VECTION TECHNOLOGIES LTD - Annual Report 2019

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ASX RELEASE

Appendix 4E Preliminary Final Report Rule 4.3A

Appendix 4EPreliminary Final Report Rule 4.3A
Name of entity:	Servtech Global Holdings Limited
ABN or equivalent company reference:	93 614 814 041

1. Reporting period

Preliminary report for the financial year ended 30 June 2019 Previous corresponding period is the financial year ended 30 June 2018

2. Results for announcement to the market

				$’000
Revenues from ordinary activities_(item 2.1)_	up	165%	to	1,258
Loss from ordinary activities after tax attributable to members(item 2.2)	up	14%	to	(4,420)
Loss for the period attributable to members (item 2.3)	up	14%	to	(4,420)

Loss from ordinary activities after tax attributable to members(item 2.2) Loss for the period attributable to members (item 2.3)	up 14% up 14%	to (4,420) to (4,420)
Dividends(item 2.4)	Amount per security	Franked amount per security
Interim dividend Final dividend	Nil Nil	Nil Nil
Record date for determining entitlements to the dividend_(item 2.5)_	Not Applicable
Brief explanation of any of the figures reported above necessary to enable the figures to be understood_(item 2.6)_: Refer to item 12.

3. Statement of profit or loss and other comprehensive income

Refer to attached unaudited Preliminary Consolidated Statement of Profit or Loss and Other Comprehensive Income for the year ended 30 June 2019.

4. Statement of financial position

Refer to attached unaudited Preliminary Consolidated Statement of Financial Position as at 30 June 2019.

5. Statement of Cash flows

Refer to attached unaudited Preliminary Consolidated Statement of Cash flows for the year ended 30 June 2019.

6. Statement of changes in equity

Refer to attached unaudited Preliminary Consolidated Statement of Cash flows for the year ended 30 June 2019.

7. Dividends

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Date of payment Total amount of
dividend
Interim dividend – year ended 30 June 2019 N/A N/A
Final dividend – year ended 30 June 2019 N/A N/A
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Amount per security

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Amount per Franked Amount per
security amount per security of
security at % foreign
tax sourced
dividend
Total dividend: Current year N/A N/A N/A
Previous year N/A N/A N/A
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Total dividend on all securities

Total dividend on all securities
	Current period $A'000	Previous corresponding Period -$A'000
Ordinary securities (each class separately)	N/A	N/A
Preference securities (each class separately)	N/A	N/A
Other equity instruments (each class separately)	N/A	N/A
Total	N/A	N/A

8. Details of dividend or distribution reinvestment plans in operation are described below:

N/A

The last date(s) for receipt of election notices for participation in the dividend or distribution reinvestment plan

N/A

9. Net tangible assets per security

Net tangible asset backing per ordinary security

Current period	Previous corresponding period
0.006	($0.008)

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

Name of entities (item 10.1)

Date(s) of gain of control (item 10.2)

Profit (loss) from ordinary activities after tax of the controlled entities for the whole of the previous corresponding period (item 10.3)

Vection Italy SRL 12 April 2019 ~AU$140,000 Profit (FY18)

Loss of control of entities

Name of entities (item 10.4)

Date(s) of loss of control (item 10.5)

Contribution to consolidated profit (loss) from ordinary activities after tax by the controlled entities to the date(s) in the current period when control was lost (item 10.6).

Profit (loss) from ordinary activities after tax of the controlled entities for the whole of the previous corresponding period (item 10.7)

N/A N/A N/A N/A

11. Details of associates and joint venture entities

Name of associate or joint venture entity (item % Securities held (item 11.2) 11.1)

N/A N/A

Aggregate share of profits (losses) of associates and joint venture entities (item 11.3)

Group’s share of associates’ and joint venture entities’: Profit (loss) from ordinary activities before tax Income tax on ordinary activities Net profit (loss) from ordinary activities after tax Adjustments Share of net profit (loss) of associates and JV entities	2019 $ 2018 $
	N/A N/A
	N/A N/A

