HRL HOLDINGS LIMITED
ANNUAL REPORT
FOR THE YEAR ENDED
30 June 2015
Index
CEO’s Letter
Directors’ Report
Remuneration Report
Auditor’s Independence Declaration
Additional ASX Information
Statement of Comprehensive Income
Balance Sheet
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Corporate Information
3
6
16
27
28
30
31
32
33
34
68
69
71
Figure 1 - Asbestos Testing in the Brisbane Laboratory
2
CEO’S LETTER
Dear Shareholders,
Your Directors and I have much pleasure in presenting the following 2015 Annual Financial Statements for HRL Holdings.
Introduction
The 2014-15 financial year was an exciting transformational year for your company. A number of material events have
taken place throughout this year, not least of which was a change in direction from a geothermal exploration business to
a commercial environmental services business. A brief look at the timeline of events over the course of the year includes:
Sep 2014 – Acquisition of OCTIEF Pty Ltd, a Brisbane based environmental consultancy and laboratory business
Nov 2014 – OCTIEF expands to Darwin and opens a NATA accredited laboratory
Dec 2014 – name changed to HRL Holdings Limited, reflecting the change in activities
Mar 2015 – Successful capital raise of $5million and relisting on ASX
Mar 2015 – Acquisition of Precise Consulting & Laboratory Limited (NZ)
May 2015 – Precise expands to Wellington (NZ) and opens a IANZ accredited laboratory
Jun 2015 – Precise relocates Christchurch (NZ) business to much larger and fit-for-purpose facility
The environmental services are delivered through two brands, being OCTIEF operating within Australia and Precise
Consulting & Laboratory operating in New Zealand. The key revenue generating activities for the group currently include:
HAZMAT auditing and survey of properties to identify suspected asbestos containing materials, lead and heavy
metals;
Air, noise and dust environmental monitoring;
Mould analysis;
Contaminated land management and analysis; and
Training services.
The group currently delivers the above environmental services through four consulting offices and accredited laboratory
facilities in Brisbane, Darwin, Christchurch and Wellington.
HRL continues to hold two geothermal exploration tenements in Victoria (GEP6 and GEP8), however, there is no value
attributed to these holdings within the FY2015 balance sheet. The development expenditure program remains suspended
pending further announcements from the Victorian State Government regarding the moratorium on onshore drilling and
fracking.
Financial Result for FY2015
The environmental services operating segments of Australia and New Zealand generated profits before tax of $517,443.
Australia
New Zealand Unallocated Consolidated
30 June 2015
Revenue:
$
$
Environmental services revenue
3,263,735
1,405,874
$
-
30,100
$
4,669,609
30,100
-
(1,953)
-
(1,953)
-
-
(3,162,172)
(988,041)
(2,446,743)
(6,596,956)
99,610
417,833
(2,416,643)
(1,899,200)
315,445
(1,583,755)
Interest income
Expenses:
Interest expense
Other expenses
Segment result
Income tax
Net Profit/(Loss)
Revenue from the New Zealand segment included $418,379 generated by OCTIEF NZ which commenced trading in
November and $987,495 from Precise Consulting which joined the HRL Group on 1 April 2014.
3
CEO’S LETTER
Due to the complex nature of the merger and acquisition transactions undertaken throughout the financial year and the
application required under accounting standards, the financial statements report a statutory loss after income tax of
$1,583,755. Excluding these items, the underlying profit position has been assessed to be $29,690 in line with the
following non-operating adjustments:
Underlying profit after tax
Non-operating adjustments (tax effected)
Acquisition related expenses
Listing expense arising on deemed acquisition
Amortisation of intangible assets arising from acquisitions
Provision arising on estimate of Precise Earn-out
Initial recognition of tax losses
Statutory loss after income tax
12 months ended 30
June 2015
$
29,690
(187,851)
(1,252,455)
(247,237)
(39,725)
113,823
(1,583,755)
The results reported above include the operations of Precise for only 3 months of trading from 1 April 2015. For the
period 1 July 2014 to 31 March 2015 Precise generated a profit after tax of $778k, as it is prior to the acquisition, which
is not reported in the above figures.
The group’s balance sheet remains strong with net assets of $6,223,208 and working capital of $864,143. The group
has available an undrawn debt facility with Westpac of $3.5m to fund expansion activities.
Precise and OCTIEF have secured a number of commercially successful contracts through the year, including:
Canterbury University campus wide hazardous materials (“HAZMAT”)
1 year extension of contract with Ergon Energy
Completion of the Northern Territory Department of Infrastructure audit of schools
Chorus NZ national HAZMAT audit of 840+ assets and expansion of service to include other inspection types
Dust monitoring for the Darwin Tiger Brennan Drive project
Soil analysis for the Darwin Hospital and RAAF land remediation projects
Operational Outlook for FY2016
The HAZMAT testing and consulting work within Australia and New Zealand continues to be the core business for HRL.
There are exciting plans for the coming year, which include:
Organic growth and improving market share in existing territories through an increase in sales and marketing
efforts;
Opportunities for geographic expansion through both green fielding operations and targeted strategic
acquisitions; and
Expanding laboratory testing services through installation of new equipment.
HRL has been closely following the upcoming introduction of the New Zealand Asbestos Regulations to accompany the
Health and Safety Reform Bill. The current document is modelled around the Australian legislation and will drive a higher
level of demand for Precise services throughout New Zealand as businesses need to ensure compliance in areas such
as asbestos registers, management plans, IANZ accredited laboratory testing and air monitoring during asbestos removal
activities.
Precise has a tender pipeline of opportunities with government agencies, councils, corporate and commercial clients.
Both the OCTIEF and Precise businesses are currently tendering and negotiating major contracts for Australia and New
Zealand. The business focus remains on HAZMAT compliance for major corporate clients and government agencies at
all levels of government.
4
CEO’S LETTER
In closing, I would like to take this opportunity to thank our Chairman and Board for their guidance over the past year and
also to thank all of the HRL Group’s employees for their dedication and hard work. My thanks also to you, our shareholders
for your ongoing support in FY15. I look forward to keeping you updated on our progress in FY16 and the transformation
of HRL to one of Australia’s and New Zealand’s leading environmental services groups.
Steven Dabelstein
CEO
5
DIRECTORS’ REPORT
DIRECTORS' REPORT
Your Directors present their report on the Consolidated Entity consisting of HRL Holdings Limited (“HRL” or “Company”)
and the entities it controlled at the end of, or during, the year ended 30 June 2015.
DIRECTORS
The following persons were directors of HRL Holdings Limited during the whole of the financial year and up to the date
of this report, unless otherwise stated:
Name
Kevin Maloney
Darren Anderson
Mark Elliott
John Taylor
Position
Period of Directorship
Non-Executive Chairman
Appointed 15 September 2014
Executive Director
Appointed 15 September 2014
Non-Executive Director
Appointed August 2006
Non-Executive Director
Appointed 25 November 2014
Frederick Kempson
Alternate Non-Executive Director
Appointed 15 September 2014
Peter Barnett
Michael Sandy
Stephen Bizzell
Former Non-Executive Director
Appointed December 2007, resigned 25 November 2014
Former Non-Executive Director
Appointed June 2007, resigned 15 September 2014
Former Non-Executive Director
Appointed September 2009, resigned 14 August 2014
Kevin Maloney
Non-Executive Chairman
Mr Kevin Maloney is the founder and Chairman of the Australian investment entity Tulla Group and has built an extensive
career in retail banking, finance and resources.
One of Kevin's many career highlights was as founder and Executive Chairman of The MAC Services Group (The MAC),
which was sold to Oil States International in 2010 for $651 million. Kevin was heavily involved in all stages of The MAC’s
growth, including its move into mining services accommodation in 1996.
Kevin has been involved with numerous public companies as both an executive and director. After spending 20 years
with ANZ Bank, Kevin joined Elders Resources Finance Limited in 1981, progressing to Chief Executive Officer before
moving on to his own business enterprises.
Kevin is currently the Chairman of ASX listed Altona Mining Limited and Integrated Holdings Group Pty Ltd which is the
parent company for software vendor OCTFOLIO™ Pty Ltd and previously, the holding company of environmental services
group OCTIEF.
Mr Maloney is currently a director of the following other ASX listed companies:
Altona Mining Limited (appointed July 2009)
Norseman Gold plc (appointed July 2012)
Darren Anderson
Executive Director
Mr Darren Anderson was formerly the Executive Director and Chief Operating Officer of Diversified Mining Services Ltd,
an unlisted public company that at its peak in mid-2012 had consolidated revenue in excess of $200 million and 850
personnel.
Previous career highlights include 15 years spent as founder and Executive Director of the Anderson Group of
Companies, which grew from a single person operation in Mackay to a company with in excess of 300 employees and
12 operating divisions across both Queensland and New South Wales that serviced the Australian and international coal
industries.
Darren is the Executive Director of Integrated Holdings Group Pty Ltd which is the parent company for software vendor
OCTFOLIO™ Pty Ltd. Prior to the OCTIEF Acquisition, Integrated Holdings Group Pty Ltd was also the parent company
of OCTIEF.
6
DIRECTORS’ REPORT
He has not been a Director of any other Australian listed company in the last three years.
Mark Elliott
Non-Executive Director
Dip App Geol., PhD, FAICD, FAusIMM(CP), FSEG
Dr Elliott is a Chartered Professional (CP) geologist with over 40 years’ experience in economic geology, exploration,
mining, project development and corporate management. He has extensive experience in managing companies and
exploration/mining operations in a wide range of commodities including energy.
He has a diploma in Applied Geology from the Ballarat School of Mines and a Doctor of Philosophy degree from the
University of New South Wales. He is a Fellow of the Australian Institute of Company Directors, Australasian Institute of
Mining and Metallurgy and Society of Economic Geologists.
Dr Elliott is currently a director of the following other ASX listed company:
Nexus Minerals Ltd (Oct 2006 – present)
John Taylor
Non-Executive Director
LLB, Grad Dip ACG
Mr Taylor is the founding partner of Taylors Solicitors, Mackay, a Senior Counsellor of the Queensland Law Society and
has over 30 years’ experience in commercial and property transactions and litigation.
John Taylor was, from 2006 and 2010, a director of ASX listed The MAC Services Group Limited, where he was Chair of
the Remuneration and Nomination Committee and a member of the Audit and Risk Management Committee. He is also
a former Chair of the Mackay Port Authority and a Board member of Tourism Mackay and Mackay Regional Economic
Bureau.
He has not been a Director of any other Australian listed company in the last three years.
Frederick Kempson
Non-Executive Alternate Director
BComm
Fred Kempson brings a wealth of experience to the Board of Directors from the highly-specialised spectrum of
international investment banking and corporate governance.
Fred has held a range of senior executive positions within the international investment banking arena including a
significant period as Managing Director of ANZ’s investment bank AIFC Limited, and Vice President of Security Pacific
Limited.
During his time as Vice President of Security Pacific Bank, in 1992 the bank merged with San Francisco-based Bank
America (now called Bank of America), in a deal that was at the time one of the largest bank mergers in history.
Fred is currently also Managing Director of Kempson Capital, Chairman of Simple Trade, Chairman of Etivity Limited and
holds a Bachelor of Commerce from the University of New South Wales.
Mr Kempson was a director of the following other ASX listed company:
Victor Group Holdings (Jan 2014 – July 2015)
7
DIRECTORS’ REPORT
DIRECTOR INTERESTS IN THE SHARES AND OPTIONS OF THE CONSOLIDATED ENTITY
As at the date of this report, the interests of the Directors in the shares and options of HRL Holdings Limited are shown
in the table below:
Director
Kevin Maloney
Fully Paid
Ordinary Shares
45,282,988
Darren Anderson
15,863,563
Unlisted
Options
-
-
Mark Elliott
John Taylor
Frederick Kempson
2,848,634
423,077
923,077
-
-
-
MEETINGS OF DIRECTORS
The following table sets out the number of meetings of the Company’s Directors held during the year ended 30 June 2015
and the number of meetings attended by each Director.
Meetings attended
Eligible to attend
Kevin Maloney
Darren Anderson
Mark Elliott
John Taylor
Frederick Kempson
Peter Barnett
Michael Sandy
Stephen Bizzell
5
5
5
4
5
1
1
1
5
5
5
4
5
2
1
1
There are no committees of directors. All relevant matters are considered by the Board.
SENIOR MANAGEMENT
Paul Marshall
Company Secretary
LLB, ACA
Paul Marshall holds a Bachelor of Law degree, a post Graduate Diploma in Accounting and is a Chartered Accountant.
He has more than 25 years’ experience initially with Ernst & Young and subsequently fifteen years spent in commercial
roles as Company Secretary and CFO for a number of listed and unlisted companies mainly in the resources sector. He
has extensive experience in all aspects of company financial reporting, corporate regulatory and governance areas,
business acquisition and disposal due diligence, capital raising and company listings and company secretarial
responsibilities.
Steven Dabelstein
Chief Executive Officer
BComm, CPA
Mr Dabelstein has a strong financial and operational background in various roles, including most recently as General
Manager Commercial and QLD Mining/Maintenance Services with Diversified Mining Services Limited.
Mr Dabelstein’s experience includes public practice accounting, manufacturing, service and the construction industries.
Previous roles have provided exposure to large-scale international businesses reporting through and working with
companies in the US, Asia and Europe.
8
DIRECTORS’ REPORT
Michael Harvey
Chief Finance Officer
BBus, B AppSci, Grad Dip ICAA, Grad Dip CSA, CA, GAIA
Mr Harvey is a Chartered Accountant and Chartered Secretary. Michael holds Bachelor degrees in Business and Property
Economics and post Graduate Diplomas in Accounting and Corporate Governance.
Michael has more than 14 years in the accountancy profession in Australia, having worked for PKF for eight years in
audit, and subsequently over five years in commercial roles as financial controller for a number of listed companies mainly
in the property and resources sector. Michael has experience in all aspects of company financial reporting, internal
control, corporate regulatory and governance areas, business acquisition and disposal, due diligence, and company
secretarial responsibilities.
PRINCIPAL ACTIVITIES
The principal operating activities of the Group are
environmental consulting and hazardous materials
analytical laboratory business with offices and laboratory
facilities
in Brisbane, Darwin, Christchurch and
Wellington.
The Group offers services including industrial hygiene,
asbestos and hazardous materials management,
environmental services (air, water and soil including
contaminated land), building contamination assessment,
and specialised NATA/IANZ - accredited laboratory
analysis and on-site testing and monitoring.
Geothermal exploration projects have been placed on
care and maintenance while the Company evaluates the
best way to develop the projects held.
Figure 2 – HRL Group Laboratory Locations
ENVIRONMENTAL REGULATION AND PERFORMANCE
The Company’s operations are subject to environmental regulations in relation to its consulting and laboratory activities.
The Directors are not aware of any breaches during the period covered by this report.
REVIEW OF OPERATIONS
The 2015 financial year was a year of transition for HRL Holdings Limited.
In 2014, the Company undertook a restructuring strategy due to difficulties facing the resource industry and, in particular,
the geothermal sector, caused by contraction of investment within global capital markets and inhibiting legislative
amendments being introduced.
HRL subsequently sold its geothermal projects in Chile and Peru, which were not in a position to create shareholder value
in the foreseeable future. Given ongoing uncertainty around Commonwealth and State government support, along with
increased regulatory risks associated with decreasing electricity prices for renewable energy, the Board decided to place
the remaining Australian geothermal projects on care and maintenance and pursue an expansion of its activities to provide
opportunities to grow shareholder value.
Acquisition of OCTIEF Pty Ltd
On 15 September 2014 the Company announced the completion of the
acquisition of an environment services business, OCTIEF Pty Ltd
(OCTIEF). OCTIEF operates an environmental consulting and hazardous
materials analytical laboratory business with offices and NATA-accredited
laboratory facilities in Brisbane and Darwin.
9
DIRECTORS’ REPORT
OCTIEF provides services including asbestos and hazardous materials management, industrial hygiene, building and
contaminated land assessment, specialised laboratory analysis and on-site testing and monitoring.
Figure 3 - Brisbane Facility
Figure 4 - OCTIEF Laboratory Staff
Key clients of OCTIEF include government agencies, education institutions and major utilities.
Acquisition of Precise Consulting and Laboratory Limited
On 1 April 2015, HRL acquired Precise Consulting and
Laboratory Limited (Precise Consulting). Operating out of
Christchurch, New Zealand, Precise Consulting offers a
number of services similar to those provided by OCTIEF, to
assist companies with the identification and remediation of
risks posed to health and safety of both humans and the
environment.
Precise Consulting provide a range of services and analysis including:
contaminated land analysis;
soil sampling;
dust monitoring;
air quality monitoring; and
asbestos auditing and building contamination assessment.
These studies are carried out in laboratories accredited by IANZ, which is part of the Testing
Laboratory Registration Council and New Zealand’s premier accreditation body.
