l y n o e s u l a n o s r e p r o F `Annual Report 31 December 2020 E4G Investment Holdings Pty Ltd and Controlled Entities ACN 614 735 474 Aerison Pty Ltd | www.aerison.com Contents 2 AERISON AT A GLANCE .................................................................................................................................. 3 DIRECTORS ....................................................................................................................................................... 4 WHO WE ARE .................................................................................................................................................... 5 PERFORMANCE AT A GLANCE ...................................................................................................................... 6 SUMMARY OF 2020 PERFORMANCE ............................................................................................................. 7 DIRECTORS REPORT ....................................................................................................................................... 8 INDEPENDENT AUDITORS REPORT ............................................................................................................ 10 GENERAL INFORMATION .............................................................................................................................. 13 FINANCIAL REPORT ...................................................................................................................................... 14 DIRECTORS' DECLARATION ........................................................................................................................ 46 l y n o e s u l a n o s r e p r o F AERISON HOLDINGS PTY LTD AND CONTROLLED SUBSIDIARIES 2020 ANNUAL REPORT 3 E4G Investment Holdings Pty Ltd is the ultimate parent in the group. The subsidiary Aerison Pty Ltd is the trading entity within the group which derives income from trading activities. l y n o e s u l a n o s r e p Aerison at a Glance Overview Aerison is an engineering and construction company which self-performs engineering, design, fabrication, installation, maintenance and commissioning for projects in the mining & minerals, oil & gas and infrastructure sectors. Aerison offers turnkey services to asset owners looking to expand or improve their operations with the construction of new facilities as well as the improvement of and maintenance of existing facilities. History Established in Perth, Western Australia in 1988, Aerison has grown over the years from a specialist Environmental Engineering company to a broad based engineering design and construction company that self-performs multi-disciplined EPC, engineering and design, construction and maintenance services to a wide variety of industries and applications across Australia. The Company is recognised for its environmental services which includes studies, compliance testing and customised designed and built solutions that reduce the impact of industry on the environments. Aerison Holdings Pty Ltd (parent entity of Aerison Pty Ltd) was acquired by E4G Investment Holdings Pty Ltd in November 2016. The business Aerison’s corporate and operating office is located in West Perth, Western Australia with a 10,800 square meter fabrication and assembly facility in Forrestfield, Western Australia The Company currently employs a full-time workforce of approximately 120 professional, technical, managerial and support personnel, in addition to approximately 400 directly employed site construction personnel. With operations throughout Australia, Aerison is a diversified services company delivering and maintaining critical assets that sustain and enhance the environment in which we live. r o F Aerison’s skilled workforce, expertise in project management and end-to- end engineering, is backed by a continuous focus on safety, quality and delivering to schedule. The success of Aerison has been built on its ability to provide a quality turnkey service, and this is only possible by having in- house engineering and design, procurement, project management, manufacturing, construction, mechanical installation and commissioning capabilities. Aerison’s business model focuses on utilising in-house capabilities for the engineering, design, construction and maintenance of process and non- process infrastructure for Asset Owners which to date have included large mining producers, infrastructure and utilities owners. E4G INVESTMENT HOLDINGS PTY LTD AND CONTROLLED SUBSIDIARIES 2020 ANNUAL REPORT 4 Directors l y n o e s u l a n o s r e p r o F Giuseppe Leone CEO & Executive Director (Shareholder) Giuseppe has a CFO and investment banking background with 25 years of executive experience with multinational LSE Listed, ASX Listed and private companies in the technology, resources, oil and gas, chemicals and power sectors, across Australia, SE Asia and the Pacific Rim . Daniel Hibbs COO & Executive Director (Shareholder) Daniel has more than 20 years of operational experience in the Australian natural resources sector, with specific oil and gas and minerals expertise, having worked for Leighton Contractors, John Holland and Paladio Group. He also has significant exposure to projects in the Pilbara mining region of Western Australia Strong Asia Pac experience managing growth from a 1,500 strong workforce to over 10,000 across an entire region. Daniel has a demonstrable track record of building strong teams, sound processes and driving sustainable company growth. E4G Investment Holdings Pty Limited ABN 77 614 735 474 E4G INVESTMENT HOLDINGS PTY LTD AND CONTROLLED SUBSIDIARIES 2020 ANNUAL REPORT 5 Who we are Our Purpose To build a successful and sustainable business operating with integrity, fairness and transparency with our people, customers, suppliers and the community. Our Mission To position Aerison as a leading multi-disciplined EPC and services provider enhancing the performance of our customers by understanding their needs and delivering our core services safely, to the highest quality and to schedule. Our Strategy To operate as One Team, providing safe, seamless delivery. Our Values l y n o e s u l a n o s r e p INTEGRITY We are reliable, honest and accountable. . NURTURE Our people are the absolute core of our operation. SAFETY Safety is at the forefront of everything we do. PERFORMANCE We always strive to do things better. r o F . INNOVATION We do not accept ordinary. RELATIONSHIPS We always work with our people, clients and suppliers in a collaborative and transparent manner. EXCELLENCE We are continually raising the bar. E4G Investment Holdings Pty Limited ABN 77 614 735 474 E4G INVESTMENT HOLDINGS PTY LTD AND CONTROLLED SUBSIDIARIES 2020 ANNUAL REPORT 6 Performance at a Glance l y n o e s u l a n o s r e p r o F E4G Investment Holdings Pty Limited ABN 77 614 735 474 E4G INVESTMENT HOLDINGS PTY LTD AND CONTROLLED SUBSIDIARIES 2020 ANNUAL REPORT 7 Summary of 2020 Performance l y n o e s u l a n o s r e p r o F Overview The business continues to achieve double digit year on year growth across both revenue and earnings. With a strong tendering pipeline, improving capability and profitable orderbook going into 2021, another year of double-digit growth is forecast for 2021. Revenue for FY20 reached $100.5M up 26% on the previous period (LY $80.1M), on the back of increasing demand for Aerison’s specialist services, particularly with Australia’s major mineral producers. All areas of the business have experienced growth with a well-diversified mix between sustaining capital maintenance works and projects. EBITDA of $10.5M was achieved, up 15% on the previous period (LY $9.1M) and underpinned by strong gross margins. We continue to service existing clients, namely BHP, RTIO, Newmont Gold, FMG, in a project capacity as well as under existing Master Service Agreements (MSA). Having demonstrated our capability over the last two years, we are well positioned to continue to increase our services offering and revenues to these and to gain new clients. Financial A strong set of results which positions the business favourably going into 2021: • Sales revenue of $100.5M, up 26% • EBITDA of $10.5M up 15% • NPBT of $6.7M up 13% • Net assets of $18.0M, up 34% • Net cash* of -$2.1M at year end, LY-$2.5M *Excludes Convertible Notes Operations Key achievements in the year include: • Award of a sustaining Capital MSA, 3 +2 year term, major Iron Ore Producer . • Extension of an existing MSA for a further 3 years, Iron Ore Producer. • Project award circa $15.0M (potential scope increase to circa $52.0M) for delivery in 2021. • Award of an engineering services project, waste to • Completion of a number of Dust Mitigation Projects energy, circa $2.5M. circa $20M. Safety and wellbeing Our safety performance continues to improve achieving 1,090 days LTI free with the business continuing its focus on critical risk controls and behavioural safety. We continue to invest in frontline leadership training programs and field support. People At year end the business had 534 regular trades and staff. We continue to focus on staff development and retention, a key focus as the market tightens across both blue-collar trades and white-collar. There were a number of key appointments in the year, most notably the appointment of a General Manager to head up the major projects division which is experiencing growth. REVENUE ($M) 2020 2019 2018 100.5 80.1 50.5 NET CASH ($M) 2020 2019 2018 -2.1 -2.5 -2.0 EBITDA ($M) 2020 2019 2018 NPBT ($M) 2020 2019 2018 10.5 9.1 3.5 6.7 5.9 2.0 NET ASSETS ($M) 2020 2019 2018 18.0 13.5 9.9 Man hours 2020 2019 2018 972,714 597,985 443,553 Pipeline, markets and growth Our order book remains strong with circa $118M secured as year end for delivery in 2021 (LY$79.4M) with multiple opportunities expected to be awarded in H1 2021. The tendering pipeline remains strong with circa $900M+ of opportunities available to Aerison. It is expected that circa 50% of revenues in 2021 will be derived from term contracts and repeat business. Blue-chip client base We are pleased to report that the majority of our revenues continue to be derived direct from asset owners and blue-chip clients. Although there will be a large focus on iron ore over the next few years the business continues to diversify with awards expected in oil and gas and infrastructure, in particular in rail and road tunnel infrastructure. On behalf of the Board, I would like to take this opportunity to thank our employees, customers and shareholders for their ongoing loyalty and support as we progress on our growth path. Daniel Hibbs Executive Chairman and Chief Operating Officer E4G Investment Holdings Pty Limited