TZ Limited
Appendix 4E
Preliminary final report
1. Company details
Name of entity:
ABN:
Reporting period:
Previous period:
TZ Limited
26 073 979 272
For the year ended 30 June 2018
For the year ended 30 June 2017
2. Results for announcement to the market
$'000
Revenues from ordinary activities
down
20.1% to
17,399
Earnings loss before interest, tax, depreciation and amortisation,
adjusted for impairment
down
10.6%
to
(2,637)
Loss from ordinary activities after tax attributable to the owners of TZ
Limited
Loss for the year attributable to the owners of TZ Limited
up
up
80.3%
to
80.3% to
(11,688)
(11,688)
Dividends
There were no dividends paid, recommended or declared during the current financial period.
Comments
The loss for the consolidated entity after providing for income tax amounted to $11,688,000 (30 June 2017: $6,481,000).
The earnings before interest, tax, depreciation and amortisation ('EBITDA'), adjusted for impairment, was a loss of
$2,637,000 (30 June 2017: loss of $2,950,000), an improvement of 10.6%.
EBITDA is a financial measure which is not prescribed by Australian Accounting Standards (‘AAS’) and represents the
profit under AAS adjusted for non-specific non-cash and significant items. The directors consider EBITDA to reflect the
core earnings of the consolidated entity.
3. Net tangible assets
Net tangible assets per ordinary security
Reporting
period
Cents
Previous
period
Cents
0.50
(0.88)
The net tangible assets is calculated based on the number of ordinary shares that would have been in existence had the
capital restructure occurred as at 1 July 2016.
4. Control gained over entities
Not applicable.
5. Loss of control over entities
Not applicable.
TZ Limited
Appendix 4E
Preliminary final report
6. Dividends
Current period
There were no dividends paid, recommended or declared during the current financial period.
Previous period
There were no dividends paid, recommended or declared during the previous financial period.
7. Dividend reinvestment plans
Not applicable.
8. Details of associates and joint venture entities
Not applicable.
9. Foreign entities
Details of origin of accounting standards used in compiling the report:
Not applicable.
10. Audit qualification or review
Details of audit/review dispute or qualification (if any):
The financial statements have been audited and an unqualified opinion has been issued.
11. Attachments
Details of attachments (if any):
The Annual Report of TZ Limited for the year ended 30 June 2018 is attached.
12. Signed
Signed ___________________________
Date: 30 August 2018
John Wilson
Managing Director
Sydney
Think TZ
2018 Annual Report
TZ Limited
Contents
30 June 2018
Corporate directory
Managing Director's report
Directors' report
Auditor's independence declaration
Statement of profit or loss and other comprehensive income
Statement of financial position
Statement of changes in equity
Statement of cash flows
Notes to the financial statements
Directors' declaration
Independent auditor's report to the members of TZ Limited
Shareholder information
General information
2
3
6
19
20
21
22
23
24
54
55
59
The financial statements cover TZ Limited as a consolidated entity consisting of TZ Limited and the entities it controlled at
the end of, or during, the year. The financial statements are presented in Australian dollars, which is TZ Limited's functional
and presentation currency.
TZ Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered office and
principal place of business are:
Registered office
Principal place of business
Level 11, 1 Chifley Square
Sydney NSW 2000
TZ Limited and TZI Australia Pty Limited, Level 11,
1 Chifley Square, Sydney NSW 2000
Telezygology Inc., 3 Twin Dolphin Drive, Redwood City,
CA 94065, USA
TZI Singapore Pte Limited, Centennial Business Suites,
Suntec Tower 2, 9 Temasek Boulevard #29-01 Singapore
038989
A description of the nature of the consolidated entity's operations and its principal activities are included in the directors'
report, which is not part of the financial statements.
The financial statements were authorised for issue, in accordance with a resolution of directors, on 30 August 2018. The
directors have the power to amend and reissue the financial statements.
1
TZ Limited
Corporate directory
30 June 2018
Directors
Mark Bouris - Chairman
John Wilson
Graham Lenzner
Thierry Denis
Mario Vecchio
Company secretary
Craig Sowden
Notice of annual general meeting
The details of the annual general meeting of TZ Limited are:
1:00pm, Tuesday, 20 November 2018 at:
Radisson Blu Plaza Hotel
27 O’Connell Street
Sydney NSW 2000
Registered office
Level 11, 1 Chifley Square
Sydney NSW 2000
Head office Tel: +61 2 9222 8890
Principal place of business
TZ Limited and TZI Australia Pty Limited
Level 11, 1 Chifley Square, Sydney NSW 2000 Australia
Telezygology Inc., 3 Twin Dolphin Drive, Redwood City, CA 94065, USA
TZI Singapore Pte Limited, Centennial Business Suites, Suntec Tower 2, 9 Temasek
Boulevard #29-01 Singapore 038989
Share register
Auditor
Solicitors
Bankers
Computershare Investor Services Pty Limited
Yarra Falls
452 Johnston Street
Abbotsford VIC 3067
Tel: 1300 787 272
Fax: +61 3 9473 2500
Grant Thornton Audit Pty Ltd
Level 17, 383 Kent Street
Sydney NSW 2000
Landerer & Company
Level 31, 133 Castlereagh Street
Sydney NSW 2000
St George Bank Limited
Level 3, 1 Chifley Square
Sydney NSW 2000
Stock exchange listing
TZ Limited shares are listed on the Australian Securities Exchange (ASX code: TZL)
Website
www.tz.net
TZ Limited's public website contains information regarding its products and the
company, including an investor services section
E-mail: info@tz.net
Corporate Governance Statement
The Corporate governance statement which was approved at the same time as the
annual report can be found at http://tz.net/investors/corporate-governance/
2
TZ Limited
Managing Director's report
30 June 2018
Dear Shareholders
FY2018 was a year of significant change for the Company.
We shifted our focus away from lower margin sales that supported revenue growth in previous years to higher margin and
more attractive market sectors. While we achieved a lower turnover for the year, our sales were at higher margins, leading
to an improvement to our EBITDA result.
Although we did not achieve our goal of positive EBITDA, I can report the following:
Revenue decreased to $17.4M from $21.5M
Gross margin improved to 51% from 46%
EBITDA improved to negative $2.6M from negative $2.9M
Operating cash outflows decreased to $3.5M from $7.6M
In September 2017, a restructure of the Board led to the resignations of Kenneth Ting and Paul Casey; Mark Bouris moving
to a non-executive Chairman role and announcing his intention to resign at the conclusion of the 2018 AGM; and the
appointment of new Directors, John Wilson as Managing Director and Graham Lenzner (Non-Executive Director). Thierry
Denis (Non-Executive Director) and Mario Vecchio (Non-Executive Director) joined the Board in May 2018. Significantly,
these changes represent a major shift in Company operation from an executive board to a more traditional board structure
of independent non-executive Directors and a Managing Director.
I would like to thank Kenneth Ting and Paul Casey for their contributions to the Company during their tenures as Directors.
Working with the Board, our year has been focused on putting in place the right foundations for a sustainable business
model, one with greater levels of accountability, stronger governance and cost management, a focus on profitable business
growth and a commitment to expanding the potential of the Company’s Smart Device technology.
Our vision is to become a world class technology company, specifically a world leader in smart locking and fastening
devices, capable of being networked and controlled over the internet and managed by TZ proprietary software. The pace of
technology innovation continues to accelerate and the core enablers that underpin our technology offering are more relevant
and importantly, more readily deployable today than in past years. We need to position ourselves as a true technology
company and leverage the track record of performance demonstrated in our Data Centre and Smart Locker businesses to
spring board into new application areas and business opportunities.
Existing business streams
Over 90% of our business today is through TZ Smart Locker sales. In fiscal year 2017, 40% of those Smart Locker sales
were to the postal and logistics sectors at an average gross margin below 20%. Today, postal sales only represent 25% of
our sales mix with the majority of sales directed at the attractive corporate, educational and retail sectors.
We have improved our margins to postal sector customers by moving to service-based offerings such as annuity hosting
and software-as-a-service options. Importantly, we’ve continued to be able to attract new and large corporate customers
demonstrating that demand exists for our differentiated high-end offerings. As a consequence, our Smart Locker business is
in a healthier position today with sales spread across an extensive range of large retained corporate customers in multiple
application sectors and an increasing acceptance of subscription based hosted software offerings.
Our efforts to market our offering to the large addressable US University sector has seen strong growth in sales, particularly
to the private university sector with major deployments at Rutgers, Princeton, Virginia Tech, Regis University and tender
wins with the University of Charlestown, University of Maine, Villanova and several others. With each University sale in the
range of US$200,000 to US$600,000, penetrating this segment and winning market share is important for the continued
growth of the US business.
We have also established a new business stream by successfully retrofitting our electronics and deploying software to a
competitor’s system. The industry has seen some Locker manufacturers retract from their existing Locker supply businesses
leaving customers with large installed systems that no longer can be supported and maintained. The ability for TZ to
upgrade these existing networks provides a profitable revenue that fully leverages TZ’s technology capability and provide an
opportunity for further system sales.
Click and collect is continuing to gain traction with major retailers as they consider the value of offering a range of new e-
commerce services to their customer that require new last mile delivery options. TZ has been engaged by several consumer
and industrial retailers who are looking to TZ to help them establish Retail Locker networks which are fully integrated with
their on-line platforms.
3
TZ Limited
Managing Director's report
30 June 2018
All markets are showing positive signs for Smart Locker business growth. Europe delivered $3M in sales from a standing
start and Asia is emerging from the dominant Sing Post and Pos Malaysia Postal Locker contracts to build new business
opportunities with major Singapore based property developers with End-of-Trip and Day Locker offerings.
While our PAD sales continue to develop strongly, we still have opportunities to reduce our deployment costs and to
improve the consistency of the overall service experience for our customers. We are continuing to proactively address our
service performance and are implementing changes that should make a difference in the coming twelve months.
This year, our data centre rack locking sales showed nominal growth, maintaining last years’ sales levels. The business has
always been heavily dependent on new data centre builds and therefore sales have consistently been impacted by delays in
project starts or in building programs. Looking forward, retained TZ customers such as NextDC and Macquarie Telecom
have announced major expansion programs over the next three years and we hope to continue to work with them. Both the
Australian and US businesses expect to see stronger growth rates in fiscal year 2019.
Building Awareness
Communication to the market is an area where we need to improve how our product offering is viewed by customers. Most
of our customers see us as a Locker manufacturer rather than a technology provider.
The opportunities for state-of-the-art smart locking solutions are emerging and we need to be seen as the provider of choice
for these complex applications. Our aim is for new business lead generation to be driven by structured market awareness.
Repositioning the business in the eyes of our customers and the market remains a most important priority. Work is currently
being done to develop new web sites that better communicate our offerings and capabilities. As competitive intensity
increases across our segments and products, we need to be clearly differentiated as the technology provider we are.
New business streams
Expanding our business application focus is designed to help us realise new opportunities that leverage our core technology
platform. We are working on building new integrated end-to-end hardware, firmware and application software innovations
that can create opportunities and new possibilities for our business. We see a range of sectors where our technology could
be applied including the consumer residential market, healthcare, workplace and retail sectors. These opportunities will take
time to nurture but we have a number of opportunities that are currently being pursued.
This year we announced the co-development agreement with a global automotive manufacturer to develop a new utility
vehicle that will integrate TZ Smart Device Technology. The project has been funded by our partner and we have completed
a functional prototype which is currently undergoing extensive testing and evaluation. We are hopeful that the project
progresses and that the collaboration is announced publicly before the end of the calendar year.
This year we completed the sale of our Infinity Design business. Our internal engineering capabilities have developed
strongly under the stewardship of our CTO, Adam Forsyth. Accordingly, we believe that the time was right for us to focus our
energies solely on internal TZ projects instead of the distraction of running a fee-for-service design consultancy.
Looking forward
We have a clear strategy and are focusing on the things that will make a difference. Momentum is building and we need to
continue to expand our current customer base and to continue to improve our service levels.
Building awareness of our Company will not only increase our market profile but present ourselves in a different light to our
customers and expand the horizons of each engagement.
Finally, we need to build our path towards future, long term and sustainable revenue growth through technology licensing
and development partnerships.
In summary we need to do three things well:
1. Drive value and growth from our existing business streams;
2. Build awareness amongst our excellent corporate customer base of our potential breadth of offerings and capability;
and
3. Build new high growth businesses founded on technology licensing and commercialisation partnering.
4
TZ Limited
Managing Director's report
30 June 2018
We thank our shareholders for their continued support and our operating teams for their tremendous efforts and dedication
to grow the Company.
___________________________
John Wilson
Managing Director
30 August 2018
Sydney
5
TZ Limited
Directors' report
30 June 2018
The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as
the 'consolidated entity') consisting of TZ Limited (referred to hereafter as the 'company' or 'parent entity') and the entities it
controlled at the end of, or during, the year ended 30 June 2018.
Directors
The following persons were directors of TZ Limited during the whole of the financial year and up to the date of this report,
unless otherwise stated:
Mark Bouris - Chairman
John Wilson (appointed on 4 September 2017)
Graham Lenzner (appointed on 8 September 2017)
Thierry Denis (appointed on 1 May 2018)
Mario Vecchio (appointed on 1 May 2018)
Kenneth Ting (resigned on 4 September 2017)
Paul Casey (resigned on 29 November 2017)
Principal activities
During the financial year the principal continuing activities of the consolidated entity consisted of the development of
intelligent devices and smart device systems that enable the commercialisation of hardware and software solutions for the
management, control and monitoring of business assets and the provision of associated value added services through its
subsidiaries globally.
Currently this technology is monetised through the sale of its IXP and PAD product lines. Infrastructure Protection (IXP)
offers a cost effective, cabinet level locking solution that delivers physical security, environmental monitoring, authorised
access control and real-time compliance reporting for the data centre market. Package Asset Delivery (PAD) solutions
feature state-of-the-art system of modular lockers that integrate a network of TZ SMArt™ locking devices and proprietary
system software. PAD solutions are used in the postal / logistics sector and for accountable mail and corporate day lockers
in the commercial market.
All of the operations of the consolidated entity are based in Australia, the United States of America, Singapore and the
United Kingdom.
Dividends
There were no dividends paid, recommended or declared during the current or previous financial year.
