Silex Systems Limited
Annual Report 2018

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ANNUAL  
REPORT

 
 
 
IMPORTANT  
NOTICE

FORWARD LOOKING STATEMENTS AND BUSINESS RISKS:

Silex Systems Limited (Silex) is a research and development 
company whose primary asset is the SILEX laser uranium 
enrichment technology, originally developed at the Company’s 
technology facility in Sydney, Australia. The SILEX technology, 
which has been licensed exclusively since 2006 to GE-Hitachi 
Global Laser Enrichment LLC (GLE) in the USA, has reached 
an advanced stage of development. However, in view of 
the continuing depressed market conditions leading to the 
Company’s 12 June 2018 announcement to withdraw from 
the GLE restructure, plans for commercial deployment are now 
highly speculative and extremely uncertain. 

Silex also has an interest in a unique semiconductor technology 
known as ‘cREO™’ through its ownership of subsidiary 
Translucent Inc. The cREO™ technology developed by 
Translucent has been acquired by IQE Plc based in the UK. 
IQE is progressing the cREO™ technology towards commercial 
deployment in various advanced semiconductor products. The 
outcome of IQE’s commercialisation program also remains 
subject to technology and market risks.

The commercial potential of these two technologies is currently 
unknown. Accordingly, the statements in this report regarding 
the future of the SILEX technology, the cREO™ technology and 
any associated commercial prospects are forward looking and 
actual results could be materially different from those expressed 
or implied by such forward looking statements as a result of 
various risk factors.

Risk factors that could affect future results and commercial 
prospects include, but are not limited to: the final outcome of 
the GLE restructure; the future of the SILEX uranium enrichment 
engineering development program (in particular whether this 
program will be continued in any way); the market demand 
for natural uranium and enriched uranium; the potential 
development of competing technologies; the potential for third 
party claims against the Company’s ownership of Intellectual 
Property; the potential impact of prevailing laws or government 
regulations or policies in the USA, Australia or elsewhere; 
results from IQE’s commercialisation program and the market 
demand for cREO™ products; and the outcomes of various 
strategies undertaken by the Company.

SILEX SYSTEMS LIMITED

ABN 69 003 372 067

CONTENTS

CHAIR’S REPORT 

CEO’S REPORT 

TECHNOLOGY OVERVIEW 

DIRECTORS’ REPORT 

CORPORATE GOVERNANCE STATEMENT 

CONCISE FINANCIAL REPORT 

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS 

SHAREHOLDERS’ INFORMATION 

COMPANY DIRECTORY 

2

4

6

12

32

33

44

47

49

1

SILEX ANNUAL REPORT 2018CHAIR’S 
REPORT

“The Board’s current 
focus is on supporting 
management in the 
evaluation of various 
options to preserve the 
value created by the  
GLE and Silex teams  
in the US over the  
last decade.”

2

Dear Fellow Shareholders,

The year ended 30 June 2018 was another very 
challenging year for Silex. We continue to face difficult 
headwinds as we seek to protect and secure a pathway 
to commercialise our core asset, the SILEX laser-based 
uranium enrichment technology. 

In early 2016, the Company embarked on a restructure of 
the exclusive Licensee for the SILEX technology, GE-Hitachi 
Global Laser Enrichment LLC (GLE), as a result of the 
decision by majority shareholder, GE-Hitachi Nuclear Energy 
(GEH) to exit GLE due to changing business priorities 
and difficult market conditions. The restructure of GLE 
was pursued by Silex and other stakeholders in the midst 
of a depressed market for nuclear fuel, which ultimately 
handicapped efforts to secure new investors for GLE. The 
combination of the lack of new investors, and the persisting 
negative state of the global nuclear fuel markets, triggered 
the Silex Board’s decision to withdraw from the GLE 
restructure, as announced to the ASX in June this year. 

The Board’s current focus is on supporting management 
in the evaluation of various options to preserve the value 
created by the GLE and Silex teams in the US over the last 
decade. To this end, we have been actively involved in a 
strategic assessment of a number of possible paths which 
would lead to the preservation of the SILEX technology in 
the hope that the development program can be ramped 
up again if and when market conditions improve. In the 
event this is not achievable, we have also considered 
the option of suspending all activities in the US and 
repatriating the technology back to Australia. At the time of 
writing, a viable path forward for the technology in the US 
had not been resolved.

Despite the difficulties encountered over the last few years, 
the Board remains committed to the view that nuclear 
power remains a proven and reliable source of carbon-free 
base-load power generation, and that the third-generation 
SILEX enrichment technology has significant potential as 
a key component of the global nuclear fuel cycle once it 
recovers in the future. 

With respect to Silex subsidiary Translucent Inc’s cREO™ 
semiconductor material technology, we were very pleased 
with IQE’s decision in March this year to purchase the 
technology, in accordance with the 2015 License and 
Assignment Agreement signed between Translucent 
and IQE. A payment of US$5 million was received in 
September 2018 (in IQE shares) for the purchase of the 
technology and with the commencement of minimum 
royalty payments to follow from FY2020, we are excited 
that the cREO™ technology may enter some fast-growing 
semiconductor device markets in the future.

IQE remains committed to the commercialisation of the 
cREO™ technology and continue to invest significantly in 
the development of the first products that will utilise the 
cREO™ technology. IQE believes that an optimal route 
to cREO™ commercialisation should occur within a 2 to 
3-year timeframe.

SILEX ANNUAL REPORT 2018CORPORATE GOVERNANCE

As noted above, the Board has been highly involved in 
the Company’s efforts to restructure GLE and to find a 
path forward for the SILEX technology with or without 
GLE. Given the difficult market conditions faced by the 
Company, we maintain a strong focus on evolving our 
strategic direction and on timely execution of strategic 
plans. This, combined with vigilant attention to risk analysis 
and oversight, continue to be priority items on our Board 
agendas. We also remain cognisant of the need to have 
a diverse, experienced and competent mix of directors 
on the Board with complementary skills and industry 
knowledge to meet the Company’s evolving needs. 

As we implement plans to rationalise and consolidate our 
operations in the face of a difficult market environment, 
the People & Remuneration Committee has made some 
tough decisions with respect to the remuneration of the 
Company’s KMP. Once again, no remuneration increases 
were awarded in FY2018 for our CEO/MD, CFO/Company 
Secretary or our Board. This is a disappointing outcome in 
view of the extraordinary dedication and time contributed 
to the Company’s activities by our Management and 
Board over the past few years. In an effort to contain KMP 
remuneration, we also did not issue our CEO/MD or CFO/
Company Secretary a Short-Term or Long-Term Incentive 
for FY2018. Further details on our remuneration can be 
found in the Directors Report. 

Finally, it is important to note that as we embark on the 
strategic challenges that face us in the year ahead, the 
Company’s balance sheet remains in a strong position 
with net assets of $47 million, including $32 million in 
cash, IQE shares of $9 million and a $7 million receivable 
from IQE as at 30 June 2018.

Our greatest asset has always been our committed and 
talented team. I would like to thank our CEO Dr Michael 
Goldsworthy, our CFO Julie Ducie, the Silex team, and 
my fellow directors for their unwavering dedication to 
the Company during challenging and uncertain times. 
I would also like to thank you, my fellow shareholders 
for your patience and ongoing support for Silex. I look 
forward to updating you again at our Annual General 
Meeting in November.

Dr Lisa McIntyre 
Chair

3 October 2018

3

SILEX ANNUAL REPORT 2018 
CEO’S 
REPORT

“We intend to continue 
to promote the merits of 
the SILEX technology, 
in the hope that at 
some point in the future 
we can ramp-up the 
development program 
again and participate in 
the forecasted recovery 
of the global nuclear  
fuel market.”

4

Dear Shareholders, 

In early 2016, the Company embarked on a restructure 
of the exclusive Licensee of the SILEX laser-based 
uranium enrichment technology, GE-Hitachi Global Laser 
Enrichment LLC (GLE). The restructure was necessitated 
by the decision of GE-Hitachi Nuclear Energy (GEH) to 
exit GLE due to changing business priorities and difficult 
market conditions. Initially our focus was on recruiting new 
investors to take GLE forward with Silex potentially holding 
a small minority interest. Given the difficulties in finding 
new investors in a risk-averse market, in August 2017 Silex 
amended a Term Sheet it had previously signed with GEH 
with a view to acquiring all of GEH’s 76% interest in GLE. 

A key objective in this restructure was to enable the 
Company to create new opportunities by becoming 
more directly involved in the SILEX technology 
commercialisation program and in GLE’s business 
development path. In particular, the Company places 
considerable value in the Paducah commercial plant 
opportunity, underpinned by a 2016 agreement signed 
between the US Department of Energy (DOE) and GLE 
for the re-enrichment of hundreds of thousands of tons of 
tails inventories using the SILEX technology. 

Despite reaching an advanced stage in negotiations with 
GEH and discussions with other stakeholders with regard to 
the GLE restructure, the Board decided that there remained 
too many risks associated with GLE’s business case, and 
that the investment in GLE and the ongoing expenditure 
that this would entail would not be in the best interests of 
shareholders. Accordingly, we announced on 12 June 2018 
that we had terminated the Term Sheet with GEH with regard 
to Silex potentially acquiring GEH’s 76% interest in GLE. 

The overarching factor which contributed to the decision 
to withdraw from the restructure of exclusive Licensee 
GLE, was the continuing negative state of the global 
nuclear fuel markets, which have deteriorated steadily 
since the Fukushima event in 2011. 

We continue to assess various options to preserve value 
created in the SILEX technology over the last decade 
with key stakeholders including the shareholders of 
GLE and the governments of Australia and the US. 
We intend to continue to promote the merits of the 
SILEX technology, in the hope that at some point in 
the future we can ramp-up the development program 
again and participate in the forecasted recovery of the 
global nuclear fuel market. Accordingly, the focus of our 
strategy going forward will involve:

•  Preserving value and optionality for the future 

commercialisation of the SILEX technology; 

•  Maintaining our profile in the US, which remains the 

best target market for eventual deployment of the 
SILEX technology;

•  Retaining our core expertise in the SILEX technology 

at a reduced level; and

• 

Focusing on effective cost management to ensure the 
most efficient use of cash reserves.

SILEX ANNUAL REPORT 2018In view of the depressed state of the nuclear fuel markets, 
any preservation plan will necessarily involve either a 
significant reduction in US-based activities, or a cessation 
of all US-based activities and repatriation of the SILEX 
technology to Australia. Until the future of the technology 
in the US is resolved, we anticipate that the SILEX 
Amended and Restated Technology Commercialisation 
and License Agreement signed in 2013 between GLE 
and Silex, and the agreement signed in 2016 between 
the US Department of Energy and GLE for the Paducah 
opportunity, will both remain in force.

Numerous challenges and risks continue to be faced by 
the Company as we look to implement a revised strategy 
for the SILEX technology. Ultimately, the future of the 
technology and likelihood of success in the remaining 
commercialisation program is intrinsically tied to a recovery 
in the global markets for natural and enriched uranium. 

