Saferoads Holdings Limited
Annual Report 2018

Plain-text annual report

ANNUAL REPORT 2018 S A F E R O A D S H O L D I N G S L I M I T E D ABN 81 116 668 538 HV2TM Barrier successful TL-4 crash test - January 2018 IMPROVING PUBLIC SAFETY 2 CONTENTS Chairman’s Overview .............................................................................................................................................. 4 Chief Executive Officer’s Review of Operations and Activities ................................................................................ 6 The Year in Review.................................................................................................................................................... 8 Directors’ Report ...................................................................................................................................................... 12 Auditor’s Independence Declaration ....................................................................................................................... 19 Corporate Governance Statement........................................................................................................................... 20 Financial Statements ............................................................................................................................................... 21 Notes to the Financial Statements........................................................................................................................... 25 Directors’ Declaration .............................................................................................................................................. 43 Independent Auditor’s Report .................................................................................................................................. 44 ASX Additional Information ...................................................................................................................................... 47 Corporate Directory ................................................................................................................................................. 48 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 C I A L O V E R V I E W On behalf of the Board, I am pleased to report a profit after tax for the financial year of $710k that is an excellent result reflecting solid organic sales growth and good cost management. This profit is however only a solid start towards a much larger goal but it does reflect our ongoing sustainable transformation 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 was up $2.2 million, or 13% to $19.2 million. There was an improvement in gross margins, which is pleasing given the highly competitive nature of the markets we operate in. Our continued focus on supply side cost reductions and product quality control has certainly enhanced our ability to organically generate sales. Of particular importance has been the interest in our products from national industrial hire companies that underscores the quality and regulatory acceptance of our barriers and our solar light products. Further scheduled bank debt reduction of $134k for the year saw it reduce to $1.86 million and with the full year effect of our revised facility rates, our finance costs reduced further. We have used hire purchase finance as necessary for our rental fleet expansion and replacement motor vehicles. Our overall net debt to equity gearing has reduced further from 20.2% to 15.6%. We again generated strong operating cash flows during the year, allowing us to maintain adequate cash reserves to support the working capital needs of the business and provide the basic funding for our significant product innovation projects. The table below summarizes the key metrics of the transformation over the past three financial years: Revenue EBITDA Profit/(loss) after tax Operating cash flows Gearing (net debt / net debt + equity) Year ending 30 June 2017 $'000 2016 $'000 2018 $'000 16,269 16,936 19,193 504 (116) 1,227 24.4% 800 119 1,218 20.2% 1,371 710 1,470 15.6% 4 S T R A T E G I C O P P O R T U N I T I E S During 2018, we have achieved good underlying profitability and our main priority continues to be organic growth in sales to regain our former market share and in turn enhanced profits. Each of our products have, S T R A T E G I C O P P O R T U N I T I E S for their respective markets, key initiatives that are gaining momentum and enhancing our profitability. During 2018, we have achieved good underlying profitability and our main priority continues to be organic National transport infrastructure spending continues to grow with committed funding from State and Federal growth in sales to regain our former market share and in turn enhanced profits. Each of our products have, Governments for major Australian transport infrastructure projects continuing to be a high priority. The for their respective markets, key initiatives that are gaining momentum and enhancing our profitability. majority of these are on the eastern seaboard where we are involved in some significant major projects. Our concrete temporary barrier solution in particular continues to be an attractive offering for major road works National transport infrastructure spending continues to grow with committed funding from State and Federal along the Pacific Highway in northern NSW and southern Queensland. Our RoadQuakeTM rumble strip is Governments for major Australian transport infrastructure projects continuing to be a high priority. The gaining significant acceptance for its ability to physically enforce roadworks speed limits. majority of these are on the eastern seaboard where we are involved in some significant major projects. Our concrete temporary barrier solution in particular continues to be an attractive offering for major road works Another area of strategic focus for us is pedestrian safety. The ongoing events around the world involving along the Pacific Highway in northern NSW and southern Queensland. Our RoadQuakeTM rumble strip is vehicles deliberately driven into urban precincts designated predominantly for pedestrians is a major concern. gaining significant acceptance for its ability to physically enforce roadworks speed limits. In response, we have developed our new OmniStopTM High Security Pedestrian Safety Bollard and we are looking at further more flexible temporary solutions designed to do this in such a way that does not decrease Another area of strategic focus for us is pedestrian safety. The ongoing events around the world involving the ambience of the urban area designated to be people-friendly. vehicles deliberately driven into urban precincts designated predominantly for pedestrians is a major concern. In response, we have developed our new OmniStopTM High Security Pedestrian Safety Bollard and we are We will remain focused on innovations that have the potential to capitalize on both domestic and the looking at further more flexible temporary solutions designed to do this in such a way that does not decrease significant overseas markets. Accordingly, we are developing strong relationships with key players to take the ambience of the urban area designated to be people-friendly. our products to market. We will remain focused on innovations that have the potential to capitalize on both domestic and the significant overseas markets. Accordingly, we are developing strong relationships with key players to take our products to market. A C K NO W L E D G M E N T S It has been another busy and successful year for the Company. This is attributable to the dedication, skills and ongoing efforts of our loyal staff who continue to find ways to provide innovative and value-added A C K NO W L E D G M E N T S solutions for our customers. It has been another busy and successful year for the Company. This is attributable to the dedication, skills Finally, I sincerely thank all our shareholders for their ongoing patience and continued support. Our and ongoing efforts of our loyal staff who continue to find ways to provide innovative and value-added primary focus continues to be the substantial improvement in the financial performance and sustainability of solutions for our customers. your Company and I am sure you can see that we are making steady progress towards this outcome. 