annual report 2018 - arbortech · arbortech industries limited a.c.n. 009 462 453 annual report...

ARBORTECH INDUSTRIES LIMITEDA.C.N. 009 462 453

ANNUALREPORT

2018

ANNIVERSARY

30 YEAR

1988 2018

ANNIVERSARY

30 YEAR

1988 2018

Shareholder InformationFinancial StatementsThe Financial Statements for the Company may be obtained from the Company Secretary at the Registered Office.

Shareholder EnquiriesShareholders seeking information regarding their shareholding should contact the Company’s share registry:Computershare Investor Services Pty LtdLevel 11, 172 St George’s TerracePerthWestern Australia 6000Telephone: (08) 9323 2000Facsimile: (08) 9323 2033

Change of addressCertified shareholders who have changed address should notify the share registry in writing stating their old and new addresses.

Change of NameCertified shareholders who change their name should notify the share registry in writing attaching a copy of the relevant marriage certificate or deed poll. All certificates bearing the person’s name must be returned to enable the share registry to reissue certificates in the new name.

Lost or stolen certificates Share certificates are important and valuable documents and should be stored securely at all times. Shareholders should inform the share registry immediately of any loss or theft, so that a replacement can be arranged. A Section 1089 Declaration may be requested from the Share Registry, completed and returned in order that a new certificate may be issued.

Removal from the Annual Report mailing listShareholders who do not wish to receive the Annual Report, or who are receiving more than one copy, should advise the share registry in writing.

Arbortech websiteArbortech may be contacted by email on [email protected] and products may be viewed at www.arbortechtools.com

Company Information Board of DirectorsExecutive DirectorsKevin R Inkster (Chairman)Kristine J Inkster

Non-Executive DirectorSelwyn J Bajada

Company SecretaryChristine A Taylor

Registered Office67 Westchester RoadMalagaWestern Australia 6090Telephone: (08) 9249 1944Facsimile: (08) 9249 2936

Share RegistryComputershare Investor Services Pty LtdLevel 11, 172 St George’s TerracePerthWestern Australia 6000Telephone: (08) 9323 2000Facsimile: (08) 9323 2033

BankersNational Australia Bank Limited48 Howe StreetMalagaWestern Australia 6017

AuditorsStantons InternationalLevel 2, 1 Walker AvenueWest PerthWA 6005

ContentsChairman’s Review ............................................. 01

Operations Report .............................................. 03

Our Brand Purpose ............................................. 08

Our Internal Brand Values .................................. 08

Our External Brand Personality .......................... 08

Group Structure and Description of Activities ..... 09

Values and Principles Statement ........................ 10

Corporate Governance ........................................ 10

Board of Directors .............................................. 12

Shareholder Information .................................... 13

Twenty Largest Shareholders ............................. 14

Financial Report ................................................. 16

Five Year Financial Performance ........................ 53

A lot has happened in the last 30 years...

ANNIVERSARY

30 YEAR

1988 2018

ANNIVERSARY

30 YEAR

1988 2018

Chairman’s ReviewOctober, 2018

Dear ShareholderI’m delighted to report to shareholders of yet another year of strong growth punctuated by a series of significant milestones.

Operating revenue grew by 22% for the year making it our eighth consecutive year of robust and steady growth. We exceeded our revenue forecasts and comfortably passed through the psychological ten million dollar threshold to finish at $11.6m. More importantly, the increased revenue was accompanied by improved net operating margins (pre-tax) resulting in an increase in net profit after tax to $2,031m confirming that the Company benefited from the strategies, research & development and new product releases throughout 2017/18.

In May this year we celebrated our 30th year in business with a function attended by many of our business partners, shareholders and along with past and present staff members. The occasion gave me cause to reflect on the many challenges we have faced over the years and an opportunity to express my deep gratitude to the various stakeholders who have contributed to the success of the Company.

Another milestone in June was the repurchase of the Malaga office and factory premises. After considering various options and the costs of disruption to business if we moved to another building, we decided to purchase the current premises with the assistance of a bank loan. This has resulted in immediate and significant cost savings compared to the previous lease arrangement. The savings will be reinvested to expand our warehouse, office and factory floor space which is desperately needed to accommodate the increasing demand for our products. It is intended that this will be done in several stages without unduly interrupting our current operations.

