A N N U A L R E P O R T
2 019
C O R P O R A T E D I R E C T O R Y
Company
Acrow Formwork and Construction Services Limited
Board of Directors
Mr Peter Lancken – Non-Executive Chairman
Mr Steven Boland – Managing Director and
Chief Executive Officer
Mrs Margaret Prokop – Executive Director
Mr Gregg Taylor – Non-Executive Director
Mr Josh May – Non-Executive Director
Mr David Moffat – Non-Executive Director (appointed
19 September 2019)
Mr Mike Hill – Non-Executive Director (resigned
19 September 2019)
Auditor
KPMG
Tower 3, 300 Barangaroo Avenue
Sydney NSW Australia 2000
ASX Code
ACF
Website
www.acrow.com.au
ACN
124 893 465
Chief Financial Officer
Mr Andrew Crowther
Company Secretary
Mr Lee Tamplin
Registered Office
c/- Automic Group
Level 5, 126 Phillip Street
Sydney NSW 2000
Share Registry
Automic Group
Level 5, 126 Phillip Street
Sydney NSW 2000
C O N T E N T S
Highlights 2019
Chairman’s Report
1
2
4
8
10 The Acrow Difference and Safety
Managing Director’s Report
Business Summary
ACROW ANNUAL REPORT 2019
Annual General Meeting
The Group will hold its 2019 Annual General Meeting at
Automic Group, Level 5, 126 Phillip Street, Sydney NSW
2000 at 11.00am on Thursday, 14 November 2019.
12 Board of Directors and Key Management Team
15 Financial Report
84 Directors’ Declaration
85
90 Shareholder Information
Independent Auditor’s Report
2 0 1 9 H I G H L I G H T S
At the start of every great project since 1936.
Acrow is a leading provider of engineered formwork solutions and
scaffold hire in Australia.
EBITDA
$m
Operating Cash
Profit $m
Total Revenue
$m
12
10
8
6
4
2
0
11.6
10
8
6
4
2
0
8.8
80
60
40
20
10
0
71
15
16
17
18
19
15
16
17
18
19
15
16
17
18
19
Revenue by Business Unit*
Revenue by Geography*
TOTAL
REVENUE
$71m
Formwork – 53%
Scaffold – 47%
*Revenue includes sale of ex hire equipment
www.acrow.com.au
Queensland – 25%
New South Wales – 42%
Victoria – 13%
South Australia – 9%
Western Australia – 5%
Tasmania – 6%
ACROW ANNUAL REPORT 2019 1
C H A I R M A N ’ S R E P O R T
I’m pleased to report a solid performance in Acrow’s first full
year as a listed company.
We achieved a great deal, reporting record underlying
earnings before interest tax and depreciation (EBITDA) of
$11.6 million, up 9% from the previous year. Disciplined
cost management delivered underlying EBITDA margin
in line with the previous year at 16.3%. Underlying net
profit of $7.5 million, which excludes the impact of
share-based payments and non-recurring acquisition
and finance restructuring costs, was also a record.
Net profit after tax was $4.9 million.
Sales revenues for the year were $71 million, an increase
of 9%, demonstrating the company’s successful
transition toward value-added, highly engineered civil
formwork solutions.
Our successful strategy of targeting east coast civil
infrastructure opportunities and increasing participation
in formwork and civil infrastructure markets resulted in
strong business growth, compensating for the weakness
in our scaffolding business which, as expected, was
impacted by the downturn in residential construction.
Over the year we more than doubled capital expenditure
to take advantage of new sales opportunities in the
infrastructure sector.
Acrow is a leading provider of engineered formwork
solutions and scaffolding hire systems, and we
serve more than 1,100 customers in the Australian
construction and civil engineering markets. Our national
network of scaffolding and formwork branches has nine
locations in six states across Australia.
We provide dry hire solutions, supplying formwork
equipment that helps our customers prepare temporary
moulds that support concrete structures during
construction. We also supply scaffolding systems
through both dry hire and wet hire models, where we
supply both equipment and labour.
Increased dividend
The Board’s dividend policy is to pay between 30-50%
of operating cash profit, which is defined as EBITDA less
2 ACROW ANNUAL REPORT 2019
maintenance capital expenditure less tax paid. This was
$8.8 million for the year. Through diligent cost controls
we have maintained a strong balance sheet, enabling
the board to declare a final dividend of 1 cent unfranked,
taking full year dividends to 2 cents per share. In the
previous year the company paid a maiden dividend of
0.5 cents, reflecting three months of being listed on
the ASX.
Successful Natform integration
During the year, we successfully integrated the Natform
business which provides the screen-based formwork
systems that support construction of civil infrastructure
and commercial and residential buildings. This
well-established business was founded in 1989 and has
a strong east coast presence and complementary dry
hire business model.
Natform’s engineering capabilities help to differentiate
Acrow and strengthen our capability in the formwork
solutions market. In the nine months since acquisition,
strong customer acceptance has led to established
clients using both organisations’ products and services.
We also secured new work providing integrated Acrow
and Natform services in Victoria, south-east Queensland
and in South Australia. This demonstrates the increased
potential of the group to service large projects.
Governance
Acrow’s most important assets are the integrity of its
people and its reputation for being an honest, ethical
and professional business. We maintain a modern,
sound governance framework with well-defined policies.
Our Board
We are committed to ensuring we have a strong board
and in August 2018 welcomed the founder of Natform,
Margaret Prokop, whose entrepreneurial skills and
infrastructure experience have benefited our growth
strategy. The board will continue to review its skills and
capabilities and has a succession plan that meets the
strategic requirements for the future of the company.
WE ACHIEVED A GREAT DEAL, REPORTING RECORD UNDERLYING
EARNINGS BEFORE INTEREST TAX AND DEPRECIATION (EBITDA)
OF $11.6 MILLION, UP 9% FROM THE PREVIOUS YEAR.
Outlook
The value of Australian major transport infrastructure
projects in 2019 is estimated at $14 billion, and the
value of work from this sector is expected to increase
by more than 50% in the next four years. Currently, we
have a strongest pipeline of potential hire revenue in
the company’s history. We anticipate long-term growth
opportunities supported by the current low interest rate
environment and remain focused on increasing our
participation in, and exposure to, this market.
Our future growth is founded on three pillars:
›› Integration of Natform has increased our ability to
participate in infrastructure construction markets and
to progress growth nationally.
›› Continued capital expenditure will support our
growing formwork business and the strong pipeline
of projects being secured on Australia’s east coast.
›› Expansion through earnings accretive acquisitions,
where these contribute to increased scale
and capability.
In closing, I would like to acknowledge the ongoing
support of our shareholders. I thank my fellow Board
members for their support, and would also like to
recognise our dedicated staff, well led by Steven Boland.
Peter Lancken
Chairman
ACROW ANNUAL REPORT 2019 3
M A N A G I N G D I R E C T O R ’ S
R E P O R T
Acrow’s first full financial year as a publicly listed company was
transformational, as our strategy to focus on the value-added,
highly engineered formwork solutions market led to record
performance and a fifth consecutive year of EBITDA growth.
Our vision to become the leading provider of engineered
formwork hire equipment solutions for the Australian
construction market has been significantly enhanced by
the successful acquisition of Natform and its integration
into Acrow’s business.
Through acquisition and organic growth, we are
becoming a national full-service provider of formwork
hire solutions for the civil, commercial and residential
construction sectors, offering the technical, high value
segments of the construction industry significant
engineering capability, design innovation and
reliable equipment.
For the first time, formwork business revenue exceeded
scaffold revenue. This represents a significant pivot in
the operations of the company and ensures a strong
competitive position for the future.
Health and safety
We are committed to ensuring that our employees and
customers that use our equipment are safe and work in
a professional environment. It was pleasing that in FY19
our lost time injury frequency rate reduced to less than a
third of the previous year; and was favourable compared
to the construction industry average. This improvement
was attributable to an ongoing focus on safe processes
and systems. Our goal remains zero injuries, and making
sure all our workers come home safely every night.
Financial overview
Our key focus was to manage the business’ transition
from low-margin residential work to higher margin
formwork hire while maintaining strict cost controls.
During the year the company focused on driving
revenue from value-added formwork hire and solutions,
capitalising on growth in the civil infrastructure market.
This was facilitated by a $5.5 million capital expenditure
program to increase our capability on Australia’s
east coast.
Although delays in new project starts affected
performance in the second half, our formwork
business, including a 10-month contribution from
Natform, increased revenue 27% to $37.7 million
for FY19, compared to $29.7 million in the previous
corresponding year.
This demonstrates the strength of our dry hire solutions
business model as formwork hire revenue increased
39% to $21.7 million, and formwork sales and
consumables revenue grew 14% to $16.0 million.
The acquisition of Natform, a leading designer and hirer
of screen edge protection systems for the construction
industry, was a significant milestone for the group.
While project delays affected Natform trading, successful
integration of the Acrow and Natform businesses
broadened our business capability, leading to seven
new business contracts using both sets of services. We
now have a fully integrated sales team. The ability to
cross-sell engineering capabilities, formwork equipment
and consumables has opened up opportunities,
positioning the businesses well to secure work and enter
new markets.
Increased competitive pressures and softening markets,
particularly in New South Wales and Queensland,
impacted revenue from our scaffold business which
declined 7% to $33.3 million from $35.6 million in
the prior year. Scaffold hire revenue decreased 35%
to $9.3 million due to a slowdown in residential
construction and fierce competition. However, labour
4 ACROW ANNUAL REPORT 2019
WE ARE COMMITTED TO ENSURING THAT OUR EMPLOYEES AND
CUSTOMERS THAT USE OUR EQUIPMENT ARE SAFE AND WORK
IN A PROFESSIONAL ENVIRONMENT.
and cartage increased market share and revenue rose
21% to $16.5 million.
Focusing on higher margin growth markets, we took
a strategic decision to exit the Melbourne residential
market where price competition had eroded margins,
and reallocated yard-related resources in Sydney from
residential to accommodate the growth in formwork.
The changing dynamic of our business was exemplified
by the sales contribution of formwork which was
64% of total sales. While group sales contribution
increased 8% to $42.6 million from $39.3 million, the
formwork business’ sales contribution increased 40%
to $27.3 million, while the scaffold business’ sales
contribution decreased 23% to $15.3 million.
The group contribution margin was 60.0%, in line
with the previous year, as the positive effect of higher
formwork margins was balanced by a 20bps margin
reduction in the scaffold business.
Acrow is a cash generative company, and cash flow
from operations was $11.6 million. Tight cost discipline
ensured overheads increased just 8%.
National full-service capability
We provide services for the civil, commercial and
residential markets in all states of Australia. Market
conditions varied significantly in each state.
There was strong demand for civil infrastructure services
in New South Wales, Victoria and Western Australia.
Demand was stable in other markets. In commercial
construction, markets in Queensland, Tasmania and
Victoria were buoyant, but stable in New South Wales
and South Australia and soft in Western Australia.
Residential markets in New South Wales and
Queensland were soft and stable in other states.
The increasing diversity of our business ensures that
Acrow is well-positioned to take advantage of new
opportunities, particularly in the key growth markets
of New South Wales and Victoria where transport
infrastructure construction is expected to grow by over
50% in the next four years.
ACROW ANNUAL REPORT 2019 5
M A N A G I N G D I R E C T O R ’ S
R E P O R T ( C O N T I N U E D )
Competitive advantage
Outlook
Acrow is a major Australian operator that provides both
engineering formwork hire and scaffold solutions through
a national network of branches and depots. This ensures
we provide flexible equipment offerings in all states,
and our ability to bundle formwork, screen and scaffold
services allows a competitive advantage.
Strong balance sheet
During the year we secured a new $15 million financing
facility with Westpac, providing greater flexibility and
a strong funding platform which supports our growth
strategy of pursuing earnings accretive acquisitions.
At 30 June 2019, Acrow had approximately $47.6 million
of net assets, compared with $39.0 million at
30 June 2018. The replacement value of the group’s
high-quality hire equipment continues to exceed
$100 million.
Net debt at 30 June 2019 was $3.6 million. Although
not reflected on our balance sheet, the company also
maintains carry forward tax losses of $40 million which
are available for use against profits in Acrow’s business.
Our people
In order to position the company for success we have
strengthened our senior management team, increasing
the company’s capability and efficiency. We have
attracted highly experienced talent including a new chief
financial officer, Queensland general manager, national
business development manager and infrastructure
projects expertise. These appointments have invigorated
our company, ensuring that our team is skilled, flexible
and committed to achieving positive outcomes for
our customers.
We are investing in our people, ensuring that Acrow
has the knowledge and systems to support the
company’s next phase of growth. This includes the
development of engineering expertise with a focus
on providing commercial customer solutions, and we
encourage our professional staff to strengthen skills and
industry accreditations.
As the company grows, we aim to attract more
experienced, qualified and like-minded talent to build
our business.
Acrow’s strategy is to leverage the assets, client network
and intellectual property that the company has built and
developed, facilitating ongoing growth.
We have experienced positive trading in the first few
months of the new financial year and maintain a record
pipeline of potential new work in the civil infrastructure
market – in fact, more than 60% higher than the same
time last year – which remains our growth focus.
We now have a stronger, value driven service offering,
with significant opportunities to win new business. The
growth capital we have put in place and our broader
offering incorporating Natform’s screen systems provide
the ability to exploit new civil, commercial and industrial
construction opportunities. We are well positioned
across all states of Australia.
Although residential construction activity is expected
to remain soft in the medium term, our business is
competing strongly in the general access scaffold
market and we maintain a stable pipeline of activity.
Acrow’s strong balance sheet allows further investment
in our business through acquisitions. While our priority
remains improving our formwork solutions, we may
also seek to purchase strategically positioned scaffold
businesses. Opportunities include extending Acrow’s
product range, enabling the group to address a greater
proportion of the civil infrastructure market, particularly in
NSW and Victoria. The company is also well positioned
to strengthen its scaffold offering through increasing
products and services for the scaffold market.
Meanwhile, our negotiations with Uni-Span Australia are
continuing, and remain subject to satisfactory terms and
due diligence.
Finally, I would like to acknowledge the contribution of
the executive team and thank all of our people for their
hard work during the year.
Steven Boland
CEO
6 ACROW ANNUAL REPORT 2019
ACROW ANNUAL REPORT 2019 7
B U S I N E S S
S U M M A R Y
Acrow is a leading provider
of engineered formwork
solutions and scaffold hire
in Australia.
Acrow Formwork
›› Provides a range of wall forming panel, soffit forming
Natform
›› Leading designer and hirer of screen systems for the
and conventional systems for large and small
construction equipment
›› Dry hires formwork equipment and provides the
product that forms the temporary mould to support
concrete structures during construction
›› Dry hires falsework equipment used to support
suspended horizontal structures during construction
›› Products are manufactured overseas and imported
›› Generates revenue through dry hire agreements that
are typically based on a price per tonne per week, or
price per cubic metre per week
FY19 Commentary
›› Continued growth focus on the buoyant east coast
civil infrastructure market
›› Supported by a growing project pipeline
›› Revenue growth driven by deployment of new hire
equipment, purchased under the company’s capital
investment program.
›› Growth trajectory driven by higher margins
›› Customer contracts in all states
FY20 Strategy
›› Continued east coast infrastructure market activity
›› Expansion from Queensland into opportunities in
NSW and Victoria
›› Further capital expenditure to support new civil and
commercial opportunities
construction industry
›› Provides screen-based formwork systems which
support the construction of commercial and
residential high-rise buildings and civil infrastructure
›› Dry-hire model offering highly-engineered solutions
for a wide range of customers
›› Engineering capabilities provide a key
competitive advantage
FY19 Commentary
›› Traditionally concentrated in NSW, ACT and
Queensland markets
›› Entered new markets in Melbourne and Adelaide
›› Focus on commercial high-rise construction industry
›› Equipment is targeted to be a superior pre-packaged
solution to competitors
›› Impacted by project delays in traditional markets
›› Integrated sales team enabling cross-selling
opportunities
FY20 Strategy
›› Ongoing pipeline of opportunities in commercial
high-rise industry
›› Continued focus on cross-selling opportunities and
expansion into new geographic markets
›› Extend competitive advantage through combining
engineering teams
8 ACROW ANNUAL REPORT 2019
Acrow Scaffolding
›› Provides access solutions to builders and building
›› Focus on dry hire rather than wet hire continues to
contractors when working at heights
drive margins
›› Generates revenue through both dry hire and wet
›› Driven principally by the demand for
hire agreements
building construction
›› Dry hire agreements are typically based on a price
per tonne per week, over a minimum of 4 weeks
›› Wet hire agreements are typically based on
a contract sum encompassing equipment
hire, transport, labour provisions and supply
of consumables
›› NSW and Victoria-based residential operations
focused on providing scaffold equipment, labour and
cartage services to the detached housing and small
residential markets
›› Solutions offered on both a wet and dry basis
FY19 Commentary
›› Scaffold products Cuplok, SuperCuplok, and Surelok
brands and modular multi-purpose scaffolding
›› Provided at all branches except Perth
›› In the NSW residential market, no formal contracts
are in place with major builders, however there are
long term relationships with key customers
›› Recent signs of market stabilising
FY20 Strategy
›› Continue to increase market share
›› Opportunity to cross sell formwork, scaffold
and screens
›› Opportunity to enter industrial scaffold market
ACROW ANNUAL REPORT 2019 9
T H E A C R O W D I F F E R E N C E
Acrow and Natform collaborated to design, engineer and dry hire a
formwork solution for the Esque Apartments at 649 Chapel Street,
South Yarra, Melbourne.
Commissioned by Mitraland Australia, the builder was
Valeo Constructions and the structures contract given to
Markscon, a leading concrete structure contractor.
Acrow delivered and supplied an engineered solution to
meet Markscon’s specific requirements, including complex
work that was critical to the success of the project.
Acrow supplied formwork frames and accessories and
Natform provided a bespoke screen solution built to match
the profile of the building. The businesses designed,
engineered and dry-hired a formwork solution for soffit
and back-propping support combined with a screens
solution for edge and fall protection. Involvement included
fully engineered drawings, engineering certifications, site
inspections, project management and on-site supervision.
The project used Acrow frames, Super Cuplock and
Aluminium GASS Props products,14 Natform bespoke
screens, and hydraulic packs.
“We know Acrow, we have worked with them before and
the relationship is good. It’s important we get the service
in the gear supplied at competitive prices, and it helps
that we are familiar with their formwork systems. The
challenge for us was that there was very little laydown
area on site which meant the coordination of deliveries
to and from the site was critical. That was achieved
with Acrow.
“We had been let down by previous supplier, but Acrow
stepped right in with Natform offering a bespoke screen
solution, turning the engineering and design around fully
costed in three weeks. With the screen anchors cast
into the slabs the installation couldn’t have gone better.
There was a sense of urgency with project engineer on
site to assist during screen installation and revisiting to
assist in the hydraulic jumping of the screens.
“I WOULD DEFINITELY BE HAPPY TO RECOMMEND AND
WORK WITH ACROW AND NATFORM ON ANOTHER
PROJECT.” – JOSEPH MCCANN, MARKSCON
10 ACROW ANNUAL REPORT 2019
S A F E T Y
The safety of our people remains our top priority. We
have a multi-tiered process that helps ensure that all our
employees and subcontractors are trained in and follow
industry-leading safe work practices.
During the year we established several key initiatives to
strengthen our safety culture, including the formation of
a National Work Health and Safety Committee which has
taken significant steps to target management focus on
the company’s safety agenda.
This has resulted in improved safety performance and
management and our Lost Time Injury Frequency
Rate (LTIFR) for the financial year was 6.0, a significant
reduction on a LTIFR of 19.7 for FY18 and of 15.9
for FY17.
Compared to the industries that we serve this continues
to be better than the industry average. It was pleasing
that there were no serious injuries and the company’s
serious indecent frequency rate (SIFR) of 0 was below
the construction industry SIFR of 8.11.
Several factors contributed to this improvement,
including:
›› Safety leadership activities improving post-incident
awareness and appointment of medical
support providers
›› A comprehensive and collaborative review of safe
operating procedures
›› Heightened reporting requirements and
auditing programs.
We are continuing our focus on the revision of transport
and storage guidelines which detail loading requirements
to reflect the increased diversity of products resulting
from acquisitions. In addition, we are improving our
quality systems to ensure that all Acrow equipment sent
to construction sites are fit and safe for purpose.
1 Safe Work Australia 2016/17.
ACROW ANNUAL REPORT 2019 11
B O A R D O F D I R E C T O R S &
K E Y M A N A G E M E N T T E A M
Mr Peter Lancken
Non-Executive Chairman
Peter has a career spanning
over 25 years in a range
of executive and director
roles in equipment hire,
industrial, and real estate
companies. He was formerly
the Managing Director and
Non-Executive Chairman of Kennards Hire Pty Limited.
