i
Financial
Calendar
Content
YEAR ENDED 30 JUNE 2020
Corporate Directory
27 NOVEMBER 2020*
Annual General Meeting
28 FEBRUARY 2021*
Half Year Results
Chairman’s Report
Managing Director’s Report
Operating and Financial Review
Directors’ Report
Remuneration Report
Audit Independence Declaration to the Directors
Statement of Profit or Loss and Other Comprehensive Income
YEAR ENDING 30 JUNE 2021
Statement of Financial Position
31 AUGUST 2021*
Preliminary full year results
30 SEPTEMBER 2021*
Full year results
Statement of Cash Flows
Statement of Changes in Equity
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report
*These dates are subject to change
Additional Information
Corporate Governance Statement
1
Corporate Directory
Directors
Uwe Boettcher (Appointed 28 April 2009 – Chairman from 25 June 2009)
Philippe Odouard (Appointed 1 August 2016 – Managing Director from 4 October 2016)
Robert Quodling (Appointed 1 March 2013)
Ivan Slavich (Appointed 23 September 2013)
Christopher Fullerton (Appointed 24 April 2018)
Secretary
Lawrence Gardiner (Appointed 17 August 2004)
Principal Registered
Office in Australia
3 Faulding Street
Symonston ACT 2609
Telephone: +61 2 6163 5588
Facsimile: +61 2 6280 6518
Website: www.xtek.net
Australian Securities
Exchange Listing
Australian Securities Exchange Limited
Level 3, Securities Exchange Centre
530 Collins Street
Melbourne VIC 3000
Australia
Auditor
Hardwickes Chartered Accountants
Hardwickes House
Level 1, 6 Phipps Close
Deakin ACT 2600 Australia
Share Registry
Computershare Investor Services Pty Limited
Yarra Falls
452 Johnston Street
Abbotsford VIC 3067 Australia
Solicitors
Minter Ellison
Level 23, Rialto Towers
525 Collins Street
Melbourne VIC 3000 Australia
2
Chairman’s Report
Dear Shareholders,
I am pleased to present you with the FY20 Annual Report for XTEK
Limited (“XTEK”). In the wake of COVID-19, this past financial year has
given rise to significant hardship and challenges within our global
communities. Despite the difficult economic backdrop, XTEK has
continued to perform strongly, giving testament to the robust nature of
the defence industry and our strategy.
Significant milestones achieved in commercialising ballistic solutions
XTEK continues to target large global orders for its high value soldier
solutions and proprietary technologies. XTEK’s record FY20 revenues
were underpinned by US ballistic sales, following the acquisition of US-
based HighCom Armor Solutions, Inc in September 2019. This
demonstrates the successful execution of XTEK’s strategy and places
the Company in a strong position to further commercialise the state-of-
the-art XTclave™ process technology. During the 2020 financial year, XTEK received its first domestic and
international orders for XTclave manufactured products. Such orders represent strong external validation of XTEK’s
proprietary technology, and the advanced capabilities of the products produced. Further orders of the XTclave
manufactured products are expected in the near to medium term, and XTEK is well placed to service this growing
interest in its ballistic solutions through the new state of the art manufacturing facility in Adelaide.
Additionally, XTEK’s advanced composite materials have unique technical advantages in various applications, such
as the space industry. In June 2020 XTEK, alongside Skykraft, was pleasingly awarded an Australian Space Agency
grant for the development of a small satellite launch stack, providing further validation of XTEK’s capabilities and a
valuable collaboration opportunity to commercialise the XTclave technology in a new sector.
Continued progress with new opportunities for unique actionable intelligence software
XTEK’s established Small Unmanned Aerial Systems (SUAS) supply and maintenance networks provide significant
opportunities to commercialise the XTatlas™ software applications. XTEK is currently a leading full-service supplier
of SUAS, as evidenced by the Company’s attainment of an exclusive long-term ADF SUAS support services contract
in September 2019 and further supply orders received. These networks provide broad access to customer channels
with potential to interface the XTatlas software with existing hardware. Furthermore, XTEK has joined with 16
companies in the Australian Government funded C4 EDGE Program that will provide XTEK with an opportunity to
showcase the XTatlas software alongside other complementary systems and technology to the Australian Army.
XTEK will continue to leverage all channels to promote the actionable intelligence software, and remains in active
discussions and demonstrations with other potential customers.
Robust defence sector with favourable market themes
The defence sector remains robust, with highly favourable global defence themes. XTEK is currently servicing clients
across key target markets including US, Europe and Australia – where spending budgets are typically uncorrelated
with markets. Defence spending remains at the forefront of the political landscape, with approximately 2% of global
GDP attributed to military expenditure. Defence expenditure is expected to continue growing at approximately 5%
annually in XTEK’s key target markets and these favourable themes support XTEK’s expectation for further
international growth.
3
Domestically, the Australian Government has committed 2% of GDP in 2020-21 towards domestic defence funding,
with ~$270bn to be invested into building defence capabilities and a larger military over the next decade. Future
Australian Government investment mandates have been established to ensure Australian businesses participate in
the supply chain of many of these contracts, leveraging high local content and Australian intellectual property. This
places XTEK in a strong position to capitalise on the increased emphasis on innovation in the Australian defence
sector.
Strong outlook with XTEK well placed to capitalise on anticipated growth in demand
Following a successful FY20, XTEK is well positioned to continue expanding into key target markets globally and
executing on its strategy to commercialise its proprietary products. This new financial year has seen XTEK
successfully carry out an oversubscribed capital raising, securing approximately $12m in capital to drive further
growth. The total proceeds from the Placement and SPP will be used to execute XTEK’s international ballistic
protection strategy and accelerate growth in other operations.
XTEK plans to establish a US based XTclave manufacturing capability which will effectively double XTclave forecast
revenue capacity from XTclave manufactured products to $80m per annum, and unlocks tendering for potentially
lucrative US contracts that require locally made product. Increased sales and marketing resources will be deployed
in the US and EU to handle the anticipated growth in demand. This places XTEK in a strong position to capitalise
on expected growth, providing a clear pathway to achieving the company’s medium-long term target of $100m pa
revenue.
The acquisition of HighCom last year has been a great success. It has contributed to both revenue and profit. XTEK
has considered the acquisition of other businesses since the HighCom acquisition but none have satisfied our
stringent acquisition criteria. XTEK will however continue to explore acquisition opportunities.
Finally, I would like to take this opportunity to thank our Shareholders for their continued support of the Company
and I look forward to sharing XTEK’s journey in the coming year.
Sincerely,
Uwe Boettcher
Chairman
Dated this 30th day of September 2020
Managing Director’s Operations Report
4
Dear Shareholders,
I am pleased to present XTEK’s Annual Report for FY20. XTEK
demonstrated strong financial and operational performance with record
results, including a record revenue of $42.7m, up ~13% from the previous
period (FY19: $37.8m). The FY20 revenue was underpinned by the
SUAS sales in Australia, and by ballistic solutions in the US. In light of
the unprecedented global pandemic, we have made all necessary
adjustments to our activities to ensure the safety of our staff and partners,
as well as carefully managing our supply chains and other business
activities. Despite the volatile markets and restrictions imposed, XTEK
has demonstrated to have a robust business model, experiencing
continued supply and demand supported by favourable global defence
spending, and shown
incredible
resilience
in
this challenging
environment.
With the recent completion of the acquisition of HighCom, a profitable
provider of body armour and personal protective equipment in the US, XTEK has developed a clear pathway to
execute its ballistics strategy and expand into the US market. The strategic combination of highly complementary
products, customer networks and an established distribution network enables us to provide a full range of ballistic
products to existing and potential US customers. This has enabled XTEK to increase the proportion of high-margin
proprietary products in its revenue mix, reflected in the 200 basis points improvement in FY20 gross margins (FY19:
18%). Lastly, XTEK continues to leverage its global networks for the sale of other market leading soldier solutions
and services.
I am pleased with all that we have achieved and look forward to sharing more significant operational milestones with
you in FY21.
Principal Activities
During FY20, XTEK focused on the following key activities:
•
•
Acquired a US ballistics armour manufacturer and distributer, HighCom, providing direct access into the US
market with established reputation and networks;
Achieved first domestic and international commercial orders of XTclave plates, and progressed further
potential customers through evaluation and testing phases;
• Officially launched the opening of the Adelaide manufacturing centre in February 2020 to enable production
for fulfilment of local and international orders for ballistic protection products;
•
•
•
•
Leveraged the unique advantages of its XTclave technology for other applications, with a grant for space
applications secured from the Australian Space Agency together with Skykraft Pty Limited;
Continued development of XTatlas actionable intelligence software and remain in active discussions with
potential customers;
Secured a long-term SUAS support and maintenance contract to the ADF, positioning XTEK as a full-service
solution provider, with further deliveries of SUAS completed and new supply orders received; and
Supplied a range of market leading products, solutions and services to government, defence and law
enforcement agencies throughout Australasia.
5
Operations Report (continued)
Operating Results
In FY20, XTEK achieved record revenue of $42.7m (FY19: $37.9m), gross profit of $8.6m (FY19: $6.9m) and net
profit of $0.3m (FY19: $0.2m), underpinned by a strong second half performance. This result was achieved as XTEK
continued to invest $542k in research and design activities. During the financial year, XTEK achieved strong
operational cash flows, holding $3.1m in cash as at 30 June 2020. The Group remains well positioned to deliver on
its key commercial objectives and milestones.
The FY20 gross margin of ~20%, representing an increase of ~200 basis points (FY19: 18%), reflects the revenue
mix shift towards proprietary products that have higher margins and is underpinned by the contribution of ballistics
sales in the US. Increasing margins are expected in FY21 and beyond, driven by higher margin revenue streams,
including XTEK’s proprietary ballistic products (US and globally), actionable intelligence software, and SUAS repair
and maintenance services from servicing Australian Defence Force’s growing SUAS fleet.
The simplified Income Statement for the financial year ended 30 June 2020 is outlined below:
Summary Income Statement
Revenue
COGS
Gross profit
Gross margin
EBITDA
Net profit
Other key metrics
Cash balance
Market Capitalisation–30 June
$m
$m
$m
%
$m
$m
$m
$m
FY18
17.3
(12.5)
4.7
27
0.23
0.1
FY18
5.9
18.0
FY19
37.9
(31.0)
6.9
18
0.31
0.2
FY19
5.3
17.5
FY20
42.7
(34.1)
8.6
20
0.83
0.3
FY20
3.1
37.7
In light of the global COVID-19 pandemic, XTEK has worked to ensure the safety of its staff and partners. While
staff have worked from home where possible to reduce numbers in key facilities, the SUAS repair and maintenance
facility in Canberra, the XTclave manufacturing centre in Adelaide and the HighCom facilities in the US continued to
operate efficiently to service ongoing demand. They all operate in accordance with the latest regulations and
recommendations to reduce the risk of contagion.
XTEK is fortunate to be part of the robust defence sector and continued to experience strong demand and supply
throughout FY20, with operations experiencing minimal disruptions due to COVID-19. This is supported by defence
and law enforcement in the US being classified as a Priority Sector, which works to protect XTEK and its supply
channels and allows ballistic operations to continue through this time.
Sincerely
Philippe Odouard
Managing Director
Dated this 30th day of September 2020
6
XTEK Limited and Controlled Entities
Directors’ Report
Your Directors present their report on the consolidated entity consisting of XTEK Limited and its controlled entity for
financial year ended 30 June 2020. The information in the preceding operating and financial review forms part of this
Directors’ report for the financial year ended 30 June 2020 and is to be read in conjunction with the following information.
Directors
The following persons were Directors of XTEK Limited during the financial year ending 30 June 2020:
-
-
-
Mr. Uwe Boettcher
Mr. Philippe Odouard
Mr. Robert Quodling
Mr. Ivan Slavich
Mr. Christopher Fullerton
Particulars of each Director’s experience and qualifications are set out later in this report.
Significant Events After the Balance Date: COVID-19
The COVID-19 outbreak has impacted the way of life in Australia. This has affected the ability of the Group to continue
operations as usual and has impacted on its operating results. In accordance with national guidelines, the Group has
implemented remote working arrangements in response to government requirements and to ensure the wellbeing and
safety of all employees and visitors.
The Group has determined that there are no going concern risks arising from the impact of the COVID-19 outbreak and has
risk mitigation strategies in place with regards to COVID-19 outbreaks and other ongoing impacts The board members
have determined that the Company remains in a healthy cash position and retained a stable revenue stream for the 2021
financial year.
Indemnifying Officers or Auditor
During the financial year, the Company has given an indemnity or entered into an agreement to indemnify, or paid or
agreed to pay insurance premiums as follows:
•
•
The Company has paid a premium of $25,000 to insure the Directors and Officers of the Company. The liabilities
insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against
the officers in their capacity as officers of entities in the Company, and any other payments arising from liabilities
incurred by the officers in connection with such proceedings. This does not include such liabilities that arise from
conduct involving a willful breach of duty by the officers or the improper use by the officers of their position or of
information to gain advantage for themselves or someone else or to cause detriment to the Company. It is not
possible to apportion the premium between amounts relating to the insurance against legal costs and those relating
to other liabilities.
No payment has been made to indemnify Hardwickes Chartered Accountants during or since the financial year.
Proceedings on behalf of the Company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on
behalf of the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking
responsibility on behalf of the Company for all or part of those proceedings.
No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under section 237
of the Corporations Act 2001.
Non-audit Services
The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor's
expertise and experience with the Company is important but has not done so during this reporting period.
7
Directors’ Report (continued)
During the year the following fees were paid or payable for services provided by the auditor of the Parent Company,
Hardwickes Chartered Accountants in 2020 (2019 Hardwickes Chartered Accountants):
Assurance services
2020
$
2019
$
Audit and review of financial reports and other audit work under the
Corporations Act 2001 – Parent company only, see note 9.
60,000
54,000
Auditors Independence Declaration
The lead auditor’s independence declaration for the year ended 30 June 2020 has been received and can be found on
page 11 of the financial report.
Information relating to the Directors and Company Secretary during the reporting period
Mr. Uwe Boettcher
Experience
Interest in Shares
Director (Non-Executive & Chairman)
Mr. Boettcher is the Principal of the law firm, Boettcher Law, starting his career at the firm
now known as King & Wood Mallesons. He is a Fellow of the Australian and New Zealand
College of Notaries. In 2011 he was appointed as a Foundation Fellow of the Australian
Association of Angel Investors. In 2005 he was appointed a Fellow of the Australian
Institute of Banking and Finance. In 1996/97 he was the Treasurer of the ACT Law Society.
Mr. Boettcher has a special interest in commercialising new and innovative technologies,
investing in them and bringing them to market.
5,626,929 ordinary shares at 30 June 2020
Special Responsibilities
Chairman of the Nomination Committee
Other Directorships
Mr. Philippe Odouard
Experience
Chairman of the Kord Defence Group of Companies, Chairman of Health-Innovate Pty Ltd,
Chairman of Manuka Corporate Pty Ltd, Chairman of Mineral Carbonation International
Pty Ltd, Director of Lava Blue Limited, Director of Greenmag Group Pty Ltd
Director (Executive)
Mr. Odouard has over 27 years in general management of defence related companies in
Australia and overseas. He developed Quickstep, an innovative ASX listed company from
a start up to a leader in composite manufacture and technology with $50m revenue. He
specialises in developing and commercialising new technology in a defence environment
and is a Graduate of the Australian Institute of Company Directors.
Interest in Shares
735,224 ordinary shares at 30 June 2020
Special Responsibilities
Managing Director
Other Directorships
None
Mr. Robert Quodling
Experience
Director (Executive)
Mr. Quodling has extensive experience as a
leader and motivator of high
performance commerce teams in the defence and aerospace sectors at the operational
and executive level. His skills have been gained in a diverse range of activities
including corporate governance, corporate planning,
financial planning, project
management, marketing, sales and business development. Mr. Quodling as a former
Army Officer held a range of command and operational appointments in the Australian
Army between 1975 and 1994. He was awarded a Conspicuous Service Medal (CSM)
for conspicuous service with the Special Air Service Regiment.
Interest in Shares
457,462 ordinary shares at 30 June 2020
Special Responsibilities
Chief Operating Officer
Other Directorships
Director of Simmersion Holdings Pty Ltd and Asura Marketing Pty Ltd
8
Mr. Ivan Slavich
Experience
Director (Non-Executive)
Mr. Slavich has over 30 years of senior management and executive experience in the
energy, banking, telecommunications and business consulting arena. He has a proven
track record over numerous years of being an exceptional leader and motivator in
developing and implementing strategic innovations, business process re-engineering and
integration, resulting in substantial improvement of business sales and profitability. He has
held an officers rank in the Australian Army Reserve and is a Graduate and Fellow of the
Australian Institute of Company Directors.
Interest in Shares
679,028 ordinary shares at 30 June 2020
Special Responsibilities
Chairman of Human Resources and Remuneration Committee
Other Directorships
Director of Service One Alliance Bank, and Director of Trident Corporate Services.
Mr. Christopher Fullerton
Director (Non-Executive)
Experience
Interest in Shares
Mr. Fullerton has extensive experience in investment, management and investment
banking and is a qualified chartered accountant. He worked in Hong Kong and Singapore
for 15 years before returning to Australia in 1992. He is an investor in listed equities and
private equity and has been a non-executive director of a number of ASX listed companies.
He is currently a non-executive director of ASX listed Paradigm Biopharmaceuticals
Limited and his unlisted company directorships cover companies in the property
investment and agriculture sectors.
100,000 ordinary shares at 30 June 2020
Special Responsibilities
Chairman of Finance, Audit and Risk Management Committee, effective 1 July 2018
Other Directorships
Director of Kador Group Holdings Ltd and Director of Paradigm Biopharmaceuticals Ltd
Mr. Lawrence Gardiner
Experience
Company Secretary (Resigned as Executive Director on 1 August 2016)
Mr. Gardiner served with the Australian Army and specialised in the fields of logistic
management and explosive ordnance disposal operations. In addition to his military
service, Mr. Gardiner also served with the Australian Federal Police (AFP), performing
senior executive roles in the areas of counter terrorist first response and protective
security operations. Mr. Gardiner is a current member of the Australian Institute of
Company Directors.
Interest in Shares
38,614 ordinary shares at 30 June 2020
Special Responsibilities
Corporate Governance
Other Directorships
None
Meetings of
Directors
Directors’ meetings
Number
eligible to
attend
Number
attended
Finance, Audit and
Risk Management
Committee
Number
eligible to
attend
Number
attended
Nomination
Committee
Remuneration
Committee
Number
eligible to
attend
Number
attended
Number
eligible to
attend
Number
attended
Mr Uwe Boettcher
Mr Philippe Odouard
Mr Robert Quodling
Mr Ivan Slavich
Mr Christopher
Fullerton
12
12
12
12
12
12
12
12
12
12
4
4
4
4
4
4
4
4
4
4
2
2
2
2
2
2
2
2
2
2
2
-
-
2
2
2
-
-
2
2
9
Remuneration Report
Table 1: Benefits and Payments for the Year Ended 30 June 2020
Key
Management
Personnel
(KMP)
Short-term Benefits
Post-Employment
Benefits
Long-
term
Benefits
Salary,
Fees and
Leave *1
Bonus
Non-
monetary
Benefits
Share
based
Pymts
Super-
annuation
Other
LSL *2
Total
% Perf.