Meanwhile, a positive outcome was achieved during the 
year with respect to Silex subsidiary Translucent Inc’s 
semiconductor material technology known as ‘crystalline 
Rare Earth Oxides’ (cREO™). In March 2018, the global 
leader in the design and manufacture of advanced 
semiconductor wafer products, IQE Plc (AIM: IQE) elected 
to purchase the cREO™ technology. The election was made 
in accordance with the 2015 License and Assignment 
Agreement between Translucent and IQE and as a result, 
US$5 million worth of IQE shares was received in September 
2018. In addition, a perpetual royalty of between 3% and 
6% will be payable to Translucent on the sale of any IQE 
products that utilise the cREO™ technology. IQE continues 
to devote significant resources to the commercialisation 
of this unique technology and while timelines to market 
are uncertain and subject to change, IQE believes that an 
optimal route to cREO™ commercialisation should occur 
within a 2 to 3-year timeframe. 

We look forward to providing a further update on our two 
technologies at the Annual General Meeting in November.

Dr Michael Goldsworthy 
CEO/Managing Director

5

SILEX ANNUAL REPORT 2018THE SILEX LASER  
ENRICHMENT TECHNOLOGY

BACKGROUND TO THE SILEX TECHNOLOGY

The SILEX technology was invented by Silex Systems 
scientists Dr Michael Goldsworthy and Dr Horst Struve 
in the mid 1990’s at Lucas Heights, Sydney. In order 
to facilitate the potential commercial deployment of 
the technology in the United States, an Agreement for 
Cooperation between the governments of the United 
States and Australia was signed in May 2000.

In June 2001, the technology was officially Classified by 
the United States and Australian governments, bringing 
the project formally under the strict security and regulatory 
protocols of each country.

The Company signed a Technology Commercialisation 
and License Agreement with General Electric Company 
(GE) in 2006 to develop and commercialise the technology 
to enrich uranium for use in nuclear power reactors around 
the world. Since 2008, the project has been managed by 
GE subsidiary GE-Hitachi Global Laser Enrichment LLC 
(GLE), However from early 2016, Silex, in conjunction with 
GLE’s shareholders GE-Hitachi (GEH) and Cameco, have 
been pursuing a restructure of GLE after GEH announced 
its intention to exit GLE due to changing business priorities 
and difficult market conditions.

As a result of the Company’s announcement on 12 June 
2018 to withdraw from the GLE restructure and terminate 
the Term Sheet with GEH with regard to Silex potentially 
acquiring GEH’s 76% interest in GLE, the outcome of the 
GLE restructure and therefore the future of GLE and the 
prospects for commercialisation of the SILEX technology 
in the US remain highly uncertain.

Until the future of the technology commercialisation 
program in the US is resolved, we anticipate that 
the SILEX Amended and Restated Technology 
Commercialisation and License Agreement signed in 2013 
between GLE and Silex will remain in force.

URANIUM ENRICHMENT

Naturally occurring uranium is dominated by two isotopes, 
U235 and U238. Nuclear energy is produced by the 
splitting (or ‘fission’) of the U235 atoms. Natural uranium 
is made up of ~0.7% of the ‘active’ U235 isotope with the 
balance (~99.3%) made up of the U238 isotope. Uranium 
enrichment is the process of concentrating or enriching 
the U235 isotope up to ~5% for use as fuel in a nuclear 
power reactor. Enrichment is a technically difficult process 
and constitutes a major component of nuclear fuel costs 
accounting for around one third of the cost of nuclear fuel 
and approximately 5% of the total cost of the electricity 
generated at current prices.

TECHNOLOGY  
OVERVIEW

6

SILEX ANNUAL REPORT 2018Uranium Production

Refinining & Conversion

Enrichment

SILEX/GLE

Other

Fuel 
Fabrication

Electricity

Power Distribution

Power Plant

The Separation of Isotopes by Laser EXcitation (SILEX) process is the only third generation laser enrichment technology at 
an advanced stage of development today. It is able to effectively enrich uranium through highly selective laser excitation of the 
235UF6 isotopic molecule. 

The two methods of uranium enrichment used to date have been the now obsolete Gas Diffusion (first generation) and Gas 
Centrifuge (second generation). Silex’s third generation laser-based process provides much higher enrichment process efficiency 
compared to these earlier methods, potentially offering significantly lower overall costs.

URANIUM ENRICHMENT TECHNOLOGY

GASEOUS DIFFUSION

CENTRIFUGE

LASER EXCITATION

1st generation technology

2nd generation technology

3rd generation technology

ß = 1.004

High cost

Obsolete

ß ~ 1.25

Lower cost

ß ~ 2 - 201

Most cost effective

Current technology

In commercialisation phase

1. ß is the process efficiency (Classified number)

THE NUCLEAR FUEL PRODUCTION

THE SILEX TECHNOLOGY

The SILEX technology can be utilised in 2 steps of the Nuclear 
Fuel Cycle to produce: 

1.  natural grade uranium via re-enrichment of tails 

inventories; and

2.  enriched uranium for use as fuel in nuclear power reactors.

The SILEX technology is a unique laser-based process that 
has the potential to economically separate uranium isotopes 
as well as commercially valuable isotopes of several other 
elements. It has a number of advantages over other uranium 
enrichment processes including:

• 

Inherently higher efficiency resulting in lower costs; 

•  Smaller environmental footprint than centrifuge and 

diffusion plants; 

•  Greater flexibility in producing advanced fuels for next 
generation small modular reactors (SMR’s); and

•  Anticipated to have the lowest capital costs of all 

enrichment technologies.

7

SILEX ANNUAL REPORT 2018THE SILEX TECHNOLOGY LICENSE 
AGREEMENT WITH GLE

Silex’s existing license agreement with GLE (the Amended 
and Restated Technology Commercialisation and License 
Agreement) signed in 2013, is an exclusive worldwide license 
for exploitation of the SILEX technology. The agreement 
provides for a perpetual royalty and further milestone payments 
if the SILEX technology is commercialised by GLE. In the event 
that commercialisation activities cease in the US, it is likely that 
the Amended and Restated Technology Commercialisation and 
License Agreement will be terminated. Therefore, the future of 
the commercialisation program for the SILEX technology and 
the timing for any potential milestone payments and royalties 
under the License Agreement is highly uncertain. 

GLE RESTRUCTURE

In early 2016 the Company embarked on a restructure of 
GLE, necessitated by the decision of majority shareholder, 
GEH to exit GLE due to changing business priorities and 
difficult market conditions. In April 2016, Silex signed a Term 
Sheet with GEH securing an exclusive option to acquire GEH’s 
76% interest in GLE and the right to assign in part or in whole 
the acquisition terms to third parties. 

An extensive search for new investors to take GLE forward 
with Silex potentially holding a small minority interest was 
conducted. Given the difficulties in finding new investors in 
a risk-averse market, in August 2017, Silex amended the 
Term Sheet it had previously signed with GEH with a view to 
acquiring all of GEH’s 76% interest in GLE. 

Despite being at an advanced stage in negotiations with GEH 
and discussions with other stakeholders with regard to the 
GLE restructure, the Board decided that there remained too 
many risks associated with GLE’s business case, and that 
the investment in GLE and the ongoing expenditure that this 
would entail would not be in the best interests of shareholders. 
Accordingly, the Company announced on 12 June 2018 that it 
had terminated the Term Sheet with GEH with regard to Silex 
potentially acquiring GEH’s 76% interest in GLE. 

A key objective in the GLE restructure was to enable the 
Company to create new opportunities by becoming more 
directly involved in the SILEX technology commercialisation 
program and in GLE’s business development path. In 
particular, the Company places considerable value in the 
Paducah, Kentucky commercial plant opportunity, which 
remains underpinned by a 2016 Agreement signed between 
the US Department of Energy (DOE) and GLE for the 
re-enrichment of hundreds of thousands of tons of tails 
inventories using the SILEX technology. 

The Company continues to assess various options to preserve 
value created in GLE over the last decade, including the 
Test Loop demonstration facility and associated intellectual 
property based in Wilmington, North Carolina. However, 
in view of the depressed state of the global nuclear fuel 
markets, any preservation plan will necessarily involve either 
a significant reduction in US-based activities, or a cessation 

8

of all US-based activities and repatriation of the SILEX 
technology to Australia.

Whilst the outcome of the GLE restructure remains uncertain, 
technology development activities continue on a reduced 
scale at our Lucas Heights facility. 

MARKET OUTLOOK – NUCLEAR POWER  
AND FUEL

The key driver of the value of the nuclear fuel market is the 
demand for fuel by nuclear power generators. Nuclear is the 
largest source of carbon-free power in the US, the European 
Union, and in several other advanced economies and has been 
proven as a robust base-load electrical generation platform. 
Despite the advantages of nuclear power, the nuclear industry 
has experienced a steady decline since the Fukushima disaster 
in 2011 and challenging market conditions continue to impact 
the nuclear fuel markets. In addition to the continued disruption 
to the Japanese nuclear industry, with only 9 out of around 40 
operable reactors restarted, the impact has also been felt in 
several countries in Western Europe, Asia and the US, where 
the share of nuclear power generation is set to decrease under 
current government policies and/or economic pressures. As a 
result, demand for enrichment and uranium remains low and 
prices continue to be depressed. 

Despite this, there are currently more new nuclear power 
plants under construction globally than has been seen in the 
last 20 years. Several countries including China, India, Russia 
and the UAE are undertaking significant expansion of their 
nuclear energy programs. However, the accessibility of the 
fuel markets for these countries are generally less accessible.

In addition, there is the potential for commercialisation of next-
generation small modular reactors (SMRs) – which may offer 
significant advantages over large conventional nuclear power 
reactors. SMRs have the potential to be cheaper and simpler 
to construct, and to compete effectively with distributed 
generation such as renewables. There are currently numerous 
SMR development programs advancing around the world. 

Whilst challenges remain in the short to medium-term for the 
nuclear power industry and its fuel markets, a more positive 
outlook remains for the long-term, driven by the merits of 
nuclear power as a clean and efficient emissions-free source 
of base load electricity becoming better understood around 
the world. 

SILEX ANNUAL REPORT 2018WORLD NUCLEAR REACTOR POPULATION

453

335 (74%)

152 (34%)

55 (12%)

Operating Reactors

Reactors Under
Construction

Planned Reactors

Proposed Reactors*

USA

France

Japan

China

Russia

South Korea

India

Other

* Other Proposed Reactors include 16 proposed in Saudi Arabia, 11 in Ukraine, 10 in the U.A.E and 8 in Turkey and South Africa

Source: World Nuclear Association September 2018

THE cREO™ SEMICONDUCTOR 
TECHNOLOGY

BACKGROUND TO THE cREO™ TECHNOLOGY 

Silex subsidiary Translucent Inc developed a novel set of 
semiconductor materials known as ‘crystalline Rare Earth 
Oxides’ (cREO™) for application to the manufacturing of 
next generation semiconductor devices used in wireless 
communications, power electronics and other advanced 
semiconductor industries. The cREO™ technology was the 
subject of an exclusive Option, License and Assignment 
Agreement signed between Translucent and UK-based IQE 
Plc (AIM: IQE) in September 2015. IQE is the global leader in 
the design and manufacture of advanced semiconductor wafer 
products used in many of today’s advanced semiconductor 
devices, such as smart phones and optical technologies.

In March 2018, IQE elected to purchase the cREO™ technology. 
The election was made in accordance with the 2015 Agreement 
and as a result, a payment of US$5 million was received from 
IQE in September 2018 (in IQE shares). In addition, a perpetual 
royalty of between 3% and 6% will be payable to Translucent on 
the sale of any IQE products that utilise the cREO™ technology, 
with minimum annual royalties starting at US$400,000 due to 
commence being paid in FY2020.