Peter managed an era of growth spanning two decades
at Kennards, with sales now exceeding $380 million
from a network of over 170╩locations, and remains on
the Board as a Non-Executive Director.
Peter is also the Non-Executive Chairman of
Crimestoppers NSW and was Non-Executive Chairman
of Propertylink Group (ASX:PLG) prior to its acquisition in
April 2019.
Peter holds a Bachelor of Engineering (Civil) degree from
the University of New South Wales, is a Fellow of the
Institute of Engineers Australia and is a member of the
Australian Institute of Company Directors.
Mr Steven Boland
Executive Director
Steven joined Acrow in 2013
and since then has served
as its Chief Executive Officer.
Steven was previously the
CEO of the Melbourne
Rebels Rugby Club and was
responsible for the start-up
phase of a Super Rugby professional sporting team.
Previously, from 2004 to 2010, Steven served as the
Global Executive Director (Recycling) of Visy Industries,
and from 2002 to 2004, Steven was the Executive
Director (Commercial Waste) of Veolia Environment UK.
Mr Gregg Taylor
Non-Executive Director
Gregg has 20 years of
international business
experience in financial
markets, technology, sports
administration, media and
retail. Gregg is an Executive
Director of Bombora
Investment Management, a boutique investment house.
Gregg has founded and managed multiple global
operating businesses in sports, retail and media sectors.
Gregg has a Bachelor of Commerce Degree from
University of Wollongong and was a CFA Charter holder.
Mr Joshua May
Non-Executive Director
Joshua is a Chartered
Accountant and transaction
advisory specialist, with
over 20 years’ experience
in Corporate Finance, and
is a currently an Executive
Director at Bombora
Investment Management. Joshua has broad corporate
advisory experience gained over many years and
through various economic cycles. Transaction themes
have included M&A, private equity, entrepreneurial clients
seeking growth capital, succession planning for large
established private businesses, and sale of non-core
assets for large corporations. His industry experience
is broad across healthcare, construction related
products and services, mining, food, consumer and
retail industries.
Joshua has a Bachelor of Arts Degree (Accountancy)
from the University of South Australia and is a member
of the Australian Institute of Chartered Accountants.
12 ACROW ANNUAL REPORT 2019
Mrs Margaret
Prokop
Mr Hill has a Bachelor of Arts Degree (Accountancy)
from the University of South Australia and is a member
of the Australian Institute of Chartered Accountants.
KEY MANAGEMENT TEAM
Steven Boland
Chief Executive Officer
As above.
Andrew Crowther
Chief Financial Officer
Andrew joined Acrow in July 2019. He has more than
20 years’ experience having held senior financial and
chief financial officer roles at Thorn Group, SFG Ltd,
BT Financial Group and Colonial First State. He brings
a breadth of industry and property infrastructure finance
expertise to Acrow, including work in the property funds
and asset management, superannuation and financial
advice, consumer finance and leasing and business
finance industries.
Robert Caporella
General Manager National Formwork and
State Manager╩(VIC)
Robert has been working with Acrow since 1994
and is currently the National Formwork Manager and
General Manager, overseeing operations in Victoria and
South╩Australia.
Colin Fisher
General Manager Operations and State
Manager (TAS)
Colin is the National Operations Manager at Acrow,
having previously worked at Honeywell Business
Solutions as a General Manager.
Prior to Honeywell Business Solutions he worked at Visy
Industries as the General Manager, and as the National
Operations Manager at Onyx UK Limited.
Executive Director
Previous proprietor of
Natform businesses.
Margaret has a Masters in
Civil Engineering and has
successfully led Natform for
30 years. Natform is now the leading designer and hirer
of screen systems for the construction industry.
Mr David Moffat
Non-Executive Director
Appointed 19 September 2019
David has a career
spanning over 35 years in
the construction industry,
most recently with Lipman
for 29 years, prior to his
resignation in December 2018. From 2013-2018,
David was the Managing Director of the Lipman Group
of Companies.
In 2019 David founded Cornerstone (NSW) Pty
Ltd, whereas Managing Director, he provides
strategic business planning and advisory services to
Subcontractors, Head Contractors and Clients within
the construction industry.
David brings with him key competencies in Leadership,
Construction Management, Innovation and Safety. He
holds a Bachelor of Engineering Degree (Civil) from The
University of Technology, Sydney (“UTS”).
Mr Michael Hill
Non-Executive Director
Resigned 19 September 2019
Mike is a former partner
of Ernst & Young and
Investment Director with
the private equity firm
Ironbridge from 2004 to
2014. He has also served on boards across numerous
industries including technology, software services, retail,
healthcare, media, waste services, tourism, hospitality
and╩manufacturing.
Mike is a founder and Managing Director of the Bombora
Special Investment Growth Fund and is currently the
Non-Executive Chairman of AHAlife Holdings Limited,
Rhipe Limited and Janison Education Group Limited.
ACROW ANNUAL REPORT 2019 13
K E Y M A N A G E M E N T T E A M
( C O N T I N U E D )
Bill Goodall
Matthew Caporella
National Manager – Engineering Operations
Matthew joined Acrow in 2012 and is currently the
National Manager – Engineering Operations.
Mr Caporella holds a Bachelor of Engineering (Civil)
and Bachelor of Business (Management) from
the Queensland University of Technology. He is a
Chartered Professional Engineer with the Institute of
Engineers Australia and a Registered Professional
Engineer Queensland.
Joe Cerritelli
General Manager, Human Resources
& Safety
Joe joined Acrow in 2014 and is currently the General
Manager for Health and Safety.
His prior roles include National Safety and Compliance
Manager at G4S Australia, and Team Leader in Industrial
Relations and Safety at Catholic Education Commission
of╩Victoria.
Jan Pienaar
General Manager, QLD
Jan joined Acrow in December 2018 as General
Manager, Queensland. He has more than 10 years’
management experience and was previously National
Sales manager at Doka Formwork Australia, and before
that as General Manager (Formwork) at Waco Kwikform.
Jan holds a BComm Hons degree from the University of
Stellenbosch, South Africa.
General Manager (NSW)
Bill joined Acrow in 2016 and is currently the General
Manager in our NSW branch having recently been
our State Manager South Australia. Bill has worked in
management roles within the Formwork and Scaffolding
industry over the last 12 years, successfully completing
projects in SA, NT and WT.
Conan Godrich
General Manager (WA)
Conan brings a decade of experience with Acrow and is
currently the General Manager for WA operations.
His prior roles include Account Manager (Gnangara
Operations) at Rinker Australia, and Sales and Customer
Service at OneSteel Reinforcing.
Mr Godrich holds a Bachelor of Commerce from
Murdoch University and a Degree in Project
Management from Curtin University of Technology.
Nicolas Dunn
National General Manager,
Business Development
Nicolas joined Acrow in 2019. He has more than
20 years’ sales management experience within
the construction industry. His previous roles
include Managing Director for PERI Asia, based in
Singapore, and National Sales Manager for PERI
Australia for over 10 years. Nicolas has a Diploma in
Business Management.
Jeffery Stewart
National Sales & Marketing Manager
Jeffery joined Acrow in 2011 and is currently the National
Sales and Marketing Manager.
His prior roles include Regional Manager and director
for Atlas Steels in New Zealand, National Market
Development Manager at Atlas Specialty Metals, and
Market Development Manager for Smorgon Steels
Metals╩Distribution.
14 ACROW ANNUAL REPORT 2019
F I N A N C I A L R E P O R T
Auditor’s Independence Declaration
Auditor’s Independence Declaration
16 Directors’ Report
X
Directors’ Report
XX
22
23 Remuneration Report – Audited
XX Remuneration Report – Audit
43 Financial Statements
XX Financial Statements
Notes to the Financial Statements
47
84 Directors’ Declaration
85
90 Shareholder Information
Independent Auditor’s Report
ACROW ANNUAL REPORT 2019 15
The directors present their report, together with the Annual Financial Report for Acrow Formwork and Construction
Services Limited (Acrow or the Company) and its controlled entities, for the year ended 30 June 2019, and the
Auditor’s Report thereon.
DIRECTORS
The directors of the Company at any time during or since the end of the financial year are:
Peter Lancken (Chairman): appointed 27 March 2018
Steven Boland (Chief Executive Officer): appointed 27 March 2018
Gregg Taylor: appointed 11 August 2017
Joshua May: appointed 27 March 2018
Margaret Prokop: appointed 31 August 2018
David Moffat: appointed 19 September 2019
Michael Hill: appointed 24 December 2015, resigned 19 September 2019
Information on the current directors is presented in the Annual Report on pages 12 and 13. This information includes
the qualifications, experience and special responsibilities of each director.
DIRECTORS’ MEETINGS
The number of directors’ meetings and number of meetings attended by each of the directors of the Company during
the financial year 2019 are:
Board of Directors
Remuneration
Nomination Committee
Audit and Risk
Committee
No. held
No.
attended
No. held
No.
attended
No. held
No.
attended
Peter Lancken (Chairman)
Steven Boland (Chief
Executive Officer)
Gregg Taylor
Joshua May
Margaret Prokop
David Moffat
Michael Hill
11
11
11
11
9
–
11
11
11
11
11
8
–
8
1
1
1
1
–
–
1
1
1
0
1
–
–
1
3
3
3
3
–
–
3
2
3
3
2
–
–
3
Mr Michael Hill was the Chair of the Remuneration and Nomination Committee up to his date of resignation on
19th September 2019 being replaced on that day by Mr Gregg Taylor. Mr Joshua May is the Chairman of the Audit
and Risk Committee.
COMPANY SECRETARY
Mr Lee Tamplin of Automic Group is the Company Secretary, he has over 20 years’ experience in financial services
in both Australia and the UK. He is Company Secretary for a number of ASX listed, NSX listed and proprietary
companies. Lee holds BA (Hons) Financial Services, Bournemouth University United Kingdom, Diploma of Financial
Planning, Graduate of the Australian Institute of Company Directors, Member of the Governance Institute of Australia
and is a Member of the Australian Institute of Company Directors.
16 ACROW ANNUAL REPORT 2019
Directors’ Reportfor the year ended 30 June 2019 PRINCIPAL ACTIVITIES
Acrow operates in the Australian construction services industry, hiring formwork, falsework and scaffolding equipment
and undertaking sales of formwork and scaffolding related consumables.
The Formwork operation involves the supply of the temporary mould that supports concrete structures in their
construction. Since the acquisition of the Natform companies, a provider of screen-based formwork systems, the
formwork operation now includes all Natform’s activities.
The Scaffolding operation supplies scaffolding equipment and access solutions to builders and building contractors
when working at heights.
OPERATING AND FINANCIAL REVIEW
The Acrow business continued to perform strongly for the 12 months to 30 June 2019, with the inclusion of
10 months of the acquired Natform business.
The business continued to re-base from the highly fragmented and price sensitive residential scaffold market towards
value added, highly engineered civil formwork solutions market.
Financial performance:
The company achieved a net profit after tax of $4.9m being lower than the 2018 profit of $10.5m. The comparative
year included only 3 months profit and included the profit of a one-off non-cash significant item being a bargain
purchase gain of $10.8m.
On an underlying basis (refer table below), assuming a full comparative 12 months results of Acrow, the key highlights
for the year included:
›› Sales revenue of $69m, up 6% on the prior year reflecting solid growth in the Formwork business and the
contribution from the Natform acquisition.
›› Underlying Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) of $11.6m, was up 9% and
EBITDA margin to revenue was consistent with previous year.
›› Underlying net profit after tax of $7.5m after adding back share-based payments and significant one off items of
acquisition and integration costs.
Basic earnings per share was 2.88cps statutory or 4.36cps on an underlying net profit basis.
A final dividend of 1.0cps (unfranked) was declared, up from a maiden final dividend of 0.5cps in FY18. Full 2019
dividends paid and declared was 2.0cps.
Financial Performance Table
Statutory Net Profit after tax
Add back share-based payments
Add back acquisition and integration costs
Add back refinancing and break costs*
Underlying net profit before tax
Add back depreciation
Add back interest*
Add back tax expense
EBITDA
$’000
4,948
1,420
897
241
7,506
3,262
723
59
11,550
*
*Total of $964k being net financing costs. Refer note 7 in the financial statements.
ACROW ANNUAL REPORT 2019 17
Financial position:
Net debt increased from a $4.9m cash position in 2018 to a $3.6m net debt position, being cash $3.3m less debt of
$6.9m. This was predominantly due to both the acquisition of Natform which included an upfront $7m debt funded
payment and significant capital expenditure during the year.
Property plant and equipment increased from $31.7m to $47.0m due to the acquisition of Natform ($9.5m) and large
capital expenditure (9.6m) offset by depreciation.
The Group entered into a $15.0m secured loan agreement in October 2018 for a period of 4 years. The facility
consists of four sub-facilities; a $7.0m amortising business loan paying variable rates (balance of $6.0m at
30 June 2019) with a monthly principal repayment obligation of $146k; a $5.0m 3-year revolving equipment finance
facility (balance of $1.0m at 30 June 2019); and a $3.0m flexible working capital / overdraft facility inclusive of bank
guarantee commitment of $592k and undrawn balance of $2.4m.
The loans are secured by interlocking guarantees across all Group companies. Interest on the business loan facilities
is variable and charged at the prevailing market rates.
The balance sheet remains strong with net gearing, being cash less bank debt at 8%.
Acquisition:
On 31 August 2018 Acrow acquired all the shares of Natform, a provider of screen-based formwork systems which
supports the construction of commercial and residential high-rise buildings and civil infrastructure in the NSW, ACT
and QLD markets. The acquisition was financed through the issue of 10,000,000 shares in Acrow Formwork and
Construction Services Limited, $7.1m of debt and existing cash reserves. Two additional instalments of $2.25m are
payable in September 2019 and 2020 and a further $2.0m payable if certain performance targets are met.
Further information on the operating and financial review is contained in the Chairman and Managing Director’s
Review on pages 2 to 6 of this Annual Report.
Operating results:
Refer to the Managing Directors Review on pages 4 to 6 of this Annual Report.
DIVIDENDS
A final unfranked dividend of $864,917 for the year ended 30 June 2018 was paid on 22 October 2018 at 0.5 cent
per share, with 380,348 new shares issued at 50.51 cents per share each as part of the Dividend Reinvestment
Plan (DRP).
An interim unfranked dividend of $1,741,130 for FY 2019 was paid on 12 April 2019 at 1.0 cent per share, with
893,491 new shares issued at 34.35 cents each also as part of the DRP.
Subsequent to balance date the Directors declared an unfranked dividend of 1.0 cent per share on 29 August 2019.
ENVIRONMENTAL REGULATIONS
Acrow’s operations are not subject to significant environmental regulations under the Commonwealth of Australia and
State/Territory legislation. The Board believes that Acrow has adequate systems in place to manage its environmental
responsibilities and is not aware of any breach of regulations.
The Group is also subject to environmental regulation in respect of its exploration activities in Ghana but not aware of
any breach of those regulations.
NON-AUDIT SERVICES
KPMG is the auditor of the listed entity. It has performed non-audit services in addition to its statutory duties for
the Acrow business. The Board has considered the non-audit services provided during the year by the auditor was
minimal, and the Board is satisfied that the provision of those non-audit services during the year by the auditor is
18 ACROW ANNUAL REPORT 2019
Directors’ Reportfor the year ended 30 June 2019 compatible with, and did not compromise, the auditor independence requirements of the Corporations Act 2001 for
the following reasons:
All non-audit services were subject to the corporate governance procedures adopted by the Group and have been
reviewed by the Audit Committee to ensure that they do not impact the integrity and objectivity of the auditor; and all
the non-audit services provided do not undermine the general principles relating to auditor independence as set out
in APES 110 Code of Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor’s
own work, acting in a management or decision-making capacity for the Group, acting as an advocate for the Group
or jointly sharing risks and rewards.
Details of the amounts paid to the auditor of the Group, KPMG and its related practices for audit and non-audit
services during the year are set out below:
Audit of the financial report – KPMG
– Stanton’s International
Taxation & advisory services – KPMG
Total amount paid or payable
2019
2018
318,198
172,838
–
107,368
57,468
27,598
425,566
257,904
SIGNIFICANT CHANGES TO THE STATE OF AFFAIRS
Acrow acquired 100% of Natform Pty Ltd and Natform (QLD) Pty Ltd on the 31 August 2018, a leading provider of
screen-based formwork systems which support the construction of commercial and residential high-rise buildings
and civil infrastructure in the NSW, ACT and QLD markets.
The consideration comprised of $7.1m in cash, 10,000,000 Acrow shares valued at $0.475 each, escrowed
for 12 months from 31 August 2018, two instalments of deferred consideration of $2.25m due and paid in
September 2019 and due on 7 September 2020 respectively, and contingent payments of $1.0m cash or an
equivalent number of shares based on a price of $0.40 per share should Natform EBITDA reach $4.5m between
1 September 2018 and 31 August 2019 and a further $1.0m cash or an equivalent number of shares based on
a price of $0.60 per share should EBITDA reach $5.0m between 1 September 2019 and 31 August 2020. As
the contingent consideration EBITDA target was not considered probable, no amounts have been included in
the consideration.
At reporting date, there is no new information about the facts and circumstances that existed on acquisition date.
Given the 12 months provisional period concluded on 31 August 2019, Acrow does not anticipate any changes to
the following amounts recognised for assets acquired and liabilities assumed at the date of acquisition.
Valuation of the assets was $8.7m, resulting in goodwill of $7.3m predominately attributable to the key management
who have been operating Natform for thirty years, their team of experienced workforce and qualified engineers,
established customer base and competitive advantage in service offerings that do not meet the recognition criteria as
an intangible asset at the date of acquisition.
Acrow entered a new financing arrangement in October 2018, for details refer to the Financial Positions of this report
or note 18 of the Annual Report.
REMUNERATION REPORT
Information on Acrow’s remuneration framework and the outcomes for FY19 for the Group is included in the
Remuneration Report section of this Annual Report.
During FY19, 5,460,000 options have been issued under the Employee Share Option Scheme (approved at the
Annual General Meeting in November 2018) to selected employees.
No new share rights or options have been issued to Key Management Personnel or Non-executive directors during
the year.
ACROW ANNUAL REPORT 2019 19
SHARE RIGHTS
At the date of this report, Acrow had 23,210,001 share options and rights outstanding. The options and rights relate
to grants of deferred equity to directors and employees under the Long-Term Incentive Plan have a range of vesting
dates through to March 2024. 250,000 options have vested but as yet were not exercised. Refer to note 28 for
details of outstanding share options and rights.
The remaining options and rights are unvested as holders are yet to complete a two-year continuous service
condition due by March 2020.
Vesting of these rights is highly probable as for options market conditions have been met and for performance rights
the EBITDA hurdle of $11m has been achieved.
Balance of outstanding options:
Options
Loan funded options
Performance rights
Quantity
outstanding
8,360,001
2,475,000
12,375,000
Weighted
average
exercise
price
$0.40
$0.20
Nil
Expiry date
23 November 2019 to
4 March 2024
26 March 2023
26 March 2020
For details, refer to note 28 of this Annual Report.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS
For information about likely developments in the operations of the Company, refer to the Chairman and Managing
Director’s Review on pages 2 to 6 of this Annual Report.
INDEMNIFICATION OF OFFICERS
Under the terms of Article 35 of the Company’s Constitution, and to the extent permitted by law, the Company
has indemnified the directors of the Company named in this Directors’ report, the Company Secretaries, and other
persons concerned in or taking part in the management of Acrow. The indemnity applies when persons are acting in
their capacity as officers of the Company in respect of:
›› Liability to third parties (other than the Company or related bodies corporate), if the relevant officer has acted in
good faith; and
›› Costs and expenses of successfully defending legal proceedings in which relief under the Corporations Act 2001
is granted to the relevant officer.
The Group has not made any indemnity payment during the year.
INSURANCE PREMIUMS
During the financial year, the Company paid a premium of $85,776 for a Directors’ and Officers’ Liability Insurance
policy. The insurance provides cover for the directors named in this Directors’ report, the Company Secretary, and
officers and former directors and officers of the Company. The insurance also provides cover for present and former
directors and officers of other companies in the Group.
20 ACROW ANNUAL REPORT 2019
Directors’ Reportfor the year ended 30 June 2019 CORPORATE GOVERNANCE STATEMENT
This statement outlines the main corporate governance practices in place throughout the financial year and can be
referred to on the Acrow Group website https://www.acrow.com.au/wp-content/uploads/2018/10/ACF-2018-CGS-
FINAL.pdf
EVENTS SUBSEQUENT TO THE REPORTING DATE
Subsequent to balance date on 29 August 2019, the Directors declared an unfranked dividend of 1.0 cent per share.