Review of operations
The consolidated entity recorded operating revenue of $17.4M for the year (30 June 2017: $21.5M). Improved gross
margins of 51.1% (30 June 2017: 46.0%) and tighter control of overhead expenses resulted in improved Earnings Before
Interest Tax Depreciation and Amortisation ('EBITDA') loss of $2.6M (30 June 2017: EBITDA loss of $2.9M). The
impairment of the consolidated entity’s intangible assets valued at $7.4M resulted in a net loss after tax of $11.7m (30 June
2017: net loss after tax $6.5m).
Key Metrics
Operating Revenue
Gross Margin
Overheads
EBITDA
Impairment
EBIT
Net profit after tax
Operating cash flow
Investment in product development
30 June 2018 30 June 2017
$'M
$'M
Variance
$'M
17.4
51.1%
11.6
(2.6)
(7.4)
(11.4)
(11.7)
(3.5)
1.5
21.4
46.0%
12.8
(2.9)
(1.3)
(6.5)
(6.5)
(7.6)
1.9
(4.1)
(1.2)
0.3
(6.1)
(4.9)
(5.2)
4.1
(0.4)
EBITDA is a financial measure which is not prescribed by Australian Accounting Standards (‘AAS’) and represents the
profit under AAS adjusted for non-specific non-cash and significant items. The directors consider EBITDA to reflect the
core earnings of the consolidated entity.
6
TZ Limited
Directors' report
30 June 2018
Revenue
The consolidated entity's operating revenue recovered strongly from a weaker than expected first half result of $6.0M to
post a second half result of $11.4M. Full year revenue was $17.4M which is 19% lower than the financial year ended 30
June 2017 ('FY17'). The lower revenue during the financial year ended 30 June 2018 ('FY18') is reflective of the
consolidated entity’s shift towards a more sustainable mix of sales to a broader customer base in new high value Smart
Locker sectors, and away from lower margin sales to the postal sector. This shift has improved the consolidated entity’s
gross margin from 46.0% last year to 51.1% in FY18. This trend will be instrumental to the consolidated entity achieving its
profitable growth ambitions.
This trend was very evident in the USA business unit. Although total USA revenue was 23.2% lower at $10.3M in FY18,
revenue in the important USA corporate Locker market rose by 25.5% compared to last year which resulted in an improved
gross profit result of $5.8M (FY17: $5.6M). The overall gross margin of the USA business unit improved from 41.8% last
year to 55.8% this year.
The increased commitment to the Europe/Middle East/Africa market ('EMEA') through the appointment of a General
Manager in the United Kingdom at the start of FY18 has produced immediate results with the signing of a large logistics
customer in South Africa. This new business generated revenues of $2.6M in South Africa this year (FY17: Nil) and the
prospects are strong that further opportunities will materialise in this market in FY19.
Overheads
The consolidated entity implemented a number of cost saving initiatives this year which resulted in overheads of $11.6M,
which was $1.2M lower than the $12.8M spent last year.
Impairment
At the half year point in December 2017, following a weaker than expected first half revenue result, the Board decided to
impair in full the intellectual property assets associated with the IXP and PAD products. These property assets were mainly
comprised of capitalised patent costs and hardware and software development costs. The value of the impairment was
$7.4M (FY17: $1.3M).
Despite the full impairment in December, the Board is firmly convinced of the value of the PAD IP assets and the
consolidated entity continued to capitalise PAD development costs in the second half of the year. At 30 June 2018, the
value of capitalised PAD development costs was $0.6M.
Financial Position
Following the impairment of the intangible assets of $7.4M, the net assets of the consolidated entity decreased from $7.3M
at 30 June 2017 to $1.0M at 30 June 2018.
On 8 November 2017, the company completed a two for five rights issue which raised $5.5M. The company then
restructured its capital by way of a 10:1 share consolidation, reducing the number of shares on issue to 70.6 million.
The strong revenue result in the second half of the year, including in the final month of the year, resulted in a significant
amount of revenue being accrued by year end for completed and partially completed projects that were invoiced to
customers after year end. This led to accrued revenue at 30 June 2018 being $3.3M (30 June 2017: $1.8M).
At the end of the year, the consolidated entity had an available debt facility of $1M, unchanged from the end of the
previous year. After year end, the debt facility was extended by an additional $2M to improve TZ’s working capital position
ahead of the new financial year.
Operating cash flow
The consolidated entity achieved a significant improvement in operating cash flows this year, down to a cash outflow of
$3.5M in FY18 from $7.6M in FY17.
Investment in product development
The consolidated entity continued its investment in product development and manufacturing improvements with a $1.5M
spend supporting development of the consolidated entity’s next generation SMArt Devices, TZ Software platform and
licensing initiatives.
Significant changes in the state of affairs
There were no significant changes in the state of affairs of the consolidated entity during the financial year.
7
TZ Limited
Directors' report
30 June 2018
Matters subsequent to the end of the financial year
On 7 August 2018, the consolidated entity increased its borrowing facility with First Samuel Limited by an additional
$2,000,000, increasing the total facility to $7,000,000. The increase comprises two revolving tranches of $1,000,000 which
can be repaid and redrawn if repayments are made before the end of the term. The interest rate applicable to the additional
facility is 90 day BBSW plus 9% per annum, payable 6 monthly in arrears. Under the revised facility, $3,000,000 of the total
loan facility matures on 13 December 2019 and $4,000,000 matures on 5 May 2020. The facilities are secured by first
ranking security interest over the assets of the consolidated entity.
No other matter or circumstance has arisen since 30 June 2018 that has significantly affected, or may significantly affect
the consolidated entity's operations, the results of those operations, or the consolidated entity's state of affairs in future
financial years.
Likely developments and expected results of operations
Further information on the future strategies is detailed in the review of operations which precedes the Directors' Report and
Annual Financial Statements.
Environmental regulation
The consolidated entity is not subject to any significant environmental regulation under Australian Commonwealth or State
law.
Information on directors
Name:
Title:
Qualifications:
Experience and expertise:
Mark Bouris
Non-Executive Chairman
BCom (UNSW), MCom (UNSW), HonDBus (UNSW), HonDLitt (UWS), FCA
Mark Bouris is the Non-Executive Chairman of TZ Limited and has over 27 years’
experience in the finance and property sectors. Mark is also the Executive Chairman
of Yellow Brick Road and a board member of the Sydney Roosters. He is an Adjunct
Professor at the University of NSW Business School and he sits on boards for the
University of NSW Business Advisory Council and the Western Sydney University
Foundation Council. In 2015, Mark was appointed a Member of the Order of Australia
for significant service to the finance industry, particularly the home loan mortgage
sector, to education, and to charitable organisations. Mark is also the author of three
business and finance books.
Executive Chairman of Yellow Brick Road Holdings Limited (ASX: YBR).
Other current directorships:
Former directorships (last 3 years): Non-Executive Chairman of Anteo Diagnostics Limited (ASX: ADO) and Non-
Executive Chairman of Serena Resources Limited
None
310,469 ordinary shares
500,000 options over ordinary shares
Special responsibilities:
Interests in shares:
Interests in options:
8
TZ Limited
Directors' report
30 June 2018
Name:
Title:
Qualifications:
Experience and expertise:
John Wilson
Managing Director and Chief Executive Officer (appointed on 4 September 2017)
Bachelor of Engineering, Post Graduate in International Marketing
John has extensive global business experience, having spent most of his 20 year
career in the development of international businesses in Asia, Europe and the US
including establishment of major strategic alliances and partnerships, technology
licenses and driving market entry strategies through new product innovation and
commercialization. John specializes in the field of strategic business development,
innovation management and product commercialization. He has a post graduate
qualification in international marketing and has received skills development from
graduate schools in the US and in Europe in the areas of value based management
and innovation management. John successfully co-founded and built TZ from the
ground up into a global publicly listed technology company before exiting the
Company in early 2007. He returned to TZ in a consulting capacity to support the new
Board of TZ Limited in 2011. John also has significant executive management
experience having spent a decade in his earlier years working for a major
multinational manufacturing corporation in a range of senior roles across marketing,
business development, strategy development, technology management and business
unit general management.
Other current directorships:
None
Former directorships (last 3 years): None
None
Special responsibilities:
8,230 ordinary shares
Interests in shares:
None
Interests in options:
Name:
Title:
Qualifications:
Experience and expertise:
Graham Lenzner (appointed on 8 September 2017)
Non-Executive Director
BEc (USyd)
Graham brings a wealth of Corporate experience to the Board as an Independent
Director. He has had a career spanning over four decades with particular emphasis
on investment management and financial markets. He was an Executive Director of
the Armstrong Jones Group for twelve years, the last four years as Joint Managing
Director until it's takeover by ING. Other previous roles include Finance and Deputy
Managing Director Aquila Steel and General Manager Finance and Investments MMI
Insurance Ltd. He has served on the Board of a number of both listed and private
companies.
Independent Non-Executive Director of 360 Capital Group Limited (ASX: TGP)
Chairman of the Audit and Risk Committee and Chairman of the Remuneration and
Nomination Committee
600,000 ordinary shares
None
Other current directorships:
Former directorships (last 3 years): None
Special responsibilities:
Interests in shares:
Interests in options:
9
TZ Limited
Directors' report
30 June 2018
Name:
Title:
Qualifications:
Experience and expertise:
Thierry Denis (appointed on 1 May 2018)
Non-Executive Director
Ingenieur (ENSEA France), GAICD
Thierry is a technology executive with more than 20 years’ international experience in
business management, company turnaround and transformation. He built an
accomplished career with billion-dollar technology company Ingenico, leading a
diverse range of mandates across dynamically different regions and markets. Thierry
has led culture and process change, while leveraging his strong foundation expertise
in IT solutions. Thierry was successful at Ingenico in delivering revenue and profit
growth through the creation of scalable, lean and efficient business models and
engaged, empowered and high performing team environments. This accomplishment
earned him industry recognition through receipt of ‘President of the Year’ Award by
TMT News.
Other current directorships:
None
Former directorships (last 3 years): None
None
Special responsibilities:
200,000 ordinary shares
Interests in shares:
None
Interests in options:
Name:
Title:
Qualifications:
Experience and expertise:
Mario Vecchio (appointed 1 May 2018)
Non-Executive Director
Electronic Engineer
Mario has run various businesses in the technology industry including sectors such as
networking, enterprise software, telecommunications and healthcare. He has had
over 35 years' experience in information technology and related markets working with
companies including Cisco Systems, Siemens, Juniper Networks and Amdocs. He
established a number of businesses since 1998 which have been involved in the
development of many technology projects for the telecommunications, healthcare and
utility industries. Mario founded Progility PLC which became public on the UK AIM
Index. Mario is currently Managing Director APJC for Big Swithch Networks Inc. His
technology experience includes networking/cloud, security solutions, GEO location
systems, voice, telecommunications, encryption technologies and wireless systems.
As a director of ASK Solutions Victoria Pty Ltd, Mario facilitated a number of
significant fund raising events for the Childrens Cancer Institute of Australia (CCIA) to
assist research projects into childhood cancers.
Other current directorships:
None
Former directorships (last 3 years): None
None
Special responsibilities:
85,000 ordinary shares
Interests in shares:
None
Interests in options:
'Other current directorships' quoted above are current directorships for listed entities only and excludes directorships in all
other types of entities, unless otherwise stated.
'Former directorships (in the last 3 years)' quoted above are directorships held in the last 3 years for listed entities only and
excludes directorships in all other types of entities, unless otherwise stated.
Company secretary
Craig Sowden is the Company Secretary and also the Chief Financial Officer of the company. Craig has over 20 years of
experience of financial and commercial experience in various listed and unlisted corporations across a diverse range of
industries. Craig joined TZ as Chief Financial Officer in October 2016 and was appointed Company Secretary in
September 2017.
10
TZ Limited
Directors' report
30 June 2018
Meetings of directors
The number of meetings of the company's Board of Directors ('the Board') and of each Board committee held during the
year ended 30 June 2018, and the number of meetings attended by each director were:
Mark Bouris
John Wilson
Graham Lenzner
Thierry Denis
Mario Vecchio
Kenneth Ting
Paul Casey
Full Board
Audit and Risk Committee
Attended
Held
Attended
Held
11
9
9
2
2
2
3
11
9
9
2
2
2
5
2
2
2
1
1
-
-
2
2
2
1
1
-
-
Held: represents the number of meetings held during the time the director held office or was a member of the relevant
committee.
Remuneration report (audited)
The remuneration report, which has been audited, outlines the director and key management personnel remuneration
arrangements for the consolidated entity and the company, in accordance with the requirements of the Corporations Act
2001 and its Regulations.
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the
activities of the entity, directly or indirectly, including all directors.
The remuneration report is set out under the following main headings:
●
●
●
●
●
●
Principles used to determine the nature and amount of remuneration
Details of remuneration
Service agreements
Share-based compensation
Additional information
Additional disclosures relating to key management personnel
Principles used to determine the nature and amount of remuneration
The objective of the consolidated entity's and company's executive reward framework is to ensure reward for performance
is competitive and appropriate for the results delivered. The framework aligns executive reward with the achievement of
strategic objectives and the creation of value for shareholders, and conforms with the market best practice for delivery of
reward. The Board of Directors ('the Board') ensures that executive reward satisfies the following key criteria for good
reward governance practices:
●
●
●
set competitive remuneration packages to attract and retain high calibre employees;
link executive rewards to shareholder value creation; and
establish appropriate demanding performance hurdles for variable executive remuneration.
The Board reviews and is responsible for the consolidated entity’s remuneration policies, procedures and practices. A
Remuneration and Nomination Committee has been established and it will be responsible for the remuneration policies
commencing from the financial year ended 30 June 2019
The consolidated entity established a Director and Executive Equity Plan in 2009 to attract, retain, motivate and reward
senior executives and directors (including non-executive directors) of the company (collectively the 'Participants') by
issuing either or both rights and options to the Participants to allow the Participants to acquire fully paid ordinary class
shares in the company upon exercising the rights or options, as the case may be. The exercise of each right or option
entitles the holder of that right or option, as the case may be, to acquire one fully paid ordinary class share in the capital of
the company.
Under the Director and Executive Equity Plan, the number of rights and options that may be issued to a Participant and the
performance criteria and hurdles to be met prior to the issue or exercise of such Rights and Options is to be set by the
board of directors of the company.
11
TZ Limited
Directors' report
30 June 2018
Non-executive directors remuneration
Fees and payments to non-executive directors reflect the demands which are made on, and the responsibilities of, the
directors. Non-executive directors' fees and payments are reviewed annually by the Board. The Board considers advice
from shareholders, and takes into account the fees paid to non–executive directors of comparable companies, when
undertaking the annual review process. Non-executive directors do not receive share options or other incentives.
