EVZ LIMITED — Annual Report 2015

Aug 27, 2015

28 August 2015, Melbourne : EVZ Limited (ASX: EVZ) has delivered its Preliminary Final Results for the year ending 30 June 2015. In summary the Groups results were:

RESULTS FOR ANNOUNCEMENT TO THE MARKET

RESULTS SUMMARY	FY2015	FY2014	Change
	$	$	$
Revenue from continuing activities	70,311,742	64,433,155	5,878,587
EBITDA	(3,379,210)	(317,891)	(3,061,319)
EBIT	(4,225,598)	(1,125,372)	(3,100,226)
Profit (loss) from continuing activities before tax & impairment	(6,386,015)	(2,482,585)	(3,903,430)
Profit (loss) from continuing activities before tax	(10,389,814)	(7,113,187)	(3,276,627)
Net profit (loss) for the period	(10,426,791)	(6,211,495)	(4,215,296)
Earnings per share	(4.99) cents	(2.98) cents

No dividend has been declared or paid in the year ending 30 June 2015.

The second half of the financial year has seen some significant challenges within the EVZ Group of businesses which has led to a deterioration in the financial results for the Group compared to the first half of FY15.

The following Appendix 4E financial information is subject to the finalisation of the audit review process.

The deterioration in results stems from the commercial resolution of a number of key projects completed or near completion in the Groups energy division and the Australian arm of the Groups water division. These projects are now nearing completion and expected future costs have been provided at reporting date. These projects have also impacted on the Groups cash position.

In addition to this, continuing higher interest costs associated with the Groups debt has also negatively impacted the financial results.

The Groups Engineering division continues its strong turnaround and has delivered a marked improvement across the financial year. It has a significant contracted pipeline of work for FY16. The Groups Asian subsidiary of its water division is also experiencing high levels of contracted work for FY16.

The continued uncertainty which persists with respect to the government’s position on energy and its pricing has stalled the roll out of the Groups clean energy strategy. Whilst the clean energy solutions being offered by TSF have supportable benefits to prospective clients, there is a general reluctance to commit to invest in these solutions by the end user until the federal government establishes its energy and pricing position. As such TSF continues to face protracted lead times on clean energy opportunities.

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The Directors have therefore considered it prudent to fully impair the carrying value of goodwill in TSF. This has resulted in a $4m impairment expense in the year to 30 June 2015.

The Groups bank facilities mature on 1 October 2015. Directors and Management are in active discussion with its financier and are pursuing refinancing options of these facilities. At the date of this report existing bank facilities have not been refinanced. Shareholders will be kept informed as to the progress of these refinancing options.

Additional financial information is provided in the enclosed Appendix 4E: Preliminary Final Report.

EVZ Limited is an industrial group with a portfolio of specialist businesses in the engineering services sector. EVZ operates in the areas of power generation, bulk storage tank design, engineering and construction and stormwater management through subsidiaries TSF Engineering, Brockman Engineering and Syfon Systems. For further information please visit our website www.evz.com.au

For further information contact Scott Farthing, CEO +613 9545 5288

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EVZ Limited Appendix 4E Preliminary final report Year ended 30 June 2015

CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2015

Revenue Cost of sales Gross profit Other income Administration and business development costs Corporate costs Impairment of other assets Impairment of plant and equipment Impairment of intangibles Profit/(Loss) before financing costs and income tax Net finance costs Profit /(Loss) before income tax from continuing operations Income tax (expense)/benefit Net Profit/(Loss) for year Net Profit/(Loss) attributable to: Members of the parent entity Non-controlling interest Earnings per Share: Overall operations Basic earnings per share Diluted earnings per share Continuing operations Basic earnings per share Diluted earnings per share	Economic Entity 2015 $ 2014 $ 70,311,742 64,433,155 (62,854,962) (53,051,154)
	7,456,780 11,382,001 71,743 109,397 (10,892,800) (11,434,477) (1,357,508) - - (4,003,799) (1,439,895) (373,712) (343,409) (3,913,481)
	(8,725,584) (6,013,576) (1,664,230) (1,099,611)
	(10,389,814) (7,113,187) (36,977) 901,692
	(10,426,791) (6,211,495)
	(10,426,791) (6,211,495) - -
	(10,426,791) (6,211,495)
	Cents per share Cents per share (4.99) (2.98) (4.99) (2.98) (4.99) (2.98) (4.99) (2.98)

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EVZ Limited Appendix 4E Preliminary final report Year ended 30 June 2015