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 Company and I am sure you can see that we are making steady progress towards this outcome. David Ashmore Chairman of the Board David Ashmore Chairman of the Board 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 7 - 2 0 1 8 The past financial year has been another successful one for Saferoads, having achieved a significant improvement in profit of $591k over the previous year to give us $710k net profit after tax. This was on the back of a 13% increase in revenue to $19.2 million and a corresponding $0.9 million increase in gross profit, driven by increased volume and margin. This was achieved through continued organic growth across most sectors of our business and the almost doubling of International sales year on year, particularly from the USA. Domestically, we secured our first sale of IronmanTM Hybrid temporary barriers to a major equipment hire company and we anticipate further transactions in the new financial year. We continued to secure significant contracts for our exclusively licensed concrete barrier solution, the T- LOKTM barrier with additional sections of the Pacific Highway upgrade in northern NSW as well as major projects in Tasmania and some Victorian metropolitan construction work zones. The introduction of our exclusively licensed SLEDTM end terminal during FY2018 allowed us to offer a more holistic temporary barrier solution to customers. Our Rental portfolio, now branded Road Safety Rental, broadened its offering during the year to not only provide our proprietary IronmanTM Hybrid temporary barrier system but also our proprietary ZONE VMS trailers. With our specialised knowledge in flexible deployments and expertise in required traffic layouts we have specifically targeted second tier contractors who require our expertise to mobilise their work zones, skillsets these customers generally don’t have internally. Our Public Lighting portfolio reported significant growth, mainly in the area of solar solutions, where we were successful in procuring a significant order of portable solar light towers by a major Australian equipment hire company, some of which were utilised at this year’s Commonwealth Games on the Gold Coast in Queensland. Our initiatives in adapting solar lighting for public spaces has seen us successfully deliver solutions for customers including portable solar light poles (incorporating CCTV) for public events and site security and even solar lights mounted on sound walls and other public infrastructure to prevent graffiti. Our urban street lighting portfolio grew by 10% year on year as we maintained our leading market share in the Victorian residential development space. With urban population growth expected to continue at current rates, we continue to provide the best range of product and an exemplary service to site for our broadening customer base. Internationally, we doubled our revenue from the past financial year. This included further orders from our USA distributor of IronmanTM barriers. We had additional orders for our flexible signage from a European customer and we continue to sell our Traffic products into New Zealand. We also successfully introduced our portable solar lighting products to the New Zealand market. 6 I N N O V A T I O N I N I T I A T I V E S I N N O V A T I O N I N I T I A T I V E S Saferoads prides itself on being able to develop new and innovative public safety solutions and we achieved a great deal in the past financial year. The main areas of focus were on our new HV2 TM temporary barrier Saferoads prides itself on being able to develop new and innovative public safety solutions and we achieved system and our OmniStopTM pedestrian safety bollard range. a great deal in the past financial year. The main areas of focus were on our new HV2 TM temporary barrier system and our OmniStopTM pedestrian safety bollard range. The most significant development for the year was the very successful crash testing of our new HV2TM barrier system in January. The HV2TM Barrier is a free standing, temporary longitudinal barrier system successfully The most significant development for the year was the very successful crash testing of our new HV2TM barrier crash tested to the MASH TL-4 standard, which included redirecting a 10 tonne truck. This is a major system in January. The HV2TM Barrier is a free standing, temporary longitudinal barrier system successfully development for this product that now complies with the new benchmark crash test standard to be in force in crash tested to the MASH TL-4 standard, which included redirecting a 10 tonne truck. This is a major the USA from 2020 onwards. We have now applied for the necessary regulatory approvals to give us a fully development for this product that now complies with the new benchmark crash test standard to be in force in compliant and marketable system for the huge market in the USA and also here in Australia. the USA from 2020 onwards. We have now applied for the necessary regulatory approvals to give us a fully compliant and marketable system for the huge market in the USA and also here in Australia. During the year we also successfully crash tested two OmniStopTM pedestrian Security bollards and both stop a vehicle travelling at 50kph. Our 2,270kg (SUV) version complied with the leading USA standard During the year we also successfully crash tested two OmniStopTM pedestrian Security bollards and both (ASTM 3016-14). The 1,600kg (family sedan) version was approved for use by VicRoads and NSW RMS stop a vehicle travelling at 50kph. Our 2,270kg (SUV) version complied with the leading USA standard during the year. This represents very substantial steps forward in effective and convenient pedestrian (ASTM 3016-14). The 1,600kg (family sedan) version was approved for use by VicRoads and NSW RMS protection and each is capable of use as either a fixed or a removable temporary deployment depending on during the year. This represents very substantial steps forward in effective and convenient pedestrian the intended safety-zone application. protection and each is capable of use as either a fixed or a removable temporary deployment depending on the intended safety-zone application. These OmniStopTM Bollard products are being developed for sale into global markets to help address the very real issue of pedestrian protection. These OmniStopTM Bollard products are being developed for sale into global markets to help address the very real issue of pedestrian protection. L O O K I N G A H E A D L O O K I N G A H E A D With committed domestic future road infrastructure spend at record levels, now is the right time to invest in our industry. We are very optimistic that we have the right product and service offerings to obtain our share With committed domestic future road infrastructure spend at record levels, now is the right time to invest in of this expected growth and have already benefited from this in the past financial year. our industry. We are very optimistic that we have the right product and service offerings to obtain our share of this expected growth and have already benefited from this in the past financial year. We intend to invest further in our Road Safety Rental brand, through offering a broader range of work zone products and services for the construction sector, particularly in Victoria. We intend to invest further in our Road Safety Rental brand, through offering a broader range of work zone products and services for the construction sector, particularly in Victoria. We anticipate we will receive regulatory approval of our new HV2TM barrier solution in both Australia and USA, which will enable full commercialisation into markets that will require this type of barrier solution. We anticipate we will receive regulatory approval of our new HV2TM barrier solution in both Australia and USA, which will enable full commercialisation into markets that will require this type of barrier solution. We will continue to build on our public lighting business, with particular focus on our diversified solar lighting opportunities. We will continue to build on our public lighting business, with particular focus on our diversified solar lighting opportunities. Finally, I would like to acknowledge the support of all the Saferoads team, who have delivered a solid financial performance for FY2018 and with the progress of our current initiatives we are focussed on delivering another Finally, I would like to acknowledge the support of all the Saferoads team, who have delivered a solid financial year of sustainable profit growth. performance for FY2018 and with the progress of our current initiatives we are focussed on delivering another year of sustainable profit growth. Darren Hotchkin Chief Executive Officer Darren Hotchkin Chief Executive Officer 7 THE YEAR IN REVIEW O M N I - S T O P T M B O L L A R D S Civil engineering contractors, RJ Vincent & Co (“RJV”), was commissioned to develop the new Aveley residential estate in Ellenbrook, WA. This included the construction of a bridge over a lake for vehicles and pedestrians to enter or exit the new