ANNUAL REPORT
2017
VEEM LTD
ACN 008 944 009
CORPORATE INFORMATION
ABN 51 008 944 009
Directors
Brad Miocevich
Mark Miocevich
Ian Barsden
Non-Executive Chairman
Managing Director
Non-Executive Director (appointed 1 July 2016)
Joint Company Secretaries
Tracy Caudwell
Peter Torre
Registered office
22 Baile Road
Canning Vale
WA 6155
Telephone:
+ 61 8 9455 9355
Facsimile:
+61 8 9455 9333
Principal place of business
22 Baile Road
Canning Vale
WA 6155
Telephone:
+ 61 8 9455 9355
Facsimile:
+61 8 9455 9333
Share registry
Computershare Investor Services Pty Ltd
Level 11
172 St Georges Terrace
PERTH WA 6000
Telephone:
+61 8 9323 2000
Facsimile:
+ 61 8 9323 2033
Solicitors
Steinpreis Paganin
Level 4
The Read Buildings
16 Milligan Street
PERTH WA 6000
Telephone:
+61 8 9321 4000
Facsimile:
+ 61 8 9321 4333
Bankers
ANZ Banking Corporation
Level 7
77 St Georges Terrace
PERTH WA 6000
Telephone:
+61 8 6298 3987
Auditors
HLB Mann Judd
Level 4, 130 Stirling Street
Perth WA 6000
Telephone:
+61 8 9227 7500
Securities Exchange Listing
VEEM Ltd shares are listed on the Australian
Securities Exchange (ASX: VEE)
2 |
V E E M LT D
DIRECTORS' REPORT CONTENTS
Corporate Information
Chairmans letter
Directors’ Report
Auditor’s Independence Declaration
Statement of 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
Additional Shareholder Information
2
4
6
15
16
17
19
20
21
50
52
56
| 3
CHAIRMAN'S LETTER
Since listing on the ASX, the Board and
management have been focused on
delivering on the objectives set out in the
prospectus, and I am pleased with the
Company’s Normalised Net Profit After
Tax, after adjusting for once off IPO costs,
of $5.35M. This exceeded the prospectus
forecast by approximately 10%.
4 |
V E E M L I M I T E D
CHAIRMAN'S LETTER
C H A I R M A N ' S L E T T E R
Dear Investor,
On behalf of the Board, I am delighted to present VEEM
Ltd’s first annual report as a public listed entity.
The transition from a long-established family owned
and operated business to a company from which we
hope many others will now benefit, gives us immense
pride.
The focus of the Board and key executives of the
Company during the first quarter of the year was on
completing a successful listing on the ASX. The Board
was cognisant of ensuring all appropriate governance
practices were established to ensure the Company was
prepared for the increased expectations and scrutiny
as a listed company. We, as a Board, were pleased to
have achieved this with minimal interruptions to the
Company’s operations.
Since listing on the ASX, the Board and management
have been focused on delivering on the objectives
set out in the prospectus, and I am pleased with the
Company’s Normalised Net Profit After Tax, after
adjusting for once off IPO costs, of $5.35M. This
exceeded the prospectus forecast by approximately
10%. The result underpinned the declaration of a final
fully franked dividend of 1.23 cents per share, which
represents a payout ratio of 30% of Normalised Net
Profit After Tax.
While we have enjoyed continued interest and growth
in sales of our gyrostabilisers units, it is reassuring
that the core business continues to generate high-
profits. This has enabled us to sustain development
and commercialisation of our gyrostabilisers and
Conquest™ range of propellers.
This year we have managed to make a number
of significant achievements in, and to support,
our on-going business growth. These include the
acquisition, installation, and commissioning of a very
large advanced multi-axis machining centre. It is
the largest of its type in the southern hemisphere,
capable of manufacturing products such as large
stabilising fins, gyro components, and expanding our
manufacturing capacity of propellers to 4.5 metre
diameter. The completion of the VG260 design study
and manufacturing data has allowed the model to
commence production.
One aspect of our company that we can all be very
proud of is the quality and market reputation we have
gained in all our products and services. Excellence
in engineering design and attention to detail is
particularly evident in our bench-mark products,
such as the world-class VEEMStar™ propeller range
and the VG gyrostabilisers units we produce. We
constantly receive positive feedback from key players
in the marine industry and this year has been no
exception. Our clients have reported excellent vessel
and stabilisation performance using VEEM products.
This same level of manufacturing excellence and
feedback has also been received in relation to our new
Conquest™ range of propellers resulting in significant
sales growth. All of this is a wonderful testimony to
the highly-skilled and dedicated staff that make VEEM
such a success.
Finally, I would like to thank my fellow board members,
our management, and our staff for their continued
efforts to deliver the very best results possible.
BRAD MIOCEVICH
NON-EXECUTIVE CHAIRMAN
C H A I R M A N S ' L E T T E R
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D I R E C TO R S ' R E P O RT
DIRECTORS’
REPORT
The Directors present their report together with the
financial statements of the Company for the financial
year ended 30 June 2017. In order to comply with the
provisions of the Corporations Act 2001,
the Directors report as follows:
The names of Directors who held office during or since
the end of the year and until the date of this report are
as follows. Directors were in office for this entire period
unless otherwise stated.
DIRECTORS
NON-EXECUTIVE
CHAIRMAN
John Bradley Miocevich
B.Comm, FAICD
Brad has been a Director of VEEM Ltd since 1983.
Combining trade qualifications with a Commerce
Degree in Finance and Banking, Brad has the unique
skills suitable for the management of an engineering
company. With a focus on strategic planning, he was
a member of the team responsible for the acquisition
of several companies over the 20 years including
S&S Foundry & Engineering and Timcast Foundry
and Engineering. Taking on the role of Director Marine
Propulsion in 2000, he has been the driving force in
creating VEEM’s now very successful international
propeller business. Brad provided the vision for VEEM’s
highly automated manufacturing processes making
VEEM the benchmark of propeller manufacturing
worldwide. Brad brings to the Board expertise in
finance, manufacturing engineering and marketing
along with practical knowledge of the Company and its
markets.
In the 3 years immediately before the end of the
financial year, Brad has not served as a Director of any
other listed company.
6 |
V E E M L I M I T E D
D I R E C TO R S ' R E P O RT
MANAGING DIRECTOR
Mark David Miocevich
B.App.Sc (Mech Eng) FIE Aust
NON-EXECUTIVE
DIRECTOR
Director since 1 July 2016
Ian Henry Barsden
CA
Mark has been a director and senior manager of VEEM
for over thirty years. Commencing as Production
Director from 1983 and until 1995 he was responsible
for the implementation of the Quality Assurance
systems in 1987, the integration of SS Engineering
into the company in 1989, and defining the Company
management model based on the Australian Business
Excellence framework guideline in 1994. From 1995
until present he has been the Managing Director of
VEEM and for a period during that time, the Managing
Director of GA Perry and a Director of Thomassen
Services Australia. He was responsible for the
integration of Timcast Engineering into VEEM during
2002. He brings to the Board intimate knowledge of
the company, its systems and strategic plan.
In the 3 years immediately before the end of the
financial year, Mark has not served as a Director of any
other listed company.
Ian is a member of the Chartered Accountants Australia
and New Zealand and is a former partner of a mid-tier
accounting firm. Ian brings over 30 years’ experience
in the accounting profession, advising and consulting
to a wide variety of businesses and industries
as to business structuring, taxation and financial
management. Ian has provided advisory services to
VEEM as a consultant since 1980 and became an
employee of the Company in 2011.
In the 3 years immediately before the end of the
financial year, Ian has not served as a Director of any
other listed company.
COMPANY SECRETARIES
Mr Peter Torre
B.Bus (Accounting), CA, AGIA
Mr Torre was appointed on 9 September 2016. Mr Torre
is the principal of Torre Corporate, a specialist corporate
advisory firm providing corporate secretarial services to
a range of listed companies.
Mrs Tracy Caudwell
Cert.Bus.Stud, Assoc Dip Acct, B.Acct
Mrs Caudwell joined VEEM in June 2005. Mrs Caudwell
has over 30 years experience in the finance field
and is responsible for managing the administration,
accounting and finance department providing the
management team and board of Directors with
accurate KPI’s and financial performance.
D I R E C TO R S ’ R E P O RT
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D I R E C TO R S ' R E P O RT
INTERESTS IN THE SHARES OF THE
COMPANY AND RELATED BODIES CORPORATE
The following relevant interests in shares of the Company or a related body corporate were held by the Directors
as at the date of this report.
FULLY PAID ORDINARY SHARES
Directors
John Bradley Miocevich
Mark David Miocevich
(i)
(i)
Ian Henry Barsden
Number
80,000,000
80,000,000
50,000
(i) Mr Brad Miocevich and Mr Mark Miocevich have a relevant interest in VEEM Corporation Pty Ltd ATF the
Miocevich Family Trust which holds 80,000,000 fully paid ordinary shares in the Company.
SHARES UNDER OPTION OR ISSUED ON EXERCISE OF OPTIONS
At the date of this report there were no unissued ordinary shares or interests of the Company under option.
PRINCIPAL ACTIVITIES
The principal activities of the Company during the course of the year were:
• Propulsion and stabilisation systems; and
• Manufacturing bespoke products and services for the marine, defence and mining industries.
REVIEW OF OPERATIONS
The Company was pleased to be able to report the following key metrics for its first year as a public listed
company.
A’$ MILLION
Operating Revenue
EBITDA
Normalised PBT1
Normalised PAT1
Statutory NPAT
EPS
FY16
41,370,130
8,449,977
6,142,579
5,014,850
5,014,850
-
FY17
PROSPECTUS FORECAST FY17
38,082,604
7,800,413
6,142,501
5,349,159
3,848,750
3.21
46,770,000
7,840,000
5,860,000
4,810,000
4,010,000
-
1. Profit before and after tax less one off IPO listing expenses
FY17 was a very significant year for VEEM Ltd. This was the first financial year trading as an ASX listed public
company. VEEM staff are to be congratulated for their hard work to not only achieve a successful listing, but for
achieving a normalised profit after tax result that exceeded the forecast in the prospectus.
The operational performance underscores the consistent reporting of profits by VEEM historically, whilst it
continues to develop ground breaking technology in new products with the view to deliver substantial future
earnings to the company.
8 |
V E E M LT D
VEEM has always held itself in high regard for its
efficiencies in manufacturing processes. Due to an
increased emphasis on production productivity gains,
largely from improvement in materials handling, a
reduction of non-conformances in casting production
and a steady improvement in machine efficiency and
utilisation, gross profit margins increased for 2017.
March 2017 saw the commissioning of a new 8 axis
computer controlled machining centre which will enable
VEEM to manufacture fully machined propellers to
4.6m diameter. This machine is one of the largest of
its type in the southern hemisphere and will enable “in
country” manufacture of large propellers for defence
vessels and for export supply around the world.
This increase and lower overhead costs, led to an
increase of normalised profit after tax of $539,159 over
forecast.
The operating success provided the result in line
with forecast and allowed the Board to maintain its
dividend policy of declaring a dividend subsequent
to year end of 30% of Normalised Net Profit after
Tax, representing 1.23 cents per share, with a total
dividend of approximately $1.6 million. Returns to
shareholders are an important part of the Company’s
capital management policy and the Board expected
to maintain this in line with its policy outlined in the
Prospectus.
A key milestone for the Company during the year was
the commencement of sales in the VEEM gyro range
of gyro stabilising for vessels and the full production
commencement of the VEEM gyro 120 and 260
production.
To design from concept, manufacture and test a
prototype, then move to full production takes a focus
and dedication from all of the people involved. The first
sales of VEEM Gyro 120’s were to three super yachts
and one sports fishing yacht in the Australasian,
European and the USA markets.
VEEM has been specified by three international
shipyards as standard equipment on at least one of
their vessel lines. Two operating mostly in the super
yacht market and one in the Oil and Gas market.
VEEM exceeded its Gyro technical expectations with
1,000+ hours of operation for both the VG120 installed
in the super yacht MY Tango and the VG 120 installed
in the VEEM test vessel. Commissioning of one other
super yacht occurred in Europe this year with trouble
free operation from installation and successful trials
showing 60% roll reduction as per design.
The Gyro sales team continues to build customer
confidence in a market with an unpredictable take up
rate and VEEM remains confident in achieving traction
in the short to medium term which will vindicate
the Boards strategy of pursuing this technology, to
become the world leader in marine stabilisation.
The production and supply of VEEM’s new range of
conquest propellers commenced during the year with
first supplies to market arriving in the second quarter of
the financial year. 53 Conquest propeller dealers have
been appointed so far and the rollout of dealers around
the world is continuing. Sales for a full year would
have approximately been $500,000, which indicates
the success this product has had in the market place.
As VEEM is continuing to develop the automated
manufacturing of these propellers, continued growth
can be expected in the future.
The defence sector continued steadily with the order
for the next submarine scheduled docking occurring
late in the year. This work is spread over the FY17 and
the FY18 financial years. VEEM was awarded a $2.8m
Pacific Patrol Boat (PPB) shaft line contract over 5
years, which represents the beginning of the new wave
of defence spending by the Australian government.
VEEM is well placed to participate in this work and this
year provided quotations to a number of the potential
future shipbuilders and major contractors. Work for the
LCS and JHSV programs in the USA, through Austal
ships, is continuing in line with expectations.
