou, China will also be available to be fully
utilized, significantly reducing Group operating costs.
Due to heavy commitment required on the Anyware business by the management team,
unfortunately, during FY18, the two joint ventures have not grown that can demonstrate a
clear revenue base level for the group. However, the early trial on Amazon US market during
recent months by the Shenzhen Joint Venture has proven to be successful, therefore, the
M2C business model will expand its coverage in the US shortly.
The company is now much more focused on the e-commerce B2C and M2C operations
having divested Anyware B2B business, the management will be able to put in more
resources into these key business operations and start improving the revenue base, as the
same time, looking for new opportunities based on new emerging technology trends.
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Corporate Information
Non-Executive Chairman
Executive Director & CEO
Executive Director
Non-Executive Director
DIRECTORS
Mr Andrew Plympton
Mr Garrison Huang
Mr Bob Xu
Mr Howard Chen
COMPANY SECRETARY
Ms Alyn Tai
REGISTERED OFFICE
136-140 South Park Drive
Dandenong South, Victoria 3175
Tel: 1300 13 99 99
AUDITORS
EXCHANGE LISTING
RSM Australia Partners
Level 21, 55 Collins Street
Melbourne Victoria 3000
Harris Technology Group Limited’s ordinary
shares are quoted on the Australian Securities
Exchange (ASX: HT8)
BANKER
STATE OF INCORPORATION
Westpac
360 Collins Street
Melbourne Victoria 3000
Victoria
SHARE REGISTRY
Boardroom Pty Limited
Level 12, 225 George Street
Sydney New South Wales 2000
Tel: 1300 13 99 99
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Directors’ Report
The Directors present their report together with the financial report of the consolidated entity
consisting of Harris Technology Group Limited (the Company) and its controlled entities (the Group),
for the financial year ended 30 June 2018 and independent auditor’s report thereon.
INFORMATION ON DIRECTORS AND COMPANY SECRETARY
The qualifications, experience and special responsibilities of each person who has been a Director of
Harris Technology Group Limited, together with details of the Company Secretary, during the
financial year and until the date of this report are as follows. Directors were in office for this entire
period unless otherwise stated.
Names, qualifications, experience and special responsibilities
Andrew Plympton, Independent, Non-Executive Chairman
Mr Plympton was appointed to the Board on 9 February 2010 as an Independent Non-Executive
Chairman. Mr Plympton assumed the role of Executive Chairman from 11 March 2016 – 19 July 2016,
after which he resumed his role as Non-Executive Chairman.
Experience and expertise
Mr Plympton joined the Company in February 2010 and brings a wealth
of experience in a diverse range of commercial activities.
Mr Plympton has spent more than 35 years in the financial services area,
as Managing Director and/or Executive Chairman of a number of
international insurance brokers and risk managers. In addition he held the
role of Chairman in Underwriting Agencies and Captive Insurance
Managers.
Other directorships held by
Director in the last 3 years
In the public company sector Mr Plympton is a director of Energy Mad
Limited (NZX: MAD).
Mr Plympton was an Executive Member of The Australian Olympic
Committee and Director of The Australian Olympic Foundation Limited.
He is a Commissioner of the Australian Sports Commission and Advisory
Board Member of Global Risk Advisory Company Aon.
During the last three years Mr Plympton has also served as a director of
the listed companies NewSat Limited (ASX: NWT) from 18 February 2010
to 30 June 2014, Sunbridge Group Limited (ASX: SBB) from 23 July 2013
to 30 December 2014, XPD Soccer Gear Limited (ASX: XPD) from 7
February 2015 to 3 August 2017 and has been a director of Bluestone
Global Limited (ASX: BUE) since 19 July 2013. Mr Plympton was also
Chairman of KneoMedia Limited (ASX: KNM) from 26 August 2010 to 21
October 2015.
Special responsibilities
Chair of the Board
Relevant interest in Harris
Technology Group securities as
at the date of this report
Mr Plympton has a relevant interest in 160,000 fully paid ordinary shares
which are held by an entity Mr Plympton controls.
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Garrison Huang, Executive Director
Mr Huang was appointed to the Board on 03 March 2016 as a Non-Executive Director. Mr Huang
was appointed as Executive Director and CEO on 19 July 2016.
Experience and expertise
Mr. Huang came to Australia from Shanghai, where he was born, and
became an Australian citizen in 1996. Mr. Huang holds a Bachelor of
Engineering degree from Zhejiang University, in China, a Graduate
Diploma in Computer Systems Engineering from Swinburne University
and a Graduate Certificate in Marketing from Melbourne University.
Mr. Huang is a co-founder of Anyware Corporation Pty Ltd – a leading IT
accessory distributor in Australia. Anyware is a well-established importing
and distribution business with offices and warehouses in Melbourne,
Sydney, Brisbane, Perth and Adelaide. In 2015 Anyware Corporation Pty
Ltd acquired Harris Technology (www.ht.com.au) from Officeworks, one of
Australia’s longest established and leading e-commerce businesses
focusing on technology products.
Other directorships held by
Director in the last 3 years
During the last three years, Mr Huang has not served as a director of any
other listed companies.
Special responsibilities
None.
Relevant interest in Harris
Technology Group securities as
at the date of this report
Mr Huang has a relevant interest in 80,110,489 fully paid ordinary shares
which are held by an entity that Mr Huang controls.
Bob Xu, Executive Director
Mr Xu was appointed to the Board on 07 March 2016 as a Non-Executive Director. Mr Xu was
appointed as Executive Director on 19 July 2016.
Experience and expertise
Mr. Xu came to Australia in 1987, and became an Australian Citizen in
1995. Mr. Xu holds a Diploma in Mechanical Engineering from the
Shanghai Aviation Technology Institute, and studied Engineering for four
years at TongJi University.
Mr. Xu started an import and distribution business with AZA International
Pty Ltd in 1996. Mr. Xu has served as Business Director of Anyware
Corporation Pty Ltd (Anyware) since 2012.
Other directorships held by
Director in the last 3 years
During the last three years, Mr Xu has not served as a director of any
other listed companies.
Special responsibilities
None.
Relevant interest in Harris
Technology Group securities as
at the date of this report
Mr Xu has a relevant interest in 8,638,903 fully paid ordinary shares which
are held by an entity that Mr Xu controls.
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Howard Chen, Non-Executive Director
Mr Chen was appointed to the Board on 19 July 2016 as a Non-Executive Director.
Experience and expertise
Mr. Chen holds a Masters of Microelectronics degree from Griffith
University, and is a member of the Institution of Engineers Australia. Mr.
Chen has a strong background in and deep understanding of electrical
and IT products, with years of extensive experience in global product
sourcing, development, brand marketing and sales. Prior to the
completion of his Masters degree, he worked as the system design
engineer in Quanta Computer (Shanghai), the global number one in
laptop and hardware manufacturing. Mr. Chen is also a graduate of
Jiliang University.
Mr. Chen is currently the managing director of Ultra Imagination
Technology Pty Ltd. The company owns mbeat, one of the most dynamic
and fast growing lifestyle tech brands in Australia. mbeat holds a
heavyweight presence in the Australian and New Zealand national
retailer and online sectors, being retailed through the likes of Harvey
Norman, Officeworks, The Warehouse Group, Catchoftheday and Kogan,
and is currently breaking into the US market.
Other directorships held by
Director in the last 3 years
During the last three years, Mr Chen has not served as a director of any
other listed companies.
Special responsibilities
None.
Relevant interest in Harris
Technology Group securities as
at the date of this report
Mr Chen has a relevant interest in 1,502,769 fully paid ordinary shares in
Harris Technology Group Ltd which are held by an entity Mr Chen
controls and by Mr Chen personally.
Alyn Tai, Company Secretary
Ms Tai was appointed as Company Secretary on 24 June 2015.
Experience and expertise
Relevant interest in Harris
Technology Group securities as
at the date of this report
Ms Tai, LL.B (Hons) Exon, is a practising lawyer. She joined the law firm
Corporate Counsel Pty Ltd, which provides corporate and company
secretarial services to Australian companies in 2010. Prior to joining
Corporate Counsel, she trained as an advocate at the Bar in London. Ms
Tai has acquired international legal experience from working in law firms
and barristers’ chambers in London, Singapore and Melbourne. Ms Tai
graduated from the University of Exeter in the United Kingdom in 2008,
and was called to the Bar of England and Wales before being admitted
to the Supreme Court of Victoria as an Australian lawyer. Ms Tai is a
member of the Honourable Society of Inner Temple in the United
Kingdom and the Law Institute of Victoria.
Ms Tai has a relevant interest in 80,000 fully paid ordinary shares in Harris
Technology Group.
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Directors’ Meetings
The number of meetings of the Board of Directors held during the financial year and the numbers
of meetings attended by each Director (while they were a Director) were as follows:
Director
Eligible to Attend
Number Attended
Mr. Andrew Plympton
Mr. Garrison Huang
Mr. Bob Xu
Mr. Howard Chen
Mr. Mark Goulopoulos*
9
9
9
9
2
9
9
9
9
1
*Mark Goulopoulos resigned as a Director on 13 September 2017
Board Committees
Functions previously being undertaken by the Nomination and Remuneration Committee and the
Audit and Risk Management Committee are currently being performed by the Board as a whole. This
will continue to be the case until the Board determines otherwise.
Directors’ Interests in Shares and Options of the Group
As at the date of this report, the relevant interests of the Directors (and former Directors during the
year) in the shares and options of the Group were:
Director
Number of ordinary shares Number of options (unlisted)
Mr. Andrew Plympton 1
Mr. Garrison Huang 2
Mr. Bob Xu 3
Mr. Howard Chen 4
Mr. Mark Goulopoulos 5
160,000
80,110,489
8,638,903
1,849,586
1,416,443
nil
nil
nil
nil
nil
1. The shares are held by Mr. Andrew J Plympton & Mrs. Kim P Plympton ATF Plympton Exec Super Fund A/C; Mr.
Plympton controls this entity.
2. The shares are held by Australian PC Accessories Pty Ltd ATF GWH A/C; Mr. Huang controls this entity.
3. The shares are held by Aza International (Aust) Pty Ltd ATF North City Family A/C; Mr. Xu controls this entity.
4. The shares are held by H & J Investment Pty Ltd ATF H & J Superannuation Fund which Mr. Chen controls; and by Mr.
Chen personally.
5. The shares are held by Atlantis MG Pty Ltd ATF MG Family Super Fund A/C and Atlantic MG Pty Ltd ATF MG Family
A/C; Mr. Goulopoulos is the practical controller of Atlantis MG Pty Ltd and figures are as at resignation date. .
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Earnings Per Share
Earnings Per Share
Basic and diluted earnings per share
Cents
(1.46)
Dividends Paid, Recommended and Declared
No dividends were paid, declared or recommended since the start of the financial year ended 30
June 2018 (2017: nil).
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OPERATING AND FINANCIAL REVIEW
Corporate Structure
Harris Technology Group Limited is a company limited by shares that is incorporated and domiciled
in Australia and listed on the Australian Securities Exchange (ASX). Harris Technology Group Limited
has prepared a consolidated financial report incorporating the entities that it controlled during the
financial year ended 30 June 2018. The Company’s subsidiary entities are set out in note 26 to the
consolidated financial statements.
Nature of operations and principal activities
The Group’s principal activities during the course of the financial year were in the areas of technology
distribution and online retailing. There was a significant change to the Group’s principal activities
during the year, which are detailed below in ‘significant changes in the state of affairs’.
Employees
The Group has 69 employees, inclusive of casual and part-time staff as at 30 June 2018 (2017:
76). The Group does not have consulting agreements with any contractors as at 30 June 2018 (2017:
Nil).
Group Performance over the five-year period
Basic earnings/(loss) per share (cents)
(1.46)
(2.20)
(1.08)
(0.47)
(0.54)
2018
2017
2016
2015
2014
Financial position
The Group had net liabilities of $2,919,908 as at 30 June 2018 (2017: $1,629,519 net liabilities).
