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Railcare Group 2019
ANNUAL
R E POR T
2019
Traffic Technologies Ltd
Traffic Technologies Ltd
Traffic Technologies Ltd
31 Brisbane Street
31 Brisbane Street
31 Brisbane Street
Eltham 3095
Eltham 3095
Eltham 3095
Victoria, Australia
Victoria, Australia
Victoria, Australia
P: +61 3 9430 0222
P: +61 3 9430 0222
F: +61 3 9430 0244
F: +61 3 9430 0244
P: +61 3 9430 0222
E: tt@trafficltd.com.au
E: tt@trafficltd.com.au
F: +61 3 9430 0244
E: tt@trafficltd.com.au
trafficltd.com.au
trafficltd.com.au
trafficltd.com.au
TRAFFIC TECHNOLOGIES LTD
ABN 21 080 415 407
AND CONTROLLED ENTITIES
ANNUAL FINANCIAL REPORT
FOR THE YEAR ENDED 30 JUNE 2019
ABN 21 080 415 407
Traffic Technologies Ltd.
address. 31 Brisbane Street, Eltham Victoria 3095 Australia
PO Box 828, Eltham Victoria 3095 Australia
phone. + 61 3 9430 0222 facsimile. + 61 3 9430 0244
web. www.trafficltd.com.au
Traffic Technologies Ltd and Controlled Entities
Chairman’s Letter
Dear Shareholder,
I have pleasure in enclosing the Annual Report for Traffic Technologies Ltd for the financial year ended 30 June
2019.
The Group experienced slower than expected revenue and profits in the domestic market in the 2019 financial
year. This was mainly due to delays in the timing of government expenditure caused by political uncertainty
resulting from the federal election and state elections in Victoria and New South Wales. Trading conditions have
also been affected by the weak economic outlook and the tightening of lending criteria by the banks. As a result
there were delays on a number of projects which had been expected to have been completed in the 2019 financial
year and which are now expected to be completed in 2019-20.
The Group is however confident about its prospects for the year ahead, underpinned by a number of significant
projects involving the roll-out of our “Smart City” platform, our LED street, road and tunnel lighting installations,
term maintenance contracts as well as further export sales to a range of overseas markets including the UK, South
America, Middle East and Asia. The increase in multi-year term contracts with power, road authorities and
municipalities is expected to underpin our earnings base in future years.
The Group’s diversification program has transformed the business by de-risking its revenue through expanding
into “Smart City” platforms, “Internet of Things” (IoT) systems and maintenance and installation contracts along
with securing long term supply contracts across the country. The roll-out of the Group’s proprietary “Smart City”
software “TST” across the east coast of Australia is enabling road authorities, councils and power companies to
fully utilise and maintain critical assets in real time. The Group is also continuing to benefit from the supply of
LED road and street lights across the country.
The Group is currently assessing a number of acquisition opportunities, which offer the opportunity to consolidate
our position in key markets, as well as a potential refinancing of the Group’s debt. This will strengthen the balance
sheet for the years ahead. Further announcements will be made in due course as these plans are finalised.
I would like to take this opportunity to thank shareholders for their support of the Group. Our Board and
management are committed to improving shareholder value and believe that the Group is in a strong position to
take advantage of the opportunities in the “Smart Cities” area with increasing focus on the use of technology to
manage traffic flows and associated services. Along with my fellow Directors, I thank you for your continued
support.
Garry Lowrey
Chairman
ABN 21 080 415 407
Traffic Technologies Ltd.`
address. 31 Brisbane Street, Eltham Victoria 3095 Australia
PO Box 828, Eltham Victoria 3095 Australia
phone. + 61 3 9430 0222 facsimile. + 61 3 9430 0244
web. www.trafficltd.com.au
Traffic Technologies Ltd and Controlled Entities
Managing Director’s Operating and Financial Review
Dear Shareholder,
The Group has reported the following result for the financial year ended 30 June 2019:
Year to
30 June 2019
$’m
Underlying+
Year to
30 June 2018
$’m
Reported
Year To
30 June 2018
$’m
Sales revenue
Earnings before Interest, Tax, Depreciation and
Amortisation (EBITDA)
Earnings before Interest and Tax (EBIT)
Net Profit After Tax (NPAT)
48.3
4.3
2.8
1.3
56.7
5.0
3.2
1.5
56.7
10.2
8.4
6.1
+ The result for the previous financial year included a gain on repayment of debt ($7.9m) and a write-down of inventory
($2.5m). To enable a comparison of the trading result, the “underlying” trading result for the previous financial year,
excluding these items, has been included in the above table.
Comparing the underlying trading result for the previous financial year excluding the gain on repayment of debt
and a write-down of inventory, trading revenue was $48.3m, compared to $56.7m in the previous financial year
and EBITDA was $4.3m, compared to underlying EBITDA of $5.0m, whilst NPAT was $1.3m, compared to
underlying NPAT of $1.5m in 2018.
Depreciation and amortisation expense was $1.5m (2018 $1.7m), mainly comprising amortisation of intangible
assets. Finance costs were $1.4m (2018: $1.5m). Tax expense was $0.2m (2018: $0.8m) which comprised
deferred tax movements in the year. The Group has sufficient R&D tax credits to cover the estimated tax liability
for the year.
Net assets were $21.2m at 30 June 2019 compared to $19.9m at 30 June 2018, reflecting the contribution of net
profit after tax for the year. Net debt was $10.1m at 30 June 2019, compared to $9.3m at 30 June 2018.
Net operating cash inflows were $1.5m for the year (2018: inflow $2.3m), reflecting the Group’s trading operations
during the year. Net investing cash outflow was $2.3m (2018: outflow $2.4m), including investment in R&D to
further expand and develop the Group’s “Smart City Software” and product portfolio. Net financing cash outflow
was $0.1m (2018: inflow $3.6m); the previous financial year included the net repayment of debt and the proceeds
of the rights issue.
The lower than expected revenue and profits in the 2019 financial year were due to delays in government
expenditure caused by the federal election and state elections in Victoria and New South Wales and diversion of
government expenditure to other priorities. The weak economic outlook and restrictions on bank lending have
also impacted the domestic markets in which the Group operates. These and other factors contributed to delays in
decisions on a number of government projects and term contracts which were expected to contribute in the 2019
financial year. A number of these contracts have now been awarded and commenced and are likely to be completed
in 2019 and beyond.
The Group continues to be a major supplier of traffic signals and road signs to all states and territories in the
domestic market, with the ability to service the requirements of all state road authorities and the largest road
projects. The Group’s diversification program has transformed the business by de-risking revenue through
expanding into “Smart City” platforms with a growing annuity revenue stream from expanding SaaS activities and
the increase in multi-year term supply contracts with power, road authorities and municipalities. These are
expected to underpin the Group’s earnings base for the years ahead.
The continued roll-out of the Group’s proprietary “Smart City” software “TST” is enabling road authorities,
councils and power companies to fully utilise and maintain critical assets in real time.
The Group is also continuing to benefit from the roll-out of LED street lights across the country. The Group’s
lighting products are well positioned for further growth, having secured approvals, long term supply contracts and
orders from state and local government agencies, power companies and contractors. The Group’s range of current
and second generation “Smart City” ready LED road lights are significantly more energy efficient than
conventional road lights and represent an attractive opportunity for state road authorities, local councils and other
customers to make significant savings in their power bills and maintenance costs in a time of rising electricity
prices as well as being digitally ready for IoT devices.
The Group continues to develop its export markets, including the UK, New Zealand, Asia, the Middle East and
South America, with “TST”, our “Smart City” platform, and the Group’s traffic controllers continuing to enjoying
success. Significant export orders have recently come from New Zealand, Singapore, Ecuador, China, Qatar and
Mexico. The Group has also identified opportunities to supply its state-of-the-art lighting control systems and
“Smart City” software to overseas markets in London, Hong Kong, Singapore and Peru.
We believe the outlook for the Group is positive taking into consideration the solid outlook in infrastructure
expenditure by governments across the country and the Group’s diversification program into “Smart Cities”
technology with IoT, new state-of-the-art products introduced and the benefit of significant long term customer
supply contracts which are expected to benefit the Group in the years ahead.
We are pleased to have your ongoing support and believe that we are well placed to achieve continued profitability
in the year ahead.
Con Liosatos
Managing Director
CORPORATE INFORMATION
This annual report covers both Traffic Technologies Ltd (ABN 21 080 415 407) 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 operating and financial review
in the Directors’ Report.
Directors
Mr. Garry Lowrey
Mr. Con Liosatos
Mr. Mark Hardgrave
Company Secretary & Chief Financial Officer
Mr. Peter Crafter
Registered Office & Principal Place of Business
Traffic Technologies Ltd
31 Brisbane Street
Eltham VIC 3095
Share Register
Computershare Investor Services Pty Limited
Yarra Falls, 452 Johnston Street
Abbotsford VIC 3067
Tel: 1300 850 505
Traffic Technologies Ltd shares are listed on the Australian Securities Exchange (stock code: “TTI”).
Lawyers
K&L Gates
Level 25
525 Collins Street
Melbourne VIC 3000
Bankers
Westpac Banking Corporation
Level 6
150 Collins Street
Melbourne VIC 3000
Auditors
ShineWing Australia
Level 10
530 Collins Street
Melbourne VIC 3000
Traffic Technologies Ltd and Controlled Entities
Financial Report for the year ended 30 June 2019
Contents
Directors’ Report
Auditor’s Independence Declaration
Corporate Governance Statement
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Directors’ Declaration
ASX Additional Information
Independent Audit Report
Page No.
1
14
15
16
17
18
19
20
53
54
55
Traffic Technologies Ltd
Directors’ Report
Your Directors submit their report for the year ended 30 June 2019.
DIRECTORS
The names and details of the Company’s Directors in office during the financial year and until the date of this report
are as follows. Directors were in office for the entire period unless otherwise stated.
Name
Mr. Garry P
Lowrey
BBus MAppFin
CA
Mr. Constantinos
L Liosatos
MAICD
Mr. Mark W
Hardgrave
B Com ACA
MAICD
Qualifications, Experience and Special Responsibilities
(Age 57) Independent Non-Executive Chairman. Appointed November 2015.
Mr. Lowrey has over 30 years of experience in a variety of advisory, management and
director roles for both private and public companies. Earlier in his career, he was a Director
of Potter Warburg's Corporate Finance team, specialising in providing capital markets and
mergers and acquisitions advice to small and mid-market companies. Mr. Lowrey was the
Managing Director of Wilson Investment Group, an ASX listed wealth management and
investment group. Mr. Lowrey served as an Executive Director of Shaw and Partners
Limited and was Chairman of Oaktree Group a private retirement village developer and
operator. He is presently a Non-Executive Director of Greenwich Capital Partners, a non-
Executive Director of Argus Property Partners Pty Ltd and Chairman of Credit Repair Pty
Ltd. Mr. Lowrey holds a Bachelor of Business degree from the University of Technology,
Sydney and a Masters of Applied Finance from Macquarie University. He is a chartered
accountant. Mr. Lowrey is a member of the Audit, Risk, Nomination & Remuneration and
Corporate Governance committees. Mr. Lowrey has not served as a Director of any other
listed companies during the three years to June 2019.
(Age 57) Managing Director. Appointed April 2003.
Mr. Liosatos has over 30 years’ experience in the construction industry, including over 25
years in the lighting industry specialising in research and design. He also has 15 years’
experience in the traffic industry. He has been involved with major design and
manufacturing projects for clients such as MCG Lighting, Etihad Stadium, the Melbourne
Sport and Aquatic Centre and the Vodafone Arena. He led the VicRoads LED Signals
Upgrade, Hong Kong Highways Department (Bus and Roadway Interchange) Upgrade and
the WA Main Roads LED Signals Upgrade. Mr. Liosatos has owned and managed a
multinational project lighting company, Moonlighting Pty Ltd. Mr. Liosatos has
qualifications in Mechanical Design and Lighting Engineering. Mr. Liosatos was Chairman
of the ITS World Congress 2016 Sponsorship Committee and is active on Australian
Standards AS 2144 and AS 1158. Mr. Liosatos is the Managing Director of Traffic
Technologies Ltd. Mr. Liosatos was appointed a Director of Traffic Technologies Ltd in
April 2003. Mr. Liosatos is a member of the Risk and Corporate Governance committees.
Mr. Liosatos has not served as a Director of any other listed companies during the three
years to June 2019.
(Age 61) Independent Non-Executive Director. Appointed January 2013.
Mr. Hardgrave has a corporate advisory and investment management background. He is
also a Non-Executive Director of ASX listed companies Wingara AG Limited and Pental
Limited and is a Director of Reclink Australia. His was co-founder and former Joint
Managing Director of M&A Partners, a Melbourne based private investment and corporate
finance group. Mr. Hardgrave was also previously Chief Executive Officer of Bennelong
Group, which specialises in listed equities, property and private equity. Earlier in his career
he worked in senior roles in a number of investment groups including Brencorp Group,
Merrill Lynch and Thorney Investment Group. Mr. Hardgrave holds a Bachelor of
Commerce degree from the University of Queensland. He is a chartered accountant and a
member of the Australian Institute of Company Directors. Mr. Hardgrave is Chairman of
the Audit, Risk, Nomination & Remuneration and Corporate Governance committees.