ASX listing rules require that the aggregate non-executive directors remuneration shall be determined periodically by a
general meeting. The amount of aggregate remuneration sought to be approved by shareholders and the manner in which
it is apportioned amongst directors is reviewed annually. The most recent determination was at the AGM held on 30
November 2006, where the shareholders approved an aggregate remuneration of $500,000.
Executive remuneration
The consolidated entity and company aims to reward executives with a level and mix of remuneration based on their
position and responsibility, which is both fixed and variable.
The executive remuneration and reward framework has four components:
●
●
●
●
base pay and non-monetary benefits
short-term performance incentives
share-based payments
other remuneration such as superannuation and long service leave
The combination of these comprises the executive's total remuneration.
Fixed remuneration, consisting of base salary, superannuation and non-monetary benefits, are reviewed annually by the
Board, based on individual and business unit performance, the overall performance of the consolidated entity and
comparable market remunerations.
Executives can receive their fixed remuneration in the form of cash or other fringe benefits (for example motor vehicle
benefits) where it does not create any additional costs to the consolidated entity and adds additional value for the
executive.
The short-term incentives ('STI') program is designed to align the targets of the business units with the targets of those
executives in charge of meeting those targets. STI payments are granted to executives based on specific annual targets
and key performance indicators ('KPI') being achieved. KPI’s include profit contribution, customer satisfaction, leadership
contribution and product management.
The long-term incentives ('LTI') includes long service leave and share-based payments. As noted above, a Director and
Executive Equity Plan has been set up to reward executives based on long term incentive measures in the form of options
and rights. These include increase in shareholders' value relative to the entire market and the increase compared to the
consolidated entity's direct competitors.
Consolidated entity performance and link to remuneration
Remuneration for certain individuals is directly linked to the performance of the consolidated entity. Executives and other
employees can be issued with options and rights to acquire shares in the company. The number and the terms of the
options and rights issued are determined by the directors after consideration of the employee's performance and their
ability to contribute to the achievement of the consolidated entity's objectives. Refer to the additional information section of
the remuneration report for details of the last five years earnings and total shareholders return ('TSR').
Use of remuneration consultants
During the financial year ended 30 June 2018, the consolidated entity engaged Remuneration Strategies Group,
remuneration consultants, to advise on an employee equity plan. Remuneration Strategies Group was paid $4,510 for
these services.
The Board is also required to make inquiries of the consultant's processes at the conclusion of the engagement to ensure
that they are satisfied that any recommendations made have been free from undue influence. The Board is satisfied that
these protocols were followed and as such there was no undue influence.
Voting and comments made at the company's 2017 Annual General Meeting ('AGM')
At the last AGM 93.2% of the shareholders voted to adopt the remuneration report for the year ended 30 June 2017. The
company did not receive any specific feedback at the AGM regarding its remuneration practices.
12
TZ Limited
Directors' report
30 June 2018
Details of remuneration
Amounts of remuneration
The key management personnel of the consolidated entity consisted of the directors of TZ Limited and the following
persons:
●
●
●
William Leong - Chief Operating Officer of Telezygology Inc. (resigned on 7 February 2018)
Adam Forsyth - Chief Technical Officer of TZ Limited
Craig Sowden - Chief Financial Officer of TZ Limited
Short-term benefits
Post-
employment
benefits
Long-term
benefits
Share-
based
payments
2018
Non-Executive Directors:
M Bouris
G Lenzner*
T Denis*
M Vecchio*
P Casey *
Executive Directors:
J Wilson*/**
K Ting*
Other Key Management
Personnel:
W Leong*
A Forsyth
C Sowden
Cash salary
and fees Other
$
$
Bonus
$
Super-
annuation
$
245,506
55,585
11,416
11,416
40,153
850
-
-
-
-
-
-
-
-
-
-
5,281
1,084
1,084
-
365,192
78,530
-
2,067
50,000
-
20,833
-
115,680
145,313
230,000
1,298,791
9,506
-
-
12,423
-
-
-
50,000
4,489
18,406
21,850
73,027
Employee
leave
$
Options
$
-
-
-
-
-
-
-
-
-
-
-
Total
$
246,356
60,866
12,500
12,500
40,153
436,025
80,597
129,675
163,719
251,850
1,434,241
-
-
-
-
-
-
-
-
-
-
-
*
**
Represents remuneration from date of appointment and/or to date of resignation.
Bonus represents a discretionary cash bonus awarded on 1 August 2018 in respect of services performed during the
year ended 30 June 2017. The bonus was paid to John Wilson’s consulting company. Payment of the bonus was
subject to achievement of deliverables including securing of strategic customer relationships, conversion of targeted
sales opportunities and contracts in line with Board expectations and delivering on defined operational objectives set
by the Board. No share of the bonus was forfeited.
13
TZ Limited
Directors' report
30 June 2018
Short-term benefits
Post-
employment
benefits
Long-term
benefits
Share-
based
payments
2017
Non-Executive Directors:
P Casey
Executive Directors:
M Bouris
K Ting
Other Key Management
Personnel:
W Leong**
B A Henley*
C Sowden*
Cash salary
and fees Other
$
$
Bonus
$
Super-
annuation
$
99,483
-
440,917
462,574
10,200
6,000
-
-
-
-
-
-
250,890
33,499
135,333
1,422,696
19,435
-
-
35,635
33,161
-
-
33,161
6,272
2,304
34,767
43,343
Employee
leave
$
Options
$
-
-
-
-
-
-
-
Total
$
99,483
451,117
468,574
309,758
35,803
170,100
1,534,835
-
-
-
-
-
-
-
*
**
Represents remuneration from date of appointment and/or to date of resignation.
Bonus represents a discretionary cash bonus granted on 1 June 2017 and awarded as part of a salary package
restructure. No performance criteria were attached to the bonus. No share of the bonus was forfeited
The proportion of remuneration linked to performance and the fixed proportion are as follows:
Name
Non-Executive Directors:
M Bouris
G Lenzner
T Denis
M Vecchio
P Casey
Executive Directors:
J Wilson
K Ting
Other Key Management
Personnel:
W Leong
Adam Forsyth
C Sowden
Fixed remuneration
2017
2018
At risk - STI
At risk - LTI
2018
2017
2018
2017
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
-
-
-
100%
-
100%
89%
-
100%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
11%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Service agreements
Remuneration and other terms of employment for key management personnel are formalised in service agreements.
Details of these agreements are as follows:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
John Wilson
Managing Director and Chief Executive Office
8 September 2017
Three years
Base salary of $450,000. Notice period is 12 months in first year, 9 months in second
year and 6 months in the third year.
14
TZ Limited
Directors' report
30 June 2018
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Adam Forsyth
Chief Technical Officer
2 May 2016
No fixed term
Base salary of AU$200,000 and notice period of 1 month
Craig Sowden
Chief Financial Officer
10 October 2016
No fixed term
Base salary of AU$235,000 and notice period 2 months
Key management personnel have no entitlement to termination payments in the event of removal for misconduct.
Share-based compensation
Issue of shares
There were no shares issued to directors and other key management personnel as part of compensation during the year
ended 30 June 2018.
Options
There were no options over ordinary shares issued to directors and other key management personnel as part of
compensation that were outstanding as at 30 June 2018.
There were no options over ordinary shares granted to or vested by directors and other key management personnel as part
of compensation during the year ended 30 June 2018.
Additional information
The earnings of the consolidated entity for the five years to 30 June 2018 are summarised below:
Sales revenue
Adjusted EBITDA *
Loss after income tax
2018
$'000
2017
$'000
2016
$'000
2015
$'000
2014
$'000
17,389
(2,637)
(11,688)
21,507
(2,950)
(6,481)
20,785
(5,277)
(7,034)
15,129
(4,469)
(6,436)
8,392
(8,552)
(11,798)
*
Earnings before interest, tax, depreciation, amortisation and other one-off non-operating items
The factors that are considered to affect TSR are summarised below:
2018
2017
2016
2015
2014
Share price at financial year end ($)
Basic earnings per share (cents per share)*
0.17
(18.45)
0.02
(12.86)
0.10
(15.10)
0.09
(15.70)
0.14
(43.90)
*
Earnings per share is calculated based on the number of ordinary shares that would have been in existence had the
capital restructure occurred as at 1 July 2013.
15
TZ Limited
Directors' report
30 June 2018
Additional disclosures relating to key management personnel
Shareholding
The number of shares in the company held during the financial year by each director and other members of key
management personnel of the consolidated entity, including their personally related parties, is set out below:
Ordinary shares
Mark Bouris
Graham Lenzner
Thierry Denis
Mario Vecchio
John Wilson
Craig Sowden
Adam Forsyth
Kenneth Ting
Paul Casey
Balance at
the start of
the year
Other*
Additions
Consolidation**
3,104,677
-
-
-
-
-
-
3,664,172
236,363
7,005,212
-
-
-
30,000
58,783
-
69,500
(3,664,172)
(236,363)
(3,742,252)
-
4,200,000
200,000
55,000
23,514
35,000
62,800
-
-
4,576,314
(2,794,208)
(3,600,000)
-
-
(74,067)
(31,500)
(119,070)
-
-
(6,618,845)
Balance at
the end of
the year
310,469
600,000
200,000
85,000
8,230
3,500
13,230
-
-
1,220,429
*
**
Other represents shares already held at the date of appointment and/or no longer being designated as a KMP, not
necessarily a disposal of holding.
Consolidation represents the adjustment to the existing shareholding at the date of the capital restructure where,
existing shareholders received 1 share for every 10 shares held.
Option holding
The number of options over ordinary shares in the company held during the financial year by each director and other
members of key management personnel of the consolidated entity, including their personally related parties, is set out
below:
Options over ordinary shares
Mark Bouris
Kenneth Ting
Balance at
the start of
the year
Consolidation*
Expired
other**
Forfeited/
Balance at
the end of
the year
8,500,000
8,250,000
16,750,000
(7,650,000)
(7,425,000)
(15,075,000)
(350,000)
(325,000)
(675,000)
-
(500,000)
(500,000)
500,000
-
500,000
*
**
Consolidation represents the adjustment to the existing options held at the date of the capital restructure where,
existing option-holders received 1 option for every 10 options held.
Forfeited/other may represent no longer being designated as a KMP. It does not necessarily represent options that
have been forfeited.
No options were granted or exercised during the year ended 30 June 2018.
Other transactions with key management personnel and their related parties
During the year ended 30 June 2018 the consolidated entity incurred the following expenses from transactions with key
management personnel and their related parties:
●
●
●
Rent and serviced office expenditure of $171,960 (2017: $171,960) was paid to YBR Services Pty Limited, a director
related entity in which Mark Bouris is a director.
Broker fees of $13,436 (2017: $12,645) were paid for insurance policies arranged by Yellow Brick Road Wealth
Management Pty Limited (formerly YBR General Insurance Brokers Pty Limited), a director related entity in which
Mark Bouris is a director.
Administration fees and storage costs of $12,989 (2017: $56,096) were paid to YBR Services Pty Limited, a director
related entity in which Mark Bouris is a director.
16
TZ Limited
Directors' report
30 June 2018
As at the 30 June 2018 the consolidated entity has the following payables with key management personnel and their
related parties:
●
●
$47,289 (2017: $31,526) payable to YBR Services Pty Limited, a director related entity in which Mark Bouris is a
director for rent, serviced office expenditure and rental bond
$nil (2017: $10,284) payable to YBR Services Pty Limited, a director related entity in which Mark Bouris is a director
for administration fees and storage costs.
This concludes the remuneration report, which has been audited.
Shares under option
Unissued ordinary shares of TZ Limited under option at the date of this report are as follows:
Grant date
15 January 2014
15 January 2014
Expiry date
30 June 2019
30 June 2020
Exercise
price
Number
under option
$4.00
$6.00
500,000
500,000
1,000,000
No person entitled to exercise the options had or has any right by virtue of the option to participate in any share issue of
the company or of any other body corporate.
Shares issued on the exercise of options
There were no ordinary shares of TZ Limited issued on the exercise of options during the year ended 30 June 2018 and up
to the date of this report.
Indemnity and insurance of officers
The company has indemnified the directors and executives of the company for costs incurred, in their capacity as a director
or executive, for which they may be held personally liable, except where there is a lack of good faith.
During the financial year, the company paid a premium in respect of a contract to insure the directors and executives of the
company against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits
disclosure of the nature of the liability and the amount of the premium.
Indemnity and insurance of auditor
The company has not, during or since the financial year, indemnified or agreed to indemnify the auditor of the company or
any related entity against a liability incurred by the auditor.
During the financial year, the company has not paid a premium in respect of a contract to insure the auditor of the company
or any related entity.
Proceedings on behalf of the company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on
behalf of the company, or to intervene in any proceedings to which the company is a party for the purpose of taking
responsibility on behalf of the company for all or part of those proceedings.
Non-audit services
Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the auditor
are outlined in note 23 to the financial statements.
The directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another
person or firm on the auditor's behalf), is compatible with the general standard of independence for auditors imposed by
the Corporations Act 2001.
17
TZ Limited
Directors' report
30 June 2018
The directors are of the opinion that the services as disclosed in note 23 to the financial statements do not compromise the
external auditor's independence requirements of the Corporations Act 2001 for the following reasons:
●
all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity
of the auditor; and
none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code
of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including
reviewing or auditing the auditor's own work, acting in a management or decision-making capacity for the company,
acting as advocate for the company or jointly sharing economic risks and rewards.
●
Officers of the company who are former partners of Grant Thornton
There are no officers of the company who are former partners of Grant Thornton.
Rounding of amounts
The company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191,
issued by the Australian Securities and Investments Commission, relating to 'rounding-off'. Amounts in this report have
been rounded off in accordance with that Corporations Instrument to the nearest thousand dollars, or in certain cases, the
nearest dollar.
Auditor's independence declaration
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out
immediately after this directors' report.
Auditor
Grant Thornton continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act
2001.
On behalf of the directors
___________________________
John Wilson
Managing Director
30 August 2018
Sydney
18
Level 17, 383 Kent Street
Sydney NSW 2000
Correspondence to:
Locked Bag Q800
QVB Post Office
Sydney NSW 1230
T +61 2 8297 2400
F +61 2 9299 4445
E info.nsw@au.gt.com
W www.grantthornton.com.au
Auditor’s Independence Declaration
To the Directors of TZ Limited
In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of TZ Limited
for the year ended 30 June 2018, I declare that, to the best of my knowledge and belief, there have been:
a
b
no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
Grant Thornton Audit Pty Ltd
Chartered Accountants
M R Leivesley
Partner – Audit & Assurance
Sydney, 30 August 2018
Grant Thornton Audit Pty Ltd ACN 130 913 594
a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389
www.grantthornton.com.au
‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients
and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International
Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are
delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one
another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to
Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to
Grant Thornton Australia Limited.