Research and DevelopmentFor a small company we spend a comparatively larger proportion of our revenue on research and development (R&D). This year it was 8.5%. An important part of our business strategy is to capitalise R&D expenditure where those Company products and technologies continue to produce revenue and/or demonstrate a strong income generating potential. Intellectual Property (IP) such as patents, designs or trademarks are assets (albeit intangible) and the value generated through R&D needs to be reflected in the value of the Company. This is particularly relevant when negotiating with potential industry participants.

Our R&D department has been expanded and aside from myself, now includes four engineers, a product designer and two machinists. Ben Inkster has been engaged as R&D Manager and brings to Arbortech a wealth of experience from large corporations. Ben

Arbortech Industries Limited Annual Report 201801

2017/2018 Highlights:Record total revenue up 20% to $11.6m (2016/17: $9.6m)

Net profit after tax up to $2.031m (2016/17: $1.974m)

27% increase in total assets to $17.477m (2016/17: $13.726m)

14% increase in net asset backing per share to $0.97 (2016/17: $0.85)

Full year dividend (unfranked) up 13.6% to 2.5 cents per share (2016/17: 2.2 cents per share)

Arbortech Industries Limited Annual Report 2018 02

has implemented a more structured and methodical approach to R&D which is already bearing fruit. In turn, this has provided me with time to focus on several new concepts which we believe will benefit the Company in the future.

Woodworking Power CarvingIn the woodworking sphere, we have carved out (excuse the pun) a new genre of woodworking which we now refer to as Power Carving and are now recognised as the worldwide leaders. Almost all of our woodworking tools are adapted for grinders and while they are ever increasingly popular, we have concluded that they deserve a dedicated and appropriately designed power source.

To this end, we will soon be releasing our own power source for a range of current and new woodworking attachments. Although based on a conventional grinder, our unit will have many advantages over current machines such as variable speed control, dust extraction and fixtures to accommodate the whole range of new attachments. This tool will be able to perform functions hitherto thought impossible and therefore will meet not only the current needs for freehand shaping, but also satisfy needs woodworkers didn’t know they needed.

Apart from cementing our position as the dominant player in Power Carving, the expectant interest will raise the woodworking side of the Company to a new level. The downside of creating such novel and interesting machines (and unfortunately outside of our control), is that the relevant overseas certification bodies do not always have a convenient category to classify them under. We understand the processes well and whilst we are making headway, one of the main holdups to earlier releases for our new products is the certification process.

Allsaw AS175Work has continued on upgrading the AS170 with the intention of designating the new product as the AS180. DeWalt - the supplier of the motor for the AS180 - has in the meantime replaced its motor with an upgraded model and as the current motor is being discontinued, we have decided to alter the current design of the AS170 to accept the new motor and incorporate some of the features of the AS180 in a model to be called the AS175. Work will continue on the AS180 though there is every likelihood that many of the advantages of the AS180 may be absorbed into the AS175.

HammersawWork on the HammerSaw Technology continued unabated throughout the year. In keeping with the methodology of the new R&D Manager, a strict

protocol of testing and measurement using an array of sensors and analytical tools, is being employed to refine, tune and improve the performance of the machine. Because of the importance of this technology to the Company and its potential to revolutionise the cutting of concrete and other hard materials, we are being extremely careful to get a full understanding of all the parameters required to get the best performance in a wide variety of sizes and applications.

Going ForwardArbortech is a complex company doing everything from R&D, IP management, manufacturing, marketing and worldwide distribution. There would only be a select number of companies in Australia of our size as diversified and certainly not many in the power tool industry. The fact that the Company has survived 30 years, grown strongly in the last eight and now begun to thrive, is a testament to the management team and the fortitude of the staff, most of whom are long term employees.

I am grateful to the vast majority of shareholders who have been and continue to be patient and supportive of the Company’s endeavours. I hope they are proud to be part of a company that has achieved so much with a transparent and ethical approach to business. I appreciate that there are a few shareholders who have expressed concern at the lack of share liquidity in recent years which concern the Board acknowledges. However, if we maintain the focus on growth, increasing profitability and generally strengthening the Arbortech brand worldwide, we believe new corporate and capital management opportunities will present themselves for evaluation. This in turn will further underpin the Company’s value and enable options to be considered to improve share liquidity.