ABN 77 614 735 474 l y n o e s u l a n o s r e p r o F E4G INVESTMENT HOLDINGS PTY LTD AND CONTROLLED SUBSIDIARIES 2020 ANNUAL REPORT 8 Directors Report The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the ‘consolidated entity’) consisting of E4G Investment Holdings Pty Ltd (referred to hereafter as “the Company” or ‘parent entity’) and its controlled entities at the end of, or during, the financial year ended 31 December 2020. Directors The names of the directors in office at any time during, or since the end of, the year are: Giuseppe Leone Daniel Hibbs Michael Fennell Min Lu (Resigned 11 March 2020) Qiudong Qiao (Appointed 11 March 2020) Directors have been in office since the beginning of the year to the date of this report unless otherwise stated. Review of Operations The profit for the consolidated entity after providing for income tax and non-controlling interest amounted to $5,051,046 (2019: $4,115,639). Dividends Dividends paid during the year was $576,000 (2019: $576,000). Principal activities The consolidated entity’s primary activity is engineering and construction and self-performs engineering, design, fabrication, installation, maintenance and commissioning for projects in the mining & minerals, oil & gas and infrastructure sectors. No significant change in the nature of these activities occurred during the year. Significant changes in the state of affairs There were no significant changes in the state of affairs of the consolidated entity during the financial year. Events subsequent to the end of the reporting date The impact of the Coronavirus (COVID-19) pandemic is ongoing. it is not practicable to estimate the potential impact, positive or negative, after the reporting date. The situation is rapidly developing and is dependent on measures imposed by the Australian Federal Government or Western Australian State Government. No other matter or circumstance has arisen since 31 December 2020 that has significantly affected, or may significantly affect the consolidated entity's operations, the results of those operations, or the consolidated entity's state of affairs in future financial years. Future development, prospects and business strategies Likely developments in the operations of the consolidated entity and the expected results of those operations in future financial years have not been included in this report as the inclusion of such information is likely to result in unreasonable prejudice to the consolidated entity. Environmental issues The consolidated entity is subject to environmental regulations under a law of the Commonwealth or of a state or territory of Australia. The consolidated entity is not aware of any breach of any environmental regulations. Options No options over issued shares or interests in E4G Investment Holdings Pty Ltd were granted during or since the end of the financial year and there were no options outstanding at the date of this report. E4G Investment Holdings Pty Limited ABN 77 614 735 474 l y n o e s u a n o s r e p E4G INVESTMENT HOLDINGS PTY LTD AND CONTROLLED SUBSIDIARIES 2020 ANNUAL REPORT 9 Indemnification of auditor The company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the company against a liability incurred by the auditor. During the year, the company has not paid a premium in respect of a contract to insure the auditor of the company. Indemnities given and insurance premiums paid to officers During the year, the company paid a premium to insure officers of the company. The officers of the company covered by the insurance policy include all directors. The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of the company, and any other payments arising from liabilities incurred by the officers in connection with such proceedings, other than where such liabilities arise out of conduct involving a wilful breach of duty by the officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else to cause detriment to the company. Details of the amount of the premium paid in respect of the insurance policies are not disclosed as such disclosure is prohibited under the terms of the contract. Proceedings on behalf of the company No person has applied for leave of Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the company or intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for all or any part of those proceedings. l The company was not a party to any such proceedings during the year. Auditor’s independence declaration A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is included within the financial report. This director’s report is signed in accordance with a resolution of the Board of Directors, pursuant to section 298(2)(a) of the Corporation Act 2001. Giuseppe Leone CEO and Executive Director Dated this 9th day of March 2021 r o F E4G Investment Holdings Pty Limited ABN 77 614 735 474 RSM Australia Partners Level 32, Exchange Tower 2 The Esplanade Perth WA 6000 GPO Box R1253 Perth WA 6844 T +61 (0) 8 9261 9100 F +61 (0) 8 9261 9111 www.rsm.com.au INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF E4G INVESTMENT HOLDINGS PTY LIMITED Opinion We have audited the financial report of E4G Investment Holdings Pty Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 31 December 2020, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the directors' declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Group’s financial position as at 31 December 2020 and of its financial performance for the year ended on that date; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. 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 auditor independence requirements of 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 also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor's report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. l y n o e s u l a n o s r e p r o F THE POWER OF BEING UNDERSTOOD AUDIT | TAX | CONSULTING RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction. RSM Australia Partners ABN 36 965 185 036 Liability limited by a scheme approved under Professional Standards Legislation Other Information The directors are responsible for the other information. The other information comprises the information included in the Group's annual report for the year ended 31 December 2020 but does not include the financial report and the auditor's report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, 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. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor's Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, 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 the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and 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 this financial report. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at: https://www.auasb.gov.au/auditors_responsibilities/ar4.pdf. This description forms part of our auditor's report. l y n o e s u l a n o s r e p r o F RSM AUSTRALIA PARTNERS Perth, WA Dated: 9 March 2021 TUTU PHONG Partner l y n o e s u RSM Australia Partners Level 32, Exchange Tower 2 The Esplanade Perth WA 6000 GPO Box R1253 Perth WA 6844 T +61 (0) 8 9261 9100 F +61 (0) 8 9261 9111 www.rsm.com.au AUDITOR’S INDEPENDENCE DECLARATION As lead auditor for the audit of the financial report of E4G Investment Holdings Pty Limited for the year ended 31 December 2020, I declare that, to the best of my knowledge and belief, there have been no contraventions of: (i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (ii) any applicable code of professional conduct in relation to the audit. l RSM AUSTRALIA PARTNERS TUTU PHONG Partner a n o s r e p Perth, WA Dated: 9 March 2021 r o F THE POWER OF BEING UNDERSTOOD AUDIT | TAX | CONSULTING RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction. RSM Australia Partners ABN 36 965 185 036 Liability limited by a scheme approved under Professional Standards Legislation E4G INVESTMENT HOLDINGS PTY LTD AND CONTROLLED SUBSIDIARIES 2020 ANNUAL REPORT 13 General Information The financial statements cover E4G Investment Holdings Pty Ltd as a consolidated entity consisting of E4G Investment Holdings Pty Ltd and the entities it controlled at the end of, or during, the year. The financial statements are presented in Australian dollars, which is E4G Investment Holdings Pty Ltd’s functional and presentation currency. E4G Investment Holdings Pty Ltd is a company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business are: Registered office 60 Havelock Street West Perth WA 6005 Principal place of business 1st floor, 56 Ord Street West Perth WA 6005 A description of the nature of the consolidated entity's operations and its principal activities are included in the directors' report, which is not part of the financial statements. The financial statements were authorised for issue, in accordance with a resolution of directors, on the ninth day of March 2021. The directors have the power to amend and reissue the financial statements. l y n o e s u l a n o s r e p r o F E4G Investment Holdings Pty Limited ABN 77 614 735 474 E4G INVESTMENT HOLDINGS PTY LTD AND CONTROLLED SUBSIDIARIES 2020 ANNUAL REPORT 14 Financial Report Statement of profit or loss and other comprehensive income For the year ended 31 December 2020 l y n o e s u l a n o s r e p r o F Revenue Cost of sales Gross profit Other income Administration expenses Depreciation and amortisation expense Finance costs Marketing expenses Occupancy expenses Other expenses Profit before income tax Income tax expense Profit after income tax Other comprehensive income Total comprehensive income for the year Note Consolidated Entity 2020 $ 2019 $ 3 3 4 4 5 100,526,414 80,058,696 (86,668,903) (68,521,219) 13,857,511 11,537,477 10,560 (1,326,850) (2,052,801) (1,712,031) (121,163) (440,944) (1,514,039) 6,700,243 (1,649,197) 13,220 (1,002,536) (1,836,525) (1,385,833) (153,091) (338,922) (920,364) 5,913,426 (1,797,787) 5,051,046 4,115,639 - - 5,051,046 4,115,639 The accompanying notes form part of these financial statements. E4G Investment Holdings Pty Limited ABN 77 614 735 474 E4G INVESTMENT HOLDINGS PTY LTD AND CONTROLLED SUBSIDIARIES 2020 ANNUAL REPORT 15 Statement of financial position As at 31 December 2020 l y n o e s u l a n o s r e p r o F Current assets Cash and cash equivalents Trade and other receivables Other assets Total current assets Non-current assets Property, plant and equipment Right of use assets Intangible assets Deferred tax assets Total non-current assets Total assets Current liabilities Trade and other payables Borrowings Lease liabilities Employee benefits Income tax Total current liabilities Non-current liabilities Lease Liabilities Employee benefits Deferred