TETRA Technologies, Inc. Annual Report 2021

FY2021 Annual Report · TETRA Technologies, Inc.

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2021

A nnual Repor t

TRAFFIC TECHNOLOGIES LTD
ABN 21 080 415 407
AND CONTROLLED ENTITIES

ANNUAL FINANCIAL REPORT

FOR THE YEAR ENDED 30 JUNE 2021

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
2021.

I am pleased to report a much improved result compared to 2020. Revenue and EBITDA have both improved
significantly. The Group has benefitted in particular from growth in sales of LED street lights.

The Group has been able to continue trading in all states and territories throughout the COVID-19 pandemic and
associated lockdowns, although export sales have been affected to some extent by international travel bans and
there have been supply chain and freight forwarding delays associated with COVID-19.

Two acquisitions were completed during the year. The acquisition of the L&M installation and maintenance
business was completed in August 2020. L&M is an accredited provider and installer for Vic Roads involving traffic
signal, urban traffic controller, street lighting and electronic speed sign installation and maintenance and is fully
approved for installation work by the Department of Transport in Victoria and holds a number of term
maintenance contracts with local councils across Victoria.

The acquisition of the ITS business was completed in June 2021. The ITS (‘Intelligent Transport Systems’) business
focuses on the design, development, manufacture and supply of electronic road signage and software systems to
customers across Australia and has also enabled the Group to expand its operations in Queensland.

The Group has continued to develop its LED street lighting and “Smart Cities” products which are seen as
significant growth areas for the future. Our “Smart City” platform enables users to monitor and control thousands
of assets linked through a secure private network to a central control system. Applications include control of
traffic management assets such as street lights, as well as detection of traffic flows, parking availability,
environmental and waste management.

The outlook for the Group is positive given the increase in government expenditure on infrastructure projects, a
strong order book and a portfolio of term contracts. However, the timing of revenue recognition is subject in
particular to government expenditure decisions and, more recently, the impact of COVID-19 and associated
lockdowns and international travel restrictions on the Group’s supply chain and freight forwarding channels.

The Group‘s loan facility with ADM Capital has been extended to 30 September 2021. The Group is currently in
discussions to refinance this facility and expects to make a further announcement when these discussions have
been completed.

Along with my fellow Directors, I would like to thank shareholders for their continued support of the Group.

Mark Hardgrave
Chairman

Traffic Technologies Ltd and Controlled Entities
Managing Director’s Operating and Financial Review

Dear Shareholder,

Operating Result

The Group has reported the following result for the financial year ended 30 June 2021:

Sales revenue

Earnings before Interest, Tax, Depreciation
and Amortisation (EBITDA)

Depreciation Amortisation and Impairment
Expense

Earnings before Interest and Tax (EBIT)

Net Profit/(Loss) After Tax (NPAT)

Year to
30 June 2021

Year To
30 June 2020+

$’m

52.3

4.5

(2.2)

2.3

0.2

$’m

44.5

1.4

(12.9)

(11.4)

(13.8)

The 2021 result represents a significant improvement compared to the previous financial year. Trading revenue
improved by 18% to $52.3m, compared to $44.5m in 2020 and EBITDA improved by 222% to $4.5m, compared to
EBITDA of $1.4m in 2020, whilst NPAT was a profit of $0.2m, compared to a loss of $13.8m in 2020.

The Group has been able to continue operating in all states throughout the coronavirus (COVID-19) pandemic and
associated lockdowns despite major delays in the supply chain caused by lockdowns affecting local and overseas
suppliers.

Whilst the Group has taken advantage of Federal and State stimulus programs where possible to mitigate the
financial impact of COVID-19, the Group was not eligible for the Federal Government’s JobKeeper program as
turnover did not fall below the required threshold. The Group however has continued to review its cost base
during the lockdown period and has reduced costs along with further increasing manufacturing efficiencies.

Depreciation, amortisation and impairment expenses were $2.2m (2020 $12.9m), while finance costs were $2.1m
(2020: $2.4m). The Group expects to reduce finance costs once it completes a refinance of its debt facilities in the
very near future.

The financial statements have been prepared on a going concern basis, which assumes continuity of normal
business activities and the realisation of assets and the settlement of liabilities in the ordinary course of business.
Accordingly, the financial statements do not include any adjustments relating to the recoverability and
classification of recorded assets or to the amounts and classification of liabilities that might be necessary should

the consolidated entity not continue as a going concern, except for the classification of the ADM Capital loan
facility as a current liability.

Financial Position

Net assets were $8.3m at 30 June 2021 compared to $8.1m at 30 June 2020, reflecting the net profit for the year.
Net debt, excluding liabilities associated with capitalised property leases, was $11.8m at 30 June 2021, compared
to $7.9m at 30 June 2020.

The increase in net debt is due to capitalised interest on the ADM Capital loan and the drawdown of funds from
the Group’s debtor finance provider as sales activities increased during the year in order to meet increasing
demand for the Group’s products, along with advance payments to offshore suppliers causing a reduction in cash
balances.

Cash Flow

Net operating cash inflows were $0.9m for the year (2020: inflow $5.1m); net operating cash flow has been
affected by the requirement of overseas suppliers to be paid in advance before shipment of parts. Net investing
cash outflow was $2.8m (2020: outflow $2.0m), including investment in R&D to further expand and develop the
Group’s “Smart City Software” and product portfolio and the payment of instalments towards the acquisition of
the L&M and ITS businesses during the year. Net financing cash inflow was $0.9m (2020: outflow $2.6m),
reflecting drawdowns from the Group’s debtor finance facility as sales have increased.

Review of Operations

Demand for the Group’s products and services has seen an increase despite COVID-19 lockdowns and travel
restrictions. The Group’s order book has remained strong during the pandemic with the increase in road
infrastructure expenditure announced by Federal and State Governments and following a number of contract wins
announced recently. We expect to see further improvement as government expenditure on infrastructure is
increased and international restrictions are eased.

The Group has continued to develop and roll-out its proprietary “Smart City” software “TST”, enabling road
authorities, councils and power companies to fully utilise and manage critical assets in real time where possible.

Street and road lighting sales continue to increase with term contracts in place and with infrastructure programs
deployed across the country. Expectations are that there will be no slowdown in this area as the trend continues
to be positive with demand for LED smart street lights with a lower carbon footprint meeting demanding
government requirements.

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 State road authorities, local government and the
largest road projects. With the next generation of LED traffic signals being available, the Group anticipates
increasing activity in the years ahead with the roll out of large scale infrastructure programs commenced by
Federal and State governments.

Export Markets

The Group‘s export markets, including the UK, New Zealand, Asia, the Middle East and South America, have
performed within expectations, whilst the Group’s traffic controllers continue to enjoy success despite COVID-19
and restrictions on international travel. Significant traffic controller contracts have been awarded recently from
New Zealand, Singapore, China and Qatar where the Group has also identified opportunities to further supply its
state-of-the-art “Smart City” software. Our export footprint continues to grow in the UK, Asia and South America
and, whilst there have been some project delays due to lockdowns and international travel restrictions, demand
has continued despite these restrictions and the outlook is promising when government restrictions ease.

Business Strategies and Prospects

We have continued to invest in research and development with a major emphasis being the roll-out of our “Smart
City” platform, “TST”. With travel restrictions and lockdowns in place, the need for remote monitoring in real time
of critical assets and infrastructure has never been more important than what is faced in the current environment.
Significantly, we have first mover advantage in various aspects of this technology as our “Smart City” platform has
multiple applications which are of significant benefit to users. Major customers include road authorities in
Australia and overseas and local councils as well as operators of large networks of assets.

