ACROW LIMITED — Annual Report 2020

Aug 24, 2020

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APPENDIX 4E

PRELIMINARY FINAL REPORT Under ASX Listing Rule 4.3A

Acrow Formwork and Construction Services Limited

ABN 36 124 893 465

Details of Reporting Period

Acrow Formwork and Constructions Services Limited ABN 36 124 893 465

Registered office

Level 5, 126 Phillip Street, SYDNEY, NSW, AUSTRALIA, 2000

p +61 2 8072 1400 f +61 2 8072 1440 e info@acrow.com.au w www.acrow.com.au

Reporting Period 12 months ended 30 June 2020 Previous Reporting Period 12 months ended 30 June 2019

Results for announcement to the market

	2020	2019	% change
	dollars	dollars
Revenue from ordinary activities*	86,984,246	71,010,327	Up 22%
Net profit after tax from ordinary activities attributable to	3,013,335	4,948,715	Down 39%
members
Share based payments and significant costs*	5,968,036	2,558,492	Up 133%
Net profit after tax from ordinary activities excluding significant	8,981,371	7,507,206	Up 20%
costs*
	Cents	Cents
Basic earnings per share (cents)	1.55	2.88	Down 46%
Diluted earnings per share (cents)	1.54	2.69	Down 43%
Basic earnings per share (cents) excluding significant costs*	4.62	4.36	Up 6%
Diluted earnings per share (cents) excluding significant costs*	4.58	4.08	Up 12%
Net tangible asset per share (cents)	25.73	24.00	Up 7%

* comparative information has been reclassified in order to comply with current period disclosure	requirements, the impact of which is not
material to the financial report
	Amount per security
Dividend distributions	(Cents)
Interim dividend per share (cents)	Nil
Final dividend per share fully franked (cents)	1.05
Record date for determining entitlements to the dividend	Wednesday, 22 October
	2020
Dividend payment date	Friday, 13 November 2020
Dividend Reinvestment Plan (“DRP”) is in place, last date for election to	Friday, 23 October 2020
participate
The Company paid a final dividend for the year ended 30 June 2019 – 100%	1.0
unfranked onthe15November 2019

1

Dividend

The Company has declared a fully franked dividend of 1.05 cents per share for the period ending 30 June 2020. The Dividend will be paid on 13 November 2020 to holders on the Company’s fully paid ordinary share register on 22 October 2020 (Record Date).

Dividend Reinvestment Plan

The Company has a Dividend Reinvestment Plan (DRP) that will be available to holders of fully paid ordinary shares (shares). The DRP allows shareholders to reinvest part or all of their dividends into new Acrow Formwork and Construction Limited shares. The issue price of the shares will be at a 2.5% discount to the Market Value which is calculated as the arithmetic average of the daily volume weighted average sale price for a Share (rounded to four decimal places) sold through a Normal Trade on ASX on the ten trading days commencing on the second trading day following the Record Date. The last date for receipt of an election notice for participation in the DRP is 23 October 2020.

Control gained over entities

On 31 October 2019 Acrow Formwork and Construction Services Limited acquired all of the shares of Uni-span Group Pty Limited (Uni-span). Uni-span is a leading provider of engineered formwork systems servicing primarily the Civil infrastructure market and scaffold hire solutions, focusing primarily on the industrial markets. In addition, it supplies an industrial labour service to complement its scaffold hire, to the energy, mining and industrial sectors currently focusing on the Queensland market.

The acquisition was financed through the issue of 10,000,000 shares in the Group, $12.6m of debt and cash acquired (additional $1.1m debt for acquisition costs and integration). Two additional instalments of $1.5m and $3.5m are payable on 31 October 2020 and 2021. A further amount up to $4.3m is payable on 31 October 2021 if certain performance targets are met.

Commentary

The Acrow business continued to perform strongly for the 12 months to 30 June 2020, with the inclusion of 9 months of the acquired Uni-span business.

The business continued to re-base towards the value added, highly engineered civil formwork solutions market as well as an increased focus on equipment sales and expanding its new Industrial Scaffold division.

On an underlying basis, the key highlights for the year included:

• Sales revenue up 22% and EBITDA up 30% on the prior comparative period, assisted by the contribution from the Uni-span acquisition, a strong focus on product sales, and improved trading from the Natform screens business.

• Underlying EBITDA of $15.0m, up 30%, and EBITDA margin of 17.3%, up 100 bpts.

• Underlying net profit after tax of $9.0m, up 20%, assisted by a tax credit but offset by a higher depreciation charge and higher funding costs.

• Significant items relating primarily to acquisition & integration costs, and share-based payments of $4.6m.

• A final dividend of 1.05cps (fully franked) was declared, previously 1.0cps (unfranked).

• Underlying Earnings per Share 4.62 cents, up 6% from previous year.

• Balance sheet remains strong with net gearing of 20% 1 .

• Operating cash profit (Underlying EBITDA less Maintenance Capex) of $11.2m, up 27%.

1 Gearing = net debt/(net debt + equity).

2

Segment Underlying EBITDA

Year end 30 June ($000) (Pre- AASB 16)	FY19 FY20 FY20/ FY19
Formwork Commercial & Residential Scaffold Industrial Scaffold Total Revenue Formwork Commercial & Residential Scaffold Industrial Scaffold Total Contribution Contribution Margin Yard Related Expenses Labour Other Total Overheads Underlying EBITDA Margin	39,370 50,676 29% 31,640 26,149 -17% - 10,159 na
	71,010 86,984 22% 27,586 34,205 24% 15,029 12,926 -14% - 4,845 na
	42,615 51,976 22% 60.0% 59.8% 0% 13,977 15,221 9% 14,029 17,263 23% 3,060 4,474 46%
	31,065 36,958 19% 11,550 15,018 30% 16.3% 17.3% 6%

FY20 Reconciliation of Reported Net Profit after Tax to Underlying EBITDA

	Underlying Significant items AASB 16 impact Reported
EBITDA (Pre AASB 16) Depreciation Net interest AASB 16 impact Pre tax profit Share based payments Tax expense (credit) Netprofit after tax	15,018 (3,276) 11,742 (4,994) (266) (5,260) (1,363) (1,363) - (1,082) (1,082)
	8,661 (3,542) (1,082) 4,037 - (1,345) (1,345) 321 321
	8,982 (4,887) (1,082) 3,013

Audit

This Appendix 4E and Preliminary Financial Report is based on financial statements which are in the process of being audited by Grant Thornton.

