ANNUAL REPORT 2015 SAFEROADS HOLDINGS LIMITED ABN 81 116 668 538 Innovative Road Safety Solutions 1 2 CONTENTS Chairman’s overview ............................................................................................................................................... 4 Chief Executive Officer’s Review of Operations and Activities ................................................................................ 6 The Year in Review.................................................................................................................................................... 8 Directors’ Report ...................................................................................................................................................... 12 Auditor’s Independence Declaration ....................................................................................................................... 18 Corporate Governance Statement........................................................................................................................... 19 Financial Statements ............................................................................................................................................... 20 Notes to the Financial Statements........................................................................................................................... 24 Directors’ Declaration .............................................................................................................................................. 43 Independent Auditor’s Report .................................................................................................................................. 44 ASX Additional Information ...................................................................................................................................... 46 Corporate Directory ................................................................................................................................................. 47 Saferoads specialises in providing innovative road safety solutions. Headquartered in Drouin, Victoria, and with representation across Australia and New Zealand, the company services State Government Departments, local councils and road construction and equipment hire companies with a broad range of products and services designed to direct, protect, inform and illuminate all road users. 3 CHAIRMAN’S OVERVIEW Dear Shareholder, O P E R A T I O N S O V E R V I E W On behalf of the board I am pleased to report a positive annual EBIT (Earnings Before Interest and Tax) of $0.35 million compared with an EBIT (loss) of $0.75 million for the previous financial year. This $1.1 million turnaround is good progress but there is much more to be done to provide an acceptable result for shareholders. This 2015 result is consistent with the guidance provided in the Company’s market update in May. Revenue for the year from Product sales and rentals was up 7% or $0.86 million however revenue from the now discontinued Civil Services operation was down $2 million. The overall revenue for the year was down $1.14 million. Further cost rationalization over the financial year also realized total savings of over $1.5 million or 24% in expenses (excluding finance costs and depreciation). The growth in ongoing higher margin products revenues and the further cost savings have allowed the Company to achieve this positive EBIT for the year. In terms of bottom line after tax results, the second half was an encouraging profit of $0.08 million and combined with the first half loss of $0.15 million the overall annual result was an after tax loss of $0.07 million. Finance cost reductions have been considerable with the annualized debt servicing costs now approximately $0.25 million compared to an actual cost of $0.53 million in 2014. This is the outcome of our reduced bank debt levels combined with the restructuring of our bank debt made possible by that debt reduction. This is a clear and tangible reward for shareholders resulting directly from the oversubscribed 12 cent Share Entitlement Offer in December 2014. We continued our disciplined management of costs and structure to ensure we are as efficient and productive as we can be. We have progressively restructured our core sales force to drive efficiency, accountability and results and a focus on continuous improvement in everything we do. It is pleasing that this has paid off, particularly in the second half of the financial year, where we secured two major concrete temporary barrier projects, and now allows us to go into the new financial year with the ability to achieve even better results. The table below summarizes the transformation over the past three financial years: Revenue Gross profit EBIT Profit/(loss) before tax Core bank debt * 2013 $’000 24,324 8,049 (1,300) (1,917) (5,600) Year ending 30 June 2014 $’000 16,273 6,082 (749) (1,283) (5,000) 2015 $’000 15,134 5,327 353 (90) (3,000) * excludes Plant & equipment hire purchase liabilities B A L A N C E S H E E T A N D D E B T M A N A G E M E N T Our balance sheet continues to improve and we have maintained adequate cash reserves to support the current working capital needs of the business as well as provide basic funding for our product innovation projects. In 2015 bank debt continued to be a key focus and it was reduced by a further $2.0 million (or 40%) from $5.0 million to $3.0 million at 30 June 2015. This was achieved mainly through the $1.25 million raised from the December 2014 Share Entitlement Issue as well as the proceeds from the sale of our remaining non-core Civil Services assets. We have secured a three year extension to our banking facilities and terminated an overly expensive fixed rate loan in favor of a more conventional variable rate facility without harsh covenant measures. S T R A T E G I C O P P O R T U N I T I E S Having finally achieved an underlying positive earnings base in 2015, we continue the strong focus on sales and profit growth. We have a number of strategic objectives for the year. A major initiative we have enacted is a series of short secondments to the USA for our CEO, Mr Darren Hotchkin, to further activate and accelerate sales opportunities in North America. This will be done by selecting and partnering with established road safety businesses to add our patented products to 4 their product offerings to economically access the very significant markets for our products in North America. The main products selected are our patented and exclusively licensed products being Ironman Hybrid, Omni bollards, Safepole and our Variable Messaging Sign (“VMS”) technology, which are ideally suited to the huge markets in North America. We are very pleased with the expansion of our Public Lighting business from Victoria into Western Australia during FY 2015 and in the coming years we plan to expand into the northern States of New South Wales and Queensland. The development and rollout of new products continues, with a new fully flexible road-sign, with a number of local government authorities showing interest. Also, we have introduced our unique temporary workzone rumble-strip to various State road authorities who are all keen to find a solution to reinforce speed restrictions in designated road workzones. We have been unable to secure an acceptable sale of our Rental barrier business, incorporating our Ironman Hybrid assets. We will now focus on pursuing an aggressive expansion of our Rental business, most likely including additions to our existing fleet of barriers. We are confident that the exclusive approvals we have from the National Panel and State Road Authorities for this free-standing Ironman Hybrid places us in a very competitive position in the broader temporary barrier market. A C K N O W L E D G M E N T S I would like to acknowledge the ongoing efforts and dedication of our staff who have continued to work tirelessly in what has finally been a year where we demonstrated we could achieve positive results. We now have a business model that is driven to succeed and I look forward to their continued assistance in taking the business further forward into a new growth phase. I also wish to acknowledge the significant dedication and contribution from my fellow directors and senior management team over the past year. Their expertise, clear thinking, industry insight and hard work has contributed to our ability to execute the turnaround in what is still a difficult trading environment. I sincerely thank all our shareholders for their ongoing patience and continued support, particularly those who contributed strongly to the December Share Entitlement Offer. This really did enable some significant change for the business by allowing us to neutralise our poor debt equity position and allow us to better focus on growth opportunities to create greater security for the future. While it is early days, and the trading environment, particularly in Australia, is still challenging, I can assure you all that the directors, management and staff are focused on substantially improving the financial performance and sustainability of the company. David Ashmore Chairman of the Board 5 CHIEF EXECUTIVE OFFICER’S REVIEW OF OPERATIONS AND ACTIVITIES P E R F O R M A N C E D U R I N G 2 0 1 4 - 2 0 1 5 I am very pleased to report that the Company has achieved a positive EBIT for the past financial year, a significant milestone on the back of the three past years of significant losses. The Company generated annual operating revenues of $15.1 million (FY2014: $16.3 million) and an EBIT of $0.3 million (FY2014: $0.7 million loss). Further efficiencies in our cost base were achieved during the year with a $1.5 million (or 24%) reduction in personnel and non-personnel costs as we continued to streamline our business model. A renegotiated extension to our bank facility following the December 2014 Share Entitlement Issue produced a significant reduction in financing costs in the second half of the year and this and other cost reduction initiatives enabled us to achieve an operating profit before tax in the second half. Whilst overall sales volumes were down, this was largely due to the impact of the orderly wind down of our non- profitable Civil Services offering during the year. All contracts have now been concluded, surplus assets sold and relevant staff paid out (provided for in FY2014) during the past year. Excluding this portfolio, ongoing revenue streams actually increased overall by 7%. In particular, our Temporary barriers portfolio grew revenue 42% on the back of three significant contracts (two in WA and one in NSW) for our exclusively licensed concrete barrier solution, the T-LOKTM barrier. Additionally, our rental barrier portfolio revenue increased 29% on the back of the launch of our new IronmanTM Hybrid steel and concrete temporary barrier solution. Customers are increasingly seeing the benefits of this new portable barrier solution, and the interest will only continue to grow