HIGHLIGHTS
• EBITDA growing strongly as restructure and
integration benefits materialize
•FY’06 adjusted EBITDA of $1.9m up from
$421k 2005
• 2H’06 adjusted EBITDA of $1.23 million up
from $684,000 in 1H’06
• Traffic Management successfully restructured
with division EBITDA margins now >10%
coupled with strong organic growth (+19%)
• DeNeefe restructuring costs of $582,000
were significantly below budget, full impact of
benefits to come through over next 18 months
• Acquisition of Ace Traffic Management
• Acquisition of DeNeefe Signs
• Acquisition of Able Traffic Management
• Acquisition of Line Marking Services
• Acquisition of Sunny Signs
• Acquisition of Guardrail Installations (July 06)
• Acquisition of Protech Traffic Management
(July 06)
• New products launched:
Enforcement equipment
On and Off Street Parking Meters
Temporary Steel Barrier - BG800
TRAFFIC TECHNOLOGIES LIMITED
ABN 21 080 415 407
AND CONTROLLED ENTITIES
FINANCIAL REPORT
FOR THE FINANCIAL YEAR ENDED
30 JUNE 2006
Traffic Technologies Limited and Controlled Entities
Chairman’s Letter
Dear Shareholder,
I have pleasure in enclosing the Annual Report for Traffic Technologies Limited for the financial year ended 30 June
2006.
Traffic Technologies completed its first full year as a listed Company by expanding rapidly through acquisition of a
number of related businesses and importantly through organic growth. This activity is consistent with the strategy to
consolidate a fragmented traffic services industry in Australia.
Traffic Technologies is now the dominant traffic services and hardware provider in Australia. The Company
operates four divisions namely Traffic Management, Signage, Signals and Hardware and the newly established
installation division, Asset Management. Revenues this year will exceed $100 Million and with over 1,300
employees, 26 locations and 400 vehicles the company is poised for a strong year in 2007.
The company has made significant progress with the integration of acquisitions within the traffic management
division.
The turnaround of the De Neefe sign business has been a major priority throughout the year. Efficiencies were
accelerated by the later acquisition of Sunny Signs. The businesses have been able to leverage off their combined
strengths resulting in manufacturing and purchasing gains.
TT has now established an asset management division with the acquisition of Guardrail Installations. This enables
TT to close the loop of designing, supplying, installing, and maintaining its complete range of products and services
making TT the only company in Australia with this integrated capability.
The company’s signals and hardware division has introduced new products in 2006 including street lighting, speed
detection equipment, traffic cones and the BarrierGuard 800 steel barrier system. As with all new products adopted
by TT, these have undergone extensive testing and trials. We expect significant sales from this division in 2007.
The Company is poised for a solid 2006 / 2007, and I, along with my fellow directors thank you for your support and
look forward to creating shareholder value for you as we develop the Company business.
Yours faithfully,
Samuel Kavourakis
Chairman
Melbourne
29 September 2006
Traffic Technologies Limited and Controlled Entities
Joint Managing Directors’ Report
Dear Shareholder,
Traffic Technologies has rapidly expanded over its first full year as a listed company. The company achieved an
adjusted EBITDA of $1.9 million for the year to 30 June 2006, up from $0.4 million in the previous year.
Importantly a further seven acquisitions during the year have created the platform for substantial growth.
Traffic Technologies is the dominant traffic products supplier to the road maintenance and construction industry in
Australia. There are four divisions: Traffic Management, Signage, Signals and Hardware, and Asset Management.
2006 Highlights
(cid:131)
(cid:131)
(cid:131)
(cid:131)
EBITDA growing strongly as restructure and integration benefits materialise
FY06 adjusted EBITDA of $1.9m up from $421k in 2005
2H06 adjusted EBITDA of $1.23m up from $684k in 1H06
Traffic Management successfully restructured with division EBITDA margins now >10% coupled with
strong organic growth (+19%)
(cid:131) De Neefe restructuring costs of $582,000 were significantly below budget, full impact of benefits expected
over the next 18 months
(cid:131) Acquisition of Ace Traffic Management
(cid:131) Acquisition of De Neefe Signs
(cid:131) Acquisition of Able Traffic Management
(cid:131) Acquisition of Line Marking Services
(cid:131) Acquisition of Sunny Signs
(cid:131) Acquisition of Guardrail Installations (July 06)
(cid:131) Acquisition of Protech Traffic Management (July 06)
(cid:131) New products including enforcement equipment, parking meters, BarrierGuard 800
Review of Operations
Traffic Management Division
The restructuring and integration of new acquisitions into the Traffic Management Division have progressed
smoothly. Fleet upgrades and improvements to our proprietary national operating software have helped increase
operating margins. The division reported strong organic growth of over 19% driven by strong demand and the
financial benefits of restructuring and acquisitions are expected in 2007.
Traffic Technologies Limited
Joint Managing Directors’ Report
(continued)
Traffic Signage Division
Restructuring of the De Neefe sign business (acquired in October 2005) is nearing completion with the benefits
expected to begin over the next 18 months. A new senior management team is in place and ongoing improvements
are expected as supplier negotiations continue and offshore componentry sourcing is expected to deliver savings.
The integration of Sunny Signs (acquired in April 2006) has been completed and the business is performing to
expectations. Strong synergies exist between these two businesses across manufacturing, geographical spread and
purchasing power.
Signals and Hardware Division
The company’s Signals and Hardware Division has introduced new products in 2006 including street lighting, speed
detection equipment, traffic cones, parking equipment and the BarrierGuard 800 steel barrier system. All these
products have passed performance and market testing and are expected to contribute around $5 million in sales in
2007.
Asset Management Division
Traffic Technologies established an Asset Management Division with the acquisition of Guard Rail Installations
(GRI) in July 2006. The De Neefe line marking division was also merged with this new business. Significant
organic growth opportunities exist within the Asset Management Division, such as the leveraging of BarrierGuard
800 through existing GRI sales channels and other cross-selling. Traffic Technologies also intends to establish De
Neefe sign installation across the eastern seaboard.
Outlook
Annualised revenue is expected to exceed $100 million in 2007 with the full integration of recent acquisitions.
Ongoing improvements in operating margins are expected in the Traffic Management Division and the De Neefe
business.
Traffic Technologies’ integrated traffic management solutions make it the most obvious outsourcing option for the
road maintenance and construction industry. Increasing regulation increases barriers to entry and entrenches the
company’s strong position. Traffic Technologies is positioned for further organic growth, profitability growth and
further acquisitions in the year ahead.
Yours faithfully,
Mr. Constantine Scrinis
Joint Managing Director
Mr. Constantinos Liosatos
Joint Managing Director
Melbourne
29 September 2006
Corporate Information
This annual report covers both Traffic Technologies Limited as an individual entity and the consolidated entity
comprising Traffic Technologies Limited and its subsidiaries. The Group’s functional and presentation currency is
AUD ($).
A description of the Group’s operations and of its principal activities is included in the review of operations and
activities in the directors’ report. The director’s report is not part of the financial report.
Directors
Mr. Samuel Kavourakis BSc. (Queensland) AIA
Mr. Constantine Scrinis
Mr. Constantinos Liosatos
Mr. Alan Brown FAICD
Mr. Cary Peter Stynes LL.B (Melb), MAICD
Dr. Richard Gregson (appointed February 2006)
Mr. Rajeev Dhawan (alternate director appointed May 2006)
Company Secretary
Mr. Peter Kenneth Crafter LL.B, MBA, FCA, CA, MCT, FAICD, FCIS
Registered Office
Level 2
87 High Street South
KEW VIC 3101
Principal Place of Business
Level 2
87 High Street South
KEW VIC 3101
Share Register
Computershare Registry Services
452 Johnston Street
ABBOTSFORD VIC 3067
Tel: 1300 137 328
Lawyers
Middletons
Level 29
200 Queen Street
MELBOURNE VIC 3000
Auditors
Pitcher Partners
Level 19
15 William Street
MELBOURNE VIC 3000
Traffic Technologies Limited and Controlled Entities
Financial Report for the year ended 30 June 2006
Contents
Directors’ Report
Auditor’s Independence Declaration
Corporate Governance Statement
Consolidated Income Statement
Consolidated Balance Sheet
Consolidated Statement of Changes in Equity
Consolidated Cash Flow Statement
Notes to the Financial Statements
Directors’ Declaration
ASX Additional Information
Independent Audit Report
Page No.
1
16
17
23
24
25
26
27
81
82
84
Traffic Technologies Limited
Directors’ Report
Directors’ Report
The Directors present their report together with the financial report of the consolidated entity, consisting of Traffic
Technologies Limited and the entities it controlled, for the year ended 30 June 2006 and independent audit report
thereon. Traffic Technologies Limited is a publicly listed company. The financial report has been prepared in
accordance with the Australian equivalents of International Financial Reporting Standards (“AIFRS”)
Directors
The names and details of the Company’s Directors in office during the financial year and until the date of this report
follow. Directors were in office for the entire period unless otherwise stated.
Name
Qualifications, Experience and Special Responsibilities
Mr. Samuel
Kavourakis
BSc. (Queensland)
AIA
(Age 61) Non-Executive Chairman. Appointed January 2004.
Mr. Kavourakis has had a distinguished career spanning 30 years with National Mutual,
including eight years as Managing Director of National Mutual Funds Management. Mr.
Kavourakis has an in-depth understanding of what institutional investors require of listed
companies. Since 1998, Mr. Kavourakis has been a Director of various companies and
associations. Current Directorships include Collins House Financial Services, Australand
Wholesale Investments Ltd, Centro Property Group Limited, Centro Retail Trust and the Rio
Tinto Staff Superannuation Fund. Mr. Kavourakis is an Associate of the Institute of
Actuaries and a graduate of the Harvard Business School Advanced Management Program.
Mr. Kavourakis was appointed Non Executive Chairman of Traffic Technologies Limited in
January 2004. During the past three years Mr. Kavourakis has also served as a Director of
the following other listed companies:
Mr. Constantine A
Scrinis
(cid:131)
(cid:131)
Ticor Limited
Centro Property Group Limited*
* denotes current Directorship
Mr Kavourakis is Chairman of the Remuneration and Corporate Governance committees and
a member of the Audit committee.
(Age 43) Joint Managing Director. Appointed April 2003.
Mr. Scrinis has over 20 years experience in the lighting industry. After spending several
years with Sunlighting and three years as owner and operator of various retail businesses, he
along with Mr. Liosatos established Moonlighting in 1991. Since 1991, he and Mr. Liosatos
built a manufacturing and distribution business in industrial and commercial lighting
employing approximately 140 people. Mr. Scrinis and Mr. Liosatos have been involved in
the development of the Smart Traffic Light since 1997 and achieved the first commercial
sales of the Company’s Smart Traffic Light product into Malaysia in 2000. Mr. Scrinis is the
Joint Managing Director of Traffic Technologies Limited. Mr. Scrinis was appointed as a
Director of Traffic Technologies Limited in April 2003. Mr. Scrinis has not served as a
Director of any other listed companies during the three years prior to June 2006 except as
noted. Mr. Scrinis was a Director of New Age Exploration Limited (formerly Labtam
Limited) between November 2003 and August 2005. Mr Scrinis is a member of the
Remuneration and Corporate Governance committees.
1
Traffic Technologies Limited
Directors’ Report (Continued)
Name
Qualifications, Experience and Special Responsibilities
Mr. Constantinos L
Liosatos
Mr. Alan J Brown
FAICD
(Age 44) Joint Managing Director. Appointed April 2003.
Mr. Liosatos has over 20 years experience in the lighting industry. After spending 10 years
with Sunlighting, he and Mr. Scrinis established Moonlighting in 1991. Since 1991, he and
Mr. Scrinis built a manufacturing and distribution business in industrial and commercial
lighting employing approximately 140 people. Mr. Liosatos has been involved in the
development of the Smart Traffic Light since 1997 and achieved the first commercial sales of
the Smart Traffic Light into Malaysia in 2000. Mr. Liosatos has qualifications in Mechanical
Design and Lighting Engineering. Mr. Liosatos is the Joint Managing Director of Traffic
Technologies Limited. Mr. Liosatos was appointed as a Director of Traffic Technologies
Limited in April 2003. Mr. Liosatos has not served as a Director of any other listed
companies during the three years prior to June 2006, except as noted. Mr. Liosatos was a
Director of New Age Exploration Limited (formerly Labtam Limited) between November
2003 and March 2004. Mr Liosatos is a member of the Remuneration and Corporate
Governance committees.
(Age 60) Non-Executive Director. Appointed January 2004.
Mr. Brown has extensive experience in both the private and public sectors. He is a Director
of a range of private companies and has established several over a thirty-year period. He has
wide ranging public sector involvement including state and local government, co-operative
societies and statutory authorities. He was a Member of the Victorian Parliament from 1979-
97 and is a former Leader of the Victorian Liberal Party. As Minister for Transport he
implemented major reforms to Victoria’s transport infrastructure. He has international
business experience and as Agent General for Victoria in London from 1997-2000 had key
responsibility for identification, negotiation and attraction of overseas investment to Victoria.
Mr. Brown also had responsibility for facilitation of exports for Victorian goods and services
to overseas markets. He is Chairman of Apprenticeships Plus and the Bass Coast
Community Foundation. He is also Chairman of Tasmanian company Work & Training
Limited. Mr. Brown was appointed a non-executive Director of Traffic Technologies
Limited in January 2004. Mr. Brown has not served as a Director of any other listed
companies during the three years prior to June 2006. Mr. Brown is Chairman of the Audit
committee and a member of the Remuneration and Corporate Governance committees.
2
Traffic Technologies Limited
Directors’ Report (Continued)
Name
Qualifications, Experience and Special Responsibilities
Mr. Cary P Stynes
(Age 42) Non-Executive Director. Appointed January 2004.
LL.B (Melb)
MAICD
Mr. Stynes spent six years in a range of senior finance and management roles for a number of
international companies. He spent five years as a commercial lawyer with law firm Minter
Ellison specialising in commercial litigation, insolvency, media, mergers and acquisitions
and corporate advisory work. He is admitted to practice in the Supreme Court of Victoria
and the High Court of Australia. In 1993 he co-founded Point of Sale Media Pty Ltd, which
was acquired in 1995 by ASX-listed Media Entertainment Group Limited. He was a Director
of Media Entertainment Group Limited from September 1995 and was Managing Director
from July 1997 until June 1999. He was Managing Director and Chief Executive Officer of
ASX-listed Software Communication Group Limited from January 2000 to July 2001. He
was Managing Director of ASX-listed CBD Energy Limited from June 2002 to June 2003
and has been Managing Director of ASX-listed The Swish Group Limited since January
2003. He is principal of Stynes Consulting and Stynes and Associates which are commercial
and legal consulting practices. He is also a Director of a range of private companies. Mr.
Stynes was appointed a non-executive Director of Traffic Technologies Limited in January
2004. During the past three years Mr. Stynes has also served as a Director of the following
other listed companies:
(cid:131)
(cid:131)
CBD Energy Limited
The Swish Group Limited*
* denotes current Directorship
Mr. Stynes is a member of the Audit, Remuneration and Corporate Governance committees.
Dr. Richard Gregson
(Age 56) Non-Executive Director. Appointed February 2006.
PhD, MBA, BSc
(Hons)
Dr. Richard Gregson is the co-founder and Managing Director of private equity funds
management group, Equity Partners. In this capacity, Dr. Gregson has assisted with the
development and expansion of many small-to-medium enterprises since 1989. He is currently
a non-executive director of private companies in industries including healthcare, logistics,
resources and financial services. Dr. Gregson is a member of the Audit, Remuneration and
Corporate Governance committees. Dr. Gregson has also served as a director and remains a
director of the following listed companies during the last three years.
(cid:131)
(cid:131)
Energy Developments Limited*
Portland Orthopaedics Limited*
* denotes current Directorship
3
Traffic Technologies Limited
Directors’ Report (Continued)
Name
Qualifications, Experience and Special Responsibilities
Mr. Rajeev Dhawan
BComm, CA, MBA
(Age 40) Alternate Director, for Dr Gregson. Appointed May 2006.
Mr. Dhawan has 13 years’ venture capital and private equity experience. Prior to joining
Equity Partners in 2005, he worked at Hambro-Grantham Management/CFSPE from 1993,
where he focused on mid size expansion capital and buyouts. He was a Director from 1998
and led the majority of CFSPE’s investments from then. Prior to the private equity industry,
Rajeev was a Manager in the Financial Consulting Practice of Arthur Anderson. Mr. Dhawan
has also served as a director and remains a director of the following listed companies during
the last three years.
(cid:131)
(cid:131)
Snowball Group Limited*
Portland Orthopaedics Limited*
* denotes current Directorship
Company Secretary
Mr. Peter K Crafter
(Age 49) Company Secretary. Appointed March 2004.
LL.B (Hons), MBA,
FCA, CA, MCT,
FAICD, FCIS
Mr. Crafter is a Chartered Accountant in both Australia and the UK and qualified Corporate
Treasurer with extensive experience in financial management including several years with
KPMG and Touche Ross in the United Kingdom. He holds an honours degree in Law from
the University of London and an MBA from Heriot-Watt University, Scotland. He migrated
to Australia in February 1999 and joined Software Communication Group Limited as Chief
Financial Officer in May 1999. He was subsequently promoted to the position of Acting
Chief Executive Officer of that Company in July 2001. He was Chief Financial Officer of
ASX-listed CBD Energy Limited from July 2002 to July 2003 and was appointed Finance
Director of The Swish Group Limited in January 2003. He is also Chief Financial Officer of
Purity Australia Limited. He was appointed Chief Financial Officer and Company Secretary
of Traffic Technologies Limited in March 2004. He retired as Chief Financial Officer in
February 2006.
(cid:131)
(cid:131)
CBD Energy Limited
The Swish Group Limited*
* denotes current Directorship
4
Traffic Technologies Limited
Directors’ Report (Continued)
Directors’ interests in the shares and options of the Company and related bodies corporate
As at the date of this report, the interest of the Directors in the shares and options of the Company were:
Director
Mr Samuel Kavourakis
Mr Constantine A Scrinis
Mr. Constantinos L Liosatos
Mr. Alan J Brown
Mr. Cary P Stynes
Dr. Richard Gregson
Mr. Rajeev Dhawan
Director
Mr Samuel Kavourakis
Mr Constantine A Scrinis
Mr. Constantinos L Liosatos
Mr. Alan J Brown
Mr. Cary P Stynes
Dr. Richard Gregson
Mr. Rajeev Dhawan
Dividends
Ordinary Shares
Directly
-
-
-
60,601
-
-
-
Indirectly
1,131,101
3,863,945
3,963,945
1,256,500
395,000
5,837,890
5,837,890
Preference Shares
Directly
-
-
-
-
-
-
-
Indirectly
-
-
-
-
-
24,000,000
24,000,000
Options
2,000,000
3,300,000
3,300,000
1,200,000
1,200,000
900,000
-
Options
-
-
-
-
-
-
-
The Directors do not recommend the payment of a dividend for the financial year ended 30 June 2006.
REVIEW AND RESULTS OF OPERATIONS
Operating Results for the Year
The proforma results from operations describing the effects of non recurring restructuring costs, discount on
acquisition and share base payments are reconciled as follows:
2006
2005
$ $
Change
%
Revenue
57,933,396
19,300,742
Net loss from total operations
De Neefe restructuring costs
Discount on acquisition
Share based payments
(193,098)
(582,529)
289,222
(426,891)
(530,192)
-
-
(79,388)
200%
64%
-
-
438%
Net loss for the year
(913,296)
(609,580)
50%
5
Traffic Technologies Limited
Directors’ Report (Continued)
a) Financial performance
The results for the financial year ended 30 June 2006 are not comparable to the previous financial year.