estate. Vehicle speed was to be a maximum 40 kmh so they required protection for pedestrians walking across the bridge. RJV wanted a solution that would not only protect pedestrians, but also look aesthetically pleasing and would blend in with the ambience of the new community. The Omni-StopTM Ultra 50 kmh Bollard was the best solution and RJV were very satisfied with the outcome. So much so that Saferoads have subsequently installed Omni-StopTM Ultra Bollards on three additional bridge sites in the Aveley Estate. I R O N M A N T M H Y B R I D B A R R I E R R E N T A L S O L U T I O N Civil construction company, Negri Contractors, was awarded a contract for the reconstruction of Bulban Road, Werribee, which had been impacted in recent years by increasing traffic volumes from the rapidly developing Wyndham West area, which includes Werribee, Wyndham Vale and Manor Lakes. The Bulban Road Project included widening the road, additional bicycle paths, pedestrian crossings, bus stop infrastructure, new pavements, underground stormwater drainage and associated landscape works. Negri sought Saferoads to provide temporary road barriers for these works and we undertook a huge task to deploy 2,288 metres of IronmanTM Hybrid barriers in a very tight timeframe. Ricardo Lima, Project Manager at Negri Contractors said “This was a record deployment and Saferoads and their subcontract crane team conducted themselves very professionally and performed amazingly well to install this amount of barriers in just 48 hours with just a four-man team. It really was an incredible team effort, assisted by Negri Contractors and our traffic management team.” 8 C A R P A R K A N D E X T E R I O R L I G H T I N G Gumbuya World, located 50 minutes from Melbourne, is Victoria’s newest theme park, located in a natural bush setting. The park opened just prior to Christmas 2017. Part owner, Ron Weinzierl said “Saferoads was instrumental in supplying all the carpark and exterior lighting throughout the park area. With an extremely short timeframe, they achieved an excellent result through the expertise and dedication of the sales staff and manufacturing area. This included designing, on short notice, unique pole mounted speaker boxes within 5 days”. “Redesigning the carpark lighting to achieve an approved layout and supplying a solution within 12 weeks contributed greatly to us meeting our deadline of opening prior to last Christmas.” S O U N D W A L L B A R R I E R L I G H T I N G The sound wall barriers along Memorial Drive at Woonona, a northern suburb of Wollongong, NSW have long been a target of graffiti and become an eyesore for both motorists and pedestrians. Roads and Maritime Services (“RMS”) hired Nowra Aboriginal artist Warwick Keen and owner of Port Kembla’s Urban Art Australia, Anthony Jones, to improve the look of the wall. After consulting Saferoads about its solar wall brackets, RMS purchased and installed them to highlight the mural artwork and deter graffiti at night, which was costing up to $100,000 a year to clean up. They also light up the adjacent pathway to make it safer for pedestrians at night. 9 THE YEAR IN REVIEW T - L O K T M C O N C R E T E B A R R I E R R E N T A L S O L U T I O N Saferoads was engaged to provide workzone protection for A1 Civil Pty Ltd for a new freeway on ramp at Nar Nar Goon, 70km south-east of Melbourne. “We engaged Saferoads Rental due to their expertise around barriers, compliance and deployment. Given the sensitivity of this project, we needed to ensure things ran smoothly right from the beginning as all stakeholders were keeping a watchful eye on progress and performance. Saferoads were able to deliver a 550 metre T-Lok concrete barrier deployment in just over 7 hours on night shift with a 4-man team and deployed the barriers with precision. A1 Civil were able to construct safely behind the barriers for the duration of the project until the barriers were removed. Again, Saferoads performed well during the demobilisation where they were working against the clock all night.” Michael McGill – Project Manager, A1 Civil I N T E R T R A F F I C A M S T E R D A M – M A R C H 2 0 1 8 Intertraffic Amsterdam is the platform of choice for transport professionals from around the world to meet. It is a biennial event organised to stay up to speed on the developments in the fields of infrastructure, safety, parking, smart mobility and traffic management, with some 800 exhibiting companies from 47 countries and over 30,000 visitors from 134 countries worldwide. Saferoads exhibited again this year and it was a great opportunity to meet with our existing international partners as well as find some new opportunities and to see what’s new in our industry. We displayed for the first time our HV2TM Barrier as well as OmniStopTM Bollards and KangouTM flexible signage. We received a very good response to all of these products and we should gain some new export orders and opportunities from this over the coming year. 10 R E S E A R C H & D E V E L O P M E N T H V 2 T M H Y B R I D W O R K Z O N E B A R R I E R Our key R&D project continued this year with four highly successful crash tests, meeting requirements for MASH TL4 (Manual for Assessing Safety Hardware - Test Level 4). The HV2TM Hybrid Workzone Barrier system has now been submitted to both FHWA (Federal Highway Administration) and ASBAP (Austroads Safety Barrier Assessment Panel) and is currently awaiting approval in USA and Australia. Three tests were completed at Texas A&M University (USA) in January. The first two tests, a 2,270kg and a 1,100kg vehicle, met requirements for MASH TL3. The third test, a 10,000kg truck, met requirements for MASH TL4. The HV2TM Hybrid Workzone Barrier is the first freestanding barrier to meet MASH TL4, with a deflection of less than 2.5m. Each test closely reflected our expected results using FEA (Finite Element Analysis) computer simulations. A fourth test was completed in New Zealand to test the transition between HV2TM Hybrid Workzone Barrier and QuadGuard End Terminal. This transition was also designed using FEA simulations, with results of the test as predicted. O M N I - S T O P T M P O R T A B L E B O L L A R D Continuing to expand on our OmniStopTM Bollard range, a new freestanding portable bollard system has recently been successfully crash tested to contain a 2,270kg vehicle at over 55km/h. This product has been designed using FEA simulation, and successfully crash tested. The OmniStopTM Portable Bollard system combines OmniStopTM Bollard technology, with patented connector and hybrid technology from our HV2TM Barrier, to create the first temporary, freestanding bollard system to protect public events from vehicle intrusion, whilst allowing unimpeded pedestrian access. 11 DIRECTORS’ REPORT DIRECTORS’ REPORT Your Directors submit their report for the year ended 30 June 2018. 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 66) (FCA GAICD F.FIN) Non-Executive Chairman David Ashmore was appointed to the Board on 22 November 2012 and was re-elected at the November 2013, October 2015 and October 2017 AGM’s. He was appointed Chairman of the Board on 19 August 2013. He is Chairman of the Remuneration Committee and a member of the Audit and Risk Committee. 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 54) 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 as Chief Executive Officer on 10 April 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 guidepost, 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 that 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. 12 David Cleland (Age 73) (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 Chairman of the Audit and Risk Committee and a member of 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 trust member of the Greater Metropolitan mergers and acquisitions. He was formerly an inaugural 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 SECRETARY Peter Fearns (CPA, BBus (Acctg)) Peter joined Saferoads in December 2011 as Chief Financial Officer and was appointed Company Secretary on 22 December 2016. He has over 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. 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 1,326,807 7,641,655 508,610 No interim or final dividend was paid or declared for the financial year ended 30 June 2018. No interim or final dividend was declared or paid for the financial year ended 30 June 2017. 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. 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. 