traffic technologies ltd and controlled entities abn … · (adm capital). the refinancing involved...

TRAFFIC TECHNOLOGIES LTD AND CONTROLLED ENTITIES

ABN 21 080 415 407

HALF-YEAR FINANCIAL INFORMATION FOR THE SIX MONTHS ENDED 31 DECEMBER 2019 PROVIDED TO THE ASX UNDER LISTING RULE 4.2A

This half-year financial report is to be read in conjunction with the financial report for the year ended 30 June 2019

TRAFFIC TECHNOLOGIES LTD (“TTI”)

(ABN 21 080 415 407)

Appendix 4D

Half-year financial report Period ended 31 December 2019

(Comparative period: period ended 31 December 2018)

Results for announcement to the market

1. Results

Revenues from ordinary activities Down

%

13% to

A$’000

21,912

Earnings before interest and tax+

Profit/(loss) after tax attributable to members+

Down

Down

to

to

(11,280)

(12,408)

Net profit/(loss) from ordinary activities after tax attributable to members+ Down to (12,408)

+ After impairment expense $10,554,000

For commentary on the results for the period and review of operations, refer to Directors’ Report.

2. Dividends Amount per security Franked amount per security

Interim dividend Nil Nil

Previous corresponding period:

Interim dividend Nil Nil

Record date for determining entitlements to the dividend N/A

3. Net tangible assets per security

Current period Previous corresponding period

Net tangible asset backing per ordinary security

(0.1) ¢ 0.4 ¢

4. Details of entities over which control has been gained or lost during the period:

Control gained over entities

Name of entitiesN/A+

Date(s) of gain of control N/A

Contribution to consolidated profit/(loss) from ordinary activities after tax by the controlled entities since the date(s) in the current period on which control was acquired

N/A

+ The acquisition of the L&M Traffic Signals business is expected to be completed in early 2020.

Control lost over entities

Name of entitiesN/A

Date(s) of loss of control N/A

5. Details of individual and total dividends or distributions and dividend or distribution payments

No interim dividend has been declared in respect of the half-year ended 31 December 2019 (2018: Nil). Total dividend Nil (2018: Nil).

6. Details of any dividend or distribution reinvestment plans in operation

The Company has adopted a Dividend Reinvestment Plan (DRP) to provide shareholders with the opportunity to reinvest their dividends in ordinary shares in the Company free of brokerage, commissions and other transaction costs. The DRP is governed by the DRP rules. Subject to the DRP rules, participation is open to shareholders with registered addresses in Australian and New Zealand. Participation can be full or partial and can be varied or cancelled at any time. If a shareholder elects to participate in the DRP, the dividend otherwise payable on the shareholder's ordinary shares participating in the DRP will be reinvested in ordinary shares in the Company. These shares will either be issued to the shareholder or acquired on-market and transferred to the shareholder. Shares may be allocated at a discount to the market price of the shares. The Directors will determine a discount of up to 10% for each dividend declared.

7. Details of associates and joint venture entities

Name of associate / joint venture % Securities held

N/A N/A

8. Financial reporting framework

The financial information provided in the Appendix 4D is based on the half-year condensed financial report (attached), which has been prepared in accordance with Australian Accounting Standards which are equivalents to International Financial Reporting Standards (IFRS).

9. Independent review of the financial report

The half-year financial report has been independently reviewed and is not subject to a qualified independent review conclusion.

TRAFFIC TECHNOLOGIES LTD AND CONTROLLED ENTITIES

ABN 21 080 415 407

FINANCIAL REPORT FOR THE HALF-YEAR ENDED

31 DECEMBER 2019

This half-year financial report is to be read in conjunction with the financial report for the year ended 30 June 2019.

Traffic Technologies Ltd Financial report for the half-year ended 31 December 2019

1

TRAFFIC TECHNOLOGIES LTD FINANCIAL REPORT FOR THE HALF-YEAR ENDED

31 DECEMBER 2019

TABLE OF CONTENTS

Page

Corporate Information 2

Directors’ Report 3-5

Consolidated Statement of Profit or Loss and Other Comprehensive Income 6

Consolidated Statement of Financial Position 7

Consolidated Statement of Changes in Equity 8

Consolidated Statement of Cash Flows 9

Notes to the Consolidated Financial Statements 10-16

Directors’ Declaration 17

Independent Auditor’s Review Conclusion 18

Auditor’s Independence Declaration 20

Traffic Technologies Ltd Financial Report for the half-year ended 31 December 2019

2

CORPORATE INFORMATION

This financial report covers Traffic Technologies Ltd (ABN 21 080 415 407) (the Company) and its subsidiaries (the Group) for the half-year ended 31 December 2019. The Group’s functional and presentation currency is AUD ($). A description of the Group’s operations and principal activities is included in the Operating and Financial Review section within the Directors’ Report.