Payment date is set for 15 November 2019, DRP participation is available for election.
The Group entered into a legal sale and lease-back transaction with a trade debtor owing $0.9m included in the
30 June 2019 trade receivables balance. This transaction resulted in the extinguishment of the unsecured trade
receivable balance and the realisation of a secured receivable.
Equipment loans of $1.8m were drawn down subsequent to balance date under the existing Equipment
Finance facility.
Share-based payments in the form of 1,200,000 options have been issued under the Employee Share Option Plan
issued to a Key Management Personnel subsequent to reporting date.
Other than the matters noted above, there has not arisen in the interval between the end of the financial year and the
date of this Directors’ report, any item, transaction or event of a material and unusual nature likely, in the opinion of
the directors of the Company, to affect significantly the operations of Acrow, the results of those operations, or the
state of affairs of Acrow in future financial years.
LEAD AUDITOR’S INDEPENDENCE DECLARATION
The lead auditor’s independence declaration is set out on page 22 and forms part of the Directors’ report for the
financial year ended 30 June 2019.
Dated at Sydney this 27 September 2019.
Signed in accordance with a resolution of the directors:
Peter Lancken
Chairman
Steven Boland
Director, Chief Executive Officer
ACROW ANNUAL REPORT 2019 21
22 ACROW ANNUAL REPORT 2019
Auditor’s Independence Declarationfor the year ended 30 June 2019 Liability limited by a scheme approved under Professional Standards Legislation.KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001 To the Directors of Acrow Formwork and Construction Services Limited I declare that, to the best of my knowledge and belief, in relation to the audit of Acrow Formwork and Construction Services Limited for the financial year ended 30 June 2019 there have been: i.no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and ii.no contraventions of any applicable code of professional conduct in relation to the audit. KPMG Marcus McArdle Partner Sydney 27 September 2019 Remuneration Report – Audited
for the year ended 30 June 2019
In addition, Acrow Formwork and Construction Services
Limited (Acrow, the Company) has decided to set out
such further information as shareholders may require for
them to obtain an accurate and complete understanding
of the Company’s approach to the remuneration of KMP.
KMP are the non-executive directors, the executive
directors and employees who have authority and
responsibility for planning, directing and controlling the
activities of the consolidated entity. On that basis, the
following roles/individuals are addressed in this report:
Non-executive Directors (NEDs)
›› Mr Peter Lancken, independent non-executive
Chairman since 27 March 2018,
›› Mr Michael Hill, independent non-executive
director and Chair of the Rem & Nom Committee,
since 27 March 2018 through to resignation on
19 September 2019,
›› Mr Josh May, independent non-executive
director since 27 March 2018, Chair of the Audit
& Risk Committee,
›› Mr Gregg Taylor, independent non-executive director
since 11 August 2017, Chair of the Rem & Nom
Committee since 19 September 2019, and
›› Mr David Moffat, independent non-executive director
since 19 September 2019.
Senior Executives Classified as
KMP During the Reporting Period
›› Mr Steven Boland, Chief Executive Officer (CEO) &
Executive Director since 27 March 2018,
›› Ms Margaret Prokop, Executive Director since
31 August 2018,
›› Mr David Williams, Chief Financial Officer (CFO) since
27 March 2018, retired 29 June 2019, and
›› Mr Andrew Crowther, Chief Financial Officer (CFO)
since 8 July 2019,
1 LETTER FROM
THE CHAIR OF THE
REMUNERATION
COMMITTEE
I am delighted to bring you this Remuneration Report
after the first anniversary of the listing of the Acrow
Group. In preparing this report we have sought to
assure shareholders that their Board is applying a high
standard of governance to both remuneration and
disclosure practices.
The development of remuneration policies and practices
that meet the needs of the Company and expectations
of stakeholders as circumstances evolve is challenging.
To that end the Remuneration Committee will continue
to review and seek feedback on remuneration practices
from a range of sources including independent advisors,
shareholders and other stakeholders. We invite our
shareholders to write to the Remuneration Committee to
provide feedback in this regard.
During the FY2019 reporting period, the Remuneration
Committee has focussed on the performance of
executives in delivering expected outcomes. We
have also engaged external advisors to support the
committee to identify those areas of remuneration
policies, procedures and practices that will require
ongoing change and improvement.
Gregg Taylor
Independent Non-Executive Director
Chair of the Remuneration Committee
2 SCOPE OF THE
REMUNERATION REPORT
AND INDIVIDUALS CLASSED
AS KMP
The Remuneration Report sets out the prescribed key
management personnel (KMP) remuneration information
and details in accordance with section 300A of the
Corporations Act and associated regulations, including
policies, procedures, governance, and factual practices
as required.
ACROW ANNUAL REPORT 2019 23
3 CONTEXT OF KMP
REMUNERATION FOR
FY2019 AND INTO FY20 –
UNAUDITED
3.1 Relevant Context for
Remuneration Governance
during FY2019
The KMP remuneration structures that appear in this
report are largely those that prevailed over FY2019, as is
required by regulation, but also address expectations for
FY20, to some extent.
The Board has undertaken to further develop
remuneration governance, policies and practices applied
to KMP of the Company, as well as other employees as
the business matures. The following outlines important
context for the decisions that were made in relation to
remuneration for/during FY2019, the outcomes of which
are presented in this report.
›› The Company acquired Natform Pty Ltd and Natform
(QLD) Pty Ltd on 31 August 2018. 10,000,000
shares under 12-month escrow were issued to
Margaret Prokop (9,999,700 shares) and Richard
Prokop (300 shares) as consideration under the Sale
Purchase Agreement of Natform.
›› An Employee Share Option Plan (ESOP) was
approved at the Annual General Meeting held
on the 20 November 2018. A total of 5,460,000
options were issued to eligible participants since the
adoption. The purpose and intention of the ESOP is
to give eligible participants the opportunity to share in
the future growth and profitability of the Company by
aligning their interests with that of shareholders, as
well as providing a greater incentive for participants
to have a greater involvement with, and to focus on
the longer term goals of the company.
›› The Company is focussed on delivering value for
shareholders by executing on strategy including:
– Seeking to replicate the Group’s Queensland civil
infrastructure success through other states;
– Select capital expenditure to acquire equipment
for deployment in civil infrastructure market;
– Actively pursuing strategically sensible
acquisitions to accelerate profitable growth.
4 OVERVIEW OF
ACROW’S REMUNERATION
GOVERNANCE FRAMEWORK
& STRATEGY
4.1 Transparency and Engagement
The Company seeks input regarding the governance
of KMP remuneration from a wide range of
sources, including:
›› Shareholders and other stakeholders,
›› Remuneration Committee Members,
›› External remuneration consultants (ERCs),
›› Other experts and professionals such as tax advisors
and lawyers, and
›› Company management to understand roles and
issues facing the Company.
The following outlines a summary of Acrow’s
Remuneration Framework, including policies and
practices to the extent developed. Shareholders
can access a number of the related documents
by visiting the investors portal on the Company
website www.acrow.com.au. It is recommended that
shareholders, proxy advisors and other interested parties
consider all the available information.
4.2 Remuneration Committee
Charter
The Remuneration Committee Charter (the Charter)
governs the operation of the Remuneration Committee
(the Committee). It sets out the Committee’s role and
responsibilities, composition, structure and membership
requirements. The purpose of the Committee is to assist
the Board by:
›› Establishing appropriate processes regarding the
review of the performance of directors, committees
and the Board, and implementing them,
›› Reviewing and making recommendations to the
Board in relation to the remuneration packages
of Senior Executives and non-executive directors,
equity-based incentive plans and other employee
benefit programs,
›› Developing policies, procedures and practices that
will allow the Company to attract, retain and motivate
high calibre executives, and
24 ACROW ANNUAL REPORT 2019
Remuneration Report – Auditedfor the year ended 30 June 2019 ›› Ensuring a framework for a clear relationship
between key executive performance and
remuneration.
The Committee has the authority to obtain outside
legal or other professional advice or assistance on any
matters within its terms of reference.
Acrow recognises the importance of ensuring that any
recommendations given to the Committee provided by
remuneration consultants are provided independently
of those to whom the recommendations relate.
Further information about the parameters under which
external remuneration consultants are engaged is
provided below.
4.3 Senior Executive
Remuneration Policy
The Company’s senior executive remuneration policy
may be summarised as follows:
›› Remuneration for senior executives should be
composed of:
– Fixed Package inclusive of superannuation,
allowances, benefits and any applicable fringe
benefits tax (FBT),
– Variable remuneration which is at-risk, creating
opportunity for the Company to pay less than
the planned remuneration when performance
expectations have not been met, and which
is partly an incentive to reward executives for
meeting or exceeding expectations, including:
■ Short Term Incentive (STI) or Bonus
opportunity which provides a reward for
performance against annual objectives, and
■ Long Term Incentive (LTI) which provides an
equity-based reward for performance against
indicators of shareholder benefit or value
creation, over a multi-year period, and
–
In total the sum of the elements will constitute a
total remuneration package (TRP).
›› Both internal relativities and external market factors
should be considered,
›› Total remuneration packages (TRPs, which include
Fixed Package and incentives) should be structured
with reference to market practices, the practices of
competitors for talent, and the circumstances of the
Company at the time,
›› Remuneration will be managed within a range so as
to allow for the recognition of individual differences
such as the calibre of the incumbent and the
competency with which they fulfil a role (a range of
+/- 20% is specified in line with common market
practices), and
›› Termination benefits will generally be limited to the
default amount allowed for under the Corporations
Act (without shareholder approval).
Changes to remuneration resulting from annual reviews
are generally to be determined in relation to:
›› external benchmarking, and/or market movements,
›› whether current remuneration for the incumbent
is above or below the policy midpoint/benchmark
– those below the midpoint will tend to receive
higher increases,
›› the competence of the incumbent in fulfilling their role
which determines their positioning within the policy
range – higher calibre incumbents are intended to be
positioned higher in the range, and
›› any changes to internal relativities related to role/
organisation design that have occurred since the
previously review.
4.4 Non-executive Director
Remuneration Policy
The Non-executive Director remuneration policy applies
to non-executive directors (NEDs) of the Company
in their capacity as directors and as members of
committees, and may be summarised as follows:
›› Remuneration may be composed of:
– Board fees,
– Committee fees,
– Superannuation,
– Other benefits, and
– Equity (if appropriate at the time)
›› Remuneration will be managed within the aggregate
fee limit (AFL) or fee pool approved by shareholders
of the Company, noting that equity does not count
towards the AFL unless cash remuneration is
sacrificed for a grant of equity, refer section 9,
›› The Board may seek adjustment to the AFL in the
case of the appointment of additional NEDs, or
should the AFL become insufficient to attract or
retain the appropriate calibre of NEDs,
›› Remuneration should be reviewed annually,
ACROW ANNUAL REPORT 2019 25
›› Committee fees may be used to recognise additional
contributions to the work of the Board by members
of committees in circumstances that the workload of
the Board is not equally shared,
›› The Board Chair fee will be set as a multiple of the
fees payable to other NEDs, in recognition of the
additional workload associated with this role.
4.5 Short-Term Incentive Policy
The short-term incentive policy of the Company is
that an annual component of executive remuneration
should be at-risk and allow the Company to modulate
the cost of employment to align with individual and
Company performance while motivating value creation
for shareholders:
›› The STI should be paid in cash and deferral should
not apply since there is a separate component of
remuneration (the LTI) which is intended to address
long term outcomes,
›› Non-executive directors are excluded
from participation,
›› A termination of employment will trigger a forfeiture of
some or all of unearned STI entitlements depending
upon the circumstances of the termination. The
Board retains discretion to trigger or accelerate
payment or vesting of incentives provided the
limitation on termination benefits as outlined in the
Corporations Act are not breached.
›› Short term awards are linked to the main drivers
of value creation at the group, business unit or
individual level, as may be appropriate to the role and
subject to Board decision.
4.6 Long-Term Incentive Policy
The long-term incentive policy of the Company is that
a component of remuneration of executives should be
at-risk and linked to equity in the Company to ensure
that the interests of executives are aligned with those of
shareholders, and share risk with shareholders:
›› The LTI should be based on Performance Rights or
Options (which may include Loan Funded Shares
arrangements) that produce a benefit for Participants
when performance objectives are met (which may
include increasing Share price),
›› The measurement period for long term incentives
should be at least two years,
›› A termination of employment will trigger a forfeiture
of some or all of the long-term incentives held by an
executive in respect of which performance conditions
and hurdles have not yet been met, depending upon
the circumstances of the termination. The Board
retains discretion to trigger or accelerate payment
or vesting of incentives provided the limitation on
termination benefits as outlined in the Corporations
Act are not breached.
4.7 Securities Trading Policy
The Company’s Securities Trading Policy applies to
Directors and executives classified as KMP (including
their relatives and associates), those employees working
closely with KMP, employees nominated by the Board,
or any other employee holding inside information. It sets
out the guidelines for dealing in any type of Company
Securities by persons covered by the policy, and the
requirement for the Company to be notified within 2
business days of any dealing. It also summarises the
law relating to insider trading which applies to everyone
at all times. Under the current policy, those covered by
the policy may not trade during a “blackout period” or
when they hold inside information (subject to exceptional
circumstances arrangements, see the policy on the
Company website). The following periods in a year are
“blackout periods” as defined in the policy:
›› 2 weeks prior to the release of the Company’s
quarterly results or half year results,
›› From the financial year balance date until 24 hours
following the release of the Company’s preliminary
full year results (Appendix 4E),
›› Within 24 hours of release of price sensitive
information to the market, and
›› another date as declared by the Board (“ad-hoc”).
4.8 Executive Remuneration
Engagement Policy and Procedure
The Company intends to adopt a set of executive
remuneration engagement policy and procedure to
manage the interactions between the Company and
ERCs, to ensure their independence and that the
Remuneration Committee will have clarity regarding
the extent of any interactions between management
and the ERC. This policy enables the Board to state
with confidence whether the advice received has been
independent, and why that view is held. The Policy
states that ERCs are to be approved and engaged by
the Board before any advice is received, and that such
advice may only be provided to a non-executive director.
26 ACROW ANNUAL REPORT 2019
Remuneration Report – Auditedfor the year ended 30 June 2019 Interactions between management and the ERC must be approved and will be overseen by the Remuneration
Committee when appropriate. Refer to section 13.
4.9 Variable Executive Remuneration – The Short-Term Incentive
Bonus Plan
Short Term Incentive Plan (STIP)
Aspect
Purpose
Measurement Period
Award Opportunities
Plan, Offers and Comments
The short-term incentive bonus plan’s purpose is to give effect to an element of
remuneration. This element of remuneration reinforce a performance focussed
culture, encourage teamwork and co-operation among executive team members
and maintains a stable executive team by helping retain key talent. These
objectives aim to be achieved by a simple plan that rewards participants for their
performance during a 12-month period.
The Company’s financial year (12 months). For the year ended 30 June 2019,
the measurement period was from 1 July 2018 to 30 June 2019 following the
acquisition of the Acrow business.
The CEO was offered an opportunity of up to 50% of Fixed Package which is
based on achieving a range of measurable KPI’s which are predominately based
on achieving EBITDA targets and strategic goals including debt reduction,
working capital improvement and meeting safety standards. For other KMP
Executives, their individual KPI’s are determined by the CEO in collaboration with
the Board.
Performance Assessments
and Award Outcomes
Performance assessments are undertaken by the CEO in relation to other Senior
Executives who then make recommendations to the Board, and by the Board in
relation to the CEO. The Board has discretion to vary the recommendations of
the CEO in determining final award outcomes.
Award Payment
Assessments and award determinations are performed following the end of
the Measurement Period and the auditing of Company accounts. Awards
will generally be paid in cash in the September following the end of the
Measurement Period. They are to be paid through payroll with PAYG tax
deducted as appropriate. Deferral has not been introduced due to the mix of
short term and long-term incentives being appropriately weighted.
Cessation of Employment
During a Measurement Period
In the event of cessation of employment due to dismissal for cause, all
entitlements in relation to the Measurement Period are forfeited.
In the event of cessation of employment due to resignation, all entitlements
in relation to the Measurement Period are forfeited, unless the termination is
classified as “good leaver” in the discretion of the Board, in which case the
Board may make an award at the time of the termination, or assess outcomes at
the normal time, following the termination.
Change of Control
In the event of a Change of Control including a takeover, the Board has
discretion regarding the treatment of short-term incentive bonus opportunities.
ACROW ANNUAL REPORT 2019 27
Short Term Incentive Plan (STIP)
Aspect
Plan, Offers and Comments
Fraud, Gross Misconduct etc.
If the Board forms the view that a Participant has committed fraud, defalcation
or gross misconduct in relation to the Company then all entitlements in relation
to the Measurement Period will be forfeited by that participant.
4.10 Variable Executive Remuneration – Long Term Incentive Plan (LTIP)
– Performance Rights, Options and Loan Funded Shares
Long Term Incentive Plan (LTIP)
Aspect
Purpose
Plan, Offers and Comments
The LTI Plan’s purpose is to provide an element of at-risk remuneration that
constitutes part of a market competitive total remuneration package and aims to
ensure that Senior Executives have commonly shared goals related to producing
relatively high returns for Shareholders. Other purposes of the LTI Plan are to
assist Senior Executives to become Shareholders, provide a component of
remuneration to enable the Company to compete effectively for the calibre of
talent required for it to be successful and to help retain employees, thereby
minimising turnover and stabilising the workforce such that in periods of poor
performance the cost is lesser (applies to non-market measures under AASB2).
Currently the Company operates a Rights, Options and Loan funded shares for
the purposes of the LTIP.
28 ACROW ANNUAL REPORT 2019
Remuneration Report – Auditedfor the year ended 30 June 2019 Long Term Incentive Plan (LTIP)
Aspect
Plan, Offers and Comments
Form of Equity
Plan Limit
The current plan includes the ability to grant the following Rights to Eligible
Employees which includes Directors and employees as nominated by the Board:
›› Share Awards,
›› Performance Rights, which are subject to performance related vesting
conditions, and which may be settled upon exercise by new issues or on
market purchase of ordinary fully paid Shares,
›› Options, which are subject to an exercise price, and which typically have
no intrinsic value when granted (exercise price is around the Share price),
creating an incentive to increase Share price and grow shareholder value.
The Options may be settled as “Cashless Exercise” in which case on
exercise of the Options the Company will only allot and issue or transfer
that number of Plan Shares to the Participant that are equal in value to the
difference between the Exercise Price otherwise payable in relation to the
Options and the then market value of the Plan Shares as at the time of
the exercise. Options may also be subject to performance related vesting
conditions, and
›› Share Purchase Loans, whereby the Company provides a non-recourse,
interest free loan to executives to acquire fully paid ordinary shares, with an
associated obligation to repay the lesser of the loan amount and the value
of the Shares at the end of the term of the loan. This functions effectively
the same as an Option, with no intrinsic value at the time the arrangement is
made, however participants hold Shares at an earlier stage.
No dividends accrue to unvested Rights or Options, and no voting rights are
attached, however dividends do accrue to vested Loan Funded Shares (along
with voting entitlements) which must be put towards repayment of the Loan if
any amount is outstanding.
Unless prior Shareholder Approval is obtained, the number of Awards which may
be granted under this Plan (assuming all Options and Performance Rights were
exercised) must not at any time exceed in aggregate 10% of the total Issued
Capital of the Company at the date of any proposed new Awards.
ACROW ANNUAL REPORT 2019 29
Long Term Incentive Plan (LTIP)
Aspect
LTI Value
Measurement Period
Plan, Offers and Comments
The Board retains discretion to determine the LTI to be offered each year,
subject to shareholder approval in relation to Directors, when the Rights are to
be settled in the form of a new issue of Company shares. The Board may also
seek shareholder approval for grants to Directors in other circumstances, at
its discretion.
FY2019 Invitations
Eligible employees were granted the following under the Employee Share
Option Plan:
›› Options: 5,460,000 units with a total fair value of $652,781
No other form of LTI are have been granted during the year.
FY2020 Invitations
No decision in regard to changing the LTIP or extending invitations to other staff
have been made for FY20.
The Measurement Period is determined by the Board as part of each grant. No
new LTI’s have been granted to executives and non-executives during FY2019.
However, they will be reviewed in respect of FY2020 and going forward, to
gauge alignment with broader market practices.
The Measurement Period applicable to each instrument was under review at the
time of writing of this report, with regards to market expectations in relation to
long term incentive performance periods.