1
Traffic Technologies Ltd
Directors’ Report
Skills and Experience
The following table shows the skills sets of each of the Board members:
Corporate Governance
Traffic Management & Infrastructure
ASX Listed Companies
Human Resources
Legal
Finance
Commercial
Manufacture/assembly
Government Contracts
Information Technology
Garry
Lowrey
Con
Liosatos
Mark
Hardgrave
Company
Secretary
Mr. Peter K
Crafter
LL.B (Hons.)
MBA FCA CA
MCT FAICD
FCIS FGIA
(Age 62) Company Secretary and Chief Financial Officer. Appointed Company Secretary
March 2004; appointed Chief Financial Officer October 2007.
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 was
appointed Chief Financial Officer and Company Secretary of Traffic Technologies Ltd in
March 2004 and retired as Chief Financial Officer in February 2006. He was reappointed
Chief Financial Officer of Traffic Technologies Ltd in October 2007.
INTEREST IN SHARES
Directors’ interests in the shares of the Company were:
Balance at
1 July 2018
Acquired through
On-Market Trades
Other
Balance at
30 June 2019
7,166,667
31,414,832
3,215,054
10,000
41,806,553
-
642,091
-
-
642,091
-
-
-
-
-
7,166,667
32,056,923
3,215,054
10,000
42,448,644
Directors
Mr. Garry Lowrey
Mr. Con Liosatos
Mr. Mark Hardgrave
Executive
Mr. Peter Crafter
Total
DIVIDENDS
The Directors do not recommend the payment of a dividend for the financial year ended 30 June 2019 (2018: Nil).
2
Traffic Technologies Ltd
Directors’ Report
OPERATING AND FINANCIAL REVIEW
Review of Operations
Traffic Technologies is Australia’s premier traffic solutions company. Established in 2004 and listed on ASX in
2005, the Company’s head office is in Eltham, Victoria with offices in all States of Australia and an office in
England.
The Group specialises in the design, manufacture and installation of traffic signals, traffic controllers, pedestrian
countdown timers, electronic road signs, emergency telephones, road lighting products and “Smart City” control
systems. The Group also supplies a wide range of directional and regulatory traffic signs and traffic control products
to road traffic authorities, municipal councils and construction companies.
The Group’s proprietary “Traffic SmartCity Technology” (TST) platform, developed for the road industry, councils
and power authorities, enables the integration of street lights and other traffic management equipment to a central
control/management system via remote “Internet of Things” (IoT) sensors.
The Group, through its subsidiary, Aldridge Traffic Systems, has been the major participant in the traffic signals
market in Australia for over 50 years where customers are mainly state road authorities or contractors building or
maintaining traffic intersections for state road authorities.
The Group, through its subsidiary, Quick Turn Circuits Pty Ltd (QTC), is involved in the manufacture of traffic
controllers. A traffic controller is an automated device that regulates the sequencing and timing of traffic signals by
monitoring vehicular and pedestrian demands and adjusting to meet these requirements. The controller has the ability
to allow co-ordination of traffic flows between adjacent intersections when connected to a co-ordinated adaptive
traffic system.
The Group is a key supplier to the road signage market across Australia, with customers including state road
authorities, local councils and construction companies. The Group’s signage products are distributed from depots
around Australia with manufacturing focused in Victoria, Western Australia and the Northern Territory.
The Group exports its traffic controllers, traffic signals and associated products such as pedestrian countdown timers
and emergency telephones to an increasing number of international customers.
Material Business Risks
The material business risks faced by the Group that could have a significant impact on the financial prospects of the
Group and how the Group manages these risks include:
•
Changes or delays in Federal or State government expenditure on road infrastructure – the Group maintains
regular contact with state road authorities to ensure that it can plan the resources required for major projects as
far ahead as possible or allow for the deferral of major projects in times of economic slowdown.
• Adverse change in economic conditions affecting demand for the Group’s products or services – the Group
•
•
plans as far ahead as possible to adjust its cost base in times of economic uncertainty.
Technological obsolescence – the Group works closely with road traffic authorities and incurs significant
research and development expenditure to ensure that its products are state-of-the-art and competitive.
Foreign exchange risk - a decrease in the Australian dollar exchange rate can affect import prices: the Group
purchases components from a number of Asian countries denominated in US dollars. Conversely, an increase
in the Australian dollar exchange rate can affect export opportunities: the Group sells its products to a number
of countries around the world. The Group has a foreign exchange exposure through its term loan which is
denominated in US dollars and a forward exchange contract has been taken out to hedge its currency exposure.
• General inflation risk, including labour costs – the Group constantly monitors its cost base and implements cost
savings and operating efficiencies where possible.
3
Traffic Technologies Ltd
Directors’ Report
•
• Availability of financing facilities – the Group is reliant on the continued availability of its financing facilities
in order to conduct its operations. The Group ensures compliance with its facility agreements and negotiates
extensions to its financing facilities when required.
Competition – the Group maintains its competitive position by investing in research and development to ensure
its products are state-of the-art and by ensuring its products are priced competitively.
Cyber security – the Group has been addressing cyber security as part of its risk management strategy in the
light of recent well-publicised breaches and increased risk in this area.
Climate change – the Group is not significantly exposed to climate change issues unless a carbon tax is
reintroduced. A significant number of the Group’s products use LED technology which is energy saving and
reduces greenhouse gas emissions.
•
•
SIGNIFICANT CHANGES IN STATE OF AFFAIRS
There were no significant changes in the nature of the Group’s activities during the year.
SIGNIFICANT EVENTS AFTER BALANCE DATE
Subsequent to balance date there have been no significant events which have affected the operations of the Group.
ENVIRONMENTAL REGULATION AND PERFORMANCE
The Group’s operations are not regulated by any significant environmental regulations under a law of the
Commonwealth or of a state or territory. There have been no significant known breaches of the Group’s compliance
with environmental regulations.
SHARE OPTIONS
As at the date of this report, there were no unissued ordinary shares of the Company under option.
INDEMNIFICATION AND INSURANCE OF DIRECTORS, OFFICERS AND AUDITORS
During the financial year ended 30 June 2019, the Group paid premiums of $88,737 in respect of a Directors’ and
Officers’ insurance policy insuring Directors and Officers in respect of claims which may be brought against them.
The contract of insurance prohibits disclosure of the nature of the liability. The Company has not otherwise, during
or since the end of the financial year, except to the extent permitted by law, indemnified or agreed to indemnify an
officer or auditor of the Company or any related body corporate against a liability incurred as such by an officer or
auditor.
4
Traffic Technologies Ltd
Directors’ Report
REMUNERATION REPORT (AUDITED)
This Remuneration Report for the financial year ended 30 June 2019 outlines non-executive director and executive
remuneration arrangements for Traffic Technologies Ltd (Company) in accordance with the requirements of the
Corporations Act 2001 (Cth) (Corporations Act) and its Regulations.
For the purposes of this report, Key Management Personnel (KMP) of the Company are defined as those persons
having authority and responsibility for planning, directing and controlling all activities of the Company, directly or
indirectly, including any director (whether executive or otherwise) of the Company.
For the purposes of this report, the term ‘executive’ includes the Managing Director and the Chief Financial Officer.
The disclosures in this Remuneration Report have been audited.
1.
Persons covered by this Remuneration Report
This Remuneration Report applies to the following persons.
Non-executive directors
Mr. Garry Lowrey
Independent Non-executive Chairman
Mr. Mark Hardgrave
Independent Non-executive Director
Executives
Mr. Con Liosatos
Managing Director
Mr. Peter Crafter
Chief Financial Officer and Company Secretary
2.
Overview of the Company's remuneration policy
The Company seeks to attract, retain and motivate skilled non-executive directors and executives of the highest
calibre. The Company aims to ensure that the remuneration packages of non-executive directors and executives are
appropriate and reflect a person's duties and responsibilities.
In this regard, the Company has put in place a Nomination & Remuneration Committee which supports and advises
the Board in fulfilling its responsibilities to shareholders. The Nomination & Remuneration Committee is
responsible for ensuring that the Board is appropriately remunerated, structured and comprised of individuals who
are best able to discharge the responsibilities of directors.
The remuneration policy of the Company has been designed to align KMP objectives with shareholder and business
objectives by providing a fixed remuneration component and offering incentives to reward sustainable long-term
performance and shareholder value creation.
KMP or closely related parties of KMP are prohibited from entering into hedge arrangements that would have the
effect of limiting the risk exposure relating to their remuneration.
In accordance with best practice corporate governance, the structure of non-executive director and executive
remuneration is separate and distinct.
5
Traffic Technologies Ltd
Directors’ Report
3.
Details of executive remuneration structure
3.1
Objective
The Company's objective is to ensure that executive remuneration is designed to promote sustainable long-term
performance and shareholder value creation. In this regard, 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:
(a)
(b)
(c)
(d)
reward executives for the Company's and individual performance;
align the interests of executives with those of shareholders;
link reward with the strategic goals and performance of the Company; and
ensure total remuneration is competitive by market standards.
3.2
Approach to setting remuneration
Remuneration levels are determined annually through a remuneration review that considers market data,
remuneration trends, performance of the Company, individual responsibilities, individual performance and the
broader economic environment.
(a)
Fixed remuneration
The objective of fixed remuneration is to provide a base level of remuneration which is appropriate and
reasonable given the executive's experience, qualifications, core duties and responsibilities. Additionally,
an executive's remuneration is determined with reference to remuneration paid by similar sized companies
in similar industry sectors.
Executives are given the opportunity to receive their fixed remuneration in a variety of forms including
cash, superannuation contributions and non-monetary benefits such as motor vehicles. It is intended that the
manner of payment chosen will be optimal for the recipient without creating undue cost for the Company.
An executive's remuneration is reviewed annually by the Nomination & Remuneration Committee.
(b)
Variable remuneration
Performance based components of an executive’s remuneration seek to align the executive’s reward with
the achievement of the Company's long term objectives and the creation of shareholder value over the short
and long term. The relevant performance based components are STI and LTI (as described below).
6
Traffic Technologies Ltd
Directors’ Report
3.3
The current structure of executive remuneration
The executive remuneration structure, including performance hurdles and performance targets, is outlined below:
(a)
Combination of fixed and variable remuneration
Remuneration
Components
Purpose
Link to Performance
Total Fixed
Remuneration (TFR)
Comprises base salary,
non-monetary benefits,
and superannuation
contributions.
To provide
competitive fixed
remuneration taking
account of the role,
market, experience
and performance.
Company and individual
performance are assessed
during the annual
remuneration review.
Short term incentives
(STIs)
The Company operates
an STI at the discretion
of the Board which is
accessed based on the
Company's performance
above budget plan.
Bonuses are paid in cash.
To reward executives
for their contribution
to achievement of
Company outcomes
according to specified
KPI’s.
Linked to achievement of
operational targets and KPI’s.
Where actual financial
performance exceeds budget
plan by up to 100%, the
Company makes payment of
an STI bonus up to 20%.
Long term incentives
(LTIs)
The Company operates
an LTI at the discretion
of the Board. Options are
allotted in accordance
with our LTI plan.
To reward executives
for their contribution
to the creation of
shareholder value over
the longer term.
The grant by the Company of
the options will be dependent
on the share price
performance of the Company
relative to the ASX 300 small
ordinaries index. If the
Company's share price
performance exceeds the
ASX 300 small ordinaries
index for the relevant period,
the LTI may be awarded for
that financial year.
Subsequent to being granted,
the LTI options will only vest
if the executive does not
resign or is not terminated for
cause within a two year
period (after the end of the
relevant financial year in
which the options are
granted). The exercise price
of the options will be
equivalent to the Company’s
share price on the last day of
the relevant financial year.
7
Traffic Technologies Ltd
Directors’ Report
(b)
Performance hurdles
Performance hurdles are thresholds which are required to be met for an executive's remuneration to vest.
(i)
The following performance hurdles are used to determine whether variable remuneration vests for
executives:
STI Targets
LTI Targets
Managing Director
10% of base salary if targeted EBIT is
exceeded by 50%.
20% of base salary if targeted EBIT is
exceeded by 100%.
Targets are based on achievement of
KPI’s set annually by the Nomination &
Remuneration Committee. A summary
of the KPIs are outlined below.
Chief Financial
Officer
5% of base salary if targeted EBIT is
exceeded by 50%.
10% of base salary if targeted EBIT is
exceeded by 100%.
Targets are based on achievement of
KPI’s set annually by the Nomination &
Remuneration Committee. A summary
of the KPIs are outlined below.
10% of base salary paid according to
KPI’s set by the Board.
(ii)
What are the KPIs and why were they chosen?
STIs
10% of base salary if the Company’s share
price performance exceeds the ASX 300 small
ordinaries index by 10% for the relevant
financial year.
