ANNUAL REPORT Year ended 30 June 2015 C.28
Annual Report Year ended 30 June 2015 Message from the Chair and CEO... 1 Financial Performance... 3 Directors Responsibility Statement... 3 Consolidated Statement of Comprehensive Income... 4 Consolidated Statement of Changes in Equity... 5 Consolidated Statement of Financial Position... 6 Consolidated Statement of Cash Flows... 7 Notes to the Consolidated Financial Statements... 8 Statement of Key Performance Indicators...36 Statutory Information...37 Statement of Corporate Governance...41 Independent Auditor s Report............................................................................ 45 Directory...47
Message from the Chair and CEO Quotable Value (QV) has delivered another strong financial result for the 12 months. Our focus on the needs of our customers and the launch of new products via new channels has positioned QV strongly in the wider property information market. Outstanding performance The return on equity for QV Group has been exceptional for the second year in succession. The return was 30.0%, which compares favourably with the Statement of Corporate Intent (SCI) target of 18.8%. Operating margins have continued at historically high levels of 16.8%, as illustrated in the chart below. This also compares favourably with the SCI target of 12.1%. QV has achieved a pre-tax profit before impairments of $5.924 million, and paid $1.943 million in ordinary and special dividends to its shareholder. The business performed ahead of expectations. The ability of the business to generate productivity through scale was again demonstrated with strong gross margins achieved. At the same time the business has commenced investment in future needs, notably in exploring more modern technology and digital connection with the market. 18 16 Operating Margin % 14 12 10 8 6 4 2 0 2011 2012 2013 2014 2015
From strength to strength in a dynamic market This year, the environment in which QV operates has been dynamic and somewhat complicated compared to previous years; the bouyant Auckland housing market, changes in the Reserve Bank loan to value requirement, regional value lags, plus sales and development volumes, have all had an impact on the property market and therefore QV s business. Homeowners and their property interests are at the heart of what QV does. We are constantly taking initiatives to reduce cost, increase value and improve connectivity. For most people, homes are the single biggest investment they will make. It is our aim to help these people make more informed property decisions by accessing the information (and services) they need, when they need it. We are focused on leading the industry and this year QV has successfully launched new products in the market. This includes QV homeguide, a source of free information via our mobile residential property app developed in partnership with CoreLogic NZ Limited, and QV costbuilder, providing online construction cost data for builders and property professionals. Our Australian business, QV Australia (QVA), has worked hard to hold the largest market share of rating contracts in New South Wales. QV s subsidiary company, Darroch, has focused on its performance and service deliverables in the commercial property services sector. Throughout the year our people have been integral in delivering these outstanding results. Their motivation and flexibility to adapt have enabled QV to push our boundaries while maintaining focus on delivering for our customers. The board appreciates the contribution of all QV Group s dedicated staff in delivering another successful outcome for 2015. The Board and management have continued to work on strategies to ensure we have the capability and capacity to build on what we have achieved in previous years. This has enabled the business to create a platform to deliver the types of services customers demand for the future. During the year Phil Lough, the Board Chair, retired. Phil made an outstanding contribution to the business over the six-year period he was Chair. We also thank all of the directors for their insights, commitment and support in enabling QV to grow and innovate. QV is well positioned to continue enabling our customers to make relevant informed property decisions and to deliver solutions that will meet their needs. Raewyn Lovett Chair Bill Osborne CEO