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2015

Profit/(Loss) for the year Other comprehensive income: Exchange differences arising on translation of foreign operations Total comprehensive income/(loss) for the year attributable to owners of the company	Economic Entity 2015 $ (10,426,791) 2014 $ (6,211,495) 56,598 (64,987)
	(10,370,193) (6,276,482)

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EVZ Limited Appendix 4E Preliminary final report Year ended 30 June 2015

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2015

CURRENT ASSETS Cash and cash equivalents Trade and other receivables Inventories Financial assets TOTAL CURRENT ASSETS NON-CURRENT ASSETS Trade and other receivables Plant and equipment Deferred tax assets Intangible assets Financial assets TOTAL NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables Provisions Tax liabilities Short-term borrowings TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Long-term borrowings Deferred tax liabilities Provisions TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Reserves Accumulated losses TOTAL EQUITY	Economic Entity 2015 $ 2014 $ 1,013,866 2,047,109 14,782,087 16,373,386 1,825,064 1,983,863 63,729 9,947
	17,684,746 20,414,305
	978,754 525,189 5,082,502 4,648,282 4,313,415 4,313,415 12,072,010 16,075,809 - 52,091
	22,446,681 25,614,786
	40,131,427 46,029,091
	14,871,425 13,817,399 3,127,660 2,380,563 - 750 13,470,838 3,666,849
	31,469,923 19,865,561
	224,638 7,455,614 23,469 47,219 149,738 60,595
	397,845 7,563,428
	31,867,768 27,428,989
	8,263,659 18,600,102
	46,088,909 46,055,159 (49,322) (105,920) (37,775,928) (27,349,137)
	8,263,659 18,600,102

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EVZ Limited Appendix 4E Preliminary final report Year ended 30 June 2015

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2015

30 June 2015 Balance at 1 July 2014 Total comprehensive income for year Loss for year Foreign currency translation reserve Total comprehensive loss for year Transactions with owners, recorded directly in equity Shares Issued Dividends Balance at 30 June 2015 30 June 2014 Balance at 1 July 2013 Total comprehensive income for year Profit for year Foreign currency translation reserve Total comprehensive income for year Transactions with owners, recorded directly in equity Shares Issued Dividends Balance at 30 June 2014	Issued Capital $ Accumulated Losses $ Foreign Currency Translation Reserve $ Total $ 46,055,159 (27,349,137) (105,920) 18,600,102
	- (10,426,791) - (10,426,791) - - 56,598 56,598
	- (10,426,791) 56,598 (10,370,193)
	33,750 - - 33,750 - - - -
	46,088,909 (37,775,928) (49,322) 8,263,659
	46,055,159 (21,137,642) (40,933) 24,876,584
	- (6,211,495) - (6,211,495) - - (64,987) (64,987)
	- (6,211,495) (64,987) (6,276,482)
	- - - - - - - -
	46,055,159 (27,349,137) (105,920) 18,600,102

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EVZ Limited Appendix 4E Preliminary final report Year ended 30 June 2015

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2015

CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers (inclusive of GST) Payments to suppliers and employees (inclusive of GST) Income tax paid Interest received Finance costs NET CASH FLOWS PROVIDED/(USED) BY OPERATING ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of plant and equipment Purchase of plant and equipment NET CASH FLOWS (USED) BY INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Repayment of bank loans Proceeds from lease financing Payments for lease financing NET CASH FLOWS PROVIDED/(USED) BY FINANCING ACTIVITIES NET DECREASE IN CASH HELD Cash at beginning of financial year CASH AT END OF FINANCIAL YEAR	Economic Entity 2015 $ 2014 $ 77,816,484 69,219,847 (78,745,995) (67,610,243) (750) (28,641) 15,142 7,345 (1,679,372) (1,106,956)
	(2,594,491) 481,352
	94,603 327,754 (1,106,368) (557,819)
	(1,011,765) (230,065)
	- (1,000,000) 102,556 110,929 (32,651) (82,553)
	69,905 (971,624)
	(3,536,351) (720,337) (527,579) 192,758
	(4,063,930) (527,579)

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EVZ Limited Appendix 4E Preliminary final report Year ended 30 June 2015

BASIS OF PREPARATION OF PRELIMINARY FINANCIAL STATEMENTS

The preliminary report has been prepared on an accruals basis and is based on historical costs modified, where appropriate, by the revaluation of selected non-current assets, financial assets and financial liabilities for which the fair value basis of accounting has been applied.

The accounting policies applied in this preliminary report are consistent with applicable accounting standards.

Going concern

The Group’s bank facilities mature on 1 October 2015. The Group is currently pursuing refinancing options of its bank facilities. At the date of this report existing bank facilities have not been refinanced.