My belief in our people, systems and products is such that I see Arbortech growing into a much larger and very profitable company over the next few years. Key to this is the culture of the Company which in last year’s Review I referred to as the Arbortech Way. This is nothing less than a commitment to doing the right thing by all stakeholders, be they staff, customers, suppliers, shareholders or the public at large, while pursuing what we consider to be wholesome and worthwhile business objectives. With this as our mainstay, we have weathered difficult economic conditions and become strong and profitable. I see the Arbortech Way as the formula for long term success.

Chairman’s ReviewOctober, 2017

2016/2017 Highlights: • Record operating revenue up 6% to $ 9.407m (2015/16: $8.867m);

• Net profit after tax steady at $1.974m (2015/16: $1.974m);

• 16% increase in total assets to $13.726m (2015/16: $11.811m);

• 16% increase in net asset backing per share to $0.85 (2015/16: $0.73);

• Full year dividend (unfranked) up 5% to 2.2 cents per share (2015/16: 2.1 cents per share).

Dear ShareholderI am happy to report that Arbortech has had yet another successful year being the seventh consecutive year of steady growth. I believe the Company has now passed a tipping point where we can confidently expect growth for many years to come. Such success has been achieved through careful management of our resources, maintaining a strong and healthy corporate culture and fostering our reputation for innovative quality products. These factors and others will ensure that we can look ahead with optimism.

Demand for both the existing woodworking products and the AS170 has continued to strengthen in all our major markets, while the efficiency of our systems and processes also continue to improve. First quarter results for 2017/18 are compelling with operating revenue up 21% and trading profit up 364% compared to the same period last year. Complementing this momentum are a suite of new technologies and unique new products nearing completion, further underpinning the expectation for continuing growth.

The Arbortech Way

When we first considered forming Arbortech, we naively promised ourselves that we would only proceed if we could commit to it totally, and we could only do so if we enjoyed and felt good about what we were doing. This philosophy has continued to this day and is embodied in our Values and Principles and Brand Vision. It has become a requirement of the Company that all our products be both unique and of the highest possible quality and that our activities make a real difference including for example to the general well-being of staff (through the best possible work conditions); our customers (through exceptional customer satisfaction); and if possible, the world at large (through our environmental and ethical responsibilities).

After attending the 2016 World Business forum in Sydney where business leaders such as Sir Richard Branson, Nicholas Negroponte and various other luminaries spoke at length on the best practices for success and the place business holds in shaping the future of the planet, I realised that Arbortech was not only already on the right path but well on its way.

The Arbortech Way enabled us to successfully navigate through the GFC and lay the groundwork for the future (whilst others in the industry fell by the wayside unable to cope with changing market conditions). Despite the isolation of Perth, we are able to be profitable as we develop our innovative technologies and then manufacture, distribute and market them around the world. This does not mean that we are not open to linking up with value adding partners, but it does mean that we recognise and accept the worldwide leadership role we perform in our respective fields. It is clear that Arbortech is becoming a strong and independent international brand in its own right.

Research and Development

Research and development on new technologies and new products is at the core of what we do well. We continued throughout the year to push through the upper limit of our resources and capabilities. Our recent history shows that the commitment we make each year to research and development (which in turn leads to the release of new products) does translate to significant increases in operating revenue. We have managed to release five new products in the last six years, and it is our intention to release at least one new product per year. In this context, the results for 2016/17 are even more impressive when you take into account the minimal time for impact of the Ball Gouge released at the very end of the financial year. Since then, demand for this product has far exceeded our initial production capacities yet sales are already having a positive effect on this year’s figures.

Woodworking

There are no less than four new woodworking products at final stages on our drawing board, most of which we hope to release in the current year. Issues such as perfecting tooling and certification in various markets, makes it difficult to accurately predict the release dates for these products. We are looking forward to further surprising and delighting our customers with wonderful new ways to work wood. It is no exaggeration to say that Arbortech has become a major draw card at Wood shows worldwide because of our reputation for releasing exciting new tools each year.

Allsaw

Work has progressed on the AS180 which is designed to replace the AS170 with a host of new features including the ability to cut much harder material. Testing has been long and involved but is now nearing completion whereupon we can begin tooling. The introduction of the new dust legislation in the US means the AS170 and 180 are of growing importance in the masonry market.