Precise Consulting also offers a number of specialised environmental services, including the
identification, monitoring and testing of asbestos materials and other occupational hygiene
issues.
10
DIRECTORS’ REPORT
Figure 5 - Precise new Christchurch Facilities
Figure 6 - Precise laboratory staff
Key clients of Precise include government agencies, construction firms and major telecommunications companies.
Facility Expansion
During the year, the Group opened new laboratories in Darwin (November 2014) and Wellington (April 2015). HRL now
has the ability to provide its full range of services to the Northern Territory and Wellington markets, providing a new
geographic source of organic growth to the Company going forward.
Figure 7 - OCTIEF Darwin Facility
Figure 8 - Darwin Laboratory
11
DIRECTORS’ REPORT
Figure 9 - Precise Wellington Office
Figure 10 - Precise Wellington Laboratory
Geothermal
A moratorium is currently in place on onshore gas exploration in Victoria. As a result of this moratorium, HRL is currently
not able to pursue drilling programs on its GEPs in the Otway Sedimentary Basin of Victoria. HRL will not focus any
further resources on its geothermal assets until it is satisfied that the projects can be commercially viable.
Change of Name
At the 2014 AGM shareholders approved the change of the Company’s name to HRL Holdings Limited. This new name
will better reflect the expanded nature of the company and the restructure of its operations into separate business
divisions.
Environmental Services Trading
Australia
Australian operations experienced subdued trading conditions during the year. A significant portion of OCTIEF’s revenue
has traditionally been derived from asbestos auditing of Queensland public sector assets, with the bulk of this work
occurring in the second half of the year. The well documented delays in establishing a new Queensland Government
had the negative flow on effect of placing this remediation work on hold. To date we are yet to see the Government
Departments return to the previous level of workflow, however there are indications that workflow will increase towards
the back end of 2015 as the Departments attempt to catch up for lost time.
Since opening the new laboratory in Darwin, OCTIEF has secured a steady stream of workflow. The bulk of contracts
have come from the NT Department of Infrastructure but more and more new opportunities are arising from other sources.
Whilst the Darwin operation will always remain smaller than the Brisbane laboratory, it is expected to remain a profitable
branch of the Group and provides geographical coverage not only around the Darwin area, but also across the more
remote centres of the Northern Territory.
New Zealand
Recognising the slowdown in the Queensland and wider Australian market, HRL focussed on moving into the high growth
New Zealand market as quickly as possible. Octief Limited (OCTIEF NZ) commenced operations in New Zealand for the
first time during November, performing asbestos audits for the University of Canterbury.
Following on from this success, OCTIEF NZ was awarded significant contract by Chorus New Zealand Limited to carry
out HAZMAT surveys across its extensive property portfolio throughout all of New Zealand. OCTIEF NZ will conduct
surveys on over 800 assets across both the North and South Islands of New Zealand. The contract, which commenced
in May 2015, is expected to continue through until at least the end of 2015.
Precise Consulting has been the outstanding performer for the HRL Group. Taking full advantage of the rebuild activities
in the Christchurch region, Precise Consulting has greatly increased both revenue and profitability over the last 12
months. Precise Consulting recently secured new premises in Christchurch to facilitate further growth and expanded into
the Wellington region for the first time. Wellington and the surrounding regions are home to a large number of commercial
and government organisations. Precise Consulting has already been offered work by a number of these organisations
and operations are beginning to ramp up quickly.
Both the HRL and Precise team continue to evaluate further geographical expansion opportunities in New Zealand.
12
DIRECTORS’ REPORT
FINANCIAL REVIEW
Key financial headlines of the HRL Group’s 30 June 2015 results are:
Statutory loss after tax of $1,583,755
Underlying profit after tax of $29,690 1
Net assets of $6,223,208
Working capital of $864,143
1 Underlying profit reflects statutory profit as adjusted to reflect the Directors’ assessment of the result for the ongoing business activities of the Group, in
accordance with AICD/Finsia principles of recording underlying profit. Underlying profit has not been audited.
The following table summarises key reconciling items between the Group’s statutory profit and underlying profit after tax:
12 months ended
30 June 2015
13.5 months from
15 May 2013 to
30 June 2014
$
$
Underlying profit after tax
29,690
1,064,752
Non-operating adjustments (tax effected)
Acquisition related expenses
Listing expense arising on deemed acquisition
Amortisation of intangible assets arising from acquisitions
Provision arising on estimate of Precise Earn-out (Employee
benefits expense)
Gain on bargain purchase price
Initial recognition of tax losses
(187,851)
(1,252,455)
(247,237)
(39,725)
-
113,823
(336,187)
-
(112,686)
-
128,950
-
Statutory loss after income tax
(1,583,755)
744,829
In the opinion of the Directors, the Group’s underlying profit reflects the results generated from ongoing operating activities
and is calculated in accordance with AICD/Finsia principles. The non-operating adjustments outlined above are
considered to be non-cash or non-recurring in nature. These items are included in the Group’s consolidated statutory
result but excluded from the underlying result.
Comparison with the Prior Period
Underlying profit after tax for the year decreased by $1,035,062 compared with the prior period. The key reasons for the
decrease were:
The prior period results represented 13.5 months of trading whereas the FY2015 results are for 12 months;
Subdued activity in Queensland as described in the Review of Operations above;
Additional administration and corporate costs arising from the OCTIEF business transitioning to an ASX listed entity;
Additional employee costs arising from the first time recognition of Board and Executive remuneration in the financial
results. The Group has made the necessary appointments during the year to facilitate both the current level of
activity across 2 countries and anticipated future expansions.
Financial Impact of the Precise Consulting Acquisition
HRL acquired the Precise Consulting on 1 April 2015. Accordingly the financial results for FY2015 only incorporate 3
months of trading (April 2015 to June 2015). For the period 1 July 2014 to 31 March 2015, Precise Consulting generated
a profit after tax (unaudited) of $777,701.
13
DIRECTORS’ REPORT
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
There following significant changes occurred during the year:
Acquisition of the Australian based environmental consulting and laboratory services business OCTIEF Pty Ltd
(September 2014);
Acquisition of the New Zealand based environmental consulting and laboratory services business Precise
Consulting and Laboratory Ltd (April 2015);
Opening of 2 new laboratories in Darwin (November 2014) and Wellington (April 2015);
Restructure of share capital through a 1 for 13 share consolidation (March 2015);
Change of name to HRL Holdings Limited (November 2014); and
Change of nature of activities to focus on environmental services, hazardous materials management and ongoing
$5 million capital raising completed (March 2015);
compliance solutions utilising technological platforms.
LIKELY DEVELOPMENTS AND FUTURE OPERATIONS
During FY2016, the Group will continue to focus on growing both the OCTIEF, OCTIEF NZ and Precise Consulting
businesses through:
Focussed business development plans to target new customers and protect the existing customer base;
Utilising new equipment and software platforms to improved efficiencies and margins;
Geographical expansion into new markets when justified; and
Capitalise when possible on the introduction of new regulations surrounding the HAZMAT sector.
Introduction of new service lines in the New Zealand market which have been traditionally focussed on laboratories;
In addition, the Group will continue to evaluate acquisition opportunities of low cost, high quality businesses both within
the environmental services sector and across other complimentary industries.
INDEMNIFICATION OF OFFICERS OR AUDITOR
Each of the Directors and the Secretary of the Company has entered into a Deed with the Company whereby the
Company has provided certain contractual rights of access to books and records of the Company and certain
indemnification to those Directors and Secretary.
The Company has insured all of the Directors of HRL Holdings Limited. The contract of insurance prohibits the disclosure
of the nature of the liabilities covered and amount of the premium paid. The Corporations Act 2001 does not require
disclosure of the information in these circumstances.
The Company has not indemnified its auditor.
PROCEEDINGS ON BEHALF OF THE COMPANY
No person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in any proceedings
to which the Company is a party for the purposes of taking responsibility on behalf of the Company for all or any part of
those proceedings. The Company was not a party to any such proceedings during the year.
SHARE OPTIONS
Details of options issued, exercised and expired during the financial year are set out below:
Expiry Date
30 November 2015*
Exercise
Price
$0.52
1 July
2014
1,615,385
Movements
Issued
Exercised
Expired
-
-
-
30 June
2015
1,615,385
* Number of options and pricing adjusted for the 1:13 share consolidation
Since year end no options have been exercised and as at the date of this report there were 1,615,385 options on issue.
14
DIRECTORS’ REPORT
AFTER BALANCE DATE EVENTS
Issue of OCTIEF Milestone Shares
The Company confirms that as per Milestone 3 under the OCTIEF acquisition agreement, full year revenue for FY2015
to equal or exceed $4.25M, has not been met. If the target had been met in full then 4,934,682 shares would have been
issuable to the vendors. As the target was not met in full the Company, in accordance with the agreement, will issue a
reduced number of 4,353,006 shares to the OCTIEF vendors in due course.
REMUNERATION REPORT
The Remuneration Report set out on pages 16 to 26 provides details of the remuneration and equity holdings of the
Directors and Key Management Personnel, including details of equity instruments issued or exercised during the financial
year, or outstanding at the date of this report, and forms part of the Directors’ Report.
DIVIDENDS
No dividends were paid or declared during the financial year.
AUDITOR’S INDEPENDENCE DECLARATION
The Auditor’s Independence Declaration on page 27 forms part of the Directors’ Report.
Signed in accordance with a resolution of the board of directors of HRL Holdings.
Darren Anderson
Director
Brisbane, 28 August 2015
15
REMUNERATION REPORT - AUDITED
This report details the nature and amount of remuneration for Directors and Key Management Personnel of the Company.
Remuneration Policy
The performance of the Company depends upon the quality of its Directors and Executives. To prosper, the Company
must attract, motivate and retain highly skilled Directors and Executives.
Remuneration Committee
The Board does not have Remuneration or Nomination Committees. The full Board is responsible for determining and
reviewing compensation arrangements for the Directors and the Executive team.
The Board assesses the appropriateness of the nature and amount of emoluments of such officers on a periodic basis
by 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.
Officers are given the opportunity to receive their base emoluments in a variety of forms including cash and fringe benefits.
It is intended that the manner of payments chosen will be optimal for the recipient without creating undue cost for the
company.
Remuneration structure
It is the Company’s objective to provide maximum stakeholder benefit from the retention of a high quality Board and
Executive team by remunerating Directors and other Key Management Personnel fairly and appropriately with reference
to relevant employment market conditions.
To assist in achieving this objective, the Board considers the nature and amount of Executive Directors’ and Officers’
emoluments alongside the company’s financial and operational performance. The expected outcomes of the
remuneration structure are the retention and motivation of key Executives, the attraction of quality management to the
Company and performance incentives which allow Executives to share the rewards of the success of the company.
In accordance with best practice corporate governance, the structure of Executive and Non-Executive Director
remuneration is separate and distinct.
Non-Executive Director Remuneration
The Board seeks to set aggregate remuneration at a level which provides the company with the ability to attract and retain
Directors of the highest caliber, whilst incurring a cost which is acceptable to shareholders.
The Constitution of HRL Holdings Limited and the ASX Listing Rules specify that the Non-Executive Directors are entitled
to remuneration as determined by the Company in a General Meeting to be apportioned among them in such manner as
the Directors agree and, in default of agreement, equally. The maximum aggregate remuneration currently approved by
shareholders for Directors’ fees is for a total of $250,000 per annum.
If a Non-Executive Director performs extra services, which in the opinion of the Directors are outside the scope of the
ordinary duties of the Director, the company may remunerate that Director by payment of a fixed sum determined by the
Directors in addition to or instead of the remuneration referred to above. Non-Executive Directors are entitled to be paid
travel and other expenses properly incurred by them in attending Directors or General Meetings of the Company or
otherwise in connection with the business of the Company.
The remuneration of Non-Executive Directors for the year ended 30 June 2015 is detailed in this Remuneration Report.
Executive Directors and Senior Management Remuneration
The Company aims to reward Executive Directors and Senior Management with a level and mix of remuneration
commensurate with their position and responsibilities within the company and so as to:
reward Executives for Company and individual performance against targets set by reference to appropriate
benchmarks;
align the interests of Executives with those of shareholders;
link reward with the strategic goals and performance of the Company; and
ensure total remuneration is competitive by market standards.
The remuneration of the Executive Directors and Senior Management may from time to time be fixed by the Board. As
noted above, the Board’s policy is to align Executive objectives with shareholder and business objectives by providing a
fixed remuneration component and offering long-term incentives. The level of fixed remuneration is set so as to provide
16
REMUNERATION REPORT - AUDITED
a base level of remuneration which is both appropriate to the position and is competitive in the market. Fixed remuneration
is reviewed annually by the Board, and the process consists of a review of company wide and individual performance,
relevant comparative remuneration in the market and internal, and where appropriate, external advice on policies and
practices.
In relation to the payment of bonuses, options and other incentive payments, discretion is exercised by the Board, having
regard to the overall performance of the Company and the performance of the individual during the year.
The remuneration of the Executive Directors and Senior Management for the period ended 30 June 2015 is detailed in
this Remuneration Report.
Employment contracts
It is the Board’s policy that employment agreements are entered into with all Directors, Executives and employees. The
current employment agreement with the Executive Director and CEO has a three month notice period. All other
employment agreements have one month (or less) notice periods. No current employment contracts contain early
termination clauses. All Non-Executive Directors have contracts of employment. None of these contracts have
termination benefits.
Non-Executive Chairman Arrangements
The Company entered into a service arrangement with Mr Kevin Maloney as Non-Executive Chairman of the Company
commencing from 15 September 2014. The key terms of the arrangement are:
Ongoing contract – no fixed term;
Fee of $75,000 per annum;
No notice period.
Non-Executive Director Arrangements
The Company entered into a service arrangement with Dr Mark Elliott and Mr John Taylor as Non-Executive Directors of
the Company commencing from 15 September 2014 and 25 November 2014 respectively. The key terms of the
arrangement are:
Ongoing contract – no fixed term;
Fee of $40,000 per annum;
No notice period.
Executive Director Arrangements
The Company entered into an employment contract with Mr Darren Anderson as Executive Director of the Company
commencing from 15 September 2014. The key terms of the contract are:
Ongoing contract – no fixed term;
Salary of $250,000 per annum, inclusive of statutory superannuation contributions;
6 weeks annual leave;
80% reimbursement of the lease costs of a motor vehicle;
80% reimbursement of the lease costs of apartment accommodation in Brisbane;
Annual bonus of up to $50,000 per annum based on the following targets:
o Operating EBIT (excluding corporate costs) of $1.5M – bonus of $20,000;
o Share price of at least $0.13 at 30 June 2015 - bonus of $20,000;
o Operating EBIT (excluding corporate costs) of $1.8M – bonus of $50,000;
o Share price of at least $0.195 at 30 June 2015 - bonus of $50,000;
3 month notice period.
17
REMUNERATION REPORT - AUDITED
Chief Executive Officer Arrangements
The Company entered into an employment contract with Mr Steven Dabelstein as Chief Executive Officer of the Company
commencing from 1 January 2015. The key terms of the contract are:
Ongoing contract – no fixed term;
Salary of $250,000 per annum, inclusive of statutory superannuation contributions;
4 weeks annual leave;
Use of a company motor vehicle;
Annual bonus of up to $50,000 per annum (pro-rata for service period) based on the following targets:
o Operating EBIT (excluding corporate costs) of $1.5M – bonus of $20,000;
o Share price of at least $0.13 at 30 June 2015 - bonus of $20,000;
o Operating EBIT (excluding corporate costs) of $1.8M – bonus of $50,000;
o Share price of at least $0.195 at 30 June 2015 - bonus of $50,000;
3 month notice period.
Chief Finance Officer Arrangements
The Company entered into a service arrangement with Mr Michael Harvey as Chief Finance Officer of the Company
commencing from 15 September 2014. The key terms of the arrangement are:
Ongoing contract – no fixed term;
Fee of $65,700 per annum, inclusive of statutory superannuation contributions;
One month notice period.
Company Secretary Arrangements
The Company entered into a service arrangement with Mr Paul Marshall as Company Secretary of the Company
commencing from 15 September 2014. The key terms of the arrangement are:
Ongoing contract – no fixed term;
Fee of $52,000 per annum, inclusive of statutory superannuation contributions;
One month notice period.