	N/A N/A

12. Significant information relating to the entity’s financial performance and financial position.

Overview

ServTech Global Holdings Limited ( ServTech or the Company ) (ASX: SVT), a multinational software company that creates Virtual Reality (VR) & Augmented Reality (AR) solutions reports the following for the Financial Year ended 30 June 2019:

Successful completion of the acquisition of established, revenue generating business “Vection”;
Establishment of European distribution network anticipating the global launch of FrameS, with access to over 6,700 potential clients in targeted industries;
Vection executed an agreement with global luxury automotive manufacturer Volvo Car Italy;
Completion of a $2M placement to sophisticated and professional investors;
Implementation of change management initiatives for the integration of Vection; and
Identification and analysis of value accretive opportunities across its portfolio of virtual reality and augmented reality software solutions.

Vection Acquisition

On 12 April 2019, the Company announced the completion of the acquisition of Vection, a VR & AR software company with a portfolio of world-renowned clients, including Ferretti (yacht building), Lamborghini (luxury vehicles), Maserati (luxury vehicles) and many others.

Volvo Car Italy Agreement

Vection signed an agreement with Volvo Car Italy (Volvo), with the luxury car manufacturer set to adopt Vection’s VR and AR technology for marketing, automotive value chain, training and sales (ASX: 6 May 2019).

Vection developed an AR vehicle demonstration hardware and software solution for use in Volvo car dealerships. This engagement will result in revenue of up $430,000 to Vection (ASX: 16 July 2019).

FrameS Global Launch Strategy - Distribution Agreements

Based on Vection’s VR technology, FrameS is considered to be the ultimate VR software visualisation, collaboration and prototyping tool, allowing users dislocated world-wide to interact real-time in a multi- user virtual environment on a shared project.

ServTech will soon finalise a global launch strategy for FrameS and integral to this is the appointment of distribution and reselling partners. In this regard, Vection entered into two distribution agreements during the financial year, the first with European Enterprise Resource Planning systems integrator, Four Bytes Group (Four Bytes).

The agreement with Four Bytes gives Vection access to an extended network of approximately 30 resellers across multiple industry segments who have ~2,700 potential clients for Vection (ASX: 4 June 2019).

Vection’s second distribution agreement was Gruppo Infor (Infor). Infor is an established software distribution company which partners with leading software companies including Microsoft and Adobe. Vection and Infor will collaborate to market FrameS to Infor’s existing clients. This agreement provides access to approximately 4,000 clients (ASX: 24 June 2019).

The Company’s ultimate goal is to make FrameS a leading and widely used SaaS platform and the FrameS distribution network will be key to accomplishing this goal.

Another positive development in this regard was Frames receiving a technical compliance certification for from TÜV InterCert Srl. With the TÜV certification, eligible FrameS clients can obtain a fiscal benefit (amortisation of 140% of the FrameS subscription cost) from the Italian government. This effectively increases the value proposition of the FrameS offering with no associated cost to ServTech (ASX: 29 May 2019).

Other Software Development

During year, ServTech announced that it had entered into an IT development contract with Emerge Gaming Solutions Pty Ltd (“Emerge”) to offer strategic insights and manage the development and maintenance of Emerge’s eSports platform, for revenue of circa $500,000 over a 2 years period.

On 10 July 2018, the Company advised that the real estate businesses sold to The Agency Group Australia Limited (“The Agency”) had been successfully migrated to The Agency. As part of the transaction, ServTech continues to deliver support and SaaS services to The Agency. ServTech’s invoiced more than ~$30,000 each month for services to The Agency demonstrating that the offering has expanded beyond the scope of the initial engagement.

On 9 August 2018, ServTech announced that it had successfully completed development of a mobile application for a leading real estate profession in WA - Real Estate Institute of WA (“REIWA”). The successful launch of the REIWA app represents the first phase of development. The Company expects to gain further incremental revenue from this engagement as well as other contracts in the pipeline.

