Announcement PDF FOS Capital Ltd and Controlled Entities ACN 637 156 275 Financial Report for the half-year ended 31 December 2020 The half-year financial report is to be read in conjunction with the financial report for the year ended 30 June 2020 FOS Capital Ltd ACN 637 156 275 Financial report for half-year ended 31 December 2020 TABLE OF CONTENTS Page Directors’ Report 2 Condensed Consolidated Statement of Comprehensive Income 4 Condensed Consolidated Statement of Financial Position 5 Condensed Consolidated Statement of Changes in Equity 6 Condensed Consolidated Statement of Cash Flows 7 Notes to the Condensed Consolidated Financial Statements 8 Directors’ Declaration 11 Auditor’s Independence Declaration 12 Independent Auditor’s Review Report 13 1|Page FOS Capital Ltd ACN 637 156 275 Financial report for half-year ended 31 December 2020 DIRECTORS’ REPORT The directors present their report together with the condensed financial report of the consolidated entity consisting of FOS Capital Pty Ltd and the entities it controlled, for the half-year ended 31 December 2020 and independent review report thereon. FOS Capital Limited was incorporated 31 October 2019 and legally acquired its 100% owned subsidiary FOS Lighting Group Pty Ltd on 31 December 2019. Notwithstanding this, the profit and loss and cash flow comparatives (together with any relevant notes) presented in these financial statements are those of the FOS Group, being the combined entity of FOS Capital Limited, FOS Lighting Group Pty Ltd and its 100% controlled subsidiary, FOS Lighting Pty Ltd. The directors have elected to present these comparatives as the transaction between FOS Lighting Group Pty Ltd was executed solely for the structuring purpose of readying FOS Group for a listing on the Australian Securities Exchange. DIRECTORS The names of the company’s directors in office during the half-year and until the date of this report are set out below. Each of the directors was in office for this entire period, unless otherwise stated. Con Scrinis, Managing Director Michael Koutsakis, Director Michael Monsonego, Director Alexander (Sandy) Beard, Director (appointed on 23 November 2020) PRINCIPAL ACTIVITIES The principal activities of FOS Group include the manufacturing of a full range of commercial luminaries, outdoor fittings and linear extruded lighting as well as distributing a complete range of commercial and architectural lighting. RESULTS OF OPERATIONS AND SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS The Directors of FOS Capital Ltd take great pleasure in reporting consolidated net profit after tax $416,083 (2019: $104,431) for the half year ended 31 December 2020. The Board is pleased to report that FOS Group trading has improved significantly with group revenues of $3,945,416 (2019: $2,747,742).for the half year ended 31 December 2020, The company has been able to manage the period through Covid19 having endured significant disruption with the Victorian second lock down. This lock down led to many Victorian projects being delayed with the constant rescheduling of projects, nevertheless our outstanding team of professionals stood up to the task always keeping our customers as our priority. This period also brought many highlights. In August we appointed Nigel Smith as our new factory manager in Brisbane. Nigel has over 30 years experience in the lighting manufacturing industry and is a great asset to FOS. In September we changed our distribution of the Megabay product range in NSW bringing it back in house. In October we appointed Integral Lighting our exclusive Distributor in the ACT. On 23 November 2020 FOS Lighting Pty Ltd acquired a 50% shareholding in Baker & McAuliffe Holdings Pty Ltd trading as JSB Lighting. 2|Page FOS Capital Ltd ACN 637 156 275 Financial report for half-year ended 31 December 2020 JSB Lighting is a supplier of commercial and architectural lighting products within Australia and New Zealand. The business has been operating over 30 years and employs 27 staff members who are spread across Sydney, Brisbane, Adelaide, Perth, Melbourne and Auckland, and focus on applying solution-based lighting on the latest in luminaire design and performance. The shareholding was acquired from ASX listed HGL Limited who continues to hold the other 50%. HGL received 3 million ordinary shares (representing 9.1% of issued capital) in FOS Lighting’s parent company FOS Capital Limited, as consideration for the sale of 50% of JSB Lighting. HGL has also granted FOS Lighting an option to acquire the balance 50% shares in JSB Lighting for Net tangible Asset value at the point of exercise of the option. This