for personal use only - asx · 2012. 2. 29. · final 30 june 2011 - - interim 31 december 2011 - -...

__________________________________________________________________________

Excela Limited

ACN 108 069 003

Appendix 4D Half-Year Report

For The Period Ended 31 December 2011 (previous corresponding period being

the half-year ended 31 December 2010)

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Excela Limited ACN 108 069 003

Half-Year Ended 31 December 2011

Results for Announcement to the Market $’000 % Change Revenue from ordinary activities 2,630 (8.3) Profit from ordinary activities after tax attributable to members

(1,749) (893.7)

Net profit attributable to members (1,749) (893.7)

Dividends Per Share Cents per share % Franked Final 30 June 2011 - - Interim 31 December 2011 - -

Record Date for interim dividend. N/A

Brief Explanation of results The Board of Excela Limited reports an Earnings Before Interest, Tax & Amortisation (EBITA) of $(1,415,741) for the half-year ended 31 December 2011, with a Net Profit/(Loss) After Tax (NPAT) (and amortisation) of $(1,748,955). This is a decrease of $1,572,925 or 893.7% on the corresponding period last year. These results reflect a full 6 months trading of Excela Equities Ltd and its stockbroking business; whilst the comparative period only reflected trading from the acquisition date, 12th August 2010. Stockbroking

Excela’s stockbroking business generated revenues of $2,439,865 for the period, contributing $740,735 to group NPAT. This business segment continues to grow although economic conditions have been unfavourable for a number of years. The business has identified a number of investing strategies for clients that have helped maintain this revenue. We will see further broker appointments in 2012 as a result of leads coming through the newly created Education division. Funds Mangagement

The funds management business generated revenues of $403,038, whilst decreasing group NPAT by $(988,616). Current worldwide market conditions have resulted in a flat to declining Funds Under Management (FUM) trend in the financial services sector. This has impacted Excela ability to grow FUM and as such our aim of having $100 million in FUM by 30 June 2012 is unlikely to be achieved. Excela had allocated significant resources towards achieving this goal and believe we are positioned to move quickly when the sector stabilises and begins to trends upwards.

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Education

As highlighted above market conditions has left consumers with uncertainty over their investing future and hoarding any cash into deposit accounts. People are not investing and are not sure what to do. As a result Excela established an education business to help people with the investing pathway. Excela will generate leads from people attending an education experience and be up-sold into a stockbroking or funds management outcome. The education business generated revenues of $150,622 whilst decreasing group NPAT by $(168,121). Investment Management

Investment management activities reflected losses upon the redemption of investments. General

Based on the weighted average number of shares on issue, the loss result equates to after tax earnings of (0.06) cents per share, a decrease of 500.0% on the previous corresponding period’s result. On the 2 July 2007 Excela Limited announced it intended to proceed with an on market buy-back of its shares. At the date of this report, 6,482,651 shares have been purchased under the buy-back plan. Outlook

While markets have appeared to stabilise for 2012 it would be unwise to think that the worst of the market conditions are behind. The next six months will see a number of seminars conducted across the eastern states focusing on an education pathway, from an introductory/market update program through to a comprehensive investment program that includes personal and investing psychology and share/option trading. This will create a sales pipeline for Excela’s products and services. Stockbroking and Funds Management revenues are expected to increase on the rise of the markets or remain flat in a falling market. FUM is expected to grow over the next 2 years as consumer confidence returns and our managed funds products gain traction with institutions and wholesale platform providers. This Preliminary Final Report for Excela Limited is based on accounts that have been reviewed and are not subject to disputes or qualifications.

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EXCELA LIMITED GROUP

FINANCIAL STATEMENTS and REVIEW REPORT

For the period ended 31 December 2011

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ACN 108 069 003

For the half year ended 31 December 2011

Contents

Page

Managing Director's Report 1

Directors' Report 3

Auditors' Independence Declaration 4

Statement Of Comprehensive Income 5

Statement Of Financial Position 6

Statement Of Cash Flows 7

Statement Of Changes In Equity 8

Notes To The Financial Statements 9

Directors' Declaration 19

Independent Auditor's Review Report 20

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Executive Chairman’s Report

Hello fellow shareholders

2011 has continued to be a year of great change. Investment markets around the world have yet to

stabilise and this trend could continue for some time. Instability in Europe will ensure that

investment markets will continue to be volatile with the ongoing effect of tempering investor

confidence. This investor confidence has been a direct contributor in Excela not being able to

execute its growth based business plan as previously advised.