Liability limited by a scheme approved under Professional Standards Legislation.
19
TZ Limited
Statement of profit or loss and other comprehensive income
For the year ended 30 June 2018
Revenue
Other income
Expenses
Raw materials and consumables used
Employee benefits expense
Occupancy expense
Depreciation and amortisation expense
Impairment of assets
Communications expense
Professional and corporate services
Travel and accommodation expense
Net foreign currency exchange gains/(losses)
Other expenses
Finance costs
Consolidated
Note
2018
$'000
2017
$'000
4
5
6
6
17,399
21,772
167
-
(8,503)
(7,873)
(573)
(1,338)
(7,411)
(155)
(868)
(668)
46
(1,599)
(285)
(11,611)
(9,103)
(644)
(2,218)
(1,320)
(221)
(728)
(809)
(235)
(1,360)
(101)
Loss before income tax (expense)/benefit
(11,661)
(6,578)
Income tax (expense)/benefit
7
(27)
97
Loss after income tax (expense)/benefit for the year attributable to the owners
of TZ Limited
(11,688)
(6,481)
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Foreign currency translation
Other comprehensive income for the year, net of tax
Total comprehensive income for the year attributable to the owners of TZ
Limited
(114)
(114)
(309)
(309)
(11,802)
(6,790)
Cents
Cents
Basic earnings per share
Diluted earnings per share
30
30
(18.45)
(18.45)
(12.86)
(12.86)
The above statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes
20
TZ Limited
Statement of financial position
As at 30 June 2018
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other
Total current assets
Non-current assets
Property, plant and equipment
Intangibles
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Provisions
Total current liabilities
Non-current liabilities
Borrowings
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Accumulated losses
Total equity
Consolidated
Note
2018
$'000
2017
$'000
8
9
10
11
12
13
14
15
16
17
18
1,003
7,977
1,279
365
10,624
382
626
1,008
669
5,860
699
555
7,783
449
7,774
8,223
11,632
16,006
6,133
521
6,654
4,000
4,000
10,654
978
4,296
379
4,675
4,000
4,000
8,675
7,331
210,400
(3,723)
(205,699)
204,951
(3,609)
(194,011)
978
7,331
The above statement of financial position should be read in conjunction with the accompanying notes
21
TZ Limited
Statement of changes in equity
For the year ended 30 June 2018
Consolidated
Balance at 1 July 2016
Issued
capital
$'000
Reserves
$'000
Accumulated
losses
$'000
Total equity
$'000
204,731
(3,300)
(187,530)
13,901
Loss after income tax benefit for the year
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
-
-
-
-
(309)
(6,481)
-
(6,481)
(309)
(309)
(6,481)
(6,790)
Transactions with owners in their capacity as owners:
Contributions of equity, net of transaction costs (note 17)
220
-
-
220
Balance at 30 June 2017
204,951
(3,609)
(194,011)
7,331
Consolidated
Balance at 1 July 2017
Issued
capital
$'000
Reserves
$'000
Accumulated
losses
$'000
Total equity
$'000
204,951
(3,609)
(194,011)
7,331
Loss after income tax expense for the year
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
-
-
-
-
(114)
(11,688)
-
(11,688)
(114)
(114)
(11,688)
(11,802)
Transactions with owners in their capacity as owners:
Contributions of equity, net of transaction costs (note 17)
5,449
-
-
5,449
Balance at 30 June 2018
210,400
(3,723)
(205,699)
978
The above statement of changes in equity should be read in conjunction with the accompanying notes
22
TZ Limited
Statement of cash flows
For the year ended 30 June 2018
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers (inclusive of GST)
Interest received
Other revenue
Interest and other finance costs paid
Income taxes refunded/(paid)
Net cash used in operating activities
Cash flows from investing activities
Payments for property, plant and equipment
Payments for intangibles
Proceeds from disposal of intangibles
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
Transaction costs on shares issued
Proceeds from borrowings
Repayment of borrowings
Net cash from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
Consolidated
Note
2018
$'000
2017
$'000
29
12
13
17
16,218
(19,480)
10
-
(260)
(27)
21,183
(29,013)
11
254
(72)
(5)
(3,539)
(7,642)
(122)
(1,528)
60
(90)
(1,902)
-
(1,590)
(1,992)
5,544
(95)
1,000
(1,000)
222
(2)
4,000
-
5,449
4,220
320
669
14
(5,414)
6,102
(19)
Cash and cash equivalents at the end of the financial year
8
1,003
669
The above statement of cash flows should be read in conjunction with the accompanying notes
23
TZ Limited
Notes to the financial statements
30 June 2018
Note 1. Significant accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies
have been consistently applied to all the years presented, unless otherwise stated.
New or amended Accounting Standards and Interpretations adopted
The consolidated entity has adopted all of the Accounting Standards and Interpretations issued by the Australian
Accounting Standards Board ('AASB') that are mandatory for the current reporting period. The adoption of these
Accounting Standards and Interpretations did not have any significant impact on the financial performance or position of
the consolidated entity.
Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.
Going concern
These financial statements have been prepared on a going concern basis, which assumes continuity of normal business
activities and the realisation of assets and the settlement of liabilities in the ordinary course of business.
While the consolidated entity incurred losses for the financial year ended 30 June 2018, in assessing the appropriateness
of the going concern concept the following factors have been taken into consideration by the Directors:
●
The Directors are of the view the consolidated entity is on track to meet revenue targets for the 30 June 2019 financial
year. It is expected that, as the monthly revenue levels increase, the consolidated entity’s operating business units will
be in a position to contribute positive cash to the bottom line; and
The Directors maintain a positive outlook on achieving profitability and positive cash flows in the 30 June 2019
financial year based on the strength of the sales pipeline.
●
In making their assessment, the Directors acknowledge that the ability of the consolidated entity to continue as a going
concern is dependent on meeting sales and profitability forecasts, the generation of positive cash flows, the continued
support of shareholders and the raising of additional share capital as and when required in the future.
The financial statements have been prepared on the going concern basis for the above reasons. Accordingly, the financial
statements do not include any adjustments relating to the recoverability and classification of recorded assets or to the
amounts and classification of liabilities that might be necessary should the consolidated entity not continue as a going
concern.
Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and
Interpretations issued by the Australian Accounting Standards Board ('AASB') and the Corporations Act 2001, as
appropriate for for-profit oriented entities. These financial statements also comply with International Financial Reporting
Standards as issued by the International Accounting Standards Board ('IASB').
Historical cost convention
The financial statements have been prepared under the historical cost convention, except for derivative financial
instruments at fair value.
Critical accounting estimates
The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the consolidated entity's accounting policies. The areas
involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the
financial statements, are disclosed in note 2.
Parent entity information
In accordance with the Corporations Act 2001, these financial statements present the results of the consolidated entity
only. Supplementary information about the parent entity is disclosed in note 27.
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of TZ Limited ('company' or
'parent entity') as at 30 June 2018 and the results of all subsidiaries for the year then ended. TZ Limited and its
subsidiaries together are referred to in these financial statements as the 'consolidated entity'.
24
TZ Limited
Notes to the financial statements
30 June 2018
Note 1. Significant accounting policies (continued)
Subsidiaries are all those entities over which the consolidated entity has control. The consolidated entity controls an entity
when the consolidated entity is exposed to, or has rights to, variable returns from its involvement with the entity and has
the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated
from the date on which control is transferred to the consolidated entity. They are de-consolidated from the date that control
ceases.
Special purpose entities ('SPEs') are those entities where the consolidated entity, in substance, controls the SPE so as to
obtain the majority of benefits without having any ownership interest.
Intercompany transactions, balances and unrealised gains on transactions between entities in the consolidated entity are
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset
transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the
policies adopted by the consolidated entity.
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest,
without the loss of control, is accounted for as an equity transaction, where the difference between the consideration
transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity
attributable to the parent.
Where the consolidated entity loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and
non-controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The
consolidated entity recognises the fair value of the consideration received and the fair value of any investment retained
together with any gain or loss in profit or loss.
Operating segments
Operating segments are presented using the 'management approach', where the information presented is on the same
basis as the internal reports provided to the Chief Operating Decision Makers ('CODM'). The CODM is responsible for the
allocation of resources to operating segments and assessing their performance.
Foreign currency translation
The financial statements are presented in Australian dollars, which is TZ Limited's functional and presentation currency.
Foreign currency transactions
Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the
translation at financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are
recognised in profit or loss.
Foreign operations
The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at the
reporting date. The revenues and expenses of foreign operations are translated into Australian dollars using the average
exchange rates, which approximate the rates at the dates of the transactions, for the period. All resulting foreign exchange
differences are recognised in other comprehensive income through the foreign currency reserve in equity.
The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is disposed of.
Revenue recognition
Revenue is recognised when it is probable that the economic benefit will flow to the consolidated entity and the revenue
can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable.
Sale of goods
Sale of goods revenue is recognised at the point of sale, which is where the customer has taken delivery of the goods, the
risks and rewards are transferred to the customer and there is a valid sales contract. Amounts disclosed as revenue are
net of sales returns and trade discounts.
Project revenue
Project revenues are recognised by reference to the stage of completion of the contracts.
25
TZ Limited
Notes to the financial statements
30 June 2018
Note 1. Significant accounting policies (continued)
Stage of completion is measured by reference to costs incurred to date as a percentage of costs for each contract. Where
the contract outcome cannot be reliably estimated, revenue is only recognised to the extent of the recoverable costs
incurred to date.
Interest
Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the
amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest
rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset
to the net carrying amount of the financial asset.
Other revenue
Other revenue is recognised when it is received or when the right to receive payment is established.
Income tax
The income tax expense or benefit for the period is the tax payable on that period's taxable income based on the
applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to
temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when
the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted,
except for:
●
When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a
transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting
nor taxable profits; or
When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and
the timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the
foreseeable future.
●
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those temporary differences and losses.
The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred
tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for
the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is
probable that there are future taxable profits available to recover the asset.
Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets
against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable
authority on either the same taxable entity or different taxable entities which intend to settle simultaneously.
Reclassification
Comparative figures in the statement of profit or loss and other comprehensive income and in the statement of financial
position have been reclassified to conform to the current year presentation.
Current and non-current classification
Assets and liabilities are presented in the statement of financial position based on current and non-current classification.
An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the entity's
normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the
reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability
for at least 12 months after the reporting period. All other assets are classified as non-current.
A liability is classified as current when: it is either expected to be settled in the entity's normal operating cycle; it is held
primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no
unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities
are classified as non-current.
Deferred tax assets and liabilities are always classified as non-current.
26
TZ Limited
Notes to the financial statements
30 June 2018
Note 1. Significant accounting policies (continued)
Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly
liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and
which are subject to an insignificant risk of changes in value.
Trade and other receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective
interest method, less any provision for impairment. Trade receivables are generally due for settlement within 30 days.
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable are written
off by reducing the carrying amount directly. A provision for impairment of trade receivables is raised when there is
objective evidence that the consolidated entity will not be able to collect all amounts due according to the original terms of
the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial
reorganisation and default or delinquency in payments (more than 60 days overdue) are considered indicators that the
trade receivable may be impaired. The amount of the impairment allowance is the difference between the asset's carrying
amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows
relating to short-term receivables are not discounted if the effect of discounting is immaterial.
Other receivables are recognised at amortised cost, less any provision for impairment.
Inventories
Finished goods are stated at the lower of cost and net realisable value on a 'first in first out' basis. Cost comprises of
purchase and delivery costs, net of rebates and discounts received or receivable.
Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion
and the estimated costs necessary to make the sale.
Investments and other financial assets
Investments and other financial assets are initially measured at fair value. Transaction costs are included as part of the
initial measurement, except for financial assets at fair value through profit or loss. They are subsequently measured at
either amortised cost or fair value depending on their classification. Classification is determined based on the purpose of
the acquisition and subsequent reclassification to other categories is restricted.
Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have
been transferred and the consolidated entity has transferred substantially all the risks and rewards of ownership.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an
active market. They are carried at amortised cost using the effective interest rate method. Gains and losses are recognised
in profit or loss when the asset is derecognised or impaired.
Impairment of financial assets
The consolidated entity assesses at the end of each reporting period whether there is any objective evidence that a
financial asset or group of financial assets is impaired. Objective evidence includes significant financial difficulty of the
issuer or obligor; a breach of contract such as default or delinquency in payments; the lender granting to a borrower
concessions due to economic or legal reasons that the lender would not otherwise do; it becomes probable that the
borrower will enter bankruptcy or other financial reorganisation; the disappearance of an active market for the financial
asset; or observable data indicating that there is a measurable decrease in estimated future cash flows.
The amount of the impairment allowance for loans and receivables carried at amortised cost is the difference between the
asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest
rate. If there is a reversal of impairment, the reversal cannot exceed the amortised cost that would have been recognised
had the impairment not been made and is reversed to profit or loss.
Property, plant and equipment
Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes
expenditure that is directly attributable to the acquisition of the items.
27
TZ Limited
Notes to the financial statements
30 June 2018
Note 1. Significant accounting policies (continued)
Depreciation is calculated on a straight-line basis to write off the net cost of each item of property, plant and equipment
over their expected useful lives as follows:
Leasehold improvements
Plant and equipment
Office equipment
20 - 33%
20%
15 - 35%
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting
date.
Leasehold improvements and plant and equipment under lease are depreciated over the unexpired period of the lease or
the estimated useful life of the assets, whichever is shorter.
An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to the
consolidated entity.
Leases
Lease payments under operating leases, where substantially all the risks and benefits remain with the lessor, are charged
as expenses in the period in which they are incurred. Lease incentives under operating leases are recognised as a liability
and amortised on a straight-line basis over the life of the lease term.
Where assets are acquired by means of finance leases, the present value of minimum lease payments is established as an
asset at the beginning of the lease term and amortised on a straight line basis over the expected economic life. A
corresponding liability is also established and each lease payment is allocated between such liability and interest expense.