Since the re-quotation of the Company’s Shares on the ASX in January 2005, the Company has made a
number of strategic acquisitions of traffic management and related businesses, including Traffic
Management Solutions (Geelong), Advanced Contract Employment, Ace (SA) and Ace Administration
(Adelaide), Able Traffic Management Melbourne), traffic signs manufacturers, De Neefe and Sunny Signs
Pty Ltd and Adelaide-based line marking business, Line Marking Services. Since 30 June 2006 the
Company has also settled the acquisitions of the businesses of Guard Rail Installations and Protech Traffic
Management.
b) Financial position
Net assets of $19.5m at 30 June 2006 (2005: $5.9m) reflect the expansion of the Company’s business
activities during the financial year and the acquisitions made during this period.
The increase in trade receivables and payables reflect the significantly increased level of trading activity
compared with the previous financial year. Inventory largely comprises traffic signage inventory. Fixed
assets comprise $9.7m.
Total borrowings of $11.2m include $5.2m drawn down under the debtor factoring facility as at 30 June
2006 and a $2m convertible note made available to the Company by Equity Partners Two Pty Ltd.
c) Cash flows
Total cash balances of $6.7m at 30 June 2006 (2005: $1.0m) take account of equity and debt capital
raisings.
Net operating cash outflow was $2.6m during the financial year ended 30 June 2006 (2005: net outflow
$0.2m), reflecting costs incurred in restructuring acquired businesses.
Net cash used in investing activities was $6.9m (2005: $6.1m) including $4.8m cash spent on acquiring
businesses, $2.4m spent on capital expenditure and $0.5m received from the disposal of fixed assets.
Net cash from financing activities was $15.2m (2005: $7.3m). The Company raised a total of $4.3m from
placements to sophisticated investors, $2.6m from a Share Purchase Plan and $8 million capital injection
from private equity firm Equity Partners Two Pty Ltd which was approved by shareholders in February
2006 comprising $2 million raised through the issue of convertible notes and $6 million through the issue
of preference shares. The Company has made use of a debtor financing facility in financing its
receivables. The facility is drawn down as trade receivables are financed by the factoring company and
repaid when the debtor pays the debt to the Company.
Principal Activities
Traffic Technologies is now a diverse traffic product related company operating across four divisions.
Traffic Management Division
The Traffic Management division provides temporary traffic management services to road traffic authorities and
construction companies. Its core business is the provision of traffic management services for the effective flow of
traffic through, or around, road and other construction projects. This includes the provision of traffic management
control plans, traffic controllers and the vehicles and equipment necessary for the installation of temporary traffic
guidance systems.
6
Traffic Technologies Limited
Directors’ Report (Continued)
Traffic Sign Division
The Traffic Sign division provides a wide range of traffic sign, traffic control products, vests, brackets and traffic
cones to road traffic authorities, municipal councils and construction companies.
Asset Management Division
The Asset Management division provides traffic sign and traffic control related product, installation and line marking
services. The line marking business services private, council, contractors and road authorities. The line marking
services include line marking products, pre-formed thermoplastic hot-tapes, pavement markers and adhesives.
Signals and Hardware Division
The Signals and Hardware division is a multi-product division specialising in the design, manufacture and
installation of traffic signals, road barriers, speeds and safety camera systems, exterior lighting and
telecommunications masts. The broad base of products and related services enables the Group to provide a total
turnkey solution to meet the exact requirements of customers.
RISK MANAGEMENT
The Group takes a proactive approach to risk management. The Board is responsible for ensuring that risks, and also
opportunities, are identified on a timely basis and that the Group’s objectives and activities are aligned with the risks
and opportunities identified by the Board.
The Group believes that it is crucial for all Board members to be a part of this process, and as such the Board has not
established a separate risk management committee. Instead sub-committees are convened as appropriate in response
to issues and risks identified by the Board as a whole, and the sub-committee further examines the issues and reports
back to the Board.
The Board has a number of mechanisms in place to ensure that management’s objectives and activities are aligned
with the risks identified by the Board. These include the following:
(cid:131)
(cid:131)
(cid:131)
Board approval of a strategic plan, which encompasses the Group’s vision, mission and strategy statements,
designed to meet stakeholder’s needs and manage business risk;
Implementation of Board approved operating plans and budgets and Board monitoring of progress against
these budgets, including the establishment and monitoring of KPIs of both a financial and non-financial
nature; and
The establishment of sub-committees to report on and monitor specific business risks.
7
Traffic Technologies Limited
Directors’ Report (Continued)
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
The Company acquired control over the following businesses during the year ended 30 June 2006.
Date
Subsidiary entity
%
Description
Consideration
Net
identifiable
assets
acquired
Goodwill /
Discount on
acquisition
July 2005
Advanced Contract
Employment
100%
Traffic
management
$1,438,317
$300,000
$1,138,317
October 2005 Able Traffic
Management
100%
Traffic
management
$594,656
$250,000
$344,656
October 2005 De Neefe Signs
100%
October 2005 Line Marking
100%
Services
March 2006
Sunny Signs Pty Ltd
100%
Traffic sign
manufacturer
Line marking
services
Traffic sign
manufacturer
$1,568,777
$1,857,999
($289,222)
$205,390
$205,390
$-
$2,332,825
$526,304
$1,806,521
Issue of shares
During the year the Company issued a total of 31,978,586 ordinary shares, comprising:
(cid:131)
(cid:131)
(cid:131)
(cid:131)
(cid:131)
(cid:131)
(cid:131)
(cid:131)
(cid:131)
(cid:131)
5,744,000 shares at a value of 25 cents per share for a placement to sophisticated investors;
10,468,000 shares at a value of 25 cents per share for a share purchase plan to eligible existing shareholders;
800,000 shares at a value of 25 cents per share for consideration as part of the acquisition of Ace Traffic
Management;
800,000 shares at a value of 25 cents per share for consideration as part of the acquisition of Able Traffic
Management;
900,000 shares at a value of 25 cents per share for the deferred consideration as part of the acquisition of
10% in Warp Pty Ltd;
1,600,000 shares at a value of 25 cents per share for consideration as part of the acquisition of De Neefe
Signs;
1,200,000 shares at a value of 25 cents per share for a placement to directors;
250,000 shares as a result of the exercise of options to acquire shares at 20 cents per share;
250,000 shares as a result of the exercise of options to acquire shares at 20 cents per share; and
9,966,586 shares at a value of 29 cents per share for a placement to sophisticated investors.
On 21 February 2006 shareholders approved the issue of 24,000,000 preference shares to private equity firm, Equity
Partners Two Pty Ltd. The share issue raised $6 million.
Debt
During the year the Company drew down on a $2m convertible note facility provided by Equity Partners Two Pty
Ltd.
8
Traffic Technologies Limited
Directors’ Report (Continued)
During the year the Company repaid a $1 million loan from CVC Limited.
During the year the economic entity acquired property, plant and equipment with an aggregate value of $2,970,000
(2005: $891,222) by means of finance leases and hire purchase agreements.
AFTER BALANCE DATE EVENTS
In July 2006 the Company completed the acquisition of the business of Guard Rail Installations Pty Ltd and Protech
Traffic Management Pty Ltd. Except for the above matters, no other matters or circumstances have arisen since the
end of the financial year which significantly affected or may significantly affect the operations of the economic
entity, the results of these operations or the state of affairs of the economic entity in future financial years.
ENVIRONMENTAL REGULATION
The Consolidated entity’s operations are not regulated by any significant environmental regulation under a law of the
Commonwealth or of a State or Territory.
PROCEEDINGS ON BEHALF OF THE COMPANY
Claims for unspecified amounts were lodged during the year against the Company. The Company has disclaimed
liability and is defending the actions. It is not practical to estimate the potential effect of these claims but legal
advice indicates that any liability that may arise in the unlikely event that the claim is successful will not be
significant.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS
The Company has not yet had the benefit of a full year’s result from several of the acquisitions made during the year
ended 30 June 2006. It is estimated that the Company’s annualised revenues are now in excess of $100 million per
annum. The Company expects to report a profit for the financial year ending 30 June 2007.
SHARE OPTIONS
Unissued Shares
As at the date of this report, there were 15,000,000 unissued ordinary shares under options (15,000,000 at the
reporting date). Refer to note 16(b) of the financial statements for further details of the options outstanding.
Option holders do not have any right, by virtue of their yet to be exercised options, to participate in any share issue
of the company or any related body corporate or in the interest issue of any other registered scheme.
Shares Issued as a Result of the Exercise of Options
During the year, no employees and executives have exercised options to acquire fully paid ordinary shares. Since the
end of the financial year, no employees or executives have exercised options.
9
Traffic Technologies Limited
Directors’ Report (Continued)
INDEMNIFICATION AND INSURANCE OF DIRECTORS, OFFICERS AND AUDITORS
During the financial year ended 30 June 2006, the consolidated entity paid premiums of $32,468 in respect of a
Directors’ and Officers’ insurance policy insuring Directors and Officers in respect of claims which may be brought
against them.
REMUNERATION REPORT
This report outlines the remuneration arrangements in place for directors and executives of Traffic Technologies
Limited.
Remuneration Philosophy
The performance of the company depends upon the quality of its directors and executives. To be successful, the
company must attract, motivate and retain highly skilled directors and executives.
Remuneration Committee
The Remuneration Committee is responsible for determining and reviewing remuneration arrangements for the
Directors and Joint Managing Directors and the executive team. The Remuneration Committee comprises all Board
members, and is chaired by Mr. Samuel Kavourakis, who is an independent Director. The Remuneration Committee
assesses the appropriateness of the nature and amount of remuneration of such officers on a periodic basis by
reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder
benefit from the retention of a high quality Board and executive team.
Remuneration Structure
In accordance with best practice corporate governance, the structure of non-executive Director and executive
remuneration is separate and distinct.
Non-executive Director Remuneration
The Company’s constitution provides that the Directors are paid for their services as Directors such fees as the
Directors determine, not exceeding in aggregate a maximum sum that is from time to time approved by the Members
in a general meeting. The notice convening a general meeting at which it is proposed to seek approval to increase
that maximum aggregate sum must specify the proposed new maximum aggregate sum and the amount of the
proposed increase. Aggregate maximum non-executive Directors’ remuneration is currently $400,000. In addition,
shareholders approved the issue of a total of 4,200,000 options to the non-executive Directors on 21 February 2006.
The issue of these options was not based on Company performance.
Structure
Non-executive directors have been encouraged by the Board to hold shares in the company (purchased by the
director on market). It is considered good governance for directors to have a stake in the company on whose board
they sit.
The remuneration of non-executive directors for the year ending 30 June 2006 is detailed within this Directors’
report.
10
Traffic Technologies Limited
Directors’ Report (Continued)
Senior manager and executive Director Remuneration
Objective
The Company aims to reward executives with a level and mix of remuneration commensurate with their position and
responsibilities within the Company so as to:
Reward executives for Company and individual performance;
(cid:131)
(cid:131) Align the interests of executives with those of shareholders;
(cid:131)
(cid:131)
Link reward with the strategic goals and performance of the Company; and
Ensure total remuneration is competitive by market standards.
Structure
Currently remuneration is paid in the form of cash remuneration, superannuation contributions and share options
where applicable. The Company paid no bonuses during the financial year ended 30 June 2006. Further details of
the remuneration of Directors and executives are provided in Note 26 to the financial statements.
Share Options
All Directors and executives have the opportunity to qualify for participation in the Company Share Option Plan.
The issue of options under this plan is at the discretion of the Board and is not currently based on Company
performance. Options are used by the Company as a non-cash form of remuneration and have the objective of
aligning employee interests with the objective of increasing shareholder wealth. Any issue of options under the plan
to Directors is subject to shareholder approval. Details regarding the issue of share options during the year are
provided in Note 16 to the financial statements.
Non-executive Director Agreements
The non-executive Directors have entered into non-executive Director Agreements with the Company. The non-
executive Director agreements: entrench a Director’s rights to be indemnified by the Company to the maximum
extent permitted by law; require the Company to take out an appropriate Directors’ and officers’ insurance policy to
protect the Director from liability (to the extent permitted by law); and access the books and records of the Company,
which relate to the period the Director acted as a Director of the Company. After resignation as a Director, the
Director can only use this information for the purposes of defending a claim.
Executive Service and Management Agreements
The Joint Managing Directors, Mr. Constantine Scrinis and Mr. Constantinos Liosatos are employed under contract.
The current employment contracts commenced on 1 November 2004 and terminate on 31 October 2006, at which
time the Group may choose to commence negotiation to enter into a new employment contract with Mr. Constantine
Scrinis and Mr. Constantinos Liosatos. The Joint Managing Directors received a total fixed remuneration each of
$200,000 during the financial year. The total fixed remuneration for each Joint Managing Director was increased to
$250,000 per annum following a review at June 2006.
Each executive has an employment or contractor agreement with notice periods varying between seven days and one
month.
11
Traffic Technologies Limited
Directors’ Report (Continued)
Structure
In determining the level and make-up of executive remuneration, the Remuneration Committee engaged an external
consultant to provide independent advice both in the form of a written report detailing market levels of remuneration
for comparable executive roles and by participating in the meeting from which the Committee makes its
recommendations to the Board.
REMUNERATION OF DIRECTORS OF THE COMPANY
Details of the nature and amount of each element of the emoluments of each Director of the Company for the
financial year ended 30 June 2006 are as follows:
Short-term
Benefits
Post-employment
Benefits
Share-based Payments
Fixed
Remuneration
$
Superannuation
$
Number of
Options issued
during the year
$
Value of Options
issued during the
year
$
Directors
2006
Mr. Sam Kavourakis Non-Exec Chairman
Mr. Con Scrinis
Joint Managing Director
Mr. Con Liosatos
Joint Managing Director
Mr. Alan Brown
Non Executive
Non Executive
Mr. Cary Stynes
Dr. Richard Gregson Non Executive
Mr. Rajeev Dhawan Alternate Director
Total
50,000
200,000
200,000
35,000
35,000
14,533
-
534,533
2005
Mr. Sam Kavourakis Non-Exec Chairman
Mr. Con Scrinis
Mr. Con Liosatos
Mr. Alan Brown
Mr. Cary Stynes
Total
Joint Managing Director
Joint Managing Director
Non Executive
Non Executive
50,000
137,500
137,500
35,000
35,000
395,000
6,750
-
-
-
-
-
-
6,750
4,500
-
-
-
-
4,500
1,500,000
3,000,000
3,000,000
900,000
900,000
900,000
-
10,200,000
40,901 42%
116,355 37%
116,355 37%
24,541 41%
24,541 41%
24,541 63%
-
347,234 39%
-
-
-
-
-
-
-
-
-
-
-
-
Total
$
97,651
316,355
316,355
59,541
59,541
39,074
-
888,517
54,500
137,500
137,500
35,000
35,000
399,500
Of total Directors’ remuneration, $Nil (2005: $260,000) was not paid to the Directors during the financial year ended
30 June 2006 and has been accrued.
The percentage value of each person’s remuneration that consists of options is shown in italics.
12
Traffic Technologies Limited
Directors’ Report (Continued)
REMUNERATION OF THE KEY MANAGEMENT PERSONNEL OF THE COMPANY
Details of the nature and amount of each element of the emoluments of the executives of the consolidated entity for
the financial year ended 30 June 2006 are as follows:
Short-term
Benefits
Post-employment
Benefits
Share-based Payments
Fixed
Remuneration
$
Superannuation
$
Number of
Options issued
during the year
$
Value of
Options issued
during the year
$
Executives
2006
Mr. Andrew Harris Chief Financial
Officer
Mr. James Hopping Divisional Manager
Mr. Stephen O'Dwyer Divisional Manager
Divisional Manager
Mr. Ron Hunt
Mr. Peter Crafter
Company Secretary
Total
2005
Mr. Geoff Burke
Fmr TSA General Mgr
Mr. James Hopping TSA General Manager
Mr. Peter Crafter
Total
Company Secretary
67,500
143,211
42,883
28,437
59,000
341,031
81,524
87,445
35,000
203,969
-
1,500,000
-
300,000
-
-
1,800,000
-
3,444
2,813
4,462
10,719
7,337
-
-
7,337
-
200,000
-
18,927 18%
88,861
300,000
500,000
106,372
28,391 45%
63,391
47,318 18% 258,624
Total
$
67,500
143,211
46,327
31,250
63,462
351,750
-
-
-
-
-
-
The percentage value of each person’s remuneration that consists of options is shown in italics.
For more information relating to interests of Directors and Executives refer to Note 26 of the Financial Statements.
13
Traffic Technologies Limited
Directors’ Report (Continued)
Directors’ Meetings
The number of meetings of Directors (including meetings of committees of Directors) held during the financial year
and the number of meeting attended by each Director was as follows:
Directors’ Meetings
Audit Committee
Remuneration
Committee
Corporate
Governance
Committee
Number
eligible to
attend
Number
attended
Number
eligible to
attend
Number
attended
Number
eligible to
attend
Number
attended
Number
eligible to
attend
Number
attended
Mr. Samuel Kavourakis
Mr. Constantine A Scrinis
Mr. Constantinos L Liosatos
Mr. Alan J Brown
Mr. Cary P Stynes
Dr. Richard Gregson (appointed 21
February 2006)
Mr. Rajeev Dhawan (alternate
appointed 30 May 2006)
13
13
13
13
13
5
2
13
13
13
11
13
5
2
2
-
-
2
2
2
-
2
-
-
2
2
2
-
1
1
1
1
1
-
-
1
1
1
1
1
-
-
1
1
1
1
-
1
-
1
1
1
1
1
1
-
14
Traffic Technologies Limited
Directors’ Report (Continued)
Auditor’s Independence Declaration
A copy of the auditor’s independence declaration in relation to the audit for the financial year is provided with this
report.
Non-Audit Services
The following non-audit services were provided by the entity’s auditor, Pitcher Partners. The directors are satisfied
that the provision of non-audit services is compatible with the general standard of independence for auditors imposed
by the Corporations Act 2001. The nature and scope of each type of non-audit service provided means that auditor
independence was not compromised.
Pitcher Partners received or are due to receive the following amounts for the provision of non-audit services:
Tax compliance services
Accounting advice and due diligence services
Investigating accountant’s report for the prospectus
Signed in accordance with a resolution of the directors.
2006
$
38,872
28,000
-
2005
$
27,390
169,740
25,520
Samuel Kavourakis
Chairman
29 September 2006
Melbourne
15
Traffic Technologies Limited
AUDITOR’S INDEPENDENCE DECLARATION
To the Directors of Traffic Technologies Limited
In relation to the independent audit for the year ended 30 June 2006, to the best of my knowledge and belief there
have been:
(i) No contraventions of the auditor independence requirements of the Corporations Act 2001.
(ii) No contraventions of any applicable code of professional conduct.
PITCHER PARTNERS
S P CATLIN
Partner
Dated at Melbourne on 29 September 2006
16
Traffic Technologies Limited
Corporate Governance Statement
The Board of Directors of Traffic Technologies Limited is responsible for the corporate governance of the
consolidated entity.
The Board of Directors has implemented the Best Practice Recommendations of the ASX Corporate Governance
Council to the extent appropriate for the size and nature of the Company’s business as described below. The format
of the Corporate Governance Statement now follows the ASX Corporate Governance Council’s “Principles of Good
Corporate Governance and Best Practice Recommendations”. The Corporate Governance Statement must now
contain specific information and also report on the Company’s adoption of the Council’s best practice
recommendations on an exception basis, whereby disclosure is required of any recommendation that has not been
adopted by the Company, together with the reasons it has not been adopted.
The Board has established a Corporate Governance Committee, which is responsible for reviewing the Company’s
compliance with best practice corporate governance requirements, including compliance with the ASX Corporate
Governance Council’s “Principles of Good Corporate Governance and Best Practice Recommendations”. The
Corporate Governance Committee comprises all Board members and is chaired by Mr. Samuel Kavourakis. For
details of meetings of the Corporate Governance Committee held during the year and the attendees at those meetings,
refer to the Directors’ report. The Company’s corporate governance practices were in place throughout the year
ended 30 June 2006.