Related
$
$
$
$
$
$
$
$
%
Mr Uwe
Boettcher
2020
2019
130,000
130,000
-
-
-
-
90,000
-
-
-
-
-
-
-
220,000
130,000
41%
Mr Philippe
Odouard
2020
2019
355,700 33,080
27,118 199,775
25,000 11,934
1,283
653,890
331,296
22,455
24,806
22,455
25,000
4,041
591
430,643
Mr Robert
Quodling
2020
2019
193,077
14,800
179,801
7,356
Mr Ivan
Slavich
Mr Chris
Fullerton
Mr
Lawrence
Gardiner
2020
2019
2020
2019
65,000
65,000
65,000
65,000
2020
139,994
2019
136,948
-
-
-
-
-
-
Mr David
Brooking
2020
2019
180,000
11,160
161,755
7,984
-
-
-
-
-
-
-
-
-
-
19,800
14,712
20,223 5,000
17,575
7,356
778
358
253,678
227,158
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
65,000
65,000
65,000
65,000
10,849
14,330 10,849
1,354
177,376
6,586
12,538
6,586
1,277
163,935
11,160
7,984
18,160
15,200
-
-
3,757
2,472
224,237
195,395
36%
10%
16%
13%
12%
8%
10%
8%
Total KMP
2020 1,128,771
59,070
27,118 331,584
77,713 27,783
7,172 1,659,181
2019 1,069,800
37,795
24,806
51,737
70,313 17,983
4,698 1,277,131
* Notes
1.
2.
Salary, fees and leave are per payroll summary or actual invoices received. These payments may vary to contract
due to employee benefits, voluntary salary reductions, additional pay, back pay and annual leave. Amounts included
for leave are movements in the accrued annual leave entitlements for the relevant twelve-month period.
Amounts included above for long service leave are movements in accrued entitlements for the relevant twelve-month
period.
a)
Options Rights Granted as Remuneration
There were no new issues of share options or share performance rights during the 2019-20 FY or the
2018-19 FY. Any share options or share performance rights issued by the parent company have lapsed.
During the year no shares were issued as a result of the exercise of options or share performance rights by
staff.
b)
Service Agreements
Remuneration and other terms of employment for the Managing Director, Chief Operating Officer, Company
Secretary, Chief Financial Officer and the other specified executives employed during the reporting period
are formalised in individual service agreements. The major provisions relating to remuneration are set out
below.
10
Mr Philippe Odouard - Managing Director
•
•
•
•
•
A written employment agreement is in place, salary level effective 1 July 2019.
Base salary, exclusive of superannuation, to the value of $355,700 per annum.
Rental Allowance, to the value of $288 per week.
Eligibility for Company Long Term Incentive Plan.
Eligibility for Company Short Term Incentive Plan.
Mr Robert Quodling - Chief Operating Officer
•
•
•
•
A written employment agreement is in place, salary level effective 1 July 2019.
Base salary, exclusive of superannuation, to the value of $200,000 per annum.
Eligibility for Company Long Term Incentive Plan.
Eligibility for Company Short Term Incentive Plan.
Mr Lawrence Gardiner - Company Secretary
•
•
•
•
A written employment agreement is in place, salary level effective 1 July 2019.
Base salary, exclusive of superannuation, to the value of $175,000 per annum (pro-rata)
Eligibility for Company Long Term Incentive Plan
Eligibility for Company Short Term Incentive Plan
Mr David Brooking - Chief Financial Officer
•
•
•
•
A written employment agreement is in place, effective 1 July 2019.
Base salary, exclusive of superannuation, to the value of $180,000 per annum.
Eligibility for Company Long Term Incentive Plan.
Eligibility for Company Short Term Incentive Plan.
This Directors’ Report and Remuneration Report is signed in accordance with a resolution of the Board of Directors.
Uwe Boettcher Chairman
Dated this 30th day of September 2020
Auditor’s independence Declaration
11
The accompanying notes form part of these financial statements.
12
Consolidated Statement of Profit or Loss and Other
Comprehensive Income for the Year Ended 30 June 2020
Notes
2020
$
2019
$
Changes in inventories of finished goods and work in progress
Gross profit
(34,085,386)
(31,008,759)
8,629,881
6,852,089
Revenue
5(a)
42,715,267
37,860,848
Other income
5(b)
850,647
54,647
Corporate and administrative expenses
Research and development expenses
6
6
Profit/(loss) from operations before income tax
Income tax expenses
Total comprehensive income/(loss) for the period
(8,635,423)
(5,123,699)
(542,427)
(1,614,604)
302,678
168,433
-
-
302,678
168,433
The accompanying notes form part of these financial statements.
13
Consolidated Statement of Financial Position
as at 30 June 2020
Notes
2020
$
2019
$
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other
Total current assets
Non-current assets
Goodwill
Property, plant and equipment
Intangibles
Total non-current assets
TOTAL ASSETS
LIABILITIES
Current liabilities
Trade and other payables
Provisions
Contract liabilities
Total current liabilities
Non-current liabilities
Trade and other payables
Provisions
Contract liabilities
Total non-current liabilities
12
13
14
15
16
17
18
19
20
18
19
20
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Reserves
Accumulated losses
TOTAL EQUITY
22
30(a)
30(b)
3,057,031
15,372,060
9,036,996
1,604,629
29,070,716
1,288,191
4,664,000
300,012
6,252,203
5,349,874
19,858,111
1,750,673
989,543
27,948,201
-
2,308,194
155,891
2,464,085
35,322,919
30,412,286
16,548,035
498,813
1,723,292
18,770,140
1,989,426
54,744
46,951
2,091,121
20,861,261
14,461,658
33,741,882
42,414
(19,322,638)
14,461,658
18,773,301
348,035
1,963,855
21,085,191
1,077,931
31,857
521,366
1,631,154
22,716,345
7,695,941
27,312,482
8,775
(19,625,316)
7,695,941
The accompanying notes form part of these financial statements.
14
Consolidated Statement of Changes in Equity for the
Year Ended 30 June 2020
Issued
capital
(note 22)
$
Equity-
based
payments
reserve
$
Accumulated
losses
$
Foreign
Exchange
valuation
reserve
$
Balance at 1 July 2018
Restatement, adoption of AASB 16 2(c)
27,196,530
-
516,110
-
(20,144,986)
(162,991)
Balance at 1 July 2018 restated
27,196,530
516,110
(20,307,977)
Profit for the year
Total income and expense for the period
Issues of ordinary shares during the year:
Transferred to retained earnings
Issue of share capital
Transaction costs associated with share
capital
Share based payment reserve
-
-
-
-
249,736
(133,784)
(514,228)
-
-
-
6,893
168,433
168,433
514,228
-
-
-
Balance at 30 June 2019
27,312,482
8,775
(19,625,316)
Balance at 1 July 2019
Profit for the year
Total income and expense for the
period
Issues of ordinary shares during the year:
Issue of share capital
Foreign exchange reserve
Transaction costs associated with share
capital
Share based payment reserve
27,312,482
-
8,775
-
(19,625,316)
302,678
-
6,663,012
-
(233,612)
-
-
-
-
-
19,446
302,678
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
14,193
-
-
Total Equity
$
7,567,654
(162,991)
7,404,663
168,433
168,433
-
249,736
(133,784)
6,893
7,695,941
7,695,941
302,678
302,678
6,663,012
14,193
(233,612)
19,446
Balance at 30 June 2020
33,741,882
28,221
(19,322,638)
14,193
14,461,658
The Group has not restated comparatives when initially applying AASB 9 and AASB 16.
The accompanying notes form part of these financial statements.
15
Statement of Cash Flows for the Year Ended 30 June 2020
Note
2020
$
2019
$
Cash flows from/(used in) operating activities
Receipts from customers
52,364,311
28,395,763
Payments to suppliers and employees
(56,926,343)
(27,850,955)
(4,562,032)
544,808
Net cash flows (used in)/from operating activities
25
(4,545,369)
Interest received
Finance costs
17,678
(1,015)
Cash flows (used in)/from investing activities
Cash acquired from subsidiary
Proceeds from sale of assets
Payment for intangibles
Payments for equipment
Net cash flows (used in) investing activities
Cash flows from financing activities
Proceeds from issue of ordinary shares
Payment of transaction costs associated with issued share capital
22(a)
Repayment of lease liabilities
Proceeds from borrowings
Repayment of loan
Net cash flows (used in)/from financing activities
180,312
429
(171,737)
(790,095)
(781,091)
3,669,643
(233,612)
(421,006)
368,643
(356,825)
3,026,843
52,252
(2)
597,058
-
-
-
(994,207)
(994,207)
180,000
(133,784)
(243,813)
-
(197,597)
Net increase (decrease) in cash and cash equivalents
(2,299,617)
(594,746)
Exchange rate impact on cash
Cash and cash equivalents at beginning financial year
Cash and cash equivalents at end of year
12
6,774
5,349,874
3,057,031
-
5,944,620
5,349,874
The accompanying notes form part of these financial statements.
16
Notes to the Financial Statements for the
Year Ended 30 June 2020
The financial report covers XTEK Limited and the Controlled Entities ('the Group'). XTEK Limited and the Controlled Entities
is a for-profit Company limited by shares, incorporated and domiciled in Australia.
Each of the entities within the Group prepare their financial statements based on the currency of the primary economic
environment in which the entity operates (functional currency). The consolidated financial statements are presented in
Australian dollars which is the parent entity’s functional and presentation currency.
The financial report was authorised for issue by the Directors on 30 September 2020.
Comparatives are consistent with prior years, unless otherwise stated.
1
Basis of Preparation
The financial statements are general purpose financial statements that have been prepared in accordance with the
Australian Accounting Standards and the Corporations Act 2001. Material accounting policies adopted in the
preparation of these financial statements are presented below and have been consistently applied.
These financial statements comply with International Financial Reporting Standards as issued by the International
Accounting Standards Board.
2
Change in Accounting Policy
a.
Financial Instruments - Adoption of AASB 9
The Group has adopted AASB 9 Financial Instruments for the first time in the current year with a date of initial
adoption of 1 July 2018.
As part of the adoption of AASB 9, the Group adopted consequential amendments to other accounting standards
arising from the issue of AASB 9 as follows:
•
•
AASB 101 Presentation of Financial Statements requires the impairment of financial assets to be presented in
a separate line item in the statement of profit or loss and other comprehensive income. In the comparative year,
this information was presented as part of other expenses.
AASB 7 Financial Instruments: Disclosures requires amended disclosures due to changes arising from AASB
9, these disclosures have been provided for the current year.
The key changes to the Group's accounting policy and the impact on these financial statements from applying AASB
9 are described below.
Changes in accounting policies resulting from the adoption of AASB 9 have been applied retrospectively except the
Group has not restated any amounts relating to classification and measurement requirements including impairment
which have been applied from 1 July 2018.
Classification of financial assets
The financial assets of the Group have been reclassified into one of the following categories on adoption of AASB
9 based on primarily the business model in which a financial asset is managed and its contractual cash flow
characteristics:
• Measured at amortised cost
•
•
Fair value through profit or loss (FVTPL)
Fair value through other comprehensive income - equity instruments (FVOCI - equity).
The accompanying notes form part of these financial statements.
Notes to the Financial Statements (continued)
Impairment of financial assets
17
The incurred loss model from AASB 139 has been replaced with an expected credit loss model in AASB 9 for assets
measured at amortised cost, contract assets and fair value through other comprehensive income. This has resulted
in the earlier recognition of credit loss (bad debt provisions).
Classification of financial assets and financial liabilities
The table below illustrates the classification and measurement of financial assets and liabilities under AASB 9 and
AASB 139 at the date of initial application (1 July 2018).
Classification
under
AASB 139
Classification
under
AASB 9
Carrying
amount
under
AASB 139
$
Carrying
amount
under
AASB 9
$
Loans / receivables
Loans / receivables
Amortised cost
Amortised cost
5,979,880
5,944,620
5,979,880
5,944,620
Other financial
liabilities
Other financial
liabilities
11,924,500
11,924,500
5,745,335
5,745,335
5,745,335
5,745,335
Financial assets
Trade and other receivables
Cash and cash equivalents
Total financial assets
Financial liabilities
Trade payables
Total financial liabilities
b.
Revenue from contract with customers
The Group has adopted AASB 15 Revenue from Contracts with Customers for the first time in the current year with
a date of initial application of 1 July 2018.
The key changes to the Group's accounting policies and the impact on these financial statements from applying
AASB 15 are described below.
The Group has applied AASB 15 using the cumulative effect method which means the comparative information has
not been restated and continues to be reported under AASB 111, AASB 118 and related interpretations. All
adjustments on adoption of AASB 15 have been taken to retained earnings at 1 July 2018.
Timing of revenue recognition based on transfer of control of performance obligations
Prior to the adoption of AASB 15, the Group recognised revenue when the risks and rewards associated with the
transfer of goods had transferred to the buyer which was when there was an unconditionally exchanged contract
and the product was practically complete.
AASB 15 requires revenue from these products to be recognised when the performance obligations to transfer
goods and services have been satisfied. The Group considers that performance obligations are satisfied when the
physical transfer of the goods has occurred as this is when control transfers to the customer.
Consequently, the timing of revenue recognition and profit has changed and revenue previously recognised in prior
years (in accordance with the previous standards) has now been recognised in the current year (in accordance with
AASB 15).
This change in timing of revenue has a consequential impact on a number of other financial statement line items
including inventories, receivables and taxation.
The accompanying notes form part of these financial statements.
18
Transfer of control to a customer - over time or at a point in time
AASB 15 has specific criteria regarding whether control is transferred over time or at a point in time. The Group has
reviewed its contracts and concluded that the criteria for recognition over time is not met in some circumstances. In
such cases, revenue and related production costs will be recognised at the delivery of each separate performance
obligation instead of over the contract using a single margin.
(c)
Leases – Adoption of AASB 16
The Group has adopted AASB 16 Leases for the first time in the current period with a date of initial adoption
of 1 July 2018.
The adoption of this new Standard has resulted in the Company recognising a right-of-use asset and related
lease liability in connection with all former operating leases except for those identified as low-value or having
a remaining lease term of less than 12 months from the date of initial application.
The new Standard has been applied using the modified retrospective approach, with the cumulative effect of
adopting AASB 16 being recognised in equity as an adjustment to the opening balance of retained earnings
for the current period. Prior periods have not been restated.
The following is a reconciliation of the financial statement line items from AASB 117 to AASB 16.
Remeasurement
$
1,170,299
(1,333,290)
162,991
Carrying amount
as at
1 July 2018
$
1,170,299
(1,333,290)
162,991
Carrying
amount as at
30 June 2019
$
Carrying
amount as at
30 June 2020
$
1,019,473
(1,212,187)
-
2,522,837
(2,793,529)
-
Right to use
Lease liabilities
Impact on Opening
retained earnings
3
Summary of Significant Accounting Policies
(a)
Basis for consolidation
The consolidated financial statements incorporate all of the assets, liabilities and results of XTEK Limited
and its 100% owned subsidiaries (Simmersion Holdings Pty Limited, XTEK, Inc holder of HighCom Armor
Solutions, Inc). Subsidiaries are entities the parent controls. The parent controls an entity when it is exposed
to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those
returns through its power over the entity.
The assets, liabilities and results of all subsidiaries are fully consolidated into the financial statements of the
Group from the date on which control is obtained by the Group. The consolidation of a subsidiary is
discontinued from the date that control ceases. Intercompany transactions, balances and unrealised gains
or losses on transactions between group entities are fully eliminated on consolidation. Accounting policies
of subsidiaries have been changed and adjustments made where necessary to ensure uniformity of the
accounting policies adopted by the Group.
(b)
Income tax
The income tax expense on revenue for the period is the tax payable on the current period’s taxable income
based on the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and
liabilities attributable to temporary differences between the tax bases of assets and liabilities and their
carrying amounts in the financial statements, and to unused tax losses. Deferred income tax is provided on
all temporary differences at the statement of financial position 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 differences:
The accompanying notes form part of these financial statements.
Notes to the Financial Statements (continued)
19
•
•
except where 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, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss; and
in respect of taxable temporary differences associated with investments in subsidiaries, associates and
interests in joint ventures, except where the timing of the reversal of the temporary differences can be
controlled and it is probable that the temporary differences 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 assets and unused tax
losses can be utilised;
•
•
except where the deferred income tax asset relating to the deductible temporary differences 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; and
in respect of deductible temporary differences associated with investments in subsidiaries, associates and
interests in joint ventures, deferred tax assets are only recognised to the extent that it is probable that the
temporary differences will reverse in the foreseeable future and taxable profit will be available against which
the temporary differences can be utilised.
The carrying amount of deferred income tax assets is reviewed at each reporting 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.
Deferred income tax assets and liabilities are measured at all 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 substantially enacted at the statement of financial position date.
Income taxes relating to items directly in equity are recognised in equity and not in the Statement of
Comprehensive Income.
(c)
Leases
For comparative year
The determination of whether an arrangement is or contains a lease is based on the substance of the
arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the
use of a specific asset or assets and the arrangement conveys a right to use the asset.
Company as a lessee
Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership
of the leased item, are capitalised at the inception of the lease at the fair value of the leased property or, if
lower, at the present value of the minimum lease payments. Lease payments are apportioned between the
finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the
remaining balance of the liability. Finance charges are recognised as an expense in profit or loss.
Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the
lease term if there is no reasonable certainty that the Group will obtain ownership by the end of the lease
term.
Operating lease payments are recognised as an expense in the statement of comprehensive income on a
straight-line basis over the lease term. Lease incentives are recognised in the Statement of Comprehensive
The accompanying notes form part of these financial statements.
20
Income as an integral part of the total lease expense.
Company as a lessor
Leases in which the Group retains substantially all the risks and benefits of ownership of the leased asset
are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added
to the carrying amount of the leased asset and recognised as an expense over the lease term on the same
basis as rental income. Income from leases relates only to property which is sub-let by the Group.
For any new contracts entered into on or after 1 July 2018, the Entity considers whether a contract is, or
contains a lease. A lease is defined as ‘a contract, or part of a contract, that conveys the right to use an
asset (the underlying asset) for a period of time in exchange for consideration’. To apply this definition the
Entity assesses whether the contract meets three key evaluations which are whether:
•
•
•
the contract contains an identified asset, which is either explicitly identified in the contract or implicitly
specified by being identified at the time the asset is made available to the Entity
the Entity has the right to obtain substantially all of the economic benefits from use of the identified asset
throughout the period of use, considering its rights within the defined scope of the contract
the Entity has the right to direct the use of the identified asset throughout the period of use. The Entity
assesses whether it has the right to direct ‘how and for what purpose’ the asset is used throughout the
period of use.