Intangible assets
Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair value
at the date of the acquisition. Intangible assets acquired separately are initially recognised at cost. Indefinite life intangible
assets are not amortised and are subsequently measured at cost less any impairment. Finite life intangible assets are
subsequently measured at cost less amortisation and any impairment. The gains or losses recognised in profit or loss
arising from the derecognition of intangible assets are measured as the difference between net disposal proceeds and the
carrying amount of the intangible asset. The method and useful lives of finite life intangible assets are reviewed annually.
Changes in the expected pattern of consumption or useful life are accounted for prospectively by changing the amortisation
method or period.
Goodwill
Goodwill arises on the acquisition of a business. Goodwill is not amortised. Instead, goodwill is tested annually for
impairment, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at
cost less accumulated impairment losses. Impairment losses on goodwill are taken to profit or loss and are not
subsequently reversed.
Patents
Expenditure directly attributable to the registration of patents is capitalised at cost and is amortised over the useful life of 15
years.
Research and development costs
Research costs are expensed as incurred. Development expenditure incurred on an individual project is capitalised if the
product or service is technically feasible, adequate resources are available to complete the project, it is probable that future
economic benefits will be generated and expenditure attributable to the project can be measured reliably. Expenditure
capitalised comprises costs of materials, services, direct labour and an appropriate portion of overheads.
Capitalised development expenditure is stated at cost less accumulated amortisation and any impairment losses, and are
amortised over the period of expected future sales from the related projects which vary from 3 to 5 years.
28
TZ Limited
Notes to the financial statements
30 June 2018
Note 1. Significant accounting policies (continued)
Impairment of non-financial assets
Goodwill and other intangible assets that have an indefinite useful life are not subject to amortisation and are tested
annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired.
Other non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying
amount exceeds its recoverable amount.
Recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The value-in-use is the
present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or
cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to
form a cash-generating unit.
Trade and other payables
These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the
financial year and which are unpaid. Due to their short-term nature they are measured at amortised cost and are not
discounted. The amounts are unsecured and are usually paid within 30 days of recognition.
Borrowings
Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They
are subsequently measured at amortised cost using the effective interest method.
Where there is an unconditional right to defer settlement of the liability for at least 12 months after the reporting date, the
loans or borrowings are classified as non-current.
Finance costs
Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs are expensed in
the period in which they are incurred.
Employee benefits
Short-term employee benefits
Liabilities for wages and salaries and other employee benefits expected to be settled within 12 months of the reporting date
are measured at the amounts expected to be paid when the liabilities are settled.
Other long-term employee benefits
Employee benefits not expected to be settled within 12 months of the reporting date are measured at the present value of
expected future payments to be made in respect of services provided by employees up to the reporting date using the
projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee
departures and periods of service. Expected future payments are discounted using market yields at the reporting date on
high quality corporate bonds with terms to maturity and currency that match, as closely as possible.
Defined contribution superannuation expense
Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred.
Share-based payments
Equity-settled share-based compensation benefits are provided to employees.
Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for
the rendering of services.
The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently determined
using the Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact
of dilution, the share price at grant date, expected price volatility of the underlying share, the expected dividend yield, the
risk free interest rate for the term of the option, together with non-vesting conditions that do not determine whether the
consolidated entity receives the services that entitle the employees to receive payment. No account is taken of any other
vesting conditions.
29
TZ Limited
Notes to the financial statements
30 June 2018
Note 1. Significant accounting policies (continued)
The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the
vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the
best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The amount
recognised in profit or loss for the period is the cumulative amount calculated at each reporting date less amounts already
recognised in previous periods.
Market conditions are taken into consideration in determining fair value. Therefore, any awards subject to market
conditions are considered to vest irrespective of whether or not that market condition has been met, provided all other
conditions are satisfied.
If equity-settled awards are modified, as a minimum an expense is recognised as if the modification had not been made.
An additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair
value of the share-based compensation benefit as at the date of modification.
If the non-vesting condition is within the control of the consolidated entity or employee, the failure to satisfy the condition is
treated as a cancellation. If the condition is not within the control of the consolidated entity or employee and is not satisfied
during the vesting period, any remaining expense for the award is recognised over the remaining vesting period, unless the
award is forfeited.
If equity-settled awards are cancelled, they are treated as if they had vested on the date of cancellation, and any remaining
expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and
new award are treated as if they were a modification.
Fair value measurement
When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the
fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date; and assumes that the transaction will take place either: in the
principal market; or in the absence of a principal market, in the most advantageous market.
Fair value is measured using the assumptions that market participants would use when pricing the asset or liability,
assuming they act in their economic best interests. For non-financial assets, the fair value measurement is based on its
highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are
available to measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of
unobservable inputs.
Issued capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax,
from the proceeds.
Business combinations
The acquisition method of accounting is used to account for business combinations regardless of whether equity
instruments or other assets are acquired.
The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity instruments
issued or liabilities incurred by the acquirer to former owners of the acquiree and the amount of any non-controlling interest
in the acquiree. For each business combination, the non-controlling interest in the acquiree is measured at either fair value
or at the proportionate share of the acquiree's identifiable net assets. All acquisition costs are expensed as incurred to
profit or loss.
On the acquisition of a business, the consolidated entity assesses the financial assets acquired and liabilities assumed for
appropriate classification and designation in accordance with the contractual terms, economic conditions, the consolidated
entity's operating or accounting policies and other pertinent conditions in existence at the acquisition-date.
Where the business combination is achieved in stages, the consolidated entity remeasures its previously held equity
interest in the acquiree at the acquisition-date fair value and the difference between the fair value and the previous carrying
amount is recognised in profit or loss.
30
TZ Limited
Notes to the financial statements
30 June 2018
Note 1. Significant accounting policies (continued)
Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair value. Subsequent
changes in the fair value of the contingent consideration classified as an asset or liability is recognised in profit or loss.
Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within
equity.
The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any non-controlling
interest in the acquiree and the fair value of the consideration transferred and the fair value of any pre-existing investment
in the acquiree is recognised as goodwill. If the consideration transferred and the pre-existing fair value is less than the fair
value of the identifiable net assets acquired, being a bargain purchase to the acquirer, the difference is recognised as a
gain directly in profit or loss by the acquirer on the acquisition-date, but only after a reassessment of the identification and
measurement of the net assets acquired, the non-controlling interest in the acquiree, if any, the consideration transferred
and the acquirer's previously held equity interest in the acquirer.
Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the
provisional amounts recognised and also recognises additional assets or liabilities during the measurement period, based
on new information obtained about the facts and circumstances that existed at the acquisition-date. The measurement
period ends on either the earlier of (i) 12 months from the date of the acquisition or (ii) when the acquirer receives all the
information possible to determine fair value.
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of TZ Limited, excluding any costs of
servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the
financial year, adjusted for bonus elements in ordinary shares issued during the financial year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account
the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the
weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential
ordinary shares.
Goods and Services Tax ('GST') and other similar taxes
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not
recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part
of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST
recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of
financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing
activities which are recoverable from, or payable to the tax authority, are presented as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority.
Rounding of amounts
The company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191,
issued by the Australian Securities and Investments Commission, relating to 'rounding-off'. Amounts in this report have
been rounded off in accordance with that Corporations Instrument to the nearest thousand dollars, or in certain cases, the
nearest dollar.
New Accounting Standards and Interpretations not yet mandatory or early adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet
mandatory, have not been early adopted by the consolidated entity for the annual reporting period ended 30 June 2018.
The consolidated entity's assessment of the impact of these new or amended Accounting Standards and Interpretations,
most relevant to the consolidated entity, are set out below.
31
TZ Limited
Notes to the financial statements
30 June 2018
Note 1. Significant accounting policies (continued)
AASB 9 Financial Instruments
This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard replaces all
previous versions of AASB 9 and completes the project to replace IAS 39 'Financial Instruments: Recognition and
Measurement'. AASB 9 introduces new classification and measurement models for financial assets. A financial asset shall
be measured at amortised cost, if it is held within a business model whose objective is to hold assets in order to collect
contractual cash flows, which arise on specified dates and solely principal and interest. All other financial instrument assets
are to be classified and measured at fair value through profit or loss unless the entity makes an irrevocable election on
initial recognition to present gains and losses on equity instruments (that are not held-for-trading) in other comprehensive
income ('OCI'). For financial liabilities, the standard requires the portion of the change in fair value that relates to the
entity's own credit risk to be presented in OCI (unless it would create an accounting mismatch). New simpler hedge
accounting requirements are intended to more closely align the accounting treatment with the risk management activities of
the entity. New impairment requirements will use an 'expected credit loss' ('ECL') model to recognise an allowance.
Impairment will be measured under a 12-month ECL method unless the credit risk on a financial instrument has increased
significantly since initial recognition in which case the lifetime ECL method is adopted. The standard introduces additional
new disclosures. The consolidated entity will adopt this standard from 1 July 2018. It is not expected to significantly impact
the financial statements on the basis that the main financial assets recognised represent cash and cash equivalent and
trade receivables that do not carry a significant financing component and involve a single cash flow representing the
repayment of principal, which in the case of trade receivables is the transaction price. Both asset classes will continue to
be measured at face value. Other financial asset classes are not material to the consolidated entity. Financial liabilities of
the consolidated entity are not impacted as the consolidated entity does not carry them at fair value.
AASB 15 Revenue from Contracts with Customers
This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard provides a
single standard for revenue recognition. The core principle of the standard is that an entity will recognise revenue to depict
the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services. The standard will require: contracts (either written, verbal or
implied) to be identified, together with the separate performance obligations within the contract; determine the transaction
price, adjusted for the time value of money excluding credit risk; allocation of the transaction price to the separate
performance obligations on a basis of relative stand-alone selling price of each distinct good or service, or estimation
approach if no distinct observable prices exist; and recognition of revenue when each performance obligation is satisfied.
Credit risk will be presented separately as an expense rather than adjusted to revenue. For goods, the performance
obligation would be satisfied when the customer obtains control of the goods. For services, the performance obligation is
satisfied when the service has been provided, typically for promises to transfer services to customers. For performance
obligations satisfied over time, an entity would select an appropriate measure of progress to determine how much revenue
should be recognised as the performance obligation is satisfied. Contracts with customers will be presented in an entity's
statement of financial position as a contract liability, a contract asset, or a receivable, depending on the relationship
between the entity's performance and the customer's payment. Sufficient quantitative and qualitative disclosure is required
to enable users to understand the contracts with customers; the significant judgements made in applying the guidance to
those contracts; and any assets recognised from the costs to obtain or fulfil a contract with a customer. The consolidated
entity will adopt this standard from 1 July 2018, resulting in an expected decrease in accrued revenue of $314,000, an
increase in work in progress of $142,000 and an overall decrease in net assets of $172,000.
32
TZ Limited
Notes to the financial statements
30 June 2018
Note 1. Significant accounting policies (continued)
AASB 16 Leases
This standard is applicable to annual reporting periods beginning on or after 1 January 2019. The standard replaces AASB
117 'Leases' and for lessees will eliminate the classifications of operating leases and finance leases. Subject to exceptions,
a 'right-of-use' asset will be capitalised in the statement of financial position, measured as the present value of the
unavoidable future lease payments to be made over the lease term. The exceptions relate to short-term leases of 12
months or less and leases of low-value assets (such as personal computers and small office furniture) where an
accounting policy choice exists whereby either a 'right-of-use' asset is recognised or lease payments are expensed to profit
or loss as incurred. A liability corresponding to the capitalised lease will also be recognised, adjusted for lease
prepayments, lease incentives received, initial direct costs incurred and an estimate of any future restoration, removal or
dismantling costs. Straight-line operating lease expense recognition will be replaced with a depreciation charge for the
leased asset (included in operating costs) and an interest expense on the recognised lease liability (included in finance
costs). In the earlier periods of the lease, the expenses associated with the lease under AASB 16 will be higher when
compared to lease expenses under AASB 117. However EBITDA (Earnings Before Interest, Tax, Depreciation and
Amortisation) results will be improved as the operating expense is replaced by interest expense and depreciation in profit
or loss under AASB 16. For classification within the statement of cash flows, the lease payments will be separated into
both a principal (financing activities) and interest (either operating or financing activities) component. For lessor accounting,
the standard does not substantially change how a lessor accounts for leases. The consolidated entity will adopt this
standard from 1 July 2019 but the impact of its adoption is yet to be assessed by the consolidated entity.
IASB revised Conceptual Framework for Financial Reporting
The revised Conceptual Framework has been issued by the International Accounting Standards Board ('IASB'), but the
Australian equivalent has yet to be published. The revised framework is applicable for annual reporting periods beginning
on or after 1 January 2020 and the application of the new definition and recognition criteria may result in future
amendments to several accounting standards. Furthermore, entities who rely on the conceptual framework in determining
their accounting policies for transactions, events or conditions that are not otherwise dealt with under Australian Accounting
Standards may need to revisit such policies. The consolidated entity will apply the revised conceptual framework from 1
July 2020 and is yet to assess its impact.
Note 2. Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and assumptions that
affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in
relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates
and assumptions on historical experience and on other various factors, including expectations of future events,
management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will
seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of causing
a material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next
financial year are discussed below.
Capitalised development costs
Distinguishing the research and development phases of a new project and determining whether the recognition
requirements for the capitalisation of development costs are met requires judgement. After capitalisation, management
monitors whether the recognition requirements continue to be met and whether there are any indicators that capitalised
costs may be impaired.
Goodwill and other indefinite life intangible assets
The consolidated entity tests annually, or more frequently if events or changes in circumstances indicate impairment,
whether goodwill and other indefinite life intangible assets have suffered any impairment, in accordance with the
accounting policy stated in note 1. The recoverable amounts of cash-generating units have been determined based on
value-in-use calculations. These calculations require the use of assumptions, including estimated discount rates based on
the current cost of capital and growth rates of the estimated future cash flows.
Impairment of non-financial assets other than goodwill and other indefinite life intangible assets
The consolidated entity assesses impairment of non-financial assets other than goodwill and other indefinite life intangible
assets at each reporting date by evaluating conditions specific to the consolidated entity and to the particular asset that
may lead to impairment. If an impairment trigger exists, the recoverable amount of the asset is determined. This involves
fair value less costs of disposal or value-in-use calculations, which incorporate a number of key estimates and
assumptions.
33
TZ Limited
Notes to the financial statements
30 June 2018
Note 2. Critical accounting judgements, estimates and assumptions (continued)
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary differences only if the consolidated entity considers it is
probable that future taxable amounts will be available to utilise those temporary differences and losses.