IQE’S DEVELOPMENT OF cREO™

The cREO™ technology was successfully transferred in late 
2015 to IQE’s Greensboro, North Carolina manufacturing 
facility for the completion of product development and 

commercialisation activities. IQE have reported very good 
progress with the development and demonstration of the 
cREO™ technology for the integration of advanced high-
performance compound semiconductor materials on 
silicon wafers. Product trials and preliminary qualification 
activities within the IQE group and with select commercial 
partners continue. In addition, IQE continue to expand the 
intellectual property portfolio acquired from Translucent for 
the cREO™ technology, with the filing of numerous patents 
providing protection in additional applications. This will help 
strengthen IQE’s competitive advantage as it takes the cREO™ 
technology to market. 

IQE’s initial product development and commercialisation 
focus for the cREO™ technology has been on applications for 
wireless communications devices (principally targeting next 
generation smart phones) and power electronics devices 
(for example, as commonly found in today’s solar inverters 
and electric vehicles). IQE regards the cREO™ technology 
as an enabling technology that would allow IQE to make 
a step change for the integration of various compound 
semiconductor devices with large scale silicon wafer-based 
production techniques. This has the potential to significantly 
lower the cost of production of next generation devices such 
as wireless chips. 

IQE is committed to the potential of the cREO™ technology 
and continue to spend significant amounts on the 
development of cREO™ and other complementary materials 
technologies. Whilst the timelines to commercialisation are 
uncertain and subject to change, IQE believes that an optimal 
route to cREO™ commercialisation should occur within a 2 to 
3-year timeframe.

9

SILEX ANNUAL REPORT 201810

SILEX ANNUAL REPORT 2018CONCISE FINANCIAL REPORT
for the year ended 30 June 2018

SILEX SYSTEMS LIMITED  
& ITS SUBSIDIARIES

ABN 69 003 372 067

DIRECTORS’ REPORT

Your directors present their report on the consolidated entity consisting of Silex Systems Limited (Silex or the Company) and the 
entities it controlled at the end of, or during the year ended 30 June 2018.

1.  DIRECTORS

The following persons were directors of Silex Systems Limited during the whole of the financial year and up to the date of this report:

Dr L M McIntyre – Chair 
Dr M P Goldsworthy 
Mr R A R Lee 
Mr C D Wilks 

2.  PRINCIPAL ACTIVITIES

Silex is primarily focused on the development of the SILEX laser uranium enrichment technology as the next generation 
technology for the global uranium enrichment industry. The development and commercialisation program has been undertaken 
jointly by Silex at its Lucas Heights facility and in Wilmington, North Carolina by GE-Hitachi Global Laser Enrichment LLC 
(GLE), the exclusive licensee of the SILEX technology since 2006. After the Company’s June 2018 announcement regarding its 
withdrawal from the restructure of GLE, the future of this program is currently uncertain.

3.  DIVIDEND

No dividend payments were made during the year. No dividend has been recommended or declared by the Board.

12

SILEX ANNUAL REPORT 2018DIRECTORS’ REPORT

4.  REVIEW OF OPERATIONS AND ACTIVITIES

Information on the operations and financial position of the consolidated entity and its business strategies and prospects is set 
out below and in section 8 ‘Likely developments and expected results of operations’.

Trading Results

A summary of consolidated revenue and results is set out below: 

Revenue from continuing operations 

(Loss) before income tax expense

Income tax expense

Net (loss) from continuing operations

Net profit from discontinued operations

Net (loss) for the year

Net (loss) is attributable to:

Owners of Silex Systems Limited

2018 
$

2017 
$

1,060,295

1,627,281

(4,579,381)

(10,257,843)

– 

– 

(4,579,381)

(10,257,843)

–

138,912

(4,579,381)

(10,118,931)

(4,579,381)

(10,118,931)

Key information about the consolidated operations, results and financial position

Comments on the operations and the results of those operations are set out below: 

Despite concerted efforts to restructure licensee GLE, on 12 June 2018 Silex announced that it had terminated the Term Sheet 
with GE-Hitachi Nuclear Energy (GEH) with regard to Silex potentially acquiring GEH’s 76% interest in GLE. The overarching 
factor which contributed to the decision to terminate the Term Sheet is the current negative state of the global nuclear fuel 
markets. As a result of termination of the Term Sheet, Silex’s funding obligations for GLE’s operations (approximately $0.6m per 
month) ceased and development activities at GLE’s Wilmington Test Loop facility were suspended. 

The assessment of various options to preserve value created in the SILEX technology over the last decade, including the Test 
Loop demonstration facility and associated intellectual property based in Wilmington, North Carolina, continue to be explored 
with the shareholders of GLE, together with the governments of Australia and the US. However, in view of the depressed state of 
the global nuclear fuel markets, any preservation plan will necessarily involve either a significant reduction in US-based activities, 
or a cessation of all US-based activities and repatriation of the SILEX technology to Australia.

The Company is also reducing the scale of its technology development activities at its Lucas Heights facility and reducing 
operational cash burn in FY2019. A number of staff have recently been made redundant and the Company will consolidate its 
operations with the relocation of the small corporate office from Sydney city to the Lucas Heights facility in October 2018. 

In March 2018, the global leader in the design and manufacture of advanced semiconductor wafer products, IQE Plc (AIM: 
IQE) elected to purchase Silex subsidiary Translucent Inc’s semiconductor material technology known as ‘Rare Earth Oxides’ 
(cREO™). The cREO™ technology has numerous potential applications in the manufacture of next generation devices in the 
semiconductor, digital communications and power electronics industries. The election was made in accordance with the 2015 
License and Assignment Agreement between Translucent and IQE and as a result, US$5 million worth of IQE shares was 
received in September 2018. In addition, a perpetual royalty of between 3% and 6% will be payable to Translucent on the sale 
of any IQE products that utilise the cREO™ technology, with minimum annual royalties starting at US$400,000 due to commence 
being paid in FY2020.

13

SILEX ANNUAL REPORT 2018DIRECTORS’ REPORT

Financial review 

A summary of our consolidated income statement is set out below: 

Revenue from continuing operations

Other income

Research and development materials

Development expenditure

Employee benefits expense

Consultants and professional fees

Rent, utilities and property outgoings

Other expenses

Income tax expense

Net (loss) from continuing operations

Net profit from discontinued operations

Net (loss) for the year

2018 
$

1,060,295

7,552,662

(382,999)

(5,799,314)

(3,866,174)

(2,066,401)

(419,164)

(658,286)

2017 
$

1,627,281

940,847

(207,498)

(6,668,102)

(3,818,168)

(1,081,456)

(395,751)

(654,996)

 – 

 – 

(4,579,381)

(10,257,843)

–

138,912

(4,579,381)

(10,118,931)

The net loss from ordinary activities was $4.6m compared to $10.1m in the prior year. The net loss is comprised of the loss from 
continuing operations of $4.6m (a decrease of $5.7m compared to the prior year) and the profit from discontinued operations of 
$nil (compared to a profit of $0.1m in the prior year). The decrease in net loss from ordinary activities is mainly due to the $6.4m 
income from the sale of Translucent’s cREO™ technology.

Further commentary on the results from our operations and the factors contributing to the decreased net loss from ordinary 
activities (after tax) attributable to members is provided below. 

Continuing Operations – Silex Systems and Translucent

The loss from continuing operations decreased by $5.7m to $4.6m, largely as a result of the reclassification of Translucent as a 
continuing operation following the election by IQE to acquire Translucent’s cREO™ technology in March 2018 and the potential 
perpetual royalty stream that may be received in the future. 

With respect to the Silex Systems segment, the result was a $10.6m loss in the current year compared to a $10.2m loss in the 
prior year. Of note was the increase in Consultants and professional fees of $0.7m largely as a result of the work undertaken with 
respect to the GLE restructure. 

The Translucent segment result was a $6.1m profit in the current year compared to a $0.05m loss in the prior year. The current 
year result included $6.4m profit on sale of assets to IQE Plc following IQE’s exercise of the option to acquire Translucent’s 
cREO™ technology in March 2018. 

14

SILEX ANNUAL REPORT 2018DIRECTORS’ REPORT

Balance sheet

A summary of our balance sheet is set out below: 

Assets

Total current assets 

Total non-current assets

Total assets

Liabilities

Total current liabilities

Total non-current liabilities

Total liabilities

Net assets

Equity

Total equity

30 June 2018 
$

30 June 2017 
$

49,668,457

119,178

49,787,635

44,520,749

7,367,498

51,888,247

2,588,070

118,501

2,706,571

2,479,087

116,892

2,595,979

47,081,064

49,292,268

47,081,064

49,292,268

As at 30 June 2018, total assets were $49.8m. Significant assets are cash holdings of $31.9m (cash and term deposits), and 
Available-for-sale financial assets of $9.4m. Total liabilities were $2.7m and included trade and other payables of $1.9m.

5.  EARNINGS PER SHARE

Earnings per share for (loss) from continuing operations attributable to the  
ordinary equity holders of the Company

Basic earnings per share 

Diluted earnings per share

Earnings per share for (loss) attributable to the ordinary equity holders of  
the Company

Basic earnings per share

Diluted earnings per share

2018 
Cents

2017  
Cents

(2.7)

(2.7)

(2.7)

(2.7)

(6.0)

(6.0)

(5.9)

(5.9)

15

SILEX ANNUAL REPORT 2018DIRECTORS’ REPORT

6.  SIGNIFICANT CHANGES IN STATE OF AFFAIRS

On 12 June 2018, Silex announced that it had decided to withdraw from the acquisition of a majority stake in GE-Hitachi Global 
Laser Enrichment LLC (GLE), the exclusive Licensee of the SILEX technology. The Board decided that there remained too many 
risks associated with GLE’s business case and that an investment in GLE and the ongoing expenditure that this would entail 
would not be in the best interests of shareholders. The announcement followed the termination of the Term Sheet to acquire GE-
Hitachi’s 76% interest in GLE on 11 June 2018 and the cessation of Silex’s funding obligations for GLE’s operations. 

The financial position and performance of the Company was favourably impacted by IQE Plc’s decision to exercise its option 
to purchase Translucent’s cREO™ technology in March 2018 for US$5 million. In accordance with the License and Assignment 
Agreement, a perpetual royalty will also be payable to Translucent on the sale of IQE products that utilise Translucent’s cREO™ 
technology. Minimum annual royalties starting at US$400,000 are due to commence being paid in FY2020. As a result, 
the Translucent operation has been reclassified as a continuing operation (and as a reportable segment) with the prior year 
amounts reclassified.

7.  MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR

Following the announcement regarding the Company’s termination of the Term Sheet with GEH on the 12 June 2018, a number 
of operational decisions were made in July 2018 to rationalise activities and reduce anticipated operational cash burn from 
FY2019 onwards. Actions taken to date include a headcount reduction of more than 40% at our Lucas Heights facility, and the 
planned consolidation of our operations with the relocation of our small corporate office to the Lucas Heights facility in October 
2018. The one-off expenses associated with these initial restructuring decisions is expected to be approximately $180,000.

Between 30 June 2018 and the date of this report, the IQE Plc share price (AIM: IQE) has decreased significantly. Combined 
with movements in exchange rates, the value of the shares held at 30 June 2018 (disclosed as Available-for-sale financial assets) 
has decreased by approximately $1,630,000 since 30 June 2018. Gains or losses arising from changes in the fair value of 
shares classified as available-for-sale are recognised in other comprehensive income. The financial effects of the movements in 
fair value since 30 June 2018 will be recognised in the financial statements for the year ended 30 June 2019.