Directors Mr. Garry Lowrey Mr. Con Liosatos Mr. Mark Hardgrave

Company Secretary & Chief Financial Officer Mr. Peter Crafter

Registered Office & Principal Place of Business Traffic Technologies Ltd 31 Brisbane Street Eltham VIC 3095

Share Register Computershare Investor Services Pty Limited Yarra Falls, 452 Johnson Street Abbotsford VIC 3067 Tel: 1300 850 505

Traffic Technologies Ltd shares are listed on the Australian Securities Exchange (“TTI”).

Lawyers K&L Gates Level 25 525 Collins Street Melbourne VIC 3000

Bankers Westpac Banking Corporation Level 6 150 Collins Street Melbourne VIC 3000

Auditors ShineWing Australia Level 10 530 Collins Street Melbourne VIC 3000

Traffic Technologies Ltd Half-year Financial Report Directors’ Report for the half-year ended 31 December 2019

3

The Directors of Traffic Technologies Ltd (the Company) present their financial report for the half-year ended 31 December 2019 in order to comply with the provisions of the Corporations Act 2001.

DIRECTORS

The names of the Group’s Directors in office during the half-year and until the date of this report are as follows. Directors were in office for this entire period unless otherwise stated.

Mr. Garry Lowrey BBus MAppFin CA (Non-Executive Chairman)

Mr. Con Liosatos MAICD (Managing Director)

Mr. Mark Hardgrave B Com ACA MAICD (Non-Executive Director)

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 Class Order 2016/191. The Company

is an entity to which the Class Order applies.

OPERATING AND FINANCIAL REVIEW

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 the design, manufacture and installation of traffic signals, traffic controllers, pedestrian

countdown timers, electronic road signs, emergency telephones, road lighting products and “Smart City” control

systems. The Group also supplies a wide range of directional and regulatory traffic signs and traffic control

products to road traffic authorities, municipal councils and construction companies.

The Group’s proprietary “Traffic SmartCity Technology” (TST) platform, developed for the road industry,

councils and power authorities, enables the integration of street lights and other traffic management equipment

to a central control/management system via remote “Internet of Things” (IoT) sensors.

The Group, through its subsidiary, Aldridge Traffic Systems, has been the major participant in the traffic signals

market in Australia for over 50 years where customers are mainly state road authorities or contractors building

or maintaining traffic intersections for state road authorities.

The Group, through its subsidiary, Quick Turn Circuits Pty Ltd (QTC), is involved in the manufacture of traffic

controllers. A traffic controller is an automated device that regulates the sequencing and timing of traffic

signals by monitoring vehicular and pedestrian demands and adjusting to meet these requirements.

In October 2019, the Group announced that it had entered into an agreement to acquire 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 is expected to be completed in early 2020.

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.


4

Financial Overview

The table below summarises the Group’s financial performance for the half-year ended 31 December:

2019 2018

$’m $’m

Revenue 21.9 25.0

EBITDA 0.5 2.4

Depreciation and amortisation (1.2) (0.8)

Impairment (10.6) -

EBIT (11.3) 1.6

NPAT (12.4) 0.8

EPS (2.57) cents 0.17 cents

Net assets 8.7 21.2++

Net debt 9.7+ 10.1++

Operating cash flows 2.0 1.5

+ Net debt excludes $1.3m relating to property leases capitalised at 31 December 2019.

++ As at 30 June 2019

Revenue and profit for the half-year to 31 December 2019 were lower than the previous corresponding period to

31 December 2018. The Company has continued to experience slow trading conditions in the market and delays

to the approval of several projects now expected to be completed in 2020.

Given the result for the half-year ended 31 December 2019, the Board has considered it prudent to record an

impairment provision against the value of goodwill in the 31 December 2019 financial statements. This

adjustment does not however affect cash flow or the trading operations of the Group and, as a result, the Group

has reported a net loss for the half-year to 31 December 2019.