Note 3. Operating segments
Identification of reportable operating segments
The consolidated entity operates in one segment being the development and commercialisation of hardware and software
products primarily in the US, Australian and Asian markets. This is based on the internal reports that are reviewed and
used by the Board of Directors (being the Chief Operating Decision Makers ('CODM')) in assessing performance and in
determining the allocation of resources.
The information reported to the CODM, on at least a monthly basis, is profit or loss and adjusted earnings before interest,
tax, depreciation and amortisation and other one off-items ('Adjusted EBITDA').
Intersegment transactions
Transactions between segments are carried out at arm’s length and are eliminated on consolidation.
Major customers
During the year ended 30 June 2018 3 customers (2017: 4 customers) each contributed more than 10% to the external
revenue of the consolidated entity. These 3 customers contributed 46% (2017: 4 customers contributed 56%) of the
consolidated entity's external revenue.
Geographical information
Australia
United States of America
United Kingdom
Singapore
Malaysia
Italy
South Africa
Other
Sales to external customers
Geographical non-current
assets
2018
$'000
2017
$'000
2018
$'000
2017
$'000
3,127
10,312
364
769
130
130
2,557
-
5,271
13,427
158
933
1,701
-
-
17
354
651
2
1
-
-
-
-
17,389
21,507
1,008
546
7,672
-
5
-
-
-
-
8,223
The geographical non-current assets above are exclusive of, where applicable, financial instruments, deferred tax assets,
post-employment benefits assets and rights under insurance contracts.
34
TZ Limited
Notes to the financial statements
30 June 2018
Note 3. Operating segments (continued)
A reconciliation of the loss after income tax expense to adjusted EBITDA is as follows:
Loss after income tax expense
Less: Interest income
Add: Interest expense
Add: Depreciation and amortisation
Add: Impairment of assets
Add/(less): Income tax expense/(benefit)
Adjusted EBITDA
Note 4. Revenue
Sales revenue
Sale and service revenue
Other revenue
Interest
Royalty
Other revenue
Revenue
Note 5. Other income
Government grants
Consolidated
2018
$'000
2017
$'000
(11,688)
(10)
285
1,338
7,411
27
(6,481)
(11)
101
2,218
1,320
(97)
(2,637)
(2,950)
Consolidated
2018
$'000
2017
$'000
17,389
21,507
10
-
-
10
11
54
200
265
17,399
21,772
Consolidated
2018
$'000
2017
$'000
167
-
35
TZ Limited
Notes to the financial statements
30 June 2018
Note 6. Expenses
Loss before income tax includes the following specific expenses:
Depreciation (note 12)
Leasehold improvements
Plant and equipment
Office equipment
Total depreciation
Amortisation (note 13)
Re-acquired right (Intevia Licence)
Patents
Development costs
Other intangible assets
Total amortisation
Total depreciation and amortisation
Impairment
Goodwill
Re-acquired right (Intevia Licence)
Patents
Development costs
Other intangible assets
Total impairment
Minimum lease payments
Defined contribution superannuation expense
Note 7. Income tax expense/(benefit)
Income tax expense/(benefit)
Current tax
Deferred tax - origination and reversal of temporary differences
Aggregate income tax expense/(benefit)
Numerical reconciliation of income tax expense/(benefit) and tax at the statutory rate
Loss before income tax (expense)/benefit
Tax at the statutory tax rate of 27.5% (2017: 30%)
Current year tax losses not recognised
Difference in overseas tax rates/refunds
Income tax expense/(benefit)
36
Consolidated
2018
$'000
2017
$'000
5
90
74
169
418
97
654
-
1,169
1,338
85
1,739
1,786
3,801
-
5
95
80
180
860
179
949
50
2,038
2,218
-
363
-
700
257
7,411
1,320
515
460
599
472
Consolidated
2018
$'000
2017
$'000
27
-
27
5
(102)
(97)
(11,661)
(6,578)
(3,207)
(1,973)
2,648
586
27
1,700
176
(97)
TZ Limited
Notes to the financial statements
30 June 2018
Note 7. Income tax expense/(benefit) (continued)
The consolidated entity is in the process of determining its tax loss position to carry forward.
Note 8. Current assets - cash and cash equivalents
Cash and cash equivalents
Note 9. Current assets - trade and other receivables
Trade receivables
Less: Provision for impairment of receivables
Other receivables
Accrued revenue
Work in progress
Impairment of receivables
The ageing of the impaired receivables provided for above are as follows:
Past due 60 - 90 days
Past due 90 days +
Movements in the provision for impairment of receivables are as follows:
Opening balance
Additional provisions recognised
Receivables written off during the year as uncollectable
Closing balance
Consolidated
2018
$'000
2017
$'000
1,003
669
Consolidated
2018
$'000
2017
$'000
4,396
(43)
4,353
170
3,309
145
7,977
4,021
(72)
3,949
103
1,808
-
5,860
Consolidated
2018
$'000
2017
$'000
43
-
43
Consolidated
2018
$'000
2017
$'000
72
47
(76)
43
-
72
72
-
72
-
72
Past due but not impaired
Customers with balances past due but without provision for impairment of receivables amount to $2,033,000 as at 30 June
2018 ($1,749,000 as at 30 June 2017).
The consolidated entity did not consider a credit risk on the aggregate balances after reviewing the credit terms of
customers based on recent collection practices.
37
TZ Limited
Notes to the financial statements
30 June 2018
Note 9. Current assets - trade and other receivables (continued)
The ageing of the past due but not impaired receivables are as follows:
Past due 0 - 30 days
Past due 30 - 60 days
Past due 60 - 90 days
Past due over 90 days
Note 10. Current assets - inventories
Finished goods - at cost
Note 11. Current assets - other
Prepayments
Security deposits
Other deposits
Note 12. Non-current assets - property, plant and equipment
Leasehold improvements - at cost
Less: Accumulated depreciation
Plant and equipment - at cost
Less: Accumulated depreciation
Office equipment - at cost
Less: Accumulated depreciation
38
Consolidated
2018
$'000
2017
$'000
1,403
486
92
52
2,033
732
661
200
156
1,749
Consolidated
2018
$'000
2017
$'000
1,279
699
Consolidated
2018
$'000
2017
$'000
202
63
100
365
407
63
85
555
Consolidated
2018
$'000
2017
$'000
418
(416)
2
1,939
(1,654)
285
755
(660)
95
382
418
(411)
7
1,824
(1,564)
260
768
(586)
182
449
TZ Limited
Notes to the financial statements
30 June 2018
Note 12. Non-current assets - property, plant and equipment (continued)
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below:
Consolidated
Balance at 1 July 2016
Additions
Exchange differences
Write off of assets
Depreciation expense
Balance at 30 June 2017
Additions
Disposals
Exchange differences
Write off of assets
Depreciation expense
Balance at 30 June 2018
Leasehold
improvements
$'000
Plant and
equipment
$'000
Office
equipment
$'000
Total
$'000
15
2
-
(5)
(5)
7
-
-
-
-
(5)
2
330
25
-
-
(95)
260
117
(2)
-
-
(90)
285
204
63
(2)
(3)
(80)
182
5
(19)
2
(1)
(74)
95
549
90
(2)
(8)
(180)
449
122
(21)
2
(1)
(169)
382
39
TZ Limited
Notes to the financial statements
30 June 2018
Note 13. Non-current assets - intangibles
Goodwill - at cost
Less: Impairment
Trade names - at cost
Less: Accumulated amortisation
Re-acquired right (Intevia Licence) - at cost
Less: Accumulated amortisation
Less: Impairment
Patents - at cost
Less: Accumulated amortisation
Less: Impairment
Developments costs - at cost
Less: Accumulated amortisation
Less: Impairment
Other intangibles - at cost
Less: Accumulated amortisation
Less: Impairment
Consolidated
2018
$'000
2017
$'000
4,095
(4,095)
-
13
(13)
-
10,138
(8,036)
(2,102)
-
2,573
(750)
(1,786)
37
8,839
(3,749)
(4,501)
589
483
(226)
(257)
-
4,155
(4,010)
145
13
(13)
-
10,157
(7,618)
(363)
2,176
2,518
(653)
-
1,865
7,383
(3,095)
(700)
3,588
483
(226)
(257)
-
626
7,774
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below:
Consolidated
Balance at 1 July 2016
Additions
Exchange differences
Impairment of assets
Amortisation expense
Balance at 30 June 2017
Additions
Disposals
Exchange differences
Impairment of assets
Amortisation expense
Balance at 30 June 2018
Goodwill
$'000
Re-acquired
right
$'000
Patents
$'000
Development
costs
$'000
Other
intangibles
$'000
Total
$'000
2,004
103
(63)
-
(179)
1,865
68
-
(13)
(1,786)
(97)
3,565
1,799
(127)
(700)
(949)
3,588
1,460
-
(4)
(3,801)
(654)
37
589
307
-
-
(257)
(50)
-
-
-
-
-
-
-
9,503
1,902
(273)
(1,320)
(2,038)
7,774
1,528
(60)
(36)
(7,411)
(1,169)
626
145
-
-
-
-
145
-
(60)
-
(85)
-
-
3,482
-
(83)
(363)
(860)
2,176
-
-
(19)
(1,739)
(418)
-
40
TZ Limited
Notes to the financial statements
30 June 2018
Note 13. Non-current assets - intangibles (continued)
Impairment testing of goodwill
Goodwill is allocated to the following CGU:
Infinity Design Pty Limited
Consolidated
2018
$'000
2017
$'000
-
145
Impairment of goodwill
As a consequence of the sale of the Infinity Design business during the financial year ended 30 June 2018, the $85,133 of
goodwill remaining within the Infinity Design CGU after the disposal was written off.
For the purpose of impairment testing of re-acquired rights and other intangibles the following CGUs are determined to be
those that benefit from the core patented technology and product development costs. The net carrying values of intangible
assets (excluding goodwill) allocated to those CGUs is as follows:
Infrastructure Protection - IXP
Package Asset Delivery - PAD
Consolidated
2018
$'000
2017
$'000
-
626
626
244
7,385
7,629
The recoverable amounts of the CGU's were determined based on value-in-use calculations covering a detailed five year
forecast and followed by an extrapolation of expected cash flows using the growth rates noted below. Management
consider the CGU's operate in the global markets for IXP and PAD products. The growth rates reflect conservative
estimates for each CGU noting current contracts and expansion of the same and general market growth over the forecast
period.
The key assumptions used are as follows:
IXP
Revenue growth (average) 17% (2017: 14%)
Margins (average) 48% (2017: 48.1%)
Discount rate 14% (2017: 12.6%)
PAD
Revenue growth (average) 14% (2017: 14.8%)
Margins (average) 53% (2017: 46.5%)
Discount rate 14% (2017: 12.6%)
Impairment test results - IXP CGU
Based on the testing performed an impairment of $425,000 (2017: $1,320,000) was recognized for internally developed
hardware & software and re-acquired rights that support the IXP CGU. The recoverable amount for the IXP CGU was
determined on a value-in-use basis. The directors considered the requirements of AASB 136 “Impairment of Assets” and
the irregular nature of project-based IXP revenues and have assessed that the carrying value exceeded the recoverable
amount. The impairment charge represents the excess carrying value of the IXP assets at 31 December 2017, the date at
which the respective assets were fully impaired. The company continues to invest in the ongoing development of the IXP
product, however, the associated costs are not being capitalised as they are not assessed to meet the conditions of AASB
138 Intangible Assets.
41
TZ Limited
Notes to the financial statements
30 June 2018
Note 13. Non-current assets - intangibles (continued)
Impairment test results - PAD CGU
Based on the testing performed an impairment of $6,901,000 (2017: $nil) was recognized for internally developed
hardware & software and reacquired rights that support the PAD CGU. The recoverable amount for the PAD CGU was
determined on a value-in-use basis. The directors considered the requirements of AASB 136 “Impairment of Assets” and
the irregular nature of project-based PAD revenues and assessed that the carrying value exceeded the recoverable
amount. The impairment charge represents the excess carrying value of the PAD assets at 31 December 2017, the date at
which the respective assets were fully impaired. The net carrying value of the PAD CGU at 30 June 2018, represents all
expenditure capitalised from 1 January 2018 to 30 June 2018.
Impairment test sensitivity
A reasonable possible change in the key assumptions above would not cause the remaining carrying value of the CGU to
exceed its recoverable amount.
Note 14. Current liabilities - trade and other payables
Trade payables
Employee expense payables
Customer deposits
Unearned income
Goods and services tax payable
Other payables
Refer to note 20 for further information on financial instruments.
Note 15. Current liabilities - provisions
Employee benefits
Note 16. Non-current liabilities - borrowings
Loan - First Samuel
Refer to note 20 for further information on financial instruments.
Consolidated
2018
$'000
2017
$'000
3,649
306
207
635
-
1,336
6,133
2,517
219
158
390
31
981
4,296
Consolidated
2018
$'000
2017
$'000
521
379
Consolidated
2018
$'000
2017
$'000
4,000
4,000
On 18 November 2016, the consolidated entity entered into a debenture deed with First Samuel Limited which provides the
consolidated entity with a secured loan facility of up to $3,000,000. On 5 May 2017, the consolidated entity entered into a
second debenture deed with First Samuel Limited which provides the consolidated entity with a secured loan facility of up
to $2,000,000. As at 30 June 2018, the consolidated entity has drawn down $4,000,000 of the $5,000,000 facility. The
remaining facility may be drawn down at any time during the term of the loan.
42
TZ Limited
Notes to the financial statements
30 June 2018
Note 16. Non-current liabilities - borrowings (continued)
First debenture deed
The interest rate applicable to the facility is 90 day BBSW plus 4% per annum, payable 6 monthly in arrears. The term of
the facility is 24 months with an option to extend for an additional 12 month. This option has been exercised and the
interest rate will increase to 90 day BBSW plus 6% per annum for the additional 12 month term.
Second debenture deed
The interest rate applicable to the facility is 90 day BBSW plus 9% per annum, payable 6 monthly in arrears. The term of
the facility is 36 months. The consolidated entity may repay part or all of the funds loans loaned before the end of the term
without penalty.
The loan is secured over the assets of the consolidated entity.
Financing arrangements
Unrestricted access was available at the reporting date to the following lines of credit:
Total facilities
Loan - First Samuel
Used at the reporting date
Loan - First Samuel
Unused at the reporting date
Loan - First Samuel
Consolidated
2018
$'000
2017
$'000
5,000
5,000
4,000
4,000
1,000
1,000
On 8 August 2018, the consolidated entity increased the facility with First Samuel Limited by an additional $2,000,000,
increasing the total facility to $7,000,000. The increase comprises two revolving tranches of $1,000,000 which can be
repaid and redrawn if repayments are made before the end of the term. In total, $3,000,000 of the Loan Facility may be
redrawn if repayments are made before the end of the term.
