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EVOLUTION ROAD
MAINTENANCE GROUP LIMITED
and its Controlled Entities
ABN 14 147 834 133
INTERIM FINANCIAL REPORT
FOR THE HALF-YEAR ENDED
31 DECEMBER 2015
This half-year financial report is to be
read in conjunction with the financial
report for the year ended 30 June 2015.
- 2 -
EVOLUTION ROAD MAINTENANCE GROUP LIMITED
AND ITS CONTROLLED ENTITIES
INTERIM FINANCIAL REPORT FOR THE HALF-YEAR ENDED
31 DECEMBER 2015
TABLE OF CONTENTS
Page
Directors’ Report 3-4
Auditor’s Independence Declaration 5
Directors’ Declaration 6
Consolidated Financial Statements for the Half-Year Ended 31 December 2014
Consolidated Statement of Comprehensive Income 7
Consolidated Statement of Financial Position 8
Consolidated Statement of Changes in Equity 9
Consolidated Statement of Cash Flows 10
Consolidated Notes to the Financial Statements 11-14
Independent Auditor’s Review Report 15-16
- 3 -
EVOLUTION ROAD MAINTENANCE GROUP LIMITED
AND ITS CONTROLLED ENTITES
INTERIM FINANCIAL REPORT FOR THE HALF-YEAR ENDED
31 DECEMBER 2015
DIRECTORS’ REPORT
Your directors present their report together with the financial report of the Group, being
Evolution Road Maintenance Group Limited (“The Company”) and its controlled entities (“the
Consolidated Group” or “the Group”), for the half-year ended 31 December 2015.
Directors
The names of the directors in office at any time during or since the end of the period are:
Hon. John Moore
Mr Kevin Chin
Mr Malcolm Keefe
Mr Steven Thomas
The directors have been in office since the start of the financial period to the date of this report
unless otherwise stated.
Review of Operations
The profit of the Consolidated Group for the financial period after providing for income tax
amounted to $51,804, down from $2,388,228 for the same period last year. The net assets of the
Consolidated Group as at 31 December 2015 are $24,348,126.
Revenue increased from $47,588,150 for the period to 31 December 2014 up to $49,788,417 for
the period to 31 December 2015 reflecting in part expanded operations with new depots at
Darwin, Northern Territory and Perth, Port Hedland and Northam, Western Australia.
Dividends Paid or Recommended
No dividend was paid during the current financial period and no dividend was declared during
the 6 months ended 31 December 2015 for payment in future periods.
Subsequent Events
On 26 February 2016, Paul Jobbins resigned as CFO and Company Secretary of the group.
Bora Han was appointed as CFO of the group on 26 February 2016.
Tom Bloomfield was appointed as Company Secretary of the group on 26 February 2016.
During April 2016, the Group refinanced its borrowings with NAB. As part of the refinancing of
the Group’s facilities, the Group has raised additional convertible notes of $6,000,000 during
April 2016, of which $1,500,000 was received from a related entity.
Except for the above events, there are no other matters or circumstances have arisen since the
end of the financial period which significantly affected or could significantly affect the
operations of the consolidated group, the results of those operations, or the state of affairs of the
consolidated group in future financial periods.
- 4 -
EVOLUTION ROAD MAINTENANCE GROUP LIMITED
AND ITS CONTROLLED ENTITES
INTERIM FINANCIAL REPORT FOR THE HALF-YEAR ENDED
31 DECEMBER 2015
DIRECTORS’ REPORT (continued)
Auditor’s Independence Declaration
A copy of the auditor’s independence declaration as required by section 307C of the
Corporations Act 2001 in relation to the review for the period is provided with this report.
Signed in accordance with a resolution of the directors:
Steven Thomas
Director
Brisbane, 28 April 2016
- 5 -
AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE
CORPORATIONS ACT 2001 TO THE DIRECTORS OF EVOLUTION ROAD MAINTENANCE GROUP LIMITED
I declare that, to the best of my knowledge and belief, during the half-year ended 31 December 2015 there have been no contraventions of:
a. the auditor independence requirements as set out in the Corporations Act 2001 in
relation to the review; and
b. any applicable code of professional conduct in relation to the review.