The sustainability model developed by VEEM has been
underpinned by a global trading concept which partially
eliminated the currency exchange risk by creating a
natural hedge. The concept of VEEM buying and selling
internationally is continuing to be developed to provide
greater costing confidence for future proofing VEEM
products. The first round of work has been completed
with initial buying contracts in place and delivering as
per expectations. The second round will be effected
during FY18 with the further development of the supply
chain in full swing.
D I R E C TO R S ’ R E P O RT
| 9
DIRECTORS' REPORT D I R E C TO R S ' R E P O RT
OUTLOOK
VEEM enters the FY 2018 with a steady look ahead for
all revenue generators of the business.
Defence work in Australia will grow steadily as new
projects go into production. VEEM has developed
working relationships with all of the tenderers for the
upcoming major projects and has already submitted
tenders for the OPV contract.
The mining sector is slowly winding up with some
increases in tendering and purchasing occurring late
in FY17. The commissioning of the new large CNC
machine will bring VEEM a great deal more market
interest from this sector which, as is already happening,
will bring additional growth.
VEEM’s propulsion and stabilisation products are
expected to continue to grow in markets around
the world. VEEM is quickly developing its marketing
network in Europe and is focusing on increasing market
confidence in the new Gyro stabiliser technology. The
cross selling of VEEM propellers and VEEM gyros is a
major focus that is expected to bring further success.
FY18 will see the VEEM test boat being relocated to
Europe for an extensive testing and evaluation regime
with major boat builders throughout the region. This
is seen as a strong customer confidence booster to
break though the barriers of change in the industry.
SIGNIFICANT CHANGES IN THE
STATE OF AFFAIRS
Other than disclosed elsewhere in this report, there
have been no significant changes in the state of affairs
of the Company to the date of this report.
SIGNIFICANT EVENTS AFTER
BALANCE DATE
Other than disclosed elsewhere in this report, there has
not been any matter or circumstance that has arisen
after balance date that has significantly affected,
or may significantly affect, the operations of the
Company, the results of those operations, or the state
of affairs of the Company in future financial periods.
LIKELY DEVELOPMENTS AND
EXPECTED RESULTS
The Company will continue with its strategy as set out
in its Prospectus lodged with the ASX on 24 October
2016. The commercialisation of the Company’s Gyro
Stabilising will be a key priority during the 2018
financial year.
ENVIRONMENTAL LEGISLATION
The Company is not subject to any significant
environmental legislation.
DIVIDENDS
Dividends paid to members during the financial year
were as follows:
• An interim ordinary dividend of $4,000,000 was
paid on 23 August 2016, prior to the initial public
offering of shares.
Since the end of the financial year the Directors have
recommended the payment of a final ordinary dividend
of $1,599,000 franked to 30 % to be paid on or around
September 2017.
INDEMNIFICATION AND
INSURANCE OF DIRECTORS
AND OFFICERS
The Company has agreed to indemnify all the Directors
of the Company for any liabilities to another person
(other than the Company or related body corporate)
that may arise from their position as Directors of the
Company and its controlled entities, except where the
liability arises out of conduct involving a lack of
good faith.
During the financial year the Company paid a premium
in respect of a contract insuring the Directors and
officers of the Company and its controlled entities
against any liability incurred in the course of their
duties 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.
10 |
V E E M LT D
The Board assesses the appropriateness of the
nature and amount of remuneration of Directors
and executives on a periodic basis by reference to
relevant employment market conditions with an
overall objective of ensuring maximum stakeholder
benefit from the retention of a high quality Board and
executive team.
REMUNERATION STRUCTURE
In accordance with best practice corporate
governance, the structure of non-executive Director
and executive remuneration is separate and distinct.
USE OF REMUNERATION CONSULTANTS
The Board has not used any independent remuneration
consultants during the year ended 30 June 2017
NON-EXECUTIVE DIRECTOR REMUNERATION
The Board seeks to set aggregate remuneration at
a level that provides the Company with the ability to
attract and retain Directors of the highest caliber, whilst
incurring a cost that is acceptable to shareholders.
The ASX Listing Rules specify that the aggregate
remuneration of non-executive Directors shall be
determined from time to time by a general meeting.
The Constitution of the Company as at the time of
listing in October 2016 provides that the aggregate
remuneration of non-executive Directors be set at
$400,000.
REMUNERATION REPORT
This report, which forms part of the Directors’ report,
outlines the remuneration arrangements in place for
the key management personnel (“KMP”) of VEEM
Ltd for the financial year ended 30 June 2017. The
information provided in this remuneration report has
been audited as required by Section 308(3C) of the
Corporations Act 2001.
The remuneration report details the remuneration
arrangements for KMP who are defined as those
persons having authority and responsibility for
planning, directing and controlling the major activities
of the Company, directly or indirectly, including any
Director (whether executive or otherwise) of the
Company.
KEY MANAGEMENT PERSONNEL
The Directors set out below were the only key
management personnel of the Company during or
since the end of the financial year.
Directors
Number
John Bradley Miocevich Chairman (non-executive)
Mark David Miocevich
Managing Director
Ian Barsden
Non-Executive Director
(appointed 1 July 2016)
Except as noted, the named persons held their current
positions for the whole of the financial year and to the
date of this report.
REMUNERATION PHILOSOPHY
The performance of the Company depends upon the
quality of the Directors and executives. The philosophy
of the Company in determining remuneration levels is
to set competitive remuneration packages to attract
and retain high caliber employees.
REMUNERATION COMMITTEE
The Company does not have a separate Remuneration
Committee. The full Board currently fulfills the role
typically undertaken by a Remuneration Committee
and is responsible for determining and reviewing
compensation arrangements for the Directors.
D I R E C TO R S ’ R E P O RT
| 11
DIRECTORS' REPORT
D I R E C TO R S ' R E P O RT
The amount of aggregate remuneration sought to be
approved by shareholders and the manner in which it
is apportioned amongst Directors is reviewed annually
leading up to the Company’s Annual General Meeting.
The Board considers advice from external shareholders
as well as the fees paid to non-executive Directors of
comparable companies when undertaking the annual
review process.
Each Director receives a fee for being a Director of the
Company. Given there are no committees currently in
place, no additional fees are paid.
SENIOR MANAGER AND EXECUTIVE
DIRECTOR REMUNERATION
Remuneration consists of reasonable fixed
remuneration only.
FIXED REMUNERATION
Fixed remuneration is reviewed annually by the
Board. The process consists of a review of relevant
comparative remuneration in the market and internally
and, where appropriate, external advice on policies
and practices. The Board has access to external,
independent advice where necessary.
Senior managers are given the opportunity to receive
their fixed (primary) remuneration in a variety of forms
including cash and fringe benefits such as motor
vehicles and expense payment plans. It is intended that
the manner of payment chosen will be optimal for the
recipient without creating undue cost for the Company.
The fixed remuneration component is detailed in Key
Management Personnel remuneration for the years
ended 30 June 2017 and 30 June 2016 tables.
2016 ANNUAL GENERAL MEETING
The year ended 30 June 2017 is the first year the
Company is reporting as a listed entity. As such, it will
be the first year that the Remuneration Report will
be considered by its members at the Annual General
Meeting.
EMPLOYMENT CONTRACTS
Date of commencement, 01 September 2016
NAME
TERM OF AGREEMENT AND
TERMINATION PROVISIONS
BASE SALARY INCLUDING
SUPERANNUATION
TERMINATION
BENEFIT
M. Miocevich
This agreement has no set term
Executive
Termination of the agreement
is 1 months’ notice by the
Executive or 3 months’ notice by
the Company and includes a 6
month restraint of trade.
Base: $385,000 per annum
plus $35,000 superannuation
3 months salary
12 |
V E E M LT D
REMUNERATION OF KEY MANAGEMENT PERSONNEL
Key Management Personnel remuneration for the years ended 30 June 2017 and 30 June 2016
SHORT-TERM
EMPLOYEE BENEFITS
POST-
EMPLOYMENT
BENEFITS
LONG
TERM
BENEFITS
SHARE
BASED
BENEFITS
30 June
2017
Salary & fee
Bonus
Non-
monetary
benefits
Other
Superannuation
Long
service
leave
Share
options
Directors
$
Bradley
Miocevich
89,824
Mark
Miocevich
314,390
Ian Barsden
63,737
$
-
-
-
$
-
-
-
$
-
-
-
$
9,150
34,260
6,055
$
-
-
-
$
-
-
-
RELATIVE PROPORTIONS
OF REMUNERATION OF
KMP THAT ARE LINKED
TO PERFORMANCE
Fixed
remuneration
Remuneration
linked to
performance
Total
$
$
98,974
100%
348,650
100%
69,792
100%
$
-
-
-
SHORT-TERM
EMPLOYEE BENEFITS
POST-
EMPLOYMENT
BENEFITS
LONG
TERM
BENEFITS
SHARE
BASED
BENEFITS
30 June
2016
Salary & fee
Bonus
Non-
monetary
benefits
Other
Superannuation
Long
service
leave
Share
options
Directors
$
Bradley
Miocevich
Mark
Miocevich
62,220
62,220
$
-
-
$
-
-
$
-
-
$
35,083
35,083
$
-
-
$
-
-
RELATIVE PROPORTIONS
OF REMUNERATION OF
KMP THAT ARE LINKED TO
PERFORMANCE
Total
$
Fixed
remuneration
$
97,303
100%
97,303
100%
Remuneration
linked to
performance
$
-
-
No member of key management personnel appointed during the period received a payment as part of his or her
consideration for agreeing to hold the position.
No cash bonuses were granted during 2017 or 2016.
D I R E C TO R S ’ R E P O RT
| 13
DIRECTORS' REPORT D I R E C TO R S ' R E P O RT
EMPLOYEE SHARE OPTION PLAN
There were no employee share options granted as compensation in the current or prior financial year.
FULLY PAID ORDINARY SHARES
BALANCE AT
BEGINNING
OF YEAR
GRANTED AS
COMPEN
SATION
RECEIVED ON
EXERCISE OF
OPTIONS
NET CHANGE
OTHER
BALANCE AT
END OF YEAR
BALANCE
HELD
NOMINALLY
30 June
2017
Directors
$
Bradley
Miocevich
Mark
Miocevich
82,955,330
82,955,330
Ian Barsden
-
$
-
-
-
$
-
-
-
$
$
(2,955,330)
80,000,0001
(2,955,330)
80,000,0001
50,000
50,000
$
-
-
-
1.
Mr Brad Miocevich and Mr Mark Miocevich have a
relevant interest in VEEM Corporation Pty Ltd ATF
the Miocevich Family Trust which holds 80,000,000
fully paid ordinary shares in the Company. During
the year, their original shareholding was divided into
a larger number and then partially sold down as part
of the initial public offering in October 2016. The net
result of this was a movement of (2,955,330) fully
paid ordinary shares.
The Company has entered into a lease agreement
with Voyka Pty Ltd, an entity controlled by an entity
related to Mr Mark Miocevich and Mr Brad Miocevich.
The Company pays Voyka Pty Ltd monthly rent of
$115,307 including GST, totalling $1,383,684 for the
twelve months to 30 June 2017. The rent is exclusive
of any outgoings including rates, taxes, insurance
premiums and maintenance costs. The lease was made
on commercial terms.
In addition, Brad Miocevich and Mark Miocevich through
their relevant interest in VEEM Corporation Pty Ltd, held
100 B Class shares, which were cancelled prior to the
Company’s Initial Public Offering in October 2016.
OTHER KEY MANAGEMENT PERSONNEL
TRANSACTIONS
In preparation for the Company’s Initial Public Offering
and listing on the ASX on 26 October 2016, certain
non-core business assets with a written down value
of $585,658 and associated hire purchase liabilities
of $641,480 were transferred out of the Company at
market value.
As at 30 June 2016, $2,750,060 was receivable from
VEEM Corporation Pty Ltd, a company related to Mr
Mark Miocevich and Mr Brad Miocevich. The debt was
retired through payment of the interim dividend prior to
the Company listing on the ASX.
END OF REMUNERATION REPORT
14 |
V E E M LT D
DIRECTORS’ MEETINGS
The number of meetings of Directors held during the year and the number of meetings attended by each Director
were as follows:
D I R E C TO R S ' R E P O RT
Number of meetings held:
Number of meetings attended:
John Bradley Miocevich
Mark David Miocevich
Ian Henry Barsden
Directors' meetings
11
11
11
11
PROCEEDINGS ON BEHALF OF THE COMPANY
No person has applied for leave of court to bring proceedings on behalf of the Company or intervene in any
proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for
all or any part of those proceedings.
NON-AUDIT SERVICES
Details of amounts paid or payable to the auditor for non-audit services provided during the year by the auditor are
outlined in Note 20 to the financial statements. The Directors are satisfied that the provision of non-audit services
is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001.
The Directors are of the opinion that the services do not compromise the auditor’s independence as all non-audit
services have been reviewed to ensure that they do not impact the impartiality and objectivity of the auditor and
none of the services undermine the general principles relating to auditor independence as set out in Code of
Conduct APES 110: Code of Ethics for Professional Accountants issued by the Accounting Professional & Ethical
Standards Board.
AUDITOR INDEPENDENCE AND NON-AUDIT SERVICES
Section 307C of the Corporations Act 2001 requires our auditors, HLB Mann Judd, to provide the Directors of
the Company with an Independence Declaration in relation to the audit of the annual report. This Independence
Declaration is set out on page 16 and forms part of this Directors’ report for the year ended 30 June 2017.
