Oldfields Holdings Limited
Annual Report 2019

Plain-text annual report

2019 Annual Report Year Ended 30 June 2019 ABN 92 000 307 988 2019 (cid:137)(cid:137)(cid:137)(cid:314)(cid:111)(cid:1140)(cid:55)(cid:67)(cid:59)(cid:1140)(cid:55)(cid:118)(cid:314)(cid:49)(cid:111)(cid:108)(cid:314)(cid:45)(cid:134) (cid:137)(cid:137)(cid:137)(cid:314)(cid:111)(cid:1140)(cid:55)(cid:67)(cid:59)(cid:1140)(cid:55)(cid:118)(cid:314)(cid:49)(cid:111)(cid:108)(cid:314)(cid:45)(cid:134) Professional Quality Woven Polyester - 12mm nap Non-shedding fabric Quality for single use or clean Annual Report Contents Directors' Report Auditor's Independent Declaration Financial Statements Directors' Declaration Independent Auditor's Report Corporate Governance Statement Risk Management Statement Shareholder Information Corporate Directory Page 2 8 9 38 39 43 51 53 54 1 Oldfields Holdings Limited 30 June 2019 Directors' Report Your Directors present their report on the consolidated entity (referred to herein as the "Group") consisting of Oldfields Holdings Limited (referred to hereafter as the "Company" or the "Parent Entity") and its controlled entities for the financial year ended 30 June 2019. Directors' Details The names and details of the Directors of the Company during the financial year and until the date of this report are set out below. Directors were in office for this entire period unless otherwise stated. Richard John Abela Chief Executive Officer and Managing Director William Lewis Timms Non-executive Director and Chairman Mr Abela has more than 20 years experience in senior/managing director roles in finance, sales & marketing and supply chain including a number of years in the building products sector, scaffolding and trade related industries Qualifications Fellow Member of CPA and Master of Business Administration Other current directorships: Order of Saint John of Jerusalem, Knights Hospitaller Mr Timms has more than 30 years experience in accounting, taxation, audit, commercial real estate and project management Special responsibilities Member of the Audit Committee and Member of the Remuneration Committee Qualifications Bachelor of Business (Accounting and Audit), Real Estate and Business Agent Previous directorships (last 3 years): None Interest in shares and options: 201,000 shares held Other current directorships: None Previous directorships (last 3 years): Non-executive Director of Buderim Ginger Limited (resigned 28 August 2016) Interest in shares and options: 39,384,528 shares held Stephen Charles Hooper Non-executive Director Gregory John Park (resigned 12 June 2019) Chief Financial Officer, Executive Director and Company Secretary Mr Hooper has more than 20 years experience in senior executive roles in the fast moving consumer goods industry, with a focus on supply chain management Mr Park has more than 20 years experience in senior financial and general management roles in retailing, manufacturing and distribution in the fast moving consumer goods industry Special responsibilities Chairman of the Audit Committee and Chairman of the Remuneration Committee Qualifications Bachelor of Business and Chartered Accountant Qualifications Bachelor of Science Other current directorships: None Previous directorships (last 3 years): None Interest in shares and options: 131,534 shares held Company Secretary Other current directorships: None Previous directorships (last 3 years): None Interest in shares and options: None Alan Lee was appointed as Company Secretary on 12 June 2019. Alan has over 25 years experience in financial reporting and controls, corporate advisory and governance, business valuation, transaction services across a wide range of industries and sectors in Australasia and Asia. He has been Chief Financial Officer of another ASX listed company and a mid-market private equity firm in Australia. Alan has worked in the Financial Advisory division and Assurance division of KPMG, PwC and EY in Sydney and Hong Kong. He holds a Bachelor of Commerce and a Graduate Diploma in Applied Finance and Investment as well as a CPA in Australia and Hong Kong. 2 Oldfields Holdings Limited 30 June 2019 Principal Activities The principal activities of the Group during the financial year were: - - - - import and distribution of paint brushes, paint rollers, painter's tools and accessories; distribution of garden sheds; hire and erection of scaffolding and related products; and manufacture and distribution of scaffolding and related equipment. There were no significant changes in the nature of the Group's principal activities during the financial year. The majority of operations are conducted in Australia. Review of Operations and Financial Results Operating Results Net operating loss for the Group after providing for income tax amounted to $228,000 (2018: $1,550,000 profit). The Group's earnings before interest, tax, depreciation and amortisation (EBITDA) of $915,000 reduced by 18% from the prior year of $1,121,000. The following table summarises the key reconciling items between profit/(loss) after income tax attributable to the shareholders of the Group and EBITDA. EBITDA is a financial measure which is not prescribed by Australian Accounting Standards ("AAS") and represents the profit under AAS adjusted for specific non cash and significant items. The Directors consider EBITDA to reflect the core earnings/(loss) of the Group. Sales revenue Profit/(loss) after income tax Income tax expense Profit/(loss) before income tax Revaluation of deferred senior loan note Profit/(loss) before income tax and revaluation Depreciation and amortisation expense Net finance costs Unrealised foreign exchange losses EBITDA 2019 $'000 2018 (1) $'000 2017 $'000 2016 $'000 2015 $'000 24,755 25,898 26,721 28,420 27,380 (228) 1,550 309 416 1,859 188 312 (722) (1,102) 315 352 234 627 (370) (868) (508) (1,936) 287 257 (320) (77) 229 914 (113) (639) 880 349 6 915 912 278 8 1,121 803 1,434 303 377 11 (37) 2,031 1,661 1,361 482 (39) 1,165 (1) The Group has initially applied AASB 15 Revenue from Contracts with Customers at 1 July 2018. Note 5 outlines the impact of adopting AASB 15 using the cumulative effect method, under which the comparative information is not restated. The Group's revenue from continuing operations for the financial year ended 30 June 2019 was $24,755,000 (2018: $25,898,000) which was a decrease of 4% over prior year. Consumer division revenue decreased $738,000 (14%) while the Scaffold division decreased by $513,000 (2%). Depreciation and amortisation expense for the year was $880,000 which was a decrease of $32,000 (2018: $912,000) which reflects the stable cost from investment in hire fleet to support the growth of the Scaffold division. The Group’s net loss after tax was $228,000 (2018: profit of $1,550,000) which included a $508,000 favourable revaluation of the deferred senior loan note (2018: $1,936,000). The Group had a loss of $320,000 before income tax and revaluation of the financial derivative (2018: Loss $77,000). The Group’s gross profit percentage remained at 46% in 2019 reflecting the stable result from the strategic change made last year of investing in customer relationships which support sustainable profitable growth. Net cash provided by operating activities was $365,000 in 2019 compared to $1,373,000 in 2018. The reduction primarily due to the increased spend in sales and distribution which is expected to provide greater benefits in the future. Strong operating cash flow continues to be a major focus for the Group with increased emphasis on profitable revenue growth and the reduction of working capital in the 2020 financial year. Review of Operations (i) Consumer Products - Paint Applications and Outdoor Storage Solutions Revenue for the Consumer division decreased by 14% ($738,000) in 2019 as compared to the previous period. Despite lower sales, the EBITDA loss of $672,000 was less than the prior year’s loss of $1,002,000. Paint equipment sales experienced a decline of $632,000 compared to the prior year. This was largely attributable to the 2019 year being the first whole year without sales to the Mitre 10 warehouse as well as some retailers pursuing a greater focus on house brands. The groups focus on innovation continues to lay a solid platform for a return to growth with the regular introduction of industry leading products. Our Pro Series brush range has been leading the charge with good revenue beginning to build across product lines. A full program of new products is now in full development and will see new ranges introduced providing necessary differentiation. Treco storage sales were $195,000 as compared to $302,000 in 2018. Treco will continue to operate as it sells down inventory. The division is not core to the overall business strategy. 3 Oldfields Holdings Limited 30 June 2019 (ii) Scaffolding The overall Scaffold division revenue decreased by 2% ($513,000) in 2019 as compared to the previous period. However, the Australian Scaffold division revenue was slightly up on the previous year, despite the domestic building market showing significant signs of decreasing volume. Overall hire and erection revenue increased by 10% from $14.8m to $16.4m. This was mainly as a result of the strategy of developing counter cyclical revenue. The international export business however did soften due to slowing markets in individual country economies and down by 60%. The business continues to work hard in the development of revenue streams across multiple channels that will assist in maintaining revenue equilibrium during various building and economic cycles. The business has commenced Scaffolding sales in China and while this is in its early stages this will be a focus for continuous development over the next 12 months. Our China division has new management and resources and has sufficient additional capacity to manage new sales from the China domestic market. With the continuous focus on improving efficiencies and the reduction of lead times, the manufacturing plant in China achieved an operating profit in current year. The national accounts strategy also continues to develop with cross border customers benefiting from the reach and product mix that Oldfields can provide. Engineering resources are being continually upskilled and as such product development in Scaffolding continues to add value both in hire services and sales. New product innovation that will roll out over the next 12 months will assist in developing growth and providing a competitive edge. Financial Position The net assets of the Group have decreased by $954,000 from $5,338,000 at 30 June 2018 to $4,384,000 at 30 June 2019. A key area of focus for the 2020 financial year will be to continue to trade profitably and further increase the net asset position of the Group. Significant Changes in State of Affairs There were no significant changes in the state of affairs during the financial year. Dividends Since the start of the financial year, no dividends have been paid or declared by Oldfields Holdings Limited. Events after the Reporting Period There are no matters or circumstances that have arisen since the end of the financial year which significantly affected or could affect the operations of the Group in future years. Future Developments, Prospects and Business Strategies Growth strategies across both division and new product introductions as well as expanding sales channels both domestically and internationally is providing the Directors confidence for an improvement of financial performance in 2020 financial year. The Paint Applications business has been restructured to achieve critical mass and return to profitability. Strategies for Scaffolding focus on driving revenue by developing non-cyclical sectors and improve efficiency in each branch. Environmental Regulation and Performance The Group’s operations are not subject to any particular or significant environmental regulation under the law of the Commonwealth or of a State or Territory in Australia. The Group has established procedures whereby compliance with existing environmental regulations and new regulations are monitored continually. This process includes procedures to be followed should an incident adversely impact the environment. The Directors are not aware of any breaches during the period covered by this report. Directors' Meetings The number of meetings of directors (including meetings of committees of directors) held during the year and the number of meetings attended by each director were as follow: Director's Name Richard John Abela William Lewis Timms Stephen Charles Hooper Gregory John Park (resigned 12 June 2019) Board Audit Committee Meetings Meetings Remuneration Committee Meetings Number Eligible to Attend Number Attended Number Eligible to Attend Number Attended Number Eligible to Attend Number Attended 14 14 14 13 14 13 13 12 - 2 2 - - 2 2 - - 1 1 - - 1 1 - 4 Oldfields Holdings Limited 30 June 2019 Remuneration Report (Audited) Remuneration Policy The remuneration policy of the Group has been designed to align key management personnel (KMP) objectives with shareholder and business objectives by providing a fixed remuneration component and offering incentives based on key performance areas affecting the consolidated entity's financial results. The Board believes the remuneration policy to be appropriate and effective in it's ability to attract and retain the high quality KMP to run and manage the Group, as well as create goal congruence between directors, executives and shareholders. The Board’s policy for determining the nature and amount of remuneration for KMP of the Group is as follows: - - - - The remuneration policy is to be developed by the Remuneration Committee and approved by the Board after professional advice is sought from independent external consultants when required; KMP receive a base salary (which is based on factors such as length of service and experience), superannuation, fringe benefits, and performance incentives; Performance incentives are generally only paid once predetermined key performance indicators (KPIs) have been met; and The Remuneration Committee reviews KMP packages annually by reference to the Group’s performance, executive performance and comparable information from industry sectors. The performance of KMP is measured against criteria with each executive and is based predominantly on the forecast growth of the Group’s profits and shareholders’ value. All bonuses and incentives must be linked to predetermined performance criteria. The Board may however exercise its discretion in relation to approving incentives, bonuses and options, and can recommend changes to the Committee’s recommendations. Any change must be justified by reference to measurable performance criteria. The policy is designed to attract high calibre executives and reward them for performance results leading to long-term growth in shareholder wealth. KMP receive at a minimum, a superannuation guarantee contribution required by the government, which is currently 9.5% of the individual's earnings. Individuals may however have chosen to sacrifice part of their salary to increase payments towards their superannuation. Upon retirement, KMP are paid employee benefit entitlements accrued to the date of retirement. All remuneration paid to KMP is valued at the cost to the Group and expensed. The Board's policy is to remunerate non-executive directors at market rates for time, commitment and responsibilities. The Remuneration Committee determines payments to the non-executive directors and reviews their remuneration annually based on, market practice, duties and accountability. Independent external advice is sought when required. The maximum aggregate amount of fees that can be paid to non-executive directors is subject to approval by shareholders at the Annual General Meeting. Engagement of Remuneration Consultants During the financial year there were no consultants engaged by the Remuneration Committee to review the elements of KMP remuneration and provide recommendations. Performance-Based Remuneration The KPIs are set annually with a certain level of consultation with KMP. The measures are specifically tailored to the area each individual is involved in and has a level of control over. The KPIs target areas the Board believes hold greater potential for the Group's expansion and profit, covering financial and non-financial as well as short and long-term goals. The level set for each KPI is based on budgeted figures for the Group and respective industry standards. Performance in relation to the KPIs is assessed annually with bonuses being awarded depending on the number and difficulty of the KPIs achieved. Following the assessment, the KPIs are reviewed by the Remuneration Committee in light of the desired and actual outcomes, and their efficiency is assessed in relation to the Group’s goals and shareholder wealth before the KPIs are set for the following year. In determining whether or not a KPI has been achieved the Group bases the assessment on audited figures, however where the KPI involves comparison of the Group or a division within the Group to the market, independent reports may be sought from organisations such as Standard & Poors. Employment Details of Members of Key Management Personnel The following table provides employment details of persons who were, during the financial year, members of KMP of the Group. Group Key Management Personnel Richard John Abela Position Held During and at 30 June 2019 Managing Director and Chief Executive Officer Contract Details: Duration & Termination Duration unspecified. Termination 3 months notice Current Salary / Fees Incl. Superannuation $262,800 William Lewis Timms Non-executive Director Duration & termination unspecified Stephen Charles Hooper Non-executive Director Duration & termination unspecified Gregory John Park (resigned 12 June 2019) Executive Director, Company Secretary and Chief Financial Officer Duration unspecified. Termination 3 months notice Alan Lee (appointed 12 June 2019) Company Secretary and Chief Financial Officer Duration unspecified. Termination 3 months notice $98,550 $54,750 $213,525 $213,525 5 Oldfields Holdings Limited 30 June 2019 The table below illustrates the proportion of remuneration that was performance related and fixed salary/fees. Richard John Abela William Lewis Timms Stephen Charles Hooper Gregory John Park (resigned 12 June 2019) Alan Lee (appointed 12 June 2019) Performance Related % Fixed % Total % - 100 100 100 - 100 - 100 100 - 100 100 - 100 100 The employment terms and conditions of all KMP are formalised in contracts of employment. There are no pre-defined termination benefits payable to key management personnel other than accrued leave entitlements. In