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RAIDEN RESOURCES LIMITED Annual Report 2013
65675_rns_2013-10-24_3ae57730-8f6c-4147-ada9-a0e588ded918.pdf
Annual Report
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2013 Annual Report
Mining support specialists
CONTENTS Page
| Chairman's Report | 2 |
|---|---|
| Managing Director's Report | 3 |
| Corporate Governance Statement | 8 |
| Financial Statements | 14 |
| Shareholder Information | 67 |
| Corporate Directory | 69 |
ANNUAL GENERAL MEETING
The 2013 Annual General Meeting of SubZero Group Limited will be held at 3:00pm on Monday 25 November 2013 at the offices of PricewaterhouseCoopers, Level 10, Darling Park Tower 2, 201 Sussex Street Sydney NSW 2000 Australia
ASX CODE SZG
WEBSITE www.subzeroservices.com.au
SHARE REGISTRY Gould Ralph Pty Limited
SubZero Group Limited ABN 68 009 161 522
Chairman's Report
SubZero Group Limited (SZG) effectively launched on the Australian Securities Exchange (ASX) in mid April 2013 and in the relatively short time since it has substantially delivered on the strategy presented to investors. Together with Mr. Glenn Molloy as the Company's inaugural Chairman, I would like to
thank those investors for their support and I am pleased to report that the Company is well positioned to face the challenges of the current economic climate.
Whilst in some respects not a traditional mining services company SZG, like all companies supporting the mining and resource sector, has not been immune from the downturn in the sector. Having resolved some initial, yet not insignificant teething issues during the final stages of the development of our new purpose built facilities in Muswellbrook, the Company has now emerged from the ASX listing process and the underlying results are whilst unsatisfactory are in line with expectations.
The Company's focus since listing has been to consolidate its financial position and to secure an ongoing pipeline of work to support its growth strategies as a provider of maintenance services to the mining and resource sector. At the time of writing this report the Company was in the process of pursuing refinancing initiatives to provide the necessary working capital to properly fund the Company's ongoing activities and its proposed growth. A number of resolutions to be considered at this year's Annual General Meeting have arisen out of this process.
The Company's commitment to work place safety, and to staff training and development have been key factors in its ability to maintain the support of long standing customers and to attracting the business of new ones. Whilst the Company has downsized to some extent to improve efficiencies it has nevertheless continued its apprenticeship program in expectation of a "maintenance boom" as companies look to repair and maintain their existing equipment rather than embark on new capital expenditure programs at this stage of the cycle.
Our business model is built around providing critical tasks and services, which involve preventative, regular and planned maintenance activities across a wide range of vehicles and machinery types. The majority of these
services are non-discretionary in nature and critical to our clients in maximising their production and minimising downtime. SZG's aim is to provide our clients with low execution risk together with meaningful cost benefits whilst generating a sound revenue basis to support its own growth and development as a business.
With the expansion of our facilities in the Hunter Valley SZG now has a total of over 17,000 square metres of climate controlled workshop space. With the completion of the new purpose built facility at Muswellbrook, SZG is in a unique position to offer clients a purpose built mining equipment and machinery, maintenance and refurbishment facility. This facility has approximately 10,000 square metres of climate controlled workshop space with 150 tonne total cranage capacity where work can be carried out for clients on a 24/7 basis to meet their long term maintenance requirements. As a result, we expect to see a rapid expansion in the volume of work in this area where SZG has both the facilities and the expertise to support the industry.
Since listing on the ASX, SZG has been awarded a number of contracts that secure an estimated $130 million worth of additional work and we have also a developed a strong pipeline behind this which is expected to support the economic viability of the business.
As Chairman of the Company I would like to acknowledge the efforts of the SZG management team and workforce who have enabled us to achieve many of our objectives and supported the Company's transition to listed public company status. As a service Company people are key to our success and we value their commitment.
Looking forward, your Board remains focussed on delivering strong financial performance and an attractive return to shareholders. I believe that the Company has achieved much in a relatively short time and is on track to meet these objectives in the years ahead.
Malcolm Jackman
Chairman
Managing Directors Report
Subzero Group Limited (SZG) is the product of some fourteen years of preliminary work of some very dedicated individuals who formed a conglomeration of highly strategic and integral mining support focussed businesses in the New South Wales thermal coal sector. This business model has displayed a
importance to the business. At the time of writing, SZG had exceeded 1.8 million man hours without a lost time injury.
Whilst the recognition of the pre float business brands were integral at a local level, SZG identified its service model as being most recognised and repeatable on a national scale, and so has set about rebranding the business on a four tiered basis.
- Subzero Mechanical support
- Subzero Structural support
- Subzero Production support
- Subzero Corporate services
This model has been adopted by our business units and has assisted in the development and implementation of a common culture across the Company.
The corporate restructure that was conducted in the last year has resulted in significant cost reductions in corporate services costs. The company has benefited significantly with the ongoing commitment to our integrated communication
decade of solid revenue growth and market acknowledgement as well as an acceptance of being safety focussed solution providers that are willing to adapt to ever changing demands of their resources based clients.
We are very proud of our dedicated management team's determination and continued efforts. They have demonstrated a high level of commitment to the transition and restructuring that has taken place over the past year and the continual review and streamlining of our business activities in order to achieve best practice.
The safety and well bring of our employees continues to be of paramount
structure. The restructure has successfully enabled management to engage with an executive team of key decision makers, that are enabled to promptly deliver high value outcomes to both clientele and other key stakeholders within the newly restructured Subzero Group.
Operating on a philosophy of business growth and value adding to our clientele, SZG embarked on a series of growth initiatives for the year to bolster its future revenue.
- Queensland expansion program initiated
- Acquisition of remainder of Harness Master NSW franchise
- Western Australian business expansion plans identified and initiated
- International launch of Hydraulic Isolator product
- 4 SubZero Group Limited Annual Report 2013
In addition SZG completed FY13 with discussions underway for further revenue growth expansion through joint venture programs in Western Australia and Queensland.
Although hampered by a series of unexpected delays, SZG have finally occupied the new facilities in Muswellbrook and Rutherford. This now firmly establishes SZG as the largest provider of offsite support, across its four business divisions, in the NSW mining sector.
SZG now has 1.7 hectares of dedicated workshop capacity which are strategically located within a few kilometres of our most valuable clientele.
SZG well recognise the importance of both the capacity and efficiency of such facilities and, these have been well
identified and achieved by the following key objectives;
Geographical advantage in either lowering or eliminating significant transport cost through negotiations with local government.
Design with maximum craneage and haulage friendly access ways that achieve significantly lower transport and crane costs
In house crane and transport that enable engagement up to 150 tons importantly allowing improved control and maximising workflow logistics.
Productivity enhancement through streamlining processes and designating more efficient facility management practices.
Summary
SubZero Group Limited has achieved a major restructuring including facilities, management, operational and organisational platforms. However these came with significant delays to our planned expansion programs which occurred simultaneously as a sector down turn negatively affecting market conditions.
The timing of these events whilst coinciding with our public listing, has none the less resulted in a far more effective and efficient company with leaner operating functions and an adaptive management base that has demonstrated the ability to retain and build on its market share in softer than expected conditions.
We remain committed to our people, our safety, our customers, our environment and our community. Our strong culture leads us to these basic principles and is reinforced in our corporate mission statement and the adoption of our vision and values.
SZG is now strongly positioned to execute profitable outcomes for FY14 and beyond with its new programs and recognised market presence. With a maintenance boom forecast well into 2017, SZG will continue to strive for beneficial outcomes on a national basis for all stakeholders.
STATEMENT OF CORPORATE GOVERNANCE PRACTICES - 2013
SubZero Group Limited ("SZG" or "the Company")
Approach to Corporate Governance and Responsibility
The SZG Board of Directors is committed to the principles underpinning good corporate governance, applied in a manner which is most suited to SZG, and to best addressing the directors' accountability to shareholders and other stakeholders. This is supported by an overriding organisation-wide commitment to the highest standards of legislative compliance and financial and ethical behaviour.
ASX Listing Rules require listed companies to include in their Annual Report a statement disclosing the extent to which they have followed the recommendations set by the ASX Corporate Governance Council ("ASX Recommendations") in the reporting period.
SZG's Statement of Corporate Governance Practices and copies of its policies are available in the designated corporate governance area of its website at www.subzeroservices.com.au
PRINCIPLE 1: Lay solid foundations for management and oversight
Companies should establish and disclose the respective roles and responsibilities of board and management.
Recommendation 1.1: Companies should establish the functions reserved to the board and those delegated to senior executives and disclose those functions.
The Board has formalised its roles and responsibilities into a Charter. The Board Charter clearly defines the matters that are reserved for the Board and those that the Board has delegated to management.
In summary, the responsibilities of the SZG Board include:
- oversight of the Company, including its control and accountability systems;
- setting the Company's major goals including the strategies and financial objectives;
- appointing, removing and controlling the Managing Director;
- the appointment and, where appropriate, the removal of the Chief Financial Officer ("CFO") and/or Company Secretary;
- input into and final approval of the corporate strategy and performance objectives;
- approving systems of risk management and internal compliance and control, codes of conduct and legal compliance;
- monitoring senior management's performance and implementation of strategy, and ensuring that
appropriate resources are available;
- approving and monitoring the progress of major capital expenditure, capital management, and acquisitions and divestitures;
- approving and monitoring financial and other reporting; and corporate governance.
The Board has delegated responsibility to the Managing Director for:
- developing and implementing corporate strategies and making recommendations on significant corporate strategic initiatives;
- maintaining an effective risk management framework and keeping the Board and market fully informed about material risks;
- developing SZG's annual budget, recommending it to the Board for approval and managing day-to-day operations within the budget;
- managing day-to-day operations in accordance with standards for social and ethical practices which have been set by the Board.
Recommendation 1.2: Companies should disclose the process for evaluating the performance of senior executives.
The Board is responsible for approving the performance objectives and measures for the Managing Director and assessing whether these objectives have been satisfied by the performance of the Managing Director during the relevant period and in accordance with agreed terms of engagement.
The Managing Director is responsible for approving the performance objectives and measures of other senior executives in consultation with the Board. The Board provides input into the evaluation of performance by senior executives against the established performance objectives.
The performance of senior executives is monitored by means of scrutiny by the Board of regular monthly reports provided by management regarding the group financial performance and forecasted results, presentations and operational reports, and the achievement of predetermined performance objectives.
Recommendation 1.3: Provide the information indicated in the Guide to reporting on Principle 1.
The Company has provided this information. The roles and responsibilities of the Board and management are detailed in the Board Charter which is available within the designated corporate governance area of the Company website.
PRINCIPLE 2: Structure the board to add value.
Companies should have a board of an effective composition, size and commitment to adequately discharge its responsibilities and duties.
Recommendation 2.1: A majority of the board should be independent directors.
The SZG is comprised of 5 directors of which a majority, comprised of Mr Malcolm Jackman, Mr Bruce Arnott and Mr Joe Clayton, are considered to be independent directors.
Recommendation 2.2: The chair should be an independent director.
The Chairman is Mr Malcolm Jackman who is considered to be an independent director.
Recommendation 2.3: The roles of chair and chief executive officer should not be exercised by the same individual.
The roles of chair and the Company's Managing Director are not be exercised by the same individual.
Recommendation 2.4: The board should establish a nomination committee.
The SZG Board has not established a nomination committee. Where a vacancy arises or it is considered appropriate to vary the composition of the Board of Directors, the full Board generally participates in any review of the Board's composition and the qualifications and experience of candidates. Directors are selected upon the basis of their specialist skills and business background so as to provide an appropriate mix of skills, perspective and business experience.
Recommendation 2.5: Disclose the process for evaluating the performance of the board, its committees and individual directors
The Board has adopted an on-going, self-evaluation process to measure its own performance and the performance of its committee and individual directors.
The Chairman meets periodically with individual directors to discuss the performance of the Board and the director. In addition, an evaluation is undertaken by the Chairman of the contribution of directors retiring by rotation prior to the Board endorsing their candidature.
The review process involves consideration of all of the Board's key areas of responsibility and accountability and is based on an amalgamation of factors including capability, skill levels, understanding of industry complexities, risks and challenges, and value adding contribution to the overall management of the business. Recommendation 2.6: Provide the information included in the Guide to reporting on Principle 2
The Company has provided this information.
PRINCIPLE 3: Promote ethical and responsible decision-making.
Companies should actively promote ethical and responsible decision-making.
Recommendation 3.1: Establish a code of conduct and disclose the code or a summary of the code as to the:
- practices necessary to maintain confidence in the company's integrity;
- practices necessary to take into account their legal obligations and the reasonable expectations of shareholders; and
- responsibility and accountability of individuals for reporting and investigating reports of unethical practices.
The Board has approved a Code of Conduct and Ethics which applies to all directors, executives, management and employees without exception. In summary, the Code provides that all directors, executives and employees must:
- act honestly, in good faith and in the best interests of the Company;
- use due care, skill and diligence in the fulfilling their duties;
- use the powers of their position for a proper purpose, in the interests of the Company;
- not make improper use of information acquired in their position;
- not allow personal interests, or those of associates, conflict with the interests of the Company;
- exercise independent judgement and actions;
- not seek or accept a gift or benefit from any party in the performance of their duties;
- maintain the confidentiality of company information acquired by virtue of their position;
- not engage in conduct likely to bring discredit to the Company; and
- comply at all times with both the spirit and the letter of the law, as well as, policies of the Company.
In addition, SZG has developed a series of policies designed to promote ethical and responsible decision making by directors, executives, employees and contractors of the Company, including:
-
Securities Dealing Policy;
-
External Disclosure and Market Communications Policy;
-
Occupational Health & Safety Policy;
-
Diversity Policy;
-
Risk Management Oversight Framework;
-
Continuous Disclosure Policy
-
Environment Policy
Employees are actively encouraged to report activities or behaviour to senior management, the Company Secretary or the Board, which are a breach of the Code of Conduct and Ethics, other SZG policies or regulatory requirements or laws.
The Company will investigate any concerns raised in a manner that is fair, objective and affords natural justice to all people involved. The Company is committed to making necessary changes to its processes and taking appropriate action in relation to employees found to have behaved contrary to legal and company standard requirements.
RECOMMENDATION 3.2: Companies should establish a policy concerning diversity and disclose the policy or a summary of that policy. The policy should include requirements for the board to establish measurable objectives for achieving gender diversity for the board to assess annually both the objectives and progress in achieving them.
The Company has established a Diversity Policy which is available on the Company's website.
RECOMMENDATION 3.3: Companies should disclose in each annual report the measurable objectives for achieving gender diversity set by the board in accordance with the diversity policy and progress towards achieving them.
The Company is committed to promoting a culture of diversity in the workplace including gender diversity.
The number of women participating throughout the workplace is reviewed on an annual basis and reported to the Board.
The Company's policies and procedures are reviewed on an annual basis to ensure that they adequately focus on the participation of women in the workforce.
Women are considered for all positions in the Company extending through to senior management and the Board as and when opportunities or vacancies arise.
The Company aims to achieve gender diversity based on merit across all levels of its organisation subject to organisational capacity.
RECOMMENDATION 3.4: Companies should disclose in each annual report the proportion of women employees in the whole organisation, women in senior executive positions and women on the board.
The Company's total workforce is comprised of 490 people of whom 308 are full time, 164 are part time and 18 are casual. Of this 40 women are employed in full time positions, 23 are part time and 17 are employed in casual positions, in total representing 19.5% of the workforce.
The Company employs 2 women as Senior Divisional Managers and 3 as Managers. The majority of the women employed by the Company are employed in administration
The Company has a Board of 5 of which none are women.
Recommendation 3.3: Provide the information indicated in Guide to reporting on Principle 3.
The Company has provided this information.