Signed in accordance with a resolution of the Directors.
MARK DAVID MIOCEVICH
Managing Director
Dated this 31 day of August 2017
D I R E C TO R S ’ R E P O RT
| 15
AUDITOR’S INDEPENDENCE DECLARATION
As lead auditor for the audit of the financial report of VEEM Ltd for the year ended 30 June 2017, I
declare that to the best of my knowledge and belief, there have been no contraventions of:
a)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit;
and
b)
any applicable code of professional conduct in relation to the audit.
HLB Mann Judd
Chartered Accountants
D I Buckley
Partner
Perth, Western Australia
31 August 2017
HLB Mann Judd (WA Partnership) ABN 22 193 232 714
Level 4 130 Stirling Street Perth WA 6000 | PO Box 8124 Perth BC WA 6849 | Telephone +61 (08) 9227 7500 | Fax +61 (08) 9227 7533
Email: mailbox@hlbwa.com.au | Website: www.hlb.com.au
Liability limited by a scheme approved under Professional Standards Legislation
HLB Mann Judd (WA Partnership) is a member of International, a world-wide organisation of accounting firms and business advisers
11
AUDITOR’S INDEPENDENCE DECLARATION
As lead auditor for the audit of the financial report of VEEM Ltd for the year ended 30 June 2017, I
declare that to the best of my knowledge and belief, there have been no contraventions of:
a)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit;
and
b)
any applicable code of professional conduct in relation to the audit.
HLB Mann Judd
Chartered Accountants
D I Buckley
Partner
Perth, Western Australia
31 August 2017
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2017
Continuing operations
Revenue
Other income
Change in inventories of finished goods and work
in progress
Raw materials and consumables
Employee benefits expense
Depreciation and amortisation expense
Repairs and maintenance expenses
Occupancy expenses
Borrowing costs expense
Listing expenses
Share registry expenses
Other expenses
Profit before income tax expense
Income tax expense
NOTES
2017($)
2016$)
2
2
2
2
3
38,082,604
41,370,130
192,533
2,949,758
(13,517,085)
(15,138,843)
(1,441,418)
(844,610)
(2,171,640)
(228,773)
(1,500,409)
(9,664)
(1,730,361)
66,167
2,588,799
(14,573,811)
(16,196,119)
(2,027,520)
(928,479)
(2,259,215)
(282,588)
-
-
(1,614,785)
4,642,092
6,142,579
(793,342)
(1,127,729)
Net profit for the year
3,848,750
5,014,850
Other comprehensive income, net of income tax
-
-
Total comprehensive income for the year
3,848,750
5,014,850
Basic earnings per share (cents per share)
5
3.21
6.04
The accompanying notes form part of these financial statements
HLB Mann Judd (WA Partnership) ABN 22 193 232 714
Level 4 130 Stirling Street Perth WA 6000 | PO Box 8124 Perth BC WA 6849 | Telephone +61 (08) 9227 7500 | Fax +61 (08) 9227 7533
Email: mailbox@hlbwa.com.au | Website: www.hlb.com.au
Liability limited by a scheme approved under Professional Standards Legislation
HLB Mann Judd (WA Partnership) is a member of International, a world-wide organisation of accounting firms and business advisers
11
S TAT E M E N T O F C O M P R E H E N S I V E I N C O M E
| 17
STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2017
NOTES
2017($)
2016($)
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other assets
Total current assets
Non-current assets
Property, plant and equipment
Deferred tax assets
Intangible assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Current tax liabilities
Trade and other payables
Borrowings
Provisions
Total current liabilities
Non-current liabilities
Borrowings
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Retained earnings
Total equity
7
8
9
10
11
3
12
3
13
14
15
14
3
587,586
646,970
7,951,188
10,445,392
8,429,143
5,976,840
366,051
584,300
17,333,968
17,653,502
14,987,968
11,740,233
1,031,271
625,812
10,826,643
6,958,710
26,845,882
19,324,755
44,179,850
36,978,257
373,431
858,499
5,155,109
4,650,136
4,815,690
4,868,818
1,098,649
1,011,402
11,442,879
11,388,855
3,169,910
699,243
761,272
673,099
3,931,182
1,372,342
15,374,061
12,761,197
28,805,789
24,217,060
16
5,140,616
400,637
23,665,173
23,816,423
28,805,789
24,217,060
The accompanying notes form part of these financial statements
18 | S TAT E M E N T O F F I N A N C I A L P O S I T I O N
V E E M LT D
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2017
Balance at 1 July 2015
Profit for the year
Other comprehensive income, net of income tax
Total comprehensive income for the year
Dividend paid or provided for
Balance as at 30 June 2016
Profit for the year
Other comprehensive income, net of income tax
Total comprehensive income for the year
Dividend paid or provided for
Shares issued during the year
Share issue costs
Balance as at 30 June 2017
NOTES
ISSUED
CAPITAL ($)
RETAINED
EARNINGS ($)
TOTAL
EQUITY ($)
400,637
22,301,573
22,702,210
-
-
-
-
5,014,850
5,014,850
-
-
5,014,850
5,014,850
(3,500,000)
(3,500,000)
400,637
23,816,423
24,217,060
-
-
-
-
-
-
3,848,750
3,848,750
3,848,750
3,848,750
(4,000,000)
(4,000,000)
5,000,000
(260,021)
-
-
5,000,000
(260,021)
5,140,616
23,665,173
28,805,789
6
6
16
16
The accompanying notes form part of these financial statements
S TAT E M E N T O F C H A N G E S I N E Q U I T Y
| 19
STATEMENT OF CASH FLOWS FOR THE YEAR
ENDED 30 JUNE 2017
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Interest paid
Income tax paid
GST paid
NOTES
2017($)
2016($)
40,334,844
42,153,185
(35,871,557)
(32,168,007)
12,279
(228,774)
(1,595,697)
2,710
(281,380)
(561,138)
(61,455)
(1,122,421)
Net cash inflow from operating activities
7
2,589,640
8,022,949
Cash flows from investing activities
Payments for property, plant and equipment
Payments for intangible assets
Net cash (outflow) from investing activities
Cash flows from financing activities
Proceeds from issue of shares
Capital raising costs
Proceeds from borrowings
Repayment of borrowings
Dividends paid
Proceeds from related party loans
Repayments of related party loans
Net cash inflow/(outflow) from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents at the end of the year
7
The accompanying notes form part of these financial statements
(980,361)
(849,883)
(3,897,090)
(3,330,262)
(4,877,451)
(4,180,145)
5,000,000
(260,021)
-
-
-
2,500,000
(1,495,363)
(1,019,314)
(4,000,000)
(3,500,000)
-
(715,274)
2,750,061
-
1,994,677
(2,734,588)
(293,134)
646,970
(8,904)
344,932
1,108,216
(469,176)
7,930
646,970
20 |
V E E M LT D
STATEMENT OF CASH FLOWS FOR THE YEAR
ENDED 30 JUNE 2017
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
NOTES
2017($)
2016($)
Net cash inflow from operating activities
7
2,589,640
8,022,949
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Interest paid
Income tax paid
GST paid
Cash flows from investing activities
Payments for property, plant and equipment
Payments for intangible assets
Net cash (outflow) from investing activities
Cash flows from financing activities
Proceeds from issue of shares
Capital raising costs
Proceeds from borrowings
Repayment of borrowings
Dividends paid
Proceeds from related party loans
Repayments of related party loans
40,334,844
42,153,185
(35,871,557)
(32,168,007)
12,279
(228,774)
(1,595,697)
2,710
(281,380)
(561,138)
(61,455)
(1,122,421)
(980,361)
(849,883)
(3,897,090)
(3,330,262)
(4,877,451)
(4,180,145)
5,000,000
(260,021)
2,500,000
(1,495,363)
(1,019,314)
(4,000,000)
(3,500,000)
(715,274)
-
-
-
-
-
2,750,061
(293,134)
646,970
(8,904)
344,932
1,108,216
(469,176)
7,930
646,970
Net cash inflow/(outflow) from financing activities
1,994,677
(2,734,588)
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents at the end of the year
7
The accompanying notes form part of these financial statements
A. BASIS OF PREPARATION
These financial statements are general purpose
financial statements, which have been prepared in
accordance with the requirements of the Corporations
Act 2001, Accounting Standards and Interpretations
and comply with other requirements of the law.
The accounting policies detailed below have been
consistently applied to all of the years presented
unless otherwise stated. For the purpose of preparing
the financial statements, the Company is a for-profit
entity.
The financial statements have been prepared on a
historical cost basis. Historical cost is based on the
fair values of the consideration given in exchange for
goods and services.
The Company is a listed public Company, incorporated
in Australia and operating in Australia selling into the
domestic and global markets. The entity’s principal
activities are described in the Directors’ Report.
B. ADOPTION OF NEW AND REVISED
STANDARDS
Standards and Interpretations applicable to
30 June 2017
In the year ended 30 June 2017, the Directors have
reviewed all of the new and revised Standards and
Interpretations issued by the AASB that are relevant
to the Company and effective for the reporting periods
beginning on or after 1 July 2016.
As a result of this review, the Directors have
determined that there is no material impact of the new
and revised Standards and Interpretations in issue not
yet adopted on the Company and therefore no material
change is necessary to Company accounting policies.
Standards and Interpretations in issue not yet
adopted applicable to 30 June 2017
The Directors have also reviewed all of the new and
revised Standards and Interpretations in issue not
yet adopted that are relevant to the Company and
effective for the reporting periods beginning on or after
1 July 2017.
As a result of this review, the Directors have
determined that AASB16 “Leases” may have a material
effect on the application in future periods. The potential
impact has not been quantified.
Other than the above, there is no material impact of
the new and revised Standards and Interpretations
on the Company and therefore no material change is
necessary to Company accounting policies.
Early adoption of Standards
The Company has early adopted AASB 15 “Revenue
from Contracts with Customers” which is mandatory
for years beginning on or after 1 January 2018. There
is no material impact to profit or loss or net assets on
the adoption of this new standard in the current or
comparative years.
C. STATEMENT OF COMPLIANCE
The financial report was authorised for issue by the
Board of VEEM Ltd on 31 August 2017.
The financial report complies with Australian
Accounting Standards, which include Australian
equivalents to International Financial Reporting
Standards (AIFRS). Compliance with AIFRS ensures
that the financial report, comprising the financial
statements and notes thereto, complies with
International Financial Reporting Standards (IFRS).
D. SIGNIFICANT ACCOUNTING ESTIMATES
AND JUDGEMENTS
The application of accounting policies requires the
use of judgements, estimates and assumptions about
carrying values of assets and liabilities that are not
readily apparent from other sources. The estimates
and associated assumptions are based on historical
experience and other factors that are considered
to be relevant. Actual results may differ from these
estimates.
The estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions are recognised
in the period in which the estimate is revised if it affects
only that period, or in the period of the revision and
future periods if the revision affects both current and
future periods.
Except as described below, in preparing the full-year
financial report, the significant judgments made by
management in applying the Company’s accounting
policies and the key sources of estimation uncertainty
were the same as those that applied to the financial
report for the year ended 30 June 2016.
N OT E S TO T H E F I N A N C I A L S TAT E M E N T S
| 21
Amortisation
F. FOREIGN CURRENCY TRANSLATION
Both the functional and presentation currency of VEEM
Ltd is Australian dollars.
Transactions in foreign currencies are initially recorded
in the functional currency by applying the exchange
rates ruling at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies
are retranslated at the rate of exchange ruling at the
balance date.
All exchange differences in the financial report are
taken to profit or loss.
Non-monetary items that are measured in terms of
historical cost in a foreign currency are translated
using the exchange rate as at the date of the initial
transaction.
Non-monetary items measured at fair value in a
foreign currency are translated using the exchange
rates at the date when the fair value was determined.
Translation differences on assets and liabilities carried
at fair value are reported as part of the fair value gain
or loss.
G. REVENUE RECOGNITION
Revenue from contracts with customers is measured
at fair value of the consideration received or receivable.
Amounts disclosed as revenue are net of returns, trade
allowances, rebates and amounts collected on behalf
of third parties. Contract liabilities are recognised where
applicable in relation to sales.
Point in time recognition - sale of goods – propulsion
& stablilisation
Revenue is recognised when the goods are delivered
and titles have passed, at which time all the following
conditions are satisfied:
• the Company has transferred to the buyer the
significant risks and rewards of ownership of the
goods;
• the Company retains neither continuing managerial
involvement to the degree usually associated with
ownership nor effective control over the goods
sold;
• the amount of revenue can be measured reliably;
• it is probable that the economic benefits associated
with the transaction will flow to the Company; and
• the costs incurred or to be incurred in respect of
the transaction can be measured reliably.
In the full-year ended 30 June 2017, management has
revised its methodology of amortisation of Product
Development. Product Development was previously
amortised over 10 years. The revised methodology is
to amortise Product Development based on units of
production to better reflect the pattern of consumption
of economic benefits by the Company over the
useful life. Amortisation of Product Development for
the year is $29,158. Amortisation under the previous
methodology would have been $390,848.
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible
temporary differences as management considers
that it is probable that sufficient future tax profits will
be available to utilise those temporary differences.
Significant management judgement is required to
determine the amount of deferred tax assets that can
be recognised, based upon the likely timing and the
level of future taxable profits.