In September 2018, the group received US$5 million worth of shares in IQE from the sale of its cREO™ technology. Since 
receiving the shares, the IQE share price has fallen. Combined with movements in exchange rates from 30 June 2018, the value 
of this tranche of shares has decreased by approximately $480,000 compared to the value of the receivable at 30 June 2018. 
Consistent with the comments above, it is expected that the gains or losses arising from changes in the fair value of the shares 
will be recognised in other comprehensive income in the financial statements for the year ended 30 June 2019. 

The consolidated entity is not aware of any other matters or circumstances which are not otherwise dealt with in the financial 
statements that have significantly, or may significantly, affect the operations of the consolidated entity, the results of its 
operations or the state of the consolidated entity in subsequent years other than those referred to in this Directors’ Report.

16

SILEX ANNUAL REPORT 2018DIRECTORS’ REPORT

8.  LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS

Overview

The primary focus of Silex is the development of the SILEX laser uranium enrichment technology as the next generation 
technology for the global uranium enrichment industry. The development and commercialisation program has been undertaken 
jointly by Silex at its Lucas Heights facility and in Wilmington, North Carolina by GE-Hitachi Global Laser Enrichment LLC (GLE), 
the exclusive Licensee of the SILEX technology from 2006. GLE has been undergoing a restructure since 2016 involving Silex 
potentially acquiring all of GEH’s 76% interest. However, it was announced on 12 June 2018, that the Term Sheet with GEH 
concerning this restructure was terminated and that Silex had withdrawn from the GLE restructure. 

The overarching factor which contributed to the decision to withdraw from the restructure of exclusive Licensee GLE, was 
the continuing negative state of the global nuclear fuel markets, which have deteriorated steadily since the Fukushima event 
in 2011. As a result of the termination of the Term Sheet, changes have been made to the commercialisation program for the 
SILEX technology with the suspension of development activities in the US and a reduction of the development program at the 
Company’s Lucas Heights facility. 

The assessment of various options to preserve value created in licensee GLE over the last decade, including the Test Loop 
demonstration facility and associated intellectual property based in Wilmington, North Carolina, continues. In the event that 
activities cease in the US, it is likely that the Amended and Restated Technology Commercialisation and License Agreement, 
signed in 2013 with GLE will be terminated. Therefore, the future of the commercialisation program for the SILEX technology and 
value and timing of any potential milestone payments and royalties under the License Agreement is highly uncertain. 

Subsequent to 30 June 2018, several operational decisions have been made by the Company to rationalise operations. These 
include more than a 40% headcount reduction at our Lucas Heights facility, and the planned consolidation of our operations with 
the relocation of our small corporate office to the Lucas Heights facility in October 2018. Further possible restructuring actions 
are currently under consideration.

The global leader in the design and manufacture of advanced semiconductor wafer products, IQE Plc elected to purchase 
Silex subsidiary Translucent Inc’s semiconductor cREO™ technology in March 2018. As a result, a payment of US$5 million was 
received in September 2018 (in IQE shares). The cREO™ technology has numerous potential applications in the manufacture 
of next generation devices in the semiconductor, digital communications and power electronics industries. IQE is committed 
to the potential of the cREO™ technology and continue to spend significant amounts on the development of cREO™ and other 
complementary materials technologies. Whilst the timelines to commercialisation are uncertain and subject to change, IQE 
believes that an optimal route to cREO™ commercialisation should occur within a 2 to 3-year timeframe. A perpetual royalty 
of between 3% and 6% will be payable to Translucent on the sale of any IQE products that utilise the cREO™ technology, with 
minimum annual royalties starting at US$400,000 due to commence being paid in FY2020. 

Business strategies and future prospects 

The SILEX Technology 

The SILEX technology represents a unique third-generation laser-based solution for production of two key components of 
nuclear power reactor fuel:

•  natural grade uranium via re-enrichment of tails inventories (i.e. GLE’s Paducah opportunity); and

•  enriched uranium for use as fuel in today’s conventional nuclear power reactors – in the form of low enriched uranium (LEU), 
as well as customised fuel for the next generation fleet of small modular reactors (SMR’s) – in the form of high assay LEU.

17

SILEX ANNUAL REPORT 2018DIRECTORS’ REPORT

We continue to assess various options to preserve the SILEX technology and value created in GLE in the US over the last 
decade. However, in view of the depressed state of the nuclear fuel markets, any preservation plan will necessarily involve either 
a significant reduction in US-based activities, or a cessation of all US-based activities and repatriation of the SILEX technology 
to Australia. Until the future of the technology in the US is resolved, we anticipate that the SILEX Amended and Restated 
Technology Commercialisation and License Agreement signed in 2013 between GLE and Silex, and the agreement signed in 
2016 between the US Department of Energy and GLE for the Paducah opportunity, will both remain in force.

We intend to continue to promote the merits of the SILEX technology, and we are hopeful of maintaining a position in the US in 
order to be able to ramp-up the development program again and participate in the forecasted recovery of the global nuclear fuel 
market in the years ahead. Accordingly, the focus of our strategy going forward will involve:

•  Preserving value and optionality for the future commercialisation of the SILEX technology; 

•  Maintaining our profile in the US, which remains the best target market for eventual deployment of the SILEX technology;

•  Retaining our core expertise in the SILEX technology at a reduced level; and

•  Focusing on effective cost management to ensure the most efficient use of cash reserves.

Numerous challenges and risks continue to be faced by the Company as we look to implement a revised strategy for the SILEX 
technology. Ultimately, the future of the technology and likelihood of success in the remaining commercialisation program is 
intrinsically tied to a recovery in the global markets for natural and enriched uranium.

Status of Nuclear Fuel Markets

The market for global nuclear fuel has deteriorated steadily since the Fukushima event in 2011 and this was the overarching 
factor that led to the Company’s termination of the Term Sheet with GEH for the potential acquisition of GEH’s 76% interest in 
GLE. In addition to the continued disruption to the Japanese nuclear industry, with only 9 out of around 40 operable reactors 
restarted, the impact has also been felt in several countries in Western Europe, Asia and the US, where the share of nuclear 
power generation is set to decrease under current government policies and/or economic pressures. As a result, demand for 
enrichment and uranium remains low and prices continue to be depressed.

Despite this, there are currently more new nuclear power plants under construction globally than has been seen in the last 20 
years with 55 reactors currently under construction. Leading this effort are several countries including China, India, Russia and 
the UAE who are undertaking significant expansion of their nuclear energy programs. Therefore, looking to the medium term 
and beyond, demand for nuclear fuel and specifically demand for uranium and enriched uranium is anticipated to recover. This 
will be supported not only by the 55 reactors currently under construction but a further 152 reactors that are planned, most with 
approvals, funding or commitments in place.

The cREO™ Technology

In March 2018, IQE Plc (AIM: IQE) elected to purchase the cREO™ technology, in accordance with the 2015 License and 
Assignment Agreement signed between Translucent and IQE. A payment of US$5 million was received in September 2018 
(in IQE shares) and the commencement of minimum royalty payments to follow from FY2020. IQE remain committed to the 
commercialisation of the cREO™ technology and continue to invest significantly in the development of the first products that will 
utilise the cREO™ technology for launch into the global market for advanced semiconductor wafer products. IQE believes that an 
optimal route to cREO™ commercialisation should occur within a 2 to 3-year timeframe.

Outlook

The Company’s future prospects and results will remain largely dependent on the outcomes of the commercialisation programs 
for the SILEX and cREO™ technologies; the future of GLE and the Paducah opportunity; availability of funding for the remaining 
commercialisation programs; and a recovery in the markets for both uranium and enrichment services.

18

SILEX ANNUAL REPORT 2018DIRECTORS’ REPORT

9. 

INFORMATION ON DIRECTORS

a)  Directors’ profiles

The following information is current as at the date of this report:

Dr Lisa McIntyre BSc (Hons), PhD, GAICD.  
Chair – Independent non-executive director

Experience and expertise

Independent non-executive director for six years and Chair for 
four years. Extensive experience as a Company Director. Other 
current directorship roles include icare NSW, HCF, Studiosity Pty 
Ltd, the University of Sydney and the NSW Generations Fund 
Advisory Board. Executive career in strategy, commercialisation 
and performance support as a senior partner of global strategy firm 
L.E.K. Consulting for 20 years.

Other current listed company directorships

None

Former listed company directorships in last 3 years

Non-executive director of Cover-More Group Limited from November 
2013 to April 2017

Special responsibilities

Chair of the Board 
Member of Audit Committee 
Chair of People & Remuneration Committee

Interests in shares and options

Ordinary shares – Silex Systems Limited

Options over ordinary shares –  
Silex Systems Limited

48,230

Nil

Dr Michael Goldsworthy BSc (Hons), MSc, PhD, FAIP, GAICD.  
Chief Executive Officer/Managing Director 

Experience and expertise

CEO/MD for twenty-six years. Founder of the Company and co-
inventor of the SILEX uranium enrichment technology.

Other current listed company directorships

Former listed company directorships in last 3 years

None

None

Special responsibilities

Interests in shares and options

 Chief Executive Officer / Managing Director

Ordinary shares – Silex Systems Limited

Options over ordinary shares –  
Silex Systems Limited

5,979,055

Nil

Mr Christopher Wilks BComm, FAICD.  
Non-executive director

Experience and expertise

Other current listed company directorships

Non-executive director for thirty years. Finance director and CFO 
of Sonic Healthcare Limited. Various other directorships of public 
companies held over the last thirty years.

Executive director of Sonic Healthcare Limited since 1989 (Finance 
director since 1993)

Former listed company directorships in last 3 years

None

Special responsibilities

Member of Audit Committee 
Member of People & Remuneration Committee 

Interests in shares and options

Ordinary shares – Silex Systems Limited

Options over ordinary shares –  
Silex Systems Limited

2,814,021

Nil

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SILEX ANNUAL REPORT 2018 
DIRECTORS’ REPORT

Mr Robert Lee BSc, MBA, GAICD. 
Independent non-executive director

Experience and expertise

Independent non-executive director for three years. Experienced 
company director, corporate adviser and former Executive Director 
of Macquarie Group Limited. Currently a non-executive director of 
Westmead IVF and Maple-Brown Abbott Limited.

Other current listed company directorships

Former listed company directorships in last 3 years

None

None

Special responsibilities

Chair of Audit Committee  
Member of People & Remuneration Committee

Interests in shares and options

Ordinary shares – Silex Systems Limited

Options over ordinary shares –  
Silex Systems Limited

Nil

Nil

10. Meetings
The number of directors’ meetings held during the financial year and the number of meetings attended by each director are set 
out in the following table:

Director’s name

Dr L M McIntyre

Dr M P Goldsworthy

Mr R A R Lee

Mr C D Wilks

Directors’  
Meetings

Audit Committee 
Meetings

People & Renumeration 
Committee Meetings

Number 
Held

Number 
Attended

Number 
Held

Number 
Attended

Number 
Held

Number 
Attended

16

16

16

16

16

16

15

15

2

* 

2

2

2

*

2

2

2

* 

2

2

2

* 

2

2

* Not a member of the relevant committee at the time the scheduled meetings were held.

20

SILEX ANNUAL REPORT 2018DIRECTORS’ REPORT

11.  REMUNERATION REPORT 

Dear Fellow Shareholders,

On behalf of the Board and as Chair of the Company’s People and Remuneration Committee, I am pleased to present to you 
the FY2018 Silex Systems Limited Remuneration Report, for which we seek your support at our Annual General Meeting in 
November 2018. 