Financial Performance Directors Responsibility Statement For the year ended 30 June 2015 The Directors are responsible for the preparation, in accordance with New Zealand law and generally accepted accounting practice, of the financial statements which give a true and fair view of the financial position of Quotable Value Limited and its subsidiaries ( the Group ) as at 30 June 2015 and the results of their operations and cash flows for the year ended 30 June 2015. The Group comprises Quotable Value Limited, Darroch Limited and Quotable Value Australia Pty Limited. The Directors consider that the financial statements of the Group have been prepared using accounting policies appropriate to the Group s circumstances, consistently applied and supported by reasonable and prudent judgements and estimates, and that all applicable New Zealand equivalents to International Financial Reporting Standards have been followed. The Directors have responsibility for the maintenance of a system of internal control designed to provide reasonable assurance as to the integrity and reliability of financial reporting. The Directors consider that adequate steps have been taken to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. The Directors are pleased to present the financial statements of the Group for the year ended 30 June 2015. This annual report is dated 21 September 2015 and is signed in accordance with a resolution of the Directors made pursuant to section 211(1)(k) of the Companies Act 1993. For and on behalf of the Directors Raewyn Lovett Chair Gary Traveller Director Dated this 21st day of September 2015 3
Consolidated Statement of Comprehensive Income For the year ended 30 June 2015 Notes $NZ 000 $NZ 000 Income Trading revenue 2 (a) 40,916 41,398 Investment revenue 2 (b) 8 33 Release of provision for insurance excess 17 1,899 - Total income 42,823 41,431 Expenses Personnel expenses 2 (c) (24,616) (24,959) Operating expenses 2 (c) (4,963) (5,425) Marketing expenses (573) (235) Occupancy expenses (2,035) (1,936) Administration expenses (769) (790) Depreciation and amortisation expenses 2 (c) (780) (894) Finance costs (154) (39) Consulting expenses (774) (414) Other expenses 2 (c) (3,694) (2,376) Total expenses (38,358) (37,068) Profit (loss) before associate share of income 4,465 4,363 Capital gain on sale of investments - 971 Share of associate profit/(loss) 11 1,459 1,100 Profit (loss) before taxation 5,924 6,434 Income tax expense 3 (1,338) (1,212) Profit (loss) for the year net of tax 4,586 5,222 Profit (loss) for the year is attributable to: Equity holders of the Parent 4,586 5,222 4,586 5,222 Profit (loss) for the year net of tax 4,586 5,222 Other comprehensive income Items that may be subsequently reclassified to profit or loss: Translation of foreign operations 18 21 (47) Other comprehensive income for the year net of tax 21 (47) Total comprehensive income for the year 4,607 5,175 Total comprehensive income is attributable to: Equity holders of the Parent 4,607 5,175 4,607 5,175 The accompanying notes form part of these financial statements.
Consolidated Statement of Changes in Equity For the year ended 30 June 2015 Fully paid ordinary shares Retained earnings Foreign currency translation reserve Total $NZ 000 $NZ 000 $NZ 000 $NZ 000 Balance as at 1 July 2013 4,600 12,294 286 17,180 Total comprehensive income for the year net of tax - 5,222 (47) 5,175 Payment of dividends - (8,320) - (8,320) Balance as at 1 July 2014 4,600 9,196 239 14,035 Total comprehensive income for the year net of tax - 4,586 21 4,607 Payment of dividends - (1,943) - (1,943) Balance as at 30 June 2015 4,600 11,839 260 16,699 The accompanying notes form part of these financial statements. 5
Consolidated Statement of Financial Position As at 30 June 2015 Notes $NZ 000 $NZ 000 Current assets Cash and cash equivalents 5 1,558 1,781 Trade and other receivables 6 7,448 8,034 Vendor loan 120 107 Taxation receivable - 341 Total current assets 9,126 10,263 Non-current assets Vendor loan - 107 Investment in associate company 11 13,175 11,716 Property, plant and equipment 7 786 570 Goodwill 8 1,148 1,148 Intangible assets 9 2,259 961 Deferred taxation 3 234 756 Total non-current assets 17,602 15,258 Total assets 26,728 25,521 Current liabilities Trade and other payables 15 2,176 2,247 Borrowings 13 3,176 - Employment entitlements 16 3,640 4,016 Provisions 17 486 1,008 Taxation payable 93 - Total current liabilities 9,571 7,271 Non-current liabilities Borrowings 13-3,000 Employment entitlements 16 179 215 Provisions 17 279 1,000 Total non-current liabilities 458 4,215 Total liabilities 10,029 11,486 Net assets 16,699 14,035 Equity Issued capital 4 4,600 4,600 Foreign currency translation reserve 18 260 239 Retained earnings 19 11,839 9,196 Total equity 16,699 14,035 For and on behalf of the Board, who authorised the issue of these financial statements on 21 September 2015. Raewyn Lovett Chair Gary Traveller Director The accompanying notes form part of these financial statements.