as we secured the final regulatory approvals during the year to be the only free-standing portable steel barrier in the Australian market today. Our Public Lighting portfolio continued to strengthen with increased market penetration in Victoria on the back of our ever-reliable ability to deliver to our customers’ needs. We also secured our first sale into the WA market during the year. Sales of our exclusively licensed Omni-stopTM bollard continued to rise during the year as we are seeing a number of urban planners and designers specifying this world-class solution into their plans where there are traffic/pedestrian interfaces. Being the only crash-tested energy absorbing bollard in Australia, it is increasingly being seen as the ideal safety device. It is also being utilised by property construction companies for urban developments which require crane-bay access and which separates workers from regular traffic flows flexibly and safely. L O O K I N G A H E A D There is continuing pressure on all levels of government to minimise expenditure and the road infrastructure sectors of government are no exception. This creates challenges for our business to source or develop cost efficient road safety solutions that can fit in with constrained government budgets and still provide a high quality solution and, most importantly, provide a high standard of safety for our urban streets and highways. Some of these initiatives include our new low maintenance flexible sign for councils who spend thousands of ratepayers’ dollars per year on repairing damaged and vandalised signs. The Tubthumpa flexible sign is targeting this segment with, what we believe, will save local government authorities significant maintenance expenditure and initial trials have been quite successful in demonstrating the sign’s durability. Our Public Lighting portfolio is currently developing a solar lighting offering to support local councils who come under increasing public pressure to provide safer environments around recreational parklands, sporting complexes and community hubs. Solar solutions are energy efficient and don’t require the invasive civil works required to install traditional power sources to light poles, particularly in public open spaces where linking the pole to a power source can be a costly exercise. On the topic of solar, we have brought out a new portable solar light tower and portable arrow board for workzones. These clean energy products are far more energy efficient, both in fuel use and noise levels and we have seen interest from some of the major equipment hire companies. With our Electronic Traffic Systems, we will be rolling out a new (Australian developed) technology platform for our VMS (Variable Messaging Sign) products. The new cloud-based programme will provide a more secure and stable platform for the management of VMS assets, as well as giving our customer an easy to use and efficient web-based programme to change messages and the ability to manage their fleet using any desktop or mobile device. 6 This is on the back of the second year of our Zone Care technical support program. The Zone Care Package provides expert technical support and additional hardware service options, with most issues resolved in a single call, providing our customers with complete business assurance. The Zone Care package has been well received by our VMS customer base. These innovative solutions assist in maintaining our leading position in this industry on technical functionality and after sales customer care. We will be relocating to a new-build head office and distribution warehouse in Pakenham on the south eastern fringe of metro-Melbourne during October/November. After being based in the Warragul/Drouin area since the company was founded in 1992, it is time to move closer to Melbourne to take advantage of various synergies and savings including consolidation from two sites to a single site, reduced freight and travel costs and access to a broader talent pool for recruitment. We have entered into a 10 year lease commencing 1 October 2015, and believe the relocation will provide a fresh new look for the business. In the latter part of the financial year, in reviewing various growth opportunities for the business, the Board analysed various overseas market opportunities. This is on the back of the fact that the Australian market continues to be constrained by limitations in government spending on road infrastructure. The Board determined the area of focus will be North America (in particular, USA and Canada). With some of the international relationships developed from recent industry trade shows such as Intertraffic and International Road Federation (IRF), there were a number of compelling reasons to investigate this, including that the USA is the largest market in the world for our type of products. The USA and Canada also have the same or similar road safety standards and a similar road safety culture. To this end, I have commenced a 3 month secondment to California to establish relationships and gain interest in our products in the USA and Canada. The main products we are focussing on will be the Ironman Hybrid barrier, Omni- stop bollard, Tubthumpa flexible signage and Variable Messaging Sign (VMS) products. This will allow us to determine interest first-hand in our products with a view to establishing a presence in USA and/ or Canada if the demand warrants it. It also allows us to identify any other product offerings in the US which may be suitable for Australian conditions. Whilst