Corporate Overview

Following the approval of Shareholders, the Company completed the acquisition of Vection (ASX: 12 April 2019). In accordance with the terms of the acquisition, the Company issued 292,556,186 fully paid ordinary shares in the capital of the Company and 150,000,000 performance rights. The Company also successfully completed the placement of 111,111,111 new Shares, at an issue price of $0.018 per Share raising $2 million (before costs).

The acquisition also brought the Company an experienced management team in the technology space to ensure continued growth and performance, enhancing the existing ServTech business. The Company announced the appointment of Mr Gianmarco Biagi as Managing Director and Mr Lorenzo Biagi as Executive Director and Chief Sales Officer.

Mr Gianmarco Biagi is an experienced executive, having served as CEO and board member of several Italian and multinational manufacturing corporations. He previously held the position of general manager of Luxury Living Group (a company with annual revenues of ~€140M).

Mr Lorenzo Biagi is an experienced company manager in the private sector, with extensive knowledge in virtual reality technology, sales and cost control management.

Company Financial Overview

The Company posted total revenue of $1,362,124 of which $1,257,617 was derived from ordinary operations. This is up substantially on the previous year (2018: $475,324) when the Company was retargeting its resources to software development and outsourced services. The acquisition of Vection in the last quarter of FY2019 positions the Company well for a strong FY2020.

Explanation of loss

The Company’s loss for the year of $4,420,102 (2018: loss of $3,872,777) is largely attributable to an accounting impairment loss of $3,084,659. This one-off, non-cash expense is recognised as a result of the acquisition of Vection. Management will routinely review its assets for impairment and should the Vection business prove to be very successful, this impairment could be partially or fully reversed. Adding back this item, the Group loss would have been ~$1.4M.

As the Vection business is integrated into the Group and synergies are achieved, both the existing and new business are anticipated to perform strongly.

Cash Position

Cash at the end of the year was ~$796,569. This balance does not reflect that the Company banked late customer receipts shortly after year end totalling ~$250,000.

The Company had significant receivables outstanding at 30 June 2019 from both ServTech’s existing operations and Vection of ~$540,000 not including amounts owed by The Agency.

One-off costs relating to the new business and implementing synergies of were also incurred. This implementation process will reduce Group administration costs going forward.

Outlook

As the Company continues its growth strategy into the European market, and into the design and engineering software market segment with its virtual and augmented reality software offering, it is currently generating opportunities in new jurisdictions and new technologies.

The Company is also looking at launching new software products aimed at targeting the AEC market segment, which is expected to generate significant sales opportunities for the group.

13. The financial information provided in the Appendix 4E is based on the preliminary financial report (attached), which has been prepared in accordance with Australian accounting standards.

14. Commentary on the results for the period.

Refer to explanation item 12.

15. Information on Audit.

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

16. Audit Opinion.

This report is based on accounts that are in the process of being audited, and are unlikely to be subject to dispute or qualification.

SERVTECH GLOBAL HOLDINGS LIMITED ANNUAL REPORT FOR THE YEAR END 30 JUNE 2019

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

Notes	Consolidated	Consolidated
	30 June 19	30 June 18
	$ 1,362,124 155,625 974,922 608,559 32,262 146,249 3,084,659 825,560 36,900 5,864,736 (4,502,612) - (4,502,612) 82,510 (4,420,102) 2,163 2,163 (4,417,939) 0.028 (1.538) (1.510) (1.510)	$
Revenue Revenue 2 Expenses Acquisition Costs Employee benefits expense 3 Consulting and professional fees Finance costs Depreciation and amortisation Impairment 6 Other expenses 3 Share based payments Total Expenditure Loss before income tax expense Income tax expense Loss after income tax attributable to equity holders Discontinued Operations Profit (loss) for the year after income tax from discontinued operations Loss after income tax attributable to equity holders of ServTech Global Holdings Limited Other comprehensive loss Items that may be reclassified to profit or loss Exchange differences on translation of foreign operations Total comprehensive loss for the period Total comprehensive loss attributable to equity holders of ServTech Global Holdings Limited Loss per share for the year attributable to the members of ServTech Global Holdings Ltd Discontinued operations profit (loss) per share for the year (per share) Continuing operations loss per share for the year (per share) Overall basic loss per share Overall diluted loss per share		475,324 - 2,167,591 684,588 196,566 118,734 - 728,969 -
		3,896,448

