AMBERTECH LIMITED — Annual Report 2019

Aug 29, 2019

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Ambertech Limited and controlled entities ACN 079 080 158

APPENDIX 4E – PRELIMINARY FINAL REPORT

Year Ended 30 June 2019

For Immediate Release 30 August 2019

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Results for Announcement to the Market Further Explanation of the Results Outlook for the business

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Results for Announcement to the Market

For the year ended 30 June 2019

Key Information

The following information is provided to the ASX under listing rule 4.3A:

	2019	2018	Movement	Movement
			Up/(Down)
	$’000	$’000	$’000	%
Revenuefrom ordinary activities	57,178	51,839	5,339	10.3
(Loss) after income taxfor the period attributable to
members	(1,332)	(143)	(1,189)	(831)

Dividends

The Board has announced that no final dividend will be paid in respect of the year ended 30 June 2019.

Dividend History

There were no dividends paid or declared during the year ended 30 June 2019.

	2019	2018
Net Tangible Assetsper security	24.5c	28.5c

Audit Status

This Report is based on accounts that are in the process of being audited.

Further Explanation of the results follows in the attached commentary.

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Consolidated Statement of Profit or Loss and Other Comprehensive Income For the year ended 30 June 2019

For the year ended 30 June 2019
	2019	2018
	$’000	$’000
Revenue	57,178	51,839
Cost of sales	(41,618)	(35,735)
Gross profit	15,560	16,104
Employee benefits expense	(10,283)	(9,496)
Distribution costs	(1,405)	(1,460)
Marketing costs	(528)	(740)
Premises costs	(1,982)	(1,971)
Depreciation and amortisation expenses	(447)	(312)
Finance costs	(592)	(670)
Travel costs	(535)	(546)
Other costs	(1,085)	(1,096)
Loss before income tax	(1,297)	(187)
Income tax (expense)/benefit	(35)	44
Loss for the year	(1,332)	(143)
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations	66	(46)
Total comprehensive loss for the year	(1,266)	(189)
Earnings per share
Basic earnings per share (cents)	(4.4)	(0.5)
Diluted earnings per share (cents)	(4.4)	(0.5)

The consolidated statement of profit or loss and other comprehensive income is to be read in conjunction with the attached notes.

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Consolidated Statementof Financial Position
As at 30 June 2019	2019	2018
	$’000	$’000
ASSETS
CURRENT ASSETS
Cash and cash equivalents	1,207	859
Trade and other receivables	11,249	9,658
Inventories	13,629	13,302
TOTAL CURRENT ASSETS	26,085	23,819
NON-CURRENT ASSETS
Plant and equipment	875	1,254
Intangible assets	61	78
Deferred tax assets	1,213	1,230
TOTAL NON-CURRENT ASSETS	2,149	2,562
TOTAL ASSETS	28,234	26,381
LIABILITIES
CURRENT LIABILITIES
Trade and other payables	11,997	9,729
Other financial liabilities	5,608	4,726
Provisions	1,764	1,764
TOTAL CURRENT LIABILITIES	19,369	16,219
NON-CURRENT LIABILITIES
Provisions	88	134
Deferred tax liabilities	19	6
TOTAL NON-CURRENT LIABILITIES	107	140
TOTAL LIABILITIES	19,476	16,359
NET ASSETS	8,758	10,022
EQUITY
Share capital	11,138	11,138
Reserves	58	(10)
Accumulated losses	(2,438)	(1,106)
TOTAL EQUITY	8,758	10,022

The consolidated statement of financial position is to be read in conjunction with the attached notes.