The interest rate applicable to the additional facility is 90 day BBSW plus 9% per annum, payable 6 monthly in arrears.
Under the revised facility, $3,000,000 of the total loan Facility matures on 13 December 2019 and $4,000,000 matures on 5
May 2020. The facilities are secured by first ranking security interest over the assets of the consolidated entity.
Note 17. Equity - issued capital
Ordinary shares - fully paid
70,558,162 503,983,352
210,400
204,951
Consolidated
2018
Shares
2017
Shares
2018
$'000
2017
$'000
43
TZ Limited
Notes to the financial statements
30 June 2018
Note 17. Equity - issued capital (continued)
Movements in ordinary share capital
Details
Date
Shares
Issue price
$'000
Balance
Issue of shares
Less: share issue costs
Balance
Rights issue
Share consolidation (10 for 1)
Shares issued for rounding purposes
Less: share issue costs
1 July 2016
18 July 2016
30 June 2017
8 November 2017
14 December 2017
14 December 2017
501,965,203
2,018,149
-
503,983,352
201,593,707
(635,019,353)
456
-
$0.11
$0.00
$0.03
$0.00
$0.00
$0.00
Balance
30 June 2018
70,558,162
204,731
222
(2)
204,951
5,544
-
-
(95)
210,400
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the company in
proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the
company does not have a limited amount of authorised capital.
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each
share shall have one vote.
Share buy-back
There is no current on-market share buy-back.
Unquoted options
At 30 June 2018 there were 1,000,000 (2017: 16,750,000) options on issue. Each option entitles the holder to subscribe for
one fully paid share in the company at the exercise price per share at any time from the date of issue until expiry of the
options subject to various vesting dates.
Capital risk management
The consolidated entity's objectives when managing capital are to safeguard its ability to continue as a going concern, so
that it can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure
to reduce the cost of capital.
In order to maintain or adjust the capital structure, the consolidated entity may adjust the amount of dividends paid to
shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
The consolidated entity would look to raise capital when an opportunity to invest in a business or company or invest in
growth was seen as value adding.
The capital risk management policy remains unchanged from the 30 June 2017 Annual Report.
Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt is calculated
as total borrowings less cash and cash equivalents.
Note 18. Equity - reserves
Foreign currency reserve
Consolidated
2018
$'000
2017
$'000
(3,723)
(3,609)
44
TZ Limited
Notes to the financial statements
30 June 2018
Note 18. Equity - reserves (continued)
Foreign currency reserve
The reserve is used to recognise exchange differences arising from the translation of the financial statements of foreign
operations to Australian dollars. It is also used to recognise gains and losses on hedges of the net investments in foreign
operations.
Movements in reserves
Movements in each class of reserve during the current and previous financial year are set out below:
Consolidated
Balance at 1 July 2016
Foreign currency translation
Balance at 30 June 2017
Foreign currency translation
Balance at 30 June 2018
Note 19. Equity - dividends
Foreign
currency
$'000
Total
$'000
(3,300)
(309)
(3,609)
(114)
(3,300)
(309)
(3,609)
(114)
(3,723)
(3,723)
There were no dividends paid, recommended or declared during the current or previous financial year.
Note 20. Financial instruments
Financial risk management objectives
The consolidated entity's activities expose it to a variety of financial risks: market risk (including foreign currency risk, price
risk and interest rate risk), credit risk and liquidity risk. The consolidated entity's overall risk management program focuses
on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of
the consolidated entity. The consolidated entity uses different methods to measure different types of risk to which it is
exposed. These methods include sensitivity analysis in the case of interest rate, foreign exchange and ageing analysis for
credit risk.
Risk management is carried out by senior finance executives ('finance') under policies approved by the Board of Directors
('the Board'). These policies include identification and analysis of the risk exposure of the consolidated entity and
appropriate procedures, controls and risk limits. Finance identifies, evaluates and hedges financial risks within the
consolidated entity's operating units. Finance reports to the Board on a monthly basis.
Market risk
Foreign currency risk
The consolidated entity undertakes certain transactions denominated in foreign currency and is exposed to foreign
currency risk through foreign exchange rate fluctuations.
Foreign exchange risk arises from future commercial transactions and recognised financial assets and financial liabilities
denominated in a currency that is not the entity's functional currency. The risk is measured using sensitivity analysis and
cash flow forecasting.
The consolidated entity's foreign exchange risk is managed to ensure sufficient funds are available to meet foreign
currency commitments in a timely and cost-effective manner. The consolidated entity will continually monitor this risk and
consider entering into forward foreign exchange, foreign currency swap and foreign currency option contracts if
appropriate.
Creditors and debtors as at 30 June 2018 were reviewed to assess currency risk at year end. The value of transactions
denominated in a currency other than the functional currency of the respective subsidiary was insignificant and therefore
the risk was determined as immaterial.
45
TZ Limited
Notes to the financial statements
30 June 2018
Note 20. Financial instruments (continued)
Price risk
The consolidated entity is not exposed to any significant price risk.
Interest rate risk
The consolidated entity's main interest rate risk arises from long-term borrowings. Borrowings issued at variable rates
expose the consolidated entity to interest rate risk. Borrowings issued at fixed rates expose the consolidated entity to fair
value interest rate risk.
The consolidated entity invests surplus cash in term deposits with fixed returns. The Board makes investment decisions
after considering advice received from professional advisors.
The consolidated entity monitors its interest rate exposure continuously.
As at the reporting date, the consolidated entity had the following variable rate exposures:
Consolidated
Cash and cash equivalents
Loan - First Samuel
Net exposure to cash flow interest rate risk
2018
2017
Weighted
average
interest rate
%
Weighted
average
interest rate
%
Balance
$'000
Balance
$'000
0.10%
7.30%
0.10%
6.90%
1,003
(4,000)
(2,997)
669
(4,000)
(3,331)
An analysis by remaining contractual maturities is shown in 'liquidity and interest rate risk management' below.
The consolidated entity has a net cash deficit totalling $2,997,000 (2017: net cash deficit $3,331,000). An official
increase/decrease in interest rates of one (2017: one) percentage point would have an adverse/favourable effect on profit
before tax of $30,000 (2017: adverse/favourable $33,000) per annum. The percentage change is based on the expected
volatility of interest rates using market data and analysts' forecasts.
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the
consolidated entity. The consolidated entity has a strict code of credit, including obtaining agency credit information,
confirming references and setting appropriate credit limits. The consolidated entity obtains guarantees where appropriate
to mitigate credit risk. The maximum exposure to credit risk at the reporting date to recognised financial assets is the
carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement of financial position
and notes to the financial statements. The consolidated entity does not hold any collateral.
The consolidated entity has a concentration of credit risk exposure with 3 customers, which as at 30 June 2018 owed the
consolidated entity $1,718,000 (2017: $3,468,000) representing 39.5% ( 2017: 88%) of trade receivables. Of this balance,
$187,000 (2017: $720,000) was outside the customers' respective terms of trade, however management is confident of
collection and no impairment was made as at 30 June 2018. There are no guarantees against these receivables but
management closely monitors the receivable balance on a monthly basis and is in regular contact with this customer to
mitigate risk.
There is a concentration of credit risk for cash at bank and cash on deposit as most monies in Australia are held with one
financial institution, St George Bank.
Liquidity risk
Vigilant liquidity risk management requires the consolidated entity to maintain sufficient liquid assets (mainly cash and cash
equivalents) and available borrowing facilities to be able to pay debts as and when they become due and payable.
The consolidated entity manages liquidity risk by maintaining adequate cash reserves and available borrowing facilities by
continuously monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and liabilities.
46
TZ Limited
Notes to the financial statements
30 June 2018
Note 20. Financial instruments (continued)
Financing arrangements
Unused borrowing facilities at the reporting date:
Loan - First Samuel
Consolidated
2018
$'000
2017
$'000
1,000
1,000
Remaining contractual maturities
The following tables detail the consolidated entity's remaining contractual maturity for its financial instrument liabilities. The
tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which
the financial liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as
remaining contractual maturities and therefore these totals may differ from their carrying amount in the statement of
financial position.
Consolidated - 2018
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Interest-bearing - variable
Loan - First Samuel
Total non-derivatives
Consolidated - 2017
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Interest-bearing - variable
Loan - First Samuel
Total non-derivatives
Weighted
average
interest rate
%
1 year or less
$'000
Between 1
and 2 years
$'000
Between 2
and 5 years
$'000
Over 5 years
$'000
Remaining
contractual
maturities
$'000
-
-
7.30%
3,649
1,336
292
5,277
-
-
4,175
4,175
-
-
-
-
-
-
-
-
3,649
1,336
4,467
9,452
Weighted
average
interest rate
%
1 year or less
$'000
Between 1
and 2 years
$'000
Between 2
and 5 years
$'000
Over 5 years
$'000
Remaining
contractual
maturities
$'000
-
-
6.90%
2,517
1,021
281
3,819
-
-
-
-
3,186
3,186
1,090
1,090
-
-
-
-
2,517
1,021
4,557
8,095
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed
above.
Note 21. Fair value measurement
Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value. The carrying amounts of
trade receivables and trade payables are assumed to approximate their fair values due to their short-term nature. The fair
value of financial liabilities is estimated by discounting the remaining contractual maturities at the current market interest
rate that is available for similar financial instruments.
47
TZ Limited
Notes to the financial statements
30 June 2018
Note 22. Key management personnel disclosures
Compensation
The aggregate compensation made to directors and other members of key management personnel of the consolidated
entity is set out below:
Short-term employee benefits
Post-employment benefits
Note 23. Remuneration of auditors
Consolidated
2018
$
2017
$
1,361,214
73,027
1,491,492
43,343
1,434,241
1,534,835
During the financial year the following fees were paid or payable for services provided by Grant Thornton, the auditor of the
company, and its network firms:
Audit services - Grant Thornton
Audit or review of the financial statements
Other services - Grant Thornton
Independent tax advice and tax compliance
Audit services - network firms
Audit or review of the financial statements
Note 24. Contingent liabilities
Consolidated
2018
$
2017
$
180,000
167,500
76,300
5,000
256,300
172,500
11,883
8,000
The consolidated entity does not have any contingent liabilities at 30 June 2018 and 30 June 2017.
Note 25. Commitments
Lease commitments - operating
Committed at the reporting date but not recognised as liabilities, payable:
Within one year
One to five years
Consolidated
2018
$'000
2017
$'000
326
191
517
359
328
687
The consolidated entity leases various premises under non-cancellable operating leases expiring between 1 and 5 years.
All leases have annual CPI escalation clauses. The above commitments do not include commitments for any renewal
options on leases. Lease conditions do not impose any restrictions on the ability of TZ Limited and its subsidiaries from
borrowing further funds or paying dividends.
48
TZ Limited
Notes to the financial statements
30 June 2018
Note 26. Related party transactions
Parent entity
TZ Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 28.
Key management personnel
Disclosures relating to key management personnel are set out in note 22 and the remuneration report included in the
directors' report.
Transactions with related parties
The following transactions occurred with related parties:
Payment for other expenses:
Rent and serviced office expenditure paid to YBR Services Pty Limited, a director related
entity in which Mark Bouris is a director.
Broker fees for insurance policies arranged by Yellow Brick Road Wealth Management Pty
Limited (formerly YBR General Insurance Brokers Pty Limited), a director related entity in
which Mark Bouris is a director.
Administration fees and storage costs paid to YBR Services Pty Limited, a director related
entity in which Mark Bouris is a director.
Interest paid/(payable) to First Samuel Limited - an entity with significant influence
Consolidated
2018
$
2017
$
171,960
171,960
13,436
12,645
12,989
275,054
56,096
110,341
Receivable from and payable to related parties
The following balances are outstanding at the reporting date in relation to transactions with related parties:
Current payables:
Rent, serviced office expenditure and remaining rental bond payable to YBR Services Pty
Limited, a director related entity in which Mark Bouris is a director.
Administration fees and storage costs payable to YBR Services Pty Limited, a director
related entity in which Mark Bouris is a director.
Interest payable to First Samuel Limited - an entity with significant influence
Consolidated
2018
$
2017
$
47,289
31,526
-
25,092
10,284
27,090
Loans to/from related parties
The following balances are outstanding at the reporting date in relation to loans with related parties:
Non-current borrowings:
Loan from First Samuel Limited - an entity with significant influence
Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates.
Consolidated
2018
$
2017
$
4,000,000
4,000,000
49
TZ Limited
Notes to the financial statements
30 June 2018
Note 27. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Loss after income tax
Total comprehensive income
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Accumulated losses
Total equity
Parent
2018
$'000
2017
$'000
(11,217)
(7,109)
(11,217)
(7,109)
Parent
2018
$'000
2017
$'000
8,955
10,427
8,955
14,844
3,950
7,950
4,068
8,068
210,397
(209,392)
204,951
(198,175)
1,005
6,776
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
The parent entity had no guarantees in relation to the debts of its subsidiaries as at 30 June 2018 and 30 June 2017.
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2018 and 30 June 2017.
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment at as 30 June 2018 and 30 June 2017.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the consolidated entity, as disclosed in note 1,
except for the following:
●
●
Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
Dividends received from subsidiaries are recognised as other income by the parent entity and its receipt may be an
indicator of an impairment of the investment.
50
TZ Limited
Notes to the financial statements
30 June 2018
Note 28. Interests in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in
accordance with the accounting policy described in note 1:
Name
Telezygology, Inc.
PDT Holdings, Inc.
Product Development Technologies, Inc.
PDT Tooling, Inc.