The details of the remuneration received by the Company’s Key Management Personnel (KMP) are prepared in accordance with 
accounting standards, legislative requirements and best practice corporate governance guidance. The following comments aim 
to provide greater insight into the Committee’s remuneration decisions with respect to FY2018 and our remuneration policies 
and practices generally.

The year ended 30 June 2018 was another very challenging year for Silex and we have sought to rationalise our operations 
in light of the strategic challenges that face us now and in the years ahead. We have again made some difficult decisions with 
respect to the remuneration of the Company’s KMP. No remuneration increases were awarded for FY2018 or FY2019 year for 
our CEO/MD, CFO/Company Secretary or our Board. This is a disappointing but necessary outcome and does not reflect the 
extraordinary dedication and time contributed to the Company’s activities by our Management and Board over the past few 
years. We also sought to contain KMP remuneration and therefore did not issue our CEO/MD or CFO/Company Secretary a 
Short-Term or Long-Term Incentive for FY2018. 

Being mindful of the difficulties faced by the Company, my fellow Directors and I also continue to not receive fees for Committee 
participation or for the extraordinary time contributed to the Company’s activities. I would also like to take this opportunity to thank 
our CEO and CFO, my fellow Directors, and our whole team for the tremendous efforts they have made throughout the past year.

As we look to FY2019, we have taken another step with the suspension of all incentive plans until the Company secures a clear 
path forward for its ongoing operations. We have planned a full review of executive and Board roles and remuneration within the 
Company and will potentially adjust in accordance with the anticipated reduced activity level of the Company.

On behalf of the Board, I invite you to review the full report and thank you for your continued support during these difficult times. 
I look forward to answering any questions you may have at our Annual General Meeting in November 2018.

Dr Lisa McIntyre 
Chair, People & Remuneration Committee

21

SILEX ANNUAL REPORT 2018 
DIRECTORS’ REPORT

The Directors present the Remuneration Report for the year ended 30 June 2018, outlining key aspects of our remuneration 
policy and framework, and remuneration awarded for the Company’s non-executive directors, executive directors and other 
executive key management personnel. 

The report contains the following sections:

a)  Directors and KMP disclosed in this report 
b)  Remuneration governance 
c)  Linking remuneration structure to company performance 
d)  Voting at the Company’s 2017 Annual General Meeting 
e)  Executive KMP remuneration structure 
f) 
g)  Contractual arrangements with executive KMPs 
h)  Non-executive directors’ remuneration 
i)  Directors’ and KMP remuneration 
j)  Details of share-based compensation and bonuses

Link between FY2018 remuneration and performance 

a)  Directors and KMP disclosed in this report

The 2018 Remuneration Report has been prepared in accordance with the requirements of section 300A of the Corporations 
Act 2001 and accounting standard requirements and applies to KMP of the Company. KMP are defined as those persons who 
have authority and responsibility for planning, directing and controlling the activities of the Company.

Name

Position

Non-executive and executive directors

Dr L M McIntyre

Dr M P Goldsworthy

Mr R A R Lee

Mr C D Wilks 

Other executive KMP 

Ms J E Ducie

b)  Remuneration governance

Board oversight

Chair and Non-executive director

CEO/Managing Director – Executive director

Non-executive director

Non-executive director 

CFO/Company Secretary 

The Silex Board is ultimately responsible for ensuring that the Company’s remuneration structure is equitable and aligned with 
the long-term interests of shareholders. The Board and its advisors are independent of Management when making decisions 
affecting employee remuneration. 

22

SILEX ANNUAL REPORT 2018DIRECTORS’ REPORT

People & Remuneration Committee structure

The People & Remuneration Committee is a committee of the Board currently comprised of a majority of independent non-
executive directors. Its role is to make recommendations to the Board regarding the Company’s remuneration policies and 
practices, including those applicable to the Company’s KMP.

Members of the People & Remuneration Committee were as follows:

Committee members

Committee secretary

Number of meetings in FY2018

Dr L M McIntyre – Chair 
Mr R A R Lee 
Mr C D Wilks

Ms J E Ducie

2

Other individuals who regularly attended meetings

Dr M P Goldsworthy – CEO/MD

The role of the People & Remuneration Committee is to: 

•  Review and recommend to the Board the appropriate remuneration policies and practices that are competitive and reasonable 

for the Company and its specific application to KMP, as well as the general application to all employees;

•  Determine remuneration levels of the CEO/MD and CFO/Company Secretary; 

•  Manage the incentive plans which apply to executive directors and senior executives (the executive team), including key 

performance indicators and performance hurdles; and

•  Review and make recommendations to the Board regarding the remuneration of non-executive directors.

The role and responsibilities of the People & Remuneration Committee are set out in the People & Remuneration Committee 
Charter, which is available on the Company’s website at www.silex.com.au/Corporate-Governance. 

Use of remuneration consultants

The Company did not engage remuneration consultants during FY2018. In the past, the Company has engaged AON Hewitt to 
conduct a thorough review of KMP and Board remuneration and structure. The recommendations from the most recent review 
were fully implemented during FY2015 and FY2016. The Company continues to access market data and industry remuneration 
surveys and reports on a regular basis.

c)  Linking remuneration structure to company performance

Remuneration strategy, policy and framework

In determining executive KMP remuneration, the Board’s policy is based on the principle of aligning remuneration outcomes 
with the successful delivery of strategy whilst ensuring our remuneration practices are designed to attract, motivate and retain 
highly qualified and specialised personnel. High regard for contemporary market practice, good governance and alignment to 
changing business circumstances is maintained at all times. The Company aims to reward executive KMP with a level and mix of 
remuneration commensurate with their position and responsibilities within the Company that is competitive within the market in 
which they were recruited. 

Remuneration for executive KMP is reviewed annually and considers market data, insights into remuneration trends, the 
performance of the Company and the individual, and the broader economic and operating environment. This review is 
conducted in consultation with independent remuneration consultants where appropriate.

23

SILEX ANNUAL REPORT 2018DIRECTORS’ REPORT

For FY2018, executive KMP remuneration comprised Total fixed remuneration (TFR) only. At-risk Short-term incentive (STIs) 
and Long-term incentives (LTIs) were not offered to the CEO/MD or CFO/Company Secretary. At this time, it has also been 
determined that no incentives will be granted until further notice. 

Element

Purpose

Performance Metrics

Potential Value

Total Fixed Remuneration 
(TFR)

Provide competitive 
market salary, including 
superannuation and non-
monetary benefits.

Reference to role, market and 
experience.

Positioned at median  
market rate.

Assessing performance and claw-back of remuneration

The People & Remuneration Committee is responsible for assessing performance against KPIs and determining the incentive 
awards to be paid to all senior management. To assist in this assessment, the Committee receives detailed reports on 
performance from Management which are based on independently verifiable data such as financial measures, market 
information and data from independently run surveys. At all times, the Board has the discretion to make a final determination 
based on share price performance or other factors. 

In the unlikely event of serious misconduct or a material misstatement in the Company’s financial statements the Board can 
cancel or defer performance-based remuneration and may also claw back performance-based remuneration paid in previous 
financial years.

d)  Voting at the Company’s 2017 Annual General Meeting

Silex Systems Limited received more than 98% of “yes” votes on its Remuneration Report for the 2017 financial year. 

e)  Executive KMP remuneration structure

For FY2018, executive KMP remuneration packages comprised total fixed remuneration (TFR) only.

TFR is comprised of base salary, superannuation and packaged benefits. TFR is reviewed annually, or on promotion. It is 
benchmarked against market data for comparable roles in companies in a similar industry and with similar market capitalisation. 
The Committee aims to position executives at or near the median, with flexibility to take into account capability, experience, and 
value to the organisation and performance of the individual. 

For FY2018, the TFR for our CEO/MD and CFO/Company Secretary remained unchanged. 

No STIs or LTIs were granted during FY2018 to the CEO/MD or CFO/Company Secretary. For FY2019, all incentive plans have 
been suspended until the Company secures a clear path forward for its ongoing operations.

A full review of the executive KMP roles and renumeration has been planned in light of the anticipated reduced activity level of 
the Company.

24

SILEX ANNUAL REPORT 2018DIRECTORS’ REPORT

f)  Link between FY2018 remuneration and performance

FY2018 performance and impact on remuneration

The Company continued to face significant challenges throughout FY2018 and as a result sought to contain KMP remuneration. 
Given the ongoing uncertainty, it was deemed appropriate to not issue our CEO/MD and CFO/Company Secretary with a STI 
or LTI for FY2018. This was mutually agreed by the Board and the Company’s KMP and does not reflect on the performance or 
commitment of our KMP to the execution of the Company’s strategy. 

Statutory performance indicators

We aim to align KMP remuneration to our strategic and business objectives and the creation of shareholder wealth. The below 
table shows measures of the Company’s financial performance over the last five years as required by the Corporations Act 
2001. However, as a pre-revenue company, the below measures are generally not the measures used in determining the variable 
amounts of remuneration to be awarded to KMPs. As a consequence, there is no direct correlation between the statutory key 
performance measures and the variable remuneration awarded. 

Year ended 30 June

2014

2015

2016

2017

2018

EPS 
Cents

(17.3)

(21.1)

(2.0)

(5.9)

(2.7)

Total STI awards to KMP 
$

Share price at 30 June 
$

76,000

 322,400 

 211,000 

 12,500 

N/A

1.16

0.46

0.31

0.37

0.20

g)  Contractual arrangements with executive KMPs

Component

Total Fixed Remuneration

CEO/MD

$550,000

CFO/Company Secretary

$325,000

Contract duration

Ongoing Common Law Contract

Ongoing Common Law Contract

Notice by the individual  
or Company

6 months

6 months

Termination of employment 
(without cause)

Partial payment for pro-rata STI may be 
applicable at Board discretion.

Partial payment for pro-rata STI may be 
applicable at the Board’s discretion

Payment of Long Service Leave accrued 
prior to 31 December 2014 at pre-1 January 
2015 TFR of $800,000. Long Service Leave 
accrued after 1 January 2015 will be payable 
as per statutory entitlements.

Termination of employment (with 
cause) or by the individual

STI/LTI not awarded

STI/LTI not awarded

Termination of employment due 
to redundancy

Potential ex-gratia payment at Board 
discretion pending review of final outcomes

Potential ex-gratia payment to partially reflect 
forfeited STI for FY2017, FY2018 and FY2019

25

SILEX ANNUAL REPORT 2018 
DIRECTORS’ REPORT

h)  Non-executive directors’ remuneration

Non-executive directors receive a board fee. They do not receive performance-based pay or retirement allowances. The fees are 
exclusive of superannuation. 

In FY2018, all non-executive directors agreed to continue to not receive committee fees (payment of committee fees suspended 
from 1 April 2016).

The aggregate non-executive directors’ fees are reviewed periodically by the Board taking into account comparable roles and 
market data. The non-executive director’s fees remain well within the limits of the shareholder approved aggregate directors fee 
pool maximum of $750,000, as approved by shareholders at the 2011 AGM. The Silex Board currently comprises three non-
executive directors and an executive director. A full review of the Board size and composition has been planned in light of the 
anticipated reduced activity level of the Company.

The current fee structure is outlined below:

Board

Committee

Chair

100,000

–

Member

80,000

–

Additional fees may be payable to non-executive directors should they undertake specific consulting projects for the Company in 
the areas of their expertise. However, in light of the challenges facing the Company, all non-executive directors waived their right 
to receive additional consulting fees for additional services performed during the year.