we start commercialising some of our recent product innovations such as Ironman Hybrid and the Tubthumpa flexible sign, we still remain focussed on developing new products and solutions, one being solar public lighting. Finally, I would like to acknowledge the support of my fellow Directors, Senior Management Team and our staff, who have continued to work tirelessly to achieve a positive result for the business for FY2015, and which should set ourselves up to now enable the business to continue to grow for the foreseeable future. Darren Hotchkin Chief Executive Officer 7 THE YEAR IN REVIEW The following section provides some insight into the types of activities Saferoads has been involved with over the past financial year and how our innovative solutions have provided (or will provide) value to our customers. I N N O V A T I O N Tubthumpa flexible sign The Tubthumpa is the latest in flexible signage from Saferoads. Extensively tested and unparalleled in durability, the Tubthumpa has an integrated sign face to stop the never ending problem of signs being damaged through vehicle impacts. Australian designed and manufactured, the Tubthumpa can be used in many different applications. A number of local councils are currently trialling this innovative solution, and initial feedback has been positive. Not just a Keep Left sign, it is a flexible advertising board and post all in one. Roadquake temporary portable rumble strips In response to finding additional safety solutions for regional road workzones, Saferoads has secured the exclusive rights to a new temporary portable rumble strip product which has been extensively tested in the United States. This very unique product is currently being assessed by the NSW Roads & Maritime Services. With the monotony of country open road driving, where driver attention spans can be tested, there have been recent incidents where drivers have not slowed down through open road workzones, even allowing for traditional roadworks signage, causing risk to roadside workers and drivers. Essentially, this product increases road user awareness by alerting drivers via sound and vibration and is an additional safety measure to slow vehicles down as they approach roadside workzones. Initial test sites have proven positive in slowing vehicles down and we anticipate state road authorities to recommend road maintenance companies take up this traffic management safety solution for open road works. 8 S E R V I C E Public Lighting - Victoria One of Saferoads’ major Public Lighting customers, Morton Power Services, is a client focused organisation, delivering capabilities in the construction and maintenance of overhead and underground electricity distribution networks, including the installation of street lighting and their maintenance. Saferoads commenced working with Morton Power Services in 2012 and has worked together with them in the growth of their business to see them become a major Victorian electrical contractor in the residential subdivision development industry. Saferoads has become their sole supplier of both standard and decorative light poles and lanterns and is proud to partner with this business in providing a seamless public lighting solution. Principal, John Morton says: “Morton Power Services is proud to have built a strong business relationship over the years with Saferoads who supply us with quality public lighting products.” “The Saferoads staff are a customer driven team with a “can do” attitude and provide us with excellent customer service, timely and reliable information and competitive rates. We appreciate the commitment Saferoads makes to our business.” T-LOK barriers on Pacific Highway Upgrade Project – New South Wales The Pacific Highway upgrade is one of the largest road infrastructure projects in NSW. It connects Sydney and Brisbane, and is a major contributor to Australia’s economic activity. Following our T-LOK concrete barrier approval in New South Wales, Saferoads has commenced working with contractors on this major upgrade project to provide both supply and logistics solutions for the installation of more than six kilometres of T-LOK temporary concrete barriers. We have also provided additional workzone safety solutions including variable message signs (VMS), traffic calming devices and site safety escape ladders. 9 THE YEAR IN REVIEW S O L U T I O N S - F O C U S S E D Ironman Hybrid barrier – Western Australia R.J. Vincent & Co. (RJV) is one of Western Australia’s leading and most respected civil engineering contractors and are well known for offering their clients innovative and cost-effective solutions based on the latest technology. During the construction of a filter lane to a new development in Western Australia, RJV used Saferoads’ new Ironman Hybrid Barrier System to provide physical protection to its workers and contractors from the busy 80km/h Mandurah road traffic. Installation of 250 metres of Ironman Hybrid Barriers and end treatments was completed efficiently during a night shift operation with minimal disruption, and without any anchoring along the length of the barriers. The ability to carry an aggregate 100 metres of barriers on a semi-trailer helped transport and logistics costs, especially with the project being out of the Perth metropolitan area. Omni-stopTM bollards - Victoria In the construction of CBD towers it is necessary to create loading bays for the delivery of building materials to the site. Providing a safe protected area for the workforce within 1.2 metres of