Consolidated Statement of Cash Flows For the year ended 30 June 2015 Notes $NZ 000 $NZ 000 Cash flows from operating activities Cash was provided from: Revenues from operations 40,660 40,275 Interest received 8 33 40,668 40,308 Cash was applied to: Payments to employees and suppliers 36,642 36,467 Net GST paid (received) (36) 61 Interest paid 154 39 Income tax paid (received) 381 504 37,141 37,071 Net cash flows from operating activities 20 3,527 3,237 Cash flows from investing activities Cash was provided from: Vendor loan 94 106 Proceeds from sale of property, plant and equipment 7 23 Part sale of share in CoreLogic NZ Limited - 3,700 101 3,829 Cash was applied to: Purchase of property, plant and equipment, and intangible assets 2,084 426 2,084 426 Net cash flows from investing activities (1,983) 3,403 Cash flows from financing activities Cash was provided from: Loan advance 176 1,900 176 1,900 Cash was applied to: Dividends paid 1,943 8,320 1,943 8,320 Net cash flows from financing activities (1,767) (6,420) Net increase (decrease) in cash and cash equivalents (223) 220 Effect of exchange rate on translation of foreign operations - - Cash and cash equivalents as at 1 July 1,781 1,561 Cash and cash equivalents as at 30 June 1,558 1,781 The net GST paid (received) component of operating activities reflects the net GST paid and received with the Inland Revenue Department (IRD). Other cash flows presented above exclude GST paid or received as the Group believes this provides more meaningful information for financial statement users. The accompanying notes form part of these financial statements. 7
Notes to the Consolidated Financial Statements For the year ended 30 June 2015 1. Summary of Accounting Policies Reporting Entity These are the consolidated financial statements of Quotable Value Limited (the Parent) and its subsidiaries. Quotable Value Limited is a State-Owned Enterprise in terms of the State-Owned Enterprises Act 1986. The Group comprises of Quotable Value Limited and Darroch Limited, which are registered under the Companies Act 1993, and Quotable Value Australia Pty Limited, which is registered in Australia under the Corporations Law. The Parent became a State-Owned Enterprise on 25 January 2005 and previously the Parent was a Crown Entity. The Parent is incorporated and domiciled in New Zealand. Its principal activity is the provision of property valuations and data. All the Companies in the Group are designated as for profit entities for the purposes of the New Zealand equivalent to International Financial Reporting Standards (NZ IFRS). The financial statements were authorised for issue by the Directors on the date stated in the Consolidated Statement of Financial Position. Statement of Compliance These financial statements have been prepared in accordance with Generally Accepted Accounting Practice in New Zealand (NZ GAAP), the requirements of the State-Owned Enterprises Act 1986, the Companies Act 1993 and the Financial Reporting Act 2013. They comply with the NZ IFRS and other applicable Financial Reporting Standards. Compliance with NZ IFRS ensures that the consolidated financial statements also comply with International Financial Reporting Standards (IFRS). Basis of Preparation The financial statements have been prepared on a historical cost basis. The accounting policies set out below have been applied in preparing the financial statements for the year ended 30 June 2015, and the comparative information presented in these financial statements for the year ended 30 June 2014. Functional and Presentation Currency These financial statements are presented in New Zealand dollars (NZD), which is the Parent s functional currency. All financial information presented in NZD has been shown in thousands and is rounded to the nearest thousand dollar. Changes in Accounting Policies There have been no changes in accounting policies during the financial year. Details of standards, amendments and interpretations that have been adopted are as follows: The Group has adopted the following new standards and amendments to standards. There was no impact on the Group s assets and liabilities from adopting these changes: NZ IFRIC 21 Levies Annual Improvements to NZ IFRSs 2010 2012 Cycle Annual Improvements to NZ IFRSs 2011 2013 Cycle
Details of standards, amendments and interpretations that are not yet effective and have not been early adopted: Standards, amendments and interpretations issued, but not yet effective, that have not been early adopted, and which are relevant to the Group are: NZ IFRS 15 Revenue from Contracts with Customers NZ IFRS 9 Financial Instruments 2014 Omnibus Amendments to NZ IFRSs Amendments to NZ IAS 16 and NZ IAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation Sale or Contribution of Assets Between an Investor and its Associate or Joint Venture (Amendments to NZ IFRS 10 and NZ IAS 28) Annual Improvements to NZ IFRSs 2012 2014 Cycle Disclosure Initiative (Amendments to NZ IAS 1). The Group has not yet analysed the impact, if any, of these changes. (a) (b) Significant Accounting Policies The following accounting policies which materially affect the measurement of financial performance and financial position for the Group have been applied: Foreign Currency Transactions Foreign currency transactions (including those for which forward exchange contracts are held) are translated into NZD using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Consolidated Statement of Comprehensive Income. Research and Development Development costs are recognised as an asset when all of the following criteria are met: the product or process is clearly defined and the costs attributable to the product or process can be identified separately and measured reliably; the technical feasibility of the product or process can be demonstrated; the Group intends to produce and market, or use, the product or process; the existence of a market for the product or process or its usefulness to the Group, if it is to be used internally, can be demonstrated; and adequate resources exist, or their availability can be demonstrated, to complete the project and market or use the product or process. Capitalisation is limited to that amount which, taken together with further related costs, is probable of recovery from related future benefits. Development costs recognised as an asset are amortised on a straight line basis over the period of expected benefits. All other development costs and all research costs are recognised as expenses in the period in which they are incurred. 9
(c) Impairment of Assets The Group reviews the carrying amounts of its finite life tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. In that case the recoverable amount of the asset is estimated in order to determine the extent of impairment loss if any. An impairment loss is recognised for the amount by which the asset s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of the assets fair value less the cost to sell and value in use. Goodwill with indefinite useful life is tested for impairment annually and whenever there is an indication that the asset may be impaired. An impairment of goodwill is not subsequently reversed. An impairment loss is recognised in the Consolidated Statement of Comprehensive Income immediately, unless the relevant asset is carried at fair value, in which case the impairment loss is treated as a revaluation decrease. Critical Accounting Judgements and Estimates In preparing these financial statements the Group has made estimates and assumptions concerning the future. These estimates and assumptions may differ from the subsequent actual results. Estimates and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed within the notes referred to below: Property, plant and equipment useful lives and residual value See note 7. Retirement and long service leave Note 17 provides an analysis of the exposure in relation to estimates and uncertainties surrounding retirement and long service leave liabilities. Critical judgements in applying the Group s accounting policies Management has exercised the following critical judgements in applying the Group s accounting policies for the period ended 30 June 2015: Goodwill impairment A review of goodwill is undertaken annually to determine that the carrying amount shown in the Consolidated Statement of Financial Position is a fair value based on the cash generating units (CGUs) of the Group. Note 8 provides an analysis of the carrying amount of goodwill. Capitalisation and impairment of intangible assets Internally generated intangible assets can only be capitalised to the extent they meet the criteria outlined in our research and development accounting policy. Any expense not meeting the capitalisation criteria is recognised as a research and development expense in profit or loss. Judgement is required in determining whether all the capitalisation criteria have been met, and at what point, and this consideration is undertaken on a case by case basis for significant projects. Research and development expenditure is disclosed in note 2c and capitalised intangible assets in note 9.
