Appendix 4E
Preliminary final report
1. Company details
Name of entity:
Sequoia Financial Group Limited
ABN:
90 091 744 884
Reporting period:
For the year ended 30 June 2020
Previous period:
For the year ended 30 June 2019
2. Results foR announCement to the maRket
The Group has adopted Accounting Standards AASB 16 ‘Leases’ for the year ended 30 June 2020. The
Accounting Standard has been applied using the modified retrospective approach and comparatives
have not been restated therefore.
Revenues from ordinary activities
up
1.8%
to
84,498,650
Profit from ordinary activities after tax attributable to the owners
of Sequoia Financial Group Limited
Profit for the year attributable to the owners of Sequoia Financial
Group Limited
up
293.0%
to
1,932,474
up
293.0%
to
1,932,474
$
3. net tangible assets
Net tangible assets per ordinary security
4. ContRol gained oveR entities
Reporting period
Cents
previous period
Cents
7.36
8.90
Name of entities (or group of entities)
Libertas Financial Planning Pty Ltd
Date control gained
7 August 2019
Contribution of such entities to the reporting entity’s profit/(loss)
from ordinary activities before income tax during the period
(where material)
Profit/(loss) from ordinary activities before income tax of the
controlled entity (or group of entities) for the whole of the previous
period (where material)
5. loss of ContRol oveR entities
Not applicable.
$
568,948
-
i
Sequoia Financial Group limited AnnuAl RepoRt — 30 June 2020 Appendix 4E
Preliminary final report
6. dividends
Current period
amount per
security
Cents
franked amount per
security
Cents
Final dividend declared for the year ended 30 June 2020
0.40
0.40
A final fully franked dividend of 0.4 cents per share in respect to the current reporting period has been
declared and to be paid on 12 October 2020. The record date for determining entitlements to the
dividend is 14 September 2020. The financial effect of these dividends has not been brought to account
in the financial statements for the year ended 30 June 2020 and will be recognised in subsequent
financial periods.
Previous period
There were no dividends paid, recommended or declared during the previous financial period.
7. dividend Reinvestment plans
The Company has resolved to implement a Dividend Reinvestment Plan (‘DRP’), which will be active for
the 2020 Final Dividend. The Directors have determined that a 2.5% discount will apply to the 2020 Final
Dividend. Shares allocated to shareholders under the DRP for the 2020 Final Dividend will be allocated
at an amount equal to 97.5% of the average of the daily volume weighted average market price of
ordinary shares of the Company traded on the ASX over the period of 5 trading days prior to Friday,
2 October 2020. The last date for receipt of election notices for the dividend or distribution plans is
Friday, 2 October 2020.
8. details of assoCiates and joint ventuRe entities
Not applicable.
9. foReign entities
Details of origin of accounting standards used in compiling the report:
Not applicable.
10. audit qualifiCation oR Review
Details of audit/review dispute or qualification (if any):
The financial statements have been audited and an unqualified opinion has been issued.
i i
Sequoia Financial Group limited AnnuAl RepoRt — 30 June 2020 11. attaChments
Details of attachments (if any):
The Annual Report of Sequoia Financial Group Limited for the year ended 30 June 2020 is attached.
12. signed
Date: 20 August 2020
John Larsen
Chairman
i i i
Notes to the consolidated financial statementsSequoia Financial Group limited ANNuAl RepoRt — 30 JuNe 2020 Sequoia Financial
Group Limited
abn 90 091 744 884
Annual Report
3 0 JuNE 2020
Contents
Chief Executive Officer and Chairman’s report ............................................................3
Directors’ report .................................................................................................................6
Auditor’s independence declaration ...........................................................................21
Consolidated statement of profit or loss and other comprehensive income ..........22
Consolidated statement of financial position ..............................................................23
Consolidated statement of changes in equity ............................................................25
Consolidated statement of cash flows .........................................................................26
Notes to the consolidated financial statements ..........................................................27
Directors’ declaration ......................................................................................................75
Independent auditor’s report to the members
of Sequoia Financial Group Limited ..............................................................................76
Shareholder information .................................................................................................82
Corporate directory .........................................................................................................84
2
Sequoia Financial Group limited AnnuAl RepoRt — 30 June 2020 Chief Executive Officer and Chairman’s report
30 June 2020
Dear Shareholders,
We are pleased to report that, despite the most challenging operating environment of our
lives, Sequoia has continued to refine its business model and significantly improve its financial
performance throughout the financial year ended 30 June 2020 (‘FY2020’). In doing so we
have established a strong platform for future growth and are cautiously optimistic about the
future outlook.
business improvement program
In late 2018, we commenced a Business Improvement Program across our entire business.
This involved multiple approaches:
• Investing in our stronger businesses, to support and promote future growth.
• Remediating under-performing businesses by reducing costs and aligning initiatives with
our broader Group objectives.
• Divesting or closing businesses which were unlikely to achieve our 15% operating return on
shareholder equity hurdle in the near future.
We are pleased to report that our Business Improvement Program has successfully re-
positioned our Group as one of the leading wealth advisory groups in Australia, with over
400 advisers (from July 2020) benefiting from the synergies of a larger group that has a wider
offering and greater focus on putting the customer first.
fy2020 milestones
We have made significant progress towards our strategic Group priorities during FY2020 as
follows;
1. Accurate Expense Platform
Our first objective was to establish an expense base platform which accurately allocated
shared services costs across the four operating Divisions, allowing management to
objectively review the operating profit contribution from each. This was completed, enabling
our Executive team to implement the Business Improvement Program with confidence.
2. 15% Return on Equity Hurdle
Our second objective was to generate a 15% return on the non-cash equity of each
operating Division. Two of our four Divisions are now exceeding this target, and the other two
are making good progress towards this significant milestone.
3. Cross-selling
Our third objective was to maximize the cross-selling of services between Divisions. We are
making good progress in this area and expect to continue this growth momentum over the
coming years.
4. Debt reduction and cash flow improvement
Our fourth objective was to reduce debt and use operating cash flow to fund acquisitions.
Our FY2020 financial results speak to our successful achievement of this strategy throughout
2020.
5. Dividend return
Our fifth objective was to recommence paying dividends to shareholders, with a dividend
payout ratio range of 20-50% of NPAT as the business matured. We are delighted to report
that FY2020 NPAT increased by 293%, allowing the Directors to declare a dividend payment
at 0.4 cents per share. This dividend payout ratio is initially at the lower end of the payout
3
Sequoia Financial Group limited AnnuAl RepoRt — 30 June 2020 Chief Executive Officer and Chairman’s report
30 June 2020
ratio range because we intend to reinvest further capital into promising growth opportunities.
(Note that shareholders will also be offered the opportunity to participate in a dividend
reinvestment plan).
Shareholder equity at the commencement of the period was $31.2 million.
fy2020 key financials
FY2020 was a transformational year for the Group.
Stable Revenues
Total Revenue remained stable throughout FY2020, despite the challenging operating
environment presented by the COVID19 pandemic and our divestment or closure of some
business units as part our Business Improvement Program.
Strong Revenue Growth Outlook
The underlying revenue growth story at an operating business unit level is strong. Our two
largest business units, Wealth Management and Morrison Securities both achieved in excess
of 30% annualized revenue growth. We expect both of these businesses to continue this
double-digit growth trend over the foreseeable future.
Strong Underlying Profit
The underlying Profit of $4.8 million equates to a 15% return on shareholder equity,
a significant improvement over FY2019. Key drivers of this result were:
• Growth in licensed adviser numbers within the Wealth division (up 68%)
• Growth in Morrison Securities’ monthly value of trading transactions (up 329%).
• Reduction of shared Head Office operating costs (down 45%).
• Reduction in total staff numbers (down 11%).
• Significant reduction in debt (down 54%).
outlook
We have a cautiously optimistic future outlook. Whilst pleased with our FY2020 financial
performance, we are carefully monitoring and responding to the impact of the COVID-19
pandemic and any associated volatility in financial markets.
4
Sequoia Financial Group limited AnnuAl RepoRt — 30 June 2020 Chief Executive Officer and Chairman’s report
30 June 2020
Financial Services Sector Transformation
Changes occurring in the financial services sector are profound and ripe for us to selectively
grow our adviser numbers, whether they be accountancy firms or AFSL holders. The current
number of advisers in Australia is expected to reduce to approximately 20,000 over the next
24 months and our ambition is to interface with 10% of this marketplace in some capacity
over the next 5 years.
Purpose and Mission
Sequoia exists to support the financial services advice community (i.e. our licensees and
their clients) and our support services include continuous education and training, research,
compliance and share trading using fast and efficient systems. We currently manage in
excess of $4 billion of client funds held in SMSFs, equity accounts and managed funds
through our network of 405 advisers.
In conclusion, the Board would like to personally thank our staff, licensees, customers and
our other key stakeholders for helping us make such significant progress through FY2020.
Through a turbulent period, our dedicated staff have showed great resilience and loyalty in
professionally supporting our businesses and customers. Their job satisfaction is reflected in
our strong customer retention and growth in new business. On behalf of the Board, we would
like to thank all shareholders for your patience over the past 18 months and we now look
forward to delivering consistently strong results over the coming years.
Garry Crole
Managing Director/CEO
John Larsen
Chairman
5
Sequoia Financial Group limited AnnuAl RepoRt — 30 June 2020 Directors’ report
30 June 2020
The directors present their report, together with the financial statements, on the consolidated
entity (referred to hereafter as the ‘Group’) consisting of Sequoia Financial Group Limited
(referred to hereafter as the ‘Company’ or ‘parent entity’) and the entities it controlled at
the end of, or during, the year ended 30 June 2020.
diReCtoRs
The following persons were directors of Sequoia Financial Group Limited during the whole of
the financial year and up to the date of this report, unless otherwise stated:
Garry Crole
John Larsen
Kevin Pattison
Executive Director and Chief Executive Officer
Non-Executive Director and Chairman
Non-Executive Director
Charles Sweeney
Non-Executive Director
pRinCipal aCtivities
The Group’s principal activity is to offer financial planners, stock brokers, self-directed
investors, superannuation funds and accountants a range of services that include but is not
limited to licensing services, business support and advice, coaching, compliance, education,
wholesale clearing and execution, legal document establishments, investments, media and
administration services.
There was no change in the principal activities during the financial year.
dividends
Dividends paid during the financial year were as follows:
Final dividend for the year ended 30 June 2018 of
0.5 cents per ordinary share*
Consolidated
2020
$
2019
$
-
589,777
* The dividend comprised of a cash dividend paid of $286,302 and dividend reinvestment
allotment of $303,475 that occurred during the year ended 30 June 2019.
Dividend declared
The Company declared a final dividend for the year ended 30 June 2020 of 0.4 cents
per share, fully franked. The record date for determining entitlements to the dividend is
14 September 2020 and is to be paid on 12 October 2020. The financial effect of these
dividends has not been brought to account in the financial statements for the year ended
30 June 2020 and will be recognised in subsequent financial periods.
6
Sequoia Financial Group limited AnnuAl RepoRt — 30 June 2020 Directors’ report
30 June 2020
Review of opeRations
The profit for the Group after providing for income tax amounted to $1,932,474 (30 June
2019: loss of $1,001,368).
Operating revenue from ordinary operating activities of the Group increased to $84,498,650,
up from $83,018,040 in the previous year, an increase of 1.8%.
Underlying Profitability
The Directors are of the view that the best guide to your Company performance is the
underlying normalised EBITDA or Profit which is defined as earnings before interest, tax,
depreciation and amortisation (‘EBITDA’) excluding the impact of:
• Non-operational items (i.e. acquisition-related costs, redundancy costs, impairment
charges, fair value adjustments and gains/losses on the sale of investments); and
• Non-cash amortisation charges relating to separately identifiable intangible assets
acquired under business combinations and other intangible assets.
The underlying profit over the financial year ended 30 June 2020 increased by 341.6% from
$1,092,882 to $4,825,701. This was in line with the commentary provided by the Group at the
2019 annual general meeting of shareholders where directors outlined 5 key focuses for
the businesses for a 3-year period to 2022.
These 5 initiatives remain the core focus of your board and management teams:
(1) To generate strong cash flow from all 4 operating divisions;
(2) To provide a ROE** on non-cash equity of 15% or above;
(3) To rebuild investor confidence in the company’s ability to generate ROE of 15%;
(4) To have the share price trading at or above equity per share; and
(5) To recommence shareholder dividend payments at 20-50% of NPAT.*
* The Company recommenced the dividend policy at 26% of NPAT.
** Return on Equity (‘ROE’) is underlying profit over Total equity.
7
Sequoia Financial Group limited AnnuAl RepoRt — 30 June 2020 Directors’ report
30 June 2020
While the Company is yet to meet all of these five milestones, significant progress has been made
on each. Operating revenue and underlying Profit compared to the prior year are presented in the
following table:
Financial Performance
Operating revenue from ordinary activities
84,498,650
83,018,040
1,480,610
1.8%
Statutory net profit/(loss) after tax
1,932,474
(1,001,368)
2,933,842
293.0%
Underlying Profit*
4,825,701
1,092,882
3,732,819
341.6%
2020
$
2019
$
Change
$
Change
$
* underlying Profit or EBITDA is a measure that the Group uses to assess performance as it excludes
certain non-cash and one-off or non-operational items. See table in the next section for reconciliation
of underlying Profit to Statutory Profit.
Normalised adjustments have been applied as set out in the following reconciliation between the
Group’s underlying Profit and the statutory net profit for the current and previous years:
Normalised EBITDA for the year
Add/(deduct) normalisation adjustments:
Restructure and acquisition costs
Statutory EBITDA for the year
Deduct:
Consolidated
2020
$
2019
$
4,825,701
1,092,882
(74,648)
4,751,053
-
1,092,882
Interest revenue calculated using the effective interest method
109,837
220,170
Depreciation and amortisation
Impairment of assets
Finance costs
(1,812,709)
(1,563,159)
-
(166,944)
(530,832)
(323,215)
Statutory net profit/(loss) before income tax for the year
2,881,237
(1,104,154)
Income tax (expense)/benefit
(948,763)
102,786
Statutory net profit/(loss) after income tax for the year
1,932,474
(1,001,368)
signifiCant Changes in the state of affaiRs
Libertas Financial Planning Pty Ltd
On 7 August 2019, the Company announced the acquisition of Libertas Financial Planning Pty Ltd
(‘Libertas’). Libertas is a successful financial advice dealer group with approximately 70 authorised
representatives. The acquisition provides Sequoia with further scale in the advice marketplace and
based on the latest Money Management dealer group survey makes Sequoia one of the largest
non-bank owned financial adviser groups in the country.
As part of the consideration the Company issued 1,500,000 fully paid ordinary shares at 22 cents per
share to the seller. $1,052,039 cash was paid upfront with an additional issue of 3,810,000 fully paid
ordinary shares at 21 cents per share as final settlement in July 2020.
8
Sequoia Financial Group limited AnnuAl RepoRt — 30 June 2020 Directors’ report
30 June 2020
Share buy-back
The Company is currently conducting an on-market buy-back. It was announced on
the market on 15 June 2020 and covers the period 1 July 2020 to 30 June 2021. The
maximum number of shares the Company proposes to acquire under the on-market buy-
back is up to approximately 11,900,899, or up to 10% of the lowest number of ordinary
shares on issue during the previous 12 months. Accordingly, the on-market buy-back
will not require shareholder approval. To date, no shares have been brought back under
the buy-back.
Morrison Securities ASX market participant status update
Morrison Securities Pty Ltd, a wholly owned subsidiary, has been granted material
amendments to the conditions associated with its ASX market participant status. The
amendments allow for a reduction in the core capital requirements from $12.0 million to
$7.5 million from 21 November 2019.
Yellow Brick Road Wealth Division
On 27 December 2019, the Company’s subsidiary, Interprac Pty Ltd, entered into an
agreement to purchase the Yellow Brick Road Wealth Division business from Yellow Brick Road
Holdings Limited (ASX: YBR). From 1 April 2020, Advisers were transferred to Sequoia. Payment
of $468,294 has been paid as part consideration with future payments of $1,438,051 subject
to contingencies being met.
There were no other significant changes in the state of affairs of the Group during the
financial year.
matteRs subsequent to the end of the finanCial yeaR
Phillip Capital Limited
On 1 June 2020, Sequoia announced the acquisition of the customer base from Phillip
Capital Limited (ASX: PCL). On 5 June 2020, a deposit of $411,000 was paid in escrow. The
Agreement was completed on 1 July 2020, with employees and Corporate Authorised
Representatives (‘CARs’) transferring to Sequoia. The next consideration payment is due
within two months post completion.
Total Cover Australia
In July 2020, Sequoia announced its intention to acquire the customer base from Total Cover
Australia (‘TCA’). Consideration will be 1,500,000 fully paid ordinary shares at 22 cents per
share, with further cash payments totalling $945,000 to be paid over two years.
Impact of Covid-19
COVID-19 restrictions have impacted all businesses and we are no different. The pandemic
has had a material impact on the financial affairs of many Australians and the need
for advice at a reasonable cost has increased. The Government initiatives such as Job
Keeper, Job Seeker and Early Superannuation Release all provided a need for interaction
between advisers and the community, and has also seen a rise in equity market turnover
with a new wave of ‘Robin Hood’ type traders entering the market. Sales in 2H20 in some
of the operating business units slowed, but growth in other parts of our business has offset
those reductions and Profit was not significantly impacted. We will continue to monitor
the pandemic and if it continues longer than anticipated there may be a need for further
reductions in aspects of our business.
