STRUCTURAL MONITORING SYSTEMS PLC
COMPANY NUMBER 4834265
ANNUAL REPORT 2021
Corporate Directory
Board of Directors
Will Rouse
Executive Chairman
R. Michael Reveley
Non Executive Director
Stephen Forman
Non Executive Director
Sam Wright
Non Executive Director
Officers
Toby Chandler
Chief Executive Officer
Sam Wright
Company Secretary
Coporate Office
Suite 116, 1 Kyle Way
Claremont WA 6010
+61 8 6161 7412
Tel:
Fax: +61 8 9467 6111
Email: sms@smsystems.com.au
United Kingdom Office & Registered Office
The Old Court, 8 Tufton Street
Ashford
Kent TN23 1PF
United Kingdom
Canada Office
15/1925 Kirschner Road
Kelowna BC.
Canada V1Y 4N7
Tel: 250-763-588
Share Registry
Computershare Investor Centre Pty Ltd
GPO Box 2975
Melbourne VIC 3001
Enquiries (within Australia) 1300 850 505
Enquiries (from Overseas) +61 3 9415 4000
www.investorcentre.com/contact
Stock Exchange Listing
Australian Securities Exchange
(Home Exchange: Perth, Western Australia)
Code: SMN
Structural Monitoring Systems Plc Website
www.smsystems.com.au
Structural Monitoring Systems Plc
Mailing Address
PO Box 661
Nedlands Western Australia 6909
Auditors
Elderton Audit (UK)
Level 2, 267 St George’s Terrace
Perth WA 6000
Australia
2
Contents
Strategic Report
Directors’ Report
Statement of Profit or Loss and Other Comprehensive Income
Statement of Financial Position
Statement of Cash Flows
Statement of Changes In Equity
Notes to the Financial Statements
Independent Auditors' Report
Shareholder Information
Important Notice
4
9
19
20
21
22
24
62
67
Structural Monitoring Systems Plc (the Company) is incorporated in the United Kingdom under the laws of England and
Wales. The Company is not subject to Chapters 6, 6A, 6B and 6C of the Australian Corporations Act 2001 dealing with
the acquisition of shares (including substantial holdings and takeovers).
CRACK DETECTION AND MONITORING
3
Strategic Report
Review of operations
Structural Monitoring Systems Plc
Structural Monitoring Systems Plc (“SMS”, the “Group” or the “Company”), recorded a solid result for 2021 in spite of
unprecedented economic conditions brought about by the Covid pandemic. Its Canadian-based wholly-owned subsidiary
Anodyne Electronics Manufacturing Corp (“AEM”), logged total sales for the 2021 financial year of $15.340m (excluding
intercompany sales), a decrease of 20% over the prior year.
Cash generation through the year was strong with a total year-end Group cash balance of $2.381 million, net of
borrowings (2020: $2.065 million), an increase of 15% year on year.
For a second consecutive year the Group achieved a positive cashflow from operating activities. As a result, the Group
has been able to devote resources to research and development, invest in new manufacturing equipment and will
relocate to a new purpose-built manufacturing facility all of which will increase product lines, manufacturing efficiency,
profit margins and enhance shareholder value in the years ahead. This has been achieved without resorting to capital
markets and a dilution of shareholder value.
Subsequent to the reporting date SMS has executed a key acquisition transaction purchasing Eagle Audio, via its
wholly-owned subsidiary Anodyne Electronics Manufacturing Corp for a purchase price of C$4.118m. As a result of
this milestone transaction Group annualised revenue and EBITDA are expected to increase by $3.500m and $2.200m
respectively. The Eagle audio business is a simple ‘plug and play’ proposition. AEM’s existing platform scale, efficiency
and production capabilities are expected to materially increase top line performance metrics with effectively zero
increase in overheads.
The Group is adequately funded to continue its current operations during these uncertain times and will continue to
demonstrate appropriate financial restraint. The Company’s Board and CEO have carefully reviewed the Group’s
cashflow outlook, in light of the timeframe remaining to the CVM™ commercialisation, and with due regard to the
constantly evolving Covid pandemic. For the first half of the financial year all SMS Board and Executive/senior staff
remained on an equity-only remuneration structure and an agreed material reduction in levels of remuneration. From
January 2021 the same staff have reverted to normal cash-based levels of remuneration, and these were paid subsequent
to the reporting date.
During the year SMS appointed Sam Wright as a Non-Executive Director. Mr Wright brings significant experience and
expertise in corporate governance, financial reporting and investor relations to the Group and will remain in the role of
Company Secretary. Mr Wright replaces Terry Walsh who remains in the role of Head of Legal and Corporate Affairs.
Anodyne Electronics Manufacturing Corporation
(“AEM”)
Wholly-owned SMS subsidiary, Anodyne Electronics
Manufacturing Corp (“AEM”), recorded $15.619m in
revenue and normalised EBITDA** for the year to 30
June 2021 of $3.363m (inc. intercompany sales on an
arms-length basis). This was a particularly impressive
result given the significant impact of the Covid
pandemic that affected both sales and production
at the platform level, while concurrent supply chain
difficulties encountered at multiple times during the
year compounded the overall business impact.
This full year result, exceeding budget, is a tribute to the excellent team the Company has assembled in Kelowna,
operating in extremely challenging conditions. Through tight expense control, and the higher margins achieved
from stronger sales of AEM developed products, the Group was able to offset the effects of softer sales in contract
manufactured products.
Subsequent to the reporting date, as announced on 2 September 2021 AEM has acquired Eagle Audio (“Eagle”) a key
acquisiton for AEM and the Group which will result in increased top line sales of $3.500m and EBITDA of $2.200m. The
acquisition, which will be entirely debt funded will provide a number of significant benefits across financial performance,
product offerings, customer and supplier relationships and staff development.
4
Strategic Report
Structural Monitoring Systems Plc
Anodyne Electronics Manufacturing Corporation (“AEM”) (continued)
Looking ahead to the next financial year, SMS will continue to increase investment in R&D and sales team expansion
which will result in a continuation of the transition to sales of higher margin, AEM developed products. The move to
a new, vastly improved purpose-built facility in the December quarter, with the associated investment in the latest
manufacturing equipment is expected to yield significant productivity improvements. Further, the new facility will provide
the capacity to manufacture both the expected increased production volumes stemming directly from these R&D
and sales investments, and also cater to the expected commercialisation and production ramp up of SMS’s CVM™
technology suite of products. Major equipment, inventory and staff transfer to the new facility will begin in October, and
the facility is expected to be at, or close to, fully operational in late November/early December.
CVM™ Commercialisation Update and Outlook
2ku Wi-Fi & APB Programmes
The Federal Aviation Administration (“FAA”) has responded with questions to clarify some of the interpretive items in
the data package for the Intelsat (GoGo) B737-800 2ku WiFi program and has established weekly conference calls with
Delta Engineering (“DE”) to expedite the process.
SMS has now received routine addressable questions and comments from the FAA via DE in regard to the Supplemental
Type Certificate (“STC”) application, Alternative Methods of Compliance (“AMOC”) application and probability of detection
(“POD”) test report. The majority of the comments were directed towards the NDT Manual that details how to perform
the CVMTM inspection, as well as the Test Report. Revisions of these documents clarifying the points in question have
now been submitted to the FAA. In turn, the FAA has asked the DE ODA to submit the Statement of Compliance. At
the current juncture, SMS is not aware of any additional required information necessary for the FAA to formally issue
the AMOC and STC. At time of writing, the Company expects the full STC approval to be granted well before the end
of calendar year 2021. Such an outcome will enable all expected commercialisation activities related to the Company’s
CVM™ technology suite to begin in earnest, with an immediate global focus on the civil and military aviation sectors –
encompassing both fixed-wing aircraft and rotorcraft.
Further, the Boeing Company (“Boeing”) continues to develop and proceed along the CVM™ certification process
path for the B737 aft-pressure bulkhead (“APB”) application affecting a very large number of the world’s B737-NG
fleet – this is fully independent to the process that has been underway for some time in relation to the Company’s STC
approval steps under the authority of the FAA. Formative meetings with Boeing specialists and certification authorities,
along with key FAA officials, have been held in the past month. Additionally, follow-up calls to discuss the test plan for
supplementary POD data capture have been held, and the formal documentation is being drafted - following a similar
process to the WiFi STC. Thus, progress to a final commercial outcome is now well advanced.
FIGURE 1 TOP-DOWN VIEW OF SENSORS
CVM™ Sensor connected to a vacuum
source with an accurate flow meter
5
Strategic Report
Structural Monitoring Systems Plc
CVM™: Post-FAA Approval Marketing and Outreach
The largest and most important marketing initiative to date has been to support the DE-led initiative to achieve the first
FAA-approved application for CVM™. The formal approval to use CVM™ as an alternative means of inspection from the
largest aerospace regulator in the world will provide the necessary “blue sky” for the rest of the industry to adopt CVM™
for use on their respective fleets. Upon formal approval, Rich Poutier, SMS Head of Global Business Development, will
be in a position to:
-
-
drive sales of CVM™ kits for those airlines that utilise all WiFi (not just GoGo) systems installed under STC and
work with all major carriers to identify further use cases for CVM™ - more so given that the optimal path for
regulatory approval process will be fully enacted and understood - by both SMS and the global civil aerospace
industry.
More than 2,594 aircraft currently in service globally are fitted with the GoGo WiFi system, 1,600 of which are based
in the USA. Rich Poutier, along with key members of the SMS Board and Management team, have met on multiple
occasions with executives from a significant number of the global airlines that have the GoGo system installed, and
continue to keep their respective management teams up to speed on the timelines expected for formal CVM™ approval.
In other activity, Delta Air Lines (“Delta”) continues to press Boeing and the FAA for additional use cases for CVM™
for the Delta fleet. The next sequential approval will very likely be for the APB structural inspection on Delta’s B737-
NG fleet. To date, SMS and Delta have outfitted twenty (20) B737-NG individual aircraft with CVM™ kits and are now
collecting data to support the current AMOC-approval process within Boeing. Further, Delta Tech Ops – Delta’s key
technical and R&D arm – have now formally requested a quotation from SMS to outfit an additional seven (7) aircraft
with APB CVM™ kits that will be included in Delta’s 2022 provisional budget.
In summary, as noted on multiple occasions, the upcoming FAA approval marks the pivotal commercial inflection point
whereby SMS can directly identify the global total addressable market for the CVM™ sensor technology. The next
phase of marketing will be to fully engage with the largest global airlines to drive sales in 2021/22, and beyond. The
priority will be for applications under the purview of the FAA and/or Boeing. However, given the extensive and ground-
breaking work that has been completed to date with the world’s major regulators and OEMs – including EASA and
Airbus, amongst others - SMS will be pursuing all commercial routes to fully open up multiple global markets for CVM™.
6
Strategic Report
Structural Monitoring Systems Plc
Analysis Using Key Financial Performance Indicators and Milestones
As at 30 June 2021, the Group had approximately $2.381m cash at bank, net of non-lease liability borrowings (2020:
$2.065m).
In this third full year of operations since the acquisition of AEM was completed in December 2017, the Group recorded
a loss for the financial year of $1.959m (2020: $2.549m). The decrease in loss was incurred due in part to lower share-
based payment expenses of $1.116m (2020: $1.952m). The Group also recorded revenue during the year of $15.340m
(2020: $19.095m), a decrease of 20% year on year. Other key expenses during the year were consumables and raw
materials used of $8.258m (2020: $10.204m) and employee costs of $5.212m (2020: $5.277m). Revenue has reduced
as a result of supply chain constraints in the second half of the year brought about by chip shortages and the Covid
pandemic. In accordance with IAS 38 Intangible Assets the Group has capitalised development expenses of $0.901m
(2020: $nil) incurred in the internal development of products at the commercialisation stage of development.
The Group EBITDA* for the financial year was ($0.478m) (2020: ($0.991m)). Normalised EBITDA** for AEM for the
year ended 30 June 2021 was $3.363m, inclusive of intercompany sales on an arms-length basis (2020: $4.178m).
Loss per share for the financial year was 1.64 cents per share (2020: Loss per share 2.19 cents).
Net tangible assets at the reporting date were 8.48 cents per ordinary security (2020: 8.62 cents).
At the reporting date the Group had net assets of $14.013m (2020: $13.401m). The Group had trade and other
receivables of $2.347m, inventory of $7.088m and intangible assets of $3.718m, including goodwill of $1.454m. The key
movements during the year were a decrease in borrowings of $0.480m as cash balances net of borrowings increased
by 15% during the year, ROU assets increased by $0.210m due to investment in new plant and equipment under lease.
ROU lease liabilities similarly increased by $0.076m. Tax payable at year end decreased by $0.514m as a result of
decreased gross profit and increased lease payments recorded by AEM for the year. Deferred tax liabilities decreased
by $0.259m during the year.
The only movements in equity during the year were due to Directors and senior management electing to receive
compensation in the form of Performance Rights (PRs) for the first half of the year in order to preserve cash, other
contractual share-based compensation and subscriptions to CDIs made by staff through the Company’s Employee
Incentive Plan.
*EBITDA, which is inclusive of FX gains/losses, is calculated by adding back interest costs, income tax, depreciation
and amortisation expenses and deducting interest revenue from loss after tax for the year of $1.959m (2020: $2.549m).
**Normalised EBITDA is calculated by adding back to EBITDA, SMS costs of $0.728m borne by AEM.
7
Strategic Report
.
Principal Risks and Uncertainties
Structural Monitoring Systems Plc
The principal risks and how they are managed are set out on page 18 of the Director’s Report.
S172 Statement
The Board has a duty under s172 of the Companies Act 2006 to promote the success of the Group of the benefit of its
members as a whole. All decisions are made with this objective and the Board considers the long-term implications of
its actions.
The Group has a continuous stakeholder engagement programme in which both Executive and Non-Executive Directors
participate to ensure the Board is aware of stakeholder interests.
The Group believes its employees are its greatest asset and it seeks to establish policies that provide a working
environment that is safe, enjoyable and rewarding.
Critical to the success of the Group is its long term relationship with its suppliers and customers, as well as its shareholders.
The Board believes the decisions it has made have been appropriated both to support these stakeholders and to foster
stronger, long-term relationships with them.
The Group is mindful of its role with its local communities and seeks to minimise the impact of its operatjons on the
environment and to be a good neighbour.
Overall in considering and taking decisions the Board seeks to act in the best interests of the business and all its
stakeholders, treating all members fairly.
The Strategic Report was signed on behalf of the Board.
William Rouse
Executive Chairman
30th September 2021
8
Directors’ Report
Structural Monitoring Systems Plc
Your directors submit their report for the year ended 30 June 2021.
Directors and officers were in office for this entire period unless otherwise stated.
Directors and Officers
Will Rouse (Executive Chairman)
Mr Rouse is an experienced businessman and finance executive focused on the acquisition and optimised growth of
specialised manufacturing-related businesses. In his last role, Will acquired Simcro Ltd (“Simcro”) in 2007, a New
Zealand-based export-manufacturer. Will sold his majority stake in Simcro in 2013 to The Riverside Company, a New
York private equity group, retaining a 20% shareholding. Simcro then acquired two further operating businesses in NZ
and Australia in 2015, with Will leading these acquisitions. Simcro was sold in 2018 to a global multinational. Mr Rouse
is a Chartered Accountant. He joined the Board of SMS primarily to oversee the acquisition and management of AEM.
His role expanded in 2019 to include chairing the Board and overseeing finance and audit.
R. Michael Reveley (Non-Executive Director)
Mr Reveley served as a managing partner, chief executive and co-CIO of SEAL Capital Ltd, a Los Angeles-based hedge
fund specialising in global macro strategies designed to provide risk-adjusted absolute returns investing in an array of
global markets, under all market conditions. Before forming SEAL Capital, he was a founding partner and deputy CIO
at Seagate Global Advisors in Los Angeles, having earlier been director of the syndicate and derivatives group at SBC
Warburg in London and New York, vice-president of global derivatives for Swiss Bank Corporation and vice-president of
the global derivatives group at First Interstate Bank, where he co-managed a US$20bn derivatives portfolio.
Stephen Forman (Non-Executive Director, appointed 1 November 2019)
Mr Forman has over 25 years of demonstrated high-level equity capital markets experience in Australia and North
America, through roles in institutional equity sales and trading, investor relations and corporate advisory with major top-
tier global investment groups, including UBS and JP Morgan, the latter where Mr Forman worked for 15 years in various
senior positions.
Mr Forman’s current role as Managing Director with New York-based investment advisory and consulting firm, Union
Square Capital Advisors saw him successfully utilise his global network to assist companies with business development
and corporate communication strategies, and to diversify their share register with Australian and North American
investors. Mr Forman holds a B.Comm – Hons (Accounting & Finance) from UWA and is a CFA Charterholder.
