Red Hill Education Limited ABN 41 119 952 493 Special purpose annual report for the year ended
ABN 41 119 952 493 Special purpose annual report - Directors' report 1 Financial report 4 Directors' declaration 23 Independent auditor's report to the members 24 Page
Directors' report Directors' report Your directors present their report on the consolidated entity (referred to hereafter as "the Group") consisting of Red Hill Education Limited and the entities it controlled at the end of, or during, the year ended. Directors The following persons were directors of Red Hill Education Limited during the whole of the financial year and up to the date of this report: JW Hyndes HWW Deane BJ Lunn (appointed 28 January 2009) PX Tobin (appointed 4 June 2010) BG Baird (appointed 25 June 2010) WJ Beerworth (appointed 25 June 2010) MC Ratcliff (resigned 4 June 2010) SL Cavill (resigned 28 January 2009) Principal activities During the year the principal continuing activities of the Group consisted of providing high quality vocational training courses and providing advice and counselling to students. Dividends - Red Hill Education Limited No dividends have been declared, paid or provided for during and since the end of the financial period (2009: $nil). Review of operations The profit after tax for the period ended 30 June 2009 amounted to $136,220 (2009: Loss $156,525). Significant changes in the state of affairs Significant changes in the state of affairs of the company during the financial year were as follows: On 25 June 2010, the parent entity changed its status to a public company, therefore changing its name to Red Hill Education Limited (formerly Red Hill Education Pty Ltd). In June 2010, the Group signed agreements to purchase two education providers. The purchase will be completed upon the Group successfully raising the required additional capital. Matters subsequent to the end of the financial year No matter or circumstance has arisen since that has significantly affected, or may significantly affect: (a) (b) (c) the Group's operations in future financial years, or the results of those operations in future financial years, or the Group's state of affairs in future financial years. Likely developments and expected results of operations Further information on likely developments in the operations of the Group and the expected results of operations have not been included in this special purpose annual report because the directors believe it would be likely to result in unreasonable prejudice to the Group. Environmental regulation The Group's operations are not regulated by any significant environmental regulation under a law of the Commonwealth or of a State or Territory. Insurance of officers During the financial year, the Group paid a premium for a contract insuring its directors and other officers of the Group against all legal liabilities incurred by them in discharging their duties within their respective official capacities, other than conduct involving a wilful breach of duty to the Group. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. The Group has not otherwise, during or since the year, indemnified or agreed to indemnify an officer or auditor of the Group or of any related body corporate against a liability incurred as such an officer or auditor. -1-
ABN 41 119 952 493 Special purpose annual report - Financial report Statement of comprehensive income 5 Balance sheet 6 Statement of changes in equity 7 Cash flow statement 8 9 Directors' declaration 23 Independent auditor's report to the members 24 Page This financial report covers financial statements of Red Hill Education Ltd as the consolidated entity consisting of Red Hill Education Ltd and its subsidiaries. The financial report is presented in the Australian currency. Red Hill Education Ltd is a company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is: Red Hill Education Ltd Suite 302 19A Boundary Street Rushcutters Bay NSW 2011 The financial report was authorised for issue by the directors on 23 August 2010. The Group has the power to amend and reissue the financial report. -4-
Statement of comprehensive income For the year ended Notes Revenue from continuing operations 7,807,614 6,979,160 Education expenses (237,519) (241,928) Employee benefits expense (3,844,087) (3,356,602) Depreciation and amortisation expense 2 (72,319) (184,175) Marketing and advertising expense (178,767) (246,257) Rental and leasing expense (703,064) (756,430) Administration fees (1,249,142) (1,230,327) Agents commissions (1,288,202) (1,309,842) Other expenses (40,368) (65,237) Net interest income 2 51,257 51,008 Profit/(loss) before income tax 245,403 (360,630) Income tax (expense)/benefit 3 (109,183) 204,105 Profit/(loss) for the year 136,220 (156,525) Other comprehensive income Exchange differences on translation of foreign operations 11 (4,798) 9,164 Other comprehensive income for the year, net of tax (4,798) 9,164 Total comprehensive income for the year 131,422 (147,361) Profit/(loss) is attributable to: Owners of Red Hill Education Ltd 136,220 (89,356) Minority interest - (67,169) 136,220 (156,525) Total comprehensive income for the year is attributable to: Owners of Red Hill Education Ltd 131,422 (80,192) Minority interest - (67,169) 131,422 (147,361) The above statement of comprehensive income should be read in conjunction with the accompanying notes. -5-