The Group’s ability to continue as a going concern is therefore dependent on the Commonwealth Bank continuing to support the Group as it undertakes the refinancing of existing bank facilities. Should existing banking facilities not be refinanced or extended by the Group’s financier, the Group may not be able to realise its assets and settle its liabilities in the ordinary course of business.

Nevertheless after making enquiries and considering the uncertainties described above the directors have a reasonable expectation at this date that appropriate funding will be obtained so as to continue its operational existence for the foreseeable future. For these reasons they continue to adopt the going concern basis in preparing this financial report of EVZ and its controlled entities.

PROFIT/(LOSS) FROM CONTINUING ACTIVITIES

(a) OTHER INCOME Sundry income (b) EXPENSES Movement in employee benefits Bad debts Impairment – receivables Total employee costs Defined contribution superannuation expense Foreign exchange losses/(gains) (Profit)/Losses on sale of plant and equipment Operating lease payments Depreciation of plant and equipment Impairment – other assets Impairment – plant and equipment Impairment – goodwill	Economic Entity 2015 $ 2014 $ 71,743 109,397
	71,743 109,397
	836,240 222,828 264,911 91,495 131,322 189,005 37,553,593 29,575,151 2,487,306 2,163,004 (82,759) (36,130) (10,144) 2,144 1,009,553 1,020,594 846,388 807,481 - 373,712 - 343,409 4,003,799 3,913,481

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EVZ Limited Appendix 4E Preliminary final report Year ended 30 June 2015

(c) NET FINANCE COSTS Finance costs Interest income INCOME TAX (a) The prima facie tax on profit from continuing activities before income tax is reconciled to income tax as follows: Profit/(Loss) before income tax Income tax calculated at 30% (2014: 30%) Tax effect of permanent differences Under provision/(over provision) in prior years Tax losses not recognised Taxation expense - offshore subsidiary Income tax expense/(benefit) The applicable weighted average effective tax rates are as follows: (b) The components of tax expense comprise: Current tax Deferred tax Under provision/(over provision) in prior years		Economic Entity 2015 $ 2014 $ 1,679,372 1,106,956 (15,142) (7,345) 1,664,230 1,099,611 (10,389,814) (7,113,187)
		(3,116,944) (2,133,956) 1,111,553 1,209,051 (3,687) 16,205 2,009,078 - 36,977 7,008
		36,977 (901,692)
		- -
		40,664 (687,434) - (230,463) (3,687) 16,205
		36,977 (901,692)

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EVZ Limited Appendix 4E Preliminary final report Year ended 30 June 2015

ISSUED CAPITAL Issued and paid up 210,548,789 ordinary shares (2014: 208,439,414 ordinary shares) Issued and fully paid up ordinary shares Opening balance Shares issued Closing balance Opening balance Shares issued Closing balance	Economic Entity 2015 $ 2014 $ 46,088,909 46,055,159 46,088,909 46,055,159 46,055,159 46,055,159 33,750 -
	46,088,909 46,055,159
	2015 No. 2014 No. 208,439,414 208,439,414 2,109,375 -
	210,548,789 208,439,414

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EVZ Limited Appendix 4E Preliminary final report Year ended 30 June 2015

EARNINGS PER SHARE Weighted average number of ordinary shares outstanding during the year used in calculation of Basic and Diluted Earnings per Share INTANGIBLE ASSETS Goodwill on consolidation Less impairment Goodwill on acquisition Less impairment	2015 No. 2014 No. 209,052,000 208,439,414
	2015 $ 2014 $ 3,282,532 3,282,532 - -
	3,282,532 3,282,532
	24,606,758 (15,817,280) 24,606,758 (11,813,481)
	8,789,478 12,793,277
	12,072,010 16,075,809

During the year, an impairment of $4,003,799 (2014: $3,913,481) was taken against the carrying value of the TSF Engineering Group goodwill.

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EVZ Limited Appendix 4E Preliminary final report Year ended 30 June 2015