PKF HACKETTS AUDIT Shaun Lindemann Partner Brisbane, 28 April 2016
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EVOLUTION ROAD MAINTENANCE GROUP LIMITED
AND ITS CONTROLLED ENTITIES
INTERIM FINANCIAL REPORT FOR THE HALF-YEAR ENDED
31 DECEMBER 2015
DIRECTORS’ DECLARATION
In accordance with a resolution of the directors of Evolution Road Maintenance Group Limited,
the directors of the company declare that:
1. The financial statements and notes, as set out on pages 7 to 14 are in accordance with the
Corporations Act 2001, including:
(a) complying with Accounting Standard AASB 134 “Interim Financial Reporting”;
and (b) giving a true and fair view of the consolidated entity’s financial position as at 31
December 2015 and of its performance for the half-year ended on that date.
2. With due regard to the commentary in Note 1, 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.
Steven Thomas
Director
Brisbane, 28 April 2016
The accompanying notes form part of these condensed financial statements.
- 7 -
EVOLUTION ROAD MAINTENANCE GROUP LIMITED
AND ITS CONTROLLED ENTITIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE HALF-YEAR ENDED 31 DECEMBER 2015
31 December 31 December
Note 2015 2014
$ $
Revenue from continuing operations
Revenue 49,788,417 47,588,150
Other income 2 2,215,265 1,198,770
Employee benefit expense (35,682,356) (32,319,806)
Direct operational expenses (5,084,260) (4,428,566)
Depreciation and amortisation expenses 2 (3,729,934) (3,144,743)
Finance cost (1,684,941) (1,123,775)
Other expenses 2 (5,826,868) (4,367,581)
Total expenses (52,008,359) (45,384,471)
Profit/(loss) before income tax (4,677) 3,402,449
Income tax benefit/(expense) 56,481 (1,014,221)
Profit/(loss) for the period 51,804 2,388,228
Other comprehensive income
Other comprehensive income - -
Total comprehensive income/(loss) 51,804 2,388,228
Profit/(loss) attributable to members of the
parent entity
51,804 2,388,228
Total comprehensive income/(loss)
attributable to members of the parent
entity
51,804 2,388,228
The accompanying notes form part of these condensed financial statements.
- 8 -
EVOLUTION ROAD MAINTENANCE GROUP LIMITED
AND ITS CONTROLLED ENTITIES
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2015
Note
31 December
2015
30 June
2015
$ $
CURRENT ASSETS
Cash and cash equivalents 685,601 1,351,338
Trade and other receivables 5 10,758,549 14,448,607
Inventories 740,333 836,502
Other assets 6 3,062,524 1,987,891
TOTAL CURRENT ASSETS 15,247,007 18,624,338
NON-CURRENT ASSETS
Trade and other receivables 1,625,535 1,823,334
Property, plant & equipment 23,251,745 22,300,527
Intangible assets 51,124,313 51,311,968
Other non-current assets 293,372 321,824
TOTAL NON-CURRENT ASSETS 76,294,965 75,757,653
TOTAL ASSETS 91,541,972 94,381,991
CURRENT LIABILITIES
Trade and other payables 7 9,399,914 12,557,902
Current tax liabilities 58,452 76,838
Employee entitlements 1,411,515 1,474,761
Borrowings 8 16,911,669 10,713,072
Deferred consideration - 1,992,208
TOTAL CURRENT LIABILITIES 27,781,550 26,814,781
NON-CURRENT LIABILITIES
Employee entitlements 187,931 147,438
Borrowings 8 38,774,869 43,151,799
Deferred tax liabilities 449,495 507,245
TOTAL NON-CURRENT LIABILITIES 39,412,295 43,806,482
TOTAL LIABILITIES 67,193,845 70,621,263
NET ASSETS
24,348,126 23,760,728
EQUITY
Share capital 32,337,962 32,535,462
Reserves (527,675) (1,260,770)
Accumulated losses (7,462,161) (7,513,964)
TOTAL EQUITY 24,348,126 23,760,728
The accompanying notes form part of these condensed financial statements.
