Saferoads Holdings Limited
Annual Report 2017

Plain-text annual report

ANNUAL REPORT 2017 SAFEROADS HOLDINGS LIMITED ABN 81 116 668 538 IMPROVING PUBLIC SAFETY SOLAR LIGHTING ELECTRONIC TRAFFIC TRAFFIC CALMING GUIDE POSTS RENTALS CRASH CUSHIONS TEMPORARY 1 BARRIERS 2 CONTENTS Chairman’s Overview .............................................................................................................................................. 4 Chief Executive Officer’s Review of Operations and Activities ................................................................................ 6 The Year in Review.................................................................................................................................................... 8 Directors’ Report ...................................................................................................................................................... 13 Auditor’s Independence Declaration ....................................................................................................................... 20 Corporate Governance Statement........................................................................................................................... 21 Financial Statements ............................................................................................................................................... 22 Notes to the Financial Statements........................................................................................................................... 26 Directors’ Declaration .............................................................................................................................................. 44 Independent Auditor’s Report .................................................................................................................................. 45 ASX Additional Information ...................................................................................................................................... 48 Corporate Directory ................................................................................................................................................. 49 Improving public safety Saferoads is an ASX listed company specialising in providing innovative safety solutions. Headquartered in Pakenham, Victoria with representation across Australia, New Zealand and the USA, the company provides state government departments, local councils, road construction companies and equipment hire companies with a broad range of products and services designed to direct, protect, inform and illuminate for the public’s safety. 3 CHAIRMAN’S OVERVIEW CHAIRMAN’S OVERVIEW Dear Shareholder, F I N A N CI A L O V ER V I E W On behalf of the Board I am pleased to report a profit before tax for the financial year of $154k, compared with a loss before tax of $157k for the previous financial year. This reflects our ongoing sustainable business transformation and solid organic growth and improvements made across the business. Another key aspect of our recovery is the ongoing development of new products and the establishment of new markets during the year. Revenue from product sales and rentals was up $1.0 million, or 6.3% to $16.9 million, notwithstanding the loss of sales following the early termination of the third party license agreement for the energy absorbing bollard, as announced in July last year. Whilst there was a minimal reduction on overall margins, in the highly competitive nature of the markets we operate in, our ability to generate sales and the continued focus on cost rationalisation has allowed the Company to generate a modest profit for the financial year. International sales of $467k were mainly derived on the back of the previous year’s work by our CEO, particularly targeting the US market. In addition, we have commenced the new financial year having delivered another order of $325k under our USA distributor agreement for our patented IronmanTM barrier. Further scheduled debt reductions of $504k for the year saw finance costs reduce 11%, with core bank debt down to $2.0 million at 30 June 2017. In turn, our gearing ratio reduced further to 20.2% at June 2017 from 24.4% as at 30 June 2016. We again generated over $1.0 million in operating cash flows during the year, maintaining adequate cash reserves to support the working capital needs of the business as well as providing basic funding for our product innovation projects which totalled $447k for the year. The table below summarizes the key metrics of the transformation over the past three financial years: Year ending 30 June 2016 $'000 2015 $'000 Revenue from product sales, rentals and royalties 13,761 16,269 EBITDA Profit/(loss) before tax Operating cash flows Core bank debt * 814 (90) 98 504 (157) 1,022 (3,000) (2,496) Gearing (net debt / net debt + equity) 26.1% 24.4% * excludes equipment finance leases 2017 $'000 16,936 800 154 1,033 (1,992) 20.2% 4 S T R A T E G I C O P P O R T U N I T I E S Having achieved underlying profitability in 2017, our main priority continues to be sustainable growth in sales S T R A T E G I C O P P O R T U N I T I E S and profit. Each of our product portfolios have key budget targets in their respective market sectors and a Having achieved underlying profitability in 2017, our main priority continues to be sustainable growth in sales number of initiatives are in play to continue the momentum achieved in the past financial year. and profit. Each of our product portfolios have key budget targets in their respective market sectors and a number of initiatives are in play to continue the momentum achieved in the past financial year. Road infrastructure spending continues to grow, with committed funding for major Australian transport infrastructure projects peaking at up to $17 billion by 2020. The majority of these are on the eastern seaboard Road infrastructure spending continues to grow, with committed funding for major Australian transport where there are major projects that we are already participating in. Our concrete temporary barrier solution infrastructure projects peaking at up to $17 billion by 2020. The majority of these are on the eastern seaboard in particular continues to be an attractive offering for major road works along the Pacific Highway in northern where there are major projects that we are already participating in. Our concrete temporary barrier solution NSW and southern Queensland. in particular continues to be an attractive offering for major road works along the Pacific Highway in northern NSW and southern Queensland. Another area of focus for us is pedestrian safety, particularly given the events around the world recently with incidents involving vehicles deliberately driven into urban precincts designated predominantly for pedestrians Another area of focus for us is pedestrian safety, particularly given the events around the world recently with and causing mass death and injury. incidents involving vehicles deliberately driven into urban precincts designated predominantly for pedestrians and causing mass death and injury. We have developed our new High Security Pedestrian Safety Bollard and are looking at other solutions to assist those charged with protecting people in these areas to at least minimize the likelihood of these We have developed our new High Security Pedestrian Safety Bollard and are looking at other solutions to situations occurring, and doing this in such a way that it doesn’t decrease the ambience of the urban area assist those charged with protecting people in these areas to at least minimize the likelihood of these designed to be people-friendly. situations occurring, and doing this in such a way that it doesn’t decrease the ambience of the urban area designed to be people-friendly. We continue to be pleased with the growth of our Public Lighting business, particularly our addition of off- grid (solar) lighting solutions. We retain a strong market share in the Victorian urban and residential street We continue to be pleased with the growth of our Public Lighting business, particularly our addition of off- lighting space and have a number of initiatives underway to exploit our unique offerings in solar lighting as grid (solar) lighting solutions. We retain a strong market share in the Victorian urban and residential street well. lighting space and have a number of initiatives underway to exploit our unique offerings in solar lighting as well. As a result of our CEO, Mr Darren Hotchkin’s continued efforts on international markets, we secured further orders under our international distribution agreement which realised sales of $325k in the past year, with a As a result of our CEO, Mr Darren Hotchkin’s continued efforts on international markets, we secured further In addition, we have secured new further $325k order delivered at the start of the 2018 financial year. orders under our international distribution agreement which realised sales of $325k in the past year, with a relationships in Belgium for our flexible signage and the USA for our bollards and traffic calming products. In addition, we have secured new further $325k order delivered at the start of the 2018 financial year. relationships in Belgium for our flexible signage and the USA for our bollards and traffic calming products. We will remain focused on innovation and will continue to bring to market products with both domestic and international sales potential. Of particular focus will be the formal MASH testing in the USA of the next We will remain focused on innovation and will continue to bring to market products with both domestic and generation Hybrid temporary barrier system (“HV2”) that passed our initial crash test in February this year. international sales potential. Of particular focus will be the formal MASH testing in the USA of the next In addition, we will continue to develop and progressively crash test our new High Security Pedestrian Safety generation Hybrid temporary barrier system (“HV2”) that passed our initial crash test in February this year. Bollard. In addition, we will continue to develop and progressively crash test our new High Security Pedestrian Safety Bollard. Since year end, we have secured a significantly enhanced facility with our financier, Commonwealth Bank, for a new term of three years, which will allow us to continue to invest in new innovations as well as have the Since year end, we have secured a significantly enhanced facility with our financier, Commonwealth Bank, working capital facilities needed to manage the organic growth of the business. We appreciate the support for a new term of three years, which will allow us to continue to invest in new innovations as well as have the the bank has provided us over the past few years of serious business transformation and are pleased at the working capital facilities needed to manage the organic growth of the business. We appreciate the support continued confidence the bank is showing in the direction and advances the Company is now taking. the bank has provided us over the past few years of serious business transformation and are pleased at the continued confidence the bank is showing in the direction and advances the Company is now taking. A C K N O W L E D G M E N T S It has been another busy year for the Company, one that has finally produced a bottom line profit. This is A C K N O W L E D G M E N T S down to the ongoing efforts and dedication of our loyal staff who continue to find ways to provide innovative It has been another busy year for the Company, one that has finally produced a bottom line profit. This is and value-added solutions for our customers. down to the ongoing efforts and dedication of our loyal staff who continue to find ways to provide innovative and value-added solutions for our customers. Finally, I sincerely thank all our shareholders for their ongoing patience and continued support. Our primary focus continues to be the substantial improvement in the financial performance and sustainability of your Finally, I sincerely thank all our shareholders for their ongoing patience and continued support. Our primary Company and I hope you can see that we are making steady progress towards this outcome. focus continues to be the substantial improvement in the financial performance and sustainability of your Company and I hope you can see that we are making steady progress