addition to the above, the Group is committed to pay the CEO and the CFO up to 6 months of base salary each in the event of a successful takeover offer and their positions are terminated or made effectively redundant. Remuneration Expenses for Key Management Personnel The following table of benefits and payments represents the components of the current year and comparative year remuneration expenses for each member of KMP of the Group. Such amounts have been calculated in accordance with Australian Accounting Standards: Executive Directors Richard John Abela Gregory John Park (resigned 12 June 2019) Alan Lee (appointed 12 June 2019) Non-Executive Directors William Lewis Timms Stephen Charles Hooper 2019 Total KMP 2018 Total KMP Year 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 Short-Term Benefits Cash Salary and Fees $ Cash Bonuses & Incentives $ Non- Monetary Benefits $ Movement in Leave Entitlements $ Long-Term Benefits Post Employment Benefits Leave Entitlements $ Super- annuation $ Total $ - - (3,983) - 22,800 240,000 - - 9,893 - 22,522 237,078 (5,621) - 18,525 - - 195,000 192,561 7,334 - 18,293 - - 10,563 - - 1,390 - 1,003 - - - - - - 258,817 269,493 207,904 218,188 12,956 - 90,000 - - - - 8,550 90,000 - - - - 8,550 50,000 - - - - 4,750 49,541 - - - - 4,706 585,563 569,180 98,550 98,550 54,750 54,247 - - - 8,214 - 55,628 632,977 640,478 - - 54,071 17,227 - Securities Received that are not Performance Related No members of KMP are entitled to receive securities that are not performance-based as part of their remuneration package. Performance-Related Share-based Payments There were no performance-related share-based payments made to key management personnel during the year. Options and Rights Granted as Remuneration There were no options or rights granted as remuneration during the year. Shares held by Key Management Personnel The number of ordinary shares in Oldfields Holdings Limited held during the 2019 financial year by each of the KMP of the Group is as follows: Richard John Abela William Lewis Timms Stephen Charles Hooper Gregory John Park Alan Lee Total Number at Beginning of Year Granted as Remuneration During the Year Issued on Exercise of Options During the Year Other Changes During the Year Number at End of Year 201,000 - - - 201,000 39,384,528 39,384,528 - - - 131,534 131,534 - - - - - - - - - - - - - 39,717,062 - - 39,717,062 - Other Transactions with Key Management Personnel There were no other transactions conducted between the Group and KMP or their related parties, other than those disclosed above or in note 29 relating to equity, compensation and loans, that were conducted other than in accordance with normal employee, customer or supplier relationships on terms no more favourable than those reasonably expected under arm’s length dealings with unrelated persons. (This concludes the Remuneration Report which has been audited) 6 Oldfields Holdings Limited 30 June 2019 Indemnifying Officers During or since the end of the financial year, the Company has given an indemnity or entered into an agreement to indemnify, or paid or agreed to pay insurance premiums as follows: - The Company has paid premiums to insure all past, present and future Directors against liabilities for costs and expenses incurred by them in defending legal proceedings arising from their conduct while acting in the capacity of Directors of the Company, other than conduct involving a wilful breach of duty in relation to the Company. The contract of insurance prohibits disclosure of the nature of liability and the amount of the premium. Proceedings on Behalf of Company No person has applied for leave of court 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. The Company was not a party to any such proceedings during the year. Options At the date of this report, there were no unissued ordinary shares of Oldfields Holdings Limited under options. Rounding Oldfields Holdings Limited has applied the relief available to it under ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument 2016/191. Accordingly, amounts in the financial statements have been rounded to the nearest thousand dollars unless otherwise stated. Non-Audit Services The Board of Directors, in accordance with advice from the Audit Committee, is satisfied that the provision of non-audit services during the year is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are satisfied that the services disclosed below did not compromise the external auditor’s independence for the following reasons: - - all non-audit services are reviewed and approved by the Audit Committee prior to commencement to ensure they do not adversely affect the integrity and objectivity of the auditor; and the nature of the services provided does not compromise the general principles relating to auditor independence in accordance with APES 110: Code of Ethics for Professional Accountants set by the Accounting Professional and Ethical Standards Board. Details of the amount paid to the auditors of the Company, BDO East Coast Partnership, and its related practices for audit and non-audit services provided during the year are set out in note 28 to the financial statements. Auditor's Independence Declaration A copy of the auditor's independence declaration as required under section 307C of the Corporation Act 2001 is set out on the following page. This Directors' Report is signed in accordance with the resolution of the Board of Directors. Richard Abela Dated: 28 August 2019 7 Oldfields Holdings Limited 30 June 2019 Tel: +61 2 9251 4100 Fax: +61 2 9240 9821 www.bdo.com.au Level 11, 1 Margaret St Sydney NSW 2000 Australia DECLARATION OF INDEPENDENCE BY IAN HOOPER TO THE DIRECTORS OF OLDFIELDS HOLDINGS LIMITED As lead auditor of Oldfields Holdings Limited for the year ended 30 June 2019, I declare that, to the best of my knowledge and belief, there have been: 1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and 2. No contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of Oldfields Holdings Limited and the entities it controlled during the period. Ian Hooper Partner BDO East Coast Partnership Sydney, 28 August 2019 BDO East Coast Partnership ABN 83 236 985 726 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO East Coast Partnership and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation. Financial Statements Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements Page 10 11 12 13 14 General Information The financial report includes the consolidated financial statements for Oldfields Holdings Limited (the ultimate parent entity) and its controlled entities ("Oldfields" or the "Group"). The financial report is presented in Australian dollars, which is Oldfields Holdings Limited's functional and presentation currency. The financial report consists of the financial statements , notes to the financial statements and the directors' declaration. Oldfields Holdings Limited is a listed public company limited by shares, incorporated and domiciled in Australia. It's registered office and principal place of business is: 8 Farrow Road Campbelltown, NSW, 2560, Australia A description of the nature of the Group's operations and its principal activities are included in the directors' report, which is not part of the financial report. The financial report was authorised for issue with a resolution of Directors on 28 August, 2019. The Directors have the power to amend and reissue the financial report. 9 Oldfields Holdings Limited 30 June 2019 Consolidated Statement of Profit or Loss and Other Comprehensive Income For the year ended 30 June 2019 Sales revenue Cost of sales Gross profit Other income Other expenses from ordinary activities: Sales and distribution expenses Marketing expenses Occupancy expenses Administrative expenses Finance costs Loss before revaluation of derivative financial instruments and income tax Revaluation of deferred senior loan note derivative component Profit before income tax Tax expense Net (loss) profit for the year Other comprehensive income: Items that will be reclassified subsequently to profit or loss when specific conditions are met: Exchange differences on translating foreign operations, net of tax Other comprehensive income for the year, net of tax 6 16 7 Total comprehensive income for the year Net (loss) profit for the year attributable to: Members of the parent entity Non-controlling interest Total net (loss) profit for the year Comprehensive income attributable to: Members of the parent entity Non-controlling interest Total comprehensive income for the year Note 5 2019 $'000 24,755 (13,361) 11,394 2018 (1) $'000 25,898 (14,044) 11,854 5 28 10 (7,375) (206) (1,484) (2,328) (349) (320) 508 188 (416) (228) (7,762) (318) (1,406) (2,177) (278) (77) 1,936 1,859 (309) 1,550 9 9 30 30 (219) 1,580 (481) 253 (228) (472) 253 (219) 1,256 294 1,550 1,286 294 1,580 Earnings per share from continuing operation attributable to members of the parent entity: Basic profit per share Diluted earnings per share Note 22 22 Cents Cents (0.585) (0.585) 1.528 1.528 The accompanying notes form part of these financial statements. (1) The Group has initially applied AASB 15 Revenue from Contracts with Customers at 1 July 2018. Note 4 outlines the impact of adopting AASB 15 using the cumulative effect method, under which the comparative information is not restated. 10 Oldfields Holdings Limited 30 June 2019 Consolidated Statement of Financial Position As at 30 June 2019 ASSETS CURRENT ASSETS Cash and cash equivalents Trade and other receivables Inventories TOTAL CURRENT ASSETS NON-CURRENT ASSETS Property, plant and equipment Intangible assets TOTAL NON-CURRENT ASSETS TOTAL ASSETS LIABILITIES CURRENT LIABILITIES Trade and other payables Borrowings Current tax liabilities Employees benefit obligations TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Borrowings Deferred tax liabilities Employees benefit obligations Derivative financial instruments TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Reserves Accumulated losses Parent interest Non-controlling interest TOTAL EQUITY Note 2019 $'000 2018 (1) $'000 8 9 10 11 12 13 14 7 15 14 7 15 16 19 20 23 23 423 3,905 2,544 6,872 4,589 852 5,441 720 3,542 2,677 6,939 4,841 858 5,699 12,313 12,638 2,853 1,884 21 763 5,521 1,869 186 116 237 2,408 7,929 4,384 2,267 1,481 75 844 4,667 1,562 208 117 746 2,633 7,300 5,338 21,106 47 (17,458) 3,695 689 21,106 38 (16,534) 4,610 728 4,384 5,338 The accompanying notes form part of these financial statements. (1) The Group has initially applied AASB 15 Revenue from Contracts with Customers at 1 July 2018. Note 4 outlines the impact of adopting AASB 15 using the cumulative effect method, under which the comparative information is not restated. 11 Oldfields Holdings Limited 30 June 2019 Consolidated Statement of Changes in Equity For the year ended 30 June 2019 Issued Capital $'000 Other Reserves $'000 Accumulated Losses $'000 Subtotal $'000 Note Non- Controlling Interests $'000 Total $'000 Balance at 1 July 2018 Adjustment on initial application of AASB 15 Adjusted balance at 1 July 2018 Comprehensive income (Loss) profit for the year Other comprehensive income for the year Total comprehensive income for the year Transactions with owners in their capacity as owners Dividends provided for or paid Total transactions with owners and other transfers 20 21 21,106 - 21,106 - - - - - 38 - 38 - 9 9 - - (16,534) (443) (16,977) (481) - (481) - - 4,610 (443) 4,167 (481) 9 (472) - - Balance at 30 June 2019 21,106 47 (17,458) 3,695 728 (39) 689 253 - 253 (253) (253) 689 5,338 (482) 4,856 (228) 9 (219) (253) (253) 4,384 For the year ended 30 June 2018 Issued Capital $'000 Other Reserves $'000 Accumulated Losses $'000 Subtotal $'000 Note Non- Controlling Interests $'000 Total $'000 Balance at 1 July 2017 21,106 8 (17,790) 3,324 782 4,106 Comprehensive income Profit for the year Other comprehensive income for the year Total comprehensive income for the year Transactions with owners in their capacity as owners Dividends provided for or paid Total transactions with owners and other transfers 20 21 - - - - - - 30 30 - - 1,256 - 1,256 - - 1,256 30 1,286 - - Balance at 30 June 2018 21,106 38 (16,534) 4,610 294 - 294 (348) (348) 728 1,550 30 1,580 (348) (348) 5,338 The accompanying notes form part of these financial statements. (1) The Group has initially applied AASB 15 Revenue from Contracts with Customers at 1 July 2018. Note 4 outlines the impact of adopting AASB 15 using the cumulative effect method, under which the comparative information is not restated. 12 Oldfields Holdings Limited 30 June 2019 Consolidated Statement of Cash Flows For the year ended 30 June 2019 OPERATING ACTIVITIES Receipts from customers Payments to suppliers and employees Other income received Finance costs Income tax paid Net cash provided by operating activities INVESTING ACTIVITIES Proceeds from sale of property, plant and equipment Purchase of property, plant and equipment Net cash used in investing activities FINANCING ACTIVITIES Proceeds from borrowings Repayment of borrowings Loans from related party - proceeds from borrowings Dividends paid by controlled entities to non-controlling interests Net cash provided by (used in) financing activities Net decrease in cash and cash equivalents Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of financial year Cash and cash equivalents at end of financial year Note 2019 $'000 2018 $'000 26,831 (25,882) 949 29 (120) (493) 365 6 (895) (889) 285 (394) 500 (253) 138 (386) (386) (172) (558) 28,472 (26,641) 1,831 10 (127) (341) 1,373 167 (1,235) (1,068) 365 (1,225) - (348) (1,208) (903) (903) 731 (172) 8 21 8 The accompanying notes form part of these financial statements. 13 Oldfields Holdings Limited 30 June 2019 Notes to the Consolidated Financial Statements Note 1 General Information and Statement of Compliance Note 2 New and Revised Standards that are Effective for Future Periods Note 3 Summary of Significant Accounting Policies Note 4 Segment Information Note 5 Revenue and Other Income Note 6 Expenses Note 7 Income Taxes Note 8 Cash and Cash Equivalents Note 9 Trade and Other Receivables Note 10 Inventories Note 11 Property, Plant and Equipment Note 12 Goodwill and Other Intangible Assets Note 13 Trade and Other Payables Note 14 Borrowings Note 15 Provisions Note 16 Derivative Financial Instruments Note 17 Financial Risk Management Note 18 Impairment of Non-Financial Assets Note 19 Share Capital Note 20 Reserves Note 21 Dividends Note 22 Earnings per Share Note 23 Accumulated Losses Note 24 Subsidiaries Note 25 Commitments and Contingencies Note 26 Events After the Reporting Period Note 27 Parent Entity Disclosures Note 28 Auditor's Remuneration Note 29 Related Party Transactions Page 15 15 16 19 21 22 22 23 24 25 25 26 27 27 28 29 30 32 32 33 33 33 34 34 35 35 36 36 37 14 Oldfields Holdings Limited 30 June 2019 Notes to the Consolidated Financial Statements 1. General Information and Statement of Compliance These consolidated financial statements and notes represent those of Oldfields Holdings Limited and Controlled Entities (the “Consolidated Group” or “Group”). The separate financial statements of the Parent Entity, Oldfields Holdings Limited, have not been presented within this financial report as permitted by the Corporations Act 2001. The financial statements were authorised for issue on 28 August 2019 by the Directors of the Company. 2. Changes in Accounting Policies 2.1 New and Revised Standards that are Effective for these Financial Statements The following Accounting Standards and Interpretations are most relevant to the consolidated entity: AASB 9: Financial Instruments The consolidated entity has adopted AASB 9 from 1 July 2018. The standard introduced new classification and measurement models for financial assets. A financial asset shall be measured at amortised cost if it is held within a business model whose objective is to hold assets in order to collect contractual cash flows which arise on specified dates and that are solely principal and interest. A debt investment shall be measured at fair value through other comprehensive income if it is held within a business model whose objective is to both hold assets in order to collect contractual cash flows which arise on specified dates that are solely principal and interest as well as selling the asset on the basis of its fair value. All other financial assets are classified and measured at fair value through profit or loss unless the entity makes an irrevocable election on initial recognition to present gains and losses on equity instruments (that are not held-for-trading or contingent consideration recognised in a business combination) in other comprehensive income ('OCI'). Despite these requirements, a financial asset may be irrevocably designated as measured at fair value through profit or loss to reduce the effect of, or eliminate, an accounting mismatch. For financial liabilities designated at fair value through profit or loss, the standard requires the portion of the change in fair value that relates to the entity's own credit risk to be presented in OCI (unless it would create an accounting mismatch). New simpler hedge accounting requirements are intended to more closely align the accounting treatment with the risk management activities of the entity. New impairment requirements use an 'expected credit loss' ('ECL') model to recognise an allowance. Impairment is measured using a 12-month ECL method unless the credit risk on a financial instrument has increased significantly since initial recognition in which case the lifetime ECL method is adopted. For receivables, a simplified approach to measuring expected credit losses using a lifetime expected loss allowance is available. AASB 15: Revenue from Contracts with Customers The consolidated entity has adopted AASB 15 from 1 July 2018. The standard provides a single comprehensive model for revenue recognition. The core principle of the standard is that an entity shall recognise revenue to depict the transfer of promised goods or services to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard introduced a new contract- based revenue recognition model with a measurement approach that is based on an allocation of the transaction price. This is described further in the accounting policies below. Credit risk is presented separately as an expense rather than adjusted against revenue. Contracts with customers are presented in an entity's statement of financial position as a contract liability, a contract asset, or a receivable, depending on the relationship between the entity's performance and the customer's payment. Customer acquisition costs and costs to fulfil a contract can, subject to certain criteria, be capitalised as an asset and amortised over the contract period. The impact on the financial performance and position of the consolidated entity from the adoption of these Accounting Standards is detailed in note 5. 