Inventories
Management estimates the net realisable values
of inventories, taking into account the most reliable
evidence available at each reporting date. The future
realisation of these inventories may be affected by
future technology or other market-driven changes that
may reduce future selling prices.
Capitalisation of internally developed products
Distinguishing the research and development phases
of a new products 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.
E. SEGMENT REPORTING
Operating segments are reported in a manner
consistent with the internal reporting provided to the
chief operating decision maker. The chief operating
decision maker, who is responsible for allocating
resources and assessing performance of the operating
segments, has been identified as the Board of Directors
of VEEM Ltd.
The Board has determined the operating segments
based on the reports reviewed by the Board of
directors that are used to make strategic decision. The
entity does not have any operational segments with
discrete financial information.
The Board of Directors review internal management
reports on a monthly basis that are consistent
with the information provided in the statement
of comprehensive income, statement of financial
position and statement of cash flows. As a result no
reconciliation is required because the information
as presented is what is used by the Board to make
strategic decisions.
22 |
V E E M LT D
Over time recognition - Sale of goods and rendering of
services - mining & industrial engineering, propulsion
& stabilisation, and defence.
In determining whether performance obligations
are satisfied over time the company considers the
following:
• Legal control is often retained by the customer;
• VEEM products and services are highly
specialised and often do not have an alternate
use; and
• Contracts are established with customers so
that VEEM has an enforceable right to payment
for performance completed to date, including
profit margin.
Revenue is recognised by reference to the stage of
completion of the performance obligation. The stage of
completion of the performance obligation is determined
as follows:
• Contract income is recognised by reference to
the total actual costs incurred at the end of the
reporting period relative to the proportion of the
total costs expected to be incurred over the life of
the performance obligation;
• Servicing fees are recognised by reference to the
proportion of the total cost of providing the service
for the product sold; and
• Revenue from time and material contracts are
recognised at the contractual rates as labour hours
are delivered and direct expenses are incurred.
Interest income
Interest income from a financial asset is recognised
when it is probable that the economic benefits will flow
to the Company and the amount of revenue can be
reliably measured. Interest income is accrued on a time
basis, by reference to the principal outstanding and at
the effective interest rate applicable, which is the rate
that exactly discounts estimated future cash receipts
through the expected life of the financial asset to that
assets’ net carrying amount on initial recognition.
H. GOVERNMENT GRANTS
Grants from the government are recognised at their
fair value where there is a reasonable assurance that
the grant will be received and the Company will comply
with all attached conditions.
Government grants relating to costs are deferred
and recognised in the profit or loss over the period
necessary to match them with the costs that they are
intended to compensate.
I. BORROWING COSTS
Borrowing costs are capitalised that are directly
attributable to the acquisition, construction or
production of qualifying assets where the borrowing
cost is added to the cost of those assets until such
time as the assets are substantially ready for their
intended use or sale.
Investment income earned on the temporary
investment of specific borrowings pending their
expenditure on qualifying assets is deducted from the
borrowing costs eligible for capitalisation.
All other borrowing costs are recognised in profit or
loss in the period in which they are incurred.
J. LEASES
Leases are classified as finance leases whenever the
terms of the lease transfer substantially all the risks
and rewards of ownership to the lessee. All other leases
are classified as operating leases.
Assets held under finance leases are initially
recognised at their fair value or, if lower, the
present value of the minimum lease payments,
each determined at the inception of the lease. The
corresponding liability to the lessor is included in the
statement of financial position as a finance lease
obligation.
Lease payments are apportioned between finance
charges and reduction of the lease obligation so as to
achieve a constant rate of interest on the remaining
balance of the liability. Finance charges are charged
directly against income, unless they are directly
attributable to qualifying assets, in which case they are
capitalised in accordance with the general policy on
borrowing costs, refer Note 1(i).
Finance lease assets are depreciated on a straight line
basis over the estimated useful life of the asset.
Operating lease payments are recognised as an
expense on a straight line basis over the lease term,
except where another systematic basis is more
representative of the time pattern in which economic
benefits from the leased asset are consumed.
In the event that lease incentives are received to enter
into operating leases, such incentives are recognised
as a liability. The aggregate benefit of incentives is
recognised as a reduction of rental expense on a
straight-line basis, except where another systematic
basis is more representative of the time pattern in
which economic benefits from the leased asset are
consumed.
N OT E S TO T H E F I N A N C I A L S TAT E M E N T S
| 23
K. INCOME TAX
The income tax expense or benefit for the period is
the tax payable on the current period’s taxable income
based on the applicable income tax rate adjusted
by changes in deferred tax assets and liabilities
attributable to temporary difference and to unused tax
losses.
The current income tax charge is calculated on the
basis of the tax laws enacted or substantively enacted
at the end of the reporting period. Management
periodically evaluates positions taken in tax returns
with respect to situations in which applicable tax
regulation is subject to interpretation. It establishes
provisions where appropriate on the basis of amounts
expected to be paid to the tax authorities.
Current tax assets and liabilities for the current and
prior periods are measured at the amount expected to
be recovered from or paid to the taxation authorities.
The tax rates and tax laws used to compute the
amount are those that are enacted or substantively
enacted by the balance date.
Deferred income tax is provided on all temporary
differences at the balance date between the tax bases
of assets and liabilities and their carrying amounts for
financial reporting purposes.
Deferred income tax liabilities are recognised for all
taxable temporary differences except:
• when the deferred income tax liability arises from
the initial recognition of 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 profit nor taxable profit or loss; or
• when the taxable temporary difference is
associated with investments in subsidiaries,
associates or interests in joint ventures, and the
timing of the reversal of the temporary difference
can be controlled and it is probable that the
temporary difference will not reverse in the
foreseeable future.
Deferred income tax assets are recognised for all
deductible temporary differences, carry-forward of
unused tax assets and unused tax losses, to the extent
that it is probable that taxable profit will be available
against which the deductible temporary differences
and the carry-forward of unused tax credits and
unused tax losses can be utilised, except:
• when the deferred income tax asset relating to
the deductible temporary difference arises from
the initial recognition of an asset or liability in a
transaction that is not a business combination and,
at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss.
The carrying amount of deferred income tax assets
is reviewed at each balance date and reduced to the
extent that it is no longer probable that sufficient
taxable profit will be available to allow all or part of the
deferred income tax asset to be utilised.
Unrecognised deferred income tax assets are
reassessed at each balance date and are recognised
to the extent that it has become probable that future
taxable profit will allow the deferred tax asset to be
recovered.
Deferred income tax assets and liabilities are measured
at the tax rates that are expected to apply to the year
when the asset is realised or the liability is settled,
based on tax rates (and tax laws) that have been
enacted or substantively enacted at the balance date.
Income taxes relating to items recognised directly in
equity are recognised in equity and not in profit or loss.
Deferred tax assets and deferred tax liabilities are
offset only if a legally enforceable right exists to set
off current tax assets against current tax liabilities and
the deferred tax assets and liabilities relate to the same
taxable entity and the same taxation authority.
L. OTHER TAXES
Revenues, expenses and assets are recognised net of
the amount of GST except:
• when the GST incurred on a purchase of goods
and services is not recoverable from the taxation
authority, in which case the GST is recognised as
part of the cost of acquisition of the asset or as
part of the expense item as applicable; and
• receivables and payables, which are stated with the
amount of GST included.
The net amount of GST recoverable from, or payable to,
the taxation authority is included as part of receivables
or payables in the statement of financial position.
Cash flows are included in the statement of cash flows
on a gross basis and the GST component of cash flows
arising from investing and financing activities, which is
recoverable from, or payable to, the taxation authority
are classified as operating cash flows.
Commitments and contingencies are disclosed net of
the amount of GST recoverable from, or payable to, the
taxation authority.
M. IMPAIRMENT OF TANGIBLE AND
INTANGIBLE ASSETS
The Company assesses at each balance date whether
there is an indication that an asset may be impaired. If
any such indication exists, or when annual impairment
testing for an asset is required, the Company makes an
estimate of the asset’s recoverable amount. An asset’s
recoverable amount is the higher of its fair value less
costs to sell and its value in use and is determined for
an individual asset, unless the asset does not generate
cash inflows that are largely independent of those from
other assets or group of assets and the asset’s value in
use cannot be estimated to be close to its fair value. In
such cases the asset is tested for impairment as part
of the cash-generating unit to which it belongs. When
the carrying amount of an asset or cash-generating
unit exceeds its recoverable amount, the asset or
24 |
V E E M LT D
cash-generating unit is considered impaired and is
written down to its recoverable amount.
In assessing value in use, the estimated future cash
flows are discounted to their present value using a
pre-tax discount rate that reflects current market
assessments of the time value of money and the risks
specific to the asset. Impairment losses relating to
continuing operations are recognised in those expense
categories consistent with the function of the impaired
asset unless the asset is carried at revalued amount
(in which case the impairment loss is treated as a
revaluation decrease).
An assessment is also made at each balance date
as to whether there is any indication that previously
recognised impairment losses may no longer exist
or may have decreased. If such indication exists,
the recoverable amount is estimated. A previously
recognised impairment loss is reversed only if there has
been a change in the estimates used to determine the
asset’s recoverable amount since the last impairment
loss was recognised. If that is the case the carrying
amount of the asset is increased to its recoverable
amount. That increased amount cannot exceed the
carrying amount that would have been determined,
net of depreciation, had no impairment loss been
recognised for the asset in prior years. Such reversal is
recognised in profit or loss unless the asset is carried
at revalued amount, in which case the reversal is
treated as a revaluation increase. After such a reversal
the depreciation charge is adjusted in future periods to
allocate the asset’s revised carrying amount, less any
residual value, on a systematic basis over its remaining
useful life.
N. CASH AND CASH EQUIVALENTS
Cash comprises cash at bank and in hand. Cash
equivalents are short term, highly liquid investments
that are readily convertible to known amounts of
cash and which are subject to an insignificant risk of
changes in value. Bank overdrafts are shown within
borrowings in current liabilities in the statement of
financial position.
all amounts due according to the original contractual
terms. Factors considered by the Company in making
this determination include known significant financial
difficulties of the debtor, review of financial information
and significant delinquency in making contractual
payments to the Company. The impairment allowance
is set equal to the difference between the carrying
amount of the receivable and the present value of
estimated future cash flows, discounted at the original
effective interest rate. Where receivables are short-
term discounting is not applied in determining the
allowance.
The amount of the impairment loss is recognised
in the statement of comprehensive income within
other expenses. When a trade receivable for which an
impairment allowance had been recognised becomes
uncollectible in a subsequent period, it is written off
against the allowance account. Subsequent recoveries
of amounts previously written off are credited against
other expenses in the statement of comprehensive
income.
P. INVENTORIES
i. Raw material, stores and work in progress
Raw materials, stores and work in progress are
stated at the lower of cost and net realisable value.
Cost comprises direct materials, direct labour and an
appropriate proportion of variable and fixed overhead
expenditure, the latter being allocated on the basis
of normal operating capacity. Costs are assigned to
individual items of stock mainly on the basis of average
cost.
ii. Contract work in progress
Contract work in progress is stated at cost plus
attributable profit to date (based on percentage of
completion of each contract) less progress billings.
Cost includes all costs directly related to specific
contracts and an allocation of overhead expenses
incurred in connection with the company’s contract
operations. Where a loss on completion is indicated
that loss is brought to account in the current year.
For the purposes of the statement of cash flows,
cash and cash equivalents consist of cash and cash
equivalents as defined above, net of outstanding bank
overdrafts.
Net realisable value is the estimated selling price in
the ordinary course of business, less estimated costs
of completion and the estimated costs necessary to
make the sale.
O. TRADE AND OTHER RECEIVABLES
Trade receivables are measured on initial recognition at
fair value and are subsequently measured at amortised
cost using the effective interest rate method, less
any allowance for impairment. Trade receivables are
generally due for settlement within periods ranging
from15 days to 60 days.
Impairment of trade receivables is continually reviewed
and those that are considered to be uncollectible are
written off by reducing the carrying amount directly.
An allowance account is used when there is objective
evidence that the Company will not be able to collect
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Q. FINANCIAL ASSETS
Financial assets in the scope of AASB 139 Financial
Instruments: Recognition and Measurement are
classified as either financial assets at fair value through
profit or loss, loans and receivables, held-to-maturity
investments, or available-for-sale investments, as
appropriate. When financial assets are recognised
initially, they are measured at fair value plus, in the
case of investments not at fair value through profit
or loss, directly attributable transaction costs. The
Company determines the classification of its financial
assets after initial recognition and, when allowed and
appropriate, re-evaluates this designation at each
financial year-end. All regular way purchases and sales
of financial assets are recognised on the trade date
i.e. the date that the Company commits to purchase
the asset. Regular way purchases or sales are
purchases or sales of financial assets under contracts
that require delivery of the assets within the period
established generally by regulation or convention in the
marketplace.
Financial assets at fair value through profit or loss
Financial assets classified as held for trading are
included in the category ‘financial assets at fair value
through profit or loss’ where applicable. Financial assets
are classified as held for trading if they are acquired
for the purpose of selling in the near term. Derivatives,
where applicable, are also classified as held for trading
unless they are designated as effective hedging
instruments. Gains or losses on investments held for
trading are recognised in profit or loss.
Held-to-maturity investments
Non-derivative financial assets with fixed or
determinable payments and fixed maturity are
classified as held-to-maturity when the Company
has the positive intention and ability to hold to
maturity. Investments intended to be held for an
undefined period are not included in this classification.