Our “Smart City” platform enables users to monitor and control thousands of assets linked through a secure
private network to a central control system. Applications include control of traffic management assets such as
street lights, as well as detection of traffic flows, parking availability, environmental, waste management, theft
and critical asset knock down. The Group’s “Smart City” software “TST” is attractive to road authorities, councils
and power companies due to its ability to fully utilise and maintain critical assets in real time in a significantly more
cost-effective manner, driving financial savings and higher utilisation of assets as well as reduction of greenhouse
gases and safety.

With our “TST” system activated and functioning in Victoria, New South Wales, South Australia and Queensland,
governments are realising the cost-benefit of “Smart City” systems and the power it delivers. The base structure
today has enabled the Group to explore and trial the system on a global scale with an anticipated annuity revenue
stream for years to come.

The Group’s LED, “Smart City”-ready lighting products continue to grow across Australia and the UK following
contract wins previously released and, with the securing of approvals, long term supply contracts and orders from
State and local government agencies, power companies and contractors, we continue to win significant contracts
in this area and, subject to COVID restrictions, we anticipate that these contract wins will underpin our growth
moving forward.

The recent acquisitions of the L&M and ITS businesses, with accreditations in Victoria, NSW and Queensland, have
proven to be positive contributors to the Group These acquisitions have enhanced the capability within the Group
to undertake installation and maintenance work, along with the design, development and manufacture of
electronic infrastructure signage and software systems which directly interact with the Group’s “Smart City
Platform” TST allowing the Group the ability to further expand into the lucrative Intelligent Transport sector. With
further accretive and strategic acquisitions on the horizon the Group is well positioned to grow and benefit from
Federal and State government infrastructure projects.

Outlook

We believe the outlook for the Group is positive and buoyant and is well positioned to benefit in the years ahead,
taking into account current government expenditure on road infrastructure, the Group beginning FY22 with a
strong order book with locked-in contracts underpinning over 40% of forward revenue, the Group’s diversification
program into “Smart Cities” technology and IoT together with expectations of increased investment by Federal
and State governments in infrastructure programs to assist economic recovery.

I would like to thank all shareholders for their ongoing support, our staff for their relentless commitment to the
Group and our financiers who have supported the Group during these challenging times.

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. Mark Hardgrave
Mr. Con Liosatos
Mr. Tim Fry (appointed 26 November 2020)
Mr. Garry Lowrey (retired 25 November 2020)

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

Grant Thornton
Collins Square, Tower 5
727 Collins Street
Melbourne VIC 3008

Traffic Technologies Ltd and Controlled Entities
Financial Report for the year ended 30 June 2021

CONTENTS

Page No.

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

Traffic Technologies Ltd
Directors’ Report

Your Directors submit their report for the year ended 30 June 2021.

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.

Mr. Mark W Hardgrave (Age 63) B Com ACA MAICD

Independent Non-Executive Chairman. Appointed January 2013.
Mr. Hardgrave has a corporate advisory and investment management background. He is also a Non-Executive
Director of ASX listed companies Forbidden Foods Limited and Pental Limited. He was co-founder and former Joint
Managing Director of M&A Partners. 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 was appointed non-executive
Chairman of the Company in November 2020.

Mr. Con L Liosatos (Age 59) MAICD

Managing Director. Appointed April 2003.
Mr. Liosatos has over 35 years’ experience in the construction industry, including over 26 years in the lighting
industry specialising in research and design. He also has 18 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 2021.

Mr. Peter Timothy James Fry (Age 57) GAICD

Independent Non-Executive Director. Appointed November 2020.

Mr. Fry is an experienced financial professional with established achievements in enabling operational change and
improved business outcomes for both internal and external stakeholders. He is currently Chairman of Delre National
Food Group and an independent non-executive director of Cloud Paper Group. Previously he was Group Chief
Financial Officer of Noske Logistics Group and then Group Financial Controller of Bulla Dairy Foods. Before relocating
from the UK to Australia in 2010, Mr. Fry held senior financial positions in the UK, including as Finance Director of
Servomex Group Ltd and Seal Analytical Ltd. He holds an accountancy and finance qualification from the University
of Sussex in the UK and is a Graduate Member of the Australian Institute of Company Directors. Mr. Fry is Chairman
of the Audit, Risk, Nomination & Remuneration and Corporate Governance committees. Mr. Fry is not currently a
director of any other listed companies.

The following Director also served on the Company’s Board during the year and retired on 25 November 2020:

Mr. Garry P Lowrey

Traffic Technologies Ltd
Directors’ Report

Skills and Experience

The following table shows the skills sets of each of the Board members:

Mark Hardgrave

Con Liosatos

Tim Fry

Corporate Governance

Traffic Management & Infrastructure

ASX Listed Companies

Human Resources

Legal

Finance

Commercial

Manufacture/assembly

Government Contracts

Information Technology

Company Secretary



Mr. Peter K Crafter (Age 64) LL.B (Hons.) MBA FCA CA MCT FAICD FGIA FCG
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 2020

Acquired through
On-Market Trades

Other

Balance at
30 June 2021

Directors

Mr. Mark Hardgrave

Mr. Con Liosatos

Mr. Tim Fry

Executive

Mr. Peter Crafter

Total

3,215,054

33,726,923

10,000

36,951,977

3,215,054

33,726,923

10,000

36,951,977

Traffic Technologies Ltd
Directors’ Report

DIVIDENDS

The Directors do not recommend the payment of a dividend for the financial year ended 30 June 2021 (2020: Nil).

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 one office in England.

The Group specialises in “Smart City” control systems, LED road and street lights along with the design, manufacture
and installation of traffic signals, traffic controllers, pedestrian countdown timers, electronic road signs, emergency
telephones and road lighting products. 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. Through the Group’s subsidiary, Aldridge
Traffic Systems, which has been the major participant in the traffic signals market in Australia for over 50 years,
customers, mainly State road authorities or contractors building or maintaining traffic intersections for State road
authorities, can monitor and analyse assets in real time in order to make informed decisions on our road networks.

Quick Turn Circuits Pty Ltd (QTC), a subsidiary of the Group, is involved in the manufacture of urban traffic
controllers. Having designed and supplied urban traffic controllers across Asia, Middle East and South America, QTC
is well placed for future improvements in cities requiring “Smart City technology” where the urban traffic controller
is automated to regulate the sequencing and timing of traffic signals by monitoring vehicular and pedestrian
demands and adjusting to meet these requirements.

In August 2020, the Group completed the acquisition of the business and assets of L&M Traffic Signals Pty Ltd (L&M).
L&M is an accredited provider and installer for Vic Roads involving traffic signal, urban traffic controller, street
lighting and electronic speed sign installation and maintenance and fully approved for installation work by the
Department of Transport in Victoria and holds a number of term maintenance contracts with local councils across
Victoria. In June 2021, the Group completed the acquisition of the business and assets of Artcraft Pty Ltd. The ITS
(‘Intelligent Transport Systems’) business focuses on the design, development, manufacture and supply of electronic
road signage and software systems to customers across Australia.

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.

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.

Supply chain disruption and freight forwarding delays due to the COVID-19 pandemic and associated
lockdowns.

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.

Traffic Technologies Ltd
Directors’ Report

OPERATING AND FINANCIAL REVIEW (continued)

•

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 as 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.

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.

COVID-19 – the Group has been able to continue trading during the pandemic having implemented a variety
of measures including enhanced hygiene, social distancing and COVID Safe plans.

Significant Changes in State of Affairs

On 28 August 2020 the Group acquired the business and assets of L&M Traffic Signals Pty Ltd (L&M). L&M is an
accredited provider and installer for Vic Roads and several local councils across Victoria.

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 2021, the Group paid premiums of $130,879 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.

Traffic Technologies Ltd
Directors’ Report

REMUNERATION REPORT (AUDITED)

This Remuneration Report for the financial year ended 30 June 2021 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. Mark Hardgrave

Independent Non-executive Chairman

Mr. Tim Fry

Independent Non-executive Director (appointed 26 November 2020)

Mr. Garry Lowrey

Former Non-executive Chairman (retired 25 November 2020)

Executives

Mr. Con Liosatos

Mr. Peter Crafter

Managing Director

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.