18
REMUNERATION REPORT - AUDITED
Details of Directors and other Key Management – HRL Holdings Limited
Name
Directors
Position
Period of Service
Kevin Maloney
Non-Executive Chairman
Appointed 15 September 2014
Darren Anderson
Executive Director
Appointed 15 September 2014
Mark Elliott
John Taylor
Non-Executive Director
Appointed August 2006
Non-Executive Director
Appointed 25 November 2014
Frederick Kempson
Alternate Non-Executive Director
Appointed 15 September 2014
Former Directors
Peter Barnett
Michael Sandy
Stephen Bizzell
Key Management
Steven Dabelstein
Michael Harvey
Paul Marshall
Former Non-Executive Director
Appointed December 2007, resigned 25 November 2014
Former Non-Executive Director
Appointed June 2007, resigned 15 September 2014
Former Non-Executive Director
Appointed September 2009, resigned 14 August 2014
Chief Executive Officer
Appointed 1 January 2015
Chief Finance Officer
Company Secretary
Appointed 15 September 2014
Appointed July 2007
Details of Directors and other Key Management – OCTIEF PTY LTD
(for the period 15 May 2013 to 15 September 2014)
Name
Directors
Kevin Maloney
Darren Anderson
Position
Period of Service
Non-Executive Director
Appointed 15 May 2013
Executive Director
Appointed 15 May 2013
Mr Kevin Maloney and Mr Darren Anderson did not receive any remuneration from OCTIEF Pty Ltd for both:
The period 15 May 2013 to 30 June 2014; and
The period 1 July 2014 to 15 September 2015.
19
REMUNERATION REPORT
Remuneration of Directors and other Key Management Personnel – 2015
OCTIEF Pty Ltd - No remuneration was paid to key management personnel of OCTIEF Pty Ltd for the period 1 July 2014 to 15 September 2014.
HRL Holdings Limited - The remuneration of the key management personnel of HRL Holdings Limited subsequent to the acquisition of OCTIEF Pty Ltd on 15 September 2014 was:
Short Term
Benefits
Long Term
Benefits
Post Employment
Benefits
Equity based
Benefits
Salary/ Director
fees
Consulting
fees
Non-
monetary
benefits
Leave
benefits
Superannuation
Options
Total
Performance
Related %
% of bonus
forfeited
Directors
Kevin Maloney 1
Darren Anderson 1
Mark Elliott 5
John Taylor 2
Alternate Director
Frederick Kempson 1
Former Directors
Peter Barnett 3
Key Management
Steven Dabelstein 4
Michael Harvey 1
Paul Marshall 5
23,694
180,746
31,667
24,000
-
-
-
-
-
23,800
8,333
115,608
47,500
41,167
472,715
-
-
-
-
-
-
42,713
22,837
35,681
17,170
-
-
-
-
-
-
-
-
-
-
-
9,738
-
-
-
-
-
-
9,390
4,513
-
66,754
23,800
42,713
32,575
1 Appointed 15 September 2014.
2 Appointed 25 November 2014.
3 Resigned 25 November 2014.
4 Appointed 1 January 2015.
5 Relates to remuneration for the period 15 September 2014 to 30 June 2015.
There were no termination benefits paid or accrued for the year ended 30 June 2015.
-
-
-
-
-
-
-
-
-
-
59,375
263,466
31,667
24,000
23,800
8,333
134,736
52,013
41,167
638,557
-
-
-
-
-
-
-
-
-
-
-
100%
-
-
-
-
100%
-
-
20
REMUNERATION REPORT
Remuneration of Directors and other Key Management Personnel – 2015 (prior to acquisition of OCTIEF - 1 July 2014 to 15 September 2014)
HRL Holdings Limited - The remuneration of the key management personnel of HRL Holdings Limited prior to acquisition of OCTIEF Pty Ltd on 15 September 2014 was:
Long Term
Benefits
Post Employment
Benefits
Equity based
Benefits
Non-monetary
benefits
Leave
benefits
Superannuation
Options
Total
Performance
Related %
% of bonus
forfeited
Directors
Mark Elliott 1 2
Former Directors
Peter Barnett 1
Michael Sandy 3
Stephen Bizzell 4
Key Management
Paul Marshall 1
Salary/
Director fees
Short Term
Benefits
Consulting
fees
7,500
17,500
7,500
7,500
4,500
10,833
37,833
-
-
-
-
17,500
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
25,000
7,500
7,500
4,500
10,833
55,333
-
-
-
-
-
-
1 Relates to remuneration for the period 1 July 2014 to 15 September 2014.
2 From 1 July 2014 to 15 September Mark Elliott in addition to his Non-Executive Director fees, provided additional consulting services to the Company totalling $17,500.
3 Resigned 15 September 2014.
4 Resigned 14 August 2014.
There were no termination benefits paid or accrued for the period ended 15 September 2014.
-
-
-
-
-
21
REMUNERATION REPORT
Remuneration of Directors and other Key Management Personnel – 2014
OCTIEF Pty Ltd - No remuneration was paid to key management personnel of OCTIEF Pty Ltd for the period 15 May 2013 to 30 June 2014.
HRL Holdings Limited - The remuneration of the key management personnel of HRL Holdings Limited for the year ended 30 June 2014 was:
Salary/
Director fees
Short Term
Benefits
Consulting
fees
173,083
160,500
35,500
35,500
44,000
34,000
-
3,600
-
-
Directors
Mark Elliott 1
Peter Barnett 2
Michael Sandy
Stephen Bizzell
Key Management
Paul Marshall
Long Term
Benefits
Post Employment
Benefits
Equity based
Benefits
Non-monetary
benefits
Leave
benefits
Superannuation
Options
Total
Performance
Related %
-
-
-
-
-
11,468
10,961
-
-
-
14,851
-
-
-
-
-
-
-
-
-
-
236,907
171,461
39,100
-
44,000
526,968
-
-
-
-
-
-
448,583
37,600
3,505
22,429
14,851
1 Mark Elliott was employed in a full-time capacity as Executive Chairman from 1 July 2013 to 31 December 2013 at a rate of $325,000 per annum (inclusive of superannuation). Mark Elliott moved to a Non-
Executive Chairman role from 1 January 2014 to 30 June 2014 at a rate of $48,000 per annum. In addition from 1 January 2014 to 30 June 2014 Mark Elliott provided consulting services to the Company
totalling $34,000.
2 Peter Barnett was employed in a full-time capacity as Managing Director from 1 July 2013 to 31 December 2013 at a rate of $285,000 per annum. Peter Barnett moved to a Non-Executive Director role from
1 January 2014 to 30 June 2014 at a rate of $36,000 per annum.
There were no termination benefits paid or accrued for the year ended 30 June 2014.
22
REMUNERATION REPORT
Key management personnel equity holdings
Shareholdings
Balance
1 July 2014
Acquired through
Rights Issue
Derecognized
on resignation
Recognized on
appointment
Vendor Milestone
Shares Issued
Adjustment share
consolidation
Acquired through
General Offer
Other additions
/disposals/transfers
Balance
30 June 2015
Directors
Kevin Maloney
Darren Anderson
Mark Elliott
John Taylor
Alternate Director
Frederick
Kempson
Former Directors
Peter Barnett
Michael Sandy
-
-
-
-
25,465,782
6,366,446
-
-
-
-
-
-
-
-
-
13,050,129
6,907,911
3,262,533
(16,312,662)
1,726,978
(8,634,889)
Stephen Bizzell
18,251,661
-
(18,251,661)
Key Management
Steven Dabelstein
Michael Harvey
-
-
Paul Marshall
8,355,604
-
833,333
7,833,333
-
-
-
208,490,331
69,496,777
-
-
-
-
-
-
-
1,888,025
-
80,188,589
(266,472,849)
26,729,529
-
-
-
-
-
-
-
-
-
(88,824,282)
(29,383,594)
-
-
-
-
-
-
(2,512,022)
(14,943,631)
24,868,655
8,461,539
400,000
769,230
(1,791,738)
45,282,988
-
-
15,863,563
2,848,634
153,847
923,077
-
-
-
-
538,269
76,923
769,230
-
-
-
-
-
-
-
-
-
-
-
538,269
286,259
2,014,536
72,031,087
20,022,623
(43,199,212)
279,875,133
106,918,118
(402,136,378)
35,883,846
(1,637,891)
67,757,326
23
REMUNERATION REPORT
Key management personnel equity holdings
Options
Balance
1 July 2014
Derecognized
on resignation
Recognized on
appointment
Adjustment share
consolidation
Other additions
/disposals/transfers
Balance
30 June 2015
Directors
Kevin Maloney
Darren Anderson
Mark Elliott
John Taylor
Alternate Director
Frederick Kempson
Former Directors
Peter Barnett
Michael Sandy
Stephen Bizzell
Key Management
Steven Dabelstein
Michael Harvey
Paul Marshall
-
-
5,500,000
-
-
-
-
-
-
-
5,500,000
(5,500,000)
1,000,000
(1,000,000)
1,000,000
(1,000,000)
-
-
1,000,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(5,076,923)
-
-
-
-
-
-
500,000
-
(461,538)
(923,077)
14,000,000
(7,500,000)
500,000
(6,461,538)
All of the above options have an exercise prices of $0.52 and have an expiry date of 30 November 2015.
All options have vested and are exercisable.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
423,077
-
-
-
-
-
-
38,462
76,923
538,462
24
REMUNERATION REPORT
Transactions with related parties
Transactions with Key Management Personnel related parties
Transaction
Entity
Rental of office space
Paget Developers
Association
Darren Anderson
Kevin Maloney
12 months
ended
30 June 2015
$
98,484
13.5 months
from 15 May
2013 to 30 June
2014
$
64,000
Underwriting $5M capital raise 1
Tulla Property
Partners
Kevin Maloney
250,000
-
Software and hosting services
Octfolio
Sublet of office space to Octfolio
Octfolio
Darren Anderson
Kevin Maloney
Darren Anderson
Kevin Maloney
Corporate services 2
Business acquisition
Integrated
Holdings Group
Darren Anderson
Kevin Maloney
Integrated
Holdings Group
Darren Anderson
Kevin Maloney
104,141
25,899
5,610
61,538
-
-
-
See below
1 Tulla Property Partners, an entity associated with Mr Kevin Maloney acted as Lead Underwriter for the $5 million capital raising
completed in late March 2015. The Lead Underwriter then arranged for other parties to sub-underwrite part of the capital raising and
will have settled these sub-underwriting fees directly with the sub-underwriters. The net underwriting fee received by Tulla Property
Partners was $116,369. Included in the sub-underwriting fees paid by Tulla Property Partners was an amount of $55,342 that was paid
to Integrated Holdings Group, an entity associated with Mr Kevin Maloney and Mr Darren Anderson.
2 Services provided from 1 July 2014 to 15 September 2014.
All of the above transactions were based on normal commercial terms and conditions.
Business acquisition
During the half year ended 31 December 2013 OCTIEF acquired the assets and business of Octief Consulting and
Laboratory Services Pty Ltd (“OCLS”), an environmental consulting business.
As disclosed in Note 4 the fair value of the net identifiable assets acquired exceeded the total consideration paid resulting
in a gain on bargain purchase of $128,950. OCLS was 100% owned by Integrated Holdings Group Pty Ltd, a company
that Mr Kevin Maloney and Mr Darren Anderson are directors and shareholders of. The contract was based on normal
commercial terms and conditions.
The acquisition was funded through a loan from Integrated Holdings Group Pty Ltd, OCTIEF’s parent entity at that time:
Details of loan from Integrated Holdings Group Pty Ltd
Beginning of the year
Funding of acquisition of OCLS (non-cash - refer Note 4)
OCLS acquisition costs funded by parent entity (refer Note 4)
Loans advanced
Recognition of OCTIEF tax expense (Refer Note 5)
Loan repayments received
Settlement of dividend liability (Refer Note 28)
Loan forgiveness (Refer Note 18)
End of year
-
-
-
-
-
-
-
-
-
-
(553,327)
(286,479)
1,318,750
(500,330)
-
(648,682)
670,068
-
25
REMUNERATION REPORT
Outstanding balances with related parties
Nature
Entity
Software and hosting services
Octfolio
Association
Darren Anderson
Kevin Maloney
30 June 2015
$
40,046
30 June 2014
$
-
Relationship between remuneration and Company performance
The factors that are considered to affect shareholder return in the past 5 years are summarised below:
Measures
Share price at end of financial year
Market capitalisation at end of financial year ($M)
2015
$
0.068
10.51
2014
$
0.005
1.73
2013
$
0.008
2.76
2012
$
0.033
7.66
2011
$
0.04
6.25
Net Profit/(loss) for the financial year
(1,583,755) 2,147,825
(7,696,487)
(2,084,118)
(1,610,352)
Director and Key Management Personnel remuneration
638,557
526,968
897,944
703,423
761,021
Fixed remuneration is not linked to Group performance. It is set with reference to the individual’s role, responsibilities and
performance and remuneration levels for similar positions in the market.
Profit targets are deemed an appropriate performance measure for the granting of short and long term incentives to senior
executives given that it is the key target hurdle referenced by the Board in preparing its annual budgets and measuring
Group performance. Profit targets reflects the Directors’ assessment of the result for the ongoing business activities of
the Group by excluding non-cash, one-off market related items that are usually out of management’s control. The annual
target is determined by the Board having regard to the Group’s annual budget. The target could be higher or lower than
budget, and is adjusted for the effect of material equity issues.
Prior to the restructure in FY2015, the link between remuneration, Company financial performance and shareholder
wealth generation was tenuous, particularly in the exploration and development stage of a geothermal company. Share
prices are subject to the influence of international energy prices and market sentiment towards the sector and increases
or decreases may occur independently of executive performance or remuneration.
No bonuses were paid or are due to be paid to the CEO and Executive Director as the performance conditions were not
met.
No dividends were paid by HRL Holdings Limited nor was there any return of capital over the past 5 years.
No shares were issued on exercise of options issued as part of remuneration in 2015.
No options lapsed during the period due to vesting conditions not being met.
No equity instruments were issued as remuneration in 2015.
The Company did not engage any remuneration consultants during the financial year.
------------------------------ END OF REMUNERATION REPORT ------------------------------
26
Tel: +61 7 3237 5999
Fax: +61 7 3221 9227
www.bdo.com.au
Level 10, 12 Creek St
Brisbane QLD 4000
GPO Box 457 Brisbane QLD 4001
Australia
DECLARATION OF INDEPENDENCE BY K L COLYER TO THE DIRECTORS OF HRL HOLDINGS LIMITED
As lead auditor of HRL Holdings Limited for the year ended 30 June 2015, I declare that, to the best of
my knowledge and belief, there have been:
1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
2. No contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of HRL Holdings Limited and the entities it controlled during the period.
K L Colyer
Director
BDO Audit Pty Ltd
Brisbane, 28 August 2015
BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050
110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited
by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional
Standards Legislation, other than for the acts or omissions of financial services licensees.
27
ADDITIONAL ASX INFORMATION
Additional information required by the Australian Stock Exchange Ltd and not shown elsewhere in this report is as follows.
The information is current as at 19 August 2015.
Distribution of equity securities
HRL – Ordinary Fully Paid Shares
Number of Securities Held
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Total
No’s of holders
327
348
134
363
118
1,290
Number of unmarketable parcels of shares
729
Twenty largest holders
HRL – Ordinary Fully Paid Shares
J P MORGAN NOMINEES AUSTRALIA LIMITED
No. Name of Shareholder
1 TULLA PROPERTY PARTNERS PTY LTD
2
3 DARREN ANDERSON & JULIE ANDERSON
4 ANDERSON PROPERTY HOLDINGS PTY LTD
5 GREG ANDERSON & NANCY ANDERSON
6 CRAIG ANDERSON & AMANDA ANDERSON
7 COWLEY SUPER PTY LTD
8 ELLIOTT NOMINEES P/L
9 ESTANZA PTY LTD
10 MR JONATHAN PAUL KERSHAW MARSHALL
11 MS AMANDA JANE ALIDENES
12 POKTON PTY LIMITED
13 MR ALEXANDER JAMES WHITE
14 HOT PROPERTY REALTY MACKAY PTY LTD
15 MR NICHOLAS DERMOTT MCDONALD
16 H K PRICE PTY LTD
17 MR LESLIE JOHN BUNT
18 MR JOHN COOPER TAYLOR & MRS SHARON MAREE TAYLOR
19 LORRAINE JEAN ZILLMAN
20 LOCANTRO SPECULATIVE INVESTMENTS PTY LTD
Voting Rights
All fully paid ordinary shares carry one vote per share without restriction.
