VECTION TECHNOLOGIES LTD — Interim / Quarterly Report 2018

Sep 2, 2018

ASX Release

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Appendix 4E Preliminary Final Report Rule 4.3A

Name of entity:	SERVTECH GLOBAL HOLDINGS LIMITED
ABN or equivalent company reference:	93 614 814 041

1. Reporting period

1. Reporting period
Preliminary report for the financial year ended	30 June 2018
Previous corresponding period is the financial year ended	30 June 2017

2. Results for announcement to the market

				$’000
Revenues from ordinary activities_(item 2.1)*_	up	647%	to	$436,468
Profit (loss) from ordinary activities after tax attributable to members(item 2.2)*	up	34%	to	(982,008)
Net profit for the period attributable to members_(item 2.3)*_	up	34%	to	(982,008)

* Re-presented to exclude those operations classified as discontinued in the reporting period.

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 2018.

4. Statement of financial position

Refer to attached unaudited Preliminary Consolidated Statement of Financial Position as at 30 June 2018.

5. Statement of Cash flows

Refer to attached unaudited Preliminary Consolidated Statement of Cash flows for the year ended 30 June 2018.

6. Statement of changes in equity

Refer to attached unaudited Preliminary Consolidated Statement of Cash flows for the year ended 30 June 2018.

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7. Dividends

7. Dividends
	Date of payment	Total amount of dividend
Interim dividend – year ended 30 June 2018	N/A	N/A
Final dividend – year ended 30 June 2018	N/A	N/A

Amount per security

	Amount per security	Franked amount per security at % tax	Amount per security of foreign sourced dividend
Total dividend: Currentyear	N/A	N/A	N/A
Previousyear	N/A	N/A	N/A

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 N/A dividend or distribution reinvestment plan

9. Net tangible assets per security

Net tangible assets per security
Net tangible asset backing per ordinary security	Current period	Previous corresponding period
	($0.008)	$0.024

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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)

N/A

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

Loss of control of entities

oss 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)_	Although still part of the ServTech Group, the following entities have been reflected as discontinued operations in the accounts of the Company - Capitol Asset Management Pty Ltd and Sell Lease Property Pty Ltd, Settlements Pty Ltd and Value Finance Pty Ltd (together The Agency entities)
	Capitol Asset Management Pty Ltd (15 September 2017) The Agency entities (21 February 2018)
	The discontinued entities posted a loss of $3,391,465 in the current period.
	The discontinued entities posted a loss of $4,562,683 in the current period.

11. Details of associates and joint venture entities

Name of associate or joint venture entity(item 11.1)	% Securities held(item 11.2)
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	2018 $ 2017 $
	N/A N/A

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Net profit (loss) from ordinary activities after tax Adjustments Share of net profit (loss) of associates and JV entities

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

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

Overview For Year Ended 30 June 2018, ServTech Global Holdings Limited (“ServTech” or the ‘Company”) the Company was focused on:

• Completion of a transaction with The Agency Group for the sale of real estate operations for total consideration of $950k payable to ServTech;

• • Successful implementation of a back-office services and technology licensing agreement which formed part of the transaction with The Agency – and expanding the service offering to The Agency;

• Conducting and implementing a whole-of-company review to streamline and consolidate the Company’s operations and structure;

• Identifying significant opportunities across IT development and contact centre support for ServTech to exploit with its IT Development Division and Outsourced Services Division

Completion of Agency Transaction

On 21 February 2018, the Company announced the successful completion of its transaction with The Agency Group Australia Limited (“The Agency”) for The Agency to acquire the assets of each of the Company’s real estate subsidiaries in exchange for consideration of $950,000 payable to ServTech.

Monetising these operations and moving their substantial payroll, real estate licensing and other compliance obligations to The Agency, allows the Company to concentrate on its core offerings of back office support, custom software development and Software as a Service (SaaS) applications.

This transaction with The Agency also provides for a further agreement for ServTech to deliver back-office services, technology licencing and support to The Agency. A focus for ServTech was to expand this service offering and post year end, ServTech updated the market that it is now providing services not only to The Agency's Sell Lease Property brand but also to The Agency’s Mortgage and Finance Solutions and Property Management divisions.

First Significant IT development Contract

On 7 May 2018, ServTech was pleased to advise that its wholly owned development division Technobrave Pty Ltd was awarded a 2-year Services Contract Agreement with Emerge Gaming Solutions Pty Ltd to offer strategic insights and manage the development and maintenance of Emerge’s cutting-edge eSports platform Arcade X.

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The award of this contract followed a successful 2-month trial and highlights the quality and performance of ServTech’s comprehensive IT development service offering.

Revenue

During the year ended 30 June 2018, the Company posted revenue of $436,468 from its continuing operations. With its Agency and Emerge contracts, ServTech has a strong base from which to build a profitable business.