The Group had trade and other receivables of $4,719,693 as at 30 June 2018 (2017: $5,979,589).
The Group had trade and other payables of $7,906,974 as at 30 June 2018 (2017: $8,923,541).
Cash flows
The Group generated net operating cash outflows of $711,710 during the year ended 30 June 2018
(2017: net cash outflows $196,752). Net investing cash inflows were $1,540 in the year ended 30
June 2018 (2017: net cash outflow $899,711).
Net financing cash inflows were $274,413 in the year ended 30 June 2018 (2017: net financing cash
inflows of $1,232,317).
There was a cash balance at 30 June 2018 of $1,783,506 (2017: $2,219,264).
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Risk Management
The Board takes a proactive approach to risk management. The Board is responsible for ensuring
that risks, and also opportunities, are identified on a timely basis and that the Company’s objectives
and activities are aligned with the risks and opportunities identified by the Board. In FY16 the
Company established an Audit and Risk Management Committee to oversee this audit and risk
management function of the Board. Following changes to the composition of the Board, the Audit
and Risk Management Committee has been suspended and its functions carried out by the Board as
a whole.
Significant changes in the state of affairs
The following significant changes in the state of affairs of the Group occurred during the financial
year:
Appointments and resignations of officeholders
On 13 September 2017, Mr Mark Goulopoulos resigned as a Non-Executive Director.
On 6 February 2018, Ms Amy Wenjuan Guan resigned as a CFO.
Change of auditor
There is no change of auditor during the financial year.
Significant events after the balance date
On 11 July 2018, the trade finance facility with Westpac was terminated. The company will finalise
the repayment of the facility in October 2018 utilising the proceeds from the sale of the assets and
liabilities of the Anyware business.
On 31 August 2018, the company announced that it signed a Business Asset Purchase Agreement to
sell Anyware to Leader Computers. The following are highlights of the deal:
The purchaser will acquire majority of the inventory held by Anyware estimated to be $4
million to $4.5 million, along with the following estimated values; account receivables of $3.5
million; account payables of $4.9 million; and a goodwill value of $250,000.
The purchaser will take over most of the employees from Anyware including their employee
provisions estimated to be $136,000.
The purchaser will acquire Anyware and related intellectual property.
The purchaser will take over the Anyware lease in NSW.
Apart from the matters detailed above, no other matter or circumstance has arisen since 30 June
2018 that has significantly affected, or may significantly affect the consolidated entity’s operations,
the results of those operations, or the consolidated entity’s state of affairs in future financial years.
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Environmental regulation
The Group’s operations are not subject to any significant Commonwealth or State environmental
regulations or laws.
Shares issued during the year
Issue of 1,020,000 performance Rights to Employees under the Company’s Long Term Incentive Plan
5th July 2017.
Issue of 50,000 performance Rights to Employees under the Company’s Long Term Incentive Plan
12th September 2017.
Issue of 678,012 shares to Howard Chan and Mark G in lieu of outstanding director fees of $30,654
and $31,645, respectively, owing to them on 7th December 2017.
Issue of 14,844,086 ordinary shares upon conversion of an outstanding loan amount of $742,204
owing by HT8 to Blooming Star Consultants Limited on 21 November 2017
Share options (listed and unlisted)
As at 30 June 2018, there were nil unlisted options under the Company’s Long Term Incentive Plan
(LTIP) on issue.
Indemnification of auditors
To the extent permitted by law, the Company has agreed to indemnify its auditors, RSM Australia
Partners, as part of the terms of its audit engagement agreement against claims by third parties
arising from the audit (for an unspecified amount). No payment has been made to indemnify RSM
Australia Partners during or since the financial year.
Proceedings on behalf of the Consolidated Entity
No person has applied for leave of Court to bring proceedings on behalf of the Group.
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Remuneration Report (Audited)
This Remuneration Report for the year ended 30 June 2018 outlines the remuneration arrangements
of the Company and the Group in accordance with the requirements of the Corporations Act 2001
(the Act) and its regulations. This information has been audited as required by section 308(3C) of the
Act.
At the Company’s 2016 Annual General Meeting, shareholders approved Harris Technology Group’s
Long Term Incentive Plan (LTIP).
The remuneration report is presented under the following sections:
1.
2.
3.
4.
5.
6.
7.
Key Management Personnel (KMP) disclosed in this report
Remuneration Governance
Executive remuneration arrangements
Non-executive director remuneration arrangements
Additional information
Details of Key Management Personnel Remuneration
Additional disclosures relating to options and shares
1.
Key Management Personnel (KMP) disclosed in this report
Key management personnel are those persons having authority and responsibility for planning,
directing and controlling activities of the Group, including any Director of the Group.
Key Management Personnel during the financial year are as follows:
(i) Executive directors
Mr Garrison Huang*
Mr Bob Xu**
(ii) Non-executive directors (NEDs)
Director (executive)
Director (executive)
Mr Andrew Plympton***
Chairman (non-executive)
Mr Mark Goulopoulos
Director (non-executive)
Mr Howard Chen****
Director (non-executive)
(iii) Executive
Miss Amy Wenjun Guan *****
Chief Financial Officer (CFO)
*Garrison Huang appointed Executive Director and CEO on 19 July 2016.
**Bob Xu appointed Executive Director on 19 July 2016.
***Andrew Plympton temporarily appointed Executive Director on 11 March 2016, resumed regular duties as
Non-Executive Chairman on 19 July 2016.
****Howard Chen appointed Non-Executive Director on 19 July 2016.
Mark Goulopoulos retired as a Non-Executive Director on 13 September 2017
***** Amy Wenjuan Guan resigned as a CFO on 6 February 2018
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2.
Remuneration Governance
Remuneration Policy
The performance of the Group depends upon the quality of its Directors and executives. To be
successful, the Group must attract, motivate and retain highly skilled Directors and executives. To
this end, the Group seeks to provide competitive rewards to attract high calibre executives. The
Nomination and Remuneration Committee assesses the appropriateness of the nature and amount
of remuneration of Non-Executive Directors, the Chief Executive Officer and other Key Management
Personnel on a periodic basis. In doing so, the Nomination and Remuneration Committee has
reference to relevant employment market conditions, with the overall objective of ensuring
maximum stakeholder benefit from the retention of a high quality Board and executive team. A
recommendation of the Nomination and Remuneration Committee is presented to the Board of
Directors for adoption and approval. Following changes to the structure of the Board, the
Nomination and Remuneration Committee has been suspended and its functions are currently being
performed by the entire Board.
Hedging of equity awards
The Group has a policy in place to prohibit Directors and executives from entering into equity
hedging arrangements to protect the value of unvested options.
Remuneration structure
In accordance with best practice corporate governance, the structure of non-executive and executive
remuneration is separate and distinct.
3.
Executive remuneration arrangements
The Group aims to reward executives with a level and mix of remuneration commensurate with their
position and responsibilities within the Group so as to:
Reward executives for the Group and individual performance;
Align the interests of executives with those of shareholders;
Link reward with the strategic goals and performance of the Group; and
Ensure total remuneration is competitive by market standards.
Currently remuneration is paid in the form of salaries & fees, superannuation contributions and
shares where applicable.
4.
Non-Executive Director remuneration arrangements
The Group’s constitution provides that the total amount of remuneration provided to all non-
executive Directors must not exceed $500,000.
Harris Technology Group Limited Annual Report 2017/18 | 23
For personal use only
5.
Additional Information
The earnings of the consolidated entity for the five years to 30 June 2018 are summarised below:
2018
2017
2016
2015
2014
$’000
$’000
$’000
$’000
$’000
Sales revenue
45,657
51,069
17,790
18,454
1,657
EBITDA
EBIT
(1,553)
782
(5,967)
(2,044)
(1,458)
(1,685)
(2,466)
(6,373)
(2,437)
(1,490)
Profit after income tax
(2,062)
(3,061)
(6,510)
(2,481)
(1,490)
The factors that are considered to affect total shareholders return (‘TSR’) are summarised below:
2018
2017
2016
2015
2014
Share price at financial year end ($)
0.05
0.08
0.10
0.35
0.525
Total dividends declared (cents per
share)
Basic earnings per share (cents per
share)
-
-
-
-
-
(1.46)
(2.20)
(1.08)
(0.47)
(0.54)
Harris Technology Group Limited Annual Report 2017/18 | 24
For personal use only
6.
Details of Key Management Personnel Remuneration
Details of remuneration received by key management personnel of the Group for the current
financial year are set out in the following table:
Short-term benefits
Post-
employment
Security based
payments
Total
$
Performance
related %
Executive
Directors
Salary & fees
$
Cash
bonus
$
Superannuation
$
Options
$
Shares
$
-
-
-
-
38,507
35,799
85,533
77,492
-
35,200
28,000
76,000
-
-
4,403
4,403
-
-
26,460
26,460
-
-
21,000
22,250
Mr Garrison
Huang 1
2018
2017
Mr Bob Xu 2
2018
Non-
Executive
Directors
Mr Andrew
Plympton 3
Mr Howard
Chen 4
Mr Mark
Goulopoulos
5
Mr Domenic
Carosa 6
Other Key
Management
Personnel
Miss Amy
Wenjun Guan
7
Mr Simon
Crean
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
35,166
32,693
83,837
77,492
35,200
48,000
-
-
-
-
-
1,250
-
-
-
-
3,341
3,106
1,695
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2018
90,548
2017
90,016
Mr Graeme Lay 2018
2017
Total KMP
2018
244,752
2017
249,451
5,956
8,552
-
2,020
-
1,188
10,992
14,866
96,504
98,568
-
2,020
-
1,188
255,744
-
-
-
-
-
79,863
344,180
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1. Garrison Huang appointed Executive Director and CEO on 19 July 2016.
2.
3. Andrew Plympton resumed his role as Non-Executive Chairman on 19 July 2016, after acting as Executive Chairman from 11 March
Bob Xu appointed Non-Executive Director on 19 July 2016.
2016 to 18 July 2016.
4. Howard Chen appointed Non-Executive Director on 19 July 2016.
5. Mark Goulopoulos resigned as a Non-Executive Director on 13 September 2017.
6. Domenic Carosa resigned as a Non-Executive Director on 19 July 2016
7. Amy Wenjuan Guan resigned as a CFO on 6 February 2018
Harris Technology Group Limited Annual Report 2017/18 | 25
For personal use only
7.
a.
Additional disclosures relating to options and shares
Performance rights holdings of key management personnel
As at the end of FY18 there were zero options granted to KMP under the LTIP. No further options
have been granted.
Shares issued on exercise of options
There were no shares issued to KMP during the year upon the exercise of options.
b.
Shareholdings of key management personnel
Acquired
during the
year pre-
consolidation
Post-
consolidat
ion
balance
Balance at
1 July 2017
Acquired/(dis
-posed)
during the
year post-
consolidation
Other
movements
No.
No.
No.
No.
Executive Directors
Mr Garrison Huang 1
80,110,489
Mr Bob Xu 2
8,638,903
Non-Executive
Directors
Mr Andrew Plympton 3
160,000
Mr. Mark Goulopoulos 5
1,416,443
Mr Howard Chen 4
1,502,769
-
-
-
-
-
-
-
-
-
346,817
-
-
-
-
-
Balance at
30 June
2018
No.
80,110,489
8,638,903
160,000
-
-
-
(1,416,443)
-
-
1,849,586
1. The shares are held by Australian PC Accessories Pty Ltd ATF GWH A/C; Mr Huang controls this entity.
2. The shares are held by Aza International (Aud) Pty Ltd ; Mr Xu controls this entity.
3. The shares are held by Mr Andrew J Plympton & Mrs Kim P Plympton ; Mr Plympton
controls this entity.
4. The shares are held by Mr Chen personally and by H & J Investment Pty Ltd ; Mr Chen controls
this entity.