Balance sheet As at Notes ASSETS Current assets Cash and cash equivalents 4 1,476,689 1,648,715 Trade and other receivables 5 1,230,938 372,983 Inventories 6 27,222 12,096 Total current assets 2,734,849 2,033,794 Non-current assets Property, plant and equipment 140,814 166,559 Intangible assets 7 14,165 18,445 Deferred tax assets 275,080 273,318 Total non-current assets 430,059 458,322 Total assets 3,164,908 2,492,116 LIABILITIES Current liabilities Trade and other payables 8 2,237,263 1,812,186 Current tax liabilities 180,158 69,213 Total current liabilities 2,417,421 1,881,399 Non-current liabilities Provisions 9 84,180 84,180 Total non-current liabilities 84,180 84,180 Total liabilities 2,501,601 1,965,579 Net assets 663,307 526,537 EQUITY Contributed equity 10 2,485,320 2,460,320 Reserves 11(a) (519,834) (523,946) Accumulated losses 11(b) (1,302,179) (1,238,826) Minority interest 12 - (171,011) Total equity 663,307 526,537 The above balance sheet should be read in conjunction with the accompanying notes. -6-
Statement of changes in equity For the year ended Contributed Accumulated Minority equity Reserves losses interest Total Notes $ Balance at 1 July 2008 2,455,327 (536,760) (1,149,470) (103,842) 665,255 Exchange differences on translation of foreign operation 11-9,164 - - 9,164 Loss for the year - - (89,356) (67,169) (156,525) Contributions of equity, net of transaction costs 10 4,993 - - - 4,993 Employee share options - value of employee services 11-3,650 - - 3,650 Balance at 30 June 2009 2,460,320 (523,946) (1,238,826) (171,011) 526,537 Balance at 1 July 2009 2,460,320 (523,946) (1,238,826) (171,011) 526,537 Exchange differences on translation of foreign operation 11 - (4,798) - - (4,798) Profit for the year - - 136,220-136,220 Contributions of equity, net of transaction costs 25,000 - - - 25,000 Minority interest acquired - - (199,573) 171,011 (28,562) Employee share options - value of employee services 11-8,910 - - 8,910 Balance at 2,485,320 (519,834) (1,302,179) - 663,307 The above statement of changes in equity should be read in conjunction with the accompanying notes. -7-
Cash flow statement For the year ended Notes Cash flows from operating activities Receipts from customers (inclusive of goods and services tax) 8,096,545 8,117,491 Payments to suppliers and employees (inclusive of goods and services tax) (7,777,977) (7,600,576) 318,568 516,915 Interest received 51,257 51,008 Net cash (outflow) inflow from operating activities 18 369,825 567,923 Cash flows from investing activities Deposit for acquisition (500,000) - Payments for property, plant and equipment (46,574) (145,995) Net cash (outflow) inflow from investing activities (546,574) (145,995) Cash flows from financing activities Proceeds from issues of shares 4,723 4,993 Net cash inflow/(outflow) from financing activities 4,723 4,993 Net increase/(decrease) in cash and cash equivalents (172,026) 426,921 Cash and cash equivalents at the beginning of the financial year 1,648,715 1,221,794 Cash and cash equivalents at end of year 4 1,476,689 1,648,715 The above cash flow statement should be read in conjunction with the accompanying notes. -8-
Contents of the notes to the consolidated financial statements Page 1 Summary of significant accounting policies 10 2 Expenses 15 3 Income tax expense (benefit)16 4 Current assets - Cash and cash equivalents 16 5 Current assets - Trade and other receivables 16 6 Current assets - Inventories 16 7 Non-current assets - Intangible assets 17 8 Current liabilities - Trade and other payables 17 9 Non-current liabilities - Provisions 17 10 Contributed equity 17 11 Reserves and accumulated losses 18 12 Minority interest 19 13 Dividends 20 14 Remuneration of auditors 20 15 Contingencies 20 16 Commitments 21 17 Events occurring after the balance sheet date 21 18 Reconciliation of profit after income tax to net cash inflow from operating activities 21 19 Parent entity financial information 22-9-
1 Summary of significant accounting policies (a) Basis of preparation In the directors opinion, Red Hill Education Ltd is not a reporting entity because there are no users dependent on general purpose financial reports. This is a special purpose financial report that has been prepared for the sole purpose of complying with the Corporations Act 2001 requirements to prepare and distribute a financial report to the members and must not be used for any other purpose. The directors have determined that the accounting policies adopted are appropriate to meet the needs of the members. Historical cost convention The financial report is prepared in accordance with the historical cost convention. Unless otherwise stated, the accounting policies adopted are consistent with those of the previous year. Comparative information is reclassified where appropriate to enhance comparability. Critical accounting estimates and judgements The preparation of financial statements requires the use of certain critical accounting estimates. It also requires the management to exercise its judgement in the process of applying the Group's accounting policies. The are no areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements. The principal accounting policies adopted in the preparation of these consolidated financial statementsare set out below. These policies have been consistently applied to all the years presented, unlessotherwise stated. The financial statements are for the consolidated entity consisting of Red Hill Education Ltd and its subsidiaries. (b) Principles of consolidation A controlled entity is an entity over which Red Hill Education Pty Limited has the power to govern the financial and