The Company has partially refinanced the debt facility managed by Asia Debt Management Hong Kong Limited

(ADM Capital). The refinancing involved a repayment by the Company of AUD $7.5m to ADM Capital which

was achieved by a secured debtor and trade finance facility of up to AUD $5.55 million with Octet Finance Pty

Ltd (Octet) and a secured note facility of AUD $3.5 million with First Samuel Limited.

The Group has capitalised certain property leases as “right of use assets” in accordance with AASB 16. The

asset relating to such leases has been included in property plant and equipment ($1.2m) and the liability in

interest-bearing loans and borrowings ($1.3m). The introduction of AASB 16 has also affected occupancy

costs, depreciation expense and finance costs.

Business Strategies and Prospects

We have continued to invest in research and development with the major focus of development being the roll

out of our “Smart City” platform “TST”. 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.

Although some of our competitors are developing “Smart City” systems, they tend to be limited to single

applications, whereas our “TST” system is enabled for multiple applications. 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 and waste management.

The roll-out of the Group’s proprietary “Smart City” software “TST” is attractive to road authorities, councils

and power companies because it enables them to fully utilise and maintain critical assets in real time in a


5

significantly more cost-effective manner than previously, driving financial savings and better utilisation of

assets as well as reduction of greenhouse gases.

All levels of government are now realising the cost-benefit of “Smart City” systems and we are now in

discussions with a number of significant road authorities around the world, including in London, Singapore and

Hong Kong. Our “TST” platform has already been rolled out in Victoria, New South Wales, South Australia

and the Gold Coast. We expect “Smart Cities” to be a significant growth opportunity for the Group in the years

ahead. This is expected to deliver annuity revenue streams for the years to come with over 16,000 sensors

currently deployed to date.

The Group is continuing to benefit from the roll-out of LED street lights across Australia. There are

approximately 2.3 million street lights in Australia and we estimate that approximately 20% have so far been

converted to LED technology which represents a significant opportunity for the Group. LED street lights are

significantly more energy efficient than conventional street lights and represent an attractive opportunity for

state road authorities, local councils and other customers to make significant savings in their power bills and

maintenance costs in a time of rising electricity prices as well as being digitally ready for IoT devices.

The Group’s LED, “Smart City”-ready lighting products are well positioned for further growth, having secured

approvals, long term supply contracts and orders from state and local government agencies, power companies

and contractors. We continue to win significant contracts in this area and, whilst the pace of the roll-out has

been less than we would have liked over the period, we are now winning some significant orders and annuity

streams to underpin our growth moving forward.

Our export markets continue to develop, including the UK, New Zealand, Asia, the Middle East and South

America, with export revenue opportunities from the Group’s “TST” “Smart City platform and traffic

controllers. The Group has also identified opportunities to supply its state-of-the-art lighting control systems and

“Smart City” platform to overseas markets in London, Hong Kong, Singapore and Peru.

The Group has retained its position as the dominant supplier of traffic signals and road signs to the Australian

market where we continue to develop innovative traffic products which utilise the latest technology and

software to drive profits in line with the Group’s profit improvement program and which have been supplied to

customers across Australia, New Zealand and the United Kingdom.

Although the Group is not yet in a position to issue earnings guidance for the full financial year to 30 June 2020,

it expects to see a positive contribution in the second half from the above initiatives.

Signed in accordance with a resolution of the Directors made pursuant to s.306 (3) of the Corporations Act

2001.

Con Liosatos Managing Director

Melbourne, 26 February 2020

Traffic Technologies Ltd Half-year Financial Report Consolidated Statement of Profit or Loss and Other Comprehensive Income for the half-year ended 31 December 2019

6

Note Half-Year to Half-Year to 31 Dec 2019 31 Dec 2018

$’000 $’000

Revenue from continuing operations 3 21,912 25,047 Other income 3 19 81 Changes in inventories of finished goods and work in progress (1,527) 1,527 Raw materials and consumables used (11,076) (15,119) Employee benefits expense (7,036) (7,086) Occupancy costs (595) (1,024) Advertising and marketing expense (67) (49) Other expenses (1,142) (937) Depreciation and amortisation expenses (1,214) (843) Impairment expense 7 (10,554) -

Earnings before interest and tax (EBIT) (11,280) 1,597

Finance costs 4 (1,094) (624)

Profit/(loss) for the period before income tax expense (12,374) 973

Income tax expense (34) (148)

Net profit/(loss) for the period (12,408) 825

Other comprehensive income for the period, net of tax - -

Total comprehensive income for the period (12,408) 825

Profit/(loss) per share Cents Cents

- Basic earnings per share (2.57) 0.17 - Diluted earnings per share (2.57) 0.17

The Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the notes to the financial statements.