At lease commencement date, the Entity recognises a right-of-use asset and a lease liability on the balance
sheet. The right-of-use asset is measured at cost, which is made up of the initial measurement of the lease
liability, any initial direct costs incurred by the Group, an estimate of any costs to dismantle and remove the
asset at the end of the lease, and any lease payments made in advance of the lease commencement date
(net of any incentives received).
The Entity depreciates the right-of-use assets on a straight-line basis from the lease commencement date
to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The Entity
also assesses the right-of-use asset for impairment when such indicators exist.
At the commencement date, the Entity measures the lease liability at the present value of the lease payments
unpaid at that date, discounted using the interest rate implicit in the lease if that rate is readily available or
the Entity’s incremental borrowing rate.
Lease payments included in the measurement of the lease liability are made up of fixed payments (including
in substance fixed), variable payments based on an index or rate, amounts expected to be payable under a
residual value guarantee and payments arising from options reasonably certain to be exercised.
Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest.
It is remeasured to reflect any reassessment or modification, or if there are changes in in-substance fixed
payments.
When the lease liability is remeasured, the corresponding adjustment is reflected in the right-of-use asset,
or profit and loss if the right-of-use asset is already reduced to zero.
The Entity has elected to account for short-term leases and leases of low-value assets using the practical
expedients. Instead of recognising a right-of-use asset and lease liability, the payments in relation to these
are recognised as an expense in profit or loss on a straight-line basis over the lease term.
On the statement of financial position, right-of-use assets have been included in plant and equipment and
lease liabilities have been included in trade and other payables.
Lease incentives
Lease incentives under operating leases are recognised as a liability and amortised on a straight-line basis
over the life of the lease term.
The accompanying notes form part of these financial statements.
21
Notes to the Financial Statements (continued)
The Entity has elected to account for short-term leases and leases of low-value assets using the practical
expedients. Instead of recognising a right-of-use asset and lease liability, the payments in relation to these
are recognised as an expense in profit or loss on a straight-line basis over the lease term.
On the statement of financial position, right-of-use assets have been included in plant and equipment and
lease liabilities have been included in trade and other payables.
(d)
Revenue and other income
Revenue from contracts with customers
The core principle of AASB 15 is that revenue is recognised on a basis that reflects the transfer of promised
goods or services to customers at an amount that reflects the consideration the Group expects to receive in
exchange for those goods or services. Revenue is recognised by applying a five-step model as follows:
1. Identify the contract with the customer
2. Identify the performance obligations
3. Determine the transaction price
4. Allocate the transaction price to the performance obligations
5. Recognise revenue as and when control of the performance obligations is transferred
Specific revenue streams
The revenue recognition policies for the principal revenue streams of the Group are as follows.
Timing of revenue recognition based on transfer of control of performance obligations
Prior to the adoption of AASB 15, the Group recognised revenue when the risks and rewards associated
with the transfer of goods had transferred to the buyer which was when there was an unconditionally
exchanged contract and the product was practically complete.
AASB 15 requires revenue from these products to be recognised when the performance obligations to
transfer goods and services have been satisfied. The Group considers that performance obligations are
satisfied when the physical transfer of the goods has occurred as this is when control transfers to the
customer.
Consequently, the timing of revenue recognition and profit has changed and revenue previously recognised
in prior years (in accordance with the previous standards) has now been recognised in the current year (in
accordance with AASB 15).
This change in timing of revenue has a consequential impact on a number of other financial statement line
items including inventories, receivables and taxation.
Transfer of control to a customer - over time or at a point in time
AASB 15 has specific criteria regarding whether control is transferred over time or at a point in time. The
Group has reviewed its contracts and concluded that the criteria for recognition over time is not met in some
circumstances. In such cases, revenue and related production costs will be recognised at the delivery of
each separate performance obligation instead of over the contract using a single margin.
The accompanying notes form part of these financial statements.
22
Deferred income
Deferred income consists of customer deposits received and government grants. Deferred income relating
to customer deposits is not recognised as revenue until such time as the ownership of the goods is
transferred to the customer. In the case of Government grants, grants are recognised in accordance with
the accounting policy outlined in note 3 (u).
(e)
Finance costs
Finance cost includes all interest-related expenses, other than those arising from financial assets at fair
value through profit or loss.
(f)
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset (i.e.
an asset that necessarily takes a substantial period of time to get ready for its intended use or sale) are
capitalised as part of the cost of the asset. All other borrowing costs are expensed in the period they occur.
Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of
funds. XTEK does not currently hold any qualifying assets but, if it did, the borrowing costs directly associated
with this asset would be capitalised (including any other associated costs directly attributable to the
borrowing and temporary investment income earned on the borrowing).
(g)
Goods and services tax (GST)
Revenue, expenses and assets are recognised net of the amount of goods and services tax (GST), except
where the amount of GST incurred is not recoverable from the Australian Taxation Office (ATO).
Receivables and payables are stated inclusive of GST.
The net amount of GST recoverable from, or payable to, the ATO is included as part of receivables or
payables in the statement of financial position.
Cash flows in the statement of cash flows are included 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 is classified as operating cash flows.
(h)
Inventories
Inventories are valued at the lower of cost and net realisable value. Costs incurred in bringing each product
to its present location and condition are accounted for as follows:
•
•
Raw materials - purchase cost on a first in, first out basis; and
Finished goods and work-in-progress cost of direct materials and labour and a proportion of
manufacturing overheads based on normal operating capacity but excluding borrowing costs.
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.
The accompanying notes form part of these financial statements.
23
Notes to the Financial Statements (continued)
(i)
Property, plant and equipment
Cost and valuation
Property, plant and equipment are stated at cost less accumulated depreciation and any impairment in value.
Depreciation
Depreciation is calculated on a straight-line basis over the estimated useful life of the asset as follows.
Major depreciation periods are:
•
plant and equipment 3 - 15 years
Impairment
The carrying values of plant and equipment are reviewed for impairment when events or changes in the
circumstances indicate the carrying value may not be recoverable. If any such indication exists and where
the carrying values exceed the estimated recoverable amount, the assets are written down to their
recoverable amount. The recoverable amount of plant and equipment is the greater of fair value less costs
to sell and value in use.
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are
included in the Statement of Comprehensive Income.
(j)
Financial instruments
Financial instruments are recognised initially on the date that the Group becomes party to the contractual
provisions of the instrument.
On initial recognition, all financial instruments are measured at fair value plus transaction costs (except for
instruments measured at fair value through profit or loss where transaction costs are expensed as incurred).
Financial assets
All recognised financial assets are subsequently measured in their entirety at either amortised cost or fair
value, depending on the classification of the financial assets.
Classification
On initial recognition, the Group classifies its financial assets into the following categories, those measured
at:
•
•
•
amortised cost;
fair value through profit or loss – FVTPL; and
fair value through other comprehensive income - equity instrument (FVOCI - equity).
Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its
business model for managing financial assets.
The accompanying notes form part of these financial statements.
24
Amortised cost
Assets measured at amortised cost are financial assets where:
•
•
the business model is to hold assets to collect contractual cash flows; and
the contractual terms give rise on specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding.
The Group's financial assets measured at amortised cost comprise trade and other receivables and cash
and cash equivalents in the statement of financial position.
Subsequent to initial recognition, these assets are carried at amortised cost using the effective interest rate
method less provision for impairment.
Interest income, foreign exchange gains or losses and impairment are recognised in profit or loss. Gain or
loss on derecognition is recognised in profit or loss.
Fair value through other comprehensive income
Equity instruments
The Group has no investments in listed and unlisted entities over which are they do not have significant
influence nor control.
Financial assets through profit or loss
All financial assets not classified as measured at amortised cost or fair value through other comprehensive
income as described above are measured at FVTPL.
The Group does not hold any assets that fall into this category.
Impairment of financial assets
Impairment of financial assets is recognised on an expected credit loss (ECL) basis for the following assets:
•
financial assets measured at amortised cost
When determining whether the credit risk of a financial asset has increased significantly since initial
recognition and when estimating ECL, the Group considers reasonable and supportable information that is
relevant and available without undue cost or effort. This includes both quantitative and qualitative
information and analysis based on the Group's historical experience, informed credit assessment and
includes forward looking information.
The Group uses the presumption that an asset which is more than 30 days past due has seen a significant
increase in credit risk.
The Group uses the presumption that a financial asset is in default when:
•
•
the other party is unlikely to pay its credit obligations to the Group in full, without recourse of the Group
to actions such as realising security (if any is held); or
the financial assets are more than 90 days past due.
Credit losses are measured as the present value of the difference between the cash flows due to the Group
in accordance with the contract and the cash flows expected to be received. This is applied using a
probability weighted approach.
The accompanying notes form part of these financial statements.
Notes to the Financial Statements (continued)
25
Trade receivables and contract assets
Impairment of trade receivables and contract assets have been determined using the simplified approach in
AASB 9 which uses an estimation of lifetime expected credit losses. The Group has determined the
probability of non-payment of the receivable and contract asset and multiplied this by the amount of the
expected loss arising from default.
The amount of the impairment is recorded in a separate allowance account with the loss being recognised
in finance expense. Once the receivable is determined to be uncollectable then the gross carrying amount
is written off against the associated allowance.
Where the Group renegotiates the terms of trade receivables due from certain customers, the new expected
cash flows are discounted at the original effective interest rate and any resulting difference to the carrying
value is recognised in profit or loss.
Other financial assets measured at amortised cost
Impairment of other financial assets measured at amortised cost are determined using the expected credit
loss model in AASB 9. On initial recognition of the asset, an estimate of the expected credit losses for the
next 12 months is recognised. Where the asset has experienced significant increase in credit risk then the
lifetime losses are estimated and recognised.
Financial liabilities
The Group measures all financial liabilities initially at fair value less transaction costs, subsequently financial
liabilities are measured at amortised cost using the effective interest rate method.
The financial liabilities of the Group comprise trade payables, bank and other loans and finance lease
liabilities.
(k)
Impairment of non-financial assets
At the end of each reporting period the Group determines whether there is evidence of an impairment
indicator for non-financial assets.
Where an indicator exists and regardless for goodwill, indefinite life intangible assets and intangible assets
not yet available for use, the recoverable amount of the asset is estimated.
Where assets do not operate independently of other assets, the recoverable amount of the relevant
cash-generating unit (CGU) is estimated.
The recoverable amount of an asset or CGU is the higher of the fair value less costs of disposal and the
value in use. Value in use is the present value of the future cash flows expected to be derived from an asset
or cash-generating unit.
Where the recoverable amount is less than the carrying amount, an impairment loss is recognised in profit
or loss.
Reversal indicators are considered in subsequent periods for all assets which have suffered an impairment
loss, except for goodwill.
The accompanying notes form part of these financial statements.
26
(l)
Intangibles
Research and development
Development expenditure incurred on an individual project is expensed. Expenditure is only capitalised when
it is probable that future economic benefits associated with the item will flow to the entity and the costs
incurred can be reliably measured. On recognising that there is an asset with a future economic benefit to
the Group the cost model is applied requiring the asset to be carried at cost less any accumulated
amortisation and accumulated impairment losses. Any expenditure carried forward is amortised over the
period of expected future sales from the related project.
The carrying value of development costs is reviewed for impairment annually when the asset is not yet in
use, or more frequently when an indicator of impairment arises during the reporting year indicating that the
carrying value may not be recoverable. Where recognition criteria are not met, development costs are
recognised in the Statement of Comprehensive Income as incurred.
Gains or losses from de-recognition of an intangible asset are measured as the difference between the net
disposal proceeds and the carrying amount of the asset and are recognised in the Statement of
Comprehensive Income when the asset is derecognised.
(m) Cash and cash equivalents
Cash and cash equivalents in the Statement of Financial Position comprise cash at bank and in hand and
short term deposits with an original maturity of three months or less. For the purposes of the Statement of
Cash Flows, cash and cash equivalents consist of cash and equivalents as defined above, net of outstanding
bank overdrafts.
(n)
Employee benefits
Provision is made for employee benefits accumulated as a result of employees rendering services up to the
reporting date. These benefits include wages and salaries, annual leave and long service leave.
Liabilities arising in respect of wages and salaries, annual leave and any other employee benefits expected
to be settled within twelve months of the reporting date are measured at their nominal amounts based on
remuneration rates which are expected to be paid when the liability is settled. All other employee benefit
liabilities are measured at the present value of the estimated future cash outflow to be made in respect of
services provided by employees up to the reporting date. In determining the present value of future cash
outflows, the market yield as at the reporting date on national government bonds, which have terms to
maturity approximating the terms of the related liability, are used.
Employee benefit expenses and revenues arising in respect of the following categories:
•
•
wages and salaries, non-monetary benefits, annual leave, long service leave and other leave
entitlements; and
other types of employee entitlements,
are charged against surpluses on a net basis in their respective categories.
The contributions made to superannuation funds are charged to the statement of profit or loss and other
comprehensive income.
i. 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 reporting date using the projected unit credit method. Consideration is given to expected future wage
and salary levels, experience of employee departures and periods of service. Expected future payments are
discounted using market yields at the reporting date on national government bonds with terms to maturity
and currency that match, as closely as possible, the estimated future cash outflows.
The accompanying notes form part of these financial statements.
Notes to the Financial Statements (continued)
ii. Termination benefits
27
Termination benefits are payable when employment is terminated before the normal retirement date, or
when an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises
termination benefits when it is demonstrably committed to either terminating the employment of current
employees according to a detailed formal plan without possibility of withdrawal or providing termination
benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than
twelve months after Statement of Financial Position date are discounted to present value.
(o)
Provisions
Provisions are recognised when the Group 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.
Where the Group 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.
If the effect of the time value of money is material, provisions are determined by discounting the expected
future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and,
where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision
due to the passage of time is recognised as a finance cost.
(p)
Earnings per share
i. Basic earnings per share
Basic EPS is calculated as net profit attributable to members, adjusted to exclude costs of servicing equity
(other than dividends) and preference share dividends, divided by the weighted average number of ordinary
shares, adjusted for any bonus element.
ii. Diluted earnings per share
Diluted EPS is calculated as net profit attributable to members, 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;
other non-discretionary charges in revenues or expenses during the period that would result from the
dilution of potential ordinary shares; and
divided by the weighted average number of ordinary shares and dilutive potential ordinary shares,
adjusted for any bonus element.
(q)
Contributed equity
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a
deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares
or options for the acquisition of a business are not included in the cost of the acquisition as part of the
purchase consideration.
The accompanying notes form part of these financial statements.
28
(r)
Foreign currency transactions and balances
Foreign currency transactions are recorded at the spot rate on the date of the transaction.
At the end of the reporting period:
•
•
•
Foreign currency monetary items are translated using the closing rate;
Non-monetary items that are measured at historical cost are translated using the exchange rate at the
date of the transaction; and
Non-monetary items that are measured at fair value are translated using the rate at the date when fair
value was determined.
Exchange differences arising on the settlement of monetary items or on translating monetary items at rates
different from those at which they were translated on initial recognition or in prior reporting periods are
recognised through profit or loss, except where they relate to an item of other comprehensive income or
whether they are deferred in equity as qualifying hedges.
(s)
Share based payment transactions
The Group has an ability to provide benefits to employees (including key management personnel) in the
form of share-based payments, whereby employees render services in exchange for shares or rights over
shares ('equity settled transactions').
There are currently two plans in place to provide such benefits:
•
•
the XTEK Long Term Incentive Performance Rights Plan (LTIPRP); and
the Employee Tax Exempt Share Plan, which provides benefits to all employees.
The cost of these equity settled transactions with employees is measured by reference to the fair value at
the date at which they are granted. The fair value is determined by reference to either the Black Scholes
valuation or by an external valuer using a binomial model.
In valuing equity settled transactions, no account is taken of any vesting conditions, other than conditions
linked to the price of the shares of XTEK ('market conditions') if applicable.
The cost of equity settled transactions is recognised, together with a corresponding increase in equity, over
the period in which the performance and/or service conditions are fulfilled (the vesting period), ending on the
date on which the relevant employees become fully entitled to the award ('vesting date').
At each subsequent reporting date until vesting, the cumulative charge to the Statement of Comprehensive
Income is the product of (i) the grant date fair value of the award, (ii) the current best estimate of the awards
that will vest, taking into account such factors as the likelihood of employee turnover during the vesting
period and the likelihood of non-market performance conditions being met; and (iii) the expired portion of the
vesting period. The charge to the Statement of Comprehensive Income for the period is the cumulative
amount as calculated above less the amounts already charged in previous periods. There is also a
corresponding credit to equity.
The accompanying notes form part of these financial statements.
29
Notes to the Financial Statements (continued)
Until an award has vested, any amounts recorded are contingent and will be adjusted if more or fewer awards
vest than were originally anticipated to do so. Any award subject to a market condition is considered to vest
irrespective of whether or not the market condition is fulfilled, provided that all other conditions are satisfied.
If the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms
had not been modified. An additional expense is recognised for any modification that increases the total fair
value of the share-based payment arrangement, or is otherwise beneficial to the employee, as measured at
the date of modification.
If an equity-settled award is cancelled, it is treated as if it has vested on the date of cancellation, and any
expense not yet recognised for the award is recognised immediately. However, if a new award is substituted
for the cancelled award and designated as a replacement award on the date that it is granted, the cancelled
and new award are treated as if they were a modification of the original award, as described in the previous
paragraph.
(t)
Interest bearing loans and borrowings
All loans and borrowings are initially recognised at cost, being the fair value of the consideration received
net of issue costs associated with the borrowing. After initial recognition, interest bearing loans and
borrowings are subsequently measured at amortised cost using the effective interest method. Amortised
cost is calculated by taking into account any issue costs, and any discount or premium on settlement. Gains
and losses are recognised in the Statement of Comprehensive Income when the liabilities are derecognised
as well as through the amortisation process.
(u)
Government grants
Government grants are recognised when there is reasonable assurance that the grant will be received, and
all attaching conditions will be complied with.
When the grant relates to an expense item, it is recognised as income over the periods necessary to match
the grant on a systematic basis to the costs that it is intended to compensate. They are not credited directly
to shareholders equity.
When the grant relates to an asset, the fair value is credited to a deferred income account and is released
to the Statement of Comprehensive Income over the expected useful life of the relevant asset by equal
annual instalments.
(v)
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed and determinable payments that are not
quoted in an active market. Such assets are carried at amortised cost using the effective interest rate
method. Gains and losses are recognised in profit and loss when the loans and receivables are derecognised
or impaired, as well as through the amortisation process.
Impairment of Loans
If there is objective evidence that an impairment loss on 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 the use of an
allowance account. The amount of the loss is recognised in profit or loss.
The accompanying notes form part of these financial statements.