operating policies so as to obtain benefits from its activities. In assessing the power to govern, the existence and effect of holdings of actual and potential voting rights are considered. As at the reporting date, the assets and liabilities of controlled entities have been incorporated into the consolidated financial statements as well as their results for the year then ended. Where the controlled entities have entered/(left) the consolidated group during the year, their operating results have been included/(excluded) from the date control was obtained/(ceased). All inter-group balances and transactions between entities in the consolidated group, including any unrealised profits or losses have been eliminated on consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with those adopted by the parent entity. Minority interests, being that portion of the profit or loss and net assets of subsidiaries attributable to equity interests held by persons outside the group, are shown separately within the equity section of the consolidated balance sheet and in the consolidated statement of comprehensive income. (c) Business combinations The purchase method of accounting is used to account for all business combinations, including business combinations involving entities or businesses under common control, regardless of whether equity instruments or other assets are acquired. Cost is measured as the fair value of the assets given, equity instruments issued or liabilities incurred or assumed at the date of exchange plus costs directly attributable to the acquisition. Where equity instruments are issued in an acquisition, the fair value of the instruments is their fair value as at the acquisition date based on the best available evidence of the price at which the instruments could be exchanged between knowledgeable, willing parties in an arm's length transaction. Transaction costs arising on the issue of equity instruments are recognised directly in equity. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The excess of the cost of acquisition over the fair value of the company s share of the identifiable net assets acquired is recorded as goodwill (refer to note 1(m)). If the cost of acquisition is less than the company's share of the fair value of the identifiable net assets of the business acquired, the difference is recognised directly in the statement of comprehensive income, but only after a reassessment of the identification and measurement of the net assets acquired. Goodwill is recognised initially at the excess of cost over the acquirer s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If the fair value of the acquirer s interest is greater than cost, the surplus is immediately recognised in profit or loss. -10-
(continued) 1 Summary of significant accounting policies (continued) Changes in accounting policy A revised AASB 3 Business Combinations became operative on 1 July 2009. While the revised standard continues to apply the acquisition method to business combinations, there have been some significant changes. All purchase consideration is now recorded at fair value at the acquisition date. Contingent payments classified as debt are subsequently remeasured through profit or loss. Under the Group's previous policy, contingent payments were only recognised when the payments were probable and could be measured reliably and were accounted for as an adjustment to the acquisition cost. Acquisition related costs are expensed as incurred. Previously, they were recognised as part of the cost of the acquisition and therefore included in goodwill. Non-controlling interests in an acquiree are now recognised either at fair value or at the non-controlling interest's proportionate share of the acquiree's net identifiable assets. This decision is made on an acquisition-by-acquisition basis. Under the previous policy, the non-controlling interest was always recognised at its share of the acquiree's net identifiable assets. If the Group recognises previous acquired deferred tax assets after the initial acquisition accounting is completed there will no longer be any adjustment to goodwill. As a consequence, the recognition of the deferred tax asset will increase the Group's net profit after tax. (d) Foreign currency translation (i) Functional and presentation currency Items included in the financial statements of each of the Group s operations are measured using the currency of the primary economic environment in which it operates ( the functional currency ). The financial statements are presented in Australian dollars, which is the Group s functional and presentation currency. (ii) Transactions and balances Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the period-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined. Exchange differences arising on the translation of monetary items are recognised in the statement of comprehensive income, except where deferred in equity as a qualifying cash flow or net investment hedge. Exchange difference arising on the translation of non-monetary items are recognised directly in equity to the extent that the gain or loss is directly recognised in equity, otherwise the exchange difference is recognised in the statement of comprehensive income. (e) Income tax The income tax expense or revenue for the period is the tax payable on the current period s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the reporting date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in foreign operations where the company is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future. -11-