Comments
Three-year Measurement Periods combined with annual grants will produce
overlapping cycles that will promote a focus on producing long term sustainable
performance/value improvement and mitigates the risk of manipulation and
short-termism (continuous improvement). Because of the timing of grants, the
life of the Right may be less than 3 years at times, however this does not impact
the Measurement Period over which performance is measured.
30 ACROW ANNUAL REPORT 2019
Remuneration Report – Auditedfor the year ended 30 June 2019 Long Term Incentive Plan (LTIP)
Aspect
Plan, Offers and Comments
Performance, Vesting and
Forfeiture Conditions
The Board has discretion to set Vesting, Performance and Forfeiture
Conditions and for each Invitation. When such conditions are not met, the
entitlement lapses.
FY2019 Invitations
Except as indicated below, a participant must remain employed by the Company
during the Measurement Period and the performance conditions must be
satisfied for LTI to vest.
The following conditions apply to the grants of FY2019 made to eligible
employees as noted above:
›› Options: vesting is subject to continued service over four years across four
equal tranches measured at end of each anniversary from the grant date,
and a hurdle of the 20-day volume weighted average price of the Company’s
shares trading on the ASX exceeding 50 cents at any time from grant date.
FY20 Invitations
As at the time of writing of this report, the vesting scales applied to the LTI for
future offers were subject to review for adjustment in light of the Company’s
current circumstances.
Comments
The performance hurdles were selected because they were linked to delivery of
the prospectus (Performance Rights) and wealth creation for shareholders (Loan
Funded Shares and Options), which are the long-term objectives that the Board
views as most critical for the KMP to focus on at this time.
Retesting
Retesting is not contemplated under the Plan Rules.
Amount Payable for Grants
The target value of LTI is included in assessments of remuneration benchmarking
and policy positioning. No amount is payable by participants for grants of
Performance Rights or Options. An Acquisition Price will apply in respect of
grants of Loan Funded Shares (with an accompanying loan) and may also apply
to grants of Share Awards, which may or may not have Vesting Conditions. Any
loan must be repaid prior to the end of the Loan Term, up to the Market Value of
the Loan Funded Shares (non-recourse).
For the FY2018 grant, Loan Funded Shares were offered at a price of 20c each,
being the share price at the time of the grant calculation, and a loan for this
amount was provided to the Participant for this amount in respect of each Loan
Funded Shares acquired.
No new Loan Funded Shares were granted in FY2019.
ACROW ANNUAL REPORT 2019 31
Long Term Incentive Plan (LTIP)
Aspect
Plan, Offers and Comments
Exercise of Grants
Disposal Restrictions etc.
Cessation of Employment
Participants will be required to submit an Exercise Notice in respect of Options,
in order to convert them to Shares, as well as the payment of the Exercise Price
in respect of each Option exercised. For the FY2019 grants, the exercise price
is 50c.
Performance Rights will be automatically exercised on the date of the Vesting
Notification which will be issued if the performance conditions and hurdles are
met. No amount is payable by KMP on the exercise of Performance Rights.
Options and/or Performance Rights granted under this Plan may not be
assigned, transferred, encumbered with a Security Interest in or over them,
or otherwise disposed of by a Participant, unless the consent of the Board is
obtained, or due to the force of law in the case of the death of a Participant. The
Board has discretion to determine the disposal restrictions attaching to Share
Awards, Loan Funded Shares or Plan Shares (resulting from vesting and exercise
of grants) as part of the Invitation terms.
In the event of cessation of employment in the circumstances of a “Bad Leaver”
(resignation or termination for cause), all unvested entitlements will be forfeited.
In other circumstances, the treatment of unvested awards will be dealt with as
determined by the Board.
In the case of outstanding loans related to Loan Funded Shares, a Bad Leaver
must repay the loan by the date of the cessation of employment. In other
cases of termination, the Participant will have six months from the date of the
termination, to repay the loan. If these requirements are not satisfied the Loan
Shares are surrendered.
Change of Control of the
Company (CoC)
If in the opinion of the Board a change of control event has occurred, or is likely
to occur;
a) Performance Rights granted will vest to the extent that the performance
period has elapsed, and to the extent performance conditions have been
met (may involve a pro-rata calculation), with the remainder lapsing,
b) Options may be subject to accelerated vesting in the sole discretion of the
Board, and
c) Share Awards or Loan Funded Shares which do not vest will automatically
be surrendered by the Participant, and any that do not lapse, and which are
subject to an outstanding loan will be subject to the requirement of the loan
being repaid by the date of the CoC.
Fraudulent or Dishonest
Actions
If the Board takes the view that a Participant has acted fraudulently, dishonestly,
or wilfully breaches their duties to the group, the Board has discretion to
determine that unvested or unexercised awards are forfeited.
32 ACROW ANNUAL REPORT 2019
Remuneration Report – Auditedfor the year ended 30 June 2019 5 PROFORMA EXECUTIVE REMUNERATION FOR FY2019
(NON-STATUTORY DISCLOSURE) – UNAUDITED
The disclosures required under the Corporations Act (including regulations) and prepared in accordance with
applicable accounting standards, do not provide shareholders with an understanding of the intended remuneration
in a given year. For example, the LTI disclosed is not reflective of the remuneration opportunity for the year being
reported on, due to the requirements of AASB2. Therefore, the following table is provided to ensure that shareholders
have an accurate understanding of the Board’s intention regarding the remuneration offered to executives during
FY2019. The values presented reflect the remuneration for a full year i.e. ignoring any part-year reporting impact.
Fixed
package
including
super
Target STI
LTI
opportunity
Total value
of package
Position
Executive Director and
Chief Executive Officer
Director
Chief Financial Officer
(retired 29 June 2019)
Incumbent
Steven Boland
$500,482
$250,000
Margaret Prokop
David Williams
$220,531
$315,662
–
$57,000
–
–
–
$750,482
$220,531
$372,662
ACROW ANNUAL REPORT 2019 33
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ACROW ANNUAL REPORT 2019 35
During the reporting period, grants of equity were made in relation to the LTI scheme as part of remuneration for
FY2019 but did not vest due to the presence of the long-term measurement period and vesting conditions that are
yet to be completed/assessed. As well as performance-based Rights, Options and Loan Funded Shares were made,
and details are given elsewhere in this report in relation to changes in equity interests such as these.
7.3 Links Between Company Strategy and Remuneration
The Company intends to attract the superior talent required to successfully implement the Company’s strategies at a
reasonable and appropriately variable cost by:
›› positioning Fixed Packages (the fixed element) around relevant market data benchmarks when they
are undertaken,
›› supplementing the Fixed Package with at-risk remuneration and incentives that motivate executive focus on:
– short to mid-term objectives linked to the strategy via annual performance assessments, and
–
long term value creation for shareholders by linking a material component of remuneration to those factors
that shareholders have expressed should be the long-term focus of executives and the Board, such as share
price appreciation.
To the extent appropriate, the Company links strategic implementation and measures of success of the strategy,
directly to incentives in the way that performance is assessed.
36 ACROW ANNUAL REPORT 2019
Remuneration Report – Auditedfor the year ended 30 June 2019 r
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i
ACROW ANNUAL REPORT 2019 41
The treatment of incentives in the case of termination is addressed in separate sections of this report that give details
of incentive design.
On appointment to the Board, all non-executive directors enter into a service agreement with the Company in the
form of a letter of appointment. The letter summarises the Board policies and terms, including compensation relevant
to the office of the director. No contracts apply to the appointment of non-executive KMP.
12 OTHER REMUNERATION RELATED MATTERS
The following outlines other remuneration related matters that may be of interest to stakeholders, in the interests of
transparency and disclosure:
›› Other than in the case of grants of Loan Funded Shares, there were no loans to Directors or other KMP at any
time during the reporting period, and
›› Other transactions with KMP:
During the year, the Company engaged Bombora Group to provide advisory services on the acquisition of Natform
companies. Michael Hill, Joshua May and Gregg Taylor are on the board of Bombora as well as Acrow. The Company
paid Bombora $82,023 at commercial terms in 2019 (2018: $300,000).
The Company leases a number of industrial and commercial properties from Margaret Prokop’s personal companies
(MRP Property, MRP Property QLD & MRP Superannuation) through the Natform subsidiaries. Rental and related
out-going payments to these companies amounted to $665,087 (2018: nil).
13 EXTERNAL REMUNERATION CONSULTANT ADVICE
During the reporting period, the Board engaged an external remuneration consultant (ERC) to provide KMP
remuneration recommendations.
The Board has adopted a policy to govern any such future engagements, the details of which will be disclosed in
future Remuneration Reports should they arise.
42 ACROW ANNUAL REPORT 2019
Remuneration Report – Auditedfor the year ended 30 June 2019 In dollars
Revenue
Other income
Personnel expenses
Sub-contract labour costs
Inventory purchased, net of changes in finished goods
Property costs
Depreciation
Other expenses
Results from operating activities
Finance income
Finance cost
Net finance income/(expense)
Profit/(loss) before income tax
Income tax expense
Profit/(loss) for the year
Other comprehensive income
Items that may be reclassified to profit or loss
Foreign operations – foreign currency translation differences
Total comprehensive income for the year
Earnings per share
Basic earnings / (loss) per share (cents)
Diluted earnings / (loss) per share (cents)
Note
2019
2018
4 68,858,910
15,478,995
5
881,092
11,086,185
(22,589,627)
(6,398,775)
(18,005,200)
(3,575,132)
(9,120,271)
(2,214,423)
(4,203,516)
(803,862)
(3,261,936)
(445,754)
6
(6,587,715)
(2,402,890)
5,971,737 10,724,344
11,261
34,076
(975,131)
(247,762)
(963,870)
(213,686)
5,007,868 10,510,658
(59,153)
–
4,948,715
10,510,658
7
8
(256)
(39)
4,948,459
10,510,619
Notes
Cents
Cents
23
2.88
2.69
19.28
19.28
The above statement should be read in conjunction with the accompanying notes.
ACROW ANNUAL REPORT 2019 43
Consolidated Statement of Comprehensive Incomefor the year ended 30 June 2019 In dollars
Assets
Cash and cash equivalents
Other financial assets
Receivables
Inventories
Prepayments and other assets
Assets held for sale
Total current assets
Property, plant & equipment
Intangibles
Other financial assets
Total non-current assets
Total assets
Liabilities
Trade payables
Other payables
Employee benefits
Borrowings
Current tax liabilities
Liabilities held for sale
Total current liabilities
Other payables
Employee benefits
Borrowings
Provisions
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Share capital
Reserves
Retained earnings / (accumulated losses)
Total equity
Note
2019
2018
9
10
3,289,617
4,917,837
–
491,827
11 13,104,919 10,477,792
12
10
13
14
15
10
16
16
17
18
13
16
17
18
19
20
3,413,361
2,111,446
1,125,992
196,297
71,296
67,650
21,005,185 18,262,849
46,992,624 31,710,998
7,301,902
–
–
311,583
54,294,526 32,022,581
75,299,711 50,285,430
10,201,225
7,298,196
2,230,199
–
2,962,801
3,095,040
2,102,006
556,301
–
–
65,878
62,508
18,118,410 10,455,744
2,128,080
–
456,609
331,597
4,837,086
–
452,474
452,474
1,683,999
–
9,558,248
784,071
27,676,659 11,239,815
47,623,052 39,045,615
21
34,814,339 29,377,927
2,062,063
679,297
10,746,650
8,988,391
47,623,052 39,045,615
The above statement should be read in conjunction with the accompanying notes.
44 ACROW ANNUAL REPORT 2019
Consolidated Statement of Financial Positionas at 30 June 2019 In dollars
Balance at 1 July 2017
Share
based
payments
reserve
Foreign
currency
translation
reserve
Share
capital
Retained
earnings/
(accum-
ulated
losses)
Total equity
1,865,819
66,502
56,325
(1,522,268)
466,378
Total comprehensive income for the period
Profit/(loss) for the period
Other comprehensive income
–
–
Total comprehensive income
–
Transactions with owners of the Group
Shares issued net of costs
26,760,233
–
–
–
–
Equity settled share base
payments
Options exercised
–
558,384
751,875
(1,875)
–
10,510,658
10,510,658
(39)
(39)
–
–
–
–
(39)
10,510,658
10,510,619
–
–
–
26,760,233
558,384
750,000
Balance at 30 June 2018
29,377,927
623,011
56,286
8,988,391
39,045,615
Balance at 30 June 2018 as
previously reported
Adjustment from adoption of
AASB 9 net of tax*
29,377,927
623,011
56,286
8,988,391
39,045,615
–
–
–
(584,408)
(584,408)
623,011
56,286
8,403,983
38,461,207
Restated balance at
1 July 2018
Total comprehensive income for the period
29,377,927
Profit/(Loss) for the period
Other comprehensive income
–
–
Total comprehensive income
–
Transactions with owners of the Group
5,249,027
–
Shares issued, net of costs
Dividends paid to shareholders
Shares issued under Dividend
reinvestment plan (DRP)
Equity settled share
base payments
Options exercised
–
1,420,406
187,384
(37,384)
–
–
–
–
–
–
4,948,715
4,948,715
(256)
(256)
–
(256)
4,948,715
4,948,459
–
–
–
–
–
5,249,027
(2,107,019)
(2,107,019)
(499,028)
(499,028)
–
–
1,420,406
150,000
Balance at 30 June 2019
34,814,339
2,006,033
56,030
10,746,650
47,623,052
*
changes made subsequent to the publication to the FY2019 interim report, details in note 3(n)
The above statement should be read in conjunction with the accompanying notes.
ACROW ANNUAL REPORT 2019 45
Consolidated Statement of Changes in Equityfor the year ended 30 June 2019 In dollars
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Cash generated from operations
Acquisition and integration related costs
Finance income
Income tax paid
Net cash from operating activities
Cash flows from investing activities
Proceeds from disposal of property, plant and equipment
Purchase of property, plant and equipment
Consideration paid for controlled entities net of cash acquired*
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
Capital raising costs
Proceeds from exercise of options
Proceeds from borrowings
Repayment of borrowings
Dividends paid
Finance costs paid
Net cash from financing activities
Net increase/(decrease) in cash and cash equivalents
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents at 1 July
Cash and cash equivalents at 30 June
Note
2019
2018
73,815,600
17,341,219
(64,260,069) (12,402,054)
9,555,531
4,939,165
(896,610)
(968,185)
7
11,261
34,076
(114,729)
–
25
8,555,453
4,005,056
2,151,417
338,154
14
31
(9,784,502)
(1,086,382)
(6,729,487)
(9,576)
(14,362,572)
(757,804)
–
–
27,400,000
(1,902,991)
150,000
750,000
8,091,239
800,000
(1,152,147) (25,607,095)
21
(2,107,019)
–
(803,174)
(247,762)
4,178,899
1,192,152
(1,628,220)
4,439,764
–
(2,647)
4,917,837
480,720
3,289,617
4,917,837
* Reconciles to note 31 Acquisition of Natform companies, being cash consideration paid $7,105,341 less cash
acquired $375,854.
The above statement should be read in conjunction with the accompanying notes.
46 ACROW ANNUAL REPORT 2019
Consolidated Statement of Cash Flowfor the year ended 30 June 2019
Notes to the Financial Statements
for the year ended 30 June 2019
CONTENTS
1
Reporting Entity
Basis of Preparation
Significant Accounting Policies
Revenue
Other Income
Other Expenses
Finance Income and Finance Costs 57
30 Group Entities
31
Acquisition of Natform Pty Ltd and
Natform (Qld) Pty Ltd
32 Operating Segments
33 Parent Entity Disclosures
34 Deed of Cross Guarantee
35 Subsequent Events
76
76
78
80
81
83
2
3
4
5
6
7
8
9
Income Tax (Expense) / Benefit
Cash and Cash Equivalents
10 Prepayments and other Assets
11 Trade and Other Receivables
12
Inventories
48
48
48
56
56
56
57
57
58
58
59
13 Assets and Liabilities Held for Sale 59
14 Property, Plant and Equipment
15
Intangibles
16 Trade and Other Payables
17 Employee Benefits
18
Loans and Borrowings
19 Provisions
20
Deferred Tax Balances
21 Share Capital
22 Capital Management
23 Earnings Per Share
60
61
62
62
62
63
63
64
66
66
24 Capital and Leasing Commitments 67
25
Reconciliation of Cash Flows from
Operating Activities
26 Auditors’ Remuneration
27 Related Parties
28 Share Based Payments
29 Financial Risk Management
68
68
69
69
72
ACROW ANNUAL REPORT 2019 47
1. REPORTING ENTITY
Acrow Formwork and Construction Services Limited
(Acrow or the Group) is a limited company whose
shares are quoted on the Australian Securities Exchange
under the issuer code “ACF”. The consolidated financial
statements of Acrow for the year ended 30 June 2019
comprise of the Company and its controlled entities
(the Group). The Group is a for-profit entity and is
primarily involved in the hire and sale of formwork and
construction related services. Acrow’s Consolidated
Annual Financial Report for previous reporting periods
are available upon request from the Group’s registered
office at Level 5, 126 Phillip Street, SYDNEY, NSW,
AUSTRALIA, 2000 or at www.acrow.com.au.
2. BASIS OF PREPARATION
(a) Basis of accounting
The consolidated financial statements are general
purpose financial statements which have been prepared
in accordance with Australian Accounting Standards
(AASBs) adopted by the Australian Accounting
Standards Board (AASB) and the Corporations Act
2001. The consolidated financial statements comply
with International Financial Reporting Standards (IFRS)
adopted by the International Accounting Standards
Board (IASB). They were authorised for issue by the
Board of Directors on 27 September 2019. Details of the
Group’s accounting policies are included in note 3.
Acrow listed through its acquisition by the ASX-listed
NMG Corporation Limited which, following shareholder
approval and a successful $27.2 million capital raising,
changed its name to Acrow Formwork and Construction
Services Limited and relisted on 9 April 2018. Acrow
then acquired Acrow Holdings Pty Ltd and its wholly
owned subsidiary Acrow Formwork and Scaffolding Pty
Ltd on 27 March 2018, and hence the consolidated
annual financial statements for FY2018 include those
subsidiaries results from 1 April 2018 to 30 June 2018.
Similarly, following the acquisition of Natform
Pty Limited and Natform (QLD) Pty Limited on
31 August 2018, the consolidated annual financial
statements for FY2019 include those subsidiaries results
from 1 September 2018 to 30 June 2019.
(b) Basis of measurement
The financial statements have been prepared on the
historical cost basis except for derivatives that are
measured at fair value.
(c) Functional and presentation
currency
These financial statements are presented in Australian
dollars, which is the Group’s functional currency.
(d) Use of estimates and
judgements
The preparation of financial statements in conformity
with AASBs requires management to make judgements,
estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets,
liabilities, income and expenses. Actual results may differ
from these estimates.
Estimates and underlying assumptions are reviewed on
an ongoing basis. Revisions to accounting estimates
are recognised in the period in which the estimates are
revised and in any future periods affected.
Information about assumptions and estimation
uncertainties that have a significant risk of resulting in
a material adjustment within the next financial year are
included in:
›› note 20 – utilisation of tax losses
The accounting policies set out below have been applied
consistently to all periods presented in these financial
statements and have been applied consistently by
the Group.
3. SIGNIFICANT
ACCOUNTING POLICIES
(a) Basis of consolidation
Business combinations
(i)
Business combinations are accounted for using the
acquisition method as at the acquisition date, which
is the date on which control is transferred to the
Group. Control is the power to govern the financial and
operating policies of an entity so as to obtain benefits
from its activities. In assessing control, the Group takes
into consideration potential voting rights that currently
are exercisable.
The Group measures goodwill at the acquisition date as:
›› the fair value of the consideration transferred; plus
›› the recognised amount of any non-controlling
interests in the acquiree; plus if the business
combination is achieved in stages, the fair value of
the existing equity interest in the acquiree; less
48 ACROW ANNUAL REPORT 2019
Notes to the Financial Statementsfor the year ended 30 June 2019 ›› the net recognised amount (generally fair value) of the
identifiable assets acquired and liabilities assumed.
the Group becomes a party to the contractual provisions
of the instrument.
When the excess is negative, a bargain purchase gain is
recognised immediately in profit or loss.
The consideration transferred does not include amounts
related to the settlement of pre-existing relationships.
Such amounts are generally recognised in profit or loss.
Costs related to the acquisition, other than those
associated with the issue of debt or equity securities
that the Group incurs in connection with a business
combination are expensed as incurred.
Any contingent consideration payable is recognised
at fair value at the acquisition date. If the contingent
consideration is classified as equity, it is not remeasured
and settlement is accounted for within equity. Otherwise,
subsequent changes to the fair value of the contingent
consideration are recognised in profit or loss.