5. The shares are held by Atlantis MG Pty Ltd ATF MG Family Super Fund A/C and Atlantic MG Pty Ltd ATF MG Family A/C;
Mr Goulopoulos is the practical controller of Atlantis MG Pty Ltd.
c.
Loans to key management personnel and their related parties
There were no loans made to key management personnel and their related parties during the
financial year and none are outstanding as at the date of this report.
Other transactions and balances with key management personnel and their related
d.
parties
All transactions were made on normal commercial terms and conditions and at market rates unless
otherwise stated.
Harris Technology Group Limited Annual Report 2017/18 | 26
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Purchases from entities controlled by KMP and their related parties
Rental of office and warehouse buildings 1
Inventories 2
Management services 3
Interest expense on directors’ loans 4
Gain on Debt Forgiveness 4
Total related party purchases
Sales to entities controlled by KMP and their related parties
Inventories 2
Management services 3
Total related party sales
2018
$
2017
$
665,262
523,702
1,453,471
1,450,252
44,355
113,061
(115,620)
77,492
72,600
-
2,160,529
2,124,046
553,619
466,560
42,000
84,000
595,619
550,560
1. Rental to Garrison Huang and his controlling entity was $601,873 in FY18 (2017: $478,800); Rental to Bob
2.
Xu’s controlling entity was $63,339 in FY18 (2017: $44,902).
Inventories purchased from Bob Xu’s controlling entity was $567,412 in FY18 (2017: $449,700); Inventories
purchased from Howard Chen’s controlling entity was $886,058 in FY18 (2017: $986,514); Inventories
purchased from Anyware New Zealand Pty Ltd was NIL in FY17 (2017: $14,038). Inventories sold to Anyware
New Zealand Pty Ltd was $553,619 in FY18 (2017: $466,560).
3. Management service fee charged by Bob Xu was $44,355 in FY18 (2017: $77,492). Management service fee
charged to Anyware New Zealand Pty Ltd was $42,000 in FY18 (2017: $84,000).
4. The Group accrued $113,061 interest expense in FY18 for loans from Garrison Huang and Bob Xu. Garrison
Huang provided the Group with a debt forgiveness of $115,620 in FY18 for unpaid interest on loans.
($)
2018
2017
Current payables to entities controlled by KMP
Trade payables - Inventories
545,050
218,171
Current receivables from entities controlled by KMP
Trade receivables - Inventories
294,024
353,531
Anyware entered in lease agreements with Garrison Huang and his controlling entity for office and
warehouse buildings at Dandenong South, VIC, Banyo, QLD, Findon, WA. The leases are for a
period of 8 years commencing on 1 July 2012.
Anyware purchases inventories from AZA International Pty Ltd for its ordinary business activities at
arm’s length.
Harris Technology Group Limited Annual Report 2017/18 | 27
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Anyware purchases inventories from Ultra Imagination Pty Ltd whose director is Howard Chen for
its ordinary business activities at arm’s length.
Anyware purchases or/and sales inventories from/to Anyware New Zealand Pty Ltd whose director
is Garrison Huang for its ordinary business activities at a discounted gross margin between 8-10%.
The discount provided was approximately $46,000.
Bob Xu entered into a service agreement with Anyware for a monthly fee from 16 March 2011, as
per the ‘Details of Key Management Personal Remuneration’ table above (Remuneration Report
section 6).
Anyware New Zealand pays management fees for operational services provided by Anyware in
purchasing, marketing, IT and management service provided by Anyware’s management team.
($)
2018
2017
Name of director Entity/Shareholder
Garrison Huang
Australian PC Accessories Pty Ltd
3,968,686
4,018,305
Bob Xu
AZA International (Aust) Pty Ltd
120,000
120,000
4,088,686
4,138,305
The payments of principal and interest on all directors’ loans have been deferred for a period through
to 30 June 2019. Interest accrued on deferred loans in the balance sheet is $110,457 as of 30 June
2018. The interest rate charged is 5.5% for loans of $2,128,305 and 12% for loan of $300,000. There
are 0% interest on loans of $1,600,380.
Tax consolidation
Harris Technology Group and its 100% owned subsidiaries are part of an income tax consolidated
group.
Auditor’s independence declaration
A copy of an auditor’s independence declaration in relation to the audit for the financial year is
provided with this report.
Harris Technology Group Limited Annual Report 2017/18 | 28
For personal use only
Non-audit services
RSM Australia Partners did not perform any non-assurance services during the year.
Signed in accordance with a resolution of the Directors
Andrew Plympton
Non-Executive Chairman
Melbourne, 27 September 2018
Harris Technology Group Limited Annual Report 2017/18 | 29
For personal use only
RSM Australia Partners
Level 21, 55 Collins Street Melbourne VIC 3000
PO Box 248 Collins Street West VIC 8007
T +61 (0) 3 9286 8000
F +61 (0) 3 9286 8199
www.rsm.com.au
AUDITOR’S INDEPENDENCE DECLARATION
As lead auditor for the audit of the financial report of Harris Technology Group Limited for the year ended 30 June
2018, I declare that, to the best of my knowledge and belief, there have been no contraventions of:
(i)
(ii)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
any applicable code of professional conduct in relation to the audit.
RSM AUSTRALIA PARTNERS
J S CROALL
Partner
Dated: 27 September 2018
Melbourne, Victoria
THE POWER OF BEING UNDERSTOOD
AUDIT | TAX | CONSULTING
RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the
RSM network is an independent accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction.
RSM Australia Partners ABN 36 965 185 036
Liability limited by a scheme approved under Professional Standards Legislation
| 30
For personal use only Corporate Governance Statement
The Company’s Directors and management are committed to conducting the Group’s business in an
ethical manner and in accordance with the highest standards of corporate governance. The Company
has adopted and has substantially complied with the ASX Corporate Governance Principles and
Recommendations (Third Edition) (Recommendations) to the extent appropriate to the size and
nature of the Group’s operations.
The Company has prepared a statement which sets out the corporate governance practices that were
in operation throughout the financial year for the Company, identifies any recommendations that
have not been followed, and provides reasons for not following such recommendations (Corporate
Governance Statement).
In accordance with ASX Listing Rules 4.10.3 and 4.7.4, the Corporate Governance Statement will be
available for review on Harris Technology Group’s website (www.ht8.com.au), and will be lodged
together with an Appendix 4G with ASX at the same time that this Annual Report is lodged with ASX.
The Appendix 4G will identify each Recommendation that needs to be reported against by Harris
Technology Group, and will provide shareholders with information as to where relevant governance
disclosures can be found.
The Company’s corporate governance policies and charters and policies are all available on Harris
Technology Group’s website (www.ht8.com.au).
Harris Technology Group Limited Annual Report 2017/18 | 31
For personal use only
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
(FOR THE YEAR ENDED 30 JUNE 2018)
($)
Revenue
Sales revenue
Direct costs
Gross profit
Other income
Distribution expenses
Marketing expenses
Transaction expenses
Employee contractor and director expenses
Occupancy costs
Technology expenses
Holding company expenses
Depreciation and amortisation expenses
Impairment expenses
Other expenses
Finance costs
Exchange gain / (loss)
(Loss) / Profit before income tax
Income tax benefit / (expense)
(Loss) / Profit from continuing operations
Discontinued operations
Total comprehensive (loss) / profit for the period
Earnings per share from continuing operations (cents)
- Basic earnings / (loss) per share
- Diluted earnings / (loss) per share
The accompanying notes form part of these financial statements.
Notes
2018
2017
6
6
7
7
7
7
8
9
9
45,656,903
51,068,575
(39,471,702)
(41,994,531)
6,185,201
9,074,044
111,201
10,271
(858,042)
(872,233)
(170,945)
(209,479)
(164,025)
(230,785)
(4,710,597)
(4,794,704)
(1,151,643)
(1,150,612)
(205,070)
(479,514)
(410,884)
(273,880)
(132,560)
(130,033)
-
(3,117,482)
(219,389)
(266,051)
(376,661)
(381,258)
41,350
(25,165)
(2,062,064)
(2,846,881)
-
-
(2,062,064)
(2,846,881)
-
(214,011)
(2,062,064)
(3,060,892)
(1.46)
(1.46)
(2.20)
(2.20)
Harris Technology Group Limited Annual Report 2017/18 | 32
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CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(AS AT 30 JUNE 2018)
($)
Notes
2018
2017
Current Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Prepayments and deposits
Total Current Assets
Non-current Assets
10
11
12
13
1,783,506
2,219,264
4,719,693
5,979,589
6,341,556
7,238,240
151,678
100,580
12,996,433
15,537,673
Property, plant and equipment
14
732,838
Intangible assets
Total Non-current Assets
Total Assets
Current Liabilities
Trade and other payables
Financial liability
Employee benefit liabilities
Total Current Liabilities
Non-current Liabilities
Financial liability
Employee benefit liabilities
Total Non-current Liabilities
Total Liabilities
Net Assets / (Net Deficiency of Assets)
Equity
Contributed equity
Accumulated losses
Total Equity
-
732,838
844,910
22,028
866,938
13,729,272
16,404,611
7,906,974
8,923,541
4,097,840
4,355,881
465,420
462,788
12,470,234
13,742,210
4,158,500
4,251,422
20,447
40,498
4,178,946
4,291,920
16,649,180
18,034,130
(2,919,908)
(1,629,519)
7,594,915
6,706,411
(10,514,823)
(8,335,930)
(2,919,908)
(1,629,519)
15
16
17
16
17
18
19
The accompanying notes form part of these financial statements.
Harris Technology Group Limited Annual Report 2017/18 | 33
For personal use only
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(FOR THE YEAR ENDED 30 JUNE 2018)
($)
At 1 July 2017
Loss for the period
Other comprehensive income
Total comprehensive income
Transactions with owners in their capacity as owners
Dividend paid
Prior Period Adjustment
Share based payments
Share issued on conversion of loan
Share Capital
Accumulated
Losses
Total Equity
6,706,411
(8,335,930)
(1,629,519)
-
-
-
-
-
146,299
742,205
(2,062,064)
(2,062,064)
-
-
(2,062,064)
(2,062,064)
-
-
(116,829)
(116,829)
-
-
146,299
742,205
At 30 June 2018
7,594,915
(10,514,822)
(2,919,907)
($)
At 1 July 2016
Loss for the period
Other comprehensive income
Total comprehensive income
Transactions with owners in their capacity as owners
Dividend paid
Placement issued
Share issued on reverse acquisition
Placement issued
At 30 June 2017
Share Capital
Accumulated
Losses
Total Equity
4,963,077
(5,275,038)
(311,961)
-
-
-
-
800,000
933,471
9,863
(3,060,892)
(3,060,892)
-
-
(3,060,892)
(3,060,892)
-
-
-
800,000
933,471
9,863
6,706,411
(8,335,930)
(1,629,519)
The accompanying notes form part of these financial statements.
Harris Technology Group Limited Annual Report 2017/18 | 34
For personal use only
CONSOLIDATED STATEMENT OF CASH FLOWS
(FOR THE YEAR ENDED 30 JUNE 2018)
($)
Notes
2018
2017
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
51,602,289
60,080,507
(52,430,828)
(60,281,369)
-
4,110
Net cash flows (used in) / provided by operating activities
10
(828,539)
(196,752)
Cash flows from investing activities
Cash acquired on reverse acquisition
Acquisition of business, net of cash consideration
Disposal of business, net of cash consideration
Payments for property, plant and equipment
Net cash flows (used in) / provided by investing activities
Cash flows from financing activities
Proceeds from placement issued
Proceeds from borrowings
Repayment of borrowings
Dividend paid
-
-
-
508,496
(1,420,706)
140,000
1,540
(127,562)
1,540
(899,772)
-
800,000
1,942,337
4,913,136
(1,551,096)
(4,480,819)
-
-
Net cash flows (used in) / provided by financing activities
391,241
1,232,317
Net increase / (decrease) in cash and cash equivalents
(435,758)
135,793
Cash and cash equivalents at the beginning of the financial year
2,219,264
2,083,471
Cash and cash equivalents at the end of the financial year
10
1,783,506
2,219,264
The accompanying notes form part of these financial statements.