For the half year to December 2011, stockbroking revenue increased by 3.45% to $2,439,865

compared to same period last year. This was an outstanding result when most stockbroking firms

have been experiencing very difficult times. It is indicative of our strong commitment to our clients,

the dedication and innovation driven stock broking team, the cash flow oriented broking strategies

and our loyal clients who have benefited from our thought leadership and trade execution.

We will be looking to recruit additional brokers to ensure all our clients get the best possible service

and we will be implementing Practice Management principles and have also upgraded our Customer

Relationship Management systems (CRM) to ensure we are maximising the existing databases and

by providing systematic lead generation to the sales teams.

This is at the same time as dealing with ever increasing regulatory hurdles that will see new

legislation based on the Future of Financial Advice (FOFA) reforms, a new Product Disclosure

Statement (PDS) regime and the usual regulatory changes to Superannuation.

The funds management business generated revenues of $403,038, whilst decreasing group NPAT by

$(988,616). Current worldwide market conditions have resulted in flat to declining Funds Under

Management (FUM) trend in the financial services sector. This has impacted Excela ability to grow

FUM and as a result we are unable to achieve our previously stated goal of having $100 million in

FUM.

Excela had allocated significant resources towards achieving this goal and believe we are positioned

to move quickly when the sector stabilises and trends upwards.

While markets have appeared to stabilise for the first part of 2012 it would be unwise for Excela to

think that the worst of the market conditions are behind. The next six months will see Excela run a

number of seminars across the eastern states focusing on an education pathway from an

introductory/market update program through to a comprehensive investment program that includes

personal and investing psychology and share/option trading. This will create a sales pipeline for

Excela’s products and services.

Stockbroking and funds management revenues are expected to increase on the rise of the markets

or remain flat in a falling market. FUM is expected to grow over the next 2 years as consumer

confidence returns and our managed fund products gain traction with institutions and wholesale

platform providers.

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Another key part of the Business Plan is to prepare The Accelerator Fund for research so that it can

accept funds from Financial Planning Dealer Groups and Institutional Investors.

To facilitate that we have been working closely with an external research company to prepare the

fund for the potential inclusion on Wrap/Masterfund Platforms and to ensure the fund is ready to be

included in institutional mandates. This is a long process but potentially very rewarding as we target

larger FUM allocations as opposed to the small but larger volumed retail FUM type transactions.

As part of this initiative Excela will also be looking at how we access Self Managed Superannuation

Funds (SMSF) with our products and services. This sector is expected to have more than $2 trillion

under management by 2030.

Sincerely,

Peter Spann

Executive Chairman

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ACN 108 069 003

Directors’ Report

4

Your directors present their report on the Group, being Excela Limited (the Company)

and its controlled entities for the half-year year ended 31 December 2011.

Directors The names of directors in office at any time during or since the end of the year are:

� Peter John Spann

� Michael Willis (resigned 1/12/2011)

� Howard Graham Woolcott (resigned 24/1/2012)

� Alan Bennett

� Rod Welford (appointed 1/12/2011)

Review and Results of Operations

The net profit/(loss) for the group for the year ended 31 December 2011 after providing

for income tax amounted to $(1,748,955) (2010: $(176,030)). This result is impacted by

$319,860 after the amortisation of identifiable intangible assets, Excela Funds

Management Pty Ltd’s fund management agreements ($195,408) and Excela Equities

Ltd’s stockbroking customer relationships ($124,452).

On Market Share Buy-Back

During the period 1 July 2011 to 31 December 2011, 304,164 shares were bought back at

a cost of $54,307.

Dividends Paid or Recommended No dividends were paid or declared during or since the end of the reporting period.

Auditors’ Independence Declaration

A copy of the independence declaration provided by the group’s auditors in accordance

with s307c of the Corporations Act 2001 in relation to the audit of the 31 December

2011 financial report is presented on page 5 and forms part of this Director’s Report.

