Tempo Australia Limited
Annual Report 2019

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Corporate Governance Statement The Board is committed to achieving and demonstrating the highest standards of corporate governance. The Board continues to refine and improve the governance framework and practices in place to ensure they meet the interests of shareholders. The Company complies with the Australian Securities Exchange (ASX) Corporate Governance Council’s Corporate Governance Principles and Recommendations (the Principles). Tempo Australia Limited ABN 51 000 689 725 Consolidated Financial Statements For the Year Ended 31 December 2019 TABLE OF CONTENTS FOR THE YEAR ENDED 31 December 2019 DIRECTORS’ REPORT ..................................................................................................................................................... 1 REMUNERATION REPORT – AUDITED ........................................................................................................................... 8 AUDITORS INDEPENDENCE DECLARATION ................................................................................................................. 14 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME ..................................... 15 CONSOLIDATED STATEMENT OF FINANCIAL POSITION ............................................................................................. 16 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY .............................................................................................. 17 CONSOLIDATED STATEMENT OF CASH FLOWS .......................................................................................................... 18 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ......................................................................................... 19 DIRECTORS’ DECLARATION ......................................................................................................................................... 58 INDEPENDENT AUDITOR’S REPORT ............................................................................................................................ 59 ADDITIONAL INFORMATION REQUIRED BY ASX ......................................................................................................... 65 CORPORATE DIRECTORY ............................................................................................................................................. 67 Corporate Governance Statement The Board is committed to achieving and demonstrating the highest standards of corporate governance. The Board continues to refine and improve the governance framework and practices in place to ensure they meet the interests of shareholders. The Company complies with the Australian Securities Exchange (ASX) Corporate Governance Council’s Corporate Governance Principles and Recommendations (the Principles). DIRECTORS’ REPORT DIRECTORS’ REPORT The Directors present this report together with the financial report of the consolidated entity consisting of Tempo Australia Limited (Tempo) and the entities it controls, for the financial year ended 31 December 2019 and the auditor’s report thereon. PRINCIPAL ACTIVITIES During the year ended 31 December 2019 the Group generated revenues from asset management and maintenance and construction across the telecommunications, infrastructure, resources, power, agricultural, industrial and commercial sectors. The Group generated minor revenue from investments in solar projects (plant and equipment) during 2019. REVIEW OF OPERATIONS & RESULTS The net loss after tax was $19.96M. This result was impacted by impairments of $15.68M including goodwill and deferred tax assets attributable to businesses acquired in prior years, that have not at this point provided sustainable trading profits to justify carrying forward these intangible assets. Revenue and other income increased to $53.2M compared to $41.8M in 2018. All parts of the business contributed to this increase. The group had Net Assets value of $8.5M at the year end, with a cash balance of $7.3M, representing funds received from the rights issue capital raise of approximately $3.7M and a cash positive operation of $2.9M for the last quarter of the FY19. The strategy for Tempo Asset Management Services (TAMS) is to remain focused on long term electrical maintenance contracts, and progressively expand into mechanical and facilities management services, initially with existing customers to add further value through the provision of broader service offerings. The solar business has assembled a high-quality team of experienced people that are very familiar with the Energy Sector in Australia. This team has executed existing projects well and further growth in this sector is expected. The traditional construction arm has been more selective in tendering for the projects and it is pleasing that all projects have been completed to clients’ satisfaction. This is expected to lead to repeat business. Since the Tempo Board changes in late 2018 and early 2019, and then complemented by the new CEO and CFO appointments made mid-year, the Group has stabilized its business and cash flows, introduced greater discipline in contracting and project execution and honed the focus on growth opportunities. The focus for 2020 is to continue with those actions and to achieve growth in a disciplined manner. FUTURE DEVELOPMENTS AND EVENTS AFTER THE REPORT PERIOD The Board of Tempo Australia has and will continue to address the potential effect of the Corona Virus on the business. Immediate cost reductions have been identified and will be implemented over the coming month/s. 1 | P A G E DIRECTORS’ REPORT The Tempo Business Executive and Board continues to examine any ongoing effects of CoVid-19 on our clients. We are in regular contact with our main clients to see if there is any additional services we can deliver given that our people are already at their sites. We have implemented further WHS protocols with our PPE to maximise individuals protections – both of our staff and of our client’s staff. The Board is meeting Bi-weekly to review business levels and will continue to address costs and reductions in working capital where possible. We will continue to fulfill our continuous disclosure obligation and provide updates if and when necessary. ENVIRONMENTAL REGULATION AND PERFORMANCE During 2019 the Group maintained its accreditations for: 1. Quality management system to ISO 9001 2. Environment management system to ISO 14001:2015 and 3. Occupational health and safety certification to ISO AS/NZS4801:2001 DIVIDENDS PAID, RECOMMENDED AND DECLARED No dividends were paid, declared or recommended since the start of the financial year. INDEMNIFICATION AND INSURANCE OF DIRECTORS, OFFICERS AND AUDITORS For the year ended 31 December 2019, Tempo had agreements to indemnify Directors and Officers of the Company against all liabilities to persons (other than the Company or related body corporate) which arise out of the performance of their normal duties as directors or executive officers unless the liability relates to conduct involving lack of good faith. The Company continues to indemnify the Directors and Executive Officers against all costs and expenses incurred in defending an action that falls within the scope of the indemnity. The Directors’ and Officers’ liability insurance provides cover against costs and expenses involved in defending legal actions and any resulting payments arising from a liability to persons (other than the Company) incurred in their position as a Director or Executive Officer unless the conduct involves a wilful breach of duty or an improper use of inside information or position to gain advantage. The insurance policy does not allow specific disclosure of the nature of the liabilities insured against or the premium paid under the policy. PROCEEDINGS ON BEHALF OF THE CONSOLIDATED ENTITY No person has applied for the leave of Court to bring proceedings on behalf of the consolidated entity. INFORMATION ON DIRECTORS AND COMPANY SECRETARY The directors of Tempo Australia Limited during the financial year and up to the date of this report are provided below, together with Company Secretary. 2 | P A G E DIRECTORS’ REPORT DIRECTORS MR GUIDO BELGIORNO-NETTIS AM – NON-EXECUTIVE CHAIRPERSON BE Civil; MBA; FIEAust Appointment: Appointed as Non-Executive Chairman 11 July 2019 Experience and Expertise: Appointed as Executive Chairman 29 April 2019 Appointed as Non-Executive Director 22 December 2016 Guido is Managing Director of the private company, Transfield Holdings Pty Ltd, which changed business focus in 2001 from Engineering and Construction to private equity. Leading up to this change, Guido held a number of key positions within the Transfield Group, including Managing Director, CEO Transfield Engineering and Construction, and Project Development Director. In 2015 he founded Angophora Capital Pty Ltd. Guido is Chairperson of the Australian Chamber Orchestra, and a Member of the Australian School of Business Advisory Council. He was named a Member of the Order of Australia in 2007 for service to the construction industry and the arts. He holds a Bachelor of Engineering from UNSW and an MBA from AGSM and is a fellow of Engineers Australia. Guido is currently a member of the Group’s Nominations and Remuneration Committee; the Risk, HSE and Commercial Committee and the Audit & Compliance Committee. During his appointment as a Non-Executive Director, but prior to his appointment as Non-Executive Chairperson, Guido was the Chairperson of the Group’s Risk, HSE and Commercial Committee and a member of the Nominations and Remuneration Committee and the Audit & Compliance Committee. Directorships: Current directorships in other listed companies: None Directorships in listed companies in the last three years: None MR WILLIAM HOWARD – EXECUTIVE DIRECTOR Appointment: Appointed as Executive Director 15 August 2019 Experience and Expertise: William brings significant experience to both these roles, having served for the past three years as the CFO of a Financial Services company in Western Sydney, realigning financial systems, operations and reporting, along with coordinating due diligence processes for interested parties on potential acquisitions. Prior to this, William had performed the role of General Manager Finance to a mining services business in the Hunter Valley, whilst managing and operating his own labour hire company. The preceding decade saw William as Regional Operations Manager at AJ Lucas and previous to that with Lahey Constructions Pty Ltd as General Manager Finance. William holds a Bachelor of Financial Administration and is a qualified Accountant. Directorships: Current directorships in other listed companies: None Directorships in listed companies in the last three years: None DR DAVID IVERACH – NON-EXECUTIVE DIRECTOR BEng Chem (Hons), Grad Dip Fuel Technology, PhD. 3 | P A G E DIRECTORS’ REPORT Appointment: Appointed as Non-Executive Director 10 December 2018 Initial appointment as alternate Non-Executive Director to Guido Belgiorno-Nettis 9 February 2017 – Resigned 21 March 2018 Experience and Expertise: David has over 45 years’ experience at the executive level in the public and private sectors and has served on several boards. David’s time at Transfield included a broad range of strategic and operational positions. He played a leading role in the formation of several Transfield businesses and projects, including the formation of Transfield Services as a standalone business unit and the entry of Transfield into the renewable energy sector. Roles included Commercial Director of Transfield Construction, CEO Energy, CEO Investments and Project Director in the development phase of several large-scale infrastructure projects. Prior to joining Transfield in 1990, David was Director General of Transport in the NSW Government with oversight of rail, roads, ports, grain handling and public transport. David is the current Chairperson of the Group’s Nominations and Remuneration Committee and the Risk, HSE and Commercial Committee and a member of the Audit & Compliance Committee. Directorships: Current directorships in other listed companies: None Directorships in listed companies in the last three years: None MR CHARLES LOUIS ROTTIER – NON-EXECUTIVE DIRECTOR BEng, GAICD and FIEAust Appointment: Appointed as Non-Executive Director 19 March 2020 Experience and Expertise: Charles is an experienced executive and director with deep and broad experience with engineering, construction and maintenance services companies. Charles has experience working in Australia, New Zealand, Papua New Guinea, Singapore, Thailand, Malaysia, China and the United Kingdom. Management responsibilities include full P&L responsibility for Australian and International business units, managing due diligence and integration of acquisitions and establishing new business opportunities for both stand-alone businesses and significant joint ventures. Until recently he was Chairman of LogiCamms. He is currently Chair of the Future Fuels CRC and has previously held the roles of CEO of Austin Engineering Limited and EGM Engineering and Construction at Transfield Services. Directorships: Current directorships in other listed companies: None Directorships in listed companies in the last three years: Chairman of LogiCamms from July 2019 to February 2020 MR IAN LYNASS – CHIEF EXECUTIVE OFFICER (CEO) AND MANAGING DIRECTOR Resignation: Experience and Expertise: Resigned as Non-Executive Director 16 August 2019 Resigned as Managing Director 29 April 2019 Ian has over 25 years management experience in the maintenance services, defence, steel, petrochemical and mining industries. Before his appointment as Chief Executive Officer and Managing Director of Bis Industries Pty Ltd in 2009, he accumulated experience in a wide range of operational and leadership areas throughout these industries. Ian has held key leadership positions nationally and internationally holding the Managing Directors role for Brambles Industrial Services – Northern Hemisphere and then returning to Australia after successfully rebuilding the business, he held Executive Director roles in Bis 4 | P A G E DIRECTORS’ REPORT Industries for Eastern and Western Australia. In 2012 Ian was a recipient of the CEO Magazine CEO of the Year Award – Logistics. In 2015 Ian co-founded GD Environmental Services in the United Kingdom, a Waste Recycling company until his return to Australia in 2017. Ian is also serving as a Non-Executive Director of WorkPac Group Pty Ltd and is Chairperson of the Engineering and Construction advisory panel. Ian has held Board positions for Bis Industries Pty Ltd and is Managing Director of Silhouette Global Solutions a family owned consultancy business. Directorships: Current directorships in other listed companies: None Directorships in listed companies in the last three years: None MR IAN WIDDICOMBE – NON-EXECUTIVE DIRECTOR BEng Civil Resignation: 3 April 2019 Experience and Expertise: With over 30 years experience in the oil and gas industry with both operators and contractors in Australia, Europe and Asia, Ian has strong credentials in operational delivery and corporate oversight. Previously with Woodside, he held Vice President role in Projects and in Subsea and Pipelines. During his tenure, he established and led the Karratha Life Extension Program and was project manager for the Angel Project. Prior to Woodside, Ian was Regional Manager Asia Pacific for DOF Subsea Group and Offshore Operations Manager for Clough. Ian is a member of the Group’s Nominations and Remuneration Committee; the Risk, HSE and Commercial Committee and the Chairperson of the Audit & Compliance Committee. Directorships: Current directorships in other listed companies: None Directorships in listed companies in the last three years: None COMPANY SECRETARY MR WILLIAM HERBERT HOWARD – COMPANY SECRETARY Appointment: Appointed as Executive Director 15 August 2019 and Company Secretary 15 July 2019 Experience and Expertise: William brings significant experience to both these roles, having served for the past three years as the CFO of a Financial Services company in Western Sydney, realigning financial systems, operations and reporting, along with coordinating due diligence processes for interested parties on potential acquisitions. Prior to this, William had performed the role of General Manager Finance to a mining services business in the Hunter Valley, whilst managing and operating his own labour hire company. The preceding decade saw William as Regional Operations Manager at AJ Lucas and previous to that with Lahey Constructions Pty Ltd as General Manager Finance. William holds a Bachelor of Financial Administration and is a qualified Accountant. Directorships: Current directorships in other listed companies: None Directorships in listed companies in the last three years: None MR SCOTT MACDONALD – COMPANY SECRETARY B.Eng. Mech (Hons), MBA, GAICD, GIA(Dip) Resignation: 17 April 2019 5 | P A G E DIRECTORS’ REPORT Experience and Expertise: Scott is a senior executive with over 30 years’ experience in the finance, commercial and M&A disciplines for CPB Contractors, BHP, Brambles, BIS Industries and Wesfarmers. Scott holds an MBA and BEng from UWA, a graduate diploma from the Governance Institute of Australia and graduated the Company Directors course with AICD. DIRECTORS’ MEETINGS The number of meetings of the Board of Directors and of each Board committee held during the financial year and the numbers of meetings attended by each director were: DIRECTORS’ INTERESTS IN SHARES AND RIGHTS OVER SHARES Current directors’ relevant interests in shares of Tempo Australia Limited or options over shares in the Company at the date of this report are detailed below. AUDITORS’ INDEPENDENCE DECLARATION A copy of the auditors’ independence declaration in relation to the audit for the financial year is provided within this financial report on page 14. 