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:

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.

Fixed remuneration

a)
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.

Variable remuneration

b)
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).

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:

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.

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 provide
competitive fixed
remuneration taking
account of the role,
market, experience
and performance.

To reward executives
for their contribution
to achievement of
Company outcomes
according to specified
KPI’s.

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.

Company and individual
performance are assessed
during the annual
remuneration review.

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%.

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.

b) Performance hurdles
Performance hurdles are thresholds which are required to be met for an executive's remuneration to vest.

Traffic Technologies Ltd
Directors’ Report

(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 is 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 is outlined below.

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.

(ii) What are the KPIs and why were they chosen?

STIs

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 is measured over a 12-month period. There will be no re-testing of performance
hurdles.

The performance hurdle for LTI targets is 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.

Traffic Technologies Ltd
Directors’ Report

(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) Claw back
The Company has the ability to reduce, cancel or claw back 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 2021.

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) 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

c) 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.

Performance outcomes

5.1 Executives

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 2021 is as follows:

Traffic Technologies Ltd
Directors’ Report

•

TFR for the financial year ended 30 June 2021 was $534,721.

No STI was awarded to Mr. Liosatos for the 2021 financial year.

No LTI was awarded to Mr. Liosatos for the 2021 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 2020 and 30 June 2021
are included in the table below.

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 2021 was $288,863.

No STI was awarded to Mr. Crafter for the 2021 financial year.

No LTI was awarded to Mr. Crafter for the 2021 financial year.

Further details of the executives’ remuneration for the financial years ended 30 June 2020 and 30 June 2021
are set out in the table below.

Performance against targets

•

No STI’s were awarded for the 2021 financial year.

No LTI’s were awarded for the 2021 financial year.

5.2 Non-executive Directors

Details of non-executive Directors’ remuneration for the financial years ended 30 June 2020 and 30 June 2021 are
set out in the table 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

2021

2020

2019

2018

2017

Net profit/(loss) $’000)

$201

($13,829)

$1,263

$6,072

$1,011

EPS (cents)

Share price (cents)

0.04

4.0

(2.87)

1.8

0.26

2.4

1.88

3.3

0.37

3.6

Management remuneration is not related to the Company's performance and shareholder returns except to the
extent disclosed above.

Traffic Technologies Ltd
Directors’ Report

REMUNERATION OF KEY MANAGEMENT PERSONNEL

Short-term benefits

Post-employment
benefits

Termination
Benefits

Salary & fees
$

Non-monetary
$

Cash
Bonus
$

Superannuation
$

Long-term
benefits
Long service
leave
$

Share based
payments

Options
$

Total

%
Performance
related

108,674

57,750

492,962

247,921

907,307

87,847

34,354

45,281

492,962

247,921

908,365

12,973

19,022

31,995

16,759

17,390

34,149

10,324

5,486

25,000

23,552

64,362

8,346

3,263

4,302

25,000

23,552

64,463

9,111

4,781

13,892

9,237

4,841

14,078

118,998

63,236

540,046

295,276

- 1,017,556

96,193

37,617

49,583

543,958

293,704

- 1,021,055

Year to 30 June 2020

Non-executive Directors
Mr. Garry Lowrey

Mr. Mark Hardgrave

Executives

Mr. Con Liosatos

Mr. Peter Crafter

Total

Year to 30 June 2021

Non-executive Directors
Mr. Mark Hardgrave

Mr. Tim Fry

Mr. Garry Lowrey

Executives

Mr. Con Liosatos

Mr. Peter Crafter

Total

END OF AUDITED REMUNERATION REPORT

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. Mark Hardgrave

Mr. Con Liosatos

Mr. Tim Fry

Mr. Garry Lowrey

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. Tim Fry

Nomination & Remuneration – Mr. Tim Fry

Corporate Governance – Mr. Tim Fry

Risk - Mr. Tim Fry

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 2016/191. 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. Mark Hardgrave
Independent Non-Executive Chairman
27 August 2021
Melbourne

Collins Square, Tower 5
727 Collins Street
Melbourne VIC 3008

Correspondence to:
GPO Box 4736
Melbourne VIC 3001

T +61 3 8320 2222
F +61 3 8320 2200
E info.vic@au.gt.com
W www.grantthornton.com.au

Auditor’s Independence Declaration

To the Directors of Traffic Technologies Limited

In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of
Traffic Technologies Limited for the year ended 30 June 2021, I declare that, to the best of my knowledge and belief, there
have been:

no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and

no contraventions of any applicable code of professional conduct in relation to the audit.

Grant Thornton Audit Pty Ltd
Chartered Accountants

Michael Climpson
Partner

Melbourne, 27 August 2021

Grant Thornton Audit Pty Ltd ACN 130 913 594
a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389

www.grantthornton.com.au

‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients
and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International
Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are
delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one
another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to
Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to
Grant Thornton Australia Limited.

Liability limited by a scheme approved under Professional Standards Legislation.

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 (Fourth
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 27 August 2021 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).

Traffic Technologies Ltd and Controlled Entities
Consolidated Statement of Profit or Loss and Other Comprehensive Income
For the year ended 30 June 2021

Note

Consolidated

Consolidated
Amended
2020
$’000

44,522

(31,402)

13,120

591

(7,902)

(1,161)

(72)

(397)

(525)

(2,247)

(2,297)

2021
$’000

52,330

(37,028)

15,302

999

(7,964)

(1,094)

(34)

(164)

(468)

(2,043)

(2,223)

(10,554)

2,311

(11,444)

(2,106)

(2,381)

205

(13,825)

(4)

201

(13,829)

201

(13,829)

Cents

0.04

Cents

(2.87)

Revenue

Cost of materials and direct labour

Gross profit

Other income

Employee benefits expense

Occupancy costs

Advertising and marketing expense

Impairment loss on financial assets

Loss on derivatives held for trading

Other expenses

Depreciation and amortisation expense

Impairment expense

Earnings before interest and tax (EBIT)

Finance costs

Net profit/(loss) for the year before income tax

Income tax expense

Net profit/(loss) for the year

Other comprehensive income

Total comprehensive income/(loss) for the year

Earnings/(loss) per share

- Basic (cents per share)

- Diluted (cents per share)

The accompanying notes form part of these financial statements.

Traffic Technologies Ltd and Controlled Entities
Consolidated Statement of Financial Position as at 30 June 2021

Note

Consolidated

Consolidated
Amended
2020
$’000

3,636

7,863

10,117

21,616

2,319

9,177

11,496

2021
$’000

2,602

9,927

12,176

24,705

1,749

1,144

9,796

12,689

37,394

33,112

10,724

11,259

3,158

25,141

3,709

204

3,913

29,054

8,340

8,752

8,566

2,730

525

20,573

4,197

203

4,400

24,973

8,139

54,755

(46,415)

8,340

54,755
(46,616)

8,139

ASSETS

Current Assets

Cash and cash equivalents

Trade and other receivables

Inventories

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

Derivative financial instrument

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

The accompanying notes form part of these financial statements.

Traffic Technologies Ltd and Controlled Entities
Consolidated Statement of Changes in Equity
For the year ended 30 June 2021

Consolidated

At 1 July 2019

Adjustment from the adoption of AASB 16

Prior period adjustment - deferred tax (see note 1h)

At 1 July 2019 adjusted

Loss for the year

Prior period adjustment - deferred tax (see note 1h)

Loss for the year adjusted

Other comprehensive income

Total comprehensive income for the year

At 30 June 2020

Profit for the year

Other comprehensive income

Total comprehensive income for the year

Contributed
Equity
$’000

Accumulated
Losses
$’000

Total

$’000

54,755

(33,595)

21,160

(37)

845

(37)

845

54,755

(32,787)

21,968

(13,985)

156

(13,829)

54,755

(46,616)

8,139

201

At 30 June 2021

54,755

(46,415)

8,340

The accompanying notes form part of these financial statements.