tax liabilities Total non-current liabilities Total liabilities Net assets Equity Issued capital Reserve Retained earnings Total equity Note Consolidated Entity 2020 $ 2019 $ 7 8 9 10 11 12 5 13 14 15 16 17 15 16 5 18 20 7,754,444 9,509,555 37,582,372 32,010,779 1,082,927 635,918 46,419,743 42,156,252 2,391,970 2,692,492 11,011 1,286,054 6,381,527 2,453,866 301,661 11,011 2,202,303 4,968,841 52,801,270 47,125,093 14,437,142 13,672,920 664,551 3,002,714 667,290 16,785,920 14,459,139 270,135 1,919,657 - 32,444,617 33,434,851 2,106,421 58,042 164,954 62,217 76,040 99,295 2,329,417 237,552 34,774,034 33,672,403 18,027,236 13,452,690 3,328,647 99,500 3,328,647 - 14,599,089 10,124,043 18,027,236 13,452,690 The accompanying notes form part of these financial statements. E4G Investment Holdings Pty Limited ABN 77 614 735 474 E4G INVESTMENT HOLDINGS PTY LTD AND CONTROLLED SUBSIDIARIES 2020 ANNUAL REPORT 16 Statement of changes in equity For the year ended 31 December 2020 Consolidated Balance at 1 January 2019 Profit after income tax expense for the year Other comprehensive income for the year, net of tax Total comprehensive income for the year Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs (note 18) Dividends paid (note 19) Issued Capital $ Reserves Retained Total Equity $ Profits $ $ 3,328,647 - 6,584,404 9,913,051 - - - - - - 4,115,639 4,115,639 - - - - - - 4,115,639 4,115,639 - - (576,000) (576,000) l Balance at 31 December 2019 3,328,647 - 10,124,043 13,452,690 Consolidated Balance at 1 January 2020 Profit after income tax expense for the year Other comprehensive income for the year, net of tax Total comprehensive income for the year Transactions with owners in their capacity as owners: Share based payments issued during the year (note 20) Dividends paid (note 19) Balance at 31 December 2020 Issued Capital $ Reserves Retained Total Equity $ Profits $ $ 3,328,647 - 10,124,043 13,452,690 - - - - - - 5,051,046 5,051,046 - - - - 5,051,046 5,051,046 99,500 - 99,500 - (576,000) (576,000) 3,328,647 99,500 14,599,089 18,027,236 l y n o e s u a n o s r e p r o F The accompanying notes form part of these financial statements. E4G Investment Holdings Pty Limited ABN 77 614 735 474 E4G INVESTMENT HOLDINGS PTY LTD AND CONTROLLED SUBSIDIARIES 2020 ANNUAL REPORT 17 Statement of cash flows For the year ended 31 December 2020 Cash flows from operating activities Receipts from customers Payments to suppliers and employees Interest received Finance costs Income tax paid Note Consolidated Entity 2020 $ 2019 $ 96,230,105 73,417,437 (93,024,895) (70,761,370) 10,291 14,785 (1,703,160) (1,314,857) - - Net cash generated from operating activities 28 1,512,341 1,355,995 Cash flows from investing activities Purchase of property, plant and equipment Purchase of intangible assets (372,960) - (587,125) 62,698 Net cash used in investing activities (372,960) (524,427) Cash flows from financing activities Repayment of short-term borrowings Proceeds from short-term borrowings Dividends declared and paid Repayment of lease liabilities Proceeds from issue of convertible notes Repayment of convertible notes Repayment of financing costs 19 (2,133,893) - (576,000) - 8,296,867 (576,000) (1,111,760) (1,055,773) 3,155,000 (2,227,839) - 485,000 (702,800) (25,205) Net cash (used in) / provided by financing activities (2,894,492) 6,422,089 Net change in cash held Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year 7 (1,755,111) 9,509,555 7,754,444 7,253,657 2,255,898 9,509,555 l y n o e s u l a n o s r e p r o F The accompanying notes form part of these financial statements. E4G Investment Holdings Pty Limited ABN 77 614 735 474 l y n o e s u l a n o s r e p r o F E4G INVESTMENT HOLDINGS PTY LTD AND CONTROLLED SUBSIDIARIES 2020 ANNUAL REPORT 18 Notes to the financial statements 31 December 2020 Note 1. Statement of significant accounting policies The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. New and amended accounting standards and interpretations adopted The consolidated entity has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period. Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. Basis of preparation These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') and the Corporations Act 2001, as appropriate for for-profit oriented entities. These financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board ('IASB'). Historical cost convention The financial statements have been prepared under the historical cost convention, except for, where applicable, the revaluation of financial assets and liabilities at fair value through profit or loss, financial assets at fair value through other comprehensive income, investment properties, certain classes of property, plant and equipment and derivative financial instruments. Critical accounting estimates The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the consolidated entity's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 2. Parent entity information In accordance with the Corporations Act 2001, these financial statements present the results of the consolidated entity only. Supplementary information about the parent entity is disclosed in note 24. Principles of consolidation The consolidated financial statements incorporate the assets, liabilities of all subsidiaries of E4G Investment Holdings Pty Ltd (‘company’ or ‘parent entity’) as at 31 December 2020 and results of all subsidiaries for the year then ended. E4G Investment Holdings Pty Ltd and its subsidiaries together are referred to in these financial statements as the ‘consolidated entity’. Subsidiaries are all those entities over which the consolidated entity has control. The consolidated entity controls an entity when the consolidated entity is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the consolidated entity. They are de-consolidated from the date that control ceases. Intercompany transactions, balances and unrealised gains on transactions between entities in the consolidated entity are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the consolidated entity. The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest, without the loss of control, is accounted for as an equity transaction, where the difference between the consideration transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity attributable to the parent. E4G Investment Holdings Pty Limited ABN 77 614 735 474 E4G INVESTMENT HOLDINGS PTY LTD AND CONTROLLED SUBSIDIARIES 2020 ANNUAL REPORT 19 Notes to the financial statements 31 December 2020 l y n o e s u l a n o s r e p r o F Note 1. Statement of significant accounting policies continued Non-controlling interest in the results and equity of subsidiaries are shown separately in the statement of profit or loss and other comprehensive income, statement of financial position and statement of changes in equity of the consolidated entity. Losses incurred by the consolidated entity are attributed to the non- controlling interest in full, even if that results in a deficit balance. Where the consolidated entity loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The consolidated entity recognises the fair value of the consideration received and the fair value of any investment retained together with any gain or loss in profit or loss. Business combinations The acquisition method of accounting is used to account for business combinations regardless of whether equity instruments or other assets are acquired. The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity instruments issued or liabilities incurred by the acquirer to former owners of the acquiree and the amount of any non-controlling interest in the acquiree. For each business combination, the non-controlling interest in the acquiree is measured at either fair value or at the proportionate share of the acquiree's identifiable net assets. All acquisition costs are expensed as incurred to profit or loss. On the acquisition of a business, the consolidated entity assesses the financial assets acquired and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic conditions, the consolidated entity's operating or accounting policies and other pertinent conditions in existence at the acquisition-date. Where the business combination is achieved in stages, the consolidated entity remeasures its previously held equity interest in the acquiree at the acquisition-date fair value and the difference between the fair value and the previous carrying amount is recognised in profit or loss. Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair value. Subsequent changes in the fair value of the contingent consideration classified as an asset or liability is recognised in profit or loss. Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any non- controlling interest in the acquiree and the fair value of the consideration transferred and the fair value of any pre-existing investment in the acquiree is recognised as goodwill. If the consideration transferred and the pre-existing fair value is less than the fair value of the identifiable net assets acquired, being a bargain purchase to the acquirer, the difference is recognised as a gain directly in profit or loss by the acquirer on the acquisition-date, but only after a reassessment of the identification and measurement of the net assets acquired, the non-controlling interest in the acquiree, if any, the consideration transferred and the acquirer's previously held equity interest in the acquirer. Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the provisional amounts recognised and also recognises additional assets or liabilities during the measurement period, based on new information obtained about the facts and circumstances that existed at the acquisition-date. The measurement period ends on either the earlier of (i) 12 months from the date of the acquisition or (ii) when the acquirer receives all the information possible to determine fair value. E4G Investment Holdings Pty Limited ABN 77 614 735 474 E4G INVESTMENT HOLDINGS PTY LTD AND CONTROLLED SUBSIDIARIES 2020 ANNUAL REPORT 20 Notes to the financial statements 31 December 2020 l y n o e s u l a n o s r e p r o F Note 1. Statement of significant accounting policies continued Revenue recognition The consolidated entity recognises revenue as follows: Revenue from contracts with customers Revenue is recognised at an amount that reflects the consideration to which the consolidated entity is expected to be entitled in exchange for transferring goods or services to a customer. For each contract with a customer, the consolidated entity : identifies the contract with a customer; identifies the performance obligations in the contract; determines the transaction price which takes into account estimates of variable consideration and the time value of money; allocates the transaction price to the separate performance obligations on the basis of the relative stand-alone selling price of each distinct good or service to be delivered; and recognises revenue when or as each performance obligation is satisfied in a manner that depicts the transfer to the customer of the goods or services promised. Variable consideration within the transaction price, if any, reflects concessions provided to the customer such as discounts, rebates and refunds, any potential bonuses receivable from the customer and any other contingent events. Such estimates are determined using either the 'expected value' or 'most likely amount' method. The measurement of variable consideration is subject to a constraining principle whereby revenue will only be recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur. The measurement constraint continues until the uncertainty associated with the variable consideration is subsequently resolved. Amounts received that are subject to the constraining principle are initially recognised as deferred revenue in the form of a separate refund liability. Sale of goods Revenue from the sale of goods is recognised at the point in time when the customer obtains control of the goods, which is generally at the time of delivery. Rendering of services Revenue from a contract to provide services is recognised over time as the services are rendered based on either a fixed price or an hourly rate. Interest Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset. Other revenue Other revenue is recognised when it is received or when the right to receive payment is established. Income Tax The income tax expense or benefit for the period is the tax payable on that period's taxable income based on the applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable’ Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for: • When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor taxable profits; or E4G Investment Holdings Pty Limited ABN 77 614 735 474 E4G INVESTMENT HOLDINGS PTY LTD AND CONTROLLED SUBSIDIARIES 2020 ANNUAL REPORT 21 Notes to the financial statements 31 December 2020 l y n o e s u l a n o s r e p r o F Note 1. Statement of significant accounting policies continued • When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable that there are future taxable profits available to recover the asset. Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on either the same taxable entity or different taxable entities which intend to settle simultaneously. Goods and Services Tax ('GST') and other similar taxes Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of financial position. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the tax authority, are presented as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority. Current and non-current classification Assets and liabilities are presented in the statement of financial position based on current and non-current classification. An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the consolidated entity's normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current. A liability is classified as current when: it is either expected to be settled in the consolidated entity's normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non-current. Deferred tax assets and liabilities are always classified as non-current. Cash and cash equivalents Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. For the statement of cash flows presentation purposes, cash and cash equivalents also includes bank overdrafts, which are shown within borrowings in current liabilities on the statement of financial position. E4G Investment Holdings Pty Limited ABN 77 614 735 474 E4G INVESTMENT HOLDINGS PTY LTD AND CONTROLLED SUBSIDIARIES 2020 ANNUAL REPORT 22 Notes to the financial statements 31 December 2020 l y n o e s u l a n o s r e p r o F Note 1. Statement of significant accounting policies continued Trade and other receivables Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any allowance for expected credit losses. Trade receivables are generally due for settlement within 30 days. The consolidated entity has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue. Other receivables are recognised at amortised cost, less any allowance for expected credit losses. Contract assets Contract assets are recognised when the consolidated entity has transferred goods or services to the customer but where the consolidated entity is yet to establish an unconditional right to consideration. Contract assets are treated as financial assets for impairment purposes. Inventories Raw materials, work in progress and finished goods are stated at the lower of cost and net realisable value on a 'weighted average cost' basis. Cost comprises of direct materials and delivery costs, direct labour, import duties and other taxes, an appropriate proportion of variable and fixed overhead expenditure based on normal operating capacity, and, where applicable, transfers from cash flow hedging reserves in equity. Costs of purchased inventory are determined after deducting rebates and discounts received or receivable. Stock in transit is stated at the lower of cost and net realisable value. Cost comprises of purchase and delivery costs, net of rebates and discounts received or receivable. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. Property, plant and equipment Each class of property, plant and equipment is carried at cost less, where applicable, any accumulated depreciation. Plant and equipment Plant and equipment are measured at cost less depreciation and impairment losses. The cost of fixed assets constructed within the consolidated entity includes the cost of materials, direct labour, borrowing costs and an appropriate proportion of fixed and variable overheads. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the consolidated entity and the cost of the item can be measured reliably. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred. Depreciation The depreciable amount of all fixed assets including building and capitalised leased assets, but excluding freehold land, is depreciated on a diminishing value basis over their useful lives to the consolidated entity commencing from the time the asset is held ready for use. Leased assets are depreciated over the shorter of either the unexpired year of the lease or the estimated useful lives of the assets. The depreciation rates used for each class of depreciable assets are: Class of fixed asset Depreciation rate Plant & machinery, fixtures, fittings & office equip Motor vehicles Computer equipment and software Leasehold improvements 5% - 25% 20% 10% - 40% 5% - 15% E4G Investment Holdings Pty Limited ABN 77 614 735 474 E4G INVESTMENT HOLDINGS PTY LTD AND CONTROLLED SUBSIDIARIES 2020 ANNUAL REPORT 23 Notes to the financial statements 31 December 2020 l y n o e s u l a n o s r e p r o F Note 1. Statement of significant accounting policies continued The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting period date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Leasehold improvements and plant and equipment under lease are depreciated over the unexpired period of the lease or the estimated useful life of the assets, whichever is shorter. An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to the consolidated entity. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss. Any revaluation surplus reserve relating to the item disposed of is transferred directly to retained profits. Intangible assets Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair value at the date of the acquisition. Intangible assets acquired separately are initially recognised at cost. Indefinite life intangible assets are not amortised and are subsequently measured at cost less any impairment. Finite life intangible assets are subsequently measured at cost less amortisation and any impairment. The gains or losses recognised in profit or loss arising from the derecognition of intangible assets are measured as the difference between net disposal proceeds and the carrying amount of the intangible asset. The method and useful lives of finite life intangible assets are reviewed annually. Changes in the expected pattern of consumption or useful life are accounted for prospectively by changing the amortisation method or period. Software Significant costs associated with software are deferred and amortised on a straight-line basis over the period of their expected benefit, being their finite life. Right-of-use assets A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payment made at or before the commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site or asset. Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of the asset, whichever is the shorter. Where the consolidated entity expects to obtain ownership of the leased asset at the end of the lease term, the depreciation is over its estimated useful life. Right-of-use assets are subject to impairment or adjusted for any remeasurement of lease liabilities. The consolidated entity has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as incurred. Lease liabilities A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the consolidated entity's incremental borrowing rate. Lease payments comprise of fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts expected to be paid under residual value guarantees, exercise price of a purchase option when the exercise of the option is reasonably certain to occur, and any anticipated termination penalties. The variable lease payments that do not depend on an index or a rate are expensed in the period in which they are incurred. E4G Investment Holdings Pty Limited ABN 77 614 735 474 E4G INVESTMENT HOLDINGS PTY LTD AND CONTROLLED SUBSIDIARIES 2020 ANNUAL REPORT 24 Notes to the financial statements 31 December 2020 l y n o e s u l a n o s r e p r o F Note 1. Statement of significant accounting policies continued Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if there is a change in the following: future lease payments arising from a change in an index or a rate used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an adjustment is made to the corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use asset is fully written down. Impairment of non-financial assets Goodwill and other intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. Recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The value- in-use is the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to form a cash-generating unit. Trade and other payables Trade and other payables represent the