Traffic Technologies Ltd Half-year financial report Consolidated Statement of Financial Position as at 31 December 2019

7

Note 31 Dec 2019 30 Jun 2019 $’000 $’000

ASSETS Current Assets Cash and cash equivalents 2,568 3,107 Trade and other receivables 8,190 8,803 Inventories 11,070 12,597 Derivative financial instrument 5 - 251

Total Current Assets 21,828 24,758

Non-Current Assets Property, plant and equipment 6 2,394 1,224 Goodwill 7 - 10,554 Intangible assets 9,127 8,929

Total Non-Current Assets 11,521 20,707

TOTAL ASSETS 33,349 45,465

LIABILITIES Current Liabilities Trade and other payables 7,140 7,341 Interest-bearing liabilities 8 3,957 142 Provisions 2,742 2,685 Deferred tax liability 875 861 Derivative financial instrument 5 130 -

Total Current Liabilities 14,844 11,029

Non-Current Liabilities Interest-bearing liabilities 8 9,579 13,073 Provisions 211 203

Total Non-Current Liabilities 9,790 13,276

TOTAL LIABILITIES 24,634 24,305

NET ASSETS 8,715 21,160

EQUITY Contributed equity 10 54,755 54,755 Accumulated losses (46,040) (33,595)

TOTAL EQUITY 8,715 21,160

The Statement of Financial Position should be read in conjunction with the notes to the financial statements.

Traffic Technologies Ltd Half-year Financial Report Consolidated Statement of Changes in Equity for the half-year ended 31 December 2019

8

Ordinary Shares $’000

Accumulated losses $’000

Total

$’000

At 1 July 2018 54,755 (34,858) 19,897

Profit for the period - 825 825 Other comprehensive income - - -

Total comprehensive income for the period

- 825 825

At 31 December 2018 54,755 (34,033) 20,722

At 1 July 2019 54,755 (33,595) 21,160

Loss for the period - (12,408) (12,408) Adjustment from the adoption of AASB 16 - (37) (37) Other comprehensive income - - -

Total comprehensive income for the period

- (12,445) (12,445)

At 31 December 2019 54,755 (46,040) 8,715

The Statement of Changes in Equity should be read in conjunction with the notes to the financial statements.

Traffic Technologies Ltd Half-year Financial Report Consolidated Statement of Cash Flows for the half-year ended 31 December 2019

9

Half-Year to Half-Year to 31 Dec 2019 31 Dec 2018

$’000 $’000CASH FLOW FROM OPERATING ACTIVITIES Receipts from customers Payments to suppliers and employees

25,286 (22,653)

29,476 (27,483)

Interest received 13 25 Interest and other costs of finance paid (614) (553) Income tax paid (4) -

Net cash provided by operating activities 2,028 1,465

CASH FLOW FROM INVESTING ACTIVITIESProceeds from sale of plant and equipment 42 17 Purchase of property, plant and equipment (89) (32) Purchase of intangible assets (959) (1,206) Acquisition costs (76) -

Net cash used in investing activities (1,082) (1,221)

CASH FLOW FROM FINANCING ACTIVITIES Proceeds from borrowings 7,500 - Repayment of borrowings (8,985) (72)

Net cash used in financing activities (1,485) (72)

Net increase/(decrease) in cash and cash equivalents (539) 172

Cash and cash equivalents at beginning of the period 3,107 4,044

Cash and cash equivalents at end of the period 2,568 4,216

The Statement of Cash Flows should be read in conjunction with the notes to the financial statements.