9
Sequoia Financial Group limited AnnuAl RepoRt — 30 June 2020 Directors’ report
30 June 2020
Apart from the dividend declared as discussed above, no other matter or circumstance
has arisen since 30 June 2020 that has significantly affected, or may significantly affect the
Group’s operations, the results of those operations, or the Group’s state of affairs in future
financial years.
likely developments and expeCted Results of opeRations
The Group does not expect any major developments or variation to results if the Group
continues to operate as normal. However major variations would occur if the Group
undertook a key strategic initiative such as a material acquisition. Currently nothing of this
nature is expected to take place in the foreseeable future but the Group remains open to
look at opportunities in this space whenever they are presented.
enviRonmental Regulation
The Group is not subject to any significant environmental regulation under Australian
Commonwealth or State law.
infoRmation on diReCtoRs
name: Garry Peter Crole
title: Executive Director and Chief Executive Officer
experience and expertise: Garry is a highly experienced and well-
regarded Financial Services Executive. He founded Deakin Financial
Planning, an ASX listed company that was later acquired by IOOF. In
more recent years, Garry started Interprac Financial Planning Pty Ltd,
which is a leading independently owned Australian Financial Services
Licensee.
other current directorships: None
former directorships (last 3 years): Non-Executive Director of Diversa Ltd (ASX: DVA) and
Non-Executive Director of Glennon Small Companies Limited (ASX: GC1)
special responsibilities: Member of Risk and Compliance Committee, Audit Committee and
Remuneration and Nomination Committee
interests in shares: 10,850,977 ordinary shares (directly held) and 896,309 ordinary shares
(indirectly held)
interests in options: None
interests in rights: None
1 0
Sequoia Financial Group limited AnnuAl RepoRt — 30 June 2020 Directors’ report
30 June 2020
name: John Larsen
title: Non-Executive Director and Chairman
experience and expertise: John brings in excess of 30 years’
experience in financial services to the Company, including senior
management positions and directorships across various businesses
licensed to provide financial services including funds management
and stock broking. John has significant experience in the
management of private portfolios and individually managed accounts. He was also the
Chairman of Odyssey Funds Management between 2002 and 2009, part of the investment
committee responsible for ASX listed, Huntley Investment Company Limited, between 2006
and 2008 and previously held the position of Group Investment Manager at ING (then
Mercantile Mutual Group) retaining responsibility for the entire Australian investments
portfolio with over $500 million of funds under management.
other current directorships: Non-Executive Director of Glennon Small Companies Limited
(ASX: GC1)
former directorships (last 3 years): None
special responsibilities: Chair of Audit Committee and member of Remuneration and
Nomination Committee
interests in shares: 101,549 ordinary shares (directly held) and 1,450,000 ordinary shares
(indirectly held)
interests in options: None
interests in rights: None
name: Kevin Pattison
title: Non-Executive Director
experience and expertise: Kevin has over 40 years’ experience in
financial services, specialising in distribution, strategic planning and
business remediation. He has been a Non-Executive Director for the
past 4 years on private companies and prior to that he was the CEO of
various large national businesses in the financial services sector. He is
currently the Chairman of Master Builders Insurance Brokers.
other current directorships: None
former directorships (last 3 years): None
special responsibilities: Chair of Remuneration and Nomination Committee and member of
Risk and Compliance Committee
interests in shares: 542,166 ordinary shares (indirectly held)
interests in options: None
interests in rights: None
1 1
Sequoia Financial Group limited AnnuAl RepoRt — 30 June 2020 Directors’ report
30 June 2020
name: Charles Sweeney
title: Non-Executive Director
qualifications: B.Comm, LL.B (Melb), Partner of Cooper Grace Ward
Lawyers
experience and expertise: Charles is a partner in Cooper Grace
Ward’s corporate and commercial group. Charles provides wide-
ranging general commercial advice to clients, with particular areas
of focus including corporate advisory and intellectual property / information technology.
Acting for listed and unlisted public and private clients, Charles advises across a broad
range of industries, including agribusiness, financial services, technology and mining. Charles
has served as a non-executive director of an ASX listed company (including during its ASX
listing) and has practical experience of the issues faced by boards in relation to corporate
governance, dealings with regulators (especially ASX and ASIC), major transactions and
capital raisings. Charles is also a regular presenter on such topics.
other current directorships: None
former directorships (last 3 years): None
special responsibilities: Chair of Risk and Compliance Committee and member of Audit
Committee
interests in shares: 300,000 ordinary shares (indirectly held)
interests in options: None
interests in rights: None
‘Other current directorships’ quoted above are current directorships for listed entities only
and excludes directorships of all other types of entities, unless otherwise stated.
‘Former directorships (last 3 years)’ quoted above are directorships held in the last 3 years
for listed entities only and excludes directorships of all other types of entities, unless otherwise
stated.
Company seCRetaRy
Mr Hasaka Martin was appointed Company Secretary on 7 August 2018. He is employed
by Boardroom Pty Ltd in their Corporate Secretarial Services Division in Melbourne. He holds
a Masters of Commercial Law, a Graduate Diploma of Corporate and Securities Law,
Banking, Corporate, Finance and Securities Law, a Graduate Diploma in Applied Corporate
Governance, a PhD in Biochemistry and Molecular Biology and a B.Ag.Sc (hons) in Molecular
Biology and Biochemistry.
1 2
Sequoia Financial Group limited AnnuAl RepoRt — 30 June 2020 Directors’ report
30 June 2020
meetings of diReCtoRs
The number of meetings of the Company’s Board of Directors (‘the Board’) and of each
Board committee held during the year ended 30 June 2020, and the number of meetings
attended by each director were:
G Crole
J Larsen
K Pattison
C Sweeney
G Crole
J Larsen
K Pattison
C Sweeney
full board
audit Committee
attended
held
attended
held
7
7
7
7
Risk and Compliance
Committee
attended
held
2
-
2
2
7
7
7
7
2
-
2
2
2
2
2
2
2
2
2
2
Remuneration and nomination
Committee
attended
held
2
2
2
-
2
2
2
-
Held: represents the number of meetings held during the time the director held office or was
a member of the relevant committee.
RemuneRation RepoRt (audited)
The remuneration report details the key management personnel remuneration arrangements
for the Group, in accordance with the requirements of the Corporations Act 2001 and its
Regulations.
Key management personnel are those persons having authority and responsibility for planning,
directing and controlling the activities of the entity, directly or indirectly, including all directors.
The key management personnel of the Group consisted of the following directors of Sequoia
Financial Group Limited:
• Garry Crole - Executive Director and Chief Executive Officer
• John Larsen - Chairman and Non-Executive Director
• Kevin Pattison - Non-Executive Director
• Charles Sweeney - Non-Executive Director
And the following persons:
• Lizzie Tan - Chief Financial Officer (appointed 23 April 2020)
• Renee Louise Minchin - Former Chief Financial Officer (resigned 11 November 2019)
The remuneration report is set out under the following main headings:
• Principles used to determine the nature and amount of remuneration
• Details of remuneration
• Service agreements
• Share-based compensation
• Additional disclosures relating to key management personnel
1 3
Sequoia Financial Group limited AnnuAl RepoRt — 30 June 2020 Directors’ report
30 June 2020
Principles used to determine the nature and amount of remuneration
The objective of the Group’s executive reward framework is to ensure reward for
performance is competitive and appropriate for the results delivered. The framework aligns
executive reward with the achievement of strategic objectives and the creation of value
for shareholders, and it is considered to conform to the market best practice for the delivery
of reward. The Board of Directors (‘the Board’) ensures that executive reward satisfies the
following key criteria for good reward governance practices:
• competitiveness and reasonableness;
• acceptability to shareholders;
• performance linkage / alignment of executive compensation; and
• transparency.
The Board of Directors, through its Remuneration and Nomination Committee, accepts
responsibility for determining and reviewing remuneration arrangements for the directors
and the senior management team. The Remuneration and Nomination Committee assesses
the appropriateness of the nature and amount of remuneration of directors and senior
managers on a periodic basis by reference to relevant employment market conditions,
giving due consideration to the overall profitability and financial resources of the Group, with
the objective of ensuring maximum stakeholder benefit from the retention of a high quality
Board and executive team.
In accordance with best practice corporate governance, the structure of non-executive
director and executive director remuneration is separate.
Non-executive directors’ remuneration
Fees and payments to non-executive directors reflect the demands which are made of the
directors in fulfilling their responsibilities. Non-executive director fees are reviewed annually
by the Board. The constitution of the Company provides that the non-executive directors of
the Company are entitled to such remuneration, as determined by the Board, which must
not exceed in aggregate the maximum amount determined by the Company in general
meeting. The most recent determination was at the Annual General Meeting held on 15
December 2006 where the shareholders approved an aggregate remuneration of $200,000.
Senior management and executive director remuneration
Executive remuneration comprises:
• Fixed remuneration component;
• Variable remuneration component including short-term incentive (STI) and long-term
incentive (LTI); and
• An Employee Share Option Plan that was approved at a meeting of shareholders on
the 27 November 2015 (LTI).
Fixed remuneration
Fixed remuneration consists of base remuneration as well as employer contributions to
superannuation. Remuneration levels are reviewed annually through a process that
considers individual performance and that of the overall Group.
Variable remuneration – short-term incentive (STI)
STIs are available to executives who achieve performance criteria including compliance.
The Board is responsible for determining who is eligible to participate in STI arrangements as
well as the structure of those arrangements.
1 4
Sequoia Financial Group limited AnnuAl RepoRt — 30 June 2020 Directors’ report
30 June 2020
Variable remuneration – long-term incentive (LTI)
The objective of the LTI plan is to reward senior managers in a manner which aligns this
element of remuneration with the creation of shareholder wealth. As such, LTI grants are
only made to executives who are able to influence the generation of shareholder wealth
and thus have a direct impact on the Group’s performance against relevant long term
performance hurdles. LTI grants to executives are delivered in the form of options or shares.
Sequoia Employee Incentive Plan (‘SEIP’)
On 1 February 2017, the Company established an employee equity scheme, called the
Sequoia Employee Incentive Plan (‘SEIP’) to offer options and performance rights to certain
employees employed in the Company.
Performance rights
All performance rights offered under the October 2018 grant were granted for nil
consideration and had a nil exercise price.
Performance rights vest in three tranches:
tranche
Tranche 1
Tranche 2
Tranche 3
october 2018
vesting date
30 June 2019
30 June 2020
30 June 2021
The vesting conditions of the performance rights granted are:
• 50% of each tranche where the employee meets the service condition; and
• 50% of each tranche where the employee meets the service condition and the Company
meets the performance conditions.
All performance rights tranches related to the October 2018 grant expire on 30 June 2023.
The service conditions are that Tranche 1, Tranche 2 and Tranche 3 will vest if continuous
employment is maintained with the Company from the date the performance rights are
granted until their respective vesting dates.
The performance conditions relating to the October 2018 grant are related to share price
hurdles as follows:
• Tranche 1 will vest if the Company’s 90 Day VWAP up to and including 30 June 2019 is
at least $0.36.
• Tranche 2 will vest if the Company’s 90 Day VWAP up to and including 30 June 2020 is
at least $0.45.
• Tranche 3 will vest if the Company’s 90 Day VWAP up to and including 30 June 2021 is
at least $0.55.
Any performance rights which meet the vesting conditions above will be available for
exercise up until the expiry date. On exercise of vested performance rights Company shares
may be acquired and held by an Employee Share Trust (‘EST’) to be established for the
purpose of settlement. Shares may be held subject to the EST and the Company’s Securities
Trading Policy.
If the Company provide an EST, the employee can apply to the Trustee to have their shares
transferred or sold from the EST, subject to compliance with the Company’s Securities Trading
Policy.
1 5
Sequoia Financial Group limited AnnuAl RepoRt — 30 June 2020 Directors’ report
30 June 2020
Use of remuneration consultants
During the financial year ended 30 June 2020, the Group did not engage remuneration consultants, to
review its existing remuneration policies and provide recommendations.
Voting and comments made at the Company’s 2019 Annual General Meeting (‘AGM’)
At the 30 October 2019 AGM, 99.68% of the votes received supported the adoption of the remuneration
report for the year ended 30 June 2019. The Company did not receive any specific feedback at the
AGM regarding its remuneration practices.
Details of remuneration
Amounts of remuneration
Details of the remuneration of key management personnel of the Group are set out in the following tables.
-
-
-
-
-
-
80,000
55,000
55,000
443,287
43,602
676,889
short-term benefits
post-
employment
benefits
share-based
payments
Cash salary
and fees
$
Cash
bonus
$
directors’
fees
$
movement
in leave
entitlements
$
super-
annuation
$
equity-
settled
$
total
$
73,059
-
-
-
-
-
-
55,000
55,000
-
-
-
6,941
-
-
2020
Non-Executive Directors:
J Larsen
K Pattison**
C Sweeney**
Executive Directors:
G Crole
340,558
50,000
Other Key Management
Personnel:
L Tan*
30,942
5,769
-
-
444,559
55,769
110,000
31,726
21,003
3,952
35,678
2,939
30,883
* Remuneration is for the period from date of appointment as a key management personnel to
30 June 2020.
R Minchin (former Chief Financial Officer) was on leave of absence and received no remuneration
from 1 July 2019 to date of resignation.
1 6
Sequoia Financial Group limited AnnuAl RepoRt — 30 June 2020 Directors’ report
30 June 2020
short-term benefits
post-
employment
benefits
share-based
payments
Cash salary
and fees
$
Cash
bonus
$
directors’
fees
$
movement
in leave
entitlements
$
super-
annuation
$
equity-
settled
$
total
$
39,059
-
-
-
-
-
-
-
-
21,250
18,250
15,000
-
-
-
-
3,711
-
-
-
21,317
(114,105)
20,531
15,399
326,920
420,245
10,000
60,000
180,057
966,281
13,699
83,699
-
-
-
(8,025)
54,500
(100,813)
14,817
54,458
8,775
8,775
209,323
1,066,900
-
-
-
-
-
-
42,770
21,250
18,250
15,000
378,768
381,539
2019
Non-Executive Directors:
J Larsen
K Pattison**
C Sweeney**
T Martin*
Executive Directors:
G Crole
S Beeton*
Other Key Management
Personnel:
R Minchin***
* Remuneration is for the period from 1 July 2018 to date of resignation as a key management personnel.
** Remuneration is for the period from date of appointment as a key management personnel to
30 June 2019.
*** Remuneration is for the period from 1 July 2018 to date of leave of absence as a key management
personnel.
The proportion of remuneration linked to performance and the fixed proportion are as follows:
name
2020
2019
2020
2019
2020
2019
fixed remuneration
at risk - sti
at risk - lti
Non-Executive Directors:
J Larsen
K Pattison
C Sweeney
T Martin
Executive Directors:
G Crole
S Beeton
Other Key Management
Personnel:
L Tan
R Minchin
100%
100%
100%
100%
89%
-
87%
-
100%
100%
100%
100%
97%
84%
-
89%
-
-
-
-
11%
-
13%
-
-
-
-
-
3%
16%
-
7%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4%
1 7
Sequoia Financial Group limited AnnuAl RepoRt — 30 June 2020 Directors’ report
30 June 2020
Service agreements
Where contracts have been established, employment terms and conditions of key management
personnel and Group executives are formalised in standard contracts of employment. All contracts are
for no fixed term with one to three months’ notice required for termination by either party.
Share-based compensation
Issue of shares, options and performance rights
There were no shares, options or performance rights issued or granted to directors and other key
management personnel as part of compensation during the year ended 30 June 2020.
Additional disclosures relating to key management personnel
Shareholding
The number of shares in the Company held during the financial year by each director and other members
of key management personnel of the Group, including their personally related parties, is set out below:
Ordinary shares
GP Crole**
J Larsen**
K Pattison**
C Sweeney**
R Minchin*
balance at the
start of the year
Received
as part of
remuneration
additions
disposals/
other
balance at the
end of the year
11,674,243
304,647
367,500
195,000
336,397
12,877,787
-
-
-
-
-
-
73,043
1,246,902
174,666
105,000
-
-
-
-
-
(336,397)
11,747,286
1,551,549
542,166
300,000
-
1,599,611
(336,397)
14,141,001
* Disposals/other represents no longer a key management personnel, not necessarily a disposal of
holding. R Minchin resigned on 11 November 2019.
** Shares acquired via on-market trade.
Subsequent to 30 June 2020, the current Chief Financial Officer, L Tan, was awarded 52,500 fully paid
ordinary shares in the Company on 9 July 2020.
Performance rights holding
The number of performance rights over ordinary shares in the Company held during the financial year
by each director and other members of key management personnel of the Group, including their
personally related parties, is set out below:
Performance rights over ordinary shares
R Minchin
balance at the
start of the year
granted
exercised
expired/
forfeited/
other
balance at the
end of the year
156,250
156,250
-
-
-
-
(156,250)
(156,250)
-
-
* Expired/forfeited/other represents no longer a key management personnel, not necessarily a disposal
of holding. R Minchin resigned on 11 November 2019.
Transactions with key management personnel and their related parties
During the financial year, $142,866 was paid or payable for services provided by Cooper Grace Ward
Lawyers, a related party entity of director, Charles Sweeney.
This concludes the remuneration report, which has been audited.
1 8
Sequoia Financial Group limited AnnuAl RepoRt — 30 June 2020 Directors’ report
30 June 2020
shaRes undeR option
There were no unissued ordinary shares of Sequoia Financial Group Limited under option outstanding at
the date of this report.
shaRes undeR peRfoRmanCe Rights
unissued ordinary shares of Sequoia Financial Group Limited under performance rights at the date of this
report are as follows:
grant date
26 October 2018
expiry date
30 June 2023
number under rights
390,000
No person entitled to exercise the performance rights had or has any right by virtue of the performance
right to participate in any share issue of the Company or of any other body corporate.
shaRes issued on the exeRCise of options
There were no ordinary shares of Sequoia Financial Group Limited issued on the exercise of options
during the year ended 30 June 2020 and up to the date of this report.
shaRes issued on the exeRCise of peRfoRmanCe Rights
The following ordinary shares of Sequoia Financial Group Limited were issued during the year ended
30 June 2020 and up to the date of this report on the exercise of performance rights granted:
date performance rights granted
share price as at date of exercise
number of shares issued
24 July 2019
5 February 2020
$0.165
$0.200
185,000
37,500
222,500
indemnity and insuRanCe of offiCeRs
The Company has indemnified the directors and executives of the Company for costs incurred, in their
capacity as a director or executive, for which they may be held personally liable, except where there is
a lack of good faith.
During the financial year, the Company paid a premium in respect of a contract to insure the directors
and executives of the Company against a liability to the extent permitted by the Corporations Act
2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the
premium.
indemnity and insuRanCe of auditoR
The Company has not, during or since the end of the financial year, indemnified or agreed to indemnify
the auditor of the Company or any related entity against a liability incurred by the auditor.
During the financial year, the Company has not paid a premium in respect of a contract to insure the
auditor of the Company or any related entity.
1 9
Sequoia Financial Group limited AnnuAl RepoRt — 30 June 2020 Directors’ report
30 June 2020
pRoCeedings on behalf of the Company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave
to bring proceedings on behalf of the Company, or to intervene in any proceedings to which
the Company is a party for the purpose of taking responsibility on behalf of the Company for
all or part of those proceedings.
non-audit seRviCes
Details of the amounts paid or payable to the auditor for non-audit services provided during
the financial year by the auditor are outlined in note 27 to the financial statements.
The directors are satisfied that the provision of non-audit services during the financial year,
by the auditor (or by another person or firm on the auditor’s behalf), is compatible with the
general standard of independence for auditors imposed by the Corporations Act 2001.
The directors are of the opinion that the services as disclosed in note 27 to the financial
statements do not compromise the external auditor’s independence requirements of the
Corporations Act 2001 for the following reasons:
• all non-audit services have been reviewed and approved to ensure that they do not
impact the integrity and objectivity of the auditor; and
• none of the services undermine the general principles relating to auditor independence as
set out in APES 110 Code of Ethics for Professional Accountants (including Independence
Standards) issued by the Accounting Professional and Ethical Standards Board, including
reviewing or auditing the auditor’s own work, acting in a management or decision-
making capacity for the Company, acting as advocate for the Company or jointly sharing
economic risks and rewards.
auditoR’s independenCe deClaRation
A copy of the auditor’s independence declaration as required under section 307C of the
Corporations Act 2001 is set out immediately after this directors’ report.
This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a)
of the Corporations Act 2001.
On behalf of the directors
John Larsen
Chairman
20 August 2020
Sydney
2 0
Sequoia Financial Group limited AnnuAl RepoRt — 30 June 2020 Auditor’s independence declaration
AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE
CORPORATIONS ACT 2001 TO THE DIRECTORS OF SEQUOIA FINANCIAL GROUP
LIMITED
I declare that, to the best of my knowledge and belief during the year ended 30 June 2020
there have been:
— no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
— no contraventions of any applicable code of professional conduct in relation to the
audit.