2. Income and Expenses Revenue The Group derives revenue through the provision of services to third parties and income from investments. Revenue is measured at the fair value of the consideration received/receivable. Partially completed services are valued on a time and cost basis excluding costs deemed not collectible. Interest revenue is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset s net carrying amount. Revenue and expenses from continuing operations includes: (a) Revenue $NZ 000 $NZ 000 Revenue from rendering services 40,916 41,398 40,916 41,398 (b) Investment Revenue $NZ 000 $NZ 000 Interest income 8 33 Dividend income - - 8 33 (c) Expenses Notes $NZ 000 $NZ 000 Personnel expenses Personnel expenses 23,978 24,508 Superannuation contributions 638 451 24,616 24,959 Operating expenses Communication expenses 602 777 Computer operating expenses 3,441 3,687 Travel expenses 429 419 Vehicle expenses 491 542 4,963 5,425 Depreciation and amortisation expenses Amortisation of intangible assets 526 612 Depreciation 254 282 780 894 Other expenses Audit fee 2 (d) 162 200 Board expenses 282 300 Loss/gain on disposal of assets - 39 Insurance 1,093 1,094 Other costs 520 137 Other valuation costs 808 591 Research and development 829 15 3,694 2,376 11
(d) Auditors Remuneration Notes $NZ 000 $NZ 000 Fees paid to auditors for: Audit fees of financial statements 132 165 Other auditor s fees for audit of Real Estate Trust Accounts 30 35 Total audit fees 2 (c) 162 200 3. Income Tax (a) Income Tax Expense Income tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the Consolidated Statement of Comprehensive Income because it excludes items of income or expenses that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. The prima facie income tax expense on pre-tax accounting profit from operations reconciles to the income tax expense in the financial statements as follows: $NZ 000 $NZ 000 Relationship between tax expense and accounting profit Profit from operations 5,924 6,434 Income tax expense at 28% NZ 1,659 1,802 Plus/(less) tax effect of: Non taxable income (409) (657) Non deductible expenditure 77 18 Timing differences - 189 Prior period adjustment 11 - Tax losses brought forward - (140) 1,338 1,212 Components of tax expense Current tax expense 816 827 Deferred tax 522 385 Tax expense 1,338 1,212 (b) Imputation Credit Account $NZ 000 $NZ 000 Imputation credits available for use in subsequent periods 1,436 1,668
(c) Deferred Taxation Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities, and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. The following table shows the deferred tax liability for the year: $NZ 000 $NZ 000 Balance as at 1 July 756 1,141 Movements during the year: Temporary differences (522) (385) Balance as at 30 June 234 756 The following tables show a breakdown of movements in deferred tax assets and liabilities for the year: (c)(i) Deferred tax assets/(liabilities) 2014 Opening Balance 2015 Charged to Income 2015 Charged to Equity 2015 Closing Balance $NZ 000 $NZ 000 $NZ 000 $NZ 000 Gross deferred tax liabilities Property, plant and equipment 70 35-105 WIP (299) (181) - (480) (229) (146) - (375) Gross deferred tax assets Employee entitlements 410 102-512 Doubtful debt and impairment losses 39 (27) - 12 Imputation credits converted to losses - - - - Tax losses carried forward - - - - Provisions 536 (451) - 85 985 (376) - 609 Total 756 (522) - 234 13
2013 Opening balance 2014 Charged to income 2014 Charged to equity 2014 Closing balance $NZ 000 $NZ 000 $NZ 000 $NZ 000 Gross deferred tax liabilities Property, plant and equipment (8) 78-70 WIP (226) (73) - (299) (234) 5 - (229) Gross deferred tax assets Employee entitlements 531 (121) - 410 Doubtful debt and impairment losses 30 9-39 Imputation credits converted to losses 56 (56) - - Tax losses carried forward 122 (122) - - Provisions 636 (100) - 536 1,375 (390) - 985 Total 1,141 (385) - 756 4. Share Capital $NZ 000 $NZ 000 Balance at 1 July 4,600 4,600 Balance at 30 June 4,600 4,600 At 30 June 2015 the Group has authorised and issued 4,600,000 shares fully paid (2014: 4,600,000). The shares have no par value. All shares carry equal voting rights and the right to share in any surplus on the winding up of the Group. None of the shares carry fixed dividend rights. There is no right of redemption attached to these shares. 5. Cash and Cash Equivalents Cash comprises cash on hand and demand deposits. Cash equivalents are short-term (less than three months), highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value. Bank overdrafts are shown with borrowings in current liabilities in the balance sheet. $NZ 000 $NZ 000 Cash at bank 1,554 1,777 Petty cash 4 4 1,558 1,781 The carrying value of short-term deposits in cash at bank with maturity dates of three months or less approximates their fair value.