Investments that are intended to be held-to-maturity,
such as bonds, are subsequently measured at
amortised cost. This cost is computed as the amount
initially recognised minus principal repayments, plus or
minus the cumulative amortisation using the effective
interest method of any difference between the initially
recognised amount and the maturity amount. This
calculation includes all fees and points paid or received
between parties to the contract that are an integral
part of the effective interest rate, transaction costs
and all other premiums and discounts. For investments
carried at amortised cost, gains and losses are
recognised in profit or loss when the investments
are derecognised or impaired, as well as through the
amortisation process.
If the Company were to sell other than an insignificant
amount of held-to-maturity financial assets, the whole
category would be tainted and reclassified as available-
for-sale.
Loans and receivables
Loans and receivables are non-derivative financial
assets with fixed or determinable payments that are
not quoted in an active market. Such assets are carried
at amortised cost using the effective interest method.
Gains and losses are recognised in profit or loss when
the loans and receivables are derecognised or impaired,
as well as through the amortisation process.
Available-for-sale investments
Available-for-sale investments are those non-derivative
financial assets that are designated as available-for-
sale or are not classified as any of the three preceding
categories. After initial recognition available-for sale
investments are measured at fair value with gains or
losses being recognised as a separate component of
equity until the investment is derecognised or until
the investment is determined to be impaired, at which
time the cumulative gain or loss previously reported in
equity is recognised in profit or loss.
The fair value of investments that are actively traded
in organised financial markets is determined by
reference to quoted market bid prices at the close
of business on the balance date. For investments
with no active market, fair value is determined using
valuation techniques. Such techniques include using
recent arm’s length market transactions, reference to
the current market value of another instrument that is
substantially the same, discounted cash flow analysis
and option pricing models.
R. DERECOGNITION OF FINANCIAL ASSETS
AND FINANCIAL LIABILITIES
Financial assets
A financial asset (or, where applicable, a part of a
financial asset or part of a Company of similar financial
assets) is de-recognised when:
• the rights to receive cash flows from the asset
have expired;
• the Company retains the right to receive cash flows
from the asset, but has assumed an obligation to
pay them in full without material delay to a third
party under a ‘pass-through’ arrangement; or
• the Company has transferred its rights to receive
cash flows from the asset and either:
• has transferred substantially all the risks and
rewards of the asset, or
• has neither transferred nor retained
substantially all the risks and rewards of the
asset, but has transferred
control of the asset.
When the Company has transferred its rights to receive
cash flows from an asset and has neither transferred
nor retained substantially all the risks and rewards
of the asset nor transferred control of the asset, the
asset is recognised to the extent of the Company’s
continuing involvement in the asset. Continuing
involvement that takes the form of a guarantee over
the transferred asset is measured at the lower of the
original carrying amount of the asset and the maximum
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V E E M LT D
If, in a subsequent period, the amount of the
impairment loss decreases and the decrease can be
related objectively to an event occurring after the
impairment was recognised, the previously recognised
impairment loss is reversed. Any subsequent reversal
of an impairment loss is recognised in profit or loss, to
the extent that the carrying value of the asset does not
exceed its amortised cost at the reversal date.
Financial assets carried at cost
If there is objective evidence that an impairment loss
has been incurred on an unquoted equity instrument
that is not carried at fair value (because its fair value
cannot be reliably measured), or on a derivative asset
that is linked to and must be settled by delivery of
such an unquoted equity instrument, the amount of
the loss is measured as the difference between the
asset’s carrying amount and the present value of
estimated future cash flows, discounted at the current
market rate of return for a similar financial asset. Such
impairment loss shall not be reversed in subsequent
periods.
Available-for-sale investments
If there is objective evidence that an available-for-
sale investment is impaired, an amount comprising
the difference between its cost (net of any principal
repayment and amortisation) and its current fair value,
less any impairment loss previously recognised in profit
or loss, is transferred from equity to the statement of
comprehensive income. Reversals of impairment losses
for equity instruments classified as available-for-sale
are not recognised in profit. Reversals of impairment
losses for debt instruments are reversed through profit
or loss if the increase in an instrument’s fair value can
be objectively related to an event occurring after the
impairment loss was recognised in profit or loss.
amount of consideration received that the Company
could be required to repay.
When continuing involvement takes the form of a
written and/or purchased option (including a cash-
settled option or similar provision) on the transferred
asset, the extent of the Company’s continuing
involvement is the amount of the transferred asset that
the Company may repurchase, except that in the case
of a written put option (including a cash-settled option
or similar provision) on an asset measured at fair value,
the extent of the Company’s continuing involvement is
limited to the lower of the fair value of the transferred
asset and the option exercise price.
Financial liabilities
A financial liability is derecognised when the obligation
under the liability is discharged or cancelled or expires.
When an existing financial liability is replaced by
another from the same lender on substantially
different terms, or the terms of an existing liability
are substantially modified, such an exchange or
modification is treated as a derecognition of the original
liability and the recognition of a new liability, and
the difference in the respective carrying amounts is
recognised in profit or loss.
S. IMPAIRMENT OF FINANCIAL ASSETS
The Company assesses at each balance date whether
a financial asset or Company of financial assets is
impaired.
Financial assets carried at amortised cost
If there is objective evidence that an impairment loss
on loans and receivables carried at amortised cost has
been incurred, the amount of the loss is measured as
the difference between the asset’s carrying amount
and the present value of estimated future cash flows
(excluding future credit losses that have not been
incurred) discounted at the financial asset’s original
effective interest rate (i.e. the effective interest rate
computed at initial recognition). The carrying amount
of the asset is reduced either directly or through use
of an allowance account. The amount of the loss is
recognised in profit or loss.
The Company first assesses whether objective
evidence of impairment exists individually for
financial assets that are individually significant, and
individually or collectively for financial assets that
are not individually significant. If it is determined
that no objective evidence of impairment exists for
an individually assessed financial asset, whether
significant or not, the asset is included in a Company of
financial assets with similar credit risk characteristics
and that Company of financial assets is collectively
assessed for impairment. Assets that are individually
assessed for impairment and for which an impairment
loss is or continues to be recognised are not included in
a collective assessment of impairment.
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T. PROPERTY, PLANT AND EQUIPMENT
Plant and equipment is stated at cost less accumulated
depreciation and any accumulated impairment losses.
Such cost includes the cost of replacing parts that are
eligible for capitalisation when the cost of replacing the
parts is incurred. Similarly, when each major inspection
is performed, its cost is recognised in the carrying
amount of the plant and equipment as a replacement
only if it is eligible for capitalisation.
Depreciation is calculated on a straight-line basis over
the estimated useful life of the assets as follows:
Motor vehicles
3-10 years
Plant and equipment
5-30 years
Computer equipment
3-5 years
The assets’ residual values, useful lives and
amortisation methods are reviewed, and adjusted if
appropriate, at each financial year end.
Impairment
The carrying values of plant and equipment are
reviewed for impairment at each balance date, with
recoverable amount being estimated when events or
changes in circumstances indicate that the carrying
value may be impaired.
The recoverable amount of plant and equipment is the
higher of fair value less costs to sell and value in use. In
assessing value in use, the estimated future cash flows
are discounted to their present value using a pre-tax
discount rate that reflects current market assessments
of the time value of money and the risks specific to the
asset.
For an asset that does not generate largely
independent cash inflows, recoverable amount is
determined for the cash- generating unit to which the
asset belongs, unless the asset’s value in use can be
estimated to approximate fair value.
An impairment exists when the carrying value of an
asset or cash-generating unit exceeds its estimated
recoverable amount. The asset or cash-generating unit
is then written down to its recoverable amount.
For plant and equipment, impairment losses are
recognised in the statement of comprehensive income
in the cost of sales line item. However, because land
and buildings are measured at revalued amounts,
impairment losses on land and buildings are treated as
a revaluation decrement.
Derecognition and disposal
An item of property, plant and equipment is
derecognised upon disposal or when no further future
economic benefits are expected from its use or
disposal.
Any gain or loss arising on derecognition of the asset
(calculated as the difference between the net disposal
proceeds and the carrying amount of the asset)
is included in profit or loss in the year the asset is
derecognised.
U. INTANGIBLE ASSETS
Intangible assets acquired separately
Intangible assets acquired separately are recorded at
cost less accumulated amortisation and impairment.
Amortisation is charged on a straight-line basis over
their estimated useful lives. The estimated useful life
and amortisation method is reviewed at the end of
each annual reporting period, with any changes in
these accounting estimates being accounted for on a
prospective basis.
Internally generated intangible assets – research and
development expenditure
Expenditure on research activities is recognised as
an expense in the period in which it is incurred. Where
no internally- generated intangible asset can be
recognised, development expenditure is recognised as
an expense in the period as incurred.
An intangible asset arising from development (or
from the development phase of an internal project) is
recognised if, and only if, all of the following have been
demonstrated:
• The technical feasibility of completing the intangible
asset so that it will be available for use or sale;
• The intention to complete the intangible asset and
use or sell it;
• The ability to use or sell the intangible asset;
• How the intangible asset will generate probable
future economic benefits;
• The availability of adequate technical, financial and
other resources to complete development and to
use or sell the intangible asset; and
• The ability to measure reliably the expenditure
attributable to the intangible asset during its
development.
The amount initially recognised for internally-generated
intangible assets is the sum of the expenditure incurred
from the date when the intangible asset first meets the
recognition criteria listed above.
Subsequent to initial recognition, internally-generated
intangible assets are reported at cost less accumulated
amortisation and accumulated impairment losses,
on the same basis as intangible assets acquired
separately.
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V E E M LT D
X. PROVISIONS
Provisions are recognised when the Company has a
present obligation (legal or constructive) as a result of
a past event, it is probable that an outflow of resources
embodying economic benefits will be required to settle
the obligation and a reliable estimate can be made
of the amount of the obligation. Provisions are not
recognised for future operating losses.
When the Company expects some or all of a provision
to be reimbursed, for example under an insurance
contract, the reimbursement is recognised as a
separate asset but only when the reimbursement is
virtually certain. The expense relating to any provision
is presented in the statement of comprehensive
income net of any reimbursement.
Provisions are measured at the present value or
management’s best estimate of the expenditure
required to settle the present obligation at the end of
the reporting period.
If the effect of the time value of money is material,
provisions are discounted using a current pre-tax rate
that reflects the risks specific to the liability.
When discounting is used, the increase in the provision
due to the passage of time is recognised as an interest
expense.
Onerous contracts
Present obligations arising under onerous contracts are
recognised and measured as provisions. An onerous
contract is considered to exist where the Company
has a contract under which the unavoidable costs of
meeting the obligations under the contract exceed the
economic benefits expected to be received from the
contract.
Warranties
Provisions for the expected cost of warranty
obligations under local sale of goods legislation are
recognised at the date of sale of the relevant products,
at the Directors’ best estimate of the expenditure
required to settle the Company’s obligation.
The following useful lives are used in the calculation
of amortisation:
Patents
Product Development
Expenditure
10 – 20 years
Units of
production
V. TRADE AND OTHER PAYABLES
Trade payables and other payables are carried at
amortised cost and represent liabilities for goods and
services provided to the Company prior to the end of
the financial year that are unpaid and arise when the
Company becomes obliged to make future payments
in respect of the purchase of these goods and services.
Trade and other payables are presented as current
liabilities unless payment is not due within 12 months.
W. BORROWINGS
Borrowings are initially recognised at fair value,
net of transaction costs incurred. Borrowings are
subsequently measured at amortised cost. Any
difference between the proceeds (net of transaction
costs) and the redemption amount is recognised
in profit or loss over the period of the borrowings
using the effective interest method. Fees paid on
the establishment of loan facilities are recognised as
transaction costs of the loan to the extent that it is
probable that some or all of the facility will be drawn
down. In this case, the fee is deferred until the draw
down occurs. To the extent there is no evidence that
it is probable that some or all of the facility will be
drawn down, the fee is capitalised as a prepayment for
liquidity services and amortised over the period of the
facility to which it relates.
Borrowings are removed from the statement of
financial position when the obligation specified in
the contract is discharged, cancelled or expired. The
difference between the carrying amount of a financial
liability that has been extinguished or transferred to
another party and the consideration paid, including any
non-cash assets transferred or liabilities assumed, is
recognised in profit or loss as other income or finance
costs.
Borrowings are classified as current liabilities unless
the Company has an unconditional right to defer
settlement of the liability for at least 12 months after
the reporting period.
N OT E S TO T H E F I N A N C I A L S TAT E M E N T S
| 29
by the weighted average number of ordinary shares,
adjusted for any bonus element.
Diluted earnings per share are calculated, where
applicable, as net profit attributable to members of the
parent, adjusted for:
• costs of servicing equity (other than dividends) and
preference share dividends;
• the after-tax effect of dividends and interest
associated with dilutive potential ordinary shares
that have been recognised as expenses; and
• other non-discretionary changes in revenues or
expenses during the period that would result from
the dilution of potential ordinary shares; divided by
the weighted average number of ordinary shares
and dilutive potential ordinary shares, adjusted for
any bonus element.
AB. GOING CONCERN
The financial report has been prepared on the going
concern basis, which contemplates the continuity of
normal business activity and the realisation of assets
and settlements of liabilities in the normal course of
business.
At balance date, the Company had a working capital
surplus of $5,891,089. The Board considers that
based on its assessment of operating cash flows, it is
appropriate to the Company’s current circumstances
to prepare its financial statements on a going concern
basis.