2.2 New and Revised Standards that are Effective for Future Periods The following new and revised standard became effective for the first time to annual periods beginning on or after 1 January 2019. Information on the more significant standards is present below. AASB 16: Leases When effective, this Standard will replace the current accounting requirements applicable to leases in AASB 117: Leases and related Interpretations. AASB 16 introduces a single lessee accounting model that eliminates the requirement for leases to be classified as operating or finance leases. The main changes introduced by the new Standard include: - - - - recognition of a right-to-use asset and liability for all leases (excluding short-term leases with less than 12 months of tenure and leases relating to low-value assets); depreciation of right-to-use assets in line with AASB 116: Property, Plant and Equipment in profit or loss and unwinding of the liability in principal and interest components; variable lease payments that depend on an index or a rate are included in the initial measurement of the lease liability using the index or rate at the commencement date; by applying a practical expedient, a lessee is permitted to elect not to separate non-lease components and instead account for all components as a lease; and - additional disclosure requirements. The Directors initial assessment of the impact of AASB 16 has determined that it will have a material impact on the Group’s financial statements. The Group will decide on the transition method it will adopt. It is noted that the application of AASB 16 will not impact the statement of cash flows. The operating lease commitments (as disclosed in note 25) which relate to office and branch spaces held by the Group, represent the undiscounted lease commitments at 30 June 2019 that have not been adjusted for lease renewals that may result in an increase to the lease term. There are no other standards that are not yet effective and that would be expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions. 15 Oldfields Holdings Limited 30 June 2019 3. Summary of Significant Accounting Policies 3.1 Statement of Compliance 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 ('IFRS') as issued by the International Accounting Standards Board ('IASB'). Material accounting policies adopted in the preparation of these financial statements are presented below and have been consistently applied unless stated otherwise. 3.2 Basis of Preparation The financial statements have been prepared on the historical cost basis except for, where applicable, the revaluation of available-for-sale financial assets, financial assets and liabilities at fair value through profit or loss, certain classes of property, plant and equipment and derivative financial instruments. Where applicable, comparative figures are adjusted to conform to changes in classification and presentation for the current financial year. 3.3 Going Concern As disclosed in the consolidated financial statements, the Group reported a loss of $320,000 before income tax and revaluation of deferred senior loan note derivative for the year ended 30 June 2019 (2018: loss of $77,000). The Directors believe that the Group will generate future profits and positive operating cash flows and as such, the Group will be able to continue as a going concern and that it is appropriate to adopt the going concern basis in the preparation of the consolidated financial report. 3.4 Functional and Presentation Currency The functional currency of each of the Group’s entities is measured using the currency of the primary economic environment in which that entity operates. The consolidated financial statements are presented in Australian dollars which is the Parent Entity's functional currency. 3.5 Rounding The parent entity has applied the relief available to it under ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument 2016/191 . Accordingly, amounts in the financial statements have been rounded to the nearest thousand dollars unless otherwise stated. 3.6 Key Judgements, Estimates and Assumptions In the process of applying the Group's accounting policies management has made a number of judgements, applied estimates and assumptions of future events. Judgements, estimates and assumptions which are material to the Group's financial report are found in the following notes: - Revenue and other income - Income taxes - Trade and other receivables - Inventories - Property, plant and equipment - Goodwill and other intangible assets - Provisions - Derivative financial instruments 3.7 Principles of Consolidation The consolidated financial statements incorporate all of the assets, liabilities and results of Oldfields Holdings Limited and all of the subsidiaries. Subsidiaries are entities the Parent controls. The Parent controls an entity when it 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 over the entity. The assets, liabilities and results of all subsidiaries are fully consolidated into the financial statements of the Group from the date on which control is obtained by the Group. The consolidation of a subsidiary is discontinued from the date that control ceases. Inter-company transactions, balances and unrealised gains or losses on transactions between Group entities are fully eliminated on consolidation. Where necessary, accounting policies of subsidiaries are changed and adjustments made where necessary to ensure uniformity of the accounting policies adopted by the Group. Equity interests in a subsidiary not attributable, directly or indirectly, to the Group are presented as ‘Non-Controlling Interests’. The Group initially recognises non-controlling interests that are present ownership interests in subsidiaries and are entitled to a proportionate share of the subsidiary’s net assets on liquidation at either fair value or at the non-controlling interests’ proportionate share of the subsidiary’s net assets. Subsequent to initial recognition, non-controlling interests are attributed their share of profit or loss and each component of other comprehensive income. Non-controlling interests are shown separately within the equity section of the statement of financial position and statement of profit or loss and other comprehensive income. 3.8 Business Combinations Business combinations occur where an acquirer obtains control over one or more businesses. A business combination is accounted for by applying the acquisition method, unless it is a combination involving entities or businesses under common control. The business combination will be accounted for from the date that control is obtained, whereby the fair value of the identifiable assets acquired and liabilities assumed, including contingent liabilities, are recognised (subject to certain limited exemptions). When measuring the consideration transferred in the business combination, any asset or liability resulting from a contingent consideration arrangement is also included. Subsequent to initial recognition, contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. All transaction costs incurred in relation to business combinations, other than those associated with the issue of a financial instrument, are recognised as expenses in the profit or loss and other comprehensive income statement when incurred. The acquisition of a business may result in the recognition of goodwill or a gain from a bargain purchase. 16 Oldfields Holdings Limited 30 June 2019 3.9 Foreign Currency Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined. Exchange differences arising on the translation of monetary items are recognised in profit or loss, except where deferred in equity as a qualifying cash flow or net investment hedge. Exchange differences arising on the translation of non-monetary items are recognised directly in other comprehensive income to the extent that the underlying gain or loss is recognised in other comprehensive income, otherwise the exchange difference is recognised in the profit or loss. The financial results and position of foreign operations whose functional currency is different from the Group’s presentation currency are translated as follows: (i) assets and liabilities are translated at exchange rates prevailing at the end of the reporting period; (ii) income and expenses are translated at average exchange rates for the period; and (iii) retained earnings are translated at the exchange rates prevailing at the date of the transaction. Exchange differences arising on translation of foreign operations with functional currencies other than Australian dollars are recognised in other comprehensive income and included in the foreign currency translation reserve in the statement of financial position. The cumulative amount of these differences is reclassified into profit or loss in the period in which the operation is disposed of. 3.10 Borrowing Costs Borrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take a substantial period of time to prepare for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are recognised in profit or loss in the period in which they are incurred. 3.11 Leases Leases of fixed assets, where substantially all the risks and benefits incidental to the ownership of the asset (but not the legal ownership) are transferred to entities in the consolidated group, are classified as finance leases. Finance leases are capitalised by recognising an asset and a liability at the lower of the amounts equal to the fair value of the leased property or the present value of the minimum lease payments, including any guaranteed residual values. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period. Leased assets are depreciated on a straight-line basis over the shorter of their estimated useful lives or the lease term. Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are recognised as expenses in the periods in which they are incurred. Lease incentives under operating leases are recognised as a liability and amortised on a straight-line basis over the lease term. 3.12 Financial Instruments Initial Recognition and Measurement Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss Classification and Subsequent Measurement Financial assets that meet the following conditions are measured subsequently at amortised cost: - - Held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Financial assets that meet the following conditions are measured subsequently at fair value through other comprehensive income (FVTOCI): - - The financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling the financial assets; The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. By default, all other financial assets are measured subsequently at fair value through profit or loss (FVTPL). As at 30 June 2019, the Group’s financial assets consist of cash and cash equivalents and trade and other receivables which are measured at amortised cost in accordance with the above accounting policy. Non-derivative financial liabilities are initially measured at fair value and are subsequently measured at amortised cost. Gains or losses are recognised in profit or loss through the amortisation process and when the financial liability is derecognised. As at 30 June 2019, the Group’s financial liabilities consist of trade and other payables, bank overdrafts and bank loans, shareholder loan and finance lease liabilities which are measured at amortised cost in accordance with the above accounting policy. The derivative element of the Deferred Senior Loan Note is measured at fair value through profit or loss. 17 Oldfields Holdings Limited 30 June 2019 3.13 Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Taxation Office (ATO). 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 ATO is included with other receivables or 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 ATO are presented as operating cash flows included in receipts from customers or payments to suppliers. 3.14 Comparative Figures When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. Where the Group retrospectively applies an accounting policy, makes a retrospective restatement or reclassifies items in it's financial statements, an additional (third) statement of financial position as at the beginning of the preceding period in addition to the minimum comparative financial statement is presented. 3.15 Other Accounting Policies Significant and other accounting policies that summarise the measurement basis used and are relevant to the understanding of the financial statements are provided throughout the notes to the financial statements. 18 Oldfields Holdings Limited 30 June 2019 4. Segment Information The Group has identified its operating segments based on the internal reports that are reviewed and used by Chief Operating Decision Maker (CODM), being the Board of Directors, in assessing performance and in determining the allocation of resources. The Group is managed primarily on the basis of product category and service offerings as the diversification of the Group's operations inherently have notably different risk profiles and performance assessment criteria. Operating segments are therefore determined on the same basis. Reportable segments disclosed are based on aggregating operating segments where the segments are considered to have similar economic characteristics and are also similar with respect to the following: - The products sold and/or services provided by the segment; - The manufacturing process; - The type or class of customer for the products or service; - The distribution method; and - Any external regulatory requirements. Operating segments are presented using the 'management approach', where the information presented is on the same basis as the internal reports provided to the CODM. The CODM is responsible for the allocation of resources to operating segments and assessing their performance. Unless stated otherwise, all amounts reported to the Board of Directors, being the CODM with respect to operating segments, are determined in accordance with accounting policies that are consistent with those adopted in the annual financial statements of the Group. The primary operating segments during the current financial period were: (i) Consumer Products The consumer products segment imports, manufactures and distributes paint brushes, paint rollers, painter's tools, garden sheds and outdoor storage systems. (ii) Scaffolding The scaffolding segment manufactures and distributes scaffolding and related equipment. scaffold and access solutions to the building maintenance and construction industries. In addition, this segment is engaged in hiring 4.1 Operating Segment Performance Year ended 30 June 2019 Revenue Sale of goods (point in time) Rendering of services (over time) Rendering of services (point in time) Total segment revenue Other revenue Total other revenue Total revenue and other income Adjusted segment EBITDA Depreciation and amortisation expense Finance costs Unrealised foreign exchange loss Profit (loss) before revaluation of derivative financial instruments and income tax Fair value adjustment to DSLN Profit (loss) before income tax Income tax expense Profit (loss) after income tax Consumer Products $'000 Scaffolding $'000 Intersegment Eliminations/ Unallocated $'000 4,441 - - 4,441 19 19 3,946 6,549 9,824 20,319 9 9 4,460 20,328 (672) (22) - - (694) - (694) - (694) 1,751 (838) - - 913 - 913 (416) 497 (5) - - (5) - - (5) (164) (20) (349) (6) (539) 508 (31) - (31) Total $'000 8,382 6,549 9,824 24,755 28 28 24,783 915 (880) (349) (6) (320) 508 188 (416) (228) 19 Oldfields Holdings Limited 30 June 2019 4.1 Operating Segment Performance (continued) Year ended 30 June 2018 Revenue Sale of goods (point in time) Rendering of services (over time) Rendering of services (point in time) Total segment revenue Other revenue Total other revenue Total revenue and other income Adjusted segment EBITDA Depreciation and amortisation expense Finance costs Unrealised foreign exchange loss Profit (loss) before revaluation of derivative financial instruments and income tax Fair value adjustment to DSLN Profit (loss) before income tax Income tax expense Profit (loss) after income tax Consumer Products $'000 Scaffolding $'000 Intersegment Eliminations/ Unallocated $'000 5,179 - - 5,179 8 8 5,998 5,934 8,900 20,832 2 2 (113) - - (113) - - Total $'000 11,064 5,934 8,900 25,898 10 10 5,187 20,834 (113) 25,908 (1,002) (23) - - (1,025) - (1,025) - (1,025) 2,196 (843) - - 1,353 - 1,353 (309) 1,044 (73) (46) (278) (8) (405) 1,936 1,531 - 1,531 1,121 (912) (278) (8) (77) 1,936 1,859 (309) 1,550 All inter-segment transactions are eliminated on consolidation of the Group's financial statements. Corporate charges are allocated to reporting segments based on the segment's overall proportion of revenue generation within the Group. The Board of Directors believes this is representative of likely consumption of head office expenditure that should be used in assessing segment performance and cost recoveries. Adjusted segment EBITDA excludes discontinued operations and the effects of individually significant expenditure, such as restructuring costs, legal expenses, and impairments when the impairment is the result of an isolated non-recurring event. It also excludes the effects of equity-settled share- based payments when applicable and unrealised gains or losses on financial instruments. Interest revenue and finance cost are not allocated to segments as this type of activity is driven by the central treasury function which manages the cash position of the Group. 4.2 Operating Segment Assets and Liabilities As at 30 June 2019 Segment assets Segment liabilities Segment net assets As at 30 June 2018 Segment assets Segment liabilities Segment net assets Consumer Products $'000 2,079 (2,220) (141) Consumer Products $'000 2,342 (1,789) 553 Intersegment Eliminations/ Unallocated $'000 (3,868) (4,143) (8,011) Intersegment Eliminations/ Unallocated $'000 (3,184) (4,796) (7,980) Scaffolding $'000 14,102 (1,566) 12,536 Scaffolding $'000 13,479 (714) 12,765 Total $'000 12,313 (7,929) 4,384 Total $'000 12,637 (7,299) 5,338 Where an asset is used across multiple segments, the asset is allocated to the segment that receives the majority of the economic value from the asset. In most instances segment assets are clearly identifiable on the basis of their nature and physical location. Liabilities are allocated to segments where there is direct nexus between the incurrence of the liability and the operations of the segment. Borrowings and tax liabilities are generally considered to relate to the Group as a whole and are not allocated. Segment liabilities include trade and other payables and certain direct borrowings. Inter-segment loans payable and receivable are initially recognised at the consideration received/to be received net of transaction costs. If intersegment loans receivable and payable are not on commercial terms, these are not adjusted to fair value based on market interest rates. 