6. Trade and Other Receivables Accounts receivable are initially measured at fair value and subsequently measured at amortised cost using the effective interest method, less any provision for impairment. Work in progress is work undertaken but not invoiced at month end. $NZ 000 $NZ 000 Trade receivables 4,045 6,074 Allowance for doubtful debts (42) (112) 4,003 5,962 Related party receivables trade 231 201 Prepayments 456 472 WIP 2,758 1,399 7,448 8,034 The average credit period on sales of services is 30 days. No interest is charged on the trade receivables. An allowance has been made for doubtful debts based on calculations made by management taking into account historical trends. As at 30 June 2015 all overdue receivables have been assessed for impairment and appropriate provisions applied. (a) Aged Debtors Schedule for the Group Past due 61 90 days Past due 31 60 days Past due 1 30 days Not past due Gross Impairment Net Gross Impairment Net $NZ 000 $NZ 000 $NZ 000 $NZ 000 $NZ 000 $NZ 000 Not past due 3,272-3,272 5,420-5,420 Past due 1 30 days 306-306 396-396 Past due 31 60 days 323 (9) 314 119 (24) 95 Past due 61 90 days 144 (33) 111 139 (88) 51 Total trade receivables for the Group 4,045 (42) 4,003 6,074 (112) 5,962 15
Movement in provision for doubtful debts $NZ 000 $NZ 000 Balance at 1 July 112 80 Additional provisions made/(released) during the year (70) 25 Bad debts recovered - 7 Receivables written off during the period - - Balance at 30 June 42 112 7. Property, Plant and Equipment Property, plant and equipment asset classes consist of leasehold improvements, motor vehicles, office equipment, furniture and fittings, general and core application hardware. Property, plant and equipment are stated at cost less depreciation and impairment losses. Additions The cost of an item of property, plant and equipment is recognised as an asset only when it is probable that future economic benefits or service potential associated with the item will flow to the entity and the cost of the property, plant or equipment can be measured reliably. Disposals Gains and losses on disposals are determined by comparing the proceeds with the carrying amount of the asset. Any gains and losses on disposals are included in the surplus or deficit. Subsequent costs Costs incurred subsequent to initial acquisition are capitalised only when it is probable that the future economic benefits or service potential associated with the item will flow to the entity and the cost of the property, plant and equipment can be measured reliably. The day-to-day servicing costs of property, plant and equipment are recognised in the Consolidated Statement of Comprehensive Income when they are incurred. Depreciation Property, plant and equipment are depreciated on a straight line basis that will write off the cost of the assets to their estimated residual value over their useful life. Asset Depreciation rate Furniture and fittings 15% Motor vehicles 20% Office equipment 33% General hardware 25% Leasehold improvements 33% The residual value and useful life of an asset is reviewed, and adjusted if applicable, at each financial year end. The cost of leasehold improvements is capitalised and depreciated over the unexpired period of the lease or the estimated remaining useful life of the improvements, whichever is the shorter. In the year ended 30 June 2015 there were no: items of property, plant or equipment which were not in current use; impairment losses recognised or reversed in the current period; borrowing costs capitalised; and restrictions in title relating to property, plant and equipment or items pledged as security for liabilities.