William Buck Audit (Vic) Pty Ltd
ABN 59 116 151 136
N. S. Benbow
Director
Dated this 20th day of August, 2020
2 1
Sequoia Financial Group limited AnnuAl RepoRt — 30 June 2020
Consolidated statement of profit or loss and other comprehensive income
Revenue
expenses
Data fees
Dealing and settlement
Commission and hedging
Employee benefits
Occupancy
Telecommunications
Marketing
General and administrative
Operating profit
Interest revenue calculated using the effective interest method
Depreciation and amortisation
Impairment of assets
Acquisition costs for Libertas Financial Planning
Finance costs
Profit/(loss) before income tax (expense)/benefit
Income tax (expense)/benefit
Profit/(loss) after income tax (expense)/benefit for the year attributable to
the owners of sequoia financial group limited
other comprehensive income
Items that will not be reclassified subsequently to profit or loss
Loss on the revaluation of financial assets at fair value through other comprehensive
income, net of tax
Other comprehensive income for the year, net of tax
total comprehensive income for the year attributable to the owners of
sequoia financial group limited
Basic earnings per share
Diluted earnings per share
Consolidated
note
2020
$
2019
$
5
84,498,650
83,018,040
(1,643,769)
(1,161,134)
(10,834,498)
(8,349,140)
(50,151,379)
(54,375,311)
6
(11,573,780)
(11,734,219)
(316,390)
(1,127,414)
(1,408,483)
(1,137,711)
(331,463)
(393,591)
(3,413,187)
(3,646,638)
4,825,701
1,092,882
109,837
220,170
(1,812,709)
(1,563,159)
-
(530,832)
(74,648)
-
(166,944)
(323,215)
2,881,237
(1,104,154)
(948,763)
102,786
1,932,474
(1,001,368)
6
15
6
7
(35,801)
(35,801)
(157,173)
(157,173)
1,896,673
(1,158,541)
Cents
Cents
34
34
1.607
1.591
(0.851)
(0.851)
The above consolidated statement of profit or loss and other comprehensive income should be read
in conjunction with the accompanying notes
2 2
Sequoia Financial Group limited AnnuAl RepoRt — 30 June 2020 Consolidated statement of financial position
assets
Cash and cash equivalents
Trade and other receivables
Contract assets and deferred costs
Inventories
Other financial assets
Derivative financial instruments
Deposits
Prepayments
Total current assets
non-current assets
Contract assets and deferred costs
Derivative financial instruments
Other financial assets
Plant and equipment
Right-of-use assets
Intangibles
Deferred tax
Deposits
Total non-current assets
total assets
Consolidated
note
2020
$
2019
$
8
9
10
11
9
11
12
13
14
15
7
22,961,750
12,250,064
8,989,093
6,875
443,759
18,852,029
11,675,680
7,510,057
6,386
675,614
2,928,246
5,042,611
455,854
877,740
138,452
706,591
48,913,381
44,607,420
5,820,757
9,695,887
110,546
1,712,799
2,764,559
8,078,679
13,719,935
40,000
1,654,060
-
24,317,249
20,621,472
7,267,653
678,448
52,367,898
101,281,279
7,775,014
392,950
52,282,110
96,889,530
The above consolidated statement of financial position should be read in conjunction
with the accompanying notes
2 3
Sequoia Financial Group limited AnnuAl RepoRt — 30 June 2020 Consolidated statement of financial position
liabilities
Current liabilities
Trade and other payables
Contract liabilities and deferred revenue
Borrowings
Lease liabilities
Derivative financial instruments
Income tax payable
Employee benefits
Lease incentives
Contingent consideration
Total current liabilities
non-current liabilities
Contract liabilities and deferred revenue
Lease liabilities
Derivative financial instruments
Deferred tax
Employee benefits
Contingent consideration
Total non-current liabilities
total liabilities
net assets
equity
Issued capital
Reserves
Accumulated losses
total equity
Consolidated
note
2020
$
2019
$
16
17
18
19
11
20
17
19
11
7
20
21
22
22,380,247
12,637,235
662,414
682,415
2,928,246
961,932
727,467
-
957,701
15,551,526
10,585,148
1,431,658
-
5,042,610
1,759,066
555,206
624,563
-
41,937,657
35,549,777
7,977,273
2,949,872
9,695,887
4,903,818
98,840
479,350
11,394,362
-
13,719,936
4,928,398
124,369
-
26,105,040
30,167,065
68,042,697
33,238,582
65,716,842
31,172,688
48,497,215
48,025,034
434,571
579,708
(15,693,204)
(17,432,054)
33,238,582
31,172,688
The above consolidated statement of financial position should be read in conjunction
with the accompanying notes
2 4
Sequoia Financial Group limited AnnuAl RepoRt — 30 June 2020 Consolidated statement of changes in equity
Consolidated
issued
capital
$
financial
assets at fair
value
reserve
$
share-
based
payments
reserve
$
accumulated
losses
$
total
equity
$
Balance at 1 July 2018
42,788,182
587,481
229,418
(15,840,909)
27,764,172
Loss after income tax benefit for the year
Other comprehensive income for the year,
net of tax
Total comprehensive income for the year
Transactions with owners in their capacity as
owners:
-
-
-
-
(157,173)
(157,173)
Contributions of equity, net of transaction costs
(note 21)
5,236,852
Share-based payments forfeited
Dividends paid (note 23)
-
-
-
-
-
-
-
-
-
(80,018)
(1,001,368)
(1,001,368)
-
(157,173)
(1,001,368)
(1,158,541)
-
-
5,236,852
(80,018)
-
(589,777)
(589,777)
Balance at 30 June 2019
48,025,034
430,308
149,400
(17,432,054)
31,172,688
Consolidated
issued
capital
$
financial
assets at fair
value
reserve
$
share-
based
payments
reserve
$
accumulated
losses
$
total
equity
$
Balance at 1 July 2019
48,025,034
430,308
149,400
(17,432,054)
31,172,688
Adjustment for change in accounting policy
(note 2)
-
-
-
(193,624)
(193,624)
Balance at 1 July 2019 - restated
48,025,034
430,308
149,400
(17,625,678)
30,979,064
Profit after income tax expense for the year
Other comprehensive income for the year,
net of tax
Total comprehensive income for the year
Transactions with owners in their capacity as
owners:
Contributions of equity, net of transaction costs
(note 21)
Share-based payments
Share-based payments forfeited
-
-
-
-
(35,801)
(35,801)
472,181
-
-
-
-
-
-
-
-
-
(38,025)
(71,311)
1,932,474
1,932,474
-
(35,801)
1,932,474
1,896,673
-
-
-
472,181
(38,025)
(71,311)
Balance at 30 June 2020
48,497,215
394,507
40,064
(15,693,204)
33,238,582
The above consolidated statement of changes in equity should be read in conjunction
with the accompanying notes
2 5
Sequoia Financial Group limited AnnuAl RepoRt — 30 June 2020 Consolidated statement of cash flows
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Interest received
Interest and other finance costs paid
Income taxes paid
Net cash from operating activities*
Cash flows from investing activities
Payment for purchase of business, net of cash acquired
Payments for investments
Payments for plant and equipment
Payments for intangibles
Proceeds from disposal of investments
Proceeds from disposal of property, plant and equipment
Consolidated
note
2020
$
2019
$
83,519,279
78,370,946
(73,956,777)
(77,910,306)
9,562,502
109,837
(166,944)
(1,509,427)
460,640
220,170
(323,215)
(171,213)
7,995,968
186,382
(1,031,350)
(70,546)
(546,893)
(855,950)
89,649
-
-
-
(754,364)
(4,877)
1,709,973
4,418
33
31
13
15
Net cash from/(used in) investing activities
(2,415,090)
955,150
Cash flows from financing activities
Proceeds from issue of shares
Repayment of convertible notes
Repayment of borrowings
Repayment of lease liabilities
Dividends paid
-
-
(860,469)
(610,688)
5,236,852
(200,000)
(5,768,565)
-
23
-
(589,777)
Net cash used in financing activities
(1,471,157)
(1,321,490)
Net increase/(decrease) in cash and cash equivalents
4,109,721
(179,958)
Cash and cash equivalents at the beginning of the financial year
18,852,029
19,031,987
Cash and cash equivalents at the end of the financial year
22,961,750
18,852,029
The Group holds cash reserves which are required to meet its broker licensing commitments.
The conditions of the license, amongst other requirements, mandate that its wholly owned
subsidiary, Morrison Securities Pty Ltd must maintain at all times core capital greater than $7,500,000
(2019: $12,000,000), where at least 90% of this core capital is cash at bank.
* For the current financial year, Net cash from operating activities includes net cash in of $6,357,053 from
client trust funds (2019: net cash out of $443,087). Refer to note 33.
The above consolidated statement of cash flows should be read in conjunction
with the accompanying notes
2 6
Sequoia Financial Group limited AnnuAl RepoRt — 30 June 2020 note 1. geneRal infoRmation
The financial statements cover Sequoia Financial Group Limited as a Group consisting of
Sequoia Financial Group Limited (‘Company’ or ‘parent entity’) and the entities it controlled
at the end of, or during, the year (referred to in these financial statements as the ‘Group’).
The financial statements are presented in Australian dollars, which is Sequoia Financial Group
Limited’s functional and presentation currency.
Sequoia Financial Group Limited is a listed public company limited by shares, incorporated
and domiciled in Australia. Its registered office and principal place of business are:
Registered office
principal place of business
Level 7
Level 8
7 Macquarie Place
525 Flinders Street
Sydney NSW 2000
Melbourne VIC 3000
A description of the nature of the Group’s operations and its principal activities are included
in the directors’ report, which is not part of the financial statements.
The financial statements were authorised for issue, in accordance with a resolution of directors,
on 20 August 2020. The directors have the power to amend and reissue the financial statements.
note 2. signifiCant aCCounting poliCies
The principal accounting policies adopted in the preparation of the financial statements
are set out below. These policies have been consistently applied to all the years presented,
unless otherwise stated.
new or amended accounting standards and interpretations adopted
The Group has adopted all of the new or amended Accounting Standards and
Interpretations issued by the Australian Accounting Standards Board (‘AASB’) that are
mandatory for the current reporting period.
The following Accounting Standards and Interpretations are most relevant to the Group:
AASB 2020-4 Amendment to Australian Accounting Standards - Covid-19-Related Rent
Concessions
The Group has early adopted the amendment to AASB 16 from 1 July 2019. The
amendment provides a practical expedient for lessees to account for COVID-19-related
rent concessions that: result in lease payments that are substantially the same as, or less
than, the consideration for the lease immediately prior to the change; where any reduction
in the lease payments affects only payments originally due on or before 30 June 2021;
and where there is no substantive change to other terms and conditions of the lease. The
practical expedient allows an entity not to assess rent concessions meeting the criteria as a
lease modification. As a result, to the extent that lease concessions represent a forgiveness
or waiver of lease payments, such concessions are treated as variable lease payments
recognised in profit or loss with a corresponding adjustment to the lease liability. To the extent
that the lease concession in substance represents a delay in lease repayments such that
lease consideration is not changed, the lease liability is not extinguished. Interest continues to
accrue for that period. The Group has applied the practical expedient to all rent concessions
that meet the abovementioned criteria and as the Group received no rent concessions,
there was no profit or loss impact from the adoption of this amendment.
2 7
Notes to the consolidated financial statementsSequoia Financial Group limited ANNuAl RepoRt — 30 JuNe 2020 note 2. signifiCant aCCounting poliCies (Continued)
AASB 16 Leases
The Group has adopted AASB 16 from 1 July 2019. The standard replaces AASB 117 ‘Leases’
and for lessees eliminates the classifications of operating leases and finance leases. Except
for short-term leases and leases of low-value assets, right-of-use assets and corresponding
lease liabilities are recognised in the statement of financial position. Straight-line operating
lease expense recognition is replaced with a depreciation charge for the right-of-use assets
(included in operating costs) and an interest expense on the recognised lease liabilities
(included in finance costs). In the earlier periods of the lease, the expenses associated with
the lease under AASB 16 will be higher when compared to lease expenses under AASB
117. However, EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) results
improve as the operating expense is now replaced by interest expense and depreciation
in profit or loss. For classification within the statement of cash flows, the interest portion
is disclosed in operating activities and the principal portion of the lease payments are
separately disclosed in financing activities. For lessor accounting, the standard does not
substantially change how a lessor accounts for leases.
Impact of adoption of AASB 16
AASB 16 was adopted using the modified retrospective approach and as such the
comparatives have not been restated. The impact of adoption on opening accumulated
losses as at 1 July 2019 was as follows:
Operating lease commitments as at 1 July 2019 (AASB 117)
Other disclosed commitments
Short-term leases not recognised as a right-of-use asset
Low value leases not recognised as a right-of-use asset
Operating lease commitments as at 1 July 2019
Discount based on weighted average incremental borrowing rate of 4.0%
Extension and termination options reasonably certain to be exercised
Lease liabilities - recognised as at 1 July 2019
The operating leases consisted of two office tenancies.
Right-of-use assets
Lease liabilities - current
Lease liabilities - non-current
Make good provision
Adjustment to treatment lease incentive
Increase in opening accumulated losses as at 1 July 2019
1 july 2019
$
3,824,368
(366,427)
(41,565)
(82,389)
3,333,987
(418,822)
1,141,974
4,057,139
3,424,788
(624,853)
(3,432,286)
(200,000)
638,727
(193,624)
2 8
Notes to the consolidated financial statementsSequoia Financial Group limited ANNuAl RepoRt — 30 JuNe 2020 note 2. signifiCant aCCounting poliCies (Continued)
AASB Interpretation 23 Uncertainty over Income Tax Treatments
This interpretation is applicable to annual reporting periods beginning on or after 1
January 2019. The interpretation clarifies how to apply the recognition and measurement
requirements of AASB 112 ‘Income Taxes’ in circumstances where uncertain tax treatments
exist which will address the accounting diversity which currently exists in practice. An
uncertain tax treatment is one where there is uncertainty over whether the relevant taxation
authority will accept the entity’s tax treatment (i.e. as submitted in the entity’s income tax
return) under tax law thereby potentially affecting an entity’s tax accounting which is based
upon the derivation of taxable profits and losses, tax bases, unused tax losses, unused tax
credits and tax rates (‘tax accounting elements’). The ‘unit of account’ to be adopted
is determined based on the approach which better predicts the anticipated resolution
of the uncertainties with the tax authority. The entity shall consider all issues that the tax
authority might consider in making such assessment and must make a presumption that
the tax authority will examine amounts that it has a right to examine and has obtained full
knowledge of all facts as a consequence. If the entity concludes that it is probable that the
taxation authority will accept its adopted position representing an uncertain tax treatment,
then the entity determines its respective tax accounting elements consistently with the tax
treatment included in its tax filings. If, however, the entity concludes that it is not probable
that the taxation authority will accept an uncertain tax treatment, the entity shall reflect
the effect of uncertainty in determining the related tax accounting elements. The Group
adopted this interpretation from 1 July 2019 and there was no significant impact on adoption.
basis of preparation
These general purpose financial statements have been prepared in accordance with
Australian Accounting Standards and Interpretations issued by the Australian Accounting
Standards Board (‘AASB’) and the Corporations Act 2001, as appropriate for for-profit
oriented entities. These financial statements also comply with International Financial
Reporting Standards as issued by the International Accounting Standards Board (‘IASB’).
Historical cost convention
The financial statements have been prepared under the historical cost convention,
except for, where applicable, the revaluation of financial assets at fair value through other
comprehensive income, financial assets and liabilities at fair value through profit or loss and
derivative financial instruments.
Critical accounting estimates
The preparation of the financial statements requires the use of certain critical accounting
estimates. It also requires management to exercise its judgement in the process of applying
the Group’s accounting policies. The areas involving a higher degree of judgement or
complexity, or areas where assumptions and estimates are significant to the financial
statements, are disclosed in note 3.
parent entity information
In accordance with the Corporations Act 2001, these financial statements present the results
of the Group only. Supplementary information about the parent entity is disclosed in note 30.
principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries
of Sequoia Financial Group Limited as at 30 June 2020 and the results of all subsidiaries for
the year then ended.
2 9
Notes to the consolidated financial statementsSequoia Financial Group limited ANNuAl RepoRt — 30 JuNe 2020 note 2. signifiCant aCCounting poliCies (Continued)
Subsidiaries are all those entities over which the Group has control. The Group controls an
entity when the Group is exposed to, or has rights to, variable returns from its involvement
with the entity and has the ability to affect those returns through its power to direct the
activities of the entity. Subsidiaries are fully consolidated from the date on which control is
transferred to the Group. They are de-consolidated from the date that control ceases.
Intercompany transactions, balances and unrealised gains on transactions between entities in
the Group are eliminated. unrealised losses are also eliminated unless the transaction provides
evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have
been changed where necessary to ensure consistency with the policies adopted by the Group.
The acquisition of subsidiaries is accounted for using the acquisition method of accounting.
A change in ownership interest, without the loss of control, is accounted for as an equity
transaction, where the difference between the consideration transferred and the book
value of the share of the non-controlling interest acquired is recognised directly in equity
attributable to the parent.
Where the Group loses control over a subsidiary, it derecognises the assets including
goodwill, liabilities and non-controlling interest in the subsidiary together with any cumulative
translation differences recognised in equity. The Group recognises the fair value of the
consideration received and the fair value of any investment retained together with any gain
or loss in profit or loss.
operating segments
Operating segments are presented using the ‘management approach’, where the
information presented is on the same basis as the internal reports provided to the Chief
Operating Decision Makers (‘CODM’). The CODM is responsible for the allocation of
resources to operating segments and assessing their performance.
Revenue recognition
The Group recognises revenue as follows:
Revenue from contracts with customers
Revenue is recognised at an amount that reflects the consideration to which the Group is
expected to be entitled in exchange for transferring goods or services to a customer. For
each contract with a customer, the Group: identifies the contract with a customer; identifies
the performance obligations in the contract; determines the transaction price which takes
into account estimates of variable consideration and the time value of money; allocates the
transaction price to the separate performance obligations on the basis of the relative stand-
alone selling price of each distinct good or service to be delivered; and recognises revenue
when or as each performance obligation is satisfied in a manner that depicts the transfer to
the customer of the goods or services promised.
Variable consideration within the transaction price, if any, reflects concessions provided
to the customer such as discounts, rebates and refunds, any potential bonuses receivable
from the customer and any other contingent events. Such estimates are determined
using either the ‘expected value’ or ‘most likely amount’ method. The measurement of
variable consideration is subject to a constraining principle whereby revenue will only be
recognised to the extent that it is highly probable that a significant reversal in the amount of
cumulative revenue recognised will not occur. The measurement constraint continues until
the uncertainty associated with the variable consideration is subsequently resolved. Amounts
received that are subject to the constraining principle are recognised as a refund liability.
3 0
Notes to the consolidated financial statementsSequoia Financial Group limited ANNuAl RepoRt — 30 JuNe 2020 note 2. signifiCant aCCounting poliCies (Continued)
Timing of revenue recognition
Sequoia Equity Markets Group: The Group offers structured products to investors seeking
exposure to investment opportunities. Management determined after lengthy evaluation
that there are different types of structured product revenue. Each revenue type has
numerous and distinct performance obligations, which allows for a different treatment to
each of these revenue streams.