			Economic	Entity
			2015	2014
			$	$
STATEMENT OF CASH FLOWS
(i)	Cash balances comprise:
	Cash on hand		1,013,866	2,047,109
	Bank overdraft		(5,077,796)	(2,574,688)
	Closing cash balance		(4,063,930)	(527,579)
(ii)	Reconciliation of the operating profit/(loss) after tax to net	cash
	flows from operations:
	Operating profit/(loss) after tax	(10,426,791)		(6,211,495)
	(Gain)/loss on sale of plant and equipment		(10,144)	2,144
	Depreciation - plant & equipment		846,388	807,481
	Foreign currency translation		43,299	(49,864)
	Impairment - receivables		131,322	189,005
	Impairment - plant & equipment		-	343,409
	Impairment – other assets		-	373,712
	Impairment - goodwill		4,003,799	3,913,481
	Changes in assets and liabilities adjusted for effects of
	acquisition/disposal of operations during financial year
	Increase/(Decrease) in provisions for employee entitlements		836,240	222,828
	(Increase)/Decrease in inventories		(86,601)	(280,400)
	(Increase)/Decrease in trade and other receivables		1,004,721	(1,600,582)
	(Increase)/Decrease in deferred tax assets		-	(908,700)
	Increase/(Decrease) in trade and other payables		1,087,776	3,711,343
	Increase/(Decrease) in tax liabilities		(24,500)	(31,010)
	Net cash provided/(used) by operating activities		(2,594,491)	481,352

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EVZ Limited Appendix 4E Preliminary final report Year ended 30 June 2015

SEGMENT REPORTING CONTINUING OPERATIONS:

Identification of reportable segments

The Group has identified its operating segments based on the internal reports that are reviewed and used by the Board of Directors (chief operating decision-makers) in assessing performance and determining the allocation of resources.

Operating segments are managed primarily on the basis of product category and service offerings.

Executive management monitors segment performance based on EBIT.

Basis of accounting for purposes of reporting by operating segments

Accounting policies adopted:

Unless stated otherwise, all amounts reported to the Board of Directors as the chief decision-makers with respect to operating segments are determined in accordance with accounting policies that are consistent with those adopted in the annual financial statements of the Group.

Inter-segment transactions:

All such transactions are eliminated on consolidation for the Group’s financial statements.

– Segment Reporting Continuing Operations

30 June 2015 REVENUE External sales Inter-segment sales Total segment revenue Reconciliation of segment revenue to group revenue Inter-segment elimination Total group revenue Segment net profit/(loss) before interest and tax Reconciliation of segment result to group net profit before tax Unallocated items Net finance costs Other costs Net profit/(loss) before tax from continuing operations	Engineering Energy Water Corporate $ $ $ $ 31,589,603 15,054,393 23,667,746 - 1,447,835 - - -	Total $ 70,311,742 1,447,835
	33,037,438 15,054,393 23,667,746 -	71,759,577 (1,447,835)
	1,658,224 (8,670,745) (265,554) (1,447,509)
		70,311,742
		(8,725,584) (1,664,230) -
		(10,389,814)

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EVZ Limited Appendix 4E Preliminary final report Year ended 30 June 2015

EVZ Limited Appendix 4E Preliminary final report Year ended 30 June 2015
30 June 2015 Included in segment net profit before interest and tax Depreciation Impairment Receivables Goodwill 30 June 2014 External sales Inter-segment sales Total segment revenue Reconciliation of segment revenue to group revenue Inter-segment elimination Total group revenue Segment net profit/(loss) before interest and tax Reconciliation of segment result to group net profit before tax Unallocated items Net finance costs Other Net profit/(loss) before tax from continuing operations Included in segment net profit before interest and tax Depreciation Impairment Receivables Plant and equipment Other assets Goodwill	Engineering Energy Water Corporate $ $ $ $ 438,266 130,814 267,554 9,754 (83,813) - 215,135 - - 4,003,799 - -	Total $ 846,388 131,322 4,003,799
	19,376,766 23,413,989 21,642,400 - 1,675,373 - - -	64,433,155 1,675,373
	21,052,139 23,413,989 21,642,400 -	66,108,528 (1,675,373)
	(1,701,533) (4,282,061) 1,847,515 (1,439,895)
		64,433,155
		(5,575,974) (1,099,611) (437,602)
	392,363 172,109 233,078 9,931 1,791 - 187,214 - - 343,409 - - - 373,712 - - - 3,913,481 - -
		(7,113,187)
		807,481 189,005 343,409 373,712 3,913,481

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EVZ Limited Appendix 4E Preliminary final report Year ended 30 June 2015