Harris Technology Group Limited Annual Report 2017/18 | 35
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Notes to the Consolidated Financial Statements
(for the Financial Year ended 30 June 2018)
1.
CORPORATE INFORMATION
The consolidated financial report of Harris Technology Group Limited (the Company or Harris
Technology Group) and controlled entities (the Group) for the year ended 30 June 2018 was
authorised for issue in accordance with a resolution of the Directors on 28 September 2018.
Harris Technology Group is a company limited by shares incorporated in Australia whose shares are
publicly traded on the Australian Securities Exchange.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a)
Basis of preparation
The financial report is a general purpose financial report that has been prepared in accordance with
Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting
Standards Board and the Corporations Act 2001. For the purposes of preparing the financial
statements, Harris Technology Group Limited is a for profit entity.
The financial report covers Harris Technology Group and controlled entities as a consolidated entity.
Harris Technology Group is a listed public company, limited by shares, incorporated and domiciled
in Australia.
The financial report has been prepared in accordance with the historical cost convention and, except
where stated, does not take into account changing money values or current valuations of non-current
assets. Cost is based on the fair values of the consideration given in exchange for assets. The
financial report is presented in Australian dollars.
The following is a summary of material accounting policies adopted by the consolidated entity in the
preparation and presentation of the financial report. The accounting policies have been consistently
applied, unless otherwise stated.
(b)
Statement of compliance
The financial report complies with Australian Accounting Standards as issued by the Australian
Accounting Standards Board and International Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board.
(c)
Going concern
The financial statements have been prepared on the going concern basis, which contemplates
continuity of normal business activities and the realisation of assets and discharge of liabilities in the
normal course of business.
Harris Technology Group Limited Annual Report 2017/18 | 36
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As disclosed in the financial statements, the consolidated entity incurred a loss of $2,062,064 (2017:
$3,060,892 loss) and had net cash outflows from operating activities of $711,710 (2017: $196,752
outflows) for the year ended 30 June 2018. As at that date the consolidated entity had net liabilities
of $2,919,908 (2017: $1,629,519 net liabilities).
These factors indicate a material uncertainty which may cast significant doubt as to whether the
consolidated entity will continue as a going concern and therefore whether it will realise its assets
and extinguish its liabilities in the normal course of business and at the amounts stated in the
financial report.
The Directors believe that there are reasonable grounds to believe that the consolidated entity will
be able to continue as a going concern, after consideration of the following factors:
As disclosed in Note 24 Significant Events after the Balance Date, the Group has entered into
an Agreement to sell the Anyware Business. The cash proceeds from the sale will in part be
utilised to extinguish the Westpac trade finance facility; and
The Directors with loans to the consolidated entity, equating to $4,088,686 of debt as at 30
June 2018, have provided commitments of financial support and irrevocably deferred
monthly payments of principal and interest on loans for a period through to 30 June 2020,
or sooner if the consolidated entity has the capacity to repay these loans without impacting
the on going viability of the consolidated entity.
Accordingly, the Directors believe that the consolidated entity will be able to continue as a going
concern and that it is appropriate to adopt the going concern basis in the preparation of the financial
report.
The financial report does not include any adjustments relating to the amounts or classification of
recorded assets or liabilities that might be necessary if the consolidated entity does not continue as
a going concern.
(d) New standards and interpretations issued but not yet effective
At the date of this financial report the following standards and interpretations, which may impact the
entity in the period of initial application, have been issued but are not yet effective. Other than
changes to disclosure formats, it is not expected that the initial application of these new standards
in the future will have any material impact on the financial report, except for AASB 16 Leases. This
standard requires operating leases which are currently held off balance sheet to be brought onto the
balance sheet. Future expected lease payments should be capitalized and brought onto the balance
sheet as an asset (right of use) and also reflect a lease liability. The asset is amortised whilst the lease
is reduced as payments are made, adjusted for any lease incentives applicable and interest costs of
winding the lease liability to present value. The expected value of such assets and liabilities at 30
June 2018 is $1,242,653 and the group has not brought such assets or liabilities to account.
Harris Technology Group Limited Annual Report 2017/18 | 37
For personal use only
Reference
Title
Summary
AASB 9
Financial Instruments
AASB 15
Revenue from Contracts
with Customers
AASB 16
Leases
This Standard supersedes both AASB 9 (December 2010) and
AASB 9 (December 2009) when applied. It introduces a “fair
value through other comprehensive income” category for debt
instruments, contains requirements for impairment of financial
assets, etc.
It contains a single model for contracts with customers based
on a five-step analysis of transactions for revenue recognition,
and two approach, a single time or over time, for revenue
recognition.
AASB 16 sets out the principles for the recognition,
measurement, presentation and disclosure of leases. This
standard removes the current distinction between operating
and financing leases and requires recognition of an asset (the
right to use the leased item) and a financial liability to pay
rentals for almost all lease contracts, effectively resulting in the
recognition of almost all leases on the statement of financial
position. The accounting by
lessors, however, will not
significantly change.
Application date
(calendar years
beginning)
1-Jan-18
1-Jan-18
1-Jan-19
(e)
Basis of consolidation
The consolidated financial statements comprise the financial statements of the Group and its
subsidiaries as at 30 June 2018. Control is achieved when the Group is exposed, or has rights, to
variable returns from its involvement with the investee and has the ability to affect those returns
through its power over the investee. Specifically, the Group controls an investee if and only if the
Group has:
Power over the investee (i.e. existing rights that give it the current ability to direct the relevant
activities of the investee)
Exposure, or rights, to variable returns from its involvement with the investee, and
The ability to use its power over the investee to affect its returns
The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that
there are changes to one or more of the three elements of control. Consolidation of a subsidiary
begins when the Group obtains control over the subsidiary and ceases when the Group loses control
of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of
during the year are included in the statement of comprehensive income from the date the Group
gains control until the date the Group ceases to control the subsidiary.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their
accounting policies into line with the Group’s accounting policies. All intra-group assets and
liabilities, equity, income, expenses and cash flows relating to transactions between members of the
Group are eliminated in full on consolidation.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an
equity transaction. If the Group loses control over a subsidiary, it:
Harris Technology Group Limited Annual Report 2017/18 | 38
For personal use only
De-recognises the assets (including goodwill) and liabilities of the subsidiary
De-recognises the carrying amount of any non-controlling interests
De-recognises the cumulative translation differences recorded in equity
Recognises the fair value of the consideration received
Recognises the fair value of any investment retained
Recognises any surplus or deficit in profit or loss
Reclassifies the parent’s share of components previously recognised in OCI to profit or
loss or retained earnings, as appropriate, as would be required if the Group had directly
disposed of the related assets or liabilities
(f)
Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the
Group and the revenue can be reliably measured, regardless of when the payment is being made.
Revenue is measured at the fair value of the consideration received or receivable, taking into account
contractually defined terms of the payment and excluding taxes or duty. The Group assesses its
revenue from the provision of services to customers and recognised upon delivery of the service to
the customer.
Revenue from online shopping is the sale of products. The sale of products is recognised on gross
basis. Any return or refund allowances will reduce revenue. The sale of products is recognised when
products are sold and significant risks and rewards of ownership of the goods have passed to the
buyer, usually on despatch of the goods.
Interest income
Interest income and expenses are reported on an accrual basis using the effective interest method.
Interest income is included in finance income in the statement of profit or loss.
All revenue is stated net of the amount of goods and services tax (GST).
(g)
Profit or loss from discontinued operations
A discontinued operation is a component of the entity that either has been abandoned, disposed of,
or is classified as held for sale, and:
represents a separate division of business or geographical area of operations; or
is part of a single co-ordinated plan to dispose of a separate major division of business or
geographical area of operations.
Discontinued operations are excluded from the results of continuing operations and are presented
as a single amount as profit or loss after tax from discontinued operations in the statement of profit
or loss.
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(h)
Income tax and other taxes
Current income tax expense is the tax payable on the current year’s taxable income. This is based on
the applicable income tax rate adjusted by changes in deferred tax assets and liabilities.
Deferred tax assets and liabilities are recognised for temporary differences between the tax bases of
assets and liabilities and their carrying amounts in the financial statements. No deferred tax asset or
liability is recognised in relation to temporary differences arising from the initial recognition of an
asset or a liability if they arose in a transaction, other than a business combination, that at the time
of the transaction did not affect either accounting profit or taxable profit or loss.
Deferred tax assets are recognised for temporary differences and unused tax losses only when it is
probable that future taxable amounts will be available to utilise those temporary differences and
losses.
Current and deferred tax balances attributable to amounts recognised directly in equity are also
recognised directly in equity.
Tax consolidation
Harris Technology Group Limited and its wholly-owned subsidiaries have formed an income tax
consolidated group under tax consolidation legislation.
The head entity, Harris Technology Group Limited and the controlled entities in the tax consolidated
group continue to account for their own current and deferred tax amounts. The Group has applied
the Group allocation approach in determining the appropriate amount of current taxes and deferred
taxes to allocate to members of the tax consolidated group.
In addition to its own current and deferred tax amounts, Harris Technology Group Limited also
recognizes the current tax liabilities (or assets) and the deferred tax assets arising from unused tax
losses and unused tax credits assumed from controlled entities in the tax consolidated group.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are
recognised as amounts receivable from or payable to other entities in the Group.
Any difference between the amounts assumed and amounts receivable or payable under the tax
funding agreement are recognised as a contribution to (or distribution from) wholly-owned tax
consolidated entities.
GST taxes
Revenues, expenses and assets are recognised net of the amount of GST except:
When the GST incurred on a purchase of goods and services is not recoverable from the
taxation authority, in which case the GST is recognised as part of the cost of acquisition of
the asset or as part of the expense item as applicable.
Receivables and payables, which are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the taxation authority is included as
part of receivables or payables in the statement of financial position.
Cash flows are included in the statement of cash flows on a gross basis and the GST
component of cash flows arising from investing and financing activities, which is recoverable
from, or payable to, the taxation authority is classified as part of operating cash flows.
Harris Technology Group Limited Annual Report 2017/18 | 40
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(i)
Cash and cash equivalents
Cash and cash equivalents include cash on hand and at banks, short-term deposits with an original
maturity of three months or less held at call with financial institutions and bank overdrafts. Bank
overdrafts are shown within short-term borrowings in current liabilities on the statement of financial
position.
Cash and cash equivalents also include amounts collected in respect of online sales during the period
by agents on behalf of the Company where clear title of ownership exists.
(j)
Trade and other receivables
Trade and other receivables are recognised and carried at the net of original invoice amount less an
allowance for any uncollectible amounts. An estimate for doubtful debts is made when there is
objective evidence that collection of the full amount is no longer probable. Bad debts are written off
when identified.
(k)
Business combinations
The Group accounts for its business combinations using the acquisition method. The cost of an
acquisition is measured as the aggregate of the consideration transferred measured at acquisition
date fair value. Acquisition-related costs are expensed as incurred and included in administrative
expenses.
The Group recognises identifiable assets acquired and liabilities assumed in a business combination
regardless of whether they have been previously recognised in the acquiree’s financial statements prior
to the acquisition. Assets acquired and liabilities assumed are generally measured at their acquisition-
date fair values.
(l)
Intangibles assets other than goodwill
Intangible assets acquired separately are initially measured at cost. The cost of intangible assets
acquired in a business combination is at its fair value as at the date of acquisition. Following initial
recognition, intangible assets are carried at cost less any accumulated amortisation and any
accumulated impairment losses. Internally generated intangibles, excluding capitalised development
costs, are not capitalised and the related expenditure is reflected profit or loss in the period which
the expenditure is incurred.
The useful lives of intangible assets are assessed to be either finite or indefinite.