(continued) 1 Summary of significant accounting policies (continued) The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income taxation legislation and the anticipation that the Group will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law. Tax consolidation legislation Red Hill Education Ltd and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation. The head entity, Red Hill Education Ltd, and the controlled entities in the tax consolidated group account for their own current and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated group continues to be a stand alone taxpayer in its own right. In addition to its own current and deferred tax amounts, Red Hill Education Ltd also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated group. The tax consolidated group has entered a tax funding arrangement whereby each company in the group contributes to the income tax payable by the group in proportion to their contribution to the group s taxable income. Differences between the amounts of net tax assets and liabilities derecognised and the net amounts recognised pursuant to the funding arrangement are recognised as either a contribution by or distribution to the head entity. (f) Leases Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Group as lessee are classified as operating leases (note 16). Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease. (g) Revenue recognition Tuition fees Tuition fees are recognised over the period of instruction on a straight line basis. Non-refundable administration fees relating to tuition are recognised upon receipt. Other course related revenue such as printing fees and stationery sales are recognised upon issue of invoice. Agent fees Agent fees are recognised at the point at which the Group is deemed to have fulfilled its commitment as an agent in placing the student in the course of their choice. This usually occurs upon commencement of the course by the student, at which time non-refundable fees have been paid by them to the education provider. Interest revenue Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets. (h) Government grants Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the company will comply with all attached conditions. Government grants relating to costs are deferred and recognised in the statement of comprehensive income over the period necessary to match them with the costs that they are intended to compensate. Government grants relating to the purchase of property, plant and equipment are included in non-current liabilities as deferred income and are credited to the statement of comprehensive income on a straight-line basis over the expected lives of the related assets. -12-
(continued) 1 Summary of significant accounting policies (continued) (i) Cash and cash equivalents For cash flow statement presentation purposes, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet. (j) Trade receivables Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. Trade receivables are generally due for settlement within 30 days. Collectibility of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off by reducing the carrying amount directly. An allowance account (provision for impairment of trade receivables) is used when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the trade receivable is impaired. The amount of the impairment allowance is the difference between the asset s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial. The amount of the impairment loss is recognised in the income statement within other expenses. When a trade receivable for which an impairment allowance had been recognised becomes uncollectible in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against other expenses in the statement of comprehensive income. (k) Inventories Inventories are measured at the lower of cost and net realisable value. (l) Property, plant and equipment Plant and equipment are carried at cost less depreciation and impairment losses. The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the assets employment and subsequent disposal. Depreciation All assets are depreciated on a straight line basis over their useful lives to the Group commencing from the time the asset is held ready for use. The following useful lives are used for each class of plant and equipment: Leasehold improvements 10-15 years Furniture, fittings and equipment 3-15 years The assets residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date. Costs incurred on assets subsequent to initial acquisition are capitalised when it is possible that economic benefits in excess of the originally assessed performance of the asset will flow to the Group in future periods, otherwise the costs are expenses incurred. (m) Intangible assets (i) Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the company s share of the net identifiable assets of the acquired business/associate at the date of acquisition. Goodwill on acquisitions of businesses is included in intangible assets. Goodwill on acquisitions of associates is included in investments in associates. Goodwill is not amortised. Instead, goodwill is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. -13-