6 | P A G E Number Eligible to AttendNumber AttendedNumber Eligible to AttendNumber AttendedNumber Eligible to AttendNumber AttendedNumber Eligible to AttendNumber AttendedGuido Belgiorno-Nettis11212661144William Howard255441144David Iverach1212661144Ian Widdicombe33311----Ian Lynass46611----3. Ian Widdicombe was resigned as Non-Executive Director on 3 April 20194. Ian Lynass was resigned as Non-Executive Director on 16 August 2019Nomination and Remuneration CommitteeRisk, HSE and Commercial Committee1. Guido Belgiorno-Nettis was appointed as Non-Executive Director on 22 December 2016, Executive Chairman on 29 April 2019 and Non-Executive Chairman 11 July 20192. William Howard was appointed as Executive Director on 15 August 2019Directors’ MeetingsAudit and Compliance CommitteeGuido Belgiorno-NettisWilliam HowardDavid IverachRights over ordinary shares - 2,000,000 - Ordinary Shares 83,322,371 324,246 6,845,216 DIRECTORS’ REPORT NON-AUDIT SERVICES There were no non-audit services provided by the Group’s previous auditors, Ernst & Young (resigned on 3rd December 2019). Fees paid to PKF (NS) Audit & Assurance Ltd Partnership (appointed from December 2019) for tax and consulting services to the Group totalled $22,800. SHARE OPTIONS Unissued shares As at the date of this report, there were no unissued ordinary shares under options. Shares issued as a result of the exercise of options During the financial year no options were exercised. 7 | P A G E REMUNERATION REPORT |AUDITED REMUNERATION REPORT – AUDITED REMUNERATION POLICIES The Board policy for determining the nature and amount of remuneration of directors and executives is agreed by the Board of Directors as a whole. The Board structures remuneration so that it rewards those who perform and is strongly aligned with the Company’s strategic direction and the creation of value to shareholders. The performance of the Company depends on the quality of its employees. To grow, the Company must attract, motivate and retain skilled employees, which includes the directors and executives of the Company. To this end, the Company utilises the principles of providing competitive rewards to attract and retain high calibre executives. In determining the remuneration levels of employees and executives, the Company takes into consideration the performance of the Group, operation, function and geographic regions as well as that of the individual. The Board obtains professional advice where necessary to ensure that the Company attracts and retains talented and motivated directors and employees who can enhance Company performance through their contributions and leadership. For executives, the Company provides a remuneration package that incorporates both fixed cash-based remuneration and variable remuneration consisting of short and long-term incentive opportunities, that may include, performance-based cash remuneration and share-based remuneration. Directors received fixed fees for their services. The contracts for service between the Company and specified directors and executives are on a continuing basis, the terms of which are not expected to change in the immediate future aside from normal negotiations on contracts as they approach their conclusion and the normal annual review processes. No remuneration consultants were engaged during the year. Short-Term Incentive Plan (STIP) For Key Management Personnel (KMP), a Short-Term Incentive Plan (STIP) has been developed which enables eligible members to a cash bonus, based on annual performance of the Company against a range of metrics and at the discretion of the Board. These targets include performance against financial metrics such as profitability, cash flow, costs, and order intake; leadership targets, such as engagement with workforce and leadership behaviour; operational metrics such as customer satisfaction, system development and governance; and Risk and HSE targets. No short-term incentives were awarded during the year. Long-Term Incentive Plan (LTIP) A Long-Term Incentive Plan (LTIP) has also been developed which will grant eligible employees to performance rights in the Company. Any issue (at the discretion of the Board) under the LTIP would likely be subject to vesting over five years subject to continued, performance of the Total Shareholder Returns (TSR) of the Company versus the ASX300 over the vesting period and future earnings per share growth over the vesting period. The TSR or future earnings per share growth targets are chosen to embed shareholder interests directly into the remuneration structure. Nil rights were vested during the year 2019. There were 26M performance rights granted to senior executives in 2019. Non-Executive Director Remuneration Non-executive directors receive fees and share-based remuneration. The Company determines the maximum amount for remuneration, including thresholds for share-based remuneration, for directors by resolution. ASX listing rules require the aggregate non-executive director’s remuneration be determined periodically by a general meeting. 8 | P A G E REMUNERATION REPORT |AUDITED Voting and comments made at the Company's 30 April 2019 Annual General Meeting ('AGM') At the last AGM held on 30 April 2019, 99.5% of the votes received supported the adoption of the remuneration report for the year ended 31 December 2018. The Company did not receive any specific feedback at the AGM regarding its remuneration practices. DIRECTORS’ COMPENSATION The directors during the year ended 31 December 2019 were: Guido Belgiorno-Nettis Executive Chairman - Appointed as Non-Executive Chairman 11 July 2019 - Appointed as Executive Chairman 29 April 2019 - Appointed as Non-Executive Director 22 December 2016 William Howard Executive Director - Appointed as Executive Director 15 August 2019 - Appointed as Chief Financial Officer and Company Secretary 15 July 2019 David Iverach Non-Executive Director - Appointed as Non-Executive Director 10 December 2018 Ian Widdicombe Former Non-Executive Director - Resigned 3 April 2019 Ian Lynass Former Chief Executive Officer and Managing Director - Resigned as Non-Executive Director 16 August 2019 - Resigned as Managing Director 29 April 2019 EXECUTIVES’ COMPENSATION Other key management personnel during the year ended 31 December 2019 were: Paul Dalgleish Chief Executive Officer - Appointed as Chief Executive Officer 15 July 2019 Scott Macdonald Former Chief Financial Officer and Company Secretary - Resigned as Chief Financial Officer and Company Secretary and ceased employment with Tempo 17 April 2019 9 | P A G E REMUNERATION REPORT |AUDITED DIRECTORS AND KMP REMUNERATION FOR THE YEARS ENDED 31 DECEMBER 2019 AND DECEMBER 2018 10 | P A G E Short-term benefitsPost-employmentTermination paymentsTotal remunerationPerformance relatedSalary & Fees$Superannuation$Long service leave$Annual leave$Share Options$Performance Rights$$$201916,601------16,6010%201814,161------14,1610%2019127,91610,396-10,401-3,586-152,3002%2018--------201914,8461,410-----16,2560%201878875-----8630%2019168,00010,501-12,693-483,478-674,67172%2018--------20193,848325-----4,1730%201813,7041,302-----15,0060%2019303,02616,493---(25,147)26,320320,6922018236,85919,967-18,049-25,147-300,0228%2019171,31812,970-----184,2880%2018141,12212,008-8,435---161,5650%2019--------201812,5621,193--(168,169)--(154,414)0%201958,8945,595-5,591---70,0800%2018100,48813,853(2,017)51,744-66,102186,131416,30116%2019--------20185,000------5,0000%2019--------2018112,50115,157(1,178)22,045-(268,076)156,25036,6992019864,44857,691-28,685-461,91726,3201,439,0612018637,18563,555(3,195)100,273(168,169)(176,827)342,381795,2032. William Howard was appointed as Chief Financial Officer and Company Secretory on 15 July 2019, as Executive Director on 15 August 20193. David Iverach retired as Alternate Non-Executive Director to Guido Belgiorno-Nettis on 21 March 2018 and was appointed Non-Executive Director on 10 December 2018Massimo Bergomi9Scott Macdonald7Carmelo Bontempo8Guido Bressani10Michael West111. Guido Belgiorno-Nettis was appointed as Non-Executive Director on 22 December 2016, Executive Chairman on 29 April 2019 and Non-Executive Chairman 11 July 2019TOTAL DIRECTORS AND KMPPlease note that the comparatives have been restated for the classification of annual leave as a long-term benefit in line with accounting policy4. Paul Dalgleish was appointed as Chief Executive Officer on 15 July 20195. Ian Widdicombe resigned on 03 April 20196. Ian Lynass resigned as Managing Director on 29 April 2019 and resigned as Non-Executive Director on 16 August 20197. Scott Macdonald resigned as Chief Financial Officer and Company Secretary on 17 April 20198. Carmelo Bontempo retired from the Board on 30 November 2018 and forfeited his share options9. Massimo Bergomi resigned as Chief Executive Officer and Managing Director on 19 March 2018. He received $158,906 in rights and forfeited $92,80410. Guido Bressani resigned as Non-Executive Director on 3 April 2018.11. Michael West resigned as Chief Financial Officer and Company Secretary on 15 June 2018 and forfeited his rights.Long-term benefitsShare-based paymentsIan Widdicombe5Ian Lynass6David Iverach3Paul Dalgleish4Guido Belgiorno-Nettis1William Howard2 REMUNERATION REPORT |AUDITED SHAREHOLDING OF KMP Shares held in Tempo Australia Limited. RIGHTS HOLDING OF KMP The number of rights over ordinary shares in the parent entity held during the financial year by each director and other members of key management personnel of the consolidated entity, including their personally related parties is set out below. 11 | P A G E Balance 1 January 2019Balance at appointment as KMPIssued on exercise of performance rightsNet change other #Resignation/Retirement of KMP*Balance 31 December 2019Guido Belgiorno-Nettis144,847,660--38,474,711-83,322,371William Howard2---324,246-324,246David Iverach3---6,845,216-6,845,216Paul Dalgleish4------Ian Widdicombe5------Ian Lynass6914,000----914,000Scott Macdonald750,000---(50,000)-TOTAL 45,811,660--45,644,173(50,000)91,405,8334. Paul Dalgleish was appointed as Chief Executive Officer on 15 July 20195. Ian Widdicombe resigned on 03 April 20196. Ian Lynass resigned as Managing Director on 29 April 2019 and resigned as Non-Executive Director on 16 August 20197. Scott Macdonald resigned as Chief Financial Officer and Company Secretary on 17 April 20193. David Iverach retired as Alternate Non-Executive Director to Guido Belgiorno-Nettis on 21 March 2018 and was appointed Non-Executive Director on 10 December 2018# These movements represent on-market purchase of shares during the year by the respective KMPs.* This represents the balance of shares held by the KMP at date of their resignationIncludes shares held directly, indirectly and beneficially by KMP.1. Guido Belgiorno-Nettis was appointed as Non-Executive Director on 22 December 2016, Executive Chairman on 29 April 2019 and Non-Executive Chairman 11 July 20192. William Howard was appointed as Chief Financial Officer and Company Secretory on 15 July 2019, as Executive Director on 15 August 2019Balance at the start of the yearGranted as remunerationRights vestedRights forfeitedBalance at the end of the yearVested at end of yearVested and exercisable at end of yearVested and exercisable at end of yearWilliam Howard1-2,000,000--2,000,000---Paul Dalgleish1-24,000,000--24,000,000---Ian Lynass2500,000--(500,000)----TOTAL500,00026,000,000-(500,000)26,000,000---1. The performance rights were granted at employment commencement and accordingly ongoing performance conditions were set as this was issued as a sign on bonus. The performance rights granted are subject to continued employment over five years of service.2. Rights granted were forfeited on resignation. REMUNERATION REPORT |AUDITED PERFORMANCE RIGHTS AWARDED, VESTED AND LAPSED DURING THE YEAR The table below discloses the number of performance rights granted, vested or lapsed during the year. ADDITIONAL INFORMATION The earnings of the consolidated entity for the five years to 31 December 2019 are summarised below: DIRECTOR AND KMP AGREEMENTS The company currently has service agreements with its executive and non-executive directors. The agreements detailing the formal terms and conditions of the appointment, expected time commitment, procedure regarding conflicts of interest, performance appraisal, remuneration, superannuation and insurance arrangements. The Tempo Constitution governs the election and appointment of directors, rotation of elected directors, casual vacancies and eligibility for election. The terms and entitlements of non-executive directors are governed by normal employment law. The following summarises the key provisions of service agreements with executives: Name: Title: Agreement Commenced: Details: Guido Belgiorno-Nettis Non-Executive Director 22 December 2016 $15,000 per annum inclusive of superannuation (if applicable) 12 | P A G E Financial year grantedRights awarded during the year No.Grant dateFair value per right at award date ($)Vesting date¹Expiry dateNo. vested during yearNo. forfeited during yearValue of rights granted during the year²Value of rights vested during the year ($) ³William Howard20192,000,00015/07/19 0.02 14/07/24--3,586-Paul Dalgleish201924,000,00015/07/19 0.03 14/07/24--483,478-Ian Lynass 2018500,00022/03/180.1922/01/2126/03/33-(500,000)--1 The performance rights vested are subject to trading in Tempo shares on ASX achievements3 Determined at the time of exercise at the intrinsic value.2 Determined at the time of grant per AASB 2. 