Intangible assets with finite lives are amortised over their useful life and tested for impairment
whenever there is an indication that the intangible asset may be impaired. The amortisation period
and the amortisation method for an intangible asset with a finite useful life is reviewed at least at
each financial year end. Changes in the expected useful life or the expected pattern of consumption
of future economic benefits embodied in the asset are accounted for prospectively by changing the
amortisation period or method, as appropriate, which is a change in accounting estimate. The
amortisation expense on intangible assets with finite lives is recognised in profit or loss in the
expense category consistent with the function of the intangible asset. The estimated useful life of
each class of intangible asset is as follows:
Harris Technology Group Limited Annual Report 2017/18 | 41
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Software Development
Domain and Websites
Customer databases
Brands
2 years
10 years
10 years
10 years
(m)
Property, plant and equipment
Property, plant and equipment is stated at cost, net of accumulated depreciation and / or any
accumulated impairment losses, if any.
The carrying amount of plant and equipment is reviewed for impairment annually by the Directors
for events or changes in circumstances that indicate the carrying value may not be recoverable. If
any such indication exists and where the carrying value exceeds the estimated recoverable amount,
the assets are written down to their recoverable amount.
Depreciation
The depreciable amounts of fixed assets are depreciated on a straight-line basis over their estimated
useful lives of the assets as follows:
Computer
Office and warehouse equipment
Motor vehicles
Improvement
3 - 4 years
3 - 5 years
5 - 6 years
20 years
In the case of leasehold property, expected useful lives are determined by reference to comparable
owned assets or over the term of the lease, if shorter.
(n)
Leases
The determination of whether an arrangement is, or contains, a lease is based on the substance of
the arrangement at the inception date. The arrangement is assessed for whether fulfilment of the
arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right
to use the asset or assets, even if that right is not explicitly specified in an arrangement.
Operating leases
Where the Group is a lessee, payments on operating lease agreements are recognised as an expense
on a straight-line basis over the lease term. Associated costs, such as maintenance and insurance,
are expensed as incurred.
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(o)
Impairment of property, plant, equipment, goodwill and intangible assets
The Group assesses at each reporting date whether there is an indication that an asset may be
impaired. The assessment will include the consideration of external and internal sources of
information. If such an indication exists, an impairment test is carried out on the asset by comparing
the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell or
value in use, to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable
amount is expensed to the statement of comprehensive income, unless the asset is carried at
revalued amount in which case the impairment loss is treated as a revaluation decrease.
(p)
Inventories
Inventories, consisting of products available for sale, are primarily accounted for using the latest
purchase price method, and are valued at the lower of cost or net realisable value. This valuation
requires the group to make judgements, based on currently available information, about the likely
method of disposition and expected recoverable values of each disposition category.
Net realisable value is the estimated selling price in the ordinary course of business, less the
estimated cost necessary to make the sale.
All inventories carried are finished goods, ready for sale.
(q)
Financial instruments
Classification
The Group classifies its financial instruments in the following categories: loans and receivables and
financial liabilities. The classification of investments depends on the purpose for which the
investments were acquired. Management determines the classification of its investments at initial
recognition.
Financial liabilities
The Group’s financial liabilities include trade payables, other payables and loans from third parties
including inter-company balances and loans from or other amounts due to director-related entities.
The Group’s financial liabilities are recognised at fair value and carried at amortised cost, comprising
original debt less principal payments and amortisation.
(r)
Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of
the financial period and which are unpaid. Due to their short term nature they are measured at
amortised cost and are not discounted. The amounts are unsecured and are usually paid within 30-
60 days of recognition.
(s)
Provisions
Provisions are measured at the estimated expenditure required to settle the present obligation,
based on the most reliable evidence available at the reporting date, including the risks and
uncertainties associated with the present obligation. Where there are a number of similar obligations,
the likelihood that an outflow will be required at settlement is determined by considering the class
of obligations as a whole.
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(t)
Foreign Currencies
Functional and presentation currency
The financial statements of each group entity are measured using its functional currency, which is
the currency of the primary economic environment in which that entity operates. The consolidated
financial statements are presented in Australian dollars, as this is the parent entity’s functional and
presentation currency.
Transactions and balances
Transactions in foreign currencies of entities within the consolidated entity are translated into
functional currency at the rate of exchange ruling at the date of the transaction.
Foreign currency monetary items that are outstanding at the reporting date (other than monetary
items arising under foreign currency contracts where the exchange rate for that monetary item is
fixed in the contract) are translated using the spot rate at the end of the financial year.
Resulting exchange differences arising on settlement or re-statement are recognised as revenues
and expenses for the financial year.
Group companies
The financial statements 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
All resulting exchange differences are recognised as a separate component of equity.
Exchange differences arising on translation of foreign operations are transferred directly to the
group’s foreign currency translation reserve as a separate component of equity in the reserve
account.
(u)
Employee benefits
Liabilities for wages and salaries, including non-monetary benefits, and annual leave that are
expected to be settled within 12 months of the reporting date are recognised in respect of
employees’ services up to the reporting date. They are measured at the amounts expected to be
paid when the liabilities are settled. Expenses for non-accumulating sick leave are recognised when
the leave is taken and are measured at the rates paid or payable. All other short-term employee
benefit obligations are presented as payables.
The liability for long service leave is recognised and measured as the present value of expected future
payments to be made in respect of services provided by employees up to the reporting date using
the projected unit credit method. Consideration is given to expect future wage and salary levels,
experience of employee departures, and periods of service. Expected future payments are discounted
using market yields at the reporting date on national government bonds with terms to maturity and
currencies that match, as closely as possible, the estimated future cash outflows.
Contributions to defined contribution superannuation plans are expensed in the period in which they
are incurred.
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(v)
Comparatives
Where necessary, comparative information has been reclassified and repositioned for consistency
with current year disclosures. A prior period adjustment of $116,829 was recognised to retained
earnings in relation to loss on foreign exchanges contracts not recognised in the prior year.
(w)
Share based payments
Equity settled transactions
The Group provides benefits to the directors and senior executives in the form of share
options/performance rights under Harris Technology Group’s Long Term Incentive Plan. These are
equity settled transactions under Australian Accounting Standards.
The cost of these equity-settled transactions with directors and senior executives is measured by
reference to the fair value of the equity instruments at the date when the grant is made using an
appropriate valuation model. The cost is recognised together with a corresponding increase in other
capital reserve in equity over the period in which the performance and / or service conditions are
fulfilled in employee benefits expense. The cumulative expense recognised for equity-settled
transactions at each reporting date until the vesting date reflects the extent to which the vesting
period has expired and the Group’s best estimate of the number of equity instruments that will
ultimately vest.
In valuing equity-settled transactions, no account is taken of any non-market vesting conditions.
The charge to the statement of comprehensive income for the period is the cumulative amount as
calculated less the amounts already charged in previous periods. There is a corresponding entry to
equity.
No expense is recognised for awards that do not ultimately vest, except for equity-settled
transactions for which vesting are conditional upon a market or non-vesting condition. These are
treated as vesting irrespective of whether or not the market or non-vesting condition is satisfied,
provided that all other performance and / or service conditions are satisfied.
(x)
Earnings per share
Basic earnings per share is calculated as net profit attributable to members of the parent divided by
the weighted average number of ordinary shares.
Diluted earnings per share is calculated as net profit attributable to members of the parent, divided
by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted
for any bonus element.
3.
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group’s principal financial instruments comprise cash, receivables and other receivables,
payables and other payables.
The Group manages its exposure to key financial risks, including interest rate risk in accordance with
the Group’s financial risk management policy. The objective of the policy is to support the delivery
of the Group’s financial targets whilst protecting future financial security.
The main risks arising from the Group’s financial instruments are interest rate risk, currency risk, credit
risk and liquidity risk. The Group uses different methods to measure and manage different types of
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risks to which it is exposed. These include monitoring levels of exposure to interest rate risk and
assessments of market forecasts for interest rates. Derivative financial instruments are used by the
Group to hedge exposure to exchange rate risk associated with foreign currency transactions. Ageing
analyses and monitoring of specific credit allowances are undertaken to manage credit risk. Liquidity
risk is monitored through the development of future rolling cash flow forecasts.
The Board reviews and agrees policies for managing each of these risks as summarised below.
Primary responsibility for identification and control of financial risks rests with the Board. The Board
reviews and agrees policies for managing each of the risks identified below, including the setting of
limits for interest rate risk, hedging limits, credit allowances and future cash flow forecast projections.
Risk exposures and responses
Interest rate risk
The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s
debt obligations with the floating interest rate. At reporting date, the Group had the following
financial instruments exposed to Australian variable interest rate risk.
2018
$
2017
$
Financial assets
Cash and cash equivalents (interest bearing)
600,215
111,199
Financial liabilities
Interest bearing liabilities – floating rate (current)
(2,985,481)
(2,155,504)
Interest bearing liabilities – fixed rate (current)
(1,062,500)
(2,200,377)
Interest bearing liabilities – fixed rate (non-current)
(4,158,500)
(4,251,422)
Net exposure
(7,606,266)
(8,496,104)
The Group constantly analyses its interest rate exposure. Within this analysis consideration is given
to potential renewals of existing positions, alternative financing and the mix of fixed and variable
interest rates.
The following sensitivity analysis is based on the interest rate risk exposures in existence at reporting
date:
At 30 June 2018, if interest rates had moved, as illustrated in the table below, with all other variables
held constant, post-tax profit / (loss) and other comprehensive income would have been affected as
follows:
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Post Tax Profit/(Loss) ($)
Other Comprehensive
Income ($)
Higher / (Lower)
Higher / (Lower)
2018
2017
2018
2017
Consolidated
+1% (100 basis points)
(76,062)
(84,961)
- 1% (100 basis points)
(76,062)
84,961
-
-
-
-
The movements in post-tax profit / (loss) and other comprehensive income are due to a larger net
exposure as at 30 June 2018. The sensitivity is lower in 2018 than in 2017 as a result of this decreased
net exposure.
Credit risk
Credit risk arises from the financial assets of the Group, which comprise cash and cash equivalents
and trade and other receivables. The Group’s exposure to credit risk arises from potential default of
the counterparty, with a maximum exposure equal to the carrying amount of these instruments.
Exposure at balance date is addressed in each applicable note.
It is the Group’s policy that all customers who wish to trade on credit terms are assessed as to
creditworthiness, including an assessment of their independent credit rating, financial position, past
experience and industry reputation. Risk limits are set for individual customers. Insurance policies
are in place to cover insured receivables and losses occurring due to insolvency or protracted default
of insured debtors.
In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s
exposure to bad debts is not significant.
Foreign currency risk
The Group’s transactions are carried out mainly in AUD and USD. The Group enters into forward
exchange contracts to buy specified amounts of foreign currencies in the future at stipulated rates.
The objective in entering into the foreign exchange contracts is to protect the economic entity
against unfavourable exchange rate movements for the purchases undertaken in foreign currencies.
The Group’s risk management policy is to hedge between 25% and 50% of anticipated cash flows
(purchase of inventory) in US Dollars for the subsequent 12 months. At 30 June 2018, 50% of US
Dollar projected FY18 inventory purchases were hedged.
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The Group’s exposure to foreign currency risk at the end of reporting period, expressed in Australian
dollars, was as follows:
Forward/Option exchange contracts
Buy US dollars
2018
$
2017
$
1,861,470
7,862,070
1,861,470
7,862,070
The carry amount of the Group’s foreign currency denominated financial assets and financial
liabilities at reporting date, expressed in Australian dollars, were as follows:
Financial assets
Cash - US dollars
Financial liabilities
Loans - US dollars
Net exposure
2018
$
2017
$
54
26,177
(62,500)
(891,003)
(62,446)
(864,826)
At 30 June 2018, had the Australian dollar moved, with all other variables held constant, pre-tax profit
/ (loss) would have been affected as follows:
Consolidated
+5% (500 basis points)
- 5% (500 basis points)
Pre Tax Profit/(Loss) ($)
Higher / (Lower)
2018
2017
36,720
41,182
(36,720)
(45,517)
The percentage change is the expected overall volatility of the significant currency, which is based
on management’s assessment of reasonable possible fluctuations taking into consideration
movements over the last 6 months each year and the spot rate at each reporting date. The actual
foreign exchange gain for the year ended 30 June 2018 was $41,316 (2017: foreign exchange loss
$25,165).