Y. EMPLOYEE LEAVE BENEFITS
Wages, salaries, annual leave and sick leave
Liabilities accruing to employees in respect of wages
and salaries, annual leave, long service leave and sick
leave expected to be settled within 12 months of
the balance date are recognised in other payables in
respect of employees’ services up to the balance date.
They are measured at the amounts expected to be
paid when the liabilities are settled. Liabilities for non-
accumulating sick leave are recognised when the leave
is taken and are measured at the rates paid or payable.
Liabilities accruing to employees in respect of wages
and salaries, annual leave, long service leave and sick
leave not expected to be settled within 12 months
of the balance date are recognised in non-current
liabilities in respect of employees’ services up to the
balance date. They are measured as the present value
of the estimated future outflows to be made by the
Company.
Long service leave
The liability for long service leave is recognised in the
provision for employee benefits and measured as the
present value of expected future payments to be made
in respect of services provided by employees up to
the balance date. Consideration is given to expected
future wage and salary levels, experience of employee
departures, and period of service. Expected future
payments are discounted using market yields at the
balance date on national government bonds with terms
to maturity and currencies that match, as closely as
possible, the estimated future cash outflows.
z. DIVIDENDS
Provision is made for the amount of any dividend
declared, being appropriately authorised and no longer
at the discretion of the entity, on or before the end of
the reporting period but not distributed at the end of
the reporting period.
AA. EARNINGS PER SHARE
Basic earnings per share is calculated as net profit
attributable to members of the parent, adjusted to
exclude any costs of servicing equity (other than
dividends) and preference share dividends, divided
30 |
V E E M LT D
NOTE 2: REVENUE AND EXPENSES
Revenue from contracts with customers
Sales revenue
Revenue – point in time
Revenue – over time
Other revenue
Apprentice subsidies
Commissions received
Interest received
Scrap metal
2017($)
2016($)
1,740,511
15,876
36,306,980
41,345,272
14,000
850
12,279
7,986
-
885
2,710
5,387
38,082,604
41,370,130
The geographic distribution of sales for the FY16/17
was approximately 68% derived within Australia and
the remaining 32% were derived predominantly from
the USA, UK, Italy and NZ.
Contracts are received and executed generally within
12 months and hence are considered short term
contracts. Period contracts (those that extend greater
than 1 year) with customers are executed by discrete
purchase orders for required shipments and hence still
fall within the definition for short term contracts.
All sales are generated by direct contract with
customers. Sales agents are utilised in Europe to
introduce enquiries and leads and contracts are then
established direct with the buyer. Where distributors
are utilised the entity purchases and contracts directly
with VEEM Ltd.
During the year, the Company recognised revenue
of $10,231,649 in relation to the prior years’ work in
progress.
The Company has progress payments at 30 June
2017 of $1,775,114 (2016: $3,887,231).
The Company has contract assets, being work in
progress (overtime) at 30 June 2017 of $3,060,509
(2016: $4,631,892).
There are no contract liabilities at balance date (30
June 2016: $Nil) as a result of first time application of
AASB 15.
The Company will recognise revenue from contracts
with customers based on the following performance:
• the completion of the contracted work-scope
following factory acceptance testing in accordance
with contract terms and conditions and
• when applicable, completion of contracted
milestones and transfer of title generally based on:
milestone 1 - material acquisition, and/or
milestone 2 - completion of casting metal pour,
and/or
milestone 3 - factory acceptance testing (FAT)
The majority of customer contracts are from the
private sector and this accounts for approximately
80% of the revenue during FY16/17. Sales to quasi-
government and government instrumentalities
accounted for 18% and 2% respectively.
N OT E S TO T H E F I N A N C I A L S TAT E M E N T S
| 31
OTHER INCOME
Other income
Foreign exchange gains/losses (net)
OTHER EXPENSES
Insurance
Advertising and marketing
Travel
Bank Charges
Safety and first aid
Motor vehicle expenses
Accounting and secretarial
Telephone expenses
Employee related expenses
Legal expenses
Other general expenses
2017 ($)
30,989
161,544
192,533
2017 ($)
276,026
332,739
193,372
141,368
75,243
28,712
141,685
49,845
82,784
74,111
334,476
1,730,361
2016 ($)
34,595
31,572
66,167
2016 ($)
256,985
168,496
161,250
108,067
66,449
50,559
63,268
36,978
104,433
91,302
506,998
1,614,785
NOTE 3: INCOME TAX
Income tax recognised in profit or loss.
The major components of tax expense are:
Current tax expense
Deferred tax expense/(income) relating to the origination and
reversal of temporary differences
2017 ($)
476,056
317,286
2016 ($)
995,059
132,670
Total tax expense
793,342
1,127,729
The prima facie income tax expense on pre-tax accounting profit from operations reconciles to the income tax
expense in the financial statements as follows:
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V E E M LT D
Accounting profit before income tax
Income tax expense calculated at 30%
Tax effect of amounts which are not deductible/(taxable) in calculating
taxable income:
• Effect of expenses that are not deductible in determining taxable
profit
• Effect of concessions – research and development
Income tax expense reported in the statement of
comprehensive income
2017 ($)
2016 ($)
4,642,092
6,142,579
1,392,628
1,842,774
-
-
102,982
8,518
(702,268)
(723,563)
793,342
1,127,729
The tax rate used in the above reconciliation is the corporate tax rate of 30% payable by Australian corporate
entities on taxable profits under Australian tax law. There has been no change in this tax rate since the previous
reporting period.
CURRENT TAX LIABILITIES COMPRISE:
Income tax payable
DEFERRED TAX ASSETS COMPRISE:
Annual leave payable
Provision for long service leave
Accrued expenses
Unrealised foreign exchange (gain) / loss
Black hole expenditure and borrowing costs
Patents
DEFERRED TAX LIABILITIES COMPRISE:
Depreciable property, plant and equipment
Patents
2017 ($)
373,431
2016 ($)
858,499
2017 ($)
307,226
329,595
54,522
(6,445)
346,373
-
2016 ($)
272,097
303,421
48,014
2,198
-
82
1,031,271
625,812
2017 ($)
676,523
84,749
2016 ($)
598,370
74,729
761,272
673,099
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| 33
RECONCILIATION OF DEFERRED TAX ASSETS/ (LIABILITIES):
30 June 2017
Accrued expenses
Annual leave payable
Provision for long service leave
Property, plant and equipment
Unrealised foreign exchange (gain) / loss
Black hole expenditure and borrowing costs
Patents
30 June 2016
Accrued expenses
Annual leave payable
Provision for long service leave
Property, plant and equipment
Unrealised foreign exchange (gain) / loss
Black hole expenditure and borrowing costs
Patents
OPENING
BALANCE ($)
CHARGED TO
INCOME ($)
CLOSING
BALANCE ($)
48,014
272,097
303,421
(598,370)
2,198
-
(74,647)
(47,287)
6,508
35,129
26,174
(78,153)
(8,643)
346,373
(10,102)
317,286
54,522
307,226
329,595
(676,523)
(6,445)
346,373
(84,749)
269,999
OPENING
BALANCE ($)
CHARGED TO
INCOME ($)
CLOSING
BALANCE ($)
86,587
230,296
284,243
(716,202)
(4,870)
1,559
(61,570)
(179,957)
(38,573)
41,801
19,178
48,014
272,097
303,421
117,832
(598,370)
7,068
(1,559)
(13,077)
132,670
2,198
-
(74,647)
(47,287)
NOTE 4: SEGMENT REPORTING
Operating segments are reported in a manner
consistent with the internal reporting provided to the
chief operating decision maker. The chief operating
decision maker, who is responsible for allocating
resources and assessing performance of the operating
segments, has been identified as the board of Directors
of VEEM Ltd.
The Board has determined the operating segments
based on the reports reviewed by the Board of
directors that are used to make strategic decision. The
entity does not have any operational segments with
discrete financial information.
The Board of Directors review internal management
reports on a monthly basis that are consistent
with the information provided in the statement
of comprehensive income, statement of financial
position and statement of cash flows. As a result no
reconciliation is required because the information
as presented is what is used by the Board to make
strategic decisions.
The Company has two customers where the revenue
from that customer was in excess of 10% of the
Company’s revenue. Customer A generated 19.8%
(2016: 19.5%) of the Company’s revenue for the year
and Customer B generated 17.7% (2016: 15.4%) of the
Company’s revenue for the year.
The total turnover for VEEM Ltd for FY2017 was
$38,047,491. This can be broken down in to the
following major sales categories. Engineering Services
is the mining and industrial engineering manufacture
and service portion of the business and sales for
FY2017 were $9,423,024. Propulsion and stabilisation
consists of the manufacture of new propellers, shaft
lines, gyro stabilisers and fin stabilisers. The sales in
this category were $21,885,080. Defence related
sales for FY2017 totaled $14,299,173 with $7,559,786
of those sales being both within the defence and
propulsion/stabilisation category.
34 |
V E E M LT D
NOTE 5: EARNINGS PER SHARE
BASIC EARNINGS PER SHARE
Basic earnings per share
There is no diluted earnings per share
Basic earnings per share
2017
2016
Cents per share
Cents per share
3.21
6.04
The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share
is as follows:
Earnings
Earnings from continuing operations
3,848,750
5,014,850
2017($)
2016($)
Weighted average number of ordinary shares for the purpose of basic
earnings per share
NOTE 6: DIVIDENDS
Fully franked dividends paid
Fully unfranked dividends paid
Total dividends paid
2017($)
Number
2016($)
Number
119,893,048
82,955,330
2017($)
2016($)
142,000
1,310,000
3,858,000
2,190,000
4,000,000
3,500,000
Balance of franking account at period end adjusted for franking credits arising from the payment of provision for
income tax and dividends recognised as receivables, franking debits arising from payment of proposed dividends
and franking credits that may be prevented from distribution in a subsequent financial year.
FRANKING ACCOUNT BALANCE
The amount of franking credits available for subsequent financial years are:
Franking account balance as at the end of the financial year at 30%
(2016: 30%)
1,539,053
859,206
The tax rate at which paid dividends have been franked is 30% (2016: 30%).
2017($)
2016($)
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| 35
NOTE 7: CASH AND CASH EQUIVALENTS
Cash at bank
586,786
646,170
2017($)
2016($)
Cash on hand
800
800
587,586
646,970
Cash at bank earns interest at floating rates based on daily bank deposit rates.
Reconciliation to the Statement of Cash Flows:
For the purposes of the statement of cash flows, cash and cash equivalents comprise cash on hand and at bank
and investments in money market instruments, net of outstanding bank overdrafts.
Cash and cash equivalents as shown in the statement of cash flows is reconciled to the related items in the
statement of financial position as follows:
Cash and cash equivalents
587,586
646,970
Bank overdraft
(242,654)
-
344,932
646,970
2017($)
2016($)
Non-cash financing and investing activities
The Company purchased assets with a value of $4,365,325 which were financed through hire purchase.
Cash balances not available for use
All cash balances are available for use
Reconciliation of profit for the year to net cash flows from operating activities
Net profit for the year
Depreciation and amortisation expense
(Gain)/loss on sale or disposal of non-current assets, property, plant
& equipment
Provision for employee leave benefits
Foreign exchange (gain)/loss
Interest income received and receivable
2017($)
3,848,750
1,441,418
(9,422)
87,247
(161,544)
2016($)
5,014,850
2,027,520
45,349
63,927
(31,572)
(Increase)/decrease in assets:
Trade and other receivables
127,573
(2,475,430)
Inventories
(2,452,304)
1,568,955
Increase/(decrease) in liabilities:
Trade and other payables
Current and deferred tax
GST payable
380,547
(802,357)
129,732
1,143,932
566,591
98,827
Net cash from operating activities
2,589,640
8,022,949
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V E E M LT D
NOTE 8: TRADE AND OTHER RECEIVABLES
Trade receivables (i)
7,787,925
7,519,119
GST recoverable
162,905
Loans to related entities (ii)
Other receivables
-
358
168,176
2,750,061
8,036
2017($)
2016($)
7,951,188
10,445,392
i.
the average credit period on sales of goods and rendering of services is 15-60 days
Aging of past due but not impaired
60 – 90 days
90 – 120 days
Total
2017($)
553,738
176,721
730,459
2016($)
550,833
112,041
662,874
In determining the recoverability of a trade receivable, the Company considers any changes in the credit quality of
the trade receivable from the date credit was initially granted up to the balance date. The concentration of credit
risk is limited due to the customer base being large and unrelated. Accordingly, the Directors believe that there is
no further credit provision required in excess of the allowance for impairment.
(ii) For details of the terms and conditions of related party receivables refer to note 19.
NOTE 9: INVENTORIES
Work in progress – over time
Work in progress – point in time
Less: progress billings
Goods for resale, raw materials and stores
2017($)
2016($)
3,060,509
4,631,892
1,806,562
2,324,251
(1,775,114)
(3,887,231)
3,091,958
3,068,912
5,337,185
2,907,928
8,429,143
5,976,840
Inventory write-downs charged to cost of sales totaled $Nil (2016 Nil)
During the year, the Company recognised revenue of $10,231,649 in relation to the prior years’ work in progress
Included in goods for resale, raw materials and stores inventories are inventories carried at net realisable value with
a carrying value of $962,676. The total impact to profit or loss is $13,738.