towards this outcome. David Ashmore Chairman of the Board David Ashmore Chairman of the Board Page 8 Page 8 5 CHIEF EXECUTIVE OFFICER’S REVIEW OF OPERATIONS AND ACTIVITIES 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 6 - 2 0 1 7 I am very pleased to report that the Company has achieved a net profit before tax for the past financial year. The Company generated annual operating revenues of $16.9 million (FY2016: $16.3 million) and a net profit before tax of $154k (FY2016: $157k loss). This was achieved on the back of continued organic growth across all sectors of our business and the first significant International sales, particularly in the USA. During the year we rationalised our domestic business into two (customer centric) streams – Traffic Solutions and Public Lighting Solutions. This was to enable greater focus on the core customer bases of the two portfolios and it is pleasing that we derived top line growth through this initiative, even allowing for the loss of the third party license agreement for the energy absorbing bollard in July 2016. Our Traffic Solutions portfolio reported annual ongoing revenue growth of 20%. This was on the back of solid growth in our posts and rubber traffic calming product range with significant orders fulfilling various requirements for Melbourne’s Monash Freeway upgrade and Sydney’s upgrade of roads around the new Northern Beaches Hospital, to name two high profile projects. Last year’s introduction and initial trials of the temporary portable rumble strip product – RoadquakeTM – have led to widespread industry interest and growing acceptance, particularly in regional areas, of this unique workzone safety product. We continued to secure significant contracts for our exclusively licensed concrete barrier solution, the T-LOKTM barrier during the financial year, with additional sections of the Pacific Highway upgrade in northern NSW as well as major projects in Melbourne including Metro Tunnel, Webb Dock and Victoria Harbour. Our barriers were also selected to safeguard the 57,000 fans who attended the 2016 Rally Australia event at Coffs Harbour in November last year. The introduction of our new Zone Essential variable messaging sign (“VMS”) trailer in the latter part of the financial year led to us winning a tender for the Sydney Olympic Park Authority. The customer selected our solution on the basis of its high quality build, its superior cloud-based communication software, and its excellent value for money. We have also continued to rollout our proprietary VMS web-based management platform – Zone2 to existing and new customers nationwide. Our IronmanTM Hybrid barrier rental offering grew 73% over the year with increased demand for our specialised knowledge in flexible deployments and expertise in required traffic layouts providing a fully outsourced barrier solution for our customers, whose primary focus is to construct a roadway. We have broadened our offering recently by including our new Zone Essential VMS to our equipment rental fleet and we will look at other products to allow us to become a more holistic provider of workzone solutions to our customers who value our expertise in determining and implementing their workzone safety obligations. Our Public Lighting solutions portfolio reported annual revenue growth of 10%. This was on the back of established customer relationships and solid demand for our urban street lighting solutions, maintaining our leading market share in the Victorian residential development space. In addition, we have successfully introduced some solar public lighting solutions, targeted initially at the local government market, to provide more flexible options in facilitating safer public spaces in areas that are not easily accessible and/or in a more environmentally friendly and cost effective way. This is definitely a targeted growth area for us as annual revenues for our solar lighting offering trebled year on year, albeit coming off an initial low base. Page 9 6 Internationally, we generated $467k in revenue from overseas sources, including our initial order from our USA distributor of IronmanTM barriers. We have also secured our first overseas customer for our flexible signage (in Europe) and we continue to sell our Traffic products into New Zealand. We have had great success during the year with regards to our innovative product research and development as a result of our previous investment in a sophisticated product performance and simulation software program, which enabled us to achieve a successful crash test of our next generation HV2 Hybrid workzone barrier in its first impact, with the actual results closely aligned to the simulation models we had run. This has demonstrated the advantage of this software tool in reducing the time and in particular, the significant costs associated in running a physical crash test. We also launched a portable off-grid solar light solution in the past year. We have seen significant initial demand for this product, which provides for temporary deployment of an energy-efficient light, ideal for night works, public events and night-time security at a fraction of the cost to maintain and power alternate solutions. In response to global concerns associated with vehicles being used to cause mass death and injury in urban precincts, we have developed a new High Security Pedestrian Safety Bollard. Whilst various authorities have deployed interim pedestrian protection systems we believe that with our extensive knowledge and understanding of how various barriers perform under a multitude of vehicle impact scenarios, we are best-placed to assist authorities in providing permanent long-term solutions to at least minimize the impact of these horrendous acts. L O O K I N G A H E A D We enter our 25th year of operation in a strong position, further enhanced with the recent confirmation from our financier to extend our banking facilities for a further three years on better terms and conditions. We are now able to pursue our growth strategies without any concerns around our debt funding. We anticipate another year of improved profitability, taking advantage of the projected growth in committed Australian construction sector projects, particularly along the eastern seaboard. We will keep building on the achievements made to date on both the domestic and international front and I believe we have the broad product range, in-depth industry knowledge and expertise to continue to seek business opportunities in assisting our customers in providing solutions to their various road and public safety needs. Finally, I would like to acknowledge the support of all the Saferoads Team, who have worked tirelessly to achieve a positive result for FY2017. We are all focussed on driving sustainable growth and profit improvement for the foreseeable future. Darren Hotchkin Chief Executive Officer 7 THE YEAR IN REVIEW R E S E A R C H & D E V E L O P M E N T HV2 HYBRID WORKZONE BARRIER One of our key R&D projects over the year passed its first major milestone when we crash-tested the HV2 Hybrid workzone barrier at the NSW Roads and Maritime Services Crashlab testing facility in Sydney in February 2017. It passed the toughest of the two tests needed to achieve TL-3 MASH (“Manual for Assessing Safety Hardware”) crash performance standards that become mandatory for Temporary Road Safety Barrier Systems in the USA from 31st December 2020 and are likely to become the rule here in Australia in the forseeable future. The test was a 100 kph test for a 2,270 kg vehicle, impacting at a 25 degree angle. The deflection result was less than 1 metre, which is extremely low for a free-standing temporary barrier, particularly given the weight of this new barrier is half the weight of conventional concrete temporary barriers most commonly used. Our barrier is an unanchored steel and concrete barrier using our patented technology. As well as the very pleasing actual test result, we are also delighted at how close the physical crash test result was to the simulations we had done during the design and development phase of the project using our new Finite Element Modelling software. O M N I - S T O P T M ULTRA SECURITY BOLLARD CRASH TEST In May this year Saferoads conducted a full-scale crash test to evaluate the performance of its new Omni-StopTM Ultra Security Bollard. A 1,600kg Ford Falcon Station Wagon was chosen as the impacting vehicle so the bollard’s performance could be compared against other similar bollards tested in Australia. The Bollard was impacted at a speed of 50 kph. The Omni-StopTM Ultra Security Bollard succeeded in containing the vehicle and prevented the vehicle from continuing past the bollard. Whilst the Omni-StopTM Ultra Security Bollard was specifically developed as a Security bollard, not a Road Safety device, the performance was evaluated against the current Standard for Road Safety Devices, to see how it faired. In conclusion, the Omni-StopTM Ultra Security Bollard has proven to be a very effective low-cost Security Bollard that can be utilised for pedestrian safety, asset protection and is removable for controlled access requirements. 8 T- L O K T M B A R R I E R S O N PA C I F I C C O M P L E T E P R O J E C T Saferoads have been contracted on several stages of the Pacific Complete project to provide Safety Barriers and deployment solutions during the extensive upgrade of the Pacific Hwy (Woolgoolga to Ballina). T-LOKTM Barriers can currently be seen from as far south as Halfway Creek to as far north as Chatsworth Island and there’s approximately 7-10 km’s currently on site, with further deployments planned in Tyndale, Woodburn and further north over the coming months. The T-LOKTM precast concrete barrier is a well-established, versatile system with a diverse range of applications over and above their typical road and crash tested use. T- L O K T M – F L E X I B L E A N D A D A P TA B L E In a completely different application, Saferoads provided T-LOKTM barriers to protect spectators and officials in Rally Australia’s Coffs Harbour Jetty Super Special Stage in November 2016. Safety is the number one priority in this world class event. 9 THE YEAR IN REVIEW V M S Z O N E E S S E N T I A L DELIVERY FOR SYDNEY OLYMPIC PARK AUTHORITY Saferoads’ Sales representative, Luke McIlwraith, was pleased to report the smooth delivery of 10 brand new Zone Essential VMS boards to Sydney Olympic Park Authority (“SOPA”) in June. After a short tendering process, Saferoads were awarded the contract. The boards were delivered on time, to specification, as requested. SOPA advised they were very pleased with the recent delivery of both the Colour and Amber VMS Boards. It was reported that Saferoads’ competitive pricing and 24 hour, 7 day Help Line and Customer Service through Zone Care, cemented SOPA’s decision as Saferoads being the preferred supplier over its competitors. S E PA R AT I O N K E R B BRISBANE CITY COUNCIL PROJECT The Brisbane City Council engaged Saferoads to provide over 50 meters of Separation Kerb to a black spot area in the city, that was renowned for many accidents. This trouble spot is located at the Eastern end of Fortitude Valley, as traffic enters the M7 Clem Jones Tunnel, on the Corner of Adelaide and Ivory Streets. The Separation Kerb was installed to prevent motorists from cutting corners and to separate traffic. This highly successful installation of Separation Kerb has seen an exceptional decrease in traffic related accidents in this area. 10 I R O N M A N T M H Y B R I D R E N TA L B A R R I E R P R O J E C T Saferoads were engaged to supply safety barriers to the Roadtek QLD Project on the Sunshine Coast. The deployment included 300 meters of IronmanTM Hybrid Barrier. Saferoads have completed many projects, requiring high level TL-3 Barrier protection over the course of the past 12 months and one of the ongoing requirements for these complex projects is night works. Having the capacity to deploy at night is safer and easier to achieve with reduced traffic volumes. Saferoads have completed several, large scale night works projects and our barrier specialists and subcontracting teams are well equipped to manage these types of projects and installations, with safety being our number one priority. On this project we were asked to provide a turn-key solution including delivery, installation and certification of the barriers installation. The deployment was a great success and one where our customer will return to Saferoads again due to our expertise and guidance through the process. P O R TA B L E S O L A R L I G H T I N G S O L U T I O N S EAT STREET PROJECT, BRISBANE The Queensland State Government required an easy, portable solar lighting solution for their Eat Street Market, Northshore in Hamilton. The Eat Street Markets are Hamilton’s iconic riverfront shipping container markets, that add a blazing coloured landmark to the Brisbane and South East Queensland dining and entertainment scene. Saferoads supplied and installed three units on the opposing street and entrance to the Market. 