Signed in accordance with a resolution of the Board of Directors:

Director

Peter John Spann

Dated this 29th day of February 2012

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Ground Floor 102 Adelaide Street Brisbane Queensland 4000 GPO Box 1008 Brisbane Queensland 4001 T + 61 7 3222 0200

F + 61 7 3222 0444

E [email protected]

W www.grantthornton.com.au

4

Grant Thornton Audit Pty Ltd ABN 91 130 913 594

a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389

Grant Thornton Australia Limited is a member firm within Grant Thornton International Ltd. Grant Thornton International Ltd and the member firms are not a worldwide partnership. Grant Thornton

Australia Limited, together with its subsidiaries and related entities, delivers its services independently in Australia.

Liability limited by a scheme approved under Professional Standards Legislation

In accordance with the requirements of section 307C of the Corporations Act 2001, as lead

auditor for the review of Excela Limited & Its Controlled Entities for the half-year ended 31

December 2011, I declare that, to the best of my knowledge and belief, there have been:

1 No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the review; and

2 No contraventions of any applicable code of professional conduct in relation to the review.

GRANT THORNTON AUDIT PTY LTD Chartered Accountants

M S Bell

Partner - Audit & Assurance

Brisbane, Dated 29 February 2012

AUDITOR’S INDEPENDENCE DECLARATION

TO THE DIRECTORS OF EXCELA LIMITED & ITS

CONTROLLED ENTITIES

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ACN 108 069 003


Statement Of Comprehensive Income

31.12.2011 31.12.2010

Note $ $

Revenue 2,630,246 2,867,183

Commission expense (452,181) (480,289)

Management & administration expenses (623,680) (484,681)

Marketing costs (251,154) (423,434)

Amortisation expense (319,860) (326,876)

Employment expenses (1,131,547) (401,344)

Occupancy expenses (356,706) (313,144)

Consultants fees (92,906) (135,425)

Event Costs (318,743) -

Insurance (154,629) (115,975)

Services fees (173,628) (114,660)

Other expenses from ordinary activities (378,985) (155,288)

Directors fees (111,828) (80,159)

Profit/(loss) before income tax (1,735,601) (164,092)

Income tax expense (13,354) (11,938)

Other comprehensive income - -

Total comprehensive income for the year (1,748,955) (176,030)

Overall operations:

Basic and diluted earnings per share (0.06) (0.01)

The above statement should be read in conjunction with the accompanying notes.

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ACN 108 069 003

As at 31 December 2011

Statement Of Financial Position

31.12.2011 30.06.2011

Note $ $

ASSETS

CURRENT ASSETS

Cash and cash equivalents 1,040,377 936,652

Trade and other receivables 446,677 314,890

Financial assets 1,394,268 2,874,056

Current tax assets - -

Other current assets 150,962 402,591

TOTAL CURRENT ASSETS 3,032,284 4,528,189

NON-CURRENT ASSETS

Intangibles 8 7,990,656 8,310,517

TOTAL NON-CURRENT ASSETS 7,990,656 8,310,517

TOTAL ASSETS 11,022,940 12,838,706

LIABILITIES

CURRENT LIABILITIES

Trade and other payables 526,126 573,185

Short-term provisions 77,077 42,522

TOTAL CURRENT LIABILITIES 603,203 615,707

TOTAL LIABILITIES 603,203 615,707

NET ASSETS 10,419,737 12,222,999

EQUITY

Issued Capital 2 25,636,813 25,691,120

Retained earnings (15,217,076) (13,468,121)

TOTAL EQUITY 10,419,737 12,222,999


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ACN 108 069 003


Statement Of Cash Flows

31.12.2011 31.12.2010

Note $ $

CASH FLOWS FROM OPERATING ACTIVITIES

Proceeds from trading investments 1,123,167 3,536,259

Payments for trading investments - (103,435)

Commission income 2,704,456 2,072,490

Event Income 150,623 -

Investment income (356,621) 225,428

Payments to suppliers & employees - (3,159,862)

Payments related to management and administration

fees (623,680) (254,550)

Tax (paid) / refund (13,354) 5,810

Net cash provided by / (used in) operating activities 2,984,591 2,322,140

CASH FLOWS FROM INVESTING ACTIVITIES

Payment for subsidiary, net of cash acquired - (2,027,148)

Net cash provided by / (used in) investing activities - (2,027,148)