Hammersaw

I am pleased to advise that we now have an impressive hydraulic prototype with a 1m diameter blade, designed to fit any small hydraulic machine such as a Kanga. Our negotiations with a major power tool company in November last year (in regards to a smaller handheld version) ended with us unable to accept their proposed terms for an arrangement. We remain in contact with other potential partners in these specialised markets. However, it’s worth mentioning that all the components for the large Hammersaw are NC machined so it is within our capabilities and contacts to produce the large blades which means that local manufacturing remains a viable option for us to consider.

Dividend

It gives me great pleasure to announce this year’s dividend of 2.2 cents per share which is an increase of 5% over last year’s dividend. It is our intention to continue increasing dividends in line with growth.

Conclusion

As I mentioned earlier, I believe we have reached a tipping point. We are confident that we can maintain the growth of the Company and our global operations through the balanced utilisation of resources that will ensure our continued success.

Once again, I’d like to thank all staff, shareholders, suppliers and customers for their support during the year and I look forward to yet another year of strong growth.

Kevin Inkster

Chairman and Executive Director

Arbortech Industries Limited - Annual Report 2017 1 Arbortech Industries Limited - Annual Report 2017 2

Kevin InksterChairman and Executive Director


We were able to grow revenue to record levels in all key regions in both Product Groups and finished the year with total revenue of $11.6m.

Arbortech USA and Arbortech Europe have both very successfully increased market share in their territories. Arbortech’s percentage of overseas sales has grown to more than 80% of operating revenue.

We were able to maintain excellent gross profit margins and higher operational efficiencies resulting in a pre-tax net operating margin of 23.07% (2016/17: 14.01%).

A record net operating profit (before tax) of $2.676m.

The Malaga premises were repurchased at the end of the year, allowing us to expand infrastructure as required to further grow the Company.

Operations ReportHighlights for 2018


CorporateTo support the continued growth of the Company a number of new positions had to be created and filled. These included the appointment of Ben Inkster as Head of the Research and Development department. Other new roles are planned for the coming financial year including a Marketing Manager in Australia; in North America we are establishing a Field Sales position on the West Coast; and in Europe we are looking for an additional sales person and administration support.

With revenue almost double compared to five years ago and the organisation expanding in Australia, North America and Europe, we recognise the challenge to keep Arbortech’s purpose, values and principles alive. Key Staff worldwide converged in Perth in May to take part in a Company Staff Day in order to strengthen the understanding of the Company’s purpose, share ideas and further develop team building and communication skills. All staff found the day very beneficial.

The Malaga property was purchased at the end of the year. Owning the building will not only reduce overheads compared to the lease agreement, but it will also enable us to expand the building to provide for additional office, warehouse and production/assembly space to accommodate further growth of the Company.

FinancialWhile the 2016/2017 financial results factored in higher investment in staff and marketing, the 2017/2018 financial results reflected the positive return from this investment. Revenue increased by more than 20% with excellent GP margins and stable overheads resulting in a record profit before income tax expense of $2.676m.

As a result of the Company’s strong financial performances in recent years Arbortech has now utilised all its tax losses and in 2017/2018 incurred an income tax expense of $645k. Inventory has increased in order to support the growing overseas demand. Fixed assets increased reflecting the purchase of the land and buildings for $1.7m. The purchase was financed by a bank loan of $1.19m and $600k from cash reserves. The cash balance was still strong at year end at $2.184m (up 15% from year end 2016/17).

Sales and MarketingWe were able to grow revenue to record levels in all key regions and in both Product Groups. The graph below shows the impressive growth achieved in the Woodworking Product Group over recent years - driven by new product releases and a successful marketing strategy.

The graph below demonstrates the importance of exports, which now contribute 81% to total operating revenue.

AllsawAllsaw revenue increased 15% compared to the previous financial year. We saw a positive trend develop in early 2017 which then carried on through the rest of the 2017/2018 Financial Year.

In North America Allsaw revenue grew more than 20%. Stricter regulation limiting airborne dust on jobsites in the US is helping us to market the unique advantages that the Allsaw Technology has in this area compared to conventional cutting methods.

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Revenue by Region

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Revenue by Product Group

Allsaw Woodworking

Allsaw revenue in Europe increased around 5% with very strong results in some countries such as Denmark but disappointing results in others. In the UK, difficult market conditions – especially in the tool hire segment – slowed down sales significantly, limiting the overall result in Europe.