20 Oldfields Holdings Limited 30 June 2019 5. Revenue and Other Income The Group derives the following types of revenue: Sales revenue Sale of goods Hire and erection revenue Total sales revenue Other income Other income Total other income Total revenue and other income from continuing operations 5.1 Recognition and Measurement 2019 $'000 2018 (1) $'000 8,382 16,373 24,755 28 28 24,783 11,063 14,835 25,898 10 10 25,908 Revenue is measured at the fair value of the consideration received or receivable after taking into account any trade discounts and rebates payables. When the inflow of consideration is deferred it is treated as the provision of financing and is discounted at a rate of interest that is generally accepted in the market for similar arrangements. The difference between the amount initially recognised and the amount ultimately received is interest revenue. Revenue is stated net of the amount of goods and services tax. When recognising revenue in relation to the sale of goods to customers, the key performance obligation of the consolidated entity is considered to be the point of delivery of the goods to the customer, as this is deemed to be the time that the customer obtains control of the promised goods and therefore the benefits of unimpeded access. When recognising revenue in relation to the hire of equipment to customers, the separate performance obligations of the consolidated entity is considered to be the various stages of the hire i.e. erection, hire and dismantle. The hire services are satisfied over time given that the customer simultaneously receives and consumes the benefits provided by the Group. The performance obligations associated with the erection and dismantle of hire equipment are recognised at a point in time. The Group derives its revenue from the transfer of goods at a point in time, transfer of services at a point in time and transfer of services over time. The table within Note 4 provides a breakdown of revenue by major business line. The categories Consumer Products and Scaffolding depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic data. Interest revenue is recognised using the effective interest method. AASB 15: Revenue from Contracts with Customers This standard is applicable to annual reporting periods beginning on or after 1 January 2018. It supersedes existing guidance included in AASB 118 Revenue and other revenue related accounting interpretations. The core principle of AASB 15 is to recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects consideration to which the Group expects to be entitled in exchange for those goods or services. AASB 15 includes the following: - Outlines a five-step revenue recognition model which determines the timing and amount of revenue recognised. The five-step mode requires: 1. contracts (either written, verbal or implied) to be identified, 2. 3. 4. together with the separate performance obligations within the contract, determination of the transaction price, adjusted for the time value of money excluding credit risk, allocation of the transaction price to the separate performance obligations on a basis of relative stand-alone selling price of each distinct good or service, or estimation approach if no distinct observable prices exist, and recognition of revenue when each performance obligation is satisfied. 5. - - Provides new and more detailed guidance on specific topics e.g. multiple element arrangements, variable consideration, rights of return etc. Increases the volume of disclosure around types of revenue and the amounts recognised. The impact of applying the new requirements of AASB 15 relate to the identification and recognition of the separate performance obligations within scaffolding voids contracts. Amounts received from customers in advance of services provided are classified as deferred revenue under the requirements of AASB 15. The Group has applied AASB 15 using the cumulative effect method without practical expedients on the date of initial application, 1 July 2018. This application resulted in an adjustment to retained earnings as at 1 July 2018 and no adjustments to the comparative period presented. The impacts recognised in the Group financial report for the year ended 30 June 2019 were: - - $482,000 reduction to retained earnings at 1 July 2018, and $73,000 net increase to profit after tax for the current period. 5.2 Key Judgements, Estimates and Assumptions: Revenue Recognition Hire and Erection Revenue Revenue recognition relating to the provision of hire equipment services is determined with reference to the stage of completion of the transaction at the end of the reporting period where outcome of the contract can be estimated reliably. Stage of completion is determined with reference to the services performed to date as a percentage of total anticipated services to be performed. Where the outcome cannot be estimated reliably, revenue is recognised only to the extent that related expenditure is recoverable. 21 Oldfields Holdings Limited 30 June 2019 6. Expenses Profit before income tax includes the following specific expenses by nature: Note 2019 $'000 2018 $'000 Inventory recognised as an expense during the year Depreciation expense Amortisation expense Plant and equipment impairment Employee benefits expense Expected credit losses Rental expense on operating leases Finance costs: Related parties Unrelated parties Hire purchase charges Unwinding of discount on deferred senior loan note Other borrowing costs 7. Income Taxes Income tax expense recognised in the income statement Current tax Current tax on profits for the year Adjustments for current tax of prior periods Total current tax expense Deferred income tax Increase in deferred tax assets Decrease in deferred tax liabilities Total deferred tax expense Total income tax expense Tax reconciliation Profit before income tax expense Tax at the Australian tax rate of 30% Tax effect of amounts which are not deductible (taxable) in calculating taxable income: Non-allowable items Under/(over) provision for income tax in prior year Unwinding of discount on DSLN not deductible Revaluation of derivative element of DSLN not deductible Less tax effect of: Net tax effect profit from overseas operations Current year tax loss not brought to account Income tax expense Unrecognised tax assets Tax losses Tax losses for which no deferred tax asset has been recognised Operating losses Capital losses Potential tax benefit @ 27.5% (2018: 27.5%) 11 12 11 29 3,830 4,389 874 6 - 898 14 208 9,705 9,311 197 17 1,105 1,084 10 81 29 229 - 349 2019 $'000 311 94 405 (10) 21 11 416 2019 $'000 188 - 94 25 151 8 278 2018 $'000 268 (11) 257 (6) 58 52 309 2018 $'000 1,859 56 558 1 94 68 (152) 67 10 339 416 2019 $'000 3 (11) 45 (580) 15 24 270 309 2018 $'000 11,609 273 3,268 11,270 273 3,174 22 Oldfields Holdings Limited 30 June 2019 7. Income Taxes (continued) Current tax liabilities Income tax liabilities Total current tax liabilities Deferred income tax in the statement of financial position Employee benefits Provision for impairment of trade receivables Fixed assets Other Net deferred tax liabilities 7.1 Recognition and Measurement 2019 $'000 21 21 2019 $'000 (34) 14 (198) 32 (186) 2018 $'000 75 75 2018 $'000 (34) 4 (190) 12 (208) The income tax expense for the period is the tax payable on the current period’s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the Company’s subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. Deferred income tax is provided in full using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates and laws that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred tax assets are recognised only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in foreign operations where the company is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. Tax Consolidation Oldfields Holdings Limited and its wholly-owned subsidiaries have implemented the tax consolidation legislation. As a consequence these entities are taxed as a single entity and the deferred tax assets and liabilities of these entities are set off in the consolidated financial statements. Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity respectively. 7.2 Key Judgements, Estimates and Assumptions: Unrecognised Deferred Tax Benefits The Group has unrecognised benefits relating to carried forward losses. The unused tax losses were incurred by the Australian tax consolidated group. The losses are currently not recognised as it is not sufficiently probable that the Group will generate taxable income in the foreseeable future that will allow the losses to be utilised. 8. Cash and Cash Equivalents Cash on hand Cash at bank Total cash and cash equivalents Reconciliation to statement of cash flows Cash and cash equivalents Bank overdrafts Balances per statement of cash flows 2019 $'000 1 422 423 2019 $'000 423 (981) (558) 2018 $'000 2 718 720 2018 $'000 720 (892) (172) Note 14 23 Oldfields Holdings Limited 30 June 2019 8. Cash and Cash Equivalents (continued) Reconciliation of cash flow from operating activities with loss after income tax Loss (profit) after income tax Adjustment for non cash items: Depreciation and amortisation Net (gains) losses on disposal of property, plant and equipment Write off of plant and equipment Unwinding of discount on deferred senior loan note Revaluation of deferred senior loan note to fair value through profit or loss Stock adjustments Changes in operating assets and liabilities: (Increase) decrease in trade and other receivables (Increase) decrease in inventories Increase (decrease) in trade payables and accruals Increase (decrease) in income taxes payable Increase (decrease) in deferred taxes payable Increase (decrease) in provisions Cash flow from operating activities 8.1 Recognition and Measurement 2019 $'000 (228) 880 (8) - 229 (508) 275 (363) 142 104 (54) (22) (82) 365 2018 $'000 1,550 912 1 (7) 151 (1,936) 208 (19) 581 (100) (84) 52 64 1,373 Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value and bank overdrafts. Bank overdrafts are shown within short-term borrowings in current liabilities in the statement of financial position, but included as a component of cash and cash equivalents for the purpose of the statement of cash flows. 8.2 Acquisition Through Finance Lease During the year the Group acquired plant and equipment with an aggregate value of $106,571 (2018: $60,350) by means of financial leases. These acquisitions are not reflected in the statement of cash flow. 9. Trade and Other Receivables CURRENT Trade receivables Expected credit losses (2018: Provision for impairment) Net trade receivables Other receivables Prepayments Total current trade and other receivables Trade receivables past due but not impaired Up to 3 months 3 to 6 months Over 6 months Total 2019 $'000 3,555 (194) 3,361 118 426 3,905 2019 $'000 2018 $'000 3,261 (96) 3,165 83 294 3,542 2018 $'000 96 148 40 27 13 9 188 145 Amounts are considered as ‘past due’ when the debt has not been settled with the terms and conditions agreed between the Group and the customer or counter party to the transaction. Receivables that are past due are assessed for expected credit loss by ascertaining solvency of the debtors and are provided for where there are specific circumstances indicating that the debt may not be fully repaid to the Group. Trade receivables that were past due relate to a number of independent customers for whom there is no recent history of default. 9.1 Expected Credit Loss and Risk Exposure Ageing analysis of expected credit loss 1 to 3 months 4 to 6 months Over 6 months Total Movement in expected credit losses Opening balances Expected credit losses recognised during the year Receivables written off during the year as uncollectable Closing balance 2019 $'000 2018 $'000 123 7 43 3 28 86 194 96 2019 $'000 2018 $'000 96 51 129 157 (112) 194 96 (31) 24 Oldfields Holdings Limited 30 June 2019 9.1 Impairment and Risk Exposure (continued) Other Receivables These amounts generally arise from transactions outside the usual operating activities of the Group. Collateral is not normally obtained. Credit Risk The Group has no significant concentration of credit risk with respect to any single counter party or group of counter parties other than those receivables specifically provided for and mentioned within note 9. The class of assets described as Trade and Other Receivables is considered to be the main source of credit risk related to the Group. 9.2 Recognition and Measurement 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. 9.3 Key Judgements, Estimates and Assumptions: Provision for Impairment of Receivables 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. 10. Inventories Raw materials - at cost Work in progress - at cost Finished goods - at net realisable value Goods in transit - at cost Total inventories 2019 $'000 278 165 1,814 287 2,544 2018 $'000 286 117 1,916 358 2,677 10.1 Recognition and Measurement Inventories are measured at the lower of cost and net realisable value. The cost of manufactured products includes direct materials, direct labour and an appropriate proportion of variable and fixed overheads. Overheads are applied on the basis of normal operating capacity. Costs are assigned on the basis of weighted average costs. 10.2 Key Judgements, Estimates and Assumptions: Provision for Impairment of Inventories The provision for impairment of inventories assessment requires a degree of estimation and judgement. The level of provision is assessed by taking into account the recent sales experience, the ageing of the inventories, and other factors that affect inventory obsolescence. 11. Property, Plant and Equipment Year ended 30 June 2019 Cost Accumulated depreciation Net book amount Opening net book amount Exchange differences Additions Disposals and impairment Depreciation expense Closing net book amount Year ended 30 June 2018 Cost Accumulated depreciation Net book amount Opening net book amount Exchange differences Additions Disposals and impairment Depreciation expense Closing net book amount Hire Equipment $'000 8,375 (4,332) 4,043 Plant and Equipment $'000 2,265 (2,143) 122 4,291 - 665 (275) (638) 4,043 157 1 18 - (54) 122 Hire Equipment $'000 8,148 (3,857) 4,291 Plant and Equipment $'000 2,240 (2,083) 157 4,395 - 934 (399) (639) 4,291 157 15 63 4 (82) 157 Leasehold Improve- ments $'000 414 (386) 28 53 1 - - (26) 28 Leasehold Improve- ments $'000 412 (359) 53 41 3 47 (2) (36) 53 Motor Vehicles $'000 2,001 (1,605) 396 340 - 212 - (156) 396 Motor Vehicles $'000 1,921 (1,581) 340 290 - 191 - (141) 340 Total $'000 13,055 (8,466) 4,589 4,841 2 895 (275) (874) 4,589 Total $'000 12,721 (7,880) 4,841 4,883 18 1,235 (397) (898) 4,841 Oldfields Holdings Limited 30 June 2019 Note 6 Note 6 25 11.1 Recognition and Measurement All property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. 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 Group and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. Repairs and maintenance costs are recognised as expenses in profit or loss during the financial period in which they are incurred. The depreciable amount of all fixed assets, including capitalised lease assets, are depreciated on a straight-line basis over the asset's useful life to the Group commencing from the time the asset is held ready for use. The estimated useful lives in the current period is as follows: Hire equipment Plant and equipment Leasehold improvements Motor vehicles 5-20 years 3-15 years shorter of lease term or useful life 5 years The assets’ residual values and useful lives are reviewed and adjusted if appropriate at the end of each reporting period. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are recognised in profit or loss in the period in which they arise. 11.2 Key Judgements, Estimates and Assumptions: Estimation of Useful Lives of Assets The Group determined the estimated useful lives and related depreciation and amortisation charges for its property, plant and equipment and definite life intangible assets. The useful lives could change significantly as a result of technical innovations or some other event. 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. The depreciation and amortisation charge will increase where the useful lives are less than previously estimated, or technically obsolete or non-strategic assets that have been abandoned or sold will be written off or down. Hire equipment is depreciated on a straight line basis over its estimated useful life, taking into account its realisable value at the end of its life. Hire equipment is constantly maintained and refurbished throughout its useful life resulting in the depreciation to be minimal on certain pieces of equipment. The Group has assessed the useful life of hire equipment to be up to 20 years. All reconditioning costs of hire equipment are expensed as incurred and are not taken into account in the carrying value of hire equipment. 12. Goodwill and Other Intangible Assets Year ended 30 June 2019 Cost Accumulated amortisation and impairment Net book amount Opening net book amount Additions Disposals Amortisation charge Balance at 30 June 2019 Year ended 30 June 2018 Cost Accumulated amortisation and impairment Net book amount Opening net book amount Additions Disposals Amortisation charge Balance at 30 June 2018 Note 6 Note 6 Goodwill $'000 Trademark & Licences $'000 Software & Other $'000 838 - 838 838 - - - 838 187 (173) 14 17 - (3) 14 386 (386) - 3 - - (3) - Goodwill $'000 Trademark & Licences $'000 Software & Other $'000 838 - 838 838 - - - 838 187 (170) 17 9 10 - (2) 17 386 (383) 3 15 - - (12) 3 2019 $'000 838 Total $'000 1,411 (559) 852 858 - - (6) 852 Total $'000 1,411 (553) 858 862 10 - (14) 858 2018 $'000 838 Goodwill is allocated to the Group's cash-generating units (CGUs). A CGU level summary of the goodwill allocation is presented below. South and Western Australian scaffold branches 26 Oldfields Holdings Limited 30 June 2019 12.1 Recognition and Measurement Goodwill Goodwill is carried at cost less any accumulated impairment losses. Goodwill is calculated as the excess of the sum of: (i) the consideration transferred; (ii) any non-controlling interest (determined under either the full goodwill or proportionate interest method); and (iii) the acquisition date fair value of any previously held equity interest; over the acquisition date fair value of net identifiable assets acquired. Intangible Assets Intangible assets acquired are measured on initial recognition at cost. Intangible assets other than goodwill have finite useful amortisation charges for intangible assets are included under depreciation and amortisation expense per the statement of profit or loss. lives. The current Patents and trademarks are recognised at cost of acquisition. They have a finite life and are carried at cost less any accumulated amortisation and any impairment losses. Patents and trademarks are amortised over their useful lives ranging from 5 to 10 years. 