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Acrow Formwork and Construction Services Limited ACN 124 893 465

Preliminary Financial Report 30 June 2020

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Acrow Formwork and Construction Services Limited | Preliminary Financial Report

Consolidated Statement of Comprehensive Income

For the year ended 30 June 2020

In dollars Note Continuing operations Revenue 3 Other income 4 Personnel expenses Sub-contract labour costs Inventory purchased, net of changes in finished goods Depreciation IT and telecommunication expenses Freight costs Property costs Gain on fair value of derivatives Other expenses 5 Profit before net finance costs and income tax Finance income Finance costs Net finance costs Profit before income tax Income tax benefit/(expense) 6 Profit from continuing operations Other comprehensive income Items that may be reclassified to profit / (loss) Foreign operations - foreign currency translation differences Total comprehensive income for the year Earnings per share from continuing operations Basic EPS (cents per share) 21 Diluted EPS (cents per share) 21	2020 2019 81,681,600 68,858,910 2,096,471 881,092 (26,611,704) (22,589,627) (18,498,438) (18,005,200) (13,303,195) (9,120,271) (9,639,607) (3,261,936) (1,331,878) (876,211) (1,252,113) (810,466) (838,757) (4,203,516) 100,000 - (7,202,173) (4,901,037)
	5,200,206 5,971,738 37,211 11,261 (2,544,787) (975,131)
	(2,507,576) (963,870) 2,692,630 5,007,868 320,705 (59,153)
	3,013,335 4,948,715
	(312) (256)
	3,013,023 4,948,459
	1.55 2.88 1.54 2.69

The Group applied AASB 16 Leases effective 1 July 2019 using the modified retrospective approach, per note 12. Under this approach, comparative information is not restated, and the cumulative effect is recognised in retained earnings at the date of initial application.

The above statement should be read in conjunction with the accompanying notes.

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Acrow Formwork and Construction Services Limited | Preliminary Financial Report

Consolidated Statement of Financial Position

As at 30 June 2020

In dollars Note Current assets Cash and cash equivalents Trade and other receivables 7 Inventories 8 Prepayments and other assets 9 Assets held for sale 10 Total current assets Non-current assets Property, plant and equipment 11 Right-of-use lease assets 12 Intangibles 13 Other assets 9 Total non-current assets Total assets Current liabilities Trade payables 14 Other payables 14 Employee benefits 15 Lease liabilities 12 Loans and borrowings 16 Current tax liabilities Liabilities held for sale 10 Total current liabilities Non-current liabilities Other payables 14 Employee benefits 15 Lease liabilities 12 Loans and borrowings 16 Provisions 17 Deferred income tax liability 18 Total non-current liabilities Total liabilities Net assets Equity Issued capital 19 Reserves Retained earnings Total equity	2020 2019 7,238,511 3,289,617 17,014,660 13,104,919 5,577,745 3,413,361 2,355,240 1,125,992 72,854 71,296
	32,259,010 21,005,185
	76,038,493 46,992,624 32,393,595 - 7,428,704 7,301,902 99,411 -
	115,960,203 54,294,526
	148,219,213 75,299,711
	16,234,858 10,201,226 3,842,952 2,230,199 4,129,727 2,962,801 3,420,761 - 5,981,098 2,102,006 556,301 556,301 67,317 65,878
	34,233,014 18,118,411
	3,331,309 2,128,080 595,571 456,609 30,729,513 - 15,837,398 4,837,086 469,274 452,474 4,727,900 1,683,999
	55,690,965 9,558,248
	89,923,979 27,676,659
	58,295,234 47,623,052
	45,674,176 34,814,339 914,264 2,062,063 11,706,794 10,746,650
	58,295,234 47,623,052

The Group applied AASB 16 Leases effective 1 July 2019 using the modified retrospective approach, per note 12. Under this approach, comparative information is not restated, and the cumulative effect is recognised in retained earnings at the date of initial application.

The above statement should be read in conjunction with the accompanying notes.

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Acrow Formwork and Construction Services Limited | Preliminary Financial Report

Consolidated Statement of Changes in Equity

For the year ended 30 June 2020

In dollars Balance at 30 June 2018 Adjustment from adoption of AASB 9 net of tax Restated balance at 1 July 2018 Total comprehensive income for the period Profit for the year Other comprehensive income Total comprehensive income Transactions with owners of the Group Shares issued, net of costs Dividends paid to shareholders Shares issued under a Dividend Reinvestment Plan (DRP) Equity settled share base payments Options exercised Balance at 30 June 2019 as previously reported Adjustment from adoption of AASB 16 net of tax Restated balance at 1 July 2019 Total comprehensive income for the period Profit for the year Other comprehensive income Total comprehensive income Transactions with owners of the Group Shares issued net of cost Shares issued under acquisition agreements Performance rights converted to shares, net of costs Dividends paid to shareholders Shares issued under a Dividend Reinvestment Plan (DRP) Equity settled share base payments Transfer of option reserves to issued capital Proceeds from exercise of options Balance at 30 June 2020	Issued capital Share based payments reserve Foreign currency translation reserve Retained earnings Total equity 29,377,927 623,011 56,286 8,988,391 39,045,615 - - - (584,408) (584,408)
	29,377,927 623,011 56,286 8,403,983 38,461,207
	- - - 4,948,715 4,948,715 - - (256) - (256)
	- - (256) 4,948,715 4,948,459
	5,249,027 - - - 5,249,027 - - - (2,107,019) (2,107,019) - - - 1,420,406 - - (499,029) - (499,029) 1,420,406 187,385 (37,384) - - 150,001
	34,814,339 2,006,033 56,030 10,746,650 47,623,052 - - - (302,854) (302,854)
	34,814,339 2,006,033 56,030 10,443,796 47,320,198
	- - - 3,013,335 3,013,335 - - (312) - (312)
	- - (312) 3,013,335 3,013,023
	4,949,090 - - - 4,949,090 3,050,000 - - - 3,050,000 2,454,140 (2,475,000) - - (20,860) - - - (1,750,337) (1,750,337) 341,661 - - - 341,661 - 1,345,059 - - 1,345,059 17,546 (17,546) - - - 47,400 - - - 47,400
	45,674,176 858,546 55,718 11,706,794 58,295,234

The above statement should be read in conjunction with the accompanying notes.