Liquidity risk
The Group’s objective is to maintain a balance between continuity of funding and flexibility through
the use of private equity facility and equity raisings.
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At 30 June 2018, 70.4% of the Group’s financial liabilities will mature in less than one year (2017:
70.1%).
The table below reflects all contractually fixed payables and receivables for settlement, repayments
and interest resulting from recognised financial assets and liabilities. The respective undiscounted
cash flows for the respective upcoming fiscal periods are presented. Cash flows for financial assets
and liabilities without fixed amount or timing are based on the conditions existing at 30 June 2018.
The remaining contractual maturities of the Group’s financial assets and liabilities are:
Year ended 30 June 2018
($)
Financial assets
< 1 year
1-2 years
2-5 years
> 5 years
Total
Cash and cash equivalents
1,783,506
Trade and other receivables
4,719,693
6,503,199
Financial liabilities
Trade and other payables
7,906,974
-
-
-
-
Loan and interest payable
4,097,840
69,813
Directors’ loans*
-
4,088,686
12,004,814
4,158,499
Net maturity
(5,501,615)
4,158,499
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,783,506
4,719,693
6,503,199
7,906,974
4,167,653
4,088,686
16,163,313
(9,660,114)
*The repayments of directors’ loans have been irrevocably deferred for a period through to 30 June 2019
Year ended 30 June 2017
($)
Financial assets
< 1 year
1-2 years
2-5 years
> 5 years
Total
Cash and cash equivalents
2,219,264
Trade and other receivables
5,979,589
8,198,853
Financial liabilities
Trade and other payables
8,923,541
-
-
-
-
Loan and interest payable
4,355,881
113,117
-
-
-
-
-
Directors’ loans
-
-
4,138,305
13,279,422
113,117
4,138,305
Net maturity
(5,080,569)
(113,117)
(4,138,305)
-
-
-
-
-
-
-
-
2,219,264
5,979,589
8,198,853
8,923,541
4,468,998
4,138,305
17,530,844
(9,331,991)
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Maturity analysis of financial assets and liabilities based on management’s expectation
Management’s expectation reflects a balanced view of cash inflows and outflows. The Group’s assets
mainly consist of cash and trade receivables with the liabilities consisting of trade payables from the
ongoing operations of the business. To monitor existing financial assets and liabilities as well as to
enable an effective controlling of funding for the business, the Group has established risk that reflects
expectations of management in terms of expected settlement of financial assets and liabilities.
All financial assets and most liabilities are payable within 12 months of reporting date. Accordingly,
the book value of each liability is equivalent to its fair value.
The liabilities due after 12 months are loans with fixed interest rate. The carrying values of these loans
are equivalent to their fair value.
4.
SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS
The preparation of the Group’s consolidated financial statements requires management to make
judgements, estimates and assumptions that affect the reported amounts of revenues, expenses,
assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities.
Uncertainty about these assumptions and estimates could result in outcomes that require a material
adjustment to the carrying amount of assets or liabilities affected in future periods.
Judgements
In the process of applying the Group’s accounting policies, management has made the following
judgements, which have the most significant effect on the amounts recognised in the consolidated
financial statements:
Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the
reporting date, that have a significant risk of causing a material adjustment to the carrying amount
of assets and liabilities within the next financial year, are described below. The Group based its
assumptions and estimates on parameters available when the consolidated financial statements were
prepared. Existing circumstances and assumptions about future developments, however, may change
due to market changes or circumstances arising beyond the control of the Group. Such changes are
reflected in the assumptions when they occur.
Impairment of goodwill and intangible assets
The fair value of assets acquired is initially estimated by the Group taking into consideration all
available information at the acquisition date. The carrying value of goodwill and intangible assets
has been impaired due to the significant losses that arose on the previous acquisition. To determine
the value in use of the tested CGUs, cash flow forecasts with an appropriate discount rate have been
prepared.
Provision for impairment of inventories
The provision for impairment of inventories assessment requires a degree of estimation and
judgement. The level of the provision is assessed by taking into account the recent sales experience,
the ageing of inventories and other factors that affect inventory obsolescence.
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Provision for impairment of receivables
The provision for impairment of receivables assessment requires a degree of estimation and
judgement. The level of provision is assessed by taking into account the recent sales experience, the
ageing of receivables, historical collection rates and specific knowledge of the individual debtor's
financial position.
Useful lives of depreciable assets
The Group determines the estimated useful lives and related depreciation and amortisation charges
for its property, plant and equipment and intangible assets with finite lives. The useful lives could
change significantly as a result of technical innovations or some other event. The depreciation and
amortisation charge will increase where technical obsolescence or non-strategic assets that have
been abandoned or sold will be written off or written down.
5.
PARENT ENTITY INFORMATION
Information relating to Harris Technology Group Ltd – Parent ($)
Current assets
Non-Current Asset
Total assets
Current liabilities
Non-Current Liabilities
Total liabilities
Issued capital
Accumulated losses
Share based payments reserve
Total shareholders’ equity
Loss after tax of the parent entity
2018
7,272
2017
76,534
1,670,706
9,760,016
1,677,978
9,836,550
(150,567)
(332,250)
(3,509,922)
(1,307,500)
(3,660,489)
(1,639,750)
8,839,744
8,693,445
(10,822,256)
(496,645)
-
-
(1,982,512)
8,196,800
(10,325,611)
(496,645)
Total comprehensive (loss) of the parent entity
(10,325,611)
(496,645)
There are no guarantees entered into by the parent entity in relation to the debts of its subsidiary.
The parent entity has no contingent liabilities. The parent entity has no contractual commitments for
the acquisition of property, plant or equipment.
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6.
REVENUE
($)
Revenue from operating activities
Sale of goods
Total sales revenue
($)
Other income
Bank interest received
Gain on Debt Forgiveness
Sale of non-current asset
Total other income
7.
EXPENSES
($)
Bad and doubtful debts
Bad debts
Doubtful bad debts
Total bad and doubtful debts
Depreciation
Office and warehouse equipment
Improvement
Computer equipment
Motor vehicles
Total depreciation
Amortisation
Software development
Total amortisation
Impairment expense
Goodwill
Intangible assets
Total impairment expense
2018
2017
45,656,903
51,068,575
45,656,903
51,068,575
2018
2017
1,149
2,157
115,620
-
(5,568)
8,114
111,201
10,271
2018
2017
66,486
(32,250)
(14,145)
42,355
52,341
10,105
47,888
29,321
13,981
19,342
55,492
26,775
12,457
21,956
110,533
116,680
22,028
13,353
22,028
13,353
-
-
-
824,482
2,293,000
3,117,482
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Finance costs
Interest expense – overseas
Interest expense – local
Total finance costs
8.
INCOME TAX
Current tax
Deferred tax
Income tax (expense) / benefit
A reconciliation between tax expense and the product of
accounting profit/(loss) before income tax multiplied by
the Group’s applicable income tax rate is as follows:
Loss before income tax expense from continuing
operations
Loss before income tax expense from discontinued
operations
At the Group’s statutory income tax rate of 30% (2017:
30%)
Tax effect amounts which are not deductible / (taxable)
in calculating taxable income:
Impairment expense
Others
Deferred tax assets not recognised
Income tax (expense) / benefit
10,396
217,998
366,265
163,260
376,661
381,258
2018
2017
$
-
-
-
$
-
-
-
(2,062,064)
(2,846,881)
-
(214,011)
(2,062,064)
(3,060,892)
(618,619)
(918,268)
-
-
618,619
-
935,245
(38,238)
21,261
-
Unused tax losses for which no deferred tax asset
has been recognised
3,742,361
3,123,742
*The comparative amounts disclosed have been amended from the prior year’s report to reflect comparative
amounts for companies joining the tax consolidated group on 1 July 2016.
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Tax Loss Deferred Tax Asset recognition
Deferred tax assets will only be recognised if:
a) future assessable income is derived of a nature and amount sufficient to enable the benefit
from the deductions to be realised;
b) the conditions for deductibility imposed by tax legislation are complied with; and
c) no changes in tax legislation adversely affect the consolidated entity in realising the benefit.
Unused tax losses for which no deferred tax asset has been recognised comprise current year
estimated tax losses only and are not yet confirmed.
Tax losses pre 2011 are not recognised because they are not expected to meet the continuity of
ownership or same business tests.
Unrecognised temporary differences
At 30 June 2018 there are no temporary differences recognised in the consolidated financial position,
on the basis of an assessment that recovery through future taxable income of those amounts is not
probable at 30 June 2018 (2017: nil).
9.
EARNINGS PER SHARE
Basic earnings/(loss) per share is calculated by dividing net profit/(loss) for the year attributable to
ordinary equity holders of the parent by the weighted average number of ordinary shares
outstanding during the year.
Diluted earnings/(loss) per share is calculated by dividing the net profit/(loss) for the year attributable
to ordinary equity holders of the parent by the weighted average number of ordinary shares
outstanding during the year plus the weighted average number of ordinary shares that would be
issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.
The following reflects the income and share data used in the calculations of basic and diluted
earnings per share:
Basic and diluted (loss)/earnings per share (cents)
Continuing operations
Discontinued operation
Basic and diluted (loss)/earnings per share from total
comprehensive income
2018
2017
(1.46)
-
(2.2)
(0.17)
(1.46)
(2.37)
Total comprehensive (loss)/profit for the year ($)
(2,062,064)
(3,060,892)
Weighted average number of ordinary shares used in calculating basic
earnings per share
140,811,756
129,537,531
Weighted average number of ordinary shares used in calculating
diluted earnings per share
140,811,756
129,537,531
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10.
CASH AND CASH EQUIVALENTS
Cash at bank and on hand
2018
$
2017
$
1,783,506
2,219,264
1,783,506
2,219,264
Cash at bank earns interest at floating rates based on daily bank deposit rates as disclosed in note
3.
Reconciliation of net (loss) / profit after tax to net operating
cash flows
Net loss after tax
Non-cash items
Depreciation and amortisation
Finance costs
Gain on sale of non-current assets
Share based payment
Impairment expense
2018
$
2017
$
(2,060,064)
(3,060,892)
132,560
264,729
-
-
146,299
104,062
(8,314)
9,863
-
3,117,482
Changes in operating assets and liabilities
(Increase) / decrease in trade and other receivables
1,143,067
1,068,667
(Increase) / decrease in prepayments and deposits
(51,098)
291,864
(Increase) / decrease in inventories
896,684
(872,524)
Increase / (decrease) in trade and other payables
(975,718)
(463,748)
Increase / (decrease) in employee benefit liabilities
(58,269)
(83,190)
Increase / (decrease) in onerous contract provision
-
(564,751)
Net cash flows provided by/(used in) operating activities
(828,539)
(196,752)
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11.
TRADE AND OTHER RECEIVABLES
($)
Trade receivables
Allowance for impairment loss
Other receivables
2018
2017
4,675,551
6,034,135
-
(64,878)
44,141
10,332
4,719,693
5,979,589
Trade receivables are non-interest bearing.
Other receivables are non-interest bearing and have a repayment terms between 30 to 90 days.
For terms and conditions relating to related party receivables refer to note 26.
Allowance for impairment loss
Trade receivables are non-interest bearing and are generally on payment terms between 30 to 90
days. The Group’s trade and other receivables have been reviewed for non-impairment. At 30 June
2018, trade receivables of the Group with a nominal value of nil (2017: $64,878) were impaired.
The balance of trade and other receivables past due and not impaired asset is $539,565 (2017:
$688,698).