		(3,421,124)
		-
		(3,421,124)
		(451,653)
		(3,872,777)
		(1,294)
		(1,294)
		(3,874,071)
		(0.002) (0.037) (0.039) (0.039)

SERVTECH GLOBAL HOLDINGS LIMITED ANNUAL REPORT AS AT 30 JUNE 2019 CONSOLIDATED STATEMENT OF FINANCIAL POSITION

SERVTECH GLOBAL HOLDINGS LIMITED ANNUAL REPORT AS AT 30 JUNE 2019 CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Notes	Consolidated
	As at 30 June	As at 30 June
	2019	2018
	$ 796,569 1,473,149 2,269,718 90,075 3,589,171 3,679,246 5,948,964 967,959 261,244 - 1,229,203 705,321	$
Current Assets Cash and cash equivalents 4 Receivables 5 Total Current Assets Non-Current Assets Property, plant & equipment Intangible assets 6 Total Non-Current Assets Total Assets Current Liabilities Trade and other payables Provisions 7 Interest bearing liabilities Total Current Liabilities Non-Current Liabilities Provisions 7 Total Non-Current Liabilities Total Liabilities Net Assets/(Liabilities) Equity Issued capital Reserves Accumulated losses Total Equity/(Deficiency in Equity)		513,754 1,054,876
		1,568,630
		161,306 -
		161,306
		1,729,936
		834,414 177,870 1,140,078
		2,152,362
		138,760
	705,321	138,760
	1,934,524 4,014,440 19,397,897 271,657 (15,655,114) 4,014,440	2,291,122
		(561,186)
		10,404,332 269,494 (11,235,012)
		(561,186)

SERVTECH GLOBAL HOLDINGS LIMITED ANNUAL REPORT FOR THE YEAR END 30 JUNE 2019 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

	Consolidated
	Issued Capital Accumulated Losses Share Based Payments Reserve Foreign Currency Translation Reserve Total
	$ $ $ $
Balance at 1 July 2018	10,404,332 (11,235,012) 272,500 (3,006) (561,186)

Loss for the period	- (4,420,102) - - (4,420,102)
Other comprehensive(loss)/income	- - - 2,163 2,163
Total comprehensive loss for theperiod	- (4,420,102) - 2,163 (4,417,939)

*Transactions with owners in their* *capacity as owners*
Share based payments	36,900 - - - 36,900
Issue of share capital	8,956,665 - - - 8,956,665
Balance at 30 June 2019	19,397,897 (15,655,114) 272,500 (843) 4,014,440
Balance at 1 July 2017 Loss for the period Other comprehensive income Total comprehensive loss for the year *Transactions with owners in their* *capacity as owners* Issue of share capital Transfer of lapsed performance rights Balance at 30 June 2018	10,040,552 (7,691,115) 601,380 (1,712) 2,949,105 - (3,872,777) - - (3,872,777) - - - (1,294) (1,294)
	- (3,872,777) - (1,294) (38,740,71)
	363,780 - - - 363,780 - 328,880 (328,880) -
	10,404,332 (11,235,012) 272,500 (3,006) (561,186)