PRINCIPLE 4: Safeguard integrity of financial reporting.
Companies should have a structure to independently verify and safeguard the integrity of their financial reporting.
Recommendation 4.1: The Board should establish an audit committee.
The Board has established an audit committee.
Recommendation 4.2: Structure the audit committee so that it:
- consists of only non-executive directors;
- consists of a majority of independent directors;
- is chaired by an independent chair, who is not chair of the board;
- has at least three (3) members.
During the reporting period, the Board's Audit Committee consisted of three members, all of whom are independent non-executive directors:
- Mr Bruce Arnott (Committee Chairman)
- Mr Joe Clayton
- Mr Malcolm Jackman.
Recommendation 4.3: The audit committee should have a formal charter.
The Board has established an Audit Committee Charter. The Charter sets out in detail the purpose, composition and membership, meeting procedures, roles and responsibilities of the committee and the authorities of the committee. The Charter will be posted on the Company's website.
Recommendation 4.4: Provide the information indicated in Guide to reporting on Principle 4.
The Company has provided this information.
PRINCIPLE 5: Make timely and balanced disclosure.
Companies should promote timely and balanced disclosure of all material matters concerning the company.
Recommendation 5.1: Establish written policies and procedures designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior executive level for that compliance and disclose those policies or a summary of those policies.
The Company regards continuous and appropriate disclosure and effective communication with its shareholders and the market generally as essential for the establishment and retention of investor confidence and the achievement of full and fair value for SZG's securities. The SZG Board is committed to keeping its shareholders, and the market, fully informed of major developments having an impact on the Company.
Comprehensive procedures are in place to identify matters that are likely to have a material affect on the price, or value, of the SZG securities and to ensure those matters are notified to the ASX in accordance with ASX Listing Rule disclosure requirements.
Senior management and the Board are responsible for scrutinising events and information to determine whether the disclosure of the information is required in order to maintain the market integrity of the Company's shares listed on the ASX.
The Company has adopted an External Disclosure and Market Communications Policy which operates in conjunction with a Continuous Disclosure Procedure.
The Company Secretary is responsible for all communications with the ASX.
Recommendation 5.2: Provide the information indicated in Guide to reporting on Principle 5.
The procedures relating to the notification of price sensitive information to the ASX and the subsequent posting of announcements on the SZG website are detailed within the SZG Market Disclosure Policy available at www.subzeroservices.com.au
PRINCIPLE 6: Respect the rights of shareholders.
Companies should respect the rights of shareholders and facilitate the effective exercise of those rights.
Recommendation 6.1: Design and disclose a communications policy to promote effective communication with shareholders and encourage
effective participation by them at general meetings.
The Company has adopted an External Disclosure and Market Communications Policy which operates in conjunction with a Continuous Disclosure Procedure. SZG communicates to its shareholders and the investment markets through a program of regular announcements as part of its periodic reporting obligations. SZG also makes a number of announcements on an ad-hoc basis to fulfil its continuous disclosure obligations. SZG communicates information to shareholders through:
- disclosures to the ASX including the Company's Annual Report;
- notices and explanatory memoranda of annual general meetings and general meetings; and
- the Company's website at www.subzeroservices.com.au
SZG publishes information to the market as a whole in addition to that required by its continuous disclosure obligations to aid market understanding of SZG and its operations. In addition SZG's senior management interacts with members of the investment community and financial and business media through a variety of forums including results briefings, 'one on one' meetings and other discussions.
The Board encourages active participation by shareholders at each Annual General Meeting, or other general meetings.
Recommendation 6.2: Provide the information indicated in Guide to reporting on Principle 6.
The Company has provided this information.
PRINCIPLE 7: Recognise and manage risk.
Recommendation 7.1: Companies should establish policies for the oversight and management of material business risks and disclose a summary of those policies.
The Board of SZG has established a Risk Oversight and Management Framework. In accordance with this framework the Board of SZG:
- recognises that effective management of risk is an integral part of good management and vital to the continued growth and success of SZG;
- is responsible for the oversight of the group's risk management and control framework including the development of risk profiles as a part of the overall business and strategic planning process; and
- has implemented policies designed to ensure that the group's risks are identified, analysed, evaluated, monitored, and communicated within the organisation on an on-going basis, and that adequate controls are
in place and functioning effectively.
Recommendation 7.2: The board should require management to design and implement the risk management and internal control system to manage the company's material business risks and report to it on whether those risks are being managed effectively. The board should disclose that management has reported to it as to the effectiveness of the company's management of its material business risks.
The SZG Risk Management and Control Policy Framework is utilised by the Board as a means of identifying opportunities and avoiding or mitigating losses in the context of its businesses.
The Audit Committee assists the Board in its risk management role by reviewing the financial and reporting aspects of the group's risk management and control practices.
The Managing Director has ultimate responsibility for control and management of operational risk and the implementation of avoidance or mitigation measures within the group and may delegate control of these risks to the appropriate level of management at each site.
The Board regularly monitors the operational and financial performance of the Company and the economic entity against budget and other key performance measures. The Board also receives and reviews advice on areas of operational and financial risk and develops strategies, in conjunction with management, to mitigate those risks.
Each month, reports are presented to the Board by the Managing Director. The reports encompass matters including actual financial performance against budgeted forecasts, workplace health and safety, legal compliance, corporate governance, strategy, quality assurance and standards, human resources, industry and market information, operational developments and environmental conformance. Reports are prepared and submitted on a monthly basis in relation to the overall financial position and performance of the Company. In addition to formalised written reporting procedures, the Board is regularly briefed by the Managing Director, retained consultants and senior management on emerging or developed trends in market and operational conditions having the potential to impact on the overall performance of the group.
The Managing Director has reported to the Board on the effectiveness of the Company's management of its material business risks in respect of the year ended 30 June 2013.
Recommendation 7.3: The Board should disclose whether it has received assurance from the chief executive officer (or equivalent) and the chief financial officer (or equivalent) that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks.
The Board has received such written assurances from the Managing Director and the person performing the chief financial officer function in respect of the year ended 30 June 2013.
Recommendation 7.4: Companies should provide the information indicated in the Guide to reporting on Principle 7.
The Company has provided this information.
PRINCIPLE 8: Remunerate fairly and responsibly Companies should ensure that the level and composition of remuneration is sufficient and reasonable and that its relationship to performance is clear.
Recommendation 8.1: The Board should establish a remuneration committee.
Recommendation 8.1: The remuneration committee should be structured so that it:
- consists of a majority of independent directors;
- is chaired by an independent director; and
- has at least three members.
The SZG Board has not established a formal Remuneration Committee as SZG is a relatively small publicly listed company and remuneration matters relating to the Managing Director and Senior Executives are considered by the full Board where appropriate.
Recommendation 8.3: Companies should clearly distinguish the structure of non-executive directors' remuneration from that of executive directors and senior executives.
The aggregate remuneration of non-executive directors is approved by shareholders.
Individual directors' remuneration is determined by the board within the approved aggregate total.
In determining the appropriate level of director's fees, data from surveys undertaken of other public companies similar in size or market section to SZG is taken into account.
Non-executive directors of SZG are:
• not entitled to participate in performance based remuneration practices unless approved by shareholders; and
• currently remunerated by means of the payment of cash benefits in the form of directors' fees.
SZG does not currently have in place a retirement benefit scheme or allowance for its non-executive directors.
Executive directors do not receive directors' fees.
A review of the compensation arrangements for the Managing Director and senior executives is conducted on a regular basis by the full Board and is based on criteria including the individual's performance, market rates paid for similar positions and the results of the Company during the relevant period.
The broad remuneration policy objective of SZG is to ensure that the total package provided properly reflect the person's duties and responsibilities and is designed to attract, retain and motivate
executives of the highest possible quality and standard in the Company's prevailing circumstances to enable the organisation to succeed.
Recommendation 8.4: Companies should provide the information indicated in the Guide to reporting on Principle 8.
The Company has provided this information where appropriate.
SubZero Group Limited ABN 68 009 161 522 Full Financial Report - 30 June 2013
| CONTENTS | Page |
|---|---|
| Directors' Report | 15 |
| Remuneration Report | 19 |
| Auditor's Independence Declaration | 23 |
| Consolidated Statement of Comprehensive Income | 25 |
| Consolidated Balance Sheet | 26 |
| Consolidated Statement of Changes in Equity | 27 |
| Consolidated Statement of Cash flows | 28 |
| Notes to Consolidated Financial Statements | 29 |
| Directors' Declaration | 64 |
| Auditors Report | 65 |
Directors' Report
Your Directors present their report on the consolidated entity (referred to hereafter as the Group) consisting of SubZero Group Limited (referred to hereafter as the Company) and the entities it controlled at the end of, or during, the year ended 30 June 2013.
The report has been divided into five sections as follows:
- A. General information B. Review of operations
- C. Remuneration report D. Other information
Corporate governance policies will be available within the Annual Report to members.
A. General information
Principal activities
During the year the principal activities of the Group consisted of providing the following services to the Mining Industry:
- Mechanical support (heavy machinery repairs)
- Structural support (on and offsite enginering and fabrication)
- Production support (mining project support and equipment hire)
- There were no major changes in the nature of the activities of the Group during the period.
Directors
The following persons were directors of SubZero Group Limited during the financial year and up to the date of this report. Directors we in office for this entire period unless otherwise noted:
| Name | Period of Directorship |
|---|---|
| Mr Malcolm Jackman | Appointed Director and Chairman 30 July 2013 |
| Mr Scott Farrell | Appointed Director and Managing Director 10 April 2013 |
| Mr Glenn Molloy | Appointed Director 10 April 2013 |
| Mr Graeme (Joe) Clayton | Appointed Director 10 April 2013 |
| Mr Bruce Arnott | Appointed Director and Chairman of the Audit Committee10 April 2013 |
Information on directors
Malcolm Jackman , BSc, BCom. Independent Non-Executive Chairman. Age 61
Experience and expertise
Malcolm Jackman is currently the Chief Executive and Managing Director of Elders Limited (formerly Futuris Corporation), one of Australia's largest Agribusinesses, servicing primary producers and regional communities across the country. Malcolm has over 20 years experience managing large distribution sales networks in a business to business environment including ADIA (now ADECCO) New Zealand/Australia/USA, Manpower Australia/New Zealand and Coates Hire. With these companies, Malcolm demonstrated the ability to grow business profitability and to do so through the retention of key executives and creating the right culture.
Other current directorships - Managing Director Elders Limited
Former directorships in the last three years - None
Special responsibilities Interest in shares
Member of the Audit Committee 1,344,525 ordinary shares in SubZero Group Limited.
A. General information (continued)
Scott Farrell. Managing Director. Age 41.
Experience and expertise
Scott is the founder and Managing Director of SubZero. He has over 15 years experience in the mining and engineering services sector and over 20 years of total engineering maintenance sector experience, including power generation and factory training and infield experience with Bucyrus Ltd, a dragline & shovel OEM (Original Equipment Manufacturer). Scott's day-to-day responsibilities include: the formulation and oversight of SubZero's corporate strategies, monitoring and execution of strategic initiatives via key personnel, identifying and maintaining sustainable community programs and identifying new client and business development initiatives.
Other current directorships - None
| Former directorships in the last three years - None | |
|---|---|
| Special responsibilities | Interest in shares and rights |
| Managing Director. | 54,751,200 ordinary shares in SubZero Group Limited. |
Glenn Molloy. Independent Non-Executive Director. Age 58.
Experience and expertise
Glenn Molloy has over 30 years experience as an investor and company director. In 1979, Glenn was the founder of a plastics packaging business, which in 1994 listed on the ASX as Plaspak Group Limited and grew the business until its ultimate sale in 2006.Glenn has extensive experience as a public company director and has been actively involved in numerous mergers, acquisitions and divestments. Glenn is currently a director of PPK Group Limited (ASX Code: PPK) and as such has worked closely with mining services providers such as Industrea Limited and the PPK subsidiary, Rambor Pty Ltd.
Other current directorships - Non-executive director PPK Group Limited
Former directorships in the last three years - None Special responsibilities Interest in shares
None 7,060,144 ordinary shares in SubZero Group Limited.
Graeme (Joe) Clayton, BE (Min) Hons. Independent Non-Executive Director. Age 55.
Experience and expertise
Graeme (Joe) Clayton is the principal of BDM Resources a privately owned mining services company which specialises in assisting mine owners and operators to address environmental and community issues. Joe has been involved in the mining industry for 36 years including managing mining operations in coal, copper, iron ore, quarrying and gold in Australia, Indonesia and PNG. He has overseen the management of 25 contract mining operations, developed 4 greenfield gold mining operations, managed 2 coal mine operations in the Hunter Valley and managed the development and approvals process for 2 large scale coal mine developments in the Hunter Valley and Gunnedah Basin.
Other current directorships - None
Former directorships in the last three years - None Special responsibilities Interest in shares
Member of Audit Committee 1,344,525 ordinary shares in SubZero Group Limited.
A. General information (continued)
Bruce Arnott, B.Com. Independent Non-Executive Director. Age 57.
Experience and expertise
Bruce Arnott currently works as an independent consultant providing accounting and finance services to a Newcastle based ship repair, general engineering and ship building company. Bruce has 38 years experience working in various finance roles in a broad range of industries including manufacturing, engineering and distribution. Bruce's positions have included six years as Group Controller of OneSteel and most recently six years as Chief Financial Officer of Bradken Limited (ASX Code BKN) where his responsibilities included finance/accounting, treasury, taxation, supply, investor relations, investments, risk management, audit and insurance.
Other current directorships - None
Former directorships in the last three years - None.
Special responsibilities Interest in shares
Chairman of Audit Committee. 250,000 ordinary shares in SubZero Group Limited.
Company Secretary
Mr Andrew J Cooke, LLB, FCIS was appointed as joint company secretary on 12 April 2013. Andrew has extensive experience in law, corporate finance and as company secretary of a number of ASX listed companies. He is responsible for corporate administration together with ASX and regulatory compliance. Mr Jury Wowk, BALLB, was appointed company secretary on 30 July 2013. Jury is an experienced public company director and secretary having held positions as such with a number of public companies over many years.
Meetings of directors
The number of meetings of the Company's board of directors and of each board committee held during the year ended 30 June 2013, and the number of meetings attended by each director were:
| Director | Full meetings of directors * | Audit and Risk Committeemeetings** | ||
|---|---|---|---|---|
| A | B | A | B | |
| Glenn Molloy | 3 | 4 | *** | *** |
| Scott Farrell | 4 | 4 | *** | *** |
| Graeme Clayton | 4 | 4 | - | - |
| Bruce Arnott | 4 | 4 | - | - |
| Jury Wowk (Alternate for Glenn Molloy) | 1 | 1 | *** | *** |
A Number of meetings attended
B Number of meetings held during the time the director held office during the period
* SubZero Group Limited does not have a fully constituted Remuneration or Nominations Committee, however, as and when required the full Board participates as these Committees in order to fulfill its corporate governance responsibilities.
** The first Audit Committee meeting after the 10 April 2013 was 22 August 2013.
*** Not a member of the relevant committee
B. Operational and Financial Review
On 10th April 2013, SVC Group Limited (a non-operating public shell corporation) acquired 100% of the voting shares of SubZero Holdings Pty Limited. The acquisition of SubZero Holdings Pty Limited was not considered a business combination (reverse acquisition) under AASB 3 Business Combinations because SVC Group Limited (the accounting acquiree) does not meet the definition of a business under the standard. As a result, the fair value of the interest issued to existing SVC Group Limited Shareholder in Subzero Holdings Pty Limited to effect the combination (the consideration for the acquisition of the public shell company) was recognised as an expense in the income statement. The impact of this one-off transaction to the Group was a increase in the Group's loss by $3.4M.