20% of base salary if the Company’s share
price performance exceeds the ASX 300 small
ordinaries index by 25% for the relevant
financial year.
40% of base salary if the Company’s share
price performance exceeds the ASX 300 small
ordinaries index by 50% for the relevant
financial year.
5% of base salary if the Company’s share price
performance exceeds the ASX 300 small
ordinaries index by 10% for the relevant
financial year.
10% of base salary if the Company’s share
price performance exceeds the ASX 300 small
ordinaries index by 25% for the relevant
financial year.
20% of base salary if the Company’s share
price performance exceeds the ASX 300 small
ordinaries index by 50% for the relevant
financial year.
The Company has chosen Earnings before Interest and Tax (EBIT) as its STI performance measure. EBIT
is a common operational performance measure used by many companies. The Board considers this financial
measure to be appropriate as it is reflective of the performance of the Company and aligns the Company's
objective of delivering profitable growth and, ultimately, improved shareholder returns.
LTIs
The Company has chosen its share price performance relative to the ASX 300 small ordinaries index as its
LTI performance measure. This is an external, relative, market-based performance measure against
competing companies. It provides a direct link between senior executive reward and returns to shareholders.
(iii)
What is the performance period?
The performance hurdle for STI's are measured over a 12 month period. There will be no re-testing of
performance hurdles.
8
Traffic Technologies Ltd
Directors’ Report
The performance hurdle for LTI targets are measured over three years, being the relevant 12 month period
and a requirement for the executive to remain with the Company for a further two years. There will be no
re-testing of performance hurdles.
(iv)
When are performance hurdles not considered to be met?
Performance hurdles will not be considered to be met where an executive achieves the performance hurdle
as a result of an acquisition by the Company.
(c)
Clawback
The Company has the ability to reduce, cancel or clawback performance based remuneration in the event of
serious misconduct or material financial misstatement.
4.
Details of Non-Executive remuneration structure
4.1
Objective
The Board seeks to set aggregate remuneration at a level that provides the Company with the ability to attract and
retain directors of the highest calibre, whilst incurring a cost that is acceptable to shareholders.
4.2
Approach to setting remuneration
Each non-executive director receives a fixed fee for being a director and a fee for the additional time commitment
made when serving as Chair. Non-executive Directors do not receive retirement benefits, other than statutory
superannuation, nor do they participate in any incentive programs.
The Company’s Constitution and the ASX Listing Rules specify that the aggregate remuneration of non-executive
Directors shall be determined from time to time by 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. The latest determination was at the AGM held
in 2005 when shareholders approved an aggregate remuneration of $400,000 per year. The amount of remuneration
paid to non-executive directors is reviewed annually against remuneration paid to non-executive directors of
comparable companies. The board did not use external consultants during the financial year ended 30 June 2019.
It is considered good governance for Directors to have a stake in the Company on whose Board they sit. Non-
executive Directors are encouraged to hold shares in the Company (purchased by the Director on market).
4.3
Non-executive Director Agreements
The non-executive Directors have entered into non-executive Director Agreements with the Company. The non-
executive Director agreements:
(a)
(b)
(c)
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
provides the non-executive Director with access to the Company's books and records relating 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.
5.
Performance outcomes
5.1
Executives
(a)
Managing Director – Mr. Con Liosatos
The Managing Director, Mr. Liosatos, is employed under a rolling employment contract. A summary of Mr.
Liosatos’ entitlements for the financial year ended 30 June 2019 is as follows:
9
Traffic Technologies Ltd
Directors’ Report
TFR for the financial year ended 30 June 2019 was $529,777.
No STI was awarded to Mr. Liosatos for the 2019 financial year.
No LTI was awarded to Mr. Liosatos for the 2019 financial year.
Employment may be terminated by the giving, by either party, of twelve months’ notice, or by the payment
or forfeiture of an equivalent amount of pay in lieu of notice from any monies owing. The Company retains
the right to terminate the contract at any time without notice in the case of serious misconduct.
Further details of the executives’ remuneration for the financial years ended 30 June 2018 and 30 June 2019
are included in the tables below.
•
•
•
•
•
(b)
Chief Financial Officer – Mr. Peter Crafter
The Company Secretary and Chief Financial Officer, Mr. Peter Crafter, is employed under a rolling employment
contract. A summary of Mr. Crafter’s entitlements is as follows:
•
•
•
•
•
TFR for the financial year ended 30 June 2019 was $288,024.
No STI was awarded to Mr. Crafter for the 2019 financial year.
No LTI was awarded to Mr. Crafter for the 2019 financial year.
Employment may be terminated by the giving, by either party, of twelve months’ notice, or by the payment
or forfeiture of an equivalent amount of pay in lieu of notice from any monies owing. The Company retains
the right to terminate the contract at any time without notice in the case of serious misconduct.
Further details of the executives’ remuneration for the financial years ended 30 June 2018 and 30 June 2019
are set out in the tables below.
(c)
Performance against targets
•
•
No STI’s were awarded for the 2019 financial year.
No LTI’s were awarded for the 2019 financial year.
5.2
Non-executive Directors
Details of non-executive Directors’ remuneration for the financial years ended 30 June 2018 and 30 June 2019 are
set out in the tables below. The Company considers the non-executive Directors’ remuneration to be reasonable
taking into account their duties, responsibilities, market, experience and performance.
5.3
Company Performance and Shareholder Returns
2019
2018
2017
2016
2015
Net profit/(loss) $’000)
$1,263
$6,072
$1,011
($22,250)
$420
EPS (cents)
Share price (cents)
0.26
2.4
1.88
3.3
0.37
3.6
(8.07)
2.6
0.15
3.9
Management remuneration is not related to the Company's performance and shareholder returns except to the
extent disclosed above.
10
TABLE 1: REMUNERATION OF KEY MANAGEMENT PERSONNEL – YEAR TO 30 JUNE 2018
Traffic Technologies Ltd
Directors’ Report
Short-term benefits
Post-employment
benefits
Termination
Benefits
Long-term
benefits
Share based
payments
Total
Salary & fees
$
Non-monetary
$
Cash
Bonus
$
Superannuation
$
$
Long service
leave
$
Options
$
$
%
performance
related
Year to 30 June 2018
Key Management Personnel
Non-executive Directors
Mr. Garry Lowrey
Mr. Mark Hardgrave
Sub-total non-executive Directors
Executives
Mr. Con Liosatos
Mr. Peter Crafter
Total
108,674
57,750
166,424
492,962
247,921
740,883
907,307
-
-
-
-
-
-
13,187
20,644
33,831
33,831
94,605
24,792
119,397
119,397
10,324
5,486
15,810
25,000
23,552
48,552
64,362
-
-
-
-
-
-
-
-
-
-
10,614
(20,557)
(9,943)
(9,943)
-
-
-
-
-
-
-
118,998
63,236
182,234
636,368
296,352
932,720
1,114,954
-
-
-
15%
8%
13%
11%
11
TABLE 2: REMUNERATION OF KEY MANAGEMENT PERSONNEL – YEAR TO 30 JUNE 2019
Traffic Technologies Ltd
Directors’ Report
Short-term benefits
Post-employment
benefits
Termination
Benefits
Long-term
benefits
Share based
payments
Total
Salary & fees
$
Non-monetary
$
Cash
Bonus
$
Superannuation
$
$
Long service
leave
$
Options
$
$
%
performance
related
Year to 30 June 2019
Key Management Personnel
Non-executive Directors
Mr. Garry Lowrey
Mr. Mark Hardgrave
Sub-total non-executive Directors
Executives
Mr. Con Liosatos
Mr. Peter Crafter
Total
108,674
57,750
166,424
492,962
247,921
740,883
907,307
-
-
-
11,815
16,551
28,366
28,366
-
-
-
-
-
-
-
10,324
5,486
15,810
25,000
23,552
48,552
64,362
-
-
-
-
-
-
-
-
-
-
14,176
15,032
29,208
29,208
-
-
-
-
-
-
-
118,998
63,236
182,234
543,953
303,056
847,009
1,029,243
-
-
-
-
-
-
-
END OF AUDITED REMUNERATION REPORT
12
Traffic Technologies Ltd
Directors’ Report
DIRECTORS’ MEETINGS
The number of meetings of Directors (including meetings of committees of Directors) held during the financial year
and the number of meetings attended by each Director was as follows:
Directors’
Meetings
Audit Committee
Risk Committee
Nomination &
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
Number
eligible
to attend
Number
attended
Mr. Garry Lowrey
Mr. Con Liosatos
Mr. Mark Hardgrave
12
12
12
12
12
12
2
2
2
2
2
2
4
4
4
4
4
4
1
1
1
1
1
1
1
1
1
1
1
1
BOARD COMMITTEES
As at the date of this report the Company had an Audit Committee, a Nomination & Remuneration Committee, a
Corporate Governance Committee and a Risk Committee of the Board of Directors. The eligibility and attendance
of each of the Directors is disclosed in the table above. The chairman of each committee was:
• Audit – Mr. Mark Hardgrave
• Nomination & Remuneration – Mr. Mark Hardgrave
•
•
Corporate Governance – Mr. Mark Hardgrave
Risk - Mr. Mark Hardgrave
ROUNDING
The amounts contained in this report and in the financial report have been rounded to the nearest $1,000 (unless
otherwise stated) under the option available to the Company under ASIC Corporations (Rounding in
Financial/Directors’ Reports) Instrument 2018/191. The Company is an entity to which the Instrument applies.
AUDITOR’S INDEPENDENCE AND NON-AUDIT SERVICES
A copy of the auditor’s independence declaration in relation to the audit for the financial year is provided
immediately following this report.
Signed in accordance with a resolution of the Directors.
Mr. Garry Lowrey
Independent Non-Executive Chairman
28 August 2019
Melbourne
13
Auditor’s Independence Declaration under Section 307C of the Corporations Act
2001 to the Directors of Traffic Technologies Limited and Controlled Entities
I declare that, to the best of my knowledge and belief, during the year ended 30 June 2019 there have been:
(i)
No contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation
to the audit, and
(ii) No contraventions of any applicable code of professional conduct in relation to the audit.
ShineWing Australia
Chartered Accountants
Rami Eltchelebi
Partner
Melbourne, 28 August 2019
ShineWing Australia ABN 39 533 589 331. Liability limited by a scheme approved under Professional Standards Legislation. ShineWing Australia is an independent member of ShineWing
International Limited – members in principal cities throughout the world.
Traffic Technologies Ltd
Corporate Governance Statement
The Board and management of Traffic Technologies Ltd are committed to conducting the Group’s business in an
ethical manner and in accordance with the highest standards of corporate governance. The Company has adopted
and has substantially complied with the ASX Corporate Governance Principles and Recommendations (Third
Edition) (Recommendations) to the extent appropriate to the size and nature of the Group’s operations.
The Company has prepared a statement which sets out the corporate governance practices that were in operation
throughout the financial year for the Company, identifies any Recommendations that have not been followed and
provides reasons for not following such Recommendations (Corporate Governance Statement).
The Corporate Governance Statement is accurate and up to date as at 28 August 2019 and has been approved by the
Board.
In accordance with ASX Listing Rules 4.10.3 and 4.7.4, the Corporate Governance Statement is available for review
on the Company’s website (www.trafficltd.com.au) and will be lodged together with an Appendix 4G at the same
time that this Annual Report is lodged with ASX.
Appendix 4G identifies each Recommendation that needs to be reported against by the Company and provides
shareholders with information as to where relevant governance disclosures can be found.
The Company’s corporate governance policies and charters are all available on the Company’s website
(www.trafficltd.com.au).
15
Traffic Technologies Ltd and Controlled Entities
Consolidated Statement of Profit or Loss and Other Comprehensive Income
For the year ended 30 June 2019
Note
Consolidated
2019
$’000
2018
$’000
Revenue
Other income
Changes in inventories of finished goods and work
in progress
Raw materials and consumables used
Employee benefits expense
Occupancy costs
Advertising and marketing expense
Other expenses
Depreciation, amortisation and impairment expense
Earnings before interest and tax (EBIT)
Finance costs
Net profit for the year before income tax
Income tax expense
Net profit for the year
Other comprehensive income
Total comprehensive income for the year
Earnings per share
- Basic (cents per share)
- Diluted (cents per share)
2
2
3
3
3
4
5
5
The accompanying notes form part of these financial statements.
48,321
125
2,433
(28,986)
(13,661)
(1,907)
(123)
(1,879)
(1,474)
56,670
8,003
(3,046)
(32,481)
(15,134)
(1,905)
(296)
(1,651)
(1,731)
2,849
8,429
(1,380)
(1,548)
1,469
(206)
1,263
-
6,881
(809)
6,072
-
1,263
6,072
Cents
0.26
0.26
Cents
1.88
1.88
16
Traffic Technologies Ltd and Controlled Entities
Consolidated Statement of Financial Position
As at 30 June 2019
Note
Consolidated
2019
$’000
2018
$’000
ASSETS
Current Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Derivatives
Total Current Assets
Non-Current Assets
Property, plant and equipment
Goodwill
Intangible assets
Total Non-Current Assets
TOTAL ASSETS
LIABILITIES
Current Liabilities
Trade and other payables
Interest bearing loans and borrowings
Provisions
Deferred tax liability
Total Current Liabilities
Non-Current Liabilities
Interest bearing loans and borrowings
Provisions
Total Non-Current Liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Accumulated losses
TOTAL EQUITY
17
6
7
12
8
9
9
10
11
13
4
11
13
14
The accompanying notes form part of these financial statements.