SERVTECH GLOBAL HOLDINGS LIMITED ANNUAL REPORT FOR THE YEAR END 30 JUNE 2019 CONSOLIDATED STATEMENT OF CASH FLOWS

	Consolidated	Consolidated
	30 June 19	30 June 18
	$ 1,553,983 (2,897,013) - 312 (25,506) (15,646) (1,383,870) - (364,274) - - 245,599 - (118,675) 2,000,000 - (207,050) 4,527 - 1,797,477 294,932 513,754 (12,117) 796,569	$
Cash flows from operating activities Receipts from customers Payments to suppliers and employees Advancement/ (payment) of funds to employees Interest received Interest paid / Finance costs Tax incentives/ (Tax paid) Net cash outflow from operating activities Cash flows from investing activities Purchase of plant and equipment Purchase of subsidiary Proceeds from sale of/ (Payments for) intangible assets - rent roll (Payments)/ refunds of leasing deposits Proceeds (Payments) for disposal of discontinued operations Proceeds from sale of other non-current assets Net cash outflow from investing activities Cash flow from financing activities Proceeds from issues of fully paid shares Proceeds from issues of convertible notes Payment of transaction costs Proceeds from borrowings Prepayment of borrowings Net cash inflow from financing activities Net increase / (decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Effect of movement in exchange rates on cash held Cash and cash equivalents at the end of the financial year		10,873,757 (15,305,478) 55,113 5,467 (63,165) -
		(4,434,306)
		(186,676) - 617,540 44,102 243,000 1,909
		719,875
		387,000 1,000,000 (23,220) - (438,231)
		925,549
		(2,788,882) 3,300,575 2,061
		513,754

NOTE 1: BASIS OF PREPARATION OF THE FINAL REPORT

BASIS OF PREPARATION

This preliminary final report for the year ended 30 June 2019 relates to the consolidated entity consisting of ServTech Global Holdings Limited (“ServTech” or “the Group”) and its controlled entities.

The preliminary final report has been prepared on an accruals basis and a historical cost basis except for certain current and non-current assets and financial instruments which are measured at fair value or where otherwise stated.

Cost is based on the fair value of consideration given in exchange for assets.

This preliminary final report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report should be read in conjunction with the annual financial report of the year ended 30 June 2018 and any public announcements made by ServTech during the year in accordance with the continuous disclosure requirements of the Corporations Act 2001.

The amounts contained in this preliminary final report are presented in Australian dollars, the functional currency of the consolidated entity.

STATEMENT OF COMPLIANCE

The preliminary final report is a general-purpose financial report and has been prepared in accordance with applicable Australian Accounting Standards, other pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations and the Corporations Act 2001. The preliminary final report is also in compliance with ASX listing Rule 4.3A and the disclosure requirements of ASX Appendix 4E. Australian Accounting Standards include Australian equivalents of International Reporting Standards (“AIFRS”).

NOTE 2: REVENUE

The following is an analysis of the Group’s revenue for the year.

REVENUE Software technology development services Outsourced services Interest received R&D Tax refund Other revenue TOTAL REVENUE	30 June 19 30 June 18 $ $
	539,509 253,329 457,409 172,325 21,374 5,456 104,507 - 239,325 44,214
	1,362,124 475,324

NOTE 3: EXPENSES

EMPLOYEE BENEFITS Director Fees Staff Wages & Amenities TOTAL EMPLOYEE BENEFITS	30 June 19 30 June 18 $ $
	248,358 93,811 726,564 2,073,780
	974,922 2,167,591

NOTE 3: EXPENSES (continued)

OTHER EXPENSES Advertising & Marketing expense Rent Administration expense TOTAL CONSULTING AND PROFESSIONAL FEES OTE 4: CASH AND CASH EQUIVALENTS Cash and bank balances RECONCILIATION TO CONSOLIDATED STATEMENT OF CASHFLOWS: Balances as above Bank overdraft BALANCES PER STATEMENT OF CASHFLOWS OTE 5: TRADE AND OTHER RECEIVABLES Trade and other receivables Trade and other receivables from sale of business Amounts receivable from (former) employees Provision for doubtful debts Prepayments	30 June 19 30 June 18 $ $
	116,222 2,613 283,622 4,460 425,716 721,896
	825,560 728,969
	30 June 19 30 June 18 $ $
	796,569 514,759
	796,569 514,759 - -
	796,569 514,759
	30 June 19 30 June 18 $ $
	1,028,212 405,524 514,250 650,000 - 232,594 (84,899) (329,362)
	1,457,563 958,756 15,586 96,120
	1,473,149 1,054,876