B. Operational and Financial Review (continued)
SubZero Group Limited (ASX:SZG) reported a statutory net loss after tax for the year ended 30 June 2013 of $6.064 million and underlying net loss after tax of $0.134 million.
Reconciliation of underlying profit to statutory profit
| EBITDA | Net/Profit/(loss) | |
|---|---|---|
| After tax | ||
| Statutory financial statements | 847 | (6,064) |
| Cost of listing | 3,468 | 3,468 |
| Consulting costs - restructure and listing | 333 | 233 |
| Legal costs - restructure and listing | 804 | 563 |
| Other costs - restructure | 405 | 283 |
| One-off costs (includes redundancies) | 358 | 251 |
| Tax losses unable to be utilised | - | 1,132 |
| 6,215 | (134) |
The underlying sales and profit results in FY13 were negatively impacted by the general downturn in the sector and in particular by:
- a. Unrecovered personnel costs incurred in maintaining a labour pool in anticipation of normally scheduled labour hire requirements.
- b. Delays in occupying the new workshop at Muswellbrook due to sewerage and water mains issues which impacted SZG's ability to carry out mining equipment.
- c. Deferral in start dates of planned contract works by customers which has led to under utilisation of SZG people and plant.
- d. Delays in corporate restructuring, refinancing and the ASX listing process.
SZG's business strategy is to provide a broad range of essential mining services and products to resources companies in the Hunter Valley region under a 'one-stop-shop' model. It is focused on providing critical tasks and services, which involve preventative, regular and planned maintenance activities. The majority of these services are non-discretionary in nature and critical to clients in maximising production and minimising downtime. This approach delivers low execution risk and provides certainty over revenue.
Even as mining capital investment slows, production levels continue to rise and SZG is strongly positioned to take advantage of the emerging maintenance boom as the market leader due to its long-term investment in both infrastructure and personnel. SZG expects expansion into Queensland and Western Australia to have a positive impact on its FY14 and FY15 earnings.
Since listing, SZG has been awarded a number of contracts that secure an estimated $130 million in additional revenue over the next 3 years. The majority of these contracts have an option to extend for a further 2 years and secure SZG a strong base workload in the coming years. In response to this increase in workload, SZG has increased its maintenance facility capacity by over 200%. SZG's total capacity now stands at 17,283 sqm of climate controlled workshop facilities. We expect to see maintenance services spend in SZG's areas of expertise to increase in NSW by 36% annually through to FY17. Accordingly, SZG will remain focussed on a growth strategy over the next three years.
Dividends
No dividend has been declared or paid by the Company during the period
Significant changes in the state of affairs
In the opinion of the Directors there were no significant changes in the state of affairs of the Group that occurred during the financial year not otherwise disclosed in the Review of Operations in this report or the consolidated financial statements.
B. Operational and Financial Review (continued)
Matters subsequent to the end of the financial year
There has not arisen in the interval between the end of the financial year 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 Company, to affect significantly the operations of the Group, the results of those operations, or the state of affairs of the Group, in future financial years.
Likely developments and expected results of operations
Additional comments on expected results of certain operations of the Group are included in this annual report under the Operating and Financial Review section on page 17. Further disclosure on likely developments in the operations of the Group and the expected results of operations have not been included in this report because the directors believe it would be likely to result in unreasonable prejudice to the Group."
C. Remuneration report
The remuneration report is set out under the following main headings:
- a. Principles used to determine the nature and amount of remuneration
- b. Details of remuneration
- c. Service agreements
- d. Share-based compensation
The information provided under headings (a) to (d) includes the remuneration disclosures that are required under the Accounting Standard AASB 124 Related Party Disclosures. These disclosures have been transferred from the financial report and have been audited. The information provided in this remuneration report has been audited as required by section 308(3C) of the Corporations Act 2001.
(a) Principles used to determine the nature and amount of remuneration
Key management personnel have authority and responsibility for planning, directing and controlling the activities of the Company and the Group. Key management personnel comprise the Directors of the Company and the executives for the Company and Group.
The Company's policy in respect of senior executives is to remunerate them on the basis of their job function, taking into account their qualifications and experience. This level of remuneration is determined by the Executive Management in consultation with the Board taking into account the position and responsibilities for which each senior executive is charged.
Non executive directors
Fees and payments to non-executive directors reflect the demands which are made on, and the responsibilities of, the directors. Non-executive directors' fees and payments are reviewed annually by the Board.
(i) Directors' fees
Directors' base fees are presently $50,000 per annum. The Chairman's fee is currently $75,000 per annum. Nonexecutive directors do not receive performance related remuneration. Directors' fees cover all main board activities and membership of any board committee.
Executive pay
(i) Base pay and benefits
Structured as a total employment cost package which may be delivered as a combination of cash and prescribed nonfinancial benefits at the executives' discretion and includes contributions to employee superannuation funds.
Executives are offered a competitive base pay that comprises the fixed component of pay and rewards. Base pay for senior executives is reviewed annually to ensure the executive's pay is competitive with the market. An executive's pay is also reviewed on promotion. No long term incentive plan is presently in place.
C. Remuneration report (continued)
(ii) At risk short term salary
Short term bonuses are paid quarterly to senior managers based on a range of measures include Health and Safety, and financial targets such as revenue and WIP targets. The maximum incentive available is 50% of the annual salary spread over four quarters
(b) Details of remuneration
The key management personnel of SubZero Group Limited and the Group are the directors of SubZero Group Limited (see page 15), and the senior Managers of the SubZero business units who report directly to the Managing Director. The executives are:
- David Hales Divisional Manager Mechanical (commenced 25 February 2013)
- Jonathon McTaggart Divisional Manager Structural
- Filipe Dacruz Divisional Manager Production
- Steven Gill Group Commercial Executive
Details of the remuneration of the directors and the key management personnel (as defined in AASB 124 Related Party Disclosures) of SubZero Group Limited and the SubZero Group are set out in the following tables.
The relative proportions of remuneration that are linked to performance and those that are fixed are as follows:
| 2013 | Short-term employee benefits | Postemploymentbenefits | Long-termbenefits | ||
|---|---|---|---|---|---|
| Name | Cashsalary andfees$ | At riskshorttermsalary$ | Nonmonetarybenefits$ | Superannuation$ | Long serviceleaveaccrued$ |
| Non-executive directors | |||||
| Glenn Molloy | 12,500 | - | - | - | - |
| Graeme Clayton | 12,500 | - | - | - | |
| Bruce Arnott | 12,500 | - | - | - | |
| Sub-totalnon-executive directors | 37,500 | - | - | - | - |
| Executive directors | |||||
| Scott Farrell | 380,000 | - | - | 34,300 | - |
| Other key management personnel | |||||
| Jonathon McTaggart | 147,725 | 30,000 | - | 13,300 | - |
| Filipe Dacruz | 186,300 | 29,656 | - | 16,785 | - |
| David Hales* | 59,500 | - | - | 5,885 | 1,051 |
| Steven Gill** | 259,280 | - | - | 23,335 | - |
| Total key management compensation (group) | 1,070,305 | 59,656 | - | 93,605 | 1,051 |
* Employed from 25 February 2013
** Contract terminated 2 July 2013
Comparison numbers have not been provided for 2012 as there was no executive directors or other key management personnel of the indivdual trusts.
C. Remuneration report (continued)
The relative proportions of remuneration that are linked to performance and those that are fixed are as follows:
| Name | 2013 | ||
|---|---|---|---|
| FixedAt risk | |||
| Executive directors | |||
| Scott Farrell | 100% | - | |
| Other key management personnel | |||
| Jonathon McTaggart | 81% | 19% | |
| Filipe Dacruz | 85% | 15% | |
| David Hales | 100% | - | |
| Steven Gill | 100% | - |
Remuneration and other terms of employment for the Managing Director and key management personnel required to be disclosed under the Corporations Act 2001 are formalised in service agreements. Each of these agreements provide for the provision of performance-related cash bonuses, other benefits including, but not limited to, motor vehicles.
All contracts with executives may be terminated early by either party with three months notice subject to termination payments. No terminations occurred during the period.
| Name | Term of Agreement | * Base salaryincludingsuperannuation |
|---|---|---|
| Scott Farrell, Managing Director | Ongoing commencing 10 April 2013 | $442,500 |
| Jonathan McTaggart, Divisional Manager Structural | Ongoing commencing 10 April 2013 | $174,400 |
| Filipe Da Cruz, Divisional Manager Production | Ongoing commencing 10 April 2013 | $196,200 |
| David Hales, Divisional Manager Mechanical | Ongoing commencing 10 April 2013 | $218,000 |
* Base salaries quoted are as at 30 June 2013; they are reviewed annually by the Board
Comparison numbers have not been provided for 2012 as there was no executive directors or other key management personnel of the indivdual trusts.
* Since the long-term incentives are provided exclusively by way of share rights, the percentages disclosed also reflect the value of remuneration consisting of rights, based on the value of rights expensed during the year.
The relative proportions of remuneration that are linked to performance and those that are fixed are as follows:
(d) Share-based compensation
Share-based compensation is not presently provided
D. Other information
Environmental regulation
No significant environmental regulations apply to the Group.
Insurance of officers
During the year, the Company paid a premium to insure the directors and secretaries of the Company and its Australianbased controlled entities, the general managers of each of the businesses, all executive officers of the Group and of any related body corporate against a liability incurred by such a director, secretary or executive officer to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium.
D. Other information (continued)
Scott Farrell, Managing Director, has been provided an indemnity by SubZero Group Limited in relation to security he previously provided to ANZ for a loan of $850,000 to a subsidiary of the Group and in respect of any liabilities which he may incur arising out of, or in connection with, personal guarantees given by him in favour of CBA in respect of the obligations of the Group or Diesel and Plant Services Pty Ltd (atf DPS Trust) under certain Hire Purchase Facilities provided by CBA to those entities.
Proceedings on behalf of the Company
No person has applied to the court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility on behalf of the Company for all or part of these proceedings.
No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under section 237 of the Corporations Act 2001.
Non-audit services
The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor's expertise and experience with the Company and/or Group are important.
Details of the amounts paid to auditors for audit and non-audit services provided during the year are set out on the following page.
The Board of Directors has considered the position and, in accordance with advice received from the Audit Committee, is satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001 for the following reasons:
- all non-audit services have been reviewed by the Audit Committee to ensure they do not impact the impartiality and objectivity of the auditor
- none of the services undermine the general principles relating to auditor independence as set out in Professional Statement F1, including reviewing or auditing the auditor's own work, acting in a management or decision making capacity for the Company, acting as advocate for the Company or jointly sharing economic risks and rewards.
During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and non-related audit firms:
| Consolidated | ||
|---|---|---|
| 2013 | 2012 | |
| $ | $ | |
| PwC Australia | ||
| 1.Audit services and assurance services | 161,862 | 138,252 |
| Audit of financial services | ||
| Total remuneration for audit and assurance services | 161,862 | 138,252 |
| 2.Other services | ||
| Accounting services | 15,495 | - |
| Agreed upon procedures | - | 10,000 |
| Non statutory review | 15,000 | - |
| Total remuneration for other services | 30,495 | 10,000 |
| Total remuneration of PwC Australia | 192,357 | 148,252 |
Auditors' independence declaration
A copy of the auditors' independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 24.
Rounding of amounts
The Company is of a kind referred to in Class Order 98/0100, issued by the Australian Securities and Investments Commission, relating to the "rounding off" of amounts in the directors' report. Amounts in the directors' report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar.
Auditor
PwC continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of the directors:
Mr Malcolm Jackman
Chairman
Mr Scott Farrell Sydney Managing Director 30 September 2013
Auditor's Independence Declaration
As lead auditor for the audit of SubZero Group Limited for the year ended 30 June 2013, I declare that to the best of my knowledge and belief, there have been:
- a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
- b) no contraventions of any applicable code of professional conduct in relation to the audit*.*
This declaration is in respect of SubZero Group Limited and the entities it controlled during the period.
Darren Turner Newcastle Partner 30 September 2013 PricewaterhouseCoopers
PricewaterhouseCoopers, ABN 52 780 433 757 PricewaterhouseCoopers Centre, 26 Honeysuckle Drive, PO Box 798, NEWCASTLE NSW 2300 T: +61 2 4925 1100, F: +61 2 4925 1199, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation. Page 8
Consolidated statement of comprehensive income For the year ended 30 June 2013
| 9 months to | |||
|---|---|---|---|
| 2013 | June 2012 | ||
| Notes | $'000 | $'000 | |
| Revenue from continuing operations | 5 | 84,903 | 64,325 |
| Cost of sales | (55,463) | (38,941) | |
| Gross profit | 29,439 | 25,384 | |
| Other income | 5 | 593 | 430 |
| General and administration expenses | (3,712) | (2,182) | |
| Vehicle and equipment costs | (5,144) | (4,263) | |
| Depreciation and amortisation | (4,230) | (3,297) | |
| Finance costs | 5 | (2,253) | (1,940) |
| Employee benefits expense | 5 | (14,879) | (9,424) |
| Rental expense | 5 | (1,957) | (1,202) |
| Costs of listing | 25 | (3,468) | - |
| Profit/(loss) before income tax | (5,611) | 3,505 | |
| Income tax (expense)/benefit | 6 | (453) | 199 |
| Profit/(loss) for the year | (6,064) | 3,704 | |
| Profit/(loss) is attributable to: | |||
| Owners of SubZero Group Limited | 19 | (6,064) | 3,550 |
| Non-controlling interests | 26 | - | 154 |
| (6,064) | 3,704 | ||
| Other comprehensive income | |||
| Other comprehensive income for the year net of tax | - | - | |
| Total comprehensive income for the year | (6,064) | 3,704 | |
| Total comprehensive income for the year is attributable to: | |||
| Owners of SubZero Group Limited | (6,064) | 3,550 | |
| Non-controlling interests | - | 154 | |
| (6,064) | 3,704 | ||
| Cents | Cents | ||
| "Earnings per share for profit attributable to the | |||
| ordinary equity holders of the company:" | |||
| "Basic earnings per ordinary share: | |||
| (cents per share)" | 29 | (3.9) | 2.3 |
| "Diluted earnings per ordinary share: | |||
| (cents per share)" | 29 | (3.9) | 2.3 |
As set out in note 25 to these financial statements, as a result of the reverse acquisition of SVC Limited and its controlled entities (SVC) by SubZero Holdings Pty Limited and its controlled entities (SubZero) the comparative information for 30 June 2012 represents results for SubZero only for the 9 months to 30 June 2012. The consolidated statement of comprehensive income for the year ended 30 June 2013 represents the results of SubZero from 1 July 2012 to 30 June 2013 and SVC from 10 April 2013 to 30 June 2013. The above consolidated income statement should be read in conjunction with the accompanying notes.