CASH FLOWS FROM FINANCING ACTIVITIES

Shares bought back (54,307) (9,830)

Net cash provided by / (used in) financing activities (54,307) (9,830)

Net increase / (decrease) in cash held 2,930,284 285,162

Cash and cash equivalents at the beginning of the

financial year 936,652 905,618

Cash and cash equivalents at end of financial year 3,866,936 1,190,780


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ACN 108 069 003

As at 31 December 2011

Statement Of Changes In Equity

Share Capital Retained

Ordinary Earnings Total

Note $ $ $

Balance 1.7.10 21,403,176 (11,132,552) 10,270,624

Shares issued during the year 3,458,438 - 3,458,438

Deferred equity consideration

recognised 895,000 - 895,000

Shares bought back during the

year (9,830) - (9,830)

Loss attributable to members - (176,030) (176,030)

Sub-total 25,746,784 (11,308,582) 14,438,202

Dividends paid or provided for - - -

Balance at 31.12.10 25,746,784 (11,308,582) 14,438,202

Balance 1.7.11 25,691,120 (13,468,121) 12,222,999

Shares issued during the year - - -

Deferred equity consideration

recognised -

Shares bought back during the

year (54,307) - (54,307)

Loss attributable to members - (1,748,955) (1,748,955)

Sub-total 25,636,813 (15,217,076) 10,419,737

Dividends paid or provided for - - -

Balance at 31.12.11 25,636,813 (15,217,076) 10,419,737


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ACN 108 069 003


Notes To The Financial Statements 1. Statement of significant accounting policies

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The financial report is a general purpose financial report for the interim half year reporting period ended 31 December 2011 and has been prepared in accordance with AASB 134 Interim Financial Reporting and the requirements of the Corporations Act 2001.

This interim financial report does not include all the notes of the type normally included in an

annual financial report. Accordingly, this report is to be read in conjunction with the annual

report for the year ended 30 June 2011 and any public announcements made by Excela Ltd during

the interim reporting period in accordance with the continuous disclosure requirements of the

Corporations Act 2001.

The financial report covers Excela Limited and its controlled entities as a consolidated entity

(“Group”). Excela Limited is an ASX listed public company incorporated and domiciled in Australia.

Basis of preparation

The same accounting policies and methods of computation have been followed in this interim

financial report as were applied in the most recent annual financial statements.

Reporting basis and conventions

The financial report has been prepared on an accruals basis and is based on historical costs

modified by the revaluation of selected financial assets and financial liabilities for which the fair

value basis of accounting has been applied.

Key judgements

Assessment of the effect life of intangible assets

The directors have assessed that the goodwill (Note 8) recognised in relation to the

acquisition of the Excela Equities Limited (stockbroking) business continues to be indefinite,

on the basis of continued profitability in the business with no intentions to wind down or

cease trading. In fact, significant expenditure has been made during the current period with a

view to increasing the customer base.

The directors have assessed that the useful life previously ascribed to the management rights

intangible (Note 8) which was recognised in relation to the Excela Funds Management

acquisition, being 7 years, continues to be appropriate. For the reasons set out in Note 8,

the directors consider that the original forecast of $180 million in FUM over the 7 year time

horizon continues to be realistic and achievable.

The directors have assessed that the useful life previously ascribed to the customer

relationship intangible(Note 8) which was recognised in relation to the Excela Equities

Limited (stockbroking) acquisition, being 10 years, continues to be appropriate. This useful

life has been attributed based on historical customer retentions of 80% per annum, which

was achieved during the current period.

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Notes To The Financial Statements (cont)2. Issued Capital 31.12.2011 31.12.2010

No. of No. of

Shares Shares

Fully paid ordinary sharesOpening balance 28,363,145 22,242,624

Shares issued during the year:

- in consideration of the acquisition of Excela Equities Ltd

(formerly Freeman Fox Stockbroking Ltd) - 6,375,000

Share buy back (304,164) (30,500)

28,058,981 28,587,124

31.12.2011 31.12.2010

$ $

Fully paid ordinary sharesOpening balance 25,691,120 21,403,176

Shares issued during the year:


(formerly Freeman Fox Stockbroking Ltd) - 3,458,438

Deferred equity consideration recognised:


(formerly Freeman Fox Stockbroking Ltd) - 895,000

Share buy back (54,307) (9,830)

25,636,813 25,746,784

3. Segment informationThe Group has identified its operating segments based on the internal reports that are

reviewed and used by the Board of Directors in assessing performance and determining

the allocation of resources. The Group is managed primarily on the basis of the service areas

it provides, with segments determined on the same basis. Those segments are:

(i) investment management, comprising the management of an investment portfolio

consisting of direct equity and managed fund investments; and

(ii) funds management, being the provision of a multi-manager approach, using sector

specialists; and

(iii) stockbroking;

(iv) events.