20192018201720162015$'000$'000$'000$'000$'000Revenue and other income (excluding interest income)53,21741,69118,11481,14278,079EBITDA(2,683)(5,400)(1,794)6,3934,579EBIT(14,645)(6,039)(2,397)6,2014,505(Loss)/Profit after income tax(19,964)(5,648)(1,047)5,4556,740Share price at financial year end ($)0.0490.1450.2400.2300.120Total dividends declared (cents per share)-----Basic (loss)/earnings per share (cents per share)(8.020)(2.344)(0.435)2.7133.449The factors that are considered to affect total shareholders return ('TSR') are summarised below REMUNERATION REPORT |AUDITED Name: Title: Agreement Commenced: Details: Name: Title: Agreement Commenced: Terms of Agreement: Details: David Iverach Non-Executive Director 10 December 2018 $15,000 per annum inclusive of superannuation (if applicable) William Howard Executive Director 15 July 2019 Permanent full time Base salary of $295,000 per annum plus superannuation. Six months termination notice by either party, STI up to 40% and performance rights subject to the satisfaction of specified milestones and performance criteria (both individual and company). The company has non-fixed term employment contracts with its executives. The contracts detail the formal terms and conditions of the employment. Name: Title: Agreement Commenced: Terms of Agreement: Details: Name: Title: Agreement Commenced: Terms of Agreement: Details: Name: Title: Agreement Commenced: Terms of Agreement: Details: Paul Dalgleish Chief Executive Officer 15 July 2019 Permanent full time Base salary of $360,000 per annum plus superannuation. Six months termination notice by either party, performance rights and bonus subject to the satisfaction of specified milestones and performance criteria (both individual and company). Ian Lynass Managing Director and Chief Executive Officer (Resigned as Managing Director on 29 April 2019 and resigned as Non-Executive Director on 16 August 2019) 22 January 2018 Permanent full time Base salary of $275,000 per annum plus superannuation. Three (3) months termination notice by either party, bonus of up to 30% subject to the satisfaction of specified milestones and performance criteria (both individual and company). Entitled to participate in the company’s ESIRP subject to the satisfaction of specified milestones and performance criteria (both individual and company). Scott Macdonald Chief Financial Officer and Company Secretary (Resigned 17 April 2019) 15 June 2018 Permanent full time Base salary of $250,000 per annum plus superannuation. Three months termination notice by either party. The employee will receive a sign-on offer of 500,000 performance rights subject to be an employee for three years after commencement date (good leaver provisions to apply). Signed in accordance with a resolution of the directors. William Howard Executive Director, Chief Financial Officer & Company Secretary Date: 31 March 2020 13 | P A G E AUDITOR’S INDEPENDENCE DECLARATION AUDITORS INDEPENDENCE DECLARATION 14 | P A G E CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME TEMPO AUSTRALIA LTD AND CONTROLLED ENTITIES CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2019 The Group has initially applied AASB 16 using the cumulative effect method and has not restated comparatives. The comparatives have been prepared using AASB 117 and related interpretations. 15 | P A G E Note2019$'0002018$'000Revenue452,94440,492Other income42731,301Revenue and other income53,21741,793Employee and director benefits expense619,48720,170Administration costs1,3321,718Occupancy costs408798Depreciation and amortisation 12, 131,399639Other expenses5394128Project material costs10,6118,661Equipment and other subcontractor costs22,63411,596Listing and other statutory charges9450Interest and finance charges198126Other professional expenses940679Impairment expense13, 1410,3653,230Total expenses67,86247,795Loss before income tax expense(14,645)(6,002)Income tax (credit) / expense7(5,319)354Loss attributable to the members of the parent(19,964)(5,648)Other comprehensive income--Total comprehensive loss(19,964)(5,648)Net loss attributable to members of the parent entity(19,964)(5,648)Loss per shareBasic loss – cents per share21(8.0)(2.3)Diluted loss – cents per share21(8.0)(2.3)The accompanying notes from part of these financial statements.Consolidated entity CONSOLIDATED STATEMENT OF FINANCIAL POSITION TEMPO AUSTRALIA LTD AND CONTROLLED ENTITIES CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2019 The Group has initially applied AASB 16 using the cumulative effect method and has not restated comparatives. The comparatives have been prepared using AASB 117 and related interpretations. 16 | P A G E Note2019$'0002018$'000CURRENT ASSETSCash and cash equivalents87,3404,766Trade and other receivables910,4395,411Contract assets101,0162,723Inventories11505402Other assets461394Total current assets19,76113,696NON-CURRENT ASSETSPlant and equipment123,3382,312Goodwill13, 14-9,230Intangible Assets13-466Deferred tax assets7-5,318Total non-current assets3,33817,326Total assets23,09931,022CURRENT LIABILITIESTrade and other payables1610,4433,831Interest bearing loans and borrowings ©171,2851,326Provisions 18805679Total current liabilities12,5335,836NON-CURRENT LIABILITIESInterest bearing loans and borrowings (nc)171,948843Provisions (nc) 1811858Total non-current liabilities2,066901Total liabilities14,5996,737Net assets 8,50024,285EQUITYContributed equity 1984,05680,341Share option reserve192,0421,580Accumulated losses(77,598)(57,636)Total equity8,50024,285The accompanying notes from part of these financial statements.Consolidated entity CONSOLIDATED STATEMENT OF CHANGES IN EQUITY TEMPO AUSTRALIA LTD AND CONTROLLED ENTITIES CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2019 The Group has initially applied AASB 16 using the cumulative effect method and has not restated comparatives. The comparatives have been prepared using AASB 117 and related interpretations. 17 | P A G E ConsolidatedContributed equityAccumulated lossesShare Option ReserveTotal equityNote$'000$'000$'000$'000At 1 January 201879,893(51,988)2,01029,915Loss for the year-(5,648)-(5,648)Other comprehensive income----Total comprehensive loss -(5,648)-(5,648)Share based payments--427427Reversal of unvested options--(776)(776)Acquisition of treasury shares(387)--(387)Tax effect relating to share based payment--(81)(81)Tax effect relating to share issue cost(15)--(15)Other contributed equity on settlement of contingent consideration for acquisition of KP Electirc850--850At 31 December 201880,341(57,636)1,58024,285At 1 January 201980,341(57,636)1,58024,285Loss for the year-(19,962)-(19,962)Other comrehensive income----Total comprehensive loss -(19,962)-(19,962)Share Issues3,915--3,915Share based payments--495495Reversal of unvested options--(33)(33)Cost of Share Raising(200)--(200)At 31 December 201984,056(77,598)2,0428,500The accompanying notes from part of these financial statements. CONSOLIDATED STATEMENT OF CASH FLOWS TEMPO AUSTRALIA LTD AND CONTROLLED ENTITIES CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2019 The Group has initially applied AASB 16 using the cumulative effect method and has not restated comparatives. The comparatives have been prepared using AASB 117 and related interpretations. 18 | P A G E Note2019$'0002018$'000CASH FLOW FROM OPERATING ACTIVITIESReceipts from customers51,65243,001Payments to suppliers and employees(50,441)(47,165)Income tax paid-(209)Interest and finance charges paid(198)(126)Interest received45103Net cash generated by /(used in) operating activities201,058(4,396)CASH FLOW FROM INVESTING ACTIVITIESPayment for acquisition of business-(2,411)Proceeds from sale of property, plant and equipment12740Intangibles--Payments for property plant and equipment(353)(689)Net cash used in investing activities(341)(2,360)CASH FLOW FROM FINANCING ACTIVITIESPayment for shares acquisition of treasury shares19-(387)Proceeds from issue of equity instruments193,715-Proceeds from borrowings1716,4151,149Repayment of borrowings17(18,273)(257)Net cash generated by financing activities1,857505Net increase (decrease) in cash and cash equivalents2,574(6,251)Cash and cash equivalents at beginning of year4,76611,017Total cash and cash equivalents at the end of the year7,3404,766The accompanying notes from part of these financial statements.Consolidated entity NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 1 Corporate information Change in accounting policy The consolidated financial statements of Tempo Australia Limited (the Company) and its subsidiaries (collectively, the Group) were authorised for issue in accordance with a resolution of the directors 26 March 2020. Tempo Australia Limited is a for profit company limited by shares, incorporated in Australia whose shares are publicly traded on the Australian Stock Exchange. The company’s registered office is c/o Company Matters Pty Limited, Level 12, 680 George Street, Sydney NSW 2000 The consolidated financial statements are presented in Australian dollars which is the parent entity’s functional and presentation currency The nature of the operations and principal activities of the consolidated entity are described in the Directors’ Report. Comparatives are consistent with prior years, except for the information relating to leases due to the modified retrospective adoption of AASB 16. Rounding The amounts contained in the financial report have been rounded to the nearest $1,000 (where rounding is applicable) where noted ($’000) under the option available to the company under ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191. The Company is an entity to which this legislative instrument applies. 2 Significant accounting policies Basis of preparation The consolidated financial statements are general- purpose financial statements, which have been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board (AASB). New and amended accounting standards and interpretations The Group applied AASB 16 Leases (AASB 16) for the first time during the current year. The nature and effect of the changes as a result of adoption of this new accounting standards are described below. Several other amendments and interpretations apply for the first time in 2019, but do not have a material impact on the consolidated financial statements of the Group. The Group has not early adopted any standards, interpretations or amendments that have been issued but are not yet effective. AASB 16 Leases The Group has initially adopted AASB 16 Leases from 1 January 2019. AASB 16 introduced a single, on- balance sheet accounting model for lessees. As a result, the Group, as a lessee, has recognised right-of- use assets representing its right to use the underlying assets and lease liabilities representing its obligation to make lease payments. The Group has applied AASB 16 using the modified retrospective approach, under which the cumulative effect of initial application is recognised in retained earnings at 1 January 2019. Accordingly, the comparative information presented for 2018 has not been restated – i.e. it Is presented, as previously reported, under AASB 117. The details of the changes in accounting policies are disclosed below. Previously, the Group determined at contract inception whether an arrangement was or contained a lease under AASB Interpretation 4 Determining Whether an Arrangement Contains a Lease. The Group now assesses whether a contract is or contains a lease based on the new definition of a lease. Under AASB 16, a contract is, or contains, a lease if the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration. At inception or on reassessment of a contract that contains a lease component, the Group allocates the 19 | P A G E NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 consideration in the contract to each lease and non- lease component on the basis of their relative stand- alone prices, although it uses the practical expedient. Lease liabilities At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating a lease, if the lease term reflects the Group exercising the option to terminate. The variable lease payments that do not depend on an index or a rate are recognised as expense in the period on which the event or condition that triggers the payment occurs. In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset. Short-term leases and leases of low-value assets The Group applies the short-term lease recognition exemption to its short-term leases of machinery and equipment (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered of low value. Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over the lease term. The Group determines the lease term as the non- cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised. The Group has the option, under some of its leases to lease the assets for additional terms of one to three years. The Group applies judgement in evaluating whether it is reasonably certain to exercise the option to renew. That is, it considers all relevant factors that create an economic incentive for it to exercise the renewal. After the commencement date, the Group reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise (or not to exercise) the option to renew (e.g., a change in business strategy). Transition At transition, for leases classified as operating leases under AASB 117, lease liabilities were measured at the present value of the remaining lease payments, discounted at either the interest rate implicit in the lease or the Group’s incremental borrowing rate. lease Right-of-use assets are measured at an amount equal to the liability, adjusted by the amount depreciation that would have been recognised had the asset been recognised at the start of the lease. The Group used the following practical expedients when applying AASB 16 to leases previously classified as operating leases under AASB 117. • Applied the exemption not to recognise right-of- use assets and liabilities for leases with less than 12 months of lease term, remaining at the date of transition. • Excluded initial direct costs from measuring the initial the date of right-of-use asset at application. The Group leases a number of motor vehicles and items of plant and equipment. Many of these leases were classified as finance leases under AASB 117. For these finance leases, the carrying amount of the associated right-of-use asset and the lease liability at 1 January 2019 were determined to be the carrying amount of the lease asset and lease liability under AASB 117 immediately before that date. 20 | P A G E NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 As a lessee The Group leases many assets, including motor vehicles and properties. As a lessee the Group previously classified leases as operating, or finance leases based on its assessment of whether the lease transferred substantially all of the risks and rewards of ownership. Under AAASB 16, the Group recognises right-of-use assets and lease liabilities for most leases – i.e. these leases are on- balance sheet. However, the Group has elected not to recognise right-of-use assets and lease liabilities for some leases where the right to control the identified asset is for a period of less than twelve months and where the underlying asset is of low value. The Group presents right-of-use assets as it presents underlying assets of the same nature that it owns. The carrying amounts of right-of-use-assets are as below. The Group presents lease liabilities in ‘Interest- bearing loans and borrowings’ in the statement of financial position. As a lessor The Group currently does not undertake any activities which would classify it as a lessor under AASB 16. Impacts on financial statements On transition to AASB 16, the Group recognised additional right-of-use assets and additional lease liabilities, recognising the difference in retained earnings. The impact on transition is summarised below. When measuring lease liabilities for leases that were classified as operating leases, the Group discounted lease payments using the rate implicit in the lease agreement, or the Group’s incremental borrowing rate when the rate was not readily determined. The weighted-average rate applied at transition was 4.84%. Impacts for the period As a result of initially applying AASB 16, in relation to the leases that were previously classified as operating leases, the Group recognised $935K of right-of-use assets and $969K of lease liabilities as at 1 January 2019. Also, in relation to those leases under AASB 16, the Group has recognised depreciation and interest expense, instead of operating lease expense. During the twelve months ended 31 December 2019, the Group recognised $799K of depreciation and $101K of interest expense from these leases. Basis of consolidation The consolidated financial statements include the financial position and performance of controlled entities from the date on which control is obtained until the date that control is lost. liabilities, equity, Intragroup assets, income, expenses and cashflows relating to transactions between entities in the consolidated entity have been eliminated in full for the purpose of these financial statements. 