13 DIRECTORS’ REPORT 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 2017-18 year, there has been no significant change in the Company’s state of affairs other than as disclosed in this financial report. SIGNIFICANT EVENTS AFTER REPORTING DATE There has been no matter or circumstance which has arisen since 30 June 2018 that has significantly affected or may significantly affect the operations of the consolidated entity or the results of those operations or the state of affairs of the consolidated entity. LIKELY DEVELOPMENTS AND EXPECTED RESULTS Likely developments in the operations of the entity and the expected results of these operations have been set out in the Chairman’s Overview and the Chief Executive Officer’s Review of Operations and Activities. INDEMNIFICATION AND INSURANCE OF DIRECTORS, 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. 14 R EM U N E RA T I O N R EP 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 2017-18 was $147,500. 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 $260,049, including statutory superannuation. In addition, Mr Hotchkin is eligible for a discretionary bonus of $45,000 based on the Company’s financial performance exceeding budget targets for FY2018. KEY MANAGEMENT PERSONNEL Key Management Personnel (“KMP”) is defined by AASB 124 - Related Party Disclosures. Only Directors and Executive Management that have the authority and responsibility for planning, directing and controlling the activities of Saferoads, directly or indirectly and are responsible for the entity’s governance are classified as KMP. PERFORMANCE-BASED REMUNERATION Performance-based remuneration (bonus incentives) paid or payable to key management personnel, including the CEO, for the year totalled $55,000 and have been accrued in the financial statements. These were discretionary and were based on the Company’s financial performance exceeding budget targets for FY2018. A summary of Company performance for the past five financial years is below. EPS (cents) 2018 1.9 2017 0.3 2016 (0.3) 2015 (0.2) 2014 (3.6) Net profit/(loss) ($) 709,692 118,847 (116,082) (72,228) (930,978) Share price ($) $0.20 $0.11 $0.13 $0.10 $0.13 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. 15 DIRECTORS’ REPORT REMUNERATION OF DIRECTORS AND KEY MANAGEMENT PERSONNEL 30 June 2018 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 69,092 65,000 240,000 166,250 540,342 - - - - - - - 45,000 10,000 55,000 - - - - - 13,408 - 20,049 24,554 58,011 - - - 4,619 4,619 - - - - - 82,500 65,000 - - 305,049 15% 205,423 5% 657,972 * 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 2017 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 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 - - - - 16 SHAREHOLDINGS OF KEY MANAGEMENT PERSONNEL Shares held in Saferoads Holdings Limited: Balance at 1 July 2017 Acquired through On-Market trade Sold Balance at 30 June 2018 7,522,585 1,301,807 508,610 33,000 119,070 25,000 - - 9,366,002 144,070 - - - - - 7,641,655 1,326,807 508,610 33,000 9,510,072 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 13 13 13 13 13 13 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. 17 DIRECTORS’ REPORT S T R A T E G I C O P P O R T U N I T I E S During 2018, we have achieved good underlying profitability and our main priority continues to be organic ROUNDING OF AMOUNTS growth in sales to regain our former market share and in turn enhanced profits. Each of our products have, for their respective markets, key initiatives that are gaining momentum and enhancing our profitability. Saferoads Holdings Limited is a type of Company that is referred to in ASIC Corporations (Rounding in National transport infrastructure spending continues to grow with committed funding from State and Federal Financial/Directors’ Reports) Instrument 2016/191 and therefore the amounts contained in this report and in Governments for major Australian transport infrastructure projects continuing to be a high priority. The the financial report have been rounded to the nearest dollar. majority of these are on the eastern seaboard where we are involved in some significant major projects. Our concrete temporary barrier solution in particular continues to be an attractive offering for major road works AUDITORS’ INDEPENDENCE DECLARATION along the Pacific Highway in northern NSW and southern Queensland. Our RoadQuakeTM rumble strip is gaining significant acceptance for its ability to physically enforce roadworks speed limits. The attached independence declaration has been obtained from the Company’s auditors, Grant Thornton. Another area of strategic focus for us is pedestrian safety. The ongoing events around the world involving vehicles deliberately driven into urban precincts designated predominantly for pedestrians is a major concern. In response, we have developed our new OmniStopTM High Security Pedestrian Safety Bollard and we are looking at further more flexible temporary solutions designed to do this in such a way that does not decrease ROUNDING OF AMOUNTS ROUNDING OF AMOUNTS Signed in accordance with a resolution of Directors the ambience of the urban area designated to be people-friendly. Saferoads Holdings Limited is a type of Company that is referred to in ASIC Corporations (Rounding in Saferoads Holdings Limited is a type of Company that is referred to in ASIC Corporations (Rounding in We will remain focused on innovations that have the potential to capitalize on both domestic and the Financial/Directors’ Reports) Instrument 2016/191 and therefore the amounts contained in this report and in Financial/Directors’ Reports) Instrument 2016/191 and therefore the amounts contained in this report and in significant overseas markets. Accordingly, we are developing strong relationships with key players to take the financial report have been rounded to the nearest dollar. the financial report have been rounded to the nearest dollar. our products to market. AUDITORS’ INDEPENDENCE DECLARATION AUDITORS’ INDEPENDENCE DECLARATION A C K NO W L E D G M E N T S The attached independence declaration has been obtained from the Company’s auditors, Grant Thornton. The attached independence declaration has been obtained from the Company’s auditors, Grant Thornton. It has been another busy and successful year for the Company. This is attributable to the dedication, skills and ongoing efforts of our loyal staff who continue to find ways to provide innovative and value-added David Ashmore solutions for our customers. Director Signed in accordance with a resolution of Directors Signed in accordance with a resolution of Directors Finally, I sincerely thank all our shareholders for their ongoing patience and continued support. Our 23 August 2018 primary focus continues to be the substantial improvement in the financial performance and sustainability of your Company and I am sure you can see that we are making steady progress towards this outcome. David Ashmore David Ashmore David Ashmore Chairman of the Board Director Director 23 August 2018 23 August 2018 18 AUDITOR’S INDEPENDENCE DECLARATION Auditor’s Independence Declaration The Rialto, Level 30 525 Collins St Melbourne Victoria 3000 To the Directors of Saferoads Holdings Limited Correspondence to: GPO Box 4736 Melbourne Victoria 3001 Collins Square, Tower 1 727 Collins Street Docklands VIC 3008 Correspondence to: GPO Box 4736 Melbourne VIC 3001 T +61 3 8320 2222 Collins Square, Tower 1 F +61 3 8320 2200 727 Collins Street E info.vic@au.gt.com W www.grantthornton.com.au Docklands VIC 3008 Correspondence to: GPO Box 4736 Melbourne VIC 3001 T +61 3 8320 2222 F +61 3 8320 2200 E info.vic@au.gt.com W www.grantthornton.com.au 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 2018, I declare that, to the best of my knowledge and belief, there have been: Auditor’s Independence Declaration T +61 3 8320 2222 F +61 3 8320 2200 E info.vic@au.gt.com W www.grantthornton.com.au no contraventions of any applicable code of professional conduct in relation to the audit. no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and a To the Directors of Saferoads Holdings Limited b AUDITOR’S INDEPENDENCE DECLARATION TO THE DIRECTORS OF SAFEROADS HOLDINGS LIMITED In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of Saferoads Holdings Limited for the year ended 30 June 2018, I declare that, to the best of my knowledge and belief, there have been: no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor a for the audit of Saferoads Holdings Limited for the year ended 30 June 2017, I declare that, to the Grant Thornton Audit Pty Ltd b best of my knowledge and belief, there have been: Chartered Accountants no contraventions of any applicable code of professional conduct in relation to the audit. a no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and Michael Climpson Grant Thornton Audit Pty Ltd b Partner – Audit & Assurance Chartered Accountants no contraventions of any applicable code of professional conduct in relation to the audit. Melbourne, 23 August 2018 Michael Climpson Partner – Audit & Assurance GRANT THORNTON AUDIT PTY LTD Chartered Accountants Melbourne, 23 August 2018 M A Cunningham Partner - Audit & Assurance 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 ‘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 Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are 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 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 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 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 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 Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited. Grant Thornton Australia Limited. Grant Thornton Audit Pty Ltd ACN 130 913 594 Liability limited by a scheme approved under Professional Standards Legislation. Liability limited by a scheme approved under Professional Standards Legislation. 