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EVOLUTION ROAD MAINTENANCE GROUP LIMITED
AND ITS CONTROLLED ENTITIES
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE HALF-YEAR ENDED 31 DECEMBER 2015
Note
Ordinary
shares
Foreign
Currency
Translation
Reserve
Accumulate
d Losses
Total
$ $ $ $
Balance at 1 July 2014 32,610,462 - (13,077,631) 19,532,831
Comprehensive Income
Profit attributable to members
of the parent entity
-
- 2,388,228 2,388,228
Other comprehensive income - - - -
Total comprehensive income - - 2,388,228 2,388,228
Transactions with owners, in
their capacity as owners, and
other transfers
Dividends paid - - - -
Total transactions with
owners and other transfers
-
- - -
Balance at 31 December 2014 32,610,462 - (10,689,403) 21,921,059
Balance at 1 July 2015 32,535,462 (1,260,770) (7,513,965) 23,760,728
Comprehensive Income
(Loss)/Profit attributable to
members of the parent entity
-
- 51,804 51,804
Other comprehensive income - 733,095 - 733,095
Total comprehensive
(loss)/income
-
733,095 51,804 784,899
Transactions with owners, in
their capacity as owners, and
other transfers
Reduction in capital (197,500) - - (197,500)
Total transactions with
owners and other transfers
(197,500)
- - (197,500)
Balance at 31 December 2015 32,337,962 (527,675) (7,462,161) 24,348,126
The accompanying notes form part of these condensed financial statements.
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EVOLUTION ROAD MAINTENANCE GROUP LIMITED
AND ITS CONTROLLED ENTITIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE HALF-YEAR ENDED 31 DECEMBER 2015
Half-year
2015
Half-year
2014
$ $
CASH FLOW FROM OPERATING ACTIVITIES
Receipts from customers 58,958,217 56,972,563
Payments to suppliers and employees (50,572,122) (47,545,894)
Interest received 11,410 3,632
Interest paid (1,684,941) (1,124,575)
Income tax paid (19,655) (2,074,013)
Net cash provided by operating activities 6,692,909 6,231,713
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from sale of property, plant and equipment 404,683 124,548
Payments for property, plant and equipment (1,844,619) (1,194,758)
Payments for intangible assets (465,934) -
Net cash used in investing activities (1,905,870) (1,070,210)
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from borrowings - -
Repayment of borrowings (5,113,240) (7,329,626)
Net cash used in financing activities (5,113,240) (7,329,626)
Net increase (decrease) in cash and cash equivalents
(326,201) (2,168,123)
Cash and cash equivalents at beginning of the half year
1,351,338 2,726,402
Impact of foreign currency movement (339,536) -
Cash and cash equivalents at end of the half-year 685,601 558,279
Non-cash flow activities:
- Addition of property, plant and equipment through
hire purchase 1,423,253 1,845,659
- Insurance premiums financed through loans 3,661,287 1,586,396
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EVOLUTION ROAD MAINTENANCE GROUP LIMITED
AND ITS CONTROLLED ENTITIES
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE HALF-YEAR ENDED 31 DECEMBER 2015
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Preparation
These general purpose interim financial statements for the half-year reporting period ended 31
December 2015 has been prepared in accordance with requirements of the Corporations Act
2001 and Australian Accounting Standard AASB 134: Interim Financial Reporting. The
Group is a for-profit entity for financial reporting purposes under Australian Accounting
Standards.
This interim financial report is intended to provide users with an update on the latest annual
financial statements of Evolution Road Maintenance Group Limited (the Company) and its
controlled entities (the Group). As such, it does not contain information that represents
relatively insignificant changes occurring during the half-year within the Group. It is therefore
recommended that this financial report be read in conjunction with the annual financial
statements of the Group for the year ended 30 June 2015.
Accounting Policies
The same accounting policies and methods of computation have been followed in this interim
financial report as were applied in the most recent annual financial statements.
Critical Accounting Estimates and Judgements
The critical estimates and judgements are consistent with those applied and disclosed in the
June 2015 annual report.
New and Revised Accounting Requirements Applicable to the Current Half-year
Reporting Period
The Group has considered the implications of new or amended Accounting Standards, but
determined that their application to the financial statements is either not relevant or not
material.
Net Current Asset Deficiency
The Group was in a net current liability position of $12,534,543 (30 June 2015: $8,190,433) as
at 31 December 2015.
Given the consolidated entity’s net current liability position, the ability of the consolidated
entity to continue as a going concern, including Evolution Road Maintenance Limited's ability
to pay its debts as and when they fall due needs to be considered.