Substantial Shareholders
The company has the following substantial shareholders as at 19 August 2015:
Mr Kevin Maloney holds an interest in 45,282,958 shares (29.30%)
Mr Darren Anderson holds an interest in 15,863,563 shares (10.26%)
Viburum Funds Pty Ltd holds an interest in 15,745,790 shares (10.19%)
Holding
45,282,988
13,844,117
8,171,255
7,692,308
7,402,024
7,402,024
3,000,000
2,646,710
2,308,000
2,011,456
2,000,000
1,538,462
1,405,000
1,400,000
1,391,538
1,140,323
1,012,540
923,077
853,847
837,902
% Held
29.30%
8.96%
5.29%
4.98%
4.79%
4.79%
1.94%
1.71%
1.49%
1.30%
1.29%
1.00%
0.91%
0.91%
0.90%
0.74%
0.66%
0.60%
0.55%
0.54%
112,263,571
72.64%
28
ADDITIONAL ASX INFORMATION
Interests in Exploration Tenements
Type
Location
Status
Grant
Expiry Date
HRL Interest
GEP 6
GEP 8
Portland
Warrnambool
Granted
Granted
14/05/2007
14/05/2007
13/9/2019
13/9/2019
100%
100%
29
STATEMENT OF COMPREHENSIVE INCOME
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2015
Environmental services revenue
Interest revenue
Costs and consumables relating to the provision of services
Employee benefits expense
Depreciation and amortisation expenses
Finance costs
Other expenses
Impairment of receivables
Gain on bargain purchase
12 months
ended 30 June
2015
13.5 months
from 15 May
2013 to 30 June
2014
Note
$
$
4,669,609
30,100
4,873,779
409
(438,496)
(2,752,910)
(432,465)
(1,953)
(1,395,610)
(5,012)
(286,221)
(2,020,802)
(221,888)
(26,720)
(893,106)
(6,969)
-
128,950
7
4
Employee benefits expense on Precise earn-out payments
16 & 7
(51,650)
-
Acquisition expenses
2 & 3
(268,358)
(409,553)
Listing expense arising on deemed acquisition
Profit/(loss) before income tax
Income tax benefit/(expense)
Profit/(loss) after income tax
Other comprehensive income
Items that may be reclassified to profit or loss
Foreign currency translation differences for foreign operations
Income tax
Other comprehensive income for the period, net of tax
Total comprehensive income/(loss)
Earnings per share
Basic earnings per share
Diluted earnings per share
2
5
8
8
(1,252,455)
-
(1,899,200)
1,137,879
315,445
(393,050)
(1,583,755)
744,829
(509,466)
-
(509,466)
-
-
-
(2,093,221)
744,829
Cents
Cents
(0.3)
(0.3)
1.7
1.7
The Statement of Comprehensive Income should be read in conjunction with the Notes to the Financial Statements.
30
BALANCE SHEET
Consolidated Balance Sheet
As at 30 June 2015
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Other current assets
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Trade and other receivables
Plant and equipment
Intangible assets
Goodwill
Deferred tax assets
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Current tax liabilities
Short-term provisions
Borrowings
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Borrowings
Deferred tax liabilities
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed capital
Reserves
Retained earnings/(Accumulated losses)
TOTAL EQUITY
Note
9
10
11
10
12
13
14
5
15
16
17
17
5
18
19
30 June
2015
$
859,500
924,916
99,103
1,883,519
68,585
372,933
251,913
4,079,678
660,905
5,434,014
30 June
2014
$
8,049
659,049
200
667,298
38,850
185,431
382,870
-
52,016
659,167
7,317,533
1,326,465
514,497
235,622
154,632
114,625
1,019,376
47,553
27,396
74,949
513,129
-
47,120
-
560,249
-
-
-
1,094,325
560,249
6,223,208
766,216
8,220,282
(509,466)
(1,487,608)
6,223,208
670,069
-
96,147
766,216
The Balance Sheet should be read in conjunction with the Notes to the Financial Statements.
31
STATEMENT OF CHANGES IN EQUITY
Consolidated Statement of Changes in Equity
For the year ended 30 June 2015
Contributed
Capital
Retained
Earnings/
(Accumulated
Losses)
Foreign
Currency
Reserve
Balance at 15 May 2013
Transactions with owners in their capacity
as owners
Contributions of capital
Dividends provided for or paid
Total
Comprehensive income
Profit after income tax
Total comprehensive income
$
-
$
-
670,069
-
670,069
-
(648,682)
(648,682)
-
-
744,829
744,829
Balance at 30 June 2014
670,069
96,147
Balance at 1 July 2014
670,069
96,147
Transactions with owners in their capacity
as owners
Deemed issue of share capital on acquisition
Contributions of capital
Share issue costs (net of tax)
Total
Comprehensive income
Loss after income tax
Foreign currency translation differences for
foreign operations
Total comprehensive income
2,899,715
5,105,240
(454,742)
7,550,213
-
-
-
-
-
-
-
(1,583,755)
Total
$
-
670,069
(648,682)
21,387
744,829
744,829
766,216
766,216
2,899,715
5,105,240
(454,742)
7,550,213
(1,583,755)
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(509,466)
(509,466)
(1,583,755)
(509,466)
(2,093,221)
Balance at 30 June 2015
8,220,282
(1,487,608)
(509,466)
6,223,208
The Statement of Changes in Equity should be read in conjunction with the Notes to the Financial Statements.
32
STATEMENT OF CASH FLOWS
Consolidated Statement of Cash Flows
For the year ended 30 June 2015
12 months
ended 30 June
2015
Note
13.5 months
from 15 May
2013 to 30 June
2014
$
$
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Payments to suppliers and employees
Interest received
Finance costs
5,222,936
(5,660,777)
22,754
(1,953)
Net cash provided by/(used in) operating activities
20
(417,040)
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for plant & equipment
Proceeds from the sale of plant & equipment
Net inflow of cash from the acquisition of OCTIEF
Net outflow of cash from the acquisition of Precise
Payments for deposits
Loans to related parties
Net cash provided by/(used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Contributions of capital
Capital raising costs
Proceeds from borrowings
Repayment of borrowings
Finance lease payments
2
3
22
Net cash provided/(used in) by financing activities
Net increase/(decrease) in cash and cash equivalents held
Net foreign exchange differences
Cash and cash equivalents at the beginning of the financial period
Cash and cash equivalents at the end of the financial period 9
(139,642)
-
1,731,848
(4,695,229)
(29,735)
-
(3,132,758)
5,105,240
(649,631)
115,002
(128,213)
(4,332)
4,438,066
888,268
(36,817)
8,049
859,500
4,901,211
(3,416,208)
409
(26,720)
1,458,692
(86,822)
13,000
-
-
(38,600)
(1,318,750)
(1,431,172)
1
-
250,000
(250,000)
(19,472)
(19,471)
8,049
-
-
8,049
The Statement of Cash Flows should be read in conjunction with the Notes to the Financial Statements.
33
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Introduction
This financial report covers the Consolidated Entity of HRL Holdings Limited (the “Company”) and its controlled entities
(together referred to as the “Consolidated Entity”). HRL Holdings Limited is a listed public company, incorporated and
domiciled in Australia. At the 2014 AGM shareholders approved the change of the Company’s name from Hot Rock Limited
to HRL Holdings Limited.
As a result of the acquisition of OCTIEF Pty Ltd (as discussed in Note 2) this financial report represents a continuation of
the financial statements of OCTIEF Pty Ltd being the accounting parent entity of the Group. OCTIEF Pty Ltd was registered
on 15 May 2013. As a result the comparatives shown cover the period 15 May 2013 to 30 June 2014.
The accounting policies have been consistently applied, unless otherwise stated.
Operations and principal activities
The principal operating activities of the Group are environmental consulting and hazardous materials analytical laboratory
services with offices and laboratory facilities in Brisbane, Darwin, Christchurch and Wellington.
The Group offers services including industrial hygiene, asbestos and hazardous materials management, environmental
services (air, water and soil including contaminated land), building contamination assessment, and specialised NATA/IANZ
- accredited laboratory analysis and on-site testing and monitoring.
Geothermal exploration projects have been placed on care and maintenance while the Group evaluates the best way to
develop the projects held.
Currency
The financial report is presented in Australian dollars, rounded to the nearest dollar, which is the functional currency of the
Company.
Authorisation of financial report
The financial report was authorised for issue on 28 August 2015.
Basis of preparation
The financial statements are general purpose financial statements that have been prepared in accordance with Australian
Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian
Accounting Standards Board (AASB) and the Corporations Act 2001. HRL Holdings Limited is a for-profit entity for the
purpose of preparing the financial statements.
The financial statements of the Consolidated Entity also comply with International Financial Reporting Standards (IFRS)
as issued by the International Accounting Standards Board (IASB).
Historical cost convention
The financial statements have been prepared under the historical convention, modified, where applicable, by the
measurement at fair value of selected non-current assets, financial assets and financial liabilities.
Critical accounting estimates and judgements
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It
also requires management to exercise its judgement in the process of applying the Consolidated Entity’s accounting
policies.
The Directors evaluate estimates and judgments incorporated into the financial report based on historical knowledge and
best available current information. Estimates assume a reasonable expectation of future events and are based on historical
experiences and the best available current information on current trends and economic data, obtained both externally and
within the Consolidated Entity. The estimates and judgements made assume a reasonable expectation of future events
but actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised if the revision affects only that period or in the period and future
periods if the revision affects both current and future periods. The following key change in accounting estimates were
made during the year:
Useful life of intangible assets (licences and accreditations) reduced from 5 years to 2 years.
Assuming the assets are held until the end of their estimated useful lives, amortisation in future years in relation to these
assets will be decreased by the following amounts:
34
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Year ending 30 June 2016: $40,000
Year ending 30 June 2017: $40,000
Year ending 30 June 2018: $37,479
The following critical accounting estimates or judgements were made in the process of applying the entity’s accounting
policies that in management’s assessment can significantly affect the amounts recognised in the financial statements:
Intangibles
Useful life of intangible assets estimated to be between 2 and 3 years.
Goodwill
The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated
in Note 1(p). The recoverable amounts of cash generating units have been determined based on value in use calculations.
These calculations require the use of assumptions. Refer to Note 14 for details of these assumptions and the potential
impact of changes to the assumptions.
Provisions
The Group has estimated the likely payout under the earn out payment on acquisition of Precise Consulting and Laboratory
Limited (refer Note 3). This calculation requires the use of assumptions. Refer to Note 16 for details of these assumptions
and the potential impact of changes to the assumptions.
Accounting policies
(a) Principles of Consolidation
Subsidiaries are all entities (including structured entities) over which the Consolidated Entity has control. The Consolidated
Entity controls an entity when the Consolidated Entity is exposed to, or has rights to, variable returns from its involvement
with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries
are fully consolidated from the date on which control is transferred to the Consolidated Entity. They are deconsolidated
from the date that control ceases.
The acquisition method of accounting is used to account for business combinations by the Consolidated Entity.
Intercompany transactions, balances and unrealised gains on transactions between Consolidated Entity companies are
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the
transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the
policies adopted by the Consolidated Entity.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statement of
comprehensive income, statement of changes in equity and balance sheet respectively.
Business combinations
Business combinations occur where an acquirer obtains control over one or more businesses.
A business combination is accounted for by applying the acquisition method, unless it is a combination involving entities
or businesses under common control. The business combination will be accounted for from the date that control is attained,
whereby the fair value of the identifiable assets acquired and liabilities (including contingent liabilities) assumed is
recognised (subject to certain limited exemptions).
When measuring the consideration transferred in the business combination, any asset or liability resulting from a contingent
consideration arrangement is also included. Subsequent to initial recognition, contingent consideration classified as equity
is not remeasured and its subsequent settlement is accounted for within equity. Contingent consideration classified as an
asset or liability is remeasured each reporting period to fair value, recognising any change to fair value in profit or loss,
unless the change in value can be identified as existing at acquisition date.
All transaction costs incurred in relation to the business combination are expensed to the statement of comprehensive
income. The acquisition of a business may result in the recognition of goodwill or a gain from a bargain purchase.
(b) Income Tax
The income tax expense (benefit) for the year comprises current income tax expense (income) and deferred tax expense
(income). Current income tax expense charged to profit or loss is the tax payable on taxable income. Current tax liabilities
(assets) are measured at the amounts expected to be paid to (recovered from) the relevant taxation authority. Deferred
income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well
unused tax losses. Current and deferred income tax expense (income) is charged or credited outside profit or loss when
the tax relates to items that are recognised outside profit or loss.
35
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Except for business combinations, no deferred income tax is recognised from the initial recognition of an asset or liability,
where there is no effect on accounting or taxable profit or loss.
Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is
realised or the liability is settled and their measurement also reflects the manner in which management expects to recover
or settle the carrying amount of the related asset or liability.
Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is
probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised.
Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and joint ventures,
deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be
controlled and it is not probable that the reversal will occur in the foreseeable future.
Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net
settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets
and liabilities are offset where: (a) a legally enforceable right of set-off exists; and (b) the deferred tax assets and liabilities
relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities
where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will
occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or
settled.
The charge for current income tax expense is based on the profit/(loss) for the year adjusted for any non-assessable or
disallowed items. It is calculated using the tax rates that have been enacted or are substantially enacted by the balance
date.
Deferred tax is accounted for using the balance sheet method in respect of temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts in the financial statements.
(c) Plant and Equipment
Each class of property, plant and equipment is carried at cost or fair value as indicated less, where applicable, any
accumulated depreciation and impairment losses.
Plant and equipment are measured on the cost basis and therefore carried at cost less accumulated depreciation and any
accumulated impairment. In the event the carrying amount of plant and equipment is greater than the estimated
recoverable amount, the carrying amount is written down immediately to the estimated recoverable amount and impairment
losses are recognised in profit or loss. A formal assessment of recoverable amount is made when impairment indicators
are present (refer to Note 1(f) for details of policy for impairment).
The cost of fixed assets constructed within the Consolidated Entity includes the cost of materials, direct labour, borrowing
costs and an appropriate proportion of fixed and variable overheads.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only
when it is probable that future benefits associated with the item will flow to the Consolidated Entity and the cost of the item
can be measured reliably. All other repairs and maintenance are charged to the statement of comprehensive income
during the financial period in which they are incurred.
Depreciation
The depreciable amount of all fixed assets is depreciated on a diminishing value basis over the asset’s useful life to the
Consolidated Entity commencing from the time the asset is held ready for use. Leasehold improvements are depreciated
over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements.
The depreciation rates used for each class of asset is:
Class of Fixed Asset
Leasehold improvements
Motor vehicles
Office equipment
Laboratory equipment
Depreciation Rate
20%
25%
40% - 67%
20% - 40%
36
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance date.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses
are included in the statement of comprehensive income. When revalued assets are sold, amounts included in the
revaluation surplus relating to that asset are transferred to retained earnings.
(d) Leases
Leases of fixed assets where substantially all the risks and benefits incidental to the ownership of the asset, but not the
legal ownership is transferred to entities in the Consolidated Entity, are classified as finance leases.
Finance leases are capitalised by recognising an asset and a liability at the lower of the amounts equal to the fair value of
the leased property or the present value of the minimum lease payments, including any guaranteed residual values.
Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period.
Leased assets are depreciated on a straight-line basis over the shorter of their estimated useful lives or the lease term.
Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are recognised
as expenses on a straight-line basis over the lease term.
Lease incentives under operating leases are recognised as a liability and amortised on a straight-line basis over the lease
term.
(e) Financial Instruments
Recognition and initial measurement
Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions to
the instrument. For financial assets, this is equivalent to the date that the Consolidated Entity commits itself to either the
purchase or sale of the asset.
Financial instruments are initially measured at fair value plus transaction costs, except where the instrument is classified
“at fair value through profit or loss”, in which case transaction costs are expensed to profit or loss immediately.
Classification and subsequent measurement
Financial instruments are subsequently measured at fair value, amortised cost using the effective interest rate method, or
cost.
Amortised cost is the amount at which the financial asset or financial liability is measured at initial recognition less principal
repayments and any reduction for impairment, and adjusted for any cumulative amortisation of the difference between that
initial amount and the maturity amount calculated using the effective interest method.
Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to
determine the fair value for all unlisted securities, including recent arm’s length transactions, reference to similar
instruments and option pricing models.
The effective interest method is used to allocate interest income or interest expense over the relevant period and is
equivalent to the rate that discounts estimated future cash payments or receipts (including fees, transaction costs and
other premiums or discounts) through the expected life (or when this cannot be reliably predicted, the contractual term) of
the financial instrument to the net carrying amount of the financial asset or financial liability. Revisions to expected future
net cash flows will necessitate an adjustment to the carrying value with a consequential recognition of an income or
expense item in profit or loss.
(i) Financial assets at fair value through profit or loss
Financial assets are classified at “fair value through profit or loss” when they are held for trading for the purpose of short-
term profit taking, derivatives not held for hedging purposes, or when they are designated as such to avoid an accounting
mismatch or to enable performance evaluation where a group of financial assets is managed by key management
personnel on a fair value basis in accordance with a documented risk management or investment strategy. Such assets
are subsequently measured at fair value with changes in carrying value being included in profit or loss.
(ii) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an
active market and are subsequently measured at amortised cost. Loans and receivables are included in current assets,
where they are expected to mature within 12 months after the end of the reporting period.
37
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(e) Financial Instruments (continued)
(iii) Held-to-maturity investments
Held-to-maturity investments are non-derivative financial assets that have fixed maturities and fixed or determinable
payments, and it is the Consolidated Entity’s intention to hold these investments to maturity. They are subsequently
measured at amortised cost.