11 THE YEAR IN REVIEW G R I D D E D L I G H T I N G S O L U T I O N S WARRNAMBOOL NETBALL COURTS Saferoads has identified a new market opportunity in the supply of Sports and Court Lighting, Car Parks and Floodlighting. With this regional Victorian project, Saferoads was asked to quote and supply all required lighting Solutions for the Allansford Netball Courts for the Warrnambool City Council. Photometric data and luminous data sheets were supplied by lighting engineers to formulate the Lumen Output to reach the levels required for a safe playing surface. Along with one of our business partners - Sonaray, we were able to calculate the 6,800-lumen required via 8 x 520 Watt LED Flood lights and 2 x 250 Watt LED Flood Lights @ 5,000 Kelvin at a 40 degree beam spread. Hose Electrical and Shane Byron of The Midfield Group were the local contractors who completed the installation. ® P E R M A N E N T S O L A R L I G H T I N G S O L U T I O N S HOBSONS BAY CITY COUNCIL, VICTORIA Saferoads were approached by the Hobsons Bay City Council to complete their permanent solar lighting upgrade at the Altona foreshore in Victoria. The project consisted of the decommissioning of seven gridded light poles and the installation of seven new off-grid, Solar Light Poles. After a short tendering process, Saferoads were awarded the project, as we offered a turn-key solution with the decommissioning of the old lights, and then the supply and installation of the new Solar Lights. Our lighting specialists and subcontracting team (S & R Foot) were all well equipped to manage this complex installation project that had limited access and challenging climatic conditions, with safety being Saferoads number one priority. 12 DIRECTORS’ REPORT DIRECTORS’ REPORT Your Directors submit their report for the year ended 30 June 2017. 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 65) (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 and October 2015 AGM’s. 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 focused 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: Respiri Limited (2014-2016). Darren Hotchkin (Age 53) 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 presented at various International Road Federation conferences. Darren has not served as a Director of any other listed companies during the preceding three years. Page 11 13 DIRECTORS’ REPORT David Cleland (Age 72) (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, November 2014 and October 2016 AGM’s. 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 Peter Fearns (CPA, BBus (Acctg)) (appointed 22 December 2016) Peter joined Saferoads in December 2011 as Chief Financial Officer and was appointed Company Secretary on 22 December 2016. He has 20 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 former ASX listed UXC Limited. Prior to Saferoads he was Chief Financial Officer of a national privately-owned urban planning and property advisory business. Peter is a Certified Practising Accountant (CPA) and holds a Bachelor of Business degree majoring in Accounting. Sonia Joksimovic (appointed 10 August 2015, resigned 22 December 2016) Sonia was Company Secretary of Saferoads from 10 August 2015 to 22 December 2016. 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. 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 DIVIDENDS Shares 1,301,807 7,522,585 508,610 No interim or final dividend was paid or declared for the financial year ended 30 June 2017. No interim or final dividend was declared or paid for the financial year ended 30 June 2016. 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 and permanent and temporary public solar lighting poles; permanent and temporary crash cushions including bollards and safety barriers. 14 Page 12 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 2016-17 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 Extension and Revision of Banking Facilities Since the end of the financial year the Company has entered into a revised facility agreement with its financier, Commonwealth Bank of Australia, offering an extended term of three years and significantly more favourable terms and conditions on the back of the improved operational performance and financial position of the Company. 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, OFFICERS AND AUDITORS During the year, Directors’ and Officers’ insurance premiums were paid for any person who was a Director and/or Officer of the Company. The Group has not agreed to indemnify its auditors, Grant Thornton. 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 greenhouse gases and falls well below the reporting thresholds set by the National Greenhouse and Energy Reporting Act 2007. PROCEEDINGS ON BEHALF OF THE COMPANY No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to 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 part of those proceedings OPTIONS At the date of this report there were no un-issued shares of the company under option. Page 13 15 DIRECTORS’ REPORT R E M U N E R A T I O N R E P O R T 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 salary information provided by various professional organisations. REMUNERATION OF DIRECTORS AND KEY MANAGEMENT PERSONNEL NON-EXECUTIVE DIRECTORS Total remuneration for non-executive Directors for 2016-17 was $140,125. 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 Mr Darren Hotchkin, Chief Executive Officer, received total remuneration of $253,615, including statutory superannuation. This was a reduction from the prior year where a component of his previous year’s remuneration covered his secondment to the USA for part of the financial year to establish business opportunities in that market. KEY MANAGEMENT PERSONNEL Key Management Personnel (“KMP”) is defined by AASB 124 - Related Party Disclosures. Only Directors and Executive Management that have the authority and responsibility for planning, directing and controlling the activities of Saferoads, directly or indirectly and are responsible for the entity’s governance are classified as KMP. PERFORMANCE-BASED REMUNERATION There was no performance-based remuneration (bonus incentives) paid or payable to key management personnel for the year. A summary of Company performance for the past five financial years is below. EPS (cents) 2017 0.3 2016 (0.3) 2015 (0.2) 2014 (3.6) 2013 (5.3) Net profit/(loss) ($) 118,847 (116,082) (72,228) (930,978) (1,388,899) Share price ($) $0.11 $0.13 $0.10 $0.13 $0.06 EMPLOYMENT CONTRACTS Executive employment agreements have been entered into with the Chief Executive Officer and the Chief Financial Officer 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 termination 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. 16 REMUNERATION OF DIRECTORS AND KEY MANAGEMENT PERSONNEL 30 June 2017 Short Term Salaries & Fees Fringe Benefits Cash Bonus Termination Payment Super- annuation Total Perform -ance Related Long Term Long Service Leave Share Based Payment Options $ $ $ $ $ $ $ $ % Non Executive Directors D Ashmore D Cleland Executive Director D Hotchkin Executive * P Fearns Total 43,516 61,750 234,000 162,250 501,516 - - - - - - - - - - - - - - - 34,859 - 19,615 28,554 83,028 - - - 2,904 2,904 - - - - - 78,375 61,750 253,615 193,708 587,448 - - - - * 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. 30 June 2016 Short Term Salaries & Fees Fringe Benefits Cash Bonus Termination Payment Super- annuation Total Perform -ance Related Share Based Payment Options Long Term Long Service Leave $ $ $ $ $ $ $ $ % Non Executive Directors D Ashmore D Cleland Executive Director D Hotchkin Executive P Fearns Total 47,283 65,000 340,000 170,250 622,533 - - - - - - - - - - - - - - - 35,217 - - - - - 20,554 55,771 3,162 3,162 - - - - - 82,500 65,000 340,000 193,966 681,466 - - - - 17 DIRECTORS’ REPORT SHAREHOLDINGS OF KEY MANAGEMENT PERSONNEL Shares held in Saferoads Holdings Limited: Balance at 1 July 2016 Acquired through On-Market trade Sold Balance at 30 June 2017 7,479,885 1,256,807 508,610 33,000 42,700 45,000 - - 9,278,302 87,700 - - - - - 7,522,585 1,301,807 508,610 33,000 9,366,002 Directors D Hotchkin D Ashmore D Cleland Executive P Fearns Total 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. 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 12 12 3 - 3 3 - 3 1 - 1 1 - 1 NON-AUDIT SERVICES During the year, Grant Thornton, the Company’s auditors, performed certain other services in addition to their statutory audit duties. The Board has considered the non-audit services provided during the year by the auditor and, in accordance with written advice provided by resolution of the Audit and Risk Committee, is satisfied that the provision of those non-audit services during the year is compatible with, and did not compromise, the auditor independence requirements of the Corporations Act 2001 for the following reasons: - - all non-audit services were subject to the corporate governance procedures adopted by the Company and have been reviewed by the Audit and Risk Committee to ensure they do not impact upon the impartiality and objectivity of the auditor the non-audit services do not undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the Company, acting as an advocate for the Company or jointly sharing risks and rewards. Details of the amounts paid to the auditors of the Company, Grant Thornton, and its related practices for audit and non-audit services provided during the year are set out in Note 21 to the financial statements. 18 ROUNDING OF AMOUNTS Saferoads Holdings Limited is a type of Company that is referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 and therefore the amounts contained in this report and in the financial report have been rounded to the nearest dollar. AUDITORS’ INDEPENDENCE DECLARATION The attached independence declaration has been obtained from the Company’s auditors, Grant Thornton. Signed in accordance with a resolution of Directors David Ashmore Director 28 August 2017 19 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 The Rialto, Level 30 525 Collins St Melbourne Victoria 3000 Correspondence to: GPO Box 4736 Melbourne Victoria 3001 AUDITOR’S INDEPENDENCE DECLARATION TO THE DIRECTORS OF SAFEROADS HOLDINGS LIMITED 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 for the audit of Saferoads Holdings Limited for the year ended 30 June 2017, I declare that, to the In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor best of my knowledge and belief, there have been: 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 2017, I declare that, to the no contraventions of the auditor independence requirements of the Corporations Act 2001 in a best of my knowledge and belief, there have been: relation to the audit; and a b no contraventions of the auditor independence requirements of the Corporations Act 2001 in b no contraventions of any applicable code of professional conduct in relation to the audit. 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 GRANT THORNTON AUDIT PTY LTD Chartered Accountants M A Cunningham M A Cunningham Partner - Audit & Assurance Partner - Audit & Assurance Melbourne, 28 August 2017 Melbourne, 28 August 2017 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 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. ‘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. Liability limited by a scheme approved under Professional Standards Legislation. Liability limited by a scheme approved under Professional Standards Legislation. 20 CORPORATE GOVERNANCE STATEMENT CORPORATE GOVERNANCE STATEMENT The Board of Directors of Saferoads Holdings Limited is responsible for the corporate governance of the the ASX Corporate Governance Principles and Saferoads group. The Board has considered 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 Group’s Corporate Governance Statement for the financial year ending 30 June 2017 is dated as at 30 June 2017 and was approved by the Board on 25 July 2017. The Board advises that it complies with the ASX Corporate Governance Principles set out in the Company’s Corporate Governance Statement which is located on the Company’s website (www.saferoads.com.au/investors/corporate-policies). 