30
(w) Dividends
No dividends were declared on or before or subsequent to the end of the financial year.
(x)
Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of financial
year, which are unpaid. The amounts are unsecured and are usually paid within thirty days of recognition.
(y)
Trade receivables
Trade receivables are recognised and carried at original invoice amount less a provision for any
uncollectable amounts. Receivables are non-interest bearing and are generally on thirty day terms, unless
otherwise agreed with the customer. Collectability of trade receivables is reviewed on an ongoing basis.
Debts that are known to be uncollectable are written off when identified. An allowance for doubtful debts is
raised when there is objective evidence that the Group will not be able to collect the debt.
Receivables from related parties are recognised and carried at amortised cost, with interest recognised using
the effective interest rate method.
(z) Adoption of new and revised accounting standards
The Company has adopted all standards which became effective for the first time at 30 June 2019, the
adoption of these standards has not caused any material adjustments to the reported financial position,
performance or cash flow of the Company. Refer to Note 2 for details of the changes due to standards
adopted.
4
Critical accounting estimates and judgments
The directors make estimates and judgements during the preparation of these financial statements regarding
assumptions about current and future events affecting transactions and balances.
These estimates and judgements are based on the best information available at the time of preparing the financial
statements, however as additional information is known then the actual results may differ from the estimates.
The significant estimates and judgements made have been described below.
Key estimates - impairment of property, plant and equipment
The Group assesses impairment at the end of each reporting period by evaluating conditions specific to the Group
that may be indicative of impairment triggers. Recoverable amounts of relevant assets are reassessed using
value-in-use calculations which incorporate various key assumptions.
Key estimates - provisions
As described in the accounting policies, provisions are measured at management’s best estimate of the expenditure
required to settle the obligation at the end of the reporting period. These estimates are made taking into account a
range of possible outcomes and will vary as further information is obtained.
Key estimates - receivables
The receivables at reporting date have been reviewed to determine whether there is any objective evidence that
any of the receivables are impaired. An impairment provision is included for any receivable where the entire balance
is not considered collectible. The impairment provision is based on the best information at the reporting date.
The accompanying notes form part of these financial statements.
31
Notes to the Financial Statements (continued)
Key judgements
The COVID-19 outbreak has impacted the way of life in Australia. This has affected the ability of the Group to
continue operations as usual and has impacted on its operating results. In accordance with national guidelines, the
Group has implemented remote working arrangements in response to government requirements and to ensure the
wellbeing and safety of all employees and visitors.
The Group has determined that there are no going concern risks arising from the impact of the COVID-19 outbreak
and has risk mitigation strategies in place with regards to COVID-19 outbreaks and other ongoing impacts The
board members have determined that the Company remains in a healthy cash position and retained a stable
revenue stream for the 2021 financial year.
5
Revenue and Other Income
(a)
Revenue from operations
Value added reseller products
In-house development and manufactured products
Logistic engineering maintenance
Grant and other revenue
Total Revenue
(b)
Other Income
Interest
Other
Total Other income
2020
$
28,884,243
10,738,409
2,580,023
512,592
2019
$
31,282,847
1,607,633
4,970,368
-
42,715,267
37,860,848
2020
$
17,678
832,969
850,647
2019
$
52,252
2,395
54,647
Total Revenue and Other Income
43,565,914
37,915,495
The accompanying notes form part of these financial statements.
6
Expenses
Profit/(loss) before income tax from continuing operations includes the following specific expenses.
32
(a)
Employee Benefits
Salaries and wages
Superannuation contributions
Payroll tax
Other employee expenses
Workers compensation
Total Employee Benefits
(b)
Depreciation
Plant and equipment
Motor vehicles
Office furniture and equipment
Computer software
Demonstration equipment
Leasehold property improvements
Right to use assets
Total Depreciation
2020
$
2019
$
3,941,313
3,005,202
437,935
362,009
54,756
129,454
332,274
146,635
15,557
61,580
4,925,467
3,561,248
2020
$
216,015
3,707
90,454
47,921
22,876
62,970
331,420
775,363
2019
$
61,285
908
43,316
18,281
10,041
25,022
150,827
309,680
With the consolidation of the new HighCom subsidiary for nine months of the 2020 financial year, a number
of the individual expense lines have increased, when compared to the previous period. Notably is the rental
costs, seen as Interest on Lease Liabilities and Depreciation on the Right of Use Assets
The increase in the depreciation of software reflects the increasing professionalisation of the firm’s systems.
A significant investment has been made in both XTEK’s product development capability and into the
businesses’ IT security.
(c)
Finance costs
Interest on lease liabilities
Other interest expense
Total Finance costs
2020
$
166,929
1,015
167,944
2019
$
122,710
2
122,712
(The “Interest on lease liabilities” refers not to borrowings but is the application of AASB16. It refers to the
internal interest component of the lease on rented properties.)
The accompanying notes form part of these financial statements.
Notes to the Financial Statements (continued)
Expenses (continued)
(d)
Operational expenditure
Accounting and Audit fees
Bank charges
Consultancy fees
Directors fees (non Executive)
Insurance
FBT
Office administrative costs
Minor operating lease
33
2020
$
179,387
28,310
679,956
260,000
285,434
23,557
653,363
12,820
2019
$
90,959
6,171
559,936
260,000
182,244
21,720
509,391
16,430
With the consolidation of HighCom for nine months of the 2020 financial year, a number of the individual expense
lines have increased, when compared to the previous period. Most notably are salaries and rental costs, seen as
Interest on Lease Liabilities and Depreciation on the Right of Use Assets. As a result of due diligence and half year
and full year audits of XTEK Ltd and the subsidiaries, a total of five financial audits were conducted in the 2020
financial year, the audit costs have risen correspondingly.
The value of the R&D expenditure in 2019-20 is a little less than half of the comparative year’s expenditure. Whilst
the company continued to invest in research and development into its own intellectual capital, more effort was spent
in the construction of the firm’s production capabilities.
7
Income Tax Expense
(a)
The major components of tax expense (income) comprise
Current tax expense
Current income tax charge
Loss used not recognised
R&D tax offset
Deferred tax expense
Origination and reversal of temporary differences
Change in unrecognised deductible temporary difference
2020
$
36,504
-
(36,504)
(67,516)
67,516
-
2019
$
528,911
-
(528,911)
(71,463)
71,463
-
The accompanying notes form part of these financial statements.
(b)
Reconciliation of income tax to accounting profit
Profit
Tax
Add:
Tax effect of amounts which are not deductible (taxable) in calculating
taxable income
- Capital raising cost amortised
- Entertainment
- Losses brought to account
- Timing differences not brought to account
- Research and development expenditure
- Research and development offsets
- Non assessable foreign subsidiary income
Income tax expense
(c)
Recognised Deferred Tax Assets and Liabilities
Deferred tax liabilities
Accrued interest
Gross deferred tax liabilities
34
2020
$
302,679
27.5%
83,237
2019
$
168,433
27.5%
46,319
(33,783)
2,524
-
67,516
149,167
(68,525)
(200,136)
-
(35,247)
2,360
-
71,463
444,016
(528,911)
-
-
2020
$
1,116
1,116
2019
$
2,681
2,681
Deferred tax liability not recognized
(1,116)
(2,681)
Total
Deferred tax assets
Accrued expenses
Superannuation
Employee leave entitlements
Unrealised foreign exchange losses
Lease assets
Impaired assets
Potential tax losses
Potential capital tax losses
Deferred differences and losses not recognised
Net deferred tax asset
-
2020
$
8,549
28,793
152,228
1,964
71,046
238,222
-
2019
$
16,089
22,984
104,470
57,375
52,996
238,222
5,640,328
5,640,328
427,972
427,972
(6,569,101)
(6,560,437)
-
-
The accompanying notes form part of these financial statements.
35
Notes to the Financial Statements (continued)
(d)
Tax Losses
The Parent Company and subsidiaries are consolidated for taxation purposes.
The Group has capital tax losses for which no deferred tax asset is recognised on the Balance Sheet that
arise in Australia of $1,556,260 (2019: $1,556,260) and are available indefinitely for offset against future
capital gains of a similar nature subject to continuing to meet relevant statutory tests.
The Group has accumulated tax losses for which no deferred tax asset has been recognised of $20,510,285
(Parent company, 2019: $20,510,285). The deferred tax asset associated with the loss will only be realisable
in the future in the event of sufficient taxable profits being available to utilise the losses, subject to loss
recoupment rules.
(e)
Unrecognised Temporary Differences
At 30 June 2020, there are no unrecognised temporary differences associated with the Parent Company's
investments in subsidiaries as the Parent has no liability for additional taxation should unremitted earnings
be remitted (2019: nil).
8
Key Management Personnel Remuneration
Refer to the remuneration report in the Directors’ report for details of remuneration paid or payable to each member
of the Group’s key management personnel for the year ended 30 June 2020.
Key management personnel remuneration included within employee expenses for the year is shown below:
Short-term employee benefits
Post-employment benefits
Other long-term benefits
9
Auditors’ Remuneration
Audit and review of financial reports and other audit work under the
Corporations Act 2001
Remuneration of the lead auditor, Hardwickes Chartered Accountants
Remuneration of US based auditor, Turner Stone
Total
2020
$
2019
$
1,546,513
1,184,137
105,496
7,172
88,296
4,698
1,659,181
1,277,131
2020
$
2019
$
60,000
89,108
149,108
54,000
-
54,000
As a result of due diligence and half year and full year audits of XTEK Ltd and the subsidiaries, a total of five financial
audits were conducted in the 2020 financial year, the audit costs have risen correspondingly.
10
Dividends
Ordinary shares
No dividends were declared on or before or subsequent to the end of the financial year.
Franking account
The franking credits available for subsequent financial years
The accompanying notes form part of these financial statements.
2020
$
2019
$
981,110
981,110
36
The above available balance is based on the dividend franking account at year-end adjusted for:
(a)
Franking credits that will arise from the payment of the current tax liabilities;
(b)
Franking debits that will arise from the payment of dividends recognised as a liability at the year-end;
(c)
Franking credits that will arise from the receipt of dividends recognised as receivables at the end of the year.
The ability to use the franking credits is dependent upon the Company's future ability to declare dividends.
11
Operating Segments
Segment information
Identification of reportable segments
The Group has identified its operating segments based on the internal reports that are reviewed and used by the
Board of Directors (chief operating decision maker) in assessing performance and determining the allocation of
resources.
The Group is managed primarily on the basis of product category and service offerings as the diversification of the
Group's operations inherently have notably different risk profiles and performance assessment criteria. Operating
segments are therefore determined on the same basis.
Reportable segments
The homeland security value added reseller business remains XTEK’s major reportable segment (see note 5a) and
includes the supply of homeland security equipment and services to predominantly government customers in the
Australasian region. The Managing Director reviews internal management reports for the strategic business units
on a monthly basis.
Operating Segments
(a) Major customers
The Parent company has a number of customers to whom it provides both products and services. The Group
supplies the agencies of a number of Australian governments, which combined, account for 96% of revenue
(2019 Parent company: 96%).
The US subsidiary supplies through a network of distributors, 99% of domestic sales are ultimately in the
hands of US Federal, state and municipal bodies. (2019 nil)
(b) Geographical information
In presenting information, the segment revenue is based on the geographical location of the Group’s
customers.
Australia
North America
New Zealand
Other
Total revenue
2020
$
2019
$
30,890,269
36,764,623
11,416,266
-
313,443
95,289
1,089,163
7,062
42,715,267
37,860,848
The accompanying notes form part of these financial statements.
Notes to the Financial Statements (continued)
12
Cash and Cash Equivalents
Cash at bank and in hand
37
2020
$
2019
$
3,057,031
3,057,031
5,349,874
5,349,874
Cash at bank earns interest at floating rates based on daily bank deposit rates.
Reconciliation of cash
Cash and Cash equivalents reported in the statement of cash flows are reconciled to the equivalent items in the
statement of financial position as follows:
Cash and cash equivalents
Balance as per statement of cash flows
13
Trade and Other Receivables
CURRENT
Trade receivables
Other receivables *
Total current trade and other receivables
Terms and conditions
2020
$
2019
$
3,057,031
3,057,031
5,349,874
5,349,874
2020
$
2019
$
4,779,104
2,696,230
10,592,956
17,161,881
15,372,060
19,858,111
Trade and other receivables are non-interest bearing and generally on thirty-day terms.
A provision for impairment loss is recognised when there is objective evidence that an individual trade receivable
is impaired. There was no impairment loss recognised in 2020 (2019: Nil).
* As in the comparative year, Other Receivables are significantly higher due to an accrual for a major delivery of
SUAS vehicles around this time. There is a corresponding payable – see note 18
The accompanying notes form part of these financial statements.
38
At 30 June 2020, the ageing analysis of trade receivables is as follows:
Not impaired
Not impaired
Gross amount
$
< 30 days
$
Past due but not
impaired
(days overdue)
Past due but not
impaired
(days overdue)
Past due but not
impaired
(days overdue)
31-60
$
61-90
$
> 90
$
2020
Trade
receivables
Total
2019
Trade
receivables
Total
4,779,104
4,779,104
3,380,572
3,380,572
1,346,595
1,346,595
40,282
40,282
11,655
11,655
2,696,230
2,696,230
2,424,101
2,424,101
272,129
272,129
-
-
-
-
99.46% of all trade receivables at 30 June 2020 were received by August 2020.
The Group does not hold any financial assets with terms that have been renegotiated, but which would otherwise
be past due or impaired.
The other classes of receivables do not contain impaired assets.
The carrying value of trade receivables is considered a reasonable approximation of fair value due to the short-term
nature of the balances.
The maximum exposure to credit risk at the reporting date is the fair value of each class of receivables in the
financial statements.
14
Inventories
CURRENT
Work in progress
Products and spare parts
2020
$
2019
$
5,931,544
3,105,452
9,036,996
1,178,759
571,914
1,750,673
During the 2020 financial year XTEK closed its holding and logistics facility in Sydney. As a consequence, the
company took the opportunity to write down $65,820 of inventory (2019: Nil).
Any expense would be included in the changes in inventories of finished goods and work in progress in the
Statement of Comprehensive Income.
15
Other Current Assets
CURRENT
Prepayments
Short term loan
2020
$
1,546,971
57,658
1,604,629
2019
$
964,454
25,089
989,543
The accompanying notes form part of these financial statements.
Notes to the Financial Statements (continued)
16
Property, plant and equipment
PROPERTY, PLANT AND EQUIPMENT
Plant and equipment
At cost
Accumulated depreciation
Total plant and equipment
Office Furniture and Equipment
At cost
Accumulated depreciation
Total office furniture and equipment
Motor vehicles
At cost
Accumulated depreciation
Total motor vehicles
Demonstration Equipment
At cost
Accumulated depreciation
Total demonstration equipment
Computer software
At cost
Accumulated depreciation
Total computer software
Leasehold Improvements
At cost
Accumulated depreciation
Total leasehold improvements
UAS
At cost
Total UAS
Right of use, lease assets
At cost
Accumulated depreciation
Total right of use, lease assets
39
2020
$
2019
$
1,669,532
(451,298)
1,218,234
552,582
(259,506)
293,076
71,168
(41,248)
29,920
221,354
(157,379)
63,975
286,624
(136,146)
150,478
449,265
(145,097)
304,168
81,312
81,312
723,127
(249,891)
473,236
388,325
(209,840)
178,485
42,554
(37,540)
5,014
194,231
(134,503)
59,728
195,222
(87,046)
108,176
464,898
(82,127)
382,771
81,312
81,312
3,001,920
(479,083)
2,522,837
1,170,299
(150,827)
1,019,472
Total property, plant and equipment
4,664,000
2,308,194
The accompanying notes form part of these financial statements.
40
(a) Movements in carrying amounts of property, plant and equipment
Movement in the carrying amounts for each class of property, plant and equipment between the beginning
and the end of the current financial year:
Plant and
Equipment
$
Office
Furniture and
Equipment
$
Motor
Vehicles
$
Demonstration
Equipment
$
Computer
Software
$
Year ended 30 June 2020
Balance at the beginning of year
Additions
Disposals
Depreciation expense
473,236
972,571
(11,558)
(216,015)
178,485
205,045
-
(90,454)
Balance at the end of the year
1,218,234
293,076
5,014
28,613
-
(3,707)
29,920
59,728
27,123
-
(22,876)
108,176
91,723
(1,500)
(47,921)
63,975
150,478
Leasehold
Improvements
$
UAS
$
Right of Use,
Lease Assets
$
Total
$
Year ended 30 June 2020
Balance at the beginning of year
Additions
Disposals
Depreciation expense
382,771
29,370
(45,003)
(62,970)
81,312
-
-
-
1,019,472
1,834,785
-
(331,420)
2,308,194
3,189,230
(58,061)
(775,363)
Balance at the end of the year
304,168
81,312
2,522,837
4,664,000
Plant and
Equipment
$
Office
Furniture and
Equipment
$
Motor
Vehicles
$
Demonstration
Equipment
Computer
Software
$
$
Year ended 30 June 2019
Balance at the beginning of year
Additions
Disposals
Depreciation expense
308,894
225,627
-
(61,285)
79,629
142,172
-
(43,316)
Balance at the end of the year
473,236
178,485
5,921
-
-
(908)
5,014
19,747
50,023
-
(10,042)
12,976
113,481
-
(18,281)
59,728
108,176
Leasehold
Improvements
$
UAS
$
Right of Use,
Lease Assets
$
Total
$
Year ended 30 June 2019
Balance at the beginning of year
Additions
Disposals
Depreciation expense
4,167
403,626
-
(25,022)
81,312
-
-
-
-
1,170,299
-
(150,827)
512,646
2,105,228
-
(309,680)
Balance at the end of the year
382,771
81,312
1,019,472
2,308,194
The accompanying notes form part of these financial statements.
Notes to the Financial Statements (continued)
17
Intangible Assets
Patents
Cost
Certification
Total Intangibles
41
2020
$
252,615
47,397
300,012
2019
$
155,891
-
155,891
During the full year ended 30 June 2020, the Company recognised $96,724 for patent application costs associated
with the Intellectual Property of the process for the manufacture of multilayer articles (2019: $59,277). These costs
have an indefinite useful life. Other intangible assets, pertaining to certification costs, were acquired with the
acquisition of HighCom.
(a) Movements in carrying amounts of intangible assets
Year ended 30 June 2020
Balance at the beginning of the year
Additions
Closing value at 30 June 2020
Year ended 30 June 2019
Balance at the beginning of the year
Additions
Closing value at 30 June 2019
18
Trade and Other Payables
Current
Trade and other payables*
GST payable
Sundry payable and accrued expenses
Derivative financial liability
Lease liability: AASB16
Rent payable
Patents
$
Certification
$
155,891
96,724
252,615
-
47,397
47,397
Total
$
155,891
144,121
300,012
Patents
$
Certification
$
Total
$
96,614
59,277
155,891
-
-
-
96,614
59,277
155,891
2020
$
2019
$
13,979,261
16,014,663
406,716
534,089
7,141
216,724
349,920
208,638
1,620,828
1,974,293
-
9,063
16,548,035
18,773,301
* As in the comparative year, “Other payables” are significantly higher due to an accrual for a major delivery of
SUAS vehicles around this time. There is a corresponding receivable – see note 13
The accompanying notes form part of these financial statements.