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Acrow Formwork and Construction Services Limited | Preliminary Financial Report

Consolidated Statement of Cash Flows

For the year ended 30 June 2020

In dollars	Note	2020	2019
Cash flows from operating activities
Receipts from customers		87,707,020	73,815,600
Payments to suppliers and employees		(71,418,334)	(64,260,069)
Cash generated from operations		16,288,686	9,555,531
Significant costs - acquisition and integration related costs		(2,999,612)	(896,610)
Finance income		37,211	11,261
Income taxpaid		-	(114,729)
Net cash inflow from operating activities		13,326,285	8,555,453
Cash flows from investing activities
Proceeds from disposal of property, plant and equipment		5,302,646	2,151,417
Purchase of property, plant and equipment		(13,101,140)	(9,784,502)
Consideration paid for controlled entities, net of cash	23	(12,182,477)	(6,729,487)
acquired*
Deferredpayment on acquisitions	14	(2,250,000)	-
Net cash outflow from investing activities		(22,230,971)	(14,362,572)
Cash flows from finance activities
Proceeds from issue of shares	19	5,200,000	-
Capital raising costs	19	(271,771)	-
Proceeds from exercise of options	19	47,400	150,000
Proceeds from borrowings		19,915,010	8,091,239
Repayment of borrowings		(5,035,606)	(1,152,147)
Repayment of lease liabilities	12	(3,299,167)	-
Dividends paid net of DRP shares	19	(1,408,676)	(2,107,019)
Finance costspaid		(2,293,610)	(803,174)
Net cash inflow from financing activities		12,853,580	4,178,899
Net increase / (decrease) in cash and cash equivalents		3,948,894	(1,628,220)
Cash and cash equivalents at the beginningof theyear		3,289,617	4,917,837
Cash and cash equivalents at the end of theyear		7,238,511	3,289,617

• Reconciles to Note 23 Acquisition of Uni-span Group Pty Ltd, being cash consideration paid of $12,905,035 less cash and cash equivalents acquired of $1,174,659 plus a related company loan of $452,101.

The above statement should be read in conjunction with the accompanying notes.

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Acrow Formwork and Construction Services Limited | Preliminary Financial Report

Notes to the Financial Statements

1. Reporting entity

Acrow Formwork and Construction Services Limited (Acrow or the Group) is a limited company incorporated in Australia and whose shares are traded on the Australian Securities Exchange under the issuer code “ACF”.

The preliminary consolidated financial statements of Acrow for the year ended 30 June 2020 comprise of the Company and its controlled entities (the Group).

The Group is a for-profit entity and is primarily involved in the hire and sale of falsework, formwork, scaffolding and screen equipment, and other construction services.

Acrow’s Annual Report for prior reporting periods are available upon request from the Group’s registered office located at Level 5, 126 Phillip Street, Sydney NSW 2000, Australia or at www.acrow.com.au.

2. Basis of preparation

(a) Basis of accounting

The preliminary consolidated financial statements are general purpose financial statements which have been prepared in accordance with Australian Accounting Standards (AASBs) adopted by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001.

The preliminary consolidated financial statements comply with International Financial Reporting Standards (IFRS) adopted by the International Accounting Standards Board (IASB) and were authorised for issue by the Board of Directors on 25 August 2020.

The Group adopted AASB 16 Leases (formerly AASB 117 Leases) from 1 July 2019 and this is the first set of the Group’s annual preliminary consolidated financial statements where AASB16 Leases has been applied. Further details are set out in note 12 Leases.

AASB 16 Leases introduced a single, on-balance sheet accounting model for lessees. As a result, the Group, as a lessee, has recognised right-of-use assets for properties, forklifts, motor vehicles and office equipment, representing its rights to use the underlying assets, and lease liabilities representing its obligation to meet lease payments.

The Group acquired the Uni-span group of companies on 31 October 2019 and the preliminary consolidated financial statements includes those subsidiaries financial statements from 1 November 2019 to 30 June 2020.

(b) Basis of measurement

The preliminary consolidated financial statements have been prepared on the historical cost basis except for derivatives that are measured at fair value.

(c) Functional and presentation currency

The preliminary consolidated financial statements are presented in Australian dollars, which is the Group’s functional currency.

(d) Use of estimates and judgements

The preparation of preliminary consolidated financial statements in conformity with AASBs requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

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Acrow Formwork and Construction Services Limited | Preliminary Financial Report

2. Basis of preparation (continued)

In particular, information about significant areas of estimations, uncertainties and critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the preliminary consolidated financial statements include the following:

• (i) Valuation of goodwill, refer to note 13; and

• (ii) Determination of expected credit losses of receivables, see note 7; and

• (iii) Utilisation of tax losses, per note 18.

The accounting policies which below have been applied consistently to all periods presented in these preliminary consolidated financial statements and have been applied consistently by the Group.

(e) Comparative information

Where applicable, comparative information is reclassified to comply with disclosure requirements and improve comparability. The impact of which is not material to the financial report.

(f) Rounding

Acrow is a company of the kind referred to in the Australian Securities and Investments Commission (ASIC) Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, dated 24 March 2016 and in accordance with that Legislative Instrument, amounts in these preliminary consolidated financial statements have been rounded off to the nearest dollar and are shown as such, unless stated otherwise.

(g) COVID-19 impact

The ongoing COVID-19 pandemic has increased the estimation uncertainty in the preparation of these preliminary consolidated financial statements. The estimation uncertainty is associated with:

• (i) The extent and duration of the disruption to businesses arising from the actions by governments, businesses and consumers to contain the spread of the virus.