Fair value and credit risk
Due to the short term nature of these receivables, their carrying value has been assessed to
approximate their fair value.
The maximum exposure to credit risk is the fair value of receivables. Collateral is not held as security,
nor is it the Group’s policy to transfer (on-sell) receivables to special purpose entities.
Foreign exchange and interest rate risk
Detail regarding foreign exchange and interest rate risk exposure is disclosed in note 3.
12.
INVENTORIES
($)
Inventories
Provision for stock obsolescence
2018
2017
6,341,556
7,340,757
-
(102,517)
6,341,556
7,238,240
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13.
PREPAYMENTS AND DEPOSITS
($)
Prepayments
Deposits
14.
PROPERTY, PLANT AND EQUIPMENT
2018
2017
133,688
17,990
82,590
17,990
151,678
100,580
Office and warehouse
equipment
$
Improvement
$
Computer
$
Motor
vehicles
$
Total
$
Gross carrying amount
At 1 July 2017
380,042
532,700
506,556
267,966
1,687,264
Additions
Business assets acquired
-
-
-
-
6,000
-
-
-
6,000
-
At 30 June 2018
380,042
532,700
512,556
267,966
1,693,264
Depreciation and impairment
At 1 July 2017
(175,705)
(84,145)
(480,781)
(101,723)
(842,354)
Depreciation charge for the year
(47,708)
(29,321)
(13,982)
(27,062)
(118,073)
At 30 June 2018
(223,413)
(113,466)
(494,763)
(128,785)
(960,427)
Net carrying amount
At 30 June 2018
156,630
419,234
17,793
139,181
732,838
At 30 June 2017
204,337
448,555
25,775
166,243
844,910
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15.
TRADE AND OTHER PAYABLES
Trade and other payables - current ($)
2018
2017
Trade payables
Other payables
7,279,230
8,370,707
627,743
552,834
7,906,974
8,923,541
Terms and conditions of the above financial liabilities:
(i)
(ii)
Trade payables are non-interest bearing and are normally settled on 30 days EOM terms.
Other creditors are non-interest bearing and are normally payable within 30 and 90 days
Fair value
Due to the short term nature of these payables, their carrying value is assumed to approximate their
fair value.
Foreign exchange and interest rate risk
Detail regarding foreign exchange and interest rate risk exposure is disclosed in note 3.
16.
FINANCIAL LIABILITY
($)
At 1 July 2017
Secured
Trade finance facility
Equipment finance
Unsecured
Loan and interest payable
Directors’ loans (Note 20)
Fair value at 30 June 2018
Current
Non-current
Total
2018
2017
2,985,481
2,155,504
162,976
-
-
1,062,500
2,150,518
4,088,686
4,138,305
8,256,340
8,607,303
4,097,840
4,355,629
4,158,500
4,251,422
8,256,340
8,607,303
The payments of principal and interest on all directors’ loans have been deferred for a period through
to 30 June 2020.
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Trade finance facility
A subsidiary of the group, Anyware Corporation Pty Ltd, has a trade finance facility agreement with
Westpac to facilitate the purchase of goods from local or overseas suppliers. The facility has a limit
of $4 million with drawdowns on the facility repayable within 180 days.
($)
Trade finance facility
Used at the reporting date
Unused at the reporting date
Covenants
2018
2017
4,000,000
4,000,000
2,985,481
2,155,504
1,014,519
1,844,496
The Westpac facility has the following covenants which are measured on a half yearly basis at June
and December on the results of Anyware Corporation Pty Ltd.
(i) Interest Cover Ratio not less than 2.5 times; where Interest Cover Ratio is EBIT / Gross Interest
Expense. As at 30 June 2018, this covenant was breached.
(ii) Capital Ratio not less than 25%; where Capital Ratio is [[Tangible Assets less Total Liabilities]/Total
Tangible Assets] x 100.
As disclosed in Note 24, the Westpac trade finance facility has been terminated and the
company will finalise the repayment of the facility in October 2018.
Security
The Westpac trade finance facility is secured against all assets and undertakings of Anyware
Corporation Pty Ltd and personal assets of Managing Director Garrison Huang.
The hire purchase facility is secured against the asset being financed.
No other financing facilities or liabilities available for the Group as of the 30 June 2018.
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17.
EMPLOYEE BENEFIT LIABILITIES
($)
Current
Annual leave
Long service leave
Non-current
Long service leave
18.
CONTRIBUTED EQUITY
Issued and paid up capital
($)
Ordinary shares
Ordinary shares fully paid
Listed options
Contributed equity
Movements in ordinary
shares on issue
Opening balance
Shares issued during the year:
Share issued under LTIP
2018
2017
258,226
291,541
207,194
171,247
20,447
40,498
2018
2017
7,595,915
6,706,411
-
-
7,595,915
6,706,411
Number of Shares
$
138,476,998
6,706,411
84,000
62,299
Directors’ fee – share based payment
678,012
Issue of ordinary shares upon conversion of an outstanding loan
amount of $742,204.31 owing by HT8 to Blooming Star Consultants
Limited
14,844,086
742,204
Closing balance
153,999,096
7,594,914
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Terms and conditions of ordinary shares
Ordinary shares have the right to receive dividends as declared and, in the event of winding up the
Company, to participate in the proceeds from the sale of all surplus assets in proportion to the
number and amounts paid up on shares held. Ordinary shares entitle their holder to one vote, either
in person or by proxy, at a meeting of the Company.
Capital management
The primary objective of the Group’s capital management is to ensure that it maintains a strong
credit rating and healthy capital ratios to support its business and maximise the shareholder’s value.
The Group manages its capital structure and makes adjustments to it in light of changes in economic
conditions. To maintain or adjust the capital structure, the Group may return capital to shareholders
or issue new shares. The Group monitors capital using a gearing ratio, which is net debt divided by
total capital plus net debt.
19.
ACCUMULATED LOSSES
($)
2018
2017
Balance at beginning of financial year
(8,335,930)
(5,275,038)
Dividend paid
-
-
Net profit/(loss) for the year
(2,062,064)
(3,060,892)
Balance at end of financial year
(10,514,822)
(8,335,930)
20.
DIRECTORS’ LOANS
During the FY16 and FY17, the group has executed number of borrowing from directors to fund the
three merge and acquisitions and provide a source of working capital. The loan balances as of 30
June 2018 are set out as below.
($)
2018
2017
Name of director Entity/Shareholder
Garrison Huang
Australian PC Accessories Pty Ltd
3,968,686
4,018,305
Bob Xu
AZA International (Aust) Pty Ltd
120,000
120,000
4,088,686
4,138,305
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21.
COMMITMENTS
The Group leases various offices under non-cancellable operating leases expiring within one to four
years. The leases have various terms, escalation clauses and renewal rights. On renewal the terms of
the leases are renegotiated.
The Group entered into a sublease contract on 30 January 2018 in respect of the premise at
Alphington, VIC.
Operating lease commitments ($)
2018
2017
Operating leases contracted
Within one year
After one year but not more than five years
More than five years
22. ONEROUS CONTRACT PROVISION
556,770
789,803
685,883
1,313,315
-
-
1,242,653
2,103,118
AASB 137 para 66 - 69 defines an onerous contract as a contract in which the unavoidable costs of
meeting the obligations under the contract exceed the economic benefits expected to be received
under it. The unavoidable costs under a contract reflect the least net cost of exiting from the contract,
which is the lower of the cost of fulfilling it and any compensation or penalties arising from failure
to fulfil it.
Onerous contract provision ($)
Within one year
After one year but not more than five years
More than five years
2018
-
-
-
-
2017
45,623
-
-
45,623
23. CONTINGENT ASSETS AND LIABILITIES
The Company had no contingent assets and no contingent liabilities as at 30 June 2018 (2017: nil).
24.
SIGNIFICANT EVENTS AFTER THE BALANCE DATE
The consolidated entity had the following events after balance date for disclosures:
On 11 July 2018, the trade finance facility with Westpac was terminated. The company will finalise
the repayment of the facility in October 2018 utilising the proceeds from the sale of the assets and
liabilities of the Anyware business.
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On 31 August 2018, the company announced that it signed a Business Asset Purchase Agreement
to sell Anyware to Leader Computers. The following are highlights of the deal:
The purchaser will acquire majority of the inventory held by Anyware estimated to be $4
million to $4.5 million, along with the following estimated values; account receivables of
$3.5 million; account payables of $4.9 million; and a goodwill value of $250,000.
The purchaser will take over most of the employees from Anyware including their employee
provisions estimated to be $136,000.
The purchaser will acquire Anyware and related intellectual property.
The purchaser will take over the Anyware lease in NSW.
Apart from the matters detailed above, no other matter or circumstance has arisen since 30 June
2018 that has significantly affected, or may significantly affect the consolidated entity’s operations,
the results of those operations, or the consolidated entity’s state of affairs in future financial years.
25.
AUDITOR’S REMUNERATION
($)
2018
2017
Amounts received or due and receivable by RSM Australia Partners
An audit or review of the financial report of the entity and any other
entity in the consolidated entity paid to RSM Australia Partners
55,000
48,000
55,000
48,000
26.
RELATED PARTY DISCLOSURE
(a) Subsidiary
The consolidated financial statements include the financial statements of Harris Technology Group
Limited and the subsidiaries listed in the following table:
Name of entity
Anyware Corporation Pty Ltd
Harris Technology Pty Ltd
AER Group Pty Ltd
Audion Innovision Pty Ltd
Country of
Incorporation
Australia
Australia
Australia
Australia
% of Equity
interest
2018
2017
100
100
100
100
100
100
100
100
*The subsidiary entity has been deregistered on 16 December 2015
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(b) Ultimate parent
The consolidated financial statements include the financial statements of Harris Technology Group
Limited and its controlled entities. Harris Technology Group Limited is the ultimate parent company.
(c) Inter-group transactions
Loans
The inter-group entities have provided or received intercompany loans within the group for working
capitals. The intercompany loans are repayable to the inter-group entities at call and no interest is
payable. At 30 June 2018, those loans have been eliminated in the balance sheet.
(d) Other related party transactions
During the financial year ended 30 June 2018, there were a total of $4,088,686 Directors’ loans
reported by the Group, refer to note 20 (2017: $4,138,305).
All Transactions were made on normal commercial terms and conditions and at market rates unless
otherwise stated.
Refer to 7d. Of Remuneration Report for more details relating to other related party transactions.
27.
KEY MANAGEMENT PERSONNEL
The total remuneration paid to KMP of the company and the Group during the year are as follows:
($)
Short-term employee benefits
Post-employment benefits
Share based payments
2018
2017
228,387
249,451
9,296
-
14,866
79,863
237,684
344,180
Short-term employee benefits
These amounts include fees and benefits paid to the non-executive Chair and non-executive
directors as well as all salary, paid leave benefits, fringe benefits and cash bonuses awarded to
executive directors and other KMP.
Post-employment benefits
These amounts are superannuation contributions made during the year.
Share-based payments
These amounts represent the expense related to the participation of KMP in equity-settled
benefit schemes as measured by the fair value of the options, rights and shares granted on grant
date.
Further information in relation to KMP remuneration can be found in the Directors' Report.
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28.
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 (who are identified as the Chief Operating Decision Markers (CODM))
in assessing the performance of the Group, and determining investment requirements. The operating
segments are based on the manner in which services are provided to the market.
The Group consists of one business segment which operates in one geographical area, being
Australia.
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Directors’ Declaration
(For the Financial Year Ended 30 June 2018)
In accordance with a resolution of the directors of Harris Technology Group Limited and its controlled
entities, I state that:
1.
In the opinion of the directors:
(a)
the financial statements and notes of Harris Technology Group Limited and its
controlled entities for the financial year ended 30 June 2018 are in accordance with
the Corporations Act 2001, including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 30
June 2018 and of its performance for the year ended on that date; and
(ii) complying with Accounting Standards and the Corporations Regulations 2001;
(b)
(c)
the financial statements and notes also comply with International Financial Reporting
Standards as disclosed in Note 2(b); and
There are reasonable grounds to believe that the Company will be able to pay its debts
as and when they become due and payable.