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Notes To The Financial Statements (cont)3. Segment information (cont)Basis of accounting for purposes of reporting by operating segments

(a) Accounting policies adopted

Unless stated otherwise, all amounts reported to the Board of Directors, being the chief

decision maker with respect to operating segments, are determined in accordance with

accounting policies that are consistent to those adopted in the annual financial statements of

the Group.

(b) Inter-segment transactions

There are no inter-segment sales.

(c) Segment assets

Where an asset is used across multiple segments, the asset is allocated to that segment that

receives the majority of economic value from that asset.

(d) Segment liabilities

Liabilities are allocated to segments where there is a direct nexus between the incurrence

of the liability and the operations of the segment. Borrowings and tax liabilities are

generally considered to relate to the Group as a whole and are not allocated. Segment

liabilities include trade and other payables.

(e) Unallocated items

The following items of revenue, expenses, assets and liabilities are not allocated to

operating segments as they are not considered part of the core operations of any segment:

- company holding costs, where these costs are incurred independent of the company's

business activities;

- income tax expense

- current tax liabilities

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Notes To The Financial Statements (cont)3. Segment information (cont)

(i) Segment Performance

31 December 2011 Investment Funds Stock-

M'ment M'ment Broking Events Total

REVENUE $ $ $ $ $

External revenue (381,577) 403,038 2,439,865 150,622 2,611,948

Less inter-segment sales - - - - -

Interest revenue 18,298 - - - 18,298

Total segment and group revenue (363,279) 403,038 2,439,865 150,622 2,630,246

Segment net profit/(loss) before tax (363,279) (793,208) 865,187 (168,121) (459,421)

and amortisation from continuing operations

Less amortisation expense - (195,408) (124,452) - (319,860)

Segment net profit/(loss) after tax (363,279) (988,616) 740,735 (168,121) (779,281)


Reconciliation of segment result to group netprofit/(loss) before tax

Amounts not included in segment result but

reviewed by Board:

- company holding costs (956,320)

Net profit/(loss) before tax from (363,279) (988,616) 740,735 (168,121) (1,735,601)

continuing operations

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(i) Segment Performance (cont)

31 December 2010 Stock-

Investment Funds Broking

M'ment M'ment 13/8-31/12/10 Total

REVENUE $ $ $ $

External revenue 544,461 458,691 1,613,816 2,616,968

Less inter-segment sales - - - -

Interest revenue 20,084 - - 20,084

Total segment revenue 564,545 458,691 1,613,816 2,637,052

Segment net profit/(loss) before tax 466,868 (705,971) 626,588 387,485


Less amortisation expense - (230,726) (96,150) (326,876)

Segment net profit/(loss) after tax 466,868 (936,697) 530,438 60,609


Reconciliation of segment result to group netprofit/(loss) before tax

Amounts not included in segment result but

reviewed by Board:

- company holding costs (224,701)

Net profit/(loss) before tax from 466,868 (936,697) 530,438 (164,092)

continuing operations

We draw attention to the stockbroking segment disclosed above, being in relation to Excela

Equities Limited which was acquired during the half-year period to 31 December 2010. Had the

acquisition date been as of the beginning of the annual reporting period, the revenues

and loss of the group for the current reporting period would be $3,361,640 and ($394,611)

respectively.