Consolidated balance sheet
As at 30 June 2013
| 2013 | 2012 | ||
|---|---|---|---|
| Notes | $'000 | $'000 | |
| Current assets | |||
| Cash and cash equivalents | 7 | 125 | 320 |
| Trade and other receivables | 8 | 14,961 | 16,495 |
| Inventories | 9 | 2,601 | 1,308 |
| Total current assets | 17,687 | 18,123 | |
| Non-current assets | |||
| Property, plant and equipment | 10 | 17,431 | 18,524 |
| Deferred tax assets | 11 | 166 | 390 |
| Financial assets | 12 | 300 | - |
| Intangible assets | 13 | 1,391 | 833 |
| Total non-current assets | 19,288 | 19,747 | |
| Total assets | 36,975 | 37,871 | |
| Current liabilities | |||
| Trade and other payables | 14 | 18,012 | 15,351 |
| Borrowings | 16 | 9,297 | 11,709 |
| Current tax liabilities | 424 | 187 | |
| Provisions | 15 | 44 | 24 |
| Total current liabilities | 27,777 | 27,270 | |
| Non-current liabilities | |||
| Borrowings | 16 | 7,511 | 12,021 |
| Provisions | 15 | 227 | 131 |
| Total non-current liabilities | 7,739 | 12,151 | |
| Total liabilities | 35,515 | 39,422 | |
| Net assets | 1,460 | (1,551) | |
| Equity | |||
| Share capital | 18 | 10,286 | 556 |
| Reserves | 19(a) | (502) | - |
| Retained earnings | 19(b) | (8,324) | (2,261) |
| Capital and reserves attributable to owners of SubZero Group Limitedowners of SubZero Group Limited | 1,460 | (1,705) | |
| Non-controlling interests | - | 154 | |
| Total equity | 1,460 | (1,551) |
As set out in note 25 to these financial statements, as a result of the reverse acquisition of SVC Limited and its controlled entities (SVC) by SubZero Holdings Limited and its controlled entities (SubZero), the comparative information for 30 June 2012 represents that of SubZero as at 30 June 2012. The consolidated balance sheet as at 30 June 2013 represents that of the consolidated group which consolidates the SVC and SubZero balance sheets as at that date.
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
| Note | ContributedEquity | Reserves | Retainedearnings | Total | Noncontrollinginterest | Total equity | |
|---|---|---|---|---|---|---|---|
| $'000 | $'000 | $'000 | $'000 | $'000 | $'000 | ||
| Total equity at the beginning of the financial year 1October 2011 | 556 | - | (2,307) | (1,751) | - | (1,751) | |
| Profit for the year | - | - | 3,550 | 3,550 | 154 | 3,704 | |
| Other comprehensive income | - | - | - | - | - | - | |
| Total comprehensive income for the year as reportedin the 2012 financial statements | - | - | 3,550 | 3,550 | 154 | 3,704 | |
| Transactions with owners in their capacity as owners: | - | ||||||
| Contributions of equity, net of transaction costs | - | - | - | - | - | - | |
| Dividends provided for or paid | - | - | (3,504) | (3,504) | - | (3,504) | |
| Balance at 30 June 2012 | 556 | - | (2,261) | (1,705) | 154 | (1,551) | |
| Profit for the year | - | - | (6,064) | (6,064)- | - | (6,064) | |
| Other comprehensive income | - | - | - | - | |||
| Total comprehensive incomefor the year | - | - | (6,064) | (6,064) | - | (6,064) | |
| Transactions with owners in their capacity as owners: | - | ||||||
| Contributions of equity, net of transaction costsand tax | 18 | 9,730 | - | - | 9,730 | - | 9,730 |
| Transactions with non-controlling interests | 26 | - | (502) | - | (502) | (154) | (655) |
| Changes in equity held by SubZero | - | - | - | - | - | - | |
| 10,286 | (502) | (8,325) | 1,459 | - | 1,459 | ||
| Balance at 30 June 2013 | 10,286 | (502) | (8,324) | 1,460 | - | 1,460 |
Attributable to owners of SubZero Group Limited
As set out in note 25 to these financial statements, as a result of the reverse acquisition of SVC Limited and its controlled entities (SVC) by SubZero Holdings Pty Limited and its controlled entities (SubZero), the comparative information for 30 June 2012 represents the changes in equity of SubZero only for the 9 months period to 30 June 2012. The consolidated statement of changes in equity for the period 1 July 2012 to 30 June 2013 comprises the equity balances of SubZero at 1 July 2012, the profit for the year and transactions with equity holders of SubZero including the impact of the reverse acquisition, and the equity balances of the consolidated group comprising SubZero and SVC at 30 June 2013.
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
Consolidated statement of cash flows
For the year ended 30 June 2013
| 2013 | 2012 | ||
|---|---|---|---|
| Notes | $'000 | $'000 | |
| Cash flows from operating activities | |||
| Receipts from customers (inclusive of goods and services tax) | 94,906 | 65,463 | |
| Payments to suppliers and employees (inclusive of goods and services tax) | (87,932) | (59,800) | |
| Other revenue | 531 | 335 | |
| Interest paid | (2,416) | (2,237) | |
| Income taxes paid | - | 199 | |
| Net cash (outflow) inflow from operating activities | 27 | 5,089 | 3,960 |
| Cash flows from investing activities | |||
| Payment for non-controlling interest | 26 | (659) | - |
| Payment for capitalised R&D & patent costs | 13 | (558) | - |
| Payment for property, plant and equipment | 10 | (3,186) | (2,885) |
| Payment for purchase of subsidiary, net of cash acquired | - | (850) | |
| Proceeds from sale of property, plant and equipment | 64 | 95 | |
| Net cash (outflow) inflow from investing activities | (4,339) | (3,640) | |
| Cash flows from financing activities | |||
| Distrubtions to unitholders | - | (1,759) | |
| Proceeds from capital raising, net of transaction costs | 6,262 | - | |
| Repayment of borrowings | (7,507) | - | |
| Proceeds from borrowings | 300 | 857 | |
| Net cash (outflow) inflow from financing activities | (945) | (902) | |
| Net increase (decrease) in cash and cash equivalents | (195) | (582) | |
| Cash and cash equivalents at the beginning of the year | 320 | 902 | |
| Cash and cash equivalents at the end of the year | 7 | 125 | 320 |
| Financing arrangements | 28 | ||
| Non-cash financing and investing activities |
As set out in note 25 to these financial statements, as a result of the reverse acquisition of SVC Limited and its controlled entities (SVC) by SubZero Holdings Pty Limited and its controlled entities (SubZero), the comparative information for 30 June 2012 represents the cash flows of SubZero only for the 9 months to 30 June 2012. The consolidated statement of cash flows for the period 1 July 2012 to 30 June 2013 comprises the cash balance of SubZero at 1 July 2012, the cash transactions for the year of SubZero including the impact of the reverse acquisition and the cash balance of the consolidated group comprising SubZero and SVC as at 30 June 2013.
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
Contents to the notes to the consolidated financial statements
| Page | ||
|---|---|---|
| 1 | Summary of significant accounting policies | 30 |
| 2 | Financial risk management | 41 |
| 3 | Critical accounting estimates and judgements | 43 |
| 4 | Segment information | 43 |
| 5 | Profit from ordinary activities | 44 |
| 6 | Income tax expense | 45 |
| 7 | Cash and cash equivalents | 46 |
| 8 | Trade and other receivables | 47 |
| 9 | Inventories | 47 |
| 10 | Property, plant and equipment | 48 |
| 11 | Deferred tax assets | 49 |
| 12 | Financial assets | 49 |
| 13 | Intangible assets | 50 |
| 14 | Trade and other payables | 51 |
| 15 | Provisions | 51 |
| 16 | Borrowings | 52 |
| 17 | Deferred tax liabilities | 54 |
| 18 | Contributed equity | 55 |
| 19 | Reserves and retained profits | 56 |
| 20 | Key management personnel disclosures | 57 |
| 21 | Remuneration of auditors | 57 |
| 22 | Contingent liabilities | 58 |
| 23 | Commitments | 58 |
| 24 | Related party transactions | 59 |
| 25 | Reverse Acquisition | 60 |
| 26 | Transactions with non-controlling interests | 60 |
| 27 | Reconciliation of profit after income tax to net cash inflow from operating activities | 61 |
| 28 | Non cash investing and financing activities | 61 |
| 29 | Earnings per share | 62 |
| 30 | Parent entity financial information | 63 |
| 31 | Events occurring after balance sheet date | 63 |
1 Summary of significant accounting policies
The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below. These policies have been consistenty applied to all years presented, unless otherwise stated. The financial statements are for the consolidated entity consisting of SubZero Group Limited and its subsidiaries.
(a) Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board and the Corporations Act 2001. Subzero Group Limited is a for-profit entity for the purpose of preparing the financial statements.
(i) Compliance with IFRSs
The consolidated financial statements of the SubZero Group Limited group also comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
(ii) New and amended standards adopted by the group
None of the new standards and amendments to standards that are mandatory for the first time for the financial year beginning 1 July 2012 affected any of the amounts recognised in the current period or any prior period and are not likely to affect future periods. However, amendments made to AASB 101 Presentation of Financial Statements effective 1 July 2012 now require the statement of comprehensive income to show the items of comprehensive income grouped into those that are not permitted to be reclassied to profit or loss in a future period and those that may have to be reclassified if certain conditions are met.
(iii) Historical cost convention
These financial statements have been prepared under the historical cost convention.
(iv) Critical accounting estimates
The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 3.
(v) Going Concern
The financial statements have been prepared on a going concern basis which is based on the assumption that assets and liabilities are recorded on the basis that the Group will be able to realise its assets and discharge its liabilities in the normal course of business.
As at 30 June 2013, the Group has incurred a loss after tax for the year of $6.064m after non- cash cost of listing of $3.468m (2012: profit $3.703m), the Group has a deficiency in net current assets of $9.670m (2012: deficiency of net current assets of $9.147m). The Group has a net asset position at 30 June 2013 of $1.461m (2012: deficiency of net assets of $1.551m) following share capital raising of $6.262m during the year. As a result of these matters, there is a material uncertainty that may cast significant doubt on the Company's ability to continue as a going concern and, therefore, that it may be unable to realise its assets and discharge its liabilities in the normal course of business.
However the Group is currently pursing refinancing initiatives to provide facilities to better fund the companies working capital and growth, specifically it is pursuing;
-
Refinance on the majority of existing finance leases which will also provide an additional $4m of funds to cover working capital. In addition following this refinance monthly repayments under the leases will reduce by over $300,000.
-
The Group has launched an issue of a Redeemable Convertible Notes to raise between $5m and $12m
While these initiatives are well advanced they have not been finalised at the time of signing.
- Since year end the Group has been successful in negotiating deferred settlement terms on a obligation of $4.8m owing at year end.
The directors believe that the company and Group will be successful in the above matters and have prepared the financial
report on a going concern basis. The directors are also of the opinion that no asset is likely to be realised for an amount less than the amount at which it is recorded in the financial report. Accordingly, no adjustments have been made to the financial report relating to the carrying amounts and classifications of assets and liabilities that might be necessary should the Group not continue as a going concern.
(vi) Group Reorganisation
SubZero Holdings Pty Limited was incorporated as a proprietary company on 1 October 2011. On 1 January 2013, SubZero Holdings Pty Limited became the holding Company for various entities. The substance of the transactions were evaluated with reference to Australian Accounting Standard AASB 3 Business Combinations and has been considered a business combination under common control. The accounting treatment adopted for recognising the new group structure was on the basis that the transaction is a form of group reorganisation involving entities or businesses under common control (controlled by the same parties both before and after the combination) and that control was not transitory and as a consequence was undertaken at book value.
The effect of the common control transaction is that the assets and liabilities of the entities, were consolidated by SubZero Holdings Pty Limited for accounting purposes as if the entities have been consolidated from the date of incorporation of 1 October 2011.
(vii) Reverse Acquisition
SVC Group Limited is listed on the Australian Securities Exchange. SVC Group Limited completed the legal acquisition of SubZero Holdings Pty Limited on 10 April 2013.
SubZero Holdings Pty Limited was deemed to be the acquirer for accounting purposes as it has obtained control over the operations of the legal acquirer. Accordingly, the consolidated financial statements of SVC Group Limited have been prepared as a continuation of the financial statements of SubZero Holdings Pty Limited. SubZero Holdings Pty Limited (as the deemed acquirer) has accounted for the acquisition of SVC Group Limited from 10 April 2013. The comparative information presented in the consolidated financial statements is that of SubZero Holdings Pty Limited.
The impact of the reverse acquisition on each of the primary statements is as follows:
Consolidated statement of comprehensive income:
- The statement for the year to 30 June 2013 comprises 12 months of SubZero Holdings Pty Limited and 3 months of SVC Group Limited.
- The statement for the period to 30 June 2012 comprises 9 months of SubZero Holdings Pty Limited.
- Consolidated statement of financial position:
- The consolidated statement of financial position at 30 June 2013 represents both SubZero Holdings Pty Limited and SVC Group Limited as at that date.
- The consolidated statement of financial position at 30 June 2012 represents SubZero Holdings Pty Limited as at that date.
Statement of changes in equity:
- The consolidated statement of changes in equity for the year ended 30 June 2013 comprises SubZero Holdings Pty Limited's balance at 1 July 2012, its loss for the year and transactions with equity holders for 12 months. It also comprises SVC Group Limited's transactions with equity holders in the past 3 months and the equity balances of SubZero Holdings Pty Limited and SVC Group Limited at 30 June 2013.
- The consolidated statement of changes in equity for the period ended 30 June 2012 comprises 9 months of SubZero Holdings Pty Limited's changes in equity.
Statement of cash flows:
- The consolidated cash flow statement for the year ended 30 June 2013 comprises the cash balance of SubZero Holdings Pty Limited, as at 1 July 2012, the cash transactions for the 12 months (12 months for SubZero Holdings Pty Limited and 3 months for SVC Group Limited) and the cash balance of SubZero Holdings Pty Limited and SVC Group Limited at 30 June 2013.
- The consolidated cash flow statement for the period ended 30 June 2012 comprises 9 months of SubZero Holdings Pty Limited's cash transactions.
(b) Principles of consolidation
(i) Subsidiaries
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Subzero Group Limited (''Company'' or ''Parent Entity'') as at 30 June 2013 and the results of all subsidiaries for the year then ended. Subzero Group Limited and its subsidiaries together are referred to in this financial report as the Group or the Consolidated Entity.
Subsidiaries are all those entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.
The acquisition method of accounting is used to account for the acquisition of subsidiaries by the Group (refer to note 1(g)).
Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated income statement, statement of comprehensive income, statement of changes in equity and balance sheet respectively.
(ii) Changes in ownership interests
The Group treats transactions with non-controlling interests that do not result in a loss of control as transactions with equity owners of the Group. A change in ownership interest results in an adjustment between the carrying amounts of the controlling and non-controlling interests to reflect their relative interests in the subsidiary. Any difference between the amount of the adjustment to non-controlling interests and any consideration paid or received is recognised in a separate reserve within equity attributable to owners of Subzero Group Limited.
When the Group ceases to have control, joint control or significant influence, any retained interest in the entity is remeasured to its fair value with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, jointly controlled entity or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.
If the ownership interest in a jointly-controlled entity or an associate is reduced but joint control or significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income are reclassified to profit or loss where appropriate.
(c) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Managing Director.
(d) Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances and amounts collected on behalf of third parties.
The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and specific criteria have been met for each of the Group's activities as described below. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.
Revenue is recognised for the major business activities as follows:
(i) Service revenue
Revenue from services is recognised in the accounting period in which the services are rendered.
(ii) Interest income
Interest income is recognised as it accrues, taking into account the effective yield on the financial asset.
(iii) Dividends
Dividends are recognised as revenue when the right to receive payment is established. This applies even if they are paid out of pre-acquisition profits. However, the investment may need to be tested for impairment as a consequence, refer note 1(l).
(e) Income tax
The income tax expense or revenue for the period is the tax payable on the current period's taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the Company's subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the Parent Entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
(f) Leases
Leases of property, plant and equipment where the Group, as lessee, has substantially all the risks and rewards of ownership are classified as finance leases (note 10). Finance leases are capitalised at the lease's inception at the lower of the fair value of the leased property and the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in borrowings. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to the income statement 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 property, plant and equipment acquired under finance leases is depreciated over the shorter of the asset's useful life and the lease term, if there is no reasonable certainty that the Group will obtain ownership at the end of the lease term.
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases (note 23). Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight line basis over the period of the lease.
(g) Business combinations
The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred also includes the fair value of any asset or liability resulting from a contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest's proportionate share of the acquiree's net identifiable assets.