21 SAFEROADS HOLDINGS LIMITED Consolidated Statement of Profit or Loss and Other Comprehensive Income FOR THE YEAR ENDED 30 JUNE 2017 Notes CONSOLIDATED 2017 $ 2016 $ Revenue Revenue from product sales and rentals Product royalty income Cost of direct materials and labour Movement in inventories Gross profit Other income Employee benefits Motor vehicle costs Occupancy costs Travel and accommodation costs IT & Communications costs Relocation costs Other expenses Earnings before interest, tax, depreciation and amortisation (EBITDA) Depreciation, amortisation and impairment Earnings before interest and tax (EBIT) Finance costs Profit/(loss) before income tax Income tax benefit/(expense) Net profit/(loss) for the period Net profit/(loss) attributable to members of the parent Other comprehensive income Total comprehensive income for the period Total comprehensive income attributable to members of the parent Earnings per share - Basic for profit/(loss) for the full year - Diluted for profit/(loss) for the full year Dividend paid per share (cents) The accompanying notes form part of these financial statements 4 4 4 4 4 4 4 4 5 6 6 7 16,909,644 26,048 15,904,666 364,084 16,935,692 16,268,750 (11,492,588) 183,232 (10,219,077) (103,247) 5,626,336 5,946,426 101,697 (3,277,238) (133,654) (362,430) (182,765) (159,526) - (812,694) 113,359 (3,230,079) (143,533) (352,703) (308,140) (155,863) (207,037) (1,158,624) 799,726 503,806 (458,894) (450,878) 340,832 52,928 (186,757) (209,988) 154,075 (157,060) (35,228) 40,978 118,847 (116,082) 118,847 (116,082) - - 118,847 (116,082) 118,847 (116,082) Cents 0.33 0.33 Cents (0.32) (0.32) - - 22 SAFEROADS HOLDINGS LIMITED Consolidated Statement of Financial Position AS AT 30 JUNE 2017 ASSETS Current Assets Cash and cash equivalents Trade and other receivables Inventories Prepayments Total Current Assets Non-current Assets Plant and equipment Intangible assets Deferred tax assets Other non-current assets Total Non-current Assets TOTAL ASSETS LIABILITIES Current Liabilities Trade and other payables Unearned income Interest-bearing loans and borrowings Provisions Total Current Liabilities Non-current Liabilities Interest-bearing loans and borrowings Provisions Total Non-current Liabilities TOTAL LIABILITIES NET ASSETS EQUITY Contributed equity Retained earnings TOTAL EQUITY The accompanying notes form part of these financial statements Notes CONSOLIDATED 2017 $ 2016 $ 9 10 11 12 5 13 14 15 14 15 16 16 665,915 2,917,658 2,833,171 83,622 6,500,366 3,505,238 944,499 1,257,312 17,917 5,724,966 808,395 3,462,035 2,649,939 176,297 7,096,666 3,474,070 771,802 1,292,540 17,917 5,556,329 12,225,332 12,652,995 2,567,846 43,151 2,170,434 411,708 5,193,139 203,923 73,748 277,671 5,470,810 6,754,522 2,640,738 5,603 659,333 387,434 3,693,108 2,285,066 39,146 2,324,212 6,017,320 6,635,675 5,353,905 1,400,617 6,754,522 5,353,905 1,281,770 6,635,675 23 SAFEROADS HOLDINGS LIMITED Consolidated Statement of Changes in Equity FOR THE YEAR ENDED 30 JUNE 2017 Contributed Equity $ Retained Earnings $ Total Equity $ CONSOLIDATED At 1 July 2015 Net profit/(loss) for the period Other comprehensive income for the period At 30 June 2016 5,353,905 1,397,852 - (116,082) - - 6,751,757 (116,082) - 5,353,905 1,281,770 6,635,675 At 1 July 2016 Net profit/(loss) for the period Other comprehensive income for the period 5,353,905 1,281,770 6,635,675 - 118,847 118,847 - - - At 30 June 2017 5,353,905 1,400,617 6,754,522 The accompanying notes form part of these financial statements 24 SAFEROADS HOLDINGS LIMITED Consolidated Statement of Cash Flows FOR THE YEAR ENDED 30 JUNE 2017 Notes CONSOLIDATED 2017 $ 2016 $ Cash flows from operating activities Receipts from customers Payments to suppliers and employees Interest received Interest paid Net cash flows from operating activities 8 Cash flows from investing activities Proceeds from sale of plant and equipment Purchase of plant and equipment Product development costs R&D tax rebate received Net cash flows from investing activities Cash flows from financing activities Repayment of borrowings Net cash flows from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period 8 The accompanying notes form part of these financial statements 19,265,263 (18,047,629) 17,969,712 (16,743,096) 1,217,634 3,219 (187,950) 1,032,903 1,226,616 6,911 (211,125) 1,022,402 25,546 (321,046) (447,035) 237,405 (505,130) (670,253) (670,253) (142,480) 808,395 665,915 35,288 (316,088) (263,752) 220,624 (323,928) (610,263) (610,263) 88,211 720,184 808,395 25 SAFEROADS HOLDINGS LIMITED Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 1 CORPORATE INFORMATION Saferoads Holdings Limited is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange (ASX). 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Basis of preparation The financial report is a general purpose financial report which is prepared in accordance with Australian Accounting Standards, Australian Accounting Interpretations of the authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001. The financial report has also been prepared on a historical cost basis. Saferoads Holdings Limited is a for-profit entity for the purposes of preparing the financial statements. (b) Statement of compliance The financial report has been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting the Australian Accounting Standards Board (AASB). Compliance with Standards and other authoritative pronouncements of Australian Accounting Standards results in full compliance with the International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). New and revised standards that are effective for these financial statements A number of new and revised standards were effective for annual reporting periods beginning on or after 1 July 2016. There was no material impact on the Group of these new and revised standards. Accounting standards issued but not yet effective and not been adopted early by the Group Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2017 reporting periods and have not been early adopted by the group. The group’s assessment of the impact of these new standards and interpretations is set out below. AASB 9 Financial Instruments replaces AASB 139 Financial Instruments: Recognition and Measurement and is effective from 1 It introduces new requirements for the classification and measurement of financial assets and liabilities and includes January 2018. impairment model and a substantially-changed approach to hedge accounting. These a forward-looking ‘expected loss’ requirements improve and simplify the approach for classification and measurement of financial assets compared with the requirements of AASB 139. AASB 9 requirements regarding hedge accounting represent a substantial overhaul of hedge accounting that enable entities to better reflect their risk management activities in the financial statements. The entity is yet to undertake a detailed assessment of the impact of AASB 9. However, based on the entity’s preliminary assessment, the Standard is not expected to have a material impact on the transactions and balances recognised in the financial statements when it is first adopted for the year ending 30 June 2019. AASB 15 Revenue from Contracts with Customers replaces AASB 118 Revenue, AASB 111 Construction Contracts and some revenue-related Interpretations and is effective from 1 January 2018. The new standard: - establishes a new revenue recognition model - changes the basis for deciding whether revenue is to be recognised over time or at a point in time - provides new and more detailed guidance on specific topics (e.g. multiple element arrangements, variable pricing, rights of return, warranties and licensing) - expands and improves disclosures about revenue The entity is yet to undertake a detailed assessment of the impact of AASB 15 . However, based on the entity’s preliminary assessment, the Standard is not expected to have a material impact on the transactions and balances recognised in the financial statements when it is first adopted for the year ending 30 June 2019. AASB 16 Leases replaces AASB 117 Leases and some lease-related Interpretations and requires all leases to be accounted for ‘on- balance sheet’ by lessees, other than short-term and low value asset leases. It provides new guidance on the application of the definition of lease and on sale and lease back accounting, largely retains the existing lessor accounting requirements in AASB 117 and requires new and different disclosures about leases. 26 SAFEROADS HOLDINGS LIMITED Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 The entity is yet to undertake a detailed assessment of the impact of AASB 16. However, based on the entity’s preliminary assessment, the likely impact on the first time adoption of the Standard for the year ending 30 June 2020 will be: - a significant increase in lease assets and financial liabilities recognised on the balance sheet - there will be a reduction in the reported equity as the carrying amount of lease assets will reduce more quickly than the carrying amount of lease liabilities - EBIT in the statement of profit or loss and other comprehensive income will be higher as the implicit interest in lease payments for former off balance sheet leases will be presented as part of finance costs rather than being included in operating expenses - operating cash outflows will be lower and financing cash flows will be higher in the statement of cash flows as principal repayments on all lease liabilities will now be included in financing activities rather than operating activities. Interest can also be included within financing activities The financial statements were authorised for issue by the Directors on 28 August 2017. The Directors have the power to amend and reissue the financial statements. (c) Basis of consolidation The consolidated financial statements comprise the financial statements of the legal parent entity, Saferoads Holdings Limited and its subsidiaries ('the Group'). The separate financial statements of the parent entity have not been presented within this financial report as permitted by the Corporations Act 2001. The financial statements of subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. Adjustments are made to bring into line any dissimilar accounting policies that may exist. All intercompany balances and transactions, including unrealised profits arising from intra-group transactions, have been eliminated in full. Subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group. Where there is loss of control of a subsidiary, the consolidated financial statements include the results for the part of the reporting period during which Saferoads Holdings Limited has control. (d) Foreign currency translation 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 and presentation currency. Transactions and balances Foreign currency transactions are translated into functional currency using the exchange rates prevailing at 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. the date of Exchange differences arising on the translation of monetary items are recognised in the statement of profit or loss and other comprehensive income, except where deferred in equity as a qualifying cash flow or net investment hedge. Exchange differences arising on the translation of monetary items are recognised directly in equity to the extent that the gain or loss is directly recognised in equity, otherwise the exchange difference is recognised in the statement of profit or loss and other comprehensive income. Group companies The financial results and position of foreign operations whose functional currency is different from the Group's presentation currency are translated as follows: - assets and liabilities are translated at year end exchange rates prevailing at that reporting date; - income and expenses are translated at average exchange rates for the period; and - retained earnings are translated at the exchange rates prevailing at the date of the transaction. Exchange differences arising on the translation of foreign operations are transferred directly to the Group's foreign currency translation reserve in the statement of financial position. These differences are recognised in the statement of profit or loss and other comprehensive income in the period in which the operation is disposed. 