The following schedule shows the movements of property, plant and equipment for the year ended 30 June 2015: Leasehold improvements Motor vehicles Office equipment Furniture and fittings WIP General hardware Core application hardware Total $NZ 000 $NZ 000 $NZ 000 $NZ 000 $NZ 000 $NZ 000 $NZ 000 $NZ 000 Gross carrying amount Balance as at 1 July 2013 1,025 376 109 518-366 77 2,471 Additions 110 22 21 78 - - - 231 Disposals (91) (53) (23) (107) - (46) - (320) Balance as at 1,044 345 107 489-320 77 2,382 30 June 2014/1 July 2014 Additions 71 53 25 73 255 - - 477 Disposals (80) (15) (3) (35) - (77) - (210) Balance as at 30 June 2015 1,035 383 129 527 255 243 77 2,649 Accumulated depreciation and impairment losses Balance as at 1 July 2013 (753) (176) (104) (351) - (335) (77) (1,796) Disposals 80 18 24 102-42 - 266 Depreciation expenses (163) (54) (7) (54) - (4) - (282) Balance as at (836) (212) (87) (303) - (297) (77) (1,812) 30 June 2014/1 July 2014 Disposals 80 11 3 32-77 - 203 Depreciation expenses (137) (47) (13) (53) - (4) - (254) Balance as at 30 June 2015 (893) (248) (97) (324) - (224) (77) (1,863) Net book value As at 30 June 2014 208 133 20 186-23 - 570 As at 30 June 2015 142 135 32 203 255 19-786 Property, plant and equipment useful lives and residual value At each balance date the Group reviews the useful lives and residual values of its property, plant and equipment. Assessing the appropriateness of useful life and residual value estimates of property, plant and equipment requires the Group to consider a number of factors such as the physical condition of the asset, expected period of use of the asset by the Group, and expected disposal proceeds from the future sale of the asset. An incorrect estimate of the useful life or residual value will impact the depreciation expense recognised in the Consolidated Statement of Comprehensive Income, and carrying amount of the asset in the Consolidated Statement of Financial Position. The Group minimises the risk of this estimation uncertainty by: physical inspection of assets; asset replacement programs; review of second hand market prices for similar assets; and analysis of prior asset sales. The Group has not made significant changes to past assumptions concerning useful lives and residual values. 17
8. Goodwill Goodwill Goodwill on acquisition of subsidiaries is recognised as an asset and separately identified. Goodwill is not amortised, but tested for impairment annually and whenever there is an indication that the goodwill may be impaired. Any impairment is recognised immediately in the Consolidated Statement of Comprehensive Income and is not subsequently reversed. $NZ 000 $NZ 000 Gross carrying amount Balance as at 1 July 10,007 10,007 Balance as at 30 June 10,007 10,007 Accumulated impairment losses Balance as at 1 July (8,859) (8,859) Impairment loss for year - - Balance as at 30 June (8,859) (8,859) Net book value as at 1 July 1,148 1,148 Net book value as at 30 June 1,148 1,148 Allocated to the following cash generating units (CGUs): Quotable Value 659 659 Darroch 489 489 1,148 1,148 Impairment testing for CGUs containing goodwill: For the purpose of impairment testing, goodwill is allocated to the Group s CGUs which represent the lowest level within the Group at which the goodwill is monitored for internal management purposes. Quotable Value CGU The recoverable value of the Quotable Value CGU was based on a Value In Use (VIU) calculation using the Discounted Cash Flow (DCF) methodology. The recoverable value was in excess of the carrying value of the CGU and therefore no impairment has been recognised (2014: Nil). The key assumptions in the VIU calculation were: cash flows were projected based on a three year business plan as approved by the Board of Directors and revenue is expected to increase by 9.7% over the three year period relative to FY15 revenue; cash flows beyond a three year period have been extrapolated using a growth rate of 2%,which reflects long term inflation expectations; and a discount rate of 9.34% per annum has been applied to the cash flows. Darroch CGU The recoverable value of the Darroch CGU is based on a fair value less costs to sell calculation. Fair value is calculated using the capitalisation of earnings approach, applying a multiple to the future maintainable EBITDA of the CGU.The recoverable value was in excess of the carrying value of the CGU and therefore no impairment has been recognised (2014: Nil). Key assumptions in the calculation were: future maintainable EBITDA being broadly consistent with the current period CGU result; and an EBITDA multiple of 3.5 based on consideration of public companies with similar characteristics to Darroch, recent acquisitions involving similar companies and a capital asset pricing model derived multiple.