Principle 1: Lay solid foundations for management and oversight
The Board has been structured to ensure that an appropriate mix of experience and expertise is available to provide
strategic guidance for the Company and effective oversight of management.
Since re-listing on ASX in January 2005 the Company has announced a number of acquisitions that it is currently in
the process of completing and integrating. Whilst the Company has laid down a system of corporate governance to
comply with ASX Recommendations, the Company expects to develop its corporate governance procedures and
internal control systems further as its business develops.
The Board guides and monitors the business and affairs of the Company on behalf of the shareholders by whom they
are elected and to whom they are accountable. The Board acts on behalf of and is accountable to shareholders. The
Board seeks to identify the expectations of shareholders, as well as other regulatory and ethical expectations and
obligations. In addition, the Board is responsible for identifying areas of significant business risk and ensuring
arrangements are in place to adequately manage these risks. The Board guides and monitors and fulfils its
responsibility to protect shareholder interests and enhance shareholder value by:
(cid:131) Approving and periodically reviewing the business and financial objectives, strategies and plans of the
consolidated entity;
(cid:131) Monitoring the financial performance of the consolidated entity, including approval of the consolidated
(cid:131)
(cid:131)
entity’s financial statements;
Ensuring that adequate internal control systems and procedures exist and that compliance with these
systems and procedures is maintained;
Identifying areas of significant business or financial risk to the consolidated entity and ensuring
management takes appropriate action to manage those risks;
Reviewing the performance and remuneration of Board members and key members of staff;
(cid:131)
(cid:131) Monitoring the operations of the consolidated entity and the performance of management;
(cid:131)
(cid:131)
Establishing and maintaining appropriate ethical standards; and
Reporting to the shareholders, the Australian Securities and Investments Commission and the Australian
Stock Exchange as required.
The Board delegates to the Joint Managing Directors and the executive team responsibility for the operation and
administration of the consolidated entity.
17
Traffic Technologies Limited
Corporate Governance Statement
(continued)
Principle 2: Structure the Board to add value
It is the intention of the Company that the composition of the Board will be determined having regard to the
following concepts:
(cid:131)
(cid:131)
(cid:131)
(cid:131)
That the Board will comprise a majority of Non-Executive Directors;
That the Board will comprise a minimum of five Directors and the actual number may be higher where
additional expertise is required in specific areas and an outstanding candidate is located;
That the Chairman of the Board will be a Non-Executive Director; and
That the Board members should represent a broad range of expertise and experience
The Directors in office at the date of this report are as follows:
Name
Mr. Samuel Kavourakis
Mr. Constantine Scrinis
Mr. Constantinos Liosatos
Mr. Alan Brown
Mr. Cary Stynes
Dr. Richard Gregson
Position
Independent Non-Executive Chairman
Joint Managing Director
Joint Managing Director
Independent Non-Executive Director
Independent Non-Executive Director
Non-Executive Director
The skills, experience and expertise relevant to the position held by each Director in office at the date of this annual
report is included in the Directors’ Report. Directors are considered to be independent when they are independent of
management, are not a substantial shareholder and are free from any business or other relationship that could
materially interfere with, or could reasonably be perceived to materially interfere with, the exercise of their
unfettered and independent judgement.
In the context of Director independence, “materiality” is considered from both the company and individual Director
perspective. The determination of materiality requires consideration of both quantitative and qualitative elements.
An item is presumed to be quantitatively immaterial if it is equal or less than 5% of the appropriate base amount. It
is presumed to be material (unless there is a qualitative element to the contrary) if it is equal to or greater than 10%
of the appropriate base amount. Qualitative factors considered include where a relationship is strategically
important, the competitive landscape, the nature of the relationship and the contractual or other arrangements
governing it and other factors which point to the actual ability of the Director in question to shape the direction of the
Company’s loyalty.
In accordance with the definition of independence above, three of the six Directors of the Company, as set out above,
were independent during the year ended 30 June 2006 and as at the date of this report. The Company has an
equivalent number of independent and non independent directors, which is not in compliance with Recommendation
2.1, which recommends that there be a majority of independent directors. The Company had an independent
chairman through the year ended 30 June 2006, as required by Recommendation 2.2.
The Company’s constitution provides that a Director other than the Managing Director may not retain office for
more than three calendar years or beyond the third annual general meeting following his or her election, whichever is
longer, without submitting for re-election. One third of the Directors retire each year and are eligible for re-election.
The Directors who retire by rotation at each annual general meeting are those with the longest length of time in
office since their appointment or last election. All Directors must be elected by the members. It is not a requirement
for a person who is a Director to own shares in the Company.
18
Traffic Technologies Limited
Corporate Governance Statement
(continued)
Recommendation 2.4 requires listed entities to establish a Nomination Committee. During the year ended 30 June
2006, the Company did not have a separately established Nomination Committee. However, the duties and
responsibilities typically delegated to such a committee are expressly included in the Board’s own charter as being
the responsibility of the full Board. The Board does not believe that any marked efficiencies or enhancements would
be achieved by the creation of a separate Nomination Committee.
The Company provides the capacity for any Director to obtain separate professional advice on any matter being
discussed by the Board and for the consolidated entity to pay the cost incurred. Before the engagement is made, the
Director is required to obtain the Chairman of the Board’s approval. Approval will not be unreasonably denied and
the Director will be expected to provide the Board with a copy of that advice.
Principle 3: Promote ethical and responsible decision-making
All Directors and officers of the Company are required to discharge their responsibilities ethically and with integrity.
The Board has drawn up a code of conduct to guide Board members, executives and employees in carrying out their
duties and responsibilities, to guide compliance with legal and other obligations and to maintain confidence in the
Company’s integrity, as required by Recommendations 3.1 and 10.1. Executives and employees are encouraged to
report to Board members any concerns regarding potentially unethical practices.
Dealings are not permitted in the Company’s securities at any time when Directors, officer or employees are in the
possession of price sensitive information not already available to the market, as required by Recommendation 3.2. In
addition, the Corporations Act 2001 prohibits the purchase or sale of securities whilst a person is in possession of
inside information and the ASX Listing Rules require disclosure of any trading undertaken by Directors or their
related entities in the Company’s securities. The company secretary must be notified of any intended trading and
must also be provided with confirmation that the trading has occurred.
Principle 4: Safeguard integrity in financial reporting
It is the Board’s responsibility to ensure that an effective internal control framework exists within the consolidated
entity. This includes internal controls to deal with both the effectiveness and efficiency of significant business
processes, the safeguarding of assets, the maintenance of proper accounting records and the reliability of financial
information. The Board has delegated the responsibility for the establishment and maintenance of a framework of
internal control to the Audit Committee.
With effect from the financial year ended 30 June 2006 Mr. Constantine Scrinis, the Joint Managing Director, and
the Chief Financial Officer have provided a written statement to the Board that the company’s financial reports
present a true and fair view of the company’s financial condition and operations results, are in accordance with
relevant accounting standards and that the company’s risk management and internal compliance and control systems
are operating efficiently and effectively, as required by Recommendations 4.1 and 7.2.
19
Traffic Technologies Limited
Corporate Governance Statement
(continued)
The Board has established an Audit Committee as recommended by Recommendation 4.2, which operates under a
charter approved by the Board, as required by Recommendation 4.1. The Audit Committee also provides the Board
with additional assurance regarding the reliability of financial information for inclusion in the financial reports.
Corporate Governance Council Recommendation 4.3 requires that the Audit Committee consists of only non-
executive Directors and that a majority be independent Directors. All members of the Board with the exception of
the Joint Managing Directors are members of the Audit Committee. The Audit Committee is chaired by Mr. Alan
Brown, who is an independent chairman and who is not Chairman of the Board, in accordance with
Recommendation 4.3. Although none of the Audit Committee members have formal accountancy qualifications, all
have extensive business experience at Board level and in senior management positions. Audit Committee meetings
are attended by the partner responsible for the Company’s audit. For details of meetings of the Audit Committee
held during the year and the attendees at those meetings, refer to the Directors’ Report.
Principle 5: Make timely and balanced disclosure
The Company has established written policies and procedures to ensure compliance with ASX Listing Rule
disclosure requirements and to ensure accountability at a senior management level for that compliance, as required
by Recommendation 5.1. All ASX announcements are handled by Mr. Constantine Scrinis, the Joint Managing
Director, and there are requirements within the Company to ensure that the ASX’s continuous disclosure
requirements are strictly followed and that unauthorized disclosure of price sensitive information is not made other
than through the ASX’s Company Announcements Office.
Principle 6: Respect the rights of shareholders
The Board recognizes its duty to ensure that its shareholders are informed of all major developments affecting the
Company’s state of affairs, as required by Recommendation 6.1. Information is communicated to shareholders and
the market through:
(cid:131)
(cid:131)
The Annual Report which is distributed to shareholders;
The Annual General Meeting and other shareholder meetings called to obtain approval for Board action as
appropriate;
The Half-Yearly Financial report; and
(cid:131)
(cid:131) Other announcements made in accordance with ASX Listing Rules.
The Company’s reports and ASX announcements may be viewed and downloaded from the ASX website:
www.asx.com.au (Stock code: TTI).
It is the Company’s policy that the external auditor attends the Annual General Meeting of the Company and is
available to answer shareholder questions, tabled in the appropriate format and with the appropriate notice period as
required under the Corporations Act 2001, about the conduct of the audit and the preparation and content of the
auditor’s report, as required by Recommendation 6.2.
20
Traffic Technologies Limited
Corporate Governance Statement
(continued)
Principle 7: Recognise and manage risk
The Board has adopted a proactive approach to risk management. The Board is responsible for ensuring that risks,
and also opportunities, are identified on a timely basis and that the Company’s objectives and activities are aligned
with the risks and opportunities identified by the Board. The Company believes that it is crucial for all Board
members to be a part of this process and, as such, the Board has not established a separate risk management
committee.
The Board has established policies on risk oversight and management, as required by Recommendation 7.1. The
Board has drawn up a risk profile for the consolidated entity, which is regularly reviewed. The executive Directors
are closely involved in the day-to-day management of the Company’s operations and, given the current size of the
operations of the consolidated entity, are in a position to continually monitor risk with the assistance of the executive
team.
Principle 8: Encourage enhanced performance
The performance of the Board and key executives is reviewed regularly by the Board against their contribution to the
performance of the Company, in accordance with Recommendation 8.1. Directors whose performance is
consistently unsatisfactory may be asked to retire.
Principle 9: Remunerate fairly and responsibility
It is the Company’s objective to provide maximum stakeholder benefit from the retention of a high quality Board and
executive team by remunerating Directors and key executives fairly and appropriately with reference to relevant
employment market conditions. To assist in achieving this objective, the Remuneration Committee takes account of
the Company’s financial and operating performance in setting the nature and amount of executive Directors’ and
executives’ remuneration. In relation to the payment of bonuses, options or other incentive payments, discretion is
exercised by the Remuneration Committee, having regard to the overall performance of the Company and the
performance of the individual during the period.
The Board has established a Remuneration Committee in accordance with Recommendation 9.2. The Remuneration
Committee is responsible for determining and reviewing remuneration arrangements for the Directors, the Joint
Managing Directors and the executive team. The Remuneration Committee assesses the appropriateness of the
nature and amount of remuneration of such officers on a periodic basis by reference to relevant employment market
conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of a high quality
Board and executive team. The Remuneration Committee comprises all Board members, and is chaired by Mr.
Samuel Kavourakis, who is an independent Director. For details of meetings of Remuneration Committee held
during the year and the attendees at those meetings, refer to the Directors’ Report.
Non-executive directors are paid Directors’ fees including options in lieu of cash. However, all Directors and
executives have the opportunity to qualify for participation in the Company Share Option Plan, including non-
executive Directors, which represents a departure from Recommendation 9.3, which recommends that non-executive
Directors should not receive options. The payment of part of the remuneration of non-executive Directors in a non-
cash form preserves cash for use in the business. In common with other smaller-cap listed companies, the Company
believes that it must pay its non-executive Directors adequate remuneration in the form of cash and options in order
to attract and retain non-executive Directors of appropriate qualifications and experience.
21
Traffic Technologies Limited
Corporate Governance Statement
(continued)
The expected outcomes of the remuneration structure are:
Retention and motivation of key executives;
(cid:131)
(cid:131) Attraction of quality management to the Company; and
(cid:131)
Performance incentives that allow executives to share the rewards of the success of the Company.
Further details of the Company’s remuneration policy, including details of the amount of remuneration and all
monetary and non-monetary components for each of the executives during the year and for all Directors, are set out
in the Remuneration Report forming part of the Directors’ Report, in accordance with Recommendation 9.1. There
is no scheme to provide retirement benefits, other than statutory superannuation, to non-executive Directors.
Shareholder approval is required for all equity-based remuneration payable to Board members, in accordance with
Recommendation 9.4.
Principle 10: Recognise the legitimate interests of stakeholders
The Board recognizes that the Company has wide ranging obligations to a broad range of stakeholders and must
comply with legal requirements such as trade practices, equal opportunity and occupational health and safety issues.
The Company’s corporate governance practices have been in place throughout the year ended 30 June 2006. With
the exception of the departures from the Corporate Governance Council recommendations detailed above, the
corporate governance practices of the Company are compliant with the Council’s best practice recommendations.
22
Traffic Technologies Limited and Controlled Entities
Income Statement
For the year ended 30 June 2006
Revenue
2
57,933,396
19,300,742
1,674,054
1,019,358
Note
Consolidated
2006
$
Consolidated
2005
$
Company
2006
$
Company
2005
$
Purchases and changes in inventory
Employee benefits expense
Other expenses
Depreciation and amortisation expense
Finance costs
Profit/(loss) before income tax
Income tax expense
Profit/(loss) for the year
Earnings per share (cents per share)
- Basic earnings per share
- Diluted earnings per share
43,728,465
14,204,931
14,316,538
4,984,204
-
1,674,054
-
1,019,358
(8,447,769)
(2,994,432)
(1,109,589)
(411,348)
(4,561,072)
(1,648,050)
(852,699)
(425,316)
(1,348,008)
(533,106)
(6,671)
-
(761,378)
(418,196)
(202,401)
(1,062)
(913,296)
(609,580)
(497,306)
181,632
-
-
-
-
(913,296)
(609,580)
(497,306)
181,632
(1.5)
(1.5)
(2.4)
(2.4)
3
3
3
3
4
5
5
The Income Statement should be read in conjunction with the notes to the financial statements.
23
Traffic Technologies Limited and Controlled Entities
Balance Sheet
As at 30 June 2006
Current Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Total Current Assets
Non-Current Assets
Property, plant and equipment
Intangible assets
Financial assets
Total Non-Current Assets
Total Assets
Current Liabilities
Trade and other payables
Short-term borrowings
Short-term provisions
Current tax payable
Total Current Liabilities
Non-Current Liabilities
Trade and other payables
Long-term provisions
Long-term borrowings
Note
20(a)
6
7
9
10
8
12
13
14
12
12
14
13
Consolidated
2006
$
Consolidated
2005
$
Company
2006
$
Company
2005
$
6,728,840
14,076,109
3,762,462
1,040,550
4,224,415
91,471
4,576,576
14,374,902
-
102,343
6,675,865
-
24,567,411
5,356,436
18,951,478
6,778,208
9,736,213
9,028,134
622,635
3,281,473
5,635,027
529,581
86,503
1,620
4,421,841
-
-
1,992,238
19,386,982
9,446,081
4,509,964
1,992,238
43,954,393
14,802,517
23,461,442
8,770,446
11,218,524
6,210,914
1,290,590
186,500
3,028,385
4,590,542
458,527
-
570,116
30,135
1,296
-
963,275
1,000,000
-
-
18,906,528
8,077,454
601,547
1,963,275
171,055
337,300
5,024,554
-
27,134
819,706
-
-
2,000,000
-
-
-
-
Total Non-Current Liabilities
5,532,909
846,840
2,000,000
Total Liabilities
Net Assets
Equity
Contributed equity
Reserves
Accumulated losses
Total Equity
24,439,437
8,924,294
2,601,547
1,963,275
19,514,956
5,878,223
20,859,895
6,807,171
15
16(b)
16(a)
20,930,309
572,578
(1,987,931)
41,679,189
145,688
(35,946,654)
20,930,309
545,416
(615,830)
41,679,189
118,525
(34,990,543)
19,514,956
5,878,223
20,859,895
6,807,171
The Balance Sheet should be read in conjunction with the notes to the financial statements.
24
Traffic Technologies Limited and Controlled Entities
Statement of Changes In Equity
For the year ended 30 June 2006
Consolidated
2006
$
Consolidated
2005
$
Company
2006
$
Company
2005
$
TOTAL EQUITY AT THE BEGINNING OF THE YEAR
5,878,223
53,701
6,807,171
218,600
Profit/(loss) for the year prior to share based payments
Options granted reserve adjustment due to share based payments
(486,405)
(426,891)
(530,192)
(79,388)
(70,415)
(426,891)
233,857
(52,225)
Profit/(loss) for the year
(913,296)
(609,580)
(497,306)
181,632
Total recognised income and expense for the period
(913,296)
(609,580)
(497,306)
181,632
Transactions with equity holders in their capacity as equity holders:
Contribution – preference shares
Contribution – sophisticated investors
Contribution – share purchase plan
Issue of shares on conversion of debt
Issue of shares for acquisitions
Issue of shares to Directors
Exercise of options
Capital raising costs
Transactions with option holders:
Options granted reserve adjustment due to share based payments
Options granted reserve adjustment due to lapse of options
Options granted reserve adjustment due to exercise of options
Retained earnings adjustment due to exercise and lapse of options
6,000,000
4,326,310
2,617,000
-
1,025,000
300,000
100,000
(245,172)
14,123,138
426,891
(8,237)
(23,664)
31,901
426,891
-
6,000,000
-
500,000
200,000
575,000
-
(920,286)
6,354,714
79,388
(8,237)
(23,664)
31,901
79,388
6,000,000
4,326,310
2,617,000
-
1,025,000
300,000
100,000
(245,172)
14,123,138
426,891
(8,237)
(23,664)
31,901
426,891
-
6,000,000
-
500,000
200,000
575,000
-
(920,286)
6,354,714
52,225
(8,237)
(23,664)
31,901
52,225
TOTAL EQUITY AT THE END OF THE YEAR
19,514,956
5,878,223
20,859,894
6,807,171
The Statement of Changes in Equity should be read in conjunction with the notes to the financial statements.
25
Traffic Technologies Limited and Controlled Entities
Cash Flow Statement
For the year ended 30 June 2006
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Interest paid
Other income
Note
Consolidated
2006
$
Consolidated
2005
$
Company
2006
$
Company
2005
$
54,706,907
(56,543,087)
29,833
(765,256)
-
18,442,912
(18,272,273)
40,324
(418,196)
37,387
-
(306,378)
27,849
(202,401)
-
-
(217,765)
40,087
(1,062)
400
Net cash used in operating activities
20(b)
(2,571,603)
(169,336)
(480,930)
(178,340)
Cash flows from investing activities
Purchase of businesses
Acquisition cost of financial assets
Purchase of plant and equipment
Proceeds of disposal of plant and equipment
Purchase of intangibles
Payment to TSA Administrator
(4,844,501)
(93,054)
(2,397,041)
463,000
(48,670)
-
(2,477,261)
(4,581)
(159,053)
228,672
(4,023)
(3,700,000)
(2,394,973)
(34,614)
(60,737)
-
(1,800)
-
(967,238)
(4,581)
-
-
-
-
Net cash used in investing activities
(6,920,266)
(6,116,246)
(2,492,124)
(967,238)
Cash flows from financing activities
Proceeds of share issues
Process from borrowings
Repayment of borrowings
Capital raising costs
Advances to controlled entities
13,343,312
49,814,588
(47,732,569)
(245,172)
-
6,000,000
3,561,678
(1,430,481)
(845,286)
-
13,343,312
2,000,000
(1,002,138)
(245,172)
(6,648,715)
6,000,000
2,015,000
(229,994)
(845,286)
(5,699,181)
Net cash provided by financing activities
15,180,159
7,285,911
7,447,287
1,240,539
Net increase in cash and cash equivalents
5,688,290
1,000,329
4,474,233
94,961
Cash and cash equivalents at beginning of the financial
year
1,040,550
40,221
102,343
7,382
Cash and cash equivalents at end of the financial year
20(a)
6,728,840
1,040,550
4,576,576
102,343
The Cash Flow Statement should be read in conjunction with the notes to the financial statements.