The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisitiondate fair value of any previous equity interest in the acquiree over the fair value of the Group's share of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the subsidiary acquired and the measurement of all amounts has been reviewed, the difference is recognised directly in profit or loss as a bargain purchase.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity's incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.
Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value recognised in profit or loss.
(h) Impairment of assets
Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.
(i) Cash and cash equivalents
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand and deposits held at call with financial institutions. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet.
(j) Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost, less provision for impairment. Trade receivables are generally due for settlement within 30 days. They are presented as current assets unless collection is not expected for more than 12 months after the reporting date.
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable are written off by reducing the carrying amount directly. An allowance account (provision for impairment of trade receivables) is used when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the
trade receivable is impaired. The amount of the impairment allowance is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial.
The amount of the impairment loss is recognised in profit or loss within administration costs. When a trade receivable for which an impairment allowance had been recognised becomes uncollectable in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against administration and financial costs in profit or loss.
(k) Inventories
(i) Raw materials and consumables
Raw materials and consumables are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale.
(ii) Work in Progress
Work in Progress comprises unbilled labour incurred to date less progress billings.
(iii) Stock Obsolescence
All inventory items are reviewed on a regular basis during the year and a provision raised for products where a sale is not likely to occur.
(l) Investments and other financial assets
Classification
The Group classifies its financial assets as loans and receivables and held to maturity investments. Management determines the classification of its investments at initial recognition and, in the case of assets classified as held-to-maturity, re-evaluates this designation at the end of each reporting date.
(i) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for those with maturities greater than 12 months after the reporting period which are classified as non-current assets. Loans and receivables are included in trade and other receivables (note 8) in the balance sheet.
(ii) Held-to-maturity investments
Held-to-maturity investments are non-derivative financial assets quoted in an active market with fixed or determinable payments and fixed maturities that the Group's management has the positive intention and ability to hold to maturity. If the Group were to sell other than an insignificant amount of held-to maturity financial assets, the whole category would be tainted and reclassified as available-for-sale. Held-to-maturity financial assets are included in non-current assets, except for those with maturities less than 12 months from the end of the reporting period, which would be classified as current assets.
Recognition and derecognition
Regular purchases and sales of financial assets are recognised on trade-date – the date on which the Group commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.
Measurement
At initial recognition, the Group measures a financial asset at its fair value. Loans and receivables and held-to-maturity investments are subsequently carried at amortised cost using the effective interest method.
Impairment
The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a 'loss event') and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.
(i) Assets carried at amortised cost
For loans and receivables, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset's original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the income statement.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor's credit rating), the reversal of the previously recognised impairment loss is recognised in the income statement.
Impairment testing of trade receivables is described in note 1(j).
(m) Property, plant and equipment
Property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.
Depreciation is calculated using the diminishing value method to allocate their cost, net of their residual values, over their estimated useful lives or, in the case of property improvements and certain leased plant and equipment, the shorter lease term as follows:
| Property improvements | 25 years |
|---|---|
| Plant and equipment | 5 to 10 years |
| Vehicles | 5 to 10 years |
| Furniture, fittings and equipment | 5 years |
| Low value pooled assets | 3 years |
The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount (note 1(h)).
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the income statement.
(n) Intangible assets
(i) Goodwill
Goodwill is measured as described in note 1(g). Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill is not amortised but it is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in
which the goodwill arose, identified according to operating segments (note 4).
(ii) Research and development
Research expenditure is recognised as an expense as incurred. Costs incurred on development projects (relating to the design and testing of new or improved products) are recognised as intangible assets when it is probable that the project will be a success considering its commercial and technical feasibility and its costs can be measured reliably. The expenditure capitalised comprises all directly attributable costs, including costs of materials, services, direct labour and an appropriate proportion of overheads. Other development expenditures that do not meet these criteria are recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period. Capitalised development costs are recorded as intangible assets and amortised from the point at which the asset is ready for use on a straight-line basis over its useful life, which varies from 3 to 5 years.
(o) Trade and other payables
These amounts represent liabilities for goods and services provided to the group prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 60 days of recognition. Trade and other payables are presented as current liabilities unless payment is not due within 12 months from the reporting date. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method.
(p) Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates.
(q) Borrowing costs
Borrowing costs incurred for the construction of any qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale. Other borrowing costs are expensed.
(r) Provisions
A provision is recognised in the accounts when there is a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.
(s) Employee Benefits
(i) Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits, and annual leave expected to be settled within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees' services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liability for annual leave is recognised in the provision for employee benefits. All other shortterm employee benefit obligations are presented as payables.
(ii) Other long-term employee benefit obligations
The liability for long service leave and annual leave not expected to be within 12 months after the end of the period in which the employees render the related service is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the end of the reporting period on government bonds with terms and currencies that match, as closely as possible, the estimated future cash outflows.
The obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting date, regardless of when the actual settlement is expected to occur.
(iii) Termination benefits
Termination benefits are payable when employment is terminated before the normal retirement date, or when an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits when it is demonstrably committed to either terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal or to providing termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after the end of the reporting period are discounted to present value.
(iv) Profit sharing and bonus plans
The Group recognises a liability and an expense for bonuses and profit-sharing based on a formula that takes into consideration the profit attributable to the company's shareholders after certain adjustments. The Group recognises a provision where contractually obliged or where there is a past practice that has created a constructive obligation.
(t) Contributed equity
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or rights are shown in equity as a deduction, net of tax, from the proceeds.
Where any group company purchases the Company's equity instruments, for example as the result of a share buy-back or a share-based payment plan, the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the owner of SubZero Group Limited.
(u) Dividends
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting period.
- (v) Earnings per share
- (i) Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to owners of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.
(w) Goods and services tax (GST)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the balance sheet. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to, the taxation authority are presented as operating cash flows.
(x) Rounding of amounts
The Company is of a kind referred to in Class order 98/0100, issued by the Australian Securities and Investments Commission, relating to the ''rounding off'' of amounts in the financial report. Amounts in the financial report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, the nearest dollar.
(y) Amended accounting standards and UIG interpretations
Certain amended accounting standards and interpretations have been published that are not mandatory for 30 June 2013 reporting periods. The Group's and the Parent Entity's assessment of the impact of these amended standards and interpretations is set out below.
AASB 119 - Revised AASB 119 Employee Benefits, AASB 2011-10 Amendments to Australian Accounting Standards arising from AASB 119 (September 2011) (effective for annual periods beginning on or after 1 January 2013)
In September 2011, the AASB released a revised standard on accounting for employee benefits. It requires the recognition of all remeasurements of defined benefit liabilities/assets immediately in other comprehensive income (removal of the socalled 'corridor' method) and the calculation of a net interest expense or income by applying the discount rate to the net defined benefit liability or asset. This replaces the expected return on plan assets that is currently included in profit or loss. The standard also introduces a number of additional disclosures for defined benefit liabilities/assets and could affect the timing of the recognition of termination benefits. The amendments will have to be implemented retrospectively. While the Group does not expect the new standard to have a significant impact, it has yet to perform detailed analysis. The Group will adopt the new standard in the financial statements for the year ended 30 June 2014.
AASB 10 Consolidated Financial Statements, AASB 11 Joint Arrangements, AASB 12 Disclosure of Interests in Other Entities, revised AASB 127 Separate Financial Statements and AASB 128 Investments in Associates and Joint Ventures and AASB 2011-7 Amendments to Australian Accounting Standards arising from the Consolidation and Joint Arrangements Standards (effective for annual periods beginning on or after 1 January 2013)
In August 2011, the AASB issued a suite of five new and amended standards which address the accounting for joint arrangements, consolidated financial statements and associated disclosures. AASB 10 replaces all of the guidance on control and consolidation in AASB 127 Consolidated and Separate Financial Statements, and Interpretation 12 Consolidation – Special Purpose Entities. The core principle that a consolidated entity presents a parent and its subsidiaries as if they are a single economic entity remains unchanged, as do the mechanics of consolidation. However the standard introduces a single definition of control that applies to all entities. It focuses on the need to have both power and rights or exposure to variable returns before control is present. Power is the current ability to direct the activities that significantly influence returns. Returns must vary and can be positive, negative or both. There is also new guidance on participating and protective rights and on agent/principal relationships. While the Group does not expect the new standard to have a significant impact on its composition, it has yet to perform a detailed analysis of the new guidance in the context of its various investees that may or may not be controlled under the new rules.
AASB 12 sets out the required disclosures for entities reporting under the two new standards, AASB 10 and AASB 11, and replaces the disclosure requirements currently found in AASB 128. Application of this standard by the Group will not affect any of the amounts recognised in the financial statements, but will impact the type of information disclosed in relation to the Group's investments. Amendments to AASB 128 provide clarification that an entity continues to apply the equity method and does not remeasure its retained interest as part of ownership changes where a joint venture becomes an associate, and vice versa. The amendments also introduce a "partial disposal" concept. The Group is still assessing the impact of these amendments. The Group does not expect to adopt the new standards before their operative date. They would therefore be first applied in the financial statements for the annual reporting period ending 30 June 2014.
AASB 13 Fair Value Measurement and AASB 2011-8 Amendments to Australian Accounting Standards arising from AASB 13 (effective for annual periods beginning on or after 1 January 2013)
AASB 13 was released in September 2011. It explains how to measure fair value and aims to enhance fair value disclosures. The Group does not use fair value measurements extensively. It is therefore unlikely that the new rules will have a significant impact on any of the amounts recognised in the financial statements.The Group does not intend to adopt the new standard before its operative date, which means that it would be first applied in the annual reporting period ending 30 June 2014.
AASB 2011-4 Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel Disclosure Requirements (effective for annual periods beginning on or after 1 January 2013)
In July 2011 the AASB decided to remove the individual key management personnel (KMP) disclosure requirements from AASB 124 Related Party Disclosures, to achieve consistency with the international equivalent standard and remove a duplication of the requirements with the Corporations Act 2001. While this will reduce the disclosures that are currently required in the notes to the financial statements, it will not affect any of the amounts recognised in the financial statements. The amendments apply from 1 July 2013 and cannot be adopted early. The Corporations Act requirements in relation to remuneration reports will remain unchanged for now, but these requirements are currently subject to review and may also be revised in the near future.
Amendments to AASB 136 Recoverable Amount Disclosures for Non-Financial Assets (effective for annual periods beginning on or after 1 January 2014)
The AASB has made small changes to some of the disclosures that are required under AASB 136 Impairment of Assets. These may result in additional disclosures if the Group recognises an impairment loss or the reversal of an impairment loss during the period. They will not affect any of the amounts recognised in the financial statements. The Group intends to apply the amendment from 1 July 2014.
AASB 2012-5 Amendments to Australian Accounting Standard arising from Annual Improvements 2009-2011 cycle (effective for annual periods beginning on or after 1 January 2013)
In June 2012, the AASB approved a number of amendments to Australian Accounting Standards as a result of the 2009- 2011 annual improvements project. The Group does not expect that any adjustments will be necessary as the result of applying the revised rules.
There are no other standards that are not yet effective and that are expected to have a material impact on the Group in the current or future reporting periods on foreseeable future transactions.
(z) Parent Entity financial information
The financial information for the Parent Entity, SubZero Group Limited, disclosed in note 30 has been prepared on the same basis as the consolidated financial statements, except as set out below.
(i) Investments in subsidiaries, associates and joint venture entities
Investments in subsidiaries, associates and joint venture entities are accounted for at cost in the financial statements of SubZero Group Limited.
2 Financial risk management
The Group's activities expose it to a variety of financial risks; market risk (including cash flow and interest rate risk), credit risk and liquidity risk. The Group's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. These methods include sensitivity analysis in the case of interest rate and ageing analysis for credit risk.
Risk management is carried out centrally by the Managing Director and finance function under policies approved by the Board of Directors.
The Group holds the following financial instruments by category:
| Financial Assets | Financial assets atamortised cost | Total |
|---|---|---|
| $'000 | $'000 | |
| 2013 | ||
| Cash and cash equivalents | 125 | 125 |
| Trade and other receivables | 14,961 | 14,961 |
| Held-to-maturity investments | 300 | - |
| 15,386 | 15,086 | |
| 2012 | ||
| Cash and cash equivalents | 320 | 320 |
| Trade and other receivables | 16,495 | 16,495 |
| 16,815 | 16,815 | |
| Financial Liabilities | Financial liabilities atamortised cost | Total |
| $'000 | $'000 | |
| 2013 | ||
| Trade and other payables | (18,012) | (18,012) |
| Borrowings | (16,808) | (16,808) |
| (34,820) | (34,820) | |
| 2012 | ||
| Trade and other payables | (15,351) | (15,351) |
| Borrowings | (23,729) | (23,729) |
| (39,080) | (39,080) |
(a) Market risk
(i) Cash flow and interest rate risk
The Group's main interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the group to cash flow interest rate risk.
The Group analyses its interest rate exposure on a dynamic basis. Various scenarios are simulated taking into consideration refinancing, renewal of existing positions and alternative financing. Based on these scenarios, the Group calculates the impact on profit or loss of a defined interest rate shift. The scenarios are run only for liabilities that represent the major interest-bearing positions. The simulation is done on a regular basis to verify that the maximum loss potential is within the limit given by management. Refer to Note 16 for further details generally of the group's borrowings.
The Group's exposure to interest rate risk at the end of the reporting period, expressed in Australian dollars, was as follows:
| Interest rate risk | ||||||
|---|---|---|---|---|---|---|
| Carrying | -100 bps | +100 bps | ||||
| amount | Profit | Equity | Profit | Equity | ||
| 2013 | $000 | $'000 | $'000 | $'000 | $'000 | |
| Financial assets | ||||||
| Cash and cash equivalents | 125 | (13) | (13) | 13 | 13 | |
| Accounts receivable | 14,961 | - | - | - | - | |
| Financial Liabilities | ||||||
| Trade payables | (18,012) | - | - | - | - | |
| Borrowings | (16,808) | 83 | 83 | (83) | (83) | |
| Total increase / (decrease) | 70 | 70 | (70) | (70) |
2 Financial risk management (cont)
| Interest rate risk | |||||
|---|---|---|---|---|---|
| Carrying | -100 bps | +100 bps | |||
| 2012 | amount | Profit | Equity | Profit | Equity |
| $'000 | $'000 | $'000 | $'000 | $'000 | |
| Financial assets | |||||
| Cash and cash equivalents | 320 | (32) | (32) | 32 | 32 |
| Accounts receivable | 16,495 | - | - | - | - |
| Financial Liabilities | |||||
| Trade payables | (15,351) | - | - | - | - |
| Borrowings | (23,729) | 92 | 92 | (92) | (92) |
| Total increase / (decrease) | 60 | 60 | (60) | (60) |
Financial risk exposure of the Parent Entity is limited to the exposure of the Group.
The Group is not exposed to foreign exchange risk as none of the financial assets or liabilities of the group are denominated in currencies other than Australian dollars.
(b) Credit risk
The Group has no significant concentrations of credit risk. The Group has policies in place to ensure that sales of products and services are made to customers with an appropriate credit history. The maximum exposure to credit risk best represents the carrying value of the financial assets at balance date. Details on the past due but not impaired trade receivables are disclosed at note 8(b). Cash transactions are limited to high credit quality financial institutions.
(c) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions.
Management monitors forecasts of the Group's liquidity on the basis of expected cash flow. See note 16(e) for details of available facilities.