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Consolidated Statement of Changes in Equity

For the year ended 30 June 2019

		Foreign	Share
		Currency	Based
	Share	Translation	Payments	Retained	Total
	Capital	Reserve	Reserve	Earnings	Equity
	$'000	$'000	$'000	$'000	$'000
Economic Entity
Balance as at 30 June 2017	11,138	32	1	(963)	10,208
Loss for the year	-	-	-	(143)	(143)
Exchange differences on translation of
foreign operations	-	(46)	-	-	(46)
Total comprehensive income for the
year	-	(46)	-	(143)	(189)
Transactions with equity holders:
Costs of share based payments	-	-	3	-	3
Balance as at 30 June 2018	11,138	(14)	4	(1,106)	10,022
Loss for the year	-	-	-	(1,332)	(1,332)
Exchange differences on translation of
foreign operations	-	66	-	-	66
Total comprehensive income for the
year	-	66	-	(1,332)	(1,266)
Transactions with equity holders:
Costs of share based payments	-	-	2	-	2
Balance as at 30 June 2019	11,138	52	6	(2,438)	8,758

The consolidated statement of changes in equity is to be read in conjunction with the attached notes.

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Consolidated statementof Cash Flows
For the year ended 30 June 2019	2019	2018
	$'000	$'000
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers	60,703	54,844
Payments to suppliers and employees	(56,181)	(50,184)
Interest received	16	16
Interest and other costs of finance paid	(592)	(670)
Net goods and services tax remitted	(4,426)	(3,845)
Net cash (used in)/provided by operating activities	(480)	161
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for plant and equipment	(51)	(574)
Payments for intangible assets - website	-	(85)
Net cash used in investing activities	(51)	(659)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings	1,221	343
Repayment of borrowings	(346)	-
Net cash provided by financing activities	875	343
Net increase/(decrease) in cash and cash equivalents held	344	(155)
Cash and cash equivalents at beginning of year	859	1,014
Effect of exchange rate changes on the balance of cash and cash equivalents
held in foreign currencies at the beginning of the financial year	4	-
Cash and cash equivalents at end of year	1,207	859

The consolidated statement of cash flows is to be read in conjunction with the attached notes.

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Notes to the Consolidated Financial Statements

1. Basis of Preparation

The Preliminary Final Report has been prepared in accordance with ASX Listing Rule 4.3A and is based on accounts which are in the process of being audited.

The preliminary financial report has been prepared in accordance with Australian Accounting Standards and Interpretations as issued by the Australian Accounting Standards Board and the Corporations Act 2001 as appropriate for profit oriented entities. The preliminary financial report does not include all the notes of the type normally included in an annual financial report.

Accordingly, this report is to be read in conjunction with the annual report for the year ended 30 June 2018 and any public pronouncements made by the consolidated entity during the year in accordance with the continuous disclosure requirements of the Corporations Act 2001. Accounting policies have been consistently applied by the entities in the group and are consistent with those applied in the 30 June 2018 annual report.

	2019	2018
	$'000	$'000
2. Revenue
Sale of goods and services	57,162	51,823
Interest received	16	16
Total	57,178	51,839
3. Expenses
Additional information on the nature of expenses
Inventories
Cost of sales	41,618	35,735
Movement in provision for inventory obsolescence	(132)	(127)
Employee benefits expense
Salaries and wages	9,937	9,345
Employee termination expense	346	151
	10,283	9,496
Depreciation and amortization
Plant and equipment	95	83
Furniture and fittings	180	67
Leasehold improvements	139	139
Leased plant and equipment	16	16
Website costs	17	7
	447	312
Bad and doubtful debts	(1)	42

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Note 3: Expenses(continued)	2019	2018
	$’000	$’000
Rental expense on operating leases
Minimum lease payments	1,503	1,480
4. Cash Flow Information
(i) Cash and cash equivalents
Cash and cash equivalents included in the statement of cash flows are comprised
of the following amounts:
Cash on hand	3	2
At call deposits with financial institutions	1,204	857
Total cash and cash equivalents	1,207	859
(ii) Reconciliation of loss after income tax to net cash provided by operating
activities
(Loss) for the year	(1,332)	(143)
Adjustments for:
Depreciation and amortization	447	312
Foreign exchange loss	24	74
Non-cash share-based payments	3	4
Changes in operating assets and liabilities
(Increase) in trade and other receivables	(1,419)	(1,730)
(Increase) in prepayments	(57)	(19)
(Increase) in inventories	(288)	(1,305)
Increase in payables	2,161	2,866
(Decrease)/increase in provisions	(53)	146
Decrease/(increase) in deferred taxes	34	(44)
Net cash (used in)/provided by operating activities	(480)	161

(iii) Non-Cash Financing and Investing Activities

There were no non-cash financing or investing activities during the financial year.