The different revenue streams include:
• application fee revenue is recognised up-front (upon execution of delivery of product
to the customer) and is non-refundable;
• structured product revenue is released over the duration of the contract as it is earned
over a period of time (duration of the contract); and
• coupon premium revenue is earned upon completion of the contract, as it is earned upon
concluding the contract (conclusion of contract).
The costs of entering into the contract with wholesale counter parties are matched to the
revenue streams.
Interest
Interest revenue is recognised as interest accrues using the effective interest method. This is
a method of calculating the amortised cost of a financial asset and allocating the interest
income over the relevant period using the effective interest rate, which is the rate that
exactly discounts estimated future cash receipts through the expected life of the financial
asset to the net carrying amount of the financial asset.
Other revenue
Revenues from other services, including brokerage, financial planning, superannuation
and corporate advisory services are performed as they are rendered to the customer, net
of any commissions. For brokerage, this occurs upon the date of settlement of clearing the
underlying transaction on behalf of the client. For corporate advisory income relating to a
transaction, this occurs upon the execution of the transaction. Where corporate advisory
services relate to fees earned under a retainer agreement, revenue is accrued pro-rata
according to the servicing of that retainer.
Contract assets and contract liabilities
Contract assets relate to hedging costs and contract liabilities relate primarily to structured
product revenues. The contract assets represents costs deferred and contract liabilities
represent revenue deferred due to recognition requirements where the revenue and cost
are spread over the product life.
income tax
The income tax expense or benefit for the period is the tax payable on that period’s
taxable income based on the applicable income tax rate for each jurisdiction,
adjusted by the changes in deferred tax assets and liabilities attributable to temporary
differences, unused tax losses and the adjustment recognised for prior periods, where
applicable.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates
expected to be applied when the assets are recovered or liabilities are settled, based on
those tax rates that are enacted or substantively enacted, except for:
3 1
Notes to the consolidated financial statementsSequoia Financial Group limited ANNuAl RepoRt — 30 JuNe 2020 note 2. signifiCant aCCounting poliCies (Continued)
• When the deferred income tax asset or liability arises from the initial recognition
of goodwill or an asset or liability in a transaction that is not a business combination
and that, at the time of the transaction, affects neither the accounting nor taxable
profits; or
• When the taxable temporary difference is associated with interests in subsidiaries,
associates or joint ventures, and the timing of the reversal can be controlled and it is
probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax assets are recognised for deductible temporary differences and unused tax
losses only if it is probable that future taxable amounts will be available to utilise those
temporary differences and losses.
The carrying amount of recognised and unrecognised deferred tax assets are reviewed at
each reporting date. Deferred tax assets recognised are reduced to the extent that it is no
longer probable that future taxable profits will be available for the carrying amount to be
recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is
probable that there are future taxable profits available to recover the asset.
Deferred tax assets and liabilities are offset only where there is a legally enforceable right to
offset current tax assets against current tax liabilities and deferred tax assets against deferred
tax liabilities; and they relate to the same taxable authority on either the same taxable entity
or different taxable entities which intend to settle simultaneously.
Current and non-current classification
Assets and liabilities are presented in the statement of financial position based on current
and non-current classification.
An asset is classified as current when: it is either expected to be realised or intended to be
sold or consumed in the Group’s normal operating cycle; it is held primarily for the purpose of
trading; it is expected to be realised within 12 months after the reporting period; or the asset
is cash or cash equivalent unless restricted from being exchanged or used to settle a liability
for at least 12 months after the reporting period. All other assets are classified as non-current.
A liability is classified as current when: it is either expected to be settled in the Group’s normal
operating cycle; it is held primarily for the purpose of trading; it is due to be settled within
12 months after the reporting period; or there is no unconditional right to defer the settlement
of the liability for at least 12 months after the reporting period. All other liabilities are classified
as non-current.
Deferred tax assets and liabilities are always classified as non-current.
Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial
institutions, other short-term, highly liquid investments with original maturities of three months
or less that are readily convertible to known amounts of cash and which are subject to an
insignificant risk of changes in value.
trade and other receivables
Trade receivables are initially recognised at fair value and subsequently measured at
amortised cost using the effective interest method, less any allowance for expected credit
losses. Trade receivables are generally due for settlement within 30 days.
3 2
Notes to the consolidated financial statementsSequoia Financial Group limited ANNuAl RepoRt — 30 JuNe 2020 note 2. signifiCant aCCounting poliCies (Continued)
The Group has applied the simplified approach to measuring expected credit losses, which
uses a lifetime expected loss allowance. To measure the expected credit losses, trade
receivables have been grouped based on days overdue.
Other receivables are recognised at amortised cost, less any allowance for expected
credit losses.
derivative financial instruments
Derivatives are initially recognised at fair value on the date a derivative contract is entered
into and are subsequently remeasured to their fair value at each reporting date. The
accounting for subsequent changes in fair value depends on whether the derivative is
designated as a hedging instrument, and if so, the nature of the item being hedged.
Derivatives are classified as current or non-current depending on the expected period of
realisation, based upon the maturity date set in the underlying derivative agreement.
investments and other financial assets
Investments and other financial assets are initially measured at fair value. Transaction
costs are included as part of the initial measurement, except for financial assets at fair
value through profit or loss. Such assets are subsequently measured at either amortised
cost or fair value depending on their classification. Classification is determined based on
both the business model within which such assets are held and the contractual cash flow
characteristics of the financial asset unless an accounting mismatch is being avoided.
Financial assets are derecognised when the rights to receive cash flows have expired or
have been transferred and the Group has transferred substantially all the risks and rewards of
ownership. When there is no reasonable expectation of recovering part or all of a financial
asset, its carrying value is written off.
Financial assets at amortised cost
A financial asset is measured at amortised cost only if both of the following conditions are
met: (i) it is held within a business model whose objective is to hold assets in order to collect
contractual cash flows; and (ii) the contractual terms of the financial asset represent
contractual cash flows that are solely payments of principal and interest.
Financial assets at fair value through profit or loss
Financial assets not measured at amortised cost or at fair value through other
comprehensive income are classified as financial assets at fair value through profit or loss.
Typically, such financial assets will be either: (i) held for trading, where they are acquired for
the purpose of selling in the short-term with an intention of making a profit, or a derivative; or
(ii) designated as such upon initial recognition where permitted. Fair value movements are
recognised in profit or loss.
Impairment of financial assets
The Group recognises a loss allowance for expected credit losses on financial assets which
are either measured at amortised cost or fair value through other comprehensive income.
The measurement of the loss allowance depends upon the Group’s assessment at the end
of each reporting period as to whether the financial instrument’s credit risk has increased
significantly since initial recognition, based on reasonable and supportable information that
is available, without undue cost or effort to obtain.
3 3
Notes to the consolidated financial statementsSequoia Financial Group limited ANNuAl RepoRt — 30 JuNe 2020 note 2. signifiCant aCCounting poliCies (Continued)
Where there has not been a significant increase in exposure to credit risk since initial
recognition, a 12-month expected credit loss allowance is estimated. This represents a
portion of the asset’s lifetime expected credit losses that is attributable to a default event
that is possible within the next 12 months. Where a financial asset has become credit
impaired or where it is determined that credit risk has increased significantly, the loss
allowance is based on the asset’s lifetime expected credit losses. The amount of expected
credit loss recognised is measured on the basis of the probability weighted present value of
anticipated cash shortfalls over the life of the instrument discounted at the original effective
interest rate.
For financial assets mandatorily measured at fair value through other comprehensive
income, the loss allowance is recognised in other comprehensive income with a
corresponding expense through profit or loss. In all other cases, the loss allowance reduces
the asset’s carrying value with a corresponding expense through profit or loss.
plant and equipment
Plant and equipment is stated at historical cost less accumulated depreciation and
impairment. Historical cost includes expenditure that is directly attributable to the acquisition
of the items.
Depreciation is calculated on a straight-line basis to write off the net cost of each item of
plant and equipment (excluding land) over their expected useful lives as follows:
Leasehold improvements Over the term of the lease
Plant and equipment
3 years
The residual values, useful lives and depreciation methods are reviewed, and adjusted if
appropriate, at each reporting date.
An item of plant and equipment is derecognised upon disposal or when there is no future
economic benefit to the Group. Gains and losses between the carrying amount and the
disposal proceeds are taken to profit or loss.
leases (to 30 june 2019)
The determination of whether an arrangement is or contains a lease is based on the
substance of the arrangement and requires an assessment of whether the fulfilment of the
arrangement is dependent on the use of a specific asset or assets and the arrangement
conveys a right to use the asset.
A distinction is made between finance leases, which effectively transfer from the lessor to
the lessee substantially all the risks and benefits incidental to the ownership of leased assets,
and operating leases, under which the lessor effectively retains substantially all such risks and
benefits.
Finance leases are capitalised. A lease asset and liability are established at the fair value of
the leased assets, or if lower, the present value of minimum lease payments. Lease payments
are allocated between the principal component of the lease liability and the finance costs,
so as to achieve a constant rate of interest on the remaining balance of the liability.
Leased assets acquired under a finance lease are depreciated over the asset’s useful life or
over the shorter of the asset’s useful life and the lease term if there is no reasonable certainty
that the Group will obtain ownership at the end of the lease term.
3 4
Notes to the consolidated financial statementsSequoia Financial Group limited ANNuAl RepoRt — 30 JuNe 2020 note 2. signifiCant aCCounting poliCies (Continued)
Operating lease payments, net of any incentives received from the lessor, are charged to
profit or loss on a straight-line basis over the term of the lease.
Right-of-use assets (from 1 july 2019)
A right-of-use asset is recognised at the commencement date of a lease. The right-of-use
asset is measured at cost, which comprises the initial amount of the lease liability, adjusted
for, as applicable, any lease payments made at or before the commencement date net of
any lease incentives received, any initial direct costs incurred, and, except where included
in the cost of inventories, an estimate of costs expected to be incurred for dismantling and
removing the underlying asset, and restoring the site or asset.
Right-of-use assets are depreciated on a straight-line basis over the unexpired period
of the lease or the estimated useful life of the asset, whichever is the shorter. Where the
Group expects to obtain ownership of the leased asset at the end of the lease term, the
depreciation is over its estimated useful life. Right-of use assets are subject to impairment or
adjusted for any remeasurement of lease liabilities.
The Group has elected not to recognise a right-of-use asset and corresponding lease liability
for short-term leases with terms of 12 months or less and leases of low-value assets. Lease
payments on these assets are expensed to profit or loss as incurred.
intangible assets
Intangible assets acquired as part of a business combination, other than goodwill, are
initially measured at their fair value at the date of the acquisition. Intangible assets acquired
separately are initially recognised at cost. Finite life intangible assets are subsequently
measured at cost less amortisation and any impairment. The gains or losses recognised
in profit or loss arising from the derecognition of intangible assets are measured as the
difference between net disposal proceeds and the carrying amount of the intangible asset.
The method and useful lives of finite life intangible assets are reviewed annually. Changes
in the expected pattern of consumption or useful life are accounted for prospectively by
changing the amortisation method or period.
Goodwill
Goodwill arises on the acquisition of a business. Goodwill is not amortised. Instead, goodwill
is tested annually for impairment, or more frequently if events or changes in circumstances
indicate that it might be impaired, and is carried at cost less accumulated impairment losses.
Impairment losses on goodwill are taken to profit or loss and are not subsequently reversed.
Customer list
Customer lists are amortised on a straight-line basis over their finite life. The finite life is the
period of expected benefit, which ranges from 5 to 20 years depending on factors such as,
their significance to the Group and acquisition consideration.
Regulatory memberships and licences
Costs in relation to regulatory memberships and licences are capitalised as an asset. These
costs are not subsequently amortised but reviewed annually for impairment.
impairment of non-financial assets
Goodwill is not subject to amortisation and is tested annually for impairment, or more
frequently if events or changes in circumstances indicate that they might be impaired.
Other non-financial assets are reviewed for impairment whenever events or changes in
3 5
Notes to the consolidated financial statementsSequoia Financial Group limited ANNuAl RepoRt — 30 JuNe 2020 note 2. signifiCant aCCounting poliCies (Continued)
circumstances indicate that the carrying amount may not be recoverable. An impairment
loss is recognised for the amount by which the asset’s carrying amount exceeds its
recoverable amount.
Recoverable amount is the higher of an asset’s fair value less costs of disposal and value-in-
use. The value-in-use is the present value of the estimated future cash flows relating to the
asset using a pre-tax discount rate specific to the asset or cash-generating unit to which the
asset belongs. Assets that do not have independent cash flows are grouped together to
form a cash-generating unit.
trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to
the end of the financial year and which are unpaid. Due to their short-term nature they are
measured at amortised cost and are not discounted. The amounts are unsecured and are
usually paid within 30 days of recognition.
borrowings
Loans and borrowings are initially recognised at the fair value of the consideration received,
net of transaction costs. They are subsequently measured at amortised cost using the
effective interest method.
The component of the convertible notes that exhibits characteristics of a liability is
recognised as a liability in the statement of financial position, net of transaction costs.
On the issue of the convertible notes the fair value of the liability component is determined
using a market rate for an equivalent non-convertible bond and this amount is carried
as a non-current liability on the amortised cost basis until extinguished on conversion or
redemption. The increase in the liability due to the passage of time is recognised as a
finance cost. The remainder of the proceeds are allocated to the conversion option that
is recognised and included in shareholders equity as a convertible note reserve, net of
transaction costs. The carrying amount of the conversion option is not remeasured in the
subsequent years. The corresponding interest on convertible notes is expensed to profit or
loss.
lease liabilities (from 1 july 2019)
A lease liability is recognised at the commencement date of a lease. The lease liability is
initially recognised at the present value of the lease payments to be made over the term
of the lease, discounted using the interest rate implicit in the lease or, if that rate cannot be
readily determined, the Group’s incremental borrowing rate. Lease payments comprise of
fixed payments less any lease incentives receivable, variable lease payments that depend
on an index or a rate, amounts expected to be paid under residual value guarantees,
exercise price of a purchase option when the exercise of the option is reasonably certain to
occur, and any anticipated termination penalties. The variable lease payments that do not
depend on an index or a rate are expensed in the period in which they are incurred.
Lease liabilities are measured at amortised cost using the effective interest method. The
carrying amounts are remeasured if there is a change in the following: future lease payments
arising from a change in an index or a rate used; residual guarantee; lease term; certainty
of a purchase option and termination penalties. When a lease liability is remeasured, an
adjustment is made to the corresponding right-of use asset, or to profit or loss if the carrying
amount of the right-of-use asset is fully written down.
3 6
Notes to the consolidated financial statementsSequoia Financial Group limited ANNuAl RepoRt — 30 JuNe 2020 note 2. signifiCant aCCounting poliCies (Continued)
employee benefits
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary benefits, annual leave and long
service leave expected to be settled wholly within 12 months of the reporting date are
measured at the amounts expected to be paid when the liabilities are settled.
Other long-term employee benefits
The liability for annual leave and long service leave not expected to be settled within
12 months of the reporting date are measured at the present value of expected future
payments to be made in respect of services provided by employees up to the reporting
date. 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 reporting date on high-quality corporate bonds with terms to
maturity and currency that match, as closely as possible, the estimated future cash outflows.
fair value measurement
When an asset or liability, financial or non-financial, is measured at fair value for recognition
or disclosure purposes, the fair value is based on the price that would be received to sell
an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date; and assumes that the transaction will take place either: in the
principal market; or in the absence of a principal market, in the most advantageous market.
Fair value is measured using the assumptions that market participants would use when
pricing the asset or liability, assuming they act in their economic best interests. For non-
financial assets, the fair value measurement is based on its highest and best use. Valuation
techniques that are appropriate in the circumstances and for which sufficient data are
available to measure fair value, are used, maximising the use of relevant observable inputs
and minimising the use of unobservable inputs.
Assets and liabilities measured at fair value are classified into three levels, using a fair value
hierarchy that reflects the significance of the inputs used in making the measurements.
Classifications are reviewed at each reporting date and transfers between levels are
determined based on a reassessment of the lowest level of input that is significant to the fair
value measurement.
For recurring and non-recurring fair value measurements, external valuers may be used when
internal expertise is either not available or when the valuation is deemed to be significant.
External valuers are selected based on market knowledge and reputation. Where there is a
significant change in fair value of an asset or liability from one period to another, an analysis
is undertaken, which includes a verification of the major inputs applied in the latest valuation
and a comparison, where applicable, with external sources of data.
issued capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in
equity as a deduction, net of tax, from the proceeds.
dividends
Dividends are recognised when declared during the financial year and no longer at the
discretion of the Company.
3 7
Notes to the consolidated financial statementsSequoia Financial Group limited ANNuAl RepoRt — 30 JuNe 2020 note 2. signifiCant aCCounting poliCies (Continued)
earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of
Sequoia Financial Group Limited, excluding any costs of servicing equity other than ordinary
shares, by the weighted average number of ordinary shares outstanding during the financial
year, adjusted for bonus elements in ordinary shares issued during the financial year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings
per share to take into account the after income tax effect of interest and other financing
costs associated with dilutive potential ordinary shares and the weighted average number
of shares assumed to have been issued for no consideration in relation to dilutive potential
ordinary shares.
goods and services tax (‘gst’) and other similar taxes
Revenues, expenses and assets are recognised net of the amount of associated GST, unless
the GST incurred is not recoverable from the tax authority. In this case it is recognised as part
of the cost of the acquisition of the asset or as part of the expense.
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 tax authority is included in other
receivables or other payables in the statement of financial position.
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 tax authority,
are presented as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from,
or payable to, the tax authority.
new accounting standards and interpretations not yet mandatory or early adopted
Australian Accounting Standards and Interpretations that have recently been issued or
amended but are not yet mandatory, have not been early adopted by the Group for the
annual reporting period ended 30 June 2020. The Group’s assessment of the impact of these
new or amended Accounting Standards and Interpretations, most relevant to the Group, are
set out below.
New Conceptual Framework for Financial Reporting
The revised Conceptual Framework is applicable to annual reporting periods beginning
on or after 1 January 2020 and early adoption is permitted. The Conceptual Framework
contains new definition and recognition criteria as well as new guidance on measurement
that affects several Accounting Standards. Where the Group has relied on the existing
framework in determining its accounting policies for transactions, events or conditions that
are not otherwise dealt with under the Australian Accounting Standards, the Group may
need to review such policies under the revised framework. At this time, the application of the
Conceptual Framework is not expected to have a material impact on the Group’s financial
statements.
3 8
Notes to the consolidated financial statementsSequoia Financial Group limited ANNuAl RepoRt — 30 JuNe 2020 note 3. CRitiCal aCCounting judgements,
estimates and assumptions
The preparation of the financial statements requires management to make judgements,
estimates and assumptions that affect the reported amounts in the financial statements.