Sam Wright (Non-Executive Director, appointed 14 October 2020 & Company Secretary)
Mr Wright has over 15 years experience in corporate governance, statutory financial reporting and investor relations with
both retail and institutional investors.
He is a member of the Australian Institute of Company Directors, the Financial Services Institute of Australasia and the
Chartered Secretaries of Australia.
Mr Wright currently serves as a Non-Executive Director of PharmAust Limited (Oct 2008 - Present).
9
Directors' Report
Structural Monitoring Systems Plc
Terry Walsh (Non-Executive Director, Resigned 14 October 2020)
Mr. Walsh is a highly experienced corporate counsel having led legal teams at such firms as Hancock Prospecting Pty
Ltd and Rio Tinto Limited (Perth). Mr. Walsh runs a private consultancy company, providing Board, commercial, business
development and corporate advisory services. He provides a key oversight role for the Company’s corporate legal affairs
including contract negotiations, IP enforcement and maintenance, regulatory oversight and corporate compliance, and
any future civil interactions.
Admission: Supreme Court of Western Australia in February 1995.
Mr Walsh currently serves as a Non-Executive Director of Nanollose Limited. During the last 3 years Mr Walsh has also
served as a Non-Executive Director of Hazer Group Limited.
Toby Chandler (Chief Executive Officer)
Mr Chandler is Co-Founder and Chief Investment Officer of SEAL Capital Ltd, a global macro hedge fund investing in
diverse global markets and financial instruments. Before forming SEAL Capital, Mr Chandler was a Partner and Portfolio
Manager with private equity and macro hedge fund, Seagate Global Advisors, Inc.
In prior roles, Mr Chandler was a Managing Director with Morgan Stanley Inc, New York, where he ran the Bank's
Specialist Hedge Fund Desk servicing key institutional counterparties in an array of financial products, and global
markets. Mr Chandler has also held several other senior bank positions including Managing Director and Head of Global
Fixed Income Distribution with HSBC Securities (USA) NA, New York; other previous Executive Director positions
with Morgan Stanley Inc and Morgan Stanley International Plc, London, as Head of Emerging Markets and Global
Fixed Income Distribution; and Vice President with Citigroup NA, New York and Citigroup Australia. He received his
B.Comm in Finance from the University of Western Australia and his Masters in Applied Finance and Investment from
the Securities Institute of Australia.
Principal Activities
During the financial year the principal continuing activities of the Group consisted of the design and manufacture of
electronic products and the provision of manufacturing services to the aviation industry.
Shareholder Meetings
Structural Monitoring Systems Plc held its Annual General Meeting of Shareholders as a virtual meeting on 21st January
2021 at 12.00pm ADST.
All resolutions that were put were passed by a poll.
Statement of Directors’ Responsibilities
The directors are responsible for preparing the Strategic Report and Directors’ Report and the financial statements in
accordance with applicable law and regulations.
Company law requires the directors to prepare group and company financial statements for each financial year. The
directors are required under the rules of the Australian Securities Exchange to prepare group and company financial
statements in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union
(“EU”).
The financial statements are required by law and IFRS adopted by the EU to present fairly the financial position of the
group and the company and the financial performance of the group. The Companies Act 2006 provides in relation to
such financial statements that references in the relevant part of that Act to financial statements giving a true and fair view
are references to their achieving a fair presentation.
Under company law the directors must not approve the financial statements unless they are satisfied that they give
a true and fair view of the state of affairs of the group and the company and of the profit or loss of the group and the
company for that period.
10
Directors' Report
Structural Monitoring Systems Plc
Statement of Directors’ Responsibilities (continued)
In preparing the Group and Company financial statements, the directors are required to:
a.
b.
c.
d.
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
state whether they have been prepared in accordance with IFRSs adopted by the EU;
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group
and the company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
group’s and the Company’s transactions and disclose with reasonable accuracy at any time the financial position of
the group and the company and enable them to ensure that the financial statements comply with the Companies
Act 2006. They are also responsible for safeguarding the assets of the group and the company and hence for taking
reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for the
maintenance and integrity of the corporate and financial information included on the www.smsystems.com.au website.
Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from
legislation in other jurasdictions.
Indemnity and Insurance of Officers
The Company has indemnified the directors and executives of the Company for costs incurred, in their capacity as a
director or executive, for which they may be held personally liable, except where there is a lack of good faith.
During the financial year, the Company paid a premium in respect of a contract to insure the directors and executives of
the company. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium.
Events subsequent to the reporting date
Subsequent to the reporting date the Company has completed the acquisition of Canadian business, Eagle Audio via its
wholly-owned subsidiary Anodyne Electronics Corporation Inc (“AEM”).
The consideration for the acquisition is C$4.118m (with C$360,000 of the purchase price to be held in escrow for 12
months). As a result of the acquisition the Company expects an increase in annualised gross revenues of $3.500m
per annum and an increase in normalised EBITDA of $2.200m per annum. The acquisition was funded using cash and
existing line of credit facilities with HSBC Canada.
A condition precendent to the facility with HSBC Canda is a deposit of US $800,000 which is to be provided by Stephen
Forman, a director of the Company for a term of 12 months. Interest of 6% per annum will be paid on the deposit.
The key customer segments of Eagle Audio are rotary and fixed wing aircraft (OEMs, law enforcement, EMS, CoastGuard,
military, forestry and firefighting). The purchase price includes approx C$0.800m in inventory plus IP/Supplemental
type certifications (“STCs”) and related process manufacturing/engineering documentation. Management is still in the
process of identifying the fair value of the assets and liabilities acquired.
The Group has experienced supply chain constraints and had to implement social distancing measures and a spilt
shift system during the first half of the year. The impact of the Coronavirus pandemic is ongoing and has had financial
impact for the Group to 30 June 2021, it is not practicable to estimate the potential impact, positive or negative, after the
reporting date. The situation is rapidly developing and is dependent on measures imposed by the Canadian government
and other countries, such as maintaining social distancing requirements, quarantine, travel restrictions and any economic
stimulus that may be provided.
Other than the above no matters or circumstances have arisen since the end of the financial year which significantly
affected or may significantly affect the operations of the Group, the results of those operations, or the state of affairs of
the Group in future financial years.
Results and Dividend
The operating loss, after income tax, for the year was $1.959m (2020: $2.549m). No dividends were proposed or paid
during the financial year.
Share Capital
The impact on share capital and share premium account of the share issues during the year, is disclosed in note 23 in
the notes to the financial statements.
11
Directors' Report
Financial Position
Structural Monitoring Systems Plc
The Group reported a net loss after tax of $1.959m (2020: loss $2.549m) and an operating cash inflow of $1.698m
(2020: inflow $0.342m) before tax for the year ended 30 June 2021 and reported working capital of $10.088m including
cash of $2.381m as at that date. Subsequent to the reporting date the Group purchased Eagle Audio for C$4.118m
funded through cash and a partial drawdown of AEM’s loan facility. A condition precedent of the loan facility is the deposit
of US$800K as security, which has been provided by a director of the Company on commercial terms.
The financial statements have been prepared on the going concern basis, which contemplates continuity of normal
business activities, the continued financial performance of AEM, the contribution of the newly acquired business, Eagle
Audio and the realisation of assets and discharge of liabilities in the normal course of business as well as the continued
availability of an established operating loan facility of up to C$5 million of which C$4.3m had been drawn down as at
the date of this report. The facility, which is provided by AEM’s bankers, while repayable on demand, is long standing
and is secured on receivables and inventory and is subject to loan covenants. The Directors expect compliance with the
covenants to continue to be met.
The Directors have prepared forecasts in respect of future trading. Achievement of such forecasts would allow the entity
to manage well within its current funding facilities for the foreseeable future. In developing these forecasts, the Directors
have made assumptions and performed sensitivity analysis on variables such as revenues and employee costs based
upon their view of the current and future economic conditions that will prevail over the forecast period of 12 months from
the date of signing these financial statements. The Directors have not made any assumptions regarding generation of
new revenue streams in the year ahead.
The Directors and senior management will formally consider all measures which would favourably reduce/defer
operational expenses should actual cash flows be less than budgeted, as they have done in previous years. The
director, who has provided a deposit of US$800K as security for the AEM loan facility, has confirmed to the Board that
he will not seek part or full repayment of this deposit for a period of at least 12 months from the date of this report, or
until the Company elects to repay the deposit, whichever is earlier.
The Directors therefore continue to adopt the going concern basis of accounting in preparing the financial statements.
Directors Meetings
The numbers of director’s meetings (including meetings of committees of directors) and number of meetings attended by
each of the directors of the Group during the financial year.
Director
W Rouse
R M Reveley
S Forman
S Wright (1)
T Walsh (2)
Board meetings
Audit committee
Remuneration committee
A
3
3
3
2
1
B
3
3
3
2
1
A
1
-
1
1
-
B
1
-
1
1
-
A
2
-
2
2
-
B
2
-
2
2
-
(1) Appointed 14 October 2020. Also attended 1 board meeting as a guest.
(2) Resigned 14 October 2020. Also attended 2 board meetings as a guest.
A – Number of meetings attended
B – Number of meetings held during the time which the director held office during the year
In addition to formal directors’ meetings held during the year regular executive meetings were held on a monthly basis
throughout the year.
12
Directors' Report
Structural Monitoring Systems Plc
Research and Development
The Group actively reviews technical developments in its markets with a view to taking advantage of the opportunities
available to maintain and improve it’s competitive position. This action involves the design and development of structural
health monitoring systems applicable to the aviation industry.
Remuneration Report
This report, which forms part of the Directors’ Report, outlines the remuneration arrangements in place for the key
management personnel of Structural Monitoring Systems Plc for the financial year ended 30 June 2021. The remuneration
report details the remuneration arrangements for key management personnel who are defined as those persons having
authority and responsibility for planning, directing and controlling the major activities of the Group, directly or indirectly,
including any Director (whether executive or otherwise) of the Group.
Remuneration Policy
The Remuneration Committee of the Board of Directors of Structural Monitoring Systems Plc is responsible for
determining and reviewing compensation arrangements for the directors and executives. The Remuneration Committee
(or the Board of directors) assesses the appropriateness of the nature and amount of emoluments of such officers on a
periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum
stakeholder benefit from the retention of a high quality board and executive team. Such officers are given the opportunity
to receive their base emoluments in a variety of forms including cash and fringe benefits such as motor vehicles and
expense payment plans. It is intended that the manner of payment chosen will be optimal for the recipient without
creating undue cost for the company.
Research and Development
The Group actively reviews technical developments in its markets with a view to taking advantage of the opportunities
available to maintain and improve it’s competitive position. This action involves the design and development of structural
health monitoring systems applicable to the aviation industry.
To assist in achieving these objectives, the Remuneration Committee links the nature and amount of executive directors’
and senior executives’ emoluments to the Company’s financial and operational performance. Executive directors and
employees have the opportunity to qualify for participation in the Company Employee Incentive Plan.
It is the Remuneration Committee’s policy that employment agreements shall be entered into with the Managing Director
and all other executives. The current employment agreement is consistent for all executives. The agreement has 3
months’ notice period and provides for payment of an amount of three months’ salary at the end of the three month
notice period. Any options or performance rights held lapse when the service period is completed.
13
Directors' Report
Structural Monitoring Systems Plc
Remuneration of Directors and Executives
Details of the nature and amount of each major element of remuneration of each director of the Group and each of the
Group executives who receive the highest remuneration are:
Salary & Fees
Post
Employment
Share-based payments
Total
Performance
rights in lieu of
fees
Superannuation
Performance*
rights
Shares**
$
$
$
$
$
Cash
$
30 June 2021
Directors
Will Rouse
R Michael Reveley
Stephen Forman
Sam Wright (1)
Terry Walsh (2)
Executive
Toby Chandler
Total
100,000
121,826
57,500
70,000
70,000
-
81,892
20,219
70,324
67,461
68,750
178,262
366,250
539,984
Salary & Fees
Post
Employment
30 June 2020
Cash
Performance
rights in lieu of
fees
Superannuation
$
$
$
Directors
Will Rouse
R. Michael Reveley
Stephen Forman (3)
Terry Walsh
Executive
Toby Chandler
Total
(1) Appointed 14 October 2020
-
-
20,369
26,256
-
46,625
142,588
217,053
57,823
102,486
218,662
738,612
-
-
-
-
-
-
-
-
-
-
138,258
107,774
67,439
-
66,834
-
-
-
34,848
11,603
426,918
247,166
157,658
140,324
113,912
223,269
89,250
559,531
571,588
167,687
1,645,509
Share-based payments
Total
Performance
rights
Shares
$
$
$
22,250
-
-
-
33,375
55,625
-
-
-
-
-
-
164,838
217,053
78,192
131,236
252,037
843,356
2,494
-
2,494
(2) Resigned 14 October 2020. Mr Walsh receives a salary of $115,000 per annum including superannuation as legal counsel.
(3) Appointed 1 November 2019
*$446,394 in Performance Rights (PRs) Share-based payment remuneration relates to PRs granted between December
2017 subject to share price hurdles which lapsed during the year ended 30 June 2021. A further $34,848 in PRs
remuneration lapsed subsequent to the reporting date.
No benefit was received by any director or executive for PRs which lapsed during the year.
**Two directors and an executive participated in the Company’s Employee Incentive Plan to subscribe for shares during
the year. The discount to market price paid for those shares is disclosed in the table above. Details of the transactions
are included in note 22 Share-based payments.
14
Directors' Report
Share-based compensation
Structural Monitoring Systems Plc
At the 2020 AGM, 91% of the votes received supported the issue of the performance rights. The Company did not
receive any feedback at the AGM regarding its remuneration practices.
The value of performance rights (PRs) granted, converted and lapsed for directors and executive as part of compensation
during the year ended 30 June 2021 are set below:
Name
Directors
Will Rouse
R. Michael Reveley
Stephen Forman
Sam Wright
Terry Walsh
Executive
Toby Chandler
Value of PRs
granted
Value of PRs
converted
$
$
Value of PRs
lapsed
$
121,826
81,892
46,919
70,324
67,461
178,262
293,815
-
118,364
-
-
-
790,875
1,032,725
-
-
-
1,919,050
The terms and conditions of performance rights are set out in Note 22: Share-based payments.
The number of PRs granted was determinded in lieu of reduced fees for the period July to December 2020 to preserve cash.
Fees for the period January to June 2021 reverted to a cash basis and were paid subsequent to the reporting date.
Service Agreements
Remuneration and other terms of employment for Directors and executives are formalised in service agreements.
Details of these agreements are as follows:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Will Rouse
Executive Chairman
1 January 2021
no fixed term
Base salary of AU$200,000, to be reviewed annually by the Remuneration Committee.
R. Michael Reveley
Non-Executive Director
1 January 2021
no fixed term
Base salary of AU$115,000 to be reviewed annually by the Remuneration Committee.
Stephen Forman
Non-Executive Director
1 January 2021
no fixed term
Base salary AU$140,000 to be reviewed annually by the Remuneration Committee.
Sam Wright
Non-Executive Director & Company Secretary
1 January 2021
no fixed term
Base salary AU$140,000 to be reviewed annually by the Remuneration Committee.
15
Directors' Report
Structural Monitoring Systems Plc
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Toby Chandler
Chief Executive Officer
1 January 2021
no fixed term
Base salary of AU$275,000 to be reviewed annually by the Remuneration Committee.
Directors and executives have no entitlement to termination payments in the event of
removal for misconduct.
Shareholdings of Directors
Shares held in Structural Monitoring Systems Plc:
30 June 2021
Directors
Will Rouse
R. Michael Reveley
Stephen Forman
Sam Wright (1)
Terry Walsh (2)
Total
30 June 2020
Directors
Will Rouse
R. Michael Reveley
Terry Walsh
Stephen Forman (3)
Balance at
beg of year
Shares held on
appointment/
resignation date
Granted as
Remuneration
Exercise of
PRs
Net Change
Other
Balance at
end of year
No.
No.
No.
No.
No.
No.
270,588
2,654,351
1,900,000
-
-
-
-
1,620,000
64,500
(64,500)
4,889,439
1,555,500
Balance at
beg of year
Shares held on
appointment/
resignation date
-
-
-
-
-
-
435,428
450,000
1,156,016
-
(182,907)
2,471,444
117,308
(277,330)
1,739,978
-
-
-
-
1,620,000
-
552,736
(10,237)
6,987,438
Granted as
Remuneration
Exercise of
PRs
Net Change
Other
Balance at
end of year
No.
No.
No.
No.
No.
No.
150,000
2,964,352
64,500
-
-
-
-
1,900,000
-
-
-
-
-
120,588
-
270,588
-
-
-
(310,001)
2,654,351
-
-
64,500
1,900,000
120,588
(310,001)
4,889,439
Total
3,178,852
1,900,000
(1) Appointed 14 October 2020
(2) Resigned 14 October 2020
(3) Appointed 1 November 2019
Performance Rights Holdings of Directors
Performance rights held over shares in Structural Monitoring Systems Plc:
30 June 2021
Directors
Will Rouse
R. Michael Reveley
Stephen Forman
Sam Wright (1)
Terry Walsh (2)
Total
Balance at beg of
year
Granted during
the year
Exercised
during the year
Held on
appointment/
resignation date
Balance at
end of year
No.
