Capital Raising Overview

Key Risks Business specific and industry risks (a) Possible payroll tax liability. As previously disclosed by the Company, the Company has been in dispute with the New South Wales Office of State Revenue (OSR) over a FY17 payroll tax assessment in NSW in relation to certain amounts paid to contractors of the Company. The matter has been the subject of proceedings in the NSW Civil and Administrative Tribunal (NCAT) and a decision is pending. While the Company is confident in its position on the basis of precedent set by others, there is a risk that the Company may be unsuccessful. The Queensland OSR (which has issued a reassessment of the Company) and Victoria OSR (which withheld its reassessment) are both awaiting the decision by the NCAT before finalising their position. While the Company remains confident of its position, the outcome of a dispute such as this cannot be assured and there remains a risk that the eventual outcome may differ from the Company's assessment of its position. If this occurs, the Company may be liable for the OSR's costs in the proceedings, together with any late payroll tax (although this is uncertain and the quantum is indeterminate), which has the potential to have a material adverse affect on the Company's immediate cash position. (b) Major contract performance risk. The Company's Fire Build and Special Projects Business Units are at any one time undertaking works and providing services under contracts for a number of projects - some of which are significant to the Company. The costs of performing such contracts (and, by extension, the profit able to be derived from such contracts) can be materially adversely affected by the inherent uncertainties associated with significant construction projects,, as well as issues such as weather events, COVID-19 related issues, pricing and availability of sub-contractors and components, design and technical risks, and productivity or industrial issues. To manage these issues, the Company undertakes monthly reviews of each such contract, including as to delivery risks and forecasts of project costs. The Company has implemented rigorous procedures around the estimation of costs. While the Company has been focusing on implementing enhanced project controls, there remains a risk of issues arising which may result in impacts to future profits or reductions or reversals of previously recorded profits. (c) Dependence on material contracts. A material proportion of the Company's revenues from its Advanced Property Solutions (APS) Business Unit is derived from construction contracts (generally with a duration of between six months to two years) run by its "Fire" and "Special Projects HVAC" businesses and relating to project-based work for clients. Thus, a significant proportion of the Company's revenue and earnings are sourced from specific projects, which may not be repeated nor offer any recurring revenue following the end of the project's life. Accordingly, the Company's operating and financial performance is partly dependent on its ability to win new work and to maintain or improve its operating margins. Long standing relationships often lead to new work and the Company believes that it is well placed to win and retain work from both new and existing clients. However, any failure to do so may have a significant impact on the Company's financial performance. Further much of the revenue in the Company's Communications & Utility Infrastructure Unit (CUI) arises from its work with NBNCO in the delivery and maintenance of the National Broadband Network. This, and CUI's contract with Foxtel, are among those long-term material contracts with clients with whom the Company has been working over a number of years. The Company actively maintains its relationships with existing clients, whilst continuing to seek new opportunities, with the objective of increasing work volumes. However, no assurance can be given that the Company will be able to continue to maintain existing client relationships or secure new opportunities. There remains a risk that existing contracts may not be renewed, may be renewed on less favourable terms or may be terminated, which may lead to a material reduction in the Company's revenue and/or profits. In addition, the volume of work orders submitted by clients under many of the Company's key contracts is not fixed and/ or is subject to variation from year to year. For example, work performed for NBNCO and/ or pursuant to CUI's contract with Foxtel is subject to fluctuations in volume, from time to time, whether as a result of reduced consumer appetite (and therefore reduced connections) and/ or as a result of changes in the allocation of work by customers amongst various service providers of which the Company is one (in the case of NBNCo). Some of these fluctuations in the volume of work and/ the extent of any variations can depend on the success of the underlying clients' own business plans (which is itself subject to a variety of risks, including industry and technological developments adversely affecting the clients' business model). To the extent that the volume of work orders materially decreases, the Company's financial performance may be adversely impacted. (d) Contract variations. In the ordinary course of the Company's business and industry, contract variations arise in relation to ongoing or completed projects regarding increased work that is out of scope from the original contract or work that customers remove from scope due to budgetary or other constraints including COVID-19. These variation claims involve the Company negotiating with contractual counterparties and the amount of any negotiated settlement may differ from the amount claimed by the Company. Close monitoring of variations occurs within the business and the Company takes a balanced view of the likely final amount recoverable and takes up appropriate provisions in the financial accounts as required. To the extent that the Company recovers less than expected on contract variations for increased scope, or that it is de-scoped, its financial performance may be adversely impacted." (e) Counterparty (client) payment risk. In the ordinary course of business, the Company relies on its clients for payments. Some clients account for a relatively large proportion of the Company's annual revenue. Should a client enter financial distress or become insolvent, the Company may not be paid for work completed, and should projects cease mid-construction, the Company may find itself with an unexpected underemployed workforce to manage. The Company maintains provisions for bad and doubtful debts which are regularly reviewed. If these provisions are inadequate, or a bad debt arises during a period for which no provision has yet been made there may be an adverse impact on the Company's financial performance and position. 19