liabilities for goods and services received by the consolidated entity that remain unpaid at the end of the reporting period. The balance is recognised as a current liability with the amounts normally paid within 30 days of recognition of the liability. Contract liabilities Contract liabilities represent the consolidated entity's obligation to transfer goods or services to a customer and are recognised when a customer pays consideration, or when the consolidated entity recognises a receivable to reflect its unconditional right to consideration (whichever is earlier) before the consolidated entity has transferred the goods or services to the customer. Refund liabilities Refund liabilities are recognised where the consolidated entity receives consideration from a customer and expects to refund some, or all, of that consideration to the customer. A refund liability is measured at the amount of consideration received or receivable for which the consolidated entity does not expect to be entitled and is updated at the end of each reporting period for changes in circumstances. Historical data is used across product lines to estimate such returns at the time of sale based on an expected value methodology. Borrowings Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They are subsequently measured at amortised cost using the effective interest method. The component of the convertible notes that exhibits characteristics of a liability is recognised as a liability in the statement of financial position, net of transaction costs. Finance costs Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs are expensed in the period in which they are incurred. Employee benefits Short-term employee benefits Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities are settled. E4G Investment Holdings Pty Limited ABN 77 614 735 474 E4G INVESTMENT HOLDINGS PTY LTD AND CONTROLLED SUBSIDIARIES 2020 ANNUAL REPORT 25 Notes to the financial statements 31 December 2020 l y n o e s u l a n o s r e p r o F Note 1. Statement of significant accounting policies continued Other long-term employee benefits The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting date are measured at the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. Defined contribution superannuation expense Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred. Provisions Provisions are recognised when the consolidated entity has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured. Provisions are measured using the best estimate of amounts required to settle the obligation at the end of the reporting year. Fair value measurement When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; and assumes that the transaction will take place either: in the principal market; or in the absence of a principal market, in the most advantageous market. Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming they act in their economic best interests. For non-financial assets, the fair value measurement is based on its highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. Assets and liabilities measured at fair value are classified into three levels, using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. Classifications are reviewed at each reporting date and transfers between levels are determined based on a reassessment of the lowest level of input that is significant to the fair value measurement. For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either not available or when the valuation is deemed to be significant. External valuers are selected based on market knowledge and reputation. Where there is a significant change in fair value of an asset or liability from one period to another, an analysis is undertaken, which includes a verification of the major inputs applied in the latest valuation and a comparison, where applicable, with external sources of data. Government grants Government grants relating to costs are deferred and recognised in profit or loss over the period necessary to match them with the costs that they are intended to compensate. Comparative figures When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. Issued capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. E4G Investment Holdings Pty Limited ABN 77 614 735 474 E4G INVESTMENT HOLDINGS PTY LTD AND CONTROLLED SUBSIDIARIES 2020 ANNUAL REPORT 26 Notes to the financial statements 31 December 2020 l y n o e s u l a n o s r e p r o F Note 1. Statement of significant accounting policies continued Dividends Dividends are recognised when declared during the financial year and no longer at the discretion of the company. New accounting standards and interpretations not yet mandatory or early adopted Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have not been early adopted by the consolidated entity for the annual reporting period ended 31 December 2020. The consolidated entity's assessment of the impact of these new or amended Accounting Standards and Interpretations, most relevant to the consolidated entity, are set out below. Conceptual Framework for Financial Reporting (Conceptual Framework) The revised Conceptual Framework is applicable to annual reporting periods beginning on or after 1 July 2021 and early adoption is permitted. The Conceptual Framework contains new definition and recognition criteria as well as new guidance on measurement that affects several Accounting Standards. Where the consolidated entity has relied on the existing framework in determining its accounting policies for transactions, events or conditions that are not otherwise dealt with under the Australian Accounting Standards, the consolidated entity may need to review such policies under the revised framework. At this time, the application of the Conceptual Framework is not expected to have a material impact on the consolidated entity's financial statements. Note 2. Critical accounting estimates and judgments The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical experience and on other various factors, including expectations of future events, management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are discussed below. Revenue recognised over time The consolidated entity has revenue where the performance obligation is satisfied over time. Revenue is recognised over time by measuring the progress toward complete satisfaction of that performance obligation. A single method is applied consistently for measuring progress for each performance obligation satisfied over time. Judgment is required when selecting a method (output or input methods) for measuring progress toward complete satisfaction of a performance obligation. Assessing the satisfaction of performance obligations over time requires judgment and the consideration of many criteria that should be met to qualify. Events and circumstances frequently do not occur as expected. Even if the events anticipated under the assumptions occur, actual results are still likely to be different from the estimates since other anticipated events frequently do not occur as expected and the variation may be material Allowance for expected credit losses The allowance for expected credit losses assessment requires a degree of estimation and judgement. It is based on the lifetime expected credit loss, grouped based on days overdue, and makes assumptions to allocate an overall expected credit loss rate for each group. These assumptions include recent sales experience and historical collection rates. Estimation of useful lives of assets The consolidated entity determines the estimated useful lives and related depreciation and amortisation charges for its property, plant and equipment and finite life intangible assets. The useful lives could change significantly as a result of technical innovations or some other event. The depreciation and amortisation charge will increase where the useful lives are less than previously estimated lives, or technically obsolete or non-strategic assets that have been abandoned or sold will be written off or written down. E4G Investment Holdings Pty Limited ABN 77 614 735 474 E4G INVESTMENT HOLDINGS PTY LTD AND CONTROLLED SUBSIDIARIES 2020 ANNUAL REPORT 27 Notes to the financial statements 31 December 2020 l y n o e s u Note 2. Critical accounting estimates and judgments continued Impairment of non-financial assets other than goodwill and other indefinite life intangible assets The consolidated entity assesses impairment of non-financial assets other than goodwill and other indefinite life intangible assets at each reporting date by evaluating conditions specific to the consolidated entity and to the particular asset that may lead to impairment. If an impairment trigger exists, the recoverable amount of the asset is determined. This involves fair value less costs of disposal or value-in-use calculations, which incorporate a number of key estimates and assumptions. Recovery of deferred tax assets Deferred tax assets are recognised for deductible temporary differences only if the consolidated entity considers it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Employee benefits provision As discussed in note 1, the liability for employee benefits expected to be settled more than 12 months from the reporting date are recognised and measured at the present value of the estimated future cash flows to be made in respect of all employees at the reporting date. In determining the present value of the liability, estimates of attrition rates and pay increases through promotion and inflation have been taken into account. . l a n o s r e p r o F E4G Investment Holdings Pty Limited ABN 77 614 735 474 E4G INVESTMENT HOLDINGS PTY LTD AND CONTROLLED SUBSIDIARIES 2020 ANNUAL REPORT 28 Notes to the financial statements 31 December 2020 Disaggregation of revenue The disaggregation of revenue from contracts with customers is follows: l y n o e s u l a n o s r e p r o F Note 3. Revenue and other income Sales revenue: Provision of services and sale of goods Other income (charges): Interest income Other revenue (charges) Total other income Sectors Natural resources Non-mining infrastructure Utilities Geographical regions Western Australia Queensland Timing of revenue recognition Goods/services transferred over time Note 4. Expenses Consolidated Entity 2020 $ 2019 $ 100,526,414 80,058,696 100,526,414 80,058,696 10,291 269 10,560 14,785 (1,565) 13,220 Consolidated Entity 2020 $ 2019 $ 93,740,372 74,911,060 1,566,109 5,219,933 1,540,432 3,607,204 100,526,414 80,058,696 100,526,414 80,056,757 - 1,939 100,526,414 80,058,696 100,526,414 100,526,414 80,058,696 80,058,696 Consolidated Entity 2020 $ 2019 $ Profit before income tax from continuing operations includes the following specific expenses: Cost of sales Cost of sales 86,668,903 68,521,219 E4G Investment Holdings Pty Limited ABN 77 614 735 474 E4G INVESTMENT HOLDINGS PTY LTD AND CONTROLLED SUBSIDIARIES 2020 ANNUAL REPORT 29 Notes to the financial statements 31 December 2020 Plant & machinery, fixtures, fittings & office equipment Note 4. Expenses continued Depreciation Leasehold improvements Motor vehicles Computer equipment & software Right of use assets Total depreciation Finance costs Finance costs expensed Superannuation expense Note 5. Income tax expense l y n o e s u a n o s r e p Interest and finance charges on borrowings l Interest and finance charges on lease liabilities a) The components of tax expense comprise: Current tax expense Current year Deferred tax r o F b) Origination and reversal of temporary differences Under provision in respect of prior years Accounting profit before tax Accounting profit before tax: Prima facie tax payable on profit before income tax at 30% (2019: 30%): Tax effect of: - Non-allowable items - Business blackhole expenditure - Under provision in respect of prior years Consolidated Entity 2020 $ 32,732 83,951 495,685 491,146 949,287 2019 $ 187,074 119,584 297,752 388,124 843,991 2,052,801 1,836,525 1,510,977 201,054 1,318,968 66,865 1,712,031 1,385,833 3,636,744 2,385,956 Consolidated Entity 2020 $ 2019 $ 667,290 - 1,320,939 (339,032) 1,649,197 1,776,960 20,827 1,797,787 6,700,243 5,913,426 2,010,073 1,774,028 13,040 - (373,916) 10,334 (7,402) 20,827 Income tax expense (benefit) 1,649,197 1,797,787 E4G Investment Holdings Pty Limited ABN 77 614 735 474 E4G INVESTMENT HOLDINGS PTY LTD AND CONTROLLED SUBSIDIARIES 2020 ANNUAL REPORT 30 Notes to the financial statements 31 December 2020 Note 5. Income tax expense continued Consolidated Entity Non-current 1 January 2020 $ Recognised in income $ Recognised in equity $ 31 December 2020 $ Deferred tax assets and liabilities: Other assets Property, plant and equipment Employee benefits Provisions Other Unused tax losses e s u 45,037 (17,063) 232,965 129,711 305 (4,368) (124,997) 470,963 381,777 6,770 1,712,053 (1,712,053) 2,103,008 (981,908) Recognised as: Deferred tax assets Deferred tax liabilities 2,202,303 (99,295) 2,103,008 Consolidated Entity Non-current 1 January 2019 $ Recognised in income $ Recognised in equity $ 31 December 2019 $ Deferred tax assets and liabilities: Other assets Property, plant and equipment Employee benefits Provisions Other Unused tax losses 28,875 (82,523) 165,514 50,444 (31,528) 16,162 65,460 67,451 79,267 31,833 3,770,011 (2,057,960) 3,900,793 (1,797,787) Recognised as: Deferred tax assets Deferred tax liabilities 4,029,844 (129,051) 3,900,793 - - - - - - - 40,669 (142,060) 703,928 511,488 7,075 - 1,121,100 1,286,054 (164,954) 1,121,100 - - - - - - - 45,037 (17,063) 232,965 129,711 305 1,712,053 2,103,008 2,202,303 (99,295) 2,103,008 l y n o l a n o s r e p r o F E4G Investment Holdings Pty Limited ABN 77 614 735 474 E4G INVESTMENT HOLDINGS PTY LTD AND CONTROLLED SUBSIDIARIES 2020 ANNUAL REPORT 31 Notes to the financial statements 31 December 2020 l y n o e s u l a n o s r e p r o F Note 6. Auditors remuneration Remuneration of the auditor for: - Auditing the financial statements - Tax compliance services - - IT support services IT equipment procurement Total remuneration of the auditor Note 7. Cash and cash equivalents Cash at banks and in hand Short-term bank deposits Total cash and cash eqivalents Reconciliation of cash Cash at the end of the financial year as shown in the statement of cash flows is reconciled to items in the statement of financial position as follows: Cash and cash equivalents Note 8. Trade and other receivables Trade receivables Other receivables – contract assets Accrued revenue – contract assets Total current trade and other receivables Consolidated Entity 2020 $ 87,000 40,021 96,580 372,915 596,516 2019 $ 87,000 13,500 34,477 206,161 341,138 Consolidated Entity 2020 $ 2,722,192 5,032,252 7,754,444 2019 $ 5,586,837 3,922,718 9,509,555 7,754,444 9,509,555 Consolidated Entity 2020 $ 2019 $ 12,573,480 21,271,451 9,951,738 15,057,154 1,777,426 8,961,902 37,582,372 32,010,779 A fixed and floating charge over the short-term bank deposits is held as part of the guarantee facility provided. Allowance for expected credit losses The consolidated entity has not recognised any losses in the profit or loss in respect of the expected credit losses for the year ended 31 December 2020. E4G Investment Holdings Pty Limited ABN 77 614 735 474 E4G INVESTMENT HOLDINGS PTY LTD AND CONTROLLED SUBSIDIARIES 2020 ANNUAL REPORT 32 Notes to the financial statements 31 December 2020 Note 8. Trade and other receivables continued Other receivables – contract assets Reconciliation of the written down values at the beginning and end of the Current and previous financial year are set out below: Opening balance Additions Transfer to income statement Transfer to property, plant and equipment Closing balance 1,777,426 9,951,738 (1,056,023) (721,403) 31,337 1,777,426 (31,337) - 9,951,738 1,777,426 Accrued revenue – contract assets Reconciliation of the written down values at the beginning and end of the Current and previous financial year are set out below: l y n o e s u l a n o s r e p Opening balance Additions Transfer to trade receivables Closing balance Note 9. Other assets Prepayments Inventory Total other assets Note 10. r o F Property, plant and equipment Plant and equipment At cost Accumulated depreciation Total plant and equipment 8,961,902 14,135,247 (8,039,995) 4,206,072 8,961,902 (4,206,072) 15,057,154 8,961,902 Consolidated Entity 2020 $ 575,927 507,000 1,082,927 2019 $ 495,918 140,000 635,918 Consolidated Entity 2020 $ 2019 $ 7,485,419 8,181,065 (5,093,449) (5,727,199) 2,391,970 2,453,866 E4G Investment Holdings Pty Limited ABN 77 614 735 474 l y n o e s u l a n o s r e p r o F E4G INVESTMENT HOLDINGS PTY LTD AND CONTROLLED SUBSIDIARIES 2020 ANNUAL REPORT 33 Notes to the financial statements 31 December 2020 Note 10. Property, plant and equipment continued Leasehold Improvements Motor Vehicles Comp. Equip & Software Consolidated $ $ $ Plant & Mach. Fixt & Office Equip $ Total $ Balance at 1 January 2019 Additions Transfers to right-of-use Depreciation expense Balance at 31 December 2019 Additions Disposals Depreciation expense Transfers from Other Receivables Transfers Balance at 31 December 2020 275,779 527,203 1,134,272 990,986 2,928,240 - - - 342,775 244,350 587,125 (65,219) (2,682) (1,064) (68,965) (187,074) (119,584) (297,752) (388,124) (992,534 ) 88,705 342,400 1,176,613 846,148 2,453,866 145,296 (1,578) (32,732) 77,273 (118) (83,951) 25,911 124,480 (15,741) (35,308) (491,146) (495,685) 372,960 (52,745) (1,103,514) - - - - 91,854 629,549 721,403 38,740 (38,740) - 199,691 335,604 920,261 936,414 2,391,970 Note 11. Right of assets Land & building right-of-use less Accumulated depreciation Consolidated Entity 2020 $ 3,479,378 (786,886) 2,692,492 2019 $ 1,239,679 (938,018) 301,661 Additions to the right to use assets during the year were $3,550,381. The consolidated entity leases land and buildings for its offices and workshop facilities under agreements of between one to six years with, in some cases, options to extend. The leases have various escalation clauses. On renewal, the terms of the leases are renegotiated. The consolidated entity also leases motor vehicles under agreements of between three to five years. Note 12. Intangible assets Non-current Software licenses Total intangible assets Consolidated Entity 2020 $ 11,011 11,011 2019 $ 11,011 11,011 E4G Investment Holdings Pty Limited ABN 77 614 735 474 E4G INVESTMENT HOLDINGS PTY LTD AND CONTROLLED SUBSIDIARIES 2020 ANNUAL REPORT 34 Notes to the financial statements 31 December 2020 All amounts are short term and the carrying values are considered to be a reasonable approximation of fair value. Deferred income – contract liabilities Reconciliation of the written down values at the beginning and end of the current and previous financial year are set out below: Consolidated Entity 2020 $ 8,094,779 4,840,611 1,501,752 - 2019 $ 7,691,065 8,099,892 11,041 983,922 14,437,142 16,785,920 11,041 1,501,752 (11,041) 1,501,752 265,990 11,041 (265,990) 11,041 Consolidated Entity 2020 $ 2019 $ 9,728,705 11,871,258 120,286 3,823,929 111,626 2,476,255 13,672,920 14,459,139 Note 13. Trade and other payables Current Trade payables Sundry payables and accrued expenses Deferred income – contract liabilities Payable to vendors - conditional Total current trade and other payables Opening balance Additions Transfer to sales revenue Closing balance Note 14. Borrowings Current Commonwealth Bank of Australia Insurance premium funding (IPF) facility Convertible notes Total Current Borrowings l y n o e s u l a n o s r e p r o F Commonwealth Bank of Australia At year end the Commonwealth Bank facility was made up as follows: a) Bank guarantee facility with a limit of $8.0M b) Trade debtor financing facility with a limit of $15.0M c) Overdraft facility with a limit of $1.5M (temporarily increased to $4.0M at year end) Subsequent to year end, the Commonwealth Bank facility was renegotiated with the limits increased as follows and leasing facility added: a) Bank guarantee facility with a limit of $16.0M b) Trade debtor financing facility with a limit of $15.0M c) Overdraft facility with a limit of $5.0M d) Leasing facility of $5.0M E4G Investment Holdings Pty Limited ABN 77 614 735 474 E4G INVESTMENT HOLDINGS PTY LTD AND CONTROLLED SUBSIDIARIES 2020 ANNUAL REPORT 35 Notes to the financial statements 31 December 2020 Consolidated Entity 2020 $ 2019 $ 3,900,000 (83,571) 2,160,000 (34,346) 7,500 350,601 3,823,929 2,476,255 2,476,255 3,350,000 (1,610,000) (195,000) 145,775 274,738 (617,839) 3,823,929 2,341,201 500,000 (647,000) (15,000) 54,963 242,091 0 2,476,255 Note 14. Borrowings continued Convertible Notes 3,900,000 (2019: 2,160,000) convertible notes Note issue costs Redemption premium At the beginning of reporting period Notes issued l Notes redeemed Note issue cost Note issue cost amortised Redemption premium Redemption premium paid At reporting date l y n o e s u a n o s r e p r o F During the year, convertible notes were issued on 7 September 2020. The convertible notes are convertible into ordinary shares in the Parent entity under certain conditions and are an unsecured obligation of the Parent entity that rank pari-passu with all other unsecured indebtedness of the Parent. The notes bear interest and have a principal amount of and an issue price of $1.00. In the prior year, convertible notes were issued under the same terms. Financing arrangements Commonwealth Bank of Australia Facilities Used at the reporting date Unused at the