Subsidiaries
(ii)
Subsidiaries are entities controlled by the Group. The
financial statements of subsidiaries are included in the
consolidated financial statements from the date that
control commences until the date that control ceases.
(b) Foreign currency
Transactions in foreign currencies are translated to the
functional currency of the Group at exchange rates
at the dates of the transactions. Monetary assets
and liabilities denominated in foreign currencies at
the reporting date are retranslated to the functional
currency at the exchange rate at that date. The foreign
currency gain or loss on monetary items is the difference
between amortised cost in the functional currency at the
beginning of the period, adjusted for effective interest
and payments during the period, and the amortised cost
in foreign currency translated at the exchange rate at the
end of the year.
Foreign currency differences arising on retranslation are
recognised in profit or loss, except for qualifying cash
flow hedges to the extent the hedge is effective, which
are recognised in other comprehensive income.
(c) Financial instruments
(i) Non-derivative financial assets
The Group initially recognises receivables on the date
that they are originated. All other financial assets
(including assets designated at fair value through profit
or loss) are recognised initially on the trade date at which
The Group derecognises a financial asset when the
contractual rights to the cash flows from the asset
expire, or it transfers the rights to receive the contractual
cash flows on the financial asset in a transaction
in which substantially all the risks and rewards of
ownership of the financial asset are transferred. Any
interest in transferred financial assets that is created or
retained by the Group is recognised as a separate asset
or liability.
Financial assets and liabilities are offset and the net
amount presented in the statement of financial position
when, and only when, the Group has a legal right
to offset the amounts and intends to either to settle
on a net basis or to realise the asset and settle the
liability simultaneously.
The Group has the following non-derivative financial
assets: receivables, cash and cash equivalents and
other financial assets.
Receivables
Receivables are financial assets with fixed or
determinable payments that are not quoted in an active
market. Such assets are recognised initially at the
transaction price plus any directly attributable transaction
costs. Subsequent to initial recognition receivables are
measured at amortised cost using the effective interest
method, less any impairment losses.
The Group has considered the collectability and
recoverability of trade receivables. An allowance for
doubtful debt is recognised for the specific irrecoverable
trade receivable amounts based on the commencement
of legal action, bankruptcy and changes in cash
collections due to economic circumstances.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and
call deposits with original maturities of three months or
less and are subject to an insignificant risk of changes in
their fair value.
Other financial assets
Other financial assets comprise term deposits that are
held as security over property leases.
(ii) Non-derivative financial liabilities
The Group initially recognises debt securities issued
on the date that they are originated. All other financial
liabilities (including liabilities designated at fair value
through profit or loss) are recognized initially on the
ACROW ANNUAL REPORT 2019 49
3. Significant Accounting Policies (continued)
trade date at which the Group becomes a party to the
contractual provisions of the instrument.
The Group derecognizes a financial liability when its
contractual obligations are discharged or cancelled
or expire.
Financial liabilities are recognized initially at fair value plus
any directly attributable transaction costs. Subsequent
to initial recognition, financial liabilities are measured at
amortized cost using the effective interest rate method.
Financial liabilities comprise loans and borrowings, trade
and other payables.
Bank overdrafts that are repayable on demand and form
an integral part of the Group’s cash management are
included as a component of cash and cash equivalents
for the purpose of the statement of cash flows.
(iii) Share capital
Ordinary shares
Ordinary shares are classified as equity. Incremental
costs directly attributable to the issue of ordinary shares
and share options are recognised as a deduction from
equity, net of any tax effects.
(d) Property, plant and equipment
Recognition and measurement
(i)
Items of property, plant and equipment are measured at
cost less accumulated depreciation and accumulated
impairment losses.
Cost includes expenditure that is directly attributable to
the acquisition of the asset. The cost of self-constructed
assets includes the cost of materials and direct labour,
any other costs directly attributable to bringing the
assets to a working condition for their intended use,
the costs of dismantling and removing the items and
restoring the site on which they are located, and
capitalised borrowing costs (see below). Cost also may
include transfers from other comprehensive income
of any gain or loss on qualifying cash flow hedges
of foreign currency purchases of property, plant and
equipment. Purchased software that is integral to the
functionality of the related equipment is capitalised as
part of that equipment.
When parts of an item of property, plant and equipment
have different useful lives, they are accounted for as
separate items (major components) of property, plant
and equipment.
50 ACROW ANNUAL REPORT 2019
The gains and losses on disposal of an item of property,
plant and equipment are determined by comparing the
proceeds from disposal with the carrying amount of
property, plant and equipment and are recognised net
within other income / other expenses in profit or loss.
Subsequent costs
(ii)
The cost of replacing a component of an item of
property, plant and equipment is recognised in the
carrying amount of the item if it is probable that
the future economic benefits embodied within the
component will flow to the Group, and its cost can be
measured reliably. The carrying amount of the replaced
part is derecognised. The costs of the day-to-day
servicing of property, plant and equipment are
recognised in profit or loss as incurred.
(iii) Depreciation
Depreciation is based on the cost of an asset less its
residual value. Significant components of individual
assets are assessed and if a component has a useful
life that is different from the remainder of that asset, that
component is depreciated separately.
Depreciation is recognised in profit or loss on a
straight-line basis over the estimated useful lives of each
component of an item of property, plant and equipment.
Leased assets are depreciated over the shorter of the
lease term and their useful lives unless it is reasonably
certain that the Group will obtain ownership by the end
of the lease term. Land is not depreciated.
50 years
The estimated useful lives are as follows:
›› buildings
›› plant and equipment
›› hire equipment
Depreciation methods, useful lives and residual values
are reviewed at each financial year end and adjusted
if appropriate.
13 -33 years
3 – 20 years
(iv) Hire equipment loss provision
A hire equipment loss provision is recognised to cover
the expected loss of equipment on hire. The provision is
based on historical experience of unrecoverable losses
incurred on the return of hire equipment from customers.
(e) Inventories
Inventories are measured at the lower of cost and net
realisable value. The cost of inventories is based on
Notes to the Financial Statementsfor the year ended 30 June 2019 the first-in first-out principle, and includes expenditure
incurred in acquiring the inventories, production or
conversion costs and other costs incurred in bringing
them to their existing location and condition. Cost also
may include transfers from other comprehensive income
of any gain or loss on qualifying cash flow hedges of
foreign currency purchases of inventories. Net realisable
value is the estimated selling price in the ordinary course
of business, less the estimated costs of completion and
selling expenses.
(f)
Impairment
(i) Non-derivative financial assets
A financial asset not carried at fair value through profit
or loss is assessed at each reporting date to determine
whether there is objective evidence that it is impaired. A
financial asset is impaired if objective evidence indicates
that a loss event has occurred after the initial recognition
of the asset, and that the loss event had a negative
effect on the estimated future cash flows of that asset
that can be estimated reliably.
Objective evidence that financial assets are impaired can
include default or delinquency by a debtor, restructuring
of an amount due to the Group on terms that the Group
would not consider otherwise or indications that a
debtor or issuer will enter bankruptcy.
Receivables
AASB 9 requires an expected credit loss model as
opposed to an incurred credit loss model under the
former standard AASB 139.
For trade receivables, the Group has elected to apply the
simplified lifetime expected credit loss approach, which
includes consideration of customer specific factors and
actual credit loss experience. The Group provides for a
loss allowance equivalent to the lifetime expected credit
losses from initial recognition of those receivables.
Losses are recognised in profit and loss and reflected in
an allowance account against trade receivables. When
a subsequent event causes the amount of impairment
loss to decrease, the decrease is reversed through profit
and loss.
(ii) Non-financial assets
The carrying amounts of the Group’s non-financial
assets, other than inventories and deferred tax assets,
are reviewed at each reporting date to determine
whether there is any indication of impairment. If any such
indication exists, then the asset’s recoverable amount
is estimated. For intangible assets that have indefinite
useful lives or that are not yet available for use, the
recoverable amount is estimated each year at the same
time. An impairment loss is recognised if the carrying
amount of an asset or its related cash-generating unit
(CGU) exceeds its estimated recoverable amount.
The recoverable amount of an asset or CGU is the
greater of its value in use and its fair value less costs
to sell. In assessing value in use, the estimated future
cash flows are discounted to their present value using
a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks
specific to the asset. For the purpose of impairment
testing, assets that cannot be tested individually are
grouped together into the smallest group of assets that
generates cash inflows from continuing use that are
largely independent of the cash inflows of other assets
or CGU.
Impairment losses are recognised in profit or loss.
Impairment losses recognised in respect of CGUs are
allocated to reduce the carrying amounts of assets in the
CGU (or group of CGUs) on a pro rata basis.
Impairment losses recognised in prior periods are
assessed at each reporting date for any indications
that the loss has decreased or no longer exists. An
impairment loss is reversed if there has been a change
in the estimates used to determine the recoverable
amount. An impairment loss is reversed only to the
extent that the asset’s carrying amount does not exceed
the carrying amount that would have been determined,
net of depreciation or amortisation, if no impairment loss
had been recognised.
(g) Employee benefits
Defined contribution plans
(i)
A defined contribution plan is a post-employment benefit
plan under which an entity pays fixed contributions into
a separate entity and will have no legal or constructive
obligation to pay further amounts. Obligations for
contributions to defined contribution plans are
recognised as an employee benefit expense in profit or
loss in the periods during which services are rendered by
employees. Prepaid contributions are recognised as an
asset to the extent that a cash refund or a reduction in
future payments is available. Contributions to a defined
contribution plan that are due more than 12 months after
the end of the period in which the employees render the
service are discounted to their present value.
ACROW ANNUAL REPORT 2019 51
3. Significant Accounting Policies (continued)
(ii) Other long-term employee benefits
The Group’s net obligation in respect of long-term
employee benefits other than defined benefit plans
is the amount of future benefit that employees have
earned in return for their service in the current and prior
periods plus related on-costs; that benefit is discounted
to determine its present value, and the fair value of any
related assets is deducted. The discount rate is the yield
at the reporting date on AA credit-rated or government
bonds that have maturity dates approximating the terms
of the Group’s obligations. The calculation is performed
using the projected unit credit method.
(iii) Termination benefits
Termination benefits are recognised as an expense
when the Group is demonstrably committed, without
realistic possibility of withdrawal, to a formal detailed
plan to either terminate employment before the normal
retirement date, or to provide termination benefits
as a result of an offer made to encourage voluntary
redundancy. Termination benefits for voluntary
redundancies are recognised as an expense if the
Group has made an offer of voluntary redundancy, it is
probable that the offer will be accepted, and the number
of acceptances can be estimated reliably. If benefits are
payable more than 12 months after the reporting period,
then they are discounted to their present value.
(iv) Short-term benefits
Short-term employee benefit obligations are measured
on an undiscounted basis and are expensed as the
related service is provided. A liability is recognised for
the amount expected to be paid under short-term cash
bonus or profit-sharing plans if the Group has a present
legal or constructive obligation to pay this amount as a
result of past service provided by the employee and the
obligation can be estimated reliably.
(h) Provisions
A provision is recognised if, as a result of a past event,
the Group has a present legal or constructive obligation
that can be estimated reliably, and it is probable that an
outflow of economic benefits will be required to settle the
obligation. Provisions are determined by discounting the
expected future cash flows at a pre-tax rate that reflects
current market assessments of the time value of money
and the risks specific to the liability. The unwinding of the
discount is recognised as finance cost.
Restructuring
(i)
A provision for restructuring is recognised when the
Group has approved a detailed and formal restructuring
plan, and the restructuring either has commenced or has
been announced publicly. Future operating losses are
not provided for.
(ii) Onerous contracts
A provision for onerous contracts is recognised when
the expected benefits to be derived by the Group
from a contract are lower than the unavoidable cost
of meeting its obligations under the contract. The
provision is measured at the present value of the lower
of the expected cost of terminating the contract and
the expected net cost of continuing with the contract.
Before a provision is established, the Group recognises
any impairment loss on the assets associated with
that contract.
(iii) Make good
A provision for make good is measured at the present
value of the cost of restoring leased properties at the
conclusion of the lease.
(i) Revenue
With the introduction of AASB 15 Revenue from
Contracts with Customers, Acrow has performed a
review of its revenue recognition policies for compliance
with AASB 15. The core principle of AASB 15 is that an
entity recognises revenue related to the transfer of goods
or services when control of the goods or services passes
to the customer. AASB 15 requires the identification of
discrete performance obligations within a transaction
and an allocation of a portion of the transaction price
to each of these obligations. The review concurs that
revenue generated from the hire of equipment should still
be recognised under AASB 117 Leases as previously
reported which will be replaced by the newly adopted
AASB 16 Leases from 1 July 2019.
Upon review, the Acrow group adopted AASB 15
Revenue from Contracts with Customers (‘AASB 15’)
from 1 July 2018 and applied the modified retrospective
approach on other forms of revenue, being Labour
and cartage services and Other hardware sales.
AASB 15 establishes a comprehensive framework
for determining the timing and quantum of revenue
recognised. It replaces existing guidance, including
AASB 118 Revenue. The new standard is based on
the principle that revenue is recognised when control of
52 ACROW ANNUAL REPORT 2019
Notes to the Financial Statementsfor the year ended 30 June 2019 a good or service transfers to a customer, that is, the
‘notion of control’ replaces the existing ‘notion of risks
and rewards’. The impact of this change in accounting
standard is not material to the Acrow group as the
‘notion of control’ is closely aligned to the ‘notion of
risks and rewards’ for Acrow revenue streams. Revenue
is recognised when the Group satisfies a performance
obligation by transferring control of the promised good
or service to a customer at an amount that reflects the
consideration to which an entity expects to be entitled in
exchange for the goods or services.
Acrow is predominately a provider of formwork and
scaffolding equipment for hire with majority of the
revenue generated via either “dry hire” or “project
hire”. “Dry hire” revenue is generated from hire of
equipment only, no supply of labour and transportation
services, whereas “project hire” involves the provision
of scaffolding services. These form of contracts may
vary in scope however all “Project hires” have one
common performance obligation, being the provision of
scaffolding structures to the customer which includes
the scaffolding equipment, the labour on installation
and dismantling, the transportation and any ancillary
materials that are required to full-fill the obligation.
The adoption of AASB 15 has not impacted the timing
of revenue recognition on the provision of labour and
cartage services. These are recognised over time as
services are rendered.
Hire of equipment
(i)
Formwork and Scaffolding equipment are rented to
customers under operating leases. Rental periods
average around six months and usually less than one
year. Rental can be arranged as “dry hire” where only
equipment is provided to the customer and revenue is
recognised at fixed rates over the period of hire; or as
part of “project hire” where Acrow supplies labour and
transportation services between warehouse and building
sites. Revenue recognition on equipment hire commence
once scaffolding structure has been certified to be safe
and access granted to customers, it is recognised over
straight-line bases over the life of the agreements.
Labour and cartage services
(ii)
Revenue from providing scaffolding labour in installation
and dismantling, and equipment transportation are
recognised over time as services are rendered. Revenue
is recognised based on the actual service provided to
the end of the reporting period because the customer
receives and uses the benefits simultaneously. For
each of these contracts, revenue and any related
sub-contractor costs are recognised as the work is
completed.
(iii) Other hardware sales and services
Revenue from the sale of goods in the course of ordinary
activities is measured as the transaction price net of
returns, trade discounts and volume rebates. Revenue
is recognised when persuasive evidence exists, usually
on delivery of the goods to the customer such that the
control been transferred to the buyer. If it is probable
that discounts will be granted and the amount can be
measured reliably, then the discount is recognised as
a reduction of revenue as the sales are recognised.
A receivable is recognised when the goods are delivered
as this is the point in time that the consideration is
unconditional because only the passage of time is
required before the payment is due.
(j) Finance income and
finance costs
Finance income comprises interest income on funds
deposited. Interest income is recognised as it accrues in
profit or loss, using the effective interest method.
Finance costs comprise interest expense on borrowings
and, where material, the unwinding of the discount
on provisions.
Borrowing costs that are not directly attributable to the
acquisition, construction or production of a qualifying
asset are recognised in profit or loss using the effective
interest method.
Foreign currency gains and losses are reported on a net
basis as either finance income or finance cost depending
on whether foreign currency movements are in a net
gain or net loss position.
(k) Tax
Tax expense comprises current and deferred tax.
Current and deferred tax are recognised in profit or loss
except to the extent that it relates to items recognised
directly in equity or in other comprehensive income.
Current tax is the expected tax payable or receivable on
the taxable income or loss for the year, using tax rates
enacted or substantively enacted at the reporting date,
and any adjustment to tax payable in respect of previous
years. Current tax payable also includes any tax liability
arising from the declaration of dividends.
Deferred tax is recognised in respect of temporary
differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the
ACROW ANNUAL REPORT 2019 53
3. Significant Accounting Policies (continued)
amounts used for taxation purposes. Deferred tax is
not recognised for temporary differences on the initial
recognition of assets or liabilities in a transaction that
is not a business combination and that affects neither
accounting nor taxable profit or loss.
Deferred tax is measured at the tax rates that are
expected to be applied to temporary differences when
they reverse, based on the laws that have been enacted
or substantively enacted by the reporting date.
Deferred tax assets and liabilities are offset if there is a
legally enforceable right to offset current tax liabilities
and assets, and they relate to income taxes levied by
the same tax authority on the same taxable entity, or on
different tax entities, but they intend to settle current tax
liabilities and assets on a net basis or their tax assets
and liabilities will be realised simultaneously.
A deferred tax asset is recognised for unused tax losses,
tax credits and deductible temporary differences, to the
extent that it is probable that future taxable profits will be
available against which they can be utilised.
Deferred tax assets are reviewed at each reporting
date and are reduced to the extent that it is no longer
probable that the related tax benefit will be realised.
(l) Exploration and
evaluation assets
Exploration and evaluation expenditure relating to an
area of interest is capitalised where exploration rights
have been obtained. This expenditure is carried forward
only to the extent that they are expected to be recouped
through successful development and exploitation, or
sale of the area, or where exploration and evaluation
activities have not reached a stage which permits a
reasonable assessment of the existence of economically
recoverable reserves and active exploration operations
are continuing. This expenditure is not subject to
amortisation but is assessed for impairment when facts
and circumstances suggest that the carrying amount
may exceed its recoverable amount.
(m) Goods and services tax
Revenue, expenses and assets are recognised net of the
amount of goods and services tax (GST), except where
the amount of GST incurred is not recoverable from the
taxation authority. In these circumstances, the GST is
recognised as part of the cost of acquisition of the asset
or as part of the expense.
Cash flows are included in the statement of cash
flows on a gross basis. The GST components of cash
flows arising from investing and financing activities are
recoverable from, or payable to, the ATO are classified
as operating cash flows.
(n) New accounting standards and interpretations adopted
The Group has adopted all the new and amended Accounting Standards and Interpretations issued by the AASB that
are relevant to the Group and effective for the current annual reporting period being:
Standard
AASB 15 Revenue from contracts with customers
AASB 9 Financial instruments
Effective for annual
reporting periods
beginning on
Initially applied in
the financial year
ending
1 January 2018
1 January 2018
30 June 2019
30 June 2019
There is no impact on the adoption of AASB 15, detailed discussions are in note 3(i) Revenue.
AASB 9 Financial Instruments has replaced the previous financial instruments guidance including AASB 139 Financial
Instruments: Recognition and Measurement. AASB 9 had a date of initial application for the consolidated entity of
1 July 2018. The classification and measurement, and impairment requirements were applied retrospectively by
adjusting the opening balance sheet at the date of initial application, with no requirement to restate comparative
periods. The consolidated entity did not restate comparatives. AASB 9 results in an expected credit loss (‘ECL’)
model as opposed to an incurred credit loss model under the previous standard. The ECL model requires the Acrow
54 ACROW ANNUAL REPORT 2019
Notes to the Financial Statementsfor the year ended 30 June 2019 group to account for expected credit losses and changes in those expected credit losses at each reporting date to
reflect changes in credit risk since initial recognition of the financial assets.
The Group has opted for the simplified approach for measuring the loss allowance at an amount equal to lifetime ECL
for trade receivables, contract assets and other receivables. Accordingly, the Acrow group’s allowance for doubtful
debts calculation applies the expected loss model and takes into consideration the likely level of bad debts (based on
historical experience) as well as any known ‘at risk’ receivables. This resulted in an adjustment of $319,408 against
the retained earnings as reported in the FY2019 interim report. As part of the year end process, it was determined
that the Group should include an additional provision of $265,000 at 1 July 2018 as part of the assessed impact of
implementing AASB 9 to account for deteriorating macroeconomic factors being experienced at 1 July 2018.