The tables below analyse the Group's financial liabilities into relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the tables are the contractual undiscounted cash flows. There is no liquidity risk at the Parent Entity level.
| Group - 2013 | Less than 1 year$'000 | Between 1and 3 years$'000 | Between 3and 5 years$'000 | Between 5and 10 years$'000 | Over 10 years$'000 |
|---|---|---|---|---|---|
| Payables | 18,012 | - | - | - | - |
| Borrowings (excluding Hire Purchase liabilities) | 426 | 421 | 167 | 242 | 119 |
| Hire Purchase liabilities | 5,534 | 6,942 | - | - | - |
| Group - 2012 | Less than 1 year$'000 | Between 1and 3 years$'000 | Between 3and 5 years$'000 | Between 5and 10 years$'000 | Over 10 years$'000 |
|---|---|---|---|---|---|
| Payables | 15,351 | - | - | - | - |
| Borrowings (excluding Hire Purchase liabilities) | 204 | 417 | 187 | 254 | 155 |
| Hire Purchase liabilities | 4,288 | 12,476 | - | - | - |
3 Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances.
(a) Critical accounting estimates and assumptions
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
(i) Estimated impairment of goodwill
The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in note 1(h). The recoverable amounts of cash-generating units have been determined based on value in-use calculatuions. These calculations require the use of assumptions. Refer to Note 13 for details of these assumptions and the potential impact of changes in the assumptions.
4 Segment information
The Group has applied AASB 8 Operating Segments from 1 July 2009. AASB 8 requires a 'management approach' under which segment information is presented on the same basis as that used for internal reporting purposes. This has resulted in a change to the reportable segments presented with the Industrial segment amended to exclude the Cast Metal Services business. Cast Metal Services is no longer managed by the Industrial segment manager and, as it does not meet the quantitative thresholds required by AASB 8, management has concluded that the results of this segment should no longer be separately reported. The results of this operation are now included in the "all other segments" column and comparative disclosures have also been amended to reflect this change.
The SubZero Group operates in a single segment, Mining Services, in Australia. The various products and services all relate to the same economic characteristics and are sold to a common set of customers. Based on the operation of a single segment and geography separate segment numbers have not been provided as the financial statements represent the one segment.
5 Profit from ordinary activities
| 2013 | 2012 | |
|---|---|---|
| $'000 | $'000 | |
| Revenue | ||
| From continuing operations | ||
| Sales revenue | 84,903 | 64,325 |
| 84,903 | 64,325 | |
| Other revenue | ||
| Interest | - | |
| Other Income | 593 | 430 |
| 593 | 430 | |
| Expenses | ||
| Profit before income tax includes the following specific expenses: | ||
| Depreciation | ||
| Motor vehicles | 1,322 | 957 |
| Plant & equipment | 2,667 | 2,233 |
| Leasehold improvements | 8 | 5 |
| Office furniture & equipment | 159 | 102 |
| Low value asset pool | 55 | - |
| Total depreciation | 4,212 | 3,297 |
| Amortisation | ||
| Intangibles assets | 1 | - |
| Borrowing costs | 17 | - |
| Total amortisation | 18 | - |
| General and administration expense | 3,712 | 2,183 |
| Vehicle and equipment costs | 5,150 | 4,257 |
| Finance costs | 2,253 | 1,940 |
| Employee benefits expense | 14,879 | 9,424 |
| Rental expense | 1,957 | 1,202 |
| 27,951 | 19,006 | |
| Amount capitalised (note (a)) | 94 | - |
| Total | 94 | - |
(a) Capitalised Borrowing Costs
The borrowing costs capitalised represent amounts incurred upfront to renew finance facilities.
6 Income tax expense
| 2013 | 2012 | |
|---|---|---|
| $'000 | $'000 | |
| (a) Income Tax Expense | ||
| Current tax | 229 | 191 |
| Deferred tax | 224 | (390) |
| 453 | (199) | |
| Income tax expense is attributable to: | ||
| Profit from continuing operations | 453 | (199) |
| Aggregate income tax expense | 453 | (199) |
| Deferred income tax (revenue) expense included in income tax expense comprises: | ||
| Decrease (increase) in deferred tax assets (note 11) | (86) | (643) |
| (Decrease) increase in deferred tax liabilities (note 17) | 310 | 253 |
| 224 | (390) | |
| (b) Numerical reconciliation of income tax expense toprima facie tax payable | ||
| Profit from continuing operations before income tax expense | (5,611) | 1,734 |
| Tax at the Australian tax rate of 30% (2012: 30%) | (1,683) | 520 |
| Tax effect of amounts which are not deductible (taxable)in calculating taxable income: | ||
| Listing costs | 1,040 | - |
| Trust distribution taxable within the group | 15 | - |
| Entertainment | 16 | 15 |
| Fines | 2 | 1 |
| Research and development rebate | (54) | - |
| Legal Fees | 235 | 13 |
| Distribution | 93 | 56 |
| Trust distribution taxed outside of group | - | (634) |
| (336) | (29) | |
| Recognition of deferred tax balances previously not recognised | (42) | (170) |
| Current year revenue losses not recognised as DTA | 831 | - |
| Income tax expense | 453 | (199) |
7 Cash and cash equivalents
| 2013 | 2012 | |
|---|---|---|
| $'000 | $'000 | |
| Cash at bank and in hand | 125 | 320 |
| 125 | 320 | |
| (a) Reconciliation to cash at the end of the year | ||
| The above figures are reconciled to cash at the end of the financial year as shown in the statement of cash flows asfollows: | ||
| 2013 | 2012 | |
| $'000 | $'000 | |
| Balances as above | 125 | 320 |
| Balances per statement of cash flows | 125 | 320 |
| (b) Interest rate risk exposure | ||
| The Group's and Parent Entity's exposure to interest rate risk is discussed in note 2. |
8 Trade and other receivables
| 2013 | 2012 | |
|---|---|---|
| $'000 | $'000 | |
| Current | ||
| Trade receivables | 14,680 | 16,410 |
| Provision for impairment of receivables | (41) | (125) |
| 14,639 | 16,285 | |
| Other receivables | 322 | 211 |
| 14,961 | 16,495 | |
| (a) Impaired trade receivables | ||
| As at 30 June 2013 current trade receivables of the Group with a nominal value of $41,000 (2012: $125,305) wereimpaired. The amount of the provision was $41,000 (2012: $125,305). | ||
| Movements in the provision for impairment of receivables are as follows: | ||
| 2013 | 2012 | |
| $'000 | $'000 | |
| Balance at 1 July | 125 | |
| Charge for the year | ||
| Receivables written off during the year as uncollectable | - | - |
| Unused amounts reversed | (84) | 125 |
| Balance at 30 June | 41 | 125 |
| The creation and release of the provision for impaired receivables has been included in administration expenses inthe income statement. Amounts charged to the provision are generally written off when there is no expectation ofrecovering additional cash. | ||
| (b) Past due but not impaired | ||
| At 30 June, the ageing analysis of trade receivables is as follows: | ||
| 2013 | 2012 | |
| $'000 | $'000 | |
| Current | 7,630 | 8,712 |
| Up to 3months | 4,206 | 6,078 |
| 3 to 6 Months | 2,403 | 1,355 |
| Over 6 Months | 441 | 266 |
| Total | 14,680 | 16,410 |
8 Receivables (continued)
As at 30 June 2013 trade receivables of $41,000 (2012:$125,305) were past due and considered impaired and trade receivables of $7,050,051 (2012:$ 7,573,267) were past due but not impaired.
The other classes within trade and other receivables do not contain impaired assets and are not past due. Based on the credit history of these other classes, it is expected that these amounts will be received when due.
(c) Fair values
Due to the short term nature of receivables, their carrying amount is assumed to approximate their fair value.
(d) Credit risk
There is no concentration of credit risk with respect to receivables, as the Group has a large number of customers, nationally. Refer to note 2 for more information on the risk management policy of the Group and the credit quality of the entity's trade receivables.
The maximum exposure to credit risk at the reporting date is the carrying amount of each class of receivables mentioned above.
9 Inventories
| 2013 | 2012 | |
|---|---|---|
| $'000 | $'000 | |
| Raw materials and stores - at cost | 983 | 379 |
| Work in Progress - at cost | 1,618 | 929 |
| Finished goods | - | |
| 2,601 | 1,308 | |
(a) Inventory expense
Write downs of inventories to net realisable value recognised as an expense during the year ended 30 June 2013 amounted to nil (2012:nil).
10 Property, plant and equipment
| Pooled Assets | Motor Vehicles | Leaseholdimprovements | Plant andequipment | Furniture andFixtures | Total | |
|---|---|---|---|---|---|---|
| $'000 | $'000 | $'000 | $'000 | $'000 | $'000 | |
| At 1 October 2011 | ||||||
| Cost or fair value | 91 | 8,716 | 149 | 17,886 | 579 | 27,421 |
| Accumulated depreciation | - | (2,921) | (33) | (5,218) | (207) | (8,380) |
| Net book amount | 91 | 5,795 | 116 | 12,667 | 372 | 19,041 |
| Year ended 30 June 2012 | ||||||
| Opening net book amount | 91 | 5,795 | 116 | 12,667 | 372 | 19,041 |
| Additions | 84 | 1,266 | 11 | 1,393 | 131 | 2,885 |
| Disposals | - | (114) | - | - | - | (114) |
| Depreciation charge | (41) | (1,019) | (6) | (2,116) | (106) | (3,289) |
| Closing net book amount | 133 | 5,928 | 121 | 11,944 | 397 | 18,524 |
| At 30 June 2012 | ||||||
| Cost or fair value | 175 | 9,759 | 159 | 19,279 | 710 | 30,082 |
| Accumulated depreciation | (41) | (3,830) | (38) | (7,336) | (313) | (11,558) |
| Net book amount | 133 | 5,928 | 121 | 11,944 | 397 | 18,524 |
| Year ended 30 June 2013 | ||||||
| Opening net book amount | 133 | 5,928 | 121 | 11,944 | 397 | 18,524 |
| Additions | 27 | 481 | 35 | 2,525 | 119 | 3,186 |
| Disposals | - | (49) | - | (22) | - | (71) |
| Depreciation charge | (55) | (1,404) | (8) | (2,581) | (160) | (4,207) |
| Closing net book amount | 105 | 4,956 | 148 | 11,866 | 356 | 17,431 |
| At 30 June 2013 | ||||||
| Cost or fair value | 160 | 10,138 | 193 | 21,779 | 829 | 33,099 |
| Accumulated depreciation | (55) | (5,183) | (45) | (9,913) | (473) | (15,669) |
| Net book amount | 105 | 4,956 | 148 | 11,866 | 356 | 17,431 |
(a) Non current assets pledged as security
Refer to note 16 for information on non-current assets pledged as security by the group.
11 Deferred tax assets
| 2013 | 2012 | |
|---|---|---|
| $'000 | $'000 | |
| The balance comprises temporary differences attributable to: | ||
| Amounts recognised in profit or loss | ||
| Capital expenditure | 166 | 225 |
| Superannuation payable | 125 | 65 |
| Employee leave benefits | 427 | 303 |
| Provision for doubtful debts | 12 | 38 |
| Accrued expenses | - | 12 |
| 730 | 643 | |
| Total deferred tax assets | 730 | 643 |
| Set off of deferred tax liabilities of Parent Entity pursuant to set off provisions (note 17) | (563) | (253) |
| Net deferred tax assets | 166 | 390 |
| Movements: | ||
| Opening balance at 1 July | 643 | - |
| Credited/(charged) to the income statement (note 6) | 87 | 643 |
| Credited/(charged) to other comprehensive income (note 6) | ||
| Credited/(charged) to equity | ||
| Acquisition of subsidiary (note 25) | ||
| Closing balance at 30 June | 730 | 643 |
| Deferred tax asset to be recovered after more than 12 months | 166 | 225 |
| Deferred tax asset to be recovered within 12 months | 563 | 418 |
| 730 | 643 |
12 Financial assets
| 2013 | 2012 | |
|---|---|---|
| $'000 | $'000 | |
| Held to maturity financial assets | 300 | - |
| 300 | - |
Held to maturity financial assets consist of term deposits with a maturity greater than 90 days.
(a) Impairment and risk exposure
The maximum exposure to credit risk at the end of the reporting period is the carrying amount of the investments. All investments were issued by high quality financial institutions. None of the held-to-maturity investments are either past due or impaired.All held-to-maturity investments are denominated in Australian currency. As a result, there is no exposure to foreign currency risk. There is also no exposure to price risk as the investments will be held to maturity.
13 Intangible assets
| Goodwill | R&D | Patents, trademarks& other | Total | |
|---|---|---|---|---|
| $'000 | $'000 | $'000 | $'000 | |
| At 1 October 2011 | ||||
| Cost | - | - | - | - |
| Accumulated amortisation and impairment | - | - | - | - |
| Net book amount | - | - | - | - |
| Year ended 30 June 2012 | ||||
| Opening net book amount | - | - | - | - |
| Additions | - | - | - | - |
| Acquisition of subsidiary | 833 | - | - | 833 |
| Amortisation charge | - | - | - | - |
| Closing net book amount | 833 | - | - | 833 |
| At 30 June 2012 | ||||
| Cost | 833 | - | - | 833 |
| Accumulated amortisation and impairment | - | - | - | - |
| Net book amount | 833 | - | - | 833 |
| Year ended 30 June 2013 | ||||
| Opening net book amount | 833 | - | - | 833 |
| Additions | - | 541 | 18 | 559 |
| Amortisation charge | - | (1) | (1) | |
| Closing net book amount | 833 | 541 | 17 | 1,391 |
| At 30 June 2013 | ||||
| Cost | 833 | 541 | 18 | 1,392 |
| Accumulated amortisation and impairment | - | - | (1) | (1) |
| Net book amount | 833 | 541 | 17 | 1,391 |
(a) Impairment tests for goodwill and other intangibles
An annual assessment for impairment has been performed for the DMST & Harness Master CGU in which all the goodwill is recorded.
The recoverable amount of the CGU is determined based on a value-in-use calculations. These calculations use cash flow projections based on financial forecasts approved by management covering a 12 month period, as such no discounting is required.
(b) Key assumptions used for value in use calculations
Management determined assumptions on revenue growth, gross margin, overhead level, working capital and capital expenditure have been determined based on past performance and expectations for the future.
(c) Impairment charge
There were no impairment charges in the period (2012: ni;).
(d) Impact of possible changes in key assumptions
The impairment testing highlights a reasonable buffer between the value-in-use amount and the net book value of assets of the CGU's. Significant changes in the major assumptions would be required to generate an impairment charge.
14 Trade and other payables
| 2013 | 2012 | |
|---|---|---|
| $'000 | $'000 | |
| Current | ||
| Trade payables | 9,232 | 6,507 |
| Other payables | 8,781 | 8,843 |
| 18,012 | 15,351 |
(a) Fair value
Due to the short term nature of these payables, their carrying value is assumed to approximate their fair value.