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Notes to the Consolidated Financial Statements
	2019	2018
5. Earnings Per Share
Basic earnings per share (cents)	(4.4)	(0.5)
Weighted average number of ordinary shares (number)	30,573,181	30,573,181
Earnings used to calculate basic earnings per share ($,000)	(1,332)	(143)
Diluted earnings per share (cents)	(4.4)	(0.5)
Weighted average number of ordinary shares (number)	30,573,181	30,573,181
Earnings used to calculate diluted earnings per share ($,000)	(1,332)	(143)

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Further Explanation of the Results

For the year ended 30 June 2019

Summary of the Result for the year

Lifestyle Entertainment Professional New Zealand Total Unallocated/Corporate EBIT Net finance costs Net Profit Before Tax	Segment Revenue from External Customers	Segment Revenue from External Customers
	2019 2018 +/- $,000 $,000 % 25,300 27,577 (8.3) 28,359 20,869 35.9 3,503 3,377 3.7
	57,162 51,823 10.3
		(1,296) (187) (1,111)

The result for the 2018/19 financial year conceals the continued progress being made on business transformation. The result for the year was certainly less than satisfactory, with the main contributors to this result being as follows:

• Continued decline in sales of AV receivers/amplifiers via the Consumer Electronics (CE) retail market. Despite maintaining a strong market position in this category with our Onkyo brand, the AV receiver/amplifier business appears now to be in a declining product life cycle. Onkyo Corporation (Japan) recently announced the sale of all its Home AV business to Sound United LLC (USA);

• Margin reduction across the business, including the CE retail, residential and commercial installation markets and the professional AV dealer-based markets. This was magnified by a falling Australian Dollar against the currencies of our major suppliers;

• Increase in outbound freight costs, primarily attributed to the buying patterns of the CE retailers for lower cost items;

• Generally higher costs associated with servicing the CE retail market, including returns, rebates and in some cases managing the risk associated with the consignment of inventory;

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Summary of the Result for the year (continued)

• Inconsistency of timing of product supply from one of our major Music Industry (MI) suppliers; and

• Significant market disruption in the form of State and Federal Election activity during the second half of the financial year.

There were several positives during the financial year which reflect the ongoing transformation of the Ambertech distribution model. These include:

• Significant growth (35.9%) in the Professional segment revenue. This growth is a consequence of the continued focus on areas where we can apply our value add through sales, marketing and engineering resources;

• Growth (14.5%) in recurring revenues from support contracts, including multi-year offerings. Future contracted revenue at balance date has also grown by more than 17%;

• Expansion in our dealer-based business as we continue to enlarge our product offering in the various channels we supply. We have seen strong growth in the MI and commercial installation markets as we increasingly become a supplier of choice, leveraging our strong brand management team; and

• Improved performance of the New Zealand operation as we continue to streamline costs and develop our customer base.

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Outlook for the Business

There remains substantial opportunity for growth within the current business infrastructure, and the Ambertech Board and management continue to focus on opportunities from within existing agencies, as well as the potential for new agency or business acquisition.

There continues to be opportunity to improve our results through the more efficient management of working capital. Efforts are being made in the areas of inventory management to assist with this goal. It is anticipated that the costs associated with funding the business could be reduced significantly with a reduced reliance on debt.

Results from our sales efforts in Defence, Law Enforcement and Security related projects have thus far been hampered somewhat by project timelines. We have been awarded several projects where the supply time remains uncertain, however we anticipate a strong result from this area of the business in the 2020 financial year.

The pipeline for project business with our media systems partners is substantial, and we anticipate continued success in the area for the 2020 financial year. We hope to be in the position to make some positive announcements on major contracts in the coming months.

Results for the new financial year have so far been encouraging, with a clear focus on margin restoration, cost control and customer satisfaction. Further guidance on results for the year and progress on strategic goals will be provided at the time of the AGM.

On behalf of the Board of Ambertech Limited

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Robert Glasson COO, Company Secretary Sydney, 30 August 2019

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