21 | P A G E PropertyMotor Vehicles$'000$'000Balance at 1 January 2019755176Balance at 31 December 20194241,583Right-of-use assets1-Jan-19Right-of-use assets presented in property755 Right-of-use assets presented in motor vehicles176 Lease liabilities(965)Write of amortised incentive payment34 1-Jan-19Operating lease commitment at 31 December 2018 as disclosed in the Group’s consolidated financial statements1,487 Less exempted non-lease components(268)Discounted using the implicit interest rate or the Group’s incremental borrowing rate(53)Less recognition exemption for leases with less than 12 months of lease term at transition(390)Plus extensions not known at 31 December 2018189 Finance lease liabilities recognised as at 31 December 20181,020 Lease liabilities recognised at 1 January 20191,985 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 Appropriate adjustments have been made to a controlled entity’s financial position, performance and cash flows where the accounting policies used by that entity were different from those adopted by the consolidated entity. All controlled entities have a 30 June financial year end. A list of controlled entities is contained in Note 24 to the financial statements. Subsidiaries Subsidiaries are all entities over which the parent has control. Control is established when the parent 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 relevant activities of the entity. Associates investments in associates, where the investor has Interests significant influence over the investee, are accounted for using the equity method in accordance with AASB128 Joint Ventures. Under this method, the investment is initially recognised as cost and the carrying amount is increased or decreased to recognise the investor’s share of the profit or loss and other comprehensive income of the investee after the date of acquisition. in Associates and Summary of significant accounting policies a. Current versus non-current classifications The Group presents assets and liabilities in the financial position based on a statement of current/non-current classification. An asset is current when it is: • Expected to be realised or intended to be sold or consumed in the normal operating cycle • Held primarily for the purpose of trading • Expected to be realised within twelve months after the reporting period or • Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period All other assets are classified as non-current. A liability is current when: • • • It is expected to be settled in the normal operating cycle It is held primarily for the purpose of trading It is due to be settled within twelve months after the reporting period or • There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period The Group classifies all other liabilities as non- current. Deferred tax assets and liabilities are classified as non-current assets and liabilities. b. Revenue from contracts with customers that Revenue from contracts with customers is recognised when goods and services are transferred to the customer at an amount the consideration to which the Group expects to be entitled in exchange for those goods and services. The Group has generally concluded that it is the principal in its revenue arrangements because it typically controls the goods and services before transferring them to the customer. reflects identify Maintenance and construction electrical services The Group provides maintenance and construction electrical services. The Group assesses each contract the performance obligations and to transaction price within the contract. The total transaction price is allocated to performance obligations based on relative standalone selling prices. the those the Group; contracts where For customer simultaneously receives and consumes the goods and the Group’s service provided by performance creates or enhances an asset that the customer controls as the asset is created or enhanced; or work is performed on assets that have no alternative use to the Group and the Group has a right to payment for performance to date, revenue is recognised over time. Where the criteria to recognise is not satisfied the group revenue over time recognises revenue at a point in time. If the consideration in the contract includes a variable amount, typically for cost plus contracts or contracts 22 | P A G E NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 with a schedule of rates, the Group estimates the amount of the consideration to which it is entitled in exchange for transferring the goods and services to the customer. The variable consideration is estimated at contract inception and constrained until it is highly probable that a significant reversal of the cumulative revenue recognised will not occur when the associated variable consideration is subsequently resolved. Certain contracts are subject to claims which are enforceable under the contract. If the claim does not result in any additional goods or services, the transaction price is updated, and the claim accounted for as variable consideration. uncertainty with the Where appropriate, the Group applies the variable to allocate consideration allocation exception variable consideration to distinct services in a contract where the contract includes a series of distinct services that form a single performance obligation. For other contracts where the Group has a right to consideration in an amount that corresponds directly with the value to the customer of the Group’s performance completed to date, the Group utilised the practical expedient to recognise revenue in the amounts to which the Group has a right to invoice. In all other cases, in recognising revenue over time, the group applies an input method to measure the Group’s progress towards satisfying the performance obligation by comparing costs incurred to date, mainly labour and consumables, to the total expected costs. Project fulfilment costs Contract fulfilment costs are expensed as incurred except where they generate or enhance resources of the Group that will be used to satisfy future performance obligations in which case they are capitalised and amortised over the course of the contract. Contract assets A contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the Group transfers goods or services to a customer before the customer pays consideration or before payment is due, a contract asset is recognised for the earned consideration. If the Group’s right to an amount of consideration is unconditional (other than the passage of time), the contract asset is classified as a receivable. The disclosures of significant accounting judgements, estimates and assumptions relating to revenue from contracts with customers are provided in Note 3. c. Government grants Government grants are recognised where there is reasonable assurance that the grant will be received, and all attached conditions will be complied with. When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed. When the grant relates to an asset, it is recognised as income in equal amounts over the expected useful life of the related asset. When the Group receives grants of non-monetary assets, the asset and the grant are recorded at nominal amounts and released to profit or loss over the expected useful life of the asset, based on the pattern of consumption of the benefits of the underlying asset by equal annual instalments. d. Income tax Current income tax Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date in the countries where the Group operates and generates taxable income. Current income tax relating to items recognised directly in equity is recognised in equity and not in the statement of profit or loss. Management periodically evaluates positions taken in the tax returns with in which applicable tax respect to situations regulations are subject interpretation and establishes provisions where appropriate. to Deferred tax Deferred tax is provided using the full liability balance sheet method on temporary differences between the tax bases of assets and liabilities and their carrying 23 | P A G E NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 amounts for financial reporting purposes at the reporting date. Deferred tax liabilities are recognised for all taxable temporary differences, except: • When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss In respect of taxable temporary differences in subsidiaries, investments associated with associates and interests in joint arrangements, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future • Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised, except: • • When the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss In respect of deductible temporary differences associated with in subsidiaries, investments associates and interests in joint arrangements, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity. Tax benefits acquired as part of a business combination, but not satisfying the criteria for separate recognition at that date, are recognised subsequently if new information about facts and circumstances change. The adjustment is either treated as a reduction in goodwill (as long as it does not exceed goodwill) if it reflects new information obtained about facts and circumstances that exist at the acquisition date that, if known, would have affected the amount recognised at that date where recognised during the measurement period or recognised in profit or loss. The Group offsets deferred tax assets and deferred tax liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities in which simultaneously, significant amounts of deferred tax liabilities or assets are expected to be settled or recovered. in each future period Tax consolidated group its wholly owned Tempo Australia Limited and Australian resident subsidiaries tax formed a consolidated group with effect from 1 July 2005. In addition to its own current and deferred tax amounts, Tempo Australia Limited also recognises the current tax liabilities (or assets) and deferred tax liabilities (or assets) arising from unused tax losses 24 | P A G E NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 and unused tax credits assumed from controlled entities in the tax consolidated group. e. Property, plant and equipment Property, plant and equipment is carried at cost less accumulated depreciation and any accumulated impairment. In the event the carrying amount of plant and equipment is greater than the estimated recoverable amount, the carrying amount is written down immediately to the estimated recoverable amount and impairment losses are recognised either in profit or loss or as a revaluation decrease if the impairment losses relate to a re-valued asset. A formal assessment of the recoverable amount is made when impairment indicators are present. The carrying amount of plant and equipment is reviewed annually by the directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received the asset’s employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts. from Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the consolidated entity and the cost of the item can be measured repairs and reliably. All other maintenance are recognised as an expense in the statement of comprehensive income during the financial period in which they are incurred. Depreciation is provided on a straight-line basis and diminishing-value basis over the asset’s useful life to the consolidated entity commencing from the time the asset for use. Leasehold improvements are depreciated over the shorter of the unexpired period of the lease and the estimated useful lives of the improvements. is held ready The useful lives used are listed as below: f. Leases The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfilment of the arrangement is dependent on the use of a specific asset (or assets) and the arrangement conveys a right to use the asset (or assets), even if that asset is (or those assets are) not explicitly specified in an arrangement. g. Intangible assets Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses. Refer to Note 13 for further details. The useful lives of intangible assets are assessed as either finite or indefinite. Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the statement of profit or loss in the depreciation and amortisation expense category. Intangible assets with indefinite useful lives are not amortised but are tested for impairment annually at the cash-generating unit level. The assessment of 25 | P A G E Furniture and fixtures5 – 10 yearsComputer equipment4 yearsPlant & Equipment4 yearsMotor Vehicles6 yearsProperty Right of Use1 – 4 years NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 indefinite life is reviewed annually to determine whether to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis. life continues indefinite the An intangible asset is derecognised upon disposal (i.e. at the date the recipient obtains control) or where no future economic benefits are expected from its use or disposal. Any gain or loss arising upon derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit and loss. Intangible assets have been recognised relating to the acquisition of customer contracts through business combinations. These assets have been measured at their fair value at the date of acquisition and are amortised using the straight-line method over periods of between 2.5 and 3 years. h. Goodwill is carried at cost Goodwill less accumulated impairment losses. Goodwill is calculated as the excess of the sum of: • The consideration transferred; • Any non-controlling interest; and • The acquisition date fair value of any previously held equity interest over the acquisition date fair value of net identifiable assets acquired in a business combination. i. Financial instruments Financial instruments are recognised initially on the date that the Group becomes party to the contractual provisions of the instrument. On initial recognition, all financial instruments are measured at fair value plus transaction costs Financial assets All recognised financial assets are subsequently measured in their entirety at either amortised cost or fair value, depending on the classification of the financial assets. Classification initial recognition, the financial assets were On measured at amortised cost. Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets. Amortised cost Assets measured at amortised cost are financial assets where: • • the business model is to hold assets to collect contractual cash flows; and the contractual terms give rise on specified dates to cash flows are solely payments of principal the principal amount and outstanding. interest on The Group's financial assets measured at amortised cost comprise trade and other receivables and cash and cash equivalents in the consolidated statement of financial position. Subsequent to initial recognition, these assets are carried at amortised cost using the effective interest rate method less provision for impairment. Interest income, foreign exchange gains or losses and impairment are recognised in profit or loss. Gain or loss on derecognition is recognised in profit or loss. Impairment of financial assets and contract assets Impairment of financial assets is recognised on an expected credit loss (ECL) basis for the following assets: • • financial assets measured at amortised cost; and contract assets. reasonable When determining whether the credit risk of a financial assets has increased significant since initial the recognition and when estimating ECL, Group considers supportable information that is relevant and available without undue cost or effort. This includes both quantitative analysis and based on the Group's historical experience and informed credit assessment and including forward looking information. information qualitative and and The Group uses the presumption that an asset which is more than 30 days past due has seen a significant increase in credit risk. 26 | P A G E NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 The Group uses the presumption that a financial asset is in default when: • • the other party is unlikely to pay its credit obligations to the Group in full, without recourse to actions such as realising security (if any is held); or the financial assets is more than 90 days past due. Credit losses are measured as the present value of the difference between the cash flows due to the Group in accordance with the contract and the cash flows expected to be received. This is applied using a probability weighted approach. Trade receivables and contract assets trade Impairment of receivables and contract assets have been determined using the simplified approach in AASB 9 which uses an estimation of losses. The Group has lifetime expected credit determined the probability of non-payment of the receivable and contract asset and multiplied this by the amount of the expected loss arising from default. The amount of the impairment is recorded in a separate allowance account with the loss being recognised in other expense. Once the receivable is determined to be uncollectable then the gross carrying amount is written off against the associated allowance. Where the Group renegotiates the terms of trade receivables due from certain customers, the new expected cash flows are discounted at the original effective interest rate and any resulting difference to the carrying value is recognised in profit or loss. Other financial assets measured at amortised cost Impairment of other financial assets measured at amortised cost are determined using the expected credit loss model in AASB 9. On initial recognition of the asset, an estimate of the expected credit losses for the next 12 months is recognised. Where the asset has experienced significant increase in credit risk then the lifetime losses are estimated and recognised. Financial liabilities The Group measures all financial liabilities initially at fair value less transaction costs, subsequently financial liabilities are measured at amortised cost using the effective interest rate method. The financial liabilities of the Group comprise trade payables, bank and other loans and lease liabilities. j. Inventories Inventories are valued at the lower of cost and net realisable value and are comprised entirely of consumables. Cost is determined on a FIFO of the direct costs of materials. Inventories determined to be obsolete or damaged are written down to net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. k. Impairments of non-financial assets Further disclosures relating to impairment of non- financial assets are also provided in the following notes: Intangible assets - Note 13 • • Goodwill - Note 14 The Group assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or CGU’s fair value less costs of disposal and its value-in- use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value-in-use, the estimated future cash flows are discounted to their present value using a post-tax discount rate that reflects current market assessments of the time value of money and the risks 27 | P A G E NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators. its The impairment calculation is performed by the Group using a value-in-use model with discounted impairment cash flows. The Group bases calculation on detailed budgets and forecast calculations, which are prepared separately for each of the Group’s CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover a five years period. A long-term growth rate is calculated and applied to project future cash flows after the fifth year. Impairment losses of continuing operations are recognised in the statement of profit or loss in impairment expense. For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is an indication that previously recognised impairment losses no longer exist or have decreased. If such indication exists, the Group estimates the asset’s or CGU’s recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no loss been recognised for the asset in prior years. Such reversal is recognised in the statement of profit or loss. impairment is tested for impairment annually Goodwill in December and when circumstances indicate that the carrying value may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of each CGU (or group of CGUs) to which the goodwill relates. When the recoverable amount of the CGU its carrying amount, an impairment loss is recognised. Impairment losses relating to goodwill cannot be reversed in future periods. less than is Intangible assets with indefinite useful lives are tested for impairment annually as at 31 December at level, as appropriate, and when the CGU circumstances indicate that the carrying value may be impaired. l. Cash and short-term deposits Cash and short-term deposits in the statement of financial position comprise cash at banks and on hand and short-term deposits with a maturity of three months or less, which are subject to an insignificant risk of changes in value. For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, as defined above. Outstanding bank overdrafts are considered as current liabilities. m. Treasury shares Own equity instruments that are reacquired (treasury shares) are recognised at cost and deducted from equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Group’s own equity instruments. n. 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. When the Group expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognised the as a reimbursement is virtually certain. The expense relating to a provision is presented in the statement of profit or loss net of any reimbursement. separate asset, but only when If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost. 28 | P A G E NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 leave and long Equity-settled Transactions o. Superannuation, annual service leave Superannuation The Group makes contributions. There superannuation scheme operated by the Group. contributions as defined is no defined benefit Long service leave and annual leave The Group does not expect its long service leave or annual leave benefits to be settled wholly within 12 months of each reporting date. The Group recognises a liability for long service leave and annual leave measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures, and periods of service. Expected future payments are discounted using market yields at the reporting date on high quality corporate bonds with terms to maturity and currencies that match, as closely as possible, the estimated future cash outflows. p. Earnings per share Basic earnings per share is calculated by dividing the profit attributable to owners of the company by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share adjusts the basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares. q. Share based payments Some employees of the Group receive remuneration in the form of share-based payments, whereby employees render services as consideration for equity instruments (equity-settled transactions). The cost of equity-settled transactions is determined by the fair value at the date when the grant is made using an appropriate valuation model, further details of which are given in Note 28. That cost is recognised in employee benefits expense (Note 6), together with a corresponding increase in equity (share-based payment reserves), over the period in which the service and, where applicable, the performance conditions are fulfilled (the vesting period). The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group’s best estimate of the number of equity instruments that will ultimately vest. The expense or credit in the statement of profit or loss for a period represents the movement in cumulative expense recognised as at the beginning and end of that period. Service and non-market performance conditions are not taken into account when determining the grant date fair value of awards, but the likelihood of the conditions being met is assessed as part of the Group’s best estimate of the number of equity that will ultimately vest. Market instruments performance conditions are reflected within the grant date fair value. Any other conditions attached to an award, but without an associated service requirement, are considered to be non-vesting conditions. Non-vesting conditions are reflected in the fair value of an award and lead to an immediate expensing of an award unless there are also service and/or performance conditions. No expense is recognised for awards that do not ultimately vest because non-market performance and/or service conditions have not been met. Where awards include a market or non-vesting condition, the transactions are treated as vested irrespective of whether the market or non-vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied. When the terms of an equity-settled award are modified, the minimum expense recognised is the grant date fair value of the unmodified award, provided the original vesting terms of the award are 29 | P A G E NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 met. An additional expense, measured as at the date of modification, is recognised for any modification that increases the total far value of the share-based payment transaction, or is otherwise beneficial to the employee. Where an award is cancelled by the entity or by the counterparty, any remaining element of the fair value of the award is expensed immediately through profit or loss. The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share (further details are given in Note 21). r. Share Capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options which vest immediately are recognised as a deduction from equity, net of any tax effects. s. Segment reporting Operating segments are presented using the information 'management approach', where the presented is on the same basis as the internal reports provided to the Chief Operating Decision Makers ('CODM'). The CODM is responsible for the allocation of resources to operating segments and assessing their performance. 3 Critical Accounting Estimates and Judgments The preparation of the Group’s consolidated financial to make requires management statements judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods. Judgements the electrical and timing of repairs and maintenance Determining telecommunications services The Group concluded that revenue for electrical and and maintenance repairs telecommunications services is to be recognised over time because the customer simultaneously receives and consumes the benefits provided by the Group. The fact that another entity would not need to re-perform work that the Group has provided to date demonstrates that the customer simultaneously receives and consumes the benefits of the Group’s performance as it performs. Determining the timing of construction and electrical project work The Group concluded that revenue for electrical project work and construction work is to be recognised over time. Factors that were considered include the act that the Group’s performance does not create an asset with an alternative use, the Group is entitled to payment for performance to date and the customer controls the asset as the entity creates or enhances it. The Group determined that the input method based on costs incurred to date compared to total expected costs is a direct relationship between the Group’s effort (i.e. costs incurred) and the transfer of services to the customer. Estimates and assumptions The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described its assumptions and below. The Group based estimates on parameters available when the consolidated financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Group. Such changes are reflected in the assumptions when they occur. Revenue from contracts with customers – Variable consideration Certain contracts contain provisions for liquidated damages which would be considered variable consideration. The group has applied judgement in not variable revenue consideration on the basis that there is no history of constraining this for 30 | P A G E NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 significant reversals of revenue liquidated damages. in relation to Impairment review losses of trade Provision for expected credit receivables and contract assets The Group uses a provision matrix to calculate ECLs for trade receivables and contract assets. The provision rates are based on days past due for groupings of various customer segments that have similar loss patterns (i.e., by geography, product type, customer type). The provision matrix is initially based on the Group’s historical observed default rates and adjusted for forward-looking information. At every reporting date, the historical observed default rates are updated and changes forward-looking estimates are analysed. in the The assessment of the correlation between historical observed default rates, forecast economic conditions and ECLs is a significant estimate. The amount of ECLs is sensitive to changes in circumstances and of forecast economic conditions. The Group’s historical credit loss experience and forecast of economic conditions may also not be representative of customer’s actual default future. The information about the ECLs on the Group’s trade receivables and contract assets is disclosed in Note 9. in the Taxes Deferred tax assets are recognised for unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits, together with future tax planning strategies. judgement The Group has $15,070K (2018: $11,407K) of tax losses carried forward. These losses relate to subsidiaries that have a history of losses, do not expire, and may be used to offset taxable income elsewhere in the Group. The Group has determined that while its deferred tax assets are recoverable based on the expectation of future taxable income but have been reversed in the assets at 30 June 2019 as a matter of prudence. Further details on taxes are disclosed in Note 7. Financial assets (including receivables) A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably. Objective evidence that financial assets (including equity securities) are impaired can include default or delinquency by a debtor, restructuring of an amount due to the Group on terms that the Group would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, or the disappearance of an active market for a security. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment. The Group considers evidence of impairment for receivables at both a specific asset and collective individually significant receivables are level. All assessed for specific impairment. All individually significant receivables found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified. Receivables that are not individually significant are collectively assessed for impairment by grouping together receivables with similar risk characteristics. In assessing collective impairment, the Group uses historical trends of the probability of default, timing of recoveries and the amount of loss incurred, adjusted for management’s judgement as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical trends. An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest 31 | P A G E NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 rate. Losses are recognised as profit or loss and reflected in an allowance account against receivables. Interest on the impaired asset continues to be recognised through the unwinding of the discount. When a subsequent event causes the amount of in loss to decrease, the decrease impairment impairment loss is reversed through profit or loss. Non-financial assets The carrying amounts of the Group’s non-financial assets (other than inventories, construction work in progress and deferred tax assets) are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. The recoverable amount of an asset or cash- generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a post-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or Group’s of assets (“the cash generating unit” or “CGU”). The Group’s corporate assets do not generate separate cash 4 Revenue and other income inflows. If there is an indication that a corporate asset may be impaired, then the recoverable amount is determined for the CGU to which the corporate asset belongs. An impairment loss is recognised if the carrying amount of an asset or its CGU exceeds its recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro-rata basis. An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. therefore in an associate Goodwill that forms part of the carrying amount of an is not recognised investment separately, and for impairment separately. Instead, the entire amount of is tested for in an associate the impairment as a single asset when there is objective evidence that the investment in an associate may be impaired. investment is not tested 32 | P A G E 2019$'0002018$'000Revenues from contracts with customers52,94440,492Interest revenue calculated using the effective interest method45103Other income2281,198Total revenue and other income53,21741,793Consolidated entity DIRECTORS’ DECLARATION The transaction price allocated to the remaining performance obligations as described in Note 2.4(b) (unsatisfied or partially unsatisfied as at 31 December) is as follows: 5 Other expenses 6 Employee and director expenses 33 | P A G E Revenue from contracts with customers by type of customer2019$'0002018$'000Government and infrastructure4,30411,540Commercial47,02224,689Education and aged care1,4611,789Resources1012,120Other56354Total revenues from contracts with customers52,94440,492Consolidated entity2019$'0002018$'000Within one year15,33815,630Total revenue and other income15,33815,630Consolidated entity2019$'0002018$'000Candidate screening cost145110Movement in allowance for expected credit losses24918Total other expenses394128Consolidated entity2019$'0002018$'000Salaries, wages and other expenses17,67917,396Superannuation expenses1,3131,531Share based payments495(349)Other staff expenses-1,592Total employee and director expenses19,48720,170Consolidated entity DIRECTORS’ DECLARATION 7 Income tax The major components of income tax expense for the years ended 31 December 2019 and 2018 are: 34 | P A G E 2019$'0002018$'000Current income taxCurrent tax benefit1,1671,390Conversion of prior year balances to 30% tax rate487(344)Defferred income taxTemporary differences68(527)Adjustments in repect of previous years-(104)Conversion of prior year balances to 30% tax rate3(61)ProvisionProvision Current year tax benefit(1,726)-Provision prior year DTA(5,319)-Income tax (credit) / expense reported in the income statement(5,319)354Consolidated entity2019$'0002018$'000Contributed EquityConversion of prior year balances to 30% tax rate2(3)Blackhole expenses(2)(12)Share-based payments reserveConversion of prior year balances to 30% tax rate-(25)Employee share trust contributions-(56)Income tax (credit) / expense reported in the equity statement-(96)Consolidated entity DIRECTORS’ DECLARATION A reconciliation between tax expense and the product of accounting profit before income tax multiplied by the Group’s application income tax rate is as follows: Deferred income tax at 31 December relates to the following: Deferred tax assets Carried forward tax losses Research and development tax credits Accrued expenses Employee benefits Share based payment reverse Trade and other receivables Others Offset of deferred tax liabilities Deferred tax not recognised for current year Deferred tax asset write down for prior year Net deferred tax assets Consolidated entity 2019 $'000 2018 $'000 4,521 2,341 124 346 61 96 - (238) (1,934) (5,318) 3,137 2,146 37 276 5 81 23 (387) - - - 5,318 35 | P A G E 2019$'0002018$'000Accounting loss before income tax(14,645)(6,002)Tax at Australia's statutory income tax rate of 30% (2018: 27.5%)4,3941,651Tax effect of amounts which are not deductible in calculating taxable income(3,158)(888)Conversion of prior year balances to 30% tax rate490(405)Others-101Adjustments in respect of previous years-(105)Income tax benefit at the effective tax rate of 11.8% (2018: 6%)1,726354Provision for Current year income tax benefit(1,726)-Provision for prior year DTA(5,319)-Income tax (credit) / expense reported in the income statement(5,319)354Consolidated entity DIRECTORS’ DECLARATION In 2019 the Group has written off a deferred tax asset on carried forward losses and unused tax credits. 36 | P A G E 01 Revenue2019$'0002018$'000Deferred tax assetsCarried forward tax losses4,5213,137Research and development tax credits2,3412,146Accrued expenses12437Employee benefits346276Share based payment reverse615Trade and other receivables9681Others-23Offset of deferred tax liabilities(238)(387)Deferred tax not recognised for current year(1,934)-Deferred tax asset write down for prior year(5,318)-Net deferred tax assets-5,318Deferred tax liabilitiesInventory1513Prepayment and receivables940Plant and equipment7280Intangibles-128Works in progress143126Offset against deferred tax asset(238)(387)Net deferred tax liabilities--Consolidated entity DIRECTORS’ DECLARATION The movement of the current and deferred tax relates to the following: 8 Cash and short-term deposits 9 Trade and other receivables Trade receivables are non-interest bearing and are generally on terms of 14 to 60 days. 37 | P A G E Current Income Tax 2019$'000Deferred Income Tax 2019$'000Current Income Tax 2018$'000Deferred Income Tax 2018$'000Opening balance-5,318-4,831Income tax (credit) / expense recognised in profit and loss-(5,318)-354R&D income recognised as government grant---305Charged to equity---(15)Charged to reserves---(81)Additions through business combination---(76)Closing balance---5,318Amounts recognised on the consolidated statement of financial positionDeferred tax asset---5,318Closing balance---5,318Consolidated entity2019$'0002018$'000Cash at bank and on hand7,3403,766Short term deposits-1,000Cash and cash equivalents7,3404,766Consolidated entity2019$'0002018$'000CURRENTTrade receivables10,2334,944Allowance for expected credit losses(321)(63)Other receivables527530Total current trade and other receivables10,4395,411Consolidated entity DIRECTORS’ DECLARATION Set out below is the movement in the allowance for expected credit losses of trade receivables: The information about the credit exposures are disclosed in Note 17. 10 Contract assets Set out below is the movement in the allowance for expected credit losses of contract assets: Contract assets are initially recognised for revenue earned from maintenance and constructions services as receipt of consideration is conditional on successful completion of performance obligations. Upon completion of these services and acceptance by the customer, the amounts recognised as contract assets are reclassified to trade receivables. In 2019, $Nil (2018 Provision for doubtful debts: $18K) was recognised as provision for expected credit losses on contract assets. No revenue was recognised during the year (2018: $Nil) for performance obligations satisfied in previous years. 38 | P A G E 2019$'0002018$'000As at 1 January6358Provision for expected credit losses (Note 17)2585As at 31 December32163Consolidated entity2019$'0002018$'000Contract assets1,0162,774Allowance for expected credit losses-(51)Total contract assets1,0162,723Consolidated entity2019$'0002018$'000As at 1 January51238Provision for expected credit losses (Note 17)-18Written off during the period-(5)Reversed during the period(51)-Provision used during the period-(200)As at 31 December-51Consolidated entity DIRECTORS’ DECLARATION 11 Inventories 12 Plant and Equipment 39 | P A G E 2019$'0002018$'000Consumables505402Total inventories505402Consolidated entity2019$'0002018$'000Furniture and fixtures - gross carrying value at cost364468Furniture and fixtures - accumulated depreciation(135)(123)Net book value furniture and fixture229345Plant and equipment - gross carrying value at cost1,3651,236Plant and equipment - accumulated depreciation(348)(117)Net book value plant and equipment1,0171,119Computer equipment – gross carrying value at cost108941Computer equipment – accumulated depreciation-(525)Net book value Computer equipment108416Motor vehicles – gross carrying value at cost2,667776Motor vehicles – accumulated depreciation(889)(344)Net book value motor vehicle1,778432Property - gross carrying value Cost755- Property - accumulated depreciation(549)-Net book value Right of Use Assets - Property206-Total gross carrying value at cost5,2593,421Total accumulated depreciation(1,921)(1,109)Total net book value3,3382,312Consolidated entity DIRECTORS’ DECLARATION Reconciliation of the carrying amounts at the beginning and end of the current financial year: The carrying value of plant and machinery held under finance leases contracts at 31 December 2019 was $912K (2018: $890K). Additions during the year include $142K (2018: $947K) of plant and equipment and motor vehicles under finance leases. Leased assets under hire purchase contracts are pledged as security for the related finance lease liability: 40 | P A G E Furniture and fixtures$'000Plant and equipment$'000Computer equipment$'000Motor vehicles$'000Building$'000Total$'000Balance at 1 January 2018114156488781-1,539Additions329925110264-1,628Additions through business combinations (Note 25)-63-93-156Disposals(63)(8)(3)(500)-(574)Depreciation expense(35)(17)(179)(206)-(437)Balance at 31 December 20183451,119416432-2,312Additions111113291,7005792,532Adjust on transition to IFRS 16---759176935Disposals(254)(37)(70)(12)-(373)Impairment on loss---(626)(169)(795)Depreciation expense(68)(181)(183)(461)(380)(1,273)Balance at 31 December 20191341,0141921,7922063,338Furniture and fixtures$'000Plant and equipment$'000Computer equipment$'000Motor vehicles$'000Building$'000Total$'000Balance at 1 January 2019---759176935Additions---1,2325791,811Depreciation expense---(408)(331)(739)Balance at 31 December 2019---1,5834242,007 DIRECTORS’ DECLARATION 13 Intangible assets 14 Goodwill impairments During the year, the Group assessed its goodwill and intangible assets for impairment. The Group considers the relationship between its market capitalisation and its book value, among other factors when reviewing for indicators of impairment. Management found that the market capitalisation of the Group was below the book value of its equity, indicating a potential impairment of goodwill and impairment of the assets. As part of assessing for impairment, it was determined that the cash generating units (CGUs) of the Group would be aggregated for the purposes of testing the goodwill of $9,230K due to the interrelated nature of operating segments. The recoverable amount of the aggregated CGU was determined based on a value-in-use calculation using cash flow projections from financial forecasts. This forecast was extrapolated to a five-year forecast based on the assumptions detailed below. The post-tax discount rate applied to cash flow projections is 11.50% (2018: 11.50%) and cash flows beyond the forecast period were extrapolated using a 2.4% growth rate (2018: 2.4%) that is the same as the long-term average growth rate for the electrical services industry. Trading during the six months to 30 June 2019 had been more difficult than had been anticipated. This led to management reassessing the forecasts used as inputs to the value in use calculations which directly impacted the results of the assessment. As a result of this analysis, it was concluded that the carrying value of the CGU exceeded its recoverable amount, and the goodwill associated with the CGU was subsequently recognised as a pre-tax impairment. In conjunction with the impairment of the goodwill management also impaired the customer contracts that had been recognised in conjunction with the goodwill when the assets were originally acquired. 41 | P A G E Goodwill$'000Customer Relationships$'000Productivity Tool$'000Total$'000Balance at 1 January 201811,79347311212,378Acquisition of a subsidiary555275-830Amortisation-(283)-(283)Impairment(3,118)-(112)(3,230)Balance at 31 December 20189,230466-9,696Amortisation-(126)-(126)Impairment(9,230)(340)-(9,570)Balance at 31 December 2019---- DIRECTORS’ DECLARATION 15 Segment reporting Segment reporting The Group has identified its operating segment based on internal management reporting that is reviewed by the Board of Directors (chief operating decision makers)) in assessing performance and determining the allocation of resources. All segments operate only in one geographical area, being Australia. (a) Segment performance 42 | P A G E 31-Dec-19Asset maintenance and serviceConstruction & electrical project workCorporate / unallocatedTotal$'000$'000$'000$'000RevenueSales22,93730,007-52,944Other revenue13110834273Total segment revenue23,06730,1153453,217Operating expenses24,88830,67140955,968Earnings before interest, tax, depreciation & amortisation (EBITDA)(1,821)(556)(375)(2,751)Depreciation and amortisation4392646951,399Earnings before interest and tax (EBIT)(2,260)(820)(1,070)(4,150)Interest expense474538131Income tax (credit)/expenses--5,3195,319Impairment of assets295810,06110,365Net profit/(loss) for the year(2,602)(874)(16,488)(19,964)31-Dec-18Asset maintenance and serviceConstruction & electrical project workCorporate / unallocatedTotal$'000$'000$'000$'000RevenueSales16,02722,8061,67840,510Other revenue1904526411,283Total segment revenue16,21723,2582,31941,793Operating expenses15,69423,2384,92643,859Earnings before interest, tax, depreciation & amortisation (EBITDA)52319(2,608)(2,066)Depreciation and amortisation40131469639Earnings before interest and tax (EBIT)483(111)(3,077)(2,705)Interest expense15262666Income tax (credit)/expenses--(354)(354)Impairment of assets-3,230-3,230Net profit/(loss) for the year468(3,367)(2,749)(5,648) DIRECTORS’ DECLARATION (b) Segment asset and liabilities Major customers The consolidated entity has a number of customers to which it provides services. The consolidated entity supplies a single external customer which accounts for 29% of external revenue (2018: 24%). The next most significant customer accounts for 25% (2018: 9%). 