15 Provisions
| 2013 | 2012 | |
|---|---|---|
| $'000 | $'000 | |
| Current | ||
| Employee Entitlements - LSL | 44 | 24 |
| 44 | 24 | |
| Non-current | ||
| Employee Entitlements - LSL | 227 | 131 |
| 227 | 131 |
(a) Amounts not expected to be settled within the next 12 months
The current provision for employee benefits includes accrued long service leave. For long service leave it covers all unconditional entitlements where employees have completed the required period of service and also those where employees are entitled to pro-rata payments in certain circumstances. The entire amount of the provision of $44,000 (2012 - $24,000) is presented as current, since the Group does not have an unconditional right to defer settlement for any of these obligations. However, based on past experience, the Group does not expect all employees to take the full amount of accrued leave or require payment within the next 12 months. The following amounts reflect leave that is not to be expected to be taken or paid within the next 12 months.
| 2013 | 2012 | |
|---|---|---|
| $'000 | $'000 | |
| Leave obligations not expected to be settled after 12 months | 44 | 24 |
16 Borrowings
| 2013 | 2012 | |
|---|---|---|
| $'000 | $'000 | |
| Current - secured | ||
| Debt factoring | 3,277 | 6,054 |
| Bank loans | 80 | 74 |
| Related party loan | 300 | - |
| Hire purchase liabilities (note 23) | 5,640 | 5,580 |
| Total secured current borrowings | 9,297 | 11,709 |
| Total current borrowings | 9,297 | 11,709 |
| 2013 | 2012 | |
| $'000 | $'000 | |
| Non-current secured | ||
| Bank loans | 676 | 838 |
| Hire purchase liabilities (note 23) | 6,836 | 11,183 |
| Total secured non-current borrowings | 7,511 | 12,021 |
| Total non-current borrowings | 7,511 | 12,021 |
(a) Secured liabilities
The total secured liabilities (current and non-current) are as follows:
| Debt factoring | 3,277 | 6,054 |
|---|---|---|
| Related party loan | 300 | - |
| Bank loans | 756 | 912 |
| Hire purchase liabilities (note 23) | 12,476 | 16,763 |
| Total secured liabilities | 16,808 | 23,729 |
(b) Assets pledged as security
The bank loans are secured by a corporate guarantee and indemnity from a related party SubZero Management Services Pty Limited, supported by registered mortgage over freehold land of SubZero Management Services Pty Limited. The related party loan is secured by a term deposit held with ANZ and the hire purchase liabilities are secured by equipment or motor vehicles.
The carrying amounts of assets pledge as security for current and non-current borrowings are:
16 Borrowings (cont)
| 2013 | 2012 | |
|---|---|---|
| $'000 | $'000 | |
| Current | ||
| Floating charge | ||
| Financial assets - held to maturity investment | 300 | - |
| Total current assets pledged as security | 300 | - |
| 2013 | 2012 | |
| $'000 | $'000 | |
| Non-current | ||
| Hire purchase liabilities | ||
| Motor vehicles | 4,883 | 5,770 |
| Plant & equipment | 8,327 | 9,657 |
| Total non-current assets pledged as security | 13,210 | 15,427 |
| Total assets pledged as security | 13,510 | 15,427 |
(e) Financing arrangements
| 2013 | 2012 | |
|---|---|---|
| $'000 | $'000 | |
| Bank loan facilities | ||
| Total facilities | 31,477 | 32,411 |
| Used at balance date | 16,885 | 23,739 |
| Unused at balance date | 14,591 | 8,672 |
(f) Fair value
The carrying amounts and fair values of interest bearing liabilities at balance date are:
| 2013 | 2012 | |||
|---|---|---|---|---|
| Carryingamount | Fairvalue | Carryingamount | Fairvalue | |
| $'000 | $'000 | $'000 | $'000 | |
| On balance sheet | ||||
| Non traded financial liabilities | ||||
| Debt Factoring | 3,277 | 3,277 | 6,054 | 6,054 |
| Related party loans | 300 | 300 | - | - |
| Bank loans | 756 | 833 | 912 | 921 |
| Hire Purchase liabilities | 12,476 | 12,476 | 16,763 | 16,763 |
| 16,808 | 16,885 | 23,729 | 23,739 |
Fair value is inclusive of costs which would be incurred on settlement of a liability.
(i) On balance sheet
The fair value of interest bearing liabilities is based upon market prices where a market exists or by discounting the expected future cash flows by the current interest rates for liabilities with similar risk profiles.
(ii) Off balance sheet
The Parent Entity and certain controlled entities have potential financial liabilities which may arise from certain contingencies disclosed in note 22. As explained in those notes, no material losses are anticipated in respect of any of those contingencies.
17 Deferred tax liabilities
| 2013 | 2012 | |
|---|---|---|
| $'000 | $'000 | |
| The balance comprises temporarydifferences attributable to: | ||
| Amounts recognised in profit or loss | ||
| Consumables | 485 | 253 |
| Eligible R&D expenditure capitalised | 78 | - |
| 563 | 253 | |
| Total deferred tax liabilities | 563 | 253 |
| Set off of deferred tax liabilities of Parent Entity pursuant to set off provisions (note 11) | (563) | (253) |
| Net deferred tax liabilities | - | - |
| Movements: | ||
| Opening balance at 1 July | 253 | - |
| Charged/(credited) to the income statement (note 6) | 310 | 253 |
| Closing balance at 30 June | 563 | 253 |
| Deferred tax liabilities to be settled after more than 12 months | - | - |
| Deferred tax liabilities to be settled within 12 months | 563 | 253 |
| 563 | 253 |
18 Contributed equity
| 2013 | 2012 | 2013 | 2012 | |
|---|---|---|---|---|
| Shares | Shares | $'000 | $'000 | |
| (a) Share capital | ||||
| Share Capital | ||||
| Fully paid | 165,900,455 | 39,046,575 | 10,286 | 556 |
| Total contributed equity | 10,286 | 556 |
(b) Movements in ordinary share capital:
| Number of shares | $'000 | ||
|---|---|---|---|
| Date | Details | ||
| 1 October 2011 | Opening Balance | 39,046,575 | 556 |
| 1 July 2012 | Balance | 39,046,575 | 556 |
| 9 April 2013 | Balance before reverse acquisition | 39,046,575 | 556 |
| 10 April 2013 | Elimination of existing legal acquiree shares | (39,046,575) | - |
| 10 April 2013 | Shares of legal acquirer at acquisition date | 13,873,255 | - |
| 10 April 2013 | Issue of shares to SZH vendors (net of listing costs note 25) | 120,000,000 | 3,468 |
| 10 April 2013 | Issue of shares to Broker | 3,326,000 | 832 |
| 10 April 2013 | Capital raising (net of transaction costs) | 26,000,000 | 4,754 |
| 10 April 2013 | Issue of shares | 2,101,200 | 525 |
| 30 June 2013 | Issue of shares as part of the purchase consideration of DMST & Harness MasterPty Limited | 600,000 | 150 |
| 30 June 2013 | Balance | 165,900,455 | 10,286 |
(c) Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the company in proportion to the number of and amounts paid on the shares held.
On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote.
19 Reserves and retained profits
| 2013 | 2012 | |
|---|---|---|
| $'000 | $'000 | |
| (a) Reserves | ||
| Transactions with NCI - Reserve | (502) | - |
| (502) | - |
| Movements: | ||
|---|---|---|
| Transactions with non-controlling interests | ||
| Balance 1 July | - | - |
| Acquisition of additional ownership ( 26%) (see note 26) | (502) | - |
| Balance 30 June | (502) | - |
| (b) Retained profits | ||
| Balance 1 July | (2,261) | (2,307) |
| Net profit (loss) for the year | (6,064) | 3,550 |
| Dividends provided for or paid | - | (3,505) |
| Balance 30 June | (8,324) | (2,261) |
(c) Nature and purpose of reserves
(i) Transactions with non-controlling interests
This reserve is used to record the differences described in note 1(b)(ii) which may arise as a result of transactions with non-controlling interests that do not result in a loss of control.
20 Key management personnel disclosures
(a) Directors
The following persons were directors of SubZero Group Limited during the financial year:
(i) Executive director
Scott Farrell, Managing Director
(ii) Non executive directors
Bruce Arnott Graeme Clayton Glenn Molloy (Interim Chairman)
(b) Other key management personnel
The following persons also had authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly, during the financial year:
| Name | Position | Employer |
|---|---|---|
| Jonathan McTaggart | Divisional Manager Structural | SubZero Holdings Pty Limited |
| Filipe Da Cruz | Divisional Manager Production | SubZero Mining Services Pty Limited |
| David Hales | Divisional Manager Mechanical | SubZero Holdings Pty Limited |
| Steven Gill | Group Commercial Executive | SubZero Holdings Pty Limited |
20 Key management personnel disclosures (continued)
(c) Key management personnel compensation
| 2013 | |
|---|---|
| $ | |
| Short-term employee benefits | 1,129,961 |
| Post-employment benefits | 93,605 |
| Other long-term benefits | 1,051 |
| 1,224,617 |
The Company has taken advantage of the relief provided by Corporations Regulation 2M.6.04 and has transferred the detailed remuneration disclosures to the directors' report. The relevant information can be found in sections (a) to (d) of the remuneration report on pages 19 to 21.
(iii) Share holdings
The number of shares in the Company held during the financial year by each director of SubZero Group Limited and other key management personnel of the Group, including their personally related entities, are set out below.
| 2013Name | Balance at the start ofthe year | Other changes duringthe year | Balance at the end ofthe year |
|---|---|---|---|
| Directors of SubZero Group Limited | |||
| Glenn Molloy | - | 6,960,144 | 6,960,144 |
| Scott Farrell, Managing Director | - | 54,751,200 | 54,751,200 |
| Bruce Arnott | - | 200,000 | 200,000 |
| Graeme Clayton | - | 1,244,525 | 1,244,525 |
| Other key management personnel of the Group | |||
| Jonathan McTaggart | - | 8,158,332 | 8,158,332 |
| Filipe Da Cruz | - | 4,681,824 | 4,681,824 |
| David Hales | - | - | - |
| Steven Gill | - | - | - |
21 Remuneration of auditors
During the year the following fees were paid or payable for services provided by the auditor of the Parent Entity and its related practices:
| 2013 | 2012 | |
|---|---|---|
| $ | $ | |
| (a) PwC Australia | ||
| (i) Audit and other assurance services | ||
| Audit of financial statements | 161,862 | 138,252 |
| Total remuneration for audit and other assurance services | 161,862 | 138,252 |
| (ii) Other services | ||
| Accounting services | 15,495 | - |
| Agreed upon procedures | - | 10,000 |
| Non statutory review | 15,000 | - |
| Total remuneration for other services | 30,495 | 10,000 |
| Total remuneration of PwC Australia | 192,357 | 148,252 |
It is the Group's policy to employ PricewaterhouseCoopers on assignments additional to their statutory audit duties where PricewaterhouseCoopers's expertise and experience with the Group are important. These assignments are principally tax or accounting advice, or where PricewaterhouseCoopers is awarded assignments on a competitive basis. It is the Group's policy to seek competitive tenders for all major consulting projects.
22 Contingent liabilities
(a) Contingent Liabilities
The Parent Entity and Group had contingent liabilities at 30 June 2013 and 2012 in respect of:
(i) Guarantees and letters of credit
| 2013 | 2012 | |
|---|---|---|
| $'000 | $'000 | |
| Bank guarantees for contract performance | 382 | - |
| Total estimated contingent liabilities | 382 | - |
(ii) Claims
The SubZero Group has been involved from time to time in various claims and lawsuits incidental to the ordinary course of business, including damages and commercial disputes relating to its services and/or products. The Group has disclaimed liability and will defend any action flowing from specific claims. It is not practical to estimate the potential effect of these claims but legal advice obtained indicates that any liability that may arise in the unlikely event these claims are successful will not be significant.
No material losses are anticipated in respect of any of the above contingent liabilities.
23 Commitments
(a) Lease commitments: group as lessee
(i) Non-cancellable operating leases
The Group leases various offices and workshops under non-cancellable operating leases expiring within one to fifteen years. The leases have varying terms, escalation clauses and renewal rights. On renewal, the terms of the leases are renegotiated.
Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows:
| Within one year | 3,757 | 1,023 |
|---|---|---|
| Later than one year but not later than five years | 11,315 | 11,177 |
| Later than five years | 16,702 | 20,598 |
| 31,774 | 32,797 |
(ii) Hire Purchase Liabilities
The Group acquired various items of plant and equipment and motor vehicles with a carrying amount of $1,284,009 (2012: $3,080,217) under hire purchase expiring within one to five years.
| 2013 | 2012 | |
|---|---|---|
| $'000 | $'000 | |
| Commitments in relation to hire purchase are payable as follows: | ||
| Within one year | 6,313 | 7,002 |
| Later than one year but not later than five years | 7,384 | 13,538 |
| Minimum lease payments | 13,697 | 20,540 |
| Future finance charges | (1,221) | (3,777) |
| Recognised as a liability | 12,476 | 16,763 |
| Lease incentives on non cancellable operating leases included in lease liabilities | - | - |
| Total lease liabilities | 12,476 | 16,763 |
| Representing lease liabilities: | ||
| Current (note 16) | 5,534 | 4,288 |
| Non current (note 16) | 6,942 | 12,476 |
| 12,476 | 16,763 |
The weighted average interest rate implicit in the leases is 8.85% (2012: 9.05%).
24 Related party transactions
(a) Parent Entities
The ultimate Parent Entity is SubZero Group Limited.
(b) Subsidiaries
Interests in subsidiaries are set out below:
| Country ofIncorporation | Class of sharesEquity Holding* | |||
|---|---|---|---|---|
| 2013 | 2012 | |||
| SubZero Holdings Pty Limited | Australia | Ordinary | 100% | 100% |
| DPS Newco Pty Ltd | Australia | Ordinary | 100% | 100% |
| Line Boring Unit Trust | Australia | Ordinary | 100% | 100% |
| Mining Services Unit Trust | Australia | Ordinary | 100% | 100% |
| Bro Built Unit Trust | Australia | Ordinary | 100% | 100% |
| SF Auto Australia Pty Limited | Australia | Ordinary | 100% | 100% |
| Harness Master Wiring Systems (NSW) Pty Limited | Australia | Ordinary | 100% | 74% |
| DMST Pty Limited | Australia | Ordinary | 100% | 74% |
| Hydraulic Isolator & Safety Technology Pty Limited | Australia | Ordinary | 100% | 74% |
* The proportion of ownership interest is equal to the proportion of voting power held.
(c) Key management personnel
Disclosures relating to key management personnel are set out in note 20.
(d) Transactions with related parties
The following transactions occurred with related parties:
| 2013 | 2012 | |
|---|---|---|
| $'000 | $'000 | |
| Sale of goods and services | ||
| Provision of trade labour services and material to other related parties | 3,123 | 262 |
| Purchases of services | ||
| Purchases of trade labour services from other related parties | 18,359 | 13,252 |
| Purchases of professional services from other realted parties | 1,146 | 818 |
| Hire of property, plant and equipment | ||
| Rental of commercial property and motor vehicles from other related parties | 895 | 540 |
| Other transactions | ||
| Remuneration paid to directors of the ultimate Australian Parent Entity | 81 | - |
(e) Outstanding balances arising from sales/purchases of goods and services
The following balances are outstanding at the reporting date in relation to transactions with related parties:
| 2013 | 2012 | |
|---|---|---|
| $'000 | $'000 | |
| Current payables (purchases of goods) | 32 | 3,874 |
There is no allowance account for impaired receivables in relation to any outstanding balances, and no expense has been recognised in respect of impaired receivables due from related parties.
(d) Terms and conditions
All other transactions were made on normal commercial terms and conditions and at market rates, except that there are no fixed terms for the repayment of loans between the parties. Outstanding balances are unsecured with no fixed term for repayment.
25 Reverse Acquisition
(a) Acquisition of SubZero Holdings Pty Limited by SVC Group Limited
On 10th April 2013, SVC Group Limited (a non-operating public shell corporation) acquired 100% of the voting shares of SubZero Holdings Pty Limited (a private operating entity), a mining services company.
The purchase was satisfied by the issue of 120,000,000 shares with a fair value of $0.25 each to the vendors of SubZero Holdings Pty Limited. The acquisition of SubZero Holdings Pty Limited was not considered a business combination (reverse acquisitions) because SVC Limited (the accounting acquiree) does not meet the definition of a business under AASB 3 Business Combinations. Instead, this transaction was considered to be a capital transaction of SVC Limited (the legal acquirer) and is equivalent to the issuance of shares by SubZero Holdings Pty Limited for the net assets of SVC Group Limited, accompanied by a recapitalisation of the new combined entity.