26
Traffic Technologies Limited and Controlled Entities
Notes to the Financial Statements
For the year ended 30 June 2006
1. Summary of Significant Accounting Policies
a) Basis of Preparation
This financial report is a general purpose financial report that has been prepared in accordance with
Australian Accounting Standards, Urgent Issues Group Interpretations and other authoritative
pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001.
The financial report covers Traffic Technologies Limited as an individual parent entity and Traffic
Technologies Limited and controlled entities as a consolidated entity. Traffic Technologies Limited is a
listed public company limited by shares, incorporated and domiciled in Australia.
The following is a summary of material accounting policies adopted by the consolidated entity in the
preparation and presentation of the financial report. The accounting policies have been consistently
applied, unless otherwise stated.
The financial report has been prepared on an accruals basis and under the historical cost convention, as
modified by revaluations to fair value for certain classes of assets as described in the accounting policies.
b) Statement of compliance
The financial report complies with Australian Accounting Standards, which include Australian equivalents
to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures that the
financial report, comprising the financial statements and notes thereto, complies with International
Financial Reporting Standards (IFRS).
This is the first financial report of Traffic Technologies Limited prepared in accordance with AIFRS. The
financial reports of Traffic Technologies Limited were prepared in accordance with the previous
Australian Generally Accepted Accounting Principles (AGAAP) until 30 June 2005. There are certain
differences between accounting policies under AIFRS and AGAAP and where applicable the comparative
figures have been restated to reflect these adjustments. A summary of the significant accounting policies
under AIFRS is provided below. Reconciliations of equity and operating loss between AGAAP and
AIFRS are provided in notes 28 and 29.
c) Basis of consolidation
The consolidated financial statements comprise the financial statements of Traffic Technologies Limited
and its subsidiaries (the Group) as at 30 June each year.
The financial statements of the subsidiaries are prepared for the same reporting period as the parent
company, using consistent accounting policies.
In preparing the consolidated financial statements, all intercompany balances and transactions, income and
expenses and profit and losses resulting from intra-group transactions have been eliminated in full.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group and cease to
be consolidated from the date on which control is transferred out of the Group.
All acquisitions have been accounted for using the purchase method of accounting. The purchase method
of accounting involves allocating the cost of the business combination to the fair value of the assets
acquired and the liabilities and contingent liabilities assumed at the date of acquisition.
27
Traffic Technologies Limited and Controlled Entities
Notes to the Financial Statements
For the year ended 30 June 2006
d) Critical accounting estimates and judgments
Estimates and judgments’ are continually evaluated and are based on historical experience and other
factors, including expectations of future events that may have a financial impact on the entity and that are
believed to be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates
will, by definition, seldom equal the related actual result. The estimates and assumptions 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 below.
Estimated impairment of goodwill
The Group tests annually whether goodwill has suffered any impairment, in accordance with the
accounting policy stated at 1(m). The recoverable amount of cash generating units has been determined
based on value-in-use calculations. These calculations require the use of assumptions. Refer to note 11 for
details of these assumptions.
e) Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group
and the revenue can be reliably measured. The following specific recognition criteria must also be met
before revenue is recognised:
(i) Sale of goods
Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to
the buyer and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Risks and rewards of ownership are considered passed to the buyer at the time of delivery of the goods to
the customer.
(ii) Rendering of services
Revenue is recognised by reference to the stage of completion of a contract.
Stage of completion is measured by reference to labour hours incurred to date as a percentage of total
estimated labour hours for each contract.
When the contract outcome cannot be estimated reliably, revenue is recognized only to the extent of the
expenses recognised that are recoverable.
(iii) Interest income
Interest revenue is recognised on a proportional basis taking into account the interest rate applicable to the
financial assets.
(iv) Dividends
Revenue is recognised when the Group’s right to receive the dividend is established.
f) Leases
The determination of whether an arrangement is or contains a lease is based on the substance of the
arrangement and requires an assessment of whether the fulfillment of the arrangement is dependent on the
use of a specific asset or assets and the arrangement conveys a right to use the asset.
28
Traffic Technologies Limited and Controlled Entities
Notes to the Financial Statements
For the year ended 30 June 2006
Group as a lessee
Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership
of the leased item, are capitalised at the inception of the lease at the fair value of the leased property or, if
lower, at the present value of the minimum lease payments. Lease payments are apportioned between the
finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the
remaining balance of the liability. Finance charges are recognised as an expense in profit or loss.
Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the
lease term if there is no reasonable certainty that the Group will obtain ownership by the end of the lease
term.
Operating lease payments are recognised as an expense in the income statement on a straight-line basis
over the lease term. Lease incentives are recognised in the income statement as an integral part of the total
lease expense.
g) Cash and cash equivalents
Cash and short-term deposits in the balance sheet comprise cash at bank and in hand and short-term
deposits with an original maturity of three months or less.
For the purposes of the Cash Flow Statement, cash and cash equivalents consist of cash and cash
equivalents as defined above, net of outstanding bank overdrafts.
h)
Inventories
Inventories are valued at the lower of cost and net realisable value.
Costs incurred in bringing each product to its present location and condition are accounted for as follows:
(cid:131) Raw materials – purchase cost on a first-in, first-out basis; and
(cid:131) Finished goods and work-in-progress – cost of direct materials and labour and a proportion of
manufacturing overheads based on normal operating capacity but excluding borrowing costs.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of
completion and the estimated costs necessary to make the sale.
i)
Financial instruments
Classification
The group classifies its financial instruments in the following categories: financial assets at fair value
through profit or loss, loans and receivables, held-to-maturity investments, and available-for-sale financial
assets. The classification depends on the purpose for which the investments were acquired. Management
determines the classification of its investments at initial recognition and re-evaluates the designation at
each reporting date.
Loans and Receivables
Loans and receivables are measured at fair value at inception.
Financial Liabilities
Financial liabilities include trade payables, other creditors and loans from third parties including inter-
company balances and loans from or other amounts due to director-related entities.
29
Traffic Technologies Limited and Controlled Entities
Notes to the Financial Statements
For the year ended 30 June 2006
j)
Impairment of financial assets
Assets with an indefinite useful life are not amortised but are tested annually for impairment in accordance
with AASB 136. Assets subject to annual depreciation or amortisation are reviewed for impairment
whenever events or circumstances arise that indicate that the carrying amount of the asset may be
impaired. An impairment loss is recognised where the carrying amount of the asset exceeds its
recoverable amount. The recoverable amount of an asset is defined as the higher of its fair value less costs
to sell and value in use.
k)
Income tax
Current income tax expense or revenue is the tax payable on the current year’s taxable income based on
the applicable income tax rate adjusted by changes in deferred tax assets and liabilities.
A balance sheet approach is adopted under which deferred tax assets and liabilities are recognised for
temporary differences between the tax bases of assets and liabilities and their carrying amounts in the
financial statements. No deferred tax asset or liability is recognised in relation to temporary differences
arising from the initial recognition of an asset or a liability if they arose in a transaction, other than a
business combination, that at the time of the transaction did not affect either accounting profit or taxable
profit or loss.
Deferred tax assets are recognised for temporary differences and unused tax losses only when it is
probable that future taxable amounts will be available to utilise those temporary differences and losses.
Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised
directly in equity.
l)
Property, plant and equipment
Plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment
losses. Such cost includes the cost of replacing parts that are eligible for capitalisation when the cost of
replacing the parts is incurred. Similarly, when each major inspection is performed, its cost is recognised
in the carrying amount of the plant and equipment as a replacement only if it is eligible for capitalisation.
Land and buildings are measured at fair value less accumulated depreciation on buildings and any
impairment losses recognised after the date of the revaluation.
Depreciation is calculated on a straight-line basis over the estimated useful life of the assets as follows:
Office furniture and fittings
Motor Vehicles
2006
2005
4 to 10 years
4 to 10 years
8 years
8 years
Plant and equipment, including signage
3 to 10 years
3 to 10 years
Leasehold improvements
10 years
10 years
The assets' residual values, useful lives and amortisation methods are reviewed, and adjusted if
appropriate, at each financial year end.
(i)
Impairment
The carrying values of plant and equipment are reviewed for impairment at each reporting date, with
recoverable amount being estimated when events or changes in circumstances indicate that the carrying
value may be impaired.
30
Traffic Technologies Limited and Controlled Entities
Notes to the Financial Statements
For the year ended 30 June 2006
The recoverable amount of plant and equipment is the higher of fair value less costs to sell and value in
use. In assessing value in use, the estimated future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of the time value of money and the risks
specific to the asset.
For an asset that does not generate largely independent cash inflows, recoverable amount is determined for
the cash-generating unit to which the asset belongs, unless the asset's value in use can be estimated to be
close to its fair value.
An impairment exists when the carrying value of an asset or cash-generating units exceeds its estimated
recoverable amount. The asset or cash-generating unit is then written down to its recoverable amount.
(ii) Derecognition and disposal
An item of property, plant and equipment is derecognised upon disposal or when no further future
economic benefits are expected from its use or disposal.
Any gain or loss arising on derecognition of the asset (calculated as the difference between the net
disposal proceeds and the carrying amount of the asset) is included in profit or loss in the year the asset is
derecognised.
m) Goodwill
Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of
the business combination over the Group’s interest in the net fair value of the acquiree's identifiable assets,
liabilities and contingent liabilities.
Following initial recognition, goodwill is measured at cost less any accumulated impairment losses.
Goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances
indicate that the carrying value may be impaired.
For the purpose of impairment testing, goodwill acquired in a business combination is, from the
acquisition date, allocated to each of the Group’s cash-generating units, or groups of cash-generating
units, that are expected to benefit from the synergies of the combination, irrespective of whether other
assets or liabilities of the Group are assigned to those units or groups of units. Each unit or group of units
to which the goodwill is so allocated:
(cid:131)
(cid:131)
represents the lowest level within the Group at which the goodwill is monitored for internal
management purposes; and
is not larger than a segment based on either the Group’s primary or the Group’s secondary reporting
format determined in accordance with AASB 114 Segment Reporting.
Impairment is determined by assessing the recoverable amount of the cash-generating unit (group of cash-
generating units), to which the goodwill relates. When the recoverable amount of the cash-generating unit
(group of cash-generating units) is less than the carrying amount, an impairment loss is recognised. When
goodwill forms part of a cash-generating unit (group of cash-generating units) and an operation within that
unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying
amount of the operation when determining the gain or loss on disposal of the operation. Goodwill
disposed of in this manner is measured based on the relative values of the operation disposed of and the
portion of the cash-generating unit retained.
Impairment losses recognised for goodwill are not subsequently reversed.
31
Traffic Technologies Limited and Controlled Entities
Notes to the Financial Statements
For the year ended 30 June 2006
n)
Intangible assets
Intangible assets acquired separately or in a business combination are initially measured at cost. The cost
of an intangible asset acquired in a business combination is its fair value as at the date of acquisition.
Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and
any accumulated impairment losses. Internally generated intangible assets, excluding capitalised
development costs, are not capitalised and expenditure is charged against profits in the year in which the
expenditure is incurred.
The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with
finite lives are amortised over the useful 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 is reviewed at least at each financial year-end. Changes in the
expected useful life or the expected pattern of consumption of future economic benefits embodied in the
asset are accounted for by changing the amortisation period or method, as appropriate, which is a change
in accounting estimate. The amortisation expense on intangible assets with finite lives is recognised in
profit or loss in the expense category consistent with the function of the intangible asset.
Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the
cash-generating unit level. Such intangibles are not amortised. The useful life of an intangible asset with
an indefinite life is reviewed each reporting period to determine whether indefinite life assessment
continues to be supportable. If not, the change in the useful life assessment from indefinite to finite is
accounted for as a change in an accounting estimate and is thus accounted for on a prospective basis.
o)
Impairment of assets
The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If
any such indication exists, or when annual impairment testing for an asset is required, the Group makes an
estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of its fair value
less costs to sell and its value in use and 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 and the
asset's value in use cannot be estimated to be close to its fair value. In such cases the asset is tested for
impairment as part of the cash-generating unit to which it belongs. When the carrying amount of an asset
or cash-generating unit exceeds its recoverable amount, the asset or cash-generating unit 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 pre-
tax discount rate that reflects current market assessments of the time value of money and the risks specific
to the asset. Impairment losses relating to continuing operations are recognised in those expense categories
consistent with the function of the impaired asset unless the asset is carried at revalued amount (in which
case the impairment loss is treated as a revaluation decrease).
32
Traffic Technologies Limited and Controlled Entities
Notes to the Financial Statements
For the year ended 30 June 2006
An assessment is also made at each reporting date as to whether there is any indication that previously
recognised impairment losses may no longer exist or may have decreased. If such indication exists, the
recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has
been a change in the estimates used to determine the asset’s recoverable amount since the last impairment
loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable
amount. That increased amount cannot exceed the carrying amount that would have been determined, net
of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is
recognised in profit or loss unless the asset is carried at revalued amount, in which case the reversal is
treated as a revaluation increase. After such a reversal the depreciation charge is adjusted in future periods
to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its
remaining useful life.
p) Share-based payment transactions
(i) Equity settled transactions
The Group provides benefits to employees (including senior executives) of the Group in the form of share-
based payments, whereby employees render services in exchange for shares or rights over shares (equity-
settled transactions).
The cost of these equity-settled transactions with employees is measured by reference to the fair value of
the equity instruments at the date at which they are granted. The fair value is determined by an external
valuer using the Black-Scholes option pricing model, further details of which are given in note 17.
In valuing equity-settled transactions, no account is taken of any performance conditions, other than
conditions linked to the price of the shares of Traffic Technologies Limited (market conditions) if
applicable.
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over
the period in which the performance and/or service conditions are fulfilled, ending on the date on which
the relevant employees become fully entitled to the award (the vesting period).
The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date
reflects (i) the extent to which the vesting period has expired and (ii) the Group’s best estimate of the
number of equity instruments that will ultimately vest. No adjustment is made for the likelihood of market
performance conditions being met as the effect of these conditions is included in the determination of fair
value at grant date. The income statement charge or credit for a period represents the movement in
cumulative expense recognised as at the beginning and end of that period.
If the terms of an equity-settled transaction are modified, as a minimum an expense is recognised as if the
terms had not been modified. In addition, an expense is recognised for any modification that increases the
total fair value of the share-based payment arrangement, or is otherwise beneficial to the employee, as
measured at the date of modification.
If an equity-settled transaction is cancelled, it is treated as if it had vested on the date of cancellation, and
any expense not yet recognised for the transaction is recognised immediately. However, if a new
transaction is substituted for the cancelled transaction and designated as a replacement transaction on the
date that it is granted, the cancelled and new transaction are treated as if they were a modification of the
original transaction, as described in the previous paragraph.
The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the
computation of earnings per share (see note 5).
33
Traffic Technologies Limited and Controlled Entities
Notes to the Financial Statements
For the year ended 30 June 2006
q) Contributed equity
Ordinary shares are classified as contributed equity. Incremental costs directly attributable to the issue of
new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
r) Earnings per share
Basic earnings per share is calculated as net profit attributable to members of the parent, adjusted to
exclude any costs of servicing equity (other than dividends) and preference share dividends, divided by the
weighted average number of ordinary shares, adjusted for any bonus element.
Diluted earnings per share is calculated as net profit attributable to members of the parent, adjusted for:
(cid:131)
(cid:131)
(cid:131)
costs of servicing equity (other than dividends) and preference share dividends;
the after tax effect of dividends and interest associated with dilutive potential ordinary shares that
have been recognised as expenses; and
other non-discretionary changes in revenues or expenses during the period that would result from the
dilution of potential ordinary shares; divided by the weighted average number of ordinary shares and
dilutive potential ordinary shares, adjusted for any bonus element.
2. Revenues
Consolidated
Consolidated
Company
Company
2006
2005
2006
2005
Revenues from continuing activities
Revenue from the sale of goods & services
57,479,578
18,839,490
Revenues from non-operating activities
Dividend income
Other income
Profit on disposal of fixed assets
Interest revenue from:
Financial institutions
Discount on acquisition
13,334
121,429
-
29,833
289,222
-
315,489
105,439
40,324
-
-
-
-
-
1,646,205
979,271
-
-
27,849
-
40,087
-
Total revenues from continuing activities
57,933,396
19,300,742
1,674,054
1,019,358
34
Traffic Technologies Limited and Controlled Entities
Notes to the Financial Statements
For the year ended 30 June 2006
3. Expenses
Profit/(loss) from continuing activities before income tax has been determined after:
Consolidated Consolidated
2006
2005
Company
2006
Company
2005
Other expenses
Occupancy expenses
Advertising and marketing expenses
Insurance expense
Professional costs
Administrative costs
Equipment rental
Restructuring costs
Total other expenses
Depreciation and amortisation expense
Depreciation of non-current assets:
Plant and equipment, including signage
Office furniture and fittings
Motor vehicles
Leasehold improvements
Total depreciation of non-current assets
Amortisation of non-current assets:
Patents and trademarks
Total amortisation of non-current assets
928,992
377,872
120,852
542,412
1,998,409
10,006
582,529
305,544
55,003
245,802
217,455
721,999
102,247
-
34,948
60,073
28,929
266,001
462,748
-
-
-
-
15,938
210,481
198,897
-
-
4,561,072
1,648,050
852,699
425,316
560,688
173,238
603,453
8,305
1,345,684
222,607
59,795
250,049
-
532,451
2,324
2,324
655
655
6,124
367
-
-
6,491
180
180
-
-
-
-
-
-
-
-
Total depreciation and amortisation expense
1,348,008
533,106
6,671
Finance costs
Interest and facility fees
Total finance costs
Significant revenue and expense items
Operating lease rentals
Doubtful debts
Bad debts expense
Employee benefits
Share based payments
Wages and salaries
Superannuation
Other on costs
761,378
761,378
418,196
418,196
202,401
202,401
1,062
1,062
999,136
-
21,492
426,891
6,929,485
236,532
854,861
8,447,769
274,554
122,597
70,191
79,388
2,506,175
136,788
272,081
2,994,432
76,127
-
-
426,891
627,081
20,246
35,371
-
-
-
52,225
354,999
4,124
-
1,109,589
411,348
35
Traffic Technologies Limited and Controlled Entities
Notes to the Financial Statements
For the year ended 30 June 2006
4.
