SMW : Appendix 1 to Preliminary Full Year Results to 30 June 2021

Appendix 1 release

30 August 2021

SMW Group Limited - Preliminary Full Year Results to 30 June 2021

Preliminary announcement for the year ended 30 June 2021

Preliminary unaudited full year report on consolidated results of SMW Group in accordance with Appendix 2 of the NZX Listing Rules.

This report has been prepared in a manner which complies with generally accepted accounting practice and gives a true and fair view of the matters to which the report relates and is based on unaudited financial statements.

The accounting policies used in the preparation of these financial statements are consistent with those used in the interim financial statements for the six months ended 31 December 2020.

SMW Group Limited completed its acquisition of the Australian company All Industrial Network ('AIN') on 8 July 2020. Immediately prior to this transaction, AIN acquired Alertvale Pty Ltd ('Alertvale') and BAE Engineering & Solar Pty Ltd ('BAE'), both Australian mining services businesses.

The statutory financial results are set out in the table below. The SMW Group incurred a net loss after income tax of $5.5 million as a result of the adverse market conditions associated with the COVID-19 pandemic and the unfavourable economic impacts on the coal sector within Australia. The results for the year ended 30 June 2021 are prepared in accordance with New Zealand equivalents to International Financial Reporting Standards (NZ IFRS) and also include several one-off costs associated with the integration and re-branding of the two operating business units. A summary of the underlying financial results is included below to facilitate an understanding of the underlying operational performance of the SMW Group and promote comparison with the wider industry.

Financial Summary	Year ended	Year ended
	30-Jun-21	30-Jun-21
	$'000	$'000
	Statutory	Underlying1
Revenue	52,003	52,003
EBITDA2	(673)	3,776
NPATA3	(5,245)	(796)
NPAT	(5,460)	(1,011)

1. Underlying profit reflects the statutory profit adjusted for the one off costs associated with the transaction that occurred on 8 July 2020.
2. EBITDA refers to earnings before interest, tax, depreciation and amortisation and is a non-IFRS measure
3. NPATA refers to net profit after tax adjusted to exclude the amortisation of intangible assets and is a non-IFRS measure

A reconciliation between underlying net profit after tax and statutory net profit after tax is detailed below:

	Year ended
	30-Jun-21
	$'000
Statutory NPAT	(5,460)
Share-base payment expense1	1,033
Listing costs now deemed issue of share capital on acquisition2	964
Transaction costs3	2,046
One-off non recurrring integration costs4	406
Underlying NPAT	(1,011)

1. This expense relates to the shares issued to the Company directors and management including the tax obligations associated with the isse of these shares
2. Lisitng costs now deemed issue of share capital on acquisition represent the cash payment to made to the pre-transaction owners and the shares issued to pre-transaction shareholders
3. Transaction costs relate to advisor fees incurred as part of the transaction
4. The costs associated with the rebranding and integration activites assoicated with the the operating business units

Note: the normalisation adjustments between Statutory and Underlying NPAT total $4.4 million. This total adjustment would equate to the difference between Statutory and Underlying EBITDA and NPATA

In accordance with NZ IFRS, SMW Group's acquisition of AIN, and AIN's acquisitions of Alertvale and BAE, both constitute reverse acquisitions. For accounting purposes Alertvale is deemed to be the acquiring entity of both reverse acquisitions and the financial statements presented are a continuation of Alertvale including comparative financial information.

Relevant matters in relation to the reverse acquisitions are as follows:

• Given the reverse acquisition nature of the transaction for accounting purposes, SMW Group has applied the continuation method of accounting which results in all comparative period information relating to Alertvale.
• Under continuation accounting, SMW Group is effectively presenting its financial results on an historical cost basis, whereby the assets and liabilities of the deemed acquirer (Alertvale) are recognised at their previous carrying amounts. No adjustments are made to reflect fair values and no new assets (including goodwill) and liabilities of the deemed acquirer are recognised at the date of the acquisition. The intangible assets recognised on acquisition consist of goodwill and customer contracts and relationships solely attributed to BAE.
• SMW Group's acquisition of AIN does not meet the definition of a business combination under
  NZ IFRS 3. It has been recognised as a share-based payment arrangement under NZ IFRS 2. Consequently, the shares issued to SMW Group's pre-transaction Shareholders are treated as share-based payments and expensed on the date of the reverse acquisition.
• The cash payment to SMW Group's pre-transaction Shareholders and the transaction costs associated with the reverse acquisition are also expensed on the date of the acquisition under NZ IFRS 32 as they are not transaction costs directly attributable to the issuance of new equity.

Given that the comparative financial information relates to Alertvale as the deemed acquirer, no discussion on the comparison between the two reporting periods has been included as the comparative information, albeit prepared in accordance with IFRS, is not like for like in nature.

No dividends paid, recommended or declared during the period 30 June 2021.