• (ii) The extent and duration of the expected economic downturn. This includes the disruption to capital markets, deteriorating availability of credit, liquidity concerns, increasing unemployment, declines in consumer discretionary spending, reductions in production because of decreased demand, and other restructuring activities; and

• (iii) The effectiveness of government and central bank measures that have and will be put in place to support businesses and consumers through this disruption and economic downturn.

The Group has developed estimates in these preliminary consolidated financial statements based on forecasts of economic conditions which reflect expectations and assumptions as at 30 June 2020 about future events that the Directors believe are reasonable in the circumstances. There is a considerable degree of judgement involved in preparing forecasts. The underlying assumptions are subject to uncertainties which are often outside the control of the Group. Accordingly, actual economic conditions are likely to be different from those forecast since anticipated events frequently do not occur as expected, and the effect of those differences may significantly impact accounting estimates included in these financial statements.

(h) Basis of consolidation

The preliminary consolidated financial statements have been prepared by aggregating the financial statements of all the entities that comprise the Group, being Acrow Formwork and Construction Services Limited and its controlled entities.

All inter-entity balances and transactions are eliminated in these preliminary consolidated financial statements.

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Acrow Formwork and Construction Services Limited | Preliminary Financial Report

3. Revenue In dollars Revenue from contracts with customers Provision of labour and contracting services Other sales of goods Other revenue Hire of equipment 4. Other income In dollars Disposal of property, plant and equipment Proceeds Written down value Net gain on disposal of property, plant and equipment 5. Other expenses In dollars Significant items - acquisition and integration related expenses Audit, tax and legal expenses Consumables Doubtful debt expense Due diligence Insurance expenses Motor vehicle expenses Plant & equipment operation expenses Travelling expenses Others 6. Income tax benefit/(expense) In dollars Profit before income tax Income tax (expense) using the Group’s domestic tax rate (30%) (Increase)/decrease in income tax expense due to: Non-deductible/(taxable) amounts (Increase)/decrease in income tax expense due to: Origination and reversal of temporary differences Tax losses not brought to account Recognition of tax losses not previously brought to account Income tax benefit/(expense)	2020 2019 22,266,865 22,075,424 22,215,220 13,642,786
	44,482,085 35,718,210 37,199,515 33,140,700
	81,681,600 68,858,910
	2020 2019 5,302,646 2,151,417 (3,206,175) (1,270,325)
	2,096,471 881,092
	2020 2019 (2,999,612) (896,610) (395,868) (363,633) (328,187) (318,622) 322,690 (368,828) (306,687) - (810,623) (593,153) (613,544) (825,575) (298,541) (647,904) (494,081) (425,852) (1,277,720) (460,860)
	(7,202,173) (4,901,037)
	2020 2019 2,692,630 5,007,868
	(807,789) (1,502,360) (602,176) (456,930) 950,133 1,775,998 (185,728) (174,591) 966,265 298,730
	320,705 (59,153)

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Acrow Formwork and Construction Services Limited | Preliminary Financial Report

7. Trade and other receivables

In dollars Trade receivables Provision for doubtful debts Current 31 to 60 61 to 90 90+ Impaired 8. Inventories In dollars Finished goods Provision for slow moving stock 9. Prepayments and other assets In dollars Current Contract assets Other receivables Prepayments Non-current Other assets 10. Assets and liabilities held for sale In dollars Assets classified as held for sale Liabilities classified as held for sale	2020 2019 18,211,600 14,134,327 (1,196,940) (1,029,408)
	17,014,660 13,104,919
	8,084,287 6,395,010 6,401,245 4,046,059 1,446,874 1,144,164 2,279,194 2,549,094 (1,196,940) (1,029,408)
	17,014,660 13,104,919
	2020 2019 5,881,998 3,688,216 (304,253) (274,855)
	5,577,745 3,413,361
	2020 2019 239,747 259,316 933,026 158,013 1,182,467 708,663
	2,355,240 1,125,992
	99,411 - 2020 2019 72,854 71,296 67,317 65,878

Acrow continues to explore the divestment of Noble Mineral Resources Ghana Ltd, which owns the Group’s exploration and evaluation assets in Ghana. The business remains non-core to the Group, has an immaterial financial and limited management impacts.

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Acrow Formwork and Construction Services Limited | Preliminary Financial Report

11. Property, plant and equipment

11. Property, plant and equipment
In dollars At 30 June 2019 Cost Accumulated depreciation Net book value At 30 June 2020 Cost Accumulated depreciation Net book value	Land and buildings Plant and equipment Hire equipment Total 388,645 11,051,856 49,732,154 61,172,655 335,940 10,541,142 3,302,949 14,180,031
	52,705 510,714 46,429,205 46,992,624
	475,989 11,528,314 82,765,705 94,770,008 354,558 10,693,801 7,683,156 18,731,515
	121,431 834,513 75,082,549 76,038,493

12. Leases

AASB 16 Leases replaces AASB 117 Leases and was adopted by the Group on 1 July 2019.

The Group leases property, forklifts, motor vehicles and office equipment.

Property lease terms are from 1 to 10 years and often include extension options. Forklift lease terms are for 7 years, motor vehicle lease terms from 1 to 3 years, whilst all office equipment are for a 5-year lease term.

All leased office equipment forms one master lease agreement while all other leases are negotiated on an individual basis and contain a broad range of terms and conditions.

Lease agreements do not impose any covenants, but leased assets may not be used as security for borrowing purposes.

AASB 16 Leases removes the current distinction between operating and financing leases and requires the recognition of an asset (the right to use the underlying asset) and a financial liability to pay rentals for all lease contracts.

Leases are recognised as a right-of-use asset and a corresponding lease liability at the date at which the leased asset is available for use by the Group.

Each lease payment is allocated between the liability and finance cost (interest). The finance cost is charged to the consolidated statement of comprehensive income over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

The right-of-use asset is depreciated over the lease term on a straight-line basis.

The right-of-use asset and lease liability are initially measured at the net present value of the future minimum lease payments.