Income Tax
Consolidated
2006
Consolidated
2005
Company
2006
Company
2005
(a) The amount provided in respect of income tax differs
from the prima facie amount attributable to the operating
profit/(loss). The difference is reconciled as follows:
Prima facie tax payable on profit/(loss) from ordinary
activities before income tax at 30% (2005:30%)
(273,989)
(182,874)
(149,192)
54,490
Tax affect of permanent differences:
Discount on acquisition
Amortisation of intangibles
Capital raising costs
Taxable capital profits
Other
Share based payments
Prior year tax losses deducted
Movement in timing differences not booked
Losses not brought to account
Income tax expense
(b) Deferred tax assets and deferred tax liabilities not
brought into account because recovery is not probable:
Tax losses – revenue
Capital raising costs
Provisions
Other accruals
Total deferred tax assets
Fair value adjustment
Finance leases
Total deferred tax liabilities
(86,767)
-
(69,929)
-
7,869
128,067
(304,843)
87,291
512,301
-
1,016,624
224,496
601,222
266,306
2,108,648
172,850
42,150
215,000
-
197
(55,217)
232,146
(44,580)
23,816
-
26,512
-
-
820,716
220,869
181,269
88,617
1,311,471
-
41,227
41,227
-
-
(69,929)
-
(3,609)
128,067
-
16,508
78,155
-
-
-
55,217
-
2,121
15,668
(34,866)
16,350
-
100,546
224,496
389
33,669
359,100
22,391
220,869
-
17,550
260,810
-
-
-
-
-
-
The deferred tax asset will only be obtained if:
(cid:131)
Future assessable income is derived of a nature and of an amount sufficient to enable the assets to be
realised;
(cid:131)
The conditions for deductibility imposed by tax legislation continue to be complied with; and
(cid:131) No changes in tax legislation adversely affect the consolidated entity in realising the benefit.
Deferred tax liabilities have not been brought to account as they have been offset against deferred tax assets.
36
Traffic Technologies Limited and Controlled Entities
Notes to the Financial Statements
For the year ended 30 June 2006
5. Earnings per Share
Basic earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary
equity holders of the parent by the weighted average number of ordinary shares outstanding during the year.
Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity
holders of the parent by the weighted average number of ordinary shares outstanding during the year plus the
weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential
ordinary shares into ordinary shares.
The following reflects the income and share data used in the basic and diluted earnings per share computations:
Basic earnings per share
Diluted earnings per share
Net loss
Weighted average number of shares used in calculating basic
earnings per share
Share options
Weighted average number of shares used in calculating
diluted earnings per share
Consolidated
Consolidated
2006
2005
(1.5) cents
(1.5) cents
(2.4) cents
(2.4) cents
(913,296)
(609,580)
60,093,608
25,302,532
5,094,953
2,051,781
65,188,561
27,354,313
There have been no other transactions involving ordinary shares or potential ordinary shares between the
reporting date and the date of completion of these financial statements.
37
Traffic Technologies Limited and Controlled Entities
Notes to the Financial Statements
For the year ended 30 June 2006
6. Trade and Other Receivables
Trade receivables
Allowance for doubtful debts
Consolidated
2006
Consolidated
2005
Company
2006
Company
2005
14,162,991
(372,597)
13,790,394
4,150,403
(122,597)
4,027,806
-
-
-
-
-
-
Other receivable and prepaid expenses
285,715
196,609
29,568
10,090
Related party receivables:
subsidiaries
-
-
14,345,334
6,665,775
14,076,109
4,224,415
14,374,902
6,675,865
(i) Trade receivables are non-interest bearing and are generally on 30-90 day terms. An allowance for doubtful
debts is made when there is objective evidence that a trade receivable is impaired. The allowance for doubtful
debts of $372,597 (2005: $122,597) (Company: $Nil (2005: $Nil)), for which the increase of $250,000 for the
year was a transfer from the acquisition of De Neefe Signs and was not recognised as an expense for the current
year.
7.
Inventories
Raw materials (at cost)
Work in progress (at cost)
Finished goods (at cost)
Consolidated
2006
Consolidated
2005
Company
2006
Company
2005
1,107,322
287,516
2,367,624
52,780
-
38,691
3,762,462
91,471
-
-
-
-
-
-
-
-
38
Traffic Technologies Limited and Controlled Entities
Notes to the Financial Statements
For the year ended 30 June 2006
8. Financial Assets
Unlisted investments, at cost
Interests in subsidiaries, at cost
Name of entity
Country of
Incorporation
Consolidated
2006
Consolidated
2005
Company
2006
Company
2005
622,635
-
529,581
-
572,785
3,849,056
529,581
1,462,657
622,635
529,581
4,421,841
1,992,238
% of equity
interest held
by the
consolidated
entity
2006
%
% of equity
interest held
by the
consolidated
entity
2005
%
Investment
Investment
2006
$
2005
$
Australia
100%
100%
500,000
500,000
Traffic Technologies Signal &
Hardware Division Pty Ltd
Traffic Technologies Traffic
Management Division Pty Ltd
De Neefe Signs Pty Ltd
Traffic Technologies Asset
Management Division Pty Ltd
Sunny Signs Pty Ltd
Australia
Australia
Australia
Australia
100%
100%
100%
100%
Pro-Tech Traffic Management Pty
Ltd
Australia
100%
100%
1,016,227
962,657
-
-
-
-
1
2
2,332,825
1
-
-
-
-
3,849,056
1,462,657
The Directors review the carrying value of the parent entity's investment in its subsidiary entities on an ongoing
basis. As at the date of this report the Directors have determined that the carrying values should be maintained
at cost.
39
Traffic Technologies Limited and Controlled Entities
Notes to the Financial Statements
For the year ended 30 June 2006
9. Property, Plant and Equipment
Consolidated
2006
Consolidated
2005
Company
2006
Company
2005
a) Carrying values
Plant and equipment, including
signage:
At cost
Accumulated depreciation
Total plant and equipment
Office furniture and fittings
At cost
Accumulated depreciation
Total office furniture and fittings
Office equipment under lease
At cost
Accumulated depreciation
Total office equipment under lease
Motor vehicles
At cost
Accumulated depreciation
Total motor vehicles
Motor vehicles under lease
At cost
Accumulated depreciation
Total motor vehicles under lease
Land and buildings
At cost
Accumulated depreciation
Total land and buildings
Leasehold improvements
At cost
Accumulated depreciation
Total leasehold improvements
Total property, plant and
equipment
At cost
Accumulated depreciation
Total written down value
4,959,944
(1,409,389)
3,550,555
853,941
(353,533)
500,408
307,790
(112,623)
195,167
1,706,475
(437,497)
1,268,978
4,336,045
(517,475)
3,818,570
199,699
-
199,699
214,948
(12,112)
202,836
1,496,254
(725,778)
770,476
597,541
(299,417)
298,124
-
-
-
1,571,700
(250,049)
1,321,651
891,222
-
891,222
-
-
-
-
-
-
-
-
-
62,914
(3,483)
59,431
30,080
(3,008)
27,072
-
-
-
-
-
-
-
-
-
-
-
-
12,578,842
(2,842,629)
9,736,213
4,556,717
(1,275,244)
3,281,473
92,994
(6,491)
86,503
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
40
Traffic Technologies Limited and Controlled Entities
Notes to the Financial Statements
For the year ended 30 June 2006
Plant &
Equipment
Office
furniture &
fittings
Office
equipment
under lease
Motor vehicles Motor vehicles
under lease
Land &
buildings
Leasehold
improvements
Total
770,476
199,683
1,120,997
2,020,087
-
(560,688)
298,124
-
136,695
186,466
-
(120,877)
-
-
122,636
124,892
-
(52,361)
1,321,651
36,481
532,635
85,407
(463,000)
(244,196)
891,222
-
686,019
2,600,586
-
(359,257)
-
-
199,699
-
-
-
-
41,538
-
169,603
-
(8,305)
3,281,473
277,702
2,798,681
5,187,041
(463,000)
(1,345,684)
b) Reconciliations
Consolidated entity
Year ended 30 June 2006
Balance at the beginning of the year
Acquisition of subsidiary entities
Acquisition of business
Additions
Disposals
Depreciation expense
Balance at the end of the year
3,550,555
500,408
195,167
1,268,978
3,818,570
199,699
202,836
9,736,213
Year ended 30 June 2005
Balance at the beginning of the year
Acquisition of subsidiary entities
Acquisition of business
Additions
Disposals
Depreciation expense
39,833
722,550
150,000
97,501
(16,801)
(222,607)
-
296,367
-
61,552
-
(59,795)
Balance at the end of the year
770,476
298,124
-
-
-
-
-
-
-
-
1,533,571
250,000
-
(211,871)
(250,049)
-
-
-
891,222
-
-
1,321,651
891,222
Company
Year ended 30 June 2006
Balance at the beginning of the year
Acquisition of subsidiary entity
Acquisition of business
Additions
Disposals
Depreciation expense
Balance at the end of the year
-
-
-
-
-
-
-
-
-
-
62,914
-
(3,483)
59,431
-
-
-
30,080
-
(3,008)
27,072
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
39,833
2,552,488
400,000
1,050,275
(228,672)
(532,451)
3,281,473
-
-
-
92,994
-
(6,491)
86,503
41
Traffic Technologies Limited and Controlled Entities
Notes to the Financial Statements
For the year ended 30 June 2006
10. Intangible Assets
Consolidated
2006
$
Consolidated
2005
$
Company
2006
$
Company
2005
$
Patents and trademarks
At cost
Accumulated amortisation
Goodwill
At cost
58,566
(2,324)
56,242
6,545
(877)
5,668
8,971,892
5,629,359
Total intangible assets
9,028,134
5,635,027
1,800
(180)
1,620
-
1,620
-
-
-
-
-
Consolidated
Patents and
trademarks
Consolidated
research and
development
Consolidated
Goodwill
Company
Patents and
trademarks
At 1 July 2005 net book value
Additions
Acquisition of subsidiaries
Adoption of AIFRS adjustments
Amortisation
At 30 June 2006 net book value
At 1 July 2004 net book value
Additions
Acquisition of subsidiaries
Adoption of AIFRS adjustments
Amortisation
At 30 June 2005 net book value
5,668
52,898
-
-
(2,324)
56,242
6,323
-
-
-
(655)
5,668
-
-
-
-
-
-
558,276
4,023
-
(562,299)
-
5,629,359
-
3,342,533
-
-
8,971,892
88,577
-
4,978,483
562,299
-
-
5,629,359
-
1,800
-
-
(180)
1,620
-
-
-
-
-
-
42
Traffic Technologies Limited and Controlled Entities
Notes to the Financial Statements
For the year ended 30 June 2006
11. Impairment Testing of Goodwill and Intangibles
a)
Impairment Testing of Goodwill and Intangibles with Indefinite Lives
Goodwill acquired through business combinations has been allocated to three individual cash generating
units, which are reportable segments, for impairment testing as follows:
(cid:131) Traffic Management Division
(cid:131) Traffic Sign Division
(cid:131) Signals and Hardware Division
Traffic Management Division
The recoverable amount of the Traffic Management Division has been determined based on a value in use
calculation using cash flow projections covering an eight year period and applying a discount rate of 12%.
Traffic Sign Division
All of the business combinations allocated to this reportable segment occurred during the year to 30 June
2006.
Signals and Hardware Division
The recoverable amount of the Signals and Hardware Division has been determined based on a value in
use calculation using cash flow projections covering a five year period and applying a discount rate of
12%.
b) Carrying amount of Goodwill allocated to each of the cash generating units
Consolidated Consolidated
2006
2005
Company
2006
Company
2005
Summary by Division
Traffic Management
Traffic Sign
Signals & Hardware
6,518,518
1,806,521
646,853
4,982,506
-
646,853
8,971,892
5,629,359
-
-
-
-
-
-
-
-
c) Key assumptions used in value in use calculations for the Traffic Management and Signals and
Hardware Divisions for 30 June 2006.
The Company has based its cash flow projections on budgets approved by management for the year ended
30 June 2007.
The cash flows have been extrapolated using expected growth rates for each business segment.
43
Traffic Technologies Limited and Controlled Entities
Notes to the Financial Statements
For the year ended 30 June 2006
12. Trade and Other Payables
Consolidated
2006
Consolidated
2005
Company
2006
Company
2005
Trade creditors
Payroll liabilities
Sundry creditors and accruals
Deferred consideration
Due to related parties
5,087,261
1,485,362
3,892,268
753,633
-
702,559
536,268
1,054,558
475,000
260,000
108,105
5,276
206,735
250,000
-
180,575
11,055
36,645
475,000
260,000
Trade and Other Payables (Current)
11,218,524
3,028,385
570,116
963,275
Tax payable (Current)
186,500
Trade & other payables (Non-Current)
171,055
-
-
-
-
-
-
Aggregate amounts payable to related
parties:
Payable to Directors and Director-related
entities
a) Deferred Consideration
-
260,000
-
260,000
Deferred consideration relates to outstanding payments both in shares and cash due to vendors of
businesses acquired.
$315,464 relates to the deferred cash consideration relating to acquisition of the De Neefe Signs business.
$8,169 relates to deferred cash consideration relating to the acquisition of intellectual property during the
year.
$250,000 relates to the deferred share consideration relating to the acquisition of the TMS during the prior
year. The deferred share consideration due to TMS is currently subject to a dispute. Refer to Note 22
Claims and Contingences.
$180,000 relates to the deferred cash consideration related for the acquisition of Able Traffic
Management.
44
Traffic Technologies Limited and Controlled Entities
Notes to the Financial Statements
For the year ended 30 June 2006
13. Borrowings
Short-term borrowings
Bank Loan
Lease liabilities
Hire Purchase liabilities
Loan
Debtor factoring
Long-term borrowings
Lease liabilities
Hire purchase liabilities
Convertible notes – related party
Consolidated
2006
Consolidated
2005
Company
2006
Company
2005
-
637,248
421,348
-
5,152,318
235,000
147,201
341,338
1,000,000
2,867,003
6,210,914
4,590,542
-
30,135
-
-
-
30,135
-
-
-
1,000,000
-
1,000,000
2,517,726
506,828
2,000,000
819,706
-
-
-
-
2,000,000
5,024,554
819,706
2,000,000
-
-
-
-
Terms and conditions relating to the above financial instruments:
(i) Convertible Note
The Company has issued $2,000,000 of convertible notes to Equity Partners Two Pty Ltd, as trustee
of the Equity Partners 2 Trust. The notes bear an interest rate of 8.0% per annum payable quarterly
in arrears and are secured by a fixed and floating charge over the Company.
The Convertible notes are convertible at the option of the Note holder into Preference shares within
two years of the date of issue (i.e. by 15 September 2007) at the face value of $0.26 (26 cents).
Preference shares are convertible into fully paid Ordinary shares on the basis that each Preference
share is convertible into one Ordinary share. No additional consideration is payable on conversion.
Equity Partners may only convert Preference shares to Ordinary shares so that the number of
Ordinary shares to be issued on conversion does not result in Equity Partners’ voting power in the
Company increasing, in contravention of section 606 of the Corporations Act 2001.
The Company must redeem all outstanding Convertible notes in cash on the second anniversary of
the issue date (i.e. 15 September 2007) if the Convertible Notes have not been converted into
Preference shares. The Convertible notes do not confer voting rights. However, if the Convertible
notes are converted into Preference shares, Preference shareholders may have certain voting rights.
45
Traffic Technologies Limited and Controlled Entities
Notes to the Financial Statements
For the year ended 30 June 2006
(ii) The debtor factoring facility is secured by a specific charge over debtors and a fixed and a floating
charge over the other assets of the Group.
(iii) The parent entity has provided guarantees with respect to certain finance lease and hire purchase
agreements.
14. Provisions
Consolidated
2006
Consolidated
2005
Company
2006
Company
2005
Short-term provisions
Provision for annual leave
Provision for long service leave
Long-term provisions
Provision for long service leave
986,930
303,660
1,290,590
337,300
337,300
458,527
-
458,527
27,134
27,134
1,296
-
1,296
-
-
Total provisions
1,627,890
485,661
1,296
At 1 July 2005
Acquisition of subsidiaries
Provided during the year
Utilised
At 30 June 2006
Consolidated
Provision for
annual leave
Consolidated
Provision for long
service leave
Parent
Provision for
annual leave
458,527
606,890
91,685
(170,172)
986,930
27,134
680,077
85,000
(151,251)
640,960
-
-
1,296
-
1,296
-
-
-
-
-
-
46
Traffic Technologies Limited and Controlled Entities
Notes to the Financial Statements
For the year ended 30 June 2006
15. Contributed Equity
Ordinary shares
Preference shares
Consolidated
2006
Consolidated
2005
Company
2006
Company
2005
14,930,309
6,000,000
20,930,309
41,679,189
-
41,679,189
14,930,309
6,000,000
20,930,309
41,679,189
-
41,679,189
Number of
Shares
$
a) Movement in Ordinary shares
At 1 July 2004
Prospectus capital raising on 7 January 2005
Issue of shares on 7 January 2005
Issue of shares on 7 January 2005
Issue of shares on 8 April 2005
Capital raising costs
At 30 June 2005
At 1 July 2005
Share placement on 2 September 2005
Share purchase plan on 5 October 2005
Shares issued as acquisition consideration on 12 December 2005
Shares issued as acquisition consideration on 12 December 2005
Shares issued as acquisition consideration on 12 December 2005
Shares issued as acquisition consideration on 12 December 2005
Placement of shares to directors on 12 December 2005
Shares issued on exercise of options on 12 December 2005
Shares issued on exercise of options on 12 January 2006
Share placement on 27 June 2006
Capital reduction for lost capital of Infosentials business
Capital raising costs
At 30 June 2006
8,256,916
35,324,475
30,000,000
5,000,000
375,000
800,000
-
6,000,000
1,000,000
75,000
200,000
(920,286)
44,431,916
41,679,189
44,431,916
41,679,189
5,744,000
10,468,000
800,000
800,000
900,000
1,600,000
1,200,000
250,000
250,000
9,966,586
-
-
1,436,000
2,617,000
200,000
200,000
225,000
400,000
300,000
50,000
50,000
2,890,310
(34,872,019)
(245,171)
76,410,502
14,930,309
47
Traffic Technologies Limited and Controlled Entities
Notes to the Financial Statements
For the year ended 30 June 2006
On 2 September 2005 the Company issued 5,744,000 fully paid ordinary shares as a share placement to
sophisticated investors.
On 5 October 2005 the Company issued 10,468,000 fully paid ordinary shares to existing shareholders as part
of a Share Purchase Plan.
On 12 December 2005 the Company issued 800,000 fully paid ordinary shares at $0.25 (25 cents) per share as
part consideration for the acquisition of the business and assets of Able Traffic Management Pty Ltd.
On 12 December 2005 the Company issued 800,000 fully paid ordinary shares at $0.25 (25 cents) per share as
part consideration for the acquisition of the business and assets of ACE Traffic Management Pty Ltd.
On 12 December 2005 the Company issued 900,000 fully paid ordinary shares at $0.25 (25 cents) per share as
part consideration for the acquisition of a 10% interest in Warp Pty Limited.
On 12 December 2005 the Company issued 1,600,000 fully paid ordinary shares at $0.25 (25 cents) per share as
part consideration for the acquisition of the business and assets of De Neefe Signs Pty Limited.
On 12 December 2005 the Company issued 1,200,000 fully paid ordinary shares as a placement to directors at
$0.25 (25 cents). 300,000 shares were issued to Astra Glen Pty Ltd (associated with Director Mr. Con Scrinis),
300,000 shares were issued to Contelite Pty Ltd (associated with Director Mr. Con Liosatos), 300,000 shares
were issued to Mr S and Mrs T Kavourakis Superannuation Fund (associated with Director Mr. Sam
Kavourakis) and 300,000 shares were issued to Mr A and Mrs P Brown Superannuation Fund (associated with
Director Mr. Alan Brown).
On 12 December 2005 the Company issued 250,000 fully paid ordinary shares on the exercise of options at a
price of $0.20 (20 cents).
On 12 January 2006 the Company issued 250,000 fully paid ordinary shares on the exercise of options at a
strike price of $0.20 (20 cents).
On 27 June 2006 the Company issued 9,966,586 fully paid ordinary shares at $0.29 (29 cents) by way of a
share placement.