2. This declaration has been made after receiving the declarations required to be made to the
directors by the chief executive officer in accordance with section 295A of the Corporations
Act 2001 for the financial year ended 30 June 2018.
On behalf of the Board
Andrew Plympton
Non-Executive Chairman
Melbourne, 27 September 2018
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INDEPENDENT AUDITOR’S REPORT
To the Members of Harris Technology Group Limited
Opinion
RSM Australia Partners
Level 21, 55 Collins Street Melbourne VIC 3000
PO Box 248 Collins Street West VIC 8007
T +61 (0) 3 9286 8000
F +61 (0) 3 9286 8199
www.rsm.com.au
We have audited the financial report of Harris Technology Group 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 and other 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:
(i) 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
(ii) 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 confirm that the independence declaration required by the Corporations Act 2001, which has been given to
the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor's
report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Material Uncertainty Related to Going Concern
We draw attention to Note 1(c) in the financial report, which indicates that the Group incurred a net loss of
$2,062,064 and had net cash outflows from operating activities of $828,539 during the year ended 30 June 2018
and, as of that date, the Group had net liabilities of $2,919,908. As stated in Note 1(c), these events or conditions,
along with other matters as set forth in Note 1(c), indicate that a material uncertainty exists that may cast significant
doubt on the Group's ability to continue as a going concern. Our opinion is not modified in respect of this matter.
THE POWER OF BEING UNDERSTOOD
AUDIT | TAX | CONSULTING
RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the
RSM network is an independent accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction.
RSM Australia Partners ABN 36 965 185 036
Liability limited by a scheme approved under Professional Standards Legislation
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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 our audit addressed this matter
Recognition of Revenue
Refer to Note 1(f) in the financial statements
The Group earns revenue through online retailing.
Revenue was considered a key audit matter
because it is the most significant account balance in
the consolidated statement of comprehensive
income.
Revenue from the sale of goods is recognised when
the risks and rewards of ownership have been
transferred to the customer, which generally occurs
at the point of delivery. However, complexity arises
due to direct drop shipping arrangements where the
inventory is shipped to the customer directly from the
supplier and these arrangements were assessed to
have an increased risk associated with cut-off.
Stock Obsolescence
Refer to Note 12 in the financial statements
The consolidated entity’s inventory balance, as
disclosed in Note 12, consists primarily of finished
goods of various technology products and solutions.
Inventory is valued at the lower of cost or net
the net
realisable value. The assessment of
realisable value of inventory requires a significant
includes
degree of management
for
concerning
assumptions
obsolescence, as well as future market conditions
based on changing customer needs and market
trends.
It
provision
judgment.
the
On the basis of the factors set out above, the
valuation of inventory was considered to be a key
audit matter.
Our audit procedures in relation to the cut-off of
revenue included:
• Assessing whether
revenue
recognition policies were in compliance with
Australian Accounting Standards;
the Group’s
• Evaluating and testing the operating effectiveness
of management’s controls related to revenue
recognition; and
• Assessing sales transactions before and after
year-end to ensure that revenue is recognised in
the correct period.
Our audit procedures in relation to the existence and
valuation of inventory included:
• Evaluating management
assumptions
provision
and
estimates
for
to
obsolescence through analysis of historical sales
levels by inventory product from the date the
product was purchased
in conjunction with
assessing the quantity of products;
applied
the
• Assessing the company’s application of its policy
for determining the provision for obsolescence;
• Performing analytical procedures in respect of
inventory holdings and inventory turnover; and
• Testing the sales prices of inventory to ensure
inventory is not being sold at less than cost.
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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 the
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.
A further description of our responsibilities for the audit of the financial report is located at the Auditing and
Assurance Standards Board website at: www.auasb.gov.au/auditors_responsibilities/ar2.pdf. This description
forms part of our auditor's report.
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Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in the directors' report for the year ended 30 June 2018.
In our opinion, the Remuneration Report of Harris Technology Group 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.
RSM AUSTRALIA PARTNERS
J S CROALL
Partner
Dated: 27 September 2018
Melbourne, Victoria
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Additional Information
In accordance with ASX Listing Rule 4.10, the Company provides the following information to shareholders not
elsewhere disclosed in this Annual Report. The information provided is current as at 5 September 2018
(Reporting Date).
Corporate Governance Statement
The Company’s Directors and management are committed to conducting the Group’s business in an ethical
manner and in accordance with the highest standards of corporate governance. The Company has adopted
and substantially complies with the ASX Corporate Governance Principles and Recommendations (Third
Edition) (Recommendations) to the extent appropriate to the size and nature of the Group’s operations.
The Company has prepared a statement which sets out the corporate governance practices that were in
operation throughout the financial year for the Company, identifies any Recommendations that have not been
followed, and provides reasons for not following such Recommendations (Corporate Governance Statement).
In accordance with ASX Listing Rules 4.10.3 and 4.7.4, the Corporate Governance Statement will be available
for review on Harris Technology Group Limited’s website (www.ht8.com.au/investor-relations/corporate-
governance), and will be lodged together with an Appendix 4G with ASX at the same time that this Annual
Report is lodged with ASX.
The Appendix 4G will particularise each Recommendation that needs to be reported against by Harris
Technology Group Limited, and will provide shareholders with information as to where relevant governance
disclosures can be found.
The Company’s corporate governance policies and charters are all available on Harris Technology Group
Limited’s website (www.ht8.com.au/investor-relations/corporate-governance).
Substantial holders
As at the Reporting Date, the names of the substantial holders of Harris Technology and the number of equity
securities in which those substantial holders and their associates have a relevant interest, as disclosed in
substantial holding notices given to Harris Technology, are as follows:
Holder of Equity Securities
Class of Equity Securities
Number of Equity Securities
held
% of total, issued
securities capital in
relevant class
Australian PC
Accessories Pty Ltd
Blooming Star
Consultants Limited
AZA International (Aust)
Pty Ltd
Ordinary Shares
80,110,489
52.02%
Ordinary Shares
14,844,086
9.64%
Ordinary Shares
8,638,903
Welland Industrial Co Ltd
Ordinary Shares
8,216,242
5.61%
5.34%
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Number of holders
As at the Reporting Date, the number of holders in each class of equity securities:
Class of Equity Securities
Fully Paid Ordinary Shares
eStore vendor shares held in voluntary escrow until further notice
Performance rights vesting on 5 July 2020
Performance Rights vesting on 12 September 2020
Number of holders
2,107
2
13
1
Voting rights of equity securities
The only class of equity securities on issue in the Company which carries voting rights is ordinary shares.
As at the Reporting Date, there were 2109 holders of a total of 153,999,096 ordinary shares of the Company.
At a general meeting of Harris Technology, every holder of ordinary shares present in person or by proxy,
attorney or representative has one vote on a show of hands and on a poll, one vote for each ordinary share
held. On a poll, every member (or his or her proxy, attorney or representative) is entitled to vote for each fully
paid share held and in respect of each partly paid share, is entitled to a fraction of a vote equivalent to the
proportion which the amount paid up (not credited) on that partly paid share bears to the total amounts paid
and payable (excluding amounts credited) on that share. Amounts paid in advance of a call are ignored when
calculating the proportion.
Distribution of holders of equity securities
The distribution of holders of equity securities on issue in the Company as at the Reporting Date is as follows:
Distribution of ordinary shareholders
Holdings Ranges
Holders
Total Units
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – 9,999,999,999
1,495
310
100
152
50
169,893
771,535
762,180
5,414,800
%
0.11
0.50
0.50
3.54
145,960,224
95.35
Totals
2,107
153,078,632
100.00
Distribution of performance rights holders
Holdings Ranges
1 – 1,000
1,001 – 5,000
Holders of
performance rights
vesting 5 July 2020
Holders of
performance rights
vesting 5 July 2020
-
-
-
-
%
-
-
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-
-
-
-
%
-
-
-
-
5,001 – 10,000
10,001 – 100,000
100,001 – 9,999,999,999
Totals
-
13
-
13
-
1
-
1
Distribution of escrowed shares
Holdings Ranges
Holders
Total Units
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – 9,999,999,999
Totals
-
-
-
-
2
2
-
-
-
-
920,464
920,464
100
100
Less than marketable parcels of ordinary shares (UMP Shares)
The number of holders of less than a marketable parcel of ordinary shares based on the closing market price
at the Reporting Date is as follows:
Total Securities
UMP Shares
UMP Holders
% of issued shares held by
UMP holders
153,078,632
2,493,830
1,959
1.62
Voluntary escrow
Class of restricted securities
Type of restriction
Number of securities
End date of escrow period
Ordinary Shares
Voluntary escrow
920,464
Until further notice
Unquoted equity securities
The number of each class of unquoted equity securities on issue, and the number of their holders are as
follows:-
Class of restricted securities
Number of unquoted
Equity Securities
Number of Holders
Performance Rights
880,000
14
There are no person who hold 20% or more of equity securities in each unquoted class other than under an
employee incentive scheme.
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On-market buyback
The Company is not currently conducting an on-market buy-back.
On-market purchase of securities under employee incentive scheme
No securities were purchased on-market during the reporting period under or for the purposes of an employee
incentive scheme; or to satisfy the entitlements of the holders of options or other rights to acquire securities
granted under an employee incentive scheme.
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Twenty largest shareholders
The Company only has one class of quoted securities, being ordinary shares. The names of the 20 largest
holders of ordinary shares, and the number of ordinary shares and percentage of capital held by each holder
is as follows:
Holder Name
AUSTRALIAN PC ACCESSORIES PTY LTD
Balance as at
Reporting Date
%
80,110,489
52.020%
BLOOMING STAR CONSULTANTS LIMITED
14,844,086
9.639%
AZA INTERNATIONAL (AUST) PTY LTD
8,638,903
5.610%
WELLAND INDUSTRIAL CO LTD
CHA SHIN CHI INVESTMENT CO LTD
PING SHEN
MISS PING YU
8,216,242
5.335%
5,488,969
3.564%
4,545,455
2.952%
4,136,097
2.686%
TIGER DOMAINS PTY LTD
1,780,467
1.156%
MR GUO QIANG XIA
MISS XIAOFEI XU
1,560,602
1.013%
1,536,304
0.998%
DOMINET DIGITAL CORPORATION PTY LTD
1,406,836
0.914%
MR SIJIN CHEN
MS ZHEN MA
MRS ISABEL COPPA
ASB NOMINEES LIMITED <291495 – ML A/C>
1,228,524
0.798%
828,000
0.538%
800,703
0.520%
800,000
0.519%
ATLANTIS MG PTY LTD
747,638
0.485%
DIAMOND BOWL PTY LTD
694,008
0.451%
MP3 AUSTRALIA PTY LTD
674,667
0.438%
H & J INVESTMENT PTY LTD
621,062
0.403%
MR DAVID CORREIA
600,000
0.390%
Total number of shares of Top 20 Holders
139,259,052
90.428%
Total Remaining Holders Balance
153,999,096
9.572%
Item 7 issues of securities
There are no issues of securities approved for the purposes of item 7 of section 611 of the Corporations Act
which have not yet been completed.
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Company Secretary
The Company’s secretary is Ms Alyn Tai.
Registered Office
The address and telephone number of the Company’s registered office are:
136-140 South Park Drive
Dandenong South, Victoria 3175
Tel: 1300 13 99 99
Share Registry
The address and telephone number of the Company’s share registry, Boardroom Pty Limited, are:
Boardroom Pty Limited
Level 12, 225 George Street
Sydney New South Wales 2000
Tel: 1300 737 760
Stock Exchange Listing
Harris Technology’s ordinary shares are quoted on the Australian Securities Exchange (ASX issuer code: HT8).
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