flowing traffic is of paramount importance. Equally, the safety of pedestrians, cyclists and motorists passing the site must be addressed appropriately. The issue that continually arises on these sites is that of minimal available space to provide a protective barrier that will prevent an errant vehicle penetrating into the work zone whilst at the same time ensuring that the impacting driver is not injured. The Omni-StopTM bollards are also utilised where the road width is too restricted to allow for the use of concrete barriers, with mesh screens placed behind them, preventing workers from stepping back into traffic. Alan Saunders, Traffic Transport & Parking Associate at professional infrastructure and environmental services company, Cardno, has identified that using the Omni-StopTM energy absorbing bollards provides protection with a minimum of space. Protecting the exposed blunt end of concrete barriers, the Omni-StopTM bollard requires less space than plastic water- filled barriers or other crash cushions. This means that deliveries by semi-trailer trucks that require wider berth access to the site can manoeuvre into position with less disruption for traffic, thereby improving productivity and safety. 10 Q U A L I T Y Separation kerb - Queensland As a leading commercial business within the Department of Transport and Main Roads, RoadTek is a major provider of transport infrastructure solutions throughout Queensland. RoadTek is instrumental in the delivery and maintenance of projects that make up the state’s extensive road and bridge network and specialise in delivering technically difficult and hard to scope projects for both state and local governments. When given the challenge of providing an appropriate solution for a busy Brisbane intersection incorporating a designated bike lane, Saferoads’ separation kerb was the ideal solution. Cinar Kunduz, Project Manager at RoadTek, is very happy with the Saferoads separation kerb solution that directs vehicles to turn correctly and not cut corners and keeps vehicles away from a designated bike lane on a high traffic volume sweeping bend. Rubber dig-in guidepost – Western Australia Under an Integrated Services Arrangement (ISA) awarded by Main Roads WA, Leighton Contractors, in a joint venture with Opus International Consultants, are delivering improvement and maintenance services for the Wheatbelt regional road network in Western Australia. They are able to take multiple hits by traffic before needing replacing and are easy for the maintenance crews to remove when conducting road shoulder grading. Leighton Opus are currently using between 3,000 and 5,000 rubber mounted guideposts per year, depending on the relevant maintenance programs. According to one of their maintenance managers, the Rubber Dig-in guideposts are favoured because they are reasonably lightweight and therefore easy for maintenance crews to carry on their maintenance vehicles. 11 DIRECTORS’ REPORT Your Directors submit their report for the year ended 30 June 2015. DIRECTORS David Ashmore Non-Executive Chairman Appointed 22 November 2012 Darren Hotchkin Executive Director (CEO) Appointed 21 October 2005 David Cleland Non-Executive Director Appointed 1 December 2010 DIRECTOR PROFILES David Ashmore (Age 63) (FCA GAICD F.FIN) Non-Executive Director (Appointed Non-Executive Chairman 19 August 2013) David Ashmore was appointed to the Board on 22 November 2012 and was re-elected at the November 2013 AGM. He was appointed Chairman of the Board on 19 August 2013. He is a member of the Remuneration Committee (appointed Chairman of this Committee on 19 August 2013) and the Audit and Risk Committee (as Chairman up to 19 August 2013). David is a career Chartered Accountant with 40 years of professional public practice experience focussed on audit, finance, due diligence, risk and governance advisory. David has worked with many dynamic private and public companies where his experience has assisted them understanding their underlying financial position, their financial management issues and business growth challenges. Those challenges typically included the development of sustainable executive management structures and business value building initiatives. He also has significant experience with the identification and management of financial and business risks and the development of structured business decision making protocols. David has considerable experience in a leadership and a chairman role through his work on numerous Audit Committee appointments and as a Senior Partner, Board Member and Practice Leader. He is a Fellow of the Institute Chartered Accountants in Australia, a Graduate member of the Australian Institute of Company Directors and a Fellow of the Financial Services Institute of Australia. Directorships of other listed companies during the preceding three years: iSonea Limited Darren Hotchkin (Age 51) Executive Director/Chief Executive Officer Darren Hotchkin was appointed to the Board on 21 October 2005 as Managing Director. On 7 February 2011 he stepped aside as Managing Director but remained on the Board as a Non-Executive Director and was re-elected at the October 2011 and November 2013 AGM’s. He was appointed acting Chief Executive Officer on 10 April 2012 and formal Chief Executive Officer on 30 June 2012. Darren is the founder of Saferoads. He has a background in the automotive industry where he owned and operated several businesses. In 1992 he founded the company now trading as our wholly-owned subsidiary, Saferoads Pty Ltd, to commercialise his invention of a rubber guide post, manufactured from recycled car tyres. As Chief Executive Officer, Darren’s key contribution to the business is in the strategic development of the Company’s product range and manufacturing processes as well as in business development. He continues to be active in Research and Development and in seeking to effectively expand the Company’s product base through international research of products which have the potential to find a sustainable place in the Australian market. Darren is also an eagerly sought-after international expert speaker on road safety barriers, having recently presented at the International Road Federation conference in Portland, USA. Darren has not served as a Director of any other listed companies during the preceding three years. 