Non-Current
Rent payable
Lease liability: AASB 16
Bank loan – interest bearing (see note 21)
19
Employee Benefits
Current liabilities
Long service leave
Annual leave provision
Non-current liabilities
Long service leave
42
2020
$
2019
$
-
1,172,701
816,725
6,797
1,071,134
-
1,989,426
1,077,931
2020
$
198,477
300,336
498,813
2020
$
54,744
54,744
2019
$
161,650
186,385
348,035
2019
$
31,857
31,857
Nature and timing of provisions
Refer to note 3(n) for the relevant accounting policy and discussion of the significant estimations and assumptions
applied in the measurement of this provision.
20
Contract liabilities
CURRENT
Customer deposits
Government grants
Total
NON-CURRENT
Customer deposits
Government grant
Total
21
Interest bearing liabilities
2020
$
2019
$
370,512
1,352,780
1,723,292
1,963,855
-
1,963,855
2020
$
46,951
-
46,951
2019
$
81,366
440,000
521,366
During the year the US subsidiary drew down and fully repaid a loan from a US bank to the amount of USD250,000.
During the year, XTEK Ltd obtained a loan facility from the Commonwealth Bank to the amount of $2.5m. The loan
is interest only for the first twelve months, interest plus a capital repayment of $500,000 in the subsequent two years
with a $1.5m balloon payment at the end. At 30 June 2020 the loan was drawn to the amount of $816,725.
The Group had no loans at 30 June 2019.
The accompanying notes form part of these financial statements.
Notes to the Financial Statements (continued)
22
Issued Capital
53,167,209 (2019: 40,579,906) Ordinary shares
Total
43
2020
$
2019
$
33,741,882
27,312,482
33,741,882
27,312,482
There were no options on issue at 30 June 2019. 400,000 unlisted share options were on issue at 30 June 2018,
these were all exercised in July 2018.
(a) Movement in ordinary shares
Opening balance
Shares issued
2020
No.
2020
$
2019
No.
2019
$
40,579,906
27,312,482
39,947,678
27,196,530
12,587,303
6,663,012
632,228
249,736
Transaction cost in relation to capital
-
(233,612)
-
(133,784)
Total
53,167,209
33,741,882
40,579,906
27,312,482
(b)
Expired options and share performance rights
There were no options on issue at 30 June 2020.
There were 400,000 unlisted options on issue at 30 June 2018, these share options were exercised in July
2018. There were no share performance rights exercisable at the end of any prior year.
As at 30 June 2020 there were no unissued shares nor were there any at the end of any prior year.
(c) Capital Management
When managing capital, management’s objective is to ensure the entity continues as a going concern as
well as to maintain optimal returns to shareholders and benefits for other stakeholders. Management also
aims to maintain a capital structure that ensures the lowest cost of capital available to the entity.
No dividends were declared on or before or subsequent to the end of the financial year.
23
Earnings per Share
Basic earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary equity
holders of the Company (after declaring interest on the convertible redeemable preference shares) by the weighted
average number of ordinary shares outstanding during the year.
Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity holders
of the Company (after deducting interest on the convertible redeemable preference shares) by the weighted average
number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that
would be issued on the conversion of all potential shares into ordinary shares.
Basic profit per share
Dilutive profit per share
2020
$
0.006
2019
$
0.004
0.006
0.004
The accompanying notes form part of these financial statements.
44
Reconciliations of earnings used in calculating basic and diluted earnings per share
(a)
Reconciliation of earnings to profit or loss from continuing operations
Profit from continuing operations
Earnings used in the calculation of dilutive EPS from continuing
operations
(b) Earnings used to calculate overall earnings per share
Earnings used to calculate overall earnings per share
2020
$
2019
$
302,678
168,433
302,678
168,433
2020
$
2019
$
302,678
168,433
(c) Weighted average number of ordinary shares outstanding during the year used in calculating basic
EPS
2020
No.
2019
No.
Weighted average number of ordinary shares outstanding during the year
used in calculating basic EPS
51,322,177
40,447,495
Weighted average number of ordinary shares outstanding during the year
used in calculating dilutive EPS
51,322,177
40,447,495
(d) Options and share performance right
Options and share performance rights granted to employees and Directors that are considered to be
potential ordinary shares have been included in the determination of diluted earnings per share to the extent
to which they are dilutive. As at reporting date, the options and share performance rights have not been
included in the determination of basic earnings per share.
(e)
Share Issuance
The issued capital of XTEK Ltd & controlled entities at 30 June 2020 comprised 53,167,209 (2019:
40,579,906) fully paid Ordinary Shares. There were no issued options as at 30 June 2020 (2019 nil).
24
Government grants
(a)
AusIndustry’s R&D tax incentive
No income from the AusIndustry R&D Tax Incentive was recognised in the 2020 financial year (FY 2019 – nil).
As the Group’s revenue exceeded $20m the R&D incentive will not be received as a cashback. XTEK would
otherwise have recognised $208k in additional revenue and net profit, and received the same in cash.
The accompanying notes form part of these financial statements.
45
Notes to the Financial Statements (continued)
25
Cash flow information
(a) Reconciliation of cash flow from operations with profit/(loss) after income tax.
Profit for the year
Adjustments for non-cash flow in profits:
Depreciation
Bonus issue of shares to employees
Share based payment to employee
Loan forgiveness
Finance cost on lease
Loss on sale of assets
Changes in assets and liabilities
(Increase) in trade debtors
Decrease / (Increase) in inventory
(Increase) / Decrease in prepayments and other
assets
Increase / (Decrease) in trade and other payables
Increase / (Decrease) in deferred income
Increase / (Decrease) in employee provisions
Net cash flows from/(used in) operating activities
(b)
Non-cash Financing and investing activities
Notes
32
2020
$
302,678
775,363
113,369
19,446
(368,643)
167,944
14,527
2019
$
168,433
309,680
69,736
6,893
-
122,710
-
5,962,165
(13,878,231)
(4,686,340)
(597,192)
(5,661,567)
(760,783)
173,664
(4,545,369)
(284,204)
(641,702)
12,838,047
1,837,814
47,882
597,058
432,467 shares issued to employees during the financial year 2019-20. As at 30 June 2020 82,166
shares remain in escrow.
FY 2018-19 232,228 shares issued to employees, 176,546 were issued with no-vesting conditions.
The balance of 55,682 shares had vesting conditions.
Shares that have vesting conditions are held in escrow and are allotted to the employee recipient
after three years from the time of granting or upon their leaving the employment of the Company.
26
Share-based Payments
During the year ended 30 June 2020, 197,685 new ordinary shares at the issue price of $0.710 per share were
issued as part of staff incentive plans for FY 2019-20 for employees of the company (FY18 232,228 new ordinary
shares at the issue price of $0.395 per share).
Employee Share Ownership Plans
The Company provides benefits to employees (including key management personnel) in the form of share-based
payments, whereby employees render services in exchange for shares or rights over shares ('equity settled
transactions').
There are currently two approved by shareholders:
(i)
The XTEK Long Term Incentive Performance Rights Plan (LTIPRP); and
(ii)
The Employee Tax Exempt Share Plan, which provides benefits to all eligible employees.
The cost of these equity settled transactions with employees is measured by reference to the fair value at the date
at which they were granted.
The accompanying notes form part of these financial statements.
46
Share Options and Share Performance Rights
There were no unlisted options at 30 June 2020 (2019: nil). There were no options or share performance rights in
the hands of staff issued at the start of financial year 2020 or the prior year. There were no options or share
performance rights in the hands of staff exercisable at the end of the year or any prior year. As at 30 June 2019,
there were no unissued shares.
Employee/Director Share Issue
The Board approved a bonus comprising cash and fully paid ordinary shares separate from the LTIP - note 3(s):
200,000 fully paid ordinary shares were issued as a director bonus. 432,467 fully paid ordinary shares were issued
to staff in accordance with a Board resolution of 1 November 2019 (FY19 232,228 fully paid ordinary shares).
Weighted Average Share Price
The weighted average market price at 30 June 2020 was 64.8 cents (2019: 44.8 cents).
27
Events Occurring After the Reporting Date
The financial report was authorised for issue on 30 September 2020 by the Board of Directors.
No matters or circumstances have arisen since the end of the financial year which significantly affected or could
significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group
in future financial years.
The COVID-19 outbreak has impacted the way of life in Australia. This has affected the ability of the Group to
continue operations as usual and has impacted on its operating results. In accordance with national guidelines, the
Group has implemented remote working arrangements in response to government requirements and to ensure the
wellbeing and safety of all employees and visitors.
The Group has determined that there are no going concern risks arising from the impact of the COVID-19 outbreak
and has risk mitigation strategies in place with regards to COVID-19 outbreaks and other ongoing impacts The
board members have determined that the Company remains in a healthy cash position and retained a stable
revenue stream for the 2021 financial year.
28
Related Parties
(a)
The Group's main related parties are as follows:
1.
Entities
The Group is XTEK Limited and its wholly owned subsidiaries:
- Simmersion Holdings Pty Ltd.
- XTEK, Inc (registered in Delaware, USA) (is the owner of HighCom Armor Solutions, Inc)
The financial details for the Parent entity are at Note 31.
2.
Directors
Details of all Directors can be found in the Directors' Report.
3.
Key management personnel
Disclosures relating to key management personnel are set out in the remuneration report.
(b)
Transactions with related parties
Transactions between related parties, if they occur, are on normal commercial terms and conditions no more
favourable than those available to other parties unless otherwise stated.
There were no related party transactions in the 2019-20 year.
There were no related party transactions in the 2018-19 year.
The accompanying notes form part of these financial statements.
47
Notes to the Financial Statements (continued)
29
Financial Risk Management
The Group is exposed to a variety of financial risks through its use of financial instruments.
The Group‘s overall risk management plan seeks to minimise potential adverse effects due to the unpredictability
of financial markets.
The most significant financial risks to which the Group is exposed to are described below.
Specific risks
•
Liquidity risk
• Credit risk
• Market risk - currency risk, interest rate risk and price risk
Financial instruments used
The principal categories of financial instrument used by the Group are described below.
•
Trade receivables
• Cash at bank
•
Trade and other payables
Summary Table
Financial assets
Held at amortised cost
Cash and cash equivalents
Trade and other receivables
Total financial assets
Financial liabilities
Financial liabilities at fair value
Trade and other payables
Total financial liabilities
2020
$
2019
$
3,057,031
5,349,874
15,372,060 19,858,111
18,429,091 25,207,985
18,537,461
19,851,232
18,537,461
19,851,232
The Group has not restated comparatives when initially applying AASB 9, the comparative information has
been prepared under AASB 139 Financial Instruments: Recognition and Measurement.
The accompanying notes form part of these financial statements.
48
Financial Risk Management
Objectives, policies and processes
The Board of Directors has overall responsibility for the establishment of the Group’s financial risk management
framework. This includes the development of policies covering specific areas such as foreign exchange risk, interest
rate risk, credit risk and the use of derivatives.
Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the
Group’s activities.
The day-to-day risk management is carried out by the Group’s finance function under policies and objectives which
have been approved by the Board of Directors. The Chief Financial Officer has been delegated the authority for
designing and implementing processes which follow the objectives and policies. This includes monitoring the levels
of exposure to interest rate and foreign exchange rate risk and assessment of market forecasts for interest rate and
foreign exchange movements.
The Board of Directors receives monthly reports which provide details of the effectiveness of the processes and
policies in place.
The XTEK Group does not engage in the trading of financial assets for speculative purposes. Mitigation strategies
for specific risks faced are described below.
Liquidity risk
Liquidity risk arises from the Group’s management of working capital and the finance charges and principal
repayments on its debt instruments. It is the risk that the Group could encounter difficulty in meeting its financial
obligations as they fall due.
The Group’s policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities as and when
they fall due. The Group maintains cash and marketable securities to meet its liquidity requirements for up to 30-day
periods. Funding for long-term liquidity needs is additionally secured by an adequate amount of committed credit
facilities and the ability to sell long term financial assets.
The Group manages its liquidity needs by carefully monitoring scheduled debt servicing payments for long-term
financial liabilities as well as cash-outflows due in day-to-day business.
Liquidity needs are monitored in various time bands, on a day-to-day and week-to-week basis, as well as on the
basis of a rolling 30-day projection. Long-term liquidity needs for a 180-day and a 360-day period are identified
monthly.
At the reporting date, these reports indicate that the Group expected to have sufficient liquid resources to meet its
obligations under all reasonably expected circumstances and will not need to establish a financing facilities.
Financial guarantee liabilities are treated as payable on demand since the Group has no control over the timing of
any potential settlement of the liabilities.
The timing of cash flows presented in the table to settle financial liabilities reflects the earliest contractual settlement
dates and does not reflect management's expectations that banking facilities will be rolled forward. The amounts
disclosed in the table are the undiscounted contracted cash flows and therefore the balances in the table may not
equal the balances in the statement of financial position due to the effect of discounting.
The accompanying notes form part of these financial statements.
49
Notes to the Financial Statements (continued)
The Group’s liabilities have contractual maturities which are summarised below:
Not > 1 month
Total
2020
$
13,979,261
2019
$
16,014,663
2020
$
13,979,261
2019
$
16,014,663
13,979,261
16,014,663
13,979,261
16,014,663
Trade payables
Total
Credit risk
Credit risk arises from the financial assets of the Group, which comprise cash and cash equivalents and trade and
other receivables. The Group’s exposure to credit risk arises from the potential default of the counter party, with a
maximum exposure being equal to the carrying amount of these instruments. Exposure at statement of financial
position date is addressed in each applicable note.
The Group trades only with recognised, creditworthy third parties, and as such collateral is not requested nor is it
the Group’s policy to securitise its trade and other receivables. The Group minimises concentrations of credit risk
in relation to trade and other receivables by undertaking transactions with a large number of government entities.
It is the Group’s policy that all non-government customers who wish to trade on credit terms are subject to credit
verification procedures including an assessment of their financial position, past experience and industry reputation.
In addition, receivables balances are monitored on an ongoing basis with the result that the Group’s exposure to
bad debts is not significant.
Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of
changes in market prices.
(i)
Foreign exchange risk
The Group has transactional currency exposures. Such exposure arises from sales or purchases by the Group in
currencies other than the Group’s functional currency. Approximately 81% (2019: 70%) of the Group’s purchases
are denominated in currencies other than the functional currency of the operating entity, whilst 52% of sales are
denominated in the Group’s functional currency (2019: 52%).
The following sensitivity analysis is based on the foreign currency risk exposures in the Statement of Financial
Position as they relate to the Parent Entity. Movements in the value of the assets of the foreign subsidiary have no
immediate impact on the profit / loss of the Group as variations in the exchange rate impact the foreign exchange
reserve (see note 30a) not the Consolidated Statement of Profit or Loss and Other Comprehensive Income.
The accompanying notes form part of these financial statements.
At 30 June 2020, had the Australian Dollar moved, with all other variables held constant, post-tax profit/(loss) would
have been affected as follows:
50
2020
+10%
$
402,969
-10%
$
(492,518)
30,897
(30,763)
(4,889)
3,999
5,123
2019
+10%
$
3,895
4,592
274
-10%
$
(4,761)
(5,613)
(335)
(4,191)
187,065
(153,053)
USD
Net results
EUR
Net results
GBP
Net results
NZD
Net results
Market risk
(i)
Foreign exchange risk
Exposure to foreign exchange rates vary during the year depending on the volume of overseas trading transactions.
Nonetheless, the analysis table is considered to be representative of the Group’s exposure to foreign currency risk.
(ii)
Interest rate risk
The Group’s exposure to market interest rates relates primarily to the cash at bank. At reporting date, the Company
had financial assets comprising cash and cash equivalents totaling $3,057,031 (2019: $5,349,874) exposed to
Australian variable interest rate risk that are not designated in cash flow hedges.
The following sensitivity analysis is based on the interest rate risk exposures in existence at reporting date. At 30
June 2020, if interest rates had moved, as illustrated in the table below, with all other variables held constant, the
post-tax net profit/(loss) for the period and equity would have been affected as below.
The calculations are based on the financial instruments held at each reporting date. All other variables are held
constant.
For cash held
2020
2019
Net results
Equity
+1.00%
$
30,570
30,570
-0.60%
$
(18,342)
(18,342)
+1.00%
$
53,494
53,494
-1.00%
$
(53,494)
(53,494)
For borrowings
2020
2019
Net results
Equity
+1.00%
$
8,167
8,167
-1.00%
$
(8,167)
(8,167)
+1.00%
-1.00%
$
-
-
$
-
-
The accompanying notes form part of these financial statements.
51
Notes to the Financial Statements (continued)
30
Reserves and retained (losses)/profits
Equity Based Payment reserve
Equity based payments reserve consists of:
•
•
•
premium paid on the purchase of Simmersion Holdings Pty Ltd during 2016;
share performance rights granted to Executives and Management during 2008, and
options and share performance rights granted to Directors and Executives during 2007 credited against
equity during the year.
(a) Movement in reserves
Capital reserve
Balance at the beginning of the year
Transfer to Retained Earnings
Balance Capital Reserve
Foreign Exchange Reserve
Creation on consolidation of subsidiaries
Balance Foreign Exchange Reserve
Equity Based Payment Reserve
Balance at the beginning of the year
Equity Based Payments
Balance Equity Based Payment Reserve
Balance at the end of the year
(b)
Accumulated Losses
Movement in accumulated profit/(losses) were as follows:
Balance at the beginning of the year
Profit/(losses) for the year
Restatement due to adoption of AASB16
Transfer to Retained Earnings
Balance at the end of the year
2020
$
2019
$
1,882
516,110
-
(514,228)
1,882
1,882
14,193
14,193
6,893
19,446
26,339
42,414
-
-
6,893
-
6,893
8,775
2020
$
(19,625,316)
302,678
-
-
2019
$
(20,144,986)
168,433
(162,991)
514,228
(19,322,638)
(19,625,316)
The accompanying notes form part of these financial statements.
31
Parent entity
The following information has been extracted from the books and records of the parent, XTEK Limited and has
been prepared in accordance with Accounting Standards.
The financial information for the parent entity, XTEK Limited has been prepared on the same basis as the
consolidated financial statements except as disclosed below.
52
Statement of Financial Position
Assets
Current assets
Non-current assets
Total Assets
Liabilities
Current liabilities
Non-current liabilities
Total Liabilities
Net Assets
Equity
Issued capital
Retained earnings
Reserves
Total Equity
Statement of Profit or Loss and Other Comprehensive Income
Total profit or loss for the year
Total comprehensive income
32
Contingencies
The Group advises of a contingent liability of USD253,000 at 30 June 2020.