TZI Australia Pty Limited
A.C.N. 156 637 704 Pty Ltd
TZI Singapore Pte Ltd
TZI UK Limited
Note 29. Cash flow information
Principal place of business /
Country of incorporation
United States of America
United States of America
United States of America
United States of America
Australia
Australia
Singapore
United Kingdom
Reconciliation of loss after income tax to net cash used in operating activities
Ownership interest
2017
2018
%
%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
-
Consolidated
2018
$'000
2017
$'000
Loss after income tax (expense)/benefit for the year
(11,688)
(6,481)
Adjustments for:
Depreciation and amortisation
Impairment of intangibles
Write off of property, plant and equipment
Net loss on disposal of property, plant and equipment
Foreign exchange differences
Interest accrued on borrowings
Change in operating assets and liabilities:
Decrease/(increase) in trade and other receivables
Decrease/(increase) in inventories
Increase in other operating assets
Increase/(decrease) in trade and other payables
Decrease in deferred tax liabilities
Increase/(decrease) in employee benefits
1,338
7,411
1
21
(94)
25
(1,767)
(580)
(160)
1,812
-
142
2,218
1,320
8
-
(15)
29
19
106
(23)
(4,708)
(102)
(13)
Net cash used in operating activities
(3,539)
(7,642)
Changes in liabilities arising from financing activities
Consolidated
Balance at 1 July 2016
Net cash from financing activities
Balance at 30 June 2017
Balance at 30 June 2018
51
Loan - First
Samuel
$'000
Total
$'000
-
4,000
4,000
4,000
-
4,000
4,000
4,000
TZ Limited
Notes to the financial statements
30 June 2018
Note 30. Earnings per share
Consolidated
2018
$'000
2017
$'000
Loss after income tax attributable to the owners of TZ Limited
(11,688)
(6,481)
Weighted average number of ordinary shares used in calculating basic earnings per share
63,358,206
50,388,383
Weighted average number of ordinary shares used in calculating diluted earnings per share 63,358,206
50,388,383
Number
Number
Basic earnings per share
Diluted earnings per share
Cents
Cents
(18.45)
(18.45)
(12.86)
(12.86)
The weighted average number of ordinary shares are calculated based on the number of ordinary shares that would have
been in existence had the capital restructure occurred as at 1 July 2016.
For the purpose calculating the diluted earnings per share the denominator has excluded 500,000 options as the effect
would be anti-dilutive.
Note 31. Share-based payments
Director and Executive Equity Plan
The Director and Executive Equity Plan ('DEEP') was approved by shareholders at 2009 Annual General Meeting that was
held on 26 February 2010. It gives directors and senior executives the opportunity to participate in the plan. There were
three tranches of options and two tranches of rights granted to the directors in 2010 and three tranches of options granted
to the directors in 2014. Details of unexpired options that remain on issue are set out below.
Each tranche of options had a fixed number granted with vesting periods from one to three years. Each option, when
validly exercised, entitles the holder to receive one fully paid share in the company.
Set out below are summaries of options granted under the plan:
2018
Grant date
Expiry date
price
Exercise
Balance at
the start of
the year
Granted
Consolidation
of
options
1 to 10*
Balance at
the end of
the year
Expired
26/02/2010
15/01/2014
15/01/2014
15/01/2014
30/06/2018
30/06/2018
30/06/2019
30/06/2020
$2.00
$3.00
$4.00
$6.00
1,750,000
5,000,000
5,000,000
5,000,000
16,750,000
-
-
-
-
-
(1,575,000)
(4,500,000)
(4,500,000)
(4,500,000)
(15,075,000)
(175,000)
(500,000)
-
-
(675,000)
-
-
500,000
500,000
1,000,000
Weighted average exercise price
$0.81
$0.00
$0.81
$2.74
$0.53
*
Following a capital restructure during the year ended 30 June 2018, all options at the date of the capital restructure
were consolidated on a 1 for 10 ratio.
52
TZ Limited
Notes to the financial statements
30 June 2018
Note 31. Share-based payments (continued)
2017
Grant date
Expiry date
price
Exercise
Balance at
the start of
the year
Granted
Exercised
Expired
Balance at
the end of
the year
26/02/2010
26/02/2010
15/01/2014
15/01/2014
15/01/2014
30/06/2017
30/06/2018
30/06/2018
30/06/2019
30/06/2020
$2.00
$3.00
$0.25
$0.45
$0.60
1,750,000
1,750,000
5,000,000
5,000,000
5,000,000
18,500,000
-
-
-
-
-
-
-
-
-
-
-
-
(1,750,000)
-
-
-
-
(1,750,000)
-
1,750,000
5,000,000
5,000,000
5,000,000
16,750,000
Weighted average exercise price
$0.81
$0.00
$0.00
$2.00
$0.70
Set out below are the options exercisable at the end of the financial year:
Grant date
Expiry date
26/02/2010
15/01/2014
15/01/2014
15/01/2014
30/06/2018
30/06/2018
30/06/2019
30/06/2020
2018
Number
2017
Number
-
-
500,000
500,000
1,750,000
5,000,000
5,000,000
5,000,000
1,000,000
16,750,000
The weighted average remaining contractual life of options outstanding at the end of the financial year was 1.50 years
(2017: 1.90 years).
Note 32. Events after the reporting period
On 7 August 2018, the consolidated entity increased its borrowing facility with First Samuel Limited by an additional
$2,000,000, increasing the total facility to $7,000,000. The increase comprises two revolving tranches of $1,000,000 which
can be repaid and redrawn if repayments are made before the end of the term. The interest rate applicable to the additional
facility is 90 day BBSW plus 9% per annum, payable 6 monthly in arrears. Under the revised facility, $3,000,000 of the total
loan facility matures on 13 December 2019 and $4,000,000 matures on 5 May 2020. The facilities are secured by first
ranking security interest over the assets of the consolidated entity.
No other matter or circumstance has arisen since 30 June 2018 that has significantly affected, or may significantly affect
the consolidated entity's operations, the results of those operations, or the consolidated entity's state of affairs in future
financial years.
53
TZ Limited
Directors' declaration
30 June 2018
In the directors' opinion:
●
●
●
●
the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the
Corporations Regulations 2001 and other mandatory professional reporting requirements;
the attached financial statements and notes comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board as described in note 1 to the financial statements;
the attached financial statements and notes give a true and fair view of the consolidated entity's financial position as
at 30 June 2018 and of its performance for the financial year ended on that date; and
there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due
and payable.
The directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001.
On behalf of the directors
___________________________
John Wilson
Managing Director
30 August 2018
Sydney
54
Level 17, 383 Kent Street
Sydney NSW 2000
Correspondence to:
Locked Bag Q800
QVB Post Office
Sydney NSW 1230
T +61 2 8297 2400
F +61 2 9299 445
E info.nsw@au.gt.com
W www.grantthornton.com.au
Independent Auditor’s Report
To the Members of TZ Limited
Report on the audit of the financial report
Opinion
We have audited the financial report of TZ Limited (the Company) and its subsidiaries (the Group), which comprises the
consolidated statement of financial position as at 30 June 2018, the consolidated statement of profit or loss and other
comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the
year then ended, and notes to the consolidated financial statements, including a summary of significant accounting
policies, and the Directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including:
a Giving a true and fair view of the Group’s financial position as at 30 June 2018 and of its performance for the year
ended on that date; and
b Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are
further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are
independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and
the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for
Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled
our other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Grant Thornton Audit Pty Ltd ACN 130 913 594
a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389
www.grantthornton.com.au
‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients
and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International
Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are
delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one
another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to
Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to
Grant Thornton Australia Limited.
Liability limited by a scheme approved under Professional Standards Legislation.
55
Material uncertainty related to going concern
We draw attention to Note 1 in the financial statements, which indicates that the Group incurred a net loss after tax of
$11,688,000 and net cash outflows from operating activities of $3,539,000 during the year ended 30 June 2018. As stated in
Note 1, these events or conditions, along with other matters as set forth in Note 1, indicate that a material uncertainty exists
that may cast doubt on the Group’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in
forming our opinion thereon, and we do not provide a separate opinion on these matters.
In addition to the matter described in the Material uncertainty related to going concern section, we have determined the
matters described below to be the key audit matters to be communicated in our report.
Key audit matter
How our audit addressed the key audit matter
Revenue recognition (Note 1 and Note 4)
The Group offers products and services to customers that require
varied revenue recognition accounting policies given different
performance obligations. In accordance with AASB 118 Revenues,
revenue from services is recognised in the accounting period in which
the services are rendered, by reference to the stage of completion of
the specific transaction.
Revenue for Packaged Asset Delivery and Postal projects is
recognised under the percentage of completion method. This method
requires a significant amount of management judgement.
This area is a key audit matter due to the degree of estimation and
management judgement required to determine the appropriate
amount of revenue to recognise.
Our audit procedures included, amongst others:
considering the appropriateness of the Group’s revenue
recognition accounting policies, placing particular focus on those
products and services for which revenue is recognised under the
percentage of completion method;
holding discussions with key management personnel and project
managers to understand and evaluate management’s assessment
and associated assumptions in determining the percentage of
completion;
evaluating the stage of completion calculation for a sample of
Packaged Asset Delivery and Postal projects to assess whether
the Group’s accounting policy had been correctly applied;
agreeing key terms of individually significant projects to underlying
contracts and purchase orders;
recalculating and assessing management’s estimate of percentage
complete by agreeing a sample of costs incurred for projects in
progress at period end and comparing to the total estimated project
costs;
assessing management’s ability to accurately estimate project
costs by comparing actual project costs to prior estimates; and
assessing the adequacy of the related disclosures in the financial
statements.
Intangible assets (Note 1 and Note 13)
The Group capitalises costs incurred in the development and
enhancement of its proprietary technology. The Group capitalised
$626,000 of development costs during the year ended 30 June 2018.
Our procedures included, amongst others:
obtaining a list of additions to intangible assets and agreeing to the
general ledger;
AASB 138 Intangible Assets sets out the specific requirements to be
met in order to capitalise development costs. The process to measure
the amount of development costs to capitalise involves significant
management judgement in assessing whether costs meet the
recognition criteria described in AASB 138.
agreeing a sample of additions to supporting documentation such
as time records or invoices from third party suppliers and
assessing whether the amounts met the recognition criteria in
AASB 138;
assessing the appropriateness of the Group’s accounting policy for
This area is a key audit matter due to the degree of subjectivity and
management judgement applied in assessing whether costs meet the
recognition criteria described in AASB 138.
research and development costs; and
assessing the adequacy of the related disclosures in the financial
statements.
56
Impairment testing of assets (Note 1 and Note 13)
AASB 136 Impairment of Assets requires that an entity shall assess at
the end of each reporting period whether there is any indication that
an asset may be impaired. If any indication exists, the entity shall
estimate the recoverable amount of the asset.
Forecasting future cash flows and applying an appropriate discount
rate involves a high degree of estimation and judgement by
management.
We have determined this is a key audit matter due to the judgement
required by management in assessing if impairment indicators are
present and in preparing an impairment assessment to meet the
requirements of AASB 136.
Our procedures included, amongst others:
assessing management’s determination of the Group’s cash
generating units (CGUs) based on our understanding of the nature
of the Group’s business;
assessing management’s allocation of goodwill and other assets to
the identified CGUs;
obtaining the impairment assessment prepared by management
and assessing the reasonableness of the key assumptions in the
impairment model including:
o checking mathematical accuracy, challenging forecast
future cash flows and the appropriateness of discount and
growth rates; and
o considering the risk of management bias in the preparation
of the financial information making up the forecast future
cash flows;
performing sensitivity analysis over key assumptions; and
assessing the adequacy of the related disclosures in the financial
statements.
Information other than the financial report and auditor’s report thereon
The Directors are responsible for the other information. The other information comprises the information included in the
Group’s annual report for the year ended 30 June 2018, but does not include the financial report and our auditor’s report
thereon.
Our opinion on the financial report does not cover the other information and we do not express any form of assurance
conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or
otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors’ for the financial report
The Directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in
accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the Directors
determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material
misstatement, whether due to fraud or error.
In preparing the financial report, the Directors are responsible for assessing the Group’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing
Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions
of users taken on the basis of this financial report.
57
A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance
Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our
auditor’s report.
Report on the remuneration report
Opinion on the remuneration report
We have audited the Remuneration Report included in pages 11 to 17 of the Directors’ report for the year ended 30 June
2018.
In our opinion, the Remuneration Report of TZ 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.
Grant Thornton Audit Pty Ltd
Chartered Accountants
M R Leivesley
Partner – Audit & Assurance
Sydney, 30 August 2018
58
TZ Limited
Shareholder information
30 June 2018
The shareholder information set out below was applicable as at 17 August 2018.
Distribution of equitable securities
Analysis of number of equitable security holders by size of holding:
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Holding less than a marketable parcel
Equity security holders
Twenty largest quoted equity security holders
The names of the twenty largest security holders of quoted equity securities are listed below:
J P Morgan Nominees Australia Limited
Delcor Advisory Investment Group Pty Ltd
HSBC Custody Nominees (Australia) Limited
Mrs Margaret Jane Watt
Mr David Frederick Oakley (Dfo Investment A/C)
One Managed Investment Funds Limited (Technical Investing Absolute R)
Mr David Frederick Oakley
National Nominees Limited
One Managed Investment Funds Limited (TI Growth A/C)
Surflodge Pty Ltd (JE Lynch Staff Super Fd A/C)
Mr Peter Howells
Rod Investments (Vic) Pty Ltd (Gronow Super Fund A/C)
Mr Graham Lenzner + Mrs Loretta Lenzner (Lenzner Super Fund A/C)
Exelmont Pty Ltd
Zellvest Pty Ltd (No 2 Account)
Surflodge Pty Ltd
Mr Ken Tuder + Ms Thuy Le (Tuder Le S/F A/C)
One Managed Investment Funds Limited (Ti Family Wealth A/C)
Citicorp Nominees Pty Limited
Mr Mark Caple
59
Number
of holders
of ordinary
shares
Number
of holders
of options
over
ordinary
shares
1,507
423
135
227
68
2,360
1,777
-
-
-
-
2
2
-
Ordinary shares
Number held
20,699,224
14,041,074
5,460,069
1,110,310
1,086,637
1,042,217
1,019,637
937,814
880,713
875,956
700,000
700,000
600,000
525,450
498,006
491,297
482,416
400,455
361,364
340,676
52,253,315
% of total
shares
issued
29.34
19.90
7.74
1.57
1.54
1.48
1.45
1.33
1.25
1.24
0.99
0.99
0.85
0.74
0.71
0.70
0.68
0.57
0.51
0.48
74.06
TZ Limited
Shareholder information
30 June 2018
Unquoted equity securities
Options over ordinary shares
Substantial holders
Substantial holders in the company are set out below:
J P Morgan Nominees Australia Limited
Delcor Advisory Investment Group Pty Ltd
HSBC Custody Nominees (Australia) Limited
Voting rights
The voting rights attached to ordinary shares are set out below:
Number
on issue
Number
of holders
1,000,000
2
Ordinary shares
Number held
20,699,224
14,041,074
5,460,069
% of total
shares
issued
29.34
19.90
7.74
Ordinary shares
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each
share shall have one vote.
There are no other classes of equity securities.
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