Management continually evaluates its judgements and estimates in relation to assets,
liabilities, contingent liabilities, revenue and expenses. Management bases its judgements,
estimates and assumptions on historical experience and on other various factors, including
expectations of future events, management believes to be reasonable under the
circumstances. The resulting accounting judgements and estimates will seldom equal the
related actual results. The judgements, estimates and assumptions that have a significant risk
of causing a material adjustment to the carrying amounts of assets and liabilities (refer to the
respective notes) within the next financial year are discussed below.
Coronavirus (COVID-19) pandemic
Judgement has been exercised in considering the impacts that the Coronavirus (COVID-19)
pandemic has had, or may have, on the Group based on known information. This
consideration extends to the nature of the products and services offered, customers,
supply chain, staffing and geographic regions in which the Group operates. Other than as
addressed in specific notes, there does not currently appear to be either any significant
impact upon the financial statements or any significant uncertainties with respect to
events or conditions which may impact the Group unfavourably as at the reporting date or
subsequently as a result of the Coronavirus (COVID-19) pandemic.
Determination of acquisitions as business combinations or asset acquisitions
During the financial year, the Group completed the acquisition of Libertas Financial Planning
Pty Ltd share capital and the purchase of the customer list from the Yellow Brick Road Wealth
Division. Subsequent to 30 June 2020, the Group completed purchases of the customer lists
from Phillip Capital Limited and Total Cover Australia. In accounting for these purchases,
the Directors formed a view as to which of these were business combinations and which
were asset acquisitions based on the characteristics of the targets, such as, the customer,
workforce and supplier relationships.
Goodwill
The Group tests annually, or more frequently if events or changes in circumstances indicate
impairment, whether goodwill has suffered any impairment, in accordance with the
accounting policy stated in note 2. The recoverable amounts of cash-generating units have
been determined based on value-in-use calculations. These calculations require the use of
assumptions, including estimated discount rates based on the current cost of capital and
growth rates of the estimated future cash flows.
Impairment of non-financial assets other than goodwill and other indefinite life intangible assets
The Group assesses impairment of non-financial assets other than goodwill and other indefinite
life intangible assets at each reporting date by evaluating conditions specific to the Group
and to the particular asset that may lead to impairment. If an impairment trigger exists, the
recoverable amount of the asset is determined. This involves fair value less costs of disposal or
value-in-use calculations, which incorporate a number of key estimates and assumptions.
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary differences only if the Group
considers it is probable that future taxable amounts will be available to utilise those
temporary differences and losses.
3 9
Notes to the consolidated financial statementsSequoia Financial Group limited ANNuAl RepoRt — 30 JuNe 2020 note 3. CRitiCal aCCounting judgements,
estimates and assumptions (Continued)
Lease term
The lease term is a significant component in the measurement of both the right-of-use
asset and lease liability. Judgement is exercised in determining whether there is reasonable
certainty that an option to extend the lease or purchase the underlying asset will be
exercised, or an option to terminate the lease will not be exercised, when ascertaining
the periods to be included in the lease term. In determining the lease term, all facts and
circumstances that create an economical incentive to exercise an extension option, or not
to exercise a termination option, are considered at the lease commencement date. Factors
considered may include the importance of the asset to the Group’s operations; comparison
of terms and conditions to prevailing market rates; incurrence of significant penalties;
existence of significant leasehold improvements; and the costs and disruption to replace the
asset. The Group reassesses whether it is reasonably certain to exercise an extension option,
or not exercise a termination option, if there is a significant event or significant change in
circumstances.
Incremental borrowing rate
Where the interest rate implicit in a lease cannot be readily determined, an incremental
borrowing rate is estimated to discount future lease payments to measure the present value
of the lease liability at the lease commencement date. Such a rate is based on what the
Group estimates it would have to pay a third party to borrow the funds necessary to obtain
an asset of a similar value to the right-of-use asset, with similar terms, security and economic
environment.
4 0
Notes to the consolidated financial statementsSequoia Financial Group limited ANNuAl RepoRt — 30 JuNe 2020 note 4. opeRating segments
Identification of reportable operating segments
The Group is organised into five operating segments, which are based on the internal reports that are
reviewed and used by the Board of Directors (who are identified as the Chief Operating Decision Makers
(‘CODM’)) in assessing performance and in determining the allocation of resources.
The information reported to the CODM is on a monthly basis. The CODM reviews operating profit, which
is earnings before interest, taxation, depreciation and amortisation adjusted for impairment (adjusted
‘EBITDA’).
Types of products and services
The principal products and services of each of these operating segments are as follows:
Sequoia
Wealth
Group
The Wealth division is the core driver of the company business thematic.
The Wealth Group is the area of the business where we provide licensee services
to Financial Planners, Wealth Managers, Equity advisers and a Corporate advisory
business unit.
In Australia this market size is just above 23,000 advisers and the Sequoia owned licenses
have just over 400 advisers, which is an increase of 100% in the last 24 months but a long
way from our goal to provide licensee services to 10% of the adviser market by 2025.
We specialise in providing the adviser market a full service licensing and support service
so they need can operate as an adviser in a market that is heavily legislated. Our role
is to charge a fee for service and assist with a range of value propositions including
compliance, marketing, coaching, education, research, and technical support.
The advisers are primarily accountants, financial planners, mortgage brokers, insurance
advisers, equity market advisers and investment professionals with their AFS licensing,
merger and acquisitions corporate advice.
The Professional Services Group provides services to our own licensed advisers as well
as other licensee holders and the industry. This includes the provision of SMSF solutions,
general insurance broking and legal document establishment services to Financial
Planners, Stock Brokers, Mortgage Brokers and Accountants Australia wide. This
division currently has relationships and provides one of its services to in excess of 3,000
accountants and financial planners across Australia.
Sequoia Equity Markets Group provides services to our own licensed advisers as well
as other licensee holders their advisers, self directed investors, superannuation funds.
The companies fully owned subsidiary Morrison Securities delivers white label Australian
Stockbroking and Specialised Investment solutions to third party institutional and
adviser networks that operate their own AFSL.
Sequoia Direct Investment Group provides general advice to self directed investors
who elect not to have a personal adviser and wish to undertake their own portfolio
management, SMSF management share trading, superannuation, and select their own
products and insurance. In addition this division provides market data, robo advice
and trading tools via various mediums including an independent news organisation
specialising in finance and business news updates, events and investor communication
for ASX listed companies.
Sequoia
Professional
Services
Group
Sequoia
Equity
Markets
Group
Sequoia
Direct
Investment
Group
Head Office
Head Office relates to the corporate running costs of the Group.
All products and services are provided predominantly to customers in Australia.
4 1
Notes to the consolidated financial statementsSequoia Financial Group limited ANNuAl RepoRt — 30 JuNe 2020 note 4. opeRating segments (Continued)
Intersegment transactions
Intersegment transactions were made at cost. Intersegment transactions are eliminated on
consolidation.
Intersegment receivables, payables and loans
Intersegment loans are initially recognised at the consideration received. Intersegment loans receivable
and loans payable that earn or incur non-market interest are not adjusted to fair value based on market
interest rates. Intersegment loans are eliminated on consolidation.
Operating segment information
Consolidated - 2020
Revenue
Revenue
sequoia
wealth
group
$
sequoia
professional
services
group
$
sequoia
equity
markets
group
$
sequoia
direct
investment
group
$
head
office
$
total
$
40,661,203
4,668,453
36,994,395
2,224,429
56,575
84,605,055
Losses on portfolio investments
(96,586)
-
(9,819)
-
-
(106,405)
total revenue
40,564,617
4,668,453
36,984,576
2,224,429
56,575
84,498,650
adjusted ebitda
2,927,624
1,540,968
3,618,514
314,727
(3,576,132)
4,825,701
Depreciation and amortisation
Acquisition costs of Libertas
Financial Planning
Interest revenue
Finance costs
Profit before income tax expense
Income tax expense
Profit after income tax expense
assets
Segment assets
total assets
liabilities
Segment liabilities
total liabilities
(1,812,709)
(74,648)
109,837
(166,944)
2,881,237
(948,763)
1,932,474
9,122,564
7,658,785
64,474,529
970,143
19,055,258
101,281,279
101,281,279
2,669,399
251,567
51,546,226
222,653
13,352,852
68,042,697
68,042,697
4 2
Notes to the consolidated financial statementsSequoia Financial Group limited ANNuAl RepoRt — 30 JuNe 2020 note 4. opeRating segments (Continued)
Consolidated - 2019
Revenue
Revenue
sequoia
wealth
group
$
sequoia
professional
services
group
$
sequoia
equity
markets
group
$
sequoia
direct
investment
group
$
head
office
$
total
$
28,891,875
4,974,170
44,825,786
4,271,980
513,536
83,477,347
Losses on portfolio investments
(438,307)
-
(21,000)
-
-
(459,307)
total revenue
28,453,568
4,974,170
44,804,786
4,271,980
513,536
83,018,040
adjusted ebitda
1,939,362
1,842,443
2,714,199
878,496
(6,281,618)
1,092,882
Depreciation and amortisation
Impairment of assets
Interest revenue
Finance costs
Loss before income tax benefit
Income tax benefit
Loss after income tax benefit
assets
Segment assets
total assets
liabilities
Segment liabilities
total liabilities
(1,563,159)
(530,832)
220,170
(323,215)
(1,104,154)
102,786
(1,001,368)
12,017,913
11,284,769
82,057,184
(2,231,243)
(6,239,093)
96,889,530
96,889,530
1,800,007
431,121
53,409,040
977,006
9,099,668
65,716,842
65,716,842
4 3
Notes to the consolidated financial statementsSequoia Financial Group limited ANNuAl RepoRt — 30 JuNe 2020 note 5. Revenue
Sales revenue
Data subscriptions fees
Brokerage and commissions revenue
Superannuation product revenue
Structured product revenue
Corporate advisory fees
Media revenue
Leasing
Other income
Other revenue
Losses on portfolio investments
Revenue
Consolidated
2020
$
2019
$
712,453
997,199
52,914,957
37,784,656
2,414,279
2,450,510
22,944,283
37,433,497
2,980,337
1,086,477
620
1,551,649
2,967,596
1,384,560
39,500
205,274
84,605,055
83,262,792
(106,405)
(244,752)
84,498,650
83,018,040
Other revenue includes general service revenue and held for trading revenue.
Disaggregation of revenue
The disaggregation of revenue from contracts with customers is as follows:
Consolidated - 2020
Timing of revenue recognition
Services transferred at a point
in time
sequoia
wealth
group
$
sequoia
professional
services
group
$
sequoia
equity
markets
group
$
sequoia
direct
investment
group
$
head
office
$
total
$
40,564,617
4,668,453
13,991,179
588,295
56,575
59,869,119
Services transferred over time
-
-
22,993,397
1,636,134
-
24,629,531
40,564,617
4,668,453
36,984,576
2,224,429
56,575
84,498,650
Consolidated - 2019
Timing of revenue recognition
Services transferred at a point
in time
sequoia
wealth
group
$
sequoia
professional
services
group
$
sequoia
equity
markets
group
$
sequoia
direct
investment
group
$
head
office
$
total
$
26,367,930
4,644,997
11,725,198
819,467
308,540
43,866,132
Services transferred over time
-
-
36,825,914
2,325,994
-
39,151,908
26,367,930
4,644,997
48,551,112
3,145,461
308,540
83,018,040
4 4
Notes to the consolidated financial statementsSequoia Financial Group limited ANNuAl RepoRt — 30 JuNe 2020 note 6. expenses
Profit/(loss) before income tax includes the following specific expenses:
Depreciation
Leasehold improvements
Plant and equipment
Land and buildings - right-of-use assets
Total depreciation
Amortisation
Customer list
Other intangibles
Total amortisation
Consolidated
2020
$
2019
$
109,963
378,191
660,229
118,155
1,274,146
-
1,148,383
1,392,301
473,960
190,366
664,326
81,884
88,974
170,858
Total depreciation and amortisation
1,812,709
1,563,159
Finance costs
Interest and finance charges paid/payable on borrowings
Interest and finance charges paid/payable on lease liabilities
Finance costs expensed
Leases
Minimum lease payments
Short-term lease payments
Total leases
Employee benefits
Wages and salaries
Redundancies and terminations
Defined contribution superannuation expense
Other employment costs
Total employee benefits
15,887
151,057
166,944
581,438
-
581,438
-
1,046,956
268,472
-
268,472
1,046,956
7,574,999
8,629,407
296,646
771,598
23,885
751,810
2,930,537
2,329,117
11,573,780
11,734,219
4 5
Notes to the consolidated financial statementsSequoia Financial Group limited ANNuAl RepoRt — 30 JuNe 2020 note 7. inCome tax
Income tax expense/(benefit)
Current tax
Deferred tax - origination and reversal of temporary differences
Adjustment recognised for prior periods
Aggregate income tax expense/(benefit)
Deferred tax included in income tax expense/(benefit) comprises:
Decrease in deferred tax assets
Decrease in deferred tax liabilities
Consolidated
2020
$
2019
$
961,429
236,470
(249,136)
500,152
(606,428)
3,490
948,763
(102,786)
507,361
606,885
(270,891)
(1,213,313)
Deferred tax - origination and reversal of temporary differences
236,470
(606,428)
Numerical reconciliation of income tax expense/(benefit) and tax at the statutory rate
Profit/(loss) before income tax (expense)/benefit
Tax at the statutory tax rate of 30%
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Amortisation of intangibles
Impairment of goodwill
Sundry items
Adjustment recognised for prior periods
Income tax expense/(benefit)
Amounts charged directly to equity
Deferred tax assets
2,881,237
(1,104,154)
864,371
(331,246)
143,513
-
190,015
-
159,250
65,720
1,197,899
(106,276)
(249,136)
3,490
948,763
(102,786)
Consolidated
2020
$
2019
$
-
12,968
4 6
Notes to the consolidated financial statementsSequoia Financial Group limited ANNuAl RepoRt — 30 JuNe 2020 note 7. inCome tax (Continued)
Deferred tax asset
Deferred tax asset comprises temporary differences attributable to:
Allowance for expected credit losses
Employee benefits
Accrued expenses
Deferred income
Share issue expenses
Net fair value loss on investment
Deferred tax assets attributable to business combinations
Lease incentives
Deferred tax asset
Movements:
Opening balance
Charged to profit or loss
Charged to equity
Closing balance
Deferred tax liability
Deferred tax liability comprises temporary differences attributable to:
Financial assets at fair value through other comprehensive income
Deferred expenses
Intangibles
Deferred tax liability
Movements:
Opening balance
Credited to profit or loss
Additions through business combinations (note 31)
Closing balance
Consolidated
2020
$
2019
$
17,100
267,620
238,404
63,153
225,664
390,875
6,183,158
6,593,853
-
166,646
151,687
243,038
37,226
138,712
109,976
215,555
7,267,653
7,775,014
7,775,014
8,394,867
(507,361)
(606,885)
-
(12,968)
7,267,653
7,775,014
Consolidated
2020
$
2019
$
214,552
251,778
4,442,955
4,676,620
246,311
-
4,903,818
4,928,398
4,928,398
6,141,711
(270,891)
(1,213,313)
246,311
-
4,903,818
4,928,398
4 7
Notes to the consolidated financial statementsSequoia Financial Group limited ANNuAl RepoRt — 30 JuNe 2020 note 8. tRade and otheR ReCeivables
Current assets
Trade receivables
Less: Allowance for expected credit losses
Trade settlement receivables for Morrison Securities Pty Ltd
Other receivables
Consolidated
2020
$
2019
$
808,305
(57,000)
751,305
9,428,581
2,070,178
766,543
(210,510)
556,033
9,782,441
1,337,206
11,498,759
11,119,647
12,250,064
11,675,680
The Group has increased its monitoring of debt recovery as there is an increased probability of
customers delaying payment or being unable to pay, due to the Coronavirus (COVID-19) pandemic.
Allowance for expected credit losses
The ageing of the receivables and allowance for expected credit losses provided for above are as
follows:
Consolidated
Not overdue
1 to 30 days overdue
31 to 60 days overdue
Over 60 days overdue
20.18%
expected credit loss rate
Carrying amount
allowance for expected
credit losses
2020
%
2019
%
2020
$
2019
$
2020
$
2019
$
-
-
-
-
11,498,759
10,909,150
3.27%
12.21%
43.03%
450,687
75,139
282,479
437,146
117,087
422,807
12,307,064
11,886,190
-
-
-
57,000
57,000
-
14,300
14,300
181,910
210,510
Movements in the allowance for expected credit losses are as follows:
Opening balance
Additional provisions recognised
Receivables written off during the year
unused amounts reversed
Closing balance
Consolidated
2020
$
2019
$
210,510
57,000
(199,810)
(10,700)
120,174
90,336
-
-
57,000
210,510
4 8
Notes to the consolidated financial statementsSequoia Financial Group limited ANNuAl RepoRt — 30 JuNe 2020 note 9. ContRaCt assets and defeRRed Costs
Current assets
Contract assets - deferred costs
Non-current assets
Contract assets - deferred costs
Consolidated
2020
$
2019
$
8,989,093
7,510,057
5,820,757
8,078,679
Contract assets - deferred costs relates to hedging costs. The costs are deferred due to recognition
requirements where the revenue and cost is spread over the product life.
Changes in contract assets and liabilities reflect both:
(a) the release of deferred revenues and costs to the profit and loss through the performance of
a contract; and
(b) new receipts and prepayments for contracts that are yet to be performed.
note 10. otheR finanCial assets
Current assets
Investment in shares
Reconciliation
Reconciliation of the fair values at the beginning and end of the current and previous
financial year are set out below:
Opening fair value
Net disposals
Revaluation decrements
Closing fair value
Refer to note 25 for further information on fair value measurement.
Ordinary shares are held in ASX listed companies and are actively traded.
Consolidated
2020
$
2019
$
443,759
675,614
675,614
1,494,444
(21,267)
(210,588)
(307,447)
(511,383)
443,759
675,614
4 9
Notes to the consolidated financial statementsSequoia Financial Group limited ANNuAl RepoRt — 30 JuNe 2020 note 11. deRivative finanCial instRuments
Current assets
Derivatives - financial assets
Non-current assets
Derivatives - financial assets
Current liabilities
Derivatives - financial liabilities
Non-current liabilities
Derivatives - financial liabilities
Consolidated
2020
$
2019
$
2,928,246
5,042,611
9,695,887
13,719,935
(2,928,246)
(5,042,610)
(9,695,887)
(13,719,936)
Refer to note 24 for further information on financial instruments.
Refer to note 25 for further information on fair value measurement.
The Group is party to derivative financial instruments in the normal course of business in order to
hedge exposure to fluctuations in the value of its investment products issued to the Group’s investors in
accordance with the Group’s financial risk management policies (refer to note 24).
The Group offers its clients investment products structured legally as loans, which provide clients a
derivative exposure to underlying market movements to those products. These exact market risks are in-
turn hedged with exact like-for-like products offered by commercial institutions, leaving the Group with
no exposure to the underlying market risks.
Information about the Group’s exposure to market risk, liquidity risk, and credit risk is disclosed in note 24.
The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each
class of derivative financial assets outlined above.
Sequoia has an obligation to its clients to pay the value of the investment at expiry. The current asset
amount and the non-current asset amount equals that of the investment obligation described as a
current liability and a non-current liability. The carrying amount equals the amount of the investment
obligation. The rise or fall offset each other.