17
3,107
8,803
12,597
251
24,758
1,224
10,554
8,929
20,707
4,044
10,766
10,164
619
25,593
1,253
10,554
7,956
19,763
45,465
45,356
7,341
142
2,685
861
11,029
13,073
203
13,276
8,730
172
2,570
659
12,131
13,128
200
13,328
24,305
25,459
21,160
19,897
54,755
(33,595)
21,160
54,755
(34,858)
19,897
Traffic Technologies Ltd and Controlled Entities
Consolidated Statement of Changes in Equity
For the year ended 30 June 2019
Contributed
Equity
Note
$’000
Share based
payments
Reserve
$’000
Accumulated
Losses
Total
$’000
$’000
CONSOLIDATED
At 1 July 2017
49,029
1,000
(41,930)
-
-
-
-
-
-
6,072
-
6,072
8,099
6,072
-
6,072
Profit for the year
Other comprehensive
income
Total comprehensive
income for the year
Transactions with
owners in their
capacity as owners:
Rights issue
Share issue costs
Transfer share-based
payment reserve
At 30 June 2018
Profit for the year
Other comprehensive
income
Total comprehensive
income for the year
14
14
14
6,200
(474)
-
54,755
-
-
-
-
-
(1,000)
-
-
1,000
6,200
(474)
-
-
-
-
-
-
(34,858)
19,897
1,263
-
1,263
1,263
-
1,263
(33,595)
21,160
At 30 June 2019
54,755
The accompanying notes form part of these financial statements.
18
Traffic Technologies Ltd and Controlled Entities
Consolidated Statement of Cash Flows
For the year ended 30 June 2019
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Interest paid
Income tax paid
Net cash from operating activities
Cash flows from investing activities
Proceeds from sale of plant and
equipment
Payment of development costs
Purchase of property, plant and
equipment
Purchase of intangible assets
Net cash from investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Payment of borrowing costs
Proceeds from share issue
Payments for share issue costs
Net cash from financing activities
Net (decrease)/increase in cash and
cash equivalents
Cash and cash equivalents at
beginning of the financial year
Cash and cash equivalents at end of
the financial year
Note
Consolidated
2019
Inflows /
(Outflows)
$'000
2018
Inflows /
(Outflows)
$'000
17
17
54,659
(51,950)
48
(1,267)
(4)
1,486
61,569
(57,748)
-
(1,552)
(5)
2,264
5
-
(1,886)
(180)
(273)
(2,334)
-
(89)
-
-
-
(89)
(1,826)
(330)
(289)
(2,445)
13,788
(15,663)
(286)
6,200
(474)
3,565
(937)
3,384
4,044
660
3,107
4,044
The accompanying notes form part of these financial statements.
19
Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
The financial report of Traffic Technologies Ltd (the Company) for the year ended 30 June 2019 was authorised for
issue in accordance with a resolution of the Directors on 28 August 2019. The Company is a company limited by
shares incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange. The nature
of the operations and principal activities of the Group are described in the Directors’ Report.
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 the requirements
of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the
Australian Accounting Standards Board (AASB) and AASB Interpretations. The consolidated financial statements
of Traffic Technologies Ltd and its subsidiaries also comply with International Financial Reporting Standards (IFRS)
as issued by the International Accounting Standards Board. The financial report has been prepared on an accruals
basis and under the historical cost convention. The financial report covers Traffic Technologies Ltd and its
subsidiaries (the Group). Traffic Technologies Ltd is a for profit Australian listed public company limited by shares,
incorporated and domiciled in Australia. The nature and operations and principal activities of the Group are
described in the Directors’ Report. The following is a summary of material accounting policies adopted by the
Group in the preparation and presentation of the financial report. The accounting policies have been consistently
applied, unless otherwise stated.
Rounding
The amounts contained in the financial report have been rounded to the nearest thousand dollars ($’000) (unless
otherwise stated) under the option available to the Company under ASIC Corporations (Rounding in
Financial/Directors’ Reports) Instrument 2018/191. The Company is an entity to which the Instrument applies.
b) New Accounting Standards for Application in Future Periods
Accounting Standards issued by the AASB that are not yet mandatorily applicable to the Group, together with an
assessment of the potential impact of such pronouncements on the Group when adopted in future periods, are
discussed below:
– AASB 16: Leases (applicable to annual reporting periods beginning on or after 1 January 2019).
AASB 16 will replace the current accounting requirements applicable to leases in AASB 117: Leases and
related Interpretations. AASB 16 introduces a single lessee accounting model that eliminates the requirement
for leases to be classified as operating or finance leases.
The main changes introduced by the new Standard include:
-
recognition of a right-to-use asset and liability for all leases (excluding short-term leases with less than
12 months of tenure and leases relating to low-value assets);
depreciation of right-to-use assets in line with AASB 116: Property, Plant and Equipment in profit or
loss and unwinding of the liability in principal and interest components;
variable lease payments that depend on an index or a rate are included in the initial measurement of the
lease liability using the index or rate at the commencement date;
by applying a practical expedient, a lessee is permitted to elect not to separate non-lease components and
instead account for all components as a lease; and
additional disclosure requirements.
-
-
-
-
20
Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Transition to AASB 16
The Group plans to adopt AASB 16 retrospectively to each prior reporting period presented. The Group will elect
to apply the standard to contracts that were previously identified as leases applying AASB 117 and AASB
Interpretation 4. The Group will therefore not apply the standard to contracts that were not previously identified as
containing a lease applying AASB 117 and AASB Interpretation 4. The Group will elect to use the exemptions
proposed by the standard on lease contracts for which the lease terms ends within 12 months as of the date of initial
application and lease contracts for which the underlying asset is of low value. The Group has leases of certain office
equipment (i.e., printing and photocopying machines) that are considered of low value. During 2019, the Group has
performed a detailed impact assessment of AASB 16. In summary the impact of AASB 16 adoption is expected to
be, as follows:
Impact on the statement of financial position (increase/(decrease) as at 30 June 2019:
Assets
Property, plant and equipment
Deferred tax assets
Liabilities
Lease liabilities
Net impact on equity
$’000
2,509
59
(2,707)
(139)
Impact on the statement of profit or loss (increase/(decrease) for 2019:
Depreciation expense
Operating lease expense (included in occupancy costs)
Operating profit
Finance costs
Income tax expense
Profit for the year
$’000
(744)
978
234
(329)
29
(66)
Due to the adoption of AASB 16, the Group’s profit will reduce due to an increase in depreciation and interest
expense. This is due to the change in the accounting for expenses of leases that were classified as operating leases
under AASB 117.
The Group has adopted all new, revised and amending Accounting Standards and Interpretations issued by the
Australian Accounting Standards Board that are mandatory for the current reporting period. The adoption of these
Accounting Standards and Interpretations did not have a significant impact on the financial performance or position
of the Group.
21
Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
c) Basis of consolidation
The consolidated financial statements incorporate all of the assets, liabilities and results of the parent (Traffic
Technologies Ltd) and all of the subsidiaries. Subsidiaries are entities the parent controls. The parent controls an
entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability
to affect those returns through its power over the entity.
Subsidiaries are consolidated from the date on which control is obtained by the Group. The consolidation of a
subsidiary is discontinued from the date that control ceases. Intercompany transactions, balances and unrealised
gains or losses on transactions between group entities are fully eliminated on consolidation. Accounting policies of
subsidiaries have been changed and adjustments made where necessary to ensure uniformity of the accounting
policies adopted by the Group. Changes in the ownership interests in a subsidiary that do not result in a loss of
control are accounted for as equity transactions and do not affect the carrying amounts of goodwill.
Business combinations are accounted for using the acquisition method. The acquisition method of accounting
involves recognising at acquisition date, separately from goodwill, the identifiable assets acquired, the liabilities
assumed and any non-controlling interest in the acquiree. The identifiable assets acquired and the liabilities assumed
are measured at their acquisition date fair values. When the Group acquires a business, it assesses the financial
assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms,
economic conditions, the Group’s operating or accounting policies and other pertinent conditions as at the acquisition
date.
If the business combination is achieved in stages, the acquisition date fair value of the acquirer's previously held
equity interest in the acquiree is remeasured at fair value as at the acquisition date through the statement of
comprehensive income. Any contingent consideration to be transferred by the acquirer will be recognised at fair
value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed
to be an asset or liability will be recognised in the statement of comprehensive income. If the contingent
consideration is classified as equity, it will not be remeasured.
All transaction costs incurred in relation to business combinations, other than those associated with the issue of a
financial instrument, are recognised as expenses in profit or loss when incurred. The acquisition of a business may
result in the recognition of goodwill or a gain from a bargain purchase.
d) Significant accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and assumptions
that affect the reported amounts in the financial statements. Management continually evaluates its judgements and
estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its
judgements and estimates on historical experience and other factors it believes to be reasonable under the
circumstances. Management has identified the following critical accounting policies for which significant
judgements, estimates and assumptions are made. Actual results may differ from these estimates under different
assumptions and conditions and may materially affect financial results or the financial position reported in future
periods.
Significant accounting judgements
Impairment testing of non-financial assets
The Group assesses impairment of all assets at each reporting date by evaluating conditions specific to the Group
and to the particular asset that may lead to impairment. These include product and manufacturing performance,
technology, economic and political environments and future product and service delivery expectations. If an
impairment trigger exists the recoverable amount of the asset is determined. This involves value in use calculations,
which incorporate a number of key estimates and assumptions.
22
Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Capitalised development costs
Development costs are only capitalised by the Group when the Group can demonstrate the technical feasibility of
completing the intangible asset so that it will be available for use or sale, its intention to complete and its ability to
use or sell the asset, how the asset will generate future economic benefits, the availability of resources to complete
the development and the ability to measure reliably the expenditure attributable to the intangible asset during its
development.
Taxation
The Group's accounting policy for taxation requires management's judgement as to the types of arrangements
considered to be a tax on income in contrast to an operating cost. Judgement is also required in assessing whether
deferred tax assets and certain deferred tax liabilities are recognised in the statement of financial position. Deferred
tax assets, capital losses and temporary differences, are recognised only where it is considered more likely than not
that they will be recovered, which is dependent on the generation of sufficient future taxable profits. Assumptions
about the generation of future taxable profits depend on management's estimates of future cash flows. Judgements
are also required about the application of income tax legislation.
Significant accounting estimates and assumptions
Long service leave provision
The liability for long service leave is recognised and measured at the present value of the estimated future cash flows
to be made in respect of all employees at balance date. In determining the present value of the liability, attrition rates
and pay increases through inflation and promotion have been taken into account. The Group’s obligations towards
long service leave liabilities are presented as non-current provisions in its statement of financial position, except
where the Group does not have an unconditional right to defer settlement for at least 12 months after the end of the
reporting period, in which case the obligations are presented as current provisions.
Allowance for impairment loss on receivables
Where receivables are outstanding beyond the normal trading terms, the likelihood of recovery of these receivables
is assessed by management. Debts that are considered to be uncollectible are written off when identified.
Estimation of useful lives of assets
The estimation of useful lives of assets has been based on historical experience (for plant and equipment), lease
terms (for leased equipment) and turnover policies (for motor vehicles). In addition, the condition of assets is
assessed at least once a year and considered against the remaining useful life. Adjustments to useful life are made
when considered necessary. Any change in the useful life or residual lives is treated as a change in accounting
estimate and recognised in the statement of comprehensive income.
Maintenance warranties
In determining the level of the provision required for warranties, the Group has made judgements in respect of the
expected performance of the products and any liability resulting from installation works. Historical experience and
current knowledge of the performance of products has been used in determining this provision.
Finance costs
In assessing the amount of finance costs charged in the year, the Group has taken into account the increase in interest
costs over the term of the loan facility provided to the Group. It is the Group’s intention to refinance its loan facility
when suitable alternative loan facilities can be obtained. Finance costs have been calculated on the assumption that
the Group’s loan facility will be refinanced by January 2020.
23
Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
2. REVENUE
The Group has applied, for the first time, AASB 15 Revenue from Contracts with Customers. The nature and effect
of these changes are discussed below.
AASB 15 Revenue from Contracts with Customers
Revenue from contracts with customers is recognised when control of the goods or services are transferred to the
customer at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those
goods or services.
Sale of goods
Revenue from sale of goods is recognised when control of the goods is transferred to the customer at an amount that
reflects the consideration to which the Group expected to be entitled in exchange for those goods.