Lease payments include:

• Variable lease payments that are based on an index or rate;

• Amounts expected to be payable by the lessee under residual value guarantees;

• The exercise price of a purchase option if Acrow is reasonably certain to exercise that option;

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Acrow Formwork and Construction Services Limited | Preliminary Financial Report

• Fixed payments (including in-substance fixed payments), less any lease incentives receivable; and

• Payment of penalties for terminating the lease, if the lease term reflects Acrow exercising that option.

Lease payments are discounted using the interest rate implicit in the lease, if determinable or at the Group’s incremental borrowing rate.

Right-of-use assets are measured at cost and comprise:

• Any initial direct costs;

• An estimate of restoration or make good costs;

• The amount of the initial measurement of lease liability; and

• Any lease payments made at or before the commencement date, less any lease incentives received.

Payments associated with short term leases and leases of low value assets are recognised on a straight-line basis as an expense in the Consolidated Statement of Comprehensive Income. A short-term lease is a lease at commencement date with a lease term of 12 months or less. A low value asset per AASB 16 Leases has an asset value of USD5,000 or lower per IFRS 16. BC100. Low value assets mainly represent IT equipment.

Extension options are only included in the lease term if the lease is reasonably certain to be extended. The assessment is reviewed if a significant event or change in circumstance occurs which affects this assessment and that is within the control of the lessee.

Impact of the adoption of AASB 16 Leases on 1 July 2019

On adoption of AASB 16 Leases, the Group recognised lease liabilities in relation to leases which had previously been classified as ‘operating leases’ under the principles of AASB 117 Leases. These liabilities were measured at the present value of the remaining lease payments, discounted using the property yields at various locations and the Group’s incremental borrowing rate for short term finances as at 1 July 2019.

In applying AASB 16 Leases for the first time, the Group has used the following practical expedients permitted by the standard:

• Relying on previous assessments as to whether a lease is onerous.

• The use of a single discount rate to a portfolio of leases with reasonably similar characteristics.

• The exclusion of initial direct costs for the measurement of the right-to-use asset at the date of initial application.

• The use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.

• The accounting for operating leases with a remaining lease term of less than 12 months as at 1 July 2019 as short-term leases.

The Group has also elected not to apply AASB 16 Leases to contracts that were not identified as containing a lease under AASB 117 Leases and Interpretation 4 Determining whether an Arrangement contains a Lease.

The recognition of the lease liability can be reconciled to the operating lease commitments disclosed at 30 June 2019 as follows:

Operating lease commitments disclosed at 30 June 2019 Discounted using the Group’s incremental borrowing rates Less:Short-term leases and low value leases recognised on a straight-line basis as an expense Lease liability recognised as at 1 July 2019	19,744,728 (1,227,960) (79,909)
	18,436,859

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Acrow Formwork and Construction Services Limited | Preliminary Financial Report

All right-of-use assets for leases were measured using the modified retrospective method as if the new rules had always been applied since the later of either the commencement of the lease or the date of business combinations.

In accordance with AASB 16 Leases, the Group has not restated comparatives as permitted under the specific transition provisions in the standard.

Following implementation of AASB 16 Leases on 1 July 2019:

• Property, plant and equipment increased by $17,771,714 to recognise the net right-of-use asset, after the impairment of onerous leases.

• Lease liabilities increased by $18,436,859

• Retained earnings reduced by $302,854

• Deferred tax assets increased by $21,090

• Accrued lease incentive was reduced by $341,202

Lease amounts recognised in the Consolidated Statement of Financial Position:

In dollars	2020	2019
Properties	29,896,913	-
Forklifts and office equipment	2,130,164	-
Motor vehicles	366,518	-
Total right-of-use assets	32,393,595	-
Lease liabilities
Current	3,420,761	-
Non-current	30,729,513	-
Total lease liabilities	34,150,274	-
Lease amounts recognised in the Consolidated Statement of Comprehensive Income:
In dollars	2020	2019
Depreciation charge for right-of-use assets:
Properties	3,686,922	-
Forklifts and office equipment	402,223	-
Motor vehicles	290,336	-
Total depreciation charge for right-of-use assets	4,379,481	-
Interest expense (included in finance costs)	1,144,161	-
Expenses relating to short term and low value asset leases	272,842	-
Impacts to the Consolidated Statement of Comprehensive Income are:
In dollars	2020	2019
(Increase) in depreciation expense	(4,379,481)	-
(Increase) in interest expense	(1,144,161)	-
Decrease in lease payments	4,443,328	-
Net impact to net profit before income tax	(1,080,314)	-

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Acrow Formwork and Construction Services Limited | Preliminary Financial Report

The Consolidated Statement of Cash Flows at 30 June 2020 includes cash outflows for lease payments of $3,299,167 and lease interest of $1,144,161 within cash flows from financing activities. The cash flows for the year ended 30 June 2019 have not been restated. Cash outflows associated with lease payments are included in payments to suppliers and employees within cash flows from operating activities.

13. Intangibles

Goodwill

All business combinations are accounted for by applying the acquisition method. Goodwill represents the difference between the cost of the acquisition and the fair value of the net identifiable assets acquired.

Goodwill is stated at costs less any accumulated impairment losses.

Acrow annually tests goodwill with indefinite useful lives for impairment. An asset that does not generate independent cash flows is tested for impairment as part of a cash generating unit (CGU).

Where there is an impairment loss, it is recognised in the consolidated statement of comprehensive income when the carrying amount of an asset exceeds its recoverable amount. The asset’s recoverable amount is estimated based on the higher of its value-in-use and fair value less costs to sell.

The recoverable amount of a CGU is determined based on a value-in-use calculation. This calculation uses discounted cash flow projections based upon management’s projected EBITDA and financial budgets approved by the board of directors covering a five-year period. Cash flows beyond the five-year period are extrapolated using the cash flows for year 5 and the estimated long-term growth rates.

The discount rate used is the Group’s weighted average cost of capital. The terminal growth rate reflects the management’s outlook on growth.