9. Intangible Assets (Finite) Software Acquisition and Development Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. Costs that are directly associated with the development of software for internal use are recognised as an intangible asset. Direct costs include software development employee costs and an appropriate portion of relevant overheads. Staff training costs are recognised as an expense when incurred. Costs of maintaining computer software are recognised as an expense when incurred. Costs of developing and maintaining the Group website are recognised as an expense when incurred. Database and Software The QIVS II database and software are recorded at cost less accumulated amortisation and impairment. Amortisation is charged on a straight line basis over their estimated useful lives. The estimated useful life and amortisation method is reviewed at the end of each annual reporting period, with any changes being recognised as a change in accounting estimate. The amortisation rates used in the preparation of these statements are as follows: Asset Amortisation rate QIVS II database 15% Software 33% Amortisation The carrying value of an intangible asset with a finite life is amortised on a straight line basis over its useful life. Amortisation begins when the asset is available for use and ceases the date the asset is derecognised. The amortisation charge for each financial year is recognised in the surplus or deficit. The useful lives and associated amortisation rates of major classes of intangible assets have been estimated as follows: Acquired computer software 3 years 33% The Group owns and operates its own proprietary software supporting the operations of the business. An example of this type of software is the QIVS platform which is integral to many of its operational processes. The fair value of the intangible assets is approximately equal to their carrying amount. In the year ended 30 June 2015 for the Group there were no: impairment losses recognised or reversed in the current period; borrowing costs capitalised; and restrictions in title relating to intangible assets or items pledged as security for liabilities. 19
The following schedule shows the movements of intangible assets for the year ended 30 June 2015: (a) Movements in Intangible Assets Computer software QIVS WIP Total $NZ 000 $NZ 000 $NZ 000 $NZ 000 Gross carrying amount Balance as at 1 July 2013 4,107 6,049 107 10,263 Additions 143 91 75 309 Disposals - - (107) (107) Balance as at 30 June 2014/1 July 2014 4,250 6,140 75 10,465 Additions 1,223 3 598 1,824 Disposals (97) (26) - (123) Balance as at 30 June 2015 5,376 6,117 673 12,166 Accumulated amortisation and impairment losses Balance as at 1 July 2013 (3,335) (5,604) - (8,939) Disposals/adjustments (23) 70-47 Amortisation (381) (231) - (612) Balance as at 30 June 2014/1 July 2014 (3,739) (5,765) - (9,504) Disposals/adjustments 98 25-123 Amortisation (399) (127) - (526) Balance as at 30 June 2015 (4,040) (5,867) - (9,907) Net book value As at 30 June 2014 511 375 75 961 As at 30 June 2015 1,336 250 673 2,259 The Group has reviewed the value of the QIVS database in accordance with the impairment test, and as the database supports operational business processes its value is estimated to be greater than the book value. The Group believes that the database holds its value on a going concern basis as revenue generating capacity continues. WIP in the table above relates to significant items purchased or committed to at balance date for projects being undertaken. They will be allocated to specific capital items in the QIVS or software on completion.
10. Subsidiaries Business Combinations Acquisitions of subsidiaries and businesses are accounted for using the purchase method. The cost of the business combination is measured as the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under NZ IFRS 3 Business Combinations are recognised at their fair values at the acquisition date, except for non-current assets (or disposal groups) that are classified as held for sale in accordance with NZ IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, which are recognised and measured at fair value less costs to sell. Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group s interest in the net fair value of the acquiree s identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in profit or loss. The Group s goodwill accounting policy is set out in note 8. The interest of minority shareholders in the acquiree is initially measured at the minority s proportion of the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. The consolidated financial statements incorporate the financial statements of the Company (Quotable Value Limited) and entities controlled by the Company and its subsidiaries. Control is achieved when the Company: has power over the investee; is exposed, or has rights, to variable returns from its involvement with the investee; and has the ability to use its power to affect its returns. The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above. When the Company has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Company considers all relevant facts and circumstances in assessing whether or not the Company s voting rights in an investee are sufficient to give it power, including: the size of the Company s holding of voting rights relative to the size and dispersion of holdings of the other vote holders; potential voting rights held by the Company, other vote holders or other parties; rights arising from other contractual arrangements; and any additional facts and circumstances that indicate that the Company has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders meetings. Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the Consolidated Statement of Comprehensive Income from the date the Company gains control until the date when the Company ceases to control the subsidiary. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group s accounting policies. 21
All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. Quotable Value Limited has two subsidiary companies (2014: three subsidiaries). Percentage of holding at balance Name of company Principal activities Balance date Subsidiaries Darroch Limited 100 100 Property Valuation and Administration 30 June New Zealand Valuation Limited 0 100 Liquidated June 2015 30 June Quotable Value Australia Pty Limited 100 100 Property Valuation 30 June (unaudited and incorporated) Country of Incorporation: Darroch Limited is incorporated in New Zealand; and Quotable Value Australia Pty Limited is incorporated in New South Wales, Australia. 11. Investment In Associate Company An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies. The results and assets and liabilities of associates are incorporated in these consolidated financial statements using the equity method of accounting. Under the equity method, an investment in an associate is initially recognised in the Consolidated Statement of Financial Position at cost and adjusted thereafter to recognise the Group s share of the profit or loss and other comprehensive income of the associate. When the Group s share of losses of an associate exceeds the Group s interest in that associate (which includes any long-term interests that, in substance, form part of the Group s net investment in the associate), the Group discontinues recognising its share of further losses. Additional losses are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate. An investment in an associate is accounted for using the equity method from the date on which the investee becomes an associate. On acquisition of the investment in an associate, any excess of the cost of the investment over the Group s share of the net fair value of the identifiable assets and liabilities of the investee is recognised as goodwill, which is included within the carrying amount of the investment. Any excess of the Group s share of the net fair value of the identifiable assets and liabilities over the cost of the investment, after reassessment, is recognised immediately in profit or loss in the period in which the investment is acquired. The requirements of NZ IAS 39 are applied to determine whether it is necessary to recognise any impairment loss with respect to the Group s investment in an associate. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with NZ IAS 36 Impairment of Assets as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount. Any impairment loss recognised forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognised in accordance with NZ IAS 36 to the extent that the recoverable amount of the investment subsequently increases.