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. Liability limited by a scheme approved under Professional Standards Legislation. www.grantthornton.com.au www.grantthornton.com.au 19 CORPORATE GOVERNANCE STATEMENT CORPORATE GOVERNANCE STATEMENT The Board of Directors of Saferoads Holdings Limited is responsible for the corporate governance of the Saferoads group. The Board has considered the ASX Corporate Governance Principles and Recommendations (“ASX Governance Principles”) and reports on compliance with these Principles. The Board’s objective is to ensure investor confidence in the Company and its operations given its size, stage of development and complexity. The Group’s Corporate Governance Statement for the financial year ending 30 June 2018 is dated as at 30 June 2018 and was approved by the Board on 20 August 2018. 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). SAFEROADS HOLDINGS LIMITED Consolidated Statement of Profit or Loss and Other Comprehensive Income FOR THE YEAR ENDED 30 JUNE 2018 Revenue Revenue from product sales and services 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 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 expense Net profit/(loss) for the period Net profit/(loss) attributable to members of the parent 709,692 118,847 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) Notes CONSOLIDATED 2018 $ 2017 $ 4 4 4 4 5 6 6 7 19,192,803 16,909,644 - 26,048 19,192,803 16,935,692 (12,896,121) (11,492,588) 239,194 183,232 6,535,876 5,626,336 124,315 101,697 (3,590,726) (3,277,238) (128,789) (337,787) (173,411) (151,400) (906,536) (133,654) (362,430) (182,765) (159,526) (812,694) 1,371,542 799,726 (515,454) (458,894) 856,088 340,832 (143,496) (186,757) 712,592 154,075 (2,900) (35,228) 709,692 118,847 - - 709,692 118,847 709,692 118,847 Cents 1.95 1.95 Cents 0.33 0.33 - - 20 The accompanying notes form part of these financial statements SAFEROADS HOLDINGS LIMITED Consolidated Statement of Profit or Loss and Other Comprehensive Income FOR THE YEAR ENDED 30 JUNE 2018 SAFEROADS HOLDINGS LIMITED SAFEROADS HOLDINGS LIMITED Consolidated Statement of Profit or Loss and Other Comprehensive Income CONSOLIDATED Consolidated Statement of Profit or Loss and Other Comprehensive Income FOR THE YEAR ENDED 30 JUNE 2018 FOR THE YEAR ENDED 30 JUNE 2018 Notes 2018 $ 2017 $ Revenue Revenue from product sales and services Product royalty income Revenue Revenue from product sales and services Product royalty income Cost of direct materials and labour Movement in inventories Gross profit Cost of direct materials and labour Movement in inventories Gross profit Other income Employee benefits Other income Employee benefits Motor vehicle costs Motor vehicle costs Occupancy costs Occupancy costs Travel and accommodation costs Travel and accommodation costs IT & Communications costs IT & Communications costs Other expenses Other expenses Earnings before interest, tax, depreciation and amortisation Earnings before interest, tax, depreciation and amortisation (EBITDA) (EBITDA) Depreciation, amortisation and impairment Depreciation, amortisation and impairment Earnings before interest and tax (EBIT) Finance costs Earnings before interest and tax (EBIT) Profit/(loss) before income tax Finance costs Income tax expense Profit/(loss) before income tax Net profit/(loss) for the period Income tax expense Net profit/(loss) attributable to members of the parent Net profit/(loss) for the period Other comprehensive income Total comprehensive income for the period Net profit/(loss) attributable to members of the parent Total comprehensive income attributable to members of the parent Other comprehensive income Total comprehensive income for the period Earnings per share - Basic for profit/(loss) for the full year - Diluted for profit/(loss) for the full year Total comprehensive income attributable to members of the parent Dividend paid per share (cents) The accompanying notes form part of these financial statements Earnings per share - Basic for profit/(loss) for the full year - Diluted for profit/(loss) for the full year Dividend paid per share (cents) Notes CONSOLIDATED 2018 $ 19,192,803 2017 $ - 4 4 4 4 5 6 6 7 4 4 4 16,909,644 26,048 16,935,692 (11,492,588) 183,232 5,626,336 101,697 (3,277,238) (133,654) (362,430) (182,765) (159,526) (812,694) 799,726 19,192,803 - 19,192,803 19,192,803 16,909,644 26,048 (12,896,121) 239,194 16,935,692 (12,896,121) 239,194 6,535,876 (11,492,588) 183,232 5,626,336 6,535,876 124,315 (3,590,726) (128,789) (337,787) (173,411) (151,400) (906,536) 124,315 (3,590,726) (128,789) (337,787) (173,411) (151,400) (906,536) 101,697 (3,277,238) (133,654) (362,430) (182,765) (159,526) (812,694) 1,371,542 799,726 (515,454) 1,371,542 (458,894) 4 856,088 (515,454) 340,832 (458,894) (143,496) (186,757) 856,088 712,592 154,075 (143,496) (2,900) (35,228) 709,692 712,592 118,847 340,832 (186,757) 154,075 5 709,692 (2,900) 118,847 (35,228) - - 709,692 118,847 709,692 118,847 709,692 118,847 709,692 118,847 - - Cents 1.95 1.95 709,692 Cents 0.33 0.33 118,847 - - 709,692 118,847 6 6 7 Cents 1.95 1.95 Cents 0.33 0.33 - - The accompanying notes form part of these financial statements 21 SAFEROADS HOLDINGS LIMITED SAFEROADS HOLDINGS LIMITED Consolidated Statement of Financial Position Consolidated Statement of Financial Position AS AT 30 JUNE 2018 AS AT 30 JUNE 2018 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 2018 $ 2017 $ 9 10 11 12 5 13 14 15 14 15 16 16 1,074,808 2,537,306 3,072,365 272,218 6,956,697 3,619,210 1,438,943 1,254,412 17,935 6,330,500 665,915 2,917,658 2,833,171 83,622 6,500,366 3,505,238 944,499 1,257,312 17,917 5,724,966 13,287,197 12,225,332 2,648,032 118,128 305,718 516,486 3,588,364 2,148,487 86,132 2,234,619 5,822,983 7,464,214 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 5,353,905 2,110,309 7,464,214 5,353,905 1,400,617 6,754,522 22 SAFEROADS HOLDINGS LIMITED SAFEROADS HOLDINGS LIMITED Consolidated Statement of Changes in Equity Consolidated Statement of Changes in Equity FOR THE YEAR ENDED 30 JUNE 2018 FOR THE YEAR ENDED 30 JUNE 2018 Contributed Equity $ Retained Earnings $ Total Equity $ CONSOLIDATED At 1 July 2016 Net profit/(loss) for the period Other comprehensive income for the period At 30 June 2017 5,353,905 1,281,770 118,847 - - - 6,635,675 118,847 - 5,353,905 1,400,617 6,754,522 At 1 July 2017 Net profit/(loss) for the period Other comprehensive income for the period 5,353,905 1,400,617 6,754,522 - 709,692 709,692 - - - At 30 June 2018 5,353,905 2,110,309 7,464,214 The accompanying notes form part of these financial statements 23 SAFEROADS HOLDINGS LIMITED Consolidated Statement of Cash Flows FOR THE YEAR ENDED 30 JUNE 2018 SAFEROADS HOLDINGS LIMITED Consolidated Statement of Cash Flows FOR THE YEAR ENDED 30 JUNE 2018 Notes CONSOLIDATED 2018 $ 2017 $ Cash flows from operating activities Receipts from customers Payments to suppliers and employees 21,439,479 (19,968,933) 19,265,263 (18,047,629) Net cash flows from operating activities 8 1,470,546 1,217,634 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 Interest received Interest paid Net cash flows from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period 9,479 (88,785) (758,067) 281,630 (555,743) (361,217) 727 (145,420) (505,910) 408,893 665,915 Cash and cash equivalents at end of period 8 1,074,808 The accompanying notes form part of these financial statements 25,546 (321,046) (447,035) 237,405 (505,130) (670,253) 3,219 (187,950) (854,984) (142,480) 808,395 665,915 24 SAFEROADS HOLDINGS LIMITED SAFEROADS HOLDINGS LIMITED Notes to the Financial Statements Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2018 FOR THE YEAR ENDED 30 JUNE 2018 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 2017. 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 2018 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. 