In Australia we found that sales in WA were down on the previous year due to a slowdown in the local construction industry. However, we have been able to strengthen our relationship with key retail partners nationwide and overall Allsaw revenue in Australia is up an impressive 20%.

WoodworkingWoodworking sales benefited from the launch of a new Power Carving attachment the Ball Gouge. The Ball Gouge was well received by our customers in all key regions and has contributed 17% to the overall Woodworking revenue in the financial year.

The internet and social media platforms such as Instagram, YouTube and Facebook continue to be an extremely important communication channel within our woodworking marketing strategy. With the help of social media influencers, we have been able to get excellent exposure to new market segments such as the ‘Makers Community’ in North America - a new target market in addition to the traditional woodworking market.

We also recognise the importance of having our product available through conventional Brick & Mortar retailers and work closely with selected key retailers to be well presented in their stores. At the same time, online sales through ecommerce websites of our retailers and third-party ecommerce sites such as Amazon are becoming the most important distribution channel for our woodworking tools. This further underlines the importance of a strong digital marketing strategy.

Product demonstrations at exhibitions continue to be an important marketing method in all regions. Nothing compares to a live demonstration to show the uniqueness of our products.

ProductionThe production department excelled all through the year to make product available on time despite product demand significantly outstripping the forecasts. In order to achieve this, we employed additional staff in assembly and also had to increase component inventory. Fostering excellent relationships with important component suppliers proved essential to meet the supply challenges throughout the year.

Research and DevelopmentWork on the new Allsaw design was the main focus of the R&D department over the year. While we made good progress developing the improved Allsaw mechanism, we have not been able to solve all the technical details required to launch the new model. Currently, we expect to start producing an updated Allsaw 175 model - incorporating a new motor - in early 2019. R&D will continue to work on further improvements to the Allsaw mechanism.

Some exciting new woodworking products including a new Arbortech Power Carving Unit are well advanced in the technical product development. However, significant R&D input is still required to finalise manufacturing details and ensure product compliance with international standards.

Development on the Hammersaw Technology has continued. Testing and extensive data collection with several prototype designs is helping us to better understand and optimise this revolutionary cutting technology.

Outlook for 2018/2019Looking forward to 2018/2019 the Company aims to:

• Successfully expand its marketing effort in Germany and the US through new sales staff appointments in those regions.

• Release new woodworking tools including the new Minicarver and the Power Carving Unit, enabling us to offer a full Power Carving System.

• Release the updated Allsaw 175 model.

• Enlarge the production/assembly area to provide more space for current production, scope for future expansion and improve the utilisation of the land on which the factory is built.

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Revenue by region

North America

Our investment in the North American sales team and the addition of new manufacturing representatives are paying off and sales results – especially in the second half of the year - have been very impressive. We have been building closer relationships with key dealers along with regular promotional activities. We have increased our presence at woodworking shows and trade fairs and also commenced to target new markets such as boat building.

Online retailers have become an important part of our distribution network along with high quality brick & mortar retailers. In September 2016 we were able to add Rockler Woodworking to our US dealer network and through its nationwide chain of stores, Rockler has become a key distribution partner for our woodworking range.

Silica dust is an increasing issue in North America. The AS170 produces far less dust than alternative tools with spinning blades. The AS170 is well placed to serve this niche market and will benefit from the new OHSA dust regulations.

Canada has been a strong performer for the Allsaw range generating around 25% of the North American revenue.

Europe

Arbortech Europe has successfully expanded marketing activities outside of Germany and we have found new distribution partners in Switzerland, France and other countries. Arbortech Europe has also taken a lead role in supporting several EU customers who previously were buying direct from Australia.

We continue to attend a large number of exhibitions where we can demonstrate our tools to a broader target audience.

In the UK, our agent has been able to achieve impressive sales growth for the woodworking range through intensified marketing activity, advertising and targeted promotions.

Australia

While we were able to grow our Allsaw sales, our woodworking sales have been stagnant. Our market penetration in the Australian woodcarving market is already quite high and we rely on new products to expand the market to achieve our sales goals. The Ball Gouge launch in June 2017 was a big success and demonstrates that we have a very loyal customer base in Australia that receives new product releases enthusiastically and with open arms.

We are strengthening the dealer network through selecting knowledgeable distribution partners who will work with us to expand the customer base. We have also made solid progress to make the Allsaw available through the big tool rental chains.