(continued) 1 Summary of significant accounting policies (continued) Goodwill is allocated to cash-generating units for the purpose of impairment testing. Each of those cash-generating units represents the company s investment in each country of operation by each primary reporting segment. (n) Impairment of assets At each reporting date, the Group reviews the carrying values of its tangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset s fair value less costs to sell and value in use, is compared to the asset s carrying value. Any excess of the asset s carrying value over its recoverable amount is expensed to the statement of comprehensive income. (o) 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 30 days of recognition. (p) Employee benefits (i) Wages and salaries, annual leave and sick leave Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be settled within 12 months of the reporting date are recognised in other payables in respect of employees' services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. (ii) 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. 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. (iii) Share-based payments Share-based compensation benefits are provided to employees via the Red Hill Education Ltd Employee Option Plan and an employee share scheme. The fair value of options granted under the Red Hill Education Pty Ltd Employee Option Plan are recognised as an employee benefit expense with a corresponding increase in equity. The total amount to be expensed is determined by reference to the fair value of the options granted, which includes any market performance conditions but excludes the impact of any service and non-market performance vesting conditions and the impact of any non-vesting conditions. (q) Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of the GST incurred is not recoverable from the Australian Taxation Office (ATO). In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables are stated inclusive of GST. The net amount of GST recoverable from, or payable to, the ATO is included as an asset or liability in the balance sheet. Cash flows are presented in the cash flow statement on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows. (r) New accounting standards and interpretations Certain new accounting standards and UIG interpretations have been published that are not mandatory for reporting periods. The directors' assessment of the impact of these new standards is that they will not affect any of the amounts recognised in financial statements or impact the type of information disclosed in relation to the Group. -14-
(continued) 1 Summary of significant accounting policies (continued) (s) Parent entity financial information The financial information for the parent entity, Red Hill Education Ltd, disclosed in note 19 has been prepared on the same basis as the consolidated financial statements, except as set out below. (i) Tax consolidation legislation Red Hill Education Ltd and its wholly owned Australian controlled entities have implemented the tax consolidation legislation. The head entity, Red Hill Education Ltd, and the controlled entities in the tax consolidated group account for their own current and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated group continues to be a stand alone taxpayer in its own right. In addition to its own current and deferred tax amounts, Red Hill Education Ltd also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated group. The entities have also entered into a tax funding agreement under which the wholly owned entities fully compensate Red Hill Education Ltd for any current tax payable assumed and are compensated by Red Hill Education Ltd for any current tax receivable and deferred tax assets relating to unused tax losses or unused tax credits that are transferred to Red Hill Education Ltd under the tax consolidation legislation. The funding amounts are determined by reference to the amounts recognised in the wholly owned entities' financial statements. The amounts receivable/payable under the tax funding agreement are due upon receipt of the funding advice from the head entity, which is issued as soon as practicable after the end of each financial year. The head entity may also require payment of interim funding amounts to assist with its obligations to pay tax instalments. Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as current amounts receivable from or payable to other entities in the company. Any difference between the amounts assumed and amounts receivable or payable under the tax funding agreement are recognised as a contribution to (or distribution from) wholly owned tax consolidated entities. 2 Expenses Profit before income tax includes the following specific expenses: Depreciation Depreciation expense 55,483 47,339 Amortisation expense 16,836 136,836 Total depreciation and amortisation 72,319 184,175 Net interest income Interest and finance charges paid/payable 1,723 589 Interest income received/receivable (52,980) (51,597) Net interest income (51,257) (51,008) -15-
(continued) 3 Income tax expense (benefit) (a) Income tax expense (benefit) Current tax 110,945 69,213 Deferred tax (1,762) (273,318) 109,183 (204,105) (b) Numerical reconciliation of income tax expense to prima facie tax payable Profit (loss) from continuing operations before income tax expense (benefit) 245,403 (360,630) Tax at the Australian tax rate of 30% (2009-30%) 73,621 (108,189) Entertainment 3,131 3,656 Amortisation of intangibles 5,050 36,886 Sundry items 27,381 82,784 Deductible items or carry forward losses not bought to account - (219,242) Income tax expense (benefit) 109,183 (204,105) 4 Current assets - Cash and cash equivalents Cash at bank and in hand 1,468,682 1,645,146 Other cash and cash equivalents 8,007 3,569 1,476,689 1,648,715 5 Current assets - Trade and other receivables Trade debtors 168,515 163,619 Deposits 500,000 - Other debtors 562,423 209,364 1,230,938 372,983 6 Current assets - Inventories Stock on hand 27,222 12,096-16-