16 Trade and other payables 17 Financial liabilities 17.1 Financial liabilities: Interest-bearing loans and borrowing 43 | P A G E 31-Dec-19Asset maintenance and serviceConstruction & electrical project workCorporate / unallocatedTotal$'000$'000$'000$'000Total Assets7,1468,8547,09923,099Total Liabilities4,9818,63398514,59931-Dec-18Asset maintenance and serviceConstruction & electrical project workCorporate / unallocatedTotal$'000$'000$'000$'000Total Assets4,3604,77521,88831,022Total Liabilities1,7982,8127605,3702019$'0002018$'000Trade payables5,0132,068Other payables5,4301,763Total trade and other payables10,4433,831Consolidated entityInterest Rate%Maturity2019$'0002018$'000Current interest-bearing loans and borrowingsObligations under leases (Note 22)4.73%20201,038177Insurance Borrowing2.18%2020247-NAB Invoice Finance Facility ($10,000,000 Facility)5.34%On Demand-1,149Total current interest-bearing loans and borrowings1,2851,326Non Current interest-bearing loans and borrowingsObligations under leases (Note 22)4.83%2021- 20221,948843Total non- current interest-bearing loans and borrowings1,948843Total interest-bearing loans and borrowings3,2332,169Consolidated entity DIRECTORS’ DECLARATION Tempo has a $10M Invoice Finance Facility with the National Australia Bank Limited (‘NAB’). This facility attracts a variable interest rate. At 31 December the effective rate was 5.34%. At 31 December 2019 $10M was unused (2018: $8,851K). It is secured by a first ranking general security interest, a security interest registered pursuant to the Invoice Finance Facility Agreement and a Guarantee and Indemnity given by the Company. The Group has an asset finance leasing facility with NAB of $3,450K. At 31 December 2019 the amount of the facility that was unused was $2,538K. At 31 December 2018, the Group has an asset finance leasing facility with NAB of $1,000K and the amount of the facility that was unused was $126K. Other finance leases in relation to financing of plant, vehicles and other equipment amount is Nil (2018: $146K). Other leases in relation to plant, vehicles and other equipment amount to $2,074K. At 31 December 2018 the amount relating to other leases was $146K. The application of AASB 16 and subsequent recognition of leases for items previously classified as operating leases was recognised as a one-off adjustment on 1 January 2019 and increased the balance relating to leases by $969K to $1,989K. All finance liabilities are repayable on demand with the exception of finance leases. Refer to Note 22 for the relevant maturity profile of these finance leases. 17.2 Financial liabilities: Bank guarantees and surety bonds The Group has surety bond facilities of $7,000K (2018: $7,000K). At 31 December 2019 bonds valued at $2,002K had been issued (2018: $795K). The bond premium rate is 1.5% per annum on the face value of each bond. As at 31 December 2019 the Company had bank guarantees issued of $286K (2018: $75K) which were secured by term deposits. Corresponding term deposits of $286K (2018: $75K) are recorded in other assets. 17.3 Fair values The carrying value of all current financial assets and liabilities approximates the fair value largely due to the short- term maturity of these instruments. Non-current financial liabilities are recognised at a discount value implicit in the finance leases (refer Note: 22). Set out below is a comparison of the carrying amounts and fair values of the Group’s financial instruments, other than those with carrying amounts that are reasonable approximations of fair values: The fair value of obligations under finance leases is estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities. The valuation requires management to use unobservable inputs in the model, of which the significant unobservable inputs are disclosed in the tables below. Management regularly assesses a range of reasonably possible alternatives for those significant unobservable inputs and determines their impact on the total fair value. 44 | P A G E Carrying amount$'000Fair value$'000Carrying amount$'000Fair value$'000Non-current interest-bearing loans and borrowings1,9482,053843913Obligations under finance leases (Note 22)1,9482,053843913Consolidated entity20192018 DIRECTORS’ DECLARATION Changes in liabilities arising from financing activities The ‘Other’ column includes is the reclassification of non-current portion of interest-bearing loans and borrowings (finance leases) to current due to the passage of time. 17.4 Financial instruments risk management objectives and policies The Group’s principal liabilities comprise loans and borrowings and trade and other payables. The main purpose of these financial liabilities is to finance the Group’s operations. The Group’s principal financial assets include trade receivables and cash and short-term deposits that derive directly from its operations. The Group has determined that there is no material market, credit, liquidity or interest risk in relation to the cash or other receivables held in deposits. The Group is exposed to market risk, credit risk and liquidity risk. Interest rate risks are not considered as significant. The Group’s senior management oversees the management of these risks under the policies approved by the Risk, HSE and Commercial Committee and the Board. Market risk Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market price. Market risk comprises three types of risk, interest rate risk, foreign currency risk and other price risk, such as equity price risk and commodity risk. Financial instruments affected by market risk include loans and borrowings, deposits and debt. The sensitivity analysis in the following sections relate to the position as at 31 December in 2019 and 2018. 45 | P A G E 1-Jan-19$'000Cash flows$'000New Leases$'000Lease recognise as AASB 16$'000Others$'00031-Dec-19$'000Current interest-bearing loans and borrowings (excluding items listed below)1,149(902)---247Current obligations under leases177(956)3623921,0631,038Non-current obligations under leases843-1,625543(1,063)1,948Total liabilities from financing activities2,169(1,858)1,987935-3,233Consolidated entity1-Jan-18$'000Cash flows$'000New Leases$'000Others$'00031-Dec-18$'000Current interest-bearing loans and borrowings (excluding items listed below)-1,149--1,149Current obligations under finance leases164(257)18684177Non-current obligations under finance leases25-902(84)843Total liabilities from financing activities1898921,088-2,169Consolidated entity DIRECTORS’ DECLARATION Interest Rate Risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group’s long-term debt is secured with fixed interest rates. All long-term deposits have variable interest rates. As a result, the Board believes there is no material interest rate risk. Foreign currency risk Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Group’s has minimal to this risk profile. Other price risk The Group does not have any equity instruments or commodity risk exposure. Credit risk Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with reputable banks and financial institutions. Credit quality of a customer is assessed prior to engagement. Outstanding customer receivables are regularly monitored. At 31 December 2019 the Group had 5 customers (2018: 6) that owed the Group more than $200K each and accounted for approximately 84% (2018: 57%) of all receivables. There were 5 customers (2018: 3) with balances over $500K accounting for 84% of all receivables (2018: 45%) of the total receivables balance. An impairment analysis is performed at each reporting date using a provision matrix to measure expected credit losses (“ECL”). The provision rates are based on days past due for groupings of various customer segments with similar loss patterns. The calculation reflects the probability-weighted outcome, the time value of money and reasonable and supportable information that is available at the reporting date about past events, current conditions and forecasts of future economic conditions. Generally, trade receivables are written-off if past due for more than one year and are not subject to enforcement activity. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in Note 9. The Group does not hold collateral as security. The Group evaluates the concentration risk with respect to trade receivables as low, as its customers are located within several industries and operate in largely independent markets. The customers are grouped into four different categories: Historically the Group’s ECL has been extremely low. Impairment charges (under AASB 139) over the 5 years 2014 to 2018 inclusive averages to 0.28% of the total trade receivables per year. Set out below is the information about the credit risk exposure on the Groups trade receivables and contract assets using a provision matrix: 46 | P A G E 2019$'000Risk Assessment2018$'000Listed public companies1,874Very Low3,718Government departments/agencies357Very Low764Not for profit organisations98Very Low135Commercial businesses811Very Low327Total trade receivables3,1404,944Consolidated entity DIRECTORS’ DECLARATION 31 December 2019 31 December 2018 Liquidity Risk The Group monitors its risk of a shortage of funds using by utilising liquidity planning tools across a 15-month horizon. The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of short-term borrowings and finance leases. The Group assessed the concentration of risk with respect to refinancing its debt and concluded it to be low. The Group has access to a variety of sources of funding and the majority of the debt maturing within 12 months can be rolled over with existing lenders. 18 Provisions 47 | P A G E 0-30 Days31-60 Days61-90 Days>91 DaysTotal$'000$'000$'000$'000$'000$'000Expected credit loss rate0.00%0.08%0.49%9.50%17.81%2.85%Total gross carrying amount1,0166,2071,6391,41097711,250Expected credit loss-58134174321Total ECL Provision-58134174321Consolidated entityContract assets0-30 Days31-60 Days61-90 Days>91 DaysTotal$'000$'000$'000$'000$'000$'000Expected credit loss rate1.84%0.25%0.25%2.00%4.25%1.48%Total gross carrying amount2,7741,7241,5796809617,718Expected credit loss51441441114Total ECL Provision51441441114Contract assetsConsolidated entity2019$'0002018$'000Current provisionsEmployee benefits805679Total current provisions805679Non-current provisionsEmployee benefits11858Total Non-current provisions11858Total provisions923737Consolidated entity DIRECTORS’ DECLARATION Employee benefits Provision for employee benefits represents amounts accrued for annual leave, rostered days off, staff retentions and long service leave. 19 Contributed equity 19 (a) Ordinary Shares Fully paid ordinary shares carry one vote per share and carry the right to dividends. 48 | P A G E 2019$'0002018$'000Carrying amount at the beginning of period7371,305Additional provision made7861,103Amounts used(600)(1,671)Total employee benefits provisions923737Other benefits2019$'0002018$'000Carrying amount at the beginning of period-43Additional provision made--Amounts used-(43)Total employee benefits provisions--Consolidated entityConsolidated entityNote2019$'0002018$'000Ordinary shares fully paid19 (a)84,05679,491Treasury shares19 (b)--Other contributed equity19 (c)-85084,05680,341Consolidated entityMovements in ordinary shares# of shares$'000# of shares$'000Balance as at the beginning of the year240,804,58179,491240,804,58179,919Shares issued – proceeds received101,730,9253,915--Costs of share issue-(200)-(413)Release of other contributed equity-850--Tax effect relating to share issue cost---(15)Balance as at the end of the year342,535,50684,056240,804,58179,491Consolidated entity2018Consolidated entity2019 DIRECTORS’ DECLARATION 19 (b) Treasury shares The share-based payments reserve is used to recognise the value of equity-settled share-based payments provided to employees, including key management personnel, as part of their remuneration. Refer to Note 28 for further details of the plan. 19 (c) Other contributed equity Other contributed equity relates 3,863,636 ordinary shares that were issued in August 2019 on settlement of contingent consideration for acquisition of KP Electric, which was agreed in the amendment purchase agreement in February 2018. Share based payments reserve The share-based payments reserve is used to recognise the value of equity-settled share-based payments provided to employees, including key management personnel, as part of their remuneration. Refer to Note 28 for further details of the plan. Capital risk management For the purpose of the Group’s capital management, capital includes issued capital and all other equity reserves attributable to the equity holders of the parent. The primary objective of the Group’s capital management is to maximise the shareholder value. The Group’s objectives when managing capital is to safeguard its ability to continue as a going concern, so it can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the consolidated entity may adjust the dividends paid to shareholders or issue new shares. The consolidated entity’s capital risk management policy remains unchanged from the Annual Report for the year ended 31 December 2018. 49 | P A G E Movements in treasury shares# of shares$'000# of shares$'000Balance as at the beginning of the year--(109,733)(26)Acquisition of on-market shares--(2,040,267)(387)Issue of shares under Employee Share Incentive Rights Plan--2,150,000413Other----Consolidated entity2019Consolidated entity201820192018$'000$'000Balance as at the beginning of the year1,5802,010Share-based payments487427Reversal of unvested options(25)(776)Tax effect relating to share-based payments-(81) DIRECTORS’ DECLARATION 20 Cash flow reconciliation 21 Loss per share (LPS) Basic LPS is calculated by dividing the loss for the year attributable to ordinary equity holders of the parent by the weighted average number of the ordinary shares outstanding during the year. There were no options outstanding at the end of 2019 (2018: Nil). The following table reflects the loss and share data used in the basic EPS calculations: 50 | P A G E 2019$'0002018$'000Reconciliations of the net loss after tax to the net cash flows from operating activitiesNet Loss(19,964)(5,648)Non-operating cash itemsDepreciation1,273437Amortisation125201Impairment of intangible and tangible assets10,3653,230Provisions for expected credit losses207-(Profit)/loss on sale of assets(5)(165)ESOP,option and performance rights expenses462(349)Gain on settlement of contingent consideration fro KP Electric acqusition-(555)Changes in assets and liabilitiesTrade and other receivables and contract assets(3,320)(2,018)Inventories(103)(2)Other assets(67)694Trade and other payables6,577961Provisions190(605)Deferred tax assets5,318(577)Net Operating cash outflows1,058(4,396)Consolidated entity2019$'0002018$'000The following reflects the loss and share data used in the calculations of basic and diluted loss per shareNet loss after tax(19,964)(5,648)Loss used in calculating basic and diluted loss per share(19,964)(5,648)Weighted average number of ordinary shares used in calculating basic loss per share248,940,380240,804,581Consolidated entity DIRECTORS’ DECLARATION There have been no transactions involving ordinary shares between the reporting date and date of completion of these financial statements. 