27 SAFEROADS HOLDINGS LIMITED Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 (e) Property, plant and equipment Property, plant and equipment are stated at cost less any accumulated depreciation and any impairment in value. Depreciation is calculated on a diminishing value basis over the estimated useful life, except for rental barrier assets which are depreciated using the prime cost method. Plant and equipment - 5% to 50% (f) Borrowing costs Borrowing costs are recognised as an expense when incurred. (g) Impairment of non-financial assets other than goodwill The Group assesses whether there is any indication that an asset may be impaired when events or changes in circumstances indicate the carrying value may not be recoverable. Where an indicator of impairment exists, the Group makes a formal estimate of recoverable amount. Where the carrying amount of an asset exceeds its recoverable amount the asset is considered impaired and is written down to its recoverable amount. Recoverable amount is the greater of fair value less costs to sell and value in use. It is determined for an individual asset, unless the asset's value in use cannot be estimated to be close to its fair value less costs to sell and it does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which case, the recoverable amount is determined for the cash-generating unit to which the asset belongs. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. (h) Goodwill and intangible assets Goodwill Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of the business combination over the group's interest in the fair value of the acquiree's identifiable assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the group's cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the group are assigned to those units or groups of units. Each unit or group of units to which the goodwill is so allocated : - represents the lowest level within the group at which the goodwill is monitored for internal management purposes, and - is not larger than a segment based on either the group's primary or the group's secondary reporting format determined in accordance with AASB 8 Operating Segments. Impairment is determined by assessing the recoverable amount of the cash-generating unit (group of cash-generating units), to which the goodwill relates. When the recoverable amount of the cash-generating unit (group of cash-generating units) is less than the carrying amount, an impairment loss is recognised. When goodwill forms part of the cash-generating unit (group of cash- generating units) and an operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this manner is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained. Intangibles Intangible assets acquired separately are capitalised at cost and from a business combination are capitalised at fair value as at the date of acquisition. Following initial recognition, the cost model is applied to the class of intangible. The useful lives of these intangible assets are assessed to be either finite or indefinite. Where amortisation is charged on assets with finite lives, this expense is taken to the statement of profit or loss and other comprehensive income through the amortisation line item. Intangible assets, excluding development costs, created within the business are not capitalised and expenditure is charged against profits in the period in which the expenditure is incurred. 28 SAFEROADS HOLDINGS LIMITED Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 Intangible assets are tested for impairment where an indicator of impairment exists, and in the case of indefinite life intangibles annually, either individually or at the cash generating unit level. Useful lives are also examined on an annual basis and adjustments, where applicable, are made on a prospective basis. Research and development costs Research costs are expensed as incurred. Development expenditure incurred on an individual project is carried forward when its future recoverability can reasonably be regarded as assured. Following the initial recognition of the development expenditure, the cost model is applied requiring the asset to be carried at cost less any accumulated amortisation and accumulated impairment losses. Any expenditure carried forward is amortised over the period of expected future sales from the related project. The carrying value of each development project is reviewed for impairment annually when the asset is not yet in use, or more frequently when an indicator of impairment arises during the reporting year indicating that the carrying value may not be recoverable. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statement of profit or loss and other comprehensive income when the asset is derecognised. Any Research and Development tax rebates received or receivable are offset against the respective capitalised development costs to the extent to which they relate to the claim. (i) Inventories Inventories are valued at the lower of cost and net realisable value. Costs incurred in bringing each product to its present location and condition are accounted for as follows: - Raw materials: purchase cost on a first-in, first-out basis; - Finished goods and work-in-progress: cost of direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity but excluding borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. (j) Trade and other receivables Trade receivables, which generally have 30-60 day terms, are recognised and carried at original invoice amount less an allowance for any uncollectable amounts. An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written off when identified. (k) Cash and cash equivalents Cash in the statement of financial position comprises cash at bank and on hand. For the purposes of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts. (l) Assets classified as held for sale Assets are classified as held for sale and measured at the lower of their carrying amount and fair value less costs to sell if their carrying amount will be recovered principally through a sale transaction. They are not depreciated or amortised. For an asset to be classified as held for sale it must be available for immediate sale in its present condition and its sale must be highly probable. 29 SAFEROADS HOLDINGS LIMITED Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 (m) Interest-bearing loans and borrowings loans and borrowings are initially recognised at cost, being the fair value of the consideration received net of issue costs All associated with the borrowing. Interest expense is recognised as it accrues. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. Gains and losses are recognised in the statement of profit or loss and other comprehensive income when the liabilities are derecognised as well as through the amortisation process. (n) Leases Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and benefits of ownership to the lessee. All other leases are classified as operating leases. Assets held under finance leases are initially recognised at fair value, or, if lower, at an amount equal to the present value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income. Finance leased assets are amortised over the estimated useful life of the asset. 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. (o) Provisions Provisions are recognised when the Group has a present obligation (legal and constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the statement of profit or loss and other comprehensive income net of any reimbursement. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre- tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. (p) Contributed equity 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. (q) Revenue Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised. Sale of goods Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer and can be measured reliably. Risks and rewards are considered passed to the buyer at the time of delivery of the goods to the customer, or where the customer has explicitly requested that the goods be held on their behalf. Rental income The Group also earns rental income from operating leases of certain plant and equipment. Rental income is recognised on a straight- line basis over the term of the lease. Product royalties Revenue is recognised when the Group's right to receive the royalty is established. Interest Revenue is recognised as the interest accrues (using the effective interest method, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument) to the net carrying amount of the financial asset. 30 SAFEROADS HOLDINGS LIMITED Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 (r) Income Tax Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to taxation authorities based on the current period's taxable income. The tax rates and tax laws used to compare the amount are those that are enacted by the reporting date. Deferred income tax assets are recognised for all deductible temporary differences, carry-forward or unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and future unused tax assets and unused tax losses can be utilised. The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Deferred income tax assets are measured at the tax rates that are expected to apply to the year when the asset is realised, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. (s) Other taxes Revenues, expenses and assets are recognised net of the amount of GST except: - where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and - receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position. Cash flows are included in the statement of cash flows on a gross basis and the GST component of cash flows arising from the investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. (t) Employee benefits Provision is made for the Group's liability for employee benefits arising from services rendered by employees to reporting date. Employee benefits expected to be settled wholly within one year have been measured at the amounts expected to be paid when the liability is settled plus related on-costs. All other employee benefit liabilities are measured at the present value of the estimated future cash outflows to be made for those benefits. (u) Trade and other payables Trade payables and other payables represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services. (v) Derivative Financial Instruments The group may use derivative financial instruments such as forward currency contracts to hedge risks associated with foreign currency fluctuations. Such derivative financial instruments are initially recognised at fair value at the date on which the derivative contract is entered into and are subsequently remeasured to fair value. Derivatives are carried as assets when the fair value is positive and as liabilities when their fair value is negative. Any gains or losses arising from changes in the fair value of derivatives are taken directly to the statement of profit or loss and other comprehensive income for the year. (w) Critical Accounting Estimates and Judgements The Directors evaluate estimates and judgements incorporated into the financial report based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Group. 31 SAFEROADS HOLDINGS LIMITED Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 Key Judgements (i) Provision for Impairment of Receivables Collectability of Trade Receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable are written off by reducing the carrying amount directly. A provision for impairment is established when there is objective evidence that the company will not be able to collect all amounts due according to the original terms of the receivables. (x) Going Concern The consolidated entity generated an operating profit after tax of $118,847 for the financial year ended 30 June 2017. The Company reduced core debt by $504,000 in the financial year and was in compliance with the repayment plan with its financier, In addition, the Company also met its single financial covenant for the financial year ended 30 Commonwealth Bank of Australia. June 2017. The Company has met all its obligations under the present facility agreement. At the date of this report, the Company has entered into a revised facility agreement with its financier, offering an extended term of three years and significantly more favourable terms and conditions on the back of the improved operational performance and financial position of the Company. The Company's ongoing financial turnaround in 2017 resulted from continuing to manage the performance of the business, including maintaining margins and operating cash flows and controlling overheads. The Company should continue to secure further profitable sales contracts for its emerging products in existing and new markets and continue to meet the minimum debt repayment plan set by the financier. At the date of this report and having considered the above factors, the continuance of its banking relationship and the fact the Company continues to improve its operating earnings base, the directors are confident that the consolidated entity is able to continue as a going concern. Accordingly, the accounts have been prepared on this basis. 