option has no expiry date. As part of the transaction on 23 November 2020 HGL Chairman Sandy Beard was been appointed a Director of FOS Capital Limited. HGL Limited has also undertaken to sub-underwrite $500,000 in new shares in FOS Capital Limited as part of this initial public offering on the ASX. The JSB acquisition will double the size of FOS Lighting and expand its geographic spread to all states of Australia and New Zealand. MATTERS SUBSEQUENT TO REPORT DATE On 1 February 2021, FOS Lighting Pty Ltd acquired the balance of 50% shareholding in Baker & McAuliffe Holdings Pty Ltd trading as JSB Lighting from ASX listed HGL Limited (HGL) and took over the control of JSB lighting business. Apart from the above, there were no matters or circumstances specific to The FOS Group that have arisen since 31 December 2020 that have significantly affected or may significantly affect The FOS Group’s operations and state of affairs. We take this opportunity to thank all stake holders especially our dedicated staff and are looking forward to an exciting second half. AUDITOR’S INDEPENDENCE DECLARATION A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 in relation to the review for the half-year attached to these financial statements. ROUNDING OF AMOUNTS In accordance with ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2019/191, the amounts in the directors’ report and in the financial report have been rounded to the nearest dollar. Signed in accordance with a resolution of the directors. Con Scrinis Director Date: 29 March 2021 3|Page FOS Capital Ltd ACN 637 156 275 Financial report for half-year ended 31 December 2020 Condensed Consolidated Statement of Comprehensive Income for the half-year ended 31 December 2020 Notes 31 Dec 2020 31 Dec 2019 $ $ 3,951,319 2,747,742 Cost of sales (2,211,202) (1,552,667) Gross Profit 1,740,117 1,195,075 55,981 - Selling and distribution expenses (337,210) (199,259) Administrative and corporate expenses (633,622) (648,323) Profit before amortisation, depreciation and finance costs 825,266 347,493 Amortisation of lease assets in use (194,507) (175,570) Depreciation (22,201) (21,207) Finance costs (13,155) (15,151) Profit before income tax expense 595,403 135,565 Income tax expense (179,320) (31,134) Profit after tax 416,083 104,431 - - 416,083 104,431 1.38 0.35 Revenue and Other Income Revenue Share of profit from JSB Lighting 3 4 Expenses Other comprehensive income for half-year Total comprehensive income for half-year Earnings per share (cents per share) for profit attributable to the equity holders of the entity: Basic and diluted earnings per share 6 The accompanying notes forms part of these Financial Statements 4|Page FOS Capital Ltd ACN 637 156 275 Financial report for half-year ended 31 December 2020 Condensed Consolidated Statement of Financial Position as at 31 December 2020 Notes 31 Dec 2020 $ 30 Jun 2020 $ Current assets Cash and cash equivalents Trade and other receivables Inventories Other current assets Total current assets 1,149,427 1,153,159 1,866,726 15,655 4,184,967 648,608 1,362,331 1,784,712 27,936 3,823,587 Non-current assets Plant and equipment Lease assets in use Investment in JSB Lighting Deposits for leaseholds Deferred tax assets Total Non-current assets 208,297 503,442 655,981 45,000 100,378 1,513,098 230,498 697,949 45,000 85,735 1,059,182 Total assets 5,698,065 4,882,769 Current liabilities Trade and other payables Lease liabilities Provision for employee entitlements Provision for income tax expense Provision for warranty Total current liabilities 591,036 330,539 313,034 287,522 42,278 1,564,409 803,288 462,058 262,450 93,559 42,278 1,663,633 215,793 9,696 225,489 320,018 7,034 327,052 Total Liabilities 1,789,898 1,990,685 Net assets 3,908,167 2,892,084 Equity Contributed capital Retained earnings Total equity 1,000,100 2,908,067 3,908,167 400,100 2,491,984 2,892,084 4 Non-current liabilities Lease liabilities Provision for employee entitlements Total non-current liabilities The accompanying notes forms part of these Financial Statements 5|Page FOS Capital Ltd ACN 637 156 275 Financial report for half-year ended 31 December 2020 Condensed Consolidated Statement of Changes in Equity Half-year ended 31 December 2019 Consolidated Contributed equity $ Retained earnings $ Total equity $ At 1 July 2019 400,100 2,368,915 2,769,015 Profit for the half year - 104,431 104,431 At 31 December 2019 400,100 2,473,346 2,873,446 Consolidated Contributed equity $ Retained earnings $ Total equity $ At 1 July 2020 400,100 2,491,984 2,892,084 Issue of shares for Investment in JSB 600,000 - 600,000 Profit for the half year - 416,083 416,083 