Held-to-maturity investments are included in non-current assets where they are expected to mature greater than 12 months
after the end of the reporting period. All other investments are classified as current assets.
(iv) Available-for-sale financial assets
Available-for-sale financial assets are non-derivative financial assets that are either not suitable to be classified into other
categories of financial assets due to their nature, or they are designated as such by management. They comprise
investments in the equity of other entities where there is neither a fixed maturity nor fixed or determinable payments.
They are subsequently measured at fair value with changes in such fair value (ie gains or losses) recognised in other
comprehensive income (except for impairment losses and foreign exchange gains and losses). When the financial asset
is derecognised, the cumulative gain or loss pertaining to that asset previously recognised in other comprehensive income
is reclassified into profit or loss.
Available-for-sale financial assets are included in non-current assets where they are expected to be sold greater than 12
months after the end of the reporting period. All other financial assets are classified as current assets.
(v) Financial liabilities
Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised cost.
Impairment
At the end of each reporting period, the Consolidated Entity assesses whether there is objective evidence that a financial
instrument has been impaired. In the case of available-for-sale financial instruments, a significant or prolonged decline in
the value of the instrument is considered to determine whether an impairment has arisen. Impairment losses are recognised
in profit or loss. Also, any cumulative decline in fair value previously recognised in other comprehensive income is
reclassified to profit or loss at this point.
Financial guarantees
Where material, financial guarantees issued that require the issuer to make specified payments to reimburse the holder
for a loss it incurs because a specified debtor fails to make payment when due are recognised as a financial liability at fair
value on initial recognition.
The guarantee is subsequently measured at the higher of the best estimate of the obligation and the amount initially
recognised less, when appropriate, cumulative amortisation in accordance with AASB 118: Revenue. Where the entity
gives guarantees in exchange for a fee, revenue is recognised under AASB 118.
The fair value of financial guarantee contracts has been assessed using a probability-weighted discounted cash flow
approach. The probability has been based on:
– the likelihood of the guaranteed party defaulting in a year period;
– the proportion of the exposure that is not expected to be recovered due to the guaranteed party defaulting; and
– the maximum loss exposed if the guaranteed party were to default.
Derecognition
Financial assets are derecognised where the contractual rights to receipt of cash flows expire or the asset is transferred to
another party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated
with the asset. Financial liabilities are derecognised where the related obligations are discharged, cancelled or expired.
The difference between the carrying value of the financial liability extinguished or transferred to another party and the fair
value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss.
38
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(f) Impairment of Assets
At the end of each reporting period, the Consolidated Entity assesses whether there is any indication that an asset may
be impaired. 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 of disposal and value in use, to the asset’s carrying
amount. Any excess of the asset’s carrying amount over its recoverable amount is recognised immediately in profit or loss,
unless the asset is carried at a revalued amount in accordance with another Standard. Any impairment loss of a revalued
asset is treated as a revaluation decrease in accordance with that other Standard.
Where it is not possible to estimate the recoverable amount of an individual asset, the Consolidated Entity estimates the
recoverable amount of the cash-generating unit to which the asset belongs.
(g) Employee Benefits
(i) Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits that are expected to be settled wholly within 12 months
after the end of the period in which the employees render the related service are recognised in respect of employees’
services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities
are settled. The liabilities are presented as current employee benefit obligations in the balance sheet.
(ii) Other long-term employee benefit obligations
The liabilities for long service leave and annual leave are not expected to be settled wholly within 12 months after the end
of the period in which the employees render the related service. They are therefore measured as the present value of
expected future payments to be made in respect of services provided by employees up to the end of the reporting period.
Consideration is given to expected future wage and salary levels, experience of employee departures and periods of
service. Expected future payments are discounted using market yields at the end of the reporting period of government
bonds with terms and currencies that match, as closely as possible, the estimated future cash outflows.
The obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to
defer settlement for at least twelve months after the reporting period, regardless of when the actual settlement is expected
to occur.
Contributions to defined contribution plans are expensed when incurred.
(h) Cash and Cash Equivalents
For statement of cash flow presentation purposes cash and cash equivalents include cash on hand, deposits available on
demand with banks, other short-term highly liquid investments with original maturities of 3 months or less, and bank
overdrafts. Bank overdrafts are reported within short-term borrowings in current liabilities in the balance sheet.
(i) Revenue and Other Income
Revenue is measured at the fair value of the consideration received or receivable after taking into account any trade
discounts and volume rebates allowed. When the inflow of consideration is deferred, it is treated as the provision of
financing and is discounted at a rate of interest that is generally accepted in the market for similar arrangements. The
difference between the amount initially recognised and the amount ultimately received is interest revenue.
Revenue from the provision of services is recognised on an accruals basis in the period in which the service is provided.
Revenue from the provision of these services is calculated with reference to the professional staff hours incurred on each
client assignment adjusted for any time that may not be recoverable.
Interest revenue is recognised using the effective interest rate method.
(j) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is
not recoverable from the relevant tax authority. Receivables and payables are stated inclusive of the amount of GST
receivable or payable. The net amount of GST recoverable from, or payable to, the relevant tax authority is included with
other receivables or payables in the balance sheet.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities
which are recoverable from, or payable to, the relevant tax authority are presented as operating cash flows included in
receipts from customers or payments to suppliers.
39
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(k) Share Capital
Issued and paid up capital is recognised at the fair value of the consideration received by the Consolidated Entity. Any
transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share
proceeds received.
(l) Earnings per Share
The Consolidated Entity presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is
calculated by dividing the profit or loss attributable to ordinary shareholders by the weighted average number of ordinary
shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary
shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential
ordinary shares.
(m) Comparative Figures
When required by accounting standards comparative figures have been adjusted to conform to changes in presentation
for the current financial year.
(n) Foreign Exchange
Exchange differences arising on the translation of monetary items are recognised in the statement of comprehensive
income, except where deferred in equity as a qualifying cash flow or net investment hedges. Exchange differences arising
on the translation of non-monetary items are recognised directly in equity to the extent that the gain or loss is directly
recognised in equity, otherwise the exchange difference is recognised in the statement of comprehensive income.
Subsidiary companies
The financial results and position of foreign operations whose functional currency is different from the Consolidated Entity’s
presentation currency are translated as follows:
- assets and liabilities are translated at year-end exchange rates prevailing at that reporting date;
-
-
income and expenses are translated at average exchange rates for the period; and
retained earnings are translated at the exchange rates prevailing at the date of the transaction.
On consolidation, exchange differences arising from the translation of any net investment in foreign entities are recognised
in other comprehensive income. When a foreign operation is sold or any borrowings forming part of the net investment are
repaid, the associated exchange differences are reclassified to profit or loss, as part of the gain or loss on sale. Goodwill
and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign
operation and translated at the closing rate.
(o) Intangible Assets
Customer contracts
Customer contracts acquired as part of a business combination are recognised separately from goodwill. The customer
contracts are carried at their fair value at the date of acquisition less accumulated amortisation and impairment losses.
Amortisation is calculated based on the timing of projected cash flows of the contracts over their estimated useful lives,
which currently vary from 1 to 3 years.
Licenses and accreditations
Licenses and accreditations acquired as part of a business combination are recognised separately from goodwill. The
licenses and accreditations are carried at their fair value at the date of acquisition less accumulated amortisation and
impairment losses. Amortisation is calculated based on the timing of projected cash flows of the contracts over their
estimated useful lives, which is estimated at 2 years.
(p) Goodwill
Goodwill is not amortised but it is tested for impairment annually, or more frequently if events or changes in circumstances
indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the
disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-
generating units or groups of cash-generating units that are expected to benefit from the business combination in which
the goodwill arose. The units or groups of units are identified at the lowest level at which goodwill is monitored for internal
management purposes.
40
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(q) Finance Costs
Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset (i.e. an asset that
necessarily takes a substantial period of time to get ready for its intended use or sale) are capitalised as part of the cost of
that asset.
For non-specific borrowings, borrowing costs are capitalised using a weighted average capitalisation rate. All other
borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that the Group
incurs in connection with the borrowing of funds.
(r) New Accounting Standards
The Consolidated Entity adopted all new Accounting Standards and Interpretations effective for the year ended 30 June
2015. There were no material impacts on the financial statements of the Consolidated Entity as a result of adopting these
standards.
(s) New Standards and Interpretations Not Yet Adopted
Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2015
reporting periods. The Consolidated Entity has decided against early adoption of these standards. The Consolidated
Entity's assessment of the impact of these new standards and interpretations is set out below:
AASB 9 Financial Instruments
This standard and its consequential amendments are currently applicable to annual reporting periods beginning on or after
1 January 2018. This standard introduces new classification and measurement models for financial assets, using a single
approach to determine whether a financial asset is measured at amortised cost or fair value. To be classified and measured
at amortised cost, assets must satisfy the business model test for managing the financial assets and have certain
contractual cash flow characteristics. All other financial instrument assets are to be classified and measured at fair value.
This standard allows an irrevocable election on initial recognition to present gains and losses on equity instruments (that
are not held-for-trading) in other comprehensive income, with dividends as a return on these investments being recognised
in profit or loss. In addition, those equity instruments measured at fair value through other comprehensive income would
no longer have to apply any impairment requirements nor would there be any 'recycling' of gains or losses through profit
or loss on disposal. The accounting for financial liabilities continues to be classified and measured in accordance with
AASB 139, with one exception, being that the portion of a change of fair value relating to the entity's own credit risk is to
be presented in other comprehensive income unless it would create an accounting mismatch. The Consolidated Entity has
not yet evaluated the impact adoption of this standard will have.
AASB 15 Revenue from Contracts with Customers
This standard and its consequential amendments are currently applicable to annual reporting periods beginning on or after
1 January 2017. This standard requires recognised revenue to depict the transfer of promised goods or services to
customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those
goods or services. This means that revenue will be recognised when control of goods or services is transferred, rather than
on transfer of risks and rewards as is currently the case under IAS 18 Revenue. The Consolidated Entity has not yet
evaluated the impact adoption of this standard will have.
41
NOTES TO THE FINANCIAL STATEMENTS
NOTE 2
OCTIEF ACQUISITION ACCOUNTING AND SHARE BASED PAYMENT EXPENSE
On 15 September 2014 the Company announced the completion of the 100% acquisition of an environment services
business, OCTIEF Pty Ltd (OCTIEF). The initial consideration paid by HRL to the vendors for the purchase of 100% of
OCTIEF was the issue and allotment of 320,754,355* fully paid ordinary HRL shares. This represents 50% of the total
maximum consideration of the transaction.
HRL agreed to issue further HRL shares to the vendors upon satisfaction of each of the three identified milestones being
achieved by the respective dates as follows:
Milestones
Milestone shares
1. OCTIEF achieves revenue for the 6 months to 31
December 2014 which equals or exceeds $1.75m.
160,377,178* being 25% of the total
consideration for the transaction.
Result
Achieved
If revenue is less than $1.75 million for the
six month period ending 31 December 2014,
the Milestone One Payment will be reduced
on a pro-rata basis, but cannot be less than
75% of the full entitlement.
2. OCTIEF establish a laboratory in Darwin
96,226,306* being 15% of the total
consideration for the transaction.
Achieved
3. OCTIEF achieves revenue for the 12 months to
30 June 2015 which equals or exceeds $4.25m.
64,150,871* being 10% of the total
consideration for the transaction.
If revenue is less than $4.25 million for the
12 month ending period 30 June 2015, the
Milestone Three Payment will be reduced on
a pro-rata basis, but cannot be less than
75% of the full entitlement.
Partially achieved –
88.2% of the maximum
number of shares to be
issued in due course
* Prior to the 1:13 share consolidation
The acquisition of OCTIEF resulted in OCTIEF shareholders holding a controlling interest in HRL after the transaction.
This transaction did not meet the definition of a business combination in AASB 3 Business Combinations. The transaction
has therefore been accounted in accordance with AASB 2 Share-based Payment and has been accounted for as a
continuation of the financial statements of OCTIEF together with a deemed issue of shares. The deemed issue of shares
is, in effect, a share-based payment transaction whereby OCTIEF is deemed to have received the net assets of HRL,
together with the listing status of HRL.
Because the financial statements represents a continuation of the financial statements of OCTIEF, the principles and
guidance on the preparation and presentation of the financial statements in a reverse acquisition set out in AASB 3 have
been applied as follows:
•
•
•
•
•
•
•
fair value adjustments arising at acquisition were made to HRL’s assets and liabilities, not those of OCTIEF. As the
carrying value of all assets and liabilities held by HRL at acquisition date approximated their fair value, no
adjustments were required;
the equity structure (the number and type of equity instruments issued) at the date of the acquisition reflects the
equity structure of HRL, including the equity instruments issued to effect the acquisition;
retained earnings/ (accumulated losses) and other equity balances at acquisition date are those of OCTIEF;
the results for the year ended 30 June 2015 comprise the consolidated results for OCTIEF together with the results
of the wider HRL group from 15 September 2014;
the comparative results represent the consolidated results of OCTIEF only;
the cost of the acquisition, and amount recognised as contributed equity to affect the transaction, is based on the
deemed number of shares that OCTIEF would have needed to issue to give the shareholders of HRL the same
shareholding percentage in the Combined Entity that results from the transaction; and
a share-based payment transaction arises whereby OCTIEF is deemed to have issued shares in exchange for the
net assets of HRL together with the listing status of HRL. The listing status does not qualify for recognition as an
intangible asset and the relevant cost has therefore been expensed as a listing expense.
The fair value of the deemed number of shares that OCTIEF would have needed to issue is estimated to be $2,899,715.
The fair value of HRL’s net assets at acquisition date was $1,647,260. Deducting this from the deemed consideration
results in a listing expense of $1,252,455.
42
NOTES TO THE FINANCIAL STATEMENTS
NOTE 2
OCTIEF ACQUISITION ACCOUNTING AND SHARE BASED PAYMENT EXPENSE (CONT’D)
The value of the transaction is as follows:
Assets and liabilities acquired:
Cash and cash equivalents
Trade and other receivables
Other current assets
Property, plant and equipment
Trade and other payables
Other liabilities
Net assets acquired
Fair value of notional shares issued to affect the transaction
Listing expense recognised in statement of comprehensive income
15 September
2014
$
1,731,848
25,554
7,416
1,161
(109,719)
(9,000)
1,647,260
2,899,715
1,252,455
The fair value of the shares was assessed on the basis of the market value of HRL Holdings Limited’s shares at
acquisition date.
Acquisition related costs
Acquisition-related costs of $120,910 that were not directly attributable to the issue of shares are included in other
expenses in profit or loss and in operating cash flows in the statement of cash flows.
NOTE 3
PRECISE CONSULTING ACQUISITION ACCOUNTING
On 1 April 2015, HRL acquired 100% of the issued capital of Precise Consulting and Laboratory Limited (Precise
Consulting). The agreed purchase consideration was:
initial payment of NZD$5,000,000 cash; and
earn-out consideration of up to NZD$2,500,000.
The amount of earn out consideration is based on Precise Consulting’s earnings before interest and taxes (EBIT) for the
year 1 January 2015 to 31 December 2015:
EBIT (NZD)
Earn Out Consideration (NZD)
Less than $1.9 million
Nil
$1.9 – 2.1 million
$2.1m to $2.3 million
$2.3m to $2.5 million
More than $2.5 million
$700,000
$1,300,000
$1,900,000
$2,500,000
One third of the earn-out consideration will be paid in early 2016. Payment of the remaining two thirds of the earn-out
consideration will be paid in equal monthly instalments from January 2016 to March 2018.
Payment of the earn-out consideration is contingent on Mr Andre Halkyard’s ongoing service with Precise Consulting. Mr
Halkyard will remain General Manager of Precise Consulting for a minimum period of three years after acquisition. In the
situation where Mr Halkyard’s employment is terminated prior to the minimum three year period, the earn-out consideration
will be reduced proportionately to the length of time not employed.
43
NOTES TO THE FINANCIAL STATEMENTS
NOTE 3
PRECISE CONSULTING ACQUISITION ACCOUNTING (CONT’D)
As the earn-out consideration is contingent on Mr Andre Halkyard’s ongoing service, the principles and guidance as set
out in AASB 3 require that any earn-out consideration be expensed as an employment cost in the relevant period the
service was provided. Consequently the earn-out consideration does not form part of the part of purchase consideration
when accounting for the business combination. Refer to Note 16 for details of the accounting for the earn-out provision.