3 SEGMENT INFORMATION The Group's chief operating decision maker (Chief Executive Officer) reviews financial makes strategic decisions based on this consolidated information. information on a consolidated basis and The Group operates predominantly in Australia. During 2017, $3,589,484 or 21% (2016: $3,531,985 or 22%) of the Group’s revenues depended on a single customer. 32 SAFEROADS HOLDINGS LIMITED Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 4 REVENUES AND EXPENSES (a) Specific Items Profit/(loss) before income tax expense includes the following revenues and expenses whose disclosure is relevant in explaining the performance of the entity: (i) Revenue Revenue from product sales and rentals Product royalty income (ii) Other income R&D tax rebate Net gain/(loss) on sale of assets Interest Government grant Other (iii) Expenses Depreciation and amortisation - Plant & equipment - Intangible assets Impairment of plant & equipment Relocation costs Bad debts written off Provision for doubtful debts / (provision writeback) Motor vehicle costs Occupancy costs CONSOLIDATED 2016 $ 2017 $ 16,909,644 26,048 15,904,666 364,084 16,935,692 16,268,750 58,861 (9,030) 3,219 18,355 30,292 101,697 121,863 (21,976) 6,911 - 6,561 113,359 17,037,389 16,382,109 355,513 103,381 - 458,894 - - 30,000 312,149 86,159 52,570 450,878 207,037 92 (3,835) 133,654 143,533 362,430 352,703 Travel and accommodation costs 182,765 308,140 IT & Communications costs 159,526 155,863 33 SAFEROADS HOLDINGS LIMITED Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 5 INCOME TAX Major components of income tax expense for the year ended 30 June 2017 are: CONSOLIDATED 2016 $ 2017 $ Statement of Profit or Loss and Other Comprehensive income Current income tax charge Income tax expense/(benefit) reported in statement of profit or loss and other comprehensive income 35,228 (40,978) 35,228 (40,978) A reconciliation of income tax expense applicable to accounting profit/(loss) before income tax at the statutory income tax rate to income tax expense at the Group's effective income tax rate is as follows: Accounting profit/(loss) before income tax 154,075 (157,060) At the statutory income tax rate of 30% Non-deductible expenses Effect of change in income tax rates on deferred tax assets Recognition of prior year unbooked tax losses 46,223 2,979 107,711 (121,685) (47,118) 6,140 - - 35,228 (40,978) Statement of Financial Position 2017 $ 2016 $ Statement of Profit or Loss and Other Comprehensive Income 2017 $ 2016 $ Deferred income tax Deferred income tax at 30 June relates to the following: CONSOLIDATED Deferred income tax asset/(liability) Employee entitlements Research & Development Costs Other Effect of change in income tax rates on deferred tax assets Deferred tax assets relating to temporary differences not brought to account Carry forward tax losses brought to account Gross deferred income tax (liability)/asset Deferred income tax charge 133,149 (245,855) 45,722 107,711 122,291 (210,525) 5,683 - (10,858) 35,330 (40,039) (107,711) (33,300) 8,769 159,768 - (40,727) 82,551 1,257,312 1,292,540 1,257,312 1,292,540 1,593 121,685 (135,237) - - - As as 30 June 2017, the consolidated entity has carry forward tax losses with a tax effect of $2,108,296, measured at the new corporate tax rate of 27.5%. Carry forward tax losses with a tax effect of $1,257,312 have been brought to account as a deferred tax asset. Carry forward tax losses with a tax effect of $850,984 have not been brought to account. The consolidated entity has realised capital losses with a gross amount of $1,832,149 that is available for offset against any future taxable capital gains. 34 SAFEROADS HOLDINGS LIMITED Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 6 EARNINGS PER SHARE Basic earnings per share amounts are calculated by dividing net profit/(loss) for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share amounts are calculated by dividing the net profit/(loss) attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year (adjusted for the effects of dilutive options). The following reflects the income and share data used in the total operation's basic and diluted earnings per share computations: CONSOLIDATED 2016 $ 2017 $ Net profit/(loss) attributable to equity holders from continuing operations Net profit/(loss) attributable to equity holders of the parent 118,847 118,847 (116,082) (116,082) Net profit/(loss) attributable to ordinary shareholders for diluted earnings per share 118,847 (116,082) Weighted average number of ordinary shares for basic earnings Adjusted weighted average number of ordinary shares for diluted earnings per share 36,400,000 36,400,000 36,400,000 36,400,000 - Basic for profit/(loss) for the full year - Diluted for profit/(loss) for the full year Cents 0.33 0.33 Cents (0.32) (0.32) For the purpose of calculating earnings and dividends per share, it is the ordinary shares of the legal parent that is used, being the proportionate weighting of the 36,400,000 shares on issue. 7 DIVIDENDS PAID AND PROPOSED Equity dividends on ordinary shares: Interim franked dividend for 2017: 0.0 cents (2016: 0.0 cents) Dividends proposed and not recognised as a liability: Final franked dividend for 2017: 0.0 cents (2016: 0.0 cents) CONSOLIDATED 2016 $ 2017 $ - - - - Franking Credit Balance: The amount of franking credits available for future reporting periods after the payment of income tax payable and the impact of dividends proposed. 5,391,050 5,391,050 35 SAFEROADS HOLDINGS LIMITED Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 8 NOTES TO THE STATEMENT OF CASH FLOWS Reconciliation of cash For the purposes of the statement of cash flows, cash and cash equivalents comprise the following at 30 June: Cash at bank and on hand 665,915 808,395 CONSOLIDATED 2016 $ 2017 $ Reconciliation from the net profit/(loss) after tax to the net cash flows from operations Profit/(loss) after tax for the year Adjustments for: Depreciation and amortisation Impairment of plant and equipment Net (profit)/loss on disposal of plant and equipment Changes in assets and liabilities (Increase)/decrease in trade and other receivables (Increase)/decrease in inventories (Increase)/decrease in other assets Decrease/(increase) in deferred tax asset (Decrease)/increase in trade and other payables (Decrease)/increase in unearned income (Decrease)/increase in provisions Net cash from operating activities 118,847 (116,082) 458,894 - 9,030 398,308 52,570 21,976 544,377 (183,232) 92,675 35,228 (139,340) 37,548 58,876 97,724 103,247 2,938 (40,978) 386,314 (13,559) 129,944 1,032,903 1,022,402 Non-cash financing and investing activities During the year, the Group acquired property, plant and equipment with an aggregate value of $120,211 (2016: $448,040) by means of finance leases. 9 TRADE AND OTHER RECEIVABLES (CURRENT) Trade receivables Other receivables Provision for impairment Ageing of trade receivables not impaired 1 - 30 days 31 - 60 days 61 - 90 days 91 days and over 236,467 (30,000) 2,711,191 3,191,402 270,633 - 2,917,658 3,462,035 1,964,361 1,886,760 716,830 1,154,916 147,226 2,500 2,681,191 3,191,402 - - Trade receivables are non-interest bearing. Amounts over 60 days are deemed overdue. Movement in provision for impairment Balance at the beginning of financial year Amounts written off Additional impairment provision recognised/(released) 10 INVENTORIES Stock on hand 36 - - 30,000 30,000 3,835 - (3,835) - CONSOLIDATED 2016 $ 2017 $ 2,833,171 2,649,939 SAFEROADS HOLDINGS LIMITED Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 11 PLANT AND EQUIPMENT Plant & equipment at cost Less accumulated depreciation Total plant & equipment CONSOLIDATED 2016 $ 2017 $ 6,143,851 5,860,065 (2,638,613) (2,385,995) 3,505,238 3,474,070 Movements in Carrying Amounts Movement in the carrying amounts of plant and equipment between the beginning and the end of the financial year. Plant & equipment Balance at beginning of year Additions Depreciation expense Impairment Disposals Carrying amount at 30 June 12 INTANGIBLE ASSETS Licence agreements at cost Less accumulated amortisation Product development costs Less accumulated amortisation Patents and product approvals Movement in carrying amounts Balance at 1 July 2015 Capitalisation of costs R&D tax rebate allocation Amortisation expense Carrying amount at 30 June 2016 Balance at 1 July 2016 Capitalisation of costs R&D tax rebate allocation Amortisation expense Carrying amount at 30 June 2017 CONSOLIDATED 2016 $ 2017 $ 441,257 (355,513) 3,474,070 3,131,925 850,129 (312,149) (52,570) (143,265) 3,505,238 3,474,070 (54,576) - CONSOLIDATED 2016 $ 2017 $ - - - 73,677 (73,677) - 1,210,594 (391,077) 819,517 124,982 944,499 Licence Agreement $ 8,855 - - (8,855) - - - - - - 989,446 (287,695) 701,751 70,051 771,802 Patents/ Product approvals $ - 70,051 - - 70,051 70,051 54,931 - - 124,982 Product Devt Costs $ Total $ 672,519 193,701 (87,165) (77,304) 701,751 701,751 392,104 (170,957) (103,381) 819,517 681,374 263,752 (87,165) (86,159) 771,802 771,802 447,035 (170,957) (103,381) 944,499 Patents/product approvals predominantly relate to various applications for new products that have yet to be commercialised and so have not been amortised as they have indefinite future benefit to the Group. Once the related asset is in use, then the relevant patent/product approval will be amortised over its expected useful life. 37 SAFEROADS HOLDINGS LIMITED Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 13 TRADE AND OTHER PAYABLES (CURRENT) Trade payables Accrued expenses GST payable CONSOLIDATED 2016 $ 2017 $ 182,585 70,493 2,314,768 2,337,295 266,902 36,541 2,567,846 2,640,738 Payables are non-interest bearing and are normally settled between 30 and 60-day terms. 14 INTEREST-BEARING LOANS AND BORROWINGS Current Hire purchase Bank loans Non-current Hire purchase Bank loans CONSOLIDATED 2016 $ 2017 $ 178,434 1,992,000 2,170,434 155,333 504,000 659,333 203,923 293,066 1,992,000 203,923 2,285,066 - The Group was in compliance with its reporting covenants at 30 June 2017 and is subject to a scheduled debt repayment plan. The current facility expires within 12 months therefore, in accordance with Australian Accounting Standard AASB 101, the Company's term loan has been classified as current as at balance date. Since the end of the financial year the Company has entered into a revised facility agreement with its financier, Commonwealth Bank of Australia, offering an extended term of three years and significantly more favourable terms and conditions on the back of the improved operational performance and financial position of the Company. Hire purchase liabilities are secured by a charge over the financial assets. the following financing facilities had been reporting date, Financing facilities available At negotiated and were available: Total facilities: - bank bills - bank charge card Facilities used at reporting date - bank bills - bank charge card Facilities unused at reporting date - bank charge card CONSOLIDATED 2016 $ 2017 $ 1,992,000 2,496,000 75,000 75,000 1,992,000 2,496,000 72,000 65,500 9,500 3,000 The bank facilities are secured by a registered charge over the whole of its assets and undertakings, and also a registered charge over the assets and undertakings of Saferoads Holdings Ltd. Saferoads Pty Ltd is required to provide the Commonwealth Bank with half yearly financial statements. 