The new standard has had the following impacts on Acrow’s consolidated financial statements:
Statement of Financial Position
Trade and other receivables
Total asset impact
Retained earnings
Total equity impact
As reported
30 June
2018
AASB 9
Transition
adjustment
AASB 9
Additional
transition
adjustment
Opening
balance
1 July 2018
10,477,792
(319,408)
(265,000)
9,893,384
10,477,792
(319,408)
(265,000)
9,893,384
8,988,391
(319,408)
(265,000)
8,403,983
8,988,391
(319,408)
(265,000)
8,403,983
Other financial assets held by Acrow are not expected to be impacted by the new standard.
(o) New standards and interpretations not yet adopted
AASB 16 Leases will replace the current AASB 117 Leases standard for Acrow’s 2020 consolidated financial
statements. Under AASB 117, leases are classified as either operating leases or finance leases based on their
nature. The adoption of AASB 16 will primarily impact Acrow’s accounting for leases which are currently classified as
operating leases, being mainly leases over premises, forklifts, office equipment and motor vehicles.
Under AASB 117, operating leases were not recognised on the balance sheet, with payments instead recognised
in profit or loss on a straight-line basis over the term of the lease. The adoption of AASB 16 will result in agreements
that were previously classified as operating leases now being recognised on the balance sheet. For these
agreements, this will result in the recognition of a right-of-use asset and a corresponding lease liability, being the
present value of future lease payments.
Over the life of the lease, the lease liability will incur interest expense and is reduced as lease payments are made.
The right-of-use asset is amortised on a straight-line basis over its useful life. As compared to AASB 117, the pattern
of expense recognition changes with a higher expense at lease commencement due to a higher lease liability at
that time. Acrow plans to adopt AASB 16 using the modified retrospective approach. Under this approach, the
cumulative impact of adoption on 1 July 2019, will be recognised as an adjustment to opening retained earnings with
no restatement of comparative periods. Acrow has elected to apply practical expedients allowed under the modified
retrospective approach and not to recognise short-term or low-value leases on the balance sheet.
Based on work completed to date, it is expected that a right-of-use asset approximately $17.8million and lease
liability approximately $18.5million will be recognised as of 1 July 2019 with the net impact of $0.7m reduce opening
retaining earning for FY2020.
ACROW ANNUAL REPORT 2019 55
4. REVENUE
In dollars
Revenue from contracts with customers
Provision of labour and contracting services
Other hardware sales
Other revenue
Hire of equipment
5. OTHER INCOME
In dollars
Disposal of property, plant and equipment
Proceed
Written down value
Net gain on disposal of property, plant and equipment
Significant item – gain on bargain purchase
6. OTHER EXPENSES
In dollars
Acquisition and integration related costs
Freight costs
Motor vehicle expenses
IT and telecommunication expenses
Insurance expenses
Plant & equipment operation expenses
Consumables
Travelling expenses
Doubtful debt expenses
Audit, tax and legal expenses
Others
56 ACROW ANNUAL REPORT 2019
2019
2018
22,075,424
4,395,244
13,642,786
2,906,916
35,718,210
7,302,160
33,140,700
8,176,836
68,858,910
15,478,995
2019
2018
2,151,417
338,154
(1,270,325)
(77,066)
881,092
261,087
– 10,825,098
881,092 11,086,185
2019
2018
(896,610)
(968,185)
(810,466)
(307,812)
(825,575)
(225,025)
(876,211)
(245,924)
(593,153)
(160,688)
(647,904)
(130,641)
(318,622)
(66,592)
(425,853)
(77,636)
(368,828)
(1,166)
(363,633)
(87,027)
(460,860)
(132,194)
(6,587,715)
(2,402,890)
Notes to the Financial Statementsfor the year ended 30 June 2019 7. FINANCE INCOME AND FINANCE COSTS
In dollars
Recognised in profit and loss
Interest income
Net foreign exchange gain
Finance income
Unwinding interest on deferred consideration
Interest expense on financial liabilities
Borrowing costs
Net foreign exchange loss
Finance costs
Net finance costs recognised in profit or loss
8. INCOME TAX (EXPENSE)/BENEFIT
In dollars
Profit/(loss) before income tax
Income tax (expense)/benefit using the Group’s domestic tax rate (30%)
(Increase)/decrease in income tax expense due to:
Non-deductible/(taxable) amounts
(Increase)/decrease in income tax expense due to:
Origination and reversal of temporary differences
Tax losses not brought to account
Recognition of tax losses not previously brought to account
Income tax (expense)/benefit
9. CASH AND CASH EQUIVALENTS
In dollars
Cash and cash equivalents
2019
2018
11,261
–
7,007
27,069
11,261
34,076
(171,957)
–
(346,373)
(189,012)
(427,571)
(58,750)
(29,231)
–
(975,131)
(247,762)
(963,870)
(213,686)
2019
2018
5,007,868
10,510,658
(1,502,360)
(3,153,197)
(456,930)
3,247,530
1,775,998
(170,995)
(174,591)
–
298,730
76,662
(59,153)
–
2019
2018
3,289,617
4,917,837
3,289,617
4,917,837
ACROW ANNUAL REPORT 2019 57
10. PREPAYMENTS AND OTHER ASSETS
In dollars
Current
Other financial assets
Term deposits held as security
Prepayments and other assets
Contract assets
Other receivables
Prepayments
Non-current
Term deposits held as security
11. TRADE AND OTHER RECEIVABLES
In dollars
Trade receivables
Provision for doubtful debts
Movement in the provision for doubtful debts:
In dollars
At 1 July
Opening balance
Addition through business combination
IFRS 9 adoption
IFRS 9 adoption – additional transition adjustment
Claims insured
Impairment expense recognised during the year
Receivables written off during the year as uncollectable
Balance at 30 June
2019
2018
–
491,827
259,316
158,013
708,663
70,441
27,819
98,037
1,125,992
688,124
–
311,583
2019
2018
14,134,326
11,309,723
(1,029,408)
(831,931)
13,104,919
10,477,792
2019
2018
(831,931)
–
–
(870,062)
(319,408)
(265,000)
(110,789)
(345,805)
–
–
–
–
843,525
38,131
(1,029,408)
(831,931)
58 ACROW ANNUAL REPORT 2019
Notes to the Financial Statementsfor the year ended 30 June 2019
Due to the short-term nature of current receivables, their carrying amount approximates their fair value. The ageing of
trade receivables is outlined below:
In dollars
Current
31 to 60
61 to 90
90+
Impaired
12. INVENTORIES
In dollars
Finished goods
Provision for slow moving stock
13. ASSETS AND LIABILITIES HELD FOR SALE
In dollars
Assets classified as held for sale
Liabilities classified as held for sale
2019
2018
6,395,010
5,486,863
4,046,059
4,072,278
1,144,164
2,549,094
935,798
814,784
(1,029,408)
(831,931)
13,104,919
10,477,792
2019
2018
3,688,216
3,166,431
(274,855)
(1,054,985)
3,413,361
2,111,446
2019
2018
71,296
65,878
67,650
62,508
On 21 March 2018, the Group entered into a conditional binding option agreement with AusGold Ghana Limited, an
unlisted Ghanaian company, under which the Group has granted an option to AusGold to acquire a 100% legal and
beneficial interest in Acrow’s wholly owned subsidiary, Noble Mineral Resources Ghana Ltd, which owns the Group’s
exploration and evaluation assets in Ghana. The option has since expired in November 2018, however the Board is
still working towards a successful sale.
ACROW ANNUAL REPORT 2019 59
14. PROPERTY, PLANT AND EQUIPMENT
In dollars
Cost
Balance at 1 July 2017
Land and
buildings
Plant and
equipment
Hire
equipment
Total
–
13,253
–
13,253
Acquisitions through a business combination
96,921
419,602
31,162,502
31,679,025
Additions
Disposals
Balance at 30 June 2018
Balance at 1 July 2018
Acquisitions through a business combination
Additions
Disposals
Balance at 30 June 2019
Depreciation and impairment losses
Balance at 1 July 2017
Acquisition through a business combination
Depreciation for the year
Disposals
Hire equipment loss adjustment
Balance at 30 June 2018
Balance at 1 July 2018
Acquisitions through a business combination
Depreciation for the year
Disposals
Hire equipment loss adjustment
–
–
96,921
96,921
–
–
–
20,676
1,065,706
1,086,382
(13,253)
(78,637)
(91,890)
440,278
32,149,571
32,686,770
440,278
32,149,571
32,686,770
118,950
9,386,173
9,505,123
247,862
9,536,640
9,784,502
(56,315)
(1,340,230)
(1,396,545)
96,921
750,775
49,732,154
50,579,850
–
–
8,861
–
–
8,861
8,861
–
13,253
–
50,390
(13,253)
–
677,662
386,503
13,253
677,662
445,754
(1,570)
(14,823)
–
(146,074)
(146,074)
50,390
50,390
–
916,521
916,521
–
975,772
975,772
–
35,355
245,986
2,980,595
3,261,936
–
–
(56,315)
(69,905)
(126,220)
–
(524,262)
(524,262)
Balance at 30 June 2019
44,216
240,061
3,302,949
3,587,226
Carrying amounts
At 1 July 2017
At 30 June 2018
At 1 July 2018
At 30 June 2019
–
–
–
–
88,060
389,888
31,233,050
31,710,998
88,060
389,888
31,233,050
31,710,998
52,705
510,714
46,429,205
46,992,624
60 ACROW ANNUAL REPORT 2019
Notes to the Financial Statementsfor the year ended 30 June 2019 15. INTANGIBLES
Goodwill
All business combinations are accounted for by applying the acquisition method. Goodwill represents the difference
between the cost of the acquisition and the fair value of the net identifiable assets acquired. Goodwill is stated at
costs less any accumulated impairment losses.
Acrow annually tests goodwill with indefinite useful lives for impairment. An asset that does not generate independent
cash flows is tested for impairment as part of a cash generating unit (CGU).
Where there is an impairment loss, it is recognised in the income statement when the carrying amount of an asset
exceeds its recoverable amount. The asset’s recoverable amount is estimated based on the higher of its value-in-use
and fair value less costs to sell.
Impairment testing on Natform companies
Goodwill of $7,301,902 is recorded at 31 August 2018 with respect to the acquisition of Natform Pty Ltd and
Natform (QLD) Pty Ltd. The recoverable amount of CGU is supported on a fair value less costs to sell basis with
reference to the market price paid to acquire the business. No indicators of impairment have arisen since the
acquisition date.
Allocation to CGU Groups
In dollars
Natform companies
2019
2018
7,301,902
7,301,902
–
–
The recoverable amount of a CGU is determined based on a value-in-use calculation. This calculation uses
discounted cash flow projections based upon management’s projected EBITDA and financial budgets approved by
the board of directors covering a five-year period. Cash flows beyond the five-year period are extrapolated using the
cash flows for year 5 and the estimated long-term growth rates.
The discount rate used is the Group’s weighted average cost of capital. The terminal growth rate reflects the
management’s outlook on growth.
Average growth rate 1 – 5 years
Terminal growth rate
Post-tax discount rate
Sensitivity
2019
13.7%
2.5%
10.0%
2018
–
–
Management have made judgements and estimates in respect of impairment testing of goodwill. Should these
judgements and estimates not occur, the carrying value of goodwill may vary. Any reasonable change in the key
assumptions on which the estimates and/or the discount rate are based would not cause the carrying amount of the
CGU to exceed the recoverable amount.
ACROW ANNUAL REPORT 2019 61
16. TRADE AND OTHER PAYABLES
In dollars
Current
Trade payables
Accrued expenses
Other Payables
Current
Non-current
2019
2018
6,925,661
3,429,138
3,275,564
3,869,058
10,201,225
7,298,196
2,230,199
2,128,080
4,358,279
–
–
–
Two equal payments in respect of the acquisition of Natform of $2,250,000 are due on 7 September 2019 and
7 September 2020. The present value of these future expected cash flows have been based on a discount rate
of 4.9%.
17. EMPLOYEE BENEFITS
In dollars
Current
Annual leave
Long service leave
Other employee benefits
Non-current
Long service leave
2019
2018
1,169,722
1,155,505
1,068,654
1,007,659
724,425
931,876
2,962,801
3,095,040
456,609
331,597
All employees are on defined contribution plans for superannuation. Expense recognised during the year
was $1,465,313.
18. LOANS AND BORROWINGS
The Group entered into a $15,000,000 secured loan agreement in October 2018 for a period of 4 years. The facility
consists of four sub-facilities; a $7,000,000 amortising business loan paying variable rates (balance of $5,978,000 at
30 June 2019) with a monthly principal repayment obligation of $146,000; a $5,000,000 3-year revolving equipment
finance facility (balance of $961,092 at 30 June 2019); and a $3,000,000 flexible working capital / overdraft facility
inclusive of bank guarantee commitment of $591,583 and undrawn balance of $2,408,417.
The loans are secured by interlocking guarantees across all Group companies. Interest on the business loan facilities is
variable and charged at the prevailing market rates. All borrowing costs have been expensed during the year as incurred.
Loans and Borrowings
In dollars
Current
Non-Current
62 ACROW ANNUAL REPORT 2019
2019
2018
2,102,006
4,837,086
6,939,092
–
–
–
Notes to the Financial Statementsfor the year ended 30 June 2019 19. PROVISIONS
In dollars
Make good
Movements during the year were as follows:
Balance at 1 July
Addition through a business combination
Charged to profit and loss
Amounts used during the year
Balance at 30 June
20. DEFERRED TAX BALANCES
In dollars
Carry forward balance
Movement during the year:
Provisions
Payables
Property, plant and equipment
Balance at 30 June
In dollars
Unrecognised Deferred Tax Assets and Liabilities
Deferred tax assets have not been recognised in respect of the
following items:
Revenue tax losses
Capital losses
Temporary differences
2019
2018
452,474
452,474
452,474
452,474
452,474
–
–
–
–
452,474
–
–
452,474
452,474
2019
–
141,395
9,506
(1,834,900)
(1,683,999)
2018
–
–
–
–
–
2019
2018
13,654,771
13,083,920
202,441
202,441
(2,911,668)
(1,088,873)
10,945,544
12,197,488
While tax losses and temporary differences do not expire under current tax legislation, deferred tax assets have not
been recognised in respect of these items as certain subsidiaries have experienced a number of years without taxable
income and therefore recovery is not considered probable. The tax losses do not expire under current tax legislation.
The potential benefit of the deferred tax asset in respect of tax losses carried forwards will only be obtained if:
(i)
the subsidiaries continue to derive future assessable income of a nature and an amount sufficient to enable the
benefit to be realised;
(ii) the subsidiaries continue to comply with the conditions for deductibility imposed by the law;
(iii) no changes in tax legislation adversely affect the subsidiaries in realising the asset; and
(iv) The subsidiaries pass the continuity of ownership test, or the same business test as outlined by the Australian
Taxation Office.
ACROW ANNUAL REPORT 2019 63
21. SHARE CAPITAL
In dollars
Number of shares
On issue of 1 July
Issue of shares (i)
Share consolidation (ii)
Issue of shares for cash (iii)
Issue of shares in exchange for debt (iv)
Exercise of share options (v)
2019
2018
162,982,615 313,328,147
11,273,839
25,000,000
174,256,454
338,328,147
–
(321,411,654)
174,256,454
16,916,493
–
136,000,000
174,256,454
152,916,493
–
6,316,122
750,001
3,750,000
175,006,455
162,982,615
(i) 10,000,000 shares under 12 month escrow were issued on 31 August 2018 as part of the consideration for the
acquisition of the Natform companies at $0.475 fair value per share; 380,348 shares were issued at 50.51 cents
per share following dividend declaration on 28 August 2018 pursuant to the Dividend Reinvestment Plan (DRP);
893,491 shares were issued at 34.35 cents per share following FY2019 interim dividend declaration on 12 April
2019 also pursuant to the Dividend Reinvestment Plan (DRP);
(ii) Consolidation of shares on 22 March 2018 at a conversion rate of 20:1;
(iii) 136,000,000 shares were issued on 27 March 2018 at $0.20 per share;
(iv) 6,316,000 shares were issued at $0.20 per share to extinguish existing debt; and
(v) All ACFOP2 options, being 750,001 units (post share consolidation) were exercised at $0.20 per share.
The holders of these shares are entitled to receive dividends as declared from time to time and are entitled to one
vote per share at general meetings of the Group.
64 ACROW ANNUAL REPORT 2019
Notes to the Financial Statementsfor the year ended 30 June 2019 Dividends
Dividend distributions payable to equity shareholders are included in other liabilities when the dividends have been
approved prior to the reporting date.
The following dividends were declared and paid by the Group during the year:
In dollars
Dividends on ordinary shares declared and paid:
Final dividend in respect of previous reporting period
(FY18: 0.5 cent per share)
– Paid in cash
– Paid via DRP
Interim dividend for the current reporting period
(FY19: 1.0 cent per share)
– Paid in cash
– Paid via DRP
2019
2018
672,803
192,114
1,434,216
306,914
2,606,047
–
–
–
–
–
A final unfranked dividend of $864,917 for the year ended 30 June 2018 was paid on 22 October 2018 at 0.5 cent
per share, with 380,348 new shares issued at 50.51 cents per share each as part of the DRP.
An interim unfranked dividend of $1,741,130 for FY 2019 was paid on 12 April 2019 at 1.0 cent per share, with
893,491 new shares issued at 34.35 cents each also as part of the DRP.
Subsequent to balance date the Directors declared an unfranked dividend of 1.0 cent per share on 29 August 2019.
Franking credit balance at 30 June 2019 was $1,958,742 (2018: nil)
Reserves
Foreign currency translation reserve
The foreign currency translation reserve is used to record exchange differences arising on translation of the Group
entities that do not have functional currency of AUD dollars and have been translated for presentation purpose.
Share based payments reserve
The share based payments reserve is used to recognize the grant date fair value of shares issued to employees and
directors that have not yet vested.
ACROW ANNUAL REPORT 2019 65
22. CAPITAL MANAGEMENT
Management monitors the capital of the Group in order to maintain a good debt to equity ratio, provide the
shareholders with adequate returns and ensure that the Group can fund its operations and continue as a
going concern.
The Group’s debt and capital includes ordinary share capital and borrowings.
There are no externally imposed capital requirements.
Management effectively manages the Group’s capital by assessing the Group’s financial risks and adjusting its capital
structure in response to changes in these risks and in the market. These responses include the management of debt
levels, distributions to shareholders and share issues.
The Board is targeting a dividend payout ratio of between 30% and 50% of its operating cash profit which it defines
as EBITDA less maintenance capital expense and less tax paid. Dividends are not expected to be franked in the
near term.
23. EARNINGS PER SHARE
Basic EPS is calculated by dividing profit for the year attributable to ordinary equity holders of the Parent by the
weighted average number of ordinary shares outstanding during the year.
Diluted EPS is calculated by dividing the net profit attributable to ordinary equity holders of the Parent by the
weighted average number of ordinary shares outstanding during the year plus the weighted average number of
ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.
The following table reflects the income and share data used in the basic and diluted EPS computations:
In dollars
Earnings reconciliation
Profit excluding significant items
Net share-based payments and significant items*
Net profit after tax
2019
2018
7,507,206
653,745
(2,558,491)
9,856,913
4,948,715 10,510,658
*
includes share-based payments of $1.4m, finance restructuring costs and significant items per note 6.
Number of ordinary shares
Number of shares
Weighted average number of ordinary shares used in the calculation of basic EPS
172,002,461
54,503,462
Weighted average number of ordinary shares used in the calculation of dilutive EPS
183,997,435
54,503,462
Basic EPS excluding significant items (cents per share)
Diluted EPS excluding significant items (cents per share)
Basic earnings / (loss) per share (cents)
Diluted earnings / (loss) per share (cents)
4.36
4.08
2.88
2.69
1.20
1.20
19.28
19.28
66 ACROW ANNUAL REPORT 2019
Notes to the Financial Statementsfor the year ended 30 June 2019 24. CAPITAL AND LEASING COMMITMENTS
In dollars
2019
2018
Capital commitments
Capital expenditure contracted for at the reporting date but not recognised as
liabilities is as follows:
Plant and equipment
In dollars
Leases as lessee
Non-cancellable operating lease rentals payable as follows:
Less than one year
Between one and five years
More than five years
2,344,645
3,752,060
2019
2018
4,420,142
3,474,087
13,999,409
9,005,695
1,325,177
2,488,434
19,744,728
14,968,216
At inception of an arrangement, the Group determines whether the arrangement is or contains a lease and whether
the lease is an operating or a finance lease.
Leases of fixed assets, where substantially all the risks and benefits incidental to the ownership of the asset (but not
the legal ownership) are transferred to entities in the Group, are classified as finance leases, if otherwise classified as
operating leases.