The assets and liabilities recognised as a result of the acquisition are as follows:
Purchase consideration:
Cash payment of $5,000,000 NZD
Fair value of assets and liabilities acquired:
Cash and cash equivalents
Trade and other receivables
Property, plant and equipment
Intangibles – licences and accreditations
Trade and other payables
Tax payable
Deferred tax liabilities
Employee provisions
Borrowings
Net identifiable assets acquired
Goodwill on acquisition
Net assets acquired
1 April 2015
$AUD
4,895,721
200,492
395,805
110,695
244,786
(231,410)
(106,074)
(68,540)
(12,736)
(148,790)
384,228
4,511,493
4,895,721
The goodwill is attributable to the location, reputation, workforce and the high profitability of the acquired business. It will
not be deductible for tax purposes.
No other intangible assets, such as customer contractual arrangements were able to be identified based on Precise
Consulting’s systems and processes at acquisition date.
Revenue and profit contribution
Precise Consulting contributed revenues of $987,495 and net profit of $476,531 to the group for the period from 1 April
2015 to 30 June 2015.
If the acquisition had occurred on 1 July 2014 and the operations of Precise been included from that date then the
consolidated pro-forma revenue and loss for the year ended 30 June 2015 would have been $6,975,140 and ($806,054)
respectively.
Outflow of cash to acquire Precise Consulting, net of cash acquired
Cash consideration
Less: cash and cash equivalents acquired
Net outflow of cash – investing activities
Acquisition related costs
1 April 2015
$AUD
4,895,721
(200,492)
4,695,229
Acquisition-related costs of $147,448 that were not directly attributable to the issue of shares are included in other
expenses in profit or loss and in operating cash flows in the statement of cash flows.
44
NOTES TO THE FINANCIAL STATEMENTS
NOTE 4 OCTIEF CONSULTING AND LABORATORY ACQUISITION ACCOUNTING
On 7 June 2013 OCTIEF Pty Ltd acquired the assets and business of Octief Consulting & Laboratory Services, an
environmental consulting business.
The assets and liabilities recognised as a result of the acquisition are as follows:
Purchase consideration:
Payable to Integrated Holdings Group Pty Ltd
Fair value of assets and liabilities acquired:
Property, plant and equipment
Trade and other receivables
Intangibles – customer contracts
Intangibles – licences and accreditations
Intangibles – other
Trade and other payables
Deferred taxes
Employee provisions
Net identifiable assets acquired
Gain on bargain purchase
Revenue and profit contribution
7 June 2013
$AUD
553,327
187,171
73,800
320,000
200,000
23,850
(19,472)
(55,264)
(47,808)
682,277
128,950
The acquired business contributed revenues of $4,874,188 and net profit of $1,414,897 to the group for the period from 7
June 2013 to 30 June 2014.
As the acquisition occurred less than 1 month after OCTIEF Pty Ltd was registered (on 15 May 2013) the difference
between the revenue and profit that would have been recognised had the acquisition occurred on 15 May 2013 is
considered immaterial.
Purchase consideration – cash outflow
The acquisition was funded through a loan from OCTIEF Pty Ltd's former parent entity - Integrated Holdings Group Pty Ltd
on behalf of OCTIEF Pty Ltd. As a result there was no cash outflow associated with the purchase of the business.
No cash was acquired in the acquisition.
Acquisition related costs
Acquisition-related costs of $409,553 are included in profit or loss. Included in this amount were $283,113 of legal
settlement costs relating to a dispute with the vendor. $286,479 of these amounts were paid for by OCTIEF Pty Ltd's
former parent entity - Integrated Holdings Group Pty Ltd on behalf of OCTIEF Pty Ltd through an intercompany loan account
(refer note 22).
45
NOTES TO THE FINANCIAL STATEMENTS
NOTE 5
INCOME TAX
Income tax expense:
Current tax
Current tax on profit/loss for the year
Adjustments for current tax of prior periods
Total current tax expense
Deferred tax
Movement in deferred tax assets
Movement in deferred tax liabilities
Total deferred tax expense/(benefit)
12 months
ended 30 June
2015
13.5 months
from 15 May
2013 to 30 June
2014
$
$
139,700
500,330
-
-
139,700
500,330
(455,116)
(31)
(60,545)
(46,735)
(455,145)
(107,280)
Total income tax expense/(benefit)
(315,445)
393,050
Reconciliation of income tax expense to prima facie tax payable:
Profit/(loss) before tax
Prima facie tax at 30%
Tax effect of not deductible (taxable) amounts in calculating taxable income:
Entertainment expenses
Transaction and legal costs
Amortisation of intangible assets
Listing expense arising on deemed acquisition
Other items
Gain on bargain purchase
Settlement payment
Difference in overseas tax rate
Previously unrecognised tax losses used to reduce deferred tax expense
Total income tax expense
Amounts recognised directly in equity:
(1,899,200)
1,137,879
(569,760)
341,363
3,414
28,183
96,497
375,737
456
-
-
(65,473)
(7,040)
(242,932)
(315,445)
2,939
37,933
-
-
-
(38,685)
49,500
393,050
-
-
393,050
Aggregate current and deferred tax arising in the reporting period and not recognised in net profit or loss or other
comprehensive income but directly debited or credited to equity:
Current tax: share issue costs
Deferred tax: share issue costs
-
194,889
194,889
-
-
-
46
NOTES TO THE FINANCIAL STATEMENTS
NOTE 5
INCOME TAX (CONT’D)
12 months
ended 30 June
2015
13.5 months
from 15 May
2013 to 30 June
2014
$
$
Unrecognised temporary differences:
Temporary differences of $Nil (2014 – $Nil) have arisen as a result of the translation of the financial statements of the
group’s subsidiaries in New Zealand. However, a deferred tax liability has not been recognised as the liability will only
eventuate in the event of disposal of the subsidiary, and no such disposal is expected in the foreseeable future.
Deferred tax assets:
Balance comprises temporary differences attributable to:
Customer contracts
Employee benefits payable
Employee leave provisions
Accrued expenses
Share issue costs
Provision for doubtful debts
Precise earn-out provision
Lease liabilities
Carried forward tax losses
Other amounts
Set-off of deferred tax liabilities
Net deferred tax assets
-
8,909
30,540
13,818
194,889
4,587
14,462
16,967
425,662
654
710,488
(49,583)
660,905
1,499
43,032
14,136
-
-
-
-
-
-
1,818
60,485
(8,469)
52,016
A deferred tax asset has been recognised as the consolidated entity is forecasting to generate taxable profits over the next
five years. The loss in the current year has been impacted by the acquisitions that occurred and the consolidated entity
expects to return to profit and utilise the losses recognised.
Movements during the period:
Year ended June 2015
1 July 2014
Charged/credited to
Profit or
Loss
Other Comp.
Income
Directly to
equity
Customer contracts
Employee benefits payable
Employee leave provisions
Accrued expenses
Share issue costs
Provision for doubtful debts
Precise earn-out provision
Lease liabilities
Carried forward tax losses
1,499
43,032
14,136
-
-
-
-
-
-
Other amounts
1,818
(1,499)
(34,123)
16,404
13,818
-
4,587
14,462
16,967
425,662
(1,163)
60,485
455,115
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
194,889
-
-
-
-
-
-
Acquisition
of subsidiary
-
-
-
-
-
-
-
-
-
-
-
30 June 2015
-
8,909
30,540
13,818
194,889
4,587
14,462
16,967
425,662
654
710,488
47
NOTES TO THE FINANCIAL STATEMENTS
NOTE 5
INCOME TAX (CONT’D)
Period ended June 2014
1 July 2014
Charged/credited to
Profit or
Loss
Other Comp.
Income
Directly to
equity
Customer contracts
Employee benefits payable
Employee leave provisions
Other amounts
-
-
-
-
-
1,499
43,032
14,136
1,818
60,485
-
-
-
-
-
Acquisition
of subsidiary
-
-
-
-
-
30 June 2015
1,499
43,032
14,136
1,818
60,485
-
-
-
-
-
12 months
ended 30 June
2015
13.5 months
from 15 May
2013 to 30 June
2014
$
$
Deferred tax liabilities:
Balance comprises temporary differences attributable to:
Licences and accreditations
Other intangibles
Plant and equipment
Other amounts
Set-off of deferred tax assets
Net deferred tax liabilities
Movements during the period:
Year ended June 2015
1 July 2014
Licences and accreditations
Other intangibles
Plant and equipment
Other amounts
7,567
902
-
-
8,469
Profit or
Loss
(15,233)
(902)
13,901
2,204
(30)
Charged/credited to
Other Comp.
Income
Directly to
equity
-
-
-
-
-
Period ended June 2014
1 July 2014
Charged/credited to
Profit or
Loss
Other Comp.
Income
Directly to
equity
Licences and accreditations
Other intangibles
-
-
-
7,567
902
8,469
-
-
-
60,874
-
13,901
2,204
76,979
(49,583)
27,396
7,567
902
-
-
8,469
(8,469)
-
Acquisition
of subsidiary
68,540
-
-
-
-
30 June 2015
60,874
-
13,901
2,204
76,979
Acquisition
of subsidiary
-
-
-
30 June 2015
7,567
902
8,469
-
-
-
-
-
-
-
-
48
NOTES TO THE FINANCIAL STATEMENTS
NOTE 5
INCOME TAX (CONT’D)
Tax consolidation
HRL Holdings Limited and its wholly-owned Australian controlled entities have formed a tax-consolidated group. HRL
Holdings NZ Limited (a wholly-owned subsidiary of HRL Holdings Limited) and its wholly-owned New Zealand controlled
entities have formed a tax-consolidated group. The entities in the tax group have entered into a tax sharing agreement to
limit the joint and several liability of the wholly-owned entities in the case of a default by the relevant Head Entity.
A tax funding agreement where the wholly-owned entities fully compensate the Head Entity for any current tax receivable
and deferred tax assets related to unused tax losses or unused tax credits that are transferred to the Head Entity under
the tax consolidation legislation has also been entered into. The transfer of such amounts to the Head Entity is recognised
as inter-company receivables or payables.
Each entity in the tax-consolidated group continues to account for its own current and deferred tax amounts. These tax
amounts are measured as if each entity in the tax consolidated group continues to be a stand-alone taxpayer in its own
right.
In addition to its own current and deferred tax amounts, each relevant Parent entity also recognises 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.
NOTE 6
AUDITOR’S REMUNERATION
Audit services – BDO Audit Pty Ltd
Audit and review of financial reports
Audit and review of Precise Consulting financial reports
Independent account reports for prospectus documents
Total audit services
Non-audit services – BDO Audit Pty Ltd
Assistance with the preparation of the financial report
Total non-audit services
12 months
ended 30 June
2015
13.5 months
from 15 May
2013 to 30 June
2014
$
$
49,000
23,500
32,000
104,500
-
-
20,000
-
-
20,000
2,000
2,000
Prior to the acquisition of OCTIEF Pty Ltd by the Company BDO prepared an Investigating Experts Report in relation to
the OCTIEF Pty Ltd acquisition. The amount charged for this engagement was $48,594. As these accounts present a
continuation of the financial statements of OCTIEF Pty Ltd the amount charged is not included in profit or loss.
NOTE 7 EXPENSES
Employee benefits expenses
Defined contribution superannuation expense
Other employee benefits expenses
Remuneration expense on Precise Consulting earn-out
16
Total employee benefits expenses
113,559
2,639,351
51,650
138,335
1,882,467
-
2,804,560
2,020,802
Rental expense relating to operating leases
Minimum lease payments
275,051
220,444
Net loss on disposal of plant and equipment
22,351
6,443
49
NOTES TO THE FINANCIAL STATEMENTS
NOTE 8 EARNINGS PER SHARE
Earnings
12 months
ended 30 June
2015
$
13.5 months
from 15 May
2013 to 30 June
2014
$
Earnings used to calculate basic and diluted EPS
(1,583,755)
744,829
Weighted average number of shares and options
Weighted average number of ordinary shares outstanding during the period,
used in calculating basic earnings per share
Weighted average number of dilutive options outstanding during the period
Weighted average number of ordinary shares and potential ordinary shares
outstanding during the period, used in calculating diluted earnings per share
Number of
shares
Number of
shares
570,096,440
44,412,141
-
-
570,096,440
44,412,141
Weighted average number of ordinary shares outstanding during the current period has been calculated using:
The number of ordinary shares outstanding from the beginning of the current period to the acquisition date computed
on the basis of the weighted average number of ordinary shares of OCTIEF Pty Ltd (accounting acquirer) outstanding
during the period multiplied by the exchange ratio of 1 OCTIEF Pty Ltd share to 577,357,839 HRL Holdings Limited
shares; and
The number of ordinary shares outstanding from the acquisition date to the end of that period being the actual number
of ordinary shares of HRL Holdings Limited (the accounting acquiree) outstanding during the period.
The basic earnings per share for the comparative period before the acquisition date presented in the consolidated financial
statements has been calculated using OCTIEF Pty Ltd’s historical weighted average number of ordinary shares outstanding
multiplied by the exchange ratio of 1 OCTIEF Pty Ltd share to 577,357,839 HRL Holdings Limited shares adjusted for the
impact of the 1:13 share consolidation that occurred in March 2015.
Options are not considered dilutive as they are currently out of the money. Options may become dilutive in the future.
NOTE 9
CASH AND CASH EQUIVALENTS
Cash at bank and on hand
Cash on deposit
579,500
280,000
859,500
8,049
-
8,049
50
NOTES TO THE FINANCIAL STATEMENTS
NOTE 10 TRADE AND OTHER RECEIVABLES
CURRENT
Trade receivables
Provision for impairment
Accrued income
Other receivables
NON-CURRENT
Bonds and other deposits
June 2015
$
June 2014
$
835,236
523,481
-
835,236
15,570
74,110
924,916
-
523,481
135,540
28
659,049
68,585
38,850
Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of
business. Trade receivables are generally due for settlement within 30 days and therefore are all classified as current.
Other receivables generally arise from transactions outside the usual operating activities of the group.
The non-current bonds and other deposits receivables are due and payable within three years from the end of the reporting
period.
Impairment of receivables
The Group recognised a loss of $5,012 during the year (2014: $Nil) in relation to impaired receivables.
Movement in the provision for impairment of receivables was:
Opening balance
Impaired receivables provided for during the period
Receivables written off during the year as uncollectible
Closing balance
Past due but not impaired
-
5,012
(5,012)
-
-
6,969
(6,969)
-
Customers with balances past due but with no provision for impairment at 30 June 2015 were $117,164 (2014: $328,769).
The Group did not consider a credit risk on the aggregate balances after review credit terms of customers based on recent
collection history.
The ageing of receivables past due but not provided for is:
Past due 0-30 days
Past due 30-60 days
Past due > 60 days
95,944
20,917
303
321,310
7,459
-
117,164
328,769
51
NOTES TO THE FINANCIAL STATEMENTS
June 2015
$
June 2014
$
99,103
200
NOTE 11 OTHER ASSETS
CURRENT
Prepaid expenses
NOTE 12 PLANT AND EQUIPMENT
Leasehold improvements at cost
Accumulated depreciation
Motor vehicles at cost
Accumulated depreciation
Office furniture and equipment at cost
Accumulated depreciation
Laboratory equipment at cost
Accumulated depreciation
Total plant and equipment at cost
Total accumulated depreciation
Total plant and equipment
Movements during the year
Year ended 30 June 2015
Balance at 1 July 2014
Additions
Additions – leases
Business combinations
Disposals
Foreign exchange movements
Depreciation
Balance at 30 June 2015
28,435
(3,822)
24,613
219,767
(78,218)
141,549
104,641
(44,218)
60,423
177,204
(30,856)
146,348
530,047
(157,114)
372,933
Motor
Vehicles
Office Furniture
and Equipment
Laboratory
Equipment
Leasehold
Improvements
2,313
25,910
-
-
-
-
126,951
-
52,852
-
-
-
(3,610)
24,613
(38,254)
141,549
25,126
107,761
-
53,854
(11,616)
(7,931)
31,041
5,970
-
56,841
(10,735)
(5,252)
(17,442)
60,423
Motor
Vehicles
Office Furniture
and Equipment
Laboratory
Equipment
Period ended 30 June 2014
Balance at 15 May 2013
Additions
Business combinations
Disposals
Depreciation
Balance at 30 June 2014
Leasehold
Improvements
-
2,525
-
-
(212)
2,313
-
50,559
137,845
(19,443)
(42,010)
126,951
-
22,433
16,537
-
(7,929)
31,041
2,525
(212)
2,313
166,915
(39,964)
126,951
38,970
(7,929)
31,041
35,883
(10,757)
25,126
244,293
(58,862)
185,431
Total
185,431
139,641
52,852
110,695
(22,351)
(13,183)
(20,846)
(80,152)
146,348
372,933
Total
-
86,822
187,171
(27,654)
(60,908)
-
11,305
32,879
(8,211)
(10,757)
25,126
185,431
52
NOTES TO THE FINANCIAL STATEMENTS
NOTE 13
INTANGIBLE ASSETS
Customer contracts at cost
Accumulated amortisation
Licences and accreditations at cost
Accumulated amortisation
Other intangibles at cost
Accumulated amortisation
June 2015
$
June 2014
$
320,000
(262,063)
57,937
421,356
(227,380)
193,976
-
-
-
320,000
(113,388)
206,612
200,000
(42,521)
157,479
23,850
(5,071)
18,779
Total intangible assets
251,913
382,870
Movements during the year
Year ended 30 June 2015
Balance at 1 July 2014
Additions
Business combinations
Disposals
Foreign exchange movements
Amortisation
Balance at 30 June 2015
Customer
Contracts
206,612
Licences and
Accreditations
157,479
Other
Intangibles
Total
18,779
382,870
-
-
-
-
(148,675)
57,937
-
244,786
-
(23,430)
(184,859)
193,976
-
-
-
-
(18,779)
-
-
-
-
244,786
-
(23,430)
(352,313)
251,913
Total
-
-
Period ended 30 June 2014
Balance at 15 May 2013
Additions
Customer
Contracts
Licences and
Accreditations
-
-
-
-
Other
Intangibles
Business combinations
320,000
200,000
23,850
543,850
Disposals
Amortisation
Balance at 30 June 2014
-
(113,388)
206,612
-
(42,521)
157,479
-
(5,071)
18,779
-
(160,980)
382,870
53
NOTES TO THE FINANCIAL STATEMENTS
NOTE 14 GOODWILL
Opening balance
Goodwill arising on acquisition of Precise Consulting
Foreign exchange movements
June 2015
$
June 2014
$
-
4,511,493
(431,815)
4,079,678
-
-
-
-
Impairment tests for goodwill
Goodwill is monitored by management at the Company level for Precise Consulting.