Although this is not a business combination under AASB 3, the accounting result is similar to reverse acquisition accounting since the previous shareholders of SubZero Holdings Pty Limited, through their newly acquired SVC Limited's shares, control the new combined entity. As a consequence, the reverse acquisition accounting principles were applied, but they did not result in the recognition of goodwill as SVC Limited (the accounting acquiree) is not a business. Instead the deemed fair value of the interest in SubZero Holdings Pty Limited issued to existing SVC Group Limited shareholders to effect the combination (the consideration for the acquisition of the public shell company) was recognised as an expense in the income statement in accordance with the requirements of AASB 2 Share-based payments.
As the motive of this transaction was for SubZero Holdings Pty Limited to obtain the listing status of SVC Group Limited, this expense in effect represents a cost of listing for the continuing entity and has therefore been presented as such on the face of the statement of comprehensive income.
| Purchase consideration | 2013 |
|---|---|
| $'000 | |
| Deemed fair value of shares issued ($) | 3,468 |
| Total purchase consideration ($) | 3,468 |
| There were no assets and liability recognised as a result of the acquisition. | |
| Cost of listing | 3,468 |
26 Transactions with non-controlling interests
(a) Transactions with non-controlling interests
On 30 June 2013, SubZero Holdings Pty Limited acquired the remaining 26% of the issued shares of Harness Master Wiring Systems (NSW) Pty Limited and DMST Pty Ltd that it did not already own for a purchase consideration of $655,473. The carrying amount of the non-controlling interests in Harness Master Wiring Systems (NSW) Pty Limited and DMST Pty Ltd on the date of acquisition was $153,552. The group recognised a decrease in noncontrolling interests of $153,552 and a decrease in equity attributable to owners of the parent of $501,921.
| 2013 | 2012 | |
|---|---|---|
| $'000 | $'000 | |
| Carrying amount of non-controlling interests acquired | 154 | - |
| Consideration paid to non-controlling interests | 655 | - |
| Excess of consideration paid recognised in the transactions with non-controlling interests reserve within equity | 502 | - |
27 Reconciliation of profit after income tax to net cash inflow from operating activities
| 2013 | 2012 | |
|---|---|---|
| $'000 | $'000 | |
| Profit for the year | (6,064) | 3,704 |
| Cost of listing | 3,468 | - |
| Depreciation and amortisation | 4,207 | 3,302 |
| Bad Debts Expense | 21 | 85 |
| Net (gain) loss on sale of non-current assets | 7 | 19 |
| (Increase) / decrease in trade debtors | 1,513 | (5,295) |
| (Increase) / decrease in inventories | (1,292) | 406 |
| (Increase) / decrease in deferred tax assets | 224 | - |
| Increase / (decrease) in trade creditors | 2,660 | 1,584 |
| Increase / (decrease) in provision for income taxes payable | 229 | - |
| Increase / (decrease) in provision for deferred income tax | - | - |
| Increase / (decrease) in other provisions | 116 | 155 |
| Net cash inflow from operating activities | 5,089 | 3,960 |
28 Non cash investing and financing activities
| 2013 | 2012 | |
|---|---|---|
| $'000 | $'000 | |
| Acquisition of plant and equipment by means of hire purchase | 1,284 | 3,080 |
| 1,284 | 3,080 |
29 Earnings per share
| 2013 | 2012 | |
|---|---|---|
| Cents | Cents | |
| (a) Basic earnings per share | ||
| Profit from continuing operations attributable to the ordinary equity holders of the company | -3.9 | 2.3 |
| Profit attributable to the ordinary equity holders of the company | -3.9 | 2.3 |
| (b) Diluted earnings per share | ||
| Profit from continuing operations attributable to the ordinary equity holders of the company | -3.9 | 2.3 |
| Profit attributable to the ordinary equity holders of the company | -3.9 | 2.3 |
| (c) Reconciliations of earnings used in calculating earnings per share | ||
| 2013 | 2012 | |
| $'000 | $'000 | |
| Basic earnings per share | ||
| Profit from continuing operations | (6,064) | 3,704 |
| Profit from continuing operations attributable to non-controlling interests | - | (154) |
| Profit from continuing operations attributable to the ordinary equity holders of the company used in calculating basicearnings per share | (6,064) | 3,550 |
| Profit attributable to the ordinary equity holders of the company used in calculating basic earnings per share | (6,064) | 3,550 |
| Diluted earnings per share | ||
| Profit attributable to the ordinary equity holders of the company used in calculating basic earnings per share | (6,064) | 3,550 |
| Profit attributable to the ordinary equity holders of the company used in calculating diluted earnings per share | (6,064) | 3,550 |
| (d) Weighted average number of shares used as the denominator | ||
| 2013 | 2012 | |
| Number | Number | |
| Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share | 154,895,470 | 151,427,200 |
| Adjustments for calculation of diluted earnings per share: | - | - |
| Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculatingdiluted earnings per share | 154,895,470 | 151,427,200 |
30 Parent entity financial information
(a) Summary financial information
As at, financial year end 30 June 2013 the legal parent company of the Group was SubZero Group Limited.
| Company | |
|---|---|
| 2013 | |
| $'000 | |
| Balance sheet | |
| Current Assets | 6,240 |
| Non Current Assets | 30,000 |
| Current Liabilities | (64) |
| Net assets | 36,176 |
| Shareholders' equity | |
| Issued capital | (83,036) |
| Retained earnings | 46,860 |
| (36,176) | |
| Profit or loss for the year | (60) |
| Total comprehensive income | (60) |
SubZero Group Limited is the legal owner of the Group. However, under the applicable accounting standards, a reverse acquisition by SubZero Holdings Pty Limited is deemed to have occurred on acquisition of SubZero Group Limited. For accounting purposes, SubZero Holdings Pty Limited is the deemed Parent Entity of the Group. Comparative figures have not been provided as the legal parent as at 30 June 2013 was not the legal parent of the Group as at 30 June 2012.
(b) Guarantees entered into by the Parent Entity
The Parent Entity has not entered into any guarantees as at 30 June 2013 or 30 June 2012.
(c) Contingent liabilities of the Parent Entity
The Parent Entity did not have any contingent liabilities as at 30 June 2013 or 30 June 2012.
(d) Contractual commitments for the acquisition of property, plant or equipment
The Parent Entity did not have any contractual commitments for the acquisition of property, plant or equipment at 30 June 2013 or 30 June 2012.
31 Events occurring after balance sheet date
No material events have occurred that affect the operations of the Group from the end of the financial period ended 30 June 2013 to the date of issue of this report.
In the directors' opinion:
- (a) the financial statements and notes set out on pages 25 to 63 are in accordance with the Corporations Act 2001, including
- (i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and
- (ii) giving a true and fair view of the consolidated entity's financial position as at 30 June 2013 and of it's performance for the financial year ended on that date; and
- (b) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable, and
Note 1(a) confirms that the financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board.
The directors have been given the declarations by the chief executive officer and chief financial officer required by section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the directors:
Mr Malcolm Jackman Chairman
Mr Scott Farrell Sydney
Managing Director 30 September 2013
Independent auditor's report to the members of SubZero Group Limited
Report on the financial report
We have audited the accompanying financial report of SubZero Group Limited (the company), which comprises the balance sheet as at 30 June 2013, statement of comprehensive income, statement of changes in equity and statement of cash flows for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors' declaration for SubZero Group Limited (the consolidated entity). The consolidated entity comprises the company and the entities it controlled at year's end or from time to time during the financial year.
Directors' responsibility for the financial report
The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In Note 1(a), the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards.
Auditor's responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the consolidated entity's preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
PricewaterhouseCoopers, ABN 52 780 433 757 PricewaterhouseCoopers Centre, 26 Honeysuckle Drive, PO Box 798, NEWCASTLE NSW 2300 T: +61 2 4925 1100, F: +61 2 4925 1199, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation. Page 65
Auditor's opinion In our opinion:
- (a) the financial report of SubZero including: Group Limited is in accordance with the Corporations Act 2001,
- (i) giving a true and fair view of the consolidated entity's financial position as at 30 June 2013 and of its performance for the year ended on that date; and
- (ii) complying with Australian Interpretations) and the Accounting Standards (including the Australian Accounting Corporations Regulations 2001.
- (b) the financial report and notes also comply with International Financial Reporting Standards as disclosed in Note 1(a). the Financial Reporting
Material Uncertainty Re Regarding Continuation as a Going Concern garding Continuation as
Without qualifying our opin that the company incurred a net loss of date; the company's current currently pursuing refinancing initiatives. 1, indicate the existence of a material uncertainty ability to continue as a going concern and therefore and discharge its liabilities in the normal course of business and at the amounts stated in the financ report. opinion, we draw attention to Note 1 in the financial report, which indicates $6,064,000 during the year ended 30 June 20 ompany's liabilities exceeded its current assets by $10,090 These conditions, along with other matters set forth in Note , that may cast significant doubt about the company's the company may be unable to realise its assets the financial uring 2013 and, as of that 10,090,000 and that the group is ther forth in and discharge liabilities in business and at the stated in financial
Other Matter
The Company was not required to prepare or lodge an audited financial report for the year ende June 2012. The comparative amounts included in this financial . report are therefore unaudited The not required an audited for the ended 30 unaudited.
Report on the Remuneration Report
We have audited the remuneration report included in pages ended 30 June 2013. The directors of the company are responsible for the preparation and presentation of the remuneration report in accordance wit 2001. Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in accordance with Australian Auditing Standards. 19 to 21 of the directors' report for the year with section 300A of the ended are responsible andh Corporations Act
Auditor's opinion
In our opinion, the remuneration report of complies with section 300A of the SubZero Group Limited for the year ended 30 June 2013, Corporations Act 2001. . express an on our ended 30 June Newcastle
PricewaterhouseCoopers
Darren Turner Partner
30 September 2013
SHAREHOLDER INFORMATION AS AT 30 September 2013
| (a) | Number of SZG shareholders: | 637 | |
|---|---|---|---|
| (b) | Total shares issued: | 95,870,759 | Unrestricted Fully Paid Ordinary |
| 35,014,848 | Escrow expiring 10 April 2014 | ||
| 35,014,848 | Escrow expiring 10 April 2015 | ||
| 165,900,455 |
(c) Percentage of total holdings by 20 largest shareholders (unrestricted) 53.6%
(d) Distribution schedule of holdings (unrestricted)
| Number of Ordinary Shares | Number of Holders |
|---|---|
| 1-1,000 | 130 |
| 1,001-5,000 | 92 |
| 5,001-10,000 | 57 |
| 10,001-100,000 | 230 |
| 100,001 and over | 128 |
| less than marketable parcel | 220 |
(e) Voting rights: Every member present personally or by proxy or attorney etc, shall, on a show of hands, have one vote and on a poll shall have one vote for every share held.
TOP 20 HOLDERS OF ORDINARY FULLY PAID SHARES
| Unrestricted | UNITS | % Class | RANK |
|---|---|---|---|
| Subzero Services Pty Limited, | 9,779,409 | 10.20 | 1 |
| PPK Investment Holdings Pty Ltd | 6,562,500 | 6.85 | 2 |
| Corso Management Services Pty Ltd | 3,250,000 | 3.39 | 3 |
| Carlie Sherie Watson | 2,755,324 | 2.87 | 4 |
| Diesel And Plant Services P/L | 2,682,184 | 2.80 | 5 |
| Wavet Fund No 2 Pty Ltd | 2,660,144 | 2.77 | 6 |
| Pebede Pty Ltd | 2,554,364 | 2.66 | 7 |
| Butler-Jones Project Management P/L | 2,490,800 | 2.60 | 8 |
| Francis M & Rosemary A O'Halloran <fm &="" o'halloran<br="" ra="">Superannuation> | 2,489,191 | 2.60 | 9 |
| Evidence Mining Solutions Pty Ltd | 2,240,308 | 2.34 | 10 |
| G & P Investments P/Ltd <g &="" fund="" p="" superannuation="" webb=""> | 1,916,524 | 2.00 | 11 |
| KE & PW Holdings Pty Ltd | 1,673,121 | 1.75 | 12 |
| Onmell Pty Ltd | 1,500,000 | 1.56 | 13 |
| Hapidayz Super Pty Ltd | 1,344,525 | 1.40 | 14 |
| Malcolm Geoffrey Jackman & Ms Kristen Elaine Jackman <jackmanFamily S/Fund A/C></jackman | 1,344,525 | 1.40 | 15 |
| Browning Price Investments Pty Ltd | 1,244,525 | 1.30 | 16 |
| Contemplator Pty Ltd | 1,244,525 | 1.30 | 17 |
| Minoan Corporation Limited | 1,244,525 | 1.30 | 18 |
| Rosevale Enterprises (NSW) Pty Ltd | 1,244,525 | 1.30 | 19 |
| Value Add Property Investments P/L | 1,170,456 | 1.22 | 20 |
| Total | 51,391,475 | 53.60 |
| Escrow Expiring 10 April 2014 | |||
|---|---|---|---|
| UNITS | % Class | RANK | |
| Subzero Services Pty Limited, | 19,558,818 | 55.86 | 1 |
| Butler-Jones Projectmanagement P/L < McTaggart Family Trust> | 3,920,784 | 11.2 | 2 |
| Carlie Sherie Watson | 2,400,000 | 6.85 | 3 |
| Pebede Pty Ltd | 2,340,912 | 6.69 | 4 |
| Turbot Investments Pty Limited | 2,340,912 | 6.69 | 5 |
| Value Add Property Investments P/L | 2,340,912 | 6.69 | 6 |
| Diesel And Plant Services Pty Ltd | 2,111,760 | 6.03 | 7 |
| SF Auto Australia Pty Ltd | 750 | 0 | 8 |
| Report Total | 35,014,848 | 100 |
| Escrow Expiring 10 April 2015 | |||
|---|---|---|---|
| Name And Address | UNITS | % Class | RANK |
| Subzero Services Pty Limited, | 19,558,818 | 55.86 | 1 |
| Butler-Jones Project Management P/L | 3,920,784 | 11.2 | 2 |
| Carlie Sherie Watson | 2,400,000 | 6.85 | 3 |
| Pebede Pty Ltd | 2,340,912 | 6.69 | 4 |
| Turbot Investments Pty Limited | 2,340,912 | 6.69 | 5 |
| Value Add Property Investments P/L | 2,340,912 | 6.69 | 6 |
| Diesel And Plant Services Pty Ltd | 2,111,760 | 6.03 | 7 |
| SF Auto Australia Pty Ltd | 750 | 0 | 8 |
| Total | 35,014,848 | 100 |
Corporate directory SubZero Group Limited ABN 68 009 161 522
| Directors | Mr Malcolm Jackman (Non-Executive Chairman)Mr Scott Farrell (Managing Director)Mr Bruce Arnott (Non-Executive Director)Mr Graeme Clayton (Non-Executive Director)Mr Glenn Molloy (Non-Executive Director) |
|---|---|
| Company Secretary | Mr Jury Wowk (Joint Co. Secretary)Mr Andrew Cooke (Joint Co. Secretary) |
| Head and Registered Office | SubZero Group LimitedLevel 1, 39-43 Bridge StreetMuswellbrook NSW 2333AustraliaTelephone: +61 (2) 6540 9400Fax:+61 (2) 6540 9444Email: [email protected]Website: www.subzeroservices.com.au |
| Postal Address | SubZero Group LimitedPO Box 561Muswellbrook NSW 2333Australia |
| Auditors | PricewaterhouseCoopers |
26 Honeysuckle Drive Newcastle NSW 2300 Australia Telephone: +61 (2) 4925 1100 Fax: +61 (2) 4925 1199
Share Registry Gould Ralph Pty Limited
Level 42, Suncorp Place 259 George Street Sydney NSW 2000 Australia Telephone: +61 (2) 9032 3000 Fax: +61 (2) 9032 3088