12 David Cleland (Age 70) (Dip.ME GAICD FIE (retired)) Non-Executive Director David Cleland was appointed to the Board on 1 December 2010 and was re-elected at the October 2011 AGM. He was appointed acting Chief Executive Officer on 28 November 2011, handing over the role to Darren Hotchkin on 10 April 2012. He is a member of the Audit and Risk Committee (becoming Chairman of this Committee on 19 August 2013) and the Remuneration Committee. David is a mechanical engineer with extensive experience as Chief Executive Officer of companies manufacturing and distributing industrial products. His career includes manufacturing experience (including lean manufacturing), brand management, product research and development, outsourcing and company mergers and acquisitions. He was formerly an inaugural trust member of the Greater Metropolitan Cemeteries Trust and is a Director of a privately owned company. David has not served as a Director of any other listed companies during the preceding three years. COMPANY SECRETARIES Sonia Joksimovic (appointed 10 August 2015) Sonia joined Saferoads on 10 August 2015, and is employed by Boardroom Pty Ltd, the company which manages Saferoads’ share registry. Sonia is an experienced Chartered Secretary with over 8 years’ experience across listed small caps, unlisted and private companies, specializing in governance and compliance matters. Elissa Hansen (appointed 10 October 2013, resigned 10 August 2015) Elissa was Company Secretary of Saferoads from 10 October 2013 to 10 August 2015 where she was employed by Boardroom Pty Ltd, the company which manages Saferoads’ share registry. Elissa is an experienced Chartered Secretary with over 15 years’ experience advising management and boards on investor relations, governance, compliance and other corporate issues. KEY MANAGEMENT PROFILES Peter Fearns Chief Financial Officer Peter joined Saferoads in December 2011. He has over 15 years’ experience managing finance functions in the information technology, infrastructure and professional services sectors, covering both public listed and private companies. He was Group Financial Controller of ASX listed UXC Limited. His most recent appointment was Chief Financial Officer of a national privately-owned urban planning and property advisory business. Peter holds a Bachelor of Business (Accounting) and is a CPA. INTEREST IN SHARES As at the date of this report, Directors’ interests in the shares of the Company are: NAME David Ashmore Darren Hotchkin David Cleland SHARES 1,159,911 7,479,885 408,610 DIVIDENDS No interim or final dividend was paid or declared for the financial year ended 30 June 2015. No interim or final dividend was declared or paid for the financial year ended 30 June 2014. 13 DIRECTORS’ REPORT PRINCIPAL ACTIVITIES The principal activity of the Group continued to be the provision of road safety products and solutions primarily to end users. Products and services the Company provides includes flexible guide posts and signage; rubber-based traffic calming products including separation kerbing and wheel stops; variable messaging sign boards; decorative and standard street and major road light poles; permanent and temporary crash cushions including bollards and safety barriers. In all its activities, the Company remains focused on providing innovative products and materials that protect the safety of all road users – motorists, road construction workers and pedestrians. REVIEW AND RESULTS OF OPERATIONS A review of the operations and activities of the Company during the financial period and the results of these operations is set out in the Chairman’s Overview and Chief Executive Officer’s Review of Operations and Activities. SIGNIFICANT CHANGES IN STATE OF AFFAIRS During the 2014-15 year, there has been no significant change in the Company’s state of affairs other than as disclosed in this financial report. SIGNIFICANT EVENTS AFTER REPORTING DATE There has been no matter or circumstance, which has arisen since 30 June 2015 that has significantly affected or may significantly affect the operations of the consolidated entity or the results of those operations or the state of affairs of the consolidated entity. LIKELY DEVELOPMENTS AND EXPECTED RESULTS Likely developments in the operations of the entity and the expected results of these operations have been set out in the Chairman’s Overview and the Chief Executive Officer’s Review of Operations and Activities. INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS During the year, Directors’ and Officers’ insurance premiums were paid for any person who was a Director and/or Officer of the Company. ENVIRONMENTAL REGULATION AND PERFORMANCE The Company’s operations are not regulated by