No.
No.
No.
No.
795,588
814,904
267,308
-
251,471
2,129,271
264,840
178,025
103,954
155,813
-
(435,428)
-
(117,308)
-
-
(625,000)
(600,000)
-
-
(251,471)
-
392,929
253,954
155,813
-
702,632
(552,736)
(1,476,471)
(802,696)
16
Directors’ Report
Structural Monitoring Systems Plc
Performance Rights Holdings of Directors (continued)
Balance at
beg of year
Granted
during the
year
Exercised
during the
year
Held on
appointment/
resignation
date
Balance at end
of the
year
No.
No.
No.
No.
No.
625,000
600,000
150,000
-
291,176
(120,588)
214,904
101,471
267,308
-
-
-
1,375,000
874,859
(120,588)
-
-
-
-
-
795,588
814,904
251,471
267,308
2,129,271
30 June 2020
Directors
Will Rouse
R. Michael Reveley
Terry Walsh
Stephen Forman (3)
(1) Appointed 14 October 2020
(2) Resigned 14 October 2020
(3) Appointed 1 November 2019
Additional information
The earnings of the Group for the 5 years to 30 June 2021 are summarised below:
Sales revenue
EBITDA
EBIT
Loss after income tax
2021
$000’
2020
$000’
2019
$000’
2018
$000’
2017
$000’
15,340
(478)
(1,445)
(1,959)
19,095
(991)
(2,043)
(2,549)
16,380
(2,827)
(3,488)
(3,626)
7,437
(3,651)
(3,966)
309
(1,380)
(1,444)
(3,895)
(1,380)
The factors that are considered to affect total shareholders return (“TSR”) are summarised below:
Share price at financial year end ($)
Total dividends declared ($)
Basic earnings per share (cents)
2021
$000’
2020
$000’
2019
$000’
2018
$000’
2017
$000’
0.36
-
(1.64)
0.43
-
(2.19)
0.65
-
(3.51)
0.88
1.45
-
-
(3.55)
(1.35)
This concludes the Remuneration Report
Information Given to Auditors
Each of the directors has confirmed that so far as he is aware, there is no relevant audit information of which the Group's
auditors are unaware, and that he has taken all the steps that he ought to have taken as a director in order to make
himself aware of any relevant audit information and to establish that the Group's auditors are aware of that information.
Creditor Payment Policy
The Group’s policy during the year was to pay suppliers in accordance with agreed terms and this policy will continue for
the year ended 30 June 2021. The Group does not follow a specific code or standard in respect of such creditors. As at
30 June 2021, the Group’s trade creditors represented 66 days’ purchases (2020: 42 days).
17
Directors' Report
Financial instruments and risks
Structural Monitoring Systems Plc
The Board has overall responsibility for the determination of the Group's risk management objectives and policies and,
whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that
ensure the effective implementation of the objectives and policies to the CEO. The Board receives monthly reports from
the finance function through which it reviews the effectiveness of the processes put in place and the appropriateness of
the objectives and policies it sets.
The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting
the Group's competitiveness and flexibility. Further details regarding these policies are set out below:
The Group is exposed through its operations to the following financial risks:
- credit risk;
- liquidity risk;
- foreign exchange risk
The Group is exposed to the usual credit risk associated with selling on credit and manages this through credit control
procedures. AEM receivables are reviewed each month as part of the routine monthly operating review conducted by
the Board. Further information is provided in note 24 in the notes to the financial statements.
As a result of operations in Canada, USA, Australia and United Kingdom the Group’s assets and liabilities can be
affected by movements in the C$/A$, US$/A$ and UK£/A$ exchange rates.
The Group also has transactional currency exposures. Such exposure arises from sales or purchases by an operating
unit in currencies other than the unit’s functional currency.
The Group is exposed to foreign currency risk following the acquisition of a Canadian-based subsidiary and the risk
could increase in the future as international commercialisation of the Group’s technologies increase. There is currently
no form of currency hedging or risk strategy in place, but this policy will be reviewed and strategies implemented once
the review is complete.
Liquidity risk arises from the Group's management of working capital. It is the risk that the Group will encounter difficulty
in meeting its financial obligations as they fall due.
In order to maintain liquidity to ensure that sufficient funds are available for ongoing operations and future developments,
the Group monitors forecast cash inflows and outflows on a monthly basis. The Group has an established operating loan
facility for up to C$5 million to assist with day to day operating requirements.
Business risks and uncertainties
The Group has a reliance on a key customer at the present time. The customer accounts for $7.076 million of revenues
totalling $15.340 million. The relationship with the customer is secured by a licence agreement and the Group is
diversifying its customer base.
The ongoing impact of the Coronavirus (COVID-19) pandemic is uncertain and the Group was impacted by supply chain
constraints, demand uncertainty within the industry, social distancing measures and the move to a spilt shift system
during the year ended 30 June 2021. It is not practicable to estimate the potential impact, positive or negative, after the
reporting date. The pandemic may affect future travel, movement of labour and enforce supply chain constraints.
The Company continues to make progress towards the commercialisation of its comparitive vacuum monitoring
technology (CVM™). Further details can be found in the Strategic Report.
Future developments
The Directors have discussed the future developments for the AEM business and CVM™ technology within the Strategic
Report on pages 4 to 5, in accordance with Section 414C of the Companies Act 2016.
By order of the Board
Will Rouse
Executive Chairman
30th September 2021
18
Statement of Profit or Loss and Other
Comprehensive Income
For the Year Ended 30 June 2021
Note
Continuing operations
Revenue
Sales
Cost of sales
Gross profit
Other income
Loss on debt for equity swap
Depreciation and amortisation
Employee expenses
Impairment charges
Occupancy expenses
4
4
5
Research and development expenses
Sales and marketing
Share-based payment expense
22
Administrative expenses
Operating loss before finance costs
and tax
Finance income
Finance costs
Foreign exchange (losses)/gains
Income tax expense
Loss after finance costs and tax from
continuing operations
6
Structural Monitoring Systems Plc
Consolidated
Parent
2021
$000’
2020
$000’
2021
$000’
2020
$000’
15,340
19,095
(8,258)
(10,204)
7,082
664
(52)
(967)
(5,212)
-
(61)
(181)
(284)
(1,116)
(1,114)
8,891
73
(127)
(1,052)
(5,277)
-
(62)
(345)
(738)
(1,952)
(1,604)
-
-
-
337
(52)
(2)
12
-
12
73
(127)
(39)
(1,070)
(1,075)
(387)
(61)
(41)
(340)
(446)
(62)
-
(585)
(1,116)
(1,952)
(382)
(472)
(1,241)
(2,193)
(3,114)
(4,673)
1
(19)
(204)
(496)
3
(32)
150
(477)
-
(3)
-
-
-
(9)
(1)
-
(1,959)
(2,549)
(3,117)
(4,683)
Loss attributable to members of the parent
(1,959)
(2,549)
(3,117)
(4,683)
Other comprehensive income/(loss)
Items that may be reclassified
subsequently to profit or loss:
Foreign currency translation
Total comprehensive income/(loss) for the year
Loss for the year attributable to owners of Structural
Monitoring Systems Plc
Earnings per share (cents per share)
Basic for loss from continuing operations
Diluted for loss from continuing operations
100
100
(273)
(273)
-
-
-
-
(1,859)
(2,822)
(3,117)
(4,683)
7
7
(1.64)
(1.64)
(2.19)
(2.19)
The accompanying notes form an integral part of the financial statements.
19
Statement of Financial Position
As at 30 June 2021
Structural Monitoring Systems Plc
Company number: 4834265
Assets
Non-current assets
Loans to subsidiaries
Plant and equipment
Right-of-use assets
Intangible assets and goodwill
Total non-current assets
Current assets
Trade receivables
Other receivables
Inventory
Cash and cash equivalents
Total current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Borrowings
Deposits
Lease liabilities
Provisions
Total current liabilities
Non-current liabilities
Loans from subsidiaries
Lease liabilities
Deferred tax
Total non-current liabilities
Total liabilities
Net assets
Equity attributable to equity holders of the parent
Issued capital
Share premium reserve
Accumulated losses
Other reserves
Total equity
Consolidated
Parent
Note
2021
$000’
2020
$000’
2021
$000’
2020
$000’
14
11
12
13
8
9
10
15
16
17
18
19
14
18
6
23
23
23
-
444
373
3,718
4,535
2,347
511
7,088
2,381
12,327
16,862
-
342
163
3,201
3,706
2991
363
7,122
2,545
13,021
16,727
9,944
11,397
3
-
-
5
-
9,947
11,402
86
22
136
-
244
3
116
184
-
303
10,191
11,705
1,845
1,504
434
245
-
-
268
126
480
43
208
640
-
-
-
-
-
43
75
-
2,239
2,875
434
363
-
70
539
609
-
54
397
451
-
-
-
-
921
19
-
940
2,848
14,014
3,326
13,401
434
1,303
9,757
10,402
31,949
36,492
31,946
35,967
31,949
36,492
31,946
35,967
(53,194)
(56,028)
(57,056)
(58,732)
(1,233)
14,014
1,516
(1,628)
1,221
13,401
9,757
10,402
The accompanying notes form an integral part of the financial statements.
Approved by the Board and authorised for issue on 30th September 2021
……………………………………….
W. Rouse, Executive Chairman
20
Statement of Cash Flows
For the Year Ended 30 June 2021
Structural Monitoring Systems Plc
Consolidated
Parent
Note
2021
$000’
2020
$000’
2021
$000’
2020
$000’
16,569
19,499
254
82
(14,853)
(19,041)
(880)
(1,507)
1
(19)
3
(119)
-
(3)
-
(10)
20(a)
1,698
342
(629)
(1,435)
(407)
(119)
-
-
1,291
223
(629)
(1,435)
Cashflows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Interest paid
Net cash provided by/(used in) operating
activities before tax paid
Income tax paid
Net cash provided by/(used in) operating
activities
Cashflows from investing activities
Payments for development expenses capitalised
Payments for plant and equipment
Net cash used in investing activities
Cashflows from financing activities
Loan from subsidiaries
Proceeds from issue of shares
Proceeds pending issue of shares
Issue costs
Repayment of lease liabilities
Net cash provided by financing activities
Net increase in cash held
Cash and cash equivalents at beginning of
year
Effect of foreign exchange on balances
Net cash and cash equivalents at end of year
20(b)
Cash and cash equivalents
Borrowings
Net cash and cash equivalents at end of year
The accompanying notes form an integral part of the financial statements.
(877)
(287)
(1,164)
-
503
-
(18)
(458)
27
154
-
(78)
(78)
-
887
43
(12)
(386)
532
677
2,065
1,562
162
2,381
2,381
-
2,381
(174)
2,065
2,545
(480)
2,065
-
-
-
144
144
503
-
(18)
-
-
-
-
592
887
43
(12)
(75)
629
1,435
-
-
-
-
-
-
-
-
-
-
-
-
-
-
21
Statement of Changes in Equity
For the Year Ended 30 June 2021
Structural Monitoring Systems Plc
Consolidated
At 1 July 2019
Loss for the year
Foreign currency translation
Total comprehensive loss for the year
Transactions with owners:
Issue of performance rights to directors
and staff/consultants
Issue of shares to directors and staff/
consultants
Conversion of performance rights to
shares
Share issue costs
Total transactions with owners
Issued
capital
Accumulated
losses
Share
premium
reserve
Share-
based
payments
reserve
Foreign
currency
translation
reserve
Total
$000’
$000’
$000’
$000’
$000’
$000’
31,932
(54,543)
35,106
1,586
(1,703)
12,378
-
-
-
-
10
4
-
14
(2,549)
-
(2,549)
-
515
549
-
1,064
-
-
-
-
-
-
-
-
(2,549)
(273)
(273)
(273)
(2,822)
2,459
873
-
-
(553)
(12)
861
-
1,906
3,492
-
-
-
-
-
2,459
1,398
-
(12)
3,845
(1,976)
13,401
At 30 June 2020
31,946
(56,028)
35,967
At 1 July 2020
Loss for the year
Foreign currency translation
Total comprehensive loss for the year
Transactions with owners:
Issue of performance rights to directors
and staff/consultants
Issue of shares to directors and staff/
consultants
Conversion of performance rights to
shares
Expiry of performance rights
Share issue costs
Total transactions with owners
31,946
-
-
-
-
2
1
-
-
3
(56,028)
(1,959)
-
(1,959)
-
-
815
3,978
-
4,793
35,967
3,492
(1,976)
-
-
-
-
-
-
-
1,467
543
478
-
-
(18)
525
(816)
(3,978)
-
(2,849)
-
100
100
-
-
-
-
-
-
13,401
(1,959)
100
(1,859)
1,467
1,023
-
-
(18)
2,472
At 30 June 2021
31,949
(53,194)
36,492
643
(1,876)
14,014
22
Statement of Changes in Equity
For the Year Ended 30 June 2021
Structural Monitoring Systems Plc
Issued
capital
Accumulated
losses
Share
premium
reserve
Share-
based
payments
reserve
Foreign
currency
translation
reserve
Total
Parent
At 1 July 2019
Loss for the year
Total comprehensive loss for the year
Transactions with owners:
Issue of performance rights to
directors and staff
Issue of shares to directors and staff
Conversion of performance rights to
shares
Share issue costs
Total transactions with owners
$
31,932
-
-
-
10
4
-
14
$
(55,113)
(4,683)
(4,683)
-
515
549
-
1,064
$
$
$
35,106
1,586
(2,271)
-
-
-
-
-
2,459
873
-
-
(553)
(12)
861
-
1,906
-
-
-
-
-
-
-
$
11,240
(4,683)
(4,683)
2,459
1,398
-
(12)
3,845
At 30 June 2020
31,946
(58,732)
35,967
3,492
(2,271)
10,402
At 1 July 2020
Loss for the year
Total comprehensive loss for the year
Transactions with owners:
Issue of performance rights to
directors and staff
Issue of shares to directors and staff
Conversion of performance rights to
shares
Expiry of performance rights
Share issue costs
Total transactions with owners
31,946
(58,732)
35,967
3,492
(2,271)
-
-
-
2
1
-
-
3
(3,117)
(3,117)
-
-
815
3,978
-
4,793
-
-
-
-
-
1,467
543
478
-
-
(18)
525
(816)
(3,978)
-
(2,849)
-
-
-
-
-
-
-
-
At 30 June 2021
31,949
(57,056)
36,492
643
(2,271)
The accompanying notes form an integral part of the financial statements.
10,402
(3,117)
(3,117)
1,467
1,023
-
-
(18)
2,472
9,757
23
Notes to the Financial Statements
For the Year Ended 30 June 2021
1.
Corporate information and authorisation of financial statements
Structural Monitoring Systems Plc
The financial statements of Structural Monitoring Systems Plc for the year ended 30 June 2021 were authorised for issue in
accordance with a resolution of the directors on 30 September 2021 and the statements of financial position were signed on
the Board’s behalf by Will Rouse.
Structural Monitoring Systems Plc is a public limited company incorporated and domiciled in the United Kingdom. The
Company’s ordinary shares, when held as a Chess Depository Interest (CDI) and registered on the CDI register, are tradable
on the Australian Securities Exchange (ASX). Ordinary shares on the UK register cannot be traded on the Australian Securities
Exchange.
2.
(a)
Summary of significant accounting policies
Basis of preparation
The consolidated financial statements and those of the parent entity are presented in Australian dollars which is the Company’s
functional currency and are rounded to the nearest Australian dollar. The average AUD:GBP rate for the year was 0.5546
(2020: 0.5328) and the reporting date AUD:GBP spot rate was 0.5429 (2020: 0.5586). The average AUD:CAD rate for the
year was 0.9572 (2020: 0.9003) and the reporting date AUD:CAD spot rate was 0.9318 (2020: 0.9387). CAD is the functional
currency of Anodyne Electronics Manufacturing Corp (AEM), a wholly-owned subsidiary of the Company.
(b)
Financial Position
The Group reported a net loss after tax of $1.959m (2020: loss $2.549m) and an operating cash inflow of $1.698m
(2020: inflow $0.342m) before tax for the year ended 30 June 2021 and reported working capital of $10.088m including
cash of $2.381m as at that date. Subsequent to the reporting date the Group purchased Eagle Audio for C$4.118m
funded through cash and a partial drawdown of AEM’s loan facility. A condition precedent of the loan facility is the
deposit of US$800K as security, which has been provided by a director of the Company on commercial terms.