The group tests whether goodwill has suffered any impairment on an annual basis. The recoverable amount of a cash
generating unit (CGU) is determined based on value-in-use calculations which require the use of assumptions.
The calculations use cash flow projections based on financial budgets covering a five-year period.
Cash flows beyond the five-year period are extrapolated using the estimated growth rates stated below. These growth
rates are consistent with forecasts included in industry reports specific to the industry in which each CGU operates.
The following table sets out the key assumptions for the value in use:
Assumption
Variable
Approach
Sales volume annual growth
2.5%
Average annual growth rate over the five-year forecast period
based on management’s expectations of market development.
Sales price annual growth
2.5%
Average annual growth rate over the five-year forecast period
based on current industry trends and including long term
inflation forecasts for New Zealand
Fixed costs per annum
$1.2M
Annual capital expenditure
$50,000
Long term growth rate
3%
Pre-tax discount rate
20%
Fixed costs of the Company, which do not vary significantly with
sales volumes or prices. Management forecasts these costs
based on the current structure of the business, adjusting for
inflationary increases but not reflecting any future restructurings
or cost saving measures.
The amounts disclosed are the average operating costs for the
five-year forecast period.
Expected capital cash costs based on the historical experience
of management, and the planned refurbishment expenditure.
No incremental revenue or cost savings are assumed in the
value-in-use model as a result of this expenditure.
This is the weighted average growth rate used to extrapolate
cash flows beyond the budget period.
The rates are consistent with forecasts included in industry
reports.
Reflects specific risks relating to the relevant segments and the
countries in which they operate.
In performing the value-in-use calculations for each CGU, the
group has applied post-tax discount rates to discount the
forecast future attributable post-tax cash flows.
There is sufficient headroom in the value in use calculation such that in management’s opinion a reasonably possible
change in a key assumption on which management has based its determination of the cash generating unit’s recoverable
amount would not cause the cash generating unit’s carrying amount to exceed its recoverable amount.
54
NOTES TO THE FINANCIAL STATEMENTS
NOTE 15 TRADE AND OTHER PAYABLES
CURRENT
Trade payables
Other payables and accrued expenses
Payables to Directors – outstanding wages and fees
June 2015
$
June 2014
$
198,271
296,226
20,000
514,497
87,704
425,425
-
513,129
Trade payables are amounts due to suppliers for goods purchased or services provided in the ordinary course of business.
Trade payables are generally due for settlement within 30 days and therefore are all classified as current.
Other payables and accrued expenses generally arise from normal transactions within the usual operating activities of the
group and comprise items such as employee taxes, employee on costs, GST and other recurring items.
NOTE 16 PROVISIONS
CURRENT
Employee benefits
Precise Consulting earn-out
102,982
51,650
154,632
47,120
-
47,120
Precise Consulting Earn-out Provision
On 1 April 2015, HRL acquired 100% of the issued capital of Precise Consulting and Laboratory Limited (Precise
Consulting). The agreed purchase consideration was:
initial payment of NZD$5,000,000 cash; and
earn-out consideration of up to NZD$2,500,000.
The amount of earn out consideration is based on Precise Consulting’s earnings before interest and taxes (EBIT) for the
year 1 January 2015 to 31 December 2015:
EBIT (NZD)
Earn Out Consideration (NZD)
Less than $1.9 million
Nil
$1.9 – 2.1 million
$2.1m to $2.3 million
$2.3m to $2.5 million
More than $2.5 million
$700,000
$1,300,000
$1,900,000
$2,500,000
One third of the earn-out consideration will be paid in early 2016. Payment of the remaining two thirds of the earn-out
consideration will be paid in equal monthly instalments from January 2016 to March 2018.
Payment of the earn-out consideration is contingent on Mr Andre Halkyard’s ongoing service with Precise Consulting. Mr
Halkyard will remain General Manager of Precise Consulting for a minimum period of three years after acquisition. In the
situation where Mr Halkyard’s employment is terminated prior to the minimum three year period, the earn-out consideration
will be reduced proportionately to the length of time not employed.
As the earn-out consideration is contingent on Mr Andre Halkyard’s ongoing service, the principles and guidance as set
out in AASB 3 require that any earn-out consideration be expensed as an employment cost in the relevant period the
service was provided.
55
NOTES TO THE FINANCIAL STATEMENTS
NOTE 16 PROVISIONS (CONT’D)
HRL estimates that Precise Consulting will exceed an EBIT of $1,900,000 NZD for the 12 months ended 31 December
2015, resulting in an estimated earn-out of $700,000 NZD.
As at 30 June 2015, Mr Andre Halkyard had performed 3 months of the 36 month service period (8.33%). Accordingly an
amount of $51,650 (being 8.33% of $700,000 NZD [$51,650 AUD]) has been recognised in profit or loss.
Movements during the year
June 2015
$
June 2014
$
Opening balance
Precise Consulting earn-out expense recognised
NOTE 17 BORROWINGS
CURRENT
Finance leases
Insurance financing
NON-CURRENT
Finance leases
-
51,650
51,650
9,003
105,622
114,625
47,553
47,553
-
-
-
-
-
-
-
-
The finance lease is secured over the individual motor vehicle that the lease relates to. The lease has an interest rate of
5.10% per annum and expires in December 2018.
Insurance financing is unsecured. The facility has an interest rate of 4.67% per annum and expires in May 2016.
Financing Facilities
The Group has access to the following lines of credit:
Total facilities available
Finance leases
Insurance financing
Bank loans
Overdraft
Facilities used at balance date
Finance leases
Insurance financing
Bank loans
Overdraft
56,556
105,622
3,500,000
250,000
3,912,178
56,556
105,622
-
-
162,178
-
-
-
250,000
250,000
-
-
-
-
-
56
NOTES TO THE FINANCIAL STATEMENTS
NOTE 17 BORROWINGS (CONT’D)
Unused facilities at balance date
Finance leases
Insurance financing
Bank loans
Overdraft
June 2015
$
June 2014
$
-
-
3,500,000
250,000
3,750,000
-
-
-
250,000
250,000
Restrictions as to use or withdrawal
The bank loan facility is subject to the Group complying with covenants listed below.
Covenants
The bank loan facility is subject to the below covenants:
Debt Service Cover Ratio greater than 1
Debt Service Cover Ratio means: EBITDA divided by the total principal and interest payments for that period.
This ratio will be assessed every 6 months.
Gearing Ratio of less than 65% at June 2015 and 60% at June 2016
Gearing ratio means: Total liabilities divided by total tangible assets (including goodwill and other acquisition based
intangibles).
This ratio will be assessed every 12 months.
Provision of bi-annual compliance certificates
HRL must provide within 60 days of 30 June and 31 December a compliance certificate (and relevant supporting
information as set out in the agreement) that states both the above covenants have been met.
There were no breaches of covenants during the period.
Assets pledged as security
In accordance with the security arrangements of the bank loans, all current and non-current assets of the Group are
secured by floating charge.
Finance leases are also secured by mortgage over the relevant motor vehicle which at 30 June 2015 had a carrying value
of $46,336.
Defaults and breaches
During the current and prior year, there were no defaults or breaches on any of the loans.
Terms and conditions
The bank overdraft facilities may be drawn at any time. Bank loan facilities may be drawn at any time and have a
maturity of 3 years. The bank loan facilities are principal and interest and amortise equally over the loan period.
57
NOTES TO THE FINANCIAL STATEMENTS
NOTE 18 CONTRIBUTED CAPITAL
154,550,025 fully paid ordinary shares (30 June 2014: 1)
8,025,393
670,069
June 2015
$
June 2014
$
June
2015
Number
June
2014
Number
Movements during the period
Balance at beginning of period
Issue of shares in OCTIEF Pty Ltd
Loan forgiveness 1
Reversal of existing share on acquisition
HRL shares on acquisition of OCTIEF
Shares issued to OCTIEF vendors on
acquisition (refer Note 2)
Rights issue shortfall shares issued
(0.5c per share)
Shares issued to OCTIEF vendors on
achieving Milestone 1 & 2 (refer Note 2)
Share consolidation – 1:13
1
-
-
(1)
414,244,896
320,754,355
17,539,914
256,603,484
(931,515,701)
General offer of shares (6.5c per share)
76,923,077
Share issue costs (net of tax)
-
Balance at end of period
154,550,025
-
1
-
-
-
-
-
-
-
-
-
1
June
2015
$
670,069
-
-
-
-
2,899,715
105,240
-
-
5,000,000
(454,742)
8,220,282
June
2014
$
-
1
670,068
-
-
-
-
-
-
-
-
670,069
1 Prior to acquisition of OCTIEF by the Company (refer Note 2) OCTIEF had a loan balance payable to its parent entity – Integrated Holdings Group
Pty Ltd of $670,068. This loan was forgiven prior to the acquisition and has been treated as a contribution of capital.
Ordinary shares participate in dividends and the proceeds on winding up of the Company in proportion to the number of
shares held. At shareholders meetings each ordinary share is entitled to one vote when a poll is called, otherwise each
shareholder has one vote on a show of hands.
Options
Details of options issued, exercised and expired during the financial year are set out below:
Expiry Date
30 November 2015*
Exercise
Price
$0.52
1 July
2014
1,615,385
Movements
Issued
Exercised
Expired
-
-
-
30 June
2015
1,615,385
* Number of options and pricing adjusted for the 1:13 share consolidation
The weighted average remaining contractual life of share options outstanding at year end was 0.42 years.
58
NOTES TO THE FINANCIAL STATEMENTS
June 2015
$
June 2014
$
NOTE 19 RESERVES
Foreign currency translation reserve
(509,466)
The foreign currency translation reserve records exchange rate differences arising from the translation of the financial
statements of foreign subsidiaries.
Movements during the year
Opening balance
Foreign exchange differences
Closing balance
-
(509,466)
(509,466)
-
-
-
-
NOTE 20 CASH FLOW INFORMATION
Reconciliation of cash flows from operations with profit/(loss) after tax
Profit/(loss) after income tax
(1,583,755)
744,829
Non-cash items in profit/(loss) after income tax
Depreciation and amortisation
Loss on sale of plant and equipment
Gain on bargain purchase
Impairment of receivables
Listing expense arising on deemed acquisition
Movements in operating assets and liabilities
Trade and other receivables
Other assets
Trade and other payables
Provisions
Tax balances
432,465
22,351
-
5,012
1,252,455
66,400
(52,537)
(234,763)
(9,223)
(315,445)
221,888
6,443
(128,950)
-
-
(592,248)
(450)
1,315,148
(688)
(107,280)
Net cash provided by/ (used in) operating activities
(417,040)
1,458,692
Non-cash investing and financing activities
Shares issued for OCTIEF acquisition (refer Note 18)
Forgiveness of loan from parent entity (refer Note 18)
Settlement of dividend liability (refer Note 28)
Funding of acquisition of OCLS (refer Note 4)
NOTE 21 SHARE BASED PAYMENTS
2,899,715
-
-
-
670,068
648,682
553,328
During the year ended 30 June 2015, HRL entered into a contract with Integrated Holdings Group Pty Ltd (“IHG”) to acquire
100% of the equity of OCTIEF Pty Ltd. Further details of the acquisition and the share based payment involved are included
in Note 2.
59
NOTES TO THE FINANCIAL STATEMENTS
NOTE 22
RELATED PARTY TRANSACTIONS
Key Management Personnel Compensation
Short-term benefits
Post-employment benefits
Long-term benefits
Termination benefits
Share-based payments
June 2015
$
June 2014
$
539,228
36,225
66,754
-
-
489,688
-
22,429
-
-
638,557
526,968
Detailed remuneration disclosures are provided in the remuneration report on pages 12 to 22.
Transactions with related parties
Transactions with Key Management Personnel related parties
Transaction
Entity
Association
Rental of office space
Paget Developers
Darren Anderson
Kevin Maloney
12 months
ended
30 June 2015
$
98,484
13.5 months
from 15 May
2013 to 30 June
2014
$
64,000
Underwriting $5M capital raise 1
Tulla Property
Partners
Kevin Maloney
250,000
-
Software and hosting services
Octfolio
Sublet of office space to Octfolio
Octfolio
Darren Anderson
Kevin Maloney
Darren Anderson
Kevin Maloney
Corporate services 2
Business acquisition
Integrated
Holdings Group
Darren Anderson
Kevin Maloney
Integrated
Holdings Group
Darren Anderson
Kevin Maloney
104,141
25,899
5,610
61,538
-
-
-
See below
1 Tulla Property Partners, an entity associated with Mr Kevin Maloney acted as Lead Underwriter for the $5 million capital raising completed
in late March 2015. The Lead Underwriter then arranged for other parties to sub-underwrite part of the capital raising and will have settled
these sub-underwriting fees directly with the sub-underwriters. The net underwriting fee received by Tulla Property Partners was
$116,369. Included in the sub-underwriting fees paid by Tulla Property Partners was an amount of $55,342 that was paid to Integrated
Holdings Group, an entity associated with Mr Kevin Maloney and Mr Darren Anderson.
2 Services provided from 1 July 2014 to 15 September 2014.
All of the above transactions were based on normal commercial terms and conditions.
Business acquisition
During the year ended 30 June 2014 OCTIEF acquired the assets and business of Octief Consulting and Laboratory
Services Pty Ltd (“OCLS”), an environmental consulting business.
As disclosed in Note 4 the fair value of the net identifiable assets acquired exceeded the total consideration paid resulting
in a gain on bargain purchase of $128,950. OCLS was 100% owned by Integrated Holdings Group Pty Ltd, a company
that Mr Kevin Maloney and Mr Darren Anderson are directors and shareholders of. At that date Integrated Holdings Group
Pty Ltd was the parent entity of OCTIEF. The contract was based on normal commercial terms and conditions.
60
NOTES TO THE FINANCIAL STATEMENTS
NOTE 22
RELATED PARTY TRANSACTIONS (CONT’D)
Outstanding balances with related parties from sales/purchases of goods and services
The following balances are outstanding at the end of the reporting period in relation to transactions with related parties:
Nature
Software and hosting services
(included in trade payables)
Entity
Octfolio
Association
Darren Anderson
Kevin Maloney
30 June 2015
$
40,046
30 June 2014
$
-
Loans to/ (from) related parties (Integrated Holdings Group Pty Ltd – parent entity of OCTIEF Pty Ltd until 15
September 2014)
June 2015
$
June 2014
$
Beginning of the year
Funding of acquisition of OCLS (non-cash - refer Note 4)
OCLS acquisition costs funded by parent entity (refer Note 4)
Loans advanced
Recognition of OCTIEF tax expense (Refer Note 5)
Loan repayments received
Settlement of dividend liability (Refer Note 28)
Loan forgiveness (Refer Note 18)
Balance at end of year
-
-
-
-
-
-
-
-
-
-
(553,327)
(286,479)
1,318,750
(500,330)
-
(648,682)
670,068
-
NOTE 23
FINANCIAL RISK MANAGEMENT
The Consolidated Entity's financial instruments consist mainly of deposits with banks and accounts receivable and payable.
The main risk arising from the financial instruments is credit risk and foreign exchange risk.