2020
$
2019
$
28,581,936
3,258,995
27,999,981
2,462,660
31,840,931
30,462,641
15,485,084
2,539,248
21,457,535
1,191,153
18,024,332
22,648,688
13,816,599
7,813,953
33,741,882
(19,951,622)
26,339
27,312,482
(19,505,422)
6,893
13,816,599
7,813,953
(446,200)
(446,200)
181,306
181,306
The US subsidiary received a forgivable loan as part of the US Government’s Covid-19 stimulus package. The
Paycheck Protection Scheme provided funding whereby, if certain conditions were met, the loan would be forgiven.
As the conditions, as prescribed by the US “Small Business Agency”, have been complied with, AASB120 allows
for recognition of the loan as income. It is represents as Other Income in the Group accounts.
The Group plans to make application for formal forgiveness of the loan in September 2020.
There were no contingent liabilities at 30 June 2019.
The accompanying notes form part of these financial statements.
53
Notes to the Financial Statements (continued)
33
Business Combination
On 29 September 2019, the parent company acquired a 100% interest in HighCom Armor Solutions, Inc
which resulted in XTEK, Inc (US incorporated, acquisition vehicle 100% owned by XTEK Ltd) obtaining control
of HighCom. This acquisition is expected to increase XTEK's share of this market and also provide an easy
segue to sell XTEK’s novel and high value products into the US.
At the acquisition date of HighCom, the following table (all in USD) shows the purchase consideration. The
value of assets acquired and liabilities assumed are from the audited Balance Sheet as at contract date. This
acquisition price harks back to the Chairman’s Report and the Managing Directors’ Report of purchasing the
business for AUD ~3.9m.
Purchase consideration
XTEK – September 2019
Total purchase consideration to end of Half Year Accounts
Assets or liabilities acquired at 29 September 2019:
Cash
Trade receivables
Inventory and other current assets
Plant and equipment and other non-current assets
Total net identifiable assets
Identifiable assets acquired and liabilities assumed
Goodwill on acquisition - September 2019
Less: Identifiable assets acquired
Capital Reserve
Fair value
$
USD
2,659,064
2,659,064
126,331
1,034,200
1,824,191
98,322
3,083,044
2,134,208
524,856
3,083,044
(423,980)
Under the terms of the acquisition contract, two more payments were made after settlement date:
- December 2019: USD 561,442 acquisition of target working capital USD2m.
- January 2020:
USD 75,583 purchase of working capital in excess of target amount.
An earnout payment threshold was not triggered.
34
Statutory Information
The principal registered office and place of business, of the company is:
XTEK Limited
3 Faulding Street
Symonston ACT 2609
The accompanying notes form part of these financial statements.
54
Directors’ Declaration
In accordance with a resolution of the Directors of XTEK Limited, the Directors declare that:
1.
The financial statements and notes are in accordance with the Corporations Act 2001 and:
(a)
(b)
Comply with Australian Accounting Standards, which as stated in accounting policy Note 1 to the financial
statements, constitutes compliance with International Financial Reporting Standards (IFRS) and;
Give a true and fair view of the financial position as at 30 June 2020 and of the performance for the year
ended on that date for the consolidated group.
2.
In the Directors’ opinion there are reasonable grounds to believe that the Group will be able to pay its debts as and
when they fall due; and
3.
The Directors have been given the declarations required by s 295A of the Corporations Act 2001 from the
Managing Director and Chief Financial Officer.
On behalf of the Board
Uwe Boettcher
Chairman
Dated this 30th day of September 20
The accompanying notes form part of these financial statements.
55
ardwickes
more than accounting
6 Phipps Close Deakin ACT 2600
ACT 2605
PO Box 322 Curtin
T 02 6282 5999
F 02 6282 5933
E info@hardwickes.com.au
www.hardwickes.com.au
Hardwickes
ABN 35 973 938 183
Hardwickes
Ply Ltd
Partners
ABN 21 008 401 536
Liability
approved
limited
by a scheme
under Professional
Legislation
Standards
XTEK Limited
and the Controlled
Entity
Independent
Entity
Controlled
Audit Report to the Directors
of XTEK Limited
and the
Report on the Audit of the Financial
Report
Opinion
We have audited
financial position
changes in equity and the statement
accounting
summary of significant
(the Group),
or loss and other comprehensive
of cash flows for the year then ended, and notes to the financial
declaration.
the financial
profit
as at 30 June 2020, the statement of
and its subsidiaries
report of XTEK Limited
and the directors'
policies,
the statement
the statement
of
of
a
including
statements,
which comprises
income,
In our opinion,
the accompanying
financial
report
of the Group is in accordance
with the
Corporations
Act 2001, including:
(i) giving
a true and fair view of the Group's financial position
as at 30 June 2020 and of its financial
performance
for the
year ended; and
(ii)complying
with Australian Accounting
Standards
and the Corporations
Regulations
2001.
Basis for Opinion
our audit in accordance
in the Auditor's
of the Group in accordance
We conducted
further described
independent
ethical
Accountants
responsibilities
of the Accounting
(the Code) that are relevant
with the Code.
requirements
in accordance
with Australian
Auditing
Standards.
Responsibilities
with the auditor
Professional
and Ethical
independence
Standards
for the Audit of the Financial
Our responsibilities
Report section
under those standards
of our report.
are
We are
Act 2001 and the
requirements
of the Corporations
APES 110 Code of Ethics
to our audit of the financial report
We have also fulfilled
Board's
in Australia.
for Professional
our other ethical
We confirm
of the Company, would
that the independence
declaration
required
by the Corporations
Act 2001, which has been given to the directors
be in the same terms if given to the directors
as at the time of this auditor's report.
We believe
that the audit evidence
we have obtained
is sufficient
and appropriate
to provide
a basis for our opinion.
The accompanying notes form part of these financial statements.
CHARTERED ACCOUNTANTS
AUSTRALIA+ NEW ZEALAND
56
Hardwickes
more than accounting
6 Phipps Close Deakin ACT 2600
ACT 2605
PO Box 322 Curtin
T 02 6282 5999
F 02 6282 5933
E info@hardwickes.com.au
www.hardwickes.com.au
Hardwickes
ABN 35 973 938 183
Hardwickes Partners
Pty Ltd
ABN 21 008 401 536
XTEK Limited
and the Controlled
Entity
Liability
approved
limited
by a scheme
under Professional
Legislation
Standards
Independent
Controlled Entity
Audit Report to the Directors
of XTEK Limited
and the
Key Audit Matters
The directors
the Key audit matters
have adopted
the "Going concern
basis of accounting"
in the preparation
of financial
statements.
In addressing
in our audit of the financial statements,
we concur with this treatment.
We have arrived
at this position
based on our assessment
of:
The continued
the year;
support
of shareholders
through
the capital
raising
program
demonstrated
by the capital raised
during
the growth in turnover
during the year and continued
strength
of forward sales contracts
negotiated;
from our review of the future
and the possible
requirement
for future
capital
prepared
and
injections;
cash flows and budgets
by management
to predict
the timing
of cash outflows
managements
demonstrated
ability
to operate
within
set budgets.
Key audit matters
report
in forming
of the current
our opinion
that, in our professional
were addressed
judgement,
in the context
opinion
thereon,
and we do not provide
a separate
period.
These matters
are those matters
were of most significance
in our audit of the financial
as a whole, and
report
of our audit of the financial
on these matters.
The financial
recorded
going concern.
report does not include
any adjustments
or qualification relating
amounts or the amounts and classification
of liabilities
that might be necessary
to the recoverability
should the entity
and classification
as a
not continue
of
Responsibilities
of Directors
for the Financial
Report
The directors
accordance
determine
misstatement,
is necessary
whether
with Australian
to enable the preparation
due to fraud or error.
of the Company are responsible
for the preparation
of the financial
report that gives a true and fair view in
and the Corporations
Accounting Standards
of the financial
Act 2001 and for such internal control
that gives a true and fair view and is free from material
as the directors
report
In preparing
disclosing,
directors
either
report,
the financial
as applicable,
matters
to liquidate
intend
the Group or to cease operations,
alternative
but to do so.
the Group's
for assessing
and using the going concern
or have no realistic
ability
to continue
basis of accounting
as a going concern,
unless the
the directors are
responsible
related
to going concern
Auditor's Responsibilities
for the Audit of the Financial
Report
are to obtain reasonable
due to fraud or error,
Our objectives
misstatement,
whether
is a high level of assurance,
will always detect a material
material
if, individually
taken on the basis of the financial report.
but is not a guarantee
misstatement
or in the aggregate,
assurance
and to issue an auditor's
report
that an audit conducted
when it exists.
they could reasonably
Misstatements
be expected
about whether the financial
report as a whole is free from material
assurance
Standards
that includes our
in accordance
can arise from fraud or error and are considered
Reasonable
Auditing
with Australian
opinion.
to influence
the economic
decisions
of users
The accompanying notes form part of these financial statements.
CHARTERED ACCOUNTANTS
AUSTRALIA+ NEW ZEALAND
57
Hardwickes
more than accounting
6 Phipps Close Deakin ACT 2600
ACT 2605
PO Box 322 Curtin
T 02 6282 5999
F 02 6282 5933
E info@hardwickes.com.au
com.au
www.hardwickes.
Hardwickes
ABN 35 973 938 183
Hardwickes
Pty Ltd
Partners
ABN 21 008 401 536
XTEK Limited
and the Controlled
Entity
Liability
approved
limited
by a scheme
under Professional
Legislation
Standards
Audit Report to the Directors
of XTEK Limited
and the
Independent
Entity
Controlled
As part of an audit in accordance
professional
scepticism
throughout
with the Australian
the audit.
We also:
Auditing
Standards,
we exercise
professional
judgement
and maintain
•
•
•
•
•
the risks of material
responsive
Identify
perform
provide
one resulting
override
and assess
audit procedures
a basis for our opinion.
from error,
of internal
control.
misstatement
to those risks,
of the financial
and obtain audit evidence
report,
whether
due to fraud or error,
design and
and appropriate
a material
forgery,
misstatement
intentional
that is sufficient
resulting
omissions,
to
from fraud is higher than for
or the
misrepresentations,
The risk of not
detecting
as fraud may involve
collusion,
Obtain an understanding
in the circumstances,
control.
of internal
control
relevant
to the audit in order to design audit procedures
on the effectiveness
an opinion
of expressing
of the Group's
internal
that are appropriate
but not for the purpose
Evaluate
disclosures
the appropriateness
made by the directors.
of accounting
policies
used and the reasonableness
of accounting
estimates
and related
Conclude
audit evidence
doubt on the Group's
required
are inadequate,
auditor's
to continue
report.
to modify our opinion.
However,
as a going concern.
future
on the appropriateness
use of the going concern
basis of accounting
and, based on the
obtained,
whether
ability
to draw attention
to continue
in our auditor's
exists
uncertainty
as a going concern.
to the related
related
If we conclude
disclosures
that a material
in the financial
uncertainty
that may cast significant
exists,
or, if such disclosures
to events or conditions
report
we are
of the directors'
a material
Our conclusions
are based on the audit evidence
up to the date of our
conditions
for which there is currently
no indication, might
cause the Group to cease
report
obtained
Evaluate
the financial
the overall
report
presentation,
structure
the underlying
represents
and content
of the financial
report,
including
the disclosures,
and whether
transactions
and events in a manner that achieves
fair presentation.
We communicate
audit findings,
among other matters,
control
in internal
including
any significant
deficiencies
that we identify
during our audit.
with the directors
regarding,
the planned
scope and timing
of the audit and significant
We also provide
independence,
our independence,
the directors
and to communicate
and where applicable,
related
safeguards.
with a statement
that we have complied
with relevant
ethical
with them all relationships
and other matters
that may reasonably
regarding
requirements
to bear on
be thought
Hardwickes
Chartered
Accountants
--H�c_�
�
Bhaumik Bumia CA
Partner
Canberra
2020
30 September
The accompanying notes form part of these financial statements.
CHARTERED ACCOUNTANTS
AUSTRALIA• NEW ZEALAND
58
Additional Information
1.
2.
The following information set out below was applicable as at 25 September 2020.
Shareholding
(a) Distribution of Shareholders
Category (size of holding)
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
(b) 20 Largest Shareholders – Ordinary Shares
Number Ordinary Shares
201,882
1,652,948
2,017,607
18,282,976
48,483,918
70,639,331
Rank Name
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
UDB PTY LIMITED
HIGHCOM GLOBAL SECURITY INC
CS THIRD NOMINEES PTY LIMITED
MRS WENDY WING LIN LO
WASHINGTON H SOUL PATTINSON AND COMPANY LIMITED
ALL OTHERS PTY LTD
FAIRLANE MANAGEMENT PTY LTD
EMALYN HOLDINGS
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
ALTOR CAPITAL MANAGEMENT PTY LTD
UDB PTY LIMITED
BNP PARIBAS NOMINEES PTY LTD
BISSAPP SOFTWARE PTY LTD
MR PHILIPPE ODOUARD
MR IVAN SLAVICH
BISSAPP SOFTWARE PTY LTD
MR NICHOLAS HENRY WEBER
DWKSJK PTY LTD
BUNDARRA TRADING COMPANY PTY LTD
ROEJO INVESTMENTS PTY LTD
Totals: Top 20 holders of ORDINARY FULLY PAID SHARES (Total)
Total Remaining Holders Balance
3.
4.
The name of the Company Secretary is Mr. Lawrence Gardiner.
The address of the Principal Registered Office of XTEK Limited in Australia is
3 Faulding Street, Symonston, ACT, 2609
Telephone +61 2 6163 5588.
Number of
Ordinary
Fully Paid
Shares
No.
4,360,630
4,000,000
2,644,209
2,572,501
2,462,179
2,193,659
2,096,097
1,666,666
1,504,468
1,400,000
1,309,778
1,263,314
1,182,351
756,964
722,507
693,493
675,804
603,090
580,510
526,993
33,215,213
37,424,118
% Held of
Issued
Ordinary
Capital
%
6.17
5.66
3.74
3.64
3.49
3.11
2.97
2.36
2.13
1.98
1.85
1.79
1.67
1.07
1.02
0.98
0.96
0.85
0.82
0.75
47.02
52.98
59
XTEK LIMITED AND CONTROLLED ENTITIES
CORPORATE GOVERNANCE STATEMENT
XTEK Limited and controlled entities is committed to implementing the highest standards of corporate governance. In
determining what those high standards should involve, the Company has turned to the ASX Corporate Governance
Council’s Corporate Governance Principles and Recommendations. The Company’s approach to corporate governance is
to have a set of values and behaviours that underpin everyday activities, ensure transparency and fair dealing and protect
security holder interests. This approach includes a commitment to best practice governance standards, which XTEK sees
as being in the best interests of investors whilst ensuring full compliance with legal requirements.
The framework for XTEK’s Corporate Governance Statement follows the Australian Securities Exchange (ASX) Corporate
Governance Council’s eight principles and recommendations for Corporate Governance (3rd Edition). Adoption of the
revised 4th Edition Principles and Recommendations will be implemented effective from 1st July 2020.
PRINCIPLE 1:
LAY SOLID FOUNDATIONS FOR MANAGEMENT AND OVERSIGHT
Council Recommendation 1.1: A listed entity should disclose the respective
roles and responsibilities of Board and Management and those matters
expressly reserved to the Board and those delegated to Management
The Board’s role is to govern the Company rather than to manage it. In governing the Company, the Directors must act
in the best interests of the Company as a whole. It is the role of senior management to manage the Company in
accordance with the direction and delegations of the Board and the responsibility of the Board to oversee the activities
of management in carrying out these delegated duties.
In carrying out its governance role, the main task of the Board is to drive the performance of the Company. The Board
must also ensure that the Company complies with all of its contractual, statutory and any other legal obligations,
including the requirements of any regulatory body. The Board has the final responsibility for the successful operations
of the Company.
To assist the Board to carry out its functions, it has adopted a formal Charter that details functions and responsibilities
of the Board and areas of authority as delegated. The Board Charter is supplemented by the Company Code of Conduct
that is available to guide Non - Executive Directors, Executive Directors, Company Secretary, Chief Financial Officer,
Chief Operating Officer and other senior executives and employees in the performance of their roles.
Role of Managing Director
The Managing Director’s role is to develop and agree with the Board the corporate strategy and vision and to oversee
implementation of the strategy and management of the Company to achieve the agreed vision in accordance with the
strategies, policies and programs set by the Board.
Responsibilities include:
•
•
•
Formulating and reviewing, with the Board, the vision and strategy and developing actions and plans to achieve
the vision and implement the strategy. Reporting to the Board on the progress against those plans;
Appointing a management team and negotiating terms and conditions for approval by the Human Resource and
Remuneration Committee or the Board. Providing leadership to and overseeing the senior management team,
ensuring employees are properly instructed to achieve a safe workplace and ensuring compliance with laws and
Company policies and that a high level of ethical behaviour is practiced;
Reporting to the Board on various matters, including all matters requiring review or approval, significant changes
to the risk profile, certification (with the Chief Financial Officer) to the Board on the fairness of the financial
statements and adequacy of policies as regards risk management, monthly reporting on performance of
businesses and continual education of Directors of the Company, its business environment and changes of law;
60
•
•
Acting within delegated authority levels for capital expenditure, sale of assets, appointment and termination of
executives; and
All other matters necessary for the day-to-day management of the Company and not reserved for the Board.
Induction procedures are in place to allow new executive management personnel to participate fully and actively
in management decision making at the earliest opportunity upon appointment. This induction process will take into
account the individuals knowledge of the Company and the homeland security industry. The induction program for
senior executives is designed to make available the Company’s financial position, strategies, operations and risk
management policies. Also, the respective rights, duties, responsibilities and roles of the Board and senior
executives.
Responsibilities of the Board of Directors
In general, the Board is responsible for, and has the authority to determine, all matters relating to the policies, practices,
management and operations of the Company. It is required to do all things that may be necessary to be done in order
to carry out the objectives of the Company.
Without intending to limit this general role of the Board, the principal functions and responsibilities of the Board
include the following:
•
•
•
•
•
•
•
•
•
Leadership of the Organisation: overseeing the Company and establishing codes that reflect the values of the
Company and guide the conduct of the Board, management and employees.
Strategy Formulation: working with senior management to set and review the overall strategy and goals for the
Company and ensuring that there are policies in place to govern the operation of the Company.
Overseeing Planning Activities: overseeing the development of the Company’s strategic plan and approving that
plan as well as the annual and long-term budgets.
Shareholder Liaison: ensuring effective communications with shareholders
communications policy and promoting participation at general meetings of the Company.
through an appropriate
Monitoring, Compliance and Risk Management: overseeing the Company’s risk management, compliance, control
and accountability systems and reviewing the effectiveness and directing the financial and operational performance
of the Company.