NOTE 4: CASH AND CASH EQUIVALENTS

NOTE 5: TRADE AND OTHER RECEIVABLES

NOTE 6: ACQUISITION OF VECTION

On 12 April 2019, the Group completed the acquisition of 100% issued capital and voting rights in Officine 8K SRL renamed Vection Italy SRL (“ Vection ”).

(a) Acquisition Consideration

The consideration for the acquisition comprised the issue to the Vection vendors of:

292.5 million fully paid ordinary shares to the Vection vendors
150 million performance rights to the Vection vendors

Under the principles of AASB 3, the assets and liabilities of Vection are measured at fair value on the date of acquisition.

(b) Goodwill

Goodwill is calculated as the difference between the fair value of consideration transferred less the fair value of the identified net assets of Vection. Details of the transaction are as follows:

NOTE 6: ACQUISITION OF VECTION (continued)

Consideration 292.5 million fully paid ordinary shares to the Vection vendors 150 million performance rights to the Vection vendors Total consideration Fair value of assets and liabilities held at acquisition date: Cash Trade and other receivables Property, plant and equipment Trade and other payables Intellectual property Rights of use intangible asset Other intangible assets (patents and development costs) Intangible assets (subtotal) Fair value of identifiable assets and liabilities assumed Consideration paid Less fair value of identifiable assets and liabilities assumed Less provision of impairment1	Fair Value $
	5,851,124 -
	5,851,124
	56,154 494,018 25,888 (1,398,766) 2,811,417 666,064 111,690
	3,589,171
	2,766,465
	5,851,124 (2,766,465) (3,084,659)
	-

Management conducted an impairment assessment of the intangible assets resulting from the acquisition of Vection. Based on impairment indicators and relevant information such as the Company’s market capitalisation, the above impairment expense was recognised. Management will conduct impairment assessments of intangible assets on a regular basis.

NOTE 7: PROVISIONS

OTE 7: PROVISIONS
Provision for annual leave Provision for onerous lease commitments - Current Other provisions Provision for onerous lease commitments – Non-current	30 June 19 30 June 18 $ $
	- 450 246,085 177,420 15,159 -
	261,244 177,870
	705,321 138,760
	705,321 138,760

NOTE 8: SEGMENT REPORTING

An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity), whose operating results are regularly reviewed by the entity's chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance and for which discrete financial information is available. This includes start-up operations which are yet to earn revenues. Management will also consider other factors in determining operating segments such as the existence of a line manager and the level of segment information presented to the board of directors. During the year the Company only operated in one segment; the provision of custom software solutions, outsourced back office and IT services.

NOTE 9: DISCONTINUED OPERATIONS

In the prior period, the Company announced the sale of its property management and rent roll business. The property rent roll business was conducted through subsidiary Capitol Asset Management Pty Ltd.

In the prior period, the Company announced the completion of binding sales agreements with The Agency Group Australia Limited. The agreements were executed between the Company’s subsidiaries (Sell Lease Property Pty Ltd, Complete Settlements Pty Ltd and Value Finance Pty Ltd) and wholly owned subsidiaries of The Agency. Under the agreements, The Agency’s subsidiaries acquire the assets of each of the Company’s subsidiaries.

Each of these entities: Capitol Asset Management Pty Ltd, Sell Lease Property Pty Ltd, Complete Settlements Pty Ltd and Value Finance Pty Ltd are considered discontinued operations.

NOTE 10: SUBSEQUENT EVENTS

There were no matters or circumstances arising since the end of the reporting period that have significantly affected, or may significantly affect the operations of the Company and the results of those operations or the state of the affairs of the Company in the financial period subsequent to 30 June 2019.