Average growth rate 1 - 5 years Terminal growth rate Post-tax discount rate In dollars Opening goodwill balance Additions Reductions Closing balance Allocation to CGU Groups In dollars Natform companies Uni-span companies	2020 2019 9.5% 13.7% 1.5% 2.5% 10.7% 10.0% 2020 2019 7,301,902 7,301,902 126,802 - - -
	7,428,704 7,301,902
	2020 2019 7,301,902 7,301,902 126,802 -
	7,428,704 7,301,902

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Acrow Formwork and Construction Services Limited | Preliminary Financial Report

Impairment testing on Natform companies

Goodwill of $7,301,902 was recorded at 31 August 2018 with respect to the acquisition of Natform Pty Ltd and Natform (QLD) Pty Ltd. The recoverable amount of CGU is supported on a fair value less costs to sell basis with reference to the market price paid to acquire the business. No indicators of impairment have arisen since the acquisition date.

Impairment testing on Uni-span companies

Goodwill of $126,802 was recorded on 31 October 2019 on acquisition of the Uni-span Group Pty Ltd and its subsidiaries. No indicators of impairment have arisen since acquisition.

Sensitivity

Management have made judgements and estimates in respect of impairment testing of goodwill. Should these judgements and estimates not occur, the carrying value of goodwill may vary. Any reasonable change in the key assumptions on which the estimates and/or the discount rate are based would not cause the carrying amount of the CGU to exceed the recoverable amount.

14. Trade and other payables

In dollars Current Trade payables Trade payables Accrued expenses Other payables Natform deferred consideration Uni-span deferred consideration Non-current Other payables Natform deferred consideration Uni-span deferred consideration	2020 2019 10,353,721 6,925,662 5,881,137 3,275,564
	16,234,858 10,201,226
	2,230,661 2,230,199 1,612,291 -
	3,842,952 2,230,199
	- 2,128,080 3,331,309 -
	3,331,309 2,128,080

Other payables represent the present values of deferred considerations relating to the acquisitions of the Natform and Uni-span group of companies and completion adjustments.

Two equal payments of $2,250,000 relating to Natform were payable. The first payment of $2,250,000 was paid in September 2019 and the second payment of $2,250,000 is payable in September 2020.

Two payments relating to Uni-span totalling $5,000,000 are payable. The first payment of $1,500,000 is payable in September 2020 and the second payment of $3,500,000 is payable in September 2021. A contingent consideration payable in September 2021 has not been provided for as the probability is deemed low. Refer to note 23 for further details.

All Natform and Uni-span deferred considerations are recognised at the present value of future expected cash outflows, based on Acrow’s incremental borrowing rate.

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Acrow Formwork and Construction Services Limited | Preliminary Financial Report

15. Employee benefits

15. Employee benefits
In dollars Current Annual leave Long service leave Other employee benefits Non-current Long service leave	2020 2019 1,690,499 1,169,722 1,357,493 1,068,654 1,081,735 724,425
	4,129,727 2,962,801
	595,571 456,609

All employees have defined contribution plans for superannuation and the expense recognised during the year was $1,935,108 (2019: $1,465,313).

16. Loans and borrowings In dollars Current Non-current Borrowings are represented by the following finance facilities: Secured amortising business loan of $13,750,000, commenced in October 2019, maturing in 30 April 2024 (Uni-span acquisition). Secured amortising business loan of $5,394,000, commenced in October 2018, maturing in 8 May 2023 (Natform acquisition). Equipment finance facility, revolving 3-year limit of $5,000,000 Headroom Working capital facility, $3m including $1.4m bank guarantee (2019: $0.9m) and $1.6m bank overdraft (2019: $2.1m): Headroom Insurance premium funding Borrowings utilised Headroom Total borrowings	2020 2019 5,981,098 2,102,006 15,837,398 4,837,086
	21,818,496 6,939,092
	12,602,000 - 4,664,000 5,978,000
	4,539,975 961,092
	460,025 4,038,908
	- -
	1,600,000 2,100,000
	12,521 -
	21,818,496 6,939,092
	2,060,025 6,138,908
	23,878,521 13,078,000

All borrowings are secured by interlocking guarantees across all Group companies.

Interest rates on secured amortised business loans are variable and dependent on prevailing market rates and bank margins.

The maturity date of the two secured business loans includes an extension of 6 months agreed to by our banker as part of our response to the Covid-19 response.

All borrowing costs incurred in the year have been expensed.

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Acrow Formwork and Construction Services Limited | Preliminary Financial Report

17. Provisions

In dollars Make good Movements during the year were as follows: Balance at 1 July Addition through a business combination Amounts used during the year Balance at 30 June 18. Deferred income tax In dollars Deferred income tax liability movement during the year: Opening balance at 1 July Provisions Accruals Property, plant and equipment Revenue tax loss Closing balance at 30 June Unrecognised deferred tax assets Deferred tax assets not recognised for the following items: Revenue tax losses Capital losses Temporary differences	2020 2019 469,274 452,474 452,474 452,474 769,587 - (752,787) - 469,274 452,474 2020 2019 1,683,999 - (709,364) (141,395) (216,032) (9,506) 5,350,418 1,834,900 (1,381,122) -
	4,727,900 1,683,999
	12,877,219 13,654,771 674,802 202,441 (4,592,901) (2,911,668)
	8,959,119 10,945,544

While tax losses and temporary differences do not expire under current tax legislation, deferred tax assets have not been recognised in respect of these items as certain subsidiaries have experienced a number of years without taxable income and therefore recovery is not considered probable. The tax losses do not expire under current tax legislation.

The potential benefit of the deferred tax asset in respect of tax losses carried forward will only be obtained if:

• (i) The subsidiaries continue to derive future assessable income of a nature and an amount sufficient to enable the benefit to be realised;

• (ii) The subsidiaries continue to comply with the conditions for deductibility imposed by the law;

• (iii) No changes in tax legislation adversely affect the subsidiaries in realising the asset and

• (iv) The subsidiaries pass the continuity of ownership test, or the same business test as outlined by the Australian Taxation Office.