Traffic Technologies Ltd Half-year Financial Report Notes to the Consolidated Financial Statements for the half-year ended 31 December 2019

10

1. CORPORATE INFORMATION

The financial report of Traffic Technologies Ltd (the Company) and its subsidiaries (the Group) for the half-

year ended 31 December 2019 was authorised for issue in accordance with a resolution of the directors on 26

February 2020. Traffic Technologies Ltd is a company incorporated in Australia and limited by shares, which

are publicly traded on the Australian Securities Exchange. The nature of the operations and principal activities

of the Group are described in the Operating and Financial Review section within the Directors’ Report. The

amounts contained in the notes to the financial statements have been rounded to the nearest $1,000 (unless

otherwise stated) under the option available to the Company under ASIC Class Order 2016/191. The Company

is an entity to which the Class Order applies. The financial report is presented in Australian dollars (AUD). For

the purpose of preparing the half-year financial report, the half-year has been treated as a discrete reporting

period.

2. BASIS OF PREPARATION AND ACCOUNTING POLICIES

a) Basis of preparation

This general purpose condensed financial report for the half-year ended 31 December 2019 has been prepared in

accordance with AASB 134 Interim Financial Reporting and the Corporations Act 2001. This half-year

financial report does not include all the notes of the type usually included within the annual financial report and

therefore cannot be expected to provide as full an understanding of the financial performance, financial position

and financing and investing activities of the Group as the full year financial report. It is recommended that the

half-year financial report be considered together with the annual report for the year ended 30 June 2019 and any

public announcements made by Traffic Technologies Ltd during the half-year ended 31 December 2019 and

subsequently to 26 February 2020, in accordance with the continuous disclosure obligations of the ASX Listing

Rules.

b) New standards adopted by the Group

The accounting policies adopted in the preparation of the interim condensed consolidated financial statements

are consistent with those followed in the preparation of the Group’s annual consolidated financial statements for

the year ended 30 June 2019, except that the Group has applied, for the first time, AASB 16 Leases as of 1 July

2019. As required by AASB 134, the nature and effect of this change is discussed below.

AASB 16: Leases.

AASB 16 has replaced the accounting requirements applicable to leases in AASB 117: Leases and related

Interpretations. AASB 16 has introduced a single lessee accounting model that eliminates the requirement for

leases to be classified as operating or finance leases. On adoption of AASB 16, the Group recognised lease

liabilities in relation to 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 weighted average lessee’s incremental borrowing rate applied

to the lease liabilities on 1 July 2019 was 15%.

The adoption of AASB 16 resulted in the Group recognising a right-of-use asset of $1.5m and related lease

liability of $1.5m 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.

AASB 16 has been applied using the modified retrospective approach, with the cumulative effect of adopting

AASB 16 being recognised in equity as a reduction to the opening balance of retained earnings of $37,000 for

the current period. Prior periods have not been restated. For contracts in place at the date of initial application,

the Group has elected to apply the definition of a lease from AASB 117 and has not applied AASB 16 to

arrangements that were previously not identified as a lease under AASB 117. On transition, for leases

previously accounted for as operating leases with a remaining lease term of less than 12 months and for leases of

low value assets, the Group has applied the optional exemptions to not recognise right-of-use assets but to

account for the lease expense on a straight-line basis over the remaining lease term.


11

3. REVENUE

Consolidated Consolidated 2019 $’000

2018 $’000

Revenue

Revenue from contracts with customers 21,912 25,047

Other income

Net gain on disposal of fixed assets 6 -

Net (loss)/gain on derivatives held for trading (130) 611

Net exchange gain/(loss) on foreign currency borrowings 120 (619)

Other income 23 89

Total other income 19 81

4. FINANCE COSTS

Consolidated Consolidated 2019 $’000

2018 $’000

Interest on loans 627 619

Lease interest 113 5

Amortisation of capitalised transaction costs 11 -

Capitalised interest (see note 8) 343 -

Total finance costs 1,094 624

5. DERIVATIVES

Derivatives are only used for economic hedging purposes but hedge accounting is not applied and they are not

speculative instruments.

31 Dec 2019 30 Jun 2019

$’000 $’000

Derivative financial (liability)/asset for foreign currency forward contracts (130) 251


12

6. PROPERTY, PLANT AND EQUIPMENT

Consolidated Consolidated 31 Dec 2019

$’000 30 Jun 2019

$’000

At cost 10,559 8,647

Accumulated depreciation (8,165) (7,423)

Net book value 2,394 1,224

Reconciliation of carrying amounts at the beginning and end of period

Right of Use Assets

Plant & Equipment Total

$’000 $’000 $’000 At opening net book value - 1,224 1,224 Adjustment on transition to AASB 16 1,488 - 1,488 Additions 4 167 171 Disposals - (36) (36) Depreciation expense (304) (149) (453)

Net book value 1,188 1,206 2,394

The Group has adopted AASB 16 and has recognised a right-of-use asset in connection with former operating

leases of properties occupied by the Group.