The financial statements have been prepared on the going concern basis, which contemplates continuity of normal
business activities, the continued financial performance of AEM, the contribution of the newly acquired business, Eagle
Audio and the realisation of assets and discharge of liabilities in the normal course of business as well as the continued
availability of an established operating loan facility of up to C$5 million of which C$4.3m had been drawn down as at
the date of this report. The facility, which is provided by AEM’s bankers, while repayable on demand, is long standing
and is secured on receivables and inventory and is subject to loan covenants. The Directors expect compliance with the
covenants to continue to be met.
The Directors have prepared forecasts in respect of future trading. Achievement of such forecasts would allow the entity
to manage well within its current funding facilities for the foreseeable future. In developing these forecasts, the Directors
have made assumptions and performed sensitivity analysis on variables such as revenues and employee costs based
upon their view of the current and future economic conditions that will prevail over the forecast period of 12 months from
the date of signing these financial statements. The Directors have not made any assumptions regarding generation of
new revenue streams in the year ahead.
The Directors and senior management will formally consider all measures which would favourably reduce/defer
operational expenses should actual cash flows be less than budgeted, as they have done in previous years. The
director, who has provided a deposit of US$800K as security for the AEM loan facility, has confirmed to the Board that
he will not seek part or full repayment of this deposit for a period of at least 12 months from the date of this report, or
until the Company elects to repay the deposit, whichever is earlier.
The Directors therefore continue to adopt the going concern basis of accounting in preparing the financial statements.
(c)
Statement of compliance
The Group’s financial statements have been prepared in accordance with International Financial Reporting Standards
(“IFRS”) as adopted by the European Union as they apply to the financial statements of the Group for the year ended 30
June 2021 and are applied in accordance with the Companies Act 2006. The Group and the Company have not adopted
any standards or interpretations in advance of the required implementation dates. It is not expected that adoption of
standards or interpretations which have been issued by the International Accounting Standards Board but have not
been adopted will have a material impact on the financial statements for the year ended 30 June 2021. See note 2(d)
for further consideration.
24
Notes to the Financial Statements
For the Year Ended 30 June 2021
2.
Summary of significant accounting policies (continued)
(d)
Accounting standards and Interpretations
Structural Monitoring Systems Plc
New Accounting Standards and Interpretations not yet mandatory or early adopted
The Directors have also reviewed all of the new and revised Standards and Interpretations in issue not yet adopted for
the year ended 30 June 2021. As a result of this review the Directors have determined that there is no material impact
of the Standards and Interpretations in issue not yet adopted on the Group and, therefore, no change is necessary to
Group accounting policies.
(e)
Basis of consolidation
The consolidated financial statements incorporate the assets, liabilities and results of entities controlled by Structural
Monitoring Systems Plc at the end of the reporting period. A controlled entity is any entity over which Structural Monitoring
Systems Plc is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to
affect those returns through its power to direct the activities of the entity.
Where controlled entities have entered or left the Group during the year, the financial performance of those entities is
included only for the period of the year that they were controlled.
In preparing the consolidated financial statements, all inter-group balances and transactions between entities in the
consolidated group have been eliminated in full on consolidation.
Non-controlling interests, being the equity in a subsidiary not attributable, directly or indirectly, to a parent, are reported
separately within the equity section of the consolidated statement of financial position and statement of comprehensive
income. The non-controlling interests in the net assets comprise their interests at the date of the original business
combination and their share of changes in equity since that date.
Business Combinations
Business combinations occur where an acquirer obtains control over one or more businesses. A business combination
is accounted for by applying the acquisition method, unless it is a combination involving entities or businesses under
common control. The business combination will be accounted for from the date that control is attained, whereby the fair
value of the identifiable assets acquired and liabilities (including contingent liabilities) assumed is recognised (subject
to certain limited exemptions).
When measuring the consideration transferred in the business combination, any asset or liability resulting from a
contingent consideration arrangement is also included. Subsequent to initial recognition, contingent consideration
classified as equity is not remeasured and its subsequent settlement is accounted for within equity. Contingent
consideration classified as an asset or liability is remeasured at the end of each reporting period to fair value, recognising
any change to fair value in profit or loss, unless the change in value can be identified as existing at acquisition date.
All transaction costs incurred in relation to the business combination are expensed to the statement of profit or loss and
other comprehensive income. The acquisition of a business may result in the recognition of goodwill or a gain from a
bargain purchase.
(f)
Foreign currency translation
(i) Functional currency
Items included in the financial statements of each of the companies in the Group are measured using the currency of
the primary economic environment in which the entity operates (‘the functional currency’). The functional currency of
Structural Monitoring Systems Plc is Australian dollars and its presentation currency is Australian dollars. The functional
currency of its overseas subsidiary, Structural Monitoring Systems Limited, is Australian dollars and the functional
currency of its overseas subsidiary, Anodyne Electronics Manufacturing Corp is Canadian dollars.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the
dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and
from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are
recognised in the statement of comprehensive income.
25
Notes to the Financial Statements
For the Year Ended 30 June 2021
Structural Monitoring Systems Plc
2.
Summary of significant accounting policies (continued)
(f)
Foreign currency translation (continued)
(iii) Group entities
The results and financial position of all the Company entities (none of which has the currency of a hyperinflationary
economy) that have a functional currency different from the presentation currency are translated into the presentation
currency as follows:
•
•
•
Assets and liabilities for each statement of financial position presented are translated at the closing rate at the
date of that statement of financial position;
Income and expenses for each statement of profit and loss and other comprehensive income are translated at
average exchange rates (unless this is not a reasonable approximation of the rates prevailing on the transaction
dates, in which case income and expenses aretranslated at the dates of the transactions); and
All resulting exchange differences are recognised as a separate component of equity and in other comprehensive
income.
On consolidation, exchange differences arising from the translation of any net investment in foreign entities are taken to
foreign currency translation reserve.
When a foreign operation is sold or any borrowings forming part of the net investment are repaid, a proportionate share
of such exchange differences are recognised in the statement of comprehensive income, as part of the gain or loss on
sale where applicable.
g)
Impairment of property, plant and equipment
At each reporting date, the Group assesses whether there is any indication that an asset may be impaired. Where an
indicator of impairment exists, the Group makes a formal estimate of the 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)
Financial instruments
Financial assets and financial liabilities are recognised when the Group becomes party to the contractual provisions of
the instrument.
Financial assets
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand and other short-term deposits held by the Group with
maturities of less than three months. 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.
Trade, Group and other receivables
Trade, Group and other receivables are recorded initially at fair value and subsequently measured at amortised cost. This
results in their recognition at nominal value less an allowance for any doubtful debts. The allowance for doubtful debts
was recognised under an “incurred loss” model until 1 July 2018 and therefore it was dependent upon the existence
of an impairment event. From 1 July 2018, the allowance for doubtful debts is recognised based on management’s
expectation of losses without regard to whether an impairment trigger happened or not (an “expected credit loss” model).
26
Notes to the Financial Statements
For the Year Ended 30 June 2021
Structural Monitoring Systems Plc
2.
Summary of significant accounting policies (continued)
(h)
Financial instruments (continued)
Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements
entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after
deducting all of its liabilities.
Trade, Group and other payables
Trade, Group and other payables are initially measured at fair value net of direct transaction costs and subsequently
measured at amortised cost.
Equity instruments
Equity instruments issued by the Group are recorded at fair value on initial recognition net of transaction costs.
Derecognition of financial assets (including write-offs) and financial liabilities
A financial asset (or part thereof) is derecognised when the contractual rights to cash flows expire or are settled, or
when the contractual rights to receive the cash flows of the financial asset and substantially all the risks and rewards
of ownership are transferred to another party. When there is no reasonable expectation of recovering a financial asset
it is derecognised (“written off”). The gain or loss on derecognition of financial assets measured at amortised cost is
recognised in profit or loss. A financial liability (or part thereof) is derecognised when the obligation specified in the
contract is discharged, cancelled or expires. Any difference between the carrying amount of a financial liability (or part
thereof) that is derecognised and the consideration paid is recognised in profit or loss.
Impairment of financial assets
An impairment loss is recognised for the expected credit losses on financial assets when there is an increased probability
that the counterparty will be unable to settle an instrument’s contractual cash flows on the contractual due dates, a
reduction in the amounts expected to be recovered, or both. The probability of default and expected amounts recoverable
are assessed using reasonable and supportable past and forward-looking information that is available without undue
cost or effort. The expected credit loss is a probability-weighted amount determined from a range of outcomes and takes
into account the time value of money.
For trade receivables, material expected credit losses are measured by applying an expected loss rate to the gross
carrying amount. The expected loss rate comprises the risk of a default occurring and the expected cash flows on default
based on the ageing of the receivable. The risk of a default occurring always takes into consideration all possible default
events over the expected life of those receivables (“the lifetime expected credit losses”). Different provision rates and
periods are used based on groupings of historic credit loss experience by product type, customer type and location.
For intercompany loans that are repayable on demand, expected credit losses are based on the assumption that
repayment of the loan is demanded at the reporting date. If the subsidiary does not have sufficient accessible highly
liquid assets in order to repay the loan if demanded at the reporting date, an expected credit loss is calculated. This
is calculated based on the expected cash flows arising from the subsidiary, and weighted for probability likelihood of
variations in cash flows.
Definition of default
The loss allowance on all financial assets is measured by considering the probability of default.
Receivables are considered to be in default when the principal or any interest is significantly more than the associated
credit terms past due, based on an assessment of past payment practices and the likelihood of such overdue amounts
being recovered.
27
Notes to the Financial Statements
For the Year Ended 30 June 2021
Structural Monitoring Systems Plc
2.
Summary of significant accounting policies (continued)
(h)
Financial instruments (continued)
Write-off policy
Receivables are written off by the Group when there is no reasonable expectation of recovery, such as when the
counterparty is known to be going bankrupt, or into liquidation or administration. Receivables will also be written off
when the amount is more than materially past due.
(i)
Provisions
Provisions are recognised when the Group has a present obligation (legal or 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 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.
(j)
Share-based payment transactions
The Group provides benefits to employees (including directors) in the form of share-based payment transactions,
whereby employees render services in exchange for rights over shares (‘equity-settled transactions’). The fair value of
options is determined using the Black-Scholes pricing model or using the trinomial option pricing model.
There is currently one plan in place to provide these benefits, the Employee Incentive Plan (EIP), which provides
benefits to directors and employees.
The cost of these equity-settled transactions with employees is measured by reference to the fair value at the date at
which they are granted.
In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked
to the price of the shares of Structural Monitoring Systems Plc (‘market conditions’).
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in
which the performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled
to the award (‘vesting date’).
The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects the
extent to which the vesting period has expired. This opinion is formed based on the best available information at the
reporting date. No adjustment is made for the likelihood of market performance conditions being met as the effect of
these conditions is included in the determination of fair value at grant date.
(k)
Revenue
Revenue recognition – Repair services
Repairs meet the definition of a distinct service whereby the associated revenue is to be recognised at a point in time,
evidenced by the completion of the agreed upon service and delivery of the repaired parts/components to the customer.
The point in time criteria are met as the following transfers of control exist: (a) The entity has the present right to payment
for the asset; (b) the customer has the legal right to the asset; (c) the entity has transferred physical possession of
the asset; (d) the customer has the significant risks and rewards of ownership of the asset; and (e) the customer has
accepted the asset. Pricing is fixed and determinable pursuant to agreed upon pricing lists that establish stand-alone
selling prices.
28
Notes to the Financial Statements
For the Year Ended 30 June 2021
Structural Monitoring Systems Plc
2.
Summary of significant accounting policies (continued)
(k)
Revenue (continued)
Revenue recognition – Product sales (stock or customised parts)
Product sales meet the definition of a distinct service whereby the associated revenue is to be recognised at a point
in time, evidenced by the delivery of the products to the customer. The point in time criteria are met as the following
transfers of control exist: (a) The entity has the present right to payment for the asset; (b) the customer has the legal right
to the asset; (c) the entity has transferred physical possession of the asset; (d) the customer has the significant risks and
rewards of ownership of the asset; (e) the customer has accepted the asset. Pricing is fixed and determinable pursuant
to agreed upon pricing lists that establish stand-alone selling prices. There are no further performance obligations
associated with these sales.
At times, multiple services or goods are sold to customers, however, contracts detail out separate prices for each
different good or service purchased. As each service or good purchased has a standalone selling price in the negotiated
contract there is no need to allocate a purchase price across multiple deliverables. In addition, each contract includes
payment terms.
The Group recognises revenue on shipping for stock parts, customised product and customer product. When the
Group provides a service (prototyping) it generally recognises revenue when the prototype is shipped or as the service
is provided if there is no item to be shipped. The Group recognises revenue when it satisfies its performance obligation
under the contract (when the Group ships the product which is also when the customer obtains control over the product
or service).
(l)
Inventories
Raw materials, work in progress and finished goods are stated at the lower of cost and net realisable value on‘a ‘first
in first out’ basis. Cost comprises of direct materials and delivery costs, direct labour, import duties and other taxes,
an appropriate proportion of variable and fixed overhead expenditure based on normal operating capacity, and, where
applicable, transfers from cash flow hedging reserves in equity. Costs of purchased inventory are determined after
deducting rebates and discounts received or receivable.
Stock in transit is stated at the lower of cost and net realisable value. Cost comprises of purchase and delivery costs,
net of rebates and discounts received or receivable.
Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion
and the estimated costs necessary to make the sale.
(m)
Property, plant and equipment
Plant and equipment and leasehold improvements are stated at historical cost less accumulated depreciation and
impairment. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Depreciation is calculated on a straight-line basis to write off the net cost of each item of property, plant and equipment
(excluding land) over their expected useful lives as follows:
Plant and equipment
Leasehold improvements
3 - 5 years
5 years
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting
date.
An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to
the consolidated entity. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or
loss.
29
Notes to the Financial Statements
For the Year Ended 30 June 2021
Structural Monitoring Systems Plc
2.
Summary of significant accounting policies (continued)
(n)
Right-of-use assets
A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost,
which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or
before the commencement date net of any lease incentives received, any initial direct costs incurred, and, except
where included in the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the
underlying asset, and restoring the site or asset.
Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated
useful life of the asset, whichever is the shorter. Where the consolidated entity expects to obtain ownership of the leased
asset at the end of the lease term, the depreciation is over its estimated useful life. Right-of use assets are subject to
impairment or adjusted for any remeasurement of lease liabilities.
The Group has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with
terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or
loss as incurred.
(o)
Intangible assets
Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair value
at the date of the acquisition. Intangible assets acquired separately are initially recognised at cost. Finite life intangible
assets are subsequently measured at cost less amortisation and any impairment. The gains or losses recognised in the
statement of profit and loss and other comprehensive income arising from the derecognition of intangible assets are
measured as the difference between net disposal proceeds and the carrying amount of the intangible asset. The method
and useful lives of finite life intangible assets are reviewed annually. Changes in the expected pattern of consumption or
useful life are accounted for prospectively by changing the amortisation method or period.
Goodwill
Goodwill arises on the acquisition of a business. Goodwill is not amortised.
Research and development
Research costs are expensed in the period in which they are incurred. Development costs are capitalised when it is
probable that the project will be a success considering its commercial and technical feasibility; the consolidated entity
is able to use or sell the asset; the consolidated entity has sufficient resources; and intent to complete the development
and its costs can be measured reliably. Capitalised development costs are amortised on a straight-line basis over the
period of their expected benefit, being their finite life of 10 years.
Certifications
Significant costs associated with certifications are amortised on a straight line basis over the period of their expected
benefit, being the finite life of 5 years.
Licence agreement
Significant costs associated with a licence agreement are amortised on a straight line basis over the period of their
expected benefit, being their finite life of 5 years.
Technology
Significant costs associated with technological intellectual property are amortised on a straight line basis over the period
of their expected benefit, being their finite life of 10 years.
30
Notes to the Financial Statements
For the Year Ended 30 June 2021
Structural Monitoring Systems Plc
2.
Summary of significant accounting policies (continued)
(p)
Impairment of non-financial assets
Goodwill and other intangible assets that have an indefinite useful life are not subject to amortisation and are tested
annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired.
Other non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying
amount exceeds its recoverable amount.
Recoverable amount is the higher of an asset’s fair value less costs of disposal and value-in-use. The value-in-use is
the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the
asset or cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped
together to form a cash-generating unit.
(q)
Income tax
The charge for taxation for the year is the tax payable on the profit or loss for the year based on the applicable income
tax rate for each jurisdiction and takes into account deferred tax. Deferred tax is the tax expected to be payable or
recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the
corresponding tax bases used in the computation of taxable profit or loss, and is accounted for using the balance sheet
method.
Deferred tax assets are only recognised to the extent that it is probable that future taxable profit will be available in the
foreseeable future against which the temporary differences can be utilised.