At reporting date, all Acrow’s leases were operating leases which are not recognised in the Consolidated statement of
financial position. Lease payments for operating leases, where substantially all the risks and benefits remain with the
lessor, are recognised as an expense on a straight-line basis over the term of lease.
The Group leases industrial and commercial properties, forklifts, motor vehicles and office equipment under
operating leases. The leases can run for more than 5 years with options to renew the leases after that date. For the
year ended 30 June 2019, $4,424,644 was recognised as an expense in profit or loss in respect of operating leases
(2018: $895,650).
ACROW ANNUAL REPORT 2019 67
25. RECONCILIATION OF CASH FLOWS FROM
OPERATING ACTIVITIES
In dollars
Cash flows from operating activities
Profit / (loss)
Adjustments for:
›› Depreciation and impairment
›› Hire loss provision
›› (Gain)/loss on disposal
›› Gain on bargain purchase
›› Share based payment
Net changes in working capital:
›› Other financial assets
›› Trade and other receivables
›› Inventories
›› Prepayments and other assets
›› Provisions and employee benefits
›› Trade and other payables
›› Cash generated from operating activities
Finance costs paid
Net cash from operating activities
26. AUDITORS’ REMUNERATION
Audit of the financial report – KPMG
– Stanton’s International
Taxation & advisory services – KPMG
Total amount paid or payable
2019
2018
4,948,715
10,510,658
3,261,936
445,754
(524,263)
(146,074)
(881,092)
(261,087)
– (10,825,098)
1,420,406
558,384
803,410
(4,551)
(2,017,311)
229,551
(954,928)
164,414
(560,854)
262,927
(503,672)
771,970
2,759,932
2,050,446
7,752,279
3,757,294
803,174
247,762
8,555,453
4,005,056
2019
2018
318,198
172,838
–
107,368
57,468
27,598
425,566
257,904
68 ACROW ANNUAL REPORT 2019
Notes to the Financial Statementsfor the year ended 30 June 2019 27. RELATED PARTIES
Key management personnel are those persons having authority and responsibility of planning, directing and
controlling the activities of the Group, directly or indirectly, including any director, whether executive or otherwise, of
the Group.
Key management personnel compensation for the period:
›› Short term employment benefits
›› Long term employment benefits
›› Post-employment benefits
›› Share based payments
Total compensation paid to key management personnel
Other Related Party Transactions
2019
2018
1,392,312
756,713
122,347
57,006
28,931
15,036
949,467
480,971
2,521,132
1,281,651
During the year, Acrow engaged Bombora Group to provide advisory services on the acquisition of Natform
companies. Michael Hill, Joshua May and Gregg Taylor are on the board of Bombora as well as Acrow. The Group
paid Bombora $82,023 in 2019 (2018: $300,000).
Acrow also leases a number of industrial and commercial properties from Margaret Prokop’s personal companies
(MRP Property Pty Ltd & MRP Superannuation Pty Ltd) through the Natform subsidiaries. Margaret Prokop was
previously a director of Natform companies, upon sale of Natform to Acrow, she has been appointed as a director
of the Group. Rental and related out-going payments to her companies amounted to $665,087 (2018: nil). Terms
on the leases range from 2 years to 5 years from 1 September 2018. Balance outstanding at 30 June 2019 was nil
(2018: nil).
Two tranches of $2,250,000 deferred consideration are payable to Margaret Prokop on the acquisition of Natform
companies, these are due on the 7 September 2019 and 7 September 2020 as detailed in note 31.
Natform engages Margaret Prokop’s brother, the proprietor of Nat Pty Ltd to manufacture and assemble screens for
Natform, the amount incurred was $824,349 in 2019 (2018: nil); balance outstanding at 30 June 2019 was $82,551
(2018: nil).
During the year there were no transactions between the parent entity and the subsidiaries within the group.
28. SHARE BASED PAYMENTS
At 30 June 2019 the Group had the following share-based payment arrangements.
Loan Funded Shares
No new Loan Funded Shares had been issued during FY2019. The Group carries forward only Loan Funded Shares
issued in 2018 where selected employees and directors of the Group had been granted an interest-free loan to
subscribe to shares of Acrow Formwork and Construction Services Limited. These loans are non-recourse other
than to the shares held by that employee/director, and the proceeds of the loan must be used to buy shares. As the
only recourse on the loans is the shares and there are vesting conditions, the arrangement has been accounted for
as share options, as required under accounting standards. These options entitle the holders to receive dividends on
ordinary shares of the Group, and these dividends are required to be used to repay the loans described above. The
Loan Funded Shares have the following terms:
(i) Date of issue: 27 March 2018
(ii) Loan term: 5 years;
ACROW ANNUAL REPORT 2019 69
28. Share Based Payments (continued)
(iii) Interest: No interest is payable; and
(iv) Vesting hurdles: subject to being a continuous employee or director of the Group for 2 years from the date of
issue, and the 20-day (at any point over the vesting period) volume weighted average share price (“VWAP”) of the
Group’s share price exceeding 40 cents per share (post the share consolidation).The fair value at grant date was
determined using an adjusted form of the Monte-Carlo model that factors in market conditions. The grant date
fair value of rights granted in the year was $0.1071.
The model inputs for the in-substance options granted had included:
a) Exercise price $0.20
b) Share price at grant date $0.20
c) Expected price volatility 75%- based on comparable companies
d) Expected dividend yield 0%
e) Risk-free interest rate 2.41%
f) Expected life 3 years
Reconciliation of outstanding loan funded share options
The number and weighted average exercise prices of loan funded options were as follows:
Outstanding at 1 July
Granted during the year
Exercised during the year
Outstanding at 30 June
2019
2018
Weighted
average
excercise
price
$0.20
Weighted
average
excercise
price
Number
–
–
–
–
2,475,000
$0.20
–
–
Number
2,475,000
–
–
2,475,000
$0.20
2,475,000
$0.20
70 ACROW ANNUAL REPORT 2019
Notes to the Financial Statementsfor the year ended 30 June 2019 Options
During the year a total of 5,460,000 of options had been granted to selected employees under the Employee Share
Options Scheme over two separate issues: 5,100,000 units on the 14 January 2019 at total fair value of $625,014
and 360,000 units on the 4 March 2019 at total fair value of $27,767. These options bear the following terms:
(i) Exercise price: 50 cents per option;
(ii) Vesting hurdles: subject to being an employee of the Group continuously over one-year, two-year, three-year and
four-year periods with four equal set of tranches; no VWAP; and
(iii) Expiry date: 5 years from the date of issue.
The fair value at grant date was determined using an adjusted form of the Monte Carlo Model that factors in market
conditions. The model inputs and fair value of options granted in the year were as follow:
Grant date
Units
Share
price at
grant
date
Service
period
Expected
price
volatility
Expected
dividend
yield
Risk-free
interest
rate
Fair
value per
option
14 January 2019
1,275,000
$0.4900 One year
14 January 2019
1,275,000
$0.4900
Two years
14 January 2019
1,275,000
$0.4900
Three years
14 January 2019
1,275,000
$0.4900
Four years
4 March 2019
4 March 2019
4 March 2019
4 March 2019
90,000
$0.4050 One year
90,000
$0.4050
Two years
90,000
$0.4050
Three years
90,000
$0.4050
Four years
50%
50%
50%
50%
50%
50%
50%
50%
3.67%
3.67%
3.67%
3.67%
3.67%
3.67%
3.67%
3.67%
1.89%
$0.0866
1.87%
$0.1164
1.78%
$0.1348
1.82%
$0.1524
1.78%
$0.0449
1.76%
$0.0732
1.69%
$0.0897
1.71%
$0.1007
Balance of all outstanding options at balanced date are as follow:
Grant date
12 April 2016
Expiry date
12 April 2019 & 2021
23 November 2016
23 November 2019 & 2021
13 December 2017
13 December 2020 & 2022
27 March 2018
27 March 2021
14 January 2019
14 January 2024
4 March 2019
4 March 2024
2019
2018
Exercise
price
Number of
options
Exercise
price
Number of
options
$0.20
$0.20
$0.20
750,001
100,000
400,000
$0.20
1,500,002
$0.20
$0.20
100,000
400,000
$0.20
1,650,000
$0.20
1,650,000
$0.50
5,100,000
$0.50
360,000
Balance at 30 June
8,360,001
3,650,002
ACROW ANNUAL REPORT 2019 71
28. Share Based Payments (continued)
Reconciliation of outstanding share options
2019
2018
Weighted
average
excercise
price
Number
$0.20
5,350,002
$0.50
2,050,000
Number
3,650,002
5,460,000
(750,001)
$0.20
(3,750,000)
8,360,001
$0.40
3,650,002
Weighted
average
excercise
price
$0.20
$0.20
$0.20
$0.20
Outstanding at 1 July
Granted during the year
Exercised during the year
Outstanding at 30 June
Performance Rights
No new performance rights have been granted during FY2019. Carried forward from previous reporting period, the
Group granted 12,375,000 performance rights in March 2018 to selected employees and directors. The performance
rights have the following terms:
(i) Exercise price: Nil;
(ii) Conversion: upon vesting, conversion to shares on a 1 for 1 basis;
(iii) Dividends: not entitled until performance rights are exercised;
(iv) Vesting hurdles: subject to continuous service by an employee or a director of the Group for 2 years from the
date of issue, and satisfaction of performance hurdles being FY19 EBITDA exceeding $11m, this has been
achieved at reporting date, given it is probable the employees and directors will continue their service or have
been granted as “good leavers”, therefore these are included as dilutive shares for the calculation of Earnings Per
Shares (note 23); and
(v) Expiry date: if unvested after 2 years from the date of issue, expires immediately thereafter.
The fair value at grant date was determined to be $0.20, equivalent to the share price on 27 March 2018.
29. FINANCIAL RISK MANAGEMENT
Risk Management Objectives and Policies
The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, interest rate
risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of
financial markets and seeks to minimise potential adverse effects on the financial performance of the Group.
The Group uses derivative financial instruments such as foreign exchange contracts to hedge certain risk exposures.
Derivatives are exclusively used for economic hedging purposes and not as trading or speculative instruments.
The Group uses different methods to measure different types of risk to which it is exposed. These methods include
sensitivity analysis in the case of interest rate, foreign exchange and other price risks, and aging analysis for credit
risk. There were no open foreign exchange contracts at 30 June 2019.
Fair value hierarchy
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for
disclosure purposes.
Fair value inputs are summarised as follows:
72 ACROW ANNUAL REPORT 2019
Notes to the Financial Statementsfor the year ended 30 June 2019 Level 1: The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and
trading and available-for-sale securities) is based on quoted market prices at the end of the reporting period.
Level 2: The fair value of financial instruments that are not traded in an active market (for example, over-the-counter
derivatives) is determined using valuation techniques which maximise the use of observable market data and rely as
little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable,
the instrument is included in level 2.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included
in level 3.
Fair value inputs are summarised as follows:
Fair value
heirarchy
Valuation technique
Derivatives – forward exchange contracts
Level 2
The fair value is determined using quoted forward
exchange rates at the reporting date and present
value calculations based on a yield curve sourced
from available market data quoted for the
respective currencies
Fair value hierarchy is re-assessed annually for any change in circumstance that may suggest a revised level be
assigned to a type of balance measured at fair value.
The Group’s risk management is coordinated by management, in close cooperation with the Board of Directors,
and focuses on actively securing the Group’s short to medium-term cash flows by minimising the exposure to
financial markets.
The Group does not actively engage in the trading of financial assets for speculative purposes. The most significant
financial risks to which the Group is exposed are described below.
Market Risk Analysis
The Group is exposed to market risk through its use of financial instruments and specifically to interest rate risk and
certain other price risks, which result from its operating activities.
Exposure to Currency Risk
As at 30 June 2019 the Group held no trade payables or open forward exchange contracts in Hong Kong Dollars.
At reporting date, the Group does not hold any Forward exchange contracts and its currency risks (United States
Dollars and Great British Pounds) at balance date are as follow:
Trade payables
Purchase orders at 30 June
Forward exchange contracts
Net exposure
30 June 2019
30 June 2018
USD
1,167,631
164,089
–
GBP
8,993
USD
271,173
HKD
90,780
–
–
1,341,810
757,798
(870,799)
(715,492)
1,331,720
8,993
742,184
133,086
ACROW ANNUAL REPORT 2019 73
29. Financial Risk Management (continued)
Foreign Currency Sensitivity
A reasonable possible strengthening/(weakening) of the USD or the Great British Pounds at 30 June would have
affected profit or loss by the amounts shown below. This analysis assumes that all other variables remain constant
and ignores the impact of forecast purchases.
USD (10% movement)
GBP (10% movement)
Interest Rate Risk
Profit or loss
Strengthening
Weakening
121,065
(133,172)
818
(899)
The Group’s policy is to minimise interest rate cash flow risk exposures on long-term financing. At 30 June 2019 the
Group has the following exposure to interest rates on borrowings
Fixed rate instruments
Financial assets
Loans and borrowings
Variable rate instruments
Financial assets
Loans and borrowings
Interest Rate Sensitivity
2019
2018
–
803,410
(961,092)
–
–
479,234
(5,978,000)
–
At 30 June 2019, the Group held interest bearing loans of $6,939,092 (2018: nil) and held interest bearing cash
accounts of $3,289,617 (2018: $2,417,778).
A reasonably possible change of 100 basis points in interest rates at the reporting date would have no impact on
profit or loss for the year.
Credit Risk Analysis
Credit risk is the risk that a counterparty fails to discharge an obligation to the Group. The Group is exposed to this
risk principally through receivables from customers. The Group’s maximum exposure to credit risk is limited to the
carrying amount of financial assets recognised at the reporting date, as summarised below:
In dollars
Classes of financial assets
Cash and cash equivalents
Other financial assets
Derivative financial instruments
Trade and other receivables
74 ACROW ANNUAL REPORT 2019
2019
2018
3,289,617
4,917,837
–
–
803,410
27,068
13,104,919 10,477,792
16,394,536
16,226,107
Notes to the Financial Statementsfor the year ended 30 June 2019 The Group continuously monitors defaults of customers and other counterparties, identified either individually or by
group and incorporates this information into its credit risk controls. Where available at reasonable cost, external credit
ratings and/or reports on customers and other counterparties are obtained and used. The Group’s policy is to deal
only with creditworthy counterparties.
Liquidity Risk Analysis
Liquidity risk is the risk that the Group might be unable to meet its obligations. The Group manages its liquidity needs
by monitoring scheduled debt servicing payments for long-term financial liabilities as well as forecast cash inflows
and outflows due in day-to-day business. The data used for analysing these cash flows is consistent with that used
in the contractual maturity analysis below. Liquidity needs are monitored in various time bands, on a day-to-day
and week-to-week basis, as well as on a rolling 30-day projection. Long-term liquidity needs for a 180-day and a
360-day lookout period are identified monthly. Net cash requirements are compared to available borrowing facilities
to determine headroom or any shortfalls. This analysis shows that available borrowing facilities are expected to be
sufficient over the lookout period.
The Group’s objective is to maintain cash to meet its liquidity requirements for 30-day periods at a minimum. Funding
for long-term liquidity needs is additionally secured by an adequate amount of committed credit facilities.
The Group considers expected cash flows from financial assets in assessing and managing liquidity risk, notably its
cash resources and trade receivables. The Group’s existing cash resources and trade receivables significantly exceed
the current cash outflow requirements. Cash flows from trade and other receivables are all contractually due within
three months.
The following liquidity risk disclosures reflect all contractually fixed repayments and interest resulting from recognised
financial liabilities and derivatives as of 30 June 2019. The timing of cash flows for liabilities is based on the
contractual terms of the underlying contract.
2019
Non-derivative financial liabilities
Deferred consideration
Contractual cash flow
Carrying
amount
Total
1 year or
less
1 to 5
years
4,358,279
(4,500,000)
(2,250,000)
(2,250,000)
Trade payables and accrued expenses
10,201,225 (10,201,225) (10,201,225)
Loans and borrowings
6,939,092
(6,939,092)
(2,102,006)
(4,837,086)
21,498,596 (21,640,317) (14,553,231)
(7,087,086)
Derivative financial liabilities
Forward exchange contracts
2018
Non-derivative financial liabilities
Trade payables
Derivative financial liabilities
Forward exchange contracts
–
–
–
7,271,049
(7,271,049)
(7,271,049)
27,068
(27,068)
(27,068)
–
–
ACROW ANNUAL REPORT 2019 75
30. GROUP ENTITIES
The consolidated financial statements include the financial statements of the following wholly owned subsidiaries:
Acrow Holdings Pty Limited (a), (b)
Acrow Formwork and Scaffolding Pty Ltd (a), (b)
Natform Pty Ltd (a), (b)
Natform (QLD) Pty Ltd (a), (b)
Acrow Group Investments Pty Ltd (a), (b)
Noble Mineral Resources Ghana Limited
Place of
incorporation
% equity
interest
NSW
NSW
NSW
QLD
NSW
Ghana
100%
100%
100%
100%
100%
100%
(a) These subsidiaries have been granted relief from the necessity to prepare financial reports under the option
available to the Group under ASIC Corporations (Wholly Owned Companies) Instrument 2016/785.
(b) These subsidiaries, along with Acrow Formwork and Construction Services Limited (the parent entity of the
Group), form the Deed of Cross Guarantee Group described further from note 34.
31. ACQUISITION OF NATFORM PTY LTD AND NATFORM
(QLD) PTY LTD
On 31 August 2018 Acrow acquired 100% of the issued shares of Natform Pty Ltd and Natform (QLD) Pty Ltd
(collectively Natform). Natform is a supplier of screen-based formwork systems which support the construction of
commercial and residential high-rise buildings and civil infrastructure across the NSW, ACT and QLD markets.
The consideration comprised of $7,105,341 in cash, 10,000,000 Acrow shares valued at $0.475 each, escrowed
for 12 months from 31 August 2018, two instalments of deferred consideration of $2,250,000 due on 7 September
2019 and 7 September 2020 respectively, and contingent payments of $1,000,000 cash or an equivalent number of
shares based on a price of $0.40 per share should Natform EBITDA reach $4,500,000 between 1 September 2018
and 31 August 2019 and a further $1,000,000 cash or an equivalent number of shares based on a price of $0.60
per share should EBITDA reach $5,000,000 between 1 September 2019 and 31 August 2020. As the contingent
consideration EBITDA target was not considered probable, no amounts have been included in the consideration.
At reporting date, there is no new information about the facts and circumstances that existed on acquisition date.
Given the 12 months provisional period concludes on 31 August 2019, Acrow does not anticipate any changes to the
following amounts recognised for assets acquired and liabilities assumed at the date of acquisition.
The goodwill is attributable predominately to the key management who have been operating Natform for thirty years,
their team of experienced workforce and qualified engineers, established customer base and competitive advantage
in service offerings that do not meet the recognition criteria as intangible assets at the date of acquisition. The
goodwill is not deductible for tax purposes. Costs on acquisition and related items amounted to $134,487.
76 ACROW ANNUAL REPORT 2019
Notes to the Financial Statementsfor the year ended 30 June 2019 Natform Pty Ltd and Natform (QLD) Pty Ltd
In dollars
Assets
Cash and cash equivalents
Receivables
Inventory
Property, plant and equipment
Other
Total assets
Liabilities
Trade and other payables
Provisions
Provision for income tax
Deferred tax liabilities
Total liabilities
Net assets
Goodwill on acquisition
Purchase consideration transferred
$
375,854
1,194,304
346,987
9,505,123
368,841
11,791,109
257,347
496,444
252,601
2,044,875
3,051,267
8,739,842
7,301,902
16,041,744
The valuation techniques used for measuring the fair value of material assets acquired were as follows:
Asset Acquired
Hire equipment
Valuation Technique
Depreciated replacement cost as determined by Acrow’s management following a
self-assessment. Depreciated replacement cost reflects adjustments for physical
deterioration as well as functional and economic obsolescence.
The consolidated statement of profit and loss and comprehensive income includes the following revenue and net
profit resulting from the acquisition made since 31 August 2018:
Revenue
Net loss after tax
6,318,979
(45,525)
If the acquisition had taken place at the beginning of the financial year (1 July 2018), the following revenue and net
profit after tax would have been included:
Revenue
Net loss after tax
7,758,132
(54,630)
ACROW ANNUAL REPORT 2019 77
32. OPERATING SEGMENTS
The Group manages all its construction-related operations, being all the Australian based formwork and scaffolding
subsidiaries as one segment and the mining operation in Ghana as a separate segment. The executive management
team (the chief operating decision makers) assesses the financial performance of the construction-related on an
integrated basis only and accordingly.
All revenue is generated by external customers in Australia on formwork and construction related services and
mineral exploration assets and liabilities are held for sale as detailed in note 13.