15 PROVISIONS Current Employee benefits Non-Current Employee benefits Deferred rent liability 38 CONSOLIDATED 2016 $ 2017 $ 411,708 387,434 32,123 41,625 73,748 20,203 18,943 39,146 SAFEROADS HOLDINGS LIMITED Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 16 EQUITY Contributed Equity Ordinary shares Balance at beginning of period Issued and fully paid Movements in ordinary shares on issue (legal parent) Balance at beginning of the period At 30 June CONSOLIDATED 2016 $ 2017 $ 5,353,905 5,353,905 5,353,905 5,353,905 No. of shares 36,400,000 36,400,000 36,400,000 36,400,000 Ordinary shares carry one vote per share, either in person or by proxy, at a meeting of the Company, and carry the rights to dividends and the proceeds on winding up of the parent entity in proportion to the number of shares held. There is no current on-market buy-back of ordinary shares. Retained Earnings Movements in retained earnings are as follows: Balance at beginning of period Net profit/(loss) for the year Balance at 30 June 17 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES CONSOLIDATED 2016 $ 2017 $ 1,281,770 118,847 1,400,617 1,397,852 (116,082) 1,281,770 The Group's principal financial instruments comprise commercial bills, hire purchase contracts, cash and short-term deposits. The main purpose of these financial instruments is to raise finance for the Group's operations. The totals for each category of financial instruments are as follows: Financial Assets - Cash and cash equivalents - Loans and receivables Total Financial Assets Financial Liabilities - Financial liabilities at amortised cost Total Financial Liabilities CONSOLIDATED 2016 $ 2017 $ 665,915 2,917,658 808,395 3,462,035 3,583,573 4,270,430 4,942,203 5,585,137 4,942,203 5,585,137 The Group has various financial instruments such as trade debtors and trade creditors, which arise directly from its operations. It is, and has been throughout the period under review, the Group's policy that no trading in financial derivatives shall be undertaken. The main risks arising from the Group's financial instruments are interest rate risk, liquidity risk, foreign currency risk and credit risk. The Board reviews and agrees policies for managing each of these risks and they are summarised below. The Group also monitors the market price risk arising from all financial instruments. 39 SAFEROADS HOLDINGS LIMITED Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 (a) Interest rate risk The Group's exposure to market risk for changes in interest rates relates primarily to the Group's long-term debt obligations. The company's exposure to interest rate risk, which is the risk that the Financial Instrument's value will fluctuate as a result of changes in market interest rates and the effective weighted average interest rates on classes of financial assets and financial liabilities, is as follows: Weighted Average Interest Rate Non Interest Bearing Fixed Interest Rate Maturing Variable Interest Rate Within 1 year 1 to 5 years Total 2017 Financial Assets - Cash - Receivables % 1.35% N/A - 2,917,658 665,915 - $ $ $ $ $ - - - - - - 665,915 2,917,658 3,583,573 Total Financial Assets 2,917,658 665,915 Financial Liabilities - Payables - Bank borrowings - Hire purchase Total Financial Liabilities 2016 Financial Assets - Cash - Receivables Total Financial Assets Financial Liabilities - Payables - Bank borrowings - Hire purchase N/A 6.15% 7.25% % 1.36% N/A N/A 6.52% 7.42% 2,567,846 - - - 1,992,000 - - - 178,434 - - 203,923 2,567,846 1,992,000 382,357 2,567,846 1,992,000 178,434 203,923 4,942,203 $ $ $ $ $ - 3,462,035 808,395 - 3,462,035 808,395 - - - - - - 808,395 3,462,035 4,270,430 2,640,738 - - - 2,496,000 - - - 155,333 - - 293,066 2,640,738 2,496,000 448,399 Total Financial Liabilities 2,640,738 2,496,000 155,333 293,066 5,585,137 (b) Credit risk The Group trades only with recognised, credit worthy third parties. It is the Group's policy that all customers who wish to trade on credit terms are subject to credit verification procedures and pre- agreed credit limits. In addition, receivable balances are monitored on an ongoing basis with the result that the Group's exposure to bad debts is not significant. The maximum exposure to credit risk, excluding the value of any collateral or other security, at reporting date recognised as financial assets is the carrying amount, net of any provisions for doubtful debts which is $30,000 at 30 June 2017 (2016: nil), as disclosed in the statement of financial position and notes to the financial statements. The company holds no collateral or security in relation to financial assets. As at reporting date, the amount of financial assets past due, but not impaired, is $27,609 (2016: $149,726). The Group does not have any material credit risk to any single debtor or group of debtors under financial instruments entered into by the company. 40 SAFEROADS HOLDINGS LIMITED Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 (c) Liquidity risk The Group's objective is to maintain a balance between continuity of funding and flexibility through the use of current working capital, bank loans, and hire purchase contracts. Maturity analysis of financial liabilities: 2017 - Payables - Bank borrowings - Hire purchase Total Financial Liabilities 2016 - Payables - Bank borrowings - Hire purchase Total Financial Liabilities Within 1 Year 1 to 5 Years Over 5 Years $ $ $ 2,567,846 1,992,000 178,434 - - 203,923 4,738,280 203,923 Within 1 Year 1 to 5 Years Over 5 Years $ $ $ 2,640,738 504,000 155,333 - 1,992,000 293,066 3,300,071 2,285,066 Total $ 2,567,846 1,992,000 382,357 4,942,203 Total $ 2,640,738 2,496,000 448,399 5,585,137 - - - - - - - - (d) (e) (f) Fair Values The carrying amount of financial assets and liabilities recorded in the financial statements represents their respective fair values, determined in accordance with the accounting policies disclosed in Note 2 to the financial statements. Foreign Exchange Risk instrument fluctuating due to Exposure to foreign exchange risk may result in the fair value or future cash flows of a financial movement in foreign exchange rates of currencies in which the Group holds financial instruments which are other than the AUD functional currency of the Group. At reporting date, the Group did not hold any financial functional currency (AUD). instruments denominated in foreign currencies other than the Group's Sensitivity Analysis The following table illustrates sensitivities to the Group's exposures to changes in interest rates on borrowings and exchange rates on purchases. The table indicates the impact on how profit and equity values reported at reporting date 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. The following sensitivities are based on market experience over the last 12 months. Year Ended 30 June 2017 +/-2% in interest rates +/-5c in AUD / USD CONSOLIDATED Profit/(loss) $ Equity $ +/-40,000 +/-160,000 +/-40,000 +/-160,000 Year Ended 30 June 2016 $ $ +/-2% in interest rates +/-5c in AUD / USD +/-50,000 +/-155,000 +/-50,000 +/-155,000 41 SAFEROADS HOLDINGS LIMITED Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 18 COMMITMENTS AND CONTINGENCIES Operating Leases - properties Non-cancellable operating leases: - less than one year - later than one year but less than five years - later than five years Operating Leases - equipment Non-cancellable operating leases: - less than one year - later than one year but less than five years Total operating lease commitments Hire Purchases Hire purchase commitments payable: - less than one year - later than one year but less than five years Less future finance charges Total hire purchase liability Reconciled to: Current liability Non-current liability CONSOLIDATED 2016 $ 2017 $ 263,207 242,447 936,505 1,177,510 909,305 891,476 2,070,428 2,350,022 4,596 12,639 11,518 17,235 17,235 28,753 2,087,663 2,378,776 201,148 216,892 418,040 (35,683) 382,357 178,434 203,923 382,357 185,799 320,867 506,666 (58,267) 448,399 155,333 293,066 448,399 The Group leases its head office and warehouse facility and other interstate office sites under non-cancellable operating leases with terms ranging from 1 to 10 years. The Group leases various warehouse and office equipment under non-cancellable operating leases with terms ranging from 4 to 5 years. There are no material make good obligations with operating leases. Hire purchase commitments relate to warehouse fitout, production and rental equipment, IT software and company motor vehicles. There are no other commitments or contingent liabilities of the Group. 19 SUBSIDIARIES The consolidated financial statements include the financial statements of Saferoads Holdings Limited and the subsidiaries listed in the following table. Name Country of incorporation % equity interest 2017 2016 Saferoads Pty Ltd Australia 100% 100% 20 RELATED PARTIES Transactions with Key Management Personnel During the financial year the Company acquired certain consumable manufacturing materials from an entity related to Mr D. Hotchkin at normal commercial rates aggregating $76,939 (2016: $24,410), with $15,887 included in Trade payables at 30 June 2017 (2016: $2,628). Mr D. Hotchkin procured certain Public lighting products at normal commercial rates totalling $7,162 during the year. 42 SAFEROADS HOLDINGS LIMITED Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2017 21 AUDITORS' REMUNERATION Amounts received or due and receivable by: - Current auditors: Grant Thornton, for the audit of the financial report Other services (R&D tax rebate): Grant Thornton Other services (government grant): Grant Thornton 22 KEY MANAGEMENT PERSONNEL DISCLOSURES (a) Details of Management Personnel (i) Directors David Ashmore Darren Hotchkin David Cleland (ii) Executives Peter Fearns Non-Executive Chairman Chief Executive Officer Non-Executive Chief Financial Officer 2017 $ 2016 $ 70,000 78,500 15,000 1,800 18,000 - (b) Compensation of Key Management Personnel Details of the nature and amount of each element of the remuneration of Key Management Personnel ("KMP") are disclosed in the Remuneration Report section of the Directors' Report. Compensation of Key Management Personnel by category: - Short-term employee benefits - Post-employment benefits - Long-term employee benefits 23 PARENT ENTITY DISCLOSURES 2017 $ 2016 $ 501,516 83,028 2,904 587,448 622,533 55,771 3,162 681,466 2017 $ 2016 $ Current assets Total assets Current liabilities Total liabilities Net assets Issued capital Retained earnings - - 5,359,929 5,359,929 - - 5,359,929 5,359,929 5,353,905 5,353,905 6,024 6,024 - - Profit/(loss) of the parent entity Total comprehensive income of the parent entity Guarantees entered into by the parent entity in relation to debts of its subsidiaries - - - (21) (21) - 24 SUBSEQUENT EVENTS Extension and Revision of Banking Facilities Since the end of the financial year the Company has entered into a revised facility agreement with its financier, Commonwealth Bank of Australia, offering an extended term of three years and significantly more favourable terms and conditions on the back of the improved operational performance and financial position of the Company. 