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| 37
NOTE 10: OTHER ASSETS
Prepayments
NOTE 11: PROPERTY, PLANT AND EQUIPMENT
2017($)
366,051
2016($)
584,300
PLANT AND
EQUIPMENT ($)
MOTOR
VEHICLES ($)
CAPITAL WORK
IN PROGRESS
($)
COMPUTER
EQUIPMENT
($)
TOTAL ($)
As at 30 June 2016
Cost
29,367,843
1,545,979
315,958
1,238,179
32,467,959
Accumulated depreciation
(18,776,718)
(799,303)
-
(1,151,705)
(20,727,726)
Closing carrying amount
10,591,125
746,676
315,958
86,474
11,740,233
Year ended 30 June 2017
Opening carrying amount
10,591,125
746,676
Additions
Disposals
Transfers
4,918,141
22,541
315,958
464,955
-
86,474
11,740,233
155,973
5,561,610
-
-
(585,657)
(315,958)
(585,657)
-
-
-
(315,958)
Depreciation charge
(1,330,291)
(50,785)
-
(31,184)
(1,412,260)
Closing carrying amount
14,178,975
132,775
464,955
211,263
14,987,968
As at 30 June 2017
Cost
34,285,984
560,932
464,955
1,394,152
36,706,023
Accumulated Depreciation
(20,107,009)
(428,157)
-
(1,182,889)
(21,718,055)
Carrying amount
14,178,975
132,775
464,955
211,263
14,987,968
The carrying value of plant and equipment held under finance leases and hire purchase contracts at 30 June
2017 is $4,241,747 (2016: $1,575,320). Additions during the year include $4,365,325 (2016: $695,441) of plant and
equipment held under finance leases and hire purchase contracts.
Leased assets and assets under hire purchase contracts are pledged as security for the related finance lease and
hire purchase liabilities.
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V E E M LT D
NOTE 12: INTANGIBLE ASSETS AND GOODWILL
As at 30 June 2016
Cost
Accumulated amortisation
Closing carrying amount
Year ended 30 June 2017
Opening carrying amount
Net additions
Amortisation charge
Closing carrying amount
As at 30 June 2017
Cost
Accumulated amortisation
Carrying amount
OTHER
INTELLECTUAL
PROPERTY ($)
PRODUCT
DEVELOPMENT ($)
TOTAL ($)
382,127
-
7,338,933
(762,350)
7,721,060
(762,350)
382,127
6,576,583
6,958,710
382,127
-
-
6,576,583
3,897,091
(29,158)
6,958,710
3,897,091
(29,158)
382,127
10,444,516
10,826,643
382,127
11,236,023
11,618,150
-
(791,507)
(791,507)
382,127
10,444,516
10,826,643
No impairment loss was recognised in the 2017 financial year (2016: $Nil).
NOTE 13: TRADE AND OTHER PAYABLES (CURRENT)
Trade payables (i)
Annual leave payable
GST Payable
Other creditors
2017($)
3,125,221
1,024,088
451,025
554,775
2016($)
2,812,140
906,990
326,564
604,442
5,155,109
4,650,136
i. Trade payables are non-interest bearing and are normally settled on 30-day terms.
Information regarding the interest rate, foreign exchange and liquidity risk exposure is set out in Note 17.
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| 39
NOTE 14: BORROWINGS
Current
Bank overdraft (a)
Bill facility (a)
Hire purchase liability
Less: Unexpired charges
Non-current
Hire purchase liability
Less: Unexpired charges
2017($)
2016($)
242,654
3,500,000
1,249,894
(176,858)
4,815,690
3,372,898
(202,988)
3,169,910
-
4,000,000
925,807
(56,989)
4,868,818
764,606
(65,363)
699,243
(a) The bank overdraft and bill facility are secured by a registered first mortgage over the assets and undertakings
of the Company.
The Company has a Multi Option Facility with a limit of $11,400,000 that may be allocated between the Overdraft
Facility and Commercial Bill Facility. In addition, there is an Electronic Payments Facility with a limit of $300,000.
The interest rate is currently at 2.92% (June 2016: 2.94%). The facility is renewed on an annual basis.
At 30 June 2017, the Company had available $7,957,346 (2016: $1,900,000) of undrawn committed borrowing
facilities in respect of which all conditions precedent had been met.
40 |
V E E M LT D
Financing facilities available
At balance date, the following financing facilities had been negotiated and were available:
Total facilities
Bank overdraft
MULTI Option Facility
Electronic Payments facility
Facilities used at balance date
Bank overdraft
MULTI Option Facility
Facilities unused at balance date
Bank overdraft
MULTI Option Facility
Electronic Payments facility
Total facilities
Facilities used at balance date
Facilities unused at balance date
2017($)
2016($)
900,000
900,000
10,500,000
5,000,000
300,000
-
11,700,000
5,900,000
242,654
3,500,000
3,742,654
657,346
7,000,000
300,000
7,957,346
-
4,000,000
4,000,000
900,000
1,000,000
-
1,900,000
3,742,654
7,957,346
11,700,000
4,000,000
1,900,000
5,900,000
NOTE 14: FINANCIAL LIABILITIES
The carrying value of plant and equipment held under finance leases and hire purchase contracts at 30 June
2017 is $4,241,747 (2016: $1,575,320). Additions during the year include $4,365,325 (2016: $695,441 of plant and
equipment held under finance leases and hire purchase contracts.
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NOTE 15: PROVISIONS
Balance at beginning of year
Net movements
Balance at the end of year
Current
Non-current
EMPLOYEE BENEFITS ($)
1,011,402
87,247
1,098,649
1,098,649
-
2016($)
400,637
The provision for employee benefits represents long service leave entitlements accrued.
NOTE 16: ISSUED CAPITAL
130,000,000 (2016: 82,955,330) Ordinary shares issued and fully paid
5,140,616
2017($)
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in
proportion to the number of and amounts paid on the shares held.
On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one
vote, and upon a poll each share is entitled to one vote.
Ordinary shares have no par value and the Company does not have a limited amount of authorised capital.
Movements in ordinary shares on
issue
Opening balance
Share split (i)
Issue of fully paid ordinary shares at
50c per share
YEAR TO 30 JUNE 2017
YEAR TO 30 JUNE 2016
No.
$
No.
$
82,955,330
400,587
82,955,330
400,587
37,044,670
50
10,000,000
5,000,000
-
-
-
-
-
-
Capital raising costs
-
(260,021)
Closing balance
130,000,000
5,140,616
82,955,330
400,587
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V E E M LT D
YEAR TO 30 JUNE 2017
YEAR TO 30 JUNE 2016
Movements in B Class Shares
on issue
Opening balance
Cancellation of B class shares (i)
Closing balance
No.
$
No.
100
(100)
-
50
(50)
-
100
-
100
$
50
-
50
i. Prior to the IPO, the Company split its Ordinary Shares from 82,955,330 shares to 120,000,000 shares and
cancelled the B class shares.
Share options
The Company has a share-based payment option scheme. No options to subscribe for the Company’s shares have
been granted during the period. There are no options on issue at balance date.
NOTE 17: FINANCIAL INSTRUMENTS
Capital risk management
The Company manages its capital to ensure it will be able to continue as a going concern while maximising the
return to stakeholders through the optimisation of the debt and equity balance.
The capital structure of the Company consists of debt, cash and cash equivalents and equity attributable to equity
holders of the Company, comprising issued capital and retained earnings.
The Company is not subject to externally imposed capital requirements.
Operating cash flows are used to maintain and expand operations, as well as to make routine expenditures such as
tax, dividends and general administrative outgoings.
Gearing levels are reviewed by the Board on a regular basis in line with its target gearing ratio, the cost of capital
and the risks associated with each class of capital.
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Categories of financial instruments
Financial assets
Cash and cash equivalents
Loans and receivables
Financial liabilities
Trade and other payables
Borrowings – Bill Facility
Borrowings – Bank overdraft
Borrowings - Hire purchase liability
Financial risk management objectives
2017($)
2016($)
587,586
7,951,188
646,970
10,445,392
5,155,109
3,500,000
242,654
4,242,946
4,650,136
4,000,000
-
1,568,061
The Company is exposed to market risk (including currency risk, fair value, risk and interest), credit risk, liquidity risk
and cash flow interest rate risk.
Foreign currency risk management
The Company undertakes certain transactions denominated in foreign currencies, hence exposures to exchange
rate fluctuations arise. This is managed by the Company’s operations having a natural hedge with materials
purchased and sold at prices fixed at the prevailing rate. The Company therefore has limited exposure to US Dollar
(USD), Euro (EUR), Great British Pound (GBP) debtors and creditors currency fluctuations.
USD
• Impact of a 5% increase to profit or loss
• Impact of a 5% decrease to profit or loss
EUR
• Impact of a 5% increase to profit or loss
• Impact of a 5% decrease to profit or loss
GBP
• Impact of a 5% increase to profit or loss
• Impact of a 5% decrease to profit or loss
CASH ($) RECEIVABLES ($) PAYABLE ($)
TOTAL
ASSETS ($)
232,778
619,009
73,464
202,896
-
-
851,787
(51,190)
33,083
276,360
(11,855)
15,987
7,053
497,509
(20,964)
525,525
(23,735)
29,085
The Company’s sensitivity to foreign exchange has not changed significantly from prior year.
44 |
V E E M LT D
NOTE 17: FINANCIAL INSTRUMENTS (CONT’D)
Market risk
The Company’s activities expose it primarily to the
financial risks of changes in foreign currency exchange
rates and exchange rates.
To negate some of this risk the company has embarked
on a global supply program the procurement of all
appropriate goods that form part of its manufactured
products. This includes but is not limited to the supply
of sub components, individual parts consumable
products used in production and stock items.
The Company also manages market risk by keeping
abreast of factors affecting its market on a continual
basis. Business improvement practices continually
evolve.
Interest rate risk management
The Company is exposed to interest rate risk as it
borrows funds at both fixed and floating interest rates.
The risk is managed by the Company by maintaining
an appropriate mix between fixed and floating rate
borrowings.
The Company’s exposures to interest rate on financial
assets and financial liabilities are detailed in the liquidity
risk management section of this note.
counterparties and obtaining sufficient collateral
where appropriate, as a means of mitigating the risk
of financial loss from defaults. The Company only
transacts with entities that are rated the equivalent
of investment grade and above. This information
is supplied by independent rating agencies where
available and, if not available, the Company uses
publicly available financial information and its own
trading record to rate its major customers. The
Company’s exposure and the credit ratings of its
counterparties are continuously monitored and the
aggregate value of transactions concluded is spread
amongst approved counterparties. Credit exposure is
controlled by counterparty limits that are reviewed and
approved by management annually.
The Company does not have any significant credit risk
exposure to any single counterparty or any group of
counterparties having similar characteristics. The credit
risk on liquid funds and derivative financial instruments
is limited because the counterparties are banks with
high credit ratings assigned by international credit
rating agencies.
The carrying amount of financial assets recorded in the
financial statements, net of any allowance for losses,
represents the Company’s maximum exposure to
credit risk without taking account of the value of any
collateral obtained.
Interest rate risk sensitivity analysis
Liquidity risk management
Ultimate responsibility for liquidity risk management
rests with the board of Directors, who have built an
appropriate liquidity risk management framework for
the management of the Company’s short, medium
and long-term funding and liquidity management
requirements. The Company manages liquidity risk by
maintaining adequate reserves, banking facilities and
reserve borrowing facilities by continuously monitoring
forecast and actual cash flows and matching the
maturity profiles of financial assets and liabilities.
Included in note 8 is a listing of additional undrawn
facilities that the Company has at its disposal to further
reduce liquidity risk.
The sensitivity analyses below have been determined
based on the exposure to interest rates for non-
derivative instruments at the balance date and the
stipulated change taking place at the beginning of
the financial year and held constant throughout the
reporting period. A 50 basis point increase or decrease
has been used when reporting interest rate risk
represents management’s assessment of the change
in interest rates.
At balance date, if interest rates had been 50 basis
points higher or lower and all other variables were held
constant, the Company’s net profit would increase by
$1,871 and decrease by $1,871 (2016:$2,000). This
is mainly attributable to the Company’s exposure to
interest rates on its variable rate borrowings.
The Company’s sensitivity to interest rates has
increased during the current period mainly due to the
increase in variable rate debt instruments.
Credit risk management
Credit risk refers to the risk that a counterparty will
default on its contractual obligations resulting in
financial loss to the Company. The Company has
adopted a policy of only dealing with creditworthy
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| 45
NOTE 17: FINANCIAL INSTRUMENTS (CONT’D)
The following table details the Company’s expected contractual maturity for its non-derivative financial liabilities.
These have been drawn up based on undiscounted contractual maturities of the financial liabilities based on the
earliest date the Company can be required to repay. The tables include both interest and principal cash flows.
WEIGHTED AVERAGE INTEREST RATE
30 June 2017
Non-interest bearing – Trade and other payables
Fixed interest rate – Hire purchase liabilities
Variable interest rate – Bill facility and bank overdraft
WEIGHTED AVERAGE INTEREST RATE
30 June 2016
Non-interest bearing - Trade and other payables
Fixed interest rate – Hire purchase liabilities
Variable interest rate – Bill facility and bank overdraft
%
4.4
2.9
%
7.0
2.9
1 year or less
1–5 years
5+ years
$
5,155,109
$
-
1,249,894
3,372,898
3,816,310
-
10,221,312
3,372,898
$
-
-
-
-
1 year or less
1–5 years
5+ years
$
4,650,136
$
-
925,807
764,606
4,079,529
-
9,655,472
764,606
$
-
-
-
-
Fair value measurement
The directors consider that the carrying value of the financial assets and liabilities as recognised in the financial
statements approximate their fair values.