The Board has overall responsibility for the determination of the Group’s risk management objectives and policies and,
whilst retaining ultimate responsibility for them, it has delegated the authority for day to day management of these risks to
the Chief Finance Officer. The overall objective of the Board is to set policies that seek to reduce risk as far as possible
without unduly affecting the Group’s competitiveness and flexibility. Further details regarding these policies are set out
below:
Credit Risk
Credit risk is the risk that the other party to a financial instrument will fail to discharge their obligation resulting in the
Consolidated Entity incurring a financial loss. This usually occurs when debtors fail to settle their obligations owing to the
Consolidated Entity. It arises from exposure to customers as well as through deposits with financial institutions.
The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date to recognised
financial assets, is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the balance
sheet and notes to the financial statements. There is no collateral held as security at 30 June 2015. Credit risk is reviewed
regularly by the Board.
The Group does not have any material credit risk exposure to any single counterparty, except for its holdings of cash which
is held with the Westpac Bank.
61
NOTES TO THE FINANCIAL STATEMENTS
NOTE 23
FINANCIAL RISK MANAGEMENT (CONT’D)
Maximum exposure to credit risk
Summary exposure
Cash and cash equivalents
Trade receivables
Other receivables
Liquidity risk
June 2015
$
June 2014
$
859,500
835,236
89,680
1,784,416
8,049
523,481
135,568
667,098
Liquidity risk is the risk that the Group may encounter difficulties raising funds to meet financial obligations as they fall
due.
Liquidity risk is reviewed regularly by the Board.
The Group manages liquidity risk by monitoring forecast cash flows and ensuring that adequate cash resources are
maintained. Refer to Note 17 for the Group’s financing facilities available at balance date:
Remaining contractual maturities
The tables below reflects the contractual maturity of fixed and floating rate financial liabilities. Cash flows for financial
liabilities without fixed amount or timing are based on the conditions existing at period end. The amounts disclosed
represent undiscounted cash flows. The tables include both interest and principal cash flows and therefore the totals
may differ from their carrying amount in the balance sheet.
The remaining contractual maturities of the financial liabilities are:
30 June 2015
Trade payables
Other payables
Insurance financing
Finance lease
30 June 2014
Trade payables
Other payables
Market Risk
Fixed interest
rate
-
1 year or less
$
198,271
1 to 2 years
$
-
Over 2 years
$
-
-
4.67%
5.10%
Interest
rate
-
-
316,226
108,104
11,677
634,278
-
-
11,677
11,677
-
-
40,452
40,452
1 year or less
$
87,704
1 to 2 years
$
-
Over 2 years
$
-
425,425
513,129
-
-
-
-
Total
$
198,271
316,226
108,104
63,806
686,407
Total
$
87,704
425,425
513,129
Market risk arises from the use of interest bearing, tradeable and foreign currency financial instruments. It is the risk that
the fair value or future cash flows of a financial instrument will fluctuate because of changes in interest rates (interest rate
risk), foreign exchange rates (currency risk) or other market factors (other price risk).
Interest rate risk
Interest rate risk is managed by constant monitoring of interest rates.
Interest rates over the 12 month period were analysed and a sensitivity determined to show the effect on profit and equity
after tax if the interest rates at reporting date had been 100 basis points higher or lower, with all other variables held
constant. This level of sensitivity was considered reasonable given the current level of both short-term and long-term
Australian and New Zealand interest rates. The following sensitivity analysis is based on the interest rate risk exposures
in existence at the balance sheet date.
62
NOTES TO THE FINANCIAL STATEMENTS
NOTE 23
FINANCIAL RISK MANAGEMENT (CONT’D)
All interest bearing liabilities have fixed interest rates so the sensitivity analysis has no impact.
All cash assets have floating interest rates. At 30 June, if interest rates had moved, as illustrated in the table below, with
all other variables held constant, post tax profit and equity would have been affected as follows:
Impact on profit and equity
+1.00% (100 basis points)
-1.00% (100 basis points)
Foreign Currency Risk
June 2015
$
June 2014
$
6,102
(6,102)
80
(80)
Foreign currency risk arises as a result of having assets/cash flows denominated in a currency other than the home
currency in which they are reported. At 30 June, the Group had the following exposure to foreign currency, shown in
Australian Dollars:
Financial assets
Cash and cash equivalents (NZD)
Trade and other receivables (NZD)
Financial liabilities
Trade and other payables (NZD)
373,482
533,125
906,607
122,853
122,853
-
-
-
-
-
Exchange rates over the 12 month period were analysed and a sensitivity determined to show the effect on profit and
equity after tax if the NZD:AUD exchange rates at reporting date had been 10% basis higher or lower, with all other
variables held constant. The following sensitivity analysis is based on the foreign currency risk exposures in existence at
the balance sheet date:
Impact on equity
+10.00%
-10.00%
Capital Risk Management
(78,375)
78,375
-
-
The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to
sustain future development of the business. Capital consists of ordinary shares and retained earnings of the Group. The
Board of Directors monitors the return on capital as well as considers the potential of future dividends to ordinary
shareholders.
The Board seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowings
and the advantages and security afforded by a sound capital position.
As part of complying with its borrowing covenants, the Group has an externally imposed requirement to maintain a Gearing
Ratio of less than 65% at June 2015 and 60% at June 2016. Gearing ratio is defined as: Total liabilities divided by total
tangible assets (including goodwill and other acquisition based intangibles). The actual gearing ratio at 30 June 2015 was
15%.
Fair Values
The fair values of financial assets and liabilities approximate their carrying value. No financial assets or liabilities are
readily traded on organised markets in standardised form.
63
NOTES TO THE FINANCIAL STATEMENTS
NOTE 24
COMMITMENTS
Operating leases
Minimum lease payments:
Payable within one year
Payable within one year and five years
Total contracted at balance date
June 2015
$
June 2014
$
335,161
685,022
1,020,183
150,955
364,305
515,260
The Group leases various properties and motor vehicles under non-cancellable operating leases expiring within one to five
years. The property leases have varying terms, escalation clauses and renewal rights. On renewal, the terms of the leases
are renegotiated.
Finance leases
Future minimum lease payments:
Payable within one year
Payable between one year and five years
Less future interest payments
Present value of minimum lease payments:
Current (Note 17)
Non-Current (Note 17)
11,677
52,129
63,806
(7,250)
56,556
9,003
47,553
56,556
-
-
-
-
-
-
-
Finance leases relate to vehicle with a written down value of $46,336. Under the lease terms, the Group does not have
the right to acquire the leased asset at the end of the lease.
Future exploration
Exploration obligations to be undertaken:
Payable within one year
Payable between one year and five years
800,000
18,500,000
19,300,000
-
-
-
The Group has certain obligations to expend minimum amounts on exploration in tenement areas. Failure to meet these
obligations may result in the Group having to relinquish these tenements. It is HRL’s intention to not focus any further
resources on its geothermal assets until it is satisfied that the projects can be commercially viable.
NOTE 25
CONTINGENT LIABILITIES
The Consolidated Entity has arranged bank guarantees of $30,000 to the Victorian Government as security over the
granted geothermal tenement. No liability has been recognised by the Group as bank deposits totalling $30,000 are in
place to satisfy any obligation to the bank. Upon relinquishment of the tenements, the Victorian Government will release
the security.
64
NOTES TO THE FINANCIAL STATEMENTS
NOTE 26
SEGMENT REPORTING
Reportable Segments
The Group has identified the operating segments based on internal reports that are reviewed and used by the executive
team in assessing performance and determining the allocation of resources:
Australia
New Zealand
New Zealand operations were established throughout the year ended 30 June 2015 and accordingly for the period ended
30 June 2014, the Group only had one reportable segment, being environmental services in Australia.
Environmental services revenue
3,263,735
1,405,874
Australia
New Zealand Unallocated Consolidated
$
$
-
(1,953)
-
-
(3,162,172)
(988,041)
(2,446,743)
(6,596,956)
99,610
417,833
(2,416,643)
(1,899,200)
Segment Revenues and Results
30 June 2015
Revenue:
Interest income
Expenses:
Interest expense
Other expenses
Segment result
Income tax
Net Profit/(Loss)
Non-cash and other significant items included in loss above:
Depreciation and amortisation
Impairment of receivables
Loss on disposal of plant and equipment
Listing expense arising on deemed acquisition
Acquisition expenses
384,659
5,012
22,351
-
-
39,807
7,999
-
-
-
-
Assets:
Segment assets
Liabilities:
Segment liabilities
Segment acquisitions:
1,983,500
5,334,034
605,587
488,738
Acquisition of property, plant and equipment
64,778
74,863
Details on non-current assets:
Trade and other receivables
Plant and equipment
Intangibles
Goodwill
Deferred tax assets
38,480
213,945
57,937
30,105
158,988
193,976
-
4,079,678
660,905
971,267
-
4,462,747
$
-
30,100
$
4,669,609
30,100
-
(1,953)
315,445
(1,583,755)
432,465
5,012
22,351
-
-
1,252,455
1,252,455
268,358
268,358
-
-
-
-
-
-
-
-
7,317,534
1,094,325
139,641
68,585
372,933
251,913
4,079,678
660,905
5,434,014
65
NOTES TO THE FINANCIAL STATEMENTS
NOTE 26
SEGMENT REPORTING (CONT’D)
Unallocated segment - other expense reconciliation
Employee benefits expense
Depreciation and amortisation expenses
Other expenses
Acquisition expenses
Listing expense arising on deemed acquisition
NOTE 27 PARENT ENTITY INFORMATION
The legal Parent Entity of the Consolidated Entity is HRL Holdings Limited.
Parent Entity Financial Information
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Issued capital
Reserves
Accumulated losses
Total equity
Profit/(loss) after income tax
Other comprehensive income
Total comprehensive income
June 2015
$
June 2014
$
747,474
8,352
170,104
268,358
1,252,455
2,446,743
465,253
5,614,874
6,080,127
262,859
47,553
310,412
-
-
-
-
-
-
1,624,003
31,912
1,655,915
29,806
-
29,086
6,390,539
1,626,109
19,258,814
165,400
(12,868,275)
14,298,986
165,400
(12,838,277)
6,390,539
1,626,109
(29,998)
2,455,888
-
-
(29,998)
2,455,888
Commitments, Contingencies and Guarantees of the Parent Entity
The Parent Entity has commitments for the motor vehicle finance lease and the geothermal exploration commitments (refer
Note 24).
The Parent Entity’s exposure to contingent liabilities is detailed in Note 25. The Parent Entity has no contingent assets or
guarantees at balance date.
Controlled Entities of the Parent Entity
Percentage Owned
Country of Incorporation
OCTIEF Pty Ltd
Hot Rock Geothermal Pty Ltd
HRL Holdings NZ Limited
Octief Limited
Precise Consulting and Laboratory Limited
2015
%
100%
100%
100%
100%
100%
2014
%
-
-
-
-
-
Australia
Australia
New Zealand
New Zealand
New Zealand
66
NOTES TO THE FINANCIAL STATEMENTS
NOTE 28 DIVIDENDS
Dividends
Un-franked dividends
June 2015
$
June 2014
$
-
-
648,682
648,682
The dividend in the prior year was from OCTIEF to its parent entity Integrated Holdings Group Pty Ltd. The dividend was
offset against a loan receivable owed to OCTIEF from Integrated Holdings Group Pty Ltd and as a result there was no
cash outflow related to the dividend. Refer Note 20 for details of non-cash investing and financing activities.
In the prior year OCTIEF Pty Ltd was a member of a tax consolidated group and did not have a franking account.
Franked Dividends
Franking credits available for subsequent financial years based on a tax rate of
30% (2014: 30%)
-
-
The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for any:
(a)
(b)
(c)
(d)
(e)
franking credits that will arise from the payment of the current tax liability;
franking debits that will arise from the payment of dividends recognised as a liability at the reporting date;
franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date;
franking credits that may be prevented from being distributed in subsequent financial years; and
franking credits acquired with subsidiaries that form a tax consolidated group with the parent entity.
NOTE 29 EVENTS AFTER BALANCE DATE
Issue of OCTIEF Milestone Shares
The Company confirms that as per Milestone 3 under the OCTIEF acquisition agreement, full year revenue for FY2015 to
equal or exceed $4.25M, has not been met. If the target had been met in full then 4,934,682 shares would have been
issuable to the vendors. As the target was not met in full the Company, in accordance with the agreement, will issue a
reduced number of 4,353,006 shares to the OCTIEF vendors in due course.
67
DIRECTORS’ DECLARATION
DIRECTORS' DECLARATION
In the Directors opinion:
(a)
the attached consolidated financial statements and notes and the remuneration report in the Directors’ Report are
in accordance with the Corporations Act 2001 and other mandatory professional reporting requirements, including:
(i)
complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(ii)
giving a true and fair view of the Consolidated Entity's financial position as at 30 June 2015 and of its
performance for the financial year ended on that date; and
the financial statements also comply with International Financial Reporting Standards as disclosed in Note 1 to the
consolidated financial statements; 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.
(b)
(b)
The directors have been given the declarations by the chief executive officer and chief financial officer required by section
295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of directors.
Darren Anderson
Director
Brisbane
28 August 2015
68
Tel: +61 7 3237 5999
Fax: +61 7 3221 9227
www.bdo.com.au
Level 10, 12 Creek St
Brisbane QLD 4000
GPO Box 457 Brisbane QLD 4001
Australia
INDEPENDENT AUDITOR’S REPORT
To the members of HRL Holdings Limited
Report on the Financial Report
We have audited the accompanying financial report of HRL Holdings Limited, which comprises the
consolidated balance sheet as at 30 June 2015, the consolidated statement comprehensive income, the
consolidated statement of changes in equity and the consolidated statement of cash flows for the year
then ended, notes comprising a summary of significant accounting policies and other explanatory
information, and the directors’ declaration of the consolidated entity comprising the company and the
entities it controlled at the year’s end or from time to time during the financial year.
Directors’ Responsibility for the Financial Report
The directors of the company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101
Presentation of Financial Statements, that the financial statements comply with International
Financial Reporting Standards.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our
audit in accordance with Australian Auditing Standards. Those standards require that we comply with
relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain
reasonable assurance about whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial report. The procedures selected depend on the auditor’s judgement, including the
assessment of the risks of material misstatement of the financial report, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the company’s
preparation of the financial report that gives a true and fair view in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the company’s internal control. An audit also includes evaluating the appropriateness
of accounting policies used and the reasonableness of accounting estimates made by the directors, as
well as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050
110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited
by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional
Standards Legislation, other than for the acts or omissions of financial services licensees.
69
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations
Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, which
has been given to the directors of HRL Holdings Limited, would be in the same terms if given to the
directors as at the time of this auditor’s report.
Opinion
In our opinion:
(a)
the financial report of HRL Holdings Limited is in accordance with the Corporations Act 2001,
including:
(i)
giving a true and fair view of the consolidated entity’s financial position as at 30 June 2015
and of its performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(b)
the financial report also complies with International Financial Reporting Standards as disclosed in
Note 1.
Report on the Remuneration Report
We have audited the Remuneration Report included in pages 16 to 26 of the directors’ report for the
year ended 30 June 2015. The directors of the company are responsible for the preparation and
presentation of the Remuneration Report in accordance with section 300A of the Corporations Act
2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit
conducted in accordance with Australian Auditing Standards.
Opinion
In our opinion, the Remuneration Report of HRL Holdings Limited for the year ended 30 June 2015
complies with section 300A of the Corporations Act 2001.
BDO Audit Pty Ltd
K L Colyer
Director
Brisbane, 28 August 2015
BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an
Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form
part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation, other than for the
acts or omissions of financial services licensees.
70
CORPORATE INFORMATION
HRL HOLDINGS LIMITED CORPORATE INFORMATION
DIRECTORS
Kevin Maloney (Chairman)
Darren Anderson (Executive Director)
Mark Elliott (Non-executive Director)
John Taylor (Non-executive Director)
Frederick Kempson (Alternate Non-executive Director)
COMPANY SECRETARY
Paul Marshall
REGISTERED OFFICE
HopgoodGanim Lawyers
1 Eagle Street
Brisbane QLD 4000
Phone: + 61 7 3105 5960
SOLICITORS
HopgoodGanim Lawyers
1 Eagle Street
Brisbane QLD 4000
Phone: + 61 7 3024 0000
SHARE REGISTRY
Link Market Services Limited
Level 15
324 Queen Street
Brisbane QLD 4000
Phone: 1300 554 474
AUDITORS
BDO Audit Pty Ltd
Level 10, 12 Creek Street
Brisbane QLD 4000
Phone:+ 61 7 3237 5999
COUNTRY OF INCORPORATION
Australia
STOCK EXCHANGE LISTING
Australian Securities Exchange Limited
ASX Code: HRL
INTERNET ADDRESS
www.hrlholdings.com
AUSTRALIAN BUSINESS NUMBER
ABN 99 120 896 371
71