Explanation of loss

During the period, the Company:

• Recognised a write down on property, plant and equipment. These assets no longer generate revenue;

• Recognised an onerous lease provision;

• Made several group personnel redundant.

The Company has moved on from the obligations of maintaining full real estate businesses employing real estate consultants and agents directly, to concentrating on its core offering which is back office support for those same consultants and agents. These efforts resulted in some one-off costs but in the long term will allow ServTech the opportunity to build a sustainable business.

Cash Position

Cash at the end of the year was ~$515,000.

The Company previously announced the successful completion of its transaction with The Agency to acquire the assets of each of the Company’s real estate subsidiaries in exchange for consideration of $950,000 payable to ServTech (ASX: on 21 February 2018). As of the end of the year, $400,000 has been received of the consideration with the balance of $550,000 to be received over 13 monthly instalments.

Outlook

With substantially reduced overheads, most legacy issues resolved and a pipeline of agreements pending, ServTech is well positioned to become cash flow positive in the short term.

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.

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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.

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FOR THE YEAR ENDED 30 JUNE 2018

Notes Revenue Revenue 2 Expenses Employee benefits expense 3 Information technology expense Consulting and professional fees 3 Finance costs Depreciation and amortisation Accounting fees Insurance expenses Other expenses Travel Share based payments Total Expenses Loss before income tax Income tax expense Loss after income tax for the year Discontinued operations 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 income Total comprehensive loss for the year Loss attributable to owners of the Company Total comprehensive loss attributable to owners of the Company Discontinued operations Loss per share for the year (cents per share) Continuing operations Loss per share for the year (cents per share) Overall Loss per share for the year attributable to the members of ServTech Global Holdings Limited (cents per share)	2018 2017 $ $* 436,468 58,405 (1,195,257) (583,592) - (28,711) (140,571) (92,685) - (2,195) - (7,630) - - (28,648) (15,450) - (31,297) - (45,590) - (662,080)
	(1,364,476) (1,469,230)
	(928,008) (1,410,825) - -
	(928,008) (1,410,825) (3,391,465) (4,562,683)
	(4,319,473) (5,973,508) (9,860) (1,712)
	(4,329,333) (5,975,220)
	(4,329,333) (5,975,220)
	(4,329,333) (5,975,220)
	(0.031) (0.090)
	(0.008) (0.028)
	(0.039) (0.118)

*FY2017 re-presented to exclude those operations classified as discontinued in the reporting period.

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AS AT 30 JUNE 2018

Notes Current Assets Cash and bank balances 4 Trade and other receivables Total Current Assets Non-current Assets Receivables Plant and equipment Intangible assets Total Non-current Assets Total Assets Current Liabilities Trade and other payables Employee provisions Borrowings 5 Total Current Liabilities Non-current Liabilities Trade and other payables Provisions Total Non-current Liabilities Total Liabilities Net Assets Equity Issued capital Reserves Accumulated losses Capital and reserves attributable to owners of the Company Total equity	2018 2017 $ $ 514,759 3,300,575 544,511 642,785
	1,059,270 3,943,360
	322,312 561,275 94,783 454,909 - 430,989
	417,095 1,447,173
	1,476,365 5,390,533
	1,138,643 1,213,918 449 143,504 1,033,000 438,231
	2,172,092 1,813,653
	320,721 555,078 - 72,697
	320,721 627,775
	2,492,813 2,441,428
	(1,016,448) 2,949,105
	10,404,332 10,040,552 589,808 599,668 (12,010,588) (7,691,115)
	(1,016,448) 2,949,105
	(1,016,448) 2,949,105

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FOR THE YEAR ENDED 30 JUNE 2018

Balance at 1 July 2017 Loss for the year Other comprehensive loss Total comprehensive loss for the year Transactions with owners in their capacity as owners Contribution of equity, net of transaction costs Share based payments Balance at 30 June 2018 Balance at 1 July 2016 Loss for the year Other Comprehensive income Total comprehensive loss for the year Transactions with owners in their capacity as owners Contribution of equity, net of transaction costs Share based payments Balance at 30 June 2017		Attributable to Owners of the Company Issued Capital Accumulated Losses Share-based Payments Reserve Foreign Currency Translation Reserve Total $ $ $ $ $ 10,040,552 (7,691,115) 601,380 (1,712) 2,949,105 - (4,319,473) - - (4,319,473) - - - (9,860) (9,860) - (4,319,473) - (9,860) (4,329,333) 363,780 - - - 363,780 - - - - - 10,404,332 (12,010,588) 601,380 (11,572) (1,016,448) 1,000 (1,717,607) - - (1,716,607) - (5,973,508) - - (5,973,508) - (1,712) (1,712)
		- (5,973,508) - (1,712) (5,975,220) 9,706,352 - - - 9,706,352 333,200 601,380 - 934,580
		10,040,552 (7,691,115) 601,380 (1,712) 2,949,105

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FOR THE YEAR ENDED 30 JUNE 2018