Online Marketing

The dedicated Arbortech channel on YouTube now has 86 separate videos produced by us and over 37,000 subscribers to the channel. A search of “Arbortech” on YouTube reveals literally thousands of videos of our tools, mostly produced by other people and companies. Not only have our woodworking videos reached millions of people (with one receiving more than four million hits), this year our Allsaw video also went viral with over 4 million likes through a Facebook page dedicated to innovative ideas. We have been gaining expertise in social media over the years and believe that social media as a medium to market our brand, values and products will continue to be successful.

Research and Development

Our Research and Development (R & D) pipeline is filled with a number of exciting projects at various project stages.

The Ball Gouge was successfully launched in June 2017. Design work for other Woodworking tools such as the new Mini Grinder and Power Chisel has been finalised and we are now in the tooling phase preparing for the product launch scheduled in 2017/2018. R & D work on specialised attachments and guards for a new Arbortech drive unit are well advanced and are also scheduled for product launch within the next 12 months.

R & D work on the Hammersaw Technology has progressed for handheld as well as large hydraulically driven applications. A large Hammersaw prototype has been constructed using a 1m diameter blade attached to a Kanga drive unit. Considerable progress has been made with the drive mechanism and the blade which has replaceable carbide teeth. This prototype demonstrates impressive advantages in applications such as road cutting and demolition work where large cutting depths or dry cutting is required. Work on a new prototype with an improved hydraulic motor configuration is in progress.

The AS180 has progressed slowly this year, with significant work carried out on a new spring mechanism as well as ergonomic improvements such as minimizing vibration, optimising handle design, etc. The product is programmed to commence production in 2018. New patents have been lodged for important novel breakthroughs.

Goals for 2017/2018

• Launch several new woodworking products and the Allsaw AS180 model.

• Appoint a Research and Development Manager to lead the Department.

• Continue to focus on the management of supply, production, inventory and cash to support growing worldwide sales.

• Continue to support the US and European offices to further develop their respective markets.

• Expand our target markets through new territories, applications and market segments.

Sven Blicks

Group General Manager

Arbortech Industries Limited - Annual Report 2017 Arbortech Industries Limited - Annual Report 20175 6

Sven BlicksGroup General Manager



At our core, we are makers and innovators with a drive for creating unrivaled products that allow better, easier and more enjoyable work and leisure.


Our Brand PurposeWhy we do what we doUsing tools is one of the fundamental characteristics of being human. Over time, tools have helped us evolve through their use. We believe that armed with Arbortech tools, we allow people to craft and create in ways they never thought possible.

At our core, we are makers and innovators with a drive for creating unrivaled products that allow better, easier and more enjoyable work and leisure. From the dedicated professional whose tools are their living through to the hobbyist newly discovering the joy of woodworking, we are proud to service a diversity of people with a common passion.

Our agility and constant innovation stems from our commitment to research and development. It’s what gives our products and business a cutting edge - we embrace new ideas, constantly challenge the norm and relish passing our innovation onto our customers.

Whilst we are innovators, we are more than the tools we make. A collaborative, inclusive and diverse team is what allows us to achieve to the level that we do.

We endeavour to produce ingenious solutions and create tools that are enjoyable to use as well as functional and productive. We engage our customers and potential customers around our ideas; challenge the norm in order to change people’s conversations, expectations and perspectives about us forever.

Our External Brand PersonalityHow we relate to our customers, suppliers and stakeholders

CreativeWe love what we do and it shows in the creativity and quality of our products and technologies.

AgileWe are quick to market with the right solution for our customers and embrace ideas and opportunities to shape an inspiring, diverse and dynamic company.

Australian/GlobalOur Australian origins are the root of inspiration and dedication to our business; they underpin our attitude to the products we make and instill passion about delivering quality products to our global customers.

CourageousBeing knowledgeable in what we do established our history, market presence and reputation - others follow where we courageously lead. We speak up, ask questions and are open to other people’s ideas. We believe in what we do and how it can make a difference to all of our customers on a daily basis.

Our Internal Brand ValuesWhat we do to maintain our Vision

CollaborationWe trust and support each other, fostering a great team spirit.

Challenge the normWe are always looking for new ways to improve and innovate, not only our product, but in our business practices.

DiversityWe value all individuals for their diverse backgrounds and treat all people with courtesy and respect.