(continued) 7 Non-current assets - Intangible assets Other intangible Licenses assets At 30 June 2009 Cost 21,400 300,000 Accumulated amortisation and impairment (2,955) (300,000) Net book amount 18,445 - Other intangible Licenses assets At Cost 21,400 300,000 Accumulated amortisation and impairment (7,235) (300,000) Net book amount 14,165-8 Current liabilities - Trade and other payables Trade payables 344,641 182,423 Deferred income 556,518 746,045 Other payables 1,336,104 883,718 2,237,263 1,812,186 9 Non-current liabilities - Provisions Make good provision 84,180 84,180 84,180 84,180 10 Contributed equity Parent entity Parent entity Shares Shares (a) Share capital Ordinary shares Fully paid 2,817,942 2,792,942 2,485,320 2,460,320-17-
(continued) 10 Contributed equity (continued) On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote. (b) Capital risk management The Company's objectives when managing capital are to safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. 11 Reserves and accumulated losses (a) Reserves Foreign currency translation reserve 3,563 8,361 Minority interest reserve (541,000) (541,000) Employee share option reserve 17,603 8,693 (519,834) (523,946) Movements: Foreign currency translation reserve Balance 1 July 8,361 - Currency translation differences arising during the year : (4,798) 8,361 Balance 30 June 3,563 8,361 Movements: Minority interest reserve Balance 1 July Balance 30 June (541,000) (541,000) (541,000) (541,000) -18-
(continued) 11 Reserves and accumulated losses (continued) Movements: Employee share option plan reserve Balance 1 July 8,693 4,240 Employee share options - value of employee services 8,910 4,453 Balance 30 June 17,603 8,693 (b) Accumulated losses Movements in accumulated losses were as follows: Balance at the beginning of the year (1,238,826) (1,149,470) Net profit/(loss) for the year 136,220 (89,356) Minority interest acquired (199,573) - Balance at the end of the year (1,302,179) (1,238,826) 12 Minority interest Interest in: Share capital Accumulated losses - 25,000 - (196,011) - (171,011) -19-
(continued) 13 Dividends (a) Franking credits Franking credits available for subsequent financial years based on a tax rate of 30% (2009-30%) 189,711 78,766 The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for: (a) (b) (c) franking credits that will arise from the payment of the amount of the provision for income tax franking debits that will arise from the payment of dividends recognised as a liability at the reporting date, and franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date. 14 Remuneration of auditors During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices: (a) Audit services PricewaterhouseCoopers Australian firm Audit and review of financial reports 30,000 26,000 Total remuneration for audit services 30,000 26,000 15 Contingencies The Group had contingent liabilities at in respect of: Dispute resolution As a result of the resignation of an employee of the Group it is expected that several clients may be impacted and may request a refund or additional services at no cost. The directors estimate that the cost of this resolution to be between $10,000 and $30,000. -20-
(continued) 16 Commitments Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows: Within one year 915,326 623,712 Later than one year but not later than five years 354,250 1,269,575 1,269,576 1,893,287 General description of leasing arrangement: Operating leases represent rental arrangement for office premises. Options exist to renew the leases at the end of the original lease period. 17 Events occurring after the balance sheet date No matter or circumstance has occurred subsequent to year end that has significantly affected, or may significantly affect, the operations of the Group, the results of those operations or the state of affairs of the Group in subsequent financial years. 18 Reconciliation of profit after income tax to net cash inflow from operating activities Profit/(loss) for the year 136,220 (156,525) Depreciation of property, plant and equipment 55,483 47,339 Amortisation of non-current assets 16,836 136,836 (Increase)/decrease in receivables (357,955) 82,918 Increase in inventories (15,126) (6,933) Increase in deferred tax assets (1,762) (273,318) Decrease in intangible assets 4,280 101,555 Increase/(decrease) in payables 420,904 566,838 Increase/(decrease) in tax liabilities 110,945 69,213 Net cash (outflow) inflow from operating activities 369,825 567,923-21-
(continued) 19 Parent entity financial information (a) Summary financial information The individual financial statements for the parent entity show the following aggregate amounts: Parent Balance sheet Current assets 2,193,755 1,568,071 Non-current assets 307,097 341,163 Total assets 2,500,852 1,568,071 Current liabilities 1,354,594 147,063 Non-current liabilities - - Total liabilities 1,354,594 147,063 Shareholders' equity Contributed equity 2,485,320 2,460,320 Reserves 17,603 8,693 Retained earnings (1,356,665) (1,048,005) 1,146,258 1,421,008 Loss for the year (308,659) (626,968) Total comprehensive income (308,659) (626,968) (b) Contingent liabilities of the parent entity The parent entity did not have any contingent liabilities as at or 30 June 2009. -22-