5 0
Notes to the consolidated financial statementsSequoia Financial Group limited ANNuAl RepoRt — 30 JuNe 2020 note 12. otheR finanCial assets
Non-current assets
Investment in other non-listed entities
Reconciliation
Reconciliation of the carrying amounts at the beginning and end of the current and
previous financial year are set out below:
Opening carrying amount
Additions
Disposals
Revaluation decrements
Write off of assets
Closing carrying amount
note 13. plant and equipment
Non-current assets
Leasehold improvements - at cost
Opening carrying amount
Plant and equipment - at cost
Less: Accumulated depreciation
Consolidated
2020
$
2019
$
110,546
40,000
40,000
70,546
-
-
-
1,944,646
-
(1,797,850)
(69,296)
(37,500)
110,546
40,000
Consolidated
2020
$
2019
$
921,060
921,060
(449,250)
(339,287)
471,810
581,773
5,264,550
4,700,949
(4,023,561)
(3,628,662)
1,240,989
1,072,287
1,712,799
1,654,060
5 1
Notes to the consolidated financial statementsSequoia Financial Group limited ANNuAl RepoRt — 30 JuNe 2020 note 13. plant and equipment (Continued)
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous
financial year are set out below:
Consolidated
Balance at 1 July 2018
Additions
Depreciation expense
Balance at 30 June 2019
Additions
Depreciation expense
Balance at 30 June 2020
note 14. Right-of-use assets
Non-current assets
Buildings - right-of-use
Less: Accumulated depreciation
leasehold
improvements
$
plant and
equipment
$
total
$
698,988
1,593,009
2,291,997
5,768
759,846
765,614
(122,983)
(1,280,568)
(1,403,551)
581,773
1,072,287
1,654,060
-
546,893
546,893
(109,963)
(378,191)
(488,154)
471,810
1,240,989
1,712,799
Consolidated
2020
$
3,424,788
(660,229)
2,764,559
2019
$
-
-
-
The Group leases buildings for its offices under agreements of between three to seven years with, in
some cases, options to extend. The leases have various escalation clauses. On renewal, the terms of the
leases are renegotiated.
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous
financial year are set out below:
Consolidated
Balance at 1 July 2018
Balance at 30 June 2019
Recognised on adoption of AASB 16 (note 2)
Depreciation expense
Balance at 30 June 2020
buildings -
right-
of-use
$
-
-
3,424,788
(660,229)
2,764,559
5 2
Notes to the consolidated financial statementsSequoia Financial Group limited ANNuAl RepoRt — 30 JuNe 2020 note 15. intangibles
Non-current assets
Goodwill
Less: Impairment
Customer list - at cost
Less: Accumulated amortisation
Regulatory memberships and licences - at cost
Brand name - at cost
Other intangibles - at cost
Less: Accumulated amortisation
Consolidated
2020
$
2019
$
11,842,072
11,304,708
(1,019,547)
(530,832)
10,822,525
10,773,876
8,896,030
5,872,704
(896,433)
(508,306)
7,999,597
5,364,398
3,840,703
3,845,121
1,200,832
-
779,059
774,809
(325,467)
(136,732)
453,592
638,077
24,317,249
20,621,472
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous
financial year are set out below:
Consolidated
goodwill
$
Customer
list
$
Regulatory
memberships
and
licences
$
brand
name
$
other
intangibles
$
total
$
Balance at 1 July 2018
11,304,708
5,446,282
3,849,539
Additions
Disposals
-
-
Impairment of assets
(530,832)
-
-
-
Amortisation expense
-
(81,884)
-
(4,418)
-
-
Balance at 30 June 2019
10,773,876
5,364,398
3,845,121
Additions
-
2,288,120
Additions through business
combinations (note 31)
Impairment from
adjustment to Deferred
consideration (note 31)
Disposals
Disposal of non-operating
company
841,255
821,039
(488,715)
-
(303,891)
-
-
-
Amortisation expense
-
(473,960)
-
-
-
(4,418)
-
-
-
-
-
-
-
-
-
1,200,832
-
-
-
-
722,174
21,322,703
4,877
-
-
4,877
(4,418)
(530,832)
(88,974)
(170,858)
638,077
20,621,472
5,881
2,294,001
-
-
-
-
2,863,126
(488,715)
(4,418)
(303,891)
(190,366)
(664,326)
Balance at 30 June 2020
10,822,525
7,999,597
3,840,703
1,200,832
453,592
24,317,249
5 3
Notes to the consolidated financial statementsSequoia Financial Group limited ANNuAl RepoRt — 30 JuNe 2020 note 15. intangibles (Continued)
Impairment testing
Goodwill acquired through business combinations has been allocated to the following cash generating
units:
Cash generating units (‘CGus’):
Sequoia Wealth Group
Sequoia Professional Services Group
Sequoia Equity Markets Group
Sequoia Direct Investment Group
Consolidated
2020
$
2019
$
1,023,335
674,686
4,386,020
4,386,020
4,862,392
5,162,392
550,778
550,778
10,822,525
10,773,876
The recoverable amount of the Group’s goodwill has been determined by a value-in-use calculation
using a discounted cash flow model, based on a 12-month projection period approved by
management and extrapolated for a further 4 years by using key assumptions.
Key assumptions are those to which the recoverable amount of an asset or cash-generating units is
most sensitive.
The following key assumptions were used in the discounted cash flow model in relation to the goodwill
associated to various cash generating units:
key assumptions
Sequoia Wealth Group
Sequoia Professional Services Group
Sequoia Equity Markets Group
Sequoia Direct Investment Group
Revenue growth rate
%
Cost of sales growth rate
%
pre-tax discount rate
%
3.0%
3.0%
3.0%
1.0%
2.5%
2.5%
2.5%
2.5%
15.0%
15.0%
15.0%
15.0%
The goodwill is considered to be sensitive to these assumptions and is carried in the statement of
financial position at a written-down value.
Sensitivity
The directors have made judgements and estimates in respect of impairment testing of goodwill. Should
these judgements and estimates not occur the resulting goodwill carrying amount may decrease. The
sensitivities are as follows:
(a) Revenue growth would need to decrease by 1% before goodwill would need to be impaired, with all
other assumptions remaining constant.
(b) The discount rate would be required to increase by 11% before goodwill would need to be impaired,
with all other assumptions remaining constant.
Management believes that other reasonable changes in the key assumptions on which the recoverable
amount of goodwill is based would not cause the cash-generating unit’s carrying amount to exceed its
recoverable amount.
If there are any negative changes in the key assumptions on which the recoverable amount of goodwill
is based, this would result in a further impairment charge for goodwill.
5 4
Notes to the consolidated financial statementsSequoia Financial Group limited ANNuAl RepoRt — 30 JuNe 2020 note 16. tRade and otheR payables
Current liabilities
Trade payables
Trade settlement payables for Morrison Securities Pty Ltd
Deferred consideration*
Accrued expenses
Client trading and security bond
Other payables
Consolidated
2020
$
2019
$
690,757
15,715,866
800,100
2,170,863
8,819,916
-
4,247,240
3,391,747
819,108
107,176
1,169,000
-
22,380,247
15,551,526
* The Deferred consideration relates to the acquisition of Libertas Financial Planning Pty Ltd
(refer to note 31).
Refer to note 24 for further information on financial instruments.
note 17. ContRaCt liabilities and defeRRed Revenue
Current liabilities
Contract liabilities - deferred revenue
Non-current liabilities
Contract liabilities - deferred revenue
Consolidated
2020
$
2019
$
12,637,235
10,585,148
7,977,273
11,394,362
Contract liabilities - deferred revenue relate primarily to structured product revenues. The revenue is
deferred due to recognition requirements where the revenue and cost are spread over the product life.
Changes in contract assets and liabilities reflect both:
(a) the release of deferred revenues and costs to the profit and loss through the performance of a
contract; and
(b) new receipts and prepayments for contracts that are yet to be performed.
5 5
Notes to the consolidated financial statementsSequoia Financial Group limited ANNuAl RepoRt — 30 JuNe 2020 note 18. boRRowings
Current liabilities
Bank loans
Capital finance
Other unsecured loans
Convertible notes payable
Lease chattel mortgage
Consolidated
2020
$
2019
$
-
-
462,414
200,000
-
785,225
400,000
100
200,000
46,333
662,414
1,431,658
Refer to note 24 for further information on financial instruments.
Interest on borrowings is payable at rates between 2.5% and 7% (30 June 2019: 4% and 12%).
As at 30 June 2020, the Company had no secured liabilities, which were repaid during the financial year.
Bank loans
The bank loan balance from 30 June 2019 was fully repaid during the financial year.
Capital finance
During the financial year to 30 June 2020, the Group settled its capital finance from working capital.
Other unsecured loans
Other unsecured loans relates to funding for Professional Indemnity Insurance Premium.
Convertible notes payable
Convertible notes payable comprised a number of convertible loans to the value of $200,000
(30 June 2019: $200,000). Interest is payable at a rate of 7% per annum (30 June 2019: 7% per annum).
Lease chattel mortgage
The lease chattel mortgage was fully repaid during the financial year.
Financing arrangements
unrestricted access was available at the reporting date to the following lines of credit:
Total facilities
Bank loans
used at the reporting date
Bank loans
unused at the reporting date
Bank loans
Consolidated
2020
$
2019
$
-
-
-
861,063
785,225
75,838
5 6
Notes to the consolidated financial statementsSequoia Financial Group limited ANNuAl RepoRt — 30 JuNe 2020 note 19. lease liabilities
Current liabilities
Lease liability
Non-current liabilities
Lease liability
Consolidated
2020
$
2019
$
682,415
2,949,872
-
-
The following table details the Group’s remaining contractual maturity for its lease liabilities:
2020
1 year or
less
$
between 1
and
2 years
$
between 2
and
3 years
$
between 3
and
4 years
$
between 4
and
5 years
$
over
5 years
$
Remaining
contractual
maturities
$
Lease liability
682,415
756,033
846,914
835,332
511,593
-
3,632,287
The cash flow in the maturity analysis above are present values of future payments and are not
expected to occur significantly earlier than contractually disclosed.
note 20. Contingent ConsideRation
Current liabilities
Contingent consideration
Non-current liabilities
Contingent consideration
Consolidated
2020
$
2019
$
957,701
479,350
-
-
Contingent considerations relate to future instalment payments for acquisition of the Yellow Brick Road
Wealth Division and are subject to the number of Advisers remaining with Sequoia.
5 7
Notes to the consolidated financial statementsSequoia Financial Group limited ANNuAl RepoRt — 30 JuNe 2020 (95,873)
48,025,034
note 21. issued Capital
Consolidated
2020
shares
2019
shares
2020
$
2019
$
Ordinary shares - fully paid
121,216,770
119,009,824
48,497,215
48,025,034
Movements in ordinary share capital
details
date
shares
issue price
$
Balance
Issue of shares
1 July 2018
24 July 2018
102,805,456
42,788,182
15,151,515
$0.330
5,000,000
Issue of shares on Dividend Reinvestment Plan
25 October 2018
940,353
$0.330
303,475
Issue of shares on exercise of performance rights under
the Long Term Incentive Plan
Share issue transaction costs
19 February 2019
112,500
$0.260
29,250
Balance
30 June 2019
119,009,824
Issue of shares on exercise of performance rights
24 July 2019
185,000
$0.165
30,525
Issue of shares on acquisition of Libertas Financial
Planning Pty Ltd
9 December 2019
1,500,000
$0.220
330,000
Issue of shares as final payment for an asset acquisition
27 December 2019
Issue of shares on exercise of performance rights
5 February 2020
484,446
37,500
$0.215
$0.200
104,156
7,500
Balance
30 June 2020
121,216,770
48,497,215
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the
Company in proportion to the number of and amounts paid on the shares held. The fully paid ordinary
shares have no par value and the Company does not have a limited amount of authorised capital.
On a show of hands every member present at a meeting in person or by proxy shall have one vote and
upon a poll each share shall have one vote.
Share buy-back
The Company is currently conducting an on-market buy-back. It was announced on the market on
15 June 2020 and covers the period 1 July 2020 to 30 June 2021. The maximum number of shares the
Company proposes to acquire under the on-market buy-back is up to approximately 11,900,899, or up
to 10% of the lowest number of ordinary shares on issue during the previous 12 months. Accordingly, the
on-market buy-back will not require shareholder approval. To date, no shares have been brought back
under the buy-back.
Capital risk management
The Group’s objectives when managing capital is to safeguard its ability to continue as a going
concern, so that it can provide returns for shareholders and benefits for other stakeholders and to
maintain an optimum capital structure to reduce the cost of capital.
Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt.
Net debt is calculated as total borrowings less cash and cash equivalents.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid
to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
5 8
Notes to the consolidated financial statementsSequoia Financial Group limited ANNuAl RepoRt — 30 JuNe 2020 note 21. issued Capital (Continued)
The Group would look to raise capital when an opportunity to invest in a business or company was seen
as value adding relative to the current Company’s share price at the time of the investment. The Group
is not actively pursuing additional investments in the short term as it continues to integrate and grow its
existing businesses in order to maximise synergies.
The Group is subject to certain financing arrangements covenants and meeting these is given priority
in all capital risk management decisions. There have been no events of default on the financing
arrangements during the financial year.
The capital risk management policy remains unchanged from prior years.
note 22. ReseRves
Financial assets at fair value through other comprehensive income reserve
Share-based payments reserve
Consolidated
2020
$
2019
$
394,507
40,064
430,308
149,400
434,571
579,708
Financial assets at fair value through other comprehensive income reserve
The reserve is used to recognise increments and decrements in the fair value of financial assets at fair
value through other comprehensive income.
Share-based payments reserve
The reserve is used to recognise the value of equity benefits provided to employees and directors as
part of their remuneration, and other parties as part of their compensation for services.
note 23. dividends
Dividends
Dividends paid during the financial year were as follows:
Consolidated
2020
$
2019
$
Final dividend for the year ended 30 June 2018 of 0.5 cents per ordinary share*
-
589,777
* The dividend comprised of a cash dividend paid of $286,302 and dividend reinvestment allotment of
$303,475 that occurred during the year ended 30 June 2019.
Dividend declared
The Company declared a final dividend for the year ended 30 June 2020 of 0.4 cents per share, fully
franked. The record date for determining entitlements to the dividend is 14 September 2020 and is to
be paid on 12 October 2020. The financial effect of these dividends has not been brought to account
in the financial statements for the year ended 30 June 2020 and will be recognised in subsequent
financial periods.
5 9
Notes to the consolidated financial statementsSequoia Financial Group limited ANNuAl RepoRt — 30 JuNe 2020 note 23. dividends (Continued)
Franking credits
Consolidated
2020
$
2019
$
Franking credits available for subsequent financial years based on a tax rate of 30%
7,660,474
6,160,369
The above amounts represent the balance of the franking account as at the end of the financial year,
adjusted for:
• franking credits that will arise from the payment of the amount of the provision for income tax at the
reporting date
• 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
note 24. finanCial instRuments
Financial risk management objectives
The Group’s financial instruments consist mainly of deposits with banks, accounts receivable and
payable, derivative assets and liabilities, convertible notes and loans receivable and payable.
This note provides details of the Group’s financial risk management objectives and policies and
describes the methods used by management to control risk. In addition, this note includes a discussion
of the extent to which financial instruments are used, the associated risks and the business purpose
served.
One of the Group’s main activities is to issue investments to its product holders which provide returns
based on the performance of an underlying reference asset, typically a single index or a single listed
equity. Different underlying reference assets, with varying features are issued in separate series. The
series are exposed to securities listed on global or local exchanges. The products issued to the product
holders have a maturity of between 18 months and 48 months from the date of issue. On maturity, if
the investment has performed sufficiently, the product holder has the option to contribute in cash the
notional value of the investment on issue date to receive a delivery asset (a liquid security on the ASX)
equal to the value of the underlying reference asset or the value in cash of the financial liability. The
Group enters into a financial instrument with an investment bank, which hedges each series that is
offered to its product holders. The Group ensures that the notional exposure across all its products are
covered via the arrangement, and as such mitigates its risk in this fashion.
The Group’s activities expose it to a variety of financial risks: market risk (including interest rate risk), credit
risk and liquidity risk.
The Board of Directors monitor and manage financial risk exposures of the Group. The Board of Directors
monitors the Group’s financial risk management policies and exposures and approves financial
transactions within the scope of its authority. It also reviews the effectiveness of internal controls relating
to financing risk and interest rate risk.
6 0
Notes to the consolidated financial statementsSequoia Financial Group limited ANNuAl RepoRt — 30 JuNe 2020 note 24. finanCial instRuments (Continued)
Financial assets
Cash and cash equivalents
Trade and other receivables
Derivative assets
Financial assets
Total financial assets
Financial liabilities
Trade and other payables
Derivative liabilities
Lease liabilities
Bank loans and capital finance
Convertible notes
Other loans
Total financial liabilities
Market risk
Consolidated
2020
$
2019
$
22,961,750
18,852,029
12,327,654
11,675,680
12,624,133
18,762,546
554,305
715,614
48,467,842
50,005,869
22,380,247
13,680,088
12,624,133
18,762,546
3,632,287
-
200,000
462,414
-
831,558
200,000
400,100
39,299,081
33,874,292
Market risk is the risk that changes in market prices, such as interest rates and foreign exchange rates
will affect the Group’s income or value of its holdings of financial instruments. The objective of market
risk management is to manage and control market risk exposures within acceptable parameters, while
optimising the return on risk.
The Group issues a structured product to the product holder that is hedged with the financial instrument
that it purchases from an investment bank. The details of the financial instruments are such that the
future cash flows from the financial assets offset the cash flows needed to settle the financial liabilities.
The Group uses this arrangement to mitigate the market risks below, except for credit risk.
Price risk
Price risk arises from changes in underlying investments designated in the financial instruments held by
the Group for which values in the future are uncertain.
The Group mitigates the above price risk by ensuring that price risk in the financial instruments is offset
with one another. The difference in fair value between the financial asset and liability held through profit
and loss is as a result of the premium associated with the financial liability arising from being issued in the
retail market. The Group does not monitor the price risk associated with the premium, as price risk would
only result if the Group were to transfer the liability, and since the Group has no intention of transferring
the financial liability, no disclosures regarding the sensitivity to price risk have been made.
The Group is, therefore, not exposed to any significant price risk.
Interest rate risk
Interest rate risk is the risk that the value of the Group’s financial instruments will fluctuate due to
changes in market interest rates.
The Group’s cash and cash equivalents are exposed to interest rate risk, however the Directors of the Group
manage financial instruments to ensure that interest rate risk remains hedged and is therefore offsetting.
6 1
Notes to the consolidated financial statementsSequoia Financial Group limited ANNuAl RepoRt — 30 JuNe 2020 note 24. finanCial instRuments (Continued)
The Group is also exposed to interest rate risk arising from long-term borrowings. Borrowings obtained
at variable rates expose the Group to interest rate risk. Borrowings obtained at fixed rates expose the
Group to fair value interest rate risk.
The Group is not exposed to any significant interest rate risk.
Credit risk
The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance
date to recognised financial assets, is the carrying amount, net of any provisions for impairment of those
assets, as disclosed in the statement of financial position and notes to the financial statements.