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EVOLUTION ROAD MAINTENANCE GROUP LIMITED
AND ITS CONTROLLED ENTITIES
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE HALF-YEAR ENDED 31 DECEMBER 2015 (continued)
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Net Current Asset Deficiency (continued)
The net current liability position was mainly due to the carried forward impact of the capital
restructuring in the 2013 year whereby the company conducted a share buy-back and capital
reduction of approximately $20 million which were funded by the borrowings from National
Australia Bank.
The continuation of the consolidated entity as a going concern is dependent upon its ability to achieve the following:
– The continued support of major creditors and loans from financial institutions (including matters noted in Note 8); and
– The continued generation of future profits by the underlying businesses.
It is on the basis of the consolidated entity's ability to maintain the above arrangements, and the
generation of future profits, that the Directors have prepared the financial report on a going
concern basis. In the event that the above arrangements and facilities are not continued, there is
uncertainty as to whether the consolidated entity will continue as a going concern and, therefore,
whether it will realise its assets and extinguish its liabilities in the normal course of business and
at the amounts stated in the financial statements. The interim financial report does not include any
adjustments relating to the recoverability and classification of recorded asset amounts or to the
amounts and classification of liabilities that might be necessary should the consolidated entity not
continue as a going concern.
NOTE 2: PROFIT FROM OPERATIONS
Profit from continuing operations before income tax expense includes the following items of
revenue and expense.
31 December 2015
$
31 December 2014
$
a. Other Income
- Interest income 11,410 2,831
- Gain on disposal of plant and equipment 91,743 38,968
- Gain on vendor forfeit of earn-out payment
(*) 2,091,309 1,000,000
- Other Income 20,803 156,971
2,215,265 1,198,770
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EVOLUTION ROAD MAINTENANCE GROUP LIMITED
AND ITS CONTROLLED ENTITIES
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE HALF-YEAR ENDED 31 DECEMBER 2015 (continued)
NOTE 2: PROFIT FROM OPERATIONS (continued)
(*) As part of the total consideration upon acquisition of Evolution Traffic Management
Limited (formerly Action Traffic Control Ltd) and Evolution Civil Limited (formerly
Temporary Traffic Control Ltd) by the group on 4 March 2015, NZD$2.25 million was taken
up as a payable in relation to future earn-out payments. Payment of this NZD$2.25 million
was subject to the companies reaching an agreed upon Gross Profit target over the next 12
months. As at 31 December 2015, the companies had failed to meet this first Gross Profit
target and as such, the earn-out payment was not considered payable to the vendor and was
recognised as a gain in the statement of comprehensive income.
31 December 2015
$
31 December 2014
$
b. Expenses
- Depreciation of plant and equipment 2,497,841 2,177,869
- Amortisation of intangible assets 1,232,093 966,874
3,729,934 3,144,743
- Occupancy expenses 1,567,301 863,241
NOTE 3: EVENTS OCCURRING AFTER BALANCE SHEET DATE
On 26 February 2016, Paul Jobbins resigned as CFO and Company Secretary of the group.
Bora Han was appointed as CFO of the group on 26 February 2016.
Tom Bloomfield was appointed as Company Secretary of the group on 26 February 2016.
During April 2016, the Group refinanced its borrowings with NAB. As part of the refinancing
of the Group’s facilities, the Group has raised additional convertible notes of $6,000,000
during April 2016, of which $1,500,000 was received from a related entity.
Except for the above events, there are no other matters or circumstances have arisen since the
end of the financial period which significantly affected or could significantly affect the
operations of the consolidated group, the results of those operations, or the state of affairs of
the consolidated group in future financial periods.
NOTE 4: CONTINGENT LIABILITIES
There has been no change in contingent liabilities since the last annual reporting period.
NOTE 5: TRADE AND OTHER RECEIVABLES
The significant decrease in trade and other receivables balances as at 31 December 2015
compared to 30 June 2015 was due to seasonality of operations. The provision of traffic
controllers in December is generally the lowest compared to any other period due to the
Christmas holiday period.