Rendering of services
Revenue is recognised in the accounting period in which the services are rendered. For fixed-price contracts, revenue
is recognised based on the actual service provided to the end of the reporting period as a proportion of the total
services to be provided (performance obligations satisfied over time). When the contract outcome cannot be
estimated reliably, revenue is recognised only to the extent of the expenses recognised that are recoverable.
Interest income
Interest income is recognised as interest accrues using the effective interest method. This is a method of calculating
the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective
interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the
financial asset to the net carrying amount of the financial asset.
Finance and other income
Finance and other income is recognised when the right to receive the income is established.
The Group has adopted AASB 15 Revenue from Contracts with Customers from 1 January 2018 which has resulted
in changes in accounting policies and the analysis of possible adjustments to the amounts recognised in the financial
reports. AASB 15 applies to all revenue arising from contracts with customers, unless those contracts are in the
scope of other standards. The new standard establishes a five-step model to account for revenue arising from
contracts with customers. Under AASB 15, revenue is recognised at an amount that reflects the consideration to
which an entity expects to be entitled in exchange for transferring goods or services to a customer.
The standard requires entities to exercise judgement, taking into consideration all of the relevant facts and
circumstances when applying each step of the model to contracts with their customers. The standard also specifies
the accounting for the incremental costs of obtaining a contract and the costs directly related to fulfilling a contract.
In accordance with the transition provisions in AASB 15, the Group has elected to adopt the new rules
retrospectively. The Group has carried out an assessment of its customer contracts. Having reviewed the nature of
the Group’s customer contracts, this has not resulted in any adjustments to the prior year comparatives.
24
Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
2. REVENUE (continued)
Revenue
Sale of goods
Other income
Gain on repayment of debt (note 11)
Net profit on disposal of fixed assets
Net gain on derivatives held for trading
Net exchange loss on foreign currency borrowings
Other income
Total other income
3.
EXPENSES
Employee related expenses
Wages and salaries
Superannuation (defined contribution)
Other employee benefits expense
Other expenses
Administrative costs
Public company costs
Finance costs
Amortisation of capitalised transaction costs
Bank loans and overdrafts
Term loan
Lease interest
Other
Total finance costs
Consolidated
2019
$’000
Consolidated
2018
$’000
48,321
56,670
-
1
862
(881)
143
125
7,883
-
619
(623)
124
8,003
Consolidated
2019
$’000
Consolidated
2018
$’000
10,272
1,012
2,377
13,661
1,679
200
1,879
113
-
1,263
4
-
1,380
10,198
982
3,954
15,134
1,455
196
1,651
24
1,148
257
24
95
1,548
Research and development costs
Research and development costs charged directly to cost of
sales in profit or loss
35
69
25
Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
4.
INCOME TAX
Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered
from or paid to the taxation authorities. Current income tax expense charged to profit or loss is the tax payable on
taxable income. Current and deferred income tax expense/(income) is charged or credited outside profit or loss when
the tax relates to items that are recognised outside profit or loss.
Income Tax Expense
Current tax
Deferred tax - origination and reversal of temporary differences
Aggregate income tax expense
Reconciliation of income tax expense and tax at the statutory tax rate
Accounting profit before income tax
Tax at the statutory rate of 30% (2018: 30%)
Permanent difference
Impact of debt restructure
Non-refundable foreign tax offset
Recoupment of R&D tax offset
Prior year under/over
Aggregate income tax expense
Weighted average effective tax rate
Deferred tax
Consolidated Consolidated
2019
$’000
2018
$’000
4
202
206
1,469
441
90
-
4
(391)
62
206
14%
5
804
809
6,881
2,064
-
(1,020)
5
(240)
-
809
12%
Deferred income tax assets are recognised for all deductible temporary differences, to the extent that is probable that
taxable profit will be available against which the deductible temporary differences and the carry forward of unused
tax credits can be utilised. The carrying amount of deferred income tax assets is reviewed at each balance date and
reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part
of the deferred income tax asset to be utilised. Deferred tax assets and liabilities are measured at the tax rates that
are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws)
that have been enacted or substantively enacted at the balance date.
Deferred tax relates to the following
Statement of Financial
Position
Statement of Profit or Loss
Income
Consolidated Consolidated
Consolidated Consolidated
2019
$’000
2018
$’000
2019
$’000
2018
$’000
Temporary differences
Intangible assets
Plant and equipment
Inventory
Employee provisions
Warranty provisions
Credit notes
Doubtful debts
Foreign exchange
Other capital expenditure
Other accruals and provisions
Deferred tax asset/(liability)
(1,824)
(376)
(60)
902
12
7
11
1
587
81
(659)
(289)
187
120
34
-
7
(2)
2
(206)
(55)
(202)
(970)
(376)
(60)
104
-
(5)
11
-
470
22
(804)
(2,113)
(189)
60
936
12
14
9
3
381
26
(861)
26
Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
4.
INCOME TAX (continued)
Tax losses
The following tax losses have not been recognised as a deferred tax asset:
Tax losses – revenue
Tax losses - capital
Carried forward tax offsets
Total deferred tax assets
Consolidated Consolidated
2019
$’000
2018
$’000
-
-
1,096
1,096
-
-
1,726
1,726
Tax credits are available to carry forward against future revenue-related profits (but not against capital related profits)
without expiry.
Other taxes
Revenues, expenses and assets are recognised net of the amount of Goods and Services Tax (GST) except:
• When the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in
which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as
applicable; and
•
Receivables and payables, which are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or
payables in the statement of financial position. Cash flows are included in the statement of cash flows on a gross
basis and the GST component of cash flows arising from investing and financing activities, which is recoverable
from, or payable to, the taxation authority, are classified as operating cash flows.
5.
EARNINGS PER SHARE
Basic earnings per share is calculated as net profit/loss attributable to members of the parent entity divided by the
weighted average number of ordinary shares. Diluted earnings per share is calculated as net profit/loss attributable
to members of the parent entity divided by the weighted average number of ordinary shares and dilutive potential
ordinary shares. The following reflects the income and share data used in the basic and diluted earnings per share
computations:
Earnings used in calculating earnings per share
For basic and diluted earnings per share:
Net profit attributable to ordinary equity holders of the parent
Weighted average number of shares
Weighted average number of ordinary shares used in calculating basic earnings
per share
Weighted average number of ordinary shares adjusted for the effect of dilution
Consolidated Consolidated
2019
$’000
2018
$’000
1,263
6,072
Consolidated Consolidated
2019
Thousands
2018
Thousands
482,225
482,225
482,225
482,225
There are no instruments excluded from the calculation of diluted earnings per share that could potentially dilute
earnings per share in the future because they are anti-dilutive for 2019 (2018: nil). 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.
27
Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
6.
TRADE AND OTHER RECEIVABLES
Trade receivables, which generally have 30 day terms, are recognised initially at fair value plus any directly
attributable transaction costs and subsequently measured at amortised cost using the effective interest rate method,
less an allowance for any uncollectible amounts. Trade receivables are non-interest bearing. Collectability of trade
receivables is reviewed on an ongoing basis. Amounts over 60 days are deemed overdue. Credit is stopped until full
payment is made. Debts that are known to be uncollectible are written off when identified. An allowance for
impairment loss is recognised when there is objective evidence that the Group may not be able to collect the
receivable. Financial difficulties of the debtor, default payments or debts more than 90-120 days overdue are
considered objective evidence of impairment. The amount of the impairment loss is the difference between the
receivables carrying amount and the present value of its estimated future cash flows, discounted at the original
effective interest rate.
Trade receivables
Allowance for impairment loss
Prepayments
Other receivables
Consolidated
2019
$’000
Consolidated
2018
$’000
7,591
(30)
7,561
494
748
8,803
8,778
(35)
8,743
951
1,072
10,766
Allowance for impairment loss – trade receivables
An allowance for impairment loss is recognised when there is objective evidence that an individual trade receivable
is impaired. The amount of the allowance for impairment loss has been measured as the difference between the
carrying amount of the trade receivables and the estimated future cash flows expected to be received from the
relevant debtors.
Ageing of trade receivables not impaired:
1-30 days
31-60 days
61 days and over
Movement in provision for impairment loss:
Balance at the beginning of the year
Charge for the year
Amounts recovered during the year
Allowance no longer required
Amounts written off as uncollectible
Balance at the end of the year
Consolidated
2019
$’000
Consolidated
2018
$’000
4,270
2,482
809
7,561
35
120
(6)
(38)
(81)
30
5,686
1,615
1,442
8,743
9
64
(10)
-
(28)
35
28
Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
7.
INVENTORIES
Inventories including raw materials, work-in-progress and finished goods are valued at the lower of cost and net
realisable value.
Costs incurred in bringing each product to its present location and condition are accounted for as follows:
Raw materials – purchase cost on a first-in, first-out basis. The cost of purchase comprises the purchase price,
import duties and other taxes (other than those subsequently recoverable by the entity from the taxing
authorities), transport, handling and other costs directly attributable to the acquisition of raw materials and
volume discounts and rebates.
Finished goods and work-in-progress – cost of direct materials and labour and a proportion of variable and fixed
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.
Raw materials
Work in progress
Finished goods
Consolidated
2019
$’000
Consolidated
2018
$’000
4,299
205
8,093
12,597
3,785
157
6,222
10,164
Inventory write-downs recognised as an expense totalled $Nil (2018: $2,520,000). The inventory write-down was
included in the statement of comprehensive income in changes in inventories of finished goods and work in progress.
8.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at historical cost less accumulated depreciation and any accumulated
impairment losses.
Depreciation is calculated on a straight-line basis over the estimated useful life of the specific assets as follows:
Plant and equipment
Plant and equipment under finance lease
Office furniture and fittings
Office furniture and fittings under finance lease
Motor vehicles
Motor vehicles under finance lease
Buildings
Leasehold improvements
2019
1 to 15 years
1 to 15 years
4 to 10 years
4 to 10 years
8 years
8 years
40 years
10 years
2018
1 to 15 years
1 to 15 years
4 to 10 years
4 to 10 years
8 years
8 years
40 years
10 years
Property, plant and equipment pledged as security for liabilities
Leased assets are pledged as security for the related finance lease liabilities.
The Group’s property, plant and equipment is pledged as security against the borrowings with ADM Capital as
disclosed in note 11.
29
Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
8.
PROPERTY, PLANT AND EQUIPMENT (continued)
Consolidated
2019
$’000
Consolidated
2018
$’000
Carrying values
Plant and equipment:
At cost
Accumulated depreciation
Total plant and equipment
Plant and equipment under lease:
At cost
Accumulated depreciation
Total plant and equipment
Office furniture and fittings
At cost
Accumulated depreciation
Total office furniture and fittings
Office furniture and fittings under
lease
At cost
Accumulated depreciation
Total office furniture and fittings
Motor vehicles
At cost
Accumulated depreciation
Total motor vehicles
Motor vehicles under lease
At cost
Accumulated depreciation
Total motor vehicles under lease
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 net book value
30
4,990
(4,411)
579
445
(401)
44
1,167
(1,077)
90
137
(137)
-
332
(295)
37
685
(409)
276
208
(117)
91
683
(576)
107
4,896
(4,324)
572
445
(348)
97
1,102
(1,045)
57
137
(136)
1
349
(302)
47
633
(374)
259
208
(108)
100
667
(547)
120
8,647
(7,423)
1,224
8,437
(7,184)
1,253
Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
8.
PROPERTY, PLANT AND EQUIPMENT (continued)
Reconciliation of carrying amounts at the beginning and end of period
CONSOLIDATED
At 1 July 2018 net book value
Additions
Disposals
Depreciation expense
At 30 June 2019 net book value
At 1 July 2017 net book value
Additions
Disposals
Depreciation expense
At 30 June 2018 net book value
Plant &
Equipment
$’000
Plant &
Equipment
under lease
$’000
Office
Furniture
$’000
Office
Furniture
under lease
$’000
Motor
vehicles
$’000
Motor
vehicles
under lease
$’000
Buildings
$’000
Leasehold
improvements
$’000
Total
$’000
1
-
-
(1)
-
15
-
-
(14)
1
47
-
-
(10)
37
5
47
-
(5)
47
259
84
(4)
(63)
276
300
84
(47)
(78)
259
100
-
-
(9)
91
108
-
-
(8)
100
120
15
-
(28)
107
117
37
-
(34)
120
1,253
260
(4)
(285)
1,224
1,265
378
(47)
(343)
1,253
572
97
-
(90)
579
499
190
-
(117)
572
97
-
-
(53)
44
153
-
-
(56)
97
57
64
-
(31)
90
68
20
-
(31)
57
31
Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
9. GOODWILL AND INTANGIBLE ASSETS
Goodwill
The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of
the acquisition date fair values of the assets transferred by the acquirer, the liabilities incurred by the acquirer to
former owners of the acquiree and the equity issued by the acquirer and the amount of any non-controlling interest
in the acquiree. Acquisition-related costs are expensed as incurred.
The difference between the above items and the fair value of the consideration (including the fair value of any pre-
existing investment in the acquiree) is goodwill or a discount on acquisition. Following initial recognition, goodwill
is measured at cost less any accumulated impairment losses.