12.2 Key Judgements, Estimates and Assumptions: Goodwill and Other Indefinite Life Intangible Assets The Group tests annually, or more frequently if changes in circumstances indicate impairment, whether goodwill and other indefinite life intangible assets have suffered impairment. Recoverable amounts of cash generating units have been determined based on value-in use calculations using assumptions including discount rates based on the current cost of capital and growth rates of estimated future cash flows. 13. Trade and Other Payables CURRENT Unsecured liabilities Trade payables Sundry payables and accrued expenses Deferred revenue Net GST payables Total trade and other payables 13.1 Recognition and Measurement 2019 $'000 2018 $'000 1,458 806 409 180 2,853 1,322 746 - 199 2,267 Trade and other payables represent the liabilities for goods and services received by the Group that remain unpaid at the end of the reporting period. The balance is recognised as a current liability with the amounts normally paid between 7 and 60 days of recognition of the liability. The carrying amounts of trade and other payables are assumed to be the same as their fair values due to their short-term nature. 14. Borrowings CURRENT Secured liabilities Bank overdrafts Bank loans Shareholder loan Other financing liabilities Hire purchase liabilities Total current borrowings NON-CURRENT Secured liabilities Hire purchase liabilities Debt element of deferred senior loan note Total non-current borrowings Total borrowings Bank overdraft Bank loan Shareholder loan Other financing liabilities Hire purchase liabilities Debt element of deferred senior loan note Total current and non-current secured liabilities Note 2019 $'000 2018 $'000 16 981 167 500 123 113 1,884 215 1,654 1,869 3,753 2019 $'000 981 167 500 123 328 1,654 3,753 892 379 - 130 80 1,481 138 1,424 1,562 3,043 2018 $'000 892 379 - 130 218 1,424 3,043 27 Oldfields Holdings Limited 30 June 2019 14.1 Recognition and Measurement 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 rate method. Where there is an unconditional right to defer settlement of the liability for at least 12 months after the reporting date, the loans or borrowings are classified as non-current. Collateral Provided The bank debt is secured by a fixed and floating charge over the Group's assets. The facility agreement currently expires in September 2020. Covenants imposed by the bank includes interest cover ratios; capital expenditure limits; gearing ratios; and the Group cannot create or acquire a new subsidiary unless that subsidiary becomes a party to the agreement. The Group complied with all its loan covenants during the year. 14.2 Shareholder Loan Transactions between related parties (as disclosed in Note 29) are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated. 15. Provisions CURRENT Employee leave obligations Total current provisions NON-CURRENT Employee leave obligations Total non-current provisions Total provisions Amounts not expected to be settled within the next 12 months Current leave obligations expected to be settled after 12 months 15.1 Recognition and Measurement 2019 $'000 2018 $'000 763 763 116 116 879 2019 $'000 280 844 844 117 117 961 2018 $'000 375 Provisions Provisions are recognised when the Group 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 the amounts required to settle the obligation at the end of the reporting period. Short-Term Employee Benefits Provision is made for the Group’s obligation for short-term employee benefits. Short-term employee benefits are benefits (other than termination benefits) that are expected to be settled wholly before 12 months after the end of the annual reporting period in which the employees render the related service, including wages, salaries and sick leave. Short-term employee benefits are measured at the undiscounted amounts expected to be paid when the obligation is settled. Other Long-Term Employee Benefits Provision is made for employees’ long service leave and annual leave entitlements not expected to be settled wholly within 12 months after the end of the annual reporting period in which the employees render the related service. Other long-term employee benefits are measured at the present value of the expected future payments to be made to employees. Expected future payments incorporate anticipated future wage and salary levels, durations of service and employee departures and are discounted at rates determined by reference to market yields at the end of the reporting period on government bonds that have maturity dates that approximate the terms of the obligations. Any remeasurements for changes in assumptions of obligations for other long-term employee benefits are recognised in profit or loss in the periods in which the changes occur. 15.2 Key Estimate: Employee Entitlement Provisions - Long Service Leave The liability for long service leave is recognised and measured at the present value of the estimated future cash flows to be made in respect of all In determining the present value of the liability, estimates of attrition rates and pay increases have been taken into employees at the reporting date. account. 28 Oldfields Holdings Limited 30 June 2019 16. Derivative Financial Instruments The Group measures and recognises the following assets and liabilities at fair value on a recurring basis after initial recognition: - Derivative financial instruments The Group does not subsequently measure any liabilities at fair value on a non-recurring basis. 16.1 Fair Value Hierarchy AASB 13 requires the disclosure of fair value information by level of the fair value hierarchy, which categorises fair value measurements into one of three possible levels based on the lowest level input that is significant to the measurement categorised as follows: Level 1 Measurements based on quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. Level 2 Measurements based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 Measurements based on unobservable inputs for the asset or liability. The fair values of assets and liabilities that are not traded in an active market are determined using one or more valuation techniques. These valuation techniques maximise, to the extent possible, the use of observable market data. If all significant inputs required to measure fair value are observable, the asset or liability is included in Level 2. If one or more significant inputs are not based on observable market data, the asset or liability is included in Level 3. The following tables provide the fair values of the Group’s assets and liabilities measured and recognised on a recurring basis after initial recognition and their categorisation within the fair value hierarchy. Recurring fair value measurements Derivative element of DSLN Total liabilities recognised at fair value 2019 Level 2 $'000 237 237 2018 Level 2 $'000 746 746 There were no transfers between levels for assets or liabilities measured at fair value on a recurring basis during the reporting period (2018: no transfers). 16.2 Valuation Techniques and Inputs Used to Measure Level 2 Fair Values The derivative element of the Deferred Senior Loan Note (DSLN) of $237,000 (June 2018: $746,000) has been valued using Level 2 inputs which are included in the terms and conditions of this instrument. The main terms of the DSLN are as follows: - - - - - - - The DSLN is secured against assets of the Group and has a 10 year maturity date of 21 December 2022; Interest calculated at 12% p.a. was payable upon early repayment up to 21 December 2017; From 21 December 2017 and up to the maturity date, the lower of interest calculated at 12% p.a. or a redemption premium is payable; The premium is equivalent to the difference between the Face Value of the DSLN and the market value. Market value is determined by the volume weighted average share price (VWAP) 15 business days prior to the redemption or maturity date as applicable multiplied by 23,702,240 reference shares; If the market value of the reference shares as calculated to be lower than the Face Value of the DSLN, the redemption premium is deemed to be nil and the only repayment due will be the Face Value of the DSLN; The bank is also entitled to receive a payment to the equivalent value of any dividend payment if made by the Group prior to the maturity date of the DSLN; and Other normal conditions apply in respect to meeting gearing and interest cover ratios. An external consultant independently assessed the valuation of the redemption premium of the DSLN as at 30 June 2019 and determined a fair value of $237,000. The fair value was based on the Black-Scholes Pricing Model. The Directors have recognised the fair value of $237,000 as at 30 June 2019 which resulted in a $508,000 gain on revaluation of DSLN derivative component recognised in the consolidated statement of profit or loss and other comprehensive income. There were no changes during the period in the valuation techniques used by the Group to determine Level 2 fair values. 16.3 Recognition and Measurement Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently measured to their fair value at each reporting date. 16.4 Key Judgements, Estimates and Assumptions: Fair Value of Derivative Senior Loan Note The core debt has been discounted by 12% to net present value over the expected term of the DSLN (i.e. 10 years) and is included in non-current borrowings. The derivative element has been fair valued including considering the redemption premium payable under the DSLN. Should the Group repay or partially repay the DSLN before the maturity date, the total amount payable could significantly differ from the respective carrying amounts such that the final premium is only determinable by the VWAP 15 business days prior to the redemption or maturity date. 29 Oldfields Holdings Limited 30 June 2019 17. Financial Risk Management 17.1 Categories of Financial Assets and Liabilities The Group’s financial instruments consist mainly of deposits with banks, local money market instruments, short-term investments, accounts receivable and payable, loans to and from related parties, bills, leases, and derivatives. The totals for each category of financial instruments, measured in accordance with AASB 9 as detailed in the accounting policies to these financial statements, are as follows: Financial Assets Cash and cash equivalents Net trade receivables Total financial assets Financial Liabilities Financial liabilities at amortised cost Trade and other payables Borrowings Financial liabilities at fair value through profit and loss Derivative instruments Total financial liabilities 17.2 Financial Risk Management Policies Note 8 9 13 14 16 2019 $'000 422 3,361 3,783 2,047 3,753 237 6,037 2018 $'000 718 3,165 3,883 2,267 3,043 746 6,056 The Board of Directors are responsible for managing financial risk policies and exposures of the Group. It also reviews the effectiveness of internal controls relating to commodity price risk, counterparty credit risk, currency risk, liquidity risk and interest rate risk. The overall risk management strategy seeks to assist the Group in meeting its financial targets while minimising potential adverse effects on financial performance. This includes the review of the use of hedging derivative instruments, credit risk policies and future cash flow requirements. 17.3 Specific Financial Risk Exposures and Management The main risks the Group is exposed to through its financial instruments are credit risk, liquidity risk and market risk consisting of interest rate risk and foreign currency risk. There have been no substantive changes in the types of risks the Group is exposed to, how these risks arise, or the Board’s objectives, policies and processes for managing or measuring the risks from the previous period. (a) Credit Risk Exposure to credit risk relating to financial assets arises from the potential non-performance by counterparties of contract obligations that could lead to a financial loss to the Group. Credit risk is managed through the maintenance of procedures (such procedures include the utilisation of systems for the approval, granting and renewal of credit limits, regular monitoring of exposures against such limits and monitoring of the financial stability of significant customers and counterparties), ensuring to the extent possible, that customers and counterparties to transactions are of sound credit worthiness. Such monitoring is used in assessing receivables for impairment. Depending on the division within the Group, credit terms are generally 30 days from the end of month after invoice date. Collateral held by the Group securing receivables is detailed in note 9. The Group has no significant concentration of credit risk with any single counterparty or group of counterparties. Details with respect to credit risk of trade and other receivables is provided in note 9. Trade and other receivables that are neither past due or impaired are considered to be of high credit quality. Aggregates of such amounts are as detailed at note 9. (b) Liquidity Risk Liquidity risk arises from the possibility that the Group might encounter difficulty in settling its debts or otherwise meeting its obligations related to financial liabilities. The Group manages this risk through the following mechanisms: - preparing forward-looking cash flow analyses in relation to its operating, investing and financing activities; - monitoring undrawn credit facilities; - maintaining a reputable credit profile; and - managing credit risk related to financial assets. The following table details the Group's remaining contractual maturity for its financial instrument liabilities. The table has 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 table includes 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. 30 Oldfields Holdings Limited 30 June 2019 17.3 Specific Financial Risk Exposures and Management (continued) (b) Liquidity Risk (continued) Financial asset and financial liability maturity analysis Financial assets - cash flows realisable Cash and cash equivalents Trade and other receivables Total anticipated inflows Financial liabilities due for payment Bank overdrafts and bank loans Debt element of DSLN* Derivative element of DSLN** Trade and other payables Shareholder loan Other financing liabilities Finance lease liabilities Total expected outflows Net (outflow) / inflow on financial instruments Within 1 Year 2019 $'000 2018 $'000 1 to 5 Years 2019 $'000 2018 $'000 Over 5 Years 2019 $'000 2018 $'000 Total 2019 $'000 422 3,361 3,783 1,148 - - 2,047 500 123 113 3,931 718 3,165 3,883 1,271 - - 2,267 - 130 80 3,748 - - - - 2,370 237 - - - 215 2,822 - - - 2,370 746 - - - 138 3,254 (148) 135 (2,822) (3,254) - - - - - - - - - - - - - - - - - - - - - - - - 422 3,361 3,783 1,148 2,370 237 2,047 500 123 328 6,753 2018 $'000 718 3,165 3,883 1,271 2,370 746 2,267 - 130 218 7,002 (2,970) (3,119) *The debt element of the DSLN has been shown at the face value of the DSLN payable on maturity or early repayment as discussed in note 16. **The derivative element of the DSLN has been shown at the fair value recognised at balance date. Financial Assets Pledged as Collateral Certain financial assets have been pledged as security for debt and their realisation into cash may be restricted subject to terms and conditions attached to the relevant debt contracts. Refer to note 16 for further details. (c) Market Risk (i) Interest rate risk Exposure to interest rate risk arises on financial assets and financial liabilities recognised at the end of the reporting period whereby a future change in interest rates will affect future cash flows or the fair value of fixed rate financial instruments. (ii) Foreign exchange risk The Board and senior management regularly monitor foreign currency movements and has undertaken to use hedging contracts where appropriate to the value of up to 100% of its US dollar requirements over a maximum 6 month period. Sensitivity Analysis As at the end of the reporting period, the Group had the following variable rate borrowings: Bank overdrafts and bank loans Weighted Average Interest Rate 12.64% 2019 2018 Balance 1,148 % of Total Loans 19% Weighted Average Interest Rate Balance 13.81% 1,271 % of Total Loans 21% The following table illustrates sensitivities to the Group’s exposures to changes in interest rates, exchange rates and commodity and equity prices. The table indicates the impact on how profit and equity values reported at the end of the reporting period would have been affected by changes in the relevant risk variable that management considers to be reasonably possible. These sensitivities assume that the movement in a particular variable is independent of other variables. +/- 2% in interest rates Profit 2019 $'000 13 2018 $'000 14 Equity 2019 $'000 13 2018 $'000 14 There have been no changes in any of the methods or assumptions used to prepare the above sensitivity analysis from the prior year. Fair Value Estimation The fair values of the Group's financial assets and financial approximate net fair values. liabilities included in the Statement of Financial Position are carried at amounts that 31 Oldfields Holdings Limited 30 June 2019 18. Impairment of Non-Financial Assets At the end of each reporting period the Group assesses whether there is any indication that an asset may be impaired. The assessment will include the consideration of external and internal sources of information including dividends received from subsidiaries, associates or jointly controlled entities deemed to be out of pre-acquisition profits. If such an indication exists, an impairment test is carried out on the asset by comparing the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, to the asset’s carrying amount. Any excess of the asset’s carrying amount over its recoverable amount is recognised immediately in profit or loss, unless the asset is carried at a revalued amount in accordance with the standard (e.g. in accordance with the revaluation model in AASB 116: Property, Plant and Equipment). Any impairment loss of a revalued asset is treated as a revaluation decrease in accordance with the standard (AASB 116). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Impairment testing is performed annually for goodwill, intangible assets with indefinite lives and intangible assets not yet available for use. The Group tests whether goodwill has suffered any impairment on an annual basis. The recoverable amount of a cash generating unit (CGU) is determined based on value-in-use calculations which require the use of assumptions. The calculations use cash flow projections based on a one-year budget and four-year projections approved by management. Cash flows beyond the one-year budget period are extrapolated using the estimated growth rates stated below. The growth rates for the terminal period do not exceed the long-term average growth rates for the industry in which each CGU operates. Sensitivity The calculation of value-in-use is most sensitive to changes in the discount rate. The Directors have made judgements and estimates in respect of impairment testing of goodwill and intangible assets. Should these estimates not occur, the resulting goodwill and intangible assets may vary in carrying amount. If the discount rate was to increase by 3%, goodwill would not need to be impaired with all other assumptions remaining constant, for scaffold division. 18.1 Key Judgements, Estimates and Assumptions: Impairment The Group assesses impairment at the end of each reporting period by evaluating conditions and events specific to the Group that may be indicative of impairment triggers. Recoverable amounts of relevant assets are reassessed using value-in-use calculations which incorporate various key assumptions. The following key assumptions were used in the value-in-use calculations: 2019 South and Western Australian scaffold branches 2018 South and Western Australian scaffold branches Growth Rate Year 1 Year 2-5 Terminal Period Growth Rate Discount Rate 8% 12% 5% 5% 0% 3% 19% 17% Management has based the value-in-use calculations on budgets for each reporting segment. These budgets use historical weighted average growth rates to project revenue. Costs are calculated taking into account historical gross margins as well as estimated weighted average inflation rates over the period which are consistent with inflation rates applicable to the locations in which the segments operate. Discount rates are pre-tax and are adjusted to incorporate risks associated with a particular segment. 19. Share Capital Ordinary fully paid shares 2019 Number 82,176,198 2018 Number 82,176,198 2019 $'000 2018 $'000 21,106 21,106 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. Capital Management Management controls the capital of the Group in order to maintain a sustainable debt to equity ratio, generate long-term shareholder value and ensure that the Group can fund its operations and continue as a going concern. The Group’s debt and capital include ordinary share capital and financial liabilities, supported by financial assets. The Group is subject to financing covenants as detailed in note 14. Management effectively manages the Group’s capital by assessing the Group's financial risks and adjusting its capital structure in response to changes in these risks and in the market. These responses include the management of debt levels, distributions to shareholders and share issues. There have been no changes in the strategy adopted by management to control the capital of the Group since the prior year. This strategy is to identify opportunities to reduce the Group's gearing ratio. The gearing ratios for the year ended 30 June 2019 and 30 June 2018 are as follows: Total borrowings Add: Derivative financial instruments Less: Cash and cash equivalents Net debt and derivative financial instruments Total equity Total capital Gearing ratio 32 Note 14 16 8 2019 $'000 3,753 237 (423) 3,567 4,384 7,951 45% 2018 $'000 3,043 746 (720) 3,069 5,338 8,407 37% Oldfields Holdings Limited 30 June 2019 20. Reserves Foreign currency translation Total reserves 2019 $'000 47 47 2018 $'000 38 38 Foreign currency translation reserve The foreign currency translation reserve records exchange differences arising on translation of a foreign controlled subsidiary. 21. Dividends Since the start of the financial year, no dividends have been paid or declared by the Parent Entity. During the year $253,333 (2018: $348,000) of fully franked dividends were paid to a related party of the Group by Adelaide Scaffold Solutions Pty Limited to Sibley Investments Pty Limited. Sibley Investments Pty Limited is the minority interest holder in the Group. Adelaide Scaffold Solutions Pty Limited is a controlled entity of Oldfields Holdings Limited. Franking account balance The amount of the franking credits available for subsequent reporting periods are: Balance at the end of the reporting period Franking credits that will arise from the payment of the amount of provision for income tax Franking credits available for subsequent reporting periods based on a tax rate of 30% 21.1 Recognition and Measurement Dividends are recognised when declared during the financial year and are then no longer at the discretion of the Company. 22. Earnings per Share a) Reconciliation of earnings to profit or loss Profit for the year Less: Profit attributable to non-controlling equity interest Earnings used to calculate basic EPS b) Weighted average number of ordinary shares outstanding during the year used in calculating basic and diluted EPS c) Profit per share 22.1 Calculation of Earnings per Share Parent Entity 2019 $'000 2018 $'000 1,077 9 1,086 1,045 32 1,077 2019 $'000 (228) (253) (481) 2018 $'000 1,550 (294) 1,256 2019 Number 2018 Number 82,176,198 82,176,198 2019 Cents 2018 Cents (0.585) 1.528 Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to the owners of Oldfields Holdings Limited, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year. Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. 33 Oldfields Holdings Limited 30 June 2019 23. Accumulated Losses Movements in accumulated losses were as follows: Opening balance at 1 July Adjustment on initial application of AASB 15 Net profit for the year Dividends paid Closing balance at 30 June Accumulated losses attributable to: Members of the parent entity Non-controlling interest Total accumulated losses at 30 June 24. Subsidiaries Note 21 2019 $'000 2018 $'000 (15,806) (482) (228) (253) (16,769) (17,008) - 1,550 (348) (15,806) (17,458) 689 (16,769) (16,534) 728 (15,806) The subsidiaries listed below have share capital consisting solely of ordinary shares or ordinary units which are held directly by the Group. The proportion of ownership interests held equals the voting rights held by the Group. Each subsidiary’s principal place of business is also its country of incorporation. Name of Subsidiary Subsidiaries of Oldfields Holdings Limited: Oldfields Pty Limited Oldfields Advance Scaffold Pty Limited Oldfields Administration Pty Limited Oldfields International Pty Limited Advance Scaffold Solutions Pty Limited Subsidiaries of Oldfields Advance Scaffold Pty Limited: Adelaide Scaffold Solutions Pty Limited Subsidiaries of Oldfields Administration Pty Limited: National Office Service Trust Subsidiaries of Oldfields International Pty Limited: Oldfields (NZ) Limited Oldfields Paint Applications (NZ) Limited Oldfields USA Incorporated Subsidiaries of Advance Scaffold Solutions Pty Limited: Foshan Advcorp Scaffold Limited Principal Place of Business Australia Australia Australia Australia Australia Ownership Interest Non-Controlling Interests 2019 % 2018 % 2019 % 2018 % 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Australia 60% 60% 40% 40% Australia 100% 100% New Zealand New Zealand USA 100% 100% 100% 100% 100% 100% China 100% 100% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Subsidiary financial statements used in the preparation of these consolidated financial statements have also been prepared as at the same reporting date as the Group’s financial statements. Set out below is the summarised financial information for Adelaide Scaffold Solutions Pty Ltd that has non-controlling interests that are material to the Group, before any intra-group eliminations. The entity's principal place of business is 5-7 Peekarra Street, Regency Park, South Australia. Summarised financial information of subsidiaries with material non-controlling interests Summarised financial position - Adelaide Scaffold Solutions Pty Ltd Current assets Non-current assets Current liabilities Non-current liabilities Net assets Carrying amount of non-controlling interests Summarised financial performance - Adelaide Scaffold Solutions Pty Ltd Revenue Profit after tax Other comprehensive income after tax Total comprehensive income Profit attributable to non-controlling interests 34 2019 $'000 1,122 2,251 (465) (356) 2,552 689 2018 $'000 1,344 2,031 (452) (272) 2,651 728 5,792 5,029 632 - 632 253 737 - 737 295 Oldfields Holdings Limited 30 June 2019 24. Subsidiaries (continued) Summarised financial information of subsidiaries with material non-controlling interests Summarised cash flow information - Adelaide Scaffold Solutions Pty Ltd Net cash from operating activities Net cash used in investing activities Net cash used in financing activities Net decrease in cash and cash equivalents Distributions paid to non-controlling interests 24.1 Recognition and Measurement 2019 $'000 782 (482) (474) (174) 253 2018 $'000 439 (378) (813) (752) 348 The consolidated financial statements incorporate the assets and liabilities of all entities controlled by the Group as at 30 June 2019 and the results of all controlled entities for the year then ended. Control exists when the consolidated entity has the power to govern the financial and operating policies of an entity so as to obtain benefit from its activities. In assessing control, potential voting rights that presently are exercisable are taken into account. Where control of an entity is obtained during a financial year, its results are included in the consolidated income statement from the date on which control commences. Where control of an entity ceases during a financial year its results are included for that part of the year during which control exists. 25. Commitments and Contingencies 25.1 Capital Commitments The Group does not have any capital expenditure commitments at reporting date. 25.2 Lease Commitments Finance lease commitments Payable — minimum lease payments Within one year Later than one year but not later than five years Later than five years Less future finance charges Present value of minimum lease payments Note 14 2019 $'000 143 226 - 369 (41) 328 2018 $'000 104 160 - 264 (46) 218 Included in finance lease commitments are hire purchase liabili(cid:415)es that are secured by a charge over the hire purchase assets. The property leases are non-cancellable leases with 1-5 year terms, with rent payable monthly in advance. Contingent rental provisions within the lease agreement require that minimum lease payments shall be increased by the lower of the change in the consumer price index or 3-5% per annum. Options exist to renew certain leases at the end of the term for an additional term of 1-5 years. On renewal the terms of the leases are renegotiated. Non-cancellable operating lease commitments Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows: Within one year Later than one year but not later than five years Total operating lease commitments 25.3 Contingencies The Group does not have any significant contingent liabilities or contingent assets as 30 June 2019 or 30 June 2018. 2019 $'000 2018 $'000 1,115 2,352 3,467 1,226 2,564 3,790 26. Events After the Reporting Period There are no matters or circumstances that have arisen since the end of the financial year which have significantly affected or could affect the operations of the Group in future years. 35 Oldfields Holdings Limited 30 June 2019 27. Parent Entity Disclosures The following information has been extracted from the books and records of the parent and has been prepared in accordance with Australian Accounting Standards. Statement of Financial Position ASSETS Current assets Non-current assets TOTAL ASSETS LIABILITIES Current liabilities Non-current liabilities TOTAL LIABILITIES NET LIABILITIES EQUITY Issued capital Accumulated losses TOTAL EQUITY Statement of Profit or Loss and Other Comprehensive Income Profit (loss) before tax Total comprehensive profit (loss) 2019 $'000 2018 $'000 1,237 2,136 3,373 6,286 2,638 8,924 (5,551) 479 2,155 2,634 5,236 2,918 8,154 (5,520) 21,106 (26,657) (5,551) 21,106 (26,626) (5,520) (31) (31) 1,532 1,532 Guarantees Oldfields Holdings Limited and it's Australian wholly-owned entities have entered into a deed of cross guarantee under which the Company and its subsidiaries guarantee the debts of each other. Contingent liabilities The Parent Entity did not have any contingent liabilities as at 30 June 2019 or 30 June 2018. Contractual commitments The Parent Entity did not have any contractual commitments as at 30 June 2019 or 30 June 2018. 28. Auditors’ Remuneration During the year the following fees were paid or payable for services provided by the auditor of the Parent Entity, its related practices and non-related audit firms: BDO East Coast Partnership Australia Auditing or reviewing the financial report Taxation services Other services Total auditors’ remuneration 2019 $ 2018 $ 136,000 18,000 19,000 173,000 134,000 29,000 11,000 174,000 36 Oldfields Holdings Limited 30 June 2019 29. Related Party Transactions Ultimate controlling entity Oldfields Holdings Limited (incorporated in Australia). Key management personnel Any person(s) having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity are considered key management personnel. The following were key management personnel (KMP) at the end of the reporting period: Richard John Abela William Lewis Timms Stephen Charles Hooper Gregory John Park Alan Lee Chief Executive Officer Non-executive Director Non-executive Director Chief Financial Officer and Company Secretary (resigned 12 June 2019) Chief Financial Officer and Company Secretary (appointed 12 June 2019) Details of remuneration Short-term employee benefits Post-employment benefits Total KMP compensation Transactions with related parties The following transactions occurred with related parties: Dividends paid to Sibley Investments Pty Ltd, holder of minority interest in Adelaide Scaffold Solutions Pty Ltd Interest paid to WL & CJ Timms, being a related party of William Lewis Timms (non-executive director) Loans from related parties Loan payable to WL & CJ Timms, being a related party of William Lewis Timms (non-executive director) Beginning of the year Loan received Loan repayments made Interest charged Interest paid End of the year 2019 $'000 577 56 633 2019 $'000 253 10 2019 $'000 - 500 - 10 (10) 500 2018 $'000 586 54 640 2018 $'000 348 - 2018 $'000 - - - - - - There is no allowance account for impaired receivables in relation to any outstanding balances, and no expense has been recognised in respect of impaired receivables due from related parties. Terms and conditions Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated. 37 Oldfields Holdings Limited 30 June 2019 Directors' Declaration In accordance with a resolution of the Directors of Oldfields Holdings Limited, the Directors of the Company declare that: 1. 2. 3. the financial statements and notes are in accordance with the Corporations Act 2001 and: (a) comply with Australian Accounting Standards, which, as stated in accounting policy note 3 to the financial statements, constitutes compliance with International Financial Reporting Standards (IFRS); and (b) give a true and fair view of the financial position as at 30 June 2019 and of the performance for the year ended on that date of the consolidated entity; in the Directors' opinion there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; and the Directors have been given the declarations required by section 295A of the Corporations Act 2001 from the Chief Executive Officer and Chief Financial Officer. Oldfields Holdings Limited and its Australian wholly-owned entities have entered into a deed of cross guarantee under which the Company and it's subsidiaries guarantee the debts of each other. At the date of this declaration, there are reasonable grounds to believe that the companies which are party to this deed of cross guarantee will be able to meet any obligations or liabilities to which they are, or may become, subject to by virtue of the deed. Richard Abela Dated: 28 August 2019 38 Oldfields Holdings Limited 30 June 2019 Tel: +61 2 9251 4100 Fax: +61 2 9240 9821 www.bdo.com.au Level 11, 1 Margaret St Sydney NSW 2000 Australia INDEPENDENT AUDITOR'S REPORT To the members of Oldfields Holdings Limited Report on the Audit of the Financial Report Opinion We have audited the financial report of Oldfields Holdings Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30 June 2019, 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 report, 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 30 June 2019 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 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. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. BDO East Coast Partnership ABN 83 236 985 726 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO East Coast Partnership and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation. Scaffolding Hire and Erection Revenue Recognition Key audit matter How the matter was addressed in our audit As disclosed in Note 5, recognition of Our procedures included, amongst others: scaffolding and erection revenue is determined as an area of key estimate and judgement on the basis of the following: • Management recognise revenue based on the performance obligations identified within the individual contracts; and • Reviewing the appropriateness of management’s judgements associated with the fair value consideration expected to be received by reference to the terms of individual contracts; • Evaluating the accuracy of management’s judgements associated with the stage of • Scaffolding hire and erection revenue is completion of individual contracts by testing the recognised with reference to the stage of accuracy of assumptions in relation to services completion of the contract and there is performed at period end against the expected judgment associated with determining the total services to be provided under the contracts; stage of completion. and Due to the nature of the key estimates and judgements, this has been determined as a • Assessing the recognition of scaffolding hire and erection revenue under individual contracts by key audit matter. reference to the assessment of the performance obligations satisfied and the impact on related revenue recognition under AASB 15 Revenue from Contracts with Customers. Accounting for the Deferred Senior Loan Note Key audit matter How the matter was addressed in our audit The Group has recognised Deferred Senior Our procedures included, amongst others: Loan Note (‘DSLN’) liabilities consisting of the debt component of $1,654,000 (as disclosed in Note 14) and the derivative element of $237,000 (as disclosed in Note 16). • Evaluating management’s significant judgments used in determining the fair value of the DSLN liabilities including the estimated value of the derivative being the Redemption Premium payable Significant judgement has been exercised by on the Maturity Date under the DSLN based on the management in determining the fair value of share price at report date; the DSLN liabilities. We therefore consider this a key audit matter. • Assessing the competency and objectivity of the valuation expert used by management; and • Obtaining the independent expert’s valuation report and evaluating the underlying inputs and assumptions applied in determining the fair value. Other information The directors are responsible for the other information. The other information comprises the information in the Group’s annual report for the year ended 30 June 2019, 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 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 has 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 (http://www.auasb.gov.au/Home.aspx) at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf This description forms part of our auditor’s report. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in the directors’ report for the year ended 30 June 2019. In our opinion, the Remuneration Report of Oldfields Holdings Limited, for the year ended 30 June 2019, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. BDO East Coast Partnership Ian Hooper Partner Sydney, 28 August 2019 Corporate Governance Statement The Board of Directors of Oldfields Holdings Limited is committed to high standards of corporate governance and adopts wherever possible the principles outlined in the Corporate Governance Principles and Best Practice Recommendations, 3rd Edition published by the ASX Corporate Governance Council in March 2014. The recommendations are written in a principles based fashion and individual boards are able to choose whether to follow the recommended practices or to adopt other practices that are better suited to the individual circumstances of the Group. Given the size and specific circumstances of Oldfields Holdings Limited, the Board recognises that some of the best practice recommendations are not suited to obtaining the best shareholder outcomes at the present time. This situation is monitored by the Board and the recommendations will be adopted as and when the Group’s circumstances allow. The Board also noted the new Corporate Governance Principles and Best Practice Recommendations, 4th Edition published by the ASX Corporate Governance Council in February 2019 which will become effective from 1 January 2020. All relevant best practice recommendations of the ASX Corporate Governance Council have been applied for the reporting period unless specifically disclosed below. Where a recommended practice has not been followed a detailed description of the practices adopted is provided together with a commentary on how the risks of non-adoption of the recommended practice are mitigated. Recommendation Recommended Practice Oldfields’ Practice Recommendation 1.1 Recommendation 1.2 Recommendation 1.3 Recommendation 1.4 Establish functions reserved for the board and for senior management Undertake appropriate checks prior to appointing as director Written agreements in place with directors and senior executives Company secretary accountable to board through the chair The recommended practice is adopted The recommended practice is adopted The recommended practice is adopted The recommended practice is adopted Recommendation 1.5 Have a measurable diversity policy recommended practice refer below The adopted, recommendation is partially to for variation Recommendation 1.6 Establish a process for evaluating performance of the board This recommendation has not yet been adopted Recommendation 1.7 a process Have performance of senior executives for periodically evaluating Recommendation 2.1 The board should have a nomination committee Recommendation 2.2 Have a board skills matrix Recommendation 2.3 Have a list of directors who are deemed to be independent The recommended practice is adopted Nominations are considered by the whole board The recommended practice is adopted The recommended practice is adopted Recommendation 2.4 Majority of the board should be directors independent The majority of the Board is not independent and the risk management process is disclosed Recommendation 2.5 The chair of the board should be independent and not the CEO The chair is not an independent director, but is independent of the CEO Recommendation 2.6 Have a program for inducting new directors The recommended practice is adopted Recommendation 3.1 Establish and disclose a code of conduct The recommended practice is adopted Recommendation 4.1 The board should establish an audit committee The recommended practice is adopted Recommendation 4.2 Prior to approving financial statements the board receive from the CFO and CEO declaration of properly maintained records and compliance with accounting standards Recommendation 4.3 External auditor attends AGM Recommendation 5.1 Establish written policies designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior executive level for that compliance and disclose those policies or a summary of those policies The recommended practice is adopted The recommended practice is adopted The recommended practice is adopted 43 Oldfields Holdings Limited 30 June 2019 Recommendation Recommended Practice Oldfields’ Practice Recommendation 6.1 Provide information about itself and its governance via its website The recommended practice is adopted Recommendation 6.2 Design and implement investor relations program for communication with investors The recommended practice is adopted Recommendation 6.3 Policies and processes in place to encourage security holder participation The recommended practice is adopted Recommendation 6.4 Recommendation 7.1 Recommendation 7.2 Provide communication electronically security holders option to receive This recommended practice is adopted Establish policies for the oversight and management of material business risks and disclose a summary of those policies Board to review risk management annually framework The recommended practice is adopted. The Risk Management Statement is disclosed The recommended practice is adopted Recommendation 7.3 Disclosure of internal audit function The recommended practice is adopted Recommendation 7.4 Disclose material environmental and social sustainability risks exposure to economic, Recommendation 8.1 The board committee should establish a remuneration Recommendation 8.2 Disclosure of policies and practices of remuneration of non-executive and executive directors Recommendation 8.3 Policy on equity based remuneration scheme The indicated information is provided recommended practice is adopted it does not have a majority of The however independent directors The recommended practice is adopted based equity No place, recommendation will be adopted when implemented scheme in Current information is available on the Group’s website which contains a clearly marked Corporate Governance section. 44 Oldfields Holdings Limited 30 June 2019 Principle 1. LAY SOLID FOUNDATIONS FOR MANAGEMENT & OVERSIGHT Recommendation 1.1 – Establish functions reserved for the board and for senior management and disclose those functions. The Board of Directors is accountable to the shareholders for the performance of the Group. The Board sets the strategic direction and delegate’s responsibility for the management of the Group to the Chief Executive Officer. A copy of the Board Charter, which promotes a culture within the Group of accountability, integrity and transparency, is available on the Group’s website. Each Board Member must at all times act honestly, fairly and diligently in all respects in accordance with the Group’s Code of Conduct and all laws that apply to the Group. Key matters reserved for the Board include: • • • • • • • • Oversight of the Group, including its control, accountability and compliance systems; Appointment, monitoring, managing performance and if necessary removal of the Chief Executive Officer, Chief Financial Officer and Company Secretary; Input, assessment, appraisal and final approval of management’s development of corporate strategy and performance objectives; Monitoring risk management; Approving and monitoring the progress of major capital expenditure, capital management and acquisitions and divestitures; Approval and monitoring financial and other reporting; Ensuring the market and shareholders are fully informed of material developments; and Recognising the legitimate interests of stakeholders. The expectations of directors are outlined in a formal Letter of Appointment which details the term of appointment, fees, power and duties and other information pertinent to their roles. Responsibility for the day-to-day management of the Group and its operations is delegated to senior executive management. The expectations of senior executive management are outlined in Board decisions which are communicated to the Chief Executive Officer and recorded in the board minutes and also in the position descriptions and KPI’s for each senior executive role. The Board holds a minimum of six formal meetings a year, but usually twelve. Additional meetings are held as required. Details of current members of the Board are disclosed in the Directors’ Report. Recommendation 1.2 – Undertake appropriate checks before appointing or putting forward to security holders a candidate for election as a director Details are provided on a candidate for director. These will be provided to security holders prior to any election of new Directors. Recommendation 1.3 – Written agreements in place with directors and senior executives Detailed service contracts are in place for all senior managers and directors, these are established prior to commencement of employment Recommendation 1.4 – Company secretary accountable to the board through the chair The CFO/Company Secretary has clear lines of accountability with the CFO responsibilities reporting directly through to the CEO and all company secretarial functions reporting through to the Chair. Recommendation 1.5 – Measurable diversity policy A detailed diversity policy is in place, and available on the Company’s webpage. In addition to this, the Company’s workplace gender equality report is available to view. Whilst the policy diverges from some of the recommendations made, key areas in the recommendation are included in the policy, including the requirement that for all jobs advertised, it is stated that the Company is an equal opportunity employer, that at least one female applicant is included in the final shortlist of candidates for the role, and shortlisted candidates are interviewed by a female as well as a male member of staff prior to a final decision on employment where possible. Specific targets of women in senior positions within the organisation have not been set, as the company will select the best person for the role. 45 Oldfields Holdings Limited 30 June 2019 Recommendation 1.6 – Process for evaluation of the performance of the board The Board has not completed a formal evaluation process within the period. The Chairman performs an informal evaluation of individual Directors and also of each Board Meeting. The Board will be considering obtaining independent advice. Recommendation 1.7 – Have a process for periodically evaluating the performance of senior management Senior executive management is evaluated each year on their performance against stated objectives, goals and key performance indicators (KPI’s). Overall performance is reviewed by the particular senior executive’s direct supervisor and ultimately by the Chief Executive Officer and/or Board of Directors. Principle 2. STRUCTURE THE BOARD TO ADD VALUE The Board currently has three directors, comprising two non-executive directors, including the Chairman, and one executive director. The Board has adopted the following principles: • • • The same individual should not exercise the roles of Chairman and Chief Executive Officer; The Board should not comprise a majority of executive directors; and The Board should comprise persons with a broad range of skills and experience appropriate to the needs of the Group. Recommendation 2.1 – The board should have a nomination committee Nominations are considered by the Board as a whole, and are only accepted if the candidate has the relevant skills required to assist the business in achieving its strategic objectives. Given the size and requirements of the Group, the Board has decided that a nomination committee is not required at this point in time. Recommendation 2.2 – Have a board skills matrix This has been established. Recommendation 2.3 – Have a list of directors that are deemed to be independent The Company has one independent director and this is disclosed in the annual report. Recommendation 2.4 – Majority of the board should be independent directors Independent directors are those who are independent of management and free of any business or other relationship that could materially interfere with, or could reasonably be perceived to materially interfere with, the exercise of their unfettered and independent judgment. In assessing the independence of directors, an independent director is a non-executive director and: • • • • Is not a substantial shareholder, as defined in section 9 of the Corporations Act, of the Group or an officer of, or otherwise associated directly with, a substantial shareholder of the Group; Has not within the last three years been employed in an executive capacity by the Group or another Group member, and there has been a period of at least three years between ceasing such employment and serving on the Board; Has not within the last three years been a principal of a material professional advisor or a material consultant to the Group or another Group member, or an employee materially associated with the service provided; and Is not a material supplier or customer of the Group or other Group member, or an officer of or otherwise associated directly or indirectly with a material supplier or customer; At the date of this report there was one independent director. The following Directors do not meet the independence criteria listed above: • • William Lewis Timms: currently a non-executive director and substantial shareholder; and Richard John Abela: currently an executive director and shareholder. The Board manages the risk of having a majority of non-independent directors through restrictions on trading in shares, restrictions on related party transactions, and a close relationship with the principal provider of debt funding and a strong independent auditor with a focus on controls. 46 Oldfields Holdings Limited 30 June 2019 Recommendation 2.5 – The chair of the board should be independent and not the CEO Due to the size and nature of the business, this recommendation has not been adopted. The Chair is a significant shareholder, however the recommendation of the Chair not being the CEO is in place. Recommendation 2.6 – Have a program for inducting new directors and ensuring appropriate professional development opportunities to develop and maintain the skills required to perform their role as directors There is an appropriate level of induction for new Directors ensuring they understand the business needs and requirements. The Board discusses from time to time requirements to ensure continuous development of skills for the performance of their role as Director. Principle 3. PROMOTE ETHICAL AND RESPONSIBLE DECISION – MAKING Recommendation 3.1 – Establish and disclose a Code of Conduct and disclose the code or a summary of the code as to the practices necessary to maintain confidence in the company’s integrity, the practices necessary to take into account their legal obligations and the reasonable expectations of their stakeholders and the responsibility and accountability of individuals for reporting and investigating reports of unethical practices The Board has a code of conduct for Directors and Group, Officers and employees. The key elements of the code are: • • • • • • • Conflicts of interest; Corporate opportunities; Confidentiality; Fair dealing; Protection of assets; Compliance with laws and regulations; and Promotion of ethical and lawful behavior. The policy is available on the Company’s webpage. Principle 4. SAFEGUARD INTEGRITY IN FINANCIAL REPORTING The Chief Executive Officer and the Chief Financial Officer state, in writing, to the Board that the Group’s financial reports present a true and fair view, in all material respects, of the Group’s financial position and operational results and are in accordance with relevant accounting standards. Recommendation 4.1 – the board should establish an audit committee The Board has an Audit Committee, which: • • • Has two members who are Non-Executive Directors; Has a written charter which can be obtained from the Corporate Governance section of the Group’s website; and Includes members who are all financially literate. Details of the members are disclosed in the Director’s Report. The Board recognises that an independent audit committee is an important feature of good corporate governance. The Audit Committee: • consists only of non-executive directors, however all Directors are entitled to receive the papers of the Committee and to attend meetings of the Committee and to meet with the auditors; is chaired by an independent chairman, who is not Chair of the Board; has two members. Given the size and structure of the Board, as discussed in Recommendation 2.1, the Board feels that two members both of whom are financially literate, is sufficient at this time. • • The risk with a small committee is that the members will lack the diversity to raise and recognise issues. Risk is managed through specific working arrangements with the auditors having access to the full Board at any time upon their request and through ensuring that the Chairman of the Audit Committee is a well-qualified independent director. It is intended to review this arrangement and adopt the recommended practice if and when the Board composition changes. 