any significant environmental regulations under a law of the Commonwealth or of a state or territory. In respect of its own activities, the Company is not a major emitter of green house gases and falls well below the reporting thresholds set by the National Greenhouse and Energy Reporting Act 2007. OPTIONS At the date of this report there were no un-issued shares of the company under option. DIRECTORS’ MEETINGS The number of meetings of Directors (including meetings of committees of Directors) held during the year, and the numbers of meeting attended by each Director, were as follows: Names Directors Audit & Risk Remuneration / Nomination Eligible Attended Eligible Attended Eligible Attended Mr D Ashmore Mr D Hotchkin Mr D Cleland 12 12 12 12 11 12 4 - 4 4 - 4 2 - 2 2 - 2 AUDITOR’S INDEPENDENCE DECLARATION The attached independence declaration has been obtained from the Company’s auditors, Grant Thornton. 14 REMUNERATION REPORT The Company’s remuneration policy is to ensure that the level of remuneration paid to key personnel is market competitive and will help to attract and retain the skills and expertise required. To determine what is a competitive level of remuneration the Company refers to the Australian Institute of Management Salary Survey and to information provided by other professional organisations. REMUNERATION OF DIRECTORS AND KEY MANAGEMENT PERSONNEL NON-EXECUTIVE DIRECTORS Total remuneration for non-executive Directors for 2014-15 was $140,000. Their remuneration packages comprised only fixed Directors’ fees plus statutory superannuation (where applicable) and were within the limits set out in the Company’s constitution. Currently this limit is set at $350,000 per annum, and can only be changed at a general meeting. EXECUTIVE DIRECTOR The remuneration package for Mr Darren Hotchkin, Chief Executive Officer, comprised a total full-time equivalent salary package of $109,500, inclusive of superannuation. Mr Hotchkin’s actual working hours varied during the year which resulted in his base salary being adjusted from the previous year. KEY MANAGEMENT PERSONNEL Key Management Personnel (“KMP”) is defined by AASB 124 - Related Party Disclosures. Only Directors and Executive Management that have the authority and responsibility for planning, directing and controlling the activities of Saferoads, directly or indirectly and are responsible for the entity’s governance are classified as KMP. PERFORMANCE-BASED REMUNERATION Performance-based remuneration (bonus incentives) for Key management personnel (apart from Mr Hotchkin) for the year ended 30 June 2015 was based on the Company performance (PBT) exceeding budget. As the Company did not exceed budgeted PBT for FY2015, there was no performance-based remuneration (bonus incentives) paid or payable to key management personnel for the year. A summary of Company performance for the past five financial years is below. EPS (cents) 2015 (0.2) 2014 (3.6) 2013 (5.3) 2012 (35.5) 2011 2.9 Net profit/(loss) ($) (72,228) (930,978) (1,388,899) (9,219,362) 747,672 Share price ($) $0.10 $0.13 $0.06 $0.09 $0.22 EMPLOYMENT CONTRACTS Executive employment agreements have been entered into with the Chief Executive Officer, the Chief Financial Officer, and other Key Management Personnel as disclosed. These agreements are of a standard form containing provisions of confidentiality and restraint of trade usually required in such agreements. Payments to be made on ter- mination of an executive employment contract have been clearly detailed and are limited to payout of accrued leave entitlements and up to three months’ salary as redundancy or termination pay. 15 DIRECTORS’ REPORT REMUNERATION OF DIRECTORS AND KEY MANAGEMENT PERSONNEL 30 June 2015 Short Term Salaries & Fees Fringe Benefits Cash Bonus Termination Payment Super- annuation $ $ $ $ $ Long Term Long Service Leave $ Total Perfor- mance Related Share Based Payment Options $ $ % Non Executive Directors D Ashmore D Cleland Executive Director D Hotchkin Executives P Fearns Total 45,000 60,000 100,000 170,000 375,000 - - - - - - - - - - - - - - - 35,000 - 9,500 - - - 16,150 60,650 2,833 2,833 - - - - - 80,000 60,000 109,500 188,983 438,483 - - - - - * Key management personnel is defined as those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly. As a result of an internal restructure, Messrs Williams, McMaster, Webb and/or their successors no longer meet the definition of Key Management Personnel for 2015 and are therefore not disclosed as such. REMUNERATION OF DIRECTORS AND KEY MANAGEMENT PERSONNEL 30 June 2014 Short Term Salaries & Fees Fringe Benefits Cash Bonus Termination Payment Super- annuation $ $ $ $ $ Long Term Long Service Leave $ Total Perfor- mance Related Share Based Payment Options $ $ % Non Executive Directors D Ashmore D Cleland G Bertuch* Executive Director D Hotchkin Executives P Fearns P Williams C McMaster H Webb P Rogers* Total 70,175 60,000 12,204 188,576 170,000 153,062 144,254 170,000 85,000 1,053,271 - - - - - 16,938 25,746 - - 42,684 - - - - - - - - - - - - - - - - - - 41,678 41,678 6,491 - 1,129 - - - 14,218 3,848 15,725 15,725 15,604 15,725 9,274 93,891 2,833 2,833 2,833 2,833 - 15,180 - - - - 76,666 60,000 13,333 206,642 188,558 - 188,558 - 188,437 - 135,952 - - 135,952 - 1,246,704 - - - - - - - - - * departed during the year 16 SHAREHOLDINGS OF KEY MANAGEMENT PERSONNEL Shares held in Saferoads Holdings Limited: Balance at 1 July 2014 Acquired through On-Market trade Acquired through Entitle- ment Issue and Shortfall take-up Sold