At 31 December 2020 1,000,100 2,908,067 3,908,167 Half-year ended 31 December 2020 The accompanying notes forms part of these Financial Statements 6|Page FOS Capital Ltd ACN 637 156 275 Financial report for half-year ended 31 December 2020 Condensed Consolidated Statement of Cash Flows for the half-year ended 31 December 2020 31 Dec 2020 31 Dec 2019 $ $ Receipts from customers 4,496,251 3,401,915 Payments to suppliers and employees (3,810,268) (3,196,593) 685,983 205,322 Payment for plant and equipment - (18,244) Net cash flows used in investing activities - (18,244) - 326,447 Payment of lease liabilities (185,164) (162,953) Net cash flows from / (used in) financing activities (185,164) 163,494 Net increase / (decrease) in cash and cash equivalents 500,819 350,572 Cash and cash equivalents at beginning of half year 648,608 599,079 Cash and cash equivalents at end of the half year 1,149,427 949,651 Cash flows from operating activities Net cash flows from operating activities Cash flows from investing activities Cash flows from financing activities Receipt of share capital The accompanying notes forms part of these Financial Statements 7|Page FOS Capital Ltd ACN 637 156 275 Financial report for half-year ended 31 December 2020 Notes to Condensed Consolidated Half-Year Financial Statements 1. BASIS OF PREPARATION OF THE HALF-YEAR FINANCIAL REPORT The condensed consolidated half year financial report does not include all notes of the type normally included within the annual financial report. It is recommended that this half-year financial report be read in conjunction with the annual financial report for the year ended 30 June 2020 of FOS Capital Ltd. FOS Capital Limited was incorporated 31 October 2019 and legally acquired its 100% owned subsidiary FOS Lighting Group Pty Ltd on 31 December 2019. Notwithstanding this, the profit and loss and cash flow comparatives (together with any relevant notes) presented in these financial statements are those of the FOS Group, being the combined entity of FOS Capital Limited, FOS Lighting Group Pty Ltd and its 100% controlled subsidiary, FOS Lighting Pty Ltd. The directors have elected to present these comparatives as the transaction between FOS Lighting Group Pty Ltd was executed solely for the structuring purpose of readying FOS Group for a listing on the Australian Securities Exchange. This condensed half-year financial report covers FOS Capital Ltd and controlled entities as a consolidated entity. FOS Capital Ltd is a for-profit company limited by shares, incorporated and domiciled in Australia. The registered office and principal place of business of FOS Capital Ltd is located at 14 Jaybel Street Salisbury QLD 4107. The half-year financial report was authorised for issue by the directors as at the date of signing the attached Directors’ Declaration. (a) Basis of accounting This condensed consolidated half-year financial report has been prepared in accordance with Australian Accounting Standard AASB 134 Interim Financial Reporting, as appropriate for for-profit entities, and the Corporations Act 2001. Compliance with AASB 134, as appropriate for for-profit entities, ensures compliance with International Financial Reporting Standard IAS 34 Interim Financial Reporting. The condensed consolidated half-year financial report includes the consolidated results of FOS Capital Ltd and its controlled entities FOS Lighting Group Pty Ltd and FOS Lighting Pty Ltd for the half year ended 31 December 2020 (collectively, the FOS Group). The half-year financial report has been prepared in accordance with the historical cost convention. The accounting policies applied in this half-year financial report are consistent with those of the annual financial report for the year ended 30 June 2019 and the corresponding half-year. (b) Accounting for the investment in JSB Lighting The investment in JSB Lighting is treated as an investment which applies the equity method of accounting. Under this method of accounting the initial investment is recognised at cost. Subsequent to initial recognition, an amount is recognised in the profit or loss for the Group’s share of the profit or loss and other comprehensive income of JSB Lighting. This method of accounting is applied whilst the Group’s retains a significant influence, but not control in JSB Lighting. In evaluating their application of the equity method and in reasoning why the Group was yet to control JSB Lighting, the directors considered the following key matters: • • • The Group’s investment in JSB Lighting is 50%; The option held by the Group presently is not yet “in the money” based upon their due diligence conducted to date and no decision had been made to exercise this option as at 31 December 2020; and From the date of purchase through to 31 December 2020 the directors and management of FOS Group were yet to be involved into the day-to-day operations of JSB Lighting and they did not have voting control of the board of JSB Lighting. 