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Acrow Formwork and Construction Services Limited | Preliminary Financial Report

19. Issued capital

Number of shares On issue of 1 July Issue of shares (i) Shares issued at Uni-span acquisition (ii) Issue of shares for cash (iii) Shares issued through conversion of performance rights (iv) Exercise of share options (v)	2020 2019 175,006,455 162,982,615 1,087,746 11,273,839
	176,094,201 174,256,454 10,000,000 -
	186,094,201 174,256,454 17,333,333 -
	203,427,534 174,256,454 12,375,000 -
	215,802,534 174,256,454 237,000 750,001
	216,039,534 175,006,455

• (i) 1,087,746 shares were issued at $0.3141 cents per share following the dividend declaration on 29 August 2019 pursuant to the Dividend Reinvestment Plan (DRP);

• (ii) 10,000,000 shares were issued on 15 November 2019 as part of the consideration for the acquisition of the Uni-span group of companies and are escrowed until 31 October 2020;

• (iii) 17,333,333 shares were issued on 4 December 2019 at $0.30 cents per share;

• (iv) 12,375,000 shares were issued through the exercise of performance rights and

• (v) 237,000 options were exercised at $0.20 cents per share

The holders of these shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at general meetings of the Group.

Dividends

Dividend distributions payable to equity shareholders are included in other liabilities when the dividends have been approved prior to the reporting date.

The following dividends were declared and paid by the Group during the year:

In dollars Dividends on ordinary shares declared and paid: Final dividend in respect of the previous reporting period: FY 19: 1.0 cent per share (FY18: 0.5 cent per share) - Paid in cash - Paid via DRP Interim dividend for the current reporting period: FY 20: Nil (FY19: 1.0 cent per share) - Paid in cash - Paid via DRP	2020 2019 1,408,676 672,803 341,661 192,114 - 1,434,216 - 306,914
	1,750,337 2,606,047

A final unfranked dividend of $1,750,337 for the year ended 30 June 2019 was paid on 15 November 2019 at 1.0 cent per share, with 1,087,746 new shares issued as part of the DRP.

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Acrow Formwork and Construction Services Limited | Preliminary Financial Report

An interim dividend of 0.7 cents per share fully franked was declared on 27 February 2020. This dividend was cancelled on 30 March 2020 in light of the Covid-19 pandemic in order to prudently preserve cash.

Subsequent to balance date, the Directors declared a dividend of 1.05 cents per share fully franked on 25 August 2020.

Franking credit balance at 30 June 2020 was $3,016,901 (2019: $1,958,742).

20. Capital management

Management monitors the capital of the Group in order to maintain a good debt to equity ratio, provide the shareholders with adequate returns and ensure that the Group can fund its operations and continue as a going concern.

The Group’s debt and capital includes ordinary share capital and borrowings.

There are no externally imposed capital requirements.

Management effectively manages the Group’s capital by assessing the Group’s financial risks and adjusting its capital structure in response to changes in these risks and in the market. These responses include the management of debt levels, distributions to shareholders and share issues.

The Board is targeting a dividend payout ratio of between 30% and 50% of its operating cash profit which it defines as EBITDA less maintenance capital expenditure and less tax paid.

21. Earnings per share

Basic EPS is calculated by dividing profit for the year attributable to ordinary equity holders of the Parent by the weighted average number of ordinary shares outstanding during the year.

Diluted EPS is calculated by dividing the net profit attributable to ordinary equity holders of the Parent by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.

The following table reflects the income and share data used in the basic and diluted EPS computations:

In dollars	2020	2019
Earnings reconciliation
Profit excluding significant items	8,981,371	7,507,206
Net share-based payments and significant items*	(5,968,036)	(2,558,491)
Net profit after tax	3,013,335	4,948,715
* Jun-20 includes the net impact of IFRS 16 Leases adoption so that profit excluding	significant items are	comparable, per
note 5
	2020	2019
Number of ordinary shares:
Weighted average number of ordinary shares used in the calculation of	194,591,893	172,002,461
basic EPS
Weighted average number of ordinary shares used in the calculation of	195,904,881	183,997,435
diluted EPS
Basic EPS excluding significant items (cents per share)	4.62	4.36
Diluted EPS excluding significant items (cents per share)	4.58	4.08

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Acrow Formwork and Construction Services Limited | Preliminary Financial Report

Basic EPS (cents per share)	1.55	2.88
Diluted EPS (cents per share)	1.54	2.69
22. Group entities
The preliminary consolidated financial statements include the financial	Place of	% Equity
statements of the following wholly owned subsidiaries:	incorporation	interest
Acrow Holdings Pty Limited (a), (b)	NSW	100%
Acrow Formwork and Scaffolding Pty Ltd (a), (b)	NSW	100%
Natform Pty Ltd (a), (b)	NSW	100%
Natform (QLD) Pty Ltd (a), (b)	QLD	100%
Uni-span Group Pty Ltd (a), (b)	QLD	100%
Uni-span Height Safety Pty Ltd (a), (b)	QLD	100%
Unispan Australia Pty Ltd (a), (b)	QLD	100%
Uni-span Formwork Solutions Pty Ltd (a), (b)	QLD	100%
Acrow Group Investments Pty Ltd (a), (b)	NSW	100%
Noble Mineral Resources Ghana Limited	Ghana	100%

• (a) These subsidiaries have been granted relief from the necessity to prepare financial reports under the option available to the Group under ASIC Corporations (Wholly Owned Companies) Instrument 2016/785.

• (b) These subsidiaries, along with Acrow Formwork and Construction Services Limited (the parent entity of the Group), form the Deed of Cross Guarantee Group.

23. Acquisition of Uni-span Group Pty Ltd

On 31 October 2019 Acrow acquired 100% of the issued shares of Uni-span Group Pty Ltd ACN 131 921 116 and its subsidiaries, per below:

• Uni-span Height Safety Pty Ltd ACN 122 411 198;

• Unispan Australia Pty Ltd ACN 099 939 287; and

• Uni-span Formwork Solutions Pty Ltd ACN 158 121 361

Uni-span is a leading provider of engineered formwork systems servicing primarily the civil Infrastructure market and scaffold hire solutions, focussing on industrial markets, in Queensland and New South Wales.

In addition, it supplies an industrial labour service to complement its scaffold hire, to the energy, mining and industrial sectors.

Details of the consideration and the fair value of identified assets acquired, liabilities assumed, and goodwill determined are set out below.