Balance at 30 June 2015 5,292,775 260,000 120,500 10,000 5,683,275 50,000 60,622 - - 2,137,110 839,289 288,110 8,000 110,622 3,272,509 - - - - - 7,479,885 1,159,911 408,610 18,000 9,066,406 Balance at 1 July 2013 Acquired through On-Market trade 20,000 5,192,775 - 69,500 - - - - - - 100,000 260,000 51,000 10,000 - - 118,928 - 5,282,275 539,928 Sold Other* Balance at 30 June 2014 - - - - - - - - - - (20,000) - - - - - - - - - 5,292,775 260,000 120,500 10,000 - - 118,928 - (20,000) 5,802,203 Directors D Hotchkin D Ashmore D Cleland Executives P Fearns Total Directors G Bertuch* D Hotchkin D Ashmore D Cleland Executives P Fearns P Williams C McMaster H Webb P Rogers Total * up to resignation date All equity transactions with Key Management Personnel have been entered into under terms and conditions no more favourable than those the entity would have adopted if dealing at arm’s length. Signed in accordance with a resolution of Directors. David Ashmore Director Drouin 26 August 2015 17 AUDITOR’S INDEPENDENCE DECLARATION The Rialto, Level 30 525 Collins St Melbourne Victoria 3000 Correspondence to: GPO Box 4736 Melbourne Victoria 3001 T +61 3 8320 2222 F +61 3 8320 2200 E info.vic@au.gt.com W www.grantthornton.com.au Auditor’s Independence Declaration To the Directors of Saferoads Holdings Limited In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of Saferoads Holdings Limited for the year ended 30 June 2014, I declare that, to the best of my knowledge and belief, there have been: a b no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and no contraventions of any applicable code of professional conduct in relation to the audit. GRANT THORNTON AUDIT PTY LTD Chartered Accountants M. A. Cunningham Partner - Audit & Assurance Melbourne, 27 August 2014 Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389 ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited. 18 Liability limited by a scheme approved under Professional Standards Legislation. Liability is limited in those States where a current scheme applies. CORPORATE GOVERNANCE STATEMENT The Board of Directors of Saferoads Holdings Limited is responsible for the corporate governance of the Saferoads group. The Board has considered the ASX Corporate Governance Principles and Recommendations (“ASX Governance Principles”) and reports on compliance with these Principles. The Board’s objective is to ensure investor confidence in the Company and its operations given its size, stage of development and complexity. The Company’s Corporate Governance Charter is located on the Company’s website (www.saferoads.com.au) under the Investor Relations icon. The Board advises that it complies with the ASX Corporate Governance Principles set out on the Company’s website (www.saferoads.com.au) under the Investor Relations icon. 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 DIRECTORS DECLARATION 43 INDEPENDENT AUDITOR’S REPORT 44 45 ASX ADDITIONAL INFORMATION The shareholder information set out below was applicable as at 31 August 2015. At this date the Company had on issue 36,400,000 ordinary shares in the company held by 654 shareholders. S U B S T A N T I A L S H A R E H O L D E R S Holder name MR DARREN JOHN HOTCHKIN & MRS JENNIFER ANN HOTCHKINRUMINATOR PTY LTD and related entities MR DUNCAN FRANCIS SMITH MR STEVEN DI FABRIZIO T W E N T Y L A R G E S T S H A R E H O L D E R S No. of ordinary shares in which interest is held 7,479,885 4,376,335 2,265,984 1,821,226 No. of shares % Held 7,479,885 20.55 3,028,601 2,265,984 1,804,409 1,496,264 1,159,911 901,131 844,522 785,000 538,687 503,212 490,000 434,000 425,000 408,610 400,000 350,000 279,925 251,094 247,771 24,094,006 8.32 6.22 4.96 4.11 3.19 2.48 2.32 2.16 1.48 1.38 1.35 1.19 1.17 1.12 1.10 0.96 0.77 0.69 0.68 66.19 % 0.18 1.61 2.39 16.52 79.30 100.00 Name MR DARREN JOHN HOTCHKIN & MRS JENNIFER ANN HOTCHKIN RUMINATOR PTY LTD MR DUNCAN FRANCIS SMITH NLKM PTY LTD CAON PTY LTD MR DAVID ALBERT McCLURE ASHMORE & MRS NOLA JOY ASHMORE WAVET FUND NO. 2 PTY LTD CONTEMPLATOR PTY LTD MR GLENN SCOTT WADSWORTH & MR RICKI MARK WADSWORTH ATKONE PTY LTD STITCHING PTY LTD KOONUNG NOMINEES PTY LTD MR ROSS GEORGE YANNIS CIMTECK SUPER PTY LTD LIVINGSTONE SERVICES PTY LTD MR PHILIP BOMFORD MR DANIEL FORBES SPILLMAN ROADWORX GROUP PTY LTD WIGRAM INVESTMENTS PTY LTD MR BRUCE ALLAN HEAD & MRS BETH ALISON HEAD D I S T R I B U T I O N O F S H A R E H O L D I N G S Holdings Ranges 1-1,000 1,001-5,000 5,001-10,000 10,001-100,000 100,001-and over Holders 120 193 106 183 52 654 Total Units 67,352 584,588 870,049 6,012,762 28,865,249 36,400,000 The number of shareholders’ holdings less than a marketable parcel is 243. V O T I N G R I G H T S All ordinary shares carry one vote per share. N U M B E R O F O R D I N A R Y S H A R E S S U B J E C T T O E S C R O W Nil. 46 Solicitors Maddocks 140 William Street Melbourne VIC 3000 Bankers Commonwealth Bank of Australia Warragul VIC 3820 Auditors Grant Thornton The Rialto, Level 30 525 Collins Street Melbourne VIC 3000 ASX Code SRH CORPORATE DIRECTORY Directors David Ashmore (Chairman) Darren Hotchkin (Chief Executive Officer) David Cleland Company Secretary Sonia Joksimovic Registered Office 39 Weerong Road PO Box 340 Drouin VIC 3818 Telephone: Facsimile: 03 5625 6600 03 5625 4986 Share Registry Boardroom Pty Limited Level 12, 225 George Street Sydney NSW 2000 GPO Box 3993 Sydney NSW 2001 Telephone Within Australia: 1300 737 760 Outside of Australia: +61 2 9290 9600 Facsimile: 1300 653 459 ISO CERTIFICATIONS: PROFESSIONAL AFFILIATIONS: 47 48