The Group has adopted a lifetime expected loss allowance in estimating expected credit losses to
trade receivables through the use of a provisions matrix using fixed rates of credit loss provisioning.
These provisions are considered representative across all customers of the Group based on recent sales
experience, historical collection rates and forward-looking information that is available.
Credit risk is managed through the maintenance of procedures (such procedures include the utilisation
of systems for the approval, granting and renewal of credit limits, regular monitoring of exposures against
such limits and monitoring of the financial stability of significant customers and counterparties), ensuring
to the extent possible, that customers and counterparties to transactions are of sound credit worthiness.
Such monitoring is used in assessing receivables for impairment.
Generally, trade receivables are written off when there is no reasonable expectation of recovery.
Indicators of this include the failure of a debtor to engage in a repayment plan, no active enforcement
activity and a failure to make contractual payments for a period greater than 1 year.
Risk is also minimised through investing surplus funds in financial institutions that maintain a high credit
rating, or in entities that the Board of Directors has otherwise cleared as being financially sound. Where
the Group is unable to ascertain a satisfactory credit risk profile in relation to a customer or counterparty,
the risk may be further managed by obtaining security by way of personal or commercial guarantees
over assets of sufficient value which can be claimed against in the event of any default.
The financial products issued by Sequoia Specialist Investments Pty Ltd (‘Issuer’) are secured obligations
of the Issuer. Investors are granted a charge which is held on trust by the security trustee. If the Issuer fails
to (i) make a payment or delivery on its due date; or (ii) meet any other obligation and in the Security
Trustee’s opinion, the failure is materially adverse to the investors and cannot be remedied (or has not
been remedied within 5 business days of written notice), the Security Trustee may enforce the charge.
In this case the investors are unsecured creditors of the provider of the hedge assets. Investors’ rights
of recourse against the Issuer on a default are limited to the assets subject to the charge. This structure
has the effect of passing through the credit rating of the provider of the hedge asset and protecting
different financial product series from cross-liability issues (other than on an insolvency of either the Issuer
or the provider of the hedge asset). The Issuer will only deal with an investment-grade (or better) bank or
a subsidiary of an investment-grade (or better) bank.
Investments grades are a rating or indicator of particular debt obligations which have a low risk of default.
Various rating agencies rate an investment bank’s creditworthiness. Different rating firms use different
designations. Sequoia Specialist Investments Pty Ltd hedge providers are considered “investment grade”
and the credit worthiness of our investment bank hedge contracts providers are between high credit
quality (‘AAA’ and ‘AA’ ) and medium credit quality (‘A’ and ‘BBB’). Therefore, the risk of default of the
selected hedge providers are considered low. In addition, if the investment bank were to unexpectedly
default the resulting financial risk would be ultimately borne by the end investor, due to the pass through of
the credit risk of the hedge provider to the end investor.
6 2
Notes to the consolidated financial statementsSequoia Financial Group limited ANNuAl RepoRt — 30 JuNe 2020 note 24. finanCial instRuments (Continued)
The following tables detail the Group’s potential exposure, should the counterparties be unable to meet
their obligations:
2020
Derivative liabilities
2019
Derivative assets
Liquidity risk
fair value
$
notional value
$
12,624,133
333,502,357
fair value
$
notional value
$
18,762,546
289,458,434
Vigilant liquidity risk management requires the Group to maintain sufficient liquid assets (mainly cash and
cash equivalents) and available borrowing facilities to be able to pay debts as and when they become
due and payable.
The Group manages liquidity risk by maintaining adequate cash reserves and available borrowing
facilities by continuously monitoring actual and forecast cash flows and matching the maturity profiles of
financial assets and liabilities.
Remaining contractual maturities
The following tables detail the Group’s maturity for its financial instrument liabilities. The tables have been
drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on
which the financial liabilities are required to be paid.
Consolidated - 2020
non-derivatives
Non-interest bearing
Trade payables
Other payables
Client trading and security bond
Contingent consideration
Interest-bearing - variable
Other loans
Interest-bearing - fixed rate
Convertible notes payable
Total non-derivatives
derivatives
Value hedges, net settled
Total derivatives
1 year or less
$
between 1
and 5 years
$
Remaining
contractual
maturities
$
16,406,623
107,176
819,108
957,701
462,414
200,000
-
-
-
16,406,623
107,176
819,108
479,350
1,437,051
-
-
462,414
200,000
18,953,022
479,350
19,432,372
2,928,246
9,695,887
12,624,133
2,928,246
9,695,887
12,624,133
6 3
Notes to the consolidated financial statementsSequoia Financial Group limited ANNuAl RepoRt — 30 JuNe 2020 note 24. finanCial instRuments (Continued)
Consolidated - 2019
non-derivatives
Non-interest bearing
Trade payables
Client trading and security bond
Interest-bearing - variable
Bank loans
Other loans
Interest-bearing - fixed rate
Convertible notes payable
Total non-derivatives
derivatives
Value hedges, net settled
Total derivatives
1 year or less
$
between 1
and 5 years
$
Remaining
contractual
maturities
$
10,990,779
1,169,000
831,558
400,100
200,000
13,591,437
-
-
-
-
-
-
10,990,779
1,169,000
831,558
400,100
200,000
13,591,437
5,042,610
13,719,936
18,762,546
5,042,610
13,719,936
18,762,546
The cash flows in the maturity analysis above are not expected to occur significantly earlier than
contractually disclosed above.
note 25. faiR value measuRement
Fair value hierarchy
The following tables detail the Group’s assets and liabilities, measured or disclosed at fair value, using
a three level hierarchy, based on the lowest level of input that is significant to the entire fair value
measurement, being:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can
access at the measurement date
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or
liability, either directly or indirectly
Level 3: unobservable inputs for the asset or liability
6 4
Notes to the consolidated financial statementsSequoia Financial Group limited ANNuAl RepoRt — 30 JuNe 2020 note 25. faiR value measuRement (Continued)
Consolidated - 2020
Assets
Listed ordinary shares
unlisted ordinary shares
Derivative financial instruments
Total assets
Liabilities
Derivative financial instruments
Contingent consideration
Total liabilities
Consolidated - 2019
Assets
Listed ordinary shares
unlisted ordinary shares
Derivative financial instruments
Total assets
Liabilities
Derivative financial instruments
Total liabilities
level 1
$
level 2
$
level 3
$
total
$
443,759
-
-
-
-
-
110,546
443,759
110,546
12,624,133
-
12,624,133
443,759
12,624,133
110,546
13,178,438
-
-
-
12,624,133
1,437,051
14,061,184
level 1
$
level 2
$
level 3
$
-
-
-
-
12,624,133
1,437,051
14,061,184
total
$
675,614
40,000
675,614
-
-
-
-
40,000
18,762,546
-
18,762,546
675,614
18,762,546
40,000
19,478,160
-
-
18,762,546
18,762,546
-
-
18,762,546
18,762,546
There were no transfers between levels during the financial year.
Convertible notes are held at amortised cost so are excluded from the fair value tables above.
The carrying amounts of trade and other receivables, trade and other payables and other financial
liabilities approximate their fair values due to their short-term nature.
The fair value of financial liabilities is estimated by discounting the remaining contractual maturities at
the current market interest rate that is available for similar financial liabilities.
Valuation techniques for fair value measurements categorised within level 2 and level 3
Financial instruments that are not traded in an active market are determined using valuation
techniques. These valuation techniques maximise the use of observable market data where it is
available and relies as little as possible on entity specific estimates. If all significant inputs required to fair
value an instrument are observable, the instrument is included in level 2. If one or more of the significant
inputs is not based on observable market data, the instrument is included in level 3.
unquoted investments have been valued using prices evident in recent third party transactions.
The valuation process is managed by the Chief Operating Decision Makers (‘CODM’) of the Group
who perform and validate valuations of non-property assets required for financial reporting purposes
(including level 3 fair values). Discussion on valuation processes and outcomes are held between the
CODM, CFO and audit committee every six months.
6 5
Notes to the consolidated financial statementsSequoia Financial Group limited ANNuAl RepoRt — 30 JuNe 2020 note 25. faiR value measuRement (Continued)
Level 3 assets and liabilities
Movements in level 3 assets and liabilities during the current and previous financial year are set out
below:
Consolidated
Balance at 1 July 2018
Disposals
Balance at 30 June 2019
Additions
Amounts paid
Balance at 30 June 2020
unlisted
ordinary shares
$
125,796
(85,796)
40,000
70,546
-
110,546
note 26. key management peRsonnel disClosuRes
Compensation
The aggregate compensation made to directors and other members of key management personnel of
the Group is set out below:
Short-term employee benefits
Post-employment benefits
Share-based payments
Consolidated
2020
$
2019
$
646,006
1,003,667
30,883
-
54,458
8,775
676,889
1,066,900
Refer to the ‘Remuneration report (audited)’ section of the Directors’ report.
note 27. RemuneRation of auditoRs
During the financial year the following fees were paid or payable for services provided by William Buck,
the auditor of the Company:
Audit services - William Buck Audit (Vic) Pty Limited
Audit or review of the financial statements
Other services - William Buck (Vic) Pty Limited
Tax services
Other services
Consolidated
2020
$
2019
$
165,959
154,410
26,755
14,994
41,749
207,708
81,627
23,118
104,745
259,155
6 6
Notes to the consolidated financial statementsSequoia Financial Group limited ANNuAl RepoRt — 30 JuNe 2020 note 28. Contingent liabilities
The Group has given a bank guarantee as at 30 June 2020 of $677,238 (30 June 2019: $677,238) in
relation to rental bonds. These are held in term deposit accounts with Westpac Banking Corporation.
The Group’s legal counsel is currently acting on several matters referred to the Australian Financial
Complaints Authority (‘AFCA’) relating to the provision of financial services to its retail clients. The Group
has assessed any potential obligations relating to these complaints after pursuing a recourse from the
advisers in the following manner:
• Those complaints for which there is a probable likelihood of restitution being paid, have been accrued
in these financial statements, together with any associated legal costs and net of any available
insurance cover; and
• The Directors have assessed complaints for which there is less than a probable likelihood of restitution
(including the impact of legal costs and insurance), and have chosen not to disclose the likely amount
as they are still subject to proceedings with AFCA and potential recourse from the advisers, and the
disclosure of such amounts is likely to prejudice those proceedings.
note 29. Related paRty tRansaCtions
Parent entity
Sequoia Financial Group Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 32.
Key management personnel
Disclosures relating to key management personnel are set out in note 26 and the remuneration report
included in the directors’ report.
Transactions with related parties
During the financial year, $142,866 was paid or payable for services provided by Cooper Grace Ward
Lawyers, a related party entity of director, Charles Sweeney.
Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates.
note 30. paRent entity infoRmation
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Profit after income tax
Total comprehensive income
parent
2020
$
2019
$
378,203
292,688
378,203
292,688
6 7
Notes to the consolidated financial statementsSequoia Financial Group limited ANNuAl RepoRt — 30 JuNe 2020 note 30. paRent entity infoRmation (Continued)
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Financial assets at fair value through other comprehensive income reserve
Share-based payments reserve
Accumulated losses
Total equity
parent
2020
$
2019
$
115,366
165,317
63,154,128
63,285,327
3,201,009
3,115,729
34,613,806
34,436,861
84,430,344
83,958,163
46,070
40,064
46,070
149,400
(55,976,156)
(55,305,167)
28,540,322
28,848,466
Contingent liabilities
The parent entity had contingent liabilities of $800,100 for the acquisition of Libertas Financial Planning
and $1,438,051 for the acquisition of Yellow Brick Road Wealth Division as at 30 June 2020. The parent
entity had no contingent liabilities as at 30 June 2019.
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2020
and 30 June 2019.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the Group, as disclosed in note
2, except for the following:
• Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
• Dividends received from subsidiaries are recognised as other income by the parent entity and its
receipt may be an indicator of an impairment of the investment.
note 31. business Combinations
year ended 30 june 2020
Libertas Financial Planning Pty Ltd
On 7 August 2019, the Company announced the 100% equity acquisition of Libertas Financial
Planning Pty Ltd (‘Libertas’). Libertas is a successful financial advice dealer group with approximately
70 authorised representatives. The acquisition provides Sequoia with further scale in the advice
marketplace and based on the latest Money Management dealer group survey, makes Sequoia one of
the largest non-bank owned financial adviser groups in the country.
As part of the consideration the Company issued 1,500,000 fully paid ordinary shares at 22 cents per
share to the seller. $1,052,039 cash was paid upfront with an additional issue of 3,810,000 fully paid
ordinary shares at 21 cents per share as final settlement in July 2020.
6 8
Notes to the consolidated financial statementsSequoia Financial Group limited ANNuAl RepoRt — 30 JuNe 2020 note 31. business Combinations (Continued)
Since acquisition, Libertas has contributed revenue of $8,135,810 and operating profit of $568,948. If the
acquisition had happened at the beginning of the financial year, the contribution would have been
revenue of $9,330,631 and operating profit of $611,181.
Details of the acquisition are as follows:
Cash and cash equivalents
Trade and other receivables
Other receivables
Accrued revenue
Prepayments
Customer list
Brand name
Trade and other payables
Other payables
Deferred tax liability
Bank loans
Other liabilities
Net assets acquired*
Goodwill**
Acquisition-date fair value of the total consideration transferred
Representing:
Cash paid or payable to vendor
Sequoia Financial Group Limited shares issued to vendor
Deferred consideration**
Acquisition costs expensed to profit or loss
Cash used to acquire business, net of cash acquired:
Fair value of the total consideration*
Less: cash and cash equivalents
Less: shares issued by Company as part of consideration
Less: shares issued by Company as part of consideration July 2020
Net cash used
* Fair values assigned to assets and liabilities by an independent valuer.
libertas
financial
planning
pty ltd
fair value
$
20,689
57,684
6,726
10,314
104,458
821,039
1,200,832
(26,819)
(23,855)
(246,311)
(91,225)
(3,933)
1,829,599
841,255
2,670,854
1,052,039
330,000
1,288,815
2,670,854
74,648
2,182,139
(20,689)
(330,000)
(800,100)
1,031,350
6 9
Notes to the consolidated financial statementsSequoia Financial Group limited ANNuAl RepoRt — 30 JuNe 2020 note 31. business Combinations (Continued)
** The Directors reassessed the deferred consideration payable in light of the performance criteria, and
agreed with the vendor on the final settlement, payable in July 2020. As a consequence, the deferred
consideration payable was reduced by $488,715, and goodwill impaired by the same amount.
year ended 30 june 2019
There were no business combinations during the year ended 30 June 2019.
note 32. inteRests in subsidiaRies
The consolidated financial statements incorporate the assets, liabilities and results of the following
subsidiaries with non-controlling interests in accordance with the accounting policy described in note 2:
name
Sequoia Financial Group Limited
Sequoia Group Holdings Pty Ltd
Sequoia Financial Australia Ltd
Sequoia Wealth Group Pty Ltd
My Own Super Fund Pty Ltd
Bourse Data Pty Ltd
The Cube Financial Group Ltd
Trader Dealer Online Pty Ltd
MDSnews.com Pty Ltd
Interprac Pty Ltd
Libertas Financial Planning Pty Ltd
Sequoia Direct Pty Ltd
Finance TV Pty Ltd
Morrison Securities Pty Ltd
Sequoia Superannuation Pty Ltd
Sequoia Specialist Investments Pty Ltd
Sequoia Asset Management Pty Ltd
Sequoia Lending Pty Ltd
Sequoia Funds Management Pty Ltd****
Sequoia Investment Management Pty Ltd****
Sequoia Brisbane Pty Ltd****
Acacia Administrative Services Pty Ltd*
Sequoia Nominees No.1 Pty Ltd
Sequoia Wealth Management Pty Ltd
Sequoia Corporate Finance Pty Ltd
parent
note
principal place
of business /
Country of
incorporation
ownership
interest
2020
%
ownership
interest
2019
%
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(c)
(d)
(d)
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
-
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
-
-
-
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
Centreboard Super Pty Ltd **
(b) (e)
Australia
100.00%
100.00%
Australian Practical Superannuation Fund Pty Ltd
(formerly Property Engine Pty Ltd)
Investor1st Pty Ltd
InterPrac Financial Planning Pty Ltd***
(e)
(e)
(e)
Australia
Australia
Australia
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
7 0
Notes to the consolidated financial statementsSequoia Financial Group limited ANNuAl RepoRt — 30 JuNe 2020 note 32. inteRests in subsidiaRies (Continued)
Sage Capital Group Pty Ltd
Interprac Securities Pty Ltd
Interprac General Insurance Pty Ltd
InterPrac Mortgage Management Pty Ltd
InterPrac Finance Services Pty Ltd
SMSF Engine Pty Ltd
Tax Engine Pty Ltd
Sequoia Private Clients Pty Ltd
Morsec Nominees Pty Ltd
(e)
(e)
(e)
(e)
(e)
(e)
(e)
(e)
(f)
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
(a) Subsidiary of Sequoia Financial Group Limited
(b) Subsidiary of Sequoia Group Holdings Pty Ltd
(c) Subsidiary of Sequoia Specialist Investments Pty Ltd
(d) Subsidiary of Sequoia Wealth Group Pty Ltd
(e) Subsidiary of Interprac Pty Ltd
(f) Subsidiary of Morrison Securities Pty Ltd
* Acacia Administrative Services Pty Ltd acts as a service entity for the Group with all employees
engaged under this entity.