(r)
Other taxes
Revenues, expenses and assets are recognised net of the amount of VAT/GST except:
Where the VAT/GST incurred on a purchase of goods and services is not recoverable from the taxation authority,
in which case the VAT/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 VAT/GST included.
The net amount of VAT/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 VAT/GST component of cash flows
arising from 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 VAT/GST recoverable from, or payable to, the
taxation authority.
(s)
Borrowings
Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs.
They are subsequently measured at amortised cost using the effective interest method.
31
Notes to the Financial Statements
For the Year Ended 30 June 2021
Structural Monitoring Systems Plc
2.
Summary of significant accounting policies (continued)
(t)
Lease liabilities
A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the
present value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit
in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. Lease payments
comprise of fixed repayments less any lease incentives receivable, variable lease payments that depend on an index
or a rate, amounts expected to be paid under residual value guarantees, exercise price of a purchase option when
the exercise of the option is reasonably certain to occur and any anticipated termination penalties. The variable lease
payments that do not depend on an index or a rate are expensed in the period in which they are incurred.
Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are
remeasured if there is a change in the following: future lease payments arising from a change in an index or a rate
used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability is
remeasured, an adjustment is made to the corresponding right-of-use asset, or to profit or loss if the carrying amount of
the right-of-use asset is fully written down.
(u)
Employee entitlements
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to
be settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the
liabilities are settled.
Defined contribution superannuation expense
Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred.
(v)
Investments in subsidiary undertakings
Investments in subsidiary undertakings are accounted for at cost less, where appropriate, allowances for impairment.
(w)
Critical accounting estimates and judgements
The preparation of the consolidated financial statements requires management to make judgements, estimates and
assumptions concerning the future which impact the application of accounting policies and reported amounts of assets,
liabilities, income and expenses. The accounting estimates resulting from these judgements and assumptions seldom
equal the actual results but are based on historical experiences and future expectations.
i)
Share-based payment transaction:
The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity
instruments at the date at which they are granted. The fair value is determined using either a Black-Scholes or binomial
pricing models, using the assumptions detailed in note 22 Share-based payments in the notes to the financial statements.
ii)
Impairment resulting from acquisition of Anodyne Electronics Manufacturing (AEM)
Impairment of goodwill and intangible assets
An annual review is carried out (as set out in note 13) as to whether the current carrying value of goodwill is impaired.
Detailed calculations are performed based on (i) discounting expected pre-tax cash flows of the relevant cash generating
units and discounting these at an appropriate discount rate; and/or (ii) the comparison of carrying value to the net selling
price of the cash generating unit; the determination of these factors require the exercise of judgement.
32
Notes to the Financial Statements
For the Year Ended 30 June 2021
Structural Monitoring Systems Plc
2.
Summary of significant accounting policies (continued)
(w)
Critical accounting estimates and judgements (continued)
iii)
Impairment of inter-company receivables
The Company has intercompany loans to its subsidiary companies which are repayable on demand. As the subsidiaries
did not have sufficient highly liquid resources to repay the loans at 30 June 2021, an expected credit loss provision is
calculated under IFRS 9.
For Structural Monitoring Systems Canada Corporation, the calculation is based upon the expectation that AEM will
continue to trade profitably in the future and that this will allow it to repay the loans over time. Further details on the
impairment provision are set out in note 14 in the notes to the financial statememts.
(iv)
Coronavirus (COVID-19) pandemic
Judgement has been exercised in considering the impacts that the Coronavirus (COVID-19) pandemic has had, or may
have, on the Group entity based on known information. The consideration extends to the nature of the products and
services offered, customers, supply chain, staffing and geographic regions in which the Group operates. Other than
as addressed in specific notes, there does not currently appear to be either any significant impact upon the financial
statements or any significant uncertainties with respect to events or conditions which may impact the consolidated entity
unfavourably as at the reporting date or subsequently as a result of the Coronavirus (COVID-19) pandemic.
As at 30 June 2021, there are no other critical accounting estimates and judgements contained in the financial report.
33
Notes to the Financial Statements
For the Year Ended 30 June 2021
Structural Monitoring Systems Plc
3.
Segment information
The Group has identified its operating segments based on the internal reports that are reviewed and used by the Board
of Directors (chief operating decision makers) in assessing performance and determining the allocation of resources.
The Group operates predominantly in two industries, being structural health monitoring (CVM™) and the design and
manufacture of avionics and audio systems. A third segment refers to the intellectual property (IP) held in another
subsidiary of the Parent (CVM™ IP). Company overheads are recorded in the Parent enity operating in the structural
health monitoring segment (CVM™).
Revenue to third parties by origin is Canada (for Avionics/audio) segment and Australia for (CVM™ segment). The
Parent Company is registered in the UK.
The following tables present revenue, expenditure and certain asset information regarding geographical segments for
the years ended 30 June 2021 and 30 June 2020:
CVMTM IP
Avionics/
audio
CVMTM
Total
$000’
$000’
$000’
$000’
Year ended 30 June 2021
Revenue
Sale of goods
Rendering of services
Total sales revenue
Other income
Interest revenue
FX gains/(losses)
Total segment revenue
Sales revenue by customer location
Australasia
Africa
Europe
Asia/Middle East
Americas
Total sales revenue
Result
EBITDA*
Depreciation and amortisation
Interest revenue
Finance costs
Profit/(loss) before income tax expense
Income tax expense
Profit/(loss) for the year
Assets and liabilities
Segment assets - current
Segment assets - non current
-
-
-
-
1
(21)
(20)
-
-
-
-
-
-
(388)
-
1
-
(387)
-
(387)
587
-
587
14,337
1,003
15,340
608
-
(183)
15,765
32
11
1,741
722
12,834
15,340
3,084
(965)
-
(16)
2,103
(496)
1,607
11,576
4,533
16,109
-
-
-
56
-
-
14,337
1,003
15,340
664
1
(204)
56
15,801
-
-
-
-
-
-
(3,174)
(2)
-
(3)
32
11
1,741
722
12,834
15,340
(478)
(967)
1
(19)
(3,179)
(1,463)
-
(496)
(3,179)
(1,959)
164
2
166
12,327
4,535
16,862
34
Notes to the Financial Statements
For the Year Ended 30 June 2021
3.
Segment information (continued)
Structural Monitoring Systems Plc
CVMTM IP Avionics/audio
CVMTM
$000’
$000’
$000’
Total
$000’
Segment liabilities - current
Segment liabilities - non current
Other segment information
Capital expenditure
Depreciation
Amortisation
Year ended 30 June 2020
Revenue
Sale of goods
Rendering of services
Total sales revenue
Other income
Interest revenue
FX gains/losses
Total segment revenue
Sales revenue by customer location:
Australasia
Africa
Europe
Americas
Total sales revenue
Result
EBITDA*
Depreciation and amortisation
Interest revenue
Finance costs
Profit/(loss) before income tax expense
Income tax expense
Profit/(loss) for the year
Assets and liabilities
Segment assets - current
Segment assets - non current
Segment liabilities - current
Segment liabilities - non current
Other segment information
Capital expenditure
Depreciation
79
-
79
-
-
-
-
-
-
73
3
(13)
63
-
-
-
-
-
(444)
-
3
(6)
(447)
-
(447)
821
-
821
78
-
78
-
-
1,726
609
2,335
287
555
410
17,183
1,900
19,083
-
-
164
19,247
42
57
1,892
17,092
19,083
4,178
(1,013)
-
(17)
3,148
(477)
2,671
10,909
3,702
14,611
2,434
433
2,866
78
591
434
-
434
-
2
-
12
-
12
-
-
(1)
11
-
-
-
12
12
(4,725)
(39)
-
(9)
(4,773)
-
(4,773)
1,291
4
1,295
363
18
382
-
39
Amortisation
*EBITDA is profit before income tax expense, depreciation, amortisation, finance income and finance costs
422
-
-
2,239
609
2,848
287
557
410
17,195
1,900
19,095
73
3
150
19,321
42
57
1,892
17,104
19,095
(991)
(1,052)
3
(32)
(2,072)
(477)
(2,549)
13,021
3,706
16,727
2,875
451
3,326
78
630
422
35
Notes to the Financial Statements
For the Year Ended 30 June 2021
3.
Segment information (continued)
Major customers
Structural Monitoring Systems Plc
During the year ended 30 June 2021 approximately $7.076m (2020: $9.390m) of the Group’s sales revenue was derived from
sales to a single US aircraft and parts company.
Revenue
In accordance with IFRS 15, the Group’s revenue of $15.340m (2020: $19.095m) is made up of revenue from customers only
and does not include any other revenue. Goods and services are transferred at a point in time, not over time, as detailed in
the group’s revenue recognition policy.
The Group does not have any contract assets or contract liabilities at 30 June 2021 ($nil at 30 June 2020) as the Group does
not fulfil any of its performance obligations in advance of invoicing to its customer or bill in advance for work performed. The
Group however does have contractual balances in the form of trade receivables.
The Group also does not have any contractual costs capitalised at 30 June 2021 ($nil at 30 June 2020) or have any outstanding
performance obligations at 30 June 2021 ($nil at 30 June 2020).
4.
Income and expenses
Income
Other income
SRED Recovery
Mangement fees
Sub-lease income
Finance income/(costs)
Foreign exchange gains/(losses)
Bank interest
Interest and finance charges payable on borrowings
Interest and finance charges payable on lease liabilities
Analysis of expenses by nature
Employee renumeration (see note 5)
Intangible assets
Amortisation of other intangible assets
Property, plant and equipment
Depreciation of plant and equipment
Depreciation of ROU assets
Total depreciation and amortisation
Operating leases
Consumables and raw materials used
Provision for obsolescence
Freight
Auditor’s remuneration (see note 28)
Impairment charges
Share-based payments expense (see note 22)
Research and develpment
Other costs of sales, distribution and administration
Consolidated
Parent
2021
2020
2021
2020
$000’
$000’
$000’
$000’
608
-
56
664
(204)
1
(7)
(12)
(222)
-
-
73
73
150
3
(2)
(30)
121
-
281
56
337
-
-
(3)
-
(3)
-
-
73
73
(1)
-
(2)
(7)
(10)
5,212
5,277
1,070
1,075
410
255
302
557
967
-
7,438
63
183
155
-
1,116
181
1,304
422
272
358
630
1,052
-
9,169
45
249
232
-
1,952
345
3,040
-
2
-
2
2
-
-
-
-
78
387
1,116
41
705
2,327
-
2
37
39
39
-
-
-
-
105
446
1,952
-
1,013
4,630
36
Total income and expenses
10,442
21,361
Notes to the Financial Statements
For the Year Ended 30 June 2021
Structural Monitoring Systems Plc
4.
Income and expenses (continued)
Impairment charges relate to loans to subsidiary undertakings which are written down to the net asset values of those
entities excluding the loans at the reporting date.
5.
Employees and directors
The average number of employees and directors employed by the Group during the year was:
Consolidated
Parent
2021
2020
2021
2020
$000’
$000’
$000’
$000’
Employee and directors’ numbers
Production
Research
Selling and distribution
Administration (including directors)
Employee remuneration
Wages and salaries
Social security costs
Defined contribution costs
Total employee costs
Share-based payments
Consolidated
Parent
2021
No.
2020
No.
2021
No.
2020
No.
52
22
18
15
107
72
19
14
17
122
-
-
2
7
9
-
-
4
7
11
Consolidated
Parent
2021
$000’
2020
$000’
2021
$000’
2020
$000’
4,602
4,624
1,070
1,075
355
255
5,212
1,116
6,328
404
249
5,277
1,952
7,229
-
-
1,070
1,116
2,186
-
-
1,075
1,952
3,027
Wages and salaries, include Directors’ fees and other employee costs amounting to $0.712m, were settled via the issue
of Performance Rights.
Directors remuneration
Directors’ fees, including superannuation, of $0.298m (2020: $0.569m) are included in employee expenses in the
Statement of Profit and Loss and Other Comprehensive Income. Directors’ share-based payments of $0.788m (2020:
$0.757m) are included in share-based payments in the Statement of Profit or Loss and other comprehensive income.
Refer to the Remuneration report in the Director’s report for further details. This also includes details of the highest paid
director.
37
Notes to the Financial Statements
For the Year Ended 30 June 2021
Structural Monitoring Systems Plc
6.
Income tax
The major components of income tax expense for
the years ended 30 June 2021 and 30 June 2020 are:
a) Income tax expense reported in Statement of Profit or Loss
and Other Comprehensive Income
Current tax expense
Deferred tax
Income tax expense reported in statement of
comprehensive income
A reconciliation of income tax expense/(benefit) applicable to
accounting loss before income tax at the statutory income tax
rate to income tax expense at the effective income tax rate for
the years ended 30 June 2021 and 30 June 2020 is as follows:
Accounting loss before tax from continuing operations at the
statutory income tax rate of 27.00%
(2020: 27.50%)
Expenses not assessable for income tax purposes
Deferred tax not recognised
Income tax expense reported in Statement of Profit or Loss
and Other Comprehensive Income
Deferred tax assets/(liabilities)
Deferred tax assets and liabilities are attributable to the following:
Costs deductible over 5 years
Accrued expenses
Tax losses
Tax assets/(liabilties)
Consolidated
Parent
2021
$000’
2020
$000’
2021
$000’
2020
$000’
361
135
496
530
(53)
477
-
-
-
-
-
-
(1,463)
(2,072)
(3,117)
(4,683)
(395)
(570)
(842)
(1,288)
509
(610)
(496)
3
124
12,904
13,031
644
477
3,951
(551)
(477)
365
(2,663)
-
-
-
3 -
63
11,525
11,588
(113)
3,106
3,222
(25)
2,626
2,601
Deferred tax not recognised
(13,031)
(11,588)
(3,222)
(2,601)
Potential deferred tax assets attributable to tax losses have not been brought to account at 30 June 2021 because the
directors do not believe it is appropriate to regard realisation of the deferred tax assets as probable at this point in time.
These benefits will only be obtained if:
i. the Group derives future assessable income of a nature and of an amount sufficient to enable the benefit from
the deductions for the loss to be realised;
ii. the Group continues to comply with conditions for deductibility imposed by law; and
iii. no changes in legislation adversely affect the Group in realising the benefit from the deductions for the loss.
38
Notes to the Financial Statements
For the Year Ended 30 June 2021
Structural Monitoring Systems Plc
6.
Income tax (continued)
2021
Recognised deferred tax liabilities
Movement in deferred tax liabilities during the year:
Brought forward
Charge to Statement of Profit or Loss and Other
Comprehensive Income
Effect of fx on balances
Carried forward
2020
Recognised deferred tax liabilities
Movement in deferred tax liabilities during the year:
Brought forward
Charge/(credit) to Statement of Profit or Loss and Other
Comprehensive Income
Carried forward
7.
Earnings per share
Business
combination
Tax losses
Other timing
difference
$000’
$000’
$000’
Total
$000’
553
(108)
-
445
-
6
-
6
(156)
237
7
88
397
135
7
539
Business
combination
Tax losses
Other timing
difference
$000’
$000’
$000’
Total
$000’
597
(44)
553
-
-
-
(147)
(9)
(156)
450
(53)
397
Basic earnings per share amounts are calculated by dividing net loss for the year attributable to ordinary equity holders
of the parent by the weighted average number of ordinary shares outstanding during the year.
The number of performance rights at 30 June 2021 was 1,692,264 (2020: 4,082,270). Of those performance rights
1,392,264 were exercisable at 30 June 2021 but have been excluded from the diluted earnings per share calculation
on the basis they are anti-dilutive.
The following reflects the income and share data used in the total operations basic loss per share computations:
Net loss attributable to equity holders from continuing
operations
Consolidated
2021
$000’
2020
$000’
(1,959)
(2,549)
Weighted average number of ordinary shares for basic loss per
share
Weighted average number of ordinary shares for diluted loss
per share
Number of shares
Number of shares
119,578,443
116,500,559
119,578,443
116,500,559
39
Notes to the Financial Statements
For the Year Ended 30 June 2021
Structural Monitoring Systems Plc
8.
Current assets – Trade receivables
Trade receivables
9.
Current assets – Prepayments and other receivables
Prepayments
Bank guarantee *
Other receivable
GST receivable
Deposits
*Bank guarantee held in security for a premises lease.
10.
Current assets - Inventory
Raw materials
Work in progress
Finished goods
Provision for obsolescence
Consolidated
Parent
2021
$000’
2020
$000’
2021
$000’
2020
$000’
2,347
2,991
2,991
3,334
86
3
3
-
Consolidated
Parent
2021
$000’
2020
$000’
2021
$000’
2020
$000’
346
134
66
21
47
31
66
90
30
43
511
363
14
-
-
-
8
22
19
-
89
-
8
116
Consolidated
Parent
2021
$000’
2020
$000’
2021
$000’
2020
$000’
4,373
906
1,828
(19)
7,088
3,988
1,089
2,204
(159)
7,122
-
-
136
-
136
-
-
184
-
184
40
Notes to the Financial Statements
For the Year Ended 30 June 2021
11.