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EVOLUTION ROAD MAINTENANCE GROUP LIMITED
AND ITS CONTROLLED ENTITIES
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE HALF-YEAR ENDED 31 DECEMBER 2015 (continued)
NOTE 6: OTHER CURRENT ASSETS
31 December 2015
$
30 June 2015
$
Prepaid expenses 1,950,651 1,449,850
Borrowing costs 163,090 185,589
Other 948,783 352,452
3,062,524 1,987,891
NOTE 7: TRADE AND OTHER PAYABLES
The significant decrease in trade and other payables balances as at 31 December 2015
compared to 30 June 2015 was due to seasonality of operations. The provision of controllers in
December is generally the lowest compared to any other periods due to the Christmas holiday
period which decreases the amount of accrued expenses related to the provision of services at
period end.
NOTE 8: BORROWINGS
In December 2015, and subsequently in April 2016 the Group refinanced its borrowings with
NAB.
These facilities are secured by an interlocking guarantee and indemnity given by all entities in
the Group supported by:
A first registered general security agreement over all present and after-acquired property
over each of the entities in the consolidated group;
A share mortgage over the shares in Queensland Infrastructure Capital Pty Ltd held by
Evolution Road Maintenance Group Limited;
An invoice finance facility agreement given by Evolution Traffic Control Pty Ltd
(secures the debtor finance facility); and
A master asset finance agreement given by Evolution Asset Management Pty Ltd.
As part of the refinancing of the Group’s facilities, the Group has raised additional
convertible notes during April 2016 and expects to undertake a further equity or unsecured
debt raising on or before 30 June 2016.
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INDEPENDENT AUDITOR’S REVIEW REPORT
TO THE MEMBERS OF EVOLUTION ROAD MAINTENANCE GROUP LIMITED
AND CONTROLLED ENTITIES
We have reviewed the accompanying half-year financial report of Evolution Road Maintenance
Group Limited (‘the Company’) and controlled entities (the consolidated entity), which
comprises the consolidated statement of financial position as at 31 December 2015, the
consolidated statement of comprehensive income, consolidated statement of changes in
equity and consolidated statement of cash flows for the half-year ended on that date, notes
comprising a summary of significant accounting policies and other explanatory information,
and the directors’ declaration.
Directors’ Responsibility for the Half-Year Financial Report
The directors of the Evolution Road Maintenance Group Limited are responsible for the
preparation of the half-year financial report that gives a true and fair view in accordance with
Australian Accounting Standards and the Corporations Act 2001 and for such control as the
directors determine is necessary to enable the preparation of the half-year financial report that
is free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express a conclusion on the half-year financial report based on our
review. We conducted our review in accordance with Auditing Standard on Review
Engagements ASRE 2410 Review of a Financial Report Performed by the Independent
Auditor of the Entity, in order to state whether, on the basis of the procedures described, we
have become aware of any matter that makes us believe that the half-year financial report is
not in accordance with the Corporations Act 2001 including: giving a true and fair view of the
consolidated entity’s financial position as at 31 December 2015 and its performance for the
half-year ended on that date; and complying with Accounting Standard AASB 134 Interim
Financial Reporting and the Corporations Regulations 2001. As the auditor of Evolution Road
Maintenance Group Limited and its controlled entities, ASRE 2410 requires that we comply
with the ethical requirements relevant to the audit of the annual financial report.
A review of a half-year financial report consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in accordance with
Australian Auditing Standards and consequently does not enable us to obtain assurance that
we would become aware of all significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
- 16 -
INDEPENDENT AUDITOR’S REVIEW REPORT
TO THE MEMBERS OF EVOLUTION ROAD MAINTENANCE GROUP LIMITED
AND CONTROLLED ENTITIES (CONTINUED)
Independence
In conducting our review, we have complied with the independence requirements of the
Corporations Act 2001.
Conclusion
Based on our review, which is not an audit, we have not become aware of any matter that
makes us believe that the half-year financial report of Evolution Road Maintenance Group
Limited and controlled entities is not in accordance with the Corporations Act 2001 including:
(a) giving a true and fair view of the consolidated entity’s financial position as at 31
December 2015 and of its performance for the half-year ended on that date; and
(b) complying with Accounting Standard AASB 134 Interim Financial Reporting and
Corporations Regulations 2001.
Emphasis of matter
Without qualification to the conclusion expressed above, attention is drawn to the following
matter. As a result of the matters described in Note 1 to the interim financial statements, there
is uncertainty as to whether the group will be able to continue as a going concern.
PKF HACKETTS AUDIT
Shaun Lindemann
Partner
Brisbane, 28 April 2016
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