(ii) Segment Assets Investment Funds Stock-

31 December 2011 M'ment M'ment Broking Total

$ $ $ $

Segment assets 2,305,052 1,971,863 6,746,025 11,022,940

2,305,052 1,971,863 6,746,025 11,022,940

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Segment Assets Investment Funds Stock-

30 June 2011 M'ment M'ment Broking Total

$ $ $ $

Segment assets 3,966,441 2,232,295 - 6,198,736

Segment asset increases for the period

- acquisitions - - 6,639,970 6,639,970

Total Group Assets 3,966,441 2,232,295 - 12,838,706

(iii) Segment Liabilities Investment Funds Stock-

31 December 2011 M'ment M'ment Broking Total

$ $ $ $

Segment liabilities - 246,981 356,222 603,203

- 246,981 356,222 603,203

Segment Liabilities Investment Funds Stock-

30 June 2011 M'ment M'ment Broking Total

$ $ $ $

Segment liabiltiies - 300,923 - 300,923

Segment liability increases for the

period - acquisitions - - 314,784 314,784

Total Group Liabilities - 300,923 314,784 615,707

(iv) Geographical Region

The Group currently operates in one geographical segment, being Australia.

4. Dividendsa. Distributions paid by the company

There were no dividends paid during the reporting period.

5. Events after the reporting periodNo matters or circumstances have arisen since the end of the reporting period which

significantly affect or may significantly affect the operations of the Group, the results of those

operations or the state of affairs of the Group in subsequent reporting periods.

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Notes To The Financial Statements (cont)6. Controlled EntitiesControlled Entities Consolidated

Country Of

Incorporation 31/12/2011 31/12/2010

Subsidiaries of Excela Ltd:

Excela Funds Management Pty Ltd Australia 100 100

Excela Equities Ltd Australia 100 100

7. Related Party Transactions 31.12.2011 31.12.2010

$ $

(i) Administration Fee

An administration fee of $5,348 (2010: $5,348) per month

plus goods and services tax, was paid by Excela Ltd to Fox

Portfolio Pty Ltd, a company controlled by Mr Peter Spann

during the year. This fee covers the provision of

administration support services to the Group. 32,088 32,550

(ii) Premises and Services Fees

Excela Ltd paid premises and services fees to Smaartco Pty Ltd

(as trustee for the Libero Volpe Trust), a company controlled

by Mr Peter Spann, during the year.

Persuant to the Premises Agreement, Smaartco provides

building, equipment, utilities and communications services.

Persuant to the Services Agreement, Smaartco provided

server, network, telephone, CRM and broker application

services. During December 2010, the company pre-paid

11 months of charges on order to access a 12% discount

offered by the supplier.

These fees are $31,007 (2010: $53,846) and $22,014 (2010:$25,360)

per month respectively Premises fees 185,103 243,448

Services fees 173,628 114,660

On 1st April 2011, Excela took over the lease of Level 21,

333 Ann Street, Brisbane. As such the un-utilised prepaid rent

component of the Premises Agreement became a receivable

to Excela Ltd. This has been recovered through the non-

payment of on-going Premises and Services Agreements

charges, with the prepayment being recovered by March 2012.

Excela Ltd charges Fox Wealth Club Pty Ltd, a company

controlled by Mr Peter Spann, office rental at Level 21, 333

Ann Street, Brisbane. ($7,680 / month + GST) 46,080 -

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Percentage Owned (%)

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Notes To The Financial Statements (cont)7. Related Party Transactions (cont)

31.12.2011 31.12.2010

$ $

(iii) Consultant Fees

Consultant fees were paid to Woolcott Corporate

Developments Pty Ltd, a company of which Mr Howard

Woolcott is a director. - 21,250

(iv) Commissions

Excela Funds Management Pty Ltd (EFM), in its capacity as

fund manager of its funds Generator, Emergent, Maximiser

and the Accelerator Fund, pays trail and

up-front commissions to Freeman Fox Ltd, a company

owned by Mr Peter Spann during the year:

- trail commission 92,157 120,745

- up-front commission 71,762 87,397

(v) Investments in Related Entities 31.12.2011 30.06.2011

$ $

On 20 January 2009, Excela Ltd acquired 675,000 shares (5%)

in Rohnan Pty Ltd , a private company, at the

time of the transaction, 100% owned ultimately by Mr Peter

Spann, at a cost of $500,000.

Rohnan Pty Ltd is the parent company of the

Freeman Fox Group and its associated business operations.

The directors are of the opinion that the investment is on at

least an arm's length basis and does not constitute a

substantial asset as defined in the ASX listing rules.