reporting date Total Facility Limit Consolidated Entity 2020 $ 2019 $ 17,425,915 18,006,300 9,574,085 6,493,700 27,000,000 24,500,000 Used amount at reporting date (Commonwealth Bank of Australia) is comprised of $9,728,705 relating to the trade financing facility and $7,697,210 relating to the bank guarantee facility (included as contingent liabilities). The overdraft facility was unused at reporting date with the limit temporarily increased to $4,000,000 at year end. E4G Investment Holdings Pty Limited ABN 77 614 735 474 E4G INVESTMENT HOLDINGS PTY LTD AND CONTROLLED SUBSIDIARIES 2020 ANNUAL REPORT 36 Notes to the financial statements 31 December 2020 Assets pledged as security The leases are secured by term deposits and security over the underlying leased assets. Refer to note 21 for further information on financial instruments and financial arrangements. Consolidated Entity 2020 $ 2019 $ 664,551 270,135 2,106,421 62,217 Consolidated Entity 2020 $ 1,570,732 461,640 970,342 2019 $ 907,230 440,299 572,128 3,002,714 1,919,657 58,042 76,040 Note 15. Lease liabilities Current Right-of-use asset lease liabilities Non-current Right-of-use asset lease liabilities Note 16. Employee benefits Current Annual leave provision Long service leave provision Other employment related payables and provisions Total current employee benefits Non-current Long service leave provision l y n o e s u l a n o s r e p r o F The current portion of these liabilities represents the consolidated entity’s obligations to which the employee has a current legal entitlement. These liabilities arise mainly from accrued annual leave and long service leave entitlements at reporting date. A provision has been recognised for employee benefits relating to long service leave for employees. In calculating the present value of future cash flows in respect of long service leave, the probability of long service leave being taken is based upon historical data. The measurement and recognition criteria for employee benefits are described note 1. Note 17. Income tax Provision for income tax Consolidated Entity 2020 $ 667,290 2019 $ - E4G Investment Holdings Pty Limited ABN 77 614 735 474 l y n o e s u a n o s r e p r o F E4G INVESTMENT HOLDINGS PTY LTD AND CONTROLLED SUBSIDIARIES 2020 ANNUAL REPORT 37 Notes to the financial statements 31 December 2020 Note 18. Equity - Issued capital Consolidated Entity 2020 2019 2020 2019 Shares Shares $ $ 1,373,014 1,373,014 3,328,647 3,328,647 Ordinary shares - fully paid Ordinary shares Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the company in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the company does not have a limited amount of authorised capital. 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 shall have one vote. l Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt is calculated as total borrowings less cash and cash equivalents. In order to maintain or adjust the capital structure, the consolidated entity may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The consolidated entity is subject to certain financing arrangements covenants and meeting these is given priority in all capital risk management decisions. There have been no events of default on the financing arrangements during the financial year. The capital risk management policy remains unchanged from the 31 December 2019 Annual Report. Note 19. Equity- dividends Dividends Dividends paid during the financial year were as follows: $144,000 per B class share (2019: $144,000) and $144,000 per C class share (2019: $144,000) Consolidated Entity 2020 $ 2019 $ 576,000 576,000 E4G Investment Holdings Pty Ltd holds 100% of the ordinary shares of Aerison Holdings Pty Ltd. As at 31 December 2020, there were also 2 fully paid B class and 2 fully paid C class shares of Aerison Holdings Pty Ltd held by Araosc Financial Investments Pty Ltd and S2S Investment Holdings Pty Ltd respectively. These special class shares participate in dividends and are entitled to one vote when a poll is called at shareholders’ meetings. Franking credits Consolidated Entity 2020 $ 2019 $ Franking credits available for subsequent financial years based on a tax rate of 30% 2,440,875 2,687,732 E4G Investment Holdings Pty Limited ABN 77 614 735 474 Note 20. l y n o e s u l a n o s r e p r o F E4G INVESTMENT HOLDINGS PTY LTD AND CONTROLLED SUBSIDIARIES 2020 ANNUAL REPORT 38 Notes to the financial statements 31 December 2020 Equity- reserves Consolidated Entity Performance rights reserve Performance rights reserve The reserve is used to recognise the fair value of performance rights issued 500,000 (2019: nil) performance rights issued 28 July 2020 2020 $ 99,500 99,500 2019 $ - - Share based payments On 28 July 2020, the company issued 250,000 performance rights to Teresa Leone (director-related spouse of Giuseppe Leone) and 250,000 performance rights to Vanessa Hibbs (director-related spouse of Daniel Hibbs). The performance rights were issued as compensation for the recipients agreeing to provide joint personal guarantees to Export Finance Australia (“EFIC”), as part of an uncommitted bond facility between the company and EFIC for $4,690,000, dated 30 March 2020. The company is also a guarantor on the EFIC facility, along with Aerison Pty Ltd, Aerison Holdings Pty Ltd, Aerison Services Pty Ltd, Daniel Hibbs and Giuseppe Leone. Under the terms of the performance rights: i. ii. iii. iv. v. vi. vii. viii. the performance rights were issued for nil purchase price and no consideration is due or payable upon the issue of shares upon the conversion of any of the performance rights; each performance right will automatically convert into one ordinary share upon the achievement of a liquidity event which values 100% of the shares on issue at the time immediately prior to the liquidity event, in any, or all of the consolidated entities, the company or any group company at $20 million or greater; the performance rights will automatically expire if no liquidity event occurs on or before 17 October 2022; the performance rights are fully transferrable at the sole and absolute election of the holder; a performance right does not confer any right to a return of capital, whether in a winding up, or a reduction of capital; a performance right has no right to participate in the surplus profits or assets of the company upon winding up; the performance rights do not confer on the holder an entitlement to vote at general meetings of the company or to receive dividends; and shares issued upon conversion of the performance rights will rank pari passu with the company’s existing shares in all respects. The fair value of the performance rights was determined via independent third party valuation conducted by Moore Stephens. Various sources were considered when selecting a valuation methodology, including AASB 2 accounting standard, the Australian Taxation Office and general option valuation theory. Due to the traditional structure of the performance rights in that they do not have any non-market based vesting conditions and the value is simply linked to the underlying value of the business, a binomial valuation methodology was selected, which valued each right at $0.199. E4G Investment Holdings Pty Limited ABN 77 614 735 474 l y n o e s u l a n o s r e p r o F E4G INVESTMENT HOLDINGS PTY LTD AND CONTROLLED SUBSIDIARIES 2020 ANNUAL REPORT 39 Notes to the financial statements 31 December 2020 Note 21. Financial instruments Financial risk management objectives The consolidated entity's activities expose it to a variety of financial risks: market risk (including price risk and interest rate risk), credit risk and liquidity risk. The consolidated entity'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 consolidated entity. The consolidated entity 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 and other price risks and ageing analysis for credit risk. Risk management is carried out by senior finance executives ('finance') under policies approved by the Board of Directors ('the Board'). These policies include identification and analysis of the risk exposure of the consolidated entity and appropriate procedures, controls and risk limits. Finance identifies, evaluates and hedges financial risks within the consolidated entity's operating units. Finance reports to the Board on a monthly basis. Market risk Price risk The consolidated entity is not exposed to any significant price risk. Interest rate risk The consolidated entity's main interest rate risk arises from borrowings. Borrowings obtained at variable rates expose the consolidated entity to interest rate risk. Borrowings obtained at fixed rates expose the consolidated entity to fair value risk. The Commonwealth Bank debtor financing facility is the only material borrowing obtained at variable rates. Due to the nature of the facility, wherein the drawdowns are generally fully repaid within 1-2 months, upon receipt of payments from customers, the consolidated entity does not have material interest rate exposure typically associated with regular variable rate bank borrowings. Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the consolidated entity. The consolidated entity has a strict code of credit, including obtaining agency credit information, confirming references and setting appropriate credit limits. The consolidated entity obtains guarantees where appropriate to mitigate credit risk. The maximum exposure to credit risk at the reporting date to recognised financial assets is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement of financial position and notes to the financial statements. The consolidated entity does not hold any collateral. Generally, trade receivables are written off when there is no reasonable expectation of recovery. Indicators of this include the failure of a debtor to engage in a repayment plan, no active enforcement activity and a failure to make contractual payments for a period greater than 1 year. Liquidity risk Vigilant liquidity risk management requires the consolidated entity to maintain sufficient liquid assets (mainly cash and cash equivalents) and available borrowing facilities to be able to pay debts as and when they become due and payable. The consolidated entity manages liquidity risk by maintaining adequate cash reserves and available borrowing facilities by continuously monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and liabilities. E4G Investment Holdings Pty Limited ABN 77 614 735 474 l y n o e s u l a n o s r e p E4G INVESTMENT HOLDINGS PTY LTD AND CONTROLLED SUBSIDIARIES 2020 ANNUAL REPORT 40 Notes to the financial statements 31 December 2020 Note 21. Financial instruments continued Financing arrangements Unused borrowing