8|Page FOS Capital Ltd ACN 637 156 275 Financial report for half-year ended 31 December 2020 Notes to Condensed Consolidated Half-Year Financial Statements 1. BASIS OF PREPARATION OF THE HALF-YEAR FINANCIAL REPORT (cont’d) (c) New or amended Accounting Standards and Interpretations adopted The directors of the FOS Group have resolved to adopt all of the new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period. There was no material impact upon these financial statements arising from their adoption. Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted, however the directors also consider that none of these will have a material impact on the Group’s existing accounting policies. 2. OPERATING SEGMENTS The FOS Group operates in one segment being the manufacturing a full range of commercial luminaries, outdoor fittings and linear extruded lighting as well as distributing a complete range of commercial and architectural lighting in Australia. 3. REVENUE a) Sales revenue Sales revenue 31 Dec 2020 $ 31 Dec 2019 $ 3,494,219 2,747,742 457,100 - 3,951,319 2,747,742 b) Other revenue Revenue from government grants – COVID support 4. INVESTMENT IN JSB Lighting On 23 November 2020 FOS Lighting Pty Ltd acquired a 50% shareholding in Baker & McAuliffe Holdings Pty Ltd trading as JSB Lighting (JSB Lighting) from ASX listed HGL Limited (HGL). JSB Lighting is a supplier of commercial and architectural lighting products within Australia and New Zealand. The business has been operating over 30 years and employs 27 staff members who are spread across Sydney, Brisbane, Adelaide, Perth, Melbourne and Auckland, and focus on applying solution-based lighting on the latest in luminaire design and performance. On 23 November 2020, the Company issued 3 million fully paid ordinary shares at an issue price of $0.20 per shares as consideration for the acquisition of 50% of JSB Lighting to HGL. HGL has also granted FOS Lighting an option to acquire the balance of 50% shares in JSB Lighting for Net tangible Asset value at the point of exercise of the option. On 1 February 2021, the company exercised the option and acquired the remaining 50% equity in JSB lighting for nil consideration from HGL Limited. At the date of this report, the initial accounting for the business combination that took place as a result of the Company now controlling JSB Lighting is yet to be concluded due to the short passage of time from the date of this acquisition to the date of the release of this report. 9|Page FOS Capital Ltd ACN 637 156 275 Financial report for half-year ended 31 December 2020 Notes to Condensed Consolidated Half-Year Financial Statements 4. INVESTMENT IN JSB Lighting (cont’d) The carrying values of the assets and liabilities of JSB Lighting as at 23 November 2020 were as follows; Cash and cash equivalents Trade receivables Inventory Prepayments Plant and equipment Lease assets in use Lease Liabilities Trade payables Employee entitlements Contract liabilities Net Deficit Investment in JSB Lighting Cost of Investment in JSB Lighting Share of profit (using equity method) 5. $ 1,244,344 2,094,640 594,186 109,781 278,269 424,240 (1,390,891) (2,927,155) (483,238) (322,090) (377,914) 31 Dec 2020 $ 600,000 55,981 655,981 EARNINGS PER SHARE Reconciliation of earnings used in calculating earnings per share: Profit used to calculate earnings per share Weighted average number of ordinary shares used in calculating earnings and diluted earnings per share Earnings per shares (in cents) 31 Dec 2020 31 Dec 2019 $416,083 Number of shares $104,431 Number of shares 30,668,478 30,000,000 1.36 0.35 To aid comparability, weighted average number of ordinary shares 30,000,000 is applied in the comparative calculation of earnings per share as at 31 December 2019 due to the restructuring reason described in Note 1 to the financial statements. 6. CONTINGENT LIABILTIES With the exception of the deposits paid for leasehold tenancies, as report date the directors are unaware of any contingent liabilities or commitments that may materially impact the Group. 7. SUBSEQUENT EVENTS On 1 February 2021, FOS Lighting Pty Ltd acquired the balance of 50% shareholding in Baker & McAuliffe Holdings Pty Ltd trading as JSB Lighting from ASX listed HGL Limited (HGL) and took over the control of JSB lighting business. Apart from the above, there were no matters or circumstances specific to The FOS Group that have arisen since 31 December 2020 that have significantly affected or may significantly affect The FOS Group’s operations and state of affairs. 