Company Finances: approving expenses in excess of those approved under the Company authorisations process
and approving and monitoring acquisitions, divestitures and financial and other reporting.
Human Resources: appointing, and, where appropriate, removing the Managing Director, Company Secretary
Chief Financial Officer (CFO) and the Chief Operating Officer as well as reviewing the performance of the Managing
Director and monitoring the performance of senior management in their implementation of the Company’s strategy.
Ensuring the health, safety and well-being of Employees: in conjunction with the senior management team,
developing, overseeing and reviewing the effectiveness of the Company’s occupational health and safety systems
to ensure the well-being of all employees.
Delegation of Authority: delegating appropriate powers to the Managing Director to ensure the effective day-to-day
management of the Company and establishing and determining the powers and functions of the Committees of
the Board.
Whilst at all times the Board retains full responsibility for guiding and monitoring the Company, in discharging its
stewardship it makes use of sub-committees. Specialist committees are able to focus on a particular responsibility and
provide informed feedback to the Board. The Board has established the following Standing Committees, details of
which are included later in this Corporate Governance Statement:
•
•
•
Finance, Audit and Risk Management Committee;
Human Resources and Remuneration Committee; and
Nomination Committee.
61
The Board is responsible for ensuring that management’s objectives and activities are aligned with the expectations
and risks identified by the Board. The Board has a number of mechanisms in place to ensure this is achieved including:
•
•
•
•
Board approval of strategic plans designed to meet stakeholders’ needs and manage business risk;
Reviewing, ratifying and monitoring systems of risk management and internal control, codes of conduct and
legal compliance;
Ongoing development of strategic plans and approving initiatives and strategies designed to ensure the continued
growth and success of the entity; and
Implementation of budgets by management and monitoring progress against budget. This is achieved by the
establishment and reporting of both financial and non-financial key performance indicators.
Other matters expressly reserved for the Board of Directors
The following matters and responsibilities have been expressly reserved for the Board:
•
•
•
•
•
Approval of the annual and half-yearly financial reports;
Approving and monitoring the progress of major capital expenditure, capital management, and acquisitions and
divestitures;
Ensuring that any significant corporate risks that arise are identified, assessed, appropriately managed and
monitored;
Ensuring appropriate resources are available to senior executives; and
Reporting to security holders.
Full details of the Board’s role and responsibilities are contained in the Board Charter, a copy of which is contained on
the Company’s website at the Corporate Governance Section. The Company complies with Recommendation 1.1.
Council Recommendation 1.2: A listed entity should undertake appropriate
checks before appointing a person, or putting forward to security holders a
candidate for election as a Director and in addition should disclose all material
information in its possession relevant to a decision on whether or not to elect or
re-elect a Director.
The Company has adopted a policy as developed by the Nomination Committee for the selection and appointment of
Directors. This policy defines procedural processes for the appointment of new Directors and the re-election of
incumbent Directors. As part of this process, the Company undertakes appropriate background checks on all
candidates being considered for appointment. Directors are appointed based on the specific governance skills required
by the Company to fill Board vacancies when they arise. The Company discloses all material information to security
holders in its possession relevant to a decision on whether or not to elect or re-elect a Director. This is achieved
primarily through the release of information contained within the Notice of Annual General Meeting of the Company
covering motions on the election and re-election of Directors. The Company complies with Recommendation 1.2.
Council Recommendation 1.3: A listed entity should have a written agreement
with each director and senior executive setting out the terms of their
appointment
All new Directors and Senior Executives are provided with a letter of appointment setting out terms of the appointment,
which include the Company’s expectations, their individual responsibilities, rights and terms and conditions of their
employment. By way of induction, new Directors and Executives meet with the Chairman and Company Secretary upon
appointment. These briefings cover the operation of the Board and its Committees and financial, strategic, operations
and risk management issues. The Company complies with Recommendation 1.3.
62
Council Recommendation 1.4: The Company Secretary of a listed entity should
be accountable directly to the Board, through the Chair, on all matters to do
with the proper functioning of the Board.
The Board has designated the Company Secretary as the Officer responsible for oversighting all governance matters
and coordinating disclosure of information to the ASX as well as communicating with the ASX. The Company Secretary
is responsible for ensuring that all Company announcements are made in a timely manner and are factual and do not
omit any material information. In addition, the Company Secretary is also responsible for the following matters:
•
•
•
•
•
•
advising the Board and its Committees on all governance matters;
monitoring of Board policy and procedures to ensure compliance standards are met by the Company;
ensuring the business of the Board/Committee meetings are accurately recorded in official Minutes and
disseminated in a timely manner;
overseeing and coordinating information disclosure to the ASX, security holders, analysts, brokers, the media and
the public;
advising Directors and staff on the Company’s governance and disclosure policies and raising awareness of the
principles underlying continuous disclosure; and
facilitating the induction and professional development of new Directors and Executives.
The Company complies with Recommendation 1.4.
Council Recommendation 1.5: A listed entity should have a disclosable
diversity policy which includes requirements to set measurable objectives for
achieving gender diversity.
The Company is committed to providing a safe working environment and equal employment opportunities for all
Directors, executives and employees at all levels within the Company. Whilst the Company is not subject to the
provisions of The Workplace Gender Equality Act, in that it employs less than 100 employees, it does recognise the
importance of diversity within the workplace.
The Company operates as an equal opportunity Employer and selects personnel based upon the principle of the best
person for the role/job, irrespective of gender, age, sexual orientation, ethnicity, marital or family status and religious
or cultural background. The Company Code of Conduct defines that discrimination, harassment, vilification and
victimisation cannot and will not be tolerated. Recruitment and selection practices at all levels are appropriately
structured to ensure all candidates are considered and that no conscious or unconscious biases are applied against
certain candidates.
The Company is a small business enterprise with less than 50 personnel overall (inclusive of the Board). None-the-
less, the Company has successfully employed a number of women to management roles in recent years. Whilst the
Company does not comply with Recommendation 1.5, nonetheless applies some of the core principles.
Council Recommendation 1.6: A listed entity should have and disclose a
process for periodically evaluating the Board, Committees and individual
Directors.
The Nomination Committee of the Board is responsible for the conduct of a performance review of the Board (both
collectively and individually) and the Managing Director. This is an annual evaluation process and is based on a number of
goals for the Board and the individual Directors that have been established in the preceding year. The goals are based
on the role of the Board and individual Directors as well as corporate objectives and any areas for improvement identified
in previous reviews. The assessment of the performance of individual Directors is undertaken by the Nomination
Committee, with the Chairman meeting privately with each Director to discuss their annual assessment. The Company
complies with Recommendation 1.6.
63
Council Recommendation 1.7: A listed entity should have and disclose a
process for periodically evaluating the performance of its senior executives.
The performance of senior executives is reviewed regularly through the application of a Performance Appraisal Program
(PAP) that defines appropriate evaluation measures to be applied in the assessment process. Each year senior
executives establish a set of performance targets. These targets are aligned to overall business goals and the
Company’s requirements of the position. The PAP is administered annually for all senior executives with the Managing
Director being responsible for their individual assessment and subsequent reporting of outcomes to the Board. The
Nomination Committee of the Board is responsible for the performance assessment of the Managing Director in
accordance with contractual performance measures and deliverables. An informal review of the PAP outcomes for
other senior executives and staff is carried out annually by the Human Resource and Remuneration Committee.
A statement outlining specific matters reserved for the Board and Executive Management are contained in the Board
Charter, a copy of which is posted on the Company’s website at the Corporate Governance Section. The Company
complies with Recommendation 1.7.
PRINCIPLE 2:
STRUCTURE OF THE BOARD TO ADD VALUE
Council Recommendation 2.1: The Board of a listed entity should have a
Nomination Committee
Nomination Committee
The role of the Nomination Committee is to help achieve a structured Board that adds value to the Company by ensuring
an appropriate mix of skills are present in Directors on the Board at all times. Under the Company’s Constitution, the
Board shall be comprised of not less than three and no more than twelve Directors, unless otherwise determined by a
general meeting. In consideration of the size of the Company and the Board, the Directors have resolved that the Board
as a whole shall comprise the Nomination Committee.
Members of the Nomination Committee during the reporting period were:
•
•
•
•
•
Mr. Uwe Boettcher (Chair);
Mr. Chris Fullerton;
Mr. Philippe Odouard;
Mr. Robert Quodling; and
Mr. Ivan Slavich.
Role of Nomination Committee
The role of the Nomination Committee is to:
•
•
•
•
•
Review the structure, size and composition of the Board;
Identify, consider and select candidates with appropriate capabilities, to fill Board vacancies when they arise;
Ensure that candidates have adequate time available to fulfil their role as a Director;
Undertake or arrange for annual performance evaluation of the Board, its committees and Directors, and
Review the:
-
-
-
continuation of the Chairman after the initial term of appointment and subsequent re-appointments;
re-election of Directors who retire by rotation; and
membership of committees.
64
Director Selection and Appointment
The Board has adopted a policy as developed by the Nomination Committee for the selection and appointment of
Directors. This policy defines procedural processes for the appointment of Directors and the re-election of incumbent
Directors. Directors are appointed based on the specific governance skills required by the Company. Given the size of
the Company and the business that it operates, the Company aims at all times to have at least one Director with
experience in the industry, appropriate to the Company’s market. If the need for a new Board member is identified, the
Nomination Committee, may initiate a search or nominate eligible candidates, who are interviewed by the Chairman
and considered by the Board. The Board then appoints the most suitable candidate, who must stand for election at the
next general meeting of security holders.
Access to independent Professional Advice
To ensure that Directors have access to independent expertise necessary to effectively carry out their role as a Director
of the Company, the Board has adopted a policy to allow Directors to seek independent professional advice at the
Company’s expense, up to specified limits, to assist them to carry out their responsibilities. The Company complies
with Recommendation 2.1.
Council Recommendation 2.2: A listed entity should have and disclose a Board
skills matrix setting out the mix of skills and diversity that the Board currently
has or is seeking to achieve in its membership.
The current Board is comprised of five Directors who possess a wide range of background skills, expertise and
knowledge deemed appropriate for the Company’s industry type. The names of Directors in office and their term in
office at the date of this statement and their standing as Executive or Non-Executive and independence, are on the
Board of Directors page of XTEK’s website. The Company complies with Recommendation 2.2.
Council Recommendation 2.3: A listed entity should disclose the names of the
Directors considered by the Board to be independent.
The Board considers independent decision-making as critical to effective governance and to meet the ASX Corporate
Governance Council Recommendations. Independent Directors are identified by their profiles in the 2019 Annual
Report. These profiles detail the skills, experience, and expertise relevant to the position of Director, and the terms of
office held by the Director and also the status of each Director in relation to the criteria listed below. Unless otherwise
stated, the Board does not consider a Director to be an independent Director of the Company if the Director:
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is a substantial shareholder of the Company or an officer of, or otherwise associated directly with, a substantial
shareholder of the Company;
is employed, or within the last three years, has been employed in an executive capacity by the Company, and there
has not been a period of at least three years between ceasing such employment and serving on the Board;
has within the last three years, been a principal of a material professional adviser or a material consultant to the
Company, or an employee materially associated with the service provided;
is a material supplier or customer of the Company or another group member, or an officer of or otherwise associated
directly or indirectly with a material supplier or customer;
has a material contractual relationship with the Company other than as a Director of the Company;
has served on the Board for a period which could, or could reasonably be perceived to, materially interfere with the
Director’s ability to act in the best interests of the Company; and
is not free from any interest and any business or other relationship which could,or could reasonably be perceived to
materially interfere with the Director’s ability to act in the best interests of the Company.
Similarly, the Board has adopted a policy that the Chair should be an independent Director. However due to changes to
the Board in 2009, Mr. Boettcher was appointed as a Director (Non-executive) and Chairman of the Company. Mr.
Boettcher, as a Director of a major shareholder of the Company, does not meet the Company’s criteria for
independence. The Company further recognises that Independent Directors are important in assuring shareholders that
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the Board is properly fulfilling its role, therefore, in addition to being a Non-executive Directors, Messrs. Fullerton and
Slavich also met the criteria for independence during the reporting period for FY2020. The Company partially complies
with Recommendation 2.3.
Council Recommendation 2.4: A majority of a Board of a listed entity should
be independent Directors
Under the Company’s Constitution, the Board is to be comprised of not less than three and no more than twelve
Directors, unless otherwise determined by a general meeting. The Board currently consists of three Non-executive
Directors and two Executive Directors.
To add value to the Company, the Board has been formed so that it has effective composition, size and commitment to
adequately discharge its responsibilities and duties. The names of the Directors and their qualifications and experience
are stated in their Director Profiles that form part of the 2019 Annual Report along with the term of office held by each of
the Directors. Directors are appointed based on the specific governance skills required by the Company and on the
independence of their decision-making and judgment. The Company recognises the importance of Non-Executive
Directors and the external perspective and advice that Non-Executive Directors can offer. Messrs Boettcher, Fullerton and
Slavich served as Non-Executive Directors during the full reporting period for FY2020. The Company further recognises
that Independent Directors are important in assuring shareholders that the Board is properly fulfilling its role, therefore, in
addition to being a Non-executive Director, Messrs. Fullerton and Slavich also met the criteria for independence during
the reporting period for FY2020.
The Board has a specific Code of Conduct for Directors and Senior Management. As part of this, where any Director has
a material personal interest in a matter, the Director will not be permitted to be present during discussions or to vote on
the matter. The enforcement of this requirement should ensure that the interest of shareholders, as a whole, are pursued
and not jeopardised by a lack of a majority of independent Directors. The independence of Non-Executive Directors is
assessed annually by the Nomination Committee. The Company currently does not comply with Recommendation 2.4.
Council Recommendation 2.5: The Chairperson of a listed entity should be an
independent Director and, in particular should not be the same person as the
Managing Director of the entity.
Independence of Chairman
Whilst the Board recognises the importance of independence in decision-making, Mr. Boettcher, as a Director of
a major shareholder of the Company, does not meet the criteria for independence as a Director (Non-Executive) and
Chairman. Although Mr. Boettcher has a substantial interest as a Director of a major shareholder of the Company, the
Board believes due to his extensive business experience and knowledge, it is appropriate for Mr. Boettcher to remain
on the Board in his current position as Chairman. The Company does not comply with this independence requirement.
Roles of Chairman and Managing Director
The roles of Chairman and the Managing Director are not exercised by the same individual.
The Company complies with this independence requirement.
Council Recommendation 2.6: A listed entity should have a program for
inducting new Directors and provide appropriate professional development
opportunities for Directors to develop and maintain skills and knowledge needed
to perform their role as Directors effectively.
The Board has designated the Company Secretary as the Officer responsible for facilitating the induction and professional
development of new Directors. By way of induction, new Directors meet with the Chairman and Company Secretary
upon appointment, whereby briefings are given on the operation of the Board and its Committees and financial, strategic,
operations and risk management issues applicable to the Company. The Company Secretary provides all new
Directors with a comprehensive induction package covering Company policies and procedures that are applicable to all
Directors and employees. As part of their ongoing professional development, new Directors may be required to
complete a Company Directors Course as conducted by the Australian Institute of Company Directors. The Company
complies with Recommendation 2.6.
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PRINCIPLE 3:
PROMOTE ETHICAL AND RESPONSIBLE DECISION-MAKING
Council Recommendation 3.1: A listed entity should have and disclose a code
of conduct for its Directors, senior executives and employees.
Company Code of Conduct
As part of its commitment to recognising the legitimate interests of stakeholders, the Company has established a Code
of Conduct to guide compliance with legal and other obligations to legitimate stakeholders. These stakeholders include
shareholders, employees, customers, government authorities, creditors and the community as whole. All Directors,
senior executives and employees are made aware of the existence of the Company Code of Conduct and are requested
to confirm they have read it.
The Company’s Code of Conduct gives guidance on the following.
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Ethical Standards: All Directors, senior executives and employees are expected to act with the utmost honesty and
integrity, striving at all times to enhance the reputation and performance of the Company.
Responsibilities to Shareholders and the Financial Community Generally: The Company complies with the spirit as
well as the letter of all laws and regulations that govern shareholders’ rights. The Company has processes in place
designed to ensure the truthful and factual presentation of the Company’s financial position and prepares and
maintains its accounts fairly and accurately in accordance with the generally accepted accounting and financial
reporting standards.
Responsibilities to Clients, Customers and Consumers: Each employee has an obligation to use their best efforts to
deal in a fair and responsible manner with each of the Company’s clients, customers and consumers. The Company
for its part is committed to providing clients, customers and consumers with fair value.
Employment Practices: The Company is committed to providing a safe workplace environment in which there is
equal opportunity for all employees at all levels of the Company. The Company does not tolerate the offering or
acceptance of bribes or the misuse of Company assets or resources.
Obligations Relative to Fair Trading and Dealing: The Company aims to conduct its business fairly and to compete
ethically and in accordance with relevant competition laws. The Company strives to deal fairly with the Company’s
customers, suppliers, competitors and other employees and encourages its employees to strive to do the same.
Responsibilities to the Community: As part of the community the Company:
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is committed to conducting its business in accordance with applicable environmental laws and regulations
and encourages all employees to have regard for the environment when carrying out their jobs; and
encourages all employees to engage in activities beneficial to their local community.
Responsibility to the Individual: The Company is committed to keeping private information from employees, clients,
customers, consumers and investors confidential and protected from uses other than those for which it was provided.
Conflicts of Interest: Employees and Directors must avoid conflicts as well as the appearance of conflicts between
personal interests and the interests of the Company. Where there is a conflict of interest, this must be declared to
the organisation. Board meetings have a standing agenda item to disclose when a Director has a conflict of interest.
In circumstances where there is a conflict of interest, the Director or employee will not participate in any material,
discussion and/or decisions being made by the organisation in relation to the conflicted organisation or interest.
How the Company Complies with Legislation: Within Australia, the Company strives to comply with the spirit and the
letter of all legislation affecting its operations. Outside Australia, the Company will abide by local laws in all countries
in which it operates. Where those laws are not as stringent as the Company’s operating policies, particularly in
relation to the environment, workplace practices, intellectual property and the giving of “gifts”, Company policy will
prevail.
How the Company Monitors and Ensures Compliance with its Code of Conduct: The Board, management and all
employees of the Company are committed to implementing this Code of Conduct and each individual is accountable
for such compliance. Disciplinary measures may be imposed for violating the Code.
•
Whistleblower Protection: The Company Code of Conduct provides for the reporting of unlawful and unethical
behaviour by Directors, Senior Executives and Employees of the Company. These provisions allow for whistleblower
protection in accordance with legislative requirements and good practice recommendations. The policy aims
to provide a working environment that enables employees to voice genuine concerns in relation to:
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breaches of relevant legislation;
breaches of the Company’s Vision and Values;
financial misconduct or impropriety or fraud;
failure to comply with legal obligations;
danger to health and safety or the environment;
criminal activity; and
attempts to conceal any of the above.