This investment was written down in the 30 June 2011

financial statements. - -

Following is the market value of NSX listed director related

entities held by the company at period end:

- Vertua Ltd 185,910 185,910

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Notes To The Financial Statements (cont)7. Related Party Transactions (cont)

31.12.2011 31.12.2010

$ $

(vi) Office Rental

Office rental of $11,250 per month plus goods and services

tax, was paid last year by Excela Ltd to Ann Street

Administration Services Pty Ltd, a company controlled by Mr

Peter Spann during the prior year. This rent was for office

space in Freeman Fox's Sydney office. - 69,696

8. Intangible Assets

31.12.2011 30.06.2011

$ $

Excela Funds Management Pty Ltd management rights 2,877,000 2,877,000

Accumulated amortisation (922,901) (727,493)

1,954,099 2,149,507

Excela Equities Ltd goodwill 3,761,586 3,761,586

Excela Equities Ltd customer relationship intangible 2,489,000 2,489,000

Accumulated amortisation (344,029) (219,576)

2,144,971 2,269,424

Australian Financial Services Licence 130,000 130,000

7,990,656 8,310,517

Impairment Disclosures - Goodwill

Goodwill is allocated to cash-generating units (CGU's) which are based on the Group's business

segments which represent the lowest level within the group at which goodwill is monitored for

internal management purposes. These segments are representative of the operating segments

as defined by accounting standards and as disclosed at Note 3. Goodwill has arisen

following the acquisition of Excela Equities Ltd on the 12th August 2010.

The recoverable amount of the cash-generating unit is determined based on value-in-use

calculations. The value-in-use is calculated based on the present value of cash flow projections

over a 5 year period. The cashflows are discounted using an appropriate post-tax discount rate,

which was derived by an independent expert in performing purchase price allocation

calculations. This rate represents the cost of equity of the Group, which has no debt. The

growth rate as disclosed, was also derived by the independent expert. The following

assumptions were used in the value-in-use claculations:

Growth rate 10%

Discount rate 12% 17

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EXCELA LIMITED

ACN 108 069 003


Notes To The Financial Statements (cont)8. Intangibles (cont)

Excela Funds Management Pty Ltd

Identifiable intangibles represent management rights agreements acquired by Excela Funds

Management Pty Ltd (wholly owned subsidiary of Excela Ltd acquired 7 January 2010) to act as

fund manager for four funds; Generator, Emergent, Maximiser and the Accelerator Fund.

These management agreements have varying expiration dates, the longest of which runs to

21 April 2033. Given the uncertainty with looking forward over such a period, management

have thought it prudent to adopt a seven year period as reflective of the useful life of these

agreements.

The purchase consideration has been allocated to the respective management agreements by

forecasting revenues derived from funds under management (FUM) over the seven year period.

The directors believed that FUM growth projections, which are in excess of the projected long

term industry growth rate over the initial three years, and which were expected to then mirror

the industry growth rate, were justified. This was based on the funds being in their early

stages and starting from a low base, and in line with the Group's marketing plan.

At balance date the FUM growth projections have not been met, with current worldwide

market conditions resulting in flat FUM trends in the financial services sector. The directors have

satisfied themselves that, whilst FUM growth is looking challenging in the retail sector, the

wholesale sector looks to provide many opportunities. Furthermore, a Business Development

Manager is budgeted to commence in the first half of 2012 tasked with the promotion of the

funds through the wholesale sector. Product development undertaken in this period should also

have Excela well placed to take advantage of improved conditions in the sector once they

stabilise. In consideration of these factors, the directors believe that the original forecast of

$180 million in FUM over the 7 year time horizon continues to be realistic and achievable,

and on this basis the amortisation rate of the management rights intangible has not been

amended and no impairment is required.

Excela Equities Ltd

Identifiable intangibles represent Excela Equities Limited's external customer

relationships, or stockbroking clients. The non-Excela customer relationships represent the

right of Excela to undertake stockbroking activities on behalf of its pre-existing customer

base.

Given the highly retentive nature of the customer relationships (approximately 80% of

customers were repeat customers), a ten year useful life has been attributed to these

customer relationships. This has been reviewed by management and determined as

appropriate.