25 SAFEROADS HOLDINGS LIMITED SAFEROADS HOLDINGS LIMITED Notes to the Financial Statements Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2018 FOR THE YEAR ENDED 30 JUNE 2018 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 23 August 2018. 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. 26 SAFEROADS HOLDINGS LIMITED SAFEROADS HOLDINGS LIMITED Notes to the Financial Statements Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2018 FOR THE YEAR ENDED 30 JUNE 2018 (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. 27 SAFEROADS HOLDINGS LIMITED SAFEROADS HOLDINGS LIMITED Notes to the Financial Statements Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2018 FOR THE YEAR ENDED 30 JUNE 2018 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. 28 SAFEROADS HOLDINGS LIMITED SAFEROADS HOLDINGS LIMITED Notes to the Financial Statements Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2018 FOR THE YEAR ENDED 30 JUNE 2018 (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. 29 SAFEROADS HOLDINGS LIMITED SAFEROADS HOLDINGS LIMITED Notes to the Financial Statements Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2018 FOR THE YEAR ENDED 30 JUNE 2018 (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. 30 SAFEROADS HOLDINGS LIMITED SAFEROADS HOLDINGS LIMITED Notes to the Financial Statements Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2018 FOR THE YEAR ENDED 30 JUNE 2018 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. 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 2018, $4,017,036 or 21% (2017: $3,589,484 or 21%) of the Group’s revenues depended on a single customer. 4 REVENUES AND EXPENSES 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: CONSOLIDATED 2017 $ 2018 $ (i) Revenue Revenue from product sales Revenue from provision of services 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 Bad debts written off Provision for doubtful debts 17,967,139 15,714,106 1,225,664 1,195,538 26,048 - 19,192,803 16,935,692 116,597 4,377 727 - 2,614 124,315 58,861 (9,030) 3,219 18,355 30,292 101,697 19,317,118 17,037,389 390,717 124,737 515,454 355,513 103,381 458,894 - - - 30,000 31 SAFEROADS HOLDINGS LIMITED SAFEROADS HOLDINGS LIMITED Notes to the Financial Statements Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2018 FOR THE YEAR ENDED 30 JUNE 2018 5 INCOME TAX Major components of income tax expense for the year ended 30 June 2018 are: CONSOLIDATED 2017 $ 2018 $ 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 2,900 2,900 35,228 35,228 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 712,592 154,075 At the statutory income tax rate of (2018: 27.5%; 2017: 30%) Non-deductible expenses Effect of change in income tax rates on deferred tax assets Recognition of prior year unbooked tax losses 195,963 2,900 - (195,963) 2,900 46,223 2,979 107,711 (121,685) 35,228 Deferred income tax Deferred income tax at 30 June relates to the following: CONSOLIDATED Deferred income tax asset/(liability) Employee entitlements Capitalised Research & Development Costs Other Effect of change in income tax rates on deferred tax assets Deferred tax assets relating to other temporary differences not brought to account Carry forward tax losses brought to account Gross deferred income tax (liability)/asset Deferred income tax charge Statement of Financial Position 2018 $ 2017 $ Statement of Profit or Loss and Other Comprehensive Income 2018 $ 2017 $ 148,714 (333,668) 42,882 - 133,149 (245,855) 45,722 107,711 142,072 (40,727) 1,254,412 1,257,312 1,254,412 1,257,312 (15,565) 87,813 2,840 107,711 (378,762) 195,963 (10,858) 35,330 (40,039) (107,711) 1,593 121,685 - - As as 30 June 2018, the consolidated entity has carry forward tax losses with a tax effect of $1,963,651, measured at the current corporate tax rate of 27.5%. Carry forward tax losses with a tax effect of $1,254,412 have been brought to account as a deferred tax asset. Carry forward tax losses with a tax effect of $709,239 relating to a prior year 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. 32 SAFEROADS HOLDINGS LIMITED SAFEROADS HOLDINGS LIMITED Notes to the Financial Statements Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2018 FOR THE YEAR ENDED 30 JUNE 2018 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 2017 $ 2018 $ Net profit/(loss) attributable to equity holders from continuing operations Net profit/(loss) attributable to equity holders of the parent 709,692 709,692 118,847 118,847 Net profit/(loss) attributable to ordinary shareholders for diluted earnings per share 709,692 118,847 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 1.95 1.95 Cents 0.33 0.33 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 2018: 0.0 cents (2017: 0.0 cents) Dividends proposed and not recognised as a liability: Final franked dividend for 2018: 0.0 cents (2017: 0.0 cents) CONSOLIDATED 2017 $ 2018 $ - - - - 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. 4,629,030 5,391,050 33 SAFEROADS HOLDINGS LIMITED SAFEROADS HOLDINGS LIMITED Notes to the Financial Statements Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2018 FOR THE YEAR ENDED 30 JUNE 2018 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 1,074,808 665,915 CONSOLIDATED 2017 $ 2018 $ 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 Net (profit)/loss on disposal of plant and equipment Interest received Interest paid 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 709,692 118,847 515,454 (4,377) (727) 143,496 458,894 9,030 (3,219) 187,950 374,264 (239,194) (186,690) 2,900 (36,411) 74,977 117,162 544,377 (183,232) 92,675 35,228 (139,340) 37,548 58,876 1,470,546 1,217,634 Non-cash financing and investing activities During the year, the Group acquired property, plant and equipment with an aggregate value of $441,065 (2017: $120,211) 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 215,326 (30,000) 2,351,980 2,711,191 236,467 (30,000) 2,537,306 2,917,658 1,657,254 1,964,361 716,830 664,726 - - - - 2,321,980 2,681,191 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 34 30,000 - - 30,000 - - 30,000 30,000 CONSOLIDATED 2017 $ 2018 $ 3,072,365 2,833,171 SAFEROADS HOLDINGS LIMITED SAFEROADS HOLDINGS LIMITED Notes to the Financial Statements Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2018 FOR THE YEAR ENDED 30 JUNE 2018 11 PLANT AND EQUIPMENT Plant & equipment at cost Less accumulated depreciation Total plant & equipment CONSOLIDATED 2017 $ 2018 $ 6,583,682 6,143,851 (2,964,472) (2,638,613) 3,619,210 3,505,238 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 Assets transferred to product development costs Disposals Carrying amount at 30 June 12 INTANGIBLE ASSETS Product development costs Less accumulated amortisation Website development costs Less accumulated amortisation Patents and product approvals Movement in carrying amounts Balance at 1 July 2016 Capitalisation of costs R&D tax rebate allocation Amortisation expense Carrying amount at 30 June 2017 Balance at 1 July 2017 Capitalisation of costs Assets transferred from plant & equipment R&D tax rebate allocation Amortisation expense Carrying amount at 30 June 2018 CONSOLIDATED 2017 $ 2018 $ 531,561 (390,717) (11,559) (15,313) 3,505,238 3,474,070 441,257 (355,513) - (54,576) 3,619,210 3,505,238 CONSOLIDATED 2017 $ 2018 $ 1,518,400 (305,062) 1,213,338 1,210,594 (391,077) 819,517 32,914 (2,932) 29,982 195,623 1,438,943 - - - 124,982 944,499 Website dev't costs $ - - - - - - 32,914 - - (2,932) 29,982 Patents/ Product approvals $ 70,051 54,931 - - 124,982 124,982 70,641 - - - Product dev't costs $ Total $ 701,751 392,104 (170,957) (103,381) 819,517 819,517 654,512 11,559 (150,445) (121,805) 771,802 447,035 (170,957) (103,381) 944,499 944,499 758,067 11,559 (150,445) (124,737) 195,623 1,213,338 1,438,943 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. 35 SAFEROADS HOLDINGS LIMITED SAFEROADS HOLDINGS LIMITED Notes to the Financial Statements Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2018 FOR THE YEAR ENDED 30 JUNE 2018 13 TRADE AND OTHER PAYABLES (CURRENT) Trade payables Accrued expenses GST payable CONSOLIDATED 2017 $ 2018 $ 413,969 78,677 2,155,386 2,314,768 182,585 70,493 2,648,032 2,567,846 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 2017 $ 2018 $ 229,318 178,434 76,400 1,992,000 305,718 2,170,434 367,063 1,781,424 203,923 - 2,148,487 203,923 During the financial year the Company entered into a revised facility agreement with its financier, Commonwealth Bank of Australia, providing an extended term of three years (expiring September 2020) and significantly more favourable terms and conditions on the back of the improved operational performance and financial position of the Company. The Group was in compliance with its reporting covenants at 30 June 2018 and its scheduled debt repayment plan. 