Traffic Technologies Ltd and Controlled Entities
Consolidated Statement of Cash Flows
For the year ended 30 June 2021

Note

Consolidated

2021

$'000

55,596

(53,344)

(1,389)

(4)

(9)

862

(247)

(1,824)

(764)

(2,779)

1,726

(44)

(799)

883

(1,034)

3,636

2,602

2020

$'000

50,512

(43,813)

(1,459)

(4)

(82)

5,170

(406)

(1,638)

(2,000)

7,500

(9,580)

(472)

(89)

(2,641)

529

3,107

3,636

Cash flows from operating activities

Receipts from customers

Payments to suppliers and employees

Interest received

Interest paid

Income tax paid

Acquisition costs

Net cash from operating activities

Cash flows from investing activities

Proceeds from sale of plant and equipment

Purchase of property, plant and equipment

Purchase of intangible assets

Purchase of businesses

Net cash from investing activities

Cash flows from financing activities

Proceeds from borrowings

Repayment of borrowings

Repayment of finance leases

Payment of borrowing 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

The accompanying notes form part of these financial statements.

Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021

The financial report of Traffic Technologies Ltd (the Company) for the year ended 30 June 2021 was authorised for
issue in accordance with a resolution of the Directors on 27 August 2021. 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

Basis of Preparation

a)
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 2016/191. The Company is an entity to which the Instrument applies.

New Standards Adopted by the Group

The consolidated entity has adopted all of the new or amended Accounting Standards and Interpretations issued by
the Australian Accounting Standards Board (‘AASB’) that are mandatory for the current reporting period. Any new
or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.

c) Going concern

The financial statements have been prepared on a going concern basis, which assumes continuity of normal business
activities and the realisation of assets and the settlement of liabilities in the ordinary course of business. Accordingly,
the financial statements do not include any adjustments relating to the recoverability and classification of recorded
assets or to the amounts and classification of liabilities that might be necessary should the consolidated entity not
continue as a going concern, except for the classification of the ADM loan facility as a current liability.

The ADM loan facility falls due on 30 September 2021. Because this is less than 12 months after the balance date
of 30 June 2021, there is material uncertainty that may cast significant doubt whether the Group can continue as a
going concern if this loan is not refinanced by that date.

In assessing the appropriateness of the going concern concept the following factors have been taken into
consideration by the Directors:

•
•

•

The consolidated entity has been able to continue trading throughout COVID-19 lockdown periods.
The consolidated entity is expected to continue to generate positive earnings before interest, tax,
depreciation and amortisation (EBITDA) in the 2022 financial year.
The Directors are working on a strategy to refinance the debt facility with ADM Capital.

Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

d) 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.

e) 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.

Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

f) 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.

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.

g) Significant accounting estimates and assumptions

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.

h) Prior period error

The Group had previously recognised a deferred tax liability in previous periods. However, because the Group has
available tax loss carry forwards and R&D tax credits, the prior period deferred tax liability of $1,001,000 has been
derecognised. This has resulted in a credit to opening reserves as at 1 July 2019 of $845,000 and a credit to tax
expense of $156,000 in the income statement for the year ended 30 June 2020. See also note 4.

Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021

2. REVENUE

Revenue

Sale of goods – recognised at point in time

Sale of services – recognised over period of time

Revenue from contracts with customers

Other income

Net (loss)/profit on disposal of fixed assets

Net exchange gain/(loss) on foreign currency borrowings

Cash boost (COVID-19 Federal Government incentive)

Other income

Total other income

Consolidated

2021
$’000

2020
$’000

47,484

44,522

4,846

52,330

44,522

(7)

420

500

999

534

591

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 are recognised when the right to receive the income is established.

Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021

3. EXPENSES

Employee related expenses

Wages and salaries

Superannuation (defined contribution)

Other employee benefits expense

Analysed as follows:

Direct labour

Indirect labour

Other expenses

Administrative costs

Public company costs

Depreciation, amortisation and impairment expenses

Depreciation

Amortisation

Total depreciation and amortisation

Impairment

Total

Finance costs

Interest on loans – paid or payable

Lease interest

Amortisation of borrowing costs

Total finance costs

Research and development costs

Research costs expensed

Finance costs

Consolidated
2021
$’000

Consolidated
2020
$’000

11,174

1,078

2,648

14,900

6,936

7,964

14,900

1,693

350

2,043

1,011

1,212

2,223

1,908

166

2,106

10,151

1,010

2,588

13,749

5,847

7,902

13,749

2,037

210

2,247

907

1,390

2,297

10,554

12,851

2,106

215

2,381

Finance costs are recognised according to the effective interest rate method which is the rate that discounts
estimated future cash payments through the estimated life of the financial liability to the amortised cost of the
financial liability.

Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021

INCOME TAX

Consolidated
2021
$’000

Consolidated
2020
$’000

Income Tax Expense
The major components of income tax expense are:
Statement of Comprehensive Income
Current income tax
Current income tax charge

Deferred income tax

Relating to origination and reversal of temporary differences

Income tax expense reported in the statement of comprehensive income

Numerical reconciliation between aggregate tax expense recognised in the statement of comprehensive
income and tax expense calculated per the statutory tax rate

Accounting profit/(loss) before income tax

Prima facie income tax expense/(benefit) at the Group’s statutory income
tax rate of 30% (2020: 30%)

Non-deductible expenditure

Non-assessable income

Non-refundable Foreign Tax

Prior year under/over provision

Net benefit of R&D tax incentive

Set-off of deferred tax liability

Variance in deferred tax adjustments

Unrecognised deferred tax asset on current year tax losses

Aggregate income tax expense

205

(150)

(45)

296

(186)

(13,825)

(4,147)

3,233

566

(156)

374

Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021

4. INCOME TAX (continued)

Deferred Tax Balances

Statement of Financial Position Statement of Profit or Loss Income

Consolidated
2021
$’000

Consolidated
2020
$’000

Consolidated
2021
$’000

Consolidated

2020
$’000

(2,430)

(103)

1,080

(1,187)

1,187

(2,317)

(163)

927

209

(3)

209

(1,001)

1,001

(113)

(204)

(5)

153

(177)

(169)

(186)

186

(9)

200

(6)

(172)

(140)

140

Consolidated
2021
$’000

Consolidated
2020
$’000

1,202

361

890

361

707

1,251

1,068

Temporary differences

Intangible assets

Right to use 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)

Set-off of deferred tax assets & liabilities

Net deferred tax assets & liabilities

Tax losses

The following tax losses have not been recognised as a deferred tax asset:

Tax losses – revenue

Tax losses – capital

Potential tax benefit @ 30.0%

Carried forward tax offsets

Unrecognised deferred tax assets

Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021

4. INCOME TAX (continued)

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.

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.

Tax Consolidation

Traffic Technologies Ltd and its 100% owned Australian resident subsidiaries formed a tax consolidated group with
effect from 1 July 2005 and are therefore taxed as a single entity from that date. The head entity within the tax
consolidated group is Traffic Technologies Ltd. Each wholly owned subsidiary of Traffic Technologies Ltd is a member
of the tax consolidated group, as identified at note 20.

Tax Funding Arrangements and Tax Sharing Agreements

The Group has entered into a tax funding agreement that sets out its funding obligations of the tax consolidated
group in respect of tax amounts. Contributions to fund the current tax liabilities are payable in accordance with
the tax funding agreement and reflect the timing of the head entity’s obligation to make payments for the tax
liabilities to the relevant taxation authority.

Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021

5. EARNINGS PER SHARE

Earnings used in calculating earnings per share

For basic and diluted earnings per share:

Consolidated
2021
$’000

Consolidated
2020
$’000

Net profit/(loss) attributable to ordinary equity holders of the parent

201

(13,829)

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
2021
Thousands

Consolidated
2020
Thousands

482,225

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:

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 2021 (2020: 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.

Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021

TRADE AND OTHER RECEIVABLES

Trade receivables

Allowance for impairment loss

Prepaid stock

Other prepayments

Other receivables

Ageing of trade receivables:

Due within 30 days

Overdue up to 30 days

Overdue more than 30 days

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
2021
$’000

Consolidated
2020
$’000

7,165

(104)

7,061

1,899

577

390

9,927

5,471

1,529

165

7,165

397

164

(457)

104

6,495

(397)

6,098

692

400

673

7,863

3,852

1,631

1,012

6,495

393

(2)

(17)

(7)

397

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.

The Group makes use of a simplified approach in accounting for trade and other receivables and records the loss
allowance at the amount equal to the expected lifetime credit losses. In using this practical expedient, the Group
uses its historical experience, external indicators and forward-looking information to calculate expected credit losses
using a provision matrix. The Group assesses impairment of trade receivables on a collective basis as they possess
credit risk characteristics based on the number of days past due.

An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are
written off when identified.

Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021

INVENTORIES

Raw materials

Work in progress

Finished goods

Consolidated
2021
$’000

Consolidated
2020
$’000

4,934

172

7,070

12,176

3,874

199

6,044

10,117

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.

Inventory write-downs recognised as an expense totaled $60,000 (2020: $56,565).

Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021

PROPERTY, PLANT AND EQUIPMENT

Consolidated

Movement in Carrying Amounts

At 1 July 2019 net book value

Additions

Disposals

Depreciation expense

At 30 June 2020 net book value

Acquisition of businesses

Additions

Disposals

Depreciation expense

At 30 June 2021 net book value

Carrying Amounts

At 30 June 2020

Cost

Accumulated depreciation

Carrying amount at 30 June 2020

At 30 June 2021

Cost

Accumulated depreciation

Carrying amount at 30 June 2021

Right of Use
Assets
Equipment
$’000

Right of Use
Assets
Property
$’000

Plant &
Equipment
$’000

320

144

(26)

(87)

351

(59)

(95)

315

692

(341)

351

640

(325)

315

1,488

244

(614)

1,118

(689)

491

2,037

(919)

1,118

2,037

(1,546)

491

904

162

(10)

(206)

850

166

158

(4)

(227)

943

8,193

(7,343)

850

8,439

(7,496)

943

Total
$’000

2,712

550

(36)

(907)

2,319

216

288

(63)

(1,011)

1,749

10,922

(8,603)

2,319

11,116

(9,367)

1,749

Property, plant and equipment is stated at historical cost less accumulated depreciation.

Depreciation is calculated on a straight-line basis over the estimated useful life of the specific assets as follows:

Right of use assets

Plant and equipment

2021

Lease term

2020
-

1 to 15 years

The Group’s property, plant and equipment is pledged as security against the Group’s borrowings - see note 12.

Leased assets are pledged as security for the related lease liabilities – see note 13.

Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021

9. GOODWILL

Carrying amount of goodwill allocated to each cash-generating unit

Signals

Carrying amount brought forward

Acquisition (see note 19)

Impairment expense

Carrying amount carried forward

Controllers

Carrying amount brought forward

Impairment expense

Carrying amount carried forward

Installation and maintenance

Acquisition (see note 19)

Carrying amount carried forward

Total carrying amount

Consolidated
2021
$’000

Consolidated
2020
$’000

1,126

1,144

10,535

(10,535)

(19)

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net
identifiable assets of the acquired subsidiary at the date of acquisition.

Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. 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.

Impairment of Goodwill

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).

During the previous financial year, as at 31 December 2019, the market capitalisation of the Group was below the
book value of its equity, indicating a potential impairment of goodwill. The Group calculated the recoverable
amount of the Signals and Controllers CGUs at that date and recognised an impairment expense ($10.6m) to write-
off the balance of goodwill so that each CGU was measured at its recoverable amount.

Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021

10. INTANGIBLE ASSETS

Consolidated

Movement in Carrying Amounts
At 1 July 2019 net book value
Additions
Amortisation
At 30 June 2020 net book value
Acquisition of businesses
Additions
Amortisation
At 30 June 2021 net book value

Carrying Amounts
At 30 June 2020
Cost
Accumulated amortisation
Carrying amounts at 30 June 2020

At 30 June 2021
Cost
Accumulated amortisation
Carrying amounts at 30 June 2021

Development
Costs

$’000

Software Costs
$’000

Patents &
Trademarks
$’000

8,836
1,453
(1,180)
9,109
-
1,630
(1,019)
9,720

17,316
(8,207)
9,109

18,946
(9,226)
9,720

33
169
(180)
22
7
176
(165)
40

2,037
(2,015)
22

2,152
(2,112)
40

60
16
(30)
46
-
18
(28)
36

532
(486)
46

549
(513)
36

Total
$’000

8,929
1,638
(1,390)
9,177
7
1,824
(1,212)
9,796

19,885
(10,708)
9,177

21,647
(11,851)
9,796

Intangible assets are carried at cost less accumulated amortisation and any accumulated impairment losses.

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 (2020: 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 (2020:
1-4 years).

Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021

10. INTANGIBLE ASSETS (continued)

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.

Intangible assets 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. 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). Assets have been allocated to the signals and controllers cash-generating units.

The recoverable amount of the Signals cash-generating unit, which exceeds the carrying value of $7.9m, has been
determined based on a value in use calculation using cash flow projections based on financial budget forecasts
prepared by management covering a one-year period, with the following key assumptions:

Growth rate beyond budget period

Growth rate beyond 5 years

Pre-tax discount rate (WACC)

2021

14.1%

2020

14.3%

The key assumptions used in the value in impairment calculations represent management’s best estimates at 30
June 2021. Management has considered the sensitivity of the value in use calculations to changes in assumptions,
including sensitivity to changes in revenue.

The recoverable amount of the Controllers cash-generating unit, has been determined based on estimated fair value
less costs of disposal.

The Group performed impairment testing at 30 June 2021 and 30 June 2020. Management has considered the
sensitivity of fair value less costs of disposal calculations to changes in assumptions. There was no impairment of
intangible assets at those dates.

Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021

11. TRADE AND OTHER PAYABLES

Trade creditors

Sundry creditors and accruals

Consolidated
2021
$’000

Consolidated
2020
$’000

5,539

5,185

10,724

6,511

2,241

8,752

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.

12. INTEREST BEARING LOANS AND BORROWINGS

Current borrowings
Term facility (ADM Capital)
Debtor & trade finance facility (Octet Finance)
Equipment lease liabilities
Property lease liabilities

Non-current borrowings
Note facility (First Samuel)
Equipment lease liabilities
Property lease liabilities

Consolidated
2021
$’000

Consolidated
2020
$’000

6,274
4,382
107
496
11,259

3,500
124
85
3,709

5,139
2,625
110
692
8,566

3,500
164
533
4,197

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.

Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021

12.