The consideration is comprised of the following:

• (i) $12,905,035 cash with adjustments subject to the outcome on the completion accounting audit;

• (ii) 10,000,000 Acrow shares valued at $0.305 each issued on the 15 November 2019, escrowed for 12 months (where if the closing price at end of escrow period is below $0.35 per share, Acrow is liable to pay each seller the amount of the difference multiplied by the number of shares issued within 7 days or at its discretion decide to issue additional shares to the sellers at the then current market value, in lieu of cash);

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Acrow Formwork and Construction Services Limited | Preliminary Financial Report

• (iii) Deferred considerations of $1,500,000 due on 30 September 2020 and $3,500,000 due on 30 September 2021 respectively; and

• (iv) A contingent payment up to $4,250,000 cash, provided the Acrow group’s EBITDA exceeds $18,000,000 for the 2021 Financial Year. At reporting date the contingent payment is estimated to be nil.

A fair value gain of $100,000 on the 10,000,000 shares has been recognised due to an increase in share price from the issue date to the end of the reporting period ($0.305 to $0.315).

Remeasurement will continue until the end of the escrow period.

Uni-span Group Pty Ltd and its subsidiaries

In dollars Fair value of consideration transferred Amount settled in cash Amount settled in equity Fair value of deferred consideration Fair value of contingent consideration Total consideration Assets Cash and cash equivalents Receivables Inventory Property, plant and equipment Right-of-use lease assets Provision for income tax Other Total assets Liabilities Trade and other payables Lease liabilities Provisions Borrowings Deferred tax liabilities Total liabilities Fair value of net assets acquired Purchase consideration paid and payable Less: Fair value of net identifiable assets acquired Preliminary goodwill on acquisition Consideration transferred in cash Cash and cash equivalents acquired Loan from related company Net cash outflow on acquisition	$ 12,905,035 3,500,000 4,464,691 -
	20,869,726
	1,174,659 4,856,007 1,413,399 24,721,898 324,938 62,622 45,525
	32,599,048
	6,089,417 335,959 1,530,331 452,101 3,448,316
	11,856,124
	20,742,924
	20,869,726 (20,742,924)
	126,802
	12,905,035 (1,174,659) 452,101
	12,182,477

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Acrow Formwork and Construction Services Limited | Preliminary Financial Report

The valuation techniques used for measuring the fair value of material assets acquired were as follows:

Asset Acquired Valuation Technique

Hire equipment An independent valuer has been engaged to determine depreciated replacement cost of the assets. The depreciated replacement costs reflect adjustments for physical deterioration as well as functional and economic obsolescence.

The consolidated statement of comprehensive income includes the following revenue and net profit resulting from the acquisition made since 31 October 2019:

Revenue	20,581,574
Net profit after tax	768,085

If the acquisition had taken place at the beginning of the financial year (1 July 2019), the following revenue and net profit after tax would have been included:

Revenue	30,872,361
Net profit after tax	1,152,098

24. Operating segments

The Group manages all its construction-related operations, being all the Australian based formwork and scaffolding subsidiaries as one segment and the mining operation in Ghana as a separate segment. The executive management team (the chief operating decision makers) assesses the financial performance of the construction-related operations on an integrated basis only and accordingly.

All revenue is generated by external customers in Australia on formwork and construction-related services.

The mineral exploration assets and liabilities are held for sale per note 10.

The Group has the following segments:

• Formwork and construction services: the provision of falsework, formwork, scaffolding, screens and related materials for hire and sales; and

• Mineral exploration activities

Segment Information as at 30 June 2020

In dollars Hire of equipment Provision of labour and contracting services Other hardware sales Other income Segment revenue Segment operating profit Unallocated corporate overhead costs Finance costs Profit before income tax Income tax benefit Profit after income tax Other material items: Goodwill on acquisition Capital expenditure	Formwork and construction services Mineral **exploration **	**Total **
	37,199,515 - 22,266,865 - 22,215,220 - 2,096,471 -	37,199,515 22,266,865 22,215,220 2,096,471
	83,778,071 - 7,048,045 (70,117) (2,507,576) - 320,705 - 7,428,704 - 13,101,140 -	83,778,071 6,977,928 (1,777,722) (2,507,576)
		2,692,630
		320,705 3,013,335
		7,428,704 13,101,140

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Acrow Formwork and Construction Services Limited | Preliminary Financial Report

Depreciation and amortisation Segment assets Segment liabilities Segment Information as at 30 June 2019 In dollars Hire of equipment Provision of labour and contracting services Other hardware sales Other income Segment revenue Segment operating profit Unallocated corporate overhead costs Finance costs Profit before income tax Income tax (expense) Profit after income tax Other material items: Goodwill on acquisition Capital expenditure Depreciation and amortisation Segment assets Segment liabilities Geographical information	5,260,125 - 148,146,232 72,981 89,526,237 67,317 Formwork and construction services Mineral **exploration **	5,260,125 148,219,213 89,923,979 **Total **
	33,140,700 22,075,424 13,642,786 881,092	33,140,700 22,075,424 13,642,786 881,092
	69,740,002 - 7,888,356 (67,532) (963,870) - (59,153) - 7,301,902 - 9,784,502 - 3,261,936 - 75,228,415 71,296 27,610,781 65,878	69,740,002 7,820,824 (1,849,086) (963,870)
		5,007,868
		(59,153)
		4,948,715
		7,301,902 9,784,502 3,261,936 75,299,711 27,676,659

The Group’s formwork and construction-related services segment operates in Australia and the mineral exploration segment operates in Ghana.

25. Net tangible assets

Net tangible assets per ordinary shares (cents)

2020	2019
25.73	24.00

26. Subsequent events

On 25 August 2020 the Directors declared a franked dividend of 1.05 cents per share to be paid on Friday 13 November 2020. Dividend Reinvestment Plan is available for election. The dividend has not been provided for in this financial report as it was not declared until after 30 June 2020.

Other than the above matter there has not otherwise arisen between the end of the year end period and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the Group, to affect significantly the operations of the Group, the results of those operations, or the state of the affairs of the Group, in future financial years.

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