26

SILEX ANNUAL REPORT 2018DIRECTORS’ REPORT

i)  Directors’ and KMP remuneration

The table below has been prepared in accordance with the requirements of the Corporations Act 2001 and relevant accounting 
regulations in Australia. This table details the remuneration for the Company’s KMP for the current and previous financial year.

 Fixed remuneration

Variable 
remuneration 

Cash salary 
and fees* 
$

Non-
monetary 
benefits* 
$

Annual and 
Long service 
leave** 
$

Post- 
employment 
benefits 
– super-
annuation 
$

Cash bonus* 
$

Total 
$

Name

Year

Executive directors

Dr M P  
Goldsworthy

2018

2017

Non-executive directors (NED)

Dr L M 
McIntyre 

Mr R A R Lee

Mr C D Wilks 

2018

2017

2018

2017

2018

2017

521,206

505,987

100,000

100,000

80,000

80,000

80,000

85,416

Other key management personnel

Ms J E Ducie 

Total 
executive 
directors and  
other KMP

Total NED 
remuneration 

Total KMP 
remuneration 

2018

2017

2018

2017

2018

2017

2018

2017

302,551

295,084

823,757

801,071

260,000

265,416

1,083,757

1,066,487

7,222

10,264

55,829

4,527

21,249

34,916

 – 

 – 

 – 

 – 

 – 

 – 

 – 

 – 

7,222

10,264

– 

– 

7,222

10,264

 – 

 – 

 – 

 – 

 – 

 – 

(1,067)

16,123

54,762

20,650

– 

– 

54,762

20,650

9,500

9,500

7,600

7,600

7,600

8,115

22,449

29,916

43,698

64,832

24,700

25,215

68,398

90,047

 – 

 – 

 – 

 – 

 – 

 – 

 – 

 – 

–

12,500

–

12,500 

 – 

 – 

 –

 605,506 

 555,694 

 109,500 

 109,500 

87,600

 87,600 

 87,600 

 93,531 

 323,933 

 353,623 

929,439

909,317 

284,700 

 290,631 

1,214,139 

12,500 

1,199,948

* Short-term benefits as per Corporations Regulations 2M 3.03(1) Item 6. 
** Other long-term benefits as per Corporations Regulations 2M 3.03(1) Item 8; Amount for M P Goldsworthy for 2018 includes a correction to the 
Long Service Leave accrual to reflect the preservation of his pre-1 January 2015 Long Service Leave entitlement at his pre-1 January 2015 TFR of 
$800,000. In the event Long Service Leave is taken in the ordinary course of business, payment for leave will be as per statutory requirements.

27

SILEX ANNUAL REPORT 2018DIRECTORS’ REPORT

The relative proportions of remuneration that are linked to performance and those that are fixed are as follows:

Name

 Fixed remuneration

 At risk – STI

 At risk – LTI *

2018

2017

2018

2017

2018

2017

Directors

Dr L M McIntyre 

Dr M P Goldsworthy 

Mr R A R Lee

Mr C D Wilks 

Other Executive KMP

Ms J E Ducie

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

N/A

N/A

N/A

N/A

N/A

–

N/A

N/A

N/A

N/A

N/A

N/A

100.0%

96.5%

N/A

3.5%

 N/A 

N/A

N/A

N/A

N/A

N/A

j)  Details of share-based compensation and bonuses

Options

No grant of options affected remuneration in the current reporting period or will affect remuneration in a future reporting period.

There were no options granted or any options exercised by any individual during FY2018 (or FY2017).

STI bonuses 

No STI’s were issued for the year ended 30 June 2018.

LTI deferred rights and cash incentives

No LTI’s were in place for the year ended 30 June 2018. 

Equity instruments held by KMP

The below table shows the number of ordinary shares in the Company that were held during the financial year by KMP of the 
Company, including by entities related to them:

2018
Name

Balance at the 
start of the year

Received during 
the year on  
the exercise  
of options

Received on 
vesting of rights 
to shares

Other changes 
during the year

Balance at the 
end of the year

Directors of Silex  
Systems Limited

Dr L M McIntyre

Dr M P Goldsworthy

Mr R A R Lee

Mr C D Wilks

Other Executive KMP

Ms J E Ducie

 48,230 

 5,979,055 

 – 

 2,814,021 

 3,759 

– 

– 

– 

– 

– 

– 

– 

– 

– 

 – 

– 

– 

– 

– 

 – 

48,230

5,979,055

–

2,814,021 

 3,759 

No options over ordinary shares in the Company were held by KMP of the Company at any time during the year ended 30 June 
2018, including by entities related to them.

28

SILEX ANNUAL REPORT 2018 
 
 
 
 
 
 
 
 
 
 
 
 
DIRECTORS’ REPORT

Shares under option

There were no unissued ordinary shares of Silex Systems Limited under option at the date of this report.

Securities Trading Policy

The Silex Securities Trading Policy applies to all staff including KMP. It prohibits staff from buying or selling Silex securities at times 
when they are in possession of inside information. In addition, staff are only permitted to trade in Silex securities during certain open 
periods. The Silex Securities Trading Policy is available on the Company’s website at www.silex.com.au/Corporate-Governance.

12. COMPANY SECRETARY

Ms J E Ducie BBus, CA, GAICD was appointed to the position of Company secretary in 2010. Before joining Silex, Ms Ducie 
held a senior finance position in the Construction industry in the Middle East and prior to that worked as a Senior Associate with 
a Chartered Accounting Practice.

13. INDEMNIFICATION AND INSURANCE OF DIRECTORS

The Company has entered into agreements to indemnify the directors of the Company against all liabilities to persons (other 
than the Company or related body corporate) which arise out of the performance of their normal duties as directors or executive 
officers unless the liability relates to conduct involving lack of good faith. The Company has agreed to indemnify the directors 
and executive officers against all costs and expenses incurred in defending an action that falls within the scope of the indemnity. 

The Directors’ & Officers’ Liability Insurance provides cover against all costs and expenses involved in defending legal actions 
and any resulting payments arising from a liability to persons (other than the Company) incurred in their position as a director or 
executive officer unless the conduct involves a wilful breach of duty or an improper use of inside information or position to gain 
advantage. The insurance policy does not allow specific disclosure of the nature of the liabilities insured against or the premium 
paid under the policy.

14. ENVIRONMENTAL REGULATION

The parent entity is subject to the environmental and health and safety regulations applicable to tenants of the Lucas Heights 
Science and Technology Centre. The parent entity is also bound by the rules and regulations set out in the Australian Radiation 
Protection and Nuclear Safety Act, 1998, and is a licensee under the Act. 

To the best of the Directors’ knowledge, all environmental and health and safety regulatory requirements have been met and 
there have been no claims made during the financial year.

15. NON-AUDIT SERVICES

The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s 
expertise and experience with the Company and/or the consolidated entity are important.

Details of the amounts paid or payable to the auditor (PricewaterhouseCoopers) for non-audit services provided during the year 
are set out on the following page.

29

SILEX ANNUAL REPORT 2018DIRECTORS’ REPORT

The Board of Directors has considered the position and, in accordance with the advice received from the Audit Committee, 
is satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors 
imposed by the Corporations Act 2001. The directors are satisfied that the provision of non-audit services by the auditor, as set 
out below, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons:

•  all non-audit services have been reviewed by the Audit Committee to ensure they do not impact the impartiality and objectivity 

of the auditor

•  none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics 

for Professional Accountants.

During the year the following fees were paid or payable for non-audit services provided by the auditor of the parent entity, its 
related practices and non-related audit firms:

Other assurance services

PricewaterhouseCoopers Australian firm

Total remuneration for other assurance services

Other services 

Seminars and training courses

Total remuneration for other services

Total remuneration for non-audit services

2018  
$

2017  
$

–

–

450

450

450

–

–

582

582

582

16. AUDITORS

PricewaterhouseCoopers continues in office in accordance with section 327 of the Corporations Act 2001.

17. 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 on 
page 31.

This report is made in accordance with a resolution of the Directors.

Dr M P Goldsworthy  
CEO/MD 

Sydney, 28 September 2018

Mr C D Wilks 
Director

30

SILEX ANNUAL REPORT 2018 
DIRECTORS’ REPORT

AUDITOR’S INDEPENDENCE DECLARATION

As lead auditor for the audit of Silex Systems Limited for the year ended 30 June 2018, I declare that, to the best of my 
knowledge and belief, there have been:

a)  no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and 
b)  no contraventions of any applicable code of professional conduct in relation to the audit.

This declaration is in respect of Silex Systems Limited and the entities it controlled during the period.

David Ronald 
Partner 
PricewaterhouseCoopers 

Sydney
28 September 2018

PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo NSW 2000 
GPO BOX 2650, SYDNEY NSW 2001 
T +61 2 8266 0000, F +61 2 8266 9999, www.pwc.com.au

Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124 
T +61 2 9659 2476, F +61 2 8266 9999, www.pwc.com.au

Liability limited by a scheme approved under Professional Standards Legislation

31

SILEX ANNUAL REPORT 2018CORPORATE GOVERNANCE STATEMENT

Silex Systems Limited (the Company) and the Board are committed to achieving and demonstrating the highest standards of 
corporate governance. The Company has reviewed its corporate governance practices against the Corporate Governance 
Principles and Recommendations (3rd edition) published by the ASX Corporate Governance Council. 

The 2018 Corporate Governance Statement is dated as at 30 June 2018 and reflects the corporate governance practices in 
place throughout the 2018 financial year. The 2018 Corporate Governance Statement was approved by the Board and lodged 
with the ASX Appendix 4G, on 28 September 2018. A description of the Company’s current corporate governance practices is 
set out in the Company’s Corporate Governance Statement which can be viewed at  
www.silex.com.au/Corporate-Governance.

32

SILEX ANNUAL REPORT 2018CONCISE FINANCIAL REPORT
for the year ended 30 June 2018

CONTENTS

FINANCIAL STATEMENTS

Consolidated income statement 

Consolidated statement of comprehensive income 

Consolidated balance sheet 

Consolidated statement of changes in equity 

Consolidated statement of cash flows 

Notes to the financial statements 

Directors’ declaration 

Independent auditor’s report to the members 

Shareholders’ information 

34

35

36

37

38

39

43

44

47

Relationship of the concise financial report to the full financial report

The concise financial report is an extract from the full financial report for the year ended 30 June 2018. The financial statements 
and specific disclosures included in the concise financial report have been derived from the full financial report. 

The concise financial report cannot be expected to provide as full an understanding of the financial performance, financial 
position and financing and investing activities of Silex Systems Limited and its subsidiaries as the full financial report. Further 
financial information can be obtained from the full financial report. 

The full financial report and auditor’s report will be sent to members on request, free of charge. Please call +61 2 9704 8888 and 
request a copy of the full financial report (or email enquiries@silex.com.au). Alternatively, you can access both the full financial 
report and the concise report via the internet on our website: www.silex.com.au.