INTEREST BEARING LOANS AND BORROWINGS (continued)

Terms and conditions relating to the above financial instruments

Lender

Octet Finance

ADM Capital

Facility Amount (AUD)

$5.5m

$6.3m

Facility Type

Debtor & trade finance

Term loan

First Samuel

$3.5m

Note deed

Interest

Expiry

Security

BBSW + 6.25%

7% cash; 12% capitalised

11%

31 August 2022

30 September 2021

18 October 2022

Second ranking charge
First ranking charge over
trade receivables

First ranking charge
Second ranking charge over
trade receivables

Third ranking charge

Currency of loan

AUD

USD

Derivative rolled over to 30
September 2021
(see note 14)

USD $247,000 margin on
derivative

AUD

Hedging

Contingent liability

Financing facilities available

Total facilities at reporting date
Term debt facility (ADM Capital)
Debtor & trade finance facility (Octet)
Note facility (First Samuel)
Bank guarantee facility (Westpac)

Facilities used at reporting date
Term debt facility (ADM Capital)
Debtor & trade finance facility (Octet)
Note facility (First Samuel)
Bank guarantee facility (Westpac)

Facilities unused at reporting date
Term debt facility (ADM Capital)
Debtor & trade finance facility (Octet)+
Note facility (First Samuel)
Bank guarantee facility (Westpac)

Consolidated
2021
$’000

Consolidated
2020
$’000

6,274
5,500
3,500
265
15,539

6,274
4,382
3,500
153
14,309

-
1,118
-
112

1,230

5,139
5,500
3,500
265
14,404

5,139
2,657
3,500
133
11,429

-
2,843
-
132

2,975

+ The amount of debtor financing available at any point in time is based on the amount of eligible invoicing.

Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021

13. LEASE LIABILITIES

Current
Equipment leases
Property leases

Non-current
Equipment leases
Property leases

Lease liability commitments payable
Less than one year
Later than one year but less than five years

Less future finance charges
Total lease liabilities

Lease payments not recognised as a liability

Consolidated
2021
$’000

Consolidated
2020
$’000

107
496
603

124
85
209

658
224
882
(70)
812

110
692
802

164
533
697

946
763
1,709
(210)
1,499

The Group has elected not to recognise a lease liability for short-term leases (leases with an expected term of 12
months or less) or for leases of low value assets. Payments made under such leases are expensed on a straight-line
basis. The expense relating to payments not included in the measurement of the lease liability is as follows:

Short-term property lease expense

Equipment lease liabilities

Consolidated
2021
$’000

Consolidated
2020
$’000

631

647

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.

Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021

13. LEASE LIABILITIES (continued)

Property lease liabilities

The Group leases a number of warehouses, 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. The Group leases plant and
equipment and motor vehicles with terms up to 4 years. The Group classifies its right-of-use assets in a consistent
manner to its property, plant and equipment (see note 8).

On adoption of AASB 16 at the start of the previous financial year, the Group recognised lease liabilities in relation
to property leases which had previously been classified as operating leases under the previous standard AASB 117.
These liabilities have been measured at the present value of the remaining lease payments, discounted using the
lessee’s incremental borrowing rate applicable to debt of similar characteristics with the same underlying security
as at 1 July 2019. The adoption of AASB 16 resulted in the Group recognising a right-of-use asset and related lease
liability in connection with all former operating leases except for those identified as low value or having a remaining
lease term of less than 12 months from the date of initial application.

14. DERIVATIVE FINANCIAL INSTRUMENT

Derivative financial liability for foreign currency forward contracts

2021

$’000

2020

$’000

(525)

Derivatives are only used for economic hedging purposes and not speculative instruments. 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. Because the derivatives used by the Group are not traded in an active market, fair value is
determined using valuation techniques which maximise the use of observable market data and do not rely on entity-
specific estimates. 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.

There was no liability at 30 June 2021 because the derivative financial instrument was rolled over on that date to 30
September 2021.

Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021

15. PROVISIONS

Current
Employee benefits
Warranty provision

Non-current
Employee benefits

Employee benefits

Consolidated
2021
$’000

Consolidated
2020
$’000

3,111
47

3,158

204

2,682
48
2,730

203

Provision is made for the Group’s obligation for short-term employee benefits. Short-term employee benefits are
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. Provision is made for employees’ long service 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; such 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.

Warranty provision

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.
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.

16. CONTRIBUTED EQUITY

Ordinary shares
At 30 June 2020

At 30 June 2021

No. of
Shares ‘000

$’000

482,225

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.

Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021

17. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

Financial risk management objectives and policies

The Group’s principal financial instruments comprise term loan facilities, debtor and trade finance, leases, hire
purchase contracts, forward contracts to purchase foreign currency and cash and short-term deposits.

The totals for each category of financial instruments are as follows:

Financial assets
Cash and cash equivalents
Trade and other receivables

Financial liabilities
Trade and other payables
Financial liabilities at amortised cost
Derivative financial instrument

Net exposure

Consolidated
2021
$’000

Consolidated
2020
$’000

2,602
9,927

3,636
7,863

(10,724)
(14,968)
-

(8,752)
(12,763)
(525)

(13,163)

(10,541)

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 carrying amount of financial assets and financial liabilities
recorded in the financial statements represents their respective fair values. The main risks arising from the Group’s
financial instruments are interest rate risk, credit risk, liquidity risk and foreign currency risk.

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:

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 2021 71% of the Group's borrowings were at a fixed rate of interest (2020: 79%). Details of
the Group’s debt are disclosed in note 12.

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.

Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021

17. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)

Credit risk

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.

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 2021

Payables

Interest bearing loans & borrowings

Finance lease liabilities

Bank guarantees

Total financial liabilities

Year ended 30 June 2020

Payables

Interest bearing loans & borrowings

Finance lease liabilities

Bank guarantees

Total financial liabilities

≤ 6
months
$’000

10,724

11,377

329

22,430

≤ 6
months
$’000
8,752

3,426

473

6-12
months
$’000

423

329

752

6-12
months
$’000
-

5,908

473

1 – 5
years
$’000

3,705

224

153

4,082

1 – 5
years
$’000
-

4,339

763

133

12,651

6,381

5,235

> 5
years
$’000

> 5
years
$’000
-

Total

$’000

10,724

15,505

882

153

27,264

Total

$’000
8,752

13,673

1,709

133

24,267

The gross amount of the derivative financial instrument hedging the ADM loan facility was US $5.1m (2020: US
$3.9m) (see note 14). The derivative financial instrument and associated loan were rolled over on 30 June 2021
with no net gain or loss recorded on that date.

Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021

17. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)

Foreign exchange risk

Exposure to foreign exchange risk arises where the Group purchases certain components denominated in foreign
currency.

The Group’s borrowing facility with ADM Capital 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. The exchange gain or loss on foreign currency transactions is recognised
directly in the statement of comprehensive income.

The Group's exposure to foreign currency risk on its foreign currency borrowings and associated forward exchange
contracts, expressed in Australian dollars, was as follows:

Loan (USD exposure)

Forward exchange contracts (USD exposure)

2021

AUD

$’000

6,274

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 loss on foreign currency derivatives not qualifying as hedges

Exchange gain on foreign currency borrowing included in other income

Total net foreign exchange (loss)/gain recognised in profit before income tax for
the period

2021

AUD

$’000

(468)

420

(48)

2020

AUD

$’000

5,139

(525)

2020

AUD

$’000

(525)

534

Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021

17. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)

Sensitivity Analysis

At 30 June 2021 29% of the Group's borrowings were at a variable rate of interest (2020: 21%). If interest rates
were to increase or decrease by 1%, the net change in finance costs would be approximately $21,000 (2020:
$27,000).

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%

2021

USD

$’000

(447)

391

2020

USD

$’000

(402)

348

The Group has taken out a forward exchange contract to hedge its currency exposure (see note 14).

Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021

18. 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

Cash at bank and on hand

Reconciliation of net profit/(loss) after tax to net cash flows from operations

Net profit/(loss)

Adjustments for:

Depreciation, amortisation of non-current assets

Impairment of goodwill

(Loss)/profit on sale of fixed assets

Foreign exchange gain

Amortisation of capitalised borrowing costs

Doubtful debts expense/ (written off)

Stock obsolescence expense

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
2021
$’000

Consolidated
2020
$’000

2,602

3,636

Consolidated
2021
$’000

Consolidated
2020
$’000

201

(13,829)

2,223

(265)

164

(2,063)

(2,059)

2,140

429

862

2,297

10,554

(8)

(12)

393

548

2,448

2,677

5,170

During the year the Group acquired property, plant and equipment with an aggregate value of $43,000 (2020:
$144,185) by means of leases. These acquisitions are not reflected in the Statement of Cash Flows.

Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021

19. BUSINESS COMBINATIONS

Summary of Acquisitions

On 28 August 2020 the Group acquired the business and assets of L&M Traffic Signals Pty Ltd (L&M). L&M is an
accredited provider and installer for Vic Roads involving traffic signal installation and maintenance and fully
approved for installation work by the Department of Transport in Victoria and holds a number of term maintenance
contracts with local councils across Victoria. The acquisition has added a capability within the Group to undertake
installation and maintenance work. The L&M business contributed revenue of $4.8m and EBITDA of $0.2m to the
Group during the financial year ended 30 June 2021 since acquisition. Acquisition costs associated with the
acquisition were $9,000.

On 16 June 2021 the Group acquired the business and assets of the ITS business of Artcraft Pty Ltd. The ITS
(‘Intelligent Transport Systems’) business focuses on the design, development, manufacture and supply of electronic
road signage and software systems to customers across Australia. The acquisition of the ITS business will significantly
enhance the Group’s position in the ITS sector. The ITS business did not contribute a material amount of revenue
or EBIT to the Group during the financial year ended 30 June 2021 as acquisition occurred shortly before balance
date of 30 June 2021. Acquisition costs associated with the acquisition were $Nil.

Details of the purchase consideration and net assets acquired are as follows:

Purchase consideration

Cash instalments paid

Balance payable in instalments

Total purchase consideration

The assets and liabilities recognised as a result of the acquisitions are as follows:

Property, plant and equipment

Intangible assets

Inventory

Prepayments

Accruals

Employee entitlements

Finance lease liabilities

Goodwill and other intangible assets

Net assets acquired

L&M
$’000

648

480

1,128

ITS
$’000

117

545

662

L&M
Fair value
$’000

ITS
Fair value
$’000

103

(115)

(51)

1,126

1,128

113

545

(30)

(88)

662

Goodwill represents the excess of purchase price over the fair value of net assets acquired and represents the
benefit of existing trading relationships of the acquired businesses prior to acquisition by the Group.

Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021

20. CLAIMS AND CONTINGENCIES

Guarantees

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 12, the Company is party to finance facility agreements with its financiers 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.

21. SUBSIDIARIES

The consolidated financial statements include the financial statements of Traffic Technologies Ltd and the
subsidiaries listed in the following table.

Principal
Place of
Business

Principal Activity

Ownership
Held by
2021
%

Interest
the Group
2020
%

Name of Subsidiary

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

Australia

Non-trading

Australia

Non-trading

Manufacture signs

Non-trading

Manufacture signs

Non-trading

Manufacture signals,
lights etc.

Non-trading

Quick Turn Circuits Pty Ltd

Australia Manufacture controllers

Traffic Technologies International Limited

Hong Kong

Telensa Pty Ltd

Telensa Australia Pty Ltd

L&M Traffic Services Pty Ltd

Australia

Non-trading

Maintenance

100

Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021

22. RELATED PARTY TRANSACTIONS

a) Transactions with Shareholders

First Samuel Limited (one of the Company’s lenders – see note 12) has disclosed that it owns 21,977,207 ordinary
shares in the Company.

b) Transactions with Directors or Director-related entities

c) The Company entered into a related party transaction with an entity associated with the Company's Managing
Director, Mr. Con Liosatos. Inventory was purchased by the related entity and sold to the Company at cost
price. The related party transaction was on arm's length commercial terms and, after the application of foreign
exchange and interest costs, no profit was made by the related party. As a result, the related party transaction
was within the arm's length exception under Part 2E of the Corporations Act 2001.

Inventory purchases and associated finance charges from the related entity amounted to $69,000 (2020:
$71,000), with $Nil included in trade payables at 30 June 2021 (2020: $130,000).

e) As at 30 June 2020, there was a loan outstanding from Mr. Con Liosatos of $73,000 in respect of insurance
premiums paid by the Company on his behalf. Interest was charged on the loan at the Company’s average cost
of funds. The loan has been repaid in full.

23. SUBSEQUENT EVENTS

Subsequent to balance date there have been no significant events which have affected the operations of the Group.

24. 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
Half Year Review – Shine Wing Australia

Final Audit:

Shine Wing

- Grant Thornton

Total

Consolidated Consolidated
2020
$

2021
$

35,000

26,000

147,689

67,000

102,000

173,689

Shine Wing Australia conducted the half year review and final audit for the financial year ended 30 June 2020 and
the half year review for the financial year ended 30 June 2021. Grant Thornton conducted the final audit for the
financial year ended 30 June 2021.

Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021

25. 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 Consolidated

2021
$

2020
$

942,514

939,302

64,463

64,362

14,078

13,892

1,021,055

1,017,556

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 2021 or at the date of this report (2020: nil). No shares have
been issued to key management personnel as a result of the exercise of remuneration options.

d) Loans to Key Management Personnel

Details of a loan to Mr. Con Liosatos at the previous balance date (since repaid) are set out in note 22.

Traffic Technologies Ltd and Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021

26. OPERATING SEGMENTS

The Group has only one operating 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

Sales revenue from government agencies was $15.6m (2020: $13.5m). Revenue from the largest non-government
customer was $3.5m (2020: $3.0m).

Geographical information

The Group operates in one principal geographical location, namely Australia.

Revenue by geographic location:

Australia

Overseas

Total

All the Group’s non-current assets are located in Australia.

27. PARENT ENTITY DISCLOSURES

Current assets

Total assets

Current liabilities

Total liabilities

Issued capital

Retained earnings

Total shareholders’ equity

Loss of the parent entity

Total comprehensive income of the parent entity

Guarantees entered into by the parent entity in relation to debts of its subsidiaries

Consolidated

2021
$’000

47,178

5,152

52,330

2021

$’000

2,503

50,332

63,621

73,421

54,755

(77,844)

(23,089)

(3,840)

153

2020
$’000

39,854

4,668

44,522

2020

$’000

3,222

51,171

61,766

70,395

54,755

(73,979)

(19,224)

(3,979)

133

Traffic Technologies Ltd
Directors’ Declaration
For the year ended 30 June 2021

DIRECTORS’ DECLARATION

The Directors of the Company declare that:

The consolidated financial statements and notes of Traffic Technologies Ltd are in accordance with the
Corporations Act 2001 and:

a) comply with Australian Accounting Standards and the Corporations Regulations 2001; and

b) give a true and fair view of the consolidated entity’s financial position as at 30 June 2021 and of its

performance for the year ended on that date.

The Company has included in the notes to the financial statements an explicit and unreserved statement of
compliance with International Financial Reporting Standards.

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.

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 21 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 20.

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

Mark Hardgrave
Chairman

Melbourne
27 August 2021

ASX Additional Information
As at 11 August 2021

Additional information required by the Australian Securities Exchange and not shown elsewhere in this report is as
follows. The information is current as at 11 August 2021.