In accordance with Section 258F of the Corporations Act 2001, on 27 June 2006 the Company undertook a
capital reduction in the amount of $34,872,019 resulting from accumulated losses from the Infosentials business
which were unable to be utilized by the Company. The capital reduction has no effect on profit/(loss), net cash,
the cash position of the Company or the number of shares on issue.
The Company incurred capital raising costs of $245,171 during the financial year ended 30 June 2006.
48
Traffic Technologies Limited and Controlled Entities
Notes to the Financial Statements
For the year ended 30 June 2006
Terms and conditions of contributed equity
Ordinary shares have the right to receive dividends as declared and, in the event of winding up of the Company,
to participate in the proceeds from the sale of all surplus assets in proportion to the number and amounts paid up
on shares held. Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the
Company.
At the date of this report, the Company has a total of 76,410,502 fully paid ordinary shares on issue, of which
71,366,410 are quoted on ASX and 5,044,092 are subject to escrow restrictions until 12 January 2007.
Upon execution of an Investor Agreement between Equity Partners, Mr. Constantine Scrinis and Mr.
Constantinos Liosatos on 15 September 2005, Equity Partners acquired an interest in a total of 5,837,890 voting
shares in the Company, as described immediately below:
a) Mr. Constantine Scrinis will be prevented from selling, assigning, transferring or encumbering, or
effecting any arrangement with respect to any of the above of all of the 3,543,945 shares he holds
personally or through his company Astra Glen Pty Ltd for a period of 3 years after the date of the
Investors’ Agreement, other than by accepting into a takeover bid provided certain conditions are
satisfied.
b) Mr. Constantinos Liosatos will be prevented from selling, assigning, transferring or encumbering, or
effecting any arrangement with respect to any of the above of all of the 2,293,945 shares he holds
personally or through his company Contelite Pty Ltd for a period of 3 years after the date of the
Investors’ Agreement, other than by accepting into a takeover bid provided certain conditions are
satisfied.
b) Movement in Preference Shares
Balance at 1 July
Issue of shares to Equity Partners Two Pty Limited on 9 March 2006
Balance at 30 June
Consolidated
2006
$
Consolidated Company
2005
$
2006
$
Company
2005
$
-
6,000,000
6,000,000
-
-
-
-
6,000,000
6,000,000
-
-
-
On 9 March 2006 the Company issued 24,000,000 Preference shares at a price of $0.25 (25 cents) to
Equity Partners Two Pty Ltd as trustee of the Equity Partners 2 Trust (associated with Directors Dr.
Richard Gregson and Mr. Rajeev Dhawan). Preference shares are convertible into fully paid Ordinary
shares on the basis that each Preference shares is convertible at the option of the Preference shareholder
into one Ordinary share. There is no time limit specified within which Preference shares must be
converted. No additional consideration is payable on conversion.
Equity Partners may only convert so that the number of shares to be issued on conversion does not result
in Equity Partners’ voting power in the Company increasing in contravention of section 606 of the
Corporations Act 2001.
49
Traffic Technologies Limited and Controlled Entities
Notes to the Financial Statements
For the year ended 30 June 2006
Preference shares are redeemable only on the occurrence of an “Insolvency Event”, (an application made
to a court to wind up the Company, the appointment of a liquidator, provisional liquidator, receiver,
manager, administrator or controller or the Company entering into an arrangement with one or more of its
creditors or failing to comply with a statutory demand) or the Company ceasing to trade, at the option of
the Preference shareholder.
Preference shareholders will not be entitled to vote at any general meeting of the Company except in the
following circumstances:
a) on a proposal:
(i) to reduce the share capital of the Company;
(ii) that affects the rights attached to Preference shares;
(iii) to wind up the Company; and
(iv) for the disposal of the whole of the property, business and undertakings of the Company.
b) on a resolution to approve the terms of a share buy-back agreement;
c) during a period win which a Dividend or part of a Dividend is in arrears;
d) during the winding-up of the Company.
Subject to the Preference share terms, but in any event only if the Directors declare a dividend on the
Ordinary shares, each Preference share entitles the Preference shareholder on a Record Date to receive on
the relevant Dividend payment date in preference to the holder of Ordinary shares a non-cumulative
dividend in an amount equal to the greater of the dividend declared on the Ordinary shares and the 90 day
Bank Bill Swap Rate. Dividends will be payable on the dates on which dividends on Ordinary shares are
payable. Preference shareholders are entitled to receive dividends in priority to holder of Ordinary shares
and equally with the holders of other Preference shares that may be issued with the consent of the holders
of the majority of the Preference shares.
16. Accumulated Losses and Reserves
Consolidated
2006
Consolidated
2005
Company
2006
Company
2005
a) Movement in Retained Earnings/(Accumulated Losses)
Balance at 1 July
Net profit/(loss) for the year
Cancellation of losses
Balance at 30 June
(35,946,654)
(913,296)
34,872,019
(1,987,931)
(35,337,074)
(609,580)
-
(35,946,654)
(34,990,543)
(497,306)
34,872,019
(615,830)
(35,172,175)
181,632
-
(34,990,543)
In accordance with Section 258F of the Corporations Act 2001, on 27 June 2006 the Company undertook a
capital reduction in the amount of $34,872,019 resulting from accumulated losses from the Infosentials business
which were unable to be utilized by the Company. The capital reduction has no effect on profit/(loss), net cash,
the cash position of the Company or the number of shares on issue.
50
Traffic Technologies Limited and Controlled Entities
Notes to the Financial Statements
For the year ended 30 June 2006
Consolidated
2006
Consolidated
2005
Company
2006
Company
2005
145,688
426,891
572,579
66,300
79,388
145,688
118,525
426,891
545,416
66,300
52,225
118,525
b) Reserves
Options Granted Reserve
Balance at 1 July
Share based payments
Balance at 30 June
Share Options
At the date of this report there are 15,000,000 unissued ordinary shares in respect of which options are
outstanding.
There are 11,900,000 options held by directors on the following terms.
1,700,000 options issued to Directors on 30 January 2004, exercisable at $0.20 (20 cents) per share on or
before 30 January 2009.
6,000,000 options issued to executive directors on 12 December 2005 the terms of which are as follows:
(cid:131)
(cid:131)
(cid:131)
2,000,000 options exercisable at $0.30 (30 cents) per share vesting on 1 July 2006, expiring on 31
December 2008;
2,000,000 at $0.40 (40 cents) per share vesting on 1 July 2007, expiring on 31 December 2009; and
2,000,000 options exercisable at $0.50 (50 cents) per share vesting on 1 July 2008, expiring on 31
December 2010.
4,200,000 options issued to non-executive directors on 21 February 2006 the terms of which are as
follows:
(cid:131)
(cid:131)
(cid:131)
1,400,000 options exercisable at $0.30 (30 cents) per share vesting on 1 July 2006, expiring on 31
December 2008;
1,400,000 at $0.40 (40 cents) per share vesting on 1 July 2007, expiring on 31 December 2009; and
1,400,000 options exercisable at $0.50 (50 cents) per share vesting on 1 July 2008, expiring on 31
December 2010.
There are 2,300,000 options held by executives of the Company exercisable on the following terms:
500,000 options issued to executives on 22 April 2005 exercisable at $0.20 (20 cents) per share on or
before 30 January 2009.
1,800,000 options issued to executives on 29 June 2006 the terms of which are as follows:
(cid:131)
(cid:131)
(cid:131)
600,000 options exercisable at $0.30 (30 cents) per share vesting on 1 July 2006, expiring on 31
December 2008;
600,000 at $0.40 (40 cents) per share vesting on 1 July 2007, expiring on 31 December 2009; and
600,000 options exercisable at $0.50 (50 cents) per share vesting on 1 July 2008, expiring on 31
December 2010.
51
Traffic Technologies Limited and Controlled Entities
Notes to the Financial Statements
For the year ended 30 June 2006
17. Share Based Payment Plans
During the year ended 30 June 2006 options were issued to directors and employees on the following terms.
400,000 options issued to employees on 8 August 2005 exercisable at $0.25 (25 cents) vesting on 8 August
2005, expiring on 8 August 2010. The market price of the underlying shares on issue was $0.33 (33 cents).
6,000,000 options issued to executive directors on 12 December 2005 the terms of which are as follows:
(cid:131)
(cid:131)
(cid:131)
2,000,000 options exercisable at $0.30 (30 cents) per share vesting on 1 July 2006, expiring on 31
December 2008;
2,000,000 at $0.40 (40 cents) per share vesting on 1 July 2007, expiring on 31 December 2009; and
2,000,000 options exercisable at $0.50 (50 cents) per share vesting on 1 July 2008, expiring on 31
December 2010.
The market price of the underlying shares on issue was $0.26 (26 cents).
4,200,000 options issues to non-executive directors on 21 February 2006 the terms of which are as follows:
(cid:131)
(cid:131)
(cid:131)
1,400,000 options exercisable at $0.30 (30 cents) per share vesting on 1 July 2006, expiring on 31
December 2008;
1,400,000 at $0.40 (40 cents) per share vesting on 1 July 2007, expiring on 31 December 2009; and
1,400,000 options exercisable at $0.50 (50 cents) per share vesting on 1 July 2008, expiring on 31
December 2010.
The market price of the underlying shares on issue was $0.25 (25 cents).
1,800,000 options issued to executives on 29 June 2006 the terms of which are as follows:
(cid:131)
(cid:131)
(cid:131)
600,000 options exercisable at $0.30 (30 cents) per share vesting on 1 July 2006, expiring on 31
December 2008;
600,000 at $0.40 (40 cents) per share vesting on 1 July 2007, expiring on 31 December 2009; and
600,000 options exercisable at $0.50 (50 cents) per share vesting on 1 July 2008, expiring on 31
December 2010.
The market price of the underlying shares on issue was $0.34 (34 cents).
During the year ended 30 June 2005 options were issued to employees on the following terms:
(cid:131)
600,000 options issued to employees on 22 April 2005 exercisable at $0.20 (20 cents) per share vesting
on 22 April 2005, expiring on or before 30 January 2009. The market price of the underlying shares on
issue was $0.20 (20 cents).
The fair value of each option is estimated on the date of issue using the Black-Scholes option pricing model
with the following assumptions, along with those specified above:
June 2006
December 2005
June 2005
Dividend yield
Expected volatility
Risk free interest rate
$Nil
38%
5.75%
$Nil
45% - 58%
5.36% - 5.75%
$Nil
78%
5.50%
52
Traffic Technologies Limited and Controlled Entities
Notes to the Financial Statements
For the year ended 30 June 2006
The dividend yield reflects the assumption that no dividends will be paid by the Company for the foreseeable
future. The expected life of the options is based on the term of the options and is not necessarily indicative of
exercise patterns that may occur. The volatility reflects the assumption that the historical volatility is indicative
of future trends, which may not necessarily be the actual outcome.
The expense recognised within the income statement in relation to share-based payments is disclosed in note 3.
18. Financial Instruments
a) Financial Risk Management Objectives and Policies
The Group’s principal financial instruments comprise a debtor factoring facility, convertible notes, finance
leases, hire purchase contracts, and cash and short-term deposits.
The main purpose of these financial instruments is to raise finance for the Group’s operations. The Group
has various other financial assets and liabilities such as trade receivables and trade payables, which arise
directly from its operations.
The Group does not enter into derivative transactions and it has been the Group’s policy that no trading in
financial instruments shall be undertaken. The main risks arising from the Group’s financial instruments
are cash flow interest rate risk, liquidity risk and credit risk.
Details of the significant accounting polices and methods adopted, including the criteria for recognition ,
the basis of measurement and the basis on which income and expenses are recognized, in respect of each
class of financial asset, financial liability and equity instrument are disclosed in note 1 to the financial
statements.
Cash flow interest rate risk
The Group’s exposure to the risk of changes in market interest rates relates to changes in the rate of
interest charged under the debtor factoring facility and for new finance lease and hire purchase contracts.
The Group’s exposure to the risk of changes in market interest rates in practice relates primarily to interest
charged under the debtor factoring facility. The Group does not actively manage its exposure to interest
rate fluctuations with respect to the facility, as the facility agreement governs the rate.
Foreign currency risk
The Group currently purchases small amounts of material and derives immaterial revenues in foreign
currencies. The Group does not enter into any forward foreign exchange contracts or undertake foreign
currency hedging.
Credit risk
It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit
verification procedures. Receivable balances are monitored on an ongoing basis with the result that the
Group’s exposure to bad debts is not significant.
There are no significant concentrations of credit risk within the Group.
53
Traffic Technologies Limited and Controlled Entities
Notes to the Financial Statements
For the year ended 30 June 2006
(b) Financial Instruments
As at 30 June 2006
Consolidated
Financial Assets
Trade and other receivables
Cash assets
Financial Liabilities
Trade and other payables
Obligations under finance leases and hire
purchase contracts
Convertible notes
Debtor factoring facility
Company
Financial Assets
Other receivables
Cash assets
Intercompany receivables
Financial Liabilities
Trade payables
Obligations under finance leases and hire
purchase contracts
Convertible notes
As at 30 June 2005
Consolidated
Financial Assets
Trade and other receivables
Cash assets
Financial Liabilities
Trade and other payables
Obligations under finance leases and hire
purchase contracts
Loan
Bank loan
Debtor factoring facility
Company
Financial Assets
Cash assets
Intercompany and other receivables
Financial Liabilities
Trade and other payables
Loan
Less than
one year
More than 1
year and less
than 5 years
More than 5
years
Total
Weighted
Average effective
interest rate
14,076,109
6,728,840
20,804,949
-
-
-
11,405,024
171,055
1,058,596
-
5,152,318
17,615,938
3,024,554
2,000,000
-
5,195,609
29,568
4,576,576
14,345,334
18,951,478
570,116
30,135
-
600,251
4,224,415
1,040,550
5,264,965
3,028,385
488,539
1,000,000
235,000
2,867,003
7,618,927
102,343
6,675,865
6,778,208
963,275
1,000,000
1,963,275
-
-
-
-
-
-
2,000,000
2,000,000
-
-
-
-
819,706
-
-
-
819,706
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
14,076,109
6,728,840
20,804,949
0.0%
3.75%
11,576,079
0.0%
4,083,150
2,000,000
5,152,318
22,811,547
29,568
4,576,576
14,345,334
18,951,478
7.5% - 8.5%
8.0%
7.3%
0.0%
3.75%
0.0%
570,116
0.0%
30,135
2,000,000
2,600,251
7.5% - 8.5%
8.0%
4,224,415
1,040,550
5,264,965
3,028,385
1,308,245
1,000,000
235,000
2,867,003
8,438,633
102,343
6,675,865
6,778,208
963,275
1,000,000
1,963,275
0.0%
3.75%
0.0%
7.5% - 8.5%
15.0%
8.9%
8.9%
3.75%
0.0%
0.0%
15%
54
Traffic Technologies Limited and Controlled Entities
Notes to the Financial Statements
For the year ended 30 June 2006
19. Expenditure Commitments
a) Premises rent commitments
Not later than 1 year
Later than 1 year and
not later than 5 years
b) Finance lease & hire purchase
Not later than 1 year
Later than 1 year and
not later than 5 years
Minimum lease payments
Deduct: future finance charges
Consolidated
2006
Consolidated
2005
Company
2006
Company
2005
1,374,088
3,434,368
4,808,456
250,566
546,538
797,104
1,351,571
610,890
3,485,823
4,837,394
754,244
972,095
1,582,985
274,740
130,503
466,236
596,739
10,043
26,507
36,550
6,415
30,135
28,836
-
28,836
-
-
-
-
-
Lease liability
4,083,150
1,308,245
20. Statement of Cash Flows
a) Reconciliation of Cash
Consolidated
2006
Consolidated
2005
Company
2006
Company
2005
Cash
Security deposits
6,728,840
-
6,728,840
1,035,394
5,156
1,040,550
4,576,576
-
4,576,576
102,343
-
102,343
Cash includes cash on hand and in banks and investments in money market instruments, net of outstanding
bank overdrafts. Cash at bank earns interest at floating rates based on daily bank deposit rates. Deposits
at call earn interest at short-term deposit rates.
55
Traffic Technologies Limited and Controlled Entities
Notes to the Financial Statements
For the year ended 30 June 2006
b) Reconciliation of net loss after tax to net cash flows from operations
Consolidated
2006
Consolidated
2005
Company
2006
Company
2005
Net loss
(913,296)
(613,603)
(497,306)
181,632
Adjustments for:
Depreciation and amortisation
of non-current assets
Loss/(profit) on sale of fixed
assets
Gain from licence fee
Share based payments
Discount on acquisition
Changes in assets and
liabilities:
(Increase)/decrease in trade
and other receivables
(Increase)/decrease in
inventories
Increase/(decrease) in trade
and other payables
Increase/(decrease) in
provisions
Net cash used in operating
activities
1,348,008
533,106
-
-
426,891
(289,222)
(101,416)
(300,000)
79,388
-
6,671
-
-
426,891
-
-
-
-
52,225
-
(2,635,228)
(468,536)
(19,477)
(8,114)
(1,113,839)
693,568
(88,485)
20,580
467,052
214,093
-
-
(399,005)
(404,083)
1,296
-
(2,571,603)
(169,336)
(480,930)
(178,340)
56
Traffic Technologies Limited and Controlled Entities
Notes to the Financial Statements
For the year ended 30 June 2006
c) Non cash financing and investing actuals
During the year the economic entity acquired property, plant and equipment with an aggregate value of
$2,970,000 (2005: $891,222) by means of finance leases and hire purchase agreements.
During the year the Company acquired plant and equipment with an aggregate value of $32,257 (2005:
$Nil) by means of finance leases. These acquisitions are not reflected in the statements of cash flow.
d) Financing facilities available
Consolidated
2006
Consolidated
2005
Company
2006
Company
2005
Total facilities
Debtor factoring
Loan facility
Bank loans
Convertible notes
Facilities used at reporting date
Debtor factoring
Loan facility
Bank loans
Convertible notes
Facilities unused at reporting date
Debtor factoring
Loan facility
Bank loans
Convertible notes
10,000,000
-
-
2,000,000
12,000,000
5,152,318
-
-
2,000,000
7,152,318
4,847,682
-
-
-
4,847,682
3,600,000
1,000,000
235,000
-
4,835,000
2,867,003
1,000,000
235,000
-
4,102,003
732,997
-
-
-
732,997
-
-
-
2,000,000
2,000,000
-
-
-
2,000,000
2,000,000
-
-
-
-
-
-
1,000,000
-
-
1,000,000
-
1,000,000
-
-
1,000,000
-
-
-
-
-
57
Traffic Technologies Limited and Controlled Entities
Notes to the Financial Statements
For the year ended 30 June 2006
21. Business Combination
a) The Consolidated entity acquired the business and assets of the following businesses during the year
ended 30 June 2006:
(i) During July 2005 the Company acquired the business and assets of ACE Traffic Management, a provider
of traffic management services.
Consideration:
Cash paid under asset agreement
Professional fees
Total cash paid
Shares issued as consideration
Total acquisition cost
Fair value of net assets acquired:
Assets
Plant and equipment
Total assets acquired
Fair value of net assets acquired
Goodwill on acquisition
$
1,200,000
38,317
1,238,317
200,000
1,438,317
300,000
300,000
300,000
1,138,317
58
Traffic Technologies Limited and Controlled Entities
Notes to the Financial Statements
For the year ended 30 June 2006
(ii) In September 2005 the Company acquired the business and assets of De Neefe Signs, a traffic sign
manufacturer.
