SMW : 2021 Annual Report

2021 Annual Report

Year Ending 30 June 2021

2 SMW GROUP

CONTENTS

CHAIR'S REPORT ..........................................................................	4
CEO'S REPORT..............................................................................	8
DIRECTORS' PROFILES.................................................................	10
FINANCIAL STATEMENTS...............................................................	12
Consolidated statement of profit or loss and other
comprehensive income.................................................................	14
Consolidated statement of financial position.....................................	15
Consolidated statement of changes in equity....................................	16
Consolidated statement of cash flows..............................................	17
Notes to the consolidated financial statements.................................	18
Independent auditor's report.........................................................	51
SHAREHOLDER & STATUTORY INFORMATION.................................	54
CORPORATE GOVERNANCE..........................................................	60
DIRECTORY................................................................................	66

2021 ANNUAL REPORT 3

CHAIR'S REPORT

Welcome to SMW Group Limited's inaugural Annual Report for the financial year ended 30 June 2021 (FY2021).

SMW Group Limited (NZX: SMW) (SMW Group or the Group) (formerly known as Aorere Resources Limited) completed its acquisition of the Australian company All Industrial Network Limited ('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 businesses. The acquisitions resulted in the merger of two established Australian services businesses operating across the mining support, construction and engineering service industries, based in Rockhampton and Mackay. The Group's listed status brings excellent governance to the business, backed by stringent corporate policies and procedures.

Financial performance

The financial summary of the	Group's results are as
follows:
Financial	Year ended	Year ended
Summary	30-Jun-21	30-Jun-21
	$'000	$'000
	Statutory	Underlying
Revenue	52,003	52,003
EBITDA	(694)	3,755
NPATA	(5,273)	(824)
NPAT	(5,481)	(1,032)

The reported statutory NPAT has been impacted by the adverse market conditions associated with the COVID-19 pandemic and the application of one-off acquisition accounting principles in accordance with New Zealand equivalents to International Financial Reporting Standards (NZ IFRS). The impact of the COVID-19 pandemic has been felt across the global mining industry. Government restrictions and general economic uncertainty led to a contraction

of commodity prices and a reduction in trade with the largest importer of Australian coal, China. The lower commodity prices and uncertainty in coal production and exports directly impacted SMW Group's customers. As a service provider to the mining industry, SMW Group has observed cancellations or deferrals in projects and reduced spending from customers. This has contributed to the Group's reduced revenue and profitability in FY2021. These challenges aside, SMW Group maintains strong relationships with its customers and is expecting activity levels in key industries to improve as commodity prices rebound.

Since the acquisition of AIN, SMW Group has rebranded, aligned processes and implemented integration plans between the two operations based out of Rockhampton and Mackay. The Group has also increased the capabilities and skillsets of employees and service offerings to existing and new customers. Associated integration costs and acquisition-related costs are included in the statutory results for FY2021.

With the continued volatility in key industry sectors in the second half of FY2021, the Group continued to see a decline in customer orders. SMW Group strategically reviewed its cost structure and made several structural changes to operations to reduce the cost base to account for the reduction in revenue during this period.

As at 30 June 2021, the SMW Group had a net liability position of $4.8 million. The acquisition of AIN on 8 July 2020 resulted in deferred consideration payments to vendors and deferred payments to external advisors involved in the transaction. As at 30 June 2021, the Group's liabilities include $7.1 million of deferred consideration owing to the vendors of Alertvale and BAE. The significant reduction in the Group's revenue, due to the COVID-19 pandemic in FY2021 has impacted the Group's level of operating cashflow during this year and its ability to commence scheduled repayment of this deferred consideration. The vendors remain major shareholders of the SMW Group. They are working with the SMW Group Board to improve the financial performance of the Group in order to commence the repayment of the deferred consideration and have agreed on a new repayment schedule.

4 SMW GROUP

Our strengths

PROVEN OPERATOR WITH LONG TERM EXPERIENCE IN THE BOWEN BASIN

PROXIMITY TO THE

GALILEE BASIN

EXTENSIVE WORKSHOP

FACILITIES AND FIELD

CAPABILITIES

ROBUST HEALTH AND SAFETY

CULTURE, COMPLIANT TO

LATEST ISO45001

FLEXIBILITY TO WORK IN RAIL,

DEFENCE, CONSTRUCTION

AND MINING

STRONG TRADE AVAILABILITY -

WORKFORCE OF OVER 500

Growth history

SMW Group's operations have a long-standing history over the past 20 years of continuously servicing its customer base throughout the volatile economic mining climate of busts and booms. The Company has diversified and adapted to serving rail, industrial and defence sectors, as well as mining and manufacturing businesses throughout Central Queensland. Operations have expanded, from purely field service to a complete one-vendor solution, including design, engineering, fabrication, painting, commissioning and maintenance of equipment, including industrial cleaning.

2021 ANNUAL REPORT 5