22 Lease expenditure commitments Operating lease commitments The Group has entered into leases for property and motor vehicles, with lease terms between one and four years. The Group has the option, under some of its leases, to lease the assets for additional terms of one to three years. Future minimum rentals payable under non-cancellable operating leases as at 31 December are, as follows: 51 | P A G E Effect of dilutive securitiesShare options--Adjusted weighted average number of ordinary shares used in calculating diluted earnings per share248,940,380240,804,5812019$'0002018$'000Depreciation charge for right-of-use assets: - Motor vehicles408- - Property331-Additions to right-of-use assets: - Motor vehicles1,992- - Property--Carrying value of right-of-use assets: - Motor vehicles1,583- - Property424-Interest expense on lease liabilities147-Short-term lease expense through profit or loss--Low value asset lease expense through profit or loss--Total cash outflow for leases1,064-Consolidated entity2019$'0002018$'000Within one year-761After one year but not more than five years-726More than five years--Aggregate lease expenditure contracted for at reporting date-1,487Consolidated entity DIRECTORS’ DECLARATION Lease commitments (2018: finance lease commitments) The Group has leases for various items of plant and machinery. The Group’s obligations under leases are secured by the lessor’s title to the leased assets. Future minimum lease payments under leases and hire purchase contracts, together with the present value of the net minimum lease payments are, as follows: Note 2.2 provides detail of the Group’s adoption of AASB 16: Leases. The Group applied the modified retrospective approach and as such, comparative disclosure continues to distinguish between operating and finance leases. 23 Capital Commitments The entity had no capital commitments as at 31 December 2019 (2018: Nil) 24 Group information Information about subsidiaries The consolidated financial statements of the Group include: The immediate and ultimate holding company of the Group is Tempo Australia Ltd which is based and listed in Australia. 52 | P A G E Minimum Payments$'000Present value of Payment$'000Minimum Payments$'000Present value of Payment$'000Within one year1,1581,038220177After one year but not more than five years958884919843More than five years1,0951,064--Total minimum lease payments3,2112,9861,1391,020Less amounts representing finance charges(225)-(119)-Present value of minimum lease payments2,9862,9861,0201,02020192018Consolidated entityCountry of Incorporation20192018Tempo Resources Solutions Pty LtdAustralia100%100%Tempo Engineering Pty LtdAustralia100%100%Cablelogic Pty Ltd Australia100%100%Tempo Construction & Maintenance Pty LtdAustralia100%100%Tempo Personnel Management Pty LtdAustralia100%100%Tempo Global Pty LtdAustralia100%100%KP Electric (Australia) Pty LtdAustralia100%100%Consolidated entity DIRECTORS’ DECLARATION 25 Related party disclosures Note 24 provides information about the Group’s structure, including details of the subsidiaries and the holding company. The following table provides the total amount of transactions that have been entered into with related parties for the relevant year. Each of the above entities is considered to be a related party due to common directorships between them and the Group. The balances relate to director fee and capital raise underwriting fee. Outstanding balances $106K for Angophora Capital Pty Ltd related to consulting fees at year-end, which are unsecured and interest free. Compensation of key management personnel of the Group 26 Business combinations Acquisitions in 2019 There were no business acquisitions in 2019. Acquisitions in 2018 On 1 July 2018, the Group acquired assets and liabilities from Comsite Services Pty Ltd (“Comsite”), a non-listed company based in Australia and specialising in end-to-end telecommunication maintenance services on mobile network infrastructure across regional NSW, ACT and Southern Queensland. The Group acquired Comsite because it enlarges the existing telecommunication maintenance services that was already offered to clients. The fair values of the identifiable assets and liabilities of the Comsite business as at the date of acquisition were: 53 | P A G E Purchases from related parties2019$'000Purchases from related parties2018$'000Angophora Capital Pty Ltd60 38 Bontampo Nominees Pty Ltd-10 D&T Superannuation Pty Ltd20 -Sadsacks Holding Pty Ltd2 -Consolidated entity2019$'0002018$'000Short-term employee benefits864 637 Post-employment benefits58 64 Long-term benefits29 97 Termination benefits26 342 Share-based payment462 (345)1,439795Consolidated entityTotal benefits DIRECTORS’ DECLARATION The business purchase agreement also contained clauses, relating to future payments to the former owners of Comsite, based on business performance and the continued employment of the personnel. These payments were classified as remuneration for post-combination services and were therefore not classed as contingent consideration on the Business Combination. From the date of acquisition, Comsite contributed $1,678,000 of revenue and $560,000 of profits before tax from continuing operation of the Group. It was not possible to identify what the business would have contributed if it was acquired on 1 January 2018, due to the Group not having access to this financial information. In December 2018 a termination to the business purchase agreement was signed with the former owner of Comsite relinquishing their rights to future remuneration-based business performance. In January 2019 the former owner resigned from their employment with the Group. 27 Parent company information 54 | P A G E Final fair value$'000ASSETSProperty, plant and equipment157Customer relationship intangibles275Total Assets432LIABILITIESBorrowings and interest-bearing liabilities148Deferred tax liability76Total liabilities224Total identifiable net assets at fair value208Cash used to acquire business763Goodwill arising on acquisition555The goodwill of $555,000 comprises the value of expected synergies arising from the acquisition, which is not separately recognised. DIRECTORS’ DECLARATION 28 Share based payments An Employee Share Incentive Right Plan (ESIRP) was established by the Company and approved by shareholders at the general meeting held in May 2013 and renewed at the general meeting held on 31 May 2016. Under the ESIRP the Company may grant options and/or performance rights over ordinary shares in the parent entity to certain employees of the Company. The options and/or performance rights are issued for nil consideration and are granted in accordance with guidelines established by the ESIRP. The expense recognised for employee services received during the year was $495K (2018: $427K). Movements during the year The following tables illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share options and performance rights during the year. Performance rights granted during the year are valued with reference to the share price at the grant date. 55 | P A G E 2019$'0002018$'000Loss after income tax16,823(2,592)Total comprehensive loss16,823(2,592)Total current assets7,03031,908Total assets7,10051,064Total current liabilities9,44340,420Total liabilities9,53640,906EquityContributed equity84,60280,341Share based payment reserve1,7841,580Accumulated losses(88,822)(71,763)Total equity(2,436)10,158ContingenciesThe parent entity had no contingent liabilities as at 31 December 2019 (2018: Nil).Capital CommitmentsThe parent entity had no contingent liabilities as at 31 December 2019 (2018: Nil). DIRECTORS’ DECLARATION 29 Auditors remuneration The auditor of Tempo Australia Limited is PKF (NS) Audit & Assurance Ltd Partnership from 31 December 19, and before that it was Ernst & Young Australia. 1. Among $91.8K, $40K was paid to Ernst & Young Australia for FY2018 additional auditing charges. 2. PKF (NS) Audit & Assurance Ltd Partnership were paid $22,800 for the consulting service provided during the year 2019. 56 | P A G E Options# of optionsWAEP# of optionsWAEPOutstanding as 1 January--2,000,000$0.34Granted during the year----Exercised during the year----Forfeited during the year--(2,000,000)$0.34Outstanding at 31 December----Consolidated entity2019Consolidated entity2018Performance rights# of sharesWAEP# of sharesWAEPOutstanding as 1 January500,000-4,945,000-Granted during the year26,000,000-4,700,000-Exercised during the year--(2,150,000)-Forfeited during the year(500,000)-(6,995,000)-Outstanding at 31 December26,000,000-500,000-Consolidated entity2019Consolidated entity20182019$2018$Audit or review of the financial reportsErnst & Young Australia 91,800¹85,400PKF (NS) Audit & Assurance Ltd Partnership²50,000-Total141,80085,400Consolidated entity DIRECTORS’ DECLARATION 30 Post balance sheet events The group has reviewed events since the 31 December 2019 and makes the following comments: The Board of Tempo Australia has and will continue to address the potential effect of the Corona Virus on the business. Immediate cost reductions have been identified and will be implemented over the coming month/s. The Tempo Business Executive and Board continues to examine any ongoing effects of CoVid-19 on our clients. We are in regular contact with our main clients to see if there is any additional services, we can deliver given that our people are already at their sites. We have implemented further WHS protocols with our PPE to maximise individuals’ protections – both of our staff and of our client’s staff. The Board is meeting Bi-weekly to review business levels and will continue to address costs and reductions in working capital where possible. We will continue to fulfill our continuous disclosure obligation and provide updates if and when necessary. Other than as noted above, no circumstances have arisen since the end of the financial period which significantly affected or could significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years. 31. Contingencies The consolidated entity has no contingent assets or liabilities as at 31 December 2019 (2018: Nil). 57 | P A G E DIRECTORS’ DECLARATION DIRECTORS’ DECLARATION FOR THE YEAR ENDED 31 DECEMBER 2019 The directors declare that the financial statements and notes are in accordance with the Corporations Act 2001 and: a. b. c. Comply with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; Give a true and fair view of the financial position of the consolidated entity as at 31 December 2019 and of its performance as represented by the results of their operations and its cash flows, for the year ended on that date; and Comply with International Financial Reporting Standards as issued by the International Accounting Standards Board. In the opinion of the directors, there are reasonable grounds to believe the Company will be able to pay its debts as and when they become due and payable. The directors have been given the declarations required by section 295A of the Corporations Act 2001. This declaration is made in accordance with a resolution of the directors. William Howard Executive Director, Chief Financial Officer & Company Secretary Sydney Date: 31 March 2020 58 | P A G E INDEPENDENT AUDITORS REPORT INDEPENDENT AUDITOR’S REPORT 59 | P A G E INDEPENDENT AUDITORS REPORT 60 | P A G E INDEPENDENT AUDITORS REPORT 61 | P A G E INDEPENDENT AUDITORS REPORT 62 | P A G E INDEPENDENT AUDITORS REPORT 63 | P A G E INDEPENDENT AUDITORS REPORT 64 | P A G E ADDITIONAL INFORMATION REQUIRED BY THE ASX ADDITIONAL INFORMATION REQUIRED BY ASX CORPORATE GOVERNANCE STATEMENT The purpose of Tempo Australia Ltd (“Tempo”) is to deliver to clients in the resources, industrial and commercial sectors specialist multidisciplinary maintenance and construction services, which protect and enhance their investments, without ever compromising on our values. Whilst doing this the Board is committed to providing a satisfactory return to its shareholders and fulfilling its corporate governance obligations and responsibilities in the best interests of the company and its shareholders. Good governance enables Tempo to deliver this purpose whilst meeting the Board’s intent. The governance structures and processes are defined in Tempo’s Corporate Governance Statement which can be found at https://www.tempoaust.com/corporate. SHAREHOLDER INFORMATION The information below is current at 22 February 2020, and includes additional information required by the Australian Securities Exchange Limited which is not shown elsewhere in this report. SECURITIES EXCHANGE LISTING Quotation has been granted for all the ordinary shares of the company on all Member Exchanges of the Australian Securities Exchange Limited DISTRIBUTION OF SHAREHOLDERS The number of shareholders, by size of holding, in each class of share is: VOTING RIGHTS On show of hands: one vote for each member on poll: one vote for each share held. SUBSTANTIAL SHAREHOLDERS The names of substantial shareholders disclosed in substantial holding notices given to the Company are: 65 | P A G E Category (Size of holding)Number of ordinary shareholdersNumber of ordinary shares% of issued capital100,001 and Over185328,838,190 96.00 10,001 to 100,00029611,900,653 3.47 5,001 to 10,000105814,342 0.24 1,001 to 5,000260903,887 0.26 1 to 1,00024578,434 0.02 Total1,091342,535,506 100.00 NameNumber of ordinary shares% of issued capitalANGOPHORA CAPITAL PTY LTD 83,322,37124.33BONTEMPO NOMINEES PTY LTD 41,702,63212.17HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 40,916,48411.95 ADDITIONAL INFORMATION REQUIRED BY THE ASX TOP 20 SHAREHOLDERS 66 | P A G E RankNameNumber of ordinary shares% of issued capital1ANGOPHORA CAPITAL PTY LTD 83,322,371 24.33 2BONTEMPO NOMINEES PTY LTD 41,702,632 12.17 3HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 40,916,484 11.95 4J P MORGAN NOMINEES AUSTRALIA PTY LIMITED 19,936,098 5.82 5NATIONAL NOMINEES LIMITED 12,945,246 3.78 6MR IVAN TANNER & MRS FELICITY TANNER 11,050,000 3.23 7INGLEWOOD LODGE PTY LTD 10,000,000 2.92 8ZERO NOMINEES PTY LTD 7,230,000 2.11 9D & T SUPERANNUATION PTY LTD 6,845,216 2.00 10CITICORP NOMINEES PTY LIMITED 5,438,490 1.59 11KAHLIA NOMINEES PTY LTD 4,000,000 1.17 12TUBECHANGERS PTY LTD 3,863,636 1.13 13MISS SILVANA MASALKOVSKI 3,548,086 1.04 14MR PAUL SANTILLO 3,025,000 0.88 15CHEMBANK PTY LIMITED 2,800,000 0.82 15VANAVO PTY LIMITED 2,150,000 0.63 16MR ALEXANDER KING 2,032,500 0.59 17MR ANTONIO SCAFFIDI & MRS MARIA SCAFFIDI 2,030,000 0.59 18CHEMCO SUPERANNUATION FUND PTY LTD 2,000,000 0.58 19MASSIMO BERGOMI 2,000,000 0.58 20MRS JENNIFER ANNE CASHION 1,759,319 0.51 Total 268,595,078 78.41 Balance of register73,940,428 21.59 Grand total342,535,506100 CORPORATE DIRECTORY CORPORATE DIRECTORY DIRECTORS Guido Belgiorno-Nettis William Howard David Iverach Charles Louis Rottier LEADERSHIP TEAM Paul Dalgleish Non-Executive Chairman Executive Director, Chief Financial Officer and Company Secretary Non-Executive Director Non-Executive Director Chief Executive Officer STOCK EXCHANGE LISTING The company’s shares are quoted on the Australian Stock Exchange under the code TPP. REGISTERED OFFICE c/o Company Matters Pty Limited Level 12, 680 George Street Sydney NSW 2000 PRINCIPAL PLACE OF BUSINESS Level 12, 680 George Street Sydney NSW 2000 +61 (8) 9460 1500 info@tempoaust.com www.tempoaust.com POSTAL ADDRESS PO Box 588 West Perth WA 6872 AUSTRALIA AUDITOR PKF (NS) Audit & Assurance Ltd Partnership Level 8, 1 O'Connell St Sydney NSW, 2000 +61 02 8346 6000 www.pkf.com.au SHARE REGISTRY Link Market Services QV1, Level 12 250 St Georges Terrace Perth WA 6000 +61 1300 554 474 www.linkmarketservices.com.au 67 | P A G E

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