43 DIRECTORS’ DECLARATION DIRECTORS’ DECLARATION DIRECTORS’ DECLARATION DIRECTORS’ DECLARATION In the opinion of the Directors of Saferoads Holdings Limited and its controlled entities: In the opinion of the Directors of Saferoads Holdings Limited and its controlled entities: (a) (a) (a) In the opinion of the Directors of Saferoads Holdings Limited and its controlled entities: the financial statements and notes of the consolidated entity and the remuneration disclosures that are contained in the Remuneration Report that forms part of the Directors’ Report are in accordance the financial statements and notes of the consolidated entity and the remuneration disclosures that with the Corporations Act 2001 (Cth), including: are contained in the Remuneration Report that forms part of the Directors’ Report are in accordance the financial statements and notes of the consolidated entity and the remuneration disclosures that with the Corporations Act 2001 (Cth), including: giving a true and fair view of the consolidated entity’s financial position as at 30 June 2017 are contained in the Remuneration Report that forms part of the Directors’ Report are in accordance and of its performance for the year ended that date; and giving a true and fair view of the consolidated entity’s financial position as at 30 June 2017 with the Corporations Act 2001 (Cth), including: and of its performance for the year ended that date; and complying with Accounting Standards and Corporations Regulations 2001. giving a true and fair view of the consolidated entity’s financial position as at 30 June 2017 complying with Accounting Standards and Corporations Regulations 2001. and of its performance for the year ended that date; and (b) There are reasonable grounds to believe that the Company will be able to pay its debts as and when (b) There are reasonable grounds to believe that the Company will be able to pay its debts as and when complying with Accounting Standards and Corporations Regulations 2001. ii) i) ii) i) i) ii) they become due and payable; they become due and payable; (c) The financial statements have been prepared in accordance with International Financial Reporting (b) There are reasonable grounds to believe that the Company will be able to pay its debts as and when (c) The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as reported in Note 2. they become due and payable; Standards (IFRS) as reported in Note 2. Standards (IFRS) as reported in Note 2. This declaration has been made after receiving the declarations required to be made to the Directors by the (c) The financial statements have been prepared in accordance with International Financial Reporting Chief Executive Officer and the Chief Financial Officer in accordance with section 295A of the Corporations This declaration has been made after receiving the declarations required to be made to the Directors by the Act 2001 (Cth). Chief Executive Officer and the Chief Financial Officer in accordance with section 295A of the Corporations This declaration has been made after receiving the declarations required to be made to the Directors by the Act 2001 (Cth). Signed in accordance with a resolution of the Directors. Chief Executive Officer and the Chief Financial Officer in accordance with section 295A of the Corporations Signed in accordance with a resolution of the Directors. Act 2001 (Cth). On behalf of the Board. On behalf of the Board. Signed in accordance with a resolution of the Directors. On behalf of the Board. David Ashmore David Ashmore Director Director David Ashmore 28 August 2017 28 August 2017 Director 28 August 2017 44 INDEPENDENT AUDITOR’S REPORT 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 The Rialto, Level 30 525 Collins St Melbourne Victoria 3000 Correspondence to: GPO Box 4736 Melbourne Victoria 3001 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF SAFEROADS HOLDINGS LIMITED T +61 3 8320 2222 F +61 3 8320 2200 E info.vic@au.gt.com W www.grantthornton.com.au Report on the audit of the financial report INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF SAFEROADS HOLDINGS LIMITED Report on the audit of the financial report Opinion We have audited the financial report of Saferoads Holdings Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30 June 2017, the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies, and the directors’ declaration. Opinion We have audited the financial report of Saferoads Holdings Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30 June 2017, the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant In our opinion, the accompanying financial report of the Group, is in accordance with the accounting policies, and the directors’ declaration. Corporations Act 2001, including: In our opinion, the accompanying financial report of the Group, is in accordance with the Corporations Act 2001, including: a Giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its performance for the year ended on that date; and a Giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its performance for the year ended on that date; and b Complying with Australian Accounting Standards and the Corporations Regulations 2001. b 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 independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. 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 independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Grant Thornton Audit Pty Ltd ACN 130 913 594 Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389 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. ‘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. Liability limited by a scheme approved under Professional Standards Legislation. Liability limited by a scheme approved under Professional Standards Legislation. 45 INDEPENDENT AUDITOR’S REPORT 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. The Rialto, Level 30 525 Collins St Melbourne Victoria 3000 Key audit matter Intangible Assets Note 12 The Group has material intangible assets which consist of development costs for their various innovative products. AASB 138 Intangible Assets sets our specific criteria to be met in order to capitalise development costs. INDEPENDENT AUDITOR’S REPORT AASB 136 Impairment of Assets requires that an TO THE MEMBERS OF SAFEROADS HOLDINGS LIMITED entity shall assess at the end of each reporting period whether there is any indication that an asset may be impaired. If any indication exists, the entity shall Report on the audit of the financial report estimate the recoverable amount of the asset. This area is a key audit matter due to the inherent subjectivity that is involved in the Company making judgements in relation to the capitalisation of their development costs, as well as the evaluation for any impairment indicators. Opinion We have audited the financial report of Saferoads Holdings Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30 June 2017, the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies, and the directors’ declaration. – – In our opinion, the accompanying financial report of the Group, is in accordance with the Corporations Act 2001, including: a Giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its performance for the year ended on that date; and How our audit addressed the key audit matter Correspondence to: GPO Box 4736 Melbourne Victoria 3001 Our procedures included, amongst others: T +61 3 8320 2222 F +61 3 8320 2200 E info.vic@au.gt.com • Enquiring with management to obtain and W www.grantthornton.com.au document an understanding of management’s process and controls related to the capitalisation of development costs and assessment of impairment; • Testing significant additions that have been capitalised in the period and assessing compliance with the recognition requirements under AASB 138; • Reviewing management’s value in use calculations for each product to critically assess inputs and assumptions applied, including: – Challenging the associated underlying forecast cash flows and comparing key assumptions to historical results and business trends; Evaluating appropriateness of the discount rate applied; and Performing sensitivity analysis on the significant inputs and assumptions and comparing to the carrying amount of the product development costs; • Identifying any discontinued products through discussions with management and review of sales results; and • Assessing the adequacy of related disclosures within the financial report. b Complying with Australian Accounting Standards and the Corporations Regulations 2001. Information Other than the Financial Report and Auditor’s Report Thereon The Directors are responsible for the other information. The other information comprises the information included in the Group’s annual report for the year ended 30 June 2017, but does not include the financial report and our auditor’s report thereon. 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 independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. 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. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. 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. 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. 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. Liability limited by a scheme approved under Professional Standards Legislation. 46 In preparing the financial report, the Directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. The Rialto, Level 30 525 Collins St Melbourne Victoria 3000 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. T +61 3 8320 2222 F +61 3 8320 2200 E info.vic@au.gt.com W www.grantthornton.com.au INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF SAFEROADS HOLDINGS LIMITED Correspondence to: GPO Box 4736 Melbourne Victoria 3001 Report on the audit of the financial report A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our auditor’s report. Opinion We have audited the financial report of Saferoads Holdings Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30 June 2017, the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies, and the directors’ declaration. 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 2017. In our opinion, the accompanying financial report of the Group, is in accordance with the Corporations Act 2001, including: In our opinion, the Remuneration Report of Saferoads Holdings Limited, for the year ended 30 June 2017, complies with section 300A of the Corporations Act 2001. a Giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its performance for the year ended on that date; and b Complying with Australian Accounting Standards and the Corporations Regulations 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. 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 independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. GRANT THORNTON AUDIT PTY LTD Chartered Accountants 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. M A Cunningham Liability limited by a scheme approved under Professional Standards Legislation. Partner - Audit & Assurance Melbourne, 28 August 2017 47 ASX ADDITIONAL INFORMATION The shareholder information set out below was applicable as at 31 August 2017. At this date the Company had on issue 36,400,000 ordinary shares in the company held by 575 shareholders. SUBSTANTIAL SHAREHOLDERS porations Act. Holder name any in accordance with section 671B of the Cor- No. of ordinary shares in which interest is held 7,522,585 4,555,897 2,609,429 2,277,428 1,904,409 No. of shares % Held 7,479,885 3,208,163 2,609,429 2,277,428 1,804,409 1,301,807 1,125,650 844,522 800,000 625,848 508,610 503,212 490,000 470,000 434,000 368,936 279,925 271,464 250,009 222,900 25,876,197 20.55 8.81 7.17 6.26 4.96 3.58 3.09 2.32 2.20 1.72 1.40 1.38 1.35 1.29 1.19 1.01 0.77 0.75 0.69 0.61 71.09 % 0.16 1.49 2.00 14.36 81.98 100.00 MR DARREN JOHN HOTCHKIN & MRS JENNIFER ANN HOTCHKIN RUMINATOR PTY LTD and related entities MR STEVEN DI FABRIZIO MR DUNCAN FRANCIS SMITH MR NOEL THOMPSON T W EN T Y L A RG E S T SH A RE H O LD E R S Name MR DARREN JOHN HOTCHKIN & MRS JENNIFER ANN HOTCHKIN RUMINATOR PTY LTD CAON PTY LTD MR DUNCAN FRANCIS SMITH NLKM PTY LTD MR DAVID ALBERT McCLURE ASHMORE & MRS NOLA JOY ASHMORE MR GLENN SCOTT WADSWORTH & MR RICKI MARK WADSWORTH CONTEMPLATOR PTY LTD MR PHILIP BOMFORD CARRIER INTERNATIONAL PTY LTD LIVINGSTONE SERVICES PTY LTD STITCHING PTY LTD KOONUNG NOMINEES PTY LTD WAVET FUND NO. 2 PTY LTD MR ROSS GEORGE YANNIS MR EDWARD JAMES DALLY & MRS SELINA DALLY ROADWORX GROUP PTY LTD MR BRUCE ALLAN HEAD & MRS BETH ALISON HEAD C J CORNWELL & SON PTY LTD MRS JANET GRIFFITHS D I S TR I B UT I ON O F SH A RE H O LD 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 120 176 88 153 46 575 Total Units 59,897 544,124 728,819 5,227,425 29,839,735 36,400,000 The number of shareholders’ holdings less than a marketable parcel is 226. V O T IN G R I GH T S All ordinary shares carry one vote per share. N U M BE R O F OR DI N AR Y S H A RE S SU B JE C T T O E SC RO W Nil. 48 CORPORATE DIRECTORY Directors David Ashmore (Chairman) Darren Hotchkin (Chief Executive Officer) David Cleland Company Secretary Peter Fearns Registered Office 22 Commercial Drive PO Box 2030 Pakenham VIC 3810 Telephone: Within Australia: International: Facsimile: Email: Website: 1800 060 672 +61 3 5945 6600 03 5940 9420 sales@saferoads.com.au www.saferoads.com.au Share Registry Automic Registry Services Suite 310, Level 3 50 Holt Street Surry Hills NSW 2010 PO Box 2226 Strawberry Hills NSW 2012 Bankers Commonwealth Bank of Australia Warragul VIC 3820 Auditors Grant Thornton The Rialto, Level 30 525 Collins Street Melbourne VIC 3000 ASX Code SRH Telephone Within Australia: 1300 288 664 International: Facsimile: Email: Website: 02 8583 3040 info@automic.com.au www.automic.com.au +61 2 9698 5414 ISO CERTIFICATIONS: PROFESSIONAL AFFILIATIONS: 49 NOTES 50 NOTES 51 

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