ExcellenceWe listen to, understand and anticipate our customers needs, responding quickly, efficiently and effectively.

Challenge the norm Diversity

Excellence

Collaboration

Agile Australian/Global

Courageous

Creative


Group Structure and Description of Activities

A.B.N. 20 009 462 453Incorporated 26th August 1992

100% Owned

100% Owned

A.C.N. 123 214 899

Incorporated 20th December 2006

Agreement to allow Arbortech Pty Ltd to commercialise

patented technologies owned by Arbortech Industries

Limited

A.B.N. 20 009 305 060Incorporated 27th June 1988

• Manufacturers and distributes products

• Exports products worldwide• Employs group personnel

A.B.N. 53 092 156 128Incorporated 23rd March 2000

• Owns Airboard patents• Production & Sales

Acquired 16th June 2011HRB 205692

• Promotion and sales in Germany and throughout

Europe

(Change of name from Arbortech USA Corp

on 20th July 2011)

Incorporated 30th April 2007 434219

• Sales representation in the USA

ARBORTECH INDUSTRIES LIMITED

AIRBOARD PTY LTD ARBORTECH PTY LTD

ARBORTECH TOOLS USA CORP

ARBORTECH EUROPE GMBH

ARBORTECH MANUFACTURING

PTY LTD


Values and Principles StatementIt is Arbortech’s intention to build a successful international company through the commercialisation of its patented technologies while acting in a manner that exemplifies its Values and Principles. The Statement of Values and Principles is regularly reviewed in consensus with all employees and serves as a guide in all its dealings:

• Respect for the individual and environment

• An open and honest approach in all dealings

• Sound financial management

• Embrace sustainable practice and technologies

• Innovation and manufacture of environmentally sound quality products with high customer value

• Providing a safe and enjoyable work environment

• Maximise a return to all stakeholders by adhering to these Values and Principles

Corporate GovernanceThis statement from the Board of Directors of Arbortech Industries Limited outlines the main regulatory and ethical procedures in place throughout the year.

• The Arbortech Board of Directors meets on a monthly basis to discuss all aspects of Arbortech’s operations. The principal issues for consideration are driving the Company’s performance, assessing and managing any primary risks, guiding and directing management and any other operational issues.

• The Board of Arbortech, consists of two Executive Directors, including the Chairman, and a Non-Executive Director. Further information concerning the individual Director’s experience and qualifications, including meeting attendance is set out in the Directors Report in the Financial Report.

• The Board is responsible for the overall corporate governance of Arbortech Industries Limited. This includes defining and monitoring the strategic direction of the Company, developing and communicating a code of ethics that reflects the corporate culture, values and principles of the Company to shareholders, employees, suppliers and the general community. The Board also reviews and monitors management and Company performance and ensures procedures are in place to manage the corporate reporting, compliance and legal requirements of the Company.

• The Board has established an Audit and Risks Committee to monitor internal control policies and procedures designed to safeguard Group assets and to maintain the integrity of financial reporting.

• The Board of Directors recognises the need for a structure that balances the needs of the shareholders while promoting a culture of performance and innovation. To this end, all Directors, management and employees are guided by the Company’s Values and Principles Statement to act with integrity and fairness to improve the Company’s reputation and performance.

It is Arbortech’s intention to build a successful international company through the commercialisation of its patented technologies


Board of Directors

Kevin Inkster Executive ChairmanKevin is a co-founder of the Company and inventor of the Technologies. He is responsible for the direction of research and development of the Technologies and has played a key role in the successful negotiation and establishment of the Company’s international technology licences. He has gained extensive experience in patent and intellectual property protection since founding the Company and has advised the Federal Minister for Industry, Science and Resources through the Advisory Council on Intellectual Property.

Kevin was presented with the Clunies Ross National Science and Technology Award for his contribution to science and technology in Australia. He is a Trustee of the Inkster Family A/C which has a relevant interest in 7,636,993 Shares in the Company.

Kristine Inkster Executive Director FAICD

Kristine is a co-founder of the Company and is actively involved in strategic planning, public relations, and marketing. She has played an integral part in developing the corporate culture of the Company including the work environment and operational systems.

Kristine is a Fellow of the Australian Institute of Company Directors. She is a Trustee of the Inkster Family A/C which has a relevant interest in 7,636,993 Shares.