The Company has a formally constituted Audit & Risk Committee of the Board of Directors.

Consolidated statement of profit or loss and other comprehensive income - unaudited

	2021		2020
	$'000		$'000
Revenue	52,003		48,488
Other income	4,059		2,413
Expenses
Changes in inventories	1,358		(1,327)
Raw materials and consumables used	(12,259)		(9,413)
Administration expenses	(5,307)		(3,689)
Freight & cartage	(578)		(430)
Employee benefits expense	(31,262)		(24,880)
Motor vehicle expenses	(1,210)		(1,060)
Depreciation and amortisation expense	(2,661)		(1,803)
Plant & equipment hire	(459)		(425)
Travel & accommodation	(460)		(602)
Other expenses	(6,263)		(1,332)
Impairment expenses	(139)		(210)
Loss on disposal of property, plant & equipment	(156)		(7)
Finance costs at amortised cost	(1,360)		(952)
Profit/(loss) before income tax expense	(4,694)		4,771
Income tax expense	(766)		(1,333)
Profit/(loss) after income tax expense for the year attributable to the
owners of SMW Group Limited	(5,460)		3,438
Other comprehensive (loss) / income
Items that will not be reclassified subsequently to profit or loss
Loss on the revaluation of equity instruments at fair value through other
comprehensive income, net of tax	(22)		-
Other comprehensive (loss) / income for the year, net of tax	(22)		-
Total comprehensive (loss) / income for the year attributable to the
owners of SMW Group Limited	(5,482)		3,438

	Cents	Cents
Basic earnings per share	(10.29) 3,370,588.24
Diluted earnings per share	(10.29) 3,370,588.24

Consolidated Statement of Financial Position - unaudited
		2021				2020
Assets	$'000				$'000
Current assets
Cash and cash equivalents	240				628
Trade and other receivables	10,745				7,544
Inventories	527				208
Contract assets	735				1,177
Other assets	545				584
Total current assets	12,792				10,141
Non-current assets
Receivables	22				25
Financial assets at fair value through other comprehensive income	-				149
Property, plant and equipment	5,976				4,789
Right-of-use assets	9,219				7,978
Intangibles	8,512				215
Deferred tax	3,314				2,729
Total non-current assets	27,043				15,885
Total assets		39,835				26,026
Liabilities
Current liabilities
Trade and other payables	11,886			2,805
Borrowings	5,178			1,833
Lease liabilities	3,120			1,479
Income tax	1,886			1,581
Employee benefits	1,397			1,103
Contract liabilities		245				788
Total current liabilities	23,712			9,589
Non-current liabilities
Payables	5,878			-
Borrowings	870			-
Lease liabilities	10,589			9,755
Deferred tax	3,217			2,214
Employee benefits		330				237
Total non-current liabilities		20,884				12,206
Total liabilities		44,596				21,795
Net assets/(liabilities)	(4,761)	4,231
Equity
Issued capital	6,391				-
Reserves	(969)			22
Retained profits/(accumulated losses)		(10,183)				4,209
Total equity/(deficiency)		(4,761)				4,231
				Cents		Cents
Net tangible assets per share	(0.49)				(67,058.82)

Statement of Changes in Equity - unaudited
		Issued						Retained
		capital			Reserves			profits			Total equity
		$'000	$'000	$'000	$'000
Balance at 1 July 2019	-	22	1,195	1,217
Profit after income tax expense for the year	-	-	3,438	3,438
Other comprehensive (loss) / income for the
year, net of tax	-	-	-	-
Total comprehensive (loss) / income for the
year	-	-	3,438	3,438
Transactions with owners in their capacity as
owners:
Dividends paid (note 30)	-		-		(424)		(424)
Balance at 30 June 2020	-	22	4,209	4,231
		Issued						Retained			Total
											deficiency in
		capital			Reserves			profits			equity
		$'000	$'000	$'000	$'000
Balance at 1 July 2020	-	22	4,209	4,231
Loss after income tax expense for the year	-	-	(5,460)	(5,460)
Other comprehensive (loss) / income for the
year, net of tax	-	(22)	-	(22)
Total comprehensive (loss) / income for the
year	-	(22)	(5,460)	(5,482)
Transactions with owners in their capacity as
owners:
Share-based payments	-	549	-	549
Deemed issue of share capital on acquisition
(note 28)	391	-	-	391
Issue of ordinary shares as consideration for
business combinations, net of transaction costs
(note 28)	6,000	-	-	6,000
Reserve arising from business combinations
under common control (note 29)	-	(1,519)	-	(1,519)
Distribution to owners of Alertvale Pty Ltd as
part of a reverse listing	-	-	(8,593)	(8,593)
Dividends paid (note 30)	-		-		(338)		(338)
Balance at 30 June 2021	6,391	(970)	(10,182)	(4,761)