Consideration:
Cash paid under asset agreement
Professional fees
Total cash paid
Shares issued as consideration
Deferred consideration:
Cash (subject to settlement adjustment)
Total acquisition cost
Net assets acquired:
Assets
Cash
Receivables
Inventory
Plant and equipment
Property
Total assets acquired
Liabilities
Trade and other payables
Borrowings
Provisions
Total liabilities acquired
Net assets acquired
Fair value adjustment to plant and equipment
Fair value of net assets acquired
Goodwill / (Discount) on acquisition
$
655,000
198,313
853,313
400,000
315,464
1,568,777
267,993
5,060,201
2,250,000
1,308,573
190,000
9,076,767
(5,864,851)
(375,764)
(1,267,375)
(7,507,990)
1,568,777
289,222
1,857,999
(289,222)
59
Traffic Technologies Limited and Controlled Entities
Notes to the Financial Statements
For the year ended 30 June 2006
(iii) In October 2005 the Company acquired the business and assets of Able Traffic Management, a provider of
traffic management services.
Consideration:
Cash paid under asset agreement
Professional fees
Total cash paid
Shares issued as consideration
Deferred consideration:
Cash
Total acquisition cost
Fair value of net assets acquired:
Assets
Plant and equipment
Total assets acquired
Fair value of net assets acquired
Goodwill on acquisition
$
200,000
14,656
214,656
200,000
180,000
594,656
250,000
250,000
250,000
344,656
(iv) In October 2005 the Company acquired the business and assets of Line Marking Services, a provider of
line marking services.
Consideration:
Cash paid under share sale agreement
Total cash paid
Total acquisition cost
Fair value of net assets acquired:
Assets
Inventory
Plant and equipment
Total assets acquired
Fair value of net assets acquired
Goodwill on acquisition
$
205,390
205,390
205,390
5,390
200,000
205,390
205,390
-
60
Traffic Technologies Limited and Controlled Entities
Notes to the Financial Statements
For the year ended 30 June 2006
(v) During March 2006 the Company acquired the share capital of Sunny Signs Pty Limited
Consideration:
Cash paid under share sale agreement
Professional fees
Total acquisition cost
Net assets acquired:
Assets
Cash
Receivables
Inventory
Plant and equipment
Other assets
Total assets acquired
Liabilities
Trade and other payables
Borrowings
Provisions
Total liabilities acquired
Net assets acquired
Goodwill on acquisition
$
2,305,687
27,138
2,332,825
461,022
1,038,225
301,762
277,702
59,070
2,137,781
(726,991)
(186,500)
(697,986)
(1,611,477)
526,304
1,806,521
The Company did not lose control over any entities during the year ended 30 June 2006.
During the year the company also acquired three 100% subsidiaries for the consideration of $1 (or $2) each
being De Neefe Signs Pty Ltd (formerly Mykios Pty Ltd), Traffic Technologies Line Marking Division Pty
Ltd and Pro-Tech Traffic Management Pty Ltd, as disclosed at Note 8.
The contribution of the above entities to the reporting entities’ profit/(loss) from continuing activities
during the period of the entities have been integrated and subject to restructuring with the business
segments and has been more appropriately disclosed in the business segment disclosed in note 27.
Similarly the contribution of the above entities to the reporting entities’ profit/(loss) from continuing
activities for the whole of the previous corresponding period has not been disclosed. The information was
not disclosed due to the integration and restructuring of each of the acquisitions into the business segments
as disclosed in note 27.
61
Traffic Technologies Limited and Controlled Entities
Notes to the Financial Statements
For the year ended 30 June 2006
b) Acquisitions subsequent to the end of the financial year.
(i)
In July 2006 the Company acquired the business and assets of Guard Rail Installations Pty Ltd.
Purchase consideration:
Cash
Total cash paid
Purchase consideration – shares
Deferred purchase consideration
Net assets acquired
Receivables
Inventory
Fixed assets
Payables
Net assets acquired
Goodwill on acquisition
$
3,600,000
3,600,000
400,000
750,000
4,750,000
2,626,630
383,765
1,737,061
(3,525,066)
1,222,390
3,527,610
(ii) In July 2006 the Company acquired the business of Protech Traffic Management.
Purchase consideration:
Cash
Total cash paid
Net assets acquired
Fixed assets
Provisions
Net liabilities acquired
Goodwill on acquisition
$
2,014,165
2,014,165
22,457
(85,836)
(63,379)
2,077,544
62
Traffic Technologies Limited and Controlled Entities
Notes to the Financial Statements
For the year ended 30 June 2006
22. Claims and Contingencies
Claims for unspecified amounts were lodged during the year against the Company. The Company has denied
liability and is defending the actions. It is not practical to estimate the potential effect of these claims but legal
advice indicates that any liability that may arise in the unlikely event that the claim is successful will not be
significant.
23. Related Party Disclosures
Ultimate Party Transactions
Traffic Technologies Limited is the ultimate parent Company.
Wholly owned group transactions.
Loans
During the financial year ended 30 June 2006 Traffic Technologies Limited made interest-free advances to its
wholly owned subsidiaries as shown below. These amounts are repayable on demand.
Subsidiary
2006
2005
Traffic Technologies Signal and Hardware Division Pty Ltd
Traffic Technologies Traffic Management Division Pty Ltd
De Neefe Signs Pty Ltd
Traffic Technologies Asset Management Division Pty Ltd
1,840,455
8,284,868
3,342,514
223,497
548,830
6,122,791
-
-
Loans with Directors or Directors-related entities
During the financial year ended 30 June 2006 the company issued $2,000,000 of convertible notes to Equity
Partners Two Pty Ltd as trustee for the Equity Partners 2 Trust, an entity associated with Dr. Richard Gregson
and Mr. Rajeev Dhawan.
Amounts recognised at the reporting date in relation to loans with Director-related entities
Payables (Current)
Payable to Astra Glen Pty Ltd
Payable to Contelite Pty Ltd
Unpaid Directors’ fees
Consolidated Consolidated
2005
$
2006
$
Company
Company
2006
$
2005
$
-
-
-
-
100,000
100,000
60,000
260,000
-
-
-
-
100,000
100,000
60,000
260,000
63
Traffic Technologies Limited and Controlled Entities
Notes to the Financial Statements
For the year ended 30 June 2006
Other transactions with Directors or Director related entities
The aggregate amounts recognised during the year relating to Directors and their Director-related entities were
as follows:
Director
Transaction
Consolidated
Consolidated
Company
Company
2006
$
2005
$
2006
$
2005
$
Cary Stynes
Legal and business consulting fees
58,340
140,729
58,340
140,729
During the year the parent entity charged management fees to subsidiaries of $1,632,871 (2005: $978,871).
There were no other transactions or balances receivable from or payable to Directors or Executives during the
financial year or at the date of this report.
24. Events after the Balance Date
In July 2006 the Company settled the acquisitions of the businesses of Guard Rail Installations Pty Ltd and
Protech Traffic Management Pty Ltd. The details of these acquisitions are provided at note 21.
25. Auditor’s Remuneration
Amounts received or due and receivable by Pitcher Partners and other members of the Pitcher Partners
association of independent accounting firms to:
An audit or review of the financial report of the
entity and any other entity in the consolidated
entity
Other services
Consolidated Consolidated Company
2006
$
2005
$
2006
$
Company
2005
$
161,000
66,872
227,872
112,745
222,650
335,395
161,000
66,872
227,872
112,745
222,650
335,395
64
Traffic Technologies Limited and Controlled Entities
Notes to the Financial Statements
For the year ended 30 June 2006
26. Directors and Executive Disclosures
a) Details of Directors and Executives
(i) Directors
Mr. Samuel Kavourakis
Mr. Constantine Scrinis
Mr. Constantinos Liosatos
Mr. Alan Brown
Mr. Cary Stynes
Dr. Richard Gregson
Mr. Rajeev Dhawan
(ii) Executives
Mr. Peter Crafter
Mr. James Hopping
Mr. Stephen O'Dwyer
Mr. Ron Hunt
Mr. Andrew Harris
b) Remuneration of Directors and Executives
(i) Remuneration Policy
Non-Executive Chairman
Joint Managing Director
Joint Managing Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Alternate Director
Company Secretary
General Manager Asset Management Division
General Manager Traffic Management Division
General Manager Traffic Signage Division
Chief Financial Officer
The Remuneration Committee is responsible for determining and reviewing remuneration
arrangements for the Directors, the Joint Managing Directors and the executive team. The
Remuneration Committee assesses the appropriateness of the nature and amount of remuneration of
such officers on a periodic basis by reference to relevant employment market conditions with the
overall objective of ensuring maximum stakeholder benefit from the retention of a high quality
Board and executive team. Currently remuneration is paid in the form of cash remuneration,
superannuation contributions and share options where applicable. The Company paid no bonuses
during the financial year ended 30 June 2006.
Directors and executives have the opportunity to qualify for participation in the Company Share
Option Plan. The issue of options under this plan is at the discretion of the Board and is not currently
based on Company performance. Options are used by the Company as a non-cash form of
remuneration and have the objective of aligning employee interests with the objective of increasing
shareholder wealth. Any issue of options under the plan to Directors would be subject to shareholder
approval.
The Joint Managing Directors, Mr. Constantine Scrinis and Mr. Constantinos Liosatos are employed
under contract. The current employment contracts commenced on 1 November 2004 and terminate
on 31 October 2006, at which time the Group may chose to commence negotiation to enter into a
new employment contract with Mr. Constantine Scrinis and Mr. Constantinos Liosatos. The Joint
Managing Directors received a total remuneration each of $200,000 during the financial year. The
total remuneration for each Joint Managing Director was increased to $250,000 per annum following
a review at June 2006.
65
Traffic Technologies Limited and Controlled Entities
Notes to the Financial Statements
For the year ended 30 June 2006
Each executive has an employment or contractor agreement with notice periods varying between
seven days and one month.
(ii) Remuneration of Directors and Executives
Short-term
Benefits
Post-employment
Benefits
Fixed
Remuneration
$
Superannuation
$
Share-based Payments
Number of
Options issued
during the
year
$
Value of
Options issued
during the year
$
Directors
2006
Mr. Sam Kavourakis Non-Exec Chairman
Mr. Con Scrinis
Joint Managing
Mr. Con Liosatos
Joint Managing
Mr. Alan Brown
Non Executive
Mr. Cary Stynes
Non Executive
Dr. Richard Gregson Non Executive
Mr. Rajeev Dhawan Alternate
Total
2005
Mr. Sam Kavourakis Non-Exec Chairman
Mr. Con Scrinis
Joint Managing
Mr. Con Liosatos
Joint Managing
Mr. Alan Brown
Non Executive
Mr. Cary Stynes
Non Executive
Total
50,000
200,000
200,000
35,000
35,000
14,533
-
534,533
50,000
137,500
137,500
35,000
35,000
395,000
6,750
-
-
-
-
-
-
1,500,000
3,000,000
3,000,000
900,000
900,000
900,000
-
Total
$
97,651
316,355
316,355
59,541
59,541
39,074
-
-
40,901 42%
116,355 37%
116,355 37%
24,541 41%
24,541 41%
24,541 63%
6,750
10,200,000
347,234 39%
888,517
4,500
-
-
-
-
4,500
-
-
-
-
-
-
-
-
-
-
-
-
54,500
137,500
137,500
35,000
35,000
399,500
Of total Directors’ remuneration, $Nil (2005: $260,000) was not paid to the Directors during the
financial year ended 30 June 2006 and has been accrued.
The percentage value of each person’s remuneration that consists of options is shown in italics.
66
Traffic Technologies Limited and Controlled Entities
Notes to the Financial Statements
For the year ended 30 June 2006
Details of the nature and amount of each element of the emoluments of the Executives of the
consolidated entity for the financial year ended 30 June 2006 are as follows:
Short-term
Benefits
Post-employment
Benefits
Share-based Payments
Fixed
Remuneration
$
Superannuation
$
67,500
143,211
42,883
28,437
59,000
341,031
81,524
87,445
35,000
203,969
-
-
3,444
2,813
4,462
10,719
7,337
-
-
7,337
Number of
Options
issued
during the
year
$
1,500,000
-
300,000
-
-
1,800,000
Value of
Options issued
during the year
$
Fixed
Remun-
eration
$
-
-
-
-
-
-
67,500
143,211
46,327
31,250
63,462
351,750
-
200,000
300,000
500,000
-
88,861
18,927 18% 106,372
28,391 45%
63,391
47,318 18% 258,624
Executives
2006
Mr. Andrew Harris Chief Financial Officer
Mr. James Hopping Divisional Manager
Mr. Stephen O'Dwyer Divisional Manager
Divisional Manager
Mr. Ron Hunt
Mr. Peter Crafter
Company Secretary
Total
2005
Mr. Geoff Burke - Fmr TSA General Mgr
Mr. James Hopping - TSA General Mgr
Mr. Peter Crafter - Company Secretary
Total
The percentage value of each person’s remuneration that consists of options is shown in italics.
c) Remuneration options: granted and vested during the year
(i) Directors remuneration
During the year ended 30 June 2006 options were granted as equity compensation benefits to
directors as set out below. The options were issued at no cash consideration. Each option entitles
the holder to subscribe for one fully paid ordinary share in the entity. The issue of options to non-
executive directors was not based on specified performance criteria. The vesting of options to
executive directors is subject to performance criteria.
Mr Samuel Kavourakis
On 21 February 2006 options were granted to Mr Kavourakis on the following terms:
(cid:131)
(cid:131)
(cid:131)
500,000 options exercisable at $0.30 (30 cents) per share vesting on 1 July 2006, expiring
on 31 December 2008;
500,000 options exercisable at $0.40 (40 cents) per share vesting on 1 July 2007, expiring
on 31 December 2009; and
500,000 options exercisable at $0.50 (50 cents) per share vesting on 1 July 2008, expiring
on 31 December 2010.
67
Traffic Technologies Limited and Controlled Entities
Notes to the Financial Statements
For the year ended 30 June 2006
Mr Alan Brown
On 21 February 2006 options were granted to Mr Brown on the following terms:
(cid:131)
(cid:131)
300,000 options exercisable at $0.30 (30 cents) per share vesting on 1 July 2006, expiring
on 31 December 2008;
300,000 options exercisable at $0.40 (40 cents) per share vesting on 1 July 2007, expiring
on 31 December 2009; and
-
300,000 options exercisable at $0.50 (50 cents) per share vesting on 1 July 2008, expiring
on 31 December 2010.
Mr Cary Stynes
On 21 February 2006 options were granted to Mr Stynes on the following terms:
(cid:131)
(cid:131)
(cid:131)
300,000 options exercisable at $0.30 (30 cents) per share vesting on 1 July 2006, expiring
on 31 December 2008;
300,000 options exercisable at $0.40 (40 cents) per share vesting on 1 July 2007, expiring
on 31 December 2009; and
300,000 options exercisable at $0.50 (50 cents) per share vesting on 1 July 2008, expiring
on 31 December 2010.
Dr. Richard Gregson
On 21 February 2006 options were granted to Dr. Gregson on the following terms:
(cid:131)
(cid:131)
(cid:131)
300,000 options exercisable at $0.30 (30 cents) per share vesting on 1 July 2006, expiring
on 31 December 2008;
300,000 options exercisable at $0.40 (40 cents) per share vesting on 1 July 2007, expiring
on 31 December 2009; and
300,000 options exercisable at $0.50 (50 cents) per share vesting on 1 July 2008, expiring
on 31 December 2010.
Mr Constantine Scrinis
On 12 December 2005 options were granted to Mr. Scrinis on the following terms subject to
performance criteria:
(cid:131)
(cid:131)
(cid:131)
2,000,000 options exercisable at $0.30 (30 cents) per share vesting on 1 July 2006, expiring
on 31 December 2008;
2,000,000 options exercisable at $0.40 (40 cents) per share vesting on 1 July 2007, expiring
on 31 December 2009; and
2,000,000 options exercisable at $0.50 (50 cents) per share vesting on 1 July 2008, expiring
on 31 December 2010.
68
Traffic Technologies Limited and Controlled Entities
Notes to the Financial Statements
For the year ended 30 June 2006
Mr Constantinos Liosatos
On 12 December 2005 options were granted to Mr. Liosatos on the following terms subject to
performance criteria:
(cid:131)
(cid:131)
(cid:131)
2,000,000 options exercisable at $0.30 (30 cents) per share vesting on 1 July 2006, expiring
on 31 December 2008;
2,000,000 options exercisable at $0.40 (40 cents) per share vesting on 1 July 2007, expiring
on 31 December 2009; and
2,000,000 options exercisable at $0.50 (50 cents) per share vesting on 1 July 2008, expiring
on 31 December 2010.
During the year ended 30 June 2005 no options were granted to directors
(ii) Executive remuneration
During the year ended 30 June 2006 options were granted as equity compensation benefits to
executives as set out below. The options were issued at no cash consideration. Each option entitles
the holder to subscribe for one fully paid ordinary share in the entity. The vesting of options to
executives is subject to performance criteria.
Mr. Andrew Harris
On 29 June 2006 options were granted to Mr. Harris on the following terms subject to performance
criteria:
(cid:131)
(cid:131)
(cid:131)
500,000 options exercisable at $0.30 (30 cents) per share vesting on 1 July 2006, expiring
on 31 December 2008;
500,000 options exercisable at $0.40 (40 cents) per share vesting on 1 July 2007, expiring
on 31 December 2009; and
500,000 options exercisable at $0.50 (50 cents) per share vesting on 1 July 2008, expiring
on 31 December 2010.
Mr. Stephen O’Dwyer
On 29 June 2006 options were granted to Mr. O’Dwyer on the following terms subject to
performance criteria:
(cid:131)
(cid:131)
(cid:131)
100,000 options exercisable at $0.30 (30 cents) per share vesting on 1 July 2006, expiring
on 31 December 2008;
100,000 options exercisable at $0.40 (40 cents) per share vesting on 1 July 2007, expiring
on 31 December 2009; and
100,000 options exercisable at $0.50 (50 cents) per share vesting on 1 July 2008, expiring
on 31 December 2010.
During the year ended 30 June 2005 options were granted as equity compensation benefits to
executives as set out below. The options were issued at no cash consideration. Each option entitles
the holder to subscribe for one fully paid ordinary share in the entity. The issue of options was not
based on specified performance criteria.
69
Traffic Technologies Limited and Controlled Entities
Notes to the Financial Statements
For the year ended 30 June 2006
Mr Peter Crafter
(cid:131) On 22 April 2005, 300,000 options were granted to Mr. Crafter exercisable at $0.20 (20
cents), expiring on 30 January 2009. The options vested upon issue.
Mr. James Hopping
(cid:131) On 22 April 2005, 200,000 options were granted to Mr. Hopping exercisable at $0.20 (20
cents), expiring on 30 January 2009. The options vested upon issue.
d) Shares issued on exercise of remuneration options
No shares have been issued as a result of the exercise of remuneration options.
e) Option holdings of Directors and Executives
Balance at beginning
of period
1 July 2005
Number of
options
Granted
as
remuneration
Number of
options
Balance at end
of period
30 June 2006
Number of
options
Vested
at
30 June 2006
Number of
options
500,000
300,000
300,000
300,000
300,000
-
1,500,000
3,000,000
3,000,000
900,000
900,000
900,000
2,000,000
3,300,000
3,300,000
1,200,000
1,200,000
900,000
500,000
300,000
300,000
300,000
300,000
-
Directors
Mr. Samuel Kavourakis
Mr. Constantine Scrinis
Mr. Constantinos Liosatos
Mr. Alan Brown
Mr. Cary Stynes
Mr. Richard Gregson
Total
1,700,000
10,200,000
11,900,000
1,700,000
Executives
Mr. Peter Crafter
Mr. James Hopping
Mr. Andrew Harris
Mr. Stephen O'Dwyer
300,000
200,000
-
-
-
-
1,500,000
300,000
300,000
200,000
1,500,000
300,000
300,000
200,000
-
-
Total
500,000
1,800,000
2,300,000
500,000
Fair value of options
The basis on which the fair value of each option has been valued is described in note 17.