NOTE 18: COMMITMENTS AND CONTINGENCIES
Operating lease commitments – Company as lessee
The Company has entered into a commercial lease on its premises. This lease has a life of 3 years with options to
renew included in the contract. There are no restrictions placed upon the lessee by entering into these leases.
Future minimum rentals payable under non-cancellable operating leases as at 30 June 17 are as follows:
a. Operating lease commitments
• within one year
• after one year but not more than 5 years
2017($)
2016($)
1,393,553
1,284,580
962,293
2,201,325
2,355,846
3,485,905
Finance lease and hire purchase commitments - Company as lessee
The Company has finance leases and hire purchase contracts for various items of plant and machinery. These
leases have terms of renewal but no purchase options and escalation clauses. Renewals are at the option of the
specific entity that holds the lease.
46 |
V E E M LT D
NOTE 18: COMMITMENTS AND CONTINGENCIES (CONT’D)
Future minimum lease payments under finance leases and hire purchase contracts together with the present
value of the net minimum lease payments are as follows:
(b) Hire purchase commitments payable
- within one year
- after one year but not more than five years
- longer than five years
Minimum hire purchase payments
Less: Unexpired charges
Present value of net minimum lease payments
Represented by:
Current
Non-current
Capital commitments
2017($)
2016($)
1,249,894
3,372,898
925,807
764,606
-
-
4,622,792
1,690,413
(379,846)
(122,352)
4,242,946
1,568,061
1,073,036
3,169,910
868,818
699,243
4,242,946
1,568,061
At 30 June 2017 the Company has no capital commitments (2016: $4,037,596)
NOTE 19: RELATED PARTY DISCLOSURE
The Company’s related parties include key management personnel and their related entities are described below.
The aggregate compensation include Directors and other key management personnel of the Company is set out
below:
Short-term employee benefits
Other long-term benefits - Superannuation
2017($)
467,951
49,465
517,416
2016($)
124,440
70,166
194,606
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Key management personnel transactions
In preparation of the Company’s Initial Public Offering and listing on the ASX on 26 October 2016, certain non-core
business assets with a written down value of $585,658 and associated hire purchase liabilities of $641,480 were
transferred out of the Company at market value.
The Company has entered into a lease agreement with Voyka Pty Ltd, an entity controlled by an entity related to
Mr Mark Miocevich and Mr Brad Miocevich. The Company pays Voyka Pty Ltd monthly rent of $115,307 including
GST, totalling $1,383,684 for the twelve months to 30 June 2017. The rent is exclusive of any outgoings including
rates, taxes, insurance premiums and maintenance costs. The lease was made on commercial terms.
As at 30 June 2016, $2,750,060 was receivable from VEEM Corporation Pty Ltd, a company related to Mr Mark
Miocevich and Mr Brad Miocevich. The debt was retired through payment of the interim dividend prior to the
Company listing on the ASX.
NOTE 20: AUDITOR’S REMUNERATION
The auditor of VEEM Limited is HLB Mann Judd.
Auditor of the parent entity
Audit or review of the financial statements
Tax compliance services
Investigating accountant’s report
2017($)
2016($)
66,500
46,000
53,131
21,855
70,000
-
189,631
67,855
NOTE 21: SUBSEQUENT EVENTS
Subsequent to the end of the financial year an ordinary dividend of $1,599,000 franked to 30% has been declared.
Other than the above, no matters or circumstances have arisen since the end of the financial year which have
significantly affected or may significantly affect the operating of the Company, the results of those operations, or
state of affairs of the Company in future financial years.
48 |
V E E M LT
DIRECTORS’ DECLARATION
1.
In the opinion of the Directors of VEEM Limited (the ‘Company’):
b. the accompanying financial statements and notes are in accordance with the Corporations Act 2001
including:
i.
ii.
giving a true and fair view of the Company’s financial position as at 30 June 2017 and of its
performance for the year then ended; and
complying with Australian Accounting Standards, the Corporations Regulations 2001, professional
reporting requirements and other mandatory requirements.
b. there are reasonable grounds to believe that the Company will be able to pay its debts as and when they
become due and payable.
c. the financial statements and notes thereto are in accordance with International Financial Reporting
Standards issued by the International Accounting Standards Board.
2. This declaration has been made after receiving the declarations required to be made to the Directors in
accordance with Section 295A of the Corporations Act 2001 for the financial year ended 30 June 2017.
This declaration is signed in accordance with a resolution of the board of Directors.
MARK DAVID MIOCEVICH
Managing Director
Dated this 31 day of August 2017
AU D I TO R ’ S I N D E P E N D E N C E D E C L A R AT I O N
C O M PA N Y S U M M A RY | 49
INDEPENDENT AUDITOR’S REPORT
To the Members of VEEM Ltd
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of VEEM Ltd (“the Company”) which comprises the statement of
financial position as at 30 June 2017, the statement of comprehensive income, the statement of changes in
equity and the statement of cash flows for the year then ended, and notes to the financial statements,
including a summary of significant accounting policies, and the directors’ declaration.
In our opinion, the accompanying financial report of the Company is in accordance with the Corporations
Act 2001, including:
a)
giving a true and fair view of the Company’s financial position as at 30 June 2017 and of its financial
performance for the year then ended; 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 Company 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.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our
audit of the financial report of the current period. These matters were addressed in the context of our audit
of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters.
Key Audit Matter
How our audit addressed the key audit matter
Carrying amount of the intangible asset
(product development expenditure)
Note 12 of the financial report
The company has an intangible asset in relation to
capitalised expenditure on
the development of
gyroscopic stabilisers.
The development expenditure of $10.445 million has
been deemed to be a key audit matter, given the
size of the balance, the technological change in the
industry, the gyrostabiliser market being relatively
new and immature, VEEM itself being a new
entrant, as well as the specific criteria that have to
Our procedures included but were not limited to
the following:
We have performed audit procedures over
the accuracy and valuation of amounts
recognised. Our audit procedures included,
among other
the
recognition criteria for intangible assets,
challenging the key assumptions used or
estimates made in capitalising development
costs, including management’s assessment
things, assessing
HLB Mann Judd (WA Partnership) ABN 22 193 232 714
Level 4 130 Stirling Street Perth WA 6000 | PO Box 8124 Perth BC WA 6849 | Telephone +61 (08) 9227 7500 | Fax +61 (08) 9227 7533
Email: mailbox@hlbwa.com.au | Website: www.hlb.com.au
Liability limited by a scheme approved under Professional Standards Legislation
HLB Mann Judd (WA Partnership) is a member of International, a world-wide organisation of accounting firms and business advisers
42
be met for capitalisation. This involves management
judgment, such as with respect to distinguishing
between
research and development phases,
technical feasibility, intention and ability to complete
the intangible asset, ability to use or sell the asset,
generation of future economic benefits and the
ability to measure the costs reliably. In addition,
determining whether there is any indication of
impairment requires management judgment and
assumptions which are affected by future market or
economic developments.
Revenue recognition
Note 2 of the financial report
Revenue recognition has been deemed to be a key
audit matter as the Company has early adopted
AASB 15 Revenue from Contracts with Customers.
This has resulted in additional audit effort given the
new five-step approach to revenue recognition
under AASB 15.
We focused on this area as a key audit matter due
to the number and type of estimation events that
may occur over the course of a contract life, leading
to complex and judgemental revenue recognition
and the direct impact on profit.
the stage of
of
the
development phase and the accuracy of
costs included;
the project
in
We considered management’s assessment
whether any indicators of impairment were
present by understanding
the business
for projects and performing
rationale
reviews for indicators of impairment;
We assessed
the adequacy of
the
financial
Company’s disclosure
report; and
in
the
We ensured management applied an
appropriate amortisation method and
amortisation period
life
intangibles.
finite
its
to
Our procedures included but were not limited to
the following:
We examined and tested the Company’s
key controls over revenue and related work-
in-progress;
We evaluated management's process to
assess the impact of AASB 15;
We read and considered a sample of the
Company’s key contracts to determine if we
concurred with management’s assessment
of performance obligations, the transaction
price and any contract liabilities that may
arise, the allocation of the transaction price,
and when to recognise revenue, either at a
point in time, or over time;
For a sample of contracts designated for
over time recognition, we assessed the
methodology and accuracy of recognising
profit at the stage of completion at balance
date;
We substantiated revenue transactions on
a sample basis by agreeing the transaction
to the customer’s contract, purchase order,
sales invoice, delivery docket, customer
certification report, and bank receipt, where
relevant;
We tested the appropriateness of progress
claims on a sample basis; and
We assessed
Company’s disclosures
report.
the adequacy of
in
the
financial
the
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 Company’s annual report for the year ended 30 June 2017, but does not include the
financial report and our auditor’s report thereon.
43
Our opinion on the financial report does not cover the other information and accordingly we do not express
any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the financial report or our
knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a true
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for
such internal control as the directors determine is necessary to enable the preparation of the financial
report that gives a true and fair view and is free from material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Company 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 Company 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 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.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgement and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial report, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that
is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s
report to the related disclosures in the financial report or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our
auditor’s report. However, future events or conditions may cause the Company to cease to continue
as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events in a
manner that achieves fair presentation.
44
We communicate with the directors regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we identify
during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the directors, we determine those matters that were of most
significance in the audit of the financial report of the current period and are therefore the key audit matters.
We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about
the matter or when, in extremely rare circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences of doing so would reasonably be expected
to outweigh the public interest benefits of such communication.
Report on the Remuneration Report
Opinion on the remuneration report
We have audited the remuneration report included in the directors’ report for the year ended 30 June 2017.
In our opinion, the remuneration report of VEEM Ltd for the year ended 30 June 2017 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.
HLB Mann Judd
Chartered Accountants
Perth, Western Australia
31 August 2017
D I Buckley
Partner
45
Twenty Largest Shareholders
Additional information required by the Australian Securities Exchange Ltd Listing Rules and not disclosed
elsewhere in this report. This information is current as at 28 September 2017.
RANK
NAME
UNITS % OF UNITS
VEEM CORPORATION PTY LTD
80,000,000
61.54
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
J P MORGAN NOMINEES AUSTRALIA LIMITED
NATIONAL NOMINEES LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
10,630,676
8,892,882
6,417,269
BNP PARIBAS NOMINEES PTY LTD
4,539,332
CITICORP NOMINEES PTY LIMITED
4,194,091
BNP PARIBAS NOMS PTY LTD
UBS NOMINEES PTY LTD
ANACACIA CAPITAL
JETOSEA PTY LTD
AUSTRAL CAPITAL PTY LTD
MR ALEXANDER PAUL CHANG
MISS AMY-JOY ABURN HARKEN
BT PORTFOLIO SERVICES LIMITED
THE STEPHENS GROUP PTY LTD
CITICORP NOMINEES PTY LIMITED
MR STEPHEN EDWARD JOHNSTON + MRS SARAH MARIE
JOHNSTON
BOTSIS SUPER PTY LTD
MR TIMOTHY LANGLOH BROUGHAM + MRS JANE BAKER
BROUGHAM
4,185,160
3,417,473
600,000
400,000
250,000
200,000
165,000
150,000
150,000
124,502
114,000
100,000
100,000
20.
HYDE SUPERANNUATION PTY LTD
100,000
Totals: Top 20 holders of ORDINARY FULLY PAID SHARES (TOTAL)
Total Remaining Holders Balance
124,730,385
5,269,615
8.18
6.84
4.94
3.49
3.23
3.22
2.63
0.46
0.31
0.19
0.15
0.13
0.12
0.12
0.10
0.09
0.08
0.08
0.08
95.95
4.05
Distribution of equity security holders
RANGE
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - 9,999,999,999
Rounding
Total
TOTAL HOLDERS
19
42
53
142
17
273
UNITS
6,544
152,006
473,444
5,162,500
124,205,506
130,000,000
% OF ISSUED
CAPITAL
0.01
0.12
0.36
3.97
95.54
0.00
100.00
V E E M LT D
54 |
MARKETABLE PARCELS
Number of shareholders holding less than a marketable parcel of ordinary shares is 15.
VOTING RIGHTS
Every ordinary shareholder present in person or by proxy at meetings of shareholders shall have one vote for
every share held.
Option holders have the right to attend meetings but have no voting rights until the options are exercised.
SUBSTANTIAL SHAREHOLDERS
The following shareholders are considered substantial shareholders:
VEEM Corporation Pty Ltd ATF The Miocevich Family Trust
61.54% of the issued ordinary shares
Contango Funds Management Limited
5.06% of the issued ordinary shares
IOOF Holdings Limited
10.084% of the issued ordinary shares
Celeste Funds Management Limited
5.02% of the issued ordinary shares
RESTRICTED SECURITIES
There are no restricted securities.
SHARE BUY BACKS
There is no current on market share buyback.
CORPORATE GOVERNANCE STATEMENT
The Company’s 2017 Corporate Governance Statement is available on the Company’s website
at www.veem.com.au.
| 55
22 Baile Rd,
Canning Vale WA 6155
Telephone: +61 8 9455 9355
+61 8 9455 9333
Facsimile:
Email:
Website:
veem@veem.com.au
www.veem.com.au