Non-current assets – Property, plant and equipment
Consolidated
Balance at 1 July 2020
Additions
Depreciation expense
Effect of FX movement on balances
Balance at 30 June 2021
Balance at 1 July 2019
Additions
Depreciation expense
Effect of FX movement on balances
Balance at 30 June 2020
12.
Non-current assets – Right-of-use assets
Consolidated
Land and buildings – right-of-use
Less: Accumulated depreciation
IT equipment
Less: Accumulated depreciation
Motor vehicle – right-of-use
Less: Accumulated depreciation
Structural Monitoring Systems Plc
Leasehold
improvements
Plant and
equipment
$000’
$000’
Total
$000’
73
-
(25)
-
48
92
12
(30)
(1)
73
269
287
(165)
5
396
448
75
(272)
18
269
342
287
(190)
5
444
540
87
(302)
17
342
Consolidated
Parent
2021
$000’
2020
$000’
2021
$000’
2020
$000’
903
(655)
248
151
(33)
118
19
(12)
7
373
454
(303)
151
-
-
-
17
(5)
12
163
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
The Group leases land and buildings for its offices and a manufacturing facility under a 12 month agreement.
The Group also leases IT equipment and a motor vehicle under 3 year agreements.
13.
Non-current assets – Intangible assets and goodwill
Consolidated
Balance at 1 July 2020
Development expenses capitalised
Amortisation expense
Effect of FX on balances
Balance at 30 June 2021
Goodwill
Certifications
License
agreement
Technology
Total
$000’
$000’
$000’
$000’
$000’
1,444
-
-
10
1,454
586
-
(230)
(2)
354
53
-
(21)
-
32
1,118
901
(146)
5
3,201
901
(397)
13
1,878
3,718
41
Notes to the Financial Statements
For the Year Ended 30 June 2021
Structural Monitoring Systems Plc
13.
Non-current assets – Intangible assets and goodwill (continued)
Goodwill Certifications
Licence
agreement
Technology
Total
$000’
$000’
$000’
$000’
$000’
1,475
-
(31)
1,444
838
(244)
(8)
586
76
(22)
(1)
53
1,295
(156)
(21)
1,118
3,684
(422)
(61)
3,201
Consolidated
Balance at 30 June 2019
Amortisation expense
Effect of FX on balances
Balance at 30 June 2020
Intangible assets
Certifications
AEM possesses distinct aircraft manufacturing and maintenance certifications, which are requisite to the sale and
maintenance of their products in key markets.
Licence agreement
AEM has a licence agreement in place with one of their key customers to be the producer and seller of certain aircraft
instruments. This has identifiable cash flows in the form of future sales to aircraft manufacturing and maintenance
providers who require these instruments.
Technology
AEM has developed proprietary aircraft parts and manufacturing technology which are expected to continue to yield
future sales. This intellectual property is seperable and identifiable to the extent that it could be licensed or acquired. In
addition, there are identifiable future benefits in the form of cash flows from the sale of the resulting products to
AEM customers.
Amortisation
The amortisation period applied to the intangible assets are as follows:
Certifications – 5 years, remaining amortisation period is 3.5 years
Licence agreement – 5 years, remaining amortisation period is 3.5 years
Technology – 10 years, remaining amortisation period is 8.5 years
Impairment testing
Goodwill of $1.454m acquired through business combinations has been allocated to the AEM cash generating unit
(2020: $1.444m).
The impairment test has been carried out using a discounted cash flow model covering a 5 year period. Cash flow
projections are based on a budget for 2021/2022 approved by management and extrapolated for a further 4 years using
a steady rate, together with a terminal value, approved by management. The principal assumptions made in determining
the recoverable amount of goodwill as at 30 June 2020 include revenue growth of 2% per annum from 2023, EBITDA
margin of 19% (2020: 14%) and a discount rate of 12.5% (2020: 14.1%).
If the revised estimated pre-tax discount rate applied to the discounted cash flows had been 10% less favourable in
management’s estimate the Group would need to reduce the carrying value of goodwill by $nil (2020: $nil).
If the EBITDA margin applied to the discounted cash flows had been 10% less favourable in management’s estimate the
effect on the Group would have been to reduce the carrying value of goodwill by $nil (2020: $nil).
The same reduction of $nil (2020: $nil) applies if revenues had been 10% less favourable.
Management believes that other reasonable changes in the key assumptions on which the recoverable amount of
AEM’s division’s goodwill is based would not cause the cash generating unit’s carrying amount to exceed its recoverable
amount.
42
Notes to the Financial Statements
For the Year Ended 30 June 2021
14.
Non-current assets/(liabilities) - Loans
Company
Year ended 30 June 2021
Cost
At 1 July 2020
Arising during the year
At 30 June 2021
Impairment
At 1 July 2020
Impairment charge
Net carrying amount at 30 June 2021
Year ended 30 June 2020
Cost
At 1 July 2019
Arising during the year
At 30 June 2020
Impairment
At 1 July 2019
Impairment charge
Net carrying amount at 30 June 2020
Company
Year ended 30 June 2021
Cost
At 1 July 2020
Received during the year
Assigned during the year
Net carrying amount at 30 June 2021
Year ended 30 June 2020
Cost
At 1 July 2019
Received during the year
Net carrying amount at 30 June 2020
Structural Monitoring Systems Plc
Loans to
subsidiary
undertakings
$000’
Total
$000’
23,014
(1,066)
21,948
11,617
387
12,004
9,944
22,990
24
23,014
(11,171)
(446)
(11,617)
11,397
23,014
(1,066)
21,948
11,617
387
12,004
9,944
22,990
24
23,014
(11,171)
(446)
(11,617)
11,397
Loans from
subsidiary
undertakings
Total
$000’
$000’
921
278
921
278
(1,199)
(1,199)
-
-
305
616
921
305
616
921
Loans to/from subsidiaries are unsecured, have no fixed date for repayment and attract no interest charge. As the parent
does not intend to call in the loans within the next 12 months the loans to subsidiaries are classified as non-current
assets.
43
Notes to the Financial Statements
For the Year Ended 30 June 2021
Structural Monitoring Systems Plc
14.
Non-current assets/liabilities - Loans (continued)
See Note 24 for further details on impairment of intercompany receivables. The consolidated financial statements include
the financial statements of the Company and the subsidiaries listed in the following table:
Structural Monitoring Systems Limited
Registered office:
Suite 116, 1 Kyle Way
Claremont WA 6010
Australia
Structural Health Monitoring Systems Canada Corp (SMSCC)
Registered office:
Unit 15, 1925 Kirschner Road
Kelowna BC Canada
Anodyne Electronics Manufacturing Corp (AEM)
Registered office:
Unit 15, 1925 Kirschner Road
Kelowna BC Canada
15.
Current liabilities – Trade and other payables
Trade payables
Other payables
Taxes payable – HST, payroll tax
Country of
Incorporation
Type of
equity
% Equity Interest
2021
2020
Australia
Ordinary
share
100
100
Canada
Ordinary
share
100
100
Canada
Ordinary
share
100
100
Consolidated
Parent
2021
$000’
2020
$000’
2021
2020
$000’
$000’
897
940
8
602
888
14
1,845
1,504
8
426
-
434
18
227
-
245
Trade payables are non-interest bearing and are normally settled within 30 day terms. Other payables are non-interest
bearing and have an average term of 66 days (2020: 42 days).
44
Notes to the Financial Statements
For the Year Ended 30 June 2021
Structural Monitoring Systems Plc
16.
Current liabilities - Borrowings
Credit card
Overdraft - secured
Consolidated
Parent
2021
$000’
2020
$000’
2021
$000’
2020
$000’
-
-
-
39
441
480
-
-
-
-
-
-
AEM has a secured overdraft facility with a banking institution. The facility has a limit of C$5m (2020:C$3m)secured on
trade receivables and inventory. The variable interest rate on the facility is 3.45%.
17.
Current liabilities - Deposits
Deposit held pending issue of shares
18.
Lease liabilities
Opening balance
Interest charged
Lease assigned during the year
Repayments during the year
Lease finance purchases during the year
Effect of foreign exchange on balances
Closing balance
Spilt between
Current
Non-current
19.
Current liabilities – Provisions
Income tax
Warranties
Consolidated
Parent
2021
$000’
2020
$000’
2021
$000’
2020
$000’
-
43
-
43
Consolidated
Parent
2021
$000’
2020
$000’
2021
$000’
2020
$000’
262
12
(94)
(458)
610
6
338
268
70
338
618
35
-
(414)
-
23
262
208
54
262
94
-
(94)
-
-
-
-
-
-
-
168
7
-
(81)
-
-
94
75
19
94
Consolidated
Parent
2021
$000’
2020
$000’
2021
$000’
2020
$000’
-
126
126
640
-
640
-
-
-
-
-
-
45
Notes to the Financial Statements
For the Year Ended 30 June 2021
Structural Monitoring Systems Plc
20 (a). Reconciliation of the net loss before tax to the net cash flows from operations
Consolidated
Parent
2021
$000’
2020
$000’
2021
$000’
2020
$000’
Loss before tax for the year
(1,463)
(2,072)
(3,117)
(4,683)
Adjustments for:
Loss on debt for equity swap
Share based payments
Directors fees and other employee costs settled via
performance rights
Depreciation and amortisation
Impairment of investments in subsidiaries
Changes in assets and liabilities
Trade receivables
Prepayments and other receivables
Inventory
Trade and other payables
Provisions
Net cash provided by/(used in) operating activities
20 (b). Cash and cash equivalents
Cash at bank
Cash on hand
Credit card
Overdraft
52
1,116
-
967
-
640
(120)
33
347
126
1,698
127
1,952
936
1,052
-
343
(2)
(962)
(1,032)
-
342
52
1,116
776
2
387
(88)
5
49
189
-
127
1,952
936
39
446
(3)
(9)
(184)
(56)
-
(629)
(1,435)
2,428
2,544
1
(48)
-
2,381
1
(39)
(441)
2,065
-
-
-
-
-
-
-
-
-
-
46
20 (a). Reconciliation of the net loss before tax to the net cash flows from operations
21.
Employee benefits
(a) Employees incentive plan
Notes to the Financial Statements
For the Year Ended 30 June 2021
Structural Monitoring Systems Plc
On 11 December 2018 shareholders approved the Employee Incentive Plan (EIP) for the granting of non-transferable
shares or performance rights (PRs) to directors, employees and relevant contractors with more than six months’ service
at the grant date. The shares vest immediately and the PRs vest upon the satisfaction of the relevant performance
hurdles within 3 years of issue. Under the plan shares will be offered at a 12.5% discount to the lowest 5 day VWAP
(calculated by taking the lowest 5 daily share price VWAPs for that quarter – and taking the average). 1,843,081 shares
were issued to employees under the plan during the reporting period. Full details of issues during the year can be found
in note 22 Share-based payments.
(b) Pensions and other post-employment benefit plans
AEM maintains a defined contribution pension plan for its’ employees. AEM contributes 5% of salary to the Plan.
Employees must be employed with the company for 12 months before they are entitled to the benefit. There are
currently 88 employees participating in the plan. Contributions are paid monthly and recognised in the Statement of
comprehensive income totalling $0.355m (2020: $0.404m). Contributions of $nil (2020: $0.044m) are outstanding at
30 June 2021.
22.
Share-based payments
The share-based payment expense for the year is as follows:
Issue of performance rights to directors and executives
Issue of shares to directors and executives under EIP
Issue of performance rights to other consultants
Issue of shares to eligible staff under EIP
Performance Rights - Directors
Consolidated
Parent
2021
$000’
2020
$000’
2021
$000’
2020
$000’
545
78
93
400
1,116
1,275
545
1,275
-
162
515
1,952
78
93
400
1,116
-
162
515
1,952
On 21 January 2021 shareholders approved the issue of 60,000 Performance Rights (PRs) as remuneration to Stephen
Forman, a Director of the Company, under the Company Employee Incentive Plan (EIP) as an annual award.
All Director PRs are subject to continued services with the Company and the issue is an annual award of 60,000 PRs to
Steven Forman in accordance with his contract of employment.
47
Notes to the Financial Statements
For the Year Ended 30 June 2021
Structural Monitoring Systems Plc
22.
Share-based payments (continued)
Also on 21 January 2021 shareholders approved the issue of 856,933 PRs to directors in lieu of fees for the period to 31
December 2020. The fair value of the PRs granted to directors, executives and staff in lieu of fees was $0.362m. The
loss on swap of equity for debt of $0.044m was recorded through the statement of profit or loss and other comprehensive
income.
Performance Rights – Executive
An executive of the Company was granted 393,796 PRs in lieu of fees for the period to 31 March 2021. The fair value
of $0.178m was determined by the closing share price on grant date. 108,553 PRs with a fair value of $0.062m were
granted in lieu of fees previously accrued for the June 2020 quarter.
Performance Rights - Consultants
On 18 February 2021 The Board granted the issue of 30,000 PRs to a consultant under the EIP. The PRs have a fair
value of $0.013m determined by the closing share price on grant date.
In addition to directors and executives, three other consultants elected to receive PRs in lieu of fees during the year. A
total of 288,526 PRs were issued and the fair value of $0.132m was determined by the closing share price on grant date.
The number of performance rights that were outstanding, their weighted average exercise price and their movement
during the year is as follows:
At 1 July
Granted
Exercised
Expired
At 30 June
Exercisable at 30 June
Weighted ave ex price
2021
No.
2020
No.
2021
$
2020
$
4,082,270
3,075,000
2.07
2.75
1,788,325
1,722,447
(1,253,331)
(715,177)
(2,925,000)
-
-
-
-
-
-
-
1,692,264
4,082,270
0.51
2.07
1,392,264 1,007,270
- -
The contractual term remaining on performance rights outstanding at 30 June 2021 is 24 months (2020: 12 months).
48
Notes to the Financial Statements
For the Year Ended 30 June 2021
Structural Monitoring Systems Plc
22.
Share-based payments (continued)
The outstanding number of performance rights at 30 June 2021 and 30 June 2020 was as follows:
Exercise price
Grant date
Expiry date
2021 No.
2020 No.
$0.001
$0.001
$0.001
$0.001
$2.00
$2.75
$3.50
$0.001
$0.001
$0.001
$0.001
$2.00
$2.50
$3.00
$3.25
$3.50
$3.75
$2.00
$2.50
$3.00
$3.25
$3.50
$3.75
$2.00
$2.20
$2.50
$2.75
$3.00
$3.15
$3.25
$3.50
$3.75
$4.00
18 February 2021
21 January 2021
11 December 2020
12 December 2019
12 December 2019
12 December 2019
12 December 2019
7 April 2020
18 November 2019
12 December 2019
3 October 2019
15 August 2018
15 August 2018
15 August 2018
15 August 2018
15 August 2018
15 August 2018
15 April 2018
15 April 2018
15 April 2018
15 April 2018
15 April 2018
15 April 2018
7 December 2017
7 December 2017
7 December 2017
7 December 2017
7 December 2017
7 December 2017
7 December 2017
7 December 2017
7 December 2017
7 December 2017
18 February 2024
21 January 2024
11 December 2023
12 December 2022
12 December 2022
12 December 2022
12 December 2022
7 April 2023
18 November 2022
12 December 2022
3 October 2022
15 August 2021
15 August 2021
15 August 2021
15 August 2021
15 August 2021
15 August 2021
15 April 2021
15 April 2021
15 April 2021
15 April 2021
15 April 2021
15 April 2021
7 December 2020
7 December 2020
7 December 2020
7 December 2020
7 December 2020
7 December 2020
7 December 2020
7 December 2020
7 December 2020
7 December 2020
259,412
584,446
232,031
316,375
50,000
50,000
50,000
-
-
-
-
25,000
25,000
25,000
25,000
25,000
25,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
143,055
78,296
754,271
31,648
25,000
25,000
25,000
25,000
25,000
25,000
50,000
50,000
50,000
50,000
50,000
50,000
600,000
450,000
250,000
400,000
150,000
150,000
100,000
175,000
225,000
125,000
1,392,264 performance rights were issued during the year and are exercisable at 30 June at no cost.
1,692,264
4,082,270
49
Notes to the Financial Statements
For the Year Ended 30 June 2021
Structural Monitoring Systems Plc
22.
Share-based payments (continued)
Terms of Performance Rights
1. The Performance Rights are non-transferable.
2. The Performance Rights do not confer any entitlement to attend or vote at meetings of the Company, to dividends, to
participation in new issues of securities or entitlement to participate in any return of capital.
3. The Performance Rights vest upon the satisfaction of the relevant performance hurdle within 3 years of the issue of
the Performance Rights and at the election of the holder.