The Group has the following segments:
›› Formwork and Construction Services: the provision of formwork, scaffolding and related materials for hire and
sales; and
›› Mineral exploration activities
Segment Information as at 30 June 2019
In dollars
Hire of equipment
Provision of labour and contracting services
Other hardware sales
Other income
Segment revenue
Segment operating profit
Unallocated corporate overhead costs
Finance costs
Profit (loss) before income tax
Income tax expense
Profit (loss) after income tax
Other material items:
Goodwill on acquisition
Capital expenditure
Depreciation and amortisation
Segment assets
Segment liabilities
Formwork &
construction
Mineral
exploration
33,140,700
22,075,424
13,642,786
881,092
–
–
–
–
Total
33,140,700
22,075,424
13,642,786
881,092
69,740,002
–
69,740,002
7,888,356
(67,532)
7,820,824
(963,870)
(59,153)
7,301,902
9,784,502
3,261,936
(1,849,086)
(963,870)
5,007,868
(59,153)
4,948,715
7,301,902
9,784,502
3,261,936
–
–
–
–
–
75,228,415
71,296
75,299,711
27,610,781
65,878
27,676,659
78 ACROW ANNUAL REPORT 2019
Notes to the Financial Statementsfor the year ended 30 June 2019
Segment Information as at 30 June 2018
In dollars
Hire of equipment
Provision of labour and contracting services
Other hardware sales
Other income
Segment revenue
Segment operating profit
Unallocated corporate overhead costs
Finance costs
Gain on bargain purchase
Profit (loss) before income tax
Other material items:
Capital expenditure
Depreciation and amortisation
Segment assets
Segment liabilities
Geographical Information
The Group’s Mineral Exploration segment operates in Ghana.
Construction related segment operates in Australia.
Formwork &
construction
Mineral
exploration
8,176,836
4,395,244
2,906,916
261,087
Total
8,176,836
4,395,244
2,906,916
261,087
15,740,083
15,740,083
2,301,505
(59,764)
2,241,741
–
1,086,382
445,754
50,217,780
11,177,228
(2,342,497)
(213,685)
10,825,099
10,510,658
1,086,382
445,754
–
–
–
67,650
50,285,430
62,508
11,239,736
ACROW ANNUAL REPORT 2019 79
33. PARENT ENTITY DISCLOSURES
In dollars
Results of parent entity
Loss for the period
Other comprehensive income
Total comprehensive income for the period
Financial position of parent entity at year end
Current assets
Non-current assets
Total assets
Current liabilities
Total liabilities
Net assets
Total equity of parent entity comprising:
Share capital
Reserves
Accumulated profits/(losses)
Total equity
In dollars
Movement to Accumulated profits/(losses)
FY 2019 opening balance
Transfer from Reserves for gain on bargain purchase of the Acrow Holdings Pty Ltd and
Acrow Formwork and Scaffolding Pty Ltd
Dividend paid and reinvested through DRP
Loss for the period
FY 2019 closing balance
2019
2018
(1,781,830)
(2,536,859)
–
10,825,098
(1,781,830)
8,288,239
6,709
397,909
39,527,860
36,483,511
39,534,569
36,881,420
288,349
288,349
66,758
66,758
39,246,220
36,814,662
34,814,339
29,377,927
2,006,033
11,448,110
2,425,848
(4,011,375)
39,246,220
36,814,662
2019
(4,011,375)
10,825,098
(2,606,047)
(1,781,830)
2,425,848
80 ACROW ANNUAL REPORT 2019
Notes to the Financial Statementsfor the year ended 30 June 2019 34. DEED OF CROSS GUARANTEE
Under the terms of ASIC Corporations (Wholly-owned Companies) Instrument 2016/785, certain wholly owned
controlled entities have been granted relief from the requirement to prepare audited financial reports. Acrow entered
into an approved Deed of Indemnity on 26 June 2018 for the cross-guarantee of liabilities with Acrow Formwork and
Scaffolding Pty Ltd and Acrow Holdings Pty Ltd, then on 19 December 2018, an Assumption Deed was executed to
include newly formed entity Acrow Group Investments Pty Ltd and newly acquired companies, Natform Pty Ltd and
Natform (QLD) Pty Ltd.
The following consolidated statement of comprehensive income and statement of financial position comprises Acrow
and its controlled entities which are party to the Deed of Cross Guarantee, after eliminating all transactions between
parties to the Deed.
Statement of Comprehensive Income
For the year ended 30 June 2019
In dollars
Revenue
Other income
Personnel expenses
Sub-contract labour costs
Inventory purchased, net of changes in finished goods
Property costs
Depreciation
Other expenses
Results from operating activities
Finance income
Finance cost
Net finance income/(expense)
Profit/(loss) before income tax
Income tax expense
Profit/(loss) for the year
Total comprehensive income for the year
2019
2018
68,858,910
15,478,994
881,092
11,086,186
(22,589,627)
(6,398,778)
(18,005,200)
(3,575,132)
(9,120,271)
(2,214,423)
(4,203,517)
(796,006)
(3,261,936)
(445,754)
(6,587,964)
(2,379,383)
5,971,488
10,755,704
11,261
34,076
(975,131)
(247,762)
(963,870)
(213,686)
5,007,618
10,542,018
(59,153)
–
4,948,465
10,542,018
4,948,465
10,542,018
ACROW ANNUAL REPORT 2019 81
34. Deed of Cross Guarantee (continued)
Statement of Financial Position
As at 30 June 2019
In dollars
Assets
Cash and cash equivalent
Other financial assets
Receivables
Inventories
Prepayments and other assets
Assets held for sale
Total current assets
Property, plant & equipment
Intangibles
Other financial assets
Total non-current assets
Total assets
Liabilities
Trade payables
Other payables
Employee benefits
Borrowings
Current tax liabilities
Liabilities held for sale
Total current liabilities
Other payables
Employee benefits
Borrowings
Provisions
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Share capital
Reserves
Retained earnings / (accumulated losses)
Total equity
82 ACROW ANNUAL REPORT 2019
2019
2018
3,289,503
4,917,429
–
491,827
13,104,919
10,477,792
3,413,361
2,111,446
1,125,992
196,297
–
–
20,933,774
18,194,790
46,992,624
31,710,998
7,301,892
–
–
311,583
54,294,516
32,022,581
75,228,291
50,217,371
10,201,225
7,298,195
2,230,199
–
2,962,801
3,095,040
2,102,006
556,301
–
–
–
–
18,052,532
10,393,234
2,128,080
–
456,609
331,597
4,837,086
–
452,474
452,474
1,683,999
–
9,558,249
784,071
27,610,781
11,177,305
47,617,510
39,040,066
34,814,339
29,377,927
2,006,033
623,012
10,797,137
9,039,127
47,617,510 39,040,066
Notes to the Financial Statementsfor the year ended 30 June 2019
35. SUBSEQUENT EVENTS
On 29 August the Directors declared an unfranked dividend of 1.0 cent per share to be paid on Friday 15th
November 2019. Dividend Reinvestment Plan is available for election. The dividend has not been provided for in this
financial report as it was not declared until after 30 June 2019.
Subsequent to year end, the Group entered into a legal sale and leaseback transaction with a trade debtor owing
$0.9m included in the 30 June 2019 trade receivables balance. This transaction resulted in the extinguishment of the
unsecured trade receivable balance and the realisation of a secured receivable.
Equipment loans of $1,819,415 were drawn down subsequent to balance date under the existing Equipment
Finance facility.
Share-based payments in the form of 1,200,000 options have been issued under the Employee Share Option Plan
issued to a Key Management Personnel subsequent to reporting date.
Mr Michael Hill was the Chair of the Remuneration and Nomination Committee up to his date of resignation on
19th September 2019 being replaced on that day by Mr Gregg Taylor. Mr Joshua May is the Chairman of the Audit
and Risk Committee.
Other than the above matters there has not otherwise arisen between the end of the year end period and the date of
this report any item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the
Group, to affect significantly the operations of the Group, the results of those operations, or the state of the affairs of
the Group, in future financial years.
ACROW ANNUAL REPORT 2019 83
In the opinion of the directors of Acrow Formwork and Construction Services Ltd (the Group):
(a) the consolidated financial statements and notes and the Remuneration report that are in accordance with the
Corporations Act 2001, including:
(i) giving a true and fair view of the Group’s financial position as at 30 June 2019 and of its performance, for the
financial year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001;
(b) there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become
due and payable.
(c) There are reasonable grounds to believe that Acrow Formwork and Construction Services Limited and its
controlled entities identified in note 30 will be able to meet any obligations or liabilities to which they are or may
become subject by virtue of the Deed of Cross Guarantee between Acrow Formwork and Construction Services
Limited and its controlled entities pursuit to ASIC Corporations wholly-owned companies instrument 2016/785.
(d) The Directors have been given the declarations required by section 295A of the Corporations Act 2001 from the
Chief Executive Officer and the Chief Financial Officer for the financial year ended 30 June 2019.
Signed in accordance with a resolution of the directors:
Peter Lancken
Chairman
Sydney
27 September 2019
Steven Boland
Director, Chief Executive Officer
84 ACROW ANNUAL REPORT 2019
Directors’ Declarationfor the year ended 30 June 2019
Independent Auditor’s Report
for the year ended 30 June 2019
ACROW ANNUAL REPORT 2019 85
Liability limited by a scheme approved under Professional Standards Legislation.KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Independent Auditor’s Report To the shareholders of Acrow Formwork and Construction Services Limited Report on the audit of the Financial Report Opinion We have audited the Financial Report of Acrow Formwork and Construction Services Limited (the Company). In our opinion, the accompanying Financial Report of the Company is in accordance with the Corporations Act 2001, including: • giving a true and fair view of the Group's financial position as at 30 June 2019 and of its financial performance for the year ended on that date; and • complying with Australian Accounting Standards and the Corporations Regulations 2001. The Financial Report comprises: • Consolidated statement of financial position as at 30 June 2019 • Consolidated statement of comprehensive income, Consolidated statement of changes in equity, and Consolidated statement of cash flows for the year then ended • Notes including a summary of significant accounting policies • Directors' Declaration. The Group consists of Acrow Formwork and Construction Services Limited (the Company) and the entities it controlled at the year end or from time to time during the financial year. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report. We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the Financial Report in Australia. We have fulfilled our other ethical responsibilities in accordance with the Code. 86 ACROW ANNUAL REPORT 2019
Independent Auditor’s Reportfor the year ended 30 June 2019Key Audit Matters Key Audit Matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial Report of the current period. These matters were addressed in the context of our audit of the Financial Report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Acquisition of Natform Pty Ltd and Natform (QLD) Pty Ltd - $16.0 million Refer to Note 31 Acquisition of Natform companies The key audit matter How the matter was addressed in our audit The Group’s acquisition of Natform Pty Ltd and Natform (QLD) Pty Ltd for consideration of $16.0 million on 31 August 2018 represents a significant single acquisition. This was a key audit matter due to the size and scale of the acquisition. The transaction had a pervasive impact on the financial statements and consequently required significant audit effort and senior team involvement. At the reporting date no new information has been obtained about the facts and circumstances that existed on the acquisition date. The Group does not anticipate any changes to the assets acquired and liabilities assumed at the date of acquisition. We focussed on the following key judgements made by the Group in determining the fair value of net assets acquired in the purchase price allocation (PPA): •the replacement cost of the hireequipment•the useful lives of the hireequipment•the methodologies applied in thevaluation of the hire equipment.Our procedures included: •Reading the acquisition contract to:-understand the key terms-assess the acquisition against the criteria of abusiness combination in the accounting standards;-assess the Group’s identification of the relevantassets acquired and liabilities assumed;•We challenged the key inputs and the valuationmethodologies applied in the PPA to hire equipment.This included.-evaluating the Group’s determination of replacementcost of the hire equipment by comparing to theoriginal cost in the acquiree’s accounting records;-assessing the Group’s useful lives of the hireequipment using the acquirees’s underlyingaccounting records, our understanding of the natureand condition of the assets required and theindustry;•We compared the acquired company’s accountingpolicies against the Group’s policies; and•We assessed the adequacy of the Group’s disclosures inrespect to the business acquisition, by comparing thesedisclosures to our understanding of the acquisition, andagainst the requirements of accounting standards. ACROW ANNUAL REPORT 2019 87
Recoverability of Trade receivables - $13.1 million Refer to Note 11 Trade and Other Receivables The key audit matter How the matter was addressed in our audit The Group’s credit exposure is concentrated in customers in the construction sector, which is subject to business cycles. The recovery of trade receivables is dependent on the ability of customers operating in this industry to remain solvent while facing these operational and macroeconomic risks. Recoverability of trade debtors was considered to be a key audit matter due to: •Trade receivables past due at thereporting date which have certainrisk characteristics and thereforehave a greater inherent risk of notbeing recovered.•The inherent subjectivity involved inthe Group making forward-lookingjudgements in relation to therecovery of credit risk exposures;and•The Group’s adoption of AASB 9Financial Instruments requiring theuse of an expected credit lossmodelThese conditions gave rise to additional audit effort, including: •Greater involvement by our seniorteam members to gather evidenceacross the various customer profilesand their trade receivables; and•To challenge the forward-lookingjudgements made by theConsolidated Entity.Our procedures included: •Testing the trade receivables ageing profile prepared bythe Group for the purpose of placing reliance on thetrade receivables ageing profile for our analysis;•Assessing the Group’s identification of credit-impairedtrade receivables including the bases adopted by theGroup in the identification;•We challenged the identified trade receivables by takinginto account past payment trends, industry data andobservable data specific to the relevant customers;•We evaluated the Group’s assessment of therecoverability of individually significant credit-impairedtrade receivables by challenging the Group’s estimatestaking into account historical payment records andsubsequent receipts after year-end. We:-agreed cash received subsequent to year-end to theGroup’s bank statements to assess its effect inreducing amounts outstanding for the relatedcustomer balances at year-end-evaluated other evidence including customercorrespondence; and-assessed the Group’s knowledge of futureconditions for individual customers which mayimpact expected customer receipts based onconsistency with the results of the proceduresperformed above; and•We assessed the Group’s expected credit loss modelagainst the requirements of the accounting standards;and•We assessed the Group’s disclosures of the quantitativeand qualitative considerations in relation to tradereceivable credit risk, by comparing these disclosures toour understanding of the matter and the requirements ofthe accounting standards. 88 ACROW ANNUAL REPORT 2019
Independent Auditor’s Reportfor the year ended 30 June 2019Other Information Other Information is financial and non-financial information in Acrow Formwork and Construction Services Limited’s annual reporting which is provided in addition to the Financial Report and the Auditor’s Report. The Directors are responsible for the Other Information. Our opinion on the Financial Report does not cover the Other Information and, accordingly, we will not express an audit opinion or any form of assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion. In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In doing so, we consider whether the Other Information is materially inconsistent with the Financial Report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. We are required to report if we conclude that there is a material misstatement of this Other Information and based on the work we have performed on the Other Information that we obtained prior to the date of this Auditor’s Report we have nothing to report.Responsibilities of the Directors for the Financial Report The Directors are responsible for: •preparing the Financial Report that gives a true and fair view in accordance with Australian AccountingStandards and the Corporations Act 2001•implementing necessary internal control to enable the preparation of a Financial Report that gives a trueand fair view and is free from material misstatement, whether due to fraud or error•assessing the Group and Company's ability to continue as a going concern and whether the use of thegoing concern basis of accounting is appropriate. This includes disclosing, as applicable, matters related togoing concern and using the going concern basis of accounting unless they either intend to liquidate theGroup and Company or to cease operations, or have no realistic alternative but to do so.Auditor’s responsibilities for the audit of the Financial Report Our objective is: •to obtain reasonable assurance about whether the Financial Report as a whole is free from materialmisstatement, whether due to fraud or error; and•to issue an Auditor’s Report that includes our opinion.Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the Financial Report. ACROW ANNUAL REPORT 2019 89
A further description of our responsibilities for the audit of the Financial Report is located at the Auditing and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our Auditor’s Report. Report on the Remuneration Report Opinion In our opinion, the Remuneration Report of Acrow Formwork and Construction Services Limited for the year ended 30 June 2019, complies with Section 300A of the Corporations Act 2001. Directors’ responsibilities The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with Section 300A of the Corporations Act 2001. Our responsibilities We have audited the Remuneration Report included in pages 23 to 42 of the Directors’ report for the year ended 30 June 2019. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. KPMG Marcus McArdle Partner Sydney 27 September 2019 The shareholder information set out below was applicable as at 23 September 2019.
SUBSTANTIAL SHAREHOLDERS
Top holders
IOOF Holdings Pty Ltd
Schroder Investment Management Australia Limited
Keneco Property Pty Ltd
Margaret Anna Prokop
HOLDING DISTRIBUTION
Analysis of numbers of equity holders by size of holding:
Securities
%
25,071,559
14.126
14,792,872
11,920,000
10,392,681
8.335
6.716
5.856
Range
100,001 and over
10,001 to 100,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
No. of fully
paid ordinary
shareholders
No. of
option-
holders
No. of
performance
rights
holders
184
603
167
252
1,569
2,775
17
9
–
–
–
26
11
–
–
–
–
11
There are 1,647 holders of unmarketable parcels of ordinary shares.
VOTING RIGHTS
Fully Paid Ordinary Shares – on a show of hands every member present at a meeting in person or by proxy shall have
one vote and upon a poll each share have one vote.
Options and Performance Rights – do not have voting rights.
90 ACROW ANNUAL REPORT 2019
Shareholder Informationfor the year ended 30 June 2019 SHARES SUBJECT TO VOLUNTARY ESCROW
Shares subject to voluntary escrow until certain time and conditions, include:
›› 2,583,337 shares voluntarily escrowed until the Company’s FY19 results are lodged with ASX (approximately
September 2019).
›› 2,583,332 shares voluntarily escrowed until the Company’s half-yearly results for FY20 are lodged with ASX
(approximately February 2020).
›› 2,583,331 shares voluntarily escrowed until the Company’s FY20 results are lodged with ASX (approximately
September 2020).
›› 2,430,000 loan funded shares to directors and management subject to a vesting condition of continuous
employment and/or service as an employee or Director (as appropriate) for 2 years from the date of issue, and a
performance hurdle of 20 day VWAP of the Company’s Share price exceeding 40 cents per share.
›› 45,000 loan funded shares to an advisor of the Company subject to a vesting condition of continuous service as
an advisor to the Company for 2 years from the date of issue. And a performance hurdle of 20 day VWAP of the
Company’s Share price exceeding 40 cents per share.
UNLISTED SECURITIES
Unlisted securities include: 4,569,001 unlisted options and 12,375,000 performance rights.
No optionholder has more than 20% of the total.
There are 2 performance rights holders with 20% or more of the total ╩ Palcort Pty Ltd 21.21% and Maryville Pty
Ltd╩20.61%.
ACROW ANNUAL REPORT 2019 91
TOP HOLDERS
Twenty largest quoted equity security holders
The names of the twenty largest holders of quoted equity securities are listed below:
As at 23 September 2019
Rank Holder name
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
20
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
NATIONAL NOMINEES LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
KENECO PROPERTY PTY LTD
BNP PARIBAS NOMINEES PTY LTD
MARGARET ANNA PROKOP
NETWEALTH INVESTMENTS LIMITED
BNP PARIBAS NOMS PTY LTD
MRP PROPERTY PTY LTD
JARUMITO PTY LIMITED
WHOOSHKA NOMINEES
JOSAMBA PTY LTD
TOTAL CONSTRUCTION PTY LIMITED
DR DAVID JOHN RITCHIE & DR GILLIAN JOAN RITCHIE
DRACKA PTY LTD
MR STEPHEN JAMES TAYLOR
KENECO PROPERTY PTY LTD
BREBEC PTY LTD
BRUNDEE INVESTMENTS PTY LTD
W H FRANKS CONSTRUCTIONS PTY LTD
KENNARD FAMILY SUPER FUND
Totals
Total Issued Capital
Holding
19,370,103
14,407,548
10,481,863
10,420,000
6,459,021
6,235,484
5,176,671
4,654,824
4,157,197
2,727,050
2,586,278
2,500,000
2,010,492
2,000,000
1,880,000
1,805,000
1,500,000
1,277,058
1,275,946
1,250,000
% IC
10.91
8.12
5.91
5.87
3.64
3.51
2.92
2.62
2.34
1.54
1.46
1.41
1.13
1.13
1.06
1.02
0.85
0.72
0.72
0.70
1,250,000
103,424,535
177,481,455
0.70
58.27
100.00
92 ACROW ANNUAL REPORT 2019
Shareholder Informationfor the year ended 30 June 2019 www.acrow.com.au