Engineering Energy Water Corporate $ $ $ $ Secondary Reporting – including Discontinued Operations 30 June 2015 ASSETS Segment assets 21,661,180 846,210 15,217,723 26,722,341 Reconciliation of segment assets to group assets Inter-segment eliminations Total group assets Segment asset increases for the period Capital expenditure 581,338 135,669 389,361 - 581,338 135,669 389,361 - LIABILITIES Segment liabilities 24,903,777 20,355,449 6,510,467 8,964,621 Reconciliation of segment liabilities to group liabilities Inter-segment eliminations Total group liabilities 30 June 2014 ASSETS Segment assets 18,683,863 9,048,242 16,089,982 29,598,347 Reconciliation of segment assets to group assets Inter-segment eliminations Total group assets Segment asset increases for the period Capital expenditure 106,813 53,669 397,337 - 106,813 53,669 397,337 - LIABILITIES Segment liabilities 23,593,839 19,312,407 6,518,311 9,596,550 Reconciliation of segment liabilities to group liabilities Inter-segment eliminations Total group liabilities	Engineering Energy Water Corporate $ $ $ $ Secondary Reporting – including Discontinued Operations 30 June 2015 ASSETS Segment assets 21,661,180 846,210 15,217,723 26,722,341 Reconciliation of segment assets to group assets Inter-segment eliminations Total group assets Segment asset increases for the period Capital expenditure 581,338 135,669 389,361 - 581,338 135,669 389,361 - LIABILITIES Segment liabilities 24,903,777 20,355,449 6,510,467 8,964,621 Reconciliation of segment liabilities to group liabilities Inter-segment eliminations Total group liabilities 30 June 2014 ASSETS Segment assets 18,683,863 9,048,242 16,089,982 29,598,347 Reconciliation of segment assets to group assets Inter-segment eliminations Total group assets Segment asset increases for the period Capital expenditure 106,813 53,669 397,337 - 106,813 53,669 397,337 - LIABILITIES Segment liabilities 23,593,839 19,312,407 6,518,311 9,596,550 Reconciliation of segment liabilities to group liabilities Inter-segment eliminations Total group liabilities	Total $ 64,447,454 (24,316,027)
30 June 2015 ASSETS Segment assets Reconciliation of segment assets to group assets Inter-segment eliminations Total group assets Segment asset increases for the period Capital expenditure LIABILITIES Segment liabilities Reconciliation of segment liabilities to group liabilities Inter-segment eliminations Total group liabilities 30 June 2014 ASSETS Segment assets Reconciliation of segment assets to group assets Inter-segment eliminations Total group assets Segment asset increases for the period Capital expenditure LIABILITIES Segment liabilities Reconciliation of segment liabilities to group liabilities Inter-segment eliminations Total group liabilities
	581,338 135,669 389,361 -
		40,131,427
		1,106,368
	581,338 135,669 389,361 -	1,106,368
	24,903,777 20,355,449 6,510,467 8,964,621	60,734,314 (28,866,546)
	18,683,863 9,048,242 16,089,982 29,598,347
		31,867,768
		73,420,434 (27,391,343)
	106,813 53,669 397,337 -
		46,029,091
		557,819
	106,813 53,669 397,337 -	557,819
	23,593,839 19,312,407 6,518,311 9,596,550	59,021,107 (31,592,118)
		27,428,989

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EVZ Limited Appendix 4E Preliminary final report Year ended 30 June 2015

REVENUE BY GEOGRAPHICAL REGION

Revenue, including revenue from discontinued operations, attributable to external customers is disclosed below, based on the location of the external customer:

Australia Asia Total revenue	Economic Entity 2015 $ 2014 $ 64,973,643 60,613,175 5,338,099 3,819,980
	70,311,742 64,433,155

ASSETS BY GEOGRAPHICAL REGION

The location of segment assets by geographical location of the assets is disclosed below:

Australia Asia Total assets	2015 $ 2014 $ 34,185,782 40,942,022 5,945,645 5,087,069
	40,131,427 46,029,091

SUBSEQUENT EVENTS

There have not been any matters or circumstances, other than that referred to in the financial statements or notes thereto, that have arisen since the end of the financial year, that have significantly affected, or may significantly affect, the operations of the economic entity, the results of those operations, or the state of affairs of the economic entity in future financial years after the financial year.

ADDITIONAL INFORMATION

Reporting period

The applicable reporting period is 1 July 2014 to 30 June 2015. The previous corresponding reporting period was 1 July 2013 to 30 June 2014.

Net tangible assets Net tangible assets per ordinary share Details of entities over which control has been gained or lost during the period Name of entity Control gained/lost Contribution of entity to reporting entity’s from ordinary activities during the period Loss of entity during the whole of the previous corresponding year	2015 2014 (1.8) cents 1.2 cents
	Not applicable

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EVZ Limited Appendix 4E Preliminary final report Year ended 30 June 2015

Dividends and Distributions

Dividends and Distributions
Date on which each dividend or distribution is payable
Amount per security of foreign sourced dividend or distribution	Not applicable
Details of dividend or distribution reinvestment plans	Not applicable
Material interests in entities which are not controlled entities	Not applicable

Compliance Statement – The accounts are in the process of being audited.

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