4. The Performance Rights lapse if the performance hurdle is not satisfied or the election to convert is not given by the
holder within 3 years of the issue of the Performance Rights except as otherwise provided for in the terms and condi-
tions of the Plan.
5. Upon vesting, 1 ordinary share will be issued for every 1 Performance Right on the payment of the par value of the
ordinary share, being £0.0005 pence per Share by the holder. The Shares will rank equally in all respects with the ex-
isting Shares on issue.
6. In the event of any reconstruction (including consolidation, sub-division, reduction or return) of the issued capital of
the Company prior to the vesting date, the number of Performance Rights, the share prices relevant to the performance
hurdle and any exercise price may be reconstructed in accordance with the terms and conditions of the Plan.
Shares issued to directors, eligible staff and consultants under EIP
No. issued
Grant date
Issue price
Share price
at grant date
Share-based
payment charge
$
$
$000’
996,636
171,320
147,000
528,125
1,843,081
3/12/2019
4/8/2020
21/1/2021
9/2/2021
0.32
0.36
nil
0.32
0.575
0.425
0.915
0.460
254
11
135
78
478
Details of the EIP are included in Note 21 Employee Benefits.
On 21 January 2021 shareholders approved the issue of 528,125 shares to two directors of the company on the same
terms and conditions as other eligible staff and consultants under the EIP.
50
Notes to the Financial Statements
For the Year Ended 30 June 2021
Structural Monitoring Systems Plc
23.
Issued capital and reserves
Ordinary Shares
On issue 121,479,031,
(2020: 118,382,619) par value £0.005
Issued and fully paid
Total issued and fully paid
Movement in ordinary shares in issue
At 30 June 2019
Issued on 26 August 2019 – CDIs issued *
Issued on 20 Dec 2019 – CDIs issued *
Issued on 21 April 2020 – CDIs issued *
Issued on 17 April 2020 – conversion of PRs
At 30 June 2020
Issued on 26 August 2019 – CDIs issued *
Issued on 20 Dec 2019 – conversion of PRs
Issued on 21 April 2020 – CDIs issued *
Issued on 17 April 2020 – conversion of PRs
Issued on 21 January 2021 – CDIs issued *
Issued on 28 January 2021 – conversion of PRs
Issued on 26 February 2021 – conversion of PRs
Issued on 20 May 2021 – conversion of PRs
Issued on 11 June 2021 – conversion of PRs
Consolidated Parent
2021
$000’
2020
$000’
2021
$000’
2020
$000’
31,949
31,949
31,946
31,946
31,949
31,949
31,946
31,946
Shares on issue
No.
$000’
115,562,285
31,932
291,347
597,499
1,216,311
715,177
1
3
6
4
118,382,619 31,946
996,636
154,342
147,000
156,683
699,445
17,676
264,840
170,588
489,202
1
-
-
-
1
-
-
-
1
At 30 June 2021
121,479,031
31,949
*Chess depositary interests (CDIs) issued to employees at below market price.
51
Notes to the Financial Statements
For the Year Ended 30 June 2021
Structural Monitoring Systems Plc
23.
Issued capital and reserves (continued)
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the company in
proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and
the company does not have a limited amount of authorised capital
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each
share shall have one vote.
Consolidated
Parent
2021
$000’
2020
$000’
2021
$000’
2020
$000’
36,492
35,967
36,492
35,967
Shares on issue
No.
$000’
115,562,285
35,106
Share Premium Reserve
Share Premium Reserve
Movement in ordinary shares in issue
At 1 July 2019
Issued on 26 August 2019 – CDIs issued *
Issued on 20 December 2019 – CDIs issued *
Issued on 21 April 2020 – CDIs issued *
Issued on 17 April 2020 – conversion of PRs
Share issue - costs
At 30 June 2020
Issued on 4 August 2020 – CDIs issued *
Issued on4 August 2020 – conversion of PRs
Issued on 11 December 2020 – CDIs issued *
Issued on 8 January 2021 – conversion of PRs
Issued on 28 January 2021 – CDIs issued *
Issued on 28 January 2021 – conversion of PRs
Issued on 26 February 2021 – conversion of PRs
Issued on 20 May 2021 – conversion of PRs
Issued on 11 June 2021 – conversion of PRs
Share issue - costs
At 30 June 2021
*Chess depositary interests (CDIs) issued to employees at below market price.
291,347
597,499
1,216,311
715,177
-
118,382,619
996,636
154,342
147,000
156,683
699,445
17,676
264,840
170,588
489,202
-
121,479,031
175
351
347
-
(12)
35,967
318
-
-
-
225
-
-
-
-
(18)
36,492
52
Notes to the Financial Statements
For the Year Ended 30 June 2021
Structural Monitoring Systems Plc
23.
Issued capital and reserves (continued)
Consolidated
Parent
2021
$000’
2020
$000’
2021
$000’
2020
$000’
Other Reserves
Foreign currency translation reserve
(1,876)
(1,976)
(2,271)
(2,271)
Share-based payment reserve
643
3,492
643
3,492
Share-based payment reserve
Outstanding at 30 June 2019
Granted during prior years
Granted during the year
Converted during the year
Outstanding at 30 June 2020
PRs Granted during prior years
PRs Granted during the year in lieu of fees
PRs Converted during the year
PRs Expired during the year
CDIs Issued under Employee Incentive Plan
Outstanding at 30 June 2021
Performance
rights on issue
No.
$000’
3,075,000
-
1,722,447
(715,177)
4,082,270
-
1,788,325
(1,253,331)
(2,925,000)
-
1,692,264
1,586
1,065
1,394
(553)
3,492
624
842
(815)
(3,978)
478
643
53
Notes to the Financial Statements
For the Year Ended 30 June 2021
Structural Monitoring Systems Plc
23.
Issued capital and reserves (continued)
Nature and purpose of reserves
Share premium reserve
The share premium reserve is used to record increments in the value of share issues when the issue price per share is
greater than the par value. The par value of shares is currently £0.005 (2020: £0.005). Costs of the issues are written
off against the reserve.
Share-based payment reserve
The share-based payment reserve is used to record the value of equity benefits provided to employees and directors as
part of their remuneration, or to other parties in lieu of cash compensation.
Foreign currency translation reserve
The foreign currency translation reserve is used to record exchange differences arising from the translation of the
financial statements of the company.
Reserves classified on the face of the consolidated statement of financial position as retained earnings represent
accumulated earnings and are distributable. All the other reserves are non-distributable.
24.
Financial risk management objective and policies
Financial risk management
Overview
The Company and Group have exposure to the following risks from their use of financial instruments:
Market risk, including foreign currency risk, price risk and interest rate risk
Credit and cashflow risk
Liquidity risk
This note presents information about the Company’s and Group’s exposure to each of the above risks, their objectives,
policies and processes for measuring and managing risk, and the management of capital.
The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework.
Risk management policies are established to identify and analyse the risks faced by the Company and Group, to set
appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems
are reviewed regularly to reflect changes in market conditions and the Company’s and Group’s activities.
The Board of Directors oversees how management monitors compliance with the Company’s and Group’s risk
management policies and procedures and reviews the adequacy of the risk management framework in relation to the
risks faced by the Company and Group.
The Company and the Group’s principal financial instruments are cash, receivables, borrowings and payables. The
financial assets are categorised as loans and receivables measured at amortised cost and the financial liabilities are
categorised as other financial liabilities measured at amortised cost.
54
Notes to the Financial Statements
For the Year Ended 30 June 2021
Structural Monitoring Systems Plc
24.
Financial risk management objective and policies (continued)
Interest rate risk
Interest rate risk is the risk that the value of a financial instrument or cash flows associated with the instrument will
fluctuate due to changes in market interest rates. Interest rate risk arises from fluctuations in interest bearing financial
assets and liabilities that the group uses.
Interest bearing assets comprise cash and cash equivalents which are considered to be short-term liquid assets. It is
the Group's policy to settle trade payables within the credit terms allowed and therefore not incur interest on overdue
balances.
Interest bearing liabilities include a bank overdraft facility secured on trade receivables. At the date of issue of this report
the facility has been repaid.
Cash flow sensitivity analysis for variable rate instruments
A change of 100 basis points in interest rates at the reporting date would have increased/(decreased) equity and profit
or loss by the amounts shown below. The analysis is performed on the same basis as 2020.
Profit or loss
Equity
Carrying value at
year end
100bp
increase
100bp
decrease
100bp
increase
100bp
decrease
$000’
2,381
2,545
(480)
$000’
$000’
$000’
$000’
24
24
26
(5)
21
(24)
(24)
(26)
5
(21)
24
24
26
(5)
21
(24)
(24)
(26)
5
(21)
Consolidated - 30 June 2021
Cash and cash equivalents
Consolidated – 30 June 2020
Cash and cash equivalents
Borrowings
Credit and cash flow risk
Credit and cash flow risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument
fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers.
The Group trades only with recognised, creditworthy third parties. In addition, receivable balances are monitored on an
ongoing basis with the result that the Group’s exposure to bad debts is not significant.
With respect to credit and cash flow risk arising from the other financial assets of the Group, which comprise cash
and cash equivalents, the Group’s exposure to credit and cash flow risk arises from default of the counter party, with a
maximum exposure equal to the carrying amount of these instruments. This risk is minimised by reviewing term deposit
accounts from time to time with approved banks of a sufficient Fitch Ratings credit rating of at least A-, Moody’s credit
rating of at least A2, and Standard & Poor’s credit rating of at least A-. The Group does not place funds on terms longer
than 30 days and has the facility to place the deposit funds with more than one bank. The Group does not hold collateral
as security for any of its’ receivables.
55
Notes to the Financial Statements
For the Year Ended 30 June 2021
Structural Monitoring Systems Plc
24.
Financial risk management objective and policies (continued)
The Company has exposure to credit and cash flow risk arising from the making of loans to subsidiaries. The loans carry
no interest rate or date for repayment. Loans are impaired to the carrying value of the subsidiarys’ assets.
The Group and Company undertake the following procedures to determine whether there has been a significant
increase in the credit risk of its other receivables, including group balances, since their initial recognition. Where these
procedures identify a significant increase in credit risk, the loss allowance is measured based on the risk of a default
occurring over the expected life of the instrument rather than considering only the default events expected within 12
months of the year-end.
The Group and Company have not determined that credit risk has increased during the year in respect of the Group’s
trade receivables.
Exposure to credit and cash flow risk
The carrying amount of the Group’s financial assets and liabilities represents the maximum credit exposure. The Group’s
maximum exposure to credit and cash flow risk at the reporting date was:
Cash and cash equivalents
Trade receivables
Loans to subsidiaries
Consolidated
Parent
Carrying amount
Carrying amount
2021
$000’
2020
$000’
2021
$000’
2020
$000’
2,381
2,347
-
2,545
2,991
-
86
-
3
11,397
-
9,944
4,728
5,536
10,030
11,400
The Group’s maximum exposure to credit and cash flow risk for trade receivables and cash and cash equivalents at
the reporting date by geographic region was:
Europe
Americas
Australasia
Other
Consolidated
Parent
Carrying amount
Carrying amount
2021
$000’
2020
$000’
2021
$000’
2020
$000’
1
502
-
-
4,226
4,259
10,030
11,397
501
-
720
55
-
-
3
-
4,728
5,536
10,030
11,400
Trade receivables at 30 June 2021 represent 56 debtors days (2020: 57 debtor days).
There were no trade receivables impairment losses at 30 June 2021 (2020: $nil).
No expected credit loss provision in respect of trade receivables has been recognised on the basis this is immaterial.
The expected credit loss rate applied has been calculated based on historical recovery rates of low bad debt write offs.
This is also supported by strong post year end collection of cash.
56
Notes to the Financial Statements
For the Year Ended 30 June 2021
Structural Monitoring Systems Plc
24.
Financial risk management objective and policies (continued)
Impairment of company receivables from subsidiaries
The Company’s group receivables represent trading balances and loan amounts advanced to other group companies
with no fixed repayment dates. Under IFRS 9 the fair value of this intercompany receivable is repayable on demand to
the Company.
The Company was due the following amounts as at 30 June 2021 before the recognition of any impairment loss
provisions:
Gross
Impairment
Carrying value at 30 June 2021
SMS Ltd
SMSCC
$000’
$000’
Total
$000’
12,512
(12,004)
508
9,436
-
9,436
21,948
(12,004)
9,944
In respect of the balance due from Structural Monitoring Systems Limited (SMS Ltd), the Company did not have
sufficient liquid resources at 30 June 2021 to repay the loan in full. An impairment loss provision has been recognised
to the extent the carrying value at 30 June 2021 is covered by the recovery of net assets in the balance sheet of SMS
Ltd. This has been measured based on lifetime expected credit losses on the basis that credit risk has increased since
initial recognition.
In respect of the balance due from Structural Monitoring Systems Canada Corporation (SMSCC), the Company did not
have sufficient liquid resources at 30 June 2021 to repay the loan in full. However, on the basis that there has been no
significant increase in credit risk and the balance is expected to be recovered by the subsidiary’s trading, no impairment
loss provision has been recognised recognised on the basis that any impairment loss provision would be immaterial
(2020: $nil). This has been measured based on 12 month expected credit losses.
Credit risk
The measurement of impairment losses depends on whether the financial asset is ‘performing’, ‘underperforming’ or
‘non-performing’ based on the company’s assessment of increases in the credit risk of the financial asset since its initial
recognition and any events that have occurred before the year-end which have a detrimental impact on cash flows.
The financial asset moves from ‘performing’ to ‘underperforming’ when the increase in credit risk since initial recognition
becomes significant.
In assessing whether credit risk has increased significantly, the company compares the risk of default at the year-end
with the risk of a default when the investment was originally recognised using reasonable and supportable past and
forward-looking information that is available without undue cost.
The risk of a default occurring takes into consideration default events that are possible within 12 months of the year-
end (“the 12-month expected credit losses”) for ‘performing’ financial assets, and all possible default events over the
expected life of those receivables (“the lifetime expected credit losses”) for ‘underperforming’ financial assets.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s
approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet
its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking
damage to the Group’s reputation.
The following are the contractual maturities of financial liabilities:
Consolidated
30 June 2021
Trade and other payables
Lease liabilities
Carrying
amount
Contractual
cash flows
1 year or
less
More than 1
year
$000’
$000’
$000’
$000’
(1,845)
(338)
(2,183)
(1,845)
(338)
(2,183)
(1,845)
(268)
(2,113)
-
(70)
(70)
57
Notes to the Financial Statements
For the Year Ended 30 June 2021
Structural Monitoring Systems Plc
24.
Financial risk management objective and policies (continued)
Consolidated
30 June 2020
Trade and other payables
Borrowings
lease liabilities
Carrying Contractual 1 year or More than 1
amount cash flows less year
$000’
$000’
$000’
$000’
(1,490)
(480)
(305)
(2,275)
(1,490)
(1,490)
(480)
(305)
(480)
(249)
(2,275)
(2,219)
-
-
(56)
(56)
The carrying amount of financial assets and financial liabilities at amortised cost recorded by category is as follows:
Financial assets measured at amortised cost
Cash and cash equivalents
Trade receivables
Loans to subsidiary undertakings
Financial liabilities measured at amortised costs
Borrowings
Trade and other payables
Lease liabiities
Loans from subsidiary undertakings
Foreign currency risk
Consolidated
Parent
Carrying amount
Carrying amount
2021
$000’
2020
$000’
2021
$000’
2020
$000’
2,381
2,347
-
2,545
2,991
-
4,728
5,536
-
1,845
338
-
480
1,504
262
-
-
86
9,963
10,049
-
434
-
-
-
3
11,397
11,400
-
245
94
921
2,183
2,246
434
1,260
The Group undertakes sales and purchases that are denominated in foreign currency and is exposed to foreign currency
risk through foreign exchange rate fluctuations in the US dollar, Canadian dollar, the Euro and the British pound. The fair
value of the Group and Parent Company financial assets and liabilties are not materially different to their book values.
Exposure to currency risk
The Group’s exposure to foreign currency risk at reporting date was as follows, based on notional amounts:
30 June 2021
In AUD
Cash
Trade receivables
Trade and other payables
30 June 2020
In AUD
Cash
Trade receivables
Trade and other payables
AUD000’
189
5
(511)
(317)
CAD000’
643
USD000’
1,549
GBP000’
189
(982)
(150)
2,153
(352)
3,350
Total 000’
2,381
2,347
(1,845)
2,883
-
-
-
-
AUD000’
CAD000’
USD000’
GBP000’
Total 000’
255
3
(199)
59
243
236
(544)
(65)
2,047
2,752
(685)
4,114
-
-
(62)
(62)
2,545
2,991
(1,490)
4,046
58
Notes to the Financial Statements
For the Year Ended 30 June 2021
Structural Monitoring Systems Plc
24.