10 | P a g e FOS Capital Ltd ACN 637 156 275 Financial report for half-year ended 31 December 2020 Directors’ Declaration The directors declare that: In the directors’ opinion, the financial statements and notes thereto, as set out in the accompanying financial report are in accordance with the Corporations Act 2001, including: (a) complying with Australian Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001; and (b) giving a true and fair view of the financial position of the consolidated entity as at 31 December 2020 and of its performance for the half-year ended on that date. In the directors’ opinion there are reasonable grounds, at the date of this declaration, to believe that FOS Capital Ltd will be able to pay its debts as and when they become due and payable. This declaration is made in accordance with a resolution of the directors. Con Scrinis Director Date: 29 March 2021 11 | P a g e AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001 TO THE DIRECTORS OF FOS CAPITAL LTD I declare that, to the best of my knowledge and belief during the half -year ended 31 December 2020 there have been: — no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the review; and — no contraventions of any applicable code of professional conduct in relation to the review. William Buck Audit (Vic) Pty Ltd ABN 59 116 151 136 N. S. Benbow Director Dated this 29th day of March, 2021 Page - 12 FOS Capital Ltd Independent auditor’s review report to members Report on the Review of the Half-Year Financial Report Conclusion We have reviewed the accompanying half -year f inancial report of FOS Capital Ltd (the Company), consisting of FOS Capital Ltd and the entities it controlled at the half -year’s end or f rom time to time during the half year (the consolidated entity), which comprises the condensed consolidated statement of f inancial position as at 31 December 2020, the condensed consolidated statement of prof it or loss and other comprehensive income, condensed consolidated statement of changes in equity and condensed consolidated statement of cash f lows f or the half -year ended on that date, notes comprising a summary of signif icant accounting policies and other explanatory inf ormation, and the directors’ declaration. Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half -year f inancial report of FOS Capital Ltd is not in accordance with the Corporations Act 2001 including: a. giving a true and f air view of the consolidated entity’s f inancial position as at 31 December 2020 and of its perf ormance f or the half year ended on that date; and b. complying with Australian Accounting Standard 134 Interim Financial Reporting and the Corporations Regulations 2001. Responsibilities of the Directors for the Half-Year Financial Report The directors of the Company are responsible f or the preparation of the half -year f inancial report that gives a true and f air view in accordance with Australian Accounting Standards and the Corporations Act 2001 and f or such internal control as the directors determine is necessary to enable the preparation of the half -year f inancial report that gives a true and f air view and is f ree f rom material misstatement, whether due to f raud or error. Auditor’s Responsibilities for the Review of the Half-Year Financial Report Our responsibility is to express a conclusion on the half -year f inancial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Perf ormed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the f inancial report is not in accordance with the Corporations Act 2001 including: — giving a true and f air view of the consolidated entity’s f inancial position as at 31 December 2020 and its perf ormance f or the half -year ended on that date; and — complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001. As the auditor of FOS Capital Ltd, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual f inancial report. A review of a half -year f inancial report consists of making enquiries, primarily of persons responsible f or f inancial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all signif icant matters that might be identif ied in an audit. Accordingly, we do not express an audit opinion. Independence In conducting our review, we have complied with the independence requirements of the Corporations Act 2001. William Buck Audit (VIC) Pty Ltd ABN 59 116 151 136 N.S. Benbow Director Dated this 29th day of March, 2021