70
Traffic Technologies Limited and Controlled Entities
Notes to the Financial Statements
For the year ended 30 June 2006
f)
Shareholdings of Directors and Executives
Balance at
1 July 2005
$
Purchased
during year
$
Issued during
year
$
Sold during
year
$
Balance at
30 June 2006
$
Directors
Mr. Samuel Kavourakis
Mr. Constantine Scrinis
Mr. Constantinos Liosatos
Mr. Alan Brown
Mr. Cary Stynes
Total
Executives
Mr. Peter Crafter
Mr. James Hopping
Mr. Stephen O'Dwyer
Mr. Ron Hunt
Mr. Andrew Harris
Total
811,101
3,543,945
3,643,945
997,101
375,000
320,000
320,000
320,000
320,000
20,000
9,371,092
1,300,000
10,000
9,300
102,000
-
50,000
171,300
-
4,000
-
-
20,000
24,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,131,101
3,863,945
3,963,945
1,317,101
395,000
10,671,092
10,000
13,300
102,000
-
70,000
195,300
g) Loans to Directors and Executives
There were no loans made to Directors or Executives during the financial year and none are outstanding as at
the date of this report.
71
Traffic Technologies Limited and Controlled Entities
Notes to the Financial Statements
For the year ended 30 June 2006
27. Segment Information
Year ended 30 June 2006
Revenue
Sales to external customers
Inter-segment sales
Total segment revenue
Inter-segment elimination
Total consolidated revenue
Result
Segment results before tax and finance costs
Finance costs
Profit/(loss) before income tax
Income tax expense
Net profit/(loss) for the year
Assets and Liabilities
Segment assets
Segment liabilities
Other segment information
Depreciation
Amortisation
Share based payments
Total non-cash expenses
Year ended 30 June 2005
Revenue
Sales to external customers
Inter-segment sales
Total segment revenue
Inter-segment elimination
Total consolidated revenue
Result
Segment results before tax and finance costs
Finance costs
Profit/(loss) before income tax
Income tax expense
Net profit/(loss) for the year
Assets and liabilities
Segment assets
Segment liabilities
Other segment information
Depreciation
Amortisation
Share based payments
Total non-cash expenses
Traffic
Management
Traffic Signs
Signals &
Hardware
Asset
Management
Unallocated
Total
33,112,757
-
33,112,757
23,744,979
-
23,744,979
528,783
172,277
701,060
505,694
-
505,694
41,183
1,632,871
1,674,054
2,129,770
(428,438)
(173,123)
75,377
(1,755,504)
57,933,396
1,805,148
59,738,544
(1,805,148)
57,933,396
(151,918)
(761,378)
(913,296)
-
(913,296)
22,751,570
11,199,816
12,852,432
9,925,892
1,962,743
544,881
243,098
167,302
8,144,550
2,601,546
45,954,393
24,439,437
1,027,744
-
-
1,027,744
274,179
2,324
-
276,503
15,069
-
-
15,069
22,201
-
-
22,201
6,491
-
426,891
433,382
1,345,684
2,324
426,891
1,774,899
19,300,742
-
19,300,742
-
19,300,742
(191,384)
(418,196)
(609,580)
-
(609,580)
14,802,517
8,924,294
532,451
655
79,388
612,494
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
19,300,742
-
19,300,742
-
19,300,742
(191,384)
(418,196)
(609,580)
-
(609,580)
14,802,517
8,924,294
532,451
655
79,388
612,494
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
72
Traffic Technologies Limited and Controlled Entities
Notes to the Financial Statements
For the year ended 30 June 2006
28. Transition to AIFRS
Consolidated
(a) At the date of transition to AIFRS – 1 July 2004
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventory
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets
Total non-current assets
TOTAL ASSETS
LIABILITIES
Current liabilities
Trade and other payables
Provisions
Total current liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Reserves
Accumulated losses
TOTAL EQUITY
AGAAP Adjustment
$
$
40,221
132,682
112,051
284,954
39,833
630,152
669,985
-
-
-
-
23,024
23,024
AIFRS
$
40,221
132,682
112,051
284,954
39,833
653,176
693,009
954,939
23,024
977,963
922,559
1,703
924,262
924,262
-
-
-
-
922,559
1,703
924,262
924,262
30,677
23,024
53,701
35,324,475
-
(35,293,798)
30,677
-
66,300
(43,276)
23,024
35,324,475
66,300
(35,337,074)
53,701
73
Traffic Technologies Limited and Controlled Entities
Notes to the Financial Statements
For the year ended 30 June 2006
b) At the end of the last reporting date under AGAAP – 30 June 2005
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventory
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets
Investments
Total non-current assets
TOTAL ASSETS
LIABILITIES
Current liabilities
Trade and other payables
Current portion of long-term
borrowings
Provisions
Total current liabilities
Non-current liabilities
Provisions
Long-term borrowings
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Reserves
Accumulated losses
TOTAL EQUITY
AGAAP Adjustment
$
$
1,040,550
4,224,415
91,471
5,356,436
3,281,473
5,205,193
529,581
9,016,247
-
-
-
-
429,834
429,834
AIFRS
$
1,040,550
4,224,415
91,471
5,356,436
3,281,473
5,635,027
529,581
9,446,081
14,372,683
429,834
14,802,517
3,028,385
4,590,542
458,527
8,077,454
27,134
819,706
846,840
8,924,294
-
-
-
-
-
-
-
3,028,385
4,590,542
458,527
8,077,454
27,134
819,706
846,840
8,924,294
5,448,389
429,834
5,878,223
41,679,189
-
(36,230,800)
5,448,389
-
145,688
284,146
429,834
41,679,189
145,688
(35,946,654)
5,878,223
74
Traffic Technologies Limited and Controlled Entities
Notes to the Financial Statements
For the year ended 30 June 2006
c) Reconciliation of profit for the year ended 30 June 2005
Revenue
Cost of sales
AGAAP Adjustment
$
$
AIFRS
$
19,300,742
(14,316,538)
-
-
19,300,742
(14,316,538)
Employee benefits expense (indirect)
(2,915,044)
(79,388)
(2,994,432)
Administrative expenses
(1,648,050)
-
(1,648,050)
Depreciation and amortisation expenses
(939,916)
406,810
(533,106)
Finance costs
(418,196)
-
(418,196)
Loss before income tax
Income tax expense
Net loss for the year
(937,002)
327,422
(609,580)
-
-
-
(937,002)
327,422
(609,580)
75
Traffic Technologies Limited and Controlled Entities
Notes to the Financial Statements
For the year ended 30 June 2006
29. Transition to AIFRS
Company
(a) At the date of transition to AIFRS – 1 July 2004
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventory
Total current assets
Non-current assets
Property, plant & equipment
Intangible assets
Investments
Total non-current assets
Total Assets
Liabilities
Current liabilities
Trade and other payables
Provisions
Total current liabilities
Total Liabilities
Net Assets
Equity
Contributed equity
Reserves
Accumulated losses
Total Equity
AGAAP
$
Adjustment
$
AIFRS
$
7,382
11,976
-
19,358
-
-
500,000
500,000
519,358
300,758
-
300,758
300,758
218,600
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7,382
11,976
-
19,358
-
-
500,000
500,000
519,358
300,758
-
300,758
300,758
218,600
35,324,475
-
(35,105,875)
-
66,300
(66,300)
35,324,475
66,300
(35,172,175)
218,600
-
218,600
76
Traffic Technologies Limited and Controlled Entities
Notes to the Financial Statements
For the year ended 30 June 2006
b) At the end of the last reporting date under AGAAP – 30 June 2005
AGAAP
$
Adjustment
$
AIFRS
$
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventory
Total current assets
Non-current assets
Property, plant & equipment
Intangible assets
Investments
Total non-current assets
Total Assets
Liabilities
Current liabilities
Trade and other payables
Current portion of long-term borrowings
Provisions
Total current liabilities
Non-current liabilities
Provisions
Long-term borrowings
Total non-current liabilities
Total Liabilities
Net Assets
Equity
Contributed equity
Reserves
Accumulated losses
Total Equity
102,343
6,675,865
-
6,778,208
-
-
1,992,238
1,992,238
8,770,446
963,275
1,000,000
-
1,963,275
-
-
-
1,963,275
6,807,171
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
102,343
6,675,865
-
6,778,208
-
-
1,992,238
1,992,238
8,770,446
963,275
1,000,000
-
1,963,275
-
-
-
1,963,275
6,807,171
41,679,189
-
(34,872,018)
-
118,525
(118,525)
41,679,189
118,525
(34,990,543)
6,807,171
-
6,807,171
77
Traffic Technologies Limited and Controlled Entities
Notes to the Financial Statements
For the year ended 30 June 2006
c) Reconciliation of profit for the year ended 30 June 2005
Revenue
Cost of sales
AGAAP
$
Adjustment
$
AIFRS
$
1,019,358
-
-
-
1,019,358
-
Employee benefits expense (indirect)
(359,123)
(52,225)
(411,348)
Administrative expenses
Depreciation and amortisation expenses
Finance costs
Profit before income tax
Income tax expense
Net profit for the year
(425,316)
-
(1,062)
-
-
-
(425,316)
-
(1,062)
233,857
(52,225)
181,632
-
-
-
233,857
(52,225)
181,632
78
Traffic Technologies Limited and Controlled Entities
Notes to the Financial Statements
For the year ended 30 June 2006
30. First Time Adoption of AIFRS - Reconciliation of Cash Flow Statement as Reported Under AGAAP to
Cash Flows Under AIFRS
The adoption of AIFRS has not resulted in any material adjustments to the cash flow statement.
31. First Time Adoption of AIFRS – Explanation of Changes in Accounting Policy Arising on First-Time
Adoption of AIFRS
For all periods up to and including the financial year ended 30 June 2005, the Group prepared its financial
statements in accordance with Australian generally accepted accounting practice (AGAAP). These financial
statements for the financial year ended 30 June 2006 are the first that the Group is required to prepare in
accordance with Australian equivalents to International Financial Reporting Standards (AIFRS).
Accordingly, the Group has prepared financial statements that comply with AIFRS applicable for periods
beginning on or after 1 January 2005 and the significant accounting policies meeting those requirements are
described in note 1. In preparing these financial statements, the Group has started from an opening balance
sheet as at 1 July 2004, the Group’s date of transition to AIFRS, and made those changes in accounting policies
and other restatements required by AASB 1 First-time adoption of AIFRS.
Changes in Accounting Policy Arising on First-Time Adoption of AIFRS
This note explains the principal adjustments made by the Group in restating its AGAAP balance sheet as at 1
July 2004 and its previously published AGAAP financial statements for the year ended 30 June 2005.
Set out below are the areas impacted upon adoption of AIFRS:
a) Share based payments
Under AASB 2 Share based Payments, the Company is required to determine the fair value of equity
settled transactions and recognise an expense in the Income Statement. Share-based payments to directors
and other employees should also be expensed under AIFRS.
On first-time adoption of AIFRS retained earnings at 1 July 2004 and reported results for the financial
year to 30 June 2005 have been adjusted for all share-based payments granted after 7 November 2002,
which did not vest prior to 1 January 2005.
b) Goodwill
Goodwill on consolidation has been recalculated to derecognise intangible assets acquired that do not meet
the identifiability criteria under AIFRS. In accordance with AASB 1, amortisation of goodwill ceased on
first-time adoption of AIFRS at 1 July 2004. The carrying amount of goodwill as previously reported
under AGAAP at 30 June 2004 is subject to impairment testing from that date. On adoption of AIFRS,
reported results for the financial year to 30 June 2005 have been adjusted for amortisation charges from 1
July 2004. Amortisation charges prior to 30 June 2004 may not be reversed under the first-time adoption
provisions.
79
Traffic Technologies Limited and Controlled Entities
Notes to the Financial Statements
For the year ended 30 June 2006
c)
Impairment of assets
Under AIFRS the recoverable amount test under the previous AGAAP is replaced by impairment testing
whereby the recoverable amount is determined as the higher of fair value less costs to sell and value in
use. Value in use incorporates the use of discounted cash flows.
On adoption of AIFRS, goodwill is not amortised but is tested annually for impairment, or more
frequently if events or changes in circumstances indicate that it might be impaired. Goodwill is carried at
cost less accumulated impairment losses.
d)
Income taxes
Under AIFRS a balance sheet approach has been adopted under which temporary differences are identified
for each asset and liability rather than accounting for the effect of timing and permanent differences
between taxable and accounting profit.
e) Research and Development Intangible asset
Under AASB 1038 Intangible Assets the Company is not permitted to recognise applied research cost as
an intangible asset.
On first time adoption of AIFRS retained earning at 1 July 2004 and reported results for the financial year
to 30 June 2005 have been adjusted to reverse the recognition of the research and development intangible
asset and all amortisation arising from the prior recognition of the asset.
80
Traffic Technologies Limited
Directors’ Declaration
For the year ended 30 June 2006
Directors’ Declaration
In accordance with a resolution of the Directors of the Company, the Directors declare that:
1.
In the opinion of the Directors:
(a) The financial statements and notes of the Company and of the consolidated entity are in accordance
with the Corporations Act 2001, including:
(i)
(ii)
giving a true and fair view of the Company’s and the consolidated entity’s financial position as
at 30 June 2006 and of their performance for the financial year ended on that date; and
complying with Accounting Standards in Australia and the Corporations Regulations 2001;
and
(b)
In the opinion of the Directors, as at the date of this declaration, there are reasonable grounds to
believe that the Company will be able to pay its debts as and when they become due and payable.
2. This declaration has been made after receiving the declarations required to be made to the Directors in
accordance with section 295A of the Corporations Act for the financial period ending 30 June 2006.
On behalf of the board
Samuel Kavourakis
Chairman
Melbourne
29 September 2006
81
ASX Additional Information
Additional information required by the Australian Stock Exchange Limited and not shown elsewhere in this report is
as follows.
a) Distribution of Equity Securities
The number of shareholders, by size of holding, in each class of share are:
1
1,001
5,001
10,001
-
-
-
-
1,000
5,000
10,000
100,000
100,001 and over
Holdings less than a marketable parcel
d) Twenty Largest Holders
Ordinary Shares
Number of
Holders
Number of
Shares
2,035
290
193
782
104
3,404
2,035
336,615
901,916
1,689,126
27,939,841
45,543,004
76,410,502
336,615
The names of the twenty largest holders of quoted shares are:
Name
Ordinary Shares
Number
Percentage
Equity Trustees Limited
1. National Nominees Limited
2. Contelite Pty Ltd*
3. Astra Glen Pty Ltd*
4. Mr. Michael Nicolls
5. Dabville Pty Ltd
6.
7. Mr. Samuel Kavourakis + Mrs Toula Kavourakis *
8. Annlew Investments Pty Ltd
9. Hedderwick Pty Ltd
10. Mr. Garry Newman
11. Mr. Alan Brown + Mrs. Paula Brown *
12. ANZ Nominees Limited
13. Bunkers Pty Ltd
14.
15. Warp Pty Ltd
16. Campbell Kitchener Hume & Associates Pty Limited
17. Mr. Michael John De La Haye
18. Mr. John Caldon
19. Austock Brokers Pty Ltd
20. Mr. Roger Nairn
J P Morgan Nominees Australia Limited
6,567,836
3,963,945
3,863,945
1,500,000
1,400,000
1,040,047
820,500
800,000
800,000
800,000
797,000
712,920
703,000
689,655
680,000
580,000
565,000
553,239
500,000
482,889
8.60
5.19
5.06
1.96
1.83
1.36
1.07
1.05
1.05
1.05
1.04
0.93
0.92
0.90
0.89
0.76
0.74
0.72
0.65
0.63
Total
* Associated with Directors.
27,819,976
36.40
82
ASX Additional Information
e) Substantial Shareholders (greater than 5%)
The names of substantial holders who have notified the Company in accordance with section 671B of the
Corporations Act 2001 are:
Ordinary Shareholders
Contelite Pty Ltd
Astra Glen Pty Ltd
Equity Partners Two Pty Ltd
f) Voting Rights
Ordinary Shares
Number
3,963,945
3,863,945
5,837,890
Percentage
5.19%
5.06%
7.64%
All ordinary shares carry one vote per share without restriction.
g) Options
At the date of this report there are 15,000,000 unissued ordinary shares in respect of which options are
outstanding.
There are 11,900,000 options held by directors on the following terms.
1,700,000 options issued to Directors on 30 January 2004, exercisable at $0.20 (20 cents) per share on or
before 30 January 2009.
6,000,000 options issued to executive directors on 12 December 2005 the terms of which are as follows:
(cid:131)
(cid:131)
(cid:131)
2,000,000 options exercisable at $0.30 (30 cents) per share vesting on 1 July 2006, expiring on 31
December 2008;
2,000,000 at $0.40 (40 cents) per share vesting on 1 July 2007, expiring on 31 December 2009; and
2,000,000 options exercisable at $0.50 (50 cents) per share vesting on 1 July 2008, expiring on 31
December 2010.
4,200,000 options issued to non-executive directors on 21 February 2006 the terms of which are as
follows:
(cid:131)
(cid:131)
(cid:131)
1,400,000 options exercisable at $0.30 (30 cents) per share vesting on 1 July 2006, expiring on 31
December 2008;
1,400,000 at $0.40 (40 cents) per share vesting on 1 July 2007, expiring on 31 December 2009; and
1,400,000 options exercisable at $0.50 (50 cents) per share vesting on 1 July 2008, expiring on 31
December 2010.
There are 2,300,000 options held by executives of the Company exercisable on the following terms:
500,000 options issued to executives on 22 April 2005 exercisable at $0.20 (20 cents) per share on or
before 30 January 2009.
1,800,000 options issued to executives on 29 June 2006 the terms of which are as follows:
(cid:131)
(cid:131)
(cid:131)
600,000 options exercisable at $0.30 (30 cents) per share vesting on 1 July 2006, expiring on 31
December 2008;
600,000 at $0.40 (40 cents) per share vesting on 1 July 2007, expiring on 31 December 2009; and
600,000 options exercisable at $0.50 (50 cents) per share vesting on 1 July 2008, expiring on 31
December 2010.
83
TRAFFIC TECHNOLOGIES LIMITED
ABN 21 080 415 407
INDEPENDENT AUDIT REPORT
TO THE MEMBERS OF
TRAFFIC TECHNOLOGIES LIMITED
Scope
We have audited the financial report of Traffic Technologies Limited and controlled entities for the financial year
ended 30 June 2006 comprising the Directors' Declaration, Income Statement, Balance Sheet, Statement of Changes
in Equity, Statement of Cash Flows and notes to the financial statements.
The Company's directors are responsible for the financial report. We have conducted an independent audit of this
financial report in order to express an opinion on it to the members of the Company.
Our audit has been conducted in accordance with Australian Auditing Standards to provide reasonable assurance
whether the financial report is free of material misstatement. Our procedures included examination, on a test basis, of
evidence supporting the amounts and other disclosures in the financial report, and the evaluation of accounting
policies and significant accounting estimates. These procedures have been undertaken to form an opinion whether, in
all material respects, the financial report is presented fairly in accordance with Accounting Standards and other
mandatory professional reporting requirements in Australia and the Corporations Act 2001 so as to present a view
which is consistent with our understanding of the Company's financial position and performance as represented by
the results of their operations and their cash flows.
The audit opinion expressed in this report has been formed on the above basis.
Audit Opinion
In our opinion, the financial report of Traffic Technologies Limited is in accordance with:
(a)
the Corporations Act 2001, including:
(i)
giving a true and fair view of the Company's and Consolidated Entity’s financial position as at 30
June 2006 and of there performance for the financial year ended on that date; and
(ii)
complying with Accounting Standards in Australia and the Corporations Regulations 2001; and
(b)
other mandatory financial reporting requirements in Australia.
PITCHER PARTNERS
S P CATLIN
Partner
Dated at Melbourne on 29 September 2006
84