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: - term loan - bank bills - overdraft - bank charge card Facilities used at reporting date - term loan - bank bills - overdraft - bank charge card Facilities unused at reporting date - overdraft - bank charge card CONSOLIDATED 2017 $ 2018 $ 1,857,824 - 250,000 75,000 - 1,992,000 - 75,000 1,857,824 - - - 1,992,000 - 67,000 65,500 250,000 8,000 - 9,500 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 quarterly financial information. 36 SAFEROADS HOLDINGS LIMITED SAFEROADS HOLDINGS LIMITED Notes to the Financial Statements Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2018 FOR THE YEAR ENDED 30 JUNE 2018 15 PROVISIONS Current Employee benefits Non-Current Employee benefits Deferred rent liability 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 2017 $ 2018 $ 516,486 516,486 411,708 411,708 24,292 61,840 86,132 32,123 41,625 73,748 CONSOLIDATED 2017 $ 2018 $ 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 CONSOLIDATED 2017 $ 2018 $ 1,400,617 709,692 2,110,309 1,281,770 118,847 1,400,617 37 SAFEROADS HOLDINGS LIMITED SAFEROADS HOLDINGS LIMITED Notes to the Financial Statements Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2018 FOR THE YEAR ENDED 30 JUNE 2018 17 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES 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 2017 $ 2018 $ 1,074,808 2,537,306 665,915 2,917,658 3,612,114 3,583,573 5,102,237 4,942,203 5,102,237 4,942,203 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. 38 SAFEROADS HOLDINGS LIMITED SAFEROADS HOLDINGS LIMITED Notes to the Financial Statements Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2018 FOR THE YEAR ENDED 30 JUNE 2018 (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 2018 Financial Assets - Cash - Receivables % 0.70% N/A - 603,735,2 1,074,808 - $ $ $ $ $ - - - - - - 1,074,808 2,537,306 3,612,114 Total Financial Assets 603,735,2 1,074,808 Financial Liabilities - Payables - Bank borrowings - Hire purchase Total Financial Liabilities 2017 Financial Assets - Cash - Receivables Total Financial Assets Financial Liabilities - Payables - Bank borrowings - Hire purchase N/A 5.05% 6.74% % 1.35% N/A N/A 6.15% 7.25% 230,846,2 - - - 1,857,824 - - - 229,318 - - 367,063 2,648,032 1,857,824 596,381 230,846,2 1,857,824 229,318 367,063 5,102,237 $ $ $ $ $ - 856,719,2 665,915 - 856,719,2 665,915 - - - - - - 665,915 2,917,658 3,583,573 648,765,2 - - - 1,992,000 - - - 178,434 - - 203,923 2,567,846 1,992,000 382,357 Total Financial Liabilities 648,765,2 1,992,000 178,434 203,923 4,942,203 (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 managed closely. 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 2018 (2017: $30,000), 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 $23,125 (2017: $27,609). The Group does not have any material unmanaged credit risk to any single debtor or group of debtors under financial instruments entered into by the company. 39 SAFEROADS HOLDINGS LIMITED SAFEROADS HOLDINGS LIMITED Notes to the Financial Statements Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2018 FOR THE YEAR ENDED 30 JUNE 2018 (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: 2018 - Payables - Bank borrowings - Hire purchase Total Financial Liabilities 2017 - Payables - Bank borrowings - Hire purchase Total Financial Liabilities Within 1 Year 1 to 5 Years Over 5 Years $ $ $ 2,648,032 76,400 229,318 - 1,781,424 367,063 2,953,750 2,148,487 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 Total $ 2,648,032 1,857,824 596,381 5,102,237 Total $ 2,567,846 1,992,000 382,357 4,942,203 - - - - - - - - (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 Exposure to foreign exchange risk may result in the fair value or future cash flows of a financial instrument fluctuating due to 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 significant financial Group's functional currency (AUD). instruments denominated in foreign currencies other than the 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 2018 +/-2% in interest rates +/-5c in AUD / USD Year Ended 30 June 2017 +/-2% in interest rates +/-5c in AUD / USD CONSOLIDATED Profit/(loss) $ Equity $ +/-40,000 +/-250,000 +/-40,000 +/-250,000 $ $ +/-40,000 +/-160,000 +/-40,000 +/-160,000 40 SAFEROADS HOLDINGS LIMITED SAFEROADS HOLDINGS LIMITED Notes to the Financial Statements Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2018 FOR THE YEAR ENDED 30 JUNE 2018 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 2017 $ 2018 $ 239,468 964,600 639,531 242,447 936,505 891,476 1,843,599 2,070,428 15,464 29,779 4,596 12,639 45,243 17,235 1,888,842 2,087,663 265,942 415,340 681,282 (84,901) 596,381 229,318 367,063 596,381 201,148 216,892 418,040 (35,683) 382,357 178,434 203,923 382,357 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 2018 2017 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 $36,801 (2017: $76,939), with $8,959 included in Trade payables at 30 June 2018 (2017: $15,887). 41 SAFEROADS HOLDINGS LIMITED SAFEROADS HOLDINGS LIMITED Notes to the Financial Statements Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2018 FOR THE YEAR ENDED 30 JUNE 2018 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: 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 / Company Secretary 2018 $ 2017 $ 70,500 70,000 24,500 2,500 15,000 1,800 (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 Current assets Total assets Current liabilities Total liabilities Net assets Issued capital Retained earnings 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 24 SUBSEQUENT EVENTS 2018 $ 2017 $ 595,342 58,011 4,619 657,972 501,516 83,028 2,904 587,448 2018 $ 2017 $ - - 5,359,929 5,359,929 - - - - 5,359,929 5,359,929 5,353,905 5,353,905 6,024 6,024 - - - - - - There has been no matter or circumstance which has arisen since 30 June 2018 that has significantly affected or may significantly affect the operations of the consolidated entity or the results of those operations or the state of affairs of the consolidated entity. 42 DIRECTORS’ DECLARATION DIRECTORS’ DECLARATION In the opinion of the Directors of Saferoads Holdings Limited and its controlled entities: (a) 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 with the Corporations Act 2001 (Cth), including: i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2018 and of its performance for the year ended that date; and ii) ROUNDING OF AMOUNTS complying with Accounting Standards and Corporations Regulations 2001. (b) There are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; 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 (c) The financial statements have been prepared in accordance with International Financial Reporting the financial report have been rounded to the nearest dollar. 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 AUDITORS’ INDEPENDENCE DECLARATION Chief Executive Officer and the Chief Financial Officer in accordance with section 295A of the Corporations Act 2001 (Cth). The attached independence declaration has been obtained from the Company’s auditors, Grant Thornton. Signed in accordance with a resolution of the Directors. On behalf of the Board. Signed in accordance with a resolution of Directors David Ashmore Director 23 August 2018 David Ashmore Director 23 August 2018 43 INDEPENDENT AUDITOR’S REPORT Collins Square, Tower 1 727 Collins Street Docklands VIC 3008 Correspondence to: GPO Box 4736 Melbourne VIC 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 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 Report on the audit of the financial report INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF SAFEROADS HOLDINGS LIMITED Opinion We have audited the financial report of Saferoads Holdings Limited (the Company) and its subsidiaries (the Group), which Report on the audit of the financial report comprises the consolidated statement of financial position as at 30 June 2018, the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows Opinion for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting We have audited the financial report of Saferoads Holdings Limited (the Company) and its policies, and the Directors’ declaration. 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, In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: consolidated statement of changes in equity and consolidated statement of cash flows for the year a giving a true and fair view of the Group’s financial position as at 30 June 2018 and of its performance for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies, and the directors’ declaration. ended on that date; and b complying with Australian Accounting Standards and the Corporations Regulations 2001. 