** 50% owned by Sequoia Group Holdings Pty Ltd and 50% owned by Interprac Pty Ltd.
*** 50% owned by Interprac Pty Ltd and 50% owned by Sage Capital Group Pty Ltd.
**** Entities were deregistered during the financial year.
7 1
Notes to the consolidated financial statementsSequoia Financial Group limited ANNuAl RepoRt — 30 JuNe 2020 note 33. Cash flow infoRmation
Reconciliation of profit/(loss) after income tax to net cash from operating activities
Profit/(loss) after income tax (expense)/benefit for the year
1,932,474
(1,001,368)
Consolidated
2020
$
2019
$
Adjustments for:
Depreciation and amortisation
Impairment of non-current assets
Impairment of investments
Net loss on disposal of non-current assets
Share-based payments forfeited
Change in operating assets and liabilities:
Increase in trade and other receivables
Decrease in contract assets and deferred costs
Decrease/(increase) in inventories
Decrease in deferred tax assets
Increase in prepayments
Decrease/(increase) in other operating assets
Increase in trade and other payables
Decrease in contract liabilities and deferred revenue
Increase/(decrease) in provision for income tax
Decrease in deferred tax liabilities
Increase/(decrease) in employee benefits
Decrease in other provisions
Increase in other operating liabilities
Net cash from operating activities
1,812,709
1,563,159
-
-
106,405
(71,311)
530,832
37,500
-
(80,018)
(509,974)
(4,587,074)
789,200
3,330,397
(489)
507,361
(66,691)
12,161
619,853
(119,633)
(190,435)
2,372,868
5,819,346
1,878,372
(1,365,002)
(3,414,999)
(797,134)
319,461
(270,891)
(1,213,313)
146,732
-
153,668
(42,797)
(19,019)
-
7,995,968
186,382
7 2
Notes to the consolidated financial statementsSequoia Financial Group limited ANNuAl RepoRt — 30 JuNe 2020 note 33. Cash flow infoRmation (Continued)
Changes in liabilities arising from financing activities
Consolidated
bank loans
and lease
chattel
mortgage
$
Capital
finance and
other
loans
$
Convertible
notes
$
lease
liability
$
total
$
Balance at 1 July 2018
1,083,514
5,826,311
400,000
90,398
7,400,223
Net cash used in financing activities
(251,956)
(5,426,211)
(200,000)
(90,398)
(5,968,565)
Balance at 30 June 2019
831,558
400,100
200,000
-
1,431,658
Net cash used in financing activities
(831,558)
(28,911)
Leases recognised on the adoption of AASB 16
Make good provision
Adjustment to treatment lease incentive
Changes through business combinations (note 31)
Other changes
Balance at 30 June 2020
-
-
-
-
-
-
-
-
-
91,225
-
-
-
-
-
-
-
(610,688)
(1,471,157)
4,057,139
4,057,139
200,000
200,000
(638,727)
(638,727)
-
91,225
624,563
624,563
462,414
200,000
3,632,287
4,294,701
Note: The cash balance at the end of the financial year of $22,961,750 (2019: $18,852,029) includes
Trust bank balances of $8,798,987 (2019: $2,441,934) held by Morrison Securities Pty Ltd. The Trust bank
balances are client funds and are not available for general use by the Group. A corresponding liability is
recognised within Trade and other payables (note 16).
note 34. eaRnings peR shaRe
Consolidated
2020
$
2019
$
Profit/(loss) after income tax attributable to the owners of Sequoia Financial Group
Limited
1,932,474
(1,001,368)
Weighted average number of ordinary shares used in calculating basic earnings
per share
Adjustments for calculation of diluted earnings per share:
Options over ordinary shares
Performance rights
number
number
120,282,464
117,643,751
1,000,000
195,000
-
-
Weighted average number of ordinary shares used in calculating diluted earnings
per share
121,477,464
117,643,751
Basic earnings per share
Diluted earnings per share
Cents
Cents
1.607
1.591
(0.851)
(0.851)
7 3
Notes to the consolidated financial statementsSequoia Financial Group limited ANNuAl RepoRt — 30 JuNe 2020 note 35. events afteR the RepoRting peRiod
Phillip Capital Limited
On 1 June 2020, Sequoia announced the acquisition of the customer base from Phillip Capital Limited
(ASX: PCL). On 5 June 2020, a deposit of $411,000 was paid in escrow. The Agreement was completed
on 1 July 2020, with employees and Corporate Authorised Representatives (‘CARs’) transferring to
Sequoia. The next consideration payment is due within two months post completion.
Total Cover Australia
In July 2020, Sequoia announced its intention to acquire the customer base from Total Cover Australia
(‘TCA’). Consideration will be 1,500,000 fully paid ordinary shares at 22 cents per share, with further cash
payments totalling $945,000 to be paid over two years.
Impact of Covid-19
COVID-19 restrictions have impacted all businesses and we are no different. The pandemic has
had a material impact on the financial affairs of many Australians and the need for advice at a
reasonable cost has increased. The Government initiatives such as Job Keeper, Job Seeker and Early
Superannuation Release all provided a need for interaction between advisers and the community, and
has also seen a rise in equity market turnover with a new wave of ‘Robin Hood’ type traders entering
the market. Sales in 2H20 in some of the operating business units slowed, but growth in other parts of
our business has offset those reductions and Profit was not significantly impacted. We will continue
to monitor the pandemic and if it continues longer than anticipated there may be a need for further
reductions in aspects of our business.
Apart from the dividend declared as disclosed in note 23, no other matter or circumstance has arisen
since 30 June 2020 that has significantly affected, or may significantly affect the Group’s operations, the
results of those operations, or the Group’s state of affairs in future financial years.
7 4
Notes to the consolidated financial statementsSequoia Financial Group limited ANNuAl RepoRt — 30 JuNe 2020 Directors’ declaration
In the directors’ opinion:
• the attached financial statements and notes comply with the Corporations Act 2001, the Accounting
Standards, the Corporations Regulations 2001 and other mandatory professional reporting
requirements;
• the attached financial statements and notes comply with International Financial Reporting Standards
as issued by the International Accounting Standards Board as described in note 2 to the financial
statements;
• the attached financial statements and notes give a true and fair view of the Group’s financial position
as at 30 June 2020 and of its performance for the financial year ended on that date; 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.
The directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the
Corporations Act 2001.
On behalf of the directors
John Larsen
Chairman
20 August 2020
Sydney
7 5
Sequoia Financial Group limited AnnuAl RepoRt — 30 June 2020 Independent auditor’s report to the members
of Sequoia Financial Group Limited
Sequoia Financial Group Limited
Independent auditor’s report to members
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Sequoia Financial Group Limited (the Company)
and its subsidiaries (the Group), which comprises the consolidated statement of financial
position as at 30 June 2020, the consolidated statement of profit or loss and other
comprehensive income, the consolidated statement of changes in equity and the
consolidated statement of cash flows for the year then ended, and notes to the financial
statements, including a summary of significant accounting policies and other explanatory
information, and the directors’ declaration.
In our opinion, the accompanying financial report of the Group, is in accordance with the
Corporations Act 2001, including:
(i) giving a true and fair view of the Group’s financial position as at 30 June 2020 and of its
financial performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations
2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our
responsibilities under those standards are further described in the Auditor’s
Responsibilities for the Audit of the Financial Report section of our report. We are
independent of the Group in accordance with the auditor independence requirements of
the Corporations Act 2001 and the ethical requirements of the Accounting Professional
and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants
(including Independence Standards) (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in
accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
7 6
Sequoia Financial Group limited AnnuAl RepoRt — 30 June 2020
Independent auditor’s report to the members
of Sequoia Financial Group Limited
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our
audit of the financial report of the current period. These matters were addressed in the context of our audit
of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters.
ASSESSMENT OF CARRYING VALUE OF INTANGIBLE ASSETS
Area of focus
The Group’s net assets include a significant
amount of intangible assets, the majority of
which have originated from acquisitions in prior
years.
There is a risk that the entities in the Group may
not trade in line with initial expectations and
forecasts, resulting in the carrying amount of
intangible assets exceeding the recoverable
amount and therefore requiring impairment.
The recoverable amounts of the four cash
generating units (CGUs) have been calculated
based upon on their value-in-use. These
recoverable amounts use discounted cash flow
forecasts in which the Directors make
judgements over certain key inputs, for example
but not limited to revenue growth, discount rates
applied, long term growth rates and inflation
rates.
Overall due to the high level of judgement
involved, and the significant carrying amounts
involved, we have determined that this is a key
judgemental area that our audit concentrated
on.
How our audit addressed it
Our audit procedures included:
— Evaluation of the Group’s determination of
CGUs. This includes reviewing internal
management reporting, comparison to our
knowledge and understanding of Group’s
operations and ensuring CGUs are no
larger than operating segments;
— A detailed evaluation of the Group’s
budgeting procedures upon which the
forecasts are based and testing the
principles and integrity of the discounted
future cash flow models;
— Testing the accuracy of the calculation
derived from each forecast model and we
assessed key inputs in the calculations such
as revenue growth, discount rates and
working capital assumptions, by reference
to the Board approved forecasts, data
external to the Group and our own views.
— We reviewed the historical accuracy by
comparing actual results with the original
forecasts.
We also considered the adequacy of the
Group’s disclosures in relation to the impairment
testing.
7 7
Sequoia Financial Group limited AnnuAl RepoRt — 30 June 2020
Independent auditor’s report to the members
of Sequoia Financial Group Limited
REVENUE RECOGNITION FOR SPECIALIST SOLUTIONS INVESTMENTS PRODUCTS
Area of focus
How our audit addressed it
The Specialist Solutions Investments business
segment (SSI) represents a significant portion of
the revenues and profitability of the Group. SSI
earns revenue by providing a counter-party solution
for its clients in their trading of market risks
(principally foreign exchange and equities) in
medium to long-term derivative products.
Sequoia effectively on-sells the derivative exposure
it has with its clients to Tier 1 investment banks with
contracts that completely match that derivative
exposure.
The margin it earns from this arrangement is priced
separately and is deferred (together with direct
costs) on a straight-line over the course of each
contract on a gross basis in the financial statements
(deferred costs and deferred revenue). The
derivative positions, which are held at fair value
with changes in fair value through the profit or loss,
are also reflected at their unhedged values on the
statement of financial position.
From our perspective, the key risks for this
arrangement include the following matters:
- The risk that client-driven derivative
exposures are not matched 1-for-1 with
wholesale contracts;
— For a sample of structured products, we
agreed the terms and conditions,
including but not limited to, interest rates,
notional hedged units, product maturity,
trade dates and hedge premiums paid to
supporting documents, including Product
Disclosure Statements, Market-to-Market
(MTM) valuations, Market registry
allotment reports and bank statements.
— We confirmed the valuations of the
derivative financial instruments at year
end through to supporting valuations
obtained from various investment banks.
— We re-calculated the model for deferral
and subsequent release of revenue and
costs relating to the structured products
and reconciled closing positions to the
statement of financial position and
statement of financial performance;
— An assessment of the credit worthiness
of the investment banks;
— We examined application fees and
coupon fees and ensured that they were
accrued to the appropriate accounting
period; and
— We reviewed the accuracy of the current
and non-current classification of deferred
revenue and deferred costs.
- The risk of default by the investment banks
providing wholesale derivative hedge
positions; and
We also considered the adequacy of the
Group’s disclosures in relation to revenue
recognition.
- The potential for revenue to be recognised
in-advance of the services provided to the
client, including other revenues related with
SSI including non-refundable application
fees, which are earned up-front and at-risk
coupon fees, which are earned at the close
of each contract.
We also reviewed the Group’s accounting
policies for its revenue and cost streams
attached to the SSI segment, to ensure
compliance with AASB 15.
7 8
Sequoia Financial Group limited AnnuAl RepoRt — 30 June 2020
Independent auditor’s report to the members
of Sequoia Financial Group Limited
BUSINESS COMBINATIONS – LIBERTAS FINANCIAL PLANNING
How our audit addressed it
Our audit procedures included:
— Reviewing the acquisition agreements to
understand the key terms and conditions of
the acquisition;
— Reviewed the accounting treatment adopted
by the Group to ensure it meets the
requirements of AASB 3 Business
Combinations;
— Comparing the completion accounting to
independent purchase price allocation
reports;
— Obtained a list of transaction costs related
to the purchase and on a sample ensured
appropriate treatment in being expensed
when incurred;
— Discussed with management their program
for ensuring that they complete their
analysis of fair values of assets and
liabilities acquired by the anniversary of the
acquisition date;
— Obtained the intangible asset allocation
journals processed and reviewed for
appropriateness and assessed the
independent specialist;
— Verified and reviewed deferred tax bases to
tax calculations; and
— Assessment of the impairment calculations
of the business combination.
We also considered the adequacy of the
Group’s disclosures in relation to the business
combination.
Area of focus
The Group acquired Libertas Financial Planning
on 7 August 2019. This business combination
was considered a significant purchase for the
Group. Areas of complexity for this transaction
were around the following:
— Accounting and appropriately fair valuing
deferred consideration and consideration
paid for the transaction, including amounts
paid through cash and scrip;
— Verifying completion accounting
adjustments to the purchase price paid;
— Allocating the intangible assets acquired to
the appropriate CGU;
— Appropriately measuring and classifying in
the profit or loss transaction costs relating to
the acquisition;
— Determination of deferred tax assets arising
from the purchase price allocation; and
— Amortisation of identifiable intangible assets
arising from the purchase.
We note that at reporting date the fair value
attribution accounting is complete (which under
Accounting Standards they are afforded 12
months from the date of acquisition), including:
a) the attribution of provisional goodwill
calculations to identifiable intangible assets;
b) the setting of tax cost bases for calculating
deferred tax assets and liabilities; and
c) identifying any vendor guarantees or
contingent liabilities that may be separately fair
valued as part of the business purchase.
As a result of the completion of attribution
accounting and an adjustment to the earn out
consideration which required an estimate of
revenues, management has impaired a portion
of goodwill identified on the business
combination from Libertas.
7 9
Sequoia Financial Group limited AnnuAl RepoRt — 30 June 2020
Independent auditor’s report to the members
of Sequoia Financial Group Limited
Other Information
The directors are responsible for the other information. The other information comprises the information in
the Group’s annual report for the year ended 30 June 2020, but does not include the financial report and
the auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the financial report or our
knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Directors’ Responsibilities
The directors of the Company are responsible for the preparation of the financial report that gives a true
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to fraud
or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or has no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted
in accordance with the Australian Auditing Standards will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of this financial report.
A further description of our responsibilities for the audit of these financial statements is located at the
Auditing and Assurance Standards Board website at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf
This description forms part of our independent auditor’s report.
8 0
Sequoia Financial Group limited AnnuAl RepoRt — 30 June 2020
Independent auditor’s report to the members
of Sequoia Financial Group Limited
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in the Directors’ Report for the year ended 30 June
2020.
In our opinion, the Remuneration Report of Sequoia Financial Group Limited, for the year ended 30 June
2020, complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration
Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an
opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing
Standards.
William Buck Audit (Vic) Pty Limited
ABN 59 116 151 136
N. S. Benbow
Director
Dated this 20th day of August, 2020
8 1
Sequoia Financial Group limited AnnuAl RepoRt — 30 June 2020
Shareholder information
The shareholder information set out below was applicable as at 12 August 2020.
distribution of equitable securities
Analysis of number of equitable security holders by size of holding:
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Holding less than a marketable parcel
number of holders
of ordinary shares
156
50
28
114
104
452
167
Voting rights
The only class of equity securities on issue in the Company that carries voting rights is ordinary shares.
equity security holders
Twenty largest quoted equity security holders
The names of the twenty largest security holders of quoted equity securities are listed below:
MR GARRY CROLE
uNRANDOM PTY LTD (uNRANDOM A/C)
EXLDATA PTY LTD
COJONES PTY LTD (THE JONES FAMILY TRUST NO 2)
STRATEGIC VALuE PTY LTD (TAL SuPER A/C)
LIBERTAS SOLuTIONS PTY LTD (MARK EuVRARD FAMILY TRuST)
HUNTLEY GROUP INVESTMENTS PTY LTD (HUNTLEY GRP INVESTMENT A/C)
BNP PARIBAS NOMS PTY LTD (DRP)
J P MORGAN NOMINEES AuSTRALIA PTY LIMITED
TOCLO INVESTMENTS PTY LTD (THE TLC INVESTMENT TRUST)
BEETON ENTERPRISES PTY LTD (THE SCOTT & SALLY BEETON A/C)
EXLDATA PTY LTD
MR NEIL CLIFFORD DuNCAN
PAMELA BEETON INVESTMENTS PTY LTD
MR PETER STIRLING + MRS ROS STIRLING
RuFFY STEEDEN LEGACY PTY LTD (RuFFY STEEDEN LEGACY SuPERANNuATION FuND)
VONETTA PTY LTD (TRBC S/F A/C)
NATIONAL NOMINEES LIMITED
MR ANTHONY CHRISTOPHER JONES
TRIFERN PTY LTD (SuPER FuND A/C)
ordinary shares
number held
% of total
shares issued
10,850,977
10,781,500
9,000,000
6,394,052
6,037,329
5,310,000
4,210,000
4,075,727
3,445,247
3,433,381
2,899,000
2,829,878
2,638,635
2,372,066
2,237,500
1,886,500
1,643,389
1,602,979
1,492,773
1,450,000
8.56
8.51
7.10
5.05
4.76
4.19
3.32
3.22
2.72
2.71
2.29
2.23
2.08
1.87
1.77
1.49
1.30
1.26
1.18
1.14
84,590,933
66.75
8 2
Sequoia Financial Group limited AnnuAl RepoRt — 30 June 2020 Shareholder information
Unquoted equity securities
Options over ordinary shares issued*
Performance rights
number on issue
number of holders
1,000,000
195,000
1
14
* On 13 March 2020, the Company granted 1,000,000 options to a Contractor with an exercise price of
30 cents.
substantial holders
Notices of substantial holdings in the Company are set out below:
date of
lodgement
2 June 2020
26 July 2018
26 July 2018
26 July 2018
ordinary shares
number held
% of total
shares issued at
lodgement
17,746,680
13,817,804
11,974,738
11,401,500
14.60
11.71
10.15
9.66
Anthony and Ryan Young
Cojones Pty Ltd
unrandom Pty Ltd
Mr Garry Crole
Restricted securities
There are no restricted securities on issue.
securities subject to voluntary escrow
There are no securities subject to voluntary escrow.
8 3
Sequoia Financial Group limited AnnuAl RepoRt — 30 June 2020 Corporate directory
Directors
Garry Crole
John Larsen
Kevin Pattison
Charles Sweeney
Company secretary
Hasaka Martin
Notice of annual
general meeting
The Company advises that its Annual General Meeting is expected on
Wednesday 28 October 2020. The time and other details relating to
the meeting will be advised in the Notice of Meeting. In accordance
with the ASX Listing Rules and the constitution, valid nominations for the
position of Director are required to be lodged at the registered office
of the Company, 35 Business days before the meeting - being 5:00pm
(Melbourne) on Tuesday 15 September 2020.
Registered office
Level 7
7 Macquarie Place
Sydney NSW 2000
Telephone: + 61 2 8114 2222
Facsimile: + 61 2 8114 2200
Level 8
525 Flinders Street
Melbourne VIC 3000
Principal place
of business
Share register
Registry Direct
Auditor
Level 6
2 Russell Street
Melbourne VIC 3000
Telephone: 1300 556 635
Facsimile: +61 3 9111 5652
William Buck
Level 20
181 William Street
Melbourne VIC 3000
8 4
Sequoia Financial Group limited AnnuAl RepoRt — 30 June 2020 Corporate directory
Bankers
National Australia Bank
330 Collins Street
Melbourne VIC 3000
Westpac Australia Bank
Royal Exchange, Cnr Pitt & Bridge Streets
Sydney NSW 2000
Maldon & District Community Bank® Branch of Bendigo Bank
81 High Street
Maldon VIC 3463
Commonwealth Bank of Australia
Level 20, Tower 1 Collins Square
727 Collins Street
Melbourne VIC 3008
Australia and New Zealand Banking Group Limited
388 Collins Street
Melbourne VIC 3000
Stock exchange listing
Sequoia Financial Group Limited shares are listed on the Australian
Securities Exchange (ASX code: SEQ)
Website
www.sequoia.com.au
Corporate Governance
Statement
The Board of Directors of Sequoia Financial Group Limited is committed
to maintaining high standards of Corporate Governance. This Corporate
Governance Statement discloses the extent to which the Company has
followed the 4th Edition of the ASX Corporate Governance Council’s
Corporate Governance Principles and Recommendations (‘ASX Principles
and Recommendations’).
The Corporate Governance Statement has been adopted by the Board
and is current as at 30 June 2020. The Statement can be found in the
Company’s Corporate Governance section:
www.sequoia.com.au/about-sequoia/corporate-governance/
8 5
Sequoia Financial Group limited AnnuAl RepoRt — 30 June 2020