Notes Cash flows from operating activities Receipts from customers Payments to suppliers and employees Finance costs Repayment / (Advancement) of funds to employees Interest received Net cash used in operating activities Cash flows from investing activities Payments for plant and equipment Proceeds (Payments) for intangible assets – rent roll Proceeds from sale of other non-current assets Net cash used in investing activities Cash flows from financing activities Proceeds from issue of shares Share issue transaction costs Net cash acquired in common controlled acquisition Proceeds from convertible loans Proceeds from borrowings Proceeds from shareholder loans Repayment of borrowings Net cash provided by financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the year Effects of exchange rate changes Cash and cash equivalents at the end of the year 4	2018 2017 $ $ 10,945,647 11,310,170 (15,401,756) (14,481,433) (63,165) (73,032) 43,113 (12,626) 5,467 8,709
	(4,470,694) (3,248,212)
	(206,736) (400,989) 567,359 (460,567) 407,500 (105,583)
	768,123 (967,139)
	387,000 6,001,000 (23,220) (590,388) - 52,355 1,000,000 - - 1,638,231 - 49,620 (438,231) -
	925,549 7,150,818
	3,300,575 364,666 (2,777,022) 2,935,467 (8,794) 442
	514,759 3,300,575

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NOTE 1: BASIS OF PREPARATION OF THE FINAL REPORT

BASIS OF PREPARATION

This preliminary final report for the year ended 30 June 2018 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 2016 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 - Revenue from sale of services - Other income - Interest income TOTAL REVENUE	2018 2017 $ $
	424,827 41,879 6,175 7,865 5,466 8,661
	436,468 58,405

NOTE 3: EXPENSES

EMPLOYEE BENEFITS - Employee wages and salaries (Outsourced services) - Employee wages and salaries (Development services) - Employee wages and salaries (Executive and administration) TOTAL EMPLOYEE BENEFITS	2018 2017 $ $
	298,329 136,431 262,158 35,978 634,770 411,183
	1,195,257 583,592

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NOTE 3: EXPENSES (continued)

CONSULTING AND PROFESSIONAL FEES

• Expenses for consultants

TOTAL CONSULTING AND PROFESSIONAL FEES

140,571	92,685
140,571	92,685

NOTE 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	2018 2017 $ $
	514,759 3,300,575
	514,759 3,300,575 - -
	514,759 3,300,575

NOTE 5: BORROWINGS

Convertible notes Finance Facility	2018 2017 $ $
	1,033,000 - - 438,321
	1,033,000 438,321

Terms of the borrowings

Convertible Note Agreement – During the period the Group entered into a binding convertible note agreement with Servnote Holding Pty Ltd (Servnote), a private consortium, to initially invest $500,000 cash into the Company. Servnote had the right to increase the investment by an additional $500,000 for a total amount of $1 million. This right was exercised on 27 March 2018. $1,000,000 has been received by the Group under this facility. An additional amount of $33,000 has been recognised to account for the costs of the facility based on its terms. The key terms of the Convertible Note Agreement are:

• Conversion price the lower of $0.02 and 80% of the volume weighted average market price for shares in 5 days prior to conversion

• 6 month maturity date (extended by agreement)

• Conversion of the convertible note into shares is subject to shareholder approval

• 10% p.a. interest on value of funds advanced (which may be converted into shares at the noteholders election)

Subsequent to period end on 10 August 2018, the Company sought and obtained shareholder approval for conversion of the Note Agreement proceeds into shares. As a result, this debt was extinguished in full with the issuance of 81,300,813 fully paid ordinary shares.

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NOTE 6: 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. With the Company’s shift in focus, only one segment is operating, being the provision of outsourced back office and IT services.

NOTE 7: DISCONTINUED OPERATIONS

On 15 September 2017, 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. Following adjustments from the sale transition process, the rent roll was sold for consideration of ~$660,000 of which ~$87,000 was yet to be received at year end.

On 21 February 2018, 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. Consideration for these agreements was $950,000 of which $550,000 was yet to be received at year end.

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.

The following is an analysis of the results of the discontinued operations for the financial year.

Discontinued operations Revenue Employee benefits expense Consulting and professional fees Financing costs Depreciation and amortisation Occupancy expenses Other administrative expenses Loss for the year from discontinued operations	2018 2017 $ $
	9,853,617 10,605,710 (9,986,239) (10,233,386) (611,813) (873,939) (124,565) (1,366,422) (224,511) (100,953) (817,772) (465,819) (1,480,182) (2,127,874)
	(3,391,465) (4,562,683)

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NOTE 8: SUBSEQUENT EVENTS

On 10 August 2018, the Company obtained shareholder approval to issue 81,300,813 fully paid ordinary shares in full satisfaction of the debt resulting from the Convertible Note Agreement under which the Company obtained $1,000,000 of funding.

Apart from the above, 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 2018.

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