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 Basis for opinion performance for the year ended on that date; and 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 b Complying with Australian Accounting Standards and the Corporations Regulations 2001. independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Basis for Opinion Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities our other ethical responsibilities in accordance with the Code. 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 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. 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 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 www.grantthornton.com.au ‘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 ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients 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 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 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 Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are 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 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 Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited. 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. 44 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 The Rialto, Level 30 forming our opinion thereon, and we do not provide a separate opinion on these matters. 525 Collins St Melbourne Victoria 3000 Key audit matter Intangible Assets - Note 12 As disclosed in Note 12 to the consolidated financial statements, as at 30 June 2018 the carrying value of capitalised development costs and patents was $1,438,943. How our audit addressed the key audit matter Correspondence to: GPO Box 4736 Melbourne Victoria 3001 Our procedures included, amongst others: • Obtaining an understanding of management’s policies relating to the capitalisation of development costs; T +61 3 8320 2222 F +61 3 8320 2200 E info.vic@au.gt.com W www.grantthornton.com.au During the year management capitalised $758,067 of patent and development related expenditure. No impairment loss INDEPENDENT AUDITOR’S REPORT in relation to intangible assets was recognised. TO THE MEMBERS OF SAFEROADS HOLDINGS LIMITED • Evaluating the appropriateness of expenses capitalised, on a sample basis, by agreeing to underlying supporting documentation; In accordance with AASB 138 Intangible Assets only directly attributable costs incurred during the development Report on the audit of the financial report phase may be capitalised and recognised as an asset. • Assessing the valuation methodology applied in managements value in use calculations, challenging the reasonableness of key assumptions based on our knowledge of the business and industry; • Reviewing sales results and identifying any discontinued products through discussions with management; • Performing sensitivity analysis on the impairment model using varied discount rates and growth projections; and • Assessing the adequacy of the financial statement AASB 136 Impairment of Assets requires that an 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 estimate the recoverable amount of the asset. 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. Determining whether research and development costs should be expensed or capitalised together with the process undertaken by management to forecast future performance and the viability of products and the assessment of impairment triggers involves an element of management judgement. 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 disclosures This area is a key audit matter due to the inherent performance for the year ended on that date; and subjectivity that is involved in the entity making judgements in relation to the capitalisation of their development costs under the requirements of AASB 138 Intangible Assets, as well as the evaluation for any impairment indicators. b Complying with Australian Accounting Standards and the Corporations Regulations 2001. Information other than the financial report and 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. 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 2018, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are Grant Thornton Audit Pty Ltd ACN 130 913 594 required to report that fact. We have nothing to report in this regard. 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. Liability limited by a scheme approved under Professional Standards Legislation. 45 INDEPENDENT AUDITOR’S REPORT Responsibilities of the Directors’ for the financial report The Directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the Directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the Directors are responsible for assessing the 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. Correspondence to: GPO Box 4736 Melbourne Victoria 3001 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. INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF SAFEROADS HOLDINGS LIMITED The Rialto, Level 30 525 Collins St Melbourne Victoria 3000 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 Report on the remuneration 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 Opinion auditor’s report. 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 Opinion on the remuneration report then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies, and the directors’ declaration. We have audited the Remuneration Report included in the Directors’ report for the year ended 30 June 2018. In our opinion, the Remuneration Report of Saferoads Holdings Limited, for the year ended 30 June 2018 complies with In our opinion, the accompanying financial report of the Group, is in accordance with the section 300A of the Corporations Act 2001. 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 Responsibilities performance for the year ended on that date; and b Complying with Australian Accounting Standards and the Corporations Regulations 2001. 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. Grant Thornton Audit Pty Ltd Chartered Accountants We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Michael Climpson Partner – Audit & Assurance Melbourne, 23 August 2018 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. Liability limited by a scheme approved under Professional Standards Legislation. 46 ASX ADDITIONAL INFORMATION The shareholder information set out below was applicable as at 31 August 2018. At this date the Company had on issue 36,400,000 ordinary shares in the company held by 554 shareholders. S U B S T A N T I A L S H A R E H O L D E R S The names of substantial shareholders who have notified the Company in accordance with section 671B of the Cor- porations Act. Holder name 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 E N T Y L A R G E S T S H A R E H O L D 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 CARRIER INTERNATIONAL PTY LTD CONTEMPLATOR PTY LTD MR PHILIP BOMFORD 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 MR BRUCE ALLAN HEAD & MRS BETH ALISON HEAD ROADWORX GROUP PTY LTD C J CORNWELL & SON PTY LTD MRS JANET GRIFFITHS D I S T R I B U T I O N O F S H A R E H O L D I N G S Holdings Ranges 1-1,000 1,001-5,000 5,001-10,000 10,001-100,000 100,001-and over Holders 106 171 83 151 43 554 Total Units 55,724 527,478 688,461 5,049,371 30,078,966 36,400,000 The number of shareholders’ holdings less than a marketable parcel is 142. V O T I N G R I G H T S All ordinary shares carry one vote per share. N U M B E R O F O R D I N A R Y S H A R E S S U B J E C T T O E S C R O W Nil. No. of ordinary shares in which interest is held 7,641,655 4,555,897 2,807,666 2,277,428 1,904,409 No. of shares % Held 7,598,955 20.88 3,208,163 2,807,666 2,277,428 1,804,409 1,326,807 1,128,450 1,023,418 844,522 800,000 508,610 503,212 490,000 470,000 434,000 378,936 295,000 279,925 250,009 222,900 26,652,410 8.81 7.71 6.26 4.96 3.65 3.10 2.81 2.32 2.20 1.40 1.38 1.35 1.29 1.19 1.04 0.81 0.77 0.69 0.61 73.22 % 0.15 1.45 1.89 13.87 82.63 100.00 47 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: Email: Website: 1800 060 672 +61 3 5945 6600 sales@saferoads.com.au www.saferoads.com.au Share Registry Automic Registry Services Level 5, 126 Phillip Street Sydney NSW 2000 PO Box 2226 Strawberry Hills NSW 2012 Telephone Within Australia: 1300 288 664 International: Email: Website: +61 2 9698 5414 hello@automic.com.au www.automic.com.au Bankers Commonwealth Bank of Australia Warragul VIC 3820 Auditors Grant Thornton Collins Square, Tower 1 727 Collins Street Docklands VIC 3008 ASX Code SRH ISO CERTIFICATIONS: PROFESSIONAL AFFILIATIONS: 48 NOTES 49 NOTES 50 NOTES 51 IMPROVING PUBLIC SAFETY 

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