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 recognised in the statement of comprehensive income 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 tested 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 prospectively 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 the statement of comprehensive income.
Development costs
Research costs are expensed as incurred. An intangible asset arising from development expenditure on an internal
project is recognised only when the Group can demonstrate the technical feasibility of completing the intangible
asset so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how
the asset will generate future economic benefits, the availability of resources to complete the development and the
ability to measure reliably the expenditure attributable to the intangible asset during its development. Following the
initial recognition of the development expenditure, the cost model is applied requiring the asset to be carried at cost
less any accumulated amortisation and accumulated impairment losses.
Any expenditure so capitalised is amortised over the period of expected benefit from the related project which is
generally 5 years (2018: 5 years). The amortisation is recognised in the statement of comprehensive income in the
line item ‘depreciation, amortisation and impairment expense’.
Software costs
Software costs are carried at cost less any accumulated amortisation and any accumulated impairment losses.
Purchased software development is assessed to have a finite life and is amortised over a period of 1-4 years (2018:
1-4 years).
Patents and trademarks
Patents and trademarks 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. Patents and trademarks are amortised on a straight line basis over a period of 3-10 years (2018: 3-10 years).
32
Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
9.
GOODWILL AND INTANGIBLE ASSETS (continued)
Carrying values
Development costs
At cost
Accumulated amortisation
Accumulated impairment
Software costs
At cost
Accumulated amortisation
Patents and trademarks
At cost
Accumulated amortisation
Goodwill
At cost
Accumulated impairment
Total intangibles
At cost
Accumulated amortisation
Total net book value
Consolidated
2019
$’000
Consolidated
2018
$’000
18,088
(8,852)
(400)
8,836
1,870
(1,837)
33
520
(460)
60
33,042
(22,488)
10,554
53,520
(34,037)
19,483
16,202
(7,945)
(400)
7,857
1,632
(1,589)
43
486
(430)
56
33,042
(22,488)
10,554
51,362
(32,852)
18,510
Reconciliation of carrying amounts at the beginning and end of period
Consolidated
At 1 July 2018 net book value
Additions
Amortisation
At 30 June 2019 net book value
At 1 July 2017 net book value
Additions
Amortisation
At 30 June 2018 net book value
Development
Costs
$’000
Software
Costs
$’000
Patents and
Trademarks
$’000
Goodwill
Total
$’000
$’000
7,857
1,886
(907)
8,836
7,183
1,826
(1,152)
7,857
43
238
(248)
33
13
241
(211)
43
56
34
(30)
60
33
48
(25)
56
10,554
-
-
10,554
10,554
-
-
10,554
18,510
2,158
(1,185)
19,483
17,783
2,115
(1,388)
18,510
33
Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
9.
GOODWILL AND INTANGIBLE ASSETS (continued)
Impairment testing
Impairment testing of goodwill
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:
•
•
represents the lowest level within the Group at which the goodwill is monitored for internal management
purposes; and
is not larger than an operating segment determined in accordance with AASB 8 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.
The Group performs impairment testing as at 30 June each year using a value in use, discounted cash flow
methodology for its cash-generating units to which goodwill has been allocated. Impairment testing may be
performed at other dates where an indicator of impairment exists.
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.
Impairment testing of non-financial assets other than goodwill
Intangible assets that have an indefinite useful life and those that are not yet available for use are not subject to
amortisation but are tested annually for impairment, or more frequently if events or changes in circumstances indicate
that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable.
The Group conducts an annual internal review of asset values, which is used as a source of information to assess for
any indicators of impairment. External factors, such as changes in expected future processes, technology and
economic conditions, are also monitored to assess for indicators of impairment. If any indication of impairment
exists, an estimate of the asset's recoverable amount is calculated.
An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable
amount. Recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes
of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash
inflows that are largely independent of the cash inflows from other assets or groups of assets (cash-generating units).
Non-financial assets other than goodwill that have suffered an impairment are tested for possible reversal of the
impairment whenever events or changes in circumstances indicate that the impairment may have reversed.
34
Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
9. GOODWILL AND INTANGIBLE ASSETS (continued)
(i) Description of the cash-generating units and other relevant information
Goodwill acquired through business combinations has been allocated to the Signals and Controllers cash-
generating units.
(ii) Key assumptions used in value in use calculations for the Signals and Controllers cash-generating units at 30
June 2019 and 30 June 2018
The recoverable amounts of the Signals and Controllers cash-generating units have been determined based on a
value in use calculation using cash flow projections based on financial budgets prepared by management
covering a five year period. The carrying value of the Signals cash-generating unit at 30 June 2019 was $18.8m
and the recoverable amount was $18.9m. The carrying value of the Controllers cash-generating unit at 30 June
2019 was $1.5m and the recoverable amount was $6.4m.
Management has budgeted for a 30% increase in revenue in the year ending 30 June 2020, based on long term
supply contracts. This will also bring budgeted revenue to a similar level achieved in the financial year ended
30 June 2018. Cash flows beyond the budget period have been extrapolated using an expected growth rate of
5% for the Signals and Controllers cash-generating units (2018: 5%).
The Group believes that the growth rate selected is justified based on expected growth in demand over the next
five years in line with government projections. The growth rate used to extrapolate the cash flows for periods
beyond the five year period is 3% (2018: 3%).
It has been assumed that the current market share achieved by the Group will be maintained and that the budgeted
growth rate will be achieved through expected growth in market demand.
The pre-tax discount rate applied to the cash flow projections is 14.8% (2018: 13.0%), which is the Group’s
WACC.
The key assumptions used in the value in use calculations represent management’s best estimates at 30 June
2019. Management has considered the sensitivity of the value in use calculations to changes in assumptions.
The value in use calculation is sensitive to revenue changes. If revenue for the Signals cash-generating unit is
below budget by $0.35m (1%) the carrying value of the unit will equal its recoverable amount, if all other
assumptions are unchanged.
(iii) Impairment testing
The Group performed impairment testing at 30 June 2019 and 30 June 2018. There was no impairment of
goodwill allocated to either the Signals or Controllers cash-generating unit at those dates. An impairment
provision of $20m was recorded against the value of goodwill in the Signals cash-generating unit as at 30 June
2016.
(iv) Carrying amount of goodwill allocated to the cash-generating unit
Consolidated Consolidated
2019
$’000
2018
$’000
30,535
(20,000)
10,535
19
10,554
30,535
(20,000)
10,535
19
10,554
Signals
Less: Impairment provision
Controllers
Total
35
Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
10. TRADE AND OTHER PAYABLES
Trade and other payables are carried at amortised cost due to their short term nature and are not discounted. They
represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid
and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and
services. The amounts are unsecured and are usually paid within 60 days of recognition. Trade payables are non-
interest bearing and are normally settled on 30-60 day terms.
Current
Trade creditors
Sundry creditors and accruals
Deferred income
Current trade and other payables
Consolidated
2019
$’000
Consolidated
2018
$’000
6,038
1,303
-
7,341
5,346
3,134
250
8,730
11.
INTEREST BEARING LOANS AND BORROWINGS
All loans and borrowings are initially recognised at the fair value of the consideration received less directly
attributable transaction costs. After initial recognition, interest bearing loans and borrowings are subsequently
measured at amortised cost using the effective interest rate method. Fees paid on the establishment of loan facilities
that are yield related are included as part of the carrying amount of the loans and borrowings. Borrowings are
classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at
least 12 months after balance date.
Current borrowings
Lease liabilities
Non-current borrowings
Term facility (secured)
Lease liabilities
Reconciliation of term facility
Term facility balance comprises:
Principal loan amount payable
Exchange loss
Capitalised interest
Less: capitalised transaction costs
Nominal
interest rate
Year of
maturity
2019
$’000
2018
$’000
Consolidated Consolidated
1.3% - 8.2%
2019-2020
15%
1.3% - 8.2%
2021
2020-2022
142
142
12,931
142
13,073
172
172
13,010
118
13,128
Consolidated Consolidated
2019
$’000
2018
$’000
12,465
262
204
-
12,931
12,500
623
-
(113)
13,010
36
Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
11. INTEREST BEARING LOANS AND BORROWINGS (continued)
Terms and conditions relating to the above financial instruments
(i)
Term Facility - The Company completed a debt restructure on 18 April 2018 under which a loan was
provided by an investment holding entity established by, and funds managed by Asia Debt Management
Hong Kong Limited (ADM Capital) for the US dollar equivalent to A$12.5 million.
(ii) The loan has been revalued based on the spot rate as at 30 June 2019. The loan balance includes a foreign
exchange loss and capitalised interest accrued to 30 June 2019.
(iii) The Company has taken out a six month derivative financial instrument expiring on 18 October 2019 to
hedge the currency exposure on the loan (see note 12). This replaced a previous derivative financial
instrument which matured on 18 April 2018.
(iv) Under the loan facility a contingent liability of USD $557,750 exists should the counter-parties to the loan
agreement and related derivative financial instrument fail to fulfil their repayment commitments. As it is
anticipated that all parties will fulfil their repayment obligations no amount has been recognised as a liability
in the financial report.
(v) The loan is secured by a fixed and floating charge over the Company’s assets.
(vi) The loan is for a term of 3 years, expiring on 18 April 2021. The Company can seek the financier's
approval to extend the term for up to 12 months.
(vii) The loan has a commercial interest rate of 7% per annum, with an additional 8% per annum capitalised into
the loan amount outstanding with effect from 18 April 2019. There is a further increase in the interest rate
from 18 April 2020, assuming that the Company has not exercised its right to repay or re-finance the loan.
(viii) In assessing the effective interest rate on the loan, management has assumed an effective interest rate of 15%.
Further information regarding the effective interest rate risk and foreign currency exposure of borrowings is
set out in note 15.
(ix) During the current and prior financial year, there were no defaults or breaches on the loan.
(x) The carrying amount of the Group’s current and non-current borrowings approximates fair value.
(xi) The Company has a bank guarantee facility with Westpac Bank secured by a cash deposit.
Financing facilities available
Total facilities at reporting date
Term facility (ADM Capital)
Bank guarantee facility (Westpac)
Facilities used at reporting date
Term facility (ADM Capital)
Bank guarantee facility (Westpac)
Facilities unused at reporting date
Term facility (ADM Capital)
Bank guarantee facility (Westpac)
37
Consolidated Consolidated
2019
$’000
2018
$’000
12,931
265
13,196
12,931
133
13,064
-
132
132
12,500
265
12,765
12,500
265
12,765
-
-
-
Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
12. DERIVATIVES
Derivatives are only used for economic hedging purposes and not speculative instruments.
Current assets
Derivative financial asset for foreign currency forward contracts
(i) Classification of derivatives
2019
$’000
2018
$’000
251
619
Derivatives are classified as held for trading and accounted for at fair value through profit or loss unless they
are designated as hedges. They are presented as current assets or liabilities if they are expected to be settled
within 12 months after the end of the reporting year.
(ii) Fair value measurements
The Group uses a three level hierarchy to measure the fair value of financial instruments. Balances are
classified into a level based on the lowest level of input that is significant to the entire fair value measurement.
Level 1:
Level 2:
Level 3:
The fair value of financial instruments traded in active markets (such as publicly traded
derivatives, and trading and available-for-sale securities) is based on quoted market prices
at the end of the reporting period. The quoted market price used for financial assets held by
the Group is the current bid price.
The fair value of financial instruments that are not traded in an active market (for example,
over-the-counter derivatives) is determined using valuation techniques which maximise the
use of observable market data and rely as little as possible on entity-specific estimates. If all
significant inputs required to fair value an instrument are observable, the instrument is
included in level 2.
If one or more of the significant inputs is not based on observable market data, the instrument
is included in level 3.
Derivatives are measured at fair value are based on level 2 inputs. The fair value of foreign currency forward
contracts is determined using forward exchange rates at balance sheet date.
The fair value of derivatives is estimated at the amount that the Group would receive or pay to terminate the
contract at the end of the reporting period taking into account current market conditions (volatility and
appropriate yield curve) and the current creditworthiness of the counterparties.
38
Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
13. PROVISIONS
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past
event, it is probable that an outflow of resources embodying economic benefits will be required to settle the
obligation and a reliable estimate can be made of the amount of the obligation. Provisions are measured at the
present value of management's best estimate of the expenditure required to settle the present obligation at
balance date using a discounted cash flow methodology. The risks specific to the provision are factored into
the cash flows. If the effect of the time value of money is material, provisions are discounted using a current
pre-tax rate that reflects the time value of money and the risks specific to the liability. The increase in the
provision resulting from the passage of time is recognised in finance costs.
Employee benefits
Short-term employee benefits
Provision is made for the Group’s obligation for short-term employee benefits. Short-term employee benefits
are benefits (other than termination benefits) that are expected to be settled wholly before 12 months after the
end of the annual reporting period in which the employees render the related service, including wages, salaries
and sick leave. Short-term employee benefits are measured at the (undiscounted) amounts expected to be paid
when the obligation is settled.