SILEX SYSTEMS LIMITED  
& ITS SUBSIDIARIES

ABN 69 003 372 067

CONSOLIDATED INCOME STATEMENT
for the year ended 30 June 2018

Revenue from continuing operations

Other income 

Research and development materials

Development expenditure

Finance costs

Depreciation and amortisation expense

Employee benefits expense

Consultants and professional fees

Printing, postage, freight, stationery and communications

Rent, utilities and property outgoings

Net foreign exchange losses

Other expenses from continuing activities

(Loss) before income tax expense

Income tax expense

Net (loss) from continuing operations

Net profit from discontinued operations

Net (loss) for the year

Net (loss) is attributable to:

Owners of Silex Systems Limited

Earnings per share for (loss) from continuing operations attributable  
to the ordinary equity holders of the company

Basic earnings per share

Diluted earnings per share

Earnings per share for (loss) attributable to the ordinary equity holders  
of the company

Basic earnings per share

Diluted earnings per share

Note

3

4

2018 
$

1,060,295

 7,552,662 

(382,999)

(5,799,314)

(8)

(40,650)

(3,866,174)

(2,066,401)

(80,977)

(419,164)

 – 

(536,651)

2017 
$

1,627,281

 940,847 

(207,498)

(6,668,102)

(11)

(27,349)

(3,818,168)

(1,081,456)

(74,377)

(395,751)

(155,223)

(398,036)

(4,579,381)

(10,257,843)

 – 

 – 

(4,579,381)

(10,257,843)

5

 – 

138,912

(4,579,381)

(10,118,931)

(4,579,381)

(10,118,931)

Cents

Cents

(2.7)

(2.7)

(2.7)

(2.7)

(6.0)

(6.0)

(5.9)

(5.9)

The above consolidated income statement should be read in conjunction with the accompanying notes.

34

SILEX ANNUAL REPORT 2018CONSOLIDATED STATEMENT OF  
COMPREHENSIVE INCOME
for the year ended 30 June 2018

Net (loss) for the year

Other comprehensive income

Items that may be reclassified to profit or loss:

 Changes in the fair value of available-for-sale financial assets

 Exchange differences on translation of foreign operations

Other comprehensive income for the year, net of tax

Total comprehensive income for the year

Attributable to:

 Owners of Silex Systems Limited

Total comprehensive income for the year

Total comprehensive income for the period attributable to owners  
of Silex Systems Limited arises from:

 Continuing operations

 Discontinued operations

2018 
$

2017 
$

(4,579,381)

(10,118,931)

1,799,643

583,591

2,383,234

(2,196,147)

5,716,932

(53,342)

5,663,590

(4,455,341)

(2,196,147)

(2,196,147)

(4,455,341)

(4,455,341)

(2,196,147)

(4,594,253)

 – 

138,912

(2,196,147)

(4,455,341)

The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.

35

SILEX ANNUAL REPORT 2018 
 
 
 
CONSOLIDATED BALANCE SHEET
as at 30 June 2018

Assets

Current assets

Cash and cash equivalents

Held to maturity investments – term deposits

Trade and other receivables

Available-for-sale financial assets

Total current assets

Non-current assets

Available-for-sale financial assets

Property, plant and equipment

Total non-current assets

Total assets

Liabilities

Current liabilities

Trade and other payables

Provisions

Total current liabilities

Non-current liabilities

Provisions

Total non-current liabilities

Total liabilities

Net assets

Equity

Contributed equity

Reserves

Accumulated losses

Total equity

30 June 2018 
$

30 June 2017 
$

2,002,145

29,851,837

8,452,352

9,362,123

1,876,319

40,801,837

1,842,593

–

49,668,457

44,520,749

–

119,178

119,178

49,787,635

7,284,502 

82,996

7,367,498

51,888,247

1,892,751

695,319

2,588,070

118,501

118,501

2,706,571

47,081,064

1,846,984

632,103

2,479,087

116,892

116,892

2,595,979

49,292,268

231,750,374

231,750,374

18,021,263

15,653,086

(202,690,573)

(198,111,192)

47,081,064

49,292,268

The above consolidated balance sheet should be read in conjunction with the accompanying notes.

36

SILEX ANNUAL REPORT 2018CONSOLIDATED STATEMENT  
OF CHANGES IN EQUITY
for the year ended 30 June 2018

Attributable to owners of Silex Systems Limited

Contributed equity 
$

Reserves 
$

Accumulated losses 
$

Total 
$

Balance at 30 June 2016

231,752,170

9,989,496

(187,992,261)

53,749,405

Net (loss) for the year

Other comprehensive income

Total comprehensive 
income for the year

 – 

 – 

 – 

 – 

(10,118,931)

5,663,590

 – 

(10,118,931)

5,663,590

5,663,590

(10,118,931)

(4,455,341)

Transactions with owners in their capacity as owners 

Deferred tax recognised 
directly in equity

(1,796)

(1,796)

– 

– 

– 

– 

(1,796)

(1,796)

Balance at 30 June 2017

231,750,374

15,653,086

(198,111,192)

49,292,268

Net (loss) for the year

Other comprehensive income

Total comprehensive 
income for the year

 – 

 – 

 – 

 – 

(4,579,381)

2,383,234

 – 

(4,579,381)

2,383,234

2,383,234

(4,579,381)

(2,196,147)

Transactions with owners in their capacity as owners

Transactions with non-
controlling interests

 – 

 – 

(15,057)

(15,057)

 – 

 – 

(15,057)

(15,057)

Balance at 30 June 2018

231,750,374

18,021,263

(202,690,573)

47,081,064

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

37

SILEX ANNUAL REPORT 2018 
 
 
CONSOLIDATED STATEMENT  
OF CASH FLOWS
for the year ended 30 June 2018

Cash flows from operating activities

Receipts from customers and government grants (inclusive of GST)

Payments to suppliers and employees (inclusive of GST)

Interest received

Interest paid

Net cash (outflows) from operating activities

Cash flows from investing activities

Payment for additional interest in subsidiary

Proceeds from held to maturity investments – term deposits

Payments for property, plant and equipment

Proceeds from sale of property, plant and equipment

Proceeds from sale of intangibles

Net cash inflows from investing activities

Cash flows from financing activities

Net cash (outflows) from financing activities

Note

2018 
$

2017 
$

997,280

2,672,348

(12,960,108)

(13,157,109)

1,225,488

1,449,905

(8)

(11)

(10,737,348)

(9,034,867)

(15,057)

–

10,950,000 

8,898,491 

(76,036)

– 

– 

(31,906)

289,100 

175,000 

10,858,907

9,330,685

 – 

–

Net increase in cash and cash equivalents

121,559

295,818

Cash and cash equivalents at the beginning of the financial year

Effects of exchange rate changes on cash

Cash and cash equivalents at end of the financial year*

1,876,319

4,267

2,002,145

1,581,746

(1,245)

1,876,319

Cash-flows of discontinued operations

5

*Held to maturity investments excluded from Cash and cash equivalents 

29,851,837 

40,801,837

The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.

38

SILEX ANNUAL REPORT 2018 
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
30 June 2018

NOTE 1 SIGNIFICANT CHANGES IN THE CURRENT ACCOUNTING PERIOD

On 12 June 2018, Silex announced that it had decided to withdraw from the acquisition of a majority stake in GE-Hitachi Global 
Laser Enrichment LLC (GLE), the exclusive Licensee of the SILEX technology. The Board decided that there remained too many 
risks associated with GLE’s business case and that an investment in GLE and the ongoing expenditure that this would entail 
would not be in the best interests of shareholders. The announcement followed the termination of the Term Sheet to acquire GE-
Hitachi’s 76% interest in GLE on 11 June 2018 and the cessation of Silex’s funding obligations for GLE’s operations. 

The financial position and performance of the Company was favourably impacted by IQE Plc’s decision to exercise its option 
to purchase Translucent’s cREO™ technology in March 2018 for US$5 million. In accordance with the License and Assignment 
Agreement, a perpetual royalty will also be payable to Translucent on the sale of IQE products that utilise Translucent’s cREO™ 
technology. Minimum annual royalties starting at US$400,000 are also due to commence being paid in FY2020. As a result, 
the Translucent operation has been reclassified as a continuing operation (and as a reportable segment) with the prior year 
amounts reclassified. 

NOTE 2 SEGMENT INFORMATION  

2018

Total segment revenue

Inter-segment revenue

Revenue from external customers

Silex Systems 
$

Translucent 
$

1,055,452

(84,000)

971,452

960,976

(872,133)

88,843

Total 
$

2,016,428

(956,133)

1,060,295

Segment result

(10,630,713)

6,051,332

(4,579,381)

Total segment assets

33,552,475

16,235,160

49,787,635

Total segment liabilities

2,351,235

355,336

2,706,571

2017

Total segment revenue

Inter-segment revenue

Revenue from external customers

1,449,646

(84,000)

1,365,646

1,080,744

(819,109)

261,635

2,530,390

(903,109)

1,627,281

Segment result

(10,211,489)

(46,354)

(10,257,843)

Total segment assets

44,468,260

7,419,987

51,888,247

Total segment liabilities

2,595,079

 – 

2,595,079

39

SILEX ANNUAL REPORT 2018 
 
 
 
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
30 June 2018

(i) Segment result

The Board of Directors assess the performance of the operating segments based on results that excludes exchange gains and 
losses on intercompany loans which eliminate on consolidation. Solar Systems has been disclosed as a discontinued operation and 
not as a reportable segment. A reconciliation of the segment result to Net (loss) from continuing operations is provided as follows.

Segment result

Net (loss) before income tax from continuing operations

NOTE 3 REVENUE  

From continuing operations

Interest income

License fees

Recoverable project costs from IQE

From discontinued operations (note 5)

Interest income

NOTE 4 OTHER INCOME

From continuing operations

Research and development tax incentive

Profit on sale of intellectual property – sale of cREO™ technology

Profit on sale of property, plant and equipment – sale of cREO™ technology

Foreign currency exchange gains (net)

From discontinued operations (note 5)

Research and development tax incentive

Profit on sale of property, plant and equipment

. 

40

2018 
$

2017 
$

(4,579,381)

(4,579,381)

(10,257,843)

(10,257,843)

2018 
$

2017 
$

 971,452 

 1,365,646 

 – 

 88,843 

 131,148 

 130,487 

 1,060,295 

 1,627,281 

 – 

 – 

 3,751 

 3,751 

2018 
$

 1,060,878 

 6,301,408 

128,600 

 61,776 

2017 
$

940,847 

 – 

– 

– 

 7,552,662 

940,847 

– 

– 

– 

41,058 

114,000 

 155,058 

SILEX ANNUAL REPORT 2018 
NOTES TO THE FINANCIAL STATEMENTS
30 June 2018

NOTE 5 DISCONTINUED OPERATIONS

In accordance with the Company’s 2014 major strategic review and resulting restructure, the Solar Systems business was 
disclosed as a discontinued operation. On 30 July 2015, Silex announced a decision had been made to cease business operations 
at Solar Systems. During the year ended 30 June 2017, the residual assets held for sale were sold. 

A.C.N. 142 019 583 Pty Ltd and A.C.N. 137 638 021 Pty Ltd (together formerly known as the Solar Systems business) as well as 
Silex Solar Pty Ltd were deregistered on 24 January 2018. 

A summary of the results of the discontinued operations is provided below.

Revenue (note 3)

Other income (note 4)

Expenses

Profit before income tax

Income tax expense

Profit after income tax of the discontinued operations

Net cash inflows from operating activities

Net cash inflows from investing activities

Net cash inflows from the discontinued operations

NOTE 6 DIVIDENDS

No dividends were declared or paid during the year or in the prior year.

