evolution road maintenance group limited · pdf fileconsolidated notes to the financial...

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.

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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

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AND ITS CONTROLLED ENTITES


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.

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AND ITS CONTROLLED ENTITES


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

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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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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


The accompanying notes form part of these condensed financial statements.

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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


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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


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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY


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


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CONSOLIDATED STATEMENT OF CASH FLOWS


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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NOTES TO THE INTERIM FINANCIAL STATEMENTS


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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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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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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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.

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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


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