Other long-term employee benefits
Provision is made for employees’ long service leave and annual leave entitlements not expected to be settled
wholly within 12 months after the end of the annual reporting period in which the employees render the related
service. Other long-term employee benefits are measured at the present value of the expected future payments
to be made to employees. The Group’s obligations for long-term employee benefits are presented as non-
current provisions in its statement of financial position, except where the Group does not have an unconditional
right to defer settlement for at least 12 months after the end of the reporting period, in which case the
obligations are presented as current provisions.
Provision for Warranties
A provision has been recognised for expected warranty claims on products supplied by the Group, based on
current sales levels, current information available about past returns and repairs and the warranty period for
products sold. The provision for warranty claims represents the present value of the Directors’ best estimate
of the future outflow of economic benefits that will be required under warranties offered for products supplied
by the Group. Based on past experience, the Group does not expect the full balance of the current provision
to be settled within 12 months. However, as the Group does not have an unconditional right of deferral, the
balance is presented as current.
Analysis of Provisions
Current
Employee benefits
Warranty provision
Non-current
Employee benefits
Consolidated
2019
$’000
Consolidated
2018
$’000
2,645
40
2,685
2,531
39
2,570
203
200
39
Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
14. CONTRIBUTED EQUITY
Ordinary shares
Ordinary shares
At 1 July 2017
Rights issue
Share issue costs
At 30 June 2018
At 30 June 2019
Consolidated Consolidated
2019
$’000
2018
$’000
54,755
54,755
No. Of
Shares ‘000
$’000
275,557
206,668
-
482,225
49,029
6,200
(474)
54,755
482,225
54,755
Ordinary shares have the right to receive dividends as declared and, in the event of a 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.
Gearing ratio
The Directors review the capital structure on a monthly basis. As a part of this review the Board considers
the cost of capital and risks associated with each class of capital. The Group will balance its overall capital
structure through new share issues and the redemption of existing debt, as market conditions allow. The
Group is not subject to any externally imposed capital requirements. The gearing ratios at 30 June 2019 and
2018 were as follows:
Total borrowings
Cash and cash equivalents
Net debt
Equity
Total capital
Gearing ratio
Consolidated
2019
$’000
Consolidated
2018
$’000
13,215
(3,107)
10,108
21,160
31,268
32%
13,300
(4,044)
9,256
19,897
29,153
32%
40
Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
15. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group has applied, for the first time AASB 9 Financial Instruments. The nature and effect of these changes
are discussed below.
AASB 9 Financial Instruments
The Group measures financial instruments such as derivatives, at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. The fair value measurement is based on the
presumption that the transaction to sell the asset or transfer the liability takes place either:
In the principal market for the asset or liability; or
In the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be accessible by the Group.
The fair value of an asset or a liability is measured using the assumptions that market participants would use
when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant's ability to generate
economic benefits by using the asset in its highest and best use or by selling it to another market participant
that would use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are
available to measure fair value, maximising the use of relevant observable inputs and minimising the use of
unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised
within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the
fair value measurement as a whole:
Level 1 – Quoted (unadjusted) market prices in active markets for identical assets or liabilities
Level 2 – Valuation techniques for which the lowest level input that is significant to the fair value
measurement is directly or indirectly observable
Level 3 – Valuation techniques for which the lowest level input that is significant to the fair value
measurement is unobservable
For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis
of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy, as
explained above.
Fair-value related disclosures for financial instruments and non-financial assets that are measured at fair value
or where fair values are disclosed, are summarised in note 12.
AASB 9 Financial Instruments replaces AASB 139 Financial Instruments: Recognition and Measurement for
annual periods beginning on or after 1 January 2018.
The Group has adopted AASB 9 from 1 January 2018 which has resulted in changes to accounting policies and
the analysis for possible adjustments to amounts recognised in the interim condensed consolidated financial
statements.
The Group has assessed which business models apply to the financial instruments held by the Group and has
classified them into the appropriate AASB 9 categories. On adoption of AASB 9, the Group classified financial
assets and liabilities as subsequently measured at either amortised cost or fair value, depending on the business
model for those assets and on the asset’s contractual cash flow characteristics.
41
Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
15. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
The Group has carried out an assessment of trade and other receivables. The Group has determined there is no
material impact of expected credit losses nor has this resulted in any adjustment to prior year comparatives.
There was no impact on the statement of comprehensive income or the statement of changes in equity on
adoption of AASB 9 in relation to classification and measurement of financial assets and financial liabilities.
The following table summarises the impact on the classification and measurement of the Group’s financial
instruments:
Presented in
statement of
financial position
Financial
asset/financial
liability
AASB 139
AASB 9
Reported
$’000
Restated
$’000
Cash and cash
equivalents
Trade and other
receivables
Trade and other
payables
Interest bearing
liabilities
Derivative
Bank deposits
Cash at cost
Cash at cost
No change
No change
Loans and
receivables
Payables
Loans and
receivables
Amortised cost
Amortised cost
No change
No change
Amortised cost
No change
No change
Debt at amortised
cost
Forward exchange
contract
Amortised cost
Amortised cost
No change
No change
Fair value through
profit or loss
Fair value through
profit or loss
No change
No change
Financial instruments
Initial recognition and measurement
Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual
provisions to the instrument. For financial assets, this is equivalent to the date that the Group commits itself
to either the purchase or sale of the asset (i.e. trade date accounting is adopted).
Financial instruments are initially measured at fair value plus transaction costs, except where the instrument is
classified “at fair value through profit of loss”, in which case transaction costs are expensed to profit or loss
immediately.
Classification and subsequent measurement
Financial instruments are subsequently measured at fair value, amortised cost using the effective interest
method, or cost. Amortised cost is calculated as the amount at which the financial asset or financial liability is
measured at initial recognition less principal repayments and any reduction for impairment and adjusted for
any cumulative amortisation of the difference between that initial amount and the maturity amount calculated
using the effective interest method.
The effective interest method is used to allocate interest income or interest expense over the relevant period
and is equivalent to the rate that discounts estimated future cash payments or receipts (including fees,
transaction costs and other premiums or discounts) over the expected life (or when this cannot be reliably
predicted, the contractual term) of the financial instrument to the net carrying amount of the financial asset or
financial liability. Revisions to expected future net cash flows will necessitate an adjustment to the carrying
amount with a consequential recognition of an income or expense item in profit or loss. The Group does not
designate any interests in subsidiaries, associates or joint venture entities as being subject to the requirements
of Accounting Standards specifically applicable to financial instruments.
42
Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
15. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
Financial Liabilities
Non-derivative financial liabilities other than financial guarantees are subsequently measured at amortised cost.
Gains or losses are recognised in profit or loss through the amortisation process and when the financial liability
is derecognised.
Derecognition
Financial assets are derecognised when the contractual rights to receipt of cash flows expire or the asset is
transferred to another party whereby the entity no longer has any significant continuing involvement in the
risks and benefits associated with the asset. Financial liabilities are derecognised when the related obligations
are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability
extinguished or transferred to another party and the fair value of consideration paid, including the transfer of
non-cash assets or liabilities assumed, is recognised in profit or loss. Financial risk management objectives and
policies.
Financial risk management objectives and policies
The Group’s principal financial instruments comprise a term loan facility, finance leases, hire purchase
contracts, forward contracts to purchase foreign currency and cash and short-term deposits.
The Group manages its exposure to key financial risks, including interest rate and currency risk in accordance
with the Group's financial risk management policy. The objective of the policy is to support the delivery of
the Group's financial targets whilst protecting future financial security.
The Group has various financial assets and liabilities such as trade receivables and trade payables, which arise
directly from its operations. It is the Group’s policy that no trading in financial instruments shall be undertaken.
The main risks arising from the Group’s financial instruments are interest rate risk, foreign currency risk, credit
risk and liquidity risk. The Group uses different methods to measure and manage different types of risks to
which it is exposed. These include monitoring levels of exposure to interest rate and currency risk and
assessments of market forecasts for interest rate and foreign exchange prices. Ageing analyses and monitoring
of specific credit allowances are undertaken to manage credit risk. Liquidity risk is monitored through the
preparation of future rolling cash flow forecasts. The Board reviews and agrees policies for managing each of
these risks as summarised below.
Primary responsibility for identification and control of financial risks rests with the Risk Committee under the
authority of the Board. The Board reviews and agrees policies for managing each of the risks identified below,
including the setting of limits for hedging cover of foreign currency and interest rate risk, credit allowances
and future cash flow forecasts.
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the
basis of measurement and the basis on which income and expenses are recognised, in respect of each class of
financial asset, financial liability and equity instrument are disclosed in the notes to the financial statements.
Fair value of financial instruments
The Directors consider that the carrying amount of financial assets and financial liabilities recorded in the
financial statements approximates their fair values (2018: fair values).
Risk exposures and responses
The main risks arising from the Group’s financial instruments are interest rate risk, foreign exchange risk, credit
risk and liquidity risk.
43
Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
15. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
Interest rate risk
The Group's exposure to market interest rates relates primarily to the Group's long-term debt obligations. At
balance date the Group had the following financial assets and liabilities exposed to market interest rate risk:
Financial assets
Cash and cash equivalents
Financial liabilities
Financial liabilities at amortised cost
Net exposure
Consolidated
2019
$’000
Consolidated
2018
$’000
3,107
4,044
(12,931)
(13,010)
(9,824)
(8,966)
The Group’s exposure to market risk for changes in interest rates relates primarily to the Group’s long-term
debt obligations. At 30 June 2019 100% of the Group's borrowings were at a fixed rate of interest (2018:
100%). Details of the Group’s debt are disclosed in note 11.
Interest rate exposure
The Group constantly analyses its interest rate exposure. Within this analysis consideration is given to potential
renewals of existing positions, alternative financing, alternative hedging positions and the mix of fixed and
variable interest rates.
Sensitivity analysis
At 30 June, the Group was not exposed to sensitivity caused by changes in market interest rates because 100%
of its borrowings were at a fixed rate of interest. Potential interest rate exposure could arise however if the
Group were to refinance its borrowings at prevailing market rates of interest.
Foreign exchange risk
Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange
rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are
retranslated at the rate of exchange ruling at the balance date. Non-monetary items that are measured in terms
of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial
transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange
rates at the date when the fair value was determined. The Group currently purchases certain components
denominated in foreign currency, hence exposures to exchange rate fluctuations can arise. Where appropriate,
the Group enters into forward foreign exchange contracts to manage the risk associated with anticipated
purchase transactions up to six months out to hedge the exposure generated. The exchange gain or loss on
these transactions is recognised directly in the statement of comprehensive income.
The Group’s borrowing facility is denominated in US dollars. To manage the risk associated with the exposure
of this balance to exchange rate fluctuations the Group entered into a foreign currency forward contract. This
foreign currency forward contract is accounted for as held for trading with gains (losses) recognised in the
statement of comprehensive income.
44
Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
15. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
The Group's exposure to foreign currency risk at the end of the reporting period, expressed in Australian dollars,
was as follows:
Loan (USD exposure)
Forward exchange contracts (USD exposure)
2019
AUD
$’000
2018
AUD
$’000
12,931
251
13,010
619
During the financial year, the following foreign-exchange related amounts were recognised in profit or loss:
Amounts recognised in profit or loss
Net foreign exchange gain on foreign currency derivatives not qualifying as
hedges included in other income/other expense
Exchange losses on foreign currency borrowing included in other income
Total net foreign exchange gains/(losses) recognised in profit before income
tax for the period
Sensitivity analysis
2019
AUD
$’000
2018
AUD
$’000
862
(881)
(19)
619
(623)
(4)
The Group is primarily exposed to changes in the US dollar exchange rate. The sensitivity of profit or loss to
changes in the exchange rates arises mainly from US dollar-denominated financial instruments is illustrated in
the table below.
Impact on post tax profit
US/$exchange rate – increase 5%
US/$exchange rate – decrease 5%
2019
USD
$’000
2018
USD
$’000
(994)
861
(861)
757
The Group has taken out a forward exchange contract to hedge its currency exposure (see note 12).
Credit risk
Credit risk arises from the financial assets of the Group, which comprise cash and cash equivalents, trade and
other receivables. The Group's exposure to credit risk arises from potential default of the counter party, with a
maximum exposure equal to the carrying amount of these instruments. Exposure at balance date is addressed
in each applicable note. The Group does not hold any credit derivatives to offset its credit exposure.
The Group trades only with recognised, creditworthy third parties and, as such, collateral is not requested nor
is it the Group's policy to securitise its trade and other receivables. It is the Group's policy that all customers
who wish to trade on credit terms are subject to credit verification procedures including an assessment of their
independent credit rating, financial position, past experience and industry reputation. Risk limits are set for
each individual customer in accordance with parameters set by the Board. These risk limits are regularly
monitored. Receivables balances are monitored on an ongoing basis with the result that the Group's exposure
to bad debts is not significant. For transactions that are not denominated in the functional currency of the
relevant operating unit, the Group does not offer credit terms without the specific approval of senior
management. There are no significant concentrations of credit risk within the Group.
45
Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
15. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
Liquidity risk
The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use
of current working capital, term loans and lease liabilities.