Distribution of Shareholdings

Ordinary Shares

Number of
Holders
158

Number of
Shares
23,576

94,043

476,075

431

19,471,482

324 462,159,519

1,002 482,224,695

256

687,982

No. of Shares

% Held

50,148,883

10.40%

21,977,207

20,000,000

19,844,761

17,606,063

14,709,208

14,137,739

13,882,162

12,895,249

11,848,360

10,644,630

9,500,000

8,599,028

7,000,000

6,000,000

5,500,000

5,070,000

5,000,000

4,709,613

4.56%

4.15%

4.12%

3.65%

3.05%

2.93%

2.88%

2.67%

2.46%

2.21%

1.97%

1.79%

1.78%

1.45%

1.24%

1.14%

1.05%

1.04%

0.98%

267,692,903

55.51%

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

Twenty Largest Shareholders

Name

RSAM INVESTMENTS PTY LTD

FIRST SAMUEL LTD ACN 086243567

ANNLEW INVESTMENTS PTY LTD

MR LAMBROU LIOSATOU*

BANNABY INVESTMENTS PTY LTD

BROWNLOW PTY LTD

PETHOL (VIC) PTY LTD

LIOSATOS SUPERANNUATION PTY LTD *

GP MANAGEMENT P/L

CLAPSY PTY LTD

11 MR ROBERT SCOTT ANTHONY MINNEY

12 DOLPHIN CAPITAL PARTNERS PTY LTD

14 NETWEALTH INVESTMENTS LIMITED

15 MORGRAE PTY LTD

16 MR PETER VELDHUIZEN

17 MRS TRUDI MILNE

FIRAH CREEK PTY LTD

19 DE LA HAYE SUPER FUND PTY LTD

20 MR MORGAN LITTLEWOOD

Total

* Associated with Directors.

CAMPBELL KITCHENER HUME & ASSOCIATES PTY LTD

8,620,000

ASX Additional Information
As at 11 August 2021

Substantial Shareholders (greater than 5%)

Holder Name

Mr. Con Liosatos

Mr. Robert Minney

Voting Rights
All ordinary shares carry one vote per share without restriction.

e) Ordinary shares subject to voluntary escrow restrictions

None.

Ordinary Shares

Number

33,726,923

6.99

60,793,513

12.61

Collins Square, Tower 5
727 Collins Street
Melbourne VIC 3008

Correspondence to:
GPO Box 4736
Melbourne VIC 3001

T +61 3 8320 2222
F +61 3 8320 2200
E info.vic@au.gt.com
W www.grantthornton.com.au

Independent Auditor’s Report

To the Members of Traffic Technologies Ltd and its Controlled entities

Report on the audit of the financial report

Opinion

We have audited the financial report of Traffic Technologies Ltd (the Company) and its subsidiaries (the Group), which
comprises the consolidated statement of financial position as at 30 June 2021, the consolidated statement of profit or loss
and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows
for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting
policies, and the Directors’ declaration.

In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including:

a giving a true and fair view of the Group’s financial position as at 30 June 2021 and of its performance for the year

ended on that date; and

b complying with Australian Accounting Standards and the Corporations Regulations 2001.

Basis for opinion

We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are
further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are
independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and
the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for
Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled
our other ethical responsibilities in accordance with the Code.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Material uncertainty related to going concern

We draw attention to Note 1(c) in the financial statements, which indicates that part of the Group’s debt is due for repayment
on 30 September 2021. As stated in Note 1(c), these events or conditions indicate that a material uncertainty exists that may
cast doubt on the Group’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in
forming our opinion thereon, and we do not provide a separate opinion on these matters.

Grant Thornton Audit Pty Ltd ACN 130 913 594
a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389

www.grantthornton.com.au

Liability limited by a scheme approved under Professional Standards Legislation.

In addition to the matter described in the Material uncertainty related to going concern section, we have determined the
matters described below to be the key audit matters to be communicated in our report.

Key audit matter

How our audit addressed the key audit matter

Impairment of goodwill and other non-financial assets
(Note 9, 10)

The Group has recorded goodwill of $1,144,000, capitalised
development costs of $9,720,000, patents of $36,000 and
software costs of $40,000 at 30 June 2021 assigned to Cash
Generating Units (CGUs). Goodwill is required to be assessed
for impairment annually by Management as prescribed in
AASB 136 Impairment of Assets. In addition, Management are
required to perform annual impairment testing for intangible
assets not yet available for use regardless of whether indictors
exist.

Non-financial assets of the Group including goodwill and other
intangible assets are allocated to appropriate CGUs for
impairment testing.

Management tests each CGU for impairment by comparing
the carrying amount against the recoverable amount
determined by either, the greater of its fair value less costs to
sell and its value in use.

This area is a key audit matter due to the significant balance
carried by the Group that Management have assessed using
estimates and judgement. The Group use the discounted cash
flow model (value in use) to determine their recoverable value,
in doing so, include significant estimates and judgements.

Capitalised development costs (Note 10)

The Group capitalises costs that are directly attributable to the
development of traffic products in accordance with AASB 138
Intangible Assets.

AASB 138 provides that an entity may only capitalise costs
that meet specific capitalisation criteria.

This area is a key audit matter due to the inherent judgement
involved in determining projects and costs which satisfy the
requirements of AASB 138.

Our procedures included, amongst others:

• Understanding and documenting Management’s process
and controls related to the assessment of impairment,
including Management’s identification of CGUs and the
calculation of the recoverable amount for each CGU;

• Evaluating the value-in-use models against the

requirements of AASB 136;

• Challenging the appropriateness of Management’s

revenue and cost forecasts by comparing the forecast
cash flows to the actual growth rates achieved historically;

• Reviewing Management’s value-in-use calculations to:
o Test the mathematical accuracy of the calculations;
o Evaluated the forecast cash inflows and outflows for

reasonableness;

o Assess estimates and judgements for growth rates

applied; and

o Assess discount rates applied to forecast future cash

flows.

• Performing sensitivity analysis on the significant inputs
and assumptions made by Management in preparing its
calculations;

• Where Management have opted to apply the fair value
less cost of disposal model, obtaining and evaluating
assumptions and methodology applied; and

• Assessing the adequacy of financial statement

disclosures.

Our procedures included, amongst others:

• Documenting our understanding of internal processes and
controls including review of Management's capitalisation
policy for compliance with AASB 138;

• Sampling costs capitalised in the year and vouching to
supporting documentation and against the criteria of
AASB 138;

• Evaluating the Group’s position that the underlying assets
is in the development phase, as well as the entity’s ability
to demonstrate technical feasibility, that the asset will
generate probable future economic benefits, the ability to
bring the asset to completion for use or sale, amongst
other requirements of AASB 138;

• Holding discussions with Management to understand the

nature and status of key projects;

• Obtaining Management's assessment of impairment
indicators for intangible assets previously capitalised;

• Reviewing a schedule of open projects to investigate

projects over budget and/or behind schedule for possible
indicators of impairment;

• Assessing Management's useful economic life including
amortisation charge for consistency with accounting
policies adopted; and

• Assessing the adequacy of relevant financial statement

disclosures.

Information other than the financial report and auditor’s report thereon

The Directors are responsible for the other information. The other information comprises the information included in the
Group’s annual report for the year ended 30 June 2021, but does not include the financial report and our auditor’s report
thereon.

Our opinion on the financial report does not cover the other information and we do not express any form of assurance
conclusion thereon.

In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or
otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.

Responsibilities of the Directors for the financial report

The Directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in
accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the Directors
determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material
misstatement, whether due to fraud or error.

In preparing the financial report, the Directors are responsible for assessing the Group’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial report

Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing
Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions
of users taken on the basis of this financial report.

A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance
Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1_2020.pdf. This description forms part of
our auditor’s report.

Report on the remuneration report

Opinion on the remuneration report

We have audited the Remuneration Report included in pages 5 to 11 of the Directors’ report for the year ended
30 June 2021.

In our opinion, the Remuneration Report of Traffic Technologies Ltd, for the year ended 30 June 2021 complies with
section 300A of the Corporations Act 2001.

Responsibilities

The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance
with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report,
based on our audit conducted in accordance with Australian Auditing Standards.

Grant Thornton Audit Pty Ltd
Chartered Accountants

Michael Climpson
Partner

Melbourne, 27 August 2021

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
P: +61 3 9430 0222
F: +61 3 9430 0244
F: +61 3 9430 0244
F: +61 3 9430 0244
E: tt@trafficltd.com.au
E: tt@trafficltd.com.au
E: tt@trafficltd.com.au

trafficltd.com.au
trafficltd.com.au

trafficltd.com.au