The Group discontinues the use of the equity method from the date when the investment ceases to be an associate, or when the investment is classified as held for sale. When the Group retains an interest in the former associate and the retained interest is a financial asset, the Group measures the retained interest at fair value at that date and the fair value is regarded as its fair value on initial recognition in accordance with NZ IAS 39. The difference between the carrying amount of the associate or joint venture at the date the equity method was discontinued, and the fair value of any retained interest and any proceeds from disposing of a part interest in the associate is included in the determination of the gain or loss on disposal of the associate. In addition, the Group accounts for all amounts previously recognised in other comprehensive income in relation to that associate on the same basis as would be required if that associate had directly disposed of the related assets or liabilities. Therefore, if a gain or loss previously recognised in other comprehensive income by that associate would be reclassified to profit or loss on the disposal of the related assets or liabilities, the Group reclassifies the gain or loss from equity to profit or loss (as a reclassification adjustment) when the equity method is discontinued. The Group continues to use the equity method when an investment in an associate becomes an investment in a joint venture or an investment in a joint venture becomes an investment in an associate. There is no remeasurement to fair value upon such changes in ownership interests. When the Group reduces its ownership interest in an associate but the Group continues to use the equity method, the Group reclassifies to profit or loss the proportion of the gain or loss that had previously been recognised in other comprehensive income relating to that reduction in ownership interest if that gain or loss would be reclassified to profit or loss on the disposal of the related assets or liabilities. When a Group entity transacts with an associate of the Group, profits and losses resulting from the transactions with the associate are recognised in the Group s consolidated financial statements only to the extent of interests in the associate that are not related to the Group. Percentage of holding at balance Name of associate company Principal activities Balance date CoreLogic NZ Limited (CLNZ) 40 40 Sale of online data information 31 December CLNZ is incorporated in New Zealand. Reconciliation of movement in investment in CLNZ $NZ 000 $NZ 000 Balance at beginning of year 11,716 13,345 Part sale of Investment - (2,729) Dividends received - - Share of profits in associate company 1,459 1,100 13,175 11,716 As at 30 June 2015, Quotable Value Limited has a 40% (2014: 40%) share holding in CLNZ. Quotable Value Limited purchased 50% of the Company shares for $10,945,840 on 2 April 2008. On 2 September 2013, Quotable Value Limited sold a 10% share in the Company for $3,700,000. The Group accounts for its investment in CLNZ using the equity method. The following schedule summarises the associate s performance and position at 30 June. This summary represents the gross amounts. 23
(a) Dividends Received from CLNZ $NZ 000 $NZ 000 Dividends received from CLNZ - - (b) Summarised Financial Information for CLNZ $NZ 000 $NZ 000 Current assets 9,172 6,237 Non-current assets 43,478 44,409 Current liabilities (9,175) (7,251) Non-current liabilities (10,537) (14,107) Revenue 29,440 22,498 Profit or (loss) from continuing operations 3,648 2,409 Total comprehensive income 3,648 2,409 Reconciliation of summarised financial information to carrying amount of investment in CLNZ: $NZ 000 $NZ 000 Net assets of CLNZ 32,938 29,290 Proportion of Group's ownership in CLNZ 40% 40% 13,175 11,716 Put and Call Options Under the CLNZ Shareholders Agreement, there is a call option to purchase and a put option, that if exercised would require the Group s remaining shares in CLNZ to be sold to the controlling shareholder in CLNZ. The call and put options can be exercised from January 2016 and January 2017, respectively. The purchase price for the shares is determined in accordance with the Agreed Methodology in the Shareholders Agreement.