Financial risk management objective and policies (continued)
The Group had net assets denominated in foreign currencies of $3.207m as at 30 June 2021 (2020: net assets of
$3.987m). Based on this exposure, had the Australian dollar weakened by 10%/strengthened by 5% (2020: weakened
by 10%/strengthened by 5%) against these foreign currencies with all other variables held constant, the Group’s loss
before tax for the year would have been $0.321m higher/$0.321m lower (2020: $0.170m higher/$0.085m lower).
The Board regularly monitors the Group’s exposure to foreign exchange fluctuations.
The following significant exchange rates applied during the year:
AUD:CAD
AUD:USD
Capital risk management
Average rate
Reporting date spot rate
2021
2020
2021
2020
0.957
0.747
0.900
0.671
0.932
0.752
0.939
0.686
The Company and the Group’s objectives when managing capital are to safeguard the Company and the Group’s ability
to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to
maintain an optimal capital structure to reduce the cost of capital. The management of the Company and the Group’s
capital is performed by the Board.
Given the level of operations of the Group, the Board has a secured overdaft facility available with a credit limit of C$5
million. It has not made use of long term debt financing, but has instead chosen to raise additional capital by issuing
shares. The Board regularly monitors, liquidity, exchange rates, cash flow and financial assets and liabilities balances
by means of financial reports and cashflow forecasting.
None of the Group’s entities are subject to externally imposed capital requirements.
25.
Commitments and contingencies
A claim for royalties amounting to $561,865 including interest (2020: claim received $435,064 inc GST/interest) has not
been provided for based on the current status of the case where a verdict is expected later this year.
At the reporting date there are no other changes to commitments or contingent liabilities.
59
Notes to the Financial Statements
For the Year Ended 30 June 2021
Structural Monitoring Systems Plc
26.
Related party disclosure
The consolidated financial statements include the financial statements of Structural Monitoring Systems Plc and the
subsidiaries listed in the following table.
Structural Monitoring Systems Ltd
Structural Monitoring Systems Canada Corp (SMSCC)
Anodyne Electronics Manufacturing Corp (AEM)
Country of
incorporation
% Equity interest
2021
2020
Australia
Canada
Canada
100
100
100
100
100
100
Structural Monitoring Systems Plc is the ultimate parent entity and is incorporated in the United Kingdom. The Company
carries on the business of developing the Group’s structural health monitoring technology.
Structural Monitoring Systems Limited is a subsidiary of the Group and is incorporated in Australia. It is the owner of the
intellectual property pertaining to the structural health monitoring technology.
SMSCC was incorporated on 24 October 2017.
Anodyne Electronics Manufacturing Corporation (AEM), was acquired by SMSCC on 8 December 2017 for a consideration
of $10,998,750.
Remuneration paid to the directors and executives, who are considered key management personnel, for the year is
disclosed in the remuneration report in the Directors’ Report.
The share-based payments charge for directors and executives for the year was $0.713m (2020: $1.275m).
The following are the amounts due to key management personnel at reporting date:
Due to executive – Toby Chandler
Due to director – Will Rouse
Due to director – Michael Reveley
Due to director – Stephen Forman
Due to director – Sam Wright *
Due to director – Terry Walsh **
* Appointed 14 October 2020 (2020: comprises Company Secretarial Fees due)
** Resigned 14 October 2020 (2021: comprises Legal Counsel fees due)
2021
$000’
2020
$000’
69
100
58
40
40
29
69
-
-
-
20
-
60
Notes to the Financial Statements
For the Year Ended 30 June 2021
Structural Monitoring Systems Plc
27.
Events after the balance sheet date
Subsequent to the reporting date the Company has completed the acquisition of Canadian business, Eagle Audio via its
wholly-owned subsidiary Anodyne Electronics Corporation Inc (“AEM”).
The consideration for the acquisition is C$4.118m (with C$360,000 of the purchase price to be held in escrow for 12
months). As a result of the acquisition the Company expects an increase in annualised gross revenues of $3.500m per
annum and an increase in EBITDA of $2.200m per annum. The acquisition was funded using cash and existing line of
credit facilities with HSBC Canada.
A condition precendent to the facility with HSBC Canda is a deposit of US $800,000 which is to be provided by Stephen
Forman, a director of the Company for a term of 12 months. Interest of 6% per annum will be paid on the deposit.
The key customer segments of Eagle Audio are rotary and fixed wing aircraft (OEMs, law enforcement, EMS, CoastGuard,
military, forestry and firefighting). The purchase price includes approx. C$0.800m in inventory plus IP/Supplemental
type certifications (“STCs”) and related process manufacturing/engineering documentation. Management is still in the
process of identifying the fair value of the assets and liabilities acquired.
The impact of the Coronavirus pandemic is ongoing and has had financial impact for the Group to 30 June 2021. The
Group has experienced supply chain constraints and had to implement social distancing measures and a spilt shift
system earlier in the year, it is not practicable to estimate the potential impact, positive or negative, after the reporting
date. The situation is ongoing and is dependent on measures imposed by the Canadian government and other countries,
such as maintaining social distancing requirements, quarantine, travel restrictions and any economic stimulus that may
be provided.
Other than the above no matters or circumstances have arisen since the end of the financial year which significantly
affected or may significantly affect the operations of the Group, the results of those operations, or the state of affairs of
the Group in future financial years.
28.
Auditors’ remuneration
Details of the amounts paid to the auditor of the Company, RSM UK Audit LLP, and other auditors for audit and non-
audit services provided during the year are set out below.
Fees payable to Elderton Audit (UK) (2020: RSM UK
Audit LLP) and its associates in respect of both audit and non-
audit services are as follows:
Audit services – statutory audit of parent and consolidated
accounts fees payable to the company’s auditor for the audit of
the companies annual accounts.
Audit of the accounts of subsidiaries
Other services
Audit-related assurance services
Taxation advisory services
Consolidated
Parent
2021
$000’
2020
$000’
2021
$000’
2020
$000’
78
77
-
-
155
80
108
38
6
232
78
-
-
-
78
80
-
25
-
105
61
REPORT OF THE INDEPENDENT AUDITOR TO THE MEMBERS OF STRUCTURAL MONITORING
SYSTEMS PLC
Opinion
We have audited the financial statements of Structural Monitoring Systems PLC (“the Company” or “Parent
Company”) and its subsidiaries (collectively referred to as “the Group”) for the year ended 30 June 2021 which
comprise Consolidated and Parent Company Statements of Financial Position as at 30 June 2021; the
Consolidated and Parent Company Statements of Profit and Loss and other comprehensive Income, the
Consolidated and Parent Company Statements of Cash Flows and the Consolidated and Parent Company
Statements of Changes in Equity for the year then ended; and the notes to the financial statements, which
include a description of the significant accounting policies. The financial reporting framework that has been
applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted
by the European Union.
In our opinion:
-
-
-
the financial statements give a true and fair view of the state of the Parent Company and the Group’s
affairs as at 30 June 2021 and of the Parent Company and the Group’s loss for the year then ended;
the financial statements have been properly prepared in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European Union; and
the financial statements have been prepared in accordance with the requirements of the Companies
Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable
law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit
of the financial statements section of our report. We are independent of the group in accordance with the ethical
requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical
Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with
these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of
accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or
conditions that, individually or collectively, may cast significant doubt on the group's ability to continue as a going
concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the
relevant sections of this report.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit
of the Financial Statements of the current period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) that we identified. These matters included those which had the
greatest effect on the overall audit strategy, the allocation of resources in the audit; and directing the efforts of
the engagement team. These matters were addressed in the context of our audit of the Financial Statements as
a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
We have determined the matters described below to be key audit matters to be communicated in our report.
Key audit matter
Going concern
The Group reported a net loss after tax of $1.959m
(2020: loss $2.549m) for the year ended 30 June
2021.
Under IAS 1: Presentation of Financial Statements,
the directors of the Group are required to assess
the appropriateness of the preparation of the
financial report on a going concern basis.
it be
This area is a key audit matter due to the nature of
the business and the current financial position.
financial
Should
statements to be prepared on the going concern
basis, the values of certain assets and liabilities as
set out in the financial statements would be
materially misstated.
inappropriate
the
for
How our audit addressed the key audit matter
Our audit work included, but was not restricted to,
the following:
• Obtaining management's assessment or
the going concern basis of preparation by
reviewing future plans and tested cash
now projections prepared by the Group for
consistency with our understanding of
planned activities;
• Held discussions with management as to
any future capital raisings and tested the
forecasted cashflows for the twelve-month
period from the date of signing the financial
statements for mathematical accuracy;
• Obtained management's
cash
flow
forecast for the 15 months period from July
2021 to September 2022 and assessed
reasonableness of management's
the
assumptions;
considered
to
subsequent
determine whether any additional facts or
information have become available since
the date on which management made its
assessment; and
events
•
Valuation of inventory
Inventory balance is the most significant asset on
the Statement of Financial Position of the Group.
As note in Note 2(l) of the financial report,
inventories comprise raw materials, work
in
progress and finished goods which are stated at
the lower of cost and net realisable value.
Cost comprises of direct materials and delivery
costs, direct labour, import duties and other taxes
including an appropriate portion of the variable and
fixed overhead expenditure based on normal
operating capacity.
As a result, judgement is applied in determining the
level of provisions required for obsolete inventories
and an appropriate apportionment of labour and
overhead.
We therefore considered this to be a key audit
matter.
• assessing
the appropriateness of
the
related disclosures.
Our audit work included, but was not restricted to,
the following:
listing and assessed
inventory by
the accuracy of
• Performing specific analysis on slow-
reviewing and
moving
the aged
verifying
inventory
the
completeness of the provision for inventory
including
that was significantly aged;
physical observation of inventory was
undertaken at the count and no issues
noted with
to condition of
inventory.
respect
•
reviewed the reasonability of the standard
overhead
rate based on standard
operations in recent years and the current
year; and
• performed NRV
testing by selecting
samples of products in inventories holding
and obtaining evidence of post year-end
value.
Our Application of Materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified
misstatements on the audit and in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be
expected to influence the economic decisions of the users of the financial statements. Materiality provides a
basis for determining the nature and extent of our audit procedures.
We determined materiality for the Group financial statements as a whole to be AUD 320,115, which represents
2% of the Group’s turnover for the year ended 30 June 2021.
This benchmark is considered the most appropriate because this is a key performance measure used by the
Board of Directors to report to investors on the financial performance of the Group.
Performance materiality
The application of materiality at the individual account or balance level. It is set at an amount to reduce to an
appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds
materiality.
On the basis of our risk assessments, together with our assessment of the Group’s overall control environment
and to drive the extent of our testing, performance materiality was 75% of our planning materiality for the audit
of the Group financial statements.
Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Board that we would report all audit differences in excess of AUD 16,006, as well as
differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to
the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the
financial statements.
Other Information
The Directors are responsible for the other information. The other information comprises the information included
in the annual report, other than the financial statements and our Auditors' Report thereon. Our opinion on the
financial statements does not cover the other information and, except to the extent otherwise explicitly stated in
our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the financial statements or our
knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to determine whether there is a material
misstatement in the financial statements or a material misstatement of the other information. If, based on the
work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact.
We have nothing to report in this regard.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken by the course of the audit:
•
•
the information given in the Strategic Report and the Director’s report for the financial year for which the
financial statements are prepared is consistent with the financial statements; and
the Strategic Report and the Director’s Report have been prepared in accordance with applicable legal
requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and their environment
obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the
Director’s Report.
We have nothing to report in respect of following matters in relation to which the Companies Act 2006 requires
us to report to you if, in our opinion:
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit
have not been received from branches not visited by us; or
•
the parent company financial statements are not in agreement with the accounting records and returns; or
•
certain disclosures of director’s remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Overview of the Scope of Our Audit
A description of the generic scope of an audit of financial statements is provided on the Financial Reporting
Council’s website at www.frc.org.uk/auditscopeprivate. We conducted our audit in accordance with International
Standards on Auditing (ISAs) (UK). Our responsibilities under those standards are further described in the
‘Responsibilities for the financial statements and the audit’ section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion. We are independent of the Group in accordance with the Auditing Practices Board’s Ethical Standards
for auditors, and we have fulfilled our other ethical responsibilities in accordance with those Ethical Standards.
The Group solely operates in Canada with head office activities carried out by Parent Company in Australia. The
Group audit team performed all the work necessary to issue the Group and parent company audit opinion,
including undertaking all of the audit work on the risks of material misstatement.
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality
determine our audit scope for each entity within the Group. Taken together, this enables us to form an opinion
on the consolidated financial statements. Based on the output of our risk assessment, along with our
understanding of the Group structure, full scope audit was performed over all companies in the Group. Full
scope audit for the component in Canada was undertaken by component auditors.
Responsibilities of directors
The directors are responsible for the preparation of the financial statements and for being satisfied that they give
a true and fair view, and for such internal control as the directors determine is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the company’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 company or to cease operations,
or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are 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 ISAs (UK) 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 these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures
in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities,
including fraud.
A further description of our responsibilities for the audit of the financial statements is located on the Financial
Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s
report.
Other matters
The financial statements of the Group for the year ended 30 June 2020 were audited by another auditor who
expressed unmodified opinion on 30 September 2020.
Use of our report
The report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members
those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the
company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
NICHOLAS HOLLENS
Senior Statutory Auditor for and on behalf of Elderton Audit UK
Statutory Auditor, Chartered Accountants
Perth, Australia
30 September 2021
Shareholder information
Structural Monitoring Systems Plc
Annual Report Disclosure on Corporate Governance
The Company has established, and continues to refine and improve procedures to ensure a culture of good corporate
governance exists and is respected across the consolidated entity.
The Company has a written policy designed to ensure compliance with ASX Listing Rules and all other regulatory
requirements for disclosures. Additionally the Company has adopted a policy designed to ensure procedures to
implement the policy are suitable and effective.
The Board wishes to acknowledge that nothing has come to its attention that would lead it to conclude that its current
practices and procedures are not appropriate for an organisation of the size and maturity of the Company. The
Corporate Governance Policy and the Company’s corporate governance practices is set out on the Company’s web
site at www.smsystems.com.au.
Additional information required by the Australian Stock Exchange and not shown elsewhere in this report is as follows.
The information is current as at 20 September 2021.
(a)
Distribution of CDI securities
Structural Monitoring Systems Plc
Range of Units As Of 20/09/2021
Range
1 -1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,000 Over
Rounding
Total
Chess Depository Interest (Total)
Composition: CDI
Total holders
Units
% Units
546
825
388
784
178
296,242
2,304,472
3,040,612
26,126,321
90,036,138
2,721
121,803,785
0.24
1.89
2.50
21.45
73.92
0.00
100.00
Unmarketable Parcels
Minimum $ 500.00 parcel at $ 0.6600 per unit
758
350
107,981
Minimum Parcel Size
Holders
Units
(b)
Substantial shareholders
The names of substantial shareholders who have notified the Company in accordance with section 671B of the
Corporations Act 2001 are:
Holder
Drake Special Situations LLC
Number of Shares
23,862,500
67
Shareholder information (continued)
Structural Monitoring Systems Plc
Structural Monitoring Systems Plc
Chess Depository Interest (Total)
Top Holders (Grouped) As Of 20/09/2021
Composition: CDI
Rank
Name
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
Units
% Units
26,110,752
21.44
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
MR PAUL COZZI
4,210,392
BNP PARIBAS NOMINEES PTY PTD
3,709,417
CITICORP NOMINEES PTY LIMITED
MR ROBERT GREGORY LOOBY
STRAIGHT LINES CONSULTANCY PTY LTD
MR STEPHEN CAMPBELL FORMAN
MR BRYANT JAMES MCLARTY
BNP PARIBAS NOMS PTY LTD
ANODYNE ELECTRONICS HOLDING CORP
ROSHERVILLE PTY LTD
STONY ROSES PTY LTD
LANDMARK CONSTRUCTION PTY LTD
MR ROSS MALCOM SPENCER + MR CLINTON LEON SPENCER
PETER FRANCIS BOYLE NOMINESS PTY LTD
MR DAVID MICHAEL BROWN
MR ROSS MALCOM SPENCER + MR CLINTON LEON SPENCER
LOOBY HOLDINGS PTY LTD
MR ROBERT GREGORY LOOBY
AVANTEOS INVESTMENTS LIMITED <4358776 DEBRA A/C>
2,551,031
2,500,000
1,775,813
1,739,978
1,525,871
1,507,622
1,320,000
1,160,000
1,121,500
1,166,679
1,040,000
982,000
900,000
862,520
800,000
800,000
780,000
3.46
3.05
2.09
2.05
1.46
1.43
1.25
1.24
1.08
0.95
0.92
0.88
0.85
0.81
0.74
0.71
0.66
0.66
0.64
Totals: Top 20 holders of CHESS DEPOSITORY INTEREST (Total)
Total Remaining Holders Balance
56,563,575
65,340,210
46.35
53.65
68