2018 
$

–

–

–

–

 – 

–

2018 
$

–

 –

–

2017 
$

3,751

155,058

(19,897)

138,912

 – 

138,912

2017 
$

1,553,428

 464,000 

2,017,428

41

SILEX ANNUAL REPORT 2018NOTES TO THE FINANCIAL STATEMENTS
30 June 2018

NOTE 7 EVENTS OCCURRING AFTER REPORTING DATE

Following the announcement regarding the Company’s termination of the Term Sheet with GEH on 12 June 2018, a number of 
operational decisions were made in July 2018 to rationalise activities and reduce anticipated operational cash burn from FY2019 
onwards. Actions taken to date include a headcount reduction of more than 40% at our Lucas Heights facility, and the planned 
consolidation of our operations with the relocation of our small corporate office to the Lucas Heights facility in October 2018. 
The one-off expenses associated with these initial restructuring decisions is expected to be approximately $180,000.

Between 30 June 2018 and the date of this report, the IQE Plc share price (AIM: IQE) has decreased significantly. Combined 
with movements in exchange rates, the value of the shares held at 30 June 2018 (disclosed as Available-for-sale financial assets) 
has decreased by approximately $1,630,000 since 30 June 2018. Gains or losses arising from changes in the fair value of 
shares classified as available-for-sale are recognised in other comprehensive income. The financial effects of the movements in 
fair value since 30 June 2018 will be recognised in the financial statements for the year ended 30 June 2019.

In September 2018, the group received US$5 million worth of shares in IQE from the sale of its cREO™ technology. Since 
receiving the shares, the IQE share price has fallen. Combined with movements in exchange rates from 30 June 2018, the value 
of this tranche of shares has decreased by approximately $480,000 compared to the value of the receivable at 30 June 2018. 
Consistent with the comments above, it is expected that the gains or losses arising from changes in the fair value of the shares 
will be recognised in other comprehensive income in the financial statements for the year ended 30 June 2019.

The consolidated entity is not aware of any other matters or circumstances which are not otherwise dealt with in the financial 
statements that have significantly or may significantly, affect the operations of the consolidated entity, the results of its operations 
or the state of the consolidated entity in subsequent years other than those referred to in this report.

NOTE 8 BASIS OF PREPARATION

This concise financial report relates to the consolidated entity consisting of Silex Systems Limited and the entities it controlled 
at the end of, or during, the year ended 30 June 2018. The accounting policies have been consistently applied to all years 
presented, unless otherwise stated below. The financial statements in this report are presented in Australian dollars.

42

SILEX ANNUAL REPORT 2018DIRECTORS’ DECLARATION
30 June 2018

The directors declare that in their opinion, the concise financial report of the consolidated entity for the year ended 30 June 2018 
as set out on pages 33 to 42 complies with Accounting Standard AASB 1039: Concise Financial Reports.

The concise financial report is an extract from the full financial report for the year ended 30 June 2018. The financial statements 
and specific disclosures included in the concise financial report have been derived from the full financial report.

The concise financial report cannot be expected to provide as full an understanding of the financial performance, financial 
position and financing and investing activities of the consolidated entity as the full financial report, which is available on request.

This declaration is made in accordance with a resolution of the directors.

Dr M P Goldsworthy  
CEO/MD 

Sydney, 28 September 2018

Mr C D Wilks 
Director

43

SILEX ANNUAL REPORT 2018 
INDEPENDENT AUDITOR’S REPORT 
to the members of Silex Systems Limited

REPORT ON THE CONCISE FINANCIAL REPORT

Our opinion

In our opinion, the accompanying concise financial report of Silex Systems Limited (the Company) and its controlled entities 
(together the Group) for the year ended 30 June 2018 complies with Australian Accounting Standard AASB 1039 Concise 
Financial Reports.

What we have audited

The Group concise financial report derived from the financial report of the Group for the year ended 30 June 2018 comprises:

•   the consolidated balance sheet as at 30 June 2018

•   the consolidated income statement for the year then ended

•   the consolidated statement of comprehensive income for the year then ended

•   the consolidated statement of changes in equity for the year then ended

•   the consolidated statement of cash flows for the year then ended

•   the related notes

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 concise financial report section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Independence

We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and 
the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional 
Accountants (the Code) that are relevant to our audit of the concise financial report in Australia. We have also fulfilled our other 
ethical responsibilities in accordance with the Code.

PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo NSW 2000, GPO BOX 2650, SYDNEY NSW 2001 
T +61 2 8266 0000, F +61 2 8266 9999, www.pwc.com.au

Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124 
T +61 2 9659 2476, F +61 2 8266 9999, www.pwc.com.au

Liability limited by a scheme approved under Professional Standards Legislation

44

SILEX ANNUAL REPORT 2018INDEPENDENT AUDITOR’S REPORT 
to the members of Silex Systems Limited

Concise financial report

The concise financial report does not contain all the disclosures required by the Australian Accounting Standards in the 
preparation of the financial report. Reading the concise financial report and the auditor’s report thereon, therefore, is not a 
substitute for reading the financial report and the auditor’s report thereon

The financial report and our report thereon

We expressed an unmodified audit opinion on the financial report in our report dated 28 September 2018. 

That report also includes: 

•   The communication of 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.

Responsibilities of the directors for the concise financial report 

The directors are responsible for the preparation of the concise financial report in accordance with Accounting Standard AASB 
1039 Concise Financial Reports, and the Corporations Act 2001, and for such internal control as the directors determine is 
necessary to enable the preparation of the concise financial report.

Auditor’s responsibilities for the audit of the concise financial report

Our responsibility is to express an opinion on whether the concise financial report, complies in all material respects, with AASB 
1039 Concise Financial Reports based on our procedures which were conducted in accordance with Auditing Standard ASA 
810 Engagements to Report on Summary Financial Statements.

45

SILEX ANNUAL REPORT 2018INDEPENDENT AUDITOR’S REPORT 
to the members of Silex Systems Limited

REPORT ON THE REMUNERATION REPORT 

The following paragraphs are copies from our report on the remuneration report of Silex Systems Limited for the year ended 30 
June 2018.

Our opinion on the remuneration report

We have audited the remuneration report included in pages 21 to 29 of the directors’ report for the year ended 30 June 2018.

In our opinion, the remuneration report of Silex Systems Limited for the year ended 30 June 2018 complies with section 300A of 
the Corporations Act 2001.

Responsibilities 

The directors of the Company are responsible for the preparation and presentation of the remuneration report in accordance 
with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report, based 
on our audit conducted in accordance with Australian Auditing Standards. 

PricewaterhouseCoopers

David Ronald 
Partner

Sydney 
28 September 2018

46

SILEX ANNUAL REPORT 2018SHAREHOLDERS’ INFORMATION
30 June 2018

1. INFORMATION RELATING TO SHAREHOLDERS AS AT 21 SEPTEMBER 2018

(a) Distribution schedule

1–1,000

1,001–5,000

5,001–10,000

10,001–100,000

100,001 and over

Total number of holders of each class of security

Voting rights  

– on a show of hands

– on a poll

Percentage of total holding held by the largest 20 holders

Number of total holding less than a marketable parcel of shares

Substantial shareholders

Jardvan Pty Ltd

Mr Paul Cozzi

1,887

2,181

704

1,013

199

5,984

47.75%

2,991

Ordinary shares

29,801,030

9,580,000

47

SILEX ANNUAL REPORT 2018  
SHAREHOLDERS’ INFORMATION
30 June 2018

(b) Names of Twenty Largest Holders as at 21 September 2018

Name

Jardvan Pty Ltd

Mr Paul Cozzi

Majenta Holdings Pty Ltd

Hillboi Nominees Pty Ltd

Throvena Pty Ltd

Polly Pty Ltd

National Nominees Limited

Hamlac Pty Ltd

Mr Christopher David Wilks

HSBC Custody Nominees (Australia) Limited

Felson Holdings Pty Ltd

Quintal Pty Ltd 

Sporran Lean Pty Ltd

RPM Super Pty Ltd

Citicorp Nominees Pty Limited

Mr Luca Rotter + Ms Jane Louise Abbott

Mr Xiangyang Wu

Mr Nobuo Maeda

J P Morgan Nominees Australia Limited

Mr Timothy Guy Lyons + Mrs Heather Mary Lyons

Number of 
securities

29,801,030

Percentage  
held

17.48%

9,580,000

5,703,923

4,229,295

2,978,203

4,073,863

2,697,342

2,525,937

2,405,070

2,292,133

2,251,000

2,002,952

1,809,999

1,500,000

1,322,511

1,312,274

1,302,771

1,250,000

1,216,792

1,150,000

5.62%

3.35%

2.48%

1.75%

2.39%

1.58%

1.48%

1.41%

1.34%

1.32%

1.17%

1.06%

0.88%

0.78%

0.77%

0.76%

0.73%

0.71%

0.67%

81,405,095

47.75%

2. INTEREST OF DIRECTORS IN SHARES AS AT 21 SEPTEMBER 2018

Dr L M McIntyre

Dr M P Goldsworthy

Mr R A R Lee

Mr C D Wilks

Ordinary shares

48,230

5,979,055

– 

Interest held

Beneficially

Personally/Beneficially

N/A

2,814,021

Personally/Beneficially

3. SECURITIES SUBJECT TO VOLUNTARY ESCROW AS AT 21 SEPTEMBER 2018

As at 21 September 2018, no securities were subject to voluntary escrow.

4. UNQUOTED EQUITY SECURITIES AS AT 21 SEPTEMBER 2018

There were no unquoted equity securities at 21 September 2018.

48

SILEX ANNUAL REPORT 2018COMPANY  
DIRECTORY

DIRECTORS

Dr L M McIntyre – Chair 
Dr M P Goldsworthy – CEO/MD 
Mr R A R Lee 
Mr C D Wilks

AUDIT COMMITTEE

Mr R A R Lee – Chair  
Dr L M McIntyre 
Mr C D Wilks  

PEOPLE & 
REMUNERATION 
COMMITTEE

Dr L M McIntyre – Chair 
Mr R A R Lee  
Mr C D Wilks

COMPANY SECRETARY

Ms J E Ducie

REGISTERED OFFICE 
AND PRINCIPAL PLACE 
OF BUSINESS

STOCK EXCHANGE

Listed on the Australian Stock 
Exchange, Ticker: SLX

Suite 8.01, Level 8 
56 Clarence Street 
Sydney NSW 2000, Australia

Listed on the OTCQX International, 
Ticker: SILXY 

Postal address: PO Box 364, Sydney 
NSW 2001, Australia

AUDITORS

📞  +61 2 9704 8888  
📠  +61 2 9704 8851 
✉ 
💻  www.silex.com.au

investor.relations@silex.com.au 

SHARE REGISTRY

Computershare Registry Services  
Pty Limited

Level 5, 115 Grenfell Street, Adelaide, 
South Australia 5000, Australia

GPO Box 1903 Adelaide  
South Australia 5001, Australia

📞  Enquiries:  
 Within Australia: 1300 556 161  
Outside Australia: +61 8 8236 2300 

✉  web.queries@computershare.com.au 
💻  www.computershare.com.au

PricewaterhouseCoopers

SOLICITORS

Baker & McKenzie  

BANKERS

Australia and New Zealand Banking 
Group Limited

AMERICAN DEPOSITORY 
RECEIPTS (ADR) 
INFORMATION

Silex Systems Limited’s ADRs may be 
purchased on the US OTCQX market.

Details are as follows: 
Ratio: 1 ADR = 5 ordinary shares 
Symbol: SILXY 
CUSIP: 827046 10 3 9414F102 
Exchange: OTCQX 
Country: Australia 

 
 
 
 
 
 
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