47 Oldfields Holdings Limited 30 June 2019 The Audit Committee has a formal charter, the key elements of the charter are: • • • • • • • Role of the Committee; Membership; Meetings; Responsibilities; Authority; Independence; and Non-audit work. The Board and Audit Committee closely monitor the independence of the external auditor. The Audit Committee meets a minimum of twice a year. The Committee may also meets in private, with management without the external auditor and, at a separate time, with the external auditor without management where considered necessary. Recommendation 4.2 – Prior to approving financial statements the board receive from the CFO and CEO a declaration of properly maintained records and compliance with accounting standards The Chief Executive Officer and the Chief Financial Officer state, in writing, to the Board that the Group’s financial reports present a true and fair view, in all material respects, of the Group’s financial position and operational results and are in accordance with relevant accounting standards. The members of the Audit Committee are: • • Stephen Charles Hooper (Chairman); and William Lewis Timms. The details of the qualifications of the Audit Committee members are disclosed in the Directors’ Report. The details of the number of Audit Committee Meetings held are contained in the Directors’ Report. Departures from recommendations included in Principle 4 have been disclosed in the discussion of the relevant recommendations. Recommendation 4.3 – External auditor attends AGM The lead partner from the Company’s auditors always attends the Company’s AGM. Principle 5. MAKE TIMELY AND BALANCED DISCLOSURE Recommendation 5.1 – Establish policy on ASX Listing Rule disclosure requirements and ensure accountability at a senior executive level for that compliance and disclose those policies or a summary of those policies The Group has established procedures to ensure compliance with ASX Listing Rules which require that when an entity becomes aware of any information concerning it that a reasonable person would expect to have a material effect on the price or value of the entity’s securities, the entity must immediately tell ASX that information. A Continuous Disclosure Policy and Procedure has been prepared and is available from the Corporate Governance section of the Group’s website. Principle 6. RESPECT THE RIGHTS OF SHAREHOLDERS Recommendation 6.1 – Provide information about itself and its governance via its website The Company has a comprehensive website for security holders, included in this website are full governance policies. Recommendation 6.2 – Design and implement investor relations program for communications with investors The Group has developed and implemented a shareholder communication strategy. The Group promotes effective communication with shareholders and encourages effective participation at the Group’s general meetings. Shareholders and other parties will be able to access the following information from the Group’s website: • • • • Copies of all announcements given to the ASX; Press releases and copies of letters to shareholders; Copies of annual and half year financial reports; and Details of notices of shareholders meetings including information on general meetings. 48 Oldfields Holdings Limited 30 June 2019 The requirements of continuous disclosure ensure that the Group discloses relevant information to the shareholders and the market in a timely and full manner. The Shareholder Communication Strategy is available on the Oldfields website. Recommendation 6.3 – Disclose policies and processes in place to encourage shareholder meeting participation Security holders who are unable to attend meetings are given the opportunity in shareholder communications to ask questions of the Directors and responses are provided to them. Recommendation 6.4 – Provide security holders the option to receive communications electronically The Company’s share registry provider provides this option to all security holders. Principle 7. RECOGNISE AND MANAGE RISK Recommendation 7.1 – Companies should establish policies for the oversight and management of material business risks and disclose a summary of those policies The Board recognises that there are a number of complex operational, commercial, financial and legal risks and has in place procedures to safeguard the Group’s assets and interests. A Work Health and Safety Committee has been established to monitor and recommend changes to safe working practices and a safe working environment. The Chairman is not a Director, and the committee comprises the Chief Executive Officer, senior executive officers and employee representatives. The Board has developed a risk management policy the purpose of which is: • • • • • • • Identify, access, monitor and manage risk; Inform investors of material changes to the Group’s risk profile; Enhance the environment for capitalising on value creation opportunities; Ensure compliance with the Corporations Act; Consider the reasonable expectations of its stakeholders; The measures and procedures in place to comply with these regulations; and How compliance with those measures and procedures will be monitored. A summary of these policies is contained in the Risk Management Statement which is disclosed on the Oldfields website. Recommendation 7.2 – The board should review the risk management framework annually The Group’s risk management policy is designed and implemented by the Board of Directors’ which meet regularly to identify all major risks, ensure appropriate risk management plans are in place and to monitor the effectiveness of the implementation of the risk management plans. The Chief Executive Officer and the Chief Financial Officer are required to state in writing to the Board that the Group’s risk management and internal compliance and control system is operating effectively and efficiently in all material aspects. Recommendation 7.3 – The board should disclose whether it has an internal audit function, how the function is structured and what role it performs From time to time and as required, the Board will outsource the internal audit function to a company that specialises in this work. The company will review certain areas of controls and compliance and report back to the Chief Executive Officer and/or Chief Financial Officer and manager of the area. This report when finalised with comments from management along with timelines for compliance are provided to the Board for review. Recommendation 7.4 – Disclose material exposure to material exposure to economic, environmental and social sustainability risk The business is exposed to various risks, in particular economic and social sustainability risk. The Board is fully aware of these and these risks are mitigated wherever possible. In terms of social sustainability risk, the Company is a party to the packaging covenant agreement and reviews product packaging for sustainability and recyclability. 49 Oldfields Holdings Limited 30 June 2019 Principle 8. REMUNERATE FAIRLY AND RESPONSIBLY Recommendation 8.1 – The board should establish a remuneration committee The Board has established a Remuneration Committee. The Remuneration Committee is responsible for developing and recommending to the Board: • • • • • • • Remuneration policies for Non-Executive Directors; Remuneration policies for the Chief Executive Officer and Chief Financial Officer; Remuneration policies for executive management; All aspects of any executive share option or acquisition scheme; Superannuation policies; Policies which motivate senior executives to pursue the long term growth and success of the Group; and Policies which show a clear relationship between senior executives’ performance and remuneration. The Board has a remuneration committee which has two members and a documented charter. The members and qualification of the Remuneration Committee are disclosed in the Directors’ Report. Due to the size and nature of the Board as discussed in recommendation 2.4 the following items of recommendation are not followed: • • consists of a majority of independent directors; and has at least three members. The remuneration of Non-Executive Directors is by way of director’s fees in the form of cash, non-cash benefits and superannuation benefits. The total annual remuneration paid to Non-Executive Directors may not exceed the limit set by shareholders at the Annual General Meeting. Non-Executive Directors do not receive options unless approved by shareholders. Recommendation 8.2 – Disclosure of policies and practices of remuneration of non-executive and executive directors The Group has clearly differentiated the remuneration structure of Executive and Non-Executive Directors. The key elements of the remuneration philosophy are disclosed in the Remuneration Committee Charter which is available on the Oldfields website. Recommendation 8.3 – Policy on equity based remuneration scheme The Company currently does not have an equity based remuneration scheme. Prior to one being implemented and approved by security holders a policy will be established for security holders to review. 50 Oldfields Holdings Limited 30 June 2019 Risk Management Statement 1. Introduction This statement provides an overview of the Group's risk management policies and internal compliance and control systems in accordance with Principle 7 of the ASX Principles of Good Corporate Governance. 2. Responsibility The Board of Directors are responsible for oversight on a regular basis of the Group's procedures and risk management policies. The responsibility of the Board is codified under the Board Charter, which is available on the Group’s website. The Group also has an audit committee, the responsibilities of which are documented in the Audit Committee Charter which is also available on the Group’s website. 3. Risk Management Monitoring The Board has implemented a combination of internal policies and procedures and use of external audits to monitor risk management and its effectiveness. 3.1. Standard Operating Procedures (SOP's) The Board has implemented risk management policies covering areas of business risk such as: • Work health and safety; • • • • Finance and treasury; Human resources; Asset protection (insurance); and Codes of conduct. The policies referred to are regularly reviewed and an internal mechanism exists whereby the Board and Committee members have access to these reports on an internal intranet site. The Board manages these risks appropriately with reference to identification, implementation and review of these risks and procedures. 3.2. External Audits The external audit of the Group is conducted annually. There is also a formal review at least once every year. Both the audit and review are conducted by an external auditor. The Group has a Work Health and Safety Committee which has received training and certification by external OH&S providers. The Group engages with qualified external advisors annually in relation to asset protection. Where possible the Board adopts the most practical and affordable insurance policies suitable to protect major assets of the Group. In general an external qualified auditor and or valuers are engaged by the Board in determining large asset values on acquisition of assets. An external valuation is obtained to determine and verify carrying values of investment property by an external independent registered property valuer at least every three years where applicable. 3.3. Risk Management Statements The integrity of the Group's financial reports relies on sound business and risk control systems. Annually, the Chief Executive Officer (CEO) and the Chief Financial Officer (CFO) are required to sign a Risk Management Statement that is provided to the audit committee in writing. The CEO and CFO sign a statement regarding the adequacy of financial controls in accordance with section 295a of the Corporations Act 2001. The Board requires management to report on the key business risks for each area of the business at each board meeting. 3.4. Internal Audit Given the Group's size, an internal auditor is not practical. In addition, the presence of an executive director on the Board allows for detailed oversight of risks within each business by managers who are familiar with the risk environment but not directly involved in the management of that particular business. In addition to this the Company from time to time may utilise the services of an internal auditing company to provide oversight of certain aspects of the business. 51 Oldfields Holdings Limited 30 June 2019 3.5. External Covenants The Group has voluntarily associated itself with the following self-regulated authorities: • WGE (Workplace Gender Equality Act): The Group reports annually on targets and policy to an external agency in regards to • Equal Opportunity Guidelines and Policy within the work force. The Board receives and reviews this annually; and Australian Packaging Covenant: The Group sets targets to reduce packaging waste and environmental impact of packaging waste. Targets are set and guidelines adopted and where possible administered by management. The Board reviews these targets annually. The Group has also entered into an agreement with its principal lender (Westpac Banking Corporation) which provides external overview of financial risks by a representative of the bank. 4. Formal Risk Management Practices The Group operates a formal process for risk management which includes: • • • • • • Risk identification; Risk analysis; Risk evaluation; Risk mitigation; Risk monitoring and reporting; and Risk communication. The risk management process meets appropriate professional standards and is reviewed annually by the Board of Directors. The process meets, but is not limited to the requirements of Principle 7 of the ASX Principles for Good Corporate Governance. 5. Risk Reporting and Communication Risks are reported and their monitoring and management are communicated in accordance with the diagram below: Material Risks General Reporting Accountabilities Direct risk response or accept material risk Review and approve strategies or accept risk risk mitigation Oversight of framework and sufficiency of reporting Board of Directors Implement risk response or escalate to Board of Directors Review and approve risk reporting and mitigation strategies Oversight of corporate risks and adequacy of framework Chief Executive Officer (CEO) Recommend material risk escalation to CEO or Board of Directors Consolidate risk assessments and prepare summary reporting Implement and monitor ERM framework and ERM system Chief Financial Officer (CFO) Identify and report material risks as they arise Prepare risk assessments in accordance with ERM framework Operationally manage risks and escalate issues Finance Department Communication Effective risk management is reliant on the timely and open communication of actual or potential risk events across the organisation. Free and frank communication is at the heart of the Group's risk management approach, and where the processes and accountabilities described in these standards may not support a suitably rapid response to any risk, then communication should be undertaken using whatever means to achieve the best outcome for the Group. For the avoidance of doubt, Oldfields Holdings Limited has a whistle-blower policy in place and encourages all staff to report risks of which they are aware. 52 Oldfields Holdings Limited 30 June 2019 Shareholder Information The shareholder information set below was applicable as at 26 August 2019. A. Substantial Shareholders The number of substantial shareholders and their associates are set out below: Shareholder Mr Williams Lewis Timms & Mrs Carolyn Jane Timms Hext Family Investments Pty Ltd B. Distribution of Equitable Security Holders Holding 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 – and over There were 175 holders of less than a marketable parcel of ordinary shares. C. Equity Security Holders The names of twenty largest quoted equity security holders are listed below: Starball Pty Ltd Oceanridge Limited Hext Family Investments Pty Ltd Benger Superannuation Pty Limited Dixson Trust Pty Limited Shareholder 1 Mr Williams Lewis Timms & Mrs Carolyn Jane Timms 2 3 4 5 Mr Rodney Boyce Hass 6 Farrow Rd Pty Ltd 7 Mr Orlando Berardino Di Julio & Ms Catharina Maria Koopman 8 9 10 Dr Gordon Bradley Elkington 11 Shandora One Pty Ltd 12 PS Super Nominee Pty Ltd 13 Mr Brian Garfield Benger 14 Mr Paul John Simpson 15 16 Man Investments (NSW) Pty Ltd 17 18 Maparily Pty Ltd 19 Bond Street Custodians Limited 20 Emerald Shares Pty Limited 21* Sanperez Pty Ltd

22* Mr Rhett Anthony John Morson Seven Bob Investments Pty Ltd Toveken Properties Pty Ltd Ordinary Shares Percentage of Issued Shares 47.927% 5.368% Number Held 39,384,528 4,411,000 Ordinary Shares Shares Options 68 77 17 71 44 277 - - - - - - Ordinary Shares Percentage of Issued Shares Number Held 39,384,528 4,411,000 4,023,796 4,000,000 3,744,054 2,200,000 2,179,887 1,782,486 1,650,000 1,527,108 1,288,000 1,233,638 1,200,000 1,200,000 693,000 675,096 584,394 573,962 500,627 500,000 500,000 500,000 74,351,576 47.927% 5.368% 4.897% 4.868% 4.556% 2.677% 2.653% 2.169% 2.008% 1.858% 1.567% 1.501% 1.460% 1.460% 0.843% 0.822% 0.711% 0.698% 0.609% 0.608% 0.608% 0.608% 90.478% *Where equal shareholding exist for lowest rankings, all shareholders with such balance are listed. D. Unquoted Equity Securities There are no unquoted or unissued securities as at the end of the reporting period. E. Voting Rights The voting rights attaching to each class of equity securities are set out below: Ordinary shares: On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. Options: No voting rights. F. On-Market Buy Back There is no current on-market buy back. 53 Corporate Directory Directors Richard John Abela William Lewis Timms Stephen Charles Hooper Company Secretary Alan Lee Notice of Annual General Meeting The Annual General Meeting of Oldfields Holdings Limited will be held at: 8 Farrow Road Campbelltown NSW 2560 Date and time to be confirmed Registered Office Oldfields Holdings Limited 8 Farrow Road Campbelltown NSW 2560 Principal Place of Business Oldfields Holdings Limited 8 Farrow Road Campbelltown NSW 2560 Share Register Boardroom Pty Limited Level 12, 225 George Street Sydney NSW 2000 Banker Westpac Banking Corporation Level 12, 55 Market Street Sydney NSW 2000 Auditor BDO East Coast Partnership Level 11, 1 Margaret Street Sydney NSW 2000 Stock Exchange Listing Oldfields Holdings Limited shares are listed on the Australian Securities Exchange (ASX Code: OLH) Website www.oldfields.com.au 54 Oldfields Holdings Limited 30 June 2019 

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