13

7. IMPAIRMENT OF GOODWILL

Impairment testing of goodwill

The Directors have considered impairment with respect to the Group’s goodwill in accordance with AASB 134

Interim Financial Reporting.

Description of the cash-generating units and other relevant information

Goodwill acquired through business combinations has been allocated to the Signals and Controllers cash-

generating units.

Key assumptions used in value in use calculations

The recoverable amounts of the Signals and Controllers cash-generating units have been determined based on a

value in use calculation using cash flow projections based on financial budgets prepared by management

covering a five year period.

Cash flows beyond the budget period have been extrapolated using an expected growth rate of 5% for the

Signals and Controllers cash-generating units (30 June 2019: 5%).

The growth rate used to extrapolate the cash flows for periods beyond the five year period is 3% (30 June 2019:

3%).

The pre-tax discount rate applied to the cash flow projections is 14.1% (30 June 2019: 14.8%), which is the

Group’s WACC.

The key assumptions used in the value in use calculations represent management’s best estimates at 31

December 2019. Management has considered the sensitivity of the value in use calculations to changes in

assumptions. The value in use calculation is sensitive to revenue changes.

Impairment testing

The Group performed impairment testing at 31 December 2019 and 30 June 2019. 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. Given the disappointing result for the half-year ended 31 December 2019, the Group has considered it

prudent to record an impairment expense of $10.6m against the value of goodwill in the Signals and Controllers

cash-generating units.

Carrying amount of goodwill allocated to each cash-generating unit


$’000 30 Jun 2019

$’000

Signals 30,535 30,535

Less: Impairment expense (30,535) (20,000)

- 10,535

Controllers 19 19

Less: Impairment expense (19) -

Total - 10,554


14

8. INTEREST-BEARING LOANS AND BORROWINGS


$’000 30 Jun 2019

$’000 Current borrowings Debtor & trade finance facility (Octet Finance) 3,224 - Equipment lease liabilities 145 142 Property lease liabilities 588 -

3,957 142

Non-current borrowings Term facility (ADM Capital) 5,311 12,931 Note facility (First Samuel) 3,500 - Equipment lease liabilities 140 142 Property lease liabilities 685 - Capitalised borrowing costs (57) -

9,579 13,073

Terms and conditions relating to the above financial instruments

Lender Octet Finance ADM Capital First Samuel

Facility Amount (AUD) $5.55m $5.3m $3.5m

Facility Type Debtor & trade finance Term loan Note deed

Interest 7.3% 7% cash; 8% capitalised 11%

Expiry 18 October 2022 18 April 2021 18 October 2022

Option - One year -

Security 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 AUD

Hedging - Derivative expiring on 20

April 2020 (see note 5)

-

Contingent liability - USD $557,750 margin

on derivative

-

Financing facilities available Consolidated Consolidated 31 Dec 2019

$’000 30 Jun 2019

$’000 Total facilities at reporting date Term debt facility (ADM Capital) 5,311 12,931 Debtor & trade finance facility (Octet) 5,550 - Note facility (First Samuel) 3,500 - Bank guarantee facility (Westpac) 265 265

14,626 13,196

Facilities used at reporting date Term debt facility (ADM Capital) 5,311 12,931 Debtor & trade finance facility (Octet) 3,224 - Note facility (First Samuel) 3,500 - Bank guarantee facility (Westpac) 133 133

12,168 13,064


15

9. LEASE LIABILITIES

Consolidated Consolidated

31 Dec 2019 30 Jun 2019

$’000 $’000

Current

Equipment leases 145 142

Property leases 588 -

733 142

Non-current

Equipment leases 140 142

Property leases 685 -

825 142

Lease liability commitments payable

Less than one year 908 154

Later than one year but less than five years 887 153

1,795 307

Less future finance charges (237) (23)

Total finance lease and hire purchase liabilities 1,558 284

Lease payments not recognised as a liability

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:

Consolidated

2019

$’000

Short-term leases 306

306

Reconciliation of total operating lease commitments at 30 June

2019 to lease liabilities at 1 July 2019

Total operating lease commitments at 30 June 2019 3,314

Discounted using the Group’s incremental borrowing rate of 15% (327)

Add: finance lease liabilities recognised as at 30 June 2019 284

Less: Short-term leases recognised on straight line basis (1,445)

Lease liability recognised as at 1 July 2019 1,826

The Group leases a number of warehouse, factory and office facilities under operating leases. The leases typically

run for periods up to 5 years with an option to renew the lease after that date. 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 6).