The Company’s Code of Conduct policy is posted on the Company’s website at the Corporate Governance Section.
The Company complies with Recommendation 3.1.
PRINCIPLE 4:
SAFEGUARD INTEGRITY IN FINANCIAL REPORTING
Council Recommendation 4.1: The Board of a listed entity should have an
Audit Committee.
Finance, Audit and Risk Management Committee
The Finance, Audit and Risk Management (formerly Audit) Committee was formed by resolution of the Board on 4
September 2006. Below is a summary of the role, composition and responsibilities of the Finance, Audit and Risk
Management Committee.
Responsibilities
The Finance, Audit and Risk Management Committee reviews the audited annual and half-yearly financial statements
and any reports which accompany published financial statements before submission to the Board and recommends
their approval.
The Finance, Audit and Risk Management Committee also recommends to the Board the appointment of the external
auditor and the internal auditor and, each year, reviews the appointment of the external auditor, their independence, the
audit fee and any questions of resignation or dismissal. The Finance, Audit and Risk Management Committee is
responsible for establishing policies on risk oversight and management. The responsibilities of the Finance, Audit and
Risk Management Committee include:
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Reviewing audit reports to ensure that where major deficiencies or breakdowns in controls or procedures have
been identified, appropriate and prompt remedial action is taken by management;
Liaising with the auditors and ensuring that the annual statutory audits are conducted in an effective manner;
Monitoring management efforts to continuously improve the quality of the accounting function;
Reviewing the half-year and annual reporting and financial statements prior to lodgment of those documents with
the Australian Securities Exchange and to make the necessary recommendations to the Board for the approval
of these documents;
Providing the Board with additional assurance regarding the reliability of financial information for inclusion in
the financial reports;
Recommending to the Board the appointment, removal and remuneration of the external auditors, and reviewing
the terms of their engagement the scope and quality of the audit;
Assessing the attention being given by management to matters likely to impact on the financial performance
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of the Company, including monitoring of compliance with laws and regulations and monitoring and control of
business risks;
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Management information and other systems of internal control and risk management; and
Ethical policies and practices for corporate conduct are in place and being adhered to.
The auditors, the Chief Financial Officer and Company Managers may be invited to the Finance Audit and Risk
Management Committee meetings at the discretion of the Committee Chair.
Composition
The Finance, Audit and Risk Management (FARM) Committee currently consists of five members. Members are
appointed by the Board from amongst the Directors. Members of the FARM Committee during the reporting period
were Messrs. Boettcher, Fullerton, Odouard, Quodling and Slavich. Mr. Fullerton is the current Chair. All members can
read and understand financial statements and are otherwise financially literate. The details of the member’s
qualifications may be found in their Director profiles that form part of the 2019 Annual Report.
Charter
A formal charter for the Finance, Audit and Risk Management (formerly Audit) Committee was established by resolution
of the Board on 4 September 2006. This charter defines the role and responsibility of the Audit, Finance and Risk
Management Committee together with procedures for the selection and appointment of external auditors and rotation
of engagement partners and is posted on the Company’s web site.
The Board, with the involvement of the Finance, Audit and Risk Management Committee, has established procedures
in relation to the external auditor selection and appointment and for discussing with the auditor the rotation of the lead
partner. The current external Auditor as appointed by the Board is Hardwickes Chartered Accountants.
Further details are contained in the Finance, Audit and Risk Management Committees Charter, which is available on
the Company’s website at the Corporate Governance Section. The Company complies with Recommendation 4.1.
Council Recommendation 4.2: The Board of a listed entity should before it
approves the entity’s financial statements for a financial period, receive
assurance from the Managing Director and Chief Financial Officer that the
declaration provided in accordance with section 295A of the Corporations Act
2001 is founded on a sound system of risk management and internal
compliance and that the system is operating effectively in all material respects
in relation to financial reporting risks.
Management Attestation
At the time the Board reviews the draft half year and full year financial statements and reports, the Managing Director
and Chief Financial Officer are required to provide a signed declaration that the statements and reports are founded
on a sound system of risk management and internal compliance and control that implements the policies adopted by the
Board, and that the Company’s risk management and internal compliance and control is operating efficiently and
effectively in all material respects.
On 27 September 2020, the Managing Director and the Chief Financial Officer declared to the Board that the risk
management and internal compliance and control systems were operating efficiently and effectively in all material
respects. Their statement has assured the Board that the financial statements are founded on a sound system of risk
management and internal compliance. The Company complies with Recommendation 4.2.
Council Recommendation 4.3: A listed entity that has an AGM should ensure that
its external Auditor attends the AGM and is available to answer questions from
security holders relevant to the audit.
The Company ensures the external Auditor is available to attend the Annual General Meeting (AGM) of the Company
and is available to answer security holder questions about the conduct of the audit and the preparation and content
of the Auditor’s Report. The Company complies with Recommendation 4.3.
69
PRINCIPLE 5:
MAKE TIMELY AND BALANCED DISCLOSURES
Council Recommendation 5.1: A listed entity should have and disclose its
written policy for complying with continuous disclosure obligations under
ASX Listing Rules.
Continuous Disclosure
It is the policy of the Company to act at all times with integrity and in accordance with law, including the disclosure required
of:
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Australian Securities Exchange (ASX) Listing Rules;
ASX Guidance Notes;
ASX Corporate Governance Council Recommendations; and
Corporations Act 2001.
In accordance with the ASX Listing Rules, the Company immediately notifies the ASX of information:
•
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concerning the Company that a reasonable person would expect to have a material effect on the price or value of
the Company’s securities; and
that would, or would be likely to, influence persons who commonly invest in securities in deciding whether to acquire
or dispose of the Company’s securities.
The only exception to this is where the ASX Listing Rules do not require such information to be disclosed. Upon confirmation
of receipt from the ASX, the Company posts all information disclosed in accordance with this policy on the Company’s
website in an area accessible by the public.
The Board has designated the Company Secretary as the person responsible for overseeing and coordinating disclosure
of information to the ASX as well as communicating with the ASX. The Company Secretary is responsible for ensuring
that all Company announcements are made in a timely manner and are factual and do not omit any material information.
The Company Secretary is also responsible for ensuring that all announcements are expressed in a clear and objective
manner that allows investors to assess the impact of the information when making investment decisions.
To assist the Company Secretary to fulfil the Company’s disclosure requirements, all Business Unit Heads are responsible
for immediately communicating to the Managing Director and Company Secretary any possible continuous disclosure matter
concerning their business unit. The Head of each business unit is required to promptly respond to requests from the
Company Secretary for further information concerning possible continuous disclosure matters.
The Company Secretary’s role includes:
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overseeing compliance with the continuous disclosure requirements in the ASX Listing Rules;
overseeing and coordinating information disclosure to the ASX, shareholders, analysts, brokers, the media and the
public; and
advising Directors and staff on the Company’s disclosure policies and procedures and raising awareness of the
principles underlying continuous disclosure.
Price sensitive information is publicly released through the ASX before disclosing it to analysts or others outside
the Company. Further dissemination to investors through the ASX website and other information providers is also
managed through the ASX.
The Company’s Continuous Disclosure policy is posted on the Company’s web site at the Corporate Governance Section.
The Company complies with Recommendation 5.1.
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PRINCIPLE 6:
RESPECT THE RIGHTS OF SECURITY HOLDERS
Council Recommendation 6.1: A listed entity should provide information about
itself and its governance to investors via its website.
The Company aims to ensure that investors are kept informed of all major developments affecting the state of affairs of
the Company and its governance regime via its website. Information currently available to investors through the
Company’s website, which has a dedicated investor relations section, includes the following:
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the names and brief biographical information of Directors and senior executives;
the Company Constitution, Board/Committee Charters and corporate governance polices;
the Annual Report and the Interim Report;
disclosures made to the Australian Securities Exchange;
notices and explanatory memoranda of annual and extraordinary general meetings; and
regular newsletters to security holders where appropriate.
The Company complies with Recommendation 6.1.
Council Recommendation 6.2: A listed entity should design and implement an
investor relations program to facilitate effective two-way communications with
investors.
The Company recognises the importance of effective communications with investors and recently introduced a new
Investor Relation program to facilitate enhanced communication with both security holders and investors. The Board
has subsequently appointed a Managing Director, who is now responsible for managing this program. Mr. Philippe
Odouard is currently appointed to this position. To facilitate the effective communication with investors, the Company is
committed to:
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communicating effectively with investors and security holders through releases to the market via ASX, the
Company’s website and information mailed to security holders and the general meetings of the Company; and
providing investors and security holders with ready access to balanced and relevant information about the Company
and corporate proposals.
The Company website also includes a feedback mechanism and an option for investors and security holders to register
their email address for direct email updates of Company matters. The Company complies with Recommendation 6.2.
Council Recommendation 6.3: A listed entity should disclose the policies and
processes it has in place to facilitate and encourage participation at meetings
of security holders.
The Company encourages full participation of security holders at the Annual General Meeting to ensure a high level
of accountability and identification with the Company’s strategy and goals. Important issues are presented to security
holders as single resolutions at general meetings. In order to make it easy for security holders to participate in general
meetings of the Company, a direct voting facility has been put in place so as to allow security holders to vote ahead
of the meeting without having to attend or appoint a proxy. This service is currently provided through the Company’s
security registry. The Company complies with Recommendation 6.3.
Council Recommendation 6.4: A listed entity should give security holders the
options to receive communications from, and send communications to, the
entity and its security registry electronically.
The Company encourages all security holders to exercise their option of receiving communications electronically from
the Company and its security registry. This allows for the dissemination of Company information to security holders in a
timely and cost- effective manner. The Company in conjunction with its contracted security registry routinely issues
newsletters, notices and financial reports electronically to those security holders that have registered for this service. The
Company has developed formal policy for promoting communication with shareholders. The Company complies with
Recommendation 6.4.
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PRINCIPLE 7:
RECOGNISING AND MANAGING RISK
Council Recommendation 7.1: The Board of a listed entity should have a
committee to oversight material business risks and disclose the charter and
policies of such a committee.
The Board’s Charter clearly establishes that it is responsible for ensuring there is a sound system for oversighting,
assessing and managing risk. The Board has delegated certain responsibilities in these matters to the Finance Audit and
Risk Management Committee. In compliance with the Board’s approach, the Company has established specific
policies and procedures to identify, assess and manage critical areas of financial and operating risk.
The Company’s Risk Management policy is posted on the Company’s website at the Corporate Governance Section.
The Company complies with Recommendation 7.1.
Council Recommendation 7.2: The Board or a committee of the Board should
review the entity’s risk management framework at least annually to satisfy
itself that it continues to be sound and subsequently disclose findings of the
review
Board R eview
The Board has delegated the responsibilities of conducting an annual review of the entity’s risk management to the Finance
Audit and Risk Management Committee. All such reviews are conducted in accordance with established risk management
policy and take into account the formal Management Statement as provided by the Managing Director and the Chief
Financial Officer on an annual basis.
Management Statement
The Managing Director and the Chief Financial Officer are required to provide a signed Management Statement to the
Board on an annual basis with regard to the risk management and internal control systems of the Company. This statement
requires the Managing Director and the Chief Financial Officer to confirm or declare otherwise:
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that the risk management and internal compliance and control systems in all material respects implements the
policies adopted by the Directors; and
that the risk management and internal compliance and control systems to the extent they relate to material business
risks are operating effectively and efficiently in all material respects, based on the risk management framework
adopted by the Company; and that nothing has come to their attention that would indicate any material change to
the statements as made in relation to risk management and compliance.
On 27 September 2020, the Managing Director and the Chief Financial Officer provided the Board with a written assurance
that the risk management and internal compliance and control systems were operating efficiently and effectively in
all material respects. Their statement has assured the Board that risk management and internal compliance and
control systems are sound. The Company complies with Recommendation 7.2.
Council Recommendation 7.3: A listed entity should disclose if it has an internal
audit function, how the function is structured and what role it performs.
The Company has established an internal audit function that applies a systematic and disciplined approach to evaluating
and continually improving the effectiveness of quality systems covering risk management and internal control measures.
All internal audit functions are conducted throughout the year on a program authorised by the Managing Director.
Findings and observations from internal audits are reported to the Managing Director and Company Secretary for
subsequent corporate and Board action as required. Internal audits performed by the Company are subject to an annual
quality systems assurance review by an external service provider. Failure to meet the requisite audit standards could
result in a loss of quality systems accreditation by the Company. The Company complies with Recommendation 7.3.
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Council Recommendation 7.4: A listed entity should disclose whether it has
any material exposure to economic, environmental and social sustainability risks
and how it manages or intends to manage those risks.
The Company manages material exposure concerns associated with economic, environmental and social sustainability
risks as part of its overall risk management strategies as defined in relevant risk policy and procedures. In the course of
conducting its business as a listed entity and recognising the legitimate interests of stakeholders, the Company also
utilises policy contained within its Code of Conduct Policy to guide compliance with legal and other obligations to legitimate
stakeholders. These stakeholders include security holders, Directors, employees, customers, government authorities,
creditors and the community as whole. The Company’s Code of Conduct gives guidance on the following.
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Ethical Standards: All Directors, senior executives and employees are expected to act with the utmost honesty
and integrity, striving at all times to enhance the reputation and performance of the Company.
Responsibilities to security holders and the financial community: The Company complies with the spirit as well
as the letter of all laws and regulations that govern business operations. The Company has processes in
place designed to ensure the truthful and factual presentation of the Company’s financial position and prepares
and maintains its accounts fairly and accurately in accordance with the generally accepted accounting and
financial reporting standards.
Responsibilities to Clients, Customers and Consumers: Each employee has an obligation to use their best efforts
to deal in a fair and responsible manner with each of the Company’s clients, customers and consumers. The
Company for its part is committed to providing clients, customers and consumers with fair value.
Obligations Relative to Fair Trading and Dealing: The Company aims to conduct its business fairly and to compete
ethically and in accordance with relevant competition laws. The Company strives to deal fairly with the Company’s
customers, suppliers, competitors and other employees and encourages it employees to strive to do the same.
Responsibilities to the Community: As part of the community the Company:
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is committed to conducting its business in accordance with applicable environmental laws and regulations
and encourages all employees to have regard for the environment when carrying out their jobs; and
encourages all employees to engage in activities beneficial to their local community.
How the Company Complies with Legislation: Within Australia, the Company strives to comply with the spirit and
the letter of all legislation affecting its operations. Outside Australia, the Company will abide by local laws in
all countries in which it operates. Where those laws are not as stringent as the Company’s operating policies,
particularly in relation to the environment, workplace practices, intellectual property and the giving of “gifts”,
Company policy will prevail.
The Company has developed a formal policy for recognising and managing risk, this policy is available and
published on the Company’s website. The Company complies with Recommendation 7.4
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PRINCIPLE 8:
REMUNERATE FAIRLY AND RESPONSIBLY
Council Recommendation 8.1: The Board of a listed entity should have a
Remuneration Committee.
Remuneration Committee
The role of the Committee is to review and make recommendations to the Board on remuneration packages for the
Managing Director, Executive Directors, Company Secretary and other senior executives. In addition, the committee
has an objective to ensure that the Company maintains a system of human resource management practices that
recognises the Company’s staff as an important asset of the Company and that human resource practices meet
legislative requirements for current and future business needs. This role also includes responsibility for share option
schemes, incentive performance packages and retirement and termination entitlements. Remuneration levels are
competitively set to attract suitably qualified and experienced directors and senior executives. The Committee may
obtain independent advice on the appropriateness of remuneration packages.
Composition
The Human Resource and Remuneration Committee currently consists of the Board. Mr. Slavich is the current
Chair. The details of the member’s qualifications may be found in their Director profiles published on the Company’s website.
The Company complies with Recommendation 8.1
Council Recommendation 8.2: A listed entity should clearly distinguish the
structure of Non-Executive Directors remuneration from that of Executive
Directors and Senior Executives.
Remuneration Practice
The Board has determined that Non-Executive Directors will be remunerated differently from Executive Directors and
senior executives in the following ways:
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Non-executive Directors will receive fees in the form of cash fees and statutory superannuation; Non- executive
Directors may be issued options as approved by security holders, but will not participate in the XTEK Staff Share
Option plan or receive bonus payments; and
Non-executive Directors will not receive retirement benefits other than superannuation
The Board has determined that in general terms the remuneration of Non-Executive Directors, Executive Directors
and senior executives, will be as follows:
Remuneration of Non-Executive Directors
Non-Executive Directors are remunerated by fixed annual fees, superannuation, and at various times may also be
remunerated at agreed hourly rates, for additional time expended in the performance of authorised tasks that are in
addition to their normal Director functions.
The level of annual Directors’ fees is reviewed by the Human Resources and Remuneration Committee, taking into
account a number of factors, including the range of Directors’ fees paid in the market, and the Company’s costs and
operating performance. The maximum total for annual fees for Directors is approved from time to time by security holders
in a general meeting. This is currently set at $500,000 per annum as approved by shareholders on 29 November 2019.
Non-Executive Directors may also, in view of the Company’s size and resources, from time-to-time be issued options
as part of their remuneration in place of a higher cash fee. Options would be issued after consideration by the
Human Resource and Remuneration Committee and the Board and subject to security holder approval.
Executive Directors and S e nio r Executives
Under the Company’s constitution, remuneration of Executive Directors, subject to other provisions in any contract
between these executives and the Company, may be by way of fixed salary, performance based bonus or participation
in the profits of the Company but may not be by way of commission on or percentage of operating revenue. Other
senior executives, including the Company Secretary, Chief Operating Officer and the Chief Financial Officer may be
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remunerated by fixed salary and performance based bonuses. Remuneration packages will generally be set to be
competitive to both retain and attract experienced executives to the Company.
Where packages comprise a fixed element and variable incentive components, the variable components will depend
on Company and personal performance. Short term incentives may include annual cash incentives on meeting specific
profit and performance criteria that have been agreed in plans set with the Managing Director and the Board. Criteria to
be met may include Company and or business unit profit performance and personal Key Performance Indicators. The
amount of the incentive will depend upon the extent that the measure is exceeded. These conditions help to ensure that
the short term incentives are aligned with the interests of security holders in the current period.
The total cost of directors and senior executive remuneration packages for FY 2020, including the fair value of options,
is listed in the Directors Report and Financial Statements of the 2020 XTEK Annual Report. The Company complies
with Recommendation 8.2
Council Recommendation 8.3: A listed entity which has an equity-based
remuneration scheme should have and disclose policy on participation in
such a scheme.
The Company has approved equity-based incentive schemes in place to remunerate directors, senior executives and staff.
The Board has determined that all approved issues of securities made to directors and employees of the Company
under equity-based incentive schemes are disclosed to security holders and investors as part of its continuous
disclosure obligations.
Policy pertaining to participation in equity-based incentive schemes by directors and employees in contained within the
Human Resources and Remuneration Committee Policy, this policy is available and published on the Company’s
website. The Company complies with Recommendation 8.3.