Maturity analysis of financial liabilities
Year ended 30 June 2019
≤ 6
months
$’000
6-12
months
$’000
Payables
Interest bearing loans & borrowings
Bank guarantees
Total financial liabilities
7,341
142
-
7,483
Year ended 30 June 2018
≤ 6
months
$’000
6-12
months
$’000
Payables
Interest bearing loans & borrowings
Bank guarantees
Total financial liabilities
8,730
172
-
8,902
1 – 5
years
$’000
-
13,073
133
13,206
1 – 5
years
$’000
-
13,128
265
13,393
> 5
years
$’000
> 5
years
$’000
-
-
-
-
-
-
-
-
Total
$’000
7,341
13,215
133
20,689
Total
$’000
8,730
13,300
265
22,295
-
-
-
-
-
-
-
-
46
Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
16. EXPENDITURE COMMITMENTS
The Group has entered into finance leases and hire purchase contracts in respect of various items of plant and
machinery and motor vehicles. These finance leases and hire purchase contracts typically run for periods of 4
years with an option to renew the lease for a further 3 years or to purchase the asset.
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 fulfilment of the arrangement is dependent on the use of a specific
asset or assets and the arrangement conveys a right to use the asset.
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. 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.
The Group leases a number of warehouse, factory and office facilities under operating leases. The leases typically
run for periods up to 5 years with an option to renew the lease after that date. Operating lease payments are
recognised as an expense on a straight-line basis over the lease term. Lease incentives are recognised as an
integral part of the total lease expense.
Finance leases and hire purchase
Less than one year
Later than one year but less than five years
Less future finance charges
Total finance lease and hire purchase liabilities
Reconciled to:
Current liability
Non-current liability
Operating leases – properties
Less than one year
Later than one year but less than five years
Consolidated
2019
$’000
Consolidated
2018
$’000
154
153
307
(23)
284
142
142
284
1,364
1,950
3,314
146
167
313
(23)
290
172
118
290
1,042
1,480
2,522
47
Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
17. NOTES TO THE STATEMENT OF CASH FLOWS
Cash and cash equivalents in the statement of financial position 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 statement of cash flows,
cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank
overdrafts.
Reconciliation of cash
Consolidated
2019
$’000
Consolidated
2018
$’000
Cash at bank and in hand
3,107
4,044
Cash at bank earns interest at floating rates based on daily bank deposit rates.
Reconciliation of net profit after tax to net cash flows from operations
Net profit
Adjustments for:
Depreciation, amortisation and impairment of non-current assets
Gain on repayment of debt
Loss/(profit) on sale of fixed assets
Foreign exchange gain
Amortisation of capitalised finance fees
Doubtful debts expense/(written off)
Inventories obsolescence expense/(benefit)
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 deferred tax assets
Increase/(decrease) in provisions
Net cash provided by operating activities
Non cash financing and investing activities
Consolidated
2019
$’000
Consolidated
2018
$’000
1,263
6,072
1,474
-
(1)
(54)
113
(5)
-
1,968
(2,433)
(1,158)
202
117
1,486
1,731
(7,883)
-
(234)
24
26
2,520
(557)
525
(1,048)
804
284
2,264
During the year the Group acquired property, plant and equipment with an aggregate value of $83,705 (2018:
$84,249) by means of finance leases. These acquisitions are not reflected in the Statement of Cash Flows.
Reconciliation of liabilities in financing activities
1 July 2018
$’000
Cash flows
$’000
Lease liabilities
Borrowings
Derivative asset
Total liabilities from
financing activities
(290)
(13,010)
619
(12,681)
89
-
-
89
48
Fair value
changes
$’000
-
396
(368)
Other
$’000
30 June 2019
$’000
(83)
(317)
-
(284)
(12,931)
251
28
(400)
(12,964)
Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
18. CLAIMS AND CONTINGENCIES
Guarantees
As detailed in note 19, the Company is party to a deed of cross guarantee with its wholly-owned subsidiaries.
The extent to which an outflow of funds will be required is dependent on the future operations of the entities
that are party to the deed of cross guarantee. No liability is expected to arise. The deed of cross guarantee will
continue to operate indefinitely. As detailed in note 11, the Company is party to a finance facility agreement
with ADM Capital to which the Company’s subsidiaries are guarantors. The extent to which an outflow of
funds will be required is dependent on the risk of default under the finance facility agreement. The Directors
do not expect default to occur.
19. RELATED PARTY DISCLOSURES
a) The Group’s main related parties are as follows:
(i) Key management personnel
Any person(s) having authority and responsibility for planning, directing and controlling the activities of the
entity, directly or indirectly, including any director (whether executive or otherwise) of that entity, are
considered Key Management Personnel. For details of disclosures relating to Key Management Personnel,
refer to note 22.
(ii) Subsidiary entities
The subsidiaries listed below have share capital consisting solely of ordinary shares which are held directly by
the Group. The proportion of ownership interests held equals the voting rights held by the Group. Each
subsidiary’s principal place of business is also its country of incorporation.
Ownership
Interest
Held by
the Group
2019
%
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
2018
%
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Manufacture signs
Non-trading
Manufacture signs
Non-trading
Non-trading
Non-trading
Non-trading
Manufacture
signals, lights etc.
Non-trading
Manufacture
controllers
Non-trading
Non-trading
Non-trading
Name of Subsidiary
Principal Place
Principal
of Business
Australia
Activity
Non-trading
Australia
Non-trading
Traffic Technologies Signal & Hardware
Division Pty Ltd
Traffic Technologies Traffic Management
Division Pty Ltd
De Neefe Pty Ltd
Traffic Technologies Traffic Hire Pty Ltd
Sunny Sign Company Pty Ltd
Pro-Tech Traffic Management Pty Ltd
KJ Aldridge Investments Pty Ltd
Aldridge Traffic Group Pty Ltd
Excelsior Diecasting Pty Limited
Aldridge Traffic Systems Pty Ltd
Aldridge Plastics Pty Ltd
Quick Turn Circuits Pty Ltd
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Traffic Technologies International Limited
Telensa Pty Ltd
Telensa Australia Pty Ltd
Hong Kong
Australia
Australia
49
Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
19. RELATED PARTY DISCLOSURES (continued)
(iii) Entities subject to Individual Order
Pursuant to the Individual Order granted by ASIC under subsection 340(1) of the Corporations Act 2001, relief
has been granted to the subsidiary companies from the Corporations Act 2001 requirements for preparation,
audit and lodgement of their financial reports. The relief granted under the Individual Order is equivalent to
the advantage of the relief offered by ASIC Corporations (Wholly owned Companies) Instrument 2018/785.
As a condition of the Individual Order, Traffic Technologies Ltd and its subsidiary entities (the “Closed
Group”) entered into a Deed of Cross Guarantee on 28 June 2007. The effect of the deed is that Traffic
Technologies Ltd has guaranteed to pay any deficiency in the event of winding up of any controlled entity or
if they do not meet their obligations under the terms of overdrafts, loans, leases or other liabilities subject to
the guarantee. The controlled entities have also given a similar guarantee in the event that Traffic Technologies
Ltd is wound up or if it does not meet its obligation under the terms of overdrafts, loans or other liabilities
subject to the guarantee.
The consolidated statement of profit or loss and statement of financial position of the closed group is equivalent
to the Group’s statement of profit or loss and statement of financial position.
b) Transactions with Directors or Director-related entities
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.
20. SUBSEQUENT EVENTS
Subsequent to balance date there have been no significant events which have affected the operations of the
Group.
21. AUDITOR’S REMUNERATION
Amounts received or due and receivable by:
Audit or review of the financial report of the entity and
any other entity in the Group
-
ShineWing Australia
81,500
79,500
Consolidated Consolidated
2019
$
2018
$
50
Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
22. KEY MANAGEMENT PERSONNEL DISCLOSURES
a) Compensation of Key Management Personnel
Details of the nature and amount of each element of the remuneration of key management personnel are
disclosed in the Remuneration Report section of the Directors’ Report.
Compensation by Category:
Key Management Personnel
Short-term employee benefits
Post-employment benefits
Other long-term benefits
Consolidated
2019
$
2018
$
935,673
64,362
29,208
1,029,243
1,060,535
64,362
(9,943)
1,114,954
b)
Shares issued on exercise of remuneration options
No shares have been issued to key management personnel as a result of the exercise of remuneration
options.
c) Option holdings of Key Management Personnel
There were no share options outstanding at 30 June 2019 or at the date of this report (2018: nil).
d) Loans to Key Management Personnel
There were no loans made to Directors or executives during the financial year and none are outstanding
as at the date of this report.
23. OPERATING SEGMENTS
The Group has only one business segment: Traffic Products. The Group’s chief operating decision maker (the
Managing Director) reviews financial information on a consolidated basis and makes strategic decisions based
on this consolidated information.
Major customers
The Group has a number of customers to which it provides both products and services. The Group supplies a
number of government agencies that combined accounted for 9% of sales (2018: 13%). Revenue from the
largest non-government customer accounted for 11% (2018: 12%) of sales.
Geographical information
The Group operates in one principal geographical location, namely Australia.
Revenue by geographic location:
Consolidated
2019
$’000
Consolidated
2018
$’000
41,923
6,398
48,321
50,292
6,378
56,670
Australia
Overseas
Total
All the Group’s non-current assets are located in Australia.
51
Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
24. PARENT ENTITY INFORMATION
The individual financial statements for the parent entity show the following aggregate amounts:
Current assets
Total assets
Current liabilities
Total liabilities
Issued capital
Retained earnings
Total shareholders’ equity
Profit/(loss) for the year
Total comprehensive income
Guarantees entered into by the parent entity^
2019
$’000
6,429
54,545
57,048
69,790
54,755
(70,000)
(15,245)
(2,574)
(2,574)
133
2018
$’000
7,756
55,475
55,127
68,146
54,755
(67,426)
(12,671)
4,365
4,365
265
^ As a condition of the Individual Order, Traffic Technologies Ltd and its subsidiary entities (the “Closed
Group”) entered into a Deed of Cross Guarantee on 28 June 2007. The effect of the deed is that Traffic
Technologies Ltd has guaranteed to pay any deficiency in the event of winding up of any controlled entity or
if they do not meet their obligations under the terms of overdrafts, loans, leases or other liabilities subject to
the guarantee. The controlled entities have also given a similar guarantee in the event that Traffic Technologies
Ltd is wound up or if it does not meet its obligations under the terms of overdrafts, loans or other liabilities
subject to the guarantee.
52
Traffic Technologies Ltd
Directors’ Declaration
For the year ended 30 June 2019
DIRECTORS’ DECLARATION
The Directors of the Company declare that:
1. The consolidated financial statements and notes of Traffic Technologies Ltd are in accordance with the
Corporations Act 2001 and:
(a)
(b)
comply with Australian Accounting Standards and the Corporations Regulations 2001; and
give a true and fair view of the consolidated entity’s financial position as at 30 June 2019 and of its
performance for the year ended on that date.
2. The Company has included in the notes to the financial statements an explicit and unreserved statement of
compliance with International Financial Reporting Standards.
3.
In the Directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay its debts
as and when they become due and payable.
4. The Directors have been given the declarations by the Managing Director and Chief Financial Officer required
by section 295A of the Corporations Act 2001.
The members of the Closed Group identified in note 19 are parties to the deed of cross guarantee under which each
company guarantees the debts of the others. At the date of this declaration there are reasonable grounds to believe
that the companies which are parties to this deed of cross guarantee will as a consolidated entity be able to meet any
obligations or liabilities to which they are, or may become, subject to, by virtue of the deed of cross guarantee
described in note 19.
This declaration is made in accordance with a resolution of the Board of Directors and is signed for and on behalf of
the Directors by:
On behalf of the Board
Garry Lowrey
Chairman
Melbourne
28 August 2019
53
ASX Additional Information
As at 12 August 2019
Additional information required by the Australian Securities Exchange and not shown elsewhere in this report is as
follows. The information is current as at 12 August 2019.
a) Distribution of Shareholdings
Ordinary Shares
Number
of
Holders
Number of
Shares
149
34
46
370
281
880
327
20,201
92,004
384,832
17,601,892
464,125,766
482,224,695
2,264,214
No. of Shares % Held
60,861,510 12.62%
41,060,719
23,104,362
19,844,761
18,000,000
17,606,063
15,661,266
14,137,739
12,500,000
12,212,162
12,000,150
11,848,360
10,644,630
7,166,667
6,000,000
5,500,000
5,461,905
5,327,151
5,195,377
8.51%
4.79%
4.12%
3.73%
3.65%
3.25%
2.93%
2.59%
2.53%
2.49%
2.46%
2.21%
1.49%
1.24%
1.14%
1.13%
1.10%
1.08%
5,000,000
1.04%
309,132,822 64.11%
Ordinary Shares
Number
32,056,923
51,705,349
%
6.65
10.70
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001 and over
Holdings less than a marketable parcel
b) Twenty Largest Shareholders
Name
1
BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD
DRP
RSAM INVESTMENTS PTY LTD
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