16

10. CONTRIBUTED EQUITY

Number of Shares (‘000) $’000

Movement in ordinary shares

At 1 July 2019 and at 31 December 2019 482,225 54,755

11. BUSINESS COMBINATION

In October 2019, the Group entered into an agreement to acquire 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. Control will pass to the Group

upon completion which is conditional on various obligations under the agreement. The acquisition is expected

to be completed in early 2020.

12. EVENTS AFTER BALANCE DATE

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

Group.

13. COMMITMENTS AND CONTINGENCIES

There have been no material changes to the commitments and contingent liabilities disclosed in the 30 June

2019 annual financial report.

14. RELATED PARTY TRANSACTIONS

First Samuel Limited (one of the Company’s lenders – see note 8) has disclosed that it owns 22,864,297

ordinary shares in the Company.

15. SEGMENT INFORMATION

The Group has only one business segment: Traffic Products. The Group’s chief operating decision maker (the

Managing Director) reviews financial information on a consolidated basis and makes strategic decisions based

on this consolidated information.

Traffic Technologies Ltd Half-year Financial Report Directors’ Declaration for the half-year ended 31 December 2019

17

DIRECTORS’ DECLARATION

The directors of the Company state:

a) the financial statements, comprising the statement of profit or loss and other comprehensive income, statement of financial position, statement of changes in equity, statement of cash flows and accompanying notes, of the Group are in accordance with the Corporations Act 2001, and:

(i) give a true and fair view of the consolidated entity’s financial position as at 31 December 2019 and of its performance for the half-year ended on that date; and

(ii) comply with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001; and

b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

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:

Con Liosatos Managing Director


ShineWing Australia ABN 39 533 589 331. Liability limited by a scheme approved under Professional Standards Legislation. ShineWing Australia is an independent member of ShineWing International Limited – members in principal cities throughout the world.

INDEPENDENT AUDITOR’S REVIEW REPORT

TO THE MEMBERS OF TRAFFIC TECHNOLOGIES LIMITED

Report on the Half-year Financial Report

Conclusion

We have reviewed the half-year financial report of Traffic Technologies Limited (“the Company”) and its controlled entities (“the Group”) which comprises the consolidated statement of financial position as at 31 December 2019, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements and the directors’ declaration.

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 the Group is not in accordance with the Corporations Act 2001 , including:

(i) giving a true and fair view of the Group’s financial position as at 31 December 2019 and of its financial performance for the half-year ended on that date; and

(ii) complying with Accounting Standard AASB 134 : Interim Financial Reporting and the Corporations Regulations 2001.

Directors’ Responsibility for the Half-year Financial Report

The directors of the Company 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 internal control as the directors determine is necessary to enable the preparation of the half-year financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error.

Auditor’s Responsibilities for the Review of the Half-Year Financial Report

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 Traffic Technologies Limited’s financial position as at 31 December 2019 and its financial 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 Traffic Technologies Limited, 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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Independence

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001.

ShineWing Australia Chartered Accountants

Rami Eltchelebi Partner


ShineWing Australia ABN 39 533 589 331. Liability limited by a scheme approved under Professional Standards Legislation. ShineWing Australia is an independent member of ShineWing International Limited – members in principal cities throughout the world.

Auditor’s Independence Declaration under Section 307C of the Corporations Act

2001 to the directors of Traffic Technologies Limited

I declare that, to the best of my knowledge and belief, during the half-year ended 31 December 2019 there have been:

(i) No contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the review, and

(ii) No contraventions of any applicable code of professional conduct in relation to the review.

ShineWing Australia Chartered Accountants

Rami Eltchelebi Partner


traffic technologies ltd and controlled entities abn … · (adm capital). the refinancing involved...

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