18

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ACN 108 069 003


Directors' Declaration

The directors of the company declare that:

1. The financial statements and notes, as set out on pages 5 - 18

a) comply with Accounting Standard 134: Interim Financial Reporting

and the Corporations Regulations; and

b) give a true and fair view of the economic entity's financial position

as at 31 December 2010 and of its performance for the half year

ended on that date.

2. In the directors' opinion there are reasonable grounds to believe that the

company will be able to pay its debts as and when they become due and

payable.

The declaration is made in accordance with a resolution of the Board of Directors.

Director

Peter John Spann

Dated this 29th day of February 2012

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Ground Floor 102 Adelaide Street Brisbane Queensland 4000 GPO Box 1008 Brisbane Queensland 4001 T + 61 7 3222 0200

F + 61 7 3222 0444

E [email protected]

W www.grantthornton.com.au

20

Grant Thornton Audit Pty Ltd ABN 91 130 913 594

a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389

Grant Thornton Australia Limited is a member firm within Grant Thornton International Ltd. Grant Thornton International Ltd and the member firms are not a worldwide partnership. Grant Thornton

Australia Limited, together with its subsidiaries and related entities, delivers its services independently in Australia.

Liability limited by a scheme approved under Professional Standards Legislation

We have reviewed the accompanying half-year financial report of Excela Limited & Its

Controlled Entities (“Company”), which comprises the consolidated financial statements

being the statement of financial position as at 31 December 2011, and the statement of

comprehensive income, statement of changes in equity and statement of cash flows for the

half-year ended on that date, a statement of accounting policies, other selected explanatory

notes and the directors’ declaration of the consolidated entity, comprising both the

Company and the entities it controlled at the half-year’s end or from time to time during the

half-year.

Directors’ responsibility for the half-year financial report

The directors of the Company are responsible for the preparation and fair presentation of

the half-year financial report in accordance with Australian Accounting Standards (including

the Australian Accounting Interpretations) and the Corporations Act 2001. This

responsibility includes establishing and maintaining internal controls relevant to the

preparation and fair presentation of the half-year financial report that is free from material

misstatement, whether due to fraud or error; selecting and applying appropriate accounting

policies; and making accounting estimates that are reasonable in the circumstances.

Auditor’s responsibility

Our responsibility is to express a conclusion on the consolidated half-year financial report

based on our review. We conducted our review in accordance with the Auditing Standard

on Review Engagements ASRE 2410: Review of a Financial Report Performed by the

Independent Auditor of the Entity, in order to state whether, on the basis of the procedures

described, we have become aware of any matter that makes us believe that the financial

report is not in accordance with the Corporations Act 2001 including giving a true and fair

view of the consolidated entity’s financial position as at 31 December 2011 and its

performance for the half-year ended on that date; and complying with Accounting Standard

AASB 134: Interim Financial Reporting and the Corporations Regulations 2001. As the

auditor of Excela Limited & Its Controlled Entities, ASRE 2410 requires that we comply

with the ethical requirements relevant to the audit of the annual financial report.

INDEPENDENT AUDITOR’S REVIEW REPORT

TO THE MEMBERS OF EXCELA LIMITED & ITS

CONTROLLED ENTITIES

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21

A review of a half-year financial report consists of making enquiries, primarily of persons

responsible for financial and accounting matters, and applying analytical and other review

procedures. A review is substantially less in scope than an audit conducted in accordance

with Australian Auditing Standards and consequently does not enable us to obtain assurance

that we would become aware of all significant matters that might be identified in an audit.

Accordingly, we do not express an audit opinion.

Independence

In conducting our review, we complied with the independence requirements of the

Corporations Act 2001.

Conclusion

Based on our review, which is not an audit, we have not become aware of any matter that

makes us believe that the half-year financial report of Excela Limited & Its Controlled

Entities is not in accordance with the Corporations Act 2001, including:

1 Giving a true and fair view of the consolidated entity’s financial position as at 31 December 2011 and of its performance for the half-year ended on that date; and

2 Complying with Accounting Standard AASB 134: Interim Financial Reporting and Corporations Regulations 2001.

GRANT THORNTON AUDIT PTY LTD Chartered Accountants

M S Bell

Partner - Audit & Assurance

Brisbane, Dated 29 February 2012

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for personal use only - asx · 2012. 2. 29. · final 30 june 2011 - - interim 31 december 2011 - -...

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