facilities at the reporting date: Consolidated Entity 2020 $ 2019 $ 9,574,085 9,574,085 6,493,700 6,493,700 Commonwealth Bank of Australia Total Remaining contractual maturities The following tables detail the consolidated entity's remaining contractual maturity for its financial instrument liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the financial liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as remaining contractual maturities and therefore these totals may differ from their carrying amount in the statement of financial position. Consolidated- 2020 Non-derivatives Non-interest bearing Trade payables Sundry payables Interest-bearing - fixed rate r o F Convertible notes Lease liability CBA- Trade Debtors Facility Insurance Premium Finding Weighted average interest rate % 1 year or less Between 1 and 2 years Between 2 and 5 years Over 5 years Remaining contractual maturities $ $ $ $ $ - 8,094,779 - 4,840,611 - - - - - 8,094,779 - 4,840,611 11.73% 3,823,929 - - - 3,823,929 8.10% 664,551 422,799 1,447,603 236,019 2,770,972 2.05% 9,728,705 3.95% 120,286 - - - - - 9,728,705 - 120,286 Total non-derivatives 27,272,861 422,799 1,447,603 236,019 29,379,282 E4G Investment Holdings Pty Limited ABN 77 614 735 474 E4G INVESTMENT HOLDINGS PTY LTD AND CONTROLLED SUBSIDIARIES 2020 ANNUAL REPORT 41 Notes to the financial statements 31 December 2020 Note 21. Financial instruments continued Consolidated- 2019 Non-derivatives Non-interest bearing Trade payables Sundry payables Payable to director Payable to vendors- conditional Convertible notes Lease liability CBA- Trade Debtors Facility Insurance Premium Finding Total non-derivatives Weighted average interest rate % 1 year or less Between 1 and 2 years Between 2 and 5 years Over 5 years Remaining contractual maturities $ $ $ $ $ - - - 7,691,055 8,074,892 25,000 983,922 - - - - 20.02% 2,476,255 - 7.30% 270,135 62,216 2.70% 11,871,258 1.75% 111,626 - - 31,504,143 62,216 - - - - - - - - - - 7,691,055 - 8,074,892 - - 25,000 983,922 - 2,476,255 - 332,351 - 11,871,258 - 111,626 - 31,566,359 l Interest-bearing - fixed rate Fair value of financial instruments Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value. Note 22. Key management personel disclosures Compensation The aggregate compensation made to directors and other members of key management personnel of the consolidated entity is set out below: l y n o e s u a n o s r e p r o F Short-term employee benefits Post-employment benefits Long-term benefits Total compensation Consolidated Entity 2020 $ 1,617,950 214,973 - 2019 $ 1,072,107 73,007 - 1,832,923 1,145,114 E4G Investment Holdings Pty Limited ABN 77 614 735 474 l y n o e s u l a n o s r e p r o F E4G INVESTMENT HOLDINGS PTY LTD AND CONTROLLED SUBSIDIARIES 2020 ANNUAL REPORT 42 Notes to the financial statements 31 December 2020 Note 23. Related party transactions Parent entity E4G Investment Holdings Pty Ltd is the parent entity. Subsidiaries Interests in subsidiaries are set out in note 25. Associates There are no interests in associates. Key management personnel Disclosures relating to key management personnel are set out in note 22. Transactions with related parties The following transactions occurred with related parties: Consulting fee paid to director (M Fennell) Performance rights issued to directors’ spouses (V Hibbs, T Leone) Payment of sundry payable due to director (G Leone) Receipt of funds due from director (G Leone) Receipt of funds due from director (D Hibbs) Disclosures relating to performance rights and share based payments are set out in note 20. Receivable from and payable to related parties The following balances are outstanding at the reporting date in relation to transactions with related parties: Consolidated Entity 2020 $ 2019 $ - 15,000 99,000 25,000 110,095 105,333 - - - - Consolidated Entity 2020 $ 2019 $ - 25,000 Consolidated Entity 2020 $ - - 2019 $ 105,760 76,998 E4G Investment Holdings Pty Limited ABN 77 614 735 474 Current payables: Payables to director (G Leone, consultancy fees) Receivables from related parties: Funds due from Director (G Leone) Funds due from Director (D Hibbs) Loans to/from related parties There are no loans to/from related parties Profit after income tax Total comprehensive income Statement of financial position Total current assets Total assets Total current liabilities Total liabilities Equity Issued capital Share based payment Total equity l y n o e s u l a n o s r e p r o F E4G INVESTMENT HOLDINGS PTY LTD AND CONTROLLED SUBSIDIARIES 2020 ANNUAL REPORT 43 Notes to the financial statements 31 December 2020 Note 24. Parent entity information Set out below is the supplementary information about the parent entity. Statement of profit or loss and other comprehensive income Parent Entity 2020 $ - - Parent Entity 2020 $ 12,222 10,350,889 6,922,742 6,922,742 2019 $ - - 2019 $ 12,332 6,943,499 3,614,852 3,614,852 3,328,647 3,328,647 99,500 - 3,428,147 3,238,647 Guarantees entered into by the parent entity in relation to the debts of its subsidiaries E4G Investment Holdings Pty Ltd has provided guarantees for the finance lease facilities that Aerison Pty Ltd has with the Commonwealth Bank of Australia. Contingent liabilities E4G Investment Holdings Pty Ltd has provided a corporate guarantee, for the bank guarantee facilities of Aerison Pty Ltd, to the Commonwealth Bank of Australia and Westpac Banking Corporation, totalling $8,027,192. The facilities are secured by a fixed and floating charge over certain short-term bank deposits. Capital commitments The parent entity had no capital commitments for property, plant and equipment as at 31 December 2020 and 31 December 2019. Significant accounting policies The accounting policies of the parent entity are consistent with those of the consolidated entity, as disclosed in note 1. E4G Investment Holdings Pty Limited ABN 77 614 735 474 l y n o e s u a n o s r e p r o F E4G INVESTMENT HOLDINGS PTY LTD AND CONTROLLED SUBSIDIARIES 2020 ANNUAL REPORT 44 Notes to the financial statements 31 December 2020 Note 25. Interests in subsidiaries The consolidated financial statements incorporate the assets, liabilities and results of the following wholly- owned subsidiaries in accordance with the accounting policy described in note 1: Aerison Holdings Pty Limited Aerison Pty Ltd Aerison Services Pty Ltd Aerison EPC Pty Ltd Aerison Mechanical and Electrical Technology Pty Ltd (Dormant) Principal place of business/ Country of Incorporation 2020 % 2019 % Ownership Interest Australia Australia Australia Australia Australia 100 100 100 100 100 25 100 100 25 l Note 26. Non-cash investing and financing activities Additions to the right-of-use assets Consolidated Entity 2020 $ 3,550,381 2019 $ - Note 27. Changes in liabilities arising from financing activities Consolidated - 2020 Balance at 1 January 2019 Net cash used in financing activities Non-cash redemption premium and costs Leases recognised on the adoption of AASB 16 Balance at 31 December 2019 Net cash used in financing activities Non-cash redemption premium and costs Convertible Notes $ IPF Facility CBA facility Lease Liability Total $ $ $ $ 2,341,201 58,042 3,902,643 311,771 6,613,657 (217,800) 53,584 7,968,615 (1,055,773) 6,748,626 352,854 - - - 352,854 - - - 1,076,353 1,076,353 2,476,255 111,626 11,871,258 332,351 14,791,490 927,161 8,660 (2,142,553) (1,111,760) (2,318,492) 420,513 - - - 420,513 Acquisition of leases - - - 3,550,381 3,550,381 Balance at 31 December 2020 3,823,929 120,286 9,728,705 2,770,972 16,443,892 E4G Investment Holdings Pty Limited ABN 77 614 735 474 E4G INVESTMENT HOLDINGS PTY LTD AND CONTROLLED SUBSIDIARIES 2020 ANNUAL REPORT 45 Notes to the financial statements 31 December 2020 Note 28. Cash flow information l y n o e s u l a n o s r e p r o F Consolidated Entity 2020 $ 2019 $ 5,051,046 4,115,639 2,052,801 52,745 8,871 99,500 1,836,525 - 70,976 - (5,571,593) (15,014,922) (546,508) (2,348,778) 667,290 981,908 1,065,059 1,512,341 (186,373) 8,175,381 - 1,797,785 560,984 1,355,995 Reconciliation of cash flow from operations with profit after income tax Profit after income tax Non-cash flows adjustments: Depreciation expense Net on disposal of property, plant and equipment Interest expense Share based payments Changes in operating assets and liabilities; - trade and other receivables - prepayments and other assets - trade and other payables - income tax payable - deferred tax assets and liabilities - employee benefits Net cash generated from operating activities Note 29. Contingent assets and liabilities Contingent assets The Group has no contingent assets. Contingent liabilities The Commonwealth Bank of Australia and Westpac Banking Corporation provided the Group with bank guarantee facilities totalling $8,027,192 (2019: $6,875,720). The facilities are secured by a fixed and floating charge over certain short-term bank deposits. Note 30. Events after the reporting date The impact of the Coronavirus (COVID-19) pandemic is ongoing. it is not practicable to estimate the potential impact, positive or negative, after the reporting date. The situation is rapidly developing and is dependent on measures imposed by the Australian Federal Government or Western Australian State Government. No other matter or circumstance has arisen since 31 December 2020 that has significantly affected, or may significantly affect the consolidated entity's operations, the results of those operations, or the consolidated entity's state of affairs in future financial years. Note 31. Group details The registered office of the Group is: 60 Havelock Street West Perth WA 6005 The principal place of business is: Level 1, 56 Ord Street, West Perth WA 6005 E4G Investment Holdings Pty Limited ABN 77 614 735 474 E4G INVESTMENT HOLDINGS PTY LTD AND CONTROLLED SUBSIDIARIES 2020 ANNUAL REPORT 46 Directors' Declaration In the directors’ opinion: a) the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; b) the attached financial statements and notes comply with International Financial Reporting Standards as issued by the International Accounting Standards Board as described in note 1 to the financial statements; c) the attached financial statements and notes give a true and fair view of the consolidated entity's financial position as at 31 December 2020 and of its performance for the financial year ended on that date; and d) there are reasonable grounds to believe that the company will be able to pay its debts as and when they l y n o e s u l a n o s r e p become due and payable. On behalf of the directors. Giuseppe Leone Director Dated this 9th day of March 2021 r o F E4G Investment Holdings Pty Limited ABN 77 614 735 474
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