Selwyn Bajada Non-Executive Director B. Juris., LLB, B.Comm SF Fin, MAICD

Selwyn has had extensive experience in the legal, corporate advisory and investment management fields. He practiced as a corporate lawyer prior to joining the corporate advisory/mergers and acquisitions department of Bankers Trust Australia Limited in Sydney. He undertook European corporate advisory and development capital work in France, Switzerland, Germany and Italy as well as in Perth as an Executive Director with the Hartley Poynton Group. Selwyn has advised and assisted companies on a range of corporate and investment management matters. In 1988, he was made a Fellow of The Securities Institute of Australia (now Senior Fellow of The Financial Services Institute of Australasia). He has been a director of the Company since 1992 and Chairman of the Audit and Risks Committee. Selwyn and associated companies act as the corporate advisors to the Company. Interests with which he is associated hold a relevant interest in 35,384 shares.

Christine Taylor Company Secretary B Sc. ACA

Christine has been with Company since 1990. She is responsible for financial and regulatory compliance issues for the Company. She studied accounting and financial management at Loughborough University, England and qualified as a chartered accountant whilst working as an auditor for KPMG in England prior to transferring to Perth. Christine has had experience in management reporting in the retail and manufacturing fashion industry and also in crisis management in the food industry.


Shareholder InformationThe shareholder information set out below was applicable at 30th September 2018.

DISTRIBUTION OF SHAREHOLDERS

UNITS HELD - ORDINARY SHARES HOLDERS TOTAL SHARES $

1-999 33 30,320 0.2

1,000 - 4,999 74 162,368 1.2

5,000 - 9,999 21 160,643 1.2

10,000+ 48 13,389,649 97.4

Total 176 13,742,980 100

The percentage of the total holding held by the twenty largest shareholders was 93%.

SUBSTANTIAL SHAREHOLDERS

An extract of the Company’s register of substantial shareholders is set out below:

NAME OF SUBSTANTIAL SHAREHOLDER NO. OF SHARES

Mr Kevin Ross Inkster and Mrs Kristine Inkster <The Inkster Family A/C> 7,636,993

Ucone Pty Ltd 1,478,688

Knights Capital Group Ltd 1,290,087

Aileendonan Investments Pty Ltd 733,524

DIRECTORS’ SHAREHOLDINGS

Kevin Inkster 7,636,993

Kristine Inkster 7,636,993

Selwyn Bajada 35,384

The interests of Directors listed above are as defined by statute and are not necessarily beneficially owned, representative of 100% ownership or of material value to the Directors concerned.

VOTING RIGHTS

On a show of hands every member present at a general meeting in person or by proxy shall have one vote. Upon a poll, voting rights of such members shall be one vote for each share owned.


Twenty Largest ShareholdersThe shareholder information set out below was applicable at 30th September 2018.

HOLDERS NUMBER % OF TOTAL SHARE CAPITAL

Mr Kevin Ross Inkster and Mrs Kristine Joanne Inkster <The Inkster Family A/C> 7,636,993 55.6%

Ucone Pty Ltd 1,478,688 10.8%

Knights Capital Group Ltd 1,290,087 9.4%

Alieendonan Investments Pty Ltd 733,524 5.3%

Misticrest Pty Ltd <Timor Property A/C> 307,692 2.2%

Edwin John Grant 213,230 1.6%

Mr Anthony Mandile & Ms Jillian Mandile <A Mandile Super Fund A/C> 150,769 1.1%

Jetan Pty Ltd 100,000 0.7%

Maxwell and Kerry Jensen 94,622 0.7%

Robert Archer Black 84,471 0.6%

Christine Draper and Andrew Lang 81,977 0.6%

Benoni Pty Ltd 79,305 0.6%

Satu Corporation Pty Ltd <Gillon Executive Super Find No 2> 76,923 0.6%

Taraglow Pty Ltd <Gillon Executive Super Fund> 76,923 0.6%

Ian Maynard Inkster 66,667 0.5%

Bokal Nominees Pty Ltd 57,440 0.4%

Bolex Pty Ltd <The Ewan Family A/C> 57,333 0.4%

David Colin Archibald 50,000 0.4%

Mr Sven Blicks 50,000 0.4%

Rhaetian Management Pty Ltd <Archibald Super Fund> 50,000 0.4%

12,736,644 92.7%

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